BestCare Foods Ltd v Origin Energy LPG Ltd (formerly Boral Gas (NSW) Pty Ltd)

[2011] NSWSC 908

Supreme Court

New South Wales

Medium Neutral Citation:	BestCare Foods Ltd & Anor v Origin Energy LPG Ltd (formerly Boral Gas (NSW) Pty Ltd) & Anor [2011] NSWSC 908
Hearing dates:	18 - 21.10.10, 25 - 28.10.10, 01 - 04.11.10, 08 - 11.11.10, 17 - 19.11.10, 22 - 25.11.10, 01.12.10, 06 - 09.12.10, 14 - 15.02.11, 18.02.11, 21 - 24.02.11, 28.02.11, 01 - 04.03.11, 10 - 11.03.11, 14 - 17.03.11
Decision date:	23 August 2011
Before:	Nicholas J
Decision:	Par 332
Catchwords:	TORTS - negligence - causation - expert evidence of cause of fire and explosion - whether defendants proved alternative theory refuting that advanced by plaintiffs - duty of care - whether defendants owed duty of care at common law and under statute - whether statutes imposed a duty to take specific precautions or measures for the safety of others - scope and content of duty - whether breach of duty established - TORTS - contributory negligence - whether plaintiffs failed to take precaution against risk of harm - whether claim for apportionment established - Civil Liability Act 2002 ss 5R-S - CONTRACT - construction and interpretation of contract - whether terms implied in the contract requiring the provision, inspection and maintenance of a gas installation to ensure its safe operation - whether exclusion clauses apply - whether breaches of contract established
Legislation Cited:	Trade Practices Act 1975 (Cth) Civil Liability Act 2002 Evidence Act 1995 Dangerous Goods Regulation 1978 Dangerous Goods (Gas Installations) Regulations 1982 Dangerous Goods (Gas Installation) Regulation 1998 Dangerous Goods (General) Regulation 1999 Occupation Health & Safety Regulations 2001
Cases Cited:	Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410 Caltex Oil (Australia) Pty Ltd v The Dredge "Willemstad" (1976) 136 CLR 529 Caltex Refineries (QLD) Pty Limited v Stavar [2009] NSWCA 258; (2009) 75 NSWLR 649 Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 49; (1982) 149 CLR 337 Council of the City of Greater Taree v Wells [2010] NSWCA 147 Customs and Excise Commissioners v A [2003] 2 All ER 736 Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82; (1986) 161 CLR 500 Digi-Tech (Australia) Ltd v Brand [2004] NSWCA 58 Gemmell Power Farming Co Ltd v Nies (1935) 35 SR(NSW) 469 Hill v Van Erp [1997] HCA 9; (1997) 188 CLR 159 John Pfeiffer Pty Ltd v Canny [1981] HCA 52; (1981) 148 CLR 281 Jones v Dunkel (1959) 101 CLR 298 Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705 McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579 McDonald t/as BE McDonald Transport v Girkaid Pty Ltd [2004] NSWCA 297 O'Connor v S P Bray Ltd [1937] HCA 18; (1937) 56 CLR 464 Podreberserk v Australian Iron & Steel Pty Ltd [1985 HCA] 34; (1985) 59 ALR 529 Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 Seltsam Pty Ltd v McGuinness [2000] NSWCA 29; (2000) NSWLR 262 Sibley v Kais (1967) 118 CLR 424 Weal v Bottom (1966-1967) 40 ALJR 436 Wilkie v Gordian Runoff Ltd [2005] HCA 17; (2005) 221 CLR 522
Category:	Principal judgment
Parties:	BestCare Foods Ltd - first plaintiff BestCare Foods (Sales) Pty Ltd - second plaintiff Origin Energy LPG Ltd (formerly Boral Gas (NSW) Pty Ltd) - first defendant Origin Energy Retail Ltd - second defendant
Representation:	Counsel: M L Williams SC/D S Weinberger/S A Lawrance - plaintiffs J N Gleeson QC/B G Smith/R D Glover - defendants Solicitors: McCabe Terrill Lawyers - plaintiffs HWL Ebsworth Lawyers - defendants
File Number(s):	05/270917

Judgment

1. HIS HONOUR : These proceedings concern the claim by the plaintiffs BestCare Foods Ltd (BestCare) and BestCare Foods (Sales) Pty Ltd (Sales) against the defendants Origin Energy LPG Ltd (formerly Boral Gas (NSW) Pty Ltd) (Boral) and Origin Energy Retail Ltd (Origin) for damages for negligence, and on other counts, resulting from the destruction of their pet food manufacturing factory on 25 January 2003.

1. These reasons relate only to the issue of liability. The issue of damages has been referred to a referee.

1. The plaintiffs owned and operated a dog food manufacturing business at the factory at Borthistle Road, Gunnedah, New South Wales (the site). At about 7.45pm on 25 January 2003 the factory was destroyed by fire and a massive explosion. As it was a long weekend, production activities had ceased, and the factory had been closed down. No one was present on site at the time. It is common ground that the fire and explosion resulted from the leakage of liquefied petroleum gas (LPG) into the factory, which then ignited.

Introduction

1. Between 1994 until the sale to BestCare in June 2001 Bayer Australia Ltd (Bayer) carried on business as a pet food manufacturer at the site.

1. Under a contract made 12 August 1994 with Bayer, Boral Gas (NSW) Pty Ltd (Boral) supplied and constructed a gas installation with related equipment for the business which remained the property of Boral. Thereafter Boral supplied LPG to Bayer for the operation of the factory.

1. On 29 June 2001 BestCare bought the plant from Bayer as an ongoing concern, and commenced operations there. At about this time Origin Energy LPG Ltd took over Boral's operations, and became its successor in title to the installations. It is the first defendant but it is convenient to refer to it as "Boral". On or about 15 August 2001 Origin entered into an agreement with BestCare for the supply of LPG, an arrangement which continued until the explosion on 25 January 2003.

1. In essence, it is the plaintiffs' case that the liability of Boral arises out of its breach of common law and statutory duties of care in respect of the construction, maintenance, and inspection of the gas installation. As against Origin, it is claimed that liability arises from its breach of similar common law and statutory duties of care, and of contractual obligations of a substantially similar kind. The plaintiffs also claim relief against Origin under s 71(1) and s 74(1) Trade Practices Act 1975 (Cth) for breaches, respectively, of implied terms that the goods supplied were not of merchantable quality, and the services rendered were not reasonably fit for the purposes of being a gas storage facility and infrastructure providing gas to the pet food manufacturing business.

1. The plaintiffs alleged that the gas leakage and subsequent fire and explosion were caused by the failure of the first stage regulator (FSR) by reason of the deterioration of internal components, namely the disc holder and sealing disc. The consequence was that the FSR failed to provide a proper seal against the high inlet pressure of LPG flowing from the high pressure storage tank, and allowed gas at high pressure to flow downstream. In these circumstances the downstream line became over-pressurised, the filter boxes on the dryer gas line were subjected to pressure beyond their capacity and fractured, thereby allowing gas to leak into the factory, where it ignited. It was claimed that at the time of the installation of the gas system the defendants wrongly failed to provide over-pressure protection to the FSR by means of an over-pressure shut off device (an OPSO) which would have operated to prevent over-pressurisation of the downstream line. (An OPSO is used as a safety device where protection against excess pressure is required. When activated it shuts off the flow of gas at the inlet of the regulator. It was common ground that over-pressure protection must be provided where, as in this case, the inlet pressure to the FSR exceeded the pressure rating of downstream equipment, its purpose being to ensure the rated working pressure of this equipment was not exceeded.) In this case the storage tank/inlet pressure was 850 kPa and the downstream equipment was set to operate at a pressure of 140 kPa.

1. Additional allegations included the allegation that the defendants wrongly failed to ensure that the gas installation was suitable and safe for use, and failed to carry out regular inspections and maintenance, which would have led to the discovery, and rectification of, the absence of over-pressure protection at the FSR.

1. The defendants denied liability on the basis that the plaintiffs had failed to prove their case that the cause and origin of the fire and explosion resulted from over-pressurisation and leakage through the dryer filters. The breaches of common law and statutory duties, and contractual obligations were denied.

