FEDERAL COURT OF AUSTRALIA

 

Nikolich v Goldman Sachs J B Were Services Pty Ltd [2006] FCA 784

EMPLOYMENT – Claim for breach of contract of employment – Applicant was employed by respondent as a client financial adviser – Nature of conduct of respondent’s office manager in connection with reallocation of clients following resignation of another adviser with whom applicant was working in a partnership team – Conduct of respondent’s employees in relation to complaint made by applicant – Whether applicant suffered a major depressive disorder as a result of conduct of respondent’s employees, including the office manager – Whether that conduct constituted a breach of applicant’s contract of employment – Whether damages are recoverable in respect of the distress and mental illness suffered by applicant – Assessment of damages.

WORKPLACE RELATIONS – Whether applicant’s employment was terminated by employer – Whether termination was for a prohibited reason – Application to the case of the statutory definition of temporary absence from work – Whether termination on ground of mental disability – Whether the reason was based on the inherent requirements of the applicant’s particular position.

TRADE PRACTICES – Whether damages are recoverable, assuming misleading conduct by employer.

Workplace Relations Act 1996 (Cth): ss 170CK, 170CP, 170CQ

Workplace Relations Regulations 1996 (Cth): reg 30C

Trade Practices Act 1974 (Cth): ss 52, 53B, 82

Fair Trading Act 1987 (NSW): s 42

PETER NIKOLICH v GOLDMAN SACHS J B WERE SERVICES PTY LIMITED

NSD 416 OF 2005

 

 

 

WILCOX J

23 JUNE 2006

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 416 of 2005

 

BETWEEN:	PETER NIKOLICH APPLICANT
AND:	GOLDMAN SACHS J B WERE SERVICES PTY LIMITED RESPONDENT
JUDGE:	WILCOX J
DATE OF ORDER:	23 JUNE 2006
WHERE MADE:	SYDNEY

 

THE COURT ORDERS THAT:

 

1.         Judgment be entered in favour of the applicant, Peter Nikolich, against the respondent, Goldman Sachs J B Were Services Pty Limited, in the sum of $515,869.

2.         If the respondent:

            (a)        does not file an appeal against this judgment; and

            (b)        pays to the applicant the sum of $465,869 within 28 days;

            the said payment shall be taken fully to satisfy the judgment referred to in order 1.

3.         The respondent pay the applicant’s costs of the proceeding.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 416 of 2005

 

BETWEEN:	PETER NIKOLICH APPLICANT
AND:	GOLDMAN SACHS J B WERE SERVICES PTY LIMITED RESPONDENT

 

JUDGE:	WILCOX J
DATE:	23 JUNE 2006
PLACE:	SYDNEY

REASONS FOR JUDGMENT

WILCOX J:

1                     In this proceeding, Peter Nikolich seeks compensation and/or damages against Goldman Sachs J B Were Services Pty Limited, his former employer.

The applicant’s claims

2                     The claims made by the applicant varied from time to time.  Ultimately, three claims were pressed in submissions:

(a)       The respondent unlawfully terminated the applicant’s employment by reason of:

 

(A)       his temporary absence from work because of illness, in breach of section 170CK(2)(a) of the Workplace Relations Act 1996 (Cth) [‘the WR Act’]; or

 

(B)       a mental disability in breach of section 170CK(2)(f) of the WR Act.

 

(b)     The respondent breached the applicant’s contract of employment.

 

(c)     The respondent engaged in misleading and deceptive conduct prior to the alteration of the terms and conditions of the applicant’s contract of employment contrary to the provisions of sections 52 and/or 53B of the Trade Practices Act 1974 (Cth) [‘the TP Act’] or s 42 of the Fair Trading Act 1987 (NSW) [‘the FT Act’].

The evidence

(i)         Mr Nikolich joins the respondent

3                     Mr Nikolich was born on 7 August 1965.  He grew up in Wollongong.  After he left school, Mr Nikolich obtained employment with the Commonwealth Bank of Australia, ending up as a Business-Superannuation Consultant for the Australian Capital Territory and Southern New South Wales.

4                     In May 2000, Mr Nikolich accepted an offer of employment in the Canberra office of Were Holdings Limited.  This company subsequently changed its name to Goldman Sachs JB Were Services Pty Limited.  It is the present respondent.  I will use the abbreviation ‘GSJBWS’ to refer to the company under either name.

5                     When he accepted the offer of employment, Mr Nikolich was provided with several GSJBWS documents, including one called ‘Working With Us’ (‘WWU’).  This 119 page document sets out information about GSJBWS and contains a number of provisions which are argued by the applicant’s counsel, Ms K Nomchong and Ms K Edwards, to constitute conditions of employment binding on both the relevant employee and GSJBWS.  It will be necessary for me, later on, to refer to some of these provisions.

6                     At the request of a human resources officer of GSJBWS, Mr Nikolich signed and returned a copy of the letter containing his offer of employment.  The letter included at least some of the terms of his employment and contained an acknowledgment that will be referred to later.  Mr Nikolich was not asked to sign a copy of WWU.

7                     Mr Nikolich commenced employment with GSJBWS on 15 May 2000.  He was then classified as an Associate Investment Adviser.  On 1 July 2001, he was upgraded to the position of Investment Adviser.  This position is also sometimes called a ‘Private Client Adviser’.  In this role, he was required to provide investment advice to existing clients and to develop new client relationships.

8                     Both as an Associate Investment Adviser and an Investment Adviser, Mr Nikolich reported to the manager of GSJBWS’s Canberra branch.  Initially, this was Colin MacKenzie.  However, in March 2001, Roderick Sutherland, another Canberra Investment Adviser, was appointed also to be the Canberra branch manager and, therefore, Mr Nikolich’s immediate supervisor.

9                     As an Investment Adviser, Mr Nikolich received a base salary of $81,495 per annum.  He was entitled, in addition, to incentive payments calculated by reference to the nature and extent of the fees he earned for his employer.  Investment Advisers often received incentive payments that dwarfed their base salaries.

10                  When he commenced with GSJBWS, Mr Nikolich was given a list of clients for whose business he was responsible.  Other names were given to him from time to time.  He himself added names.  Mr Nikolich said he actively cultivated all the clients on the list and sought to recruit others.  In the financial year 1 July 2001 to 30 June 2002, his total remuneration (base salary and incentive payments) was $161,178.

(ii)        The partnership concept

11                  In December 2001, Mr Sutherland presented a paper to a meeting of the financial advisers in the Canberra office, of whom there were about ten.  The paper was entitled Establishment of a partnership approach to client management within the Canberra Office.  It seems the partnership concept had been brought to Australia from the United States.  Mr Sutherland announced that he and two other Canberra financial advisers, Stephen Johnston and Lee Scott, would ‘trial a partnership approach to client management’.  He said ‘all clients and revenues will be pooled under a newly formed “RSL” adviser code, with the remuneration structure reflecting each partner’s level of experience and capacity to contribute to the future growth of the partnership’.

12                  Mr Sutherland identified the following advantages of the partnership approach:

‘•         Clients will have access to a greater range of adviser skills and styles;

•          Clients will be able to benefit from different specialisations within the team, such as options trading, Select, Premium, etc;

•          Clients will gradually build rapport with more than one adviser, which is especially important when the “primary” adviser is on leave, interstate, sick, etc;

•          Lower value clients will receive more attention that [sic] they receive presently; and

•          Clients will benefit from the transfer of knowledge and sharing of ideas between partners.’

13                  Mr Sutherland claimed the partnership arrangement would enable him to devote more time to office management.  He argued it will ‘greatly enhance business efficiency and profitability’ in these ways:

‘•         Partners will be able to dedicate more time to genuine business development activities, secure in the knowledge that their clients are being properly serviced by other members of the partnership;

•          Partners will be able to cross-sell/leverage off the specific skill sets/interest within the team;

•          Consistency of marketing strategies across the partnership should produce better outcomes;

•          Working in unison rather than in competition should enhance the sharing of information and ideas, with direct benefits in terms of profitability;

•          Follow-up to mail-outs, marketing initiatives, etc will be shared, thereby alleviating some of the burden on each partner and increasing the likelihood of success from each initiative pursued; and

•          The creation of centralised mailing, e-mail and research lists will improve efficiency and consistency of client contact.’

14                  Mr Sutherland devoted a section of his paper to what he called ‘Responses to Criticisms & Frequently Asked Questions’.  One of the ‘questions’ was: ‘What if a member of the team wants to leave the partnership’.  Mr Sutherland responded in this way:

‘Exit from a partnership will prove extremely disruptive to our clients and is, therefore, highly discouraged.  As I see it, a partnership is similar to a marriage in that it is a long-term commitment where, once established, partners cannot opt in and out on a whim.  I would urge anyone contemplating entering into a partnership to carefully consider the extent and duration of the commitment involved.

In the rare case that a partner insists on leaving the partnership, that partner will leave his/her clients behind with the partnership, with the exception of any clients who insist on dealing with the exiting partner.’

15                  In response to a ‘question’ on remuneration, Mr Sutherland said:

‘One of the benefits of entering into a partnership is that the aggregation of revenues will result in each partner’s remuneration being based on a higher grid level than may have been achieved on a stand-alone basis.’

16                  Mr Nikolich gave evidence that, at the meeting in which he presented his paper, Mr Sutherland spoke enthusiastically about the partnership approach.  He said he understood from Mr Sutherland’s presentation that he would be able to increase his earnings:  ‘by reason of the exchange of information, the ability to rely on other members of the team for assistance in administering my portfolios and being able to obtain assistance in conducting transactions about which I previously was unable to participate in.’

17                  In his affidavit evidence, Mr Nikolich said:

‘When I was reading the document prepared by Mr Sutherland I took particular notice of what would happen if a team member left the partnership.  I noted that if a partnership had been established and one of the partners left then the clientele of that team member would be redistributed amongst the existing members of the partnership team.  It was certainly an attractive proposition to me that I would be able to obtain a number of additional clients by reason of participation in a partnership team.’

18                  Mr Nikolich said he believed ‘that since [GSJBWS] was encouraging the team or partnership based employment arrangement then any team arrangement would be honoured and enforced by [GSJBWS]’.

(iii)       The DKN partnership

19                  Mr Nikolich had discussions with two other Investment Advisers, Mark Keogh and Gabrielle Dal Bon.  The three advisers decided to form a team named ‘DKN’.  They drafted a business plan for the team which was ‘based to some degree on the materials contained in Mr Sutherland’s presentation document’ and, in particular, the RSL team business plan.

20                  The DKN business plan was intended to operate from 1 July 2002.  The document identified advantages of a team approach, both for clients and the team members.  Among the claimed advantages was that clients will ‘have access to a greater range of skills and services’ and ‘will be able to deal with a secondary adviser if their key adviser is unavailable’.

21                  The draft business plan contained performance targets for the first three years of its operation.  The targets included revenue targets that commenced by exceeding the total of the three partners’ current year projected revenues.  The first year’s revenue projection ($1,900,000) was then split amongst the three partners as follows: Dal Bon 39.90%, Keogh 33.24% and Nikolich 26.85%.  This split was reflected in a net earnings projection for each partner; in Mr Nikolich’s case $181,956.  As I understand the situation, that would be his total income, including his base salary.  It was projected that both revenue and earnings would increase by about 16% over the three year period.  That would have brought Mr Nikolich’s income to about $211,000 per year.

22                  The business plan set out the primary and secondary roles of each team member.  It also included a paragraph, headed ‘Exit Strategies’, that read:

‘The decision to enter into a team arrangement has not been taken lightly.  Under the team arrangement, if a team member decides to exit the partnership, then all clients will remain within the team structure with subsequent revenue to be split 50:50.’

23                  Mr Nikolich said that, in February 2002, the members of the team discussed the proposed business plan with Mr Sutherland.  They showed the draft document to him.  Mr Sutherland emphasised that formation of the partnership was a serious step that ought to be considered carefully; however, he raised no objection to the terms of the document.  In particular, Mr Nikolich said, Mr Sutherland did not indicate that the ‘exit strategies’ paragraph was contrary to GSJBWS policy or suggest that a retiring team member’s clients might not remain with the team.

24                  In his affidavit, Mr Sutherland agreed he was shown the draft business plan.  He said he ‘glanced at’ it and handed it back.  He did not keep a copy of the business plan.  He said he did not recall that the draft business plan contained information about the agreed revenue split between the team members.  He also said:

‘At no time did I approve or endorse this business plan.  I was not required to approve or endorse the plan because it was merely an internal working document for the members of the team.’

25                  In his affidavit, Mr Sutherland did not say whether he noted the ‘exit strategies’ paragraph when he ‘glanced at’ the draft business plan.  However, he commented:

‘This wording is similar to wording contained in the paper that I distributed to advisers in relation to Team RSL ...  I have referred in paragraphs 10 and 11 of this Affidavit to my purpose in including this wording in the Team RSL paper.’

26                  The explanation contained in paras 10 and 11 of the affidavit was as follows:

‘In this section of the [the partnership presentation] document, I was referring to a situation where one of the members of the team left the team, not when one of the members of the team left the employment of GSJBW.  When forming a team, the expectation was that the team would remain working together.  Accordingly, the intention of this section was to state that, with certain exceptions, if a member of the team left the team, that person would not have the right to retain the clients serviced by the team.

This section of the paper was not intended to deal with the arrangements that would be put into place when an adviser leaves the firm.  This is because, based on my understanding of GSJBW policy and practice, when an adviser leaves the firm, the clients previously serviced by that adviser remain clients of the firm and it is the responsibility of the Manager of the relevant office to reallocate those clients to other advisers at his discretion.  Clients are clients of GSJBW and do not “belong” to individual advisers.  In particular, clients sign engagement agreements with the firm, not with the advisers individually.’

27                  Under cross-examination in this case, Mr Sutherland maintained that he ‘only quickly glanced at’ the draft business plan.  His evidence went on:

‘I am going to put it to you, Mr Sutherland, that you were the manager of the Canberra office, is that correct?---Correct.

And you were concerned to understand the way in which your investment advisers who reported to you were going to do their business?---Correct.

That was your role and duty and responsibility as a manager wasn’t it?---Correct.

So when Ms Dal Bon, Mr Keogh and Mr Nikolich brought you this business plan you were interested to understand how it was they were going to conduct the business of Goldman Sachs from the Canberra office weren’t you?---Correct.

You didn’t just glance at this document you went through it paragraph by paragraph to understand what was being anticipated didn’t you?---No.  The purpose of my asking them to think about drawing up a business plan was to demonstrate the seriousness of their intention to form a team rather than the specific document itself.

Are you seriously telling this court, Mr Sutherland, that a business plan was drawn up and you did no more than give it a cursory glance, is that your evidence?---Yes.

I see, and you say that that complied with your responsibility as the manager of the Canberra office do you?---Yes.’

28                  Mr Sutherland said he could not say whether or not he saw the ‘exit strategies’ paragraph.

29                  Mr Nikolich also mentioned a later meeting, in April 2002, between the three DKN team members, on the one hand, and David Evans and Chris Voigt on the other.  At that time Mr Evans and Mr Voigt were, respectively, Managing Director-Retail for New South Wales and for Victoria.  The meeting was on the occasion of a regular performance review of the Canberra employees.  Mr Nikolich said in his affidavit:

‘During the course of that meeting, which was conducted in Canberra, we discussed the Team DKN Business Plan with them and went through our particular thoughts and ideas about how the strategy would work.  At no time during that meeting did Mr Evans or Mr Voight indicate to me or anyone else in the team whilst I was present that any of the paragraphs or provisions of the Business Plan were contrary to the Respondent’s policy.  In particular, nothing was said to us to the effect that the paragraph entitled “Exit Strategies” would not be honoured in the event that one of the team members left the partnership.’

30                  Mr Evans agreed in evidence that he ‘went through the proposed DKN business plan with Mr Nikolich’.  He said he did this with Mr Voigt - or possibly Paul Heath, who was then Manager, New South Wales Private Clients, he could not remember which man.  He recalled going through the team targets and goals.

31                  Mr Nikolich accepted, in his evidence, that neither Mr Sutherland or Mr Evans said anything that indicated he considered the business plan to be a binding document.

32                  The DKN partnership commenced to operate on 1 July 2002.  Mr Nikolich gave evidence that the clients of each team member were notified of the change and advised to contact an alternative team member if their usual adviser was unavailable.  He said each team member took all available opportunities to introduce their clients to the other team members.  The team members shared information, became familiar with each other’s client portfolio and looked after each other’s clients during the other’s absences from work.  According to Mr Nikolich, the team system worked well.  However, in the financial year to 30 June 2003, Mr Nikolich’s total earnings (base salary plus incentive payments) were less than in the previous year, being only $96,650.

33                  It should be noted that receipts in a particular year may understate actual earnings for that year.  It was the practice of GSJBWS to hold back, until the following quarter, 50% of any incentive payment that was earned by an adviser in a particular quarter.

(iv)       The resignation of Ms Dal Bon

34                  On about 2 May 2003, Ms Dal Bon announced she would leave GSJBWS on 30 June 2003.  Her announcement precipitated a number of meetings between Mr Nikolich, Mr Keogh and Mr Sutherland about client allocation.  Mr Nikolich and Mr Keogh believed their team was entitled to retain all Ms Dal Bon’s clients.  However, they recognised that, with only two people, they would be unable to provide proper service to all the people on the combined list.  Accordingly, they proposed – and, Mr Nikolich said, Mr Sutherland agreed – that they transfer 250 relatively inactive family groups to a GSJBWS on-line service, Were@Call, or to more junior staff members, reducing the DKN client base to about 600 family groups.  The transfer was apparently not to include any clients in the five categories that generated the most revenue: gold, A clients, options, funds under management and marginal lending.

35                  At a later meeting, Mr Nikolich said, Mr Sutherland suggested the transfer of more family groups; he and Mr Keogh agreed. 

36                  Mr Nikolich said that, after this later meeting, Mr Sutherland prepared a list of clients to be transferred and distributed it to all advisers within the office.  Arrangements were made to forward letters to all affected clients.  However, according to Mr Nikolich, Mr Johnston (a member of team RSL) was unhappy about the situation and, on 9 June 2003, approached Mr Sutherland about it.  Mr Sutherland denied he was approached by Mr Johnston, but he did say he was ‘approached by other advisers in the Canberra office who … told me that they were concerned that Peter Nikolich and Mark Keogh were going to try to corral all of the clients that Gabrielle Dal Bon had dealt with’.  Mr Sutherland also agreed that, on 10 June 2003, he told Mr Nikolich he had changed his mind, that there would be a reallocation of all Ms Dal Bon’s clients and he would let Mr Nikolich know which ones he could keep.  Mr Sutherland directed that letters to clients not be sent at that stage.

37                  Shortly afterwards, Mr Sutherland announced a reallocation.  According to Mr Nikolich, it included transfer to Mr Scott (Mr Sutherland’s partner in team RSL) of a large proportion of Ms Dal Bon’s clients, including some high revenue generating clients.  It is common ground that Mr Nikolich protested to Mr Sutherland about this reallocation and claimed Mr Sutherland had gone back on his word.

38                  The terms of the protest conversation are in dispute.  On Mr Nikolich’s account of the matter, the conversation was acrimonious; Mr Sutherland made a number of critical and offensive comments, including telling Mr Nikolich he was ‘disgusted’ with his ‘greed’, that he was ‘lazy’ and ‘whingeing’.  Mr Nikolich claimed in evidence that he felt Mr Sutherland had a conflict of interest, being both the person allocating clients and a member of team RSL,  and that he suggested Mr Sutherland appoint an independent person to mediate the dispute over allocation.

39                  Mr Nikolich said in his affidavit that he thought Mr Sutherland was breaching the team DKN business plan.  In para 87 of his affidavit, he quoted himself as saying:

‘What about Team RSL’s Business Plan that no clients are to leave the team if someone resigns.  How does that work?’

Mr Nikolich said that Mr Sutherland ‘just shrugged’.  [Although the matter was not picked up at the trial, the reference to ‘Team RSL’ may have been an error for team DKN.]

40                  Mr Nikolich said he then told Mr Sutherland that he wished to speak to Mr Heath and Mr Sutherland replied: ‘You speak to Paul Heath and you’ll get nothing’.

41                  Mr Sutherland denied most of the specifics of Mr Nikolich’s account, but it is clear the relationship between the two men was fractured that day.  Mr Sutherland said he had no recollection of Mr Nikolich suggesting a mediator; in any event, no mediator was appointed.

42                  The last four paragraphs are written as if there was only one conversation on these matters.  However, there  may have been multiple conversations, within a short space of time, dealing with the matters I have set out.

43                  Mr Sutherland subsequently told Mr Nikolich and Mr Keogh that he was allocating to them 40 out of the 120 ‘gold’ and ‘A’ clients that were on the DKN client list; he listed all 120 clients in order of their fee-generating value, and put a line under every third name; he then invited Mr Nikolich and Mr Keogh to select one name out of each group of three.  Mr Nikolich and Mr Keogh reluctantly did this.  Mr Sutherland then allocated the remainder of the ‘gold’ and ‘A’ clients to other financial advisers.  For each client given to one of the individual advisers, he allocated three clients to the RSL team, no doubt on the basis that it included three members.

44                  In his affidavit, Mr Nikolich described the aftermath to Mr Sutherland’s decision.  He said that, from the date of the reallocation decision, ‘Mr Sutherland’s attitude toward me was intimidating and threatening.  He was belligerent and aggressive’.  He said he felt ‘angered and betrayed, bullied, discriminated against and was beginning to feel very stressed both at work and at home’.

(v)        The complaint to Mr Heath

45                  Mr Nikolich and Mr Keogh decided to contact Mr Heath.  On 25 June 2003, they telephoned him from outside the GSJBWS office.  Subject to one qualification, it is common ground between Mr Nikolich and Mr Heath – Mr Keogh did not give evidence – that the conversation substantially accorded with a file note made by Mr Heath that day.  The note reads:

‘Took a call this am from Mark Keogh and Peter Nicolich [sic].  They were calling from outside the office, and indicated they were reluctant and nervous about calling.

They were concerned about the process by which Rod had allocated Gabriel Dal Bon’s client book.  After 4 weeks of negotiating to what they felt was the right solution, Rod had indicated early this week that he had drawn a line under every third client, and said choose 1.

They were reluctant to call because they had asked Rod if they could call me to discuss their concerns, but that Rod had said if they did that, they would get no clients at all.

Their concerns were based around:

1.         They did not understand the reasons for the allocation policy

2.         They did not feel it was in the best interests of clients

3.         They were concerned about their relationship with Rod (they were very upset that Rod had called them greedy)

They did not have any solutions to the above (I asked) so I asked them to come back to me later with what they wanted me to do.  I made it clear that I did not want to interfere with Rod’s right to run the office, and that I would not offer an opinion without asking Rod his point of view.’

46                  The qualification to which I referred is that Mr Nikolich claimed he and Mr Keogh ‘clearly stated to Mr Heath that we had agreed to distribute Ms Dal Bon’s clients between us because of the Business Plan.’

47                  Mr Heath also noted two later telephone calls on the same day.  The first was from Ms Dal Bon, who was ‘concerned that the 1:3 allocation policy would “rip apart” the remainder of the team, and that the clients would not want to be allocated this way’.  Ms Dal Bon ‘wanted the existing relationships between her clients and Mark/Peter recognised, and that “due process” was followed’.

48                  The other file note relates to a further call from Mr Keogh.  It was in these terms:

‘Mark Keogh called.  He said he did not have an answer to what he wanted me to do.

He wanted:

1.         a fair outcome

2.         one that was in the best interest of clients

He explained he felt he had been encouraged into a team, and to cross sell to Gabriels [sic] clients, but that now the team was being penalised.

We discussed his relationship with Rod – he was very worried about the ongoing relationship – felt that Rods decision was personal.

I suggested that I could speak to Rod – and let him know there was a problem.  I told Mark that he was entitled to speak about his concerns, as long as he understood that Rod ran the office, and he needed, in the end, to accept Rods decision.  I said the firm would always ensure he was treated fairly despite raising concerns as long as he was sensible, and worked with Rod to ensure the relationship was good.

We agreed that Mark would tell Rod that we have spoken, and that I would then call Rod to let him know of the discussions I had had today.’

