Appeal Dismissed: Workers Compensation Claim Against Principal Contractor

The Court of Appeal dismissed an appeal regarding a deemed worker's claim for compensation against a principal contractor under the Workers Compensation Act 1987. The lower court found that the second respondent was not a principal contractor, and the appeal was dismissed.

[ADDRESS] of Appeal

CITATION : [NAME] Authority of New South Wales v [NAME] & 2 Ors [2001] NSWCA 362 FILE NUMBER(S) : CA 40878/00 HEARING DATE(S) : 4 September 2001 JUDGMENT DATE : 11 October 2001

[NAME] Authority of New South Wales - Appellant PARTIES : [NAME] - 1st Respondent [COMPANY] - 2nd Respondent [COMPANY] - 3rd Respondent JUDGMENT OF : Priestley JA at 1; [NAME] at 2; Davies AJA at 30

LOWER COURT JURISDICTION : [ADDRESS] COURT CC 10363/96 FILE NUMBER(S) : LOWER COURT Judge Walker QC JUDICIAL OFFICER :

Walker QC/[NAME]/[NAME] - Appellant COUNSEL : [redacted] L C King SC/M R Gracie - 2nd Respondent [NAME] Authority of New South Wales - Appellant SOLICITORS : [redacted] [NAME] - 2nd Respondent [NAME] - 3rd Respondent CATCHWORDS : TORTS - negligence - liability - Workers Compensation Act 1987 - deemed worker - employer uninsured - whether a party was a 'principal' - whether compensation can be ordered against appellant where judge noted a non-party was the principal - whether a positive finding made - CONTRACT - sub contractor - whether a contractual relationship existed - ND Workers Compensation Act 1987 LEGISLATION CITED : Workplace Injury Management Act [ADDRESS] 1990 CASES CITED: n/a

DECISION :

1) Appeal dismissed.

2) Appellant to pay costs of the first respondent on appeal.

3) Cross-appeal dismissed with no order as to costs.

4) The appellant and second respondent to lodge written submissions with respect to costs within 7 days.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

CA 40878/00 CC 10363/96 PRIESTLEY JA [NAME], 11 October 2001 [NAME] AUTHORITY OF NEW SOUTH WALES v [NAME] & ORS

An award was made in the [ADDRESS] in favour of the first respondent against the third respondent, the principal contractor under s20 of the Workers Compensation Act 1987, for compensation for injuries arising out of a workplace accident. As the third respondent was uninsured, the appellant was ordered to pay the compensation awarded. The first respondent was the deemed worker of the third respondent, who was then engaged by the second respondent. A company called [COMPANY] was described in the documents as 'the Proprietor'. [NAME] had paid for the services of the third respondent, via the second respondent. [NAME] was not a party to the workers compensation proceedings. The third respondent had applied for [NAME] to be joined, however the trial judge declined to do so as it would involve an adjournment of the proceedings. The trial judge made a finding that the second respondent was not the principal contractor, and went on to note that in his view [NAME] was a principal contractor. The appellant appealed, submitting that the trial judge having formed a view that [NAME] was a principal, erred in ordering the appellant to pay the first respondent's compensation.

Held:

[NAME] (Priestley JA and Davies AJA agreeing):

1) The trial judge clearly found that the 2nd respondent was not a principal contractor under s20 of the Workers Compensation Act 1987.

2) The statement by the trial judge that [NAME] was a principal contractor was unnecessary, and his Honour was doing no more than proffering a view or opinion. When considered in conjunction with the language of the finding against the second respondent, it is clear that there was no positive finding made against [NAME] under s20. [NAME] was not a party and whether it was a s20 principal was not an issue squarely before the court.

Orders:

1) Appeal dismissed.

2) Appellant to pay the costs of the first respondent in the appeal.

3) Cross-appeal dismissed with no order as to costs. 4) Appellant and second respondent to lodge written submissions on costs as between them within 7 days.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

