Thomson v Woolworths Limited
[2015] VCC 1853
•16 December 2015
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMON LAW DIVISION | Revised Not Restricted Suitable for Publication |
| GENERAL LIST |
Case No. CI-11-00277
| KATHLEEN THOMSON | Plaintiff |
| v | |
| WOOLWORTHS LIMITED | First Defendant |
| and | |
| ASCC PTY LTD | Second Defendant |
| and | |
| KLODI CLEANING CORPORATION PTY LTD (in liquidation) | Third Defendant |
| and | |
| THE MEMBERS OF LLOYD’S SYNDICATE 2468 | Third Party |
---
JUDGE: | HIS HONOUR JUDGE SACCARDO | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 24 November 2015 | |
DATE OF JUDGMENT: | 16 December 2015 | |
CASE MAY BE CITED AS: | Thomson v Woolworths Limited & Ors | |
MEDIUM NEUTRAL CITATION: | [2015] VCC 1853 | |
REASONS FOR JUDGMENT
---
Subject: INSURANCE
Catchwords: Agreement to settle plaintiff’s claim – insurance policy issued by third party to the second defendant – second defendant seeking indemnity for damages and legal costs – analysis of policy and subject clauses
Cases Cited:Major Engineering Pty Ltd v CGU Insurance [2009] VSC 504; McCarthy v St Paul International Insurance Co Ltd (2007) 157 FCR 402
Judgment: Second defendant entitled to indemnity sought.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M Thomson QC with Ms A Golding | Shine Lawyers |
| For the Third Party | Ms M Britbart SC | Tisher Liner FC Law |
HIS HONOUR:
1 In this proceeding, ASCC Pty Ltd (ASCC) seeks a declaration that it is entitled to indemnity by the members of Lloyd’s Syndicate (Lloyds) pursuant to a Policy of Insurance issued by Lloyds to ASCC (the policy).
2 The claim with respect to indemnity arises in the following circumstances:
· Kathleen Thomson (the plaintiff) sought damages against the first defendant (Woolworths Limited), the second defendant, ASCC Pty Ltd (ASCC), and the third defendant, Klodi Cleaning Corporation Pty Ltd (Klodi), in respect of injury and loss suffered by her on 14 August 2009, when she slipped and fell on a wet floor as she entered a Woolworths store in Sunshine (the supermarket).
· In the proceeding, the plaintiff alleged:
(i) against Woolworths, that her injuries were occasioned by reason of the breach by Woolworths, as occupier of the supermarket, of its duty of care to her;
(ii) against ASCC, that her injuries were occasioned by reason of the breach by ASCC of a duty owed by ASCC to the plaintiff pursuant to an agreement entered between ASCC and Woolworths in which ASCC agreed “to undertake and or provide cleaning services” at the supermarket;[1]
(iii) against Klodi that her injuries were occasioned by reason of its negligence in undertaking cleaning works at the supermarket.
[1]The plaintiff also alleged that ASCC was negligent in undertaking cleaning works at the supermarket. There is no issue that ASCC did not undertake such work and that this allegation had no merit.
3 Immediately before the commencement of the trial in the proceeding, the plaintiff’s claim was settled by ASCC and Woolworths (the settlement).
4 Klodi played no role in that settlement for reasons related to its impecuniosity.
5 There is no issue that the settlement involved an agreement between Woolworths and ASCC that they would pay the plaintiff’s claim and costs in the following amounts:
(i) Damages in the sum of $250,000, in respect of which:
§ Woolworths would contribute $50,000;
§ ASCC would contribute $200,000;
(ii) The plaintiff’s agreed costs in the sum of $120,000, which would be paid by ASCC.
6 Further, there is no issue that in its defence of the claim brought against it by the plaintiff, ASCC has incurred legal costs in a sum yet to be quantified.
7 It is in respect of these amounts, namely:
(i) The damages and legal costs which ASCC is required to pay to the plaintiff; and
(ii) The legal costs incurred by ASCC in defence of the claim brought against it by the plaintiff
that ASCC seeks indemnity from Lloyds in this proceeding.
The viva voce evidence
Deepak Singh
8 The evidence of Deepak Singh, the Chief Operating Officer of ASCC, may be summarised as follows:
· ASCC contracted with Woolworths to provide cleaning services. In order to fulfil that obligation, it employed sub-contract companies to undertake the cleaning.
