State Transit Authority of New South Wales v Fritzi Chemler

LEGISLATION CITED: Workers Compensation Act 1987; s4, s9A, s11A Workplace Injury Management and Workers Compensation Act 1998; s352, s353(1), s354(6)

Allianz Australia Insurance Limited v GSF Australia Pty Limited (2005) 221 CLR 568 Aluminium Louvres & Ceilings Pty Limited v Zheng [2006] NSWCA 34 Boston Clothing Co v Margaronis (1992) 27 NSWLR 580 Bottle v Wieland Consumables Pty Limited (1999) 19 NSWCCR 135 Environment Agency v Empress Car Co (Abertillery) Limited [1992] 2 AC 22 Fairchild v Glenhaven Funeral Services Limited [2003] 1 AC 32 Kooragang Cement Pty Limited v Bates (1994) 35 NSWLR 452 Litynski v Albion Steel Pty Limited (1994) 10 NSWCCR 287 Mansini v Director General of Education (1990) 6 NSWCCR 1 CASES CITED: Morgan v Tame (2000) 49 NSWLR 21 Nominal Defendant v Gardikiotis (1995) 186 CLR 49 O'Halloran v R T Thomas & Family Pty Limited (1998) 45 NSWLR 262 South Western Area Health Service v Edmonds [2007] NSWCA 16 State Transit Authority of New South Wales v Chemler [2006] NSWCA 249 State Transit Authority of NSW v Chemler No 2 [2006] NSWWCCPD 332 Tame v New South Wales (2002) 211 CLR 317 Townsend v Commissioner of Police (1992) 25 NSWCCR 9 Travel Compensation Fund v Tambree (2005) 224 CLR 627 Watson v Hanimex Colour Services Pty Limited (1992) 8 NSWCCR 190 Yeo v Western Sydney Area Health Service (1999) 17 NSWCCR 573

PARTIES: State Transit Authority of New South Wales (Appellant) Fritzi Chemler (Respondent)

COUNSEL: G M Watson SC, D G Saul (Appellant) B G McManamey (Respondent)

SOLICITORS: Sparke Helmore, Lawyers (Appellant) Turner Freeman, Lawyers (Respondent)

LOWER COURT JURISDICTION: Workers Compensation Commission

LOWER COURT FILE NUMBER(S): WCC No 509-2004

LOWER COURT DATE OF DECISION: 4 December 2006

LOWER COURT MEDIUM NEUTRAL CITATION: State Transit Authority of NSW v Chemler No 2 [2006] NSWWCCPD 332

