CSR Limited v Adecco (Australia) Pty Limited

1. [1]

   McCOLL JA: The appellants, CSR Limited (CSR) and Holcim (Australia) Pty Limited (Holcim), [1] appeal from a decision of Adamson J that Adecco (Australia) Pty Limited (Adecco Australia) was not liable to indemnify them in respect of their liability in damages arising from a personal injury claim brought by the plaintiff, David Frewin, a truck driver employed by Adecco Industrial Pty Ltd (Adecco Industrial) who was injured as a result of driving a defective truck in the course of his employment at a CSR concrete plant. [2] Her Honour reached that decision substantially because she held that the indemnity provision CSR sought to enforce (cl 23.2) did not form part of an agreement between CSR and Adecco Australia for the supply of labour during, relevantly, the period in which Mr Frewin’s cause of action arose. [3]

2. [2]

   A formal contract for labour supply (Agreement) between the parties had expired prior to the relevant period, however it had first been continued by agreement to a specified date, following which Adecco Australia continued to supply labour and CSR continued to pay for it. CSR’s central submission at trial was that the primary judge should find that after the Agreement expired, there was an implied contract between the parties for the supply of labour hire services by Adecco Australia to CSR on the same terms and conditions (including the indemnity) as had previously been the subject of the Agreement, save only as to duration and term.

3. [3]

   The primary judge also held that, in the event cl 23.2 did form part of an implied contract between the parties, nevertheless it did not apply as CSR did not prove that Mr Frewin was “Temporary Staff”, nor that he was working “in an Assignment for CSR” at any relevant time within the meaning of that provision. Her Honour rejected the other bases upon which Adecco Australia contended cl 23.2 did not apply.

4. [4]

   By notice of contention Adecco Australia challenges her Honour’s findings that, if cl 23.2 did apply, construed objectively, it covered all claims, including those caused, or contributed to, by CSR’s own fault and, further, that CSR’s liability to Mr Frewin otherwise fell within the terms of the indemnity provision. [4]

5. [5]

   For the reasons that follow the appeal should be allowed with costs. In my view, the Court should hold:

   1. (1)

      That the primary judge erred in failing to infer from the conduct of CSR and Adecco Australia that the expired Agreement continued in existence on the same terms and conditions (including cl 23.2) beyond its agreed expiry until at least the end of March 2003 (at which time Mr Frewin ceased driving the defective truck, and any cause(s) of action he had arising from that activity had accrued) save that the agreement was terminable on reasonable notice.

   2. (2)

      That during the period Mr Frewin’s cause of action accrued, he was “Temporary Staff” working “in an Assignment for CSR” within the meaning of cl 23.2.

   3. (3)

      That CSR’s liability to Mr Frewin fell within the terms of the indemnity provision, such that Adecco Australia is liable to indemnify it in that respect.

Factual background

1. [6]

   The trial proceeded on the basis of statements relevantly from Gail Miller, Adecco Australia’s National Account Director between February and October 2002 (prepared by Adecco Australia, but tendered by CSR) and Mr Frewin, and undisputed documents.

2. [7]

   Ms Miller “was responsible for the contractual and business relationship between Adecco Australia and its major clients, including CSR.” [5] She was not cross-examined. The primary judge accepted her evidence as to the respective functions of Adecco Australia and Adecco Industrial, which her Honour identified as follows:

3. [8]

   As the primary judge explained, the Agreement was the product of Adecco Australia successfully responding to CSR’s request in 1999 for proposals to supply “casual labour (also referred to as contract labour) for its operations in both metropolitan and country areas” (Proposal). [7] One of the country areas listed in an attachment to the Proposal included a concrete plant at Batemans Bay of which a Mr Geoff Whitfield was identified as “the engaging manager”. This was where Mr Frewin worked. [8]

4. [9]

   In the Proposal, CSR summarised its requirements as follows:

5. [10]

   The primary judge noted the following matters in the Proposal:

6. [11]

   It should also be noted for convenience at this point that under the same “Indemnity” heading in the Proposal, the following appeared:

7. [12]

   By letter dated 17 December 1999 CSR accepted Adecco Australia’s offer to provide casual labour and confirmed that the letter constituted the full agreement pending the execution of a formal contract document. The letter contained a term, cl 4, that the agreement was non-exclusive and that CSR was entitled to obtain labour hire services from other providers. Appendix 1 to the letter set out the “General Conditions of Supply”, which included cl 18.3 (the requirement for insurance) and cl 23.2 (indemnity) in the same form as in the Proposal. [10]

The Agreement

1. [13]

   On 1 April 2000 Adecco Australia entered into the Agreement with CSR. [11] It was entitled “Supply Agreement for Labour Hire Services”.

2. [14]

   Clause 1.1 of the Agreement defined the following terms:

3. [15]

   Clause 2 of the Agreement provided:

4. [16]

   Clause 3 provided:

5. [17]

   Clause 4 relevantly provided:

6. [18]

   Clause 5 required Adecco Australia, if requested by the Engaging Manager (a CSR employee responsible for the work location at which an Assignment was executed), to ensure a suitably qualified representative attended safety and toolbox meetings at a place of delivery.

7. [19]

   Clause 7 provided:

8. [20]

   Clause 11 dealt with Recording of Attendance. Temporary Staff were required either to clock on or off the CSR Card System where available or, where that system did not exist, to fill in the “Supplier Time Sheet which shall be approved by the Engaging Manager prior to submission of any related claim for payment by the Supplier”.

9. [21]

   Clause 14 relevantly provided:

10. [22]

    Clause 18 relevantly provided:

11. [23]

    Clause 21 of the Agreement provided:

12. [24]

    Clause 22 of the Agreement provided:

13. [25]

    Clause 23 of the Agreement provided:

14. [26]

    Clause 32 provided:

15. [27]

    The Agreement expired on 31 March 2002. It was common ground at trial that it was extended, initially until 30 June 2002, and then until 31 July 2002. [16] According to an internal Adecco email dated 27 August 2002, it was “renewed verbally until end July”. There was no evidence of the discussions which led to the extensions. [17]

16. [28]

    Ms Miller’s statement relevantly said: [18]

17. [29]

    Between June 2002 and May 2004, the parties sought to negotiate the terms of a new agreement. The primary judge recorded the negotiations in detail, it is unnecessary to reproduce. [20] It was also common ground that those negotiations, which were ultimately abandoned, did not result in the execution of a new agreement. [21] The primary judge expressed the view that it was “not … determinative, one way or the other, that the parties were endeavouring to negotiate a new agreement which was different from the Agreement.” [22]

18. [30]

    Of the evidence adduced concerning this period, it is relevant to note that, during the period from April 2002 to the end of January 2003, CSR paid Adecco Australia 77.62 per cent of its total labour hire spend, an amount of $13.285 million.

19. [31]

    In respect of the general negotiations for a new Agreement post July 2002, Adecco Australia emphasises that the parties were “in dispute” about the inclusion of any new arrangement of an indemnity expressed in like terms to cl 23.2 of the Agreement.

CSR’s corporate structure

1. [32]

   In respect of CSR and its subsidiaries, Readymix Holdings Pty Ltd (Readymix) was incorporated on 27 February 2002. It was a wholly owned subsidiary of CSR. Readymix changed its name to Rinker Australia Pty Ltd on 5 September 2005, to Cemex Australia Pty Ltd on 29 February 2008 and to Holcim on 2 October 2009.

2. [33]

   On 28 March 2003, CSR’s construction materials businesses (including its concrete plants) underwent a demerger, as a result of which Holcim (then known as Readymix) ceased to be wholly owned by CSR. [23] The significance of this, according to Mr D T Miller of Senior Counsel who appeared on appeal, but not at trial, with Mr H J Neal, was that Readymix remained a subsidiary of CSR until the end of March 2003, which coincided with when Mr Frewin ceased to have any involvement with the subject vehicle. Thereafter, employees were transferred from CSR to the Rinker Group Limited, which was a wholly owned subsidiary of CSR. [24]

Mr Frewin’s claim

1. [34]

   The indemnity issue, the subject of the primary judgment, fell for determination consequent upon the settlement of Mr Frewin’s personal injury proceedings.

2. [35]

   Mr Frewin applied for a job as a truck driver at CSR’s Batemans Bay concrete plant on 5 September 2001. He spoke with Mr Whitfield and filled in an employment application which bore a CSR/Readymix header. On 14 September 2001, he filled in a document entitled “Candidate Declaration” (Declaration), on the letterhead of Adecco. The formal names and ACN numbers of Adecco Australia, Adecco Industrial and a company called Adecco Projects Aust Pty Ltd appeared at the bottom of the Declaration. The form did not identify which of the Adecco companies there identified was the company which engaged Mr Frewin.

3. [36]

   By signing the Declaration, which he did, Mr Frewin agreed that he understood the terms and conditions to which the document referred. They included that he was to be “engaged by Adecco as a casual (hourly) employee”, was to be “paid weekly upon Adecco’s receipt of a correctly completed timesheet …authorised by the client” and that “Adecco will offer you assignments for which you are qualified…”. The primary judge found the Declaration was apparently provided by Adecco Industrial, which was consistent with her Honour’s finding that, at all material times, Mr Frewin was an employee of Adecco Industrial. [25]

4. [37]

   In one of his two statements admitted at trial, Mr Frewin said he “commenced working for Adecco Industrial Pty Limited in about 2001 [and] was immediately asked to work as a truck driver for Readymix.” He was inducted onto the Batemans Bay site by CSR. [26]

5. [38]

   At all times, Mr Frewin worked under CSR’s direction and control. He described himself as being “casually employed” at the Batemans Bay plant, saying he was “called to work on a day to day basis” at CSR’s direction. At the end of the week, he “would complete a timesheet and my boss would send it up to Adecco” which paid him. He also said that he “worked for Adecco at Readymix in Batemans Bay … until 5 December 2004.”

6. [39]

   The primary judge found that “Adecco Industrial … invoiced Holcim or CSR for the provision of [Mr Frewin’s] services.” [27] In the course of the hearing in this Court, the parties agreed that there was no evidence which supported this finding, nor or any concession at trial, or submission to that effect. Following the hearing, the parties provided an agreed note in which they confirmed that there was no evidence adduced, or submission put by either party that Adecco Industrial ever directly invoiced CSR/Holcim. Rather, the only evidence as to payment by CSR to any Adecco entity was to the effect that there were payments to Adecco Australia as set out in paragraph 17 of Ms Miller’s statement (which was admitted without objection) and in CSR’s summary of its spend on casual labour including the reference to “Batemans Bay NSW Concrete”. CSR submitted the Court should correct this finding and, rather, find that it was Adecco Australia which invoiced it for Mr Frewin’s services. Adecco Australia did not oppose that submission. I have proceeded on that basis.

