Coles Supermarkets Australia Pty Ltd v Ready Workforce (A Division of Chandler Macleod) Pty Ltd

1. [1]

   BASTEN JA: I agree with the orders proposed by White JA, for the reasons he gives.

2. [2]

   WHITE JA: This is an application for leave to appeal and a cross-appeal from orders of the District Court made on 13 July and 15 August 2017 (Sorby ADCJ).

3. [3]

   The claim in the District Court was brought by Ready Workforce (A Division of Chandler Macleod) Pty Ltd (“Ready Workforce”) against Coles Supermarkets Australia Pty Ltd (“Coles”) for indemnity pursuant to s 151Z(1)(d) and (2)(e) of the Workers Compensation Act 1987 (NSW) (“the WC Act”) in respect of workers’ compensation payments made by Ready Workforce’s insurer to a Ms Nicole Murphy. Ms Murphy was injured at work at a Coles warehouse in Smeaton Grange at about 7:00 am on 17 November 2011. She received workers’ compensation payments totalling $135,142.41. Ready Workforce alleged that Ms Murphy commenced employment with it on or about 20 July 2011 and that she was “lent on hire” to work with Coles at Coles’ premises pursuant to a contract for the provision of temporary labour hire entered into between Ready Workforce’s parent company, Chandler Macleod Group Limited (“Chandler Macleod”) and Coles. It alleged that Coles owed Ms Murphy a duty of care and that her injuries were caused by Coles’ negligence in, amongst other things, failing to provide a safe system of work.

4. [4]

   Coles denied that Ms Murphy was employed by Ready Workforce. It contends that she was employed by Chandler Macleod. It denied owing Ms Murphy a duty of care as alleged in the further amended statement of claim. It alleged that Ms Murphy was contributorily negligent, but that claim was not pressed on appeal. Coles also alleged that Ms Murphy’s injury was sustained partly or in whole by Ready Workforce’s own fault. It alleged that:

5. [5]

   Coles also brought a cross-claim against Chandler Macleod claiming contribution or indemnity against it pursuant to s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) that provides for contribution between joint tortfeasors. It also claimed indemnity pursuant to its labour hire agreement with Chandler Macleod or damages for breach of that agreement.

6. [6]

   Coles contends that if Ready Workforce were not Ms Murphy’s employer, Ready Workforce is not entitled to recover from it any indemnity in respect of workers’ compensation payments made by Ready Workforce’s insurer to Ms Murphy.

7. [7]

   The primary judge made inconsistent findings as to whether Ms Murphy was employed by Ready Workforce or by Chandler Macleod.

8. [8]

   The primary judge found that Coles breached a duty of care it owed to Ms Murphy. The primary judge found that if sued, Coles would have been liable to Ms Murphy for damages totalling $438,024.92. He concluded that Ms Murphy’s whole of body impairment exceeded 15 per cent and concluded that Ready Workforce would also be liable to pay damages. As between Coles and Ready Workforce the judge apportioned fault as to 60 per cent to Coles and 40 per cent to Ready Workforce.

9. [9]

   The primary judge rejected Coles’ cross-claim against Chandler Macleod on the ground that the cross-claim alleged that any injuries occasioned to Ms Murphy were the result of negligence of the “subcontractor”, being Ready Workforce. He said that Ready Workforce was not a subcontractor as defined and Coles did not engage it as a subcontractor. He therefore dismissed the cross-claim. Coles complains that the primary judge erred because it was admitted on the pleadings that Chandler Macleod subcontracted performance of the work of providing temporary labour to Coles to Ready Workforce.

10. [10]

    Having found the amount of damages to which Ms Murphy would have been entitled if she had sued Coles for damages, and having determined the proportion of fault as between Coles and Ready Workforce the primary judge directed the parties to calculate the “damages” (sic) for which judgment should be given. Ready Workforce’s claim was a claim in debt for an indemnity, not a claim for damages (Westpac Banking Corporation v Tomassion (1993) 32 NSWLR 207 at 215, 220; Howard Rotavator Pty Ltd v Wilson (1987) 8 NSWLR 498). The parties agreed that judgment should be given for Ready Workforce against Coles in the sum of $37,495.01. That sum included pre-judgment interest.

11. [11]

    By notice of cross-appeal filed on 26 October 2017 Ready Workforce seeks judgment in the sum of $135,142.41 plus interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW) in place of the judgment for $37,495.01.

12. [12]

    By its cross-appeal Ready Workforce contends that it was not open to the primary judge to determine that Ms Murphy’s degree of whole person impairment was at least 15 per cent. Accordingly it says that had Ms Murphy brought a claim for work injury damages against Ready Workforce she would not have been entitled to recover any damages by reason of s 151H of the WC Act.

13. [13]

    The second ground of cross-appeal was that the primary judge erred in his apportionment of the degree of negligence between Ready Workforce and Coles.

