Ward v Allianz Australia Services Pty Ltd

[2019] NSWDC 293

District Court

New South Wales

Medium Neutral Citation:	Ward v Allianz Australia Services Pty Ltd [2019] NSWDC 293
Hearing dates:	29 and 30 April, 2 May 2019, 17 May 2019 on the papers
Date of orders:	05 July 2019
Decision date:	05 July 2019
Jurisdiction:	Civil
Before:	Judge J Smith SC
Decision:	Verdict for the plaintiff. Defendant to pay the plaintiff damages in the amount of $1,394,421.91 together with interest and costs.
Catchwords:	WORKERS COMPENSATION – intentional tort – conduct calculated to cause harm – defendant’s responsibility for employee’s deliberate conduct – liability in negligence
Legislation Cited:	Civil Liability Act 2002 (NSW), sub-s 3B(1)(f) District Court Act 1973 (NSW), sub-s 44(1)(d1) Social Security Act 1991 (Cth), s 151IA Workers Compensation Act 1987 (NSW), ss9A, 151D, 151G, div 3 of pt 5
Cases Cited:	Bunyan v Jordan [1937] HCA 5; (1937) 57 CLR 1 Koehler v Cerebos (Australia) Ltd (2005) 222 CLR 44 Nationwide News Pty Ltd v Naidu (2007) 71 NSWLR 471 Northern Territory of Australia v Mengel (1995) 185 CLR 307 New South Wales v Lepore (2003) 212 CLR 511
Category:	Principal judgment
Parties:	Craig Ward – Plaintiff Allianz Australia Services Pty Ltd - Defendant
Representation:	Counsel: Plaintiff: Mr S Kalfas SC with Mr Moffet Defendant: Mr I Todd   Solicitors: Plaintiff: Shine Lawyers Defendant: Turks Legal
File Number(s):	2018/178332
Publication restriction:	Nil

Judgment

1. The plaintiff is a 52 year old man suffering from a range of psychiatric conditions including PTSD [1] and depression. He claims that his condition was materially caused by the bullying and harassment he experienced at the hands of his manager (Mr Smith) when he was employed by the defendant between 2003 and 2004.

   1. Post-traumatic stress disorder.

2. The plaintiff seeks common law damages, as circumscribed by the Workers Compensation Act1987 (NSW). In particular, he claims damages for the past lost wages and for the future earnings up to the date on which he would have been entitled to retire, namely 20 February 2034.

3. The defendant accepts that the plaintiff was bullied by Mr Smith; however, it argues that there are a number of reasons for which the plaintiff’s claim ought not succeed. These include the following. First, the physical component of Mr Smith’s behaviour towards the plaintiff had no connection to Mr Smith’s role as manager. Secondly, it argues that it did not know that at the time that the plaintiff had been bullied, or that that conduct had had any impact on the plaintiff’s health. Thirdly, it argues that the plaintiff’s condition, and his subsequent inability to perform work, were caused by factors other than the bullying.

4. Although there are some issues of fact, the main contest between the parties was the application of the law to the facts. For that reason, it is convenient first to deal with the evidence and any issues of fact and then to deal with the questions of law that arise from them.

The facts

i.   The plaintiff at work

5. The plaintiff’s evidence was given by way of written statements and oral evidence. It is fair to say he was not a very good historian; however, as there is no issue that he is suffering at least one psychiatric illness, I will leave that to one side and assess his evidence against the established facts.

6. The plaintiff started working at the defendant immediately after school and has never worked anywhere else. He started off as an underwriting clerk and progressed from there to underwriting and various other positions. By 2003 the plaintiff was an accounts manager when a new State Manager, Mr Smith, was appointed.

7. Shortly before this, the HIH Insurance Group had collapsed and had gone into liquidation. That collapse had broad-ranging effects and had left a large number of insurance policy holders uninsured in respect of certain risks. Mr Ward’s employer, Allianz, took on a large number of policies that had been issued by HIH. This was an important period of time in the insurance industry in Australia in general and also for Allianz.

