KD TALENT MANAGEMENT PTY. LTD. trading as MD College v NEXT INTERIORS PTY LTD

District Court of NSW|2021-11-11

Solicitors: Plaintiff: Solis Lawyers Defendant: James Tuite & Associates File Number(s): 2020/00092602

The plaintiff's claim

The plaintiff is a corporation carrying out work as a tertiary training college from rented premises in Marsden Street Parramatta. The defendant is a corporation carrying out fit-out and internal building construction works for commercial premises.
In August 2018, the defendant undertook building fit-out works at a site adjacent to the premises rented by the plaintiff. The building at which the defendant carried out the work and the premises rented by the plaintiff were both owned by another company, Holdmark Pty Ltd. The north-western corner of the adjacent building overlapped with the south-eastern corner of the building in which the plaintiff commenced carrying on business from approximately September 2018.
The work carried out by the defendant included subcontracted hydraulic work, which was performed by Brads On Tap Pty Ltd. The defendant's works were granted a certificate of practical completion and, after a site meeting, handed over to the lessees of those premises on 30 November 2018.
The plumbing installed by Brads On Tap was invoiced for in October and November 2018. There were minor rectification works being carried out at the site between 5 and 20 December 2018 but these did not include any plumbing issues. The defect rectification works were completed by 20 December 2018.

The pleadings

The plaintiff claims damages from the defendant on the following bases: 1. Vicarious liability for Brad's On Tap's negligence. 2. Negligent failure on the part of the defendant to manage and supervise the execution of the subcontract by Brads On Tap.
A claim of liability in the tort of nuisance was abandoned during closing submissions.
The defendant denies negligence and the carrier's liability and in addition pleads that the payment is an apportionable claim within the meaning of s 34(1) of the Civil Liability Act 2002 (NSW), and that Brads On Tap was a "concurrent wrongdoer".

The evidence in the proceedings

The following witnesses gave evidence: 1. Mr Mohamed Samir from (T15 - 50); 2. Mr James Laurendet (T51 - 60); 3. Mr Mitchell Ryan (T 63 - 70); 4. Mr Edan Anthony Koll (T 74 - 82).
The plaintiff's oral evidence consisted of Mr Samir's description of the flood damage and the expenses he incurred. The plaintiff also tendered a report from Paul O'Donnell (CB: 488 and following), which identified the cause of the flood and expressed views on a range of legislative provisions (summarised at paragraphs 14 - 26) which, in the opinion of Mr O'Donnell, could establish liability. Mr O'Donnell was not required for examination, his assertions about legislative provisions potentially leading to liability were not adopted by Mr Keller, and his conclusions were not the subject of any submissions.
The three witnesses called by the defendant gave evidence concerning project management and supervision.

Events leading up to the flooding incident

Mr Samir, the sole director and CEO for the plaintiff company, purchased the business in approximately 2015 for the purpose of conducting education courses in the beauty industry for overseas students. His goal was to obtain Department of Education accreditation which would enable him to progress from offering basic courses to additional certificates in beauty services. The company applied for and was granted initial registration on 3 January 2017. As it grew, it became necessary to move into larger premises and the business moved to the Marsden Street address on 1 June 2018. The company entered into a five year lease for $270,000 plus GST per annum. A bond of $123,750 was paid for the lease.
The business had its first term at the new premises in September 2018. Although only a small number of students were involved, Mr Samir was hopeful that there would be substantially more enrolments in 2019.
The school was reopened for business after the Christmas holidays on 7 January 2019. Mr Samir and the company employees carried out a regular day, with preparations for an upcoming audit, which documents were left on the table for inspection by the departmental auditors. However at approximately 8 AM on the following morning, 8 January 2019, Mr Samir received a telephone call from the school manager Mr Robinson, who told him to come quickly as the school was "flooded everywhere". He said "it's like a swimming pool and the lights (electricity cables) have fallen in."
When Mr Samir arrived he found the staff waiting outside the premises in a shocked state. There were pools of water varying from 1 cm to 7 cm in depth, and water was still pouring through the ceiling. Ceiling tiles and swollen with water and broken off in multiple locations and tables with documents and computers were covered in water. The computers had been left on standby from the previous day and had now shut off from an electrical shortage brought about by the water.
Mr Samir waited at the premises for assistance. About four hours later, a Mr Fotheringham told him "we have come from the insurance to help clean up." Mr Samir asked, "insurance from who?" And he replied "Insurance from contractor at Culture Kings (this being the name of the landlord for the adjoining premises). The cleaning up work was carried out over the next three days. During that time, the plaintiff encountered the plumbers responsible for the leak. He also learned that the plumbing company was going to go into liquidation.

