WESFARMERS FEDERATION INSURANCE LTD v STEPHEN WELLS trading as WELLS PLUMBING [2008] NSWCA 186 | Case summary

This benefit is in addition to the sum insured shown on the certificate of insurance. 12 It is to be noted that the cross-claim did not allege that the legal costs in respect of which indemnity was sought were incurred with the prior written consent of the appellant; and it is also to be noted that the defence did not refer to that requirement, apart from relying generally on the terms of the policy in response to paragraph 3 of the cross-claim (including in particular (d)(ii)) and a denial that the defendant was entitled to indemnity. 13 As noted by Basten JA, when the appellant's solicitors advised the defendant, by letter dated 11 November 2005, of the appellant's decision to deny indemnity and not to defend the plaintiff's claim, they went on to recommend that the defendant immediately take steps to protect his interest in the proceedings including obtaining legal representation. 14 By letter dated 28 February 2006 to the appellant, the defendant's solicitors sought written consent to incur costs to defend the claim by the plaintiff (Blue 524). The appellant replied to that letter on 10 March 2006 (Blue 552) but did not respond to the request for consent. 15 Before the primary judge, the defendant's counsel referred to that correspondence and said there was absence of consent (Black 410), but then (Black 411) referred to the proposition that where an insurer suggests in writing that the carriage of the defence be taken over by the insured's solicitors, that would constitute a consent in writing to incurring the costs of the defence; and also to the proposition that consent must not be withheld for extraneous considerations or unreasonably. 16 In his submissions before the primary judge on this matter (Black 421-428) the appellant's counsel did not rely on the absence of consent in writing. 17 On appeal, the appellant contended that the defendant could not rely on the letter of 11 November 2005 as constituting consent in writing. Having regard to all the circumstances set out above, I would reject that contention. 18 I agree with Basten JA, for the reasons he gives, that the defendant is entitled to an indemnity from the appellant in respect of costs incurred in defending the plaintiff's claim. However, the following points should be noted: (1) This indemnity applies to those costs incurred by the defendant in defending the plaintiff's claim, which would extend to costs incurred on the question of quantum; but otherwise, it would I think apply only to costs incurred for the purpose of denying the plaintiff's claim (essentially, establishing that the plaintiff was an employee). It appears in fact that, apart from the question of quantum, legal costs incurred by the defendant were substantially for the opposite purpose, that is, showing the plaintiff was an independent contractor. (2) The defendant will have an order against the plaintiff covering these same costs. That does not displace the defendant's right against the appellant, though if the appellant pays those costs, the appellant will be subrogated (pro tanto) to the defendant's rights against the plaintiff. 19 This leads to the question of the costs of the cross-claim. On that analysis, the cross-claim has substantially failed. The indemnity for costs is likely to extend only to a small part of the defendant's costs of the proceedings, and then only to costs as to which the defendant also has an entitlement against the plaintiff. I agree with Basten JA that the defendant should pay 75 per cent of the insurer's costs of the cross-claim. 20 I agree with the orders proposed by Basten JA. 21 BASTEN JA: On 18 December 2001 Mr Adam Hubbard ("the plaintiff") was injured while operating a jackhammer on a construction site at Pyrmont in Sydney. The plaintiff was working for Mr Stephen Wells ("the defendant"), a plumbing contractor, when he struck an electric cable carrying 33,000 volts and suffered serious burns and related injuries. He recovered well and was left with a relatively minor degree of permanent impairment. 22 He sought damages from several parties responsible for activity on the construction site, including, relevantly for present purposes, from the defendant. 23 He brought proceedings on the basis that he was an independent contractor engaged by the defendant. Had he been an employee rather than an independent contractor, his right to damages would have been subject to a threshold requirement contained in s 151H of the Workers Compensation Act 1987 (NSW). It was common ground that his injury was not sufficiently serious to allow him to pass the threshold. Further, the defendant did not have workers' compensation insurance, but did hold insurance with Wesfarmers Federation Insurance Ltd ("the appellant") in respect of his liability to independent contractors. 24 In proceedings in the District Court, Norrish DCJ held that the plaintiff was an independent contractor. The plaintiff obtained a judgment in an amount slightly in excess of $174,000 against the defendant: see Hubbard v Stephen Wells t/as Wells Plumbing [2007] NSWDC 93. 25 The appellant seeks to challenge that finding and, hence, its liability in respect of the award of damages. It contends that his Honour should properly have found that the plaintiff was an employee at the time of the accident and not an independent contractor. That challenge identifies the primary issue on the appeal. 26 A secondary issue arises in the event that the appellant is successful. If the plaintiff were properly characterised as an employee, the defendant seeks to set aside the judgment against him on the basis that the plaintiff failed to demonstrate a degree of permanent impairment of at least 15%. The plaintiff conceded that that threshold was not met. As became apparent during the hearing of the appeal, the live issue was not the plaintiff's entitlement to retain his judgment, but the entitlement of the defendant to obtain from the appellant payment of his costs incurred in defending the proceedings. 27 This latter issue required the application of the clause in the insurance policy providing indemnification for legal costs incurred by the defendant in relation to a claim made against him. Characterisation of work relationship: legal principles 28 The characterisation required of the work relationship between the plaintiff and the defendant arose under the business liability policy issued by the appellant to the defendant. That policy excluded liability for personal injury to "a person employed by you under a contract of service": "What is not insured?", cl 13. That language was apt to engage the general law distinction between contracts of service (employment) and contracts for services (independent contractors). 29 It was also accepted that the trial judge had correctly identified the relevant legal principles as those found in Stevens v Brodribb Sawmilling Company Pty Ltd [1986] HCA 1; 160 CLR 16; Hollis v Vabu Pty Ltd [2001] HCA 44; 207 CLR 21 and Boylan Nominees Pty Ltd v Sweeney [2005] NSWCA 8; Aust Torts Rep ¶81-780; 148 IR 123, to which may be added Sweeney v Boylan Nominees Pty Ltd [2006] HCA 19; 226 CLR 161 and earlier cases discussed in those authorities. 30 The trial judge correctly noted the importance of "control" as a factor in determining the nature of the relationship; he also noted that it was not the sole criterion, but one of a number of indicia which should be considered: at [10]-[11]. As explained by Mason J in Stevens at 24: "Other relevant matters include, but are not limited to, the mode of remuneration, the provision and maintenance of equipment, the obligation to work, the hours of work and provision for holidays, the deduction of income tax and the delegation of work by the putative employee." 31 One criticism made of the trial judge in the present case was that he tended to elide the distinction between the exercise of control and the contractual right to control the carrying out of the work. The distinction was noted by Dixon J in Humberstone v Northern Timber Mills [1949] HCA 49; 79 CLR 389 at 404, in a passage quoted by Mason J in Stevens at 24. However, as explained by Mason J, both in relation to control and by reference to other relevant factors, the actual exercise of control may itself be relevant. 