Yun Hee Choi v City of Sydney Council & 4 others

[2007] NSWSC 65

CITATION:	Yun Hee Choi v City of Sydney Council & 4 others [2007] NSWSC 65
HEARING DATE(S):	11 October 2006 - 7 November 2006
JUDGMENT DATE :	13 March 2007
JUDGMENT OF:	Barr J at 1
DECISION:	In the plaintiff’s claim - 1. A verdict for the first defendant, City of Sydney Council, in the claim of the plaintiff, Yun Hee Choi. 2. A verdict for the plaintiff, Yun Hee Choi, against the second defendant, Prestige Property Services Pty Limited, in the sum of $718,259.95. Interest is not to run until 21 days after the second defendant has received from the plaintiff a completed Health Insurance Commission form and a Centrelink clearance. 3. The plaintiff is to pay the first defendant’s costs and the second defendant is to indemnify her. The second defendant is to pay the plaintiff’s costs of suit against both defendants. In the first cross-claim - 4. A verdict for the first cross-defendant, Prestige Property Services Pty Limited. 5. I make no order as to costs. In the second cross-claim - 6. A verdict for the first cross-defendant, Active Tree Services Pty Limited. 7. I order the cross-claimant, Prestige Property Services Pty Limited, to pay the costs of the first cross-defendant, Active Tree Services Pty Limited, on an indemnity basis. 8. A verdict for the second cross-defendant, City of Sydney Council. 9. I order the cross-claimant, Prestige Property Services Pty Limited, to pay the costs of the second cross-defendant, City of Sydney Council. In the third cross-claim - 10. A verdict for the first cross-defendant, P Matson on behalf of the Underwriting Members of Syndicate 990. 11. I order the third cross-claimant, Active Tree Services Pty Limited, to pay the costs of the first cross-defendant, P Matson on behalf of the Underwriting Members of Syndicate 990. Those costs are to be assessed on a party-party basis up to 5pm on 22 March 2006 and thereafter on an indemnity basis. 12. A verdict for the second cross-defendant, City of Sydney Council. 13. I make no order as to the costs of Active Tree Services Pty Limited and City of Sydney Council. 14. A verdict for the third cross-defendant, Prestige Property Services Pty Limited. 15. I make no order as to the costs of Active Tree Services Pty Limited and Prestige Property Services Pty Limited.
CATCHWORDS:	Negligence - plaintiff injured by falling tree branch - whether Council under a duty to protect users of park against injury by falling tree branches - whether tree dangerous - whether Council's duty delegable - whether Council's duty delegated to contractor - whether contractor under a duty to users of park - whether contractor in breach of duty - whether contractor's duty delegated to subcontractor - Negligence - damages - plaintiff brain damaged - assessment
CASES CITED:	Kondis v State Transport Authority (1984) 154 CLR 672 Burnie Port Authority v General Jones Pty Limited (1992-1994) 179 CLR 520 Hollis v Vabu Pty Limited (2001) 207 CLR 21 Bazley v Curry [1999] 2 SCR 534 Bushey and Sons v United States (1968) 398 F2d 167 Northern Sandblasting Pty Limited v Harris (1997) 188 CLR 313 Voli v Inglewood Shire Council (1963) 110 CLR 74 Eckersley v Binnie and Partners (1988) 18 Con LR 1 King v Stewart (1994) 85 LGERA 384 Hide and Skin Trading Pty Limited v Oceanic Meat Traders Limited (1990) 20 NSWLR 310 Codelfa Construction Pty Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 Prenn v Simmonds [1971] 1 WLR 1383 DTR Nominees Pty Limited v Mona Homes Pty Limited (1978) 138 CLR 423 Thoday v Thoday [1964] P 181 at 197-8 Workington Harbour Board v Trade Indemnity Co Limited (No 2) [1938] 2 All ER 101
PARTIES:	Yun Hee Choi City of Sydney Council Prestige Property Services Pty Limited Active Tree Services Pty Limited P Matson on behalf of the Underwriting Members of Syndicate 990
FILE NUMBER(S):	SC 20689/01
COUNSEL:	M B Williams SC and R A O'Keefe J G Stewart D G Nock SC and J Downing E Petersen A J McInerney
SOLICITORS:	Gaitanis Lawyers McCulloch and Buggy Ebsworth & Ebsworth Livingstone & Company Griffin Hilditch

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

GRAHAM BARR J

13 MARCH 2007

20689/01 YUN HEE CHOI v CITY OF SYDNEY COUNCIL & ANOTHER

JUDGMENT

1 HIS HONOUR: The plaintiff, Choi Yun Hee, whom I will call by her present, married, name, Mrs Choi, sues the defendants, the City of Sydney Council (the Council) and Prestige Property Services Pty Limited (Prestige), for damages following an incident that took place in Hyde Park North, Sydney on 14 December 2000.

2 On 14 December 2000 Mrs Choi, a native of South Korea, was twenty-two years old and an undergraduate student at Sydney University. During the afternoon she and a friend, Kim Eun Jung (Miss Kim), went to Hyde Park North and lay on the grass in a spot near the prominent sculpture called Earth, Water, Fire. Immediately to the east of the place where they sat were two parallel rows of trees, running north-south on the western side of the central avenue of the park. The trees were of the species ficus microcarpa var. Hillii, known as Hill’s weeping fig. As Mrs Choi and Miss Kim were on the grass, a branch overhanging the lawn fell from one of the figs and struck Mrs Choi on the head, causing her serious injury.

3 Mrs Choi says that the Council had the care, control and management of Hyde Park and that it owed her a duty to take reasonable care to avoid exposing her to the risk of injury. She says that the Council was negligent, that is, in breach of its duty, in the following ways -

(a) Failing to lay down an appropriate system for the inspection, care and maintenance of trees in Hyde Park in order to avoid risk of falling branches.
(b) Failing to ensure the implementation and maintenance of such system.
(c) Failing to ensure that areas of Hyde Park where people were accustomed to lie was a safe environment and was not subject to overhang of hazardous branches.
(d) Failing to properly inspect trees in the areas where people were accustomed to lie on the grass.
(e) Failing to warn of the likelihood of branches falling.
(f) Failing to remove a specific hazardous branch which fell upon the Plaintiff.
(g) Failing to ensure that any person to whom the First Defendant delegated any relevant responsibility in respect of the said Park, in fact discharged such responsibility fully and properly.

4 The Council denies that it had the care, control and management of the park. It denies owing Mrs Choi the duty alleged and denies negligence. In the first cross-claim the Council seeks indemnity or contribution from Prestige which, as a contractor to the Council, had certain obligations concerning trees in Hyde Park North. The Council repeats against Prestige the allegations of negligence made by Mrs Choi against the Council and adds the following particulars of negligence -

(b) Failing to carry out the maintenance of the trees in Hyde Park in a conscientious, diligent and professional manner which is higher than or equal to the degree of skill, care and diligence normally exercised by recognised professional persons which supply services of a similar nature.
(c) Failing to carry out the maintenance of the trees in Hyde Park in a proper and workmanlike manner.
(d) Failing to maintain the subject tree such that it was healthy and free of diseases, insects, dead wood and damage.
(e) Failing to remove all dead and dangerous branches from the subject tree.

5 As will appear, these latter assertions rely on the terms of a contract between the Council and Prestige. The Council also pleads the contract and avers breaches thereof.

6 In her claim against Prestige Mrs Choi repeats the assertions made by the Council in its cross-claim. She also asserts the existence between herself and Prestige of a proximity giving rise to a duty to her to conduct itself as the Council says it ought to have conducted itself. Prestige denies the allegations of breach. It does not admit the asserted proximity.

7 There was a subcontract by which Active Tree Services Pty Limited (Active Tree Services) agreed to do some of the work Prestige was obliged to do under its contract to the Council. In the second cross-claim, Prestige pleads its contract with the Council, sets up particular terms thereof and asserts Active Tree Services’ breach of those terms. Active Tree Services puts the terms of any subcontract in issue, denies any asserted duty of care and denies the breaches pleaded. Prestige also seeks indemnity or contribution from the Council.

8 There is a third cross-claim, brought by Active Tree Services against its insurer, P Matson on behalf of the Underwriting Members of Syndicate 990, seeking indemnity under a policy of insurance. Active Tree Services also seeks indemnity or contribution from the Council and from Prestige.

The risk of harm to visitors to Hyde Park

9 Many members of the public visit Hyde Park North on every day of the week. The Hill’s weeping figs grow over paths where they walk and lawns where they lie and sit. So it was at the time of these events. The figs were planted early last century during the restoration of Hyde Park following construction of the city railway. Unfortunately, they were planted too close together and as a result they formed a more or less unbroken canopy. Trunks and branches which have to compete for light tend to become longer and thinner than they otherwise would. So it was with the Hill’s weeping figs. The trees were under stress.

10 Hill’s weeping figs tend to have a condition called included bark. The condition affects the junctions of co-dominant stems, that is members of equal or about equal size and deviating from one another at an acute angle, each trying to form the main trunk or branch. The bark covering the common wood at and immediately below such junctions sometimes intrudes into the wood. When it does, the junction is weakened so that a given amount of lateral force, which would not normally damage the tree, may cause the stems to part and the joint to fail. The external bark at junctions so affected takes on a characteristic appearance, so the presence of included bark can be ascertained by external inspection. However, a close look is needed and such an affected junction high in a tree may not be detectable or easily detectable from ground level.

11 The Council received advice about the trees in Hyde Park well before these events. One example was a report from Ralph H Clark, Tree Surgeon, dated 24 May 1988. Mr Clark criticised the design and maintenance of Hyde Park. He said that the figs, particularly those in the avenue, had been allowed to become too large and too heavy, with dead and dangerous wood. He observed that the Council had no program for the removal of dangerous trees and for the management of other trees in need of attention.

12 Another document the Council had was a report written for the Council on 23 January 1996 by a firm called Arborcraft. The report remarked on the root damage occasioned to the Hill’s weeping figs by compaction of soil from excessive watering of plants growing under them and from trenches dug to install electrical cables. The report continued -

Hill’s Figs can have included bark. In Hyde Park South and other Sydney parks, mature specimens have failed. The defect is easy to see, but the outcome is not easy to predict. (Appendix 6)

13 The report went on to deal with root rot fungus and continued -

The trenching, the tendency to have included bark, and the presence of a root rot fungus are wild cards that will have an impact on Hyde Park North over the next 20 years. It is possible that the avenue effect will be lost in some areas.

