1. Before turning to a consideration of each of the grounds, I will consider some of the authorities which touch upon a worker's subjective reaction and perception to events in a workplace.

Psychological disorder caused by a worker's subjective reaction to workplace events

1. Workers are entitled to compensation under the Act where they suffer an injury arising out of or in the course of any employment. A psychological disorder may be caused by a worker's subjective reaction to events and circumstances actually occurring in the workplace, provided that the reaction 'has a real connection [with those events] - as distinct from an event [that the worker] simply imagined was connected with [the] employment'.[52]
2. In State Transit Authority of New South Wales v Chemler,[53] Spigelman CJ (Bryson AJA agreeing) discussed a worker's 'perception' of events occurring in the workplace and emphasised that whether an injury arose out of or in the course of any employment 'gave rise to a test of causation'.[54] Spigelman CJ went on to say that:[55]

Employers take their employees as they find them. With respect to psychological injury, there is a 'eggshell psyche' principle which, like the equivalent 'eggshell skull' principle is a law of compensation not a liability.

1. In the same, case Basten JA noted that compensation for 'injury' depended upon causation and 'to focus on the concept of 'perception' may obscure the real issue'.[56] Basten JA also referenced the judgment of Windeyer J in Federal Broom Company Pty Ltd v Semlitch[57] that an:

incident which precipitated or stimulated, however irrationally, the worsening of [the worker's] condition could be regarded as a factor contributing to it.[58]

1. In Federal Broom Company a worker with a history of functional mental illness suffered a muscular strain in the course of her work. She sought workers compensation for ongoing incapacity to work which resulted from her delusional condition of the extent of her injury. The worker hurt herself in a minor way while at work and subsequently, for no ascertainable reason, she suffered pain in her right side. This pain was found to be delusional. The High Court held that an event which a disordered mind irrationally attributes physical suffering to, which is real to the patient but delusional, can properly be called a contributing factor to the injury.
2. There is no requirement at law that a worker's perception of the events must have been one that passed some quality of test based on an 'objective measure of reasonableness'.[59]
3. Recently, the Victorian Court of Appeal[60] observed that authorities recognise the possibility of a worker recovering 'no fault compensation' as a result of a perception by the worker arising from conduct which occurred in the workplace, and, that it is not for the court to determine where the truth lies in terms of the alleged conduct, but, nevertheless, the court must be satisfied that some conduct or circumstance actually occurred.[61]
4. A worker's subjective reaction to objectively proven facts was referred to by counsel in Pilbara Iron Company (Services) Pty Ltd v Suleski[62] as the worker's 'Azmitia' perception, an expression seemingly based on a decision of McCann DCJ in Department of Education v Azmitia.[63] In this appeal, Mr Morgan's counsel also referred to a worker's subjective reaction to objectively proven facts as an Azmitia perception. In Azmitia McCann DCJ held that a stress claim is compensable if it is caused by a worker's subjective reaction to objectively proven facts. Further, it is not necessary for a worker to prove that his or her subjective perception of proven facts was reasonable.[64] If any shorthand expression is to be used, it may be preferable to refer to the test postulated in Wiegand[65] which first recognised stress-related claims under Workers' Compensation legislation, which is the decision McCann DCJ followed in Azmitia. The three-step test recognised in Wiegand was explained succinctly by Perram J in Dean v Australian Postal Corporation:[66]

(b) whether it created a perception in the mind of the employee (whether reasonable or unreasonable in the thinking of others); and

(c) whether that perception contributed to, in a material degree, a contraction (or an aggravation) of the employee's ailment.[67]

1. In the context of stress-related claims under the Act, in Pilbara Iron, Herron DCJ noted:[68]

If there is an event in the employment which significantly contributed to stress suffered by a worker, the worker will have established the necessary casual connection but if the stress was caused by an excluded matter the worker is not entitled to compensation. If a person is more vulnerable to stress than a person of so-called normal fortitude, the employment remains a contributing factor to that stress. If the stress-related disease would not have been suffered but for the employment, that is, but for the employer taking the type of action referred to in s 5(4) the employment would have significantly contributed to the contraction of the disease. To prove the employment contributed to the contraction of a disease a worker does not have to prove that objectively his response to the employer's action was reasonable or that a person of normal fortitude would have suffered the same reaction.

1. In Pilbara Iron Herron DCJ observed that a worker's perception of unfair treatment which causes a stress-related disease is not compensable if the perceived unfair treatment was part of an action taken by the employer which was an excluded matter within s 5(4) of the Act.[69] His Honour noted:

[I]t was unnecessary to consider ... Mr Suleski's perception (because it) only arose from the fact of the implementation of the PMP.[70] It is clear from the evidence, particularly the medical evidence, that the disease suffered by Mr Suleski would not have been suffered if he had not been placed on the PMP.