32 Where, as in the present case, there is no written contract, nor even a clear oral agreement, the nature of the relationship will need to be inferred from such facts as can be objectively determined. Indeed, even in the case of an express contract identifying the character of the relationship, extraneous circumstances may lead to a conclusion at odds with the express terms. In Queensland Stations Pty Ltd v Federal Commissioner of Taxation [1945] HCA 13; 70 CLR 539, a drover was found to be an independent contractor, despite an express requirement that he would obey all lawful instructions of the 'employer'. Thus the right to control may not be conclusive in circumstances where there is little scope for the exercise of a lawful authority to command; on the other hand, the fact that the person performing the work is required to exercise independent skill and judgment will not preclude an employment relationship: see Zuijs v Wirth Brothers Pty Ltd [1955] HCA 73; 93 CLR 561. The distinction between a right to exercise control, on the one hand, and the matters over which control can be exercised and the extent to which it is exercised, on the other, is primarily a distinction between a legal criterion and the means of its proof. In the present case where there was little evidence of any express agreement, the very existence of a contract, to say nothing of its terms, needed to be inferred from such circumstances and facts as could be established on the evidence. 33 In Marshall v Whittaker's Building Supply Company [1963] HCA 26; 109 CLR 210 at 217, Windeyer J noted, in a passage cited with approval in the joint judgment in Hollis v Vabu at [40], that the definition of "worker" in the Workers' Compensation Act 1912-1960 (WA) depended upon "the distinction between a servant and an independent contractor". His Honour continued: "That is rooted fundamentally in the difference between a person who serves his employer in his, the employer's, business, and a person who carries on a trade or business of his own." 34 That fundamental difference suggests that underlying various indicia relevant to whether a person is an employee or an independent contractor is the question whether the person is in fact running his or her own business. It will be unlikely that a person is an independent contractor if he or she has not established a business or taken any of the steps required by law in that regard. Inferences to be drawn from primary facts 35 There were a number of considerations which suggested that the plaintiff was not running his own business. First, had he undertaken that course, it would have been necessary to identify the nature of the business. The most obvious business was that of a plumbing contractor, in pursuit of which he had taken a number of steps. As noted by the trial judge at [4], he had commenced employment as an apprentice plumber in early 1997, had completed a trade certificate at the end of 1999, completed his apprenticeship at the end of 2000 and had been awarded a certificate of proficiency in plumbing, gas fitting and draining in January 2001. He had thus undertaken relevant training. 36 On the other hand, in contrast to the defendant, he was not a licensed plumber. 37 The significance of being unlicensed was that he was not entitled to contract to do "specialist work" except on behalf of an individual, partnership or corporation that was the holder of a licence authorising its holder to contract to do that work: Home Building Act 1989 (NSW), s 4. Further, an individual "must not do" any specialist work except as the holder of a licence, or as a member of a partnership or an officer of a corporation that is the holder of a licence: s 12. "Specialist work" is defined to include plumbing work: s 3(1). 38 On the basis that he was not able to operate a plumbing business without a licence, there remained the possibility that he operated a labour hire business as an unlicensed worker with training and experience in plumbing. On the other hand, he may simply have sought casual employment in that capacity. 39 For a person seeking to carry on his or her own business, there are particular requirements imposed by taxation legislation. Under the tax regime which existed before the introduction of the GST, deductions from income were required to be made by an employer on a "pay as you earn" (PAYE) basis and by a principal under the prescribed payments scheme (PPS) in relation to an independent contractor, pursuant to Part VI, Div 3A of the Income Tax Assessment Act 1936 (Cth) as in force between 1994 and 1999. (The operation of the scheme was recently discussed by this Court in Trimcoll Pty Ltd v Deputy Commissioner of Taxation [2007] NSWCA 307 at [8]-[20].) The PAYE system arose under Part VI, Div 2 of the Act and was explained by Hill J in Stergis v Boucher (1989) 86 ALR 174 at 183-184. 40 Courts have taken differing views as to the inference which should be drawn from the arrangements made between parties with respect to deduction of tax: see Australian Air Express Pty Ltd v Langford [2005] NSWCA 96; 147 IR 240 at [49]-[53] (McColl JA, Ipp and Tobias JJA agreeing). Clearly, the strength of the inference will depend upon the circumstances of the case and the likely understanding of each party as to relevant tax implications of the relationship. (The time for determining the particular relationship in Langford was the date of injury, namely 11 June 1999, but in relation to a contractual situation which had existed for some years prior to that date.) 41 With the commencement of the GST legislation in July 2000, tax was required to be withheld from payments to an independent contractor who did not have an Australian Business Number (ABN). Both parties were aware that the plaintiff did not have an ABN, but that he did have a tax file number (TFN) which would have been sufficient and appropriate to be provided to an employer for the purposes of the new "pay as you go" (PAYG) deductions. 42 The account keeping and tax returns of the defendant allowed for no clear inference as to whether the plaintiff was being treated as an employee or as an independent contractor in the defendant's records. That ambivalence was reflected in the plaintiff's tax records. In the end, the trial judge was not inclined to draw any inference from this material and no complaint is made in that regard. Nevertheless, it is appropriate to start from the position that, despite the fact that the plaintiff had used an accountant to prepare his tax returns, he had not taken any of the basic steps to set up a business, such as obtaining an ABN, providing invoices to those with whom he contracted and obtaining appropriate insurance. Change in relationship 43 A second issue involved the suggestion that the relationship between the plaintiff and the defendant changed in about September 2001. The trial judge stated at [15]: "Up until September 2001, on the evidence available, there can be little doubt that the Plaintiff was regarded by himself and Mr Wells as an independent contractor. … The work provided by Wells was sporadic, the Plaintiff was working for and with other people, providing his own tools, no tax was deducted or withheld and he was paid on a daily basis for work done when it was mutually convenient for his services to be provided. There were other indicia of this type of working relationship, yet the Defendant 'controlled' the work performed for him by Mr Hubbard when he worked. He also paid the Plaintiff 'wages' according to his cheque records for August/September." 44 His Honour concluded, at [15], that the "critical issue" in the case was "whether the relationship changed from contractor to employee from about mid October 2001". The case appears to have been argued by the appellant at trial, at least in part, on the basis that there had been such a change. With respect to the evidence up until October 2001, the trial judge stated that the appellant had "scarcely, if at all, argued to the contrary" of the proposition that the plaintiff was then an independent contractor: at [15]. However, as the appellant contended on the appeal, there was no concession in that regard, the issue being not what may have been the situation prior to October, but what the situation was at the time of the accident in December 2001. It contended that, to the extent that any inference should be drawn in relation to the earlier period, it was one consistent with that which should be drawn in relation to the later period, namely that the plaintiff was a casual employee of the defendant. 