New South Wales Court of Appeal CITATION: STATE TRANSIT AUTHORITY OF NEW SOUTH WALES v CHEMLER [2006] NSWCA 249 HEARING DATE(S): 28 August 2006 JUDGMENT DATE: 8 September 2006 JUDGMENT OF: Handley JA at 1; Santow JA at 2; McColl JA at 26 DECISION: Appeal allowed with costs; see orders at [25]. CATCHWORDS: WORKERS COMPENSATION - Psychological injury –whether any psychological injury suffered by respondent wholly or predominantly caused by disciplinary action taken by appellant – nature of reasons giving rise to error in point of law. LEGISLATION CITED: Workers Compensation Act 1987 s9A(1), s11A(1) Workplace Injury Management and Workers Compensation Act 1998 s353 CASES CITED: Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 PARTIES: STATE TRANSIT AUTHORITY OF NEW SOUTH WALES (Appellant) Fritz CHEMLER (Respondent) FILE NUMBER(S): CA 40719/05 COUNSEL: G WATSON, SC/ D SANT (Appellant) S GORMLEY, SC/ B McMANAMEY (Respondent) SOLICITORS: Sparke Helmore (Appellant) Turner Freeman (Respondent) LOWER COURT JURISDICTION: Workers Compensation Commission LOWER COURT FILE NUMBER(S): WCC509-04 LOWER COURT JUDICIAL OFFICER: Acting Deputy President Robin Handley LOWER COURT DATE OF DECISION: 10 August 2005 LOWER COURT MEDIUM NEUTRAL CITATION: [2005] NSW WCC PD 82 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40719/05 WCC 509/04 HANDLEY JA SANTOW JA McCOLL JA 8 SEPTEMBER 2006 STATE TRANSIT AUTHORITY OF NEW SOUTH WALES v CHEMLER Judgment 1 HANDLEY JA: I agree with Santow JA. 2 SANTOW JA: INTRODUCTION This appeal is brought by the employer, State Transport Authority of New South Wales ("STA") pursuant to s353 Workplace Injury Management and Workers Compensation Act 1998 ("WIM"). It is, in terms of s353(1), an appeal " in point of law " from Acting Deputy President Handley's review, pursuant to s352 WIM, of the decision of the Arbitrator Mr Stephen Lancken. ADP Handley confirmed the decision of the Arbitrator in favour of the worker Mr Chemler. 3 The appeal principally concerns s11A Workers Compensation Act 1987 ("WCA"). Though s9A is also relevant it is so because of the way in which the Arbitrator reasoned; no reliance was in the end placed on s9A as an independent ground of appeal. Section 9A(1) provides: "No compensation is payable under this Act in respect of an injury unless the employment concerned was a substantial contributing factor to the injury." Section 11A(1) provides: "No compensation is payable under this Act in respect of an injury that is a psychological injury if the injury was wholly or predominantly caused by reasonable action taken or proposed to be taken by or on behalf of the employer with respect to transfer, demotion, promotion, performance appraisal, discipline, retrenchment or dismissal of workers or provision of employment benefits to workers." 4 The appeal to this Court concentrated in argument upon so much of the determination of ADP Handley as dealt with s11A of the WCA. As so refined, the essential ground of appeal was that ADP Handley acknowledged error on the part of the Arbitrator in failing to specifically address s11A WCA when in actuality the Arbitrator did address s11A but in terms which confirmed its application. Yet the Arbitrator still decided for the worker notwithstanding s11A, in terms suggesting that he thought, wrongly, conformance with s9A somehow overrode application of s11A. ADP Handley, it was said, fell into legal error concerning the application of s11A. It starts with his failure to appreciate what the Arbitrator did decide and then proceeding to conclude that "had the Arbitrator done so [addressed s11A], he would have found s11A to have no application" (at [47]). SALIENT FACTS 5 The respondent, Mr Chemler, worked as a boilermaker and welder for the appellant STA from March 1981 to early 2003. At the time of his injury he was employed as a body maker in the Waverley depot, having been re-located there in October 1995 (chronology for HREOC Blue, 248). It is there that he alleges his psychological injury arose when he was harassed and racially vilified for being Jewish as well as for his lack of English. The STA rely on the fact that during December 2002/ June 2003 he was disciplined including for leaving work unfinished. He was demoted for three months from a level 4 to level 3 tradesman. He appealed against that demotion to the Transport Appeals Board on 8 January 2003 following a Notice of Punishment dated 17 December 2002 for misconduct essentially alleging poor workmanship; Red, 35, para 33 of ADP Handley's determination. There had been earlier