State Rail Authority of New South Wales v Gudgeon

Court of Appeal (NSW)|2000-05-11|Before: Meagher JA, Handley JA, Stein JA, Blanch CJ, Per Handley JA

CITATION : State Rail Authority of New South Wales v Gudgeon [2000] NSWCA 165 FILE NUMBER(S) : CA 41051/98 HEARING DATE(S) : 11 May 2000 JUDGMENT DATE : 7 August 2000

PARTIES : State Rail Authority of New South Wales (Appellant) Ronald Gudgeon (Respondent) JUDGMENT OF : Meagher JA at 1; Handley JA at 2; Stein JA at 9

LOWER COURT JURISDICTION : District Court LOWER COURT DC 4916/97 FILE NUMBER(S) : LOWER COURT Blanch CJ JUDICIAL OFFICER :

COUNSEL : J D Hislop QC/ D J Brogan (Appellant) P Webb QC/K W Andrews (Respondent) SOLICITORS : Astridge & Murray (Appellant) Sowden Akerman (Respondent) CATCHWORDS : NEGLIGENCE - industrial deafness - independent contractor - deemed employment - duty of principal to contractor - direction by principal - co-ordination by principal - organisation by principal - interdependence between operation of the principal and activities of contractor - safe system of work - supervision - vulnerability to injury - ND LEGISLATION CITED : Workers Compensation Act 1987 Crimmins v Stevedoring Industry Finance Committee (1999) 74 ALJR 1 Perre v Apand Pty Ltd (1999) 73 ALJR 1190 CASES CITED: Pyrenees Shire Council v Day (1998) 192 CLR 330 Stevens v Brodribb Sawmilling Company Pty Ltd (1985 - 1986) 160 CLR 16 Sutherland Shire Council v Heyman (1985) 157 CLR 424 DECISION : Appeal allowed with costs. Verdict and judgment entered by the District Court set aside. Respondent to receive a certificate under the Suitors' Fund Act 1951, if otherwise qualified.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

CA 41051/98 DC 4916/97 MEAGHER JA HANDLEY JA STEIN JA Monday, 7 August 2000 STATE RAIL AUTHORITY OF NEW SOUTH WALES v Ronald GUDGEON

From about 1971 to 1990 the plaintiff (respondent) was contracted by the defendant, the State Rail Authority (SRA) to produce railway sleepers. SRA officers gave the plaintiff a 'licence', along with a sample and specification, and later a quota, for the sleepers he was to supply. The plaintiff supplied his own transport and tools and paid for any repairs and replacements. He decided where and when he would work. SRA officers rarely came on site but would examine the timber once it was delivered to the SRA depot. In 1997 he sued the SRA for damages for negligence relating to industrial deafness which he maintained resulted from his activities as a sleeper cutter.

The trial judge found that the plaintiff was an independent contractor to the SRA. He found that there was physical proximity between the parties as a result of their ongoing relationship over such a lengthy time period. The SRA was aware of the dangers of industrial deafness and ought to have been aware of the plaintiff's limited understanding of those dangers. His Honour held that it was reasonably foreseeable that a failure to warn the plaintiff of the dangers of industrial deafness or to insist on the wearing of hearing protection or to test for hearing loss, would be likely to cause him harm. A verdict was found for the plaintiff.

The appellant (SRA) submits that the trial judge erred in finding that a duty of care existed. It submits that no duty arose because it had no involvement in the work undertaken by the respondent.

The appellant did not owe a duty of care to the respondent. The SRA had no active involvement in the work performed by the respondent. It gave no direction, nor did it co-ordinate activities or organise the work. Stevens v Brodribb Sawmilling Company Pty Ltd (1985 - 1986) 160 CLR 16 applied.

The evidence did not support a finding that the appellant was aware of an industrial deafness problem with sleeper cutters during the years when a warning about the risks may have prevented the respondent's industrial deafness.

