DEPARTMENT OF EDUCATION & TRAINING v SINCLAIR

Court of Appeal (NSW)|2005-11-16|Before: Spigelman CJ, Hodgson JA, Bryson JA, Sheahan J

CITATION: DEPARTMENT OF EDUCATION & TRAINING v SINCLAIR [2005] NSWCA 465

JUDGMENT OF: Spigelman CJ at 1; Hodgson JA at 99; Bryson JA at 100

DECISION: 1 The orders of Sheahan J are set aside; 2 The proceedings are remitted to the Commission for determination in accordance with these reasons; 3 Order the Respondent to pay half the Appellant's costs of the Appeal; 4 The Respondent receive a certificate under the Suitor's Fund Act if otherwise entitled.

Supreme Court Rules: Pt 51 r 23 WorkCover Legislation Amendment Act 1995 LEGISLATION CITED: WorkCover Legislation Amendment Act 1996 Workers Compensation Act 1987: Pt 2; ss 4, 9, 9A, 11A Workplace Injury Management and Workers Compensation Act 1998: ss 352, 353

Christiansen v JW Simpson & Co Pty Ltd [1971] SASR 412 Commission for Safety Rehabilitation and Compensation of Commonwealth Employees v Chenhall (1992) 37 FCR 75 Dayton v Coles Supermarkets Pty Ltd (2001) 22 NSWCCR 46 Department of Education & Training v Sinclair [2004] NSW WCC PD 90 Department of Education & Training v Sinclair [2005] NSWCA 402 Gerlach v Clifton Bricks Pty Ltd (2002) 209 CLR 478 Hope v Bathurst Council (1980) 144 CLR 1 McMahon v Lagana [2004] NSWCA 164 CASES CITED: Mercer v ANZ Banking Group Ltd (2000) 48 NSWLR 740 Nizich v Royal Prince Alfred Hospital [1973] WCR 291 Ritchie v Department of Community Services (1998) 16 NSWCCR 727 Sinclair v Department of Education & Training [2004] NSW WCC 18 Stead v State Government Insurance Commission (1986) 161 CLR 145 Vergis v Brownbuilt Ltd (1973) 5 SASR 591 Way v Penrikyber Navigation Colliery Co Ltd [1940] 1 KB 517 WorkCover Authority of New South Wales v Walsh [2004] NSWCA 186

Department of Education and Training (Applicant) PARTIES: Jeffrey Sinclair (Respondent)

L King SC, D Saul (Appellant) COUNSEL: M Joseph SC, J Trainor (Respondent)

Hunt & Hunt (Appellant) SOLICITORS: Maurice Blackburn Cashman (Respondent)

LOWER COURT JURISDICTION: Workers Compensation Commission

27 - IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40011/05

SPIGELMAN CJ HODGSON JA BRYSON JA

Tuesday 20 December 2005 DEPARTMENT OF EDUCATION & TRAINING v SINCLAIR

The Respondent was a school teacher employed by the Appellant. On 21 February 2001 the Respondent was informed by letter that an allegation had been made against him that could amount to improper conduct against a student. Shortly thereafter he was transferred away from the school (the "Transfer"), and directed to have no contact with any student from the school (the "No Contact Direction"). The Respondent was provided with no details of the allegations made against him until 8 November 2001. On 14 November 2001 the Respondent made a claim for compensation for psychological injuries arising from his employment. The Appellant accepted liability and made weekly payments. On 12 August 2002 the Respondent was advised that he had been charged with two breaches of discipline, which charges were found proven on 19 June 2003. On 15 August 2003 the Respondent was dismissed. The Appellant then denied any further liability for weekly compensation payments. The matter proceeded to the Workers Compensation Commission (the "Commission").

Pursuant to s9 of the Workers Compensation Act 1987 (the "Act") an employer is liable for personal injuries "arising out of the course of employment". This general liability is then limited by s9A, which requires that employment must be a "substantial contributing factor" to the injury for the employer to be liable. Section 11A further excludes liability in cases of psychological injury where the "sole or predominant cause" of the injury was "reasonable action with respect to", relevantly, discipline.

The proceedings in the Commission were heard by an Arbitrator. The Arbitrator found that the Respondent's injuries were sustained "in the course of" his employment, and that the employment was a "substantial contributing factor" thereto. The Respondent argued that four aspects of the investigation were not 'reasonable actions with respect to discipline' for the purpose of s11A: the delay in investigating the claim; the failure to give particulars of the allegations; the No Contact Direction; and the Transfer. The Arbitrator found that the delay was reasonable, but that the other impugned aspects of the investigation were unreasonable. The Arbitrator concluded that the Respondent's injuries were not 'wholly or predominantly' caused by the Appellant's reasonable actions with respect to discipline.

The Appellant appealed to the Presidential Division of the Commission before Sheahan J. His Honour upheld the Arbitrators findings on s9 and s9A. In respect of s11A, Sheehan J agreed with the Arbitrator that the No Contact Direction and the failure to give particulars were not reasonable actions. However, contrary to the finding of the Arbitrator, his Honour found that the Transfer was reasonable. His Honour upheld the Arbitrator's finding that the employer's liability was not excluded by s11A.

The Appellant appealed to this Court pursuant to s353 of the Workplace Injury Management and Workers Compensation Act 1998, which limits the appeal to questions of law.

The Appellant challenged Sheehan J's findings, upholding those of the Arbitrator, that the Respondent's injuries were sustained "in the course of" his employment, that the employment was a "substantial contributing factor" to the injury, and that there was a causal connection between the Respondent's injury and his employment. Further, in respect of s11A, the Appellant argued that Sheahan J failed to properly apply the statutory formula, or gave inadequate reasons for his finding thereon.

