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[2013] NSWCA 5
Court of Appeal (NSW)
2013-01-31
McColl JA, Basten JA, Barr AJ, Gleeson CJ, Hayne JJ
Original judgment source is linked above.
P E King (Applicant) T M Glover (Respondent) Solicitors:
Gells Lawyers (Applicant) DLA Piper (Respondent) File Number(s): CA 2012/ 223452 Decision under appeal Jurisdiction: 9111 Citation: Waters v Commonwealth of Australia [2012] NSWSC 790 Date of Decision: 2012-07-13 00:00:00 Before: Barr AJ File Number(s): SC 2010/367053
Judgment 1McCOLL JA: I agree with Basten JA. 2BASTEN JA: In 2010 the applicant commenced proceedings against the Commonwealth seeking damages for psychological or psychiatric conditions which arose in the course of her employment. The Commonwealth contended that she was bringing an action for damages for an injury sustained by her in the course of her employment for the purposes of s 44 of the Safety, Rehabilitation and Compensation Act 1988 (Cth) ("the Compensation Act"). That section extinguishes any such cause of action contingently upon the operation of s 45: Austral Pacific Group Ltd (In liq) v Air Services Australia [2000] HCA 39; 203 CLR 136 at [21]-[22] (Gleeson CJ, Gummow and Hayne JJ) and [67] (McHugh J) and [80] (Callinan J). 3Section 45 permits the bar to be lifted where the claimant elects to bring an action for damages, rather than receive statutory compensation. However, a precondition to the application of s 45 is that compensation "is payable" in respect of the injury under one of ss 24, 25 or 27. Each of those sections is contingent upon the employee suffering a "permanent impairment as a result of" the injury. Unless that condition is satisfied no election can be made and the extinguishment of the cause of action continues to operate: Telstra Corporation Ltd v Flynn [2002] NSWCA 315; 55 NSWLR 303 at [42]-[44] (Beazley JA) and [48] (Hodgson JA). Where the preconditions to the operation of s 45 are satisfied, the employee is required, before any amount of compensation is paid to her pursuant to any of those sections, to "elect in writing" to institute an action against the Commonwealth for non-economic loss. She has not taken that step. Accordingly, the Commonwealth contended, the cause of action remains barred. 4These arguments were accepted by Barr AJ in the Common Law Division and the applicant's second further amended statement of claim was struck out with no opportunity to replead: Waters v Commonwealth of Australia [2012] NSWSC 790. The applicant sought leave to appeal from that judgment. For the reasons given below, the application must be dismissed with costs.
Case presented below 5The applicant, Natalie Elizabeth Waters, commenced employment with the Commonwealth in the Australian Taxation Office in February 2000. Her employment terminated on 22 November 2004. By the time her employment terminated, she claimed she was suffering from obsessive-compulsive disorder and major depressive disorder. The medical evidence available to this Court indicated that, at least in part, her health problems, which included an immunodeficiency, existed prior to the conduct of her employer relied upon as the basis of the claim, which conduct occurred between 15 July 2004 and 22 November 2004. 6On 24 October 2011 the Commonwealth filed a notice of motion seeking to have the claims dismissed pursuant to r 13.4 of the Uniform Civil Procedure Rules 2005 (NSW). In the alternative, it sought that the further amended statement of claim (which had been filed on 31 August 2011) be struck out, pursuant to r 14.28. The primary ground on which the Commonwealth relied for seeking dismissal of the claim was that any cause of action had been extinguished by s 44 of the Compensation Act and that there had been no election under s 45. In the alternative, the Commonwealth relied upon the continued inadequacies of the pleading, the difficulties faced by the applicant in obtaining and retaining legal representation and the unlikelihood that any further indulgence would result in the formulation of a proper pleading. 7The trial judge concluded that the cause of action had been extinguished: at [36]. He also accepted the alternative argument that the pleading should be struck out, without leave to file a further amended document.
