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Aug 3, 2010

Will sexual harassment cost DJs $37m?

A $37 million sexual harassment claim launched against David Jones and its former chief executive Mark McInnes has sent shockwaves through Australia's business community.

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A $37 million sexual harassment claim launched against David Jones and its former chief executive Mark McInnes may have sent shockwaves through Australia’s business community, but experts say it is highly unlikely that former David Jones publicist Kristy Fraser-Kirk will receive anything like that in a payout.

Fraser-Kirk, who launched her explosive case with a press conference in Sydney yesterday, is seeking compensation for breach of contact, loss and damages. But in a highly unusual move, Fraser-Kirk, through her law firm Harmers, is also suing David Jones, McInnes and the company’s board for punitive damages, alleging that the company engaged in misleading and deceptive conduct under the Trade Practices Act by claiming that McInnes alleged harassment of Fraser-Kirk was an isolated incident.

While Fraser-Kirk was only employed by David Jones between mid-2008 and June 2010, she is seeking punitive damages of 5% of David Jones’ profits for the seven years McInnes was chief executive (estimated at $35 million) plus 5% of McInnes’ salary during that period (estimated at $2 million).

However, legal experts have cast doubt on the size of the claim, pointing to the fact that the largest ever court judgement for s-xual harassment was $466,000, awarded in June last year in a case involving Hickinbotham Group (which recently lost an appeal against the case).

Punitive damages claims — which are awarded by a judge in situations where the court wants to set a deterrent for the community — are extremely rare in Australia.

Workplace lawyer Peter Vitale says the case can be seen as a further step towards a more American style of litigation, where there have been punitive damage payouts in the millions for s-xual harassment cases.

“It reflects some importation of an American attitude to litigation. The merits of the case often take a back seat to the perceptions of the conduct of the defendant, with punitive damages intended to punish the defendant,” he says.

“The Australian courts take a very different view to the American courts to punitive damages. It should be noted that a lot of those awards in the US are made by juries, and are often later limited on appeal.”

The decision to name the David Jones directors as defendants in the case also goes towards a trend of personally prosecuting directors.

Vitale says this can be seen in the way the Fair Work Ombudsman is chasing directors for underpayments, and in a recent case where a group of union have launched legal action against the director of a collapsed company, seeking to recover lost entitlements.

“In relation to employment matters generally we are starting to see a greater willingness to have a go at directors personally,” Vitale says.

“Lawyers are clearly trying to drive home that the directors are responsible for the conduct of the company.”

Gerard Phillips, a lawyer in Middletons’ workplace relations and safety practice, has described the case as “unprecedented” and has also questioned the sheer size of the claim.

“Normally one gets large judgements in cases or large settlements where you’ve got really two things: high earnings and total incapacity for work for a long period of time. It seems, just from reading the media, that that’s not the case here,” he told ABC radio.

“It certainly is an unprecedented claim and it’s unprecedented in terms of a claim for percentages of the business’s turnover and the executive salary.”

There may even be some risk to the strategy employed by Fraser-Kirk and Harmers. The sheer size of the claim —  in its dollar value and the fact it names David Jones’ entire board as defendants — means David Jones is likely to follow through on its promise to “vigorously defend” the case, rather than settle.

If Fraser-Kirk was to lose, that could mean she is liable to face some big legal bills, given the sheer number of lawyers who are now likely to become involved.

However, it should be pointed out that Harmers has been very successful in running big s-xual harassment cases in the past, most notably with former PricewaterhouseCoopers employee Christina Rich, who settled an $11 million harassment claim against the accounting firm for an estimated $5 million-$6 million.

Vitale expects David Jones preference would be to settle, and settle confidentially.

“There is a very good chance we’ll never, ever know what the result was.”

The launch of Fraser-Kirk’s claim, on the eve of David Jones spring/summer fashion shows, was clearly calculated for maximum impact on the company.

Her statement of claim describes in detail the chain of events that led to the alleged harassment.

Fraser-Kirk, who joined David Jones as a temporary employee in June 2008 and became a permanent staff member two months later, claims the first incident occurred on May 23 at a lunch hosted by David Jones, when she alleges McInnes urged her to try a dessert at the event by describing it as, “like a f-ck in the mouth”.

It is alleged that McInnes then placed his hand under her clothing and touched her bra strap, before inviting Fraser-Kirk back to Bondi (where McInnes lived) with “the clear implication that such a visit would be for the purpose of s-xual interc-urse”.

Fraser-Kirk says the alleged harassment took place within two metres of several David Jones middle managers, including Anne-Maree Kelly, general manager of public relations, and Fraser-Kirk’s direct superior, Tahli Koch.

Fraser-Kirk says Kelly would later confirm she had witnessed the incident and “stated that she was not surprised” as similar incidents had occurred in the past.

Kelly allegedly told Fraser-Kirk that “next time that happens, you just need to be very clear and say ‘no Mark’ and he’ll back off”.

After allegedly receiving a series of text messages with “unwelcome s-xual advances” from McInnes, Fraser-Kirk says she told Koch in late May that she did not want to attend a function in Melbourne with McInnes.

However, on June 7, she was required to attend another function with McInnes in Sydney, where McInnes again allegedly placed his hands under Fraser-Kirk’s clothing and tried to kiss her on the mouth.

The next day, McInnes allegedly called Fraser-Kirk and told her “I could have had guaranteed s-x with that brunette last night but I wanted you”.

After reporting the latest incident to her superiors, Fraser-Kirk went to Harmers, who then asked David Jones to prevent McInnes contacting Fraser-Kirk.

However, Fraser-Kirk says McInnes then attempted to contact her on seven separate occasions.

Fraser-Kirk’s statement of claim also includes details of four other unnamed women who claim to have been s-xually harassed by McInnes.

Fraser-Kirk yesterday described the incidents as devastating.

“This has been a devastating period in my life — for me personally, for my professional career, and for the effect that it is having on my family and my friends,” she said.

“I am a young woman standing here today simply because I said it wasn’t OK. Because I said that this should never happen to me or to anyone. I just wanted to be treated with respect.”

She also announced she would set up a phone hot line so other female employees at David Jones could report harassment, and would donate any money received through punitive damages to a charity that helps woman who have experienced harassment.

David Jones chairman Robert Savage, who has been named as a defendant in the case, has rejected suggestions that the board knew about a pattern of alleged s-xual harassment issues involving McInnes and has also questioned the size of Fraser-Kirk’s claim.

The case is due to come before the Federal Court on August 30.

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