Unilever Australia Limited v Pahi & Anor; Swire Cold Storage Pty Limited v Pahi & Anor [2010] NSWCA 149 (5 July 2010)

Last Updated: 6 July 2010

NEW SOUTH WALES COURT OF APPEAL

CITATION:
Unilever Australia Limited v Pahi & Anor; Swire Cold Storage Pty Limited v Pahi & Anor [2010] NSWCA 149


FILE NUMBER(S):
2009/00298423
2009/00298468

HEARING DATE(S):
1 April & 6 April 2010

JUDGMENT DATE:
5 July 2010

PARTIES:
CA 2009/00298423
Unilever Australia Limited t/as Streets Ice Cream (Appellant)
Tricia Pahi (First Respondent)
Swire Cold Storage Pty Limited (Second Respondent)
CA 2009/00298468
Swire Cold Storage Pty Limited (Appellant)
Tricia Pahi (First Respondent)
Unilever Australia Limited t/as Streets Ice Cream (Second Respondent)

JUDGMENT OF:
Allsop P Beazley JA Giles JA

LOWER COURT JURISDICTION:
District Court

LOWER COURT FILE NUMBER(S):
DC 2950/07

LOWER COURT JUDICIAL OFFICER:
Curtis DCJ

LOWER COURT DATE OF DECISION:
27 August 2009


COUNSEL:
P Morris (Unilever Australia Limited)
S Norton SC; M Fraser (Tricia Pahi)
I Roberts SC; I Judd (Swire Cold Storage Pty Limited)

SOLICITORS:
Astridge & Murray Solicitors (Unileverl Australia Limited)
Brydens Law Office (Tricia Pahi)
Lee & Lyons Lawyers (Swire Cold Storage Pty Limited)

CATCHWORDS:
TORTS – negligence – duty of care – duty owed by principal contractor to employees of independent subcontractor – whether duty owed by principal is co-extensive with that owed by an employer – Leighton Contractors Pty Limited v Fox
Calliden Insurance v Fox [2009] HCA 35
TORTS – negligence – duty of care – Leighton v Fox – decisions on the duty of care owed by principals to be read in light of the decision in Leighton v Fox
TORTS – negligence – duty of care – standard of care – whether standard of care requires one to undertake such measures as were within its power to obviate the dangers in question

LEGISLATION CITED:
Workers Compensation Act 1987

CATEGORY:
Principal judgment

CASES CITED:
Climaze Holding Pty Ltd v Dyson (1995) 13 WAR 487
Leighton Contractors Pty Limited v Fox; Calliden Insurance v Fox [2009] HCA 35
National Insurance Ltd v Chalker [2005] NSWCA 62
Pacific Steel Constructions Pty Limited v Barahona; Jigsaw Property Group Pty Limited v Barahona [2009] NSWCA 406
Rockdale Beef Pty Limited v Carey [2003] NSWCA 132;
Tolhurst v Cleary Bros (Bombo) Pty Ltd & Anor [2008] NSWCA 181
Stevens v Brodribb Sawmilling Company Pty Ltd [1986] HCA 1; (1986) 160 CLR 16
Sydney Water Corporation v Abramovic [2007] NSWCA 248; 5 DDCR 570

TEXTS CITED:


DECISION:
In each appeal:
1. Appeal allowed;
2. Set aside the orders of the trial judge;
3. Order that there be judgment for the appellants (defendants in the Court below);
4. Order that the respondent pay the appellants’ costs both at first instance and of the appeal;
5. The respondent is to have a certificate under the Suitors’ Fund Act 1951 if so qualified.



JUDGMENT:

- 29 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 2009/298423

CA 2009/298468

ALLSOP P

BEAZLEY JA

GILES JA

5 July 2010

Unilever Australia Limited t/as Streets Ice Cream v Tricia Pahi & Anor

Swire Cold Storage Pty Limited v Tricia Pahi & Anor

Headnote

The first respondent in each appeal, Tricia Pahi, sustained a repetitive strain injury to her left wrist during the course of her employment as a process worker with ESP Techforce Pty Limited (ESP), a labour hire company. ESP had been engaged by Swire Cold Storage Pty Limited (Swire) to repackage ice cream products for Unilever Australia Limited (Streets). ESP designed the repackaging system, which was undertaken in a coolroom at Swire’s premises, a cold storage facility. Whilst Streets did not have any contractual relationship with ESP, instructions on the quantity and type of products to be repackaged were given directly by Streets to ESP. A copy was given to Swire.

Ms Pahi commenced proceedings against Swire and Streets alleging that her carpal tunnel injury was caused by their failure to take due care in overseeing, and, to some extent, directing her work for ESP. She did not commence proceedings against ESP, as she had been advised that her injuries were not so severe as to overcome the 15 per cent permanent disability threshold required to claim under the Workers Compensation Act 1987.

The trail judge, Curtis DCJ, held that Ms Pahi’s injuries were caused by the negligence of each of Swire and Streets and awarded her damages in the sum of $281,861.57, after deducting one third of the award to represent the negligence of her employer, ESP.

Swire and Streets each appealed against his Honour’s findings of liability and damages, and, alternatively, against the proportion of liability attributable to ESP.

Held
Per Beazley JA (Allsop P and Giles JA agreeing):

(i) The law does not require a standard of care that involves a person using such measures as were within its power to obviate the dangers in question. The standard is one of reasonable care: [38].

(ii) The law has been careful in distinguishing the duty of care that is owed in particular relationships: [42]. Swire was in the position of a principal in respect of ESP, which was an independent contractor. Streets did not have a contractual relationship with ESP. Its arrangement was with Swire: [44].