45 There was no evidence that either the plaintiff or the defendant gave contemporaneous consideration to the nature of their relationship prior to December 2001. Nor do the objective circumstances provide much by way of assistance. Indeed, the only objective circumstance from which any clear inference can be drawn was consistent throughout 2001 and was the insurance policy taken out by the defendant with the appellant, covering liability for, amongst other matters, injuries suffered by an independent contractor. To the extent that the defendant held such a policy, but held no workers compensation insurance, there was an inference available that the defendant did not intend to employ people to work for him. However, in circumstances which involved a general disregard by the defendant of his obligations under the taxation legislation as well as other statutory obligations, it is understandable that little emphasis was placed upon this isolated factor. 46 Two circumstances which did change in October 2001 were, first, a reduction in the amount paid to the plaintiff by the defendant and, secondly, the provision of a steady flow of work over a number of weeks. Thus, prior to October 2001 the defendant provided the plaintiff with work intermittently and paid him $800 per week, without deduction for tax. From mid-October until the date of the accident, the defendant provided regular work at the Pyrmont site, paying him at the rate of $635 per week, but deducting an amount of approximately $133 on account of tax. 47 The plaintiff suggested other details of the changed arrangement in October. In a statement to a WorkCover Authority officer dated 25 March 2002, the plaintiff stated (par 5): "Sometime during September 2001 Mr Wells came to me and told me that he would be having more work and he agreed to employ me on a full-time basis. He agreed to pay me $502.00 nett per week and with leave entitlements. I was not working for any other employer and I still was not engaging labour on my own behalf. He still directly supervised my work and supplied all materials required." 48 In cross-examination, the plaintiff confirmed the truth of this statement: Tcpt, 14/11/06, p 205. The defendant, however, disagreed that the plaintiff was employed by him full-time and had leave entitlements: Tcpt, 15/11/06, pp 289 and 316. 49 As will be discussed below, the reason for the change in the arrangements with respect to payment was somewhat unclear. The defendant asserted that the deductions made on account of income tax were made in accordance with directions from his accountant: Tcpt, 16/11/06, p 342. However, the amount deducted was not forwarded to the Commissioner but was paid to the plaintiff in March 2002. It was put to the defendant in cross-examination that the tax deduction was paid to the plaintiff in order to avoid the suggestion that he was an employee and hence avoid the commission of an offence in failing to obtain workers' compensation insurance. The defendant accepted that the payment had been made, but denied the purpose. He was unable to account for the amount of the deduction, merely stating that the figure was in accordance with his accountant's advice. 50 There are real difficulties in drawing specific inferences with respect to the arrangements prior to October 2001. The arrangement appears to have been both casual and informal. For example, although the defendant agreed that he had been paying the plaintiff $800 per week, he denied claiming those amounts as a tax deduction in the conduct of his business: Tcpt, 16/11/06, p 334. The best that can be said is that the reduction in the weekly payments, together with the deduction on account of income tax, was consistent with an intention to provide regular work with additional benefits generally accorded to an employee in lieu of the higher weekly payments. 51 Other factors relied on in relation to the period up until October 2001 do not allow for any firm conclusion to be drawn. First, the evidence of how the plaintiff and defendant regarded themselves in that period is largely a matter to be derived from subsequent statements: the objective facts are ambivalent. For example, the facts that the work was sporadic and that the plaintiff was paid on a daily basis were entirely consistent with casual employment, as was the fact that he was working for or with other people. 52 That he provided his own tools was again consistent with employment, some allowance for tools of trade being accepted by counsel as a provision not uncommon in awards dealing with tradespeople. Further, the fact that no tax was deducted is primarily an indication that the defendant did not comply with his obligations under the taxation legislation. Whether the plaintiff was an employee or an independent contractor without an ABN, tax should have been deducted and remitted to the Commissioner. 53 In a sense, it may be immaterial that the trial judge reached a particular view in relation to the period up until October 2001: however, if that view led him to seek change in the relationship thereafter, the exercise may have proceeded on an inappropriate, and possibly false, premise. Financial arrangements from October 2001 54 The trial judge noted the plaintiff's evidence that "in September he was desperate for work and he was told by Wells that there would be a lot more work later in the year": at [16]. His Honour concluded that for at least six weeks from 31 October until 18 December 2001 he did not work for anybody else. The defendant's records of payment to the plaintiff also indicate a period of approximately six weeks during which payments of $500 per week were made, one cheque stub stating that the rate was "$635 less tax $133". Although tax was deducted, the defendant gave the plaintiff a cheque for $1,080 in February 2002, which appears to have been calculated at an amount of $135 per week for eight weeks. His Honour was unable to infer why the defendant made that payment to the plaintiff: at [36]. It appears that the cheque was not presented by Mr Hubbard: Tcpt, 16/11/06, p 346. 55 The appellant complained that the deductions made in October-December 2001 were not consistent with the plaintiff being an independent contractor. Had he been an independent contractor who did not have an ABN, the withholding rate would have been 48.5%, rather than the amount of approximately 21% in fact deducted. As the appellant noted, the deduction was close to the appropriate deduction for an employee, taking into account income tax and the Medicare levy. 56 This complaint, which constituted the first challenge to his Honour's finding, is a reconstruction which appears to have been formulated after the event. No case was presented to his Honour on the basis of these calculations, nor, more importantly, did the defendant explain whether the deduction, made on the basis of advice provided by his accountant, was in accordance with a specific understanding of the relationship provided by the defendant to his accountant. Accordingly, although the reconstruction has a degree of verisimilitude, it does not provide a proper basis for demonstrating error in the finding that the plaintiff was not an employee, given the manner in which the trial was run. 57 On the other hand, the defendant agreed that he was not supplied, and did not expect to be supplied, with invoices by the plaintiff, although he conceded that he received invoices from other contractors, a point noted by the trial judge at [16] (based on the defendant's evidence), [30] (based on the plaintiff's evidence) and, in summaries at [39] and 43. This finding was at least inconsistent with the plaintiff being an independent contractor. Control 58 The second matter on which the appellant relied as a ground of appeal was the manner in which his Honour dealt with the question of "control". The principle that a relationship was more likely to be one of employment if characterised "by a significant degree of control" and as one of independent contractor in the absence of control, was not in dispute. Rather, the appellant contended that the trial judge failed to give proper weight to his finding that the defendant controlled the work performed by the plaintiff both in the period up to October 2001 and thereafter. 