By Gabrielle Croese, Associate, and Stephen Vardanega, Partner

The NSW Supreme Court recently handed down its decision in Scott v Usinch Pty Ltd, dealing with vicarious liability and damages assessment in workplace incidents involving a motor vehicle and labour hire.

Background

Usinch owned and operated an abattoir in NSW.

The Plaintiff, Scott, was an employee of a labour hire company, Epona. He was working at the abattoir as a labourer when he was seriously injured after a stillage (cage containing packaged meat, weighing 200kg) fell from some height from a forklift which was being driven by an unlicensed labourer co-worker, Smith, also employed by Epona. As Smith reversed, turned the forklift and was lowering the stillage, the Plaintiff was struck in the head and back by the stillage, rendering him unconscious.  The stillage ought to have been secured to the forklift. Surgery included a five-level spinal fusion.

Epona and Usinch were operated by the same sole working director and both worked out of the abattoir, however, were distinct legal entities.

The labour hire agreement between Epona and Usinch was not documented.

Usinch leased the forklift, which was neither registered or insured, and directed the work performed by the Plaintiff and Smith, including driving the forklift.

Usinch had standard operating procedures for forklift driving, requiring that only licensed forklift drivers operate it and that its tines be lowered before it was driven. There was no evidence that either the Plaintiff or Smith had been trained in the forklift procedures.

The Plaintiff received statutory benefits under the Workers Compensation Act.

The Plaintiff commenced proceedings for damages against both defendants. There were no cross claims.

He claimed damages from Usinch under the Civil Liability Act 2002 (NSW).

Against Epona, he sought damages under the Motor Accidents Compensation Act 1999 (NSW) (“MACA”) or, in the alternative, work injury damages under the Workers Compensation Act 1987 (NSW) (“WCA”).

Neither Epona nor Usinch called any evidence regarding the relationship between them or the events surrounding the accident.

Issues

1. Whether Smith was negligent.
2. Whether Epona or Usinch was vicariously liable for Smith’s negligent driving.
3. Whether Epona breached its non-delegable duty of care.
4. The nature of the duty owed by Usinch to the Plaintiff and whether it was breached.
5. Under which statutory framework the damages payable by Epona should be assessed (MACA or WCA).
6. Whether there was to be any discount for contributory negligence (on account of where the Plaintiff was standing at the time of the incident).

Findings

Negligence

The incident was a result of both Smith’s negligent operation of the forklift, which was captured on CCTV footage, and Usinch’s unsafe system of work, in failing to implement the practical operation of its forklift procedures and failing to supervise the operations. Usinch’s submission that the accident was caused by a casual act of negligence of Smith for which it was not responsible, was rejected.

Given Epona had the same controlling mind as Usinch, and both operated out of the same premises, Epona was also negligent. It had to be aware of what was going on, when its employees worked at the abattoir. At the very least, it should have ensured that Smith, whom it supplied to Usinch, had the necessary licensing and training. It knew Usinch used Smith to drive the forklift.

Vicarious Liability

Only one of the defendants could be vicariously liable for Smith’s negligent driving.

Prima facie, an employer is vicariously liable for the tortious acts of their employees. However, if the employer has transferred authority to control the doing of that act to a third party, that party may be liable. It is the nature and extent of the control transferred which determines whether there is a shift of liability from the employer to the third party.

Relevantly, Usinch controlled the worksite, safety procedures and daily operations of both workers, even though it was not the formal employer. Usinch leased the forklift and directed the work that the Plaintiff and Smith did on a day-to-day basis. Smith was following Usinch’s directions and operating within its systems when he was driving the forklift. It was Usinch’s failure to provide the relevant training or supervision that resulted in the negligent driving causing injury.

Smith was so incorporated into Usinch’s workforce, with the relationship being indistinguishable from that of employee and employer, so as to render Usinch, and not Epona, vicariously liable for his negligence.

