Menzies Property Services Pty Limited v New South Wales [2003] NSWCA 17 (26 February 2003)

Last Updated: 28 February 2003

NEW SOUTH WALES COURT OF APPEAL

CITATION: Menzies Property Services Pty Limited v State of New South Wales [2003] NSWCA 17

FILE NUMBER(S):

40457/02

HEARING DATE(S): 10/02/03

JUDGMENT DATE: 26/02/2003

PARTIES:

Menzies Property Services Pty Limited (Appellant)

State of New South Wales (Respondent)

JUDGMENT OF: Stein JA Santow JA Ipp JA

LOWER COURT JURISDICTION: District Court

LOWER COURT FILE NUMBER(S): DC 7308/00

LOWER COURT JUDICIAL OFFICER: Payne DCJ

COUNSEL:

J Simpkins SC (Appellant)

P Greenwood SC/J Kirk (Respondent)

SOLICITORS:

Phillips Fox (Appellant)

P W Turk & Associates (Respondent)

CATCHWORDS:

CONTRACT - Indemnity clause by which the Contractor is to indemnify the State for any loss or liability arising from a claim against the State caused by the Contractor's negligence - Personal injury claim against Contractor and State successful - Cross claim by State for Contractor to indemnify it completely in respect of its liability - Cross claim by Contractor against State for a contribution order pursuant to the Law Reform (Miscellaneous Provisions) Act 1946 - Held that State's negligent conduct causing injury to the plaintiff was separate and independent from Contractor's negligent conduct, such that Contractor's negligence did not cause State's loss - State not entitled to be indemnified by the Contractor in respect of the State's liability. ND

LEGISLATION CITED:

Law Reform (Miscellaneous Provisions) Act 1946, Pt III

Arbitration (Civil Actions) Act 1983 (NSW), s 18B(2)

Workers Compensation Act 1987, s 151Z(2)(c)

DECISION:

(1) Appeal upheld (2) Orders made by Payne DCJ set aside (3) Answer the question posed for determination under s 18B(2) of the Arbitration (Civil Actions) Act (being whether cl 51.1 of the contract had the effect that the Contractor must indemnify the State in respect of the State's forty per cent liability to the Plaintiff) in the negative (4) The State to pay the costs of the proceedings before Payne DCJ and the costs of the appeal.

JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 40457/00

DC 7308/00

STEIN JA

SANTOW JA

IPP JA

Wednesday 26 February 2003

MENZIES PROPERTY SERVICES PTY LIMITED v STATE OF NEW SOUTH WALES

Judgment

1 STEIN JA: The difficulty in this appeal is not so much construing cl 51.1 of the contract between the parties, rather the bare findings of the arbitrator, unadorned by any amplification or express finding on whether the contractors' negligence was a cause of the State's loss.

2 The particulars in the pleadings provide some limited assistance but the court has no transcript of the evidence before the arbitrator.

3 However, it seems to me that in the way in which the arbitrator has expressed his brief reasons, there was a finding that the State was negligent quite separately and independently from the negligence of the contractor. In essence he found that the negligence of the State created a risk of injury to the plaintiff and that risk was increased by the negligent conduct of the contractor.

4 Accordingly, I would agree with Ipp JA's conclusion and judgment that the arbitrator's findings do not reliably or safely establish that the negligence of the contractor was a cause of the loss suffered by the State.

5 I agree with the orders proposed by Ipp JA.

6 SANTOW JA:

INTRODUCTION AND OVERVIEW

The material facts are set out in the judgment of Ipp JA which I have had the advantage of reading. I adopt his statement of those facts with gratitude and refer to them only where necessary in stating my own reasons. These have however led me to a different conclusion, for reasons which I explain.

7 In essence, I conclude that the Arbitrator's findings lead to the result that the State's loss, following successful action to recover for the Plaintiff's injuries, was concurrently caused by the combination of the respective negligent acts and omissions of State and Contractor; and that suffices to trigger the written indemnity in favour of the State. I conclude that the Arbitrator's findings, challenged only as to indemnity, lead unavoidably to these conclusions. That each of the two defendants, the Contractor and the State, contributed to the negligently inflicted injuries to the Plaintiff; that the Contractor's negligence was thus a concurrent or contributory cause of the plaintiff's damage and of the State's resultant liability or loss, following the plaintiff's successful claim. I understand "cause" as in this context to include a concurrent cause; that is to say that which is a "but for" cause so long as it materially contributes to the result. The Arbitrator found that acts or omissions of the Contractor and State were negligent in particular, distinct ways. He found that the plaintiff's injuries "were caused as a result of negligence on the part of both [the State] and [the contractor]"; that is, not by either alone. Finding them concurrent tortfeasors as the Arbitrator did, it necessarily followed as a matter of law that the damage to the plaintiff, to which each contributed in the proportions 60/40, was the same damage. It necessarily follows that the Contractor's acts and omissions were not only a "but for" cause of the plaintiff's damage materially contributing to it, but were a "but for" cause of the ultimate loss (or liability) of the State, materially contributing to it also. That in turn renders the Contractor contractually liable to indemnify the State, as the Arbitrator concluded, and Payne DCJ on appeal.