59 In the statement prepared by an officer of the WorkCover Authority dated 25 March 2002, the plaintiff stated that when he started work for the defendant, the defendant "controlled where and when I worked and he supervised my work in that he overlooked all my work": par 4. He stated that he had "often worked on site alone" but continued, in relation to the subsequent period from about September 2001, the defendant "still directly supervised my work and supplied all materials required": par 5. This evidence was accepted by his Honour at [30]: "I accept [that] this and other statements accurately reflect the way in which Mr Wells, 'controlled', that is supervised and directed him at work." 60 At [40] his Honour held: "Importantly Mr Wells accepted that he 'controlled' where the Plaintiff worked when he worked for Wells Plumbing and what work he did. He also supervised the work that Mr Hubbard did. However, Mr Wells had 20 years experience and the Plaintiff was a person with limited [experience] and was not a licensed plumber." 61 He noted that the defendant allocated work and "when present directed the Plaintiff as to how he wanted the work performed because of his greater experience and because he was the principal contractor": at [41]. This, his Honour said, was illustrated by the events of 17 and 18 December 2001, which he described further in considering whether the defendant was negligent. His Honour stated at [49]: "Inside the trench the Plaintiff and the Defendant had hand tools as well as the 'Kanga hammer', which the Defendant instructed the Plaintiff to use to clean underneath the exposed beam and remove any sort of 'dag', or shale or loose bits of concrete attaching to the bottom of the beam as earlier explained. [His Honour then referred to plans available to the defendant which showed that the beam carried within it electricity services and continued:] Mr Hubbard had no need to examine them in detail because he was performing the work under the direction of Mr Wells and relied on his experience." 62 Further, his Honour stated at [51]: "I accept the Plaintiff's account that when he used the Kanga hammer at the relevant time, on the instruction of the Defendant, he chipped off what he thought was enough but that he was instructed to 'knock [off] the last little bit of concrete' attaching to the underside, at which time the Kanga hammer came in contact with the high voltage wires and there was a big explosion'." 63 The appellant contends, with some force, that this material demonstrated a level of control of the work being undertaken by the plaintiff which was consistent with him being an employee rather than an independent contractor. Needless to say, even employees do not usually require constant supervision, and may receive less as their competence and experience with a particular task grows. That this may have been true of the relationship between the plaintiff and the defendant is apparent from the following cross-examination of the defendant (Tcpt, 16/11/06, p 362): "Q. And when you say that you have provided some supervision to Adam is it correct to say that that is the sort of supervision you provided to him; that is to check work that he had done on tasks that you had allotted to him from time to time? A. Correct. Q. As your relationship proceeded throughout 2001 did it become more and more apparent to you that Mr Hubbard was competent and capable of being left on his own? A. Correct." 64 As the trial judge noted, the defendant was a "compliant" witness under cross-examination by counsel for the plaintiff: at [17]. However, that conclusion merely highlighted the need to be wary of statements which diminished the degree of supervision and direction. Overall, the evidence which his Honour accepted demonstrated a significant level of control. 65 His Honour also noted the evidence of the plaintiff's subjective beliefs as set out in a statement made on 16 September 2003 in support of an insurance claim. Under the heading "Employment history", he noted: "I began employment with Stephen Wells Plumbing in about March 2001. I started on an arrangement when I was paid $800 gross per week. On 15 October 2001 I became a full time employee of Stephen Wells Plumbing, earning $502 nett per week plus leave entitlements." 66 This material, referred to by the trial judge at [31] was, as his Honour noted at [33] the subject of oral evidence. His Honour concluded at [34]: "What emerges from the evidence of the Plaintiff was that in effect he understood that he had been given 'full time employment' by the Defendant in the sense that he had a full time 'retainer' from mid October until the date of his injury. His adoption and/or use of the words 'employee, employer … employment' in the various documents he completed or signed may reflect his view of the arrangement but those expressions do not necessarily establish their 'legal meaning'. I accept the Plaintiff's use of these terms does not have of itself legal effect but may be construed as admissions, if reasonable to do so in the context of all the evidence. Ultimately I do not believe they are. … His expression may be viewed as colloquial, although potentially persuasive." 67 What weight his Honour ultimately gave to the evidence concerning supervision and direction is unclear. It should have been treated as a significant aspect of the relationship which tended to support the view that it was one of employment. Given the paucity of evidence as to the nature of the relationship, it should have been treated as the primary available indicator. However, his Honour treated it with circumspection at [41]: "The truth was the Plaintiff was happy to work when Mr Wells required him and not otherwise from 31 October until he was injured. There are aspects of this arrangement that have the hallmarks of the control required for an 'employer/employee' relationship to exist, but the evidence reveals that the parties had different views of what was required of the other, particularly as to what Mr Wells was to do to ensure the financial security of the Plaintiff. Even if the Plaintiff believed he was 'employed', there was not enough 'mutuality of obligation' to establish that he was at least a part time 'employee' given all the circumstances and the objective indicia of the arrangement." 68 It may be inferred from this passage, that while the demonstration of control pointed in one direction, it was negated by the lack of "mutuality of obligation". It was the emphasis placed on mutuality which led to the third challenge raised by the appellant. Mutuality 69 In relation to this issue, the appellant contended that the trial judge had misunderstood or misapplied the relevance of the test in defining the employment relationship. In particular, it referred to the citation by his Honour at [13]-[14] of a passage in the judgment of Ipp JA in this Court in Boylan at [56] where his Honour stated, after noting the significance of the absence of control of the worker under consideration: "Another important factor is the absence of mutuality of obligation to provide work for a particular period (even if it be only a reasonable period) and to work for that period. Such a mutuality of obligation is a usual ingredient of the employer/employee relationship: Commissioner of Payroll Tax (Vic) v Mary Kay Cosmetics Pty Ltd [1982] VR 871. The fact that [the worker] was free to accept or decline work is a strong indication that he was not an employee." 70 Boylan involved an injury caused by a faulty door on a refrigerator in a service station, the refrigerator having been supplied by Boylan. Maintenance work on the refrigerator was carried out by a refrigeration mechanic, under contract to Boylan. The mechanic held a trade certificate and a contractor's licence issued by the Department of Fair Trading: at [27]. He did work for Boylan on request: at [28]. He provided his own equipment and tools, his own superannuation, workers' compensation and public liability insurance, had his own van with his own business name on it and operated as a director and employee of his own company. Understood in this context, the passage set out from the judgment at [56] was entirely understandable. Taken out of context, and applied generally, it might be seen to render all arrangements involving casual employment as independent contracting. When a relationship depends upon various indicia, there is always a danger in extracting one indicium and giving it decisive weight because of the way in which it has been used in a different context, rather than weighing each matter in the balance. 