(iii) Previous authorities of this Court must now be read in the light of the decision in Leighton v Fox: [48]. In Leighton v Fox the High Court emphasised that the duty of care owed by a principal was not co-extensive with that of an employer.

(iv) The trial judge effectively required both Swire and Streets to do all in their respective power to ensure that ESP employees were provided with a safe system of work: [50]. This is contrary to the principles stated in Stevens v Brodribb Sawmilling Company Pty Limited [1986] HCA 1; (1986) 160 CLR 16, reaffirmed in Leighton v Fox: [57]. It is also contrary to the standard of care required in negligence cases: see (i) above.

(v) In accordance with the principles stated in Stevens v Brodribb, there was no duty on Streets or Swire to control the system of work implemented by ESP: [62]. Accordingly, his Honour erred in finding that Streets and Swire each owed and breached a relevant duty of care to Ms Pahi: [75].
IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 2009/298423

CA 2009/298468

ALLSOP P

BEAZLEY JA

GILES JA

5 July 2010

Unilever Australia Limited t/as Streets Ice Cream v Tricia Pahi & Anor
Swire Cold Storage Pty Limited v Tricia Pahi & Anor

Judgment

1 ALLSOP P: I have read the reasons of Beazley JA. I agree with them and with the orders proposed by her Honour. I only wish to add the following comments.

2 The High Court in Leighton Contractors Pty Limited v Fox [2009] HCA 35 has made it clear that the legal and juridical significance of the place of both the employment relationship and the corporate form is to be maintained in the assessment of the existence of any duty of care in a workplace context – whether complex or simple. Bearing this in mind, as Beazley JA says, care needs to be taken in applying authorities which can be seen not to place appropriate regard to that legal and juridical foundation.

3 That said, the common law does not operate in a fashion that ignores substance in a preference for legal form. Here, ESP Techforce Pty Ltd (“ESP”) was the employer. It was responsible for and carried out direct supervision. There was nothing to lead to any conclusion or apprehension in either Swire or Streets that ESP was not willing or able to understand, undertake or fulfil its duties to its employees who were carrying out work within the overall context of Swire’s operations for the commercial interests of Streets. The substance was that ESP, alone, carried the duty of care owed to the respondent.

4 BEAZLEY JA:

Introduction

The first respondent, Tricia Pahi, sustained a repetitive strain injury to her left wrist during the course of her employment as a process worker with ESP Techforce Pty Limited (ESP), a labour hire company, whilst engaged in the work of repacking ice cream products. The injury was diagnosed as a carpal tunnel injury.

5 Unilever Australia Limited t/as Streets Ice Cream (Streets) stored its ice cream and ice confectionary products at a cold storage facility operated by Swire Cold Storage Pty Limited (Swire). Swire had entered into an arrangement with Streets to repackage some of Streets’ products into smaller boxes, so as to be suitable for sale in supermarkets. Swire engaged ESP to provide process staff to undertake this task.

6 Ms Pahi was employed by ESP from 2003 through to August 2007, when she resigned due to increasing pain in her left wrist. Sporadically between December 2003 and January 2004, and on a full-time basis between June 2005 and March 2006, Ms Pahi repackaged ice creams at Swire’s cold storage facility pursuant to the contract between ESP and Swire.

7 Ms Pahi commenced proceedings against Swire and Streets on the basis that her carpal tunnel injury was caused by their failure to take due care in overseeing, and, to some extent, directing her work for ESP. She did not commence proceedings against her former employer, ESP, as she had been advised that her injuries were not so severe as to overcome the 15 per cent permanent disability threshold required to claim under the Workers Compensation Act 1987.

8 The trial judge, Curtis DCJ, held that Ms Pahi’s injuries were caused by a breach of duty of care by each of Swire and Streets. After deducting one third of the damages to which she would have otherwise been entitled for the negligence of her employer, ESP, pursuant to the Workers Compensation Act, s 151Z(2), his Honour awarded Ms Pahi damages in the sum of $281,861.57. Those damages comprised:

General damages:	148,500.00
Past economic loss:	40,847.70
Future economic loss:	224,763.70
Past out-of-pocket expenses:	3,680.95
Future out-of-pocket expenses:	5,000.00
Total damages:	422,792.35
Section 151Z(2) adjustment:	(140,930.78)
Judgment:	$281,861.57

9 Swire and Streets each appeals against his Honour’s findings of liability and damages. Each also contended that if there was any liability in negligence to Ms Pahi, at least three quarters of that liability lay with ESP. Swire further challenged the apportionment of liability between itself and Streets.

Background

10 Swire operated a cold storage facility adjacent to Streets’ manufacturing premises where it warehoused and dispatched Streets’ ice cream products. The ice cream products were transported from Streets to Swire through a tunnel that interconnected the two premises.

11 In about December 2003, Swire entered into an arrangement with Streets to repack some of Streets’ products including ‘Cornettos’, ‘Gaytimes’, ‘Splices’ and ‘Magnums’. It was agreed that the repackaging would take place within Swire’s premises, where the items were already in cold storage. Swire, with Streets’ consent, engaged ESP to provide the workforce to undertake the physical task of repackaging. ESP invoiced its labour charges to Swire. Swire paid ESP, then separately invoiced Streets for the ESP amount plus 15 per cent.

12 The repackaging process was organised as follows.

13 On a daily basis, Maria Clemenek, an employee of Streets, emailed a ‘purchase order’ to Cassandra Pennington-Collins, ESP’s project manager, who acted as a full-time on site supervisor of the work performed pursuant to ESP’s contract with Swire. Ms Clemenek also forwarded a copy of the purchase order to representatives at Swire. The purchase order specified the type and quantity of ice cream products that were to be repackaged.