The nature and extent of the damage

The plaintiff still had to fulfil its departmental auditing on 16 January 2019. To ensure that the company could complete it sorted, it had to carry out extensive repairs. In general terms these were as follows: 1. Repairs to the fit out, totalling $92,236; 2. repairs to computers and networking for $71,280; 3. Additional costs to ensure the premises were ready for audit; and 4. Replacement of damaged consumables from suppliers for a total of $31,129.15.
After repairing the damages to the premises, the company began to experience financial stress. Money that had been set aside to fund the business had been diverted to the repair costs as well as additional salary for the clean-up. Although the audit of 16 January 2019 was successful, the companies' financial affairs had been substantially affected. Request for rental reprieve from the landlord was denied.
Due to the diminishing cash reserves of the company and the disordered state of its records due to water damage, the company was unable to accept student enrolments in the first semester of 2019. The decision to not take enrolments was in part due to departmental requirements that a provider under financials stress should not accept enrolment of any new students. Failure to comply with this requirement could result in deregistration.
Mr Samir did all that he could, including reducing the number of staff, borrowing money to pay salary and rental and seeking to find out more about who was responsible for the leak.
Mr Samir had not taken out insurance which would have enabled him to claim or any of these costs. He explained to the court that the business had only begun operation in September 2018 and he thought it was too early to insure. Instead, he sought to bring a claim against the insurance for Brads On Tap. However there was no insurance, and the company went into liquidation.
The plaintiff was locked out of the premises on 15 November 2019 due to non-payment of rental. The landlord kept the five-month bond monies as payment towards the shortfall. The plaintiff then commenced these proceedings.

The evidence for the defendant

It is not in dispute that Brads On Tap was an independent subcontractor and that the work was carried out in that capacity.
The first and most relevant witness concerning supervision issues was Mr Laurendet, whose evidence at T 53 - 54 was as follows: "Q. Was it the practice from you as project manager to give directions to sub-contractors as to how they would complete works? A. Not how. The scope of works, not how they did the works. Q. And you see in paragraph 1.10, a requirement that the sub-contractor provide reports as requested? A. Yes. Q. Did you seek, or did your junior seek, any such reports from contacts? A. I don't believe so, no. Q. You see there on paragraph 1.14? A. Yes. Q. There's a requirement for sub-contractors to comply with all relevant standards and codes. A. Yes. Q. Did you make any enquiries yourself as to whether Brad's On Taps had complied with relevant standards and codes? A. I can't recall, but I doubt it. Q. Do you recall whether you directed your junior, the project engineer, to make such enquiries? A. I don't recall. But, as I said, I don't believe he was employed at the time of this contracts being let. I could be wrong, but I don't know, I don't know admittedly so I forget whether he was working on this project at the start or not. But I wouldn't..(not transcribable)..anyway. Q. Did you direct the site foreman to ensure or ask Brad's On Tap whether they had complied with all relevant standards and codes? A. No."
He described his role as supervisor as follows: "Q. Look further down that page, there's a heading, "Supervision", do you see that? A. Yes. Q. The third bullet point: "Continue its coordination of the installation with Next Interiors, the architect and other trades"? A. Yes. Q. Did you direct your site foreman to interact in continuous coordination between him and the Brad's On Taps people? A. Yes, that's his role. Q. Did he, in fact, do that, to your knowledge? A. Yes. Q. The fifth bullet point refers to weekly meetings with Next Interiors' representative on site? A. Yes. Q. You have no recollection of weekly meetings with Brad's On Taps people, is that right? A. That's right. Q. If there were such meetings, they would be with the project engineer? A. Generally, the site foreman or manager would run those meetings. Otherwise, the project engineer may also attend. Q. Could you turn over to page 845 of the court book? A. Yes. Q. See the general preambles section? A. Yes. Q. The last bullet point? A. Yes. Q. Is your experience, as a project engineer for some years - and now, I think, you have the title, "senior project manager", is that right? A. No, not currently. I did for a short time on this, but not currently. Q. Your expectation for a plumber, doing hydraulic works on a site for which you are the project manager, is that the plumber would comply with the relevant codes of practice and standards of workmanship? A. Yes. Q. And it's your experience that when there's a water flooding event, that it's usually some form of negligence by the person installing the equipment, or alternatively, a disruption caused by an exterior force of some sort, is that right? A. Generally, yes, unless something had failed, a PC item, but yes." (T56 - 57)
As the project manager, he directed the company as to the scope of his works, not how those works were carried out.
It was put to Mr Laurendet that a certificate of completion had not been obtained from Brads on Tap after the work was completed: "Q. If you look at the paragraph that's headed, "Project completion"? A. Yes. Q. The sentence, "All project completion information is due to be submitted to Next Construction for approval, if not noted otherwise, then no later than one week after completion"? A. Yes. Q. What does that sentence mean? A. It depends on the project, if they're required to submit as builts, usually, or if they're required to submit certification for council approval. Q. Any time a plumber connects a fitting to a water carrying system, is that not something that requires appropriate certification? A. Not generally in commercial fit out, no, because it's an existing - existing water feed; they're just tapping into an existing feed, so no, we normally would not ask for that. Q. I'll take you down to two sentences afterwards: "provide warranties for products and workmanship as required from Next Interiors' practical completion date", do you see that sentence? A. Yep. Q. Did you obtain, from Brad's On Taps, the appropriate workmanship warranty after completion of their tasks? A. I don't really recall, but I don't believe so." (T 56)
However, as already noted, there is no expert or other evidence to the effect that the certificate of completion process would have resulted in the faulty valve being picked up. To the contrary, the evidence is that the hydraulics were in use from the time of completion in November until the leak in the following January.
Mr O'Donnell's report suggests that a Safe Work Method Statement should have been called for (CB: 491; 509). However, Mr Laurendet's evidence was that a Work Method Statement was required from Brads On Tap: "Q. You write a letter congratulating Brad, and that's Brad's On Taps, for the awarding of the contract. A. An email. Yes. Q. And you ask him to provide certain information. A. Yes. Q. And that is to return the contract document together with SWMS. A. Yes. Q. What does that [SWMC] mean? A. Safe work method statement. Q. And insurances. A. Yes." (T 58)
Similar evidence was given by the other witnesses called by the defendant.
As noted above, there was no expert evidence supportive of any challenge to the manner of supervision or the carrying out of the plumbing works. This is a significant problem in terms of the alternate negligence claim in relation to supervision of the works, as I must accept the denials of Mr Laurendet and his colleagues that no negligent act or omission occurred. Mr O'Donnell's observations on liability are acknowledged to be speculative; for example, he himself notes that "if found", the failure to require an SWMS "could be seen as a dereliction of duty of care" (CB: 511); leaving aside the many other problematic issues arising from this generalised statement of liability, Mr Laurendet categorially stated that an SWMS was sought.