8 I should add that, if it be asserted that a concurrent cause precludes indemnity, that could not be so. Otherwise the fact that the loss or liability suffered by the State requires also the concurrent cause of a successful plaintiff legal action would preclude resort to the indemnity. That would be absurd. Clearly, the indemnity must accommodate that kind of concurrent cause and others as well. It would render the indemnity useless if it only applied where the Contractor's negligence was the sole cause of the Plaintiff's injury. Just as the concurrent cause of a successful plaintiff action does not preclude resort to the indemnity, so too a concurrent cause consisting of the State's negligence (so long as the State does not incur its loss or liability unreasonably). Otherwise if the indemnity only applied when the State was totally blameless, that would limit its application to when the State was merely vicariously liable. But as the law already indemnifies the State in that situation, the written indemnity would then add nothing.

9 It is undoubtedly the case that on one of the alternative cases sought to be made out in the pleadings, it was alleged that the negligent acts or omissions of the State solely brought about the damage suffered by the plaintiff. But that was not how the Arbitrator found. His findings read collectively, were unambiguous and are not in need of further elucidation by that aspect of the pleadings. Thus he found: "I am satisfied that the plaintiff's injuries were caused as a result of negligence on the part of both the first defendant and the second defendant" [emphasis added]. That leaves no room for the State having sole and separate responsibility for the damage, and consequent loss. That it was followed by a finding dividing their respective responsibilities 60/40 removes any possible ambiguity in the word "both". This was not a case, like the two hunters, where a stray bullet from each negligently kills the beater so that each alone causes the damage; compare the discussion in "Lords a'leaping evidentiary gaps" by Jane Stapleton (2002) 10 TLJ 276 at 280 where that situation is briefly revisited in an extended analysis of causation. This was not a case where the negligent act of either was enough to bring about the damage and ultimate loss to the State. A finding of 60% responsibility on the part of the Contractor necessarily finds joint responsibility. It is on any view a material contribution by the Contractor both to the plaintiff's damage and to the State's ultimate loss or liability following a successful claim.

10 The last part of the Arbitrator's findings, set out after quantifying damages, is clearly premised on Contractor and State being concurrent tortfeasors, whether joint or otherwise. Being concurrent tortfeasors, they necessarily as a matter of law cause the same damage. That last part of the findings, though not specifically referred to in argument, reinforces the conclusions reached from the earlier findings. Focussing, as the indemnity clause requires, on one of the two concurrent tortfeasors, the Contractor, the Contractor's negligent acts or omissions played the major role (60%) in bringing about, that is to say, causing, the damage suffered by the plaintiff. Thus the Contractor's conduct materially contributed both to the damage and to the loss or liability suffered by the State from the resultant successful claim, so causing that loss or liability. That satisfies the requirement for indemnity.

11 The difference between Ipp JA and my view, if I may respectfully attempt to encapsulate it, is this. Ipp JA concludes that:

(a) "the Arbitrator's findings do not preclude the failure by the State ... from being a cause of the plaintiff's loss quite independently of the cleaning fluid that had settled on the floor"; and

(b) thus that the indemnity is not available.

12 I agree with (a) subject to the words "quite independently" accommodating distinct and separate negligent acts and omissions of Contractor and State, but both contributing, as the Arbitrator found, to the injuries suffered. I do not agree with (b). The Arbitrator's findings necessarily mean both State and Contractor were a cause of the Plaintiff's damage and hence of the State's loss - with the Contractor, in "causal potency" terms, being found to bear the greater share of responsibility (60%) compared to the State's 40%. In cases of concurrent tortfeasors it is to be expected that their individual negligent acts are distinct, even independent. But that does not stop them from being both a cause of the same damage. That is what the law lays down for concurrent tortfeasors. I consider that the indemnity still applies so long as

(a) each of State and Contractor are a cause of the Plaintiff's damage; and

(b) the resultant loss to the State from successful action against it is "reasonably incurred".

13 Clearly Ipp JA does not advance proposition (a) as a fatal impediment, merely because the Contractor's negligence was only a cause, that is to say a concurrent cause. Earlier he says "The State did not have to prove that the Contractor's negligence was the sole cause of its loss; it merely had to prove that the Contractor's negligence was a cause of its loss."

14 What therefore precludes the indemnity applying must (I infer) be the second part of proposition (a), namely that the Contractor's conduct was "quite independent" of the State's conduct, which (possibly) was itself a cause of the Plaintiff's injuries. But, applying Hart and Honoré's terminology to the Arbitrator's findings;

"both wrongful acts are necessary conditions of the harm ... the first group may be termed cases of contributory causation, since here each wrongful act may be said to have contributed to the harm. Of this the main examples occur in the law of joint or concurrent tortfeasors and contributory negligence."

Hart & Honoré "Causation in the Law" (Oxford, 1985) at 205 [footnotes omitted].