71 As explained by the appellant, a greater degree of assistance may be obtained from the reasoning in JA & BM Bowden & Sons Pty Ltd v Chief Commissioner of State Revenue [2001] NSWCA 125; [2001] ATC 4220; 47 ATR 94; 105 IR 66. That case concerned liability for payroll tax on remuneration paid to fruit-pickers who worked on a seasonal basis. Ipp AJA (Giles and Hodgson JJA agreeing) dealt with the question of mutuality of obligation at [87]-[93]. In that case, it was clear that the workers had a far greater level of flexibility in determining their own hours and whether they would continue working than appears to have been accepted by the parties in the present case. In holding that the fruit pickers were in fact employees, his Honour noted at [90]: "Like virtually all factors relevant to the existence of an employment relationship, absence of mutuality of obligation cannot be looked at in isolation. It has to be seen in context and the context will colour any inferences to be drawn from the fact that a worker is entitled to work whenever he or she wishes." 72 After further reference to authority, Ipp AJA concluded at [93]: "In the present case I am not persuaded by the fact that, in theory, the seasonal workers could work whenever they wished, to conclude that they were engaged as independent contractors. In my view, the degree of control the appellant was entitled to and did, in practice, exercise, over the work of the seasonal workers is a powerful indicator that they were engaged as employees." 73 Ultimately, the degree of control is likely to be a strong indicator as to whether a worker was engaged in the business of the contractor, or was undertaking business on his or her own account: cf Roy Morgan Research Centre Pty Ltd v Commissioner of State Revenue (Vic) (1997) 97 ATC 5070; 37 ATR 528 (VSCA). 74 Further, in circumstances where it is difficult to identify, except by inference, the terms of the contract, there is a degree of circularity in determining whether the contract is one of employment by reference to mutuality of obligation. In the present case, there was no clear indication as to the degree of obligation between the parties, even with respect to a particular job. The facts that the plaintiff needed work and that the defendant needed a worker were not inconsistent with the view that the worker was hired for the duration of the particular contractual undertaking of the defendant. The fact that the plaintiff might have been free to work for others at the end of that period is not inconsistent with it being a period of employment, though not permanent. Conclusions - employment 75 The defendant and the plaintiff resisted the appeal on the basis that there was no error in the statement of principles set out in the judgment below and that their application was a matter for evaluative judgment with respect to which no error had been identified. At best, they contended, the appellant had argued for a different set of inferences to be drawn from the facts available on the case as presented to the trial judge. It is not appropriate, they further contended, to assess the facts on a basis not relied on below. 76 There is substance in each of these points. In relation to the last point, as already indicated, it is inappropriate to undertake an analysis of the payments and apparent tax deductions made by the defendant in circumstances where the trial judge was left with no assistance on this aspect of the matter, the case not having been presented on that basis. 77 The first point raised by the respondent is also broadly correct. As already noted, the trial judge identified the relevant authorities and extracted the appropriate principles. However, the second point of resistance is not so clear. In applying the relevant principles the trial judge gave undue weight, in my view, to the apparent lack of mutuality of the obligations of the plaintiff and the defendant and allowed that consideration to override the reasonably clear inference that the defendant exercised the degree of control and supervision over the plaintiff which would be expected in an employment relationship. In this respect his Honour fell into error in a way which affected the evaluative judgment required. 78 Because of the error in his Honour's approach, it is necessary for this Court to reconsider the determination that the plaintiff was an independent contractor. 79 There are factors which would usually provide assistance in dealing with the characterisation of a relationship, including contractual terms with respect to sick leave, holidays and superannuation. That no arrangements were made in regard to these matters may weigh against the relationship being one of employment. 80 On the other hand, there are factors which support the view that the plaintiff was an employee at the date of his accident. The first significant factor is the absence of any objective evidence in the year preceding the accident supporting the conclusion that the plaintiff was running his own business. He had obtained certain skills and was eager for work in areas which would allow him to use those skills. However, he had not obtained a licence which would allow him to undertake plumbing work on his own account, nor had he taken other steps to establish a business, such as obtaining an ABN. 81 Secondly, the plaintiff's relationship with the defendant in respect of the work undertaken was one which involved the defendant giving precise directions not only as to the identification of the work to be done, but also as to the manner in which it should be undertaken. Concomitantly, the defendant supervised the plaintiff's work. 82 These latter factors, taken in combination, lead to the conclusion on the probabilities that the plaintiff was an employee of the defendant albeit on a job by job basis and without permanency. 83 Accordingly, the appeal should be allowed and the judgment and orders in favour of the plaintiff set aside. Similarly, the judgment for the defendant against the appellant on the first cross-claim in relation to the liability of the appellant to indemnify the defendant in relation to compensation should also be set aside. There remains a question as to the defendant's costs of the proceedings and the cross-claim made against the appellant for an indemnity in relation to the costs incurred in defending the plaintiff's claim. Liability of appellant for costs 84 As already noted, the business liability policy held by the defendant from the appellant excluded from its coverage liability for personal injury to an employee. Under the heading "Legal costs" the policy provided: "If you are entitled to be indemnified under this policy for a claim made against you, we pay the reasonable legal costs incurred with our prior written consent in defending or settling the claim." 85 The appellant resisted liability under this clause ("the costs clause") on two bases: first, it said that no indemnity arose where the claim against the insured failed; secondly, it said that the indemnity extended only to costs incurred with prior written consent, which had not been provided. 86 Because the trial judge held that the plaintiff was an independent contractor and therefore the liability of the defendant was covered by the policy, it was not necessary for his Honour to consider the situation in respect of legal costs had the plaintiff not been an independent contractor. The matter being a point of construction and the need to determine it having arisen on the basis that the plaintiff was an employee, it is convenient that this Court address the issue, rather than remit it. The only factual issue which arose was whether the appellant had given written consent to the defendant to incur costs in defence of the claim, a matter to which it will be necessary to return below. On any view, the factual question was to be resolved, if it arose, solely by reference to the correspondence which was in evidence. 87 It is clear that the primary cover provided by the policy was in respect of a "legal liability to pay compensation". Absent liability and absent liability falling within the terms of the policy, there could be no obligation on the appellant to indemnify the defendant in relation to compensation. Nor could it be said that the costs incurred by the defendant in successfully defending the claim fell within this primary liability. Although the defendant may have had a legal liability to his lawyers, it was not a liability "to pay compensation". Accordingly, any right to recover the legal costs of his successful defence must have arisen under the "additional benefit" provided by the costs clause. 88 That clause commenced with a precondition, namely entitlement to be indemnified "under this policy" for a claim made against the insured. Unless that condition were self-referent, it must have required entitlement to indemnification under another clause of the policy which, in this case, must have been that involving primary cover against liability to pay compensation. Accordingly, the appellant argued that because no entitlement would arise in relation to a successfully defended claim, the condition was not satisfied. 