WESTERN SYDNEY REGIONAL ORGANISATION OF COUNCILS GROUP APPRENTICES v STATRONA PTY LTD t/as RECYCLE AUTO ELECTRICAL; COMMERCIAL UNION WORKERS COMPENSATION NSW LTD v HANNAFORD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MAHONEY AP, MEAGHER and SHELLER JJA 1 August 1995, 29 August 1995 WORKERS COMPENSATION — apprentices scheme — negligence — insurance- indemnity On 23 March 1987 an apprentice, Dean Richard Hannaford, suffered a serious injury while working at the premises of Statrona Pty Ltd (Statrona), trading as Recycle Auto Electrical. The parties accepted that Mr Hannaford was apprenticed to Western Sydney Regional Organisation of Councils Group (WSROC) at the time of his injury. WSROC conducted a group apprentices scheme whereby it placed apprentices in industry for training. Under such an arrangement Mr Hannaford came to work at Statrona. Mr Hannaford sued WSROC (the first defendant) and Statrona (the second defendant) for his injuries said to have been occasioned by reason of their negligence. In their defences WSROC admitted and Statrona denied employing him. The claim led to a series of third party notices: * WSROC claimed contribution or indemnity from Statrona alleging that Statrona had the control and supervision of the plaintiff as though he was directly employed by it. * Statrona claimed indemnity from its workers compensation insurer, Commercial Workers' Compensation NSW Ltd (the second third party). * Statrona claimed contribution or indemnity from another insurer, Mercantile Mutual Insurance (Australia) Pty Ltd (the third third party) under a policy of general insurance. * Statrona claimed against WSROC for breach of an agreement between them that in consideration of Statrona participating in the WSROC apprenticeship scheme and the payment of an "on cost" charge WSROC would handle, inter alia, all compensation matters such as claim and payment of accounts. In his judgment of 18 October 1991, Judge McLachlan found: * that Statrona was under a duty of care to the plaintiff, had provided an unsafe system of work and was liable to the plaintiff in negligence. He entered a verdict for the plaintiff against Statrona in the sum of $103,963.46 inclusive of interest; * that WSROC was the plaintiff's employer but not guilty of negligence. He entered a verdict for WSROC against the plaintiff and for Statrona on WSROC's third party notice against Statrona; * that there was a clear implication that WSROC would insure Statrona as well as itself in respect of workers compensation liability. He entered a verdict for Statrona on its third party notice against WSROC; * that the plaintiff was the employee pro hac vice of Statrona and since he was injured whilst employed by Statrona there would be a verdict for Statrona against Commercial Union. The claim against Mercantile Mutual failed as pursuant to an exclusion clause in its policy, it was not liable for claims for injury arising out of or in the course of employment. (1) THE FIRST APPEAL: No 40745/91 WSROC appealed against the verdict for Statrona on Statrona's third party notice against WSROC. WSROC argued that it was bound to take out an insurance policy in respect of its liability but was not required to take out insurance in the name of Statrona. Further since Mr Hannaford was not employed by Statrona within the meaning of any employer's indemnity policy, it would not have been entitled to any indemnity under the 2 UNREPORTED JUDGMENTS common law extension of any employer's indemnity policy taken out by WSROC on its behalf; Denham v Midland Employers Mutual Assurance Ltd [1955] 2 QB 437; Monarch Insurance Co Ltd v Steel Mains Pty Ltd (1986) VR 831. Held: per Mahoney AP The evidence established a contract which obliged WSROC to effect insurance to indemnify Statrona against liability. If WSROC did not have such a policy, it was liable to Statrona for such damages as would, in effect, indemnify Statrona against its liability. If it did have such a policy, Statrona would be entitled to claim under the policy for, in effect, such an indemnity. As it has not been established that there was a policy which would conform with WSROC's promise to Statrona, Statrona was entitled to judgment on the relevant third party notice for the amount in question. per Meagher and Sheller JJA Pursuant to s18(1) of the Workers Compensation Act 1926 (the Act) every employer was obliged to obtain a policy of insurance or indemnity. Although strictly speaking WSROC was the employer liable to make workers compensation payments, any company such as Statrona with persons working on its premises would be conscious of the need to be insured against liability for any injury to that person while carrying on that work. Under the scheme, WSROC offered to arrange insurance whereunder Statrona would be covered against any claims made by persons working on its premises for injuries suffered by them in the course of their work. WSROC's submissions that Statrona suffered no loss as it was entitled to be fully indemnified by Commercial Union or alternatively that its liability to Statrona should not exceed 