Recent case examples of principal contractor and sub-contractor liability on construction sites

AF Concrete Pumping Pty Ltd v Ryan & Ors [2014] NSWCA 346

HEADNOTE

[This headnote is not to be read as part of the judgment]

The first respondent Mr Ryan was injured while engaged in the construction of a swimming pool on the seventh floor of a building. The principal contractor subcontracted with Reliance Pools Pty Ltd (Reliance Pools) to construct the pool and AF Concrete Pumping Pty Ltd (AF Concrete) (the appellant) to pump concrete from ground level to the seventh floor. Mr Ryan was an employee and director of Reliance Pools. In turn, Reliance Pools engaged C&J Concrete Sprayers Pty Ltd (C&J Concrete) to undertake the spraying of concrete to form the walls and floor of the pool.

On the morning of 15 July 2008 most of the concrete spraying was complete. An employee of C&J Concrete indicated that AF Concrete should commence “blowing” the concrete pipes through which the concrete was pumped from ground level to the seventh floor. “Blowing” the pipes involved clearing them of concrete by inserting a sponge ball in the pipes at ground level and forcing it through them by the use of compressed air. On the seventh floor, a flexible hose was connected to the pipe at one end and secured to the floor of the pool at the other end. An employee of AF Concrete detached the end of that hose which was fastened to the end of the fixed pipe and attached a hose with a larger diameter, the other end of which was left hanging over the edge of the pool and was unsecured.

Mr Ryan attempted unsuccessfully to ask the AF Concrete employee to secure the hose. He then approached the pool to ensure that the hose was tied down again. Unknown to the employees of Reliance Pools and C&J Concrete, AF Concrete had already commenced the process of blowing the pipes. As Mr Ryan stopped and stood at the edge of pool, concrete burst out of the pipe and the pipe flicked around. The sponge ball and concrete shrapnel struck him in the face. He suffered a traumatic brain injury and injuries to his face and head.

The primary judge found that AF Concrete was negligent, that Reliance Pools and C&J Concrete were not negligent, and that there was no contributory negligence on the part of Mr Ryan.

The issues for determination on appeal were:

(i) Whether the primary judge erred in finding that Reliance Pools was not negligent;

(ii) Whether the primary judge erred in finding that for the purposes of s 151H of the Workers Compensation Act 1987 (NSW), Mr Ryan’s degree of permanent impairment was 29%;

(iii) Whether there was an error in the exercise of the discretion as to costs.

The Court held (per Meagher JA, Leeming JA and Sackville AJA agreeing), dismissing the appeal:

In relation to (i)

  1. Reliance Pools, by Mr Ryan, discharged the duty of care which it owed to its employees to monitor AF Concrete’s activities so as to guard against the consequences of AF Concrete’s carelessness in the performance of its operations.
  2. Reliance Pools did not fail to provide a safe system of work for its employees. AF Concrete was responsible for the concrete pumping and pipeline blow out and cleaning. Reliance Pools was not required to devise or control AF Concrete’s system of work in the performance of these tasks. It also did not have the power to do so.
  3. Reliance Pools did not breach the duty which it owed to ensure reasonable care would be taken for the safety of its employees. Reliance Pools and AF Concrete had contracted to perform operations which were interdependent. AF Concrete was not a subcontractor of Reliance Pools. Reliance Pools’ employees were not working under a system of work devised by AF Concrete. Nor were they subject to AF Concrete’s supervision. AF Concrete’s failure to adopt a safe system of work was not a breach by Reliance Pools of its duty to adopt a safe system of work for its own employees.

Czatyrko v Edith Cowan University [2005] HCA 14; 214 ALR 349; Leighton Contractors Pty Ltd v Fox [2009] HCA 35; 240 CLR 1; Kondis v State Transport Authority [1984] HCA 61; 154 CLR 672; Elliott v Bickerstaff [1999] considered.