89 The contrary argument was that the reference to a "claim" in the costs clause meant that the entitlement to be indemnified was to be construed by reference to the claim made. Consistently, the exclusions to the policy were expressed in terms that the policy "does not insure you against any claim", for example, "for personal injury to … a person employed by you under a contract of service". The defendant submitted that so long as the claim itself was formulated as one which engaged the policy, whether it was ultimately made good or not, the condition in the costs clause was satisfied. In the present case, the statement of claim alleged that the plaintiff was "engaged as an independent contractor". Accordingly, the appellant was responsible for the costs incurred by the defendant in resisting that claim. 90 Although differing language may justify different conclusions, this latter approach is supported by authority. Thus, in Thornton Springer v NEM Insurance Co Ltd [2000] 2 All ER 489, Colman J in the Queen's Bench Division considered a special condition which provided that the insurer should "in addition indemnify the Assured in respect of all costs and expenses incurred with their written consent in the defence or settlement of any claim made against the Assured which falls to be dealt with under this Certificate …": see [10]-[11]. As in the present case, the clause envisaged payment of costs in two eventualities, namely the defence, or the settlement, of a relevant claim. Colman J held at [48]: "In my judgment, special condition 1 does not require that the costs must have been incurred in defence of a successful as distinct from an unsuccessful claim against the assured. It is significant that the condition is concerned not only with the costs of defence but with the expense and cost of settlement of any such claim. If there were to be super-added to the requirement that the underwriter should have consented to the costs or expenses being incurred also the requirement that there should be actual liability to the claimant, that requirement must apply equally to the expenses of settlement. However, the assured is not permitted to enter into a settlement unless the underwriters have consented to it. A construction which left it open to underwriters to decline indemnity in respect of such costs or expenses, when they had already consented to the settlement being entered into, on the grounds that there had in truth been no liability of the assured to the claimant would, I have to say, be quite absurd. It would lead to the result that insurers who had already consented to a settlement of a claim which in substance fell within the scope of cover might then decline to indemnify the assured in respect of what he had paid unless he established that he was in truth liable in respect of the claim. That could not have been the mutual intention of the parties. Since the words 'which falls to be dealt with under this Certificate' cannot have one meaning for settlements and another meaning for defences, it must obviously follow that they bear the meaning merely that the claim is in substance one capable of falling within the scope of indemnity under the insuring clauses. In both cases the underwriters are entitled to rely on their control mechanism of consent, but, once that has been given, they cannot impose a pre-condition of actual liability in respect of the claim." 91 The appellant contended that the point of distinction from the policy in the present case is evident: the appellant's policy has indeed imposed as a condition of liability for costs, not only a requirement of prior written consent, but also a condition of entitlement to be indemnified. If the insurer approved a settlement in such circumstances, it might be estopped from denying the liability of the insured, but it is clear that such liability is a precondition to a claim for costs. The condition was not satisfied where the defence succeeded. 92 It may, however, be added that there is a temporal element affecting the insurer's obligation to pay legal costs. Thus, it will not be known whether the condition is satisfied until the claim has been settled or legal proceedings resolved. Where, as in Thornton Springer, the costs extension clause provided an indemnity, that temporal element needed to be accommodated by treating the insured as having an entitlement, retrospectively, to recover costs incurred prior to the fulfilment of the condition. However, in the present case, the obligation with respect to legal costs was not by way of indemnity, but was an obligation to pay costs incurred and, it would seem, as they were incurred. This point of distinction between the policies militates against acceptance of the appellant's contention and in favour of the application of the reasoning of Colman J, namely that the costs clause, unlike the primary liability clause, was not conditional on a legal liability to pay compensation. 93 In Fitzpatrick v Job [2007] WASCA 63; 14 ANZ Ins Cas ¶61-731; Aust Torts Rep ¶81-891, the Western Australian Court of Appeal considered a clause by which an insurer agreed to pay "legal costs, charges and expenses incurred as a result of your entitlement to indemnity under this Optional Benefit and incurred with our written consent": set out at [160]. Buss JA (with whom Steytler P agreed) held, consistently with the last conclusion noted above in respect of the temporal operation of such a clause, that it must reasonably be construed as applicable to costs incurred prior to any judgment or settlement: at [280]. However, his Honour continued at [281]: "The costs extension clause should be given a construction which promotes its evident commercial purpose, namely, to provide cover in respect of legal costs, etcetera, incurred by Jobs Engineering, with the written consent of GIO, as a result of claims made against Jobs Engineering which, if established or admitted, would require GIO to indemnify it." 94 The intention of that conclusion is not entirely clear. Thus, the reasoning was expressly obiter because the claim of the plaintiff in that case (Mr Fitzpatrick) against the manufacturer, Jobs Engineering, failed and accordingly Jobs Engineering did not incur a liability covered by its policy with its insurer, GIO. By majority, the Court of Appeal upheld Mr Fitzpatrick's appeal against Jobs Engineering, which rendered it unnecessary to deal with the GIO appeal. For the majority, it was not necessary to consider the correctness of the conclusion of the trial judge that, despite absence of liability to Mr Fitzpatrick, Jobs Engineering was entitled to recover its costs of successfully defending the claim from GIO. Nevertheless, the conclusion of the majority that the trial judge was correct may be seen to be inconsistent with the appellant's approach in this case. 95 The reasoning in Fitzpatrick was more fully apparent from the judgment of Pullin JA, who would have dismissed the appeal by Mr Fitzpatrick and thus concluded that there was no legal liability under the primary indemnity. His Honour held that liability under the primary indemnity was not a precondition to the payment of the insureds' costs in the following passage at [177]-[179]: "In the insurance clause, an indemnity is provided in respect of sums that the insured becomes legally liable to pay. So, under the main insurance clause the liability of GIO to indemnify does not crystallise until there is a judgment or a contract of settlement obliging the insured to pay damages to someone. However, the costs extension clause does not say that legal liability to pay costs is dependent upon a legal liability to pay compensation. Instead, the costs extension clause states that GIO will 'pay' legal costs (not 'indemnify' the insured for those costs or reimburse them for the legal costs paid) incurred as a result of 'your entitlement to indemnity'. This obliges GIO to pay the legal costs as the costs fall due for payment. The clause does not oblige the insured to pay the costs and then seek indemnity. If GIO must pay these costs as they fall due then, in my opinion, the phrase 'entitlement to indemnity' means entitlement to indemnity with respect to claims made by the claimant against the insured. … … The claims made by Mr Fitzpatrick against Jobs Engineering included a claim for the negligent omission to give advice about the machine's safe use. … If there had been success on that allegation, then Mr Fitzpatrick would have been entitled to judgment and GIO would have been obliged to indemnify Jobs Engineering. Jobs Engineering was therefore 'entitled to indemnity' with respect to that claim. The fact that the claim, based on negligent advice, was later dismissed is beside the point. Thus 'entitled to indemnity' means 'entitled to indemnity with respect to claims made'." 