Fussell v Pilbara Iron Company (Services) Pty Ltd
[2024] WADC 72
•30 AUGUST 2024
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: FUSSELL -v- PILBARA IRON COMPANY (SERVICES) PTY LTD [2024] WADC 72
CORAM: PALMER DCJ
HEARD: 29 APRIL - 3 MAY 2024
DELIVERED : 30 AUGUST 2024
FILE NO/S: CIV 3707 of 2020
BETWEEN: GRAHAM FUSSELL
Plaintiff
AND
PILBARA IRON COMPANY (SERVICES) PTY LTD
Defendant
AAI LIMITED trading as GIO
Third Party
Catchwords:
Tort - Negligence - Collision between front end loader and haul truck - Whether defendant owed a duty of care to the plaintiff - Whether the defendant breached a duty of care that it owed to the plaintiff
Insurance - Whether the defendant entitled to indemnity from insurer - Meaning of the words 'arising out of' - Whether indemnity extends to defence costs
Legislation:
Civil Liability Act 2002 (WA), s 5B(1)
Insurance Contracts Act 1984 (Cth), s 54
Workers' Compensation Act 1981 (WA), s 160, s 175
Result:
Judgment for plaintiff against the defendant
Judgment for defendant against the third party
Representation:
Counsel:
| Plaintiff | : | Mr R D McCabe |
| Defendant | : | Mr G R Hancy |
| Third Party | : | Mr J J Sheldrick |
Solicitors:
| Plaintiff | : | Percy Kakulas Gleeson |
| Defendant | : | Minter Ellison |
| Third Party | : | Mills Oakley |
Case(s) referred to in decision(s):
Babsari Pty Ltd v Wong [1999] QSC 326; [2000] 2 Qd R 576
Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2006] NSWSC 223
Certain Underwriters at Lloyds of London v Allianz Australia Insurance Ltd [2018] VSC 735
CGU Insurance Ltd v Coote (by his Next Friend Stephen Desmond Coote) [2018] WASCA 117
Clark v Macourt [2013] HCA 56; (2013) 253 CLR 1
Czatyrko v Edith Cowan University [2005] HCA 14; (2005) 79 ALJR 839
Dickinson v Motor Vehicle Insurance Trust (WA) [1987] HCA 49; (1987) 163 CLR 500
Erect Safe Scaffolding (Australia) Pty Ltd v Sutton [2008] NSWCA 114; (2008) 72 NSLWR 1
F & D Normoyle Pty Ltd v Transfield Pty Ltd [2005] NSWCA 193; (2005) 63 NSWLR 502
Fitzpatrick v Garvey [2012] WADC 42
HL Bolton (Engineering) Co Ltd v TJ Graham & Sons Ltd [1957] 1 QB 159
Insurance Australia Ltd t/as CGU Insurance v MOS Beverages Pty Ltd [2021] FCAFC 165; (2021) 286 FCR 1
Marsh v Baxter [2015] WASCA 169; (2015) 49 WAR 1
Mercer v Commissioner for Road Transport and Tramways (NSW) (1936) 56 CLR 580
Nathaniel Corbett by his Next Friend Debra Todd v Town of Port Hedland [2021] WADC 55
Parlin Pty Ltd v Choiceone Pty Ltd [2012] WASCA 19
Prince Alfred College Inc v ADC [2016] HCA 37; (2016) 258 CLR 134
Quikfund (Australia) Pty Ltd v Prosperity Group International Pty Ltd (in liq) [2013] FCAFC 5; (2013) 209 FCR 368
Roads and Traffic Authority (NSW) v Palmer [2003] NSWCA 58; (2003) 38 MVR 82
Speno Rail Maintenance Australia Pty Ltd v Hamersley Iron Pty Ltd [2000] WASCA 408; (2000) 23 WAR 291
State of New South Wales v Fahy [2007] HCA 20; (2007) 232 CLR 486
TNT Australia Pty Ltd v Christie [2003] NSWCA 47; (2003) 65 NSWLR 1
Veitch v Connor [2023] WADC 38
Victorian WorkCover Authority v Carrier Air Conditioning Pty Ltd [2006] VSCA 63
Table of Contents
The issues to be determined
Whether Pilbara Iron is liable to compensate Mr Fussell
Findings about Mr Reidy, Mr Fussell and the collision
The duty of care owed to Mr Reidy
The analysis required by the Civil Liability Act2002 (WA)
Whether Mr Reidy breached his duty of care
Whether Pilbara Iron also breached its duty of care
The safety precautions Mr Fussell alleged were required
Findings about the safety precautions taken at West Angelas
Whether Pilbara Iron failed to take sufficient safety precautions
Conclusion
Whether the breaches of duty caused Mr Fussell's injury
Conclusion
Whether GIO must indemnify Pilbara Iron
Clause 4 of the Principal's Extension
Was there a contract between Pilbara Iron and WorkPac?
The contract alleged by Pilbara Iron
The basis on which GIO disputed the contract alleged
There was a contract between WorkPac and Rio Tinto
Did Mr Fussell's injury arise out of and occur during the performance of that contract?
Previous judicial consideration of the phrase 'arising out of'
The cases relied upon by GIO
Two cases referred to by Pilbara Iron
The relevance of these cases
The proper construction of cl 4.1
What the terms of the Insurance Policy and Principal's Extension reveal about the commercial context
Clause 4
Whether there was 'Principal's negligence' in this case
Does the Principal's Extension extend to cover defence costs?
Whether Pilbara Iron breached the Insurance Policy and failed to mitigate
Conclusion
PALMER DCJ:
The issues to be determined
At 7.30 am on 4 July 2018 the plaintiff, Mr Fussell, was driving a haul truck at the West Angelas mine when it was struck by a loader driven by Mr Jonathan Reidy. Mr Reidy was employed by the defendant company, Pilbara Iron Company (Services) Pty Ltd (Pilbara Iron).
Mr Fussell alleges that the collision and his injury were caused by the negligence of Mr Reidy and Pilbara Iron. He alleges that Pilbara Iron is both vicariously liable for Mr Reidy's negligence and directly liable to Mr Fussell for its own negligence.
Pilbara Iron has denied its liability to Mr Fussell (although it has not vigorously defended Mr Fussell's claim). Pilbara Iron has brought third party proceedings against an insurance company, AAI Limited trading as GIO (GIO). Pilbara Iron claims that it is entitled to an indemnity from GIO in relation to Mr Fussell's claim pursuant to an extension (the Principal's Extension) to an insurance policy (Insurance Policy) that GIO issued to Mr Fussell's employer, WorkPac Pty Ltd (WorkPac).
WorkPac is a labour hire company that was engaged to provide personnel to work at the West Angelas mine. The Insurance Policy insured WorkPac against common law claims made by employees for workplace injuries. Clause 4 of the Principal's Extension extended the coverage of the Insurance Policy to a principal for whom WorkPac performed work under a contract between WorkPac and the principal, where an injury:
(a)arose out of and during the performance of the work required by that contract; and
(b)was caused or contributed to by the principal's negligence.
GIO denies that it is obliged to indemnify Pilbara Iron because it says that the conditions in cl 4 of the Principal's Extension have not been met. It denies both that there was a contract between Pilbara Iron and WorkPac and that Mr Fussell's injury arose out of the performance of such a contract. Further, it denies that Pilbara Iron breached any duty that it owed to Mr Fussell and contends that this means there was no principal's negligence.
GIO also contends that the indemnity given by cl 4 of the Principal's Extension does not extend to the payment of Pilbara Iron's legal costs, that Pilbara Iron breached a condition of the indemnity by making admissions and that it failed to mitigate its loss.
It is not in dispute that the collision between Mr Reidy's loader and Mr Fussell's haul truck injured Mr Fussell. The quantum of damages to which Mr Fussell is entitled has been agreed at $1,100,000.00.
There are two principal issues to be determined in these proceedings.
First, whether Pilbara Iron is liable to compensate Mr Fussell. In order to resolve this issue, it is necessary to consider whether:
(a)Mr Reidy breached his duty of care to Mr Fussell and whether Pilbara Iron was vicariously liable for that breach of duty; and
(b)Pilbara Iron owed Mr Fussell a duty of care itself and, if so, whether it breached that duty. The question of whether Pilbara Iron breached any duty requires consideration of the adequacy of the safety precautions taken at the West Angelas mine.
Secondly, whether Pilbara Iron is entitled to an indemnity for any liability that it may have to Mr Fussell and, if so, the extent of the indemnity. In order to resolve this issue, it is necessary to consider whether:
(a)there was a contract between Pilbara Iron and WorkPac;
(b)Mr Fussell's injury arose out of and occurred during WorkPac's performance of such a contract;
(c)Mr Fussell's injury was caused or contributed to by Pilbara Iron's negligence;
(d)any indemnity given by the Principal's Extension extended to an indemnity for the legal costs of defending Mr Fussell's claim; and
(e)Pilbara Iron breached the conditions of the Principal's Extension, or failed to mitigate its loss.
Whether Pilbara Iron is liable to compensate Mr Fussell
Findings about Mr Reidy, Mr Fussell and the collision
I make the following findings about Mr Reidy, Mr Fussell their work at the West Angelas mine and the collision.
On 4 July 2018, both Mr Fussell and Mr Reidy were working at the West Angelas mine.
Mr Fussell was employed by WorkPac to work as a mobile plant operator driving haul trucks. He was required to drive the haul truck to the ore face where it would be loaded with ore or waste and then drive the truck to another part of the mine where his truck would be unloaded.
WorkPac employees who worked at West Angelas were integrated into Pilbara Iron's workforce and supervised by Pilbara Iron's supervisors. This included them being assigned tasks each morning by a Pilbara Iron supervisor at a pre-start meeting.
Mr Fussell's shift supervisor was Mr Ricky Lee. Mr Lee was a Pilbara Iron employee. Mr Lee's duties involved a health and safety component. He was responsible for investigating accidents involving workers he was supervising and addressing any safety concerns that arose from those accidents.
Mr Reidy was a machine operator employed by Pilbara Iron to drive front end loaders to load haul trucks, like those being driven by Mr Fussell. He was an experienced loader operator.
A haul truck being loaded would reverse into the loading bay at an angle to the ore or waste face. If Mr Reidy had already loaded a bucket, he would be waiting with the bucket raised, ready to load the truck when it arrived.
Several bucket loads are required to fill a haul truck. After Mr Reidy had loaded a bucket into the truck, he would need to manoeuvre the loader back to the face to fill the bucket again. This involved him reversing the loader away from the truck in an arc. He would then arc the loader forward in the opposite direction, towards the face. Once he had loaded the bucket, he would perform this manoeuvre in reverse.
The manoeuvre was illustrated in the training material tendered at trial as follows, although Mr Reidy described the manoeuvring as involving more arcing so that it formed a 'Y' rather than a 'V':[1]
[1] Exhibit 2, page 45.
On 4 July 2018, Mr Fussell started his shift at 5.30 am. Mr Reidy started his shift around 6.00 am.
At about 7.30 am on 4 July 2018 Mr Fussell drove his haul truck to the loading bay where Mr Reidy was loading.
Mr Reidy tooted his horn to indicate that Mr Fussell was to stop and then he emptied a load into Mr Fussell's truck. Mr Reidy then loaded another load without incident.
As Mr Reidy was reversing from the face on the third pass, a section of the face came away leaving large rocks in his path. Mr Reidy was concerned that the rocks could damage the loader if he drove over them. To avoid any rocks, he reversed straighter and arced the loader later than normal. This brought him close to the back of Mr Fussell's haul truck and as he was passing it, he hit the back left hand corner with the tooth of the loader bucket.
Immediately before he hit the truck, Mr Reidy had noticed that the rock guard on the side of the loader bucket had cleared the back corner of the truck and he turned his attention to the rocks on the ground. He realised that he had hit the haul truck that Mr Fussell was driving when he saw the tray of the haul truck moving.
The duty of care owed to Mr Reidy
Pilbara Iron admitted that it owed Mr Reidy a duty of care and that it was vicariously liable for Mr Reidy's conduct. Pilbara Iron admitted that:
(a)it owed Mr Fussell a duty to exercise reasonable care to avoid injury to him;[2]
(b)when Mr Reidy was operating the loader in close proximity to the haul truck driven by Mr Fussell, both Pilbara Iron and Mr Reidy owed Mr Fussell a duty to exercise reasonable care to avoid conduct that he could reasonably foresee might injure Mr Fussell;[3] and
(c)if Mr Reidy breached his duty of care, Pilbara Iron was liable in negligence to pay damages for Mr Reidy's conduct.[4]
[2] Defendant's Amended Defence, par 11.