The principles relevant to vicarious liability

It has been said that there is "endless disputation" about the content of and relationship between the categories of servant, agent and independent contractor (Jane Swanton, "Master's liability for the wilful tortious conduct of his servant", 16 Western Australian Law Review 1 at [16]) and the extent to which there will be liability by a principal for their acts. In International Harvester Co of Aust Pty Ltd v Carrigan's Hazeldene Pastoral Co (1958) 100 CLR 644 at 652, the High Court cited with approval the observation of Lord Herschell in Kennedy v De Trafford [1897] AC 180 at [188] that "No word is more commonly abused than 'agent'".
The law in relation to independent contractors is, nevertheless, settled. In Sweeney v Boylan Nominees Pty Limited (2006) 226 CLR 161, Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ held that a company that had hired an independent contractor to perform work was not to be curiously liable to a customer who was injured by that independent contractors' negligence.
The facts of the case were as follows. Boylan Nominees managed refrigerators in service stations and convenience stores. As part of their lease, the company was required to maintain and service those refrigerators. The operators of the service station and convenience store observed that the refrigerator door was not closing correctly and contacted Boylan Nominees, who hired an independent contractor to examine and repair the refrigerator. Those repairs (at least, according to the first instance judgment) were carried out at a poor level of care.
The independent contractor was not employed by Boylan Nominees. He carried out work when he was contacted by the company and invoice the company for each job. The independent contractor supplied his own tools, vehicle, uniform, superannuation and workers compensation as well as public liability insurance.
The plaintiff went to the service station to purchase a bottle of milk. When she opened the refrigerator door, it came loose and fell upon her, causing head and hand injuries. She sued the company, but not the independent contractor. She was successful at first instance, but the judgment was set aside on appeal and this decision then affirmed by the High Court.
The relevant principles of law are set out [11], [12] and [13]: "11 Three recent decisions of this Court have examined questions of vicarious liability: Scott v Davis, Hollis v Vabu Pty Ltd and New South Wales v Lepore. It is unnecessary to rehearse all that is established by those decisions. It is important, however, to begin examination of the issues in this appeal from a frank recognition of some considerations that are reflected in those decisions. First, "[a] fully satisfactory rationale for the imposition of vicarious liability in the employment relationship has been slow to appear in the case law". Secondly, "the modern doctrine respecting the liability of an employer for the torts of an employee was adopted not by way of an exercise in analytical jurisprudence but as a matter of policy". That may suggest that the policy to which effect was given by "the modern doctrine" is clearly identified, but, as is implicit in the first proposition, the policy which is said to lie behind the development of the modern doctrine is not and has not been fully articulated. Thirdly, although important aspects of the law relating to vicarious liability are often traced to the judgment of Parke B in Quarman v Burnett, neither in that decision, nor in other early decisions to which the development of the doctrine of vicarious liability may be traced, does there emerge any clear or stable principle which may be understood as underpinning the development of this area of the law. Indeed, as is demonstrated in Scott, the development of the law in this area has not always proceeded on a correct understanding of the basis of earlier decisions. 12 Nonetheless, as the decisions in Scott, Hollis and Lepore show, there are some basic propositions that can be identified as central to this body of law. For present purposes, there are two to which it will be necessary to give principal attention. First, there is the distinction between employees (for whose conduct the employer will generally be vicariously liable) and independent contractors (for whose conduct the person engaging the contractor will generally not be vicariously liable). Secondly, there is the importance which is attached to the course of employment. Whether, as has recently been suggested, these, or other, considerations would yield a compelling and unifying justification for the doctrine of vicarious liability need not be decided in this matter. In particular, whether, as suggested, the justification for the doctrine of vicarious liability is found in an employer's promise in the contract of employment to indemnify the employee for legal liability suffered by the employee in the conduct of the employer's business is a large question which is better examined in the light of full argument. 13 Whatever may be the justification for the doctrine, it is necessary always to recall that much more often than not, questions of vicarious liability fall to be considered in a context where one person has engaged another (for whose conduct the first is said to be vicariously liable) to do something that is of advantage to, and for the purposes of, that first person. Yet it is clear that the bare fact that the second person's actions were intended to benefit the first or were undertaken to advance some purpose of the first person does not suffice to demonstrate that the first is vicariously liable for the conduct of the second. The whole of the law that has developed on the distinction between employees and independent contractors denies that benefit or advantage to the one will suffice to establish vicarious liability for the conduct of the second. But there is an important, albeit distracting, consequence that follows from the observation that the first person seeks to gain benefit or advantage from engaging the second to perform a task. It is that the relationship is one which invites the application of terms like "representative", "delegate" or "agent". The use of those or other similar expressions must not be permitted to obscure the need to examine what exactly are the relationships between the various actors."