Judgment

1 PRIESTLEY JA: I agree with [NAME]. 2 [NAME]: In the [ADDRESS] Walker QC made an award in favour of the first respondent, [NAME], against the third respondent, [COMPANY] ([NAME]). [NAME] was uninsured, [NAME] was ordered to pay the compensation awarded. His Honour also found an award in favour of the second respondent, [COMPANY] ([NAME]). 3 The case was a complicated one with many issues. Apparently, there had been a history of litigation in the [ADDRESS] between the parties. 4 [NAME]'s claim arose out of an injury he suffered on 30 September 1995 when he was working as a carpenter on a building site at Dee Why. He was employed by [NAME], which was, as indicated above, uninsured. [NAME] had quoted for the carpentry work on the site to a [NAME] of [NAME]. [NAME] was paid by [COMPANY] ([NAME]) via [NAME], which was described in the contract documents before the Court as 'The Construction Manager'. [NAME] was therein described as 'the Proprietor'. 5 His Honour found that [NAME] was a deemed worker under the Workers' Compensation Act 1987 (the Act), a finding which is not challenged. Having found that [NAME] was uninsured, his Honour went on to find that [NAME] was not a principal within s20 of the Act. I will return to the specific findings concerning principals in a moment. Before doing so, it is helpful to indicate the issues arising on the appeal. 6 [NAME]'s Notice of Appeal specifies one ground. In essence it says that, having formed a view that [NAME] was a principal within s20 of the Act, his Honour erred in ordering the appellant to pay compensation to the first respondent out of the fund constituted by s34 of the Workplace Injury Management Act 1998. 7 There was an earlier ground of appeal directed against [NAME], but this was abandoned. 8 The deemed worker, [NAME], has filed a defensive cross-appeal to be relied upon in the event that the Court accepts the case urged by the appellant. 9 Before turning to his Honour's judgment, it is pertinent to examine how the case was conducted below. 10 The Answer filed by [NAME] did not raise any issue relating to s20 of the Act. The Answer by [NAME] pleaded that the applicant was employed directly by [NAME] and '[[NAME]] is a principal of [[NAME]] in terms of Section 20 and the Applicant is not eligible to make a claim under the Uninsured Liability and Indemnity Scheme by operation of Section 140(4)'. 11 The hearing commenced on 18 October 1999. The transcript notes that an application was made to adjourn the proceedings but was refused. We have been informed from the bar table that [NAME] applied to join [NAME] to the proceedings but his Honour declined to do since it would involve an adjournment. Given the issues seen to arise on the pleadings, it is unsurprising that the application was refused. The hearing continued through the 19th October and was adjourned part-heard to 25 May 2000. On that day counsel for [NAME] called [NAME], the principal of [COMPANY]. It is plain that in doing so he was seeking to support the defence filed that [NAME] was the principal of [NAME]. Counsel for [NAME] cross-examined [NAME]. [NAME] agreed that while his accounts were presented to [NAME] for payment, he knew that payments would be made by [NAME]. 12 At the conclusion of the evidence it appears that counsel agreed with his Honour that they would file written submissions. In the course of discussion about this his Honour asked counsel what they saw as the issues arising for consideration. Counsel for [NAME] raised the issue that his client was not a s20 principal. Counsel for [NAME] also raised certain matters. His Honour then asked counsel for [NAME] for his assistance. His sole contribution was to raise the question of whether it had been conceded that [NAME] was uninsured and informed his Honour that his instructions were that it was uninsured. No mention was made to the effect that [NAME] submitted that [NAME] was a principal, and it must be kept in mind that it had not so pleaded. 13 The parties lodged written submissions. [NAME]'s submission relevantly stated that the required elements of s20 had been made out against [NAME]. Alternatively, it was argued that the required elements had been made out against [NAME], although noting that it was not a party to the proceedings. The submission then developed reasons, by reference to the evidence, upon which it relied to support its primary case against [NAME]. No further mention was made of the alternative proposition and no evidence was relied on as supporting it. As noted earlier, [NAME] had not raised any such defence, as regards [NAME], in its Answer. 14 [NAME]'s submission was that it was not a s20 principal, pointing to evidence which supported such a conclusion. Counsel stressed that there was no contractual relationship between [NAME] and [NAME]. 15 The applicant worker's written submission curiously adopted [NAME]'s submission on s20. It is plain that counsel then engaged had not completely thought through the implications of such a broad adoption. 16 In his judgment, Walker CCJ noted that [NAME] denied that it was a s20 principal while [NAME] submitted the opposing view. Indeed, this had been clearly raised by the parties as the s20 issue for the Court to determine. 17 His Honour specified the conditions necessary to establish liability under s20 of the Act and referred to relevant authority, later returning to what he identified as being the resolution of the s20 issue. In a later reference to the evidence he concluded: To my mind the contract speaks for itself. The work undertaken by the first respondent [[NAME]] was that of construction manager not general carpentry. The distinction here from the situation in Easton case is that there was an unbroken chain of contractors doing the same work. In this case the first respondent's role is that of the agent for [COMPANY] and the third respondent's [[NAME]] contract makes it abundantly clear that the first respondent is not doing the work of a builder. 18 His Honour continued: Accordingly I determine that the first respondent [[NAME]] is not a principal contractor within the meaning of s20. 19 This is a very clear finding that, on the evidence, [NAME] was not a s20 principal. It was a finding against the primary case advanced by [NAME]. 20 His Honour did not need to add anything more. This, in conjunction with other findings, was sufficient for an award to be made against [NAME] and an order that [NAME] meet it out of the Fund since [NAME] was uninsured. 21 However, his Honour went further and stated: [COMPANY] is in my view a principal contractor but is not a party to the current proceedings. 22 This was not a necessary finding, if indeed it is one at all. On its face it is not a finding that [NAME] was a s20 principal, and his Honour did not examine the other elements of the provision as far as concerns [NAME]. His Honour did not proceed to conclude that s140(4) of the Act was engaged. When considered in conjunction with the emphatic language of the finding with respect to [NAME] and the lack of reference to [NAME] in his Honour's summary of findings, it is clear that there was no positive finding made against [NAME]. 23 Section 140(4) provides that a claim shall not be made against the Scheme if the claimant is entitled under s20 to claim compensation against a principal within s20. Senior counsel for [NAME] on the appeal informed the Court that [NAME] is insured. 24 It beggars belief why [NAME] did not inform the trial judge of this situation and seek to add [NAME] as a party to the proceedings, as it was entitled to do under s144(2)(b) of the Act. 25 Bearing in mind the failure of [NAME] to plead any s20 issue regarding [NAME] and its failure to inform the judge that it submitted in the alternative that [NAME] was a principal, except in the most elliptical way, it was unnecessary for his Honour to determine whether or not [NAME] was a principal. This is especially so when it is remembered that [NAME] was not a party to the proceedings and the issue was never properly explored. Rather, the s20 issue which was explored at the trial was the position of [NAME]. 26 In my view, his Honour was doing no more than proffering a view, no doubt garnered from the documents before the Court, that [NAME] was a principal. It was an unnecessary statement. It was not responding to any issue squarely before the Court. His Honour could have said, I find that [NAME] is not a s20 principal, and left it at that. That would have determined the issue raised. Alternatively, he could have said that it may be that [NAME] is a principal, but it is not a party and I do not need to make a finding. 27 If his Honour had done this, there could, I believe be no criticism. 28 When judged in its proper context (the pleadings and the way the case was run) what his Honour said was no more than surplusage and was unnecessary. In any event, his Honour did not specifically find that [NAME] was a s20 principal. That is, that the worker had an entitlement to claim against [NAME] under s20. Walker QC argues that such a finding is implicit. I do not accept that this is so. 29 It follows, in my opinion, that the appeal should be dismissed. The appellant should pay the costs of the first respondent of the appeal. The cross-appeal is dismissed with no order as to costs. Since there is a costs dispute between the appellant and the second respondent caused by the amendment of the Notice of Appeal, those parties should lodge written submissions within 7 days and the Court will determine on the papers what orders should be made. 30 DAVIES AJA: I have had an opportunity to read the reasons for judgment of [NAME]. I agree with them and the orders proposed but would add a few words of my own. 31 At the relevant time, s 140 of the Workers Compensation Act, 1987 ("the Act") provided, inter alia:- " 140 Persons eligible to make claims (1) A claim may be made under the Scheme by any person who considers he or she has a claim for compensation under this Act against an employer in respect of an injury to a worker, if the employer (a) had not obtained, or was not maintaining in force, a policy of insurance for the full amount of the employer's liability under this Act in respect of the injured worker at the relevant time, or