15 That the respective acts and omissions of Contractor and State were separate and independent does not preclude the indemnity applying as each of those separate and independent acts and omissions were found by the Arbitrator, whatever be their temporal order, to have caused the same damage, brought about by Contractor and State as concurrent tortfeasors. As was said in Grant v Sun Shipping Co [1948] AC 549 at 563 by Lord du Parcq:

"I regard it as a well settled principle that when separate and independent acts of negligence on the part of two or more persons have directly contributed to cause injury and damage to another, the person injured may recover damages from any one of the wrongdoers or from all of them." [emphasis added] [footnotes omitted]

16 It is conceivable, and was one of the alternative cases in the pleadings, that the State's acts and omissions could have been enough by themselves to cause the Plaintiff's injuries; namely the State's failure to provide a non-slippery floor and allowing use of a piece of carpet in the kitchen area which the Arbitrator found to be dangerous. But it is clear that the findings of the Arbitrator, unchallenged, were that the injuries, and thus the ultimate loss to the State following successful legal action, resulted in the events that happened not only from those acts and omissions of the State but also from the Contractor's own negligent acts and omissions in allowing the liquid to settle on that same kitchen floor. Such a finding is not inherently contradictory or so contrary to common experience as to be capable of being treated as inherently contradictory, more especially when the parties themselves have chosen not to challenge those findings. The end result of those findings is to provide a narrative which concludes that the injuries were the causal result of that combination of acts and omissions by both the State and Contractor with the Contractor bearing the greater responsibility.

ELABORATION

17 The contract in question is a cleaning contract entered into between the Appellant ("the Contractor") with the State Contracts Control Board ("State"). Pursuant to it, the Contractor cleans the offices of the Department of Community Services. The latter, as an emanation of the State is covered by the indemnity as `the Government, its agencies and statutory authorities...". This is provided the conditions for that indemnity to apply are satisfied. The Department of Community Services employed Ms Evans the original plaintiff. She was injured on 30 October 1997 when she slipped in the kitchen area in circumstances where there was a piece of carpet covering a film of cleaning fluid that had fallen on the kitchen floor and allowed to settle. She subsequently sued both the State and the Contractor where their respective responsibilities were in issue. The pleadings dispute liability as against the plaintiff, but there are also cross-actions between the two defendants.

18 The relevant clause 51.1 of the Contract provided:

"Subject to the provisions of this Contract the Contractor shall at all times indemnify, hold harmless and defend the Government its agencies and statutory authorities and its officers, employees and agents (in this clause 51 referred to as "those indemnified") from and against any loss (including legal costs and expenses) or liability reasonably incurred or suffered by any of those indemnified arising from any claim, suit, demand, action or proceeding by any person against any of those indemnified where such loss or liability was caused by any wilful, unlawful or negligent act or omission of the Contractor, its employees, agents or sub-contractors in connection with this Contract."

19 The plaintiff having commenced proceedings in the District Court against both the State and the Contractor (the first and second defendants) alleged that either or both had negligently caused her injuries. By cross-claim, the State contended that, should it be held that it was liable to the plaintiff, the Contractor was required by clause 51.1 of the Contract to indemnify it completely. The Contractor, in turn, cross-claimed against the State for a contribution order pursuant to the Law Reform (Miscellaneous Provisions) Act 1946.

20 The matter was submitted to arbitration and the Arbitrator made the following findings under the heading "Liability": I set these out below.

"Liability

I am satisfied that the plaintiff's injuries were caused as a result of negligence on the part of both the first defendant and second defendant. [the "first finding"]

I consider the first defendant [the State] was negligent in failing to ensure that the floor of the kitchen area where the plaintiff worked was provided with a non slippery surface and more particularly in allowing the use of a piece of carpet in the kitchen area which was dangerous. [the "second finding"]

I consider the second defendant [the Contractor] was negligent, through it's [sic] employee, by allowing cleaning fluid to settle on the kitchen floor thus increasing the risk of injury to the plaintiff. [the "third finding"]

I find that the first defendant is 40% responsible for the plaintiff's injuries loss and damage and that the second defendant is 60% responsible for the plaintiff's injuries loss and damage. [the "fourth finding"]

I find that by virtue of the cleaning contract between the first defendant and the second defendant that the second defendant owes a complete indemnity to the first defendant in relation to the liability of the first defendant. [the "fifth finding"]

(I have added reference to the "first finding", etc to facilitate cross-reference.)

21 The Arbitrator then under "Damages" proceeded on the express basis that:

(a) contribution applied, as between the Contractor and the State they being "joint tortfeasors or otherwise", but

(b) the plaintiff could not recover against the State as employer by reason of s151Z(2)(c) of the Workers Compensation Act, because

(c) that statute precludes recovery where an indemnity operates, as here, in favour of the employer, so

(d) recovery by the plaintiff was on that basis to be entirely from the Contractor.

22 That emerges from what is said by the Arbitrator under "Damages" below, read in conjunction with the earlier determinations under "Liability". I quote:

Damages

......

