Employers’ Insurance
Cases
Shinkwin v Quin-Con Ltd. and Nicholas Quinlan
[2000] ILRM 155 Supreme Court,
Smith J
In the Statement of Claim delivered on the 20th of September 1993 the Plaintiff alleges that the first named Defendant was at all material times the Employer of the Plaintiff. It also alleges in the Statement of Claim that the second named Defendant was the controlling shareholder in the family busi ness and was the supervisor and controller of the Plaintiff in and about the carrying out of his duties in the Defendant factory premises.
It is also alleged that on the third of August 1993 when the Plaintiff was working on an electrical circular saw that his right hand came in contact with the circular saw and he suffered a severe injury to his right hand. De fences were filed on behalf of both Defendants denying all allegations and pleading contributory negligence on the part of the Plaintiff. During the course of the trial an amended Statement of Claim was delivered in which it is alleged that the Plaintiff was, at all material times, in the lawful employ ment of the Defendants, or either of them, and was then under the specific control and supervision of the second named Defendant as his employer and also as agent for the first named Defendant.
The evidence in this case has established that the Plaintiff was born on the 11th of November of 1972, he left school at 15 years of age. In the years 1988/89 he did a training programme with FAS, subsequently he did some
work experience with the Defendant company, that’s the first named Defen dant, for a few weeks.
Sometime later he was contacted by the son of the second named Defen dant, namely Nicolas Quinlan junior, and he was offered a job which he ac cepted. He was then 17 years of age.
Eight months or so before the accident he was asked to work on the circu lar saw in the machine room in the factory premises. There was a jig at tached to the saw, this jig was difficult to operate because it was stiff. There was alsoa galvanised steel angle along side the top of the saw. The Plaintiff regarded the galvanised steel angle as the dust extractor. The Plaintiff was never made aware that this dust extractor was also a guard. According to the Plaintiff there was a four inch gap between the top of the blade of the circular saw and the so-called guard. When the Plaintiff was moving the jig on the occasion of the accident towards the saw, the jig slipped and his hand came in contact with the revolving circular saw. It was never the practice to turn off the saw and move the jig in and out, that is according to the Plaintiff.
Paul Quinlan, who is the son of the second named Defendant, said in evi dence that he allowed the Plaintiff, or permitted him to move the jig out if the blade was rotating; not to move the jig in towards the blade if it was ro tating. According to the evidence of the safety inspector, namely Mr. Flynn, he said he interviewed Paul Quinlan and that Paul Quinlan admitted to him that he, Paul Quinlan, took no steps to have the circular saw stopped when the jig was being moved in or out.
The Plaintiff stated in evidence that there was no guard on the circular saw. He did not consider the dust extractor to be a guard. Nicholas Quinlan junior, the son of the second named Defendant, stated in evidence that he did not show the Plaintiff how to adjust the guard. He also stated in evidence that the guard was permanently set low, that is that there was a gap of two and a half inches between the guard and the table top. The Plaintiffs case is that there was a four inch gap between the top of the blade and this particu lar guard. The Plaintiff stated that he was never instructed that he should stop the circular saw when moving the jig in and out.
The Plaintiffs case against the second named Defendant is that he was a manager of the small family run business. He stated that Nicholas Quinlan senior was in and out of the machine shop where he was working, on a regu lar basis. He stated that sometimes Nicholas Quinlan senior even helped him out with the work that he was doing and the Plaintiff stated that on many occasions Nicholas Quinlan senior saw him using the saw and setting up this particular jig.
It appears from the evidence that if the circular saw was turned off it could take anything from eight and a half minutes to 10 minutes before it ceased revolving, unless of course it was assisted by a push stick to slow it down. This switching off of the circular saw had also the effect that it inter fered with production in the premises.
The machine in question was inspected by inspector, Mr. Flynn, the safety inspector with the Health and Safety Authority, on two dates; namely the 9th of September 1993 and the 12th of September 1993 – I think I have the dates correct. According to Mr. Flynn he spoke to the two sons of the sec ond named Defendant; namely Nicholas Quinlan junior and Paul Quinlan. It appears from the evidence of Mr. Flynn that there was in fact a guard at tached to his saw which is also a dust extractor, but this guard according to Mr. Flynn was not adjusted on his visit, it’s to cover this particular saw. He stated that it could of course, if properly adjusted, cover the saw.
He stated that the Plaintiff could have adjusted this particular guard when moving the jig if properly trained and/or supervised so to do. He also noted dust in the channel on the bench which would have made it difficult to operate the jig in question. Mr. Flynn also considered that there were breaches of the Woodworking Regulations of 1972.
The evidence from Nicholas Quinlan junior was that the guard was per manently set, and that accords in fact with the evidence of the Plaintiff, that he never adjusted the guard and he was not aware in fact that the guard was adjustable. Nicholas Quinlan senior, that is the second named Defendant, stated in evidence that he wasthe manager of this small family run business. For two and a half weeks, he said, out of every six weeks he was on the road, leaving him present in the factory premises for three and a half weeks out of every six weeks. The business was a family business which included Mr. Quinlan senior and his two sons and a few other employees.
Mr. Nicholas Quinlan senior stated that he saw the Plaintiff use the cir cular saw. He stated that there was in fact a guard attached to the saw and he has no recollection of ever telling the Plaintiff to stop the blades when adjusting this particular jig. He agreed in cross-examination that there was no system of work in the factory and he took no stand to make the machine as safe as possible and he failed to get insurance for his employees in 1989. The son, Nicholas Quinlan junior, also gave evidence – he stated that he did not show the Plaintiff how to adjust the guard. He stated that the guard was permanently set low. This, I find hard to accept, because if the guard was permanently set low the Plaintiffs hand could not in fact have come in con tact with the saw and accident could not have happened.