8. Mr Smith was responsible for about 100 employees including the plaintiff who reported directly to him.

9. From the outset, Mr Smith was an aggressive manager, telling the account managers that they had failed and that he would drag them to Human Resources and have them walk the managers out [2] . When he first commenced in the position, Mr Smith brought all the account executives into the boardroom and declared that a new era had started, that the account executives were all to blame and that he had been “brought in to kick (them) in the head” [3] .

   2. Transcript, p25.22.

   3. Transcript, p22.30.

10. On many occasions Mr Smith yelled at the plaintiff, telling him he was hopeless at his job, berating him for some aspect of his work and telling him that the brokers all thought he was a poor performer.

11. The abuse was also physical. On one occasion the plaintiff was seated at his cubicle when, without warning, Mr Smith slapped him hard with an open hand across the back of the head so hard that his head nearly hit the keyboard of his computer [4] . On other occasions Mr Smith hit the plaintiff with his shoulder as he was walking past. Mr Smith’s favoured form of physical harassment, however, was to shoulder charge [5] .

    4. Transcript, p24.23.

    5. Transcript, p27.9.

12. None of this evidence was contested. It is supported by the evidence of other employees of Allianz at the time. Ms Jambazin, a property underwriter at Allianz at the time, said that Mr Smith was a tough manager who had been an Army Commander who brought his Army management style into Allianz [6] . Mr Fokas, another account manager at Allianz, not only corroborated the plaintiff’s evidence but also stated that he, too, had been bullied and abused [7] .

    6. Exhibit 1, p42.

    7. Exhibit 1 pp104-106. Mr Fokas was called to give oral evidence but no longer recalled these events.

13. I accept that the plaintiff was treated in this way by his manager over the period of about 14 months from early 2003 to April 2004.

14. The plaintiff said that his immediate response to the treatment was to avoid being in the office when Mr Smith was there [8] . He did that because he did not want to be abused [9] . The plaintiff was largely able to work from home and did so apart from monthly meetings that required his personal attendance. On those occasions he said that the abuse continued and that Mr Smith would call him into the office and yell at him and abuse him.

    8. Transcript, p28.22.

    9. Transcript, p28.47.

15. In January 2004, Mr Fokas complained about Mr Smith’s conduct and eventually left the defendant. As a result of that complaint the plaintiff was interviewed by Ms McGuiness of Human Resources [10] . The meeting started in a friendly and open manner. He was shown Mr Fokas’ statement and asked if he was aware of Mr Smith’s conduct. The plaintiff said that not only was he aware that Mr Fokas had been bullied, but that he too had been assaulted, physically and verbally [11] . As soon as he said that, Ms McGuiness closed her notebook and ended the meeting [12] .

    10. Transcript, p31.21.

    11. Transcript, p31.38-45.

    12. Transcript, p31.47.

16. In April 2004 Mr Smith was removed as State Manager, given a national role [13] and later left the defendant to work at a broking firm [14] .

    13. Exhibit 5.

    14. Transcript, p33.50.

17. Following the departure of Mr Smith, the plaintiff experienced a large number of physical ailments over a significant period of time and took sick leave at various times in that period. These complaints included Crohn’s disease, ulcers, scoliosis and a viral illness.

18. From 2008 the plaintiff was supervised by Mr Asher who gave evidence in the proceedings. Mr Asher said that the plaintiff had a good work ethic and was conscientious of the quality of the work he did to the point where he might spend too much time on a job [15] . He said that the plaintiff had been able to meet an increase in workload, although he had had to work increased hours to do so [16] . He said that there was only one time that the plaintiff ever complained to him about his workload[17] and otherwise did not appear to be distressed[18] , although he was aware that the plaintiff was having difficulty coping with his home life and that he did not interact well with his children[19] .

    15. Exhibit 2, p12.

    16. Exhibit 2, p18.

    17. Exhibit 2, p10; p19 at [45].

    18. Exhibit 2, p20 at [52].

    19. Exhibit 2, p17 at [32].

19. The one time that the plaintiff seemed to Mr Asher to struggle with his work was in August 2010. However, it appears that this was not the end of the matter. In late November and December 2010 Mr Asher noticed that the plaintiff “was starting to get calls from the underwriters for reports that were not completed”[20] and, when the plaintiff left on leave in December 2010, he did not return to work.