1 The appeal in respect of Sheahan J's findings that the Respondent's injuries were sustained "in the course of" his employment, that the employment was a "substantial contributing factor" to the injury, and that there was a causal connection between the injury and the employment does not disclose any question of law and must be dismissed. [42], [45], [46], [99], [100] Dayton v Coles Supermarkets Pty Ltd (2001) 22 NSWCCR 46; McMahon v Lagana [2004] NSWCA 164; WorkCover Authority of New South Wales v Walsh [2004] NSWCA 186 referred to.

2 It is necessary to understand s11A to mean that the employer is not liable where, to the extent that the employment contributed to the injury, that contribution was wholly or predominantly caused by reasonable action taken with respect to discipline. [58], [99], [100] Mercer v ANZ Banking Group Ltd (2000) 48 NSWLR 740; Dayton v Coles Supermarkets Pty Ltd (2001) 22 NSWCCR 46 referred to.

3 Sheahan J erred by not redetermining whether the Respondent's injury was wholly or predominantly caused by the Appellant's reasonable actions with respect to discipline, after disagreeing with the Arbitrator about the scope thereof. [69], [99], [100]

4 The matter should not be remitted to the Commission unless the error has occasioned some substantial wrong or miscarriage. This will depend on whether it was open to Sheahan J to have found that the Appellant's contribution to the Respondent's injury was wholly or predominantly caused by reasonable actions with respect to discipline. [73], [99], [100] Gerlach v Clifton Bricks Pty Ltd (2002) 209 CLR 478; Stead v State Government Insurance Commission (1986) 161 CLR 145 followed.

5 It was open to Sheahan J to have concluded that the Appellant's contribution to the Respondent's injury was wholly or predominantly caused by reasonable actions with respect to discipline. [87], [99], [100]

6 The fact that the Appellant did not contest its liability for a period of time should not be taken as an admission capable of prejudicing its defences under the Act. [90]-[93], [99], [100] Vergis v Brownbuilt Ltd (1973) 5 SASR 591; Christiansen v JW Simpson & Co Pty Ltd [1971] SASR 412; Nizich v Royal Prince Alfred Hospital [1973] WCR 291; Way v Penrikyber Navigation Colliery Co Ltd [1940] 1 KB 517 distinguished.

7 His Honour further erred by failing to consider whether the disciplinary process as a whole was "reasonable action" within the meaning of s11A. [97], [99], [100]

2 The proceedings are remitted to the Commission for determination in accordance with these reasons.

3 Order the Respondent to pay half the Appellant's costs of the Appeal.

4 The Respondent receive a certificate under the Suitor's Fund Act if otherwise entitled. IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40011/05

SPIGELMAN CJ HODGSON JA BRYSON JA

Tuesday 20 December 2005 DEPARTMENT OF EDUCATION & TRAINING v SINCLAIR Judgment 1 SPIGELMAN CJ: These proceedings arise from a Workers Compensation Claim lodged on 14 November 2001 by the Respondent for psychological injuries suffered in the course of his employment and attributed to the manner in which the Appellant handled allegations of misconduct against him. The Respondent accepted liability, and compensation was paid until 20 August 2003, after which the Appellant denied any further liability. On 26 September 2003 the Respondent initiated proceedings in the Workers Compensation Commission (the "Commission") that were resolved in his favour by an Arbitrator, Mr Bruce McManamey (the "Arbitrator"): Sinclair v Department of Education & Training [2004] NSW WCC 18. An appeal against the Arbitrator's decision to the Commission constituted by a presidential member was dismissed by Sheahan J: Department of Education & Training v Sinclair [2004] NSW WCC PD 90. 2 The Appellant appeals from the decision of Sheahan J to this Court pursuant to s353 of the Workplace Injury Management and Workers Compensation Act 1998, which limits this appeal to a point of law. By s352(5) of that Act, the appeal to Sheahan J was "by way of review of the decision" of the Arbitrator.

The Facts 3 The Respondent was employed as an English teacher at Baulkham Hills High School (the "School"). On 21 February 2001, the Respondent was informed by letter that an allegation had been made against him that could amount to improper conduct against a student. The conduct was described as arising from his having developed "a close personal relationship with a student". No further details of the allegation were provided. However, as the Arbitrator noted (at [43]), it must have been evident to the Respondent that the alleged relationship was of a sexual nature, as the letter advised that the allegation would be investigated in accordance with the Appellant's policy entitled "Procedures to be Followed in Response to Allegations of Improper Conduct of a Sexual Nature by a Staff Member Against a Student". 4 The letter of 21 February 2001 also contained a direction: the Respondent was told that while the investigation was proceeding he was to take no action which would hinder its progress, including contacting any student currently attending the School either directly or through an intermediary. His attention was drawn to the availability of counselling support. 5 On 26 February 2001 the Respondent was informed by further letter that he was to be placed on alternative duties at the Departmental Office in Parramatta for the course of the investigation (the "Transfer"). The letter contained an expounded direction which repeated the earlier direction and also prohibited visiting or meeting any student (the "No Contact Direction"). 6 On 25 July 2001, the Respondent commenced a course of counselling with Ms Fagan, a psychologist. 7 After commencing alternative duties, the Respondent was provided with no further particulars of the allegations made against him until 8 November 2001. On that date the Respondent received a letter containing an allegation that he had, in 2000 and 2001, developed and maintained an improper and sexual relationship with a named student ("the Student"). The letter provided particulars of alleged meetings and events. 8 It is pertinent to note that there was no evidence that the Respondent was involved in a sexual relationship with the Student in February 2001. The Arbitrator found: "[32] … At that stage [the Student] viewed the Applicant more as a father figure and the Applicant was doing no more than providing guidance to a student. Whilst that guidance was wider than the strict confines of teaching the English syllabus there is no evidence that at that stage it was outside what would be expected of a caring teaching [sic] with an interest in his students." 9 On 14 November 2001 the Respondent made a claim for compensation for which liability was accepted, and weekly payments began. After a period off work, the Respondent continued to work part-time. 10 The Respondent provided responses to the allegations against him on 22 February 2002. 11 On 12 August 2002 the Respondent was advised by letter that he had been charged with breach of discipline in two respects (the "Charges"): first, that he had developed and maintained an improper relationship with the Student during 2000, 2001 and 2002; and secondly, that he had wilfully disobeyed the No Contact Direction. The Respondent, through his solicitors, replied to the Charges on 19 September 2002. 12 The Appellant informed the Respondent by letter dated 19 June 2003 that the Charges had been found proven, and sought submissions as to penalty. On 28 July 2003 it was recommended that the Respondent be dismissed, and the Respondent was in fact dismissed on 15 August 2003. 13 On 20 August 2003 the Appellant denied any further liability for weekly compensation payments, which ceased on 2 September 2003.

