FEDERAL COURT OF AUSTRALIA

Commonwealth of Australia v Aurora Energy Pty Ltd [2006] FCAFC 148

CONTRACT – workplace injury when working with original employer – rehabilitation program with host employer – work trial agreements prepared by original employer but not signed by any of the parties to it – second injury when working with host employer – claim for damages made by worker against host employer – whether work trial agreements form part of contractual arrangements between original and host employers – whether construction of term of work trial agreement required original employer to indemnify host employer

Australian Protective Service Act 1987 (Cth)

Safety, Rehabilitation and Compensation Act 1988 (Cth) ss 48, 49, 51

Workers Rehabilitation and Compensation Act 1988 (Tas)

Andar Transport Pty Ltd v Brambles Ltd (2004) 217 CLR 424 referred to

Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 referred to

E.E. Caledonia Ltd v Orbit Valve Co. Europe [1993] 4 All ER 165 referred to

National Vulcan Engineering Insurance Group Ltd v Pentax Pty Ltd [2004] NSWCA 218 referred to

Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 referred to

Schenker & Co (Aust) Pty Ltd v Maplas Equipment and Services Pty Ltd [1990] VR 834 referred to

Toll (FGCT) Pty Limited v Alphapharm Pty Ltd (2004) 219 CLR 165 referred to

Valkonen v Jennings Construction Ltd (1995) 184 LSJS 87 referred to

Digest of Justinian, trans A. Watson, University of Pennsylvania Press, Philadelphia, 1998

COMMONWEALTH OF AUSTRALIA v AURORA ENERGY PTY LTD

TAD5 OF 2006

NORTH, MANSFIELD AND EMMETT JJ

19 OCTOBER 2006

MELBOURNE (HEARD IN HOBART)

THE COURT ORDERS THAT:

1.                  The Orders of Heerey J of 24 February 2006 in TAD3/2005 be set aside.

2.                  In lieu of those orders, TAD3/2005 be dismissed with costs.

3.                  The respondent pay the appellant’s costs of the appeal.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

NORTH & EMMETT JJ:

1                     Mr Shane Anthony Fowle (‘the Employee’) is employed by the Australian Protective Service (‘the Service’). The Service was established within a department of the appellant, the Commonwealth of Australia (‘the Commonwealth’), under the Australian Protective Service Act 1987 (Cth). From about February 1996, the Employee became incapacitated from performing his duties with the Service and, from May 1996, the Employee became entitled to, and received, payments of compensation pursuant to the Safety, Rehabilitation and Compensation Act 1988 (Cth) (‘the Commonwealth Compensation Act’).

2                     From 29 July 1996, as part of his rehabilitation, the Employee carried out duties for, and undertook training with, the Hydro-Electric Corporation of Tasmania (‘the Hydro’). He did so pursuant to arrangements made between the Hydro and instrumentalities of the Commonwealth, pursuant to a Work Trial Agreement. The arrangements continued in force, with variations, from 29 July 1996 until 14 October 1997, when the Employee was injured as a result of a fall during his training with the Hydro. In separate proceedings, the Employee has sued the Hydro and its successor, the respondent, Aurora Energy Pty Ltd (‘Aurora’), for damages in respect of the injury he sustained in that fall.

3                     Comcare is a statutory authority established under the Commonwealth Compensation Act. The Employee made a claim on Comcare on the basis that he was injured in the course of his employment by the Service. In a notification to Comcare, the Employee described the incident as follows:

‘Whilst on training exercise with [the Hydro]… I was abseiling from an elevated platform, the rope broke 2 metres from concrete floor causing me to fall onto my back.’

The notification also records that the Hydro had initiated the recall of all rescue ropes.

4                     The precise claim that has been made by the Employee against the Hydro and Aurora is not clear. Thus, it is by no means clear that he has sued the Hydro and Aurora as his employer. Indeed, an inference can be drawn that the Employee’s proceeding against the Hydro and Aurora is for breach of a duty of care by providing faulty ropes in connection with training exercises. That may have some bearing on whether the Work Trial Agreement would respond in any way to the claim that the Employee has brought against the Hydro and Aurora.

5                     Aurora commenced a proceeding in the High Court of Australia, claiming to be entitled to be indemnified by the Commonwealth in respect of any liability that Aurora might have, as the Hydro’s successor, in respect of the Employee’s injuries. The proceeding was remitted by the High Court to the Federal Court of Australia. Following the hearing of the remitted proceeding by a judge of the Court, the Court declared that:

(1)   the Commonwealth is liable to indemnify Aurora in respect of any damages awarded to the Employee against Aurora for injuries suffered by the Employee on 14 October 1997;

(2)   the Commonwealth is liable to indemnify Aurora in respect of any claims for payment that may be made against Aurora pursuant to the Commonwealth Compensation Act as a consequence of any damages awarded against, or agreed to be paid by, Aurora to the Employee for injuries suffered by him on 14 October 1997.

