HEARD IN THE DISTRICT COURT OF WA AT PERTH BY HIS HONOUR JUDGE HERRON IN DECEMBER 2016 AND APRIL 2017

PILBARA IRON COMPANY (SERVICES) PTY LTD -v- SULESKI [2017] WADC 114 – APP 71 of 2016

In August 2014 Mr Suleski claimed weekly payments of workers' compensation for total incapacity from 22 August 2013 – the date of the alleged injury – and continuing together with statutory allowances against his employer Pilbara Iron Company Services Pty Ltd.

Mr Suleski alleged he was suffering stress and anxiety which was caused by experiencing bullying and threats made by his management from 22 August to 10 December 2013. The diagnosis of the alleged injury was an adjustment disorder.

Pilbara Iron denied liability and the claim went to a hearing before an arbitrator, Mr Nugawela, at WorkCover WA in 2015. On 19 August 2016 the arbitrator delivered written reasons for decision allowing Mr Suleski's application and ordering Pilbara Iron to pay Mr Suleski workers' compensation payments for total incapacity and statutory allowances.

By an amended notice of appeal, Pilbara Iron sought leave to appeal against the arbitrator's decision and sought various orders including that the decision of the arbitrator be quashed.

Expectation of discipline?

His Honour noted that – At WorkCover WA

"...Mr Suleski accepted that a meeting on 22 August 2013 related to performance issues, and that the meeting was a contributing factor and contributed to a significant degree to his psychiatric disease (stress), but maintained that:
  1. the meeting was not discipline;
  2. if it was, the meeting was not the whole or predominant cause of his incapacity; and
  3. if it was, then Pilbara Iron's actions on 22 August 2013 were unreasonable and harsh."

He also noted – "Pilbara Iron's case before the arbitrator was two-fold. It argued that Mr Suleski's psychiatric disease arose wholly or predominantly from:

  1. Mr Suleski's expectation of discipline, in which case, the arbitrator should not have turned his mind to whether Pilbara Iron's conduct was unreasonable and harsh as this concept cannot apply to an expectation (McPherson v State Print (Unreported, WASC, Library No 960697, 15 December 1996)); or, alternatively
  2. actual discipline which was not unreasonable and harsh.

9 Pilbara Iron's primary argument was that of an 'expectation' of discipline."

The issues before the Arbitrator

"Therefore, the issues before the arbitrator were:
  1. whether, apart from the PMP meeting on 22 August 2013, there were any other employment-related matters or events, such as bullying and harassment, which were significant contributing factors to the contraction of the disease;
  2. whether the implementation of the PMP at the meeting on 22 August 2013 was discipline, and if it was, whether the stress that caused Mr Suleski's psychiatric disease:

    1. wholly or predominantly arose from a matter mentioned in s 5(4) of the Act, namely discipline or an expectation of discipline; and
    2. if there was actual discipline (as opposed to an expectation of discipline) whether the discipline was unreasonable and harsh on the part of Pilbara Iron."

The Arbitrator's findings

The arbitrator found:

  1. that Mr Suleski's psychiatric condition wholly or predominantly arose from an excluded matter in s 5(4) being the implementation of the PMP at the meeting [99(a)];
  2. that the implementation of the PMP at the meeting on 22 August 2013 was disciplinary [99]. In brief reasons the arbitrator, citing FAI General Insurance Co Limited v Goulding [2004] WASCA 167, found that the PMP meeting amounted to actual discipline; [99(d)];
  3. that the actions of Pilbara Iron in implementing the PMP were both unreasonable and harsh:

    1. because each of the reasons given by Pilbara Iron for implementing the PMP were unreasoned and unjustified and therefore unreasonable and amounted to harsh conduct as a justification for implementing the PMP 'against the workers' understandable and steadfast refusal to sign the same'. In so finding, the arbitrator found:

      1. that it was unreasonable for Pilbara Iron not to accept (or to disregard) Mr Suleski's explanations in relation to issuing warnings to subordinates and to instead implement the PMP [100(a)];

      2. that there was no reasonable opportunity for Mr Suleski to complete the role description for transport operator and that it was unreasonable for Pilbara Iron not to accept (or to disregard) Mr Suleski's explanations in relation to the provision of the role description and to instead implement the PMP [100(b)];

      3. that it was unreasonable for Pilbara Iron not to accept (or disregard) Mr Suleski's explanations and instead to implement a PMP in circumstances where [100(c)]:

    3. Mr Suleski had not been provided with any or any adequate leadership training [88(b)];

    4. Mr Suleski's mid-year performance review was selectively downgraded on Ms Bufton's email instruction [88(c)]; and

    5. Pilbara Iron departed from its own procedures in managing Mr Suleski and placing him on a PMP instead of a development plan [88(f)].

