O'LEARY v OOLONG ABORIGINAL CORPORATION INC

LOWER COURT District Court JURISDICTION : LOWER COURT 68/01 (Nowra) FILE NUMBER(S) : LOWER COURT Garling DCJ JUDICIAL OFFICER :

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 41090/02 DC 68/01 (Nowra)

SPIGELMAN CJ SHELLER JA McCOLL JA

O'LEARY v OOLONG ABORIGINAL CORPORATION INCORPORATED

The respondent is a residential drug and rehabilitation centre which specialises in treating members of the Aboriginal community. The appellant was employed as a bookkeeper by the respondent from 31 December 1983 until January 1999. In October 1998, the appellant went on leave and a number of changes occurred during, and immediately after, this period. All books of account were removed from the appellant's office, his workspace was moved to a verandah area, his computer was taken away and he was no longer allowed to sign cheques. The respondent offered no explanation for what was happening. Other employees were aware that the appellant was suspected of misappropriating funds. The appellant was never confronted by the respondent with this suspicion nor asked for an explanation. By January 1999, the appellant was no longer able to cope with the situation and resigned.

These events took place in circumstances where the appellant in September 1998, had been diagnosed as suffering from an adult adjustment disorder, required some time off work and had presented the respondent with a medical certificate to this effect.

The appellant commenced proceedings claiming negligence on the part of the respondent in failing to take adequate precautions for his safety at work, resulting in the appellant suffering psychological injury, namely adjustment disorder with depression.

The trial Judge found that the respondent employer owed to the appellant a duty to take reasonable care to avoid injury to the appellant as its employee. Further, evidence accepted by his Honour demonstrated a breach of that duty. The central issue was therefore whether damages were recoverable for the harm, namely a major depressive disorder, resulting from the breach. In fact, the trial Judge held that this injury was "far too remote" and that the respondent could not have reasonably foreseen that a possible consequence of its conduct was that the plaintiff would suffer a recognised psychiatric illness. The trial Judge entered a verdict for the defendant.

The appellant challenged the findings of the trial judge as to the foreseeability of the injury suffered and submitted that the respondent ought reasonably to have foreseen that its conduct was likely to result "in mental anguish of a kind that could give rise to a recognised psychiatric illness." As a fallback position, the appellant relied upon the September 1998 medical certificate as evidence that to the knowledge of the respondent the appellant suffered from a particular vulnerability. Held: per Spigelman CJ and Sheller JA, (McColl JA dissenting), that the appeal should be dismissed with costs. Per Spigelman CJ:

1. The primary submission of the appellant relied upon a passage in the trial Judge's decision where his Honour appears to find in favour of the appellant on issues of liability whereas later in his judgment he comes to the opposite view. This passage in issue is better understood as recording the Plaintiff's submissions. It is not a finding by the trial Judge but is an oral interpolation into a passage in which his Honour was setting out the submissions of the plaintiff. There is therefore no glaring inconsistency.
2. Although set out in the context of breach rather than duty, the "far fetched and fanciful" test has long since been applied as a determination of the foreseeability test for purposes of duty. It replaces the test of reasonable foreseeability with one of conceivable foreseeability.

Wyong Shire Council v Shirt (1980) 146 CLR 40 Tame v New South Wales; Annetts v Australian Stations Pty Ltd (2002) 211 CLR 317 3. There remains an important distinction between stress and a recognised psychiatric illness. The inadequate nature of the evidence, submissions and judgment in this case is such that this is not an appropriate occasion to permit recovery for a situation in which stress, an inevitable concomitant of every day life including working life, has led to psychiatric damage. 4. "Normal fortitude" is a relevant consideration but not an independent test or precondition of liability. The reaction of the appellant to the evidence of suspicion of his conduct and progressive isolation was sufficiently idiosyncratic that it could not be said to be reasonably foreseeable that psychiatric injury, as distinct from non-compensable stress, could result from the respondent's conduct.

Gifford v Strang Patrick Stevedoring Pty Ltd (2003) 77 ALJR 1205.

5. The existence of the September medical certificate, and the knowledge of the respondent with respect to the appellant's reaction at the time, did not give rise to a knowledge of susceptibility, which would impose a duty, where none would otherwise exist.
6. The law of negligence involves a duty to take reasonable care, not a duty to avoid risks by all reasonably affordable means. His Honour has confused duties, which arise in an employer/employee context with a duty of care. A number of aspects of the respondent's conduct do suggest conduct on the part of an employer, which was improper and capable of being expressed in language of breach of duty. However, the duty breached was not, in the circumstances of the case, a duty of care. Per Sheller JA:
7. Undeniably, the respondent as employer owed to the appellant a duty to take reasonable care to the appellant as its employee. The evidence, accepted by the trial Judge, demonstrates a breach of this duty.

8. Full force must be given to the distinction between any emotional distress suffered and a recognisable psychiatric illness. This distinction is one of degree rather than kind and might change with advances in medical knowledge. Little attention has been given by the courts to identifying the basis upon which this distinction is to be made.

Tame v New South Wales; Annetts v Australian Stations Pty Ltd (2002) 211 CLR 317 Van Soest v Residual Health Management Unit [2000] 1 NZLR 179 at 197 9. In cases of psychiatric injury, a question of reasonable foreseeability depends on what knowledge is to be attributed to the reasonable person as to the operation of cause and effect in psychiatric medicine.

McLoughlin v O'Brian [1983] 1 AC 410 10. The behaviour of the respondent as an employer, towards the appellant in several respects was wrong if not disgraceful. Undoubtedly, as a result of his experience in the defendant's workplace, the plaintiff suffered a recognised psychiatric illness. Unquestionably, the respondent should have reasonably foreseen that its conduct would have caused the appellant to suffer some form of workplace stress. 11. Any objective consideration of the respondent's behaviour would have revealed that it was foreseeable, if not inevitable given the plaintiff's medical history of adult adjustment reaction, that it could lead to the appellant enduring some form of workplace stress. However, as the medical evidence demonstrated, it was doubtful that any individual would have foreseen that the appellant would have developed reactive depression. Annetts v Australian Stations Pty Ltd (2002) 211 CLR 317 distinguished; New South Wales v Seedman [2000] NSWCA 119 distinguished; Mannall v State of New South Wales NSWCA 327 distinguished. 12. While it is not a condition of liability that the precise character of the damage should have been foreseen, the plaintiff must show that the class of injury ought to have been foreseen. In the present case, the class of injury was a recognised psychiatric illness.

Mount Isa Mines Limited v Pusey (1970) 125 CLR 383. 13. Having regard to the limits of the opinion expressed by Dr McMurdo, it was on the evidence, open to the trial Judge to find that the respondent could not have reasonably foreseen that a possible consequence of its conduct was that the plaintiff would suffer a recognised psychiatric illness. Per McColl JA (dissenting): 14. The trial Judge held that the respondent's conduct was such as to create a foreseeable risk of psychological injury to the appellant and that there was a reasonably practicable means of avoiding this foreseeable risk of psychological injury. 15. After reaching this conclusion, the trial Judge sought to determine whether the respondent ought to have foreseen that the appellant would develop the particular psychiatric condition which ultimately resulted. This was an erroneous approach. It was sufficient that the class of injury, psychiatric injury, was reasonably foreseeable as a consequence of the defendant's conduct.

Mt Isa Mines Pty Limited v Pusey (1970) 125 CLR 383; Tame v New South Wales; Annetts v Australian Stations Pty Ltd (2002) 211 CLR 317; New South Wales v Seedman [2000] NSWCA 119; Mannall v State of New South Wales NSWCA 327. 16. Whether the respondent ought reasonably to have foreseen that its conduct might cause the appellant to suffer psychiatric harm is judged by the standards of the reasonable person. The question is whether in all the circumstances, the risk of the appellant sustaining a recognisable psychiatric illness was reasonably foreseeable in the sense that it was not far-fetched or fanciful. 17. The probability that the appellant would develop a psychiatric disorder as a result of the respondent's conduct was neither fanciful nor far-fetched. It was a matter which ought to have been foreseen by a reasonable employer in the circumstances of the changes wrought to the appellant's employment conditions. 18. The respondent's conduct struck at the heart of the relationship of trust which exists between employer and employee. It was reasonably foreseeable that exposing an employee even to a short period of profound stress, which struck at the heart of his integrity and honesty, was as capable of causing psychiatric illness as a sustained period of stress over a lengthy period.

Cases cited: Gifford v Strang Patrick Stevedoring Pty Ltd (2003) 77 ALJR 1205 Mannall v State of New South Wales [2001] NSWCA 327 McLoughlin v O'Brian [1983] 1 AC 410 Mount Isa Mines Ltd v Pusey (1970) 125 CLR 383 New South Wales v Paige (2002) Aust Torts Rep 81-676 State of New South Wales v Seedsman [2000] NSWCA 119 Sullivan v Moody (2001) 207 CLR 562 Tame v New South Wales; Annetts v Australian Stations Pty Ltd (2002) 211 CLR 317 Van Soest v Residual Health Management Unit [2000] 1 NZLR 179 Wyong Shire Council v Shirt (1980) 146 CLR 40

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 41090/02 DC 68/01 (Nowra)

SPIGELMAN CJ SHELLER JA McCOLL JA

Friday, 14 May 2004 O'LEARY v OOLONG ABORIGINAL CORPORATION INCORPORATED Judgment