7. [40]

   Mr Frewin suffered injury as a consequence of driving a particular cement mixer truck, known as Truck 619, during the course of his employment at the CSR plant in Batemans Bay. The driver’s seat of Truck 619 lacked the suspension of other seats in similar vehicles, causing Mr Frewin to suffer pain in his lower back. [28] He complained to CSR that there was a problem with the suspension of the vehicle, but CSR directed him to continue to drive the vehicle. He drove Truck 619 from approximately September 2002 until March 2003, at which time he was directed to drive a different truck. He continued to work at the Batemans Bay plant until he was dismissed in December 2004. He subsequently experienced excruciating back pain and underwent surgery on his back. [29]

8. [41]

   Mr Frewin was being paid by Adecco Industrial with Holcim described as the client, as late as 1 December 2004 for the week ending 28 November 2004.

9. [42]

   CSR identifies the 8 month period for the purposes of its implied contract claim as from 31 July 2002 (following the express extension of the Agreement) to March 2003 when Mr Frewin last drove Truck 619 as the “true period of significance” and the “relevant period of uncertainty”, as after March 2003 he no longer drove the truck. Further, after the CSR and Holcim demerger took place, there were no relevant causal events insofar as Mr Frewin’s claim was concerned. I shall refer to this as the “critical period”.

10. [43]

    Mr Frewin commenced proceedings in the Supreme Court of the Australian Capital Territory against Adecco Industrial, seeking damages for personal injury. The proceedings were subsequently transferred to the Supreme Court of New South Wales. By an amended statement of claim filed on 12 February 2013, Mr Frewin joined Holcim as the second defendant and CSR as the third defendant. On 19 April 2013, Holcim and CSR filed a cross-claim against Adecco Australia, claiming an indemnity pursuant to the Agreement. [30] It appears from the terms on which Mr Frewin’s claim was resolved, that Adecco Industrial cross-claimed against Holcim and CSR apparently pursuant to s 151Z of the Workers Compensation Act 1987 (NSW) to recover workers compensation payments made to Mr Frewin.

11. [44]

    Mr Frewin’s claim was settled on 14 October 2015, on the following basis:

12. [45]

    Accordingly, the only matter that remained to be determined by the primary judge was Holcim and CSR’s cross-claim seeking indemnity from Adecco Australia.

Primary judgment

1. [46]

   The primary judge identified the central issue for her consideration as “whether the indemnities in the Agreement continued to apply, in circumstances where there [was] no particular reason to suppose that they were necessary to the continuing legal relationship between the parties”. [32] As I have said, although her Honour summarised at some length, negotiations between the parties for a new agreement, [33] in her Honour’s view, it was not “determinative, one way or the other, that the parties were endeavouring to negotiate a new agreement which was different from the Agreement.” [34]

2. [47]

   Her Honour found that CSR’s evidence established the following facts:

3. [48]

   In her Honour’s view, those facts gave rise, at least theoretically, to the following three possibilities:

4. [49]

   In support of its argument that the Agreement had been extended by the parties’ conduct, CSR relied on the decision of the Victorian Court of Appeal in Brambles Ltd v Wail; Brambles Ltd v Andar Transport Pty Ltd. [37] The primary judge summarised Brambles in the following terms.

5. [50]

   On appeal to the High Court, the majority held that the indemnity did not cover Brambles’ claim against Andar and, accordingly, held that it did not need to determine the extent to which the expired agreement remained in force. [39] Callinan J, who dissented on the construction of the indemnity, was the only member of the Court to consider whether the agreement continued to govern the parties’ relationship. His Honour agreed with the Court of Appeal’s conclusion that the expired agreement remained in force, such that the indemnity continued to bind the parties. [40]

6. [51]

   The primary judge distinguished Brambles for the following reasons. First, there was no evidence in Brambles that there were any negotiations for a new agreement between the parties during the relevant period or that any extensions had been expressly agreed. Conversely, in the present case, the parties appreciated that the Agreement had expired. They had agreed to extend it informally on two occasions. However, on the evidence, they refrained from expressly addressing the status of any further extension beyond 31 July 2002, notwithstanding their several communications about the negotiation of a new agreement. [41]

7. [52]

   Secondly, the Court of Appeal in Brambles was satisfied that the agreement was performed “in exactly the same way and on exactly the same basis, notwithstanding its expiry.” In the present case, her Honour considered that “[a]ll that [could] be taken from [Ms Miller’s] evidence [was] that Adecco Australia continued to supply labour to CSR and was paid for that labour on the same terms as had applied, at least from February 2002.” [42]

8. [53]

   Thirdly, the evidence in the present case did not extend beyond October 2002, when Ms Miller left Adecco Australia. The primary judge considered that CSR bore the onus of proving that the performance of the arrangement between the parties continued in the same way in the period from 31 July 2002 until March 2003, when, as I have said, Mr Frewin stopped driving Truck 619. [43] As a question of actual, rather than hypothetical, fact this could have been the subject of evidence. It was not. In such circumstances, her Honour was not prepared to draw the inference that the situation to which Ms Miller deposed continued after her departure. Accordingly, CSR had failed to discharge its onus of proof. [44]

9. [54]

   The primary judge concluded that Brambles “establishes … that, in some circumstances, it is appropriate to conclude that parties remain bound by the terms of an agreement that has expired. I do not regard the circumstances of the present case as giving rise to such a conclusion.” [45]

10. [55]

    CSR also submitted that the parties had agreed to an extension of the Agreement on the basis that its right under cl 2.2 to extend the Agreement for a maximum of another two years was not subject to any formal requirement, such that it give written notice. It argued the primary judge should draw that inference, as her Honour said, “because of the improbability of two large commercial entities, which had previously conducted their commercial relationship (which involved annual expenditure well in excess of $10m) by reference to a detailed agreement which made specific provision for such matters as insurance and indemnity. [sic, as in original]”. [46]

11. [56]

    I infer that the balance of this submission concerned the improbability in such circumstances of the parties “abandoning that agreement and operating on an ad hoc basis”. This is consistent with the submission from CSR her Honour next recorded as being that “CSR contended that there would be considerable uncertainty created by a conclusion that they had not done so and, accordingly, the inference that they had extended the Agreement ought be drawn,” relying on what Callinan J said in Andar, [47] that his Honour “doubt[ed] whether it would ever have occurred to the parties that their arrangements were governed other than by the terms of the written contract.” [48]

12. [57]

    The primary judge rejected this submission. In her Honour’s view “[a]lthough no formal notice for an extension by CSR was required by cl 2.2, some outward objective intention to extend was necessary in order that the question whether the right had been exercised could be resolved.” [Emphasis added.] [49]

13. [58]

    Her Honour then turned to CSR’s implied contract case. [50] Her Honour attributed significance to the fact that “notwithstanding the many and varied communications between the parties, from 31 July 2002 until after April 2003, neither party confirmed the terms of their continuing relationship pending further agreement.” [Emphasis added.] [51] In her Honour’s view, the more probable explanation was that:

14. [59]

    The effect of this conclusion was CSR had failed to establish that cl 23.2 formed part of any agreement with Adecco Australia for the supply of labour after 31 July 2002. This conclusion is the subject of CSR’s first ground of appeal.

15. [60]

    The primary judge then turned to consider whether, notwithstanding her conclusion that cl 23.2 did not apply to the legal relationship between CSR and Adecco Australia after 31 July 2002, cl 23.2 would have entitled CSR to be indemnified in respect of Mr Frewin’s claim. [53]

16. [61]

    Adecco Australia contended that it was not liable to indemnify CSR under cl 23.2 as first, CSR had not established that Mr Frewin was an employee of Adecco Australia. Rather, the evidence established that he was employed by Adecco Industrial and, accordingly, he was not “Temporary Staff” as defined in the Agreement. Secondly, CSR had not established that Mr Frewin was working on an “Assignment”, as defined, for the relevant period. Thirdly, Mr Frewin’s claim did not arise “out of or in connection with the performance of ‘Assignment’ duties” (as required to bring it within cl 23.2); rather, it arose out of Holcim’s/CSR’s breach of duty to Mr Frewin and fourthly, CSR had not established that Holcim was an “Affiliate”, as defined. [54]

17. [62]

    As to the first issue, the primary judge concluded the word “employed” as it appeared in the definition of Temporary Staff in cl 1.1 of the Agreement was ambiguous. This was because it had either a narrow sense as describing the relationship of employment or, a wider sense, merely meaning “used”. [55] Adecco Australia contended her Honour ought adopt the narrow sense as the provision being construed was an indemnity clause, and any ambiguity ought be resolved in the indemnifier’s favour. CSR submitted the expression should be construed so as to be consistent with the general commercial arrangement between the parties in the Agreement. [56]

18. [63]

    The primary judge held that cl 23.2 was ambiguous and, accordingly, she could have regard to “the surrounding facts and circumstances, or the so-called Codelfa matrix” (referring to Codelfa Construction Pty Ltd v State Rail Authority). [57]

19. [64]

    In that respect, her Honour took into account the following matters. First, that Adecco Industrial was solely a labour hire company and that Adecco Australia was responsible for the overall management of the Adecco group of companies. [58]

20. [65]

    Secondly, an internal CSR email of 10 February 2003 which Mr Simon Lillyman, CSR’s General Manager – Procurement, sent to Mr Davis, Project Manager, CSR Procurement, setting out CSR’s year to date expenditure on casual labour and “nominated Adecco Australia as a ‘labour hire company’, for which 77.62% of CSR’s total expenditure was referable and included the Batemans Bay concrete plant on the list of plants to which ‘Adecco Australia’ supplied ‘casual labour’”. [59]

21. [66]

    Her Honour observed that this tended “to suggest, as Ms Miller said in her statement, that those dealing with Adecco Australia, including CSR, would not distinguish between Adecco Australia and Adecco Industrial (by which [Mr Frewin] was actually employed) and that the internal group structure within the Adecco group was not material to the relationship between CSR on the one hand and Adecco Australia on the other.” [60]

22. [67]

    However, her Honour concluded that this inference was “largely a matter of speculation” in circumstances “where the evidence [was] not sufficient to establish, for example, that Adecco Australia did not employ any people whose labour it hired to others, such as CSR.” Although her Honour accepted that “Adecco Industrial was, according to Ms Miller, ‘solely a labour hire company’”, in her Honour’s view “her evidence did not go so far as to say that it was the sole labour hire company in the Adecco group.” [61]

23. [68]

    In addition, her Honour had regard to the “more fundamental objection to the use of [Ms Miller’s] evidence for that purpose” which was that it post-dated “the making of the Agreement and its use would infringe the prohibition on the use of subsequent conduct for the purposes of interpretation, which is based on the principle that the context must be determined as at the date of the contract”, referring to Franklins Pty Ltd v Metcash Trading Ltd. [62]

24. [69]

    Her Honour repeated that indemnities are to be construed against the indemnified. [63] She concluded:

25. [70]

    In light of this conclusion her Honour dealt briefly with Adecco Australia’s other arguments.

