Nationwide News Pty Ltd v Naidu & Anor; ISS Security Pty Ltd v Naidu & Anor [2007] NSWCA 377 (21 December 2007)

Last Updated: 25 March 2008

NEW SOUTH WALES COURT OF APPEAL

CITATION: Nationwide News Pty Ltd v Naidu & Anor; ISS Security Pty Ltd v Naidu & Anor [2007] NSWCA 377
This decision has been amended. Please see the end of the judgment for a list of the amendments.

FILE NUMBER(S):
40182/06
40198/06

HEARING DATE(S): 30 and 31 July 2007

JUDGMENT DATE: 21 December 2007

PARTIES:
CA 40182/06
Nationwide News Pty Ltd (Appellant)
Devanar Naidu (First Respondent)
ISS Security Pty Ltd (Second Respondent)
CA 40198/06
ISS Security Pty Ltd (Appellant)
Devandar Naidu (First Respondent)
Nationwide News Pty Ltd (Second Respondent)


JUDGMENT OF: Spigelman CJ Beazley JA Basten JA

LOWER COURT JURISDICTION: Supreme Court - Common Law Division

LOWER COURT FILE NUMBER(S): SC 20188/01

LOWER COURT JUDICIAL OFFICER: Adams J

LOWER COURT DATE OF DECISION: 24 June 2005 and 15 March 2006

LOWER COURT MEDIUM NEUTRAL CITATION:
Naidu v Group 4 Securitas Pty Ltd & Anor [2005] NSWSC 618; Naidu v Group 4 Securitas Pty Ltd & Anor [2006] NSWSC 144
Naidu v Group 4 Securitas Pty Ltd & Anor [2005] NSWSC 618; Naidu v Group 4 Securitas Pty Ltd & Anor [2006] NSWSC 144


COUNSEL:
C Bridge SC; S Torrington (Nationwide News Pty Ltd)
G Little SC; G Parker (ISS Security Pty Ltd)
D T Kennedy SC; S E McCarthy (Devandar Naidu)


SOLICITORS:
Lander & Rogers (Nationwide News Pty Ltd)
Turks Legal (ISS Security Pty Ltd)
Albert A Macri Partners (Devandar Naidu)

CATCHWORDS:
CONTRACTS
General contractual principles
Construction and Interpretation of Contracts
Implied terms
Terms essential to enable performance
Employment contract
Whether trial judge erred in finding additional implied terms
DAMAGES
Measure and remoteness of damages in actions for tort
Mental and nervous shock
Failure to provide safe place of work
Whether double compensation for breach of contract and tort
DAMAGES
Exemplary damages
Focus upon conduct of wrongdoer
Whether trial judge erred in awarding exemplary damages
s 151M of Workers Compensation Act 1987 and Pt 33 r 8A of Supreme Court Rules 1970
whether trial judge erred in awarding interest
LIMITATION OF ACTIONS
Contracts, torts and personal actions
Personal injury cases
Workers Compensation Act 1987 s 151D
Whether trial judge erred in granting leave to bring proceedings
Fairness underlying principle as to whether to allow action
TORT
Negligence
Essentials of action for negligence
Where nervous shock or mental disorder
Common law
Reasonable foreseeability of damage
As between employer and employee
Workplace bullying and racial taunts
TORT
Negligence
Essentials of action for negligence
Duty of Care
Special relationships and duties
Employer and Employee
Where employee is subcontracted to workplace where bullying occurs
Third party’s duty to provide safe place and safe system of work
TORT
Negligence
Liability for other’s negligence
Contractors
Direct liability of employer for actions of site supervisor
TORT
Negligence
Apportionment of responsibility and damages
Liability of employer and contracting party
Whether trial judge erred in apportionment
TORT
Negligence
Vicarious liability
Sufficient connection with duties and responsibilities as employee
Site supervisor bullied and intimidated contractor under his control
Whether conduct in course of employment
TORT
Intentional tort
Mental and nervous shock
Requires intention or reckless indifference

LEGISLATION CITED:
Anti-Discrimination Act 1977 s 123
Civil Liability Act 2002 s 3B
Civil Procedure Act 2005 Sch 6 cl 5
Limitation Act 1969 s 13, 14, 18A, 60C, 60E
Racial Discrimination Act 1975
Supreme Court Rules 1970 Pt 33 r 8A, Pt 52 r 17
Uniform Civil Procedure Rules 2005 r 42.14
Workers Compensation Act 1987 s 151D, 151M

CASES CITED:
Arthur Guinness, Son & Company (Dublin) Ltd v The Freshfield (Owners) and Ors: (The Lady Gwendolen) [1965] P 294
Atkinson v Gameco (NSW) Pty Ltd [2005] NSWCA 338
Australian Securities & Investments Commission [2007] NSWCA 75; (2007) 62 ACSR 1
Baltic Shipping Company v Dillon [1993] HCA 4; (1993) 176 CLR 344
Bazley v Curry 1999 Can LII 692 (SCC); [1999] 2 SCR 534
Beale v Government Insurance Office (1997) 48 NSWLR 430
Beaudesert Shire Council v Smith [1966] HCA 49; (1966) 120 CLR 145
Belmont Finance Corp Ltd v Williams Furniture Ltd (No 2) [1980] 1 All ER 393
Blackburn Low & Co v Vigors (1887) 12 App Cas 531
Bolton (HL) Engineering Co Ltd v TJ Graham & Sons Ltd [1957] 1 QB 159
Boodhoo and another v Attorney General of Trinidad and Tobago [2004] UKPC 17; [2004] 1 WLR 1689
Bourke v Hassett [1998] VSCA 24; [1999] 1 VR 189
BP Refinery (Western-Port) Pty Limited v Shire of Hastings [1977] HCA 40; (1977) 180 CLR 266
Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1996) 186 CLR 541
Bunyan v Jordan [1937] HCA 5; (1937) 57 CLR 1
Byrne v Australian Airlines Limited [1995] HCA 24; (1995) 185 CLR 410
Canterbury Bankstown Rugby League Football Club Ltd v Rogers (1993) Aust Torts Reports 81-246
Carrier v Bonham [2001] QCA 234; [2002] 1 Qd R 474
Colonial Mutual Insurance Society Limited v Producers and Citizens Co-Operative Assurance Company of Australia Limited [1931] HCA 53; (1931) 46 CLR 41
Czartyrko v Edith Cowan University [2005] HCA 14; (2005) 79 ALJR 389
Deatons Proprietary Limited v Flew [1949] HCA 60; (1949) 79 CLR 370
Director General, Department of Education and Training v MT [2006] NSWCA 270; (2006) 67 NSWLR 237
El Ajou v Dollar Land Holdings Plc [1993] EWCA Civ 4; [1994] 2 All ER 685
Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322
FJ Walker Limited v Webber (Court of Appeal, 16 November 1989, unreported)
Gifford v Strang Patrick Stevedoring Pty Ltd [2003] HCA 33; (2003) 214 CLR 269
Goldman Sachs JBWere Services Pty Ltd v Nikolich [2007] FCAFC 120
Goose v Wilson Sandford and Co (1998) 142 SJLB 92
Gray v Motor Accident Commission [1998] HCA 70; (1998) 196 CLR 1
Hadid v Redpath [2001] NSWCA 416
Hall v A&A Sheiban Pty Ltd [1989] FCA 72; (1988) 20 FCR 217
Hamilton v Whitehead [1988] HCA 65; (1988) 166 CLR 121
Healing (Sales) Pty Ltd v Inglis Electrix Pty Ltd [1968] HCA 60; (1968) 121 CLR 584
Hollis v Vabu Pty Limited [2001] HCA 44; (2001) 207 CLR 21
Holt v Wynter [2000] NSWCA 143; (2000) 49 NSWLR 128
Hunter v Canary Wharf Ltd [1997] UKHL 14; [1997] AC 655
James v Hill [2004] NSWCA 301
Janvier v Sweeney [1919] 2 KB 316
Jury v The Commissioner for Railways (New South Wales) [1935] HCA 29; (1935) 53 CLR 273
Koehler v Cerebos (Australia) Limited [2005] HCA 15; (2005) 222 CLR 44
Kondis v State Transport Authority [1984] HCA 61; (1984) 154 CLR 672
Lennard’s Carrying Company Limited v Asiatic Petroleum Company Limited [1915] AC 705
Lepore v State of New South Wales [2001] NSWCA 112; (2001) 52 NSWLR 420
Limpus v London General Omnibus Co (1862) 1 H&C 526; 158 ER 993
Lloyd v Grace, Smith & Co [1912] UKHL 1; [1912] AC 716
Magill v Magill [2006] HCA 51; (2006) 81 ALJR 254
Marcic v Dalma Formwork (Australia) Pty Ltd [2006] NSWCA 174
McCracken v Melbourne Storm Rugby League Football Club Ltd [2007] NSWCA 353
Mifsud v Campbell (1991) 21 NSWLR 725
Morgan v Johnson [1998] NSWSC 367; (1998) 44 NSWLR 578
Morris v C W Martin & Sons Ltd [1966] 1 QB 716
Moylan & Ors v The Nutrasweet Co [2000] NSWCA 337
Mutton v Howard Haulage Pty Ltd [2007] NSWCA 340
Naidu v Group 4 Securitas Pty Ltd & Anor [2005] NSWSC 618
Naidu v Group 4 Securitas Pty Ltd & Anor [2006] NSWSC 144; (2006) 150 IR 203
New South Wales v Burton [2006] NSWCA 12
New South Wales v Fahy [2007] HCA 20; (2007) 81 ALJR 1021
New South Wales v Harlum [2007] NSWCA 120
New South Wales v Ibbett [2005] NSWCA 445; (2005) 64 NSWLR 168
New South Wales v Ibbett [2006] HCA 57; (2006) 81 ALJR 427
New South Wales v Lepore [2003] HCA 4; (2003) 212 CLR 511
New South Wales v Mannall [2005] NSWCA 367
New South Wales v Seedsman [2000] NSWCA 119; (2000) 217 ALR 583
North Sydney Council v Roman [2007] NSWCA 27; (2007) 150 LGERA 419
Northern Territory v Mengel [1995] HCA 65; (1995) 185 CLR 307
O’Callaghan v Loder [1983] 3 NSWLR 89
O’Connor v The Commissioner for Government Transport [1954] HCA 11; (1954) 100 CLR 225
O’Leary v Oolong Aboriginal Corporation Inc [2004] NSWCA 7
Palmer Bruyn & Parker Pty Ltd v Parsons [2001] HCA 69; (2001) 208 CLR 388
Permanent Trustee Australia Co Ltd v FAI General Insurance Co Ltd [2001] NSWCA 20; (2001) 50 NSWLR 679
Podrebersek v Australian Iron & Steel Pty Ltd [1985] HCA 34; (1985) 59 ALJR 492
R v Biggin; ex parte Fry [1955] VLR 36R v Maxwell (1998) 217 ALR 452
Roads and Traffic Authority of New South Wales v Dederer [2007] HCA 42; (2007) 81 ALJR 1773
Sargent v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634
Smits v Roach [2006] HCA 36; (2006) 227 CLR 423
Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247
South Australian Housing Trust v State Government Insurance Commission (1989) 51 SASR 1
South Eastern Sydney Area Health Service v King [2006] NSWCA 2
State of New South Wales v Ibbett [2005] NSWCA 445
State of New South Wales v Lepore [2003] HCA 4; (2003) 212 CLR 511
State of New South Wales v Mannall [2005] NSWCA 367
Starks v RSM Security Pty Ltd & Ors [2004] NSWCA 351
Stingel v Clark [2006] HCA 37; (2006) 226 CLR 442
Sutherland v Hatton [2002] EWCA Civ 76; [2002] 2 All ER 1
Tame v State of New South Wales [2002] HCA 35; (2002) 211 CLR 317
TCN Channel Nine v Anning [2002] NSWCA 82; (2002) 54 NSWLR 333
Tesco Supermarkets Ltd v Nattrass [1971] UKHL 1; [1972] AC 153
The Lady Gwendolyn (1965) P 294
TNT Australia Pty Limited v Christie & 2 Ors [2003] NSWCA 47; (2003) 65 NSWLR 1
Trend Management v Borg (1996) 40 NSWLR 500
Vairy v Wyong Shire Council [2005] HCA 62; (2005) 223 CLR 422
Vinidex v Theiss [2000] NSWCA 67
Wainwright v Home Office [2003] UKHL 53; [2004] AC 406
Wilkinson v Downton [1897] 2 QB 57; 66 LJQB 493
Wyong Shire Council v Shirt [1980] HCA 12; (1980) 146 CLR 40
Zorom Enterprises Pty Ltd v Zabow & Ors [2007] NSWCA 106
Elvin, J, “The duty of schools to prevent bullying”, (2003) 11 Tort L Rev 168
Mark Lunney, "Practical Joking and its Penalty: Wilkinson v Downton in Context" (2002) 19(2) Tort L Rev 168
Trindade, Cane and Lunney, The Law of Torts in Australia 4th ed (2007) OUP at [2.43]
Penelope Watson, "Searching the Overfull and Cluttered Shelves: Wilkinson v Downton Rediscovered" (2004) 23(2) UTasLR 264
Peter Handford, Mullany & Handford's Tort Liability for Psychiatric Injury 2nd ed (2006) Lawbook Co, Ch 22

DECISION:
The orders are
(1) In matter No. CA 40182 of 2006 (appeal by Nationwide News Pty Ltd)
(i) dismiss the appeal
(ii) dismiss the cross-appeal of ISS Security Pty Ltd
(iii) order the Appellant to pay the costs of the Respondents of the appeal
(2) In matter No. CA 40198 of 2006 (appeal by ISS Security Pty Ltd)
(i) allow the appeal and set aside the orders of Adams J entered on 12 May 2006
(ii) in place thereof, make the following orders
(a) judgment for the plaintiff against the second defendant, Nationwide News Pty Ltd
(b) order the second defendant to pay the plaintiff $1,946,189.40, such judgment to have effect from 12 May 2006
(c) order the second defendant to pay the plaintiff’s costs of the proceedings in the Common Law Division on an ordinary basis up to 26 March 2004 and thereafter on an indemnity basis
(d) order the plaintiff to pay the first defendant’s costs of the proceedings in the Common Law Division
(3) Dismiss the cross-appeal of Nationwide News Pty Ltd
(4) Order the cross-appellant to pay the costs of the cross-respondents to the cross-appeal
(5) Order the Respondents to pay the Appellant’s costs of the appeal
(6) Grant the First Respondent (Mr Naidu) a certificate under the Suitors’ Fund Act 1951 (NSW) in relation to the costs of the appeal.


JUDGMENT:

- 137 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40182/06

CA 40198/06

SPIGELMAN CJ

BEAZLEY JA

BASTEN JA

Friday 21 December 2007

Nationwide News Pty Limited v Devandar Naidu & Anor

ISS Security Pty Limited v Devandar Naidu & Anor

Judgment

1 SPIGELMAN CJ: I have read the judgment of Beazley JA in draft. Her Honour sets out the facts, issues and submissions. Subject to the following additional observations I agree with her Honour’s judgment. I have nothing to add to her Honour’s analysis of the limitation, estoppel, causation, exemplary damages, apportionment, damages and indemnity costs issues.

Factual Findings

2 With respect to the issue of delay I wish to express my agreement with her Honour’s analysis of the judgment of Adams J (Naidu v Group 4 Securitas Pty Ltd [2005] NSWSC 618). His Honour clearly addresses the complex factual issues, particularly of credit, comprehensively, directly and in a manner which indicates that the apprehensions that considerable delay in delivery of judgment can occasion do not apply in the present case. His Honour’s detailed analysis provides no analogy with the cases in which appellate courts have concluded that delay has affected findings of fact. In this regard, the position is the same as that found to exist in Vines v Australian Securities & Investments Commission [2007] NSWCA 75; (2007) 62 ACSR 1 at [26]- [31].

3 For the reasons given by Beazley JA the appellants’ submissions challenging the primary findings of fact by Adams J should be rejected.

Breach of Contract

4 As Beazley JA indicates, the trial judge made a number of different findings with respect to the contractual cause of action pleaded by Mr Naidu against ISS. Nothing turns on the implied term imposing an obligation on the employer to provide a safe system of work, because it is co-extensive with the duty in tort.

5 Insofar as his Honour found an implied term to protect employees from racial or personal vilification based on the ISS corporate policy, as Beazley JA shows, that policy was not in existence at the relevant time.

6 His Honour also found an implied term that employees are not to be placed in fear of insult or physical harm [200], upon which term his Honour further elaborated in his judgment on damages. In that second judgment he expressed the implied term in a different manner, namely that an employer would not “intimidate, racially or personally vilify, subject to demeaning, harassing or abusive conduct or threats of such conduct or threats of violence and insofar as it was reasonably practicable protect an employee from any such conduct”.

7 The test for the implication of terms into a contract, including a contract of employment, is well established. (See BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266.) At no stage in his reasoning does his Honour refer to or apply this test.

8 In my opinion there is no scope for the implication of a term of this character in a contract which already contains an obligation upon the employer to provide a safe system of work. I can see no basis on which it can be said that a term of this character is “necessary to give business efficacy to the contract”. The employment contract is perfectly “effective without” any such term. Furthermore, it cannot be said that the term of this character is so obvious that “it goes without saying”.

9 I agree with the conclusion of Beazley JA that the appeal should be allowed with respect to his Honour’s award of damages in contract.

Duty of Care

10 Two months before the delivery of judgment in the present case the High Court handed down its decision in Koehler v Cerebos (Australia) Ltd [2005] HCA 15; (2005) 222 CLR 44. His Honour’s attention was not directed to this case in any supplementary submissions and it is not referred to in his judgment. With respect to the liability of an employer for breach of the duty of care to avoid a risk of psychiatric injury, this case is directly applicable to the situation of ISS. By a close analogy, on the facts of the present case, it is also applicable to the situation of Nationwide News which, in relevant respects became virtually a surrogate employer.

11 As the joint judgment in Koehler makes clear, issues of duty and breach frequently overlap. In Koehler the High Court determined that that case could be decided at the level of breach of duty. (See at [20], [26] and [42].) However, the joint judgment made it clear that the starting point for analysis was the determination of the content of the duty of care. This required analysis of the relationship between the parties, relevantly, between Mr Naidu and each of ISS and Nationwide News. (See at [19]. [20[, [22], [24] and [25].) In many cases, as in Koehler, the analysis would commence with the particular contract of employment, although that factor does not appear particularly pertinent on the facts of this case. (See at [24] and [26].) It also requires analysis of the relevant statutory context, but no such context was suggested in the present case on appeal.

12 The joint judgment stated;

“[33] ... The central inquiry remains whether, in all the circumstances, the risk of a plaintiff ... sustaining a recognisable psychiatric illness was reasonably foreseeable, in the sense that the risk was not far-fetched or fanciful.”

13 Their Honours referred to Tame v New South Wales; Annetts v Australian Stations Pty Ltd [2002] HCA 35; (2002) 211 CLR 317 at [16], [61]-[62] and [201]. In those paragraphs a majority of the court rejected “normal fortitude” as a test of foreseeability, whilst accepting the relevance of the underlying idea. (See Gifford v Strang Patrick Stevedoring Pty Ltd [2003] HCA 33; (2003) 214 CLR 269 at [98] and [119].) Adams J erred at [185] in referring to “normal fortitude” as a test, but nothing turned on this reference on the appeal.

14 The joint judgment in Koehler also stated:

“[35] The duty which an employer owes is owed to each employee. The relevant duty of care is engaged if psychiatric injury to the particular employee is reasonably foreseeable ... [T]hat invites attention to the nature and extent of the work being done by the particular employee and signs given by the employee concerned.”

15 The joint judgment made it clear that a range of factors should be considered with respect to determining the issue of reasonable foreseeability at the level of breach. (See eg at [24].) However, particular emphasis was given to any signs from the employee that the risk of psychiatric injury, as distinct from psychological disturbance such as stress, had appeared. In this regard the High Court observed:

“[36] ... [T]he employer engaging an employee to perform stated duties is entitled to assume, in the absence of evident signs warning of the possibility of psychiatric injury, that the employee considers that he or she is able to do the job.”

16 With respect to the facts of Koehler, the joint judgment stated:

“[26] The Full Court was right to conclude that a reasonable person in the position of the employee would not have foreseen the risk of psychiatric injury to the appellant ...”

17 The Court gave two reasons for this conclusion, but explained that the first had “limited significance” [28]. The reason which was of significance was that:

“[27] ... [T]he employer had no reason to suspect that the appellant was at risk of psychiatric injury”.

18 The joint judgment concluded:

“[41] The conclusion that the employer had no reason to suspect that the appellant was at risk of psychiatric injury is the reason upon which the Full Court’s conclusion hinged. Here there was no indication (explicit or implicit) of any particular vulnerability of the appellant. As noted earlier, she made many complaints to her superiors but none of them suggested (either expressly or impliedly) that her attempts to perform the duties required of her were putting, or would put, her health at risk. She did not suggest at any time that she was vulnerable to psychiatric injury or that the work was putting her at risk of such an injury. None of her many complaints suggested such a possibility. As the Full Court said, her complaints may have been understood as suggesting an industrial relations problem. They did not suggest danger to her psychiatric health. When she did go off sick, she (and her doctor) thought the illness was physical, not psychiatric. There was therefore, in these circumstances, no reason for the employer to suspect risk to the appellant’s psychiatric health.

[42] The Full Court was right to conclude that the employer was not shown to have breached a duty of care.”

19 In the present case, it is also pertinent to note that the inquiry into breach of duty cannot focus only upon the way in which a particular injury has occurred. As Hayne J said in Vairy v Wyong Shire Council [2005] HCA 62; (2005) 223 CLR 422 after posing the question in terms of ”what is to be done in response to the various foreseeable risks of injury”:

“[124] ... [B]ecause the inquiry is prospective, it would be wrong to focus exclusively upon the particular way in which the accident that has happened came about ... [T]he examination of the causes of an accident that has happened cannot be equated with the examination that is to be undertaken when asking whether there was a breach of a duty of care which was a cause of the plaintiff’s injury. The inquiry into the causes of an accident is wholly retrospective. It seeks to identify what happened and why. The inquiry into breach, although made after the accident, must attempt to answer what response a reasonable person, confronted with a foreseeable risk of injury, would have made to that risk. And one of the possible answers to that inquiry must be ‘nothing’.

[125] There are fundamental reasons why the inquiry cannot be confined to where the accident happened or how it happened. Chief among them is the prospective nature of the inquiry to be made about response to a foreseeable risk.

[126] When a plaintiff sues for damages alleging personal injury has been caused by the defendant’s negligence, the inquiry about breach of duty must attempt to identify the reasonable person’s response to foresight of the risk of occurrence of the injury which the plaintiff suffered. That inquiry must attempt, after the event, to judge what the reasonable person would have done to avoid what is now known to have occurred. Although that judgment must be made after the event it must seek to identify what the response would have been by a person looking forward at the prospect of the risk of injury.”

(See also per Gummow J at [61] and Roads and Traffic Authority of New South Wales v Dederer [2007] HCA 42; (2007) 81 ALJR 1773 at [65]- [69].)

20 The prospective nature of the inquiry as to breach has particular significance in the case of the risk of psychiatric injury. In any organisation, including in employer/employee relationships, situations creating stress will arise. Indeed, some form of tension may be endemic in any form of hierarchy. The law of tort does not require every employer to have procedures to ensure that such relationships do not lead to psychological distress of its employees. There is no breach of duty unless a situation can be seen to arise which requires intervention on a test of reasonableness.

21 Koehler affirms the line of High Court authority, including, Tame, Annetts and Gifford, which focuses attention on the purpose for which the inquiry as to foreseeability is undertaken, namely, to determine what reasonableness requires by way of response and, therefore, whether legal responsibility for the conduct should be attributed to the defendant for the injury to the plaintiff.

22 As Gleeson CJ said in Gifford supra at 276: “reasonable foreseeability involves more than mere predictability”. In the same passage his Honour said “advances in medical knowledge have made us aware of the variety of circumstances in which emotional disturbance can trigger, or develop into, recognisable psychiatric injury” and concluded:

“[A]dvances in the predictability of harm to others ... do not necessarily result in a co-extensive expansion of the legal obligations imposed on those whose conduct might be a cause of such harm. The limiting consideration is reasonableness, which requires that account be taken both of interests of plaintiffs and of burdens on defendants.”

23 The reasoning and result in Koehler confirms this analysis. It may well be the case that it is now well established that workplace stress, and specifically bullying, can lead to recognised psychiatric injury. That does not, however, lead to the conclusion that the risk of such injury always requires a response for the purpose of attributing legal responsibility. Predictability is not enough.

24 It does appear that over recent decades the helping professions and the pharmaceutical industry have medicalised many of the normal stresses of every day life, including working life. The law has not expanded legal responsibility for conduct in the same way. Koehler makes it clear that the common law of Australia will not do so, failing to follow such developments in other common law jurisdictions.

25 An employer can be liable for negligence because of a failure to protect an employee against bullying and harassment. However, the existence of such conduct does not determine the issue of breach of duty. As Hayne J put it in Tame supra at [296]:

“[A] plaintiff will not recover damages for an injury which psychiatric opinion recognises as a psychiatric injury by demonstrating only that such an injury was reasonably foreseeable and that the defendant’s negligence was a cause of the injury which the plaintiff sustained.”

26 One of the elements required to be assessed is the degree of probability that the risk of psychiatric injury may occur, even when the reasonable foreseeability test of a risk that is not far fetched and fanciful, has been satisfied.

27 As the actual employer, the duty owed by ISS to the respondent is that set out in the joint judgment of the High Court in Czartyrko v Edith Cowan University [2005] HCA 14; (2005) 79 ALJR 389 at [12]:

“An employer owes a non-delegable duty of care to its employees to take reasonable care to avoid exposing them to unnecessary risks of injury. If there is a real risk of an injury to an employee in the performance of a task in a workplace, the employer must take reasonable care to avoid the risk by devising a method of operation for the performance of the task that eliminates the risk, or by the provision of adequate safeguards.”

28 The facts of the particular relationship between, relevantly, Mr Naidu and Nationwide News, or with its related corporations, as set out by Beazley JA, are such as to make it appropriate to characterise Nationwide News as a surrogate employer. In the circumstances of this case the duty set out in the extract from Czartyrko, save perhaps for the reference to the duty being non-delegable, applies to Nationwide News. (See TNT Australia Pty Ltd v Christie [2003] NSWCA 47; (2003) 65 NSWLR 1 esp at [41]-[43].)

Breach of Duty

29 The relevant factual matrix is fully set out by Beazley JA. For purposes of analysis of the issue of breach it is particularly pertinent to note certain matters.

· Mr Naidu worked at premises and in a work environment under the control of Nationwide News, pursuant to a contractual arrangement between ISS and News;

· Mr Naidu worked under the direct supervision of Mr Chaloner, in substance as his assistant;

· The relevant conduct occurred over a period of five years and, although not continuous, appears to have been sufficiently frequent to be characterised as systematic;

· Mr Naidu was employed in security, a form of occupation in which he would expect to be exposed to stressful situations;

· Mr Naidu did not complain about Mr Chaloner’s conduct, nor take any other steps to draw his conduct to the attention of persons who could do something about it in either Nationwide News or ISS; and

· Save on one occasion in the case of Nationwide News, his fellow employees, who witnessed Mr Chaloner’s conduct, did not do so either.

30 The fact that the workplace was under the control of Nationwide News is a relevant, but not determinative, factor when deciding whether ISS was in breach. (See Bourke v Hassett [1998] VSCA 24; [1999] 1 VR 189 esp at [41]-[42]; Atkinson v Gameco (NSW) Pty Ltd [2005] NSWCA 338 at [18]- [19]; Mutton v Howard Haulage Pty Ltd [2007] NSWCA 340 at [18], [144]-[145].) The fact that the element of control by the employer is somewhat attenuated may be relevant to determining whether an employer did breach its duty in the particular circumstances. This consideration may be of greater significance where the relevant risk is psychiatric injury than in other cases.

31 The fact that Mr Naidu was employed in a job which necessarily involved exposure to stressful situations is of significance even though the nature of the stress involved in this case – bullying and harassment by a superior – was not within the scope of his employment.

32 In the case of both appellants, but particularly ISS, this aspect of his employment requires consideration of a number of the elements emphasised in Koehler, referred to above:

· The particular contract of employment [24] and [26];

· The nature and extent of the work by the particular employee [35]; and

· The assumption that the employee considers he is able to do the job [36].

33 The facts and matters that may be said to give rise to foreseeability of psychiatric injury involve matters known to Mr Chaloner and matters known to other employees, including two senior executives – Mr Paine in the case of Nationwide News and Mr Blinkworth in the case of ISS. The paragraph references below are to the judgment of Adams J.

34 There is a substantial body of evidence of racial vilification and personal abuse incorporating a range of insults including “black boy”, “black cunt”, “monkey face”, “curry muncher”, “boofhead”, “poofter”, “hopeless” (see [95], [96], [106], [111], [112], [115]). It is accurate to describe the course of conduct as bullying or harassment. The evidence suggests that the conduct was frequent enough to be characterised as systematic.

35 On one occasion, an employee of Nationwide News, Mr Kamaledine, drew the racial abuse to the attention of Mr Paine, a senior executive. Mr Kamaledine had observed that the Mr Naidu was “in tears. He was horrified and looked very scared” [95]. Although the evidence of Mr Kamaledine indicates that he spoke to Mr Paine about the incident, it does not indicate clearly whether he informed him both of the content of the abuse and of Mr Naidu’s reaction. He simply states “I told him exactly what had happened”. His Honour’s finding is in similar, but not identical, terms: “he repeated what he had seen to Mr Paine” [95]. On his Honour’s finding this was the only occasion on which Mr Paine was directly informed of the conduct.

