INSIGHTS: The duty of care requirement – not to be taken for granted

July 18, 2018

Author

Lachlan Heather
Special Counsel

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[i]

The recent New South Wales Supreme Court decision (Ball J) in Bettergrow v TransGrid (No 2) provides useful guidance on how the established elements of negligence should be applied in building cases where principals have engaged specialist contractors.  In particular the judgment discusses the requirements for establishing both non-delegable and ordinary duties of care,  the meaning of “physical damage to property” when assessing ordinary duty of care, and the importance of proper and precise pleadings.

Overview

The Plaintiff, Bettergrow, commenced proceedings in the Supreme Court of NSW for damages against four defendants who were involved, to varying degrees, in works concerning the refurbishment of an electricity substation.

During the process of excavation work, soil contaminated with friable asbestos was delivered to a waste recycling facility owned and operated by Bettergrow. The facility was not licensed to accept asbestos contaminated waste, and as a result had to be closed for a period of 7 weeks while the waste was removed and the facility decontaminated.

Bettergrow advanced claims in negligence against each defendant,  pleading it was owed a common law duty of care. Bettergrow additionally claimed that: (1) TransGrid owed it a non-delegable duty of care; and (2) the company which delivered the contaminated mud, On-Line, was in breach of contract.

Ball J ultimately found against Bettergrow on all counts, and found that its attempt to enlarge well settled categories of duty of care, by imposing a general ‘duty to supervise’, was impractical  and inconsistent with established authorities.

Facts

The First Defendant, TransGrid, had sought tenders for a principal contractor in relation to second stage refurbishment works at its substation located in Beaconsfield, NSW.  TransGrid awarded the tender to the Second Defendant, Powercor.

In compliance with various statutes and regulations, and its own company policy, TransGrid required a number of management plans to be prepared by Powercor, including a Construction Environmental Management Plan (CEMP), Asbestos Management Plan (AMP), and Safe Work Method Statements (SWMS).  TransGrid also provided a number of documents to prospective and successful contractors in which the presence of asbestos located in soil at the site had been identified

Powercor prepared a CEMP and an AMP.  Those documents confirmed the presence of asbestos in the soil and classified all of the soil at the site as containing asbestos.  Copies of these documents were given to all subcontractors engaged on the site.

Powercor subcontracted civil works to the Third Defendant, TTR. TTR then outsourced non-destructive drilling works to the Fourth Defendant, On-Line.  The works carried out by On-Line were primarily to locate services under the ground, and involved  the removal and disposal of drill soil/mud.

Prior to commencing work, employees of TTR and On-Line completed Powercor’s online safety induction course and an in-person site induction. As part of On-Line’s induction, workers signed documents which included reference to the works involving, or likely to involve, the “disturbance or removal of asbestos”.[ii]

On-Line carried out drilling works on 30 and 31 March 2016.  It disposed of the waste at the end of each day at Bettergrow’s facility. On-Line had an existing commercial relationship with Bettergrow and had previously been provided with Bettergrow’s terms of disposal, which included a disclaimer that “drill mud must be free of contaminants such as plastics, metals and other obvious rubbish” and that Bettergrow reserved the right to “refuse delivery of drill mud when there is cause to doubt the content of the load”. Further, it was a condition of using Bettergrow’s facility that if any deliveries contained obvious contamination, Bettergrow had to the right to “request the load be removed from the facility at the cost of the waste generator”.[iii]

Powercor first became aware that potentially contaminated drill mud had been disposed of at an unlicensed facility (i.e. Bettergrow’s) when it received Bettergrow’s waste disposal dockets on 1 April 2016.  Immediate steps were taken to contact and confirm this with TTR, On-line, and Bettergrow.  As it turned out, the drill mud delivered by On-Line to Bettergrow was in fact contaminated with friable asbestos.

On 4 April 2016, Bettergrow closed its facility and commenced decontamination works following positive test results for asbestos.  The facility was shut down for 7 weeks.

Bettergrow’s damages were agreed during the trial at $1.5 million.

Decision

Ball J dismissed Bettergrow’s proceedings against all of the defendants, with costs.

Non Delegable duty of care

Ball J found that TransGrid did not owe Bettergrow a non-delegable duty of care on the basis advanced by it, being a broad ‘catch-all’ duty imposing responsibility for any failure on the part of On-Line (and all contractors in the chain of works) to take reasonable care in delivering the waste to Bettergrow’s facility.

