“Not without my pick stick” – Picker Packer finds damages are just out of his reach

Most of us go through life thinking very little about pick sticks, but in the case of Smith v Coles Supermarkets Australia Pty Ltd,[1] it was the humble pick stick that (almost) picked victory out of the jaws of defeat.
 
This case examines some of the complications which arise in labour‑hire cases, in particular contractual liabilities.   
 
And so, what is a pick stick?
 
In the words of Mr Smith’s counsel, the pick stick in question was a “long metal tube with what appears to be an end that looks a bit like a domestic hoe that one would use in the garden.[2]
 
Mr Smith was a “picker packer”, employed by Ready Workforce (Ready) and working at the Coles Supermarket’s (Coles) Smeaton Grange distribution centre (premises). Mr Smith was deployed to the premises pursuant to a labour hire agreement (agreement) between Coles and a Ready related‑entity, Chandler Macleod (Chandler).
 
On 10 May 2014, Mr Smith suffered a back injury while lifting a carton of water bottles while working at the premises. Mr Smith received workers’ compensation benefits from Ready. What ensued was a number of legal proceedings;
  • Mr Smith sued Coles in negligence (Smith proceedings);
  • Coles filed a cross‑claim against Chandler seeking to enforce a contractual indemnity in the agreement and claiming damages for breach of contract; and
  • Ready sued Coles pursuant to s 151Z seeking indemnity in respect of workers compensation paid (151Z proceedings).
District Court
The substantive proceedings and 151Z proceedings were heard together in the District Court:
  • Coles was successful against both Mr Smith and Ready; and
  • Coles was successful on its cross‑claim against Chandler, but awarded a mere $100 “nominal damages”.
Ready, Mr Smith and Coles appealed;
  • Ready and Mr Smith appealed against the judgment in favour of Coles; and
  • Coles appealed against the award of nominal damages on its cross‑claim, alleging Chandler was liable for its defence costs in defending the Ready and Smith proceedings.
The Smith/Ready Appeal
The court was asked to determine whether the pleadings and particulars of negligence permitted the plaintiffs at first instance to rely on the absence of pick sticks as amounting to a breach of a duty of care.
 
In its defence, Coles alleged that it had an appropriate system of training, instruction and provision of equipment; and that any injury was caused by Mr Smith’s departure from that system.
 
The Coles work safe manual advised that pick sticks should be used in certain instances. During the cross examination of Mr Smith by Coles’ counsel, it became apparent that Mr Smith was never provided a pick stick, and indeed, didn’t know what a pick stick was.
 
The pleadings and particulars did not allege a failure to provide pick sticks. All parties seemingly proceeded on the mistaken assumption that pick sticks were available to Mr Smith.[3]
 
The plaintiff’s evidence came as a surprise to the parties, and both Mr Smith and Ready sought to take advantage of this fact which emerged during trial.
 
The trial judge found that this development was fortuitous, and that no criticism could be made of Mr Smith and Ready in seeking to take advantage of it. However, the trial judge held that the proceedings would be determined on the basis of the pleadings, which did not allege a failure to supply pick sticks.
 
The Court of Appeal, by 2:3 majority, agreed in this regard,[4] citing the following passage from the High Court decision of Berry v CCL Secure Pty Ltd. [5]
 
“The function of pleadings is to state with sufficient clarity the case that must be met’ and thereby to ‘ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her ….”.
 
By 2:3 majority, the court found that the absence of pick sticks would, in any event, not have amounted to a breach of duty of care.
The Coles Appeal
Coles contended that its costs in defending the Smith and Ready proceedings were damages it could recover against Chandler for breach of contract.
 
Consistent with an earlier Court of Appeal decision in Coles v Ready Workforce [2018],[6] (2018 decision) Coles did not appeal against the primary judge’s rejection of Coles’ claim for indemnity from Chandler.[7]
 
Briefly, the 2018 decision concerned a similar factual scenario in which the picker packer (Ms Murphy) and Ready were successful at first instance, but Coles’ cross claim against Chandler failed. On appeal, judgment in favour of Ms Murphy was overturned, and the question arose as to whether Coles was entitled to recover its defence costs from Chandler pursuant to the following indemnity clause:
 
“[Chandler] indemnifies Coles in respect of any loss … or expenses (including legal costs … directly in connection with [Chandler’s/Ready’s breaches of the services agreement/negligent acts].”
 
In the 2018 decision, the court found that Coles’ legal costs did not arise “directly in connection with” the negligence of Ready.[8]
 
In the present case, Coles once more sought to recover its defence costs against Chandler, but via the alternative route of damages in breach of contract.
 
The trial judge’s award to Coles against Chandler for the nominal amount $100, reflected the finding that Chandler did breach certain provisions of the agreement,[9] but that those breaches did not result in any loss.[10]
 
The Court of Appeal agreed, finding that as a matter of causation Coles’ costs in defending the claims by Ready and Mr Smith were as a result of Mr Smith’s unsuccessful claim, and not Chandler’s breach.[11] Coles was required to prove more than mere “but for” causation with respect to the costs incurred.[12]

Our observations
Defendants should be alert to changes in a plaintiff’s case. The decision affirms a “tough line approach’ in which plaintiffs will be held to their pleaded case.
 
The decision provides a reminder that, when apportioning liabilities between principals and contractors, close attention needs to be paid to the precise words of contractual indemnities and the correct identification of losses flowing from breaches of contract.

Posted by Senior Associate, Robert Mitas, and Paralegal, Jonathon Gilmour
[1] Smith v Coles Supermarkets Australia Pty Ltd t/as Coles Distribution Centre; Ready Workforce (A Division of Chandler Macleod) Pty Ltd v Coles Supermarkets Australia Pty Ltd; Coles Supermarkets Australia Pty Ltd v Chandler Macleod Group Ltd [2020] NSWCA 206.
[2] [73].
[3] [98].
[4] [99].
[5] Berry v CCL Secure Pty Ltd [2020] HCA 27 at [72].
[6] Coles Supermarkets Australia Pty Ltd v Ready Workforce (a Division of Chandler Macleod) Pty Ltd [2018] NSWCA 140.
[7] [193].
[8] [108].
[9] [194].
[10] [196].
[11] [207].
[12] [206].

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