1. As I have already observed, a difficulty with each of grounds 1, 3 and 4 is that no challenge was made by Mr Morgan to the finding of the arbitrator[71] that the 'stronger, main or leading element' of Mr Morgan's overall concern that caused his stress-related disease was his loss of status or demotion from an executive leadership position to a classroom teacher at the school. While the arbitrator canvassed other potential causes of his stress and, for reasons I develop, may have approached the question in the wrong way, without a challenge of the finding at Reasons [177] it does not appear that any other result might have occurred.
2. In the case of Pilbara Iron, which I have set out in [48] and [49] above, as Herron DCJ explained, the critical enquiry is whether the predominant cause of stress, taking the worker as found, arises from an excluded matter, not whether the worker's particular reaction to that matter was objectively reasonable. This approach was consistent with the statutory purpose of s 5(4) of the Act. That section recognises that certain employment processes are inherently stressful but excludes compensation unless the employer's conduct is unreasonable and harsh. Allowing compensation based solely on a worker's subjective perception, without considering whether the perception related to an excluded matter, would effectively circumvent the exclusions, as a particular reaction could transform what should be an excluded matter into a compensable injury.
3. For the reasons which I set out in the next paragraphs, grounds 1, 3 and 4 relate to Mr Morgan's subjective perceptions relating to the TLS position, African student interactions and Ms Prendergast undermining his attempts to attain the TLS position. These were all events in 2021. Although the arbitrator made a finding relating to Ms Prendergast undermining Mr Morgan's attempt to obtain an executive level position in 2020, that was tied up with the finding made about demotion. Namely, the predominant and significant cause of Mr Morgan's stress was the ending of his employment agreement without obtaining a comparable or higher executive position with a CEWA school. As such, these are matters which fit within the definition of demotion as found by the arbitrator.
4. The arbitrator set out a chronology of relevant events at Reasons [18] - [32].[72]
5. In 2020 a restructure of the executive leadership team of the school was announced meaning that Mr Morgan's executive contract would not be extended beyond the end of 2020. On 14 October 2020 Mr Morgan applied for the vice principal's position at CBC Fremantle. He was not successful in obtaining an interview let alone the position. On 29 October 2020, after speaking to someone about his CBC application, Mr Morgan formed the mistaken view that Ms Prendergast was working against him in his attempts to secure other executive positions. On or about 16 December 2020, he met with Ms Prendergast and accused her of working against him. His executive contract ended on 31 December 2020 and he returned to classroom teaching at the beginning of 2021.
6. The 2021 incidents occurred from about 19 January 2021 when Mr Morgan applied for a TLS position and was told on 21 January that he would not be shortlisted for interview. He initiated a complaint concerning Ms Prendergast on 24 January 2021. The African student interactions occurred between 23 and 26 February 2021. He was asked to attend a meeting about his conduct regarding the African student interactions on 4 March 2021. The next day, Mr Morgan said he would not address any investigation until a meeting about his interest in the then-vacant TLS position was held. On 8 March 2021, Ms Prendergast emailed Mr Morgan saying a meeting about the TLS position would not occur until after the investigation into allegations arising from the African student interactions was finalised and the TLS position had been re-advertised. From 9 March 2021, Mr Morgan ceased work at the school and did not return.
7. Taking each of the grounds in turn, what may be noted is that grounds 1, 3 and 4 all relate to events which occurred in 2021.
8. Ground 1 specifically refers to [130], [135], [136] and [138] of the arbitrator's Reasons. In those paragraphs the arbitrator considered Mr Morgan's evidence with respect to not being interviewed for the TLS position and found that he was tainted by his mistaken belief Ms Prendergast was actively sabotaging his efforts to find alternative employment: Reasons [130] - [135]. The arbitrator concluded there was no evidence that the decision not to interview Mr Morgan resulted from Ms Prendergast's enmity or that she was actively working against him: Reasons [138].
9. A difficulty with ground 1 is that when these events occurred, Mr Morgan's executive contract had expired, and he had returned to a classroom teaching position. That was the substance of what the arbitrator found was his demotion and the predominant cause of his stress.
10. The ground contends that in assessing the evidence, the arbitrator should have addressed whether the appellant was stressed by a perception that Ms Prendergast had undermined his TLS application and, if so, whether the employment significantly contributed to that perception. However, without attacking the ultimate finding about the predominant cause of stress, any error could not have changed the outcome. If the arbitrator had hypothetically found that the TLS position and Mr Morgan's failure to obtain an interview was a predominant cause of stress, ground 1 might have merit. But without challenging the ultimate conclusion that the primary cause was his loss of status or demotion from executive leadership to classroom teacher, the arbitrator's decision could not have been different based on the matters pertaining to the TLS position.
11. Similar observations apply with respect to Mr Morgan not being reconsidered for the later TLS position when it became vacant and the accusations of racism and the African student allegations as those events occurred on and after 23 February 2021.
12. The arbitrator dealt extensively with the question of the African student interactions in his Reasons, referring to Mr Morgan's argument that the predominant cause of his stress resulted from being mobbed and accused of racism by the student body and the lack of support shown by the principal and the executive leadership team.
13. The arbitrator weighed all evidence from Mr Morgan, his general practitioner Dr Seal and the psychiatric reports before concluding, based on Dr Cheng's opinion, that the predominant cause and diagnosis of Mr Morgan's stress-related disease was the loss of status associated with his executive contract ending and his inability to find alternative employment.
14. Ground 3 overlaps with ground 4. I do not consider that whether the arbitrator misconceived the question of whether Mr Morgan perceived that Ms Prendergast was actually working against him or undermining him impacts the correctness of his decision.
15. To the extent that there may have been an error in that Mr Morgan subjectively may have had a basis to conclude that Ms Prendergast was actively working against him or undermining his attempt to obtain the TLS position, that was not the predominant cause of his stress. Rather, his overall concern and the predominant cause of his stress-related disease was his loss of status or demotion. The fact that he mistakenly attributed his loss of status or demotion to Ms Prendergast is immaterial. Whether he rightly or wrongly attributed his loss of status or demotion to Ms Prendergast does not escape the fact that the predominant cause of his stress was the loss of status itself. Even if a consideration was that the predominant cause of the demotion was the principal's conduct (which was not the finding), that would not make the cause compensable.
16. To the extent that the arbitrator approached the question of subjective perception by attempting to ascertain whether the subjective perception was reasonable or unreasonable, that enquiry may have been in error, depending upon a full consideration of whether it was addressed by medical evidence. However, in all the circumstances, the arbitrator did consider, in the context of the overall causes of Mr Morgan's stress, the African student interactions and not being reconsidered for the TLS position, and held that when considering the contributing causes, the stronger, main or leading element of his overall concern was the loss of status or demotion from the executive leadership position of deputy principal to classroom teacher.
17. Mr Morgan's subjective perception of what caused his loss of status or demotion could not have changed the finding and the ultimate objective fact that it was his demotion. Accordingly, unless the ending of the executive contract and his return to classroom teaching at the beginning of 2021 is not considered a demotion, the criticisms of the arbitrator of not considering Mr Morgan's subjective perceptions could not have led to a different outcome on the appeal.
18. Grounds 1, 3 and 4 are not made out. Leave to appeal should be refused because there is no demonstrated error material to the decision in the sense that the arbitrator's decision could have been different.[73]

At paragraphs [86] and [172], the arbitrator misconceived the reports of Dr Ng as failing to identify the African students incident in Dr Ng's original report.