Mr. Hickey, on behalf of the second named Defendant, submitted to me that there were two questions for my consideration. The first is whether the Plaintiff was employed at all by the second named Defendant, and if not then whether the second named Defendant owed a duty of care to the Plaintiff in so far as the condition of the circular saw was concerned.
Mr. O’Driscoll on behalf of the Plaintiff submitted that the second named Defendant was negligent in failing to properly train and/or warn the Plaintiff in relation to the dangers inherent in the work that he wasobliged to do. He submitted that the principles of law, as laid down in the case of Donoghue versus Stevenson applied in this case, that is that one must take reasonable
care to avoid acts or omissions which one can reasonably foresee would be liable to injure your neighbour.
Mr. O’Driscoll submitted that the Plaintiff was the neighbour in so far as Nicholas Quinlan senior was concerned, and that he, Nicholas Quinlan sen ior, was in breach of his duty of care which he owed to the Plaintiff. In so far as the first named Defendant is concerned, that’s Quin-Con Limited, that company is now in liquidation. It has no assets, in fact in this case, the Plain tiff himself became a worker in this factory as a young recruit at 17 years of age. This was his first job. He knew nothing about safety regulations or what
precautions he should take for his own safety. He knew nothing about limited liability for the company.
I am satisfied that he received no training in the work that he wasobliged to do.I am satisfied that he received no warnings as to the dangers that were inherent in the work that he wasobliged to do. I am satisfied that the system of work was unsafe, the circular saw had no effective guard. There wasa guard, as such, which was also used as a dust extractor. This guard, I am satisfied, was permanently in a fixed position and at least four anda half inches above the top of the saw. It seems to me, from the evidence, that the Plaintiff was probably employed by the first named Defendant, and that the first named Defendant; that is the company; was negligent in failing to pro videa safe place of work and a safe system of work. What concerns me most
is the relationship between the second Defendant Nicholas Quinlan senior and the Plaintiff.
The Plaintiff regarded the second named Defendant as his boss. The sec ond named Defendant was in my opinion, or did in my opinion, owe a duty of care to the Plaintiff as manager of the factory premises, and I am satisfied that he failed in that duty in that he failed to provide proper training for the Plaintiff. He failed to warn the Plaintiff of the dangers inherent in the work that he wasobliged to do. He failed to ensure that the guard was at all times properly adjusted over the saw and he failed to ensure that the saw was switched off at all times when the jig was being moved.So there must be a finding of negligence against both Defendants; and I am satisfied that there is no evidence of any contributory negligence. In so far as the Plaintiff is concerned he is too young and inexperienced in the work that he wasobliged to do.
The injury, according to Mr. O’Connor the plastic surgeon, was significant injury to the right hand. The index, middle and ring fingers of the right hand were virtually amputated. He has now three short stumps instead of three fingers. His right thumb has also been stiffened at the top joint, the result is a right hand with very poor function and with virtually no grip. The loss of the fingers is also a significant cosmetic disfigurement.
It is however possible for the Plaintiff to do certain categories of work of a light nature, however, heavy manual work and clerical work are out as he is now obliged to write, as such, with his left hand.
Mr. Des White, a rehabilitation consultant, stated in evidence that retrain ing was the only option for the Plaintiff, that is going back to secondary school and completing his Leaving Certificate and then advancing himself further. This seems to be unlikely as the Plaintiff left school over 10 years ago at 15 years of age. The Pbintiff will have difficulty in getting suitable employment. He can drive and possibly do some light security work. His further earning capacity, in my opinion, has been reduced by as much as 50 percent.
If employable at present he would expect to earn 200 to 300 pounds per week. His earning capacity at present is reduced to approximately 125
pounds a week. That is a loss that he would suffer for the rest of his life.
The actuary, Mr. Brendan Lynch, has given evidence that the loss of one pounds per week until the age of 65 years is 1,166 pounds. A modest reduc tion of five percent – this is a modest reduction – reduces that figure to 1,108 pounds.
The total sum then for future loss of earnings comes to 138,500 pounds. There is also the loss of wages to date, that’s four and a half years, at ap
proximately 175 pounds per week, that works out at 9,000 pounds per an num, for four and a half years, I make a calculation of 40,500 pounds.
The general damages I am assessing as a sum of 125,000 pounds.
So in my calculation, the total amount of the judgment is 304,000 pounds.
JUDGMENT delivered on the 21st day of November, 2000 by FENNELLY J.
The present appeal concerns one principal issue namely, whether the second defendant was correctly held liable to the plaintiff for serious injuries he sus tained in an accident at the factory premises where he was employed by the first defendant. The first defendant was uninsured, had no assets and did not defend the claim. Hence the plaintiffs wish to succeed against the second defendant, the effective sole shareholder and controller of the first defendant. The award was £304,000. The plaintiff lost several fingers in his right hand. Damages are not in issue on the appeal.
The plaintiff cross-appeals against the failure of the trial judge to find that he wasemployed by the second defendant, an issue which does not arise if he succeeds on the principal issue …
In order to resolve this argument, I would take two points at opposite ends of a spectrum. On the one hand, a person might be the sole effective and controlling shareholder in a business run by a company but have no involvement in its day to day operations. He would have control of the company but not of the manner in which it conducted its operations. It is clear that such a person would not, without more, be responsible to employees injured by the negli gent acts of the company and, in particular, the failure of the company to ensure that there was a safe system of work in operation in its factories. That would disregard the separate legal character of the company, the principle of limited liability and the rule in Salomon v Salomon [1897] AC. 22. Counsel for the plaintiff does not suggest otherwise.
On the other hand, any employee owes to his fellow employees a duty to exercise at least such care in the performance of his work that he does not cause direct injury to his fellow workers. An example, mentioned in the course of argument was the careless dropping of a hammer by one worker on the foot of another.
The second defendant, it seems, falls between these two stools. He is the dfective sole shareholder and effective day to day manager. I would reduce the issue to this: did he involve himself so closely in the operation of the fac tory and, in particular, in the supervision of the plaintiff as to make himself Personally liable for any of the acts of negligence which injured the plaintiff?