Relevant principles

26 The general principles by reference to which an employer’s breach of duty is to be determined are not controversial. They were stated by the Court in Czatyrko v Edith Cowan University [2005] HCA 14; 214 ALR 349 at [12]:

“An employer owes a non-delegable duty of care to its employees to take reasonable care to avoid exposing them to unnecessary risks of injury. If there is a real risk of an injury to an employee in the performance of a task in a workplace, the employer must take reasonable care to avoid the risk by devising a method of operation for the performance of the task that eliminates the risk, or by the provision of adequate safeguards. The employer must take into account the possibility of thoughtlessness, or inadvertence, or carelessness, particularly in a case of repetitive work.” [Footnotes omitted]

27 In this case Reliance Pools’ employees were engaged in activities undertaken in conjunction with the activities of others including another subcontractor of Uno, AF Concrete. The principles which apply in such circumstances are explained by Brennan J in Stevens v Brodribb Sawmilling Co Pty Ltd [1986] HCA 1; 160 CLR 16 at 47-48. In Leighton Contractors Pty Ltd at [21], having referred to those principles, the Court addressed the circumstances in which an employer may be liable to its employee where negligent conduct of its independent contractor has occasioned injury to that employee:

“An employer owes a personal, non-delegable, duty of care to its employees requiring that reasonable care is taken. This is a more stringent obligation than a duty to take reasonable care to avoid foreseeable risk of injury to a person to whom a duty is owed. While an employer is not vicariously liable for the negligent conduct of an independent contractor, it may incur liability where the negligent conduct occasions injury to its employee. This is because it will have failed to discharge the special duty that it owes to its employees to ensure that reasonable care be taken, whether by itself, its employees or its independent contractors, for the safety of its injured employee.” [Footnotes omitted]

28 Contrary to the proposition underlying AF Concrete’s third argument, the references to “independent contractor” in this passage are to an independent contractor of the employer whose liability is in question. That appears from the language of the passage and from a consideration of the relevant principles. The duty of the employer is a personal or non-delegable duty to exercise reasonable care to provide to its employees adequate plant and equipment, a safe place of work and a safe system of work. If the discharge of any part of that duty is delegated to an employee or independent contractor, the employer remains liable if either is negligent in the performance of that delegated function. That is so even if the employer exercised reasonable care when engaging the relevant employee or contractor. For that reason, the position of the employer is as described by Mason J (as he then was) in Kondis v State Transport Authority [1984] HCA 61; 154 CLR 672 at 681:

“So it is said that the employer in order to discharge his general duty of care for the safety of his employees must ensure that reasonable care and skill is exercised in relevant respects.”

29 If, as was the case in Kondis, an employee as part of the duties of his employment assists an independent contractor of the employer to undertake a particular task, and does so under its supervision and control, the employer’s non-delegable duty to provide a safe system of work extends to the performance of that task. If the contractor fails to adopt a safe system of work, the employer is liable for that failure. As Mason J held in Kondis (at 688), that is “not on a vicarious basis, but because [the contractor’s] omission to adopt a safe system is a breach of [the employer’s] duty”.

30 It may be, as was also the case in Kondis, that the work accident was the result of “casual negligence” on the part of the contractor. However, as Mason J observed (at 688), the fact that the contractor’s negligence might be characterised in that way would not inhibit the conclusion that there was also a breach of the employer’s duty to provide a safe system of work. That would be so if the contractor’s failure to adopt such a system meant that the employer did not provide such a system. The point is explained by Giles JA in Elliott v Bickerstaff [1999] NSWCA 453; 48 NSWLR 214 at [75]:

“The language [of delegation] can mislead. In both situations the duty of care is owed by the [employer], and the duty of care is not delegated. The performance can be and is delegated. The effect of a non-delegable duty of care is that the person owing the duty of care is under a more stringent duty of care, a duty of care which can not be fulfilled by exercising reasonable care in entrusting performance to a competent third party. The duty of care requires that the person ensure that the third party exercises reasonable care, in the sense that the person is liable if the third party does not exercise reasonable care.”

 

Waco Kwikform Ltd v Perigo and Workers Compensation Nominal Insurer [2014] NSWCA 140

HEADNOTE

[This headnote is not to be read as part of the judgment]

P (the first respondent) suffered serious injuries on 16 May 2006 when he fell eight metres whilst dismantling scaffolding. At that time refurbishment works were being undertaken. The principal contractor in relation to those works contracted with Waco (the appellant) for the supply, erection and dismantling of the scaffolding. Waco contracted with BTSS (P’s employer) for the supply of scaffold labour services to erect and dismantle the scaffolding Waco was to supply.