Issues raised on application 8The applicant obtained legal representation in or about October 2012 and briefed counsel to appear on the application for leave to appeal. On the evening before the hearing of the application, a document entitled "revised proposed third further amended statement of claim" was provided to the respondent and to the Court. Submissions made on her behalf identified a number of errors in the judgment of the primary judge. Only one of these, however, is even potentially material. 9First, the applicant noted that the primary judge had identified the period of employment as extending from 8 February 2000 until 24 November 2006, at [2]. The latter date was wrong, but the correct date (22 November 2004) was noted in the following paragraph. Nothing turned on the misstatement at [2]. Secondly, there was said to be a factual error at [36] which, being a focus of challenge to the judgment below, may be set out in full: "It seems to me that as they apply to the present case ss 44 and 45 are clear in their meaning. The plaintiff had a choice whether to seek benefits under the Act scheme or to proceed outside the Act. Before taking the latter course she had to elect. She has not elected. On the contrary, she has claimed and has already received benefits under the Act. I conclude that in so far as her claim is for non-economic loss, therefore, her cause of action has been extinguished by s 44." 10The applicant challenged the statement that she had claimed and received benefits under the Compensation Act: she asserted there was no evidence before the primary judge upon which to base such a statement. However, assuming the statement to be erroneous, the error is immaterial, for reasons which will shortly appear. 11The third, and potentially significant error, which appears to have resulted from the applicant's submissions when appearing for herself at the hearing of the motion, involved reference to the definition of "injury" in s 5A of the Compensation Act, being a provision which was not introduced until 2007, well after the applicant's employment had terminated. In order to assess this challenge it is necessary to set out the critical statutory provisions. 12The operative provisions in the Compensation Act, as in force on 1 November 2004, relevantly provided: "44 Action for damages not to lie against Commonwealth etc in certain cases (1) Subject to section 45, an action or other proceeding for damages does not lie against the Commonwealth ... in respect of: (a) an injury sustained by an employee in the course of his or her employment, being an injury in respect of which the Commonwealth ... would, but for this subsection, be liable (whether vicariously or otherwise) for damages .... 45 Actions for damages - election by employees (1) Where: (a) compensation is payable under section 24, 25 or 27 in respect of an injury to an employee; and (b) the Commonwealth ... would, but for subsection 44(1), be liable for damages for any non-economic loss suffered by the employee as a result of the injury; the employee may, at any time before an amount of compensation is paid to the employee under section 24, 25 or 27 in respect of that injury, elect in writing to institute an action or proceeding against the Commonwealth ... for damages for that non-economic loss. (2) Where an employee makes an election: (a) subsection 44(1) does not apply in relation to an action or other proceeding subsequently instituted by the employee against the Commonwealth ... for damages for the non-economic loss to which the election relates ...." 13If s 44(1) applied to the claims made by the applicant, the relevant causes of action were extinguished. That was not only because she had not made an election pursuant to s 45 before commencing the proceedings, but because no such election was available to her. An election is only available where compensation is payable under at least one of ss 24, 25 or 27. Each of those sections has operation in respect of injuries resulting in "permanent impairment". The applicant disclaimed any entitlement to compensation based on permanent impairment. Accordingly, the right of election under s 45(1) was not available to her. That is why the question of whether she had been paid compensation was immaterial. 14Recognising this difficulty, the applicant sought to avoid the conclusion that she had no cause of action by submitting that s 44(1) did not apply to her claims. The submission commenced with the correct proposition that s 44 only applied with respect to proceedings for damages "in respect of ... an injury". That invited attention to the definition of injury in s 4 of the Compensation Act which, in November 2004, stated: "4 Interpretation (1) In this Act, unless the contrary intention appears: ... injury means: (a) a disease suffered by an employee; or (b) an injury (other than a disease) suffered by an employee, being a physical or mental injury arising out of, or in the course of, the employee's employment; or (c) an aggravation of a physical or mental injury (other than a disease) suffered by an employee (whether or not that injury arose out of, or in the course of, the employee's employment, being an aggravation that arose out of, or in the course of, that employment; but does not include any such disease, injury or aggravation suffered by an employee as a result of reasonable disciplinary action taken against the employee or failure by the employee to obtain a promotion, transfer or benefit in connection with his or her employment." 