Naidu v Group 4 Securitas Pty Ltd & Anor

Damages for breach of contract 9 In the principal judgment I expressed the view that the plaintiff was entitled to damages for breach of contract from Group 4 and foreshadowed an award of $150,000 for what I described as "over four years of malicious mistreatment". I invited the parties to make further submissions on this point. 10 I have described the implied term of the plaintiff's contract of employment in various ways in the course of the principal judgment. The wrongful conduct of Mr Chaloner constituted, as I noted, a breach of Group 4's contractual obligation to provide a safe place of work. The discrimination and harassment policy published by the company also constituted, in my view, a condition of the employment contract with the plaintiff, in effect, that it would ensure, so far as reasonably practicable, that he would not be subjected to conduct of the kind contemplated by the policy. For the reasons given in the principal judgment I concluded that preventing Mr Chaloner's wrongful conduct was reasonably practicable for Group 4 to achieve. Even in the absence of such a policy, I considered that permitting intimidatory conduct to be inflicted on employees is a breach of an implicit term that employees are not to be placed in fear of insult or physical harm and that a course of intimidation in the workplace is a substantial breach sounding in damages. 11 Bringing these various descriptions of Group 4's employment obligations together, it seems to me that it was an implied term of its contract with the plaintiff that it would not, by its servants or agents, intimidate, racially or personally vilify him, subject him to demeaning, harassing or abusive conduct or threats of such conduct or threats of violence and that it would, so far as is reasonably practicable, protect him from any such conduct occurring in the course of his employment. 12 Group 4 has submitted that no such implied term was alleged in the plaintiff's pleadings. Paragraph 5 of the plaintiff's amended statement of claim is as follows - "During the course of the Plaintiff's employment, the Plaintiff was continuously exposed to harassment, belittlement, abuse, racial intolerance, physical assault, sexual assault, humiliation, unreasonable pressure, unrealistic work loads and responsibilities…degrading conduct, threats of violence and financial harm and duress inflicted on him by his direct superior and employee of the Second Defendant…" 13 Paragraph 5A alleges, in substance, that the plaintiff was placed in that position by the first defendant. Paragraph 7 alleged a duty to provide a safe place of work and paragraph 8 alleged a breach of that duty, in substance, because of the matters alleged in paragraph 5. Paragraphs 10 to 15 specifically allege breaches of the contract of employment, particularised as those allegations made in paragraphs 5 and 8. Although it is true the statement of claim did not specifically allege an implied term of the contract as found by me, there can be no doubt that the plaintiff's case was, from an early stage, that Mr Chaloner's misconduct was a breach of the plaintiff's contract of employment with Group 4. 14 I do not think there is any merit in the argument that the pleadings did not sufficiently identify a cause of action in contract that rendered Group 4 liable for the breaches I have identified. I notice also that the first defendant does not suggest that it was been prejudiced by the suggested omission in the pleadings of the implied term. Not does Group 4 submit that its contract of employment with the plaintiff did not contain by implication a term of the character that I have described or (except to the extent that it contended it was not responsible for the misconduct of Mr Chaloner) that what was done to the plaintiff was not a breach of that term. 15 Mr Kennedy SC submits both that the plaintiff is entitled to damages under this head and that the foreshadowed sum is appropriate. Mr Parker for Group 4 contends that damages for the alleged breach should not be awarded or, if they must be, that they should be nominal only. 16 The starting point is Baltic Shipping Company v Dillon [1992-1993] 176 CLR 344. The plaintiff was a passenger on a cruise vessel and suffered injury when the ship sank ten days into a fourteen-day cruise. In her action against the shipowner for damages for breach of contract, the plaintiff was awarded compensation for, inter alia, her disappointment and distress. The High Court held that she was entitled to compensation for disappointment and distress. 17 The basis for the plaintiff's right to compensation was stated by their Honours in slightly different terms but it is not necessary to deal with those different expressions of the rule for present purposes. Mason CJ held that the rule is that "damages for disappointment and distress are not recoverable unless they proceed from physical inconvenience caused by the breach or unless the contract is one the object of which is to provide enjoyment, relaxation or freedom from molestation" (176 CLR at 365). Brennan J focused on the question whether the contract contained "a promise, express or implied that the promisor will not cause the promisee, or will protect the promisee from, disappointment of mind" (ibid at 370). To ascertain that, say, obtaining peace of mind is "the object or, more accurately, an object a contract, reference is made to its terms, express or implied, construed in the context of facts that the parties know or are taken to have known". Thus, damages are recoverable for a failure to provide peace and comfort where peaceful and comfortable accommodation is promised but the accommodation does not answer that description (ibid at 371). It seems to me (with respect) that the analysis undertaken by Deane and Dawson JJ is for relevant purposes no different. Toohey, Gaudron and McHugh JJ agreed, in substance, with Mason CJ. 18 I have held that it was a term of the plaintiff's contract of employment with Group 4 that he would not be intimidated by physical or verbal abuse by persons with whom he was required to work nor was he to be subjected to personal or racial vilification. The effects of the intimidation and vilification were considerable distress, humiliation and accumulating stress, anxiety and unhappiness. 