1 SPIGELMAN CJ: I have read the judgments of Sheller and McColl JJA in draft. Their Honours set out the facts and issues that arise in the proceedings. 2 The primary submission of the Appellant relied upon a passage in his Honour's judgment where he appears to find in favour of the Appellant on issues of liability whereas later in his judgment he comes to the opposite conclusion. It is unlikely that his Honour was guilty of so gross an inconsistency. It is necessary to appreciate the pressures under which judges of the District Court work and their difficulty in obtaining a transcript of evidence and of judgments. 3 The relevant passage is as follows: "The plaintiff submits, firstly, that defendants did not call any evidence to the contrary. Indeed, I accept the plaintiff and I accept his evidence, that the plaintiff has made out two conditions necessary to establish liability and negligence against the defendant. First, the conduct of the defendant was such as to create a foreseeable risk of psychological injury to the plaintiff. Secondly, there was available to the defendant a reasonably practical means of avoiding a foreseeable risk of psychological injury and that is the process of discussion, which I refer to earlier." 4 In the course of his Honour's oral judgment, he manifested a tendency on a number of occasions to refer to issues discursively and resolve them by way of an aside. The part of the judgment in which the above passage appears is primarily concerned with setting out the Plaintiff's submissions. In a subsequent part the primary concern is setting out the Defendant's submissions. In my opinion, the whole of the above passage should be understood as recording submissions of the Plaintiff and dealing with two separate aspects of the submission. 5 His Honour first referred to the Plaintiff's submission that the Defendants did not call evidence to the contrary of the Plaintiff's case. In this respect his Honour indicated an acceptance of the Plaintiff's evidence. The whole of the passage beginning "Firstly" and ending "I accept his evidence" is an oral interpolation into a passage in which his Honour was setting out the Plaintiff's submissions, so that the balance should be read as follows: "The plaintiff submits … that the plaintiff has made out two conditions necessary to establish liability and negligence against the defendant." 6 Understood in this way, this is not a finding by his Honour. There is, in my opinion, no glaring inconsistency in his Honour's judgment. 7 The second submission of the Appellants is that his Honour posed the question of foreseeability in terms of the particular psychiatric injury that emerged. It is true that his Honour used the definite article in one passage when he said: "And if they did not handle him in that way or they were careless in what they did, that it would develop into the psychological condition it did." 8 Reading his Honour's judgment as a whole, I do not believe his Honour was using the definite article in the sense of the specific illness that emerged, as distinct from referring to a condition of considerable severity. In the previous paragraph his Honour referred in similarly loose language to the process which the Appellant went through as follows: "Things build up further and further in his mind and eventually he has a real psychological problem." 9 In my opinion his Honour was referring to the same matters in both relevant passages of "the psychological condition" and "a real psychological problem". In each case he was referring to the severity of the condition which in fact emerged. 10 A few paragraphs before he had referred to the Defendant's submissions in terms: "… that they were to know that if they were not careful about the way they handle him that he may develop a further psychological condition …" 11 His Honour's reasons for rejecting the Appellant's case on liability are not easy to discern. The full passage is set out by Sheller JA. It is by no means clear to me what his Honour meant by the words "far too remote". His Honour had earlier said: "The whole matter really comes down to what was identified by the parties and that is what the defendant knew or should have known and the foreseeability aspect."

His final conclusion was: "I do not see how this defendant, armed with that knowledge, would have been expected to have known or to have done something different to that which they did … One has to link up what happened to their knowledge and I do not see how it could be said that they have knowledge which would allow me to find a verdict in favour of the plaintiff …" 12 If this is a statement that no kind of recognised psychiatric illness was foreseeable, it is difficult to reconcile with the "far fetched and fanciful" test based on Wyong Shire Council v Shirt (1980) 146 CLR 40 at 47-48, to which his Honour had earlier referred in his judgment. Although set out in a context of breach rather than duty, the formulation has long since been applied as a determination of the foreseeability test for purposes of duty. In my opinion it replaces the test of reasonable foreseeability with one of conceivable foreseeability. It has been effectively criticised by McHugh J with whom Callinan J agreed in Tame v New South Wales (2002) 211 CLR 317 see esp at [96]-[108] and [331]. Nevertheless it has not been overturned and is the law which this Court must apply. 13 Notwithstanding the inadequacy of his Honour's statement of reasons, this Court should determine the matter rather than remit the case for further hearing. McColl JA has come to the conclusion that there was a duty of sufficient scope and breach. 14 Once the two submissions to which I have referred above are rejected, the thrust of the Appellant's case is summarised in the following oral submission: "Are we not entitled to assume an employer who subjects their employee to suffer workplace stress has to foresee there could be a severe problem?" 15 There remains an important distinction between stress and a recognised psychiatric illness. In my opinion, the inadequate nature of the evidence, submissions and judgment in this case is such that this is not an appropriate occasion to permit recovery for a situation in which stress, an inevitable concomitant of every day life including working life, has led to psychiatric damage. Important questions were left unexplored, e.g. issues of coherence of the law especially in the context of investigations of suspicion, albeit groundless, of malfeasance. (See e.g. Sullivan v Moody (2001) 207 CLR 562; New South Wales v Paige [2002] Aust Torts Rep 81-676.) 16 It is not easy to understand some passages of the Notice of Contention filed for the Respondent in this case. One, however, does raise the "normal fortitude" test in the following terms: "It is important to note that His Honour did not find, nor was there any evidence to suggest, that the respondent's conduct or action created a foreseeable risk of psychiatric injury in a person not suffering from a particular vulnerability." 17 The significance of particular susceptibility of a person to psychiatric injury is variously expressed in the judgments in Tame at [16], [61]-[62], [95], [110], [113], [118], [199], [201], [273], [331] and [366]. For present purposes it is sufficient to act on what appears to be a broadly accepted test that 'normal fortitude' is a relevant consideration, but not an independent test or precondition of liability. (See Gifford v Strang Patrick Stevedoring Pty Ltd (2003) 77 ALJR 1205 at [98] and [119].) 18 In the present case, in my opinion, the factor is entitled to weight in reaching the conclusion that liability should not be imposed. The reaction of the Appellant to the evidence of suspicion of his conduct and of his progressive isolation was sufficiently idiosyncratic that it could not be said to be reasonably foreseeable that psychiatric injury, as distinct from non-compensable stress, could result from the Respondent's conduct. Other considerations, such as vulnerability and control, do not outweigh this factor. 19 The Appellant sought to rely on the certificate given in September 1998 of an Adult Adjustment Reaction as an indication of vulnerability. This diagnosis was of a qualitatively different character to the psychiatric injury from which the Appellant ultimately suffered. The existence of the certificate, and the knowledge of the Respondent with respect to the Appellant's reaction at that time, did not give rise to a knowledge of susceptibility which would impose a duty, where none would otherwise exist. 20 I have expressed the above conclusion in terms of scope of duty. As is often the case questions of duty and breach overlap. A number of the matters which arise in terms of 'normal fortitude', could also arise on breach. 21 In its Notice of Contention the Respondent raised a number of questions which relate to his Honour's findings on breach which I do not find it necessary to determine. The Notice and submissions are unclear but the proposition is advanced that there was no evidence that the Respondent's conduct created a foreseeable risk of injury. No cross-appeal is required. The paragraph from the Notice quoted in [16] above is sufficient. 22 One of the facts that must be taken into account on the issue of breach is the magnitude of the risk of causing relevant mental trauma. As Sheller JA indicates the expert evidence on this matter is unclear. There is, in my opinion, no adequate basis in the evidence for assessing the standard of care in this respect. There is a real danger of hindsight bias. (See New South Wales v Paige esp at [198]-[202], [211]-[212].) The law of negligence involves a duty to take reasonable care, not a duty to avoid risks by all reasonably affordable means. 23 In my opinion, his Honour has confused other duties which arise in an employer/employee context - such as an obligation to accord natural justice or of fair dealing - with a duty of care. A number of aspects of the conduct of the Respondent to which his Honour refers, which are also mentioned in the judgments of Sheller and McColl JJA, do suggest conduct on the part of an employer which was improper and capable of being expressed in language of breach of duty. The duty breached, however, was not, in my opinion, in the circumstances of the case a duty of care. 24 In my opinion, the appeal should be dismissed with costs. 25 SHELLER JA: Introduction

The plaintiff, Barry James O'Leary, appeals from a judgment given by his Honour Judge Garling on 17 July 2002 in proceedings brought by the plaintiff against his employer, Oolong Aboriginal Corporation Incorporated (OACI). In those proceedings, the plaintiff sought to recover damages against the defendant for negligence in failing to take adequate precautions for his safety at work as the result of which he claimed to have suffered psychological injury, namely adjustment disorder with depression. Judge Garling gave a verdict for the defendant and ordered the plaintiff to pay the defendant's costs. I have had the benefit of reading in draft the judgments of the Chief Justice and McColl JA. McColl JA disagrees with my conclusion and is of opinion that the appeal should be allowed.