50 percent of the verdict failed. The plaintiff's entitlement under a different contract for indemnity on the contingency of its becoming legally liable to pay compensation to the worker does not reduce the damages recoverable for breach of contract. It is immaterial that, had WSROC obtained the cover it contracted to obtain, that insurer might have been entitled to contribution from some other of Statrona's insurers. The damages were correctly assessed in the amount of the verdict obtained against Statrona. (2) THE SECOND APPEAL; NO 40750/91 His Honour held that Commercial Union was liable to indemnify Statrona because the plaintiff was the employee pro hac vice of Statrona and injured whilst employed by it. Commercial Union appealed against the verdict for Statrona on Statrona's third party notice against Commercial Union. Pursuant to Commercial Union's policy, it agreed to indemnify Statrona if Statrona was liable to pay compensation under the Act to or in respect of any person who is deemed by the Act to be a worker of the employer. "Worker" was defined to mean "any person who has entered into or works under a contract of service or apprenticeship with the employer". Held: per Meagher and Sheller JJA As Mr Hannaford remained employed as the apprentice of WSROC and was not under such a contract with Statrona, Statrona was not entitled to indemnity under its policy with Commercial Union. Accordingly, there should be a verdict for Commercial Union on Statrona's third party notice against it. (3) STATRONA'S CROSS APPEAL In both appeals Statrona cross appealed out of time against the verdict for Mercantile Mutual on Statrona's third party notice against it. Held: per Meagher and Sheller JJA The exclusion clause was directed to excluding indemnity in those cases where it was to be had under the statutory workers compensation policy. For this purpose and read in its context, the words "their employment with you" includes employment under a contract of apprenticeship. Accordingly, on this third party notice the verdict in favour of Mercantile Mutual should be set aside and a verdict entered for Statrona ORDERS WASSTERN SYDNEY REGIONAL ORGANISATION OF COUNCILS GROUB APPRENTICES v STATRONA PTY LTD tas RECYCLE AUTO ELECTRICAL; COMMERCIAL UNION WORKERS COMPENSATION NSW LTD v HANNAFORD (Mahoney Appeal No 40745/91 AP) Appeal dismissed with costs; Appeal No 40750/91 1. Appeal allowed; 2. Cross Appeal allowed; 3. Set aside the verdict for Statrona Pty Ltd against the second third party Commercial Union Workers' Compensation NSW Ltd in the sum of $103,963.46 and substitute a verdict for Commercial Union Workers' Compensation NSW Ltd; 4. Set aside the verdict for the third party Mercantile Mutual Insurance (Australia) Ltd against Statrona Pty Ltd and substitute a verdict for Statrona Pty Ltd against Mercantile Mutual Insurance (Australia) Ltd in the sum of $103,963.46; 5. Set aside so much of the costs orders as order the second third party to pay the costs of the second defendant, the second defendant to pay the costs of the third third party and the second third party to indemnify the second defendant in respect of the last mentioned order and in lieu thereof order the second defendant to pay the costs of the second third party, the third third party to pay the costs of the second defendant and the third third party to indemnify the second defendant in respect of the order that it pay the costs of the second third party. 6. The substituted verdicts to take effect from 18 October 1991; 7. Statrona Pty Ltd to pay Commercial Union Workers' Compensation NSW Ltd's costs of the appeal and Mercantile Mutual Insurance (Australia) Pty Ltd to pay Statrona Pty Ltd's costs of the appeal. Mahoney AP The facts are detailed in the judgment of Sheller JA which I have had the advantage of reading. The main issue argued in this appeal was an issue between Western Sydney Regional Organisation of Councils Group Apprentices ("WSROC') and Statrona Pty Ltd ("Statrona'"'). The issue arose under the fourth third party notice served in the proceeding. Statrona claimed that there was an agreement between it and WSROC whereby WSROC "would handle, inter alia, all compensation matters such as claims and payment of accounts", that WSROC did not do so, and that accordingly WSROC was liable in damages to Statrona. The effect of the agreement was not, as the event showed, accurately pleaded. The parties treated Statrona's claim as one in which the agreement relied on obliged WSROC to effect insurance to indemnify Statrona against liability for workers compensation and common law damages for injuries to the relevant apprentices arising out of or in the course of their employment in the business of Statrona. It is proper to deal with the matter on that basis. In my opinion the evidence established a contract of the kind relied upon by Statrona. The details of the contractual discussions are set forth in the judgment of Sheller JA. Having regard to the documentation provided by WSROC to Statrona for its consideration and to the subsequent conversation, I am of opinion that the