36 His Honour accepted Mr Kamaledine’s evidence that when Mr Naidu first came to work at News: “he was enthusiastic, honest, dedicated, reliable, sincere and also sensitive” but that as the years passed he notice that Mr Naidu “became progressively more quiet and, as it seemed to him, more depressed” and that he saw him “always in tears”, from about mid 1995 [103]. Mr Kamaledine gave evidence that from time to time he observed Mr Naidu to look “depressed”. (See eg [94], [97].)

37 Similarly, Mr Hassan O’Demis, an employee of ISS, gave evidence that when he first met the respondent he was “a nice cheery and confident person, friendly and gregarious and socialised on the premises with other staff members” but that when he returned to work in 1996 he noticed that Mr Naidu was “quite afraid” of Mr Chaloner and “would always be a bit passive, quiet and afraid to say or do anything wrong in front of him”. He also said that Mr Naidu was “more quiet, looked tired all the time and did not seem to be his ‘old confident self’. He seemed more withdrawn ... and he saw him from time to time with red eyes as if he had been crying” and noticed on one occasion that he seemed “very depressed ... and very worn out, tired” [106]-[107].

38 Another employee of ISS who worked at the Surry Hills premises, Ms Tanya Pool, said that when she first met Mr Naidu he was “very relaxed, very nice person and nothing seemed to bother him but by the end of the time that I left he always looked distressed, looked upset and looked tired ... and withdrawn ... it was like the spark had gone from him” [109].

39 In my opinion, in the context of determining what reasonableness requires, there is no scope for extending the doctrine of constructive knowledge so as to encompass all the employees of a company. To do so would be, in substance, to impose a duty on all organisations to establish elaborate systems of inquiry and investigation which are unduly burdensome.

40 Whether a principal is affected by an agent’s knowledge depends upon the context. (See Smits v Roach [2006] HCA 36; (2006) 227 CLR 423 at [47], referring to El Ajou v Dollar Land Holdings Plc [1993] EWCA Civ 4; [1994] 2 All ER 685 at 701-704.) In an agency context the issue turns on actual or ostensible authority. Analogous principles apply in the context of employees in an organisational hierarchy.

41 Whether the knowledge of a particular person should be imputed to a corporation depends on the scope of that person’s employment. A person in a supervisory position – such as Mr Paine or Mr Blinkworth - has duties which encompass the receipt of the relevant knowledge and accordingly, could be said to have a duty to communicate and/or act upon it. That cannot be said to be the case for the other employee witnesses.

42 The test of a duty to communicate knowledge as establishing such knowledge in a corporation has been applied in a number of contexts. (See eg South Australian Housing Trust v State Government Insurance Commission (1989) 51 SASR 1 at 23; Sargent v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634 at 658; R v Biggin; ex parte Fry [1955] VLR 36 at 39-41; Belmont Finance Corp Ltd v Williams Furniture Ltd (No 2) [1980] 1 All ER 393 at 404.) Lord Hoffmann has rejected the terminology of duty to communicate and explained the cases on the basis that “communication to the agent is treated, by reason of his authority to receive it, as communication to the principal” (El Ajou at 703). This is a reference to a situation where “the agent has actual or ostensible authority to receive communications”. In this Court, Handley JA has expressed ‘difficulties’ with Lord Hoffmann’s approach in Permanent Trustee Australia Co Ltd v FAI General Insurance Co Ltd [2001] NSWCA 20; (2001) 50 NSWLR 679 esp at [76] and see [87]-[88]. At least in the case of an agent acting within the scope of the agency (or, by analogy, within the scope of duty as an employee), the distinction does not appear to me to be material. (See generally Reynolds Bowstead and Reynolds on Agency, 18th ed (2006) Article 95 esp [8-209] and [8-212].)

43 A felicitous description of a person whose knowledge will be imputed to a corporation is an “agent to know”. (Blackburn Low & Co v Vigors (1887) 12 App Cas 531 at 537.)

44 Putting aside Mr Chaloner himself, only Mr Paine and Mr Blinkworth could relevantly be characterised as “agent[s] to know” for purposes of determining what reasonableness requires in the context of Mr Chaloner’s conduct towards Mr Naidu. In my opinion, they did not know enough to require them to act.

45 In the case of Nationwide News, the relevant knowledge was that of Mr Paine. His Honour found:

· He accepted Mr Kamaledine’s evidence that he told Mr Paine about one incident [182];

· That it was “very likely that Mr Chaloner was adept at concealing any inappropriate conduct from Mr Paine” and “Mr Paine was unaware ... of the way in which Mr Chaloner treated the plaintiff” [183];

· His Honour subsequently referred to “Mr Paine’s probable knowledge of that conduct” [202], which appears to be a reference to the single occasion involving Mr Kamaledine; and

· “[I]t was known to and agreed by News (through Mr Paine) ... that ... given Mr Chaloner’s personality, [his management style] would be likely to involve unreasonable and possibly excessive demands on the plaintiff” [210].

46 With respect to ISS, the relevant knowledge was that of Mr Blinkworth. In this regard his Honour’s findings were:

· Mr Chaloner’s communications with Mr Blinkworth included “to a significant degree ... but perhaps only an occasional one”, Mr Chaloner’s proclivity to employ verbal intimidation including “by way of raised voice and peremptory and contemptuous language” [158].

· Mr Naidu did complain to Mr Blinkworth that Mr Chaloner was “difficult, demanding and unreasonable”, but not about “any racial vilification” [159].

· This complaint by Mr Naidu to Mr Blinkworth was not of a character that “might have led any reasonable person to apprehend any risk of psychological injury” [161].

· However, “Mr Blinkworth was well aware that Mr Chaloner was a bully and would or all should have realised that he frequently used at least verbal intimidation in his relations with staff including, in particular, the plaintiff” [161].

· His Honour summarised the state of Mr Blinkworth’s knowledge and concluded that these were not matters that “should have led him to suspect that Mr Chaloner was behaving in such a way as could or might lead to injuring the plaintiff” [189].

· Mr Blinkworth knew or should have known that Mr Chaloner would “be demanding and unreasonable towards” Mr Naidu [191].

· Mr Blinkworth ought to have known that Mr Chaloner “was likely to use intimidation as one of his techniques of management and that the plaintiff would be the butt of this behaviour. It follows that Mr Blinkworth had responsibility, under the plaintiff’s contract of employment, to make reasonable inquiries of the plaintiff and other co-workers at the site about its nature and extent” [200]. This finding distinguishes the tort from the contract cause of action.

· His Honour also referred to the knowledge of other ISS employees on site and attributed that knowledge to ISS [197]. It is not entirely clear how his Honour reached this conclusion and whether it was pertinent to the cause of action in tort or contract.

· His Honour held that the circumstances were such that ISS should have investigated Mr Chaloner’s “exercise of control”. Had it done so, his Honour held, “it would have discovered its serious and potentially dangerous extent” [197]. Again it is not clear whether his Honour was dealing with both the cause of action in contract and in tort.

· This conclusion appears to be based on his Honour’s finding that: [193] “... even one complaint of serious misconduct should initiate in any employer acting reasonably an enquiry both of the person against whom the allegation is made and about the affected subordinate about the truth of the allegation and the extent of the misconduct. That process should also involve an enquiry of the employee about an employee’s response to an ability to cope with the conduct of which he or she had complained”.

47 Insofar as his Honour’s analysis of the position of ISS was based on contract, I have dealt with it above. Insofar as his Honour was dealing with breach of the duty of care in tort, in my opinion, the proposition that “even one complaint of serious misconduct”, whether referable to the liability of Nationwide News or of ISS, should lead an employer to initiate an inquiry, states the requirement of reasonableness too generally and too high. What is required depends on the whole of the circumstances including, for example, the failure of the person involved to complain.

48 It is not clear how his Honour applied this “one complaint test”. His Honour was dealing with the liability of ISS but the single complaint in this case was made by a third party to Mr Paine, who represented Nationwide News. It does not appear that any of the employees of ISS who witnessed relevant events did anything about it. I can see no proper basis on which it can be concluded that ISS failed to act reasonably by not having in place mechanisms which would have disclosed Mr Chaloner’s conduct. Nor, in my opinion, can that be said of Nationwide News. In the case of neither Nationwide News nor ISS, did the imputed knowledge derived, respectively, from Mr Paine or Mr Blinkworth, require any steps to be taken.

49 To the state of knowledge and the observations made by the respective employees who gave evidence, must be added the knowledge and direct observations made by Mr Chaloner himself. The extent to which Mr Chaloner’s conduct binds either of the appellants is an analytically distinct issue and I will consider it further below. At this point of the analysis the question is the extent to which his knowledge and observations are pertinent to determining whether it was foreseeable on the part of Nationwide News or ISS that Mr Naidu would suffer psychiatric injury, relevantly, from the point of view of determining whether there was a breach of duty by either of the appellants.

50 Mr Chaloner was in a position that could be characterised as an “agent to know”. To suggest that he had authority to receive communications about the results of his own misconduct, or a duty to communicate these results, strains the idea of imputed knowledge in a way to which I will return.

51 In this regard the critical finding by his Honour was:

“[187] ... [T]he conduct of Mr Chaloner as described by [Mr Naidu] was so brutal, demeaning and unrelenting that it was reasonably foreseeable that, if continued for a significant period of time, certainly the period of the plaintiff’s relationship with Mr Chaloner, it would be likely to cause significant, recognisable psychiatric injury.”

52 Earlier his Honour had held:

“[17] ... I have concluded that so extreme was Mr Chaloner’s behaviour that he well knew, or would have known had he reflected as any reasonable man should have, that prolonged misconduct of the kind he exhibited towards the plaintiff could reasonably be expected to expose him to the real risk of such psychological injury. ... I think that the risk of such injury would have been obvious to any objective and reasonable observer.”

53 In the course of considering the liability of Nationwide News, his Honour also said:

“[205] ... I am satisfied that it was reasonably foreseeable that such an illness might well result from the infliction of that conduct upon the plaintiff, whether or not Mr Chaloner was aware, or cared, whether this might be the result. I have no doubt that Mr Chaloner realised that his behaviour would have caused some injury to the plaintiff. If he turned his mind to the risk of inflicting serious injury of the plaintiff, he was, at least, indifferent to the risk.”

54 It is pertinent to the issue of breach that his Honour found that Mr Naidu did not complain to other persons or, more understandably, to Mr Chaloner, about the extraordinary conduct that continued over a lengthy period of time. His Honour described Mr Naidu’s response as “passive” [13]. Unlike Koehler, in this case there were signs, but there was no complaint.

55 Mr Chaloner was not called as a witness. The evidence as to what he would have observed about Mr Naidu’s reaction is not systematic. Mr Naidu did, however, give evidence which was not contested and which his Honour appeared to accept. Mr Naidu said that he had on many occasions been reduced to tears in Mr Chaloner’s presence. (See eg the extracts set out in the judgment at [22] and [24], [37], [41].)

56 On the basis of the findings and the evidence about Mr Paine and Mr Blinkworth, and in the absence of evidence from Mr Chaloner, this is not a case in which it could be concluded that a senior employee had actual knowledge of the risk of psychiatric injury. (As was found to be the case in New South Wales v Mannall [2005] NSWCA 367 at [104], [114].) Nor is this a case in which the exposure to stressful events was anything like the order of magnitude identified in New South Wales v Seedsman [2000] NSWCA 119; (2000) 217 ALR 583, see at [7] and [37].

57 The evidence suggesting some form of mental disturbance is twofold. First, the frequency and intensity of crying by Mr Naidu. Secondly, the observations by co-workers of a significant change in Mr Naidu’s personal behaviour over the years. The former is clearly linked to Mr Chaloner’s conduct. The latter may be linked, albeit less clearly. However, it does not appear that Mr Blinkworth knew of either and Mr Paine may have known about crying on one occasion.

58 These signs are of a character which suggest an effect on Mr Naidu’s mind of an adverse character. However, what is required is foreseeability of a recognised psychiatric illness. The signs suggestive of psychiatric illness, rather than psychological disturbance, satisfy the not far fetched and fanciful test of foreseeability. However, they do not, in my opinion, reach the level of possibility which would require the employer or surrogate employer to intervene.

59 Workers are subject to stress in both their working and personal lives which can affect their mental health. Changes in personal behaviour over a period of years may occur for many reasons. So may the response of crying. These responses did not, in my opinion, indicate psychiatric illness to the degree that required a response from the actual or surrogate employer.

60 An employer, like ISS, or a surrogate employer, like Nationwide News, are not, in my opinion, required to have in place systems of inquiry and/or response, to manifestations of mental disturbance in order to determine whether or not the disturbance is work related and, if so, to remedy the situation. In the present case, at least via Mr Chaloner, both ISS and Nationwide News can be taken to be aware of the systematic course of conduct by him which created the possibility that the disturbance may be work related. They did not, however, have sufficient information about Mr Naidu’s response, even via Mr Chaloner, that the disturbance could be a recognised psychiatric illness requiring intervention.

61 In any event, in the face of Mr Chaloner’s intentional course of conduct, which brutalised the respondent, it is artificial to analyse his conduct in terms of a duty of care owed by either appellant, through the agency of Mr Chaloner, based on the foreseeability of psychiatric damage together with the application of a standard of reasonableness as to the steps which should have been taken to avoid psychiatric injury.

62 The imperial march of the tort of negligence is such that, as a matter of practice, it has led the legal profession to abjure the sometimes more demanding requirements of proof of an intentional tort. This has led to an accompanying lack of rigour in the analysis of the elements of a cause of action.

63 To treat Mr Chaloner’s knowledge as pertinent to determining what a reasonable employer or surrogate employer should have done appears to me to be so inappropriate as to engage the wrong sphere of legal discourse. That conclusion is reinforced by the artificiality of any suggestion that Mr Chaloner was authorised to receive information about, or had a duty to communicate, the results of his own misconduct and that, on that basis, each appellant had imputed knowledge of whatever he knew.

64 As Gleeson CJ said in New South Wales v Lepore [2003] HCA 4; (2003) 212 CLR 511:

“[31] ... Furthermore, although deliberately and criminally inflicting injury on another person involves a failure to take care of that person, it involves more. If a member of a hospital's staff with homicidal propensities were to attack and injure a patient, in circumstances where there was no fault on the part of the hospital authorities, or any other person for whose acts or omissions the hospital was vicariously responsible, the common law should not determine the question of the hospital's liability to the patient on the footing that the staff member had neglected to take reasonable care of the patient. It should face up to the fact that the staff member had criminally assaulted the patient, and address the problem of the circumstances in which an employer may be vicariously liable for the criminal acts of an employee. Intentional wrongdoing, especially intentional criminality, introduces a factor of legal relevance beyond a mere failure to take care. Homicide, rape, and theft are all acts that are inconsistent with care of person or property, but to characterise them as failure to take care, for the purpose of assigning tortious responsibility to a third party, would be to evade an issue.”

65 A similar approach is suggested by the observations of Gummow and Hayne JJ in Lepore at [270]:

“As Williams v Milotin [1957] HCA 83; (1957) 97 CLR 465 at 470 makes plain, negligently inflicted injury to the person can, in at least some circumstances, be pleaded as trespass to the person, but the intentional infliction of harm cannot be pleaded as negligence...”

The Intentional Tort

66 The respondent has sought to uphold his Honour’s award of damages in tort on the basis of the intentional tort it pleaded. This was done by way of notice of contention rather than notice of appeal, so that it arises only if the Court allows the appeal on the finding of negligence which, for the reasons I have given above, should occur.

67 His Honour’s findings of fact are that Mr Chaloner wilfully committed a series of acts calculated to cause Mr Naidu physical harm, being a recognised psychiatric injury. This could constitute an intentional tort of the character identified in Wilkinson v Downton [1897] 2 QB 57; 66 LJQB 493 affirmed in Janvier v Sweeney [1919] 2 KB 316 and accepted, albeit without affirmation, by the High Court in Bunyan v Jordan [1937] HCA 5; (1937) 57 CLR 1 and Northern Territory v Mengel [1995] HCA 65; (1995) 185 CLR 307 at 347.

68 His Honour made all of the findings of primary fact required to establish the tort but refrained from concluding that the cause of action had been made out. He said:

“[186] The acts of Mr Chaloner were, of course, not mere negligence. They were deliberate and intended to demean, offend and injure. Because no particular occasion could be said to have caused the plaintiff’s ultimate psychological illness, the defendants argue that the line of reasoning expressed in Janvier v Sweeney [1919] 2 KB 316 does not apply. It strikes me as extraordinary that, the intention of Mr Chaloner being as I have characterised it, he would not be liable for the actual injury he inflicted on the plaintiff, though he had not actually thought that what he was doing might do more than cause temporary, though acute and painful distress. In fact, I consider that Mr Chaloner was indifferent to the consequences of his malice and was content to cause as much distress as his actions were capable of inflicting, subject, I suppose, to the desirability of the plaintiff being able to continue to work in subjection to him. In this sense, this case is markedly different from the situation under consideration in Tame. If Janvier v Sweeney (supra) be rightly decided – and there is no reason, I think, to suppose otherwise – it appears to follow that the defendants are both liable for such of Mr Chaloner’s misbehaviour as was inflicted in the course of his employment, a matter to which I come in due course. As it happens, however, it seems to me that the defendants are liable in negligence – and Group 4 in contract – for the plaintiff’s psychological injury at Mr Chaloner’s hands and I have not, therefore, found it necessary to consider further the application of this line of authority to the present case.”

69 His Honour also held:

“[205] ... I have no doubt that Mr Chaloner realised that his behaviour would have caused some injury to the plaintiff. If he turned his mind to the risk of inflicting serious injury to the plaintiff, he was, at least, indifferent to the risk.”

70 A conclusion in a particular case that what was involved was the intentional infliction of personal injury is a matter of significance, eg for deciding whether to award exemplary damages and also for determining any question of contribution between joint tort feasors. Indeed, with respect to a range of matters, notably the availability of exemplary damages, the distinction between an intentional tort and negligence will be of growing significance by reason of the exemption of the intentional torts by s 3B of the Civil Liability Act 2002 from the provisions of that Act, which modify the common law of negligence in a number of significant respects. (See eg New South Wales v Ibbett [2005] NSWCA 445; (2005) 64 NSWLR 168.)

71 Observations have been made which suggest that the reasons that led the courts to develop the Wilkinson v Downton line of authority have been superseded by the tort of negligence and that therefore Wilkinson v Downton has “no leading role in the modern world”: (Wainwright v Home Office [2003] UKHL 53; [2004] AC 406 at 425; see generally the analysis per Lord Hoffmann at [36]-[47].)

72 In Australia it has been suggested that the Wilkinson v Downton line of territory has been “subsumed under the unintentional tort of negligence”. (See Magill v Magill [2006] HCA 51; (2006) 81 ALJR 254 at [117].) However, this Court should follow the acceptance by the High Court of the authority of Wilkinson v Downton in Bunyan v Jordan and in the joint judgment in Northern Territory v Mengel supra.

73 The position in Australia appears to be that identified by Gleeson CJ in Magill v Magill supra at [20]. His Honour referred to Wilkinson v Downton and Janvier v Sweeney as cases which “would probably now be explained either on the basis of negligence, or intentional infliction of personal injury”. As in the case of negligence, the requirement of “personal injury” means the test does not extend to any form of psychological damage but requires a recognised psychiatric condition. (Cf Hunter v Canary Wharf Ltd [1997] UKHL 14; [1997] AC 655 at 707.)

74 Although in some respects an intentional tort is more difficult to establish than negligence, it is not confined by a test of foreseeability and does not involve an inquiry into reasonableness of response.

75 The tort of intentional infliction of psychiatric injury has been the subject of significant literature. (See, eg F Trindale, P Cane and M Lunney, The Law of Torts in Australia 4th ed (2007) Oxford Uni Press, Melbourne at 86-95; P Handford, Tort Liability for Psychiatric Damages 2nd ed (2006) Law Book Co, Sydney Ch 28; C Witting, “Tort Liability for Intended Mental Harm” (1998) 21 University of New South Wales Law Journal 55; P Watson “Searching the Overfull and Cluttered Shelves: Wilkinson v Downton Rediscovered” (2004) 23 University of Tasmania Law Review 264.)

76 One issue that arises is what is meant by the word “calculated” in the Wilkinson v Downton and Janvier v Sweeney formulation of the tort. For the reasons I have set out above, psychiatric injury was reasonably foreseeable on the test of conceivable foreseeability adopted for the law of negligence. Clearly something substantially more certain is required for the intentional tort.

77 The word “calculated” is notoriously ambiguous: it can either mean a subjective, actual, conscious desire to bring about a specific result or it can mean what is likely, perhaps overwhelmingly likely, to occur considered objectively.

78 As McPherson JA said in Carrier v Bonham [2001] QCA 234; [2002] 1 Qd R 474 at [25]:

“To my mind, however, the problem is that the expression ‘calculated’ which is used in those passages is one of those weasel words that is capable of meaning either subjectively contemplated and intended, or objectively likely to happen. See, for example, O’Sullivan v Lunnon [1986] HCA 57; (1986) 163 CLR 545, 549. The implication I draw from the context in which the word appears in the passages quoted is that it was being used in the latter and not the former sense. That seems plain to be so in what was said by Latham CJ in Bunyan v Jordan [1937] HCA 5; (1937) 57 CLR 1, 11, where, reverting to Wilkinson v Downton, his Honour remarked that the words in that case were of such a character and spoken in such circumstances that ‘it was naturally to be expected that they might cause a very severe nervous shock’. Certainly that seems to have been the view of Dixon J who, in contrasting the facts of Bunyan v Jordan with those of Wilkinson v Downton, concluded (57 CLR 1, 17) that the harm which was said in fact to have ensued in the case before the High Court, was ‘not a consequence which might reasonably have been anticipated or foreseen’.”

79 This issue has not been determined authoritatively. It does appear that an actual subjective intention is not required. Indeed, the formulation in Wilkinson v Downton at 59 refers to an “imputed intention”. (See also the reference by Latham CJ to the result that was “naturally to be expected” in Bunyan v Jordan supra at 11).

80 It is not necessary, in this case, to decide, as McMurdo P suggests in Carrier v Bonham at [12], that “calculated” means “likely to have that effect”. It may be that it is sufficient if the result satisfied a test of “substantial certainty”. (See Trindade et al supra at 40-41.) However, a test of reckless indifference to a result will, in this context, satisfy the requirement of intention. (See Trindade et al at 41-42, 48, 56.) In the present case, the findings of Adams J establish such reckless indifference and that is sufficient to establish intention, just as it is in the criminal law.

81 The High Court has authoritatively established the test for recovery of consequential loss in the case of an intentional tort in terms of asking whether the particular head of damage is a natural and probable result of conduct. (See Palmer Bruyn & Parker Pty Ltd v Parsons [2001] HCA 69; (2001) 208 CLR 388 esp at [13], [73], [114]. See also TCN Channel Nine v Anning [2002] NSWCA 82; (2002) 54 NSWLR 333 at [100].)

82 There is no finding that Mr Chaloner did actually intend to inflict psychiatric damage. However, the nature and scale of his conduct was such, as the expert evidence confirmed, as to constitute a recognised psychiatric injury as a natural and probable consequence of that course of conduct. The limitations of foresight and remoteness are not applicable. (See Palmer Bruyn at [13] and [78].)

83 If sued, Mr Chaloner would, in my opinion, have been liable to pay the damages awarded to Mr Naidu on the basis of the intentional infliction of psychiatric injury. The final matter to be determined is whether either, or both, of the appellants are also so liable.

Liability of Nationwide News

84 I agree with Beazley JA that in relevant respects, Mr Chaloner was Nationwide News. Accordingly, it is not strictly necessary to analyse the matter in terms of vicarious liability. He was responsible for security of the News Limited Group generally, including its subsidiary Nationwide News. He supervised the security contract with ISS and had direct responsibility for seeing how the contract was administered. In response to a question as to why he was not Nationwide News for all relevant purposes, Mr C Bridge SC, who appeared for Nationwide News, submitted that was because he did not have the power to hire and fire, relevantly, Mr Naidu. However, this is not a determinative consideration with respect to the issue whether or not Mr Chaloner’s conduct constituted, of itself, a breach of any duty of care which Nationwide News owed to persons who are not its employees.

85 For matters relating to security and, in particular, the administration of the contract with ISS, Mr Chaloner was the person of whom, in the words of Wilmer LJ in The Lady Gwendolyn (1965) P 294 at 343: “It can fairly be said that his act or omission is that of the company itself”. There is no complication in the present case, as there was in The Lady Gwendolyn, that the manager of the traffic department, about whom these remarks were made, was in fact knowledgeable about railways, but took little interest in ships where the relevant incident occurred. (See Meridian Global Funds Management Agent Ltd v Securities Commission [1995] 2 AC 500 at 510.)

86 In the present case, Mr Chaloner was, for relevant purposes, the company irrespective of the existence of lines of authority and reporting to those in the management hierarchy above him.

87 In the alternative, I agree with Beazley JA that if Nationwide News was not directly liable for Mr Chaloner’s acts then it was vicariously liable. Much, probably most, of his relevant conduct constituted a mode of asserting authority over Mr Naidu whose activities he was expressly required to control. Some aspects of his conduct could not be so classified, particularly the insistence that Mr Naidu perform work of a private nature for Mr Chaloner. Nevertheless, in my opinion, as in the case of a bouncer who uses excessive force, the exercise of a brutalised form of control was the performance of his actual tasks in an inappropriate manner.

88 A number of different formulations appear in the judgments of the High Court in New South Wales v Lepore [2003] HCA 4; (2003) 212 CLR 511, in elaboration of the traditional formulation of the “course of employment” ie that the conduct was ‘so connected with authorised acts that it may be regarded as a mode – although an improper modes – of doing them’. In my opinion, the conduct of Mr Chaloner satisfies each of them:

· Mr Chaloner’s conduct was so closely connected with his responsibilities as to be in the course of his employment. ([85] per Gleeson CJ).

· The conduct of Mr Chaloner was the “doing of an authorised act in an unauthorised way” and vicarious liability can be justified “on the basis of ostensible authority” (at [108] per Gaudron J and see at [130]).

· There is here “a close connection between what was done and what that person was engaged to do” (at [131] per Gaudron J).

· The “identification of what [Mr Chaloner] was actually employed to do and held out as being employed to do” encompassed, relevantly, control over the services provided under the security contract by Mr Naidu (at [232] per Gummow and Hayne JJ).

· Mr Chaloner’s conduct “was done in the ostensible pursuit of the employer’s business or the apparent execution of the authority which the employer held out the employee as having” (at [239] per Gummow and Hayne JJ).

· There was a “sufficiently close connection” between the conduct which was not authorised and the acts which were authorised (see at [315] per Kirby J).

89 Notwithstanding the difficulties that sometimes attend the traditional formulation – the “course of employment” – it is, in my opinion, quite clear that the relationship between Mr Chaloner and Nationwide News was such that most all of his conduct with respect to Mr Naidu did fall within the course of employment and, accordingly, Nationwide News was vicariously liable for his conduct.

Liability of ISS

90 In the case of ISS it cannot be said that Mr Chaloner was the company. The issue is one of vicarious liability. Imposing liability upon ISS for the conduct of Mr Chaloner raises issues of policy and principle of a kind discussed in the joint judgment in Hollis v Vabu Pty Ltd [2001] HCA 44; (2001) 207 CLR 21 at [32]- [45], notably the emphasis given to the element of control which, in part, explained the traditional differentiation between the position of an employee and of an independent contractor.

91 In the present case, ISS clearly acquiesced in placing Mr Naidu under the direct supervision and authority of Mr Chaloner. Nevertheless, this was in the context in which he was administering a contract on behalf of Nationwide News. ISS had no element of control over Mr Chaloner. His conduct was not closely connected with anything he could be said to be doing for or on behalf of ISS. It should not be fixed with vicarious liability for his conduct.

92 In my opinion, the appeal of ISS should be allowed.

93 I agree with the orders proposed by Basten JA.

94 BEAZLEY JA: The first respondent in both appeals, Devandar Naidu, (Mr Naidu) was a security guard employed by ISS Security Pty Limited (ISS Security), the appellant in CA 40198/06. Mr Naidu’s services were made available to Nationwide News Pty Limited (Nationwide News), the appellant in CA 40182/06, pursuant to a contract between ISS Security and Nationwide News. In 1997, Mr Naidu suffered from a psychiatric injury in the form of Post Traumatic Stress Disorder, depression and anxiety, which he contends was directly caused by the humiliating and harassing treatment to which he was subjected by Nationwide News’ Fire and Safety Officer, Mr Chaloner, whilst providing security services at Nationwide News’ premises.

95 Mr Naidu brought proceedings against both Nationwide News and ISS Security. In his final pleading against Nationwide News, Mr Naidu pleaded both that Nationwide News had breached its duty of care to him and had committed a number of intentional torts. The duty was framed in terms that Mr Naidu was “the pro hac vice [for this occasion] servant of [Nationwide News]” and as such, it had a duty to him to provide a safe system of work. A number of intentional wrongs were also particularised, including assault and battery. As against ISS Security, Mr Naidu pleaded breach of its duty to him as its employee to provide him with a safe system of work. It also alleged breach of his contract of employment and in particular, a breach of certain implied terms of that contract.

96 Justice Adams heard Mr Naidu’s claim. His Honour held that Nationwide News and ISS Security each owed and each had breached a duty of care to Mr Naidu. His Honour also held that ISS Security had breached its contract of employment with Mr Naidu. His Honour awarded Mr Naidu damages for economic and non-economic loss. He ordered Nationwide News to pay exemplary damages to Mr Naidu in the sum of $150,000.