In essence the arbitrator found that Mr Suleski contracted an injury in the course of his employment (which was a disease caused by stress) and found that the condition wholly or predominantly arose from the PMP implementation meeting on 22 August 2013. However, he also found that the PMP implementation was both unreasonable and harsh.

Subjective perception of proven facts

His Honour then stated –

"I now turn to consider the principle for which Azmitia is authority. The arbitrator referred to the 'reality test' in Wiegand v Comcare Australia [2002] FCA 1464 [24] as considered by McCann DCJ in Department of Education v Azmitia [2014] WADC 85. (An appeal from the decision of McCann DCJ was dismissed by the Court of Appeal in Department of Education v Azmitia [2015] WASCA 246.
The grounds of appeal focused on the arbitrator's finding that the worker was totally incapacitated for work and McCann DCJ's conclusion that the finding was open on the evidence and involved no appealable error. The appeal did not raise any issue concerning the correct test of causation in a stress claim). Although the arbitrator refers to McCann DCJ's observations at [58] – [60], the paragraphs he has cited in his reasons are not from Azmitia. They are taken from McCann DCJ's judgment in Pedley v West Coast College of TAFE (Unreported, C21-2006 (McCann DCJ) 8 November 2006) which is cited at [16] in Azmitia.
In Azmitia McCann DCJ held [16], [19]: A stress claim is compensable if it is caused by a worker's subjective reaction to objectively proven facts. It is not necessary for a worker to prove that his or her subjective perception of proven facts was reasonable. (See Wiegand v Comcare [2002] FCA 1464; Gallin v Central West Coast College of TAFE [2006] CM-21/2003; Pedley v West Coast College of TAFE C21 – 2006 [26], [50] – [51]).
In my view, to the extent that ground 1 challenges the arbitrator's finding that the implementation of the PMP at the meeting on 22 August 2013 was the cause of Mr Suleski's psychiatric condition, the ground does not establish any error of law or give rise to a question of law and I dismiss ground 1 to that extent. In my view, the finding was the correct finding.
Accordingly, I dismiss ground 1 of the amended notice of appeal to the extent that it alleges the arbitrator was wrong in law in finding the cause of the stress-related disease was the implementation of the PMP."

The Performance Management Plan

His Honour then examined the Performance Management Plan and considered its content and implications and stated –

"In my view the arbitrator's finding that the implementation of the PMP was 'disciplinary' was correct. His finding that the PMP was not purely a training tool but was similar to the warning letter the employer provided the worker in FAI General Insurance Co v Goulding is correct.
The letter provided to Ms Goulding was very critical of her work performance and attitude and set out performance standards she was required to immediately adopt and maintain. The letter advised her that her performance would be reviewed in a month's time and should her behaviour not comply with those standards, her position with the company will be reviewed and the review may result in the termination of her services. The purpose of the PMP and the language of it are very similar to the letter the employer provided to Ms Goulding."

His Honour continued –

"In my view in deciding what is discipline, the three questions posed by Cooper J in Chenhall [25] (cited above [137]) are relevant and should normally be posed and answered. However, it may be that in certain factual circumstances it is unnecessary to ask the three questions posed by Cooper J. Nor will the failure to ask those questions necessarily result in an error of law being made."
His Honour went on to state "In my view placing Mr Suleski on the PMP was clearly a matter of discipline. Whether further disciplinary action, up to and including the termination of employment, might be taken does not mean the PMP was not discipline. Nor does it mean the implementation of the PMP was only a preliminary step taken to determine whether disciplinary action might be taken." And "I am of the view that a warning letter from an employer to its employee raising concerns about the employee's work performance, and actions taken in respect of unsatisfactory work performance to manage and address the employer's concerns about work performance, would generally be regarded as discipline for the purposes of s 5(4)(a). I am supported in that view by Murten and Goulding."