disciplinary steps, via what were described as a form E1, on 27 June 2001 (Orange, 12), and 10 December 2002 (Blue, 248, chronology for proceedings before HREOC). The last of these E1 notices was just before he left the STA, namely on 6 June 2003. In effect the STA rely for the application of s11A on what it describes as the reasonable disciplinary action which it took in December 2002 contending that, in terms of s11A, that action was the sole or predominant cause of any psychological injury suffered by Mr Chemler. Both before the Arbitrator and ADP Handley Mr Chemler relies on the evidence summarised below, as well as various medical and psychiatric reports of some cogency, to negate that conclusion on causation. 6 On 6 January 2003 and 6 June 2003 Mr Chemler notified the appellant that he was suffering from anxiety, depression and hypertension as a result of what he described as racial harassment, anti-Semitic graffiti and victimisation at work over a number of years. His complaint of racial vilification centred upon the fact that he was Jewish and English was not his first language. 7 There was evidence of an anti-Semitic sign on a piece of sheet metal in the workplace at Waverley, its original text subsequently added to. It appears to have been upon the wall of the body-repairer's room since about 1997 (Blue, 159 evidence of a non-Jewish co-worker Mr Darbon dated 27 July 2003 where he says "I would think that this sign has been up on the wall of the Body Repairer's room for about six years" [emphasis added]). Thus it was for most if not all of Mr Chemler's time there in the body repair shop. It contained writing as follows throughout that time: "Home Sweet Home Dave Darbon And Keith Abrahams $ Jewish Boys (The "O.T." Kings) Money Money Money Isn't Funny In A Jewish World" (Blue,146) 8 The sign later had added to it in handwriting "Out Jewish". This occurred shortly before Mr Chemler ceased work in early June 2003 (Black, 57.14 to .27 where Mr Hyland, solicitor for Mr Chemler so states to the Arbitrator at the arbitration hearing without contradiction). 9 The sign was taken down in mid-July 2003 after Mr Chemler left employment. He was then suffering from a psychological injury (Red, 35 at [31]) which appears not to be disputed. ADP Handley records that the Arbitrator found Mr Chemler was first affected by the sign in January 2003 "despite the sign having been at the same workplace since 1995" (Red, 33 at [22]). 10 Mr Chelmer took some time off in January 2003 but returned to work in late January. 11 Mr Chemler stopped work permanently in early June 2003. He made a claim for weekly compensation under the WCA, which the appellant disputed. 12 Mr Chemler commenced proceedings in the Workers Compensation Commission ("WCC") which the appellant defended. The matter was referred to the Arbitrator, Mr Lancken. He did not take oral evidence at the hearing, but instead relied on written statements, medical reports and the submissions of the parties. However, there was an informal oral conference, at which a transcript was taken. The respondent relies in part on the informality of that process to derive from scattered observations by the Arbitrator a conclusion on his part that s11A was not made out, despite concluding observations by the Arbitrator which clearly enough acknowledge "that it's the discipline that caused Mr Chemler to be emotionally distressed and to cause him his psychological injury" (Black, 59.3-.10). I shall return to this aspect under Disposition, below. 13 On 10 August 2004 the arbitral decision was delivered. The Arbitrator found in favour of the respondent and awarded him weekly compensation. A dispute arose over whether the Arbitrator adequately dealt with three legal issues: (a) whether the respondent's employment was a substantial contributing factor to any injury suffered (s9A, WCA); (b) whether any psychological injury suffered by the respondent was wholly or predominantly caused by disciplinary action taken by the appellant (s11A, WCA); and (c) the quantum of weekly payment calculated under s40. 14 Only (b) is relevant to the present appeal as (a) was not pressed and (c) abandoned. 