The Commonwealth has appealed to the Full Court of the Federal Court from those declarations.

6                     Subject to questions of limitation, the Employee may have a common law claim for damages against the Commonwealth, as his employer, for failing to provide him with a safe system of work, in addition to his rights under the Commonwealth Compensation Act. However, Aurora’s claim is based solely upon the Work Trial Agreement and has no other juridical basis. For example, there has been no claim for contribution based on equitable principles by reason of some coordinate liability of the Hydro, on the one hand, and the Commonwealth, as an employer, on the other hand.

7                     There are two issues in the appeal. The first concerns the terms of the contractual arrangements between the Commonwealth and the Hydro relating to the Employee’s working for, and training with, the Hydro. The second issue concerns the construction of a provision that Aurora says was a term of those contractual arrangements.

8                     The proceeding was decided by the primary judge on the basis of a statement of agreed facts and agreed documents. No oral evidence was given. Accordingly, the Full Court is in the same position as the primary judge to draw inferences from the agreed facts and the documentary evidence. Due respect must be given to the conclusions of the primary judge. However, in an appeal by way of rehearing, where the primary judge has no particular advantage, the Full Court must reach its own conclusion on the material before the primary judge.

NEGOTIATION OF THE WORK TRIAL AGREEMENT

9                     When the Employee became incapacitated, the Service engaged Vocational Rehabilitation Service Pty Ltd (‘Vocational’) to arrange a work placement for him. On 8 July 1996, Mr Keith McVilly of Vocational wrote to the Hydro. The letter said that the Employee had previously worked for the Hydro as a line worker, B Grade, and sought a placement for a period of three to four months, during which time the Employee would be able to decide whether a return to the Hydro would be a long term goal. The letter stated that, on placement, the Employee’s wages would continue to be covered by the Commonwealth as part of a rehabilitation plan.

10                  The Hydro responded on 12 July 1996, indicating that it would be able to provide assistance for a period of three months from a date to be decided. On 22 July 1996, Vocational forwarded a Return to Work Programme to the Hydro. Vocational stated that the Employee’s wages and workers’ compensation would continue to be covered by the Commonwealth, through Comcare.

11                  Mr Tony Mihelcic, of the Commonwealth Department of Administrative Services, is the Employee’s case manager in connection with his workers’ compensation entitlement from the Service. On 27 July 1996, Mr Mihelcic sent to Mr McVilly a form of Work Trial Agreement. A further version of the Work Trial Agreement was sent to Mr McVilly on 30 July 1996.

12                  The Work Trial Agreement sent on 30 July 1996 was an agreement in relation to placing the Employee into ‘a realistic work environment’, as outlined in the attached Work Trial Proposal. The Work Trial Proposal provided for a starting date of 29 July 1996 and a completion date of 31 October 1996. It stated that the aim was to provide the Employee with meaningful work and ‘to promote the redevelopment of his self-esteem’ and‘enhance [his] long term vocational prospects’.

13                  The parties to the Work Trial Agreement were to be the Employee, Mr Mihelcic, Comcare, the Commonwealth and the Hydro. Relevantly, the Work Trial Agreement provided as follows:

‘DURATION AND MONITORING OF WORK TRIAL

Comcare Australia has agreed that a period of 3 months will be funded under the [Commonwealth Compensation Act] to accommodate and assist with the placement of [the Employee].

THE HOST EMPLOYER

1. [The Hydro] will allow [the Employee] to perform the tasks outlined in the Work Trial Proposal.

…

3. [The Hydro] does not pay [the Employee] any salary/wage during the period of the Work Trial.

…

THE WORKER

1. [The Employee] will attend [the Hydro’s] premises as instructed by [the Hydro] and will undertake the work required to the best of his ability.

…

CURRENT EMPLOYER/OR INSURER (COMCARE)

…

2. [Comcare] will continue [the Employee’s] weekly payments during the period of the Work Trial subject to the provisions of section 37 of the [Commonwealth Compensation Act].

…

4. The current employer, i.e. [the Service], accepts liability for any injury sustained during the period of the Work Trial.

…’

14                  Vocational also prepared a document entitled ‘Return to Work Programme’, which was dated 25 July 1996. That document was signed by the Employee and a copy was given to the Hydro. It provided that the Employee’s placement was to be of a duration from 29 July to 31 October 1996. It stated that his duties were to include ‘domestic installations, Proline Crew, EPV Crew, all duties for which [the Employee] is qualified, excluding pole top work’. The document included the following comment:

‘Options for in-service training to be explored later (upgrade to A grade certificate).’

