Vicarious liability of sub-contractor for employees’ breach of duty to employee of another sub-contractor

15 July 2021

The plaintiff allegedly sustained a psychiatric injury after witnessing physical injuries to employees of a sub-contractor on a work site. The plaintiff was unsuccessful in establishing liability against either defendant.

In issue

  • Whether there was a breach of duty of care owed by the first defendant to the plaintiff;
  • Whether there was a breach of duty of care owed by the second defendant to the plaintiff;
  • Whether the second defendant was vicariously liable for the acts of its employees who caused the incident;
  • Whether the plaintiff suffered psychiatric injury.

The background

The plaintiff was employed as a traffic controller. Her employer was engaged by the first defendant, Power Distribution Services Pty Ltd, to perform traffic control duties at a site where subsurface electrical cables were being installed for a data centre.

The principal contractor had a subcontract with the first defendant to perform electrical work. The first defendant then engaged Superior Civil Pty Ltd (the second defendant by its insurer Allianz) to install new subsurface conduits, cut and remove existing conduits and install new high-voltage service pits.

On 30 October 2013, 2 employees of the second defendant were cutting keyholes in the underground conduits to identify which were empty. One worker inserted his shovel between two conduits to hold them apart, whilst the other used a reciprocating saw to cut into the conduit wall. In doing so, he struck a live cable, causing an electrical explosion. The plaintiff, present on site, heard the explosion and witnessed the aftermath, including the employees appearing with burns to their bodies. She alleged that she suffered psychiatric injuries as a result and sought damages against both defendants.

The decision at trial

The claim against the first defendant failed on the basis that there was no evidence that the reasonable precautions which allegedly ought to have been taken were within the scope of the duties, control and role of the first defendant. The first defendant was responsible for issuing directions as to when and where the work was to be done. The actual requirements about inspecting conduits and the tools to be used, were entirely within the second defendant’s scope of sub-contract work. The plaintiff alternatively submitted that the first defendant’s Managing Director individually owed her a duty, but this was rejected by the court for similar reasons; the incidents related to duties and a scope of work outside of that owed and carried out by the Managing Director.

As to the second defendant, the court referred to section 32 of the Civil Liability Act 2002 (NSW) (“CLA”) which provides that a duty to take care not to cause a plaintiff mental harm does not arise unless a defendant ought to have foreseen that a person of normal fortitude might, in the circumstances of the case, suffer a recognised psychiatric illness if reasonable care were not taken. The court found the second defendant owed the plaintiff a duty of care, notwithstanding the absence of any direct relationship with the plaintiff. The court considered it was reasonably foreseeable that if reasonable care were not taken, an explosion could occur which could be witnessed by a person working in proximity, which would have the characteristics of a “sudden shock” (a relevant circumstance to be considered pursuant to s 32(2)(a) CLA), causing a witness to suffer PTSD.

The court, however, did not accept that any such duty was breached. The court noted that the duty was to exercise reasonable care, not to prevent anything from happening or to ensure nothing untoward happened. The evidence demonstrated the second defendant prepared satisfactory Safe Work Method Statements prohibiting the activities undertaken and took reasonable and effective steps to ensure that its employees read and signed acceptance of the same. It specifically instructed employees not to use a reciprocating saw in particular circumstances, including those on the day of the incident. There was nothing else it could have reasonably done to discharge its duty.

The court then considered whether the second defendant was vicariously liable for the tortious conduct of its employees who caused the explosion. This again led the court to consider s 32 CLA, as concerns a duty of the employees directly. Given the scope of their engagement, the court held that the employees ought reasonably to have foreseen that if care was not taken, there may have been an explosion causing injury, which if witnessed, would have the characteristics of sudden shock, causing PTSD or similar injury. The court found both workers failed to exercise reasonable care by adopting a negligent and unauthorised mode of doing work assigned to them. As such, they were considered liable.

As to whether the second defendant bore their liability vicariously, the second defendant relied on s 30 of the CLA to argue that the plaintiff cannot recover damages from it in circumstances where the employees would themselves be precluded from damages for the injuries they suffered. The court agreed on the basis that the second defendant adequately carried out its duties, and the injuries were caused solely by the workers’ own disregard for safety instructions issued. However, the court held that s 30 did not apply, as s 30(1) required the employees to have been injured by an act or omission of the second defendant, which was not the case. The court therefore held that if the plaintiff could establish that she sustained psychiatric injury from the incident, the second defendant would be vicariously liable. Ultimately, the court did not accept that the plaintiff demonstrated any psychiatric injury as a result of the incident, and liability was therefore not established.

An appeal by the plaintiff worker was dismissed by the Court of Appeal in February 2022.

Implications for you

The decision reinforces that although an employer can take all reasonable steps to take reasonable care in the workplace, they can still be held vicariously liable for the acts of their employees. Although the second defendant ultimately escaped liability this was because of the court’s finding that the plaintiff did not suffer the psychiatric injury alleged. The case also demonstrates the importance of keeping detailed and contemporaneous records. The plaintiff’s employer kept contemporaneous records of communication with the plaintiff following the incident, which demonstrated no symptoms of psychiatric injury and also helped to discredit her testimony.

Sdrolias v Power Distribution Services Pty Limited [2021] NSWSC 321

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