· ASCC undertook none of the cleaning itself.
· The sub-contractors employed by ASCC were chosen through an interview process which was generally undertaken subject to ASCC having received a recommendation as to the competence of the relevant company.
· ASCC had engaged Klodi as a sub-contractor to carry out the cleaning services required by Woolworths at the supermarket.
· ASCC undertook monthly audits at the supermarket which were performed by its area managers, the primary purpose of which was to assess the standard of cleaning but which also involved those managers voicing any concerns which they had as to safety issues in the manner described at Transcript 57, Lines 8-10.
· Woolworths would provide GAP reports to ASCC, commenting upon the cleaning standards of the sub-contractors. Those reports would be assessed by Shane Mugara, the General Manager of ASCC, who would liaise if necessary with the cleaning sub-contractors to fix any problem which arose. Discussions of this type would extend to issues of safety if they were raised by Woolworths.
· ASCC would provide monthly or quarterly circulars for its sub-contractors which would include relevant information which addressed topics such as methods of cleaning and safety warnings, such as those set out in exhibit E which related to the placing of safety warning cones in floor areas which were being treated or cleaned, together with the placement of barriers formed by trolleys to eliminate access to floor surfaces which were being cleaned and the placement of trolleys to eliminate access to such areas.
· ASCC had agreed to indemnify Woolworths in respect of claims made against it arising out of the cleaning of surfaces the subject of the agreement between Woolworths and ASCC.
· The standards of cleaning which were to be applied to the supermarket were fixed by Woolworths and the contract between ASCC and Woolworths required ASCC to meet those standards.
· No complaints had been made by Woolworths as to the cleaning standards which were maintained at the supermarket, which was one of the best performing stores in the State as far as cleaning was concerned, and no concerns had been raised by Woolworths to ASCC as to the way the store was being cleaned.
· Generally, any safety concerns as to the methodology employed by cleaners would be addressed in the following manner:
§ The store in question would report to Woolworths head office;
§ Woolworths head office would report to ASCC; and
§ ASCC would then take the matter up with the appropriate sub-contractor.
Whilst the above method was the usual practice by which safety concerns became known to ASCC and disseminated to sub-contractors if, in the course of their inspection of cleaning standards, unsafe practices were detected by ASCC, ASCC “would obviously say something”.[2]
[2]T57
Kathleen Thomson
9 The plaintiff said that:
· Her injury occurred as she entered the premises and lost her footing when she came into contact with a recently cleaned and still wet floor surface, about the presence of which she had been provided with no warning.
· At the time at which she was injured, she noted that the floor of the premises was being cleaned by a cleaning company (which I am satisfied in this instance was Klodi).
10 There was no suggestion by the plaintiff that any supervisor employed by ASCC was present within the supermarket at the time of her fall.
Approach adopted to analysis
11 In undertaking the task required of me in this instance, I am satisfied that I am required to determine the construction of the policy so as to give effect to the intention of the parties in executing the policy.
12 In doing so, I must first make findings as to the nature of the claim brought by the plaintiff against ASCC.
13 I am satisfied that the approach which I should adopt in making such finding in the current circumstances in which the proceedings were resolved before any evidence was adduced in the plaintiff’s claim is that described by Pagone J in Major Engineering Pty Ltd v CGU Insurance,[3] as follows:
[3][2009] VSC 504
“How I should determine whether Timelink’s claim against Major came within the legal costs clause was a matter of extensive debate and extensive evidence. Each party sought to obtain support from the way in which the claim was asserted in various places, including the pleadings between Timelink and Major, observations by the trial judge and by the judges of the Court of Appeal, and submissions by counsel at various stages in the proceeding both orally and in writing. Determining a claim by recourse to such material may be instructive but may equally be distracting. In McCarthy v St Paul International Insurance Co Ltd[4] Stone J said:
‘At an early stage of any complaint a claim may be inarticulately expressed as a general assertion of the insured’s responsibility for a disadvantageous position of the claimant. By the time of attempted vindication in court, the claim may be the subject of sophisticated alternative or cumulative foundation and expression in pleadings drafted by learned and skilled lawyers.’