15                  While the Work Trial Agreement of 30 July 1996 contained provision for signature, there is no evidence that any form of agreement was ever signed on behalf of any of the parties to it. Nevertheless, from 29 July 1996, the Employee carried out duties and tasks for the Hydro. The Hydro did not pay him any salary or wage. On the other hand, Comcare continued to pay weekly payments of compensation and such other payments of compensation to which the Employee was entitled pursuant to the provisions of the Commonwealth Compensation Act.

16                  On 21 October 1996, Mr McVilly wrote to Mr Mihelcic, saying that he had spoken with various officers of the Hydro and that the Hydro were willing to extend the Employee’s placement for a further three months to 31 January 1997, on the basis that the Hydro would be willing to discuss a salary sharing agreement with Comcare ‘possibly up to 50% of the Line Worker Salary’. On 25 October 1996, Ms Fran Brewster agreed to such an arrangement on behalf of the Service.

17                  On 8 November 1996, Vocational sent a facsimile to the Hydro saying that Mr McVilly understood that Mr Peter Sutczak of the Hydro would be speaking directly with Comcare to arrange an exchange of letters to cover the Employee’s workers’ compensation coverage while with the Hydro. A Return to Work Programme attached to the facsimile provided for placement for the Employee from 12 November 1996 to 4 February 1997. That document included the following statement:

‘[The Hydro] will be invoiced monthly by Comcare (3 x $1666.67).

Workers’ Compensation insurance cover to be agreed between [the Hydro] and Comcare by exchange of letters.’

18                  A file note made by Mr Mihelcic on 8 November 1996 recorded that Mr Sutczak had contacted him regarding the payment of the Employee’s salary during his work trial from 12 November. Mr Sutczak said that the Hydro was concerned about the type of arrangements that the Employee would be under during the trial and the consequences, should he sustain a work related injury. Mr Sutczak said that the Hydro had recently had a bad experience with a person who worked for a contractor and was working at the Hydro. Mr Mihelcic told Mr Sutczak that the Service and Comcare would be liable for workers’ compensation and that ‘the previous contract had made mention to this [sic] arrangement’. Mr Mihelcic agreed to send to Mr Sutczak the copy of ‘the last contract’. Those references appear to be references to the unsigned Work Trial Agreement of 30 July 1996.

19                  On the same day, a copy of that document was sent to Mr Sutczak under a cover of the facsimile that said:

‘As discussed I have faxed you a copy of the work trial agreement used for [the Employee’s] first three months. A similar one will be prepared for his next three months. As you will see Item [4] under the heading “Current Employer” makes reference to which organisation is responsible for ongoing liability.’

Mr Sutczak responded on 15 November 1996, requesting an amendment to clause 4 so as to provide as follows:

‘4. The current employer, i.e. [the Service], accepts liability for any injury sustained during the period of the Work Trial. [The Service] shall ensure in terms of the Tasmanian Workers Rehabilitation and Compensation Act 1988 or similar workers compensation legislation against liability for death of or injury to [the Employee]. The insurance cover shall be unlimited in amount and shall be maintained until the work trial is completed.’

20                  On 16 December 1996, Mr Mihelcic sent that wording to Ms Brewster by facsimile, in which he observed that the Hydro would like to have such an additional clause inserted because they ‘are contributing financially to [the Employee’s] current work trial’. That appears to be a reference to the arrangement whereby the Hydro was to contribute 50 per cent of the workers compensation payments being made to the Employee by Comcare.

21                  On 30 December 1996, the Commonwealth wrote to the Hydro submitting an amended Work Trial Agreement under cover of the following:

‘I have adjusted the agreement and I have faxed you a copy for your information and appropriate action.

Could you please advise me if the new wording is suitable for your needs. It should be noted that I discussed your amendments with [Comcare and the Service].’

The form of Work Trial Agreement that was forwarded on 30 December 1996 was in similar terms to that of 30 July 1996, except for clause 4 under the heading ‘Current Employer’ and certain provisions of the attached Work Trial Proposal.

22                  Clause 4 in the Work Trial Agreement of 30 December 1996 was in the following terms:

‘4. The current employer, i.e. [the Service], accepts liability for any injury sustained during the period of the Work Trial. [The Service] is insured under the [Commonwealth Compensation Act] against liability for death of or injury to [the Employee]. In the event that an injury has occurred the matter will be handled by [the Service] and Comcare Australia.’

The attached Work Trial Proposal stated that the Employee would be employed as a ‘Vegetation Officer’ and that his duties would ‘include the identification of vegetation that may impose on power lines and endanger power supply and recommend and prioritise appropriate action’. The starting date was to be 12 November 1996 and the completion date 4 February 1997. Thus, the agreement being negotiated related to a period that had commenced some weeks before the date on which the document was sent to the Hydro.