96 There are points of similarity and distinction between the policies in the present case and in Fitzpatrick. The primary point of similarity is that both involved an obligation on the insurer to "pay" legal costs as opposed to the provision of an additional indemnity. Further, and consistently with an ongoing obligation as costs are incurred, the present case involves costs incurred "in defending or settling" the claim. The use of the participle in each case suggests a present liability arising as costs are incurred. On the other hand, the language in Fitzpatrick tends to provide confirmation of that conclusion because it refers to costs incurred "as a result of" an entitlement to indemnity. If the obligation is to pay costs as they are incurred, the phrase "as a result of" suggests that there must be a causal connection with a pre-existing event, presumably a claim rather than an entitlement to indemnity, as the latter will not be established until after the expenses have been incurred. 97 In Fitzpatrick, Pullin JA noted that three authorities in particular had been relied upon by the trial judge in reaching that conclusion. The first was Thornton Springer, referred to above, the second being Karenlee Nominees Pty Ltd v ACN 004 312 234 Ltd (1994) 8 ANZ Ins Cas ¶61-236 (VSC, Hedigan J). However, the extension of cover in relation to legal costs and expenses was of clearer import in Karenlee than is the present clause. It provided that the insurer would pay all "law costs, charges and expenses incurred, with the written consent of [the insurer], by either [the insurer] or the insured or recoverable by the insured from claimants in settlement or defence of claims for compensation". There was nothing in the clause which limited it to circumstances where liability for compensation was established. 98 The third case relied upon was Sherlex Pty Ltd v Thornton [2003] QCA 461 (Davies and Jerrard JJA and Jones J). The plaintiffs in that case were the charterers of a helicopter which had been adapted by the defendant (referred to in the judgment as "Medical Plumbing") to permit the supply of oxygen to patients carried in the helicopter. Whilst the helicopter was on the ground, oxygen exploded, destroying the helicopter. The plaintiff sued the defendant, which in turn joined its insurer, AMP General Insurance Ltd. On the assumption that its liability was excluded from coverage by the policy, the defendant sought to have a preliminary question determined, namely whether its insurer was in any event liable for its costs of defending the claim. The primary judge agreed to separate determination of the question and held against the insurer. 99 The coverage for public liability arose if the insured became "legally liable to pay Compensation for … bodily injury …". The second paragraph of the clause read as follows: "We shall also pay in connection with any claim for Compensation referred to above all law costs and charges and expenses incurred in the settlement or defence of that claim, provided they are incurred by us or by you with our consent. This also includes all law costs, charges and expenses recoverable from you by any claimant." 100 The primary liability to pay compensation made no reference to a "claim". Accordingly, the Court of Appeal held that "any claim for Compensation referred to above" must refer to the compensation referred to in the first paragraph: at [9]. The Court held that such "Compensation" was that which was covered by the clause and not excluded by other clauses. The Court continued at [11]-[12]: "What then is a claim for such compensation? In our opinion it is a claim for compensation which satisfies the positive requirements of the first paragraph, that is, a claim for compensation for bodily injury …; and also which satisfies the negative requirement of the exclusions clause. It is only all law costs, charges and expenses incurred 'in connection with' the settlement or defence of such a claim that AMP by the second paragraph promises to pay. Of course it is not only costs in connection with a successful claim which are payable by the second paragraph. The claim may fail notwithstanding that it is for compensation which satisfies the positive requirements of the first paragraph and the negative requirements of the exclusions clause; for example, because the insured was not negligent or not in breach of contract." 101 Because there were possible outstanding questions of fact, their Honours concluded that the question was not appropriate to be determined as a preliminary question. However, they also indicated that had it been appropriate to answer the question, it would have required a negative answer: at [13]. 102 It appears that in Sherlex the entitlement to recover costs from the insurer was held to depend upon the form of the claim, rather than the legal liability to pay compensation pursuant to the claim. Otherwise, the language bore a significant similarity to that considered in Fitzpatrick and the present case, namely that the insurer's obligation was to "pay" costs incurred in the settlement or defence of the claim, and not merely by way of indemnity after the event, as in Thornton Springer. 103 In Karenlee Nominees, Hedigan J noted that if the insurer were not required to indemnify the insured for the successful defence of a claim, the insured would always be better off losing the case than winning it: at 75,659. That may be so, but it may only avail the insured if the insurer is party to the litigation and hence bound by the result. To achieve that result, it may be necessary for the insured to join the insurer to the proceedings and cross-claim against it, as occurred in the present case. In taking that step, the insured will effectively require the insurer to carry out the defence of the claim, although the insured may still wear its own costs of the defence and of its cross-claim if the defence is successful. As a practical matter, such costs as the insured does incur in relation to the claim may be unrecoverable from the plaintiff and, on the hypothesis, from the insurer. Further, there is the argument which found favour in Thornton Springer, namely that if the insurer consents to the insured incurring costs, it seems unlikely that the insurer could then disown liability to pay those costs in the event that the defence was entirely successful. (Colman J expressed the argument at [48] with respect to settlements, but it would appear to have some force also in relation to cases which were not settled: see [90] above.) 104 Finally, it seems unlikely that the parties intended that the insurer, which had the option under the general conditions, "to take over and conduct in your name the defence or settlement of any claim against you" could force the insured to join it to proceedings in order to bind it to the result where a successful defence, which was in its interests, was available. On the other hand, it could be argued that the contrary view would in effect oblige it to take over the proceedings or give its consent to the insured defending the proceedings. There might be reasons why the insurer would not wish to take such a course, such as the likely disproportionate cost of defending the proceedings (albeit successfully) against the likely quantum of a successful claim. Nevertheless, that concern could equally be met by taking over and settling the proceedings at an early stage. 105 The question in the present case is whether these matters of commercial reality can affect the language of the condition upon which the costs extension clause is based, namely a legal liability in respect of the primary cover. Arguably, the difference in language between the present clause and that considered by the Western Australian Court of Appeal in Fitzpatrick is not so great as to justify a different conclusion, in the light of the commercial considerations noted. That conclusion is supportable because the condition is not expressed in relation to 'legal liability for which the insured is entitled to be indemnified under this policy' but is conditioned upon entitlement to be indemnified under this policy "for a claim made against you". That language is a departure from the language of the clause providing primary cover: it is consistent with the obligation to "pay" costs as they are incurred in resisting a "claim" which, in its terms, falls within the scope of the indemnity given by the policy, whether a legal liability results or not. 106 The claim was formulated in terms which fell within the policy, both within the primary liability clause and outside the exclusion clauses. Subject to the question of written consent, the claim against the appellant for legal costs should be upheld. Was there written consent? 