To this may be added such words of caution as that observations in judicial pronouncement in the proceeding will not have been made with an eye to whether a claim fell within the terms of an insurance policy which, in many instances, will not be relevant or in evidence during the dispute. Care should also be taken in relying too much upon the linguistic way in which a claim may be couched by an adversary for various reasons including the temptation for claims to be couched as widely as possible in the interests of a plaintiff. In extreme cases a claim could, conceivably, be couched in language intended to expose a defendant to the risk that the claim as expressed might not engage a legal costs clause thereby seeking (perhaps inappropriately) to expose a defendant to a particular forensic disadvantage for the purpose of promoting settlement.
Whether Timelink’s claim against Major fell within the legal costs clause of the insurance contract between Major and CGU depends upon the proper construction of the terms of the policy, an adequate identification of the claim and an evaluation of whether the claim falls within the terms of the policy as properly construed. In that regard it has been said that neither the actual facts nor the particular formulation of the claim are determinative. It is the true nature of the claim that must be considered and for that purpose it is necessary to make such inquiry as is necessary. In undertaking the task of construing and applying the terms of a contract, it is always essential to bear in mind that what is to be determined is whether the intention of the parties as revealed by the insurance contract was to cover the particular claim which the events gave rise to.”
[4](2007) 157 FCR 402
Analysis of the nature the Plaintiff’s claim against ASCC
14 The pleading by the plaintiff against ASCC, as set out in her Further Further Further Amended Statement of Claim dated 2 July 2014, involved a claim that the plaintiff suffered injury by reason of the negligence of ASCC.
15 As is the norm in common law pleadings, the particulars of negligence were drawn broadly. In this instance, it is my impression that they were drawn so as to encompass every possible allegation which may be made in asserting negligence on the part of ASCC and contained the following allegations:
“(a)Failing to undertake and or provide the cleaning work with due care, skill and expertise.
(b)Failing to ensure that employees, servants or agents performing the cleaning work were appropriately trained in the execution of the cleaning services.
(c)Failing to engage competent contractors to perform the cleaning work.
(d)Failing to monitor and or supervise the cleaning work provided.
(e)Failing to ensure that the cleaning work did not create a slipping hazard.
(f)Failing to ensure that the cleaning work in particular the mopping of the floor surface of the premises, was not performed in such a fashion that the floor surface of the premises in the immediate vicinity of the point where the incident occurred became and was:
(i)wet
(ii)damp
(iii)unduly slippery.
(g)Failing to ensure that the plaintiff was given or any adequate warning about or concerning the fact that the floor surface of the premises in the immediate vicinity of the point where the incident occurred was wet and/or slippery.
(h)Failing to ensure that the area of the floor surface of the premises in the immediate vicinity of the point where the incident occurred was cordoned off and/or barricaded.
(i)Failing to ensure that the aisle along which the plaintiff had been proceeding immediately before the incident occurred was blocked off.”
16 These particulars, some of which were unlikely to have proven to be justified in my opinion, must be read for the purpose of the deciding of the issues in this instance, in the context of the undisputed relationship between ASCC and Woolworths in which:
(i) ASCC was engaged to source subcontract cleaners to clean the supermarket;
(ii) ASCC employed area managers whose primary job was to undertake periodic inspections to ensure that the floors of the supermarket were cleaned adequately in accordance with the relevant contractual obligations imposed upon ASCC by its agreement with Woolworths, but who would also address unsafe work practices if such practices were observed;
(iii) ASCC acted as the conduit between Woolworths and the sub-contractors engaged by ASCC in passing on complaints as to the adequacy of the cleaning services provided and/or safety information of the type the subject of the circular which is exhibit E (the circular), in which sub-contractors were warned of the risk of injury which arose if customers of Woolworths entered areas in which cleaning operations had resulted in a floor which was wet in the absence of appropriate warnings as to the condition of the floor.
17 Further, whilst in order to determine whether or not the policy in this instance responds to the claim brought by the plaintiff against ASCC, the relevant pleadings relied upon by the plaintiff need to be considered in the context of the evidence of the plaintiff and Mr Singh to which I have referred above.
