Colefax v Prestige Trojan Personnel Pty Ltd [2003] QDC 289

DISTRICT COURT OF QUEENSLAND CITATION: Colefax v Prestige Trojan Personnel Pty Ltd [2003] QDC 289 PARTIES: DION GRAHAM COLEFAX Plaintiff v PRESTIGE TROJAN PERSONNEL PTY LTD Defendant FILE NO/S: D3878 of 2002 DIVISION: PROCEEDING: Interlocutory application ORIGINATING COURT: District Court, Brisbane DELIVERED ON: 21 August 2003 DELIVERED AT: Brisbane HEARING DATE: 5 August 2003 JUDGE: McGill DCJ ORDER: Application dismissed CATCHWORDS: EMPLOYMENT LAW – Rights of employer against third persons – labour hire contract – host employer counter- claiming against employers – whether WorkCover Queensland liable to indemnify – issue hypothetical as no liability to third party possible. Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 – followed. COUNSEL: D O J North SC for WorkCover Queensland K F Holyoak for the defendant SOLICITORS: Mullins & Mullins for WorkCover Queensland Corrs Chambers Westgarth for the defendant [1] This is an unusual application. The action was commenced by a claim and statement of claim by the plaintiff seeking damages for negligence and/or breach of contract of employment and/or breach of statutory duty in respect of an injury which it is alleged he suffered on 30 March 2000 in the course of his employment. The application is by WorkCover Queensland (“WorkCover”), which is not a party to the litigation but has a statutory right1 to conduct the defence of the action on behalf of the named defendant. The application is brought against the named 1 WorkCover Act 1996 (“the Act”) s 306(5). -- 1 of 6 -- 2 defendant, which is a party, but for the purposes of this application is of course not being represented by WorkCover, notwithstanding the statutory provision. [2] In order to understand the application it is necessary to know that the defendant issued a third party notice and statement of claim alleging that the third party was liable to indemnify the defendant in respect of any liability to the plaintiff, or contribute to the defendant’s liability to the plaintiff in respect of any injury. The plaintiff was at the relevant time employed by the defendant, a labour hire company which had hired the defendant’s services to the third party for a period of some months under a contract between them. The defendant alleged that the injury happened in circumstances where the third party would, if sued, have been liable to the plaintiff in tort, and was therefore liable to contribute pursuant to the Law Reform Act 1995. [3] The third party then counter-claimed against the defendant, seeking an indemnity in respect of whatever amount the third party might be held liable to pay the defendant on the third party claim. The defendant asserted that WorkCover was liable to indemnify it in respect of any liability to the third party on the counter-claim, but this proposition was disputed by WorkCover. [4] By this application WorkCover seeks a declaration that it is not liable to indemnify the defendant for the damages the third party claims from the defendant by the counter-claim filed on or about 12 November 2002, and costs of and incidental to the application. The question arose when the application came on for hearing how I could decide such an issue when it had not arisen as an issue in the proceedings between parties, but as I indicated at the time if necessary this difficulty could be overcome by the defendant (if necessary with leave) issuing a third party claim against WorkCover, asserting an entitlement to an indemnity in respect of any liability to the existing third party on the counter-claim, and WorkCover filing a notice of intention to defend and defence denying any such liability, and then applying under r 293 for summary judgment. Had that step been taken, there could have been no dispute about whether the issue I was being asked to decide was really raised in the context of an application in the proceeding commenced by the plaintiff’s claim. However, at the conclusion of the hearing I did not give any directions for those steps to be taken, since I was of the opinion that, even if these difficulties had been overcome, the issue was anyway one which was intractably hypothetical, and therefore not one which I should decide.2 [5] The issue is intractably hypothetical for a different reason, because it raises the question of whether or not there is an entitlement to an indemnity in respect of damages, which can never arise, because there never can be a liability on the part of the defendant to the third party for damages, at least on the current pleadings or anything like them. In order to explain why this is so, it is necessary for me to expound a little more fully the matters raised in the third party statement of claim, and the third party counter-claim. [6] The third party statement of claim alleges that there was an agreement between the defendant and the third party for the supply to the third party of the services of the 2 Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334. -- 2 of 6 -- 3 plaintiff during a particular period, a proposition which is admitted in the defence of the third party. It then alleges that there were various implied terms of that agreement, and that the injury suffered by the plaintiff was caused by the negligence and/or breach of contract3 of the third party. The statement of claim goes on to allege in paragraph 8: “In the premises, if the defendant is adjudged to be liable to pay to the plaintiff any amount by way of damages or costs, the defendant is entitled to be indemnified by the third party, or alternatively, is entitled to contribution by the third party to the extent determined appropriate by the court, having regard to the degree of its responsibility for the plaintiff’s injuries. The defendant claims relief by way of indemnity or contribution against the plaintiff’s claims and costs.” [7] It is apparent from the defendant’s pleading therefore that it is alleging that the third party was negligent and the plaintiff’s injury was caused by the negligence of the third party, so that, if the defendant is also liable in negligence to the plaintiff, the defendant is entitled to contribution from the third party pursuant to the Law Reform Act “as may be found by the court to be just and equitable having regard to the extent of that person’s responsibility for damage”: s 7. As well, the defendant is claiming that the third party breached the contract between them and that as a result of that breach the defendant has suffered damage in the amount of its liability to the plaintiff, and is entitled to recover damages for breach of contract from the third party in the amount that liability to the plaintiff.4 [8] The third party by way of counter-claim alleges, first, that there were certain terms implied into the admitted contract between the defendant and the third party, and that the defendant had breached those implied terms, if, which was not admitted, the plaintiff suffered an injury in the incident pleaded in paragraph 5 of the plaintiff’s statement of claim. In those circumstances, if there was a liability on the part of the third party to the plaintiff, whether by way of contribution or indemnity to the defendant or otherwise, the third party would suffer loss and damage as a result of the defendant’s breach of contract “in a sum equal to the amount that the third party is liable to pay to the plaintiff and/or the defendant for the claim and costs.” (para 7). [9] In the alternative, it is alleged that there was a duty of care owed by the defendant to the third party which, in the event that the third party is liable to the plaintiff in this action (including liability to indemnify the defendant or contribute to the defendant for the plaintiff’s damages and costs), such liability was caused or contributed to by breach of that duty of care by the defendant. It is further alleged that in those circumstances the third party would suffer loss and damage as a result of the defendant’s negligence in a sum equal to the amount which the third party is liable to pay to the plaintiff and/or to the defendant for the claim and costs. The third party accordingly claims “damages for breach of contract and for negligence in a 3 Presumably the contract the breach of which is alleged was the contract between the defendant and the third party. 4 This pleading assumes (or perhaps hopes) that such a claim survives s 253(1) of the Act. I do not know whether there is any authority on that point. -- 3 of 6 -- 4 sum equal to any amount the third party is liable to pay to the plaintiff and/or the defendant in this proceeding for the claim and costs of the plaintiff or such amount found by the court to be just and equitable.” The third party also claimed all necessary consequential and other orders, and costs. [10] It must be said at once that the concluding words of the claim for relief in the counter-claim of the third party appear to be directed to a claim for contribution under the Law Reform Act, and are not appropriate since the third party is not (at least at the moment) sued by the plaintiff in respect of the injury alleged to have been suffered by him, and therefore has no entitlement to claim contribution under s 6(c) of the Law Reform Act. If both the defendant and the third party had been sued in tort by the plaintiff, each could have claimed contribution against the other, because (assuming both were liable to the plaintiff in respect of the same damage) judgment would be given for the plaintiff for the full amount against both defendants, and each would be entitled to contribution from the other, with the amounts recoverable by way of contribution balancing out so that, whether the plaintiff executed against one defendant or the other, they would share the liability in the same way. But in this action the plaintiff can only recover against the defendant, and under the Law Reform Act the defendant would recover from the third party only the third party’s contribution as determined under s 7. There could be no question of the third party’s recovering from the defendant any share of that amount under the Law Reform Act.5 [11] It follows therefore that the damages claimed by the third party against the defendant are limited to the amount which the third party is liable to pay to the plaintiff and/or the defendant in the proceedings for the claim and costs of the plaintiff. Liability to the plaintiff could arise in two ways: at the suit of the plaintiff (which at the moment is not being pursued by the plaintiff directly against the third party) or if the third party was ordered, pursuant to a liability to indemnify the defendant in respect of the defendant’s liability to the plaintiff, to discharge that liability by direct payment to the plaintiff. For the moment I will leave aside this situation, and consider the other situation contemplated by the relief claimed, that the third party will be liable to the defendant. On the basis of the defendant’s claim that could arise in one of only two ways: under the Law Reform Act, or as damages for breach of contract. In either case, the amount sought to be recovered by the third party from the defendant is limited to the amount of the third party’s liability to the defendant. [12] If the defendant’s claim against the third party succeeds, and the third party’s claim against the defendant on the counter-claim also succeeds, the liabilities would be the same and would be recoverable each way. Accordingly they would cancel out, either because the two money judgments would be set off against each other so as to extinguish each other under r 184, or because the court would dismiss the defendant’s claim against the third party for relief against the third party on the basis that it was futile, because the third party was entitled to be reimbursed in 5 The position would be different if the plaintiff joined the third party as a defendant. It appeared to follow from the argument advanced by senior counsel for WorkCover, however, that in such circumstances it was accepted that WorkCover would be liable to indemnify the defendant in respect of any amount payable to the present third party in a claim for contribution under the Law Reform Act, based on the liability in tort of the defendant to the plaintiff and the defendant’s responsibility for the damage suffered by the plaintiff. -- 4 of 6 -- 5 respect of any amount of such relief. The counter-claim in such circumstances can