Cutting Edge Services Pty Ltd v Raymond and Therese Penfold; Raymond and Therese Penfold v The Hollard Insurance Company Pty Ltd - [2021] NSWSC 1322

Supreme Court

New South Wales

Medium Neutral Citation: Cutting Edge Services Pty Ltd v Raymond & Therese Penfold; Raymond & Therese Penfold v The Hollard Insurance Company Pty Ltd [2021] NSWSC 1322
Hearing dates: 2, 3, 4, 5, 6 and 10 August 2021
Date of orders: 15 October 2021
Decision date: 15 October 2021
Jurisdiction: Common Law
Before: N Adams J
Decision:
(1) Judgment for the plaintiff against the defendant in the amount of $177,290 plus interest.
(2) The cross-claim against the cross-defendant is dismissed.
(3) All questions of costs and interest are reserved pending written submissions by the parties.

Catchwords:
NEGLIGENCE — Breach — destruction of railway sleepers by fire – fire caused by use of arc welder in paddock in summer – where defendant was a farmer and firefighter of 30 years’ experience – whether expert evidence required to establish precautions a reasonable person in defendant’s position would have taken – held, expert evidence not required – precautions a question of common sense
NEGLIGENCE — Damages – where plaintiff claimed much larger number of sleepers were present on the property than it paid for – where value of sleepers dependent on grade – where plaintiff claimed 47% of sleepers were redundant broken/part sleepers – whether quality can be established by reference to sleepers stored at another facility
NEGLIGENCE — Defences — Contributory negligence – where defendant told plaintiff to move sleepers to allow for construction of a firebreak – where plaintiff refused – held, plaintiff was contributorily negligent
INSURANCE — Insurance Contracts Act 1984 (Cth) – dispute over relevant PDS – whether s 58 of the Act required insurer to prove service of the PDS – where PDS was available on request and defendants’ evidence was that they did not know whether a later or earlier PDS applied – construction of exclusion clause – whether property in defendants’ physical or legal control – where property stored on defendants’ property

Legislation Cited:
Civil Liability Act 2002 (NSW), ss 5A, 5B, 5C, 5R
Civil Procedure Act2005 (NSW), ss 98, 100
Insurance Contracts Act 1984 (Cth), ss 11, 58
Uncollected Goods Act 1995 (NSW), ss 5, 6
Uniform Civil Procedure Rules 2005 (NSW), rr 42.1, 42.34

Cases Cited:
Australian Broadcasting Commission v Australasian Performing Right Association (1973) 129 CLR 99; [1973] HCA 36
Benson v Rational Entertainment Enterprises Ltd(No 2) [2018] NSWCA 148
Botany Fork & Crane Hire Pty Ltd v New Zealand Insurance Company Limited (1993) 44 FCR 27; [1993] FCA 559
Bunnings Group Ltd v Giudice [2018] NSWCA 144
Caltex Refineries (Qld) Pty Ltd v Stavar (2009) 75 NSWLR 649; [2009] NSWCA 258
CGU Insurance Limited v Porthouse (2008) 235 CLR 103; [2008] HCA 30
CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384; [1997] HCA 2
Commercial Union Insurance Co Ltd v Willetts Radio & TV Limited (1985) 3 ANZ Insurance Cases 60-677
Cutting Edge Services Pty Ltd v Raymond & Therese Penfold [2020] NSWSC 1012
Electricity Generation Corporation v Woodside Energy Limited (2014) 251 CLR 640; [2014] HCA 7
Evans v Braddock [2015] NSWSC 249
Gray Brothers Engineering Limited v New Zealand Insurance Company Limited (1992) 7 ANZ Insurance Cases 61-124
Hobbs v Petersham Transport Co Pty Ltd (1971) 124 CLR 220; [1971] HCA 26
Indemnity Insurance Co v Excel Cleaning Service (1954) 2 DLR 721
Indigo Mist Pty Limited v Palmer [2012] NSWCA 239
Junemill Ltd (in liq) v FAI General Insurance Co Ltd [1999] 2 Qd R 136
Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11
McCann v Switzerland Insurance Australia Limited (2000) 203 CLR 579; [2000] HCA 65
MOS Beverages Pty Ltd v Insurance Australia Ltd trading as CGU Insurance [2020] FCA 1716
Neill v NSW Fresh Food & Ice Pty Ltd (1963) 108 CLR 362; [1963] HCA 4
NH Ins Co v Abellera 6 Wn.App 650, 495 P.2d 668 (1972)
Ohlstein v E&T Lloyd trading as Otford Farm Trail Rides [2006] NSWCA 226
Onley v Catlin Syndicate Ltd as the Underwriting Member of Lloyd’s Syndicate 2003 [2018] FCAFC 119; (2018) 360 ALR 92
Origin Energy LPG Ltd v BestCare Foods Ltd [2012] NSWCA 407
Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11
Pebsa Pty Ltd v McNaughton Gardiner Insurance Brokers Pty Ltd [2002] WADC 190
Pennington v Norris (1956) 96 CLR 10; [1956] HCA 26
Podrebersek v Australian Iron & Steel Pty Ltd [1985] HCA 34; (1985) 59 ALJR 492
Pollard v Baulderstone Hornibrook Engineering Pty Ltd [2008] NSWCA 99
Port Macquarie-Hastings Council v Diveva Pty Limited [2017] NSWCA 97
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28
Reid Crowther & Partners Ltd v. Simcoe & Erie General Insurance Co. [1993] 1 S.C.R. 252; 99 D.L.R. (4th) 741
Roads and Traffic Authority of NSW v Refrigerated Roadways Pty Limited (2009) 77 NSWLR 360; [2009] NSWCA 263
Uniting Church in Australia Property Trust (NSW) v Miller; Miller v Lithgow City Council (2015) 91 NSWLR 752; [2015] NSWCA 320
Walz Construction Company Pty Ltd v ASP Ship Management [2002] QCA 136
Watson v Foxman (1995) 49 NSWLR 315

Texts Cited:
D Derrington and R Ashton, The Law of Liability Insurance (3rd ed, 2013 LexisNexis Butterworths)

Category: Principal judgment
Parties: Cutting Edge Services (Aust) Pty Ltd (Plaintiff)
Raymond Mark Penfold (First Defendant/Cross-Claimant)
Ruth Therese Penfold (Second Defendant/Cross-Claimant)
The Hollard Insurance Company Pty Ltd (Cross-Defendant)
Representation:
Counsel:
Mr G Carolan (Plaintiff)
Mr J Drummond with Mr P Boncardo (Defendants/Cross‑Claimants)
Ms E Peden SC with Mr P Mann (Cross-Defendant)
Solicitors:
Baldock, Stacy and Niven (Plaintiff)
Campbell Paton & Taylor (Defendants)
McMahons Lawyers (Cross-Defendant)

File Number(s): 2018/00033995
Publication restriction: Nil.

Judgment

Background

On 18 December 2016, Raymond Penfold was welding on a silo on one of his farms near Barmedman known as “Maryvale”. A spark from the welder started a grass fire which spread and destroyed a large number of timber railway sleepers then stored on Maryvale. The sleepers were the property of a company owned by his sister Janine Brus and her husband Dean Brus known as Cutting Edge Services (Aust) Pty Ltd (“Cutting Edge”). By arrangement between Cutting Edge and Mr Penfold, the sleepers had been taken to Maryvale in June 2015 for storage.
By statement of claim filed on 1 February 2018 the plaintiff, Cutting Edge, seeks damages arising from the destruction of what it alleges were approximately 32,865 wooden railway sleepers stored at Maryvale. The proceedings are brought against both Mr Penfold and his wife Ruth Penfold because the farming business on Maryvale was conducted by them both under a partnership arrangement entered into in 2011.
Cutting Edge brings its case in negligence. It claims that the defendants owed it a duty of care because “the plaintiff entrusted the sleepers to the defendants, to be kept by them safely and then to be returned on demand”. The particulars of breach of the duty of care included that Mr Penfold failed to identify the potential hazards in carrying out welding on a hot and dry day; failed to ensure that the welding would not start a fire; and failed to ensure that he had appropriate fire-fighting equipment nearby.
Cutting Edge pleaded its damages case as follows:

“(a) The estimated value of the destroyed sleepers was $872,894.40 excl. GST

(b) Recovery and stockpile costs thrown away - $221, 838.75 excl. GST

The defendants deny liability and, additionally, have cross-claimed against their insurer, the Hollard Insurance Company Pty Ltd (“Hollard”) who has denied liability in excess of $100,000. In a defence filed on 1 May 2018, the defendants pleaded that the agreement between Mr Brus, on behalf of Cutting Edge, and Mr Penfold was a “bare licence agreement” to store the sleepers “at no cost”. It is contended that at all times, Cutting Edge retained “the care, custody and/or control of the railway sleepers”. The defendants further allege that Cutting Edge caused its own loss by failing to act on Mr Penfold’s instructions to store the sleepers in a location that would enable the construction of a firebreak.
The dispute on the cross-claim arises because the insurance policy limits or excludes the defendants’ capacity to claim for damage to property “not belonging to [them] but in [their] physical and legal control” or, as stated elsewhere in the policy, “physical or legal care, custody or control”. Hollard alleges that the arrangement was one of bailment rather than a bare licence.
The hearing was conducted before me from 2-6 August 2021. Final submissions were made on 10 August 2021 and I reserved my decision at that time. Mr Grant Carolan of counsel appeared for Cutting Edge, Mr John Drummond appeared with Mr Phillip Boncardo for Raymond and Ruth Penfold and Ms Elisabeth Peden SC appeared with Mr Peter Mann for Hollard.
The plaintiff’s evidence comprised the following documents: five affidavits of Dean Maxwell Brus dated 22 June 2018, 5 November 2018, 22 July 2019, 2 July 2020 and 18 June 2021, three affidavits of Janine May Brus dated 22 June 2018, 5 November 2018 and 22 July 2019, the affidavit of Peter Dean Brus dated 22 July 2019, three expert reports from Adam Perry dated 18 January 2019, 26 June 2020 and 18 June 2021 as well as the joint report of Michael Kennedy and Adam Perry dated 30 July 2021. Other exhibits included the court book, an email exchange on 27 May 2016, a map of the area, “TRAB” sheets and Bureau of Meteorology documents.
The defendants’ evidence comprised: two affidavits of Raymond Mark Penfold dated 7 September 2018 and 14 June 2019, the affidavit of Ruth Therese Penfold dated 14 June 2019, the affidavit of Leonie Emmott dated 30 April 2021, the affidavit of Mark Antunac dated 13 May 2021 and the affidavit of Robert Bennie dated 5 August 2021. The defendants’ expert evidence consisted of four reports of Michael Kennedy dated 25 September 2019, 3 March 2021, 23 April 2021 and 22 July 2021. The defendants provided a cross-examination bundle. Other exhibits included a diary entry on 4 June 2015, minutes of a meeting on 1 May 2017, five photographs produced by Mr Kennedy and certain JHR contracts.
Dean Brus gave evidence and was cross-examined on 2, 3 and 4 August 2021. Janine Brus and Peter Brus did so on 4 August 2021. Ruth Penfold gave evidence and was cross-examined on 4 August 2021, Raymond Penfold on 4 and 5 August 2021, Mark Antunac and Leonie Emmott on 5 August 2021, and Robert Bennie on 6 August 2021.
In addition to relying on the defendants’ evidence the cross-defendant relied on the insurance documents from Allstate Underwriting Agency including a Product Disclosure Statement dated 19 October 2015 and the Insurance Certificates applicable from 22 July 2016, 31 October 2016 and 12 December 2016. A notice to produce with correspondence and other documents produced under subpoena were also tendered.

Issues in dispute

Almost every factual and legal issue pertinent to the determination of both the statement of claim and the cross-claim were in dispute. The most significant issues in dispute were as follows:

Did Mr Penfold owe Cutting Edge a duty of care?

Was there a not insignificant risk of harm in welding the silo?

What were the precautions a reasonable person in the position of Mr Penfold would have taken?

Did Mr Penfold fail to take those precautions?

Is the question of the precautions a reasonable person in the position of Mr Penfold would have taken a matter of expert evidence or common sense?

If Mr Penfold was negligent, was Cutting Edge also contributorily negligent in not moving the sleepers when asked to do so in mid-2016?

If Cutting Edge was contributorily negligent by how much should any damages be reduced?

How many sleepers were stored on Maryvale as at 18 December 2016?

What is the explanation for the difference between the number of sleepers set out in the contracts with JHR and the number paid for by Cutting Edge?

Why was the contract for removal of the sleepers performed so slowly?

What was the quality of the sleepers stored at Maryvale as at 18 December 2016?

Was the quality of the sleepers stored at Maryvale on 18 December 2016 equivalent to those stored at Access Recycling in Barmedman as at that date?

Did Dean Brus select the better quality sleepers to store at Access Recycling and store the lesser quality sleepers at Maryvale?

Was the quality of the sleepers stored on both the Barmedman to West Wyalong and the Temora to Barmedman corridors consistent throughout?

Can sleepers be graded based on photographs?

How much would it cost to transport the sleepers from Maryvale to Orange?

Should Cutting Edge have sought to mitigate its loss by obtaining further contracts whilst they were still available?

Should the sleepers be replaced at wholesale market value given there are no new contracts available to Cutting Edge?