49                  Mr Heath did telephone Mr Sutherland, but apparently not until the following day.  In the meantime, Mr Heath received an email from Mr Keogh in which he said:

‘I spoke with Rod and told him that I had spoken with you earlier in the day.  I raised my concerns again that relationships had been formed with clients and that the current allocation policy of 1 from every 3 clients caused us to have to choose between these relationships.  I mentioned that many clients were already expecting to deal with either Peter or myself and that I would also hope that they would prefer to do so.  I also asked for an explanation as to the sudden change in his allocation policy.  Rod listened to what we had to say, he explained that the change in policy was simply as a result of him changing his mind overnight and as such he has decided to stick to his current allocation policy.  He feels that this is the fairest way to hand out clients to advisers within this office.  In my view still not necessarily the fairest way or most ideal result for some clients.  Rod did say that any client that raises the concern that they wish to deal specifically with either Peter or myself will be re-allocated after this concern has been aired to Rod.

I am not aware of any intention of Rod to speak with you on this issue following our discussion with him.  My view on the matter is that unfortunately reason has not won the day which is disappointing however we did decide before going ahead with talking with you, that we would accept any decision as final and we have to accept that.  If you think that any issue needs to be raised as a result of our discussions with you please feel free to do so as everything is now out in the open, otherwise I guess it is a closed matter.’

50                  It appears that Mr Keogh sent a copy of this email to Mr Nikolich.  Mr Nikolich took no action in relation to it.

51                  After receipt of the email, Mr Heath telephoned Mr Sutherland.  Mr Sutherland told him that ‘the issue has now been sorted out’.  Mr Heath gave evidence that he responded:

‘I told Mark and Peter that I did not want to interfere but that I would have been concerned if you had said to them, “don’t call Paul”.  We will always support you however you must not shut down the staff.’

(vi)       Later conflict in the Canberra office

52                  Unfortunately, at least from Mr Nikolich’s point of view, the issue had not been sorted out.

53                  Mr Nikolich gave evidence of a meeting on 8 July 2003, at which Mr Sutherland announced the distribution of the new client lists and said, ‘if I become aware of any adviser having had previous contact with clients without my authorisation there will be trouble’.  Mr Nikolich observed that:

‘When he said this, Mr Sutherland looked directly at Mr Keogh and me and used a very intimidating tone.  I felt extremely intimidated and threatened’

54                  Mr Nikolich also recounted being summoned to a meeting with Mr Sutherland on 10 July 2003, when he was asked why he had met a particular client ‘after being warned on 8 July 2003 not to do so’.  Mr Nikolich said he replied:

‘I have discussed [the client’s] affairs with him on previous occasions and in the absence of another adviser being allocated, I was happy to oblige.  The client’s request for a meeting had been arranged approximately one week prior to the meeting on 8 July and at the time of my meeting, he had not been allocated to an adviser.  I have an association with this client, having conducted business on a variety of occasions in Ms Dal Bon’s absence during the year.’

55                  Mr Nikolich said Mr Sutherland responded that he was ‘tired of seeing you drag your feet around the office’.  Mr Nikolich then told Mr Sutherland about the likely financial effect on him of the reallocation decision, to which Mr Sutherland replied:

‘I’m not responsible for your financial situation, I am not your father, and if you have problems at home you shouldn’t bring them to work.’

56                  Mr Nikolich told Mr Sutherland:  ‘I do not have problems at home, my difficulties and problems are with you’.

57                  Shortly after this date, Mr Keogh told Mr Nikolich that he had decided to withdraw from team DKN.  He explained:  ‘With the reallocation there is a lack of quality clients’.  Mr Nikolich went on:

‘This had a significant and detrimental affect on my health and my overall state of mind regarding the decisions made by Mr Sutherland and the way I had been treated by him.

After this, I could not talk to Mr Sutherland.  Whilst I continued to do my work, I avoided having any contact with him.’

(vii)      Mr Nikolich’s formal complaint

58                  On 28 July 2003, Mr Nikolich sent a four-page letter to the Human Resources section of GSJBWS that commenced in this way:

‘It is with a considerable degree of trepidation that I write to express my concern over issues that have occurred in the Canberra Office in recent months.  These issues have caused me a significant degree of angst.’

59                  Mr Nikolich then set out much of the historical material summarised above.  He included a complaint that Dianne Grunbaum, the assistant attached to team DKN, had been transferred to team RSL, giving that team two assistants for three advisers and leaving only one assistant, who was new to GSJBWS, to service four advisers, including Mr Nikolich and Mr Keogh.  The letter also included the following:

‘After considerable thought, it was decided to raise our concerns with Paul Heath.  This appeared to aggravate Rod considerably and resulted in the allocation/retention of approximately 40 of 120 “A” clients (total 350 family groups) and being forced to choose one of every three “A” clients to be shared between us. This represented 11% of the total GSD client base.  The majority of the remaining quality “A” clients were allocated to the RSL team and primarily to Lee Scott who has gained considerably in direct brokerage and FUM clients.  After assuring us on several occasions he would not benefit personally, Rod has quarantined numerous valuable clients for himself and will also benefit from a majority share of business written of those clients transferred to RSL.  This is notwithstanding that the RSL client base is considerably larger than DKN and that RSL had culled significantly during the year and would not allow DKN to proceed with a similar exercise to reduce our client numbers.

During a meeting called for all advisers on 8 July 2003, Rod appeared extremely angry and commenced by confirming the new client distribution lists will be provided today and that if he becomes aware of any adviser having had previous contact with clients without his authorisation “there will be trouble”.  This comment was aimed at Mark and myself and delivered by Rod turning and looking directly at us.  I personally viewed this act as extremely intimidating and threatening.

I was called to a subsequent meeting with Rod on 10 July 03.  At this time, I was asked about a client who at the time of conducting an interview on 8 July, had not been allocated to an adviser.  I confirmed my association with this client having conducted business on a variety of occasions in Gabrielle's absence during the year.  The discussion had become quite heated at the suggestion of my attempt to poach this client.  During this discussion, I disclosed to Rod I felt I had been harshly dealt with given the poor quality of my existing client base and sought his managerial direction as to my future as I had made personal and financial decisions based on our business plan.  I highlighted that since the revised allocation of DKN clients, I had been forced to reassess my family's future and decided to relocate as existing premises were no longer affordable.  Rod responded to this by suggesting he was not responsible for my financial situation as he was not my father and suggested that if I had problems at home, I shouldn't bring those problems to work.  I confirmed my problems were not at home but with his decision and his conduct.

Upon further investigating the JB Were Career Mentor Program - Your Role as Manager in Career Development - quoting “since discussions will take place about personal issues, including doubts an individual may have about their future direction or about personal weaknesses, the role demands sensitivity to the individuals feelings. The individual needs to have a relationship of trust and confidence”. Unfortunately, my trust and confidence in Rod is non-existent.’

60                  The letter was referred to Gina Jowett, GSJBWS’s Sydney Human Resources Manager.  She read it and noted it was accompanied by a copy of the team DKN business plan.  She immediately telephoned Mr Nikolich and arrangements were made to speak at a time when Mr Nikolich was out of the office.  Subsequently, she had a long conversation with him in which he amplified his complaints.  Ms Jowett made a file note about the conversation that summarised the history of the matter and concluded as follows:

‘•         I asked Peter what he wanted out of this particular complaint, he said that if action wasn’t taken he would decide how he wanted to handle it.  I asked what did he mean by “action taken”.  He said he wants something done and he doesn’t want his position to be jeopardised.  He wants management to view his decision and based on what he has said he believes there is a case for discrimination and intimidation.  He believes that by saying to HR that he is intimidated that something should be done.

•          I explained to Peter that I felt that there were two issues here, the client distribution and the other was the concerns that he had mentioned in regards to the behavioural issues in the office.  Peter said that intertwined there was one situation here, they are not separate items.  He said that he doesn’t feel that Rod has treated him appropriately.

•          He has not been happy, he is stressed.  The environment is not conducive to allow him to do his job appropriately and that management have done nothing about it.

•          He indicated again that if he continued with the firm that he was worried about his continuation of employment with the organisation.  I explained the process of the complaint and asked in relation to this particular complaint what he felt needed to be done.

•          Peter indicated that the only way to move forward is for Rod to be removed from the role and he will not be satisfied until this particular action had been taken.

•          Explained to Peter that again this was the first discussion that we had had and that it was an opportunity for him to elaborate on the concerns that he had documented in his letter to me.

•          Peter wanted my view on the situation.  I acknowledged that he was obviously feeling unhappy and felt strongly about his treatment and that it was important the way he was feeling and we needed to work through this.  I explained the complaint process.

•          Peter indicated we would just wait and see and that as far as he’s concerned that was there was only one option to resolve this.

•          Peter kept making references to the fact that the RSL group had monopolised and, in particular, Rod monopolised the obtaining of new clients and the business in the office.  He said that all of the estates get sent through the office and were quarantined by RSL.  They received the benefit of those estates.

•          Peter indicated that he was by no means greedy it was a matter of principal and honesty.  He felt that his personal characteristics had been thrown into question by Rod which he felt was inappropriate and felt like he was victimised and harassed as a result.

•          I asked Peter about the structure of the DKN team and he spoke about the fact that Gabby was the person who went out to see clients.  It was a demographic thing, he is not scared to do the work but Gabby and Mark went to do most of the business development activities.  Peter indicated that the whole reason the DKN team had actually been put together in the first place was that they felt that the RSL team was gaining too much control.

•          I explained to Peter that I would investigate the situation and he said “You do that because you’ll find that the story will unfold”.’

61                  Apparently, Ms Jowett was concerned about Mr Nikolich’s demeanour during this telephone conversation.  She called him two days later to see how he was.  In her file note of this conversation, she said:

‘He made few comments but reiterated the following:

•           He indicated that it is up to the firm to make decisions surrounding client allocation.

•           Peter actually indicated that he felt that Rod had become aggressive and intimidating and he is actually “demonic” and “on fire” and in no mood to negotiate.  You could see the whites of his eyes, he’s never seen anyone this out of control before and never seen Rod acting like this before.’

62                  Ms Jowett did not immediately take any steps to contact anyone in GSJBWS’s Canberra office.  She did speak to Mr Evans and Mr Heath.  In an undated file note, she recorded what they had told her:

‘•         Checked with David Evans and Paul Heath regarding client allocation.

 •         David confirmed that clients are the firms and that he was comfortable with this being the branch managers decision

 •         Drew attention to the business plan, David felt this was a plan for business approach and not a contract

 •         Paul agreed that Rod handled this badly (client allocation but it was ultimately his call

 •         Cant argue business plan was the ultimate as other aspects of the plan had not been delivered.

 •         Paul and Chris working with Rod to have him step aside – numerous discussions occurring in the background resulting in Rod stepping aside

 •         All agree morale had suffered and inconsistent decisions.’

63                  There is no evidence explaining Mr Heath’s alleged claim that ‘other aspects of the plan had not been delivered’, presumably by Mr Nikolich and Mr Keogh.

64                  In late August 2003, Ms Jowett spoke to Trish Barber, an investment adviser in the Canberra office, about another matter.  In the course of that conversation, Ms Barber said ‘Rod was a nice person but there had been a lack of trust in the office’; ‘[h]e’s a good business writer but just not a good manager’.

65                  At about the same time, Ms Jowett contacted Mr Sutherland.  She told him she had received a letter from Mr Nikolich and invited him to come to Sydney to discuss it.

66                  Mr Sutherland attended the Sydney office on 27 August 2003.  Ms Jowett showed him the letter, which Mr Sutherland had not previously seen.

67                  Apparently, Mr Sutherland took some time to consider the letter.  He made notes on a copy of it.  That copy is in evidence in this case (exhibit E).  It contains, at the end, a note summarising the allocation of Ms Dal Bon’s clients, confirming what is set out above.  The note does not disclose any reasoning process undertaken by Mr Sutherland or any investigation by him of the needs of particular clients or the extent of past contact between any of them and particular financial advisers.

68                  Ms Jowett then had a conversation with Mr Sutherland.  Once again, she made a file note of the conversation.  According to that note, Mr Sutherland denied most of Mr Nikolich’s substantive allegations but he agreed he had referred to ‘greed of advisers’ at one meeting.  He also agreed that ‘morale was bad’.

69                  Mr Heath was then called in.  Ms Jowett’s note of the ensuing conversation was as follows:

‘•         Paul reiterated the serious nature of the complaint and indicated that at a minimum morale was the worst that it has been and Rod needed to look at the part he played in this.  He confirmed that the transparency and consistency of decision making [sic: ‘lack of’?] had caused a loss of trust and confidence in his management style and he needed to consider his position carefully.

•          Paul and Chris were looking at what are the next steps for the office and we are all at a loss as to how this situation can be turned around

•          Rod acknowledged that he found the role difficult and he loves his work but said he would think about this feedback carefully’

70                  Despite the fact that Ms Jowett now had Mr Sutherland’s responses to Mr Nikolich’s allegations, and Mr Heath’s comment about the serious nature of the complaint, Ms Jowett took no immediate steps either to investigate the factual conflicts in the accounts given by Mr Nikolich and Mr Sutherland or, if she was not going to do this, to bring the ‘investigation’ to a formal conclusion.  During September 2003, she apparently did speak to Mr Nikolich by telephone on several occasions.  During one conversation, Mr Nikolich says, he asked Ms Jowett to ‘provide written confirmation of what you are doing to investigate my complaint’ and referred to GSJBWS’s grievance policy document.  Mr Nikolich explained in his affidavit:

‘I felt angered by the fact that the firm was taking no steps to redress the client reallocation whilst there was still time to do so.  To me, time was of the essence and my conversations with Mr. [sic] Jowett were frustrating in that the investigation was taking so long and, in the meantime, I was left in the office with Rod Sutherland as my direct superior.  I felt that nothing was being done in a timely way to fix up what was, to me, a clear case of injustice.’

71                  Mr Nikolich said, in his affidavit, that, in one of these telephone conversations, Ms Jowett told him Mr Sutherland ‘is willing to apologise’ but he had responded that he would ‘not accept any form of apology without restitution, that is Rod Sutherland reversing his decision about the client reallocation’.  Apparently, that was the end of the proposed apology.

72                  In early October 2003, Ms Jowett asked Mr Nikolich to come to Sydney for a meeting with herself and Mr Heath.  The meeting was held on 15 October.  Once again, Ms Jowett made a file note of the conversation.  It appears the conversation opened by Ms Jowett and Mr Heath telling Mr Nikolich that Mr Sutherland was ‘stepping aside’ from his role as Canberra manager.  However, they learned Mr Nikolich already knew that.  During the course of the conversation Mr Nikolich raised a new complaint, about the circumstances under which Mr Sutherland had taken over dealings with a client in Mr Nikolich’s list, one Alan Barter.  According to Ms Jowett’s file note, Mr Nikolich said a discussion between Mr Keogh and Mr Barter indicated ‘that Alan had some awareness that Rod was going to step aside and that Rod had manipulated Alan to move across to be a client of Rod and was no longer dealing with Peter’.  Mr Nikolich presented a letter setting out details of his complaint.

73                  There was also discussion about the original complaints.  However, neither Ms Jowett nor Mr Heath stated any conclusions about their validity.  Instead, there was discussion about Mr Nikolich’s position.  The file note said:

‘•         We explained that we wanted him to focus on his job at hand and without actually knowing what his expectations were it is very difficult to work towards an outcome.

•          He proceeded to then tell us that he was too stressed to think about the situation.  He hadn’t been feeling well and he felt that one of the options that the firm could do was enable him to take some time off.  We proceeded to advise Peter that he was welcome to take time.  He could either take time as holidays in which he should do that sooner rather than later.  If he felt that he needed to take time and felt it was a health issue then we would require a doctors certificate and for him to go to see his local doctor to take that time off.  Again we encouraged him to do that and offered that if he needed help addressing his client situations or presentations so he could take some leave that we would provide some assistance on that front.  He did not respond on that issue.

•          He did indicate that he was feeling quite frustrated about the whole situation.  He said that when he came into the office in the morning he felt sick, he actually hated Rod and hated the sight of him – just looking at him made him feel ill.

•          I explained that that was a concern to us and that was something unfortunately that he would have to deal with his feelings at a personal level and to try enable him to deal with that situation we offered the employee assistance programme.  Explained this was a confidential [counselling service], that are outside and separate to the organisation, for him to actually take advantage of.’

74                  By the date of this meeting, Mr Keogh had withdrawn from the DKN team, leaving Mr Nikolich to operate alone.  In his affidavit, Mr Nikolich commented:

‘My employment had changed back to its previous base where I was responsible for all of my own clients.  The reallocation of clients had taken most of the quality clients away from me.  Moreover, I did not have the collegiate support that I had had in the Team and with the hostile environment caused by Mr Sutherland; the workplace became extremely stressful for me.’

75                  As a result of Mr Nikolich’s allegations about the Barter account, Ms Jowett made four telephone calls: to Mr Sutherland, to Dorian Bontempelli (the new Canberra manager), to Mr Nikolich and to Mr Keogh.  Mr Sutherland denied any wrongdoing.  Mr Bontempelli thought that representation was a matter for the client to decide but ‘in result of the complications surrounding the communication around the transaction it would be appropriate for Rod to split some of that brokerage’.

76                  Mr Nikolich sent to Ms Jowett a tape of some conversations between Mr Sutherland and Mr Barter which, he contended, would confirm his complaint.  Ms Jowett did not listen to the tape.  She said she sent it to Adelaide, where there was an appropriate machine for listening to it.  She said: ‘Someone attempted to listen to it, and, yes, as far as I’m aware, did’.  Ms Jowett had no transcript or, it seems, any definitive report about the content of the tape, but she volunteered the comment that ‘the conversations referred to by Peter I don’t believe were on that tape’.  She did not report that belief to Mr Nikolich.

77                  Ms Jowett had a lengthy telephone conversation with Mr Keogh on 8 November 2003 about the Barter complaint.  Mr Keogh was not happy about what Mr Sutherland had done.  Ms Jowett made this note of his account of the matter:

‘•         Mark had a number of phone calls with Alan and discussed what needed to be done, the sorts of forms that needed to be filled out.  Alan had actually made some requests for Mark to investigate some Afic Rights.

•          Mark did quite a bit of work in the background only to discover that Rod was also doing some work in the background.

•          Mark had actually spoken to David Evans about securing enough of the rights for Alan.  He asked Alan to send him some of the paperwork which Alan proceeded to do.  Said that to Rod, Rod received the form, took action and actually booked the stock and received the brokerage for that particular transaction.

•          Mark approached Rod about the issue, he’d approached him on two separate occasions to try and open up communication lines around this particular account.  Rod did not provide any assistance in terms of keeping him posted with where he was at with the account.  Now Mark as a consequence is extremely frustrated and his trust in any discussions that he may have had with Rod in the future is now lost.’

78                  On the same day, Ms Jowett received an email from Mr Sutherland in which he stated it was Mr Barter who had decided to switch to Mr Sutherland.

79                  Sometime in November 2003, Ms Jowett telephoned Mr Nikolich in order to advise him of the outcome of his complaint.  Her file note of that conversation reads as follows:

‘•         Gina advised Peter that his concerns had been taken seriously and we had investigated the situation that had been discussed and the incident relating to the Alan Barter client transfer. Whilst we acknowledged that it had been a difficult time for him, we have taken action.

•          The action was that Paul Heath, in his capacity as co-head of private clients, has advised and instructed Rod Sutherland that any transfers of clients between any advising in the Canberra office in the future will be referred to Dorian Bontempelli.

•          Dorian and Paul Heath would investigate further the situations and make decisions around that.

•          Peter proceeded to be disbelieving of the result. He said "What else are you going to do" and I explained to him that under the circumstances we felt that the situation had been addressed in the most appropriate way. Also that a combination of Rod moving from the role and the new manager in the Canberra office being appointed, and the instructions that had been clearly given to Rod, were the most appropriate course of action in this point in time.

•          I proceeded to indicate that I would put to him in writing the outcome of the investigation. He asked for that to be done asap and couldn't again express his disbelief that the issues had been swept under the carpet and I again explained to him that we had not swept them under the carpet and reconfirmed the action that had been taken.

•           He became quite hostile over the telephone and indicated that he wanted to see the response in writing as soon as possible and that he was not satisfied.

•           I explained to him again that I had asked him on numerous occasions, and made alternative suggestions, how he would like the situation to be handled. He had given no further information or feedback around these issues.

•          We felt that the situation had been addressed and some of the problems removed for him.

•          Again he confirmed that everyday he has to go into the office and everyday he is harassed and he was extremely unhappy and left the phone call with the feeling that he was definitely going to take the matter further.’

 

80                  On 1 December 2003, Ms Jowett wrote to Mr Nikolich ‘to confirm the outcomes of your letter dated 28 July 2003 regarding the allocation of client accounts to Team DKN in the Canberra office and your subsequent letter dated 10 October 2003 outlining your complaint against Rod Sutherland’.  The formal findings were stated in this way:

‘I have now completed an investigation into your complaints.  Following my review of the issues you have raised, I acknowledge that an apparent lack of transparency and failure by Rod to clearly communicate his decisions regarding the allocation of client accounts has contributed to the issues you have raised in your complaints concerning your relationship with Rod.  However, I confirm that it was necessary and appropriate for Rod in his position as the Canberra Manager to make decisions regarding the operations of the Canberra office.  Rod's decisions regarding the allocation of client accounts following the resignation of Gabrielle Dal Bon were appropriate having regard to the needs of the firm's clients and the operations of the Canberra office.  Although, I accept that you have felt distressed and upset on occasions as a result of the issues giving rise to your complaints, I am satisfied that Rod has not attempted to intimidate you or cause you stress during his discussions with you about the allocation of client accounts.

As you are aware, Rod has stepped down from the position of Canberra Manager and is now employed in the position of Investment Adviser in the Canberra office.  Dorian Bontempelli has subsequently been appointed to the role of Canberra Manager.

In your letter dated 10 October 2003 you make a complaint in relation to the transfer of the Barter account to Mark Keogh.  Following my investigation, I have found no evidence to support your claim that the confidential complaint made by you against Rod has been discussed by him with any clients or that Barter’s decision to transfer its account to Mark was related in any way to your complaint against Rod.’

 

(viii)     Further action by Mr Nikolich

81                  Apparently Ms Jowett’s letter was sent to an old address.  Mr Nikolich received a copy of the letter on 18 December 2003.  He immediately asked Ms Jowett to refer his complaint to Mr Evans and Dianne Jacobs, Group Manager, Human Resources.

82                  Ms Jowett spoke to Ms Jacobs, who was her immediate supervisor, and asked her to contact Mr Nikolich.  She gave Ms Jacobs copies of the relevant documents.

83                  Ms Jacobs did not give evidence in this case.  However, the documentary evidence includes her file note of a meeting on 17 March 2004 attended by Mr Nikolich, Mr Evans and herself.  The note includes the following:

‘Peter went through the issues and background as outlined in prior file notes. Key points were around the allocation of clients. He said he felt his job was under threat.  He went on to say that it was a testing time. “I was off my rocker. I won't go there now” (he look [sic] as if he would cry).

 

He said although he had spoken to Paul Heath, he felt no-one was listeninqto him.

 

Rod had stepped down for family reasons and not due to his complaint.  He felt his complaint was being ignored.  David replied that sometimes actions are taken that it may not be obvious as to why.  Peter’s concerns were a substantial part, but not the only reason, why Rod stepped down.

 

Peter then explained that in December 2003 he was very stressed.  He sought counselling and was referred to his doctor. He was put on medication.  He “was suicidal”.  He said he could not face going to work, but his doctor wanted him to return to work in a month so he could “face the reality of returning to work.”  He said he is on medication during the day, sleeping pills at night to get through the highs and lows of the day. He feels isolated and not supported.

 

David told him he was brave, has been through a lot and apologised that he feels this way and that he has obviously been affected by it.  David then said that “to say this has not been treated seriously (PH and HR Sydney) is not the case.”  The feedback given by Peter to Paul has been considered and formed a real part of the decision regarding Rod not continuing in the role of manager.  Dianne pointed out that it was handled in the way it was to help Peter retain confidentiality and dignity.’  (Original emphasis)

84                  The discussion turned to Mr Nikolich’s present condition; he was feeling pressured, unmotivated, depressed and suicidal.  Mr Evans and Ms Jacobs suggested he reduce his working hours and spend more time with his family.  Mr Evans promised to give thought to a method of subsidising Mr Nikolich to enable him to do this.