14. [14]

    The following issues arise:

15. [15]

    Section 151Z of the WC Act provides:

16. [16]

    Section 151H of the WC Act provides:

17. [17]

    The effect of these provisions, in a case where the injured worker does not sue either his or her employer or a third party tortfeasor but has received compensation payments, is that “the person by whom compensation was paid” can recover indemnity in respect of those payments from a third party tortfeasor (s 151Z(1)(d)). If the worker was entitled to take proceedings against both the employer and third party tortfeasor but did not do so, the third party tortfeasor can set off against its liability to provide indemnity under s 151Z(1)(d) the amount it could recover by way of contribution from the employer had the worker sued (s 151Z(2)(e)). But the amount that can be recovered is to be determined as if the whole of the damages were assessed in accordance with Div 3 of Pt 5 of the WC Act (s 151Z(2)(d)). That means that if the worker could not recover any damages because the degree of permanent impairment was less than 15 per cent, the third party tortfeasor cannot reduce its liability to provide indemnity under s 151Z(1)(d) by any contribution from the employer. It also means that the amount of the employer’s contribution that reduces the amount of indemnity is assessed by reference to the restrictions on recoverable work injury damages provided for by Pt 5.

18. [18]

    Had the primary judge found that the 15 per cent permanent impairment threshold not been reached, no notional contribution from Ready Workforce as Ms Murphy’s employer could have applied in reduction of the indemnity under s 151Z(1)(d) (J Blackwood & Son v Skilled Engineering [2008] NSWCA 142).

19. [19]

    The basis for the calculation of indemnity in the sum of $37,495.01 was as follows. On the primary judge’s finding Ready Workforce was responsible as to 40 per cent for Ms Murphy’s injury. Had it been sued Ready Workforce would only have been liable for damages for past economic loss due to loss of earnings and future economic loss due to impairment of earning capacity (s 151G). The primary judge assessed these at $259,118.52. Forty per cent of that figure is $103,647.41. The difference between the employer’s contribution ($103,647.41) and the compensation payments ($135,142.41) was $31,495 (s 151Z(2)(e)) to which pre-judgment interest was added.

Leave to appeal

1. [20]

   Ready Workforce opposed Coles’ application for leave to appeal on the following grounds:

2. [21]

   Were it not for the cross-appeal, I would refuse leave to appeal. The amount in dispute in the appeal is trivial for the parties concerned. The dispute is essentially one between Ready Workforce’s workers’ compensation insurer and Coles’ public liability insurer (or Coles if it is a self-insurer) which has no real social utility and no advantage to the injured person. The observations of Brownie AJA in Toll Pty Ltd v Dakic [2006] NSWCA 58 in relation to disputes between motor vehicle insurers and workers’ compensation insurers (at [163]) are applicable to the present case.

3. [22]

   But the amount in issue on Ready Workforce’s cross-appeal is more than $100,000. It brings its cross-appeal as of right (District Court Act 1973 s 127(3)). It accepts that each issue that is raised on the proposed notice of appeal can and would be raised in opposition to its cross-appeal. In those circumstances justice requires that leave to appeal be granted.

Who was Ms Murphy’s employer?

1. [23]

   Mr G Parker SC who appeared for Coles, submitted that the primary judge found that Ms Murphy was employed by Chandler Macleod. He submitted that Ready Workforce was not entitled to dispute that finding in the absence of a notice of contention.

2. [24]

   Whether a notice of contention need be filed when leave to appeal has not been granted but the application for leave is heard concurrently with the hearing of the appeal, need not be debated (Uniform Civil Procedure Rules 2005 (NSW), r 51.40). In anticipation that leave to appeal might be granted Ready Workforce gave notice of proposed grounds of contention. These did not include a challenge to a finding that Chandler Macleod, and not Ready Workforce, was Ms Murphy’s employer.

3. [25]

   The primary judge did make a finding that Chandler Macleod was Ms Murphy’s employer. He said (at [17]):

4. [26]

   But the primary judge also and inconsistently found that Ready Workforce was Ms Murphy’s employer. In para [2] of his Honour’s reasons the primary judge said that s 151Z(1)(d) of the WC Act was engaged:

5. [27]

   Mr Parker submitted that in that paragraph the primary judge was not making a finding but was describing the nature of Ready Workforce’s claim. That is a possible construction of that paragraph. But the primary judge went on to find (at [15]) that the plaintiff carried out a limited role as an employer on site and that:

6. [28]

   This was describing employees whose services were supplied by Chandler Macleod “through Ready Workforce”, indicating that Ready Workforce was the employer, through whom Chandler Macleod supplied services to Coles.

7. [29]

   In para [58] the primary judge said “… the Plaintiff [viz. Ready Workforce] had a significant role in ensuring the safety of its employees, such as Ms Murphy …”, a clear finding that Ms Murphy was employed by Ready Workforce. The primary judge’s conclusion that Ready Workforce (not Chandler Macleod) had a 40 per cent responsibility for Ms Murphy’s injury is only explicable on the basis that it and not Chandler Macleod was Ms Murphy’s employer.