Can sleepers be sold as firewood?

The cross-claim

Whether the correct Product Disclosure Statement was that dated 1 July 2012 or 19 October 2012?

Were the sleepers under the physical and legal control of Raymond and Ruth Penfold as at 18 December 2016?

In respect of a number of significant conversations and events, the witnesses for the various parties gave very different versions. It was necessary for me to make a number of credit findings in relation to the evidence of Dean, Janine and Peter Brus and Raymond and Ruth Penfold. The evidence of these witnesses did not always correspond to the contemporaneous documents. In that respect, I have had regard to the observations of Hallen J in Evans v Braddock [2015] NSWSC 249 at [74] where his Honour observed:

“A court, in cases involving events which occurred long before the litigation, usually prefers to rely upon contemporaneous, or near contemporaneous, documents, which will often provide valuable and, usually, more revealing, information than what may be flawed attempts at recollection of those facts by persons with an interest in the outcome of the litigation: Bathurst Regional Council v Local Government Financial Services Pty Ltd (No 5) [2012] FCA 1200, per Jagot J, at [1247]. Greater weight is usually accorded to such documents, as often they provide a safer repository of reliable fact, particularly when it is clear that they have been prepared by a person with no reason to misstate those facts in the documents and where there is no suggestion that the documents are other than genuine: Hughes v St Barbara Mines Ltd [No 4] [2010] WASC 160, per Kenneth Martin J, at [157].”

Similar observations were made by McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 319 where his Honour observed that:

“… human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed.”

I propose to summarise the evidence below by subject matter (rather than witness) and then make the relevant factual findings. I will then go on to consider the relevant legal issues for determination in this matter.

Railway sleepers

A large part of this case concerns the value of railway sleepers. Expert evidence was adduced concerning the business of recycled timber railway sleepers. The use of sleepers depends on their grade. The expert witnesses agreed that there is no industry standard grading system and that the assessment as to which grade is applicable is based on a visual assessment including an inspection of all four sides and both ends of the sleeper and verification by an accredited independent party. They agreed that the characteristics of sleepers in each grade were as follows:

AA grade: high quality with little to nil structural damage or deterioration in wood fibre quality, square on all sides and both ends, would pass assessment for re-use as a railway sleeper and could be used in high end structural landscaping, decking, flooring, cladding and furniture;

A grade: sound quality, with minor structural damage or deterioration in wood fibre quality, reasonably square and consistent in sizing, would pass the assessment for structural load bearing application and could be used in load bearing retaining walls and fence posts;

B grade: minimum of one sound face and edge, other faces and edges have structural damage or deterioration in wood fibre quality, suitable for garden edging and non-critical retaining walls;

C grade: three or more sides and ends have structural damage and/or deterioration in wood fibre quality, suitable for decorative applications only such as landscape rustic features and embedded timber steppers;

D grade: all sides have significant structural damage and/or deterioration in wood fibre quality and would only be suitable for decorative purposes or firewood. As stated above, there was some disagreement over whether sleepers were classified as contaminated and thus not able to be sold as firewood.

The dramatis personae

Cutting Edge is a company based in Orange that sells landscaping and garden supplies. In 2015 it became involved in the purchase and removal of timber railway sleepers from John Holland Railway Network Pty Ltd (“JHR” or “John Holland”) for the purpose of supplying them to wholesale and retail markets or as firewood.
Dean Brus is the sole director of Cutting Edge. He is married to Janine Brus. Raymond Penfold is his brother-in-law.
Janine Brus is the company secretary of Cutting Edge. She is married to Dean Brus. Raymond Penfold is her brother.
Peter Brus is the son of Dean and Janine Brus. He was a casual employee of Cutting Edge as at December 2016.
Raymond Penfold is married to Ruth Penfold. Janine Brus is his sister and Dean Brus his brother-in-law. The Penfolds carried out a farming business at the relevant time and owned a number of farming properties. They lived at “Millara”, a property near Quandialla. Another of their farms was a property known as “Maryvale”, located approximately 20km from Barmedman. The fire the subject of this litigation occurred at Maryvale. Mr Penfold had been a member of the Rural Fire Service (“RFS”) for over 30 years.
Ruth Penfold is married to Raymond Penfold.
Hollard is the insurer of Raymond and Ruth Penfold’s farm properties.
Adam Perry is the director of Access Trading Pty Ltd t/as Access Recycling Services (“Access”), a company in Barmedman that specialises in providing materials, recovery and recycling services to the rail industry. He provided both lay evidence and expert evidence about railway sleepers for the plaintiff.
Michael Kennedy is the CEO of Kennedy’s Timber, a company based in Queensland. He gave expert evidence for the defendants.
Leonie Emmott is the NSW branch manager of Timber Recycling Pty Ltd t/as Recycled Timbers, a company that deals in the sale of second-hand railway sleepers. That company was acquired by Kennedy’s Timber in 2016. Her evidence was relevant to some of Mr Kennedy’s evidence about pricing.
Mark Antunac is the managing director of Outback Timber Supplies Pty Ltd, a company that was involved in the sleeper replacement program and sold recycled timber sleepers in the retail and wholesale markets.
Robert Bennie is a director of the company known as BMJ Truckin’ Pty Ltd. He provided a quote for the transportation of railway sleepers.
John Holland Railway Network Pty Ltd is a company that was involved in issuing contracts for the sleeper replacement program. Documents from this company were tendered but no evidence was called from anybody at JHR.

James Xu is the procurement and contracts officer at JHR. He was not called as a witness but was mentioned in business records of JHR.
Nolan Press is the logistics manager at JHR. He was not called as a witness but was mentioned in business records of JHR.

The lay evidence

Given the significant number of issues in dispute, it is necessary to summarise the evidence leading up to the fire in some detail. I will start with the background to the contracts for the removal of the sleepers, the process of removal, how it was that the sleepers came to be stored at Maryvale for such a long period of time and, finally, the circumstances of the fire itself.

Cutting Edge’s contracts

The practice of JHR was to invite companies such as Cutting Edge to submit tenders for the removal of timber sleepers and other steel components (“jewellery”) from certain sections of the railway line. When JHR upgraded sleepers along a particular railway corridor it would remove the old sleepers and stack them along the corridor before replacing them with steel or concrete sleepers. The agreement would be that a company such as the plaintiff would bid for contracts to remove the sleepers and the jewellery and then sell those components at a profit. The price per sleeper that JHR charged its contractors pursuant to these agreements was far below the wholesale value because the cost of removing, transporting, storing, grading and selling the sleepers was borne by the successful bidder. In this way JHR had old sleepers and jewellery removed from the railway corridors and the contractor had the opportunity to make a profit on the sleepers and steel it removed.
On 10 March 2013, Cutting Edge entered into a contract with JHR, No. CRN-SuB-0201314 (“the Head Contract”), to dismantle and remove sleepers and the railway jewellery from disused rail lines.
Under the Head Contract, Cutting Edge could be issues Work Orders (“WOs”) for the removal of sleepers and steel from a specified section of railway corridor at an agreed price. Pursuant to the Head Contract JHR issued six WOs to Cutting Edge between 10 March 2013 and 30 July 2015. The work orders which pertained to the sleepers the subject of the fire were WOs No 5 and 6.
WO No 2 was issued on 23 May 2014, for the removal of 60,000 sleepers between Bathurst and Orange. That contract provided that Cutting Edge would remove all items from the corridor but stated that “sleepers that are in pieces will not attract any charge but must be removed by the purchaser”. Cutting Edge was required to maintain documentary evidence of each load of material taken from the site. The tender price was $6.10 per sleeper and the contract stipulated that the planned finish was three months from the date of signature.
Mr Brus was cross-examined about WO 2. It was put to him that the price was higher than subsequent work orders because those sleepers were of higher quality than the Temora to Barmedman and Barmedman to West Wyalong lines, for which he paid $2.75 per sleeper. He denied that they were of higher quality and maintained that they were more valuable to him because they were “closer to home” (Mr Brus’ home base being in Orange).
An invoice dated 19 September 2014 indicated that Cutting Edge had retrieved 4,200 sleepers from that corridor. An invoice dated 19 January 2015 recorded the retrieval of a further 16,000 sleepers. An invoice dated 4 May 2015 recorded the retrieval of 1,045 sleepers and an invoice dated 29 July 2015 recorded the retrieval of 150 sleepers.
WO No 4 was issued on 17 April 2015 for the removal of up to 50,000 timber sleepers at a price of $2.05 per sleeper from the railway corridor between Temora and Griffith. That contract provided that:

“The selected contractor will be required to remove all timber sleeper parts and rubbish from the corridor. The contractor is to inspect the site and provide a count of the sleepers to be purchased and the price to be offered for these sleepers. Disposal of broken sleeper parts will be at the contractor’s expense.” (emphasis in original)

WO No 5 was issued on 17 April 2015 for the removal of up to 22,365 sleepers from the railway corridor between Temora and Barmedman at a price of $2.75 per sleeper. The work was to commence on 20 April 2015 and finish on 15 May 2015. That agreement contained the same term extracted above at [39].
WO No 6 was issued on 17 April 2015, for removal of up to 17,000 timber sleepers at a price of $2.75 each from the Barmedman to West Wyalong rail corridor. The planned start date was 10 April 2015 and the planned finish date was 15 May 2015. That agreement contained the same term as WOs 4 and 5.
The sleepers collected by Cutting Edge under WOs 5 and 6 were the sleepers burned in the fire. One of the live issues in the proceedings was the number of sleepers collected under WOs 5 and 6.
WO No 8 was issued on 17 July 2015 for removal of up to 61,645 sleepers from the Dubbo to Orange rail corridor at a price of $5.10 per sleeper with a completion date of 31 October 2015. On 30 May 2018, JHR issued an invoice to Cutting Edge for 41,500 sleepers from that corridor.

Record Keeping: Removal of sleepers in 2015-2016

WO No 5 required the removal of up to 22,365 sleepers from the railway corridor between Temora and Barmedman starting on 20 April 2015 and finishing on 15 May 2015. WO No 6 required the removal of up to 17,000 timber sleepers from the Barmedman to West Wyalong rail corridor starting on 10 April 2015 and finishing on 15 May 2015.
It was common ground that the contracts were not completed during these times and dragged on until early 2017. It was not common ground as to how many sleepers were in fact removed under WOs 5 and 6 prior to the fire. I propose to proceed on the basis that the best evidence is that contained in the various records tendered in these proceedings.
Mr and Mrs Brus both accepted in cross-examination that they did not keep records of the numbers of sleepers extracted on each day that Cutting Edge worked in the corridor (or the total number extracted), despite this being a condition of each of the WOs. Mr Brus stated that he kept a “mental tally” of the truck movements each day to keep track of how many kilometres of the corridor had been covered.
The plaintiff’s case was that all the sleepers in WOs 5 and 6 were recovered, that being 22,365 from the Temora to Barmedman corridor and 17,000 from the Barmedman to West Wyalong corridor. This was the basis of the pleaded claim for 39,365 sleepers (less 6,155 sleepers stored at Access which will be considered further below). By the close of its case the plaintiff had reduced that amount by 10% given the volume of evidence about the prevalence of theft in the railway corridor. Both Mr and Mrs Brus accepted in cross-examination that there were no records to confirm the number of sleepers they claimed to have collected. They relied on the accuracy of the JHR records and their assertion that they collected all the sleepers left in the corridor.
A difficulty for the plaintiff is that the contemporaneous records do not support this assertion.
The only documents evidencing how many sleepers were retrieved by Cutting Edge under WOs 5 and 6 were the invoices sent by JHR to Cutting Edge seeking payment for the sleepers retrieved. The invoices were accompanied by emails from Cutting Edge stating how many sleepers had been collected. Cutting Edge also tendered “TRAB” sheets (explained below) recording the days on which work was performed in the corridors and whether steel or sleepers were recovered. Those documents disclosed the following.

Emails and invoices

Mr Brus gave evidence that Cutting Edge first commenced work on the Barmedman to West Wyalong corridor and completed those works on 26 February 2016. On 13 March 2016, Mr Brus emailed Nolan Press at JHR in these terms:

“We are on schedule for the forecast time frame as discussed, we are now working through Dripstone to Wellington, I will keep Eddie informed of our progress.

We have 2 small bundles of sleepers between Barmedman and West Wyalong to collect. The numbers collect[ed] from this section are as follows

9400 sleepers

3700 redundant broken/part sleepers

85 tonnes steel.

I will keep you informed with our progress…” (emphasis added)

Thus, at the conclusion of WO 6 (the contract for the removal of up to 17,000 sleepers) Mr Brus told JHR that Cutting Edge had retrieved 9,400 sleepers and 3,700 “redundant” sleepers. There was some dispute as to what the word “redundant” meant which I address below at [69]-[76]. JHR invoiced Cutting Edge for 13,100 sleepers at $2.75 each (a total of $36,025).
No other invoices relating to the Barmedman to West Wyalong corridor were ever produced by the plaintiff. Mr Brus claimed in cross-examination that Cutting Edge must have collected more sleepers in 2015. He could not produce any further invoices to support this. When asked why he did not include that fact in his affidavits, he stated that he did not know how much detail was required for an affidavit. Thus, despite the fact that the plaintiff bore the burden of proving that it collected more than 13,100 sleepers, it could produce no evidence to support this beyond the claim that Cutting Edge would have collected all 17,000 sleepers under WO 6.
Mr Brus gave evidence that after completing WO 6 in February 2016 Cutting Edge then commenced work on WO 5, the Temora to Barmedman corridor. It is to be noted that the terms of WO 5 required Cutting Edge to remove the sleepers between 20 April 2015 and 15 May 2015.
On 28 June 2016, Mr Brus emailed Nolan Press of JHR, stating the following:

“Thought it would be self explanatory regarding any delays as Barmedman to Temora is a flood zone as you could imagine. To date we have collected between Barmedman and Temora 52 tonne of steel, 4500 sleepers and 8500 redundant sleepers with only approximately 8km to go.