1. The defendants advanced an alternative case under what came to be called the pressure wave theory. In essence, the theory was that the FSR failed after, and not before, the explosion, and that the explosion generated a pressure wave which struck the FSR with such force as to damage its disc and disc holder, components necessary for its operation.

1. The defendants also contended that the plaintiffs were guilty of contributory negligence in that they failed to isolate the LPG storage tank when the factory was closed down and unattended, and that they themselves wrongly failed to install over-pressure protection at the FSR.

Preliminary observations

1. Some statistics: The hearing proceeded, with interruptions for 46 days, from 18 October 2010 until 17 March 2011. 24 witnesses gave evidence. The plaintiffs' exhibits included witness statements, experts' reports, photographs, site models, and various pieces of equipment, marked from Ex A to Ex AAAX. The defendants' 42 exhibits included witness statements, experts' reports, photographs and various pieces of equipment. The transcript of evidence and submissions contained 2894 pages. Oral submissions were heard over nine days.

1. The factual and legal issues were many and complex, and presented the Court with a difficult task. I have kept in mind the principle that the primary function of a first instance judgment is to find facts and identify the crucial legal points and to advance reasons for deciding them in a particular way ( Customs and Excise Commissioners v A [2003] 2 All ER 736, per Schiemann LJ, p 754; approved by the Court of Appeal in Digi-Tech (Australia) Ltd v Brand [2004] NSWCA 58, pars 285, 286). Accordingly, I consider it to be neither necessary nor appropriate nor realistic in these reasons to deal with all of the issues and arguments raised by the parties. No utility would be served in repeating evidence and submissions on issues which were peripheral or would not affect the outcome. However, I read the written and oral evidence and submissions in their entirety, some many times. It would be erroneous to assume that matters not referred to were not considered in the course of reaching a conclusion. I have confined these reasons to those issues which were found to be crucial for the determination of the plaintiffs' claim. I was guided by the principles expressed in Digi-Tech (pars 282-291).

1. The following is a description, so far is relevant, of the plant at the time of the explosion. It should be read with reference to the diagram of gas services, in Ex V.

1. The factory included the building known as the extrusion plant, inside which were the boiler and the dryer. To the north was the bakery area. The three gas fired appliances on site were a hot air dryer, a boiler, and a biscuit baking oven. A large LPG storage tank was at the southern side of the site. From it LPG passed through the FSR and downstream into the lines which supplied these appliances. Immediately downstream of the FSR was a Bourdon pressure gauge.

1. The extrusion building was described by Mr Michael Anthony Goldring, BestCare's operations director, as follows (Ex Z2, par 23):

"Within the extrusion building, the boiler room was located at the far western end and was separated (at ground level) from the rest of the extrusion building by a wall with an access doorway but there was no door on this opening. Within the rest of the extrusion building, the extruder and drier were located at the west end of the extrusion building (on the other side of the wall from the boiler room). The extruder was at ground level and the drier was elevated. The western end of the drier was directly above the boiler room wall and could be clearly seen from within the boiler room as the boiler room protruded into the Extrusion Building at the southern end."

1. A gas fuelled burner heated the boiler which was situated in the boiler room at the western end of the extrusion plant building.

1. Immediately above the boiler, on the first floor level, the western end of the dryer was located. The dryer was a long box-shaped oven with doors down each side. It had two heated zones; the western end was designated zone 1, and the eastern end zone 2. Two gas trains provided gas to its burners. Each comprised a stop valve, a filter, and a second stage regulator with an OPSO. A Bourdon pressure gauge was attached to the western end of the dryer line.

1. The bakery oven was a long oven through which biscuits were conveyed and heated. It ran east/west inside a building on the northern side of the site. It was serviced by three gas trains, each of which comprised a stop valve, a filter, and a second stage regulator with an OPSO.

Background

1. The following history was common ground and, in any event, are findings made on the evidence.

1. On 12 August 1994 Boral agreed with Bayer to supply and install at the site equipment which included a 43kl LPG storage tank, all gas regulators, and a gas service line from the LPG storage tank to the burner trains terminating with ball valves. It also agreed to supply LPG in bulk. On 14 October 1994 the Gunnedah Shire Council permitted construction of the storage tank and stand conditional upon the work being "... completed in accordance with Dangerous Goods Act and approved plans".

1. On 30 January 1995 Mr M McKillop, on behalf of Boral's sub-contractor, issued a compliance certificate under the Dangerous Goods (Gas Installations) Regulations 1982 that the installation was in safe working order. It is common ground that, although required, an OPSO to the FSR was not provided.

1. In February 2000 Origin Energy LPG Ltd was created through the demerger of Boral Ltd and Boral Energy Ltd.

1. On 29 June 2001 BestCare acquired from Bayer the factory and plant at Gunnedah, and the pet food business of J & J Dry Pet Food Manufacturers Pty Ltd at Rouse Hill. The last mentioned became a wholly owned subsidiary of BestCare, changed its name to Bestcare Foods (Sales) Pty Ltd, and is the second plaintiff in these proceedings.

1. On about 1 July 2001 BestCare commenced operations at the site. During July and August 2001, and thereafter, Origin supplied LPG to BestCare.

1. On 18 July 2001 BestCare's manager, Mr Richard Sherlock, signed a contract with Origin for the supply of LPG, which was signed by Origin's sales manager on 15 August 2001. It was for a term of 12 months commencing 18 July 2001. Origin undertook to install equipment which was listed as the same as that specified in the contract of 12 August 1994 between Boral and Bayer (cl 2.1). Property and title to the equipment were to remain with Origin (cl 6.3). Origin undertook to carry out repairs and maintenance necessary to keep the equipment in reasonable working order and to provide for maintenance and inspection of the equipment (cl 7.1). Detailed reference to the contract provisions are made later in these reasons.

1. In August 2001 BestCare began planning for the installation of a new biscuit baking oven. On about 11 September 2001 Mr Danny Oldman and Mr John Lowe, employees of Origin, inspected the site, discussed the gas line for supply of LPG to the new oven, and recommended a contractor, Mr Brian Torrens, for its installation. During September 2001 there were communications concerning requirements for the new gas line.

1. Mr David Druitt, was a director of Rapat Australasia Pty Ltd which had been engaged by BestCare as project manager for the installation of the new biscuit baking oven. In August and September 2001 he had discussions on site with Messrs Oldman, Sheldon and Lowe in respect of the installation required for the bakery.

1. On 28 September 2001 Mr Lowe rectified a fault in the vaporiser which allowed emission to the atmosphere of LPG from the storage tank.

1. Mr Torrens, a licensed gasfitter, in October 2001 commenced the installation of a gas line with a second stage regulator, OPSO and fittings for the main boiler. After testing, it was left in working order.

1. In May 2002 the installation of the new baking line was completed, and it commenced operations.

1. On 23 May 2002, during a meeting on site with representatives from Origin (Messrs Oldman and Andrew Murray) discussed with Mr Goldring a proposal to renew BestCare's contract after July 2002. It was said that Origin would pay for any upgrade to the gas equipment on site.

1. On 24 May 2002 Mr Oldman sent an email to Mr Shane Sheldon the defendants' project and installation engineer, questioning whether allowance had been made for various items in a quotation to be put to BestCare. It included:

"3. 1 st stage reg current what is its capacity? Have you allowed for a new 1 st stage reg (OPSO)?"

1. Thereafter negotiations continued between the parties. Origin continued to supply LPG to BestCare after expiry of the contract on 18 July 2002.

1. On 16 August 2002 Mr Oldman sent an email to Mr Goldring seeking a response to the proposal and expressing concern that "... your demand is causing some stress to the regulators and pipe work currently in place".

1. Mr James Kearney, a consulting steam engineer of 50 years experience, on 2 October 2002 carried out the annual service and safety inspection of the boiler. This included opening and closing the ball valve of the boiler gas line. He found nothing unusual about it, and found the boiler met all relevant safety requirements and passed the inspection. He said that the ball valve was shut when the handle was at right angles to the pipe, and open when the handle was in line with the pipe. He said he had never seen a diaphragm in a boiler regulator damaged.

1. On 22 January 2003 Mr Goldring informed Mr Oldman that BestCare would be changing gas suppliers in the near future.

1. At about 11am on 24 January 2003 the last delivery of LPG to the factory was made. Operations continued in the extrusion plant until about 2.30pm, and in the bakery until about 9.30pm when the burners on the baking ovens were turned off. These were the last LPG appliances to be turned off.