    20. Exhibit 2, p10 at [17].

20. Mr Asher also gave evidence about certain workplace practices and policies put in place by the defendant; however, he could not give evidence about that insofar as it concerned the plaintiff prior to 2008.

ii.   The plaintiff’s mental health: diagnosis and treatment

21. In October 2010, Dr Nicolaou, who had been the plaintiff’s treating general practitioner, returned to the medical practice attended by the plaintiff after several years’ absence. It was then that he suspected that the plaintiff may be suffering from a mental health condition and referred him for assessment to Dr Clarke. In his referral, Dr Nicolaou wrote [21] :

“…steadily worsening depression/anxiety type symptoms for the last 8 years or so. He was involved in the HIH fallout and ended up on the receiving end of a lot of abuse from managers at work … he has had increasing somatic ailments, increase in weight, reduced ability to concentrate, labile mood. He is feeling mroe and more of a failure and it appears the work issues have becoming all-encompassing for him … He appears to be suffering trauma type symptoms as well.”

(Errors in original)

21. Exhibit 1, p2.

22. On 31 January 2011 Dr Nicolaou wrote a workcover medical certificate in respect of the plaintiff. In it, he expressed the opinion that Mr Ward was suffering from “severe Post Traumatic Stress Disorder with marked Somatic symptoms” and that it was caused by “Systematic physical and psychological abuse from State Manager throughout 2003” [22] .

    22. Exhibit 1, p3.

23. Dr Nicolaou wrote a report for Mr Ward on 16 October 2012 in which he summarised his past treatment of him. He wrote [23] :

“… my first consultation with Craig on 28/11/2004 that Craig’s “stress levels (are) high”.

…

At the consult with me on 10/01/2005, Craig … stated he had experienced symptoms for around two years prior (i.e. 2003). The symptoms he was mostly experiencing were headache, fatigue, sore joints and sore throat that had become chronic by 2005.

…

The following consultation was with me on 14/10/2010. As I mentioned earlier in this report, the deterioration in Craig’s mental health since I had seen him previously on 20/05/2005 was very dramatic.

…

I have no doubt there is a “causal link” between the bullying and harassment and the subsequent psychiatric condition and that the current psychiatric injury is a direct result of the initial harassment and bullying from 2003 to 2004.”

23. Exhibit 1, p4.

24. In May 2010 Mr Ward was referred to a clinical psychologist, Robert Armstrong, for treatment. In his report of 17 May 2010, Mr Armstrong referred to [24] :

“… chronic history of what appears to be workplace abuse, resulting in escalating apprehension, feelings of being trapped…”

24. Exhibit 1, p.14.

25. In April 2011 the plaintiff, as an inpatient, commenced seeing Dr Son Nguyen, a psychiatrist, for treatment. On 1 December 2017, Dr Nguyen prepared a report in which he wrote [25] :

“…In my opinion, he has had severe and chronic Post Traumatic Stress Disorder (PTSD) and chronic Major Depressive Disorder.

…

He has been significantly debilitated by his Mental Disorders in the period I have seen him (since April 2011). He has not been able to work in any capacity in the period I have known him due to his Mental Disorders. …”

25. Exhibit 1, p.56.

26. On 29 November 2018, Dr Nguyen wrote [26] :

“…

When I last saw him on 29/11/2018 he had significant residual PTSD and depressive symptoms. …”

26. Exhibit 1, p.60.

27. In a report of 11 April 2019 Dr Nguyen confirmed his earlier diagnoses and continued [27] :

“…

When I last saw him on on [sic] 4/4/2019, he had severe residual PTSD and depressive symptoms.

…

In my opinion, his work injury and previous severe bullying and harassment at work were major and significant factors in his work-injury related Mental Disorders … they are the main factors …

Based on his history to date, in my opinion, it is unlikely that he will be able to return to work in any capacity due to his work-injury related Mental Disorders in the foreseeable future (the next 2 years or longer).”