The Statutory Context 14 Part 2 of the Workers Compensation Act 1987 (the "Act") contains the relevant provisions relating to the Appellant's liability to pay compensation to the Respondent. 15 The general obligation is found in s9: " 9 Liability of employers for injuries received by workers - general (1) A worker who has received an injury (and, in the case of the death of the worker, his or her dependants) shall receive compensation from the worker's employer in accordance with this Act. …"

Injury is defined in s4 of the Act to mean "personal injury arising out of or in the course of employment". 16 Liability to pay compensation for injury is narrowed by s9A: " 9A No compensation payable unless employment substantial contributing factor to injury (1) No compensation is payable under this Act in respect of an injury unless the employment concerned was a substantial contributing factor to the injury. … (2) The following are examples of matters to be taken into account for the purposes of determining whether a worker's employment was a substantial contributing factor to an injury (but this subsection does not limit the kinds of matters that can be taken into account for the purposes of such a determination): (a) the time and place of the injury, (b) the nature of the work performed and the particular tasks of that work, (c) the duration of the employment, (d) the probability that the injury or a similar injury would have happened anyway, at about the same time or at the same stage of the worker's life, if he or she had not been at work or had not worked in that employment, (e) the worker's state of health before the injury and the existence of any hereditary risks, (f) the worker's lifestyle and his or her activities outside the workplace. (3) A worker's employment is not to be regarded as a substantial contributing factor to a worker's injury merely because of either or both of the following: (a) the injury arose out of or in the course of, or arose both out of and in the course of, the worker's employment, (b) the worker's incapacity for work, loss as referred to in Division 4 of Part 3, need for medical or related treatment, hospital treatment, ambulance service or occupational rehabilitation service as referred to in Division 3 of Part 3, or the worker's death, resulted from the injury. …" 17 With respect to psychological injury, as is the case in these proceedings, the employer's liability is further limited by s11A: "11A No compensation for psychological injury caused by reasonable actions of employer 11A(1) No compensation is payable under this Act in respect of an injury that is a psychological injury if the injury was wholly or predominantly caused by reasonable action taken or proposed to be taken by or on behalf of the employer with respect to transfer, demotion, promotion, performance appraisal, discipline, retrenchment or dismissal of workers or provision of employment benefits to workers. …" 18 The proceedings below proceeded on the basis that the onus of proving reasonableness for the purposes of s11A(1) lay on the Appellant. 19 At the beginning of the hearing of oral submissions, counsel for the Appellant sought to add a ground of appeal with respect to which party bore the onus. This application was rejected: Department of Education and Training v Sinclair [2005] NSWCA 402. 20 The appeal to this Court is governed by s353 of the Workplace Injury and Workers Compensation Act 1998 which relevantly provides: "353(1) If a party to any proceedings before the Commission constituted by a Presidential member is aggrieved by a decision of the Presidential member in point of law, the party may appeal to the Court of Appeal."

The Findings of the Arbitrator 21 A hearing was conducted before the Arbitrator at which the Appellant gave oral evidence and numerous medical reports were tendered. 22 The Arbitrator found that the Respondent had suffered an injury in the course of his employment (at [28], [49]), satisfying the requirements of s9 to establish general liability. 23 In respect of s9A, after considering the reports of Drs Pendel, Teoh and Synnott, the Arbitrator held that the Respondent's employment was a "substantial contributing factor" to his injury (at [29]). 24 In respect of s11A, the Arbitrator considered two discrete issues: first, whether all of the Appellant's actions after February 2001 could properly be characterised as action "with respect to … discipline"; and secondly, whether such action was reasonable. In respect of the definition of "discipline", the Arbitrator noted that: "[39] …[T]here is no doubt that what followed after formal charges were laid in August 2002 was action with respect to discipline. A question arises, however, whether the action up until that time can be so categorised." 25 The arbitrator determined to follow the authority of Commission for Safety Rehabilitation and Compensation of Commonwealth Employees v Chenhall (1992) 37 FCR 75 to hold that the Appellant's actions up to 12 August 2002 (i.e. the day that the Defendant was informed of the charges) were not "action with respect to … discipline". 26 In respect of the issue of reasonableness, the complaints pointed to four aspects of the Appellant's conduct that were said to be unreasonable: (a) the delay in investigating the claim;

(b) the failure to give the Respondent particulars of the Allegations at the outset;

(d) the Transfer. 27 The Arbitrator found that (a) was reasonable, but that (b)-(d) were unreasonable. In respect of (b), the Arbitrator said: "[43] … The failure to give details of the allegation would have greatly increased the stress factor of the Applicant's situation. For the Respondent's actions to be reasonable they must be justified. The only justification submitted by the Respondent was that such action was necessary in these cases to protect the other party. In this instance I asked Mr Saul of Counsel to identify the specific risk to [the Student] or any other party that would be created by disclosing the allegation and he was not able to do so. Having considered all of the evidence I am unable to identify any risk to any person that would have been created by informing the Applicant at the outset that there had been an allegation made by [the Student's] parents that he was involved in a sexual relationship with their daughter. In my view the failure of the Respondent to take that step was unreasonable." 28 In respect of (c), the Arbitrator said: "[44] … The order not to speak to any student placed him in a difficult position with respect to particularly his year 12 students who were depending upon his assistance and guidance in the most important year in their schooling lives. The Applicant was also placed in the position of not being able to assist [the Student] in what was for her a personally very difficult time." 29 The Arbitrator concluded (at [47]) that s11A had "no application" and (at [49]) that "the injury was not caused by reasonable action with respect to discipline or transfer". 30 Sheahan J considered the medical evidence. He said: "[84] So far as expert medical evidence is concerned, the Arbitrator had before him: · Certificates of incapacity and medical reports from Mr Sinclair's treating doctors, Dr Janusz Pendel (his GP) and Dr Ben Teoh (his Psychiatrist). · A Certificate from the State's 'HealthQuest' dated 18 August 2003. · A report from Clinical Psychologist, Vicki Garner whom Mr Sinclair consulted regularly between 30 January 2002 and 21 August 2003. · A report from Dr Inglis Howe Synnott (a consultant psychiatrist retained on the Department's behalf). · Various rehabilitation reports from CRS Australia.