[3] Further Amended Statement of Claim, pars 5 and 7A. Defendant's Amended Defence, pars 5 and 8.
[4] Defendant's Amended Defence, par 8.
GIO denied that Pilbara Iron owed Mr Reidy a duty to exercise reasonable care to avoid conduct that it could reasonably foresee might injure Mr Fussell.[5] GIO admitted, however that Mr Reidy owed Mr Fussell a duty to exercise reasonable care to avoid conduct that might cause a collision with the haul truck.[6]
[5] Defendant's Amended Statement of Claim Against Third Party (Third Party Amended Statement of Claim), par 8. Third Party's Defence to Defendant's Substituted Statement of Claim (Third Party Defence), par 20.
[6] Third Party Amended Statement of Claim, par 9, Third Party Defence, par 9.
I am satisfied that Pilbara Iron owed Mr Fussell a duty of care.
While Mr Fussell was working at the West Angelas mine he was integrated into Pilbara Iron's workforce and Pilbara Iron exercised day‑to‑day control over him and the work performed by other workers that he worked alongside, such as Mr Reidy. His position was akin to that of one of Pilbara Iron's employees. The work involved the operation of heavy machinery that could cause injury if reasonable care was not taken. A company who seconds a worker from a labour hire company in such circumstances, owes the worker a duty of care.[7]
The analysis required by the Civil Liability Act2002 (WA)
[7] Parlin Pty Ltd v Choiceone Pty Ltd [2012] WASCA 19 [66] (Murphy JA); Victorian WorkCover Authority v Carrier Air Conditioning Pty Ltd [2006] VSCA 63 [6] (Ashley JA) and TNT Australia Pty Ltd v Christie [2003] NSWCA 47 [41] - [42] (Mason P) and [178] (Foster AJA); (2003) 65 NSWLR 1.
Section 5B(1) of the Civil Liability Act2002 (WA) (Civil Liability Act) provides that a defendant will not be liable for harm caused by their fault in failing to take precautions against a risk of harm unless three elements are found:
(a)the risk was foreseeable (that is, it is a risk of which the defendant knew or ought to have known);
(b)the risk was not insignificant; and
(c)in the circumstances, a reasonable person in the position of the defendant would have taken those precautions.
The Civil Liability Act does not provide that a person is liable for harm caused by that person's fault in failing to take precautions against a risk of harm. Rather, it modifies the common law as to breach of duty of care by, among other provisions, identifying situations in which a person is not liable for harm.[8]
[8] Marsh v Baxter [2015] WASCA 169; (2015) 49 WAR 1 [717] (Newnes & Murphy JJA); CGU Insurance Ltd v Coote (by his Next Friend Stephen Desmond Coote) [2018] WASCA 117 [77] (judgment of the court) (CGU Insurance); Veitch v Connor [2023] WADC 38 [164] (Gething DCJ) (Veitch).
Section 5B(1)(c) of the Civil Liability Act requires the identification of the precautions a reasonable person in the position of the defendant would have taken. The relevant principles were summarised by Gething DCJ in Nathaniel Corbett by his Next Friend Debra Todd v Town of Port Hedland,[9] as follows:
[9] Nathaniel Corbett by his Next Friend Debra Todd v Town of Port Hedland [2021] WADC 55 [89] (Corbett).
… In undertaking this inquiry, some principles are well settled:
(a)the issue is to be determined objectively;
(b)the issue is also to be determined prospectively, not with the wisdom of hindsight;
(c)it is only through correct identification of the risk that one can assess what a reasonable response to that risk would be;
(d)the response to a foreseeable risk is to be judged by the criterion of reasonableness, not some more stringent requirement of prevention, meaning the court does not look backward to identify what would have avoided the injury to the plaintiff;
(e)a failure to eliminate a reasonably foreseeable risk does not establish negligence;
(f)the determination of what, if anything, a reasonable person … would have done involves an assessment of what would have been reasonable and practicable … to have done;
(g)contemporary standards within the community are relevant in determining what is reasonable in the circumstances of a particular case;
(h)in some circumstances, a reasonable person's reaction to a risk of harm may take account of the possibility of thoughtlessness, inadvertence or carelessness on the part of persons to whom a duty is owed;
(i)reasonableness may require no response to a foreseeable risk that is not insignificant;
(j)the occurrence of a foreseeable risk, that was not insignificant, does not establish unreasonableness; and
(k)the answer to this question involves a factual judgment turning on the facts of the case as they are proved in evidence.
(footnotes omitted)
Section 5B(2) of the Civil Liability Act provides that in determining whether a reasonable person would have taken precautions against a risk of harm, the court is to consider the following (amongst other relevant things):
(a)the probability that the harm would occur if care were not taken;
(b)the likely seriousness of the harm;
(c)the burden of taking precautions to avoid the risk of harm; and
(d)the social utility of the activity that creates the risk of harm.
Mr Fussell alleged that there was a foreseeable and not insignificant risk of injury should there be a collision between the haul truck and the loader whilst the haul truck was being loaded.[10] That there was such a foreseeable and not insignificant risk of injury was not contested. Both Pilbara Iron[11] and GIO[12] accepted that there was such a risk.
[10] Plaintiff's Opening Submissions dated 8 April 2024 (Plaintiff's Opening Submissions), pars 27 and 32. Further Amended Statement of Claim, par 7E.
[11] Defendant's Closing Submissions dated 2 May 2024 (Defendant's Closing Submissions), par 44.
[12] Third Party's Outline of Closing Submissions dated 2 May 2024 (Third Party's Outline of Closing Submissions), par 27. ts 685 - ts 686.
The question of whether there was a breach of duty turned on consideration of the precautions a reasonable person in the position of the defendant would have taken in the circumstances. This is the consideration identified in s 5B(1)(c) of the Civil Liability Act.
Whether Mr Reidy breached his duty of care
Although the question of whether or not Mr Reidy breached his duty of care remained in issue, that he breached his duty was not meaningfully contested.
Mr Fussell alleged that a reasonable person in Mr Reidy's position would have paid reasonable attention to what was happening around them while driving their loader.[13] He submitted that Mr Reidy's work was dangerous as he was in charge of a heavy vehicle carrying a significant load that had the capacity to do significant damage if there was an impact. He referred to the training manuals that were put into evidence that established the dangers of operating machinery of the type being operated by Mr Reidy.[14]
[13] Plaintiff's Closing Submissions, par 72.
[14] Plaintiff's Closing Submissions, pars 65 - 67.
Mr Fussell alleged that Mr Reidy drove the loader without paying due care and attention, failed to brake, swerve, steer, manoeuvre or otherwise drive the loader in a manner to avoid the collision, failed to adequately control the loader so as to avoid the collision and failed to keep any or any proper look out.[15] He submitted that Mr Reidy owed duties similar to those owed by the driver of a motor vehicle.[16]
[15] Further Amended Statement of Claim, par 6.
[16] Plaintiff's Closing Submissions, pars 72 - 75.
GIO accepted that Mr Reidy's driving was negligent but attributed the accident to an individual act of negligence on Mr Reidy's part.[17]
[17] Third Party Defence, par 19(b).
Although Pilbara Iron denied that Mr Reidy breached the duty of care that he owed Mr Fussell,[18] its case did not extend beyond a bare denial. It did not advance a positive case that Mr Reidy had taken reasonable precautions and it did not submit that he did.
[18] Defendant's Responsive Trial Opening Submissions dated 22 April 2024 (Defendant's Opening Submissions), par 10. Further Amended Statement of Claim, pars 6 and 7. Amended Defence pars 6 and 7.
The manual for the loader that Mr Reidy was driving (with which Mr Reidy was familiar[19]) warned that when travelling or carrying out operations it was necessary to keep a safe distance from other machines to avoid coming into contact with them.[20] It seems to me that a reasonable person would have kept a safe distance.
[19] ts 397.
[20] Exhibit 1, page 8.
In my view a reasonable loader driver in Mr Reidy's position would have driven the loader so as to ensure that at all times he maintained a sufficient distance from Mr Fussell's truck to ensure that if he had to suddenly manoeuvre the loader, he would not hit the truck.
I find (on the basis of Mr Reidy's evidence) that it was not an uncommon occurrence for material to rill down during the course of a shift as occurred here.[21] A reasonable loader driver would have foreseen that it was possible that there might be some reason to suddenly manoeuvre the loader (including a rock fall of the kind that occurred in this case) and if they were too close to the truck, they might hit it.
[21] ts 450 - ts 451.
The evidence before me does not suggest that the burden of driving at a sufficient distance to avoid a collision if it was necessary to unexpectedly manoeuvre the loader would be significant. There was no apparent social utility in driving the loader so close to the truck that a collision could not be avoided if something unexpected occurred. The harm that could occur was serious.
In this case Mr Reidy failed to take the precaution of ensuring at all times he maintained a sufficient distance from Mr Fussell's truck to ensure that if he had to suddenly manoeuvre the loader, he would not hit it. Instead, he drove his loader too close to Mr Fussell's truck. In my view, in doing so, he breached the duty of care owed to Mr Fussell.
Mr Fussell also submitted that Mr Reidy breached a duty to keep a proper lookout, including diverting his attention away from the loader bucket after the bucket guard had cleared Mr Fussell's truck.[22] I am not satisfied that Mr Reidy breached his duty by turning his attention to the rocks that had fallen from the face. Those rocks too posed a potential hazard that he needed to avoid. Although it was suggested to Mr Reidy that he could have stopped his truck, it was unclear to me how this would have assisted him to identify the location of the fallen rocks which was the hazard he was seeking to avoid. Further, if it were not for the fact that Mr Reidy was too close to Mr Fussell's truck, turning his attention to the fallen rocks would not have been a problem.
Whether Pilbara Iron also breached its duty of care
The safety precautions Mr Fussell alleged were required
[22] Plaintiff's Closing Submissions, pars 96 - 97.
Mr Fussell alleged that a reasonable person in the position of Pilbara Iron would have trained loader operators to measure a safe distance from a haul truck whilst they were digging.[23] He alleged that a reasonable person in Pilbara Iron's position would have taken the precaution of specifying a minimum safe distance that loader drivers should have maintained while loading trucks.[24]
[23] Further Amended Statement of Claim, pars 7F(d) and 7G.
[24] Plaintiff's Closing Submissions, par 109.
Pilbara Iron admitted both that a reasonable person in the position of Pilbara Iron would have trained loader operators to measure a safe distance from a haul truck whilst they were digging ore and that it did not take that precaution.[25] It did not advance a positive case that the other precautions that had been taken at the West Angelas mine meant that reasonable precautions had been taken.
[25] Amended Defence, pars 13 and 14.
GIO maintained that Pilbara Iron was not itself negligent.[26] GIO argued that Pilbara Iron took adequate steps to guard against the risk of harm. It also submitted that Pilbara Iron instructed loader operators to maintain a minimum safe distance.[27]
Findings about the safety precautions taken at West Angelas
[26] Third Party Defence, par 24.
[27] Third Party Closing Submissions, par 34.
GIO's submission that adequate steps were taken to guard against the risk of harm drew attention to the safety precautions taken at the West Angelas mine. I make the following further relevant findings in this regard.
Mr Reidy had read the operator manual for the loader he was driving. That manual required him to always leave a safe distance between the loader and other machines. Mr Reidy had no recollection of anyone from Pilbara Iron pointing this out to him, or instructing him how to measure a safe distance.[28]
[28] ts 397.
It was a requirement of working at the West Angelas mine site that Mr Reidy hold a Heavy Vehicle Driver's Licence issued by the Western Australian Government.[29]
[29] Exhibit 19, ts 355.
Mr Reidy was also required to obtain a 'Pit Permit' before he could start work.[30] In Mr Reidy's case he obtained a Pit Permit when he first commenced working at West Angelas in October 2016, as an employee of a labour hire company called Programmed.[31]
[30] Exhibit 19.
[31] Exhibit 19.
Obtaining a Pit Permit required Mr Reidy to be assessed as demonstrating certain required competencies. He was required to drive at least 14 hours under supervision as part of his assessment.[32]
[32] Exhibit 19.
