Makdessi v Millennium Security Specialist Services Pty Ltd (NSWPICPD 2025)

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Key Takeaways

In circumstances where a third party or host employer is involved in implementing a s11A action, the employer will need to adduce evidence of the contractual obligations between the employer and third party as well as evidence that the third party’s actions were also reasonable to successfully raise a s11A defence.

Brief Facts

The worker was employed by Millennium Security Specialist as a security guard. He was placed at the host employer to carry out his duties.

There was a robbery at the shopping centre at which time the security cameras were switched off. As a result, the worker and another security guard were accused by the host employer of being complicit in the robbery and they were stood down with full pay while an investigation was undertaken. Following the investigation, the worker was exonerated, however at the host employer's request, he was not allowed to return to work at the shopping centre. The employer did offer to place the worker at a different site.

As a result of these events, the worker alleged that he suffered a psychological injury and made a claim for workers compensation.  

Liability for the worker’s claim was disputed on the basis that his psychological injury was wholly or predominantly due to the employer’s reasonable action with respect to discipline and transfer.

The worker sought to challenge this dispute in the Personal Injury Commission (PIC). The matter was heard at arbitration before Member Catherine McDonald. Member McDonald found in the employer’s favour and determined that the worker’s injury was wholly caused by reasonable action with respect to discipline.

The worker appealed the Member’s decision.

Judgment

The appeal was heard by Acting Deputy President Geoffrey Parker.

The worker relied on 18 grounds of appeal, which were summarised as follows:

Overall, the common thread in the errors was a failure to properly apply the test under s11A which creates a positive onus on the [employer] to prove reasonableness.

One of the primary grounds for appeal was that it was not open to the Member to find that the employer’s actions were reasonable on the evidence before her. The worker argued that the Member had to consider the actions of the host employer in order to determine whether the actions of the employer were reasonable.

The employer did not put into evidence the contract between it and the host employer, statement evidence from relevant employees at the host employer or relevant written correspondence regarding the robbery and investigation.

In the absence of this, ADP Parker found that there was no evidence to support the Member’s conclusion that contractually the host employer was authorised to give directions to the employer, and that the employer was obliged to comply with these directions.

ADP Parker considered and applied the Court of Appeal decision in Jeffery v Lintipal Pty Limited [2008] NSWCA 138 (Jeffery) and referred to the following reasoning by Basten JA:

... Section 11A is a provision which removes a right to compensation otherwise available in respect of a psychological injury arising out of or in the course of employment. It is concerned with reasonable action on the part of an employer which may have such a consequence. The reasonableness of the action should properly be assessed by reference to the facts giving rise to the transfer, rather than the contractual relationship between the employer and a third party. The contractual relationship is not, of course, irrelevant: it may mean that the conduct of the third party becomes a relevant factor in assessing the reasonableness of the transfer

Applying the decision in Jeffery ADP Parker, noted that there was no evidence as to the matters taken into consideration by the host employer to initially suspend the worker and then exclude him from the shopping centre.

It was noted there was some ‘tension’ between the decisions of members of the Court of Appeal in Jeffery. Basten JA was of the view that an employer cannot establish reasonableness pursuant to s11A unless it establishes that the third party has acted reasonably. In contrast, Hodgson JA concluded that the employer’s conduct can be reasonable even if the third party has not acted reasonably, provided the employer has itself acted reasonably in assessing the validity of the direction provided by the third party.

ADP Parker found that the employer would fail on the application of either view, as there was no evidence as to the contractual basis for the direction given by the host employer to the employer, and there was no evidence as to the consideration taken by the host employer in suspending the worker.

In these circumstances, it was found that the employer had not discharged its onus to establish that its actions were reasonable.

Implications

This decision serves as a timely reminder that if a third party or host employer is involved in implementing one of the s11A actions, then evidence should be obtained to confirm the contractual relationship between the employer and third party, as well as evidence to establish the reasonableness of the third party’s actions.