1. On 25 January 2003 the factory was not operating, but a number of employees were working on site on various jobs. The last departed at about 1.30pm.

At about 7.55pm an explosion destroyed the factory.

24 and 25 January 2003

1. Evidence of relevant activities at the factory during 24 and 25 January 2003 was given by BestCare's employees of which the following is a summary. Evidence was also given by others of observations at the time of the explosion. Unless otherwise stated, I found they were truthful witnesses who gave their evidence as best as recollection allowed. I accept the evidence of each witness, and was not persuaded that it was undermined in cross-examination.

1. Mr J F Heness was the factory manager. He said that if there was a door at the extrusion plant it was always open because the operator watched the boiler. He was not sure if there was a door in the doorway between the boiler room and the extruder, but remembered that the boiler could always be seen from the extruder. He agreed that on 25 January 2003 he did not know if a door was open or closed. The effect of his evidence was that whether or not there was a door, the doorway was always open.

Mr Heness explained the shut down procedure for cleaning the oven and the extruder at the end of each week or when production was to cease. This required the boiler to be shut down which, in turn, involved turning off the gas and water to the boiler. He said that employees Kevin Thompson, Vaughn Eather, and Jim Hall were experienced in operating the extruder and the shut down process, and Mr Darren Guest was a learner.

He said that when the factory was shut down the gas supply at the storage tank was never turned off, and there was no requirement to do so. He said that had there been such a requirement, it would have been shut off.

1. In January 2003 Mr Vaughn Eather was employed as an extruder operator. He could not remember whether there was a door at the doorway between the boiler room and the extrusion room, but said that the doorway was always open.

He described the procedure for cleaning the extruder when there was no more cooking to be done. This included shutting down the boiler by turning off the water and gas, and releasing all pressure and steam from inside the boiler. He demonstrated that he would turn off the ball valve by pulling the handle horizontal to the pipe. He said that at about 3pm 24 January 2003 he and Mr Hall were showing Mr Guest how to shut the boiler down. He said he was unsure who of them closed the ball valve, although in his Police statement of 27 January 2003 he said that he saw Mr Hall shut down the two gas valves by pulling a hand valve to the off position.

Mr Eather accepted there was no restriction on going to the storage tank and shutting it off. He said he never shut it off. It was not put to him that he was aware of any requirement that it be shut off when the factory was not operating.

1. Mr James Hall was an extruder operator. He said that when he started his shift at about 3.30pm 24 January 2003 the extruder had been shut down. He and Mr Eather then shut down the boiler. He said that Mr Guest was present as an onlooker under instruction as to how to shut down the boiler. He said that the boiler had been turned off correctly. He insisted that he had shut the gas line off by turning the ball valve handle to the horizontal, and that Mr Eather shut down the other appliances. He rejected the suggestion that it was Mr Eather, not him, who turned off the gas and, in my view, was unshaken in cross-examination. He described as standard the procedure to shut down the boiler, the first step of which was to shut off the gas from the valves. He had followed the procedure on numerous occasions. He ended his shift at 11.30pm and left the factory. When shown the ball valve, Ex D, he observed the handle was bent whereas it had been straight whenever he operated it. From a photograph taken by a WorkCover employee at 2.15pm, 27 January 2003 he observed that the position of the handle was slightly off the horizontal. He said that the handle was in the horizontal position when he left the ball valve.

1. Mr Jamie Fordham worked in the bakery section. On 24 January 2003 he finished work and left the factory at about 11.30pm. At this time the gas to the baking oven had been turned off, no gas was getting to the oven, and there was no smell of gas.

1. Dennis Wright was a technician employed at the factory. He said that on 25 January 2003 he was working at the factory until about lunchtime. At the time he saw no machinery operating, and did not detect any unusual noises or smells.

1. Mr Michael Thompson in January 2003 was employed as a floor foreman. He said there was a door in the doorway between the extruder room and the boiler room but it was very rarely shut. It would have been very odd if it had been shut. He left the site at about 1.30pm 25 January 2003 after checking the factory, including the boiler room and extruder room, to make sure everything was turned off. He did not smell gas, there were no unusual sounds, and all was quiet. He was the last to leave.

1. Mr Ronald Verning was employed in the baking section. He said that when he finished work and left the factory at about 11.30pm 24 January 2003 everything had been closed down, and he could not smell gas. He said that after hearing the explosion at about 7.55pm 25 January 2003 he went to the factory and checked the valves to the storage tank. He recalled turning off a number of valves at the warehouse side of the storage tank and another at its other end.

He recollected that there was a door between the boiler room and the extruder room, and moving a wooden chock to enable him to sweep behind it.

1. Mr Michael Jones' evidence, in a record of interview, was that on 25 January 2003 he was at his property about 400 metres from the site when, at about 2pm, he heard a rattling noise at the plant which continued until about 2.30pm. Just before sundown he heard an explosion and saw a fireball rising to about 50 metres in the air.

1. Mr Dean Gollan's evidence, in a record of interview, was that on 25 January 2003 he was working at premises in Borthistle Road about 400 metres from the site when, at about 5.30pm, he noticed a strong smell of gas and later heard the explosion, and saw flames, at the factory.

1. Mr Goldring said he frequently went to and from the boiler room and the extruder room, but did not believe there was a door between them.

He said that in about July 2002 a fire occurred in the extrusion dryer. Following this event a procedure was established to regularly check for a build-up of fines within the dryer, and to carry out a complete clean out of the inside of the dryer at least once a week.

He said there was a practice to turn gas off at the appliances to stop gas leaking into the factory when the appliances were not operating, but there was no practice to isolate the storage tank.

He said he was unaware of any need or requirement to isolate the storage tank by turning the gas off when the factory was not operating or was unattended. He was not aware of the requirement of Australian Standard 1596. It was his understanding that the tank and all its components were the responsibility of the LPG supplier. He said that had he been aware that the law required the storage tank be shut down it would have been. He rejected the suggestion that the tank was not shut down because time would be lost in starting up again.

1. Mr Brian Henderson and his wife Judith Henderson, on 25 January 2003 were on their property not far from the site. During the morning there was a smell of gas from the factory which became stronger by mid-day. At about 2pm they heard a loud bang, and a hissing sound for a few seconds.

1. Evelyn Stamps a visitor to Gunnedah, was walking her dogs past the factory at about 7pm 25 January 2003. She was wearing a sleeveless top and shorts, and her arms, shoulders and legs were exposed.

Her recollection is that she was lying on the ground, and on opening her eyes saw the fire and debris in the air. She suffered bruising and shock, but no burns, blisters or other harm from the heat of the explosion. She became hysterical afterwards. She was unable to recall her location at the time, or the circumstances in which she was blown to the ground.

Investigation into cause of the fire and explosion

1. The plaintiffs claimed that the fire and explosion were caused by the failure of the FSR. An understanding of the evidence requires an explanation of the operation of relevant components of the FSR namely, the disc holder, the sealing disc, and the seat ring.

1. The function of the FSR is to control the pressure at which LPG from the storage tank flows downstream. The LPG flows at high pressure into the FSR through an orifice within the seat ring. The disc forms part of the sealing surface within the FSR and is held in place against the seat ring by the disc holder. Any loss of its ability to seal against the seat ring could allow LPG to flow downstream through the second stage pipe work at an unregulated pressure.

1. When there is no demand for LPG for the downstream appliances, and the appliances are shut off, the FSR diaphragm causes the disc holder to push the disc against the seat ring to act as a seal to shut off the inward flow. When there is demand downstream the disc holder and disc are moved off the seat ring to allow LPG to flow in through the orifice to the outlet side of the regulator, and thence downstream at the set pressure.

1. The plaintiffs claim that the failure of the FSR was caused by the fracturing of the disc holder which then forced the disc onto the seat ring where it was damaged with the consequence that there was no complete seal against the seat ring. The FSR was then unable to regulate the pressure and, there being no OPSO, LPG flowed downstream at high pressure. In these circumstances, the dryer filters (the filters) were unable to withstand the over-pressure, and allowed gas to leak into the factory where it ignited.

1. The FSR is fitted with an orifice which is termed the seat ring. Its edge is rounded. The surface area of the end of the orifice forms an effective seal against the disc.