85                  On 29 March 2004, Mr Evans wrote to Mr Nikolich offering a minimum bonus payment of $100,000 for the six months to 30 September 2004.  This payment was to be a one-off gesture and to be made by instalments on 30 April, 30 July and 30 October 2004.  The offer was made against the background that Mr Evans had ascertained that Mr Nikolich ‘is on target to make $192,000 for the year’.  However, Mr Evans explained in evidence that the effect of the offer was that Mr Nikolich would have been guaranteed about $140,000 ($100,000 plus half his annual base salary) for the six months.

86                  It is not clear that Mr Nikolich understood the offer in this way.  Counsel for the applicant drew attention to the second paragraph in Mr Nikolich’s letter, of 13 May 2004, in which he responded, rejecting the offer.  Mr Nikolich said:

‘After considering all aspects of your proposal I feel the firm’s offer, although attractive, does not fully recognise the degree of injustice and harm caused to myself and my family by the events that occurred through mid to late 2003, and in particular the actions of Rod Sutherland.

 

This is particularly so, when based on my current best projections I anticipate, indeed am aiming, to produce more bonus than this over the three identified quarters absent any guarantee.  As such, I currently anticipate that the proposed guarantee arrangement would be of little, if any value to me.

 

At a very basic level (being the failure of Rod to allocate Gabrielle Dal Bon's clients as had been agreed on her departure and similar to other allocations throughout JB Were), this has conservatively occasioned me a loss of gross annual revenue of $300,000, not to mention the psychological trauma that I have endured as a result of the various events. These losses are ongoing whilst others within the Canberra office continue to benefit from their actions.’

 

87                  Mr Nikolich went on to propose his own solution:

(i)         at least substantial financial compensation for the lost $300,000, ‘backdated to 1 July 2003 and paid with final bonus for financial year ending 30 June 2004’;

(ii)        redressing the ongoing impact of ‘the change in the distribution method of clients’:

‘The obvious method would be to undo the unfair distribution and re-transfer clients with annual brokerage/fee revenue totaling $300,000 to my adviser code (P\N) as at 1 July 2004. Obviously, I would suggest that any such transfer be supervised by a mediator to ensure appropriate and suitable relationships are transferred. Alternatively, some other proactive method of JB Were increasing my annual brokerage/fee revenue by this amount would need to be considered.’

 

(iii)       Team RSL to be dissolved and its members relocated to alternate dealing desks.

88                  Mr Evans did not immediately respond to the letter.  He arranged a further meeting for 22 June 2004.  At the meeting, Mr Evans and Ms Jacobs discussed with Mr Nikolich the state of his health and his ability to resume work.  At the conclusion of the meeting, Mr Evans handed Mr Nikolich a letter which contained the following:

‘I regret that you have decided to reject the offer made to you on behalf of Goldman Sachs JBWere in my letter to you dated 29 March 2004.

For the avoidance of doubt, I wish to make it clear that Goldman Sachs JBWere does not accept that it is liable to compensate you in the manner set out in your letter or at all and the “counter-offer” contained in your letter is not acceptable to us. As far as Goldman Sachs JBWere is concerned, these matters are now closed and no further offers of assistance will be made.

 

Peter, if you are presently fit for work, you will be expected to now carry out your full range of duties and responsibilities. We are concerned about the health issues that you have raised, so I have asked Dianne Jacobs to write to you separately regarding your health and your capacity and fitness for work.’

 

89                  Mr Nikolich’s earnings (salary and incentive payments) for the year ended 30 June 2004 amounted to $197,485.

(ix)       Termination of Mr Nikolich’s employment

90                  In her affidavit, Ms Jowett deposed that Mr Nikolich was absent from work on sick leave from 1 December 2003 until 2 January 2004.  Although he was continuing to receive psychological counselling, Mr Nikolich resumed work on Monday, 5 January 2004.  He continued to work until 6 August 2004, when he again went on sick leave.  He remained on sick leave until 31 August 2004, when his sick leave entitlement ran out.  Mr Nikolich then was paid salary for two weeks and had two week’s leave without pay, from 16 September to 1 October 2004.  Mr Nikolich then used accrued annual leave until 30 November 2004, when this leave ran out.  From 1 December to 6 December 2004, Mr Nikolich was on leave without pay.  In all, if it matters – the applicant’s counsel say it does – Mr Nikolich’s total period of leave without pay was less than three weeks.

91                  In July 2004, Ms Jowett arranged for a psychological assessment of Mr Nikolich by Thomas O’Neill, a clinical psychologist.  In September 2004, she also contacted Dr Stephen Jamieson, Mr Nikolich’s treating general practitioner.  Ms Jowett also had frequent contact with Mr Nikolich himself, concerning his health and leave entitlements.  However, she left GSJBWS on 26 November 2004.  She was succeeded as Human Resources Manager in GSJBWS’s Sydney office by Paula Ward.

92                  Ms Ward deposed that, as Mr Nikolich had used up all his leave by 1 December 2004 and GSJBWS had not heard from him, he was expected to attend for work on that day.  He did not do so.  Accordingly, Ms Ward sent him an express letter asking for information, as a matter of urgency, ‘whether you are intending to return to work to resume your normal duties and responsibilities’.

93                  Mr Nikolich responded through a firm of solicitors, Harmers Workplace Lawyers (‘Harmers’).  On 6 December 2004, they wrote a letter to Ms Ward that included the following:

‘As you will no doubt be aware, Mr Nikolich has for some time now been unwell because of various actions taken by Goldman Sachs JBWere against him in relation to his employment.  At this time we are currently finalising our instructions from Mr Nikolich and expect to respond more fully shortly but are currently advised that if Mr Nikolich were to return to work such would have adverse consequences for his health.’

94                  Ms Ward discussed this letter with Ms Jacobs and Mr Heath.  On 7 December 2004, she wrote to Mr Nikolich.  After referring to the solicitors’ letter, she said:

‘In the circumstances, it is clear to us that you either do not intend to return to work or are not able to return to work in the foreseeable future or at all.  In those circumstances, Goldman Sachs JBWere regards your employment with Goldman Sachs JBWere as having terminated.  For this purpose, Goldman Sachs JBWere will treat the termination of your employment as having taken effect on Monday, 6 December 2004.’

95                  On 18 March 2005, Harmers filed an Application in this Court seeking relief in relation to unlawful termination pursuant to ss 170CK(2)(f) and 170CP of the WR Act.  After a change of solicitors, the Application was amended to include the other causes of action, mentioned in para 2 above.

96                  In the 2004-05 financial year, Mr Nikolich received from GSJBWS a total sum of $22,928.

(x)        The medical/psychological evidence

(a)        Introductory

97                  The parties jointly tendered, as one exhibit, a number of medical and psychological reports.  Counsel told me they had agreed that none of the reports’ authors would be cross-examined.  I expressed concern that it might be difficult, without cross-examination, to resolve any significant differences of expert opinion, but I agreed to defer further discussion of that matter until I had read the reports.  Having now done so, I accept that cross-examination is not essential.  The differences between the experts are differences in professional judgments.  They do not need oral elucidation.  I will attempt to summarise the views of each of the six experts.

(b)        Dr Jamieson

98                  Dr Jamieson is a Canberra general practitioner.  He has seen Mr Nikolich on numerous occasions since 1 December 2003.  Dr Jamieson reported, in this way, the applicant’s demeanour at the first consultation:

‘Mr Nikolich attended my surgery for the first time on December 1, 2003.  He presented in a most distressed state and related to me a 6-month history of work-place conflict.  The latter was of such a degree that his career, not just with his firm, but in the industry as a whole, was compromised.  This had had a very serious effect on his mental state, on his marriage and family life.

Mr Nikolich presented with symptoms of a major depressive disorder, ie depressed mood, poor self-esteem, an extremely poor view of his future, a great sense of failure and withdrawal.  I was very concerned about his mental state at the time and Mr Nikolich accepted to start anti-depressant medication immediately.’

99                  Dr Jamieson said that, over the next few months, ‘there was a moderate lift in his mood but he continued to be consumed by the conflictual problems at work’.  In early 2005, Dr Jamieson referred Mr Nikolich to Dr Fatma Lowden, a Canberra psychiatrist, who took over responsibility for Mr Nikolich’s medication.  However, Dr Jamieson continued to see Mr Nikolich from time to time.  He reported in April 2005 that ‘his mood remains low’.  Dr Jamieson related Mr Nikolich’s condition entirely to his conflicts at work.  He said that ‘Mr Nikolich’s feeling of injustice and fears that his career would be destroyed were foremost in the development of his clinical disorder’.  Dr Jamieson did not think Mr Nikolich was fit to return to work, either with GSJBWS or ‘anywhere else in his field for the moment’.

100               In a supplementary report dated 4 April 2006, Dr Jamieson detailed Mr Nikolich’s medication.  He noted that, since the earlier report, Mr Nikolich’s marriage had failed, having ‘a major detrimental effect on his health’.  He thought Mr Nikolich, at that time, was ‘unfit for any professional duties’.  He also thought Mr Nikolich ‘is unlikely to improve in the short to medium term’.

(c)        Dr Lowden 

101               Dr Lowden first saw Mr Nikolich on 26 April 2005.  In a letter to Dr Jamieson of 19 May 2005, Dr Lowden set out the extensive history she had obtained from Mr Nikolich and provided this summary:

‘In summary he is a thirty-nine year old presenting with twenty-three month history of depression at the background of mild family history of psychiatric disorder, possibly early emotional problems but good sense of self, some unresolved losses and separations, relationship difficulties and quite severe work issues.  On the other hand his intelligence, his psychological insight and his ability to hold a relationship are his strengths which should be taken into account in his prognostic evaluation.

My provisional diagnosis for Peter Nikolich is major depression anxiety, which could be bipolar in nature but is difficult to differentiate at this stage.  This needs to be monitored over the next six to twelve months to clarify this diagnosis.  In terms of differential diagnosis I considered organic mood disorder, personality disorder and dysthymia.

In terms of immediate management, first of all I discussed suicide risk management measures with him then explained his condition and it’s management with him in detail.  He did not require hospitalisation.  I plan to talk to his wife with his consent in the future for further information if necessary.  Thank you for organising investigations for him, which revealed no major abnormality.  I discussed with him a trial of mood stabilizer for the future in case his bipolar symptoms are present but I asked him to cease the sleeping tablets and instead I initiated quetiapine 25mg po nocte for his insomnia and some of the mild paranoid thinking.  I also initiated psychotherapy to improve his self-esteem, to deal with interpersonal issues and for anger management.’

102               In a later report, dated 13 March 2006, Dr Lowden identified her diagnosis for Mr Nikolich as ‘major depressive disorder according to DSM IV’.  This report was prepared after interviewing Mr Nikolich on eight different occasions.  Dr Lowden gave the cause of the condition as ‘betrayal of trust and lack of respect, difficulty in conflict resolution at the workplace and a hostile work environment’.  In relation to Mr Nikolich’s fitness for work, Dr Lowden said:

‘(a)      I do not believe that he could return to work at Goldman Sachs JB Were given the history of events with that company.

(b)       He might be able to start a part-time job with another company since there is a significant improvement in his symptoms.

I believe that if Mr Peter Nikolich continues treatment and psychotherapy he will eventually be able to return to work.’

(d)        Dr Lucas

103               Dr William Lucas is a consultant forensic psychiatrist.  He was asked to see Mr Nikolich by Pamela Coward and Associates, Mr Nikolich’s present solicitors.  Dr Lucas saw Mr Nikolich on 20 April 2005 and reported on 14 June 2005.  The report set out an extensive history.  That history included complaints by Mr Nikolich about the manner in which GSJBWS had handled his concerns about Mr Sutherland’s conduct.  Dr Lucas said:

‘Mr Nikolich went off work about the 2^nd Dec 2003.  He spoke to the officer mentioned above.  He began taking Lovan.

After six months delay he received correspondence from the firm.  The officer said the firm did not know how to handle the situation and that procedure may not have been followed.  Mr Nikolich became more frustrated and went deeper into depression.  He had to face colleagues involved in the problem.’

104               Dr Lucas accepted that Mr Nikolich had been suffering from major depression when first seen by Dr Jamieson on 1 December 2003.  In relation to Mr Nikolich’s current condition, Dr Lucas said:

‘There is no personality diagnosis.  Mr Nikolich has some obsessive-compulsive traits but these do not amount to a disorder.  They are likely to have been an advantage during his employment, considering the nature of his duties and responsibilities.

His only medical diagnosis is hypertension.

From the information available the onset and continuation of Mr Nikolich’s symptoms appears related to his employment.’

105               In relation to working capacity, Dr Lucas said:

‘…he could not return to work at Goldman Sachs J B Were.  Further, in his present mental state he is probably unfit to return to work of a similar type with another firm.  He remains depressed, anxious, has insomnia and concentration is poor.

With further treatment leading to an improvement in his condition Mr Nikolich should be able to return to work but his placement and duties will require careful planning.  He obviously has a number of skills in the financial area but while depressed and anxious will have difficulty performing at his previous level.  As mentioned, a return to his previous firm will not be possible.’

(e)        Mr O’Neill

106               Mr Thomas O’Neill is a clinical psychologist.  He saw Mr Nikolich on 9 July 2004, at the request of Ms Jowett.  In a report dated that day, Mr O’Neill set out a history that was consistent with Mr Nikolich’s evidence in this case.  He detailed Mr Nikolich’s results in relation to three assessments:  Personality Assessment Inventory, Beck Depression Inventory 2^nd edition and Beck Anxiety Inventory.  Mr O’Neill set out the following conclusions:

‘From a psychological point of view, there is no doubt that Mr. Nikolich was distressed by his perception of how Mr. Sutherland dealt with his concerns last year, and began to find it difficult to function at work by the end of 2003. He met criteria for a Major Depressive Episode by December 2003 and these symptoms definitely interfered with his ability to function both at work and home. He began to receive some therapeutic benefits after commencing antidepressant medication, although continued to report ongoing symptoms of depression that were not as severe as those in the latter part of 2003. Although there was exaggeration noted on personality testing, my overall impression was that he still does have signs of a low-grade depression consistent with a Dysthymic Disorder. This level of depression is also complicated by his conviction that he has been unfairly treated by Mr. Sutherland and his team and also in general by Goldman Sachs and Were. He is also highly sensitive about how his concerns are being dealt with within the organisation and his perception that Mr. Sutherland has been able to get away with some unacceptable unprofessional behaviour. As noted in my report, he wants a resolve to his concerns to include financial remuneration/compensation, attempts to break up Mr. Sutherland's team and reallocation of Ms Dolbann's original clients by an outside mediator.

The presence of a Dysthymic disorder does not preclude the possibility of someone being able to function normally at work. I believe that Mr. Nikolich is fit for normal duties and responsibilities and would be more motivated at work if he perceived that attempts were being made by Goldman Sachs and Were to support his requests for a resolve. I consider these to be industrial issues and are not issues that require clinical attention per se.

It is difficult to comment on Mr. Nikolich's prognosis. He reported to me that his psychological well being in the future will be contingent on the outcome of his negotiations with Goldman Sachs and Were. I do not believe any psychological treatment could assist with this process apart from perhaps reviewing the reasonableness of his requests with a counsellor of his own choice. He has had a positive response to his medication and I would suggest ongoing treatment with this.’

 

So far as I am aware, Mr O’Neill has not subsequently seen Mr Nikolich.

(f)        Dr Synnott

107               Dr Inglis Synnott is a Canberra consultant psychiatrist.  He saw Mr Nikolich on two occasions, at the request of solicitors then acting for GSJBWS or its insurer.

108               Dr Synnott first saw Mr Nikolich on 24 October 2005.  On that occasion, he took a history, less extensive than that taken by some others but also consistent with Mr Nikolich’s evidence.  The history included complaints about the manner in which GSJBWS had handled his concerns about Mr Sutherland’s conduct.

109               Dr Synnott thought the symptoms described by Mr Nikolich met the diagnostic criteria of a major depressive disorder.  However, he said it should not automatically be assumed that Mr Nikolich had a significant psychiatric impairment or was precluded from returning to work.  He said:

‘In my opinion, it is the anger of Mr Nikolich and his determination to gain “satisfaction” with regards his former employers meeting his demands (for justice and restitution) that are the major factors in why he is not returning to employment.  There is no psychiatric incapacity to work.’

110               Dr Synnott thought Mr Nikolich would not have a permanent psychiatric impairment but was ‘unlikely to return to employment until he regains satisfaction in his requests’.  The ‘prognosis should be good – assuming there is some reasonable industrial solution’.

111               Dr Synnott saw Mr Nikolich again on 31 March 2006.  In a report dated 7 April 2006, he brought the history up to date but thought there had been no significant change in Mr Nikolich’s psychological status.

112               However, Dr Synnott expressed concern at what he called ‘a considerable shift in the “mindset” of Mr Nikolich’.  Dr Synnott explained:

‘In October 2005, Mr Nikolich was of the opinion that, once he received restitution and justice, he could return to the same industry – and in a similar job, although not with his former employer.  However, at the consultation on 31 March 2006 that was no longer his position – he is now of the opinion that he is currently incapable of any employment or participating fully in his usual life roles and activities, even if there is satisfaction in the courts.

In my opinion, at the consultation on 31 March 2006, Mr Nikolich described sufficient psychological symptoms to meet the diagnostic criteria of a Major Depressive Disorder – as he did at the initial consultation.  However, what has changed in the five months since I first saw him is that he now has a different mindset regarding his capabilities (in employment and other life roles) – this may prove to be a self-fulfilling and self-perpetuating prophecy.  It does not augur well for the future.’

113               Dr Synnott reported that:

‘currently Mr Nikolich is not able to return to any kind of work on a fulltime basis.  He said he is psychiatrically incapable of participating in any kind of employment and, in my opinion, his mindset will prove this to be a self-fulfilling and self-perpetuating prophecy’.

(g)        Dr Samuell

114               Dr Doron Samuell is a clinical and forensic psychiatrist.  He saw Mr Nikolich on two occasions, at the request of solicitors acting for GSJBWS or its insurer.

115               The first interview was on 6 September 2005.  Dr Samuell took an extensive history on this occasion.  Once again, the history included complaints about the way in which GSJBWS had dealt with his concerns about Mr Sutherland.

116               Dr Samuell thought Mr Nikolich’s psychological state had been ‘unnecessarily medicalised’.  He said:

‘A more helpful approach may have been to assist Mr Nikolich develop some perspective about his circumstances.  In worrying about incremental changes to his income, he now faces the prospect of having no income. His distress about this is understandable.

 

I did not make a psychiatric diagnosis.  This is because Mr Nikolich’s difficulties should be better understood within the framework of a rigid premorbid personality decompensating in the face of challenges.  As such, the remedy forMr Nikolich’s distress is to obtain perspective about his circumstances and begin the process of finding alternative employment.  He needs to abandon the sick roll and relinquish his abnormal illness behaviour. It is unlikely that medication will have any meaningful impact on him.

 

In my opinion, Mr Nikolich is fully fit to work in any capacity for which he is suitably qualified.

 

In my opinion, despite that [sic] fact that he has lost confidence, he could perform his normal duties in his usual work environment if those duties were available to him.

 

In my opinion, the applicant has not suffered from a psychological condition.’

117               Dr Samuell said that Mr Nikolich’s prognosis ‘is entirely dependent upon the way that he now approaches life’s challenges and difficulties.  He is not behaving in an adaptive manner and is further entrenching himself in the sick role’.

118               Dr Samuell saw Mr Nikolich again on 6 April 2006.  By this time, he had read the reports of Dr Jamieson, Dr Lowden, Dr Lucas and Mr O’Neill.  These reports caused him somewhat to modify his earlier view.  In a report dated 10 April 2006, he said there ‘is no doubt that Mr Nikolich was deeply unhappy and angry about the workplace circumstances’; nonetheless, he thought there remains ‘some considerable doubt about whether he was in fact mentally ill’.  In answer to a specific question as to whether Mr Nikolich was ‘currently suffering any medical condition’, Dr Samuell said that he ‘did not make a psychiatric diagnosis’.  Later, he said:

‘Mr Nikolich referred to the unethical behaviour of his employer, the workplace restructure, and the failure of his employer to follow protocols.  I am not in a position to validate the factual basis of his history.  Mr Nikolich responded to the perceived circumstances in a highly personalised and rigid manner.  It was my view that his response was maladaptive, and that he lacked the internal resources to reconcile the circumstances.  Therefore, I think that if Mr Nikolich did suffer from a medical condition, it was likely to be a product of the external circumstances and his personality.’

119               Dr Samuell expressed the opinion that Mr Nikolich ‘could work as an investment adviser or in any other capacity for which he was suitably qualified’.

Findings about the evidence

(i)         Preliminary

120               Much of the evidence I have summarised is uncontentious.  However, some important matters are in issue.  Before turning to the parties’ submissions, it is appropriate to make some findings about them.

121               In reaching my conclusions, I have given some weight to the applicant’s reliance upon the principles enunciated in Jones v Dunkel (1959) 101 CLR 298.  The three persons named by counsel (Ms Jacobs, Mr Bontempelli and Mr Keogh) are apparently all still employed by GSJBWS.  However, I do not think it makes much difference, in relation to most issues, whether or not a Jones v Dunkel approach is taken.

122               It is difficult to see that Ms Jacobs could have assisted in relation to any contentious issue in the case.  She participated in the recommendation to Mr Heath to terminate Mr Nikolich’s employment.  However, it was Mr Heath who took the termination decision and he gave evidence about his reasons for that decision.

123               Mr Bontempelli could have dealt with the atmosphere in the Canberra office after early June 2003 and, as counsel suggested, Mr Sutherland’s conduct towards Mr Nikolich.  The same comment may be made about the other people who were in the Canberra office at that time, none of whom were called.  Jones v Dunkel principles apply to the respondent’s failure to call any of these people.   However, it must be said, there was no real question about these matters.

124               Mr Keogh’s absence from the witness box is more significant.  Mr Keogh was involved in most, if not all, of the June 2003 conversations between Mr Nikolich and Mr Sutherland.  He would have been in a position to corroborate Mr Sutherland’s denial of having used abusive and bullying language during those conversations.  It is not adequate for the respondent’s counsel, Mr A Coleman, to argue, as he does, that there ‘was no need to call Mr Keogh’ as he ‘had clearly stated his position with respect to the Dal Bon client re-allocation in his email to Mr Heath dated 26 June 2003’.  So he had, reluctantly accepting the finality of Mr Sutherland’s reallocation.  However, that says nothing about Mr Sutherland’s conduct towards Mr Nikolich.

125               It is true, as Mr Coleman submitted, that the applicant was free to call Mr Keogh.  However, this was not a real option if, as I understand, Mr Keogh is still employed by GSJBWS.

126               Particularly in relation to Mr Keogh, it is appropriate to apply Jones v Dunkel principles, adversely to GSJBWS.  I do so.  However, my conclusion that I should prefer the evidence of Mr Nikolich to Mr Sutherland, where it is necessary to choose between them, rests more upon the evidence about events in 2003 and my assessment of the two men, rather than the failure of the respondent to call Mr Keogh.

(ii)        Credibility issues

127               I accept Mr Nikolich as a witness of truth.  My impression, as he gave his evidence, was that he was an honest and straight-forward person, but one who was deeply troubled by what he was recounting.  Mr Nikolich obviously has a strong sense of injustice about the way he was treated by GSJBWS.  This sense may have led him to draw some unjustified inferences about people’s motives and conduct.  However, I have no hesitation in accepting his account of factual matters, including the substance of the conversations he had with Mr Sutherland and his descriptions of Mr Sutherland’s demeanour and attitude towards him.  I do so the more readily because I was not impressed with Mr Sutherland.  Although Mr Sutherland answered most of the questions put to him in cross-examination in a succinct and direct way, he exhibited a tendency to prevaricate in relation to important issues.  I cite, by way of example, this extract from his cross-examination concerning the conversation about reallocation of Ms Dal Bon’s clients:

‘And you understood at that time that there was a dispute between you on the one hand and Mr Nikolich and Mr Keogh on the other hand?‑‑‑I knew they weren't happy about it.

Well, not only were they not happy they brought to your attention that what you were doing was in contravention of the Team DKN business plan; that's correct isn't it?‑‑‑It's got nothing to do with the business plan.

No, that's not the question, Mr Sutherland.  If you don't understand the question please ask me?‑‑‑Okay.

