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

The Facts

The plaintiff, Tricia Pahi, sustained a repetitive strain injury to her left wrist whilst engaged in the work of repackaging ice cream products for Unilever Australia Limited t/as Streets Ice Cream (Streets). The plaintiff was employed as a process worker by ESP Techforce Pty Limited (ESP), a labour hire company.

Streets stored its ice cream and ice cream confectionary products at a cold storage facility operated by Swire Cold Storage Pty Limited (Swire). Swire's cold storage facility was adjacent to Streets' manufacturing premises where it warehoused and dispatched Streets' ice cream products.

Swire entered into an arrangement with Streets to repackage some of Streets' products into smaller boxes so that they would be suitable for sale in supermarkets. Swire engaged ESP to provide process staff, including the plaintiff, to undertake this task. ESP invoiced its labour charges to Swire. In turn Swire separately invoiced Streets for the amount invoiced to ESP plus 15%.

Ms Clemenek, an employee of Streets, would send a "purchase order" to ESP's project manager, Ms Pennington-Collins, who acted as a fulltime onsite supervisor of the work performed pursuant to ESP's contract with Swire. The purchase order specified the type and quantity of ice cream products that were to be repackaged. A copy of the purchase order was also forwarded by Ms Clemenek to a representative of Swire.

Swire allocated a portion of a cool room within its cold storage facility to ESP employees to carry out the repackaging.

The plaintiff was employed by ESP from 2003 to August 2007, when she resigned due to increasing pain in her left wrist. Between December 2003 to January 2004 and June 2005 to March 2006 the plaintiff repackaged ice creams at Swire's cold storage facility pursuant to the contract between ESP and Swire.

The plaintiff 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 directing her work for ESP. She did not commence proceedings against her former employer, ESP, as she did not satisfy the necessary statutory threshold.

The trial judge, Curtis DCJ, found that both Streets and Swire owed the plaintiff a duty which required them to “take such measures as were within [their] power to obviate the dangers posed to the ESP workers in an activity which had been commissioned” by them.

His Honour found that Streets owed the plaintiff a duty of care because it knew, or ought to have known, that the ESP workers were at risk of injury and that ESP had taken no steps to alleviate that risk. In this regard Streets were aware that too few persons were employed to perform the task of repackaging the products and were under constant exhortation to work more quickly. The rate and volume of work was not only known to Streets but effectively dictated by it through its employee, Ms Clemenek. Moreover, his Honour found that as an ice cream manufacturer, Streets, should have appreciated the particular dangers of performing repetitive movements in conditions of extreme cold. His Honour also held that Streets was capable of controlling the work performed by ESP workers by contractually stipulating safe work methods to Swire.

In grounding a duty of care on the part of Swire, his Honour held that Swire had ample opportunity to observe ESP's system of work and knew the number of persons employed to undertake the work. Moreover, Swire directly controlled the number of employees engaged by ESP. His Honour further held that as the operators of a cold storage facility, Swire should have had access to specialised knowledge of the particular dangers of performing repetitive movements in conditions of extreme cold.

The trial judge relied on authorities such as Rockdale Beef Pty Limited v. Carey [2003] NSWCA 132, and Sydney Water Corporation v. Abramovic [2007] NSWCA 248 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.

Streets and Swire both appealed against the trial judge's findings in respect of liability. In the alternative they contended that if there was any liability to the plaintiff, at least 75% of that liability rested with the plaintiff's employer, ESP. Swire further challenged the apportionment of liability between itself and Streets.

The Findings

The Court of Appeal held that the contents of the duties found to be owed by Streets and Swire were outside of that which is imposed by the law of negligence. In this regard the Court of Appeal held that the duty owed is one to take reasonable care and not one which requires a person to use measures within their power to obviate dangers in question.

The Court of Appeal noted that although separate consideration was given by the trial judge to the factors that gave rise to a duty of care on the part of Streets and Swire respectively, the principles that the trial judge used to determine the question of duty were the same in each case. The Court of Appeal warned that “the law has been careful in distinguishing the duty of care that is owed in particular relationships”.

The Court of Appeal held that Swire was a principal in respect of ESP, which was an independent contractor of services to Swire. As the plaintiff was an employee of ESP the duty which was owed by Swire to ESP was that which was described by Brennan J in Stevens v. Brodribb Sawmilling Company Pty Limited [1986] HCA 1, recently affirmed by the High Court in Leighton Contractors Pty Limited v. Fox [2009] HCA 35, and was not one which required Swire to provide a safe system of work to ESP or its employees.

The Court of Appeal noted that 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. Swire gave no instructions either to Ms Pennington-Collins or ESP employees as to how the repackaging work was to be carried out. Swire submitted that there was no allegation that it failed to engage a competent contractor and the Court of Appeal noted that the case did not involve any allegation that the static conditions of Swire's premises were unsafe. Accordingly the Court of Appeal found that Swire, as principal, did not owe the plaintiff, an independent contractor, a duty of care in the circumstances.

Insofar as any duty was owed by Streets, the Court of Appeal noted that Streets was not the principal in the contractual arrangements whereby ESP provided personnel to carry out the repackaging work. There was nothing negligent in Streets specifying the quantity of goods to be repackaged. It engaged Swire to undertake this work. Swire in turn engaged ESP to perform that work. The Court of Appeal held that how ESP managed the workload was entirely a matter for it and in accordance with the principles stated in Stevens v. Brodribb Sawmilling Pty Limited, there was no duty on Streets to control the system of work implemented by ESP.

Accordingly, the Court of Appeal found that the trial judge erred in finding that Streets and Swire each owed and breached a duty of care to the plaintiff and a verdict was entered for both defendants.

Conclusion

In Leighton Contractors Pty Limited v. Fox the High Court noted that the construction industry is an industry where it is very common for a principal to engage subcontractors, rather than its own employees, to carry out the performance of work. However, engagements of this kind are not limited to the construction industry. Whether an independent contractor is retained on a construction site or to repackage ice cream products, a principal does not owe a duty to ensure safe work practices and to take reasonable steps to ensure that those working on the site are properly trained once an activity has been organised and its operation is in the hands of independent contractors.

The High Court decision in Stevens v. Brodribb Sawmilling Pty Limited remains the leading authority in respect of this issue. As the High Court noted in Leighton Contractors Pty Limited v. Fox the circumstances where a principal contractor owes a duty of care is governed by the principle stated by Mason J in Stevens v. Brodribb Sawmilling Company Pty Limited that:

“... If an entrepreneur engages independent contractors to do work that might as readily be done by employees, in circumstances in which there is a risk to them of injury arising from the nature of the work and where there is a need for him to give directions as to when and where the work is to be done and to coordinate the various activities, the entrepreneur will come under a duty to prescribe a safe system of work...”

Brennan J elaborated on the content of the duty by stating that:

“...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 duty of care imposed by the common law is one to take reasonable care and nothing more. As Fitzgerald JA held in Rasic v. Cruz [2000] NSWCA 66:

“An infinite variety of circumstances produce a foreseeable risk of injury which could often be eliminated or reduced. The current tendency to consider only individual circumstances which produce injury and the means by which those circumstances could have been changed and the injury avoided is redefining the foundation of the law of negligence by impermissibly expanding the content of the duty of care from a duty to take reasonable care to a duty to avoid any risk by all reasonably affordable means.”