14 Swire allocated a portion of a cool room, kept at 4-6 degrees Celcius, within the cold storage facility to ESP employees for the purposes of carrying out the repacking. Some time after ESP’s contract commenced, a Swire employee informed Ms Pennington-Collins that the ESP employees could not be “in the freezer this long” and that they should be given five minute breaks. Ms Pennington-Collins said that she then introduced five minute breaks. This was confirmed by Ms Pahi.

15 Forklift drivers employed by Swire removed pallets of the identified product from the freezers, as well as pallets containing flat, unassembled cartons, and transported them to ESP’s designated packing area. Sometimes, the pallets were full and sometimes, about half full.

16 Male employees of ESP carried the containers and cartons from the pallets to the sorting tables. Over the course of the day, ESP employees, directed by Ms Pennington-Collins, manually repackaged the products into smaller cartons before they were returned to the freezer by Swire forklift drivers.

17 Ms Pennington-Collins designed, implemented and monitored the workflow system undertaken by ESP employees. If she was not present, an ESP work team leader supervised the repackaging work. ESP was also responsible for ensuring that the safety and hygiene requirements of dealing with food products were observed. There was a system known as Hazard Analysis Critical Control Point (HACCAP), which required, for example, the wearing of gloves and hairnets in food handling areas. ESP provided the necessary equipment and apparel for compliance with HACCAP and then invoiced Streets directly for the cost of these items.

18 ESP employees engaged to work on the repackaging of the ice cream products were obliged to undertake a one-day induction at Swire, which was conducted by a Swire employee. This induction was primarily for the purpose of acquainting the ESP employees with matters such as the layout of the warehouse, the emergency exits and obvious dangers.

19 One problem that needed to be addressed in the repackaging process was the possibility that the ice cream product might thaw and therefore spoil, if left out of cold storage too long. Generally, the maximum time in which products could be left out was 30 minutes and each pallet had to be completed within that time. However, different products had different “thaw times”. In particular, ‘Gaytimes’ could not be left out of the freezer for longer than 20 minutes and Magnums for longer than 25 minutes.

20 Initially, to accommodate this problem, half pallets only of those products were brought out at any one time. However, once ESP staff became proficient at repacking, full pallets were brought out and finished within the required time. Ms Pennington-Collins said that if product was spoiled she would receive a complaint from Streets’ quality control section.

21 From time to time, Patricio Reveco, Streets’ quality control officer, came to where the goods were being repackaged to collect “QA samples”. Ms Pennington-Collins said that initially this occurred on a daily basis and gradually decreased to once a week and then once a month. Ms Pahi said that “QA samples” were collected once a week. She was not cross-examined to the contrary.

22 Ms Pennington-Collins said that the only purpose of Mr Reveco’s visits was to pick up samples for the quality assurance process. Ms Pahi said Mr Reveco checked the boxes to ensure that the date code sticker was being applied in the correct place. I would consider this to be an aspect of quality control. Ms Pahi also said that during one of his early visits, Ms Pahi overheard Mr Reveco say to Ms Pennington-Collins:

“They need to pick it up. 30 minutes, cannot sit there. 20 minutes, the pallets are got to be gone, going into the freezer, packed.”

23 Ms Pahi said that after this, Ms Pennington-Collins directed the ESP employees to work faster, saying: “Come on guys, we’ve got to go faster than this” and “we need to go faster”. Ms Pennington-Collins denied the conversation with Mr Reveco, or that she required the employees to work faster. She said that Mr Reveco, and therefore Streets, was concerned only with the quality of the product, and not with the speed at which it was being repackaged.

24 The trial judge accepted Ms Pahi’s evidence, which I understand to be an acceptance both that Mr Reveco had made the remark referred to and that Ms Pennington-Collins responded by telling the employees to “go faster”. However, it should be observed that in cross-examination, Ms Pahi said that Ms Pennington-Collins did not use the words, “go faster”, but pushed them and sometimes told them they were “too slow” and to “pick it up”.

25 Ms Pahi also said that Ms Pennington-Collins sometimes rotated her from her usual position and directed her to work with a slower packer, so that the work flow of that other employee would pick up. On other occasions, when new employees started, the workflow slowed down and Ms Pahi said that this meant that she had to work faster.

26 Ms Pennington-Collins denied that ESP required its employees to “work faster”, except to the extent that it was sometimes necessary to get them to stop talking and get them to focus on the work. However, Ms Pennington-Collins said that Ms Pahi and one other employee were particularly fast workers and she would sometimes have to tell Ms Pahi to slow down, otherwise she would “give [herself] a coronary”.

27 On average, the Streets daily purchase orders specified 13 pallets for repackaging. At the commencement of ESP’s contract, ESP was not meeting this target and Ms Pennington-Collins expanded the ESP team from six to seven process workers in 2004, to 13 to 15 in 2005/2006, so that the daily purchase orders could be filled. Ms Pennington-Collins also said that from time to time, only seven to eight pallets would be finished in a day. There was no penalty imposed by Swire or Streets for failing to repackage the number of pallets specified in Street’s daily purchase order. There was no evidence that Streets had complained of any failure to meet its requirements.

28 Ms Pennington-Collins gave evidence of periods of time in which Swire did not permit ESP to undertake any work. The interruptions were caused by a variety of factors, such as the loading and unloading of trucks. These interruptions undoubtedly involved safety considerations from Swire’s point of view. Ms Pennington-Collins explained that whilst these interruptions had an impact on how much packing could be done, it did not result in the work having to be done faster. Rather, It meant less packing would be done on those days.