…

They, Mr Nikolich and Mr Keogh, brought to your attention that your reallocation of Ms Dal Bon's clients outside of Team DKN was in contravention of the exit strategy in the Team DKN business plan didn't they?‑‑‑They may well have done, yes.

They did do that didn't they, Mr Sutherland?‑‑‑They may well have done, yes.

Ten minutes ago you told us that they brought the plan to your attention; you would agree with that?‑‑‑They mentioned it, yes.

No, they brought it to your attention.  They said to you, what you are doing directly contravenes the Team DKN business plan, didn't they?‑‑‑They mentioned it, yes.

You understood that then created a dispute between you and Mr Keogh and Mr Nikolich about how Ms Dal Bon's clients were going to be reallocated?‑‑‑No.

I think you said just a moment ago that they weren't happy about it?‑‑‑Correct.

And they questioned you about it didn't they?‑‑‑Correct.

And they said to you, what you're doing is wrong, is in contravention of the business plan, didn't they?‑‑‑I do not recall words to that effect that they said that it was in contravention of the business plan.

You understood they were in dispute with you about how you were reallocating the clients; isn't that right?‑‑‑I knew they had an issue with the way I was reallocating clients.

By the term "issue" you know that's just another word for a grievance or a complaint; isn't that right?‑‑‑No.’

128               During her cross-examination of Mr Sutherland, Ms Nomchong drew his attention to a segment of Ms Jowett’s file note of her conversation with him on 27 August 2003 which reads as follows:

‘Whilst discussion occurred around Peter and Mark retaining Gabriella [sic] client base he does not believe this was ever agreed absolutely.  I pointed out the business plan item confirming this and Rod doesn’t recall having seen this previously.’

129               The exchange in cross-examination was as follows:

‘Now, during this meeting on 27 August with Ms Jowett,  Ms Jowett asked you directly whether you had ever seen Team DKN business plan, do you recall that?‑‑‑She may well have done, we had a long discussion.

You told her, I don't recall having seen this document previously, do you remember that?‑‑‑This specific document.

The Team DKN business plan?‑‑‑Yes.

But that wasn't the truth was it?‑‑‑I had seen a business plan.

But you told Ms Jowett that you don't recall having seen the plan previously?‑‑‑Not that version that they had. I said I'd seen a business plan.’

130               Mr Sutherland went on to say that Ms Jowett did not show him a copy of the business plan.  Ms Nomchong then read to him Ms Jowett’s file note.  The evidence went on:

‘Are you saying that when Ms Jowett raised this with you she didn't point out the business plan item on the document itself?‑‑‑No.

But you did say to her, I don't recall ever having seen a draft plan or a business plan, sir?‑‑‑No, I didn't say that, I said I had seen a draft plan originally when the team was being formed.

Just a moment ago, Mr Sutherland, I think you told us that you'd seen a version of the plan but you didn't know if the plan she showed you was a plan that you'd seen back in April 2002.  So did she show you a document or didn't she?‑‑‑She didn't show me a document.

And you didn't ask to see the document?‑‑‑No.

And you didn't ask to read this business plan that talked about an arrangement about the allocation of Ms Dal Bon's clients?‑‑‑No.’

131               Two observations may be made about this reply.  First, I find it inconceivable that, if Ms Jowett did not show Mr Sutherland the business plan, about which she was questioning him, he would have failed to ask to see it.  Second, the file note does not suggest that Mr Sutherland told Ms Jowett that he had seen a business plan, but not the particular business plan she said she showed him.  There is no suggestion there was ever more than one team DKN business plan.

132               Having regard to Mr Sutherland’s concession, in evidence in this case, that he had seen the team DKN business plan, it seems to me the only available conclusion is that he sought to mislead Ms Jowett.

133               During her cross-examination, Ms Nomchong asked Mr Sutherland about his decision to stand down as Canberra office manager.  He said it was his choice to do so; there were a number of reasons but poor performance was not one of them; neither was Mr Nikolich’s complaint; when Mr Heath and Mr Voigt asked him to consider stepping down, they merely said ‘they were looking at management change within the Canberra office’.  [Ms Nomchong incorrectly referred to Mr Evans, rather than Mr Heath, in her question but Mr Sutherland was in no doubt about the meeting under reference.]

134               When it was his turn to be cross-examined, Mr Heath gave evidence contrary to that of Mr Sutherland.  He said he and Mr Voigt told Mr Sutherland they had ‘serious issues about the low morale in the Canberra office’, that ‘a lot of people had expressed dissatisfaction with his managerial style’ and that he and Mr Voigt had ‘serious concerns about whether or not he should continue in the role’.  Mr Heath specifically denied they had said only that they were ‘looking at management change in Canberra’.

135               The evidence of Mr Heath on this issue is more probable than that of Mr Sutherland.  If there was no problem in the Canberra office, why would Mr Heath and Mr Voigt wish to change managers?  I can only conclude that Mr Sutherland was willing to mislead the Court about the reason for his standing down as manager.

136               Further, in relation to credibility, as he gave his evidence, it seemed to me Mr Sutherland exhibited a lack of sensitivity to the complaints of Mr Nikolich and Mr Keogh that is consistent with Mr Nikolich’s version of the relevant conversations.  For example, Mr Sutherland said in evidence he had not thought the fact that Mr Nikolich and Mr Keogh had taken their complaint to a higher authority (Mr Heath) meant the complaint was a serious one.  He agreed that, after he learned Mr Nikolich and Mr Keogh had complained to Mr Heath, he did not talk to them about, or try to resolve, their concerns.  Although he was manager of the Canberra office, and Mr Nikolich’s immediate supervisor, he took no steps, at any stage, to re-establish an amicable working relationship with him; even though, as he told Ms Nomchong, he observed Mr Nikolich to be anxious, stressed and avoiding him.

(iii)       The handling of Mr Nikolich’s complaints

137               I agree with counsel for Mr Nikolich that GSJBWS’ handling of their client’s complaint was extremely inept.  My agreement does not depend upon my accepting any contentious evidence.  It arises irresistibly from the evidence of GSJBWS’s own witnesses, especially Ms Jowett, Mr Heath and Mr Evans, and contemporaneous letters and file notes.

138               There is an inherent conflict of interest in a system under which an office manager has the task of allocating clients amongst financial advisers, of whom he himself is one.  On several occasions in their evidence, Mr Sutherland, Mr Heath and Mr Evans repeated the mantra that clients are clients of the firm, not of particular financial advisers.  In a legal sense, that is true; the client contracts with the firm, not the adviser; fees are charged by the firm, not by the adviser.  However, advisers have a considerable financial interest in the number and identity of the clients that are allocated to them.  The incentive system employed by GSJBWS meant that, as Mr Sutherland agreed, ‘the ability to service [a] client is a very valuable right’.  It should, therefore, have been obvious to GSJBWS’s senior officers that it was essential to develop and enforce a client-allocation protocol which left no room for the office manager to favour himself or his own team, or be perceived to be doing so.  A suitable protocol could have taken any of a number of forms.  However, there was no protocol in place in the Canberra office in 2003. 

139               Mr Evans and Mr Heath knew there was no protocol in place.  Accordingly, they should have been particularly sensitive to any complaint, whether justified or not, that the office manager had abused his power of allocation.  Yet they seemingly failed to comprehend – they certainly failed to act upon - Mr Nikolich’s complaint that this is what had happened in relation to the reallocation of Ms Dal Bon’s clients. 

140               In his letter of 28 July 2003, Mr Nikolich made three relevant allegations:

(i)         Mr Sutherland’s final reallocation decision was a reprisal for the action of Mr Nikolich and Mr Keogh in raising their concerns with Mr Heath;

(ii)        A majority of the ‘A’ clients taken away from team DKN were ‘allocated to the RSL team’; and

(iii)       Contrary to previous assurances that he would not benefit personally, Mr Sutherland had ‘quarantined numerous valuable clients for himself and will also benefit from a majority share of business written of those clients transferred to RSL’.

141               In the light of evidence given in this case, it is possible to say that allegations (ii) and (iii) overstate the situation.  I am not able to make a finding about (i).  The only relevant evidence is that of Mr Sutherland, in whose evidence I have little confidence.  However, I accept that allegation (i) may have been incorrect.  It does not matter.  My present point is that these were all serious allegations warranting investigation, yet there was no effective investigation.

142               It might have been thought that a letter such as that of 28 July 2003 would have resulted in a senior person immediately travelling to Canberra and conducting a series of one-to-one meetings with members of the Canberra staff.  This would not have been a large task.  There were only about a dozen people employed in Canberra.  Mr Coleman suggested it would have been difficult for Ms Jowett to conduct confidential meetings in the Canberra office.  However, if Ms Jowett had not wished to conduct meetings in the Canberra office, she surely could have arranged a room elsewhere in the city.  Everybody in the office would have known meetings were being held, but they all must anyway have known of the conflict between Mr Sutherland and Mr Nikolich.

143               Mr Coleman also argued that Ms Jowett knew Mr Heath was discussing with Mr Sutherland the possibility of Mr Sutherland stepping down as Canberra manager.  He said: ‘Ms Jowett thought that if Mr Sutherland stepped down from his role, this may resolve the Applicant’s grievance’.  However, Mr Sutherland’s removal as manager would not have reversed the allegedly unfair reallocation decision.  It would have remained necessary for Ms Jowett to investigate that decision and, if it was wrong, take action to rectify the position.  In any event, it was not reasonable for Ms Jowett to delay for three months, while Mr Sutherland considered his position.

144               Lest it be thought that my criticisms on this matter are too severe, I mention that their essence was accepted by Mr Evans.  At the close of his cross-examination, I asked Mr Evans about his reaction when he first saw Mr Nikolich’s letter, on his return from sabbatical leave in August 2003.  Mr Evans’ evidence was as follows:

‘Well, if you saw his letter it would have been obvious to you that what he was saying and rightly or wrongly was, in effect, that Mr Sutherland had allocated on the basis that took into account his own self interest rather than fairness to other people, that's perhaps putting fairly mildly what he was complaining about, is that right?‑‑‑That's right.

Now, doesn't that complaint go to the real heart of the system that Goldman Sachs operated whereby it had branch managers who were already financial advisers and had to trust their integrity to do the right thing in allocations, does it not?‑‑‑That's correct.

Now, what I don't understand … why weren't there red lights flashing in your mind and in the mind of those like Mr Heath who had responsibility, to say, hang on, what's Mr Sutherland doing and I add to that, this at the very time when you were developing your own very serious doubts about Mr Sutherland's performance?‑‑‑Look, in hindsight, I should have got more involved.  I did leave it to Mr Heath at the time. You're absolutely right, sir, that we do place a lot of emphasis on integrity of the manager.  What happens in client allocations is if an adviser knows and has a relationship with that client that may be looked after by another client adviser in the office, that when that client adviser leaves for smoothness of the relationship that it goes to one of those other or the adviser that has the existing relationship.

Well, I understand that, but one of the arguments in favour of partnerships is that advisers can cover for each other?‑‑‑Correct.

When, for any reason, they're away?‑‑‑Yes.

So that instead of everybody having, if you like, a one person relationship with a particular client, although no doubt that's the person the client primarily asks for when they ring up.  If they ring up X, they also know that if X is away to ask for Y or Z?‑‑‑Absolutely, your Honour. 

And Y or Z get to know something about those clients, that's the whole argument in favour of partnerships, isn't it?‑‑‑Yes, it is, absolutely.

So why doesn't the logic of that mean that if X leaves, at least within the limit of their capacity to service, Y and Z are the people who take over those clients?‑‑‑Yes, look, without the knowledge that Paul Heath who was involved in this has on how the allocation was done, I really can't answer the question.

But what worries me is that I would have thought that after that letter of July, somebody would have gone down to Canberra, it's easy enough to get to, and spend a day in the office and said "I want to look at the way that Dal Bon's clients have been allocated" ‑ ‑ ‑?‑‑‑I suspect that did happen, I don't know.

‑ ‑ ‑ gone through it and asked Mr Sutherland to justify what he's done, would you agree that that is what should have been done?‑‑‑Yes, yes absolutely.

You see, if you've got a problem with an employee, you can nip the grievance in the bud and give the person satisfaction.  You don't run into the psychological problems that undoubtedly have occurred here?‑‑‑I totally agree with you, sir.’

145               In any event, neither Ms Jowett or Mr Heath took action to arrange meetings in Canberra.  Instead, Ms Jowett allowed nearly a month to elapse before she even showed the letter to Mr Sutherland.  At no stage did she interview Mr Keogh or Ms Grunbaum, who were both named in Mr Nikolich’s letter, nor any of the other Canberra financial advisers.  More than two months after receiving Mr Nikolich’s letter of 28 July, and without having taken any meaningful action to establish the truth or otherwise of his allegations, Ms Jowett invited Mr Nikolich to attend a meeting in Sydney with herself and Mr Heath.  However, it is apparent from Ms Jowett’s file note that this meeting did not address the concerns he had raised in his letter; rather it developed into a counselling session about Mr Nikolich’s stress.  Instead of responding to a plea for justice, Ms Jowett and Mr Heath, no doubt with good intentions, treated him as the problem.  This response was inappropriate.

146               After that meeting, a further six weeks was allowed to elapse before Ms Jowett formally responded to Mr Nikolich’s complaint.  Even then, she missed the main point of his complaint.  She failed to deal with his allegations of abuse of power, except by the bland statement that Mr Sutherland’s allocation decisions ‘were appropriate having regard to the needs of the firm’s clients’, a matter about which she had made no inquiry.  Although Ms Jowett knew Mr Nikolich was relying – rightly or wrongly – on the exit strategies paragraph in the DKN team business plan, she made no reference to the plan at all.  If she had thought it was inapplicable to the situation that had arisen on Ms Dal Bon’s departure, it would have been helpful for her to explain why that was so.

147               Mr Nikolich was understandably dissatisfied with this response.  He asked that his complaint be referred to Mr Evans and Ms Jacobs.  However, they were even less active in ascertaining the merit of his complaints; they seem to have made no investigation at all.  Instead, and once again no doubt with good intentions, they set about counselling Mr Nikolich; once again, he was treated as the problem.

(iv)       Mr Nikolich’s contribution to the inept handling

148               Mr Nikolich contributed to GSJBWS’s inept handling of his complaints.  Although he knew of Mr Keogh’s email of 26 June 2003 reluctantly accepting the finality of Mr Sutherland’s reallocation decisions, Mr Nikolich took no immediate action to dissociate himself from Mr Keogh’s position or to inform Mr Heath that he continued to press a complaint against Mr Sutherland.  He did not do this for over a month, until he sent the letter of 28 July 2003.  This delay possibly set the tempo for Ms Jowett’s subsequent dilatory conduct. 

149               There was a delay of a couple of weeks in Mr Nikolich receiving Ms Jowett’s letter of 1 December 2003.  Mr Nikolich may have contributed to this delay by failing promptly to notify a change of address. 

150               Mr Nikolich’s delays were unfortunate.  However, it is only fair to note that Mr Nikolich was suffering stress at both these times, as was well known to the relevant GSJBWS employees. 

151               It might be thought Mr Nikolich was unwise to refuse the offer Mr Evans made in his letter of 29 March 2004.  Perhaps he was; that rather depends upon the precise meaning of Mr Evans’ letter.  However, Mr Nikolich thought the offer did not provide a just result; that was a judgment he was entitled to make.

152               In some of the file-notes, there is an implied criticism of Mr Nikolich for having failed to indicate how he wished GSJBWS to handle his complaint.  I do not think this is a fair criticism.  Mr Nikolich was not an expert in the handling of complaints of this type.  So far as I am aware, he had had no previous relevant experience.  He made his complaint to the appropriate human resources officer.  He was entitled to expect she would know what to do, without advice from him.  Moreover, Mr Nikolich was neither impartial or objective.  He recognised this himself, in speaking of his stress and emotional reaction to what he perceived to be the injustice to which he had been subjected.

(v)        Mr Nikolich’s psychological condition

153               It appears to be the view of five of the six experts who have assessed Mr Nikolich that he has exhibited, and continues to exhibit, symptoms of psychological disability.  Those experts agree the disability arises out of the events which are the subject of this proceeding.  However, there is some difference between them, in their descriptions of the disability and assessments of its severity and effects.

154               Dr Jamieson was concerned about Mr Nikolich’s condition when he first saw him, on 1 December 2003.  He detected symptoms of ‘a major depressive disorder’.  He continued to see Mr Nikolich regularly and remained concerned about his condition.  I bear in mind that Dr Jamieson is not a specialist psychiatrist; however, I would not disregard the opinion, on a matter like this, of a general practitioner who has frequently seen the patient.

155               Dr Lowden and Dr Synnott, both specialist psychiatrists, thought Mr Nikolich was suffering a major depressive disorder; Dr Lucas accepted he had done so at one stage, and remained depressed, anxious and suffered from insomnia and poor concentration.  Mr O’Neill diagnosed a low grade depression. 

156               Only Dr Sammuell failed to report a medical or psychological condition; although it is fair to point out that he specifically stated that he had not made a psychiatric diagnosis.  Even so, Dr Samuell referred to Mr Nikolich’s personality characteristics as ‘maladaptive’.

157               It seems to me the preferable view is that expressed by Dr Lowden, the treating psychiatrist.  Her opinion is fully supported by Dr Synnott, substantially supported by Dr Lucas and Mr O’Neill and consistent with Dr Jamieson’s observations.  Dr Sammuell has not had prolonged exposure to Mr Nikolich.

158               It follows that I find Mr Nikolich has suffered, and perhaps continues to suffer, a major depressive disorder flowing from the events the subject of this proceeding.  In accordance with the overwhelming view of the experts, it would be inadvisable for him to return to employment by GSJBWS.  However, it seems he can return to work in the finance industry.  This will not be easy for him to do.  Mr Nikolich is obviously disillusioned about the culture of the finance industry.  However, as several of the experts pointed out, a major aspect of his current problem is his feeling of injustice.  If that problem is resolved, and a job is available, he probably can return to the industry, although probably not immediately in a full-time capacity.

The WR Act claims

(i)         The statutory provisions

159               As at the date of Mr Nikolich’s termination of employment, Subdivision C of Division 3 of Part VIA of the WR Act dealt with unlawful termination of employment by an employer.  Section 170CK(2) provided that – except as provided by subs (3) or subs (4) - an employer must not terminate an employee’s employment for any one or more of nine specified reasons, or for reasons that include any one or more of those nine reasons.  The specified reasons included:

‘(a)      temporary absence from work because of illness or injury within the meaning of the regulations;

(f)        race, colour, sex, sexual preference, age, physical or mental disability, marital status, family responsibilities, pregnancy, religion, political opinion, national extraction or social origin.’

160               Section 170CK (4) is not argued to be relevant to this case.  However, Mr Coleman relies on s 170CK(3), the ‘inherent requirement’ provision.  That subsection was as follows:

‘Subsection (2) does not prevent a matter referred to in paragraph (2)(f) from being a reason for terminating employment if the reason is based on the inherent requirements of the particular position concerned.’

161               Section 170CK(3) was awkwardly expressed.  It purported to overrule a prevention by subs (2) of a matter referred to in subs (2)(f) from being a reason for terminating the particular employment.  But subs (2) did not prevent a particular matter being a reason for the termination; it simply commanded employers not to terminate for any of the proscribed reasons.  Nonetheless, the intention behind subs (3) is plain; subs (2)(f) is not to apply in any case in which the reason for termination, being a reason that would otherwise fall within subs 2(f), is based on the inherent requirements of the particular position.

162               Section 170CP of the WR Act permitted an employee to make an application to this Court in respect of any alleged contravention of s 170CK of the WR Act by his or her employer.  Section 170CQ provided, in relation to any such proceeding, that:

‘(a)      it is not necessary for the employee to prove that the termination was for a proscribed reason; but 

(b)       it is a defence in the proceedings if the employer proves that the termination was for a reason or reasons that do not include a proscribed reason (other than a proscribed reason to which subsection 170CK(3) or (4) applies).’

163               As Moore J said in Laz v Downer Group Limited [2000] FCA 1390; 108 IR 244 at [26], the effect of s 170CQ is similar to the effect of s 298V of the WR Act, as described by Cooper J and myself in Davids Distribution Pty Ltd v National Union of Workers [1999] FCA 1108; 91 FCR 463 at [109]:

‘Section 298V does not relieve the applicant in proceedings under Div 6 of Pt XA of the Act from proving on the balance of probabilities each of the ingredients of the contravention.  It enables the allegation to stand as sufficient proof of the fact unless the employer proves otherwise: R v Hush; Ex parte Devanny (1932) 48 CLR 487 at 507.’

(ii)        Whether the respondent terminated the applicant’s employment

164               Mr Coleman submitted GSJBWS did not terminate Mr Nikolich’s employment.  He said: ‘[w]hilst Mr Heath made a decision to write to [Mr Nikolich] informing him that his employment had terminated, it is clear that [Mr Nikolich’s] employment terminated as a consequence of him abandoning his employment’.  Mr Coleman said the test of whether a termination of employment is at the initiative of the employer is whether ‘the action of the employer is the principal contributing factor which leads to the termination of the employment relationship’.  He cited Mohazab v Dick Smith Electronics Pty Ltd (No 2) (1995) 62 IR 200.  In that case, at 205-206, a Full Court of the Industrial Relations Court of Australia said:

‘In these proceedings it is unnecessary and undesirable to endeavour to formulate an exhaustive description of what is termination at the initiative of the employer but plainly an important feature is that the act of the employer results directly or consequentially in the termination of the employment and the employment relationship is not voluntarily left by the employee.  That is, had the employer not taken the action it did, the employee would have remained in the employment relationship.’

165               In the present case, it was the act of GSJBWS that terminated the employment relationship.  As at 1 December 2004, Ms Ward regarded Mr Nikolich as a continuing employee of GSJBWS.  That is why she wrote to him asking for information as to whether he intended to return to work and resume his normal duties.  The response from Harmers did not constitute a termination of employment by Mr Nikolich or an abandonment by him of his employment.  On the contrary, the letter assumed the employment relationship was continuing but stated that Mr Nikolich was currently unable to return to work for health reasons.  The solicitors said they were currently finalising their instructions and expected ‘to respond more fully shortly’; in other words, it was Mr Nikolich’s wish to maintain the existing situation pending further advice.

166               In the light of this letter, Mr Heath took a decision to notify Mr Nikolich that he regarded his employment as terminated.  It was this notification that brought the employment relationship to an end.

167               The applicant has made out the first ingredient of each of his s 170CK claims.

(iii)       Temporary absence from work: s 170CK(2)(a)

168               The term ‘temporary absence from work’, used in s 170CK(2)(a) of the WR Act, was not defined in the Act itself.  However, reg 30C of the Workplace Relations Regulations 1996 provided as follows:

‘(1)      For paragraph 170CK(2)(a) of the Act, an employee’s absence from work because of illness or injury is a temporary absence if:

(a)     the employee provides a medical certificate for the illness or injury within:

(i)         24 hours after the commencement of the absence; or

(ii)        such longer period as is reasonable in the circumstances; or

(b)     the employee:

(i)         is required by the terms of an award, a certified agreement, an AWA, a State award, a State employment agreement or an old IR agreement to:

(A)     notify the employer of an absence from work; and

(B)     substantiate the reason for the absence; and

(ii)        complies with those terms.

(2)     Subregulation (1) does not apply if:

(a)     the employee’s absence extends for more than 3 months, unless the employee is on paid sick leave for the duration of the absence; or

(b)     the total absences of the employee, within a 12 month period, whether based on a single or separate illnesses or injuries, extend for more than 3 months, unless the employee is on paid sick leave for the duration of the absences.’

169               Counsel for the applicant rightly said this definition ‘is not easily comprehensible’.  The only thing that is clear is that reg 30C was intended to be an exhaustive statement of what constituted a ‘temporary absence from work’ for the purposes of s 170CK(2)(a) of the WR Act.  If a particular absence does not fall within the reg 30C definition, s 170CK(2)(a) has no application to it, even if, in ordinary language, it would be regarded as a temporary absence from work.

