Manifest inadequacy of damages – a question of law under the VCAT Act?

Leung v Chung [2023] VSC 38

The Supreme Court of Victoria has overturned a controversial award of damages by the Victorian Civil and Administrative Tribunal (VCAT / the Tribunal) in a sexual harassment matter. In doing so, it has provided guidance on whether an award’s ‘manifest inadequacy’ is a ‘question of law’ (and therefore, a basis for appeal), under s 148(1) of the Victorian Civil and Administrative Tribunal 1998 (Vic) (VCAT Act).

Context and first instance decision

Since the landmark decision of the Full Court of the Federal Court in Richardson v Oracle Corporation Australia Pty Ltd & Tucker [2014] FCAFC 82 (Oracle), practitioners and decision makers throughout Australia have observed an increase in the awards of damages for loss, damage and injury in sexual harassment matters.

Consistent with this trend, VCAT has also awarded greater sums of compensation for sexual harassment under s 125 of the Equal Opportunity Act 2010 (Vic) (EO Act).

Examples may be seen in: ZBL v Olivo [2021] VCAT 850; Kerkofs v Abdallah [2019] VCAT 259 and Collins v Smith [2015] VCAT 1992, where applicants received awards of over $100,000 as a consequence of the respondents’ sexual harassment.

Against this background, the VCAT decision in Leung v Chung (Human Rights) [2022] VCAT 216 (first instance decision) stood out as something of an outlier.

In that case, the Tribunal accepted that the applicant – whom it described as being in a “vulnerable position” due to her age and the fact that English was not her first language – was sexually harassed at work in contravention of s 93 of the EO Act. The Tribunal accepted that Ms Leung had been slapped on the buttocks, touched, massaged, and subjected to comments about her body: [48]-[76].

The Tribunal awarded Ms Leung a total of $10,000 in general damages. The Tribunal considered that Ms Leung’s claim for $110,000 was at “the high end of amounts awarded for sexual harassment”, but differed from the cases where such significant payments were awarded, where the harassment was “overt, included requests and demands for sexual favours, was manipulative, continuing and aggressive”: [97].

The Tribunal also refused Ms Leung’s claims for:

• special damages for lost wages, because Ms Leung had resigned, and she refused an offer to return to work: [103]; and
• aggravated damages, which the Tribunal held could not be awarded in this instance, as such damages could only be awarded as “where the circumstances are extreme or exaggerated by the conduct of the respondent”: [107]-[110].

Decision on appeal

Ms Leung subsequently sought leave to appeal against the decision on a total of six grounds, pursuant to s  148(1) of the VCAT Act. The application for leave and the appeal were heard concurrently by McDonald J.

Manifest inadequacy – a question of law?

Ms Leung’s first ground of appeal was that the award of $10,000 in general damages was “manifestly inadequate”.

Because s 148(1) of the VCAT Act only permits appeals on a question of law, the Court first had to determine whether manifest inadequacy of damages is a question of law.

Prior to this decision, there had been no judicial guidance on the question of whether ‘manifest inadequacy’ was a question of law for the purpose of s 148(1) VCAT Act.

Accordingly, McDonald J turned to two Victorian Court of Appeal decisions which assessed the question in the context of other legislation.

First, in Martin v Crimes Compensation Tribunal & State of Victoria (1997) 91 A Crim R 301, the Applicant challenged a decision of VCAT’s predecessor, the Administrative Appeals Tribunal (AAT), on the basis that an award of damages under the Criminal Injuries Compensation Act 1983 (Vic) was inadequate. The Appeal was brought under s 52 of the Administrative Appeals Tribunal Act 1984 (Vic) (AAT Act (Vic)), which limited appeals to questions of law. The Court of Appeal in that case held (at 302) that manifest inadequacy of compensation does not raise a question of law in respect of which an appeal could be brought.

Second, in Phillips v The Estate Agents Board [1988] VR 179, the Court of Appeal determined (at 182) that manifest excess or inadequacy of penalty was not a question of law for the purpose of s 52 of the AAT Act (Vic).

With the wording of s 52 AAT Act (Vic) and s 148 VCAT Act being “indistinguishable” ([17]), his Honour considered himself bound by Martin and Phillips, and concluded that the question of whether an award of damages was manifestly inadequate is not a question of law for the purposes of s 148(1) of the VCAT Act: [17].

While McDonald J considered himself bound by the Victorian authorities to reject this ground of appeal, his Honour noted with approval the decision of the Western Australian Court of Appeal in Real Estate and Business Agent Supervisory Board v Landa [2009] WASCA 191 at [24]-[25], in which it was held that the imposition of a manifestly inadequate penalty constitutes an implied error of law: [19].

His Honour also noted in obiter that if the Tribunal’s decision had been challenged on the grounds of legal unreasonableness, it is strongly arguable that the challenge would have succeeded: [21].

Other grounds

His Honour upheld all five of Ms Leung’s other grounds and remitted the matter back to the Tribunal for determination of compensation that ought to be awarded.

Key takeaways

1. The decision will likely guide the Tribunal away from making similarly low awards of damages in sexual harassment cases where significant injuries are made out. In addition to the fact that the appeal was upheld, it is noteworthy that McDonald J said that “the award of $10,000 for general damages borders on derisory”: [35].
2. In the absence of guidance from the Victorian Court of Appeal, practitioners should shy away from seeking to appeal an award of damages from VCAT on the ground of ‘manifest inadequacy’. Rather, practitioners should consider whether an inadequate or excessive award may be challenged under well-established questions of law, such as legal unreasonableness.