8. [30]

   Because Coles said that the primary judge had found that Ms Murphy was employed by Chandler Macleod (as he had), it did not challenge the primary judge’s finding that Ms Murphy was employed by Ready Workforce. The identity of Ms Murphy’s employer was in issue. As the primary judge made inconsistent findings, the question is one for this Court. Ready Workforce bore the onus of establishing that it was Ms Murphy’s employer.

9. [31]

   Ms Murphy signed an agreement called a “Casual On-Hire Employment Agreement Terms and Conditions of Employment”. She did so on 20 July 2011 by way of acceptance of those terms. Contrary to Coles’ submission, the terms of that agreement do not identify Ms Murphy’s employer. The document states:

10. [32]

    Coles submitted that the references in the agreement to “Chandler Macleod” was to Chandler Macleod Group Limited. That is not so. The term “Chandler Macleod” refers to Chandler Macleod Group Limited or any of its related entities. The pro-forma agreement contemplates that employees may be employed not by Chandler Macleod Group Limited, but by a related entity of that company. If the individual is employed by a related entity of Chandler Macleod, then the references in the agreement to Chandler Macleod refer to the company with whom the employee accepted employment.

11. [33]

    The code of conduct that is Annexure A to the terms and conditions of employment has the same indeterminacy.

12. [34]

    The pro-forma agreement signed by Ms Murphy did not include a provision for it to be signed by the employer. On the face of the document, in the form in which it was tendered, the document would be equally consistent with the employer’s being Ready Workforce or Chandler Macleod.

13. [35]

    The document tendered was incomplete. It consisted of pages 1, 3 and 4 of four pages. Page 1 included clauses 1-8 and part of clause 9. Page 3 commenced with clause 23. It can be inferred that the balance of clause 9 and all of clauses 10-22 were on page 2. Ready Workforce did not lead evidence as to why page 2 was missing from the copy document that was tendered. Counsel for Ready Workforce attempted to lead evidence as to the contents of page 2 from a witness called by Ready Workforce, a Ms Nancy Leyland. She gave her occupation as being a branch manager at Chandler Macleod. She was asked to explain the relationship between Chandler Macleod and Ready Workforce. She said:

14. [36]

    Ms Leyland was taken to the employment agreement and to the fact that page 2 was missing. She was asked whether she knew what page 2 dealt with. The primary judge rejected questions that attempted to elicit the contents of the missing page 2. He required the page to be produced. Counsel for Ready Workforce said that he did not know why the page was not reproduced and that it might be a photocopying error, or it might be lost, but that was a matter for speculation. Ms Leyland then gave the following evidence:

15. [37]

    Page 2 was never produced. The agreement that was produced did not contain any provision for the selection of “which group your employees will be employed under”. The document produced did not include any provision for ticking as a selection that Ms Murphy would be employed by Ready Workforce.

16. [38]

    No explanation was given as to why only part of the contract was produced. No-one gave evidence that it had been lost. Ms Leyland said that it “looks like the back of page 2 is missing”. In fact, (as Ms Leyland agreed) all of page 2 was missing. She said that she had seen the document included in the tender bundle as part of Ms Murphy’s employment file. The original of the document in the employment file was not produced. The inference to be drawn is that the missing page 2 would not have assisted Ready Workforce in establishing that it was Ms Murphy’s employer. The true identity of her employer was an issue squarely raised on the pleadings. It should be inferred that although the standard form contract included a provision to enable the ticking of a selection as to the company by whom the employee was to be employed, Ready Workforce was not so selected. It cannot be inferred that some other company, such as Chandler Macleod, was selected. That would be to speculate that the selection had been completed so as to nominate Chandler Macleod as the employer.

17. [39]

    Counsel for Ready Workforce submitted that the contract of employment nominated Ready Workforce as the relevant employer for Ms Murphy as opposed to one of the other subsidiaries within the group. There is no evidence of that.

18. [40]

    Ms Murphy was required to complete, and did complete, a “Pre-Employment Health Questionnaire”. Coles contends that the questionnaire is a “Chandler Macleod Pre-Employment Health Questionnaire”. It includes prominently the following trade mark:

19. [41]

    The name “Chandler Macleod” as distinct from the trade mark that appears above was not used. There is no identification of the particular corporate entity or entities that used the trade mark. It may well have been used by Chandler Macleod and any of its subsidiaries.

20. [42]

    Ms Murphy’s wages were paid by Chandler Macleod. It withheld the tax payable by Ms Murphy on her wages and issued Ms Murphy with her PAYG payment summaries. Clause 12-35 of Schedule 1 to the Taxation Administration Act 1953 (Cth) provides:

21. [43]

    Clause 12-60 provides:

22. [44]

    The fact that Chandler Macleod and not Ready Workforce paid Ms Murphy’s wages and withheld and presumably remitted to the Commissioner the tax referable to those wages is consistent with its being Ms Murphy’s employer, but it is not determinative of that question. The Taxation Administration Act allows for group remittances.

23. [45]

    Ready Workforce did not adduce any evidence of any intra-group accounting whereby Ready Workforce was liable to its parent company for the wages paid by the parent company. Prima facie, the fact that Chandler Macleod, and not Ready Workforce, paid Ms Murphy’s wages is a significant pointer to Chandler Macleod being her employer, in the absence of evidence as to the accounting practice in the group.

