Circumstances leading to the litigation
211 When he commenced employment with the appellant, the respondent was given a list of clients for whose business he was responsible. Other names were given to him from time to time, and he himself added names. At this time (and until about mid 2002) the appellant was singly responsible for the business of the clients on his list.
212 As a result of an initiative in late 2001 by Mr Sutherland, the concept of a "partnership approach" was introduced into the work of investment advisers in the appellant's Canberra office. Under this concept, a small group of investment advisers (in each case referred to in the evidence, three) would share a single list of clients for whose business they were jointly responsible. The concept was said to have a number of advantages over the existing system in which each adviser had his or her own list. In practice, and as explained by Mr Sutherland to the other advisers at the time, what was required was that financial advisers who proposed to form a "partnership" should draw up a "business plan" to which they agreed, and which dealt with the way their partnership would work in practice, the way clients' needs would be serviced by the members of the partnership, and how the total revenues of the partnership would be allocated as between those members (eg for the purposes of the appellant's incentive-based remuneration). Mr Sutherland himself entered into a partnership with two other investment advisers in the Canberra office. This was referred to as the "RSL Partnership".
213 In 2002, the respondent and two other investment advisers, Ms Dal Bon and Mr Keogh, decided to form their own partnership, which became known as the "DKN Partnership". They drew up a business plan and showed it to Mr Sutherland. The DKN Partnership commenced operation on 1 July 2002.
214 In the discussion paper originally presented by Mr Sutherland on the partnership concept in December 2001, there was a "frequently asked questions" section. One of the questions was: "what if a member of the team wants to leave the partnership?" Mr Sutherland's response was that the exit of a member from a partnership was "highly discouraged". He said that a partnership was similar to a marriage, in that it was a long-term commitment. He added:
In the rare case that a partner insists on leaving the partnership, that partner will leave his/her clients behind with the partnership, with the exception of any clients who insist on dealing with the exiting partner.
In the business plan drawn up for the DKN Partnership, the respondent and his colleagues had agreed on the following "exit strategies":
The decision to enter into a team arrangement has not been taken lightly. Under the team arrangement, if a team member decides to exit the partnership, then all clients will remain within the team structure with subsequent revenue to be spread 50:50.
215 On about 2 May 2003, Ms Dal Bon announced that she would leave the employ of the appellant on 30 June 2003. This development squarely raised the question of the allocation of the existing clients of the DKN Partnership. The respondent and Mr Keogh accepted that they would be unable to provide a proper service to all the clients who had been on their combined list with Ms Dal Bon. According to the respondent, there was a suggestion, with which Mr Sutherland initially agreed, that some "relatively inactive family groups" should be transferred to an online service operated by the appellant. After some further development of that proposal, however, Mr Sutherland changed his mind and, on 10 June 2003, announced that a large number of high-value clients would be transferred out of the DKN Partnership. There followed an acrimonious conversation between the respondent and Mr Sutherland. According to his Honour -
Mr Sutherland made a number of critical and offensive comments, including telling [the respondent] he was 'disgusted' with his 'greed', that he was 'lazy' and whingeing'. [The respondent] claimed in evidence that he felt Mr Sutherland had a conflict of interest, being both the person allocating clients and a member of team RSL, and that he suggested Mr Sutherland appoint an independent person to mediate the dispute over allocation.
When the respondent told Mr Sutherland that he would speak to Paul Heath (the Manager, NSW Private Clients, of the appellant) about the matter, Mr Sutherland replied "you speak to Paul Heath and you will get nothing".
