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Case Law Update: Duty of Care for Contractor Relationships

by Matthew Gerathy
18 February 2016
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South Sydney Junior Rugby League Club Ltd v Gazis [2016] NSWCA 8

A unanimous decision from the Court of Appeal on 9 February 2016 found no breach of an occupier's, or an employer's, duty of care to the injured labour hire plaintiff. The manner in which the Court of Appeal resolved the scope of the duty, and alleged knowledge of the occupier, will be of most interest to occupiers, head contractors, subcontractors generally, employers and their insurers. The decision further evidences the ongoing practical approach by the New South Wales Court of Appeal to occupier's liability claims.

Facts

South Sydney Junior Rugby League Club (the Club) subcontracted Sermacs Australia (Sermacs) to provide armed security, who in turn retained the plaintiff from MPS Security (MPS).  The plaintiff was injured at the Club whilst working as an armed security guard when (outside his responsibilities) he moved a large trolley used for transporting boxes of coins. In the course of doing so, he lost his grip, fell backwards and injured his back.

Proceedings were commenced against the Club, Sermacs and MPS and after MPS and Sermacs went into liquidation, the proceedings continued against their insurers.  At first instance, Rothman J found the Club and MPS liable, apportioning 75% and 25% respectively. Sermacs was not liable. Damages were assessed at almost $930,000 plus costs.

Appeal 

The Club and MPS appealed both the Judgment in favour of the plaintiff and finding Sermacs was not liable. The Court of Appeal unanimously held neither the Club nor MPS were liable to the plaintiff.  As a result, it was not necessary to determine the liability of Sermacs, or the responsiveness of its Public Liability Policy to the claim.

The most relevant aspect of this Appeal was determining the scope of the particular duty owed by each defendant and breach.  The Appeal required analysis of the

  1. contractual relationships between the parties
  2. nature of the work required of the plaintiff
  3. manner in which the plaintiff was injured; and
  4. actual or constructive knowledge of the parties of the plaintiff performing tasks outside his responsibilities.

The plaintiff ultimately failed to prove moving the trolley was part of his employment duties as an armed security guard.  Therefore to succeed against the Club, he needed to establish the Club knew, or ought to have known, he regularly did so.  This issue became the major focus of the argument before the Court of Appeal and the manner in which the Court of Appeal resolved it is key, particularly for occupiers, head contractors and subcontractors generally, employers and of course, their insurers.

The nature of the relationships between the defendants had significance to the scope of the duty of care owed by each. Although there was ambiguity about the precise terms of the arrangements between all 3 parties, the Court of Appeal found the contract between Sermacs and MPS was a labour hire arrangement. There was not enough evidence to make findings as to the terms of the contractual agreement between the Club and Sermacs.

The Club's duty of care as occupier

The plaintiff failed to establish his employment duties as an armed security guard extended to moving the trolleys.  As such he needed to demonstrate the Club knew, or ought to have known, he regularly did so, and then failed to take reasonable precautions.

Because the Club was the occupier, it clearly owed a duty of care. As observed in appellate Courts previously, the test for foreseeability is undemanding and the Court of Appeal found there was a foreseeable risk of injury for the purposes of section 5B(1)(a).

As to the requirement for the risk being not insignificant for the purposes of section 5B(1)(b), the Club's safe work method statement did not demonstrate a significant risk of moving an unladen trolley in the circumstances in which the plaintiff was injured. Although the accident may have been foreseeable, it was quite unlikely to eventuate and Justice Basten found the risk could be dismissed as insignificant.

Breach

Even if they never saw him doing so, it could reasonably be inferred lower level Club employees had knowledge the plaintiff was moving the trolleys.  As a result, the Club's duty of care where it knew, or ought to have known, the plaintiff was moving trolleys could only have required it to tell him to stop because it was inconsistent with his duties as an armed security guard.  

However the risks in moving an unladen trolley were obvious and quite unlikely to eventuate. Accordingly, the Court of Appeal found there was an absence of evidence to conclude that a reasonable person in the position of the Club's supervisor should have directed the plaintiff not to move the trolleys. 

As a result of the Court's conclusions, it was not necessary to determine the Club's actual or constructive knowledge. Nevertheless the Court of Appeal addressed this, which is of interest to all defendants in negligence cases. It found there was no evidence the lower level employees had any supervisory or managerial responsibilities within the Club and there was no evidence to suggest knowledge from any person at a relevant level of seniority in the Club management.  

The Court of Appeal stated knowledge of every employee of a company, particularly as to the activities of independent contractors, does not become the knowledge of the company. It depends upon the context.  As Spigelman CJ noted in Nationwide News Pty Ltd v Naidu [2007] NSWCA 377 "whether the knowledge of a particular person should be imputed to a corporation depends upon the scope of that person's employment".  In that earlier decision Spigelman CJ contrasted the functions of a specific employee with "a person in a supervisory position who has duties which encompass the receipt of the relevant knowledge and accordingly, could be said to have a duty to communicate and/or act upon it … that cannot be said to be the case for the other employee witnesses". 

The Court of Appeal found there was no evidentiary basis for imputing the knowledge of any of the lower level staff about the activities of the plaintiff security guard moving trolleys to the Club management.  Accordingly, in the absence of knowledge that the plaintiff was regularly moving trolleys, there should have been a finding that the duty of care owed to the plaintiff by the Club did not extend to giving a direction not to move them.  Accordingly, any finding of negligence on the part of the Club was also set aside on that basis.

MPS as the employer, duty, breach, but no causation

It is uncontroversial that an employer owes a non-delegable duty to take reasonable care to avoid exposing its employees to unnecessary risks of injury.  However it was incorrect of the lower Court to find the duty somehow equated to an obligation to ensure safety at work. Rather it is an obligation to take reasonable care to avoid unnecessary risks of injury.

The scope of an employer's duty of care depends upon the nature of the plaintiff's work. MPS provided the Claimant's services via a labour hire agreement. As such, the place of work at the Club was not under MPS' control and no MPS supervisor ever visited the Club to inspect the premises. In the circumstances, MPS was found to have breached its duty of care by failing to take reasonable steps to investigate the plaintiff's workplace where he had been placed on a semi-permanent basis.

However this breach was not causative because there was nothing about the Club's premises which gave rise to any particular risk of injury and the risk would not have been identified in any reasonable inspection. Further, had the system of work been explained, it would not have included the movement of trolleys. Accordingly, any steps reasonably expected of an employer in these circumstances would not have given rise to further instructions.  Therefore, the Court of Appeal also allowed the employer's appeal.   

Conclusion

It is unusual for both an occupier and employer to be found not liable in proceedings for damages arising out of a labour hire workplace accident. Although an employer may have no control over a workplace their employees are being sent to, it nevertheless retains a non-delegable duty of care to its employees, the discharge of which may require it to inspect the premises and work practices. In these proceedings the employer escaped liability because of the way the plaintiff was injured. An inspection of the premises would not have identified the risk of injury.

Makinson d'Apice consider the most relevant points for defendants to take away from the decision is both the continuing practical approach by the New South Wales Court of Appeal in occupier's liability cases, and confirmation that knowledge of a risk of injury by an employee of a defendant does not of itself translate to knowledge of the defendant. It depends upon the context.