27. Exhibit 1, p.62.

28. Dr Nguyen was asked to clarify the last comments in that report. On 30 April 2019 he wrote [28] :

“In my report dated 11/4/2019 I used the phrase ‘next 2 years or longer’ as this is the usual time period for total and permanent disability (TDP) criteria for superannuation and Death/TDP insurance policies.

In my opinion, on the balance of probabilities, it is unlikely that Mr. Ward will be able to return to work again prior to his eligible retirement date in 2034 (15 years away). … In my opinion, he has had maximal improvement and it is unlikely that he will have further improvement with further treatment.

…

Based on his history to date, in my opinion, his incapacity for work is likely to persist into the future and it is likely that he is permanently disabled for work in any capacity due to his Mental Disorders. His treatment is now aimed at maintaining him at functioning at home and avoiding severe decompensation requiring inpatient hospitalization and adverse outcomes such as suicide.”

28. Exhibit 6.

29. Dr Nguyen’s opinions were, to a large extent, supported by the medico-legal reports from Dr Dinnen. In his first report (dated 4 October 2011) [29] Dr Dinnen wrote:

    29. Exhibit 1, p64.

“…The patient is still quite ill. … The depth of his illness would suggest that it may take a considerable period of time to return him to a reasonable level of function. …

… continues to be unfit for work…

2. Is our client totally incapacitated as a result of this condition?

Yes.

…

8. Conclusions – your opinion in relation to the worker’s injury and diagnosis of current condition and the rationale for your opinion:

i. Your diagnosis with reference to pathology

Major Depressive Disorder.

ii. Your views on causation

The history and documentation indicates this is a consequence of work stress and harassment and bullying.

...”

(Emphasis in original)

30. In his second report dated 4 October 2011, Dr Dinnen opined:

“… Percentage of whole body permanent impairment is 27% …”

(Emphasis in original)

31. In his report of 23 February 2012 [30] , Dr Dinnen explained that he had reviewed the documents from Mr Ward’s treating general practitioner and that his opinion was unaltered.

    30. Exhibit 1, p74.

32. On 14 October 2015 Dr Dinnen wrote [31] :

    31. Exhibit 1, p77.

“… condition is much the same as … four years ago. He continues to suffer from major depressive disorder and continues to be unfit for work.

…I believe this is likely to persist. Ongoing treatment is required to prevent any further deterioration.

… unfit for work … and I believe this will persist indefinitely.

…

I do not believe he would be able to engage in such employment in the future because of his chronic psychiatric condition.

…

ii. your views on causation

Work place stress from bullying and harassment”

(Emphasis in original)

33. No challenge was made to any of this evidence, the authors of the reports were not cross-examined and the defendant did not adduce any medical evidence of its own. While it is perfectly open to a party to take such an approach to medical evidence, it leaves the defendant with a considerable difficulty in its case. As will be seen, the defendant concedes that the plaintiff’s current condition is, to some extent, caused by Mr Smith’s conduct [32] . However, there is no basis on which it can argue that the Court should not accept the uncontested evidence of the plaintiff’s treating doctors and qualified expert.

    32. Transcript, p122.28.

iii.   The plaintiff’s claim for worker’s compensation

34. The plaintiff lodged a claim for workers compensation in respect of his psychiatric illness. On 19 April 2017 the Workers Compensation Commission determined that the plaintiff had suffered a primary psychological injury to which his employment was a substantial contributing factor within the meaning of s 9A of the Workers Compensation Act [33] . The matter was then referred to an Approved Medical Specialist for assessment of the plaintiff’s impairment. On 24 May 2017 a medical assessment certificate [34] was issued by that specialist assessing the plaintiff’s whole person impairment as 22%.

    33. Exhibit 1, p88.

    34. Exhibit 1, p108.

35. The plaintiff then sought, and was granted, leave under s 151D of the Workers Compensation Act to bring proceedings for damages against the defendant.

The Issues

i.   Statutory context

36. This claim is governed by Division 3 of Part 5 of the Workers Compensation Act: s 151E. There are a number of consequences that flow from that. First, the only damages that may be awarded to the plaintiff are in respect of past economic loss due to loss of earnings and future economic loss due to the deprivation or impairment of earning capacity: s 151G(1). Secondly, no damages may be awarded unless the degree of impairment of the plaintiff is at least 15%: s 151H. There is no issue here that that threshold has been met. Thirdly, future economic loss is limited to any loss up to the pension age as defined in the Social Security Act 1991 (Cth): s 151IA. That age is 67.

