New South Wales Court of Appeal CITATION : Leighton Contractors Pty Ltd v Rodney James Smith anor [2000] NSWCA 55 revised - 29/02/2008 FILE NUMBER(S) : CA 40498/98 HEARING DATE(S) : 17 February 2000 JUDGMENT DATE : 19 April 2000 Appellant: Leighton Contractors Pty Limited PARTIES : 1st Respondent: Rodney James Smith 2nd respondent: B&B Detail Joinery Manufactuers Pty Ltd JUDGMENT OF : Mason P at 1; Meagher JA at 14; Fitzgerald JA at 1 LOWER COURT JURISDICTION : Supreme Court - Common Law Division LOWER COURT SC 182/93 FILE NUMBER(S) : LOWER COURT Studdert J JUDICIAL OFFICER : Appellant: B Toomey QC / M McAuley COUNSEL : 1st Respondent: C Calloway QC / R Taperell 2nd Respondent: J Hislop QC / J Lonergan Appellant: John Sharpe HIH Workers' Compensation (NSW) Pty Limited Sydney SOLICITORS : 1st Respondent: Baker & Love Solicitors (Charlestown) 2nd Respondent: Dunhill Madden Butler Sydney CATCHWORDS : Negligence - workplace injury - quantum of damages - declaration as to indemnity of employer - Workers compensation Act 1987 (NSW) - Construction Safety Act 1912 (NSW) LEGISLATION CITED : Workers Compensation Act 1987 (NSW) Darlington Futures Limited v Delco Australia Pty Ltd(1986) 161 CLR 500 Leonard v Smith (1992) 27 NSWLR 5 Canberra Formwork Pty Ltd v Civil & Civic Ltd(1982) 41 ACTR 1,21 CASES CITED: Rylands v Fletcher [1861-73] All E R Rep 1, doctrine Grljak v Trivan (1994) 35 NSWLR 82 Grljak v Trivan (No2), Court of Appeal unreported, 19 April 1996 Hampic Pty Ltd v Adams [1999] NSWCA 455 DECISION : 1. Appeal against the dismissal of Leighton's claim for indemnity by B&B allowed with costs.; 2.Declaration that Leighton is entitled to indemnity by B&B in respect of Leighton's liability to Smith.; 3. Leighton's appeal and application for leave to appeal dismissed.; 4. Application by Smith to strike out Leighton's appeal dismissed.; 5. Application by Smith for leave to appeal in relation to damages awarded from B&B be dismissed. LEIGHTON CONTRACTORS PTY LIMITED V Rodney James SMITH & ANOR NEGLIGENCE-WORKPLACE INJURY-QUANTUM OF DAMAGES-DECLARATION AS TO INDEMNITY OF EMPLOYER- WORKERS COMPENSATION ACT 1987 (NSW)-CONSTRUCTION SAFETY ACT 1912 (NSW) Facts: Smith was employed by Leighton Contractors Pty Limited ("Leighton"). On the day he was injured he was working for a subcontractor, B&B Detailed Joinery Manufacturers Pty Limited ("B&B"). Smith joined Leighton and B&B as defendants. He brought action against them for failing to provide a safe system of work, and for breach of the Construction Safety Act 1912 (NSW). At the trial, Leighton and B&B presented evidence and defences jointly. Leighton sought a declaration that it was entitled to an indemnity from B&B. This was refused by the trial judge. The jury found for Smith. They awarded 65% against Leighton and ' 35% against B&B. Leighton appeals against this finding on the following grounds: 1. The subcontracting contract stated that B&B was to fully indemnify Leighton against any loss or damage. This included the full amount awarded against Leighton at the trial. 2. The jury assessment of damages against Leighton, as against B&B, was excessive given S151Z Worker 's Compensation Act 1987. 3. The jury failed to assess damages against Leighton with regard to Division 3 of Part 5 Worker's Compensation Act 1987. 4. The damages awarded against Leighton for non-economic loss were excessive. There was a cross appeal by Smith on the quantum of damages awarded, which would only proceed if Leighton was successful in its appeal against B&B. Held: per Meagher JA: There is nothing stopping an appellate court from acting on what appears to be an irrational verdict of a jury. Under normal circumstances, this court would be in favour of setting aside the verdict against B&B, or ordering a new trial. However, under the contract, B&B was to wholly indemnify Leighton in matters relating to personal injury. In Darlington Futures Limited v Delco Australia Pty Limited (1986) 161 CLR 500, the court found that one must construe contract clauses by giving them their ordinary, or natural meaning. The trial judge erred in adopting a purposive construction of the clause. per Mason P, Fitzgerald JA agreeing: B&B argued the indemnity clause did not apply because there was no fault imposed on Leighton by the negligence of B&B. Canberra Formwork Pty Limited v Civil & Civic Limited (1982) 41 ACTR 1. However, the clause was not directed at Leighton's liability to Smith, but at the cause of Smith's personal injury. It is irrelevant that B&B's negligence was the cause of Leighton's liability, as it was the cause of Smith's injury. ORDERS 1. Appeal against the dismissal of Leighton's claim for indemnity by B&B allowed with costs. 