New South Wales Supreme Court CITATION : Docker v Achievement Concepts P/L & Redken [1999] NSWSC 248 CURRENT JURISDICTION : Common Law Division FILE NUMBER(S) : 20797 of 1996 HEARING DATE(S) : 29/09/98 JUDGMENT DATE : 29 March 1999 Natasha Docker (plaintiff) PARTIES : Achievement Concepts Pty Ltd (first defendant / third cross defendant) Redken Laboratories (Australia) Pty Ltd (second defendant / third cross claimant) JUDGMENT OF : Hidden J at 1 COUNSEL : P Deakin QC (third cross claimant ) R Stitt QC, C M Simpson (third cross defendant) SOLICITORS : Hickson Wisewoulds (third cross claimant) Minter Ellison (third cross defendant) CATCHWORDS : Joint tortfeasors - employer and sub contractor - negligence of both causing injury to employee - whether term should be implied in contract between employer and contractor creating duty of care by contractor to employee - if so whether breach of that term entitles employer to complete indemnity by contractor ACTS CITED : Law Reform (Miscellaneous Provisions) Act 1946 Florida Hotels v Mayo (1965) 113 CLR 588 CASES CITED : Taylor v Leach (NSWSC, Wood J, unreported 23 October 1984) Hawkins v Clayton (1988) 164 CLR 539 DECISION : Cross claim based on contract dismissed THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION HIDDEN J Monday 29 March 1999 20797 of 1996 NATASHA DOCKER v ACHIEVEMENT CONCEPTS & ANOR Judgment on Cross Claim 1 On 14 August 1998 I gave judgment in this matter, finding that the plaintiff was entitled to recover against both defendants and apportioning liability between the defendants pursuant to s5(2) of the Law Reform (Miscellaneous Provisions) Act 1946. I recorded the fact that the second defendant, Redken claimed complete indemnity by the first defendant, Achievement Concepts on the basis of the contract between them. That contract was oral, and Redken claimed an implied term that "the design, set-up and supervision of the activities would be carried out" by Achievement Concepts "with all due care and skill, so as to protect so far as possible the employees of the second defendant from injury". Arising from that implied term, Redken claimed to be entitled to indemnity by Achievement Concepts for any amount for which it might be found liable to the plaintiff. 2 Achievement Concepts denied any such implied term or, if there were such a term, that it entitled Redken to the indemnity it sought. Alternatively, it alleged contributory negligence on the part of Redken leading to a reduction of any damages it might recover pursuant to the contract. 3 The question to be resolved is not an easy one and, as it did not appear to me that it had been adequately argued in final submissions at the hearing, I invited further submissions from counsel for the defendants. I have since had the benefit of written submissions and oral argument. 4 Counsel for Redken relied upon Florida Hotels Pty Ltd v Mayo & Anor (1965) 113 CLR 588. In that case the appellant had engaged the respondents as architects for the purpose of construction of a swimming pool. The appellant did not engage a builder and the work was undertaken by its own employees. In the course of pouring concrete some reinforcing mesh was improperly laid by the employees, so that its reinforcing strength was substantially reduced. This work was done in the absence of the respondents. Later, when the formwork was removed a concrete slab collapsed, causing severe injuries to one of the employees. 5 The injured employee sued the appellant and those proceedings were settled, with judgment being entered for the plaintiff. The appellant then took third party proceedings against the respondents, claiming contribution or indemnity under the 1946 Act and damages for breach of contract. The breach alleged was the respondents' failure to supervise the placement of the reinforcing steel mesh. It was common ground that part of the respondents' retainer was to provide "such periodical supervision and inspection as may be necessary to ensure that the works are being executed in general accordance with the contract". 6 The primary judge found that the appellant was entitled to a 20 per cent contribution from the respondents under the Act, but was entitled to complete indemnity under the contract. That judgment was set aside by a majority of the Full Court on the basis that, in the circumstances proved by the evidence, the respondents had not been shown to be in breach of their duty to supervise: Mayo v Florida Hotels Pty Ltd (1964) 65 SR(NSW) 41. Sugerman J, dissenting, would have upheld the judgment on the basis of the contractual claim. As to this, his Honour said (at p51): Subject only to the reasonable foreseeability of the injury suffered as liable to result from the breach, the owner is, then, entitled to recover from the architect the damages which he has had to pay to an injured person. Thus a measure of indemnity is afforded by contract, which, where it exists, is different from and independent of the right to contribution under the Law Reform (Miscellaneous Provisions) Act and results in a full indemnity (see Lister v Romford Ice and Cold Storage Co [1957] AC 555). 