15The applicant asserted that the injury or aggravation suffered by her was as a result of "reasonable disciplinary action" and thus fell outside the concept of "injury" in the Compensation Act and thus outside the bar on proceedings imposed by s 44(1). It will be necessary to assess whether that argument has any reasonable prospect of success. However, it is necessary first to note the further assertion that the critical qualification to the definition of injury, as found in s 4, differed in material respects from the definition in s 5A on which the primary judge had erroneously relied. Thus, the words of exclusion found at the end of the definition in s 5A(1), following the amendment in 2007, read: "but does not include a disease, injury or aggravation suffered as a result of reasonable administrative action taken in a reasonable manner in respect of the employee's employment." 16The concept of "reasonable administrative action" was then the subject of a further explanatory provision in s 5A(2) which stated: "(2) For the purposes of subsection (1) and without limiting that subsection, reasonable administrative action is taken to include the following: (a) a reasonable appraisal of the employee's performance; (b) a reasonable counselling action (whether formal or informal) taken in respect of the employee's employment; (c) a reasonable suspension action in respect of the employee's employment; (d) a reasonable disciplinary action (whether formal or informal) taken in respect of the employee's employment; (e) anything reasonable done in connection with an action mentioned in paragraph (a), (b), (c) or (d); (f) anything reasonable done in connection with the employee's failure to obtain a promotion, reclassification, transfer or benefit, or to retain a benefit, in connection with his or her employment." 17The applicant submitted that the change was significant for her case. As appeared from the proposed revised pleading provided to the Court, she accepted that on or about 1 October 2003, "there occurred or apparently occurred the occasion for reasonable disciplinary action": paragraph 8. She then pleaded that thereafter action was taken by the respondent, "but the said action was not taken in a reasonable manner": paragraph 9. The thrust of the submission was that, until 2007, the exclusion covered all reasonable disciplinary action, whether taken in a reasonable manner or not. Her claim was therefore within the exception to the definition of "injury". Further, she alleged that her injury resulted from the failure to obtain a transfer or benefit, being a matter also excluded from the definition of "injury" in s 4. The different structure resulting from the amendments in 2007 may well, the applicant submitted, have explained why the primary judge failed to accept her submissions that, in 2004, her claim fell outside the scope of an "injury". 18It would be unproductive to consider how this issue was dealt with below. It is clear from the judgment that it was the applicant (appearing in person) who sought to rely upon the language of s 5A. It was the primary judge who noted that it had been inserted later by an amending Act: at [32]. His Honour also referred to a contemporaneous regulatory impact statement which adopted the same language as the definition in s 4. He then expressed difficulty in understanding how the applicant framed her claim, commenting that he did not "understand it to include compensation for the consequences of legitimate management action": at [33]. As the applicant no longer seeks to rely upon the pleading before the primary judge, it is not fruitful to examine its detail here. 19The applicant's submissions in respect of this issue have the flavour of casuistry. First, what is excluded is "reasonable disciplinary action", not a precondition for taking reasonable disciplinary action. If the action is undertaken in an unreasonable manner it would not constitute "reasonable disciplinary action" under s 4. Even if the first steps taken were reasonable, it will have ceased to be reasonable whenever it involved conduct of the kind alleged by the applicant, namely abuse, harassment and bullying. This conclusion does not rely upon any change in the wording following the insertion of s 5A. 20Further, and more fundamentally, the submission ignores the structure of the Compensation Act. In common with workers' compensation legislation in comparable jurisdictions, statutory compensation is payable under the Compensation Act in respect of any injury arising out of or in the course of employment, without the need to prove fault on the part of the employer. The effect of s 44(1) is to impose a bar on civil damages claims in respect of such injuries as are compensable under the statutory scheme. The bar does not, consistently with that policy, operate in respect of any loss or damage suffered at the hands of the employer, which is not compensable under the statutory scheme. However, it is highly implausible that either negligence or deliberate tortious conduct suffered in the course of employment will not give rise to compensation. Reasonable disciplinary action may fall outside the statutory scheme, but it is quite implausible that it would give rise to a claim in tort, if for no other reason than that it is, ex hypothesi, "reasonable". The sort of conduct complained of in the pleading, which may plausibly aggravate a mental condition, was described as harassment, bullying, taunting, abusive conduct and so on. However, the applicant has no reasonable prospect of establishing that such conduct is not covered by the statutory scheme for compensation. Such a proposition would be inconsistent with well understood principles as to the availability of workers compensation. 