14 Appendix 6 was as follows –

6. CO-DOMINANT STEMS
Definition : Two stems or trunks of equal size developed from two apical buds at the tip of the same stem.
There are no branch collars at the bases of co-dominant stems; there is no “built-in” protection zone. A stem bark ridge separates the two stems from each other.
When the stem bark ridge turns upwards, there is a strong union between the stems regardless of the angle of the stems.
When the stem bark ridge turns inward or when there is a crack between the stems, there is a weak union regardless of the angle of the stems.
Therefore the type of the union and not the angle is the major factor (see figures 1 and 2).
Included bark is bark which remains between branch and trunk or between co-dominant stems. It occurs when the cambium turns inward and its most common occurrence is between co-dominant stems. Co-dominant stems with included bark and a downward stem bark ridge are weak.
Co-dominance can be quite normal with some species particularly when they reach their mature form and size.
Recommendations :
* do not buy plants with co-dominant stems with included bark
* do not vegetatively propagate from trees with this defect
* if co-dominant stems are to be removed it is best done early – see figures 3 and 4. Note: - a strongly attached co-dominant stem need not necessarily have to be removed.
* another option is to prune a new stem more than the other – the stem with more pruning will grow more slowly and the other will form a collar about it
* on older stems, cabling may be another option
* trees with serious defects may have to be removed.

15 The Appendix incorporated a series of diagrams illustrating the appearance of joints with normal bark and joints with included bark.

16 The Council engaged a further arborist, Garry Clubley, to write a review commenting on the Arborcraft report and its recommendations. Arborcraft’s recommendations had concentrated on the consequences of the presence of the fungal diseases Armillaria and Phytophthora and made recommendations for dealing with trees affected by those diseases. So did Mr Clubley’s review. Mr Clubley did not mention included bark. There were, however, these passages -

1.2 The Arborcraft Report provides a basic overview of the condition of the identified trees, and specifies tree removal/tree surgery work to rectify observable potential hazards, ie: removal of dead branches, etc. Some general comments in respect of tree management are also included in the report.
1.3 The comments in the Arborcraft Report conform to recognised tree management practices and contemporary knowledge in respect of tree biology/physiology.
Why the branch fell

17 On the day of Mrs Choi’s injury, Miss Kim telephoned Mrs Choi’s father in Korea and he asked her to photograph the tree. She returned to Hyde Park on the following day and did so. In due course, prints of Miss Kim’s photographs were delivered to an arborist, Mr David Ford, qualified by Mrs Choi’s solicitor. By that and other means Mr Ford was able to identify the tree from which the branch had fallen. He went to Hyde Park and examined the tree. It looked early in the hearing as though there would be an issue whether Mr Ford had reported on the very tree, but following Miss Kim’s evidence that ceased to be a contentious matter. Realistically, defence counsel did not submit that there was any doubt about the correct identification of the tree. I am satisfied that Mr Ford, as well as Mr Atkins, an arborist qualified by the Prestige, reported on the tree from which the branch fell.

18 In his report of 19 July 2004 Mr Ford said this -

The tree is a mature specimen of Ficus microcarpa ‘Hillii’ (Hill’s Weeping Fig) with a trunk diameter of approximately 1200mm, dividing into two subtrunks with diameters of 900mm and 600mm. It is located in a double row of trees of the same species, with two specimens of Eucalyptus pilularis (Blackbutt) located nearby … It is an edge tree, with a poorly formed crown shape due to competition. The crown overhangs a footpath which has a high frequency of foot traffic, and a grassed area which contains sculptures and fountains.
The tree is in good health and in fair structural condition. It has been suppressed by nearby trees, so that the crown is drastically offset towards the west and southwest and the bulk of the crown scaffold is not located over the trunk. Crown spread to the east is negligible but to the west is approximately 20m. Deadwood to a diameter of approximately 100mm is present in the crown. Pruning cuts are present in the lower and central crown areas.
The tree does not appear to be subject to insect attack or infection by disease. However the root rot fungal disease Armillaria luteobubalina is known to have caused the deaths of trees in the avenue, both in Hyde Park North and South (Sydney Morning Herald 15 May 2004). Debilitation as the result of root rot diseases would predispose the tree to shed branches.
The lower trunk divides into two subtrunks at a height of approximately 3m. Of the two subtrunks, one (600mm diameter) is almost vertical and the other is inclined at about 30 degrees towards the southwest. This latter subtrunk divides into two parallel branches. One of these two branches has a long bark rip evident at a point approximately 15m from the main lower trunk… This wound is the result of a failed junction between two branches, and I am informed that the falling branch section caused the injury to your client. The failed branch does not appear to be affected by insects or disease.
Just below the bark rip, a distinct inclusion line is visible on a junction in the main branch, evidence of another, larger, weak junction … Beyond this point, another bark inclusion is present on the outer branch junction … These two defects are clearly evident from the ground with the naked eye.
The subject tree is atypical of the species, having been suppressed and malformed by competition from nearby trees. As a result, the major branch supporting the failed section has a long cantilever in excess of approximately 20m from the trunk, and is severely endweighted. This weak scaffold overhangs highly trafficked areas.
Comment
The species Ficus microcarpa ‘Hillii’ (Hill’s Weeping Fig) is well known for its habitual production of poor trunk and branch junctions. These junctions are prone to failure due to the bark being ‘included’ in the junction. In a well-formed junction the bark at this point rolls outwards so that growth increments can take place. In these defective junctions the bark rolls inwards so that the junction becomes weakened as the included bark expands within the joint. This is also termed a ‘compression fork’… and ‘is a structure that is absolutely bound to fail if a tensile load is applied at right-angles to the axis of the stems, pulling them apart’… Junctions of codominant stems (ie stems of about equal diameters) are particularly prone to included junctions…
The subject junction (noted in this discussion as Fork A) failed due to a bark inclusion; inrolling bark is present at the apex of the wound and is evident from the ground … The two stems were approximately equal diameters and were joined with an acute included angle. It is possible that the presence of this weak fork was obscured prior to failure by its position in the upper crown and by the orientation of the junction: the lower stem, now no longer present, may have been in a position to conceal the presence of the bark inclusion when viewed from below. However, a line of included bark would probably have been present along the side of the junction, and there would probably have been some increase in stem diameter at that point. Regardless, the narrowness of the included angle between the stems would strongly suggest the presence of a compression fork. These symptoms are a frequent occurrence in this species, which is noted for such defects. If present, the symptoms would have been visible from the ground.
Fork B: a junction between two codominant stems occurs in a branch below fork A. This junction is similar to the failed junction, and is equally prone to failure. The two sets of stems are similar in diameter. A line of included bark is visible along the side of the junction…

Fork C: closer to the trunk, on the same branch, is another weak junction between two codominant stems, the upper of which supports Fork A. A line of included bark is visible along the side of the junction. Swelling of the stem at the point of the junction is visible from a position on the ground below the branch…, showing that additional wood is being deposited in an attempt by the tree to compensate for weakness. This is a larger fork than either Fork A or Fork B and is equally prone to failure…
A routine inspection of the tree for the purposes of tree maintenance or hazard assessment should have detected at least the defects in Forks B and C, even if the defect in Fork A was not fully visible. Remediation of the weak junctions at Forks B and C either by closer inspection or by pruning operations would then have brought Fork A to notice. The weak structure of Fork A, once identified, certainly required action to be taken, since the failure of this junction would have been entirely predictable. The future failures of Fork B or Fork C are also entirely predictable events. The predisposition to failure is evidenced by the presence of bark inclusions, visible from the ground. Any reasonable assessment of the subject tree should detect these defects, and either aerial inspection or pruning should be undertaken.

19 Mr Ford appended to his report photographs of the tree, showing the scarred limb from which the branch had fallen and the other forks discussed in the report. He referred to those photographs in appropriate places. He also referred to the opinions of expert writers on the subject of co-dominant stems and included bark.

20 Service of Mr Ford’s report prompted Prestige to qualify an arborist, Mr Atkins, who wrote a report and a supplementary report on 16 November 2004. Mr Atkins inspected the tree on 4 November 2004. He observed that there were “wounds” from previous pruning all along the major scaffold branches, mainly in the lower parts of the canopy. He estimated that the pruning had been done within the last ten years. He said that the canopy spread towards the east for approximately three metres and to the west for approximately nineteen metres, a growth pattern he described as phototropic (turning towards the light). The result, he said, was a disproportionate amount of foliage and branching on the western side. He saw the wound caused by the failure of the branch that caused Mrs Choi’s injury and estimated that the missing branch would most likely have been similar in size to the limb from which it tore loose, which was about 150 – 200 millimetres in diameter. He included in his report of 16 November 2004 a photograph of trees in the avenue showing phototropic growth and disproportionate canopy form. Mr Atkins noticed a distinctive pattern to the wound wood that indicated that bark was included within the fork at the branch union. He thought that the likely cause of failure was the presence of co-dominant branches and bark included in the branch union.

21 In their oral evidence Mr Ford and Mr Atkins confirmed their opinions about the probable cause of the failure of the branch. There is no evidence that might suggest that the branch was dead, dying or diseased. There is no evidence to suggest that the failure might have resulted from a high wind. There is no evidence to suggest that the joint failed because the roots of the tree were affected by fungal disease.

22 Miss Kim estimated the length of the branch at 1.5 metres, but I do not regard her as a good judge of such matters. It seems more likely that, like its co-dominant partner, the branch was in the order of seven or eight metres long. That was the opinion of Mr Atkins and Mr Willcocks, the managing director of Active Tree Services.

23 I am satisfied that the phototropic growth of the branch towards the west caused it to become significantly end-weighted and that the tree became unable to bear its weight at a fork weakened by included bark.

Was the risk of harm reasonably foreseeable?

24 Mr Ford and Mr Atkins prepared individual reports, which came into evidence. They also prepared joint reports. The second of those reports, exhibit T, was written during the trial after Mr Ford and Mr Atkins had been furnished with copies of relevant exhibits and a copy of the transcript of the evidence of relevant witnesses. Some of the questions they were invited to answer were taken from the particulars of negligence pleaded by Mrs Choi against the Council and Prestige and some from a series of questions posed by Mr Ford in his supplementary report of 6 October 2006, exhibit A tab 3. Mr Ford and Mr Atkins gave simultaneous oral evidence.

25 Both experts were of the opinion that it was well-known in the arboricultural industry in Sydney between 1998 and 2000 that the Hill’s weeping fig was prone to defects that could lead to limb failure. Those defects included the one known as included bark. The experts also agreed that close planting, with consequent restriction of light and elongation of limbs, would have been recognised by arborists as increasing the risk of failure of joints with included bark.

26 I conclude from this evidence that any person competent in the management of trees would have recognised from the fact that the trees in the avenue were Hill’s weeping figs, with their known tendency to include bark, that had developed long, end-heavy branches on the western side overhanging lawns used by visitors to the park, that there was a risk that these conditions might combine to cause a joint to fail, with consequent risk of injury.