29 Ms Pennington-Collins said that Swire also specified the number of employees ESP could have on site. However, that evidence has to be understood in context. Ms Pennington-Collins said:

“At one stage there was a demand of 12, 24, 36,000 which has tripled the amount of work we normally repack requested by Streets and so we wanted to bring extra people in during the day. But we couldn’t have them – we were working Saturdays also, we couldn’t have them working unless we took five of the Swire people working with us. So at that time, we did have Swire people working with us.”

30 It appears that this evidence related to a particular occasion or period when the work load was high and ESP needed more staff on site. Properly analysed, it was not evidence that Swire prevented ESP bringing more staff on site, or specified the number of ESP employees who could come on site, but that in a particular situation, that is, of Saturday work, Swire, to deal with its own unionised work force, required ESP to use the services of five Swire employees. In any event, later cross-examination seemed to indicate that this had occurred after Ms Pahi had left her employment with ESP.

31 The actual position as to staffing arrangements emerged in the following cross-examination of Ms Pennington-Collins by Mr Lidden, senior counsel for Ms Pahi:

“Q. Right at the start of this arrangement ... is it the case that there was a committee formed with the interested parties in this ... arrangement?

...

A. There was no set committee, no.

...

Q. ... there were meetings with representatives from the interested parties ...

A. Yes.

Q. And on occasions you would be one of those representatives, is that right?

A. Yes, that’s correct.

...

Q. Is it the case that you were intimately involved with the development of this aspect of the ESP business, the repacking?

...

A. Was I closely involved with Streets and ESP [workforce]?

Q. Yes, yes?

A. Yes, I was.

Q. ... your father was involved for one meeting – is that right?

A. Yes.

Q. Afterwards it was you, is that right?

A. No.

Q. Was it you sometimes?

A. Sometimes yes.

Q. Because there had to be something worked out as to what Streets actually needed is that so, isn’t it?

A. That’s right.

Q. How much product they needed to have packed would be something you needed to know, correct?

A. That’s correct.

Q. What time frame you had to repack in you would need to know?

A. Half an hour, yes.

Q. The number of workers you would have present to do the job --

A. No.

Q. -- is something you would need to work out?

A. We had to work that out, that was not something we were informed.

Q. No. but you would need to know how much had to be packed, how it had to be packed and in what time frame so that you could work out how many workers were necessary to accomplish the task, that’s true, isn’t it?

A. Not entirely, no.

Q. Well at the end of the day you have got to provide a service so far as packing goods are concerned, correct?

A. That’s right.

Q. You are going to need to know what the customer, Streets, requires, that’s so, isn’t it?

A. Yes.

Q. Then you will need to work out what arrangements you have to put in place so as to fulfil their need, correct? Staffing arrangements I mean.

A. Staffing arrangements, we are a labour hire company ... if we initially started off the job with six people and increased it to twelve so we were never told and we never knew. It’s something that was trial and error.

Q. Well weren’t you able right at the start to work out how many workers you needed on the site at any one time to perform Streets requirements ...

A. No because we didn’t know how long it was going to take us to accomplish half an hour per pallet.

Q. Well, you found that out pretty quickly, didn’t you?

A. Within a few weeks but then the product changed, we went through anywhere between 11 to 16 products with the time working with Streets --

Q. Well, is it --

A. -- each time the product changed, the pallet times will change and we’d have to start all over again.” (emphases added)

32 Mr Lidden SC later put a series of leading questions to Ms Pennington-Collins as to the role that Swire played:

“Q. Swires I want to ask you about ... They controlled where you worked. Correct?

...

A. Yes ...

Q. They controlled how many workers you were allowed to bring onto the site to do your job, didn’t they?

A. Yes.

Q. They controlled the times at which you worked?

A. Yes.

Q. They prevented you from working at times quite often?

A. Yes.

Q. Times when ordinarily your workers would have been repacking ice-creams, you were unable to do it because Swires prevented you from doing it. Correct?

A. Yes.

Q. Thereby directly affecting your work rate. Correct?

A. Yes.” (emphasis added)

33 However, Ms Pennington-Collins clarified in re-examination that during the period that the repackaging of ‘Gaytimes’ was undertaken, ESP put on extra staff, because ‘Gaytimes’ were a difficult product to handle.

34 In my opinion, the bolded answer above (at [33]), read in the context of the whole of the evidence, should be understood in the same way as the evidence Ms Pennington-Collins gave earlier in cross-examination (at [32] above), that is, as relating back to the evidence she gave about being required to engage Swire employees when work was undertaken on a Saturday.

Findings by the trial judge

35 Curtis DCJ found that both Streets and Swire owed and breached a duty of care to Ms Pahi. His Honour apportioned their respective liability as one third to Streets and one third to Swire and found that the residual one third responsibility for Ms Pahi’s accident was attributable to the breach of the duty owed by ESP as her employer.