19 Mr Parker for Group 4 submits that the object or characteristic of an employment contract is not to prevent molestation or intimidation and hence mistreatment by an employer or agent will not result in a compensable breach. 20 In Addis v Gramophone Co Ltd [1909] AC 488, the House of Lords held that damages for wrongful dismissal cannot include compensation for the manner (as distinct from the fact) of the dismissal or for the distress caused by the dismissal to the employee. 21 In Baltic Shipping (176 CLR at 365) Mason CJ (and, I think, Toohey and Gaudron JJ, agreeing) accepted that mere disappointment or distress following a breach or failure to perform a contract is not compensable, and there was no suggestion by his Honour that Addis ought not to be followed. The Chief Justice's reference to specific conditions promising enjoyment, relaxation or freedom from molestation suggests that his Honour was not concerned with contracts of employment (a point made in Burazin v Blacktown City Guardian (1996) 142 ALR 144 at 149). Brennan J referred to Addis without disapproval (176 CLR at 368), citing the point made by Lord Atkinson ([1909] AC at 495-6) that "a promisee's disappointment of mind flows naturally whenever a contractual promise is not fulfilled". His Honour, however, as I have noted above, distinguished this from the position where the disappointment or distress is itself the subject of the broken promise (ibid at 370). This distinction was also made by Deane and Dawson JJ (ibid at 380-1) and McHugh J (ibid at 405). 22 In Burazin the Full Court of the Federal Court, after a review of the cases, found it unnecessary to determine whether a breach of a term of an employment contract as to the employer's conduct which would inflict distress was compensable, although the Court appeared to doubt that breach of an implied term not to act in a manner likely to damage or destroy the relationship of confidence and trust between the parties would give rise to a claim.

23 In my view, the question is to be answered by reference to the specific contractual obligations undertaken by the employer, whether express or implied and that, for this purpose, the terms of the contract define what is to be regarded as a breach and the matter for which an employee is to be compensated in the event of a breach. This seems to me to follow from Baltic Shipping. Just as in that case, the distress suffered by the plaintiff flowed directly from Group 4 (through its agent) inflicting on him conduct of its very nature likely to cause it and which occurred in breach of its agreement not to permit conduct of that kind to occur. 24 Mr Parker also submitted that the damages, if payable, should not be substantial, citing Burazin v Blacktown City Guardian (1996) 142 ALR 144. In that case Ms Burazin sued and succeeded against the employer for breach of an implied contractual term that it would not, without reasonable cause, conduct itself in a manner that was likely to damage or destroy the relationship of confidence and trust between the parties as employer and employee. Ms Burazin contended that the damages should also compensate her for the distress she suffered caused by "the repudiatory breach of contract". On appeal, by way of elaboration, counsel for Ms Burazin referred to the actions of the employer in calling in the police and the unnecessary humiliation and hurt suffered by Ms Burazin when they removed her. She was dismissed the following day. Counsel relied on the trial judge's finding that Ms Burazin "was shocked, humiliated to the quick, financially worried, disorientated and depressed, as anyone might have been". There was no distinction made by the trial judge between the hurt caused by Mr Burazin's eviction and that occasioned by her dismissal. The Full Court considered that this was significant. In the result, the Court considered that Ms Burazin's claim should be allowed under the Industrial Relations Act 1988. 25 There is nothing in Burazin that suggests an artificial limit should be placed on the amount that might appropriately be awarded for breach of a term of an employment contract - on the assumption, of course, that damages are payable at all. In this case the distress, anxiety and humiliation suffered by the plaintiff is the very consequence that the implied term not to abuse or intimidate him is designed to avoid or, to use the language of Cullen CJ in Silberman v Silberman (1910) 10SR (NSW) 554 at 557, cited with approval by Brennan J in Baltic Shipping (176 CLR at 371), the mere breach of such a term in a contract "brings about the very consequence contemplated by the parties." 26 Mr Parker submitted that I should bear in mind the award of general damages made in respect of the suffering by the plaintiff of the major psychiatric illness caused by Mr Chaloner's conduct. He submitted that when that sum was compared with the damages tentatively proposed under this head, there was a such a lack of proportion that indicated that the latter sum was too great. Mr Kennedy SC for the plaintiff submitted otherwise. 27 On further reflection, I think that Mr Parker's submission is made good. It seems to me that I erred in reacting too strongly to the character of Mr Chaloner's misbehaviour, in effect double counting what was the very essence of the breaches I found to have occurred. Accordingly, I propose to award the sum of $100,000 in respect of the breach (or breaches) of the plaintiff's contract of employment.