24. [46]

    Before Chandler Macleod or its subsidiary provided labour for Coles at its warehouse in Smeaton Grange a “client risk assessment (workforce)” form was completed and signed both by a Client Representative (viz. a representative of Coles) and a “CM Representative”, an “OHS Co-ordinator”, and a “CM Branch Manager”. The form used the trade mark Chandler Macleod (as appears at [40] above). It included matters to be documented including questions such as “Who will supervise and monitor Chandler Macleod employees while on site?”. “Chandler Macleod” was not defined. The answer to that question was that “Chandler Macleod’s” employees would be supervised and monitored by “Chris Mitaui – Team Manager”. There was no evidence as to whether Mr Mitaui was an employee of Ready Workforce, Chandler Macleod or Coles.

25. [47]

    The reports generated after Ms Murphy’s injury are also equivocal as to the identity of her employer.

26. [48]

    No argument was advanced that Ms Murphy had more than one employer. The question raised by Morgan v Kittochside Nominees Pty Ltd (2002) 117 IR 152 and Coghill v Indochine Resources Pty Ltd [2015] FCA 377 does not arise.

27. [49]

    There was no direct evidence as to who had the right to control Ms Murphy in how she performed her tasks (Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16 at 24, 36; [1986] HCA 1). The question was complicated because to some extent Coles had the right to control Ms Murphy in how she performed her tasks. In so far as the right of control was reserved to Chandler Macleod or its subsidiary, there was no evidence, whether the control was to be exercised by someone employed by Chandler Macleod or by Ready Workforce.

28. [50]

    A relevant consideration for determining who was Ms Murphy’s employer was into whose enterprise Ms Murphy was integrated (Hollis v Vabu Pty Ltd (2001) 207 CLR 21 at [47]-[52], [54]; [2001] HCA 44; Sweeney v Boylan Nominees Pty Ltd (2006) 226 CLR 161 at [31]-[33]; [2006] HCA 19).

29. [51]

    By its cross-claim Coles accepted that Chandler Macleod subcontracted to Ready Workforce the provision of labour to Coles. This is consistent with Ms Leyland’s evidence that Ready Workforce supplied blue-collar labour as a “division” under Chandler Macleod. Ready Workforce was not a division of Chandler Macleod as that expression is usually understood. It was Chandler Macleod’s subsidiary. Its name is misleading. But that does not obscure the fact that according to Ms Leyland it supplied labour that Chandler Macleod, a labour hire company, agreed to supply to Coles.

30. [52]

    Importantly, the workers’ compensation payments were made by CGU Workers Compensation (NSW) Ltd (“CGU”) and its records disclosed that Ms Murphy’s employer was Ready Workforce. The WC Act requires a worker’s employer to take out workers’ compensation insurance. The fact that CGU’s records disclosed that Ms Murphy was Ready Workforce’s employee is a powerful pointer to Ready Workforce being Ms Murphy’s employer.

31. [53]

    Ms Leyland described Ready Workforce as a division of Chandler Macleod. It was a separate legal entity. But the effect of her evidence, when assessed with the terms of the employment agreement and Ready Workforce’s own name, is that different subsidiaries were described as divisions of the parent company and contributed labour of different types that the parent company contracted to supply. Although the evidence is far from ideal, in my view Ready Workforce discharged the onus that was on it to establish that it was Ms Murphy’s employer.

Ready Workforce’s standing to sue if it were not the employer

1. [54]

   Under s 159(2)(a) of the WC Act the insurer as well as the employer is directly liable to the worker insured under the policy to pay compensation for which the employer is liable. In Cockatoo Docks & Engineering Co Pty Ltd v Dalgety & Co Ltd (1939) 39 SR (NSW) 295 the Full Court (Halse Rogers J with whom Bavin J and Barton AJ agreed) said that if the insurer made the payment of compensation to discharge its own liability, the insurer would be the proper plaintiff to seek an indemnity under s 64(b) of the Workers Compensation Act 1926 (that was in materially the same terms as the present s 151Z(1)(d) of the WC Act). However, if the insurer purported to act on behalf of the employer and to discharge the employer’s liability at the employer’s request, the employer could seek the indemnity (at 303-304).

2. [55]

   In State Rail Authority of NSW v Sun Alliance & Royal Insurance Australia Ltd (2003) 58 NSWLR 561; [2003] NSWCA 288 Mason P with whom Sheller JA and Foster AJA agreed, noted (at 566):

3. [56]

   Coles argued that if Ready Workforce were not Ms Murphy’s employer it had no standing to claim indemnity. Coles did not contend that Ready Workforce had not demonstrated that CGU was not discharging its direct liability, in which case CGU would have been the appropriate plaintiff. It accepted that if Ready Workforce were Ms Murphy’s employer the payment made by CGU could be said to have been made on Ready Workforce’s behalf and at its request. There was no evidence of a direct request, but the request might be implied.