parties made the contract relied on. In the conversation to which Sheller JA has referred, the representative of WSROC indicated that WSROC would "cover" the apprentices for workers compensation and "in respect of any claims made for injuries to such people"; it was stipulated "that they would be covered by WSROC's compensation policy". Questions arise as to the effect of that conversation: to what was the cover to extend; and who was to be entitled to claim on it. The cover was to be obtained by WSROC; that must be implied from what was said. It was, of course, to extend to liability for workers compensation payable to the apprentices accepted by Statrona from WSROC. It may be that it would not extend to "all" injuries suffered by such apprentices while working in Statrona's premises but it would at least extend to liability for common law damages for 4 UNREPORTED JUDGMENTS injuries which would give rise to workers compensation liability. The present injury was assumed to be such. Accordingly, the cover to be obtained by WSROC was one which would extend to liability for the common law damages payable by Statrona in this case. The cover was to be one on which Statrona would be entitled to claim. It appears to have been assumed that the policy would be effected by WSROC and that WSROC would be the insured. If that policy was obtained, prima facie Statrona would not be entitled to claim on it directly; it would be necessary to imply an obligation on the part of WSROC to meet that liability (in so far as it was a liability of Statrona), an obligation which it would no doubt satisfy by calling on the policy. On this basis, if WSROC did not have such a policy, it was liable to Statrona for such damages as would, in effect, indemnify Statrona against its liability to the worker Mr Hannaford upon its judgment against Statrona for common law negligence. If it did have such a policy, Statrona would be entitled to claim under the policy for, in effect, such an indemnity. The terms of the policy effected by WSROC are not in evidence; it has not been established that there was a policy which would conform with WSROC's promise to Statrona. Accordingly, Statrona is in my opinion entitled to judgment on the relevant third party notice for the amount in question. I come now to the issues referred to in argument concerning the right of Statrona to claim against its own insurers. It had ordinary workers compensation insurance with Commercial Union Workers' Compensation NSW Ltd ("C/U") and a general policy of insurance with Mercantile Mutual Insurance (Australia) Ltd ("MMI"). These issues are, in my opinion, either non-existent or of no practical significance in the circumstances of this case. It is not in issue but that WSROC will pay to Statrona the moneys for which, as I have held, it is liable to Statrona. If it does so, there will, in practical terms, be no basis for Statrona to call upon either of its insurers for indemnity under the policies. If, for some reason, Statrona were not paid by WSROC or (perhaps) if Statrona saw fit, pending payment from WSROC to seek reimbursement from the relevant insurer, it would be necessary to determine which insurer was liable. For reasons of the kind referred to by Sheller JA in this regard, C/U would be liable only if, at the time he was injured, Mr Hannaford had become a "worker" within the Workers Compensation legislation. Under the arrangements as contemplated between WSROC and Statrona, standing alone, I do not think that Mr Hannaford, as the "loaned" apprentice, would be such a worker: there was nothing in the arrangement which would give Statrona such control over the apprentice as would constitute a relationship of worker and employer between them. It is, of course, possible, in the case of a "loaned" worker, for the parties to the transaction, the apprentice and Statrona, themselves to enter into a relationship giving rise to a worker-employer relationship within the Act. But in my opinion this was not explored definitively at the trial, much less litigated before this Court. Accordingly, the relationship between Mr Hannaford and Statrona was, in my opinion, not one of worker and employer within ie Act. On that basis, Statrona was not entitled to call upon its workers compensation insurer. Prima facie, therefore, it would be entitled to call upon the MMI company if that policy extended to all injuries not covered by a workers compensation policy. But as Statrona will have been paid by WSROC the amount of its liability, it is WASSTERN SYDNEY REGIONAL ORGANISATION OF COUNCILS GROUB APPRENTICES v STATRONA PTY LTD t/fas RECYCLE AUTO ELECTRICAL; COMMERCIAL UNION WORKERS COMPENSATION NSW LTD v HANNAFORD (Sheller not necessary to pursue the question Whether there are exclusions in the MMI policy which would prevent Statrona recovering under it. Were it necessary to do so, I would conclude that, absent payment by WSROC, Statrona could claim indemnity from the MMI company. But in the present case, having regard to the way in which the proceeding has been conducted, no insurable loss has been established. The