170               Although Mr Nikolich provided medical certificates covering most of his periods of absence from work, between 6 August 2004 and 7 December 2004, it is clear that neither of the alternatives identified in subreg (1) was satisfied in this case.  In that situation, subreg (2) becomes critical.  Counsel for the applicant treated it as an alternative to subreg (1) and submitted the correct interpretation of reg 30C is as follows:

‘the employee is on a temporary absence by reason of illness or injury if he/she is either;

(a)          on paid sick leave; or

(b)          is on leave without pay by reason of illness or injury and has been absent from work on that basis for less than 3 months (either continually or for 3 months calculated as a total taken over a 12 month period).’  (Original emphasis)

171               Counsel argued that this interpretation ‘is both logical and … consistent with the common law position of frustration of a contract of employment.  It is the statutory equivalent of the principle set down in Finch v Sayers [1976] 2 NSWLR 540 at 558’.  At that reference, Wootten J held there is little room for the operation of the doctrine of frustration in relation to a modern contract of employment.  I do not, with respect, think the citation assists the interpretation of reg 30C.

172               Counsel for the applicant also argued that the word ‘duration’, in reg 30C(2)(a) and (b), does not have the effect of requiring that the employee be on sick leave throughout the whole of the absence or absences.  However, that is a difficult argument to sustain.  The ordinary meaning of the word ‘duration’ is given in the Macquarie Dictionary as: ‘1.  continuance in time.  2. the length of time anything continues.’  The Australian Oxford Dictionary offers a similar definition.  Although such an interpretation is a rigorous one, incompatible with employees assisting their employers, for example by taking part of the time as annual leave, it seems to me clear that the intention behind subreg (2) is that the employee must have been on paid sick leave throughout the whole of the relevant absence or absences from work.

173               Counsel for the respondent submitted:

‘A plain construction of Regulation 30C is that an employee’s absence from work because of illness and injury will only be a temporary absence if the employee provides a medical certificate for the illness within the appropriate times as set out in Regulation 30C(1)(a) and the provisions of Sub-Regulation 2 do not apply.  That is, if the employee’s absence extends for more than three months and the employee is not on paid sick leave for the duration of that absence then the absence is not a temporary absence because of illness or injury …  Additionally, if the total absence of the employee within a twelve month period, whether based on a single or separate illness, extends for more than three months and the employee is not on paid sick leave for the duration of the absence then the employee’s absence is not a temporary absence because of illness or injury …’  (Original emphasis)

174               The applicant’s construction of reg 30C seems to pay little regard to the structure of the regulation.  It is certainly not enough that the employee was on paid sick leave at the time of the termination.  At least unless the absence from work has exceeded three months, or a total of three months, so that reg 30C(2) would apply, the absence will only be a ‘temporary absence from work’, within s 170CK(2)(a), if the employee has complied with either para (a) or para (b) of reg 30C(1).  A similar comment may be made about counsel’s second alternative.

175               I think the respondent’s construction of reg 30C is correct.  It is consistent with the view adopted by Marshall J in Sallehpour v Frontier Software Pty Ltd [2005] FCA 247; 139 IR 457 at [45]. He thought subreg (1) had the effect of making a ‘temporary absence from work’, within the meaning of s 170CK(2)(a), conditional upon compliance with one or other of the preconditions set out in that subregulation i.e. para (a) or para (b).  However, subreg (2) made that provision unavailable in either of the situations mentioned in that subregulation: the employee’s absence, or total absences, exceeded three months and the employee was not on paid sick leave throughout the whole of the absence or absences.  In other words, it was always necessary to satisfy the requirements of subreg (1), but subreg (2) limited the situations in which satisfaction of subreg (1) was available.

176               In the present case, the requirements of subreg (1) of reg 30C were not satisfied.  Even if they had been, subreg (2) made subreg (1) unavailable.  Mr Nikolich was absent from work for more than three months immediately before the termination of his employment, and was not on paid sick leave for the whole of the absence.  During part of that time, he was on annual leave; during another part, he was on leave without pay.  Consequently, he did not satisfy the proviso to para (a) of subreg (2).  Similarly, although his absences within a 12 month period exceeded three months, he was not on paid sick leave for the duration of the absences, but only part of that duration.  Consequently, he did not satisfy the proviso to para (b) of subreg (2).

177               Although Mr Nikolich’s absence from work between 6 August 2004 and 7 December 2004, was a ‘temporary absence from work’ in ordinary parlance, it was not a ‘temporary absence from work because of illness or injury within the meaning of the regulations’. (Emphasis added.)  It follows that the claim under s 170CK(2)(a) or the WR Act must fail.

(iv)       Mental disability: s 170CK(2)(f)

178               Paragraph (f) of s 170CK(2) sets out a list of attributes that constitute proscribed reasons for termination of an employee’s employment.  The list is derived from various international Conventions designed to protect employees against discriminatory treatment.  Most of the items in this list have no possible application to this case, but counsel for the applicant relies on the reference to ‘mental disability’.  The first issue then, having regard to the ‘reverse onus’ provisions of s 170CQ of the WR Act, is whether the Court is satisfied, on the balance of probabilities, that GSJBWS did not terminate Mr Nikolich’s employment wholly or partly because of his actual or supposed mental disability.

179               In para 28 of his Second Amended Statement of Claim, the applicant alleged the respondent terminated his employment ‘for a prohibited reason’.  In answer, the respondent denied it terminated the applicant’s employment at all.  In making that denial, the respondent pleaded the circumstances under which it sent the letter of 7 December 2004:

‘at the time, the Respondent believed that the Applicant either:

(1)       was not ready, willing and able to provide services to the Respondent and did not intend to return to work in the foreseeable future or at all; or

(2)       was not fit to return to work and provide services to the Respondent in accordance with the inherent requirements of his position and his contract of employment and was likely to remain unfit for the foreseeable future.

and the Respondent therefore considered the Applicant’s employment to have terminated as at that date.’

180               I have held that the respondent did in fact terminate the applicant’s employment.  Accordingly, although it was not specifically so pleaded, I will take this plea as an assertion of its reason for doing so.

181               The decision to send Mr Nikolich the termination letter of 7 December 2004 was taken by Mr Heath, on the recommendation of Ms Ward and Ms Jacobs.  Ms Ward gave evidence that she spoke to Ms Jacobs after reading the letter from Harmers, dated 6 December 2004.  She thought that, as the solicitors had given ‘no indication as to when he will be returning to work, if at all’, GSJBWS could send a letter to Mr Nikolich ‘stating that we consider his employment to have been terminated’.  Ms Jacobs agreed but said Ms Ward should speak to Mr Heath and let him decide.  Ms Ward said she then spoke to Mr Heath.  He agreed with the recommendation.  So Ms Ward sent the letter of 7 December 2004.  Ms Ward’s accounts of the relevant conversations contain no reference to mental disability, although she quoted, to Ms Jacobs and Mr Heath, Harmers’ statement that a return to work ‘would have adverse consequences for [Mr Nikolich’s] health’.

182               Ms Nomchong cross-examined Ms Ward about the reason for her client’s termination:

‘Ms Ward, you would agree with me that the reason Mr Nikolich was terminated was by reason of his illness, is that right?‑‑‑No.

What do you say was the reason for his termination?‑‑‑That there was no foreseeable timeframe in which he would return to work.

And you understood that his absence from work was by reason of illness?‑‑‑A medical condition, yes.

So then the reason for his termination was that his medical condition, in your view, prohibited him from coming back to work, is that right?‑‑‑No.  We did not have a timeframe for him to return to work.

So was it because he'd been absent from work due to illness, is that right?‑‑‑Yes, he'd been absent from work.

Was that one of the reasons that you took into account in recommending the termination of his employment?‑‑‑Again, I don't believe I recommended it, but yes, I took it into consideration.’

183               As previously mentioned, Ms Jacobs did not give evidence.  However, Mr Heath dealt with the termination decision in his first affidavit.  He said Ms Ward spoke to him and attributed to Ms Jacobs a recommendation ‘that we should write to Peter stating that we consider his employment to have terminated’.  He agreed with this recommendation.  Mr Heath said the decision to send the letter was ultimately his.  He went on:

‘I made this decision because Peter Nikolich had failed to return to work after his approved leave had been exhausted and the fact that he had made no attempt to let us know whether and when he would return to work.  As discussed above, Gina Jowett and I made a number of unsuccessful attempts to communicate with Peter Nikolich and his doctor regarding his medical condition, his intended return to work and the servicing of the clients’

184               Ms Nomchong took Mr Heath to this matter in cross-examination.  His evidence was as follows:

‘It was your decision to terminate Mr Nikolich's employment, was it not?‑‑‑Yes.

And you did that without ever seeing the letter from Harmers Solicitors that had been sent to Ms Ward?‑‑‑I believe I saw that letter.

You do?  Is that your evidence?‑‑‑I recall seeing the letter.  Did I do that prior to the decision, I can't recall.

And you made the decision without contacting Mr Nikolich to discuss your decision that you were about to terminate him?‑‑‑Yes.

And you understood that at that time he'd been off work on sick leave and annual leave and leave without pay for some time?‑‑‑Yes.

And you decided that enough was enough and that he had been absent from work long enough and decided to terminate his employment.  Is that right?‑‑‑Yes.

And you decided to terminate his employment because he had been off work with psychological symptoms which you thought rendered him unable to perform his duties.  Would that be fair?‑‑‑That was one of the reasons.’

185               Notwithstanding this last answer, Mr Coleman submitted that his client had not dismissed Mr Nikolich for a prohibited reason, or reasons that included a prohibited reason.  He said that, if it is found that the respondent terminated Mr Nikolich’s employment, this was because of his ‘failure to attend work and properly communicate with the Respondent about his medical condition and expected return date’.  Mr Coleman added that the applicant’s failure to do these things ‘were not a consequence of his disability’ and, anyway, according to the latest report held by GSJBWS (that of Mr O’Neill of 9 July 2004), he was fit for work.

186               Despite this fitness for work, Mr Coleman said, Harmers had indicated the applicant would not be returning to work in the foreseeable future.  He contended the situation was similar to that in Sallehpour.

187               There are similarities between the facts of this case and those in Sallehpour.  In both cases, the employee was absent from work for a long time before the termination, during which time the employer expressed concern about the employee’s medical condition, offered support in relation to that condition and experienced some frustration in obtaining meaningful information about the employee’s medical condition and date of likely return to work.  However, a major difference between the two cases is that, in Sallehpour, the person who made the termination decision gave evidence, which Marshall J accepted, ‘that Mr Sallehpour’s mental health was not a reason for the termination’.  In the present case, the decision-maker, Mr Heath, said one of his reasons was that Mr Nikolich ‘had been off work with psychological symptoms’ that he thought ‘rendered him unable to perform his duties’; in other words, one of his reasons was that Mr Nikolich had a mental disability rendering him unfit for work.

188               If an employer terminates an employee’s employment for a proscribed reason, I do not think it matters whether the reason is factually correct.  Section 170CK(2)(f) is intended to constrain discriminatory conduct.  It is just as objectionable for persons to act in a discriminatory way on the basis of perceived facts as true facts.  It may also be just as detrimental to the person being discriminated against.

189               However, in case I am wrong about this, I indicate that, notwithstanding Mr Coleman’s contrary submission, I think Mr Heath’s perception of unfitness was correct.  Mr O’Neill’s report was dated 9 July 2004; it was five months old at the date of termination.  During that five months, Mr Nikolich had been allowed to be absent on sick leave for three weeks and, for another five weeks, on either full pay or without pay.  During this time, Mr Nikolich had continued to see Dr Jamieson, who had, from time to time, certified him unfit for work.  Mr O’Neill had qualified his opinion that ‘Mr Nikolich is fit for normal duties and responsibilities’, notwithstanding that he still had ‘signs of a low-grade depression consistent with a Dysthymic Disorder’, by saying he ‘would be more motivated at work if he perceived that attempts were being made by [GSJBWS] to support his requests for a resolve’ of the ‘industrial issues’.  As Mr Heath was aware, nothing had been done by GSJBWS in that connection between 9 July 2004 and 7 December 2004.

190               In view of Mr Heath’s last answer, in the section of cross-examination set out in para 184 above, I must conclude that GSJBWS has not made out a defence to Mr Nikolich’s claim that his employment was terminated for the reason of mental illness.

191               This brings me to Mr Coleman’s alternative submission about s 170CK(2)(f).  He says it does not apply in the present case because of subs (3); the reason for termination was ‘based on the inherent requirements of the particular position concerned’.  Mr Coleman submitted:

‘Clearly, here, it was inherent in the work undertaken by the Applicant for the Respondent that he be able to attend work at the Respondent’s offices, deal with enquiries from clients and service those clients in accordance with their need for broking advice.’

192               Mr Coleman quoted the terms of the GSJBWS position description for an Investment Adviser and said: ‘[i]f the Applicant was unable to go to work and felt unable to properly advise clients, clearly he could not meet these purposes’.

193               It will be recalled that Mr Heath told Ms Nomchong in cross-examination that one of the reasons for his decision to terminate Mr Nikolich’s employment was ‘because he had been off work with psychological symptoms’ that he thought ‘rendered him unable to perform his duties’.  Although counsel for the applicant were able to rely on this answer to defeat any claim that the reasons for termination did not include Mr Nikolich’s mental illness, they confront the problem that Mr Heath’s asserted reason related the mental illness to Mr Nikolich’s inability to perform his duties.  And this inability had been at the heart of Ms Ward’s thinking.

194               I have been troubled about the relationship between s 170CK(2)(f) and s 170CK(3).  Some of the proscribed employee attributes will rarely, if ever, give rise to an ‘inherent requirement’ issue; for example, race, colour, national extraction and social origin.  These attributes are all immutable, as are some of the other attributes listed in para (f), that are more likely to give rise to an inherent requirement issue.  However, some other attributes (family responsibilities, pregnancy, physical disability, mental disability) may only be temporary.  I thought a too-ready acceptance that a temporary attribute enlivens s 170CK(3) might lead to an erosion of the protection that s 170CK(2) was designed to ensure.  I had in mind the case of an employee who has a physical disability that requires hospital treatment and a short absence from work.  I was concerned by the possibility that s 170CK(3) might permit termination for the reason of physical disability, on the basis that the employee will be unable to perform his or her usual duties during the period of hospitalisation and recuperation.  However, I have been persuaded by Mr Coleman that this concern is unwarranted.  In such a case, a medical certificate would be available; this would bring the case within reg 30C(1)(a) of the regulations.  Unless the employee’s absence from work exceeded three months, s 170CK(2)(a) would have been available to the employee.  If the absence exceeded three months, s 170CK(2)(a) would still have been available, provided the employee was on paid sick leave throughout the absence.

195               In Qantas Airways Limited v Christie (1998) 193 CLR 280 at 305, McHugh J drew a distinction between the inherent requirements of a position and the inherent requirements of the tasks that the position-holder has to perform.  His Honour referred to a definition of the word ‘inherent’ adopted in a report of a Commission of Inquiry of the International Labour Organisation.  He thought that definition ought to be applied to s 170DF(2) of the Industrial Relations Act 1988 (Cth), an Act that metamorphasised into the WR Act.  In the ILO report, ‘inherent’ was interpreted to mean ‘existing in something as a permanent attribute or quality; forming an element, especially an essential element, of something; intrinsic, essential’.  McHugh J commented ‘that which is essential to the performance of a particular position must be regarded as an inherent requirement of that position’.

196               It is a permanent, essential requirement of the position of financial adviser – or, indeed, almost any position – that the employee attend for work and carry out the duties attached to the position.  Where the effect of a reason mentioned in s 170CK(2)(f) is that the employee cannot attend for work during usual hours, and carry out the duties attached to the position, I think subs (3) applies, to save the reason from being one proscribed by subs (2).

197               This was the approach taken in Laz.  Moore J found the employee’s employment had been terminated for reason of her family responsibilities; her employer was unhappy about the fact that, on certain days, she left work between 5.30pm and 6pm in order to pick up her son from day care.  If given prior notice, the employee could arrange for someone else to pick up the child; if she had no notice, she had no alternative but to go herself.  The employer defended a claim under s 170CP relating to an alleged contravention under s 170CK of the WR Act on the basis that it was an ‘inherent requirement’ of the employee’s position, as personal assistant to the managing director, that she be able to work, without prior notice, later than 5.30pm.  However, Moore J found there was no evidence that: (1) there had been work that should have been done by the employee, as holder of the relevant position, after 5.30pm and was not done by her on the day in question; (2) that any failure had a consequence of substance; or, (3) that advance notice could not have been given that later work was required.

198               The information before Mr Heath on 7 December 2004 was that provided on the previous day by Mr Nikolich’s solicitors, Harmers.  They had stated their current instructions were ‘that if Mr Nikolich were to return to work such would have adverse consequences for his health’; in other words, he was unfit for work and would not be returning immediately.  It is true, as counsel for Mr Nikolich emphasised, that the letter was not intended as a final response to Ms Ward’s letter to Mr Nikolich of 1 December 2004.  Harmers said they expected ‘to respond more fully shortly’.  Still, it contained a clear statement that Mr Nikolich was not presently able to fulfil the inherent requirements of his position.

199               Counsel for Mr Nikolich argued that Mr Heath ‘jumped the gun’; Mr Nikolich was not ignoring Ms Ward’s letter of 1 December 2004; Mr Heath could, and should, have waited for a fuller response to that letter.  Counsel also said, that, if Mr Heath had made further inquiries, he would have discovered that Mr Nikolich’s health was improving.  I understand those submissions, but the fairness of Mr Heath’s decision is not a matter I have to determine.  The only question for me is whether Mr Heath’s decision to terminate Mr Nikolich’s employment on the ground of mental illness was based upon the inherent requirements of the position concerned.  I think it clearly was.  Consequently, I must conclude that s 170CK(3) applies to exclude the application of s 170CK(2) to the termination of Mr Nikolich’s employment.

200               The unlawful termination of employment claim must be rejected.

Breach of contract: the team DKN business plan

201               The first of the applicant’s two breach of contract claims arises out of the formation of team DKN.  The applicant pleaded the adoption of the business plan ‘constituted an alteration of the express terms of the contract [of employment] as from July 2002’.  It was alleged that this alteration was agreed to by GSJBWS, either expressly or impliedly through the following matters of conduct or acquiescence:

‘(a)      the formation of Team DKN as a structure within which the Applicant would perform his duties under the contract of employment was approved of and endorsed by the Respondent;

(b)       the business plan was submitted to and approved by Mr. Sutherland and Mr. Evans;

(c)        at no time did the Respondent, its officers or agents indicate to the Applicant that he could not perform his duties within the structure of Team DKN;

(d)       at no relevant time did the Respondent, its officers or agents indicate to the Applicant that the terms of the business plan for Team DKN were unacceptable to the Respondent;

(e)        from July 2002 to May 2003, the Applicant (and the other members of Team DKN) performed their duties within the framework of Team DKN and pursuant to the provisions of the business plan for Team DKN;

(f)        from July 2003 to May 2003, the Applicant (and the other members of Team DKN) were paid commissions in accordance with the terms of the business plan for Team DKN.’

202               The respondent denied that the formation of team DKN, and the adoption of its business plan, constituted an alteration of the terms of the applicant’s contract of employment.  The respondent also denied the particular items of conduct or acquiescence relied on by the applicant.

203               I do not accept Mr Sutherland’s assertion that he only ‘glanced’ at the DKN business plan.  I think he would have read it in full and noted the ‘exit strategies’ paragraph.  In any event the ‘exit strategies’ paragraph was not dissimilar to the paragraph in the RSL partnership agreement entitled ‘What if a member of the team wants to leave the partnership?’ that was held up as an example of partnership agreements. I also note that Mr Evans agreed he and Mr Voigt went through the business plan with Mr Nikolich during the April 2003 performance review.  Although Mr Evans had no recollection of the ‘exit strategies’ paragraph, the probability is that he read it at that time.  However, I do not think it follows that the paragraph was thereby incorporated into Mr Nikolich’s employment contract.

204               The evidence suggests it was routine practice for GSJBWS financial advisers to prepare, from time to time, a business plan setting out their objectives and their proposed strategy for realising those objectives.  It was routine practice for such plans to be discussed with, and approved by, the adviser’s immediate supervisor and, perhaps, also with higher officers conducting performance reviews.  I think it is correct to say, with Mr Coleman, that the preparation of a business plan was something undertaken by a financial adviser pursuant to his or her contract of employment but was not ordinarily thought to be something incorporated into the contract of employment.  It would, for example, be startling if GSJBWS brought an action for damages against an adviser who had failed to achieve the revenue projections set out in an approved business plan.

205               The team DKN business plan was different from an individual’s business plan.  It governed the activities of three financial advisers, not just one of them.  Also it set out the terms of the partnership that the three team members had agreed to enter.  As between the three partners, it may have been contractually binding.  But that does not mean it was contractually binding as between the team members, or any one of them, and GSJBWS.

206               One of the matters agreed between the team members was the manner in which they would divide the income derived by the team.  If effect was to be given to that agreement, it was necessary that details of it be made known to those within GSJBWS who were responsible for calculating and making incentive payments.  Although there is no evidence about the matter, I assume the necessary information and authorisation was given by DKN team members to GSJBWS’s financial department.  However, that was a mechanical matter; the agreement as to distribution did not affect the total incentive payments to be made by GSJBWS or make it necessary for the business plan to be explicitly agreed by an appropriate GSJBWS officer.

207               The ‘exit strategies’ paragraph is different.  It purports to deal with the situation that would arise if any of the three partners left the partnership.  Mr Sutherland expressed the view, and counsel for GSJBWS argued, that the paragraph only applied if the exiting partner remained in the employment of GSJBWS.  I see no justification for reading down the wide terms of the paragraph in this way but, for present purposes, that does not matter.  Upon any view, the paragraph purported to control the exercise of the office manager’s reallocation discretion; it therefore limited GSJBWS’s rights.  It does not matter whether the limitation occurred only when the exiting partner remained with GSJBWS or in all cases.

208               When persons enter into an agreement between themselves that will have the effect of limiting the rights of another person, they need to obtain the express agreement of that other person, if the limitation is to be binding on that person.  It is not enough for the other person to become aware of the content of the agreement and make no objection to it.

209               I appreciate that an agreement for a variation of a contract of employment may be made orally, and even with a minimum of formality.  It may be implied from conduct.  See Commonwealth of Australia v Crothall Hospital Services (Aust) Ltd (1981) 36 ALR 567 at 576.  However, there must be something that expresses an intention to vary the contract, as distinct from acting pursuant to the contract.  In the present case, the contract of employment was constituted by a letter of offer, setting out the terms of employment, that was issued by GSJBWS’ Human Resources Services Manager in Melbourne, which letter was, at her request, signed and returned by Mr Nikolich; together, perhaps, with other documents referred to in that letter.  In those circumstances, one would have expected any agreement to vary the contract of employment to have been enshrined in writing, or at least be covered by an explicit oral statement.  Yet, as Mr Nikolich concedes, neither Mr Sutherland, Mr Evans or Mr Voigt said anything, at any time, that indicated the speaker considered the business plan, or the exit strategies paragraph, to be binding on GSJBWS or that it would constitute a variation of the contract of employment.  Leaving aside any question of the authority of any of those men to vary the terms of Mr Nikolich’s contract of employment, none of them expressly did so.  None of them promised that GSJBWS would abide by the exit strategies paragraph.  Their knowledge of that paragraph, and the obvious expectation of the team DKN members that it would be followed in the event of a departure from the partnership, is relevant to the reasonableness of the conduct of Mr Sutherland, and other officers, when Ms Dal Bon resigned.  However, GSJBWS was not contractually bound by the paragraph.

210               Counsel for the applicant emphasised that the notion of creating partnerships was something introduced by GSJBWS, not by the DKN team members.  The justification for the notion was that it would lead to better service of clients – a matter that was of critical importance to GSJBWS.  Moreover, Mr Heath said in evidence that the purpose of a business plan was to demonstrate how the adviser or advisers intended to service clients.  Accordingly, counsel argued, the creation of the DKN business plan was something done for the benefit of GSJBWS; upon approval of that plan by the appropriate GSJBWS officer or officers, it should therefore be treated as binding on GSJBWS, in the sense of being incorporated into the contracts of employment of the team members.

211               I appreciate the force of the argument.  However, it does not affect my view that the creation and approval of the team DKN business plan was something done by the relevant people in the course of their employment, pursuant to their respective contracts of employment, and not something done by way of a variation of anyone’s contract of employment.

212               The first breach of contract claim must be rejected.

Breach of contract: WWU

(i)         Whether the relevant provisions created legally-enforceable obligations

213               As previously mentioned, when he commenced with GSJBWS, Mr Nikolich received a copy of WWU.  He did so in the context that his letter of appointment, signed by the Human Resources Services Manager and dated 4 May 2000, contained the following two paragraphs:

‘General Instructions

From time to time the Company has issued and will in the future issue office memoranda and instructions with which it will expect you to comply as applicable.  If you have any queries at any time about which memoranda and instructions apply to you, you should raise that question with me or with Colin.

