Management of contractors: Where to draw the line?

One of the most difficult aspects of work health and safety is the management of contractors. A recent judgment has highlighted some of the challenges in this area and how hard it can be to draw the line between being able to rely on the specialist expertise of your subcontractor and discharging your own health and safety duties.

Facts of the case

In SafeWork NSW v McConnell Dowell Constructors (Aust) Pty Ltd (No. 2) [2020] NSWDC 668 McConnell Dowell was convicted of an offence related to the death of an employee of a McConnell Dowell contractor, Brady Marine.

Brady Marine was contracted by McConnell Dowell to perform works associated with the construction of a ferry wharf. As part of that process Brady Marine was removing a number of large metal beams, known as "headstocks", using a barge on 1 March 2017. The headstocks were placed on the deck of the barge upright and unsecured. One of the headstocks unexpectedly tipped over and crushed and tragically killed a Brady Marine employee.

SafeWork NSW charged McConnell Dowell with a breach of its duty to ensure so far as reasonably practicable the health and safety of workers at work in its business or undertaking.

McConnell Dowell pleaded not guilty. It accepted that it owed a duty to the employees of Brady Marine, but denied that it had breached its duty. It pointed out that Brady Marine was a specialist and skilled contractor and that McConnell Dowell did not directly control the work performed by Brady Marine. Its key submission was that it was entitled to rely upon Brady Marine for the maintenance and proper implementation of safety systems, and that it was not reasonably practicable for it to be involved in any capacity in the application of those systems to every aspect of the work performed on the barge by Brady Marine. It also pointed out that it had provided safety training to Brady Marine staff and that Brady Marine itself had implemented comprehensive safety systems.

The decision

The Court considered the authorities which explored the obligations of principal contractors in relation to the employees of subcontractors. Russell DCJ noted that the authorities indicate that a principal contractor cannot delegate their duties to a subcontractor, but may in some cases be entitled to rely on the skill and expertise of a subcontractor. Where a subcontractor is appropriately skilled and the principal has taken steps to ensure that the subcontractor is required to and is in fact operating safely, the principal may be entitled to rely on the subcontractor to see that work is carried out safely.

However, ultimately, the Court concluded that McConnell Dowell had not discharged its duty by relying on the safety management undertaken by its subcontractor.

The key factors leading to that conclusion included:

• McConnell Dowell itself had a similar level of skill and expertise in marine construction to Brady Marine. This was not a case where the principal had engaged a subcontractor to complete a task which the principal was not itself competent to perform (or by extension, supervise).
• Under the contract, McConnell Dowell had an obligation to inspect the work site daily and the right to stop the works on safety grounds. However, McConnell Dowell did not in fact inspect the worksite on the day of the incident or the previous day.
• If McConnell Dowell personnel had inspected the work site (i.e. the barge) as required, they would have observed that the headstocks were upright and not secured. Put differently, McConnell Dowell did not know that the headstocks were unsecured but it should have known.
• If McConnell Dowell personnel knew that headstocks were not secured, they could and would have required Brady Marine to secure the headstocks or stop the works. The Brady Marine personnel on the other hand did not give any thought to the risk posed by standing the headstocks upright and unsecured.

There were other matters considered by the Court, including that McConnell Dowell had not directed Brady Marine to conduct a specific risk assessment in relation to the transport of the headstocks nor given supervision or training in relation to that task (but had the skills and expertise to do so).

What does this mean for contractors?

This case highlights the practical dilemma for engaging and managing contractors. When is it appropriate to rely on a subcontractor to carry out the work safely and how can this be done in a way that discharges the principal contractor's own health and safety duties?

A principal contractor cannot delegate its own health and safety duties. However, as outlined above the courts have held that a principal contractor can call upon expertise that it does not itself have and in certain circumstances it may be entitled to rely on a specialist contractor to see that the work is carried out safely. Further, the question of control over the contractor is an important one. For example, to ensure a safe place of work may involve the principal considering matters which are beyond its expertise. It may have no control over how a competent or expert contractor does the work because they have the skill and expertise including knowledge of safety precautions the principal doesn't have (which is one of the reasons for engaging them). The principal's lack of control over those matters may in turn affect what is considered reasonably practicable for it to do to discharge its duties.

One of the most challenging tasks for principal contractors and those advising them is to understand where the line should be drawn to discharge its own duties (particularly where the principal may have just as much expertise as the specialist contractor it is appointing). What is reasonably practicable is a question of fact and degree in each case. However some broad observations can be made.

Firstly, if a principal contractor has agreed to take on a particular safety task (such as the worksite inspection obligation on McConnell Dowell) it is critical that it in fact completes the task. To agree to supervise or inspect works and then fail to do significantly increases your risks.

Secondly, as this case highlights, there is additional risk where the work being subcontracted is within the principal's core area of expertise and where the principal has the ability to judge for itself whether or not the work is being done safely. In these circumstances, a court is likely to consider the expertise of the subcontractor and that of the principal in weighing what is reasonably practicable for the principal to do to discharge its obligations. This may lead to a finding that it is reasonably practicable for the principal to do more, for example to give instructions on how the work is to be done, and what safety measures are to be taken. Commercial benefits to contracting out in these circumstances must be weighed against the additional risk involved. If a specialist subcontractor is engaged, care should be taken to demonstrate both in the procurement and ongoing contractor management process, why it is appropriate for the principal contractor to rely on the expertise of that contractor.

Lastly, the fact that the subcontractor is experienced, well known and well regarded is no guarantee that it is operating to the same safety standard as the principal contractor. There can often be a gap in safety awareness between the principal and a subcontractor, notwithstanding that a subcontractor is a large and experienced operator. It is very important that the parties' respective safety obligations are clearly established, well documented and understood by both parties, before works commence.

McConnell Dowell has not yet been sentenced, but it is exposed to a maximum penalty of $1,500,000 for a Category 2 offence under the Work Health and Safety Act 2011 (NSW). The maximum penalty for the offence would be $1,731,000 if it occurred now following increase in penalties this year.