23                  On 10 January 1997, Mr Mihelcic left a message for Mr McVilly that he had sent a facsimile to Mr Sutczak at the Hydro regarding the Employee’s Work Trial Agreement but had received no reply. His file note records that he contacted Mr Sutczak’s office and was told that Mr Sutczak would be away all of January. Mr Mihelcic asked Mr McVilly to investigate the current status concerning the Work Trial Agreement for the Employee.

24                  On 31 January 1997, Mr McVilly sent a facsimile to Mr Mihelcic stating that the Hydro had advised that it would like to extend the current work trial for the Employee for a further twelve weeks with cost share at 50 per cent. Mr McVilly said that he would proceed with the work trial and that paperwork would follow. However, there was no evidence that any paperwork followed.

25                  A Return to Work Programme for the Employee was prepared by Vocational on 4 February 1997. The programme provided for placement of the Employee with the Hydro from 4 November 1996 to 29 April 1997. The document included the same comment as the document of 8 November 1996 concerning monthly invoicing by Comcare and agreement concerning Workers’ Compensation insurance cover. In early February 1997, the Hydro indicated to Comcare that at a management team meeting it was decided that, should the Employee’s work trial be continued for a further three months, he would be allocated to a project that involved placing possum guards on electricity poles. On 25 February 1997, a facsimile was sent by Mr Mihelcic to Kim McCabe of Comcare, indicating that the Employee’s work trial would cease on 4 May 1997 and that there would be no further extensions beyond that date.

26                  On 4 March 1997, Mr McVilly prepared a rehabilitation progress report in respect of the Employee. The report recorded that the Hydro continued to pay 50 per cent of the Employee’s salary and were pleased with his work. The report said, however, that due to organisational rationalisation, it was unlikely that a full-time position with the Hydro would become available in the near future. The report noted that the current work trial was to cease on 7 May 1997, and also observed that resolution of the Employee’s condition would appear to hinge significantly upon his obtaining permanent full-time employment.

27                  On 14 April 1997, Mr Mihelcic spoke, concerning the Employee, to Mr Wilson-Haffenden of the Hydro. The possibility of a permanent job was discussed and Mr Wilson-Haffenden said that it was difficult for the Hydro to employ the Employee since he possessed a B grade linesman certificate and that the Hydro was employing linesmen with A grade certificates. He said that the Hydro would facilitate the Employee’s endeavours to qualify for an A grade certificate. Mr Mihelcic said that he would consider extending the work trial for a further six months to give the Employee the opportunity to obtain his A grade certificate. Mr Wilson-Haffenden said that he was happy to help with the rehabilitation and training of the Employee up to an A grade certificate.

28                  On 15 April 1997, Mr Mihelcic wrote to Ms Brewster saying that, unless the Employee obtained his A grade certificate, the possibility of a position with the Hydro was remote. Mr Mihelcic said that he had discussed the issue of permanent employment with the Hydro and that Mr Wilson-Haffenden was prepared to assist the Employee as much as possible to obtain his A grade certificate. Mr Mihelcic sought approval for the extension of the work trial for a further six months, with an interim arrangement of two months to obtain further information required to consider the six month extension. The information was:

·        how long it would take the Employee to obtain his A grade certificate;

·        whether there would be any additional costs associated with the work trial;

·        whether the current arrangement concerning remuneration would continue.

That proposal was approved by Ms Brewster on 18 April 1997.

29                  On 22 April 1997, Mr Mihelcic spoke to Mr Haffenden-Wilson again. In the course of that conversation, Mr Haffenden-Wilson said he was checking the Employee’s previous employment history to determine when he could start training. Mr Haffenden-Wilson said that the Hydro was prepared to meet the cost of the Employee’s training as long as the Service were prepared to pay his salary during the period of training. No mention was made of arrangements concerning liability for injury sustained by the Employee during the period of his training.

30                  On the same day, the Hydro wrote to Mr Mihelcic confirming that the Hydro was able to place the Employee for a period of up to six months to facilitate his achieving his qualification as an A grade line worker. The letter recommended a program to assist the Employee in obtaining his A grade certification and said that the Hydro was prepared to meet the Employee’s costs for training, clothing, protective equipment and materials for the placement, on the basis that the Commonwealth would meet the cost of the Employee’s salary. No mention was made of liability for injury sustained by the Employee during training.

31                  From 12 May to 14 October 1997, the Employee carried out the duties and tasks for the Hydro by way of on-the-job training to upgrade his line workers’ certificate. The Hydro paid the training costs but did not pay him any salary or wage. Comcare continued to pay weekly payments of compensation and such other payments of compensation to which he may have been entitled pursuant to the provisions of the Commonwealth Compensation Act.

THE TERMS OF THE CONTRACT

32                  There was no evidence of any relevant exchanges between the Hydro, on the one hand, and the Commonwealth, on the other hand, concerning the terms upon which the Employee was to be placed with the Hydro, other than as summarised above. However, it is clear that there were contractual arrangements in place between the Commonwealth and the Hydro concerning the placement of the Employee. The terms of those contractual arrangements were varied at least as to the period of the placement, the duties of the Employee and the payment of salary and training costs. Nevertheless, there was a contract, the terms of which are disputed.

