Insurance, Workplace Insurance

Indemnity, liability and quantum: the personal injury trifecta examined in the context of labour-hire arrangements

16 March, 2020

To what extent is a labour-hire employer negligent when its employee is injured on the premises of a ‘host’? Can a liability insurer rely on an employment-related exclusion clause in the policy to deny the occupier indemnity? What is required to overturn a finding on appeal? The Court of Appeal has examined these issues in the following case.

Author: Chad Farah
Judgement Date: 10 March 2020
Citation: Marketform Managing Agency Ltd for and on behalf of the Underwriting Members of Syndicate 2468 for the 2009 Year of Account v Ashcroft Supa IGA Orange Pty Ltd
Jurisdiction: NSW Court of Appeal1


  • Where there are unchallenged factual findings, an appeal concerning the primary judge’s interpretation of those findings will not be successful unless it can be shown that the interpretation was ‘plainly wrong’.
  • Labour-hire employers are not automatically liable in negligence for injuries sustained by their employees at the premises of a host employer. Yes, those employers owe a non-delegable duty of care to their employees. However, whether a breach of that duty (if any) was the cause of the injuries, and the extent of any apportionment of liability under Section 151Z, will very much depend on the facts of each case.
  • Whether a liability insurer can rely on an exclusion clause under a policy of insurance to deny indemnity to an insured will also depend on the facts of each case. In particular, it will depend on the Court’s interpretation of the wording used and how it applies to the given factual matrix. The insurer bears the onus of proving why the exclusion clause should be given effect.


Mr Paul (the worker) was employed by Skillset Ltd (the employer), a labour-hire company. He was a 20 year-old apprentice butcher dispatched by the employer to complete his apprenticeship at the premises of Supa IGA Orange Ltd (the host employer). It was not in dispute that the host employer gave day-to-day directions to the worker.

On 10 October 2012, during the course of his employment at the host employer’s premises, the worker suffered injury to his back when he slipped on a piece of sausage mince and fell against a wall. The sausage mince spillage had not been detected by the host employer and was estimated to have been on the meat room floor, concealed under a trolley, for up to two hours.

The worker sued the host employer for damages arising from negligence under the Civil Liability Act. He did not sue his employer.

The host employer sought indemnity under a policy of insurance (the Policy) held with Marketform Managing Agency Ltd (the insurer). The insurer denied indemnity on the basis that Clause 16.5 of the Policy wording excluded:

‘Liability for injury to any person under a contract of employment, service or apprenticeship with or for the provision of labour only services to the Insured where such injury arises out of the execution of such contract.’

The host employer cross-claimed against the insurer for indemnity pursuant to the Policy.

The primary judge held that:

  1. the host employer owed the worker a duty of care (which was not in dispute);
  2. the host employer breached its duty of care to the worker and that breach was causative of the worker’s injuries;
  3. contributory negligence amounted to 10%, resulting in a proportionate reduction of the damages;
  4. section 151Z(2) of the Worker Compensation Act attracted a further 10% reduction of the damages on account of the employer’s liability in negligence, noting it was not sued;
  5. overall, the worker was entitled to $578,689.11 in damages against the host employer; and
  6. the insurer was not entitled to rely on the exclusion clause in the Policy to deny indemnity to the host employer.

On appeal, the insurer challenged the findings referred to in paragraphs (c), (d) and (f) above. In addition to relying on the exclusion clause, and in the alternative, it sought findings of 30% for contributory negligence and 20% for the employer’s negligence. This was no doubt done in an attempt to reduce its exposure in the event that it was found to be bound by the Policy.

The worker cross-appealed, seeking to challenge the primary judge’s calculation of the damages. He argued that the figure ought to have been $613,864.21. The insurer was in agreement that the primary judge erred in calculating the damages but came to a slightly different figure by about $1,000.

Court of Appeal

In a unanimous judgement delivered by Payne JA, the Court of Appeal dismissed the insurer’s appeal and allowed the worker’s cross-appeal.

It was held there was no reason to disturb the primary judge’s finding as to contributory negligence or the extent of the negligence by the employer.