Temora to Griffiths we have picked up 45 tonne of steel and 2000 redundant sleepers only. Theft has been ramped [up] in this area, we heard whilst visiting West Wyalong over the weekend conducting a site survey that 8 people are required to attend court this week over theft of railway sleepers.

I will keep you and Eddie posted upon our immediate start, hopefully we get a window with this weather soon.” (emphasis added)

Thus, as at 28 June 2016, Cutting Edge claimed to have recovered 4,500 sleepers and 8,500 “redundant” sleepers amounting to 13,000 of the 22,365 sleepers it was required to collect under WO 5.
On 31 August 2016, Nolan Press emailed Mr Brus stating:

“From the two emails you sent below and the contracts attached here is what I can gather you are proposing for the part payments which I will arrange today…

Temora to Griffith

[2000 sleepers at a cost of $2.05 each]

Temora to Barmedman

[13,000 sleepers at a cost of $2.75 each]

Barmedman to West Wyalong

[17,000 sleepers at a cost of $2.75 each].”

On 1 September 2016, Mr Brus emailed Nolan Press stating the following:

“My apologies for sounding very frustrated today, I have had this wet weather up to the eyeballs and not being able to complete our contracts… is nothing short of extremely frustrating…

After careful assessment of the progress with the outstanding contracts and the progress numbers, regarding Barmedman to West Wyalong…

We have actually over paid the part payment.

The numbers were 9400 sleepers @ $2.75 = $25,850

3700 redundant broken/part sleepers should have been nil charge, but were charged…

Barmedman to Temora, 4500 sleepers and 8500 redundant sleepers… therefore a part payment invoice could be made up for the following.

4500 sleepers @ $2.75 = $12,375

…

8500 Redundant broken/part sleepers nil charge

Temora to Griffith collected to date 2000 sleepers of which only 20% were not redundant.

…

Regarding the 2000 sleepers in this contract we started and the quality was rubbish which in turn got us more focused on the steel at the time. The areas that we looked at for the purpose of tendering, highlighted that there is areas that are much better quality which in turn will lead to a much higher percentage of payable sleepers.” (emphasis added)

On 30 September 2016, Nolan Press emailed Mr Brus stating that:

“From our conversation the other day [regarding Temora to Griffith] you told me to forecast whatever have been removed by John Holland minus 12% for damaged/stolen sleepers, so am I correct in forecasting the following…

…

I have not had a comment back from our contracts team regarding the redundant sleeper issue we discussed, but I will follow that up again.” (emphasis added)

Thus, as at 1 September 2016, putting to one side the issue of what was meant by a “redundant” sleeper, Mr Brus confirmed that he had retrieved and invoiced for 13,100 (out of 17,000) sleepers from the Barmedman to West Wyalong corridor and 13,000 (out of 22,365) for the Temora to Barmedman corridor.
The fire occurred three months later on 18 December 2016.
Mr and Mrs Brus continued to retrieve sleepers after the fire. Those sleepers are not part of the claim for damages, but their retrieval is relevant to some of the expert evidence discussed further below.
On 9 January 2017, Mrs Brus emailed Matthew Taylor and Nolan Press of JHR informing them that Cutting Edge had completed the works on the West Wyalong to Barmedman and Barmedman to Temora contracts.
A further email from Cutting Edge on 10 January 2017 noted that an additional 6 tonnes of steel had been collected on the West Wyalong to Barmedman line and that a total of 14,500 sleepers had been collected from Barmedman to Temora. On the same day, JHR issued Cutting Edge an invoice in the sum of $39,875 for 14,500 sleepers at a price of $2.75 per sleeper. Thus, a further 1,500 sleepers were retrieved under WO 5.
On 16 January 2017, in response to an email from JHR enquiring as to expected production rates under the Temora to Griffith contract, Mrs Brus emailed Matthew Taylor, James Xu and Nolan Press of JHR stating the following:

“We have been informed of a blue truck actively stealing sleepers in the Temora Barmedman region, this was evidence as we finished that contract and was mentioned to us from various sources. We have raised this with Bullet from West Wyalong and Dean has an appointment with the Temora Police on Thursday morning to advise of the same.

The numbers and the count should be close depending on how active the theft has been, as quoted, we will keep you posted…”

In relation to the average rate of recovery, Mr Brus stated in his affidavit that the sleeper recovery rate was between 700 and 800 sleepers per day, depending on wet weather, sleeper location in the corridor (i.e. whether on the correct side of the tracks), sleeper quality and distance to the storage location.
A “semi trailer daily running sheet” which commenced on 30 January 2017 (after the fire) indicated that between 600 and 630 sleepers were extracted from Temora each day between 30 January and 3 February and 7-10 February 2017 (with 600, 300, 630 and 880 on the latter four days). That document also indicated that sleepers were extracted from Puccawan, Quandry, Ariah Park, Mirool, Beckom, Ardlethan and Moombooldool in amounts of between 300 and 1,500 per day in February and March 2017. The running sheet documented the removal of 19,700 sleepers between 30 January and 24 March 2017.

The TRAB sheets

Mrs Brus, as protection officer for the railway corridor, was required by JHR to maintain Task Risk Assessment Briefing Notes (referred to as “TRAB sheets”) for every day on which Cutting Edge worked in the corridor. The TRAB sheets were in evidence. When confronted in cross-examination with the fact that the TRAB sheets did not reflect their evidence, both Mr and Mrs Brus speculated that there may have been additional TRAB sheets that were not produced which showed that Cutting Edge performed more work in the corridors. No additional TRAB sheets were ever produced to support this. The TRAB sheets that were tendered at the hearing disclosed the following:

Cutting Edge commenced steel recovery between Barmedman and West Wyalong on 27 April 2015. Works were carried out over four days from 27-30 April 2015.

Cutting Edge began sleeper recovery between Barmedman and West Wyalong on 3 June 2015 and continued on 4 June 2015, with three people working on each day.

Steel recovery took place between Barmedman and West Wyalong on 25-26, 28-30 June and 1-3 July 2015 (a total of eight days) with between two and five people working each day.

Cutting Edge performed steel and sleeper recovery between Barmedman and West Wyalong on 6-10 July 2015 (five days total) with three or four people working each day.

Cutting Edge performed steel recovery on 14, 15, 16 and 21 July 2015 between Barmedman and West Wyalong, with three or four people working each day.

Cutting Edge performed scrap recovery between Barmedman and Temora on 17-19 and 22-26 February 2016 (eight days total) with four to six people working each day.

Cutting Edge performed scrap recovery between Barmedman and Temora between 28-30 November, 1-2 December and 7-8 December 2016 (seven days total) with one to three people working each day.

Cutting Edge performed sleeper recovery between Temora and Barmedman on 12-14 and 19-22 December 2016 (seven days total, four of which occurred after the fire) with two to four people working each day.

Cutting Edge performed scrap recovery on 2-5 January 2017 (four days) on both lines (West Wyalong to Barmedman and Barmedman to Temora) with three or four people working each day.

The TRAB sheets are consistent with the invoices and emails and do not support the plaintiff’s contention that more sleepers were retrieved in 2015 than those recorded on the invoices.

Evidence about the meaning of “redundant sleepers”

As discussed above at [51], an issue arose as to the meaning of “redundant” sleepers, given that Mr Brus informed JHR in his emails that 3,700 sleepers from West Wyalong to Barmedman and 8,500 from Temora to Barmedman were “redundant broken/part sleepers” which should have been “nil charge”.
In cross-examination Mr Brus denied that the “redundant” sleepers which he claimed he should not have to pay for were “worthless”. He stated that “redundant” was a “common term” used by JHR and all the sleepers under the contract were “redundant”. Mr Brus claimed that it was used in the tender documents, although he accepted that it did not appear anywhere in JHR’s contracts with subcontractors. Cutting Edge did not produce any of the tender documents said to refer to “redundant” sleepers.
Mr Brus went on to state that “redundant” referred to anything less than an “A” grade sleeper (i.e. the B, C and firewood grade sleepers). He said that JHR “appreciated” Cutting Edge collecting the “redundant” (less than A grade) sleepers as they were very thorough in cleaning up the corridor. Mr Brus agreed that JHR did not accept that Cutting Edge was not obliged to pay for “redundant broken/part” sleepers and charged Cutting Edge $2.75 per sleeper including for those which Cutting Edge claimed were redundant.
When asked why he claimed that Cutting Edge was not obliged to pay for “redundant” sleepers, Mr Brus stated that:

“the previous manager of the John Holland contracts allowed that to go through and considered the double As and As the sleepers and the other grades and firewood as redundant. I followed suit. The new guy looked at it through a different view and we - and he’d invoiced us for the lot.”

Mr Brus went on to say that:

“sometimes the sleepers are split lengthways in half or cracked across, so then you’re saying that you would expect me to pay twice as much for that part sleeper…”

He agreed that a B, C or D grade sleeper is a “whole” sleeper with varying grades of deterioration and when it was put to him that the contract provided that broken sleepers did not have to be paid for but had to be disposed of at Cutting Edge’s expense he said that:

“We willingly picked up all the pieces of sleeper… because they all are of value. Even a broken sleeper we saw as firewood, so it’s still a valuable commodity to our business.”

Mr Brus went on to say that when corresponding with JHR about the “redundant” sleepers, he was only “trying to exercise the same policy that the previous supervisor had managed”.
While Mr Brus’ explanation of the “previous supervisor’s” policy was that Cutting Edge did not have to pay for “redundant” sleepers of B grade or less, no documents were produced to substantiate that claim. Despite this, there was in evidence a contract signed by Cutting Edge on 23 May 2014 for the rail section from Bathurst to Orange, which provided that, “sleepers that are in pieces will not attract any charge but must be removed by the purchaser” (emphasis added).

The agreement to place sleepers on Maryvale

A key factual dispute in this matter which depends largely on credit findings is as to the terms of the agreement made between Mr and Mrs Brus and the defendants to store sleepers retrieved under WOs 5 and 6 at the defendants’ property, Maryvale.
Mr Brus’ evidence was that shortly after Cutting Edge obtained these two contracts he had the following conversation with Mr Penfold:

“[Dean Brus]: We have won a contract for the sleepers on the Temora to Barmedman and Barmedman to West Wyalong line.

[Ray Penfold]: What are the plans? It’s a long way to haul them back to Orange.

[Dean Brus]: Yes, it’s too far.

[Ray Penfold]: You could store them on ‘Maryvale’.

[Dean Brus]: Where exactly is ‘Maryvale’?

[Ray Penfold]: It’s about 18-20 km out on the Grenfell Road from Barmedman.

[Dean Brus]: Where on the property do you want me to put them?

[Ray Penfold]: Up near the house in the paddock with the dirt track leading out to Rees Road. The main driveway onto the property is very stony and rough, so you’d be better to use Rees Road.

[Dean Brus]: Oh, that would be good. We will take you up on that offer if that’s OK.

[Ray Penfold]: That’s OK.

[Dean Brus]: There will be 30,000 to 40,000 sleepers and they will be there for some time, like a number of years.

[Ray Penfold]: Not a problem, that won’t worry me.”

Mrs Brus deposed that she was present for that conversation along with Mrs Penfold and that she may have spoken to Mr Penfold about the sleepers.
Mr Penfold denied such a conversation ever occurred. He denied ever being informed that Cutting Edge intended to store 30,000-40,000 sleepers or that Cutting Edge intended to store the sleepers for more than three months. His recollection was that in late April or early May 2015 he had a conversation with his sister, Mrs Brus, in which the following was said:

“[Ray Penfold]: I heard from Mum and Jodi that you and Dean have won the railway contract and [Mum has] asked me if we can store them on Maryvale.

[Janine Brus]: Yes, that is correct, but we only need a place to leave them for about three months, as that should give us enough time to grade and sell them. Would it be possible to store them on ‘Maryvale’?

[Ray Penfold]: Yes you can store them on ‘Maryvale’ if you would like.

[Janine Brus]: Okay, leave it with me, I need to talk to Dean, but that would be great, thank you.

[Ray Penfold]: As I am only out there every so often, if you want to store them on Maryvale, then you will have to be fully responsible for them as I won’t have any time to look after them.

[Janine Brus]: Yes, I understand that. We will look after them. We are just now arranging the transport for them.”