Appeal allowed with costs and the verdict and judgment entered by the District Court set aside. The respondent receive a certificate under the Suitors' Fund Act 1951, if otherwise qualified. oOo

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

CA 41051/98 DC 4916/97 MEAGHER JA HANDLEY JA STEIN JA Monday, 7 August 2000 STATE RAIL AUTHORITY OF NEW SOUTH WALES v Ronald GUDGEON

1 MEAGHER JA: I agree with Stein JA. 2 HANDLEY JA: I agree with the reasons for judgment of Stein JA in this appeal but wish to add additional reasons on the question of the Authority's knowledge of the risks of industrial deafness to its sleeper cutters. 3 The trial Judge found, correctly, that the Authority was well aware of the dangers of "industrial deafness" and that this was not really in dispute. Exhibit A (the report of Acoustic Dynamics) shows, as the Judge found, that the Authority (or its statutory predecessor) had arranged noise level surveys at the Chullora and Everleigh railway workshops as early as 1950 and 1951. The Judge also referred to Exhibits K and L, reports by Dr F J Sharrod, the Authority's Chief Medical Officer, of 10 September 1985 and 12 February 1986. These documents only refer to the position of employees, and the second refers specifically to the Authority's duty to prevent employees being exposed to excessive noise. On the basis of this material the Judge was bound to find that the Authority, at least institutionally, knew all about the problems with industrial deafness and was trying to do something about it. 4 However other evidence showed the nature of the industrial deafness problem confronting the Authority. Exhibit N contained statistics relating to the Authority's industrial deafness claims for the seven years ending 30 June 1978 to 30 June 1984. Further statistics relating to such claims appear in the report of Richard Heggie Associates Pty Limited of 19 March 1985, which became Exhibit M. This material demonstrates that the problem of industrial deafness, and workers' compensation claims arising therefrom, was concentrated overwhelmingly in the workshops, mechanical and loco operations, rail operations, and way and works operations of the Authority. 5 It is a reasonable inference that any industrial deafness claims by persons in the position of the respondent would have been included in the statistics for the purchasing and supply section. Exhibit N showed that the total claims from this section for the years for which precise figures were available were: 1978 $ 2,373 1979 $ 8,527 1982 $43,225 1983 $ 4,233 1984 $ 7,411 6 The percentage of the total claims referable to those originating within the purchasing and supply section during the year ended 30 June 1984 was .01%. Moreover it was neither established, nor self evident, that this figure included any claims by sleeper cutters. The statistics shown in Table 1 of Exhibit M for the 5 years for which a breakdown of the total figures were available further demonstrate the insignificant level of industrial deafness claims originating from the purchase and supply section. The total cost of such claims over those 5 years was $65,769 out of a total of $6,737,642, a proportion in the order of .01%. The corresponding figures for loco operations and workshops were $2,442,211 and $2,072,561 respectively, comprising 67% of the total. There are no figures for claims from the purchase and supply section in the earlier years, but they would be no greater and may even have been non existent. 7 This evidence is destructive of any finding that the Authority was aware of an industrial deafness problem with sleeper cutters during the years when a warning about the risks may have prevented the respondent's industrial deafness. 8 I agree with the orders proposed by Stein JA. 9 STEIN JA: Introduction 10 From the early 1970s until 1990 the plaintiff (the respondent to the appeal) was contracted by the appellant, the State Rail Authority (SRA), to produce railway sleepers for it. In 1997 he brought an action in the District Court against the SRA for damages for negligence relating to industrial deafness which he maintained resulted from his activities as a sleeper cutter. 11 The plaintiff pleaded that he was employed by the SRA or in the alternative, was an independent contractor to it. The trial judge found that there was no relationship of employer/employee and this finding is not challenged by way of Notice of Contention. His Honour held that the plaintiff was an independent contractor to the SRA, his principal. This meant that the authority of Stevens v Brodribb Sawmilling Company Pty Ltd (1985 - 1986) 160 CLR 16 was, as his Honour acknowledged, to be considered. His Honour found a verdict for the plaintiff from which the SRA appeals.

The judgment at first instance 12 It is apparent from his Honour's reasoning that he found that as a result of the ongoing relationship between the parties over such a lengthy period of time, there was physical proximity between them, albeit not involving any supervision of the work performed. Because the SRA licenced the plaintiff to obtain quotas of sleepers and because the licence could be withdrawn if there was a shortfall in quantity or quality, this constituted a sufficient relationship. His Honour found that the SRA was aware of the dangers of industrial deafness and aware of the manner in which the work would, of necessity, be carried out by the plaintiff. In addition, his Honour found that the SRA knew, or ought to have known, of the plaintiff's limited understanding of those dangers. 13 His Honour said that it was reasonably foreseeable that a failure to warn the plaintiff of the dangers of industrial deafness or to insist on the wearing of hearing protection or to test for hearing loss, would be likely to cause harm to the plaintiff. To determine whether a duty of care existed his Honour applied the three stage test expressed by Kirby J in Pyrenees Shire Council v Day (1998) 192 CLR 330 at 419 (244), which had then been recently decided in the High Court. This was before Perre v Apand Pty Ltd (1999) 73 ALJR 1190 was determined wherein the High Court moved away from the concept of proximity as a unifying criterion for the existence of a duty of care. 14 The appellant submits that, having regard to Brodribb and to the circumstances in which a principal will owe a duty of care to a contractor, the trial judge erred in finding that a duty of care existed. It is submitted that no duty arose because the SRA had no involvement in the work undertaken by the plaintiff. It did not, for example, give directions as to when and where the work was to be performed or organise or co-ordinate the activities involved in the work.