97 His Honour ordered judgment against Nationwide News in the sum of $1,946,189.40, determined that the provisions of s 151Z of the Workers Compensation Act 1987 (NSW) (the Workers Compensation Act) applied and in accordance with the requirements of that section, ordered that there be judgment against ISS Security in the sum of $1,767,050.56.

98 His Honour determined that liability between ISS Security and Nationwide News be apportioned; 35 per cent to ISS Security and 65 per cent to Nationwide News (to be applied to the award of damages against each respectively).

The appeal

99 Nationwide News contends that it did not owe a duty of care to Mr Naidu or, if it did, it did not breach that duty. In particular, it alleges that in the circumstances of this case there was no reasonably foreseeable risk of psychiatric injury. Both of those challenges were advanced through a number of grounds of appeal, including his Honour’s acceptance of the evidence of one witness over another. There is also a challenge to his Honour’s award of damages and to his finding of contribution.

100 ISS Security also contends that there was no reasonably foreseeable risk of psychiatric injury to Mr Naidu.

Specific issues on the appeal:

101 The specific issues raised by Nationwide News may be summarised as follows:

1. whether the judgment of Adams J was appellably flawed because: first, it was attended by such delay that his Honour could not produce a proper judgment in circumstances where critical factual findings depended upon credit findings; secondly, the reasons for judgment were inadequate; and thirdly, because the fact findings were themselves attended by error;

2. whether his Honour erred in granting an extension of the limitation period (the limitation issue);

3. whether the conduct of Mr Chaloner could be attributed to Nationwide News (the direct liability issue) or alternatively, whether Nationwide News was vicariously liable for the acts of its employee, Mr Chaloner (the vicarious liability issue);

4. whether his Honour erred in finding that Nationwide News was estopped from denying that Mr Chaloner was acting as its servant or agent in respect of the acts complained of (the estoppel issue);

5. whether his Honour erred in finding that the workplace abuse caused Mr Naidu’s psychiatric injury (the causation issue);

6. whether his Honour erred in awarding exemplary damages;

7. whether his Honour erred in apportioning liability in the proportions of 65 per cent to Nationwide News and 35 per cent to ISS Security (the apportionment issue);

8. whether his Honour erred in his assessment of the various heads of damages (the damages issue); and

9. whether his Honour erred in awarding indemnity costs (the indemnity costs issue).

102 The specific issues raised by ISS Security were:

1. whether his Honour erred in accepting Mr Naidu’s evidence as reliable (the fact finding issue);

2. whether his Honour erred in finding that there was a foreseeable risk of psychiatric injury (the foreseeability issue);

3. whether his Honour erred in finding that ISS Security was estopped from denying that Mr Chaloner was acting as its servant or agent in respect of the acts complained of (the estoppel issue);

4. whether his Honour erred in finding breach of duty;

5. the causation issue;

6. the contract issue;

7. the apportionment issue; and

8. The limitations issue.

103 To the extent that the issues raise common matters of fact or principle, they will be dealt with together, but I will otherwise deal with the grounds raised in the order set out above.

Background facts

104 The background facts in this matter, although lengthy, are substantially not in dispute. Accordingly, I will draw directly upon Adams J’s judgment for the purposes of explaining the facts insofar as they are relevant to the issues on the appeal: Naidu v Group 4 Securitas Pty Ltd & Anor [2005] NSWSC 618. Where necessary, I will also refer to additional material in the evidence. The factual background as reviewed below should be understood in the context that the trial judge accepted Mr Naidu’s evidence of the treatment he received at the hands of Mr Chaloner, but did not accept in totality the complaints he said he had made to his employer in respect of that conduct.

105 It is convenient at this stage to record the statement made on behalf of Nationwide News during the course of final submissions, in respect of Mr Chaloner, who did not give evidence:

“[Nationwide] News does not seek to defend or in any way excuse Mr Chaloner's conduct, which is indefensible and outrageous. The cornerstone of our [defence] is, once we found out about it, we immediately terminated him.” (Judgment [4])

106 Notwithstanding this admission, Nationwide News denied that it was vicariously liable for his conduct.

107 Mr Naidu was a Fijian national who came to Australia in 1982. He married in Australia and has two children. He had a number of different jobs in Australia and then, after completing a security industry course, was employed by ISS Security as a security officer in March 1990. ISS Security had a contract with Nationwide News to provide 24 hour on-site security services at its premises at Surry Hills and Chullora. Mr Naidu, in the course of his employment with ISS Security, was required to perform security work at both sites, but mainly at Surry Hills. The security work essentially involved Mr Naidu checking the identity of persons entering the site, patrolling the building and generally ensuring the safety of Nationwide News’ personnel and premises. Mr Naidu received on-the-job training from more experienced security staff employed by ISS Security.

108 In about September or October 1990, Mr Naidu was promoted to the position of senior security officer and then, about three months later, to the position of leading hand. He was further promoted to the position of supervisor of the site, a position which he held jointly with two other supervisors.

109 Mr Naidu’s immediate supervisor at ISS Security was Mr Blinkworth. Mr Blinkworth was the liaison officer or manager for ISS Security and was responsible for the security provided to Nationwide News pursuant to the contractual arrangements between ISS Security and Nationwide News. Mr Blinkworth’s assistant, Mr Miles, also had a supervisory role in relation to Mr Naidu. However, Mr Naidu’s work was arranged in such a way that it was not necessary for Mr Naidu to attend ISS Security’s own premises and he in fact did not attend there until after the events with which these proceedings are concerned. Mr Blinkworth attended the Surry Hills premises monthly and was in weekly telephone contact (judgment [11]).

110 At Nationwide News, Mr Naidu worked under the direction of Mr Chaloner. Mr Chaloner arranged with ISS Security for Mr Naidu to act as his assistant and to report directly to him in respect of his duties. This was conveyed to Mr Naidu at a meeting with Mr Blinkworth and Mr Chaloner. At this time, Mr Naidu was given the title of Assistant Security and Fire Control Manager, News Limited. As part of his duties as Assistant Security and Fire Control Manager, Mr Naidu was required to prepare tender specifications relating to fire protection and security systems. In order to undertake this work, he needed access to a computer which was located in Mr Chaloner’s office.

111 The trial judge held, at [10] that Mr Naidu was placed in the

“... charge of Mr Chaloner as his subordinate whatever the formalities [of his employment, Nationwide News] took over, on its own behalf, and as agent for [ISS Security], at least joint responsibility for the course, content and character of [Mr Naidu's] employment.”

112 His Honour, after reviewing all of the evidence, reiterated this finding at [177], where he said:

“The overwhelming evidence about Mr Chaloner's manner of operating and managing his relations with sub-contractors is consistent with [Mr Naidu’s] description of his position (quite apart from the question of abuse) as subordinate to Mr Chaloner.”

113 His Honour concluded that whatever the formal contractual arrangements between ISS Security and Nationwide News, Mr Naidu

“... was controlled and supervised and subject to the day-to-day directions of Mr Chaloner as though he were his assistant and a [Nationwide] News employee. Moreover, this was known to be the real situation both by [ISS Security], through Mr Blinkworth, and [Nationwide] News, through Mr Paine.”

114 There was other evidence relevant to the control that Mr Chaloner had over the employment conditions, not only of Mr Naidu, but of ISS Security employees generally. Mr Paine, who was News Limited’s National Properties and Administration Manager and third in the chain of management hierarchy at News Limited, gave evidence of the relationship between ISS Security and Nationwide News. He explained that ISS Security provided a total security service for Nationwide News, including, but not limited to, the provision of staff. The service included security assessments and workplace inspections, which included advice as to appropriate electronic surveillance equipment and the like. Nationwide News paid ISS Security monthly on invoice. He said that Mr Chaloner had the responsibility for negotiating the annual contract costs.

115 Mr Paine said that Mr Chaloner negotiated the salary levels of all of the guards and all of the services to be provided and that that information would be presented to him on an annual basis as part of Nationwide News’ budgetary process. Mr Paine explained that salaries for individual security guards provided by ISS Security were not negotiated, but rather the salary levels for specific positions were negotiated. He said, however, that once Mr Naidu had progressed through the obvious levels relevant to the position of security guard (for example security guard, senior security guard or supervisor) and became a site manager, his specific salary was the subject of negotiation by Mr Chaloner on behalf of Nationwide News.

116 Mr Chaloner’s misconduct occurred both inside and outside the workplace. The trial judge found that Mr Chaloner created a structure of oppression that was built on the power that his position with both Nationwide News and ISS Security gave him over the nature and course of Mr Naidu’s employment (judgment [19]).

117 The abuse to which Mr Naidu was subjected in the workplace may be briefly outlined. The abuse commenced at about Easter 1992, when Mr Chaloner “offered” Mr Naidu the building services of some of Mr Chaloner’s relatives to build a house that Mr Naidu was contemplating constructing on land that he owned on the Central Coast. Mr Chaloner made it clear to Mr Naidu that the offer was not to be refused, and that Mr Naidu was to give him sufficient funds to pay for the work. In a telephone conversation with Mr Chaloner, Mr Naidu refused the offer. Mr Chaloner then abused Mr Naidu with extreme racist language and threatened that he would have him transferred from his job. He threatened that he would ensure that Mr Naidu did not get work anywhere in New South Wales in the security industry. He also threatened him with the words “[I] will do [you]” (judgment [22]). Mr Naidu believed these threats and was frightened by them, particularly by the threat of physical harm.

118 When Mr Naidu next saw Mr Chaloner at work, Mr Chaloner physically abused him and repeated that he would have him transferred, and it appears, asserted that he had spoken to Mr Deegan, who was Mr Chaloner’s superior and also a director of ISS Security.

119 Mr Chaloner threatened he would “do” Mr Naidu on other occasions and had once punched a hole in a wall, saying, “this is what I'm going to do to you” (judgment [24]). Mr Naidu’s overall evidence was that Mr Chaloner spoke to him in an aggressive and physically threatening way (judgment [28]).

120 Following the specific occasion referred to in [25] above, Mr Naidu contacted Mr Blinkworth to ask why Mr Chaloner was having him transferred and asked what was happening. Mr Naidu did not, at that time, inform Mr Blinkworth of the abuse. Mr Blinkworth told Mr Naidu that he did not know anything about a transfer and that he would discuss the matter with Mr Deegan. Mr Deegan contacted Mr Naidu and told him to stay at Nationwide News, as Mr Chaloner had not spoken to him and he knew nothing about any suggested transfer. The communication to Mr Deegan came to the attention of Mr Chaloner, who again abused Mr Naidu, and reminded him that he was not allowed to contact any one except him.

121 Mr Naidu went to his own office in an extremely upset state and contacted Mr Blinkworth. He told Mr Blinkworth about Mr Chaloner's demand concerning the building of the house. Mr Blinkworth stated that he would speak to Mr Deegan and they would sort the matter out. Again, Mr Chaloner became aware of this communication and once more directed Mr Naidu that he was not allowed to talk to anyone except him.

122 Mr Deegan again contacted Mr Naidu directly and told him that the client, Nationwide News, wanted his services and to “hang in there” (judgment [24]).

123 Mr Naidu said that after this incident, Mr Chaloner always appeared very angry with him and was consistently abusive, using racist taunts. He also said that Mr Chaloner continued to threaten him physically, using the phrase “I will do you”; that he would kick chairs and throw things; and that he told Mr Naidu that if he ever left, he would never have another job and that he “would never be able to walk” (judgment [28]).

124 Mr Chaloner was described in the evidence as a big man who had a black belt in martial arts and had been a boxer (judgment [41]). Mr Naidu said that sometimes the abuse would occur in the presence of other ISS Security officers, including two named supervisors, Terry O'Dwyer and Fred Jones, a senior officer Stuart Windham, and a number of other security officers (judgment [29]). The abuse also extended to abusive comments about Mr Naidu’s wife. Mr Naidu also said that Mr Chaloner could be “very very nice” especially when he wanted something done, and that his mood was very changeable (judgment [31]).

125 Mr Naidu said that he complained to Mr Blinkworth about Mr Chaloner’s abusive conduct on a regular basis. However, he became aware from Mr Blinkworth that Mr Chaloner was, in effect, threatening Mr Blinkworth with loss of the contract if Mr Chaloner's demands were not met. Mr Naidu understood that the contract was worth close to $1m a year to ISS Security (judgment [30]). The nature and extent of the complaints made by Mr Naidu are the subject of a substantially adverse finding against Mr Naidu which I discuss below.

126 Mr Chaloner also required Mr Naidu to work extremely long hours. His official work hours were 7am to 4pm. However, he usually finished between 10 and 11pm. This became particularly onerous when Mr Naidu moved to the Central Coast and commuted to work in Sydney. In order to arrive at work at 7am, Mr Naidu caught his train at about 4.30am and if he did not finish work until 11pm, he would not arrive home until some time after 1am. Mr Chaloner also required Mr Naidu to work a 12 hour shift on Sundays. Mr Naidu said that although he recorded the additional hours that he worked, he was never paid for those hours.

127 Mr Naidu said he complained about this to Mr Blinkworth who, apparently after having spoken to Mr Chaloner, informed Mr Naidu that Mr Chaloner wanted him to do those hours and that Mr Chaloner was the customer. Mr Blinkworth asked Mr Naidu to “hang on there” for the sake of the contract (judgment [32]). In 1995, ISS Security made a vehicle available to Mr Naidu to relieve the travelling pressure he was under because of his long hours. Mr Naidu gave evidence that up until that time, he was always very tired, that he would frequently cry on the train on the way home, that he did not see his children and that his long working hours caused arguments at home. His marriage eventually broke down and his Honour accepted that this was because of the conditions under which Mr Naidu was required to work (both in terms of the abuse and his long hours) and the effect this had on him.

128 Mr Chaloner directed other controlling and bizarre behaviour towards Mr Naidu. Mr Naidu was required to seek permission from him to go to the toilet; Mr Chaloner would hide Mr Naidu's files; he would throw files on the floor and make Mr Naidu pick them up in front of others (judgment [34]-[37]). The abusive and racist taunts continued in numerous other work situations (judgment [40]). Mr Chaloner, at one stage, also engaged in behaviour towards Mr Naidu of a sexually harassing or confronting kind (judgment [41]).

129 On another occasion, Mr Chaloner only permitted Mr Naidu to have three days off work to travel to Fiji when his mother was ill and refused him an extension of this period. When he returned to work, Mr Chaloner immediately required Mr Naidu to work on Mr Chaloner’s property (a matter which is discussed further below).

130 In February 1996, Mr Naidu was involved in a motor vehicle accident and was hospitalised. Mr Chaloner demanded that he return to work the morning after his release from hospital, notwithstanding that he was not well enough to do so. Mr Naidu complained to Mr Blinkworth, who again prevailed upon him to accede to Mr Chaloner’s requests, because Mr Chaloner was giving ISS Security “a very hard time”.

131 There were other specific instances of misconduct. In 1993, Mr Chaloner tried to have Mr Naidu enter into a new salary package which was for less than he was currently receiving and also less than other security officers were being paid. When Mr Naidu refused to sign the new contract Mr Chaloner was abusive to Mr Naidu (judgment [38]). When Mr Naidu went for a holiday to Fiji in 1995 with his family, Mr Chaloner required that he ring daily to see if there was any issue that needed to be discussed. This required Mr Naidu driving 15km to an available telephone (judgment [46]). When he returned from Fiji, Mr Chaloner required Mr Naidu to return to work a day before his holiday period expired. Mr Naidu protested and said he also complained to Mr Blinkworth, but Mr Blinkworth prevailed upon him to comply with the request.

132 Mr Chaloner's abuse of Mr Naidu outside the workplace essentially revolved around requiring Mr Naidu to perform building work at Mr Chaloner’s home on Saturdays and Sundays and on occasions, during work time. The request was first made during one of Mr Naidu’s holiday periods and was initially made under a ruse that Mr Chaloner wanted to speak to Mr Naidu about work matters. For the most part, Mr Naidu was requested to work on weekends, but it sometimes extended to the working week. Mr Chaloner told Mr Naidu that he had obtained the approval of Mr Paine to have Mr Naidu work for him, provided that it did not interfere with his work. What then happened was that on the occasions that Mr Naidu was required to work on Mr Chaloner's residence during the working week, he was still required to keep up with his normal work.

133 Mr Chaloner was often abusive to Mr Naidu when he undertook physical work at Mr Chaloner’s residence, such as mixing cement and pushing wheelbarrows and the like. He was also insulting about Mr Naidu’s wife (judgment [29]).

134 Mr Naidu said that he did the work on Mr Chaloner's residence because Mr Chaloner abused and threatened him with physical violence and the loss of his job (judgment [50]). Mr Naidu complained to Mr Blinkworth about being required to work at Mr Chaloner’s property and Mr Blinkworth said that he would speak to Mr Chaloner. However, Mr Blinkworth’s response to Mr Naidu was to request him to “hang in there”, because of ISS Security’s contract.

135 Mr Naidu was often tearful, both at work and away from work, during this period. By late August or September 1996, he started to feel ill, with headaches, poor appetite and nausea. He was scared and did not wish to go to work or to see or hear Mr Chaloner. His concentration was impaired and he found it difficult to keep his mind on his job. He was depressed, felt enervated and at times suicidal. Prior to commencing work with Mr Chaloner, Mr Naidu considered himself to be a happy person who got on well with those around him and who liked socialising with family and friends (judgment [72]).

136 Mr Naidu tape-recorded a conversation with Mr Blinkworth that occurred in February 1996. That conversation mainly dealt with Mr Chaloner’s demands that Mr Naidu return to work almost immediately after his motor vehicle accident. In that conversation, Mr Blinkworth stated that he understood Mr Naidu’s position, but added, “I can't do much, as you know” (judgment [123]). Mr Naidu complained, in this conversation, of some of Mr Chaloner’s offensive language, but his Honour found at [123]:

“... that language is really by way of emphasis rather then being insulting and, perhaps as significant, involves no vilification or, indeed, any demeaning language.”

137 Mr Naidu also informed Mr Blinkworth in this conversation that Mr Chaloner had threatened that he could stop Mr Naidu’s salary at any time. His Honour considered that Mr Chaloner’s demand that he return to work was unreasonable and that his statement that it was he (or implicitly, Nationwide News) that was paying his salary was an inaccurate statement as to Mr Naidu’s employment position. However, his Honour was not satisfied that this complaint included any hint of insult or offence (judgment [123]).

138 This extraordinary period of abuse and bullying came to an end in late 1996, after complaints of sexual harassment were made against Mr Chaloner by two female employees to the Anti-Discrimination Board. One employee was a supervisor, the other was engaged as Mr Chaloner’s secretary and had been present on many occasions when Mr Chaloner had abused Mr Naidu. Mr Chaloner’s conduct became the subject of an investigation by Nationwide News.

139 The Human Resources Manager for Nationwide News, Sandra McDiarmid, interviewed Mr Naidu as to his knowledge of the complaints of sexual harassment. Ms McDiarmid informed Mr Naidu that other interviewees had also mentioned that he had been the subject of abusive treatment from Mr Chaloner. Mr Naidu informed her of some of Mr Chaloner's conduct. It appears that Ms McDiarmid was so distressed by the complaints that she became tearful (judgment [60]-[69]).

140 Mr Chaloner’s employment with Nationwide News was terminated in January 1997.

141 Mr Naidu became unfit for work in mid-1997 for a period of about a month. He eventually ceased work altogether in February 1998 and his employment with ISS Security was terminated on 9 November 1998 because of his medical condition which had caused him to be absent from work for more than six months. Mr Naidu was informed that if he was certified fit to resume work in the following two years, ISS Security would be pleased to re-employ him.

142 Mr Naidu had other significant stressors during this period that were unassociated with his employment, but which sometimes had work implications. Reference has already been made to his mother’s illness in July 1995, when Mr Naidu was required to return to work before the end of his leave. Earlier, in 1992, Mr Naidu’s wife had a miscarriage. Mr Naidu wished to pick her up from the hospital, but was initially refused permission to leave work to do so. Mr Blinkworth (apparently fortuitously) was at the Nationwide News premises and when Mr Naidu explained his position, Mr Blinkworth permitted Mr Naidu to leave work. Mrs Naidu, however, had already caught a taxi home from the hospital. Mr Naidu said that Mr Blinkworth later told him that Mr Chaloner was “ropable” that he had left work and not to take any more time off.

143 In December 1996, there was a fire in one of the bedrooms of Mr Naidu’s home after a forced entry through the back door. About one week before that, Mr Naidu had been informed by one of the other security officers that they had received a phone call at work at Nationwide News’ premises, telling them to inform Mr Naidu that he would “not live long”. About a week and a half earlier, some shots, possibly from an air rifle, had been fired at Mr Naidu’s home. Mr Naidu was at work at the time and was not given permission to go home.

144 Another significant stressor occurred when Mr Naidu’s aunt was killed in a violent incident in Fiji.

Evidence of knowledge of Mr Chaloner's behaviour

145 There was evidence that various personnel of both ISS Security and Nationwide News observed Mr Chaloner's behaviour towards Mr Naidu and/or Mr Naidu's reaction to his behaviour. In particular, Haitham Kamaledine, who was project coordinator in Nationwide News’ National Properties Section, observed Mr Chaloner’s conduct towards Mr Naidu, both at Nationwide News’ premises and at Mr Chaloner’s residence. He said that he frequently heard Mr Chaloner’s abuse of Mr Naidu and described the tone of voice in which he spoke as “aggressive” (judgment [96]).

146 Mr Kamaledine said that other people were around on occasions when this conduct occurred, including Mr O'Dwyer and Mr Jones, who were supervisors employed by ISS Security, as well as his own secretary and other staff in Nationwide News’ purchasing department (judgment [96]). On one occasion, in the middle of 1995, Mr Kamaledine heard Mr Chaloner racially abusing Mr Naidu and observed that Mr Naidu was “in tears” and “was horrified and looked very scared” (judgment [95]). He reported what he had seen to Mr Paine, who responded “leave it with me, I’ll see what I can do” (judgment [95]).

147 Mr Kamaledine described Mr Chaloner’s conduct generally in the workplace as being aggressive and he had observed him throw furniture around on several occasions (judgment [99]). He had observed a staff member in tears (being one of the staff members who eventually lodged a sexual harassment complaint against Mr Chaloner) leaving Mr Chaloner's office. This staff member said that she had just been abused by Mr Chaloner, but asked Mr Kamaledine not to do anything about it.

148 Mr Kamaledine observed Mr Naidu change over the years of his employment from being “enthusiastic, honest, dedicated, reliable, sincere and ... sensitive” to becoming progressively more quiet and it seemed to him, depressed. He said that he observed Mr Naidu “always in tears” from about mid-1995 onwards (judgment [103]).

149 Mr Kamaledine himself had been the subject of serious racial abuse at the hands of Mr Chaloner. On one occasion, Mr Deegan witnessed this. On that occasion, Mr Chaloner greeted him with the words “Hey camel driver, where have you parked your camel downstairs?” Mr Kamaledine said that Mr Deegan just laughed this off.

150 There was evidence from a number of security officers employed by ISS Security at Nationwide News’ premises who also observed Mr Chaloner's abusive conduct towards Mr Naidu. In addition, other contractors who worked at Nationwide News’ premises corroborated Mr Naidu's evidence. The most senior of the ISS Security personnel appears to have been Mr Windham, who was the security controller for ISS Security who worked with Mr Naidu and who considered that Mr Chaloner was his “overall boss”. A statement made by Mr Windham was admitted into evidence, although he was not called as a witness.

151 In that statement, Mr Windham referred to constant racial and abusive taunts towards Mr Naidu. He also said that he witnessed physical threats being made by Mr Chaloner to Mr Naidu and generally described Mr Chaloner’s treatment of Mr Naidu as “always putting him down and ordering him about” (judgment [119]). He said that on one occasion, both he and Mr Naidu had been threatened by Mr Chaloner with the loss of their jobs. His Honour found that Mr Windham believed that Mr Chaloner could make good this threat.

152 Mr Windham said that the security staff had complained to their own management (in the early days when the company was called TNT) about the treatment that they received from Mr Chaloner, but nothing was done about it. He said “[t]he difficulty was Chaloner was a customer and, I suppose in their eyes, the customer is always right” (judgment 119]). He said that the staff knew that they “had to take the treatment dished out by Chaloner as we wanted to keep our jobs”.

153 As I understand his Honour’s reasons, his Honour accepted that complaints were made to ISS Security management, but not that they included complaints of Mr Chaloner’s conduct towards Mr Naidu as an individual and in particular, did not accept that this part of Mr Windham’s statement meant that the vilification and demeaning conduct towards Mr Naidu was part of the complaints that were made (judgment [119]).

154 Mr Windham also asserted in his statement that in about May 1996, he complained to Mr Blinkworth and to Mr Miles about Mr Chaloner’s conduct in demoting him, and at the same time, complained about the way Mr Chaloner treated the security personnel on site, including both himself and Mr Naidu. Mr Blinkworth denied this conversation and Mr Miles was not called to give evidence. The trial judge found that as Mr Windham had not been called to give evidence and he had not thereby been able to assess his demeanour, he was not inclined to disbelieve Mr Blinkworth’s denial of the conversation (judgment [160]).

Trial judge’s findings as to complaints made to Mr Blinkworth

155 The trial judge found, at [92], that Mr Naidu

“... complained from time to time to Mr Blinkworth about Mr Chaloner’s unreasonable demands and the amount of direct management control he was exercising over [Mr Naidu's] own responsibilities on behalf of [ISS Security].”

156 His Honour rejected Mr Naidu’s evidence that he complained to Mr Blinkworth about Mr Chaloner's misconduct. In this regard, he accepted Mr Blinkworth’s evidence in preference to the evidence of Mr Naidu. His Honour accepted, however, that it was probable that Mr Naidu mentioned to Mr Blinkworth that Mr Chaloner had insulted or demeaned him in some way.

157 His Honour was not satisfied that such occasional complaint would, or should, have conveyed to Mr Blinkworth

“... any real indication of misconduct (which he should have taken further in the sense of an investigation rather than a merely emollient response) amounting to notice that action was or should have been required.” (judgment [93])

158 In particular, his Honour was of the opinion that such complaints that were made would not have brought to Mr Blinkworth’s attention the fact that “any racial or discriminatory harassment was occurring”. His Honour was not satisfied, therefore, “that Mr Blinkworth was aware of any racial slurs or harmfully demeaning conduct”.

Evidence of Mr Paine

159 Stephen Paine, the Properties and Administration Manager for Nationwide News and News Limited, was the third most senior person in its executive management, and Mr Chaloner’s direct superior (judgment [163]). He saw Mr Naidu on a daily basis and sometimes several times during the day. He described the relationship between Mr Chaloner and Mr Naidu as being, to his observation, “not only close work colleagues but also friends” (judgment [164]). He had direct dealings with Mr Blinkworth about once every three months (judgment [166]). Mr Paine acknowledged that Mr Blinkworth had informed him that Mr Chaloner was “demanding, indeed very demanding” but said that he had never been informed that Mr Chaloner was either “unreasonable or intimidating” (judgment [177]).

160 Mr Paine gave evidence as to the nature of the work relationship between Mr Chaloner and ISS security staff, including Mr Naidu. Mr Paine said that Mr Naidu was never Mr Chaloner’s assistant. However, Mr Paine conceded that over a lengthy period, where two entities had joint responsibilities, a closer and more detailed form of management of the contract was likely to develop (judgment [176]).

161 Mr Paine gave evidence that Nationwide News had an anti-discrimination policy, which was not limited to Nationwide News’ employees, but extended to anyone engaged to work at Nationwide News’ premises. He said that Mr Chaloner had attended seminars conducted by Nationwide News in relation to these matters and said that he himself had attended one with Mr Chaloner at some time in the mid-1990s (judgment [168]).

162 Mr Paine denied that Mr Kamaledine informed him about racist slurs made by Mr Chaloner to Mr Naidu. His Honour held, at [182] that Mr Kamaledine’s evidence should be accepted in preference to the evidence of Mr Paine on this point. This finding is the subject of challenge by Nationwide News and I will return to it.

Nationwide News’ anti-discrimination policy

163 Nationwide News had in place a written policy dealing with any form of harassment. The policy commenced with a statement that News Corporation Limited, its subsidiaries and affiliates (which include Nationwide News):

“... maintains a strong policy of equal employment opportunities for all employees and applicants for employment ...

Our equal employment opportunity philosophy applies to all aspects of employment with the Company, including but not limited to recruiting, hiring, training, transfer, promotion, employee benefits and compensation ...

The Company is committed to adhering to and enforcing its obligations under applicable non-discrimination laws ... All managers and employees are expected to help implement the Company’s goals with regard to equal opportunity employment.”

Under the heading “Sexual Harassment”, the following appeared:

“The Company opposes harassment of others for any reason whatsoever, including sex, age, race, color [sic], national origin ... making ‘jokes’ about ethnic or other groups, and other verbal, physical and visual behaviour.

It is the policy of the Company ... to provide a non-discriminatory work environment free of intimidation and sexual harassment. All employees are expected to cooperate in maintaining this work environment.

...

It is the Company's policy to thoroughly investigate and remedy any known incidents of sexual harassment.”

There followed further statements about sexual harassment and a specified complaint procedure for responding to sexual harassment claims.

First issue

Delay in giving judgment/failure to give reasons

164 The hearing in this matter commenced on 24 May 2004 and continued on successive days until 10 June 2004. His Honour delivered judgment on liability on 24 June 2005. His Honour also assessed the various heads of damage in that judgment, but did not make an award of damages at that stage, as there were a number of matters relevant to the final determination of damages that needed further attention, including the effect of s 151Z of the Workers Compensation Act. The matter was then stood over for the assessment of damages and final judgment was delivered on 15 March 2006: Naidu v Group 4 Securitas Pty Ltd & Anor [2006] NSWSC 144; (2006) 150 IR 203 (the second judgment).