The evidence discloses that the plaintiff dealt personally with the second de fondant from the beginning. It is true that the latter’s two sons were more physi cally active on the factory floor. The second defendant was often absent from the premises. Nonetheless, it was the second defendant who, about eight months hl!fore the accident approached the plaintiff about using all the machines. He was always in and out of the machine area if the shop was busy, saw the plaintiff on the machine on at least one occasion. He repeatedly warned the employees, on hiH own evidence, that there was no insurance and was aware of a history of ac
<•.idents that made it impossible to get insurance. He gave instructions about not playing football for the same reason. All of these factors, even though partially cli11puted by the plaintiff, demonstrate the intimate involvement of the second dPfondant in the management of the factory and supervision of the plaintiff, in pnl’ticular, and his consciousness of the danger of accidents. It is in this context thnt his concession, in cross-examination, that he was in undisputed control of tlw factory becomes significant.
McCarthy Jin Ward v McMaster [1988] 337 at page 349 declared his un willingness to “dilute the words of Lord Wilberforce…”. We are here concerned only with the first stage of the two stage test adopted by Lord Wilberforce in tlw passage from Anns v Merton London Borough [1978] 728 at 752:
“First, one has to ask whether, as between the alleged wrongdoer and the per Non who has suffered in damage there is a sufficient relationship of proximity OI’ neighbourhood such that, in the reasonable contemplation of the former, cnrelessness on his part may be likely to cause damage to the latter … ”
‘l’lu, criterion of “control” which is proposed in this case is not an addition to tho toHt for the existence of proximity. The open textured language of Lord Willberforce leaves wide scope for argument as to the character of “proximity or fl1’iRhbourhood”. Clearly it involves more than a mere test of foreseeability of’ dnmage. The assessment of the relevance of control as well as its nature
and degree will depend on the circumstances. Dalaigh C.J. in Purtill v Athlone [1968] I.R.205 at 213 noted that “the defendants employees were
in charge and control of the detonators ” which caused injury to the plaintiff in that case. In my opinion some assessment of the element of control, in the sense of “control of the circumstances” mentioned by Gannon J in the Tulsk case, isa useful guide to the decision as to the existence ofa duty of care.A person cannot be held liable for matters which are outside his control. He will not be, as the defendant in Ward v McMaster was not, in control of the plaintiffs independent actions and should be responsible in law only for matters which are within his own control.
In my view, the second defendant, on the particular facts of this case,placed himself ina relationship of proximity to the plaintiff. He had person ally taken ona young and untrained person to work in a factory managed by him and personally put him to work upon a potentially dangerous machine over which he exercised control to the extent of giving _some though com pletely inadequate instructions to the workers. He was bound to take appro priate steps to warn the plaintiff of such obvious dangers as failing to stop the circular saw from revolving while adjusting the jig or to ensure that it was guarded. In his supervision and instruction to the plaintiff, he failed to do these things and was consequently negligent.
I do not think the decision in Sweeney is relevant, despite its superficial resemblance to the present case. The plaintiff was also the victim of an acci dent at the hands of an uninsured corporate employer operating, in that case, a quarry. He obtained a judgment against the company but this was unsatis fied and he was left to prove in the liquidation. He tried to fix the defendant, Duggan, with liability in a separate action on the basis that he was the prin cipal shareholder as well as the quarry manager. The principal basis of the claim, however, was that Duggan should have seen to it that the company
was insured. His failure to do so caused damage to the plaintiff, but the claim sounded in economic loss. Insofar as the claim was made for damages for per sonal injury it was statute barred. It emerges clearly from the judgment of MurphyJ on the appeal that the claim failed because the defendant, Duggan, could not be undera greater obligation to the plaintiff in respect of insurance than was the company, which was his employer. The plaintiff failed to estab lish that sucha term should be implied into his contract of employment.
Hence, his claim also failed against Duggan.
Here the plaintiff makes his claim directly in negligence against the second defendant, not as employer or as shareholder but asa person who had placed himself by his own actions in such a relationship to the plaintiff as to call upon himself the obligation to exercise care.
It is not necessary, on the facts of the present case to express an opinion on the issue raised in the argument as to the potential exposure generally of fac tory managers to personal liability. Counsel for the defendant points to the serious implications, inter alia, for insurance and industrial relations of such liability. It may, however, be relevant to observe that there has never been any doubt as to the right of the employer to be indemnified by an employee who, in the course of his employment, negligently causes injury to another. (See McCarthy J in Sinnott v Quinnsworth [1984] ILRM 523 at 537). Counsel for the plaintiff was prepared, if necessary, to cross that bridge. In the event,I find it unnecessary to do so, because of the special facts of the case.
In the light of what I have said, it is unnecessary also to decide whether, as the plaintiff asks, the plaintiff was employed by the second defendant.I would dismiss the appeal.
Kelly v Michael McNamara
High Court, 5 June 1996
Budd J.
