Frewin v Adecco Industrial Pty Limited

David Frewin, the plaintiff, commenced proceedings in the Supreme Court of the Australian Capital Territory against Adecco Industrial Pty Ltd, the first defendant (Adecco Industrial). The proceedings were subsequently transferred to this Court. By amended statement of claim filed on 12 February 2013, the plaintiff joined Holcim (Australia) Pty Ltd (Holcim) as the second defendant, and CSR Ltd (CSR) as the third defendant.

On 19 April 2013, Holcim and CSR filed a cross-claim (the Cross-claim) against Adecco Australia Pty Ltd (Adecco Australia) claiming an indemnity pursuant to an agreement between CSR and Adecco Australia dated 1 April 2000 (the Agreement).

On 14 October 2015 the plaintiff’s claim was settled on terms that were filed in Court, as a result of which I made the following orders:

The Terms of Settlement noted that:

The only matter for that remained for determination was the Cross-claim.

Because of the reliance placed in the parties’ submissions on documents which preceded the Agreement as well as those that followed its execution it is necessary to set out in some detail the sequence of events and the parties’ negotiations.

In 1999 CSR called for proposals to supply casual labour (also referred to as contract labour) for its operations in both metropolitan and country areas. In its request, which called for proposals by noon on 3 September 1999, CSR summarised its requirements in the following terms:

The locations of CSR’s concrete plants listed in an attachment to the request for proposals included a concrete plant at Bateman’s Bay of which Geoff Whitfield was identified as “the engaging manager”. This was where the plaintiff worked.

CSR annexed to its proposal a document headed: “Part B-Terms and Conditions”. It included a provision, cl 18, entitled “Insurance”, cl 18.3 of which provided that the “Supplier” would be obliged to arrange insurance cover for its full liability under applicable laws relating to workers’ compensation and that such insurance shall be endorsed to fully indemnify CSR against any liability which it may incur as Principal under any workers’ compensation legislation; and any common law liability (however arising) in relation to such employees.

Clause 23 of Part B provided for the Supplier to indemnify CSR in respect of certain identified matters. Clause 23.2 provided in part:

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 request for proposal referred to above.

The Agreement, entitled “SUPPLY AGREEMENT FOR LABOUR HIRE SERVICES-CSR LIMITED AND ADECCO AUSTRALIA PTY LTD”, was apparently executed on 1 April 2000. In general terms, it required Adecco Australia to provide casual, or temporary, labour to CSR in return for a fee calculated by reference to the employee’s wages; statutory on-costs; and a margin of 9.5% (see cll 3, 4 and 7).

Clause 1.1 included the following definitions:

The “Commencement Date” was defined as meaning 1 April 2000 (cl 1.1). Clause 2 provided for the term of the agreement as follows:

Clause 3 provided:

Clause 4, which related to orders, relevantly provided:

Clause 14, entitled “Supplier’s Responsibilities”, provides, in part:

Clause 18.3 was in the same terms as contained in the terms and conditions attached to the acceptance letter, except that 18.3.3 was omitted and marked “not used”.

Clause 23, entitled “Indemnity”, is set out in full because of its importance to the Cross-claim. It provided:

Gail Miller became the National Account Director of Adecco Australia in February 2002, shortly prior to the end of the initial term of the Agreement. In that role, she was responsible for the contractual and business relationship between Adecco Australia and its major clients, including CSR. Of the relationship between Adecco Australia and Adecco Industrial she said, in her unchallenged statement tendered by CSR in these proceedings:

On 27 February 2002 Readymix Holdings Pty Ltd was incorporated. At that time it was a wholly owned subsidiary of CSR. Readymix Holdings Pty Ltd 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.

On 28 March 2003, the construction materials businesses of CSR, including its concrete plants, underwent a demerger, as a result of which Holcim (which was then known as Readymix Holdings Pty Ltd) ceased to be wholly owned by CSR. The demerger was the subject of orders made by the Federal Court: Re CSR Ltd [2003] FCA 82 (Conti J).

On 31 March 2002 the Agreement expired by operation of cl 2.1, unless extended by CSR under cl 2.2. There is no evidence of any discussions that took place at that time which expressly addressed the expiry of the term or any extension. It was, however, common ground that the Agreement was extended, first until the end of June 2002 and later, until the end of July 2002.

Ms Miller’s evidence (which was tendered by CSR in the proceedings and not challenged in cross-examination by Adecco Australia) as to the extension was as follows. The parts objected to by Adecco Australia are italicised:

I reject the parts objected to as they involve legal conclusions and are not in proper form. I note that, even had I admitted them, they could go no further than Ms Miller’s knowledge as to these matters, which ceased in October 2002 when she ceased working for Adecco Australia.

As set out below CSR and Adecco Australia negotiated the terms of a new agreement between them. It is common ground that these negotiations, which were eventually abandoned, never resulted in an agreement.