1. It is also necessary to understand the meaning of the term "wadding". Mr Arthur Donnelley (Ex AAG) explained:

"9.15 This is a term applied to the non-metallic sealing disc when a circular incision is made in the sealing face of the sealing disc by the disc having been forced onto the gas orifice inside the regulator. Such circular marks are common on regulator sealing discs which have been in service for a long time.

9.16 The term derives from a 'wad punch' which is a tubular punch with a sharp beveled edge on its end and is commonly used in leather work or for punching holes in gasket material.

...

9.23 Wadding of the regulator sealing disc is the most common cause of downstream excess pressure problem."

And (Ex AAH):

"6. ... Wadding is an indentation on the sealing disc caused by the sealing disc repeatedly contacting the sealing ring. It has the effect of compromising the sealing ability of the disc ... Once wadding occurs it makes the disc more prone to accumulate dust and dirt particles and other foreign bodies thus further compromising the ability of the disc to seal ...

7. A wadded seal with cause, and in this case did cause, an overpressure situation downstream of the regulator ... when the gas demand ceases or the appliances are shut off the downstream pressure will continue to build up in the closed pipeline system ..."

1. The following is a summary of the plaintiffs' evidence as to the investigations and results. Necessarily it is limited to that which I considered to be significant.

Mr Alan Kerruish

1. Mr Alan Kerruish retired in March 2009 as a senior safety inspector for WorkCover, New South Wales. In 1968 he was awarded a certificate of mechanical engineering from Granville Technical College. In about 1978 he obtained an unrestricted gas installer's licence. In 1987 he was employed by the Department of Industrial Relations (later known as WorkCover) as a boiler inspector. Subsequently he was employed in advising and training on the design, operation, and inspection of boilers, pressure vessels and pressure equipment. He gained experience, inter alia, in the investigation of accidents involving LPG and possible design failures, and in the design and installation of LPG plants and facilities in numerous locations, including for local councils and corporations. He said his speciality was in gas boilers and pressure vessels. He has been a member of professional bodies and associations.

1. He did not claim expertise in metallurgy, or in the investigations of the origins of fires and explosions.

1. His reports of 11 June 2003, 17 July 2003, 5 January 2004, 11 June 2004, 25 September 2009, and 21 June 2010 were admitted subject to objection as Ex AAE. He was cross-examined extensively.

1. The defendants objected to the entirety of Mr Kerruish's reports with the exception of certain paragraphs of the report of 25 September 2009 which related to his training and experience, and to the application of various codes to LPG installation. In short, it was put that the reports dealt with the investigation and determination of the origin and cause of the explosion in support of his opinion that the ultimate cause of the explosion was the failure of the FSR. The substantial ground for objection was his lack of expertise or specialised knowledge in such investigations, and in the determination of the origins of fires and explosions. Reliance was also placed on what was said to be his lack of expertise as to dust and dust explosions, and in metallurgy and material science. In particular, it was put that he lacked the qualifications or experience for admission of evidence of his opinions as to the means of failure of the disc and disc holder of the FSR, and of the dryer filters.

1. In my opinion the objection should not be upheld. I admit Ex AAE. The evidence establishes that Mr Kerruish has had a lifetime of actual experience in the design and operation of gas pressure vessels, boilers, and LPG installations, including mechanisms integral to these installations, such as regulators and OPSOs, and attached appliances. His evidence was of his observations which went to the cause and circumstances of the leakage of LPG into the factory which resulted in the fire and explosion. I am satisfied that his opinions on these matters as stated in the reports were wholly based on his specialist knowledge, and attract the application of s 79(1) Evidence Act 1995.

1. The evidence meets the requirements for admissibility summarised in Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705, par 85. To the extent that it appears his evidence is unsupported by his specialist knowledge it will be of diminished weight.

1. Alternatively, I am satisfied that because Mr Kerruish is well-qualified by experience to speak of the failure of the FSR and its effect upon the operation of the LPG installation, and consequential flow of gas through it at high pressure, and leakage into the factory, his evidence on these matters is admissible under the principles explained by Barwick CJ in Weal v Bottom (1966-1967) 40 ALJR 436.

1. Mr Kerruish's task as a WorkCover specialist inspector was to determine the most likely cause of the explosion and to identify possible means to prevent similar future occurrences. He first visited the site on 3 February 2003 for about two weeks, and again on about 8 July 2003.

1. On his first visit he inspected the damage in all parts of the factory and the site. He came to the view that the boiler had been properly shut down and the ball valve had been closed. On completion of the investigations he developed the opinion that the source of the gas leak which caused the explosion was in the area of the extruder. He found the pipe work connecting the gas trains servicing the dryer, and noticed the second stage regulators were burnt, and each gas train was substantially damaged, the train for zone 2 more so than for zone 1. These trains and the appliances were removed for testing. As he considered that a possible cause of the over-pressurisation was the failure of the FSR, this also was removed for testing.

1. On 11 June and 12 June 2003 Mr Kerruish tested the FSR at TestSafe, Londonderry and reported (report 25 September 2009):

"12.7 The union connecting the diaphragm body to the regulator body was disconnected and the two halves parted. It then became obvious why the regulating of the outlet pressure of the FSR was not taking place. The rubber seat of the disc holder had been 'wadded' and the central plug from the seat trapped in the orifice ...

12.8 A portion of the outer section of the rubber seat was found lodged in the outlet side of the regulator and similarly the aluminium disc holder had been shattered and only a portion of it remained in the regulator ...

12.9 The remaining piece of the disc holder, rubber seat and orifice containing the wadded piece of rubber seating were removed and secured.

...

12.11 Visual examination of the fracture surfaces of the disc holder appeared to me to be a fatigue type failure due to repeated pressurisation and release. When the disc holder fractured this allowed an increased force to be applied to the nitrile rubber disc which was already partially indented from repeated seating onto the orifice. When the extra force was applied, the central section wadded out and the seat, frozen through the throttling of gas past the fractured disc holder, failed in a tensile manner and fragmented.

...

12.13 This allowed me to positively establish that over pressurisation of the downstream reticulation pipe work downstream of the FSR was caused by a failure of the disc holder in the FSR.

12.14 My primary opinion of the cause of the over pressurisation was wadding (or cookie cutting) of the seat disc and associated stressing of the seat disc holder to the point where it eventually failed.

...

12.20 ... I observed evidence of seat indentation over a long period of time. The effect of this indentation is that it compromises the disc seat and can lead to an overpressure situation by gas leaking past the damaged seat disc.

...

12.24 ... it is my view from my observation of the seat disc in particular that the integrity of the seat disc had been compromised which enabled the leaking of gas past the seat disc and to the down stream side. It was my view that this is what occurred on the afternoon of 25 January 2003 and which lead to the complete failure of the FSR prior to the explosion."

1. In reply to Mr Cox's report of 11 May 2009 (Ex 26) he said:

"19.3 In response to paragraph 16 of Mr Cox's first report I agree with Mr Cox that repeated operation of the FSR may have caused the initiation and growth of fatigue cracks in the seat disc. Fatigue cracking is a time dependant phenomenon and I do not agree that the failure of the FSR was not as result of these developing fatigue cracks over time.

19.4 The fatigue cracks are directly related to the failure of the FSR. What happens is that fatigue cracks slowly develop over time until they reach a point of failure. The ultimate event which can accelerate the failure due to fatigue cracking can be a sudden impact of the seat disc against the orifice. However, a sudden event is not necessary. It is not unlike any fatigue cracking- for example rocks weathering on a cliff face, or removing a lid from an old jam tin; the principal is the same in that stress cracking occurs until a point is reached where the mechanical strength of the remaining solid material cannot sustain the load placed on it.

...

19.8 In response to Mr Cox's summary at 5.6 of his first report, I agree with his conclusion that the FSR failed as a result of the seat disc being forced onto the orifice. Whilst it is conceivable that an over pressure event could trigger the defining failure, it has to be remembered that from the perspective of the inlet side of the regulator there is constantly an over pressure event occurring to that inlet side of the regulator. Having regard to the metallurgical evidence of Mr Cox it is clear that there was pre-existing fatigue cracks to the seat disc and disc holder and it is to be expected that eventually the seat disc and disc holder could not withstand the inlet pressure.