• 18 - IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40826/06

SPIGELMAN CJ BASTEN JA BRYSON AJA

Tuesday 18 September 2007 STATE TRANSIT AUTHORITY OF NEW SOUTH WALES v Fritzi CHEMLER Judgment 1 SPIGELMAN CJ: This is an appeal from a decision of Acting Deputy President Handley of the Workers Compensation Commission. The appeal is brought pursuant to s353(1) of the Workplace Injury Management and Workers Compensation Act 1998 ("the WIM Act") and is limited to a point of law. 2 The Appellant submits that two points of law arise: (i) Whether a tribunal, when considering what action it should take to reverse findings of fact, should remit the matter to the primary decision-maker unless it is satisfied that there could not be a different result. (ii) Whether it is sufficient to establish an injury under the Workers Compensation Act 1987 ("the 1987 Act ") that the claimant perceived that an event occurred, when that event had not in fact occurred. 3 The two points of law raise issues under s4, s9A and s11A of the 1987 Act and s352 of the WIM Act which, relevantly, provide: "4 … 'injury' … means personal injury arising out of or in the course of employment … … 9A(1) No compensation is payable under this Act in respect of an injury unless the employment concerned was a substantial contributing factor to the injury. … 11A(1) No compensation is payable under this Act in respect of an injury that is a psychological injury if the injury was wholly or predominantly caused by reasonable action taken or proposed to be taken by or on behalf of the employer with respect to transfer, demotion, promotion, performance appraisal, discipline, retrenchment or dismissal of workers or provision of employment benefits to workers." "352(5) An appeal under this section is to be by way of review of the decision appealed against. (6) Evidence that is fresh evidence or evidence in addition to or in substitution for the evidence received in relation to the decision appealed against may not be given on an appeal to the Commission except with the leave of the Commission. (7) On appeal, the decision may be confirmed or may be revoked and a new decision made in its place. Alternatively, the matter may be remitted back to the Arbitrator concerned, or to another Arbitrator, for determination in accordance with any decision or directions of the Commission." 4 This is the second time this matter has been the subject of appeal to this Court. The Appellant successfully appealed from an earlier decision of Acting Deputy President Handley with the result that the proceedings were remitted to the Commission. (See State Transit Authority of New South Wales v Chemler [2006] NSWCA 249.) Upon the remitter Acting Deputy President Handley made a second decision adverse to the Appellant, but on a different basis. 5 One issue in the case was whether the sole or principal cause of Mr Chemler's injury was certain disciplinary proceedings taken against him shortly before his psychological condition became manifest. In his second decision Mr Handley held that that was not so and, accordingly, the Appellant could not rely on s11A. 6 The background facts can be briefly stated. Mr Chemler was employed by the Appellant. He claimed that he had been subject to racial harassment and vilification in the workplace over a period of years. The harassment and vilification he alleged related to the fact that Mr Chemler is Jewish and that English was not his first language. 7 The decision now appealed from recited the prior proceedings, including the reasons of the Court of Appeal for allowing the first appeal. The Acting Deputy President identified his task in the following way: "[7] Accordingly, my task on this remitter is to revisit the cause of Mr Chemler's psychological injury and consider the application of section 11A of the 1987 Act." 8 The Acting Deputy President also said: "[12] At this stage in the proceedings, there appears to be no dispute that Mr Chemler suffers from a psychological injury, nor that his employment was a substantial contributing factor to his injury (section 9A)." 9 Furthermore, he said: "[18] The orders made by the Court of Appeal included setting aside my decision and, in lieu thereof, ordering that the decision of the Arbitrator be set aside and the matter remitted to the Commission for rehearing. Thus, it is open for me to redetermine this first issue, which involves a finding of fact." 10 Mr Handley posed the question to be decided by him under s11A in the following manner: Was the injury wholly or predominantly caused by the STA's disciplinary process? 11 The Acting Deputy President set out extracts from this Court's earlier judgment and passages from his own earlier judgment, in which he had made a number of findings of fact. Mr Handley ultimately concluded: "[24] In my view, the evidence referred to above supports a finding that while the disciplinary action taken by the STA undoubtedly contributed to Mr Chemler's psychological injury, the injury was not 'wholly or predominantly caused' by the disciplinary action in the sense of being the sole or principal or main cause. The medical evidence and that of Mr Chemler supports a finding that Mr Chemler had perceived he was being subjected to harassment and victimisation over a period of some years - since transferring to the STA's Waverley depot in October 1995, and this perception, which arose from his employment situation, was a significant cause of his psychological injury. It is difficult to separate out the effect of disciplinary action from other action that Mr Chemler perceived to be victimisation, harassment, or discriminatory. However, in my view the evidence does not support a finding that the injury was wholly or predominantly caused by the disciplinary action. Thus section 11A of the 1987 Act does not apply." 12 He went on to state that, in view of the finding that the psychological injury was not wholly or predominantly caused by the disciplinary action, it was unnecessary to consider the other issue that arose under s11A as to whether or not the disciplinary process was "reasonable". 13 The Acting Deputy President concluded: "[26] My conclusion is that the Arbitrator made an error of fact in his decision. However, notwithstanding this, I am not satisfied that a rehearing would lead to a different outcome. In my original decision, I found no other error of fact or law that would affect the outcome …".