1. Dr Frederick Ng is a psychiatrist whom Mr Morgan's solicitors engaged to review Mr Morgan and to provide his expert opinion as to various issues relevant in the arbitration. Dr Ng prepared two reports dated 20 January 2022 and 13 December 2022. He consulted with and assessed Mr Morgan on each report date. The reports and the letters of instruction were contained in the parties' respective books of papers for the judge.[74] Both parties addressed the reports and the instructions given by Mr Morgan's solicitors during the appeal.
2. The arbitrator noted that Mr Morgan relied on Dr Ng's reports to support his claim of injury and resulting incapacity.[75] Dr Ng expressed the opinion that Mr Morgan's psychiatric symptoms started as an adjustment disorder that evolved and deepened into a major depressive disorder, with his employment significantly contributing to 'the onset or aggravation' of his psychiatric disorder.
3. The arbitrator accepted Dr Ng's reports, together with evidence from other medical practitioners (and Mr Morgan himself), to find that on or about 9 March 2021 Mr Morgan contracted a stress-related disease contributed to by his employment and which was a recognised psychiatric disorder. As I have already observed, the arbitrator found that Mr Morgan contracted a new injury rather than aggravated a pre-existing injury.[76] Dr Ng's reports were part of the evidence the arbitrator considered in deciding the contested issues of whether Mr Morgan was suffering from an injury, whether it was a new injury or aggravation of an existing injury, and what was the whole or predominant cause of the stress causing the injury.
4. Dr Ng's reports were also relevant to what caused Mr Morgan's stress - which was relevant to deciding issue 3 as posed by the arbitrator, whether Mr Morgan's stress wholly or predominantly arose from a s 5(4) excluded matter.
5. Different medical practitioners (and Mr Morgan himself) describe various sources of stress. Mr Morgan described feeling enormously stressed by the African students' behaviour and Ms Prendergast's tacit support of it. His GP, Dr Seal, described Mr Morgan experiencing anxiety and stress as a result of workplace conflict with Ms Prendergast and misconduct on 9 March 2021. Dr Ng identified that depression and anxiety was caused because of Mr Morgan's allegation that he was mistreated and vilified by Ms Prendergast and CEWA.
6. Dr Cheng said Mr Morgan experienced significant distress in the context of his executive contract coming to an end, his complaint against Ms Prendergast and the allegations of misconduct made against him.[77]
7. Ultimately it was for the arbitrator to weigh this evidence. The arbitrator's finding on this central issue, was, as I have already noted several times, that the whole or predominant cause of Mr Morgan's stress-related disease was the ending of the executive contract in 2020.[78]
8. The arbitrator reached his findings at [177] - [179] after weighing competing medical evidence together with non-medical contemporaneous records consisting of email communications between Mr Morgan and other school staff, contemporaneous notes by various individuals, and evidence given by Ms Prendergast and Ms Vicoli at the hearing.[79]
9. The arbitrator preferred Dr Cheng's opinion to Dr Ng's about the predominant cause of Mr Morgan's stress-related disease. The arbitrator said:[80]

I considered the facts the basis of Dr Cheng's opinion accord with the evidence and the contemporaneous records that I accept. Consequently, I prefer Dr Cheng's opinion to that of Dr Ng about the predominant cause and diagnosis of Mr Morgan's stress related disease. I find also that the preponderance of medical evidence support the conclusion that the predominant cause of Mr Morgan's stress was the loss of status associated with his executive contract ending and his inability to find alternative employment, other than a teaching position [at the school] and his mistaken belief Ms Prendergast was the antagonist behind these stressors.

(footnote omitted)

1. One reason the arbitrator seemingly offered for preferring Dr Cheng's opinion over Dr Ng's on the cause of Mr Morgan's stress was that, regarding the African student interactions, this was not considered part of 'the original subject difficulties' at work Dr Ng identified.
2. As I will turn to, both of Dr Ng's reports made mention of what the arbitrator referred to as the African student interactions.
3. I consider that the findings the arbitrator made at [172] - [179] were open to him and he did not misconceive Dr Ng's reports as contended in ground 7. Further, no ground of appeal challenges the arbitrator's finding of what the predominant cause of Mr Morgan's stress was. To the extent that there was any misconception by the arbitrator about inferences to be drawn from Dr Ng's reports, at its highest, that would constitute an error of fact only and not an error of law. As I have already noted, an error of law is required by the Act for the District Court to interfere with an arbitrator's decision on appeal. I elaborate in the following paragraphs.

1. Mr Morgan's lawyers sent Dr Ng a letter of instruction which was dated 31 December 2021 containing the following statements:[81]

We act for Mr Morgan in relation to a workers' compensation claim against his employer. ...

We have arranged for you to examine Mr Morgan on Thursday, 20 January 2022 ...

Mr Morgan was stressed by the impending loss of his position as a deputy principal, and what he saw as a lack of support from the principal, Ms Karen Prendergast, in the redirection of his career, but he was able to continue working both as a deputy principal until the end of 2020, and as a teacher in early 2021. However, shortly before he ceased work, he experienced three events as follows:

...

1. on 23 February 2021, Mr Morgan overheard a group of African female students using the word 'n...' and he counselled them against using this word, even within their ethnic group. Ms Prendergast complained about his use of the word himself in the course of his talk to the students, to the Catholic Education authority ... which, on 30 April 2021, found Mr Morgan guilty of misconduct for using the word himself.
2. In his first report dated 20 January 2022, Dr Ng commenced by describing factual matters about Mr Morgan in a section entitled 'Preamble'. Dr Ng said as follows:[82]

He indicated that the first misconduct allegation was in relation to a conversation he had with some students in respect of a word that the students were using which your client felt was inappropriate. The next 4 misconduct allegations pertained to your client trying to address issues in relation to what had just been stated above with respect to the word used by the students that was inappropriate, in light of the leadership team not responding to your client's requests for assistance from the leadership team in addressing and in dealing with the word that had been used by these students which your client felt was inappropriate.