19.9 The other reason that confirms my view that it was not a single over pressure event, is that with 2.3 - 3.4 tonnes of LPG unaccounted for and the gas supply being shut off from the reticulation system within 15 minutes of the explosion and fire, there is in my view no other explanation available to account for the tonnes of gas that were missing other than the FSR fatiguing to a point where it was no longer able to carry the load and fractured during the afternoon of 25 January 2003.

...

19.11 Mr Cox's explanation fails on the basis that his suggested single over pressure event is quite simply too late; there is just not enough time after the explosion to discharge 2.3 - 3.4 tonnes of LPG from the vessel.

...

19.15 I do not agree that this explosion was as a result of a single over pressure event. It is my opinion that this occurred as a result of gradual deterioration of the seat disc. The final failure came about when the seat disc failed to regulate the downstream pressure and the resulting over pressurisation lead to the ultimate failure of the disc and disc housing."

1. Mr Kerruish subsequently recovered missing pieces of the disc holder and disc from the filter located immediately downstream from the FSR, which confirmed his view that the over-pressure event had come from the storage tank.

1. On 22 December 2003 Mr Kerruish, with Mr David Pearson, of TestSafe, pressure tested the second stage regulators which supplied the boiler and the dryer ovens. No mechanical damage to the regulators or their OPSOs was noted. He found (report 25 September 2009):

"14.10 However, this was not the end of the matter as the line filter fitted immediately prior to the second stage regulator of Zone 2 was completely shattered and the filter to Zone 1 was split into two pieces.

14.11 The importance of the filters being located before the second stage regulators is that they were not protected by the OPSO tripping on the second stage regulators when the over pressure situation occurred. It also suggested to me that the over pressure situation had reached the second stage regulators prior to the explosion.

14.12 The OPSOs would only have tripped on the second stage regulators as a result of over pressure situation at the outlet of the second stage regulator prior to the explosion. Once the filter boxes fractured as they did any gas pressure would have escaped through those fractures and the OPSO's could not have tripped as the pressure at the outlet side of the second stage regulators would have been reduced to zero.

14.13 In my view, the fact that the OPSOs had tripped indicates that an overpressure had been sensed at the outlet of the second stage regulators prior to explosion.

14.14 The same reasoning applies to the OPSOs of the second stage regulators to the baking ovens. They would only have tripped as a result of an overpressure situation prior to the explosion."

1. Mr Kerruish then investigated the possibility of either or both the zone 1 and zone 2 filters as a source of the leakage. He said (report 5 January 2004):

"It is not possible to test the filter boxes on the dryer for leakage as the filters are not intact. The main body is in two parts for the unit fitted to the Zone 1 burner train (see photograph 10) and the unit fitted to the Zone 2 train has been shattered and the cover and some pieces are missing (see photograph 11). It cannot be determined, by the available examination methods, whether the damage to this filter was caused by a mechanical blow resulting from the explosion or by a rupture due to excessive internal pressure prior to the explosion. A possible way to establish the cause of this filter box's failure is to allow a metallurgist to examine the fracture surfaces. If it can be shown that an excess internal pressure rupture caused the damage to the filter, then this becomes the most probable source of a large-scale gas leakage into the factory building. Had this filter housing ruptured due to excess internal pressure it would allow gas at around 500kPa to freely discharge through a 40mm pipe."

1. He subjected an identical unit to pressure testing. He said (report 25 September 2009):

"16.14 The pressure was raised in increments. At 400kPa a significant leak was observed on the left hand side of the inlet port of the filter box between the cover and the body (photograph 10). At 690kPa, a much more significant leak developed on the right hand side between the cover and the body. Then at 975kPa the box lid had distorted to such a position under the pressure contained within the box that the sealing 'O' ring between the cover and the body blew out completely allowing unrestrained discharge from the filter box.

16.15 When the filter box was removed from the test apparatus and examined, it showed that the left hand side and the right hand side of the lid had distorted to an extent that retention of pressure was not possible.

16.16 Comparing this with the one filter box that had its lid intact from the BestCare site, it showed that the lid on the filter box from the site had suffered identical damage to the test unit.

16.17 The conclusion that I drew from this, is that the filter box from the site and similarly the identical one which had been shattered had been subject to a pressure far in excess of 100kPa, the pressure that it had been rated for, and a pressure of a significant magnitude to physically and permanently distort the filter box lids.

16.18 The gas leak could have had two possible sources, either the 'O' ring seal of the filter box lids had been extruded out of its sealing face or a complete fracture of the filter boxes had occurred. Either way this enabled me to conclude that the filter boxes fitted to the dryer were the ultimate source of gas leakage into the factory."

1. Mr Kerruish also tested the boiler main burner regulator and the boiler pilot regulator for defects, and to ascertain whether they were a possible source of leakage of LPG. He found that the periphery of the diaphragm of the main burner regulator OPSO, and its O-ring had been damaged by heat. The only leak source found was at the O-ring seal, caused by the heating of the unit in the fire. His view was that neither regulator nor OPSO was a source for the leakage of LPG into the factory prior to the explosion.

1. In his report of 17 July 2003 Mr Kerruish recorded findings on inspection of the storage tank. Relevantly, he found it to have a nominal capacity of 43 kl, and that the amount of LPG removed from the vessel was 14.88 tonnes.

1. On 8 June 2004 Mr Kerruish examined the Bourdon tube pressure gauge downstream of the FSR (the first gauge), and an identical gauge from the dryer gas drain (the second gauge). As for the first gauge, the indicator needle was found to be against the underside of the zero peg. The Bourdon tube within the gauge casing had a significant bulge which indicated this gauge had been subjected to a pressure greatly in excess of 250 kPa for which it was designed. As for the second gauge, the needle was found to be off set 25 kPa from the zero position. The Bourdon tube was found to be out of true roundness which indicated that excessive pressure within the tube had caused it to yield and not return to its true circular shape. In the conclave of experts he said he would have expected the second gauge to have suffered similar damage to the first, namely bulging of the Bourdon tube, but not necessarily.

1. Mr Kerruish also examined the three second stage regulators from the baking (biscuit) oven. Apart from minor impact damage the three gas trains for this oven did not show visual signs of fire damage. He observed that the nearest two regulators were rated to operate at a maximum of 240 kPa, and had tripped, indicating that they had been subject to over-pressure. The third regulator located at the furthest point along the gas train was rated to operate at a maximum of 450 kPa. It had not tripped, which indicated that once the escape of gas commenced at the point of least resistance it was unlikely that the line pressure at this regulator reached 454 kPa.

1. Mr Kerruish's opinion as to the sequence of events may be summarised as follows:

(1)   LPG leaked through the FSR past the disc which caused pressure downstream to increase. This activated the OPSOs for the second stage regulators and stopped all flow past those regulators;

(2)   the increased pressure caused the distortion of the disc holder which allowed pressure to increase at a greater rate downstream, which eventually caused the disc and disc holder to fail;

(3)   the dryer filters, not being protected by OPSOs, suffered an increase in pressure beyond their rated pressure which caused their lids to bow allowing leakage of LPG through their O-ring seals into the plant below;

(4)   upon failure of the FSR sealing assembly, full tank pressure, estimated at 850 kPa, was applied to a filter rated for only 100 kPa, and caused it to fail, allowing an uninterrupted flow of LPG from the storage tank into the factory.

1. He said that had the supply valve from the storage tank been turned off when the factory shut down no gas would have entered the pipeline and the explosion would not have occurred.

1. Mr Kerruish was cross-examined as to his assertion that the zone 1 filter was deformed in the same manner as the tested unit. He pointed to the distortion of the lid in the centre of the filter which showed that the lid was not sitting flush with the lower portion of the unit (T p 1472). He said that this distortion was caused by excess pressure forcing the O-ring through the gap. i.e. the pressure from within caused it to bow and the LPG to leak out through the gap.

1. As for the zone 2 filter, in the conclave he agreed (Ex 42, q 14.4) that it was not possible to determine whether its lid was deformed prior to the explosion in the same manner as the tested unit was deformed, but adhered to his view that it failed from over-pressurisation of the second stage pipe work. He said, in effect, his conclusion was based on all the evidence he collected and tests carried out, relying on 50 years experience in the industry (T p 1467).