2. Declaration that Leighton is entitled to indemnity by B&B in respect of Leighton's liability to Smith. 3. Leighton's appeal and application for leave to appeal dismissed. 4. Application by Smith to strikeout Leighton's appeal dismissed. 4. Application by Smith for leave to appeal in relation to damages awarded from B&B be dismissed. IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA40498/98 SC182/93 Mason P Meagher JA Fitzgerald JA 19 April 2000 Leighton v Smith Judgment 1 MASON P & FITZGERALD JA: The judgment which has been prepared by Meagher JA enables us to state our opinion briefly. 2 Leighton appealed against both the trial judge's refusal of its claim for a declaration that it is entitled to an indemnity from B&B under the clause set out in paragraph 25 of Meagher JA's judgment and the amount of the damages which Smith was awarded against Leighton. Smith applied to strike out Leighton's appeal against his damages award, and Leighton instituted a precautionary application for leave to appeal. However, Leighton made it plain that it did not seek to proceed with its appeal or application. for leave to appeal against Smith's damages if it is entitled to an indemnity from B&B. Smith applied for leave to appeal in respect of the damages which he was awarded against B&B, but only if Leighton successfully. prosecuted its appeal against the damages which he had been awarded against Leighton. B&B opposed Leighton's claim for an indemnity and Smith's attempt to have the Court increase the damages which he was awarded against B&B, but did not seek any reduction in the damages which Smith was awarded against Leighton in the event that Leighton is held entitled to an indemnity against B&B. Since no more need be decided if Leighton is entitled to an indemnity from B&B, it is convenient to consider that question first. 3 So far as presently material, the relevant clause provides: "[B&B] shall indemnify and keep indemnified [Leighton] against all loss or damage resulting from .. personal injury arising out of or resulting from any act, error, or omission or neglect of [B&B]." 4 B&B accepted that Leighton's "loss or damage" was its liability to Smith, and resulted from the "personal injury" which he had sustained. Further, it was not disputed that that "personal injury" literally meets the description "personal injury arising out of or resulting from any act, error, or omission or neglect of [B&B]." B&B argued that the clause does not apply because Leighton's liability for Smith's "personal injury" arose out of or resulted from Leighton's own "act, error, or omission or neglect", not B&B's "act, error or omission or neglect". According to B&B, like the clause 'in Canberra Formwork Ptv Ltd v Civil & Civic Ltd [1], the present clause provides Leighton with an indemnity "only against such liability as might be imposed on [Leighton] by fault on the part of [B&B]",[2] such as "liability for breach of a non-delegable duty (e.g. one imposed by statute or for strict liability e.g. under the Rvlands v Fletcher [1861-73] All E R Rep 1, doctrine), occasioned by the trespass, nuisance or negligence Of [B&B], but not against liability arising from the fault of [Leighton] itself."[3] 5 In Canberra Formwork [4] after reaching a "tentative conclusion" based on its content and. context that the clause then under consideration did not entitle the contractor to an indemnity from the subcontractor, the trial judge, Blackburn CJ, said:[5] "I am fortified in my tentative conclusion by two further matters. One is the principle expressed by Buckley L.J. in Gillespie Bros & Co. Ltd v Roy Bowles Transport Ltd [1973] 1 Q.B. 400, at p.419: "It is ... a fundamental consideration in the construction of contracts of this kind that it is inherently improbable that one party to the contract should intend to absolve the other party from the consequences of the latter's own negligence." Or as Kitto J said (dissenting) in Davis v Commissioner for Main Roads (1968) 117 CLR 529, at p.534: "It seems