On 19 June 2002 Ms Miller forwarded to Simon Lillyman, CSR’s General Manager–Procurement a proposal for a “Work Solutions Strategy using a Master Vendor Management model”, which was said to constitute “a different approach to the existing Adecco supplier agreement”. The proposal included, at the outset, the following:

Ms Miller also produced a program, described as “Adecco Safety Assurance Program” (ASAP), dated August 2002 which was said to have been developed for CSR.

On 8 August 2002 Mr Lillyman sent an email to Ms Miller in which he said, of present relevance:

Ms Miller forwarded this email to Jo Collier, the Chief Executive Officer of Adecco Australia, on about 27 August 2002, in an email which contained the following:

At about this time, Ms Miller sent a further email to Ms Collier, in part in the following terms:

Ms Collier responded on 27 August 2002 as follows:

On 27 September 2002 Ms Clarke, on behalf of Mr Lillyman, sent a draft agreement to Ms Miller. On 1 October 2002 Ms Miller forwarded the new draft contract to her colleagues at Adecco Australia for their review. CSR sent a further version on 10 September 2002, which Ms Miller forwarded to others at Adecco Australia for their consideration.

There is a draft agreement in evidence, entitled “Supply Agreement for Labour Hire Services” which proposed a commencement date of 1 October 2002. Clause 23 is in substantially the same terms as the Agreement and (as in the Agreement) includes the word “where” at the end of cl 23.2i, although it does not appear to relate to the words that follow. Unlike the Agreement, this draft annexed, as Appendix 3, the ASAP.

By memorandum dated 8 October 2002 from Ms Miller to persons at both CSR and Adecco, Ms Miller referred to additional services which Adecco proposed to provide to CSR and noted that “this would be outside scope of Labour Hire Agreement”.

Ms Miller’s employment with Adecco Australia ceased in about October 2002. The evidence revealed that CSR provided another draft contract to Adecco Australia on Christmas Eve, 2002. This was forwarded by the recipient, Bronwyn Mitchell, to others at Adecco, including Michele Mier-Wolff, under cover of an email dated 6 January 2003 which contained the following paragraph:

On 10 February 2003 Mr Lillyman sent an email to Mr Davis, Project Manager, CSR Procurement, in which he forwarded a summary of the year-to-date expenditure by Readymix & Humes (CSR) on casual labour for the period April 2002-January 2003. The document had four columns, entitled “Labour Hire Company”, “Plants”, “Dollars” and “% of Total Labour”. It recorded that CSR had paid Adecco Australia $13,285,374, which amounted to 77.62% of its casual labour expenditure for that part of its business. The concrete plant at which the plaintiff worked, Batemans Bay, appeared on the list of sites to which labour had been supplied.

By email dated 11 February 2003, Mr Davis wrote to Helen Jones, also of CSR, forwarding the draft agreement with Adecco Australia and inviting her to comment on “the worker’s comp provisions in the agreement (primarily clauses 14, 18 & 23)”. Debbie Schroeder, also of CSR, responded by email of 14 February 2013 and provided her comments to Mr Davis. Her email contained the following paragraph:

As referred to above, on 28 March 2003, the construction materials businesses of CSR, including its concrete plants, underwent a demerger, as a result of which CSR ceased to hold an interest in Holcim (then known as Readymix Holdings Pty Ltd).

A further draft of the agreement appears to have been prepared in March 2003, which provided for a commencement date of 1 October 2002 and a term of three years unless earlier terminated. Clause 4.2 of this draft provided that Readymix Holdings Pty Ltd was entitled to source labour from another labour hire company. Clause 14 provided for indemnities by both Readymix Holdings Pty Ltd and Adecco Australia.

By email dated 26 June 2003, Mr Davis wrote to others at CSR about the “Adecco trading terms”. He said in part:

By email dated 14 December 2003 Mr Davis asked Ms Jones of CSR to forward the draft indemnity clause in the draft contract with Adecco Australia to solicitors for advice “before I finalise the indemnity clause with Adecco”.

By 12 January 2004 the issue of the indemnity clause had still not been resolved. Mr Davis wrote to Darren Campbell of Adecco in the following terms:

In February 2004 Ms Collier sent an email to Mr Lillyman who had apparently relocated to the United States, seeking his understanding of the indemnity clause in the Agreement (referred to by Ms Collier as “our original agreement”). In his response, Mr Lillyman set out his understanding of how the indemnity would work. Mr Neal, who appeared on behalf of CSR, objected to this evidence on the basis that it was outside the pleading and also that it was inadmissible as it constituted the subjective view of someone associated with the Agreement as to the meaning of one of its terms. Mr Lloyd, who appeared for Adecco Australia, contended that it was relevant to the factual question whether the parties would have agreed to a new agreement on the basis of that interpretation. I accept Mr Neal’s submissions; I do not regard this evidence as admissible and I reject it: see Toll (FGCT) Pty Ltd v Alphafarm Pty Ltd [2004] HCA 52; 219 CLR 165 at [35].

