Action Workforce Pty Ltd v DHL Exel Supply Chain (Australia) Pty Ltd; DHL Exel Supply Chain (Australia) Pty Ltd v Action Workforce Pty Ltd

The dispute before the New South Wales Court of Appeal concerned a claim for indemnity arising from damage to goods stored in a warehouse. Action Workforce Pty Ltd, a labour hire company, provided staff to DHL Exel Supply Chain (Australia) Pty Ltd, a warehousing service provider. An employee of Action Workforce caused damage to goods owned by a third party, and both Action Workforce and DHL Exel separately settled their liabilities with the owner of the goods. DHL Exel then sought to recover the amount it paid to the owner from Action Workforce under an indemnity clause in their contract.

The primary legal issue was whether DHL Exel's settlement with the owner of the goods was reasonable, thereby entitling it to an indemnity from Action Workforce. Specifically, the court had to determine if the settlement amount paid by DHL Exel reflected its actual liability to the owner of the goods, considering that Action Workforce had also settled its liability separately. The indemnity clause in the contract between the parties stipulated that Action Workforce would indemnify DHL Exel against all losses arising from the negligence of its employees.

The Court of Appeal upheld the primary judge's finding that DHL Exel's settlement was reasonable. The court reasoned that the indemnity clause was broad and intended to cover liabilities incurred by DHL Exel as a result of the actions of Action Workforce's employees. While Action Workforce had also settled with the owner, this did not negate DHL Exel's right to indemnity. The court applied the principle that an indemnified party is entitled to recover the amount reasonably paid to discharge a liability, even if the indemnifying party has also made a separate settlement. The reasonableness of the settlement was assessed by reference to the potential liability DHL Exel faced, not solely by the amount Action Workforce paid.

Consequently, the appeal and cross-appeal were dismissed, and Action Workforce was ordered to pay DHL Exel's costs of the appeal.