NSW Court of Appeal Confirmed an Employer is not Always Vicariously Liable for the Actions of their Employees

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By Matthew Skelly, Associate and Camille Capati, Law Graduate

The Law Reform (Vicarious Liability) Act 1983 states, to the extent a servant’s act or omission is a breach of the servant’s duty of care, performed in the course of the servant’s service to his/her master, the master will be held vicariously liable for that act or omission.

The NSW Court of Appeal in Hallmark Construction Pty Ltd v Brett Harford; Copeland Building Services Pty Ltd v Hallmark Construction Pty Ltd; Hallmark Construction Pty Ltd v Harford Transport Pty Ltd [2020] NSWCA 41 recently confirmed employers are not, in all cases, the master of their employees to be held vicariously liable for the employee’s negligent acts and omissions, especially in circumstances where they vest in a third party complete, or substantially complete, control over their employee.

Facts

On 24 May 2013, Brett Harford fell into a 4 metre deep stormwater retention pit whilst unloading concrete blocks and bricks at a building site at Homebush West (the Site). Mr Harford originally brought in negligence, in the Supreme Court of NSW, which centred on the actions of the “Site Supervisor”, Mr Isaia, who provided direction to unload his truck in the area adjacent to the retention pit, without any warning that the area included the dangerous penetration, breaching his duty of care owed to Mr Harford.

At the time of the incident Hallmark Construction Pty Ltd (Hallmark) was the principal contractor, which had subcontracted construction works to Copeland Building Services Pty Ltd (Copeland). Copeland then contracted to ANM Building Services Pty Ltd (ANM), for bricklayers and labourers to work at the Site. Mr Isaia was employed by ANM.

Interestingly, Copeland was found at first instance and on appeal to be liable for the actions of Mr Isaia, not his employer ANM.

The Supreme Court of NSW (Fagan J) found at first instance, Copeland was 50% liable for Mr Harford’s loss, as a result of it breaching its duty of care owed to Mr Harford both directly and vicariously for the actions, and failings, of Mr Isaia.

Decision of the NSW Court of Appeal – Copeland, The Master For Another’s Employee

On appeal Copeland stated the trial judge had erred in finding it had breached its duty of care, stating it could not be either directly liable for the actions of Mr Isaia or vicariously liable.

Basten JA, Meagher JA and Emmett AJA of the NSW Court of Appeal unanimously upheld the primary judgement as against Hallmark and Copeland but increased Copeland’s contribution from 50% to 75% solely on the basis of its vicarious liability for Mr Isaia’s negligence.

Basten JA gave the primary judgement and first found Mr Isaia had acted negligently by directing Mr Harford to unload the supplies in an area which included the hazard, in the dark, and without any warning of the trap.This finding formed the basis upon which the Court would find Copeland liable.

Basten JA quickly rejected the trial judge’s finding Mr Isaia was an agent for Copeland for which Copeland would be directly liable. His Honour found, in the absence of Mr Isaia having authority to bind the principal contractually, and not being Copeland’s employee, there was no basis upon which Copeland could be found directly liable for Mr Isaia’s actions.

The Vicarious Liability of Copeland

Emmett AJA in his judgement put eloquently and succinctly the basis of the Court of Appeal finding of vicarious liability on the part of Copeland when he said at [119]:

“Mr Isaia was negligent and, in the discharge of his duties as an employee of ANM, was required to act in accordance with the directions of Copeland. Mr Isaia was therefore Copeland’s agent. It follows that the actions of Mr Isaia were the actions of his principal, Copeland… since Mr Isaia had been seconded to the employment of Copeland, in the discharge of his duties as an employee of ANM, ANM was not for present purposes the employer of Mr Isaia such as to render ANM vicariously liable.”

Basten JA accepted, in circumstances by which Mr Isaia operated as Copeland’s supervisor on the site demonstrated both the capacity and actuality of Copeland’s conferral of authority on Mr Isaia and its control over the manner in which his work was undertaken. In these circumstances a contract of employment was not decisive for the purposes of determining vicarious liability, as vicarious liability had been transferred to Copeland, and ANM had reduced to the status of the payer of wages only.

Implications

This case confirms the law in NSW is that the existence of a contract of employment is not definitive of vicarious liability. Though an employment relationship commonly will give rise to vicarious liability of an employer, the fundamental condition of a Master/Servant relationship is control.

When assessing liability of the actions of employees or contractors, especially in the context of contractors and labour hire employees, the question which must be answered is who is controlling the system of work being performed.

Further Reading

Kelly v Bluestone Global Ltd (In Liq) [2016] WASCA 90

Rodriguez & Sons Pty Ltd v Queensland Bulk Water Supply Authority trading as Seqwater (No 22) [2019] NSWSC 1657

Day v The Ocean Beach Hotel Shellharbour Pty Ltd (2013) 85 NSWLR 335

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