Mrs Brus denied ever having such a conversation with Mr Penfold. Her evidence was that she never told Mr Penfold that the sleepers would only be on Maryvale for three months as she knew that the retrieval and transport process would not take place all at once and that retrieval would occur over many months. She also stated that she knew the grading process was very time consuming and that it would be undertaken by Mr Brus from time to time and that “in all likelihood” the sleepers would stay at Maryvale for more than one year.
In relation to the nature of the agreement and who had control over the sleepers, Mr Penfold stated that he never asked his sister and Mr Brus whether they had insured the sleepers. He agreed that if someone he did not know had tried to take the sleepers off Maryvale he would have asked them what they were doing.

Initial transport of sleepers in June 2015

Mr Penfold’s evidence was that several days prior to the first delivery of sleepers to Maryvale, his sister telephoned him and asked where the sleepers should be placed. Mr Penfold then spoke to Mr Brus about the placement of sleepers in these terms:

“[Dean Brus]: Ray, we are about to start transporting the sleepers. What is the best access to ‘Maryvale’?

[Ray Penfold]: When you come out on the Mary Gilmour Way, the turn into the main entrance to ‘Maryvale’ is too tight for trucks, so I think you would be better going further along until you come to Rees’ Lane and then access the property from that lane. Although it is only a gravel road, it is much easier to turn into Maryvale from Rees’ Lane than Mary Gilmour Way.

[Dean Brus]: Okay, we will use the access from Rees’ Lane. Where do you want the sleepers to go?

[Ray Penfold]: I think the best place to put them is up beside the house and away from the work shed.

[Dean Brus]: Okay, we’ll do that. As I am a bit short staffed at the moment, would you be able to help us and drive one of the trucks so you can show us where the sleepers are to go?

[Ray Penfold]: I’m pretty busy at the moment, but if I can sort things out, I’ll give Janine a call.”

Mr Penfold said that early the next day or several days later his sister called him and asked if he could help by driving a truck from Barmedman to Maryvale.
Mrs Brus denied calling Mr Penfold to ask where to place the sleepers. Her evidence was that she only called to inform him that they were going to start transporting the sleepers to Maryvale. Mr Brus also denied that the above conversation occurred and said that the only conversation about the placement of sleepers was that extracted below at [86].
Mr Brus said that he had the following conversation with Mr Penfold at Maryvale shortly after 2 June 2015:

“[Ray Penfold]: Your best access is the one off Rees Road. The access from Grenfell Road is pretty rough.

[Dean Brus]: We’ll need up to a couple of acres. Where’s our spot?

[Ray Penfold]: Between the track here and the fence and you can go to the road if you want.

[Dean Brus]: So we stack them in rows up as high as our machine will reach. Here, I’ll show you.”

A drawing annexed to Mr Brus’ affidavit indicated that the track ran closely to the north of the new fence line, with the track and fence running along either side of where the sleepers were stacked prior to the fire. He stated that there was no conversation about proximity to the fence or firebreaks. Mr Brus deposed that he showed Mr Penfold photos of sleeper stacks from other properties. Mr Penfold denied that the above conversation occurred and stated that he was never shown photos of sleeper stacks.
Mr Brus stated that when the first truck arrived at Maryvale carrying sleepers he told the driver to stack the sleepers along the fence to the tree and then start another stack adjacent to that. He said that they were removed in a stack (rather than dumped in a pile).
Mr Brus deposed that Mr Penfold made five or six trips that day and that they were in radio contact the whole time. He said that Mr Penfold did not say anything about the placement of the sleepers which were already stacked at Maryvale. He said that by the end of the day on 4 June there were between 8,000 and 10,000 sleepers either stacked or in piles to be stacked in the area between the fence and the track on Maryvale.
Mr Penfold’s account of the events of 4 June 2015 was as follows. He deposed that on 4 June 2015 he travelled from his property at Millara to Maryvale and met Mr Brus. On arrival, he observed that there were three piles of unstacked sleepers to the north and east of the northern end of the house on Maryvale. The pile of sleepers closest to the new fence line was 18 to 20 metres away from the fence, to the north. The two other piles were further north again from that pile.
Mr Penfold said that after arriving at Maryvale Mr Brus asked him whether it would be better if the sleepers were placed in the shed paddock. Mr Penfold said:

“No, it is too crowded because of the trees and the access is not good. As you are using tipper trucks, there are power lines to contend with. If you just stack them directly out from where these piles are toward Rees’ Lane, they will be on bare earth and they should be fine.”

Mr Penfold said that Mr Brus agreed to do this. Mr Brus denied the above conversation and said that he would never have entertained placing the sleepers in the shed paddock because of the power lines.
Mr Penfold said that he then drove to a location in the rail corridor approximately 20km from Barmedman to collect a load of sleepers. Mr Penfold stated that he helped Mr Brus on the day by driving a truck because he had arranged that with his sister about one week beforehand. He denied that he was only contacted on the day of 4 June 2015.
Mr Penfold deposed that while he was waiting for the sleepers to be loaded into the truck, he had the following conversation with Mrs Brus:

“[Ray Penfold]: Have you already picked up some of the sleepers?

[Janine Brus]: Yes. We have collected the best ones along the line and put them at Access Recycling at Barmedman so that nobody steals them.”

Mr Brus denied that he had placed any sleepers at Access prior to the day on which Mr Penfold transported sleepers to Maryvale.
Mr Penfold stated that he then drove the truck carrying sleepers back to Maryvale and deposited the sleepers to the east of the sleepers that were already stacked to the north-east of the house. He took two or three more loads that day, placing them to the east of the existing pile.
Mr Penfold’s account of driving the truck on 4 June 2015 was supported by a diary entry made by Mrs Penfold on 4 June 2015 which stated:

“Ray drove truck for Janine carting sleepers to Maryvale”.

Mrs Penfold said that she would have made that diary entry on the basis of what her husband told her on that day.
Mr Penfold said that he left Maryvale after carting two or three loads and returned to Millara around 2:00pm.
Mr and Mrs Brus denied that they first delivered sleepers to Maryvale on 4 June 2015 and claimed that deliveries began earlier, on 2 or 3 June 2015. Mrs Brus accepted that she had a conversation with her brother at the corridor on the that the sleepers were transported to Maryvale but could not remember whether that occurred 4 June 2015.

Storage of sleepers from June 2015 to 18 December 2016 (relevant to contributory negligence)

As set out above at [67], the TRAB sheets recorded that sleepers were recovered from Temora to Barmedman and Barmedman to West Wyalong on 3-4 June 2015, 6-10 July 2015, 17-19 and 22-26 February 2016, 28-30 November 2016, 1-2, 7-8 and 12-14 December 2016.
After 4 June 2015, at which time Mr Penfold said he became aware the transportation of sleepers to Maryvale commenced, he did not return to Maryvale for two or three weeks. His evidence was that he had no conversations with Mr or Mrs Brus during that time. He returned to Maryvale after two or three weeks and observed that a large number of sleepers had been stacked immediately to the north of the new fence line. The stacks were approximately 10 feet high, with the western stack being 46 metres long and the eastern stack 41 metres long. The two stacks were approximately 15 metres apart and only one metre from the fence at the closest point. He observed that some of the sleepers had fallen off the stacks and damaged the new fence.
Mr Penfold said that he was surprised by the number of sleepers and said that he had never been notified of the number of sleepers Mr Brus intended to store on Maryvale. He said that he did not discuss the number of sleepers or their location with Mr or Mrs Brus in mid-2015 because he understood that they would only be there for three months (while they were graded) and would be removed before the next fire season.
Mr Brus’ evidence was that on the first occasion he visited Maryvale after June 2015 he called Mr Penfold and said he was going to the property. He stated that Mr Penfold said “[j]ust do what you gotta do” and that after that he did not consider it necessary to contact Mr Penfold each time he visited Maryvale. Mr Penfold denied having that conversation with Mr Brus.
Mr Brus stated that after late June 2015 all retrieval was difficult because of the wet conditions but that some additional sleepers were retrieved in the weeks after 17 February 2016 and again from 28 November to 2 December and on 7-8 and 13-14 December 2016. He agreed that no sleepers were delivered to Maryvale between February and November 2016.
As to why some sleepers were stored on Maryvale and others at Access, Mr Brus’ evidence was that due to heavy rain in July 2015 he could not access Maryvale so he arranged to store sleepers at Access in Barmedman. Around 6,155 sleepers were stored at the Access facility.
Mr Penfold stated that when he attended Maryvale in March 2016 he observed that two additional stacks had been placed immediately to the north of the previous two stacks, with approximately one metre between them (the “June 2015” stacks and the “March 2016” stacks). Mr Penfold said that he did not at any time discuss the additional sleepers with Mr or Mrs Brus.
Mr Penfold said that he planted a wheat crop in the north and south paddocks on Maryvale in May 2016 and the weather remained relatively dry until June 2016 when Maryvale started receiving regular rain. He only visited Maryvale a limited number of times during winter 2016 but had a number of conversations with Mr Brus during that time in the following terms:

“[Dean Brus]: How much rain have you had out at ‘Maryvale’, as we need to know what the road is like and whether we can get there.

[Ray Penfold]: Look it’s been pretty wet recently, but if you need to get to the farm you may have to use the all weather Mary Gilmour Way and access ‘Maryvale’ that way.

[Dean Brus]: Yes, that is how we’ve been getting out there using the all weather road, but we’ve had to take some gravel as our trucks keep getting bogged.”

Mr Penfold said that in July or August 2016 he attended Maryvale to check on the wheat crop and met Mr and Mrs Brus who were collecting some scrap metal from Maryvale. Mr Penfold said that the following conversation occurred:

“[Ray Penfold]: What are you going to do with the steel?

[Janine Brus]: The steel is to be sold for cash flow, but we plan to spread the sale of the sleepers over a few financial years for tax purposes.

[Ray Penfold]: I thought the sleepers were only going to be here for 3 months. They are too close to the fence to put in a proper firebreak. If they are to be here for that length of time, they should be moved further away from the fence. If you do that, then it will be possible to build a proper firebreak around them.

[Dean Brus]: It’s too big a job to shift them now.

[Ray Penfold]: When you asked me where I wanted them placed, I said that they had to be placed on the east side of the house and away from the machinery sheds and silos.

[Dean Brus]: It’s too late now, they’ll just have to stay where they are.”

Mr Brus denied this conversation. His evidence was that there would have been more than three months’ work involved in transporting all the sleepers to Maryvale and grading them. Mrs Brus said that she may have told Mr Penfold that the steel was to be sold immediately and the sleepers progressively but denied hearing the rest of the above conversation.
As to the quality of sleepers transported to Maryvale during this period, Mr Brus stated that all the sleepers were of a similar quality except one section of the line where the sleepers were more deteriorated than the rest of the corridor (because they had not been replaced for a long period of time). About 5,000 of these sleepers were transported to Maryvale and 500 to 1,000 were left in the corridor “to be collected at a later time because they were less accessible, inferior and also out of sight from passers-by who might be tempted to steal them.” Mr Brus deposed that the sleepers on Maryvale were predominantly AA, A and B grade and were of a similar quality to those at Access, excluding the 5,000 inferior sleepers mentioned above.
Mr Brus stated that the sleepers were stacked as close to the fence as possible to minimise the intrusion onto arable farming land. He agreed that there was no firebreak between the sleepers and the fence. He stated that no firebreak was made on the south side of the fence (the shed paddock) because that paddock was used for grazing and it contained trees. He stated that he was aware that there was a risk of fire from a harvester during summer. He knew that the paddock in which the sleepers were stored was used for cropping.

The sleepers at Access Recycling

As stated above, Mr Brus claimed that 6,155 sleepers were stored at Access Recycling in Barmedman from mid-2015. Mr Brus explained that this occurred when Maryvale became inaccessible due to wet weather. As set out above at [94], Mr Penfold claimed that Mrs Brus told him on 4 June 2015 that the best sleepers had already been extracted and placed at Access. The TRAB sheets reflected that Cutting Edge performed steel retrieval from 27-30 April 2015 and sleeper recovery from 3-4 June and 6-10 July 2015.
Mr and Mrs Brus denied in cross-examination that the best sleepers were extracted on 27-30 April 2015 and stored at Access. The TRAB sheets do not record the retrieval of sleepers in April 2015. As set out above, Mrs Brus denied ever telling Mr Penfold that the best sleepers had been placed at Access.
There was no evidence, other than the recollections of Mr and Mrs Brus, about when the sleepers were transported to Access. A notice to produce dated 8 February 2019 sought all documents relating to the transportation, delivery, storage and costs of storage of railway sleepers removed by the plaintiff, including any invoices or receipts for the storage of railway sleepers. No documents were ever produced to substantiate the plaintiff’s claims about when the sleepers were taken to Access, nor did Adam Perry from Access keep or produce any records about this.

Conversations about construction of a firebreak and removal of the sleepers (relevant to contributory negligence)

Mr Penfold’s evidence was that in late 2016 he and Mrs Penfold were considering selling Maryvale to fund the purchase of a property known as Wallaroi. He said that he had a conversation with Mrs Brus in which he explained this and said that the sleepers would have to be removed from Maryvale in the event that it was sold. He said that Mrs Brus said it would cost a fortune to move them back to Orange. Mr Penfold said that he said, “they were only meant to be there for three months. They have now been there for about 15 months. If I’ve got to sell Maryvale… [t]hey will just have to go.”
Mrs Brus deposed that she had a conversation with Mr Penfold about the purchase of a new property, which she recalled as occurring in harvest season in 2015. She recalled Mr Penfold saying that the sleepers would have to be moved if the property was sold. She recalled saying, “[i]t won’t be a problem Ray. We will do what we have to do. We won’t hold you back.”
Mr and Mrs Penfold purchased Wallaroi in November 2016 but did not sell Maryvale.
The need for a firebreak was raised during the conversation in late July or early August extracted above at [109]. Mr Brus denied that conversation and stated that Mr Penfold was “never, ever… concerned about [a] firebreak at all”. He said that it would have been a big job to move the four stacks of sleepers that were located adjacent to the fence, but that it would have been “doable”. He denied that there was a need for firebreaks, stating that there was about 150 to 200 metres of buffer and “plenty of room” between the south paddock and the sleepers in the north paddock.