1. This is clearly a reference to what was referred to as 'the African student interactions' in the arbitration, both by Dr Ng's reference to an inappropriate word used with students and by adopting the letter of instructions dated 31 December 2021.
2. After the preamble section, the next part of Dr Ng's report was entitled 'The Subject Difficulties at Work'. In this part of his report Dr Ng referred to difficulties Mr Morgan was encountering with the school principal, the ending of his contract as deputy principal, the non-renewal of that contract, his efforts to apply for work of similar or higher seniority at other schools, and that Mr Morgan found out that his current principal had been undermining his efforts to find work elsewhere. He noted that the principal had told many untruths about him and that he had become increasingly isolated from the leadership team due to the principal's conduct. Dr Ng then continued on page 9 of his report[83] by saying:

The above is a brief summary of the major issues that your client raised with me in respect of this new and now current principal, and you have also summarised in your medical brief to me dated 31 December 2021 the major issues that had arisen since, his then new principal and now current principal had come to his school.

1. In the final part of his report in which he answered the questions put by Mr Morgan's solicitors Dr Ng responded as follows:[84]

1. Your client provided a plausible history ... of being mistreated, allegedly vilified, and treated harshly and unreasonably by his then new and now current principal, ...

In the above context, your client developed various manifestations of pathological depression and anxiety, and these psychiatric symptoms may well have started off, to the extent of an adjustment disorder but the psychiatric condition has since evolved and deepened due to the subject difficulties at work, ...

2. From the history elicited and the available documentation, I form the view that the psychiatric disorder stated in my answer to question 1 above was most significantly and directly contributed to by the subject difficulties at work, the basis of this claim, as recounted by your client and your client provided a plausible history of the subject difficulties at work.

1. Read fairly, Dr Ng's phrase 'the subject difficulties at work' was a shorthand cross reference back to that part of his report entitled 'The Subject Difficulties at Work'. Relevantly, 'the subject difficulties at work' as described by Dr Ng in his report were referred to by the arbitrator as follows:[85]

... the then new and now current principal [i.e., Ms Prendergast] had caused difficulties for him since she had come to his school. ...

... his contract as deputy principal was due to end during the tenure of this then new and now current principal and that he was unable to renew his contract due to his then new and now current principal. ...

... this then new then (sic) principal and now current principal had been undermining his efforts to find work elsewhere and had been sabotaging his efforts to do so and had spoken negatively about him to others.

... His efforts to find alternative work role even within his present school had also been undermined particularly in relation to him applying for an internal job as learning support officer.

... He alleged that this then new and now current principal had told many untruths about him, and that once she came to be principal of his school, he became increasingly isolated from the leadership team due to her.

1. While Dr Ng did refer briefly to the African student interactions in his report, he did not do so in the part entitled 'The subject difficulties at work'.
2. On 6 December 2022 Mr Morgan's lawyers wrote to Dr Ng before a proposed appointment on 13 December 2022, specifically seeking clarification about the African student interactions:[86]

Once you have examined Mr Morgan, would you please advise us on the following matters:

1. at pages 7-8 of your report, you mention the misconduct allegations arising out of Mr Morgan's use of the word 'n...' in the course of counselling African students not to use the word. At pages 8-9, you note Mr Morgan's view that the principal had sabotaged his efforts to find work elsewhere and also within the school. You then set out your opinion at point 2 on page 12 that the 'subject difficulties at work' significantly contributed to the psychiatric disorder. Can you please confirm (or otherwise) that the African girls allegations of misconduct (both by the students and the school), the sabotage mentioned at the foot of page 8 and the undermining mention at the top of page 9, all significantly contributed to the psychiatric disorder; ...
2. The fact that Mr Morgan's solicitors sought clarification that the African girls' allegations of misconduct significantly contributed to his psychiatric disorder underlines the ambiguity about what Dr Ng was saying in his first report about the causes of Mr Morgan's stress. The need for clarification infers that even Mr Morgan was not satisfied that Dr Ng's first report sufficiently addressed the effect which Mr Morgan alleged the African student interactions had on him.
3. In Dr Ng's second report dated 13 December 2022 Dr Ng identified the reasons for Mr Morgan's stress as Ms Prendergast sabotaging his efforts to find alternative work, Ms Prendergast speaking negatively about him, and 'the African girls allegations of misconduct (both by the students and the school)'.
4. The arbitrator noted[87] that in his second report, responding to Mr Morgan's letter of instruction, Dr Ng identified the student allegations of misconduct (both by the students and the school) as part of 'the subject difficulties'. That Dr Ng directly quoted from Mr Morgan's solicitors' second letter of instructions rather than expressing Mr Morgan's concerns in his own words was also assessed by the arbitrator.[88] In his report Dr Ng said this:

1. I note what you have stated in your question 1 on page 1 of your medical brief to me dated 6 December 2022.

I confirm that the African girls allegations of misconduct (both by the students and the school), the sabotage mentioned at the foot of page 8 of my initial report dated 20 January 2022, and the undermining mention at the top of page 9, significantly contributed to the onset of his psychiatric disorder.

1. That is, Dr Ng adopted what was said by Mr Morgan's solicitors in their instructions verbatim in his report. That was a matter the arbitrator was entitled to take into account in determining what weight to attach to Dr Ng's opinion.