4. [57]

   Because I have concluded that Ready Workforce was Ms Murphy’s employer, it follows that the basis for Coles’ first ground of appeal fails. It is strictly not necessary to consider what the position would be if Chandler Macleod, and not Ready Workforce, were Ms Murphy’s employer. In terms of s 151Z(1)(d) the question would be whether Ready Workforce was “the person by whom the compensation was paid”. That would depend on whether the payments of compensation were made by CGU “on behalf of” Ready Workforce, even though Ready Workforce was not the party liable to make the payments. Clearly it did make the payments on Ready Workforce’s behalf because Ready Workforce was its insured.

5. [58]

   Section 151Z(1)(d) refers to the person by whom the compensation was paid, not the person who was liable to pay the compensation. In State Rail Authority of NSW v Sun Alliance & Royal Insurance Australia Ltd Mason P did not say that the words “the person by whom the compensation was paid” mean the insurer or the employer.

6. [59]

   Section 151Z(2)(d) and (e) assume that the employer will be the party claiming indemnity under s 151Z(1)(d). That might imply that a non-employer could not claim indemnity under s 151Z(1)(d). But it is clear that an insurer can claim indemnity under s 151Z(1)(d). In such a case the indemnity the insurer can recover will be affected by the third party tortfeasor’s right of contribution from the employer. Exactly the same issue would arise if a person who was neither the employer nor the employer’s insurer paid the compensation for which the employer was liable.

7. [60]

   If Ready Workforce were not Ms Murphy’s employer but Chandler Macleod was, questions of restitution would arise between CGU, Ready Workforce, Chandler Macleod and the workers’ compensation insurer of Chandler Macleod if that insurer were not CGU. (There was no evidence as to whether CGU was also Chandler Macleod’s workers’ compensation insurer.) But those questions would not affect Ready Workforce’s standing to sue for indemnity under s 151Z(1)(d) as being the person by whom the compensation to Ms Murphy was paid.

Ready Workforce a tortfeasor

1. [61]

   In its written submissions Coles submitted that s 151Z(1)(d) did not confer a right of indemnity in circumstances where the employer is itself a tortfeasor. This submission was made in support of an argument that because Ready Workforce was itself found to be a tortfeasor, it was not entitled to indemnity under s 151Z(1)(d) (Public Transport Commission (NSW) v J Murray-Moore (NSW) Pty Ltd (1975) 132 CLR 336; South West Helicopters Pty Ltd v Stephenson [2017] NSWCA 312 at [170]-[172]).

2. [62]

   I did not understand this argument to be ultimately pressed on appeal. Mr Robison, who appeared for Ready Workforce and Chandler Macleod, submitted that the decision in South West Helicopters Pty Ltd v Stephenson did not inhibit reliance on s 151Z(1)(d) by an employer where a worker does not commence proceedings against the employer for damages. That should be accepted. In South West Helicopters Pty Ltd v Stephenson Basten JA, with whose reasons in this respect Leeming and Payne JJA agreed, said (at [173]):

3. [63]

   Ms Murphy did not take proceedings against her employer. Therefore, s 151Z(2)(e) is engaged and the fact that Ready Workforce was itself negligent does not preclude its being entitled to claim an indemnity pursuant to s 151Z(1)(d) (I & J Foods Pty Ltd v Bergzam Pty Ltd (1997) 14 NSWCCR 486 at 496).

Negligence finding against Coles

1. [64]

   Ms Murphy was employed at Coles’ warehouse and distribution centre at Smeaton Grange as a “picker/packer”. Her job involved receiving an order of stock to be picked from pallets or racks in the warehouse, placing a label on the stock, putting it on a machine, driving it to a designated area where it would be packed by being wrapped for delivery by truck to a Coles store. Ms Murphy’s shift was from 5.00 am to 2.30pm, although she finished anywhere up to 3.00 pm.

2. [65]

   On the morning of 17 November 2011 she arrived at the warehouse at about 4.30am. The warehouse commenced operations at the start of her shift at 5am. At the beginning of the shift she participated in a toolbox talk by a Coles manager. A toolbox talk is a talk addressed to occupational health and safety issues. Ms Murphy said that “it would have been like a health safety topic for the week, any [incidents] that may have happened over the previous shift before we started, things like that. …”. She collected and scanned her order to be filled. She then moved to the machine that she would be using on the day called a DCP Personal and then used the machine to collect goods to fill the order. On the day in question she was filling orders for pet food which was dry kibble mix in sealed plastic bags.

3. [66]

   Ms Murphy described the DCP Machine as a little car on the rear of which either two pallets or three roll cages could be carried. She described the process as follows:

4. [67]

   The sealed bags of dry dog food were loaded manually onto the machine. At about 7am Ms Murphy was injured. She described the accident as follows:

5. [68]

   Ms Murphy slipped on a fine layer of crushed dry kibble that was like dust. A Chandler Macleod incident report form stated “when kibble is walked on or crushed by equipment it turns into a fine slippery powder which is hard to see”. The same Chandler Macleod incident report forms identified the root cause of the incident as being “failure by person unknown to clean up spillage from the floor of the aisle”.