P brought proceedings for negligence against Waco and BTSS. After BTSS was deregistered, P was given leave to continue those proceedings against its workers compensation insurer (the second respondent). The primary judge held that each of Waco and BTSS was negligent, that there was no contributory negligence on the part of P, and apportioned liability 75 per cent as to Waco and 25 per cent as to BTSS. A critical aspect of her Honour’s reasoning was that following a serious accident involving another BTSS employee at a different site, Waco had assumed responsibility for devising and supervising the system of work to be followed by BTSS’ employees when dismantling the scaffold.

Waco challenged the findings as to scope of duty of care, breach, causation, contributory negligence and apportionment. The insurer cross-appealed against the findings as to breach, causation and contributory negligence. It did not challenge the conclusion that BTSS continued to owe P a duty of care as his employer. Although the claim against it was not subject to the provisions of the Civil Liability Act 2002 (NSW), BTSS did not contend that the issues raised by it engaged any materially different principles from those which arose under the common law as between P and Waco.

The principal issues were:

(i) the scope and content of the duty of care Waco owed P as an employee of its independent contractor; and, in particular, whether after 5 May 2006 that duty of care extended to taking reasonable care to ensure that work methods employed by BTSS were safe;

(ii) whether a safe system of work required that precautions be taken to bring to the BTSS workers’ attention that the way in which particular bays in the scaffold had been constructed required that wooden rather than metal planks be used in the dismantling process;

(iii) whether, in the particular circumstances, there was contributory negligence by P.

The Court held, allowing the appeal and cross-appeal in part:

In relation to (i):

(per Meagher JA, Beazley P, and Macfarlan JA agreeing)

After an earlier incident at another site, following which Waco assumed primary responsibility for devising a safe work method, Waco’s duty to exercise reasonable care extended to ensuring that the system of work adopted by BTSS for dismantling the scaffold was safe: [46]-[47].

Stevens v Brodribb Sawmilling Co Pty Ltd [1986] HCA 1; 160 CLR 16; and Leighton Contractors Pty Ltd v Fox [2009] HCA 35; 240 CLR 1 applied.

Pacific Steel Constructions Pty Ltd v Barahona [2009] NSWCA 406 referred to.

In relation to (ii):

(per Meagher JA, Beazley P and Macfarlan JA agreeing)

The primary judge did not err in finding that a safe system of work required that steps be taken to identify for the scaffolders the bays in which wooden rather than metal planks would be required in the dismantling process. In exercising reasonable care in devising that system, Waco and BTSS were required to take into account the possibility of inadvertence and carelessness on the part of the scaffolder: [62]-[63], [66]-[67].

Vairy v Wyong Shire Council [2005] HCA 62; 223 CLR 422; Smith v The Broken Hill Proprietary Co Ltd [1957] HCA 34; 97 CLR 337; Da Costa v Cockburn Salvage & Trading Pty Ltd [1970] HCA 43; 124 CLR 192; McLean v Tedman [1984] HCA 60; 155 CLR 306 and Czatyrko v Edith Cowan University [2005] HCA 14; 79 ALJR 839 applied.

In relation to (iii):

(per Meagher JA, Beazley P and Macfarlan JA agreeing)

P’s conduct was not merely due to inadvertence or carelessness and was incompatible with the conduct of a prudent and reasonable scaffolder. Accordingly, there was contributory negligence: [79]-[82].

Commissioner of Railways v Ruprecht [1979] HCA 37; 142 CLR 563; Joslyn v Berryman [2003] HCA 34; 214 CLR 552; and Sungravure Pty Ltd v Meani [1964] HCA 16; 110 CLR 24 applied.

McLean v Tedman & Brambles Holdings Ltd [1984] HCA 60; 155 CLR 306 discussed.

No error in application of relevant principles

43 In Leighton Contractors it was recognised at [20] that “in some circumstances a principal will come under a duty to use reasonable care to ensure that a system of work for one or more independent contractors is safe”.