Mrs Sweeney's arguments were summarised as follows: "In the present case, the appellant's contention that the respondent was vicariously liable for the negligence of the mechanic fastened upon a number of statements found in the reasons for judgment of Dixon J in Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co‑operative Assurance Co of Australia Ltd. It was submitted that those statements supported the conclusion that the mechanic did the work he did "as a representative" of the respondent. He was a "representative", so the appellant submitted, because the mechanic "represented" that he had an association with the respondent, and the respondent "represented" that same association. It was not said that these representations of association had in any way been relied on by the appellant. She knew nothing of these matters until after her accident. The "representing" was said to be constituted by what passed between the respondent and the service station operators before and at the time of the attempted repairing of the door."
The majority rejected Mrs Sweeney's arguments, noting the factual differences between these proceedings and the subject of Hollis v Vabu [2001] 207 CLR 21. In Hollis, the independent contractor had worn the principles uniform, and the principal controlled the work. However, in the present case, the principal had no control over the independent contractor.
Mr Keller draws my attention to the dissenting judgment of Kirby J and submits that the profound changes to work arrangements mean that the principles relevant to the curious liability are ripe for change.
Kirby J referred to Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Cooperative Assurance Co of Australia Ltd (1931) 46 CLR 41 where the court had held a principal liable for statements made by a representative who was an independent contractor. These were defamation proceedings where the matters complained of were statements made by a life insurance canvasser to obtain business. The company argued that it had little or no control over the canvasser, who was paid a fixed commission, and in particular had no power to dismiss him.
The majority (Gavan Duffy CJ and Starke J and, in a separate judgment, Dixon J) held that the class of acts which the canvasser was employed to do necessarily involved the use of arguments and statements for persuading the public to effect insurance, and that the company had confided to his judgment the choice of inducements and arguments. The Company had thus authorised such observations as the canvasser deemed appropriate, and the wrong arose from the mistaken and erroneous manner in which that authority was exercised. Gavan Duffy CJ and Starke J emphasised that was a clause in the contract to the effect that the canvasser should not make defamatory statements, a stipulation which the canvasser had not been kept to by him. Their Honours stated: "In our opinion the judgment of the Judicial Committee, in Citizens' Company v Brown, (1904) AC 423, really concludes the present case. But if it does not, still we apprehend that one is liable for another's tortious act "if he expressly directs him to do it or if he employs that other person as his agent and the act complained of is within the scope of the agent's authority." It is not necessary that the particular act should have been authorised; it is enough that the agent should have been put in a position to do the class of acts complained of - Barwick v English Joint Stock Bank, LR 2 Ex 259; Lloyd v Grace, Smith and Co., (1912) AC at p 733. And if an unlawful act done by an agent be within the scope of his authority, it is immaterial that the principal directed the agent not to do it - cf. Limpus v London General Omnibus Co Ltd., 1 H. & C. 526. The class of acts which Ridley was employed to do necessarily involved the use of arguments and statements for the purpose of persuading the public to effect policies of insurance with the defendant, and in pursuing that purpose he was authorised to speak, and in fact spoke, with the voice of the defendant. Consequently the defendant is liable for defamatory statements made by Ridley in the course of his canvass, though contrary to its direction."
However, Kirby J went on to acknowledge, at [94] - [98]: "94 No attempt was made in this appeal to suggest that the CML principle, which has stood for 75 years, should now be abolished. Even Boylan disclaimed such a submission. The result is that an independent contractor, with its own business, cannot generally look to the principal to assume vicarious liability for its wrongs. But if the contractor has been armed with the authority to act as the principal's representative, law and justice sustain the rule in CML that, if sued, the principal will be liable for its representative's wrongs to others acting within the scope of that authority. 95 Whilst the rule in CML remains, it should be applied by this Court in accordance with its terms. It is part of Australian law. Its terms apply in the present case. Mr Comninos was the representative of Boylan which afforded him the means to persuade others that he should be admitted to their premises, permitted to repair a refrigerator placed there for which Boylan was responsible by lease and even allowed to receive Boylan's money and to give a receipt for what he received. 96 The respondent submitted that the joint reasons in Hollis favoured maintaining a firm distinction between independent contractors and employees. However, the word "representation" used in the joint reasons in Hollis is entirely consistent with the use of the word by Dixon J in CML. It is a noun expressing what a "representative" does. This is made plain by the words that the search is for "identification with the alleged employer as indicative of a relationship of principal and independent contractor". There is nothing in the treatment of the CML rule in Hollis that suggests an outcome of this appeal adverse to Mrs Sweeney. That is scarcely surprising because, in Hollis, vicarious liability was upheld by the majority within the category of an employment relationship. Invocation of CML was not therefore necessary, still less essential, as it is in this instance. 