6. [69]

   The floor where the slip occurred had been last cleaned at 9.15pm the previous night. There was no evidence as to when the warehouse closed. It did not operate 24 hours per day because the evidence established that operations commenced at 5.00 am. Evidently there were two shifts. It is a reasonable inference that the second shift finished at about 10.00 pm or up to half an hour later, consistently with the length of the first shift. Ready Workforce did not adduce evidence of any later operations. It is a reasonable inference that the cleaning was done within 45 minutes to one and a quarter hours before the conclusion of the second shift.

7. [70]

   Mr Robison who appeared for Ready Workforce and Chandler Macleod accepted in his written submissions that “the next interval of cleaning was 9.15am (twelve hours after the previous interval).” This is a reasonable inference from the Coles incident report form that was evidently prepared later on 17 November 2011. It identified the time at which the floor was last cleaned as being 9.15am on that day.

8. [71]

   Ms Murphy had been in the area where the kibble was that morning before her accident on more than one occasion. She agreed that she may have filled two or three orders. On those other occasions she had had no difficulty with slipping on the floor. She estimated that she was in the aisle for about ten minutes before the fall. She described the area as being very dusty. She also said she had not seen dust in the area before that day or any other day.

9. [72]

   The sweeping machine went through the factory on a regular basis, at least once a day, but it seems to be accepted that the machine cleaning was done twice a day. There was a protocol for everyone working in the warehouse that if they observed any debris that was to be picked up, and if they observed any spillage, the spill was to be marked with appropriate safety signage or barricading until the spill was attended to.

10. [73]

    After Ms Murphy’s fall a cleaning machine was used to clean the area where she slipped. That was done by 8.30am.

11. [74]

    The primary judge found that the fine powder of dog food on which Ms Murphy slipped, had probably:

12. [75]

    The primary judge observed that at the end of each aisle in the warehouse there was a telephone with numbers enabling contact to be made with cleaning staff in the event of a spillage or hazard requiring removal (at [40]). The primary judge referred to the Chandler Macleod incident report that under the heading “Corrective Action Description” stated (at [43]):

13. [76]

    No evidence was adduced as to the outcome of the review of the cleaning schedule. It is in any event of limited significance (Civil Liability Act 2002 (NSW), s 5C(c)). Any amendment to the cleaning schedule would not constitute an admission of liability in connection with the risk of slipping.

14. [77]

    The primary judge concluded:

15. [78]

    Although there was evidence from Ms Murphy that the work was very dusty and dirty, her evidence of noticing white powder on her clothes (Judgment at [45]) was that the left side of her clothes were dusty after the fall.

16. [79]

    Ms Leyland’s evidence included the following:

17. [80]

    Chandler Macleod had made its own investigation of the workplace and Coles’ systems. The review was carried out on 15 July 2011. Chandler Macleod was satisfied with Coles’ occupational health and safety procedures and that the floors were free of trip hazards. Ms Leyland said that Chandler Macleod had assessed the Smeaton Grange premises to be safe and appropriate and a place in which reasonable care for the safety of employees would be taken and that its systems were viewed as being adequate. That remained the position up to 17 November.

18. [81]

    The warehouse complex was the size of a couple of football fields. Chandler Macleod supplied anywhere up to 100 workers per day depending on what Coles requested. Another labour hire company called Action Workforce supplied roughly the same number. Coles had about the same number of casual employees and another 300 or so permanent employees.

19. [82]

    There was no expert evidence as to any industry standard or practice in relation to the cleaning of warehouses of the kind used by Coles or similar workplaces. Ready Workforce relied on a report of a Mr Carl Strautins, the managing director of a company described as a “multi-specialist consultancy operating in the building construction and property management industries [which] provides necessary guidance and risk minimisation strategies required by architects, construction companies and facility managers to ensure they mitigated their risk to property risk [sic].” He had qualifications in materials science and a Masters degree in occupational health and safety management. He inspected the warehouse on 17 March 2016 for the purpose of preparing a report for use in the litigation. He tested the slip resistance of the floors, but noted that the floor was similar to many other warehouse floors he had inspected, being of a smooth burnished type of concrete finish which promoted comfort, particularly for forklift and pallet drivers, and cleanability. He said that those types of surfaces were suitable in regards to slip-resistance when situated within clean and dry environments. Unsurprisingly, he found that testing with kibble powder on the surface of the floor showed a high to very high risk of slipping. He said that he had not been provided with information relating to the system of cleaning at the warehouse. He said that the most effective control would be to provide a slip-resistant surface with a degree of volumetric displacement for the particles of crushed kibble to be captured that prevented rolling between the foot and the floor. He said that in the meantime cleaning the surface and monitoring the effectiveness of the cleaning regime as to whether the frequency of cleaning was adequate would assist in reducing the overall risk of a person slipping. He said it was understood that the pallets on which kibble was placed were previously located on the warehouse floor, but they were since raised and that this assisted in cleaning dust and crushed kibble more effectively.

