Whitehouse Properties t/as Beach Road Hotel v McInerney & Anor

Court of Appeal (NSW)|2005-12-13|Before: Mason P, Ipp JA

CITATION: Whitehouse Properties t/as Beach Road Hotel v McInerney & Anor [2005] NSWCA 436

JUDGMENT OF: Mason P at 1; Ipp JA at 2; Brownie AJA at 3

DECISION: 1. As between the appellant/hotelier and the first respondent/plaintiff, appeal dismissed, with costs; 2. As between the appellant/hotelier and the second respondent/security company, appeal allowed in part; 3. On the cross-claim, the verdict and judgment of the District Court set aside; and in lieu thereof verdict and judgment for the cross-claimant for $79,955.40, and costs of the cross-claim; 4.The second respondent/security company should pay to the appellant/hotelier half of the costs of the appellant on the appeal, but if otherwise qualified should have a certificate under the Suitors' Fund Act 1951.

CATCHWORDS: Torts - vicarious liability - contributions between tort-feasors, both of whom are vicariously liable.

Civil Liability Act 2002 Law Reform (Miscellaneous Provisions) Act 1946 LEGISLATION CITED: Liquor Act 1982 Suitors' Fund Act 1951

Scott v Davis [2000] HCA 52, 204 CLR 323 Quarman v Burnett (1940) 6 M & W 499, 151 ER 509 CASES CITED: Starks v R S M Security Pty Ltd [2004] NSWCA 351 Soblusky v Egan [1960] HCA 215 (1960) 103 CLR 215

Whitehouse Properties t/as Beach Road Hotel - Appellant PARTIES: Anthony McInerney - First Respondent S Smith Security Pty Ltd - Second Respondent

A M Colefax SC - Appellant COUNSEL: R T McKeand SC and D W Elliott - First Respondent G M Watson SC - Second Respondent

Hunt & Hunt - Appellant SOLICITORS: G H Healey & Co , Bondi - First Respondent Shearman Lawyers - Second Respondent

1 - IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40263/05 DC 2554/02

MASON P IPP JA BROWNIE AJA

Judgment 1 MASON P: I agree with Brownie AJA. 2 IPP JA: I agree with Brownie AJA. 3 BROWNIE AJA: The appellant (the hotelier) was the owner and the occupier of premises known as the Beach Road Hotel (the hotel). The first respondent (the plaintiff) sued the hotelier in trespass and in negligence, claiming that he had been assaulted by two security guards, or "bouncers", whilst a patron at the hotel. The hotelier joined the second respondent, S Smith Security Pty Ltd (the security company) as a cross-defendant, claiming that the security guards were employees of the security company. 4 At trial, the plaintiff succeeded against the hotelier, and the cross-claim failed. On appeal by the hotelier, three topics were debated: first, whether the hotelier was vicariously liable for the conduct of the security guards; secondly, a question about the measure of damages; and thirdly, whether the hotelier was entitled to contribution from the security company.