26. [71]

    First, her Honour rejected Adecco Australia’s submission that cl 23.2 was ambiguous because of its possible ambit, literally construed, and the fact that “the inclusion of the word ‘where’ at the end of cl 23.2.1 indicated that the indemnity was not intended to be unconditional”. [64] Her Honour held that “the word ‘where’ at the end of the clause [was] obvious surplusage”, [65] and that, “[o]nce the word ‘where’ is excised, cl 23.2 is … sufficiently clear to indicate an objective intention to cover all claims, whether caused or contributed to by CSR’s own fault.” [66] This finding is the subject of grounds 1(a) and 2(a) in Adecco Australia’s notice of contention.

27. [72]

    Secondly, her Honour rejected Adecco Australia’s contention that Mr Frewin’s claim was one that arose from CSR’s breach of its duties to him and not one “arising out of or in connection with the performance of Assignment duties” and therefore was not covered by the cl 23.2.1 indemnity. Her Honour did not regard the circumstance that “the plaintiff’s liability [sic, claim] arose from CSR’s negligence as providing a warrant for concluding that the claim was not one ‘arising out of or in connection with the performance of Assignment duties’.” [67] This finding is the subject of grounds 1(b) and 2(b) in Adecco Australia’s notice of contention.

28. [73]

    Thirdly, in addition to her finding that Mr Frewin was not “Temporary Staff” within the meaning of cl 23.2, her Honour also accepted Adecco Australia’s submission that CSR had failed to establish that Mr Frewin was relevantly employed “to work in an Assignment for CSR” as required by the definition of “Temporary Staff”, in that he was undertaking tasks at a location and a classification specified in an “Order”. In her Honour’s view, the absence of evidence of an Order (as defined in the Agreement), or adequate explanation for its absence was “an additional, and independent, basis for concluding that CSR has not established that the plaintiff, even had he been employed by Adecco Australia (which he was not), was ‘Temporary Staff’.” [68] This finding is the subject of ground 2(b) in CSR’s amended notice of appeal.

29. [74]

    Fourthly, her Honour rejected Adecco Australia’s submission that it was not liable to indemnify CSR in respect of Mr Frewin’s claim against Holcim because Holcim did not fall within the definition of “CSR” in the Agreement as it has not been shown to be an affiliate. [69] Her Honour had regard in this respect to CSR’s 2000 Annual Report, which showed that for the year ended 2000, Readymix was one of its wholly owned subsidiaries. In the Federal Court, on 7 February 2003, Conti J made orders for the demerger (which affected Holcim) to which I have earlier referred. Those orders foreshadowed an application for approval of the arrangement on 28 March 2003. [70] In these circumstances, her Honour was satisfied that Holcim fell within the definition of CSR at the relevant time and therefore, to that extent, Mr Frewin’s claim fell within cl 23.2. [71]

30. [75]

    Fifthly, her Honour rejected Adecco Australia’s submission that Mr Frewin’s claim did not fall within cl 23.2 as Readymix was not incorporated until 27 February 2002, which post-dated the making of the Agreement, and the definition of “CSR” in the Agreement was in the present tense (that it “has” a 50% or greater interest). In her Honour’s view, the parties could not “have intended to exclude from the operation of the indemnity claims against wholly owned subsidiaries of CSR incorporated after the date of the Agreement”. [72]

31. [76]

    Finally, her Honour considered CSR’s claim pursuant to cl 23.2.2 to be indemnified by Adecco Australia in respect of its liability on the cross-claim to Adecco Industrial for $160,000. [73] This claim substantially failed for the reasons her Honour had given in respect of cl 23.2.1. Her Honour held that cl 23.2.2 did not apply as “[a]lthough CSR’s liability to Adecco Industrial [was] ‘a liability to any person’ within the meaning of cl 23.2.2, it [was] not ‘in connection with such personal injury’ [and] [t]he word ‘such’ in cl 23.2.2 imports the limitations in cl 23.2.1 concerning Temporary Staff and the performance of Assignment duties.” [Emphasis in original.] [74]

32. [77]

    In summary, the primary judge concluded that CSR had not established any entitlement to be indemnified in respect of Mr Frewin’s claim because:

33. [78]

    The primary judge gave judgment for Adecco Australia on the cross-claim brought by CSR and Holcim and ordered that, unless an application for a different order was made in writing to her Honour’s Associate within seven days, CSR and Holcim should pay Adecco Australia’s costs.

34. [79]

    As finally pressed, CSR relies on grounds 1 and 2 in its amended notice of appeal:

    1. (1)

       The primary judge erred in:

    2. (2)

       Further, on the premise that the primary judge ought to have found that the indemnities in cl 23 of the Agreement continued to form part of the parties’ commercial relationship for labour hire, the primary judge erred in:

35. [80]

    CSR did not pursue the argument advanced at trial that the parties had informally exercised the cl 2.2 right to extend the Agreement. [76]

36. [81]

    In its notice of contention, Adecco Australia contends that the primary judge’s orders should be upheld for reasons additional to those given by her Honour. Ground 1 contends that the primary judge erred in finding that:

37. [82]

    Ground 2 in the notice of contention contends that the primary judge should have found:

Implied contract: authorities

1. [83]

   CSR’s central submission is that the primary judge ought to have found, in the sense of inferred, that after the Agreement expired, there was an implied contract between the parties for the supply of labour hire services by Adecco Australia to CSR on the same terms and conditions as had previously been the subject of a fixed term contract, save only as to duration and term.

2. [84]

   The Court’s appellate jurisdiction is governed by s 75A of the Supreme Court Act 1970 (NSW). In exercising its jurisdiction to conduct an appeal “by way of rehearing” (s 75A(5)), it has the power to draw inferences and make findings of fact (s 75A(6)(b)) and to “make any finding or assessment, give any judgment, make any order or give any direction which ought to have been given or made or which the nature of the case requires” (s 75A(10)).

3. [85]

   In general, an appellate court is in as good a position as the trial judge to decide on the proper inferences to be drawn from facts which are undisputed, or which, having been disputed, are established on the findings of the judge. In deciding the proper inference that is to be drawn, the appellate court should give respect and weight to the conclusion of the judge, but, once having reached its own conclusion, it must give effect to it. [79]

4. [86]

   Having regard to the significant role the drawing of inferences plays in this case, it is necessary to revisit the basis upon which an inference might be drawn, absent direct proof of a fact. In order to find a fact proved, including by inference:

5. [87]

   The inherent unlikelihood of an occurrence of a given description is one consideration which must affect the answer to the question whether an issue has been proved to the reasonable satisfaction of the tribunal. [81] Further, “[i]n establishing an inference of a greater degree of likelihood, it is only necessary to demonstrate that a competing inference is less likely, not that it is inherently improbable.” [82]

6. [88]

   The continuing agreement for which CSR contends is the sort of implied contract to which Chitty on Contracts [83] refers as follows:

7. [89]

   The passage dealing with implied contracts as it appeared in the 28th edition of Chitty was referred to in Brambles, [85] in the context of the Court’s observation that “[i]t … is not easy to find much discussion in the books or case law, except in North America, of the question whether the terms of a detailed written agreement for a fixed term continue, after that term has expired, to govern the parties to it where they continue dealing with each other.”

8. [90]

   The position in the United States is summarised in Corbin on Contracts as follows:

9. [91]

   As I have said, the quotation in Chitty came from the reasons of Mance LJ, as his Lordship then was, in Modahl. [87] In Modahl, the question arose whether there was an implied contract between Ms Modahl, an 800 metre runner who had represented Great Britain in the Olympic Games, World Championships and European Championships and the British Athletic Federation (BAF). The Court of Appeal (Latham and Mance LLJ in separate reasons, Jonathan Parker LJ dissenting) held that, in all the circumstances, the necessary implication from Ms Modahl’s conduct in joining a club affiliated to the BAF (which, in turn was affiliated to the International Amateur Athletic Federation (IAAF)), in competing at national and international level on the basis stated in the IAAF and BAF rules and in submitting herself to doping tests both in and out of competition was that she became party to a contract with the defendant subject to the relevant terms of the rules.

10. [92]

    In addition to the passage Chitty reproduced, Mance LJ held that, absent any “conversation or document which [could] be identified as constituting an express agreement”, “[a]ny contract must be implied from conduct, in the light of the rules.” [88] His Lordship concluded that, despite the paucity of the material before the Court, Ms Modahl was “in a contractual relationship with the [BAF] on terms providing for eligibility, drug testing and … dispute resolution.” [89]

11. [93]

    Macfarlan JA expressed a similar view concerning the necessity for implying a contract, in Laidlaw v Hillier Hewitt Elsley Pty Ltd. [90] In Laidlaw, his Honour applied the decision of the House of Lords in Brogden v Metropolitan Railway Co [91] to the effect that while the conduct of parties may give rise to a contract, “the character and circumstances of the conduct must indicate unambiguously that the parties intended to contract.” [92] His Honour added, referring to Empirnall Holdings Pty Ltd v Machon Paull, [93] that “[n]ot only must the conduct point to the existence of a contract but it must point to the existence of the contract in the terms alleged in the proceedings. As stated by McHugh JA in Empirnall, ‘[t]he ultimate issue is whether a reasonable bystander would regard the conduct of the offeree, including his silence, as signalling to the offeror that his offer has been accepted’”. [94]

12. [94]

    In like vein, in Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council, [95] a case concerning the contractual obligations, if any, arising out of an invitation to tender, Bingham LJ, as his Lordship then was, observed that “…contracts are not to be lightly implied [and that] [h]aving examined what the parties said and did, the court must be able to conclude with confidence both that the parties intended to create contractual relations and that the agreement was to the effect contended for [and also] in most cases, be able to answer the question … ‘What was the mechanism for offer and acceptance?’”.

13. [95]

    Modahl, Laidlaw and Blackpool all concerned the question whether there was an implied contract to enter into legal relations. CSR accepted that a like necessity principle such as expressed in those authorities applies when a court is asked to consider whether there is an available inference that the parties intended an expired contract to continue to govern their relationship.

14. [96]

    Brambles, of course, was such a case. Each party contends that Brambles supports their contention as to the continuation or not of the Agreement. The primary judge sufficiently set out the facts in Brambles. [96] It should also be noted that the indemnity provision Brambles sought to enforce against Andar was cll 8.2.2 and 8.2.3 of the expired agreement. [97] It will be recalled that in Brambles, the relevant contract expired on 4 April 1993.