216 The respondent and Mr Keogh did speak to Mr Heath. They complained to him of Mr Sutherland's decision to reallocate a good many of the higher value clients away from the DKN Partnership. According to a file note made by Mr Heath, the concerns of the respondent and Mr Keogh were, first, that they did not understand the reasons for the reallocation policy; that they did not feel that the reallocation was in the best interests of the clients; and that they were concerned about their relationship with Mr Sutherland, particularly insofar as Mr Sutherland had called them "greedy". They did not offer any solutions to Mr Heath, who made it clear to them that he did not want to interfere with Mr Sutherland's right to run the Canberra office, and that he would not offer an opinion without asking Mr Sutherland's point of view. Before Mr Heath could speak to Mr Sutherland, the former received an email from Mr Keogh, explaining his difficulty with Mr Sutherland's change in client allocation policy, and concluding with the following paragraph:
I am not aware of any intention of Rod to speak with you on this issue following our discussion with him. My view on the matter is that unfortunately reason has not won the day which is disappointing however we did decide before going ahead with talking with you, that we would accept any decision as final and we have to accept that. If you think that any issue needs to be raised as a result of our discussions with you please feel free to do so as everything is now out in the open otherwise I guess it is a closed matter.
When Mr Heath did speak to Mr Sutherland, the latter said that "the issue has now been sorted out", and the former said that he had told the respondent and Mr Keogh that he did not want to interfere, but that he would have been concerned if Sutherland had said to them "don't call Paul". He told Sutherland that "we will always support you however you must not shut down the staff".
217 It seems that the concluding paragraph of Mr Keogh's email was not an accurate representation of the respondent's position. At a meeting on 8 July 2003, at which Mr Sutherland announced the distribution of the new client lists, he (Sutherland) said: "if I become aware of any adviser having had previous contact with clients without my authorisation there will be trouble". While saying this, Mr Sutherland looked directly at the respondent and Mr Koegh, and used a very intimidating tone.
218 Two days later, on 10 July 2003, there was a discussion between the respondent and Mr Sutherland about the latter's allegation that the former had had contact with a previous client without the latter's authority. Mr Sutherland told the respondent that he was "tired of seeing you drag your feet around the office". The respondent told Mr Sutherland of the adverse financial impact which he and his family would suffer as a result of the reallocations, and Mr Sutherland replied: "I am not responsible for your financial situation, I am not your father, and if you have problems at home you shouldn't bring them to work."
219 On 28 July 2003, the respondent wrote to the human resources section of the appellant. He said that he wrote with "a considerable degree of trepidation" to express his concern over issues that had occurred in the Canberra office. He said that those issues had caused him a significant degree of "angst". He recited at length the events which had followed Ms Dal Bon's announcement of her imminent departure. He complained about the reallocation of clients away from the DKN Partnership. He referred to the statements made by Mr Sutherland on 8 and 10 July 2003. He referred to Mr Sutherland's aggressive statements and demeanor. He implied that Mr Sutherland had reallocated clients, at least in some cases, to his own advantage. He said that he viewed Mr Sutherland's remarks and behaviour at the meeting on 8 July 2003 as "extremely intimidating and threatening". He said:
Upon further investigating the JB Were Career Mentor Program - Your Role as Manager in Career Development - quoting 'since discussions will take place about personal issues, including doubts an individual may have about their future direction or about personal weakness, the role demands sensitivity to the individual feelings. The individual needs to have a relationship of trust and confidence'. Unfortunately, my trust and confidence in Rod is non-existent.
220 The respondent said that he had found Mr Sutherland's comments and actions "both threatening and disturbing", and that he felt "a considerable" degree of anxiety, stress and discomfort" and was "reluctant to accept the decision as final". He enclosed with his letter a copy of an item extracted from the Australian Financial Review of 22 July 2003 headed "Bully Bosses a Health Risk for Workers". The burden of that article was that bullying by bosses in the workplace can affect employees' blood pressure, and increase the chance of heart attack or stroke. The respondent said that the item reinforced his view that "Canberra Management in recent weeks has displayed a considerable number of these traits." He added: "It has become apparent that Rod has given little consideration to the success of advisers outside of the RSL team as the situation appears to be stained with nepotism". The respondent asked for his letter to remain confidential.