The Facts 5 Some facts found by the trial Judge, Rolfe DCJ, are no longer in dispute. On the evening of 1 January 2001, the plaintiff and some friends were patrons of the hotel. The plaintiff and one of those friends, Mr Colleary, were playing pool when the plaintiff noticed a security guard escorting another friend, Ms Moylan, from the hotel. The plaintiff asked another security guard, who was standing outside the door of the hotel, what was happening and why, and he was told that she was drunk and had to go. The plaintiff spoke to her outside the hotel, and arranged to meet her elsewhere later that evening, after he and "the rest of the crew" had finished their game of pool. 6 The plaintiff returned to the pool table. At that stage a security guard (not identified as either of the security guards already mentioned) was "pushing" or tapping the arm of Mr Colleary, who had apparently fallen asleep, perhaps because he had not had much sleep on the preceding night, New Year's Eve. The plaintiff asked the security guard what was wrong, and the security guard replied that Mr Colleary was either drunk or had fallen asleep, and he had to go. The plaintiff asked the security guard if he and Mr Colleary could finish their drinks and their game of pool, and said that they intended to leave, but the security guard said that Mr Colleary had to leave "now". 7 The plaintiff said nothing further, but turned to pick up his drink, and then the security guard to whom he had just spoken touched the plaintiff on the shoulder, as if to attract the plaintiff's attention. Then the security guard slapped the drink out of the plaintiff's hand, and grabbed the plaintiff by the throat, causing the plaintiff to lose consciousness. The security guard then took the plaintiff in a headlock and "very roughly" dragged the plaintiff, with his feet trailing on the floor, to a point outside the hotel. A second security guard followed them, "shepherding" them. Then, when the plaintiff was lying face down, the second security guard just mentioned kicked the plaintiff repeatedly until Mr Leonard, another friend of the plaintiff, intervened. The plaintiff and Mr Leonard ran off together. Mr Colleary, concerned about his own safety, left separately. 8 The learned trial Judge found that the attack upon the plaintiff, as described by Messrs Colleary and Leonard, was unprovoked, and that the consequences to the plaintiff were severe. He decided the case on the basis that the hotelier was liable in trespass, but that if it had been necessary to consider the claim in negligence, that claim would have succeeded. Damages in trespass were assessed in accordance with the principles of the common law, whilst damages in negligence would have had been assessed pursuant to the provisions of the Civil Liability Act 2002, at some lesser sum. 9 His Honour noted that most of the evidence I have summarised was not challenged, and found that the two security guards who assaulted the plaintiff, and also, if he was a different person, the security guard who escorted Ms Moylan from the hotel, were wearing what was treated as the uniform that was generally worn by the security guards at the hotel: black trousers and a white T-shirt. Other evidence described the shirts as having sewn into them the letters BRH, standing for Beach Road Hotel. The hotelier had provided those shirts to the security company. 10 From 1994 onwards Mr Smith worked at the hotel as a security guard, as an employee of an entity described as Smiling Security Services. In 1998, at the suggestion of the hotelier, principally it seems through Mr Law, who was employed by the hotelier as a manager, he caused the security company to be incorporated, and for it to contract with the hotelier for the provision of security services at the hotel. Mr Smith's sister, Ms Smith, became the sole director of the security company, and Mr Smith continued to work as a security guard at the hotel, although now as an employee of the security company; and he undertook some management responsibility on behalf of the security company. 11 Mr Smith said, and it was not contested on appeal, that until the events of 1998, he was inexperienced, and that he was doubtful about the suggestion that the hotelier made, that he take over from Smiling Security Services. However, with the encouragement and assistance of Mr Law, he agreed to do so, and the security company and the hotelier, working together, prepared a manual for the use of the security guards that the security company employed at the hotel. That document gave general advice and instructions to the security guards, of a kind that attracted no criticism. In particular, it instructed them that if it was possible they should persuade unwanted patrons to leave, rather than physically evict them. His Honour found that Mr Smith had been encouraged by the hotelier to incorporate the security company "specifically for the purpose of continuing the provision of security services to the Hotel". 