33                  The placement from 29 July 1996 to 31 October 1996 was on the terms of the Work Trial Agreement sent to Mr McVilly on 30 July 1996. There is no real dispute as to that conclusion. However, the Commonwealth says that that contract was spent when the term of the placement came to an end on 31 October 1996. While negotiations were entered into for a replacement contract, those negotiations were never consummated.

34                  Aurora contends that the parties must be taken, by their continued dealing after 30 December 1996, to have accepted the amended clause 4 of that date. Alternatively, Aurora says that the agreement between the Commonwealth and Hydro continued in the form of that of 30 July 1996. Clause 4 of that version was in identical terms to the first sentence of clause 4 of the version of 30 December 1996. Either way, Aurora contends that the provision provides the indemnity that it now claims. The Commonwealth also accepts that there was some contact in place between the Commonwealth and the Hydro from 1 November 1996 but says that its terms did not include either clause 4 of the Work Trial Agreement of 30 July 1996 or the proposed amended clause 4 of 30 December 1996.

35                  It is tolerably clear that both the Hydro and the Commonwealth, through its various instrumentalities, intended to enter into contractual relations in relation to the Employee’s placement after 31 October 1996. Clearly enough, while there were changes in the contractual arrangements with effect from a date in early November, the parties intended that their contractual framework from 30 July 1996 would continue to govern their relationship, subject to the changes that were expressly agreed. While the Hydro clearly sought an amendment to clause 4, the Commonwealth did not accept the amendment. The Commonwealth proposed an alternative but the Hydro never evinced acceptance of the Commonwealth’s alternative wording of 30 December 1996. We are not persuaded that the arrangement was regulated by a clause in the terms of paragraph 4 of that version of the Work Trial Agreement.

36                  It is clear, however, that the terms of the contractual arrangements were varied. Thus, the period of the placement was extended to 4 February 1997. Instead of being employed as a line worker, the Employee was to be employed as a vegetation officer. Further, it was agreed that the Hydro would contribute the sum of $1,666.67 per month for a period of three months. Subsequently, it was agreed that the placement was to come to an end on 4 May 1997. Otherwise, however, the framework of the Work Trial Agreement of 30 July 1996 continued to bind the parties. While the parties had negotiated about amendment to clause 4, they did not ever reach consensus as to that amendment. Accordingly, clause 4 of 30 July 1996 continued to be a term of the contractual arrangements binding the parties to the Work Trial Agreement.

CONSTRUCTION OF CLAUSE 4

37                  Aurora says that the Commonwealth is liable to indemnify the Hydro, and therefore Aurora, for any liability that the Hydro has to the Employee for any injury sustained by him during the period of the work trial. The Commonwealth, on the other hand, says that the language of clause 4 of the Work Trial Agreement was such that the Commonwealth, through the Service, accepted liability only to the Employee and did not accept liability to indemnify the Hydro for any liability that the Hydro might incur to the Employee for injuries sustained during the period of the work trial, as a consequence of the Hydro’s negligence. The Commonwealth has accepted liability to the Employee as his employer, whatever that liability might be, either under the general law or statute.

38                  It is significant that not only the Commonwealth, through the Service, and the Hydro were parties to the Work Trial Agreement. The Employee, Mr Mihelcic and Comcare were also parties. Obligations were imposed upon the Hydro and the Employee, as well as on the Commonwealth, through the Service, and Comcare. While the Hydro was described in the Work Trial Agreement as ‘Host Employer’, clauses 2 and 4 under the heading ‘Current Employer/Comcare’ were designed to make clear that the Hydro was to have no responsibility as an employer of the Employee. Rather, Comcare was to continue his compensation payments under the Commonwealth Compensation Act and the Service was to accept responsibility to the Employee for any injury sustained by him during the period of the Work Trial.

39                  The additional sentences proposed by the Hydro, and the alternatives suggested on behalf of the Commonwealth, were concerned only with the position of the Hydro as an employer. The language was designed to make it clear that the Employee should look to the Service for compensation in respect of any injury sustained by him. The language of clause 4, both in the version of 30 July 1996 and in the version of 30 December 1996, is not the language of indemnity. There is nothing in the language of clause 4 in any of its versions to suggest that the Service was agreeing to indemnify the Hydro against liability for the Hydro’s negligence in causing injury to the Employee.

