Understanding Psychological Injury Claims in NSW: Insights from Karzi v Toll Pty Ltd

The recent Court of Appeal decision in Karzi v Toll Pty Ltd [2024] NSWCA 120  confirmed and clarified much of the existing law in NSW regarding psychological injury claims.

Mohd Younas Karzi was employed by Toll in their Erskineville depot. Between around September 2014 and January 2015, Mr Karzi was exposed to hostile and racist comments made towards him, by another staff member of the Respondent. Mr Karzi notified his team leader about these comments on (at least) one occasion in November 2014. The complaint was investigated and the staff member who made these comments was ultimately terminated from their employment as a result. Mr Karzi was also transferred to the Mascot depot, before being returned to Erskineville. Mr Karzi stopped work in November 2015 following a back injury and the cancellation of his working visa.

This case involved an appeal from the District Court. The primary judge found that while Mr Karzi was owed a duty of care, the injury was not reasonably foreseeable, and that the Respondent did not breach their duty. The judge also commented that even if liability was made out, Mr Karzi would not be entitled to damages, as he was not entitled to work in Australia due to the cancellation of his visa, and that his work capacity was significantly impacted by his back injury.

Mr Karzi appealed the decision on a number of grounds as follows:

• That the primary judge erred in finding the risk of psychiatric harm was not reasonably foreseeable.
• That the primary judge erred in finding the respondent had not breached its duty of care to the appellant.
• That the primary judge erred in failing to address the appellant’s case on vicarious liability.
• That the primary judge erred in finding the appellant’s psychiatric injury was transient.
• That the primary judge erred admitting the evidence of a witness who was not referred to in the respondent’s pre-filing defence.

The Court of Appeal dismissed the appeal, finding the following:

That the primary judge erred in finding the risk of psychiatric harm was not reasonably foreseeable

The Court of Appeal’s decision confirmed that in circumstances where the nature of the injured workers work does not inherently give rise to risk of psychiatric harm, the existing law from Koehler v Cerebos (Australia) Pty Limited [2005] HCA 15 applies. That is, for a psychological injury to be considered reasonably foreseeable by an employer, there should be either complaints (or reports) made by the injured person, or signs of psychological injury exhibited by the injured worker.

Although, some members of the Court recognised that injured worker making a complaint about his colleague’s conduct was adequate for the respondent to be considered on notice of the risk of psychological injury.

That the primary judge erred in finding the respondent had not breached its duty of care to the appellant

The Court of Appeal found that the employer had done all that was reasonable to resolve Mr Karzi’s issue by investigating the complaint, terminating the offending staff member, transferring the injured worker to a different location and/or referring the issue to the TWU for mediation.

That the primary judge erred in failing to address the appellant’s case on vicarious liability

There was no allegation of vicarious liability included in Mr Karzi’s pleadings, and as such, the Court was not required to deal with this issue. The appellant’s argument that vicarious liability did not need to be pleaded, because it is “a proposition of law” was not accepted.

That the primary judge erred in finding the appellant’s psychiatric injury was transient

The Court of Appeal found that an assessment of whole person impairment does not prevent a Judge from finding that an injured worker’s psychiatric injury was transient with respect to causation. That is, s326 of the Workplace Injury Management and Workers Compensation Act 1998 allows for the following matters to be conclusively presumed to be correct:

1. the degree of permanent impairment.
2. the degree of impairment due to a pre-existing condition.
3. that the impairment is permanent.
4. that the degree of impairment is ascertainable.
5. the nature and extent of the loss (in respect of hearing loss cases).

The Court noted that causation is not included in this list, and therefore, it was open to the primary judge to find that the condition was not permanent (or was “transient”), for the purpose of establishing causation in a negligence claim.

That the primary judge erred admitting the evidence of a witness who was not referred to in the respondent’s pre-filing defence

The Court found that it was appropriate that additional evidence was submitted outside of the Pre-Filing Defence, as the additional claims made by the plaintiff were made after the service of this document.

What does this mean for psychological injury claims in NSW?

• This decision does not change the existing law in relation the employer’s duty of care with respect to psychological injury claims in NSW. It confirms the existing law, that an injury is only reasonably foreseeable to an employer, if the injured worker reports it or exhibits signs of psychological injury.

• It is also a reminder to plaintiff lawyers that they are bound by their pleadings, and if vicarious liability is not pleaded, the Court is not obligated to consider this. Additionally, the Court confirmed that the parties are bound by the contents of their Pre-Filing documents, but if additional matters are raised outside of those pleaded, the Defendant is entitled to obtain evidence to challenge those matters.

• The Court of Appeal considered that it was open to the primary judge to find that the condition was “transient” for the purpose of establishing causation, despite the Workers Compensation Commission’s findings regarding the permanent impairment.

How can Stacks Goudkamp lawyers help you?

If you have suffered a psychological injury at work, the expert workers compensation lawyers at Stacks Goudkamp are here to help. Our team can guide you through your entitlements under the workers compensation scheme and ensure you receive the support you need. We will arrange for an independent medical examiner to assess your whole person impairment, ensuring a thorough and impartial evaluation of your condition. Reach out to Stacks Goudkamp for dedicated and comprehensive legal assistance with your workers compensation claim.