12 The two security guards who assaulted the plaintiff were not identified by name, but his Honour found that they were employees of the security company, and not employees of the hotelier. As the plaintiff had sued the hotelier, and not the security company, this led to a good deal of evidence directed to questions whether the hotelier was vicariously liable for their conduct, and concerning the cross-claim. 13 His Honour found that the hotelier, by its management staff, including Messrs Whitehouse and Law and a Ms Law, were "heavily involved in the selection of staff [that is, the staff of the security company], and they made it clear in no uncertain terms which staff it wanted on duty". When the security company proposed to employ a new security guard, Mr Smith introduced that person to the hotelier's management personnel, and the hotelier reviewed that person's performance. If the hotelier expressed dissatisfaction with the person, the security company did not keep that person on its payroll. These arrangements, concerning the selection of new staff members, and the nomination of which staff members were to be rostered on duty from time to time, were the subject of weekly meetings, usually involving Mr and Ms Law on behalf of the hotelier, and Mr and Ms Smith on behalf of the security company. The number of security guards rostered on duty varied from night to night, varying between 2-3 and 9-10 (the estimates varied). The hotelier decided how many should be rostered on duty on any particular night. Typically, they worked from about 5pm until after closing time for the hotel. Security guards were expected to wear the uniforms mentioned above, and Mr Whitehouse said in evidence that the hotelier liked to have its patrons think that the hotel employed the security guards. Security guards generally ate at the hotel, and at the end of the evening's work, were supplied with drinks there, and they "bundied on and off like all the other Hotel staff". The security guards communicated with each other by two-way radio, and the radio sets were kept in the office of the hotelier's managers when not in use. 14 Mr Whitehouse was employed by the hotelier as a manager, was the son of the hotelier's managing director, and was the licensee of the hotel at the time. He gave instructions as to where the security guards "were to stand, how they should talk to patrons, what the hotel did not want happening in the hotel and what circumstances should apply when patrons should be removed". If patrons fought each other, the security guards might on their own initiative remove one or more of them, but otherwise a decision to remove a patron was made only by one of the hotelier's managers, and for this purpose the hotelier ensured that there was always one of its managers present after 5 pm. The "standard procedure" to be followed for removing a patron from the hotel was for a manager of the hotelier to ask the security guards to remove the patron, for two security guards to approach the patron, for those security guards to ask the patron to leave, and for them to walk the patron out from the premises. Mr Whitehouse said that he himself would not hesitate to give the security guards instructions to remove a patron, in order to fulfil the hotelier's obligation to itself maintain good order, and he said that it was not unusual for a hotel manager to give a direction for the removal of patrons who appeared to be intoxicated, or giddy from drinking alcohol, or over boisterous, or nodding off, and he said that all the hotel staff were expected to keep an eye out on patrons who answered any of these descriptions. He said that the hotelier's managers instructed the security guards what to do. 15 His Honour found that, notwithstanding this protocol, the hotelier had given its permission for the security guards to remove patrons who answered these descriptions, without necessarily speaking to a manager; and Mr Whitehouse said that evictions could get "pretty violent" at times, that excessive force was used sometimes, and that sometimes people were hurt whilst being evicted (Black 178-180). 16 The only witness called for the hotelier was Mr Whitehouse. 17 The security guards were "not supposed to touch a patron unless Mr Smith was present", but from time to time he was not present, and in his absence the hotelier's managers supervised the security guards, without attempting to contact Mr Smith before deciding what to do. On the evening of 1 January 2001 Mr Smith was not rostered to work at the hotel, although he said that, as was his usual practice, he went to the hotel for an hour between 9 and 10 pm.