7 The appellant succeeded in the High Court and the judgment at first instance was restored. The leading judgment was delivered by Barwick CJ, with whom Kitto, Taylor and Menzies JJ agreed. Windeyer J also agreed in a separate judgment. One of the matters argued in the High Court was that, assuming the respondents to be in breach of their contract, "the liability of the appellant to the plaintiff was not damage for which the respondents could be made responsible" because of that breach: see the judgment of Barwick CJ at 597. The manner in which the Chief Justice disposed of that argument is of importance to the resolution of the matter which I must decide. What his Honour said was this (at 598): But, in my opinion, the possibility of liability of the appellant to its workmen flowing from the consequences of lack of supervision of work of the kind in question must be taken to have been fairly within the contemplation of the parties. His Honour, the trial judge, found the lack of supervision to be the cause of the collapse of the slab and the removal of the formwork but the occasion for it; because of the inherent weakness for want of proper reinforcement, it would have fallen down whenever the formwork was removed; and with this conclusion I respectfully agree. Of course, vis-a-vis the plaintiff the premature removal of the formwork was negligent on the part of the appellant. But this would not prevent the appellant recovering from the respondents for their breach of contract simply because they are therefore joint tortfeasors with the appellant. It would be otherwise if the effect of the respondents' breach of their obligation to the appellant had become spent and no longer causally connected with the plaintiff's injury. But that is not this case. The intervention of the appellant's act in removing the timber, though it occasioned the injury to the plaintiff, will not avail the respondents. The respondents, in my opinion, are liable to the appellant for the amount which the appellant reasonably paid to the plaintiff in discharge of its liability to the plaintiff for the consequences of the collapse of the slab. 8 Wood J (as he then was) had occasion to consider this authority in his judgment in Taylor v Leach & Sons Pty Ltd (Wood J, unreported 23 October 1984), to which I was also referred by counsel for Redken. That was an action under the Compensation to Relatives Act, 1867 by the widow of a man who had been killed in the course of his employment by the defendant. He was electrocuted while using a vacuum cleaner. Prior to the accident the cleaner had been repaired by an electrical contractor, against whom the defendant brought a cross claim. His Honour found that the contractor had caused the cleaner to be wired incorrectly. However, that was not the sole cause of the accident. The deceased had used an extension cord in which the neutral and active wires were internally reversed. It was the combination of the incorrect wiring of the cleaner and the reversed polarity of the extension cord which caused the electrocution. 9 There was evidence that extension cords with cross-polarity of this kind were not uncommon. His Honour found that the condition of the extension cord used by the deceased was the responsibility of another employee of the defendant. His Honour summarised his findings of fact in this way (at p20): …it is proper to record my finding that the cleaner as wired was potentially dangerous, and my further finding that an electrical contractor, acting reasonably, should have been aware of the fact that extension cords with cross-polarity are commonly encountered. The potentially disastrous effects of the two conditions coming into combination should have been within the realisation of a competent electrician, as should have the need to carefully test all circuits that had been worked on to eliminate the risks flowing from incorrect connections and defective earthings. 10 His Honour then considered the law relating to the responsibility of an employer who engages an independent contractor to maintain and repair the equipment used by its employees, and concluded that the employer remains responsible in law for the negligence of such a contractor (p30). His Honour found the defendant liable for "the defective and dangerous plant made available" to the deceased. His Honour continued (at p31): So far as the defect concerned the flex, I find that was attributable to the negligence of its own employee; and so far as it concerned the unsafe wiring of the cleaner, that was attributable to negligence in and about the maintenance and repair of that unit carried out for the defendant by the cross defendant as the independent contractor retained by it for such purpose. 11 Pursuant to the Law Reform (Miscellaneous Provisions) Act, his Honour considered that the electrical contractor should bear 80 per cent of the damages to which the plaintiff was entitled. However, the cross claim also alleged the contractor's breach of an implied term of the contract for repair and maintenance, being the failure "to repair and maintain the vacuum cleaner in a good and workmanlike manner, so that it was safe for use". His Honour noted that the contract and the implied term were admitted on the pleadings, although the breach was denied. After consideration of Florida Hotels and, in particular, the dissenting judgment of Sugerman J in the Full Court, his Honour concluded that the defendant was entitled to full indemnity for the damages and costs which he proposed to award against it in favour of the plaintiff (p34). 12 Those cases can be distinguished from the present case in two significant respects. Firstly, in both of them it was accepted that there was a contractual term of the kind alleged: in Florida Hotels an express requirement for the architects to provide periodic supervision and inspection, and in Taylor v Leach an implied undertaking by the electrical contractor to repair and maintain the vacuum cleaner in a good and workmanlike manner. In the present case, Achievement Concepts denied that the term alleged in the cross claim by Redken should be implied. At most, it was argued, such a term merely restated the common law duty of care which Achievement Concepts acknowledged it owed to Redken's employees. Counsel for Achievement Concepts referred to a passage from the judgment of Deane J in Hawkins v Clayton (1988) 164 CLR 539 at 583: To the extent that the content and incidents of the contractual duty of care correspond with those of the ordinary duty of care under the common law of negligence, the implication of a general contractual term is difficult to rationalize. If the implication of the term is based upon some perceived general principle of law, one is led to ask why the common law should imply a contractual term imposing a duty of care which the common law imposes in any