165 Mr Naidu gave evidence over the first four days of the hearing. Mr Kamaledine gave evidence on the fourth day and again on the 12th day. Mr Paine gave evidence on 9 June 2004, being the 13th day of the trial. As I have indicated, judgment was delivered on 24 June 2005.

166 Nationwide News submitted that the delay between the taking of the critical evidence of Mr Kamaledine and Mr Paine, and the giving of judgment, was such that his Honour was not able to properly assess their evidence. The resolution of the conflict in their evidence was an essential aspect of the case and on one approach, could have been determinative of Nationwide News’ liability. It was submitted, therefore, that the delay was such that his Honour could “no longer produce a proper judgment”: Boodhoo and another v Attorney General of Trinidad and Tobago [2004] UKPC 17; [2004] 1 WLR 1689 at 1694-1695 [11]- [12].

167 This submission was related to a further submission that his Honour, in any event, failed to give adequate reasons as to why he preferred Mr Kamaledine’s evidence. It was submitted that in cases where there is no delay, an appellate court may more readily overlook a paucity in a trial judge’s reasons, particularly in respect of credit findings. However, where there has been a significant delay, a trial judge is required to state clearly why the evidence of a particular witness has been preferred: Hadid v Redpath [2001] NSWCA 416 at [34] and [53].

168 There has been a body of judicial comment over the last 15 years about the consequences of delay in delivering judgments. These cases were ‘collected’ by this Court in Hadid v Redpath in the judgment of Heydon JA (as his Honour then was). Relevantly, for present purposes, those cases have held that the usual advantage enjoyed by a trial judge in relation to findings of fact based upon credit may be lost when there is a substantial delay in delivering judgment, so that the trial judge’s findings of fact must be looked at with special care: Goose v Wilson Sandford and Co (1998) 142 SJLB 92. It has also been held that a significant delay requires “a more comprehensive statement of the relevant evidence than would normally be required, in order to manifest, for the parties and the public, that the delay has not affected the decision”: R v Maxwell (1998) 217 ALR 452 at 463. See also Moylan & Ors v The Nutrasweet Co [2000] NSWCA 337.

169 In Hadid v Redpath Heydon JA, at [53], explained that:

“To ‘prefer’ one item over another is to reach a comparative conclusion after weighing the merits and demerits of each. An evaluation of the merits of a conclusion of preference depends on what reasons it rested on.”

It was held in that case that the trial judge had failed to explain why she had reached the conclusion she had in preferring the evidence of one witness over another. Nor had the trial judge set out her analysis of the evidence of the respective witnesses, including the manner in which that evidence was affected by entries in a log book. The Court held that the gaps in the trial judge’s reasons for judgment involved appealable error.

170 Senior counsel for Nationwide News approached his argument on appeal by first referring the Court to his Honour’s factual findings, which extended over 90 pages of the judgment. This was an appropriate and useful course for an understanding of the case, but also by happenstance revealed that the trial judge, in respect of every witness, had engaged in a detailed recounting of the evidence and where necessary, indicated what evidence he accepted and explained why he accepted some, or all of a particular witness’ evidence, including the evidence of Mr Naidu.

171 When Nationwide News’ submission was properly analysed, senior counsel’s only complaint in relation to the primary fact finding was in relation to his Honour’s preference for Mr Kamaledine’s evidence relating to the conversation that he said he had with Mr Paine, in which he reported Mr Chaloner’s abusive conduct. It will be recalled that Mr Paine denied there was any such conversation. Because of the importance of his Honour's preference for Mr Kamaledine’s evidence as to the occurrence of this critical conversation with Mr Paine, it is necessary to refer to his Honour's reasoning process in some detail.

172 His Honour recorded, at [178], that he had carefully re-read the evidence of both witnesses on this question. He recorded his impression of the witnesses that he formed at the time they gave their evidence and said, “[e]ach was, considered alone, quite convincing” (judgment [178]). His Honour noted that each was giving evidence about occurrences of many years previously and that in different ways each had an interest in giving his particular version. In Mr Kamaledine’s case, he was friendly towards Mr Naidu and knew that he ought to have said something to Mr Chaloner’s superior about Mr Chaloner's conduct. Further, he had himself been abused by Mr Chaloner, who had called him a “camel driver”, a reference to Mr Kamaledine’s ethnic origins. For his part, Mr Paine was Mr Chaloner's superior and an omission to take appropriate action in respect of a complaint of wrongful conduct could be regarded as a serious failure in management.

173 His Honour said at [179], that the conflict that he was seeking to resolve could not be determined by demeanour. He considered that both witnesses were forthright and accepted that each was attempting to give truthful evidence. His Honour observed that when evidence was being given of an event so long ago there was a risk of reconstruction. It was at this point that his Honour considered that Mr Kamaledine’s evidence was likely to be the more reliable of the two witnesses. In the first place, his Honour considered that it would have been a “big step” for Mr Kamaledine to report Mr Chaloner's conduct to an executive of Mr Paine's seniority. He considered that in this respect it was most unlikely that Mr Kamaledine’s evidence would suffer from reconstruction. However, his Honour also thought it was unlikely that Mr Paine would have forgotten a report to the effect that his immediate subordinate had racially abused the senior officer of a sub-contractor who worked on site.

174 His Honour considered it relevant to his assessment of the evidence of each that Mr Chaloner’s abusive conduct towards Mr Naidu was of such an habitual nature that it was difficult to accept without qualification Mr Paine's assertion that he was completely unaware of Mr Chaloner's frequent mode of addressing Mr Naidu, or of the racist attitude that underlay it. His Honour considered there were two possible explanations for Mr Paine’s failure to observe Mr Chaloner’s intimidatory conduct. Either Mr Chaloner was adept at concealing it, or Mr Paine was not alert to this type of behaviour. His Honour considered that the problem was a combination of both explanations.

175 His Honour concluded, at [182], that on balance, and with reservation, he accepted Mr Kamaledine’s evidence as more probably being the truth.

176 His Honour adequately explained why he preferred Mr Kamaledine’s evidence. As his Honour noted, the likelihood that Mr Kamaledine would remember reporting the incident, given Mr Paine’s seniority and the fact that he was making a complaint about his own superior, is likely to have been a significant matter to any employee. It was for that reason, coupled with the fact that Mr Kamaledine was himself racially abused, that his Honour considered the event was more likely to be correctly remembered by Mr Kamaledine than by Mr Paine.

177 In my opinion, no error has been shown in his Honour's reasoning process. Nor has any error been shown in the adequacy of his reasons. His Honour’s reasoning process is entirely transparent, so that not only his conclusion, but the manner in which he reached that conclusion, including the discarding of premises that were not the subject of evidence, are explicit. His Honour’s final determination is based upon his assessment of the way one person was likely to remember an event, as compared to another person. This is part of the legitimate process of fact finding.

178 In my opinion, these grounds of appeal should be rejected. In rejecting these grounds, I should add that I have not overlooked the principle and authorities that govern the obligation of a trial judge to give reasons and the content of that obligation: see Mifsud v Campbell (1991) 21 NSWLR 725; Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247; Beale v Government Insurance Office (1997) 48 NSWLR 430. For these reasons I have given in respect of delay, I consider the trial judge’s reasons were adequate.

The limitations issue: Nationwide News

179 His Honour accepted the evidence that Mr Naidu's psychiatric illness became evident in about November 1996 and his Honour found that that was the date upon which the limitation period commenced. This is not disputed by Nationwide News, who had been prepared to accept a later date of June 1997 as being the date on which the limitation period began to run.

180 Mr Naidu commenced these proceedings by the filing of a Statement of Claim on 20 March 2001. The relevant period of limitation for Mr Naidu’s claim in negligence against Nationwide News is three years: the Limitation Act 1969 (NSW) (the Limitation Act) s 18A. The limitation period for that claim thus expired in November 1999. The Court may grant an extension of time: ss 60C and 60E. Those sections provide, relevantly:

“60C Ordinary action (including surviving action)

(1) This section applies to a cause of action, founded on negligence, nuisance or breach of duty, for damages for personal injury ...

(2) If an application is made to a court by a person claiming to have a cause of action to which this section applies, the court, after hearing such of the persons likely to be affected by the application as it sees fit, may, if it decides that it is just and reasonable to do so, order that the limitation period for the cause of action be extended for such period, not exceeding 5 years, as it determines.

60E Matters to be considered by court

(1) In exercising the powers conferred on it by section 60C ... a court is to have regard to all the circumstances of the case, and (without affecting the generality of the foregoing), the court is, to the extent that they are relevant to the circumstances of the case, to have regard to the following:

(a) the length of and reasons for the delay,

(b) the extent to which, having regard to the delay, there is or may be prejudice to the defendant by reason that evidence that would have been available if the proceedings had been commenced within the limitation period is no longer available,

(c) the time at which the injury became known to the plaintiff,

(d) the time at which the nature and extent of the injury became known to the plaintiff,

(e) the time at which the plaintiff became aware of a connection between the injury and the defendant’s act or omission,

(f) any conduct of the defendant which induced the plaintiff to delay bringing the action,

(g) the steps (if any) taken by the plaintiff to obtain medical, legal or other expert advice and the nature of any such advice the plaintiff may have received,

(h) the extent of the plaintiff’s injury or loss.”

181 The relevant limitation period in respect of the claim against ISS Security is also three years: s 151D of the Workers Compensation Act, unless the court grants leave to commence proceedings after that time.

182 Nationwide News contended that the trial judge erred in finding that it was just and reasonable to extend the limitation period. Both at trial and on appeal, it relied on the loss of Mr Chaloner’s employment history and file. I will return to the relevance of that file shortly. First, it is convenient to consider the approach that his Honour took to the limitation question.

183 His Honour observed that the question for determination under both s 60C of the Limitation Act and s 151D of the Workers Compensation Act was whether it was just and reasonable to extend the limitation period (judgment [259]). That is the correct test under the Limitation Act. I will deal with the test under s 151D later in these reasons. In determining that question, his Honour first looked at the question of delay. His Honour observed that the first complaint suggestive of psychiatric injury was made on 30 May 1997 to Dr Phadke, Mr Naidu’s general practitioner. Mr Naidu was then referred to Dr Butler, Consultant Psychiatrist, by Dr Phadke and had four consultations with Dr Butler between 6 and 23 June 1997. Dr Butler diagnosed that Mr Naidu was suffering from “a severe Major Depressive Episode which has been gradually worsening over at least the last few months”. His Honour considered that Mr Naidu could scarcely be taken to have known that he suffered from a psychiatric injury until Dr Butler’s report of 25 June 1997.

184 Dr Butler reported that Mr Naidu had put up with continual harassment and discrimination at work for quite a long time and considered that this was what eventually had caused him to become depressed. Dr Butler gave him one month off work at that time. Mr Naidu continued to see Dr Butler on a regular basis. In January 1998, Dr Butler reported that Mr Naidu’s depression had been going up and down, depending on how things were going at work. Dr Butler’s subsequent frequent reports continued to record Mr Naidu’s variable psychiatric condition, which at times became so severe that he was suicidal. PTSD was first diagnosed in about November 1998.

185 Mr Naidu was admitted to St John of God Hospital, Burwood, in December 1998. By September 1999, Mr Naidu was becoming more depressed and was losing control of his anger to such an extent that Dr Butler again arranged to have him admitted to St John of God Hospital. It will be recalled that the limitation period expired in November 1999. In early December 1999, Dr Butler reported that Mr Naidu still had persistent problems with feelings of depression, anxiety and anger. Mr Naidu had another admission to St John of God Hospital in April 2000.

186 His Honour concluded at [261], that the principal reason for delay in the commencement of proceedings was the time that it took for Mr Naidu’s psychiatric injury to become evident, notwithstanding that it had been inflicted at a much earlier point in time.

187 His Honour also considered that the evidence of Mr Carney of counsel and Mr Sparks, solicitor, supported the conclusion that delaying the commencement of proceedings until March 2001 was not unreasonable. Mr Carney had been first consulted by Mr Naidu in December 1997, when Mr Naidu sought advice as to whether he should sign a deed of release concerning the alleged misconduct of Mr Chaloner. Mr Carney believed at that stage that because Mr Naidu was still employed and was in receipt of workers compensation, such potential causes of action as he might have, either for workers compensation or “employment law issues”, had not arisen.

188 On 22 April 1998, there was a meeting between Mr Carney and the solicitors for Nationwide News, Minter Ellison. Mr Naidu, Mr Paine and Ms McDiarmid were in attendance (judgment [270]). The purpose of this meeting was to obtain Mr Naidu’s execution of the deed of release. Mr Naidu was not advised at this stage that he had a common law action, because Mr Carney did not think that he had any.

189 His Honour found that Nationwide News had investigated Mr Chaloner’s conduct prior to the commencement of proceedings, an inference he drew from the fact Nationwide News had attempted to have Mr Naidu sign the deed of release in late 1997. His Honour also considered it was likely that Nationwide News was aware, at least in general terms, of Mr Naidu’s medical condition and that in any event, no complaint was made by either Nationwide News or ISS Security that it was prejudiced by the delay in respect of the medical cases Nationwide News and ISS Security sought to bring (judgment [262]).

190 His Honour considered that Nationwide News and ISS Security had each placed Mr Naidu in the position where he was “under Mr Chaloner’s thumb and found it very difficult (in the result impossible ...) to make explicit complaints about his misconduct” (judgment [263]). His Honour also considered that ISS Security was able to identify the Nationwide News employees who may have known about Mr Chaloner’s conduct, so that the loss of Nationwide News’ records containing the allegations was not prejudicial.

191 In late 1999, Mr Naidu had a brief consultation with Mr Draca, the solicitor who commenced the proceedings for him. Mr Draca asked him to provide a detailed statement of his allegations of mistreatment. Mr Naidu provided this in about March 2000. Mr Draca wrote to ISS Security’s solicitors, advising that he had been retained to advise on Mr Naidu’s workers compensation rights, and requesting particulars. His Honour considered that it must have been obvious to ISS Security at that time that Mr Naidu might have also sought advice in respect of a common law claim (judgment [273]). In short, his Honour considered that both Nationwide News and ISS Security should have been aware of the risk of litigation at around this time.

192 Mr Draca undertook further investigations, obtaining medical reports and witness statements. He briefed counsel to advise. He first discussed the issue of a possible common law claim with Mr Naidu in January 2001. Mr Draca briefed senior counsel, first, in January 2001 and then different senior counsel in February 2001. The second briefed senior counsel advised that a Statement of Claim should be filed urgently and an application for extension of time should be made.

193 A significant problem at this time was Mr Naidu’s financial position as he could not afford to pay any substantial legal costs. His Honour considered that this was another reason the solicitors were entitled to move with a degree of circumspection in respect of the commencement of proceedings.

194 At judgment [278], his Honour observed that it was necessary to give due weight to the fundamental consideration that Mr Naidu’s causes of action (with the possible exception of the cause of action for negligence in respect of PTSD) had expired by the time he commenced the proceedings. His Honour considered that a number of factors were relevant in determining whether it was “just and reasonable” to extend the limitation period and that those matters were not limited to actual or potential prejudice in the conduct of the time-expired proceedings. In this regard, his Honour observed that the court was entitled to take into account the desirability that potential parties to litigation be entitled to organise their affairs on the basis that once claims had expired, their potential liability had come to an end; the public interest in the rapid settlement of disputes; and the fact that the legislature had recognised that there were cases where it was just and reasonable to extend a limitation period. Nonetheless, his Honour held that it was just and reasonable to extend the limitation period, or in the case of ISS Security, to grant leave to commence proceedings. His reasons for doing so were those which I have reviewed above, as well as the fact that Mr Naidu’s claim arose out of the conduct of Mr Chaloner, who was a senior employee of Nationwide News and who had the actual day-to-day supervision of Mr Naidu, to ISS Security’s knowledge and with its agreement.

195 Nationwide News contends that his Honour erred in extending the limitation period. First, it was submitted that his Honour asked himself the wrong question in focusing upon whether Mr Naidu was aware of his diagnosis. It was submitted that the correct test was whether he was aware of material facts giving rise to that diagnosis. Secondly, it submitted that his Honour failed to consider whether there was actual prejudice to Nationwide News. Thirdly, it was submitted that his Honour was in error in accepting the explanation for the delay as being sufficient.

196 As to the first of these matters, senior counsel for Nationwide News submitted that Mr Naidu was aware of the material facts upon which his cause of action was based well before the expiration of the limitation period. He referred the Court, inter alia, to the decision of this Court in FJ Walker Limited v Webber (Court of Appeal, 16 November 1989, unreported). That was a decision in which the provisions of s 58 of the Limitation Act were under consideration and which relates to the date of commencement of the limitation period. Here, his Honour determined a date that was more favourable than the date that Nationwide News itself proffered as being the date upon which the connection between Mr Naidu’s work conditions and his medical condition were known to him. The determination of that date was a matter within the province of his Honour’s evaluation of the facts and no error has been shown in the manner in which he approached that task.

197 Nationwide News further submitted it was entitled to rely on both actual and presumptive prejudice and that if actual prejudice was proved, it would be fatal to the application. Reliance was placed upon the well-known statement in Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1996) 186 CLR 541 at 555, where McHugh J said

“When actual prejudice of a significant kind is shown, it is hard to conclude that the legislature intended that the extension provision should trump the limitation period.” (Emphasis added)

198 In my opinion, his Honour clearly had regard to the presumptive prejudice that arose by reason of the expiration of the limitation period and asked himself the correct question as to whether it was just and reasonable to extend the limitation period.

199 The actual prejudice of which Nationwide News complained was the loss of the file on Mr Chaloner. The file was not a contemporaneous file compiled either by or in respect of Mr Chaloner, nor was it a general employment file. Rather, it was a file put together by Ms McDiarmid, following the sexual assault allegations. Ms McDiarmid subsequently left her employment with Nationwide News. There was no evidence of what material was on the file or likely to be on the file. Senior counsel for Nationwide News submitted that there may have been material on the file which would explain the knowledge, or lack of knowledge, on the part of Nationwide News as to Mr Chaloner’s conduct towards Mr Naidu. For example, there might have been information on the file as to whom Mr Naidu had told of Mr Chaloner’s conduct, or why he hadn’t told anybody about that conduct.

200 As McHugh J said in Brisbane South Regional Health Authority v Taylor at 554, an applicant for extension of time had the “positive burden of demonstrating that the justice of the case requires that extension”. This burden extends to both presumptive and actual prejudice. Nationwide News submitted, in relation to actual prejudice, that the effect of McHugh J’s judgment is that once actual prejudice was shown, the limitation period should not be extended. This is not a correct reading of his Honour’s judgment. Rather, his Honour stated that there had to be “actual prejudice of a significant kind” (emphasis added).

201 In the following passage in McHugh J’s judgment, his Honour discusses both presumptive and actual prejudice and explains what needs to be established for actual prejudice to be relevant. His Honour said at 555:

“Legislatures enact limitation periods because they make a judgment, inter alia, that the chance of an unfair trial occurring after the limitation period has expired is sufficiently great to require the termination of the plaintiff's right of action at the end of that period. When a defendant is able to prove that he or she will not now be able to fairly defend him or herself or that there is a significant chance that this is so, the case is no longer one of presumptive prejudice. The defendant has then proved what the legislature merely presumed would be the case.” (Emphasis added)

202 Thus, whilst presumptive and actual prejudice are both relevant in the way explained by his Honour, their relevance has to be determined in the context of the “real question”, which Toohey and Gummow JJ explained at 550, “is whether the delay has made the chances of a fair trial unlikely” in the particular case, or, as Dawson J explained in agreeing with McHugh J:

“... the applicant must establish that the commencement of an action beyond the limitation period would not result in significant prejudice to the prospective defendant.”

203 In this case, as Adams J recognised, the prospective defendant had the benefit of the presumption that applies once the limitation period has expired. It is apparent from his Honour’s reasons that he did not consider that presumptive prejudice in this case required him to not extend the limitation period. The ‘real question’ for determination became, thereafter, whether there was actual prejudice of a significant kind. I am inclined to agree with the submission that his Honour did not directly address the consequences to Nationwide News of having lost its file. However, it is apparent from the submissions of senior counsel for Nationwide News that it could not identify any actual prejudice. Indeed, senior counsel for Nationwide News conceded that he could not point to any specific prejudice. Rather, what was advanced was a speculative argument as to what the files might have contained. In my opinion, no actual prejudice was demonstrated, let alone actual prejudice of a significant kind.

204 Accordingly, for the reasons that I have given, no error has been shown in his Honour's consideration of this question.

The limitations issue: ISS Security

205 ISS Security contended that the correct test under s 151D of the Workers Compensation Act was that stated by the Court in Holt v Wynter [2000] NSWCA 143; (2000) 49 NSWLR 128 at 146-147, namely, whether a fair trial could be achieved. Holt v Wynter applied the principles stated by the High Court in Brisbane South Regional Health Authority v Taylor, so that, relevantly, the same principles apply as in the case of an application for extension of time under s 60C.

206 ISS Security submitted that his Honour erred in concluding that there was no prejudice to it and in particular, no prejudice arising from the loss of Nationwide News’ file. It submitted that it had been deprived of a contemporaneous investigation into at least some of the facts that were the subject of these proceedings. It was said that Mr Naidu’s own conduct in making a statement in March 1998 in which he had said that he had made no complaint of Mr Chaloner’s misconduct to ISS Security had encouraged a belief that the relevant tortious acts were those of Nationwide News’ employees.

207 It was further submitted that many of Mr Naidu’s allegations were made without corroboration, so that ISS Security was limited in the investigations it could carry out. The first of these submissions is incorrect, in that there was ample corroboration for Mr Naidu’s allegations of misconduct. The second matter does have some relevance, but was a matter for assessment by the trial judge. Senior counsel for ISS Security conceded during the course of argument on the appeal that it was not contended that his Honour acted on a wrong principle. In those circumstances, this challenge to his Honour’s determination of the limitation defence effectively amounts to a submission that this Court should re-exercise the evaluative judgment that is required to be undertaken under the section.

208 ISS Security also contends that his Honour erred in extending the limitation period in respect of the contract claim. Having regard to my conclusion on the contract issue, I do not need to deal with this issue.

209 The challenge to his Honour’s determination of the limitation defences raised by Nationwide News and ISS Security should be rejected.

Duty of care: Nationwide News

210 Nationwide News’ essential challenge to the finding that it owed a duty of care to Mr Naidu was a challenge to the finding that it was reasonably foreseeable that Mr Naidu would suffer psychiatric injury. In support of this challenge, it adopted the submissions made by ISS Security which were in these terms (with substituted references to Nationwide News as appropriate):

“It is submitted that the case established by the plaintiff at trial should have failed in negligence: Koehler v Cerebos Australia Pty Limited [2005] HCA 15; (2005) 79 ALJR 845 where it was said ‘the relevant duty is engaged if psychiatric injury to the particular employee is reasonably foreseeable.’ [35] The trial judge did not address the nature and extent of the work or the effect of the conduct on Mr Naidu at the time of its occurrence, and he did not determine what ‘signs’ or indicia were given by Mr Naidu at that time.

A reasonable employer could not be expected to have identified the risk to Mr Naidu from the mere circumstance of the employment itself: cf State of New South Wales v Burton [2006] NSWCA 12 [40]. Psychiatric harm to Mr Naidu from conduct by the [Nationwide News] security supervisor could not have reasonably been foreseen by [Nationwide News]. Mr Naidu’s case is unlike other cases in which psychiatric harm has been held to be foreseeable. Mr Naidu was not a specialist police officer (as in Burton or State of New South Wales v Seedsman [2000] NSWCA 119); the conduct was not known to fellow [Nationwide News] employees or known to the supervisor (as in [State of New South Wales v Mannall [2005] NSWCA 367).”

211 Having regard to the primary challenge to the findings of the existence of a duty of care, it is appropriate to commence the consideration of the question whether Nationwide News owed a duty to Mr Naidu by reference to Tame v State of New South Wales [2002] HCA 35; (2002) 211 CLR 317. Two matters established in Tame can be dealt with briefly. The first is that it is not necessary that the plaintiff be a person of normal fortitude in order to recover for psychiatric injury, although whether a person is of normal fortitude is relevant, but is not a separate or definitive test of liability. However, in this case it was not suggested that Mr Naidu had any special susceptibility or vulnerability to psychiatric injury, so that any particular knowledge of susceptibility is not a matter that need concern the Court. Secondly, damages are only available for a recognisable psychiatric injury and are not available for emotional distress. In this case the evidence clearly established that Mr Naidu suffered a recognisable psychiatric injury.

212 The facts of Tame are useful in understanding a circumstance in which it was held that it was not foreseeable that a plaintiff would suffer psychiatric injury. In that case, a police officer compiled a motor traffic accident report in respect of an accident involving Mrs Tame’s car, which she was driving at the time. The accident was the fault of the driver of the other vehicle. The driver of the other vehicle returned a high level blood alcohol reading. Mrs Tame had a nil alcohol reading.

213 By mistake, the police officer filled in the report attributing to Mrs Tame the same blood alcohol reading as that returned by the driver of the other vehicle. He realised his mistake at a later point of time and corrected it. In the meantime, a copy of the uncorrected accident report had been obtained by an insurer, although the insurer did not act on the information and admitted liability. Sometime later, Mrs Tame became aware of the mistake and became obsessed by the error. She was emotionally disturbed about other matters at the time. She was eventually diagnosed as suffering a psychotic depression and had a history that predisposed her to such illness.

214 Two questions arose for determination. The first question was whether a police officer filling out an official accident report was under a duty to take reasonable care to avoid psychiatric injury to Mrs Tame. It was held that as the police officer was completing an official report in which he was required to provide honest and frank information to his superiors, it would be inconsistent with that duty to require the police officer to protect the person subject of such an investigation and report from emotional disturbance and possible psychiatric illness: see Gleeson CJ at 334-335 [23]-[27]; Gaudron J at 341-342 [55]-[58]; McHugh J at 361-362 [122]-[126]; Gummow and Kirby JJ at 396 [231]; Hayne J at 418 [298].

215 The second question was whether the psychiatric injury suffered by Mrs Tame was reasonably foreseeable. The Court held that the injury was not reasonably foreseeable. The present case is concerned with the question whether the psychiatric injury was reasonably foreseeable. It was not suggested, nor could it be, that the nature of the relationship was one where a duty of care could not or did not otherwise arise, although as the High Court pointed out in Koehler v Cerebos (Australia) Limited [2005] HCA 15; (2005) 222 CLR 44, a failure to separate out the various elements of the tort may lead to error: see also New South Wales v Burton [2006] NSWCA 12 at [38] per Basten JA.

216 Gleeson CJ, after finding at 335 [29] that the psychiatric injury was not reasonably foreseeable, explained at 336 [29]:

“The question concerns the reasonableness of requiring Acting Sergeant Beardsley to have this possibility in contemplation when he completed the report. He could not reasonably have been expected to foresee that his mistake carried a risk of harm to Mrs Tame of the kind that resulted. It was not reasonable to require him to have her mental health in contemplation when he recorded the results of the blood tests.”

217 Gummow and Kirby JJ stated, at 385 [201] that the question to be determined was

“... whether, in all the circumstances, the risk of the plaintiff sustaining a recognisable psychiatric illness was reasonably foreseeable, in the sense that the risk was not far-fetched or fanciful.”

218 This, of course, is the classic formulation of the test of foreseeability in Wyong Shire Council v Shirt [1980] HCA 12; (1980) 146 CLR 40 at 47-48.

219 In Koehler v Cerebos (Australia) Limited the Court was directly concerned with an employer’s duty of care in the case of a purely psychiatric illness. The specific matter under consideration was whether the employer's duty of care to avoid psychiatric injury required the employer to modify the employee’s work. That is not the precise question here. However, their Honour’s consideration of the content of the relevant duty of care in the case of a psychiatric injury is of relevance.

220 In the joint judgment, their Honours McHugh, Gummow, Hayne and Heydon JJ pointed out at 54 [22] that, when determining the question of the content of a duty of care and what satisfaction of that duty might require, it was necessary to consider the obligations which existed between the parties as determined by the terms of the employment contract, any obligations that equity would enforce and any relevant statutory controls. Their Honours specifically rejected the notion that the only question to be considered was whether the kind of harm alleged to the particular employee was reasonably foreseeable, although that was the basis upon which the case was ultimately determined.

221 The appellant was a part-time sales representative, engaged to work for 24 hours per week. On the date that she commenced her part-time position, she was shown a listing of the stores that she was required to service each week. She immediately complained that the territory was too large. Her supervisor suggested that she try the job for one month and if she felt that she could not cope she should let him know. The appellant thereafter complained frequently, both orally and in writing, that the area that she was required to service was too big and contained too many stores and she did not have sufficient time to properly carry out her work. None of her complaints suggested that she was experiencing any difficulties that affected her health. The appellant consistently sought changes in the manner in which she performed her employment, either by being engaged for longer hours, or by reducing the number of stores that she was required to visit. No changes were made.

222 Their Honours considered that the appellant’s claim in negligence had been correctly rejected for two reasons. First, the appellant had agreed to perform the duties which were a cause of her injury. Secondly, and relevant to the submission of Nationwide News in this case, the employer had no reason to suspect that the appellant was at risk of psychiatric injury. It was of some significance on the facts of the case that the appellant’s agreement to undertake the work ran contrary to her contention that the employer ought reasonably to have appreciated that the performance of those tasks posed a risk to her psychiatric health. Their Honours considered that the appellant’s agreement to undertake the work evinced not only a willingness to try, but was not consistent with harbouring, let alone expressing, a fear of danger to her health. This was relevant, because the complaints that the appellant made, namely, that she could not perform the work within the time available, did not convey any reason to suspect the possibility of future psychiatric injury.

