Avoiding liability for a subcontractor's employee: practical tips

Insurance eBulletin - 5 October 2016

Summary

In Marinko Gulic v Boral Transport Limited,1 the New South Wales Court of Appeal found a principal not liable to a subcontractor's employee for an alleged breach of duty causing personal injury.

Because the principal had engaged reputable and competent contractors with appropriate qualifications and capabilities, the Court determined that it had delegated its duties of design, manufacture, installation, maintenance and repair of transportation equipment to its contractor. The principal was not only entitled to rely upon the contractor's work, but also its choice of subcontractors.

The decision reaffirms the duties of principals to contractors per the High Court decisions of Leighton Contractors Pty Ltd v Fox & Ors and Calliden Insurance Limited v Fox & Ors2 and Stevens v Brodribb Sawmilling Co Pty Limited.3

In this eBulletin, we review the decision and the implications for principals, head contractors and their insurers. We also discuss prudent steps that can be taken to minimise potential liabilities in the future.

 

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Background

In February 2010, Marinko Gulic sustained injuries to his shoulders, head and spine whilst performing cartage work for Boral Transport Limited. At that time, Mr Gulic was employed by GMG Transport Pty Limited as a truck driver. Mr Gulic was also GMG's sole director and shareholder.

GMG had entered into a Cartage Agreement (Agreement) with Boral to perform haulage services. The Agreement required Boral to supply a body and trailer (Trailer) for installation onto GMG's prime mover. Boral retained full ownership of the Trailer and the Agreement precluded GMG from altering the Trailer and required GMG to perform work in accordance with any written direction, procedure or specifications provided by Boral. In the event of repairs, Boral had the power to direct GMG to cease driving the vehicle in order to carry out repairs.

The Trailer was surrounded by gates aligned on either side, which could be released to provide access to the cargo. While attempting to lock one of these gates it fell, striking Mr Gulic. According to Mr Gulic, the gates were notoriously difficult to lock and, before the accident, in July 2009, he informed Boral's transport fleet manager. He was directed to leave his truck with Prancer Enterprises Pty Limited for repair. Prancer was engaged by Barker Trailers Pty Limited, the gate's designers and installers, to undertake repairs under a warranty provided by Barker to Boral in relation to the gates. The repairs did not resolve the problem.

Barker was a large organisation and the evidence suggested it was well regarded and had a strong reputation in the industry.

 

Findings

The Court of Appeal acknowledged that the duty of care Boral owed to Mr Gulic was delegable and could be discharged to another person who was competent and qualified.

There was no evidence to suggest Barker was not competent to design, manufacture, install and maintain the gates. It was accepted that Boral had delegated its duty to a competent contractor and that it was not liable for the fact that the gates were negligently manufactured.

Similarly, Boral delegated the repair of the gates to Barker, which delegated the work to Prancer. The Court accepted Boral was entitled to rely on both Barker's competence in relation to work performed, and also on Barker's choice of subcontractor.

The Court then looked at whether someone in Boral's position, acting reasonably, would have done something beyond retaining Barker to engage a subcontractor to repair gates on the trucks. Throughout Mr Gulic's interaction with Boral's transport manager, no suggestion was made that there was a safety issue. Absent this, and noting Mr Gulic's many years of experience, Boral was not criticised for concluding the issue with the gate was a matter of inconvenience, not safety.

 

Lessons and practical tips for principals and head contractors

Head contractors and principals can minimise their risk by:

  • conducting regular audits of subcontractors' qualifications, accreditations and procedures to ensure that they meet the principal's and industry standards. These should be performed, where appropriate, by members of the industry who have a detailed knowledge of the subcontractors' area of expertise;
  • maintaining documentation of all due diligence undertaken in anticipation of engaging a contractor, in particular to the extent that it demonstrates the contractor's expertise and standing in the industry;
  • executing contractual arrangements which limit sub-contracting of services and/or which require the contractor to warrant that any sub-contractor engaged by it is reputable and competent; and
  • carefully considering —where a matter concerns safety—whether any further steps can be taken by the principal to minimise that risk.

Authors
Thomas Nguyen, Lawyer
Sybilla Waring-Lambert, Special Counsel & Head of Liability (Sydney)

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Further information


1 [2016] NSWCA 269.
2 (2009) 240 CLR 1.
3 (1986) 160 CLR 16.

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