The plaintiff is a 49 year old carpenter, a married man with five children of whom the three youngest aged 18, 16 and 12 are still at home. He was born on the 2nd July, 1946, was brought up near Nenagh and lives with his family in Nenagh. Over his 17 years as a carpenter in the building industry, he has worked around Ireland and, indeed, for some three years, 1984 to 1987, in England. In late 1988, he worked for about two or three months ona McNa mara site in Nenagh. After Christmas, he phoned his contact, Denis Leonard, and gota job with him working on McNamara sites in Shannon for some six months and then for three months at Easons in Limerick. Denis Leonard paid him. He was doing very long hours and Saturday and Sunday work; so when he got work nearer his home he took this. In July 1991, he contacted McNamara’s again and spoke to Brian Quill, their Accountant, on the tele phone. Mr. Quill put him in touch with Joe Hynes, who was in charge of their job at Moons, the well known large store in Galway. He was invited to call to their office at Moons and he did this some four or five days before he began work there. On his arrival there, he met Eugene Hyland and Brian Quill. Mr. Hyland asked if he was coming to work for them and the plaintiff said that this would depend on terms and that he had his C2 Revenue form. He was asked if he could bring some men with him and he said that he would see what he could do and that he would need £9 per hour for skilled tradesmen
and £7 for unskilled men. The plaintiff is adamant that he then said words to the effect that: –
“The one thing is, whoever is on site, we have to be covered by your insurance”. Mr. Hyland’s reply was:
“You are a bit expensive if you want to be covered at £9 per hour”. The plaintiff says that he then agreed to a rate of £8 per hour for skilled tradesmen and £6 for labourers and that both Mr. Hyland and Mr. Quill agreed to this. He says that it wasan integral part of this agreement that the defendants would provide insurance cover in respect of liability to himself and his men.
Brian Quill,a Quantity Surveyor in the employment of the defendants for some seven years before 2nd September, 1991, was the last witness called.
However, as his evidence was relevant to this issue with regard to insurance cover, I propose to set out his evidence on this nett issue at this stage. His version of the meeting at Moons some days before the plaintiff started work was that he met the plaintiff with Eugene Hyland and Joe Hynes in the site office. James Kelly said that he had a C2 and a rate was agreed after James Kelly had looked for £9 and £7 which was negotiated down a pound from that. He said that their own craftsmen were being paid £5.80 per hour and a general operative was on £5.30 per hour. James Kelly was given the rates for an independent sub-contractor and he was to cover his own insurance. Under cross-examination, he asserted that the rate agreed with James Kelly was such that he was meant to cover himself by insurance. He conceded that McNamara’s had never required the plaintiff to produce his insurance policy. He agreed that with labour only sub-contractors, it was the job of the defen dant’s foreman to ensure that the men had the necessary equipment and, furthermore, he agreed that the defendants’ foreman would say what work was to be done. He also agreed that the defendants had their own safety offi cer and that they were responsible for safety on the building site.
I pause at this point to comment that neither Eugene Hyland nor Joe Hynes were called as witnesses. I accept the plaintiffs evidence that after this conversation at the site office, which was a brief and friendly conversa tion in which he was requested to come and work, and to bring men with him whom the defendants knew would be as competent and trustworthy as they regarded him to be, he was left under the impression that the defendants would have insurance cover in the usual way for those employed by the de fendants and under their control and management on a building site. I am aware that main contractors in Ireland in the past may have built large ho tels and even airports without any written agreement between them and the employer, nevertheless, in this day and age I find it incredible that a respon sible main contractor would not have insurance cover for labour only sub contractors. If responsibility for providing such cover was going to be imposed on the sub-contractor, then I would certainly expect this to be made crystal clear to the labour only sub-contractor and I would expect not only that this would be put in writing to the sub-contractor but there would also be an ex plicit requirement that he produce written evidence from an insurance com pany to the effect that he has the requisite cover in place …
In cross-examination the plaintiff made clear that on the Galway job he was doing all kinds of building work such as demolition and shuttering. Previ ously he had worked on three contracts in the Nenagh area and for these he had used his own son as his helper. When he went to the site in Galway, he transported the three men who went with him and he bore the cost of travel. The plasterer, James Ryan, who went with him had two or three trowels. He himself had his own small tools and saws. The defendant provided the rest of the tools and equipment including the shovel used by Matthew Fogarty. He paid the plasterer £250 per week take home pay and Matthew Fogarty £150 per week take home pay. While he hired them and agreed their rates, it was from Joe Hynes and Kevin Greene that they received their instructions. Theoretically, he could dismiss them but so could the defendants and in any event such a situation had never arisen with any men he had brought
……
The duties imposed under the 1975 Regulations, by Regulation 5, are im posed upon “contractors” as defined in those regulations. Regulation 3 defines “contractor”: –
“Contractor means a contractor or an employer of workmen undertaking any of the operations or works to which these regulations apply, or any person who carries out work for a fixed or other sum and who supplied the materials and labour (whether his own labour or that of another) to carry out such operations or works or supplies the labour only”.
I understand a contractor to be a person who contracts to furnish supplies, or to perform any work or service at a certain price or rate or who undertakes work by contract. In my view, a contractor can include the main contractor being a legal person who contracts … to perform any work … at a certain price or rate, notwithstanding that he neither works himself nor suppliers goods or services nor employs workmen, but employs independent contractors or sub-contractors to carry out the works. I think that the employer of an independent contractor can himself be a contractor within the meaning of the Regulations by virtue of his arrangement with another person whereby he has contracted to perform given works or services at a particular rate; I should add that the exception to this would be where the employer is himself the person commissioning the works. In short, I think that the concept of contractor includes the main contractor as well as all sub-contractors …
On the liability issue, Counsel for the defendants argued that the plaintiff, be ing an independent contractor and not a direct employee, was not covered by the provisions of Section 12 or the Regulations. H referred to Regulation 3 of the Construction (Safety, Health and Welfare) Regulations, 1975 S.I. No. 282 of 1975 and in particular the interpretation of”contractor” in Regulation 3.
‘”Contractor’ means a contractor or an employer of workmen undertaking any of the operations or works to which these Regulations apply, or any person who carries out work for a fixed or other sum and who supplied the materials and labour (whether his own labour or that of another) to carry out such operations or works or supplies the labour only”.
He relied on the following facts:
( I) Every place at which any person has at any time to work shall be made 11 nd kept ina safe condition and in addition to the foregoing there Hhnll, so far as is reasonably practicable, be provided and maintained Hofe means of access to and egress from every such place.
(:.l) Where any person is to work at a place from which he will be liable to fitllu distance of more than two metres (6.56 ft.), then, unless the place iH one which affords secure foothold and, where necessary, secure hundhold, means shall be provided, so far as is reasonably practicable, by fencing or otherwise, for ensuring his safety”.