possibility might arise in some cases of this kind of double insurance: the liability might, in a relevant sense, be covered by WSROC's insurer and Statrona's general insurer. But in the present case it was the clear agreement between WSROC and Statrona that the ultimate burden of a liability such as the present would be borne by WSROC. In those circumstances, it is not necessary to pursue the issues which might arise in the case of ordinary double insurance. In my opinion there should be judgment for Statrona against WSROC, with costs. Meagher JA I agree with Sheller JA. Sheller JA INTRODUCTION On 23 March 1987 an apprentice, Dean Richard Hannaford, suffered a serious injury while working at the Victoria Road, Rydalmere premises of Statrona Pty Ltd (Statrona), which trades as Recycle Auto Electrical. The Indenture of Apprenticeship with Western Sydney Regional Organisation of Councils Group Apprentices (WSROC) whereunder Mr Hannaford bound himself apprentice to WSROC was executed on 24 June 1987. However its terms were deemed to have commenced on 2 March 1987. The parties accept that Mr Hannaford was apprenticed to WSROC at the time of his injury. WSROC, in a printed pro forma letter it published at the time, described itself as a non profit company funded and supported by both the Commonwealth and State Governments and owned by Local Government. It conducted a group apprentices scheme which recruited, tested and interviewed apprentices from the ranks of school leavers, pre apprentices and apprentices who may have lost employment through no fault of their own. It placed these apprentices in industry for training for a minimum period of three months up to a full four year term with host companies. Under such an arrangement Mr Hannaford came to work at Statrona's premises. Mr Hannaford sued WSROC (the first defendant) and Statrona (the second defendant) to recover damages for his injuries said to have been occasioned by reason of their negligence. He alleged that WSROC employed him and sent him to work upon Statrona's premises. Alternatively he alleged that both defendants jointly employed him. In their defences WSROC admitted and Statrona denied employing Mr Hannaford at the relevant time. Mr Hannaford's claim led to a series of third party notices: * WSROC claimed contribution or indemnity from Statrona alleging that Statrona had the control and supervision of the plaintiff as though he was directly employed by it. * Statrona claimed indemnity from its workers compensation insurer, Commercial Union Workers' Compensation NSW Ltd (the second third party). * Statrona claimed contribution or indemnity from another insurer, Mercantile Mutual Insurance (Australia) Ltd (the third third party), under a policy of general insurance. 6 UNREPORTED JUDGMENTS * Statrona claimed against WSROC for breach of an agreement between them that in consideration of Statrona participating in the WSROC apprenticeship scheme and the payment of an "on cost" charge WSROC would handle, inter alia, all compensation matters such as claims and payments of accounts. Defences were filed to the various third party notices. Judge McLachlan heard the proceedings in October 1991 and delivered judgment on 18 October 1991. His Honour found that Statrona was under a duty of care to the plaintiff, had provided an unsafe system of work and was liable to the plaintiff in negligence. He entered a verdict for the plaintiff against Statrona in the sum of $103,963.46 inclusive of interest. He found that WSROC was the plaintiffs employer but was not guilty of negligence. Accordingly he entered a verdict for WSROC against the plaintiff and for Statrona on WSROC's third party notice against Statrona. His Honour found that WSROC did agree to handle all compensation matters such as claims and that it was a clear implication from that that WSROC would insure Statrona as well as itself in respect of workers compensation liability which included liability at common law independently of compensation payments as provided by the workers compensation legislation. Accordingly he entered a verdict for Statrona on its third party notice against WSROC. His Honour found that the plaintiff was the employee pro hac vice of Statrona and since he "was injured whilst employed by (Statrona) in the premises of (Statrona).there will be a verdict for (Statrona) against' Commercial Union, the workers compensation insurer. Mercantile Mutual issued a "Business Pak Policy Wording" containing a "Policy F - Legal Liability" whereunder the insurer agreed to pay all sums the insured should become legally liable to pay by way of compensation for bodily injury happening in connection with the carrying on of its business at the premises. By an exclusion CL2.4 the insurer was not liable for claims "for bodily injury to any person arising out of or in the course of their employment with you". His Honour said that since he had found that the plaintiff was the employee pro hac vice of Statrona and the accident occurred in the course of the employment, its claim against Mercantile Mutual failed. There are