Ms Brus had no recollection of being at Maryvale with her husband and Mr Penfold in late July or early August 2016. She did not recall having a conversation with her brother about moving the sleepers to enable the construction of a firebreak and denied having any conversations about where the sleepers should be placed.
On or about 30 or 31 October 2016 Mr Penfold attended Maryvale to arrange for the cutting of firebreaks. This was done by a contractor using an implement that created a firebreak of 15-16 feet per pass. Four passes were done by the machine to the north side of the sleepers in the north paddock, to separate the sleepers from the wheat crop. That firebreak was cut on 30-31 October and 1 November 2016. It was approximately 20 metres wide and was located to the north of the track between Rees Lane and the home on Maryvale (the sleepers were placed south of the bare earth track, between the track and the fence).
Mr Penfold’s evidence was that he was unable to create a firebreak between the sleepers and the new fence line because there was only a gap of approximately one metre. He was also unable to create a firebreak between the new fence and the old fence separating the north and south paddocks from the shed paddock because of the presence of trees and other obstacles. Mr Penfold deposed that if Mr Brus had placed the sleepers in the location he originally wanted, that being in a line to the east of the house on Maryvale, north of the track, he would have been able to cut a firebreak approximately 20 metres wide between the new fence line and the stacked sleepers to protect them from any fires in the south paddock or shed paddock.
Mr Brus denied seeing a firebreak on Maryvale when he attended on 28 November 2016 and said that Mr Penfold had a contractor cut hay around the crops, not a firebreak.
As to the effectiveness of the firebreak, Mr Penfold accepted that the fire on 18 December 2016 jumped the firebreak and ran into the paddock. He did not accept that a firebreak could have been cut through the area between the old and the new fence and denied that a slasher could have moved through the shed paddock. He later accepted that he could have done it with a “fair bit of effort”.

Evidence about the shortfall and delay in recovery

There was significant delay in retrieving the sleepers under the contract. This was explained by Mr and Mrs Brus as being the result of rain which meant that that could not access the railway corridor (including apparently from February to November 2016). The defendants suggested that the delay was due to the fact that Mr and Mrs Brus went through the corridors and collected the best quality sleepers and stored them at Access and were slow to retrieve the sleepers of a lesser quality. Mr Brus denied storing higher quality sleepers at the Access facility.
As set out above, there was a shortfall between the number of sleepers estimated by JHR and what Cutting Edge told JHR it had retrieved. The defendants’ (and cross-defendant’s) case was that the shortfall was due to theft, primarily because Cutting Edge left the sleepers unattended in the corridor for up to 20 months. As stated above, emails between Mr Brus and Nolan Press on 28 June 2016 and 30 September 2016 confirm that Mr Brus complained to JHR about theft of sleepers being “ramped” up in the area and said that that eight people were required to attend court over theft of railway sleepers.
Mr Antunac gave evidence that he was involved in the sleeper replacement program from Barmedman to West Wyalong in 2002 and in 2010 and also lodged tenders with JHR for the collection of sleepers from Temora to Barmedman and Barmedman to West Wyalong sections in 2015. Before submitting the tenders for those sections, he inspected the entirety of the track by driving along the length of the corridor. He recalled that the contract stipulated collection of up to 17,000 sleepers for the Barmedman to West Wyalong section of the track and 22,365 sleepers for the Temora to Barmedman section. He did not believe that those estimates were accurate.
Mr Antunac believed that 10% would have been pilfered by the time the job began. He also stated that theft was more of an issue when the subcontractor for retrieval was not working alongside the re-sleepering teams, as that meant that the sleepers were left sitting beside the track for months, allowing for a greater proportion of loss due to pilfering. Mr Antunac stated that he believed when he surveyed the corridor in 2015 that the sleepers had been pilfered because the good sleepers had been removed, leaving a flat spot in each pile with a “whole heap of rubbish right at the front”.
Mr Antunac believed that it was unusual to have sleepers still lying along the corridor for so long (throughout 2015 and 2016). He said that it was well-known in the industry that the sleepers need to be removed as quickly as possible to minimise loss due to theft. He also stated that pilfering only occurred when a contractor was not working alongside JHR such that the sleepers were left in the open for a period of time.
Mr Perry and Mr Kennedy agreed that higher quality sleepers were more likely to be stolen then low quality sleepers, especially if they were left in the corridor for a long time.
Mr Brus accepted in cross-examination that it would be safer to remove the sleepers and put them in locations where they are easily accessible than to leave them in the corridor unprotected.
Mr Penfold said that his sister told him about theft and asked if she could bring them to Maryvale “because they would be safe there”.
On 16 January 2017, Mrs Brus emailed JHR stating that “[t]he numbers and the count should be close depending on how active the theft has been”.
Minutes from a progress meeting on 1 May 2017 were also tendered. Present at the meeting were Dean Brus and Janine Brus of Cutting Edge and Nolan Press, James Xu and Matthew Taylor of JHR.
Under the heading “Labour Performance” the minutes noted that the following four contracts were significantly behind schedule:

Temora to Griffith: 23 months;

Temora to Barmedman: 20 months;

Barmedman to West Wyalong: 20 months;

Orange to Dubbo: 8 months.

The minutes recorded that “JHR expressed concerns that the labour performance was not satisfactory for Cutting Edge about substantial delay… JHR advised that other contractors did not have as significant delays during a similar wet period… [Cutting Edge] advised wet weather is a main concern and causing the delay of delivering those jobs.”
Under the heading “Commercial Considerations”, the minutes recorded the shortfall in recovery under each contract, with a shortfall of $19,784 for Temora to Barmedman and $7,120 for Barmedman to West Wyalong. The minutes stated that “JHR and [Cutting Edge] agreed that the shortfall of Temora and Griffith is due to the changing of scope… the other three projects scope did not change, and shortfall in revenue is due to theft of sleepers.”
Under the heading “Comments” the minutes noted that:

“b. JHR felt they did not get to the true cause for the delays in production – and that [Cutting Edge] did not fully explain why their production was so much slower than others in a similar areas [sic]…

c. JHR is not satisfied with the overall performance of [Cutting Edge] hence JHR is questioning whether to invite [Cutting Edge] for future works…

…

a. [Cutting Edge] admitted the works were delayed but highlighted that they did complete Orange to Dubbo contract in between the other contracts… [the main factors were] the weather and access to the corridor…”

Under “Final Comments” the minutes stated that “[c]onsidering [Cutting Edge’s] performance under this subcontract, JHR will consider what options and/or preconditions might be applicable should it consider inviting [Cutting Edge] for future tenders”.

Weather conditions in December 2016

A key issue, relevant to the assessment of risk on the day of the fire, was the weather conditions on Maryvale in the days leading up to and on the day of the fire, 18 December 2016. Mr Penfold’s evidence was that the ground was wet on 18 December due to rainfall in the preceding days. The plaintiff disputed this.
Mr Penfold’s evidence was that due to the wet weather conditions on Maryvale the harvest did not commence until 14 December 2016. By 16 December 2016 the harvest in the north paddock was complete, and the harvest in the south paddock had commenced. His evidence was that on 16 December 2016 Maryvale received between 25-30mm of rainfall, causing the harvest to cease. The staff employed to complete the harvest were given the weekend off due to the wet weather. Mr Penfold’s evidence was that on 17 December 2016 the weather remained foggy, misty and overcast and no further harvesting took place on that date.
Mr Penfold produced a rainfall chart from his property at Millara where he lived with his wife, located near Quandialla, around 30km north-east of Barmedman. Maryvale was described as being 20km east of Barmedman. That rainfall chart disclosed that Millara received significant amounts of rain from June to October 2016. The total monthly rainfall was 115mm in June, 67.5mm in July, 75.5mm in August, 155mm in September and 16.5mm in October. The monthly total for December was 26mm of which 21mm fell on 16 December (and the remaining 5mm on 8 December).
Cutting Edge tendered Bureau of Meteorology (BoM) data for Barmedman Post Office, Temora Airport and West Wyalong Airport. Those records indicated the following in relation to rainfall in December 2016:

Barmedman Post Office recorded 0.5mm of rainfall on 7 December, 4mm on 9 December, 2.4mm on 15 December, 17.6mm on 16 December, and 4.3mm on 30 December 2016. The monthly total was 28.8mm;

Temora Airport recorded 2.4mm on 9 December, 7.8mm of rainfall on 15 December, 4.4mm on 16 December, 9.4mm on 17 December, 0.2mm on 18 December, 2.4mm on 25 December, 0.2mm on 26 December, 6.4mm on 30 December, and 0.8mm on 31 December 2016 (monthly total 34mm);

West Wyalong Airport recorded 0.4mm on 6 December, 0.2mm on 7 December, 3.8mm on 9 December, 11.2mm on 15 December, 7.8mm on 16 December, 17.8mm on 17 December, and 1.4mm on 30 December (monthly total 42.6mm).

The daily maximum temperature at those locations was as follows (not supplied for Barmedman Post Office):

Temora Airport from 16-18 December 2016: 22.3, 31.3, 26.1 degrees (monthly mean of 32.2 degrees);

West Wyalong airport from 16-18 December 2016: 24.7, 30.9, 25.8 degrees (monthly mean of 32.6 degrees).

The daily Global Solar Exposure at those locations was as follows:

Barmedman Post Office from 16-18 December 2016: 8.9, 30.2, 31.0 (monthly mean of 27.1);

Temora Airport from 16-18 December 2016: 29.4, 30.4, 29.4 (monthly mean of 27.1);

West Wyalong airport from 16-18 December 2016: 9.8, 30.8, 31.4 (monthly mean of 27.2).

Mr Penfold stated that Maryvale was about 60 kilometres from West Wyalong and 45 kilometres from Temora. His evidence was that it was possible for rain to fall at Maryvale but not at Temora or West Wyalong. He said that there was significant rainfall on Friday night (16 December), which was recorded in the rain gauge at Millara, and that the next day was “foggy, sort of misty”.

The fire on 18 December 2016

On 18 December 2016, Mr Penfold travelled to Maryvale from Millara to perform maintenance on a silo. Upon arriving at approximately 10:45am he first performed a service and repair work on the header before proceeding to the silo at approximately 11:30am. He climbed on top of the silo furthest to the south in the shed paddock to weld around a crack in the main shaft of the auger. The auger was full of grain and unable to be moved. He estimated that it took one or two minutes to perform the welding and that he started welding around midday. He said that he usually used his phone as a watch and believed his time estimates were accurate to around 10 minutes.
Mr Penfold said that it had been a “very still” morning but a breeze sprung up around lunch time (around the time he was welding). He stated that a southerly breeze came up around that time.
He began welding using an arc welder. He acknowledged in cross-examination that arc welders throw more spatter than other types of welders. He said that he had never taken a formal course in welding and only had experience performing welding on the farm including on gates and posts. He did not use any protective equipment to prevent hot spatter from being thrown from the weld site.
In cross-examination Mr Penfold was asked whether he took any steps to clear the grass around the base of the silo. He said he did not as he did not believe it was necessary. He said that it was “very still” and the grass had been “very dewy” in the morning. He said he considered clearing the grass but decided not to. He also decided that it was not necessary to further dampen the grass around the silo.
He stated that he did not have a fire extinguisher with him but did have a water cart which was at the wool shed while he was welding. He estimated that the wool shed was around 80 metres from the silo.
After finishing the welding and turning off the generator, Mr Penfold heard a crackle and realised that a grass fire had started at the base of the silo on the eastern side (the side of the silo closest to the sleepers). He estimated that the fire was about three or four square metres in size and that the flames were around 20 or 30 centimetres high. He extinguished the small grass fire with a “rag” from the back of his ute. He then realised that there was another grass fire five to eight metres behind him, to the north. That fire had larger flames, around 45 centimetres high.
It was put to Mr Penfold in cross-examination that the ground was in fact “pretty dry” when he was doing the welding and that was the reason the fire spread so fast. He denied that and said that it was only because the ground was damp that he was able to extinguish the first grass fire. He said that if it had been a dry day he would have had “no chance”. He accepted that he did not have a fire extinguisher with him when he was welding and that he did not have anything in his ute suited for fighting a grass fire.
Mr Penfold then realised that the larger fire was too big to extinguish with the materials in his ute so he drove to the wool shed. From the landing of the wool shed he called his wife, Mrs Penfold. He informed her that there was a fire at Maryvale and asked her to contact Neil Haddrill and Mark Stewart, the owners of two neighbouring properties approximately four and two kilometres from Maryvale respectively.
Mr Penfold then returned with the water cart. He estimated that it had taken around five minutes to make the call and return with the water cart. When he returned the second fire covered an area of around 50 square metres. He observed that it had progressed north, passing under the new fence line, underneath the sleepers, and out the other side. It had progressed around 60 to 70 metres north of the sleepers at that point. The neighbours then arrived.

