Telstra Corporation Limited v Frontline Demolition NSW Pty Ltd
[2013] NSWDC 241
•15 November 2013
District Court
New South Wales
Medium Neutral Citation: Telstra Corporation Limited v Frontline Demolition NSW Pty Ltd [2013] NSWDC 241 Hearing dates: 4, 5 and 6 November 2013 Decision date: 15 November 2013 Jurisdiction: Civil Before: P Taylor SC DCJ Decision: (1) Judgment for the plaintiff against the first defendant in the sum of $54,677.72.
(2) Judgment for the plaintiff against the second defendant in the sum of $54,677.73.
(3) Costs reserved.
Catchwords: NEGLIGENCE - breach of duty to take reasonable care - principal contractor and subcontractor - off-site removal of tree stump - presence of underground services - known to principal contractor - failure to warn - failure to investigate - inappropriate manner of removal - when a person becomes an employee - proportionate liability - apportionment of damage Legislation Cited: Civil Liability Act 2002, s 3B, s 5B, s 34, s 34A
Uniform Civil Procedure Rules 2005, r 42.1Cases Cited: Calliden Insurance Ltd v Fox [2009] HCA 35
Hamilton v Whitehead (1988) 166 CLR 121
Hollis v Vabu Pty Ltd [2001] HCA 44
Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16
Tesco Supermarkets Ltd v Nattrass [1972] AC 153Category: Principal judgment Parties: Telstra Corporation Limited (ACN 051 775 556) (plaintiff)
Frontline Demolition NSW Pty Ltd (ACN 124 788 138) (first defendant)
Total Construction Pty Ltd (second defendant)Representation: Mr D P O'Dowd (plaintiff)
Mr C P O'Neill (first defendant)
Mr W Reynolds (second defendant)
Sparke Helmore Lawyers (plaintiff)
Lee & Lyons (first defendant)
HWL Ebsworth Lawyers (second defendant)
File Number(s): 2012/135999 Publication restriction: No
Judgment
A. Introduction
Frontline Demolition NSW Pty Ltd ("Frontline") was retained by Total Construction Pty Ltd ("Total Construction") to do demolition work at a site controlled by Total Construction in Peakhurst. On 8 April 2009 Frontline workers damaged a Telstra cable, near the footpath adjacent to the site. Telstra Corporation Limited ("Telstra") claims that Frontline and Total Construction must each meet 50 per cent of the cost of repair because of their negligence, and I uphold that claim.
B. Issues
The amount of damage sustained by Telstra is not in dispute. Nor is the duty owed by Frontline and Total Construction. The only issues left for me to decide is, first, whether Frontline or Total Construction (or both) failed to take reasonable care to identify the presence of cables and avoid damaging them, and, secondly, if both Frontline and Total Construction are liable, what proportion of the damages should each bear.
C. Background
In 2007 Total Construction requested and was issued "Dial Before You Dig" plans from Telstra for the Peakhurst site. The plans indicated a Telstra cable just in front of, and running parallel to, the front boundary of the site.
This plan of the location of the cables tended to be confirmed by the presence, on or adjacent to the footpath in front of the site, of Telstra lids covering a pit. Further, there was evidence from Otre Moussa of Telstra that the project manager of Total Construction had admitted to Mr Moussa that it had identified the location of the cables by "potholing". The record kept by Mr Moussa stated, "The project manager onsite admitted that they could have done better to prevent this damage as they had already potholed the network and knew where everything was". Total Construction called no witnesses and did not dispute that it was aware of the location of the Telstra cables.
Some months prior to the incident when the cables were damaged, Frontline was engaged to do work at the site. The precise nature of that engagement was not defined by any written agreement. But Frontline had done work for Total Construction before, and the business records comprising invoices and site instructions indicated that Frontline was paid some conventional hourly rate for Frontline workers and machines engaged at the site.
On the day of the incident the Frontline employees, Paul Pattane and Patrick Evans, were working near the footpath some distance away from the bus stop. There was some evidence from a drawing on the Dial Before You Dig documents, added after the incident, that the distance from where the damage occurred to the Telstra pit near the bus stop was about 40 metres. But having seen the photographs taken on the day after the incident, I do not accept that the distance was so great. It seems to me more closely to approximate 10 to 15 metres.
In any event, on 8 April 2013, Mr Pattane was told by Anthony Butler, the Total Construction site foreman, to remove a tree stump from a location in front of the site, near the footpath. A similar instruction had been given a week or two previously, and had been refused by Mr Killorn on the basis that the Frontline machinery was not capable of, or suitable for, removing the stump.
On this occasion Mr Pattane expressed a similar view, but he was again instructed, in forceful terms, to remove the tree stump. He decided to proceed.