1. Ground 7 is, in substance, a challenge of the factual finding made by the arbitrator of the predominant cause of Mr Morgan's stress. The arbitrator had to make findings based on the competing evidence. At its highest, the complaint is that overlooking what Dr Ng said in his first report when read with the second report was, at best, an error of fact that his first report had used the African student interaction as a potential cause of his stress.
2. To the extent that the arbitrator overlooked or disregarded relevant evidence or made a finding involving any incorrect inference from the facts or made a finding against the other evidence, or the weight of the evidence, no error of law arises.
3. The arbitrator did not limit his conclusion on the cause of Mr Morgan's stress by reference to a contest between Dr Ng's and Dr Cheng's reports. The arbitrator also considered non-medical contemporaneous records which consisted of email communications between Mr Morgan and other school staff, contemporaneous notes made by various individuals and what Ms Prendergast and Ms Vicoli gave evidence about at the hearing.[89] The arbitrator's conclusions were based on an assessment of all of the evidence.
4. Ground 7 is, in effect, a complaint about a factual finding by the arbitrator. Ground 7 does not raise an error of law. Leave to appeal is refused on ground 7.

... the learned arbitrator's characterisation, and in reasons 111 and 117 of the end of the appellant's contractual term as a demotion for the purposes of section 5(4), was an error of law. The arbitrator should have found that the injury which he found in paragraphs 92 and 95, did not result predominantly or at all from any of the matters mentioned in section 5(4). Because the transition from deputy principal to teacher resulted from the contract of employment and was not a demotion within the meaning of the Act.

1. On 5 September 2024 counsel applied to amend Mr Morgan's appeal grounds to add an additional ground, ground 8. At the time the application was heard, CEWA's counsel had commenced addressing grounds 1, 2, 3 and 7. Nevertheless, I allowed the application to amend on 5 September 2024. One of the consequences of allowing the amendment was that the hearing had to be further delayed, and a third hearing day scheduled so as to give CEWA an opportunity to respond to the new ground.
2. One initial observation that may be made on ground 8 is the use of the words 'transition from deputy principal' which reflect that there was no ending of employment between CEWA and Mr Morgan.

1. Mr Morgan's submissions on ground 8 could be summarised as follows:
   1. A 'demotion' within the meaning of s 5(4) of the Act does not passively arise or evolve. Rather a demotion is a state of affairs caused by administrative action by the employer.
   2. The word 'demotion' should be interpreted in a similar way to 'dismissal' in an employment context. Further, in an employment context 'dismissal' describes an industrial action, or process, taken by an employer and 'demotion' should be interpreted in a similar manner.
   3. The 'matters' in s 5(4)[90] are matters involving conduct on the part of the employer. Specifically, because the section uses the phrase 'unreasonable and harsh on the part of the employer', the 'matters' it refers to must involve employer actions.
   4. The High Court decision in Victoria v Commonwealth,[91] which is authority for the proposition that when a term of employment expires the employer does not terminate the employee's employment, rather the employment comes to an end by agreement assists an analysis of this case. Mr Morgan argued that in his case all that had occurred at the end of 2020 was that his contract of employment came to an end by the effluxion of time and the end of the contract was a matter of agreement between him and CEWA and not an 'industrial process directed at' Mr Morgan.

1. As I have noted the arbitrator found as follows:
   1. On 10 November 2010 Mr Morgan signed a contract of employment as Deputy Principal of Pastoral Care, an executive position, at the school. His contract commenced on 1 January 2011.
   2. On 15 August 2020 Mr Morgan signed a third and final executive contract extension. Under that contract he was to be employed as the Deputy Principal of Pastoral Care at the school from 1 January 2020 until 31 December 2020.
   3. A term of Mr Morgan's contract entitled him upon the expiration of the contractual period to take a classroom teaching position at the school in 2021.[92] Clause 2 of the employment contract provided relevantly:

(e) At the conclusion of the Third Term, this position will be advertised and the Employee is eligible to apply for appointment at the same School or at any other school owned or conducted by the Employer.

(f) If at the conclusion of the Third Term, the Employee is unable to secure appointment in a school owned or conducted by the Employer, they shall be appointed to a teaching position at the same School or at any other school owned or conducted by the Employer, as the parties may agree.

1. As I have already detailed, Mr Morgan was unsuccessful in finding an alternative position and took up a teaching role at the school in 2021. The arbitrator found[93] that Mr Morgan's executive contract entitled him to a non-executive classroom teaching position with CEWA (at the school or another CEWA school) when his executive term ended, provided he had not secured another CEWA appointment of his choosing. This entitlement was to a position that was inherently lower paid than his executive role.
2. When Mr Morgan accepted the classroom teaching position for 2021, he was exercising this contractual entitlement. This represented a continuation of his employment relationship with CEWA rather than a termination followed by re-engagement or re-hiring. While the executive contract term had expired, the original contract retained some legal effect, particularly regarding his employment commencement date, which affected his long service leave and other entitlements.
3. In 2021 the contractual arrangements between CEWA and Mr Morgan had new terms which superseded the terms under the executive agreement including, necessarily, obligations of performance and salary.
4. The effect of Mr Morgan exercising the term of the contract to take up a classroom teaching position at the school in 2021 was two-fold in that:

(a) he was no longer a member of the executive team of the school, including its deputy principal; and

(b) his salary was significantly less as a classroom teacher compared to when he was the deputy principal.

1. The arbitrator noted that Mr Morgan's failure to secure other employment before the term of the executive contract came to an end on 31 December 2020 meant that his status at the school changed from deputy principal to classroom teacher. Further, that carried with it 'an evident loss of status and income'. The arbitrator observed[94] that this encompassed loss of Mr Morgan's role as leader of pastoral care and his position as part of the executive leadership team as well as a significant loss of income.
2. The arbitrator referred to the case of Fernandez v Murdoch University,[95] a case in which Compensation Magistrate Hogan (as her Honour then was) made a number of observations about the meaning of 'demotion' under the Act. I will return to a discussion of Fernandez later in these reasons.
3. The arbitrator concluded that 'demotion' in s 5(4)(a) of the Act equated to loss of status, which, on all the evidence in Mr Morgan's case, had occurred as a result of Mr Morgan's transition from deputy principal to classroom teacher. Further, as this 'demotion' was the predominant cause of his injury Mr Morgan was not entitled to compensation under the Act.