Section 151Z(2)(c) of the Workers Compensation Act 1987 provides, in effect, that in a workers action against a third party, common law damages which the worker otherwise would recover are to be reduced. The amount of the reduction is the excess of the contribution which the third party would, except for Part 5, be entitled to recover from the employer over the amount of the contribution recoverable from the employer.

The effect is that an employer who has paid compensation is to be indemnified by the third party, not to the full extent of the compensation paid by the employer, but only to the extent to which that compensation exceeds the amount of the sum which the employer would have been obliged to contribute had he been sued as a joint tort fees [scil "tortfeasor"] by the worker.

Section 15Z(c) [scil "s151Z(2)(c)"] provides as follows:

"The damages that may be recovered from the person by the worker in proceedings referred to in paragraph (a) are to be reduced by the amount by which the contribution which the person would (but [scil "for"] this Part) the entitle [scil "be entitled"] to recover from the employer as a joint tort feasor or otherwise exceeds the amount of the contribution recoverable."

As stated above I am on the view that by virtue of the cleaning contract between the first defendant and the second defendant, that the second defendant owes a complete indemnity to the first defendant in relation to the liability of the first defendant.

I am therefore of the view that, in view of the indemnity of the first defendant, that the plaintiff is not entitled to recover any amount from her employer as a joint tort feasor [sic] or otherwise and there is therefore no contribution from the employer which should be deducted from the damages that the plaintiff is entitled to recover from the second defendant.

I am therefore of the view that the second defendant is not entitled to recover from the first defendant any amount and I am therefore not required to determine what that amount may have been, but for the indemnity, in accordance with the provisions of Division 3 as to the award of damages as provided by Section 15Z(d) [scil "s151Z(2)(d)"]."

23 The Contractor then brought the issue of its indemnity to the State before Payne DCJ as a question for determination on a limited hearing under s18B(2) of the Arbitration (Civil Actions) Act 1983 (NSW). That specific question for determination was whether clause 51.1 of the Contract had the effect that the Contractor must indemnify the State in respect of the State's 40 % liability to the plaintiff. Payne DCJ upheld the findings of the Arbitrator as to the indemnity and made an order "reinstating the award of the Arbitrator". The Contractor now appeals against that decision and order.

RESOLUTION OF APPEAL

24 The ultimate question to be determined is whether, based on the findings of the Arbitrator, uncontested save as to the effect of the indemnity, the State would not have reasonably suffered loss or incurred liability, but for the material contribution of the negligent act or omission of the Contractor, so as to be in that sense "caused" "by any ... negligent act or omission of the Contractor ... in connection with this Contract". I agree with Ipp JA that the State did not have to prove that the Contractor's negligence was the sole cause of its loss; it merely had to prove that the Contractor's negligence was a cause of its loss. I would add two things. First, it might be argued that such causation would be sufficiently made out if the Contractor's negligent act or omission were merely a "but for" condition of the State's loss or liability though not of the merely incidental kind. But I consider that it is necessary that the relevant conduct materially contribute to the State's loss or liability. Second, I consider that, just as court orders can only be construed by reference to pleadings as extrinsic material, where they are genuinely ambiguous, (see note by Justice Young "Construing Court Orders" and the authorities cited in (1998) 72 ALJ 187), so too by parity of reasoning, an Arbitrator's findings must be ambiguous before resort may be had to the associated pleadings for their interpretation. The present pleadings as particularised simply state each side's version of its case. They do no more than identify the issues and thus the scope of the dispute. It is the findings which are determinative.

25 I would also agree that to the extent it were legitimate to look beyond the Arbitrator's findings, the particulars in the pleadings provide but limited assistance.

26 Where I part company is with the conclusion that the Arbitrator's findings "do not reliably or safely establish that the Contractor's negligence was a cause of the loss suffered by the State". In so doing, I recognise the force of the reasoning for the opposite view. However, the real difference between how I see matters is that I believe the Arbitrator's findings, terse as they were, go far enough in establishing an affirmative answer to the ultimate question posed above. Absent ambiguity in the findings there is risk of error in resorting to the pleadings.

27 Clause 51.1 is focused on loss or liability incurred or suffered by the State. The causal question relates to the State's loss or liability, not the damage suffered by the plaintiff. Clearly enough plaintiff damage is a necessary condition, along with a successful claim against the State, for the State to suffer loss or liability. That suggests that at least vicarious liability for the contractor's conduct would be covered. But the State contends, correctly in my judgment, that the indemnity must be wider in its operation than that, covering here, concurrent tortfeasor liability of the State. Otherwise the written indemnity would go no further than the law provides anyway.