Mr Pattane and Mr Evans worked together, Mr Pattane on the bobcat and Mr Evans on the excavator. A hammer attachment to the excavator was used to split the stump so as to enable it to be removed in parts. The first part was successfully removed by using the excavator to flatten or push the stump over, and by using the bobcat to lift the prone stump. But in the course of removing the second part of the stump, tree roots caused the cable conduit to break and the cable was bent. The tree roots were observed to have entwined around the conduit.
The hole, broken conduit and damaged cable were then filled in and covered up on the instruction of Mr Butler. When problems in the Telstra service were noted the next day, the problem was discovered, and photographs of the damage were taken. In due course the repairs were effected at a cost of $79,241.70.
D. Frontline's knowledge of the cables
About two months before the incident, on 7 February 2009, Frontline did work at the site recorded on a "Variation/Site Instruction" document as "excavate under services under footpath near bus stop". This work involved the use of an excavator and a labourer but otherwise the nature of the work was unclear. It appeared to involve work immediately adjacent to the Telstra pit referred to earlier. In those circumstances I am prepared to infer that the "services" referred to in the document were the Telstra cables.
Total Construction submitted that this event also led to other inferences, namely that Frontline knew the location of the cables at the place of the incident, and that Total Construction knew that Frontline and its employees who damaged the cable were aware of the location of the Telstra cable at the place of the incident.
I do not accept this submission, for a number of reasons.
First, Total Construction called no witnesses. In those circumstances, I must infer that no witness, including its site foreman or its project manager, would be able to assist Total Construction as to its knowledge of Frontline's awareness of the location of the Telstra cables at the place of the incident. Further, I do not think I should draw any inference that Total Construction knew of Frontline's awareness of the cables (if it existed) when the knowledge of Total Construction on this relevant matter could have been established by direct evidence but was not.
Secondly, there was no evidence that Frontline employees established the location of the services (assuming they were Telstra cables) in the region of the footpath excavation. The site instruction only indicates that the excavation went "under", that is "below", the services. I doubt whether that is enough to establish that the excavator had determined the location of the services.
Thirdly, even if the depth of the services was determined by the workers in the course of the footpath excavation near the bus stop, it does not mean that the workers would know the location of the Telstra cables some distance down the road where the cable damage incident took place.
Fourthly, the witnesses called by Frontline said that they did not know of the location of the Telstra cable, and Total Construction did not challenge this evidence in cross-examination. Cameron Delaney, a director of Frontline, conceded some matters contrary to Frontline's interest, such as that Frontline should have checked for utility services when excavating on the footpath, especially where Telstra lids could be found nearby. But he gave evidence that he was unaware of the existence of the cables. I accept Mr Delaney to be an honest witness. Nor do I reject the other witnesses of Frontline on this issue of their knowledge of the cable, especially as it is unchallenged evidence.
Fifthly, Frontline's knowledge is not established by proving (if it were proved, which it was not) the knowledge of Frontline employees. The corporation's knowledge is generally the knowledge of its directing mind and will (see Tesco Supermarkets Ltd v Nattrass [1972] AC 153 at 170-1, approved in Hamilton v Whitehead (1988) 166 CLR 121 at 127). Leigh Killorn signed the "Variation/Site Instruction" on 7 February 2013, and he seemed to accept it was therefore likely that he was onsite. Like Mr Delaney, Mr Killorn was a director of Frontline, one of at least two. However, there was no evidence that Mr Killorn was the managing director or was otherwise the embodiment of the company. The knowledge of one director, without more, is not established to be the knowledge of Frontline.
Sixthly, the Frontline employees who damaged the cable should not be assumed to have the knowledge of Frontline, or the knowledge of other Frontline workers, who had previously been onsite. The evidence did not establish that the two workers onsite on the date of damage to the cable were onsite on 7 February 2009 when there was excavation "under services" but on the contrary, tended to establish that they were not then onsite. Of course, this conclusion says nothing about what Frontline or its employees ought to have known.
For these reasons, I do not accept that Frontline or the Frontline employees, who damaged the cables, knew of the location of the cables before the damage occurred.
E. Negligence of Frontline
Frontline is a specialised excavation and demolition company. Its workers possessed the required skill and training and the qualification of a license to operate large excavation machinery.
As noted above, Mr Delaney, a director of Frontline, accepted that when excavating on footpaths underground services were an obvious matter to be guarded against. He accepted that there was nothing that prevented Frontline from making enquiries of Total Construction about the location of the cable and whether Total Construction had made a Dial Before You Dig enquiry. He accepted that the pit covers in the footpath were a good indicator of the presence and location of Telstra cabling.
