Australia, CICA, Research & Analysis

Understanding Wet and Dry hire

Both wet hire and dry hire agreements are common place in the hire industry. In this article, Holding Redlich lawyers Jacqui Doyle (partner) and Sam Billingsley-Dadd (associate) explain some of the key clauses that builders and suppliers need to be aware of when entering into these types of arrangements.

Dry hire vs Wet Hire – what’s the difference and does it matter?

In a dry hire agreement, the equipment is supplied by the supplier and the hirer is responsible for sourcing an operator. 

Conversely, in a wet hire agreement both the equipment and the operator are sourced by the supplier. 

While a dry hire will typically be cheaper if a hirer already has an appropriately qualified staff member on-site, a wet hire will often provide significant risk and liability benefits.

Liability under a wet hire agreement

One of the most important things to understand in any hire arrangement is who bears responsibility should something go wrong. 

Jacqui Doyle, partner, Holding Redlich.

Typically, wet-hire agreements will assign liability for damages caused by:

1. the actions of the operator to the supplier; and

2. the actions of the hirer’s staff to the hirer.

However, parties need to be careful when drafting liability clauses, as overzealous drafting can lead to clauses that unduly burden one of the parties. This issue was discussed by the court in Westina Corporation Pty Ltd v BGC Contracting Pty Ltd (2009) 41 WAR 263 (Westina v BGC). 

Background facts:

BGC Corporation Pty Ltd (BGC) operated an iron ore mine in Western Australia and entered into a standard form wet hire agreement with Westina Corporation Pty Ltd (Westina). Under the agreement, Westina would supply a truck (the Westina Truck) and operator (Mr Ingold) to BGC, so that BGC could transport iron ore from the mine to a nearby railway siding. 

The contract contained an indemnity clause that:

“Where the plant [the Westina truck] is hired on a wet hire basis, the supplier [Westina] shall… bear the risk of loss in the hiring of the plant and must defend, indemnify and hold BGC harmless against any injury, death, claim or other loss arising from the hiring of the plant.”

During one of the trips between the mine and the siding, the Westina truck collided with the trailer of an oncoming truck owned by BGC. The driver of the BGC truck had lost control and its trailer had flipped over onto the wrong side of the road. The collision killed Mr Ingold and caused irreparable damage to the Westina truck.

Westina sued BGC for the loss of the truck, alleging that the driver of the BGC truck had been negligent and that BGC was vicariously liable for their actions.  

Sam Billingsley-Dadd, associate, Holding Redlich.

BGC sought to rely on the indemnity in the contract and argued that the indemnity clause covered all losses associated with the hiring of the truck, including where the loss was caused by BGC’s own negligence. 

The ORIGINAL decision

The trial judge found that:

1. the BGC truck driver had been negligent and caused the accident; however

2. the contract drafting meant Westina could not recover damages from BGC even where the accident was caused by BGC. 

Westina appealed 

The Court of Appeal allowed the appeal, and found that the indemnity:

1. was intended to protect BGC from any loss caused by the negligence of Westina or its employee while operating the truck; 

2. should be read against the interest of BGC as the party receiving the benefit of the indemnity; and

3. did not release BGC from any loss caused by their own negligence. 

Although ultimately the court found in favour of Westina, the above case demonstrates why it is important to review the risk allocation clauses in your contract carefully. A well drafted liability clause should eliminate the risk of these misunderstandings and operate to ensure that all parties to the agreement have the same expectations should an accident occur. 

Key considerations in a wet-hire contract 

The sbove table provides a summary of some items you will need to consider when entering into a wet-hire agreement.

As discussed above, who actually bears the risk and responsibility for an item will come down to the specific terms of the contract, so it is important you review your contract carefully.

Obtaining legal advice can be useful in avoiding risks. This extends to having your hire arrangements reviewed regularly to ensure they remain consistent with any changes to relevant laws. 

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