15 ADP Handley granted leave to appeal and determined that the appeal would be decided on the papers. He delivered his decision on 10 August 2005, dismissing the appeal and confirming the Arbitrator's decision. It is to that determination I now turn. DISPOSITION 16 ADP Handley deals with s11A in his review of the Arbitrator's earlier determination specifically at paragraphs [40], [46] and [47] which I quote below: "40. Having examined the evidence and the submissions of the parties on the appeal, I am not satisfied that the Arbitrator made any error of law or fact in relation to his treatment of the evidence or findings of fact. In my view, it is clear from all the medical evidence that Mr Chemler perceived he was being subjected to harassment and victimisation, and it was this perception that caused his psychological injury. This is consistent with the opinions of Drs Lewin and Fischer, and psychologists Dr Lowy and Mr Jones. The fact there are inconsistencies between Mr Chemler's evidence and that of the STA's witnesses is not in itself surprising because Mr Chemler's evidence is a reflection of his perception of events. …… 46. The other errors of law contended by the STA fall under its first ground of appeal, that the Arbitrator failed to apply sections 11A and 9A of the 1987 Act. Section 11A provides that no compensation is payable in respect of a psychological injury if that injury was wholly or predominantly caused by reasonable action taken or proposed to be taken by or on behalf of the employer with respect to, amongst other matters, performance appraisal and discipline. Although I agree the Arbitrator did not sufficiently set out his reasoning process on this issue, it is clear enough that he found the psychological injury suffered by Mr Chemler was caused by what Mr Chemler perceived to be harassment, victimisation and racial vilification. As mentioned above, the medical evidence supports such a finding. The Arbitrator did accept that Mr Chemler only sought treatment after he had been disciplined, and that this caused him emotional stress and motivated him to seek treatment (arbitration hearing transcript page 59). However, the Arbitrator went on to say that although the conditions at work were not the sole cause of Mr Chemler's injury, they were the substantial contributing factor to his injury. 47. In my view, it could reasonably be argued that the disciplinary action taken by the STA was a symptom of how Mr Chemler was being treated at work. Having so concluded, the Arbitrator should have specifically addressed section 11A of the 1987 Act and, presumably, had he done so, he would have found section 11A to have no application. Despite what is arguably an error of law in failing to specifically address section 11A, in my view this is not a basis for revoking the decision since the outcome would be the same." 17 ADP Handley relevantly concludes (at [49] that "the Arbitrator's error of law in failing to address s11A does not warrant revoking the decision since, in my view, the outcome would be the same". 18 It will be observed from [47] of ADP Handley's decision that his reasoning proceeds on the basis that the Arbitrator should have specifically addressed s11A and had he done so would have found it to have no application. The fundamental problem with that reasoning is that the Arbitrator did specifically address s11A of the Act at various points in what was undoubtedly an informal hearing (see, for example, Black 2.45-.53). In none of these passages does he unequivocally reject the application of s11A. Moreover he ultimately concluded that "it's the discipline that caused Mr Chemler to be emotionally distressed and to cause him his psychological injury". To put this in context I shall provide the whole quotation: "I accept what the respondent says, that he only sought that treatment after he had been disciplined and that it's the discipline that caused Mr Chemler to be emotionally distressed and to cause him his psychological injury , and certainly in terms of the timing of those events there was discipline and Mr Chemler did shortly after that discipline first start seeing Dr Fischer, who was his treating general practitioner." (Black, 59.3-.10) [emphasis added] 19 Confusingly, the Arbitrator then follows this paragraph with the following observations: "The question though, when I get to – and there is also no doubt that Mr Chemler was distressed by the fact that he was being disciplined at work for a long period of time and that caused him distress. The question that crosses my mind is one of those chicken-and-egg-type questions, which I don't think I have to answer, but that is: is Mr Chemler's poor work performance from about 1998 as a result of harassment or the other way around? I don't think I need to answer that question. The legislation requires me to determine whether Mr Chemler's present illness was substantially contributed by conditions that occurred at work, and I accept what