Facts 26 The defendant organisation offered residential rehabilitation for alcoholics and drug addicts, in particular, but not exclusively, Aboriginal people. From 31 December 1985 until January 1999 the defendant employed the plaintiff as a bookkeeper. 27 When first employed the plaintiff was directly responsible to a director of the defendant, Mr Jessup, who was responsible to the executive committee of the defendant. In 1988, allegations of dishonesty and potential misappropriation were made against Mr Jessup and the plaintiff. When this happened, Mr Jessup identified the problem, asked the plaintiff about it, investigated it and found that the plaintiff had done nothing incorrectly. In January 1996, Mr Jessup retired. No one immediately replaced Mr Jessup. The plaintiff had to do what had been Mr Jessup's duties as well as his own. This he did for about eighteen months until 1998. In about June 1998, the defendant employed Ms White and the plaintiff returned to his old job. 28 On 30 June 1998, the plaintiff closed off the defendant's books. They were audited by a chartered accountant. No significant problems were identified by the auditor. 29 In September 1998, the plaintiff visited his general practitioner, Dr Douglas Jameson, who issued a certificate dated 14 September 1998 certifying that the plaintiff was suffering from adult adjustment reaction and would be unfit for work from 14 September to 25 September 1998. On 18 September 1998, Dr Jameson certified that the plaintiff was suffering from adult adjustment reaction and would be fit for work from 8.30 am to 12.30 pm only Monday to Thursday from 28 September to 16 October 1998. 30 According to a letter dated 18 February 2000 from Dr Andrea Dipold in answer to a letter from the plaintiff's solicitors, the plaintiff consulted "our practice" on 14 September 1998 regarding his increasing stress at work and his difficulty to cope. He felt depressed, worried and lethargic. He had been a patient of the practice since April 1992 and had a history of colonic polyps and irritable bowel syndrome. He had several colonoscopies. Polyps had been removed. He also suffered from prostatitis. He had a few superficial skin cancers, and elevated cholesterol. He suffered no physical injuries only mental and emotional fatigue. The letter confirmed the diagnosis of adult adjustment reaction and continued: "(7) He has tried to return to work, but has not been able to cope with the hostile environment at Oolong House. He has been unable to cope with this environment for over 18 months. (8) He used to be a committed worker at Oolong House since 1985 but the increasing pressure at work exhausted his mental capacity to continue to cope. (9) Presently he is taking an anti-depressant medication which helps him to cope in his everyday life. He is having counselling. He is still unfit for any administrative work. He is fit for light manual work. (10) Mr O'Leary was well adjusted to his work at Oolong House between 1985 and 1998. During 1998 internal problems were increasing to OACI and in spite of all his efforts, he gradually lost his ability to cope with all the pressures at his work place. This led to an 'Adult Adjustment Reaction', finally displaying symptoms of depression, and preventing him to continue [sic] to work." 31 From 21 October 1998 until 30 October 1998 the plaintiff was on leave. When he returned at the end of his leave all the books of account had been taken out of his office and his workspace had been moved to a verandah area. Ms White told the plaintiff that the treasurer had asked for the books to be sent to him to check. The plaintiff was curious and did not know what was going on. He thought it was normal procedure. He asked for the books and was told they would be brought back soon. The auditor rang and asked what was going on. The plaintiff did not know. Later in 1998 the books had not been returned. His computer was taken away and he was no longer allowed to sign cheques, something he had done since he first went to work for the defendant. He felt isolated. The defendant offered him no explanation for what was happening. 32 Mr Jessup, who kept in contact with the affairs of Oolong House, was aware that the plaintiff was suspected of misappropriating funds. Evidence was given by Robyn Diebert, who was at the time a drug and alcohol counsellor employed by the defendant, that the plaintiff was, during this period, being investigated for fraud. A further audit was carried out by Daley and Co. The plaintiff was not confronted with the suspicion nor asked for an explanation nor given any explanation. According to the trial Judge he was "cut out". Some books were returned but only those needed to do his job as bookkeeper. 33 The plaintiff felt under suspicion and tendered his resignation in January 1999. He received a letter from the defendant dated 18 January 1999 which stated as follows: "At a meeting of the Executive Committee your resignation was accepted and discussed. The Executive Committee is also aware of sick leave taken and your scheduled return to work on Monday 18 January. Please be advised that a unanimous decision was carried to suspend your employment, with pay, for the last two weeks prior to your effective resignation date of 28th January 1999. All money payable for accrued leave entitlements will be deposited in your nominated account on the 28th January 1999. Further to this letter detailing [sic] your final pay entitlements will be sent to you prior to that date." 34 Shortly before that letter was written Daley and Co, on 13 January 1999, wrote to the defendant stating that, based on their review, which was not an audit, apart from minor discrepancies and two other matters (a failure to accrue for trade credit liabilities payable as at 30 June 1998 in a total amount of $8,199 and a failure to capitalise all fixed asset purchases made during the financial year to a total of $5,227): "… nothing else has come to our attention that causes us to believe that the financial statements of Oolong House are not drawn up so as to give a true and fair view of the association's state of affairs as at 30 June 1998."

The defendant conceded that there was never any problem with the books and never any misappropriation by the plaintiff.

35 Dr Robin McMurdo, a specialist psychiatrist, examined the plaintiff on 12 April 2000 and re-assessed him on 4 June 2002. He made a report dated 10 June 2002, which became part of an exhibit, and gave oral evidence. Dr McMurdo agreed with the opinion of Professor Ivor Jones that by the time of his report the plaintiff was suffering from a major depressive disorder. In his report Dr McMurdo said: "On the history given to me your client was exposed to some very difficult situations while working at Oolong House. When the manager left, he was expected to carry out duties for which he was not experienced nor trained. He had problems with the Aboriginal board whom he believes wanted to remove him from office. He finally resigned only to be dismissed before his resignation was formally accepted. He also found it very difficult that there was suspicion about his handling of the financial records and felt that he was seen as fraudulent. This distressed him very greatly. He feels that even though he was eventually exonerated, … he was still seen as dishonest. There is little doubt that these factors would have been an aggravating factor in causing reactive depression. It is doubtful if any individual would foresee that he would develop reactive depression, but is quite understandable that he developed Adjustment Disorder with Depression, given the circumstances that occurred in the course of his employment." 36 I interpolate that the plaintiff's evidence about the dates of various events was in places confused and inconsistent. Importantly, his case on appeal concerned his treatment by the defendant in the course of his employment, particularly between the end of October 1998 and the beginning of January 1999 when his employment ended. By September 1998, he suffered from an adult adjustment disorder which his counsel described as not particularly serious but "self-limiting" and affecting the person's ability to adjust to a stress or change in the environment or as a result of a significant event. Counsel conceded that nothing significant happened before the plaintiff went on leave on 21 October 1998. This concession means that some of the history given to the doctors was inaccurate. The plaintiff gave evidence that he was uneasy about the way he was being treated but did not rely on that as relevant to negligence. The defendant did have in its possession a medical certificate dated 14 September 1998 certifying that the plaintiff suffered from adult adjustment reaction which counsel described as a psychological problem which resulted in limiting his work capacity. 37 In his oral evidence, Dr McMurdo agreed that in his view the circumstances of the plaintiff's employment as outlined to him and of which he was aware, "created a foreseeable risk that some form of workplace stress might occur". He said that there was a strong probability that workplace stress might go on to develop into a form of psychological or psychiatric illness or disorder. Dr McMurdo thought there was little doubt that the circumstances of his employment would be stressful and that given his situation, "the incredible change of his work employment [scil environment] was very likely to precipitate a psychiatric order". He was saying that as a doctor. Later he was asked: "Doctor, do you believe that the employer, in the circumstances which confronted Mr O'Leary, ought to have foreseen that he would suffer some form of workplace stress"

Reasons for judgment at trial 38 Before examining the reasons for judgment it is important to remember that undeniably the defendant as employer owed to the plaintiff as its employee a duty to take reasonable care to avoid injury to the plaintiff. Judge Garling referred to Mannall v State of New South Wales (2001) NSWCA 327 as authority for that proposition. Further, evidence accepted by his Honour, demonstrated a breach of that duty. The question remained whether damages were recoverable for the harm resulting from that breach diagnosed as a major depressive disorder. The answer to that question depended upon whether such harm was a foreseeable consequence of the defendant's breach of duty. 39 Judge Garling said of the medical evidence: "The medical evidence reveals that the plaintiff saw Dr Dipold [in fact it was probably Dr Jameson] on 14 September 1998 regarding his increasing stress at work and his difficulty in coping. He felt depressed and worried, and that is when there was the certificate issued and the diagnosis of adult adjustment reaction. On 4 December 1998 the plaintiff saw the doctor and again says he is having difficulty at work, he cannot cope with the hostile work environment. On 2 January 1999 he was very stressed. 16 January 1999 he cannot face work; he has insomnia and anxiety, some suicidal thoughts. The doctor said that the plaintiff was well adjusted at his work at Oolong House between 1985 and 1998. During 1998 internal problems were increasing and in spite of all his efforts he gradually lost his ability to cope with the pressures of his workplace. This led to an adult adjustment reaction, finally displaying symptoms of depression and preventing him from continuing to work. All those matters are really matters of fact and one then has to turn to the real arguments in this case. It is alleged on behalf of the plaintiff that the defendant knew that the plaintiff was vulnerable to workplace stress. It is alleged that they knew or should have known this because he was a man who had worked for them as a bookkeeper for many years, who when Mr Jessup retired was placed under additional stress because he had to do additional work. They knew that he had seen a doctor in September 1998 and they had the medical certificate. They knew or should have known that by dealing with this matter in the manner they did that they were liable to cause psychological damage to the plaintiff. The way they dealt with it was negligent and there are a lot of other ways it could have been dealt with which would not have resulted in the plaintiff sustaining psychological injury." 40 The plaintiff and the defendant each tendered reports prepared by, what could be described as, workplace relations experts. His Honour preferred that prepared by Mr Hughes of Mawson Consulting Pty Ltd. He summarised Mr Hughes' opinion as follows: "This matter was not handled properly. What should have been done was, there should have been established with the individual the requirements, the role and what was required. Level of performance and the performance being discussed, and where there was a problem the individual should be made fully aware of the problem, given an opportunity to answer it. There should be a proper review and then discuss it again with the individual." 41 This the trial Judge thought was commonsense. There being some suspicion, "the books are looked at, the problem is identified and then there is discussion held with the plaintiff where he is asked to explain a very simple matter." The trial Judge said: "If his workplace is going to be moved one would have thought he would be told why. If his access to the computer was going to be taken away one would have thought he would be told why. If his right to sign cheques was being taken away surely he would have been told why. None of that happened and in my view, that is a negligent system of work. Of course that nowhere near resolves the issue between the parties in this matter." 42 The trial Judge described the central issue as follows: "What this matter really comes down to is this; the defendants became aware that the plaintiff received treatment in September 1998. They became aware there was a diagnosis of adult adjustment reaction. They were aware that he was not then fully fit for work. In other words, he had to cut back his hours. What is then argued, of course, is that the defendant knew or should have known that he was vulnerable and their action - which I am satisfied they took - was taken in a negligent way. One of the problems which has to be faced up to was, did the defendant know or should they have known of the plaintiff's medical condition?" 43 The trial Judge said: "Dr McMurdo who has reported in this matter, in particular on 10 June 2002 said, 'It is doubtful if any individual would foresee that he would develop reactive depression. But it is quite understandable that he developed adjustment disorder with depression given the circumstances that occurred in the course of the employment.' The plaintiff submits, firstly, that the defendants did not call any evidence to the contrary. Indeed, I accept the plaintiff and I accept his evidence, that the plaintiff has made out two conditions necessary to establish liability and negligence against the defendant. [My emphasis] Firstly, the conduct of the defendant was such as to create a foreseeable risk of psychological injury to the plaintiff. Secondly, there was available to the defendant a reasonably practical means of avoiding a foreseeable risk of psychological injury and that is the process of discussion, which I referred to earlier." 44 This led logically to findings for the plaintiff on liability for negligence. But as I have said, because of the relationship of employer and employee and the acceptance of the evidence of Mr Hughes, the duty of care and breach of it could hardly be an issue. There was a foreseeable risk of psychological injury to the plaintiff and the process of discussion to which his Honour referred could and should have taken place. His Honour gave no indication that in this context he equated psychological injury with "a recognised psychiatric illness". A reading of his reasons as a whole shows that he did not. After referring to State of New South Wales v Seedsman [2000] NSWCA 119 and Mannall v State of New South Wales the trial Judge said: "The questions which must be asked in connection with the breach of duty of care are; 1) did the conduct of the employer result in the foreseeable risk of psychological injury? The test for foreseeability is that set out by Mason J in Wyong Shire Council v Shirt (1980 ) 146 CLR at 40 and in particular at pages 47 and 48. Secondly, once their [scil - there was] evidence on which it could be found that the employer unreasonably failed to implement a reasonably practical means of avoiding the foreseeable risk." 45 His Honour referred to a passage in the judgment of Spigelman CJ in Seedsman where it is pointed out that in making a decision of foreseeability, expert evidence is not always required. Commonsense has a role to play. 46 His Honour was not impressed with the suggestion that the defendant did not know of the September medical certificate. However, he said that there was no evidence that the plaintiff had ever told the defendant what he was suffering from, other than giving them the medical certificate. There was, his Honour said, no evidence that anyone was openly hostile to the plaintiff. He came back to work, things had changed, but he continued working. How was the defendant to know that the adult adjustment problem had resulted from his work? How was the defendant to know that if it was not careful about the way it handled him he might develop "a further psychological condition" which would result in him having to leave work? 47 The trial Judge concluded as follows: "It seems to me, when I apply the principles which I have set out above, we have a plaintiff who has a problem, an adult adjustment disorder. He goes to a doctor, he comes back to his employer, he produces a certificate. He continues to work although at a reduced level. He goes off on holidays. Somewhere some suspicion develops, the books are taken for inspection, he is kept in the dark. He lets things build up in his mind. Again, there is no confrontation between anyone, no one has asked what is going on. Things build up further and further in his mind and eventually he has a real psychological problem. The problem I have with the plaintiff's case is, that I do not see how I could find the defendant knew or should have known - even keeping in mind what they knew of his work history and of him - that having received a medical certificate saying he had an adult adjustment disorder, that that meant that a situation existed which required careful handling of this plaintiff. And, if they did not handle him in that way or they were careless in what they did, that it would develop into the psychological condition it did. To me, that is far too remote. I do not see how this defendant, armed with that knowledge, would have been expected to have known or to have done something different to that which they did. I do not condone what they did in any way whatsoever. One has to link up what happened to their knowledge and I do not see how it can be said that they have knowledge which would allow me to find a verdict in favour of the plaintiff, even though I am not at all happy with the way they handled this situation. Accordingly, I must find a verdict for the defendant." 48 The trial Judge set out the formula by which he would have quantified the damages to be awarded if he had found for the plaintiff. The application of this formula produces a verdict of $105,886. There is no appeal against quantum.