28 The first finding makes the negligence of both the cause of the injury. The fourth finding removes any ambiguity with the word "both". The 60/40 division of responsibility means this is not a case where it remains open that each of the State or Contractor could have, by itself, caused the injury, without involvement of the other. So removing either the Contractor's negligence or the State's negligence means in each case no injury. The State's own negligence was thus a necessary condition of the liability or loss ultimately suffered by the State. But it was not a sufficient condition for the plaintiff's damage and thus for the ultimate loss or liability suffered by the State. The same applies to the Contractor. Each have, in a but for sense caused both plaintiff damage and resultant loss or liability to the State. The Contractor has, in a causal sense, materially contributed to both damage and resultant loss or liability to the State (in the way described in the third finding). This is so, though the State has too. Had the State incurred the loss or liability unreasonably, that would take it outside the scope of the indemnity. But that must be more than merely being a concurrent tortfeasor, with but a 40% responsibility compared to a 60% one.

29 Here, while the pleadings accommodate the possibility that the acts and omissions of the State alone caused the plaintiff's injuries and hence the State's ultimate loss or liability, resort to the pleadings is only warranted to resolve an ambiguity in the Arbitrator's findings. But those unchallenged findings, collectively, are not ambiguous. They clearly determine that the Contractor's negligence was a necessary condition for the plaintiff's injury and thus her damage, materially contributing to it to the extent of 60%. And the plaintiff's injury thus brought about, coupled with her successfully suing on it for damage suffered, were in turn the necessary condition for the State's loss or liability, materially contributing to it. Thus the causal connection between contractor's negligence and the State's loss or liability is made out, though a further condition for that loss or liability was the State's own negligence and its 40% responsibility.

30 All this is clear enough without resort to what the Arbitrator determined under Damages. But what he there determined reinforces these conclusions, though they sufficiently follow from the four findings under liability to which I have referred. I turn to that now.

31 Thus the earlier findings before damages are reached, are entirely consistent with what is then said under damages. Though their negligent acts and omissions be distinct there is no room for the suggestion that there are here different and divisible plaintiff injuries brought about, giving rise to separate and wholly independent responsibility on the part of State or Contractor.

32 When one then considers the Arbitrator's express reference (under "Damages") to s151Z(2)(c) of the Workers' Compensation Act 1987 it necessarily presupposes contribution would otherwise be available against the State, but for that provision. The availability of statutory contribution in the original plaintiff action would otherwise follow from the legislative reforms brought about in New South Wales by the Law Reform (Miscellaneous Provisions) Act 1946, Pt III. Since contribution in this context may be claimed only from concurrent tortfeasors, it follows that the State and the Contractor must be either joint tortfeasors, or several but concurrent tortfeasors. This is explained lucidly by Fleming in "The Laws of Torts" 9th ed (LBC, 1998) at 288 citing Glanville Williams on Joint Torts:

"For a number of purposes, the common law used to, and to a modified extent still does, attach some significance to the distinction between "joint" and "several" tortfeasors. The problem arises where one and the same injury is attributable to the tort of two or more wrongdoers. Such concurrent tortfeasors are regarded as "joint" when there is concurrence not only in the causal sequence leading to the single damage, but also in some common enterprise; they are "several" or "independent" when the concurrence is exclusively in the realm of causation. The former are responsible for the same tort, the latter only for the same damage. In the first case, there is but one cause of action in contemplation of law; while in the second, there are as many separate causes of action as there are tortfeasors."

33 The Arbitrator, in denying contribution against the State, necessarily concluded that each of the State and the Contractor were either joint, or several concurrent, tortfeasors, responsible for the same damage (with the Arbitrator having determined their proportionate responsibility in the manner earlier set out; 40 % for the State and 60 % for the Contractor). This is because s151Z(2)(c) precludes recovery from the employer "as a joint tortfeasor or otherwise".

34 It follows that the Arbitrator must necessarily have determined that each of the State and the Contractor were jointly responsible for, that is to say causally brought about, the same damage suffered from their respective acts and omissions. From this it follows that, but for the act or omission of the Contractor ("by allowing cleaning fluid to settle on the kitchen floor thus increasing the risk of injury to the plaintiff") the State would not have suffered the loss or incurred the liability constituted by 40 % of the total damage, being its proportionate responsibility save for the effect of the indemnity.

35 I should add that the liability or loss referred to in clause 51.1 must in logic refer to that liability or loss before consideration of the effect of the indemnity, and thus before application of s151Z(2)(c) of the Workers' Compensation Act 1987. Otherwise the position would be entirely circular and create absurdity. If the effect of the statute, working on the indemnity in favour of the State as an employer, were to preclude any loss or liability arising at all against the State, it could only be so because there were in the first place a loss or liability qualifying for indemnity.

36 The findings of the Arbitrator as to the particular, though differentiated acts of negligence of the State and the Contractor pre-suppose that the State and the Contractor were several concurrent tortfeasors causing the same damage rather than joint tortfeasors. To be joint tortfeasors, as earlier explained, there would need to be a common enterprise involving the State Contracts Control Board and /or Department of Community Services along with the Contractor. There is no suggestion of that. Nor is there any suggestion of vicarious liability, as likewise might suggest joint tortfeasors.