21The applicant sought to escape the logic of this conclusion in two ways. First, she submitted that her complaint was not that she had been bullied by her superior, but that the Commonwealth had failed to transfer her away from the person responsible for the bullying and her failure to obtain a transfer fell within the terms of the exclusion. 22That submission cannot be accepted: if it were correct, it would mean that the Commonwealth, as employer, would not be liable to pay compensation in respect of either deliberate bullying or an unsafe work environment in circumstances where the employee had sought a transfer or that other steps be taken to avoid the harassment or the safety risk. Even if the refusal to take such steps had been entirely reasonable, if the risk or injury materialised, compensation would be payable. The Commonwealth could not be heard to say, 'your injury resulted not from the bullying but from our failure to transfer you away from the bully, which is conduct covered by the exemption'. 23The second and final manner in which the applicant sought to avoid the operation of s 44(1) was to assert that her claim was for breach of the contract of employment and not for damages for personal injury. This argument, too, must be rejected. 24Section 44(1) in its terms is not limited to causes of action in tort or for breach of statutory duty, as distinguished from breach of contract. It precludes actions or other proceedings for damages "in respect of ... an injury". The applicant's contention in this respect not only lacks support in the statutory language, but would undermine the apparent purpose noted above, namely to exclude actions or proceedings for damages for injury coextensively with the scope of the statutory scheme for payment of compensation. The argument based on the existence of a cause of action for breach of contract (in contrast to the earlier argument) does not rely upon an absence of entitlement to compensation but rather ignores the consequence of its existence, namely that a claim for damages is to be available in circumstances where statutory compensation is also available. Acceptance of the submission would fundamentally undermine the clear legislative purpose of s 44(1).
Conclusions 25The critical question was whether any possible claim for damages the applicant had in respect of the conduct of officers in the employ of the Commonwealth, which caused a physical or mental injury or an aggravation of a physical or mental injury, had been extinguished by s 44(1) of the Compensation Act. 26Whether the primary judge in fact mistook the relevant definition of "injury" is unclear: as his reasons reveal, he addressed the submissions made by the applicant which relied upon s 5A whilst noting that it was introduced by a later amendment. Further, as that reasoning also revealed, the submissions put to this Court based on the definition of "injury" in s 4, as in force in 2004, were not raised in the Court below. Because they were not raised, it has been necessary to consider them in greater detail than would usually be called for on a leave application. However, that analysis reveals that, as issues of law, they enjoy no prospects of success. 27The conclusion reached by the primary judge at [36], as set out at [9] above, erred in favour of the applicant by assuming that an election under s 45 may have been available to her, when it was not. However, none of that casts any doubt upon the conclusion of the primary judge that any cause of action she may have had in respect of the injuries complained of was extinguished by s 44(1). 28In those circumstances, it is unnecessary to comment further on the state of the pleadings as they arose in the Court below, nor on the proposed revised pleading proffered in this Court. 29The primary judge ordered that the second further amended statement of claim be struck out and that the applicant pay the respondent's costs. Because there was no leave to replead, that constituted a dismissal of the proceedings. Those orders were appropriate: no question of repleading could arise once it was accepted that the applicant's potential causes of action had been extinguished. 30The appropriate orders in this Court are: (1) Dismiss the application for leave to appeal from the judgment and orders in the Common Law Division. (2) Order the applicant to pay the respondent's costs of the proceedings in this Court.
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Waters
Commonwealth of Australia