T a Taylor (SA) Pty Ltd v Hansen & Yuncken Pty Ltd No. Scciv-02-1374

T A TAYLOR (SA) PTY LTD v HANSEN & YUNCKEN PTY LTD
[2003] SASC 212
Masters Appeal
GRAY J

This is an appeal against a judge’s refusal to strike out a third party statement of claim.
The Dispute
The relevant District Court action arises out of an industrial incident. Hansen & Yuncken Pty Ltd, the respondent and defendant, was the principal builder and occupier of a construction site on North Terrace, Adelaide. T A Taylor (SA) Pty Ltd, the appellant and first third party, was a sub-contractor on the construction site. T A Taylor employed Robert Filosi, the plaintiff in the District Court action.
Mr Filosi claimed that on 23 January 1996 he was directed by T A Taylor to finalise water-proofing a lift shaft on the construction site. Mr Filosi attended the work area with a fellow worker. A ladder was in position when they arrived. Mr Filosi climbed the ladder and with the assistance of the other worker put a water-proofing sheet in place. The ladder dislodged and Mr Filosi fell 2.5 to 3 metres and sustained personal injury.
Mr Filosi claimed damages. He claimed that Hansen & Yuncken had negligently failed to properly secure the ladder or alternatively failed to provide a warning that the ladder was not secure. It was alleged that there was no safe system of work. Further, it was asserted that Hansen & Yuncken had breached its statutory duty under the Occupational Health and Safety Act 1986 (SA).
Hansen & Yuncken claimed an indemnity and damages for breach of contract from T A Taylor. The third party statement of claim alleged that T A Taylor had entered into a contract to undertake tanking and water-proofing work. A term of the contract was that it indemnify Hansen & Yuncken against any liability for personal injury. Hansen & Yuncken claimed to be entitled to a complete indemnity from T A Taylor with respect to any claim brought by Mr Filosi against Hansen & Yuncken.
The Contract
Paragraph 8.02 of the contract between Hansen & Yuncken and T A Taylor provided:
LIABILITY FOR INJURY TO PERSONS
The Sub-Contractor shall be liable for and shall indemnify the Builder against any liability, loss, claim or proceeding whatsoever arising under any legislation or at Common Law in respect of personal injury to or death of a person whomsoever arising out of or in the course of or caused by the execution of the Sub-Contract Work provided always that the same is due to the negligence, act, omission or default of the Sub-Contractor, the Sub-Contractor’s servants or agents, of any nominated sub-sub-contractor or further sub-contractor from the Sub-Contractor or of the servants or agents of any such further sub-contractor or sub-sub-contractor and providing further that the Sub-Contractor’s liability to indemnify the Builder shall be reduced proportionately to the extent that the negligence, act, omission or default of the Builder or Proprietor or of any person other than the Sub-Contractor for whom the Builder is responsible may have contributed to the personal injury or death.
Clause 32.10.01 provided:
Safety
Accidents: Promptly notify the Builder of the occurrence of the following:
- Accidents involving death or personal injury.
- Accidents involving loss of time
-Incidents with accident potential such as equipment failure, slides and cave-in Accident reports: Submit reports of accidents.
-Purpose of submission: Information only.
Asbestos: Do not use products containing asbestos.
Pallets:Palletised materials requiring craning into position shall not be on timber pallets. For safety reasons they shall be on steel type pallets or encased in wire baskets or cages.
(a)The Subcontractor shall be required to comply with these provisions, Hansen Yuncken’s Safety Policy and all other Statutory Legislation.
The Subcontractor acknowledges his responsibilities for his employees, any subcontractors engaged on his behalf, safe work procedures, plant and equipment and materials delivered to site, in accordance with the provisions of the Occupational Health, Safety and Welfare Act 1986.
When requested the Subcontractor shall be expected to produce a Statement of its Safety policy on acceptance and identify the person responsible within its organization for health, safety and welfare.
The Subcontractor shall be responsible for payment of any consequential costs incurred which result from the adoption of unsafe work practices, or the use of unsafe plant or equipment.
(b)Safety on Construction Sites
Subcontractors shall at all times take precaution against the risk of injury to person or property whilst carrying out the work. Such precautions are to be those defined in regulations or used in common practice and/or as directed by the Builder’s representative, in accordance with the Builder’s Safety Policy.