be seen as being genuinely defensive in nature, and there could not be a balance in favour of the third party against the defendant. That is because the most that is sought to be recovered is the amount ultimately found to be the amount of the third party’s liability to the defendant. In neither of those situations will there be any net or real liability of the defendant to the third party, which could be the subject of any claim for indemnity against WorkCover (or anyone else). [13] Turning then to the situation where the defendant seeks as against the third party relief in the form of payment direct to the plaintiff, a court would only order the third party to pay the plaintiff directly if the contract between the defendant and the third party, on its true construction, provided an obligation to relieve the defendant by preventing it having to pay the debt: McIntosh v Dalwood (No 4) (1930) 30 SR (NSW) 415 at 418; and see Spry “Equitable Remedies” (6th edition 2001) p.71. Such a situation could not arise if the third party’s claim, that the defendant was itself in breach of the same contract, were made out; in such circumstances equitable relief would not be given. The same would apply if it was the defendant’s own breach of duty to the third party which the defendant was relying on as giving rise to the third party’s entitlement to an indemnity. Equitable relief would not be given in circumstances where the foundation of the liability was the defendant’s own wrong. Accordingly it is unnecessary to consider whether a set-off could be avoided in these circumstances by the defendant seeking relief directly in favour of the plaintiff. Such relief would not be given in circumstances where relief on the third party’s counter-claim would be appropriate. [14] It follows that this is not really a counter-claim in the ordinary sense, that is a claim which is maintained over and above, and independently of, any defence which the counter-claiming party might otherwise have. It is in truth an allegation that the defendant’s claim against the third party cannot succeed because there is a balancing claim which the third party has against the defendant, which in effect would extinguish it. There cannot be in this situation an outcome which produces a net liability by the defendant to the third party, or even a liability of the defendant to the third party independent of the liability of the third party to the defendant. [15] If the third party could succeed against the defendant, it would follow that the defendant’s claim against the third party must fail. Were it otherwise, the money judgment on the defendant’s claim against the third party would simply be reduced by the money judgment on the third party’s claim against the defendant, so as to extinguish it (or perhaps leave a balance in favour of the defendant). On the current pleadings there could not be a balance in favour of the plaintiff. [16] Of course, if the defendant’s claim against the third party fails, the third party’s counter-claim becomes irrelevant, and if the third party’s counter-claim fails (because there was no such implied term in the contract, or no such duty, or no breach of one or the other) no question can arise as to any indemnity in respect of any liability of the defendant to the third party. [17] It follows therefore that any decision as to the existence or otherwise of any right in the defendant to indemnity in respect of any liability of the defendant to the third party is necessarily hypothetical, because there cannot be any liability of the -- 5 of 6 -- 6 defendant to the third party in this action on these pleadings, or on any “tidied up” version of these pleadings. In these circumstances it seems to me the question I am being asked to answer is one I should not answer. The same applies to the question of whether WorkCover is entitled to defend the counter-claim on behalf of the defendant (or indeed the question of whether it was entitled to bring the third party proceeding on behalf of the defendant). As to the latter question, in my opinion, if it is to be challenged, it should be challenged by the third party, but that party has deliberately decided to take no part in this application. In my opinion the defendant has no interest in that issue. Either WorkCover was entitled to initiate the third party claim or, if it was not, it in fact initiated it so it is the only party liable to the third party in respect of any costs incurred by the third party in defending it. [18] If it be the case, as senior counsel for WorkCover submitted, that WorkCover, although entitled to bring the third party proceeding, has no statutory right or power to defend the third party’s counter-claim, that in my opinion is a problem for no one except WorkCover. If no one defends the third party’s counter-claim and the third party obtains judgment for the relief sought in it by default, all that will mean is that the third party proceedings will have become futile. [19] In these circumstances I consider there is no point in going through the procedural steps foreshadowed earlier which would have meant that the issue could at least be the subject of an application in these proceedings between the two parties who in fact argued it before me. The issue would still be one I should not answer. It follows that it is not appropriate for me to say anything about the interesting questions as to the construction of certain provisions of the WorkCover Queensland Act which were the subject of some detailed debate before me, and in the outlines of argument.6 [20] It seems to me that, whatever happens, the defendant itself is not exposed to any liability in these circumstances, and therefore it can safely ignore these proceedings. There is certainly no reason why I should grant the relief sought in the application. However as I foreshadowed on the hearing of the application, I will invite further submissions from the parties before deciding the question of costs. 6 It does seem to me however that the defendant faces a difficult task in showing that the third party’s claim is one for “damages for injury sustained by a worker” for the purposes of s 11(1) of the Act, but not for the purposes of s 253 of the Act. -- 6 of 6 --