Queensland Court of Appeal finds that a third party’s contractual indemnity against the employer in a WorkCover claim is void

A major development in Queensland’s workers compensation law occurred on Friday 13 September 2024 when the Queensland Court of Appeal handed down judgement in Bilson v Vatsonic Communications Pty Ltd (2024) QCA 171. This significant case dealt with the enforceability of a third party’s contractual indemnity asserted against the employer in an injured worker’s claim for damages brought under the Workers’ Compensation and Rehabilitation Act 2003 (Qld) (WCRA).

In an unanimous decision, the Court held that:

1. Section 236B of the WCRA provides that WorkCover Queensland (WorkCover) is not required to indemnify an insured employer for a liability arising under contractual indemnity between the employer and a third party; and
2. Section 236B further provides that an agreement between an employer and a third party is void to the extent it requires the employer to indemnify the third party.

The background

The injured worker/Plaintiff was employed by Vatsonic Communications Pty Ltd (Vatsonic) to operate a hydro vac truck to remove debris from drainage pits. Vatsonic had a contract with Townsville City Council (the Council) under which it supplied a hydro vac truck, vacuum hose and the injured worker to the Council under a wet hire agreement. This agreement required the injured worker to work in cooperation with workers employed by the Council, who used a Council truck with a crane and sling to manoeuvre the hose in and out of a drainage pit. As the injured worker was uncoupling the vacuum hose from the outlet valve of the truck, the hose unexpectedly flung out of his hand and struck him in the face. The injured worker instituted proceedings in the District Court at Townsville against his employer and the Council, claiming damages for negligence. In turn, the Council issued third party proceedings against Vatsonic which included a claim for indemnity pursuant to the agreement that was in place between Vatsonic and the Council.

Trial outcome

The District Court accepted the injured workers’ evidence that prior to the incident, there had been a departure from the system of work in that contrary to the standard practice, the Council employees were not to operate the crane for the purpose of moving the vacuum hose, whilst the injured worker was changing the hose from the truck’s outlet valve to the inlet valve. That movement of the hose by the crane led to a build-up of stored energy in the hose, causing it to spontaneously dislodge when it was released from the valve.

According to District Court Judge Coker, the Council was vicariously liable for the negligence of their workers in placing the injured worker at risk when they acted contrary to the standard procedure.

The court also found the injured worker’s employer liable for not having taken reasonable precautions, such as compiling a safe work method statement and/or carrying out a site assessment for the task when the risk of injury associated with the task’s performance was evident and foreseeable.

Liability in respect of the incident was apportioned by the trial judge at 70% against the employer and 30% against the Council.

In so far as the contractual indemnity relied upon by the Council against the employer was concerned, the Court held that the relevant clause was not ambiguous and clearly provided for the indemnity to apply to any injury or loss which arose from Vatsonic’s performance of the contract or negligent act. Having found that the worker’s injury directly arose out of the performance of the contract, the trial judge held that Vatsonic was required to indemnify the Council and that Section 236B of the WCRA was not applicable to the circumstances of the case.

Appeal outcome

WorkCover was a separate appellant in the appeal proceedings.

In a unanimous judgment handed down by Bowskill CJ, the Court of Appeal affirmed that both the employer and the Council were liable to the injured worker and upheld the trial judge’s apportionment of liability at 70/30 in the Council’s favour.

The Court of Appeal also agreed with the trial judge’s conclusion that the indemnity clause in the agreement between the employer and the Council was engaged and required the employer to indemnify the Council.

However, that portion of the appeal brought by WorkCover and the employer, in which it was asserted that the trial judge erred in constructing Section 236B as not voiding the indemnity clause, was successful. In that regard, Bowskill CJ observed that whilst the legislature’s intent of Section 236B was to reverse the effect of the well-publicized decision in Byrne v People Resourcing (Qld) Pty Ltd (2014) QSC 269, the words used in Section 236B(3) went further than that. Specifically, Bowskill CJ found Section 236B operates so that WorkCover is not required to indemnify the employer for an amount of an injured worker’s damages which the employer is obliged to pay a third party, in this case the Council, under an indemnity clause contained in an agreement between the employer and the third party. In addition, Bowskill CJ further held that Section 236B provides that the agreement between the employer and the third party is void to the extent that it requires the employer to indemnify the third party for any contribution claim made by the insurer against the third party.

In a welcome development for employers, the Court of Appeal observed that the plain meaning of Section 236B(3) of the WCRA is that the third party, namely the Council in this case, is prevented from enforcing the indemnity clause in the agreement against employer.

This decision will provide much needed certainty to employers and insurers alike in terms of the employer not being exposed to liability from contractual indemnities in workers compensation claims brought in Queensland.