The Builder’s representative will give attention to the proper observation of safe practices and procedures and will report to the contractor’s representative any breaches of safe practices which he or she observes or of which he or she becomes aware. At the same time the Builder’s representative will place on the project file a brief report of the circumstances giving rise to the report to the contractor’s representative.
In the event that the unsafe practices reported to the contractor’s representative are not rectified, the Builder, shall write to the Subcontractor drawing attention to the report and instructing that the unsafe practices cease.
The Third Party Statement of Claim
The amended third party statement of claim included:
3.    On 26 June, 1995 Taylor entered into a contract with the defendant for the performance of certain tanking and water proofing work at the site (“the contract”).
4.    It was a term of the contract that Taylor indemnify the defendant against any liability, loss claim or process whatsoever arising in respect of personal injury to a person arising out of or in the course of, or caused by the execution of the contract works provided that same was due to the negligence, act, omission or default of Taylor and then to the extent of such negligence, act, omission or default.
5.    Further, it was a term of the contract that:
5.1All work be carried out in accordance with the Occupational Health Safety & Welfare Act 1986, Construction Safety Regulations and Industrial Safety Regulations.
5.2That Taylor comply with the defendant’s Safety Policy.
5.3That Taylor was responsible for his employees and for safe work procedures, plant and equipment used on the site.
5.4That Taylor should be responsible for the payment of any consequential costs incurred which result from the adoption of unsafe work practices, or the use of unsafe plant or equipment.
5.5That Taylor should take precautions against risk of injury to persons whilst carrying out the work pursuant to the contract.
6.    By the within action the plaintiff claims damages against the defendant as set out in the Statement of Claim attached to the Third Party Notice for personal injury allegedly sustained by him in the execution of the contract works.
7.    By its Defence the defendant denies that it was negligent or in breach of statutory duty to the plaintiff.
9.    Taylor:
9.1Failed to properly supervise the plaintiff.
9.2Failed to provide the plaintiff with a ladder which he could use in the performance of his work.
9.3Failed to instruct the plaintiff in the proper use and security of ladders.
9.4Failed to ensure that the ladder referred to in paragraph 7 of the plaintiff’s Statement of Claim was properly secured and fastened in place so as to prevent it from becoming dislodged, falling or slipping.
9.5Failed to warn the plaintiff that ladder was not secured properly.
9.6Failed to have in place a safe system of work, in particular, failed to properly instruct or train the plaintiff in the performance of his work and in the safe and effective use of ladders.
9.7Failed to ensure that the plaintiff adopted a safe system of work.
9.8Failed to ensure that the plaintiff had a safe means of access and egress to and from the workplace.
9.9Failed to comply with the Safety Policy.
9.10In breach of the Occupational Health Safety & Welfare Act 1986 and the Occupational Health Safety & Welfare Regulations 1995.
9.11Failed to guard against the plaintiff’s fall (Regulation 2.1.3(1)(a)).
9.12Failed to ensure safe access to an elevated workplace (Regulation 2.13.1(1)(c)).
9.13Failed to comply with the appropriate stand in relation to the use of a ladder (Regulation 2.13.1(1)(d)).
9.14Failed to provide the plaintiff with reasonable protection against a fall (Regulation 2.13.1(2)).
9.15Failed to provide the plaintiff with a suitable ladder (Regulation 2.13.1(3)).
9.16Failed to provide the plaintiff with training in relation to the hazard associated with the use of the ladder in the circumstances (Regulation 2.13.1(5)(c)).
9.17Failed to provide competent persons for the supervision of the plaintiff (Regulation 2.13.1(5)(d)).
9.18Failed to provide the assistance of another person, in particular, to steady or hold the ladder (Regulation 2.13.1(5)(e)).
9.19Failed to ensure that the ladder was of the type required and used in the manner specified by the Regulations (Regulation 2.13.1(10)).
9.20Failed to provide the plaintiff with a safe means of access and egress to the workplace (Regulation 2.1.1(2)).
9.21Failed to comply with AS 1657: Fixed Platforms, Walkways, Stairways and Ladders (Regulation 2.1.1).
9.22Failed to comply with the duties of employers as specified in Section 19 of the Occupational Health Safety & Welfare Act 1986.
10.    The conduct of Taylor referred to in paragraphs 9.1 to 9.9 inclusive hereof was a breach of the terms of the contract referred to in paragraphs 5.2 and 5.5 hereof and the contractual duty created by the term of the contract referred to in paragraph 5.4 hereof.