27 Such recognition would not, of course, have identified which trees, if any, presented that particular danger, but a competent manager would have realised the need to inspect the trees in order to identify any that did.

28 The experts agreed that close inspection would have been needed to identify the presence of included bark at any joint. Mr Atkins remarked on the crowded state of the canopy and considered that any inspection of the higher parts of the trees could be properly done only by the use of an elevated work platform. Mr Ford agreed, though he thought that much could be detected from an inspection at ground level.

29 I have extracted above Mr Ford’s statement of opinion that the two joints below the one that failed could be identified from ground level as having included bark. Mr Atkins did not agree. He thought that ridges of bark and swellings that might indicate the presence of included bark might be apparent from a ground level inspection, though he could not identify the fault accurately from that level. Both experts agreed that the failed joint was high in the canopy. Obviously, other growth might at the time have obscured it from an inspection at ground level.

30 Although I am not satisfied that the presence of included bark could have been ascertained from ground level, I am satisfied that the condition of the tree, including the appearance of the two lower forks noted by Mr Ford, would have led a reasonable manager to carry out a close inspection at height. I am satisfied that such an inspection would have revealed the presence of included bark and would have alerted the manager to the danger presented by that particular fork and branch.

31 There were at the time means of lifting personnel into the canopy for close inspection. For example, Active Tree Services used elevated work platforms routinely in the course of its work. Once detected, the danger could have been removed by lopping at the affected junction and, perhaps, at the two other junctions identified by Mr Ford.

32 In my opinion the risk of harm to visitors was foreseeable.

The management of Hyde Park North; contractual relations between the Council, Prestige and Active Tree Services

33 Until 1998 the Council managed Hyde Park North by the labours of its own staff but contracted out the management of Hyde Park South. Prestige was a contractor. The services it offered were wide-ranging, including the management of gardens, turf management, cleaning and tree care. It sublet the arboricultural work for Hyde Park South to Active Tree Services. The Council knew this.

34 Late in 1996 the Council decided to invite tenders for the management of a number of its parks, streets and spaces, including Hyde Park North and Hyde Park South. The services called for were of several kinds and related to streets and parks across the municipality.

35 By cl 1.4 of the Conditions of Tender issued by the Council to intending tenderers the request for tender comprised the following -

(1) the Conditions of Tender
(2) the Tender Form
(3) the General Conditions of Contract
(4) the Specification
(5) the drawings; and
(6) the Addenda

36 Cl 1.5 was as follows -

1.5 Addenda
Council may issue Addenda from time to time and at any time prior to the Closing Date. Addenda may be issued to clarify the Request for Tender or to effect modifications to the Request for Tender. Each Addendum will be issued to all Tenderers and upon issue will form part of the Request for Tender.
Receipt of each Addendum must be acknowledged by the Tenderer in Part 19 of the Tender Form. Council may consider any Tender submitted without acknowledgement of all Addenda to be non-conforming.

37 The General Conditions of Contract included these terms -

1. In this Agreement, unless the context otherwise requires:
…
(aa) “ Services ” means the services to be performed by the Service Provider, as set out in Schedule 1 and includes additional services or services of a higher standard provided in the Tender, if any, and any other services agreed by Council and the Service Provider and where provision is made in the Specification for goods or other materials (e.g. plants and trees) also to be provided by the Service Provider, references to Services shall be deemed to mean the provision of services or goods and materials and services, as applicable;
…
2.1 Council appoints the Service Provider to provide the Services on the terms of this Agreement and the Service Provider accepts the appointment.
…
3.1 The Service Provider shall perform the Services:
(a) at the times and in the manner specified in the Specification;
(b) in a conscientious, diligent and professional manner, which is higher than or equal to the degree of skill, care and diligence normally exercised by recognised professional persons which supply services of a similar nature;
…
16.7 Without limiting the generality of the foregoing the Service Provider shall:
(a) ensure all employees, agents and sub-contractors of the Service Provider involved in providing the Services are fully qualified or trained for the work and satisfactorily complete any training required by Council from time to time;
(b) ensure all employees, agents and sub-contractors of the Service Provider comply with any lawful direction of the Contract Manager in the event such direction is given for the safety of the public (such as in the case of fire);
(c) by fully responsible for the acts and omissions, whether negligent or otherwise, of its employees, agents and sub-contractors and shall ensure that all of them fully comply with the terms of this Agreement;
(d) evaluate the performance of all personnel engaged in connection with the provision of the Services from time to time as requested by Council and at least annually and provide a copy of all such evaluations to Council within ten (10) Business Days of their completion by the Service Provider; and
(e) establish (to the extent not established at the date of this Agreement) and maintain an effective occupational health and safety system to ensure a safe system of work.
…
17.1 The Service Provider will advise Council of the details of any sub-contractors which it wishes to engage to provide Services. No sub-contractor shall be engaged by the Service Provider to provide Services without the prior consent of Council. The Service Provider shall be fully responsible for the performance of the Services notwithstanding the consent of Council or that the Service Provider has sub-contracted the performance of any part of the Services.
…
20.1 The Service Provider shall indemnify, and shall at all times keep indemnified, Council, its offices, employees, agents and contractors (and their employees and agents) from and against loss, damage, expense (including legal costs on a solicitor-client basis) and other liability which they may incur or sustain arising from any claim, demand, action suit or proceeding that may be made or brought by any person against Council, its officers, employees and contractors for, or as a consequence of, any act or omission or any negligence by the Service Provider, its employees, agents or sub-contractors or otherwise arising directly or indirectly from the provision of the Services or failure to preform or observe the terms of this Agreement, including all loss, damage or injury to persons or property caused or contributed to by the Service Provider, its employees, agents or sub-contractors and including any personal injury to or death of any person.
…
20.3 The Service Provider’s liability to indemnify Council shall be reduced proportionally to the extent that any negligent act or omission or wilful default by Council or its employees or agents may have contributed to any loss, damage, death or injury referred to in clauses 20.1 or 20.2.
…
25.1 The relationship of Council to the Service Provider is that of principal and independent contractor and the Service Provider shall perform the Services and all acts and agreements related thereto, whether or not requested by Council, in and to promptly arrange such written undertakings to be given by its employees or subcontractors engaged in the performance of the Services.
…
31 WHOLE AGREEMENT
31.1 This Agreement supersedes any and all agreements between the parties, whether oral or written, in relation to the matters referred to herein.
31.2 This Agreement consists of all the documents listed in clause 32 in their order of precedence and constitutes the entire agreement of the parties in respect of its subject matter and its terms and conditions shall not be varied by the parties other than in writing.
32 PRECEDENCE
32.1 In the event of any inconsistency between the documents constituting the Agreement, the order of precedence shall be as follows, with the first document listed prevailing over the second document, and so forth;
(a) the Special Conditions,
(b) Schedule 1 to the General Conditions of Contract
(c) the Specification
(d) the Tender
(e) the Request for Tender

38 Schedule 1 provided in part -

Services (clause 2.1) see the Request for Tender and the Specification and includes:

Additional Services or services of a higher standard provided in the Tender (if any); and

any other services agreed by Council and the Service Provider.

39 Volume 1 of the Request for Tender comprised conditions including these -

1.6 Precedence of Documents
To the extent there is any inconsistency between:
(a) an Addendum and the Request for Tender, the Addendum shall prevail; and
(b) two or more Addenda, the last issued Addendum shall prevail.
…
14 Tenderer to Rely on Own Enquiries
14.1 All information in the Request for Tender and in a briefing, if any, is provided for the assistance of Tenderers only and no representation or warranty is made by or on behalf of Council concerning the information.
14.2 Council shall not be liable for any representations or warranties made or purportedly made by Council’s agents or any other person or company on Council’s behalf, whether in the Request for Tender, the briefing (if any) or otherwise.
14.3 Tenderers acknowledge in receiving this Request for Tender and in submitting any Tender that they have relied entirely on their own knowledge and enquiries and they do not rely on any warranties or representations made to them by or on behalf of Council including those contained in this Request for Tender.
…
17.1 Tenderers must read and understand all Parts of the General Conditions of Contract. Tenderers should particularly note the following provisions of the General Conditions of Contract, unless indicated otherwise in the Specification:


(a) Standard of Services (clauses 3.1 and 3.2). Services must be provided to the standard set out in the Specification and the General Conditions of Contract, or at least in a conscientious, diligent and professional manner.

(b) Use the premises (clause 4 and Part 12 of the Tender Form). If the Specification and the General Conditions of Contract indicate these provisions apply, Tenderers must be aware of the limitations on the use of Council Premises and the obligations in clause 4.

(c) Security Requirements (clause 9.1). Tenderers must comply with Council’s security requirements in using Council Premises.

(d) Industrial Relations and Occupational Health and Safety (clause 9.2). Tenderers must comply with the requirements of clauses 9.2 (c), (d), (e) and 16.

(e) Intellectual Property (clause 15). Tenderers must be aware of the provisions of clause 15 in relation to Intellectual Property used or created in the course of providing the Services.

(f) Sub-contractors (clauses 16 and 17 and Part 9 of the Tender Form). All proposed sub-contractors must be approved by Council before their engagement by the Service Provider. The Service Provider remains responsible at all times for ensuring the sub-contractor meets all requirements of Council in the Request for Tender and the General Conditions of contract.

(g) Insurance (clauses 20.4 and 20.5). Tenderers must comply with the insurance requirements of clauses 20.4 and 20.5.

(h) Indemnities (clauses 19.2, 20.1 and 20.2). Service Providers are required to indemnify Council in the manner provided including the circumstances set out in clauses 19.2, 20.1 and 20.2.

(i) Termination (clauses 21 and 22). Certain acts or omissions of Service Providers will entitle Council to terminate the General Conditions of Contract immediately under clause 21. Council may also terminate if a breach of the Service Providers obligations remains unremedied following notice under clause 21.

(j) Banker’s Undertaking (clause 26). Tenderers must provide a Banker’s Undertaking guaranteeing the Service Provider’s obligations under the General Conditions of Contract.

(k) Performance Guarantee (clause 27). Guarantees of the Service Provider’s obligations under the General Conditions of Contract must be provided in the form specified by Council.

(l) Codes of Conduct (clauses 3.5, 4.3 and 5.1). Tenderers must comply with all applicable codes of conduct of Council, in addition to any other express or implied obligations under the General Conditions of Contract.