1. Ground 8 relies upon the proper interpretation of the word 'demotion' is s 5(4) of the Act. The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute. The meaning of a provision must be determined by reference to the language of the statute viewed as whole. That may require consideration of the context, the general purpose and policy of the provision and its consistency and fairness.[96]
2. The context includes the existing state of the law and the mischief to which the statute is directed. Inconvenience or improbability of result may assist the court in preferring to the literal meaning, an alternative construction which is reasonably open and more closely conforms to the legislative intent.[97]

What is the purpose of the exclusions in s 5(4) of the Workers' Compensation and Injury Management Act 1981?

1. The word 'demotion' is defined by The New Shorter Oxford English Dictionary as 'a reduction to a lower rank or class'.[98] For the reasons which follow I consider that the word 'demotion' should be given its ordinary meaning.
2. The relevant context for the interpretation of the word demotion appears from s 18 of the Act. By s 18, if an injury of a worker occurs, the employer shall, subject to the provisions of the Act, be liable to pay compensation.
3. By the definition of 'injury' in s 4, a worker who, in the course of his employment at (or away from) his place of employment, and to which employment is a contributing factor and contributed to a significant degree, contracts a disease caused by stress is entitled to compensation unless the stress wholly or predominantly arises from a matter mentioned in s 5(4).
4. Accordingly, a worker is not entitled to compensation where the disease was caused by stress that arose wholly or predominantly from one of the matters set out in s 5(4)(a) or s 5(4)(b) unless there has been conduct that is unreasonable and harsh on the part of the employer.
5. The statutory purpose of the exclusions in s 5(4) was described in FAI General Insurance Co Ltd (De-Registered) v Goulding[99] as preventing claims for compensation as a consequence of stress-related diseases that wholly or predominantly arise out of specified incidents of the employment relationship which, by their very nature, are particularly stressful, but which are not harsh and unreasonable on the part of the employer. In the same case it was said that a disease caused by stress cannot constitute a compensable disability if the stress itself results from what may be described as the managerial processes referred to in s 5(4) unless those processes of the employer are seen to be unreasonable and harsh.[100]
6. In Housing Industry Association Ltd v Murten[101] it was said that the relevant words in s 5(4)(a) should be given their ordinary meaning in an employment context. Specifically, in that case the word under consideration was 'discipline'.

1. Mr Morgan referred to the Hansard[102] record of the parliamentary debate concerning the amendment which resulted in Act No. 48/1993. This Act introduced the s 5(4) matters. In response to questions Mr Kierath MLA said:

I will place that on the record ... that this wording ensures that under subsection (4)(a) and (b), ... which is basically the worker's dismissal, retrenchment, demotion, discipline, transfer or redeployment, or the worker's not being promoted, reclassified, transferred or granted leave of absence or any other benefit in relation to the employment - if the action by the employer is unreasonable and harsh, certainly the stress caused to an employee would be compensable. ...[103]

...

In this case, we are allowing stress claims to continue except where they relate to matters of employment, which I have outlined. They are the ones under clause 4(a) and (b) that are excluded from the definition of disability. If there is unreasonable and harsh conduct by an employer, clause 4(a) and (b) will not apply. In other words, the claims would still be compensable.[104]

1. Mr Morgan submitted, as I understood his argument, that the parliamentary debates disclose the intention that the word 'demotion' should be interpreted in the ordinary use of the word 'demote' as a verb would be used in a transitive form. Further, to use the word as simply meaning any reduction in rank or class without any positive action on the part of the employer, is to use the word in the intransitive form which involves separating the meaning of demotion as a noun from the meaning of demote as a verb.[105] Further, the evident purpose is that the section was drafted to ensure that compensation would be payable if an employer's actions were unreasonable and harsh. The reason for the addition of those words was that for an employer to act in a manner which was unreasonable and harsh the employer had to take a positive step.
2. The use of extrinsic materials such as Hansard is permitted but the use of extrinsic materials still requires the process of interpretation to determine the ordinary meaning conveyed by the text taking into account its context and purpose. Further, Hansard is generally resorted to where there is ambiguity or that an ordinary meaning would lead to manifestly absurd or unreasonable results.[106] Care must be taken to avoid scrutiny of parliamentary debates degenerating into 'an exercise in psychoanalysis of the individuals involved in the legislative process' and there are risks in placing too much reliance upon parliamentary debates.[107]
3. I will approach the meaning of the word 'demotion', in the absence of any ambiguity, in a manner which is consistent and harmonious with the other provisions of the Act and that it must be given an ordinary and grammatical meaning.

Is there any case that has considered the meaning of the word demotion in the context of s 5(4) of the Workers' Compensation and Injury Management Act 1981?

1. In Fernandez, Hogan CM considered the interpretation of the word 'demotion' in the context of a worker whose workplace position was changing which resulted in the worker having an expectation of a perceived loss of status and a loss of supervisory duties. The changes in the employment structure did not result in any change of the level of employment and the worker, Mr Fernandez, contended amongst other matters that he was 'humiliated' and 'embarrassed' at a change in his duties (and) the position of his desk.[108]
2. Hogan CM found that the word 'demotion' should be given its ordinary meaning in an employment context. Her Honour rejected taking a narrow approach to the word 'demotion' and accepted a submission that a reference to demotion includes what flows from the demotion, that is a loss of status and/or loss of income that leads to the development of a disease as contemplated by the Act.
3. Hogan CM distinguished an earlier case, Central Metropolitan College TAFE v Heaton[109] where another compensation magistrate considered the various terms in s 5(4) noting that 'demotion' appeared along with the words 'dismissal' and 'retrenchment' that were also terms associated with a loss of employment, that discipline was a term associated with the bringing under control, rebuking, a loss of privileges and that transfer and redeployment were words associated with reposition within an organisation. Finally, Hogan CM held[110] that 's 5(4)(a) does not restrict its focus but encompasses different processes which can result in a variety of outcomes'.
4. The arbitrator quoted extensively from Fernandez.[111] The facts in Fernandez are not the same as in the present case. However, I agree with Hogan CM that a narrow approach should not be taken to the word 'demotion'. Rather, the interpretation of the word must take into account:
   1. The statutory purpose of s 5(4) is to exclude stress-related diseases that wholly or predominantly arose out of specific incidents or instances of employment which by their nature were particularly stressful.
   2. The exclusion extends to stress caused by a worker's expectation of 'a matter' or 'a decision by the employer in respect of a matter'. Clearly, a worker's expectation of a matter or employer's decision can be the whole or predominant cause of a worker's stress.
   3. The proviso in s 5(4) is designed to limit the circumstances in which a person may be entitled to compensation for a stress-related disease if it arises from one of the matters mentioned in s 5(4)(a) or s 5(4)(b) unless 'the matter' is unreasonable and harsh on the part of the employer.[112] Those matters are to be given their ordinary meaning in an employment context.[113]