11.    The conduct of Taylor referred to in paragraphs 9.10 to 9.22 inclusive hereof was a breach of the term of the contract referred to in paragraph 5.1 hereof.
12.    Pursuant to the terms of the contract referred to in paragraph 4 hereof the defendant claims indemnity from Taylor against any liability to the plaintiff for personal injury and says that any such personal injury was due to the negligence, act, omission or default of Taylor as set out in paragraphs 10 and 11 hereof.
13.    But for the breaches of contract of Taylor referred to in paragraphs 10 and 11 hereof the plaintiff would not have been injured and would therefore have no cause of action against the defendant.
14.    In the circumstances any damages award for which the defendant may be found liable to the plaintiff is damage the defendant has incurred in consequence of the breaches of contract of Taylor referred to in paragraphs 10 and 11 hereof.
AND the defendant claims from the first third party.
i.     Full indemnity in relation to the plaintiff’s claim and costs (pursuant to paragraph 12 hereof).
ii.    Full indemnity in relation to the defendant’s costs of the defence of the plaintiff’s claim (pursuant to paragraph 12 hereof).
iii.   Damages for breach of contract (pursuant to paragraph 14 hereof).
iv.   Costs.
The Application in the District Court
T A Taylor made application to a judge of the District Court to strike out the third party claim, or alternatively the third party statement of claim. The judge considered that Hansen & Yuncken’s third party statement of claim disclosed a reasonably arguable claim. The application to strike out was dismissed. The Judge concluded:
I have read the submissions supporting the strike out application and have heard oral argument from both sides. It is perfectly clear firstly that the first 3^rd party is arguing a complexity of law which requires a very close study of the various cases cited. It also requires an interpretation of at least one clause in the contract and to what extent indemnity is applicable. This is not the type of decision a Master should be asked to make, it is a matter for the trial judge. The statement of claim prima facie establishes a reasonably arguable case and in my opinion should stand.
The Appeal
The Test to be Applied
In General Steel Industries Inc v Commissioner of Railways (NSW)[1] Barwick CJ considered the test to be applied on an application to strike out:
The test to be applied has been variously expressed; ‘so obviously untenable that it cannot possibly succeed’; ‘manifestly groundless’; ‘so manifestly faulty that it does not admit of argument’; ‘discloses a case which the Court is satisfied cannot succeed’; ‘under no possibility can there be a good cause of action’; ‘be manifest that to allow them’ (the pleadings) ‘to stand would involve useless expense’.
At times the test has been put as high as saying that the case must be so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed; or ‘so manifest on the view of the pleadings, merely reading through them, that it is a case that does not admit of reasonable argument’; ‘so to speak apparent at a glance’.
As I have said, some of these expressions occur in cases in which the inherent jurisdiction was invoked and others in cases founded on statutory rules of court but although the material available to the court in either type of case may be different the need for exceptional caution in exercising the power whether it be inherent or under statutory rules is the same.
This is the test to be applied in the present case.
[1] (1964-1965) 112 CLR 125 at 129
Counsels’ Submissions
The issue raised on appeal was whether the judge erred in declining to strike out the third party statement of claim. Counsel for Mr Taylor submitted that because Mr Filosi did not have a common law claim against T A Taylor, third party recovery was precluded by the provisions of the Workers Rehabilitation and Compensation Act 1986 (SA). Any residual liability that rested with the employer in the past had been extinguished by the Act. It was also contended that the judge should have concluded that on their proper construction the relevant clauses of the contract in substance provided no more than a right to contribution. The so called “indemnity” was the equivalent in every sense of a claim for contribution. The contract it was suggested added nothing to the rights of contribution provided for in the Wrongs Act. It was claimed that Hansen & Yuncken’s right to recovery against T A Taylor was confined to the extent of T A Taylor’s liability as a tortfeasor. Once this was recognised it was said that the relevant clause of the contract could have no effective operation.
Counsel for Hansen & Yuncken submitted that the contract provided a contractual indemnity. The third party claim could succeed in contract. Counsel submitted that the Workers Rehabilitation and Compensation Act 1986 (SA) did not seek to restrict private arrangements between contracting parties regarding the terms of their contract. It was said that the Act addressed the statutory right to contribution provided by the Wrongs Act 1936 (SA) and did not preclude a claim for indemnity.