40 Volume 2 of the Request for Tender comprised the Specification. It included the following terms -

3.3 TREES
The requirement is to maintain healthy well formed, attractive trees, free of diseases, insects, deadwood and damage by utilizing the latest arboricultural technology and to apply maintenance procedures in accordance with this specification.
Maintenance of tree guards and tree surrounds in Street Trees is NOT a requirement of this Contract and will be the responsibility of another Service Provider.
The Service Provider shall be required to undertake the following:

(a) The Service Provider shall include a program for tree maintenance in the Quality and Operational Plan. The Service provider shall outline all relevant details relating to maintenance of trees in Parks, Open Space Areas and Streets and provide for a minimum one year cyclic program;

(b) The Service Provider shall monitor, record and report the condition of all trees in Parks, Open Space Areas and Streets and submit a report to the Contract Manager each month;

(c) The Service Provider shall remove all dead, dangerous and fallen branches in accordance with the best practices of the Arboricultural Trade and dispose of the same from site;

(d) The Service Provider shall make provisions for the adequate watering of trees. The Service Provider shall propose his arrangements for the watering of the trees during dry spells, when there may be Sydney Water restrictions on the use of water, to the approval of the Contract Manager. The proposals should ensure survival of the trees during the dry spell, as any trees which die as a result of the Service Provider’s failure in watering are to be replaced with trees of the same species and similar maturity at the Service Provider’s expense;

(e) The Service Provider shall be required to maintain levels of mulched areas around Street Trees to ensure public safety;

(f) The Service Provider shall provide minimum clearance between tree branches and the following:

· Pedestrian paths 3 metres

· Access roads 4 metres

· Service wires 0.5 metre

· Lighting As required to

provide illumination

· Building/structures 1 metre

· Awnings 1 metre

(g) The Service Provider shall give priority to clearance orders from Energy Australia and undertake work in accordance with Energy Australia’s Codes of Practice.

(h) The Service Provider shall provide a minimum of one week’s prior notice to residents affected by the removal of a tree except in the case of an emergency.

(i) The Service Provider shall remove stumps within one week after removal of a tree and provide adequate safety barriers, lights etc in the interim period.

…

5.18 MONTHLY REPORT
The following information shall be provided by the Service Provider and must be forwarded to the Contract Manager by the end of the third week of the every month:

(a) An inspection report for each area confirming completion of all maintenance in accordance with the specification and the details of any remedial work required (eg pest/disease treatment);

(b) Tree condition report;

(c) Park and Open Space Lighting Inspection Report;

(d) Inspection Report for Monuments, Sculptures, Fountains and Art Works;

(e) The total hours worked by the employees during the claim period;

(f) Any changes to management personnel;

(g) Industrial relations issues;

(h) A list of complaints, requests and inquiries;

(i) Any initiatives or improvements implemented;

(j) Risk management issues.
The report should also include details of any incident or accident which is the subject of a workers compensation claim, damage to public property or which involves the public.

41 Volume 3 comprised General Conditions of Contract, to which I have already referred.

42 Mr Craig McCallum, Managing Director of Prestige, wished to tender but to engage Active Tree Services to do the tree maintenance called for in the tender, or the greater part of it. He knew Mr Willcocks. He telephoned him and told him that Prestige was putting in a tender to manage parks and trees in the city. He said that he would send him part of the tender documents concerning the trees and asked for Active Tree Services to quote for some of the work. Mr Willcocks agreed to quote and asked to be sent a description of the work. Mr McCallum sent Mr Willcocks two pages from the Specification which included cl 3.3, which I have set out above.

43 Mr Willcocks read the document and spoke again to Mr McCallum. He said “It is a very broad Specification. We can’t do all of it. We will come back with a proposal”. Mr Willcocks made some enquires and spoke to one of his managers. On or about 16 January 1998 he wrote a letter, mistakenly dated 16 January 1997, in these terms -

Prestige McCallum Landscape Management
22 Bridge Road
GLEBE NSW 2037

Attn: Mr Craig McCallum

Dear Craig

RE: MAINTENANCE OF PARKS , OPEN SPACE AREAS AND STREET TREES - TENDER NO. 9754 CITY OF SYDNEY.

I have inspected all the parks, open space areas and street trees. We intend to use different crews for the parks and the street trees. The specification as we have discussed, is very brief and also very broad or all encompassing. The following is the procedure we intend to use.

STREET TREES

It is our intention to proceed to prune all the street trees in one single pass, working through the City in a methodical pattern. There are many roads with traffic restrictions, almost permanently parked cars and high volume pedestrian traffic, that will require special attention at hours that suit the work, so at times we will be moving to quite different parts of the City at appropriate hours of the day.

We are considering working in the late afternoon or evening using hydraulic equipment to minimise noise to get safe access to a number of sites. The time frame for this work would be 4 months from commencement of the contract, and then 3 months in subsequent years.

The work performed would be:


1. As per 3.3F in the Specification, with the exception of the clearances from buildings and awnings. In this case we would clear, when the trees appeared to be damaging the building or on request, as often the residents do not want the branches removed.

2. Removal of deadwood above 20mm diameter. Removal of any broken branches or any branches that show regular damage from vehicles.

3. Clearance of all powerlines as per the requirements of Energy Australia, including trees growing out of parks into the conductors.

4. Record the number of trees worked on in each street, the predominant species and the number of each activity, any trees not worked on requiring additional work.

The crew make-up would generally be 3 personnel, with an EWP and a tipper/chipper. The EWP will be insulated and designed to work without outriggers. Staff will be trained in the following, as appropriate:

a) 5099 Certificate of Exemption;
b) Tree Care for Electrical Workers;
c) Chain Saw Safety Awareness Certificate;
d) First Aid;
e) Traffic Control;
f) EWP Certificate of Competence;
g) Manual Handling;

h) Wood Chipper Safety Awareness;

i) An induction course for the requirements of this contract.

PARK/OPEN SPACE TREES

This work will be programmed for an even spread of work for the year. I have included a probable schedule, but we may flex the schedule when we have specialised equipment available or to accommodate events in the areas.

The work performed will be:

i) Clearance of lights, pedestrian and access roads as per 3.3F

ii) Removal of deadwood above 20mm diameter in high traffic areas and as appropriate in other areas;

iii) Removal or pruning of damaged branches;

The crew will be 2 or 3 personnel, and generally will be a crew experienced in advanced climbing techniques using ropes. We will also use a truck mounted EWP or a boom lift, as required. In general the trimmings will be chipped or taken back to our yard for grinding. At least one person will have completed "Arboricultural Techniques" as taught by T.A.F.E.

The contract will be managed by Peter Dubiez, and the technical management by John Sheely. (A brief resume of each is included and also those of other key staff. We have allowed within our rates for emergency work in the event of occasional damage by vandals or storms, provided that minor damage that can be reached from the ground, and any small fallen branches are handled by yourselves, and in the event of a major storm, we would be paid for the work. In the event that we do not have staff available working on the contract, as is likely in years 2 to 5, we have a large number of crews available.
We provide 24-hour services for Energy Australia and Integral Energy, and have about 60 personnel working in the Sydney area. We have previously supplied up to 40 staff for major emergencies for up to 4 months.

ADDITIONAL SERVICES TO BE OFFERED

From our inspection of the Parks and streets, there are a number of mature trees that pose a risk to the public, because they have a habit of dropping large branches. This risk could be reduced by suitable pruning and crown reduction. There are also a number of unsuitable trees that should be replaced. I believe that a comprehensive inventory of these unsuitable trees should be done at the commencement of the contract, and a list should given to the Council. This would take about one month to visit and document, and the cost would be $9,000.00.

I would recommend that a total inventory and data base be established for trees in streets and parks. We are the Australian distributor for "TreeKeeper", a tree management software program developed by the Davey Tree Company. Davey are the largest municipal and domestic tree contractor in the U.S. They employ over 4,000 staff and have a substantial R&D section.

Treekeeper has over 200 users worldwide and TreeKeeper Junior is distributed by the International Society of Arboriculture.

The City of Hume is currently installing TreeKeeper. The advantages of a data base are many, but include:

1. A total inventory of all trees from which information such as distribution by species, age and condition can be determined;

2. All maintenance of trees is recorded, allowing a comprehensive history to be recorded. This allows an analysis of the suitability of trees by species and location and for liability an accurate record. Many queries relating to a tree can be answered from the computer screen. The system we are currently offering is a gaper record which is not readily referenced.

3. Routine maintenance programs can be generated by species or site, or type of equipment required. This means more efficient use of plant and staff i.e. the location of all Moreton Bay Figs.
4. Non-routine maintenance can be stored and then programmed in an efficient manner.
5. Data can be recorded electronically by field staff and the results down-loaded directly on a daily or weekly basis. We are currently using "Touch Screen" computers to record daily activities on Energy Australia contracts, and have built up a comprehensive data base on the sites and trees we trim. Information about the system is included (Appendix D).
I have enclosed information about TreeKeeper (Appendix E). I believe that within a few years it will be normal for councils to have this type of information. Treekeeper can use GIS such as MAP INFO. There is a different software for Parks called “ParkKeeper”.

44 There followed a description of Active Tree Services, including the kind of work they had done and for which principals as well as other information about the company and a description of the experience of Mr Willcocks and a number of the senior employees of the company. Also annexed were quoted prices.

45 In due course Prestige made its tender. In fulfilment of its obligation to identify any subcontractor it intended to use, it included this statement on its letterhead -

Major tree maintenance would be carried out by:

Active Tree Services
9 McCowan Road
INGLESIDE NSW 2101

Street Trees

It is the intention of Active Trees to proceed to prune all the street trees in one single pass, working through the City in a methodical pattern. There are many roads with traffic restrictions, almost permanently parked cars and high volume pedestrian traffic, which will require special attention at hours that suit the work, so at times we will be moving to quite different parts of the City at different hours of the day.

It is considered working in the late afternoon or evening using hydraulic equipment to minimise noise and to get safe access to a number of sites. The time frame for this work would be 4 months from the commencement of contract, and then 3 months in subsequent years.

The work performed would be:
1. As per 3.3F in the Specification, with the exception of the clearances from buildings and awnings. In this case we would clear, when the trees appeared to be damaging the building or on request, as often the residents do not want the branches removed.


2. Removal of deadwood above 20mm diameter. Removal of any broken branches or any branches that show regular damage from vehicles.

3. Clearance of all powerlines as per the requirements of Energy Australia, including trees growing out of parks into the conductors.

4. Record the number of trees in each street, the predominant species and the number of each activity, any trees not worked on requiring additional work.

The crew make-up would generally be 3 personnel, with an EWP and a tipper/chipper. The EWP will be insulated and designed to work without outriggers. Staff will be trained in the following, as appropriate:

a) 5099 Certificate of Exemption
b) Tree Care for Electrical Workers
c) Chain Saw Safety Awareness Certificate
d) First Aid
e) Traffic Control
f) EWP Certificate of Competence
g) Manual Handling
h) Wood Chipper Safety Awareness
i) An introduction course for the requirements of this contract.