event. If the implication of the term is based upon the imputed intention of the parties, it is difficult to see how any of the ordinary tests for the implication of a term on that basis could properly be seen as satisfied. It could not be sensibly said that it is necessary for the business efficacy or the reasonable or effective operation of a contract to imply a contractual term imposing a general duty which corresponds with the general duty which already exists under the common law. 13 From an earlier passage in the judgment (at 571-3), it is clear that Deane J's remarks were directed to implied terms, whether the implication is said to arise in fact or by law. (That distinction was explained by the Court of Appeal, with reference to authority, in Australis Media Holdings v Telstra Corporation (1998) 43 NSWLR 104 at 122-3). The High Court was dealing with a case involving the duty owed by solicitors to a testatrix for whom they had prepared a will. Applying his reasoning to the facts of the case, his Honour concluded (at 585): ...the imputation of a relevant contractual term should be confined to what is justified by ordinary principles governing the implication of a term on the basis of the imputed intention of the parties, which, in a case such as the present where the parties have not sought to express all of the terms of the contract between them, is what can be seen to be necessary for the effective or reasonable operation of that contract. Plainly it is not necessary for either the effective or reasonable operation of the contract between the firm and the testatrix that there should be superimposed upon the duty of care which the firm owed the testatrix under the common law of negligence a concurrent contractual duty of care of co-extensive content. 14 Counsel for Redken did not submit that the implied term here included an obligation on the part of Achievement Concepts to indemnify Redken for any liability it might incur arising from its own negligence. Rather, he argued that, in the circumstances of the case, such an indemnity was the "ultimate result" of Achievement Concepts' breach of the implied term alleged: that it would conduct the activity with due care and skill, so as to avoid as far as possible injury to any of Redken's employees. It was for this purpose that reliance was placed upon Florida Hotels and Taylor v Leach. I was also referred to The Dredge "WH Goomai" v Australian Oil Refining Pty Ltd (1989) Aust Torts R 80-241, in which the reasoning of the High Court in Florida Hotels was applied: see the judgment of McHugh JA (as he then was), with whom Hope and Clarke JJA agreed, at 68,580-1. 15 Guided by the observations of Deane J in Hawkins v Clayton to which I have referred, I am not satisfied that the term alleged by Redken should be implied in its agreement with Achievement Concepts. However, even if it were, I am not persuaded that its breach would entitle Redken to the indemnity which it seeks. This brings me to the second matter which distinguishes this case from cases such as Florida Hotels and Taylor v Leach. 16 I think there is force in the submission of counsel for Achievement Concepts that indemnities were awarded in those cases because, notwithstanding the negligence of one party to the contract, the breach of contract by the other party was the anterior and primary cause of the plaintiff's loss. In Florida Hotels, the effect of the reasoning of Barwick CJ in the passage quoted in paragraph seven of these reasons is that it was the lack of supervision by the architects which led to the incorrect placing of the reinforcing mesh. Windeyer J (at 601) was in general agreement with the analysis of Sugerman J in the Full Court. Sugerman J (at p51 of the report of the Full Court's decision) had said: In cases such as are now in question there will also be a want of due care on the part of some employee of the owner in proceeding contrary to the plans and specifications. But this is the very thing which the supervising architect is employed, by reasonable measures of general supervision, to guard against. 17 Wood J took the same approach in Taylor v Leach. From the passage of the judgment quoted in paragraph nine of these reasons, it appears that his Honour saw the incorrect wiring of the vacuum cleaner as the primary cause of the accident, particularly as the electrical contractor should have foreseen that an extension cord with cross-polarity might have been used. To the same effect on this aspect is the decision in The Dredge "WH Goomai", the facts of which I do not propose to recite. It is sufficient to say that one tortfeasor was held liable to indemnify another because the breach of contract by the first tortfeasor was anterior to, and had facilitated, the breach of duty by the other. 18 The two-fold basis upon which I found Redken liable to the plaintiff is set out at pages 13-14 of my judgment of 14 August 1998. The first basis is the failure of the plaintiff's fellow employees adequately to support her, but I am prepared to disregard this for present purposes. It is the second basis which is relevant: that is, the failure of senior executives at Redken to attend the site and assess the safety of the exercise, particularly before it was undertaken. That lack of care on the part of Redken was an anterior cause of the plaintiff's loss, just as much as the inadequate preparation and supervision of the exercise by Achievement Concepts. The extent to which Achievement Concepts should bear a greater responsibility for that loss, given its professed expertise in the area, is reflected in the apportionment at which I arrived in my earlier judgment. 19 Accordingly, Redken is not entitled to a complete indemnity by Achievement Concepts in respect of its liability to the plaintiff. Insofar as it relies upon an implied term in the contract, the cross claim must fail. I will hear the parties on costs. ********** Last Modified: 03/29/1999 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.