40                  The reference to the Workers Rehabilitation and Compensation Act 1988 (Tas) in the words proposed by the Hydro suggests a concern about the liability that might be imposed upon the Hydro as an employer. However, the Hydro’s proposal was expressly rejected. The two sentences that were proposed on behalf of the Commonwealth qualify the first sentence by making it clear that the Service was accepting liability under the Commonwealth Compensation Act as employer. If any injury occurred, it was to be handled by the Service, as employer, and by Comcare, as the insurer of the Service. There is nothing in the language of the version of 30 December 1996 to suggest that the Service was accepting liability for anything beyond the liability that was imposed by the Commonwealth Compensation Act. That is to say, under each version, the liability that was being accepted was the Service’s liability as the employer of the Employee, notwithstanding that the Employee was to perform tasks set by the Hydro.

41                  Some reliance was placed by the parties before the primary judge on the doctrine expressed in the maxim verba chartarum fortius accipiuntur contra proferentem – the words of an instrument should be understood more strongly against the party advancing them. That maxim has nothing to do with the fortuity as to which of the parties actually composed the language in question. The construction of a promise in the common law does not depend upon who drafted the language. The maxim means simply that a promise is to be construed contrary to the interests of the person who makes the promise, irrespective of who the drafter might have been. The ‘proferens’ is, essentially, the promisor under the provision in question, whoever composes the language. The rationale for the maxim is that a party should look after its own interests in agreeing to make a promise. In the event of ambiguity, the promise is to be construed against the promisor.

42                  The effect of the maxim might be contrasted with the position in the Roman contract of stipulatio. One of the requirements for a valid contract of stipulatio was that the stipulator must ask the promisor whether the promisor promised to do or give something or refrain from doing or giving something. Upon the promisor responding in equivalent terms to the question by saying that the promisor promised to give or do the same thing, or refrain from giving or doing the same thing, the promisor became immediately bound. There was no requirement for a quid pro quo on the part of the stipulator who posed the question. The Roman principle was that, because it was the stipulator who formulated the question, the promisor simply responding in terms, it was for the stipulator to formulate the question that was required and, accordingly, the words were construed contrary to the interests of the stipulator (see Digest of Justinian, trans A. Watson, University of Pennsylvania Press, Philadelphia, 1998, 45.1.99.pr).

CONCLUSION

43                  The Commonwealth is not liable under the terms of the Work Trial Agreement to the Hydro, or to Aurora as the successor of the Hydro, for any liability that the Hydro may have to the Employee. The primary judge reached a different conclusion concerning the obligation of the Commonwealth to indemnify Aurora. It is probably fair to say that the arguments accepted above were not the arguments put to the primary judge. Nevertheless, it follows that the appeal should be upheld. The orders made by the primary judge should be set aside. In lieu of those orders, there should be orders that the proceeding be dismissed with costs. Aurora should pay the Commonwealth’s costs of the appeal.

Associate:

Dated: 17 October 2006

REASONS FOR JUDGMENT

MANSFIELD J

44                  I have read the reasons for judgment of North and Emmett JJ. I agree that the appeal should be allowed, that the orders made by the learned primary judge should be set aside, and that the claim of Aurora Energy Pty Ltd (Aurora) should be dismissed with costs, including that Aurora should pay the costs of the appeal.

45                  I am grateful to adopt the description of the relevant facts, and of the relevant documents, from the reasons of the joint judgment. I respectfully agree with their Honours’ conclusion, for the reasons they have given, on the first issue on the appeal – namely that clause 4 of the Work Trial Agreement of 30 July 1996 continued to be the relevant term of the contractual arrangements between the Commonwealth and the Hydro relating to the Employee’s working for, and training with, the Hydro at the time of his fall on 14 October 1997. I use the description of the Commonwealth to include the Australian Protective Service (the Service), Vocational (as defined in the joint reasons) and Comcare except where it is necessary to distinguish between them.

46                  I also agree with North and Emmett JJ that clause 4 of the Work Trial Agreement of 30 July 1996 does not oblige the Commonwealth to indemnify Aurora in respect of any damages awarded to the Employee against Aurora for injuries suffered in the fall on 14 October 1997.

47                  Clause 4 of the Work Trial Agreement provided that:

‘The current employer, i.e. the Australian Protective Service, accepts liability for any injury sustained during the period of the Work Trial.’

48                  As North and Emmett JJ have pointed out, the language of that clause is not the language of indemnity. It indicates – in respect of an agreement to which at least the Commonwealth, the Employee and the Hydro were parties – that liability for any injury sustained during the period of the work trial would be accepted by the Service. The liability referred to must be liability to the Employee. Indeed, in accordance with clause 4, the fall on 14 October 1997 has led to a claim by the Employee under the Safety Rehabilitation and Compensation Act 1988 (Cth) (the Commonwealth Compensation Act) and that liability to the Employee has been accepted by both the Service and by Comcare. There is presently no other liability asserted by the Employee against the Service or Comcare arising out of that fall.