Separation

Our employment commitments are long term and the Company will endeavour to provide every opportunity for you to be effective in your role.’

214               WWU contained six substantive chapters: ‘overview of our main services’; ‘code of conduct’, ‘JB Were team support package’, ‘reward strategy’, ‘additional helpful information’ and ‘sign-off forms for JB Were team members and consultants to JB Were’.  The titles are indicative of the content of each chapter.  The ‘code of conduct’ chapter (12 pages) lays down numerous rules to be followed by employees.  Some of those rules are relied on in this case by counsel for the applicant.  I will mention four of them.

            (a)        Under the heading ‘Conflict of Interest’:

‘It is important that you avoid any situation where personal interests may conflict with the interests of the firm or its clients.  If you are involved in any financial, political or civic activities you are free to exercise your individual rights, but should avoid any conflict of interest between your outside activities and your position within the firm.’

            (b)        Under the heading ‘Harassment’:

‘The JBWere culture and “family” approach means each person is able to work positively and is treated with respect and courtesy.  It is within the context of our culture that all people within the JBWere team will work together to prevent any unwelcome, uninvited and unwanted conduct which makes another team member feel offended, humiliated or intimidated in any work related situation and where that reaction is reasonable in the circumstances.

The professional behaviour and conduct of each team member is important.  It is a reflection of the person, the firm and our client service attitude.  Further information may be obtained by Human Resources.

            (c)        Under the heading ‘Integrity’:

Integrity is a core value of the firm.  It means we are open and honest, and we honour our obligations and commitments to each other, our clients, the people we do business with and the community.  Always remember that you are a representative of the firm, therefore you cannot advise friends or social contacts without a proper authority.

If you feel that you are placed in a situation that makes you feel uncomfortable, consider asking yourself the following questions:

1.  Why is this bothering me?           Is it really an issue?

2.  Who else matters?                        What are the implications for clients, the firm and other JBWere team members?

3.  Is it my responsibility?                Am I responsible or is someone else responsible for resolving the issue?  What will happen if I do not act?

4.  What is the ethical concern?      Is there a legal obligation?  What are my values?  What are the firm’s values?

5.  Whom can I ask for advice?        My associates, my manager, Human Resources?

6.  Am I being true to myself?          Is my action consistent with my basic values?  With JBWere shared values?  Would I make the same decision if it concerned my family and friends?

Often when you are aware of something that may require action, the best first step is for you to advise your Department Head, Branch Manger or General Manager.’

            (d)        Under the headings ‘Professional Conduct’ and ‘Welcoming Diversity and Preventing Discrimination’, there are statements about treating people (including other employees) with respect, and behaving in a non-aggressive, courteous and non-discriminatory manner.

215               The largest chapter in  WWU (41 pages) is that containing the support package.  It is divided into eight sections: ‘Support for Career Management’, ‘Support for Ideas and Innovation’, ‘Support for Personal Time’, ‘Support for Heath and Well-being’, ‘Support for Community Involvement’, ‘Support for Families’, ‘Support for Parents’ and ‘Support for Personal Issues’.  Each of these sections sets out employees’ entitlements in relation to the relevant area of support.  In some cases, the entitlement is stated in absolute terms, sometimes conditionally.  The language is generally promissory: ‘we will …’.  The section on personal time contains provisions about leave that are routinely covered by formal contracts of employment or industrial awards; for example, annual leave, long service leave, overtime payments in lieu of public holidays.

216               The section on health and well-being contains a subsection, entitled ‘Health and Safety’, that starts with this statement:

‘JBWere will take every practicable step to provide and maintain a safe and healthy work environment for all people.  Prevention is the most effective health and safety principle.  Through a shared responsibility, co-operation and support from all people, we will realise our health and safety objectives and create a safe work environment for ourselves and our team.  Each member of the team has a duty to take the care for their own health and safety and of other team members affected by their actions.’

217               After a reference to particular programs, the document continues:

‘The health and safety of all people within JBWere is a shared responsibility of the firm, and each team member.  In fulfilling this responsibility, the firm has a duty to provide and maintain, so far as is practicable, a working environment that is safe and without risk to health.  The responsibility involves:

•      Maintenance of the workplace in a condition that is safe and healthy

•      Provision of adequate facilities to protect the welfare of all people

•      Provision and maintenance of safe systems of work

•      Provision of information and support to enable people to work in a safe and healthy manner.’

218               In the sub-section headed ‘Support for Personal Issues’, the following appears:

‘Feeling Uncomfortable?

Sometimes clients, colleagues, managers or people we deal with, say or do things which make us feel uncomfortable, offended, humiliated, degraded or intimidated – and we don’t know how to prevent or deal with it.

Where to go for assistance

If you have doubts as to what is appropriate, or feel that you are placed in a situation that makes you feel uncomfortable, often the best first step is to talk it over with someone who can provide confidential advice and support.  Some people who can do this are:  Dianne Jacobs, Gina Jowett, Judith O’Leary or Paula Ward.

All initial discussions are confidential and may either be as a sounding board or you may simply ask for information and guidance as to your options.

We are committed to make sure that anyone who has a genuine concern will be supported, and the issue will be handled with discretion.’

219               After a reference to other matters, WWU proceeds:

‘Concerns or Grievances

The door is wide open at all times for people to discuss any issue, not only with Department Heads, Directors, and Human Resources, but also with the Chairman.  Such discussions are welcome as the firm has been built on the principle that it is a team with common interests and ideals.  This interest extends beyond the range of career and business issues to more personal concerns.

Our culture means each member of the team is able to work positively and productively, and is treated with respect and courtesy.

If you feel you have a complaint or grievance (including any form of harassment) please contact the Group Manager – Human Resources or your Branch Manager.  We are committed to make sure that anyone who makes a genuine complaint will be able to discuss the concern confidentially, will be supported by the firm and is not penalised in any way.

The JBWere “family” way of operating and “help each other” attitude exists because people have seen that it works, and they believe in it and support it.’

220               The chapter of WWU that was headed ‘Reward Strategy’ sets out rules concerning the calculation of salary packages, including fringe benefits such as superannuation, motor vehicles, subscriptions etc.  There are also promises about career benefits (education fees, study leave, fees for professional memberships), life insurance, financial products and services, overtime payments, meal allowances and the like.

221               There is an issue between the parties as to the contractual significance of WWU.  By para 8A of his Second Amended Statement of Claim, the applicant pleaded:

‘It was an express term of the Applicant’s contract of employment and subsequent promotions that the Respondent would not, by its servants or agents treat the Applicant other than in accordance with the Respondent’s policies as amended from time to time including the Respondent’s document headed “Working With Us”.’

222               The respondent answered this paragraph, in para 10 of its Second Amended Defence, in the following way:

‘(a)      the Applicant was required to comply with the policies and procedures set out in the “Working With Us” document, however the “Working With Us” document did not constitute a term or condition of the Applicant’s contract of employment;

(b)       when the Applicant was offered employment with the Respondent, he was given a copy of the “Working With Us” document;

(c)        when the Applicant was offered employment with the Respondent, he was asked to sign off on specific policies and procedures contained in the “Working With Us” document but was not asked to sign off on the document itself;

(d)       the “Working With Us” document expressly states that the Respondent “reserves the right to vary, change or cancel from time to time the information stated in this booklet”; and

(e)        otherwise denies the allegations in paragraph 8A.’

223               The respondent’s defence suggests that WWU was intended to bind the applicant but not itself.  Mr Coleman explained that suggestion in a supplementary written submission by saying that WWU was ‘simply a manifestation of the Respondent’s right to issue lawful and reasonable directions to its employees (including the Applicant), and the corresponding obligation of employees to comply with such directions’.  However, the document did more than set out directions to employees.  It contained numerous provisions that purported to be promises made by GSJBWS or that purported to grant specific entitlements to employees. Many of these provisions related to matters that one would normally expect to find covered by a contract of employment.  If the document does not bind GSJBWS at all, those of its provisions that constitute promises by GSJBWS, or which purport to confer entitlements, are misleading, a cruel hoax; moreover, employees to whom the document was issued have no enforceable right in respect of numerous matters that are routine employee entitlements.

224               At an earlier point of time, Mr Coleman put a submission that fell short of the position taken in his client’s defence.  He simply said that ‘the whole of the document, when read in context’, cannot be imported into the employment contract.

225               In support of that submission, Mr Coleman referred to a so-called concession in para 157 of the applicant’s written submissions ‘that he did not sign the totality of this document upon the commencement of his employment’.  I do not find that concession in para 157, but the statement seems to be true.  What actually happened is not entirely clear.  In his first affidavit, Mr Nikolich said he signed and returned a copy of the letter offering him the position.  He did not deal with WWU.  In his second affidavit, Mr Nikolich said:

‘I understood [WWU] operated as an express term of my contract of employment as it contained policies and procedures regarding important matters of legal compliance.  To this end, the Respondent updated and circulated that document in order to ensure that Investment Advisers complied with relevant legal compliance requirements in relation to, for example, financial services, occupational health and safety and discrimination legislation.  I took note of the fact that the document states, “each person at JBWere is responsible for ensuring that the highest standards of compliance are maintained” …  That is, the consequences for not complying with the policies and procedures could result in the termination of my contract of employment.  I also recall that when I started work with the Respondent I was required to sign off on the version of the document applicable at that time on the basis that I would continue to be bound by that document as amended from time to time.’

226               In oral evidence in chief, given by leave, Mr Nikolich gave the following evidence:

‘When you entered into the contract of employment in May 2000 were you given any documents or policies of the kind referred to in the bottom paragraph on page 50?‑‑‑Yes, it was the Working With Us document.

Could I ask you to turn to your second affidavit at page 28 and leaf through the pages from 28 through to 144?  When you say the Working With Us document was a document in that form or similar form?‑‑‑It was in a similar form but bound.

Were you asked to sign any forms as a result of being presented with that policy document?‑‑‑It was all incorporated in my contract agreement that I'd read the document and understood it and the like.’

227               The last answer was not responsive to the question, but Ms Nomchong then left the subject.  Mr Coleman did not return to it in cross-examination.

228               Mr Nikolich’s evidence establishes that he was given a copy of WWU at the same time as he received the letter of offer of employment.  He regarded WWU as binding on him, as one of the ‘office memoranda and instructions’ with which he was expected to comply.  He also apparently thought it bound GSJBWS as ‘an express term of my contract of employment as it contained policies and procedures regarding important matters of legal compliance’.

229               For such relevance as it may have, I note the respondent’s main witnesses all thought WWU was a binding document.  Mr Evans said he had been familiar with WWU since 2000, that ‘employees and managers alike between 2000 and 2004 were expected to comply with the policies and procedures in the terms set down’ in WWU and that they might be disciplined, even terminated, if they did not.  Mr Evans asserted he would have been careful to ensure he managed his subordinates in accordance with the document and that those who reported to him did likewise.

230               Mr Sutherland agreed he was ‘required to comply with the policies and procedures contained in’ WWU.

231               Ms Jowett was well aware of WWU.  She said it contained policies ‘with which Goldman Sachs was expected to comply and with which its employees were expected to comply’.  Mr Heath spoke to like effect.

232               Mr Coleman drew attention to the following words in a prefatory note to WWU issued under the names of the Executive Chairman, Terry Campbell, and Ms Jacobs:

‘We trust the following information will assist you in gaining an understanding of JBWere.  We take an active personal interest in all our people and will make every effort to guide and direct your career aspirations towards a successful goal.’

233               Mr Coleman also mentioned the statement, at the end of the table of contents: ‘The firm reserves the right to vary, change or cancel from time to time the information stated in this booklet’.  He went on:

‘The material in totality which is primarily information on the firm, its policies and procedures from time to time cannot therefore be imported into the contract as terms of the contract.  There is no reason why the whole of the document would constitute implied terms of the contract.’

234               The question under discussion is reminiscent of that addressed in Riverwood International Australia Pty Ltd v McCormick [2000] FCA 889; 177 ALR 193.  In that case, a Full Court by majority (North and Mansfield JJ; Lindgren J dissenting), confirmed a decision by Weinberg J (McCormick v Riverwood International (Australia) Pty Ltd [1999] FCA 1640; 167 ALR 689) that a document called ‘Human Resources Policies and Procedures Manual’ bound the employer so as to entitle an ex-employee to redundancy benefits.  Weinberg J had upheld the applicant’s case on two bases: incorporation by reference and an implied term of the contract of employment.

235               There appears to have been no disagreement amongst the members of the Full Court concerning the relevant principles for determining whether the terms of the document were incorporated in the contract of employment; the point of difference between the majority judges and Lindgren J related to the application of those principles.

236               At [80], North J noted Weinberg J’s finding that ‘virtually every document’ in the manual ‘provides a benefit of some sort to that company’s employees.  No burden of any kind is imposed, except upon the employer’.  He also quoted the following observations of Weinberg J:

‘In ascertaining the meaning of an expression contained in a contract such as the requirement that the applicant ‘abide’ by all ‘company policies and practices currently in place, any alterations made to them, and any new ones introduced’, the approach to be adopted differs from that taken in statutory interpretation.  It must rest on the premise that the contract was made in good faith with the object of at least potential mutual benefit by due performance. 

The court approaches the task of ascertaining the meaning of the parties’ expressions from an objective point of view.  In the case of a disputed clause in a commercial agreement ‘the essential question is what would reasonable business people in the position of the parties have taken the clause to mean’: Schenker & Co (Aust) Pty Ltd v Maplas Equipment and Services Pty Ltd [1990] VR 834 at 840 per McGarvie J.  In Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 at 201Lord Diplock said:

‘… if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense.’

237               North J also quoted this further comment of Weinberg J:

‘The actual terms of a contract are those which the parties intended to incorporate in that contract.  They comprise the terms expressed by the parties as well as terms which it must be inferred were intended though not expressed.  The law may infer such an intention from the nature and context of the transaction.  The difference between inferred terms based on actual intention, and implied terms based on presumed intention is not always easy to discern.’  (citations omitted)

238               At [89], North J rejected a submission that it was inappropriate to examine the terms of the manual in order to ascertain the intention of the parties.  He said:

‘The subject matter of the particular term is the policy and procedures recorded in the manual.  The nature of that subject matter is as relevant to the determination of the intention of the parties as the other elements of the term, namely, to whom the term relates and in what way the term relates to the parties.  In other words, the expression of the term involves a composite concept.  There is no reason to isolate one element of the concept as irrelevant to the process of determining the meaning of the term as a whole.  To do so would ignore the plain wording of the term which includes all its elements.  Consequently, it is both permissible and necessary to examine the provisions contained in the manual in order to ascertain the intentions of the parties.’

239               North J summarised the provisions of the manual.  It is necessary only to note they included both highly specific obligations, such as those relating to pay, leave etc, and also more general obligations, such as protection of employees’ health and safety, control of alcohol supply at company social functions, acting quickly on complaints about sexual harassment etc.  At [103], North J said:

‘If, in dealing with [company policies and practices] the contract was intended only to legally bind Mr McCormick to observe obligations imposed on him, the contract would in practice have the effect of binding him to comply primarily with administrative procedures such as requirements to apply for accumulation of annual leave, with the generally expressed prohibitions against discriminatory conduct and sexual harassment, and with the requirement to transact business in accordance with the highest standards of corporate conduct.  On the interpretation contended for by Riverwood, the major purpose of the Manual, which was to require Riverwood to extend certain employment conditions to the employee, would be irrelevant to the particular employment contract in which the reference to the Manual was found.’

240               His Honour stated the effect of Riverwood’s argument in this way:

‘While Mr McCormick was legally bound to comply with all aspects of the Manual relating to him, Riverwood was at liberty to choose to apply the terms of the Manual or not, at its discretion.’

241               North J, at [111], also dealt with a submission for Riverwood based on the fact that the relevant term of Mr McCormick’s letter of appointment imposed a requirement that he abide by, not only all current policies and practices, but also ‘any alterations made to them, and any new ones introduced’.  North J said:

‘…the purported agreement to abide by alterations or additions to the policies and practices of Riverwood did not create a legally binding obligation on Mr McCormick to accept any unilateral alteration or addition.  A purported agreement which leaves the content of the agreement entirely at the discretion of one party is not contractual in nature.  Any alteration or addition to the company policies and practices could only achieve binding contractual effect if there was separate agreement to such alterations or additions, either by way of variation of the existing agreement or by way of entering into a new agreement.’

242               Mansfield J, at [129], noted four principles accepted by Weinberg J:

‘•      the contract of employment was made in good faith with the object of at least potential mutual benefit by due performance …;

•        the court’s task is to ascertain the meaning of the parties’ expressions from an objective point of view …;

•        the parties may be bound by the meaning reasonably to be inferred in the circumstances, even though the meaning does not confirm [sic] to the interpretation advanced by either of them …;

•        if the language of the contact [sic] is ambiguous or susceptible of more than one meaning, evidence of surrounding circumstances is admissible to assist in its interpretation …’   (citations omitted)

243               Mansfield J thought the entitlement to redundancy pay had been incorporated by reference into the contract of employment; accordingly he did not need to deal with the employee’s reliance upon an implied term.

244               There is little advantage in my setting out the considerations, peculiar to the particular set of policies, that induced Mansfield J to agree with Weinberg J’s conclusion.  However, it is worth mentioning his observation, in [151], that:

‘in general, its policies are expressed in terms which are entirely apt to be treated as expressing mutually enforceable obligations; they are clear, precise, direct and mainly deal with matters which one might expect to be encompassed within a particular employment contract.’

245               Mansfield J also thought it immaterial that Riverwood could change the policies from time to time.  At [152], he said:

‘Nor do I consider that the fact that it was contemplated by the policy clause in the letter that the appellant might change its policies from time to time, or introduce new policies, signifies that it did not intend to be contractually bound to the respondent to comply with its policies from time to time.  Its power to change its policies, or to introduce new policies, from time to time would be constrained by an implied term that it would act with due regard for the purposes of the contract of employment … so it could not act capriciously, and arguably could not act unfairly towards the respondent ...  It might also be a power which, by implication, must be exercised reasonably having regard to the nature of the contract and the entitlements which exist under it.’  (Citations omitted)

246               In Riverwood, the relevant term of the employment agreement was that the employee would ‘abide by’ the policies and practices contained in a secondary document.  In the present case, the relevant term of the employment agreement was that GSJBWS ‘will expect’ Mr Nikolich to ‘comply as applicable’ with presently-existing and future ‘office memoranda and instructions’.  There is not much difference between the wording of the two terms.  Also, in both cases, the relevant secondary document clearly purported to impose obligations on the employer, some, at least, of which are obligations customarily found in employment contracts and which would otherwise be absent from the employment contract.  Accordingly, it seems to me that the approach taken in Riverwood has application to this case. 

247               Despite Mr Coleman’s contrary submission, it is difficult to accept that the parties did not intend, at least, that the obligations customarily found in employment contracts would be contractually binding.  It surely cannot be without significance that WWU was sent to Mr Nikolich at the same time as the letter of offer of employment and that he was required to familiarise himself with its terms.  WWU was in his possession at the time he accepted the offer of employment.  I think the explicit promises made in WWU by GSJBWS should be regarded as express terms of Mr Nikolich’s contract of employment; the real issue between the parties is whether GSJBWS has incurred any contractually binding obligation as a result of the provisions concerning behavioural standards such as those noted in paras 213-219 above.

248               This issue should be resolved in the applicant’s favour.  It is clear that GSJBWS was concerned to insist that all its employees (including Mr Nikolich: see the term of his employment contract set out in para 213 above) would comply with those behavioural standards, which it trumpeted as reflecting the firm’s values and culture.  It provided mechanisms in WWU for resolving problems, including satisfaction of grievances.  It made promises about supporting staff, including (relevantly) ‘anyone who makes a genuine complaint’.  Particularly as the document appears to impose legal obligations on GSJBWS in relation to other matters, I see no reason to doubt that it also does so in relation to those provisions of the document that contain express promises about behavioural standards.  The document must be read fairly and reasonably; that means GSJBWS must be accorded some discretion as to how it will deal with any particular management problem.  However, I accept that the respondent may be held liable in breach of contract where it can be shown that, on no view of its conduct, has it responded to a problem or a complaint in the manner promised or assumed in a particular WWU provision.  The question, then, is whether this has been shown in this case.

249               Counsel for the applicant argued breaches by GSJBWS of four obligations expressly or impliedly cast upon it by WWU.  I will examine each of them separately.

(ii)        Conflict of interest

250               The applicant’s counsel contended that the system of allocation of clients that was in operation in the Canberra office in 2003 ‘manifestly contravened [GSJBWS’s] own policy in relation to conflict of interest and integrity’.  Counsel went on to refer to evidence that team RSL earned $125,511 in the financial year 2003-04 from the fees of the Dal Bon clients that were reallocated to it in June 2003 by Mr Sutherland.  This represented 26.76% of the entire commission earnings from Ms Dal Bon’s former clients for that year.  Under the terms of the agreement in operation between the RSL team members, Mr Sutherland was entitled to 36% of the team’s earnings.  So his personal share, for 2003-04, in the fees earned by team RSL for servicing Ms Dal Bon’s former clients was $45,184.

251               Counsel for the applicant submitted:

‘The conflict of interest was raised by the Applicant when he first spoke to Mr. Sutherland and suggested that a mediator be called in to oversee the distribution of Ms. Dal Bon's clients. It was a matter which was raised in his written complaint on 28 July 2003.  Notwithstanding the fact that these matters were squarely raised with the Respondent, no steps were taken at any time to investigate whether a proper allocation had taken place. The scribblings of Mr. Sutherland as to the way in which he conducted the reallocation does not represent an independent assessment of the allocation. What should have been done was for an independent person to investigate the validity of the Applicant's complaint that the Team DKN Business Plan had been approved and should therefore have been complied with in relation to the reallocation of clients and/or an independent person to oversee the distribution of clients giving prominence and due consideration to the claims then being made to Mr. Keogh and the Applicant of their ability to service the clients and their right to do so given the work that they had put in during the operation of Team DKN.’

252               The reference to ‘scribblings’ of Mr Sutherland is a reference to his note, on the copy letter of 28 July 2003, of the allocation break-up: see para 67 above.

253               Counsel referred to a statement in para 15 of Mr Heath’s first affidavit:

‘When an investment adviser leaves GSJBWS, the manager of the relevant office is responsible for deciding how the clients managed by the investment adviser will be re-allocated.  The overriding principle in this regard is that the clients are clients of the firm and they do not belong to individual investment advisers.  In each situation the manager is expected to assess the appropriate allocation of the clients on a case by case basis having regard to various factors including:

(a)       the specific interests and requirements of the clients involved;

(b)       the dynamics of the relevant office and team, including which investment advisers have the capability and/or capacity to deal with the clients; and

(c)        whether any other investment advisers have dealt with the clients in the past.’

254               It will be recalled that Ms Dal Bon telephoned Mr Heath on 25 June 2003, the day on which Mr Nikolich and Mr Keogh first contacted Mr Heath about Mr Sutherland’s reallocation decision.  In her cross-examination of Mr Heath, Ms Nomchong sought to relate para 15 of his affidavit to this conversation.  Her exchange with Mr Heath took the following form:

‘Now, I want you to look at paragraph 15 of your affidavit and you set out there the things or matters that should be taken into account when determining the reallocation of clients on an investment adviser leaving.  The first is the specific interests and requirements of the clients involved.  Do you see that?‑‑‑Yes.

And that was one of the matters raised by Ms Dal Bon.  She said she felt there was a difference in the expectations how the clients would be handled, so she was talking about client interests.  You'd agree with that?‑‑‑No, my interpretation of what Ms Dal Bon [was talking about] is a difference in expectations between the remaining members of Team DKN and Rod and what was happening.

Okay.  Didn't she also say to you that she wanted the existing relationships between her clients and Mark and Peter recognised?‑‑‑That's right.

Yes.  So she was concerned about the existing recognition of that relationship which had been built up over a year.  Now, the second issue that you say should be looked at is the dynamics of the relevant office and team, including which advisers have the capability or capacity to deal with clients.  Now, you would agree with me that Ms Dal Bon was telling you that Mr Keogh and Mr Nikolich had already built up a relationship with clients.  Is that right?‑‑‑Yes.