What time did the fire start?

Mr Penfold gave evidence that it took him a while to get any phone service after the fire started and he ended up getting reception after driving to the landing of the wool shed. He then called his wife asked her to contact the neighbours while he went to get the water cart. He did not accept that his phone call to his wife could have been later than 12:30pm or 1:15pm even though it was put to him in cross-examination that the RFS was not called until 2:34pm.
Mrs Penfold said that she received the call from her husband, contacted the neighbours and then left for Maryvale. She estimated that she received the call from her husband around 12:30pm and then immediately called the two neighbours and left Millara, arriving at Maryvale around 1:00pm or 1:15pm. She said that when she arrived there was no strong wind blowing, but there was some breeze. She said that Mr Penfold told her that a “whirly-whirly” had caught the grass fire and spread it.
Mr Penfold’s evidence was that the two neighbours, Neil and Mark, arrived around 12:45pm and assisted him to extinguish the fire in the north paddock. He estimated that it took 20 minutes to extinguish that fire and said that when he had finished there was no sign that the sleepers were on fire, even though the fire had passed underneath the sleepers.
The third person to arrive at the scene, after the two neighbours, was Trevor Penfold, the local fire captain (it was not suggested that he was related to Mr Penfold). Mr Penfold estimated that Trevor Penfold arrived shortly after 1:00pm. He discussed with Trevor Penfold how to manage the fire. Trevor Penfold wanted to drive around and have a look at the fire. After observing the fire, he decided that the best course would be to create a back burn in the north paddock to prevent the fire from spreading, before applying water to the smoking sleepers.
When Mrs Penfold arrived at Maryvale, which she estimated was at 1:15pm, Mr Penfold was driving around the north paddock with the fire captain, Trevor Penfold, in a Rural Fire Service (“RFS”) truck and other RFS volunteers were arriving. The RFS volunteers then completed the back burn, starting deep in the north paddock and burning back to the point at which Mr Penfold and the two neighbours had extinguished the grass fire in the north paddock.
Mr Penfold estimated that the back burn was completed at around 1:30pm or 1:45pm and at that point the RFS volunteers positioned the fire trucks next to the sleepers and commenced applying water to the sleepers. Mr Penfold said that at around 2:00pm he observed smoke rising from the sleepers.
Mr Penfold said that despite the water being applied by the RFS trucks, he observed flames visible on the sleeper pile at around 2:45pm.
It was put to Mr and Mrs Penfold in cross-examination that the call to the RFS was made at 2:34pm and therefore the times given by them could not be correct. They maintained that the times given were accurate. Neither Mr nor Mrs Penfold recalled calling the RFS and they did not know if anyone else did.

The arrival of Dean and Peter Brus

After the sleepers caught fire Mr Penfold said that he called Mr Brus and told him that the sleepers had caught fire due to the welding. Mr Brus said that he had already heard about the fire and was on the way to Maryvale in his helicopter with his son, Peter Brus. Mr Brus was 45 minutes away.
Mr Penfold stated that at around 2:45pm Trevor Penfold instructed him to call Mr Brus and say that the helicopter was not required. Mr Penfold relayed this to Mr Brus. Mr Brus told Mr Penfold that he was five to ten minutes away and:

“If I can’t use the helicopter, try and save the sleepers at the western end of the stack closest to the house because they are the ‘A’ grade top grade ones.”

Mr Penfold deposed that at around 3:00pm Mr Brus arrived in his helicopter and they had a conversation in the following terms:

“[Dean Brus]: They won’t let me use my helicopter to save my own sleepers. I need to save the ones closest to the house as they are A grade sleepers. I’m not worried about the rest, if we can save them. Who is the fire captain and where is he?”

Mrs Penfold recalled a conversation shortly after Mr Brus arrived in very similar terms.
Peter Brus took five photographs depicting the fire from the helicopter on approach at 2:58pm and 2:59pm and from the landing site at 3:00pm. He denied that any conversations took place suggesting that grading of the sleepers had already occurred or that only the better sleepers should be saved.
Mr Penfold directed Mr Brus to speak to Trevor Penfold. Mr Penfold said that Mr Brus returned around 3:30pm and was “visibly upset and angry”. Mr Penfold said that Mr Brus said words to the following effect:

“They are not doing anything to save the sleepers. They are just letting them burn. A big fire needs big water. If they would just let me use my helicopter, I can dump water on the western end and save all the better A grade sleepers. Once I have done that, Peter can use the excavator to push them away so that we can try and save some of [them]. We’ve got to save the sleepers on the western end, as they are all top A grade sleepers. I’m not worried about the rest.”

Following these oral submissions, I ruled that I would permit the tender of the 2015 PDS. As I indicated at that time, following the evidence of the Penfolds, and in the absence of any objection to the tender of the 2015 PDS (and given the multiplicity of other issues in dispute at the hearing), I had presumed by the time of the close of the evidence that the defendants accepted that the 2015 PDS was the relevant document in place at the time. I provided leave to Ms Peden to tender evidence to meet the objection but Ms Peden submitted that the evidence to be adduced would be in relation to the practice of the underwriter and insurer to provide these documents to brokers and that they are readily available either upon request or pursuant to a notice under s 74 of the ICA. Ms Peden agreed that there would be no need to adduce evidence of matters that I had already inferred.
I have considered Mr Drummond’s submission that s 58 of the ICA determines which of the two PDSs is applicable, including his reliance on the decision of CIC Insurance. I am not persuaded that that case has any relevance to this case. It concerned very different facts. The central issue in CIC Insurance was whether the insurer was liable for a fire that took place after a policy had lapsed in circumstances where an earlier claim had been considered fraudulent by the insurer. Mr Drummond relied upon the judgment in CIC Insurance at 404, 407 and 409 but those passages concern the unusual factual situation in that case, where the insurer had purported to cancel the policy for fraud under s 60 of the ICA, had not given notice that the policy only had about three months to run and that a second fire occurred after the policy had lapsed.
Section 58 of the ICA is intended to cover the situation whereby a policy holder finds himself or herself uninsured because the insurer did not remind them that their policy was due for renewal. That is not this case. Section 58 of the ICA does not place any onus on an insurer in litigation between an insurer and insured person to establish certain evidentiary matters which do not form part of the pleaded claim.
The insurer does not dispute liability based on the policy having lapsed; it relies on the relevant exclusion clause. Given the pleaded issues in this case, I am not satisfied that the insurer, as the cross-defendant, was required to establish on the balance of probabilities either that it provided notice to the Penfolds that their insurance contract was due to expire or that the 2015 PDS had been provided to the Penfolds.
I am satisfied that the 2015 PDS is the relevant document on the available evidence. Mr Penfold did not know which version was the correct one; he said his wife gave it to him. Mrs Penfold, on the other hand, thought it came from the broker but was unsure about the details of which PDS applied.
There was no dispute that the Penfolds were issued with the insurance certificate, which was in evidence. It clearly provides that the certificate should be read in conjunction with the 2015 PDS. It also states that the insured person is to contact the insurer to obtain a copy of the PDS if not provided with one. The Penfold were clearly familiar with contract variations; they varied the current policy twice when they purchased new vehicles.
The relevant insurance contract refers to the 2015 PDS. Mr Drummond was unable to identify any section of the ICA which provided that, for an insurance contract such as that the subject of this cross-claim, there is any onus on the insurer to provide proof of actual service of the relevant PDS on the policy holders.
I propose to proceed on the basis that the 2015 PDS is the relevant document but, as will become apparent in the reasons that follow, I am not satisfied that my conclusion would have been any different in this matter had the applicable PDS been the 2012 version.

Were the sleepers under the “control” of the defendants at the time of the fire?

Defendants’/cross-claimants’ submissions

The defendants’ denied liability to the plaintiffs on the basis that the agreement to store the sleepers was a “bare licence agreement”, “at no cost” and that they were at all times in “the care, custody and/or control” of Mr Brus and Cutting Edge.
Similarly, the cross-claim is brought against the insurer on the basis that the defendants assert that the sleepers were not in their physical legal control or their physical and legal control at the time of the fire.
The insurer, on the other hand, claims that the sleepers were clearly in the custody and control of the Penfolds as operators of the farming business on Maryvale. The insurer accepts that it is liable up to $100,000.
Mr Drummond relied on the evidence that the Penfolds never attempted to remove any of the sleepers in support of its contention that never exercised any legal and/or physical control over them. Although it was accepted that the defendants had rights as the operators of the farming business on Maryvale to touch, move or relocate the sleepers, they did not. Nor, it was submitted, did they seek to exercise their right to dispose of or remove any of those sleepers from Maryvale.
As for the relevant principles for construing insurance contracts, Mr Drummond relied upon the decisions in McCann v Switzerland Insurance Australia Limited (2000) 203 CLR 579; [2000] HCA 65 per Gleeson CJ at [22] and CGU Insurance Limited v Porthouse (2008) 235 CLR 103; [2008] HCA 30 per Gummow, Kirby, Heydon, Crennan and Kiefel JJ at [43]-[44] in support of a general submission that construction of the insurance contract must give effect to the purpose of the policy, the commercial circumstances which the policy addresses and the objects which the contract of insurance intends to secure.
Mr Drummond also relied upon Junemill Ltd (in liq) v FAI General Insurance Co Ltd [1999] 2 Qd R 136 at 268; [1997] QCA 261 in which Fryberg J (with whom Fitzgerald P and McPherson JA agreed) applied and approved the following passage from the judgment of McLachlin J in Reid Crowther & Partners Ltd v. Simcoe & Erie General Insurance Co. [1993] 1 S.C.R. 252 at 268-9; 99 D.L.R. (4th) 741 at 751-752:

"In each case the Courts much examine the provisions of the particular policy at issue (and the surrounding circumstances) to determine if the events in question fall within the terms of coverage of that particular policy. This is not to say that there are no principles governing this type of analysis. Far from it. In each case, the courts must interpret the provisions of the policy at issue in light of general principles of interpretation of insurance policies including but not limited to:

(1) the contra proferentem rule;
(2) the principle that coverage provisions should be construed broadly and exclusion clauses narrowly; and
(3) the desirability, at least where the policy is ambiguous, of giving effect to the reasonable expectation of the parties.”

His Honour noted that it was unnecessary to decide whether the third principle was part of Australian law.
It was submitted that cls 2 and 3 of the subject policy are exclusion clauses thus the onus of establishing that the exclusion applies falls squarely on the cross-defendant, the insurer.
As for the meaning of “care and control”, the defendants also relied upon the decision in Botany Fork & Crane Hire Pty Ltd v New Zealand Insurance Company Limited (1993) 44 FCR 27; [1993] FCA 559 (“Botany Fork”) which considered the phrase “custody or control” in an insurance contract. I will consider that decision below. Mr Drummond submitted that Botany Fork had been applied in subsequent decisions including Pebsa Pty Ltd v McNaughton Gardiner Insurance Brokers Pty Ltd [2002] WADC 190 and Walz Construction Company Pty Ltd v ASP Ship Management [2002] QCA 136.
Mr Drummond submitted that even if a person had possession of a chattel that did not establish that they had control. He submitted that the Penfolds never exercised control over the sleepers. He noted that even when the Penfolds told Cutting Edge to remove the sleepers and they refused, the Penfolds did not remove the sleepers themselves. He agreed that the Penfolds could have done so but did not concede that that established any control over the sleepers. He accepted that the Penfolds could control who came onto the property but submitted that they did not exercise any physical control over the sleepers because they did not move them. He submitted that because the Penfolds did not touch the sleepers while they were on Maryvale, they did not exercise physical or legal control and the sleepers remained under the control of Cutting Edge at all times.
Mr Drummond submitted that because the Penfolds were the registered proprietors of Maryvale they had the ability to exercise control in relation to the sleepers but what they did not have was any power to exercise control over the railway sleepers. Thus, it was submitted the exclusion clause relied upon by the cross-defendant did not apply to this case, in particular in circumstances where neither the first or second defendants as cross-claimants purported to or did in fact exercise any “control over” the destroyed sleepers.
Finally, it was submitted that the exclusion clause did not apply with the consequence that the cross-defendant is liable to indemnify the defendants/cross-claimants for all sums, not limited to $100,000, that the defendants may be held liable to pay to the plaintiff together with the costs of the first and second defendant in defending the plaintiff's claim and prosecuting the cross-claim.