97 Conclusion: Boylan is vicariously liable: The result is that a person such as Mrs Sweeney was entitled to treat Mr Comninos as the representative of Boylan's "refrigeration company", just as the Patels, by inference, believed he was. If Boylan complains about having to assume vicarious liability for the wrongs done by Mr Comninos, they may be answered in the way contemplated by the CML principle. They should not have put Mr Comninos into the position that he could represent himself as Boylan's agent. They should have taken steps to make it plain to third parties that people, such as Mr Comninos, were not their "representatives" but represented their own business alone, being a separate, independent enterprise. At trial Boylan should have joined Mr Comninos as a third party liable to indemnify it or to contribute to any judgment. Because, to the contrary, Boylan armed Mr Comninos with the means to make the representations that he did (and took no steps to correct such representations or claim indemnity or contribution) Boylan must accept the legal consequences. 98 It follows that it was open to the primary judge to hold that Boylan was vicariously liable for the wrong committed by Mr Comninos, its representative, and that this was the cause of Mrs Sweeney's injury. The Court of Appeal erred in disturbing that conclusion and the judgment at trial that gave effect to it."
Kirby J then added the following caveat, at [99]: "99 Representative agent: a caveat: Nothing I have said in these reasons should be taken to suggest that I favour the adoption of a rule which exposes a principal to vicarious liability in respect of torts committed by an independent contractor in circumstances where the contractor "represents" the principal simpliciter. CML does not support the adoption of such a rule. I did not apprehend the appellant as presenting her case in such terms. Nor would I decide it so."
The difficulty for the plaintiff in these proceedings is that, factually speaking, this is such a case. Beyond managing Brads On Tap's visits to the site and checking to see that they are appropriately licensed, there was little in his supervisor of the site could do. As noted above, the absence of any expert evidence on plumbing as to any steps which could have alerted the defendant to problems (such as performing some kind of checking, or requiring a certificate of completion of some kind) is a significant difficulty. By reason of this concession, I do not see any comfort for the plaintiff in Kirby J's dissenting view.
I conclude these observations as to changes in the law in this area by noting that consideration of the principles for vicarious liability in the United Kingdom have been described as being "on the move" (Cox v Ministry of Justice [2016] UKSC 10, [2016] AC 660 at [1]). In R (on the application of HNA) v Secretary of State for the Home Department [2021] EWHC 2100 (Admin), Jacobs J summarised these changes as follows: "90. The argument based on vicarious liability is no better. As is clear from the Catholic Child Welfare Society case, to which Mr de Mello referred, the modern law of vicarious liability no longer draws a line between employees and independent contractors. That case has been considered in subsequent Supreme Court authority, Cox v Ministry of Justice [2016] UKSC 10, [2016] AC 660. 91. The relevant principle is summarised in paragraph [24] of Cox: "The result of this approach is that a relationship other than one of employment is in principle capable of giving rise to vicarious liability where harm is wrongfully done by an individual who carries on activities as an integral part of the business activities carried on by a defendant and for its benefit (rather than his activities being entirely attributable to the conduct of a recognisably independent business of his own or of a third party), and where the commission of the wrongful act is a risk created by the defendant by assigning those activities to the individual in question." 92. Lord Reed expanded upon this concept at paragraphs [29] - [30]: "[29] It is important, however, to understand that the general approach which Lord Phillips PSC [in Catholic Child Welfare Society] described is not confined to some special category of cases, such as the sexual abuse of children. It is intended to provide a basis for identifying the circumstances in which vicarious liability may in principle be imposed outside relationships of employment. By focusing upon the business activities carried on by the defendant and their attendant risks, it directs attention to the issues which are likely to be relevant in the context of modern workplaces, where workers may in reality be part of the workforce of an organisation without having a contract of employment with it, and also reflects prevailing ideas about the responsibility of businesses for the risks which are created by their activities. It results in an extension of the scope of vicarious liability beyond the responsibility of an employer for the acts and omissions of its employees in the course of their employment, but not to the extent of imposing such liability where a tortfeasor's activities are entirely attributable to the conduct of a recognisably independent business of his own or of a third party. An important consequence of that extension is to enable the law to maintain previous levels of protection for the victims of torts, notwithstanding changes in the legal relationships between enterprises and members of their workforces which may be motivated by factors which have nothing to do with the nature of the enterprises' activities or the attendant risks. [30] … The individual for whose conduct it may be vicariously liable must carry on activities assigned to him by the defendant as an integral part of its operation and for its benefit. The defendant must, by assigning those activities to him, have created a risk of his committing the tort.""
The claims before Jacobs J, like the claims in Cox, related to a very different aspect of vicarious liability, namely the position of the employer in relation to long-term employment relationships, not to a one-off contract to perform a specific task such as plumbing work.
While concepts of vicarious liability may be changing to adapt to new workplace employment methods, those changes have not happened yet, and the majority decision in Sweeney v Bolan remains good law. Even if the law were to change, the likelihood that vicarious liability would extend to the performance of individual subcontractors in circumstances such as those applicable here. To hold contractors liable in such circumstances would, in the words of Lord Reed in Armes v Nottinghamshire County Council [2017] UKSC 60 at [69], open the floodgates.
For the above reasons, the claim of vicarious liability must fail.