And that the dynamics of the relevant office and team, she was concerned that the way in which the clients were going to be allocated was going to rip apart Mr Nikolich and Mr Keogh's remaining team?‑‑‑Yes.

So that was a viable concern which you would share?‑‑‑Yes.

Yes.  And thirdly you say the last matter to be involved or to be taken into account is whether any other investment advisers had dealt with the clients in the past?‑‑‑Yes.

And clearly we've dealt with that.  Ms Dal Bon was raising with you that that's exactly what had happened over the past year?‑‑‑Yes.

All right.  So when you spoke to Rod Sutherland on 26 June … you didn't raise with him the matters that had been brought to your attention by Ms Dal Bon, did you?‑‑‑I don't recall specifically whether I raised them in the detail that she did.

Well, it would be fair to say that when you spoke to Mr Sutherland on 26 June your primary focus was really about this allegation that Mr Sutherland had threatened Mr Keogh and Mr Nikolich about calling you?‑‑‑That was my concern.

Yes, but there's nowhere in your file note that says that you've raised these client relationship issues with Mr Sutherland about the client allocation?‑‑‑That's right.’

255               Counsel submitted there is no evidence that any of the matters raised with Mr Heath on 25 June 2003 were identified or applied by Mr Sutherland in making his reallocation decision.  That statement is correct.  It may be added there was also no evidence that Ms Jowett, or anyone else outside the Canberra office, addressed their mind to the factors identified by Mr Heath.

256               Counsel’s submissions on this matter concluded:

‘It is submitted that the breach of this particular term of the Applicant’s contract with the Respondent led directly to the reallocation of clients away from Mr Keogh and the Applicant, in contravention of the Team DKN Business Plan.  As a result, the consequential financial loss from the revenue generated by those clients flows directly from that breach.’

257               Counsel for the respondent put a number of matters in response to these submissions.  One submission was that Mr Sutherland had no conflict of interest because some other financial advisers (including both Mr Nikolich and Mr Keogh) each made more out of Ms Dal Bon’s former clients in 2003-04 than did Mr Sutherland.  The statement is factually correct.  However, it is irrelevant.  The question whether a decision-maker has a conflict of interest has to be determined on a logical basis, considering the situation that existed at the time of the person’s decision; it is immaterial how events worked out.  Mr Sutherland did have a conflict of interest; that fact should have been recognised both by himself and his superiors. 

258               Mr Coleman made much of the fact that it would have been impossible for Mr Nikolich and Mr Keogh to service all the Dal Bon clients; some would have had to be reallocated elsewhere.  Mr Nikolich conceded this; but his point was that he and Mr Keogh should have been allowed to decide which clients would be culled from the team list.  In making their decision on that matter, they would no doubt have taken into account how much revenue was derived from particular clients; but they also could have taken into account the extent and nature of their relationship with particular clients.  The right to make decisions as to the clients to be culled from the list was a valuable right, in relation to which Mr Sutherland had a conflict of interest. 

259               Mr Coleman is on sounder ground in relation to two other submissions concerning conflict of interest.  First, he pointed out the applicant has not pleaded the existence of a contractual term concerning conflict of evidence.  Second, he noted that the conflict of interest clause in WWU (para 214 above) is directed to a ‘situation where personal interests may conflict with the interests of the firm or its clients’.  I am prepared to hold that WWU casts legally-enforceable obligations onto GSJBWS, in relation to the subject matters with which it deals.  However, there is no legitimate basis for the Court to extend the terms of the subject matters so as to take in situations that are not covered.  The relevant sentence does not cover a conflict of interest between one GSJBWS employee, who has to make a management decision, and another GSJBWS employee.

260               I agree with counsel for the applicant that the relevant sentence is wide enough to have required Mr Sutherland to avoid a conflict between his personal interests, as a potential recipient of reallocated clients, and the interests of the clients themselves.  However, this is not the conflict of interest situation relied on in this case.  No doubt for that reason, no evidence was put before the Court as to the effect on the clients of Mr Sutherland’s reallocation decision.

261               I conclude that the conflict of interest clause in WWU does not, in this case, give rise to an entitlement to damages.  That does not mean that conflict of interest is irrelevant to the case; the existence of a conflict of interest situation, and GSJBWS’s recognition of the importance of ‘integrity’ and avoiding conflict of interest situations, provide an important backdrop to other alleged breaches.

(iii)       Health and safety obligations

262               At para 216 above, I set out the principle enunciated by GSJBWS in relation to health and safety.  The relevant passage commences with a promise by GSJBWS to ‘take every practicable step to provide and maintain a safe and healthy work environment for all people’.  The passage goes on to talk about prevention being the most effective health and safety principle, shared responsibility, co-operation and support and every member of the team having a duty to take care for their own health and safety and that of other team members affected by their actions.  The passage goes on to acknowledge that GSJBWS ‘has a duty to provide and maintain, so far as is practicable, a working environment that is safe and without risk to health’.

263               It has not been suggested that the references in this document to ‘health and safety’ are confined to physical health and safety or that ‘risk’ excludes psychological risk.

264               In paras 92-100 of their written submissions, counsel for the applicant argued that GSJBWS had obligations to the applicant, pursuant to both the ‘Health and Safety’ subsection of WWU and the terms of the Occupational Health and Safety Act 1989 (ACT) (‘the ACT Act’).  Counsel said both sources of obligation required GSJBWS ‘to undertake risk identification, risk assessment and risk management for the avoidance of injury (either mental or physical) to any of its employees.’

265               Before setting out the factual references of counsel for the applicant, in relation to health and safety, it is desirable to determine the width of the issue.

266               First, Mr Coleman pointed out that the applicant’s Second Amended Statement of Claim contains no reference to the ACT Act.  No breach of that Act was pleaded.  Consequently, he said, the ACT Act must be disregarded.  I agree.

267               Second, Mr Coleman submitted that the applicant failed to plead any claim with respect to breaching obligations pursuant to the ‘Health and Safety’ subsection of WWU.  I do not agree.  The submission overlooks para 8A of the Second Amended Statement of Claim, set out at para 221 above. 

268               The term of the contract of employment alleged in para 8A necessarily includes a promise by the respondent that it would not, by its servants or agents, treat the applicant in such a way as to conflict with its promises to ‘take every practicable step to provide and maintain a safe and healthy work environment’ and to ‘provide and maintain, so far as is practicable, a working environment that is safe and without risk to health’.  The question is whether GSJBWS complied with these obligations.

269               It is desirable also to note some specific allegations in the Second Amended Statement of Claim.  In para 18 the applicant pleaded that, in June and July 2003, he and Mr Sutherland had a number of altercations resulting from the Dal Bon client reallocation ‘which resulted in the Applicant suffering anxiety and stress’.  In para 18B he referred to Mr Sutherland being ‘aggressive, intimidating and threatening’ towards him.  In paras 19 – 25 the applicant made allegations about his ‘resultant medical disability’, which he described as ‘work related stress and depression’.  In para 33A, the applicant alleged it was either a further express term or an implied term of his contract of employment that ‘the Respondent would not, by its servants or agents:

‘(i)       intimidate or personally vilify the Applicant;

(ii)       subject the Applicant to demeaning, harassing or abusive conduct or threats of such conduct;

(iii)      and that the Respondent would, so far as was reasonably practicable, protect the Applicant from any such harassing or bullying conduct occurring in the course of his employment.’

Plainly, conduct of the nature stated in (i) or (ii) is inimical to the provision of a safe and healthy work environment.

270               Paragraph 34 contained an allegation that, by reason of the matters pleaded in paras 16 to 18H (the whole list of grievances), ‘the Respondent breached the said express and implied terms of the contract of employment’.

271               When these paragraphs of the pleadings are taken into account, it is plain that the applicant squarely raised the question whether GSJBWS complied with the obligations set out in the ‘Health and Safety’ subsection of WWU.

272               Counsel for the applicant focused their submissions about health and safety on Ms Jowett’s conduct.  They said:

‘The letter of complaint from the Applicant dated 28 July 2003 contains serious allegations of bullying and harassment in the workplace and states that the Applicant was suffering from feelings of intimidation and harassment as a result.

The file notes taken by Ms. Jowett in her initial conversations with the Applicant in August 2003 indicate the extremely distressed state of the Applicant at even that early stage.

The Applicant's continuing agitation of his complaint for the four (4) months that it took to complete the investigation was apparent to all of the Respondent's managers who dealt with him, but particularly to Ms. Jowett who stated that she observed the Applicant's symptoms increasing over time.

During cross examination, it was apparent that Ms. Jowett had no understanding of the obligations placed upon her under the Health and Safety policy (or the OHS legislation). Although Ms. Jowett stated that it was her view that she had complied with the health and safety policy of the Respondent, Ms. Jowett's explanation of the steps that she took in relation to risk identification, risk assessment and risk management displayed that in fact no such steps had been taken. Risk identification was thought by Ms. Jowett to be about providing EAP or employee assistance program counselling. Ms. Jowett said risk identification also involved protocols training, although she could not specify the dates upon which that training had happened and whether or not the Applicant or Mr. Sutherland had attended such training.  However, it is apparent from those answers that Ms. Jowett had no idea as to what was required in terms of the identification of an occupational health and safety risk.

 

In terms of risk assessment, Ms. Jowett said that this had been satisfied by obtaining feedback from Mr. Sutherland and the Applicant.  In terms of the proactive steps to prevent the risk actually materialising into an injury, being something that Ms. Jowett said she understood what was required, Ms Jowett’s evidence was as follows:

“Further discussions, you know, was the primary issue. The matter was still being investigated so I suppose during the course of that it was a matter of identifying what the risk actually was, and any point during that period.”

 

Ms. Jowett then elaborated by saying that risk management was undertaken by:

 

“During the period of the investigation we had increased representation by the management group in the Canberra Office”.

 

Ms. Jowett then advised that this increased representation was by visits from the Private Client Managers, Chris Voigt and Paul Heath.  However, when cross-examined as to the actual times that Mr. Voigt and Mr. Heath had visited the Canberra Office following the Applicant’s complaint, Ms. Jowett could provide no information other than an attendance on one occasion on 18 August 2003.’

273               I have omitted counsel’s transcript references from this quotation.  The references support counsel’s statements.

274               I have some difficulty with counsel’s subdivision of GSJBWS’s responsibility into risk identification, risk assessment and risk management.  Although these steps may be inherent in the overall obligation undertaken by GSJBWS in WWU, the document nowhere mentions them.  However, I do agree with the counsel’s summary submission:

‘It is submitted that the Respondent breached its own Health and Safety policy, being an express term of the contract of employment with the Applicant, by reason of the failures and omissions of Ms. Jowett. Despite the fact that Ms. Jowett had been put on notice of potentially injurious conduct by Mr. Sutherland and the effect that it was having on the Applicant, no steps at all were taken which would satisfy the relevant occupational health and safety procedures laid down in a “Working with Us” document.

That breach, taken together with the breaches discussed below in relation to the grievance handling procedure, ultimately led to the onset and exacerbation of the Applicant’s psychological symptoms.’

275               As counsel submitted, Ms Jowett was aware from the beginning that Mr Nikolich was in an extremely distressed state.  Mr Heath also soon became aware of this.  Both people knew Mr Nikolich was continuing to work in a small office managed by a person with whom he had come into serious conflict, whose actions Mr Nikolich had found ‘extremely intimidating and threatening’ and with whom he was no longer on speaking terms.  It ought to have been obvious to both Ms Jowett and Mr Heath that it was necessary urgently to investigate and resolve the issues raised by Mr Nikolich, to reverse any inappropriate decision that had been made by Mr Sutherland, to take action to effect a reconciliation between the two men and/or, if it was appropriate, to terminate Mr Sutherland’s supervision of Mr Nikolich’s activities.  An employer who took seriously its obligation to ‘take every practicable step to provide and maintain a safe and healthy work environment’ would have done this.  GSJBWS did not.

276               I find the applicant has established a breach of the WWU health and safety obligations.

(iv)       Harassment

277               In para 269, I set out the applicant’s allegations of harassment.  Items (i) and (ii) are directed to actions of Mr Sutherland, for whose conduct in the course of his employment GSJBWS is vicariously liable.  Item (iii) relates to the inactivity of Ms Jowett and Mr Heath, mentioned above.

278               The respondent’s response to this aspect of the applicant’s case was to press me to prefer Mr Sutherland’s denials to Mr Nikolich’s assertions about the content of their conversations.  For the reasons I have set out, I am unable to do this.  I accept the evidence of Mr Nikolich in relation to the conversations between himself and Mr Sutherland; also his evidence about Mr Sutherland’s demeanour and attitude towards him.  Not only do I prefer Mr Nikolich to Mr Sutherland, as a witness of truth; I also take into account the fact that Mr Nikolich’s evidence is similar to the tenor of his contemporaneous complaints to Ms Jowett and the failure of the respondent to call any of the other Canberra office employees, all of whom must have observed the state of the relationship between Mr Sutherland and Mr Nikolich after the reallocation decision.

279               People react in different ways to a particular problem.  Some people are able to brush off aggressive or offensive behaviour.  Mr Keogh may be one of them.  It is apparent from his conversation with Mr Heath on 25 June 2003 that he was deeply unhappy about Mr Sutherland’s reallocation decision.  He felt targeted: ‘the team was being penalised’, ‘felt that Rod’s decision was personal’.  However, he seems to have swallowed his disappointment and anger and got on with the job; not without difficulty, as appears from the file note of Mr Keogh’s conversation with Mr Jowett on 8 November 2003 about the Barter account.  However, the fact that Mr Keogh managed to cope with Mr Sutherland’s behaviour does not derogate from the fact that the behaviour was intimidatory and demeaning and foreseeably might cause psychological damage to another person.  It was behaviour inconsistent with GSJBWS’s promise to ‘take every practicable step to provide and maintain a safe and healthy work environment’.  It was also inconsistent with the statement, in the sub-section of WWU relating to harassment, about GSJBWS’s asserted ‘culture and “family” approach’ meaning that ‘each person is able to work positively and is treated with respect and courtesy’.  I read that statement as an express promise that employees will be so treated by GSJBWS itself, and those within the company for whom it is responsible.  However, if such a promise is not expressly made, it is at least implied.  

280               There is also an express promise that ‘all people within the JBWere team will work together to prevent any unwelcome, uninvited and unwanted conduct which makes another team member’ (surely including a financial adviser) ‘feel offended, humiliated or intimidated in any work related situation and where that reaction is reasonable in the circumstances’.  As office manager, Mr Sutherland arguably had more onerous responsibilities in this regard than other employees.  But his conduct broke that promise.

281               The issues concerning harassment, directly related to Mr Sutherland’s conduct, overlap other issues of health and safety, raised also by the conduct of Ms Jowett, Mr Heath and others.  I agree with the description of the situation offered in the applicant’s submissions:

‘The failure to provide a secure and safe workplace left the Applicant festering in an environment of harassment and intimidation for an extremely lengthy period of time.  No doubt that was exacerbated by the fact that no one in the Respondent’s management team or Human Resources area took any steps to intervene to determine the veracity of the Applicant’s complaint, other than by asking Mr Sutherland himself.  The onset of the Applicant’s psychological symptoms and the development of those symptoms over time occurred as a direct result of the Respondent’s breach in this regard.’

(v)        The grievance procedures

282               At para 219, I set out the sub-section of WWU dealing with ‘Concerns or Grievances’.  Counsel for the applicant contended this subsection had contractual significance and obliged GSJBWS to conduct a timely investigation of the matters raised in Mr Nikolich's letter of 28 July 2003.  They submitted the investigatory steps taken by Ms Jowett ‘were manifestly inadequate’ and itemised the following matters:

‘… during the 5 month period during which Ms. Jowett had conduct of the investigation the following occurred:

 

(a)     although Ms. Jowett had a lengthy conversation in early August 2003 it was not until some 10 weeks later (on 15 October 2003) that Ms. Jowett had her first face to face meeting with the Applicant and Mr. Heath in Sydney;

 

(b)     no steps were taken to arrange any other meeting off-site in Canberra on an urgent basis;

 

(c)     upon receiving the complaint no effort was made to stand down either Mr. Sutherland or the Applicant on pay pending the investigation;

 

(d)     the first meeting or conversation with Mr. Sutherland did not occur until 27 August 2003 (some 4 weeks after the written complaint was received);

 

(e)     the first time Mr. Keogh, a key player in the complaint, was even contacted was on 8 November 2003 (some 3 months after the complaint was received);

(f)        Ms. Dal Bon was never contacted (and Mr. Heath never passed on the complaints that Ms. Dal Bon had made concerning her view of Rod Sutherland's behaviour being inappropriate);

(g)       no other members of the Canberra Office were interviewed about the Applicant's allegations of harassment and bullying;

(h)       a short conversation with Ms. Trish Barber occurred at the end of August 2003 but she was not asked about Mr. Nikolich's complaints in particular;

 

(i)        the original conversation with Mr. Evans in early August 2003 about the proper interpretation of the Team DKN Business Plan took place in circumstances where Mr. Evans had not even seen the written complaint;

(j)        no investigator was appointed to ascertain what had occurred in relation to the reallocation of Ms. Dal Bon's clients and whether it contravened the conflict of interest policy of the Respondent and/or the Team DKN Business Plan;

(k)     Ms. Grunbaum (Team DKN assistant) was never interviewed despite the fact that a particular complaint was made about Mr. Sutherland's treatment of her;

(l)        a short conversation with Mr. Dorian Bontempelli about the Barter incident took place in late October 2003 but Mr. Bontempelli was not asked any questions about the other allegations made by Mr. Nikolich; and

(m)      the tapes containing conversations concerning the Barter incident were received but neither transcript nor any notes of the content of those tapes has ever been produced.’

 

283               The submission went on:

‘The only investigation ever undertaken by Ms. Jowett into the client reallocation was an inquiry by her of Mr. Sutherland on 27 August 2003. In response, Mr. Sutherland wrote down on a piece of paper the way in which he had distributed Ms. Dal Bon's clients and, apparently, Ms. Jowett was satisfied with his explanation.

 

On the basis of the above steps, Ms. Jowett concluded her “investigation” and wrote to the Applicant … in December 2003. Amongst other things, Ms. Jowett stated that she had formed the view that the allocation of Ms. Dal Bon's clients was “appropriate” and belittled the Applicant's psychological symptoms as simply feelings of being “distressed and upset on occasions”.

The letter referred to a series of recommendations and actions that the Respondent had taken following the investigation of the Applicant's complaint. However, during cross­examination, most of the alleged recommendations were procedures that had already been in place (eg visits by retail senior management) or simply untrue.’

 

284               Mr Coleman did not put in issue his opponents’ factual claims.  His response was more general.  He said:

‘Insofar as the “Working with Us” document contains steps in the complaints process, and it is held that these formed part of the contract of employment, it is clear that those processes were followed in this case.  As stated above, once the complaint was formally made by the Applicant to Human Resources by his letter dated 28 July 2003, an investigation was commenced.  Ms Jowett of Human Resources telephoned the Applicant almost immediately upon receipt of the letter and then commenced investigations by notifying her superiors including Mr Heath who was, at that time, responsible for the Canberra Office in the absence of Mr Evans on sabbatical leave.  Following the additional complaints by the Applicant with respect to the Barter account, these complaints were also investigated.  In December 2003, Ms Jowett provided the Applicant with a letter outlining the outcome of her investigation.  Because the Applicant was not satisfied with the outcomes and conclusions drawn by Ms Jowett, the matter was escalated to Ms Jacobs and Mr Evans who made various offers to the Applicant in an attempt to resolve his concerns.  The investigation culminated in March 2004 with, in essence, a rejection of the complaints made by the Applicant.’

285               At paras 137-141 above, I set out some findings in connection with GSJBWS’s handling of Mr Nikolich’s letter of 28 July 2003.  It will be obvious that I accept the detailed criticisms of that handling made by counsel for the applicant.  The facts stated by Mr Coleman in response are not untrue but they do not meet the criticism made by his opponents.

286               I think the real question in relation to this claim is whether WWU casts on GSJBWS a legally enforceable obligation to conduct an adequate and timely investigation into an employee’s complaint.

287               The relevant subsection of WWU says: ‘The door is wide open at all times for people to discuss any issue’ with, amongst others, Human Resources.  Discussions are said to be welcome ‘as the firm has been built on the principle that it is a team with common interests and ideals’.  The document goes on to invite contact with Human Resources by anyone who has a complaint or grievance.  There is then a promise: ‘We are committed to make sure that anyone who makes a genuine complaint will be able to discuss the concern confidentially, will be supported by the firm and is not penalised in any way’.

288               There is no doubt that the complaints made in Mr Nikolich’s letter of 28 July 2003 were genuine.  Consequently, as it seems to me, they were covered by GSJBWS’s promise.  Mr Nikolich was able to discuss his concerns confidentially; there can be no complaint about that aspect of GSJBWS’s conduct.  However, the promise of support necessarily includes, at least, an implied promise to carry out an adequate and timely investigation into the merit of any complaint or grievance, and to endeavour to achieve a result that will resolve the problem and accord with GSJBWS’s culture of each member of the team being ‘able to work positively and productively’, and be ‘treated with respect and courtesy’.  That did not happen in this case.  The result was to exacerbate the stress that Mr Nikolich was already suffering as a result of Mr Sutherland’s conduct.

289               I conclude that GSJBWS breached its contract with Mr Nikolich in respect of provisions in WWU concerning health and safety, harassment and the grievance procedures.  I will deal later with the issue of quantum of damages for those breaches.

The TP Act claims

290               The applicant makes two claims pursuant to the TP Act.  Both claims concern the likely application of the ‘exit strategies’ paragraph in the team DKN business plan in the event of a departure by one of the three members of the team.  First, the applicant says that the respondent, in trade or commerce, engaged in conduct that was misleading or deceptive or likely to mislead or deceive, contrary to s 52 of the TP Act or s 42 of the FT Act.  Second, the applicant relies on s 53B of the TP Act.  That section says:

‘A corporation shall not, in relation to employment that is to be, or may be, offered by the corporation or by another person, engage in conduct that is liable to mislead persons seeking the employment as to the availability, nature, terms or conditions of, or any other matter relating to, the employment.’

291               These claims are disputed by the respondent, both in terms of their availability in this case and whether they are established by the evidence.  However, I have reached the conclusion that I need not resolve those disputes; even if one or both the claims could be established, they would not result in recovery of any damages.

292               In order to explain that conclusion, it is necessary to refer to the case pleaded by the applicant.  Paragraph 36 of the Second Amended Statement of Claim sets out representations said to have been made by the respondent, which representations are said (in para 39) to be misleading and deceptive or likely to mislead or deceive.

293               The representations pleaded in para 36 are as follows:

‘(a)      The Applicant could perform his duties under the contract of employment through the formation of and participation in Team DKN, being a working structure set in place at the initiative of the Respondent;

(b)       the business plan for Team DKN was approved by the Respondent;

(c)        the formation of Team DKN and the business plan formed part of the terms and conditions of the Applicant’s employment with the Respondent;

(d)       the Applicant could perform his duties under the contract of employment through business plan for Team DKN;

(e)        the terms of the business plan would be enforced;

(f)        in the event of the resignation of any member of Team DKN, that person’s clients would be redistributed on 50:50 basis to the remaining two members of the team.’

294               Let it be assumed that the applicant has proved that GSJBWS made all of these representations and that some or all of them were false or, being a representation about a future matter, were made without GSJBWS having reasonable grounds for making the representation: see s 51A of the TP Act.  What flows from the representations?

295               In para 43 of his Second Amended Statement of Claim, the applicant alleged that, acting in reliance on the representations and the respondent’s conduct, he entered into ‘the new terms of the contract of employment, being the formation of Team DKN and the adoption of the business plan’.  I will treat this paragraph as alleging that, whether or not there were ‘new terms of the contract of employment’, but for the misleading conduct the applicant would not have joined team DKN or agreed to the business plan.  Assume that to be so; did the applicant sustain loss because, misled by GSJBWS, he in fact joined team DKN and agreed to the business plan?

296               No such loss has been demonstrated.  Mr Nikolich’s earnings, during the year of operation of the DKN partnership (2002-03), were less than in the previous (or subsequent) year.  However, no attempt was made to relate this reduction to the fact of the partnership which, Mr Nikolich said, worked well.