Contributory Negligence

Both Epona and Usinch argued that the Plaintiff was not standing behind the safety barrier when the incident occurred, and this contributed to his injuries.

Her Honour was critical of the defendants for failing to call any evidence from “obvious witnesses”, including those who either witnessed the accident, supervised the Plaintiff and Smith in their day-to-day work, or prepared Usinch’s incident report. The inference drawn was that this evidence would not have supported their defence.

Accordingly, no contributory negligence was assessed.

Apportionment

Her Honour apportioned 70% to Usinch and 30% to Epona.

Damages and the Statutory Framework

There was lengthy consideration as to whether the damages against Epona ought to be assessed under the MACA or WCA.

The Plaintiff argued that he had been injured in a “motor accident”, with the result that Chapters 3–6 of the MACA applied.

“Motor Accident” is defined in s 3 of the MACA to mean:

“an incident or accident involving the use or operation of a motor vehicle that causes the death of or injury to a person where the death or injury is a result of and is caused…..during—

• • the driving of the vehicle, or
  • a collision, or action taken to avoid a collision, with the vehicle, or
  • the vehicle’s running out of control, or
  • a dangerous situation caused by the driving of the vehicle, a collision or action taken to avoid a collision with the vehicle, or the vehicle’s running out of control.”

The definition was satisfied.

However, Epona argued that the MACA still did not apply to it, it not having been either the owner of the forklift, nor vicariously liable for Smith. There was no relevant fault on its part, as required by s3A of the MACA, which provides:

“3A (1) This Act…. applies only in respect of the death of or injury to a person that is caused by the fault of the owner or driver of a motor vehicle in the use or operation of the vehicle and only if the death or injury is a result of and is caused (whether or not as a result of a defect in the vehicle) during—

• • the driving of the vehicle, or
  • a collision, or action taken to avoid a collision, with the vehicle, or
  • the vehicle’s running out of control, or
  • a dangerous situation caused by the driving of the vehicle, a collision or action taken to avoid a collision with the vehicle, or the vehicle’s running out of control.”

Her Honour was satisfied that the Plaintiff’s injuries were caused by a motor accident as defined in s3 of the MACA. However, as Epona was neither the owner of the forklift, nor vicariously liable for Smith’s negligent driving, there was an insufficient causal link between Epona’s negligence and the Plaintiff’s injuries. Accordingly, the WCA applied; the Plaintiff was only entitled to claim work injury damages against Epona.

S3B of the MACA provides:

“3B (1) The application of Chapters 3–6 in respect of death or injury that results from the use or operation of a motor vehicle is limited to death or injury that—

• • is caused by a motor accident for which the vehicle has motor accident insurance cover, or
  • gives rise to a work injury claim, other than a work injury claim in respect of the death of or injury to a coal miner (as defined in clause 3 of Part 18 of Schedule 6 to the Workers Compensation Act 1987).

(2) …

(3) For the purposes of this Act, death or injury gives rise to a work injury claim if it is—

• • ….
  • an injury to a worker caused by the negligence or other tort of the worker’s employer,”

As the forklift was not insured and Epona was liable for the work injury damages claim, damages against Usinch were assessed under the Civil liability Act.

The parties were ordered to confer in relation to the calculation of damages in light of Her Honour’s findings. However, Her Honour assessed non-economic loss under the Civil Liability Act at 38% or $289,500.

Takeaways

• Vicarious liability in labour hire arrangements hinges on who exercises control over the worker and the work environment, rather than solely on who is the formal employer.
• Businesses using labour hire need to carefully consider how work is organised, supervised and controlled, as well as implement stringent safety and compliance systems, in order to mitigate exposure.
• The onus lies with defendants to establish contributory negligence and to shift liability elsewhere. Defendants not calling any evidence do so at their peril. A failure to call evidence from key or obvious witnesses is crucial to avoid the Court drawing negative inferences that such evidence would not assist the defence case.