On 3 March 2004 Mr Davis sent a copy of the then current draft contract to Peter James (whom I infer to be associated with CSR). Mr Davis noted in the email that: “Adecco has objected to clause 14 re indemnities”.

On 31 May 2004 Annette Niven of Adecco sent an email entitled “Draft Commercial Contract – CSR/Readymix & Adecco” in the following terms to Kevin Eeles of Holcim, which was copied to others within Adecco:

The evidence does not reveal how the negotiations ultimately ended but, as referred to above, it is common ground that no new agreement was ever executed.

CSR was the registered owner of the truck which had a faulty seat and was the cause of the plaintiff’s injuries (as accepted in the terms of settlement). On 5 September 2001 the plaintiff presented himself at CSR’s Bateman’s Bay concrete plant to apply for a job as a truck driver. He spoke with Geoff 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”, apparently provided by Adecco Industrial. At some time in this period, he provided a copy of his resume in support of his application which set out his licences, qualifications and experience.

A document entitled “Safety Induction Checklist” recorded that the plaintiff was inducted by Mr Beckett, CSR’s plant manager at Batemans Bay, on 24 September 2001. On 5 October 2001, the plaintiff acknowledged receiving the CSR Readymix Safety, Health and Environment (SHE) Rulebook. His status was recorded on the acknowledgment form as “Casual employee”.

At all material times, the plaintiff was an employee of Adecco Industrial, which invoiced Holcim or CSR for the provision of his services.

In about September 2002 the plaintiff began driving an international truck, known as “619”. Its seat lacked the suspension of other seats in similar vehicles. As a result the plaintiff suffered pain in his lower back. In September 2002 a complaint was lodged in the book of Driver Safety Concerns kept by CSR at Batemans Bay by “B. Lymbery”. The complaint read:

Notwithstanding his complaints about the seat in truck 619, the plaintiff was directed to continue to drive the truck until about March 2003 when he was directed to drive another truck, 617, which had a seat with better suspension. At about this time the seat in truck 619 was replaced. By invoice dated 16 April 2003, Forestry Commission of New South Wales charged CSR for its replacement.

The plaintiff continued to work at the Bateman’s Bay site until he was dismissed in December 2004. On 11 March 2005, he experienced excruciating back pain, as a result of which he underwent surgery on his back.

In March 2005, the plaintiff’s mother submitted a workers’ compensation claim on his behalf. Although Adecco Industrial initially declined the plaintiff’s claim, it ultimately accepted his claim and paid workers compensation payments for wages and medical expenses which, as at the date of the hearing, continued.

The first question is the status of the Agreement after the end of July 2002, it being accepted that the Agreement, having expired on 31 March 2002, was informally extended until 31 July 2002. The starting point is cl 2.2 of the Agreement which gave CSR the right to extend the term of the Agreement “for a maximum of two years”.

It is common ground that there was no express extension after 31 July 2002. CSR contended that, as the parties had continued to perform the Agreement after this day in the same manner, on the same conditions and for the same prices as they had hitherto, it ought be inferred that the parties had agreed, by their conduct, to extend the agreement, at least until a new agreement was entered into between them.

There are difficulties with the admissibility of the evidence of Ms Miller (on which CSR relied) to establish the continuity in performance. First, as referred to above, it is expressed as a conclusion. Secondly, Ms Miller’s association with Adecco Australia ceased in October 2002. Accordingly, anything she might say could not go beyond that month in any event. I note that no objection was taken to the evidence that payments continued in the same way as when the Agreement was on foot (at least as far as Ms Miller was aware, and she was employed from February 2002).

CSR submitted further that, as Ms Miller was not cross-examined, I should accept her evidence that nothing changed, as far as the provision of casual labour hire services was concerned, at least while she was there. I accept that, in so far as the payments made for labour were concerned, her evidence was not challenged. However, any evidence she gave about whether the indemnity clauses continued to apply would be either inadmissible (as an expression of subjective opinion: see Codelfa Construction Pty Ltd v State Rail Authority (1982) 149 CLR 337 at 352 per Mason J) or irrelevant, unless, possibly, some practice could be shown of Adecco Australia continuing to indemnify CSR in respect of such claims during the relevant period.

In any event, it does not, in my view, follow from the uncontroverted evidence of Ms Miller that CSR continued to pay Adecco Australia “according to the same terms and conditions” as provided for in the Agreement, that the parties agreed that the Agreement itself was extended. Ms Miller herself ventured a reason for Adecco Australia not insisting on a new agreement immediately upon the expiry of the old: it did not want to have to submit itself to the process of re-tender and, presumably, the competitive forces that such a process would entail. CSR may have had its own reasons for not wanting to exercise its option to extend the Agreement.