44 Those circumstances are described in Brennan J’s statement of the relevant principles in Stevens v Brodribb at 47-48:

“An entrepreneur who organizes an activity involving a risk of injury to those engaged in it is under a duty to use reasonable care in organizing the activity to avoid or minimize that risk, and that duty is imposed whether or not the entrepreneur is under a further duty of care to servants employed by him to carry out that activity. The entrepreneur’s duty arises simply because he is creating the risk (Sutherland Shire Council v Heyman (1985) 59 ALJR 564 at 587; 60 ALR 1 at 42) and his duty is more limited than the duty owed by an employer to an employee. The duty to use reasonable care in organizing an activity does not import a duty to avoid any risk of injury; it imports a duty to use reasonable care to avoid unnecessary risks of injury and to minimize other risks of injury. It does not import a duty to retain control of working systems if it is reasonable to engage the services of independent contractors who are competent themselves to control their system of work without supervision by the entrepreneur. The circumstances may make it necessary for the entrepreneur to retain and exercise a supervisory power or to prescribe the respective areas of responsibility of independent contractors if confusion about those areas involves a risk of injury. But once the activity has been organized and its operation is in the hands of independent contractors, liability for negligence by them within the area of their responsibility is not borne vicariously by the entrepreneur. If there is no failure to take reasonable care in the employment of independent contractors competent to control their own systems of work, or in not retaining a supervisory power or in leaving undefined the contractors’ respective areas of responsibility, the entrepreneur is not liable for damage caused merely by a negligent failure of an independent contractor to adopt or follow a safe system of work either within his area of responsibility or in an area of shared responsibility.”

45 It was Mr Perigo’s case that in organising the activity of erecting and dismantling the scaffold, Waco was under a general law obligation to use reasonable care to avoid unnecessary risks of injury and to minimise other risks of injury. It was not suggested that this obligation required that it retain control of the scaffolding subcontractor’s system of work, or that it was unreasonable for Waco to subcontract that task. Nor was it part of Mr Perigo’s case that in doing so Waco had failed to engage a competent contractor; or that at some stage it should have terminated its contract with BTSS because it no longer answered that description. Mr Perigo’s case was that from 12 May 2006 Waco assumed control of its subcontractor’s system of work because it was no longer satisfied as to its competence; and that in doing so its general law obligation to exercise reasonable care extended to the prescribing of a safe system of work to be employed by BTSS.

46 Contrary to the submissions made by Waco, that case respects the distinction that the common law draws between the duty a principal owes to its own employees and the duty it owes to its independent contractors and their employees. As the analysis above shows, Mr Perigo does not contend for a more extensive obligation in the circumstances of this case than that recognised in Stevens v Brodribb. Here the primary responsibility for the adopting and following of a safe system of work with respect to the task of dismantling the scaffold was assumed by Waco. From that point in time it had taken primary responsibility for adopting such a system out of the “contractor’s hands”: see Stevens v Brodribb at 48; Leighton Contractors at [59].

47 That conclusion accords with the following statement of the Court in Leighton Contractors at [59]:

“However, provided that the contractor was competent, and provided that the activity of concrete pumping was placed in the contractor’s hands, [the principal] was not subject to an ongoing general law obligation with respect to the safety of the work methods employed by the contractor or those with whom the contractor subcontracted.”

48 It is also consistent with the statement of this Court (Allsop P, Beazley and Giles JJA) in Pacific Steel Constructions Pty Ltd v Barahona [2009] NSWCA 406 at [122] that a principal contractor which has engaged an independent contractor to perform an activity nevertheless might owe a duty to an employee of the independent contractor to exercise reasonable care in the supervision of that employee’s work where there has been an assumption of responsibility for that supervision by the principal contractor.

49 For these reasons, Waco’s submission that the primary judge’s conclusion as to the scope of Waco’s duty of care was contrary to these principles must be rejected. So also must its submission that it did not extend to the exercise of reasonable care in relation to the devising of a safe system of work for BTSS’ employees.

50 The remaining argument made on behalf of Waco in relation to its duty of care concerns the significance of Waco’s preparing the revised SWMS which is referred to in [25] above. The passage relied upon in Leighton Contractors accepts that “obligations under statutory or other enactments have relevance to determining the existence and scope of a duty”. Here the primary judge did not seek to impose, by reference to the existence of any such obligation, a more stringent or onerous burden on Waco than arises under the general law, or do so other than in accordance with the principles in Stevens v Brodribb. Those principles direct attention to whether the principal has placed a discrete activity in the hands of an independent contractor, on the basis that it is competent to and will exercise control of its own systems of work in relation to the conduct of that activity. That consideration made it necessary in this case to address the events following 5 May 2006 and in particular to address what was proposed as between Waco and BTSS with respect to the adoption and supervision of a revised system of work. Her Honour undertook that exercise in accordance with those principles. This remaining argument also must be rejected.

David Cormack – Brisbane Barrister & Mediator

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