Host with the most – the shifting vicarious liability landscape (Mt Owen v Parkes  NSWCA 77)
Who should read this
Business owners, CEOs, CFOs and contract and procurement managers of companies who procure labour through external providers or who have structured their group so that an employing entity supplies labour to an operating entity.
The New South Wales Court of Appeal recently found that a ‘host’ employer, as opposed to a ‘legal’ employer, was vicariously liable for the negligence of a hired worker who caused injury to another worker while performing work duties for the host. Vicarious liability is liability imposed on one person for the wrongful act of another on the basis of the relationship between them. This is a significant decision for all businesses who use labour hire personnel.
On 29 July 2017, Mr Glen Parkes, Mr Mitchell Kemp and a third worker were performing maintenance on a bulldozer at the Glendell coal mine, owned and operated by Mt Owen Pty Ltd (Mt Owen).
All three workers were employed by Titan Technicians Enterprise Pty Ltd (Titan) and working under the supervision of a Mt Owen employee, Mr Cameron Wallace.
The workers were obtaining hydraulic and engine oil samples from a bulldozer while conducting a 1,000-hour service. This involved bleeding pipes containing circulating oil while the motor was running. To do that, Mr Kemp positioned himself in the bulldozer cabin and operated the hydraulic system so as to raise and lower the attached implements.
Mr Parkes was injured when Mr Kemp suddenly dropped the blade of the bulldozer, which caused the track on which Mr Parkes was standing, to flick up and crush his right leg between the track and the edge of an access platform.
Mr Parkes claimed damages for personal injuries against both Mt Owen and Titan.
Findings at trial
It was not disputed that Mr Kemp was negligent by suddenly dropping the blade of the bulldozer.
Campbell J found that Mr Kemp was an employee pro hac vice (for this occasion) of Mt Owen and that Mt Owen was vicariously liable for Mr Kemp’s negligence.
His Honour found that both Mt Owen and Titan had breached their own duties of care to Mr Parkes and apportioned liability as follows:
- 60% for Mr Kemp’s negligence for which Mt Owen was vicariously liable; and
- the remaining 40% was shared equally by Mt Owen and Titan.
Mt Owen was therefore liable for 80% of the damages and Titan 20%.
Mt Owen’s appeal
Mt Owen appealed against the finding that it was vicariously liable for the negligence of Mr Kemp.
The Court of Appeal dismissed Mt Owen’s appeal. It found that Campbell J correctly concluded that two parties cannot both be vicariously liable for the negligent act of an individual.
Normally, an employer will be vicariously liable for the negligent act of their employee within the scope of his or her employment. However, where the arrangements between the actual employer and the host are such that there is a transfer of control from the employer to the host, this can lead to an outcome where the host will be vicariously responsible for the negligence of the hired worker. Such an outcome will only arise in exceptional circumstances such as when the host employer is in full control of the manner in which the work is undertaken.
The factors which will indicate that there has been the necessary transfer of control resulting in vicarious liability on the part of the host are:
- where the contract confers on the host (Mt Owen), the authority to give directions and orders to workers employed by the labour hire company (Titan);
- where the hired worker (Mr Kemp) is subject to the direction of the host employer;
- where the host manages and implements safety systems and requirements; and
- where the labour hire company requires its employees to follow the workplace health and safety policies of the host.
Titan’s cross appeal
Titan successfully appealed against the finding that it had breached its duty of care to Mr Parkes by failing to have the job safety analysis (JSA) spell out that no implement movement should occur while tradesmen were within the footprint of the bulldozer.
The Court concluded that Titan was not liable even though it owed a non-delegable duty of care as the Mr Parkes’ legal employer.
The initial finding of negligence against Titan was based on the inadequacy of Mt Owen’s JSA which was completed and signed off by Mr Wallace on behalf of Mt Owen before the crew commenced work on the bulldozer.
The Court found the JSA was not deficient and sufficiently covered the situation of obtaining oil samples from the bulldozer as it already stipulated that movement should only occur while other tradespeople are beyond the footprint of the bulldozer. To cover the situation of oil testing would restate the prohibition, which reasonable care did not require.
The Court concluded that any deficiency would not have caused the accident either. Mr Kemp did not follow the JSA for some unknown reason and it was not proved that a procedure for oil testing would have prevented the accident. The net result was that Titan escaped liability for the claim.
Key issues and how we can support you.
The use of labour hire personnel is very common in a range of industries and, depending upon how those arrangements are structured, this could have important implications for host employers and their insurance programs.
It is important to remember that this issue only arises where the labour hire worker negligently causes injury to a third party or damage to property during the course of their deployment. It does not impact on the situation where the labour hire worker themselves is injured, unless they are injured by the actions of a fellow labour hire worker.
The impact upon companies who structure their affairs so that workers are employed by one entity and are deployed to perform work for an operating entity may not be directly impacted because the group entities will usually be insured under the same insurance program. However, there are many variations on these arrangements and companies who seek to engage their workers under ‘contractor’ type arrangements to shield themselves from liability may find that these structures will face very close scrutiny in a claims situation.
McCullough Robertson and our insurance advisory service, Allegiant IRS, can assist you with a review and assessment of your current insurance policy to ensure you have appropriate cover. We can also guide you through the process of redesign, placement and renewal of insurance cover for your business to ensure that it best fits your current or anticipated risk profile.
This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.