Findings that Streets owed a duty of care

36 In finding that Streets owed a duty of care to Ms Pahi, his Honour made the following findings, at [56]:

(a) The ESP workers were particularly vulnerable with little or no prospect of alternative employment and no opportunity to protect themselves;

(b) Streets knew, or ought to have known, that the workers were at risk of injury and that ESP had taken no steps to alleviate that risk. In this regard, his Honour found that Streets were aware, through Ms Clemenek and Mr Reveco, that the packing was performed by too few persons under constant exhortation to work more quickly. (This latter comment was clearly a reference to Ms Pahi’s evidence, at [24]-[25] above, relating to Mr Reveco’s comment about the products being left out too long and Ms Pennington-Collins’ subsequent direction to the staff that they had to go faster);

(c) The rate and volume of work was not only known to Streets, but effectively dictated by it through its scheduler, Ms Clemenek, who controlled the volume of packing to be completed each day;

(d) Streets, as an ice cream manufacturer, should have appreciated the particular dangers of performing repetitive movements in conditions of extreme cold;

(e) Streets possessed the means of controlling the work by contractually stipulating safe work methods to Swire. It could have requested that Swire allow more staff on site, or it could have limited the number of pallets that had to be repacked each day;

(f) Streets obtained a “commercial advantage” by outsourcing the packing works. As a matter of public policy, Streets should not be permitted a commercial advantage whilst countenancing the risk of physical injury to persons employed in its enterprise. A practicable alternative system, the delivery of partial pallet loads for packing, had already been successfully instituted as a means of protecting ice creams from melting during the packing process. The relevant duty of care was analogous to that which would have been owed to ESP employees, had Ms Pahi been directly employed by Streets.

37 His Honour qualified this last point by stating, at [58], that the content of the duty was not coextensive with that of ESP:

“... because of the limits of control. Nevertheless the ambit of that duty required that Streets take such measures as were within its power to obviate the dangers posed to the ESP workers in an activity which had been commissioned by Streets.”

38 It is worth pausing here to note that, leaving aside the question whether Streets owed a duty of care to Ms Pahi, the law does not require a standard that involves a person using such measures as were within their power to obviate the dangers in question. The standard is one of reasonable care.

39 His Honour, at [58], also posited several measures that Streets could have implemented so as to satisfy the duty of care he found that it owed to Ms Pahi. Those measures were:

(1) the incorporation of rules of safe practice in the contract with Swire [see Tolhurst v Cleary Bros (Bombo) Pty Ltd & Anor [2008] NSWCA 181];

(2) reduction by Ms Clemenek, Streets’ scheduler, of the daily quotas of pallets to be packed by the workforce;

(3) a direction to Swire to secure additional workers;

(4) or, most simply, the delivery of partial pallet loads of ice creams for repacking.

Findings that Swire owed a duty of care

40 In holding that Swire owed a duty of care to Ms Pahi, his Honour made the following findings, at [59]:

(a) The ESP workers were vulnerable;

(b) Swire had ample opportunity to observe ESP’s system of work and knew the number of persons employed to undertake the work. It could not, therefore, have been unaware of the number of pallets repackaged in the course of a day;

(c) Swire directly controlled the number of employees engaged by ESP;

(d) Swire, operating as a cold storage facility, should have had access to specialised knowledge of the particular dangers of performing repetitive movements in conditions of extreme cold;

(e) Managers at Swire knew, or ought to have known, that repacking partial pallets would prevent the product from melting and its employees were in charge of delivering the product to the ESP employees for repacking;

(f) Swire obtained a commercial advantage from the arrangement, in that it on-charged ESP’s labour costs at a surcharge of 15 per cent.

41 His Honour held, at [60], that the duty of care owed by Swire was not coextensive with ESP’s duty as Ms Pahi’s employer. Nevertheless, his Honour held that the ambit of the duty owed required that Swire take such measures as were within its power to obviate the dangers posed to the ESP workers in performing a service for which Swire had contracted. (I have already indicated that that is not the standard of care imposed by the law of negligence.) His Honour held that those measures could have included:

(1) the incorporation of rules of safe practice in the contract with ESP;

(2) directing or permitting ESP to engage more workers; or

(3) most simply, directing Swire’s forklift drivers to deliver partial pallets for repacking.

Legal principles

42 The trial judge, although giving separate consideration to the factors that gave rise to a duty of care on the part of Streets and Swire respectively, considered the principles that governed the question of duty were the same in each case. However, the law has been careful in distinguishing the duty of care that is owed in particular relationships.

43 Thus, in the case of Swire, it was in the position of a principal in respect of ESP, which was an independent contractor of services to Swire. Ms Pahi was an employee of ESP. In those circumstances, Swire’s duty of care to Ms Pahi was that described by Brennan J in Stevens v Brodribb Sawmilling Company Pty Ltd [1986] HCA 1; (1986) 160 CLR 16, and as recently affirmed by the High Court in Leighton Contractors Pty Limited v Fox; Calliden Insurance v Fox [2009] HCA 35 where the Court stated, at [20]:

“The common law does not impose a duty of care on principals for the benefit of independent contractors engaged by them of the kind which they owe to their employees. However, it is recognised that in some circumstances a principal will come under a duty to use reasonable care to ensure that a system of work for one or more independent contractors is safe. The principles were explained by Brennan J in Stevens v Brodribb Sawmilling Co Pty Ltd:

‘An entrepreneur who organises an activity involving a risk of injury to those engaged in it is under a duty to use reasonable care in organising the activity to avoid or minimise that risk, and that duty is imposed whether or not the entrepreneur is under a further duty of care to servants employed by him to carry out that activity. The entrepreneur's duty arises simply because he is creating the risk and his duty is more limited than the duty owed by an employer to an employee. The duty to use reasonable care in organising an activity does not import a duty to avoid any risk of injury; it imports a duty to use reasonable care to avoid unnecessary risks of injury and to minimise other risks of injury. It does not import a duty to retain control of working systems if it is reasonable to engage the services of independent contractors who are competent themselves to control their system of work without supervision by the entrepreneur. The circumstances may make it necessary for the entrepreneur to retain and exercise a supervisory power or to prescribe the respective areas of responsibility of independent contractors if confusion about those areas involves a risk of injury. But once the activity has been organised and its operation is in the hands of independent contractors, liability for negligence by them within the area of their responsibility is not borne vicariously by the entrepreneur. If there is no failure to take reasonable care in the employment of independent contractors competent to control their own systems of work, or in not retaining a supervisory power or in leaving undefined the contractors' respective areas of responsibility, the entrepreneur is not liable for damage caused merely by a negligent failure of an independent contractor to adopt or follow a safe system of work either within his area of responsibility or in an area of shared responsibility.’” (emphasis added)