37 While therefore it is notionally conceivable on the pleadings that the negligent conduct of the State, which caused the plaintiff to be injured, could have been entirely separate and independent from the negligent conduct of the Contractor which caused the plaintiff to be injured, it is the findings which are determinative. Entire separateness of the conduct of each, in the sense that they produce different damage, could not be reconciled with the first and fourth findings to which I refer. Nor with the State and Contractor being found to be concurrent tortfeasors so causing the same damage. However, the conduct of each can be understood as independent, in a more limited sense. That is, the distinct acts and omissions of each operate as a concurrent cause of the damage suffered by the plaintiff. The conduct of each is naturally distinct; but each contributes to the damage suffered. That, as a matter of plain English, is what is meant when the Arbitrator finds, specifically, first that the Plaintiff's injuries "were caused as a result of negligence of both [the State] and [the Contractor]", second, that they shared (60/40) responsibility though with distinct negligent acts and omissions and third, that they were concurrent tortfeasors. If the Arbitrator meant to leave open the possibility from the pleadings that the State was solely responsible, he could not have made those findings. And concurrent causal responsibility suffices to activate the indemnity, provided the State "reasonably" incurred its resultant loss.

38 The conclusions earlier reached are consistent with the way in which an indemnity clause is to be construed. An indemnity clause is to be given effect according to its natural and ordinary meaning Valkonen v Jennings Construction Ltd (South Australian Full Supreme Court, 29 November 1995, unreported), at paras 30-1, citing Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82; (1986) 161 CLR 500 at 510-11.

39 The indemnity here does not qualify "caused" with words such as "to the extent that it is". It invokes a simple, unqualified notion of causation. A finding by the Arbitrator that "the plaintiff's injuries were caused as a result of negligence on the part of both the [State] and the [Contractor]", with 60% responsibility on the part of the Contractor, comfortably satisfies such a test of causation. A 60% responsibility is on any view a material contribution to both plaintiff damage and loss by the State. Those findings necessarily entail that the negligence of the Contractor was by itself a necessary but not sufficient cause of the plaintiff's damage and of the State's ultimate loss or liability, materially contributing to both. That suffices to satisfy the causal requirement of the indemnity. The State's own negligent acts or omissions are, by the findings, precluded from being able, by themselves alone, to have brought about plaintiff damage and the State's loss.

40 Moreover, the notion of causation incorporated in the indemnity is not totally at large. It requires that the relevant act or omission be in relation to acts or omissions "in connection with" the Contract. Moreover, there is a further limitation in clause 51.1 upon the indemnity, namely that the relevant loss (including legal costs and expenses) or liability must be "reasonably incurred or suffered" by those indemnified. That avoids absurdity and gives the indemnity an operation sensible in scope, precluding indemnity where for example the State has been predominantly responsible by reason of its own gross negligence or becomes liable by admitting liability without proper reason. There is no suggestion that the State in the present case acted with such gross carelessness that it is precluded from recovering under the clause.

41 Clause 51.1 as the Respondent pointed out in its submissions, also requires the contractor to "defend the Government" from claims. That purpose is consistent with the purpose manifest in clause 49 that the contractor must take "responsibility for claims and litigation". It is also, as the Respondent argues, consistent with the construction that the contractor indemnifies the Government for loss or liability for which its acts or omissions have been a cause. For it would then be appropriate and efficient for the contractor to take over the defence of the claim. Moreover, the intended construction would allow the contractor to take over such claims without this necessarily involving the contractor in any conflict of interest as regards defending the claim of negligence. Otherwise conflict might occur if the indemnity were limited much more narrowly to vicarious liability situations. That it is not to be construed so narrowly in any event follows from the fact that there would be no point in the indemnity. This is because the law entitles the party vicariously liable to an indemnity in any event, save in employer/employee situations.

CONCLUSION

42 Though the findings of the Arbitrator are relatively brief, I consider that the proper conclusion from a consideration of those findings, read with the rest of the award is that clause 51.1 of the Contract operates as a total indemnity for the State in the present case. As an indemnity, it is to be given effect according to its natural and ordinary meaning. I would propose orders dismissing the appeal and that the Appellant pay the costs of the Appeal.

43 IPP JA: On 8 December 1993 the appellant ("the Contractor") entered into a cleaning contract with the State Contracts Control Board ("the State"). By the contract, the Contractor was required to clean certain premises under the control of the respondent.

44 Clause 51.1 of the contract provided:

"Subject to the provisions of this Contract the Contractor shall at all times indemnify, hold harmless and defend the Government its agencies and statutory authorities and its officers, employees and agents (in this clause 51 referred to as "those indemnified") from and against any loss (including legal costs and expenses) or liability reasonably incurred or suffered by any of those indemnified arising from any claim, suit, demand, action or proceeding by any person against any of those indemnified where such loss or liability was caused by any wilful, unlawful or negligent act or omission of the Contractor, its employees, agents or sub-contractors in connection with this Contract."

45 On 30 October 1997, while the contract was still in force, a person ("the Plaintiff") was injured when she slipped at premises which, by the contract, the Contractor was obliged to clean.