two appeals, the first (40745/91) by WSROC against the verdict for Statrona on Statrona's third party notice against WSROC, the second (40750/91) by Commercial Union against the verdict for Statrona on Statrona's third party notice against Commercial Union. In both appeals, by leave of the Court, Statrona cross appealed out of time against the verdict for Mercantile Mutual on Statrona's third party notice against it. Mr Hannaford was excused and did not take part in the hearings of the appeals. THE FIRST APPEAL Statrona's bookkeeper, Mrs Barbara Paul, gave evidence that towards the end of 1985 she was present at a meeting with Mr Peter Wright of WSROC and Mr Colin Tinker, the manager and owner of Statrona. At that meeting Mr Wright handed either to Mr Tinker or to Mrs Paul and left with them two documents to enable them to look at and discuss the group apprentices scheme. The first document bore WSROC's name and logo and described the nature and aim of the scheme. It was stamped "Peter Wright Field Officer". It contained a column headed "How you can benefit" and a column headed "How the Scheme operates". The first column contained eight numbered paragraphs of which the first two were as follows: " 1. You select a WSROC Apprentice to suit your own requirements. WASSTERN SYDNEY REGIONAL ORGANISATION OF COUNCILS GROUP APPRENTICES v STATRONA PTY LTD t/fas RECYCLE AUTO ELECTRICAL; COMMERCIAL UNION WORKERS COMPENSATION NSW LTD v HANNAFORD (Sheller If you require a first-year apprentice #)a pre-apprenticeship trained apprentice. or a third-year apprentice, WSROC can fill your need for the time specified by you. 2. WSROC maintains administrative records at no extra charge. You don't have to worry about indentures, group tax, payroll tax, workers' compensation or annual leave records." The second column was as follows: ""* WSROC employs and indentures the apprentice. * WSROC releases the apprentice to participating companies for periods of three months to four years, subject to the lessee's requirements. * WSROC handles administrative work such as pay records, leave calculations, group tax, etc. * WSROC is a non-profit company and charges a percentage on the gross wages. This charge is all-up and includes: annual leave, workers' compensation, sick leave, public holidays and tax. * The lessee undertakes to gainfully employ the apprentice in the relevant trade for a minimum period of three months, and to give one month's notice if the services of the apprentice are no longer required. * The apprentice may need to be rotated through a group of companies in order to complete thorough training in all aspects of the trade." The second document was the pro forma letter confirming major details of the Apprenticeship Scheme for the information of the recipient. I earlier summarised what WSROC said in paral, para2 and para3. The letter continued: "4. Apprentices are not placed on the wages records of companies they work for. 5. Companies are asked to pay the apprentices net wages each week, fill in weekly time sheets (supplied), and post time sheets to us on the weekly or monthly basis, whichever best suits the company. These sheets form the basis of our monthly invoice which: a. Recovers tax not paid; b. Charges 30% of gross wages as an 'on cost'. Payment of tax, issue of Group certificates and all tax matters are handled by the scheme. The 'on cost' charge covers: a. Workers Compensation insurance, paid by the scheme, allowing it to handle all compensation matters such as claims, payments of accounts, wages and personnel records. b. Annual holidays and leave loading paid by the scheme direct to the apprentices. c. Payment of Sick leave, Bereavement leave and public holidays direct to the company via account credit where recorded on time sheets. Additional Technical College rebates are claimed by the scheme twice a year and paid in full to the company where the apprentice is placed. 6. The apprentices may be handed back to the scheme any time after the agreed period or should problems indicate such an action. Two weeks notice is requested before return so that the scheme may find alternative employment for the apprentice. The aim of our scheme is to provide employment and training opportunities for capable youth and assist industry in protecting the trade skill base for industry needs." 8 UNREPORTED JUDGMENTS Mrs Paul agreed that Mr Wright discussed with her the benefits of the WSROC scheme in the presence of Mr Tinker. She gave the following evidence: "Q. And did he mention the fact that WSROC would cover such people for Workers Compensation? A. Yes. Q. And that in respect of any claims made for any injuries to such people that they would be covered by WSROC's compensation policy? A. Yes, that was the way we understood it." This evidence was not challenged. WSROC sent invoices to Statrona showing a total net amount due by Statrona to WSROC of gross wages less an amount described as "Paid on our Behalf", which Statrona paid to Mr Hannaford. The difference was the 30 percent on cost, which Statrona paid to WSROC. WSROC argued that this agreement