…….
to ensure the safety of the personnel working on this site. A main contractor, while he is in occupation of a construction site, owes a duty of care as the occupier thereof. The main contractor has the duty of organising the work so
as to ensure the safety of everyone working on the site, although the scope of the duty will depend upon the nature of the work and the experience of the personnel involved. Where the sub-contractor is only providing labour and the main contractor is organising the work and supplying the materials and equipment, then the main contractor is very much responsible for the safety standards on the building site. I find that in the circumstances on this site the defendants were in control and responsible for organising the works. They were in charge of where the concrete blocks were positioned on the
ground floor causing a difficulty of access. …
1. The plaintiff negotiated a rate for himself and his fellow workmen;
2. The plaintiff employed workmen and was responsible for their PAYE and PRSI;
3. The plaintiff made his profit on the job from his own labour and the labour of his employees and he paid them less than he was paid was their work;
4. The plaintiff was paid fortnightly and he paid his employees weekly;
5. The plaintiff was employed on this as a once off job in Moons’ premises only;
6. The plaintiff had the right to dismiss his employees;
7. The set of accounts produced covering 1989 to 1991 by the plaintiffs accountant showed that he purchased materials, paid telephone, ESB and insurance bills all of which were indicative of a person conducting business on his own account. Furthermore, the preliminary letter dated 11th September, 1991 from his Solicitor stated: – “our client was em ployed as sub-contractor to you”. I find that this letter was written on the instructions of the plaintiff given by his wife to their Solicitor and
I find that Mr. Fogarty was in fact under the overall direction of the defen dants’ employees although it is strictly correct to say that the plaintiff did ask him to help him with the shuttering and to locate the trestles on that Monday evening.I have no doubt that the plaintiff, Mr. Ryan and Mr. Fogarty were all working under the general direction of Kevin Greene and Joe Hynes.
Counsel for the defendant stressed that the onus was on the plaintiff himself to find and to put up the scaffolding. He also urged that the plaintiff was, in any event, responsible for contributory negligence to a very high de gree. First, this accident was not caused by mere inadvertence as the plaintiff had walked on top of the wall on several occasions knowing that this wasa risky and dangerous practice. Furthermore, on the evidence of Kevin Greene there had been ten large and ten small trestles on this site and they were still there to be located. The plaintiff being an experienced carpenter knew very well himself the safe and appropriate way to do this job and he had never asked Mr. Fogarty to check with the defendants as to the location of the trestles …
In the present case before me, it is appropriate to apply this test as to who was in control. I have no doubt whatsoever but that the defendants were in overall control of the operations on the site and were responsible for the arrangements of the sequence of work and for the provision of equipment and the ensuring of safety standards on the site.
In my view, the object of the Act and the Regulations is to protect those persons who, broadly speaking, are employed on the building site in the con struction work or work incidental to it. In general terms I accept the princi ple stated by Walsh J. in Roche v P. Kelly & Co. [1969] IR 100 at page 110 to the effect that an independent contractor is “a person employed” or “a person working ina factory when he is there working for the purpose of the factory or when his work there is incidental to the purpose of the factory”. In fact Mr. Roche was injured when he fell from a height while erecting a barn. Ironi cally, since part of his damages were premised on a claim based on actuarial evidence for loss of potential earnings as a roof contractor, he was many years later involved in a fatal accident when he fell from a roof on another construction site. The principle is the same whether it was a factory ora con struction site. I have no doubt that the defendants were responsible for insti tuting and maintaining a safe system of work; for the organisation of the work force and for giving overall the necessary instructions and supervision made the plaintiff work under time pressure and take short cuts by working from a perilous footing on top of the shuttering battens.
Counsel for the plaintiff argues that it would be an unreal construction of “contractor” in Regulation 3 of the 1975 Regulations to regard the plaintiff as a contractor within this meaning in the context of the circumstances in this case. I accept the argument that the main cause of the plaintiff’s injury was the fail ure in the organisation, institution and maintenance of a safe system and work programme by the defendants as main contractors. I accept that there was a breach of Section 12 of the Act and of Regulations 47 and 48 by the defendants. Counsel for the plaintiff urges that the breach of statutory duty on the part of the defendants was of such high culpability that the plaintiff should not be found guilty of any contributory negligence. I accept that the defendants were overwhelmingly at fault and I accept the principles enunciated by the Supreme Court in Kennedy v East Cork Foods [1973] IR 244 as implemented in practice by Barron J. in Dunne v Honeywell Control Systems Ltd. [1991] ILRM 595. Nevertheless, I do not think that the plaintiff as an experienced carpenter and an obviously responsible and competent tradesman can escape all liability for succumbing to the taking of an obvious risk by going on a precarious foothold on the battens on top of the shuttering. I accept that he was striving to fix the shuttering and was reacting to the time pressures imposed on him by the im minent arrival of the readymix concrete ordered by the defendants. His culpa bility is minimal as compared with the defendants’ failure to comply with the terms of the statute and the Regulations. Nevertheless I feel that a small por tion of the fault must be ascribed to the plaintiff in putting himself in peril, albeit he was reacting to a very understandable time pressure and he was working under difficulties of access created by the defendants in their failure to keep the working area on the ground floor clear of concrete blocks and in their failure to provide a safe working platform and safe access and also by their failure to have available appropriate scaffolding. I should add that I have no doubt that Matthew Fogarty was a responsible person to send for the trestles and his return empty handed indicates that such trestles were not readily available. It is quite clear that Kevin Greene was in and out of the area, and indeed on a ladder nearby when the plaintiff fell, and I have no doubt that he was in general aware of the perilous way in which the work was being done under the time constraints. In view of the overall responsibility of the defen dants for safety on this site, the defendants’ supervisory staff should have en sured that the trestles were located and if there were in fact twenty sets of trestles on this site, then they would have known in general terms where they were, and should have ensured that they were fetched and used. No doubt the imminent arrival of the concrete allowed the defendants to lapse intoa mind frame in which they failed in their duty to ensure overall safe procedures and systems on the site. In all the circumstances I think that the defendants were
primarily and chiefly liable but that the plaintiff was guilty of 10% contributory negligence.