107 Accepting that the costs clause covered costs of defending a claim successfully, there is also the requirement that the insured had obtained the prior written consent of the insurer. In the present case, following notification of the claim, the insurer initially filed a defence but then denied liability under the policy on the basis that the plaintiff was an employee at the time of the accident. A letter from the appellant's solicitors to the defendant, dated 11 November 2005, promised to return documents provided as a matter of urgency and recommended "that you immediately take steps to protect your interests in the proceedings including obtaining legal representation". 108 By way of response, solicitors for the defendant then sought written consent to defend the claim brought by the plaintiff, by letter dated 28 February 2006. The evidence does not reveal any response to that letter. 109 According to the appellant, this inconclusive result did not constitute an express written consent. That consent could not have been unreasonably withheld was neither pleaded nor litigated, nor was reliance placed on any statutory right. 110 Although in part the argument set out above was that the precondition of legal liability on the part of the insured could not be an additional requirement over and above written consent, the argument did not involve an obligation to give such consent, but merely the consequences of giving it. It follows that, in the absence of such consent and in the absence of any argument that it was withheld in breach of contract, the claim for costs must fail. 111 The letter of 11 November 2005, written on behalf of the appellant (referred to as "WFI"), was in part as follows: "We have been instructed by WFI that, subject to the policy terms and on the facts as currently known to WFI, you are not entitled to indemnity in respect of the claim made by [the plaintiff]." 112 The letter explained that the view taken by the appellant was that the plaintiff was an employee. It seems likely that, consistently with the view that the policy did not respond to the claim, there was no relevant application for the costs extension clause and the requirement of prior written consent did not arise. Nevertheless, the position taken by the appellant was not a repudiation of the policy but merely a decision, based on the facts as then known, not to undertake a defence to the claim. The letter continued: "However, we recommend that you immediately take steps to protect your interests in the proceedings including obtaining legal representation. In this regard, we advise that the matter is next before the Court …." 113 It may be that the appellant assumed that the defendant would have an interest in defending the proceedings whether or not the policy responded to the claim. It may also be inferred that the appellant was aware that a different view might be taken by the Court in relation to the factual matters on which it based its view that the plaintiff was an employee. The letter did not constitute an acceptance of liability for legal costs incurred by the defendant, but the recommendation to obtain legal representation should be treated as consent to the incurring of such costs, to the extent that the consent of the appellant was material. In circumstances where the costs extension clause should be construed to include the costs of defending a claim which, in its terms, fell within the cover of the policy, the letter provided consent in writing to incurring those costs. 114 The defendant sought support for this approach from the decision of the Full Court in Yellow Express Carriers Ltd v The Government Insurance Office of New South Wales [1960] SR (NSW) 227. That case involved an action brought by an injured passenger in a car against the owner of a second vehicle for injuries sustained when the latter vehicle lost part of its load. As in the present case, the insurer took over the defence of the claim, but after inquiry advised the insured owner that "the evidence may disclose that the accident was not one arising out of the use of the motor vehicle, and for that reason you are not indemnified under the third-party policy". The letter stated the date of the hearing and advised that papers would be handed to the owner's solicitors, after noting that "it is considered desirable that the carriage of the matter should be taken over by your Solicitors": at 231. 115 Yellow Express did not in terms involve a policy requiring written consent to the incurring of costs, but rather a statutory prohibition on the owner or driver incurring costs without the consent in writing of the authorised insurer: Motor Vehicles (Third Party Insurance) Act 1942 (NSW), s 20(1)(e)(iii). However, Owen J (with whom Street CJ agreed) held that the correspondence constituted not merely a consent in writing for the purposes of the prohibition, but also a contractual obligation on the insurer to indemnify the plaintiff against the costs incurred to its solicitors if it should turn out that there was a liability under the policy: at 232-233. 116 The reasoning in Yellow Express provides support for the conclusion that the letter of 11 November 2005 provided prior written consent to the defendant incurring legal costs sufficient to satisfy the requirement in the policy, to the extent that the policy did respond to a claim for such costs. It follows that the defendant was entitled to recover his costs pursuant to the cross-claim against the appellant. He has therefore succeeded on his notice of contention in relation to the costs of his defence of the claim at trial. Costs 117 The bulk of the five-day trial was taken up with the issue of liability as between plaintiff and defendant where the appellant was the only contradictor. The manner in which the appeal proceeded demonstrated the apparent convergence of interests between the plaintiff and the defendant, who united in resisting the appellant's contention that the plaintiff was an employee of the defendant. In truth the defendant's interest in taking that position was in part to justify his failure to hold workers' compensation insurance and in part to protect his right to payment of his own costs by the appellant under the policy. He filed a defensive cross-appeal against the plaintiff, as to which there may have initially been an element of risk, which must have evaporated when the plaintiff conceded that, if he were an employee, he would not be entitled to retain his judgment against the defendant because he could not pass the statutory threshold. Nevertheless, the plaintiff, having failed entirely on his claim, should pay the defendant's costs of the claim at trial. 118 The appellant has been largely successful, as a result of the appeal, having established that the plaintiff was an employee of the defendant and not an independent contractor. Nevertheless, the defendant has had a degree of success, having established an entitlement to an indemnity with respect to the costs incurred in defending the plaintiff's claim. Having regard to the limited nature of this issue and the limited time spent on it in the course of the appeal, the defendant (cross-claimant at trial) should pay 75% of the appellant's (cross-defendant's) costs of the cross-claim and of the appeal. 119 In relation to the cross-appeal, the plaintiff has been unsuccessful and should pay to the defendant (cross-appellant) his costs of the cross-appeal. As the plaintiff did not separately resist the orders sought by the defendant on the cross-appeal, those costs will be limited accordingly. Orders 120 I would propose the following orders:

WESFARMERS FEDERATION INSURANCE LTD v STEPHEN WELLS trading as WELLS PLUMBING

At a glance

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Before

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Judgment (53 paragraphs)

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Legislation Cited (5)

Cases Cited (15)

Cited By (7)