49                  As their Honours note, the Employee has sought compensation from the Service in respect of the injuries he then received under the Commonwealth Compensation Act, obviously on the basis that he accepts that at that time he was still an employee of the Service. Comcare has paid benefits under that Act. Although the pleadings in the Employee’s claim against the Hydro and Aurora were not before this Court either at first instance or on appeal, the Amended Statement of Claim of Aurora in this proceeding asserts that the Employee’s claim against Aurora includes damages to cover the compensation paid to him by the Commonwealth, presumably having regard to his obligation to repay such compensation from any damages he recovers under s 48 of the Commonwealth Compensation Act.

50                  The Employee clearly also asserts a liability on the part of the Hydro or its successor Aurora in respect of that incident. As he has claimed compensation against the Service in respect of that incident, it appears that that liability is said to arise at common law for breach of a duty of care which the Hydro is alleged to have owed him by reason of the relationship of proximity between them. The alleged liability appears to stem from the Hydro providing unsafe equipment. Such a liability could also arise, for example, in the event of careless driving or of careless maintenance of a vehicle by an employee of the Hydro, for which it is vicariously liable, leading to a vehicular accident. And it could arise whether the incident occurred in the premises of the Hydro, or at any site where it was carrying out its operations, or indeed on the open highway.

51                  The issue is whether, judged objectively from the position of reasonable people in the position of the parties (see Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352-353; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22]; and Toll (FGCT) Pty Limited v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40]), clause 4 was intended by the parties to extend to any such liability on the part of the Hydro so that the Commonwealth or the Service were also thereby agreeing to indemnify the Hydro for any liability it incurred in relation to the Employee.

52                  There is no indication that that was the intention of the parties.

53                  The terms of clause 4 do not use the word ‘indemnity’. The concept of shifting by agreement any liability of Hydro to the Employee to the Commonwealth so that the Commonwealth should incur that liability to the exclusion of the Hydro is a significant one. It is one which would have been expected to have been explicitly addressed: see e.g. the remarks of Kirby J in Andar Transport Pty Ltd v Brambles Ltd (2004) 217 CLR 424 at [67]-[68]. The identification of the Service as the current employer accepting liability puts the focus upon its liability to the Employee. The nature of the work trial clearly called for elucidation of the Employee’s relationship with the Service and with Comcare, so that he (and the other parties to the Work Trial Agreement) would know in unequivocal terms who was his employer at material times. That elucidation is provided. It carried with it the assurance of the existence of the protection available under the Commonwealth Compensation Act. In my view, the wording of clause 4 points to the ‘liability’ being liability incurred by the Service to the Employee.

54                  The context, namely the relationship which arose under the Work Trial Agreement, explains why all the parties would have wished to remove any doubt about the identity of the employer and so about the entity against which the Employee might make a compensation claim. The acceptance of the ongoing relationship of employer/employee between the Service and the Employee is a sensible matter to identify at the time. The Employee, in the context of the arrangement, would be unlikely to have eschewed that entitlement, or to have eschewed any entitlement to recover damages from the Hydro if he were injured through its negligence. The Hydro and the Commonwealth could not agree to remove that latter entitlement from him. It is most unlikely that the word ‘liability’ was to perform two different functions and to carry two different meanings. Consequently, if the word ‘liability’ in clause 4 was intended to provide that the Commonwealth would indemnify the Hydro for any liability for negligence to the Employee, it would remove the function of that clause as identifying for the benefit of the Employee and the Hydro the employer of the Employee.

55                  The fact that, despite clause 4, the Employee has sued the Hydro for damages for the injuries sustained on 4 October 1997 simply reflects that understanding of the contract. That post-contractual conduct is not, of course, a proper aid to its construction. It is nevertheless consistent with the conclusion I have reached about the meaning of clause 4 from its text and content. Put another way, if at the time of the contract an objective but informed observer had asked whether (accepting that the Service remained the relevant employer of the Employee) if the Hydro had caused injury to the Employee through its negligence, the Employee’s claim for damages would have been against the Service, the answer in my view would have been a firm ‘no’. And if that observer had been asked whether the Hydro’s liability for its negligence had been agreed to be indemnified by the Commonwealth, the same negative answer would have been given. The text does not support that claim, nor the context. And the observer would simply have said that the parties could have, but did not, address that circumstance.

