Coles Supermarkets Australia Pty Ltd v Ready Workforce (A Division of Chandler Macleod) Pty Ltd [2018] NSWCA 140

Summary

On 28 June 2018, the NSW Court of Appeal delivered judgment in Coles Supermarkets Australia Pty Ltd v Ready Workforce (A Division of Chandler Macleod) Pty Ltd [2018] NSWCA 140.

The appeal arose from principal proceedings commenced in the District Court brought by Ready Workforce (A Division of Chandler Macleod) Pty Ltd (Ready Workforce) against Coles Supermarkets Australia Pty Ltd (Coles) for indemnity pursuant to sections 151Z(1)(d) and (2)(e) of the Workers Compensation Act 1987 (NSW) (the WC Act) in respect of workers’ compensation payments made by Ready Workforce’s insurer to a Ms Nicole Murphy. Ms Murphy had been injured on 17 November 2011 while working at Coles’ warehouse. The workers’ compensation payments totalled $135,142.41.

Ready Workforce alleged that Ms Murphy was its employee and that she was “lent on hire” to Coles pursuant to a labour hire contract entered into between Coles and Chandler Macleod Group Ltd, the parent company of Ready Workforce. It alleged that Coles owed Ms Murphy a duty of care, which had been breached by Coles’ failing to provide a safe system of work which had caused Ms Murphy’s injury.

The primary judge found that Coles had breached its duty of care and, if sued, Coles would have been liable for damages totalling $438,024.92. Responsibility for the injury could be apportioned 60 per cent to Coles and 40 per cent to Ready Workforce.

On appeal, two interesting issues arose – (1) whether duty of care was breached, and causation was established; and, (2) whether costs and expenses incurred in defending the principal proceedings were a direct result of negligence

Whether Coles breached its duty of care to Ms Murphy and was causation established

Ms Murphy was employed at Coles’ warehouse and distribution centre at Smeaton Grange as a “picker/packer”. Her job involved receiving an order of stock to be picked from pallets or racks in the warehouse, placing a label on the stock, putting it on a machine, driving it to a designated area where it would be packed by being wrapped for delivery by truck to one or more of Coles many stores.

Ms Murphy slipped on a fine layer of crushed dry kibble that was described as “like dust”. A Chandler Macleod incident report form stated “when kibble is walked on or crushed by equipment it turns into a fine slippery powder which is hard to see”. The same Chandler Macleod incident report forms identified the root cause of the incident as being “failure by person unknown to clean up spillage from the floor of the aisle”.

Ms Murphy gave evidence that she had worked in the area of the incident location on several occasions earlier in her shift without any difficulty. Sweeping machines proceeded through the area twice a day and a protocol was in place requiring those working in the warehouse to remove. Regular team meetings and tool box talks were also conducted, reinforcing this message.

The primary judge found Coles was negligent. The primary judge did not find Coles' negligence arose by not providing a more slip-resistant floor (nor did Ready Workforce contend that such a finding should have been made). Instead, the primary judge was of the view that Coles erred by failing to clean the aisle in which Ms Murphy was working more frequently than once every four hours.

Ready Workforce contended that goods that had a propensity to create dust should have been segregated from other goods that did not, and that segregation of higher risk goods to one area in the warehouse would have facilitated more frequent inspection and cleaning of that area.

The Court of Appeal was not convinced, noting there was no evidence that the sealed packages of dry dog food were any more likely to leak and leave the fine layer of kibble dust than any other package which, if it leaked, would create a slip hazard.

The primary judge’s finding that Coles was negligent was set aside.

Whether costs and expenses incurred in defending the principal proceedings were a direct result of negligence

Ready Workforce was found to have breached its duty to Ms Murphy.

By clause 16(e) of the Services Agreement with Coles, Chandler Macleod was liable for any services or other obligations that were performed or discharged by its subcontractors.

It admitted that Ready Workforce was its subcontractor.

Clause 13.1 provided that Chandler Macleod indemnified Coles in respect of any loss or expense incurred by Coles directly in connection with any negligent act or omission of Chandler Macleod’s subcontractor, “except to the extent that the loss was directly attributable to the negligence or wrongful act or omission of Coles”.

Given the finding against Coles was overturned on Appeal, Coles was entitled to costs. As the Court of Appeal noted, “Coles did not seek an order that Chandler Macleod pay its costs on a solicitor and own client basis. It simply sought an order that the respondents pay its costs”.

No submissions were made as to the significance of the requirement under clause 13.1 that the costs or expenses incurred by Coles be incurred “directly in connection with” the negligent act or omission of Chandler Macleod’s subcontractor.

The Court of Appeal concluded “the costs and expenses incurred by Coles in defending the litigation were incurred not as a direct result of Ready Workforce’s negligence (as found) but as a result of Ready Workforce’s bringing a claim for indemnity under s 151Z(1)(d).”

Comment

Failing to establish facts setting out Coles’ alleged inadequate system of cleaning and the propensity (if any) of the goods to create a slippery dust, has cost Ready Workforce. While it did almost achieve this by obtaining its own assessment of Coles’ procedures, the report failed to go as far as comment on the products tendency to create a slip hazard. Expert opinion may not necessarily be required on this issue, however evidence of relevant witnesses may have resulted in a different outcome for the parties.

This decision also serves as a reminder for contracting parties to check the indemnity clause and be specific when seeking a costs order.