223 Their Honours reiterated at 57 [33] the statement of the Court from Tame v State of New South Wales that “normal fortitude” was not a precondition to liability for negligently inflicted psychiatric injury and that the “central inquiry” remained whether “the risk of a plaintiff ... sustaining a recognisable psychiatric illness was reasonably foreseeable, in the sense that the risk was not far-fetched or fanciful”. Their Honours pointed out, at 57 [35], that the duty owed by an employer is one owed to each employee and that the relevant duty of care was engaged “if psychiatric injury to the particular employee is reasonably foreseeable”. They added that that inquiry “invites attention to the nature and extent of the work being done by the particular employee and signs given by the employee concerned” (emphasis added): see Sutherland v Hatton [2002] EWCA Civ 76; [2002] 2 All ER 1 at 14 [26]- [27].

224 Their Honours also stressed at 57-58 [36] that an employer was entitled to assume, in the absence of obvious signs to the contrary, that an employee considered that he or she was able to do the job for which he or she was engaged. The obligations of the parties were fixed at the time that the contract was entered into, unless and until that contract was varied. Those obligations, so fixed at that time, could not be qualified as a result of information that the employer later acquired about the vulnerability of the employee to psychiatric harm. (Two caveats were placed upon that proposition, neither which is of relevance here.)

225 Callinan J considered at 64-65 [55]-[56] that it was far-fetched and not foreseeable that the appellant, a competent and seemingly well woman, would suffer a disabling psychiatric injury within six months of taking up a part-time position by reason of the work that her job entailed. His Honour considered that it was significant that the appellant was not seen to undergo any changes in her personality or exhibit any symptoms before she became ill.

226 Nationwide News’ principal challenge to his Honour’s finding that it owed a duty of care to Mr Naidu, was that it was not sufficiently on notice of Mr Chaloner’s conduct, such that it was not reasonably foreseeable that Mr Naidu was at risk of psychiatric harm. His Honour’s finding was based essentially upon his acceptance of Mr Kamaledine’s evidence that he reported Mr Chaloner’s conduct to Mr Paine. I have already concluded that there was no error in his Honour accepting this evidence. Nationwide News submitted, however, that even accepting this, a single complaint was not sufficient to alert a reasonable employer to such risk. I will return to this submission. It is convenient to deal first with the basis upon which Nationwide News may be liable for Mr Chaloner’s conduct.

227 His Honour found that Nationwide News was vicariously liable for Mr Chaloner’s conduct. However, there are circumstances where a corporation may be directly liable for wrongful conduct.

Nationwide News’ direct liability to Mr Naidu

228 The direct liability of a corporation for a wrongful act to another person as distinct from any vicarious liability has been discussed judicially on many occasions. The principle was explained by Viscount Haldane LC in Lennard’s Carrying Company Limited v Asiatic Petroleum Company Limited [1915] AC 705 at 713:

“... a corporation is an abstraction. It has no mind of its own any more than it has a body of its own; its active and directing will must consequently be sought in the person of somebody who for some purposes may be called an agent, but who is really the directing mind and will of the corporation, the very ego and centre of the personality of the corporation.”

229 In Arthur Guinness, Son & Company (Dublin) Ltd v The Freshfield (Owners) and Ors: (The Lady Gwendolen) [1965] P 294 Willmer LJ explained at 343 that it was necessary to look closely at the organisation of the company in order to ascertain “of what individual it can fairly be said that his act or omission is that of the company itself”. His Lordship referred to the passage in the speech of Viscount Haldane to which I have just referred. The inquiry is initially a factual matter: see Lennard’s Carrying Company Limited v Asiatic Petroleum Company Limited per Dunedin LJ at 715.

230 In Lennard’s Carrying Company Limited v Asiatic Petroleum Company Limited, the acts of Mr Lennard, who was a director of the appellant company and managing director of the company that acted as the ship manager for the appellant company, were found to be the acts of the company itself. On the principles discussed that would be axiomatic. However as Willmer LJ at 343 observed in The Lady Gwendolen, nothing in the judgments in the Court of Appeal, or the House of Lords, required that it was necessary that a person be a director in order that such persons’ acts be considered the acts of the company.

231 In The Lady Gwendolen, Willmer LJ considered, at 344, that it was sufficient in that case, where a company had a separate traffic department which assumed responsibility for running the company’s ships, for the head of that department, even though not a director of the company, to be regarded as a person whose action was “the very action of the company itself, so far as concerns anything to do with the company's ships”.

232 Willmer LJ also referred to the statement of Denning LJ in Bolton (HL) Engineering Co Ltd v TJ Graham & Sons Ltd [1957] 1 QB 159 at 172-173 where his Lordship, after drawing a distinction between those in a company who would be servants and agents who did the work, and of those who were directors and managers who represented the mind and will of the company, stated that whether the intention of such directors or managers was the company’s intention, “depends on the nature of the matter under consideration, the relative position of the officer or agent and the other relevant facts and circumstances of the case”.

233 In Tesco Supermarkets Ltd v Nattrass [1971] UKHL 1; [1972] AC 153, Lord Reid, at 170, stated the principle in similar terms:

“A corporation ... must act through living persons, though not always one or the same person. Then the person who acts is not speaking or acting for the company. He is acting as the company and his mind which directs his acts is the mind of the company. There is no question of the company being vicariously liable. He is not acting as a servant, representative, agent or delegate. He is an embodiment of the company or, one could say, he hears and speaks though the persona of the company, within his appropriate sphere, and his mind is the mind of the company. If it is a guilty mind then that guilt is the guilt of the company. It must be a question of law whether, once the facts have been ascertained, a person in doing particular things is to be regarded as the company or merely as the company’s servant or agent. In that case any liability of the company can only be a statutory or vicarious liability.”

234 These authorities have been consistently applied in Australia. It is sufficient to refer to Hamilton v Whitehead [1988] HCA 65; (1988) 166 CLR 121; Director General, Department of Education and Training v MT [2006] NSWCA 270; (2006) 67 NSWLR 237; and North Sydney Council v Roman [2007] NSWCA 27; (2007) 150 LGERA 419.

235 It is necessary at this point, therefore, to consider the position and authority of Mr Chaloner within Nationwide News. As I have said, he was the Fire and Safety Officer. He directly reported to Mr Paine. Whilst Mr Chaloner was not said to be the next most senior manager below him, the fact that he reported to Mr Paine does indicate his high level of seniority in the organisation. More importantly, however, was the nature of his management role. He was in charge of all Nationwide News’ security requirements, Australia-wide. His Honour accepted Mr Blinkworth’s evidence that Mr Chaloner did not have the power to cancel ISS Security’s contract with Nationwide News. Mr Blinkworth said that decisions of that nature were made at director level. However, Mr Chaloner was responsible for negotiating salary levels and the security operations that were provided to Nationwide News and for managing the contracts with ISS Security.

236 In my opinion, Mr Chaloner’s position and his responsibilities were such that he was in fact the “mind and will” of Nationwide News so far as the management of its security requirements were concerned. That responsibility included supervision of Mr Naidu’s work. In this regard, it is irrelevant whether that situation evolved or was a matter of agreement (tacit or otherwise) between Nationwide News and ISS Security. In his “appropriate sphere”, namely, the arrangement and implementation of security arrangements for Nationwide News, Mr Chaloner was an embodiment of the company.

237 When that position is reached, the question of reasonable foreseeability for the purposes of establishing the existence of a duty of care, resolves itself in this case fairly readily. Nationwide News, as embodied by Mr Chaloner, perpetrated conduct on Mr Naidu that was prolonged, abusive, intimidating and physically threatening. It was bullying in an extreme form. Bullying has been described in a different context as a “serious and insidious form of violence”: see Elvin, J, “The duty of schools to prevent bullying”, (2003) 11 Tort L Rev 168 at 169. This is not cutting edge psychology. Any person could reasonably foresee that the conduct engaged in by Mr Chaloner carried with it the risk of psychological or psychiatric harm. But in any event, Mr Naidu exhibited signs of such harm to Mr Chaloner. He was observed to cry and to be scared when Mr Chaloner directed such conduct towards Mr Naidu and threatened him with the loss of his job. In addition, he was observed by others at the workplace to change over a period of time from a happy person to one who appeared depressed. Accordingly, this was not a case like Koehler v Cerebos (Australia) Limited where the plaintiff gave no outward signs of her emotional state.

238 It follows that there was a reasonably foreseeable risk of psychiatric injury arising from Mr Chaloner’s conduct to Mr Naidu. It was not seriously challenged that the instance of the relationship between Mr Naidu and Nationwide News was such that, provided that reasonable foreseeability was established, Nationwide News owed Mr Naidu a duty of care. His Honour found and the evidence clearly established that Mr Chaloner was Mr Naidu’s work supervisor. Mr Blinkworth had agreed to that arrangement; his job title was Assistant Fire and Safety Officer, Mr Chaloner being the Fire and Safety Officer; and Mr Paine recognised that a de facto management role could develop in respect of a long, ongoing contractual relationship such as was the case between Nationwide News and ISS Security. The content of that duty would have been relevantly the same as the duty owed by an employer, that is, to provide a safe place and system of work.

Nationwide News’ vicarious liability for Mr Chaloner’s conduct

239 The question of Nationwide News’ vicarious liability only arises if I am wrong in finding that Mr Chaloner’s conduct was the conduct of Nationwide News itself. However, because of the significance that vicarious liability had, not only in the trial judge’s determination, but also in the argument advanced on appeal, it is appropriate for me to deal with that issue as well. Much of what I have already said in relation to foreseeability is relevant on the question of vicarious liability.

240 The starting point of the application of the principle of vicarious liability is easy enough to state: an employer is vicariously liable for a tort or other actionable wrong committed by an employee in the course of employment: Deatons Proprietary Limited v Flew [1949] HCA 60; (1949) 79 CLR 370 at 379; State of New South Wales v Lepore [2003] HCA 4; (2003) 212 CLR 511 at 535 [40]. However, there must be a sufficient connection with the duties and responsibilities of the employee as employee, for the employer to be vicariously liable. An employer will not be vicariously liable for a wrongful act if it is committed by the employee in what is often described as being “upon a frolic of his own”: Morris v C W Martin & Sons Ltd [1966] 1 QB 716 at 733. In State of New South Wales v Lepore Gleeson CJ said at 535 [40]:

“Not everything that an employee does at work, or during working hours, is sufficiently connected with the duties and responsibilities of the employee to be regarded as within the scope of the employment. And the fact that wrongdoing occurs away from the workplace, or outside normal working hours, is not conclusive against liability.”

241 As I discussed in Starks v RSM Security Pty Ltd & Ors [2004] NSWCA 351 at [13], an employer is liable for wrongful acts of an employee if the employer has authorised those acts. As Salmond stated in “Salmond on Torts”, 9th ed (1936), an employer may also be liable for an employee's unauthorised acts if those acts are:

“... so connected with authorised acts as they may be regarded as modes – although improper modes – of doing them but the employer is not responsible if the unauthorised and wrongful act is not so connected with the authorised act as to be a mode of doing it, but is an independent act.”

See also State of New South Wales v Lepore per Gleeson CJ, at 536 [42].

242 In State of New South Wales v Lepore, Gleeson CJ also observed at 540-541 [54]:

“Where acts of physical violence are concerned, the nature and seriousness of the criminal act may be relevant to a judgment as to whether it is to be regarded as a personal, independent act of the perpetrator, or whether it is within the scope of employment. A security guard at business premises who removes a person with unnecessary force may be acting in the course of employment. On the other hand, as Jordan CJ pointed out in Deatons Pty Ltd v Flew, extreme and unnecessary violence, perhaps combined with other factors, such as personal animosity towards the victim, might lead to a conclusion that what is involved is an act of purely personal vindictiveness. Sexual abuse, which is so obviously inconsistent with the responsibilities of anyone involved with the instruction and care of children, in former times would readily have been regarded as conduct of a personal and independent nature, unlikely ever to be treated as within the course of employment. Yet such conduct might take different forms. An opportunistic act of serious and random violence might be different, in terms of its connection with employment, from improper touching by a person whose duties involve intimate contact with another. In recent years, in most common law jurisdictions, courts have had to deal with a variety of situations involving sexual abuse by employees.”

243 Provided that there is necessary connection with the employment, an employer may be liable even if there has been an express prohibition against the wrongful conduct: see Hollis v Vabu Pty Limited [2001] HCA 44; (2001) 207 CLR 21 per McHugh J at 60 [99], citing Limpus v London General Omnibus Co (1862) 1 H&C 526 [158 ER 993]; and Colonial Mutual Insurance Society Limited v Producers and Citizens Co-Operative Assurance Company of Australia Limited [1931] HCA 53; (1931) 46 CLR 41, where Gavan Duffy CJ and Starke J said at 47 “if an unlawful act done by an agent be within the scope of his authority, it is immaterial that the principal directed the agent not to do it”. Dixon J said, at 50:

“The wrong committed arose from the mistaken or erroneous manner in which the actual authority committed to him was exercised when acting as a true agent representing his principal in dealing with third persons.”

244 In this case, the trial judge found that Mr Naidu’s ultimate psychiatric illness was caused by Mr Chaloner’s misconduct. His Honour also concluded that it was reasonably foreseeable that such an illness might well result from the infliction of that conduct upon Mr Naidu and that Mr Chaloner realised that his behaviour would cause some injury to Mr Naidu. His Honour considered that if Mr Chaloner had turned his mind to the risk of inflicting serious injury, then he was at least indifferent to that risk (judgment [205]). His Honour considered that the injury suffered by Mr Naidu was inflicted by Mr Chaloner in the course of his employment: see Canterbury Bankstown Rugby League Football Club Ltd v Rogers (1993) Aust Torts Reports 81-246 (62,538); Starks v RSM Security Pty Limited & Ors.

245 His Honour held at [202] that, having regard to the nature of Mr Kamaledine’s complaint, if appropriate inquiries had been instituted, Nationwide News would have become aware at a high level of management, both of the content of Mr Chaloner’s misconduct and the potential impact on Mr Naidu’s well being.

246 His Honour found, at [210] that, leaving aside the formalities of Mr Naidu’s and Mr Chaloner’s respective employments, it was known and agreed by Nationwide News through Mr Paine, and ISS Security through Mr Blinkworth, that Mr Chaloner

“... would be likely to and, indeed, did directly manage [Mr Naidu’s] work activities in every relevant sense as though [Mr Naidu] was answerable to Mr Chaloner for their due performance”.

247 His Honour concluded at [217], after reviewing the authorities, that, except for the sexual misconduct, Mr Chaloner’s treatment of Mr Naidu in the course of exercising his authority over Mr Naidu in the performance of his duties, was sufficiently connected with Mr Chaloner’s duties as to make Nationwide News vicariously liable for it. His Honour found that the sexual misconduct, although occurring in the work context, was so far removed from any work-related responsibilities that neither Nationwide News nor ISS Security was vicariously liable for it. (There is no cross-appeal in respect of this finding.)

248 Nationwide News made two challenges to his Honour’s finding that it was vicariously liable for Mr Chaloner’s conduct. The first was that his Honour erred in finding that it was reasonably foreseeable that Mr Naidu would suffer psychiatric injury. The second was that Mr Chaloner’s conduct was not a means of carrying out his employment.

249 Nationwide News made an initial challenge to the trial judge’s finding of reasonable foreseeability on the basis that such a finding was not open in circumstances where there had been a single complaint. Support for this submission was sought to be found in his Honour’s finding at [190], when dealing with the claim against ISS Security, where his Honour considered that the general complaints made to Mr Blinkworth were not sufficient to alert a reasonable employer that there was a foreseeable risk of injury.

250 In my opinion, this submission does not advance Nationwide News’ challenge to his Honour’s conclusion. A finding that a particular risk of injury is reasonably foreseeable involves a finding of “fact and value” and it is a matter for the tribunal of fact to determine whether the defendant ought to have reasonably foreseen that his or her conduct might cause psychiatric injury: Tame v State of New South Wales at 355 [103], 358 [115], 386 [203], 437 [360]; State of New South Wales v Mannall [2005] NSWCA 367 at [114]. The finding of his Honour at [202] was based on different facts from his finding in relation to ISS Security at [190]. In the case of ISS Security, his Honour found that it was not on notice of the physically and verbally abusive and racially discriminatory conduct of Mr Chaloner towards Mr Naidu. It was aware, however, from Mr Naidu’s complaints, of his unreasonably demanding conduct and that he was a bully.

251 In the case of Nationwide News, the complaint to Mr Paine was at least of Mr Chaloner’s verbal and racially abusive misconduct towards Mr Naidu (there was no evidence that Mr Kamaledine complained of his physical abuse). Further, Mr Paine gave evidence that if he had become aware of bullying or intimidating or racist behaviour, he would have undertaken an initial investigation and if serious, forwarded the matter to the human resources department for a proper investigation. He also said that if there was bullying, the person engaging in such conduct would be dismissed.

252 His Honour’s acceptance of Mr Kamaledine’s evidence meant that there was at least one occasion when Mr Paine was made aware of Mr Chaloner’s misconduct towards Mr Naidu. The terms of Mr Kamaledine’s report were graphic: he said he had heard Mr Chaloner calling Mr Naidu “black boy” and “black cunt”, that he observed Mr Naidu in tears, and that Mr Naidu “was horrified and looked very scared”. Mr Kamaledine said he reported what he had seen to Mr Paine, but that Mr Paine’s response was to leave it with him, he would see what he could do. This was the type of complaint that Mr Paine said he would act upon. If a complaint was serious enough to act upon in the way Mr Paine said, it was sufficient to make it reasonably foreseeable that such conduct could cause a risk of harm. The relevant likely harm was of psychological or psychiatric injury.

253 In my opinion, given the nature of the report made by Mr Kamaledine, Nationwide News was on sufficient notice of conduct that was so extreme that it was reasonably foreseeable to Nationwide News that there was a risk of psychiatric injury to Mr Naidu.

254 In any event, I am of the opinion that it is not only Mr Paine’s knowledge that was relevant in determining whether it was reasonably foreseeable to Nationwide News that Mr Chaloner’s conduct would cause psychiatric harm to Mr Naidu. I have already explained the position and responsibility of Mr Chaloner within Nationwide News. To the extent that knowledge is relevant to reasonable foreseeability in cases such as the present, it was Mr Chaloner’s knowledge which I consider to be relevant. He was the person in charge of this particular section or department within Nationwide News. He was the supervisor.

255 If misconduct had been directed at Mr Naidu by another employee of Nationwide News, Mr Chaloner would have been the relevant person to whom complaint would be made. It would not be expected that employees would go “over” Mr Chaloner’s head and report such a matter to the absolute senior levels of the organisation. Had Mr Chaloner failed to act in that situation, Nationwide News could not have argued that the risk of psychiatric injury was not reasonably foreseeable: see State of New South Wales v Mannall at [104] and [116].

256 Nationwide News cannot hide behind the fact that it was the supervisor who was the perpetrator of the conduct. In State of New South Wales v Mannall the plaintiff’s immediate supervisor was found to have acted negligently towards her, materially contributing towards the plaintiff’s mental breakdown. The supervisor knew of the seriousness of the problems that beset the plaintiff in her workplace and had himself engaged in humiliating conduct towards her. True it was in that case that the plaintiff had also complained to the next senior person, including making complaint of her own supervisor’s conduct. However, that is not materially different to the position here. A complaint of such seriousness had been made to Mr Paine that he said that he would have acted upon. The fact that he did not do so does not diminish the importance of the complaint in determining the question of reasonable foreseeability.

257 Nationwide News makes another challenge to his Honour’s finding that it owed a duty of care to Mr Naidu. It submitted that his Honour failed to examine the nature and extent of Mr Naidu’s work, or the effect of the conduct on Mr Naidu at the time of its occurrence. Likewise, it was submitted that his Honour failed to determine what “signs” were given by Mr Naidu at that time in response to such conduct. In particular, Nationwide News submitted that there were no objective signs exhibited by Mr Naidu that would have made it aware that he was unhappy in his job, let alone the onset of any complex psychiatric symptoms. These submissions were directed to the matters considered to be essential to the determination of the content of the duty as stated by the High Court in Koehler v Cerebos (Australia) Limited.

258 This submission has not been made out. His Honour may not have collected these particular matters together. However, his reasons are replete with findings relating to Mr Naidu’s work duties, the manner in which his work was managed as between Nationwide News and ISS Security, the complaints that he made and the signs of upset, distress, humiliation, fear and depression that he exhibited.

259 Nationwide News further contends that Mr Chaloner’s abusive conduct towards Mr Naidu had no connection with the performance of Mr Chaloner’s responsibilities. Indeed, it argued that the conduct in which he engaged was specifically banned by Nationwide News. In this regard, reliance was placed upon the anti-discrimination policy that Nationwide News had in place and upon the fact that such conduct, if known, would result in immediate dismissal. It was further submitted that the conduct in which Mr Chaloner engaged was not a method of engaging in the day-to-day direction and control of a staff member, nor could it be classified as an unauthorised way to perform an authorised act on behalf of Nationwide News. Rather, it was submitted that Mr Chaloner’s conduct was absolutely unauthorised and unconnected with the carrying out of his employment obligations.

260 In this case, there was conduct that was physically threatening, which might be at the extreme edge of conduct that could properly be seen as falling within Mr Chaloner’s employment. However, the majority of Mr Chaloner’s misconduct was verbally racist and humiliating. Whilst, forensically, an argument that such conduct might be seen to fall outside the course of employment, for the reasons stated by Gleeson CJ in State of New South Wales v Lepore at [54] set out at [149] above, was understandably made, I do not consider that this is so. The evidence disclosed that Mr Chaloner, in the course of carrying out his work responsibilities, engaged in conduct towards a number of employees that was highly inappropriate and at times unlawful. It just so happens that his conduct towards Mr Naidu was more prolonged and more extreme. This may have been because of the de facto direct supervisory role that Mr Chaloner had in respect of Mr Naidu. Nonetheless, his conduct remained the manner in which he carried out his employment.

261 It follows that no error has been shown in his Honour’s finding that Mr Chaloner’s conduct was sufficiently connected with his duties as Nationwide News’ Fire and Safety Officer. The conduct for which his Honour found Nationwide News liable was conduct engaged in by Mr Chaloner as part of the manner in which Mr Chaloner directed Mr Naidu in the performance of his duties. Further, the consequence of his Honour’s acceptance of Mr Kamaledine’s evidence is that Nationwide News accepted, or permitted, such conduct to occur without taking any action to stop it.

262 Nationwide News’ challenge to his Honour’s finding of the existence of a duty of care to Mr Naidu was based upon its challenge to the factual finding that it had knowledge, or constructive knowledge, of Mr Chaloner’s conduct. No direct challenge was made to his Honour’s finding of breach although that issue surfaced in argument from time to time. However, as will be apparent from my reasons so far, once issues relating to duty are resolved in favour of Mr Naidu, little needs to be said in relation to breach. Although Mr Naidu was not an employee of Nationwide News, he was performing the services that his employer had contracted to provide to Nationwide News, but in circumstances where his work was actually controlled and directed by Mr Chaloner. In those circumstances, the content of the duty of care was analogous to that owed by an employer, including providing him with a safe system of work. Mr Chaloner’s maltreatment of Mr Naidu breached that duty.

The estoppel issue

263 Nationwide News challenges a ‘finding’ made by his Honour, at [219], that Nationwide News was estopped from denying that Mr Chaloner was acting as their servant, agent or representative in connection with the conduct of which Mr Naidu complained. His Honour’s ‘finding’ followed a consideration of New South Wales v Lepore and in particular, the analysis of Gaudron J at 561 [130]-[131] as to the basis upon which vicarious liability can be imposed for the deliberate criminal acts of another and related only to that conduct which had taken place in the workplace.

264 Nationwide News submitted that the effect of his Honour’s finding was that the estoppel to which his Honour referred at [219] extended to Nationwide News being estopped from denying that Mr Chaloner's unauthorised conduct in the workplace was so connected with his authorised acts so as to be responsible for them: see New South Wales v Lepore per Gleeson CJ at [42], referred to above at [148].

265 In my opinion, the estoppel found by his Honour did not operate in this way. As is apparent from the paragraph as a whole, his Honour made a finding of fact that there was a close connection between Mr Chaloner’s misconduct towards Mr Naidu, and the tasks that he was engaged by Nationwide News to do. I should add that during the course of argument on the appeal, senior counsel for Nationwide News, whilst not conceding this ground of appeal, effectively accepted that the argument advanced involved a misunderstanding of the extent of the estoppel found by his Honour, so this ground of appeal was unnecessary.

266 ISS Security essentially made the same complaint and for the same reasons, it too should be rejected.

Nationwide News and ISS Security’s challenge to causation

267 Both parties challenged his Honour’s finding that the workplace abuse was a substantial cause of Mr Naidu’s psychiatric injury. However, the medical evidence in this regard was overwhelming and as I understand the way the matter was conducted on the appeal, this was not a matter seriously in dispute.

Exemplary damages

268 The trial judge awarded Mr Naidu the sum of $150,000 for exemplary damages. He did so on the basis that Nationwide News was vicariously liable for the acts of Mr Chaloner; whose virtually unremitting abuse of Mr Naidu was the cause of his injury, and that having regard to Mr Chaloner’s senior position and the abuse inflicted on Mr Naidu while acting on behalf of his employer, it followed in his Honour’s view, that Nationwide News was accountable also for the payment of such damages. Alternatively, his Honour’s conclusions concerning Mr Paine’s probable, though limited knowledge, which in his Honour’s view should have led to further inquiry, led to the same conclusion that exemplary damages were warranted and strengthened the link between Mr Chaloner’s misconduct and Nationwide News.

269 His Honour referred to Gray v Motor Accident Commission [1998] HCA 70; (1998) 196 CLR 1, where Gleeson CJ, McHugh, Gummow and Hayne JJ said at 9-10 [22]:

“For present purposes it is enough to note two things. First, exemplary damages could not properly be awarded in a case of alleged negligence in which there was no conscious wrongdoing by the defendant. Ordinarily, then, questions of exemplary damages will not arise in most negligence cases be they motor accident or other kinds of case. But there can be cases, framed in negligence, in which the defendant can be shown to have acted consciously in contumelious disregard of the rights of the plaintiff or persons in the position of the plaintiff. Cases of an employer's failure to provide a safe system of work for employees in which it is demonstrated that the employer, well knowing of an extreme danger thus created, persisted in employing the unsafe system might, perhaps, be of that latter kind. No doubt other examples can be found.” (Citations omitted)

270 Nationwide News does not challenge the quantum of damages so awarded. However, it contends that exemplary damages ought not to have been awarded. It was submitted that the conduct of Nationwide News was far removed from Mr Chaloner’s conduct and that even if Mr Chaloner was acting within the scope of his authority, the facts fell far short of supporting a finding of sufficient involvement of Nationwide News, such as would provide a basis for an award. It was further submitted that in the absence of tacit approval of Mr Chaloner’s conduct by a larger section of management, an award of exemplary damages was not appropriate.

271 Nationwide News also relied upon its anti-discrimination policy and the summary dismissal of Mr Chaloner in support of its contention that his Honour was in error in awarding exemplary damages.

272 Senior counsel for Mr Naidu submitted that Nationwide News was liable to pay exemplary damages, both because of its personal liability for Mr Chaloner as his agent and further, for its vicarious liability for Mr Chaloner as its employee. In support of the award of exemplary damages, it was submitted that if Nationwide News did have an anti-discrimination policy for employees working at its worksite, it was not followed. Senior counsel for Mr Naidu also stated that his Honour, in line with the authorities, was right to order exemplary damages, not only to deter this particular employer but also others who might be like minded, that the behaviour of Mr Chaloner in this day and age was not to be tolerated.

273 I have already referred to his Honour’s reliance on Gray v Motor Accident Commission. That case involved an appeal from a refusal to award exemplary damages to a young man who was seriously injured in a motor accident in circumstances where the driver of the car was sentenced to seven years imprisonment for intentionally causing grievous bodily harm. Relevantly, in considering the power of a court to award exemplary damages, Gleeson CJ, McHugh, Gummow and Hayne JJ stated:

“[12] Exemplary damages are awarded rarely. They recognise and punish fault, but not every finding of fault warrants their award. Something more must be found.

...

[14] Because the kinds of case in which exemplary damages might be awarded are so varied, it may be doubted whether a single formula adequately describes the boundaries of the field in which they may properly be awarded. Nevertheless, the phrase adopted by Knox CJ in Whitfeld v De Lauret & Co [1920] HCA 75; (1920) 29 CLR 71 of ‘conscious wrongdoing in contumelious disregard of another's rights’ describes at least the greater part of the relevant field.

[15] In considering whether to award exemplary damages, the first, if not the principal, focus of the inquiry is upon the wrongdoer, not upon the party who was wronged.” (citations omitted)

See also James v Hill [2004] NSWCA 301 at [66]- [68]; State of New South Wales v Ibbett [2005] NSWCA 445 per Spigelman CJ at [35] ff and Basten JA at [221] ff for a discussion of the underlying basis for the making of an award of exemplary damages.

274 This Court in Trend Management v Borg (1996) 40 NSWLR 500 held that where it can be shown that an employer showed a conscious and contumelious disregard for the employee’s health in circumstances in which the employer knew what should be done and could have been done, an award of exemplary damages can be made.

275 In addition, it has been decided that a person may be liable for exemplary damages even though their liability for the contumelious act is vicarious: see Healing (Sales) Pty Ltd v Inglis Electrix Pty Ltd [1968] HCA 60; (1968) 121 CLR 584; New South Wales v Ibbett [2006] HCA 57; (2006) 81 ALJR 427 at 435 [41] ff; Zorom Enterprises Pty Ltd v Zabow & Ors [2007] NSWCA 106 at [44]- [45].