Park/Open Space Trees

This work will be programmed for an even spread of work for the year. A probable schedule is included, but may be altered when we have specialised equipment available, or to accommodate events in the areas.

The work performed will be:

i) Clearance of lights, pedestrian and access roads as per 3.3F

ii) Removal of deadwood above 20mm diameter in high traffic areas and as appropriate in other areas

iii) Removal or pruning of damaged branches.


The crew will be 2 or 3 personnel, and generally will be a crew experienced in advanced climbing techniques using ropes. ATS will also use a truck mounted EWP or a boom lift, as required. In general the trimmings will be chipped or taken back to the yard for grinding. At least one person will have completed "Arboricultural Techniques" as taught by TAFE college.

Tree Maintenance will be managed by Peter Dubiez, and the technical management by John Sheely (a brief resume of each is included and also those of other key staff).

Active Trees provide 24 hour services for Energy Australia and Integral Energy, have about 60 personnel working in the Sydney area, and have previously supplied staff of up to 40 for major emergencies for up to 4 months.

Additional Services to be Offered

Following an inspection of the Parks and streets, there are a number of mature tees (sic) that pose a risk to the public, as they have a habit of dropping large branches. This risk could be reduced by pruning and crowd (sic) reduction. There are also a number of unsuitable trees that should be replaced. It is suggested a comprehensive inventory of these unsuitable trees be done at the commencement of the contract, and a list should be given to the Council (at an additional charge to Council).

It is recommended that a total inventory and data base be established for trees in streets and parks. Active Trees are the Australian distributor for "TreeKeeper', a tree management software program developed by the Dave Tree Company. Davey are the largest municipal and domestic tree contractor in the US. They employ over 4,000 staff and have a substantial R&D section.

TreeKeeper has over 200 users worldwide and TreeKeeper Junior is distributed by the International Society of Arboriculture.

The City of Hume is currently installing a TreeKeeper.
The advantages of a data base are many, but include:


1. A total of all trees from which information such as distribution by species, age and condition can be determined.

2. All maintenance of trees is recorded, allowing a comprehensive history to be recorded. This allows an analysis of the suitability of trees by species and location and a reliable accurate record. Many queries related to a tree can be answered from the computer screen.

3. Routine maintenance programs can be generated by species or site, or type of equipment required. This means more efficient use of plant and staff i.e. the location of all Moreton Bay Figs.

4. Non routine maintenance can be stored and then programmed in an efficient manner.

5. Data can be recorded electronically by field staff and the results down loaded directly on a daily or weekly basis. ATS currently use "Touch Screen" computers to record daily activities on Energy Australia contracts, and have built up a comprehensive data base on the sites and trees we trim. Information about the system is included(App D)

Enclosed is information about TreeKeeper (App E). Active Tree believes that within a few years it will be normal for Councils to have this type of information. TreeKeeper can use GIS such as MAP INFO. There is a different software for Parks called "ParkKeeper".

46 There followed a description of Active Tree Services, its Managing Director and principal employees, taken from Active Tree Services’ letter to Prestige.

47 During the tender period the Council issued a number of Addenda. Addendum number four comprised a number of questions asked by intending tenderers seeking clarification of the Specification and the Council’s responses. It included these questions and answers -

Q1. Council would have inventories of trees, litter bins, street/park furniture and irrigation installations etc. What procedure or process can we follow to obtain this information?
A. Unfortunately, no inventories are available.
…
Q10. Under section 3.3 (b) of the Specification, the Service Provider is required to monitor, record and report the condition of all trees and report to the Contract Manager each month. Is there are prescribed frequency of inspection for each tree? If not, would a yearly inspection in keeping with the yearly maintenance cycle satisfy Council’s needs?
A. Yes, monthly inspections are to be undertaken, reporting only those trees affect by disease, damage or insects.
…
Q12. Section 3.3(c) of the Specification calls for the removal of all deadwood in accordance with arboricultural best practice. Section 8.3 of the Australian Standard for Pruning of Amenity Trees (AS 4373-1996) states in relation to deadwood that a minimum diameter of branches to be removed shall be specified. In the majority of contracts currently performed by ************ , this minimum diameter is set at 20mm. We believe that a requirement to remove all deadwood may result in a considerable increase in tender prices but no real improvement in the appearance or health of the city’s trees. We therefore request that a minimum diameter for deadwood removal be set and suggest 20mm or larger as an appropriate size.
A. All deadwood, as specified, must be removed.
…
Q58. Are we to assume from Spec Clause 3.3b) that we are to inspect every tree in Parks, Open Spaces and Streets on a monthly basis or that we are to report on a monthly basis on those trees that were inspected during that month?
A. See answer to Question 10.
Q59. Does council have a Street Tree database?
A. See answer to Question 1.

48 On 27 April 1998, eight days before the contract was formed, the Council sent to each of the remaining tenderers, including Prestige, a letter by facsimile transmission which included this passage –

Under clause 16 of the Local Government (Tendering) Regulation 1993, [and clause 12 of the Conditions of Tender] (as the case may be) the Tender Evaluation Committee seeks further information by way of explanation or clarification regarding the following matters:
1. (a) Clause 3.3(c) of the Specification currently reads:
‘The Service Provider shall remove all dead, dangerous and fallen branches in accordance with the best practices of the Arboricultural Trade and dispose of same from site;’
(b) Clause 3.4.2 of the Specification provides:
‘The Service Provider shall remove litter, garbage, glass, debris, spent leaves, branches and palm fronds and other extraneous materials from gardens, refuse containers, shrubbery, lawns and fountains within the Parks and Open Spaces Areas and arrange for the rubbish to be taken away on a daily basis.’

(c) Clause 5.6 of the Specification includes the following:
‘The Service Provider shall respond immediately to all situations directly or indirectly threatening the safety of the public.’
Council considers that the Specification requires the removal of all dead, dangerous and fallen branches within 24 hours, with removal required immediately if the safety of the public is threatened directly or indirectly. Tenderers are requested to confirm that their tender was submitted on the basis of Council’s interpretation of the Specification described above and whether the above matters can be accommodated within the Quality and Operational Plan and price as submitted with the tender. If not, tenderers must advise what the additional cost would be for provision of the service as described.
2. (a) Clause 2.2 of the Specification provides for an annual provisional allowance in the contract price of $50,000 for tree planting/removal.
Clause 3.3(i) of the Specification currently reads:
‘The Service Provider shall remove stumps within one week after removal of a tree and provide adequate safety barriers, lights in the interim period.’
(b) Council considers that under the Specification it may require the replacement of dead trees within one week of notification by the Contract Manager, and that this is a matter which may be dealt with under the Specification and/or the General Conditions of Contract.
Tenderers are requested to advise whether the above matters can be accommodated within the price as submitted with the tender, or if not, what the additional cost would be for the provision of the service as described.

49 On 28 April Prestige replied in a letter that included these passages -

With reference to your facsimile dated 27th April ’98 concerning street (sic) trees:
Point 1: Requirement of all dead, dangerous and fallen branches within 24 hours, with removal required immediately if the safety of the public is threatened directly or indirectly.
Reply: Prestige McCallum Landscape Management confirms this is the interpretation we have placed on this requirement and no additional cost would be passed onto the council.

50 Notwithstanding the terminology of Prestige’s reply, the correspondence was not confined to the requirements for street trees. The parties were referring to trees in parks as well. It should be noted that in this letter Prestige, in using the term “dangerous branches”, was reverting to the Council’s use of that term in cl 3.3(b) of the Specification and its letter under reply, and departing from the sense of the statement in its tender, reproduced at para 45 above, which omitted the word “dangerous”.

51 On 4 May 1998 the Council resolved to award Prestige the contract. The agreement was for an initial term of three years, commencing on 1 June 1998, with provision for a further term. Prestige was referred to in the contract as the Service Provider.

Mrs Choi’s case against the Council

52 According to the Draft Hyde Park Tree Management Plan 2006, issued by the Council in June 2006 (exhibit A tab 38), responsibility for Hyde Park was transferred from the Colonial Secretary to the Council in 1904. The action was conducted on the assumption that the Council had the duty to manage the park. It was in the exercise of that duty that it sought advice, published reports, called for tenders and let the tender to Prestige.

53 Where the Common Law duty of care resting on a defendant is the general duty to use reasonable skill and care, and if that skill and care can be exercised by a competent contractor, the defendant’s duty will be satisfied or discharged by the engagement of such a contractor. This is especially so where the service or work to be done requires the exercise of skill or experience which the defendant does not possess. So there is a general rule that a defendant is not responsible for the wrongful acts committed by a contractor or the contractor’s employees in the course of work which it was engaged to do. The same may be said for the wrongful omissions of the contractor or its employees.

54 Sometimes, however, the defendant’s duty is said to be personal, non-delegable. Then, a defendant who engages a contractor assumes a duty to see that the contractor takes reasonable care for the safety of persons to whom the duty is owed: Kondis v State Transport Authority (1984) 154 CLR 672; Burnie Port Authority v General Jones Pty Limited (1992-1994) 179 CLR 520.

55 In the beginning Mrs Choi sued only the Council, and it was not until after the Council joined Prestige, pleading their contract, that Mrs Choi amended her Statement of Claim to assert that the Council’s duty to her was non-delegable – see particular (g). As the amendment impliedly recognises, if the Council proves that it delegated the relevant duty to Prestige, Mrs Choi’s action against the Council is apt to fail unless it is also made to appear that the Council’s duty was non-delegable.

56 The rationale for making a defendant liable for the tortious act or omission of its contractor has been described in various ways. In Hollis v Vabu Pty Limited (2001) 207 CLR 21 at [40], the majority of the High Court of Australia said that in general, under contemporary Australian conditions, the conduct by the defendant of an enterprise in which persons are identified as representing that enterprise should carry an obligation to third persons to bear the costs of injury or damage to them which may fairly be said to be characteristic of the conduct of the enterprise. Reference was made to Bazley v Curry [1999] 2 SCR 534 where McLachlin J had used the term “enterprise risk” and had said that “where the employee’s conduct is closely tied to risk that the employer’s enterprise has placed in the community, the employer may justly be held vicariously liable…”. There was reference to Bushey and Sons v United States (1968) 398 F2d 167 where the reference was to responsibility for accidents which may fairly be said to be characteristic of (the) activities (of the business enterprise).

57 In Hollis v Vabu Pty Limited it was held that these notions influence the meaning of “control” in the distinction between employees and independent contractors. As the Court said, however, it is not merely control but the whole of the relationship between principal and contractor that must be looked at. Plainly, the ability of the principal, in a practical sense, to control the operations of the contractor, is important.