CSR has established the following primary facts:

In my view, the facts give rise, at least theoretically, to the following possibilities:

If the correct analysis is either (2) or (3), CSR is not entitled to the benefit of the indemnity in cl 23.2. If (1) is established, there is a further question whether the indemnity clause extends to CSR’s liability to the plaintiff as a matter of construction.

For the reasons that follow, I am not persuaded that CSR has established (1) above. Accordingly, its claim under the indemnity fails.

In order to address the parties’ submissions it is necessary to refer, at least in summary form, to the authorities relied upon, which will be addressed below.

CSR relied on Brambles Ltd v Wail; Brambles Ltd v Andar Transport Pty Ltd [2002] VSCA 150; 5VR 169, a decision of the Victorian Court of Appeal in support of its argument that the Agreement was extended by conduct.

The facts were, in summary, as follows. Brambles Ltd (Brambles) provided laundry services to various hospitals. It provided large trolleys to these hospitals which were filled with soiled linen, which was loaded onto trucks and taken away to be laundered. Until 1990, Brambles employed the drivers of these trucks. In 1990, Brambles entered into an agreement with Andar Transport Pty Ltd (Andar), which expired on 3 April 1993, pursuant to which Andar employed the drivers of the trucks who performed this work for Brambles. The contract between them contained an express indemnity whereby Andar agreed to indemnify Brambles in respect of loss, damage or injury caused or contributed to either by Andar’s conduct of the delivery round, or its acts or omissions. One of Andar’s employees, Wail, was injured while loading a trolley in July 1993 (after the formal agreement had expired). He sued Brambles, which claimed an indemnity from Andar. A jury awarded Wail damages for his claim against Brambles. The primary judge dismissed Brambles’ claim on the indemnity.

Brambles appealed. The Victorian Court of Appeal (Winneke P, Charles and Batt JJA) found that the evidence warranted a finding that, after the written agreement between Brambles and Andar expired on 3 April 1993, the parties proceeded as though they were still governed by the terms of the original agreement, except that, as the agreement had expired, either was entitled to terminate the agreement on reasonable notice. Their Honours said at [61] (omitting footnotes):

The Victorian Court of Appeal also appeared to have regarded as significant the circumstance that the formal agreement between the parties was lengthy and detailed and, at [58], referred to Cawsand Pty Ltd v Normans Wines Pty Ltd (Unreported, Brooking J, 21 June 1989) in the following terms (which were relied on by CSR in the present case):

The Victorian Court of Appeal, at [61], described the question whether an implied or tacit agreement to continue dealing on the same terms (apart from that it be terminable on reasonable notice) is to be inferred is “an evidentiary or factual question”. It allowed the appeal and gave judgment for Brambles on the indemnity.

Andar was granted special leave to appeal to the High Court. The High Court found 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: Andar Transport Pty Ltd v Brambles Ltd [2004] HCA 28; 217 CLR 424 at [29] (Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ). Callinan J (who dissented on the construction of the indemnity and was the only judge to deal with the point in the High Court) agreed with the Court of Appeal that the expired agreement remained in force (at [11]-[29], [108]-[111].

CSR contended that the facts of Brambles Ltd v Andar Transport Pty Ltd were on all fours with the present case and that the same conclusion (as to the continued application of the terms of an expired agreement) ought be reached. It submitted that, in circumstances where parties continue to conduct themselves as if they were bound by a detailed agreement that has expired, the inference ought be drawn that they have agreed to extend that agreement and they should be bound by that agreement.

Adecco Australia contended that Brambles Ltd v Andar Transport Pty Ltd does not authoritatively determine any issue in the present case since it turned on a factual question which, on the evidence in that case, was determined in favour of the object of the indemnity. It submitted that the conclusion that the parties remained bound by their expired agreement depended on the finding that Andar had continued to perform the agreement “in exactly the same manner as it had done between April 1990 and April 1993” (when the agreement was on foot). Moreover, it submitted that where the High Court refrained from addressing the challenge to that finding (as it was unnecessary to do so) it ought not be inferred that the finding would have survived appeal, had it been necessary for the High Court to address it.

In so far as Brambles Ltd v Andar Transport Pty Ltd turned on a question of fact, I consider it to be distinguishable from the present case for at least three reasons.

First, there was no evidence in that case that there were any negotiations for a new agreement between the parties during the relevant period or that any extensions that had been expressly agreed. 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.

Secondly, the Court of Appeal in Brambles Ltd v Andar Transport Pty Ltd was satisfied that the agreement was performed in exactly the same way and on exactly the same basis, notwithstanding its expiry. Although there is some evidence from Ms Miller (to which no objection was taken) that CSR paid Adecco Australia for labour hire services in the same way up until October 2002, the evidence is in the form of a conclusion, which does not permit a distinction to be drawn between the three possibilities listed above. All that can be taken from this evidence is 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.