[85] Dr Pendel had cared generally for Mr Sinclair since 1992, but for 'work related anxiety and depression for over 2 years' (as at his report dated 13 June 2003), which exacerbated to such an extent that Mr Sinclair could not continue as a teacher from 'early 2002'. Dr Pendel opined that Mr Sinclair's condition was 'chronic' and the prognosis 'poor'. 'In my opinion his depression and emotional problems are serious enough to render his permanently unfit for teaching duties. I strongly suggest that he retire from work in the education system', but continue with treatment and counselling. [86] Ms Garner found Mr Sinclair to have developed symptoms of depression and anxiety linked to the 'prolonged nature of the investigation'. [87] Dr Pendel referred Mr Sinclair to Dr Teoh, whose detailed report dated 28 February 2004 notes Mr Sinclair to be in good physical health (as at 26 August 2002), with no history of alcohol or substance abuse, but as presenting in a way 'consistent with a diagnosis of an adjustment disorder with depressed mood'. Dr Teoh opined that Mr Sinclair's 'problems with the investigation and disciplinary proceeding have been a substantial contributing factor to his depression. However he has other factors that could be relevant including the death of his son in 1996 - he showed evidence of prolonged grief. He had vulnerable factors in his childhood with a sick mother and unhappy home environment. His wife had left him in 2002, this has no doubt contributed to his depression as well'. Dr Teoh treated him with psychotherapy and anti-depressant medication and opined that he will require ongoing psychotherapy. [88] The HealthQuest certificate of 18 August 2003 projects that Mr Sinclair's 'health condition' will 'in all likelihood prove permanent'. It certifies him as unable to perform the inherent requirements and job demands of a Head Teacher position 'for the foreseeable future'. [89] Dr Synnott saw Mr Sinclair on 19 May 2003, on the Department's behalf, and Mr Sinclair appears to have been frank and comprehensive with him. He was working 3 days per week on planning and professional development tasks and could not face more days/hours, even though he had kept working following the tragic death of his son in 1996. He told Dr Synnott that the major cause of his then psychological symptoms was 'the delay in resolving' the complaint against him, there being 'no end in sight' after 2 ½ years. He told Dr Synnott he 'had problems' with being shown on television and being described as a 'disgraced teacher'. [90] Dr Synnott found no 'pre-existing condition', and 'no overt evidence of any current major psychiatric disorder' (P43), but diagnosed '309.28 Adjustment Disorder with mixed anxiety and depressed mood'. He opined that 'Employment with the Department of Education & Training contributed to the development of the Adjustment Disorder, but it was not the only contributing factor. Also, the Adjustment Disorder did not produce any significant psychiatric impairment and it was not a contraindication to Mr Sinclair returning to work'. Later in his report he concludes that 'employment with the Department of Education & Training was a substantial contributing factor'. Other 'causes' he found to be 'the death of his son several years earlier, the disintegrating marriage with his wife, the death of his father and the pre-existing personal vulnerability that only became apparent when he became anxious about his own future'. [91] Dr Synnott concluded: 'From a strictly psychiatric perspective, Mr Sinclair could "resume normal pre-injury duties if they (sic) wanted to"'. He found him fit to resume normal teaching duties, or the duties of a professional development officer at Parramatta District Office. Although fit, his lack of motivation 'may well be the major reason why he ultimately does not end up resuming face-to-face teaching, or being involved with students in any way in the future'. Dr Synnott would put no restrictions on Mr Sinclair resuming employment. He saw no reason to change his medication or undertake further specialist treatment. 'The "injury" will improve and the patient recover only if his motivation to work improves … There is no permanent psychiatric impairment'. [92] The CRS reports (of which No.6 in the series is missing) deal mainly with the Department's efforts, in which Mr Sinclair was cooperative, to get him back to substantial work after his inability to resume in early 2002. They note fluctuations in his fitness and/or preparedness to increase his hours beyond 16 per week, as certified in October 2002. For example, he commenced doing 3 days per week in the week of 24 February 2003, but was certified unfit for any work during some period in May/June 2003, as a result of 'increased stress due to media attention about the internal departmental investigation'. Report No.9 (dated 11 August 2003) notes that Mr Sinclair's 'mental state remains variable depending on his external circumstances', including medical and legal appointments, and concludes that 'an increase in hours/days of work is not viable until the investigation is settled'." 31 In the course of dealing with the submissions of the Appellant that employment was not a substantial contributing factor within s9A of the Act, his Honour made findings of fact based on the medical evidence. His Honour referred to the contention of the Respondent that there was "an initial onset of relevant symptoms in February 2001" (at [132]), relying on the original consultation with Dr Pendel. His Honour held: "[133] I would conclude, as apparently did the Arbitrator, that Mr Sinclair's psychological condition was evolving throughout 2001, as the investigation and redeployment continued and that it became incapacitating when specific allegations (as distinct from 'charges') were formulated." 32 This appears to place the onset of the injury in November 2001. However, the conclusion that that is when the injury became "incapacitating" does not require a finding that there was no prior injury. Nor does it prevent reference to earlier conduct that commenced the psychological process which culminated at that time.