obliged it to do no more than provide insurance which would cover payments of workers compensation entitlements to Mr Hannaford. This it had done. WSROC's workers compensation insurer, QBE Workers Compensation (NSW) Ltd, made the workers compensation payments, to which Mr Hannaford was entitled, to him. Under the definition of "employer", s6 (1) of the Workers Compensation Act 1926 (the Act) provided that, where the services of a worker were temporarily lent to another person by the person with whom the worker had entered into a contract of apprenticeship, the latter should be deemed to continue to be the employer of the worker whilst he was working for that other person. WSROC submitted that, accordingly, it was statutorily bound to make payments to Mr Hannaford of workers compensation and to take out an appropriate policy of insurance in its name in respect of its liability. This it did and accordingly performed its agreement to handle claims under the Act. WSROC submitted that there was no agreement by it, express or implied, to take out insurance in the name of Statrona in respect of liability under the Act or independently of the Act. Further, since Mr Hannaford was not employed by Statrona within the meaning of an employer's indemnity policy, it would not have been entitled to any indemnity under the common law extension of any employer's indemnity policy taken out by WSROC on its behalf; Denham v Midland Employers Mutual Assurance Ltd [1955] 2 QB 437; Monarch Insurance Co Ltd v Steel Mains Pty Ltd (1986) VR 831. In my opinion this appeal is without any merit. Pursuant to s18(1) of the Act every employer was obliged at the time to obtain from a licensed insurer a policy of insurance or indemnity, conforming to the section, for the full amount of its liability under the Act to all workers employed by it and for an unlimited amount in respect of its liability independently of the Act for any injury to any such worker. Although, strictly speaking, WSROC was the employer liable to make workers compensation payments, any company such as Statrona with persons working on its premises would be conscious of the need to be insured against liability for any injury to that person while carrying on that work. Mrs Paul's evidence was that Mr Wright from WSROC mentioned that WSROC would cover people working under the scheme for workers compensation and "that in respect of any claims made for any injuries to such people that they would be covered by WSROC's compensation policy." When this statement is combined with printed material to prospective "host employers" that they do not have to worry about workers compensation and that the all-up 30 percent of gross wages as an on cost covers workers compensation insurance paid by the scheme, I do not think that it can seriously be contended that WSROC was not offering and WASSTERN SYDNEY REGIONAL ORGANISATION OF COUNCILS GROUB APPRENTICES v STATRONA PTY LTD t/fas RECYCLE AUTO ELECTRICAL; COMMERCIAL UNION WORKERS COMPENSATION NSW LTD v HANNAFORD (Sheller Statrona accepting that WSROC woukfdrrange insurance whereunder Statrona would be covered against any claims made by persons working on its premises under the scheme for injuries suffered by them in the course of such work. For this Statrona paid a consideration of 30 percent of the gross wage. WSROC put alternative submissions that Statrona suffered no loss as it was entitled to be fully indemnified by Commercial Union or alternatively that its liability to Statrona should not exceed 50 percent of the verdict. It has been long established that where a plaintiff is insured and suffers, as the result of the defendant's negligence, loss covered by the policy, the sum received by the plaintiff is not taken into account in reduction of damages; Bradburn v The Great Western Railway Co [1874] LR 10 Exch 1; RG and TJ Anderson Pty Ltd v Chamberlain John Deere Pty Ltd (1988) 15 NSWLR 363 at 373; Hussain v New Taplow Paper Mills Ltd [1988] AC 514 at 527. In the first of these cases Pigott B at 3 said that the plaintiff was entitled to recover the damages caused to him by the negligence of the defendants, and there was no reason or justice in setting off what the plaintiff had entitled himself to under a contract with third persons, which he had bargained for the payment of a sum of money in the event of an accident happening to him. He did not receive that sum of money because of the accident, but because he had made a contract providing for the contingency; an accident must occur to entitle him to it, but it was not the accident but his contract. which was the cause of his receiving it. There is no difference in principle where a plaintiff is entitled to recover damages for breach of a contract to effect liability insurance for its benefit. The plaintiff's entitlement under a different contract for indemnity on the contingency of its becoming legally liable to pay compensation to the worker does not reduce the damages recoverable for breach of contract. The plaintiff is not indemnified by the second contract of insurance for breach of the first contract