Thirdly, the evidence in the present case does not extend beyond October 2002, when Ms Miller left Adecco Australia. Although, in some cases, the inference can be drawn that the past can be used as a guide to the future (see, for example, Minister for Immigration and Ethnic Affairs v Guo [1997] HCA 22; 191 CLR 559 at 574-575) I am not persuaded that such an inference ought be drawn in the present case. 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. It was not. In these circumstances, I am 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. I reject CSR’s submission that I ought draw a Jones v Dunkel inference from Adecco Australia’s not calling any evidence on the matter. CSR bore the onus and has not, in my view, discharged it.

I reject CSR’s argument that it should be inferred from the inclusion of a relevantly identical indemnity clause to cl 23 in the Agreement, in a draft agreement that was extant in January 2003, that the parties were in agreement that such a clause continued to bind them. It is not appropriate to draw such a conclusion from the course of negotiations.

Moreover, the evidence, such as it is, showed that CSR was embarking, if not at the time of Ms Miller’s departure, then shortly afterwards, on a demerger, which would result in its divesting itself of its concrete plants, such as the one conducted at Batemans Bay. The evidence does not establish how much of CSR’s requirement for casual labour (the cost of which was set out in the document referred to above that covered CSR’s expenditure for the period April 2002 to January 2003, which totaled $17,116,583) related to the businesses of which it divested itself. However, it cannot be assumed that it was insignificant, or that this would not have impacted its commercial relationship with labour hire companies such as Adecco Australia. Although the demerger did not actually take effect until about the time the plaintiff stopped driving truck 619, it was in contemplation prior to that time.

CSR also submitted that it was enough that it establish that the Agreement had been extended for at least some of the period during which the plaintiff was driving truck 619 and that it had established that the Agreement was on foot at least until Ms Miller left Adecco Australia. I do not accept this submission. However, even were it correct, I am not persuaded that the Agreement had been extended beyond 31 July 2002 because of the form of Ms Miller’s evidence.

What Brambles Ltd v Andar Transport Pty Ltd establishes is 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.

In Optus Networks Pty Ltd v Gilsan (International) Ltd [2006] NSWCA 171 the Court of Appeal considered whether terms as to payments continued to apply notwithstanding that relevant agreements as to rates of payments had expired. For present purposes the following summary suffices.

Gilsan, a so-called “entertainment provider”, provided adult entertainment dispensed in Sydney to customers in the United States (US) for a fee known as the “collection rate”. Three telephone service carriers were involved: ATT (the US carrier); Optus (the Australian carrier); and TVL (the terminating carrier). On or about 25 June 1996 they entered into an agreement (the Tripartite Agreement), which stipulated a total rate per minute for this traffic and how this rate would be divided between them.

In March 1998 Optus and ATT made the first of a series of successive annual confidential agreements. It was expressed to be effective from 1 January 1998 to 31 December 1998 (the Confidential Agreement). It provided for different rates, as between Optus and ATT, than those set out in the Tripartite Agreement.

The Confidential Agreement ended on 31 December 1998. No similar agreement was made for 1999 until 30 September 1999. The agreement made on that date was expressed to apply from 1 January 1999 until 31 December 1999. In 2000 no agreement to cover the rates for 2000 was made until 4 August 2000. In 2001 no agreement to cover the rates for 2001 was made until 31 May 2001.

The issue was whether, at the time of the dispute, the applicable rates were those under the Tripartite Agreement or those as provided for in the most recent Confidential Agreement, notwithstanding that the dispute arose at a time when the Confidential Agreement for the then current period had not yet been made.

The Court of Appeal accepted the submission by Optus (which relied on Brambles Ltd v Andar Transport Pty Ltd) that there was an implied agreement between Optus and ATT that the Confidential Agreement of a previous year should continue in the following year until a new agreement was made. For present purposes, the relevant finding of Hodgson JA (Beazley and McColl JJA agreeing) was:

In the present case, the issue is not whether the terms as to payment continued to apply between the parties. Whether they did or not, or whether the parties simply chose to conduct themselves on that basis, although they were not bound to, need not be determined. The issue is a more difficult one: whether the indemnities in the Agreement continued to apply, in circumstances where there is 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.

It is not, in my view, determinative, one way or the other, that the parties were endeavouring to negotiate a new agreement which was different from the Agreement. CSR contended that the continuing negotiations did not affect the existing agreement (relying on Optus Networks Pty Ltd v Gilsan (International) Ltd); Adecco Australia contended that the course of the negotiations was proof positive that the parties were not prepared to enter into an agreement on the old terms and instanced the indemnity clause, about which there was correspondence in early 2003, as an example of such disagreement.

CSR relied on the circumstance 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 further submitted that I should infer that the parties had agreed to an extension of the Agreement pending further agreement 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. 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. CSR submitted that what Callinan J said in Andar Transport Pty Ltd v Brambles Ltd at [111] was apposite in the present case:

Although 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. I am not satisfied that there was any such extension pursuant to cl 2.2. The question whether the Agreement was extended, or continued to operate, in terms, by agreement is addressed further below.