The Judgment of Sheahan J 33 The appeal before Sheahan J was conducted pursuant to s352 of the Workplace Injury Management and Workers Compensation Act 1998, without any further witnesses giving evidence. 34 Sheahan J upheld the Arbitrator's findings that the injury arose in the course of the Respondent's employment (at [127]), and that his employment was a "substantial contributing factor" for the purposes of s9A (at [134]). 35 With respect to s11A, his Honour had "difficulty" with the Arbitrator's narrow definition of "action with respect to discipline", however his Honour considered that nothing turned on this as the Arbitrator went on to find that the Appellant's actions were unreasonable. His Honour was correct to doubt the Arbitrator's reliance on Chenhall (1992) 37 FCR 75. That case involved the determination of whether an injury arose out of "reasonable disciplinary action". Those words are necessarily narrower than the words presently applicable - "reasonable action with respect to discipline": see also Ritchie v Department of Community Services (1998) 16 NSWCCR 727 at [45]. The conclusion in Chenhall that the statutory foundation there under consideration does not extend to the investigatory process does not apply to the Act. The formulation in s11A extends to the entire process involved in, relevantly, "discipline" including the course of an investigation. 36 His Honour did not agree with all of the Arbitrator's findings on reasonableness. Contrary to the finding of the Arbitrator, his Honour found that the Transfer, that I have labelled "(d)", was reasonable (at [153]). His Honour accepted that such action was reasonable as action taken for the protection of students. 37 His Honour upheld the Arbitrator's decision that s11A did not apply.

The Grounds of Appeal 38 The grounds of appeal to this Court are: 1 The President erred in holding that the Respondent suffered injury arising out of or in the course of employment with the Appellant.

2 The President erred in holding that employment with the Appellant was a substantial contributing factor to injury sustained by the Respondent with the meaning of s9A of the Act.

3 The President erred in holding that s11A of the Workers Compensation Act 1987 did not disentitle the Respondent to compensation for injury sustained out of or in the course of employment with the Appellant.

4 In the alternative to (3) above the President erred in giving no sufficient reasons for holding that s11A did not disentitle the Respondent to compensation.

5 The President erred in finding a causal connection between injury sustained by the Respondent and employment with the Appellant.

Grounds 1, 2 and 5 39 It is convenient to consider these grounds together. 40 With respect to Ground 1, the Appellant submitted that the Respondent's injury arose outside the course of his employment because it arose from his "inappropriate behaviour". The Respondent submitted that the Arbitrator had found, on the medical evidence before him, that the investigation was the cause of the Respondent's injury, and that the investigation should properly be considered as having occurred within the course of the Respondent's employment. Further, the Respondent submitted that the Appellant was seeking to challenge a finding of fact made by the Arbitrator, upheld by Sheahan J, that is not assailable in this Court because the appeal is limited to points of law. 41 When considering this issue, Sheahan J said: [126] … In this case the injury was alleged to arise not as a result of the alleged disentitling conduct, but as a result of the investigation, which ensued from an allegation of wrongful conduct, an investigation which must be seen to occur in the course of, and arising out of, his employment." 42 Ultimately, the finding that the injury arose 'in the course of employment' was a finding of fact: WorkCover Authority of New South Wales v Walsh [2004] NSWCA 186 at [57]. There are well known circumstances in which an error of law may infect a finding of fact. The Appellant has not sought to press any such circumstance upon this Court. Ground 1 should be dismissed. 43 With respect to Ground 2, the Appellant similarly submitted that the Respondent's employment was not "a substantial contributing factor" to his injury, which was rather the consequence of his "inappropriate behaviour". The Respondent pointed the Court to the factual findings of the Arbitrator, upheld by the Sheahan J, and submitted that they were not findings with which this Court could interfere. 44 The Arbitrator found that "all of the medical opinion is that the employment was a substantial contributing factor. I am satisfied that it was" (at [15]). Sheahan J found that the Arbitrator was "entitled to make a s9A finding favourable to Mr Sinclair" (at [134]). 45 This Court has on a number of occasions held that a finding that employment is a "substantial contributing factor" within the meaning of s9A(1) is a finding of fact: see, e.g. Dayton v Coles Supermarkets Pty Ltd (2001) 22 NSWCCR 46 at [29]; McMahon v Lagana [2004] NSWCA 164 at [32]; WorkCover Authority of New South Wales v Walsh [2004] NSWCA 186 at [5], [97]. Again, the Appellant was unable to point to any error of law attendant on these findings. Ground 2 should be dismissed. 46 In respect of Ground 5, the Appellant relied upon the same reasons as were used to support Grounds 1 and 2. For the same reasons, Ground 5 should be dismissed.