1. The practical effect of Mr Morgan's transition from deputy principal to classroom teacher clearly satisfies the ordinary meaning of the word 'demotion'. In my view, there is no basis for narrowly interpreting the word to require the act of demotion to only occur when it is at the initiative of the employer. A demotion in its ordinary meaning is simply a reduction to a lower rank or class. Since the term appears unambiguous, limiting it to employer-initiated circumstances would require importing additional words rather than applying its ordinary meaning. Nothing in the proviso or s 5(4) restricts 'demotion' to unilateral employer actions - the provision only requires that the stress 'arises from' the matter.
2. A consideration of all of the terms of s 5(4) supports this interpretation. Section 5(4)(c) contemplates that excluded matters can arise from a worker's 'expectation' of employer decisions, indicating the provision extends beyond completed employer actions.
3. I do not accept Mr Morgan's submission that 'demotion' requires positive employer action, by analogy to 'dismissal'. The statutory purpose, as explained in FAI, is to exclude compensation for stress arising from inherently stressful but reasonable 'managerial processes'. Limiting 'demotion' to direct employer action would create artificial distinctions inconsistent with this purpose. The word 'demotion' as used in s 5(4) is not qualified. The case of Victoria v Commonwealth is of no real assistance in the interpretation of the word 'demotion' in this case. In that case the High Court held that as a matter of ordinary language an employer does not terminate an employee's employment when his or her term of employment expires. Rather, employment comes to an end by agreement, or, where the term is fixed by award or statute, by operation of law.[114]
4. In Victoria v Commonwealth, the word 'termination' was not used in the same sense as 'dismissal'. The excluded factors in s 5(4)(a) do not use the word termination. In that respect, 'dismissal' means a termination or end of the contract of employment at the initiative of the employer.[115] The words 'dismissal' and 'demotion' are different and distinguishable and the word demotion is not limited to an action on the initiative of an employer. Rather, properly construed, the word demotion is a noun which may describe a result, or state of affairs, when the word is used as the object of a verb. For example, 'he received a demotion after his third written warning' or, as I have attempted to describe above, 'he received a demotion after the executive contract expired in 2020'.
5. It is not difficult to envisage examples in a workplace of cases where a transfer or demotion, being excluded matters under s 5(4), could potentially arise from consensual arrangements rather than a decision solely taken by an employer. For example, a transfer in locations or offices of a workplace. A redeployment to a different team at the request of the worker. A temporary finite promotion, for example, working in 'higher duties' in a specific role in an organisation for a specific period and then a return to a pre-existing role of lower status could constitute an excluded matter of demotion.
6. Anomalous and contradictory outcomes could easily arise in such cases, if Mr Morgan's interpretation was accepted. A worker whose status reduces through the expiry of a specific role for a fixed period of time would not be excluded from receiving compensation, while another demoted through direct employer action would be excluded (unless the employer's conduct was unreasonable and harsh). Stress caused by a transfer or redeployment requested by a worker would not be excluded from compensation, but a transfer or redeployment directed by an employer would be excluded (unless unreasonable and harsh). In my view, a narrow interpretation contradicts the statutory purpose of excluding stress claims from normal employment processes.
7. What occurred in late 2020 appears uncontroversial on the facts as found. Mr Morgan's deputy principal contract expired, he failed to secure alternative positions, and, by early 2021, he was employed as a classroom teacher - a clear reduction in rank and position compared to his executive role. The arbitrator found the ending of the deputy principal position occurred as a result of a restructure, and, that Mr Morgan's stress resulted from a managerial process, being the restructure of the school's senior leadership team.[116]
8. While the exact contractual terms of Mr Morgan's continued employment are unclear from available materials, Mr Morgan's employment relationship with CEWA never terminated on 31 December 2020, nor was he re-employed in 2021. The employment relationship continued from late 2020 into 2021, with his role changing from deputy principal to classroom teacher within this ongoing employment relationship. The arbitrator correctly characterised Mr Morgan's change of position as a demotion under s 5(4).
9. For all of these reasons, I consider that ground 8 is not made out. The arbitrator did not make an error of law in his interpretation of the word 'demotion'.
10. Leave to appeal on ground 8 is refused.
11. The end result is that leave to appeal is refused and the appeal is dismissed. Without hearing from the parties, my view is that the costs of the appeal should follow the event and that Mr Morgan ought to pay the costs of the appeal. Nevertheless, upon publication of these reasons I will hear the parties as to an appropriate costs order.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.

[1] For reasons not important to the appeal, prior to June 2020, the first respondent employed Mr Morgan.

[2] Such disease being an 'injury' within the meaning of s 5 of the Act.

[3] Arbitrator Wallbridge's reasons delivered 22 February 2024 [108], [177] (Reasons). For shorthand I will sometimes refer to this finding as being 'the ending of the executive contract in 2020'.

[5] See generally Reasons [177] - [179].

[6] CEWA highlighted in opposition to the appeal grounds that Mr Morgan did not challenge the finding that CEWA did not act in a manner that was unreasonable and harsh.

[9] Reasons [90] - [92]. This finding is not challenged on appeal.