Negligent supervision of the works

As Mr Purdy points out in his helpful submissions, the relationship between a fit-out contractor and its plumbing subcontractor does not readily fall within any category of relationship or circumstances giving rise to a non-delegable duty of care upon the contractor. Any liability for the defendant could only arise from negligence which was, on the defendant's part, causative of the failure of the valve which burst and caused the flooding.
In Stevens v Brodribb Sawmilling Co Pty Ltd (1985 - 1986) 160 CLR 16 at [47], Brennan J (as his Honour then was) stated that, if there was no failure to take reasonable care in the employment of independent contractors competent to control their own systems of work, or in not retaining a supervisory power, or in leaving undefined the contractors' respective areas of responsibility, the entrepreneur would not be liable for damage caused merely by a negligent failure of an independent contractor to adopt or follow a safe system of work either within his area of responsibility or in an area of shared responsibility. These observations were more recently referred to by the High Court of Australia in Leighton Contractors Pty Ltd v Fox (2009) 240 CLR 1 at [20] - [22] where, after setting out the relevant passage from Stevens v Brodribb, the Court went on to state, at [21] - [22]: "21 It is common in the construction industry for the principal contractor to arrange for the works to be carried out by subcontractors rather than by employing its own labour force. Among the advantages that accrue to the principal contractor in adopting this model for its undertaking is that it does not incur the obligations that the law imposes on employers. An employer owes a personal, non-delegable, duty of care to its employees requiring that reasonable care is taken. This is a more stringent obligation than a duty to take reasonable care to avoid foreseeable risk of injury to a person to whom a duty is owed. While an employer is not vicariously liable for the negligent conduct of an independent contractor, it may incur liability where the negligent conduct occasions injury to its employee. This is because it will have failed to discharge the special duty that it owes to its employees to ensure that reasonable care be taken, whether by itself, its employees or its independent contractors, for the safety of its injured employee. In this case, if the pipe had struck the forklift driver, an employee of Leighton, there may be little doubt as to Leighton's liability in respect of the injury to him. The distinction that the common law draws between independent contractors and employees has been the subject of criticism. However, as five Justices of this Court observed in Sweeney v Boylan Nominees Pty Ltd, whatever the logical and doctrinal imperfections and difficulties in the origins of the law relating to vicarious liability, the concept of distinguishing between independent contractors and employees is one too deeply rooted to be pulled out. 22 In particular, and as was emphasised in Sweeney, the authorities in this Court do not support any principle that "A is vicariously liable for the conduct of B if B 'represents' A (in the sense of B acting for the benefit or advantage of A)". Earlier, in Scott v Davis the Court refused to recognise an "agent" in a non-technical sense as an actor attracting principles of vicarious liability."
The principle that an entrepreneur or head contractor may discharge the duty of care by engagement of a competent contractor or subcontractor has been widely applied in decisions involving the operation of shopping malls and other commercial premises (see for example Bevillesta Pty Ltd v Liberty International Insurance Co [2009] NSWCA 16 and Laresu Pty Ltd v Clark [2010] NSWCA 180). Those principles extend to the facts in this case, where the defendant engaged a competent and licensed plumber as its hydraulics subcontractor (see paragraph 16 of the defence). To all intents and purposes, this long-established and apparently competent subcontractor, engaged in a perfectly proper way, performed work under the subcontract to the appropriate standards.
Mr O'Donnell's report is of no assistance to the plaintiff. It consists largely of ipse dixit statements such as that "Colliers International have a fiducial [sic] duty as the Owner and Principal have [sic] an obligation of duty of care" under s 106 of the Strata Schemes Management Act 2015 (NSW) and under work and safety legislation (CB: 491). There is, in addition, a complete absence of factual evidence of wrongdoing by anybody; as Mr O'Donnell notes at paragraph 24 of his report, the pipe burst incident was "accidental".
In the absence of expert evidence to the contrary, there is no evidence to challenge the evidence of the defendant's witnesses as to their manner of carrying out their duties as supervisors. To bring such a case, the plaintiff would have to lead evidence of the defendant noticing (or failing to notice) some egregious defect or some other basis for what Mr Purdy referred to as "micro-management" of the execution of this part of the works.
For the above reasons, the claim in negligence must also fail.