1. He accepted that his opinion that the disc failed before the disc holder failed was based on speculation.

1. In cross-examination Mr Kerruish adhered to the view that over-pressurisation prior to the explosion caused the second stage regulator OPSOs for the dryer and bakery to trip. He rejected the proposition that this was caused by the violence of the explosion.

1. With regard to the Bourdon tube pressure gauges Mr Kerruish was pressed to explain why, if the FSR failed and caused over-pressurisation, there was no bulge in the second gauge's Bourdon tube although the gauges were identical. He maintained his view that both gauges were subject to over-pressurisation, and did not accept that the zero offset in the second gauge was caused otherwise. In his opinion, the position of its needle indicated excessive pressure within the Bourdon tube which caused it to yield and lose true roundness.

Mr Arthur Donnelley

1. Mr Arthur Donnelley died in August 2009, aged 72 years. His evidence was contained in his reports of 9 April 2008 and 27 July 2009, Ex AAG and Ex AAH respectively. They were admitted subject to objection.

1. He joined his family firm, A W Donnelley Pty Ltd, industrial gas fitters and plumbers, as an apprentice plumber in 1957. He became a licensed plumber, gas fitter, and drainer and was granted an unrestricted LPG licence in 1965. He subsequently obtained an advanced towns gas licence which qualified him to work on large industrial gas installations. Mr Donnelley was experienced in the design and building of industrial gas fired appliances, and in the installation of LPG storage systems for shire councils and service stations. He had many years experience as an investigator into gas related accidents for police, loss adjusters, and insurance companies, and for many years was a member of relevant professional associations.

1. Objection was taken to his reports on the ground that he lacked the necessary specialist knowledge to support his opinions as to the origin and cause of the explosion, and the cause of failure of the FSR, and of the filters. His expertise in the design and installation of gas systems was accepted. For the same reasons for admitting Mr Kerruish's reports, I am satisfied that Mr Donnelley was well qualified to express an opinion as to the cause and circumstances in which LPG leaked into the factory, and as to the mechanism and operation of the FSR. His evidence meets the requirements for admissibility explained in Makita and Weal and, accordingly, is admitted. Where his evidence appears to extend beyond his specialist knowledge it will be of diminished weight, if any.

1. Mr Donnelley said he first visited the site on 29 January 2003 and seven times thereafter over the next few weeks. He inspected the several installations and appliances, and tested the underground gas lines. He was present on 11 June 2003 with Mr Alan Kerruish at the premises of TestSafe, Londonderry, when the FSR was tested, dismantled and examined.

1. He said that the wadding effect had punched right through the disc, something he had never seen before. He said that wadding of the disc is the most common cause of excess pressure downstream. His opinion was that the wadding had begun between six to twelve months before actual failure. He observed that the disc holder was fractured, and a piece had been recovered from the downstream pipe work.

1. As a result of his on site investigations, he concluded that LPG had escaped inside the extruder building, from a high level above the elevated dryer. He then searched for the device in the elevated dryer gas trains which had the lowest pressure rating. He noticed the filters were fractured, and had a pressure rating of 100 kPa.

1. On 11 August 2003 he carried out a pressure test on a filter similar to the dryer filters. He also became aware of pressure testing of similar filters at TestSafe by Mr David Pearson and Mr Kerruish. He concluded that the gas escape emanated from either or both filters, from which gas would readily cascade down over the dryer to the boiler and, in time, could permeate throughout the site resulting in an explosion.

1. In summary, Mr Donnelley's view as to the sequence of failure of the FSR was:

(1)   the effect of wadding compromised the ability of the disc to properly seal against the inlet pressure, thus allowing slow leakage of LPG past the disc;

(2)   the leakage caused over pressuring of the downstream pipe and fittings, which caused LPG to leak from the filter(s), rated at 100 kPa, into the factory;

(3)   the explosion occurred when the leaked gas ignited;

(4)   the filters fractured due to mechanical damage from the explosion. This created two open ends in the gas lines which caused a large flow of gas through, and a sudden excessive load on, the FSR;

(5)   the massive flow of LPG towards the open ends of the gas line caused the fracture of the disc holder.

1. He said (Ex AAH):

"64. ... if the FSR simply allowed a slow leakage past the sealing disc, which is my view, then the pressure in the gas line could take some time, possibly minutes, to fully pressurise the downstream gas lines. I would describe this as a first stage failure of the FSR.

This would only apply if the first stage regulator completely failed in one single step. Based on my years of experience with these regulators, in my opinion the regulator allowed gas to pass to the downstream side and thus caused a build up of pressure in the downstream pipework. The dryer filter/s began to leak thus causing a build up of free gas in the buildings. This free gas found an ignition source and an explosion occurred.

In my opinion, the failure of the first stage regulator occurred in two stages.

1. The gas leaked past the sealing disc thus over pressurising the downstream pipe and fittings. The dryer filters began to leak gas. Uncontained LP Gas permeated throughout the area and was finally ignited.

2. The explosion occurred and the filters were fractured by mechanical damage. This created two open ends in the gas lines causing a large flow of gas through the first stage regulator which caused a sudden excessive load on the regulator.

The first stage regulator components failed, including the fracture of the Sealing disc holder, due to the massive flow of gas toward the open ends of the gas line."

1. He disagreed with Mr Cox's proposition that minor damage to the seat ring would not permit leakage past the disc. He said (Ex AAH):

"79. Mr Cox says that minor physical damage of the seat ring would not have permitted the leakage of LPG past the sealing disc. I disagree. Based on my extensive experience in serving regulators of this type, I have found that an OPSO trip can be caused by dust alone on the sealing disc. Considering the degree of damage sighted by Mr Cox I do not agree that that would not allow gas past the seal."

1. He said that a reasonably competent supplier of the gas installation would have provided an OPSO at the FSR and had this been done the failure of the FSR would have caused a shut down of the system, and prevented the fire and explosion.

1. With regard to the boiler ball valve handle, Mr Donnelley did not accept that the photographs established its position prior to the explosion. His view was that it could have been moved by impact from flying debris.

Dr David Corderoy

1. Dr Corderoy's evidence consisted of his report of 15 December 2005 (Ex AAU) for the Coroner. He was retained to report on the condition of equipment retrieved from the site including the FSR, the filters, and the Bourdon gauges. He was a qualified mechanical and metallurgical engineer, and a full-time consultant to Unisearch Pty Ltd at the University of New South Wales, and a member of various professional bodies and associations. He was unavailable to give oral evidence, and his findings and opinions were not tested under cross-examination.

1. Dr Corderoy examined the components of the FSR and the filters with the assistance of scanning electron micrographs and x-ray analyses. He concluded that the fire and explosion was a consequence of the failure of the FSR by reason of the fracture of the disc holder which was of insufficient toughness to withstand the repeated force of impact against the seat during operation of the FSR. This resulted in the initial leakage of LPG past the disc. He thought that a secondary factor in the FSR's failure was the brittle failure of the rubber nitrile disc, due to the freezing of the disc by escaping gas prior to the explosion. He thought that another factor was the manufacture of the filter boxes and tanks in an unmodified aluminium-silicon alloy which was of insufficient strength to withstand the over-pressure resulting from the failure of the FSR.

Mr R David Pearson

1. Mr Pearson is the senior fire and explosion investigator employed by TestSafe, Australia. He has been so employed for over 20 years during which he has gained extensive experience into the explosability of dust, and dust explosions. He has investigated numerous incidents involving the causes of gas and dust fires and explosions. He claims no expertise in metallurgy, material science, the operation of LPG regulators, or the mechanism of Bourdon tube pressure gauges.

1. His evidence included two reports of January 2004 (Ex AT and Ex AU), a report of June 2004 (Ex AV), and a report of July 2004 (Ex AW). He was cross-examined extensively.

1. It was accepted that Mr Pearson has specialist knowledge in fire and explosion investigation. Objection was taken to s 9, Ex AW in which he expressed the conclusion that the second stage pipe work had been over-pressurised prior to the explosion. The ground was that the admissibility of his opinion depended upon proof of the assumption stated in s 4.1 in respect of the Bourdon tube pressure gauges, the damage to the disc and disc holder, the activation of the second stage regulator OPSOs, and the damage to the filters. It was put that as Mr Pearson had relied on the work and views of others, including Mr Kerruish, proof of the assumptions required evidence other than his. I admit Mr Pearson's evidence. The weight to be given to it will depend upon the extent to which the matters he relied upon are proven.