but because it has made a contract for a contingency upon the happening of which it became entitled to indemnity. If Statrona claims against an insurer to be indemnified it must account to the insurer for any benefit which reduces the loss or liability insured against; Castellain v Preston [1883] 11 QBD 380 at 389-390, 393-394 and 402; British Traders' Insurance Co Ltd v Monson (1964) 111 CLR 86 at 94 and Transport Accident Commission v CMT Construction of Metropolitan Tunnels (1988) 165 CLR 436 at 441. For like reason it is immaterial that, had WSROC obtained the cover it contracted to obtain, that insurer might have been entitled to contribution from some other of Statrona's insurers. In my opinion the damages were correctly assessed in the amount of the verdict obtained by the plaintiff against Statrona. I would dismiss this appeal. SECOND APPEAL Judge McLachlan held Commercial Union, Statrona's workers compensation insurer, liable to indemnify Statrona because the plaintiff was the employee pro hac vice of Statrona and hence injured whilst employed by it. We are no longer concerned with the vexed question of whether a person, working in the situation in which Mr Hannaford was working, was owed by Statrona the common law duty owed by an employer to an employee or some lesser duty such as that owed by an invitor to an invitee; Australian Safeway Stores Pty Ltd v Zaluzna (1987) 162 CLR 479 not following London Graving Dock Co v Horton [1951] AC 737. Statrona owed a duty of care under the ordinary principles of negligence to Mr Hannaford and in the circumstances was in breach of it. The duty of care 10 UNREPORTED JUDGMENTS depended in part on the arrangement under which at the time Mr Hannaford was working at Statrona's premises and would be the same as that owed if Statrona had been Mr Hannaford's employer. If a third person had been injured by Mr Hannaford's negligence while working at Statrona's premises, in order to answer the question of whether WSROC or Statrona was responsible for that negligence, it would have been necessary to determine whether, to adapt the language of Lord Simonds in Mersey Docks and Harbour Board v Coggins and Griffith (Liverpool) Ltd [1947] AC | at 18, WSROC could show that pro hac vice the relation of employer and employee had been temporarily constituted between Statrona and Mr Hannaford and temporarily abrogated between WSROC and Mr Hannaford. That would depend upon whether entire and absolute control over Mr Hannaford had passed to Statrona. In Denham v Midland Employers Mutual Assurance Ltd at 444, Denning LJ said that there was no hann in describing the worker as a temporary servant "so long as it is remembered that it is a device designed to cast liability on the temporary employer........ The right of control carries with it the burden of responsibility." In the present case Mr Hannaford remained employed as the apprentice of WSROC. It was unnecessary to call in aid the device of "temporary employment" to deal with the question of whether WSROC or Statrona was in breach of its duty of care to him. Commercial Union's policy was not in evidence but we were informed that it was in the form of the statutory Employer's Indemnity Policy under which Commercial Union agreed to indemnify Statrona if Statrona was liable to pay compensation under the Act to or in respect of any person "who is or is deemed by the Act to be a worker of the Employer" Statrona. "Worker" was defined to mean "any person who has entered into or works under a contract of service or apprenticeship with an employer". Quite clearly Mr Hannaford was not under such a contract with Statrona and therefore Statrona was not entitled to indemnity under its policy with Commercial Union. The appeal should be upheld and there a should be a verdict for Commercial Union on Statrona's third party notice against it. STATRONA'S CROSS APPEAL Mercantile Mutual's verdict on Statrona's third party notice against it depended upon his Honour's conclusion that Mr Hannaford was the employee pro hac vice of Statrona and that, accordingly, exclusion CL2.4 applied since the accident occurred in the course of employment. For reasons I have already given this basis for the verdict in favour of Mercantile Mutual cannot stand. In Monarch Insurance Co Ltd v Steel Mains Pty Ltd the Victorian Full Supreme Court held that, in case where the services of a worker were hired out by his employer to another company and the worker was injured whilst working at that other company's premises, the company liable in damages for personal injuries to the worker was entitled to indemnity under a general and products liability policy. The insurer agreed to indemnify the company for all amounts which the company should become liable to pay as compensation in respect of personal injury caused by an occurrence in connection with the business of the company. The insurer relied upon a proviso to the policy that "the indemnity in respect of liability shall operate only in respect of persons in the direct service of [the company]........ when the injury was sustained." At 837 Kaye J, with whose judgment the other members of the Court agreed, said that the exclusion clause operated where the employment of the injured person arose out of a contract of WASSTERN SYDNEY REGIONAL ORGANISATION OF COUNCILS GROUP APPRENTICES v STATRONA PTY LTD tas RECYCLE AUTO ELECTRICAL; COMMERCIAL UNION WORKERS COMPENSATION NSW LTD v HANNAFORD (Sheller service between him and the insured. TH®evidence did not establish the existence of such a contract and accordingly the exclusion clause did not apply. Mr Harrison, who appeared for Mercantile Mutual, submitted that the exclusion clause in the present case was distinguishable. The words "'in the direct service of the company", which Kaye J at 835 regarded as synonymous with "under a contract of service with" the company, are absent from the exclusion clause. I accept the force of this argument. But exclusion CL2.4 picks up the language of the definition of "injury" in the Act, that is to say, personal injury "arising out of or in the course of employment". Undoubtedly the employment envisaged is that under a contract of service or apprenticeship, leaving aside deeming provisions with which we are not here concerned. The exclusion clause is directed to excluding indemnity in those cases where it is to be had under the statutory workers compensation policy. For this purpose and read in its context I think that the language used, "their employment with you", includes employment under a contract of apprenticeship. Accordingly in my opinion on this third party notice the verdict in favour of Mercantile Mutual should be set aside and a verdict entered for Statrona. I have already referred to the principle that the insured must account to Mercantile Mutual for any benefit, that is to say any amount it receives from WSROC, which reduces the loss or liability insured against. ORDERS I propose the following orders: Appeal No 40745/91 Appeal dismissed with costs; Anneal No 40750/91 1. Appeal allowed; 2. Cross appeal allowed; 3. Set aside the verdict for Statrona Pty Ltd against the second third party Commercial Union Workers' Compensation NSW Ltd in the sum of $103,963.46 and substitute a verdict for Commercial Union Workers' Compensation NSW Ltd; 4. Set aside the verdict for the third third party Mercantile Mutual Insurance (Australia) Ltd against Statrona Pty Ltd and substitute a verdict for Statrona Pty Ltd against Mercantile Mutual Insurance (Australia) Ltd in the sum of $103,963.46; 5. Set aside so much of the costs orders as order the second third party to pay the costs of the second defendant, the second defendant to pay the costs of the third third part and the second third part to indemnify the second defendant in respect of the last mentioned order and in lieu thereof order the second defendant to pay the costs of the second third party, the third third party to pay the costs of the second defendant and the third third party to indemnify the second defendant in respect of the order that it pay the costs of the second third part. 6. The substituted verdicts to take effect from 18 October 1991; 7. Statrona Pty Ltd to pay Commercial Union Workers' Compensation NSW Ltd's costs of the appeal and Mercantile Mutual Insurance (Australia) Ltd to pay Statrona Pty Ltd's costs of the cross appeal. Appeal No 40745/91 Appeal dismissed with costs; Appeal No 40750/91 1. Appeal allowed; 2. Cross Appeal allowed; 12 UNREPORTED JUDGMENTS 3. Set aside the verdict for Statrona Pty Ltd against the second third party Commercial Union Workers' Compensation NSW Ltd in the sum of $103,963.46 and substitute a verdict for Commercial Union Workers' Compensation NSW Ltd; 4. Set aside the verdict for the third party Mercantile Mutual Insurance (Australia) Ltd against Statrona Pty Ltd and substitute a verdict for Statrona Pty Ltd against Mercantile Mutual Insurance (Australia) Ltd in the sum of $103,963.46; 5. Set aside so much of the costs orders as order the second third party to pay the costs of the second defendant, the second defendant to pay the costs of the third third party and the second third party to indemnify the second defendant in respect of the last mentioned order and in lieu thereof order the second defendant to pay the costs of the second third party, the third third party to pay the costs of the second defendant and the third third party to indemnify the second defendant in respect of the order that it pay the costs of the second third party. 6. The substituted verdicts to take effect from 18 October 1991; 7. Statrona Pty Ltd to pay Commercial Union Workers' Compensation NSW Ltd's costs of the appeal and Mercantile Mutual Insurance (Australia) Pty Ltd to pay Statrona Pty Ltd's costs of the appeal. COUNSEL: 1. Appellant: JD Hislop QC/ADM Hewitt Respondent: PH Blackburn-Hart 2. Appellant: AB Parker Fourth Respondent: MMI - IG Harrison SOLICITORS: 1. Appellant: Moray and Agnew Respondent: Mikelis Strikis Second Respondent: Maclarens 2. Appellant: Lee Virtue and Collins Respondent: Maclarens Second Respondent: Moray and Agnew Third Respondent: Mikelis Strikis Fourth Respondent: McCulloch and Buggy