20. [83]

    As appears from para [48] of the reasons of the primary judge his Honour was of the view that the precaution that a reasonable person in Coles’ position would have taken was to clean the aisle in which Ms Murphy was working more frequently than once every four hours. His Honour did not find that Coles was negligent by not providing a more slip-resistant floor. Nor did Ready Workforce contend that such a finding should have been made.

21. [84]

    There was no evidence to support the finding that a reasonable person in Coles’ position would have cleaned the aisle more frequently than once every four hours. There was no evidence that the particular area in which Ms Murphy was working was dustier or more prone to spillages than any of the other aisles of the warehouse. It is to be borne in mind that the plastic bags of kibble were supposed to be sealed so that there must have been some failure of packaging that allowed the kibble or fine kibble powder to escape.

22. [85]

    There was no evidence as to how long it would take to clean the whole of the warehouse premises or what number of machines would be required for that purpose. There was no evidence that slipping was a particular hazard of the job Ms Murphy was doing. Chandler Macleod’s client risk assessment required the assessor to identify “what are the typical type/s of incidents/injuries sustained in the areas where Chandler Macleod employees will be working?” The answer was “manual handling/cuts”.

23. [86]

    Chandler Macleod’s client risk assessment form also asked the assessor to specify the frequency of occurrence of incidents or injuries sustained in the areas where Chandler Macleod employees would be working and how many such injuries or incidents there were per year. The assessor’s answer was “last LTI 70 days”. I infer that “LTI” refers to Lost Time Injuries. The answer may mean that per year 70 days of workers’ time was lost due to injury. That figure was not explained. In the absence of explanation, no conclusion can be drawn as to whether it has any significance in respect of the adequacy of the occupational health and safety systems in place. Evidently Chandler Macleod did not consider that it indicated an inadequacy in Coles’ systems.

24. [87]

    Later in his reasons the primary judge said that the evidence was that a cleaning machine was used in the aisles at least once a shift (at [56]). He noted that Coles gave no evidence about its cleaning system. The only evidence as to its cleaning system came from documents tendered by Ready Workforce and the cross-examination of Ms Murphy. That did not relieve Ready Workforce of the onus of proving the facts by reason of which it said Coles breached its duty of care.

25. [88]

    Although expert evidence would not necessarily be required to establish that Coles’ system of cleaning was inadequate, or to establish what additional cleaning a reasonable person in Coles’ position would undertake, or what other steps it would undertake as a precaution against the risk of injury by slipping, Ready Workforce did have to establish the facts by reference to which such an assessment could be made. It was in a position to do that, having carried out its own assessment of Coles’ procedures and having its representatives on site. It did not do so.

26. [89]

    Ready Workforce provided a draft notice of contention in anticipation that leave to appeal might be given. It contended that the primary judge had failed to address its contention independently of a failure to have an adequate system of cleaning, Coles had inadequate housekeeping. It contended that goods that had a propensity to create dust should have been segregated from other goods that did not, and that segregation of higher risk goods to one area in the warehouse would have facilitated more frequent inspection and cleaning of that area.

27. [90]

    There was no evidence that the sealed packages of dry dog food were any more likely to leak so as to leave the fine layer of kibble dust than any other package which, if it leaked, would create a slip hazard.

28. [91]

    For these reasons, in my view, the primary judge’s finding that Coles was negligent should be set aside.

29. [92]

    Even if Coles owed a duty to machine clean the aisles more frequently than once every four hours, there was no evidence that but for Coles’ failure to comply with such a duty the injury would not have occurred (Civil Liability Act, s 5D(1)(a)). As noted above, Ready Workforce did not establish when the previous night’s shift finished. If the previous shift finished somewhere between 10.00 and 10.30 pm, Ms Murphy was injured somewhere between two and three-quarter hours and three and a quarter hours after the last cleaning. The primary judge did not find that machine cleaning of the aisle in question should have been carried out before 7.00 am and there was no evidence to require such a finding.

Ready Workforce cross-appeal – 15 per cent permanent impairment threshold

1. [93]

   In light of my conclusion on the question of Coles’ negligence, Ready Workforce’s cross-appeal does not arise. Had there been a real issue at trial as to whether or not Ms Murphy suffered at least a 15 degree of whole person impairment, the primary judge’s reasons for finding that the 15 per cent impairment threshold was reached would have been inadequate. The primary judge did not say why or how he reached that conclusion. None of the medical evidence that was adduced directly addressed the degree of permanent impairment suffered by Ms Murphy as determined in accordance with the WorkCover Guidelines. The primary judge merely said that he had read the medical evidence tendered by the plaintiff and was satisfied that the threshold was reached (para [9]).

2. [94]

   Prima facie, Ready Workforce is correct in its submission that the onus was on Coles to establish that had Ms Murphy sued Ready Workforce, damages would have been recoverable from it and therefore Coles had the onus of establishing that Ms Murphy’s degree of permanent impairment exceeded the threshold. Coles submitted that at the trial Ready Workforce contended that the non-economic loss component for the award of notional damages, in accordance with s 16 of the Civil Liability Act, should be 30 per cent and had limited its submission in respect of s 151Z(2) to the issue of apportionment, thereby implicitly accepting that an assessment, if undertaken, would have resulted in a finding of whole person impairment of 15 per cent.