Grounds of appeal and notice of contention 49 On appeal the plaintiff urged that the trial Judge's findings entitled the plaintiff to a verdict, though in oral submissions this was not pressed with any vigour. 50 The plaintiff's primary case was that the defendant owed to him a duty to take reasonable care to eliminate all risks of injury that could be reasonably foreseen and avoided - whether they were risks of the employee's psyche, person or property. In the words of McHugh J in Tame v New South Wales; Annetts v Australian Stations Pty Ltd: (2002) 211 CLR 317 at 366 para [140]: "The general law, like the law of contract, does not impose two duties on the employer - one to avoid physical injury and one to avoid nervous shock to the employee. 'The ruling principle', said Lord Keith of Avonholm, [ Cavanagh v Ulster Weaving Co Ltd [1960] AC 145 at 165] 'is that an employer is bound to take reasonable care for the safety of his workmen, and all other rules or formulas must be taken subject to this principle'. " 51 After the plaintiff returned from leave at the end of October 1998, the defendant was in breach of that duty of care in the way it treated the plaintiff and continued to treat the plaintiff, by changing his workplace, by taking away his computer and his right to sign cheques and by failing to give him any explanation for doing these things, so as to create suspicion of misconduct, ultimately found to be without any basis, and finally, instead of accepting his resignation, by suspending him. The plaintiff submitted that the defendant ought reasonably to have foreseen that this conduct was likely to result "in mental anguish of a kind that could give rise to a recognised psychiatric illness"; per Gleeson CJ in Tame at 338 para [41]. The trial Judge made no such finding. His findings were to the contrary and were supported by Dr McMurdo's evidence. 52 Only as a fallback position did the plaintiff rely upon the September certificate as evidence that to the knowledge of the defendant the plaintiff suffered from a particular vulnerability. In his amended statement of claim the plaintiff pleaded: "9A. The additional duties which the plaintiff was required to perform between January 1996 and June 1998 imposed considerable stress on the plaintiff. The plaintiff was able to cope with those additional duties, and that stress, but as a result was an emotionally vulnerable person by June 1998, and the defendant knew or ought to have known of that vulnerability." 53 The defendant filed a notice of contention that there was no evidence that to the extent to which the plaintiff encountered an atmosphere of suspicion in the workplace, that was known to the defendant or its responsible officers or was causally related to the damage claimed.

Discussion 54 As Gummow and Kirby JJ pointed out in their judgment in Tame at 379 para [185]: "Protection of mental integrity from the unreasonable infliction of serious harm, unlike protection from transient distress, answers the 'general public sentiment' underlying the tort of negligence that, in the particular case, there has been a wrongdoing for which, in justice, the offender must pay." 55 Full force must be given to the distinction between any emotional distress suffered and a recognisable psychiatric illness. At 382 para [193] their Honours referred to the judgment of four members of the New Zealand Court of Appeal in Van Soest v Residual Health Management Unit [2000] 1 NZLR 179 at 197. The majority saw it as significant that psychiatry distinguished between mere mental distress and psychiatric illness, albeit the distinction was one of degree rather than kind and might change with advances in medical knowledge. Gummow and Kirby JJ at 385-6 para [202] noted that in McLoughlin v O'Brian [1983] 1 AC 410 at 432 Lord Bridge of Harwich made the point that in cases of psychiatric injury, a question of reasonable foreseeability "depends on what knowledge is to be attributed to the hypothetical reasonable man [sic] of the operation of cause and effect in psychiatric medicine". 56 In his judgment in Tame, Hayne J raised several questions about breach of duty and causation. What knowledge of psychiatry is to be imputed to the reasonable person (407 para [262])? Again, at 414 para [285] Hayne J asked "How is the distinction to be made between compensable injury and non-compensable 'ordinary' or 'normal' emotional consequences?" His Honour observed at 415-6 para [292] that little explicit attention had been given to identifying the basis upon which the distinction is to be made "beyond noting that it is only the former which is to be compensable. So far, the courts appear to have been content to defer to the way in which psychiatrists distinguish between the two." These questions are pertinent to the resolution of this appeal. 57 The behaviour of the defendant as an employer, towards the plaintiff as an employee, in several respects was wrong if not disgraceful. In November 1998 Ms White received a communication dated 5 November from Tony O'Connor the Chief Executive Officer of The Illawarra ITeC Ltd, an employment and training services business. It was in the following terms: "Following a brief review of the financial information supplied I would like to make the following recommendations. It is extremely difficult to ascertain whether or not there has been any misappropriation of funds and on the random checks that I have conducted I have found no evidence of wrongdoing. However I cannot understand why the organisation is continuing to utilise a manual accounting system when it has purchased a computer accounting system, had staff trained in use of the system and have [sic] a 2 years support contract in place with the supplier. The utilisation of this system would certainly create a much better audit trail, reduce the amount of time spent on accounting functions and ensure that all finances are tracked in an efficient manner. Whilst reviewing the information supplied a number of issues that will need to be addressed were identified. These include the following: 1. Cheques for payment of clients and suppliers are being requisitioned, authorised and signed by the same person. This is not a recommended system as it will open up the opportunity for fraudulent activity. 2. A number of cheque stubs have not been filled in. Therefore there is no information as to why the cheque was issued and to whom. It may be worth speaking to the bank and have some of these cheques retired [sic - returned] to ensure that the expenditure was legitimately incurred. 3. There is an extraordinary amount of cash transactions. Much of this is payments to clients where there seems to be no acknowledgment from the client as having received the funds. I would recommend that all payments to clients are made directly into a nominated bank account and all funds received for and paid to a client are recorded in a separate account in MYOB. 4. Ensure that all household expenses ie, food etc. are paid on account. With the amount of consumables being purchased it is important that some kind of internal control is put in place to stop any pilfering. 5. Given my above concerns I would strongly recommend that you retain the services of external auditors to review the position of the organisation and make further recommendations as to internal controls. Following our conversation I have spoken to Mr Michael Gleeson a partner of Daley and Co in Wollongong. I have given him a brief outline of my concerns and he would be happy to take on the audit role as well as be of assistance in the establishment of your computer accounting system. My company has used Daley and Co for the past ten years and find them both thorough and extremely helpful. Whilst this will incur extra expenditure I believe that it should be undertaken as a matter of urgency to protect both yourself and the Board from any future possible liability. I suggest that [you] give Michael a call on 02 42 296477. I hope that this is of assistance to you and would be happy to discuss this further at any time." 58 This letter acknowledged difficulty in ascertaining whether there had been any misappropriation of funds but on a random check found no evidence of wrongdoing. There were problems with using a manual accounting system which had stated disadvantages. Issues needed to be addressed such as cheques for payment of clients and suppliers being requisitioned, authorised and signed by the same person. Some cheque stubs had not been filled in. There was an extraordinary number of cash transactions. Internal controls needed to be put in place. Mr O'Connor recommended external auditors who, in turn, were expected to recommend appropriate internal controls. The comments were directed to the defendant's accounting system not to the behaviour of the plaintiff. Not to raise these questions with the plaintiff demonstrated poor management. To allow suspicion to be directed to him was disgraceful. Yet Ms Diebert, when she returned from leave early in 1999, was told by Ms White that the plaintiff was being investigated for fraud. 59 The plaintiff's evidence was that he received no warning that his records were to be taken out of his office. This had not happened before. He spoke to Ms White who told him that the treasurer had taken the books to check them. Nothing more was said. Apart from current cash books that he needed for his bookkeeping the remaining books were never returned to him. He was curious but did not have any concerns because there was nothing the matter with the books. He kept on asking the co-ordinator when the books would be returned and she kept on saying they would be back soon. He became concerned because he could not quite comprehend what was going on. He was not informed. Everything seemed to be done secretly. There were lots of meetings going on but no feedback. "They were telling me absolutely nothing." Asked if there was any change in his office when he returned from leave he said: "The office had been - I had been relocated to the back area. I had no facilities to do anything. The computer had been taken away from me. My signature had been, I wasn't allowed to sign cheques. I'll correct that. I wasn't allowed to sign cheques except when they couldn't find a committee member they allowed me to sign cheques." 60 In answer to a further question he said: "I found it hard to comprehend. I couldn't work out what was going on. I wasn't feeling that I had done anything. I felt that the meetings that were going on were meetings that were secretive. They were - there was nothing being disclosed. I was getting no feedback as to what was happening and I felt completely isolated because I had no contact with any of the committee members and even the staff at that stage, I was having trouble communicating with." 61 By the end of 1998 he was not feeling secure about his future with the defendant. Nobody accused him of misappropriating anything. Nobody discussed his bookkeeping practices or the receipts of money or cashing of money. He was not asked to provide any further information nor was he aware of any specific accusation. When he returned after several weeks leave he found himself virtually working by himself on the back veranda. He had this to say about the letter from the defendant dated 18 January 1999: "A. Well I received a letter in the mail from the coordinator. Q. Miss White? A. Miss White I'm sorry. Q. Stating that my services were no longer required and my employment had been terminated as of that period. In other words they didn't want me to come back to work. Q. Were you given any reason? A. No reason whatsoever. Q. Were you paid out then until the 26th which was when you were supposed to finish? A. Yes I was. Q. Were you ever given a reason why you weren't required to work those last three to four weeks? A. No sir. Q. Did you want to go back and work those last three or four weeks? A. I was willing to go back but I wasn't looking forward to it. Q. Up to the time when you received a letter in the mail, had you ever been consulted in any way about the books that were removed months earlier? A. No sir. Q. Were the books ever given back to you? A. I think I received - I had to request some of the cash books back which they did come back but-- Q. The other books? A. The other books never came back. Q. Did the treasurer ever speak to you, the person who was supposed to be looking at the books? A. No sir. Q. Were you made aware of whether the books had been sent to anybody? A. No sir. Q. How did you feel about the suspicions that you'd mentioned when your employment was terminated in early January 1999? A. I felt completely - I forget the word I was trying to use. I felt as though I was being victimised because I couldn't - I couldn't see any justification as to why these things were happening. I had no reason to feel any other way. I was - I was - I felt very destructed. My whole mental capacity collapsed because I'll become a victim of a system, that's basically what it was and they were determined to get rid of me, it's as simple as that. … Q. Were you ever given any reason for what you saw as this change of attitude towards you at Oolong House after June 98? A. No sir." 62 The defendant relied upon evidence that the plaintiff had told Dr Jameson on 18 September 1998 that he was going to resign in December of that year. That was his then intention.