37. Fourthly, the provisions of the Civil Liability Act 2002 (NSW) do not apply: Civil Liability Act: s 3B(1)(f). Finally, there is no monetary limit on the Court’s jurisdiction in respect of the claim: District Court Act 1973 (NSW): sub-s 44(1)(d1).

38. The parties each prepared a list of issues for determination. Each of those lists identified, in essence, two principal issues: first, whether the defendant was liable in negligence for the plaintiff’s injuries; and secondly, what is the extent of those injuries. However, the issues that arise on the pleadings and from the facts go beyond those two matters. Two of the largest issues in the case are whether the bullying of the plaintiff by Mr Smith was such as to give rise to any liability for the injuries that arose from it and, if so, whether the defendant is vicariously liable for Mr Smith’s conduct. These issues arise in the context of deliberate conduct by an employee.

39. It is convenient to deal first with the plaintiff’s claim that the defendant was liable for the intentional infliction of harm on the plaintiff by Mr Smith.

ii.   The defendant’s liability for intentional harm by Mr Smith

40. To establish an intentional tort, the plaintiff must prove on the balance of probabilities that Mr Smith’s intentional conduct was calculated to cause him physical harm, being a psychiatric or psychological injury: Bunyan v Jordan [1937] HCA 5; (1937) 57 CLR 1 at 11 (Latham CJ); Northern Territory of Australia v Mengel (1995) 185 CLR 307 at 347. Spigelman CJ said in Nationwide News Pty Ltd v Naidu (2007) 71 NSWLR 471 at 487 [77], that the word “calculated” in this context is notoriously ambiguous and can mean either “subjective, actual, conscious desire to bring about a specific result or it can mean what is likely, perhaps overwhelmingly likely, to occur considered objectively”. His Honour also noted, at [80], that “a test of reckless indifference to a result will, in this context, satisfy the requirement of intention”.

41. Here, Mr Smith’s purpose from the outset of his employment as State Manager was to kick the account managers in the head. It seems that this was more than just a figure of speech. It was the managers’ fault that the business was suffering and he saw his role as sorting them out or having them fired. He did this by means of constant and ongoing belittling and intimidation, both verbal and physical. There was no real issue that a natural and probable consequence of such conduct was some form of psychiatric illness, such as the depression suffered by the plaintiff. I am satisfied from Mr Smith’s stated purpose and the fact that he put his plan into action against a number of the managers, including the plaintiff, that such illness was a calculated outcome in the sense that Mr Smith was recklessly indifferent as to whether or not it occurred.

40. The next question is whether the defendant is responsible for Mr Smith’s deliberate conduct.

41. The defendant argued that it cannot be held liable for the physical aspects of Mr Smith’s treatment of the plaintiff because they were not authorised by it, and not so connected to authorised acts, as to constitute improper modes of doing such acts: New South Wales v Lepore (2003) 212 CLR 511 at 536 [42] (Gleeson CJ). I disagree. Mr Smith’s conduct cannot properly be divided in this way: he embarked on one course of conduct aimed at achieving what he saw as his single goal, the improvement of the business. That course of conduct included physical abuse that was, on any view, improper. However, it was intimately connected with Mr Smith’s task because it was done in the apparent execution of the authority which Allianz had given him as State Manager: see Lepore at 594 [239] (Gummow and Hayne JJ); Naidu at 489 [88] (Spigelman CJ).

42. The plaintiff argued, in the alternative, as was the case in Naidu, that for relevant purposes, Mr Smith was the defendant: Naidu at 504–505 [228]–[236] (Beazley JA). In my view, the evidence here is insufficient to support that conclusion. Although Mr Smith had responsibility for the management and supervision of the plaintiff and his fellow managers, there was little evidence about the overall reporting structure within the defendant at the relevant time, or whether there was any supervision of Mr Smith and his conduct. The fact that there was a complaint made against him by Mr Fokas which was investigated and led to Mr Smith being transferred to a different position runs against the plaintiff’s argument about this to some extent.