Mr Reidy was required to confirm that he had read and understood 14 'Standard Work Procedures' concerning:
(a)CSI ROM PAD - interaction and dumping;
(b)ROM interaction and dumping;
(c)Pit operations - managing dust emissions;
(d)Pit operations during disruptive weather;
(e)Tyre fires and lightning strikes;
(f)Equipment wash down for designated hazardous areas;
(g)Single lane operation;
(h)Transportation and operation of light trailers and lighting plants;
(i)Escorting within the pit;
(j)Approaching and overtaking working auxiliary equipment;
(k)Working within the loading zone (50 m) at CSI plant area;
(l)Walking on broken ground;
(m)Changing a flat tyre on a light vehicle; and
(n)Hydrocarbon spill response.
Mr Reidy was also required to confirm that he had read and understood two 'Single Point Lessons' concerning 'West Angelas radio channels and call signs' and 'Mayday Emergency Procedure'.
There were Pit Permit Rules that applied at West Angelas that Mr Reidy was required to follow.[33] These included a requirement that it was the responsibility of the operator to ensure the vehicle or equipment has adequate clearance when reversing, passing or overtaking other vehicles and equipment.[34]
[33] Exhibit 20, ts 404.
[34] Exhibit 20, par 4.9.7.
When Mr Reidy obtained his Pit Permit, he was assessed as being an experienced operator, aware of all the Pit Permit Rules.[35]
[35] Exhibit 19.
Mr Reidy was required to complete an assessment of his competency for operating Komatsu 1200 loaders in October 2017. This involved him being assessed by way of written questions, oral questions and a practical demonstration conducted by an assessor over a few days. The practical demonstration involved operating a loader in a dig area.[36]
[36] Exhibit 4, ts 483.
A Loader Assessment Record Book from that assessment recorded that Mr Reidy satisfied the pre-requisites of currency in 'Iron Ore essentials and area orientation', 'Lockholder (isolation regulations)', 'Pit Permit and current drivers' licence.[37]
[37] Exhibit 4.
As part of the practical demonstration, Mr Reidy was required to demonstrate competency in how he would plan and prepare for loader operations. This required him to complete a risk assessment process by completing a 'Take 5' or 'Job Hazard Assessment' identifying potential risks and implementing controls, prior to completing the task.[38] It also required him to be able to locate and follow applicable emergency and safe work/current best practices and procedures which were available to him in hard copy.[39]
[38] Exhibit 4, pages 209 - 211.
[39] Exhibit 4, page 209; ts 483.
The person who assessed Mr Reidy, assessed him as competent and commented that his 'Take 5' was of a good standard.[40]
[40] Exhibit 4, page 209.
The practical demonstration also required Mr Reidy to demonstrate competency in conducting loader operations. This required him to demonstrate competency in, amongst other things, minimising travel distance for effective cycle times and positioning the truck effectively for loading and to have safe clearances over the truck tray.[41]
[41] Exhibit 4, page 212.
Mr Reidy was again assessed as competent, with the assessor commenting that Mr Reidy exhibited 'good cycle times'.[42]
[42] Exhibit 4, page 212.
Overall, the assessor assessed Mr Reidy as being an experienced operator with good smooth operations, with good knowledge of loader components and who was a safe and knowledgeable operator who did not require follow up.[43]
[43] Exhibit 4, page 227.
As part of the assessment Mr Reidy was given a Front End Loader Training Manual. This set out the procedures for operating the loader, including for loading operations.[44]
[44] Exhibit 21, ts 406.
Before commencing work each day, Mr Reidy was required to complete a 'Take 5' safety analysis. This required Mr Reidy to identify potential hazards that might arise during his work and how he might address those hazards.[45]
[45] ts 358 - ts 359.
Mr Reidy completed a 'Take 5' on 4 July 2018. One of the hazards he identified was 'interactions'. In relation to how he might address that hazard he wrote 'be aware of surroundings', 'take time' and 'don't rush'. The Take 5 also referred to the need to maintain 50 m from light vehicles.[46] It did not mention other heavy vehicles.[47]
[46] Exhibit 5.
[47] Exhibit 7, page 171.
Mr Reidy was required to complete an Incident Statement Form on the day of the collision. That form asked Mr Reidy whether there were any improvements that he could identify that might prevent such an incident in the future. He responded slightly increase distance between loader and truck. He was also asked whether he could have done anything differently to avoid the accident and he gave the same answer.[48]
[48] Exhibit 7, page 173.
Prior to the accident, Mr Reidy was conscious of the need to maintain a safe distance from the haul truck to avoid a collision.[49]
[49] ts 435.
Mr Reidy was disciplined for not maintaining a safe working distance between the loader and the haul truck.[50]
[50] Exhibit 8, Exhibit 9.
On 8 July 2018, a 'single point lesson' was issued that provided that at no time was the loader to load material from behind the haul truck and to always keep three metres between the haul truck and the loader to allow for the safe articulation of the loader and to reduce the possibility of contact.[51] During the trial, this was sometimes referred to as the 'three metre rule'.
[51] Exhibit 10.
The work that Mr Fussell and Mr Reidy were engaged in was repetitive and involved long 12-hour shifts.
Before turning to consider the adequacy of the precautions taken, it is necessary to address a submission made by GIO in its written closing submissions. GIO submitted that Mr Reidy was, as a matter of fact, provided with the instruction that Mr Fussell alleged should have been provided.[52] GIO's submission failed to identify the evidentiary basis underlying that submission. Although it is a little unclear, it seems likely that GIO was referring to the statement in the loader manual that the operator was to always leave a safe distance between the loader and other machines.[53]
[52] Third Party's Closing Submissions, par 34.
[53] Third Party's Closing Submissions, par 38, ts 659.
Mr Reidy's evidence was that Pilbara Iron did not draw his attention to the contents of the loader manual, or tell him how to measure a safe distance.[54] It was not put to Mr Reidy in cross‑examination that this evidence was incorrect.
[54] ts 397.
The Pit Permit Rules provided that it was the responsibility of the operator to ensure the vehicle or equipment had adequate clearance when reversing, passing or overtaking other vehicles and equipment.[55] If this is what GIO was referred to, this rule did not specify a minimum safe distance to be maintained, or how to measure a minimum safe distance.
[55] Exhibit 20, par 4.9.7.
Mr Lee's evidence was that prior to the introduction of the three metre rule, there was no rule in place about the distance a loader was to maintain from a haul truck.[56]
[56] ts 528.
I do not find that Mr Reidy was provided with the instruction that Mr Fussell alleged should have been provided (as GIO submitted).
Whether Pilbara Iron failed to take sufficient safety precautions
Mr Fussell alleged that a reasonable person in Pilbara Iron's position would have taken the precaution of specifying a minimum safe distance that loader drivers should have maintained while loading trucks.[57]
[57] Plaintiff's Closing Submissions, par 109.
Mr Fussell pointed to the single point lesson that was introduced after the accident mandating a minimum safe distance of three metres and submitted that the fact that this was introduced quickly and easily after the accident reveals that it was a precaution that could readily have been taken before the accident.[58]
[58] Plaintiff's Closing Submissions, par 112.
GIO contended that such an analysis involved retrospectively focusing upon a single absent instruction, ignoring the 'array of training and instruction' that had actually been provided and the multitude of tasks and responsibilities that arise in the course of Mr Reidy performing his duties on any given day.[59]
[59] Third Party's Closing Submissions, par 50. State of New South Wales v Fahy [2007] HCA 20; (2007) 232 CLR 486 [57] - [58].
GIO submitted that many thousands of passes were performed in the load-and-haul operation at West Angelas every week, including by Mr Reidy who was an experienced operator.[60] It asserted that judged at the time of the accident, the probability of a loader colliding into a haul truck in the load-and-haul process was very low indeed.[61]
[60] ts 653.
[61] Third Party's Closing Submissions, par 42.
GIO contended that mandating a minimum safe distance was not done because it would not have occurred to a reasonably careful person either that injury would result, or that the neglected measure would have made a difference.[62]
[62] Third Party's Closing Submissions, par 49.
GIO referred to the judgment of Latham CJ in Mercer v Commissioner for Road Transport and Tramways (NSW)[63] and submitted that the 'general practice of prudent men is an important evidentiary fact'.[64] In this regard GIO referred to the evidence of three witnesses:
(a)Mr Ricky Lee (Mr Fussell's supervisor) who said that he had not raised any concerns that a 'three metre rule' should have been in place and saw no need for any such rule before this accident;[65]
(b)Mr Phillip Norris, the Superintendent of Mine Development/Superintendent of Production who said that prior to the accident, he had not seen any deficiencies in Rio's load and haul policies;[66] and
(c)Mr Raleigh Jordan, Superintendent Load and Haul at the time of the injury who said that prior to this accident, he had not raised any particular concerns about Rio Tinto load and haul OHS procedures at West Angelas.[67]
[63] Mercer v Commissionerfor Road Transport and Tramways (NSW) (1936) 56 CLR 580, 589.
[64] Third Party's Closing Submissions, par 43.
[65] Third Party's Closing Submissions, par 44, ts, 525.
[66] Third Party's Closing Submissions, par 45, ts, 550.
[67] Third Party's Closing Submissions, par 46, ts, 558.
While I accept that the evidence of Mr Lee, Mr Norris and Mr Jordan suggests that the possibility of mandating a minimum safe distance when loading haul trucks might not have occurred to them, I do not consider this advances GIO's argument to any significant extent.
None of them gave evidence that prior to the accident they had been involved in any review of the extant safety procedures for loader operators. The evidence of Mr Norris and Mr Jordan rose no higher than that they had not noticed any deficiencies in the load and haul policies generally. Mr Lee's evidence extended a little further but not much further. None of them gave evidence that they were positively satisfied that the safety precautions in place were sufficient having given the matter careful consideration.
Further, none of them gave evidence that the established safety procedures for loader operators had been established because of some relevant general practice. The circumstances in which the safety procedures prior to the accident were developed was not the subject of evidence. Nor was there any evidence that a conscious decision was made to not mandate a minimum safe distance because of a considered general practice, or some operational reason.
I am not satisfied that the evidence of Mr Lee, Mr Norris and Mr Jordan establishes that there was a general practice as GIO asserted.
GIO further submitted that, in any event, judged prospectively the safety precautions taken were adequate to address the relevant risk of injury so that the risk of injury was 'incredibly low' and a reasonable person would not have considered further precautions necessary.[68]
[68] ts 658.
None of the safety precautions referred to by GIO mandated a particular minimum safe distance for loader operators to maintain from haul trucks. The minimum safe distance was left to the judgment of the individual loader drivers.
I consider that a reasonable person would have taken the precaution of mandating the minimum safe distance to maintain between loaders and haul trucks. I consider that three metres would have been a reasonable safe distance but it could have been a greater distance.
A reasonable person would have considered that such a precaution was warranted because it would have reduced the risk of misjudgement by providing a simple rule of thumb to be applied by loader drivers.
While Mr Reidy was an experienced operator, a reasonable person would have appreciated that not all drivers would be so experienced. A reasonable person would have appreciated that an inexperienced operator might find it harder to judge the appropriate safe distance to maintain to allow sufficient manoeuvring room if something unexpected happened.
Further, a reasonable person would have appreciated that all loader operators were performing repetitive work for long shifts. A reasonable person would have appreciated that the repetitive nature of such work meant that the judgment of loader operators risked being impaired by thoughtlessness, inadvertence and carelessness.[69] A reasonable person would have appreciated that mandating a minimum distance that allowed a margin of error would reduce the risk that such thoughtlessness, inadvertence and carelessness would result in a collision.
[69] Czatyrko v Edith Cowan University [2005] HCA 14; (2005) 79 ALJR 839 [12].
Finally, GIO argued that it would have been impractical to have a rule mandating minimum safe distance between loaders and trucks.[70] This proposition was not put to any of the witnesses who gave evidence at trial and none of them said that such a rule would have been impractical. Further, as Mr Fussell submitted, prior to the accident the Pit Permit Rules mandated certain minimum distances during the production cycle.[71] It does not seem to me that mandating minimum distances was impractical.
Conclusion
[70] ts 666.
[71] Plaintiff's Closing Submissions, par 109.
I am satisfied that a reasonable person in the position of Pilbara Iron would have mandated a particular minimum safe distance of at least three metres. As it did not do so, I am satisfied that Pilbara Iron breached the duty of care that it owed Mr Fussell.
Whether the breaches of duty caused Mr Fussell's injury
GIO submitted that even if Pilbara Iron breached a duty of care that it owed to Mr Fussell, that breach of duty did not cause any injury that he suffered. It noted that Mr Reidy was an experienced operator of heavy mobile equipment and he was well aware of the need to maintain a minimum safe distance.[72] It submitted that Mr Reidy did not give evidence that he would have maintained a minimum safe distance if that was required.[73]
[72] Third Party's Closing Submissions, par 51a.
