Property Law Update (Retail Leasing) – October 2009
Published on October 1, 2009 by Matthew Rafferty and Paul Carroll
Due to the nature of the issues associated with OH&S and fitout works in leased premises, this October E-newsletter is a little longer than our regular monthly updates.
OH&S and Fitout Works in Leased Premises – Principal Contractors
OH&S Liability
All Owners, lessees, shopfitters and subcontractors are under various duties to ensure that premises are safe workplaces during any construction work including:
1. a general common law duty of care;
2. additional duties imposed upon employers, controllers of workplaces (which extends to lessee who have an obligation under a lease to maintain or repair premises), designers, manufacturers, and suppliers by the Occupational Health and Safety Act (NSW) 2000 (“OH&S Act”); and
3. the Principal Contractor’s specific statutory duties which include OH&S induction training and other duties outlines in chapter 8 of the Occupational Health and Safety Regulations (NSW) 2001 (“Regulations”).
Damages can be awarded for a breach of the common law duty of care which results in an injury.
Breaches of the OH&S Act can result in significant fines or imprisonment. The fines may be in excess of $800,000 for a corporation and $80,000 for an individual, or double those amounts if a death occurred. A corporation’s director can be personally fined or imprisoned for a corporation’s breach of the OH&S Act. It is not possible to contract out of these duties.
A Principal Contractor can be fined up to $11,000 for breach of the Regulations as they apply specifically to Principal Contractors. In a recent case (discussed in detail below), an injured employee of a subcontractor attempted to claim common law damages of approximately $500,000 for an injury which it was claimed resulted from a breach of the Principal Contractor’s duties. The High Court found that common law damages did not flow from the breach of the Regulations.
The Principal Contractor’s obligations include being satisfied that all people on the premises have undergone OH&S induction training, keeping records of OH&S induction training, preparing a site management plan, ensuring that each subcontractor has a Safe Work Method Statement for the work being carried out, directing each subcontractor to comply with that safe work method, monitoring the subcontractors and keeping a register of hazardous substances. There are additional specific obligations relating to formwork, excavation work, demolition work, asbestos and diving work.
Fitout Works in Leased Premises
Frequently, at the beginning of a lease, the lessee will complete fitout works to the premises. As this fitout work is likely to be subject to the Regulations, a Principal Contractor will need to be appointed by the Owner of the premises.
A Principal Contractor is the person appointed as being responsible for all the work being carried out on the premises (often by numerous sub-contractors) and is responsible for compliance with the Regulations. The Principal Contractor has legal authority to control who is admitted to the premises during the construction – provisions in a lease may not overcome this authority. For this reason, the Principal Contractor will often also be the controller of the workplace, and responsible for compliance with the OH&S Act (and liable for the significant penalties), although it is possible that an Owner, if they retain actual control of the workplace, will be potentially liable to the penalties under the OH&S Act even if there has been a valid appointment of the Principal Contractor.
Many Owners require lessees to accept appointment as Principal Contractor. However, because the Regulations do not allow the Lessee to on-appoint a third party, many Lessees refuse to accept the appointment. The Lessees argue that they are not shopfitters and do not have the required expertise, knowledge, or resources to carry out the duties imposed on the Principal Contractor by the Regulations. Lessees may prefer that the Owner appoint the lessee’s shopfitter as the Principal Contractor. If the Owner does not appoint a Principal Contractor the owner is deemed to be the Principal Contractor.
The Principal Contractor must be responsible for the conduct of all construction work at the premises at all times until the work is completed. It is arguable that if the Owner appoints someone who will not be responsible for the construction work at all times, then the appointment is invalid and the Owner remains the Principal Contractor by default.
An Owner needs to ensure that it validly appoints a Principal Contractor. An Owner should allow that Principal Contractor to control the premises during the construction work, however, the Owner should be aware of its responsibilities and potential liability under the OH&S Act.
Principal Contractor Sued for Damages
In the case Leighton Contractors Pty Limited v Fox; Calliden Insurance Limited v Fox [2009] HCA 35, the High Court had to decide whether a Principal Contractor’s breach of the Regulations was also a breach of a common law duty of care owed towards an employee of a subcontractor. The following diagram shows the relationships between the various parties:
Hilton (owner)..
↓
Leighton (Principal Contractor) ..
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Sub-contracted to Downer to carry out the concreting..
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Subcontracted to Still and Cook to carry out the concrete pumping..
↓
Employed Mr Fox and Mr Stewart..
Mr Stewart’s negligence caused an injury to Mr Fox. The plaintiff initially brought a successful case against Stewart. The plaintiff’s case against Leighton and Downer was dismissed. Stewart was unable to pay the judgement debt, so the plaintiff appealed against Leighton and Downer.
While various sections of the OH&S Act or Regulations prevent breaches giving rise to a civil right of action, the plaintiff argued that the Principal Contractor’s common law duty of care included the duty to comply with the Regulations. The plaintiff argued that the Principal Contractor’s breach of the Regulations contributed to the injury.
The Court of Appeal found that the Principal Contractor had breached the Regulations because induction training had not been provided to Mr Stewart. Such a breach was also a breach of its common law duty of care to the plaintiff and the Court of Appeal found against the Principal Contractor. Substantial damages were awarded.
The High Court found that a statutory obligation does not automatically create a duty of care owed to third parties, and that the Principal Contractor had not breached any such duty. The Court of Appeal’s decision was overturned.
Reasoning
The Court of Appeal had found that OH&S induction training would have included training in relation the “Pumping Code”. The Court of Appeal accepted the evidence that had Mr Stewart received such training the injury would not have occurred and the Principal Contractor’s breach of the statutory obligation to provide OH&S training caused the injury. The Court of Appeal found that this was a breach of the Principal Contractor’s common law duty of care owed to the plaintiff.
The High Court found that the pumping specific induction training was not required by the Regulations, but that the Principal Contractor only needed to be satisfied that a worker coming on to the site had undergone general and work activity based OH&S induction training. This obligation would ordinarily be discharged by obtaining a copy of the workers statement of satisfactory completion of the general and work activity based component of the training.
However, the High Court went further and found additional obstacles which would prevent the plaintiff from successfully arguing that a breach of the Regulations was also a breach of a common law duty of care.
Justice Gummow in Roads & Traffic Authority (NSW) v Dederer [2007] HCA 42, explained “Whatever their scope, all duties of care are to be discharged by the exercise of reasonable care. They do not impose a more stringent or onerous burden.”
The High Court found that “The Court of Appeal gave no consideration to whether Leighton had implemented a reasonable system for ensuring that workers coming on to the site were identified, were required to undergo site induction and were required to show evidence of completion of general and work activity based OHS induction training.”
“It may be accepted that Leighton, as the occupier of the site, owed a duty to persons coming onto it to use reasonable care to avoid physical injury to them. However, this says nothing about whether Leighton owed a duty to Mr Fox to take reasonable care to prevent him suffering injury on the site as the result of the negligent conduct of Mr Stewart.”
There was no evidence provided from Mr Fox of what measures Leighton might have taken to be satisfied that workers coming on to the site had undergone OH&S training. As such, even if the common law duty of care existed, the plaintiff had not shown what the Principal Contractor would have reasonably been expected to do to comply with that duty, and nor had it been shown that the Principal Contractor had failed to exercise reasonable care.
Further Advice
Please feel free to contact us for specific advice about OH&S matters in relation to fitout works in leased premises, construction generally, or other workplace OH&S issues.
