Principles of contractual indemnities revisited by the New South Wales Supreme Court
Apr 2016 |
The Supreme Court of New South Wales has recently considered the construction of an indemnity clause in a labour hire agreement to determine whether a company could enjoy an indemnity for its own negligence in a personal injuries matter, in the case of Frewin v Adecco Industrial Pty Limited [2015] NSWSC 1568.
The plaintiff, David Frewin, made a claim for personal injuries sustained while working as a labour hire worker at CSR’s Bateman’s Bay concrete plant over a period of time between September 2002 and December 2004. He had suffered severe back pain as a result of driving a truck registered and owned by CSR Ltd (CSR) whose seat had inadequate suspension. He pursued a claim against Adecco Industrial Pty Ltd (Adecco Industrial), his employer, CSR, the host employer, and Holcim (Australia) Pty Ltd (Holcim), formerly a subsidiary of CSR, in the Supreme Court of New South Wales. That claim was settled with CSR agreeing to pay the plaintiff $800,000 all inclusive. CSR and Holcim made a cross-claim against Adecco Australia Pty Ltd (Adecco Australia) claiming a contractual indemnity.
Adecco Australia had contracted to supply casual labour to CSR in 2000. The contract required Adecco Australia to arrange insurance cover endorsed to fully cover CSR against any liability it may incur in relation to the labour hire workers. The contract also contained an indemnity in favour of CSR in clause 23 as follows:
‘23. INDEMNITY
…
23.2. Any loss or damage to property of CSR, real or personal caused or contributed to by the Supplier or its employees, agents, sub-contractors or Temporary Staff.
Notwithstanding any other provision of this Agreement, the Supplier indemnifies CSR against
23.2.1 any claim by Temporary Staff for personal injury and/or property damage arising out of or in connection with the performance of Assignment duties where [sic]; and
23.2.2 any liability to any person (including the Supplier and any workers compensation insurer claiming in the name of the Supplier) in respect of or in connection with such personal injury and/or property damage.’
The contract expired at the end of July 2002. Negotiations regarding new terms were ongoing into 2004 but no new agreement was ever executed, although Adecco Australia continued to provide labour hire services to CSR. CSR took the position that the services were provided pursuant to the terms and conditions of the 2000 agreement, which included clause 23.2 containing an indemnity in its favour. Adecco Australia disputed that position.
Having considered the evidence, the court determined that the contract was not extended, expressly or impliedly, beyond July 2002. In reaching that conclusion, the court distinguished Brambles Ltd v Wail, Brambles Ltd v Andar Transport Pty Ltd [2002] VSCA 150 5VR 169, where an agreement was found to have been extended by conduct. CSR argued that, in circumstances where parties continue to conduct themselves as if they were bound by a detailed agreement that has expired, the inference ought to be drawn that they have agreed to extend that agreement and should be bound by it. However, in this case, there was evidence of negotiations for a new agreement following an extension of a finite timeframe which had specifically been agreed. Further, there was insufficient evidence before the court that the parties had continued to perform the contract in exactly the same way and on the same basis notwithstanding its expiry, or had intended to do so.
Despite finding that the indemnity clause did not apply to the relationship between Adecco Australia and CSR with respect to this claim, the court helpfully considered its application in any event. The outcome was of course specific to the circumstances of the claim as it turned on the specific wording of the indemnity clause. From the outset, even if the contract was in force at the time of the plaintiff’s injury, the claim by CSR for indemnity would have failed as the plaintiff was employed by Adecco Industrial whereas the contract was between CSR and Adecco Australia so the plaintiff was not ‘temporary staff’.
In relation to any alleged ambiguity in the wording of the clause, the court considered the intention of the parties from the wording of the contract and found that it was sufficiently clear to indicate an objective intention by Adecco Australia to cover all claims whether caused or contributed to by CSR’s own negligence. Therefore, if other circumstances had allowed, the wording of the clause would seemingly have been sufficient to allow CSR to claim indemnity for its own negligence.
Adecco Australia argued that the plaintiff’s claim arose from CSR’s breach of its duties to the plaintiff, and not ‘out of or in connection with the performance of Assignment duties’. Adecco Australia and CSR each raised decisions in support of their respective positions, highlighting the differing outcomes of disputes involving contractual indemnities and the extent to which each indemnity turns on its own wording and each case on its own facts. Adecco Australia’s argument was not deemed persuasive. However, the absence of documentary evidence that the plaintiff was working for CSR pursuant to a specific order was a further basis for the court to conclude that the plaintiff was not ‘temporary staff’ even if he had been employed by Adecco Australia.
This case raises yet another interpretation of a contractual indemnity clause which, although not ultimately applicable to the plaintiff’s claim, suggests CSR may have been in a position to obtain indemnity for its own negligence had the circumstances of its contractual relationship with Adecco been found to clearly provide for that. While each case will continue to require close scrutiny, this decision tends to support a trend away from assuming a party did not intend to take on liability for another’s negligence or that a court will inevitably find an ambiguity in a contractual indemnity and read it down.
This article may provide CPD/CLE/CIP points through your relevant industry organisation.