221 The respondent's correspondence came to the attention of Gina Jowett, the appellant's Human Resources Manager based in Sydney. She immediately telephoned the respondent and made arrangements to speak at a time when he was not in the office. They had a lengthy telephone conversation on 6 August 2003. According to a file note made by Ms Jowett, the respondent told her that he wanted something done by management about what he viewed as "a case for discrimination and intimidation". Ms Jowett said that there were two issues - the client distribution issue and the behavioural issue in the office. The respondent disputed that, saying that intertwined there was one situation only, not separate issues. He said he was not happy, and was stressed. The environment was not conducive to allow him to do his job appropriately, and management had done nothing about it. He said that the only way forward was for Mr Sutherland to be removed from his role, and that he would not be satisfied until that step had been taken. Ms Jowett said that, as that was the first discussion which they had had, it was an opportunity for him to elaborate on his concerns. She acknowledged the respondent's feelings, and said that they needed to "work through" the matter. She explained the appellant's complaint process to the respondent. The respondent indicated that they would "just wait and see" and that, for him, there was only one option to resolve the matter. Ms Jowett said that she would investigate the situation.
222 Ms Jowett telephoned the respondent about two days later. Again, the respondent said that it was up to the appellant to make decisions surrounding client allocation. He said that Mr Sutherland had become aggressive and intimidating, and was "demonic" and "on fire" and in no mood to negotiate. The respondent said that he could see the whites of Mr Sutherland's eyes, and that he had never seen anyone that far out of control before.
223 Although the timing of the steps next taken by Ms Jowett is unclear, it does appear as though a period of about at least two weeks passed before she did anything else in relation to the respondent's complaint. In a conversation which Ms Jowett put as "towards the end of August", she discussed the matter again with Mr Heath. Mr Heath said that he and another member of the appellant's staff identified only as "Chris" were working with Mr Sutherland to have him step aside. Apparently he said there were numerous discussions occurring in the background which would result in Mr Sutherland stepping aside.
224 Ms Jowett contacted Mr Sutherland, and arranged for him to meet her at the appellant's Sydney office on 27 August 2003. It was then that she showed Mr Sutherland the respondent's letter of 28 July 2003 for the first time. Mr Sutherland denied most of the respondent's substantive allegations, but agreed that morale was bad in the Canberra office. Ms Jowett told Mr Sutherland that at a minimum some of his comments had been unprofessional, and that he needed to make sure that he did not put himself or the appellant in "this position" again. Mr Heath joined the discussion, and told Mr Sutherland that lack of transparency and consistency of decision making had caused a loss of trust and confidence in his management style, and he needed to consider his position carefully. Mr Sutherland said that he found his role difficult, and that he would think about that feedback carefully.
225 Although there is no specific record of what passed, it seems that Ms Jowett and the respondent had a number of telephone conversations about the respondent's complaint in the months of August, September and October 2003. In his affidavit, the respondent said there were six to eight such conversations.
226 On 10 October 2003, Ms Jowett arranged for the respondent to fly to Sydney, and on 15 October 2003 he did so, and there met Ms Jowett and Mr Heath. Ms Jowett told the respondent that Mr Sutherland was stepping aside from his role as Canberra manager. To her surprise, the respondent indicated that he already knew that fact. He raised a new complaint about Mr Sutherland, namely, that one of his clients, a Mr Alan Barter, had been manipulated by Mr Sutherland to discontinue receiving service from the respondent, and to commence receiving service from Mr Sutherland. There was some discussion about that new complaint.
227 At this meeting, there was also discussion about the respondent's original complaint. According to Ms Jowett's file note, she and Mr Heath told the respondent that, without knowing what his expectations were, it was difficult to work towards an outcome. He said he was too stressed to think about the situation, that he had not been feeling well, and that one option would be for the appellant to allow him some time off work. Ms Jowett said that he was welcome to take time off work, either as holidays or (with a medical certificate) as sick leave. The respondent said he was frustrated about the whole situation, and that when he came into the office each morning (according to Ms Jowett's notes) "he felt sick, he actually hated [Mr Sutherland] and hated the sight of him - just looking at him made him feel ill". Ms Jowett said that that was a concern to her, and referred to the appellant's employee assistance program. She explained the availability of a confidential counselling service provided by an outside organisation and available to the respondent. A few days after this meeting, Ms Jowett completed an authorisation form for that counselling service to be provided to the respondent, at the expense of the appellant.