The apportionable claim

Section 34(1) of the Civil Liability Act provides: "34 Application of Part (1) This Part applies to the following claims (apportionable claims) - (a) a claim for economic loss or damage to property in an action for damages (whether in contract, tort or otherwise) arising from a failure to take reasonable care, but not including any claim arising out of personal injury, (b) a claim for economic loss or damage to property in an action for damages under the Fair Trading Act 1987 for a contravention of section 42 of that Act (as in force before its repeal by the Fair Trading Amendment (Australian Consumer Law) Act 2010) or under the Australian Consumer Law (NSW) for a contravention of section 18 of that Law."
Section 35 provides: "35 Proportionate liability for apportionable claims (1) In any proceedings involving an apportionable claim - (a) the liability of a defendant who is a concurrent wrongdoer in relation to that claim is limited to an amount reflecting that proportion of the damage or loss claimed that the court considers just having regard to the extent of the defendant's responsibility for the damage or loss, and (b) the court may give judgment against the defendant for not more than that amount. (2) If the proceedings involve both an apportionable claim and a claim that is not an apportionable claim - (a) liability for the apportionable claim is to be determined in accordance with the provisions of this Part, and (b) liability for the other claim is to be determined in accordance with the legal rules, if any, that (apart from this Part) are relevant. (3) In apportioning responsibility between defendants in the proceedings - (a) the court is to exclude that proportion of the damage or loss in relation to which the plaintiff is contributorily negligent under any relevant law, and (b) the court may have regard to the comparative responsibility of any concurrent wrongdoer who is not a party to the proceedings. (4) This section applies in proceedings involving an apportionable claim whether or not all concurrent wrongdoers are parties to the proceedings. (5) A reference in this Part to a defendant in proceedings includes any person joined as a defendant or other party in the proceedings (except as a plaintiff) whether joined under this Part, under rules of court or otherwise."
The defendant pleads that Brad's On Tap was a concurrent wrongdoer for the following reasons: "(a)On or about 29 August 2018 Brad's On Tap was subcontracted by the Defendant ("the Subcontract") to perform works involving the design and construction of hydraulic works at the Site ("the Hydraulic Works"). (b) It was a term of the Subcontract that Brad's On Tap was responsible for the design, documentation, compliance, supervision, labour, material, transport, plant, equipment, set out, testing and certification and for the successful installation and commissioning of the Hydraulic Works. (c) It was a term of the Subcontract that Brad's On Tap warranted that it was suitably qualified and experienced. (d) At all material time the principal of Brad's On Tap, Brad Fotheringham, held a Contract Licence (Licence Class Plumber and Roof Plumber) Being License No. 144910C. (e) It was a term of the Subcontract that Brad's On Tap would perform the Hydraulic works in accordance with relevant Australian Standards and other relevant codes & legislation. (f) The Hydraulic Works that were performed by Brad's On Tap included the installation and commissioning of the water carrying item that is the subject of the Statement of claim. (g) By reason of the fact that Brad's On Tap was subcontracted to, and did, perform the Hydraulic Works it owed the Plaintiff a duty to exercise reasonable care to avoid causing foreseeable and not insignificant risks of harm caused by the Hydraulic Works. (h) By reason of the fact that Brad's On Tap was subcontracted to, and did, perform the Hydraulic Works it owed the Plaintiff a duty to exercise reasonable care to not cause a nuisance by its performance of the Hydraulic Works. (i) In the event that the Plaintiff suffered loss and damages or was subject to a nuisance as alleged, such loss damage and nuisance was caused by a breach of duty on the part of Brad's On Tap."
As set out in Williams v Pisano [2015] NSWCA 177 by Emmett JA, Pt 4 of the Civil Liability Act, in relation to proportionate liability, was introduced to replace the system of joint and several liability for most economic loss and property damage claims with proportionate liability. The reform was prompted by concerns that litigation against well-insured professionals (particularly auditors) was driving up professional liability insurance premiums. The purpose was to prevent plaintiffs taking advantage of the system of joint and several liability by targeting only the well-insured wrongdoer (whose contribution to the plaintiff's loss may have been minimal) and obtaining 100 per cent of the damages award from that wrongdoer. Although the well-insured defendant could seek contribution from the other concurrent wrongdoers, the risk that the other wrongdoers would be untraceable or insolvent was borne by that defendant.
One consequence of the introduction of a system of proportionate liability is that that "risk" is arguably shifted to the plaintiff. The facts in this case are a good example of the problem for which this important reform was brought into being.
The term "concurrent wrongdoer" expression has a wide operation because its definition relevantly refers only to the person being someone who "caused" the plaintiff's loss or damage: Liprini v Hale [2020] NSWCA 130 at [106]. On the facts the basis of these proceedings, Mr Keller acknowledged that Brad's On Tap was a concurrent wrongdoer, and that the only contentious issue between the parties was one of degree, with the defendant submitting that the percentage was 95% and the plaintiff responding that a lesser sum of around 85 - 90% was more appropriate.
The evidence of Brad's On Tap's responsibility for the leak and subsequent flooding is overwhelming and the estimates given by both counsel are sensible and reasonable. In the circumstances, the appropriate percentage should be 90%.

Quantum

The jurisdictional limit applies to the plaintiff's schedule, the full extent of which is as follows: Schedule 1 No. Category Seller Date Amount (inc. GST) GST Amount (ex. GST) Product Court Book Page 1 Commitments Telephone 31-04-19 $5,895.00 $535.91 $5,359.09 3 months Annexure A 2 REMOVED 3 Consumables Initial 31-04-19 $2,499.09 $227.19 $2,271.90 Onsite hygiene products Annexure B 4 REMOVED 5 REMOVED 6 Commitments Mandoe Media 31-04-19 $751.00 $68.27 $682.73 Media software Annexure C 7 REMOVED Subtotal $9,145.09 $831.37 $8,313.72

Schedule 2 No. Category Seller Date Amount (inc. GST) GST Amount (ex. GST) Product 8 Consumables Nova Rewards 18/06/2018 $7,979.59 $725.42 $7,254.17 Various items 235 9 Consumables Professional Beauty Solutions 06/08/2018 $5,979.60 $543.60 $5,436.00 Various 'Youngblood kits' 229 10 Consumables Frocks Entertainment 30/07/2018 $4,840.00 $440.00 $4,400.00 Band performance on 15/08/18 227 11 Consumables Hawley International 17/07/2018 $2,195.56 $199.60 $1,995.96 Various salon supplies 219 12 Consumables Direct Salon Supplies 04/06/2018 $2,039.00 $185.36 $1,853.64 x5 Neptune Lounge, x1 Hair Dyer 221 13 Consumables AMR Hair and Beauty Supplies 04/06/2018 $625.92 $56.90 $569.02 x6 Stool, x4 Acrylic Nail Rack 228 14 Consumables Direct Salon Equipment Coburg 04/06/2018 $400.00 $36.36 $363.64 Various salon supplies 247 15 Consumables Professional Beauty Solutions 07/08/2018 $300.00 $27.27 $272.73 Youngblood MM Training Day 1 230 16 Consumables Officeworks 16/01/2019 $6,769.48 $592.65 $6,176.83 Officeworks supplies 248 Subtotal $31,129.15 $2,807.17 $28,321.98