The working total 28 In the result, I assess damages - omitting the sums attributable to exemplary damages, in respect of News Limited, and breach of contract in respect of Group 4 - as follows. As I understand it, these amounts are agreed between the parties as following from the substantive decisions on disputed matters which I have already determined. If I am mistaken about this, leave is given to the parties on three days' notice to apply to correct this error. Unless the parties require further evidence or oral submissions, arrangements should be made through my Associate for written submissions to be made. 29 Taking the figures in the working total, the following calculation is urged by Mr Kennedy SC for the plaintiff - NATIONWIDE NEWS LTD (2ND DEFENDANT) GROUP 4 SECURITAS PTY LTD (1ST DEFENDANT GENERAL DAMAGES $200,000 $150,000 INTEREST ON GENERAL DAMAGES $16,000 - OUT OF POCKET EXPENSES to 25 JUNE 2005 (including Dr Bokor $5,022.00 and Dr Butler $3,674.00 $137,964.62 $137,964.62 FOX v WOOD $10,430 $10,430 PAST WAGE LOSS $318,812 $318,812 INTEREST ON PAST WAGE LOSS · $132,585.66 $99,439.22 (s.151M) PAST SUPERANNUATION AT 7% $22,317 $22,317 INTEREST ON PAST SUPERANNUATION · $16,523.16 $12,392.37 (s.151M) RESPITE CARE $259,891.16 (at 3% 1,119.2 x 575x7x3 52 $201,071.97 (at 5% 865.9x575x7x3 52 HOSPITALISATION $39,548.65 (at 3%1,119.2x525x7+104) $30,597.91 (at 5% 865.9x525x7+104) FUTURE PSYCHIATRIC TREATMENT $33,576 $25,977 FUTURE PSYCHOTHERAPY $89,536 $69,272 FUTURE MEDICATION $5,596 $4,329 LOSS OF FUTURE EARNING CAPACITY (LESS 25% VICISSITITUDES OF LIFE) $563,722 $482,501 FUTURE SUPERANNUATION AT 9% $50,735 $43,425 COMPENSATORY DAMAGES WORKING TOTAL $1,897,237.25 $1,608,529.09

Section 151Z adjustment 30 Section 151Z(2) of the Workers Compensation Act 1987 applies in the present case. It "is directed to determining the amount of common law damages which a third party who has been sued must pay to the plaintiff worker…[having regard] to the circumstance that workers compensation is payable under the Act and, further, that regard is to be had additionally to any entitlement, whether exercised or not, to sue the employer for common law damages": Grljak v Trivan Pty Limited unreported, NSWCCA 19 April 1996, per Cole JA at 13-14. 31 Subsection 151Z(2) is as follows - (2) If, in respect of an injury to a worker for which compensation is payable under this Act: (a) the worker takes or is entitled to take proceedings independently of this Act to recover damages from a person other than the worker's employer, and (b) the worker also takes or is entitled to take proceedings independently of this Act to recover damages from that employer, the following provisions have effect: (c) the damages that may be recovered from the person by the worker in proceedings referred to in paragraph (a) are to be reduced by the amount by which the contribution which the person would (but for this Part) be entitled to recover from the employer as a joint tortfeasor or otherwise exceeds the amount of the contribution recoverable, (d) the amount of the contribution that the person is entitled to recover from the employer as a joint tortfeasor or otherwise is to be determined as if the whole of the damages were assessed in accordance with provisions of Division 3 as to the award of damages, (e) if the worker does not take proceedings against that employer or does not accept satisfaction of the judgment against that employer, subsection (1) applies as if the worker had not been entitled to recover damages from that employer, except that: (i) if the compensation paid by that employer exceeds the amount of the contribution that could be recovered from that employer as a joint tortfeasor or otherwise - the indemnity referred to in subsection (1) (d) is for the amount of the excess only, and (ii) if the compensation paid by that employer does not exceed the amount of that contribution - subsection (1) (d) does not apply and the employer has, to the extent of the compensation so paid, a defence to an action for such a contribution." 32 As Cole J said (continuing from passage quoted above) - "Against that background section 151Z(2)(c) provides that in the worker's action against the third party, common law damages which the worker otherwise would recover are to be reduced. The amount of the reduction is the excess of the contribution which the third party would, except for Part 5, be entitled to recover from the employer (whether as joint tortfeasor or otherwise) over the amount of the contribution recoverable from the employer. Subsection (2)(d) then addresses the amount of the contribution which is recoverable from the employer, whether as a joint tortfeasor or otherwise. The amount entitled to be recovered is to be determined as if the whole of the worker's common law damages were addressed in accordance with the provisions of Division 3. Subsection (2)(d), in addressing the amount that the third party 'is entitled to recover' from the employer, is not addressing the first integer in subsection (2)(c), namely, the amount of the contribution which the third party "would (but for this Part) be entitled to recover from the employer", whether as joint tortfeasor or otherwise. Accordingly, one must assess the amount of contribution which, absent Part 5, the third party would have been entitled to recover from the employer, and deduct from that sum the amount which is in fact recoverable upon the basis that the contribution recoverable is calculated by reference to damages assessed in accordance with Part 5, and in particular Division 3." 