to me impossible to suppose that the parties were intending that the appellant should indemnify the respondent against claims based upon the respondent's negligence." The other matter is the contra proferentem rule. It is not disputed that in this contract the [contractor] was the proferens. Nothing would have been easier than to draw a clause by which the liability of the subcontractor to indemnify the general contractor against the consequences of the latter's own negligence was made explicit, if that had been the intention. The [contractor] rather than [subcontractor] should bear the consequences of the omission to do so. I conclude, therefore, that the contract does not require the [subcontractor] to indemnify the [contractor] in the circumstances of this case. This conclusion is contrary to Wilkie v John McIntyre Asphalting Pty Ltd unreported (Supreme Court of New South Wales, Meares J., 26th March, 1975) a case in which Meares J. held that this very clause had the effect of indemnifying the general contractor against the consequences of its own negligence. I would differ from that learned judge on any point with great hesitation and respect, and I do so here. His Honour did not explain his reasons for his ruling." 6 B&B did not suggest that the present clause could usefully be compared with the contract considered in Canberra Formwork, but commended the approach adopted by Blackburn CJ to the Court. However, the solution to the dispute between Leighton and B&B must be found in the language of.the present clause. 7 First, the present clause is not directed to the cause of Leighton's "loss or damage", i.e., its liability to Smith, but to the cause of Smith's personal injury. It is irrelevant to the operation of the clause that B&B's "act, error or omission or neglect" was not the cause of Leighton's liability. It was a cause of Smith's personal injury. 8 Second, no implied limitation on Leighton's right to an indemnity can readily be identified. One suggestion made by B&B was that the word "solely" might be inserted after the words "personal injury", but there is no reason to suppose that it was not intended that Leighton should have an indemnity from B&B if both B&B and some third party caused a personal injury which resulted in loss or damage to Leighton. 9 Third, as Meagher JA has pointed out, the modern approach to the construction of commercial contracts is to. give them their natural and ordinary meaning. [6] If applied to the present clause, the approach adopted in Canberra Formwork [7] would require that the ordinary and natural meaning of the words chosen by the parties be put to one side on the footing that the Court considers that they cannot have intended to mean what they said, although what they said is neither ambiguous nor absurd. That is not the Court's legitimate function. 10 Accordingly, we agree with Meagher JA that Leighton's appeal against the dismissal of its claim against B&B for an indemnity should be allowed with costs and a declaration made that Leighton is entitled to be indemnified by B&B in respect of Leighton's liability to Smith. 11 Conformably with the parties' submissions, Leighton's appeal against the damages awarded to Smith should be dismissed, as should its application for leave to appeal. Smith's application to strike out Leighton's appeal and his application for leave to appeal against the damages awarded him against B&B should also be dismissed. 12 We note what Meagher JA has written about Leonard v Smith (1992) 27 NSWLR 5. Leonard has been followed and applied by this Court implicitly in Grliak v Trivan (1994) 35 NSWLR 82 and explicitly in Grliak v Trivan (No 2), Court of Appeal unreported, 19 April 1996 and Hampic Ptv Ltd v Adams [1999] NSWCA 455. No submissions were advanced as to the correctness of Leonard, not was leave sought to reconsider the earlier Court of Appeal decisions. In recording this, we are not suggesting any view as to the likely outcome of such application had it been made. 13 The parties should have fourteen days within which to make submissions in writing in relation to costs. 14 MEAGHER JA: The plaintiff, Mr R J Smith, ("Smith") an employee of the appellant Leighton Contractors Pty Limited ("Leighton") was, on, 27 August 1992, working for B&B Detailed Joinery Manufacturers Pty Limited ("B&B"), one of Leighton's subcontractors securing roof trusses which were in the course of being erected on a building in the course of construction. B&B is the second respondent in the appeal. 