15. [97]

    In Brambles, the Court agreed with the primary judge’s reasons for finding that the indemnity provision remained in force and binding, such that Brambles could enforce it against Andar. His Honour had said:

16. [98]

    However, out of deference to counsel for Andar, the Court amplified their reasons. It might be noted in this respect that in support of his submissions that Brambles had not discharged its onus to prove by evidence that the agreement, including the clauses relied upon, was in existence at the date Mr Wail was injured, counsel for Andar had argued that “[t]he … inference that the agreement was in force three months after it had ended was not open, especially in the light of the draconian clause 8. Some evidence was needed that Andar had agreed to the continuation of liability under clause 8. No doubt some informal arrangement was in force, but it did not include clause 8.” [99]

17. [99]

    The Court was of the view that both parties to the appeal sought to extract from the evidence and course of proceedings, concessions and implications which could not be sustained. [100] In the court’s view, the evidence was “relatively meagre” [101] and “fairly sparse”. [102] Their Honours summarised it as follows:

18. [100]

    Recognising that the question whether an implied or tacit agreement to continue dealing on the same terms, save that the agreement should be terminable on reasonable notice, is to be inferred was, as the authorities and treatises made clear, an evidentiary or factual question. On the facts set out (at [56]) the Court considered such an inference should be drawn in Brambles’ favour. In their Honours’ view:

19. [101]

    In so finding, as I have said, the Court relied upon the passage in the 28th edition of Chitty, which was relevantly in like terms to the passages from the 32nd edition of Chitty and Corbin set out above. Their Honours also referred to several authorities they considered illustrative of the application of the principle of implied contract in the context of a continuing relationship.

20. [102]

    First, in Bullock v Wimmera Fellmongery and Woolscouring Co Ltd, [105] the appellant had been appointed manager and accountant of a company at a certain annual salary with a house rent-free, the appointment being expressed to be for one year only, “then to be at the option of the shareholders” of the company. The engagement ran on without interruption for some 15 months, when the appellant was given notice of termination. He brought an action contending that the employment contract continued such that his dismissal without reasonable notice was wrongful. The judge directed the jury, as a matter of law, to find a verdict for the defendants on all the issues. In holding that there should be a new trial, Stawell CJ said that there was a “tacit consent, on both sides, to a continuance of the engagement; the defendants accepted the plaintiff’s continued services without stating their intentions as they ought to have done, if they intended either to vary the terms or not to pay for the services.” [106] Accordingly, “the defendants not having altered the terms, the plaintiff [had] just grounds for maintaining that the terms of his engagement continued as before.” [107] Barry J’s reasons were to like effect. [108] It is apparent there was no express reference to the terms of the plaintiff’s engagement during the 3 months following the expiry of the 12 month term.

21. [103]

    Secondly, their Honours referred to Cawsand Pty Ltd v Normans Wines Pty Ltd, [109] which concerned an expired written agreement for the sole distribution of wine. The agreement was entered into in August 1984 between Elders IXL and Normans Wines Pty Ltd (1984 Agreement) for a three year period expiring in August 1987. It was short and did not contain all the terms agreed upon. To the extent the court referred to it in Brambles, their Honours observed that “[i]n those and other special circumstances of the case Brooking J declined to infer agreement as to a term for a particular period of notice of termination in the implied replacement agreement.” The Court regarded it as significant for their purposes, that his Honour distinguished the case “of a lengthy written agreement containing numerous terms governing the relationship between the parties, including one concerning notice, where the parties have so acted as to lead to the inference that notwithstanding the expiration of the term they regard the provisions of the agreement as still governing their relationship.” [110]

22. [104]

    It should be noted, as this does not, with respect, clearly appear from the Court’s consideration of Cawsand in Brambles, that Brooking J inferred from the course of dealing between the parties after the expiration of the term of the agreement that the parties agreed Elders should continue to act as sole distributor of Normans’ wines notwithstanding the expiration of the term of the 1984 Agreement. This was based on evidence that “after the expiration of the three year term of the written agreement the business relations between Elders and Normans continued as before”. [111] As might be expected in an agreement involving the distribution of wine, there was evidence of Elders having devised a marketing plan in respect of Normans’ wines for 1988/89, of Elders reporting to Normans on 1988 actual sales compared with budgeted sales, and documents showing a degree of forward planning. [112] By August 1988 Normans’ wines had become one of the biggest contributors of revenue and profit to Elders. [113] At the beginning of March 1988 an arrangement was being made between Elders and Normans which contemplated a three year agreement for the supply of wine to Moonee Valley Racing Club. [114]

23. [105]

    In such circumstances, Brooking J held that, notwithstanding the expiry of the written 1984 Agreement, there was a distribution agreement of indefinite duration. [115] The critical question was how it was terminable in the absence of breach. [116] It was in that context that Brooking J made the observations distinguishing the case he was considering from one concerning a lengthy written agreement to which the Court referred in Brambles. [117] It should also be noted, that the 1984 Agreement had contained a provision “that should either party wish to terminate the agreement three months' notice must be given in writing prior to 14 August 1987”. [118] However, in circumstances where “the agreement of the parties was as to a number of its terms to be derived always from the course of dealing, which indeed had begun before the written agreement came into existence” and “the provision for three months’ notice [in the 1984 Agreement] had been agreed upon … a considerable time before, and in different circumstances”, his Honour was not prepared to infer that that term continued to apply. [119] Rather, his Honour held that having regard to the evidence as a whole, the proper view, was that the distribution agreement was terminable by either party by the giving of reasonable notice. [120]

24. [106]

    In Brambles, the Court also considered several North American cases from which their Honours drew the following propositions. [121] First, referring to Steed v Busby: [122]

25. [107]

    Secondly, in the New York Telephone Co case, referred to in Steed v Busby, Lehman CJ, speaking for the Court of Appeals of New York, stated:

26. [108]

    Thirdly, in Cinefot International Corp v Hudson Photographic Industries:

27. [109]

    Before leaving Brambles, I note that there was no suggestion in the consideration of the proved facts, and it is apparent that their Honours rejected the submission of counsel for Andar to the effect that there had to be, any express reference by the parties during the continued relationship to the indemnity provision (cl 8.2), yet the court inferred it continued to bind the parties.

28. [110]

    As I have noted, Brambles went to the High Court by grant of special leave where the majority held in Andar that, as a matter of construction, cl 8.2 did not oblige Andar to indemnify Brambles in respect of its liability arising as a result of Mr Wail’s injury so that it was unnecessary to consider the extent to which the terms of the agreement continued in force after its formal expiry on 4 April 1993. [125] As I have also said, Callinan J dissented. In his Honour’s view, and by parity of reasoning with Brogden, [126] the course of dealings between Brambles and Andar was such that the parties “should be held to be in a similar situation, that is, of being bound by the terms of the written contract (except as to duration).” [127]

29. [111]

    Brambles is not authority for the proposition that the terms of a detailed written agreement for a fixed term continue to govern the parties where they continue dealing with each other after the fixed term has expired. Rather, it is authority for the proposition that it is open to a court to draw the relevant inference. [128]

30. [112]

    Two authorities in which Brambles was applied, in the context of an implied continuing contract, should be mentioned.

31. [113]

    In Viva Olives Pty Ltd v Origin Olives Australasia Pty Ltd, [129] the defendant served a statutory demand on the plaintiff. It sought to resist the proposition that there was a genuine dispute between the parties about the existence or amount of the debt in the statutory demand pursuant to s 459H(1)(a) of the Corporations Act 2001 (Cth). It contended that the plaintiff was required to pay the licence fees the subject of its statutory demand in circumstances where the original agreement to do so had expired, and, although the plaintiff had continued thereafter to use the defendant’s trademark, it had not paid the defendant the licence fees prescribed under the agreement. The defendant submitted that on the expiry of the agreement, a new agreement came into existence on the same terms as had applied in the final year of the old agreement, including the plaintiff’s obligation to pay the defendant an annual licence fee. It sought to resist the proposition that no such agreement could be implied because the plaintiff had been delinquent as to payment of the licence fees prior to expiration of the agreement.

32. [114]

    Perram J rejected that submission. His Honour held that what was required in the case of an implied contract was “conduct by the parties as if the contract remained on foot”, meaning “conduct which is the same as if the contract was still binding”, not merely conduct both before and after the expiry of the agreement which is the same. [130]

33. [115]

    In Optus Networks Pty Ltd v Gilsan (International) Limited, [131] three telephone carriers, AAT, Optus and TVL, entered into a Tripartite Agreement in 1996 with Gilsan (International) Limited (Gilsan), which provided the total rate per minute for the telephone carriers to carry entertainment traffic provided by Gilsan and how the rate would be divided between them. Following its expiration on 31 December 1998, the parties executed a series of successive annual confidential agreements for each of the years 1998 – 2001 providing different rates, as between Optus and AAT, to those provided in the Tripartite Agreement. In each year, although the agreement was expressed to be effective from 1 January of the relevant year (effective date), it was not made until several months after the effective date.

34. [116]

    In those circumstances, one issue was whether business between the parties in the months of each year prior to entry into the agreement for that year was on the terms of the confidential agreement for the previous year or reverted to the rates provided in the Tripartite Agreement. Hodgson JA described the latter rates as “plainly far removed from those indicated by current commercial reality”. [132]

35. [117]

    Applying Brambles and Andar, [133] and “having regard to the commercial reality of the circumstances”, Hodgson JA found that the intention manifested by ATT and Optus in continuing to transact business in the months of each year before the confidential agreement was entered into for that year, was that there was an implied agreement between the two parties that the confidential agreement of the previous year should continue until a new agreement was made, rather than manifesting an intention to return to the, by then, uncommercial, rates provided under the Tripartite Agreement. [134] As is apparent, the implied agreement Hodgson JA discerned, was inferred in circumstances where there was no express reference by the parties to the continuation of the previous year’s rates pending a new agreement.

36. [118]

    The primary judge distinguished Optus on the basis that the present case did not involve the issue whether terms as to payment continued to apply between the parties, but, rather the more difficult issue “whether the indemnities in the Agreement continued to apply, in circumstances where there [was] no particular reason to suppose that they were necessary to the continuing legal relationship between the parties, including the continuing supply of labour by Adecco Australia to CSR for its concrete plants.” [135]

Implied contract: determination

1. [119]

   In my view, the primary judge erred in holding that after 31 July 2002 (and up to, at least, 31 March 2003), the commercial relationship between CSR and Adecco Australia changed such that their “governing commercial terms” did not include the indemnity in cl 23.2 of the Agreement. Rather, in my view, as CSR submitted, her Honour ought to have inferred from the parties’ conduct that the parties agreed to extend the Agreement pending further agreement. [136]

2. [120]

   As is apparent from the authorities to which I have referred, and as both parties accepted, the question whether an implied contract following upon the expiry of an express fixed term contract may be inferred turns on an objective inquiry. This was the approach the Court of Appeal took in Brambles where their Honours clearly adopted the objective formulation of the test from Steed v Busby to which they referred. [137] Adapting the language of McHugh JA in Empirnall, [138] the ultimate issue is whether a reasonable bystander would regard the conduct of the parties, including their silence, as signalling to the other party that their relationship continued on the terms of the expired contract. What was “required [was] conduct by the parties as if the contract remained on foot”. [139] Whether the inference will be drawn is “an evidentiary or factual question.” [140]

3. [121]

   Adecco Australia submitted in reliance, it contended, upon Brambles, that before an inference of an implied continuing contract could be drawn, the evidence had to conform to the measure of exactitude it submitted was critical to the Victorian Court of Appeal’s determination. It drew attention to what it submitted were passages in that court’s reasons it argued were consistent with that submission as follows:

4. [122]

   I do not accept, in this context, Adecco Australia’s submission that Brambles mandates a finding that before an inference of an implied contract can be drawn, there must be evidence of exactitude in performing the expired contact in the post-expiry conduct of the parties. The findings in Brambles to which Adecco Australia drew attention were particular to that case. Each case will turn on its own facts.

