An Independent Contractor is Not a Shield to Liability!

Summary

The Court of Final Appeal (CFA) decided in Luen Hing Fat Coating & Finishing Factory Limited v. Waan Chuen Ming (FACV 19/2009) that an occupier can be liable for injury caused by an independent contractor to the contractor's own employees, even if:

1. the contractor is apparently competent;
2. the work is not intrinsically hazardous; and
3. the Occupier lends equipment to the contractor that is not intrinsically dangerous, although it could be rendered unsafe if not used properly.

Full Update

Background

A factory operator (Occupier) engaged an independent contractor to attend its factory to repair a machine. The contractor and its worker attended the factory and used two pallet jacks and a bearing trolley (that belonged to the factory) to detach a part of the machine that weighed 1.5 tonnes. The part of the machine fell when being reinstalled owing to the unstable platform created by the two pallet jacks and bearing trolley. It landed on and crushed the Worker's legs.

The High Court ruled in favour of the plaintiff, holding the independent contractor liable for failing to provide the worker with a safe system of work and the Occupier liable under the Occupiers Liability Ordinance (Cap. 314). The Court of Appeal affirmed the trial judge's findings. The Occupier appealed to the CFA.

The Ruling

The CFA upheld the trial judge and Court of Appeal's ruling and found the Occupier liable for the accident. The CFA found a duty of care existed between the Occupier and the worker. The CFA applied the approach in Caparo Plc v. Dickman [1990] 2 AC 605 as explained by Lord Nicholls in White v. Jones [1995] 2 AC 207, where the test for finding liability was whether:

1. the loss was "foreseeable";
2. there was "proximity or neighbourhood";
3. the requirements of "fairness, justice and reasonableness" were satisfied.

Applied to the case, the CFA considered the salient points as:

1. The accident was "foreseeable". It was obvious that the method of work adopted by the contractor was dangerous.
2. There existed "proximity" between the Occupier and the worker, as the worker was on its premises. He was doing work that his direct employer (the independent contractor) was engaged to do for the Occupier. He was also using equipment on loan from the Occupier.
3. It was "fair, just and reasonable" to hold the Occupier liable as:
   
   
   1. The Occupier chose to engage an independent contractor who had to borrow makeshift equipment from it. It could have engaged an independent contractor that had equipment to carry out the work safely.
   2. The danger was to life and limb.
   3. The worker was in a vulnerable position who was not in a good position to protest against or veto the unsafe method of work.
   4. The Occupier knew of the unsafe method of work but took no steps to warn or stop it.
   5. The Occupier took a positive role in creating the danger by lending the contractor equipment it knew, or ought reasonably to have known, would be used to do the work in an unsafe method.

Conclusion

The take away here is that an occupier who engages an independent contractor who causes injury/damage to the employees of the contractor, may not be absolved from liability even if the contractor is competent, the work is not hazardous and the occupier lends equipment that is not defective or dangerous to use. This is primarily because the Occupier knew or ought to have known what would happen if the equipment was used to do work by a method that was unsafe.

With the issue of costs increasingly becoming the primary means of determining the choice of "independent contractor", it will be prudent for occupiers of premises to ensure (a) the works carried out by its contractor are done in a safe manner; (b) contractors working for them have effected adequate liability insurance coverage for both parties; and/or (c) there are relevant contractual indemnities/hold harmless clauses between them.