43. For those reasons, the defendant is liable for the injuries suffered by the plaintiff as a consequence of Mr Smith’s deliberate conduct.

44. This conclusion makes it strictly unnecessary to consider whether the defendant is liable in negligence for the harm caused to the plaintiff by Mr Smith’s conduct. However, for the sake of completeness, I will deal briefly with this issue.

iii.   The defendant’s liability in negligence

47. The plaintiff pleaded his negligence claim on two bases: first, on the basis that, in perpetrating the abuse on the plaintiff, Mr Smith failed to take reasonable care for the plaintiff’s safety; and secondly, that the defendant failed to take reasonable care for the plaintiff’s safety and well-being.

48. I will deal first with the second of these bases.

49. In Koehler v Cerebos (Australia) Ltd (2005) 222 CLR 44 the plurality said, at 57:

“35.   The duty which an employer owes is owed to each employee. The relevant duty of care is engaged if psychiatric injury to the particular employee is reasonably foreseeable. That is why in Hatton, the relevant question was rightly found to be whether this kind of harm to this particular employee was reasonably foreseeable. And, as pointed out in that case, that invites attention to the nature and extent of the work being done by the particular employee and signs given by the employee concerned.”

(Citation omitted; Emphasis in original)

50. Here, subject to only one matter, there were no signs given by the plaintiff of any impact, let alone the possibility of psychiatric damage, that might be caused by the conduct of Mr Smith during neither the 14 months that Mr Smith was there nor the remaining six years of his employment after Mr Smith’s departure. The qualification to that is that, during the investigation into Mr Fokas’ complaint, the plaintiff said that he, too, had been bullied by Mr Smith. However, he made no formal complaint about it and certainly said nothing about its impact on him.

51. The immediate consequence of the investigation into Mr Fokas’ complaint, and by extension, the plaintiff’s assertion of bullying, was the removal of Mr Smith. Although there was no direct evidence that the bullying allegation was the reason for Mr Smith’s removal, that is a compelling inference and the most likely reason. This reveals two important matters: first, the defendant had a system in place to deal with the potential consequences of bullying and, secondly, that it took steps to put an end to that conduct. In my view, the circumstances required nothing more. Given that there was no indication at all that there might be psychological harm caused to the plaintiff, that harm was not reasonably foreseeable once Mr Smith was removed. It was not incumbent on the defendant to investigate the plaintiff’s illnesses in order to determine whether they were caused by the bullying or to provide the plaintiff with any counselling. It may have been different if the plaintiff showed sufficient, or any, signs of mental illness, but he did not. His own treating doctor did not see the possibility of mental harm until the end of 2010.

52. The first basis of the pleading in negligence is, in essence, to analyse the defendant’s duty of care through the agency of Mr Smith. This analysis is artificial given the deliberate nature of Mr Smith’s conduct: see Naidu at 484-485 [61]–[65] (Spigelman CJ) and the cases cited there. In the absence of notice or a finding that Mr Smith was the defendant for the purpose of notice, I conclude that his conduct was not, itself, a breach of the defendant’s duty of care to the plaintiff.

53. For those reasons, the claim in negligence would fail.

iv.   Damages

54. The medical evidence is all one way in establishing both the extent and the cause of the plaintiff’s injuries. He has been unable to work since December 2010 and has no capacity to return to work. That incapacity was materially caused by the conduct of Mr Smith. The defendant is liable to pay the plaintiff damages for his economic loss, both past and future. Those damages were agreed by the parties to be as follows:

Past economic loss	$559,427.30
Superannuation on past earnings	$62,935.57
Past lost leave loading	$7,509.75
Damage to future economic capacity	$668,941.50
Superannuation on future earnings	$86,627.92
Future leave loading	$8,979.87
$1,394,421.91

Conclusion

55. There will be a verdict for the plaintiff and an order that the defendant pay the plaintiff damages in the amount of $1,394,421.91 together with interest and costs. I will direct the parties to bring in short minutes calculating the interest and with any agreed amount of costs.

**********

Endnotes

Decision last updated: 05 July 2019