228 As mentioned in the meeting on 15 October 2003, Mr Sutherland stood aside from the position of Manager of the Canberra office in that month. He was replaced by another investment adviser, Mr Dorian Bontempelli. Ms Jowett discussed the respondent's new complaints regarding Mr Barter's account with Mr Bontempelli. When the matter was put to Mr Sutherland, he said that it was Mr Barter himself who had decided to take his account away from the respondent.
229 Some time in November 2003, Ms Jowett telephoned the respondent to advise him of the outcome of his complaint. She said that his concerns had been taken seriously, and that she had investigated the situation raised by his complaint, as well as the incident relating to Mr Barter. She said that Mr Heath had instructed Mr Sutherland that any transfers of clients between staff members in the Canberra office would in future be referred to Mr Bontempelli. She said that Mr Bontempelli and Mr Heath "would investigate further the situations and make decisions around that". The respondent reacted to this news with disbelief. He asked: "what else are you going to do?" Ms Jowett said that she felt that the situation had been addressed in the most appropriate way. She said that the combination of Mr Sutherland moving from the role of Manager, and the instructions that had been given to him, "were the most appropriate course of action in this point in time". The respondent said that the issues had been "swept under the carpet", and became quite hostile over the telephone. He said he wished to see the response in writing as soon as possible, and that he was not satisfied.
230 On 1 December 2003, the respondent attended at the rooms of his General Practitioner, Dr Jamieson. According to a letter which Dr Jamieson wrote to the respondent's solicitors on 15 April 2005, the respondent presented in a most distressed state, and related a six month history of workplace conflict. He told Dr Jamieson that the conflict was of such a degree that his career in the industry as a whole was compromised, and that it had had a very serious effect on his mental state, on his marriage and on his family life. Dr Jamieson said the respondent presented with symptoms of a major depressive disorder, ie depressed mood, poor self esteem, an extremely poor view of his future, a great sense of failure and withdrawal. Dr Jamieson prescribed anti-depressant medication. On the same day (1 December 2003), the respondent commenced a period of sick leave, and remained on leave until 2 January 2004.
231 In a letter to the respondent dated 1 December 2003, but not sent until 8 December 2003, Ms Jowett said:
I have now completed an investigation into your complaints. Following my review of the issues you have raised, I acknowledge that an apparent lack of transparency and failure by Rod to clearly communicate his decisions regarding the allocation of client accounts has contributed to the issues you have raised in your complaints concerning your relationship with Rod. However, I confirm that it was necessary and appropriate for Rod in his position as the Canberra Manager to make decisions regarding the operations of the Canberra office. Rod's decisions regarding the allocation of client accounts following the resignation of Gabrielle Dal Bon were appropriate having regard to the needs of the firm's clients and the operations of the Canberra office. Although, I accept that you have felt distressed and upset on occasions as a result of the issues giving rise to your complaints, I am satisfied that Rod has not attempted to intimidate you or cause you stress during his discussions with you about the allocation of client accounts.
As you are aware, Rod has stepped down from the position of Canberra Manager and is now employed in the position of Investment Adviser in the Canberra office. Dorian Bontempelli has subsequently been appointed to the role of Canberra Manager.
In your letter dated 10 October 2003 you make a complaint in relation to the transfer of the Barter account to Mark Keogh. Following my investigation, I have found no evidence to support your claim that the confidential complaint made by you against Rod has been discussed by him with any clients or that Barter's decision to transfer its account to Mark was related in any way to your complaint against Rod.
232 The respondent did not accept the resolution of his complaint by Ms Jowett. He required the matter to be referred further up the line, as a result of which it was dealt with by Ms Diane Jacobs, the Group Manager, Human Resources, of the appellant. Although she did not give evidence, a file note made by Ms Jacobs of a meeting with the respondent on 17 March 2004 was admitted into evidence. According to that note, the respondent said that the "key points were around the allocation of clients". He felt his job was under threat. He said he was "off his rocker" and that he would not "go there now". Ms Jacobs noted that the respondent looked "as if he would cry". He felt that no one was listening to him. He alleged that Mr Sutherland had stepped down for family reasons, not because of his complaint. He felt his complaint was being ignored. He explained that, in December 2003, he was very stressed, he sought counselling, he was referred to his doctor, he was put onto medication, he was "suicidal", he could not face going to work, he was on medication during the day and on sleeping pills at night, and he felt isolated and not supported. Mr David Evans (the Managing Director - Retail for NSW of the appellant), who was at the meeting, told the respondent that he had been through a lot, and apologised. He said that it was not the case that the matter had not been treated seriously by the appellant. He said that the feedback given by the respondent to Mr Heath had been considered "and formed a real part of the decision regarding [Mr Sutherland] not continuing in the role of Manager." Ms Jacobs herself said that it was handled in the way it was to help the respondent "retain confidentiality and dignity".