On this issue His Honour concluded –

"The arbitrator's finding that the PMP implementation meeting on 22 August 2013 was a matter of discipline was correct and was not in error. Accordingly, I dismiss ground 2 of the amended notice of appeal. I also dismiss Mr Suleski's cross-appeal."

Wholly or predominantly?

His Honour then turned to a consideration of whether the stress wholly or predominantly arose from actual discipline or an expectation of discipline – ground 3 amended notice of appeal and stated –

"A further issue arises as to whether each of the matters in subparagraphs (a), (b) and (c) of s 5(4) can exist together at the same time or whether they are mutually exclusive. ...Therefore, in my view, once the arbitrator found that the stress suffered by Mr Suleski wholly or predominantly arose from discipline, being the implementation of the PMP, he implicitly found that the stress did not wholly or predominantly arise from an expectation of discipline. As, in my view, he was correct in his finding that the stress wholly or predominantly arose from the implementation of the PMP, which was a matter of discipline, it follows he was correct in failing to find that the stress wholly or predominantly arose from an expectation of discipline.
Therefore, for this further reason, I dismiss grounds 2 and 3 of the amended notice of appeal."

Was the conduct of the employer unreasonable and harsh?

As to whether the conduct of the employer was 'unreasonable and harsh' his Honour said –

"I now turn to consider the challenge to the arbitrator's finding that the employer's actions in implementing the PMP were unreasonable and harsh. The words in the expression 'unreasonable and harsh' in the definition of 'injury' in s 5 must be given their ordinary and natural meaning: Housing Industry Association Limited v Murten (Le Miere J) [24] – [25]. 'Unreasonable' means 'not guided by reason or good sense; not based on or in accordance with reason or sound judgment; exceeding the bounds of reason; immoderate; exorbitant': Macquarie Dictionary (5th ed). It can also mean 'irrational, not based on or acting in accordance with reason or good sense, going beyond what is reasonable or equitable, excessive': New Shorter Oxford English Dictation. 'Harsh' means 'unpleasant in action or effect': Macquarie Dictionary (5th ed). It can also mean 'an action which is severe, rigorous, cruel, unfeeling': New Shorter Oxford English Dictionary. What is unreasonable and harsh will vary according to the circumstances of the case."

His Honour continued –

"Whether discipline of a worker is unreasonable and harsh on the part of an employer is a question of fact and degree: Housing Industry Association Limited v Murten (Le Miere J) However, the true scope of the inquiry undertaken by an arbitrator in deciding whether a worker's discipline is unreasonable and harsh on the part of the employer must be ascertained on a proper construction of the Act and therefore does involve a question of law. It is not to the point that the ultimate decision as to whether the discipline was unreasonable and harsh on the part of an employer also involves questions of fact: Jenkins v Western Australian Department of Training [1999] WASCA 199 [35] (Anderson J (Malcolm CJ & Ipp J agreeing); Bednarczyk v Natcorp Investments Limited (Unreported, FCt WASC, Library No 970363, 23 July 1997) [5] – [6] (Franklyn J)."

As to this particular case His Honour found –

"Whether the employer's actions were unreasonable and harsh must be judged by having regard to all of the circumstances that I have earlier outlined, including the circumstances leading up to the decision to implement the PMP, the way in which the decision was made and how Mr Suleski was informed of it, in the context of any work policies or procedures or codes of conduct and how it impacted upon Mr Suleski personally.
In focusing on Mr Suleski's belief or perception that he was being unfairly treated, the arbitrator failed to have regard to the proper statutory construction and purpose of s 5(4) by which an employer is entitled to take administrative action to manage the performance of its workforce, the purpose of which, as observed by the High Court in Comcare v Martin [46], would be defeated if the operation of the exclusion were dependent upon the subjective psychological drivers of the employee's reaction to the administrative action. It follows I would uphold ground 1 of the notice of appeal insofar as it alleges the arbitrator was wrong in law in finding the implementation of the PMP was unreasonable and harsh and set aside that finding."

Appeal Orders

  1. Leave to appeal be granted.
  2. The appeal be allowed.
  3. The decision that the implementation of the performance management plan (PMP) was unreasonable and harsh be set aside.
  4. The issue of whether the implementation of the PMP was unreasonable and harsh be remitted to the Workers' Compensation and Arbitration Service to a different arbitrator for further determination in accordance with these reasons.
  5. Orders 1, 2 and 3 of the orders made by the arbitrator be set aside.
  6. The cross-appeal be dismissed.

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