Bernadone v Pall Mall Services Group and Others;
Martin v Lancashire County Council Court Of Appeal (Civil Division) [2000] IRLR 487
PETER GIBSON LJ
There are two appeals before us, each raising the same primary issue. Where there has been the transfer of an undertaking to which the Transfer of Un dertakings (Protection of Employment) Regulations 1981 (‘TUPE’) apply, isa liability of the transferor in tort to an employee, which has accrued before the transfer, transferred by TUPE to the transferee? Differing answers have been given to that question in the High Court in the two cases, and in earlier county court cases. The second case also raises a further issue in circum stances where the transferor had effected an employers’ liability insurance policy: is the insured employer’s right to an indemnity under the policy in respect of a liability to an employee transferred by TUPE to the transferee? Both issues are of some general importance.
In the first case the claimant, David Martin, alleges that while working for the refuse department of the defendant, Lancashire County Council (‘the council’), between 1978 and 1993 he suffered progressive injury to his back and neck and on 23 February 1991 a specific injury to his wrist. Bys 3 Em ployers’ Liability (Compulsory Insurance) Act 1969 (‘the 1969 Act’) the coun cil, like other public bodies, are exempted from the requirement ins 1 of that Act to have employers’ liability insurance. Such bodies are expected to be their own insurers. In fact, the council did have a policy, but one which carried a large excess, so large that the insurance would not have enabled the council to recover under it.
On 13 May 1993 the council transferred their entire waste disposal and refuse services including the business in which Mr Martin worked to an in dependent waste disposal company, Lancashire Waste Services Ltd (‘LWS’). That was effected by a Transfer Scheme and Business Agreement dated 15 May 1993 and made pursuant to s 32 of and Sch 2 to the Environmental Pro tection Act 1990. By clause 9.2 it was expressly stated that TUPE should apply and that pursuant thereto the contracts of employment between the council and its employees (as defined; Mr Martin was named as such an em ployee) and certain collective agreements would have effect after the transfer as if originally made between LWS and the employees (or their trade union). For the sake of completeness I should mention two further provisions of the agreement. Clause 3.2 provides for the inclusion in the transfer of all liabili ties of and incurred in connection with the business and assets which were transferred (save for any taxation liability already incurred). Clause 8.2 pro vides that LSW should indemnify the council against all liabilities in respect of any act or omission on the part of the council prior to the transfer, pro vided that where any such act or omission resulted in a third party making a claim or suffering a loss in respect of injury, details of that claim or loss or incident are supplied by LWS to the council within 28 days of the transfer. But we have not heard argument on the effect of those clauses, and I say nothing further about them.
Mr Martin commenced proceedings against the council on 21 August 1995, claiming damages for personal injuries. By their amended defence the council took the point that by virtue of TUPE any right of action or cause of action possessed by Mr Martin and arising from his employment by the coun cil became on and after 13 May 1993 a right or cause of action against LWS. The case was then transferred to the High Court where His Honour Judge Fawcus, sitting as a Deputy High Court Judge, was asked to determine the following matters as preliminary issues: (1) whether the rights of [Mr Mar tin] as against [the council] have been transferred to [LWS] by virtue of [TUPE]; (2) whether [Mr Martin’s] claim ought to be struck out as disclosing no cause of action against the [council]. The judge on 12 February 1999 de clared that TUPE did not transfer liability in tort from the council to LWS. The judge adopted the reasoning of His Honour Judge Neligan in Cramer v Watts Blake Bearne & Co. plc, unreported, 31 December 1997. The second issue did not arise. He gave permission to appeal.
In the second case the claimant, Theresa Bernadone, was employed by the first defendant, Pall Mall Services Group Ltd (‘Pall Mall’), as a catering as sistant in St Ann’s Hospital in North London. On 18 December 1996 she hurt her hand in an accident at work. On 1 April 1997 the second defendant, Ha ringey Healthcare National Health Trust (‘the Trust’), took over the activity carried out by Pall Mall. Until that takeover, Pall Mall had an employers’ liability insurance policy (‘the policy’) with Independent Insurance Ltd (‘In dependent’) in force. In 1998 Mrs Bernadone commenced proceedings in the Central London County Court against Pall Mall for damages for negligence and breach of statutory duty under s 2 Occupiers’ Liability Act 1957. Mrs Bernadone then joined the Trust as a defendant and on 6 October 1998 amended her particulars of claim to allege in the alternative that when the Trust took over from Pall Mall there was a transfer of an undertaking to
which TUPE applied and that Pall Mall’s liability to compensate her passed to the Trust which became liable for the acts and omissions of Pall Mall. In its amended defence, Pall Mall admitted and averred that there wasa rele vant transfer to which TUPE applied and that any liability rested with the Trust. The Trust by its defence denied that liability had been transferred to it under TUPE. Alternatively it averred that by TUPE the rights of Pall Mall under the policy were transferred to the Trust. The District Judge ordered thata preliminary issue be heard in the High Court. Two preliminary issues were agreed before the Master: (1) whether the Trust had become liable for the acts and omissions of Pall Mall by virtue of TUPE; (2) whether the policy by virtue of TUPE was deemed to have been entered into by the Trust. The second issue was later amended by consent to ‘whether the right of [Pall
Mall] to an indemnity in respect of [Mrs Bernadone’s] claim under the policy. \
.. is by virtue of [TUPE] transferred to [the Trust].’ On 5 March 1999a third party notice was issued by the Trust to Independent. On 25 May 1999 Inde pendent was given liberty to appear at the hearing of the preliminary issues.