Vicarious Liability? 18 One factual question debated on appeal was whether Mr Smith was present at the hotel at the time that the plaintiff was assaulted. The trial Judge accepted Mr Smith's evidence as to the time at which he was there on that evening, so that on the appeal the debate turned upon the time at which the plaintiff was assaulted. 19 The plaintiff (unnecessarily) pleaded that the event occurred at about 9 pm. In his opening address at trial, the plaintiff's counsel said that the event occurred at about 8.30 pm. A police record in evidence shows that the plaintiff reported the event to the police on 2 April 2001, saying that it had occurred between 8 and 8.10 pm (Blue 3). The plaintiff gave histories to two doctors, saying that the event had occurred at about 8.30 pm: to Dr O'Keefe on 28 October 2004 (Blue 66), and to Dr Lee on 30 November 2004 (Blue 111). Mr Smith gave evidence that he went to the hotel for an hour between 9 and 10 pm, and that on that night he was not aware of the event (Black 200). 20 None of this evidence was the subject of any challenge at trial. It appears that the topic was first raised in the submissions for the appeal. His Honour found that Mr Smith was not present at the hotel on the night in question until "well after" the assault. The appellant challenges this finding of fact, and submits that, since the plaintiff had to prove that the appellant was vicariously liable for the conduct of the security guards, and since he failed to prove that Mr Smith was absent at the time, it follows that it was the security company and not the appellant that was vicariously liable to the plaintiff; or alternatively, that both were vicariously liable. 21 I consider that the criticism of the use of the word "well" in the finding that Mr Smith did not arrive at the hotel until "well after" the assault has theoretical merit, but, in the circumstances, no real or practical significance. Mr Smith, whose evidence his Honour generally accepted, said without challenge that he knew nothing of the event on the night that it occurred. If he had been present, the protocol of the hotelier required his knowledge of the evicting of any patron, and the creation of a record of that evicting, and there was no such record. 22 The question of the time at which the event occurred was simply not investigated at trial. It was not suggested to the plaintiff, or to any witness of the plaintiff, or to Mr Smith, that Mr Smith had then been present, and there was no question asked of any witness that supports the present factual contention. In final oral submissions (Black 273-283), the appellant's then counsel raised other grounds of defence, but not this one. His Honour did not address the question, except to say (Red 21), when summarising the plaintiff's evidence, that the event occurred at about 9 o'clock, and when summarising the evidence of Mr Colleary that it was coming up to 9 o'clock (Red 40). In my judgment it would be wrong to say that his Honour committed any relevant error. 23 The appellant accepts that the learned trial Judge correctly directed himself as to the relevant law. He referred to various decisions, including Scott v Davis [2000] HCA 52, 204 CLR 323, and quoted from the judgment of Parke B in Quarman v Burnett (1840) 6 M & W 499 at 507, 151 ER 509 at 513-514: "It is undoubtedly true that there may be special circumstances which may render the hirer of job-horses and servants responsible for the neglect of a servant, though not liable by virtue of the general relation of master and servant. He may become so by his own conduct, as by taking the actual management of the horses, or ordering the servant to drive in a particular manner, which occasions the damage complained of, or to absent himself at one particular moment, and the like."

