A recent decision by the Full Court of the Supreme Court of South Australia highlights the cost of common law claims.
Facts
The worker, Mr Sayed Anwar, was working in a potato packing plant operated by Mondello Farms Pty Ltd (‘Mondello Farms’), pursuant to a labour-hire agreement. At the time of the injury, Mr Anwar was 21 years of age.
Mr Anwar’s duties required him to, amongst other things, remove 20 kilogram bags of washed potatoes from a conveyor belt and place them manually on a pallet. On 11 April 2005, at which point he had only been working at the plant for just over a week, his hand became caught in a gap between the belt and a roller. His hand was caught for approximately 10 minutes, before it could be extracted using tools.
As a consequence of the incident, Mr Anwar suffered burns to the back of his hand and underwent plastic surgery on 5 May 2005, in which a skin graft was performed.
In September 2005, Mr Anwar suffered a psychotic episode and was subsequently diagnosed as suffering from schizophrenia. He then later developed Type II Diabetes.
District Court
The Trial Judge, His Honour Judge Cuthbertson, found that Mondello Farms was liable in negligence and breach of statutory duty.
His Honour then went on to find that Mr Anwar’s schizophrenia had been caused by the stress he suffered as a result of the hand injury and that his schizophrenia was the primary cause of his inability to work.
Judge Cuthbertson assessed the damages suffered by Mr Anwar as:
Past loss - $574,825.42.
Future loss - $1,503,057.50.
Included in this assessment was an amount of $11,032 for future treatment of Mr Anwar’s diabetes. This amount was fixed after His Honour had already reduced it by 50% to account for his finding that Mr Anwar would have developed diabetes by the age of 50 years in any event.
Importantly, in applying the statutory test set out in section 33 of the Civil Liability Act 1936 (SA) (‘the Act’), Judge Cuthbertson found that Mondello Farms did not owe Mr Anwar a duty of care for the mental harm caused by the hand injury as a reasonable person in the Mondello Farms’ position would not have foreseen that a person of normal fortitude in Mr Anwar’s position would have suffered a psychiatric illness as a consequence of the hand injury. His Honour stated that ‘This was an extreme reaction by an extremely vulnerable and predisposed individual’.
Accordingly, His Honour did not award damages for the psychiatric component of Mr Anwar’s claim, and instead only awarded damages in the amount of $18,042.
His Honour went on to state that if Mondello Farms was liable for the psychiatric component of the claim, he would have awarded damages in the amount of $1,679,415.77, which included a reduction of 30% to account for the likelihood that Mr Anwar would have developed schizophrenia in any event.
Supreme Court
The issues on appeal were:
- Was Mondello Farms’ breach of duty a cause of Mr Anwar’s schizophrenia, having regard to section 34 of the Act?
- Was the consequential mental harm (mental harm arising as a consequence of a physical injury) reasonably foreseeable?
- Did the trial judge err in reducing his calculation of the damages he would have awarded to Mr Anwar, had he found Mondello Farms liable for his schizophrenia, by 30%?
In his judgement, Justice Stanley (Kourakis CJ and Gray J concurring) stated that the trial judge had placed too much importance on the nature of the mental harm suffered by Mr Anwar, namely the fact that he had developed schizophrenia.
Their Honours found that the Court was required to consider 4 factors in relation to determining liability pursuant to section 33 of the Act:
- Whether the plaintiff has in fact suffered mental harm.
- The Court must conduct its enquiry from the viewpoint of a ‘reasonable person in the defendant’s position’. This, the Court stated is ‘the reasonable person possessed of the knowledge, experience, and capacity for care and foresight of, or to be expected of, the defendant’.
- Whether it is reasonably foreseeable by that defendant that a person of normal fortitude in the plaintiff’s position would suffer a psychiatric illness in the circumstances of the case.
- The Court must have regard to the use of the indefinite article. It is only necessary for the plaintiff to establish that it was reasonably foreseeable that they would have suffered any diagnosable psychiatric injury, rather than the specific injury that had been suffered.
It is this last point that proved to be the key difference, as their Honours found that ‘a reasonable person in the defendant’s position, namely, the operator of a potato processing factory using unguarded machinery which it knows has the potential to do physical harm of varying levels of severity, engaging unskilled manual labourers from Afghanistan of normal fortitude who suffers injury to his hand, of sufficient severity to require surgery, when trapped in unguarded machinery, might suffer a psychiatric illness, such as anxiety or depression.’.
Justice Stanley (Kourakis CJ concurring) then went on to consider the medical evidence and found that although an award of damages in relation to Mr Anwar’s schizophrenia should be made, a reduction of 30% was manifestly inadequate as the medical evidence established that Mr Anwar would have likely gone on to develop schizophrenia regardless of the hand injury. Accordingly, their Honours reduced the award of damages by 50%.
On this basis, the appeal was allowed and the damages awarded to Mr Anwar were increased from $18,042 to $1,331,869.87.
Lessons for Businesses/Employers
Businesses that commonly use contractors of labour hire companies need to be particularly mindful of their work health and safety obligations as they are not afforded the protection of the restrictions placed on employees bringing a claim for common law damages by the Return to Work Act 2014 (SA); which requires a worker to establish a level of whole person impairment in excess of 30% (for either physical or mental injury – not both) arising from the work injury before they can bring a claim against their employer.
Businesses operating in “high-risk” industries should consider arranging periodic work health and safety audits to ensure that they are placed in the best position to rebut any allegations of negligence if somebody does suffer a workplace injury.
Close attention should also be paid to:
- the terms of the contract under which labour is provided to your business to ensure that you are not incurring undue risk and liability; and
- ensuring that the right insurance policies are purchased by your business that offer the coverage in the event of a workplace injury to avoid unpleasant surprises when a claim is made and coverage refused.
Businesses should consult with their legal providers to ensure that their business arrangements minimise the risk of a substantial claim for damages being brought against them by an injured worker.