Insurer’s submissions

Ms Peden, on behalf of the insurer, submitted that the sleepers stored on Mr Penfold’s land were in the defendants’ “physical and legal control” and their “physical or legal care, custody or control”. She submitted that these expressions, properly construed and applied, are relevantly congruent and co-extensive. It was submitted that the cl 2 exception operated to exclude property damage to the sleepers and that the item 4 benefit provided limited cover for property not in the defendants’ “physical or legal care, custody or control”.
As for the relevant principles to apply in construing an insurance contract, it was submitted that the principles relied upon by the defendants as to the proper construction of an insurance contract (extracted above at [441], [444]) had been superseded in the last 22 years. Ms Peden submitted that the relevant principles were to be derived from the decisions of the High Court concerning the construction of commercial agreements. The insurer noted the summary of principles set out in Electricity Generation Corporation v Woodside Energy Limited (2014) 251 CLR 640; [2014] HCA 7 at [35] per French CJ, Hayne, Crennan and Kiefel JJ, the principles in Onley v Catlin Syndicate Ltd as the Underwriting Member of Lloyd’s Syndicate 2003 [2018] FCAFC 119; (2018) 360 ALR 92 at [33] and MOS Beverages Pty Ltd v Insurance Australia Ltd trading as CGU Insurance [2020] FCA 1716 per Allsop CJ at [18].
As to the meaning of “control” and “care”, Hollard relied upon passages from D Derrington and R Ashton, The Law of Liability Insurance (3rd ed, 2013 LexisNexis Butterworths) at [10.86]-[10.88].
Ms Peden also noted the similarity with the facts in NH Ins Co v Abellera 6 Wn.App 650, 495 P.2d 668 (1972), which is discussed further below.
Hollard further relied upon the fact that on 18 October 2019, after these proceedings were commenced by the plaintiff, Mr Penfold demanded the removal of the sleepers, threatening legal action under the Uncollected Goods Act 1995 (NSW). The letter requested the removal of the sleepers from Maryvale by 31 October 2019 and stated that an order would be sought pursuant to the Uncollected Goods Act to remove the sleeper’s at Cutting Edge’s cost should it fail to do so. Cutting Edge responded on 23 October 2019 requesting an extension of time, which was given until 15 November 2019. I shall consider the relevance of this below.
It was submitted that there was no requirement for the Court to find that the nature of the arrangement was a bailment, but reliance was placed on the Penfolds’ letter of 18 October 2019, and the reference to the Uncollected Goods Act in support of that categorisation.

Consideration

I am satisfied that the relevant principles are those identified by the insurer. The preferred construction is that which supplies a congruent operation to the various components of the whole of a policy of insurance. As French CJ, Hayne, Crennan and Kiefel JJ observed in Electricity Generation Corporation v Woodside at [35]:

“… The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding ‘of the genesis of the transaction, the background, the context [and] the market in which the parties are operating’. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption ‘that the parties … intended to produce a commercial result’. A commercial contract is to be construed so as to avoid it ‘making commercial nonsense or working commercial inconvenience’.” (footnotes omitted)

As the Federal Court relevantly observed in Onley v Catlin Syndicate at [33]:

“It goes without saying that a construction that avoids capricious, unreasonable, inconvenient or unjust consequences, is to be preferred where the words of the agreement permit.”

More recently, Allsop CJ in MOS Beverages Pty Ltd v Insurance Australia Ltd trading as CGU Insurance [2020] FCA 1716 provided a useful summary of the principles in the context of insurance policies at [18]. After referring to the relevant authorities, including Wilkie v Gordian Runoff Limited (2005) 221 CLR 522; [2005] HCA 17 (“Wilkie”) his Honour noted the importance of the commercial purpose in the interpretation and construction of a policy and went on to state:

“The principles need not be restated fully here, but it is important to note that the Policy is to be given a businesslike interpretation, paying attention to the language used by the parties in its ordinary meaning, and to the commercial purpose and object of the contract, in the context of the surrounding circumstances, including the market or commercial context in which the parties are operating, by assessing how a reasonable person in the position of the parties would have understood the language.”

His Honour went on to note that in Wilkie the High Court (Gleeson CJ, McHugh, Gummow and Kirby JJ) observed the following at [16]:

“In construing the Policy, as with other instruments, preference is given to a construction supplying a congruent operation to the various components of the whole.”

A similar observation had been made much earlier by Gibbs J in Australian Broadcasting Commission v Australasian Performing Right Association (1973) 129 CLR 99; [1973] HCA 36 at 109 where his Honour stated, “the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another”.
I have construed the contract with these principles in mind. I have also considered the decisions the parties relied upon which have considered similar exclusion clauses.
The defendants placed considerable reliance on the decision in Botany Fork. I am not satisfied it stands as authority for the proposition advanced on behalf of the defendants. In Botany Fork, a forklift driver negligently damaged a gondola he had been hired to move. The Full Federal Court (Hill, Higgins and Cooper JJ) considered a clause which excluded liability for (at 29):

“damage to property belonging to or held in trust by or in the custody or control of the Insured or any person indemnified by this Section." (emphasis added)

The Court observed at 31 that the words "custody" and "control" are words the meaning of which will depend upon context. The Court was satisfied that the purpose of the exclusion clause in that case was to exclude claims for damage to property which, whilst not belonging to the insured, nevertheless had some connection with the insured, which otherwise could make the insured responsible for the loss or damage of the item in question.
At 32, the Court quoted with approval from the decision in Commercial Union Insurance Co Ltd v Willetts Radio & TV Limited (1985) 3 ANZ Insurance Cases 60-677 (“Willetts”), a decision of the New Zealand High Court, as follows:

"The exclusion is in respect of loss or damage to property owned by the insured or leased or rented to the insured or in his physical or legal control. The only conclusion I can come to is that the exception is intended to exclude loss or damage to property in respect to which the insured has a responsibility and over which he may exercise rights by reason of or arising from contract or bailment or actual possession connected with his business; property which for some reason is under his influence or under his control by reason of his business, as opposed to property belonging to persons with whom he has no such dealings (with express exclusion from the exception of buildings not owned but rented or occupied)."

At [24] the Court distinguished the decision in Gray Brothers Engineering Limited v New Zealand Insurance Company Limited (1992) 7 ANZ Insurance Cases 61-124. That decision concerned an insured person who had been retained to repair a boom attached to an excavator at a mining site. In the course of that repair work, damage was occasioned to the excavator itself. The Court in Botany Fork noted at 33 that:

"… It was held that the exclusion clause [‘in the charge or under the control of…’] had no application. Again this was a case where the insured could properly be said to have had control over some part of the goods in question, that is control in relation to the goods but not control of the goods themselves. The Court pointed out that the insured had no authority to move the vehicle, no authority to alter it structurally or indeed to make any decision as to the vehicle's future."

The Court went on to contrast further cases on their facts where there was only control “in relation to” goods. One such case was Indemnity Insurance Co v Excel Cleaning Service (1954) 2 DLR 721 which concerned a cleaner engaged to clean a rug fixed in place who was allowed onto it but only to clean it. Another case distinguished on its facts was Interprovincial Pipe Line Co v Seller's Oil Field Service Ltd [1976] 66 DLR (3d) 360), in which a cleaner was engaged to clean an oil tanker in situ.
The Court went on to observe at 34:

“From these cases it may be concluded first, that both custody and control refer not only to legal custody and control but also to actual or de facto custody or control. Secondly, it may be said that the custody or control need not be exclusive of some other person, that is to say, that more than one person may have, at any given point of time, custody or control of the item in question. Thirdly, while control clearly relates to dominion or power over the item ultimately damaged, the exclusion clause will not be attracted where the control is merely in relation to that item but not over it. Nor will the exclusion clause be attracted if the control is of a part only but not the whole of the item.

Ordinarily control of an item will entail possession of it. However, in the ordinary meaning of the word at least, control does not require possession. It may be that in the present context it does, but it is unnecessary to decide that question in the present case. Suffice it to say that once the gondola and trailer rested upon the tines of the forklift, the driver of that forklift truck had as much possession of the gondola and trailer as would the driver of a truck into which the gondola and trailer might have been placed in order to transport them by road. That possession enured to Botany through the agency of the forklift truck driver.

What distinguishes the present case from the others decided before, is that in the present case the goods in question were moved by the driver of the forklift truck, albeit that that movement which was under his control was but brief and was for the purpose merely of moving the goods from the ceiling where they had been stored to the floor of the warehouse premises. Nevertheless, Botany was employed for the precise purpose of moving the goods in this way.” (emphasis added)

The Court held that although the forklift driver did not own the gondola, he had been hired to move it from one place to another and the gondola was under his control while he was moving it. The Court found it unnecessary to decide whether the gondola owner also had control over the vessel at that time.
I have considered the distinction raised in Botany Fork and the cases referred to therein, as relied upon by the defendant, between control "in relation to", but not "control over" the good or chattel. But this is not a case in which the Penfolds had only some control in relation to the sleepers, nor control over only some of them. It is to be accepted that the exclusion clause has been held not to apply in some such cases but that is not this case. All of the sleepers were present on the property. The plaintiff intentionally left the sleepers on Mr Penfold’s land for safekeeping and the Penfolds had control over all of the sleepers.
Neither party relied upon any factually similar Australian cases, but Ms Peden noted the similarity between the facts in this case and those in the decision of the Court of Appeals of Washington in NH Ins Co v Abellera. In that case the defendant’s friend allowed him to store a dragster in their basement garage for no charge “where it would not be vandalised”. The defendant was permitted to go into the garage at any time to work on the dragster. The dragster was destroyed in a housefire at the premises and the defendant claimed the loss of the dragster was due to the homeowner’s negligence. The homeowner’s evidence was that they would not have allowed anyone to take the dragster, and both parties’ position was that the sole purpose of storing the dragster in the garage was to keep it safe.
The issue turned on whether the dragster was within the “care, custody or control” of the homeowner. The Court of Appeal considered that these words “being words of common usage and connotation in the vocabulary of laymen… must be given their plain and ordinary meaning.” By keeping the dragster safe the homeowners had the “care, custody or control” of the dragster.
Finally, I have considered the passages from The Law of Liability Insurance (3^rd ed) including at [10-88] relied upon by Hollard where the authors stated:

“‘Custody’ and ‘control’ have no fixed meaning at law, and should be read in that context. … ‘custody’ means to have things in charge or safekeeping; and it implies temporary physical control merely, and does connote domination or supremacy or authority…. It requires exclusive possessory control at the time of loss, but this will be met if the property is in his vehicle, and even if it is parked outside his premises and he has no knowledge of the presence of the particular property in it.

…If ‘care’ is also used, it adds something. It includes the concepts of charge, supervision, management, responsibility for or attention to safety and well-being, and temporary keeping for the benefit of the owner. These expressions are all influenced by the context and are sometimes synonymous, not confined to legal custody and control but also to de facto or actual custody and control, and not necessarily exclusive and the context and purpose of the provision strongly suggest that it is not intended to do so… Each connotes possession and the power in fact, if not in law, to keep others (not necessarily all others) from access to interference with the chattel and to effect some degree of physical disposition or management of it. …

It does not refer only to the exclusive legal control by the insured and it is sufficient that there be a measure of legal control… For example, it applies to a bailee… when an insured bailee of goods stores those goods in its own warehouse, it has the necessary powers…

It is a factual matter as to whether the relevant property was in his care, custody or control and whether it met the description of the exclusion when the harm occurred.” (footnotes omitted)

Having regard to the decision in Botany Fork and the principles set out above, I am satisfied that the words in the contract should have their ordinary meaning in the context of the contract and applied to the facts as I have found them. I am not satisfied that the fact that the Penfolds assert that they took no responsibility for the sleepers overcomes the other evidence establishing that they did have the physical and legal control of them at the time of the fire.
The evidence was that the sleepers were placed at Maryvale for safekeeping. It was common knowledge that there had been pilfering of sleepers from the corridor. Access to the property was controlled by the defendants. Permission was required for people other than the plaintiff to access them on that land. To use the language of Botany Fork, the control was “over” the sleepers, not merely “in relation to” them. Nor, as was the case in Botany Fork, did someone else on the property have physical control of the sleepers at the time of the fire such as to potentially shift the responsibility to someone else. They were simply lying in situ on the property close to where the fire started.
I cannot accept the defendants’ argument that they had no physical or legal control over the sleepers at the time of the fire just because they did not exercise their right to move them or otherwise deal with them.
I have had regard to the inconsistency in language as between cl 2 and the additional benefit in cl 3, item 4. As set out above, whereas cl 2 refers to the property being in a person’s “physical and legal control”, cl 3 refers to the property being under “physical or legal care, custody or control” (although it is headed “physical and legal control”). I am satisfied that the construction of one clause in the policy cannot be undertaken in isolation. I am satisfied that when the cl 2 exclusion is read with the item 4 benefit, the words in cl 2 must mean the same as “Property in your physical and legal control”. I accept the insurer’s submission that the intention is that the item 4 benefit is to be read back-to-back with the clause 2 exception, so that property in an insured person’s physical and legal control (which is also to be read as property in the person’s physical or legal care, custody or control), is to be subject to a liability sub-limit in the sum of $100,000. They are both on the same page of the PDS.
I am satisfied that the intention was that cl 2 would not provide cover for property identified as falling within cl 3. The two clauses are to be read together and harmoniously with each other and with the insurance certificate which noted the following under the heading “Farm Liability” the certificate:

“Legal liability Limit of Liability $20,000.000

…

Goods in Physical & Legal Control… Limit of Indemnity $100,000

Do you have horses on your property or do you allow access to your property for people with horses? No

Additional Cover

Farm Hosting Not taken

Photographic Turnover: $5,000 Taken

Excess $1,000

Interested Party(s)

Rural Bank, QUANDIALLA NSW 2721” (emphasis added)