58 There is this passage in the judgment of the majority of the Justices of the High Court of Australia in Burnie Port Authority v General Jones Pty Limited at 550 - 551 -

In Kondis v State Transport Authority, in a judgment with which Deane J and Dawson J agreed, Mason J identified some of the principal categories of case in which the duty to take reasonable care under the ordinary law of negligence is non-delegable in that sense: adjoining owners of land in relation to work threatening support or common walls; master and servant in relation to a safe system of work; hospital and patient; school authority and pupil; and (arguably), occupier and invitee. In most, though conceivably not all, of such categories of case, the common "element in the relationship between the parties which generates [the] special responsibility or duty to see that care is taken" is that "the person on whom [the duty] is imposed has undertaken the care, supervision or control of the person or property of another or is so placed in relation to that person or his property as to assume a particular responsibility for his or its safety, in circumstances where the person affected might reasonably expect that due care will be exercised. It will be convenient to refer to that common element as "the central element of control". Viewed from the perspective of the person to whom the duty is owed, the relationship of proximity giving rise to the non-delegable duty of care in such cases is marked by special dependence or vulnerability on the part of that person.

59 The Council knew generally about the condition of trees in Hyde Park but had no particular knowledge of the tree which failed. It lacked the skill and experience necessary to identify defects of the kind present in the subject tree. It did not employ arborists. The Council knew that Prestige was a substantial company. Prestige had contracted for the Council before. The Council knew that Prestige would engage Active Tree Services to do the aboricultural work. It had reason to accept Active Tree Services as a substantial and reliable company. It had sub-contracted for work in Hyde Park South.

60 The Council went about its selection of Prestige with some care. The evidence establishes that it advertised for tenders for the provision of a wide range of services throughout the municipality. Sixteen responses were received. Six of those responding were considered not to have sufficient operational expertise, managerial ability and financial stability. After tenders closed, an evaluation panel considered the eight tenderers then remaining. The panel included an independent expert, Mr David Westall.

61 As Prestige informed the Council in its tender documents, it was established in 1957 and was a division of a group having an annual turnover approaching $100 million. It employed more than five thousand staff, employees and tradespeople. Prestige listed many important engagements it had had, some of which were known to the Council. Prestige had provided services in thirty per cent of the Council’s parks and open spaces.

62 I have already mentioned Council’s Specification, the Addenda and the further requirements made of tenderers. Cl 2.1 of the Specification was as follows -

2.1 General Objectives
The mission of the Service Provider shall be to:

· Maintain all Parks, Open Space Areas and Street Trees to a high standard and which ensures the preservation and enhancement of the public landscape assets of the City of Sydney;

· Provide and conduct an efficient, effective and environmentally acceptable operation for maintaining a safe and aesthetic landscape environment within the Parks and Open Space Areas of the City of Sydney.

63 The Specification dealt with the scope of works to be done, including gardens, lawns, trees, refuse collection, park structures, signs and noticeboards, bollards, walls, fencing, playgrounds and exercise stations, drains and gullies, irrigation systems, parks and open space lighting, paved areas, furniture, barbecues, vermin control, monuments, sculptures, fountains and artworks.

64 In its tender Prestige stated that it would “maintain all parks, open space areas and street trees to a high standard which ensures the preservation of enhancement of the public landscape assets of the City of Sydney”.

65 I have already mentioned the Council’s knowledge of Active Tree Services. Active Tree Services was described by Prestige in its tender as “… possibly the only Australian firm providing such a complete range of tree services”.

66 According to a Council report, Prestige was the only tenderer “that convincingly focused on performance achievement of the Specification; where senior and middle management were technically superior to that of the other tenderers in the areas of relevant tertiary qualifications, experience and skills; had a well-defined and established response procedures and quality control systems in place and had a history of satisfactory performance in the provision of similar maintenance services resulting in the renewal of contracts for Council, Olympic Co-ordination Authority, Sydney Water, RAAF Richmond and Parramatta Park Trust”.

67 The contract was let to Prestige for more than $9 million over five years. The amount referable to Hyde Park North was $2.4 million. The greater part of that amount was for maintenance, including maintenance of trees. Prestige was not the lowest tenderer.

68 I am satisfied that the Council chose Prestige because it believed that it was the tenderer best qualified to carry out the contract. I am satisfied that it made its enquiries and stated its requirements in a careful manner and that it was entitled to come to the conclusion that it did.

69 The Council had no special arboricultural skill. It did not employ arboricultural staff. It noted that Mr McCallum, the principal of Prestige, described himself as an arborist and it knew that Active Tree Services had arborists on its staff or senior management.

70 In order to fulfil its contractual obligations in relation to trees, Prestige had to make a monthly report: see cl 3.3(b). It did so. Mr Beckett became responsible on behalf of the Council for overseeing the contract and he conferred fortnightly with Mr Adam Gersbach of Prestige. According to Mr Gersbach, Prestige’s employees checked daily on the trees to make sure that there was nothing overtly dangerous or unusual that required attention. Worksheets and checksheets were prepared. A monthly report was prepared.

71 Mr Gersbach carried out monthly inspections in the company of senior employees of the Council, including Mr Beckett and his predecessor Mr Summergreene.

72 I am satisfied that the Council administered Prestige’s contract in a careful way, requiring the submission of necessary reports and the like. Because Prestige, or more correctly its sub-contractor Active Tree Services, was expert and the Council was not, Council was in no position to know that a tree that ought to be inspected had not been inspected or that a branch that ought to have been identified as dangerous had not been so identified. Council was incapable of exercising control over the inspection of trees and of taking part in deciding whether anything needed to be done and of taking any necessary action.

73 No doubt every job that involves workers raising themselves to a substantial height above the ground and, if appropriate, removing limbs from trees, involves a degree of danger, but that danger is easily understood and easily able to be avoided if proper equipment is used and sensible precautions are taken. The process of inspecting and maintaining trees would not properly be called inherently dangerous, as that term might have been used concerning the electrical apparatus in Northern Sandblasting Pty Limited v Harris (1997) 188 CLR 313 or the use of fire in the presence of inflammable material as in Burnie Port Authority v General Jones Pty Limited.

74 It seems to me that the whole of the relationship between the Council and Prestige was one of a general principal which engaged a specialist contractor. It did so responsibly. It supervised the contract responsibly but in a practical sense there could be no oversight of the specialist work which Prestige was required to do. There was nothing inherently dangerous about the work. The essence of Mrs Choi’s claim is the failure to identify the branch as dangerous, because it was likely to fall, and remove it. That was the very thing that the Council engaged Prestige to do. It seems to me that there is nothing about the relationship or the contract that leads to the conclusion that the Council ought to be fixed with the responsibility towards Mrs Choi of ensuring that Prestige did what it was required to under the contract in the manner in which it was required to do it.

75 In my opinion the Council’s duty towards Mrs Choi was delegable and was delegated to Prestige. Mrs Choi’s action against the Council fails.

Mrs Choi’s case against Prestige

76 Mrs Choi pleads her case against Prestige mainly by repeating parts of the Council’s cross-claim against Prestige (including paragraphs asserting breach of contract, which were not pressed on the hearing). The particulars originally pleaded by Mrs Choi against the Council, and repeated by it in its cross-claim against Prestige, are these –

(a) Failing to lay down an appropriate system for the inspection, care and maintenance of trees in Hyde Park in order to avoid risk of falling branches.
(b) Failing to ensure that areas of Hyde Park where people were accustomed to lie was a safe environment and was not subject to overhand of hazardous branches.
(c) Failing to properly inspect trees in the areas where people were accustomed to lie on the grass.
(d) Failing to warn of the likelihood of branches falling.
(e) Failing to remove a specific hazardous branch which fell upon the plaintiff.

77 In her Amended Statement of Claim Mrs Choi repeated these particulars taken from the Council’s cross-claim against Prestige -

(b) Failing to carry out maintenance of the trees in Hyde Park in a conscientious, diligent and professional manner which is higher than or equal to the degree of skill, care and diligence normally exercised by recognised professional persons which supply services of a similar nature.
(c) Failing to carry out the maintenance of the trees in Hyde Park in a proper and workmanlike manner.
(d) Failing to maintain the subject tree such that it was healthy and free of diseases, insects, deadwood and damage.
(e) Failing to remove all dead and dangerous branches from the subject tree.

78 Finally, by paragraph 8 of the Amended Statement of Claim, Mrs Choi pleaded a proximity of Prestige to herself such that Prestige ought to have conducted itself towards her as asserted by the Council in its cross-claim.

79 A contractor may be held liable for the reasonably foreseeable consequences for strangers to the contract of careless or unskilful conduct in the performance of the contract: Voli v Inglewood Shire Council (1963) 110 CLR 74. That case was about an architect. Engineers have been so held liable: Eckersley v Binnie and Partners (1988) 18 Con LR 1. So have builders: King v Stewart (1994) 85 LGERA 384. There is no reason why the principle should not apply to a contractor like Prestige, which assumed responsibility for the management of trees. Neither is there any reason to distinguish between the careless commission of an act and the negligent failure to act.

80 Mr Nock SC did not dispute that a duty was owed by Prestige to persons in the position of Mrs Choi. In final written submissions Mr Nock said this -

At a very general level, Prestige does not dispute that it owed a duty of care to the plaintiff. There is no dispute that Prestige had entered an agreement with SCC to maintain parks, open space areas and street trees and consequently, because the plaintiff was within a class of persons who used one of the parks in which Prestige was to perform maintenance works, it is not disputed that a duty of care of some description was owed. The more difficult issue is the nature and extent of any such duty of care.

81 By cl 3.3(c), Prestige was obliged to remove all dead, dangerous and fallen branches in accordance with the best practices of the arboricultural trade and dispose of them from the site. It may be accepted, as submitted by Mr Nock, that the subject tree was not affected by disease, insects, deadwood or damage. By cl 3.3(b) Prestige was to monitor the condition of all trees each month, though it did not have to report on any tree unless it was affected by disease, damage or insects: Addendum 4, Q and A 10.

82 The question that arises is whether the branch was dangerous as that word is used in the contract. It was submitted by Mr Nock that the word “dangerous” in cl 3.3 was ambiguous, that the Council had not attempted to define it, and that the Court should avoid a commercially inconvenient or nonsensical construction. Reference was made to Hide and Skin Trading Pty Limited v Oceanic Meat Traders Limited (1990) 20 NSWLR 310. Mr Nock submitted that pre-contractual and post-contractual conduct (the “factual matrix”) should be taken into account in construing it. Reference was made to Codelfa Construction Pty Limited v State Rail Authority of New South Wales (1982) 149 CLR 337; Prenn v Simmonds [1971] 1 WLR 1383; DTR Nominees Pty Limited v Mona Homes Pty Limited (1978) 138 CLR 423. Pre-contractual conduct included Council’s lack of interest in the offer of additional services suggested by Active Tree Services and recommended by Prestige and Council’s keeping to itself knowledge from the several reports it had of the condition of the Hill’s weeping figs.