5. [123]

   As I have said, the Court in Brambles described the evidence as “meagre” and “sparse”, but nevertheless was prepared to uphold the primary judge’s finding that there was an implied contract. In particular, and at the risk of repetition, it is clear there was no evidence the parties ever turned their minds to the continuing application of the indemnity provision, yet the Court held it continued to bind the parties. I infer the Court drew this conclusion because, assessed objectively, the evidence that the parties in Brambles conducted themselves on a basis which recognised the central components of the agreement (delivery of services and payment) supported their conclusion that “the parties proceeded as though still governed by the terms of the original agreement”. [145] It was unnecessary that there be express reference in this assessment to each term of the expired contract. The parties’ intentions that their relationship continued on the terms of the expired agreement could be inferred as much by silence, as by performance. Similarly, in Modahl, there was a “paucity” of evidence, yet the majority in the Court of Appeal was able to conclude there was an implied contract.

6. [124]

   The primary judge, with respect, failed to apply the objective, or reasonable bystander, test. Rather, it is apparent that her Honour was of the view that, in order to infer there was an implied contract under which the Agreement was extended, it was necessary to identify communications between the parties “confirm[ing] the terms of their continuing relationship pending further agreement”. [146] To the extent this statement implies the parties had to refer expressly to the contract continuing, it flies in the face, with respect, of the notion of an implied contract.

7. [125]

   What CSR had to establish was that the parties continued to act as though the Agreement still bound them after the term expired. In such a case the Court may infer that the parties have agreed to renew the express contract for another term or the Court may infer an implied contract drawing on some of the terms of the earlier contract, but omitting others. As the Supreme Court of Arkansas held in Steed v Busby, [147] “[w]hen an agreement expires by its own terms, if without more the parties continue to perform as before, an implication arises that they have mutually assented to a new contract containing the same provisions as the old…”. [148]

8. [126]

   As CSR submitted, the parties to the Agreement were “sizeable and sophisticated entities” which contracted for the supply to CSR by Adecco Australia of labour for a substantial return, including, in the 9 months following the expiry of the Agreement, an amount of $13.285 million. The primary judge recognised the value of the Agreement to Adecco Australia when her Honour found that there was a commercial benefit to it in continuing to provide labour hire services after the expiry of the Agreement, notwithstanding the lack of express extension by CSR, as it would thereby circumvent the public tendering process that would be likely to apply if there was a fresh contract. [149] Such a finding was, in my view, a strong foundation for the inference that, in such circumstances, Adecco Australia would be concerned not to “rock the boat” by departing from the terms of the Agreement in continuing to provide its services.

9. [127]

   It was common ground at trial that CSR continued to place orders with Adecco Australia after 31 July 2002, such orders continuing beyond March 2003. The primary judge held that “Adecco Australia continued to supply labour to CSR and was paid for that labour on the same terms as had applied [under the Agreement], at least from February 2002.” [150] In addition, as her Honour also held, CSR continued to pay Adecco Australia according to the same terms and conditions as in the Agreement until October 2002. [151]

10. [128]

    In addition, Mr Frewin was clearly employed by Adecco Industrial pursuant to the Agreement from September 2001 – December 2004, his labour was supplied by Adecco Australia which invoiced CSR for his services until late November 2004. Although, as in Brambles and other cases concerning implied contract following expiry of an agreement, the evidence, at least post the end of January 2003 might be regarded as “meagre” or “sparse”, in my view it afforded a sufficient foundation, for a finding that the relationship between the parties continued on the terms of the Agreement.

11. [129]

    The primary judge held that, notwithstanding the fact that CSR continued to pay Adecco Australia according to the same terms and conditions as in the Agreement until October 2002, that fact did not permit a distinction to be drawn between the three possibilities concerning the relationship between the parties after the expiry of the Agreement. [152]

12. [130]

    In so doing, her Honour failed, with respect in my view, to have regard to the commercial realities of the parties’ relationship to which I have already referred. The parties’ conduct was consistent with them acting as though the Agreement still bound them. It does not conform with commercial reality, in my view, to suggest that after the Agreement expired, notwithstanding that labour continued to be supplied and paid for, and Adecco Australia was anxious to continue to provide its services in order to circumvent a public tendering process that would be likely to apply if there was a fresh contract, no inference was available that the terms of the Agreement continued to apply to the relationship. It is also inconsistent with the size of the parties’ operations and the complex agreement under which they had operated to suggest that an equally available inference was that the parties’ relationship after July 2002 continued on a quantum meruit basis or that they operated on “terms related to payment for labour hire services, but did not include indemnities.” [153]

13. [131]

    Neither the primary judge, with respect, nor Adecco Australia, in my view, identified any conduct of the parties which supported theoretical possibilities (2) and (3), each of which involved a departure from the terms of the Agreement. In my view, the alternative possibilities would have required evidence of conduct indicating the parties intended to so act. Neither the primary judge nor Adecco Australia pointed to any such conduct.

14. [132]

    As CSR submitted, it must objectively be doubted “whether it would ever have occurred to the parties that their (ongoing) arrangements were governed other than by the terms of the (original) written contract (save as to term)’”. [154] Accepting that the correct test is not the parties’ subjective assessment of their relationship, but, rather, that of the reasonable bystander, in my view, the latter person would be of the same view.

15. [133]

    In my view, Brambles was not relevantly distinguishable. The primary judge’s first reason for distinguishing Brambles was because in the latter case, there was no evidence there were any negotiations for a new agreement between the parties during the relevant period or that any extensions had been expressly agreed. [155] This basis of distinction appears at odds with her Honour’s subsequent finding that it was “not … determinative, one way or the other, that the parties were endeavouring to negotiate a new agreement which was different from the Agreement”. [156] Nothing in the negotiations, in my view, indicated that, pending any new agreement, the parties did not consider that they were not bound by the expired Agreement. Rather, it can be inferred from their silence and their continued course of dealings that they were conducting their relationship in accordance with its terms.

16. [134]

    The primary judge was also concerned that the documentary chain of the negotiations after 31 July 2002, “refrained from expressly addressing the status of any further extension”. [157] It is apparent from her Honour’s summary of the negotiations towards a new agreement, that both parties were considering changes in any new express contractual relationship. It is hardly surprising in the circumstances that they did not advert to their existing Agreement. Once again, if anything, in my view, their silence in this respect speaks in favour of them considering the Agreement continued to bind them. [158]

17. [135]

    I also, with respect, do not accept the distinction the primary judge drew based on the proposition that in Brambles, the Victorian Court of Appeal found “the agreement was performed in exactly the same way and on exactly the same basis, notwithstanding its expiry.” [159] When one has regard to the Court’s findings, it is apparent that it was speaking of only two matters: Andar “continu[ing] to conduct the linen delivery and collection service in exactly the same manner as it had done between April 1990 and April 1993” [160] and invoicing Brambles for those services and Brambles paying the invoices. [161] Other than reference to those basic propositions, each of which was either admitted or proved in this case (as to the continuation of supply, post-March 2003 and as to payment, at least until the end of January 2003), neither the trial judge in Brambles, nor the Court of Appeal addressed any other aspect of the expired agreement which continued to be performed.

18. [136]

    Thirdly, the primary judge distinguished Brambles on the basis that, in this case, the evidence did not extend beyond October 2002. [162] That is not, with respect, the case. First, there was the evidence that CSR paid Adecco Australia approximately $13 million for the supply of labour including in relation to the Batemans Bay plant, in the period April 2002 – January 2003. Secondly, there was evidence after October 2002 that labour hire services continued to be provided by Adecco Australia, and payments continued to be made by CSR.

19. [137]

    Although this was not raised in argument, in my view, it is not apparent that in order for an implied contract to continue or a contractual relationship be inferred, it is necessary that it be established that the parties continued to conduct themselves as if bound by the agreement for its entire term. Both the passages from Chitty and Corbin set out above speak of continuing to act as if still bound by the contract leading to an inference of an agreed renewal on the terms, and for the term, of the expired agreement. It may be, for example, that it is sufficient to call evidence that the parties so acted for a substantial period in order to found the inference. In this case one might think Ms Miller’s evidence which took the position to October 2002 was sufficient. However, the point not having been raised, I do not deal with the issue on that basis.

20. [138]

    I also do not accept the primary judge’s doubt as to “whether the indemnities in the Agreement continued to apply, in circumstances where there [was] no particular reason to suppose that they were necessary to the continuing legal relationship between the parties.” [163] In my view, with respect, that statement did not recognise the commercial relationship between the parties and the risk allocation they agreed upon as reflected not least in the indemnities. Her Honour’s statement also did not take into account the fact that Adecco Australia bore responsibility for a number of matters under the Agreement being industrial relations and industrial actions; [164] ensuring all staff complied with all Occupational Health, Safety and Welfare laws; [165] and effecting, at its cost, insurance in connection with the performance of its obligations under the Agreement, including Public Liability Insurance and Workers Compensation Insurance. [166] Such matters indicated that Adecco Australia was to carry the financial risk of the labour it supplied.

21. [139]

    Further, CSR submitted that, contrary to the primary judge’s conclusion that there was “no evidence” before the Court to base an inference that during the 5 month period of 1 November 2002 to 31 March 2003 the parties objectively agreed to continue to be bound by their prior Agreement, [167] (save possibly as to its term) sufficient material was before the Court. By its amended defence to the first cross-claim, Adecco Australia admitted that it, “supplied staff to CSR at various times after 30 June 2002.” As regards the period leading up to March 2003, the primary judge accepted that there was evidence that between April 2002 and January 2003 CSR had paid Adecco Australia $13,285,374 for casual labour hire. [168] Thereafter, Mr Frewin’s wage records that were in evidence confirmed that Adecco Australia continued to provide supply labour hire services to Holcim, such hire encompassing Mr Frewin himself, after the March 2003 demerger and up until November 2004. [169] CSR noted that no evidence was adduced, or submission made, to the effect that the payment rates were altered in the interim. CSR argued that absent any documented agreement, it was difficult to know what other evidence it could have adduced.