The preliminary issues came before Blofeld J. He was not referred to the decision of Judge Fawcus. He answered both preliminary issues in the affirma tive, holding that TUPE did transfer the liabilities in tort of Pall Mall to the Trust and that TUPE conferred on the Trust the right to an indemnity under the policy in respect of Mrs Bernadone’s claim by virtue of an implied term in Mrs Bernadone’s contract of employment that she would be protected by em ployers’ liability insurance. He ordered Independent to pay Mrs Bernadone’s and the Trust’s costs. He gave permission to appeal and cross-appeal.
On the second issue it is not in dispute, even by Mrs Bernadone whose argument had been accepted by Blofeld J, that he was wrong to hold that there was such an implied term. Whilst there is an implied term ofa contract of employment that the employee should not be required to do an unlawful act (such as driving on a public road without insurance), there is no implied term as to insurance under the 1969 Act, the object of which is that the em ployer should have insurance against his own liability for causing injury to his employees. In Richardson v Pitt-Stanley [1995] QB 123 this court held that non-compliance with the 1969 Act does not give rise to any civil liability for breach of statutory duty, even on the part of the directors ofa company who are, with the company, exposed to criminal sanctions for non-compliance with the 1969 Act. Mr Hand QC, for Mrs Bernadone, reserved the right to challenge the correctness of that decision if this case goes further. However, it is in issue before us whether the transferor’s rights under its employers’ liability insurance in respect of an employee are transferred by TUPE.
There are therefore two main issues for us to decide. The first is whether the liability in tort of an employer to an employee is transferred by TUPE. On this Mr Hand for Mr Martin and Mrs Bernadone argues that it is not trans ferred, as does Mr Walker QC for the Trust. Mr Lynch for the council and Mr Edelman QC for Pall Mall and Independent argue to the contrary. The second issue is whether Pall Mall’s rights under the policy were transferred …
It is not in dispute that TUPE must be given a purposive construction having regard to, and, so far as possible, consistently with, the Directive. In Bergv Hesselsen [1989] IRLR 447 the European Court of Justice held that under Article 3(1) of the Directive the transfer of an undertaking entailed the automatic transfer to the transferee of the employer’s obligations arising from a contract of employment or an employment relationship, subject to the right of Member States to provide for joint liability of the transferor and transferee following the transfer. Whilst an employee of the transferor was not obliged to remain in the transferee’s employ, the transfer took place even if the employees to whom the transferor owed obligations did not consent to the transfer. The second sentence of Article 3(1) of the Directive was said to enable Member States to reconcile the rule of automatic transfer with the principles of their domestic legal systems …
On the first issue, I start with the Directive. It is clear that its purpose is to safeguard the rights of employees on a change of employer by a transfer of an undertaking. The economic entity carrying on the undertaking after the trans fer will be the transferee, and in general the employees are more likely to be protected if the rights and obligations to be transferred are more rather than less comprehensive. But such rights and obligations must of course fall within the limiting words ‘arising from a contract of employment or from an employ ment relationship’. It would seem to me to be surprising if the rights and obli gations were to be limited to contractual claims and to exclude claims in tort. Why should there be such a dividing line (in accordance with the distinction in English law between tort and contract) in a European Directive? It is the more surprising when the language used in the Directive is broad (‘arising from’) and when it is not only a contract of employment but also an employment relation ship (which is plainly something different) from which the rights and obliga tions must arise. The European Commission guidelines and the remarks of Lord Slynn in the Wilson case which I have cited in paragraph 19 do not sup port the exclusion of non-contractual rights and obligations.
When one goes to TUPE, it is noticeable that the language does not mirror that of the Directive, although it is of course necessary to construe TUPE con sistently with the Directive if possible. Again one notes the width of the lan guage used in para (a) of reg 5(2): ‘all the transferor’s rights, powers, duties and liabilities under or in connection with’ the contract of employment. The rights etc are not limited to those under the contract but include those ‘in connection with’ the contract. That prepositional phrase is far wider and it does not sug gest that the rights etc need be contractual. That is supported by para (b) of reg
5(2). It is not just what is done by the transferor in respect of the contract that is deemed to have been done by the transferee but also anything done by the transferor in respect of the employee. That does not suggest that it is limited to what will result in contractual rights and liabilities. It is further supported by reg 5(4). That suggests that but for that paragraph the liability of a person to be prosecuted for, convicted of and sentenced for any offence would or might have been transferred, and that para (2) therefore cannot be limited to contrac tual rights and liabilities. Considerations such as these weighed with Balcombe LJ in Spence and with Mummery J in DJM International.
It is to my mind significant that by common consent all contractual rights and liabilities are transferred. They are not limited to those, which are still contingent. Thus fully accrued rights and liabilities are transferred. That demonstrates the far-reaching effect of TUPE. But if such contractual rights and liabilities are transferred it is hard to understand why tortious rights and liabilities are not transferred. There will be many circumstances, which enable an action to be brought either in contract or in tort or both. Take, for example, a case where the employee is injured at work and can claim both that the employer, who owed him a duty of care, has been negligent and that the employer has been in breach of an implied term of the contract of em ployment that the employer would take all reasonable care for the safety of his employee. In Matthews v Kuwait Bechtel Corp. [1959] 2 QB 57, this court rejected an argument that in such a case the plaintiffs cause of action was in tort and not in contract, holding that the employee was entitled to claim damages either in tort or for breach of contract. Mr Walker reserved the right to argue that that case was wrongly decided. But the decision (described by Lord Goff in Henderson v Merrett Syndicates Ltd. [1995] 2 AC 145 atp 187 as ‘of high authority’) binds this court, as he accepted. It would be very strange if the effect of TUPE was that the contractual claim of the employee was transferred so that the transferee alone became liable in exoneration of the
transferor employer but that the tortious claim remained enforceable against the transferor.