15 Suddenly and without warning the trusses collapsed and Smith fell heavily onto a concrete floor, which was approximately 2.9 metres (9 feet) below him. He sustained serious injuries. They included: a) severe head injury b) fractured skull c) contusions of the right frontal lobe d) Injury producing a post traumatic infarct in the region of the right anterior frontal lobe; e) injuries to the neck; f) injuries to the back; g) fracture of the twelfth thoracic vertebra; h) injury producing post-traumatic epilepsy, diplopia necessitating the wearing of a patch over the left eye, loss of the sense of smell and hearing loss; i) bruises and abrasions; j) pain and shock. 16 He sued both Leighton and B&B in negligence for failure to provide a safe system of work and for breach of the Construction Safety Act 1912(NSW). Both defendants were sued in the same Supreme Court action. The case was heard by Studdert J and a jury. The same facts were relied on in the case against B&B as were relied on in the case against Leighton. It was apparent to all parties that Smith was suing the defendants jointly, not severally; or at least, if severally, was alleging that they were both liable for the same damage. Thus, no evidence was led against either defendant solely. Nor was any defence asserted on behalf of one defendant which was not available to the other. 17 The jury found for the plaintiff, Mr Smith, against both defendants: However, and incredibly, its verdict against B&B ($548,953.00) was less than its verdict against Leighton ($679,181.00). I say "incredibly" because for the reasons I have outlined one would expect either that each verdict was for exactly the same sum or, alternatively, that the verdict against B&B would be higher than that against Leighton's. There is no rational basis for B&B's verdict being lower than Leighton's. 18 I say that the verdict against B&B could conceivably be higher than that against Leighton. This is because (a) as against Leighton there is a statutory "cap" on the amount of damages which can be awarded for non­economic loss, but no such "cap" in B&B's case and (b) impairment of future earning capacity would be calculated on a 5% discount basis, as far as Leighton was concerned, but in B&B's case would be calculated on a 3% basis. 19 From the manner in which the jury gave its verdicts we know how the figure of $679,181.00 was calculated. It is in the following manner: 1. Damages for non-economic loss $180,000.00 2. Out-of-pocket expenses $ 36,079.00 3. Future treatment $ 9,476.00 4. Past economic loss $176,526.00 5. Impairment of future earning capacity $277,100.00 $679,181.00 20 We also know how the fifth figure ($277,100.00) was reached: it was $500.00 per week from date of trial to age 65, calculated on a 5% basis, and minus 15% discount. 21 It is inconceivable that the jury could, rationally, have found the 2nd, 3rd or 4th figures (which together total $212,081.00) against B&B differently from against Leighton. On the . fifth figure, if they found against Leighton that Smith was losing $500.00 per week they had to make the same finding against B&B. Recalculating the 5th figure on a 3% basis, one would get $325,976.00. Thus the figure at which the jury arrived in the case of B&B really amounts to the $212,081.00 figure plus the $325,976.00 figure, but nothing else. 22 This must mean that, in this case of B&B, the jury awarded nothing in general damages, although they saw fit to award $180,00.00 for the same item against Leighton. 23 I appreciate the sanctity of jury findings, as I do the deep-seated principle that appellate judges must not pry into the reasons why juries do whatever they do. However, so far as I know, there is no principle that an appellate court is powerless in the case of a demonstrably irrational verdict. 24 In normal circumstances, therefore, I should be in favour of setting aside the verdict against B&B and either ordering a substantive verdict of $548,913.00 or alternatively ordering a new trial of the B&B case limited to the ascertainment of general damages. However, in view of the conclusions to which I have come to on the indemnity question, it may well be that the appeal can be disposed of without making any such order. 