… (4) A claim shall not be made under the Scheme if the person claiming the compensation is entitled under section 20 to claim compensation against a principal within the meaning of section 20." 32 Section 20(1) of the Act provided:- " 20 Principal liable to pay compensation to workers employed by contractors in certain cases (1) If any person (in this section referred to as the principal ) in the course of or for the purposes of the person's trade or business, contracts with any other person (in this section referred to as the contractor ) for the execution by or under the contractor of the whole or any part of any work undertaken by the principal, the principal is, if the contractor does not have a policy of insurance or is not a self-insurer at the time a worker employed in the execution of the work receives an injury, liable to pay any compensation under this Act which the principal would have been liable to pay if that worker had been immediately employed by the principal." 33 When the matter came on for hearing in the [ADDRESS] of New South Wales before his Honour Judge Walker, the parties were [NAME], the applicant ("[NAME]"), [COMPANY] ("[NAME]"), to whom [NAME] was contracted, [COMPANY] ("[NAME]"), the construction manager of the building project, and [NAME] Authority of New South Wales ("[NAME]"). [NAME] was not insured under the Act. 34 [NAME] claimed compensation from [NAME] alleging that [NAME] was his employer, either in the ordinary sense or under s 20(1) of the Act. As [NAME] was uninsured, [NAME] also claimed against [NAME] under s 140(1) of the Act. [NAME] also claimed compensation from [NAME], relying upon s 20(1). [NAME] was insured under the Act. 35 In its answer, [NAME] alleged that [NAME] was a relevant principal under s 20(1) of the Act and that [NAME] was, by virtue of s 140(4), not eligible to claim under the Uninsured Liability and Indemnity Scheme. The answer also, alternatively, claimed that [NAME] was employed directly by [NAME]. 36 When the matter came on for hearing before the trial Judge, [NAME] sought an adjournment to permit the joinder of [COMPANY] ("[NAME]"), which company, [NAME] alleged, might be the principal contractor in terms of s 20(1), rather than [NAME]. The trial Judge refused the adjournment. It may be assumed that the other parties either objected to the adjournment or did not join in the application. Of course, any liability on the part of [NAME] had not been raised neither in the claim nor in any of the answers filed in the Court. 37 The matter thus proceeded on the footing that the matter in dispute was a matter which concerned the parties before the Court and that the issues to be determined were set out in the application for determination and the answers filed in the Court. 38 After viewing a contract which was expressed to be entered into by [NAME] as proprietor and [NAME] as contractor and which specifically made the point that [NAME] was the construction manager, not the builder of the project, and after hearing evidence that [NAME] was paid by [NAME], not [NAME], the trial Judge understandably held that [NAME] was not a principal contractor of [NAME] for the purposes of s 20(1). 39 The trial Judge stated:- "390. [COMPANY] is in my view a principal contractor but is not a party to the current proceedings." 40 Accordingly, his Honour made an award in favour of [NAME] against [NAME] and ordered that, as [NAME] was not insured, [NAME] cause payment of the compensation and costs to be made out of the Uninsured Liability Fund constituted for the purposes of the Uninsured Liability and Indemnity Scheme. 41 In this appeal, [NAME], with whom [NAME] of counsel and [NAME] of counsel appeared for the appellant, relied upon an affidavit deposing that [NAME] was insured under the Act at the relevant time. He submitted that Parliament intended by s 140(4) that the Scheme would not be liable in the situation where the worker was entitled to recover from a person who was a principal contractor under s 20(1) of the Act. 42 However, as [NAME] has pointed out, as [NAME] was not a party in the proceedings below, it was not established that [NAME] was entitled to claim compensation against [NAME]. Entitlement to claim against [NAME] would not exist unless there was a liability on the part of [NAME] to pay compensation. A finding to that effect could not be made unless [NAME] was a party to proceedings in which that fact was established. 43 [NAME] submitted that there was an obligation on the part of [NAME] to prove that he was not entitled to claim compensation from [NAME]. In my opinion, that was not so. The matter proceeded by way of a claim under s 140(1) on the allegation that [NAME] was entitled to claim compensation from [NAME] and that [NAME] was uninsured. An alternative claim was made by [NAME] that he was entitled to claim compensation from [NAME]. He succeeded on the first claim but not the alternative claim. [NAME] was joined in the proceedings and was entitled to raise, by its answer, any issue which it considered to be relevant. It chose to contend, in its answer, that [NAME] was entitled to claim compensation from [NAME] and that [NAME] was insured. That answer failed. 44 Although the [ADDRESS] of New South Wales is not a court governed by pleadings and a trial Judge must endeavour to do justice to the parties in accordance with the Act, it is not irrelevant that Pt 11 r 3 of the [ADDRESS], 1990 provides, inter alia:- " 3 Answer (1) A respondent to proceedings may, not later than 28 days after service on him of the originating process in the proceedings, file, and serve on all other parties to the proceedings, an answer setting out: (a) any grounds on which he intends to deny wholly or partially the applicant's claim,

