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Employer negligence for psychological injury – foreseeability of risk and duty of care

  • Newsletter Article
  • Published 24.06.2024

Karzi v Toll Pty Ltd (NSWCA 2024)

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Key Takeaways

Absent an inherent risk of psychological harm arising from the nature of the work itself, the question of whether an employer ought to have foreseen that a worker would suffer psychological harm depends on whether the worker gave any indication or demonstrated any signs that he or she was at risk.

In circumstances where the test for foreseeability is satisfied thereby giving rise to a duty of care on the part of the employer, that duty will be discharged if the evidence confirms that the employer did all that it reasonably could to eliminate or reduce the risk of injury.

An assessment of whole person impairment (WPI) in respect of a primary psychological injury issued in accordance with s326 of the Workplace Injury Management and Workers Compensation Act 1998 (1998 Act) does not preclude a finding that an injury is transient for the purpose of determining causation in negligence.

An employer will not be in breach of s318 of the 1998 Act for seeking to introduce evidence in proceedings that was not included in its Pre Filing Defence (PFD) if that evidence is a response to a worker’s allegations not pleaded in the Pre Filing Statement (PFS).

Brief Facts

The worker was employed as a dock hand on the afternoon shift at its Erskineville depot. His duties required him to process freight for international and domestic transport.

Between September 2014 and January 2015 the worker was subjected to offensive and racist remarks by a co-worker. He made several complaints to senior management in regards to his co-worker’s conduct.

Significantly, the evidence of the employer’s witnesses was that the worker’s demeanour was concerned yet calm when reporting the situation to management. He did not report or display conduct indicative that the behaviour of which he complained was having an adverse impact on in his mental state consistent with an emerging psychological disorder.

The worker’s complaint prompted the employer to undertake an internal investigation, the outcome of which resulted in the offending co-worker’s dismissal. This action prompted members of the Transport Workers’ Union (TWU) to protest against the worker remaining at the Erskineville site.

In response, the employer transferred the worker to its Mascot depot. Later in 2015 the worker’s visa application was refused and he sustained a lower back injury, both of which prevented him from continuing to work for the employer. He decompensated at this time.

The worker commenced proceedings in the District Court of NSW seeking work injury damages. He asserted that his employer owed him a duty of care to protect him from the risk caused by the conduct of his co-workers and had breached that duty by failing to take reasonable precautions to prevent that conduct thereby resulting in him suffering psychological injury.


The Court noted that it was common ground between the parties that the employer owed the worker a duty of care and the risk of harm was the risk of psychological injury caused by the actions of the worker’s co-workers.

In dismissing his claim in negligence, Olsson SC DCJ (the primary judge) determined that the risk of the worker suffering psychological injury was not reasonably foreseeable. In this instance there was nothing in the worker’s conduct which either expressly or impliedly should have indicated to his employer that he was at risk of psychological harm.

Her Honour concluded on the evidence that the issue of which the worker complained and brought to the attention of management was “interpersonal” and not sufficient to establish that the employer knew or ought to have known that there was risk of psychiatric harm.

If the risk of injury was found to be foreseeable, her Honour was satisfied that the employer took reasonable precautions to eliminate or reduce that risk in any event by taking action in response to the worker’s complaints in accordance with its own internal policies and procedures “swiftly, fully and robustly”, thereby discharging its duty of care.

Further, the primary judge accepted that the worker developed a psychiatric injury in response to events at the workplace though concluded the injury was “transient” in nature and not causative of his eventual decompensation in late 2015 despite having established a 20% WPI in accordance with s326 of the 1998 Act.

In so finding, her Honour noted that the worker continued to work well throughout 2015 whilst dealing with an ongoing dispute regarding his immigration status and difficulties in his marriage. Further, there was no evidence that the worker had sought treatment for his mental state in response to events at his workplace prior to suffering a “breakdown” in late 2015 suggesting that his decompensation related to other causes.

The worker challenged the findings of the primary judge and the key issues on appeal discussed below were whether the primary judge erred in:

  1. Finding the risk of psychological injury was not reasonably foreseeable
  2. Finding the employer had not breached its duty of care
  3. Finding that the worker’s psychological injury was transient
  4. Admitting late evidence not included in the employer’s PFD

On appeal 

The NSW Court of Appeal (Adamson JA Lemming JA and Basten JA) unanimously dismissed the appeal.

To begin, Adamson JA concluded that the primary judge had correctly applied the foreseeability test for psychological injury espoused by the High Court in Koehler v Cerebos (Australia) Pty Ltd (HCA 2005) as there was nothing in the nature and extent of the work being undertaken by the worker itself which gave rise to a risk of psychological harm.

In such circumstances, the appropriate enquiry is whether the worker gave any indication that he was at risk of psychological harm to which his employer was required to respond. The primary judge had provided sufficient reasons as to why she had found that the worker had not displayed conduct that would have alerted his employer that he was at risk in this instance.

Similarly, the Court of Appeal agreed with the finding of the primary judge that the employer had discharged its duty of care in any event. Adamson JA noted that by undertaking a well-documented investigation, its dismissal of the offending co-worker, referring the matter with the TWU to mediation and re-locating the worker, the employer had done “all that it could reasonably do” to resolve the issue.

Notably, the Court of Appeal dismissed the worker’s challenge to the primary judge’s determination of the transient nature of the psychological injury. In so doing, Adamson JA stated that a Medical Assessment Certificate (MAC) issued under s326 of the 1998 Act was evidence, but not conclusive evidence, of causation. Accordingly, the primary judge was entitled to find that the work related injury was transient and there was no statutory impediment to her finding as she did.

The worker also failed in his submission that the primary judge fell into error when admitting evidence in the employer’s case which was not included in the PFD, contrary to s318 (1)(d) of the 1998 Act.

Adamson JA noted that contrary the requirements of s315 of the 1998 Act, the worker failed to file a statement of evidence with his PFS on which he proposed to rely in support of his claim. The employer then proceeded to file its PFD which responded the worker’s draft statement of claim.

At the hearing, the worker sought to rely on evidence not disclosed in his PFS and which had not been addressed by the PFD filed for the employer. In the opinion of Adamson JA, the employer’s “omission” was a direct result of the worker’s non-compliance with s315 of the 1998 Act. As the worker was ultimately permitted to rely on evidence not disclosed the pre-filing stage, procedural fairness required that the employer be permitted to rely on late evidence in response.


This decision confirms that when considering liability in negligence for a psychological injury, the Court will have regard to the nature of a worker’s duties when determining whether the risk of harm was reasonably foreseeable thereby giving rise to a duty of care.

Where the duties being undertaken by a worker are not in themselves of a nature to give rise to a risk of psychological harm, foreseeability will hinge on an examination of whether the worker gave any indication or demonstrated any signs that he or she was at risk of injury. The Court of Appeal in this decision has confirmed that complaints and concerns raised by a worker to his or her employer will not in themselves be sufficient to hold that the employer was or should have been on notice of a risk of psychological harm.

The decision of the primary judge as confirmed by the Court of Appeal also serves as a useful insight into the scope or content of the duty owed by an employer to an employee at risk of psychological injury arising in the context of workplace conflict.
The decision suggests that where an employer can demonstrate that it responded to the subject risk “swiftly, fully and robustly” and in accordance with its own policies and procedures, it may be able to satisfy the Court that it did “all that it reasonably could” to eliminate or reduce the risk of injury thereby discharging its duty of care.