1. In Ex AU, Mr Pearson reported on visual examination of the disc, disc holder, and seat ring of the FSR. He described and photographed the recovered fragments of these components. He noted that although the wadded out centre of the disc had lodged inside the seat ring, it did not form a seal, and would have allowed gas to flow through. He noted the base and sides of the disc holder had fractured. He inferred, inter alia, from the incision made by the seat ring into the disc, and the nature of the fractures of the disc holder, that there may have been a considerable amount of force exerted by the disc and disc holder assembly onto the seat ring. He listed a number of possible modes of failure of the FSR which he described as unclear and speculative. He said (p 16):

"One other mode of failure may be as a result of the rupture of the LPG pipes, which was associated with the large explosion. This could have caused much higher gas velocities through the regulator than would occur during normal operation. This may apply a high load upon the "Disc" + "Disc Holder" assembly causing damage.

(2)   that after the addition of the second gas line to the bakery in 2002, the plaintiffs failed to ensure that the gas installation, including the equipment, was inspected by a qualified person to ascertain, inter alia, whether or not there was over pressure protection for the FSR.

1. Relevantly, the Civil Liability Act 2002 provides:

"5R Standard of contributory negligence

(1) The principles that are applicable in determining whether a person has been negligent also apply in determining whether the person who suffered harm has been contributorily negligent in failing to take precautions against the risk of that harm.

(2) For that purpose:

(a) the standard of care required of the person who suffered harm is that of a reasonable person in the position of that person, and

(b) the matter is to be determined on the basis of what that person knew or ought to have known at the time.

5S Contributory negligence can defeat claim

In determining the extent of a reduction in damages by reason of contributory negligence, a court may determine a reduction of 100% if the court thinks it just and equitable to do so, with the result that the claim for damages is defeated."

1. With regard to the first ground, the defendants contended that the duty to isolate the tank when the factory was unattended arose from the inherently dangerous nature of the installation, the requirement of cl 10.2.10 AS1596-2002, and the defendants' contractual obligations to comply with basic safety requirements. It was put that had the tank been isolated the fire and explosion could not have occurred.

1. AS1596-2002 applied to installations commenced after its publication date and, unless specifically indicated, did not apply to existing installations (cl 1.1.2). The standard was published on 10 May 2002. Section 10 prescribed procedures for the operation and upkeep of an LPG gas installation as distinct from its construction (cl 10.1). Clause 10.2.10 provided:

"When a site is unattended by trained staff, the tank is not in use and not fitted with an automatic shut-down system, the tank isolation valve shall be kept closed."

1. The contractual provisions relied upon were:

"4 Safety

4.1 The customer shall:

4.1.1 ensure that each of the Customer's employees, contractors and customers and every other person purchasing or receiving from the Customer LPG is adequately warned and instructed as to the known dangerous qualities of LPG and safe handling procedures,

...

4.1.3 at all times handle LPG and the Equipment in a safe and proper manner and take all reasonable precautions to prevent misuse and damage,

4.1.4 comply with the requirements of all laws and orders or directions of statutory authorities and Origin Energy in relation to the handling and storage of LPG and access to the Equipment."

1. It was common ground that the tank isolation valve was not closed when the site was unattended. The defendants relied upon the evidence of Mr Heness, BestCare's factory manager, that the tank was never isolated when the factory was regularly shut down, that there was no restriction on access to the tank, and that it was open to isolate the tank if he wanted to do so. They also relied upon Mr Goldring's evidence was that the tank was never shut down.

1. The defendants argued that it was the plaintiffs' system not to isolate the tank although it was a straightforward task to do so, and the reason for not doing so was because it could slow down the start-up process of the factory. It was put that isolation of the tank was the simplest and most effective way of avoiding the accident.

1. For the plaintiffs it was submitted that cl 10.2.10 did not apply to the installation which included the tank. This was because, having been installed by Boral in 1994, it was an installation in existence prior to publication of the standard on 10 May 2002.

1. On the issue of knowledge relevant to the application of s 5R(2)(b) it was submitted that there was no evidence that Mr Goldring, or anyone else on behalf of the plaintiffs, knew or ought to have known that the tank should have been isolated, or that over-pressure protection for the FSR should have been installed. It was put that, in breach of its duty under cl 128 and cl 132 OHSR Origin had given BestCare neither instruction to shut off the gas supply to the factory when it was unattended, nor information that applicable codes and standards required this to be done. The proposition was supported by reference to the evidence of Mr Lowe, Origin's operations supervisor, that he was unaware of any instruction about isolating the tank been given to BestCare.

1. The plaintiffs drew attention to Mr Heness' evidence in cross-examination that although it was impractical to shut the gas off, there was never a requirement to do so. He said that if there was such a requirement, the gas supply at the tank would have been shut off. It was pointed out that it was not put to Mr Heness that he knew of any requirement or information on the question. Attention was also drawn to Mr Goldring's evidence in cross-examination that he was not aware of any need to turn the gas off at the tank, or of the requirement of the standard. As to responsibility he said (T p 631, l 29 - l 34):

"Q. 43,000 litres of gas on your premises, would you agree you had an obligation to be aware of all relevant standards, regulations or acts relating to the safe handling of that product?

A. No, I was under the impression that we were being supplied with gas by our supplier and the tank and all its components was his responsibility. Our responsibility started once the gas was supplied to us ..."

And (T p 632, l 4 - l 7):

"Q. Never knew it. Is that because you didn't make yourself aware of the standards or obligations that might be on you in relation to this tank?

A. No. It's because we understood that the responsibility for high pressure gas was that of the supplier."

1. Mr Goldring denied that the reason the gas was not shut down was because time would be lost in starting up, and he said (T p 634, l 16) "... If I had been aware that the law required it to be shut down it would have been shut down".

1. The principles were recently reviewed in Council of the City of Greater Taree v Wells [2010] NSWCA 147 in which it was held (par 81) that in cases governed by the Civil Liability Act 2002 a question whether a person is contributorily negligent is governed, relevantly, by s 5R and s 5S. "Contributory negligence is determined objectively from the facts and circumstances of a case, which includes what the plaintiff knew or ought to have known at the time: s 5R(2)(b); Joslyn v Berryman [2003] HCA 34; (2003) 214 CLR 552 at [16]" (par 83).

1. Basten JA explained the difference between the exercise involved in the assessment of the defendants' conduct and that involved in the assessment of the plaintiffs' conduct. He said:

"107 The assessment of the plaintiff's conduct involves a quite different exercise. A critical difference between the assessment of negligence and the assessment of contributory negligence is that the purpose of the latter assessment is to allow for an apportionment of responsibility for the injury by a reduction in the damages recoverable by the plaintiff "to such extent as the Court thinks just and equitable having regard to the claimant's share in the responsibility for the damage": Law Reform (Miscellaneous Provisions) Act 1965 (NSW), s 9(1). That is a different exercise from the determination of whether or not the defendant has been negligent.

108 A further important difference in approach in assessing the negligence of the defendant, as against the contributory negligence of the respondent, involves the degree of precision by which the activity, including relevant states of knowledge and understanding, is to be identified ... With respect to the plaintiff, the focus of the evidence is often quite different. Although the ultimate question is what a reasonable person in (the plaintiff's) position would have known and done, it is inevitable that the evidence will focus upon the knowledge, understanding and actions of the plaintiff himself, shortly prior to the accident, in part to determine whether he exercised reasonable care, but also to assess what would be reasonable care in the specific circumstances."

1. In Podreberserk v Australian Iron & Steel Pty Ltd [1985 HCA] 34; (1985) 59 ALR 529 the High Court, in dealing with questions of apportionment between parties, stated:

"10 The making of an apportionment as between a plaintiff and a defendant of their respective shares in the responsibility for the damage involves a comparison both of culpability, i.e. of the degree of departure from the standard of care of the reasonable man (Pennington v. Norris [1956] HCA 26; (1956) 96 CLR 10, at p 16) and of the relative importance of the acts of the parties in causing the damage: Stapley v. Gypsum Mines Ltd. [1953] UKHL 4; (1953) AC 663, at p 682; Smith v. McIntyre (1958) Tas.SR 36, at pp 42-49 and Broadhurst v. Millman (1976) VR 208, at p 219 and cases there cited. It is the whole conduct of each negligent party in relation to the circumstances of the accident which must be subjected to comparative examination. The significance of the various elements involved in such an examination will vary from case to case; for example, the circumstances of some cases may be such that a comparison of the relative importance of the acts of the parties in causing the damage will be of little, if any, importance."