22. [140]

    CSR submitted that the evidence pointed to only one inference: that the Agreement continued on the same terms and conditions (other than as to duration) up until at least March 2003, which was sufficient to cover the period during which Mr Frewin’s cause of action accrued.

23. [141]

    The primary judge was not prepared to draw the inference for which CSR contended, although her Honour appears to have accepted that she could take into account the evidence of the supply of labour and payment at least until the end of January 2003 as to the likelihood of what occurred in the remaining two months of the critical period, in light of the following statement in Minister for Immigration & Ethnic Affairs v Guo:

24. [142]

    Her Honour refused to do so because she said, “CSR bore the onus of proving, if it contended it to be the case, that the performance of the arrangement between the parties continued in the same way in the period from 31 July 2002 until March 2003 when the plaintiff stopped driving international truck 619. This was a question of actual fact and not one of hypothetical fact and could, therefore, have been the subject of evidence.” [171] Her Honour said she was “not prepared to draw the inference that the situation deposed to by Ms Miller continued after her departure, since there is no evidence to base such an inference.” [172]

25. [143]

    Adecco Australia submits that this Court should draw a Jones v Dunkel [173] inference that the evidence of relevant CSR employees as to the state of affairs between the parties between October 2002 and March 2003 would not have assisted its case. [174] The primary judge did not expressly draw such an inference.

26. [144]

    The rule in Jones v Dunkel is that the “unexplained failure by a party … to call witnesses … may (not must) in appropriate circumstances lead to an inference that the uncalled evidence … would not have assisted that party’s case.” [175] The circumstances for drawing a Jones v Dunkel inference are found where the uncalled witness is “a person presumably able to put the true complexion on the facts relied on [by a party] as the ground” for any inference favourable to the party. [176] A Jones v Dunkel inference is not mandatory. [177] “[G]enerally speaking, [such an inference] only become[s] material where the balance of the evidentiary record is equivocal.” [178]

27. [145]

    Most Jones v Dunkel cases tend to be about a party’s failure to call an identified person as a witness. This is no doubt because the court needs to be able to evaluate the possible evidence that person may have given, as well as determine whether the witness was not called because the party expected to call him feared to do so as part of the exercise of determining whether the relevant inference is open. [179] That is not this case. Adecco Australia does not identify any particular person CSR ought to have called. Rather it seeks to have the Court draw an inference adverse to CSR, one it might be noted the primary judge did not draw, by reference to people described as “the relevant CSR employees”.

28. [146]

    It is unnecessary to consider whether the Court can draw a Jones v Dunkel inference in such circumstances, that is to say, by reference to a potential class of witnesses, rather than an identified person. It is sufficient to say that, in my view, for the reasons I have explained elsewhere, the evidence on which CSR relied to found the implied contract inference was not equivocal, nor was there an “an unexplained failure to call evidence”. No witness could have given evidence about his or her subjective belief about the relationship between the parties. Contrary to the primary judge’s statement that CSR did not call evidence “that the performance of the arrangement between the parties continued in the same way in the period from 31 July 2002 until March 2003”, [180] there was evidence that for a substantial, if not all, of the critical period, the parties behaved as if the Agreement remained on foot.

29. [147]

    Adecco Australia also submitted that there was considerable evidence that Adecco Australia “did not continue to supply the services in exactly the same manner” [Emphasis in submissions.] All but two of the matters to which it pointed concerned the parties’ negotiations towards a new agreement. Nothing in the matters to which it referred in this respect cast any light on how the parties were then conducting their relationship of supply of, and payment for, casual labour, save to the extent that one might infer from their silence, as I have said, that their relationship in that respect continued notwithstanding its formal expiry and the negotiations for a new agreement.

30. [148]

    The other two matters concerned first, CSR rearranging its intra-company structure to which I earlier referred. [181] Adecco Australia’s submissions concerning this refer to two dates. The first in time was February 2002 after which it contended CSR was no longer a contracting party, apparently because of the incorporation of Readymix, CSR’s subsidiary. [182] The primary judge rejected a submission to this effect when her Honour held that, in the event she was wrong on the principal issue of an implied contract, the parties could not “have intended to exclude from the operation of the indemnity claims against wholly owned subsidiaries of CSR incorporated after the date of the Agreement”. [183] Adecco Australia had not challenged that finding with which I agree and which is sufficient to deal with the first date. The second date Adecco Australia identified was September 2002, referring to part of Ms Miller’s statement that that was the date she became aware of the restructure proposal. No restructure took effect at that date. Rather, the restructure took effect as at 28 March 2003, a time sufficient to capture the critical period as it coincided with when Mr Frewin ceased to use the unsafe truck.

31. [149]

    The second matter concerned CSR’s failure, according to Adecco Australia, to adduce evidence of a single “Order” as defined in the Agreement before or after the expiry of the Agreement. Accordingly Adecco Australia submitted, the primary judge was not in a position to reach any conclusions about whether the procedures remained the same in that respect. Two points may be made about that submission. First, as Perram J held in Viva Olives, what was required in the case of an implied contract was “conduct by the parties as if the contract remained on foot”, meaning “conduct which is the same as if the contract was still binding”, not merely conduct both before and after the expiry of the agreement which is the same.” [184] Secondly, this point also arises in ground 2(b) of CSR’s notice of appeal. For the reasons I have set out when dealing with that ground of appeal, the primary judge ought to have inferred that Orders were issued to procure Mr Frewin and other casual employees’ labour.

32. [150]

    In my view, the course of conduct between CSR and Adecco Australia in the relevant period supported the proposition that the parties continued to act as if bound by the Agreement, including cl 23.2. I cannot discern the basis upon which the primary judge found that after 31 July 2002 they intended to conduct their relationship “on a more basic footing”, involving no more than payment of the amounts stipulated in the Agreement, in return for labour supply, but in effect disregarding or leaving to future agreements the “finer points of insurance and indemnity.” [185] As CSR contended, this was, in effect, an unrealistic conclusion suggesting the parties intended to continue doing business in a state of uncertainty, a conclusion inconsistent with the commercial realities of the parties’ relationship.

33. [151]

    Finally, I note that in the course of argument Adecco Australia accepted that the inference of an implied contract engaging all the terms of the expired Agreement could be drawn if there was no evidence of anyone turning their mind to whether the contract had expired or not. For the reasons I have given, the fact the parties started negotiating for a new agreement, without referring to the nature of the agreement under which their relationship continued, supports the inference for which CSR contended.

34. [152]

    I would allow CSR’s first ground of appeal.

35. [153]

    The remaining grounds of appeal and the issues arising on the notice of contention turn on the premise that the implied contract governed the parties’ relationship during the critical period on the terms in the expired Agreement, save as to notice. Although the contract is implied, the issues raised turn on the construction of the terms of the written Agreement in light of the principles of contractual construction applying to such documents.

36. [154]

    The essential principles were stated in the joint judgment in Electricity Generation Corporation v Woodside Energy Ltd: [186]

37. [155]

    Applying the principle of construction which avoids “making commercial nonsense or working commercial inconvenience” is “a requirement not to approach words in a business contract pedantically or in a manner prone to defeat the evident commercial purpose. They should be read ‘fairly and broadly, without [the court] being too astute or subtle in finding defects.’” [187]

38. [156]

    The words of the agreement are not be construed in a vacuum. The contract must be construed as a whole. [188] In the case of a commercial contract where the words are ambiguous or susceptible of more than one meaning, the court should understand its commercial purpose (the purpose of reasonable persons in the position of CSR and Adecco Australia are relevant) and, to that end, may have regard to “the genesis of the transaction, the background, the context, [and] the market in which the parties are operating” as known to both parties. [189] The construction placed upon a disputed provision must be consistent with the commercial object of the agreement. [190]

39. [157]

    As the primary judge accepted, a court has power to “make informal rectification of documents that contain obvious errors”. [191] The learned authors of Cheshire and Fifoot refer to this power as “simply the use of the objective test in action”, “so as to give effect to the parties’ apparent intentions”. [192]

40. [158]

    As “a contract can have but one legal meaning”, ultimately, the “task of identifying the single legal meaning of the [indemnity] clause is the task of identifying the imputed intention of the parties, by reference to the contractual text construed in light of its context and purpose”. [193]

41. [159]

    Mention should also be made of the principles of construction applicable to contractual indemnities.

42. [160]

    At law, as in equity, the traditional view is that the liability of the surety is strictissimi juris, that ambiguous contractual provisions should be construed in favour of the surety and that doubt as to the status of a provision in a guarantee should therefore be resolved in favour of the surety. [194] In Andar, the Court described Ankar as the starting-point for the principles of construction applicable to contractual indemnities and re-affirmed the doctrine of strictissimi juris. [195] The Court reaffirmed these authorities in Bofinger v Kingsway Group Ltd, adding that it was “implicit in [the principle of strictissimi juris] that the doubt may arise not only from the uncertain meaning of a particular expression but from its apparent width of possible application.” [196]

43. [161]

    In Andar the joint judgment recognised that guarantee provisions such as those considered in Ankar and indemnity clauses such as those at issue in Andar differed in form and effect, not least because the latter are not subject to s 4 of the Statute of Frauds 1677 (UK). Nevertheless, their Honours held that both are designed to satisfy a liability owed by someone other than the guarantor or indemnifier to a third person, such that the principles adopted in Ankar, and applied in Chan v Cresdon Pty Ltd, [197] are relevant to the construction of indemnity clauses. [198] Their Honours also recognised consistently with Mason CJ’s statement in Sunbird Plaza Pty Ltd v Maloney, [199] that an indemnity clause must be construed in the context of the contract in which it appears. [200]

44. [162]

    In Bofinger, the Court described an indemnity, in its widest sense, as including a contract obliging one person to make good the loss suffered by another. [201] The proposition was illustrated in Halsbury’s Laws of England, [202] as follows: “[a]n indemnity usually operates ‘where one contracting party, A, may become liable to a third party, X, and the other contracting party, B, promises to indemnify A’.”

45. [163]

    I addressed the relevance of a contextual approach to the construction of guarantees and the application of the strictissimi juris principle of construction in Zhang v BM Sydney Building Materials Pty Ltd, [203] as follows:

46. [164]

    Finally, I would observe that, as is the case of using definitions in statutory interpretation, [207] the words of definition in the Agreement have to be read into the operative text, save where the context or intent derived from the document construed as a whole indicates a contrary intention. [208] It is erroneous to construe the definition independently of the substantive enactment. [209]

Temporary staff

1. [165]

   The first issue, raised by ground 2(a) of the notice of appeal is whether the primary judge erred in finding that cl 23.2 did not apply because Mr Frewin was employed by Adecco Industrial, not Adecco Australia.