and he asked himself whether there were "special circumstances" that rendered the hotelier liable to the plaintiff, notwithstanding that the security guards were not the employees of the hotelier. The hotelier contends that his Honour erred, in finding that there were special circumstances. 24 As the appellant (properly) conceded, this legal question is effectively answered by the finding of fact that Mr Smith was not present the time of the assault: on his Honour's findings of fact, the hotelier had effectively assumed responsibility for the management and supervision of the security guards, in relation to the evicting of patrons, when Mr Smith was not present.

Damages 25 The sum awarded for damages included various amounts representing the expected cost of future medical treatment. These sums represented the cost to the plaintiff of obtaining this treatment in Australia, but he was a resident of the Irish Republic. The trial proceeded initially as if all involved were assuming that there was no relevant difference between the likely costs in Australia and in Ireland. The hearing commenced on Monday 6 December 2004, and proceeded until the end of Thursday 9 December. All parties had closed their cases, and the hearing was adjourned until Wednesday 15 December, for addresses. 26 On 15 December, the appellant tendered a report from an Irish medical practitioner, Dr Meehan, dated 13 December, that counsel said had only arrived that morning (Blue 108, Black 258). Other reports of Dr Meehan had been tendered earlier, but this report dealt (amongst other things) with the costs of obtaining medical treatment in the Irish Republic. The report referred to the "Health Act Benefit here in Ireland", without more. Nobody appears to have known, either at trial or on appeal (although the Court did not hear the plaintiff on the point) what this meant, given that the plaintiff is entitled to damages for the tort that resulted in his needing treatment. Given this, and the lateness with which the point was first taken, the Court took the view that it was not in the interests of justice to allow the appellant to raise the point. If the point was a good one, it would have been necessary to order a new trial, limited to damages, and the Court is not to make such an order unless it appears that some substantial wrong or miscarriage has been occasioned by the supposed error of the judge: SCR Pt 51 r 23.