276 No error has been demonstrated in his Honour’s application of principle to the award of exemplary damages and such an award was clearly available on the facts. The only description that can be given to Mr Chaloner’s conduct was contumelious in the extreme. On the conclusion that I have reached that Nationwide News was directly liable to Mr Naidu, then it was Nationwide News’ conduct that must bear that description. Even if Nationwide News liability arose because it was vicariously liable for Mr Chaloner’s conduct, then, the conduct was still of a kind that attracts the opprobrium of an award of exemplary damages.

Apportionment

277 Both Nationwide News and ISS Security challenge his Honour’s assessment of their respective contribution to Mr Naidu’s injury. ISS Security contends that his Honour should have apportioned liability in the proportion of 90 per cent to Nationwide News and 10 per cent to ISS Security. Nationwide News submits that the appropriate apportionment should be that it be held 50 per cent liable.

278 His Honour’s finding on contribution was based in large part upon the fact that Mr Chaloner was an employee of Nationwide News and that Mr Kamaledine had reported some of his conduct to Mr Paine (judgment [281]). The principles governing appellate review of a trial judge’s contribution findings are well-established and involve the same principles as apply in respect of an assessment of contributory negligence. In Podrebersek v Australian Iron & Steel Pty Ltd [1985] HCA 34; (1985) 59 ALJR 492, the High Court stated at 493-4:

“A finding on a question of apportionment is a finding upon a ‘question, not of principle or of positive findings of fact or law, but of proportion, of balance and relative emphasis, and of weighing different considerations. It involves an individual choice or discretion, as to which there may well be differences of opinion by different minds': British Fame (Owners) v Macgregor (Owners) [1943] AC 197 at 201. Such a finding, if made by a judge, is not lightly reviewed.

...

The making of an apportionment as between a plaintiff and a defendant of their respective shares in the responsibility for the damage involves a comparison both of culpability, ie of the degree of departure from the standard of care of the reasonable man (Pennington v Norris [1956] HCA 26; (1956) 96 CLR 10 at 16) and of the relative importance of the acts of the parties in causing the damage: Stapley v Gypsum Mines Ltd [1953] UKHL 4; [1953] AC 663 at 682; Smith v McIntyre [1958] Tas SR 36 at 42-49 and Broadhurst v Millman [1976] VR 208 at 219 and cases there cited. It is the whole conduct of each negligent party in relation to the circumstances of the accident which must be subjected to comparative examination. The significance of the various elements involved in such an examination will vary from case to case; for example, the circumstances of some cases may be such that a comparison of the relative importance of the acts of the parties in causing the damage will be of little, if any, importance.”

279 In Vinidex v Theiss [2000] NSWCA 67 Rolfe AJA (Sheller and Fitzgerald JJA agreeing) said at [29]:

“... the Court must have regard to what is just and equitable and, in doing so, it must make a comparison of the culpability and of the acts of the parties causing damage and, thus, to the relative blameworthiness and the relevant causal potency of the negligence of each party, and to the whole conduct of each negligent party in relation to the circumstances of the accident by way of comparative examination: Podrebersek v Australian Iron and Steel Pty Limited [1985] HCA 34; (1985) 59 ALJR 492; Wynbergen v Hoyts Corporation Pty Limited (1977) 72 ALJR 65; Macquarie Pathology Services Pty Limited v Sullivan (Court of Appeal - 28 March 1995 - unreported) and James Hardie & Coy Pty Limited v Roberts & Anor (1999) 47 NSWLR 45.”

280 In this case, regardless of whether Nationwide News is considered to be directly or vicariously liable for Mr Chaloner’s conduct, given that it was his conduct that was the direct cause of Mr Naidu’s injury, it should bear the major portion of the blame. The question then is whether, in accordance with the principles to which I have just referred, it should bear a greater proportion than that ordered by the trial judge. That question in turn directs attention to the nature and extent of the obligations each party owed to Mr Naidu and the nature of the breach of that obligation. In ISS Security’s case, it had a non-delegable duty to provide him with a safe place and system of work. It breached that duty by having a system of work whereby Mr Naidu was placed under the supervisory management of a third party who maltreated him. ISS Security, although not aware of the nature and extent of the maltreatment, nonetheless knew of Mr Chaloner’s bullying behaviour and permitted it to continue unchecked, apparently because of concern for its own contractual position. Regardless of its reasons for failing to act, its breach was significant and serious. The apportionment made by his Honour was open to him. Accordingly, this challenge to his Honour’s finding should also be rejected.

Damages

281 The trial judge awarded damages to Mr Naidu in a total sum of $1,946,189.40 as against Nationwide News. The awards for the individual heads of damage were as follows:

$200,000 in respect of general damages

$16,000 in respect of interest on general damages

$137,964.62 in respect of past out of pocket expenses

$10,430 in respect of the Fox v Wood component

$318,812 in respect of past wage loss

$132,585.66 in respect of interest on past wage loss

$22,317 in respect of past superannuation loss

$16,523.16 in respect of interest on past superannuation loss

$259,891.16 in respect of respite care

$39,548.65 in respect of hospitalisation

$33,576 in respect of future psychiatric care

$89,536 in respect of future psychotherapy

$5,596 in respect of future medication

$563,722 in respect of loss of future earning capacity

$50,735 in respect of future superannuation

Each of these awards (save for the Fox v Wood component) is challenged as being excessive: grounds 15-23.

282 However, the challenge made in both the written and oral submissions was of a general kind and appeared to be directed to a failure by his Honour to analyse, or analyse in greater detail, the evidence of the various witnesses. In particular, in failing to analyse the evidence that indicated that Mr Naidu was able to continue to work at a high level after Mr Chaloner’s departure from Nationwide News and that his condition had improved after he had undertaken a retreat at an ashram in India. It was submitted that that improvement indicated that it was an error to accept the medical evidence that indicated that Mr Naidu was unlikely to improve.

283 At trial, Nationwide News had contended that the diagnosed condition of PTSD from which Mr Naidu was found to have suffered was not caused by the work-related incidents, but from incidents unrelated to the workplace, including the out-of-work abuse Mr Chaloner directed to Mr Naidu, as well as to the serious incident when Mr Naidu's home was “shot at”. It was submitted that his Honour failed to critically analyse these matters. It was submitted that had he done so, then it is likely that his Honour would have reduced the damages to make allowances for damage that might have resulted from these matters.

284 It was also submitted that his Honour had failed to make any allowance for increased vicissitudes in relation to Mr Naidu's condition and that his Honour had simply accepted that Mr Naidu could never work again. It was submitted that his Honour failed to give proper regard to the fact that Mr Naidu had continued to work at a very high level after the abuse had ceased.

285 In his oral submissions, senior counsel for Nationwide News conceded that the medical evidence was very much against these submissions and that in cross-examination, the medical evidence made significant concessions in favour of Mr Naidu in relation to his employment prospects. It was submitted, however, that the medical evidence should have been contrasted with Mr Naidu’s own evidence and that it was improbable that Mr Naidu would only function at 25 per cent of his capacity for the rest of his working life. In respect of general damages, it was submitted that the award was excessive and that an appropriate range was between $100,000 and $150,000.

286 Given the concession that the medical evidence was against the submission advanced in respect of damages it is not necessary to deal with that issue any further. As a result, these grounds of appeal should be rejected.

Indemnity costs

287 The trial judge made an order that Nationwide News were to pay Mr Naidu’s costs on an indemnity basis for the period from 26 March 2004. This order was made as a result of an offer of compromise made by Mr Naidu to Group 4 and Nationwide News on 26 March 2004 in the amount of $1m plus party/party costs as agreed or assessed, clear of workers compensation payments. The offer was made without prejudice and was open for 28 days after the date of offer. His Honour found the offer of compromise was made in accordance with the Supreme Court Rules 1970 (NSW) (the Supreme Court Rules) as then in force.

288 His Honour considered that the character of Mr Naidu’s case and injury, as evidenced by his medical evidence, were well known by the time of the offer to enable an assessment to be made of the risk in the event that Mr Naidu’s evidence was believed. Once it was recognised that there was no evidence available contradicting Mr Naidu’s account of Mr Chaloner’s conduct, in his Honour’s opinion, there was a more than sufficient basis for Nationwide News to appreciate whether the offer was realistic and acceptance was sensible: see Morgan v Johnson [1998] NSWSC 367; (1998) 44 NSWLR 578 per Mason P at 581-582.

289 The terms of the offer were deemed to represent a significant compromise of the matter and in his Honour’s view, the quantum of the offer was ascertainable.

290 In addition, the trial judge found that the rejection of Mr Naidu’s offer in the circumstances was unreasonable. It was not desirable that policy considerations underlying the costs rule in question be disregarded merely because a defendant did not have all the detail necessary to contest a matter in litigation. The mere fact that Nationwide News might have needed more time to make further enquiries was not a sufficient reason for holding rejection to be reasonable. Alternatively, even if rejection of the offer was reasonable, having regard to the point of assessment of risk, the case was not deemed to be truly exceptional so that an order otherwise than for indemnity costs should be made.

291 Nationwide News submitted that the trial judge erred in awarding indemnity costs as the case before his Honour was exceptional. This submission was based on two matters: first, the extraordinary nature of the allegations which were said to be outside the ordinary course of conduct and secondly, the limited nature of knowledge that was found to rest with Nationwide News resulting from the concealment of Mr Chaloner’s conduct and Mr Naidu’s delay in making a complaint.

292 In response to these submissions, senior counsel for Mr Naidu submitted that while the case was unusual, there was nothing novel about Mr Naidu’s claim, and it was far from exceptional being the very type of case which the offer of compromise regime was designed to protect. It was also stated that the offer was more than reasonable, such that it was a true compromise of Mr Naidu’s case and there was no basis for finding that the normal principles that apply in relation to offers of compromise should not apply in this case.

293 Although the offer of compromise was made on 26 March 2004 under the Supreme Court Rules, the Civil Procedure Act 2005 (NSW) (Civil Procedure Act) Sch 6 cl 5 provides that the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) apply to proceedings commenced before the commencement of the Civil Procedure Act unless the court orders otherwise.

294 In those circumstances, any award of indemnity costs resulting from Mr Naidu’s offer of compromise should be determined according to the rules regulating offers of compromise as defined in Pt 42 Div 3 of the UCPR. Rule 42.14 of the UCPR provides:

“(1) This rule applies if the offer concerned is made by the plaintiff, but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim concerned no less favourable to the plaintiff than the terms of the offer.

(2) Unless the court orders otherwise, the plaintiff is entitled to an order against the defendant for the plaintiff’s costs in respect of the claim:

(a) assessed on the ordinary basis up to the time from which those costs are to be assessed on an indemnity basis under paragraph (b), and

(b) assessed on an indemnity basis:

(i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made ...”

295 As Mr Naidu obtained judgment no less favourable than the terms of the offer made to Nationwide News, unless the Court orders otherwise, he is entitled to costs on an indemnity basis from 27 March 2004, the day following the offer in accordance with r 42.14(2)(i). It should be noted that under Pt 52 r 17 of the Supreme Court Rules as then in force, Mr Naidu was entitled to costs as from the date of the offer, 26 March 2004.

296 It is now well accepted that only in exceptional circumstances should a court deviate from the general rule provided for in r 42.14 of the UCPR. Hunt AJA in South Eastern Sydney Area Health Service v King [2006] NSWCA 2 considered the authorities in relation to Pt 52 r 17 of the Supreme Court Rules which are relevantly in the same form as UCPR r 42.14. His Honour (Mason P and McColl JA agreeing) stated at [83]:

“The onus is on the defendant to persuade the Court that indemnity costs should not be ordered. He must demonstrate the basis on which an order should be made denying the plaintiff's entitlement to indemnity costs. He must establish that he had given serious thought to the risk involved in non-acceptance of the offer, and that he had assessed the plaintiff’s case properly and in the context of the rule and the achievement of its purpose — to encourage the proper compromise of litigation, in the private interests of the litigants and in the public interest of the prompt and economical disposal of litigation. Generally, exceptional circumstances are required to justify such an order denying the plaintiff's entitlement. See, generally, Fowdl v Fowdl Court of Appeal, 4 November 1993 unreported, per Kirby P at 12, 16; Hillier v Sheather (1995) 36 NSWLR 414 at 422–423; Morgan v Johnson [1998] NSWSC 367; (1998) 44 NSWLR 578 at 581–582.”

297 Whilst the facts of this case might be considered to be extraordinary, the case was not exceptional. It raised conventional, albeit difficult questions of law and fact. Indeed, for that very reason it is the type of case that the rules are directed to in their encouragement of settlement by way of, inter alia, offers of compromise. This challenge to his Honour’s reasons should be rejected.

Liability of ISS Security

The fact finding issue

298 ISS Security contend, as its first ground of appeal, that his Honour erred in accepting Mr Naidu's evidence as reliable in circumstances where he found that his evidence was difficult to accept, truthful only in the sense that Mr Naidu believed it, and where his Honour accepted contradictory evidence from other witnesses. They cite [13] of his Honour’s judgment to support this ground. It is appropriate to set out [13] in full, as by doing so, his Honour's reasoning process becomes transparent, demonstrating that this ground misstates his Honour’s reasons and otherwise has no basis and should be rejected. His Honour stated:

“As [Mr Naidu’s] evidence unfolded, I found it difficult to accept the truthfulness of his account, so extraordinary did his descriptions of Mr Chaloner’s conduct seem and so passive was [Mr Naidu’s] response. However, I have been persuaded that the substance of [Mr Naidu’s] evidence in this regard is not only truthful (in the sense that he believes it to be true) but also by and large reliable. At the same time, I think that it contains some exaggeration and repetition. This is an overall impression and does not fasten on any particular incident; it is a common sense evaluation of [Mr Naidu’s] evidence as a whole. In order to convey the sense of [Mr Naidu’s] evidence and the way in which it was given, I have set out far more of it that one ordinarily would: initial attempts to summarise simply failed to do it justice.”

299 His Honour, at [14] ff, stated that there were aspects of Mr Naidu's evidence that he did not accept in full. Those matters are discussed fully in the reasons and rather than revealing error, they demonstrate that his Honour paid careful regard to the evidence and as he was entitled to do, accepted substantial parts of Mr Naidu's evidence but, in certain critical respects accepted the evidence of other witnesses, particularly Mr Blinkworth.

The foreseeability issue

300 ISS Security next contended, and it should be said that this was the main focus of the appeal, that it was not reasonably foreseeable that Mr Naidu would suffer psychiatric injury, so that no duty of care arose in the circumstances. ISS Security submits that the whole tenor of the decision in Koehler v Cerebos (Australia) Limited is to make knowledge, through complaints or obvious signs, the touchstone of liability in this area. It contends that it had no knowledge of Mr Chaloner’s misconduct and there was no evidence to establish that it ought to have known: see Tame v State of New South Wales, Koehler v Cerebos (Australia) Limited, New South Wales v Fahy [2007] HCA 20; (2007) 81 ALJR 1021.

301 ISS Security further submitted that it did not delegate any part of its duty as employer to Mr Chaloner. In particular, it contended that he was not appointed to supervise ISS Security’s employees. Rather, he was the representative of the other contracting party who determined whether or not the services provided by ISS Security were adequate and acceptable to Nationwide News. This submission constitutes a direct challenge to his Honour’s finding at [10] and [210] that Mr Chaloner was appointed by both Nationwide News and ISS Security to supervise Mr Naidu. In my opinion, that challenge fails for reasons I have already discussed above. Accordingly, ISS Security’s liability, and relevantly for present purposes, the question whether it was reasonably foreseeable that Mr Naidu would suffer a psychiatric injury is to be approached on the basis that Mr Chaloner was Mr Naidu’s supervisor.

Reasonable foreseeability of psychiatric injury

302 The question whether the risk of psychiatric harm to Mr Naidu was reasonably foreseeable so far as ISS Security was concerned raises different considerations to those relevant to Nationwide News. I have already adverted to this above. His Honour found that ISS Security had no knowledge of Mr Chaloner’s racial discrimination towards Mr Naidu. His Honour found, however, that Mr Naidu complained about Mr Chaloner being difficult, demanding, and more relevantly, unreasonable (judgment [159]).

303 The trial judge further found, at [161], that although Mr Naidu’s complaints to Mr Blinkworth were not sufficient to lead any reasonable person to apprehend the risk of psychiatric injury and although he had not witnessed any misconduct, Mr Blinkworth was well aware that Mr Chaloner was a bully. His Honour considered, therefore, that Mr Blinkworth would, or should, have realised that Mr Chaloner frequently used, at least, verbal intimidation in his relations with staff, including Mr Naidu.

304 His Honour reiterated this at [191] where he found that Mr Blinkworth knew or should have known from his own experience of Mr Chaloner’s manner, that he would in all likelihood be demanding and unreasonable towards Mr Naidu in connection with his work as Mr Chaloner’s assistant whenever Mr Naidu did not satisfy his requirements. He further found, at [200], that Mr Blinkworth knew that Mr Chaloner was likely to use intimidation as one of his techniques of management and that Mr Naidu would be the butt of his behaviour. His Honour found that permitting this conduct to continue for a significant period carried with it the foreseeable risk of causing psychological illness of the kind Mr Naidu ultimately suffered.

305 His Honour had found earlier, at [197], that the knowledge of other employees of Mr Chaloner’s conduct, which he found was notorious, should be attributed to ISS Security, either directly or constructively. His Honour considered, therefore, that ISS Security should have been sufficiently aware of the nature of Mr Chaloner’s exercise of control and relationship with Mr Naidu to have alerted it to the need to investigate the conduct. He held that if it had done so, it would have discovered its serious and potentially dangerous side.

306 His Honour considered, at [198], that by agreeing that Mr Chaloner be Mr Naidu’s direct supervisor, ISS Security must be taken to have accepted responsibility for Mr Chaloner’s conduct. He found that Mr Chaloner was ISS Security’s agent for the purpose of managing the on-site aspects of the security services supplied by ISS Security and for directing Mr Naidu in the performance of his duties. Having regard to this relationship, and in circumstances where Mr Chaloner was Mr Blinkworth’s opposite number, his Honour found Mr Chaloner’s knowledge of his own misconduct was attributable to ISS Security.

307 His Honour concluded at [228] that ISS Security either knew of Mr Chaloner’s misconduct towards Mr Naidu through the knowledge of its employees on Nationwide News’ site because it had failed to prevent Mr Chaloner’s intimidation; or because it had failed to make reasonable enquiries about it; or because it had failed to put in place appropriate procedures that would have encouraged reporting and given its employees an awareness of the need to report such misconduct.

308 There were thus three bases upon which his Honour found that it was reasonably foreseeable to ISS Security that Mr Naidu would suffer psychiatric injury: first, Mr Blinkworth’s knowledge of intimidatory conduct; secondly, Mr Chaloner’s knowledge was attributable to ISS Security; and thirdly, the knowledge of ISS Security’s employees of his misconduct was attributable to it. I will deal with each in turn.

Foreseeability based on Mr Blinkworth’s knowledge

309 As I have already explained, the trial judge rejected Mr Naidu's evidence that he specifically complained of Mr Chaloner’s racial slurs and harmfully demeaning conduct. His Honour found that Mr Naidu probably complained at some time that Mr Chaloner had insulted or demeaned him in some way. He considered, however, that such complaint was not sufficient to require Mr Blinkworth to act upon it in any way. In particular, his Honour found that such complaint was not sufficient to require Mr Blinkworth to undertake any enquiries or investigation (judgment [93]).

310 His Honour also found that Mr Naidu probably complained to Mr Blinkworth from time to time about Mr Chaloner’s unreasonable demands on him. His Honour concluded that these complaints, of themselves, were also insufficient to lead Mr Blinkworth to suspect that Mr Chaloner was behaving in a way that might cause injury to Mr Naidu (judgment [189]). However, his Honour concluded that Mr Blinkworth had sufficient knowledge himself of Mr Chaloner’s conduct, including that it was of an intimidatory nature, and that Mr Naidu was the butt of it (judgment 191). His Honour made references to other issues in this finding. However, the effect of this finding is that the combination of Mr Naidu’s complaints and Mr Blinkworth’s own knowledge were such that it should have been reasonably foreseeable to Mr Blinkworth that Mr Chaloner’s intimidatory conduct over a protracted period could cause psychiatric harm.

311 That Mr Blinkworth had that knowledge is supported by the transcript of the conversation between him and Mr Naidu in early 1996, recorded by Mr Naidu. It will be recalled that that conversation occurred after Mr Naidu had a motor vehicle accident and was required to return to work immediately after being discharged from hospital. In that conversation, Mr Blinkworth expressly recognised that Mr Naidu had been undertaking “too much work”. He also made comments that indicated that he was aware of Mr Chaloner’s unreasonable demands on Mr Naidu and of his own perceived inability to do anything about it. The following is illustrative of this:

“[Mr Naidu] And so I just wanted to let you know Charles and the doctor is seeing me again on Thursday and he’s going to see me again on Friday and that’s the only time they can tell me exactly of like when I’m going back to work.

[Mr Blinkworth] Ok mate no worries.

[Mr Naidu] I mean I’ve spoken to Lance.

[Mr Blinkworth] How was he?

[Mr Naidu] He’s not happy. He’s saying that you are not happy.

[Mr Blinkworth] Yeh – Lance was pretty upset yesterday, you know what I mean?

...

[Mr Blinkworth] Look mate I understand ... I can’t do much as you know.

[Mr Blinkworth] And I went in there and said look you know I’m sorry mate but that’s why. He wanted me to ring you up.

[Mr Blinkworth] I know, it’s very difficult as you know mate.”

(Emphases added)

Foreseeability based on Mr Chaloner’s knowledge

312 In finding that ISS Security was liable for the conduct of Mr Chaloner and that his knowledge was attributable to it, his Honour relied upon the decision of this Court in TNT Australia Pty Limited v Christie & 2 Ors [2003] NSWCA 47; (2003) 65 NSWLR 1.

313 The plaintiff in TNT v Christie was employed by an employment agency, or “a body hire company”. He was sent by his employer to work at the brewery premises of TNT where he worked under the daily management of the TNT warehouse manager. The plaintiff’s wages were paid by the employer and a representative of the employer visited the brewery once a week. The plaintiff’s duties at TNT’s premises were to pick up cartons of beer and have them ready for delivery to liquor outlets. The plaintiff was injured in the course of carrying out these tasks when a pallet jack, which was equipment supplied by TNT to enable the plaintiff to carry out his duties, malfunctioned and ran over his foot.

314 Mason P held that both the employer and TNT owed to the plaintiff a non-delegable duty of care. His Honour analysed the scope of that duty at 10 [45]. It is not necessary to repeat all of that analysis. What is relevant for present circumstances, and as TNT v Christie confirms, is that a non-delegable duty is not discharged merely by the employment of a qualified independent contractor. As Mason P had earlier observed in his judgment in this Court in Lepore v State of New South Wales [2001] NSWCA 112; (2001) 52 NSWLR 420 at 426 [29]:

“The expression ‘non-delegable duty’ is somewhat misleading. It implies that a person cannot delegate a duty, but the truth is that the person cannot avoid liability by relying on the delegation, even to a competent delegate.”

315 His Honour continued at 429 [43]

“Discussion about non-delegable duties of care is usually accompanied by the statement that the duty will not be discharged merely by the employment of a qualified and ostensibly competent independent contractor (e.g. Burnie Port Authority at 550). However, the concept extends to negligence by employees because it may be invoked whether fault is, or might be, that of an employee whether or not acting in the course of employment.”

316 In Kondis v State Transport Authority [1984] HCA 61; (1984) 154 CLR 672 the employer was held liable for the negligence of its independent contractor in failing to adopt a safe system of work. It was held that the contractor’s failure to adopt a safe system of work constituted a failure by the employer to satisfy its non-delegable duty to exercise reasonable care in providing a safe system of work for its employee.

317 ISS Security owed a non-delegable duty of care to Mr Naidu to take reasonable care for his safety, including taking reasonable care to provide him with a safe system of work and a safe place of work. If Mr Chaloner had been employed by ISS Security, then ISS Security would have been liable for his conduct to Mr Naidu, provided that the conduct could properly be characterised as an unauthorised mode of carrying out his duties. I have already concluded that that was the appropriate characterisation of his conduct.

318 Once it is accepted that Mr Chaloner became Mr Naidu’s effective supervisor, and the person to whom he was directly answerable with the consent and concurrence of ISS Security, I am of the opinion that it also became vicariously liable for any tortious wrongdoing in which he engaged: see New South Wales v Lepore per Gleeson CJ at [40] ff.

319 This conclusion does not require that ISS Security had knowledge of the wrongdoing. Nor does it require any formal relationship of agency. As Gaudron J explained in New South Wales v Lepore:

“To the extent that vicarious liability is imposed on employers by reason that an employee has either done something that the employer has authorised or has done something in the course of his or her employment, it is referable to the general law of principal and agent. To the extent that vicarious liability is imposed for acts which constitute the doing of an authorised act in an unauthorised way, it will generally be the case that it can be justified on the basis of ostensible authority, a species of estoppel by which a principal is precluded from denying his or her agent's authority.” (footnotes omitted)

320 Having appointed, or allowed Mr Chaloner to be Mr Naidu’s de facto supervisor, ISS Security became vicariously liable for his conduct just as it would have been vicariously liable for his conduct if he had been its direct employee. For the reasons discussed above in relation to Nationwide News’ liability, it does not matter that Mr Chaloner may have been acting contrary to a direct instruction not to engage in non-discriminatory conduct. As Mr Chaloner was ISS Security’s agent, his knowledge of his own conduct became ISS Security’s knowledge. The matter may also be expressed in slightly different terms. There could have been no dispute that had Mr Blinkworth been the party who had engaged in the conduct, his seniority was such that his knowledge would have been that of ISS Security. As Mr Chaloner was Mr Blinkworth’s “opposite number” and ISS Security’s agent, his knowledge was the knowledge of ISS Security on the principles that I have discussed above.

Foreseeability based on the knowledge of ISS employees

321 Senior counsel for ISS Security submitted that the knowledge of other employees was not sufficient to establish reasonable foreseeability. It relied upon the decision of this Court in O’Leary v Oolong Aboriginal Corporation Inc [2004] NSWCA 7 as an example of a case where knowledge of staff members was not sufficient to establish that there was a reasonably foreseeable risk of injury. The majority judgments do not support that submission. Rather, Spigelman CJ, at [18], held that the reaction of the plaintiff to the suspicion that he was engaged in fraudulent conduct in his workplace 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 [employer’s] conduct”: see generally Tame v State of New South Wales discussed above. Sheller JA considered that whilst it might have been reasonably foreseeable that the employer’s conduct in continuing to maintain that the plaintiff was under suspicion for fraud, in circumstances where an independent report had already been received dispelling any notion of wrongdoing by him, would cause the plaintiff some form of workplace stress, it was not foreseeable that he would suffer a psychiatric illness. I do not therefore find the case to be of assistance.

322 ISS Security also referred to this Court’s decision in State of New South Wales v Mannell, in this context, to support a submission that unlike that case, where the plaintiff had complained over a long period of time to a senior supervisor, here there were no complaints of a kind that would alert management to Mr Chaloner’s misconduct. Mr Naidu argued, however, that in any event, the notoriety of Mr Chaloner’s conduct in the workplace was sufficient for ISS Security to be fixed with the knowledge of its employees.

323 His Honour’s reasoning around this point is complicated by references to the company’s anti-discrimination policy and other contractual issues. I do not consider it necessary to determine the correctness of his Honour’s approach in doing so. In the first place, the anti-discrimination policy was introduced after the time when his Honour found Mr Naidu had suffered relevant harm. And, for reasons which I give below, I would not base liability in this case on breach of contract.

324 Having said that, I am doubtful that his Honour’s finding regarding the employees’ knowledge, was sufficient to make it reasonably foreseeable to ISS Security that Mr Chaloner’s conduct gave rise to a risk of harm. It may be, of course, that if the negligence alleged is a failure to implement proper checking systems as to the welfare of employees, then such knowledge might be sufficient. In this case, although there was an element of that approach in his Honour’s reasons, I do not consider that this case was, in reality, a systems case. Here, the employees were off-site and not under the daily or even weekly supervision by Mr Blinkworth, or, it would seem, any other relevant supervisor. It appears that none of them complained and in any event, Mr Naidu was the senior ISS Security officer on site and in the ordinary course would be the person to whom complaints would be made or who would be expected to make complaint, and as his Honour found, he did not do so in a relevant way.

325 However, this conclusion relates only to one basis for finding reasonable foreseeability. I have concluded that his Honour was otherwise correct in finding that there was a reasonably foreseeable risk of psychiatric harm.

Breach of duty

326 The finding of the existence of a duty and in particular, a finding that a defendant has knowledge of a foreseeable risk of injury, does not mean that a finding of negligence is inevitable. The question whether there has been a breach of the duty depends upon what, judged prospectively, a reasonable person ought to have done in response to the risk. The conduct complained of may not call for any particular response and if it does not, there will be no breach for failing to take any particular postulated response.

327 In New South Wales v Fahy the High Court was concerned principally with the question whether the Police Service had breached its duty of care to Ms Fahy by failing to provide a system of work instructing officers to work in pairs, remaining together wherever possible, and each providing psychological support to the other during any dramatic incident.

328 Gummow and Hayne JJ, in dealing with the question of breach of duty, emphasised at 1034 [57] that the inquiry directed by Wyong Shire Council v Shirt “[look[s] forward to identify what a reasonable person would have done, not backward to identify what would have avoided the injury”. As Hayne J had stated in Vairy v Wyong Shire Council [2005] HCA 62; (2005) 223 CLR 422 at 461 [124]:

“The inquiry into breach, although made after the accident, must attempt to answer what response a reasonable person, confronted with a foreseeable risk of injury, would have made to that risk. And one of the possible answers to that inquiry must be 'nothing'.”