2. [166]

   CSR accepted that, although the Agreement was with Adecco Australia, by reason of the way in which the Adecco Group organised its affairs, and as the primary judge found, Adecco Industrial employed Mr Frewin at all material times. [210]

3. [167]

   CSR submitted that the words of cl 23.2.1, read with the definition of “Temporary Staff” supported a broad meaning of the clause. In particular it submitted the primary judge should have construed the expression “employed by” in the definition to have the meaning “use the services of”, rather than as referring to the employment relationship. On that approach, it argued Mr Frewin fell within the meaning of “Temporary Staff” because he was a person Adecco Australia “used” or “used the services of” and Mr Frewin was “employed by” CSR, again in the sense of “used”, for the purposes of cl 23.2.1. CSR submitted that the phrase “to work in an Assignment for CSR” qualified the expression “employed by” in the definitional phrase, “an individual employed by the Supplier”.

4. [168]

   CSR contended that further textual support for a broad meaning of “employed by” in the definition could be found in cl 22, which refers to “persons employed by the Supplier under this Agreement”. CSR argued that this meant persons not actually employed by Adecco Australia, but, rather, taken to be employed, in the sense again of “used” by Adecco Australia for the purposes of the Agreement.

5. [169]

   CSR submitted that the broad construction it advanced was consistent with authorities dealing with labour hire in which employees in the position of Mr Frewin may, depending on the extent of control vested in, or exerted by, the third party by the labour hire agreement, be found to be employees pro hac vice of the entity that has hired labour (CSR) from a third party (Adecco Australia or Adecco Industrial). It pointed out that Mr Frewin’s evidence was that, despite being employed by Adecco Industrial, while at CSR’s Batemans Bay plant, he acted under the directions of CSR’s employees.

6. [170]

   CSR submitted that the primary judge’s application of the narrow use of “employed” created an evident commercial absurdity. It drew attention to cl 14.1 of the Agreement pursuant to which Adecco Australia was “responsible at all times for establishing and maintaining its relationship as employer with its Temporary Staff on Assignment to CSR.” It argued that on her Honour’s construction, Adecco Australia could circumvent the indemnity provision because persons in Mr Frewin’s position would be excluded from the definition of “Temporary Staff” simply by reason of an administrative arrangement within the Adecco Group whereby Adecco Industrial paid Mr Frewin’s wages and entitlements, and thus employed him in the narrow sense. This would occur without notice to CSR and in express breach of cl 21 of the Agreement which prohibited Adecco Australia from sub-contracting the whole or any part of the supply of Temporary Staff provided under the Agreement without CSR’s prior written consent.

7. [171]

   Next, CSR submitted that the primary judge’s construction of the definition of “Temporary Staff” was apt to cause commercial inconvenience. This was because it inverted the express commercial or risk allocation in the Agreement. It argued that the obvious intended commercial outcome of the Agreement was for Adecco Australia to supply staff to CSR for a fee on terms that regulated that supply (including terms as to insurance and indemnities). It argued that the primary judge’s construction of cl 23.2 allowed the Agreement to be retrospectively re-written by dint of the Adecco Group’s internal administrative arrangements. It submitted that this approach to construing the definition was at odds with the principles of contractual construction, to which I have referred, and created evident commercial inconvenience.

8. [172]

   Finally, CSR submitted that the narrow construction the primary judge preferred would enable a labour hirer in the position of Adecco Australia to unilaterally arrange its internal affairs so as to avoid indemnity and other clauses in the written labour hire agreement, without notice of that arrangement being given to the Principal, and in breach of the underlying agreement, by an administrative device of sourcing workers from a related entity that held the direct contract of employment with him or her.

9. [173]

   Adecco Australia emphasised that “Temporary Staff” was defined in the Agreement “to mean (not ‘include’) ‘an individual employed by the Supplier to work in an Assignment for CSR’”, [emphasis in original] that “Supplier” was defined to mean “Adecco Australia” and that it was common ground that Mr Frewin’s employer at all times was Adecco Industrial, not Adecco Australia.

10. [174]

    Accordingly, Adecco Australia submitted the primary judge was correct to reject CSR’s proposed broad construction of the words “employed by” in the definition to include workers supplied by Adecco Australia and used in CSR’s operations, even if they were not employees of Adecco Australia. It argued that the following matters supported the primary judge’s finding on this issue.

11. [175]

    Adecco Australia submitted that on CSR’s submissions the definition of “Temporary Staff” was ambiguous, and the primary judge correctly held that the indemnity clause should be construed strictly against CSR.

12. [176]

    Secondly, the primary judge was correct in holding that there was support in other parts of the Agreement for a narrow construction of “employed by”. In particular, cl 14.1 was a powerful indication that the parties intended the word “employed” to be used in a narrow sense.

13. [177]

    Thirdly the parties’ choice to define “The Supplier” narrowly to mean Adecco Australia was highly significant. If the parties had intended that workers who were not employees of Adecco Australia were to be included as “Temporary Staff”, the parties could have included affiliates of Adecco Australia in the definition of Adecco Australia, a technique Adecco Australia observed the parties adopted in their definition of “CSR”.

14. [178]

    In answer to CSR’s submission that the primary judge’s narrow construction of “employed by” should be rejected as inconsistent with the intended commercial outcome of the Agreement, Adecco Australia contends that one of the purposes of the Agreement was CSR’s desire to outsource its legal and statutory obligations as an employer with day-to-day control over workers at its sites, such as Mr Frewin. His legal employer, Adecco Industrial, had no role in supervising him. The evidence was that CSR inducted him to the site and directed him at work. Adecco Australia contended that the importance of the formal employment relationship was at the heart of the Agreement.

15. [179]

    Secondly, Adecco Australia submitted that it was not correct for CSR to claim that Adecco Australia never supplied “Temporary Staff” as defined if the narrow construction is adopted, as there was no evidence to support that conclusion.

16. [180]

    Finally, Adecco Australia contended that CSR’s reliance on cl 21 of the Agreement was misplaced. CSR had not alleged any breach of that clause below. Accordingly, Adecco Australia had no opportunity to call any evidence addressing whether consent was obtained as cl 21 of the Agreement required. It submitted that it was not open to CSR to raise this point for the first time on appeal.

17. [181]

    In my view, when the definition of “Temporary Staff” is read into the Agreement, it can be seen that Adecco Australia’s responsibility as specified in cl 3.1, was “to supply [an individual employed by the Supplier to work in an Assignment for CSR] at the Places of Delivery in accordance with this Agreement.” CSR’s obligation, in turn, pursuant to cl 3.2, again reading in the definition, was to “place Orders with the Supplier for the provision of [an individual employed by the Supplier to work in an Assignment for CSR] at the Places of Delivery in accordance with this Agreement.”

18. [182]

    The parties’ obligations, as so understood, did not have as their object, the employment relationship between the “individual” and the Supplier but, rather, that the “Temporary Staff” be a person Adecco Australia made available to CSR, in the sense of to be used by CSR, to work in an Assignment. As CSR submitted, further support for the broad meaning of the words “employed by” in the definition of “Temporary Staff” can be found in cl 22 of the Agreement referring to “persons employed by [Adecco Australia] under this Agreement ….”. This suggests, again, consistently with cl 3.1, the notion of utilisation of the people referred to.

19. [183]

    Such an interpretation of the Agreement is, in my view, a businesslike one. A reasonable person, in my view, would have understood the words “Temporary Staff” where they appear in those provisions dealing with the procurement of labour under the Agreement for the express purposes of working on Assignments for CSR, to refer to those persons Adecco Australia provided for that purpose.

20. [184]

    Similarly, when one comes to the indemnity provision, one would understand the term “Temporary Staff” to refer to those persons Adecco Australia had supplied to undertake that work for CSR. It would not, in my view, be a sensible commercial, or consistent, construction of the Agreement to read those provisions, as Adecco Australia submits, as referring to the employment relationship.

21. [185]

    To so interpret “Temporary Staff” in cl 23.2 would make commercial nonsense of the indemnity provision which was clearly intended to oblige Adecco Australia to make good the loss suffered by CSR in relation to “any claim … for personal injury … arising out of or in connection with the performance of Assignment duties” made by those individuals Adecco Australia had supplied under the Agreement. The focus was on the nature of the activity the person had been carrying out.

22. [186]

    When cl 23.2 is construed in the context of the Agreement, it is plain, in my view, that it intended to apply to the persons Adecco Australia supplied to CSR to work in an Assignment for CSR.

23. [187]

    It was to Adecco Australia that CSR paid $13.285 million in the year April 2002 – January 2003, which almost covered the entirety of the critical period, for the supply of casual labour. The primary judge accepted that Mr Frewin, “appear[ed] to have been part of the parties’ commercial relationship.” [211]

24. [188]

    The evidence, in my view, was also consistent with him being Temporary Staff. He filled out a CSR employment application, and he signed a CSR acknowledgment of receipt of a CSR rule book. He was supplied by Adecco Australia, which invoiced CSR for his services. [212] He said he was “casually employed” at the Batemans Bay plant, in that he was “called to work on a day to day basis” at CSR’s direction. He worked at CSR premises in Batemans Bay, which was one of the locations included in CSR’s $13.285 million spend on casual labour in the period April 2002 – January 2003. He took direction from CSR employees. [213] He filled out time sheets which were sent to Adecco for payment.

25. [189]

    In my view, with respect, the primary judge’s construction was an unrealistic or unlikely construction of the indemnity provision which defeated its evident commercial purpose when construed in the context of the Agreement.

26. [190]

    Applying a commercial construction to the indemnity provision, it is apparent that it was intended to oblige Adecco Australia to make good loss suffered by CSR in relation to any claim by an individual employed by, in the sense of “used by”, Adecco Australia to work in an Assignment for CSR. As CSR submitted in reply, Adecco Australia elevates the principle of contra preferentem to the paramount consideration of construction, and strives to find ambiguity, where none exists if the proper approach to construction is adopted.

27. [191]

    I would allow ground 2(a) of CSR’s notice of appeal.

Absence of an Order

1. [192]

   Ground 2(b) of the notice of appeal complains about the primary judge’s second reason for finding Mr Frewin was not Temporary Staff within cl 23.2: because CSR had failed to adduce any evidence of an Order as defined in the Agreement.

2. [193]

   It will be recalled that the effect of cl 4.1 of the Agreement was that a written Order given by an Engaging Manager was required to order Temporary Staff. [214] A reference to an “Order” was to the Order CSR places under “Part 4 of this Agreement.” There was no “Part 4”. Rather the provisions concerning orders were found in cl 4.

3. [194]

   The primary judge accepted that Mr Frewin was undertaking work at a location where CSR, or a subsidiary, ran a concrete plant, and inferred that such work was for the benefit of CSR or its affiliate. Nevertheless, her Honour concluded, that absent evidence of an “Order” such as referred to in cl 4, CSR has not established that Mr Frewin, “even had he been employed by Adecco Australia (which he was not), was ‘Temporary Staff’.” [215]

4. [195]

   In my view the primary judge erred in failing to draw the inference that the circumstances in which Mr Frewin worked at the Batemans Bay plant supported the inference that he was “Temporary Staff” within the meaning of the Agreement.