297               Mr Nikolich’s complaint is that GSJBWS failed to honour the understanding set out in the ‘exit strategies’ paragraph of the team DKN business plan.  Undoubtedly, that failure adversely affected his income.  However, that is not a loss or damage consequential upon the misleading conduct.

298               A person’s entitlement to damages for contravention of s 52 or s 53B of the TP Act is governed by s 82(1) of the TP Act.  That subsection provides:

‘A person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV, IVA, IVB or V or section 51AC may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.’

Sections 52 and 53B are contained in Part V of the TP Act.

299               The fundamental principle of s 82(1) of the TP Act was explained by the High Court in Gates v City Mutual Life Assurance Society Limited (1986) 160 CLR 1.  The appellant in that case had applied to the respondent for the addition to his superannuation policy, and the insertion in his life policy, of a total disability clause.  He was misled by the respondent’s agent as to the circumstances under which the total disability benefit would be payable, but there was no evidence that the total disability clause was not worth what he paid for it.

300               The appellant sustained an injury which resulted in incapacity to carry on his usual occupation.  He sued for damages, inter alia, for contravention of s 52 and s 53(g) of the TP Act.  The claim was based on what the appellant would have received if the circumstances under which the total disability clause operated were as stated by the agent.

301               Gibbs CJ said at 6:

‘Actions based on ss. 52 and 53 are analogous to actions in tort and the remedy in damages provided by s. 82(1) appears to adopt the measure of damages applicable in an action in tort.  That sub-section refers to loss or damage by the conduct of another that contravened a provision of Pt IV or Pt V; it therefore looks to the loss or damage flowing from the offending act of the other person.  The acts referred to in ss. 52 and 53 do not include the breach of a contract, and in awarding damages under s. 82 for a breach of either of those sections, no question can arise of damages for loss of a bargain.  The contractual measure of damages is therefore inappropriate in such a case.’

302               At 11-12, Mason, Wilson and Dawson JJ explained the difference between damages recoverable in contract and those recoverable in tort:

‘The Act does not prescribe the measure of damages recoverable by a plaintiff for contravention of the provisions of Pts IV and V. Accordingly, it is for the courts to determine what is the appropriate measure of damages recoverable by a plaintiff who suffers loss or damage by conduct done in contravention of the relevant provisions.  Two established measures of damages, those applicable in contract and tort respectively, compete for acceptance.  In contract, damages are awarded with the object of placing the plaintiff in the position in which he would have been had the contract been performed - he is entitled to damages for loss of bargain (expectation loss) and damage suffered, including expenditure in­curred, in reliance on the contract (reliance loss). In tort, on the other hand, damages are awarded with the object of placing the plaintiff in the position in which he would have been had the tort not been committed (similar to reliance loss).’

 

303               Their Honours said, at 13, that, if the tort measure of damages is applied to a claim under s 82 of the TP Act, ‘it is necessary to determine what the plaintiff would have done had he not relied on the representation’.  At 14, they said:

‘there is much to be said for the view that the measure of damages in tort isappropriate in most, if not all, Pt V cases, especially those involving misleading or deceptive conduct and the making of false statements. Such conduct is similar both in character and effect to tortious conduct, particularly fraudulent misrepresentation and negligent misstatement.’

304               Mason, Wilson and Dawson JJ made some concluding comments (at [14]-[15]) that have a resonance in the present case, substituting a reference to the business plan for that to the insurance policy:

‘The disappointed expectations of a person induced by a misrep­resentation to believe erroneously that his insurance policy entitles him to the payment of benefits on maturity or on the happening of a certain event are sometimes so great as to encourage the thought that compensation on the basis of lost expectations would be appropriate.  However, neither authority nor principle offer support for adopting this approach.  In all the cases in which a plaintiff has sought to recover damages on the footing that a representation amounts to a collateral contract, a fraudulent misrepresentation or a negligent misstatement, damages for expectation loss have only been awarded when the representation amounted to a collateral contract.  Neither the fact that the representation induces entry into a contract nor the fact that it is a statement of the benefits to which the plaintiff will be entitled under that contract is enough to justify compensation for expectation loss.’

 

305               The High Court has considered s 82 of the TP Act on several occasions since Gates: see Wardley Australia Ltd v Western Australia  (1992) 175 CLR 514; Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 and Henville v Walker [2001] HCA 52; 206 CLR 459.  In these later cases, some members of the Court have argued the undesirability of tying the interpretation of s 82 too firmly to concepts such as the measure of damages in tort or in contract.  However, nothing has been said against the distinction made in Gates between a loss caused by the misleading conduct (commonly a misrepresentation) and loss caused by disappointment of an expectation generated by the misleading conduct.  McHugh J summarised the position in Henville at [130]:

‘This Court has addressed the question of assessment of damages under s 82 on several occasions.  The Court has concluded that in most cases the measure of damages in tort is the appropriate guide in determining an award of damages under s 82.  However, in assessing damages under s 82, courts are not bound to choose between the measure of damages in deceit or other torts or contract.  In Marks v GIO Australia Holdings Ltd,the Court said that the central issue under s 82 is to establish a causal connection between the loss claimed and the contravening conduct.  Once such a connection is found to exist, nothing in s 82 suggests that the recoverable amount should be limited by drawing an analogy with contract, tort or equitable remedies although they will usually be of great assistance.’  (footnotes omitted)

 

306               The loss claimed in the present case is the loss of expected income from transactions undertaken by persons on Ms Dal Bon’s client list who were allocated by Mr Sutherland away from team DKN.  This loss was not caused by Mr Sutherland’s alleged misleading conduct in conveying to Mr Nikolich (and Mr Keogh) that he would regard himself as bound by the ‘exit strategies’ paragraph in the team DKN business plan; it was a loss caused by his failure to act in accordance with the expectation he thereby generated.  There is no evidence that Mr Nikolich would have embarked on a more profitable course had he not been led to believe the exit strategies would be honoured.  Conceptually, the position is similar to that in Gates.  The principle there enunciated means the present TP Act claims must fail.  The same statement must be made about the FT Act claim.  The relevant terms of that Act are indistinguishable from those of the TP Act.

307               For the sake of completeness, I mention that, when pressed in argument about this issue, Ms Nomchong said that, as a result of what Mr Sutherland had said, Mr Nikolich entered into the team DKN business plan, and thereby put himself to trouble in servicing Ms Dal Bon’s clients when she was overseas.  No doubt that is factually correct.  But loss of that nature was not pleaded.  No evidence was led to show that Mr Nikolich was financially disadvantaged by the responsibility he had undertaken in the business plan.

Assessment of damages for breach of contract

(i)         What damages are available?

308               It remains for me to assess the damages that should be awarded to Mr Nikolich in relation to the only cause of action he has established: breaches by GSJBWS of the contractual obligations it undertook in WWU.  I have found breaches of three sub-sections in that document: ‘Health and Safety’, ‘Harassment’ and ‘Concerns or Grievances’.  It is neither possible nor necessary to separate the effects of the separate breaches.  However it is necessary immediately to consider a submission made by Mr Coleman that Mr Nikolich’s psychological problems, and consequential loss of income, were not caused by any such breaches, but rather by his disappointment at the substance of Mr Sutherland’s decision concerning reallocation of Ms Dal Bon’s clients; a decision which I have held not to represent a breach of GSJBWS’s contract with Mr Nikolich.  To the extent that Mr Nikolich’s psychological disability stemmed from the reallocation decision, rather than behaviour (of Mr Sutherland, Ms Jowett etc) that constituted a breach or breaches of WWU, it is not compensable in this proceeding.

309               Undoubtedly, Mr Nikolich was disappointed and distressed by Mr Sutherland’s reallocation decision.  However, the expert evidence suggests that his psychological problems stemmed more from the way he was treated than from the decision itself.

310               The first expert to see Mr Nikolich was Dr Jamieson, on 1 December 2003.  He reported that Mr Nikolich ‘presented in a most distressed state and related to me a 6-month history of workplace conflict’: see para 98 above.  Dr Jamieson found ‘symptoms of a major depressive disorder, ie depressed mood, poor self-esteem, an extremely poor view of his future, a great sense of failure and withdrawal’.  His later reports also relate Mr Nikolich’s problems to his conflicts at work.  There is no suggestion that the reallocation decision, in itself, caused the psychological disability diagnosed by Dr Jamieson.

311               Dr Lowden’s assessment is to similar effect.  It will be recalled that, in her report of 13 March 2006, she identified the cause of Mr Nikolich’s major depressive disorder as ‘betrayal of trust and lack of respect, difficulty in conflict resolution at the workplace and lack of respect’.

312               I put great weight on the opinions of Drs Jamieson and Lowden; they have seen Mr Nikolich on many occasions and have been responsible for his medical treatment.  However, they are not alone in distinguishing between the effect of Mr Sutherland’s reallocation decision and the effect of the manner of treatment of Mr Nikolich.  Dr Lucas took a full history of Mr Nikolich’s problems at work, including particularly the processing of his complaint against Mr Sutherland, before commenting:

‘From the information available the onset and continuation of Mr Nikolich’s symptoms appears related to his employment.’

Mr O’Neill spoke of Mr Nikolich’s distress ‘by his perception of how Mr Sutherland dealt with his concerns last year’, that he began ‘to find it difficult to function at work by the end of 2003’ and about Mr Nikolich’s sensitivity ‘about how his concerns are being dealt with within the organisation’.

313               Dr Synnott and Dr Samuell related Mr Nikolich’s problems to the workplace without making any distinction between the reallocation decision and Mr Nikolich’s treatment by Mr Sutherland and others.

314               Assessing the expert evidence as a whole, I do not think it supports the respondent’s theory that Mr Nikolich’s psychological problems were, and are, the result, only or primarily, of the reallocation decision made by Mr Sutherland.  I think the better view is that they stem more from the aftermath of that decision, in the way Mr Nikolich was treated by Mr Sutherland and the failure of Ms Jowett and others to give him proper support in handling his problems with Mr Sutherland.  Certainly that seems to be the view of Dr Jamieson and Dr Lowden, the two experts who know him best.  I conclude, therefore, that the breaches of the three relevant sub-sections of WWU caused the psychological damage which I summarised in [98]-[119] and [153]-[158] above.  This included a major depressive disorder.

315               In Baltic Shipping Company v Dillon (1993)176 CLR 344, the High Court considered the recoverability of damages for what Mason CJ called ‘disappointment and distress’ at the defendants’ breach of contracts.  The members of the Court unanimously held that, ordinarily, such damages are not recoverable.  They applied a long-standing rule often associated with the decision of the House of Lords in Addis v Gramophone Co Ltd [1909] AC 488; although the rule goes back much earlier, at least to Hamlin v Great Northern Railway Co (1856) 1 H&N 408; 156 ER 1261.

316               However, in Dillon, all members of the High Court recognized exceptions to the rule.  All the Justices upheld an award of damages to the respondent, which was intended to compensate her for disappointment and distress at the appellants’ breach of contract in respect of a pleasure cruise.  Their Honours did so because the ‘very object’ of the contract was to provide enjoyment and relaxation: see per Mason CJ at 365; Brennan J at 371-372; Deane and Dawson JJ at 382; Gaudron J at 387 and McHugh J at 394.

317               The present case does not concern a pleasure cruise.  However, it is strongly arguable that it comes within the principle applied in Dillon.  The purpose of the relevant sub-sections of WWU was to provide assurance to existing and prospective GSJBWS employees concerning the manner in which they would be treated in their workplace and, in particular, about the support they would be offered by their employer.  The ‘very object’ was to provide peace of mind.  It was foreseeable that, if the employer’s promises were broken in relation to a particular employee, that employee might suffer distress.  Accordingly, it seems to me this case falls within the principle enunciated by Brennan J at 370:

‘If a contract contains a promise, express or implied, that the promisor will not cause the promisee, or will protect the promisee from, disappointment of mind, it cannot be said that disappointment of mind resulting from breach of the promise is too remote.  Such a promise is expressed or implied in many contracts the object of which is to provide a service or facility conducive to peace of mind, tranquility of environment or ease of living and damages have been awarded accordingly.’ (footnotes omitted)

 

318               It is not really necessary for me to reach a final view about the matter just discussed.  The case clearly comes within another exception to the Addis rule.  This exception was explained by McHugh J, in Dillon, at 405:

‘… because damages for personal injury may be recovered in an action for breach of contract and because psychiatric illness constitutes personal injury, damages for mental distress associated with a psychiatric illness or physical injury must also be recoverable in an action for breach of contract.’  (footnotes omitted)

 

319               A major depressive disorder constitutes a psychiatric illness.  Subject to one matter, it follows that Mr Nikolich is entitled to recover damages in respect of the mental distress he suffered, including the psychiatric illness itself, consequentially upon the respondent’s breaches of the contractual obligations it undertook in WWU.

320               The qualification to which I referred is that Mr Coleman argued that damages for psychiatric injury are not recoverable because, even if foreseeable, they are too remote: such damages would not have been within the contemplation of the parties at the time of making the contract of employment.  Mr Coleman cited the following statement of McHugh JA (as he then was) in Alexander v Cambridge Credit Corporation Ltd [1987] 9 NSWLR 310 at 365:

‘In later cases … there has been a tendency to play down the distinction between reasonable foreseeability and reasonable contemplation as semantic only.  However, I think that the difference is a real one which results in a significant narrowing of liability.  The word “contemplation” seems to be used in Koufos in the sense of “thoughtful consideration” or perhaps “having in view in the future”.  It emphasises that, if the parties had thought about the matter, they would really have considered that the result had at least a “serious possibility” of occurring.’

321               However, McHugh JA said a little more than this.  He went on to explain what he meant by a ‘serious possibility’.  At 365-366 (and omitting citations) his Honour said:

‘An important matter in ascertaining whether the loss or damage is too remote is the extent to which the parties may be taken to have contemplated the events giving rise to that loss or damage.  The parties need not contemplate the degree or extent of the loss or damage suffered …  Nor need they contemplate the precise details of the events giving rise to the loss.  It is sufficient that they contemplate the kind or type of loss or damage suffered.

The most difficult question in determining the relevant kind of damage concerns the level of classification of the damage which the parties must have contemplated.  Clearly the level must not be so high that the parties are required to contemplate the very loss in question or the precise manner of its occurrence.  Nor must it be so low that any loss or damage, no matter how unusual in nature or occurrence, would fall within the classification.’

322               McHugh JA found ‘helpful guidance’ in some decided cases.  Of those cases, the one that comes closest to the present one is Rowe v McCartney [1976] 2 NSWLR 72, a majority decision of the New South Wales Court of Appeal (Moffitt P, Samuels JA; Glass JA dissenting).  The plaintiff in that case was the owner of a car.  After discussion with a friend, the plaintiff allowed him to drive the car, on the basis that he would be careful.  She accompanied him as a passenger.  While the friend was driving, the car ran off the road and hit a telegraph pole; the driver was rendered quadriplegic.  The plaintiff was awarded damages against the driver in respect of her physical injuries but the trial judge held she was not entitled to recover damages in respect of a depressive neurosis caused by a feeling of guilt at having allowed the friend to drive.

323               Moffitt P said at 76:

‘The damage in the present case was quite different from that which is ordinarily found to flow from negligence in relation to a vehicle or equipment capable of inflicting physical damage.  The damage to the plaintiff would not have occurred but for the impact, which in turn would not have occurred but for the defendant’s negligence.  However its only connection with the impact has no rational basis.  The sole connection was made illogically and contrary to that which one would expect from a reasonable mind.  The damage fell into the class where its sole connection with the negligent act was irrational reasoning in relation to, but external to, the negligent act.’

324               At 89-90, Samuels JA said:

‘It is necessary, first, to characterize the nature of the harm which the plaintiff did suffer – held in this case to have been unforeseeable – in order to determine whether that harm can reasonably be included in a wider, more general and foreseeable category.  The harm which she sustained as a result of the events which happened was the onset of a complex or obsessive feeling of guilt or remorse which manifested itself symptomatically in a depressive illness.  No doubt the feeling of guilt was a neurotic reaction to the circumstances, and was thus a mental illness.  But I do not consider it to be an adequate answer to the present problem merely to seize upon that description, and allot the plaintiff’s damage, without more, to the category of foreseeable harm. I do not see anything in Mount Isa Mines Ltd v Pusey (1970) 125 CLR 383, for example, which compels such a step; indeed, Windeyer J’s reasoning tends the other way.  Certainly, if the infliction of a feeling of guilt was foreseeable, as the infliction of emotional shock was in Mount Isa Mines Ltd v Pusey then the nature of the sequential symptoms would not be determinative; it would not matter what kind of psychiatric disability followed.  But the question here, of course, is whether that initial injury was indeed foreseeable.’  (footnotes omitted)

325              Mount Isa Mines v Pusey was a case in which an engineer employed in a powerhouse suffered a serious mental disturbance, of a kind normally comprehended in the term ‘schizophrenia’, as a result of observing injuries to fellow-employees who were severely burnt while testing a switch-board.

326               At 388, Barwick CJ summarised the trial judge’s findings:

‘He thought that injuries which the employer ought to have foreseen could result from the employees’ misuse of the multi-meter could include what he described as “gruesome burning injuries”.  The trial judge further found that a reasonable employer in the circumstances ought to have foreseen that a fellow employee seeing another employee suffering from such gruesome burning injuries might well suffer some psychological reaction of more than a transient kind.  He did not find that the specific psychological reaction which as he thought was the direct result of the respondent having seen Kuskopf’s injuries was foreseeable by the appellant.  However, he took the view that to establish liability it was enough that the employer ought to have foreseen the possibility of an employee suffering an injury within the broad category of injury of which the respondent’s condition was a particular manifestation.’

327               At 389, Barwick CJ said it could be held that an employer could, and ought to, foresee that the sight of a burning, or recently burnt, human might mentally disturb an employee whose proximity to the injured fellow employee ought to be foreseen.

328               The Chief Justice went on (at 390) to refer to evidence that the particular injury of the respondent ‘was a rare consequence or reaction to follow emotional excitement or stress’.  He thought that did not matter: ‘it is sufficient that the class of injury as distinct from the particular injury ought to be foreseen as a possible consequence of particular conduct in order to establish liability for damages for the particular injury’.

329               Rowe v McCartney and Mount Isa Mines v Pusey are decisions about foreseeability in tort.  However, they raise the same problem, in relation to specificity of the foreseeable damage, as occurs in relation to remoteness of damages for breach of contract.  The cases each make the point that it is not necessary that the particular damage could have been foreseen (or would have been contemplated); it was sufficient that damage of that general type was foreseeable (or in contemplation).

330               In the present case, as I have pointed out, the relevant contractual obligations are intended to provide peace of mind to existing and prospective GSJBWS employees.  It must be taken to have been within the contemplation of the parties that, if the obligations were not fulfilled, the particular employee to whom the obligations were owed might become upset, stressed and disturbed.  It is notorious that stress and disturbance of mind may lead to a psychological disability.  It may be unusual for disturbance of mind to lead to a psychological condition as severe as that suffered by Mr Nikolich; there is no evidence on the point.  However, that is a statement about the extent of the injury, not its type.  This is not a case, as in Rowe v McCartney, of a mental disability arising out of irrational guilt feelings that had only a tenuous connection with the plaintiff’s cause of action.  This is a case of a mental disability that was a particularly severe manifestation of the very type of detriment that the WWU promises were designed to prevent.

331               I reject the argument that the psychological injury suffered by Mr Nikolich was too remote to sound in damages.

(ii)        Calculation of damages

332               Two damages elements require consideration: loss of income and general damages (pain and suffering, distress etc).

333               During the three completed financial years in which he was working for GSJBWS as an Investment Adviser (2001-02; 2002-03 and 2003-04), Mr Nikolich earned a total of $455,3131; an average of $151,771 per year.  In the year 2004-05, he earned $22,923.  He has been unemployed throughout the current financial year.

334               I accept that it has not yet been possible for Mr Nikolich to resume employment.  Accordingly, he should be compensated for his loss of income during the whole of the period until now.  I calculate that loss as follows:

(a)        Two years loss of an average income of

            $151,771 ($303,542) less $22,928 received

            in 2004-05                                                                   $280,614

(b)        Interest at 9% per annum for one-year

            (representing the approximate half-way

            point of the loss in para (a)) on $280,614                      $  25,255

            Total loss to date                                                          $305,869

335               The figures upon which I have based the above calculations are pre-tax figures.  That course is appropriate since damages for lost income are subject to tax in the hands of the recipient: see Cheshire and Fifoot, Law of Contract, 8^th Australian ed, LexisNexis Butterworths, 1966 at [23.29].

336               Upon my reading of the experts’ reports, it ought to be possible for Mr Nikolich to resume work relatively soon after resolution of this case.  The experts’ reports strongly suggest that the non-resolution of Mr Nikolich’s claims against GSJBWS has been a major hindrance to his feeling able to return to work.  I, therefore, hope that Mr Nikolich will now endeavour to put this experience behind him and search for work with a new employer.  However, having been unemployed for two years, work may not be easy for him to find; and it may be necessary for him to commence part-time.  Accordingly, I think it is appropriate to allow something for loss of future earnings.

337               In assessing loss of future earnings, I will assume that Mr Nikolich’s new employment will be within the finance industry and that he will ultimately be able to command a salary equivalent to his average earnings with GSJBWS.  These assumptions may not be borne out; however, I do not have evidence that would entitle me to make assumptions less favourable to the respondent.

338               If I were to assume that it will take Mr Nikolich six months to find a new job and that, thereafter, he will work only part-time for six months, it would be appropriate to allow a figure for future loss of earnings of about three-quarters of one years’ loss of income; that is, $113,828.  However, allowance would have to be made for the fact that his earnings would be subject to income tax, whereas this aspect of his damages award will not.  Also, he would receive the money sooner than if he earned salary throughout the period.  In order to cover those factors, I would reduce the loss of future earnings award to $80,000.

339               There is a further complication.  It will be open to the respondent to appeal against this judgment.  That is its right and I do not seek to inhibit exercise of that right.  However, in calculating damages, I have to take account of the possibility of such an appeal, with a consequential further delay, probably of about six months, in resolution of the case and, therefore, the date at which it is realistic to expect that Mr Nikolich will feel able seriously to search for work.  I refer again to the medical reports that suggest a lack of resolution of his grievance has hindered the applicant’s ability to recover and thus be fit for work.  I think I should allow for the possibility that recovery will be further delayed by an appeal by adding a further $50,000 to my assessment of damages for loss of future income, but adding a proviso to my orders that this is not to be payable if the respondent does not file a notice of appeal and satisfies the judgment within 28 days.

340               The course I propose is unusual.  I emphasise that it is not taken to inhibit an appeal, or to punish the respondent for an unsuccessful appeal (if that is what it should turn out to be), but merely to prevent Mr Nikolich being compensated on a basis that turns out to be false.

341               Assessment of general damages is necessarily a matter of judgment.  Mr Nikolich was extremely distressed and disturbed by the way in which he was treated by GSJBWS’s employees.  This caused him to suffer a mental illness from which he has yet to fully recover.  His psychological condition appears to have been a major factor in the break-up of his marriage and separation from his children.  It must have adversely affected his professional reputation.  On the other hand, as I read the expert evidence, there is no reason to suppose that Mr Nikolich’s psychological disability will be permanent.  Although it may take him some time to do so, there is every prospect that he eventually will obtain employment and return to normal life.

342               In my judgment, the figure of $80,000 is an appropriate assessment of general damages.

343               I calculate Mr Nikolich’s damages for breach of contract as follows:

            (a)        past loss of earnings (including allowance for interest)    $305,869

            (b)        loss of future income $80,000 + $50,000                                  $130,000

            (c)        general damages                                                                       $ 80,000

                                                                                                                        $515,869

344               I will order that judgment be entered for that amount, with the proviso that, if no notice of appeal is filed by the respondent and the sum of $465,869 is paid to the applicant within 28 days, that payment shall be taken as full payment of the judgment sum.

345               The respondent will be ordered to pay the applicant’s costs.

I certify that the preceding three hundred and forty-five (345) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wilcox.

Associate:

Dated:              23 June 2006

Counsel for the Applicant:	Ms K T Nomchong and Ms K A Edwards
Solicitor for the Applicant:	Pamela Coward & Associates
Counsel for the Respondent:	Mr A P Coleman
Solicitor for the Respondent:	Freehills
Dates of Hearing:	10, 11, 12, 13 April & 18 May 2006
Date of Judgment:	23 June 2006