44 Streets did not have any contractual relationship with ESP. Its arrangement was with Swire. Accordingly, any duty of care that Streets might have to a person in the position of Ms Pahi was not expressly governed by these statements in Stevens v Brodribb. I will deal with the duty, if any, that Streets owed to Ms Pahi, below. It is first necessary to consider his Honour’s reasons for finding that each of Streets and Swire owed a duty of care in the circumstances under consideration.

45 His Honour commenced his consideration of whether Swire and Streets owed a duty of care to Ms Pahi by reference to the principles stated in Stevens v Brodribb. His Honour then considered a number of cases in this Court where it had been held that a principal owes a duty to an independent contractor, or to the employees of an independent contractor. Those cases were Rockdale Beef Pty Limited v Carey [2003] NSWCA 132; Climaze Holding Pty Ltd v Dyson (1995) 13 WAR 487; National Insurance Ltd v Chalker [2005] NSWCA 62; and Sydney Water Corporation v Abramovic [2007] NSWCA 248; 5 DDCR 570.

46 His Honour’s decision was delivered prior to the decision of the High Court in Leighton v Fox and this Court’s subsequent decision in Pacific Steel Constructions Pty Limited v Barahona; Jigsaw Property Group Pty Limited v Barahona [2009] NSWCA 406.

47 Although his Honour set out the passages of Mason J and Brennan J in Stevens v Brodribb, which formed the core of the reasoning in Leighton v Fox, it is apparent that his Honour considered that the cases in this Court to which he referred were authority for the proposition that a duty of care may be owed by a principal to an independent contractor or its employees, or in circumstances where there was some interplay between parties, as was the case between Streets and ESP, in circumstances where there were factors such as vulnerability and control: see Rockdale Beef Pty Limited v Carey; or where the principal had knowledge (actual or constructive) of a relevant risk which the employer did not and could not reasonably be expected to know (or where, notwithstanding that the employer had relevant knowledge, the employer, to the knowledge of the principal, had not taken reasonable steps to alleviate the risk): Sydney Water Corporation v Abramovic.

48 It is apparent from his Honour’s reasoning at [57] to [60] of his judgment (referred to above) that he considered all of these factors were in play in this case. However, as this Court said in Pacific Steel v Barahona, those cases and, therefore, the considerations in them that were said to found a duty of care, must now be read in the light of Leighton v Fox.

49 The principles of law that applied to Swire and, by analogy, to Streets, were recently reaffirmed by the High Court in Leighton v Fox. In Leighton v Fox, the High Court explained the application of the principles in Stevens v Brodribb to a case where a head contractor had engaged subcontractors to carry out work on a building site. The application of those principles to a construction site case does not provide a point of distinction from the facts here. As this Court pointed out in Pacific Steel v Barahona and as the caselaw in this Court prior to the decision in Leighton v Fox demonstrated, outsourcing and the engagement of independent contractors is a common feature of modern business operations. It is not confined for example to the construction industry which merely provided the factual circumstances in which the principles were considered.

50 In Leighton v Fox the High Court stressed that the duty of care owed by a principal was not co-extensive with that of an employer. For reasons discussed below, the trial judge in this case effectively required both Swire and Streets to do all in their respective power to ensure that ESP employees were provided with a safe system of work. That is contrary to the principles stated in Stevens v Brodribb. In this regard the High Court in Leighton v Fox said, at [48]:

“It may be accepted that Leighton, as the occupier of the site, owed a duty to persons coming onto it to use reasonable care to avoid physical injury to them. However, this says nothing about whether Leighton owed a duty to Mr Fox to take reasonable care to prevent him suffering injury on the site as the result of the negligent conduct of Mr Stewart. The relationship between principal and independent contractor is not one which, of itself, gives rise to a common law duty of care, much less to the special duty resting on employers to ensure that care is taken.”

51 In Pacific Steel v Barahona, this Court noted, at [88]:

“The circumstances [in Stevens v Brodribb] to which Brennan J referred were not elaborated. Subsequent cases have explored the circumstances, but Leighton v Fox stands against arriving at ‘a general law obligation ... of a more extensive kind than that recognised in Stevens v Brodribb Sawmilling Co Pty Ltd’ (at [59]).”

The liability of Streets and Swire

52 Both Streets and Swire submitted that the trial judge erred in finding that each owed a duty of care to Ms Pahi in the terms formulated by his Honour. In essence, their case was that neither owed Ms Pahi a duty of care to ensure that ESP implemented safe work practices and, if there was any causative negligence in Ms Pahi having sustained injury, it was caused by ESP’s failure to implement or maintain a safe system of work.

53 Swire pointed out that it was not alleged that it had failed to engage a competent contractor. Although this was a labour hire case, the undisputed evidence was that ESP, through Ms Pennington-Collins, designed the system of work and retained supervisory control over its daily implementation, either personally or through ESP team leaders. Swire gave no instructions, either to Ms Pennington-Collins or ESP employees, as to how the repackaging work was to be carried out. Its involvement with ESP employees was limited to: the induction; general safety requirements; moving and returning the pallets of product to and from cold storage; and specifying when and where within its premises the work was to be carried out.