The Legislative Scheme
The objects of the Workers Rehabilitation and Compensation Act are set out in section 2:
(a)     to establish a workers rehabilitation and compensation scheme—
(i)    that achieves a reasonable balance between the interests of employers and the interests of workers; and
(ii)    that provides for the effective rehabilitation of disabled workers and their early return to work; and
(iii)     that provides fair compensation for employment-related disabilities; and
(iv)     that reduces the overall social and economic cost to the community of employment-related disabilities; and
(v)     that ensures that employers' costs are contained within reasonable limits so that the impact of employment-related disabilities on South Australian businesses is minimised; and
(b)     to provide for the efficient and effective administration of the scheme; and
(c)     to establish incentives to encourage efficiency and discourage abuses; and
(d)     to ensure that the scheme is fully funded on a fair basis; and
(e)     to reduce the incidence of employment-related accidents and disabilities; and
(f)    to reduce litigation and adversarial contests to the greatest possible extent.
In Jennings Constructions v Workers Rehabilitation and Compensation Corporation[2] Doyle CJ described the relevant history of the legislation:
Employers have long been liable to their workers for a failure to take proper care for their safety. A duty to take care is imposed by the law through the medium of a duty of care, and by a term implied by law into the contract of employment. The right to damages that thus arose has long been described as the worker’s common law right to damages. Statutory schemes for the payment of workers’ compensation have dealt in various ways with the relationship between the common law right to damages and the statutory right to workers’ compensation.
It has been common for legislation to require a worker to elect between those rights or to eliminate the right to common law damages.
The Act in 1986 severely limited the damages recoverable in exercise of the common law right, and in 1992 eliminated the right of a worker to common law damages, as far as lay within the power of the Parliament of this State.
In that respect, the focus of the Act has been upon the liability of an employer (and the entitlement of a worker) to damages at common law (in the sense explained). It is generally understood that the Act has provided statutory rights in substitution for the common law rights to damages.
[2] (1998) 71 SASR 465 at 470
Section 54(4b) of the Workers Rehabilitation and Compensation Act provides:
Where—
(a)     a worker suffers a compensable disability (not being a disability that arises out of the use of a motor vehicle and gives rise to a liability of a kind referred to in subsection (2)); and
(b)     action is taken against a person other than the employer for damages in respect of the disability,
the other person has no right to recover contribution from the employer.
Section 119 provides:
(1)     Any agreement or arrangement entered into without the consent of the Corporation that purports to exclude, modify or restrict the operation of this Act is to that extent void and of no effect.
(2)     Any purported waiver of a right conferred by or under this Act is void and of no effect.
Section 54(4b) has been the subject of judicial consideration. In Andrews v Ziersch & Ors[3] Legoe ACJ observed:
By amending s.54 in 1988, Parliament has unequivocally prohibited any ‘right to recover contribution from the employer’. Whether there was any such right prior to 1988 is not a matter which concerns this court. Section 54(5) and (7) give the person who has paid or by whom the compensation is payable (usually the Corporation) an entitlement to recover that amount of compensation. Since the 1988 amendment that compensation can be recovered from ‘that other person’ (the third party). Sub-section (4b) expressly prohibits recovery of any contribution from the employer.
Perry J concluded:
…it is clear that in the case where a person other than the employer is sued by a worker for damages at common law, that person’s right of contribution under the Wrongs Act against an employer who otherwise might properly be regarded as ‘liable in respect of the same damages’ within the meaning of of s25(1) of the Wrongs Act 1936, is extinguished by reason of the operation of the words ‘the other person has no right to recover contribution from the employer’ in s54(4b) of the Act. Any common law right of contribution (and I know of none) would likewise be extinguished.
[3] (1994) 175 LSJS 377 at 384, 396
In The Workers Rehabilitation & Compensation Corporation v JR Engineering Services Pty Ltd & Ors Olsson J[4] drew a clear distinction between contribution and indemnity.
…insofar as subsection (4b) of section 54 of the Compensation Act operates to restrict rights of recovery by third parties, it specifically directs its attention to a restriction on the right of such parties ‘to recover contribution from the employer’. What is manifestly there in contemplation is the concept of contribution (in the technical, legal sense) as reflected upon by section 25(1) of the Wrongs Act. As the learned trial judge held, the legal concept of ‘contribution’ is quite distinct and separate from the legal concept of an indemnity – particularly a contractual indemnity…Indeed the Wrongs Act itself makes such a distinction, in subsection (1)(c) of section 25.