Dr Lewin says, that it was. It may not have been the sole cause but it was a substantial contributing factor to Mr Chemler being sick, and I accept what Dr Lewin says and what the psychologist had to say, that Mr Chemler is and was sick and continues to be sick and unable to work as a result of his psychological injury and, therefore, he's entitled to compensation." (Black, 59.11-.34) 20 The fundamental problem is that once the Arbitrator accepts the factual premise of s11A, he has actually addressed the s11A question. The Arbitrator has moreover addressed it adversely to Mr Chemler though he does not use the precise causal terminology of s11A. The latter is postulated on psychological injury "wholly or predominantly caused by reasonable action taken … by … the employer with respect to … discipline …". There is nothing to indicate that the Arbitrator only meant to find that it was a contributory cause of the psychological injury, falling short of a predominant or sole cause. 21 Insofar as the "chicken and egg" question that the racial or anti-Semitic harassment caused Mr Chemler's poor work performance which attracted the discipline leading to his psychological injury, he did not decide that question. Neither does ADP Handley decide that question. That may have to do with how the case was put. Thus even in the argument on appeal there was a suggestion from Counsel for Mr Chemler late in the day that the discipline itself was a form of harassment, though no evidence was cited in support of that. In the first sentence of [47], ADP Handley observes that, "In my view, it could reasonably be argued that the disciplinary action taken by the STA was a symptom of how Mr Chemler was being treated at work". That statement is intrinsically ambiguous. Does he mean that the racial and anti-Semitic harassment could be the ultimate cause of Mr Chemler's work suffering, leading in turn to disciplinary action? Or does he mean that the disciplinary action could itself be harassment and thus not reasonable? He made no finding on that question. 22 ADP Handley's reasoning appears to conclude, by its approval at [49] of the reasoning of the Arbitrator, that Mr Chemler's present illness was substantially contributed to by conditions that occurred at work; see last sentence of [46], and also [48] and [49]. However, that is no more than a determination that s9A WCA was satisfied, with its weaker causal requirement ("substantial contributing factor to the injury"). Such a determination does not mean that s11A could not apply. It is perfectly possible for the employment to be a substantial contributing factor and yet for reasonable disciplinary action arising out of and in the course of the employment to be the sole or predominant cause of the injury. A simple illustration of this would be disciplinary action arising out of the employment which in turn is the sole or predominant cause of the injury. Conclusion 23 I conclude that the reasoning of ADP Handley does not recognise that essential causal distinction between s9A and s11A. Nor does his reasoning correctly identify the Arbitrator's true finding. In particular his reasoning fails to recognise that the Arbitrator's finding if correct would lead to the opposite conclusion to that reached by the Arbitrator. This reasoning process reveals error in point of law on the part of ADP Handley. As Glass JA observed in Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 156 (omitting references): A finding of fact in the Commission may nevertheless reveal an error of law where it appears that the trial judge has misdirected himself ie has defined otherwise than in accordance with law the question of fact which he has to answer. A possibility of this kind exists with ultimate findings of fact …... Further an ultimate finding of fact, even in the absence of a misdirection, may reveal error of law if the primary facts found are necessarily within or outside a statutory description and a contrary decision has been made," 24 This conclusion leaves no alternative to a re-hearing. OVERALL CONCLUSION 25 I conclude that the appeal should succeed and propose orders as follows: (1) Appeal allowed. (2) Set aside the decision of ADP Handley and in lieu thereof order: (a) set aside the decision of the Arbitrator, and (b) remit the matter to the Workers Compensation Commission for re-hearing. (3) The respondent to pay the appellant's costs but to be entitled to a certificate under the Suitors Fund Act . 26 McCOLL JA: I agree with Santow JA. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.