The claim for contribution 27 The hotelier made a claim for contribution against the security company under s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (the Act). This claim was made on the basis that each of the hotelier and the security company was a tort-feasor, liable to the plaintiff in respect of the same damage. Although a claim for contractual indemnity had been pleaded, that claim was not pressed. 28 Section 5 of the Act contains these provisions: "Proceedings against and contribution between joint and several tort-feasors (1) Where damage is suffered by any person as a result of a tort (whether a crime or not): (a) …. (b) …. (c) any tort-feasor liable in respect of that damage may recover contribution from any other tort-feasor who is, or would if sued have been, liable in respect of the same damage, whether as a joint tort-feasor or otherwise, so, however, that no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by that person in respect of the liability in respect of which the contribution is sought. (2) In any proceedings for contribution under this section the amount of the contribution recoverable from any person shall be such as may be found by the court to be just and equitable having regard to the extent of that person's responsibility for the damage; and the court shall have power to exempt any person from liability to make contribution, or to direct that the contribution to be recovered from any person shall amount to a complete indemnity." 29 On appeal it was not in issue (except to the extent discussed above) that the hotelier was a tort-feasor, liable to the plaintiff in trespass. There was however a dispute as to whether the security company was a tort-feasor liable to the plaintiff; and if the security company was so liable, there was a dispute as to the contribution that was appropriate. 30 The learned trial Judge gave extensive reasons for coming to the conclusion that special circumstances had been shown, such as to make the hotelier vicariously liable to the plaintiff for the conduct of the security guards. Having dealt with the matter at some length, he summarised the position in these terms: "In coming to the conclusion that the Hotel had taken over the management of the security guards at the time the assault occurred, I have taken into account all the evidence which I have accepted, namely, security guards working at the Hotel were supplied with the [hotelier's] t-shirts and, for all intents and purposes, appeared to patrons to be employees of the Hotel; they were deployed to locations in the Hotel determined by its management; and the management instructed security staff what to do, specifically whether or not to ask patrons to leave and eject them if necessary. The guards operated under the Hotel's direction and the number of guards rostered was determined by the Hotel which heavily involved itself in the first place in the selection of the security staff and the security guards manual which the [security company] distributed was prepared by it in consultation with the management of the hotel." 31 His Honour then dealt with the cross-claim, by the hotelier against the security company in these terms: "The insurmountable difficulty facing the Hotel is that there was no reason whatsoever for the plaintiff to be ejected from the Hotel or asked to leave. The plaintiff was minding his own business. He was not doing anything wrong. Moreover, as I have said, the assaults would not have occurred if the Hotel had been doing what it was supposed to be doing, namely, supervising the bouncers in the absence of Mr Smith. Looking at it this way, in terms of vicarious liability, the Hotel was entirely responsible for what occurred to the plaintiff, not the cross-defendant." 32 Subject to the one question mentioned earlier, concerning whether Mr Smith was present at the hotel at the time of the assault, his Honour's findings concerning the liability of the hotelier to the plaintiff were not in issue on the appeal. Nor was there any question raised as to the correctness of what Beazley JA said in Starks v R S M Security Pty Ltd [2004] NSWCA 351 at [12] - [24], and in my judgment that decision is authority for the proposition that the security company was a tort-feasor, vicariously liable to the plaintiff for the conduct of the security guards. What the security guards did, so far as concerned the plaintiff, was done by them in the course of their employment by the security company. No doubt it was done improperly, but evicting patrons from the hotel was the very sort of thing that the security guards were employed by the security company to do, and the security company retained the right to direct them, both as to what they were to do, and how they were to do it. As between the security company and the plaintiff, it would not have been a ground of defence that the security company had for the time being delegated to the hotelier the supervision, direction and control of the security guards. 33 In short, the security company, like the hotelier, was vicariously liable to the plaintiff, in trespass, for the damage suffered by the plaintiff. 34 In Soblusky v Egan [1960] HCA 215 (1960) 103 CLR 215, there was a finding that Soblusky and Egan were each vicariously liable for the negligent driving driving of a vehicle by a third person. The trial judge, noting that neither Soblusky nor Egan was personally at fault, or to blame, apportioned liablity equally between them, and the High Court saw no error in this. Whilst the judgment in Soblusky needs to be read together with the judgment in Scott, the latter decision casts no doubt upon the general proposition that if two persons are both vicariously liable for some tort committed by a third person, it might be appropriate that they contribute equally. 35 However, in any particular case, it will be necessary to address the question posed by s 5(2) of the Act, as to what is just and equitable having regard to the extent of the responsibility for the damage of the person against whom the claim for contribution is made, but the question is not necessarily limited to consideration of the extent of responsibility for the extent of the damage: Soblusky at 234-235. 36 The hotelier submitted that the trial judge did not give weight to the circumstance that the security company, like the hotelier, was a tort-feasor, vicariously liable to the plaintiff for the assault. In addition, it may be that (for example at Red 68) when his Honour spoke of the hotelier not supervising the security guards in the course of their duties at about the time of the assault, his Honour was blurring the concepts of negligence and trespass. The language used suggests, but perhaps does not establish that blurring, but in any event, I consider that his Honour did fall into error in not taking into account that the security company was a tort-feasor liable to the plaintiff for the same damage as the hotelier. 37 It was of course appropriate for his Honour to consider in detail the factual circumstances that went to what was required, by way of a just and equitable contribution from the security company, and in a sense the judge did just that, when considering the question of the liability of the hotelier. It may be that what his Honour had in mind when dealing with the claim for contribution was no more than to refer back to his earlier findings, and to conclude that a proper apportionment meant that the hotelier should bear the whole loss. However, his Honour did not say that, and in the circumstances I conclude that this Court must re-examine the matter and decide what contribution is appropriate. No party sought a retrial on this issue. 38 On his Honour's findings, not now in contest, it was the position as between the hotelier and the security company that, in the ordinary course of their respective businesses, and even when Mr Smith was present at the hotel on occasions when patrons might be evicted, the hotelier exercised a dominant role in relation to the work of the security guards, choosing who would be so employed, how many would be deployed on a given night, where they would work, and to a large extent how they would work, deciding whether or not to evict any particular patron, and requiring the security guards to wear a uniform suggesting that the security guards represented the hotel. It made decisions about possible evictions by reference to its obligation to maintain good order in the hotel, and, no doubt, in the exercise of the powers given under s 103 of the Liquor Act 1982. 39 Further, at the time of the assault, Mr Smith was not present, and, according to the usual course of business of the two companies, in his absence the hotelier supervised and directed the relevant activities of the security guards. It remains true, of course, that the security company continued to be the employer of those men, responsible for their wages and the like, although I do not think that this is immediately relevant, that it had given them training and general instructions as to how they were to carry out their work, and that it had not abandoned the right to control their activities at the hotel, but as a practical matter, they were for the time being under the supervision, direction and control of the hotelier. 40 In my view, it is just and equitable having regard to the extent of the security company's responsibility for the damage, that it pay 20% of the damages payable to the plaintiff. 41 I propose the following orders:

1 As between the appellant/hotelier and the first respondent/plaintiff, appeal dismissed, with costs.

2 As between the appellant/hotelier and the second respondent/security company, appeal allowed in part.

3 On the cross-claim, the verdict and judgment of the District Court set aside; and in lieu thereof verdict and judgment for the cross-claimant for $79,955.40, and costs of the cross-claim.

4 The second respondent/security company should pay to the appellant/hotelier half of the costs of the appellant on the appeal, but if otherwise qualified should have a certificate under the Suitors' Fund Act 1951. **********

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