Conclusion 63 Undoubtedly, as a result of his experience in the defendant's workplace the plaintiff suffered a recognised psychiatric illness. Undoubtedly, and according to Dr McMurdo's evidence, the defendant should reasonably have foreseen that its conduct would have caused the plaintiff to suffer some form of workplace stress, which indeed he did suffer. Dr McMurdo as a psychiatrist thought that the change of the plaintiff's work employment [environment] was very likely to precipitate a psychiatric disorder. 64 In terms of reasonable foreseeability of a recognised psychiatric illness by a lay person, the facts of the present are in marked contrast to the facts in Seedsman where a female police officer, at a relatively young age and with very little training, was placed on her own in an environment in which even trained detectives had difficulty coping with the stress or Mannall, where a female employee was continuously treated in a denigratory way, subjected to destabilising conduct and belittled at meetings and conferences. The present case is far removed from the facts in Annetts v Australian Stations Pty Ltd where the applicants' son had gone to work for the respondent as a jackaroo and, contrary to assurances given to them, was sent to work alone as caretaker of a remote property and went missing in circumstances where it was clear he was in grave danger. As a result some months later he was found after having died of dehydration, exhaustion and hypothermia. 65 As a fallback, the plaintiff relied upon the defendant's knowledge of the doctor's certificates of September 1998. The plaintiff submitted that those certificates put the defendant on notice that the plaintiff was vulnerable to a condition described as adult adjustment reaction which affected his fitness for work. By 7 December, the plaintiff was certified as suffering from "adult adjustment reaction leading to depression". Enquiry of the plaintiff would certainly have revealed the cause of this condition. 66 Any objective consideration of the defendant's behaviour would have revealed that it could foreseeably, indeed, against the plaintiff's history in September 1998 of medically certified adult adjustment reaction, would almost inevitably, lead to the plaintiff's enduring stress. But Dr McMurdo, who was called for the plaintiff, reported that it was doubtful if any individual would have foreseen that the plaintiff would have developed reactive depression. In his oral evidence Dr McMurdo agreed only that, in the circumstances which confronted the plaintiff, the defendant ought to have foreseen that the plaintiff would suffer some form of workplace distress. But "… save in exceptional circumstances, a person is not liable, in negligence, for being a cause of distress, alarm, fear, anxiety, annoyance, or despondency, without any resulting recognised psychiatric illness;" per Gleeson CJ in Tame 329 para [7]. While it is not a condition of liability that the precise character of the damage should have been foreseen (Mount Isa Mines Limited v Pusey (1970) 125 CLR 383 at 413-4), the plaintiff must show that the class of injury ought to have been foreseen (ibid at 390). In the present case, the class of injury was a recognised psychiatric illness. 67 In my opinion, particularly having regard to the limits of the opinion expressed by Dr McMurdo, it was, on the evidence, open to the trial Judge to find that the defendant could not reasonably have foreseen between the end of October 1998 and the end of January 1999 that a possible consequence of its conduct was that the plaintiff would suffer a recognised psychiatric illness. The plaintiff failed to prove that his injury was compensable. As the trial Judge put it, it was "far too remote". In my opinion, his Honour was correct in finding a verdict for the defendant. The appeal should be dismissed with costs.

Appeal dismissed with costs. 68 McCOLL JA: The issue in this case is whether in the circumstances of the appellant's employment with the respondent at Oolong House, particularly from September 1998 until January 1999, it was reasonably foreseeable by the respondent that the appellant might suffer psychiatric injury. 69 Spigelman CJ and Sheller JA have held that it was not. I disagree. In my view the findings of the trial judge require this Court to uphold his conclusion that the respondent ought to have foreseen that its conduct in relation to the appellant was such as to cause him to suffer psychiatric injury. Further, independently of the trial judge's reasons, I, too, would conclude that the respondent ought to have foreseen that its conduct in relation to the appellant was such as to cause him to suffer psychiatric injury.

Statement of the case 70 The appellant was employed by the respondent from 31 December 1985 until January 1999. Oolong House is a Drug and Alcohol Rehabilitation Centre which is open to all members of the community but specialises in treating members of the Aboriginal community. The appellant was responsible for maintaining a manual system of bookkeeping for the respondent. He was the only bookkeeper. 71 To all intents and purposes his employment proceeded in an unremarkable manner until October 1998. At the end of the 1998 financial year, the appellant closed off the respondent's books. A chartered accountant audited them. An auditor's report was prepared. It did not identify any problems with the accounts. 72 Prior to October 1998 there had been no adverse comments about the accounts for the year ending 30 June 1998. At the end of October 1998, the appellant went on leave. A number of changes occurred during and immediately after that period. I set out those changes below as well as the evidence relating to their significance.

(a) While he was on leave the appellant's workspace was moved to a verandah area; this position meant that he was virtually working by himself. No one ever explained to him why he had been consigned to work by himself on the back verandah;

(b) While he was on leave the books of account he used were removed from his office - they had never been taken before. The appellant asked for the books and was told they would be brought back soon but they were not. He was told the Treasurer had asked for the books to be sent to him so he could check them. The Treasurer never spoke to him. The books were never returned to him prior to his resignation in January 1999;

(c) The auditor telephoned the appellant and asked what was going on - the appellant was unable to explain;

