'Nervous Shock': Extended Duty of Care for Employers

by Miriam Morgan-Hobbs

Introduction

The High Court's decisions in Tame v New South Wales (Tame) and Annetts v Australian Stations Pty Limited (Annetts) dispensed with two of the special rules that previously existed to limit liability for nervous shock, namely, the requirements of 'sudden shock' and 'direct perception'. In those cases, the court rejected these rules as being too rigid, preferring the flexibility of 'reasonable foreseeability'. (See 'Nervous shock: what limits remain' in the AAR Annual Review of Insurance Law 2002). It was foreshadowed that this was likely to expand liability for nervous shock claims. The recent decision of Gifford v Strang Patrick Stevedoring Pty Ltd confirms this.

The facts

The respondent (Strang) employed Mr Barry Gifford (Mr Gifford) as a wharf labourer and wharf clerk. On 14 June 1990, in the course of his employment, Mr Gifford was killed when a forklift reversed over him, crushing him to death immediately. Mr Gifford's estranged wife and his children, aged 14, 17 and 19, were informed of the accident later the same day. They did not see the deceased's body. The Gifford children did not live with the deceased but maintained a close and loving relationship with him, with Mr Gifford visiting them almost daily.

Strang admitted that its negligence caused the accident. Mrs Gifford brought a claim against Strang on behalf of herself and the three children for damages for nervous shock. After preliminary argument in the lower courts, the Court of Appeal determined that the case should be decided on ordinary common law principles and that these had not been displaced by certain statutory enactments3 . It further held that, as the appellants had not seen the incident or its immediate aftermath, they were precluded from bringing a nervous shock action.

Subsequently, in Tame and Annetts, the High Court dispensed with the requisites of 'sudden shock' and 'direct perception of events' for establishing nervous shock cases. Therefore, the task for the High Court in this case was to apply the revised principles to the facts of this case.

High Court ruling

The High Court allowed the appeal, ruling that an employer owes a duty of care to take reasonable steps to avoid psychiatric injury to the children of their employees. In finding that Strang owed the Gifford children a duty of care, the High Court judges confirmed that the revised test for nervous shock cases requires a consideration of reasonable foreseeability. Justice McHugh affirmed Lord Atkin's renowned neighbourhood principle in the context of a nervous shock case:

"... would a reasonable person in the defendant's position, who knew or ought to know of that particular relationship, consider that the third party was so closely and directly affected by the conduct that it was reasonable to have that person in contemplation as being affected by that conduct?"

The High Court considered that by reason of the closeness of relationship, the children of an employee form an obvious category of people to whom an employer owes a duty. That the children no longer lived with their father was irrelevant as there was evidence of a close and loving relationship. Chief Justice Gleeson and Justices McHugh and Hayne all made very strong obiter comments that in nervous shock claims at common law, the reasonable foresight of the defendant extends to all those with whom the victim has a close and loving relationship.

Further, the High Court considered that, while 'direct perception' of the incident or its immediate aftermath was no longer an indispensable element in a nervous shock claim, it will still be relevant, particularly where there is no close relationship between the plaintiff and the injured person when considering 'reasonable foreseeability'.

While all judges considered that more than foreseeability is required to establish a duty in nervous shock actions, there was a divergence of opinion on what control factors should replace 'direct perception' and 'sudden shock'.

Justices Kirby, Gummow and Hayne considered inconsequential the lack of reliance of the children on the employer to protect the employee in this case, a factor that was significant in Annetts. Justice Hayne also considered irrelevant the distinction between a parent's reaction to losing their child compared to a child's reaction to the loss of a parent, and also the different reactions of infant and adult children. Justice Callinan reiterated that the plaintiff's normal fortitude should be a requisite in any nervous shock action.

The case will now go back to the District Court, as the Gifford children need to establish whether the duty was breached and whether they have actually suffered a recognisable psychiatric illness before they can succeed in their claim. (Mrs Gifford failed in her claim as she was unable to establish this).

Conclusion

This decision applies the principles established by the High Court's recent landmark decisions, Annetts and Tame. It demonstrates that a duty may be found to be owed to those persons in a close relationship with an injured employee, despite them not directly perceiving the event. The closeness of the relationship can mean that it was reasonably foreseeable that the employer's conduct could cause them to suffer psychiatric harm.

This area of the law is still developing and the boundaries are uncertain. While previous control factors have now been dispensed with, it is apparent that the High Court is alert to the need to retain or identify appropriate limits on nervous shock claims. In the absence of statutory intervention, the nature of those factors should become clearer in cases to come. In the meantime, employers should be aware of, not just their duty of care to their employees, but also their potential liability to persons in a close relationship with their employees, particularly an employee's children.


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