Does such a liability arise from the contract of employment (in the words of the Directive) or under or in connection with that contract (in the words of reg 5(2)(a))?I would not say that it arose under the contract, but I have no diffi culty in saying that it arose from or in connection with the contract. In this context the observations of Lord Wright in Wilson & Clyde Coal Co. Ltdv. Eng lish [1938] AC 57 are helpful. At p 78 he referred to ‘those fundamental obliga tions ofa contract of employment … for the performance of which employers are absolutely responsible.’ ‘The employer’s obligation’ was said atp 81 to in clude the provision of a proper system of working. The duty of care arises out of the relationship of employer and employee, and in my judgment any liability for its breach arises from and is in connection with the contract of employment.
In the present cases, although Mr Martin and Mrs Bernadone sued in negligence, they could have sued in contract for breach of an implied term to providea safe system or place of work. I would hold, in agreement with Blofeld J, that the liability in negligence was transferred to the transferee under TUPE. I do not accept the reasoning of Judge Neligan which was adopted by Judge Fawcus. The language of reg 5(2) is wide enough, without any express reference to tortious rights and liabilities for the reasons already given, and, so construed, accords with the Directive and its purpose.I shall come to the effect of TUPE in relation to employers’ liability insurance, but in any event it would be surprising if the insurance point could be determina tive of whether non-contractual rights and liabilities were transferred by TUPE. There are many large employers exempted bys 3 of the 1969 Act from having to take out employers’ liability insurance, the council included.
In Mrs Bernadone’s case, her claim against the council was not limited to that in negligence and also included a claim under s 2 Occupiers’ Liability Act 1957. By that section the occupier of premises owes the common duty of t·nrn to all his visitors. Mr Edelman submitted that Mrs Bernadone could only have been a visitor of Pall Mall for the purposes of her employment. Her pl(•111ling makes clear that it was in the course of her employment that she W(•nt. into the storeroom of the cafeteria at the hospital, when and where she
suffered her injury. Mr Walker and Mr Hand say that that is not sufficient, the duty under the Occupiers’ Liability Act being imposed on occupiers, not employers. In my judgment, the particular circumstances of the alleged li ability must be examined to see whether it did arise from or was in connec tion with Mrs Bernadone’s contract of employment. On the pleaded facts I would hold that there was a sufficient connection with the contract of em ployment and that that liability was also transferred.
Finally on the first issue I should deal with the argument of Mr Hand that if liability for personal injury was transferred under TUPE, that part of reg 5(2) that had that effect was ultra vires. That argument proceeds on the premise that the Directive does not provide for the transfer of tortious liabili ties and that TUPE therefore went wider than the Directive. For the reasons already given I do not accept the correctness of that premise.
I come now to the question whether the transferor’s rights under any em ployers’ liability insurance effected by the transferor are transferred by TUPE.
I have already referred to the purpose of the Directive as being to safe guard the employee’s rights on a change of employer by a transfer of an un dertaking and to the obligation on the court to construe TUPE purposively. TUPE, therefore, must if possible be construed in such a way as to ensure that on the transfer the employee is not deprived of rights against his em ployer, which he would otherwise have, had he continued to be employed by the transferor and arising out of or in connection with his contract of em ployment with the transferor.
For an employer not exempted bys 3 of the 1969 Act, it was his statutory duty under s 1(1) to insure against liability for ‘injury sustained by his em ployees and arising out of and in the course of their employment … in that business’. Although an employee does not have a right of action under the 1969 Act against the employer, the Act was enacted partly for his benefit because it enabled the employer to recover from his insurers the amount of any liability to the employee, whether in tort or in contract, arising out of his employment. If the employer becomes insolvent, the employee could sue the insurers direct under the Third Parties (Rights Against Insurers) Act 1930. The employee is thus protected while employed by the transferor employer.
There can be no doubt that on a transfer a liability which is transferred ceases to be enforceable against the transferor: see Allan. It is very unlikely that the transferee would have employers’ liability insurance which covered liability arising before the employee became the employee of the transferee. The transferee could become insolvent. Unless the employee had the same benefits and potential rights under the 1969 Act and the 1930 Act after the transfer as he had before, he could be seriously disadvantaged by the trans fer. That would be contrary to the purpose of the Directive and TUPE.
The transferor prior to the transfer has a vested or contingent right to re cover from his insurers under the employers’ liability policy in respect of the liability to the employee. On the basis of the conclusion reached on the first issue that obligation arising from or being in connection with the contract of employment is transferred by TUPE to the transferee. It follows that the trans feror’s vested or contingent right to recover from his insurers is a vested or con tingent right to recover from them in respect of a liability to his employee arising from or in connection with the employee’s contract of employment.
The question under Article 3 of the Directive and reg 5(2)(a) is whether the right against the transferor’s insurers is a right arising from or in connection with the employee’s contract of employment …
The transferor employer’s right is to recover from the insurers an indemnity in respect of the transferor’s liability arising from or in connection with the con tract of employment. That is the very liability, which the transferor was re quired to insure under the 1969 Act. True it is that that right is under the contract of insurance with third parties, the insurers. But the important point is that the right arises from and is in connection with the contract of employ ment, because the liability insured under the contract is sucha liability.
Sucha solution is, in my judgment, consistent with the purpose of the Di rective and of TUPE. Moreover it is just, because the transferor’s insurers have received premium in respect of this very liability and there is no good
reason why TUPE should be construed in such a way as to enable the insur ers to keep the premium but avoid liability …
For these reasons, in Mr Martin’s case I would allow the appeal of the coun cil, set aside the order of Judge Fawcus and declare that the rights of Mr Martin as against the council have been transferred to LWS by virtue of TUPE, and in Mrs Bernadone’s case I would dismiss the appeal of Mrs Ber nadone and the Trust from Blofeld J’s determination of the first preliminary issue and I would dismiss the appeal of Pall Mall and Independent from Blofeld J’s determination of the second preliminary issue.