25 The contract between Leighton and B&B contained the following clause: "The subcontractor (i.e. B&B) shall indemnify and keep indemnified the company (Leighton) against all loss or damage including but not limited to all physical loss or damage to property (other than property for which the subcontractor is responsible under clause 16) and all loss or damage resulting from death or personal injury arising out of or resulting from any act, error, or omission or neglect of the subcontractor." 26 Learned senior counsel for Leighton, Mr B J Toomey QC, submitted that pursuant to that clause B&B was obliged to indemnify Leighton in full for the verdict against it of $679,181.00. This is a submission which, in my view, must be accepted. As he pointed out, the High Court in Darlington Futures Limited v Delco Australia Pty Limited(1986) 161 CLR 500 reverted to the principle that one construes contractual clauses by giving_them their natural or ordinary meaning. If that were done here, Leighton would be entitled to its indemnity. Studdert J declined to accept this submission, however. He either added an implication that the "act, error, omission' or neglect" had to be solely that of the subcontractor, or he adopted some purposive construction. As far as the latter possibility is concerned, I can see no purpose in the clause other than the negation of liability in Leighton. 27 Mr Toomey, however, also submitted that the figure of $180,000.00 awarded against his client for non-economic loss was too high. The "cap" figure under s.1516 of the Workers Compensation Act 1987 (NSW) was $210,100.00. The figure of $180,000.00 was therefore the equivalent of 85.7% of the "cap" figure. He almost made light of Smith's injuries. But "he jests at scars, that never felt a wound" (Romeo and Juliet 2.2.1); and in my view the jury was guilty of no error at arriving at the figure of $180,000.00. 28 There is only one further matter which deserves comment. The jury decided, on a question of contribution, that Leighton was 65% liable and B&B 35% liable. That was, I should have thought, a finding, of some interest to the defendants, but is of no concern to the plaintiff Smith. However, his Honour took the jury's verdict in this regard as implying a limitation on the plaintiffs verdict, so that, the plaintiff was entitled against Leighton only to a verdict of 65% of $679,181.00. In this regard he was following a decision of Allen J ( Leonard v Smith (1992)27 NSWLR 5), a decision which in my view is clearly erroneous and should never have been reported. The basis of Allen J's reasoning is that such a limitation is necessary in order to give support to s.151Z of the Workers Compensation Act. Subsection(2)(a)(b)and (c) are as follows: (2) If, in respect of any injury to a worker for which compensation is payable under this Act: a) the worker takes or is entitled to take proceedings independently of this Act to recover damages from a person other than the worker's employer, and b) the worker also takes or is entitled to take proceedings independently of this Act to recover damages from that employer, the following provisions have effect: c) the damages that may be recovered from the person by the worker in proceedings referred to in paragraph (a) are to be reduced by the amount by which the contribution -which the person would (but for this Part) be entitled to recover from the employer as a joint tortfeasor or otherwise exceeds the amount of the contribution recoverable,.... 29 I cannot see how an obscure provision in the Workers Compensation Act 1987 (NSW) could have the effect that a basic principle of law is overthrown, viz. that a plaintiff is entitled to one judgement in solidum against all joint tort-feasors. 30 In my opinion, a declaration as to the indemnity should be made in the terms sought by Leighton, together with such further or other orders as are necessary to dispose of the matter. ********** END NOTES 1 (1982)41ACTR 1 2 Canberra Formwork Pty Ltd v Civil & Civic Ltd (1982) 41 ACTR 1, 21 3 Canberra Formwork Ptv Ltd 41 ACTR 1, 22 4 (1982) 41 ACTR 1 5 (1982) 41 ACTR 1,23 - 24 6 See, for example, Darlington Futures Ltd v Delco Australia Pty Ltd (1996) 161 CLR 500. 7 See, for example, Darlington Futures Ltd v Delco Australia P' Ltd (1996) 161 CLR 500 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.