Grounds 3 and 4 47 There was no submission that his Honour misinterpreted s11A. However, one issue of interpretation did arise on the submissions. 48 A literal reading of the combined operation of s9A and s11A would give rise to an absurdity. 49 Section 9A(1) imposes liability on the employer in circumstances where the employment was "a substantial contributing factor" to the injury. These words, particularly the use of the indefinite article, admit the possibility of other, possibly non-employment-related, substantial contributing factors: see Mercer v ANZ Banking Group Ltd (2000) 48 NSWLR 740 at 745; Dayton v Coles Supermarkets Pty Ltd (2001) 22 NSWCCR 46 at [22]. Importantly, liability under s9A(1) has no regard to the reasonableness of the employer's actions. All that is required is that the employment 'substantially contribute' to the 'injury'. 50 In circumstances in which a psychological injury has two or more 'substantial causes', one being employment related, s9A does not operate to exclude the employer's liability due to the presence of the other substantial causes. Nor, read literally, does s11A. Even if the whole of the employment-related cause of the injury was the product of reasonable actions with respect to, say, discipline, it might not be said to be the 'sole' or 'predominant' cause of the injury. The presence of other, albeit non-employment-related, 'substantial causes' could preclude such a characterisation. That is, the employer's action might not be the 'sole' or 'predominant' cause in circumstances where other causes have been found to be 'substantial'. 51 This issue potentially arises in this case. The Respondent's depression was also causally linked, inter alia, to the death of his father in 2001, and to the breakdown of his marriage. To interpret the provision in a literal fashion that would allow the unrelated causes to preclude the Appellant relying on s11A would be to allow a non-employment related injury to sustain an award of compensation. 52 The proper construction of the two sections requires an investigation of their legislative history. 53 Section 11A was first inserted into the Act by the WorkCover Legislation Amendment Act 1995, a year before s9A, for the purpose of applying "reasonable restrictions" upon claims for psychological injury. (New South Wales, Parliamentary Debates, Legislative Assembly, 6 December 1995, 4255.) Initially, s11A(1) was in the following terms: " 11A. No compensation for psychological injury unless employment substantial cause and not due to reasonable actions by employer (1) No compensation is payable under this Act in respect of an injury that is a psychological injury unless: (a) the employment concerned was a substantial cause of the injury, and (b) the injury was not wholly or predominantly caused by reasonable action taken or proposed to be taken by or on behalf of the employer with respect to transfer, demotion, promotion, performance appraisal, discipline, retrenchment or dismissal of workers or provision of employment benefits to workers." 54 In addition, the word "substantial" was defined by s11A(5): "11A(5) A worker's employment is not to be regarded as a substantial cause of a psychological injury merely because the employment is a real or actual cause of the injury. The term "substantial" is used in this section in the sense of real and important." 55 The global requirement that all injuries be 'substantially caused' by employment before compensation is payable was brought into being when s9A was inserted by the WorkCover Legislation Amendment Act 1996. Section 11A(1) was also amended to its present form. 56 The Attorney General, in the second reading speech, described the purpose of the amendments: "… [T]he bill will limit compensation coverage to situations where employment is a substantial contributing factor to the worker's injury or disease. This is in line with the primary objective of compensating workers who suffer injuries that have a proper link with the workplace, rather than those whose injuries have only a remote or tenuous connection with work. The amendments specify that the weaker test of considering whether an injury arose out of or in the course of employment will no longer be enough by itself. Questions relevant to whether employment was a substantial factor in a worker's injury can include the time and place of the injury, the nature and duration of the work, whether it was merely a coincidence that the injury occurred at work and the extent of any non-employment contributing factors. In the case of psychological stress claims, the substantial contributing work factor requirement for claims generally subsumes the provision introduced on 1 January 1996 that workers' employment should be a 'substantial cause' of the stress condition." (New South Wales, Parliamentary Debates , Legislative Council, 26 November 1996, 6509-6510 (The Hon Jeff Shaw - Attorney General, and Minister for Industrial Relations).) 57 The important feature of the legislative history of the two sections is the fact that, as initially framed, s11A(1) captured each of the concepts of 'substantial cause' and 'whole or predominant cause' and was inserted into the Act to place "reasonable restrictions" upon claims for psychological injury. The 'substantial cause' requirement was moved to s9A(1) when Parliament determined to make that requirement apply to all claims, thus 'subsuming' the operation of s11A(1). It is proper to continue to construe both requirements as operating in an interrelated manner. 58 To avoid the absurdity that arises from a literal approach, and having regard to the context of the legislative scheme and its purpose, it is necessary to understand s11A to mean that the employer is not liable where, to the extent that the employment contributed to the injury, that contribution was wholly or predominantly caused by reasonable action taken with respect to … discipline". 59 With respect to grounds 3 and 4, the Appellant asserted that his Honour failed to apply the statutory formula contained in s11A, or, alternatively, did not provide sufficient reasons to indicate that he had done so. 60 As outlined above, his Honour overturned one of the Arbitrator's findings on reasonableness. The Appellant submitted that it was therefore necessary for his Honour to revisit the other aspect of s11A, and to make a finding thereon. That is, his Honour should have determined for himself whether or not the Respondent's psychological injury was "wholly or predominantly caused by" the Appellant's 'reasonable actions with respect to discipline'. 61 The Appellant also contended that, on the evidence, the sole or predominant cause could only be the investigation and the delay in completing it. Both the Arbitrator and his Honour held that the delay was reasonable. On these facts, s11A was necessarily made out. This raises a point of law. (See Hope v Bathurst Council (1980) 144 CLR 1.) 62 His Honour's findings on the Appellant's unreasonable conduct, and his finding on the application of s11A that followed, were: "[154] … I agree with the Arbitrator that the Department's (a) failure to provide more detail of the allegations it was investigating, and (b) total prohibition on contact with any students at the school were not 'reasonable action[s] with respect to discipline'. To overturn those conclusions the Department on this appeal has to do more than simply say (see P25-26) that Mr Sinclair simply must have known what the allegation against him actually was, on reading the 21 February letter in full. Even if that were so, he was then confronted within days by a firm direction to have no contact at all with any student at the school. … [156] For those reasons I uphold the Arbitrator's conclusion in par [47] that s 11A does not apply to Mr Sinclair's case, and that he is 'entitled to compensation if he is in fact incapacitated'. Grounds 5 and 5A of this appeal, therefore, fail." [His Honour's emphasis] 63 With respect to s11A counsel then appearing for the Appellant made the following submission to Sheahan J with respect to the evidence of Ms Garner: "The depression was due to the extremely prolonged investigation. Not to the transfer. …" (Black 149) 64 By this submission the Appellant contended that his Honour ought to attribute the cause of the injury solely to the investigation and the delay in the investigation. On the medical evidence to which I will refer below, this submission was open to be made. 65 Furthermore, the submission was reinforced when, in the context of referring to Dr Teoh's reference to the Respondent's "problems", counsel submitted: "If the problems were him not knowing the outcome of the investigation and his future or the failure to make decisions for a prolonged period, in our submission, the Arbitrator's finding which you would follow, that the investigation was not unreasonably delayed, would dispose of that issue altogether." (Black 149-150) 66 A submission was also made that there was no basis in the medical evidence for concluding that the failure to give particulars was a cause of the injury. (Black 125).