33 In Grljak v Trivan Pty Limited (1994) 35 NSWLR 82, Mahoney JA (with whom Kirby P and Priestley JA agreed) said, as to the application of paras 151Z(2)(b) and (c) - "The paragraphs provide for the reduction of the amount of damages which otherwise would be recoverable by a worker from a third party. The legislature has chosen to apply a formula to achieve that reduction. That formula involves, conceptually, three steps: the Court must first decide what is the amount of the contribution which the third party would (but for Div 3) be entitled to recover from the employer as a co-tortfeasor or otherwise at common law; it must then decide what is "the amount of the contribution recoverable" within par (c) and par (d); and it must then deduct the second from the first to determine the amount by which the worker's common law damages from the third party are to be reduced."

Section 151Z(2) Section 151Z(2) applies only to the calculation of the damages of the Second Defendant, News. STEP 1 151Z(2)(C) 35% OF $1,897,237.25 = $664,033.04 151z(2)(D) 35% OF $1,608,529.00 = $562,985.18 $664,033.04 - $562,985.18 = $101,047.85 STEP 2 $1,897,237.25 - $101,047.85 = $1,796,189.40 34 The verdict against News is $1,796,189.40 plus exemplary damages of $150,000, a total of $1,946,189.40. 35 The verdict against Group 4 is $1,608,529.09 plus damages for breach of contract of $100,000, plus interest on $100,000 calculated from 1992 to December 1996, and thence to judgment in accordance with Schedule J. I leave this to the parties to calculate. In the event of disagreement, each has liberty to apply on three days' notice.

Costs 36 On 28 March 2004 the plaintiff gave notice in accordance with the Rules of an offer to compromise his action for $1 million plus party/party costs as agreed or assessed, clear of worker's compensation payments to date. That offer was open for twenty-eight days. The defendants contend that this is a case where an order for costs calculated on the usual basis should be made. 37 In Morgan v Johnson (1998) 44 NSWLR 578 Mason P said (at 581-582, omitting references) - "The following principles can be extracted: (1) The purpose of the rule is to encourage the proper compromise of litigation, in the private interests of individual litigants and the public interest of the prompt and economical disposal of litigation… (2) The aim is to oblige the offeree to give serious thought to the risk involved in non- acceptance… (3) The prima facie consequence of non- acceptance will be that the rule will be enforced against the non-accepting party…This is because, from the time of non-acceptance 'notionally the real cause in occasion of the litigation is the attitude adopted by [the party] which has rejected the compromise'… (4) Lying behind the rule is the common knowledge that 'litigation is inescapably chancy'…For this reason, the ordinary provision is expected to apply in the ordinary case…The mere fact that it was reasonable for the litigant to take the view that he or she did in rejecting the offer is not enough to displace the rule [emphasis added]…As Clark JA expressed it in Houatchanthara v Bednarczyk (Court of Appeal, 14 October 1996, unreported)] (at 2-3): 'The rule lays down the general principle that should be applied, and the order provided for in that rule should only be departed from for proper reasons which, in general, only arise in an exceptional case. It is clear that if the rule operates, the plaintiff will be significantly disadvantaged, but that disadvantage flows naturally from the risks of litigation. The idea behind the rule is to encourage settlement or compromise of proceedings, and more specifically, to encourage litigants to give serious consideration to the settlement of proceedings. Where an offer is made by a defendant to a plaintiff the latter is put on notice that unless he or she accepts that offer, there is a significant risk that the order provided for by the rule may follow. In declining to accept the offer, the plaintiff undertakes the risk and the consequences that follow naturally from that risk.' (5) The discretion to displace the rule is a judicial one, requiring the private and public purposes of the rule to be borne in mind…Reasons must be given for 'otherwise ordering'…" 38 Counsel for the defendants point to the unusual circumstances of the case, in particular to the facts that the plaintiff kept working and he appeared - so some of the evidence showed - to be content at work and that Mr Chaloner's conduct was bizarre and deceptive and that the defendants were entitled to doubt that they would be liable for acts that fell so far out of the usual scope of employment. I am unimpressed by these contentions. The character of the plaintiff's case and the injury which he said was caused to him was well known by the time of the offer. It was known by that stage, I think, that Mr Chaloner would not be called by either defendant. The extent to which his conduct was otherwise known to senior employees was, it may be, thought to be slight. But the question was ultimately going to be decided upon whether the plaintiff would be substantially believed. The extent of his claimed incapacity was certainly known well enough by the date of the offer to enable an assessment to be made of the risk in the event that the plaintiff was believed. 