CSR further submitted that, if any alteration were to be made to the Agreement (such as to retain the payment terms and exclude other clauses, such as those providing for insurance and indemnities), this could only be done by those authorised to make such an agreement: Mr Lillyman, on behalf of CSR, and Ms Collier on behalf of Adecco Australia.

In my view this submission overlooks the fact that the Agreement had expired and, implicitly, reverses the onus of proof. Thus the question is whether all, any, or none of its terms survived its expiration. One would not conclude from the undoubted lack of evidence of any agreement between Mr Lillyman on behalf of CSR and Ms Collier on behalf of Adecco Australia, that all terms survived expiration. This does not determine that they did not; but rather that the evidence of any agreement to extend (whether implied or express) must be sought elsewhere.

I consider it to be significant 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. In these circumstances I would not infer that they were silent either because they had forgotten (unlikely, and, in any event, inconsistent with Ms Collier’s email of 27 August 2002 referred to above) or because they both assumed that the Agreement had been extended by conduct (also inconsistent with the email of 27 August 2002). It is also telling that they were cognisant that the Agreement expired on 31 March 2002 and had agreed to extend it, first until the end of June 2002 and, subsequently, until the end of July 2002.

I consider the more probable explanation to be that their commercial relationship continued after 31 July 2002 on a more basic footing whereby Adecco Australia supplied the labour to CSR and, in return, CSR paid it the amounts stipulated in the (expired) Agreement. The finer points of insurance and indemnity (which were likely to be contentious) were left to be determined, if at all, on another day, which did not, as it happened, ever arrive.

I note for completeness that there was no allegation in the present case of promissory, or other, estoppel such as was established in Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; 164 CLR 387. Accordingly there was no suggestion that CSR had relied on any representation or other conduct on the part of Adecco Australia that would make it unconscionable for Adecco Australia to rely on its strict legal rights, namely: that there was no extension of the Agreement and that thereby it was not liable to CSR pursuant to the indemnity in favour of CSR conferred by cl 23.2 of the Agreement. Indeed, such a suggestion was eschewed by CSR. Accordingly, there was no such impediment to Adecco Australia’s reliance on its strict legal rights.

Notwithstanding my conclusion that cl 23.2 did not apply to the legal relationship between CSR and Adecco Australia after 31 July 2002, I propose to address the question of its application, having regard to the submissions of the parties on the question.

Adecco Australia contended that it was not liable to indemnify CSR under cl 23.2 as CSR for the following reasons:

Adecco Australia relied generally on the principle that indemnity clauses, like guarantee clauses, ought be construed in favour of the surety and against the indemnified: Andar Transport Pty Ltd v Brambles Ltd at [17]-[23]. It referred to Chan v Cresdon Pty Ltd (1989) 168 CLR 242 where a guarantee of a “lease” was held to be confined to a legal lease, rather than an agreement to lease, which, although a lease in equity, is not one at law.

Clause 1.1 defines “Temporary Staff” as meaning an individual employed by the Supplier to work in an Assignment for CSR. The word “employed” has both a narrow sense and a wide sense. In its narrow sense it describes the relationship of employment between a master and a servant, or employer and employee. In its wider sense, it merely means “used”. The plaintiff was employed by Adecco Industrial and not Adecco Australia. Accordingly, if the word “employed” is used in its narrow sense, the plaintiff was not “Temporary Staff”. If it is used in its wide sense the plaintiff fell within “Temporary Staff”, as long as the other conditions in the definition were satisfied.

Adecco Australia contended that, because the definition of Temporary Staff appeared in cl 23.2, which was an indemnity clause, any ambiguity ought be resolved in its favour and the word “employed” ought be construed in its narrow sense. CSR submitted that the principles relating to construction of indemnity clauses ought not be permitted to subvert the principle that a contract is to be read as a whole and that, accordingly, the expression “Temporary Staff” should be construed so as to be consistent with the general commercial arrangement between the parties in the Agreement.

Several clauses in the Agreement include the expression “Temporary Staff”. The Supplier has a responsibility to “supply” Temporary Staff under cl 3.1. CSR places orders for the “provision of Temporary Staff” in cl 3.2. Under cl 4.4 the Supplier is obliged to “ensure that the Temporary Staff services are delivered”. CSR is obliged to pay the Supplier by reference to invoices submitted (cl 12) but it is the Supplier who is responsible, under cl 14.1, “at all times for establishing and maintaining its relationship as employer with its Temporary Staff on Assignment to CSR. Clause 14.1 is a powerful indication that the word “employed” is used in its narrow sense, although the other clauses are less unequivocal.

Where there is an ambiguity, as I consider there to be regarding the meaning of “employed” in the definition, regard can be had to the surrounding facts and circumstances, or the so-called Codelfa matrix (after Codelfa Construction Pty Ltd v State Rail Authority, at 352 per Mason J). In the present case, these circumstances include 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.