3. [95]

   Ready Workforce did not take issue with that submission. In the course of oral submissions before the primary judge Mr Parker SC who appeared for Coles, referred his Honour to s 151H of the WC Act. He observed that the plaintiff contended that Ms Murphy’s notional non-economic loss claim was for 30 per cent of a most extreme case (Civil Liability Act 2002, s 16). He submitted that if Ms Murphy went to an approved medical specialist under the workers’ compensation system she would achieve a 15 per cent whole person impairment assessment. There was the following exchange:

4. [96]

   Mr Robison, who appeared at trial, did not contradict that assertion.

5. [97]

   Accordingly, as the case was fought at trial, no issue was ultimately raised concerning s 151H of the WC Act. This ground of cross-appeal would fail in any event.

Ready Workforce Cross-Appeal: Apportionment

1. [98]

   In light of my conclusion that the finding that Coles was negligent should be set aside, the issue of apportionment does not arise.

Claim against Chandler Macleod

1. [99]

   Under an agreement called a Services Agreement between Coles and Chandler Macleod in which Chandler Macleod was called the “Service Provider” it was provided that:

2. [100]

   Because I have concluded that Coles was not liable for Ms Murphy’s injury, the question whether it could have obtained indemnity under clause 13.1 from Chandler Macleod, notwithstanding the concluding words of the clause, does not arise.

3. [101]

   The only remaining issue is whether Coles is entitled to its costs on a solicitor and own client basis from Chandler Macleod.

4. [102]

   Clause 16 of the Services Agreement relevantly provided:

5. [103]

   The primary judge found that Coles did not subcontract its obligations to Ready Workforce. However, it was admitted on the pleadings that Chandler Macleod did so. Chandler Macleod did not seek leave from the primary judge to withdraw its admission. The admission was entirely consistent with its case that Ms Murphy was employed by Ready Workforce.

6. [104]

   Chandler Macleod was therefore liable for the Services and other obligations that were performed by Ready Workforce.

7. [105]

   The obligations assumed by Chandler Macleod under the Services Agreement included responsibility for maintaining a clean and tidy work site (Schedule 2, cl 13.2.1). Clause 1.1 of Schedule 2 required Chandler Macleod to ensure, so far as was reasonably practicable, that it comply with all of its OH&S legal obligations. These included any obligation imposed under the common law relating to health and safety in the work environment.

8. [106]

   Ready Workforce was found to have breached its duty to Ms Murphy. It has not disputed that finding in its draft notice of contention. By clause 16(e) Chandler Macleod was liable for any services or other obligations that were performed or discharged by its subcontractors. It admitted that Ready Workforce was its subcontractor. Clause 13.1 provided that Chandler Macleod indemnified Coles in respect of any loss or expense incurred by Coles directly in connection with any negligent act or omission of Chandler Macleod’s subcontractor, “except to the extent that the loss was directly attributable to the negligence or wrongful act or omission of Coles”.

9. [107]

   Given my conclusion that Coles was not shown to be negligent, the exception can be put aside. The question is whether the costs of the proceedings incurred by Coles was a loss or expense incurred by it “directly in connection with” the negligence as found of Ready Workforce.

10. [108]

    Coles did not seek an order that Chandler Macleod pay its costs on a solicitor and own client basis. It simply sought an order that the respondents pay its costs. No submissions were made as to the significance of the requirement under cl 13.1 that the costs or expenses incurred by Coles be incurred “directly in connection with” the negligent act or omission of Chandler Macleod’s subcontractor.

11. [109]

    The costs and expenses incurred by Coles in defending the litigation were incurred not as a direct result of Ready Workforce’s negligence (as found) but as a result of Ready Workforce’s bringing a claim for indemnity under s 151Z(1)(d). Although during the course of submissions Mr Parker said that costs were sought on a solicitor and own client basis from Chandler Macleod, he did not elaborate on that submission. In my view, the primary judge was right to have dismissed the cross-claim, although not for the reasons he gave.

Proposed orders

1. [110]

   For these reasons I propose the following orders:

   1. (1)

      Grant leave to appeal.

   2. (2)

      Order that within seven days the appellant file a notice of appeal in the form of its draft notice of appeal.

   3. (3)

      Appeal allowed in part.

   4. (4)

      Order that order 1 entered on 15 August 2017 (that there be judgment for the first respondent in the sum of $37,495.01) be set aside.

   5. (5)

      In lieu thereof, order that judgment be entered for the appellant on the first respondent’s claim.

   6. (6)

      Set aside order 3 entered on 15 August 2017.

   7. (7)

      In lieu thereof, order that the first respondent pay the appellant’s costs of the trial, including the costs of the cross-claim.

   8. (8)

      Cross-appeal dismissed.

   9. (9)

      Order that the first respondent pay the appellant’s costs of the appeal, and cross-appeal.

   10. (10)

       No order as to the second respondent’s costs of the appeal, or cross-appeal.

2. [111]

   SIMPSON AJA: I agree with White JA.