…

(2) Without limiting the generality of subrule (1), where a respondent intends: (a) to deny wholly or partially that he is liable to pay to the applicant the compensation claimed or that the applicant is entitled to the relief sought, he shall set out in his answer a statement of the grounds on which and the extent to which he denies that he is so liable or that the applicant is so entitled, or

(b) to rely upon the fact that: (i) any notice of injury or of incapacity or death was not given as required by the [NAME] and the respondent is prejudiced in his defence by the want of that notice, or

(ii) that the claim for compensation was not made within the time limited by the [NAME],

he shall set out in his answer a detailed statement of that fact.

(3) A respondent shall not, at any hearing of the proceedings, except by consent of the applicant or by leave, given on terms, of the Court, raise any matter of defence not raised in the answer filed by him under this rule." 45 In the proceedings before the trial Judge, [NAME] did not seek leave to rely upon the point that [NAME] was entitled to claim compensation from [NAME] as a principal contractor and that [NAME] was insured. No such leave was given. Indeed, if an application for leave had been sought, it would have been refused having regard to [NAME]'s objection to or failure to support [NAME]'s application at the commencement of the trial for an adjournment to permit the joinder of [NAME]. Once the adjournment had been refused, all parties necessarily proceeded on the footing that the issues before the Court did not include an issue in respect of which the joinder of [NAME] was essential. 46 The trial Judge was correct in dealing with the matter having regard to the claim and the answers which were before him. 47 I agree with the orders proposed by [NAME].

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