5. [196]

   Adecco Australia emphasised the meanings in the Agreement of the definitions of “Assignment”, “Place of Delivery”, “Classification” and “Order”, the requirements of an “Order” in cl 4.3 and argued that the importance of adherence to the strict terms of an “Order” was apparent from cl 4.4. It contended that alternative possibilities included that Mr Frewin was supplied as “Permanent Staff” (cl 7.5, Agreement) or that he was provided to CSR outside the terms of the Agreement, or that he was initially supplied as “Temporary Staff” but ceased to be so characterised three days after he was provided (cl 4.2.1, Agreement) or at some time later and before September 2002 or for a number of other reasons to which Adecco Australia pointed had some other characterisation.

6. [197]

   Adecco Australia did not draw attention to any evidence to support the theoretical possibilities as to Mr Frewin’s employment in a capacity other than as Temporary Staff. At least one, the notion that he was “Permanent Staff”, can be dispelled. As is apparent from Mr Frewin’s evidence, he was employed on a casual basis. Secondly, as is apparent from cl 7.5, permanent staff were paid on an annual basis. Mr Frewin was paid on the basis of weekly timesheets recording the hours he had worked.

7. [198]

   The evidence I have set out above, [216] in my view, positively supports the proposition that Mr Frewin was supplied by Adecco Australia to CSR in accordance with the Agreement, that is to say, that in the critical period (some 12 - 13 years prior to the trial), Mr Frewin’s services were supplied pursuant to an Order. As CSR submitted, the overwhelming inference was that an Order had been issued. Otherwise no sensible reason could be advanced to explain Mr Frewin’s presence at the CSR site, or to explain Adecco Australia receiving payments for Mr Frewin’s services (which, in turn, can be inferred from the fact he was paid), and those of other employees, amounting to a sum of approximately $13.285 million during a large part of the critical period.

8. [199]

   I would allow ground 2(b) in the notice of appeal.

Ambit of the indemnity provision

1. [200]

   Resolution of the notice of contention turns again on the ambit of cl 23.2, the indemnity provision which appeared in cl 23 headed “Indemnity”. [217] It is convenient to repeat it:

2. [201]

   Although the notice of contention appears to address two issues (whether cl 23.2 provided indemnity to CSR for claims caused or contributed to by its fault and whether CSR’s liability to Mr Frewin was one “aris[ing] out of or in connection with the performance of Assignment duties”), the proposition for which Adecco Australia contended it turned on ultimately was that while the performance of the Assignment duties provided the occasion for CSR's negligence, and therefore for the claim, it was not a claim which arose out of, or in connection with, the performance of Assignment duties.

3. [202]

   At trial, Adecco Australia’s submission on this point was that the breadth of cl 23.2 raised doubt as to its meaning such that it was ambiguous and should be construed strictly against CSR. Similar arguments were advanced in this Court.

4. [203]

   Adecco Australia also submitted that cl 23.2 was ambiguous because it did not make grammatical sense, commencing in a way which was nonsensical. In addition, it argued the word “where” at the end of the clause suggested an intention to qualify cl 23.2.1, but the sentence was left unfinished. These submissions were based on the inclusion in cl 23.2 of the words I emphasised earlier in these reasons. [218] Adecco Australia argued that, having regard to the surrounding circumstances, the nonsensical nature of the clause could not be dismissed as “plainly a typo” as CSR had submitted at trial and the primary judge had effectively accepted.

5. [204]

   In my view the primary judge did not err in treating the word “where” as it last appeared in cl 23.2 as surplusage. Further, although Adecco Australia also complained at trial about the prefatory words in cl 23.2, a complaint with which the primary judge did not deal, her Honour would, in my view, have been entitled to treat those words in the same way. Although I accept that there is a presumption against treating any part of a contract as surplusage, [219] the presumption is not a strong one, [220] and excess words may be the product of clumsy draftsmanship. [221] It is manifest, in my view, that cl 23.2 is a product of such clumsiness.

6. [205]

   Adecco Australia also made submissions concerning the proper construction of cl 23.2 based on differences between cl 23 in the Proposal and its ultimate inclusion in the Agreement. The Court can only have regard to such material in the interpretation of the Agreement if the language is ambiguous or susceptible of more than one meaning. [222] In my view, when construed in the context of the Agreement as a whole, [223] cl 23.2 cannot be so characterised. Rather, as the primary judge held, cl 23.2 is “sufficiently clear to indicate an objective intention to cover all claims, whether caused or contributed to by CSR’s own fault.” [224]

7. [206]

   The words “arising out of” are well recognised as being of broad import. [225] They require some causal or consequential relationship between the subject and the object, but do not require the direct or proximate relationship which would be necessary if the expression was “caused by”. [226]

8. [207]

   The ambit of such words, and the manifest reason for their inclusion in an indemnity clause such as cl 23.2, can be seen from Davis v The Commissioner for Main Roads. [227] That case concerned the construction of a contract with the Commissioner for Main Roads which provided, inter aIia, that “[t]he Contractor shall undertake the whole risk of carrying out the contract, and without limiting the generality thereof, shall (a) hold the Commissioner indemnified against all claims arising out of (i) damage to the property of the Contractor or any third party; (ii) death of or bodily injury to the Contractor or his employees or employees of the Commissioner or any third parties … whether such damage, death or bodily injury is caused by the use of a motor vehicle or by goods projecting therefrom or otherwise howsoever .... The Contractor shall insure any motor vehicle used on the contract in the joint names of himself and the Commissioner under a policy unlimited in amount covering liability for damage to the property of third parties.”

9. [208]

   The High Court held by majority (Menzies J, Barwick CJ and McTiernan J agreeing; Kitto and Windeyer JJ dissenting), that the indemnity clause extended to a claim for damage to the property of a third person caused by collision with the contractor’s motor vehicle where the negligence of the Commissioner was a cause of the damage. Menzies J rejected a submission that the clause could not be understood as conferring an indemnity upon the Commissioner against liability for its own negligence, saying, “[d]efault of this sort for which the Commissioner is liable seems to me the very subject matter of [the clause].” His Honour continued:

10. [209]

    In my view, Davis applies squarely to this case. In the course of the hearing, Adecco Australia was invited to, but did not, distinguish it.

11. [210]

    Similarly the words “connected with” are “capable of describing a spectrum of relationships ranging from the direct and immediate to the tenuous and remote”. [229] They do not require a causal connection between the matters said to be connected. [230] The phrase “connected with” is not conceptually different from “in connection with”.

12. [211]

    When one has regard to cl 23.2 in the context of the whole Agreement, it is apparent that one of the purposes of the Agreement was to ensure that Adecco Australia was legally responsible for the Temporary Staff it supplied pursuant to the Agreement. That is apparent, not least, from the fact that Adecco Australia was responsible for effecting insurances, including public liability insurance “for any one occurrence in respect of bodily injury … arising out of the provision of the services under this Agreement” (cl 18.2.1), workers compensation insurance “for its full liability under any applicable laws relating to workers’ compensation …. ” (cl 18.3.1) and “insurance coverage for any liability, loss, claim or proceedings whatsoever and whether arising at law or in equity or by virtue of any relevant statute relating to employer’s liability by any person employed by the Supplier or any sub-contractor in or about the provision of the Services … ” (cl 18.3.2). All insurances Adecco Australia was required to effect and maintain were to be arranged in such a manner as to name Adecco Australia and note CSR’s interest for their respective rights, interests and liabilities and, save for the limit of liability, apply as if there were a separate policy in force covering each of Adecco Australia and CSR (cl 18.6).

13. [212]

    In addition, it is apparent that Adecco Australia was to have a role in ensuring the safety of Temporary Staff at any Place of Delivery. Thus, if requested by CSR, it was to ensure a suitable qualified representative attend at safety and toolbox meetings at a Place of Delivery (cl 5.1), instruct its Temporary Staff to abide by the CSR regime when on CSR’s premises and at the Place of Delivery (cl 14.1), ensure Temporary Staff had the requisite skills and competencies (cl 14.2) and ensure all Temporary Staff complied with all laws, including Occupational Health, Safety and Welfare laws and CSR’s Occupational Health, Safety and Environmental Policies and guidelines (cl 14.4). Adecco Australia was to provide training relevant to the Assignment to its Temporary Staff at no cost to CSR (cl 16) and was to warrant that such Staff possess the requisite skills, competencies, experience and capability duly to perform their Assignment duties (cl 17).

14. [213]

    Adecco Australia submitted that on the primary judge’s construction, cl 23.2 required it to indemnify CSR in circumstances where CSR supervised and directed him effectively as his employer pro hac vice and “neither Adecco Australia nor Adecco Industrial had any involvement at the Batemans Bay plant”.

15. [214]

    In the light of the provisions in the Agreement to which I have referred, a requirement that Adecco Australia indemnify CSR in such circumstances is hardly as surprising as Adecco Australia’s submissions appear to contend. Adecco Australia’s submissions were made with no reference to the responsibility of labour hire firms by virtue of the employer’s non-delegable duty of care where legal employment is not transferred to the hirer. [231]

16. [215]

    Next, Adecco Australia submitted that, applying Erect Safe, [232] Mr Frewin’s claim did not arise out of and was not in connection with his performance of “Assignment” duties. Rather, it arose out of, or was connected with, CSR’s negligent acts or omissions.

17. [216]

    Each case must clearly stand and fall on the terms of the relevant provision construed in the context of the contract as a whole. This argument must also fail having regard to the width of the words in cl 23.2 in respect of which it was sufficient that the occasion for Mr Frewin being at the Batemans Bay plant was to carry out an Assignment as referred to in cl 23.2. [233] As in Davis, cl 23.2 should operate on its own terms.

18. [217]

    The notice of contention should be rejected.

Orders

1. [218]

   I propose the following orders:

   1. (1)

      Appeal allowed.

   2. (2)

      Set aside the judgment for Adecco (Australia) Pty Limited (as the cross-defendant) on the cross-claim brought by CSR Limited and Holcim (Australia) Pty Limited.

   3. (3)

      Judgment for CSR Limited on the cross-claim as against Adecco (Australia) Pty Limited.

   4. (4)

      Order that the Adecco (Australia) Pty Limited indemnify CSR Limited and Holcim (Australia) Pty Limited as regards:

   5. (5)

      Order that Adecco (Australia) Pty Limited pay CSR Limited and Holcim (Australia) Pty Limited’s costs of the appeal and the proceedings below.

2. [219]

   MACFARLAN JA: I agree with the orders that McColl JA proposes and with her Honour’s reasons.

3. [220]

   SIMPSON JA: I agree with McColl JA.