46 The Plaintiff commenced proceedings in the District Court against both the State and the Contractor. She alleged that either or both had negligently caused her injuries. By cross-claim, the State contended that, should it be held that it was liable to the Plaintiff, the Contractor was required by cl 51.1 of the contract to indemnify it completely. The Contractor, in turn, cross-claimed against the State for a contribution order pursuant to the Law Reform (Miscellaneous Provisions) Act 1946.

47 The matter was submitted to arbitration and the arbitrator found that the Plaintiff's injuries were "caused as a result of negligence on the part of both [the State] and [the Contractor]."

48 The arbitrator held that the Contractor was negligent "through its employee, by allowing cleaning fluid to settle on the kitchen floor thus increasing the risk of injury to the Plaintiff".

49 The arbitrator held that the State was negligent "in failing to ensure that the floor of the kitchen area where the Plaintiff worked was provided with a non slippery surface and more particularly in allowing the use of a piece of carpet in the kitchen area which was dangerous".

50 He found that the Contractor was 60 per cent responsible for the Plaintiff's injuries and the State 40 per cent. He went on to find that by virtue of cl 51.1 of the contract, the Contractor "owed a complete indemnity to [the State]" in relation to its liability to the Plaintiff, and made orders accordingly.

51 The Contractor then brought the issue of its indemnity to the State before Payne DCJ as a question for determination on a limited rehearing under s 18B(2) of the Arbitration (Civil Actions) Act 1983. The specific question for determination by her Honour was whether cl 51.1 of the contract had the effect that the Contractor must indemnify the State in respect of the State's forty per cent liability to the Plaintiff.

52 Payne DCJ upheld the findings of the arbitrator as to the indemnity and made an order "reinstating the award of the arbitrator". The Contractor now appeals against that order.

53 By cl 51.1, the Contractor agreed to indemnify the State "against any loss (including legal costs and expenses) or liability reasonably incurred or suffered by [the State] arising from any claim .... by any person against [the State] where such loss or liability was caused by any .... negligent act or omission of the [Contractor]".

54 By the terms of cl 51.1, the Contractor's obligation to indemnify the State was triggered in the event of one of two situations arising. The first was where the State suffered any loss (including legal costs and expenses) arising from a claim against it, where such loss was caused by a negligent act of the Contractor. The second was where the State incurred liability arising from a claim against it, where such liability was caused by a negligent act of the Contractor. The claim by the State for an indemnity from the Contractor (which is in issue in this case) is based on the proposition that the first situation obtained.

55 Thus, to succeed in its claim for an indemnity, the State had to establish that its loss, resulting from the Plaintiff's successful claim against it, was caused by the negligence of the Contractor. The State did not have to prove that the Contractor's negligence was the sole cause of its loss; it merely had to prove that the Contractor's negligence was a cause of its loss.

56 The fact that the arbitrator found that the Plaintiff's injuries were caused by the negligence of both the State and the Contractor did not alone establish that the Contractor's negligence caused the State's loss. It was notionally conceivable that the negligent conduct of the State, which caused the Plaintiff to be injured, was entirely separate and independent from the negligent conduct of the Contractor that caused the Plaintiff to be injured. If that were so, the Contractor's negligence was not a cause of the State's loss.

57 The arbitrator made no express finding on the issue whether the Contractor's negligence was a cause of the State's loss. He does not appear to have addressed this issue at all. His reasons move immediately from the finding of a 60:40 apportionment to a finding that, by the contract, the contractor is obliged to indemnify the State completely. This is understandable to a degree when regard is had to the cross-claim of the State (whereby the indemnity was sought) which does not allege that the Contractor's negligence was a cause of the State's loss and does not expose the issue at all.

58 Mr Greenwood SC, who, with Mr Kirk, appeared for the State, submitted that, properly construed, the arbitrator's reasons contain factual findings to the effect that the Contractor's negligence was a cause of the State's loss. He sought to derive support from the particulars of negligence pleaded in the Plaintiff's particulars of claim. He submitted that the particulars evidenced the way in which the case was conducted at trial.

59 The particulars show that the Plaintiff, in substance, was alleging that the Contractor was negligent in causing liquid spray or gossamer from the spray to settle on the vinyl floor of the premises, thereby making the floor slippery, and in allowing an employee of the State to place a piece of carpet over the spray on the floor, thereby causing the carpet to be "a slipping hazard".

60 The particulars also show that the Plaintiff, in substance, was alleging that the State was negligent in allowing the Contractor to cause spray, or gossamer from the spray, to settle on the vinyl floor of the premises, thereby making the floor slippery, and in placing a piece of carpet on top of the spray that had settled on the floor, thereby making the carpet "slippery and hazardous".

61 The Plaintiff's particulars indicate that she was conducting the case on the basis that the Contractor caused liquid spray to fall on to the vinyl floor, thereby making it slippery, and the slippery quality of the floor was compounded by the State employee putting a piece of carpet over the liquid. On this basis, the negligence of the Contractor caused the Plaintiff's loss - as but for the Contractor's negligence in allowing the spray to come on to the floor - the floor would not have become slippery, the piece of carpet would not have been placed on it, and the Plaintiff would not have slipped on it.