Schedule 3 No. Category Seller Date Amount (inc. GST) GST Amount (ex. GST) Product 17 Fitout Franchise Fitout Group 30/08/2018 $159,500.00 $14,500.00 $145,000.00 Premises fitout 270 18 Fitout Franchise Fitout Group 30/08/2018 $140,800.00 $12,800.00 $128,000.00 Additional fitout work 278 19 Repairs Franchise Fitout Group 30/01/2019 $93,236.00 $8,476.00 $84,760.00 College fitout repairs 281 20 Fitout Doyles Carpet Court 07/08/2018 $49,310.00 $4,482.73 $44,827.27 Carpeting 222 Subtotal $442,846.00 $40,258.73 $402,587.27

Schedule 4 No. Category Seller Date Amount (inc. GST) GST Amount (ex. GST) Product 21 Furniture Salon Mega Mall 14/06/2018 $1,990.00 $180.91 $1,809.09 x10 Cosmo Design Styling Chair 233 22 Furniture Kogan.com 04/06/2018 $1,026.30 $93.30 $933.00 x10 L Shape Bar Stools 232 22 Repairs SK Tech Solution Pty Ltd 12/01/2019 $71,280.00 $6,480.00 $64,800.00 Replacement computers 291 23 Equipment AA Brothers F/T 01/08/2018 $108,901.60 $9,900.15 $99,001.45 Electronics 225 24 Equipment Little Lease Company 19/11/2019 $27,545.46 $2,504.13 $25,041.33 Spa Annexure D 25 Commitments Camnet Finance 19/11/2019 $12,120.47 $1,101.86 $11,018.61 Finance for equipment 378 Subtotal $222,863.83 $20,260.35 $202,603.48

Schedule 5 No. Category Seller Date Amount (inc. GST) GST Amount (ex. GST) Product 26 Rental Holdmark Pty. Ltd. 14/11/2019 $175,210.86 $15,928.26 $159,282.60 7 months rent 293 27 Wages + Super MD College of Australia 17/01/2019 $156,329.93 $156,329.93 90 days of wages clean up 289 28 Wages + Super H&M International Agency P/L 17/01/2019 $34,044.39 $34,044.39 90 days of wages clean up 288 29 Wages + Super MD Beauty Care of Australia 17/01/2019 $8,223.66 $8,223.66 30 days of wages clean up 290 30 REMOVED Subtotal $373,808.83 $15,298.26 $357,880.57

TOTALS $1,079,792.90 $79,455.87 $999,707.03

The defendant's Schedule is for a sum just under the jurisdictional limit: Schedule 1 - Commitments All items agreed $8,314.72

Schedule 2 - Consumables Items 8 - 15 Reduce by 50% to take account of usage prior to incident & post-incident residual value $11,072.58 Item 16 Allow $6,176.83

Schedule 3 - Fitout Items 17, 18 & 20 Reduce by 10% for 6 months use pre-incident $286,044.54 Item 19 Allow $84,760.00

Schedule 4 - Furnishings/Fixtures/Equipment Items 21, 22 (1st), 23 & 24 Reduce by 10% for 6 months use pre-incident $114,106.38 Item 25 Reject (see CB 378) relates to debt of "Stonebridge Global Consulting", not plaintiff

Schedule 5 Item 26 Allow $159,282.60 Item 27 Reduce by 50% for 5 months' wages paid pre-incident $78,164.97

In practical terms, in addition to my findings on liability, analysis of the quantum of the claim is of little assistance to the parties, given the jurisdictional maximum of this court is $750,000. In addition, the plaintiff would only be entitled to 10% of this sum by reason of my findings concerning Brad's On Tap being a concurrent wrongdoer (which results in a sum of approximately $75,000).

Costs

Sweeney v Boylan Nominees Pty Ltd is conclusive authority against the proposition that the defendants were or could be vicariously liable for negligence by its subcontractor. The nuisance claim, which was hopeless, was abandoned during closing submissions. This is a clear case where costs should follow the event. However, I also grant liberty to apply.
I thank Mr Keller and Mr Purdy for their efficient conduct of the proceedings and for their helpful submissions.

Order: 1. Judgment for the defendant. 2. Plaintiff pay defendant's costs. 3. Exhibits retained until further order. 4. On the defendant's oral application (pursuant to the liberty to apply) for special costs orders: 1. Defendant's submissions for special costs orders pursuant to Civil Procedure Act 2005 section 98 and UCPR r 42.15 by Monday 6 December 2021. 2. Plaintiff's submissions in reply by Wednesday 8 December 2021. 3. Matter listed on Friday 10 December 2021 at 9:15am.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 30 November 2021

At a glance

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Judgment (25 paragraphs)

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Legislation Cited (2)

Cases Cited (8)