The Remitter Test Issue 14 In written submissions, the Appellant submitted that although, in accordance, with s352(5) of the WIM Act an appeal is "by way of review of the decision appealed against", it is not a hearing de novo and, the Appellant submitted, "[a]ppropriate respect had to be paid to the Arbitrator's decision - the Arbitrator saw Mr Chemler give evidence. The Arbitrator could not lightly be dismissed ...". Alternatively, at the least the Acting Deputy President should have remitted the matter to a fact finder "so that the witnesses could be heard and seen". 15 As originally propounded, the Appellant's submission was expressed in terms of whether it was open to the Acting Deputy President to reverse a finding of fact in the circumstances of this case, including observations by this Court on the first appeal. However, in the course of oral submissions the Appellant amended its contentions in this respect and reformulated its point of law in the form set out in par [2] at (i) above. 16 The Appellant submitted that the Acting Deputy President applied the reverse of the correct test in the passage set out at [13] above. He had to be satisfied "that a hearing could not lead to a different outcome", whereas he posed the question as not being "satisfied that a rehearing would lead to a different outcome". 17 As the Appellant originally formulated this point of law, it may have been material to consider what the Arbitrator decided and what this Court earlier decided with respect to the application of s11A. A passage in the Arbitrator's decision is open to the interpretation that he determined, although he did not use that precise terminology, that the disciplinary proceedings were the sole or predominant cause of the psychological injury. The Applicant also contended that this Court had, in the first appeal, affirmed this conclusion. 18 This issue was not before this Court on the point of law it had to decide in the first appeal and I do not interpret the judgment as doing so. However, this matter does not arise on the point of law as reformulated. In any event, I do not accept, as I will elaborate below, that a Presidential member is relevantly constrained when reviewing an Arbitrator's decision on such a finding of fact. 19 The proposition for which the Appellant contends on this first point of law is not based on the relevant text. The actual power of the Commission under the WIM Act on an appeal is in s352(7) of the Act set out above. 20 The Appellant submitted that its formulation was a general principle of law applicable to any situation in which an appeal lies to a tribunal from a finding of fact. It referred to one authority which used such language but which involved a completely different legislative scheme. 21 The general proposition for which the Appellant contends is unsustainable. It involves an unwarranted gloss on the legislative text. It imposes an inappropriate restraint on the power under s352(7) to choose, relevantly, between making "a new decision" and 'remitting' the matter. 22 The scope of an internal merits review by a Presidential member is an important safeguard for the proper operation of the legislative scheme. Arbitrators' decisions, particularly on issues of credit, are entitled to respect. That does not, however, mean that such a merits review process should operate on the basis of some kind of presumption that the first instance decision-maker should redetermine the matter. 23 In s4 of the Act is a statement of objectives of the workers compensation system which concludes with the objective: "4(f) to deliver the above objectives efficiently and effectively." 24 It is inconsistent with this objective to confine the discretion of the Presidential member to make a "new decision" in the manner proposed. 25 Furthermore, a specific power, designed to serve objective 4(f), to hold what has been called a "paper hearing" is found in s354(6): "354(6) If the Commission is satisfied that sufficient information has been supplied to it in connection with proceedings, the Commission may exercise functions under this Act without holding any conference or formal hearing." 26 This power may be exercised by a Presidential member conducting a review. The existence of such a broadly expressed discretion is itself inconsistent with the Appellant's contention that the power to review a decision is constrained. 27 I note that the Acting Deputy President determined to proceed without a formal hearing. No challenge has been made to his 'satisfaction' that he had "sufficient information". 28 The concept of a review on the merits is wider than the concept of an appeal in a judicial context. There is a well established line of authority on the use of the terminology of "review" instead of "appeal" with respect to the workers compensation system in this State which establishes the breadth of a review on the merits. 29 That line of authority is also inconsistent with the kind of restriction on the powers of a Presidential member for which the Appellant contends. (See Mansini v Director General of Education (1990) 6 NSWCCR 1 at pp4-20; Watson v Hanimex Colour Services Pty Limited (1992) 8 NSWCCR 190 at 199-206; Boston Clothing Co v Margaronis (1992) 27 NSWLR 580 at 584-585; Litynski v Albion Steel Pty Limited (1994) 10 NSWCCR 287 at 295-297, c/f 298-300; Aluminium Louvres & Ceilings Pty Limited v Zheng [2006] NSWCA 34 at [38]; South Western Area Health Service v Edmonds [2007] NSWCA 16 at [133]-[134].) 30 A Presidential member exercising a power to review a decision must decide whether the original decision is wrong or, as it is often put in the context of administrative appeals on merits, must decide what is the true and correct view. If s/he does so decide then s/he should substitute his or her own views, unless it is an appropriate case to remit. The power to remit is not constrained in the manner for which the Appellant contends. 31 This ground of appeal should be dismissed.