329 This case was not in that last category. The reasonable foreseeability did call for a response. As I have indicated, in the case of Nationwide News, that response was probably dictated by its declared policy, namely, that such conduct warranted dismissal. However, some lesser response could have been adequate, such as removing Mr Chaloner from any supervisory duties, or perhaps counselling and conciliation. Nationwide News implemented none of those responses and in the circumstances, breached its duty of care.

330 In the case of ISS Security, a number of options were open to it. Once having investigated the complaints it could have removed Mr Naidu from that workplace. It could have made representations to Mr Paine. It could have ensured that the employment conditions, including hours of work, were properly negotiated and complied with. It could have ensured that there were systems of review to ensure that employees who were working off-site under the control of others were properly supervised. What is absolutely clear is that the appropriate response was not to do nothing.

The terms of the contract of employment

331 One of ISS Security’s major challenges to his Honour’s reasons was to his Honour’s findings as to the terms of Mr Naidu’s contract of employment and his Honour’s finding of breach of those terms. Having regard to my conclusion on ISS Security’s liability in negligence, this issue is superfluous to the overall result. However, as his Honour made a separate award for breach of contract and as the question raises some matters of principle, a brief consideration of the issues raised is necessary.

332 There was no written contract of employment between ISS Security and Mr Naidu. There was no dispute that his contract of employment contained the usual implied terms requiring an employer to provide a safe place of work and a safe system of work. It was acknowledged by the parties that in this regard the duty of an employer in contract and tort was identical in content: see Jury v The Commissioner for Railways (New South Wales) [1935] HCA 29; (1935) 53 CLR 273 at 290. ISS Security submitted that the content of the duty was as stated by the High Court in O’Connor v The Commissioner for Government Transport [1954] HCA 11; (1954) 100 CLR 225 at 229: That duty was:

“... to take reasonable care for the safety of [his employee] by providing proper and adequate means of carrying out his work without unnecessary risk, by warning him of unusual or unexpected risks, and by instructing him in the performance of his work where instructions might reasonably be thought to be required to secure him from danger of injury.”

333 Mr Naidu had further pleaded in his Amended Statement of Claim that ISS Security would provide him with a safe working environment and would hire competent staff. Mr Naidu then pleaded specific implied terms, namely: that he would not be subjected to physical and sexual assault, harassment and would not be mistreated: para 12 of the Amended Statement of Claim; and that he would not be required to work unreasonably long hours and would not be forced to perform degrading tasks: para 13. In its Grounds of Defence, ISS Security denied that there were implied terms as alleged in these two paragraphs. It also did not admit that there was an implied term that it would provide Mr Naidu with a safe working environment and would hire competent staff.

334 The trial judge found, at [191], that there was an implied term in the contract of employment to protect all employees from racial or personal vilification and that the employer take reasonable steps to prevent such conduct being inflicted during the course of employment. His Honour held that a term to this effect was necessarily implicit in a duty to provide a safe place and a safe system of work.

335 His Honour further held that, in any event, as ISS Security had a policy prohibiting personal vilification and systems designed to deal with it, the terms of that policy were a condition of Mr Naidu’s contract of employment that ISS Security would ensure, as far as reasonably practicable, that he would not be subjected to conduct of the kind contemplated by the policy: judgment [191]; and [10] of the second judgment. However, the anti-discrimination policy only came into effect in April 1997, shortly before Mr Naidu went off work for the first time and only after Mr Chaloner had been dismissed from his employment. Accordingly, even if such a finding could be sustained, it is not relevant to the issues before the Court.

336 His Honour further found that there was an implied term in every contract of employment that employees are not to be placed in fear of insult or physical harm: judgment at [200]; and [10] of the second judgment.

337 His Honour then found that there was, in effect, a blanket implied term that ISS Security would not, by its servants or agents, intimidate, racially or personally vilify Mr Naidu, subject him to demeaning, harassing or abusive conduct, or threats of such conduct, or threats of violence, and that it would, so far as reasonably practicable, protect him from any such conduct occurring in the course of his employment: [11] of the second judgment.

338 ISS Security complained that the implied terms found by his Honour were not those pleaded by Mr Naidu. It further submitted that other than terms that the employer provide a safe place of work and a safe system of work, there were no other implied terms of the contract of employment. It referred the Court to the authorities that relate to the implication of a term: see BP Refinery (Western-Port) Pty Limited v Shire of Hastings [1977] HCA 40; (1977) 180 CLR 266; Byrne v Australian Airlines Limited [1995] HCA 24; (1995) 185 CLR 410.

339 As I have already indicated it is not necessary to determine whether there were implied terms beyond the usual implied terms that there be a safe place of work and a safe system of work. His Honour found, at [191], the specific implied terms that he found were necessarily implicit in the duty to provide a safe place and a safe system of work. This was not a workplace where the use of machinery was the means by which work was performed. Rather, it was a sophisticated ‘white collar’ workplace. The meaning and content of an implied term such as “safe place” and “safe system” have to be ascertained in that context. The workplace also has to be viewed in the context that racial abuse is unlawful, and in a modern society bullying and intimidation are recognised as improper forms of conduct. Those factors also give content to the meaning of these terms.

340 Accepting that there was a foreseeable risk of injury in this case, ISS Security’s duty included an obligation to take all reasonable steps to ensure that Mr Naidu was not subject to conduct that was likely to expose him to psychiatric harm. The days when foreseeable risk of injury in the workplace was only a foreseeability of physical harm is long past. It is well recognised that psychiatric illness may result from abusive and physically threatening conduct, such as that to which Mr Naidu was subjected. Accordingly, even if there was error in the trial judge’s findings as to the extended implied terms of the contract of employment, it is not error which of itself requires appellate intervention.

341 I should state, however, that I have reservations about the implication of terms beyond those that are co-extensive with an employer’s obligation to provide a safe place and a safe system of work. The content of that obligation will vary, depending upon the nature of the employment. It may, for example, be the case that particular employment, as a matter of contract, involves the working of long hours. Likewise, to imply terms such as his Honour did to the effect that there was a blanket term that ISS Security would not, by its servants or agents, intimidate, racially or personally vilify Mr Naidu, subject him to demeaning, harassing or abusive conduct, or threats of such conduct, or threats of violence and the like, could have the effect of cutting across the demarcation made in the law relating to vicarious liability between acts that are a means of carrying out the employment activity and conduct which is properly characterised as falling outside the course of employment. This is the distinction discussed above. Such a term could also have the effect of cutting across the principles that govern the determination of the question of whether a particular risk was reasonably foreseeable and have the effect of imposing a form of strict liability.

342 In any event, none of the ‘additional terms’ that his Honour found were implied satisfy the “business efficacy test” stated in BP Refinery (Western-Port) Pty Limited v Shire of Hastings and Byrne v Australian Airlines Limited.

343 There was also a challenge to his Honour’s finding of breach of contract on the basis that Mr Chaloner was not ISS Security’s agent. Whilst I do not need to deal with this question, for the reasons I have given, I should indicate that my view on that matter is that, on the basis that the implied terms of the contract employment were that ISS Security was required to provide a safe place and a safe system of work, its relationship with Mr Chaloner was such that it was liable for his conduct.

Error in making a separate award for breach of contract

344 The trial judge awarded Mr Naidu the sum of $100,000 for ISS Security’s breach of its contractual obligation to provide a safe place of work. As just discussed, his Honour later expanded upon the content of the implied terms and found that there was an implied term not to subject Mr Naidu to the vilifying conduct. His Honour found that that term had been breached and that “[t]he effects of the intimidation and vilification were considerable distress, humiliation and accumulating stress, anxiety and unhappiness”: see second judgment at [18].

345 In Baltic Shipping Company v Dillon [1993] HCA 4; (1993) 176 CLR 344 at 365 Mason CJ held:

“... it is preferable to adopt the rule that damages for disappointment and distress are not recoverable unless they proceed from physical inconvenience caused by the breach or unless the contract is one the object of which is to provide enjoyment, relaxation or freedom from molestation. In cases falling within the last-mentioned category, the damages flow directly from the breach of contract, the promise being to provide enjoyment, relaxation or freedom from molestation.”

346 The essential attack made upon this award is that the distress, humiliation and the like suffered as a result of breach of contract, had in fact been subsumed in the award of damages for psychiatric injury itself. It was submitted that there was, therefore, no loss flowing discretely from the breach of contract. Although the submission was not precisely in these terms, the effect of it was that there had been double compensation. In my opinion, this argument on its face has merit. In order to see whether it ought to be sustained, it is necessary to know what was encompassed in the award of general damages arising from the claims in negligence and intentional torts.

347 His Honour reviewed the medical evidence at judgment [234]-[255]. That evidence, to the extent that it was accepted by his Honour, revealed that over time Mr Naidu’s condition fluctuated, but he suffered from anxiety, depression and PTSD. Mr Naidu’s own evidence was of being upset, crying, being scared, and not knowing what he could do, and of being very concerned that he would lose his job. In my opinion, these complaints were part and parcel of the complaints that led to Mr Naidu being diagnosed with the illnesses to which I have referred. It would be difficult, if not impossible, to single out some other constellation of symptoms that called for, or in respect of which one would be entitled to, separate compensation, at least in circumstances where compensation was awarded for the overriding illness and its consequences.

348 ISS Security also challenged the making of the award itself. However, having regard to my finding in relation to damages, it is not necessary to determine this question. It follows that this ground of appeal should be upheld and the award of damages for breach of contract should be set aside.

349 Having regard to the conclusion that I have reached in respect of the contract and contract damages issues, it is not necessary to deal with Ground 17 of the Notice of Appeal. In that Notice of Appeal, ISS Security contend that it was denied procedural fairness, in that his Honour failed to inform ISS Security that he was considering finding (and it followed, his Honour did not hear argument on the question) that there were implied terms of the contract of employment, beyond the usual implied terms of a safe place and system of work.

Damages

350 ISS Security challenges the award of pre-injury earnings of $70,000 on the grounds that the evidence was inadequate to support his Honour’s finding and an award for future treatment needs, including lifetime care and hospitalisation.

351 The trial judge found that Mr Naidu acted in a capacity superior to other site supervisors (judgment [287]). His Honour’s finding of pre-injury earnings, the basis upon which he made his award of economic loss, was based upon that assessment, together with ISS Security’s records, including the records relating to comparable employees. No error has been shown in his Honour’s assessment.

352 The medical evidence was overwhelming as to Mr Naidu’s need for lifetime care and future hospitalisation. ISS Security did not point to any evidence that might have demonstrated error.

353 The appeal, so far as it relates to damages, should therefore be dismissed.

Interest

354 ISS Security challenges the award of interest on damages for past economic loss. It contends that as Mr Naidu had not complied with Pt 33 of the Supreme Court Rules, he had not provided all particulars necessary to enable it to assess the claim and respond to the offer, as required by s 151M of the Workers Compensation Act.

355 Section 151M provides:

151M Payment of interest

(1) Limited statutory entitlement

A plaintiff has only such right to interest on damages as is conferred by this section.

...

(4)

(a) Interest is not payable (and a court cannot order the payment of interest) on damages unless:

(i) information that would enable a proper assessment of the plaintiff’s claim has been given to the defendant and the defendant has had a reasonable opportunity to make an offer of settlement (where it would be appropriate to do so) in respect of the plaintiff’s full entitlement to all damages of any kind but has not made such an offer, or

(ii) the defendant has had a reasonable opportunity to make a revised offer of settlement (where it would be appropriate to do so) in the light of further information given by the plaintiff that would enable a proper assessment of the plaintiff’s full entitlement to all damages of any kind but has not made such an offer, or

(iii) the defendant has made an offer of settlement, the amount of all damages of any kind awarded by the court (without the addition of any interest) is more than 20% higher than the highest amount offered by the defendant and the highest amount is unreasonable having regard to the information available to the defendant when the offer was made.

(b) The highest amount offered by the defendant is not unreasonable if, when the offer was made, the defendant was not able to make a reasonable assessment of the plaintiff’s full entitlement to all damages of any kind.

(c) For the purposes of this subsection, an offer of settlement must be in writing.

(5) Calculation of interest

If a court is satisfied that interest is payable under subsection (4) on damages:

(a) the amount of interest is to be calculated for the period from the date of the death of or injury to the worker until the date on which the court determines the damages, and

(b) the amount of interest is to be calculated in accordance with the principles ordinarily applied by the court for that purpose, subject to this section.

(6) Rate of interest

The rate of interest to be used in any such calculation is three-quarters of the rate prescribed for the purposes of section 101 of the Civil Procedure Act 2005 for the period concerned.

(7) Judgment debts

Nothing in this section affects the payment of interest on a debt under a judgment or order of a court.”

356 The trial judge held that ISS Security had sufficient information to enable it to assess the claim. He said:

“[5] I am of the view that certainly by the time of trial Group 4 was well-aware of [Mr Naidu’s] case that he was for all practical purposes completely or largely incapacitated from any work. Aside from anything else, this was the clear purport of the medical evidence which had been served. I do not doubt that any defendant would have been fully aware that this was the nature of the claim and, furthermore, that it could assess the likelihood of such a claim being made good. It follows, I think, that [ISS Security] also had a reasonable opportunity to make an offer of settlement and that it would have been appropriate to do so. The offer of settlement may have been one which took into account the risks not only facing [ISS Security] but also [Mr Naidu] and an offer which did that in an appropriate way would not have been unreasonable. However no offer was made.”

357 ISS Security submit that his Honour failed to address the question whether it had been provided with information to enable it to make a proper assessment of Mr Naidu’s claim. At the time the hearing had commenced, Mr Naidu had not complied with Pt 33 r 8A of the Supreme Court Rules. That rule provided:

“8A Personal injuries cases; particulars

(1) Subrule (2) applies to proceedings in the Common Law Division in which a claim is made for damages in respect of personal injuries.

(2) The plaintiff may not file a notice to set down for trial proceedings to which this subrule applies unless the party has served on all other parties who have an address for service in the proceedings a statement setting out:

(a) particulars of injuries received,

(b) particulars of continuing disabilities,

(c) details of out-of-pocket expenses, and

(d) where any claim is made in respect of loss of income:

(i) the name and address of each employer during the 12 months preceding the accident together with details of the periods of employment, capacity in which employed and net earnings during each period of employment,

(ii) the name and address of each employer since the accident together with details of the periods of employment, capacity in which employed and net earnings,

(iii) the amount claimed in respect of loss of income to the date of the statement by comparison between what the plaintiff has earned since the accident and what he would have earned but for the accident, setting out, in respect of what the plaintiff would have earned but for the accident, particulars thereof, including where appropriate, particulars of the earnings of comparable employees and the identity of those employees or, where appropriate, particulars of payment which the plaintiff would have received under a relevant award or industrial agreement and the description of that award or industrial agreement,

(iv) particulars of any alleged loss of earning capacity and future economic loss,

(v) where self-employed, such additional particulars as will achieve full disclosure of the basis of the claim for loss of income, and

(vi) particulars of any claim in respect of services of a domestic nature or services relating to nursing or attendance,

together with:

(e) copies or originals of all documents available to the plaintiff in support of a claim for special damage and economic loss, whether past, present or continuing, including:

(i) hospital, medical and similar accounts,

(ii) letters from a workers’ compensation insurer indicating moneys paid to or on behalf of the plaintiff,

(iii) letters from employers, wage records, income records and group certificates, and

(iv) reports, contracts, correspondence and award rates relied on to support any claim in respect of services of a domestic nature or services relating to nursing and attendance, and

(f) copies or originals of all hospital and medical reports available at the time of serving the statement upon which the plaintiff intends to rely at the trial.

(3) Subrule (4) applies to proceedings in the Common Law Division in which a claim made under the Compensation to Relatives Act 1897 includes a claim for loss of maintenance and support.

(4) The plaintiff shall not file a notice to set down for trial proceedings to which this subrule applies unless the party has served on all other parties who have an address for service in the proceedings a statement setting out:

(a) the name and address of each employer of the deceased person during the 12 months preceding death with details of the periods of employment, capacity in which employed, net earnings during each period of employment and the basis of any assertion that those earnings would have increased but for death,

(b) where the deceased person was self-employed, such particulars as will achieve full disclosure of the basis of the claim,

(c) particulars of expenses of the funeral or cremation of the deceased person or the cost of erecting a headstone or tombstone over the grave of the deceased person,

together with:

(d) copies or originals of all documents available to the plaintiff in support of the claim including:

(i) letters from employers, wage records, income records and group certificates, and

(ii) material from which the particulars referred to in paragraph (b) were derived.

(5) Where subrule (2) applies, the statement mentioned in subrule (2) (a)–(d), and, where subrule (4) applies, the statement mentioned in subrule (4) (a)–(c), shall be filed with the notice to set down for trial.

(6) Subrules (3), (4) and (5) do not affect the requirements of section 6 of the Compensation to Relatives Act 1897 (which section relates to a particular of the nature of the claim, etc).”

358 It was submitted that the purpose of Pt 33 r 8A was to facilitate the provision of information to a defendant, so that it was aware of the case that the plaintiff was seeking to make. It was submitted that this purpose could not be achieved unless information was in fact provided to a defendant and that a defendant should not be left to its own resources to draw such inferences as it could from the medical evidence that had been served upon it (and, which presumably, it had in its possession). It was further submitted that in any event, without knowing what case was being advanced, a defendant was not in a position to make an offer of settlement.

359 Mr Naidu contended that, as his Honour found, ISS Security knew the case that was being made and in particular, was aware that he was advancing a case of total incapacity for work. He submitted that this was particularly apparent having regard to the fact that ISS Security had sought to have him sign a Deed of Release. Further, he had been provided with the services of a rehabilitation provider through its workers compensation insurer, and also had the medical evidence upon which he sought to rely. It was also submitted that ISS Security was well aware of Mr Naidu’s salary, and the salary packages of comparable employees.

360 In the usual course, a failure of a plaintiff to provide the particulars of claim that are required by the rules of court would be a powerful indicator that a defendant had not been put in a position such as to be able to assess a claim. However, this case is somewhat unusual, in that Mr Naidu’s medical evidence strongly supported a case of permanent incapacity. Further, he had been granted a disability pension in 2001, a fact that would have been known to ISS Security, as it would have been relevant to his workers’ compensation entitlements. When there is added to those factors the information that ISS Security had at the time of the negotiation of the proposed Deed of Release, no error has been shown in his Honour's reasoning process.

The Notice of Contention

361 Mr Naidu filed a Notice of Contention seeking to uphold the award of damages on the basis of the intentional torts that he had pleaded. Having regard to the conclusion I have reached in respect of the claim in negligence it is not necessary to deal with the contention point.

Conclusion

362 It follows, therefore, that Nationwide News has been unsuccessful in its appeal and cross-appeal. ISS Security has been successful on one issue, which requires that the award of damages against it be reduced, so as to eliminate the award for contract damages. However, as Mr Naidu was substantially successful on the appeal, I consider that ISS Security should pay his costs. Accordingly, I propose the following orders:

Appeal CA 40182/06: Nationwide News v Naidu and Anor

1 Appeal dismissed with costs;

2. Cross-appeal dismissed with no order as to costs.

Appeal CA 40198/06: ISS Security v Naidu & Anor

1. Appeal allowed in part;

2. The parties to bring in short minutes of order in conformity with these reasons;

3. ISS Security to pay Mr Naidu’s costs of the appeal;

4. The cross-appeal is dismissed with no order as to costs.

363 BASTEN JA: These proceedings involved two appeals arising from a judgment given by Adams J in the Common Law Division. The judgment awarded damages to Mr Naidu (“the plaintiff”) for injury to his mental health caused during a period of years when he was placed by his employer, a security firm, at premises operated by Nationwide News Pty Ltd (“Nationwide News”) at Surry Hills in Sydney. The first appeal was brought by Nationwide News. When the proceedings were commenced, the second defendant was identified as News Limited. A defence was filed by Nationwide News Pty Ltd, stating that it had been “incorrectly named as News Limited”. In due course it filed a notice of appeal without appointment, but when filing a notice of appeal with appointment and an amended notice of appeal, the company described itself as “Nationwide News Ltd”. In the Court below, all three names were used, somewhat indiscriminately. It was assumed throughout the appeal that the appellant in the first appeal was both the employer of a Mr Chaloner and was the party which contracted for security services with the Appellant in the second appeal.

364 The second appeal was brought by the first defendant in the proceedings commenced in the Supreme Court in 2001. It was a company then known as Group 4 Securitas Pty Ltd, which accepted that it was the employer of the plaintiff between 7 March 1990 and 9 November 1998. It was known by that name throughout the trial proceedings and was joined by that name in the appeal commenced by Nationwide News. However, it commenced its own appeal in the name ISS Security Pty Ltd, formerly Group 4 Securitas Pty Ltd. It is convenient, therefore, to refer to it as “ISS Security”.

365 As Beazley JA explains in her statement of the facts, the plaintiff claimed that he had suffered psychiatric illness as a result of the deliberate and vindictive actions of Mr Chaloner, an employee of Nationwide News. Nevertheless, the case was run at trial primarily (though not solely) on the basis of a breach by the present Appellants, Nationwide News and ISS Security, of their respective duties of care owed to the plaintiff.

366 The Chief Justice has noted at [61] above that it is artificial to analyse Mr Chaloner’s intentional course of conduct in terms of a duty of care owed by Nationwide News or ISS. The trial judge also concluded that the acts of Mr Chaloner were not “mere negligence”: Naidu v Group 4 Securitas Pty Ltd [2005] NSWSC 618 at [186] quoted by the Chief Justice at [68] above. To the extent that the matter should have been addressed as an intentional tort, rather than negligence, the plaintiff now relies upon a notice of contention, which is necessary because, although the trial judge made most of the relevant factual findings, he did not find it necessary to reach a conclusion on such a cause of action.

367 Because the elements of an intentional tort are likely to differ from the elements of negligence, there is a question as to whether it is appropriate to reach a conclusion based on negligence in relation to intentional conduct, or whether the causes of action are truly alternative. In State of New South Wales v Lepore [2003] HCA 4; (2003) 212 CLR 511 at [270] Gummow and Hayne JJ noted that “negligently inflicted injury to the person can, in at least some circumstances, be pleaded as trespass to the person, but the intentional infliction of harm cannot be pleaded as negligence”. That statement would suggest that, at least in one respect, an intentional infliction of harm and negligence must be seen as true alternatives. However, Lepore was a case where the plaintiff sought to impose on the State, as the authority responsible for the operation of a school, liability for the criminal acts of a teacher, including sexual assault. A claim was made against the teacher, asserting trespass to the person, and against the State in negligence. The plaintiff failed in the negligence claim against the State and then sought, on appeal, to rely upon a cause of action for breach of a non-delegable duty of care. The comments in the High Court are to be understood in this context.

368 The interests which are protected by the civil law include physical integrity, mental health and property, including economic interests. Liability is not imposed, however, for all forms of interference with such interests: in many cases the interference may be justified, as in the case of an arrest or imprisonment under lawful authority. Even where conduct is unlawful, in the case of a government officer acting without authority, the civil law will not necessarily provide compensation for consequential loss.

369 Under the general law, the blameworthy quality of the act or omission necessary to engage tortious liability may be an intention to cause harm, reckless indifference as to the possible harm or failure to take reasonable care to avoid a foreseeable risk of harm. Different tests may arise in relation to statutory causes of action, where Parliament demonstrates an intention to create a right to compensation for breach of a statutory duty (as in the case of safety legislation) or creates a statutory tort (as in the case of anti-discrimination legislation)

370 These principles were affirmed by the High Court in Northern Territory v Mengel [1995] HCA 65; (1995) 185 CLR 307, at 339-349 in overruling Beaudesert Shire Council v Smith [1966] HCA 49; (1966) 120 CLR 145. The Court held that an essential element in an intentional tort is the intention to cause harm, not merely the carrying out of an intentional act: at 347. Mengel was concerned with the unlawful act of a government officer causing relevant harm, but in stating the principle to be applied, the majority judgment drew on principles applicable to torts of private individuals (at 347):

“And principle suggests that misfeasance in public office is a counterpart to, and should be confined in the same way as, those torts which impose liability on private individuals for the intentional infliction of harm. For present purposes, we include in that concept acts which are calculated in the ordinary course to cause harm, as in Wilkinson v Downton [1897] 2 QB 57, or which are done with reckless indifference to the harm that is likely to ensue, as is the case where a person, having recklessly ignored the means of ascertaining the existence of a contract, acts in a way that procures its breach.”

371 It may be assumed that reference to “harm” is a reference to compensable loss or damage. However, in the present context, that would mean harm going beyond embarrassment, injury to feelings, humiliation or psychological distress and constituting a psychiatrically cognizable injury to mental health. This gives rise to nice questions in terms of intention, which must be answered without assumptions based on hindsight. Thus, the fact that the plaintiff has suffered psychiatric injury, caused by the conduct in question, does not mean either that it was inevitable, or that it was intended.

372 Further, there are difficulties arising from the notion of “reckless indifference to the harm that is likely to ensue”. The difficulty of applying that test is particularly acute in the case of conduct undertaken in the course of an on-going lawful relationship. Such cases are quite different from Wilkinson and its progeny. In Wilkinson, the plaintiff was told by the defendant that her husband had been badly injured in an accident, a statement which was not true, but was apparently intended as a “practical joke”: see Mark Lunney, “Practical Joking and its Penalty: Wilkinson v Downton in Context” (2002) 10(2) Tort L Rev 168. Janvier v Sweeney [1919] 2 KB 316 was a wartime case in which the plaintiff was told that she was wanted by authorities for communicating with an enemy spy, namely her fiancé. This false and intimidatory statement was designed to induce her to take letters from her employer to which she was not entitled. Bunyan v Jordan [1937] HCA 5; (1937) 57 CLR 1 involved a claim by a plaintiff for shock suffered as a result of her employer’s drunken threat to shoot himself, followed by a shot being fired.

373 Quite different considerations arise where the conduct occurs in the course of a lawful activity, the elements of which are governed by a pre-existing relationship between the parties. An example may be found in a sporting contest such as the rugby league game which was considered in McCracken v Melbourne Storm Rugby League Football Club Ltd [2007] NSWCA 353. In that case there was an intention to cause a degree of physical discomfort to the player being tackled, which would have been legitimate, but the tackle went beyond that permitted by the rules of the game. The player being upended and landing on his head, the tackle was one which was no doubt “calculated in the ordinary course to cause harm”: however, whether it was intentional, reckless or merely negligent, would have raised nice questions which were not addressed in the case. Similar questions may arise in an employment context where the work is stressful, possibly requiring a high degree of co-ordination amongst a team and quick decisions which must be acted on promptly. On one side of the line there will be forceful but legitimate direction, on the other illegitimate bullying. Again, whether a defendant crosses the line intentionally, recklessly or negligently, will involve nice questions. Similar examples arise in cases of police or security guards exceeding the limits of their powers; such cases frequently being brought in negligence: see, eg, Zorom Enterprises Pty Ltd v Zabow [2007] NSWCA 106 and Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322.

374 On one view, where an employer (or person in authority over an employee) oversteps the limits of his or her authority to such an extent that there could be said to be an intentional infliction of harm, it may be thought that the conduct would be so far outside that authorised by the employer as to be conduct for which the employer was not liable. However, although unauthorised, the conduct may have a sufficient connection with the course of employment to render the employer liable: see Deatons Pty Ltd v Flew [1949] HCA 60; (1949) 79 CLR 370 and other cases discussed in State of NSW v Lepore (supra) and in Zorom.

375 Where the person injured is not a fellow employee, it may be necessary to identify any liability of the employer according to principles of vicarious liability (unless the person responsible for the conduct can be said to be an emanation of the corporation). That was the situation in Lepore. However, a different analysis may be available in circumstances where both aggressor and victim are covered by the relationship. In that case, the employer’s duty to provide a safe system of work for all employees may provide liability in negligence for the deliberate acts of one employee causing harm to another, thus allowing an analysis not available in relation to the security guard and the clientele of licensed premises.

376 There is a further difficulty in the way of a finding of intentional infliction of harm where the harm is the result of a course of conduct extending over years. While there may have been a foreseeable risk of psychiatric injury, it is far more difficult to conclude that the harm was a “calculated” result of the conduct, although it might be easier to say that the aggressor was recklessly indifferent as to the consequences of his conduct. There remains, however, a question as to the relationship of the conduct to the contractual circumstances. For an intentional tort, in the course of a relationship such as employment, must the person undertaking the conduct know or be recklessly indifferent to the fact that it goes beyond the means for giving direction to a subordinate?

377 In the present case, a claim in negligence would require that the defendants knew or ought to have known of conduct which was likely to give rise to a risk of psychiatric injury to the plaintiff, in circumstances where steps directed to the amelioration of the conduct should reasonably have been taken.

Conduct in contravention of anti-discrimination legislation
378 Some of the conduct complained of involved racially abusive epithets of a kind which could readily give rise to a racially hostile working environment. Like cases of sexual harassment, racial harassment of that kind would be unlawful under the Anti-Discrimination Act 1977 (NSW) in accordance with the principles discussed in O’Callaghan v Loder [1983] 3 NSWLR 89 (Mathews DCJ) and Hall v A&A Sheiban Pty Ltd [1989] FCA 72; (1988) 20 FCR 217 at 233 (Lockhart J), 247 (Wilcox J) and 274-277 (French J). At the relevant time, the Anti-Discrimination Act provided:

“123 Effect of contravention of Act

(1) A contravention of this Act shall attract no sanction or consequence, whether criminal or civil, except to the extent expressly provided by this Act.

(2) Nothing in subsection (1) prevents an action for defamation.”

379 Neither this provision nor the effects of the Racial Discrimination Act 1975 (Cth) were fully considered at trial: see c.f. Tcpt, 24/05/04, pp 3-4. His Honour expressly adverted to the effect of the Racial Discrimination Act, but did not find it necessary to consider its effect on the common law liability of Nationwide News and ISS Security: at [144]. His Honour stated at [191]:

“Whatever the effect of the Anti-Discrimination Act 1977 or similar legislation, I do not doubt that an employer has a duty by virtue of an implied term in the contract of employment to protect all employees from racial or personal vilification... This is necessarily implicit in the duty to provide a safe place and a safe system of work.”