(e) The appellant was no longer permitted to sign cheques - a matter to which he had attended since he had been employed in 1985. 73 In addition to these discrete events, the appellant was no longer invited to participate in meetings held by the Executive Committee and other management meetings in which he had previously been involved. He found the events "hard to comprehend". He "couldn't work out what was going on". He had trouble coping. "There were lots of meetings going on. ... [t]hey were telling me absolutely nothing". He "felt that the meetings that were going on were meetings that were secretive … there was nothing being disclosed. [He] was getting no feedback as to what was happening and [he] felt completely isolated because [he] had no contact with any of the committee members and even the staff at that stage …". 74 The appellant's reaction to the changes was at first one of curiosity. However, as the situation continued, he took the absence of his records to be a reflection upon himself. He felt agitated and as if he was being "victimised…being set up…for some reason to dismiss [him]". He could see no justification as to why the events he described were occurring. The events led him to feel "completely isolated". He felt he was being "secretly accused of misappropriation of funds". He formed that impression because of "the secrecy and the feedback and the feeling I was getting from the people involved…" 75 During this period nobody on the respondent's part discussed any problems in connection with his work with the appellant - he was not asked to clarify any matter in relation to his accounts, he was not asked to provide any further information in connection with his functions, he was not asked anything about his bookkeeping practices, or anything to do with writing or signing cheques or receiving or cashing of money. He was not asked to reply to any accusation - or made aware of any specific accusation. 76 The appellant felt he had become a "victim of a system" and that "they were determined to get rid of me". He said his "whole mental capacity collapsed". 77 By the end of 1998 the appellant was not "feeling very secure at all" about his future at Oolong House. He "found the environment difficult to cope with…[he] had no contact with anybody. [He] was virtually working by [himself] on the back verandah …[he] had no contact with management whatsoever." 78 In January 1999 he felt he could no longer keep on working at Oolong House. He "felt [he] couldn't cope with the situation any more. The environment had completely changed…". The appellant tendered his resignation either in late December 1999 or early January 1999. He gave several weeks notice, so that the effective date of his resignation would have been January 26, 1999. He then received a letter from the respondent advising him that the respondent had unanimously decided to suspend him with pay for the last two weeks prior to his effective resignation date. He interpreted the letter as meaning the respondent "didn't want me to come back to work". He was given no explanation for this letter. He had been prepared to work out his notice period "although I wasn't looking forward to it". He never returned to work. 79 These events took place in circumstances in which the appellant was already in a condition of some mental fragility. In September 1998 he was diagnosed as suffering from "adult adjustment disorder". A doctor certified him unfit for work for 14 days. Thereafter the doctor certified him fit for only part-time work for a further period of 14 days. 80 The changes to the appellant's work environment took place in circumstances where the respondent suspected that there had been a misappropriation of its funds. There was no evidence that this had occurred. However two witnesses gave evidence of hearing of those suspicions. 81 Mr Jessup, who had worked with the appellant for many years as his effective supervisor at the House until his resignation in 1996, said that in September 1998 a member of the respondent's management committee gave him some documents which were an audit of the respondent and said "Barry O'Leary had misappropriated funds and here was the evidence …". He said he had looked at the documents and could see no allegation of misappropriation or fraudulent activity and had warned her to be "very careful" about what she said in relation to the documents. 82 He also said that a couple of months later he was approached by the chairman of the respondent who also had the documents and was "making similar statements that … the committee of Oolong was in a bit of a mess and there's all these allegations about Barry O'Leary flying around and making certain comments about missing cheques and other things". He said he told the chairman he had seen the documents and "to my mind there's nothing untoward about them whatsoever". He said he told the chairman to "go and talk to Barry, see what it's all about." Under cross-examination it emerged that Mr Jessup's recollection of the date of these conversations may not have been accurate. There was no suggestion, however, that the conversations to which he deposed had not occurred. 83 In November 1998 a letter was forwarded to a person identified as "Chris" (most probably Christine White who was the coordinator of the House) from a Mr O'Connor, the Chief Executive Officer of "The Illawarra IteC Ltd." Mr O'Connor referred to a "brief review of the financial information supplied" and said "[i]t is extremely difficult to ascertain whether or not there has been misappropriation of funds and on the random checks that I have conducted I have found no evidence of wrong doing." He expressed some concern about the fact the organisation was using a manual accounting system and recommended the Board retain the services of Daley & Co, an external auditor, to review "the position of the organisation and make further recommendations as to internal controls". 84 On 13 January 1999 Daley & Co wrote to Ms White referring to a review of the financial statements for the year ended 30 June 1998. Although the letter referred to some "minor discrepancies" and made recommendations about internal controls, the author stated: "Based on our review, which is not an audit, nothing else has come to our attention that causes us to believe the accounting records of Oolong House are not drawn up so as to give a true and fair view of the association's status as at 30 June 1998." 85 Ms Diebert, a counsellor who was employed by the respondent from 1983, gave evidence that she took leave in December 1998 - January 1999 and on her return made inquiries of Ms White as to why the appellant was not at Oolong House. She said she was told that "Barry was being investigated for fraud". 86 Mr Jessup also gave evidence that he was shown a copy of the report from Daly & Co and that he then wrote to the chairman of the respondent pointing out that: "There is absolutely nothing in this document to suggest any fraudulent activity or misappropriation of funds…If this is all the evidence supposedly pointing to some misappropriation of funds and the rumours surrounding Barry O'Leary's resignation, then you have a greater problem. 1. The understanding of the Executive and Senior Management on basic accounting and management principles and the resulting, 2. Victimisation. Whatever party or parties, prompted this search, had no ground to do so, further the rumours and gossip that was spread about Barry is false…(sic)" 87 The respondent called no evidence from any of its employees. It tendered a written report from a management consultant and some medical reports. 88 In the course of the proceedings, the respondent admitted that there were never any problems with its books and that there had never been any misappropriation of its funds. 89 The appellant called Dr McMurdo who had examined the appellant twice, first in April 2000 and again in June 2002. Dr McMurdo gave the following oral evidence: "REWELL: Q. Doctor I want you to assume, and I'll ask you in a moment whether you already have assumed, that the plaintiff was an employee of the Oolong Aboriginal Corporation for about 13 years before the events which give rise to these proceedings. Were you aware of that? A. Yes. Q. That he was employed there in the capacity essentially of a bookkeeper? A. Yes. Q. Who had sole charge of the bookkeeping records of the Corporation, were you aware of that? A. Yes. Q. That he carried out those duties with the trust of his employer and without essentially any question for 13 years? A. Yes.

Q. But that in the second half of 1998, whilst he was on leave, his accounting records were removed from his office without any warning and without his knowledge, were you aware of that? A. Yes. Q. And that upon his return, the records were not restored to him or not restored to him completely and no explanation was ever proffered? A. Yes. Q. That ultimately he developed the impression that he was under suspicion in respect of his keeping of the records and the management of the funds of the organisation, were you aware of that? A. Yes. Q. Now, you diagnosed that Mr O'Leary was suffering reactive depression? A. Yes. Q. And an adjustment disorder with depression? A. Correct. Q. In your view, would the circumstances of Mr O'Leary's employment as I have outlined them and of which you were aware, created a foreseeable risk that some form of workplace stress might occur? A. Yes. … [LEGAL ARGUMENT] Q. Having regard to those circumstances of employment to which I've referred, in your view was it foreseeable that a person in the position Mr O'Leary found himself in might develop firstly workplace stress, and I think you answered yes, is that correct? A. Yes. Q. And that workplace stress might go on to develop into a form of psychological or psychiatric illness or disorder? A. Yes that's a strong probability. … [LEGAL ARGUMENT] Q. But what was your opinion, do you remember? A. Yes your Honour, I think there's little doubt that the circumstances of his employment would be stressful. It's always easy to talk in hindsight but I think given the situation for this fellow, the incredible change of his work employment was very likely to precipitate a psychiatric disorder. I'm saying that as a doctor your Honour."

90 The appellant tendered a report from Mr Hughes, an expert in "organisational change, industrial relations and employee relations advice" which said: "…[T]here is no evidence of Mr O'Leary having been counselled or disciplined with respect to the quality or conduct of his work. At no time prior to, or following the second audit were any allegations or questions put to Mr O'Leary. Nor am I aware of any evidence that the circumstances behind the audit, and the outcome, were explained to other staff ….The very fact that a second audit was conducted, of itself is likely to give rise to a view that inappropriate conduct has occurred, particularly if this second audit is conducted without forewarning the incumbent. In a workplace of this size, it is relatively easy to speak to staff to clarify the purpose and intent of such an audit, and in so doing confirm that the audit was not a reflection on Mr O'Leary's work … Furthermore, if an employee's work location is changed, authority reduced and resources removed, an employee can reasonably expect to be told the reason for these changes, particularly when they represent a reduction in responsibility and status within the business. Such highly visible actions by the employer can only add to speculation among other staff about Mr O'Leary's conduct. In my view Mr O'Leary was not afforded the level of procedural fairness by his employer to which he was entitled." (Emphasis added)

The trial judge's findings 91 The trial judge accepted that the respondent had made the changes to the appellant's workplace which he had described. The trial judge found that the respondent was suspicious that there had been a misappropriation of its funds. He also found that, notwithstanding the suspicion it entertained, the respondent did not confront the appellant with this suspicion or ask him for any explanation in relation to whatever matters about which it may have had concerns. The trial judge found that the appellant "was cut out". He also accepted that the appellant "felt he was under suspicion". 92 The trial judge held that the respondent had acted negligently in effecting the changes to the appellant's workplace. He concluded that in the circumstances of the changes to the appellant's work place and conditions in the absence of any explanation, the respondent's system of work was negligent. He accepted Mr Hughes' evidence, the effect of which he summarised as being: "This matter was not handled properly, … where there was a problem (the appellant) should be made fully aware of the problem (and) given an opportunity to answer it. There should be a proper review, and then discuss it again with [the appellant] (sic)." 93 The trial judge accepted that the appellant had established "two conditions necessary to establish liability and negligence" against the respondent. First he held that the respondent's conduct was such as to create a foreseeable risk of psychological injury to the appellant. (Red 20) (Although the trial judge referred to "psychological" injury, there was no dispute on appeal that this should be understood as a reference to "psychiatric" injury). Secondly, he found that there was a reasonably practicable means of avoiding the foreseeable risk of psychological injury, namely the process of discussion, referring to Mr Hughes' expert evidence. 94 Notwithstanding these findings, the trial judge then said that "the whole matter really comes down to what was identified by the parties, and that is what the defendant knew or ought to have known and the foreseeability aspect." He referred to the fact that the respondent knew of the medical certificate which diagnosed the appellant as suffering from "adult adjustment disorder" but found that, apart from that, there was otherwise no evidence that the appellant ever told the respondent "what he was suffering from" and that "there was no evidence anyone was openly hostile" to the appellant. He found "… true it is things had changed but [the appellant] continued working." 95 He held: "…[W]e have a plaintiff who has a problem, an adult adjustment disorder. He goes to a doctor, he comes back to his employer, he produces a certificate…He goes off on holidays. Somewhere some suspicion develops, the books are taken for inspection, he is kept in the dark. He lets things build up in his mind. Again there is no confrontation with anyone, no one has asked what is going on. Things build up further and further in his mind and eventually he has a real psychological problem. The problem I have with the plaintiff's case is, that I do not see how I could find the defendant knew or should have known - even keeping in mind what they knew of his work history and of him - that having received a medical certificate saying he had an Adult Adjustment Disorder, that that meant that a situation existed which required careful handling of this plaintiff. And, if they did not handle him in that way or they were careless in what they did, that it would develop into the psychological condition it did . To me, that is far too remote. I do not see how this defendant, armed with that knowledge would have expected to have known or to have done something different to that which they did (sic). I do not condone what they did in any way whatsoever. One has to link up what happened to their knowledge and I do not see how it can be said that they have knowledge which would allow me to find a verdict in favour of the plaintiff, even though I am not at all happy with the way they handled this situation." 96 Accordingly, the trial judge entered a verdict for the defendant. He assessed the appellant's damages, in the event he had found a verdict in his favour, at $105,886.