54 The case did not involve any allegation that the static conditions of the Swire premises were unsafe. In any event, the induction process that Swire had in place was clearly directed to the satisfaction of its obligations in that regard.

55 Swire also contended that, contrary to the finding made by the trial judge, it did not control the number of employees that ESP engaged to undertake the work. That question is dealt with below.

56 As I have said, Streets did not have any contractual relationship with ESP. Rather, its contractual relationship was with Swire and it was a third party to Swire’s contract with ESP. It was argued on behalf of Ms Pahi that the work required to be undertaken on any particular day was dictated by Streets through the “invoices” forwarded by Ms Clemenek. It was also argued that Streets controlled the speed at which product had to be repacked. Neither of these matters gave rise to a duty of the kind found by his Honour. Streets had no role in determining the size of the ESP workforce. Nor did they impose any penalty on ESP, either directly or through Swire, if the number of pallets specified in the daily invoice were not repackaged. The fact that Streets had quality control requirements which meant that products could not be left out of the freezer for more than 20 to 30 minutes (depending upon the particular product) did not involve an assumption of responsibility by it in the manner in which the repackaging work was carried out.

57 Streets and Swire submitted that it was apparent, therefore, given the recent reaffirmation of Stevens v Brodribb, that neither owed a relevant duty of care to Ms Pahi. On its face, I would agree with that submission. However, His Honour made three findings, including the finding that Swire controlled the size of ESP’s workforce on site that require further consideration.

58 The first was his Honour’s finding that Streets knew, or ought to have known, that the workers were at risk of injury and that ESP had taken no steps to alleviate that risk. His Honour “particularised” this general finding in terms that Streets were aware, through Ms Clemenek and Mr Reveco, that the packing was performed by too few persons under constant exhortation to work more quickly. This particularisation appears to be based upon Ms Pahi’s evidence, at [24]-[25] above.

59 Ms Pahi’s evidence, however, does not support the finding. Her evidence established no more than that she heard Mr Reveco saying, on one occasion, that “they needed to pick it up” because the pallets had to be returned to the freezer in 20 or 30 minutes. I have already expressed the opinion that Mr Reveco’s comment should be seen in the context of his function as Streets’ quality controller. What ESP did in response to Streets’ requirements that product not be left out of the freezer for longer than a specified time, was a matter for ESP. The fact that ESP designed the system of work and maintained on site supervision is critical in this regard. Accepting that on this occasion Ms Pennington-Collins did tell the employees to work faster, that was not a response for which Streets was responsible, even assuming that Mr Reveco heard the direction being given. It was a matter solely in the control of ESP. Further, there was no evidence that Streets knew or ought to have known that following upon this, ESP employees were required to work at a faster rate which gave rise to a risk of injury. In my opinion, his Honour’s finding is not supported by the evidence.

60 The second matter upon which specific comment should be made is in respect of his Honour’s findings at [56] (c) and (e). Those findings were that Streets dictated the rate and volume of work through its scheduler, Ms Clemenek and that Streets possessed the means of controlling the work by contractually stipulating safe work methods to Swire. In this regard, his Honour held that Streets could have requested Swire to allow more staff on site, or it could have limited the number of pallets listed for repackaging each day. Streets submitted that there was no evidence it resisted any request from ESP or Swire to specify a lower number of pallets, or to pay for a higher number of packers. It also relied on the fact that ESP’s workforce was increased so as to manage the amount of work being specified in Streets’ daily purchase orders.

61 His Honour’s findings in these paragraphs were based in large measure on the pre-Leighton v Fox authorities in this Court. However, as the decision in Leighton v Fox demonstrates, his Honour’s reasoning that underlies these findings cannot stand. The consideration of what, hypothetically, was within Streets’ capacity or power was not to the point. The control of the work to be performed was with ESP. This was so even though Streets gave daily orders specifying the quantity of product to be repacked. If the staffing levels were inadequate to undertake the work in a safe manner, that was a matter for ESP to address under its contract with Swire, as in fact it did. The lack of complaint by Streets demonstrated that completion on the day of the order was not mandatory.

62 Further, Streets was not the principal in the contractual arrangements whereby ESP provided personnel to carry out the repacking work. The considerations his Honour raised in [59] (c) and (e) involved the notion that Streets either could have specified to Swire that a certain number of employees should be engaged, or it could have reduced its scheduled requirements. These propositions ignore the legal aspects of the relationship between the parties, the actual factual circumstances and the legal obligations that thereby arose. There was nothing negligent in Streets specifying the quantity of goods to be repackaged. It engaged Swire to arrange for that work to be undertaken. Swire, in turn, engaged ESP to perform that work. How ESP managed the workload was entirely a matter for it. In accordance with the principles stated in Stevens v Brodribb, there was no duty on Streets to control the system of work implemented by ESP.

63 The third matter was a finding that related to Swire’s liability. His Honour found that Swire directly controlled the number of employees engaged by ESP. Swire challenges this finding.

64 The evidence as to who was responsible for the number of employees on site was given by Ms Pennington-Collins. Twice in her evidence, Ms Pennington-Collins said that Swire controlled how many workers ESP were allowed to bring on site. However, as the extracted portion of her evidence at [31]-[32] above demonstrates, a finding in the terms made by his Honour does not find support in the evidence. It is apparent that ESP at all times maintained control over the number of employees it had on site to undertake the work, except for the occasion when it was required by Swire to engage the services of Swire employees.