On a reading of section 54 of the Compensation Act it at once becomes apparent that the word ‘contribution’ was employed advisedly and does not (and was not intended to) remove any entitlement which relevant parties may have conferred by their express contractual arrangements.
It follows that section 54(4b) does not operate so as to avoid other than contributions between tortfeasors pursuant to the statutory provisions in that regard. (See the reasoning in Andrew v Ziersch and Ors (1994) 175 LSJS 377).
Debelle J[5] drew the same distinction and said that it was of no consequence that an indemnity may be “equivalent to” a right to contribution.
…it is possible for a court to order contribution which would amount to a complete indemnity…Notwithstanding that the contribution may in the result be equivalent to an indemnity, the law nevertheless distinguishes between a contribution which has the consequence of providing a complete indemnity and a contractual indemnity.
…
The word ‘contribution’ in s54(4b) is being used in the context of recovering contribution from a joint tort-feasor. It is not being used in the context of a contractual indemnity. For these reasons, s54(4b) does not operate so as to prevent recovery under a contractual indemnity. Had it been the intention that s54(4b) should prevent a person other than the employer from relying on a contract of indemnity, the subsection would have been expressed in quite different terms.
[4] (1995) 180 LSJS 276 at 283-4 - Mohr J expressed his agreement with Olsson and Debelle JJ
[5] at 289

On appeal it was accepted by Hansen & Yuncken that section 54(4b) of the Workers Rehabilitation and Compensation Act precluded any claim against T A Taylor for contribution. However as earlier observed it was contended that the statutory restriction imposed by section 54(4b) did not preclude its contractual claim for indemnity against T A Taylor.
The intention of the Workers Rehabilitation and Compensation Act was to ensure that all workers would receive compensation for injuries sustained during the course of their employment. Parliament intended to restrict recovery pursuant to the contribution provisions of the Wrongs Act 1936 (SA). Parliament did not intend to regulate contractual arrangements between private parties. The reasoning in J R Engineering Services appears to resolve the issue of interpretation that arises in this appeal. Hansen & Yuncken entered into a contract with T A Taylor which contains an agreement to indemnify. As Debelle J observed in J R Engineering it does not matter that a contractual indemnity may happen to coincide with rights or former rights to contribution. T A Taylor were aware or must be taken to be aware of the provisions of section 54(4b) when undertaking a contractual obligation to indemnify Hansen & Yuncken. T A Taylor elected to undertake an independent contractual obligation. The Act does not preclude private contractual arrangements. On its face clause 8.02 of the contract does not seek to detract from the operation of section 54(4b). In these circumstances section 119 has no application.
Counsel for T A Taylor submitted that the term of the contract did not create a right of indemnity in Hansen & Yuncken. Reliance was placed on the decision of the Full Court in Jennings Constructions[6]. Counsel highlighted the statement of Doyle CJ, regarding a claim for contribution in that case. Doyle CJ found that the court was bound by a decision of the High Court that
the contributing tortfeasor could not be made liable to contribute an amount greater that the amount of the statutory limit upon that tortfeasor’s liability to the plaintiff.
Counsel for Hansen & Yuncken responded that its claim was not a claim for contribution but was a claim that relied solely on the terms of the contract.
[6] (1998) 71 SASR 465 at 473
Although some members of the court in Jennings Constructions differed in part with the reasoning in JR Engineering that difference is not relevant to the issues raised on this appeal. In any event any difference of view that may exist would demonstrate that the third party claim was at the very least arguable.
Conclusion
It is arguable that paragraph 8.02 of the contract creates a liability of T A Taylor to Hansen & Yuncken that is not precluded by the provisions of the Workers Rehabilitation Compensation Act. It cannot be said that the third party claim is ‘manifestly groundless, faulty or untenable’.
The appeal against the refusal to strike out the claim is dismissed.
JUDGMENT CITATIONS LISTED IN ORDER OF APEARANCE IN JUDGMENT
1 (1964-65) 112 CLR 125 at 129
2 (1998) 71 SASR 465 at 470
3 (1994) 175 LSJS 377 per Perry J (Mullighan J agreeing) at 396
4 (1995) 180 LSJS 276 at 283-4 - Mohr J expressed his agreement with Olsson and Debelle JJ
5 at 289
5 (1998) 71 SASR 465 at 473

[2003] SASC 212

4 July 2003