The purpose of the insurance policy is to provide farm insurance for identified risks and in relation to identified property. As with any insurance contract, the premium charged depends on the specification of the property. The defendants’ policy was updated several times, each time the Penfolds purchased a new vehicle or piece of machinery to be used or stored on the insured property. As a matter of general principle, the identification of property allows an insurer to calculate the premium payable either on inception, renewal or variation.
The property on the farms owned by the defendants was insured up to the amount of $20 million in the case of a fire. I cannot accept the defendants’ argument that, construing the contract as a whole, the insurer should be liable for other people’s goods stored on their farm up to this amount which are not specified in the policy and the insurer was unaware of. I am satisfied that the purpose of the exclusion in cl 2 is to limit this type of loss because an insurer could not know about it in order to assess its potential liability and adjust the premium accordingly. On the defendants’ case, how could the risk associated with the storage of property belonging to others ever be assessed by an insurer in order to arrive at an appropriate premium?
Clause 2 covers the insured for claims made by others in relation to property but not if it is under the physical and legal control of the insured. Where certain property is under their physical and legal control it must be specified in the contract. Despite this, some limited cover is provided for the property excluded under cl 2, to the value of $100,000. To construe the two clauses otherwise would overlook the need to construe the policy harmoniously.
Given these findings, it is not necessary for me to determine the precise legal arrangement in order to determine this matter. Despite this, I note the insurer’s submission that I would properly categorise the arrangement as one of bailment; that is, that the legal possession of the sleepers was passed by the plaintiff to the defendants. As Windeyer J observed in Hobbs v Petersham Transport Co Pty Ltd (1971) 124 CLR 220; [1971] HCA 26 at 238, “[a] bailment comes into existence upon a delivery of [the] goods of one person, the bailor, into the possession of another person, the bailee, upon a promise, express or implied, that they will be re-delivered to the bailor or dealt with in a stipulated way.”
The insurer relied upon the letter dated 18 October 2019 sent to the plaintiff pursuant to the Uncollected Goods Act which requested the removal of the sleepers from Maryvale by 31 October 2019. Reliance was placed on the warning therein that an order would be sought pursuant to the Uncollected Goods Act to remove them at their client’s cost should Cutting Edge fail to do so. It was submitted that this was an acknowledgement of a bailment given s 5 of the Uncollected Goods Act which provides that bailed goods will be considered to be uncollected for the purposes of the Act where:

5 When goods uncollected for purposes of Act

(1) Bailed goods are uncollected for the purposes of this Act if–

(a) the goods are ready for delivery to the depositor in accordance with the terms of the bailment, but the depositor has failed to take delivery of the goods or, if those terms so provide, to give directions as to their delivery …

Mr Brus accepted that there would have been “legal ramifications” if he had not collected the sleepers which the insurer submitted was further acceptance that the Act applied.
The insurer submitted that the defendants by seeking a remedy under the Uncollected Goods Act admitted that there had been a bailment. Mr Drummond, on the other hand, submitted that a direction by the defendants’ solicitor to remove the goods failing of which they would be removed as uncollected goods did not establish bailment.
I am not satisfied that this letter, which post-dates the fire by almost three years, amounts to an admission that there was a bailment at the time of the fire, although it does suggest an involuntary bailment as at the date of the letter. There could not have been an involuntary bailment at the time of the fire as Mr Penfold clearly gave permission for the sleepers to be stored on Maryvale. The plaintiff did not plead its case as one of bailment and I do not consider it necessary to consider this issue further.
I have reached the conclusion that the applicable policy is the 2015 PDS, the sleepers were under the physical and legal control of the defendants and that the words in cls 2 and 3 and the certificate all are to be read harmoniously.
Finally, I am satisfied that even if the 2012 PDS was the relevant document, the defendants would still have to prove that the sleepers were not in their “physical and legal control” or “physical legal control” reading the policy harmoniously. Given that I have already found that the clauses of the PDS must be read harmoniously, for the reasons I have already provided I am not satisfied that the defendants have established that the sleepers were not in their “physical legal control” or “physical and legal control”.

Interest

The insurer submitted that I should not award interest on any damages payable. Section 100 of the Civil Procedure Act2005 (NSW) provides the Court with a discretion to award interest. It was submitted that the unreasonable delay in this matter militated against such an order. That delay was occasioned by the plaintiff requiring further time to source expert evidence on its loss of profit, which was never adduced. I granted an adjournment based on the plaintiff’s need to obtain this evidence which led to an earlier trial date of 17 August 2020 being vacated: Cutting Edge Services Pty Ltd v Raymond & Therese Penfold [2020] NSWSC 1012.
It was submitted that the significant delay and vacation of the first hearing date ought not be a burden imposed on the defendants/cross-defendant by way of an award of interest. It was further submitted that the cross-defendant ought not be liable for interest on any sum up to $99,000 by reason of its admission of liability to that sum.
Given the findings I have made, I do not need to consider the second part of this submission but the question of interest payable on the amount owed by the defendants to the plaintiff remains relevant.
The defendants made no submission either way as to whether they should be liable for any interest payable on the damages sum beyond the date of the hearing that was vacated. In those circumstances I propose to hear the parties further on that issue.

Costs

The final question is that of costs. Section 98(1)(a) of the Civil Procedure Act provides that costs are in the discretion of the Court. Section 98(1)(b) provides that the Court has “full power to determine by whom, to whom and to what extent costs are to be paid”. This discretion is subject to the qualification that it “must be exercised judicially in accordance with established principle and factors directly connected with the litigation”: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [65], per McHugh J. Among the fetters on the discretion to award costs are the rules of the court contained in Part 42 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”). The usual rule is that costs follow the event, unless it appears to the Court that some other order should be made: UCPR, r 42.1.
On this basis, I would order that the cross-claimant pay the cross-defendant’s costs and, in the absence of evidence of any rejected offers of compromise, costs would be payable on the ordinary basis.
As for the payment of costs by the defendants to the plaintiff, I have ordered damages in an amount less than $500,000. Rule 42.34 of the UCPR provides that where a plaintiff in Supreme Court proceedings obtains judgment for less than $500,000, the Court may make an order for costs but ordinarily will not unless the Court is satisfied that the commencement and continuation of the proceedings in the Supreme Court, rather than the District Court, was warranted. The relevant principles concerning this rule were discussed by the Court of Appeal in Benson v Rational Entertainment Enterprises Ltd(No 2) [2018] NSWCA 148 (Beazley P, Leeming JA, Emmett AJA) and Port Macquarie-Hastings Council v Diveva Pty Limited [2017] NSWCA 97 the Court of Appeal (Payne JA, Beazley A/CJ and Simpson JA agreeing).
In the absence of any submissions on this question, I propose to hear the parties further on the question of costs as well.

ORDERS

The Court orders:

Judgment for the plaintiff against the defendant in the amount of $177,290 plus interest.

The cross-claim against the cross-defendant is dismissed.

All questions of costs and interest are reserved pending written submissions by the parties.

**********

Decision last updated: 15 October 2021

Medium Neutral Citation:	Cutting Edge Services Pty Ltd v Raymond & Therese Penfold; Raymond & Therese Penfold v The Hollard Insurance Company Pty Ltd [2021] NSWSC 1322
Hearing dates:	2, 3, 4, 5, 6 and 10 August 2021
Date of orders:	15 October 2021
Decision date:	15 October 2021
Jurisdiction:	Common Law
Before:	N Adams J
Decision:	(1) Judgment for the plaintiff against the defendant in the amount of $177,290 plus interest. (2) The cross-claim against the cross-defendant is dismissed. (3) All questions of costs and interest are reserved pending written submissions by the parties.
Catchwords:	NEGLIGENCE — Breach — destruction of railway sleepers by fire – fire caused by use of arc welder in paddock in summer – where defendant was a farmer and firefighter of 30 years’ experience – whether expert evidence required to establish precautions a reasonable person in defendant’s position would have taken – held, expert evidence not required – precautions a question of common sense NEGLIGENCE — Damages – where plaintiff claimed much larger number of sleepers were present on the property than it paid for – where value of sleepers dependent on grade – where plaintiff claimed 47% of sleepers were redundant broken/part sleepers – whether quality can be established by reference to sleepers stored at another facility NEGLIGENCE — Defences — Contributory negligence – where defendant told plaintiff to move sleepers to allow for construction of a firebreak – where plaintiff refused – held, plaintiff was contributorily negligent INSURANCE — Insurance Contracts Act 1984 (Cth) – dispute over relevant PDS – whether s 58 of the Act required insurer to prove service of the PDS – where PDS was available on request and defendants’ evidence was that they did not know whether a later or earlier PDS applied – construction of exclusion clause – whether property in defendants’ physical or legal control – where property stored on defendants’ property
Legislation Cited:	Civil Liability Act 2002 (NSW), ss 5A, 5B, 5C, 5R Civil Procedure Act2005 (NSW), ss 98, 100 Insurance Contracts Act 1984 (Cth), ss 11, 58 Uncollected Goods Act 1995 (NSW), ss 5, 6 Uniform Civil Procedure Rules 2005 (NSW), rr 42.1, 42.34
Cases Cited:	Australian Broadcasting Commission v Australasian Performing Right Association (1973) 129 CLR 99; [1973] HCA 36 Benson v Rational Entertainment Enterprises Ltd(No 2) [2018] NSWCA 148 Botany Fork & Crane Hire Pty Ltd v New Zealand Insurance Company Limited (1993) 44 FCR 27; [1993] FCA 559 Bunnings Group Ltd v Giudice [2018] NSWCA 144 Caltex Refineries (Qld) Pty Ltd v Stavar (2009) 75 NSWLR 649; [2009] NSWCA 258 CGU Insurance Limited v Porthouse (2008) 235 CLR 103; [2008] HCA 30 CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384; [1997] HCA 2 Commercial Union Insurance Co Ltd v Willetts Radio & TV Limited (1985) 3 ANZ Insurance Cases 60-677 Cutting Edge Services Pty Ltd v Raymond & Therese Penfold [2020] NSWSC 1012 Electricity Generation Corporation v Woodside Energy Limited (2014) 251 CLR 640; [2014] HCA 7 Evans v Braddock [2015] NSWSC 249 Gray Brothers Engineering Limited v New Zealand Insurance Company Limited (1992) 7 ANZ Insurance Cases 61-124 Hobbs v Petersham Transport Co Pty Ltd (1971) 124 CLR 220; [1971] HCA 26 Indemnity Insurance Co v Excel Cleaning Service (1954) 2 DLR 721 Indigo Mist Pty Limited v Palmer [2012] NSWCA 239 Junemill Ltd (in liq) v FAI General Insurance Co Ltd [1999] 2 Qd R 136 Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 McCann v Switzerland Insurance Australia Limited (2000) 203 CLR 579; [2000] HCA 65 MOS Beverages Pty Ltd v Insurance Australia Ltd trading as CGU Insurance [2020] FCA 1716 Neill v NSW Fresh Food & Ice Pty Ltd (1963) 108 CLR 362; [1963] HCA 4 NH Ins Co v Abellera 6 Wn.App 650, 495 P.2d 668 (1972) Ohlstein v E&T Lloyd trading as Otford Farm Trail Rides [2006] NSWCA 226 Onley v Catlin Syndicate Ltd as the Underwriting Member of Lloyd’s Syndicate 2003 [2018] FCAFC 119; (2018) 360 ALR 92 Origin Energy LPG Ltd v BestCare Foods Ltd [2012] NSWCA 407 Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 Pebsa Pty Ltd v McNaughton Gardiner Insurance Brokers Pty Ltd [2002] WADC 190 Pennington v Norris (1956) 96 CLR 10; [1956] HCA 26 Podrebersek v Australian Iron & Steel Pty Ltd [1985] HCA 34; (1985) 59 ALJR 492 Pollard v Baulderstone Hornibrook Engineering Pty Ltd [2008] NSWCA 99 Port Macquarie-Hastings Council v Diveva Pty Limited [2017] NSWCA 97 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 Reid Crowther & Partners Ltd v. Simcoe & Erie General Insurance Co. [1993] 1 S.C.R. 252; 99 D.L.R. (4th) 741 Roads and Traffic Authority of NSW v Refrigerated Roadways Pty Limited (2009) 77 NSWLR 360; [2009] NSWCA 263 Uniting Church in Australia Property Trust (NSW) v Miller; Miller v Lithgow City Council (2015) 91 NSWLR 752; [2015] NSWCA 320 Walz Construction Company Pty Ltd v ASP Ship Management [2002] QCA 136 Watson v Foxman (1995) 49 NSWLR 315
Texts Cited:	D Derrington and R Ashton, The Law of Liability Insurance (3rd ed, 2013 LexisNexis Butterworths)
Category:	Principal judgment
Parties:	Cutting Edge Services (Aust) Pty Ltd (Plaintiff) Raymond Mark Penfold (First Defendant/Cross-Claimant) Ruth Therese Penfold (Second Defendant/Cross-Claimant) The Hollard Insurance Company Pty Ltd (Cross-Defendant)
Representation:	Counsel: Mr G Carolan (Plaintiff) Mr J Drummond with Mr P Boncardo (Defendants/Cross‑Claimants) Ms E Peden SC with Mr P Mann (Cross-Defendant) Solicitors: Baldock, Stacy and Niven (Plaintiff) Campbell Paton & Taylor (Defendants) McMahons Lawyers (Cross-Defendant)
File Number(s):	2018/00033995
Publication restriction:	Nil.