65 There is one remaining factual matter to be considered in determining whether a duty of care was owed to Ms Pahi by either or both of the appellants, namely, that as a result of specifying that the work was to be performed in the cool room, Ms Pahi was required to work in cold conditions and that Streets and Swire were aware of this.

66 The injury suffered by Ms Pahi was a repetitive strain injury resulting in carpal tunnel syndrome. Although there was some dispute on the medical evidence as to whether carpal tunnel is a repetitive strain injury, or is due to congenital factors, his Honour found that the injury was caused by the repetitive movements involved in the packing. His Honour made no finding that the injury was caused by or materially contributed to by the cold conditions in which Ms Pahi was required to work.

67 There was some evidence to support that this might have been so. Dr Conrad, surgeon, provided a medico-legal opinion, in which he attributed the injury to repetitive work in cold conditions. Dr Matheson, consultant neurosurgeon, expressed the opinion that the carpal tunnel could be blamed on her age and weight and that the repetitive packaging work undertaken in a cool room would aggravate it.

68 Dr Ellis, surgeon, was of the opinion that Ms Pahi sustained the injury:

“As a result of the work with Streets Ice Cream in the factory packing the boxes with ice cream scooping manually the ice cream into the boxes constantly and repetitively ...”

He made no reference to the effect of cold on Ms Pahi’s condition.

69 Dr Harvey, orthopaedic surgeon, who provided an opinion to the solicitors for Streets, stated that carpal tunnel is a constitutional condition, but that it may have been temporarily aggravated by the repetitive work that Ms Pahi had undertaken in the packing work.

70 Dr Hitchen expressed the opinion that carpal tunnel was not an overuse condition and there was no evidence associating its occurrence with cold conditions. He said that there was an association with thyroid disorders, from which Ms Pahi suffered.

71 The trial judge accepted Dr Ellis’ opinion that Ms Pahi had a 40 per cent impairment due to her carpal tunnel syndrome. It is apparent that his Honour also accepted Dr Ellis’ evidence as to the existence of occupational carpal tunnel syndrome.

72 Dr Adams, ergonomics and safety management consultant, provided an expert report in which he stated that Ms Pahi’s employment exposed her to a combination of potentially injurious factors including:

“... working in a very cold environment ... and without adequate thermal protection from very cold air”

73 However, in his recommendations as to the modifications that could have been made to eliminate potential risk factors, Dr Adams did not refer to working in cold conditions, except in the context that there should have been more rotation of jobs within the cool room. The recommendation was in these terms:

“... systems of task rotation between different workers within the cool-room could have been implemented to ensure that no worker spent too long at a given task having regard to the rates of repetition and the forces and postures involved, and that each worker moved through a series of genuinely different tasks (ie. each successive task should have been planned to ensure that it did not simply impose on the same musculo-skeletal components of a given worker similar stresses to those that were associated with the preceding task). For example, within the cool-room there would have been opportunity for a system of controlled rotation between the positions of packer and sticker girl to have reduced the overall risks of injury”

74 This recommendation did not suggest that Ms Pahi should not work, or work for so long in, or was being harmed by, the cold conditions in which she was working. His Honour did not make a finding that Ms Pahi’s injury was caused by the cold conditions in which she worked. He made no finding in respect of Dr Conrad’s and Dr Matheson’s evidence. He dealt with Dr Adam’s evidence that cold conditions were a potentially injurious factor only in terms of the injury being foreseeable.

75 It follows, in my opinion, that his Honour erred in finding that Streets and Swire each owed and breached a relevant duty of care to Ms Pahi.

76 Having regard to my conclusion that neither Streets nor Swire owed a relevant duty of care to Ms Pahi, the other issues raised on appeal are strictly academic. Nonetheless, I would make the following brief observations in respect of damages.

Damages

77 Streets submitted that his Honour’s assessment of non-economic loss was both flawed and excessive. It relied upon the fact that Ms Pahi already suffered from carpal tunnel syndrome, prior to her employment with ESP and that she could, and did, continue to work up until the day before the trial. Streets contended that, in the circumstances, an allowance of 33 per cent of a most extreme case was excessive and an allowance of 20 per cent for non-economic loss was more appropriate.

78 Streets further submitted that his Honour’s finding of a 70 per cent impairment of earning capacity was excessive and contended that a reasonable rate should be between 20 per cent to 30 per cent.

79 Swire supported these submissions save that it contended that the magnitude of Ms Pahi’s symptoms were reasonably modest (a modest disability) and, on this basis, submitted that an assessment of non-economic loss of 20 per cent of the most extreme case represented the appropriate award. It submitted that a finding of 33 per cent was just not open.

80 There is no doubt that his Honour’s assessments of both non-economic and economic loss were generous. However, Ms Pahi was a manual worker whose daily life and her capacity to earn an income were significantly affected by the carpal tunnel syndrome. His Honour accepted Dr Ellis’ evidence that Ms Pahi has a 40 per cent impairment of her left upper extremity. Ms Pahi is left-handed and the extent of disability assessed by Dr Ellis provides support for his Honour’s assessment both of general damages and future economic loss. Had the appeal not succeeded on other grounds, I would not have interfered with his Honour’s award.

81 I would propose the following order in each appeal:

1. Appeal allowed;

2. Set aside the orders of the trial judge;

3. Order that there be judgment for the appellants (defendants in the Court below);

4. Order that the respondent pay the appellants’ costs both at first instance and of the appeal;

5. The respondent is to have a certificate under the Suitors’ Fund Act 1951 if so qualified.

82 GILES JA: I agree with Beazley JA.

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LAST UPDATED:
5 July 2010