380 These matters did not receive any attention in the course of the appeal and it may be that the existence of statutory remedies was not necessarily inconsistent with a general law liability for intentional infliction of a recognisable psychiatric injury. Alternatively, at least when the first anti-discrimination legislation was enacted in this country in the 1970’s, parliaments may not have appreciated the possibility that damages might be recoverable under the general law for racial abuse intended to cause nervous shock. (The history of the developments in this area may be found in Trindade, Cane and Lunney, The Law of Torts in Australia 4th ed (2007) OUP at [2.43] and see Penelope Watson, “Searching the Overfull and Cluttered Shelves: Wilkinson v Downton Rediscovered” (2004) 23(2) UTasLR 264, esp at 280-288 and Peter Handford, Mullany & Handford’s Tort Liability for Psychiatric Injury 2nd ed (2006) Lawbook Co, Ch 22.)

Basis of liability of Nationwide News
381 Of the grounds of appeal raised by Nationwide News, the first to be addressed, in logical order, is the challenge to his Honour’s conclusion that the plaintiff should be allowed an extension of time within which to commence his proceedings against Nationwide News. His Honour worked on the basis that the relevant limitation period was three years from the date on which the cause of action accrued, pursuant to s 18A(2) of the Limitation Act 1969 (NSW). That appears to have been based on the conclusion that the cause of action was in negligence. Even if the cause of action were for an intentional tort, being for damages for personal injury, s 18A would have applied. Such a claim should be understood as a claim for “breach of duty”, a phrase, which has been held to include intentional torts: see Stingel v Clark [2006] HCA 37; (2006) 226 CLR 442, applied in State of New South Wales v Harlum [2007] NSWCA 120 at [116]. Although the cause of action also fell within the six year limitation period provided in s 14, the shorter period will apply: s 13. In any event, I agree with Beazley JA that the ground of appeal based on the limitation defence should be rejected.

382 Putting to one side questions of damages and apportionment, the appeal by Nationwide News focused on two aspects of the findings of the trial judge, namely:

(a) the basis upon which Nationwide News was found liable for the tortious conduct of Mr Chaloner, and

(b) the finding that Mr Chaloner’s tortious conduct was a substantial cause of the plaintiff’s psychological illness.

383 In relation to the first question, his Honour addressed the liability of both Appellants at [185]-[229]. He commenced with the proposition that “there is no liability in negligence for causing distress, alarm, anxiety or despondency without any resulting recognized psychiatric illness” referring to Tame v State of New South Wales [2002] HCA 35; (2002) 211 CLR 317. His Honour continued:

“186 The acts of Mr Chaloner were, of course, not mere negligence. They were deliberate and intended to demean, offend and injure. Because no particular occasion could be said to have caused the plaintiff’s ultimate psychological illness, the defendants’ [sic] argue that the line of reasoning expressed in Janvier v Sweeney [1919] 2 KB 316 does not apply. It strikes me as extraordinary that, the intention of Mr Chaloner being as I have characterised it, he would not be liable for the actual injury he inflicted on the plaintiff, though he had not actually thought that what he was doing might do more than cause temporary, though acute and painful distress. In fact, I consider that Mr Chaloner was indifferent to the consequences of his malice and was content to cause as much distress as his actions were capable of inflicting, subject, I suppose, to the desirability of the plaintiff being able to continue to work in subjection to him. In this sense, the case is markedly different from the situation under consideration in Tame. If Janvier v Sweeney (supra) be rightly decided – and there is no reason, I think, to suppose otherwise – it appears to follow that the defendants are both liable for such of Mr Chaloner’s misbehaviour as was inflicted in the course of his employment, a matter to which I come in due course. As it happens, however, it seems to me that the defendants are liable in negligence – and [ISS Security] in contract – for the plaintiff’s psychological injury at Mr Chaloner’s hands and I have not, therefore, found it necessary to consider further the application of this line of authority to the present case.”

384 The first part of this passage in the reasoning of the trial judge appears to be concerned with the potential liability of Mr Chaloner, although he was not a party to the proceedings. The final sentence, refers to Nationwide and ISS Security being liable in negligence for Mr Chaloner’s conduct. There is, however, no clear connection drawn between Mr Chaloner’s intentional wrongdoing and the negligence of the defendants. At [188]-[201] his Honour dealt with the liability of ISS Security, which may be put to one side for present purposes. He reached conclusions in relation to ISS Security at [226]-[229].

385 His Honour dealt with the liability of Nationwide News at [202]-[225]. His Honour commenced with the proposition that Mr Paine, as Mr Chaloner’s superior at Nationwide News, was aware of Mr Chaloner’s misconduct on the basis of a report from another Nationwide News employee, Mr Kamaledine, in June 1995, and long before the dismissal of Mr Chaloner in November 1996. However, his Honour then diverted to a question of vicarious liability for intentional acts of Mr Chaloner before returning at [225] to deal with the question of knowledge in the following terms:

“225. The above discussion does not depend upon the finding that Mr Paine was told of Mr Chaloner’s misconduct by Mr Kamaledine and that reasonable inquiries would have exposed its extent, including its potential for causing psychological injury. However, as it seems to me, the conclusion that News is vicariously liable for Mr Chaloner’s misconduct is strengthened by that conclusion.”

386 In the intervening paragraphs, the trial judge dealt explicitly with the liability of Nationwide News for intentional misconduct on the part of Mr Chaloner. His Honour concluded that part at least of Mr Chaloner’s conduct was sufficiently closely connected to his duties as an employee of Nationwide News to be characterised as the exercise of his authority in the course of his employment, though by an improper and unauthorised mode. Accordingly, he concluded that Nationwide was vicariously liable for misconduct so characterised: at [224].

387 Despite his Honour’s statement that Nationwide News was “liable in negligence”, at [186], the reasoning was directed to a finding of vicarious liability for an intentional tort. By its notice of contention, the plaintiff sought to uphold the judgment below on the basis that Nationwide News was so liable. Accordingly, that matter must be addressed.

388 The plaintiff’s notice of contention stated that “independently of liability in the tort of negligence the Appellant is personally and vicariously liable to the Plaintiff in an action on the case for wilful injury arising out of the deliberate infliction of mental harm to the [plaintiff] by Mr Chaloner”. Despite the reference to “personal liability”, very little in the written submissions on the appeal addressed a form of direct, as opposed to vicarious, liability on the part of Nationwide News. Such a form of liability would require a finding as to Mr Chaloner’s status as the alter ego of the company. The reference to direct liability of the company in the plaintiff’s written submissions on the appeal (p 3, 23, 35 and 36) presented no substantial argument as to the basis for such a conclusion. Nor was the matter significantly advanced in oral argument, although counsel for Nationwide News took no exception to the suggestion that it might be liable on that basis (Appeal Tcpt, 30/07/07, pp 23(25)) and counsel for the plaintiff confirmed that he sought to pursue that basis of liability: Tcpt, 31/07/07, p 25(40). Although, as demonstrated by other members of the Court, there may be strong reasons for an affirmative finding in that regard, I would prefer not to decide the appeal on that basis. To determine whether a finding of vicarious liability was correctly made it is necessary to consider whether those aspects of the conduct of Mr Chaloner for which Nationwide News is to be held responsible give rise to the relevant tortious liability.

389 His Honour appears to have accepted that some conduct of Mr Chaloner was closely connected with his supervision of the security services supplied by ISS and hence of the plaintiff. The plaintiff commenced work as a security officer at the Surry Hills premises of Nationwide News on 7 March 1990: Tcpt, 24/05/04, p 17(20). He was promoted to senior security officer after six months, presumably in about September 1990: p 18(30). Three months later he was promoted to leading hand and then became one of three site supervisors in 1991: pp 18-19. It was at that stage that he appears to have come under the direct supervision of Mr Chaloner: p 20(15).

390 The first adverse incident of which Mr Naidu complained was an attempt by Mr Chaloner to arrange for his (Mr Chaloner’s) father to provide building services to Mr Naidu. He said that Mr Chaloner became angry and abusive, using racial and sexual epithets and insulting Mr Naidu’s wife. From reading the transcript, the incident is almost incomprehensible. It may have been part of the evidence which the trial judge found “difficult to accept” because it was so “extraordinary”: at [13]. Although the incident was about a matter unrelated to the employment of either Mr Chaloner or the plaintiff, the incident involved threats to the plaintiff to have him transferred and was clearly connected to the circumstances of their work relationship in that sense.

391 There were other episodes between 1992 and 1996 when Mr Chaloner was alleged to have made unreasonable demands on Mr Naidu’s time, both during periods of personal difficulty (including shortly before his wife’s miscarriage, during his mother’s illness and following a motor accident involving the plaintiff himself) and more generally.

392 Other incidents had, on one view, a more remote connection with his employment. The plaintiff gave evidence of an occasion when both he and Mr Chaloner were living at Nationwide News premises at Chullora. Mr Chaloner directed the plaintiff to wake him in the morning and stand guard in the shower area, which had no doors. The plaintiff gave evidence that Mr Chaloner sexually assaulted him by grabbing his “private part” and squeezing it: Tcpt, p 46(40)-(50). Somewhat surprisingly, this performance, including playing with his own genitals, was said to have been repeated by Mr Chaloner on subsequent mornings. The trial judge treated this as not relevantly connected with their employment.

393 The plaintiff gave evidence that Mr Chaloner required him in 1995 or 1996, to go his (Mr Chaloner’s) premises outside work hours to work on his property: Tcpt, p 59 and 67-69. In explaining why he did the work, he stated that he “had to ... [b]ecause he threatened me with my job and he was always abusing me and physical violence as well”: Tcpt, p 66(40-45). Although the subject matter of the demand was not connected with his employment, the threat which induced him to carry out the demand was.

394 His Honour was invited by counsel for Nationwide News to distinguish those categories of misconduct which were employment-related, and those which were not. There was some ambivalence expressed as to the appropriate approach to this issue. At [203], his Honour stated:

“As I think should be obvious from my account of the evidence, the usefulness of this analysis should not deflect attention from the reality that all these aspects of Mr Chaloner’s conduct, including his insistence upon unreasonably lengthy hours, were part and parcel of the process of exercising control over and demeaning the plaintiff. Some elements, such as labour at his house and sexual behaviour, related to Mr Chaloner’s private concerns. However, although the other elements of his conduct no doubt fed his own ego and sense of importance and power (that is, were personally gratifying) they were also ways by which he controlled the plaintiff in the actual performance of his employment. They had the effect of ensuring his almost unprotesting compliance with Mr Chaloner[’s] directions as to how those duties should be performed and induced him to work far longer hours than he otherwise would have. As I have said, I do not think it is possible, let alone sensible, to divide up the contribution that each particular aspect of Mr Chaloner’s impositions had on the plaintiff’s psychiatric condition. With the possible exception of the sexual assault, all Mr Chaloner’s requirements were inextricably intertwined in what was essentially the same course of conduct, which was to a very significant extent inextricably connected with the performance by the plaintiff of his work.”

395 The exception of the sexual assault was elaborated on in the following paragraph:

“Although the sexual misconduct occurred in the work context, it was so far removed from any work-related responsibilities that I am unable to hold that either News or [ISS Security] is vicariously liable for it. However, I am quite satisfied that the plaintiff would still have suffered from the psychological injury that was ultimately demonstrated, even if this particular disgraceful behaviour had not occurred.”

396 The circumstances of the case gave rise to something of a dilemma: the more outrageous Mr Chaloner’s conduct was found to be the greater the likelihood that it was beyond the scope of conduct for which his employer should be held responsible, whilst the less outrageous the conduct, the less the likelihood that it involved intentional infliction of harm, as opposed to an unreasonable manner of directing the plaintiff in his contractual duties to provide security services at Nationwide News’ premises.

Intentional infliction of harm
397 Nationwide News did not in substance seek to justify Mr Chaloner’s conduct in any respect; its defence was that it had no knowledge of his conduct until briefly before he was summarily dismissed. Accordingly, it was open to the trial judge to find that his conduct was “so brutal, demeaning and unrelenting that it was reasonably foreseeable that, if continued for a significant period of time ... it would be likely to cause significant, recognizable psychiatric injury” at [187]. Indeed, Nationwide News does not challenge that finding. The only remaining question is therefore whether Nationwide News could properly be held responsible for that conduct.

398 As his Honour recognised, the answer to that question depended upon an application of the principles accepted by the High Court in Lepore. Considering the language of each of the majority judgments in that case, his Honour was satisfied that, whichever test might be adopted, liability was established. If correctly applied, that may suggest that this was a clear case, or that the disparities in the language adopted in Lepore may not reflect significant disparities in principle. In my view, it is appropriate to approach the matter on the latter basis. As noted by Gleeson CJ in Lepore at [42] the test formulated by Salmond, Law of Torts 1st ed (1907) (at p 83) was that “an employer is liable even for unauthorised acts if they are so connected with authorised acts that they may be regarded as modes – although improper modes – of doing them, but the employer is not responsible if the unauthorised and wrongful act is not so connected with the authorised act as to be a mode of doing it, but is an independent act”. His Honour noted that such a test has it limitations: at [51]. Differentiation in particular circumstances may, his Honour noted, depend upon “the level of generality at which the authorised act is identified”.

399 Attention may need to be given to identifying the particular responsibility exercised by the employee. Thus, in Deatons Pty Ltd v Flew [1949] HCA 60; (1949) 79 CLR 370, the act of throwing a glass of beer at a customer in a pub might be seen as an act of “personal retribution” on her part, for which the employer was not responsible, because she was not employed to keep order in the bar. On the other hand, the theft committed by a managing clerk of a law firm of property belonging to a client may be viewed differently because the obligation of safekeeping was part of the employer’s contractual obligation to the client, and hence part of the employee’s responsibility: see Lloyd v Grace Smith & Co [1912] UKHL 1; [1912] AC 716. Similarly, the theft of a fur stole left for cleaning, might be an act of an employee for which the employer was responsible because part of the employee’s responsibility was the safekeeping of the stole: see Morris v CW Martin & Sons Ltd [1966] 1 QB 716. In each case, the unauthorised and criminal act of the employee was to be judged by the closeness of its connection with the responsibilities imposed by the contract of employment.

400 Gaudron J in Lepore stated that the test must require that “the person against whom liability is asserted is estopped from asserting that the person whose acts are in question was not acting as his or her servant, agent or representative when the acts occurred”: at [130]. Her Honour noted that ordinarily “a close connection between what was done and what that person was engaged to do” will not be the test of estoppel. Rather she said “the test is whether the person in question has acted in such a way that a person in the position of the person seeking the benefit of the estoppel would reasonably assume the existence of a particular state of affairs”: at [131]. Her Honour concluded:

“In the case of vicarious liability, the relevant state of affairs is simply that the person whose acts or omissions are in question was acting as the servant agent or representative of the person against whom liability is asserted.”

401 This test seeks to establish the basis for a finding of vicarious liability, rather than a means of differentiating particular categories of case. The application of the principle seems to have treated a “close connection” test as not irrelevant: at [132].

402 Gummow and Hayne JJ, after referring to a critical passage in the judgment of Dixon J in Deatons, identified two elements which were considered significant for the purposes of Lepore at [231]:

“First, vicarious liability may exist if the wrongful act is done in intended pursuit of the employer’s interests or in intended performance of a contract of employment. Secondly, vicarious liability may be imposed where the wrongful act is done in ostensible pursuit of the employer’s business or in the apparent execution of authority which the employer holds out the employee as having.”

403 This principle was adopted as sufficient for determination of that case at [239].

404 Kirby J took a potentially broader view of the scope of vicarious liability, than that taken in Deatons. His Honour stated at [324]:

“With the House of Lords and the Supreme Court of Canada, I am of the view that more recent expositions of the law of vicarious liability require the application of a broader formulation to describe those cases where, by the common law, an employer assumes, derivatively, liability for the wrongs committed by an employee occurring on work premises and in work hours against vulnerable people put at risk by the employer’s enterprise although such wrongs were deliberate and even constitute criminal acts on the part of the employee.”

405 Further, after referring to Bazley v Curry 1999 Can LII 692 (SCC); [1999] 2 SCR 534 at 560 [41.3], his Honour stated that “the expression ‘connection’ potentially connotes either a causal or temporal connection between the acts alleged and the employment, or both”: at [326].

406 There is no doubt, as all members of the majority in Lepore recognised, that the concept of acting in the “course of employment” may extend to “some acts done by an employee in direct contravention of explicit and binding directions given to that employee by the employer”: see, eg, Gummow and Hayne JJ at [225]. The nature of the connection with employment is implicit also in their Honours’ identification of “the apparent execution of the authority” conferred on the employee. What is within the scope of the authority, so as to provide a sufficient connection with the course of employment, may depend, as the Chief Justice noted in Lepore, on the level of generality at which the authority of the employee is to be considered. It may also depend upon the place of the employee within the organisational hierarchy of the employer. Thus, each of the employees in the cases such as Deatons, Morris and Lloyd were at a relatively low level. In the present case, Mr Chaloner was at a high level and may, indeed, have constituted the alter ego of Nationwide News for the purposes of directing and supervising the plaintiff’s work. In these respects, the position of Mr Chaloner was somewhat different from that of each of the employees in the cases referred to in Lepore. First, at a senior executive level, the work relationship is likely to expand beyond usual working hours. Further, as the senior officer at Nationwide News with responsibility for administering the contract by which security services were provided to Nationwide News, Mr Chaloner had broad discretionary powers.

407 The connection between the unlawful conduct of the immediate tortfeasor and the course of his employment, for the purposes of considering the vicarious liability of the employer, is not determined by the subjective views or motives of the employee. For example, while the occasion for the theft of the fur stole in Morris arose in the course of employment, the employee was not intending to act for the benefit of his employer in stealing the fur; on the contrary, he acted purely in his self-interest and to the disadvantage of the employer and the employer’s customer. The employee’s motive or intention is a critical element of the tort which involves an intentional infliction of harm, but is neither a critical element of, nor a reason for excluding, vicarious liability of the employer.

408 There remains a question as to whether the trial judge was correct in finding vicarious liability for the whole of the harm suffered by the plaintiff, despite the fact that some of the harm (such as the sexual assault and the work at Mr Chaloner’s private premises) were not seen as having a sufficiently close connection with the course of his employment. In effect, his Honour treated the tort as involving one course of conduct, the elements of which were inextricably intertwined. It was the connection between the course of conduct, taken as a whole, and Mr Chaloner’s employment which needed to be assessed.

409 Accepting his Honour’s assessment (which was not challenged by the plaintiff) that parts of Mr Chaloner’s conduct were outside the scope of his employment, so that his employer would not be liable for such conduct, the exclusion of those aspects of the conduct did not render the remaining conduct otherwise than tortious. Accordingly, if the relevant conduct were to be unravelled, so that Nationwide News was responsible only for a part, that part was nevertheless a substantial contribution to the harm suffered by the plaintiff. As a result, Nationwide News and Mr Chaloner were concurrent tortfeasors to the extent that Mr Chaloner was solely liable for conduct for which Nationwide News was not liable. Nationwide News was responsible for the whole of the damages suffered: whether it could have recovered any part thereof from Mr Chaloner as a concurrent tortfeasor is not a question which was raised in these proceedings.

410 It was, therefore, unnecessary to attempt to disentangle the elements of the tortious conduct and his Honour’s approach was not in error. For these reasons, I would dismiss the appeal by Nationwide News on the question of liability to the plaintiff.

411 In relation to the grounds of appeal concerning the assessment of damages, I agree with Beazley JA.

Liability of ISS
412 As the plaintiff’s employer, ISS Security admitted that it owed the plaintiff a duty to provide a safe system of work, as alleged in paragraph 7 of the statement of claim. In an amended statement of claim, the plaintiff further alleged that he was “pro hac vice in the service of the second defendant”. That was denied by both defendants. The legal significance of the pleading is somewhat obscure, but if it were intended to assert that Nationwide News owed to the plaintiff the same duties as did his employer, it need not be considered further on the basis that Nationwide News is otherwise liable to the plaintiff, for the reasons set out above.

413 ISS Security had a contract with Nationwide News pursuant to which it provided security services. No contract was in evidence, but correspondence between the parties in mid-1997, in relation to a number of disputed payments, suggested that there should be a “formal contract”, implying that previously there had been inadequate documentation of the contractual arrangements. There was also, apparently, no written contract between the plaintiff and ISS Security, he having been asked to sign a salary package in about September 1993, but had declined: Tcpt, 24/05/04, p 44(5).

414 Although it would be possible to construct a contract of employment, with terms implied by law, the liability of ISS Security may be assessed as a matter of tort, rather than breach of contract: c.f. Goldman Sachs JBWere Services Pty Ltd v Nikolich [2007] FCAFC 120 at [22] and [31] (Black CJ) and [324]-[326] (Jessup J). Putting to one side the remarks of the trial judge in relation to contract, it appears that he found liability in negligence on the part of ISS Security on four separate bases.

415 First, his Honour approached the matter on the basis that a senior officer of ISS Security, Mr Blinkworth, must have had sufficient information in relation to Mr Chaloner’s conduct to put him on notice that the plaintiff was at risk, thereby engaging an obligation to investigate further. However, at [189] his Honour concluded that Mr Blinkworth was on notice only of Mr Chaloner’s “unreasonable demands”, and then only of “isolated incidents of excessive demands”. His Honour concluded:

“I do not consider that his knowledge of these matters would or should have led him to suspect that Mr Chaloner was behaving in such a way as could or might lead to injuring the plaintiff, subject to a qualification to which I will come shortly.”

416 The precise nature of the qualification is not entirely clear, although at [193] his Honour held that “even one complaint of serious misconduct should initiate in any employer acting reasonably an enquiry both of the person against whom the allegation is made and of the affected subordinate about the truth of the allegation and the extent of the misconduct”.

417 The reason for that conclusion was twofold, namely that a failure to investigate might discourage further complaints and that one complaint was unlikely to mean there was only a single incident of misconduct, indeed a failure to investigate that act might not only discourage further complaints, but might encourage a continuation of the conduct. This line of reasoning, however, provided little assistance to the plaintiff who did not say that he was dissuaded or discouraged from complaining, but rather that he complained repeatedly, evidence which was rejected by the trial judge.

418 The conclusion reached in relation to Mr Blinkworth appears at [200] after referring to the risk of permitting intimidatory conduct, which could give rise to a recognisable psychiatric condition.

“It seems to me that the starting point is that Mr Blinkworth knew or ought to have known from his own relationship with Mr Chaloner that the latter was likely to use intimidation as one of his techniques of management and that the plaintiff would be the butt of misbehaviour. It follows that Mr Blinkworth had a responsibility, under the plaintiff’s contract of employment, to make reasonable enquiries of the plaintiff and other co-workers at the site about its nature and extent. I am satisfied that he did not do so. Had he done so, I think that, more probably than not, the true extent of Mr Chaloner’s misbehaviour would have been mostly, if not entirely, exposed.”

419 This conclusion is not easy to reconcile with his Honour’s earlier findings as to Mr Blinkworth’s state of knowledge. He held, at [93]:

“At the same time, it is probable that he [the plaintiff] mentioned to Mr Blinkworth at some time or another that Mr Chaloner had insulted or demeaned him in some way. However, I am unable to be satisfied on the balance of probabilities that such occasional complaint would or should have conveyed to Mr Blinkworth any real indication of misconduct (which he should have taken further in the sense of an investigation rather than a merely emollient response) amounting to notice that action was or should have been required.”

420 As the High Court held in Koehler v Cerebos (Australia) Ltd [2005] HCA 15; 222 CLR 44, the liability of an employer is not engaged unless there is a reasonably foreseeable risk of cognizable psychiatric illness: at [33] and [35]. His Honour’s finding at [200] is not supported by a factual finding engaging an obligation to investigate. Indeed, as it follows shortly after the rejection of the proposition that knowledge of demanding and unreasonable directions would constitute a sufficient trigger for further investigation, it appears that the conclusion at [200] probably follows from other concerns which were addressed in the intervening paragraphs.

421 The second basis upon which his Honour appears to have found liability on the part of ISS Security is that the company “had not paid sufficient attention to the practical consequences of harassment and bullying in the workplace” with the result that the policy of the company in that respect was inadequate. Whether that was seen as a failure to provide a safe system of work, taken in isolation, is unclear. As no express finding is made in that regard, it was probably only a factor which his Honour took into account, although in what way is not clear.

422 The third matter upon which his Honour appears to have placed weight, perhaps as a concomitant of the previous finding, is the knowledge of other ISS Security employees working at Nationwide News’ premises as to the manner in which the plaintiff was treated by Mr Chaloner. His Honour held that that knowledge should be attributed to the company “either directly or constructively”: at [197]. To attribute it constructively may have been intended as an appropriate consequence flowing from the absence of an effective policy which would have required such conduct to be reported by company employees, at any level. However, it is not clear that the case was presented quite in that manner and, if it were not, it should not now be adopted as a basis for upholding a finding against the company. As the Chief Justice explains, it is not possible to treat the knowledge of junior employees, who were either subordinate to or at best of equal status to the plaintiff, as knowledge of the company: at [44] above. To treat their knowledge as, constructively, knowledge of the company would require consideration of the circumstances in which the company was obliged to have a policy requiring junior members of staff to report unreasonable demands of supervisory staff at Nationwide News. If they were not as seriously affected by the conduct as one of their fellow ISS Security employees, who was superior to them, it is not possible to impose a legal obligation on the employer to require all its employees to assess the effects on their co-workers and report the conduct to their employer.

423 Fourthly, the trial judge appears to have treated ISS Security as liable by attributing to it Mr Chaloner’s “own knowledge of his misconduct”: at [198]. That followed from his Honour’s holding that “[i]n effect, and for all practical purposes, Mr Chaloner was the agent jointly of News and [ISS Security] for the purpose of managing the on-site aspects of the security contract between the two companies”. This was the reverse of the pleading that Nationwide News was “pro hac vice” the employer of the plaintiff, so as to make Mr Chaloner “pro hac vice” an employee of ISS Security. In truth, he held no such position. There was no contractual material which supported an obligation on Mr Chaloner to report to ISS Security; nor did Mr Chaloner have any general law obligation in that regard. Further, there is something incongruous about the proposition that an individual has an obligation to report his own misconduct. Either ISS Security was liable for Mr Chaloner’s misconduct, even absent specific knowledge, or it was not. It did not become liable because Mr Chaloner should have reported his own misconduct to it.

424 It should be accepted that ISS Security, as employer, had a duty at all times in respect of the safety of its employees, even if it did no more than supply the services of those employees to its principal: see TNT Australia Pty Ltd v Christie [2003] NSWCA 47; (2003) 65 NSWLR 1 at [63]- [65] (Mason P) applying Kondis v State Transport Authority [1984] HCA 61; (1984) 154 CLR 672 at 687-688 (Mason J); Maricic v Dalma Formwork (Australia) Pty Ltd [2006] NSWCA 174 at [57]- [58] and Goldman Sachs JBWere Services (supra). However, once it was established on the facts that, through its relevant officer, Mr Blinkworth, ISS Security did not have, nor ought to have had, knowledge of circumstances which would give rise to a reasonably foreseeable risk of cognizable psychiatric harm to the plaintiff, its failure to take steps in relation to his safety did not constitute negligence. There was no notice of contention seeking to support the judgment against ISS Security on any other basis. Accordingly, the appeal by ISS Security should be upheld and the judgment against it set aside.

425 It also follows that the notice of cross-appeal filed by Nationwide News seeking to vary the apportionment as between it and ISS Security should also be dismissed.

426 I would propose the following orders:

(1) In matter No. CA 40182 of 2006 (appeal by Nationwide News Pty Ltd):

(i) dismiss the appeal;

(ii) dismiss the cross-appeal of ISS Security Pty Ltd;

(iii) order the Appellant to pay the costs of the Respondents of the appeal.

(2) In matter No. CA 40198 of 2006 (appeal by ISS Security Pty Ltd):

(i) allow the appeal and set aside the orders of Adams J entered on 12 May 2006;

(ii) in place thereof, make the following orders:

(a) judgment for the plaintiff against the second defendant, Nationwide News Pty Ltd;

(b) order the second defendant to pay the plaintiff $1,946,189.40, such judgment to have effect from 12 May 2006;

(c) order the second defendant to pay the plaintiff’s costs of the proceedings in the Common Law Division on an ordinary basis up to 26 March 2004 and thereafter on an indemnity basis.

(d) order the plaintiff to pay the first defendant’s costs of the proceedings in the Common Law Division.

(3) Dismiss the cross-appeal of Nationwide News Pty Ltd.

(4) Order the cross-appellant to pay the costs of the cross-respondents to the cross-appeal.

(5) Order the Respondents to pay the Appellant’s costs of the appeal.

(6) Grant the First Respondent (Mr Naidu) a certificate under the Suitors’ Fund Act 1951 (NSW) in relation to the costs of the appeal.

427 Because the plaintiff has ultimately been successful against one defendant, but not the other, there may be questions as to the appropriate orders in respect of costs in relation to the appeal by ISS Security and in relation to the trial costs of ISS Security. If further or different orders to those proposed are sought, a memorandum of alternative orders may be filed by consent. If agreement cannot be reached, the parties have leave to file one set of submissions each in relation to the orders each proposes, no later than 15 February 2008.

428 Nationwide News should also have leave to correct in the orders, before they are entered, its name if incorrectly recorded above.

**********
AMENDMENTS:


12/03/2008 - Judgment paragraph numbers added - Paragraph(s) Coversheet


LAST UPDATED: 12 March 2008