The liability of principals, contractors and subcontractors to third parties is an important issue for Australian insurers and Australian businesses more generally. Two recent New South Wales decisions provide some welcome consistency and greater certainty into how contractors disputes will be dealt with by Australian courts.

In Leighton Contractors Pty Ltd v Fox [2009] HCA 35, the High Court held that a contractor is not liable for the negligent actions (or inaction) of a competent independent subcontractor. A critical premise of this legal position is the engagement of a subcontractor is competent to do the job and control the relevant system of work without supervision.

Two recent decisions from New South Wales demonstrate how a subcontractor’s competency (or lack thereof) can substantially affect the duty owed by a contractor to third parties.

In Waco Kwikform Ltd v Perigo [2014] NSWCA 140, Mr Perigo was seriously injured when he fell while dismantling scaffolding on 16 May 2006. Mr Perigo’s employer, Bradley Tracey Scaffolding Services Pty Limited (BTSS), was contracted by Waco Kwikform (Waco) to supply labour services to erect and dismantle scaffolding supplied by Waco.

There had been two prior similar incidents involving BTSS workers where Waco was the contractor. On 5 May 2006, Waco decided to no longer engage BTSS for scaffolding services but was required to carry out the contracts already in existence. For these remaining contracts, Waco assumed responsibility for devising and supervising the system of work to be followed by BTSS.

At the Perigo trial, it was held that prior to 5 May 2006, Waco’s duty of care was to supply safe equipment and to devise safe methods of work using the equipment supplied. It was not under a duty to retain control of nor supervise BTSS’s system of work. The position was different after 5 May 2014 because Waco had in fact assumed control and supervision of BTSS’s system of work. For this reason, it was found to have owed a duty of care to BTSS workers, including Mr Perigo. This finding was upheld on appeal.

In McGlashan v QBE Insurance (Australia) Ltd (No 2) [2014] NSWSC 486, Mr McGlashan was a roofing carpenter trading as B & J Roofing. Lidoran Roofing Pty Ltd (Lidoran) engaged B & J Roofing for roofing labour services. The legal relationship between Lidoran and B & J Roofing was determined to be that of contractor and subcontractor. 

On 7 September 2006, Mr McGlashan was injured when a gust of wind blew over a ladder he was descending from a roof while fixing leaks. This should have been a two-man job but Mr McGlashan was working alone. Mr McGlashan argued that Lidoran did not provide another worker to assist him when it should have and he was “vulnerable” in the sense that he was unable to protect himself from the consequences of Lidoran’s decision.

The court found that Mr McGlashan was experienced in the roofing industry and was prepared to do the work on his own. Lidoran was entitled to leave it to the judgment of Mr McGlashan as to whether a particular job could be undertaken safely by him. There was no vulnerability on the part of Mr McGlashan in the sense that he was unable to protect himself from Lidoran’s decision not to provide a second man to assist him with the job. Lidoran was therefore found not to have owed a duty of care to Mr McGlashan which extended to the provision of a safe system of work.

These two cases make clear that the principles set out by the High Court in Leighton Contractors Pty Ltd v Fox are firmly established. The existence or absence of a contractor’s duty of care to its subcontractor is a matter of law however, each case will be determined by the facts and circumstances surrounding the methods of work used by the parties.