233 On 29 March 2004, Mr Evans wrote to the respondent with a financial offer, being a minimum bonus payment of $100,000 for the six months to 30 September 2004. The respondent did not accept that offer. Instead, he sought financial compensation for what he said was a loss of $300,000. Further, he wanted the appellant to rectify the impact of Mr Sutherland's reallocation of clients. He said that the obvious "method" would be "to undo the unfair distribution and re-transfer clients with annual brokerage/fee revenue totalling $300,000 to my adviser code … as at 1 July 2004." He further sought that the RSL Partnership (of which Mr Sutherland was a member) be dissolved and its members relocated to other dealing desks.
234 At the conclusion of a further meeting held on 22 June 2004, Mr Evans handed the respondent a letter which referred to his rejection of the offer contained in the letter of 29 March 2004, which contained a denial that the appellant was liable to compensate the respondent as proposed by him, which said that the matter was now "closed and no further offers of assistance will be made", and which stated that, if the respondent were fit for work, he would be expected to carry out his full range of duties and responsibilities.
235 On 9 July 2004, the respondent saw a Clinical Psychologist, Mr O'Neill, on reference from Ms Jowett. In the concluding section of a lengthy report written by Mr O'Neill that day, he said that the respondent met the criteria for a major depressive episode by December 2003, and that the symptoms which he displayed definitely interfered with his ability to function both at work and at home. The respondent still (ie in July 2004) had signs of a low grade depression consistent with a dysthymic disorder. Mr O'Neill said that the respondent was convinced that he had been unfairly treated by Mr Sutherland, and was highly sensitive about how his concerns were being dealt with by the appellant, and his perception that Mr Sutherland had been able to get away with some unacceptable, unprofessional behaviour.
236 The respondent commenced sick leave again on 6 August 2004. On 31 August 2004, his sick leave entitlement expired. He was paid salary for the next two weeks, and then had two weeks' leave without pay. He then used accrued annual leave until 30 November 2004, when that too expired. From 1 to 6 December 2004, the respondent was on leave without pay.
237 On about 1 December 2004 (when the respondent had used up all his leave), the appellant wrote to him, seeking an indication as to his intentions to return to work and resume normal duties. The respondent replied by way of a letter from his solicitors dated 6 December 2004. It was said that the respondent had for some time been unwell because of various actions taken by the appellant. It was said that, if the respondent were to return to work at that time, it would have an adverse consequence for his health. The appellant responded by letter dated 7 December 2004, indicating that, in the circumstances which obtained, it regarded the respondent's employment as having terminated. The trial Judge treated this letter, correctly I consider, as a termination of the respondent's employment by the appellant.
238 The respondent was subsequently seen by four different psychiatrists. His solicitors referred him to Dr Lucas, who saw the respondent on 20 April 2005. Dr Jamieson referred the respondent to Dr Lowden, who saw him on eight occasions commencing on 26 April 2005 and concluding on 23 December 2005. Solicitors for the appellant or its insurer referred the respondent to Dr Samuell, who saw him on 6 September 2005 and 6 April 2006. They also referred the respondent to Dr Synott, who saw him on 24 October 2005 and on 31 March 2006. Each of these practitioners provided a written report as to the respondent's condition - and in some cases answered specific questions on such matters as causation - but none of them gave evidence before the trial Judge. The parties proposed, and his Honour accepted (initially with some reservations, it would seem) a procedure whereby the written reports of the practitioners were handed to his Honour as a joint exhibit. Based only upon those reports, his Honour was obliged to identify the medical evidence which he would accept.