The facts 15 The plaintiff, Ronald Gudgeon, was born in 1934. Between 1950 and the early 1970s (the precise year is in doubt) he worked in a variety of positions; sausage maker; two years pine cutting with an axe; fruit and vegetable picking; a fire fighter; meat processor and as a slaughterman. A friend, who was a sleeper cutter for the SRA, introduced him to SRA officers in an hotel. After a discussion the plaintiff was issued with what he described as a licence to cut sleepers. An example of the document, which appears to be issued annually, was tendered in evidence. It is entitled 'Identity Card for Registered Cutters of Sawn or Hewn Sleepers, Timber Girders, Poles etc'. It contains the footnote 'No undertaking is given that timber submitted for inspection will be purchased'. On the reverse side of the document appear five numbered clauses. These include the condition that all timber is to be subjected to inspection (by the SRA) before acceptance, and claim forms are to be presented to the Inspector prior to inspection. The document was known as a 'sleeper cutter's ticket'.

16 SRA officers gave the plaintiff a sample and specification for the sleepers that he was to supply. He was later given a quota of sleepers to produce. The quota changed from time to time. The plaintiff would be paid in the hotel once the sleepers he supplied were accepted. This normally occurred on a monthly basis. 17 It is common ground that the 'licence' was to be exclusive. That is, that the plaintiff himself had to cut the sleepers and was not permitted to sub-contact. To cut the timber, the plaintiff used a chainsaw and a swingsaw. It was not contested that these tools are very noisy, especially the former. The plaintiff never wore any form of hearing protection. 18 The plaintiff supplied all of his own tools and paid for any repairs and replacements. He used his own truck to transport the dressed sleepers to the SRA. He personally sourced the timber on private property or in State forests. He was also responsible for paying the landowner a royalty on timber cut, a royalty which he personally negotiated. Sometimes the SRA paid the royalty on his behalf but deducted it from the moneys due to him from the sleepers supplied. 19 When the plaintiff delivered the sleepers to the SRA depot at Gulgong, an inspector would examine them to see if they were cut and shaped to the correct size and of the correct species and quality of timber. As I have said, payments were then made at the hotel, and were fixed at a rate per sleeper. No income tax was deducted by the SRA at source. 20 It appears that SRA officers or inspectors never came on site (where the work was being performed) except on a couple of occasions in wet weather or to check the timber availability. Otherwise the plaintiff was completely his own man as to where, when and how he carried out his timber cutting operations. 21 In summary, as his Honour found, the relationship between the parties was clearly one of principal and contractor. The relevance of Stevens v Brodribb 22 Turning to Stevens v Brodribb, ibid, in examining whether the principal, Brodribb, owed a duty of care to the independent contractor, Stevens, Mason J (as he then was) said: The interdependence of the activities carried out in the forest, the need for co-ordination by Brodribb of those activities and the distinct risk of personal injury to those engaged in the operations, called for the prescription and provision of a safe system by Brodribb. Omission to prescribe and provide such a system would expose the workers to an obvious risk of injury. Although the obligation to provide a safe system of work has been regarded as one attaching to an employer, there is no reason why it should be so confined. If an entrepreneur engages independent contractors to do work which might as readily be done by employees in circumstances where there is a risk to them of injury arising from the nature of the work and where there is a need for him to give directions as to when and where the work is to be done and to co-ordinate the various activities, he has an obligation to prescribe a safe system of work. The fact that they are not employees, or that he does not retain a right to control them in the manner in which they carry out their work, should not affect the existence of an obligation to prescribe a safe system. Brodribb's ability to prescribe such a system was not affected by its inability to direct the contractors as to how they should operate their machines. (at 31)

