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Case summary: Karzi v Toll Pty Ltd [2024] NSWCA 120 – clarification on psychological injury claims in New South Wales

Published on December 4, 2024 by Samantha De Freitas

The recent Court of Appeal decision in Karzi v Toll Pty Ltd [2024] NSWCA 120 has provided important confirmation and clarification of existing laws in New South Wales (NSW) concerning psychological injury claims.

Background

Mohd Younas Karzi, (Mr Karzi) was employed by Toll Pty Ltd (Toll) at their Erskineville depot as a dockhand on a casual basis. His role involved processing ingoing and outgoing freight for internal and domestic transport.

During the period of September 2014 until January 2015, Mr Karzi was subjected to hostile, offensive and racists remarks made by another employee.

Mr Karzi reported these incidents to senior management in November 2014. Following an investigation, the offending staff member was terminated on 9 February 2015. The Transport Workers Union became involved, which led to union members and colleagues of Mr Karzi protesting about his presence at the Erskineville depot as they alleged that Mr Karzi was a risk to their health and safety following the offending staff members termination.

As a result, Mr Karzi was transferred to the Mascot depot in mid February 2015 where he remained working until 16 March 2014.

From April 2015, Mr Karzi was made a permanent employee and returned to the Erskineville depot working in Freight Solutions.

Mr Karzi alleged that part of his psychological / psychiatric injury had arisen due to the conditions he was required to work in whilst working in Freight Solutions. He gave evidence that he was required to work in a “small cage” that was “no bigger than a dining room”. He described the work as being “dehumanizing” and “humiliating”. Whereas witness evidence from Ms Prince, a supervisor of Freight Solutions at Toll, described the area being located outside surrounded by a cyclone fence, which was approximately the size of half a football field.

From April 2015 until November 2015, Mr Karzi continued working without complaint, and did not have any time off work. He also did not seek medical treatment during this period. In November 2015, Mr Karzi ceased working due to a back injury and the cancellation of his working visa.

Mr Karzi commenced proceedings in the District Court of NSW seeking damages for his psychological / psychiatric injury suffered during the course of his employment with Toll on the basis that Toll was negligent in causing his injury.

Decision at First Instance

The primary judge accepted that Toll owed Mr Karzi a duty of care but determined that the risk of harm was not reasonably foreseeable.

The primary judge found that the issue Mr Karzi complained about was interpersonal in nature and was insufficient to establish that the employer knew or ought to have known about the risk of psychological harm.

Even if the risk of injury were foreseeable, the primary judge was satisfied that Toll took reasonable precautions to eliminate or reduce the risk of injury, by investigating the circumstances of the complaint, terminating the offending employee, and transferring Mr Karzi to a different depot, and thereby, having discharged its duty of care.

Whilst the primary judge accepted that Mr Karzi had developed a psychiatric injury, she concluded that the injury was transient in nature and not the cause of his breakdown at the end of 2015 despite Mr Karzi having been assessed with a whole person impairment of 20% as part of his workers compensation claim.

The primary judge further noted that even if liability were established, Mr Karzi would not be entitled to damages due to his ineligibility to work in Australia following his visa cancellation and the significant impact of his back injury on his work capacity.

Appeal Grounds

Mr Karzi appealed the decision on the following grounds:

1. The primary judge erred in finding the risk of psychiatric harm was not reasonably foreseeable;
2. The primary judge erred in finding the respondent had not breached its duty of care to the appellant;
3. The primary judge erred in failing to address the appellant’s case on vicarious liability;
4. The primary judge erred in finding the appellant’s psychiatric injury was transient; and
5. The primary judge erred in admitting the evidence of a witness not referenced in the respondent’s pre-filing defence.

Court of Appeal decision

The Court (Adamson JA, Leeming JA and Basten AJA agreeing, Leeming JA and Basten AJA giving separate reasons) held, dismissing the appeal that:

• The primary judge was correct to prefer the evidence of the respondent, which included well documented evidence of its investigations, to that of Mr Karzi having regard to her Honour’s credibility findings against Mr Karzi [1]. [58, 69, 74, 82]
• In respect of the foreseeability of psychiatric harm, the Court affirmed that the primary judge correctly followed and applied the principles from Koehler v Cerebos (Australia) Pty Limited [2005] HCA 15. The Courts concluded that there was nothing in the nature of the appellant’s work itself that gave rise to a risk of injury, thus whether the appellant had suffered psychiatric harm depended on whether Mr Karzi gave any indication to this effect. For a psychological injury to be considered reasonably foreseeable, there must be complaints or signs of psychological injury from the injured worker. Thus, the Court found it was correct for the primary judge to have found, in circumstances where the appellant did not complain, or exhibit any signs of psychological harm, that it was not reasonably foreseeable from Toll’s point of view that there was a risk of psychological harm.
• In respect of duty of care, the Court found that the employer acted reasonably by investigating the complaint, terminating the offending staff member, transferring Mr Karzi to different site, and referring the issue to the TWU for mediation.
• In respect of vicarious liability, the Court noted that vicarious liability was not pleaded in Mr Karzi’s initial claims. Therefore, the Court was not required to address this issue, rejecting Mr Karzi’s argument that vicarious liability need not be pleaded as it is a “proposition of law.” Had Mr Karzi wished to advance the argument that Toll were vicariously liable for the actions of certain employees, this needed to be pleaded, requiring particularisation of the name of the employee, and the conduct said to give rise to tortious liability for which Toll were vicariously liable for.
• In respect of transient psychiatric injury, the Court found that an assessment of whole person impairment as assessed as part of the workers compensation claim, does not preclude a judge from finding a psychiatric injury to be transient concerning causation in a claim for damages. Under section 326 of the Workplace Injury Management and Workers Compensation Act 1998, causation is not conclusively presumed, allowing the primary judge to determine the condition’s permanence or transience.
• In respect of the admissibility of witness evidence, the Court upheld the inclusion of additional evidence submitted outside the Pre-Filing Defence, in particular, witness statement evidence from Ms Prince (as referred to above), which was introduced as a direct consequence to remedy the additional allegations of negligence made by Mr Karzi following the service of his pre-filing statement. Namely, the statement of claim had originally pleaded the injury having occurred on 17 February 2015, but further allegations were later put that Mr Karzi’s transfer to the Mascot depot, and his return to the Erskineville depot to work in Freight Solutions had also contributed to his injury.

Key takeaways

The decision reaffirms existing laws regarding employers’ duty of care for psychological injury claims in NSW. In the absence of an inherent risk of psychological harm arising from the nature of work itself, the question of whether an employer ought to have foreseen that a worker would suffer psychological harm will depend on whether the worker gave any indication or demonstrated any signs that he or she was at risk.

An assessment of whole person impairment in respect of a primary psychological injury does not preclude a finding in negligence / work injury damages claims that an injury is transient for the purposes of determining causation.

Additionally, the case serves as a reminder to plaintiff lawyers to carefully consider their pleadings. If vicarious liability is not pleaded, the Court is then not obliged to consider it.

Please note that this article does not constitute legal advice. If you are seeking professional advice on any legal matters, you can contact Carroll & O’Dea Lawyers on 1800 059 278 or via our Contact Page and one of our lawyers will be able to assist you.

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[1] at [1] (Leeming JA); [58], [69], [74], [82] (Adamson JA).