[17] Reasons [64] - [66]. This occurred on 21 January 2021 [64], but another position also opened up and was going to be re-advertised after 8 March 2021 [148]. See also [127] - [138].

[18] Appellant's submissions dated 7 June 2024, par 10.1.

[19] Appellant's submissions dated 7 June 2024, par 10.2.

[21] Reasons [67] - [74], being events which commenced on 23 February 2021.

[22] Reasons [102] - [105]. At the hearing of the appeal Mr Morgan's counsel did not submit that the arbitrator had misunderstood Mr Morgan's case about the predominant cause of his stress.

[24] Reasons [90], which was the date of the onset of Mr Morgan's stress-related disease and his incapacity to work on.

[42] Reasons [92]. The arbitrator made reference in his reasons to the date of injury as being both 8 March 2021 and 9 March 2021. See, for example Reasons [2], [51], [55], [90], [92], [163], [164]. Nothing appears to turn on this distinction, but it appears to me the date of injury was 9 March 2021.

[45] And since 1 July 2024 under s 391(2) of the Workers Compensation and Injury Management Act 2023 (WA).

[46] Marks v Coles Supermarkets [2021] WASCA 176 [6], [134], [136], [163].

[47] BHP Billiton Iron Ore Pty Ltd v Brady [2008] WASCA 250 [15] (BHP Billiton).

[48] Paridis v Settlement Agents Supervisory Board [2007] WASCA 97; (2007) 33 WAR 361 [53].

[50] Atanasoska v Inghams Enterprises Pty Ltd [2009] WASCA 17 [21].

[52] St Mary's School v Askwith [2011] VSCA 90; (2011) 206 IR 414 [12] (Ashley JA with whom Warren CJ & Kyrou AJA agreed);.State Transit Authority of New South Wales v Chemler [2007] NSWCA 249 (State Transit Authority).

[54] State Transit Authority [37].

[55] State Transit Authority [40].

[56] State Transit Authority [69].

[57] Federal Broom Company Pty Ltd v Semlitch [1964] HCA 34; (1964) 110 CLR 626 (Federal Broom Company).

[58] Federal Broom Company, (642).

[59] Wiegand v Comcare Australia [2002] FCA 1464; (2002) 72 ALD 795 [31] (Wiegand).

[60] AB v XYZ Pty Ltd [2024] VSCA 31 [73].

[61] This comment was made in the context of an allegation of a psychiatric injury being suffered in a context of a sexual assault which occurred in the workplace.

[62] Pilbara Iron Company (Services) Pty Ltd v Suleski [2017] WADC 114 [76] (Pilbara Iron).

[63] Department of Education v Azmitia [2014] WADC 85 (Azmitia).

[66] Dean v Australian Postal Corporation [2010] FCA 680 [12] (Dean).

[69] Pilbara Iron [79]. In that case Mr Suleski had a perception of unfairness of being placed on a performance management plan which was a form of discipline and an excluded matter.

[70] A 'performance management plan' which was a form of discipline and an excluded matter.

[72] [54] - [55] are based on the arbitrator's chronology.

[73] Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321, 353; BHP Billiton [15].

[74] In preparation of the hearing of the appeal, each of the parties prepared bundles of documents and after ground 8 was added, a joint book of supplementary papers.

[76] Reasons [92]. This finding has not been challenged in this appeal.

[79] These matters were all set out by the arbitrator in his Reasons [114], [167].

[81] Appellant's papers for the judge, page 70.

[82] Appellant's papers for the judge, page 80 (Dr Ng's report page 8).

[83] Appellant's papers for the judge, page 81.

[84] Appellant's papers for the judge, page 83.

[86] Respondent's book of papers for the judge, pages 1 - 2.

[88] Appellant's papers for the judge, page 92.

[89] These matters were all set out by the arbitrator in his Reasons [114], [167].

[90] Being the worker's dismissal, retrenchment, demotion, discipline, transfer or redeployment and/or the worker's not being promoted, reclassified, transferred or granted leave of absence or any other benefit in relation to the employment.

[91] Victoria v Commonwealth [1996] HCA 56; (1996) 187 CLR 416.

[95] Fernandez v Murdoch University (Unreported, CM 16/05 (Hogan PM) 9 June 2005) (Fernandez).

[96] See, for example, Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 [69]; Larussa v Anna Carr as administratrix of the estate of Giuseppe Larussa [2024] WASCA 16 [59] (Buss P & Vaughan JA) (Larussa).

[97] Larussa [116] - [117] (Hall JA).

[98] Brown L, The New Shorter Oxford English Dictionary on Historical Principles (1993).

[99] FAI General Insurance Co Ltd (De-Registered) v Goulding [2004] WASCA 167 [39] (Steytler J) (FAI).

[101] Housing Industry Association Ltd v Murten [2004] WASCA 139 [20] - [21].

[102] Western Australia, Parliamentary Debates, Legislative Assembly, 3 November 1993, 6214 (Mr Kierath, Minister for Labour Relations).

[103] Western Australia, Parliamentary Debates, Legislative Assembly, 3 November 1993, 6216.

[104] Western Australia, Parliamentary Debates, Legislative Assembly, 3 November 1993, 6217.

[105] Compare with, in the present case, an example of where demotion could be used as 'Mr Morgan received a demotion after the expiry of his executive contract in 2020' where the noun 'demotion' is the object of the verb 'received'.

[106] Interpretation Act 1984 (WA) s 19.

[107] Attorney General for Western Australia v Her Honour Judge Schoombee [2012] WASCA 29 [43] - [44].

[109] Central Metropolitan College TAFE v Heaton (Unreported, CM 91/01 (Hogan PM) 20 November 2001).

[112] Attorney General for Western Australia v Her Honour Judge Schoombee [41] - [42].

[113] Housing Industry Association Ltd v Murten [18].

[114] Victoria v Commonwealth (520).

[115] Gallotti v Argyle Diamond Mines Pty Ltd [2003] WASCA 166 [4] - [8].

[116] Reasons [177] and [4] above.