23 From this quotation it will be seen that Mason J (as he then was) highlighted a number of factors which lead to the finding of the existence of a duty of care by the entrepreneur to the independent contractor. These included: · the interdependence of the activities in the forest · the need for co-ordination by the principal of those activities · where there is a need for the principal to give directions as to when and where the work is to be done and to co-ordinate the activities 24 The combination of these factors meant that Brodribb had an obligation to prescribe a safe system of work. This duty was not affected by Brodribb's inability to direct the contractors as to how they should operate their machines. 25 Wilson and Dawson JJ also referred to the duty to exercise care in the co-ordination of the activities of the contractors. Brennan J also found that an entrepreneur who organises an activity involving the risk of injury to those engaged in it is under a duty to use reasonable care in organising that activity. This was because he was 'creating the risk'. His duty was however more limited than the duty owed by an employer to an employee. Brennan J added: It does not import a duty to retain control of working systems if it is reasonable to engage the services of independent contractors who are competent themselves to control their system of work without supervision by the entrepreneur. [at 47]

26 Applying Brodribb to the instant facts it is apparent that none of the factors enumerated by Mason J are present. There was no interdependence, in the sense explained by his Honour, between the operations of the SRA and the activities of the plaintiff cutting and dressing sleepers in the forest. There was no need for the SRA to co-ordinate the activities of the plaintiff with those of others. There was no need for the SRA to give the plaintiff directions as to when and where he was to work. All it did was to give him a specification and a quota. The plaintiff decided where he would work and when he would work, so long as he was able to produce the required quota of sleepers. The SRA did not create the risk of injury in the sense discussed by Brennan J. 27 It was unnecessary for the SRA to retain any control of the plaintiff's working system. It did not purport to do so and the system was a matter entirely under the plaintiff's own control without any hint of supervision. I cannot see how a duty of care was owed by the appellant, even of the limited nature urged by the plaintiff involving a duty to warn or to insist on the wearing of hearing protection or to test for hearing loss. In some ways the relationship demonstrated by the facts is more in the nature of vendor and purchaser of goods. The involvement of the SRA was little higher than specifying the quality and quantity of sleepers it required the plaintiff to supply. It had no involvement in the conduct of the activity by the plaintiff which caused the injury. Nor is the plaintiff's 'deemed employment' for the purposes of the Workers Compensation Act 1987 of any significant materiality in defining the nature of the relationship between the parties and the question of whether a duty of care arose from the circumstances of that relationship. The fiction, however, operates only for the purposes of the Act and does not affect the deemed employer's liability at common law. 28 Senior Counsel for the respondent submitted that Brodribb did not stand for any legal principle but was merely an illustration of the existence of a duty found on an examination of a particular factual context. In my opinion, the factors discussed by their Honours in Brodribb, particularly by Mason J, are of assistance in examining any particular principal/contractor factual matrix to determine the existence of a duty and its content. The factors have relevance in deciding whether a duty of care exists where the relationship is one of principal and independent contractor. 29 Reference was made to Crimmins v Stevedoring Industry Finance Committee (1999) 74 ALJR 1, in particular the focus of some of their Honours upon the plaintiff's vulnerability to injury by reason of the hazardous nature of the employment and his lack of ability to protect his own interest. In this respect, reference was made to the casual nature of the employment and the power of the Authority to direct waterside workers as to when and where they must work. 30 While the SRA had some knowledge of the risk, it did not direct sleeper cutters when, where and how they were to work. I do not see that the plaintiff was vulnerable in the sense discussed in Crimmins. 31 In examining the particular connections or relations between the parties (as per Apand) I am unable to see that it can be concluded that the appellant owed a duty of care to the plaintiff. The fact of the matter is that the SRA had no active involvement in the work performed by the plaintiff. It gave no directions, nor did it co-ordinate activities or organise the work. 32 Counsel for the respondent also submitted that the facts of the case were such as to make it appropriate to adopt an incremental approach to a novel category or situation, see Brennan J in Sutherland Shire Council v Heyman (1985) 157 CLR 424 at 481. However, I do not see that this is a novel case which dictates an incremental approach. In any event, what is suggested on behalf of the respondent goes beyond a mere increment. It belies caution in the extension of duties of care owed by principals to independent contractors who do not fall within the indicia discussed in Brodribb. Such an extension would clearly have a significant effect on existing business relationships. The situation is by no means analogous to Crimmins, which was a novel and unique case on its facts and focussed on a failure of the statutory authority to exercise statutory powers and functions. 33 In my opinion, the appeal should be allowed with costs and the verdict and judgment entered by the District Court should be set aside. The respondent should receive a certificate under the Suitors' Fund Act 1951, if otherwise qualified.

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