Wesfarmers Federation Insurance Ltd v Stephen Wells trading as Wells Plumbing

The case of *Wesfarmers Federation Insurance Ltd v Stephen Wells trading as Wells Plumbing* concerned an appeal to the New South Wales Court of Appeal regarding an insurance contract and the characterisation of a work relationship. The dispute arose from an insurance policy held by Wesfarmers Federation Insurance Ltd (Wesfarmers) which covered liability to independent contractors but excluded employees. Stephen Wells, trading as Wells Plumbing, sought an indemnity from Wesfarmers for costs incurred in defending a claim brought by a third party, arguing he was an independent contractor.

The primary legal issues before the Court of Appeal were whether Mr Wells was an employee or an independent contractor for the purposes of the insurance policy, and consequently, whether Wesfarmers was liable to indemnify him for the costs of defending the third-party claim. A further issue concerned the extent to which the insurance contract permitted recovery of costs, particularly in circumstances where no underlying liability was established.

The Court of Appeal considered the distinction between the exercise of control and the contractual right to control the carrying out of work, as well as factors such as financial and tax arrangements and mutuality of obligations, to determine the nature of the relationship. The Court found that while Mr Wells was not entitled to an indemnity for the entire claim, he was entitled to an indemnity limited to the costs incurred in defending the plaintiff's claim. The Court also considered the terms of the insurance contract regarding the apportionment of costs and the conditions under which costs could be obtained.

In its orders, the Court of Appeal allowed the appeal in part, setting aside the District Court's judgment and orders. It declared that Mr Wells was entitled to an indemnity limited to the costs of defending the plaintiff's claim, otherwise dismissing the cross-claim. Mr Wells was ordered to pay 75% of Wesfarmers' costs of the cross-claim, and Mr Wells was also ordered to pay 75% of Wesfarmers' costs of the appeal. Certificates under the *Suitors' Fund Act 1951* (NSW) were granted to the respondents in respect of their costs of the appeal.