18 I am satisfied, in this instance, that of the particulars of negligence levelled by the plaintiff against ASCC, particulars (d) through to (i) could clearly relate to instructions or supervision which ASCC provided to Klodi by reason of:
· its engagement of Klodi as a sub-contractor to undertake the relevant works;
· its obligation by reason of its contractual relationship with Woolworths to pass on any safety instructions issued to it by Woolworths as to the system of work employed by its sub-contractors; and
· its practice of addressing safety issues if they were observed to be present by its area managers;
and further, that they exposed ASCC to the potential of an attack by the plaintiff that ASCC should have done more to ensure that Klodi did not employ the cleaning system which caused the plaintiff’s fall given the content of the March 9 circular.
19 Having regard to the evidence of Mr Singh however, I am satisfied that Klodi was an experienced and reputable cleaning company, in respect of whose work Woolworths was generally well satisfied, the result being that particulars (d) and (h) were unlikely to have been established by the plaintiff.
20 There is no issue, however, that:
· the relationship between Woolworths and ASCC was one in which:
(i) Woolworths engaged ASCC to provide commercial cleaning services to it at the supermarket;
(i) ASCC, through its trust company QTC, retained Klodi as a sub-contractor to undertake the cleaning services required by Woolworths at the supermarket;
(ii) neither ASCC nor QTC were direct employers of any cleaners;
(iii) neither ASCC nor QTC undertook any activities which fell within the normal meaning of the term “labour-hire company”, namely a company which makes available its employees to provide labour or services to another entity.
· ASCC had been informed by Woolworths of the fact that an unsafe practice had arisen in the modus operandi of some cleaners, in that they were failing to provide signs warning of the presence of wet and potentially slippery floor surfaces which had recently been cleaned.
· ASCC considered itself obliged to pass on the above safety concerns to the sub-contractors engaged by it and, accordingly, that it faced the prospect of a reasonable case being mounted against it on behalf of the plaintiff that it should have notified Klodi as to the problem referred to above notwithstanding that no problem had been raised by Woolworths as to adequacy or safety of the work practices employed by Klodi.
· The injury to the plaintiff was the result of Klodi employing the exact same work process which the safety concerns the subject of the circular issued by Woolworths to ASCC dealt with.
The policy
21 The operative clause of the policy states that Lloyds agreed to indemnify ASCC in respect of the insured’s business “as stated in Item 3 of the Schedule”.
22 It is not in issue that the policy extended cover to reasonable costs and expenses involved in investigating and defending a claim such as that brought by the plaintiff, and indemnified ASCC with respect to claims made against it in respect of:
“liability to pay damages, including claimants’ costs, fees and expenses … for and/or arising out of injury and or damage.”
23 The policy included a number of general exclusions, one of which involved an exclusion with respect to contractual liability in Clause 7.4 in the following terms:
“Liability assumed by the insured under any liquidated damage, penalty or forfeiture clause, express warranty, contract, agreement or guarantee, other than to the extent that such liability would have attached to the insured in the absence of such clause warranty, contract agreement of guarantee.”
24 The coverage section of the policy indemnified the insured against:
“… liability to pay damages, including costs, fees and expenses, in accordance with the law of any country for and/or arising out of injury and/or damage.”
25 There is no issue that the occupation of ASCC as described by the policy was that of:
“Commercial cleaning contract organiser (Excluding the Insured Physically Cleaning the premises and all Labour Hire Activities).”
26 Documents relevant to the policy additional to the policy itself included:
· A Certificate of Currency issued on 19 March 2009, and current for twelve months, contained the following note:
“This policy does not provide any cover for the activities of labour hire or the physical cleaning of premises. Cover is also excluded for subcontractors.”
· A Memorandum of Insurance dated 27 March 2009 described the coverage under the policy as follows:
“Legal liability in respect to commercial cleaning contract organiser (Excluding the Insured Physically Cleaning the premises) including associated activities including property occupier’s liability.”
· A Schedule of Cover dated 6 August 2009 which:
(i) described the coverage in the following terms:
“Legal liability in respect to Commercial cleaning contract organiser (Excluding the Insured Physically Cleaning the premises and all Labour Hore (sic) Activities) including associated activities including property occupier’s liability.”
(ii)stated that:
“This policy does not provide any cover for the activities of labour hire or physical cleaning of premises.”