The "Perception" Issue 32 The second ground of appeal is based on a number of references in the findings of fact by the Acting Deputy President to the Respondent's "perception" of acts of harassment and vilification against him. The Appellant submitted that this constitutes a legal error because "a perception of harassment is not a sufficient basis to support a finding of 'injury' under the 1987 Act". 33 The Appellant invoked: · The definition of "injury" in s4 of the 1987 Act as a "personal injury arising out of or in the course of employment". · The provision in s9 of the Act that compensation is payable to a worker "who has received an injury". · The provision in s9A of the 1987 Act to the effect that no compensation is payable in respect of an injury "unless the employment concerned was a substantial contributing factor to the injury". · The provision in s11A of the Act which prevents compensation in the case of psychological injury in the circumstances set out in the section. 34 The Appellant submitted: "These words make it apparent that statutory compensation is only payable in respect of an actual injury; there is no basis under the Act for making an employer liable to pay compensation because a worker has imagined some event occurred. This is a concept which is fundamental to the liability; and it applies with equal force whether the injury be psychological or physical." 35 In this regard the Appellant referred to a line of authority including Townsend v Commissioner of Police (1992) 25 NSWCCR 9; Yeo v Western Sydney Area Health Service (1999) 17 NSWCCR 573; Bottle v Wieland Consumables Pty Limited (1999) 19 NSWCCR 135. 36 As the Respondent submitted, in this case there was no issue as to injury. The Appellant's submissions are directed to the proposition that where a matter is imagined, and operates merely as a "perception", it cannot be said that the injury arose "out of or in the course of employment" (s4). 37 The Respondent correctly submitted that this test gave rise to an issue of causation. It has been said that the test to be applied is a "commonsense" test. (See Kooragang Cement Pty Limited v Bates (1994) 35 NSWLR 452.) Issues of causation, even if expressed in terms of a test of "commonsense", differ according to the scope and purpose of the rule or statutory provision with respect to which the issue arises. (See Environment Agency v Empress Car Co (Abertillery) Limited [1999] 2 AC 22 at 29 and 31; O'Halloran v R T Thomas & Family Pty Limited (1998) 45 NSWLR 262 at 271-272; Fairchild v Glenhaven Funeral Services Limited [2003] 1 AC 32 at [49]-[60]; Allianz Australia Insurance Limited v GSF Australia Pty Limited (2005) 221 CLR 568 at [96]-[98]; Travel Compensation Fund v Tambree (2005) 224 CLR 627 at [45]-[46].) 38 In the present context the scope and purpose of the provision is to establish the requisite connexion between the injury and the work performed for the employer, in a system of compulsory insurance, and to which injury "the employment concerned was a substantial contributing factor" (s9A). 39 Plainly, perception by the person affected is normally required before there can be psychological injury. There is no issue in the present case that there was such injury. Nor is there any issue in this Court that the "substantial contributing factor" test was made out. 40 In this area of law, as in negligence, the talem qualem principle is applicable i.e. employers take their employees as they find them. With respect to psychological injury there is an "eggshell psyche" principle which, like the equivalent "eggshell skull" principle, is a rule of compensation not of liability. The element of foreseeability required by the law of negligence is not the basis of the "eggshell skull" principle and it can be applied by way of analogy to claims for compensation under the 1987 Act. (See Morgan v Tame (2000) 49 NSWLR 21 esp at [23]-[29] and cases quoted therein. See also Tame v New South Wales (2002) 211 CLR 317 esp at [318] and Nominal Defendant v Gardikiotis (1995) 186 CLR 49 at 68.) 41 As noted above, there are numerous references in the Acting Deputy President's decision to "perception". A typical example is that set out in par [24], quoted above, where Mr Handley referred to "this perception, which arose from his employment situation, was a significant cause of his psychological injury". There were similar observations by Mr Handley in his first decision, which he set out again in his second decision by way of repeating the original findings of fact, e.g.: "Mr Chemler perceived he was being subjected to harassment and victimisation, and it was this perception that caused his psychological injury." 