Frontline made no enquiry about the Dial Before You Dig results obtained by Total Construction. Nor did it make any enquiry itself of Telstra. So far as the evidence reveals Frontline employees made no enquiry to anyone about underground services. And they apparently failed to observe the pit covers nearby on the footpath that indicated the presence of cables. Frontline were aware of the need for safety in operating the machinery but made no enquiries in this case to ensure that valuable and potentially dangerous services in the footpath were not damaged.
In my view, the Frontline workers proceeded to undertake the task without taking any reasonable steps to ensure they would not interfere with services below the footpath.
None of this is really disputed by Frontline. Rather, it says that the damage is the fault of Total Construction because Total Construction directed the removal of the stump and had "occupation, custody and control of the site".
As to the second reason, I accept that Total Construction had occupation, custody and control of the site adjacent to the footpath. But that is not where the relevant Frontline work was done and where the damage occurred. The removal of the stump was not on the site but on or next to the footpath in front of the site, between the site and the roadway. Even if it is significant that Total Construction had control of the site, and I am not persuaded that it is significant in respect of the liability of Frontline, it has no significance to this damage, which occurred "offsite".
As to the first reason, I accept that the direction is relevant to the reasonableness of Frontline's conduct. But it is far from determinative. Frontline retained the ability to refuse to carry out the excavation, as it did in the week or two previous, and as did these particular workers initially before Mr Butler of Total Construction gave them a more strongly worded direction.
Frontline also submits that the manner in which the stump was removed was dictated wholly by the instructions given by the site foreman, Mr Butler. This submission is contrary to the evidence. Mr Butler said nothing about the method of removal of the stump. I accept that his direction implicitly conveyed the instruction that the machines would be used to extract the stump, because the direction was a response to a doubt about the capacity of the machines to perform the task. But how the machines were to be used was entirely a matter for Frontline employees. The use of the excavator and the bobcat to flatten and lift the stump was a method devised solely by the Frontline employees.
Frontline also submitted that the Frontline employees became servants of Total Construction because of the instructions given, because of the hourly rate at which Frontline received payment for its work, and because Total Construction "instructed them to do tasks other than simply operating the plant".
There is no basis to suggest that the Frontline workers somehow ceased to be employees of Frontline for the reason submitted. Frontline, not the workers, received payment from Total Construction for the hours the workers and the machines were onsite. Further, Frontline was engaged to have its workers do certain tasks; the reference to "simply operate the plant" is meaningless without the performance of a task.
The decision of the High Court of Australia in Hollis v Vabu Pty Ltd [2001] HCA 44 gives guidance as to when a person may be an employee. The factors mentioned at [48] to [57] of Hollis v Vabu do not assist Frontline. The plant operators were providing skilled labour, requiring special qualifications. They had control about the manner of their work, they bore no uniform or signage that connected them with Total Construction. Total Construction did not pay the workers anything for their services rather it paid Frontline. Total Construction provided no equipment to Frontline. The workers worked exclusively for Frontline but did not work exclusively for Total Construction. The decision as to which workers went to the site was made by Frontline.
For these reasons, there is no substance in the submission that the Frontline employees became servants of Total Construction.
Frontline concedes that, in hindsight, it was reasonable to investigate for services. I do not regard that as a matter that only became reasonable with hindsight. The evidence of the Frontline employees included a concession that excavating on or near a footpath raises an obvious risk of interfering with services, and requires careful investigation as to the location of services. Once Frontline should be aware of the existence of those services lawfully in the footpath it was under a duty to take care not to damage those services. It apparently took no care at all in regard to that risk, and must therefore be found to be negligent.
Although Frontline addressed no submissions to the provisions of the Civil Liability Act 2002 ("the Act"), it is apparent to me that the requirements of s 5B of the Act are satisfied. The risk of damaging cables was one that Frontline ought to have known of, as the Frontline witnesses effectively conceded, and that the risk was foreseeable. It was not an insignificant risk, and a reasonable person would have taken the precaution of ascertaining the location of the cable either by enquiring Total Construction, making its own Dial Before You Dig search or excavating by hand. The reasonable person could also refuse to remove the tree stump. The last option was adopted in the week previous and remained an option for Frontline to take.
In my view, there was a high probability of damage to services if the tree stump was pulled out, roots and all, without any enquiry as to the location of the services. Indeed, it seems almost inevitable when the cable is directly under the tree stump. It could only be avoided if all the tree roots of any significance lay above the depth of the services. The damage to the cable was likely to be significant and the risk could have been avoided in a number of ways, including by making enquiries of Total Construction and then refusing to use the machinery, which would compel Total Construction to grind the stump or remove it by hand. There was no particular social utility in extracting the tree stump by the method chosen compared to the other options available.
