Yarzabal v Victorian WorkCover Authority (2026) VCC 3

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Case summary

The worker, a former police officer, alleged that she was subjected to bullying while working at a police station in Melbourne between 2018 and 2021, resulting in psychiatric injury. She lodged a WorkCover claim in March 2021 and ceased working as a result of her claimed condition. Her employment was terminated in July 2023, and she began receiving an Emergency Services pension. She later opened a small shop selling plants.

The worker brought an application for ‘serious injury’, seeking to access common law damages for pain and suffering and economic loss. Under the definition of ‘serious injury’ in the Workplace Injury Rehabilitation and Compensation Act 2013 (WIRCA), she needed to demonstrate that she suffered a permanent severe mental or permanent severe behavioural disturbance. The worker alleged various significant consequences arising from her condition, including depression, anger, social withdrawal, anxiety around middle-aged men and police officers, sleep disruption, relationship strain with her husband and child, and the loss of her career.

The Victorian WorkCover Authority (VWA) disputed the worker’s ‘serious injury’ application, primarily challenging her reliability and credibility. Accordingly, she made an application to the Victorian County Court for leave to issue proceedings for damages, and the dispute proceeded to hearing in September 2025.
At the hearing, the VWA presented surveillance footage taken over several days showing the worker appearing happy and relaxed while attending a baby shower with police officers present and visiting the Melbourne CBD during a busy Christmas period with large crowds and a police presence. This footage contrasted with her sworn statement describing severe social limitations and triggers.

The extensive medical evidence presented at the hearing included the following:

• Treating GPs and psychologists, who had diagnosed adjustment disorders, anxiety, and depression, with some opining she was totally unfit for work or had very limited capacity. One GP uniquely diagnosed PTSD, and this opinion was ultimately rejected.
• Independent medical examiners instructed by the worker’s lawyers (psychiatrists and occupational specialists), who based their opinions largely on the worker’s self-reporting, concluding she had very limited work capacity or had reached the end of her working life.
• The VWA’s psychiatrists, who found the worker had a mild adjustment or depressive disorder in partial remission and possessed the capacity for alternative full-time employment outside the police force.

Decision

Judge Magee delivered judgment on 21 January 2026. The Court granted leave for the worker to issue proceedings for pain and suffering damages but dismissed the application for economic loss damages. The rationale behind the decision rested heavily on the Court’s assessment of the worker’s reliability, and the relevant tests for ‘serious injury’ under the WIRCA.

Pecuniary loss dismissal

The Court found the worker had not met the required threshold of sustaining a permanent loss of earning capacity of 40% or more. Judge Magee found the surveillance footage significantly undermined the worker’s reliability regarding her claimed restrictions.

Consequently, the Court treated her evidence with caution and preferred the opinions of the VWA’s medical experts as being more realistic. The Court concluded the worker retained the capacity to work full-time in alternative roles that did not require further qualifications, which exceeded the 60% earning capacity threshold defined in the Act.

Pain and suffering grant

Despite the concerns regarding her reliability, especially in relation to her reported social limitations and anxiety, the Court accepted that her psychiatric condition was permanent. In a finely balanced decision, the Court determined that the permanent consequences of her injury, including the loss of her career, which was a significant part of her identity and dream job, met the ‘severe’ test required to establish an entitlement to pain and suffering damages. The Judge cited previous case law (including Schotten v VWA) which confirms that the loss of a passion or dream career could be a pivotal pain and suffering consequence in meeting the ‘severe’ threshold. The combination of career loss, ongoing treatment requirements with a psychologist and psychiatrist, and permanent medication, albeit modest, pushed the consequences into the severe range.

Implications

• A worker’s credibility and reliability are central to a ‘serious injury’ application. Inconsistencies between a worker’s self-description of impairment and objective evidence, such as surveillance footage, can significantly weaken a worker’s case and the medical opinions based on their subjective reporting.
• The thresholds for pain and suffering and economic loss differ. This case highlights that failing the economic loss test (40% permanent loss of earning capacity) does not automatically mean a worker fails the test for pain and suffering (‘severe’ injury).
• Loss of vocation can be a ‘severe’ consequence. The loss of an intended career that was a core part of a person’s identity or passion can, in combination with other ongoing symptoms, be sufficient to meet the ‘severe’ injury test for pain and suffering damages.
• The Court weighs different medical opinions according to their credibility. Here the court heavily scrutinised opinions that were overly pessimistic, lacked a path of reasoning, or relied entirely on subjective, unverified patient history that contradicted other evidence. Opinions from treaters or IMEs that do not acknowledge a patient’s current work status or objective functioning may be disregarded.