Bettergrow had submitted that a non-delegable duty of care was owed by TransGrid on the basis that the removal and disposal of asbestos was an “inherently hazardous” activity to which it was particularly vulnerable.[iv]  In attempting to reconcile this position with accepted judicial precedent, Ball J referred to the High Court decision in Burnie Port Authority v General Jones Pty Ltd[v] in which it was determined that for a non-delegable duty to arise there must be some “element in the relationship between the parties which generates [the] special responsibility or duty to see that care is taken”. The central element of such a relationship is control, and in these instances the relationship becomes one of “special dependence or vulnerability” on the part of whom the duty is owed.[vi]

In finding that TransGrid did not owe a non-delegable duty of care, Ball J identified three main issues:

  1. The removal of drill mud from the substation was not a particularly hazardous activity to which Bettergrow was vulnerable.[vii] The question must relate to whether the actual activities undertaken were hazardous. The fact that asbestos is a hazardous material was not a relevant factor in the circumstances of this particular case;
  2. Bettergrow, as a specialist waste disposal facility, was capable of controlling the waste it accepted or rejected,[viii] and was not particularly vulnerable to waste contaminated with asbestos. As such no special relationship of vulnerability arose; and
  3. It is impractical and impossible to impose upon a principal contractor a duty to prevent specific acts by a subcontractor, especially in circumstances where the subcontractor is likely to have specialised skills to undertake the relevant task at hand.[ix]

Ordinary duty of care

Ball J found against Bettergrow in its claim against all defendants, largely because it: (1) failed to adequately frame the nature of the alleged duty said to be owed; (2) failed to establish damages in relation to the alleged physical injury to property; and (3) was unable to establish the requisite “relationship of proximity” required to succeed on a submission that the facts established a novel case giving rise to a duty of care.

The claims against each active defendant can be summarised as follows:

  1. Each defendant owed Bettergrow a duty “to exercise reasonable care to avoid causing Bettergrow harm by illegal dumping of waste at Bettergrow’s facility[x] [‘the general duty to supervise]; and
  2. Each defendant breached its duty of care by failing to take reasonable care to: (a) ensure that the waste was disposed of at a licensed facility; and (b) ensure the contractors engaged were appropriately licensed.[xi]

Ball J found that the duty and the alleged acts of negligence were expressed with a level of generality that deprived them of any real content,[xii] thereby causing Bettergrow “insuperable problems[xiii] in articulating the nature of the duty and to whom it was said to be owed.[xiv]

Definition of physical damage to property

In arguing that all of the defendants owed it a duty of care, Bettergrow contended that it suffered physical damage to its property.  Firstly, it said the mud in its facility was damaged due to contamination, and, secondly, the facility itself was damaged because it could not be used for a period of time.[xv] While Ball J was minded to accept that the first type of damage was properly classified, Bettergrow’s damages claim only contemplated the cost of decontaminating the facility, and the loss of trade whilst the facility was closed. His Honour found that the mere fact that the facility was closed did not mean that it was damaged[xvi], as a disruption to functional utility is different from physical damage.[xvii]

Relationship of proximity

Bettergrow then attempted to rely on the decision of Sydney Water v Asset Geotechnical Engineering [2013][xviii] to assert that in cases of physical injury to property, the imposition of a duty of care has been held to be appropriate in certain recognised categories where the harm was reasonably foreseeable and a relationship of proximity exists between the act and the damage[xvi] (the ‘novel case argument’).  This argument failed for much the same reason as Bettergrow’s other submissions, that is, it failed to distinguish between the positions of the various defendants or identify the precise aspects of the relationships that were said to give rise to a duty of care.[xvii] Because of the generality of its submissions as to duty, Bettergrow conceded that the duty it said was owed applied to all facilities that were not licensed to receive waste containing asbestos,[xix] thereby enlarging the class rather than specifying the reasons why they were claiming to have a special dependence or vulnerability to the harm.  This proved fatal to Bettergrow’s case.

Ball J was also of the view that finding that TransGrid owed an ordinary duty of care to Bettergrow would produce anomalous results.  In saying this, he relied upon the decision of the High Court in Leighton Contractors v Fox[xx]  which reaffirmed that principals do not owe a duty of care to independent contractors with specialised knowledge and skill other than, in some limited situations, a duty to ensure a safe system of work.   Ball J concluded that if the principal in Leighton did not owe a duty to those working on the site to provide adequate training and to prevent the risk of injury, there was no basis for him to find that TransGrid owed a duty to supervise contractors and subcontractors to prevent the risk of physical damage or economic loss to Bettergrow.