62 The cross-claim pleaded by the State is consistent with the Plaintiff's particulars of negligence and the inference set out in the last sentence of the previous paragraph.

63 The cross-claim of the Contractor differs, however, and Mr Simpkins SC, senior counsel for the Contractor, relied on it. The Contractor's cross-claim asserts that the Plaintiff's injuries were caused by the negligence of the State in "[p]lacing the carpet square in the doorway of the kitchen" and in returning the carpet square to the kitchen after the Contractor had removed it. The Contractor's cross-claim also asserts that the State was negligent in "[f]ailing to ensure that the kitchen floor was made up of slip resistant material".

64 I do not find it possible to give a confident answer to the question whether the Contractor's allegations about the carpet mean that the negligence of the State lay in the State (and not the Contractor) putting the piece of carpet over the spray on the floor, or that it lay in the State leaving the carpet on the floor (not over the spray) where it was an object that could (and did) cause the Plaintiff to slip. The particulars are too ambiguous to construe in a reliable way.

65 The meaning of the Contractor's allegation that the floor was not made of slip resistant material is also not clear. Does it mean that the floor was slippery, even without the liquid spray, or does it mean that, had the floor been of slip resistant material, it would not have become slippery when the liquid spray settled on it? Here again I find it impossible to give a reliable answer.

66 It is possible to construe the Contractor's cross-claim as asserting that the Plaintiff's injuries were caused by the State's negligence in placing the piece of carpet on the floor in the kitchen, thereby causing the Plaintiff to slip (without the spray being a contributing factor at all) and in having a floor that was slippery even without the spray on it. This means that it is possible that the Contractor's cross-claim was pursued before the arbitrator on the basis that the negligence of the State was unconnected with, and not caused by, the negligence of the Contractor.

67 There is no transcript of the proceedings before the arbitrator and it is not possible to determine in any other way how the proceedings were conducted before him.

68 I now return to the arbitrator's findings which are to be examined against the background of the pleaded allegations to which I have referred. Consideration first has to be given to the findings that the State was negligent "in failing to ensure that the floor of the kitchen area where the [employee] worked was provided with a non slippery surface and more particularly in allowing the use of a piece of carpet in the kitchen area which was dangerous".

69 Against the background of the pleaded allegations, I am not satisfied that the arbitrator thereby held that the floor of the kitchen only became slippery when, and because, the Contractor allowed spray to settle on it. Nor am I satisfied that, according to these findings, the negligence involving the carpet had anything to do with the spray on the floor.

70 These doubts are compounded by the next finding of the arbitrator, namely that the Contractor was negligent "through its employee, by allowing cleaning fluid to settle on the kitchen floor thus increasing the risk of injury to the Plaintiff". The clear inference from this finding is that there was a risk of injury to the Plaintiff, caused by the State, before the Contractor allowed fluid or spray to settle on the kitchen floor. The inference is that when the fluid or spray settled on the floor, the risk, previously created by the State's conduct, was increased by the Contractor's conduct.

71 Accordingly, the findings of the arbitrator do not establish that there was a causal connection between the negligence of the Contractor (in allowing the cleaning fluid to settle on the floor) and the negligence of the State ("in failing to ensure that the floor of the kitchen area where the [employee] worked was provided with a non slippery surface and more particularly in allowing the use of a piece of carpet in the kitchen area"). Such a causal connection is not established merely because both were held to have negligently caused the Plaintiff's loss, or because both were held to be concurrently liable. The arbitrator's findings do not preclude the negligence of the State being entirely separate from and independent of the negligence of the Contractor. They also do not preclude the conduct of the Contractor, that constituted negligence on its part, from being entirely unrelated to any conduct on the part of the State that led to it being held to have negligently caused the Plaintiff's injuries.

72 In other words, the arbitrator's findings do not preclude the failure by the State to ensure that the floor of the kitchen area was provided with a non-slippery surface and its conduct in allowing the use of the carpet in the kitchen area, from being a cause of the Plaintiff's loss quite independently of the cleaning fluid that had settled on the floor. It has not been established that, but for the cleaning fluid on the floor, the State would not have been negligent in regard to the floor and the carpet. Nor has it been established that, but for the cleaning fluid on the floor, the Plaintiff would not have been injured by the floor and the carpet.

73 Accordingly, in my opinion, the arbitrator's findings do not reliably or safely establish that the Contractor's negligence was a cause of the loss suffered by the State.

74 I would therefore uphold the appeal, set aside the orders made by Payne DCJ, and answer the question posed for determination under s 18B(2) of the Arbitration (Civil Actions) Act (being whether cl 51.1 of the contract had the effect that the Contractor must indemnify the State in respect of the State's forty per cent liability to the Plaintiff) in the negative. I would order the State to pay the costs of the proceedings before Payne DCJ and the costs of the appeal.

**********

LAST UPDATED: 27/02/2003