174 I am satisfied that Mrs Choi suffered a serious head injury which has produced lasting results. She has a scar which embarrasses her. She has pain at the operation site. She is self-conscious about her appearance. Her high-level language skills (particularly as demonstrated by her difficulties with Korean) were affected. This was the opinion of the speech therapists, Ms Taylor and Ms Ryan -

Higher level language skills and complex problem-solving capacity have shown a presumed decline relative to premorbid levels. However, gradual recovery in basic cognitive functioning, in conjunction with ongoing therapy and home practice, has resulted in improved performance for these linguistic deficits. It is anticipated that she will continue to improve with time, and continued practice and generalisation of language tasks in the home environment.

175 I note that those therapists recommended against any early return to study.

176 I am satisfied that Mrs Choi has suffered serious and permanent consequences which will materially affect her life. The higher functions of language are permanently affected. She has a permanent deficit in short-term memory, which affects language and other aspects of her life. Her behaviour has been permanently affected, noticeably in the angry moods that continually beset her. She suffers from fatigue, headaches and pain in the shoulders. Her sense of taste has been affected. Her skull and scalp are painful at the operation site. She is embarrassed about her appearance. She has difficulty sleeping on the left side of her head. She will have difficulties in her personal relationships. She suffers from a chronic depressive disorder. I note that she has always been a fearful person, with anxieties about animals, trains, roads and fast moving vehicles, and that that may in part explain her reluctance to speak English and try to regain whatever she can of her former abilities in the language. It may also go some way towards explaining why she exaggerates her symptoms, as I think she does. Nevertheless, she has suffered well-demonstrated organic injury and I am satisfied that significant and permanent deficits and effects are the result.

177 I assess her general damages at $250,000.00, which includes a component of interest on half the sum allowed for 6.25 years at 2 per cent.

Past and future medical expenses

178 Past medical expenses are agreed in the sum of $73,259.95.

179 Mrs Choi’s claim for past travel expenses in connection with her treatment is for $12,000.00. It has been necessary for her both to maintain her contacts with her treating specialists in Australia and to pursue her home life in Korea. I think that her travel was necessary and reasonable and I allow the sum claimed.

180 Dr Buckley thinks that Mrs Choi will need to consult a few times a year with a general practitioner and to have occasional consultations with a physician in rehabilitation management. I am satisfied that she will be able to obtain those medical services in Korea and that there will be no need for her to undertake the expenses of travel. I allow her $15,000.00, for future medical expenses.

Economic loss

181 Mrs Choi’s claim is for total and permanent wage loss. Since her return to Korea she has turned her attention to the Korean language and, it appears, to Japanese, though not to English. As I have said, I do not think that Mrs Choi is particularly gifted in languages and I doubt whether she would ever have acquired the facility in English that would have been necessary before she could teach it for a living. She achieved only modest results in High School and has not formally studied it since then. She might well have had a dream about teaching English but she never tried to give effect to it when she had the opportunity.

182 Since her return to Korea she has had two jobs, the first for a substantial period of time, but I accept that she has proved unsuitable, perhaps because of her anxieties and angers, and has been dismissed. No wage records have been produced from either employer. Mrs Choi has married and wishes to have a family.

183 I am satisfied that the effects of her injury have probably excluded her from highly paid work and left her suitable only for more menial tasks. I do not accept, bearing in mind that she has married and wishes to have a family, that she would, uninjured, have worked full-time until normal retirement age. The net wage rate for an English teacher would have been about $650 per week, but I doubt whether, uninjured, Mrs Choi would have secured an appointment as an English teacher. There is scant evidence of other wage rates in Korea; none, for example, for teachers of Japanese, which might have been appropriate. The fairest approach seems to be to select a lump sum which would produce about $300.00 per week between the present time – Mrs Choi is now twenty-eight years old - and Mrs Choi’s sixtieth birthday. This amount includes an allowance for the vicissitudes. The multiplier for thirty-two years is 1079.8. A lump sum of $300,000.00 would produce almost $300.00 per week for the period I have named. I allow that lump sum.

184 As to past wage loss, the claim is for $650.00 per week, based on Korean wage rates for English language teachers. For the reasons I have explained, those rates are inapplicable. During her periods of employment Mrs Choi earned the equivalent of about $20,000.00 over ten months, the equivalent of $2,000.00 per month. I am prepared to assume that uninjured she would have earned at a greater rate than that. A teacher would earn approximately $650 per week net on current exchange rates. I propose to allow $400.00 per week for the four years 2003 to 2006 and to offset the sum of $20,000.00, which is approximately equivalent to the amounts Mrs Choi actually earned. That allowance is inclusive of interest. The total amount I allow is $65,000.00.

185 So I allow $365,000.00 for economic loss.

Care

186 I accept that Mrs Choi had a need for care following her discharge from hospital and her stay in Korea immediately before returning and resuming her studies. That was a period for about four months. Mrs Choi’s claim is for $25,196.00 for a three year period. The four months I have allowed is one-ninth of that period and I allow $2,800.00, which I round up to $3,000.00 for interest.

187 Mrs Choi makes a claim for the cost of care for the present and the future. I am not satisfied that that claim has been made good. As soon as she returned to resume her studies she lived in her own private accommodation and managed her own affairs. She had, apparently, no need of special assistance from anyone. There is no reason to suppose that the position has changed. I note that care has been provided for her in Korea, but the evidence about it is quite unsatisfactory. It seems possible that her mother and stepfather are overprotective. It seems possible that the wages claimed as the cost of care are for domestic assistance for Mrs Choi’s family or husband. Mrs Choi informed Dr Buckley that she had a carer between three and fives a week, for five hours on each occasion. The carer assisted her with cleaning and cooking and they walked together for about an hour. Sometimes the carer massaged her shoulders.

188 Dr Buckley thought it unlikely that Mrs Choi needed any independent daily supervision by carers or that in the future she would need the services of any professional person to care for her. I accept that opinion.

189 There is a claim for the cost of a case manager for four hours per month and for the provision of a handyman for three hours per week. Although Dr Buckley considered it reasonable for these services to be provided I do not propose to make any allowance because of the unsatisfactory nature of the evidence of the help said to have been provided and because of the tendency of Mrs Choi to make exaggerated claims.

190 The total allowance for care is $3,000.00.

Total assessment

191 I assess damages in total at $718,259.95.

Costs

The plaintiff’s claim

192 In view of Mrs Choi’s ignorance of and then uncertainty about the contractual arrangements between the Council and Prestige, it was reasonable for her to commence and sustain her action against both parties. Having failed in her claim against the Council, she should pay the Council’s costs on a party-party basis. Counsel for Mrs Choi did not resist such an order but sought a Bullock order that Prestige indemnify her for the costs so ordered. Counsel for Prestige did not resist such an order.

193 Counsel for Prestige sought a special order concerning the costs of the evidence of Kim Eun Jung, namely that the plaintiff ought to have to pay Prestige’s costs. The circumstances were these. The trial began on 11 October 2006. By that time the plaintiff had served a statement of Miss Kim and of her mother, Mrs Kim. Photographs of a tree had been taken. Mrs Kim’s statement dealt with a conversation she had had with Miss Kim which left it unclear, it was submitted, whether Miss Kim could identify the tree from which the branch had fallen or who took the photographs or when. Accordingly to Mrs Kim, Miss Kim said that she and Mrs Choi were sitting on a bench when the branch fell. In contrast, when Miss Kim gave evidence she plainly stated that she had returned to the scene on the following day and had taken photographs of the tree from which the branch fell. She and Mrs Choi were sitting on the grass. It was submitted that the failure to serve a statement to that effect before the hearing “had the effect of leaving in issue matter which did not need to be and, of thereby increasing costs”.

194 I do not accept that submission. It implies that if Prestige had known what Miss Kim was going to say it would not have required her to give evidence at all. I have considerable doubts about that. It seems likely that even if both sides had had a statement in accordance with the tenor of the evidence Miss Kim eventually gave, it would have been necessary to call her to give evidence. Miss Kim gave her evidence via videolink from Korea. It did not take long. Prestige chose to defend that as well as the other issues and ought to pay the costs.

195 Accordingly, I shall order Mrs Choi to pay the Council’s costs of her claim against it and shall order Prestige to indemnify her. I shall order Prestige to pay Mrs Choi’s costs of her claim against it and the Council on a party-party basis.

The cross-claims between the Council and Prestige

196 In the first cross-claim the Council sought indemnity or contribution from Prestige. As part of the second cross-claim Prestige sought indemnity or contribution from the Council. Both cross-claims raised the same broad issues, notably whether the tree was dangerous, whether Prestige was negligent or in breach of the terms of its contract and whether the Council was liable for its own negligent acts, omissions or wilful default. In the attribution of blame between the Council and Prestige two fundamental questions were whether the Council’s duty to users of Hyde Park was delegable and whether it had been delegated.

197 As between the Council and Prestige, all these questions were answered in favour of the Council.

198 Although the Council’s cross-claim was dismissed, it ought not for these reasons and because the costs of its cross-claim must have been modest, to have to pay Prestige’s costs.

199 On ordinary principles, Prestige, having cross-claimed against the Council and lost, ought to pay the Council’s costs on a party-party basis.

The cross-claim between Prestige and Active Tree Services

200 Prestige brought in Active Tree Services as a cross-defendant and lost its case. It should pay Active Tree Services’ costs. Active Tree Services submitted that those costs ought to be on an indemnity basis. Two reasons were put forward for this, namely that Prestige brought a baseless claim and that it refused an offer of compromise.

201 Paragraph 9 of the second cross-claim is as follows -

By an agreement made in or about June 1998 between Prestige and Active Trees, made partly in writing and partly orally (‘the sub-contract’), Active Trees agreed, inter alia, to:
(a) undertake and perform that part of the obligation of Prestige pursuant to clause 3.3 of the Specification for Maintenance of Parks, Open Space Areas and Street Trees of the Agreement, in respect of Hyde Park in Sydney City; and
(b) by clause 3.3(c) of the said specification, to “remove all dead, dangerous and fallen branches in accordance with the best practices of the Arboricultural Trade and dispose of the same from site”.
Particulars
That part of the agreement in writing as contained in the letter of 16 January 1997 (sic-1998) from Active Trees to Prestige and clause 3.3 of the Specification for Maintenance of Parks, Open Space Areas and Street Trees.