The appellant's submissions 97 The appellant complains that the trial judge misunderstood and misapplied the legal onus which the appellant was required to satisfy. He submitted that having regard to his Honour's findings that the system of work was "negligent" and was such as to create "a foreseeable risk of psychological injury to the appellant" and that there was available to the respondent a "reasonably practicable means of avoiding the foreseeable risk of psychological injury", it was not necessary for the appellant to show that the respondent should have foreseen that the appellant would develop the particular "psychological condition" he did. The appellant submitted that it was sufficient that the development of a psychological or psychiatric condition was foreseeable, referring to Tame v State of New South Wales; Annetts v Australian Stations Pty Ltd [2002] HCA 35; (2002) 211 CLR 317 - which was delivered approximately two months after the judgment in this case. 98 The appellant also submitted that the trial judge erred in the following respects:

(a) In taking the view that the precise nature of the "psychological condition" from which the appellant suffered had to be foreseeable;

(b) In concluding that the respondent could not have been expected to have done something different to what it did. The appellant submitted that once the trial judge found the system of work was negligent, it should have been changed. Further, the appellant submitted, once the trial judge found that there was available to the respondent a reasonably practicable means of avoiding the foreseeable risk of psychological injury to the appellant, the situation compelled a change of the system of work;

(c) In concluding that the appellant could not succeed unless he could prove that a situation existed which required "careful handling" of the appellant. The appellant submitted that the appellant did not require "careful handling", rather he required a safe system of work being one which afforded fair and reasonable treatment by his employer. The appellant submitted that the respondent's conduct in its management of its suspicions of the appellant was unacceptable towards any worker, not just towards a worker who was somehow vulnerable to psychological injury;

(d) In apparently concluding that the appellant was required to prove that the respondent knew or ought to have known that the appellant was vulnerable to psychological injury. The appellant submitted that having found that the system of work was such as to create a foreseeable risk of psychological injury to the appellant it did not matter whether he was "vulnerable" to psychological injury or not. The appellant submitted that if he developed a psychiatric or psychological condition as the result of the respondent's negligent system of work, the respondent was liable for the consequences of that negligent system of work.

The respondent's submissions 99 The respondent did not file a notice of cross-appeal challenging the trial judge's findings that its system of work was negligent, that its conduct was such as to create a foreseeable risk of psychological injury to the plaintiff and that there was a reasonably practicable means of avoiding that foreseeable risk. 100 The respondent's written submissions to a large extent amounted to a recapitulation of the evidence, apparently intended to reinforce the trial judge's conclusion in its favour. At times, however, the respondent's submissions appeared to seek to challenge the trial judge's adverse findings as well as their significance. Thus it sought to argue that "there was no evidence …which would enable the Court to infer or conclude that there was ever such an atmosphere [of a hostile environment with lack of consultation] other than the appellant's own evidence of his perceptions…evidence of [the appellant's] perceptions are of no probative…value in these proceedings without there being evidence of facts or circumstances which would establish a background against which there might be a finding that a reasonable employer ought to have foreseen a risk of injury in those circumstances". In a later section of its submissions, the respondent sought to challenge the trial judge's findings that the system of work was negligent. Finally the respondent submitted that there was no evidence upon which the trial judge could find that it could have foreseen, as a reasonable employer, that there was a foreseeable risk of injury to the appellant. 101 The respondent also filed a Notice of Contention. It is not easy to discern from that document precisely how the respondent alleges that the trial judge's decision should have been upheld for reasons other than those given: Supreme Court Rules Pt 51 r 21. As I understand the structure of the submissions, however, the Notice of Contention was intended to advance the propositions that:

(a) whatever the appellant's reaction was to the changes to his workplace, it was not communicated to the respondent; (b) whatever suspicions the respondent had about the appellant were not communicated to him and, even if communicated to third parties, were not communicated to them until after the period the appellant claimed to have been adversely affected by the respondent's conduct;