[73] Third Party's Closing Submissions, par 54.
I am satisfied that Mr Reidy would have complied with any instruction to maintain a particular minimum safe distance from a haul truck if a particular safe distance had been specified. He was an experienced machine operator who was familiar with the need to follow safety directions.
It was not put to Mr Reidy that he would have ignored mandated safety precautions and there did not seem to me to be any evidence to support such a conclusion. While it is true that he was involved in the collision that gave rise to the current proceedings, that collision seemed to me to be due to misjudgement rather than any reckless disregard for safety.
Mr Reidy's evidence was that if he had been keeping a three-metre distance, the collision would not have occurred.[74] I accept his evidence and I am satisfied that if the precaution of mandating the minimum safe distance to maintain between loaders and haul trucks have been taken, Mr Reidy would have observed that minimum distance and the accident would have been avoided.
[74] ts 395.
GIO also referred to the evidence of Mr Lee who at one point of his evidence observed that the three metre rule was only a 'guideline' which could not stop a collision occurring.[75]
[75] Third Party's Closing Submissions, par 53, ts 527.
This comment must be understood in the context of Mr Lee's evidence more broadly. Shortly after making the comment that GIO relies upon, Mr Lee explained that prior to the introduction of the rule there was no hard and fast rule concerning the minimum safe distance that should have been maintained between a loader and a haul truck. He said that the purpose of introducing the rule was to put a distance rule in place which allowed for a buffer to allow for misjudgements. He made the point that the repetitive nature of the loading process meant that even a very experienced operator can misjudge what is a safe distance.[76]
[76] ts 528.
While it is true that any rule that was mandated could not guarantee that a collision would be avoided (for example, an operator might ignore the rule) taken as a whole, Mr Lee's evidence does not assist GIO. Rather, it underscores the conclusions that I have reached.
Conclusion
For these reasons, I am satisfied that Pilbara Iron breached the duty of care that it owed Mr Fussell.
Whether GIO must indemnify Pilbara Iron
Clause 4 of the Principal's Extension
GIO has refused to indemnify Pilbara Iron because it says that the Principal's Extension does not respond to Mr Fussell's claim. To understand why, it is necessary to have regard to the wording of clause 4 of the Principal's Extension. That clause provides:[77]
[77] Exhibit 32.
4.Where:
4.1Injury to, or death of, an Employee arises out of and occurs during the performance of the work required to be done by you under a contract with a Principal during the Policy Period;
4.2the Employee is employed in, and, at the time when the Injury occurs, is working in the Business; and
4.3the Injury or death is caused by or contributed to by the Principal's negligence and the Principal is liable to pay damages, or to contribute to an award of damages, for that Injury or death;
we shall indemnify the Principal against that Common Law Liability.
(emphasis added)
The term 'Principal' is defined to mean any party for whom you perform work during the Policy Period provided that the work is within the scope of the Business and for the purpose of the Principal's business.
There are three issues that require resolution.
First, whether there was a contract between Pilbara Iron and WorkPac. Clause 4.1 expressly requires that the work be performed 'under a contract with a Principal'. GIO disputes Pilbara Iron's claim that it entered into a contract with WorkPac.
Secondly, whether Mr Fussell's injury arose out of and occurred during the performance by WorkPac of that contract. Clause 4.1 also expressly requires that the injury to an Employee 'arises out of and occurs during the performance of' the work required to be done by you under a contract with a Principal. Even if there was a contract between Pilbara Iron and WorkPac, GIO disputes Pilbara Iron's claim that Mr Fussell's injury arose out of WorkPac's performance of that contract. The resolution of this issue largely turns on the proper construction of the words 'arises out of' in the context of the Insurance Policy.
Thirdly, whether Mr Fussell's injury was caused by Pilbara Iron's negligence. Clause 4.3 expressly required that the injury was caused by or contributed to by the 'Principal's negligence'. GIO disputed Pilbara Iron's claim that the term Principal's negligence extended to a situation in which Pilbara Iron was vicariously liable for Mr Reidy's conduct. My finding that Pilbara Iron breached a duty that it owed Mr Fussell means that this issue assumes much less significance.
Was there a contract between Pilbara Iron and WorkPac?
The contract alleged by Pilbara Iron
Pilbara Iron alleged that it entered into a contract with WorkPac by issuing a purchase order to WorkPac for it to provide Mr Fussell's services to Pilbara Iron (Purchase Order), WorkPac accepting that offer by sending Mr Fussell to site to perform those services, WorkPac invoicing Pilbara Iron and Pilbara Iron paying that invoice. The Third Party Statement of Claim described this contract as the 'Mobile Plant Operator Contract'.[78]
[78] Defendant's Closing Submissions in Third Party Action dated 2 May 2024 (Defendant's Closing Submissions in Third Party Action), pars 15 - 16. Defendant's Amended Statement of Claim Against Third Party, pars 5 - 6.
That Pilbara Iron issued the Purchase Order, Mr Fussell attended site, WorkPac invoiced Pilbara Iron for the work performed and Pilbara Iron paid the invoice was established by the evidence before the court. I make findings accordingly. These matters did not seem to be the subject of any real contest.
Pilbara Iron also relied on an Umbrella Supply Contract between WorkPac and Rio Tinto Services Ltd (who was said to contract as agent for Pilbara Iron). It said that the Umbrella Supply Contract created the framework of contractual terms for the Mobile Plant Operator Contract. It said that the Mobile Plant Operator Contract incorporated terms from the Umbrella Supply Contract.[79]
The basis on which GIO disputed the contract alleged
[79] Defendant’s Closing Submissions in Third Party Action, par 16.
GIO disputed Pilbara Iron's claim that the acceptance of the Purchase Order gave rise to a contract. GIO contended that the terms of the Umbrella Supply Contract meant that there was no 'meeting of the minds' between Pilbara Iron and WorkPac.[80]
[80] Third Party's Closing Submissions, pars 6 and 8. ts 673 - 678.
GIO noted that the Purchase Order describes the Umbrella Supply Contract as 'the Supply Contract', in contrast with the lack of reference to the Purchase Order being a contract. It relied on the fact that the Purchase Order does not describe itself as a contract.[81]
[81] ts 621.
GIO's submissions referred to three features of the Umbrella Supply Contract that it asserted revealed that there was no meeting of the minds.
First, GIO said[82] the Umbrella Supply Contract represented[83] to WorkPac that Rio Tinto Services Ltd entered into the agreement on its own behalf and as agent severally on behalf of each of the 'Relevant Companies' which was defined to include Pilbara Iron.[84] GIO submitted that WorkPac therefore received the Purchase Order in circumstances in which it had been told that Rio Tinto Services Ltd had executed the Umbrella Supply Contract as Pilbara Iron's agent.[85]
[82] Third Party's Closing Submissions, par 7(a).
[83] Execution Clause, Exhibit 34, page 579.
[84] Schedule D - Exhibit 34, first item on page 824, Third Party's Closing Submissions, par 7(b).
[85] Third Party's Closing Submissions, par 7(c).
Secondly, GIO referred to the fact that cl 3.1(b)(ii) of Schedule A to the Umbrella Supply Contract provided that in order to request services under the agreement, a purchase order was to be issued referring to the agreement.[86] It submitted that it was therefore significant that the Purchase Order referred to the Umbrella Supply Contract.
[86] ts 621 - ts 622, Exhibit 34, page 583.
GIO also pointed to the fact that by cl 3.1(d) of the Umbrella Supply Contract, WorkPac must perform the Services upon receipt of the applicable Purchase Order in accordance with the terms of the Umbrella Supply Contract and the Purchase Order.
Thirdly, GIO relied upon the fact that by executing the Umbrella Supply Contract WorkPac had agreed to the Rio Tinto General Conditions for Services (and Associated Goods) (AU) (Rio Tinto General Conditions).
GIO referred to the fact that the definition of 'Purchase Order' in cl 1.1 of the Rio Tinto General Conditions specifies that an individual purchase order will be subject to the terms of the Umbrella Supply Contract.[87]
[87] Exhibit 34, page 1099.
GIO noted that the definition of 'Contract' in cl 2.1 of the Rio Tinto General Conditions does not include purchase orders.[88] The term was defined to mean the agreement entered into by Rio Tinto on its own behalf and as agent for and on behalf of Pilbara Iron.[89]
[88] Exhibit 34, page 1101.
[89] Exhibit 34, page 1101, Rio Tinto General Conditions, clauses 1.1 and 1.2.
GIO relied on the fact that cl 2.2(b) of the Rio Tinto General Conditions stipulated that if there is any conflict or inconsistency between a Purchase Order and the Contract, the Contract would prevail to the extent of that conflict or inconsistency.[90]
[90] Exhibit 34, page 1101.
GIO referred to cl 5.3 which provided that without limiting cl 5.1, upon receipt of a Purchase Order from the Relevant Company, the Service Provider must provide the Services ordered in accordance with the Contract and the instructions contained in the Purchase Order.[91]
[91] Exhibit 34, page 1102.
GIO pointed[92] to the fact that cl 2.3(a) of the Rio Tinto General Conditions was an entire agreement clause.[93] It relied on the fact that that clause provided that if Pilbara Iron issued a purchase order which incorporated a separate set of terms and conditions, those terms and conditions would not form part of, or be incorporated into, that purchase order or the 'Contract'.[94]
[92] Third Party's Closing Submissions, par 7(d).
[93] Exhibit 34, page 1101.
[94] Third Party's Closing Submissions, par 7(e).
Further, GIO asserted that there was an absence of consideration because the consideration pleaded was the consideration due under the Umbrella Supply Contract.[95]
[95] Third Party's Closing Submissions, par 9, Exhibit 34.
GIO referred to cl 5.1 of the Rio Tinto General Conditions which had the effect that WorkPac must perform the services in accordance with the terms of the Contract and in consideration of the payment of the Contract Price by Pilbara Iron.[96]
[96] Third Party's Closing Submissions, par 9.
It also referred to cl 13.1 of the Rio Tinto General Conditions that defined 'Contract Price' to mean the aggregate amount payable (excluding Indirect Transaction Taxes payable in accordance with cl 14) by Pilbara Iron to WorkPac for the services.[97]
[97] Exhibit 34, page 1105.
It is important to appreciate that although GIO relied heavily on the Umbrella Supply Contract, it disputed that Pilbara Iron was a party to that contract.
In the Umbrella Supply Contract Rio Tinto Services Ltd said that it was entering into that contract on behalf of, amongst others, Pilbara Iron. GIO said that this was insufficient to prove that Rio Tinto Services Ltd was authorised to act on behalf of Pilbara Iron.
GIO referred to the decision in Quikfund (Australia) Pty Ltd v Prosperity Group International Pty Ltd (in liq)[98] where the Full Federal Court (Foster, Barker & Griffiths JJ) observed that assertions made by the alleged agent that he or she is acting for the alleged principal can never by themselves prove the existence of the alleged agency and that there must be some conduct on the part of the alleged principal from which the relationship of agency can be inferred and which breathes life into the assertions of the alleged agent.
There was a contract between WorkPac and Rio Tinto
[98] Quikfund (Australia) Pty Ltd v Prosperity Group International Pty Ltd (in liq) [2013] FCAFC 5; (2013) 209 FCR 368 [79].
In effect, GIO accepted that WorkPac entered into a contract but said that contract was the Umbrella Supply Contract with Rio Tinto Services Ltd. GIO maintained that Pilbara Iron was not a party to the Umbrella Supply Contract, even though the contract states that Rio Tinto Services Ltd was contracting on behalf of Pilbara Iron (as well as itself).
No evidence was lead before me addressing the circumstances in which Rio Tinto Services Ltd executed the Umbrella Supply Contract and the case before me was conducted on the basis that Pilbara Iron was not a party to that contract.[99] In such circumstances I am unable to make a finding that Rio Tinto Services Ltd was authorised to contract on behalf of Pilbara Iron and must proceed on the basis that it was not.
[99] ts 626.
The Purchase Order indicated that it was subject to the terms and conditions set out in various documents, including any 'Supply Contract'. I consider that the Purchase Order was an offer made by Pilbara Iron to WorkPac requesting that WorkPac provide Mr Fussell's services. I consider that the Purchase Order incorporated the terms of the Umbrella Supply Contract by reference.