39 It is true that there were outstanding issues that required to be addressed as at 26 March 2004. But none of these were, to my mind, crucial to the adequate assessment of the plaintiff's offer. Once the essential fact was grasped - as it should have been by this stage - that the defendants were unable to call evidence contradicting the plaintiff's account of Mr Chaloner's conduct, the plaintiff's medical evidence and his own claims of incapacity provided a more than sufficient basis for the defendants to appreciate whether the offer was realistic and acceptance was sensible for the reasons enunciated by the President in Morgan v Johnson. 40 Even if rejection of the offer of compromise was reasonable, I do not think that this was - in point of assessment of risk - a truly exceptional case. I would point out that the plaintiff's case - with the possible exception of the sexual assaults - was that the wrongful conduct occurred at work in the very directions given by Mr Chaloner to the plaintiff as to how that work was to be performed and most of the offensive comments made by Mr Chaloner concerned the plaintiff's performance of his duties and relationship to Mr Chaloner in that respect. I am also of the view, at all events, that rejection of the plaintiff's offer was unreasonable. It is not desirable that the public policy considerations underlying the law on this question permit a defendant to disregard a reasonable offer of compromise because it does not have to hand all the detail necessary to contest the case in the event that it must be litigated. Amongst other things, that would in all likelihood entail the incurring of further substantial costs for the offeror which the offer is designed to avoid. The question is no doubt one of degree, but I do not doubt that the defendants were in a position to consider within a reasonable range of certainty the extent of their risk, although that would have involved judgment about matters that were relatively uncertain. The mere fact that they might have needed, in the time frame allowed, to make some further enquiries, even enquiries of the plaintiff, is not a sufficient reason for holding rejection to be reasonable. 41 It was also submitted that the offer did not so greatly differ from the ultimate award when workers' compensation payments are taken into account as to represent a significant compromise. I am not certain this is a significant consideration, since the issue is assessment of risk. No doubt this is a question of degree. I am of the view, at all events, that the offer did indeed represent a significant compromise. It is also submitted that the offer was unclear, having regard to the reference to costs and workers' compensation payments. The latter figure was easily ascertainable by both defendants. There is no evidence that they found this an impediment to consideration of the offer. As I have already said above in a somewhat different context and a fortiori in the present one, it does not seem to me that a defendant will avoid the consequences of an offer of compromise by declining to take obvious steps to evaluate the extent of its exposure, even if that requires obtaining information from third parties or, indeed, the offering litigant. 42 I am unpersuaded that an order otherwise than for indemnity costs should be made for the period from 26 March 2004.

Form of the orders 43 Mr Kennedy SC submitted that the effect of s151Z(2) on the damages awarded here is to require separate judgments against each of the defendants. The alternative is to give one judgment against both, but limit any execution against the employer a sum no more than the verdict suffered by it. Having regard to the entirely severable sums payable for exemplary damages (News) and breach of contract (Group 4), it seems to me that two separate judgments must be given. It would be otherwise were contribution differences the only distinction between the mutual liability of each defendant. 44 It is clear that the plaintiff is entitled to no more in total than the sum awarded against News and no more should be executed against Group 4, than the sum awarded against Group 4. 45 The final form of the judgment against Group 4 must await agreement or determination of the interest owed for breach of contract. I give judgment against News in the sum of $1,946,189.40 plus costs. 46 Both defendants are liable to pay indemnity costs on and from 26 March 2004. **********

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