202 Prestige knew before the hearing began that the written part of the agreement pleaded, Mr Willcocks’ letter dated 16 January 1997, was not evidence of any agreement by Active Tree Services to remove dangerous branches or to comply with the literal requirements of cl 3.3 of the Specification. Prestige knew that before he wrote that letter Mr Willcocks had told Mr McCallum that the Specification was too wide. Prestige had Mr Willcocks’ statement, dated 6 July 2006, setting out these matters. At the hearing, Prestige adduced no evidence to support the assertion of a partly oral agreement to remove dangerous branches. In the end counsel was reduced to proposing an inference of such an agreement from the “factual matrix” I have mentioned.

203 In written submissions, counsel for Prestige conceded that Mr McCallum did not give evidence of any particular conversation with Mr Willcocks in which Mr Willcocks agreed to undertake responsibility for the removal of dangerous branches under cl 3.3 of the Specification. Counsel submitted nevertheless that the absence of such evidence did not justify a finding that Prestige should have known that it had no chance of success against Active Tree Services such that an order for indemnity costs would be appropriate. It was submitted that the existence of an oral term of the type contended for by Prestige might, from Prestige’s point of view at the beginning of the case, have been proved by inference from other evidence or through the cross-examination of Mr Willcocks or Mr Dubiez. Reference was made to work done as recorded in worksheets.

204 I do not accept these submissions. Prestige could have had no reasonable expectation that it might make out its case pleaded by cross-examining Mr Willcocks or Mr Dubiez. Even if it thought there was room in the worksheets for a conclusion that Active Tree Services’ removal of dangerous or unsafe branches might be linked to the sub-contract, Prestige also knew that Active Tree Services had carried out many items of work outside the obligations of its general contract as requested from time to time and separately charged for. Moreover, the argument based on the “factual matrix” was an attempt to rely on a contract by inference, a case never pleaded.

205 The offer of compromise was contained in a Calderbank letter, which was written in these circumstances. The case was originally set down to commence on Monday, 9 October 2006. It was called on for hearing on Wednesday, 11 October 2006 at 10am. Active Tree Services’ letter was sent after 4pm on 11 October and received by Prestige the same evening or early on the following morning.

206 Prestige had effectively two working days, the second and third days of hearing, to respond to the letter or decide to ignore it. That period was short, but in my estimation adequate for proper consideration, bearing in mind that Prestige then knew what it was undertaking to prove and must have known that it did not have the necessary evidence. Knowing what it did, Prestige needed no more than a few hours to make up its mind.

207 The two factors put forward by Active Tree Services combine to persuade me that Active Tree Services’ costs should be on an indemnity basis.

Active Tree Services’ cross-claim against its insurer

208 Active Tree Services’ cross-claim against its insurer was predicated on Active Tree Services’ liability to indemnify Prestige. Active Tree Services was found to have had no such liability and its cross-claim has been dismissed. Even so, Active Tree Services has asked that the insurer pay its costs or such of its costs as it is unable to recover from Prestige. The insurer asks for costs as following the event, but partly on an indemnity basis.

209 Although the cross-claim against the insurer assumed that Active Tree Services was liable to indemnify Prestige, that issue was not litigated between Active Tree Services and the insurer, which took no part in Active Tree Services’ defence of Prestige’s claim. The insurer admitted the policy and the obligation to indemnify Active Tree Services according to its terms, but asserted that liability of the kind assumed by Active Tree Services did not fall within the policy.

210 Active Tree Services’ joinder of the insurer depended on proof of a liability that had not been established and that Active Tree Services was resisting. The only issue in the case between Active Tree Services and the insurer was whether, if Active Tree Services was indeed liable to Prestige, its liability was of a kind contemplated by the policy. Although it had an interest in doing so, the insurer played no part in contesting Prestige’s attack on Active Tree Services.

211 On the failure of Prestige’s cross-claim it became unnecessary to determine the issue on the insurance policy. Notwithstanding Active Tree Services’ submissions, that issue cannot be now be litigated, having merged in the judgment: Thoday v Thoday [1964] P 181 at 197-8; Workington Harbour Board v Trade Indemnity Co Limited (No 2) [1938] 2 All ER 101 at 106.

212 Counsel for Active Tree Services made an alternative submission, citing cl 5 of the policy, which provided for the insurer to pay reasonable costs and expenses incurred with the insurer’s prior consent, inter alia, in the defence of any claim under the policy.

213 That submission was an afterthought and should not be accepted. Active Tree Services never pleaded cl 5 or attempted to prove circumstances giving rise to the operation of cl 5. The first time cl 5 was raised was in the written submissions filed on the question of costs. Besides, the issue of any liability on the part of the insurer to pay such costs has merged in the judgment.

214 Active Tree Services’ joining the insurer to a lengthy and complicated dispute was wasteful. Active Tree Services could have waited to see whether it was legally liable to Prestige before bringing on any action against its insurer. That action, if necessary, would have lasted only a day or two given the narrow issue involved in it. The result that eventuated was foreseeable to Active Tree Services. Active Tree Services could easily have relieved the insurer of the need to run up costs by deferring trial of the insurance policy issue pending the result of Prestige’s claim.

215 I am not satisfied that anything but the ordinary rule should apply, namely that costs of Active Tree Services’ cross-claim against its insurer should follow the event.

216 The solicitor for the insurer wrote three letters to Active Tree Services offering to compromise the action. The first, dated 28 November 2005, offered a verdict for the insurer with the insurer paying its own costs to date. The solicitor for Active Tree Services replied on 23 January 2006, mentioning attempts to compromise Prestige’s cross-claim and asking whether the insurer was prepared to consent to Active Tree Services’ discontinuance of its cross-claim with each party to bear its own costs. On 27 January the solicitor for the insurer asked for clarification and on 30 January Active Tree Services’ solicitor wrote to say that the offer of discontinuation was conditional upon the insurer paying its own costs and Prestige discontinuing and paying Active Tree Services’ costs. This second condition was outside the insurer’s control, of course. Active Tree Services was unable to secure such an arrangement with Prestige and no settlement resulted.

217 On 3 March 2006 the solicitor for the insurer wrote again, offering discontinuance with each party bearing its own costs. The offer was expressed to be open until 5pm on 22 March 2006. The circumstances were that the hearing was approaching and costs were being run up with appearances before registrars and the like. The solicitor for Active Tree Services did not respond.

218 On 11 October 2006, the first day of hearing, the solicitor for the insurer again wrote to Active Tree Services. The offer was for the payment of $55,000.00 on condition that there should be a verdict for the insurer and no order as to costs. The offer was expressed to remain open until the end of that week, namely 5pm on Friday 13 October 2006. The offer was not accepted.

219 At the time of the first letter things were no doubt difficult for the solicitor for Active Tree Services, trying simultaneously to settle claims by Prestige and against the insurer. Of course, that difficulty was of Active Tree Services’ own making. The claim that raised the simple question whether liability of the kind asserted by Prestige was covered by the policy could have been deferred, to be litigated only if Prestige succeeded against Active Tree Services. The offer was open for a long time. Active Tree Services ultimately rejected it in order to hedge its bets. But Active Tree Services was trying, I think, to make a constructive response to the letter and I would not say that the rejection of the offer was in all the circumstances then obtaining unreasonable.

220 The failure to accept the offers contained in the second and third letters was, however, unreasonable. The solicitor for Active Tree Services must have realised that negotiations with Prestige were not resulting in a successful compromise. Active Tree Services’ continuing to tie the insurer to the dispute about Active Tree Services’ possible liability to Prestige was unreasonable. It was unreasonable for Active Tree Services not to respond to the offers in those letters.

221 The failure to respond to a reasonable letter of offer does not carry with it any automatic right to indemnity costs, but I think in all the circumstances, that that would be a just result. I will order that Active Tree Services pay the insurer’s costs on a party-party basis up to 5pm on 22 March 2006 and thereafter on an indemnity basis.

222 Counsel for Active Tree Services asked for an order that Prestige indemnify it for any costs of the insurer that it should be ordered to pay. It was submitted that it was foreseeable to Prestige that its joining Active Tree Services would lead to further cross-claims. So Prestige’s unsustainable allegations in its cross-claim against Active Tree Services “led directly to the additional litigation, and consequent expense, of the third cross-claim”.

223 I do not accept that submission. The nature of the dispute between Active Tree Services and its insurer was foreign to that between Prestige and Active Tree Services. It is not apparent to me how Prestige could have known that any dispute would arise between Active Tree Services and its insurer. No doubt any commercial organisation that sues another might expect that that other will involve its insurer in the defence of the claim, but that is far from an expectation that the insurer will be joined as a party, bringing into question another set of costs.

Active Tree Services’ cross-claims against the Council and Prestige

224 Active Tree Services sought indemnity or contribution from the Council and Prestige. These cross-claims raised no issue not already raised and occasioned no evidence which would not otherwise have been adduced. The costs of this part of the third cross-claim should not be the subject of any order.

Orders

225 The orders of the Court are as follows -

In the plaintiff’s claim -
1. A verdict for the first defendant, City of Sydney Council, in the claim of the plaintiff, Yun Hee Choi.
2. A verdict for the plaintiff, Yun Hee Choi, against the second defendant, Prestige Property Services Pty Limited, in the sum of $718,259.95. Interest is not to run until 21 days after the second defendant has received from the plaintiff a completed Health Insurance Commission form and a Centrelink clearance.
3. The plaintiff is to pay the first defendant’s costs and the second defendant is to indemnify her. The second defendant is to pay the plaintiff’s costs of suit against both defendants.
In the first cross-claim -
4. A verdict for the first cross-defendant, Prestige Property Services Pty Limited.
5. I make no order as to costs.
In the second cross-claim -
6. A verdict for the first cross-defendant, Active Tree Services Pty Limited.
7. I order the cross-claimant, Prestige Property Services Pty Limited, to pay the costs of the first cross-defendant, Active Tree Services Pty Limited, on an indemnity basis.
8. A verdict for the second cross-defendant, City of Sydney Council.
9. I order the cross-claimant, Prestige Property Services Pty Limited, to pay the costs of the second cross-defendant, City of Sydney Council.
In the third cross-claim -
10. A verdict for the first cross-defendant, P Matson on behalf of the Underwriting Members of Syndicate 990.
11. I order the third cross-claimant, Active Tree Services Pty Limited, to pay the costs of the first cross-defendant, P Matson on behalf of the Underwriting Members of Syndicate 990. Those costs are to be assessed on a party-party basis up to 5pm on 22 March 2006 and thereafter on an indemnity basis.
12. A verdict for the second cross-defendant, City of Sydney Council.
13. I make no order as to the costs of Active Tree Services Pty Limited and City of Sydney Council.
14. A verdict for the third cross-defendant, Prestige Property Services Pty Limited.
15. I make no order as to the costs of Active Tree Services Pty Limited and Prestige Property Services Pty Limited.

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