42 The Acting Deputy President referred to an anti-Semitic sign that was found to exist on the premises, the most recent daubing on which said "Out Jewish". In this regard the Acting Deputy President made the following finding: "Similarly, he perceived the 'Out Jewish' sign as an overt display of discrimination, the sign being clear tangible evidence to which he could point. It was therefore natural that he should focus on this both in terms of his perceptions and in seeking to prove discrimination." 43 He also held: "I am not satisfied that the Arbitrator placed too much weight on the presence of the 'Out Jewish' sign. It would not be unreasonable to conclude that Mr Chemler perceived the sign as a clear manifestation of the discriminatory way in which he was treated in the workplace, and for others to focus on the sign as evidence of the way in which he was treated." 44 The Appellant referred to the fact that the Respondent, and doctors to whom he had recounted his version of the events, relied on a number of statements said to have been made by co-workers. These statements were denied in evidence and the Arbitrator accepted the denials. Nevertheless, the Arbitrator made findings of fact, upon which the Acting Deputy President also acted, that there was evidence of harassment and racial vilification in addition to the sign. 45 The Arbitrator also made findings as follows: "[T]here is no doubt that in this workplace, racial slurs and comments were made, particularly in relation to the Jewish religion, and the Respondent's witnesses accept that. They say that it was a joke, and I accept that that was not a joke as far as Mr Chemler was concerned. I accept that these jokes occurred in the workplace going back at least until 2001." [Red AB 15 T-W] 46 Furthermore, the Arbitrator found: "There were in this workplace racially based jokes that were particularly offensive to Mr Chemler. There was also in this workplace two signs that referred to Mr Chemler's religion and they, when added to the other things, would have further affected Mr Chemler." [Red AB 16 T-U] 47 In the light of these findings it cannot be said that this is a case in which there was an erroneous perception not based upon conduct in the workplace. The Acting Deputy President's references to "perception" should be understood as establishing the causal link between acts in the workplace and the effect upon the mind of the Respondent. 48 Contrary to the Appellant's submissions, the Acting Deputy President did not question let alone overturn the credit findings made by the Arbitrator. Mr Handley proceeded on the basis that he accepted the Arbitrator's findings of primary fact. That included the rejection of some of the Respondent's evidence. It also included acceptance of other evidence that established conduct at work which could be, and was held to be, causally linked through the perception of the Respondent to psychological injury. 49 The position in Townsend supra, on which the Appellant relied, was quite different. There the relevant acts were mere rumours about whether or not the transfer of a police officer represented the implementation of the Police Department's anti-corruption policy. Nothing suggested that the rumours could be sourced to conduct in the workplace. 50 McGrath CJ of Comp Ct said at [235]: 'My conclusions are that the anxiety state resulted from the applicant's erroneous perception of external events and not from his reaction to real events which were potentially damaging." 51 In this case, there was no "erroneous perception of external events". Not only were none of the events "external", there were positive findings of fact about "real events" with respect to which the Respondent's "perception" was accurate. There was also evidence of perception of events which the Arbitrator found did not occur, but that did not break the causal nexus. 52 I note that in Yeo, Neilson J referred to Townsend as authority for the proposition: "[53] … that a misperception by a worker of otherwise innocuous matter, which misperception leads a worker to develop a psychiatric condition, does not constitute injury arising out of or in the course of employment." 53 On the facts of that case he held, as an alternative basis for refusing compensation, that the Applicant's irrational behaviour was "a misperception of the real events which were going on". 54 In my opinion, this states the authority of Townsend too broadly. As McGrath CJ Comp Ct indicated, as quoted above, a "perception of real events", which are not "external events", can satisfy the test of injury "arising out of or in the course of employment". 55 In my opinion, the Acting Deputy President was entitled to conclude that the psychological injury arose by reason of an accurate perception of actual events in the workplace and, accordingly, that the causal link was established. 56 This ground of appeal should be dismissed.