(c) to the extent the respondent held suspicions about the appellant, there was no evidence as to when those suspicions arose or of their nature. 102 These were, by and large, the reasons the trial judge found in the respondent's favour. It does not appear to me that the Notice of Contention plays any useful role in the determination of the appeal. 103 The appellant submitted in reply that the trial judge's findings of fact had the invincibility required by Abalos v Australian Postal Commission (1990) 171 CLR 167 and Devries v Australian National Railways Commission (1993) 177 CLR 472. He further contended that the manner in which he was treated by the respondent after many years in which he enjoyed its unqualified trust was clearly sufficient to support the trial judge's finding that there was a "foreseeable risk of psychological injury to the plaintiff." He submitted that the evidence supported the trial judge's findings that the respondent harboured the suspicions communicated to Mr Jessup and Ms Diebert while the appellant was still working and believed he was under suspicion. Consideration 104 As Sheller JA says in his judgment there was no doubt that as a result of his experience in the respondent's workplace the appellant suffered a recognised psychiatric illness. It was first diagnosed in May 2000 as Adjustment Disorder with Depression as defined in DSM IV Classification of Mental Disorders. By 2002 it had become a Major Depressive Disorder precipitated by his experiences at the workplace. 105 The only issue which arises between the parties, as I understand the respondent's submissions, is whether the trial judge's conclusion that, in the circumstances, the risk of the appellant developing a psychiatric condition was foreseeable could be sustained. 106 As I have already observed, I do not understand how, absent a cross-appeal, it is open to the respondent to challenge that finding of the trial judge. Had the trial judge's reasons for judgment ended at his conclusion that "the conduct of the defendant was such as to create a foreseeable risk of psychological injury to the plaintiff" and that there was a reasonably practicable means of avoiding the foreseeable risk of psychological injury, namely the process of discussion referred to in Mr Hughes' expert evidence, logically a finding for the plaintiff on breach of the employer's duty of care to the plaintiff employee should have followed. 107 After he reached his conclusion that the conduct of the defendant was such as to create a foreseeable risk of psychological injury to the plaintiff, the trial judge, in my view, embarked upon an entirely irrelevant area of inquiry. He sought to determine whether the respondent ought to have foreseen that the appellant would develop the particular psychiatric condition which was ultimately diagnosed. 108 That was an erroneous approach. It was not necessary that the particular type of disorder that eventuated be reasonably foreseeable. It was sufficient that the class of injury, psychiatric injury, was reasonably foreseeable as a consequence of the defendant's conduct: Mt Isa Mines Pty Limited v Pusey (1970) 125 CLR 383 per Barwick CJ at 390; at 402 per Windeyer J, at 412-414 per Walsh J; Tame v State of New South Wales, above, at 386 [203] per Gummow and Kirby JJ; New South Wales v Seedsman [2000] NSWCA 119 at [22], [29] per Spigelman CJ (with whom Mason P and Meagher JA agreed); Mannall v State of New South Wales [2001] NSWCA 327 at [60], [66] per Sperling J (with whom Heydon and Ipp JJA agreed). 109 Logically, therefore the trial judge made findings which were sufficient to found a verdict for the appellant. Those findings are not challenged by a notice of cross-appeal nor addressed by the Notice of Contention. In my view that is sufficient reason to uphold the appeal. 110 Sheller JA has considered the issue whether in all the circumstances the respondent ought to have foreseen that the appellant would suffer psychiatric injury and, having resolved it adversely to the appellant, has concluded that the appeal ought be dismissed. I disagree with that conclusion for the reasons I express below. 111 The respondent's duty to the appellant as his employer was to take reasonable care to eliminate all risks of injury that could be reasonably foreseen and avoided, whether they were risks to his psyche, person or property: Tame v New South Wales, above, at 365-6 [140] per McHugh J, at 413 [281] - [282] per Hayne J. 112 I note that Sheller JA agrees with the trial judge's finding that the respondent breached its duty of care to the appellant in the manner in which it treated him and continued to treat him after his return from leave in October 1998. He also accepts that the respondent's behaviour was "wrong if not disgraceful" and "demonstrated poor management" and was "disgraceful" in "allow[ing] suspicion to be directed to him". I also agree with and adopt both the trial judge and Sheller JA's conclusions in this respect. The respondent called no evidence to the effect that it was impracticable for it to have informed the appellant of the reasons it was changing his workplace and removing his books of account. 113 The issue upon which we part company is whether, in the circumstances of that breach of duty, psychiatric injury was a reasonably foreseeable consequence. 114 The question of foreseeability is, as the trial judge recognised, one for the Court to determine. Whether the respondent ought reasonably to have foreseen that its conduct might cause the appellant to suffer psychiatric harm is judged by the standards of the reasonable person, in this case, the reasonable employer: cf Tame v State of New South Wales, (at 384 [200]) per Gummow and Kirby JJ. 115 The test of foreseeability in this context is no different from that applied in any other negligence case. It is the test prescribed in Wyong Shire Council v Shirt (1980) 146 CLR 40, involving "a consideration of the magnitude of the risk and the degree of probability of its occurrence, along with the expense, difficulty and inconvenience of taking alleviating action and any other conflicting responsibilities which the defendant may have". The test is "an undemanding one" and, despite recently expressed criticisms, bind this Court until the High Court decides otherwise: cf Tame v State of New South Wales at 351 [96] ff per McHugh J. 116 The question therefore, was whether, in all these circumstances, the risk of the appellant sustaining a recognisable psychiatric illness was reasonably foreseeable in the sense that it was not far-fetched or fanciful. In Mt Isa Mines Pty Limited v Pusey (above at 398) Windeyer J referred to the reasonable hypothetical observer by reference to whom reasonable foreseeability is to be assessed as: "… not a seer who can foretell future occurrences that are quite unlikely according to the natural and ordinary course of events. Happenings that were fortuitous, in the sense that no reasonable man would have thought of them as within the range of possible consequences, cannot be said to have been reasonably foreseeable. And knowledge after the event, when it is easy to be wise cannot shew that the event was foreseeable." 117 In Tame v State of New South Wales Gummow and Kirby JJ said (at 386 [203]): "… [Q]uestions of reasonable foreseeability are not purely factual. Expert evidence about the foreseeability of psychiatric harm is not decisive. Such evidence cannot usurp the judgment that is required of the decision-maker." 118 Later, their Honours added (at 397 [234]): "[A]s indicated earlier … expert evidence about the foreseeability of a risk of psychiatric injury is not decisive. The question of reasonable foreseeability involves an assessment respecting the foresight of a reasonable person in the defendant's position; that foresight might differ from the foresight of qualified psychiatrists. The judgment belongs, ultimately, to a court, not to an expert witness. In making that judgment, a court will draw upon its reserves of commonsense and reasonableness." 119 In like vein, in State of New South Wales v Seedsman (above, at [32]) Spigelman CJ held that in determining the issue of foreseeability expert evidence was not always required. As his Honour said: "commonsense has a role to play in this, as in other areas of judicial decision making". 120 In Mt Isa Mines Pty Limited v Pusey (1970) 125 CLR 383 at 394, 403 Windeyer J observed: "It is, … today, a known medical fact that severe emotional distress can be the starting point of a lasting disorder of mind or body, some form of psychoneurosis or a psychosomatic illness. For that, if it be the result of a tortious act, damages may be had…. Courts have come--slowly, cautious step by cautious step--to give damages for mental disorders resulting from a man's seeing another person hurt, without himself having suffered physical injury or been in any peril of physical harm." 121 This Court has held that employees may recover for psychiatric injury caused by the accumulation of occupational stress over time without the need to establish exposure to isolated trauma sustained in the workplace: State of New South Wales v Seedsman [2000] NSWCA 119; Mannall v New South Wales [2001] NSWCA 327 - two decisions to which the trial judge referred. The same conclusion has been reached in England in Walker v Northumberland County Council [1995] 1 All ER 737; Hatton v Sutherland [2002] 2 All ER 1 at 12 - 20; see also Barber v Somerset County Council [2004] UKHL 13. 122 Sheller JA refers to Dr McMurdo's evidence in his report of 10 June 2002 that it was doubtful any individual would foresee that the appellant would develop reactive depression as well as to his oral evidence that the circumstances of the appellant's employment "created a foreseeable risk that some form of workplace stress might occur". Dr McMurdo's opinions are not, as the authorities to which I have referred make plain, determinative - although they are not entirely irrelevant: cf Mannall v New South Wales [2001] NSWCA 327 at [67] - [69]. 123 Dr McMurdo's view that the development of a psychiatric illness in the circumstances was a strong probability, while expressed by a medical practitioner, is one which, in my view, accords with a commonsense approach informed by modern appreciation of the development of psychiatric disorders. In my view a reasonable employer would foresee that the circumstances in which it suddenly, without warning or explanation, changed the appellant's working conditions, including removing the books of account from his custody, would expose him to extreme stress and, probably, to the development of a psychiatric disorder. 124 I have already referred to Windeyer J's 1970 observation that it is "a known medical fact that severe emotional distress can be the starting point of a lasting disorder of mind …" Cases such as Seedsman and Mannall demonstrate judicial recognition that the medical profession's view of the aetiology of such disorders has been accepted by the lay world. In my view the probability that the appellant would develop a psychiatric disorder as a result of the respondent's conduct was neither fanciful nor far-fetched. It was a matter which ought to have been foreseen by a reasonable employer in the circumstances of the changes wrought to the appellant's employment. 125 As I understand Sheller JA's decision, his Honour bases his conclusion that the appellant's psychiatric illness was not reasonably foreseeable upon the "marked contrast" between the facts of this case and those of Seedsman and Mannall, in both of which the employer's conduct exposed the plaintiff to stressful workplace conditions over substantial periods of time. 126 I do not share his Honour's conclusion. It might be noted that in Seedsman, even in the circumstances of police work, which might ordinarily be expected to expose an employee to stress, the employer was found to have breached its duty of care because of the sustained stress to which the plaintiff was exposed. 127 The appellant was a bookkeeper working in a small workplace in circumstances where one might expect the greatest stress would have been finding his books did not balance. 128 In this case the circumstances relevant to determining the issue of foreseeability were such that, as the trial judge held, it was reasonably foreseeable that the appellant would suffer a psychiatric illness. Those circumstances included the fact that the respondent had employed the appellant as a bookkeeper in a position of trust for some thirteen years. Suddenly, and without warning or explanation, his workplace was relocated, his books of account were moved and apparently sent for examination to at least the Treasurer of the organisation, he was deprived of his cheque signing power and his computer was removed. He was effectively deprived of his "tools of trade". As he himself said, he felt isolated, victimised and under suspicion of misappropriating funds. Those were all, in my view, legitimate reactions to his circumstances. Indeed, the respondent did not challenge the legitimacy of those reactions. 129 Any reasonable employer ought, in my view, to have envisaged that its actions would be such as to cause the appellant to suffer psychiatric illness. The respondent's conduct struck at the heart of the relationship of trust which exists between employer and employee. The fact was that at the time it took the step of removing the books of account from the appellant's custody, it suspected that there had been misappropriation of funds. It did not explain that to the appellant but he, sensibly and predictably, inferred as much. The respondent ought to have perceived that that step alone, of removing the books, was such a dramatic signal to a bookkeeper of apprehension of serious misconduct that, unless clearly explained, it would subject him to extreme distress. Indeed, it was apparent from his conduct in frequently seeking explanations of what had happened to his books and why they had not been returned that he was suffering from anxiety in relation to their removal. 130 Rather than explain the situation, the respondent prolonged the distress to which the appellant was exposed by keeping him in the dark - indeed the respondent never explained its conduct to the appellant. Even when he finally resigned, rather than asking how it had come about that he had made that decision, the respondent, once again without explanation, suspended him for the remaining period of notice which he had given. 131 Dr McMurdo described the changes to which the appellant was exposed as being an "incredible change". But there was more to it than merely a change in the appellant's workplace conditions. There was a change, which as I have sought to explain, struck at the heart of the trust the appellant felt the respondent had reposed in him for so long and in circumstances where the appellant also, reasonably in my view, feared that he was, in substance, suspected (wrongly) of having engaged in criminal activity. 132 It is true that the respondent did not expose the appellant to the sustained period of stress to which the plaintiffs in Seedsman and Mannall were exposed but that is beside the point. It was reasonably foreseeable that exposing an employee even to a short period of profound stress which struck at the heart of his integrity and honesty and, indeed, caused him to fear he was suspected of criminal conduct, was as capable of causing psychiatric illness as a sustained period of stress over a lengthy period. It should however be noted in this respect that the respondent did nothing, as far as the evidence discloses, until the hearing, to indicate there had never been any misappropriation of funds. 133 The appellant's reaction to the stress to which he was exposed was neither extreme or idiosyncratic. It was, in my view, reasonably foreseeable by a reasonable employer. 134 For those reasons, too, I would uphold the appeal. 135 In my view, the matters to which the respondent refers in its Notice of Contention, namely that there was no evidence that to the extent to which the appellant encountered an atmosphere of suspicion in the workplace that was known to the respondent or its responsible officers, or that the respondent's later statements of belief were not relevant to its earlier action, are entirely misconceived. "It is but a very familiar principle of the law of evidence that subsequent behaviour may be regarded in order to indicate a state of mind which existed at an earlier time": Allied Pastoral Holdings Pty Ltd v Federal Commissioner of Taxation [1983] 1 NSWLR 1 at 6 per Hunt J (as his Honour then was). I have no doubt that correspondence showing the respondent suspected there had been a misappropriation of funds, which suspicion was also reflected in Mr Jessup's and Ms Diebert's evidence, were the reasons for the changes to the appellant's workplace environment. 136 I equally have no doubt that the appellant justifiably sensed the finger of suspicion was pointing at him and that that added to the stress caused by the unexplained changes the respondent effected. As Mr Hughes said, the "highly visible actions" by the respondent were bound to add to speculation among other staff about the appellant's conduct. Indeed, Mr Jessup referred in his letter to the Chairman of the Board to the "rumours and gossip that was spread about Barry". I have no doubt those rumours and gossip existed contemporaneously with the changes and atmosphere of suspicion of which the appellant complained. 137 The respondent called no evidence to dispute the appellant's evidence concerning the "incredible change" (to repeat Dr McMurdo's expression) to the appellant's workplace. It did not dispute that it had treated the appellant suddenly and remarkably differently to the manner in which it had treated him since 1985. Its expert evidence concerning the propriety of its handling of the situation was rejected. Apart from raising what, in my view, were specious propositions about the inferences to be drawn from the proven events, it advanced no substantive argument. 138 The appellant advanced an alternative case that the respondent ought also to have foreseen he would suffer a psychiatric injury because it was aware he was suffering from "adult adjustment disorder". It is not necessary to consider this alternative case having regard to the conclusions I have reached.

3. In lieu thereof, judgment in favour of the appellant against the respondent in the sum of $105,886.

4. Respondent to pay the appellant's costs of the appeal and of the proceedings in the District Court.

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