By performing the work set out in the Purchase Order, WorkPac accepted the offer made. Both Pilbara Iron and WorkPac were then bound by the contract on the terms set out in the Umbrella Supply Contract.
GIO's argument that there was no consideration for such a contract overlooks the fact that if Pilbara Iron was not a party to the Umbrella Supply Contract, it was not bound by the terms of that agreement, including any obligation to pay WorkPac. By offering to contract on the terms of the Umbrella Supply Contract, Pilbara Iron provided additional valuable consideration in the form of agreeing to be bound by the terms of that agreement, including an obligation to pay.
I had some difficulty with GIO's argument that there was no 'meeting of the minds'. An argument that there was no meeting of the minds typically involves a situation where two parties have been dealing at cross-purposes such that they do not reach consensus. GIO referred to a decision of Commissioner Gething (as he then was) in Fitzpatrick v Garvey[100] which is an example of such a case. In that case Commissioner Gething referred to another example of such a case: Babsari Pty Ltd v Wong.[101]
[100] Fitzpatrick v Garvey [2012] WADC 42 (Fitzpatrick).
[101] Babsari Pty Ltd v Wong [1999] QSC 326; [2000] 2 Qd R 576 (Babsari).
In Babsari Chesterman was prepared to accept evidence from the parties who negotiated the contract regarding their subjective intentions. This evidence of differing subjective intentions allowed a finding that the parties had been dealing at cross-purposes and that there had been no meeting of the minds. In Fitzpatrick Commissioner Gething also considered such evidence to be admissible.[102]
[102] Fitzpatrick [288(b)].
In this case no evidence was lead about the subjective intentions of the persons representing Pilbara Iron or WorkPac in issuing the Purchase Order, filling that order, invoicing for the work done or paying that invoice.
While it might be accepted that WorkPac had executed the Umbrella Supply Contract, there was no evidence before me from anyone associated with WorkPac to suggest that they had understood the Purchase Order as being issued pursuant to that agreement, or had any particular subjective belief in filling that order and invoicing for the work done.
Various Pilbara Iron employees were called to give evidence. It was not put to any of them in cross-examination that they were familiar with the terms of the Umbrella Supply Contract, or that the Purchase Order was issued and WorkPac's services paid for, on the basis of any particular subjective belief.
GIO's submission seemed to be that it could be inferred from the terms of the Umbrella Supply Contract that WorkPac understood the work that it would perform for Pilbara Iron would be governed by the Umbrella Supply Contract.[103] If GIO ascribed a different intention to Pilbara Iron, it was not entirely clear what that was.
[103] ts 626 - ts 628, ts 674.
GIO asserted that it was 'clear' that the Purchase Order was issued with the Umbrella Supply Contract in mind because it referred to that contract.[104]
[104] ts 621 - ts 622.
While I accept that the Purchase Order incorporated the terms of the Umbrella Supply Contract by reference, the Purchase Order does not refer to the Umbrella Supply Contract in terms. It averts to the possibility of a 'Supply Contract' with any member of the Rio Tinto Group as a source of the relevant terms and conditions amongst a cascading list of possible sources of applicable terms and conditions. The relevant part of the Purchase Order is in the following terms:[105]
SUBJECT TO RIO TINTO TERMS AND CONDITIONS:
This Purchase Order is subject to and governed by:
(a) the terms and conditions of the Supply Contract entered into with you by a member of the Rio Tinto Group, for and on behalf of Rio Tinto, in relation to the Goods and/or Services (as the case may be) ordered under this Purchase Order; or
(b) if paragraph (a) above does not apply, the terms and conditions of an agreement entered into by Rio Tinto Group and you, in relation to the Goods and/or Services (as the case may be) ordered under this Purchase Order; or
(c) in any other case - the Rio Tinto Global Purchase Order Conditions for Goods and Services, that are in effect on the date of this Purchase Order, and any special conditions annexures or attachments referred to in or attached to this Purchase Order.
A copy of the Purchase Order Conditions for Goods and Services can be accessed at the Supplier page of the website at under the heading 'Global Purchase Order Conditions for Goods and Services' or obtained by contacting the purchasing office identified in this Purchase Order.
By supplying the Goods and/or Services (as the case may be) as specified in this Purchase Order, you have agreed to be bound by the applicable terms and conditions of this Purchase Order.
Any terms and conditions relating to your supply as provided in any quotation, offer, invoice, proposal, shipping materials, consignment note, delivery docket or any other sale documents is of no force and effect.
[105] Exhibit 33.
This part of the Purchase Order seems to be a 'boilerplate' clause intended to ensure that Rio Tinto's standard terms and conditions prevail over any terms and conditions proposed by the supplier.
I do not accept that these terms of the Purchase Order reveal that the person who issued it 'clearly' had in mind the Umbrella Supply Contract. The reference to a Supply Contract is expressed in generic terms and the Umbrella Supply Contract is not particularly identified.
I am not satisfied that on the evidence before me establishes that the parties were dealing at cross-purposes.
Further, if GIO's point was that both WorkPac and Pilbara Iron intended the terms of the Umbrella Supply Contract to apply, it is not apparent to me how that could establish that there was no meeting of the minds. It would suggest that there was consensus. It might also be observed that the conclusion that I have reached is consistent with such an intention as I have found that the terms of the Umbrella Supply Contract applied as those terms were incorporated by reference.
Did Mr Fussell's injury arise out of and occur during the performance of that contract?
Previous judicial consideration of the phrase 'arising out of'
The cases relied upon by GIO
GIO's submitted that in any event, Mr Fussell's injury did not arise 'out of' the performance of any contract. Its submissions rested heavily on three decisions of the New South Wales Court of Appeal concerning the proper construction of contractual indemnities: Roads and Traffic Authority (NSW) v Palmer,[106] F & D Normoyle Pty Ltd v Transfield Pty Ltd[107] and Erect Safe Scaffolding (Australia) Pty Ltd v Sutton.[108] GIO asserted that the conclusions reached in those cases applied to the construction of the Principal's Extension in this case.
[106] Roads and Traffic Authority (NSW) v Palmer [2003] NSWCA 58; (2003) 38 MVR 82 [213] (Palmer).
[107] F & D Normoyle Pty Ltd v Transfield Pty Ltd [2005] NSWCA 193; (2005) 63 NSWLR 502 [90] (Normoyle).
[108] Erect Safe Scaffolding (Australia) Pty Ltd v Sutton [2008] NSWCA 114; (2008) 72 NSLWR 1 [11] (Erect Safe).
Each of those cases involved the consideration of whether a contractual indemnity given by a contractor required the contractor to indemnify someone else for an injury that was not caused by negligence of the contractor. In some of those cases the injury was caused or contributed to by the negligence of a principal who was seeking indemnity. In each case, the court resolved that properly construed the indemnity did not require the contractor to indemnify the other party.
In Palmer the New South Wales Court of Appeal was constituted by Spigelman CJ, Handley and Giles JJA.
In that case a driver sued the Road Traffic Authority, a council and a contractor (engaged in roadworks), for damages for injuries sustained as a result of a car accident in an area of the roadworks. The council and the contractor were both found liable. The council claimed indemnity from the contractor pursuant to an indemnity in the following terms:[109]
18Property Damage and Public Risk
The Contractor shall indemnify the Principal against all loss of or damage to the property of the Principal (other than the Works but including existing property on which the works are being carried out) and against any claim or action brought by any person against the Principal or his agents in respect of personal injury or death of any person or loss of or damage to any property, arising out of the construction of the Works by the Contractor.
[109] Palmer [201].
The issue before the trial judge had been whether on its proper construction cl 18 was limited to claims which arose out of actions of the contractor and did not extend to claims that arose out of acts or omissions of the principal.[110]
[110] Palmer [203].
GIO relied upon the comments made by Spigelman CJ regarding the meaning of the words 'by the Contractor'. He observed:[111]
I have not found this matter easy to resolve ... The concluding words 'by the Contractor' perform a function in the nature of the limitation. If cl 18 had ended with the words 'arising out of the construction of the Works', it may very well be that the differences between this case and Venturoni would lead to the conclusion that one would not add any further words. In those circumstances, it may have been the case that the proper construction would be to extend the indemnity to acts performed by the Principal. The addition of the words 'by the Contractor' were intended to limit the scope of the 'claims or actions' for which Pioneer agreed to indemnify the Council. They were not words merely added to indicate that the 'construction of the Works' was as a matter of contract to be undertaken 'by the Contractor'.
[111] Palmer [213].
Spigelman CJ considered that this consideration was reinforced by the contra proferentem rule.[112]
[112] Palmer [214].
Giles JA (with whom Handley JA also agreed[113]) arrived at the same result as Spigelman CJ but stated his own reasons[114] (although he considered that these did not depart from anything said by Spigelman CJ).[115]
[113] Palmer [230].
[114] Palmer [235].
[115] Palmer [245].
Giles JA identified the issue as being whether the words in the indemnity 'by the Contractor' (after the words 'arising out of the construction of the Works'):
(a)are descriptive of the activity of construction of the roadworks out of which the damage must arise (which he described as 'the first approach'); or
(b)mean that the damage must arise out of the contractor's performance of that activity (which he described as 'the second approach').[116]
[116] Palmer [238].
Giles JA considered that the contractual indemnities and insurance obligations in the contract dealt with risk allocation and protection against risk. He observed that the first approach would mean that the risk allocation would be unbalanced. He said that the contractor would be obliged to indemnify the principal for claims against it for wrongs committed by it over which the contractor has no control, even if they were negligently or willfully committed. He observed that an indemnity can extend to a liability caused by the negligence of the indemnified party, but the unbalanced allocation of risk gave some point to 'by the Contractor'.[117]
[117] Palmer [241] - [242].
Giles JA preferred the second approach, reasoning that if the words were only descriptive of the works, they were of little significance because no one else was constructing the works[118] and the provisions with respect to insurance favoured the second approach.[119]
[118] Palmer [240].
[119] Palmer [244].
Giles JA considered that the indemnity might apply if the only basis of the liability lay in the acts or omission of the contractor, without fault of the principal. He considered, however, that as the liability arose out of the fault of both the contractor and the principal as well, the liability fell outside the indemnity.[120]
[120] Palmer [249].
It may be observed that cl 18 under consideration in Palmer was a contractual indemnity given by a contractor to a principal in relation to claims made by an injured member of the public. The present case involves the construction of a different type of indemnity: an insurance indemnity related to claims made by an injured employee.
Although it was not a matter relied upon by GIO, the court in Palmer considered other terms of the contract that dealt with contractual indemnities and insurance obligations in relation to injuries to employees. Given the nature of the indemnity in this case, those observations are worthy of note.
The contract in Palmer required the contractor to obtain insurance in both the names of the contractor and the principal for injuries to employees.[121] The relevant insurance provision was as follows:[122]
21Insurance of Employees
The Contractor shall at his own cost insure and keep insured his workmen under an Insurance Policy pursuant to the Workers Compensation Act, 1987. The policy of insurance under this clause shall cover the Principal's liability at common law and shall be effected with an insurer approved by the Principal.
(emphasis added)
[121] Palmer [201], [210] - [211].
[122] Palmer [201].
Both Spigelman CJ[123] and Giles JA[124] accepted that the insurance the contractor was required to obtain by this clause would have responded even if the injury was caused by the negligence of the principal. They did not have the same concerns that they had in relation to cl 18.
[123] Palmer [211].
[124] Palmer [244].
In Normoyle the Court of Appeal was constituted by Ipp, McColl and Bryson JJA.
A worker (an employee of the first contractor) successfully sued the main contractor for damages for injuries sustained on a construction site occupied by the main contractor, after falling over pipes brought onto the site by the second sub-contractor (but then placed in the dangerous position by someone unknown).
The main contractor claimed indemnity from the first sub‑contractor and the second sub-contractor (both of whom were found not liable to the worker)[125] under the following standard provision in the sub‑contracts:
The sub-contractor shall indemnify … [the main contractor] … against all claims, demands, proceedings, liabilities, costs, charges and expenses arising as a result of any act, neglect or default of the sub-contractor, its employees or agents … relating to its execution of the Works.
[125] Normoyle [73], [86] (Ipp JA).
