A recent NSW Supreme Court case confirms that principal contractors do not owe a duty of care to the parties with whom their sub-contractors interact, but it's also a warning that crucial information can be lost as it passes down the chain of sub-contracting, with costly results.

The NSW Supreme Court has dismissed a claim for damages against TransGrid and three subcontractors after asbestos contaminated waste was delivered to a site which was not licensed to process it (Bettergrow Pty Limited v NSW Electricity Networks Operations Pty Ltd as trustee for NSW Electricity Networks Operations Trust t/as TransGrid (No 2) [2018] NSWSC 514).

Disposal of asbestos waste

Bettergrow Pty Limited, a waste management company, received asbestos-contaminated mud from one of the sub-contractors working on the refurbishment of the Beaconsfield electricity substation, which TransGrid owns and operates.

The asbestos-contaminated mud arrived at Bettergrow's facility despite numerous plans and controls being in place to prevent this type of event. The sequence of events in this case indicates how even well-laid plans can go awry:

  • TransGrid had carried out testing and was aware of asbestos contamination at the site.TransGrid disclosed that information and required contractors to prepare specific plans to manage risks at the site, including the risk of encountering asbestos and disposing of any asbestos contaminated waste.
  • Powercor Network Services contracted with TransGrid to refurbish the Beaconsfield site.The contract noted that the soil at the site was classified as contaminated with asbestos, and that all disposal needed to be carried out in accordance with that classification.Powercor prepared an Asbestos Management Plan.
  • Powercor engaged TTR Construction & Excavation Pty Limited (TTR) to carry out some civil works for the refurbishment. Powercor was obliged under its contract to get TransGrid's approval for the appointment of subcontractors, but did not do this in relation to TTR. TTR was given the Asbestos Management Plan and told about the contamination risks.
  • TTR engaged On-Line Pipe & Cable Locating Pty Ltd to carry out "non-destructive digging" work, which involved water blasting of soil and removal of the resulting excavated mud.On-Line gave evidence (which was accepted) that TTR did not mention the asbestos risk.On-Line was not licensed to dispose of asbestos contaminated materials and the Court found that it would not have accepted the job if it had known of the asbestos issue.
  • On-Line took a truckload of mud from the site, unaware that it contained asbestos, to Bettergrow's facility, where it was to be processed.Bettergrow did not see any obvious contaminants and so it received the mud, and only realised with later testing that the mud was contaminated, requiring the whole facility to be closed down for decontamination for seven weeks to clean it, causing a claimed loss of $1.5 million.

Bettergrow brought a claim of negligence against each of TransGrid, Powercor, TTR and On-Line . In order to succeed, a claim of negligence requires that the negligent party owe a duty of care to the injured party, and have breached that duty. Bettergrow argued that TransGrid had a special duty of care – a non-delegable duty – which would have made it liable for the negligence of all the sub-contractors.

The claim for a non-delegable duty of care

A non-delegable duty of care is one that cannot be passed on to someone else. It is a duty on the principal person owing the duty to ensure that reasonable care is taken by others in carrying out a particular task.

Bettergrow argued that TransGrid owed such a duty, and that therefore TransGrid was liable for the damage caused by sub-contractors failing to take reasonable care regarding asbestos contamination.

Generally, a non-delegable duty of care can arise under Australian law where there is a relationship of special dependence or vulnerability on the part of the person to whom the duty is owed. That dependence or vulnerability could arise, for example, from the person owing the duty having information which it is essential for the person being owed the duty to have in order to carry out a particular task. In the UK, a broader category of situations has been held to give rise to a non-delegable duty of care. Bettergrow argued that it fell within this category.

Justice Ball found that Bettergrow was not particularly vulnerable in this situation. It had control over the waste it accepted for processing, and could have carried out testing for contamination, or required contractors delivering the waste to carry out testing. In short, the facts of this case were held to be "far removed" from those in which a non-delegable duty of care would exist.

Justice Ball also noted that, for public policy reasons, placing such a broad non-delegable duty on companies to ensure that sub-contractors take reasonable care in carrying out activities would be unreasonable.

The claim for negligence

Apart from the non-delegable duty argument, Bettergrow also sought damages for negligence on the part of TransGrid, Powercor and On-Line . (It did not claim against TTR because TTR is in liquidation.)

It was held that none of the parties owed Bettergrow a duty of care, because there was no relationship of proximity and the situation did not fall into an existing duty of care category.

Bettergrow also made a claim for contractual damages against On-Line , because Bettergrow had contracts with parties who delivered waste at the facility for processing, including On-Line . However, the words of the contract only referred to checking for "obvious waste", and did not oblige On-Line to check for asbestos or other non-obvious contaminants. A better drafted contract might have saved Bettergrow in this situation.

How can principals, subcontractors and third parties protect themselves?

TransGrid was diligent in disclosing the existence of asbestos contamination of the site and requiring its contractor to put in place appropriate measures to manage any risk associated with it. It required Powercor to prepare management plans, and conducted periodic audits of Powercor's compliance. Even though TransGrid was not held to owe a duty of care to Bettergrow, this compliance checking would have helped to protect it against a negligence claim if a duty of care did exist.

The loss of compliance moving down the chain of sub-contractors is a telling example of how difficult it can be to enforce a procedure through multiple parties. In this case, Powercor omitted to obtain Transrid's approval for the appointment of TTR, even though it should have done so.

As for Bettergrow, the cautionary tale here is that it can be difficult to pin liability on a party where there is a chain of sub-contractors. The prudent course would have been for Bettergrow to have a clause about asbestos waste in its contract with On-Line, so that it could have claimed damages for breach of contract.