Conclusion 57 The appeal should be dismissed with costs. 58 BASTEN JA: I agree with the Chief Justice that the appeal should be dismissed and the Appellant should pay the Respondent's costs of the appeal. I also agree with his Honour's reasons and rely upon the following additional matters. 59 The jurisdiction of this Court is relevantly limited to considering a challenge to a decision of a Presidential member of the Commission by a party who is aggrieved "in point of law": Workplace Injury Management and Workers Compensation Act 1998 (NSW) ("the 1998 Act"), s 353(1). The first point of law identified by the Appellant was the failure of the Deputy President to remit the matter to an arbitrator: see 2 above. Whether that constituted an error at all will depend upon the matter before the Deputy President and what he was asked to do in relation to it. Whether the procedure adopted constituted an error of law will depend upon the nature of the jurisdiction exercised by the Deputy President. 60 The matter before the Deputy President was the application of the State Transit Authority to review the decision of the arbitrator made on 9 August 2004. That application was made pursuant to s 352 of the 1998 Act. It was the determination of that application which this Court previously held involved an error in point of law: State Transit Authority of New South Wales v Chemler [2006] NSWCA 249. However, in allowing the first appeal, this Court not only set aside the decision of the Deputy President but in lieu thereof ordered:

(b) remit the matter to the Workers Compensation Commission for re-hearing: at 25.

The usual course for this Court would have been to set aside the first decision of the Deputy President and direct him to determine the appeal under s 352, according to law. Setting aside the decision of the arbitrator would appear to have left the Deputy President with no decision to review. Nevertheless, he accepted that his jurisdiction was, in effect, to determine the question as if he stood in the shoes of the arbitrator and neither party took issue with that course. Given the orders made by this Court on the first appeal, that was the correct approach. 61 When the matter went back to the Deputy President, he invited submissions on three points. These were whether the claimant's injury was wholly or predominantly caused by the disciplinary process taken against the claimant; secondly, whether the disciplinary action was reasonable and thirdly, whether the matter could be determined on the papers or whether an oral hearing was required. The parties took different approaches to the first question, the Authority stating that the issue had been determined by the arbitrator, whilst the claimant submitted that a different conclusion should be reached, namely that that requirement of s 11A was not fulfilled. Both parties agreed that the matter could be determined "on the papers". Neither party invited the Deputy President to remit the matter to the arbitrator. That was understandable: no oral evidence had been taken by the arbitrator and no witness was sought to be cross-examined on the re-hearing. In those circumstances it is difficult to understand the submission that there was legal error on the part of the Deputy President in failing to remit the matter to an arbitrator. 62 In considering whether there was any obligation to remit the matter to the arbitrator, it may be noted that the express power of remittal, relied upon by the Appellant, was only inserted in s 352(7) of the 1998 Act on 9 July 2004: see Workers Compensation Legislation Amendment Act 2004 (NSW), Sch 2 [5]. It should be inferred that the amendment was intended to expand the powers of the Commission by way of providing an alternative option, without requiring the Presidential member to adopt that option in any particular circumstances. 63 The procedural challenge must therefore depend upon the proposition, as put in written submissions, that it was "not open" to the Deputy President to reverse a finding of fact made by the arbitrator. This proposition was based on the assertion that the appeal undertaken by the Deputy President was in the nature of a "review" and was therefore not a hearing de novo. By that it was presumably meant that because s 352(1) permitted an "appeal" against the decision of an arbitrator, the Presidential member considering the appeal was required to identify error on the part of the arbitrator. 64 There are several difficulties with that approach. First, it appears to depend upon the classification of appeals in accordance with the terminology adopted in Builders Licensing Board v Sperway Constructions (Syd) Pty Ltd (1976) 135 CLR 616 at 621-622 (Mason J) and more recently identified in Coal and Allied Operations Pty Ltd v Australian Industrials Relations Commission (2000) 203 CLR 194 at [11]-[14]. Even if the appeal were to be placed in one class rather than another, as a matter of statutory construction the nature of the appeal by way of review should not be seen to be so constrained. Section 352(7) permits a Presidential member to confirm a decision or to revoke it and make a "new decision" in its place. Further, s 354 permits the Commission to conduct its proceedings with as little formality and technicality as the proper consideration of the matter permits, not to be bound by the rules of evidence and to act according to "equity, good conscience and the substantial merits of the case without regard to technicalities or legal forms": s 354(3). In particular, the Commission is relieved of any obligation to conduct proceedings "by formal hearing" and may conduct them by way of "a conference between the parties", or "without holding any conference or formal hearing": s 354(4) and (6). 65 The precise scope of a provision such as s 354 will depend upon the circumstances in which its operation arises. No doubt the Commission is required to apply substantive rules of law applicable to its jurisdiction and to comply with rules of procedural fairness, although the content of the latter may be affected by the terms of the provision: see generally Sue v Hill (1999) 199 CLR 462 at [42] (Gleeson CJ, Gummow and Hayne JJ); Qantas Airways Ltd v Gubbins (1992) 28 NSWLR 26 at 29 (Gleeson CJ and Handley JA); Italiano v Carbone [2005] NSWCA 177 at [70]; South Western Sydney Area Health Service v Edmonds [2007] NSWCA 16 at [87]-[94] (McColl JA, Tobias and Giles JJA agreeing), and Haider v JP Morgan Holdings Aust Ltd [2007] NSWCA 158 at [42]. So long as each party has notice of, and a reasonable opportunity to address, the case against it, there is no reason to suppose that the Commission is not at liberty to determine how it will proceed and whether it should make a new decision. A different approach may apply in relation to a grant of leave to appeal, but that is not in issue in the present case: cf Re Coldham; Ex parte Brideson [No. 2] (1990) 170 CLR 267 at 275 (Deane, Gaudron and McHugh JJ). 66 There are two further reasons, specific to the circumstances of this case, which indicate that there was no legal error on the part of the Deputy President in reconsidering the factual findings made by the arbitrator. The first was that this Court had set aside the decision of the arbitrator, but had not otherwise constrained the statutory power to be exercised by the Commission constituted by the Deputy President. Secondly, it was open to the Deputy President to consider and assess the findings made by the arbitrator. As the Deputy President fairly commented, the arbitrator had not made findings in the terminology of s 11A of the Workers Compensation Act 1987 (NSW) ("the 1987 Act"), in considering the effects of the disciplinary action and had made statements which the Deputy President described as confusing. That confusion needed to be resolved, as the Deputy President correctly recognised.