Ipp JA (with whom McColl JA agreed) held that 'any act' should be interpreted ejusdem generis with 'neglect' and 'default'; and therefore it did not include an act that is 'neither a neglect nor a default'.[126] Accordingly, he thought that the employer and the first sub-contractor were not obliged to indemnify the main contractor because the worker's injury was not caused by an act or omission of the employer that amounted to a breach of a duty of care, a contract or a statutory duty.[127] Ipp JA said:[128]
Further, in my view, while the phrase 'arising as a result of', in cl 12, is a particularly broad expression of the notion of causation, it is not open ended. The clause plainly does not connote 'proximate cause' or 'direct cause', but it could not be construed so as to import an unlimited concept of causation. The clause does involve some causal or consequential relationship (cf Dickinson v Motor Vehicle Insurance Trust (1987) 163 CLR 500, 505). Remoteness must form an element of the meaning of 'arising as a result of'; more is required than the mere existence of connecting links between an act, neglect or default of the sub-contractor and the liability incurred by the [main contractor].
In my opinion, the acts of [the second sub-contractor] in bringing the pipes on to the ground level of the construction site and storing them in their proper place are so remote from the accident which caused [the worker's] injuries that the liability which the [main contractor] incurred in consequence of those injuries could not be said to arise as a result of those acts.
[126] Normoyle [67].
[127] Normoyle [68], [75].
[128] Normoyle [90] - [91].
Bryson JA dissented. He considered that the word 'act' is strikingly distinct from 'neglect' and from 'default' and conveys in a clear intention that there was a right of indemnity in situations of which fault was not an aspect.[129] He concluded that the employer was obliged to indemnify the main contractor because the worker's successful claim arose as a result of an act of an employee of the employer (the worker himself)[130] and the second sub-contractor was not obliged to indemnify the main contractor. He considered that the fact that the sub-contractor brought the pipes onto the site (but not to the place of the accident) was too remote to constitute a relevant act.[131]
[129] Normoyle [147].
[130] Normoyle [153].
[131] Normoyle [155].
In Erect Safe the court was comprised of Giles JA, Basten AJA and McClellan CJ at CL.
In that case a worker successfully claimed damages from the head contractor (25%), a scaffolding sub-contractor (60%) and his employer (15%) with respect to an accident, when he hit his head on scaffolding. The head contractor claimed indemnity from the scaffolding sub‑contractor under the sub-contract, which relevantly provided:[132]
Indemnity
The Subcontractor must indemnify [the head contractor] against all damage, expense …, loss … or liability of any nature suffered or incurred by [the head contractor] arising out of the performance of the Subcontract Works and its other obligations under the Subcontract
[132] Erect Safe [6].
Giles JA considered that the words 'arising out of' were wide but required a substantial relationship that was not remote but the relationship was less than that required by words such as 'caused by' or 'as a result of'.[133]
[133] Erect Safe [11].
Applying Normoyle, he concluded that the head contractor's liability did not arise out of an act of the scaffolding sub-contractor because, although the works provided the occasion for the injury to incur liability that was insufficient.[134]
[134] Erect Safe [12] - [15].
He also relevantly observed that there is no easy test for the nature or extent of the causal or consequential relationship involved in the words 'arising out of', and a substituted form of words should not be devised to replace the words chosen by the parties. He also said that the relationship should not be remote, but one of substance albeit less than that required by words such as 'caused by' or 'as a result of' but beyond that, it is a question of judgment on the particular facts.[135]
[135] Erect Safe [11].
McClellan CJ at CL identified the question as whether the scaffolding sub-contractor was obliged to indemnify the head contractor for liability arising from the scaffolding sub-contractor's performance of the subcontract works or in relation to those works.[136] He concluded that the liability did not arise out of the sub-contractor's performance of the subcontract works because although the faulty erection of the scaffolding by the scaffolding sub-contractor provided the 'occasion' for the head contractor's liability, the head contractor's liability arose from its own independent act of negligence.[137]
[136] Erect Safe [155].
[137] Erect Safe [157].
Basten AJA dissented. He concluded that the scaffolding contractor was liable to indemnify because the main contractor's liability arose out of the performance of the subcontract works. He reasoned that the phrase 'arising out of' only connoted a weak causal relationship, which was satisfied when the activity of the sub-contractor in the performance of the contract contributes in a material way to the breach of duty by the head contractor.[138] He concluded that a requirement that the liability of the head contractor be entirely derivative from that of the sub-contractor would deprive the indemnity of any obvious operation.[139]
Two cases referred to by Pilbara Iron
[138] Erect Safe [97].
[139] Erect Safe [98].
Pilbara Iron's oral closing submissions emphasized the need for this court to construe the words used in the Principal's Extension. It was submitted that the decisions in other cases tended to turn on their own facts and were at times inconsistent. That said, Pilbara Iron's written submissions referred to two decisions. A decision of the High Court in Dickinson v Motor Vehicle Insurance Trust (WA)[140] and a decision of the Full Court of Western Australia in Speno Rail Maintenance Australia Pty Ltd v Hamersley Iron Pty Ltd.[141]
[140] Dickinson v Motor Vehicle Insurance Trust (WA) [1987] HCA 49; (1987) 163 CLR 500, 505 (Dickinson).
[141] Speno Rail Maintenance Australia Pty Ltd v Hamersley Iron Pty Ltd [2000] WASCA 408; (2000) 23 WAR 291 (Speno).
Dickinson was decided in 1987. In that case it was necessary for the High Court to consider whether the appellant's injury arose out of the use of a car in a statutory insurance context. The case involved a father who drove his two young children to town and then left them in the car while he went shopping. While he was away, the elder boy found a box of matches between the seats in the car and set the car alight, seriously injuring his younger sister. With regard to the meaning of 'arising out of', the High Court observed:[142]
Whether or not the appellant's injuries were actually caused by the use of the motor car, it is sufficient to say that they arose out of such use. The test posited by the words 'arising out of' is wider than that posited by the words 'caused by' and the former, although it involves some causal or consequential relationship between the use of the vehicle and the injuries, does not require the direct or proximate relationship which would be necessary to conclude that the injuries were caused by the use of the vehicle.
[142] Dickinson (505).
The High Court was satisfied that the occupation of the motor car by the appellant and her brother as passengers whilst the car was stationary, was a use of the vehicle and that the car caught fire whilst it was in use in that way. The High Court was also satisfied that the injuries which the appellant sustained as a result arose out of that use.
Speno was decided in 2000. Speno had contracted with Hamersley to carry out rail grinding work for Hamersley on its railway. A worker employed by Speno was injured whilst travelling on the railway in the course of his work, as a result of the negligence of employees of Hamersley.[143] He was travelling in a car known as an HIRail, which ran on the rail tracks, when the points were carelessly changed against him, causing the vehicle to be derailed, as a result of which he was injured. Hamersley had insurance with Zurich Australian Insurance Ltd in which both Speno and Hamersley were named as insureds, Hamersley being identified as the principal in respect of a contract between it and Speno. The clause in that case was worded as follows:
[Speno] shall be solely liable for, and shall be deemed to indemnify and hold harmless [Hamersley] against any and all liabilities, losses, damages ... of every name or nature whatsoever arising whether:
(a)under any statute or at common law in respect of personal injury ... or death of
(i)any and all persons employed by it in the execution of the Work/Services ...
resulting either directly or as a consequence of the performance of the Work/Services under the Contract.
[143] Speno [1] - [2] (Malcolm CJ).
It was accepted by Zurich that Hamersley was an insured under the policy, but only in respect of any liability of Hamersley 'arising out of the performance by [Speno] of any contract … for the performance of work for [Hamersley]'. Zurich maintained that while Speno was fully insured, Hamersley's cover was limited to its capacity 'as the Principal' and to 'liability arising out of the performance' by Speno of the work the subject of the rail grinding contract with Hamersley.
It was contended on behalf of Zurich that Hamersley's liability did not arise out of performance by Speno of the contract but that Hamersley's liability to the person injured 'arose out of' the negligent operation by Hamersley employees of the points at the siding, which caused the HIRail to be derailed. It was said that the fact that the points at the siding were negligently operated was merely coincidental and not causative of the liability and that the performance of the contract by Speno formed no element of the cause of action against Hamersley. It was also asserted that nothing Speno did or omitted to do in performance of the contract gave rise to Hamersley's liability. It was said that Speno's performance of the contract with Hamersley merely gave occasion for Hamersley to be negligent and was not causally or consequentially related to the accident.[144]
[144] Speno [10].
Malcom CJ said that the question to be determined was not whether the liability to the injured person was caused by the performance by Speno of the contract, but whether the liability of Hamersley to him arose out of the performance by Speno of the contract with Hamersley.[145] He considered that the HIRail journey was something being done in the course of the performance of the contract by Speno and that the negligent incident giving rise to liability occurred in the course of Speno's performance of the contract. He considered this was enough to establish that Hamersley's liability was one 'arising out of' the performance by Speno of the contract.[146]
[145] Speno [11].
[146] Speno [12].
Ipp JA said reached a similar conclusion and explained his reasoning as follows:
66It is true that the negligent act that gave rise to liability was the operation of the switches while the HIRail was travelling on the rail track, and not some aspect of Speno's performance of [the contract]. But the incident giving rise to liability occurred in the course of Speno's performance of the contract. That is to say, the HIRail was on the track and [the worker] was in the HIRail only because Speno required them to be in those places so as to enable it to perform the contract. There is undoubtedly a causal link between Hamersley's liability and the performance by Speno of the contract, namely, the presence of the HIRail (with [the worker] in it) on the tracks at the very moment the switches were negligently operated.
67The words 'arising out of' are well recognised as being of broad import. Further, in the context of an insurance policy, there is no reason to construe them narrowly. It is difficult to conceive of any situation where Hamersley could incur a liability arising out of the performance by Speno of its contract … in circumstances different in principle to those in the present case. …
Wheeler J said:
131In the present case, I have no difficulty with Zurich's proposition that the relevant negligent act or omission was the switching of the switches or points by the Hamersley employee. However, in doing so, Hamersley breached its duty of care which was owed to those travelling on the railway that it operated. It was by reason of Speno's performance of the contract that Mr Nolan, Speno's employee, was travelling on the railway. His presence was directly related to and formed part of the performance of the contract, and in that sense the duty, which was one ingredient of Hamersley's liability, 'arose' out of the performance of the contract by Speno.
Wheeler J said she was fortified in reaching that view because it would have been difficult to imagine any situation in which a negligent act by Hamersley could arise out of the performance by Speno of the contract.[147]
The relevance of these cases
[147] Speno [128].
There are other cases in which the words 'arising out of' have been considered by courts in different contexts. Some of those additional cases were discussed by Einstein J in Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd,[148] Basten JA in Erect Safe[149] and Riordan J in Certain Underwriters at Lloyds of London v Allianz Australia Insurance Ltd.[150]
[148] Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2006] NSWSC 223 [990] ‑ [1004].
[149] Erect Safe [45] - [86].
[150] Certain Underwriters at Lloyds of London v Allianz Australia Insurance Ltd [2018] VSC 735 [24] ‑ [58] (Certain Underwriters).
As Pilbara Iron submitted and was observed by Basten JA in Erect Safe[151] and Riordan J Certain Underwriters,[152] some of those cases appear difficult to reconcile. It does not seem to me that it is necessary for me to undertake such an exercise.
[151] Erect Safe [45] - [86].
[152] Certain Underwriters [67].
In Erect Safe McClellan CJ at CL observed that the resolution of any disagreement about a particular clause in a contract must be approached by considering the terms of the relevant document. He said that although the resolution of disputes in other cases may provide guidance, each dispute must be resolved by the application of the accepted principles of construction to the particular contract.[153] Giles JA said something similar.[154]
[153] Erect Safe [154].
[154] Erect Safe [5].
With respect, I agree. None of the cases that GIO or Pilbara Iron referred to considered an insurance indemnity in the same terms as the Principal's Extension. The contractual indemnities considered in most of those cases are far removed from the insurance indemnity under consideration in the present case. The resolution of this case turns upon the construction of the terms of the Principal's Extension, considered in the context of the Insurance Policy, of which it forms part.
The proper construction of cl 4.1
What the terms of the Insurance Policy and Principal's Extension reveal about the commercial context
The terms of the Insurance Policy and other terms of the Principal's Extension provide the context in which cl 4 falls to be construed.
The Insurance Policy is a Workers Compensation Western Australia Employer Indemnity Policy. The policy provided workers compensation insurance and 'common law' insurance.
At the time s 160 of the Workers' Compensation & Injury Management Act 1981 (WA) (Workers' Compensation Act) (which had since been repealed and replaced with a new Act) required an employer to obtain insurance for the full amount of the employer's liability to pay compensation under the Act to any worker employed by the employer and the amount of the employer's liability to pay damages to or in respect of any worker employed by the employer.