The email dated 10 February 2003 (referred to above) provides some evidence of surrounding circumstances since it related to the period from 1 April 2002 to January 2003 (which included, at least, the period of 1 April 2002–31 July 2002 during which it was accepted that the Agreement still applied). It 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”. This would tend 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 the plaintiff 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.

However, this inference is largely a matter of speculation. The evidence is not sufficient to establish, for example, that Adecco Australia did not employ any people whose labour it hired to others, such as CSR. Although Adecco Industrial was, according to Ms Miller, “solely a labour hire company”, her evidence did not go so far as to say that it was the sole labour hire company in the Adecco group. Moreover, there is a more fundamental objection to the use of this evidence for that purpose: it post-dates 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: Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; 76 NSWLR 603 at [6] per Allsop P.

CSR contended that the Agreement ought not be interpreted in an unduly technical way and that regard ought be had to the commercial realities and the exigencies of the parties’ relationship. It also submitted that the ingenuity of lawyers to discern ambiguity ought not be permitted to undermine practical interpretation, or impede a court’s power to “make informal rectification of documents that contain obvious errors”: Cheshire and Fifoot, Law of Contract (10th Aust. Ed, 2012, LexisNexis Butterworths), 6.5-6-6. These principles are apposite to the interpretation of contracts generally

As referred to above, indemnities are to be construed against the indemnified: Ankar Pty Ltd v National Reece Westminster Finance (Australia) Ltd (1987) 162 CLR 549 at 561. That the definitions of “Supplier” or “Temporary Staff” appear to create a lacuna and exclude the plaintiff from their operation, although he would appear to have been part of the parties’ commercial relationship, is not sufficient to satisfy me that there is an “obvious error” or that I would be entitled (much less correct) to conclude that “Supplier” should include not only Adecco Australia but also Adecco Industrial.

In these circumstances, I am not persuaded that the term “Temporary Staff” in cl 23.2 includes the plaintiff, who was employed by Adecco Industrial but not “the Supplier” (Adecco Australia). Accordingly, CSR is not entitled to be indemnified by Adecco Australia in respect of his claim.

In light of this conclusion it is not necessary to deal in any detail with the other arguments propounded by Adecco Australia although I propose to address each briefly.

Adecco Australia contended that the breadth of cl 23.2 raised doubt as to its meaning and relied on Andar Transport Pty Ltd v Brambles Ltd, as refined in Bofinger v Kingsway Group Ltd [2009] HCA 44; 239 CLR 269 at [53]. It contended that, putting to one side the issue regarding the meaning of “Temporary Staff”, the clause would appear to require Adecco Australia to indemnify CSR even where CSR was solely responsible for the claimant’s injury by reason of its own negligence. It submitted that clear words would be required to permit a party, in effect, to profit from its own breach by shifting the consequences of its wrong to the (putative) innocent party. Further, it submitted 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.

Dealing with the last proposition first, I regard the word “where” at the end of the clause as obvious surplusage. The history of its provenance appears from the pre-contractual material but no conclusion can be drawn from it other than that it ought to have been removed; the word serves no purpose. I reject Adecco Australia’s submission that it cannot be regarded as surplusage in the absence of a suit for rectification. It is well-established that courts have power to “make informal rectification of documents that contain obvious errors”: see Cheshire and Fifoot, Law of Contract, 6.5 and the passages referred to in footnote 43.

Once the word “where” is excised, cl 23.2 is, in my view, sufficiently clear to indicate an objective intention to cover all claims, whether caused or contributed to by CSR’s own fault. That the parties intended the clause to prevail over all others is evident from the prefatory words: “Notwithstanding any other provision of this Agreement”. Sight ought not be lost of the need to construe contractual language in accordance with its normal meaning: Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500 at 510.

Adecco Australia contended that the plaintiff’s claim was one that arose from CSR’s breach of its duties to the plaintiff and not one “arising out of or in connection with the performance of Assignment duties” and therefore was not covered by the indemnity in cl 23.2.1 of the Agreement. It relied on Erect Safe Scaffolding (Australia) Pty Ltd v Sutton [2008] NSWCA 114 (Erect Safe), particularly at [12] per Giles JA.

Erect Safe concerned a claim for damages brought by Mr Sutton, who was employed by Dalma, a formwork company which was subcontracted to Australand, the head contractor, who was engaged in the construction of a large multi-storeyed building. Erect Safe was also subcontracted to Australand and was responsible for erecting and maintaining scaffolding on the site. Mr Sutton sued Australand and Erect Safe for damages in negligence. Australand cross-claimed against Erect Safe on the basis of an indemnity clause in the subcontract between Erect Safe and Australand which, relevantly, provided that the subcontractor, Erect Safe, must indemnify Australand Constructions (the head contractor) against liability incurred by Australand Constructions arising out of the performance of the Subcontract Works and its other obligations under the Subcontract. The primary judge entered judgment against both defendants; found that Erect Safe was liable to indemnify Australand in respect of its liability to the plaintiff; and entered judgment for Australand on the cross-claim accordingly.