Relevance of "misperception" 67 The Appellant's contention that a misperception, or indeed a perception, cannot give rise to an injury "arising out of or in the course of employment", must be a contention that the accepted psychological state of the Respondent did not arise out of or in the course of that employment. For there to be the relevant connection with the employment, it was argued that the events perceived must be "real" and not "imagined". 68 No doubt a psychological state can be based upon a delusion, but the question remains one of causation. The point was succinctly identified and addressed by Windeyer J in Federal Broom Company Pty Ltd v Semlitch (1964) 110 CLR 626 at 642: "Can the event to which a disordered mind irrationally attributes physical suffering, that is real to the patient but delusional, be properly called a contributing factor? Ordinary concepts of cause and consequence are perhaps not applicable. Yet it seems to me that the incident which precipitated or stimulated, however irrationally, the worsening of her condition could be regarded as a factor contributing to it." 69 There must be an aspect of the employment which constitutes "a substantial contributing factor to the injury" for compensation to be payable: see s 9A(1) of the 1987 Act. To focus on the concept of "perception" may obscure the real issue. Although the arbitrator said that he accepted the statements from witnesses who denied that they had heard anybody refer to the Respondent in a derogatory fashion because of his race or religion, he nevertheless accepted that "in this workplace, racial slurs and comments were made, particularly in relation to the Jewish religion, and the respondent's witnesses accept that": Reasons, Tcpt, 09/08/04, p 57. In so far as his findings constituted a rejection of the need for an intention to harass, there was no error of law. Nor is it necessary to determine whether the Respondent's response was a misperception as to the intention or attitudes of his fellow workers. In contrast to discrimination law, the proper focus in this context is the consequence of conduct on the claimant and not, even in a limited sense, the motivation, intention or other mental state of the co-worker or supervisor: cf Purvis v New State Wales (Department of Education and Training) (2003) 217 CLR 92 at [166] (McHugh and Kirby JJ); and [234]-[236] (Gummow, Hayne and Heydon JJ). If conduct which actually occurred in the workplace was perceived as creating an offensive or hostile working environment, and a cognizable injury followed, it was open to the Commission to conclude that causation was established. Accordingly, no error in point of law was identified by this ground. 70 BRYSON AJA: I agree with Spigelman CJ. **********

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