The recent Court of Appeal decision in Lee v Wickham Freight Lines Pty Ltd  NSWCA 209 reaffirms the accepted position that, generally speaking, a principal does not owe a duty of care to the employees of its subcontractor. However, the case stands as a critical reminder of the circumstances in which liability can be imposed on a principal. It also offers useful guidance on the measures organisations should take to ensure the safety of (and limit their liability to) employees of subcontractors. This is particularly important for organisations who have subcontractors operating on their premises or that direct and coordinate the activities of a subcontractor's employees.
The case involved an incident which occurred in March of 2005 when Mr Lee sustained a back injury whilst repacking damaged pallets of boxes (containing loose cans of soft drink) that had dislodged whilst in transit. Mr Lee claimed damages for his injury from Woolworths Ltd (Woolworths), Coca-Cola Amatil Ltd (Coca Cola) and Wickham Freight Lines Pty Ltd (Wickham) but subsequently abandoned the claims against Woolworths and Coca-Cola Amatil prior to trial.
At the time of the incident, Mr Lee was employed by Williams Bulk Haulage Pty Ltd (WBH) who had been subcontracted by Wickham to deliver goods to a Woolworths' Big W store in Campsie. The injury occurred at a depot at Yennora which was owned and operated by a third party, Combined Distribution Management Pty Ltd (CDM).
At trial, the primary judge held that Wickham did not owe a duty of care to Lee.
Integral to the judge's decision was the fact that Wickham had not taken charge of the system of work or exerted any substantial control over the manner in which the activity (that resulted in the injury) was performed by Mr Lee.
Mr Lee argued that because Wickham rented a designated space at CDM's premises and it had instituted certain guidelines for the way work was to be undertaken by its subcontractors, it followed that Wickham owed him a duty of care.
Despite this, the Court found that:
- the area where the truck was unloaded had not been under Wickham's control; and
- the guidelines were not sufficient to establish that any legal responsibility had been assumed by Wickham for its subcontractor's employees.
Mr Lee appealed the decision.
Among other factors, in his appeal Mr Lee relied upon the following matters in seeking to establish that a duty of care was in fact owed:
- Wickham had been responsible for the final delivery of the goods and, importantly, had made the call that damaged pallets were to be delivered to the Campsie site;
- A Wickham manager was aware of the damage that had occurred in transit and of the task to be undertaken by Mr Lee in reloading the pallets; and
- Wickham had assumed responsibility for coordinating the activities of its two subcontractors.
Notwithstanding these factors, the Court of Appeal found no error in the decision of the primary judge that duty of care could not be established. Accordingly, the Court dismissed Mr Lee's appeal.
In re-affirming the finding of the trial judge, the Court distinguished the facts of the case from previous decisions where a duty of care had been found.1 The Court noted that a critical factor supporting the finding of a duty of care in those cases was that the injury was sustained in the performance of a task pursuant to "systems of work" devised or imposed by the defendants. In this case however, the Court found that:
"The system of work was not devised by Wickham, nor did it take place on Wickham's premises. Wickham exercised no control over how the work was undertaken"
The case reaffirms the general position that a principal cannot be held liable for the acts of its subcontractor. Whilst there are limited circumstances where a principal can be held liable for damage suffered by employees of a subcontractor, such liability is not the same as a duty of care owed by an employer to its employee. Nonetheless the case offers pertinent lessons for organisations who regularly coordinate the activities of various subcontractors.
- If you impose systems of work for subcontractors, you should ensure that those systems are safe and appropriate for the circumstances, situations and conditions in which your subcontractors' employees operate;
- If you seek to exercise a degree of control over the modes in which subcontractors perform their various duties (which is beyond a mere coordination of activities) you should be aware that you may be unwittingly assuming a degree of liability should things go wrong; and
- If you have knowledge of a risk that employees of your subcontractors are exposed to, you should immediately bring that to the attention of the subcontractor and have systems by which the subcontractor itself can appropriately direct the actions of its employee in such situations.
Whilst not a factor in this case, it should also be noted that, when subcontracting transport tasks, organisations will have important Chain of Responsibility obligations regardless of the degree of control they exert.
If you have concerns about your organisation's exposure to liability in the use of subcontractors or have questions as to how you can better manage your Chain of Responsibility obligations, please contact our Workplace Relations & Safety or Transport teams.
1 See for example Wooby v Australian Postal Corporation  NSWCA 183 or Thompson v Woolworths (Qld) Pty Ltd  HCA 19
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