Determination

1. The fire and explosion which resulted in the destruction of the factory was caused by the failure of the FSR for which no over-pressure protection had been provided. Origin negligently failed to prevent the risk of such harm in that it failed to provide an OPSO for the FSR.

1. To succeed in the claim of contributory negligence, the defendants must prove that the plaintiffs had been contributorily negligent in failing to take precautions against the risk of such harm (s 5R(1)). In deciding what a reasonable person in the plaintiffs' position would have done, and whether he exercised reasonable care in the circumstances, it is necessary to take into account the evidence of the plaintiffs' knowledge, understanding, and actions, shortly prior to the accident ( Council of City of Greater Taree (par 108)). In my opinion the relevant risk of harm against which precautions might have been taken was over-pressurisation downstream from the failure of the FSR, which would have been prevented by the installation of an OPSO. Accordingly I do not accept that failure to isolate the tank was a failure to take a precaution against the risk of harm which is capable of establishing negligent conduct on the part of the plaintiffs. It follows that the defendants' claim on this ground should be dismissed.

1. Nevertheless, it is appropriate to consider the issue that isolation of the tank was a precaution to be taken by the plaintiffs against the risk of the harm.

1. On the question of knowledge, I accept the evidence of Mr Heness and Mr Goldring as truthful. I find that neither knew of the requirement of cl 10.2.10 of AS 1596-2002, or of similar information. I also infer that it was improbable that anyone else employed by the plaintiffs had this knowledge. It follows that the defendants have failed to prove that the plaintiffs knew of any instruction or information that the tank should be isolated when the factory was closed down.

1. The contractual relationship has been referred to in detail already. From the terms of the contract it is self-evident that responsibility for keeping the equipment safe for BestCare's use was undertaken by Origin. The contract evidences the parties' intention to ensure BestCare's dependence upon Origin for maintenance and repairs, including alterations and attachments (e.g. cl 6.6, cl 7.1). It was envisaged that Origin would make requirements and give directions in relation to the handling and storage of LPG and access to the equipment with which BestCare must comply (cl 4.1.4). In these circumstances it is not unreasonable to infer as a possible explanation for Origin's failure to give information about, inter alia, the isolation of the tank that it took the view there was no need for the plaintiffs to know what, if anything, was required to be done to ensure the safe operation of the equipment. Furthermore, in support of this ground the defendants did not attempt to prove that the plaintiffs knew or ought to have known of the risk of harm arising from failure of the FSR without an OPSO which could have been prevented by the isolation of the tank. The findings which established Origin's conduct in breach of its contractual obligations and common law and statutory duties support the finding, which I make, that Origin was wholly responsible for the damage and harm suffered by the plaintiffs.

1. In my opinion, the defendants have utterly failed to prove that it was negligent of the plaintiffs, or either of them, to have closed down the factory on 25 January 2003 without isolating the tank. To the contrary, I find that in the circumstances it was reasonable for the plaintiffs to have closed down the factory without isolating the tank, doubtless on the assumption that there was no risk of harm and/or it was safe to do so. It follows that the defendants have established no basis for apportionment under s 5S. Accordingly, their claim on this ground is rejected.

1. With regard to the second ground, the defendants contended that after completion of the second gas line to the bakery the plaintiffs negligently failed to inspect the whole installation and, had this been done, the absence of an OPSO for the FSR would have been discovered, and an OPSO should have been installed. It was claimed that in the course of carrying out the gas fitting work for the second gas line the plaintiffs breached cl 7, cl 8, and cl 9 of DGIR 1998.

1. Clause 7 prohibits the carrying out of any kind of gas fitting work unless the person who carries out the work is qualified as specified. Clause 8 requires compliance with the standards which require provision of over-pressure protection (these are set out in par 220 above).

1. Relevantly, cl 9 provides:

"9 Testing for patent defects

Immediately after the completion of gasfitting work on a gas installation, the person responsible for the carrying out of the work:

...

(b) in the case of work comprising the alteration, extension or repair of an existing gas installation:

(i) must inspect such part of the installation as has been altered, extended or repaired, and

(ii) must inspect all gas containers, gas regulators and gas appliances connected to such part of the installation as has been altered, extended or repaired, and

(iii) must test the whole installation for patent defects."

1. Evidence relevant to this ground was given by Mr Goldring and Mr Torrens. I accept it.

1. Mr Goldring said that Mr Torrens carried out the gas fitting work for BestCare which was work necessary for the connection of the new bakery oven to the existing installation. The installation of the second gas line was completed in May 2002. Mr Torrens' evidence was that he was a licensed gas fitter, and the work was carried out by his company, Vimcrest Pty Ltd. He said that neither he nor the company were engaged to carry out work on the FSR, or to provide any advice relating to the gas installation and any over-pressure protection system.

1. The defendants submitted that cl 7 was breached because Mr Torrens was not qualified as required. They also submitted that upon completion of the second gas line the plaintiffs were required under cl 9(b)(iii) to test the whole installation, which included the FSR, for patent defects but, in breach, did not do so. It was argued that had the whole installation been tested the absence of over-pressure protection for the FSR would have been discovered, a situation which, under the standards, the plaintiffs should have rectified by providing an OPSO. It was put that in failing to test and, ultimately, to install an OPSO for the FSR, the plaintiffs were contributorily negligent. The defendants submitted (T p 2660, l 10-l 18):

"So that, the absence or failure to have over pressure protection at the time of the explosion was a concurrent breach of duty by both Origin and by the plaintiffs, in that they had both done gasfitting work on the installation. By doing so, they both become subject to a non-delegable duty of over pressure protection at or after the first stage regulator. To the extent to which the absence of over pressure protection, that that causally contributed to the explosion occurring, both the defendant and the plaintiffs were involved in the same fault. The same submission is made, that the breach of the common law duty, there was also a breach of the contractual obligation to act safely."

1. In essence, as I understood it, the defendants were saying that upon completion of the fitting of the second gas line in May 2002, the plaintiffs negligently failed to install the OPSO, which was the precaution to be taken against the risk of harm.

1. In response, the plaintiffs submitted, inter alia, that the defendants had failed to prove culpability on this ground. It was put that there was no evidentiary basis for finding the plaintiffs knew or ought to have known of the requirements of cl 7, cl 8, and cl 9 of DGIR 1998. They referred to the defendants' failure to put to Mr Goldring in cross-examination that he knew of these requirements, or that he should have ensured that Mr Torrens caused inspection to be made of the whole installation after completion, or that he knew or ought to have known there was no OPSO for the FSR, or that one should have been installed. The plaintiffs also referred to similar failures in the cross-examination of Mr Torrens, in particular, that it was not put to him that he should have arranged inspection of the whole installation. Reminder was made of the failure of Origin to provide the plaintiffs with relevant information e.g. as required by cl 132 OHSR.

1. I have held that Origin was wholly responsible for the damage resulting from the fire and explosion. The matters ventilated by the defendants on this ground do not justify any qualification of that conclusion. The failure complained of by the defendants was non-inspection in May 2002. The damage caused by their negligence happened on 25 January 2003. In their submissions the defendants overlooked the fact that throughout this period Origin's contractual obligations for inspection and maintenance, and its overriding responsibility for the safe operation of the equipment, continued. Furthermore, it was not established that the plaintiffs knew or ought to have known of any requirements for inspection, or that the risk of harm could have been prevented by the process of inspection and rectification postulated. These considerations are sufficient to dispose of the question of culpability in the plaintiffs' favour.

1. Accordingly, the defendants' claim for apportionment on this ground is rejected.

Conclusion

1. For the above reasons the plaintiffs have succeeded in their claims against each defendant for damages to be assessed by the Referee. The defendants' claim for apportionment of damages under s 5S Civil Liability Act 2002 is dismissed.

1. I direct the plaintiffs to bring in short minutes of orders to give effect to this result.

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Decision last updated: 23 August 2011