3 (b) That's right. In this case A has probably suffered some emotional feelings that would cause substantial discomfort - fear, anxiety, sorrow and grief are all possibilities in such circumstances.
However, in Australian law, such emotions do not constitute 'harm' for the purposes of Negligence. They are considered to be transient emotions and part of everyday life. Accordingly, if these were the only unwelcome results on A of C's conduct, A would have no action in Negligence.
But if a person suffers a sudden assault on their nervous system - seeing, hearing or touching something very distressing - and this causes a recognisable psychiatric illness, this may be recognised as harm in Australian law for the purposes of Negligence.