(iii) stated that cover is also excluded for sub-contractors within the description of “Major Exclusions under the Policy”. The relevant exclusions which were mentioned being:
“14 (labour hire activities)
15 (physical cleaning of premises).”
Analysis as to the indemnity provided by the policy
27 Given the way in which the relevant endorsements to the policy in this instance were introduced, namely that they followed the policy and referred to the cover with respect to sub-contractors as being excluded under the policy and further listed labour-hire activities and physical cleaning of premises under the heading “Major Exclusions”,[5] I am satisfied that any exclusions to the operation of the policy the subject of those endorsements should be categorised as being exclusions to the cover provided by the policy.
[5]Joint Court Book (“JCB”) 584
28 In these circumstances, I am satisfied that the provisions, excluding cover with respect to labour-hire activities and sub-contractors’ liability, should be interpreted as being exceptions or exclusions to the cover provided by the policy in respect of which the onus to establish such exclusions operate to exclude indemnity rests with Lloyds.
29 In interpreting the intention of the parties as to the risk which was to be covered by the policy in this instance, I am satisfied that the relevant risk involved that associated with ASCC’s business as the organiser of cleaning services, which in turn involved ASCC:
(i) Retaining sub-contracting cleaning companies possessing the relevant skills, both at the supervisory level and at the hands-on cleaning level, to undertake the duties as set out in Annexure “B” to the supplier agreement;[6]
[6]See exhibit B
(ii) Employing area managers whose job was primarily to check the quality of cleaning works done by its sub-contractors but who involved themselves in safety issues in the manner which I have earlier described;
(iii) Passing on instructions issued by Woolworths to ASCC appointed sub-contractors relevant to the safety of the work practices of those sub-contractors.
30 I am further satisfied that the words within the policy documents, which excluded labour-hire or physical cleaning of premises and coverage for sub-contractors, should be interpreted such as evidencing the intention of Lloyds to provide insurance in respect of the activities of ASCC when operating as a “commercial cleaning contract organiser” but not as a hands-on cleaner or primary employer of labour.
31 Whilst it is put on behalf of Lloyds that the wording of the policy should be interpreted such that the policy operated so that it did not apply to any liability of ASCC which was in any way associated with the activity of any sub-contractor engaged by ASCC, were this position accepted, it would be difficult to imagine a situation in which ASCC might be exposed to any claim with respect to bodily injury by reason of the operation of a business in which its sole activity is to engage cleaning sub-contractors and check on their work as required by the commercial arrangement between ASCC and Woolworths
32 I am satisfied that it would have been likely to have been accepted by the parties to the policy that, in operating as a “commercial cleaning organiser”, ASCC would be involved in sourcing and liaising with sub-contract cleaners, with the result that a condition excluding ASCC from indemnity in respect of any action by ASCC involved in that activity would be unlikely to have been within the contemplation of the parties in this instance.
33 For these reasons, I am satisfied that activities to which cover under the policy was to be excluded should be characterised as follows:
(i) any work undertaken by a direct employee of ASCC which involved physical cleaning; and or
(ii) any activity in which a direct employee of ASCC was hired out to some organisation other than ASCC to provide services to that organisation whilst in a direct employment relationship with ASCC; and or
(iii) the liability of any sub-contractor engaged by ASCC which arose in the course of its cleaning operations.
34 For these reasons, I am satisfied that, in order to give effect to the intention of the parties in executing the policy, the wording of the policy should be interpreted in the manner in which I have referred above.
35 It follows that ASCC is entitled to indemnity under the policy in the current circumstances insofar as the contribution by ASCC to the settlement was appropriate given exposure which ASCC had to the claim by the plaintiff to which the policy responded in accordance with my findings above.
36 In pressing its position that the contribution by ASCC to the settlement could not have arisen in response to any liability which was covered by the policy, it was put by Ms Britbart SC, on behalf of Lloyds, that whilst the quantum of damages paid to the plaintiff was not unreasonable, the contribution to those damages by ASCC was not reasonable, having regard to its potential liability to the plaintiff.
37 This position was in turn based upon the argument that the plaintiff’s evidence suggested that the primary liability to her lay with Woolworths as the occupier of the premises rather than ASCC, but that the respective contributions by the defendants to the settlement sum suggested the contrary, the explanation for this being that the contractual obligation of ASCC to indemnify Woolworths must have exerted a significant influence in fixing the contribution by ASCC to the settlement.