Clause 7 of the Insurance Policy provided that if during the Policy Period a Worker suffered an Injury and WorkPac was liable under the Workers' Compensation Act to make any payment in respect of the Injury, GIO would indemnify WorkPac against that payment and in addition, will pay all reasonable costs and expenses WorkPac incurred with GIO's written consent.
Clause 8 provided for an indemnity in relation to any Damages WorkPac was liable to pay, and reasonable legal costs it incurred with GIO's written consent, for the Common Law Liability. The term Common Law Liability was defined to include liability to a Worker for damages due, claimed or paid independently of the Workers' Compensation Act.
The Principal's Extension extends indemnity to a Principal. The term Principal was defined to mean any party for whom WorkPac performed work during the Policy Period provided that the work is within the scope of the Business and for the purpose of the Principal's business.
Like the Insurance Policy, the Principal's Extension provides a Principal with indemnity for liability to make payments under the Workers' Compensation Act and for common law liability.
With regard to workers compensation, cl 1 of the Principal's Extension provided that GIO would indemnify a Principal where:
(a)a Principal is liable pursuant to s 175 of the Workers' Compensation Act to pay compensation to WorkPac's injured Worker for an Injury that arises out of and occurs during the performance of the work required to be done by WorkPac under a contract with the Principal during the Policy Period; and
(b)the Worker is employed by or engaged in the business at the time when the Injury occurs.
Clause 1.1 referred to s 175 of the Workers' Compensation Act. Section 175(1) of the Workers' Compensation Act deemed a principal to also be an employer of a contractor's employee, who would be joint and severally liable to pay workers' compensation to the contractor's injured employee. Thus, both Pilbara Iron and WorkPac might both have been jointly and severally liable to pay worker compensation to Mr Fussell.
Importantly, however, s 175(2) of the Workers' Compensation Act provided that a principal would be entitled to an indemnity from a contractor for the principal's liability under s 172(2). Therefore, if Mr Fussell had claimed workers compensation from Pilbara Iron, WorkPac would have been required to indemnify Pilbara Iron for any payment it was required to make to Mr Fussell.
Once this is understood it may be seen that extending indemnity to a Principal for any workers compensation liability, had the effect of protecting WorkPac from a potential liability to indemnify the Principal. Although as I have mentioned, s 160 of the Workers' Compensation Act required an employer to obtain insurance for the full amount of the employer's liability to pay compensation under the Act, it is not apparent to me that that obligation extended to insuring against an obligation to indemnify a principal.
Insurance that offered such coverage would presumably be more attractive to a contractor such as WorkPac as without it, WorkPac might be exposed to a claim for an indemnity from a principal such as Pilbara Iron. Such insurance would also be more attractive to principals as it would protect them against a situation in which the statutory indemnity provided for in s 175(1) was worthless because the contractor had no capacity to pay.
It seems to me that when the terms of the workers compensation insurance afforded by the Principal's Extension are considered in the relevant statutory context, it may be seen the purpose underlying the Principal's Extension was to insure WorkPac against any liability it might have to indemnify a principal.
It is in this context that cl 4 falls to be considered.
Clause 4
The full text of cl 4 is set out at [104] above. Clause 4.1 required that an injury to an employee 'arises out of and occurs during the performance of the work required to be done by WorkPac under a contract with a Principal' during the policy period.
Pilbara Iron accepted that 'arises out of' involves some causal or consequential relationship between an event and an injury but said that it does not require the direct or proximate relationship that would be necessary to conclude that the injury was caused by the event.[155]
[155] Defendant's Third Party Closing Submissions, par 3, Dickinson (505) (arising out of the use of a motor vehicle); Speno.
Pilbara Iron argued that the necessary causal connection was satisfied here because Mr Fussell was performing the work that WorkPac was required to do under the terms of its contract with Pilbara Iron.[156] Although Pilbara Iron's submissions did not expressly rely on the decision in Speno, the argument advanced adopted similar reasoning to that adopted in that case.
[156] ts 742.
GIO said it was relevant to note that the general policy wording did not contain the 'arising out of' requirement. It submitted that if the intention of the Principal's Extension was to provide the coverage Pilbara Iron contended, then only the phrase 'occurred during' would have been used. It contended that the additional phrase 'arises out of' imports a requirement of causation that would otherwise not be present.[157]
[157] Exhibit 31.
Relying on the reasoning of Spigelman CJ in Palmer, GIO submitted that the fact that cl 4.1 referred to the work that was required to be done 'by' WorkPac under a contract, had a limiting function.[158] It submitted that properly construed the effect of the words 'arises out of' is that a Principal would not be covered under WorkPac's policy unless WorkPac was involved in the circumstances causing the injury.
[158] Palmer [213].
The insurance indemnity in this case is quite different to the contractual indemnities in Palmer and the other cases referred to by WorkPac. Those cases involved consideration of whether a contractual indemnity should be construed so as to require a contractor who had not caused or contributed to an injury to indemnify the party who had. Whether the indemnity extended to such an obligation was unclear because the indemnity did not expressly state that the indemnifying party was obliged to indemnify the other party for that party's negligence. As Giles JA observed in Palmer, a contractual indemnity that requires a contractor to indemnify a principal for injuries caused by the principal's own negligence would seem to produce an 'unbalanced' allocation of risk. While such a contractual indemnity is not unheard of, such an allocation of risk seems to make less commercial sense.[159]
[159] Palmer [241] - [242].
The indemnity under consideration in the present case is not a contractual indemnity. It is an insurance indemnity. In Palmer the court had no difficulty accepting that a principal's insurance against the principal's common law liability would extend to require the insurer to indemnify the principal against the principal's own negligence.[160]
[160] Palmer [211] (Spigelman CJ), [244] (Giles JA).
This is unsurprising. There is nothing exceptional about an insurer indemnifying an insured for the insured's own negligence. On the contrary, it is typical.
Here (unlike in Palmer) it is clear that the indemnity given by the Principal's Extension was intended to extend to the principal's negligence. This is because cl 4.3 made indemnity conditional upon the principal's negligence, causing or contributing to the injury. Given this, it does not seem to me that the reasoning in Palmer relied upon by GIO assists in this case.
To the extent that GIO's submission was that the objective intention evident from the Principal's Extension was that both WorkPac and Pilbara Iron must be negligent, I do not accept that submission for two reasons.
First, cl 4.1 (which refers to the work done by WorkPac) does not use any language suggestive of a requirement of fault on the part of WorkPac. It does not use words like 'neglect' or 'default' which Ipp JA and McColl JA considered significant in Normoyle.[161]
[161] Normoyle [68], [75].
The language used in cl 4.1 can be contrasted to the language used in cl 4.3 which expressly made indemnity conditional upon the principal's negligence, causing or contributing to the injury. It seems to me that the use of different language reveals different intentions and that cl 4.1 was intended to operate differently to cl 4.3.
Secondly, cl 4.3 contemplates that GIO might indemnify a principal where the principal's negligence was the sole cause of the injury. The clause conditions indemnity on the principal's negligence having 'caused or contributed' to the injury. In this context both 'caused' and 'contributed' concern causation, with 'contributed' addressing the situation where the principal's fault was one of multiple causes of the injury and 'caused' addressing a situation in which the principal's negligence is the sole cause of the injury.
This is significant because if it were a condition of indemnity that the injury was caused by WorkPac's fault, then it would be unnecessary for cl 4.3 to address a situation in which the principal's negligence is the sole cause of the injury. If fault on the part of WorkPac was always required, then there could never be a situation in which the principal's negligence was the sole cause of the injury and the indemnity would respond. That cl 4.3 addresses a situation where the principal's negligence was the sole cause of the injury suggests that it was contemplated that the indemnity might apply in such a situation.
In Dickinson the High Court observed that the words 'arising out of' are wider than that posited by the words 'caused by' and although they involve some causal or consequential relationship, they do not require a direct or proximate relationship.[162] Ipp JA in Normoyle said that some concept of remoteness is also necessary.[163]
[162] Dickinson (505).
[163] Normoyle [90] - [91].
In this case the work to be performed by WorkPac was described in the Purchase Order[164] as labour hire services with Mr Fussell performing the daily tasks assigned by his supervisor. Given this, Mr Fussell's presence on site following the directions given by Pilbara Iron's supervisors was WorkPac's performance of the contract.
[164] Exhibit 33.
It seems to me therefore that Mr Fussell's injury arose out of WorkPac's performance of the contract as he was present on site performing that contract when he was injured. This seems to me to be a sufficient causal connection. Such a construction is consistent with the approach adopted in Speno.
It does not seem to me that such a construction fails to give different effect to the words 'arises out of' and 'during', as GIO suggests. They have separate effect, but both were satisfied in this case.
The term 'arises out of' requires some causal or consequential relationship, but not a direct or proximate causal connection. The word 'during' imposes a temporal limitation. The use of the word during temporally limits the satisfactory causal connection to those that occur during the period in which the works are being performed.
There might be circumstances in which one requirement was satisfied but the other not. For example, imagine Mr Fussell had been injured in a taxi on his way to the airport to take a plane to site. This may have been before the performance of WorkPac's contract with Pilbara Iron commenced (because he had not yet arrived at site) but the injury might still have 'arisen out of' that performance as he would not have been in the taxi if it were not necessary to travel to site. In such a case the requirement that the injury occur during the performance of the contract might not be satisfied as the injury did not occur during the period in which the contract was being performed.
GIO suggests[165] that the construction it advanced was a 'business like' construction, implying that a construction that required the Principal's Extension to respond where WorkPac was not at fault lacked commercial common sense.
[165] Insurance Australia Ltd t/as CGU Insurance v MOS Beverages Pty Ltd [2021] FCAFC 165; (2021) 286 FCR 1 [25]. Third Party Closing Submissions, page 18.
It seems to me that the evident commercial purpose of the Insurance Policy and the Principal's Extension was to discharge any legal obligation that WorkPac might have to obtain workers compensation and common law insurance. Such insurance also protected WorkPac against any claims that Pilbara Iron might have against it for an indemnity.
As I discussed above, this is the evident intent of the provisions addressing indemnity against claims made under the Workers' Compensation Act. It seems to me that the same intent may be discerned in the provisions of the Principal's Extension addressing Pilbara Iron's common law liability.
As is evident from the various cases to which GIO referred, it is common for contractors to be contractually obliged to obtain insurance naming the principal as an insured and for the insurance obligation to be more extensive than a contractual indemnity. This is a common method by which the parties to such contracts manage risk.
By way of illustration, cl 33.3(a) of the Rio Tinto General Conditions required a service provider to obtain workers' compensation and employers' liability insurances covering all 'Liabilities', whether arising under statute, common law or civil law, in relation to the death of, or injury to, any employee of the service provider.[166] The term 'Liabilities' was defined to include damages.[167] Clause 33.3(b) provided that this insurance must be endorsed to indemnify Pilbara Iron against any liability which it may incur to the service provider's employees, arising by virtue of the applicable workers' compensation statute or at common law.
[166] Exhibit 34, pages 1112 - 1114.
[167] Exhibit 34, page 1099.
The Rio Tinto General Conditions also contain a contractual provision requiring the service provider to indemnify Pilbara Iron, but the contractual indemnity was narrower than the insurance obligation.[168]
[168] Clause 34, Exhibit 34, pages 1114 - 1115.
I have only referred to the Rio Tinto General Conditions by way of illustration because there is no evidence before me that the Insurance Policy was specifically obtained by WorkPac to discharge the contractual obligation in the Rio Tinto General Conditions, or that GIO was familiar with these terms.
It does not seem to me that the construction I have arrived at lacks commercial common sense. Insurance that offered broader coverage for a principal's liability would have been more likely to satisfy any insurance obligation that a contractor like WorkPac would be likely to have to a potential principal. Insurance that only responded where both the contractor and the principal were liable might well be unsatisfactory if the contractor was required to obtain insurance fully indemnifying the principal.
GIO also contended that Mr Fussell's injury was too remote. It submitted that the work completed by WorkPac was too far removed from the cause of the injury, which was the actions of the loader operator. It said that no actions by WorkPac caused the collision and the consequent injury.
I do not consider that the work completed by WorkPac was too remote. For the reasons I have already given, I do not consider that it was necessary for WorkPac's actions to have caused the injury before the injury arose out of the performance of its contract with Pilbara Iron.