67 Sheahan J was exercising a statutory jurisdiction to "review" the Arbitrator's decision. His Honour conducted a reassessment of the evidence with respect to whether the Appellant had discharged the onus (assumed by all parties to rest with the Appellant) that the sole or "predominant cause" of the psychological injury suffered by the Respondent was "reasonable action taken or proposed to be taken … with respect to discipline". His Honour rejected one of the grounds upon which the Arbitrator relied, i.e. that the transfer was not reasonable. Nothing in his Honour's reasons indicated that he thereupon applied the statutory formula and made his own judgment in this respect. 68 The Appellant submits that his Honour either failed to apply the statutory formula or he failed to set out his reasons. In either event a point of law arises which entitles this Court to intervene. 69 In view of the submission made to him, in my opinion, it was necessary for his Honour to form his own judgment as to whether or not the sole or predominant cause of the employer's contribution to the Respondent's psychological injury was reasonable action on the part of the Appellant, and to express reasons for that conclusion. The statutory test could not be satisfied merely by identifying two respects in which the Appellant's conduct was unreasonable. It remained necessary to determine whether, notwithstanding those blemishes in the decision-making process, "reasonable action" was the sole or predominant cause. On the submissions before his Honour, it was incumbent upon him to determine whether or not the sole or predominant cause was the employer's reasonable action, in circumstances where the investigation itself, the delay in completing it, and the Transfer, were all found to be reasonable. His Honour did not address that issue.

Substantial Wrong or Miscarriage 70 The question then arises whether the matter should be remitted back to the Commission for redetermination, or some other order be made. This Court is given a power to remit by s353(2) of the Workplace Injury Management and Workers Compensation Act 1998 which provides: "353(2) The Court of Appeal may, on the hearing of any appeal under this section, remit the matter to the Commission constituted by a Presidential member for determination by the Commission in accordance with any decision of the Court and may make such other order in relation to the appeal as the Court thinks fit."

71 The Respondent submitted that that power is constrained by Pt 51 r 23 of the Supreme Court Rules, which states: "23(1) The Court of Appeal shall not order a new trial: (a) On the ground of misdirection, non-direction or other error of law; … unless it appears to the Court of Appeal that some substantial wrong or miscarriage has been thereby occasioned." 72 In Gerlach v Clifton Bricks Pty Ltd (2002) 209 CLR 478, Gaudron, McHugh and Hayne JJ noted in respect of the predecessor to Pt 51 r 23 that: "[10] … As the terms of [Pt 51 r 23(1)] make plain, it is not enough to point to some error of law to warrant ordering a new trial. More must be demonstrated - that some substantial wrong or miscarriage of justice has been thereby occasioned." (at 485) 73 In Stead v State Government Insurance Commission (1986) 161 CLR 145 the High Court noted at 145 that "an appellate court will not order a new trial if it would inevitably result in the making of the same result as that made by the primary judge in the first trial." Applied to this case, the determination of whether a substantial wrong or miscarriage has occurred depends upon whether it was reasonably open to his Honour to consider that the Respondent's injuries were "wholly or predominantly caused" by the Appellant's reasonable actions with respect to discipline. However, this Court must proceed cautiously before determining that his Honour could not have found that the s11A defence was made out. 74 The Appellant's principal submission was that the investigation and the delay were the 'whole or predominant' cause of the injury. The Appellant submitted that there was nothing on the evidence that could support a finding that there was any other cause than the investigation and the delay. Accordingly, it was submitted that there was no other finding open to his Honour other than to find that the injury was "wholly or predominantly caused" by the Appellant's reasonable actions. 75 The Respondent submitted that insufficient evidence was put forward by the Appellant to enable Sheahan J to determine the 'whole or predominant cause' issue in favour of the Appellant. The Respondent submitted that if the Appellant wished to rely upon s11A, then it needed to put forward sufficient evidence to enable it to meet its onus. The Respondent further submitted that the reason that the Appellant did not put forward evidence of this character before either the Arbitrator or Sheahan J is because it elected to run the case on the credit of the Respondent. Finally, the Respondent submitted that the Appellant had compromised its position by initially accepting liability, which should be understood as an admission that s11A did not disentitle the Respondent from compensation.