In my view, the plaintiff has established a clear case of negligence against Frontline.
F. Negligence of Total Construction
Principals are not liable vicariously for the negligence of independent contractors but in some circumstances the principal will be under a duty of care to ensure the system of work for the independent contractors is safe: Calliden Insurance Ltd v Fox [2009] HCA 35 at [20].
"An entrepreneur who organises an activity involving a risk of injury to those engaged in it is under a duty to use reasonable care in organising the activity to avoid or minimise that risk": Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16 at 47-48.
Telstra did not submit that Total Construction was vicariously liable for the negligence of Frontline, but submitted that Total Construction was liable because of its own conduct.
I have already found that Total Construction was aware of the location of the cable. Notwithstanding that knowledge, Total Construction organized an activity that involved a risk of injury or loss. The risk was foreseeable, and significant. Total Construction accepted this but submitted that a reasonable person would not have taken precautions to avoid the risk under s 5B of the Act.
The obvious precaution is to inform Frontline workers of the existence and location of the cable. But Total Construction submits that this was unnecessary and of no utility because Frontline and its employees already knew of the location of the cable. I have already rejected the facts that are foundational to that submission.
Further, given the reluctance of Frontline to extract the tree stump using its machines, I would infer that a warning about the location of the cable would have ensured that the work did not proceed, at least in the manner that it did.
Total Construction produced an unsigned Accident/Dangerous Investigation Report. The report conceded the following matters:
(a) Frontline Excavation were working "under the direction" of the Total Construction site foreman, Anthony Butler.
(b) The Telstra conduits were "located directly below the tree stump location".
(c) The Dial Before You Dig document had been obtained almost two years previously, and although not valid for the date of the incident, the constant work on the site by Total Construction meant that it was known that Telstra had done no future work at the front of the site and therefore the existence and location of conduits were correctly identified in the Dial Before You Dig documents.
(d) "The incorrect decision to remove the stump was taken, when a more appropriate action would have been to grind the stump below the required level [or] ...carefully remove the stump by hand".
The "decision to remove the stump" was taken by Total Construction. This was an action that a reasonable person would not have taken, according to Total Construction's own report. I would reach the same conclusion even without the report, given the probability of damage to the conduit, and the potential significance of damage to the conduit.
Further, the Total Construction report implicitly concedes that the alternative approach of grinding the stump to the required level was not a burden of significance.
Accordingly, I find negligence established against Total Construction, in failing to warn Frontline employees of the presence of the Telstra cable, in directing Frontline employees to remove the stump knowing that Telstra services lay below it, and in failing to adopt the alternative course of grinding the stump to the required level.
Although Frontline was able to, and did on occasion, hire machinery, I would not infer without evidence that they were experienced in stump grinding. Rather, I would infer that this was a matter that Total Construction rather than its demolition contractor, Frontline, would ordinarily arrange.
G. Apportionment
It was accepted by all parties that this was an apportionable claim under s 34 of the Act. It was a claim for "damage to property in an action for damages ... arising from a failure to take reasonable care", under s 34(1).
Neither of the defendants is an excluded wrongdoer under s 34A, since the damage was neither intentional nor fraudulent nor otherwise excluded under the provisions of s 3B of the Act.
Accordingly, I must determine the "amount reflecting that proportion of the damage...[that is] just having regard to the extent of [each defendant's] responsibility for the damage or loss".
Telstra submitted that the appropriate apportionment is 50 per cent each.
The factors in favour of Frontline bearing a greater proportion of the damages include that its conduct (by its workers) was the more immediate cause of the damage to the conduit, that Frontline determined the method of extracting the stump, that the risk was obvious, and that it was an excavator company with reputed expertise and training in safely using excavation equipment.
On the other hand, Total Construction was in control of the work, it inducted workers at the site, it directed the work to be done, and it had actual knowledge of the location of the Telstra services and thus a greater awareness of the risk.
Bearing all these matters in mind I am persuaded that a 50:50 apportionment is just, and fairly reflects each defendant's responsibility for the loss.
Interest on the repair costs is agreed at $30,113.75.
Telstra would ordinarily be entitled to its costs according to the usual rule in Uniform Civil Procedure Rule 42.1, but at the request of the parties I will reserve costs to allow the parties to make submissions.
Accordingly, the orders of the Court are:
(1) Judgment for the plaintiff against the first defendant in the sum of $54,677.72.
(2) Judgment for the plaintiff against the second defendant in the sum of $54,677.73.
(3) Costs reserved.
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Decision last updated: 13 December 2013
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