In relation to contributory negligence, his Honour Payne JA said at paragraph 80:

‘In truth, this was a case where the only issue was whether this Court considered the apportionment to be plainly wrong. My conclusion is that on the unchallenged findings of fact…the 10% allowance for contributory negligence was well open to the primary judge and may even have been generous to the first respondent and the appellant.’

The Court of Appeal also rejected the insurer’s submissions in relation to the extent of the employer’s negligence. In doing so, the Court noted there was no evidence that the employer’s field officer ever detected a hazard of this nature during a prior visit to the host employer’s premises. Nor was there a failure to inspect the premises or to properly train the worker, on the part of the employer, that was causative of the accident. The accident was instead caused by a casual act of negligence on the part of the host employer. In preserving the primary judge’s findings, Payne JA said at paragraph 91 of the judgement:

‘The primary judge, however, determined that the relevant contribution from Skillset that Mr Paul would have been entitled to was 10% having regard to the non-delegable character of the employer’s duty to Mr Paul. This was because his Honour was persuaded that an employer’s non-delegable duty is one of a special and more stringent kind. That finding, on the evidence in this case, was favourable to the appellant and the first respondent.’

In relation to the question of indemnity, the insurer accepted that that Policy would have responded to the claim but for the exclusion clause. The Court re-iterated that the onus was on the insurer to show why the clause should be given effect. Taking a different approach to the primary judge, the Court then held that ‘the correct construction of Clause 16.5 was that the Policy did not cover:

(a) liability for injury to any person under a contract of employment, service or apprenticeship with the insured; or

(b) liability for injury to any person under a contract for the provision of labour only services to the insured

where the injury arises in the course of giving effect to the relevant contract.’

Payne JA held that the insurer’s liability that is excluded by Clause 16.5 is for an injury to a person who is under either of the two relevant types of contract with the insured. When used here, his Honour found ‘under a contract’ means ‘pursuant to’ a contract and that the injury arose out of the ‘execution of such a contract’ in the sense of the carrying out of the terms of the contract. As such, the first limb of the exclusion applied so that the Policy did not respond.

The remaining question for the Court was to determine whether the contract between the employer and the host employer was for the provision of ‘labour only services’. Of note is that the expression was not defined in the Policy.

When the contractual relationship between the employer and the host employer was examined by the Court of Appeal, it transpired that the services provided by the employer, in addition to labour, included recruitment, vocational training, payroll and administration services and other types of support.

The Court ultimately found that the second limb of the exclusion did not apply. Payne JA explained the Court’s reasoning in paragraph 69 of the judgement:

‘The phrase the parties have chosen to use is ‚Äúlabour only services‚Äù. The language used captures a narrower class of contractual arrangements than all ‚Äúlabour hire‚Äù arrangements. Whatever the limits of the expression labour only services, the contract between Skillset and the first respondent was not a contract for the supply of ‚Äúlabour only‚Äù services because a number of other important services were supplied under the contract.’

Lastly, the insurer had accepted the worker’s calculation of the damages during oral submissions. It was a decision that the Court deemed sensible in light of the insignificant difference. With the primary appeal having failed, the cross-appeal was allowed on the basis of the agreed figure ($613,864.24).

Why this case is important

The employer’s liability in these cases is far from certain and will depend on the facts of each case. It should not be assumed that the employer’s non-delegable duty of care will sound in an apportionment of liability between it and the occupier. That said, plaintiffs that do not (or are unable to) join the employer to such proceedings run the risk that their award of damages will be discounted on account of the absent employer’s negligence. This risk must be finely balanced against the risk of a finding that the employer did not breach its duty of care, at all, which would attract an adverse costs order offsetting any damages awarded to the plaintiff against the occupier.

Similarly, whether indemnity will extend to an insured will also depend on the facts of each case. Caution must be exercised when drafting (and interpreting) exclusion clauses under a policy of insurance. It is suggested that the use of any expression containing a combination of words should be defined under the Policy, if possible. This will serve to remove any ambiguities and to assist the parties in determining whether the circumstances of the loss enliven the exclusion, before significant legal costs are incurred.

1 Ward CJ, Leeming JA and Payne JA.

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