The Medical Evidence 76 I have set out above his Honour's summary of the medical evidence. In addition, the Respondent said in a document entitled "A Statement Relating to My Mental Decline Feb-Dec 2001" that was tendered before the Arbitrator and Sheahan J: "On 25th July [2001] I attended the first of six free counselling sessions with Fran Fagan, a psychologist in Parramatta. On 9th August she determined that I was clinically depressed and expressed the opinion that it was a result of the treatment I had received from my employer: especially being removed from my role, instructed not to speak to students (many of whom live near by and frequent the same shops as I normally would etc) and kept in the dark." 77 This evidence is hearsay and is entitled to less weight than evidence from the psychologist. 78 Ms Garner was the only expert who gave a clear indication of a sole or predominant cause. The Appellant placed considerable emphasis on her Report. She said: "I have seen Mr Sinclair for regular psychological consultations, approximately fortnightly between 30/10/2002 and 21/08/2003, for treatment of symptoms of depression and anxiety resulting from the prolonged nature of the investigation by the Child Protection Investigation Department of the NSW Education Department. … Mr Sinclair was informed that he was dismissed by the Education Department on 18/08/2003. Although this decision has contributed to a worsening of his depression as would be expected his chronic depression as a result of the extremely prolonged investigation precludes him from returning to work for at least the next few months." [Emphasis added] 79 The other medical evidence does not address this issue in terms. 80 The report of Dr Teoh noted that the Respondent: "…presented with a history of significant depression when I first saw him in August 2002. He was experiencing problems with his employer. He told me that he was notified of 'unprofessional conduct, and that he was transferred out of school' He had consulted a psychologist, Vicki Garner, but his depression had persisted despite counselling and anti-depressants prescribed by his general practitioner. The process started on 23rd January 2001 and no clear decisions were made for a prolonged period. Mr Sinclair said that not knowing the outcome of the investigation and his future made him more depressed. … His problems with the investigation and disciplinary proceeding have been a substantial contributing factor to his depression. …" (Blue 67) 81 This makes no specific mention of either the failure to furnish particulars or the No Contact Direction, but draws attention to the long period of time taken by the investigation overall. 82 The Report of Dr Pendel, dated 13 June 2003 states that: "I have treated Mr Sinclair for work-related anxiety and depression for over two years. In early 2002 his depression exacerbated to a point when he was unable to continue with his duties as a teacher of English" (Blue 25) 83 The certificate, dated 11 September 2003, prepared by Dr Pendel stated that the Respondent had suffered from depression for more than two years, that is, prior to September 2001. He had prescribed antidepressant medication in September 2001. The certificate of Dr Teoh, of the same date, estimates the duration of the injury at 1.5 years, that is, March 2002. 84 The report of Dr Synott notes that the Respondent claimed that the cause of his injury was: "the investigation into his misconduct (and the drawn out nature of the investigation)". 85 The use of the word "and" suggests that both the delay and the investigation were causes. 86 Only Ms Garner gave evidence which expressly addressed the s11A issue. Understandably, the expert evidence was generally focused on the s9A issue, i.e. did employment substantially contribute to the injury. There was, however, uncontradicted expert evidence which identified as the sole cause conduct which was found to be reasonable. It was open to be accepted and the other expert evidence did not detract from it and, with regard to a test of "predominance", may be seen to be supportive. 87 In my opinion it was open to his Honour to have concluded that the Appellant had made out its s11A defence on the expert evidence before him. This Court should remit the matter.

The 'Admission' Issue 88 The Respondent submitted that the Appellant, by not contesting liability between November 2001 and August 2003, has made an admission of some character that ought to bear upon this Court's assessment of the evidence. 89 These is some authority for the proposition that payment of compensation is prima facie evidence of a compensable injury: see Vergis v Brownbuilt Ltd (1973) 5 SASR 591; Christiansen v JW Simpson & Co Pty Ltd [1971] SASR 412; Nizich v Royal Prince Alfred Hospital [1973] WCR 291; Way v Penrikyber Navigation Colliery Co Ltd [1940] 1 KB 517. 90 Nevertheless, in my view, this submission should be rejected. 91 First, it would involve a substantial stretch to apply these principles to the present circumstances that involve the complex interaction of statutory tests. While it might be appropriate to attach some small weight to such an admission in cases involving simple questions of fact (e.g. whether there was an employment injury), it would not be appropriate to develop that principle to cases of this complexity. In particular, it would be inappropriate to see such action as an admission that the statutory 'whole or predominant test' is established. 92 Secondly, any weight that could be attached to such an admission must be of the slightest weight given that medical reports have been tendered. 93 Finally, I would particularly reject any suggestion that an employer might adversely affect their position in the Commission by not fully investigating each possible defence prior to making their first payment. Such an outcome would have the effect of deterring precisely the kind of reasonable behaviour that beneficial legislation such as the workers compensation scheme seeks to encourage.

Conclusion 94 There is evidence which suggests that the Respondent did manifest psychological difficulties prior to the occurrence of delay. That does not, however, mean that there was personal injury from which he was suffering at the time. This issue fell to be determined by Sheahan J. 95 The thrust of the medical evidence was directed to establishing that employment was a substantial cause of the injury from which he was then suffering. The only medical evidence which expressly addressed the question of whether aspects of the Appellant's conduct was the sole or predominant cause is the evidence of Ms Garner. She states that the cause was the delay, which conduct both the Arbitrator and Sheahan J found to be reasonable. His Honour did not determine that issue. For that reason alone this appeal should be allowed. 96 Furthermore, the case before Sheahan J primarily focused on the whole course of Departmental conduct as constituting the relevant "substantial contributing factor" for purposes of s9A. His Honour appeared to approach the s11A issue on the same basis. This is an appropriate course to adopt in a context concerned, and concerned only, with psychological injury arising from matters such as "demotion, promotion, performance, appraisal, discipline, retrenchment or dismissal". Such actions usually involve a series of steps which cumulatively can have psychological effects. More often than not it will not be possible to isolate the effect of a single step. In such a context the "whole or predominant cause" is the entirety of the conduct with respect to, relevantly, discipline. 97 His Honour's analysis, as that of the Arbitrator, appears to assume that any specific blemish in the disciplinary process, however material in a causative sense or not, was such as to deprive the whole course of conduct of the characterisation "reasonable action with respect to discipline". In my opinion, a course of conduct may still be "reasonable action", even if particular steps are not. If the "whole or predominant cause" was the entirety of the disciplinary process, as much of the evidence suggested and his Honour appeared to assume, his Honour did not determine whether the whole process was, notwithstanding the blemishes, "reasonable action". For this alternative reason the appeal should be allowed. 98 The Appellant seeks an order for costs both in this Court and before Sheahan J. The Respondent succeeded on almost all points below and may well succeed entirely on remitter. The order for costs should be set aside but left in the discretion of the Commission on remitter. His Honour may well find it appropriate to restore the order in whole or in part. In this Court the Appellant was successful in part. The Respondent should pay half the Appellant's costs in this Court.

2 The proceedings are remitted to the Commission for determination in accordance with these reasons.

3 Order the Respondent to pay half the Appellant's costs of the Appeal.

4 The Respondent receive a certificate under the Suitor's Fund Act if otherwise entitled. 99 HODGSON JA: I agree with Spigelman CJ. 100 BRYSON JA: I agree with Spigelman CJ. **********

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

(1998) 16 NSWCCR 727

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Cases Cited (11)