Breach and causation

Ball J considered that Bettergrow’s terms of disposal gave it sufficient opportunity to protect itself against the wrongful and illegal dumping of asbestos contaminated waste.  In other words, Bettergrow had the power to determine  for itself what waste it accepted and rejected, and was at no time relying on TransGrid, Powercor, TTR or On-Line. For this reason, Bettergrow was not in a particular position of vulnerability, and at no time did any of the contractors in the chain of works assume responsibility for any harm that may be suffered by it (or the class described as any facility not licenced to accept waste contaminated with asbestos).[xxi]

Although TTR did not participate in the proceedings (as it was in liquidation), Ball J reasoned that Bettergrow’s case against it in relation to duty was ‘stronger’ than its case against the other defendants, however his Honour was still unable to find that TTR had breached any such duty.[xxii] This was because Bettegrow had control over their facility and did not rely on any party, nor did any party assume responsibility for the risk of harm to Bettergrow.  In the alternative, Ball J suggested that had the duty been characterised as a duty to take reasonable care to inform On-Line of the presence of asbestos (rather than the alleged ‘general duty to supervise’), TTR would have been in clear beach of that duty, being one that gave rise to the damages so claimed.[xxiii] In arriving at this conclusion, Ball J preferred the evidence given by On-Line’s employees that they were unaware of the presence of asbestos at TransGrid’s site, notwithstanding what had been disclosed in the AMP and Powercor’s induction documents.

Contract claim against On-Line

His Honour was not satisfied that there was:

  1. Any breach of an express term of the contract between Bettergrow and Online that drill mud had to be free of contaminants such as plastics, metal, or other obvious rubbish – mainly because the asbestos in question did not fall within the description “other obvious rubbish”;
  2. Any implied term in the contract to the effect that asbestos or asbestos containing material would not be deposited at the Bettergrow’s facility.

Implications  

  1. The case serves as a strong reminder that parties (particularly plaintiffs) must carefully assess all elements of the tort of negligence, including whether a duty of care is owed at all. Often parties proceed with little, or inadequate, regard to the first step – namely, that a duty of care is owed;
  2. In cases involving novel facts and circumstances, great care needs to be taken to precisely plead how it is alleged a duty of care is owed, and by whom, and the things that a defendant ought to have done which were not done, or were done which should not have been;
  3. The case reaffirms the principle in Leighton v. Fox that principals do not owe a duty of care to supervise contractors and subcontractors having specialized knowledge and skill other than in exceptional circumstances.
  4. Courts will be reluctant to impose a non-delegable duty of care except where the case falls into the established categories. Moreover, it is unlikely that a head contractor will owe a non-delegable duty to ensure that reasonable care is taken by an independent contractor, even where the contractor undertakes hazardous activities.

 

This article was written by Principal Robert Crittenden and Senior Associate Lachlan Heather. Please contact us if you have any questions or if you would like further information.

This article was first published in the Lexis Nexis Australian Civil Liability (newsletter) Volume 15 No 2 – May 2018.

[i] (‘Bettergrow v Transgrid (No 2)’)

[ii] Bettergrow v Transgrid (No 2) [37]

[iii] Bettergrow v Transgrid (No 2) [45]

[iv] Bettergrow v Transgrid (No 2) [64] citing Armes v Knottinghamshire Country Council [2017] UKSC 60 [33] (Lord Reed).

[v] (1994) 179 CLR 520, citing Kondis v State Transport Authority (1984) 154 CLR 672 [687] (Mason J)

[vi] Ibid [164] (Mason J).

[vii] Bettergrow v Transgrid (No 2) [66]

[viii] Bettergrow v Transgrid (No 2) [67]

[ix] Bettergrow v Transgrid (No 2) [69]

[x] Bettergrow v Transgrid (No 2) [73]

[xi] Bettergrow v Transgrid (No 2) [101]

[xii] Bettergrow v Transgrid (No 2) [85]

[xiii] Bettergrow v Transgrid (No 2) [116]

[xiv] Bettergrow v Transgrid (No 2) [83]

[xv] Bettergrow v Transgrid (No 2) [76]

[xvi] Bettergrow v Transgrid (No 2) [77]

[xvii] Transfield Constructions Pty Ltd v GIO Australia Holdings Pty Ltd [1996] NSWCA538  [1-2] (Meagher J)

[xviii] NSWSC 1274

[xix] Ibid [118] (Campbell J)

[xx] Bettergrow v Transgrid (No 2) [83]

[xxi] Bettergrow v Transgrid (No 2) [84]

[xxii] (2009) 240 CLR 1

[xxiii]  Bettergrow v Transgrid (No 2) [91]; [116];

Disclaimer: This information is current as of July 2018. This article does not constitute legal advice and do not give rise to any solicitor/client relationship between Meridian Lawyers and the reader. Professional legal advice should be sought before acting or relying upon the content of this article.