38 For the reasons set out below, I am not satisfied there is any merit in this point.
39 While ASCC and Woolworths agreed to an order dismissing Woolworths’ claim for indemnity or contribution against ASCC, there is no evidence that the claim by Woolworths that it was entitled to a contractual indemnity from ASCC in respect of the claim made by the plaintiff against it played any part in fixing the contribution by Woolworths and ASCC to the compensation and costs paid to the plaintiff.
40 When account is taken of the fact that ASCC was in a position in which it was required, through its own resources, to fund a jury trial:
· with an estimate of ten days;
· in which it had retained both Senior and Junior Counsel;[7]
I am satisfied that ASCC must have faced the prospect of incurring trial costs well in excess of $100,000 in its own defence of the proceeding.[8]
[7]I do not consider this decision to be in any way unreasonable having regard to the fact that Senior and Junior Counsel were retained on behalf of the plaintiff
[8]Given the range of counsel fees as prescribed by the rules, those fees alone in respect of a ten-day trial would most probably have exceeded that amount.
41 Further, ASCC occupied the position as the conduit between Woolworths and Klodi in disseminating the safety instructions by Woolworths as to the method of cleaning which would have obviated the precise risk which gave rise to the plaintiff’s injury. In these circumstances it could not be said, in my opinion, that ASCC was unjustified in taking the position that a jury may have found ASCC to be a very significant contributor to the unsafe cleaning system which resulted in the plaintiff’s injury, the result being that ASCC was exposed to the potential of having to fund a substantial contribution to:
(i) a verdict in favour of the plaintiff substantially greater than the damages which were agreed upon; and
(ii) the plaintiff’s trial costs which had the potential of inflating the agreed legal costs payable to the plaintiff as at the first day of the trial by a sum in excess of $100,000 given the retention by the plaintiff of Senior and Junior Counsel.
42 For these reasons, I am satisfied that the respective contributions by the defendants to the plaintiff’s damages is readily explained by ASCC adopting a commercial and pragmatic approach to its potential liability to meet its own trial costs and its exposure to the plaintiff’s damages and costs.
Analysis as to the applicability of Clause 7.4
43 There is no issue, that in the current proceedings, Woolworths sought contribution with respect to the claim made by the plaintiff against it, from ASCC, and that in its Notice of Contribution, Woolworths relied upon the undertaking by ASCC to indemnify it –
“… for any liability, loss or damage the first defendant suffers as the result of any breach by then second defendant of its obligations under the Contract.”
44 It is put on behalf of Lloyds that the liability in respect of which ASCC seeks indemnity must have arisen by reason of the contractual indemnity relied upon by Woolworths in its Notice of Contribution, which liability is excluded by the operation of Clause 7.4 of the policy.
45 I am satisfied that Clause 7.4 is an exclusion clause in respect of which the onus falls upon the insurer to establish the existence of the facts which make the exclusion clause operative.
46 In this instance, ASCC seeks indemnity with respect to the claim made by the plaintiff against it.
47 Given that the pleading by the plaintiff against ASCC is based in negligence, it could not be asserted that the potential liability of ASCC to the plaintiff was in any way founded upon any contractual liability which ASCC had to her.
48 For that reason, I am satisfied that clause 7.4 has no part to play in the indemnity sought by ASCC in respect of its liability to the plaintiff.
49 The relevance of Clause 7.4 is pressed on an alternative basis on behalf of Lloyds, namely that an inference should be drawn that ASCC’s agreement to indemnify Woolworths was influential in fixing the sums which both Woolworths and ASCC agreed to pay to the plaintiff in settlement of the proceeding.
50 For the reasons set out previously, I do not find that position to be persuasive. Rather, I am satisfied that the settlement represents an appropriate commercial response by ASCC to the case mounted against it by the plaintiff given the position in which it found itself by Lloyd’s refusal to indemnify it.
51 For the reasons set out above, I am satisfied that ASCC is entitled to the indemnity sought in this instance.
52 I will hear the parties as to the precise form of the order which should be made in the claim and also on the issue of costs.
- - -
0
2
0