Whether there was 'Principal's negligence' in this case
Pilbara Iron argued that Mr Fussell's injury was caused or contributed to by Pilbara Iron's negligence either because of its own negligent breach of the duty of care that it owed to Mr Fussell, or the attribution of Mr Reidy's negligence to Pilbara Iron as his employer.[169]
[169] Defendant's Opening Submissions in Third Party Proceedings dated 8 April 2024 (Defendant's Opening Submissions in Third Party Proceedings), par 26.4.
Pilbara Iron submitted that the term 'Principal's negligence' means negligent conduct and liability for that negligence that is imposed by the law on the principal. It submitted that nothing in the term confined the conduct to that of the principal only and that its construction conforms with the objective of the Insurance Policy.[170] Pilbara Iron submitted that negligence is necessarily an evaluative process.[171]
[170] Defendant's Responsive Trial Opening Submissions in Third Party Action dated 26 April 2024 (Defendant's Responsive Third Party Opening Submissions), par 21.
[171] ts 755.
GIO did not dispute that Pilbara Iron's breach of duty met the definition of 'Principal's negligence' but it disputed that Pilbara Iron's vicarious liability for Mr Reidy's negligence did.[172] GIO argued that vicarious liability is imposed despite the employer itself not being at fault and it referred to the decision of the High Court in Prince Alfred College Inc v ADC.[173] It submitted that as Mr Reidy was a mere servant or agent of the company, rather than a manager of Pilbara Iron, his negligence was not the negligence of Pilbara Iron.[174] In this regard GIO relied upon the decision of HL Bolton (Engineering) Co Ltd v TJ Graham & Sons Ltd.[175]
[172] Third Party's Outline of Submissions dated 17 April 2024 (Third Party's Opening Submissions), pars 32 - 33.
[173] Prince Alfred College Inc v ADC [2016] HCA 37; (2016) 258 CLR 134 [39]; Third Party's Opening Submissions, par 34.
[174] Third Party's Opening Submissions, pars 35 - 36.
[175] HL Bolton (Engineering) Co Ltd v TJ Graham & Sons Ltd [1957] 1 QB 159.
As I have found that Mr Fussell's injury was caused or contributed to by Pilbara Iron's breach of a duty that it owed Mr Fussell, even GIO's narrower definition of 'Principal's negligence' has been satisfied. It is therefore unnecessary for me to determine whether or not the term 'Principal's negligence' extends to include legal liability that Pilbara Iron might have for another person's negligence.
I will note, however, that I had some reservations about the correctness of Pilbara Iron's argument.
It seems to me that the use of the possessive in the term 'Principal's negligence' suggests that the negligence must be that of the principal. The Principal's Extension defines the term 'Principal' to mean any party for whom WorkPac performed work during the relevant period.[176] When the name of the relevant Principal (Pilbara Iron) is read into the term 'Principal's negligence', the term becomes 'Pilbara Iron's negligence'.
[176] Exhibit 32.
I have some reservations about whether the ordinary meaning of the words 'Pilbara Iron's negligence' would extend to include Pilbara Iron's legal liability for some other person's negligence.
Does the Principal's Extension extend to cover defence costs?
Clause 4 of the Principal's Extension provides for indemnity against 'Common Law Liability'. That term was defined to mean damages due, claimed or paid independently of the Workers' Compensation Act.[177] The term is not defined to include any liability to pay legal costs incurred defending any claim. Clause 4 did not otherwise provide for the payment of such costs.
[177] Exhibits 31 and 32.
By contrast, cl 8 of the Insurance Policy expressly provided that WorkPac was entitled to indemnity for any damages that WorPac was liable to pay and any reasonable legal costs incurred with GIO's consent.
GIO contended that even if it were obliged to indemnify Pilbara Iron for its 'Common Law Liability', GIO's obligation did not extend to an obligation to pay Pilbara Iron's legal costs.[178]
[178] Third Party's Closing Submissions, par 19.
Pilbara Iron maintained that GIO was obliged to pay its legal costs. Pilbara Iron relied on cl 7 of the Principal's Extension. That clause provided that the principal's entitlement to indemnity was 'subject to, governed by and limited by' the Policy Period, limits of indemnity, exclusions, conditions and other terms of the Insurance Policy.[179] Pilbara Iron contended that the effect of cl 7 of the Principal's Extension was to 'pick up' the parts of cl 8 of the Principal's Extension that provided for the payment of legal costs.[180]
[179] Exhibits 31 and 32.
[180] ts 589 - ts 591.
Pilbara Iron sought to draw support for its argument from condition 4 of the Insurance Policy. That condition provided that 'you' must not incur any expense of litigation or make any payment (including weekly payments and medical expenses), settlement or admission of liability in respect of any 'Injury' to or claim made by any 'Worker', without GIO's written consent.[181] Pilbara Iron submitted that the fact that cl 7 of the Principal's Extension picked up such a condition revealed an intention that GIO would pay the Principal's legal costs.[182]
[181] Exhibit 31.
[182] ts 587 - ts 588.
While I accept that the application of condition 4 might provide some support for Pilbara Iron's position, I have difficulty accepting Pilbara Iron's construction of the Principal's Extension and Insurance Policy. This is for three reasons.
First, Pilbara Iron's argument rests on the proposition that cl 7 of the Principal's Extension 'picks up' GIO's obligation to pay Pilbara Iron's legal fees in cl 8 of the Insurance Contract. Clause 7 provides that:[183]
The Principal's entitlement to indemnity shall be subject to, governed by and limited by the Policy Period, limits of indemnity, exclusions, conditions and other terms of the Policy, except Condition 9, as if the Principal were the employer of your injured or deceased Employee.
[183] Exhibit 32.
The use of the words 'subject to, governed by and limited' after the reference to the 'Principal's entitlement to indemnity' suggest an intention to constrain the indemnity granted in cl 4 of the Principal's Extension by making it subject to the limits of indemnity, exclusions, conditions and other terms of the Insurance Policy. The use of language suggestive of constraint does not suggest an intention to extend the scope of the indemnity by picking up further rights of indemnity provided for in the Insurance Policy.
Secondly, if cl 7 of the Principal's Extension picked up cl 8 of the Insurance Policy, it would also pick up the indemnity provided for in that clause. A Principal's entitlement to indemnity is addressed in cl 4 the Principal's Extension which grants indemnity if the conditions in that clause are satisfied. Those conditions are different to the conditions provided for in cl 8 of the Insurance Policy. It seems unlikely that it was intended that cl 8 applied to a Principal.
Pilbara Iron sought to avoid this consequence by suggesting that cl 7 of the Principal's Extension did not pick up cl 8 of the Insurance Policy in its entirety. It contended that cl 7 of the Principal's Extension did not pick up the conditions contained in cl 8 of the Insurance Policy, or the indemnity to pay damages but it did pick up the indemnity for legal costs.[184]
[184] ts 583.
It seems to me, however, that cl 8 provides that any entitlement to legal costs depends on the satisfaction of the conditions provided for in that clause. To construe cl 7 as picking up the entitlement to legal costs without any need to satisfy the conditions in cl 8 would be to defeat the evident intention of cl 8.
Thirdly, that cl 8 of the Insurance Policy expressly provides for the payment of legal costs but cl 4 of the Principal's Extension does not, suggests a deliberate intention that the two clauses were to operate differently. That different language was used, suggests that a different outcome was intended.
It seems to me that properly construed, cl 7 of the Principal's Extension does not pick up any part of cl 8 of the Insurance Policy. As neither the Insurance Policy, nor the Principal's Extension otherwise require GIO to indemnify Pilbara Iron for its legal costs of defending Mr Fussell's claim, GIO is not obliged to indemnify Pilbara Iron for those costs.
GIO also submitted that if Pilbara Iron was entitled to indemnity for its legal costs of defending Mr Fussell's claim, it breached the Insurance Policy because it incurred those legal costs without GIO's written consent.[185] As I have determined that GIO is not obliged to indemnify Pilbara Iron for its legal costs, it is unnecessary for me to address this point.
Whether Pilbara Iron breached the Insurance Policy and failed to mitigate
[185] Third Party's Opening Submissions, par 56.
GIO contended that Pilbara Iron should not have defended Mr Fussell's claim to trial. It said that Mr Reidy was plainly negligent, Pilbara Iron is vicariously liable for Mr Reidy's negligence and quantum was agreed on 9 March 2023.[186]
[186] Third Party's Opening Submissions, par 56.
GIO submitted that Pilbara Iron had breached condition 4 of the Insurance Policy and its duty of mitigation by admitting that there were precautions that could have been taken and that Pilbara Iron did not instruct loader operators to measure a safe distance. GIO said that it was 'extraordinary' that Pilbara Iron would plead such matters, in the face of the clear instructions and training that were provided to Mr Reidy.[187] GIO contended that based on the evidence that had been discovered, Pilbara Iron ought to have mounted a 'robust' defence of Mr Fussell's allegations that Pilbara Iron was negligent, rather than pleading matters that suggest it was negligent.[188]
[187] Third Party's Opening Submissions, par 57(misnumbered 19).
[188] Third Party's Opening Submissions, par 57(misnumbered 19).
GIO submitted that a proper instruction had been given by Pilbara Iron before the accident and when Pilbara Iron investigated the accident contemporaneously, it considered its training was adequate and subjected Mr Reidy to discipline and counselling. GIO submitted that Pilbara Iron had advanced these contentions only in the context of the third-party proceedings, where Pilbara Iron's negligence was a prerequisite to insurance coverage.[189]
[189] Third Party's Opening Submissions, par 57.
Pilbara Iron submitted that the principle that a plaintiff must take all reasonable steps to mitigate his or her loss consequent upon a breach of contract or negligent breach of duty is not about 'breach' but concerns what loss is or is not recoverable.[190] Further, it contended that s 54 of the Insurance Contracts Act 1984 (Cth) applies to the Principal's Extension, so even if Pilbara Iron breached the insurance contract, GIO must prove that it has been prejudiced and the value of that prejudice.[191]
[190] Defendant's Closing Submissions in Third Party Action, par 14; Clark v Macourt [2013] HCA 56 [17]; (2013) 253 CLR 1.
[191] Defendant's Closing Submissions in Third Party Action, par 25.
I am not satisfied that Pilbara Iron breached condition 4 of the Insurance Policy. Condition 4 provided that Pilbara Iron could not make a settlement or admission of liability without GIO's written consent. Condition 4 did not prohibit Pilbara Iron from making any admissions at all. It only prohibited it from making an admission of liability. While it is true that the paragraphs of the defence referred to by GIO made admissions, those admissions did not admit liability. Pilbara Iron's defence continued to deny liability to pay Mr Fussell damages.
Further, although GIO's submissions proceeded on the basis that admissions were made without its consent, this was not established by any evidence. No evidence was led before me about the circumstances in which Pilbara Iron made the admissions, including that they were made without GIO's consent. There was no evidence before me to establish that any admissions were made without GIO's consent.
Nor am I satisfied that there has been any failure to mitigate.
Insofar as the alleged failure to mitigate was because Pilbara Iron made admissions, it does not seem to me that it was unreasonable for it to make those admissions. In the context of the evidence before me, those admissions were not 'extraordinary' as GIO submitted and were reasonable and proper.
Insofar as the alleged failure to mitigate was because Pilbara Iron failed to settle the proceedings, condition 4 of the Insurance Policy meant that Pilbara Iron was not in a position to settle the proceedings without GIO's written consent. There was no evidence before me regarding GIO's attitude towards a settlement with Mr Fussell prior to trial that would have allowed me to conclude that it would have consented to a settlement. Rather, GIO's criticism of Pilbara Iron for making the admissions that were made, suggested an uncompromising attitude.
Conclusion
For these reasons, I am satisfied that Pilbara Iron is entitled to indemnity for any Common Law Liability (as that term is defined in the Insurance Policy) that it might have to Mr Fussell. I am not satisfied, however, that Pilbara Iron is entitled to an indemnity under the Insurance Policy for the costs of defending Mr Fussell's claim.
For the avoidance of any doubt, that Pilbara Iron is not entitled to an indemnity under the Insurance Policy for its costs does not prevent it from seeking an order for costs as a consequence of its success in these proceedings. I will hear further from the parties on the question of costs.
There was also a dispute between the parties regarding whether or not the Insurance Contracts Act applied to this Principal's Extension. Given the conclusions that I have reached, it did not seem necessary for me to resolve this issue.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
GS
Associate
30 AUGUST 2024
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