56                  Indeed, if it is permissible to address the conduct of the parties in trying to negotiate a refined and different version of clause 4 (as illustrated by North and Emmett JJ), on the basis that there were successive contracts and that the relevant contract was that entered into for the second trial period or for the final trial period during which the Employee was undergoing training by the Hydro, that conduct illustrates that the parties by then had recognised that their earlier agreement (including clause 4, which in the circumstances remained part of the ongoing or renewed agreement) did not provide for the indemnity now asserted by the Hydro and Aurora and that they did not come to a consensus about it. The remarks of Hobhouse J in E.E. Caledonia Ltd v Orbit Valve Co. Europe [1993] 4 All ER 165 at 173 (affirmed [1995] 1 All ER 174) are apposite. Those negotiations in late 1996 and early 1997 would then provide the context in which clause 4 of the Work Trial Agreement as still in force should be construed. The evidence indicates that Mr Sutczak of the Hydro was to ‘arrange an exchange of letters to cover [the Employee’s] Workers [Compensation Coverage]’ with the [Hydro] on the occasion of the first renewal of the work placement. During that period the Hydro was to pay Comcare by way of contribution to the amount Comcare was paying the Employee so the employer/employee relationship may have needed further clarification. The Hydro then suggested that the Service should ‘insure in terms of the Tasmanian Workers Rehabilitation and Compensation Act 1988 or similar workers compensation legislation [sic] … [to be] unlimited in amount’. That suggestion from the Hydro focuses on liability to the Employee, rather than upon indemnity to the Hydro for any liability it might incur to the Employee. The response of the Commonwealth (which was not accepted by the Hydro), was in terms of clause 4 but additionally confirmed that the Service is insured under the Commonwealth Compensation Act in respect of liability for death of or injury to the Employee, and that any injury he suffered ‘will be handled’ by the Service and by Comcare. Clearly, that context points to clause 4 referring to liability to the Employee. Even if the revised clause 4 proposed by the Commonwealth had become part of the contract (as the learned primary judge found), the construction in its context would lead to the same conclusion as the Court has reached in this matter for much the same reasons.

57                  There is, moreover, no business reason why the Commonwealth would have agreed to indemnify the Hydro in respect of any liability it incurred for injury sustained by the Employee. The Commonwealth was getting some benefit from the arrangement: it was receiving the benefit of the Employee being rehabilitated to meaningful employment, and so of reducing its potential liability under the Commonwealth Compensation Act to the Employee in respect of the earlier injury. But it had no control over the systems of work of the Hydro, or over the Hydro’s employees in their work activities, so as to have any capacity to prevent any negligent conduct. And the Hydro, for its part, was already receiving the benefit of the services of the Employee, during his training, without having to pay him any salary. At the completion of the training period it would have had a trained A grade linesman capable of employment by it.

58                  Reference may be made to Valkonen v Jennings Construction Ltd (1995) 184 LSJS 87 (Valkonen), and to National Vulcan Engineering Insurance Group Ltd v Pentax Pty Ltd [2004] NSWCA 218 (National Vulcan Engineering). In Valkonen, Cox J at [36] (with whom Matheson and Perry JJ agreed) emphasised the need to give words in exemption and indemnity clauses their plain and natural meaning having regard to the context in which they appear. His Honour followed the approach of the Full Court of the Supreme Court of Victoria in Schenker & Co (Aust) Pty Ltd v Maplas Equipment and Services Pty Ltd [1990] VR 834. That case concerned an express indemnity clause in a contract, and the issue was as to the extent of its reach, so it is factually quite different. The helpful feature is the general approach to construction of the clause in that contract. In National Vulcan Engineering, the issue was whether an insurance policy granting indemnity in defined circumstances responded to the particular circumstances. Again, the approach to its construction was consistent with that referred to above. That is the approach which I have endeavoured to apply to clause 4 of the relevant agreement in this matter.

59                  In the event that the Hydro, and so Aurora, is found to be liable to the Employee for damages for personal injuries sustained in the fall on 14 October 1997, the second declaration sought by Aurora against the Commonwealth assumes significance. The learned primary judge declared that the Commonwealth is liable to indemnify Aurora in respect of any claims for payment that are made against it under the Commonwealth Compensation Act

‘… as a consequence of any damages awarded against or agreed to be paid by [Aurora] to [the Employee] for any injuries suffered by him in October 1997 provided that [Aurora] has not paid any such damages to or on behalf of [the Employee] in breach of any notice issued against [Aurora] pursuant to s 51 of the [Commonwealth Compensation Act].’

60                  Section 51 of the Commonwealth Compensation Act entitles Comcare to give notice to a third party which has agreed to be, or been found to be liable, to pay damages to an employee in respect of a compensatable injury under that Act, that the third party pay to Comcare so much of the damages as does not exceed the amount that the employee would be liable to refund Comcare under ss 48 or 49 of that Act. The Employee has pursued against the Commonwealth his claim for compensation in respect of the 14 October 1997 injury, and Comcare has accepted liability to make payments under the Commonwealth Compensation Act in respect of it.

61                  For the reasons given, I share in the conclusion of North and Emmett JJ that that determination should also be set aside. The result will be that, if Aurora is found liable to pay damages to the Employee, Comcare will be entitled to recover from the damages for which Aurora is liable the compensation it has paid in respect of the injury on 14 October 1997 pursuant to s 51 of the Commonwealth Compensation Act.

Associate:

Dated: 12 October 2006