The judgment against Erect Safe on the cross-claim was overturned on appeal. The Court of Appeal (Giles JA and McClellan CJ at CL, Basten JA dissenting) accepted Erect Safe’s argument that the indemnity clause did not extend to Australand’s liability to Mr Sutton. Their Honours found that Australand’s liability arose by reason of its own negligence, rather than the performance of the subcontract works by Erect Safe, which had merely been the occasion for the loss, not its cause (which was Australand’s breach of the duty it owed to Mr Sutton) and that this was insufficient to engage the indemnity.

CSR referred to State of New South Wales v Tempo Services Ltd [2004] NSWCA 4, in which the Court of Appeal overturned the decision of the primary judge that the State had no right to be indemnified by Tempo Services in respect of costs incurred in defending a claim by a cleaner employed by Tempo Services to clean State schools. The Court of Appeal held that the words in the indemnity “arising out of or in connection with or caused by the performance of the Services [the cleaning of schools]” covered the costs incurred by the State in defending the cleaner’s claim. It rejected as irrelevant the circumstance that Tempo Services was not to blame for the accident.

In response, Adecco Australia contended that State of New South Wales v Tempo Services Ltd was no longer good law in light of Andar Transport Pty Ltd v Brambles Ltd.

It has often been emphasised that each indemnity turns on its own wording and each case on its own facts. I accept CSR’s submission that Erect Safe does not provide any real guidance in the instant case. I do not regard the circumstance that the plaintiff’s liability arose from CSR’s negligence as providing a warrant for concluding that the claim was not one that “arising out of or in connection with the performance of Assignment duties”. Although characterisation on one basis was found to exclude characterisation on the other in Erect Safe, I do not consider dual characterisation to be excluded in the present case. Furthermore, the words “in connection with” are of wide import and ought not be read down without good reason.

Adecco Australia submitted that it had not been established that the plaintiff was relevantly employed “to work in an Assignment for CSR” as required by the definition of “Temporary Staff”. It contended that “Assignment” was a defined term (see above) and that, accordingly, CSR had to establish that the plaintiff was undertaking tasks at a location and a classification specified in an “Order” being a term defined to mean the order CSR places with the Supplier under Part 4 of the Agreement.

No “Order” was in evidence. No explanation beyond the passage of time was given by CSR for the absence of any such order. Nor was any attempt made to establish that all relevant orders had been destroyed such as would warrant the admission of secondary evidence. Although the plaintiff was undertaking work at a location where CSR, or a subsidiary, ran a concrete plant, and I infer that such work was for the benefit of CSR or its affiliate, the lack of evidence of an Order is 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”.

Adecco Australia also submitted that it was not liable to indemnify CSR in respect of the plaintiff’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. Adecco Australia accepted that the evidence established that CSR had a 100% interest in Readymix Holdings Pty Ltd (which became Holcim) on 27 February 2002 and that it had no interest in Holcim as at 28 March 2003. However, it contended that there is no evidence about the position between September 2002 and March 2003.

CSR tendered its 2000 annual report, which showed that for the year ended 2000, Readymix Holdings Pty Ltd was one of its wholly owned subsidiaries. Justice Conti made orders for the demerger (which affected Holcim) on 7 February 2003 which foreshadowed an application for approval of the arrangement on 28 March 2003. In these circumstances, I am satisfied that Holcim fell within the definition of CSR at the relevant time and therefore, to that extent, the plaintiff’s claim fell within cl 23.2.

Adecco Australia also submitted that Readymix Holdings Pty Ltd was not incorporated until 27 February 2002, which post-dated the making of the Supply Agreement and that the definition of “CSR” is in the present tense (that it “has” a 50% or greater interest). I do not regard this point as a basis for excluding the plaintiff’s claim from the wording of cl 23.2. The parties cannot have intended to exclude from the operation of the indemnity claims against wholly owned subsidiaries of CSR incorporated after the date of the Agreement.

Little argument was directed to this clause. However, it was relevant because it was the basis of CSR’s claim to be indemnified by Adecco Australia in respect of its liability on the cross-claim to Adecco Industrial for $160,000 (see the Terms of Settlement above). Although CSR’s liability to Adecco Industrial is “a liability to any person” within the meaning of cl 23.2.2, it is not “in connection with such personal injury”. The word “such” in cl 23.2.2 imports the limitations in cl 23.2.1 concerning Temporary Staff and the performance of Assignment duties. Accordingly, for the same reasons as given in respect of cl 23.2.1, cl 23.2.2 does not apply in the present case.

In summary, I do not consider CSR to have established any entitlement on its cross-claim against Adecco Australia to be indemnified in respect of the plaintiff’s claim for the following reasons:

For the foregoing reasons, I make the following orders: