Girkaid Pty Limited and 1 Ors v McDonald

[2001] NSWSC 1202

CITATION:	GIRKAID PTY LIMITED & 1 ORS v McDONALD & ORS [2001] NSWSC 1202
CURRENT JURISDICTION:	Common Law
FILE NUMBER(S):	SC 20335/98
HEARING DATE(S):	30 January 2001, 31 January 2001, 1 February 2001, 5 February 2001, 7 February 2001, 8 February 2001, 4 December 2001, 14 December 2001
JUDGMENT DATE:	14 December 2001
PARTIES :	Girkaid Pty Limited Inghams Enterprises Pty Limited (Plaintiffs) v Barry Edward McDonald t/as B E McDonald Transport (Defendant) Robert Bryce & Company EKA Chemicals (Australia) Pty Limited SLE Industrial Supplies Pty Limited Hudson Resources Ltd formerly Mallina Holdings Ltd (variously cross-claimants and cross-defendants)
JUDGMENT OF:	Adams J at 1

COUNSEL :	Mr I D Faulkner (Girkaid Pty Limited & Inghams Enterprises Pty Limited) Mr S G Finch SC with Mr P Braham (Barry Edward McDonald t/as McDonald Transport) Mr M A Ashhurst (Robert Bryce & Co Limited) Mr D R Pritchard (SLE Industrial Supplies Pty Ltd) Mr I Wales (Hudson Resources Ltd)
SOLICITORS:	Minter Ellison (Plaintiff) A R Conolly & Company (Defendant) Michael Samios (Robert Bryce & Company) PricewaterhouseCoopers Legal (SLE Industrial Supplies Pty Ltd) Moray & Agnew (Hudson Resources Ltd) Miles Oakley by their Sydney agents McCabes (EKA Chemicals (Australia) Pty Limited)
CATCHWORDS:	Negligence - dangerous goods - fire caused by spontaneous combustion - whether occupier should have known - meaning of Dangerous Goods Regulation 1978 - causation - whether Ockham's razor applicable
LEGISLATION CITED:	Dangerous Goods Act 1975 Dangerous Goods Regulation 1978 Law Reform (Miscellaneous Provisions) Amendment Act 2000 Sale of Goods Act 1923
CASES CITED:	O'Connor v S P Bray Limited (1937) 56 CLR 464 J D Bell (Caloul) Pty Limited & others v Shortland County Council (1991) Australian Torts Reports [#81-131] Proprietors - Strata Plan No 30232 v Margiz Pty Limited (unreported, NSWSC 30 June 1993) O'Connor v S P Bray Pty Limited (1937) 56 CLR 464 Lubrano v Proprietors of Strata Plan No 4038 (unreported, NSWSC 13 September 1993) John Pfeiffer Pty Limited v Canny 1981 55 ALJR 683 Hoey v Hardies & Anor (1912) 12 SRNSW 268
DECISION:	Judgment for the plaintiffs against McDonald. Judgment for McDonald in cross claim against Bryce and Hudson and judgment for Bryce and Hudson against Mr McDonald in respect of their cross claims against him. Hudson and Bryce are each responsible for the damage 40% and McDonald 20%. In relation to the particular loss of Bryce it is responsible as to two-thirds and Mr McDonald as to one-third. The cross-claim by McDonald against SLE fails. The cross-claims by Hudson and Bryce against SLE also fail.

1 HIS HONOUR: This litigation arises out of a fire which, for all practical purposes destroyed an industrial warehouse in Durie Road, Cardiff. The property was owned by Girkaid Pty Limited (Girkaid), the first plaintiff, and leased to two tenants, one of which is Inghams Enterprises Limited (Inghams), the second plaintiff, and the other, Mr Barry Edward McDonald (Mr McDonald) who is the defendant in the actions brought by the plaintiffs and also the cross claimant and cross defendant in other related actions.

2 Mr McDonald operated a transport business, which first started trading in about 1972. The firm focused on short hauls around the Newcastle area and from Newcastle and Sydney. Mr McDonald owned several trucks of varying sizes and used two forklifts in the warehouse. Mr McDonald himself manages and organised the business including, especially, taking responsibility for the warehouse premises, which were leased from Girkaid. Mr McDonald’s business was relatively modest, employing only five persons. Amongst the items transported were alcohol products of various kinds, which were kept in the warehouse overnight and distributed the next morning. Chemicals and bagged material were also stored at the warehouse for a relatively short time before transportation to their destinations. Mr McDonald had been using the warehouse since about 1991. One of its customers was Bryce & Company Limited (Bryce) whose products were frequently stored and transported by Mr McDonald. Some of the goods handled by Mr McDonald are “dangerous goods” within the meaning of the Dangerous Goods Act 1975 (the Act) and the Dangerous Goods Regulation 1978 (the Regulation) and he possessed the necessary licence.

3 On 29 January 1998, Mr McDonald was telephoned by a lorry driver at about 2am and told that the warehouse was on fire. He quickly drove to the premises, which were blazing fiercely despite the efforts of the fire brigade. The warehouse was so badly affected by the fire that, in due course, it was necessary to demolish the structure to the concrete slab.

4 For obvious reasons, an investigation was conducted as to the cause of the fire. Suspicion focused on the use of a mineral product called attapulgite by Mr McDonald a few days before the fire to soak up a large quantity of tall oil (being held for on transportation on Bryce’s account) that had been accidentally spilled. It is the plaintiff’s case that the fire was caused by the spontaneous combustion of the mixture of oil and attapulgite (the mixture), which was left in the warehouse by Mr McDonald after the floor had been cleaned. On the other hand, Mr McDonald’s case is that the evidence does not establish that the fire was caused in this way and, even if it did, he was not negligent in failing to guard against the risk.

5 It is necessary to briefly explain how the mixture came to be stored in the warehouse. This account comes from the evidence of Mr McDonald, which was not sought to be controverted. Mr McDonald’s half of the warehouse is a large area with goods stored more or less around the perimeter. In the Inghams’ half was stored additives for its feed mill as well as feed and machinery. On Friday 23 January 1998, a consignment of twenty containers of tall oil, imported and distributed by Bryce, was delivered to the warehouse for further delivery. The product was called Brytall and comprised linoleic and oleic acid as two of its major components. Each container held 900 litres of oil in a plastic bladder. The container itself is roughly octagonal and made of fibreboard with a wooden top and side supports reinforced by steel bands. Each of the containers sat on a wooden pallet. Mr McDonald unloaded the delivery, using a forklift to carry two drums at a time, one on top of the other. After moving six of the containers towards the back of the warehouse without incident, as Mr McDonald entered the factory with the fourth load the top container overbalanced and fell to the floor. Something like two hundred litres of oil remained inside the container. The other container on the pallet was slightly damaged and had a small leak of oil. Although the tops had been dislodged, the containers remained largely undamaged.

6 It is obvious that Mr McDonald needed to clean up the oil and he contacted SLE Industrial Supplies Pty Limited (SLE), with which he had a previous acquaintance, in order to obtain a product with which to do this. Mr McDonald spoke to Mr Emerson, who was one of the directors of SLE working as its sales representative, amongst other things, in which connection he and Mr McDonald had known one another for some time. Indeed, they were friends. Mr McDonald and Mr Emerson gave evidence as to their telephone conversation and what later occurred. As might be expected, their accounts are not identical but, in my view, little turns on this. The substance of their conversation was that Mr McDonald told Mr Emerson that he needed a large quantity of oil absorbent because about 1000 litres of pine oil had been spilled in the warehouse. (Tall oil is extracted from pine trees.) It appears that Mr Emerson agreed to supply some absorbent and arranged for its delivery to the warehouse. Mr McDonald also asked him to pick up an empty container from another fire and hire a pump so that oil in the damaged container could be transferred to an undamaged one. Mr Emerson did this and in due course arrived at the warehouse. In the meantime, a supply of attapulgite had been delivered and Mr McDonald was using it to prevent any further oil spread within the warehouse. Mr Emerson told him that the attapulgite should be spread on top of the oil and, after it was soaked, shovelled up. Mr McDonald placed the tall oil soaked attapulgite (the mixture) into the two drums which had been upset, one of which had 100-200 litres or so of unspilled oil in it, whilst the contents of the other had been transferred to the replacement container. Mr McDonald said that the bulk of the oil was soaked up and placed in the containers by the evening of Friday 23 January, with only a little oil left under some of the pallets that had not been cleaned up by that stage. Twenty-one bags of attpulgite were used in this process overall. He then left for the ensuing long weekend and returned on Tuesday to continued the cleanup, which was completed on the evening of Wednesday 28 January. Pulling or tearing a strip of paper-type material from the top opened the attapulgite bags. This material was gathered up during the process and placed with the mixture in the containers. I infer from Mr McDonald evidence, although it is not entirely clear about this, that some, if not most, of these strips were put on top of the boxes when the cleanup was finished. By the time the cleanup was completed, one of the drums was about three-quarter full and the other about half full of the mixture. Mr McDonald said that neither of the containers showed any signs of becoming warm. Nor had they given off any fumes or smell. The uncovered containers storing the mixture were left in the warehouse. The positions of these drums, as they were left on the Wednesday night, is indicated by the letters A and B on a diagram supplied to Professor Gray, the plaintiffs’ expert and appended to his report. Mr McDonald agreed that the containers were in the positions so marked, although the substance of his evidence was, to my mind, rather indicative than precise on this point. The points marked A and B on the diagram are described in Professor Gray’s report as approximate locations that were not measured accurately as conditions in the warehouse, even on the date of his inspection, 16 February 1998, were still extremely difficult and dangerous for movement. Container B contained the bulk of the mixture. In the vicinity of the containers was material described as L7, being an inert, inorganic carbonate. When inspected by professor Gray, a quantity of this material had fallen onto container B. Professor Gray discovered that the mixture in this container was still self-heating and was very, hot, though the fire had been extinguished two and a half weeks earlier.

7 The case for the plaintiffs is that the mixture was likely to and did in fact spontaneously ignite and the flames then spread to other nearby combustible material, causing the fire that ultimately destroyed the warehouse. When Professor Gray inspected the premises he described it as of brick and iron construction, very badly damaged, with all the walls in various stages of collapse and the roof had collapsed in part. He said that the interior of the building was filled with water and debris from the fire fighting operation. I do not think that it could be safely assumed that there had not been substantial movement of items as a result of the fire itself or a combination of the fire and the fire fighting efforts. This point might be significant since one of the arguments for the defendants was that, even if the mixture had self-ignited it had not been established that there was any readily combustible material nearby which could have provided a mode for the fire to spread so that another possible cause of the fire had not been excluded.

8 The scientific validity of Professor Gray’s conclusion is that the mixture in the container he described as “B” had indeed self-heated was not really in contention, though whether it had done so to the point of ignition spontaneously or because of the heat from the fire otherwise caused was, it was argued, speculative and, in the end, unproved. An examination of container B showed that it had been considerably charred on the inside, more extensively than on the outside, and completely destroyed further up. The other container showed less combustion effects but self-heating had obviously taken place with darkening due to combustion in the interior of the mixture, although there was no significant thermal activity when the inspection occurred. Professor Gray considered that the time lapse between the oil spill and the fire was entirely consistent with the cause of the fire being spontaneous combustion of a body of about the same volume as the Brytall containers were.

9 It was not contested that two of the main components of Brytall are linoleic and oleic acids. These are unsaturated fatty acids with a propensity to undergo spontaneous combustion when distributed on any kind of porous material such as, in particular, attapulgite. (I use the term “spontaneous combustion” as meaning self heating to the point of spontaneous ignition.) Professor Gray undertook standard tests to examine the liability of tall oil to undergo spontaneous combustion. This involved packing a container with attapulgite, which had absorbed a particular quantity of Brytall. This was then placed in an oven and raised to an ambient temperature of 120 degrees Centigrade. He said that a considerable degree of self-heating above oven temperature was demonstrated. Whether it was reasonable to infer, however, that the mixture in the containers packed by Mr McDonald achieved a temperature sufficient to cause fire is a somewhat more difficult question to resolve and was the subject of extensive cross-examination. Professor Gray agreed that the degree of the wetness of the mixture of attapulgite and tall oil (to mention but one variable, though probably the most significant) had a significant bearing on its tendency to undergo spontaneous combustion and, of course, he did not suggest that his experiment had replicated the proportions of tall oil and attapulgite in the containers. For obvious reasons, this was impossible. On the other hand, it seems that there was quite a wide range of proportions within which spontaneous ignition could take place. Whether the mixture in the containers, more particularly container B, fell within that range had not been examined by Professor Gray. As I have already mentioned, perhaps as much as 200 litres of oil was left in the broken container to which the mixture was added as the cleanup proceeded. Professor Gray agreed that this might be significant as to the likelihood of spontaneous combustion occurring (on the assumption that it was effectively available to dilute the mixture) but, as I understand his evidence, the true significance of this fact could not be assessed. On the other hand, the overwhelming likelihood is, as I understand Mr McDonald’s evidence, the unpsilled oil was separated from the mixture by being in its own bladder whilst the mixture was placed in a separate bladder on top of the waste oil and, hence, the waste oil was not absorbed by any of the attapulgite.

10 As a result either of the fire or the steps taken to extinguish it, a large amount of inert, inorganic carbonate (called L7) had fallen on top of container B. A substantial quantity of this product had been stored nearby but when and how it had collapsed onto the container is unknown. Professor Gray said that container B was up against what was, in effect, a wall of insulating material around approximately two-thirds of its circumference and that this material would have inhibited the dissemination of heat from the self-heating process and accordingly encourage the development of higher temperatures.

11 As I have mentioned, the containers were constructed of fibreboard and Professor Gray assumed that it would probably require something of the order of 300 degrees Centigrade to ignite it. However, whether the fibreboard could be or was ignited by contact with the self-heating mixture, Professor Gray was unable to say. Even so, he did see what he described as heavy charring from the inside of the container, which indicated to him that it was likely that the self-heating had got to the stage of ignition which had then destroyed the balance of the container. He inspected the container on 16 February and was unable to say when the charring had occurred, in particular, whether it had occurred before or at the time of the fire. So far as the mechanism itself is concerned, Professor Gray described it as a “hotspot” caused by the self-heating process moving through the material and, when it reaches the surface it gains access to an increased amount of oxygen so that usually overt flame appears within a short time, the oil itself spread on he outside surface of the aggregate being the fuel. There is a convective buoyancy effect, which would tend to cause the hotspot to rise so that if there was no lid on top of the container (as in this case) the oil on top might be expected to burn. Once overt flame has occurred, air is drawn up from the sides and the flame can grow quite quickly and reaches many hundreds of degrees within a short time. I think that it is likely that waste paper material from the used bags of attapulgite was placed on the top of the mixture: it was all rubbish that needed to be disposed of in due course. This, of course, would provide additional fuel.

12 Professor Gray considered that the material in container A, though self-heating, had not sustained the process to the point of ignition but he rejected the suggestion by counsel that the difference between it and container B was that the latter had been exposed for a longer period to a higher temperature because of its proximity to a fire initiated from another source. Professor Gray considered that that was inconsistent with his observations of the contents of container B. Professor Gray also thought it significant that the material in container A had been self-heating but not to the point of spontaneous ignition as a reference or useful comparison with what happened to container A. Indeed, so far as the latter is concerned, he believed that the probability of spontaneous ignition of the material in container B was virtually certain. He accepted, of course, that further conditions had to be present for that ignition to have caused the fire that demolished the warehouse, in particular, that some mode of transfer to transport of the flame itself to other combustible material had to be present.

13 Whilst Professor Gray stated in his report that the probability that this ignition caused the fire was 80%, he did so, in part, by applying what is known as Ockham's razor, the name given to the principle enunciated by William of Ockham, a late English medieval scholastic (c 1285 -c 1349) that "non sunt multiplicanda entia praeter necessitatem” ie, entities are not to be multiplied beyond necessity. This principle is a powerful scientific tool and underlies much of modern science. However, whether it may be usefully invoked for the proof of facts in an action in tort, as was sought to be controverted by Mr Finch of Senior Counsel for Mr McDonald, is not an easy question. Fortunately, it is not one that I need to answer in this case. I will return to this matter later in the judgment.

14 It was suggested to Professor Gray by Mr Finch SC that the spontaneous combustion demonstrated in container B may have been initiated or, at least, developed to the point of ignition by the extreme heat of a fire that had started elsewhere. In a lengthy explanation, which I need not set out here, but which seemed to me (as a lay person) to be convincing, the Professor indicated why he thought that this was not only unlikely but next to impossible. Professor Gray emphatically disagreed with the suggestion that what he saw when he inspected the premises and, in particular, container B, was entirely consistent with there having been a self-heating reaction in that container which commenced during the fire but had not resulted in ignition until sometime later, in the result, demonstrating the particular features that he saw two and a half weeks after the fire.

15 Professor Gray was an impressive witness. His curriculum vitae demonstrates considerable expertise both by way of research and fire and explosion investigation. He has a profound theoretical and practical understanding of the cause and character of spontaneous combustion. I thought he gave his evidence forthrightly and objectively. He was not an advocate for the plaintiffs and gave his evidence in a way that was calculated to assist the Court to consider and determine the issues upon which he had been consulted.

16 The principle argument constructed by the defendants is that, whilst it may well be that spontaneous combustion occurred, the plaintiffs had not established that this occurred prior to and was a cause of the fire. This argument depends on a number of aspects of Professor Gray's evidence but, in particular, his positing of what he described as "an intermediate position" capable of explaining the appearance of the material in container B as the result of self heating, perhaps assisted by rising ambient temperature caused by the fire, but not having reached the point of ignition until after the fire had commenced. I think it is clear on a consideration of the whole of Professor Gray's evidence that he regarded this explanation as being distinctly less successful in explaining the appearance of the material as he saw it than the hypothesis that, indeed, the self-heating of the material had proceeded to the point of ignition prior to and was the cause of the fire.

17 Whilst to some degree this is an over-simplification, I consider that there are five crucial factors which, taken together, point to the probability that spontaneous combustion of the mixture in container B was the cause of the fire. The first of these, of course, is that a mixture of tall oil and attapulgite will self-heat in a mixture such as that in container B to the point of ignition; second, the mixture in container B in fact self heated to the point of ignition; third, there was paper and other similar material, probably soaked to some extent with oil, which was left on top of container B and capable of providing a significant amount of fuel; fourth, the difference between container A and container B strongly suggests that the rising ambient temperature of the fire was not a significant factor in causing self heating in the containers; and, fifth, the chances that the fire resulted from some other independent cause seem to me, as a matter of common sense, to be very remote. There is, of course, no complete description of the contents of the Inghams' premises but their use as described in the evidence does not suggest any likely cause. There was evidence that rats had gnawed vehicle wiring and it was submitted that rats gnawing at the electrical wiring that powered the roller doors and the refrigerator (the only live circuits) had caused some electrical fault that led to the fire. I think that this is most unlikely. There was no evidence that rats had been attracted to this wiring, where the wiring was, whether any short circuit was in proximity to flammable material and no evidence that gave the proposed mechanism any support. I am certainly not prepared to assume that rats gnawing on the live wiring is a possible cause of this fire. To the contrary, I think the theory is most unlikely. The fifth consideration mentioned above is, for obvious reasons, not insignificant, but I reject the submission that, in so considering it, I have reversed the onus of proof. Nor have I had recourse to Ockham's razor.

18 I am therefore of the opinion that the plaintiffs have satisfied the onus of establishing on the balance of probabilities that the fire that destroyed the warehouse and its contents was caused by the spontaneous combustion of the mixture in container B.

19 There is no dispute that container B was filled with this mixture by Mr McDonald and those working under his instructions. It was submitted that, even so, the plaintiffs had not established that McDonald was negligent in so doing. Whilst the plaintiffs rely on common law negligence, they rely also upon an alleged breach of statutory duty said to be imposed by virtue of the Dangerous Goods Act 1975 and the Dangerous Goods Regulation 1978. So far as is relevant regs 18 and 19 provide -

"18. Every:
(b) occupier of premises in or on which dangerous goods are kept;

shall take all practicable steps to ensure that every person subject to his direction and control and engaged in the handling of the dangerous goods is:
(e) adequately instructed as to the hazards involved in the handling of those goods and precautions to be observed in relation to those goods,'. .

“19. Every...
(b) occupier of premises in or on which dangerous goods are kept... shall
(e) take all practicable precautions to prevent the occurrence on the premises of accidents through fire, explosion, leakage of dangerous goods or other causes
...and
(g) not do any act in or on the premises that may cause fire... or any other dangerous occurrence, or that is not reasonably necessary for the purposes of , or property incidental to, the keeping... of dangerous goods. "

20 Regulation 31 provides that a person who contravenes the regulations is liable to a specified penalty. It is not disputed that Brytall is "dangerous goods" within the meaning of the regulation.

21 So far as the standard of care imposed by the Regulation is concerned, the requirement of reg 19(e) "to take all practicable precautions" is not directed at the prevention of, for example, fire but "the occurrence on the premises of accidents through fire" (emphasis added). However, I think this must involve the prevention of a fire that would cause accidents. This probably goes no further than the law of negligence so far as the standard of care is concerned although, of course, the obligation is to prevent damage to a party to whom a duty of care is owed rather than simply, to prevent the occurrence of an event. Another important point of distinction is that reg 19(e) does not depend at all upon the occurrence of an accident but is designed to ensure that practicable precautions are taken to prevent accidents.

22 Regulation 19(g), on the face of it, imposes an absolute prohibition of any act that, inter alia, may cause fire. It also prohibits all acts that are "not reasonably necessary for purposes of, or properly incidental to, the keeping... of dangerous goods"

23 The question is whether these obligations give rise to a civil cause of action in the plaintiffs in the event of breach. In O'Connor v S P Bray Limited (1937) 56 CLR 464 at 477-8, Dixon J said -

"It is a question of some difficulty whether a civil remedy is given to a person injured in consequence of the breach of that clause [of an Act]. Such a person may, of course, maintain an action of negligence and rely upon the failure to comply with the statutory regulations as evidence of negligence. But it is a different question whether the enactment itself confers a distinct cause of action. The received doctrine is that when a statute prescribes in the interests of the safety of members of the public or a class of them a course of conduct and does no more than penalise a breach of its provisions, the question whether a private right of action also arises must be determined as a matter of construction. The difficulty is that in such a case the legislature has in fact expressed no intention upon the subject, and an interpretation of the statute, according to ordinary canons of construction, will rarely yield a necessary implication positively giving a civil remedy. As an examination of the decided cases will show, an intention to give, or not to give, a private right has more often than not been ascribed to the legislature as a result of presumptions or by reference to matters governing the policy of the provision rather than the meaning of the instruments. Sometimes it almost appears that a complexion is given to the statute upon very general considerations without either the authority of any general rule of law or the application of any definite rule of construction… perhaps in the end, a principle of law will be acknowledged as the foundation of the cases. In the absence of a contrary legislative intention, a duty imposed by statute to take measures for the safety of others seems to be regarded as involving a correlative private right, although the sanction is legal, because it protects an interest recognised by the general principles of the common law ...whatever wider rule may ultimately be deduced, I think it may be said that a provision prescribing a specific proportion for the safety of others in a matter where the persons upon whom the duty is laid is, under the general law of negligence, bound to exercise due care, the duty will give rise to a correlative private right, unless from the nature of the provision of from the scope of the legislation of which it forms a part a contrary intention appears. The effect of such a provision is to define specifically what must be done in furtherance of the general duty to protect the safety of those affected by the operations carried on."

24 In J D Bell (Caloul) Pty Limited & others v Shortland County Council (1991) Australian Torts Reports [#81-131], Cole J expressed the view that the application of this principle applies equally to the damage to property resulting from a breach of statutory duty as to personal physical injuries. The issue before his Honour was whether certain regulations requiring the electricity supply authority to trim trees to prevent contact with an aerial conductor imposed liability on the authority for property damage occasioned by a fire which was caused by a failure to comply with the regulation. Cole J construed the regulation as demonstrating that the legislative intention for requiring trees to be trimmed to avoid contact between trees and serial conductors was to prevent injury to persons or property. This being so, his Honour concluded that "the purpose of the regulation goes beyond imposing upon the electricity supply authority an obligation to the Crown sounding only in penalty" (#81-140 at 69,321). Accordingly, his Honour held that the regulation prescribed "a specific precaution for the safety of persons and their property in a matter where the council upon whom the duty laid is, under the general law of negligence, bound to exercise due care, and thus the duty gives rise to a co-relative private right to sue for breach of that duty".

25 In Proprietors -Strata Plan No 30234 v Margiz Pty Limited (unreported, NSWSC 30 June 1993) Brownie J considered the question whether s 68 of the Strata Titles Act 1973, in the circumstances imposing a duty to repair and maintain air conditioning facilities in a building, imposed a duty that was enforceable at common law. Citing, amongst other authorities, O'Connor v S P Bray Pty Limited (1937) 56 CLR 464 at 477-478, his Honour said-

“...once it is recognised that the Act imposes a duty on the plaintiffs, and that the defendant is one of the class of persons for whose benefit the duty was created (namely the proprietors of the constituent lots), there does not seem to be any reason why the ordinary rules of the common law would not give the Court jurisdiction to award the defendant damages, upon proof of breach of duty and consequential damage."

26 In Lubrano v Proprietors of Strata Plan No 4038 (unreported, NSWSC 13 September 1993) Young J was of the same opinion.

27 In John Pfeiffer Pty Limited v Canny 1981 55 ALJR 683 at 689 Mason J said, citing O'Connor v S P Bray Limited (supra)-

"Ordinarily a duty imposed by Statute to take measures for the safety of others involves a correlative private right unless from the nature of the provision or from the scope of the legislation a contrary intention appears... [No] doubt the principle was expressed in these terms so as to exclude the statutory prohibition against driving a motor vehicle without a licence, there having been a reluctance on the part of the court to accept that such a statutory prohibition creates a private right of action."

28 The Act and the Regulation regulate the manufacture and storage of dangerous goods by, inter alia, imposing particular duties on persons who undertake these activities. It seems obvious that fire in a warehouse used to store dangerous goods may be catastrophically destructive by virtue of the nature of the goods so stored which may, of course, be dangerous in a number of different ways. It is unarguable that the purpose of the Act and Regulation is to avert injury to persons who and property that might be at risk by virtue of the manufacture and storage of such goods. I do not think that the purpose is any less so because, in addition to such provisions as regulation 19, the legislation creates a series of licensing requirements and the powers of inspectors. Provision is made for the taking of legal proceedings for the contravention of the Act and Regulation but these are conventional in form and do not, to my mind, suggest that civil liability for a breach of the statutory duty that resulted in injury should be excluded. The defendants, with some justice, submit that, at all events, reg 19(g) does not impose strict liability since it seems obvious that it is possible to do some act in or on the premises that might cause a fire in entirely unforseen and unforeseeable circumstances. Creating a liability in such a situation cannot further the purposes of the Act since, in respect of such acts, nothing which a person might do could avoid the risk. It was therefore submitted that, properly understood, the regulation prohibits an act which the occupier knew or ought to have known "may cause" a fire. In the circumstances of this case, it is not difficult to conclude that neither Mr McDonald or his employees had the slightest notion that soaking up the tall oil with attapulgite and accumulating the resulting mixture in containers without lids was capable of leading to ignition. The real question is what McDonald ought to have known, accepting for the present the defendant's formulation of the relevant duty. This matter, it seems to me, is prescribed by reg 18.

29 I consider that Mr McDonald's liability to the plaintiffs is (to use the language of Mason J in the passage last cited above) correlative to his duty under the Act and Regulation.

30 It is clear from his evidence that Mr McDonald assumed that, if there were any particular dangers that a layperson, such as himself, might not be aware of, it would have been brought to his attention by either the suppliers or the manufacturers of Brytall. As it happened, Mr McDonald had worked for Bryce for some years as a delivery driver and had acquired the warehouse in question from that company. He was aware that Bryce did not manufacture Brytall but was the importer and wholesaler of the product which was, in fact, as he knew, manufactured by EKA Chemicals, whose label was prominently displayed on the containers. Material safety data sheets (MSDS) are prepared by companies such as Bryce in accordance with the Worksafe Australia National Code of Practice for the purpose, inter alia, of warning persons dealing with the product of any dangers that might be associated with its use, including fire risk, accidental spillage, and procedures for clean-up. Although Mr McDonald did not consult the MSDS issued by Bryce in respect of Brytall, had he done so he would have read the following, as to spills and disposals -

"In event of a major spill, alert fire brigade and advise of nature & location of spill. Prevent spillage from entering drains or watercourses.
Stop leak if safe to do so and contain spill. Absorb onto vermiculite, sand, sawdust or other absorbent material. Sweep up and shovel or collect recoverable product into labelled containers for recycling or salvage. Recycle containers wherever possible.
After spills, wash area, preventing run-off from entering drains. If material enters drains, advise emergency services.
This material may be suitable for approved incineration or landfill. Dispose of only in compliance with local, state and federal regulations.
Launder all contaminated clothing before reuse.”

31 So far as any fire or explosion hazard is concerned, the MSDS said that there was no explosion hazard from the material under normal circumstances, that there were no unusual fire and explosion hazards and that it would not polymerise. Attapulgite is similar to vermiculite for present purposes. In dealing with Mr McDonald’s situation it is important to focus on the point that the damage did not arise from cleaning up the spilt tall oil with attapulgite. There was no risk of fire associated with this process. The risk of fire was created by the storage of the mixture in a condition where it was reasonably possible that it would spontaneously ignite and where fuel was available to permit the spread of fire. It seems to me that an appropriate way of looking at this problem is to ask what would have been Mr McDonald’s position if he had accepted into storage an open container filled with a mixture of tall oil and attapulgite in unknown proportions and a quantity of strips of paper torn from storage bags. I think that it should have occurred to Mr McDonald that he had in his warehouse a mixture of two products, the chemical properties of which he was unaware, and about which he should make reasonable enquiries. He made no such enquiries. Had he made such enquiries in relation to attapulgite, he would no doubt have been informed that it could safely be used to soak up the tall oil. Whether he would have been informed that it was safe to store the mixture is, however, somewhat doubtful. If he had enquired of Bryce and had been supplied with its MSDS, he would have inferred that it was safe to oak up the oil with attapulgite and, in the absence of any contrary suggestion, would reasonably have inferred that storage of the mixture was not dangerous or hazardous. The recommendation to “collect recoverable product into labelled containers for recycling or salvage” appeared to suggest that it was safe to store but, though to that extent misleading, was significantly less than an assurance of safety.

32 The EKA MSDS revealed that, in respect of large spillages, as much of the oil as possible should be collected in a clean container with a material such as vermiculite and, in respect of stability and reactivity, a condition to avoid was “prolonged contact with porous materials”. There was no warning as to why this condition should be avoided but its sense is clear enough. Certainly, at least to a focused mind, it warned of an unspecified danger or risk with the storage of the mixture; but it did not suggest the possibility of spontaneous combustion and, indeed, suggested that there was no such risk. Nevertheless, Mr McDonald should have obtained and referred to the MSDS, not only of the distributor (Bryce) but also the manufacturer (EKA), to instruct himself appropriately of the risks associated with the storage of tall oil and its safe clean up and disposal in the event of spillage.

33 As I have said, the crucial question here was not whether it was appropriate to use attapulgite to mop up the spilled oil. This was clearly both entirely safe and reasonable. The danger was created by the storage of the mixture in the containers together with other flammable material providing fuel when the point of spontaneous ignition was reached. In light of the evidence of Professor Gray, it is clear that the Bryce MSDS significantly fell short of providing appropriate information by its failure to mention the risk of spontaneous combustion constituted by the storage of absorbent and oil. However, it did not mislead Mr McDonald since he did not consult it or, for that matter, seek any information from Bryce. EKA's MSDS, at least, warned that prolonged contact between the tall oil and the absorbent should be avoided, and thus indicated that there was more about the mixture, as it were, than met the eye, but there was no warning as to the nature of the danger. Even so, I think that it was probable, had Mr McDonald inquired about storage of a mixture of attalpulgite and tall oil from EKA, he would have been told of the risk of spontaneous combustion. On the other hand, there was nothing to indicate to Mr McDonald that he was faced with an emergency in respect of which he needed to consult with EKA except that the label itself, by reference an emergency telephone number, pointed to the possibility that a circumstance might arise in which information about the product or dealing with it might be necessary.

34 I consider that reg 18 requires a person in Mr McDonald's position to know more than whom to telephone in the event of an emergency. Such a person must at least consider that he or she cannot rely on his or her general knowledge (the equivalent in this situation of ignorance) of the dangerous product being handled or stored as indicating when a dangerous or hazardous situation has arisen. The information about the product and what should be done, say, when it is spilt and what to do with the resultant clean-up material should be acquired before the occasion for its application occurs. Here, it is obvious that spillage of tall oil was possible. It was probable (as Mr McDonald, indeed knew) that some such absorbent as attapulgite might be used to clean it up. The resultant mixture would need to be stored before disposal. To my mind, reg 18 imposed on Mr McDonald the duty to ascertain whether there were any hazards associated with that storage which involved, at least, reference to the MSDS of the distributor (his client) and the manufacturer of a dangerous product and obtaining a specific assurance that what he proposed to do was safe. Mere collection of the spilt tall oil was not, of course, all that he proposed to do. He also proposed to store the resultant mixture until it was disposed of. In short, it is the very point of the dangerous goods regime that those who store them, such as Mr McDonald, cannot take for granted that their common knowledge assumptions about safety can be relied on. Specific information about the particular mode of, say, storage, must be obtained. It matters not, in my view, that tall oil, as here, was prescribed as dangerous for reasons other than the hazard that caused the damage. This point is clear from the regulation itself.

35 It is obvious that Mr McDonald, whatever the duty imposed upon him by virtue of reg 19, was, in the circumstances not "adequately instructed as to the hazards involved in the handling of” tall oil within the meaning of reg 18. Adequate instruction required more than simple reference to the MSDS prepared by Bryce or, for that matter, EKA if those documents did not expressly address the problem about which information was necessary. Whether instruction is adequate is a question to be objectively determined by the hazards involved in the handling of the goods in question. It seems to me that, at least, there should have been an express advertence to the possible circumstance requiring attention, here, clean up of spilled tall oil with an absorbent material and safe storage and disposal of the resultant mixture. Knowledge of chemistry was not necessary -depending on the substances involved -but Mr McDonald was required by reg 18 to be armed with information that directly and unmistakeably dealt with the foreseeable situation. Thus, it was no compliance with reg 18 to wait until something happened that he recognized as an emergency before he instructed himself how to properly respond.

36 The point about the prescribed instruction is that it must be adequate to avoid any real or significant risk to life, limb or property, the protection of which is the fundamental purpose of the legislation. In this case, specific information about whether a mixture of tall oil and a product such as attapulgite kept in containers for days was safe has been demonstrated to be necessary in order to avoid the fire which occurred. That some substances may spontaneously combust is a notorious fact and, as I explain later, the plaintiffs have proved, through the evidence of Professor Gray, that both the fact and the risk that tall oil was capable in circumstances similar to those brought about by Mr McDonald of spontaneous combustion, was sufficiently known in industry (though perhaps not the warehousing industry) to demonstrate that the problem was no mere matter of hypothetical or theoretical interest but was a real and substantial risk which anyone in Mr McDonald's position faced with cleaning up a substantial quantity of tall oil with a product such as attapulgite should have known. It is no answer, as it seems to me, to argue that all that Mr McDonald needed to have done was to consult Bryce and that, as he would not have been usefully informed by its MSDS, his ignorance was excusable or, to put it another way, his instruction was adequate. I do not see how it is possible to be "adequately instructed" by acquiring significantly misleading information. I am far from certain that reg 19(g) does not impose strict liability on a person who does an act that "may cause fire" in premises used for the keeping of dangerous goods. However, it is unnecessary for the purposes of this case to determine this question, since doing an act that might cause fire, in this case, storing the self-combusting mixture of oil and attapulgite, would have been known to Mr McDonald to be dangerous if he had been "adequately instructed" within the meaning of reg 18(e). I note in passing that, whatever the relevance of s 36 of the Act might have in the circumstances as providing a defence to an employer who did not authorise or permit a contravention of the Act by an employee and used all due diligence to prevent such a contravention, it can have no application here where there was no attempt by Mr McDonald to obtain any information, adequate or otherwise, as to the nature and characteristics of tall oil when it has been absorbed into material such as attapulgite and stored in the containers as I have described.

37 I should deal with the situation at common law against the event that I am mistaken as to the application of the dangerous goods legislation in the present circumstances. Professor Gray's evidence is that there were a significant number of references in the literature to the propensity of tall oil to self-combust. He also discovered pertinent references in "an old textbook" on paint technology and a handbook of the National Fire Protection Association. Tall oil is comprised mainly of linoleic and oleic acids which are unsaturated fatty acids well known for its tendency to undergo spontaneous combustion when disbursed on porous material. As it happens, linoleic acid is one of the main components conferring this property on linseed oil, which is notoriously dangerous in this respect, although the major risk in respect of linseed oil is another fatty acid known as linolenic acid, which is more reactive than linoleic acid. Thus, references to the attributes of linoleic and oleic acids would be additional sources of information about the self-heating qualities of tall oil. I am satisfied that any reasonably competent industrial chemist would either be aware of or could easily ascertain information that tall oil had a propensity for spontaneous combustion when absorbed by materials such as attapulgite. This information should have been available from both Bryce's and EKA's MSDS.

38 To my mind, Mr McDonald's duty of care to persons who were foreseeably at risk as a result of fire from dangerous goods stored by him required him to take reasonable steps to inform himself of the nature of the dangerous goods which it was his business to handle and that this included modes of safe disposal in the event of spillage. Whether a reasonable person in Mr McDonald's position has failed in this duty of care, measured purely by reference to the common law, is not easy to determine but, in all the circumstances as I have outlined them, I consider that that Mr McDonald was obliged to acquaint himself with the risks of storage of a mixture of tall oil and attapulgite or similar product before he undertook to do so and that reliance upon merely suggestive and indirect assurances, such as would have been obtained from the MSDS produced by Bryce and EKA would not be sufficient. Only a positive statement in such a document that there was no risk associated with the storage of such a mixture would have sufficed to satisfy Mr McDonald’s duty of care. Of course, had he referred to the EKA MSD, he would (or should) have realized that storage of the mixture as he intended was to be avoided. This should, at least, have put him on enquiry. Reference to EKA would probably have revealed the danger of spontaneous combustion and to the conclusion that the mixture should not be stored as he intended. At all events, he should not have stored the mixture unless he had a positive assurance from a person with sufficient expertise that it was safe to do so.

39 However, this matter does not fall to be determined by the common law standard considered in isolation. I have already referred to the provisions of reg 18. I consider that Mr McDonald was required by virtue of that enactment, at the least, to obtain from some suitably qualified person (and Bryce or EKA would fall into this class) reasonable assurance as to the absence of risk of storing the mixture. I do not consider that any person such as Mr McDonald, considering whether it was safe to store the mixture in question, could have reasonably inferred from either the Bryce or the EKA MSDS that there was no risk involved since, on a fair reading, these documents do not suggest any advertence by their authors to the actual situation which Mr McDonald should have assessed. I have said that, so far as Mr McDonald's statutory duty was concerned, the test of adequate information is objective and could not be satisfied by wrong information, even if that came from an apparently appropriately qualified source. But, even if I am mistaken about that, it seems to me that, at least, information about the nature of the hazard must be unambiguous and relate directly to the character of the hazard being considered. Mr Finch SC argued that the implication of the Bryce MSDS, had Mr McDonald sought it, was that there was no risk involved in the storage of the mixture. Whilst the document is open to this interpretation, I think it should be more correctly read by someone in Mr McDonald's situation as not dealing with that situation at all. Assuming that Mr McDonald's next step was to consult the EKA MSDS, that certainly indicated there was some kind of unspecified risk associated with the long term contact between tall oil and porous materials but it, also, did not directly address the problem about which Mr McDonald required information. Further enquiry, was to my mind, necessary and there was a telephone number on the container label which was an obvious source of further information. Having regard to the warning, albeit limited, expressed in the EKA MSDS I think it more likely than not (as has already been mentioned) that Mr McDonald, on such an enquiry, would have been informed of the risk of spontaneous combustion providing he insisted, as I think it was his duty, on obtaining an unambiguous answer to the question of the safety of storage of the mixture. Accordingly, whether the duty to be informed of the risk is directly imposed by reg 18 or by virtue of that regulation informing the common law duty (see Sutherland Shire Council v Heyman (1984) 157 CLR 424 per Mason J at 459.5) does not, in the end, matter very much. Either way, I am satisfied that the appropriate standard of skill and competence to be possessed by a person in Mr McDonald's position, undertaking the storage of dangerous goods, required that he or she be informed of the dangers of storing products such as tall oil soaked into attapulgite and the risk that such a mixture will spontaneously ignite and cause a fire.

40 Mr McDonald called a Mr Ross Underwood to give expert evidence as to the appropriateness of Mr McDonald's mode of cleaning up the spilt tall oil and the quality and accuracy of the information contained in the MSDS produced by Bryce and EKA. Mr Underwood had many years of experience as a professional engineer, initially in the petrochemical industry, and for the last ten years has been a consultant advising on appropriate warehouse practices, including spill procedures, and including the handling and storage of dangerous goods. Mr Underwood considered that it was reasonable to use clay as a medium for containing and absorbing the tall oil spill. As I have said, this could scarcely be controverted. The question, however, was not whether attapulgite should have been used for cleaning but whether the mixture should have been stored.

41 Mr Underwood said that Mr McDonald could legitimately have relied on the fact that the Standards Australia handbook providing immediate general information and advice for the handling of dangerous goods in emergency situations suggests that an emergency response for a spill or a leak is to absorb it with earth, sand or other non-combustible material. However, as Mr Underwood himself said, the handbook was principally written for trained emergency responders such as the fire brigade and other persons "first on the scene of an accident". It follows that it is not directed to the storage of a mixture of a product such as tall oil with a substance such as attapulgite.

42 In dealing with the MSDS of Bryce and EKA, Mr Underwood's report points to the national standard for describing the requirements for information on spills, which are confined to the cleanup itself and do not refer to the storage of a resultant mixture of substances. Mr Underwood concludes that the method adopted for cleaning up the tall oil spill was appropriate, however, and that there was no reason for Mr McDonald, "on the basis of ...[the information available to him] to foresee that there would be a risk of any adverse interaction between the Brytall and the attapulgite (clay) either immediately, or over time, should the mixed substances be kept in storage". It will be obvious from what I have already said that this approach conflates the issues of clean up and storage. As Mr Underwood himself said, the MSDS do not discuss storage. Accordingly, they are not a source of information about the risks involved in storage and I do not consider the absence of reference to problems that might be associated with storage of the mixture to be a basis for any sufficiently firm conclusion that such storage would be safe. In the end, Mr Finch SC seemed to rely on Mr Underwood's evidence that he was himself unaware of the risks of spontaneous combustion arising from the storage of the mixture and hence there was no reason for inferring that Mr McDonald should have been aware of those risks. But Mr Underwood was not in Mr McDonald's situation. The question is not whether Mr McDonald should have had the information so much as whether he should have made enquiries as to the risk of the storage of the mixture in question.

43 It follows that I am satisfied on the balance of probability that the plaintiffs have proved that Mr McDonald is liable to them for the losses attributable to the fire under the Dangerous Goods Act 1978 and Dangerous Goods Regulation 1978 and in respect of negligence. It is therefore necessary to consider the various cross-actions.

44 Mr McDonald has cross-claimed against Bryce (the first cross-claim) and SLE (the second cross-claim) in both contract and tort, claiming damages for loss and damage caused to him including, pursuant to the Law Reform (Miscellaneous Provisions) Act 1946 (LRMPA), a contribution and indemnity in respect of any judgment in favour of the plaintiffs. Mr McDonald submitted that Bryce had a duty, as bailor, to inform him of the propensity of Brytall to spontaneously combust when mixed with a substance such as attapulgite, a probable and foreseeable occurrence if it were spilled in any quantity. The damages for breach of contract would, of course, not be susceptible to reduction for contributory negligence: Astley v Austrust Limited (1999) 197 CLR 1 (the Law Reform (Miscellaneous Provisions) Amendment Act 2000 not applying since the present proceedings had been commenced and not completed when that Act commenced: see Sched 1, cl 4). They would comprehend the whole of the damage flowing directly from the breach, which, in this event, would amount to so much of the judgment in favour of the plaintiffs as Mr McDonald was liable to pay. The submissions do not deal with Bryce's liability to the plaintiffs in tort in terms, a prerequisite of their liability to make a contribution under the LMPA, except to submit that, if the fire was caused by spontaneous combustion of the mixture, the failure of Bryce to inform Mr McDonald of Brytall's propensity in this regard, rendered it liable to contribute to the loss. Bryce took no point as to this matter. I think I should deal with the question on the basis that the parties are agreed that Bryce's liability to contribute to the judgment against Mr McDonald in favour of the plaintiffs will arise if it is proved that Bryce should have informed Mr McDonald of the danger of storing the mixture.

45 Although Bryce did not manufacture Brytall, Bryce was its importer and distributor and its product had the propensity to spontaneously combust when in the presence of an absorbent like attapulgite, which would be the most likely material to be used to clean up any substantial spill. None of these matters are really in dispute. The real question is whether Bryce had a duty to inform Mr McDonald of the risk of spontaneous combustion following clean up. I have already mentioned the recommendation of Bryce as contained in its MSDS concerning the mode of cleaning up any spill. Had Mr McDonald consulted this MSDS, it is likely that he would have been (though he should not have been) lulled into a false sense of security about the risks associated, not only with clean up but also with storage of the mixture. In that event, Bryce could scarcely contest its liability. However, it is Mr McDonald's evidence that he simply assumed that there was no risk associated with storage of the mixture and did not consult Bryce's MSDS in this or, indeed, any other respect. The failure of Bryce to set out in its MSDS the risks associated with storage following clean up is therefore immaterial. However, the question arises whether notification of such a risk as that of spontaneous combustion in the MSDS would have been adequate to satisfy Bryce's obligations under the contract of bailment or its duty of care and, in particular, whether the danger of spontaneous combustion should have been displayed on the container's label.

46 It is clear law that a bailor of dangerous goods has a duty to inform the bailee of the danger in question. In Hoey v Hardies & Anor (1912) 12 SRNSW 268 at 271 the Chief Justice said -

"Now the principle upon which actions for negligence of this nature rest has been well-settled for a long time. In Farrant v Barnes (11 CBNS 553) Willis J said-

‘I apprehend that as a matter of legal duty, a person who gives another dangerous goods to carry, goods which require more caution than ordinary merchandise, and which are likely in the absence of such caution to injure persons handling them, is bound to give notice of their dangerous character to the party employed to carry them, and is liable for the consequences which are liable to ensue from the omission to give such notice'.

47 Pring J said at 274 -

'I think this case is really concluded by the principle stated by the Privy Council in Dominion Natural Gas v Collins [1909] AC 640, a statement which only repeats what has been laid down over and over again. Lord Dunedin says -
‘In the case of articles dangerous in themselves, such as loaded firearms, poisons, explosives, and other things ejusdem generis , there is a peculiar duty to take precaution imposed upon those who send forth or install articles, when it is necessarily the case that other parties will come within their proximity.’"

48 Bryce foresaw the probability that if there were a substantial spill of Brytall, a product such as attapulgite would be used to clean it up. I think that it was also reasonably foreseeable that the resultant mixture would be stored before disposal and, therefore, Bryce was obliged to ascertain whether there were any unusual risks associated with such storage about which it should inform its bailee, Mr McDonald. Had it made such an enquiry, I think it inevitable that the self-combusting propensity of tall oil would have been revealed. Moreover, as was admitted in its defence, Brytall was purchased from EKA, renamed and distributed for resale. It therefore, at least, had notice, I think it reasonable to infer, of the information in the EKA MSDS to which I have referred. Accordingly, it knew (or, at all events) ought to have known that there was a danger associated with the storage of a mixture of a product like attapulgite and Brytall. It seems to me that both the accident which occurred in Mr McDonald's warehouse during the movement of Brytall into the warehouse and the storage of the mixture on clean up was the sort of occurrence that was distinctly possible and plainly foreseeable. In that event, Bryce had the obligation to take reasonable steps to inform Mr McDonald of the dangers posed by storage of the mixture without special precautions. The appropriate mode of conveying that information was, firstly, in the MSDS and, second on the label on the container, which would, in all likelihood, be the first source of information consulted by any person in Mr McDonald's position. Had there been a clearly marked warning, as there should have been, on the label, I think it very likely that Mr McDonald would have noticed it and taken heed. It is argued on Bryce's behalf that Mr McDonald was an experienced carrier of dangerous goods with six years of experience in warehousing such goods. Over the six years in which he had been storing dangerous goods for Bryce, it had not provided him with any information on how to clean up spilt material. Mr McDonald said that he knew that, if he wanted that information, he would need to contact Bryce to obtain it. However, Mr McDonald said in effect, and I accept, that if the label had notified him of the hazard, he would have made inquiries - though, as it happened, by calling the number indicated on the label, which was EKA's. I do not accept the submission that the evidence showed there had been an implicit variation of Bryce's obligation as bailor to inform its bailee Mr McDonald of unusual dangers or that there was a practice which varied or qualified its duty of care under the general law to him in this regard.

49 So far as SLE is concerned, the attapulgite was provided for the purpose of cleaning up the spilled Brytall. Mr Emerson was a principal of SLE, the supplier of the attapulgite to Mr McDonald and recommended its use. It is not disputed that Mr McDonald informed Mr Emerson that the oil was "pine oil", which, for practical purposes, is the same as tall oil. Mr Emerson was unaware of the propensity for such an oil to spontaneously combust when mixed with material such as attapulgite. It is obvious that he was either unaware of the fact that it contained a substantial proportion of linoleic acid or, if so, that this was significant. It is submitted by Mr McDonald that, in the circumstances, s 19(1) of the Sale of Goods Act 1923 (Sale of Goods Act) is enlivened and it was a term of the contract of sale that attapulgite was reasonably fit for the purpose of cleaning up pine/tall oil. That provision states -

"Where the buyer expressly or by implication makes known to the seller the particular purpose for which the goods are required so as to show that the buyer relies on the seller's skill or judgment, and the goods are of a description which it is in the course of the seller's business to supply (whether he be the manufacturer or not) there is an implied condition that the goods shall be reasonably fit for such purpose:
provided that in the case of a contract for the sale of a specified article under its patent or other trade name there is no implied condition as to its fitness for any particular purpose".

50 Mr Emerson, as I have mentioned, himself attended at Mr McDonald's premises shortly after the attapulgite was delivered and saw how the cleanup of the spilled oil was being effected and indeed, helped with that process. He was therefore aware that the mixture was being placed in the broken containers. At all events, he should have realised (and probably did realize) that Mr McDonald would probably store the mixture for a number of days before disposal, especially having regard to the impending long weekend. It is submitted on SLE's behalf that this actual information came after the contract for sale of the attapulgite had been completed and hence was immaterial to the nature of its terms. However, in the circumstances, Mr Emerson's attendance at the warehouse and advice to Mr McDonald as to the application of the attapulgite to the spill was part of and pursuant to the contract for sale. Even so, nothing depends on this, as Mr Emerson well knew the circumstances giving rise to the need for attapulgite and the likelihood that the mixture would be stored at the warehouse for a number of days. SLE concedes that the purpose of the supply of attapulgite was made known to SLE but submits that this purpose was merely for cleaning up the oil and not for storage of the mixture. However, storage of the mixture pending disposal was so clearly a part of the cleanup of the spilled oil that any significant risk (of which SLE knew or ought to have known) that the mixture was unsafe for short-term storage should have been made known to Mr McDonald. This was especially so since SLE knew that, in light of the impending long weekend and the scale of the work involved, it was very likely that the mixture would be stored at the warehouse for about the time that it was in fact stored before the fire broke out. It seems to me that the purpose of the attapulgite, in the circumstances as they were known to SLE at the time of the supply of the product, was that it would be used to soak up something between 700 and 1,000 litres of tall oil and that the resultant mixture would be stored in the premises, certainly over the long weekend and likely for several ensuing days before disposal. However, a mere retailer such as SLE providing product to a customer who apparently intends to use the product for the purposes for which it is supplied does not have the duty to inform itself of other potential risks, even if they are associated with the conventional use, which might arise from the particular circumstances in which the customer uses the product. Moreover, it is clear that Mr McDonald did not rely on SLE so to inform him. SLE was merely a distributor of the product, together with many others, which had a wide range of industrial and other uses. Having regard especially to the vast array of liquids which might be usefully absorbed by attapulgite, I do not consider that it had a duty of care towards Mr McDonald to ascertain whether one or more of those uses might give rise to a risk of damage of the kind suffered. It could not be expected that a company in the position of SLE would have the means of ascertaining all the hazards associated with the use of the products it carried and had a duty towards its customers as to advise them of those hazards. So far as the claim in contract is concerned, as I have said, Mr McDonald did not rely on SLE's "skill or judgment", except to the extent that the attapulgite was suitable for cleaning up the spilled oil. Mr McDonald was well aware of the scale of SLE's business and the extent of Mr Emerson's own likely competence and experience. I am satisfied that, although he no doubt thought that Mr Emerson considered the mixture could be safely stored, as he himself did, he did not rely on Mr Emerson or SLE to tell him whether or not that was safe. It follows that both the claims under the Sale of Goods Act and in negligence by Mr McDonald against SLE fail.

51 Mr McDonald also sues (the ninth cross-claim) Hudson Resources Limited, formerly Mallina Holdings Limited (Hudson), claiming damages for loss and contribution. Hudson carries on the business, inter alia, of mining and selling river clay under the name attapulgite. Hudson described attapulgite to SLE in a written communication in October 1996 as having a wide range of uses including, in particular, the following -

"Reduces Fire Hazards -It readily absorbs oil and dangerous chemicals, substantially reducing the risks. Being inorganic and chemically inert, it is non- flammable and safe to use around machinery."

52 Amongst the other suggested uses was on slippery ramps and floors to prevent slipping, dust control, shock absorbent in packaging, the removal of oil film from machinery parts, floor scrubbing, tank cleaning, carrier for liquids in agriculture and animal feed. It is obvious that there is an enormous range of oil and dangerous chemicals capable of being usefully absorbed by attapulgite. However, amongst these is a distinct class of such products containing the unsaturated fatty acids, in particular linoleic and oleic acid which, in appropriate circumstances, when absorbed into a material such as attapulgite, will or have the potential spontaneously to combust. In this event, attapulgite was capable, when used as Hudson expected it to be used, of creating a very dangerous situation, which would in all likelihood not be obvious to the user of the product. It was submitted by Mr Wales SC for Hudson that it is not reasonable to expect the supplier of "a perfectly safe and useful product" to provide a warning on the product which is, for all practical purposes, "commercial suicide". I pass over the question begging description of attapulgite as "perfectly safe". I do not accept that a warning to the effect that the attapulgite should not be stored after absorbing liquids containing linolenic, linoleic and oleic fatty acids such as tall and linseed oils (and other liquids known to contain substantial proportions of these substances) in open combustible containers and describing a mode of safe storage of such a mixture would be "commercial suicide". Nor do I accept that a warning in some such terms would be futile. In my view, Hudson did have a duty to warn users of attapulgite for the purpose of soaking up or absorbing products such as tall oil against the risk of spontaneous combustion even though I am prepared to accept that such liquids form only one small part of a possible range of liquids in connection with which attapulgite might be used. However, as I have said, liquids containing, linolenic, linoleic or oleic acids thereby fall into a distinct and well-recognized class. It seems to me that the risks of spontaneous combustion occurring in such liquids when mixed with porous material such as attapulgite are sufficiently known in industry that, if Hudson had made reasonable enquiries as to the suitability of attapulgite for soaking up and storing flammable liquids, it would have discovered the dangers associated with tall oil arising out of its content of linoleic and oleic acids. It marketed attapulgite specifically for the purpose of soaking up such liquids to remove fire hazards whereas it ought to have known that a mixture of attapulgite and those liquids might well pose a real risk of fire itself, a risk which would not be likely to have been obvious or even occurred to the user. By doing so, it created such a relationship with those likely to use attapulgite as to give rise to a duty to take due care to ascertain for itself whether there were any serious and unusual hazards that such persons might not otherwise be aware of and take reasonable steps give them warning. This was especially so when the risk arose if the product was used as Hudson itself supposed it would. Bags of attapulgite should have been appropriately labelled. There was no such label. The fire that resulted from the inappropriate storage of the mixture of tall oil and attapulgite supplied by Hudson was, or ought to have been, reasonably foreseeable by Hudson. Had there been a warning on the package of attapulgite, I am satisfied that Mr Emerson would probably have brought it to Mr McDonald's attention or that Mr McDonald would, at all events, have noticed it and would have taken appropriate action. The failure to warn about the use of attapulgite in the circumstances where it was going to be stored for some time was an implicit suggestion that no such potential hazard existed. In the result, Mr Emerson and SLE, who neither knew nor ought to have known of the risk of spontaneous combustion, were the innocent agents of Hudson, which did know or ought to have known of that risk and should have taken steps calculated to ensure that a user of the product in accordance with the purpose for which it was designed would be warned of the risk of its storage when soaked with a liquid, such as tall oil, that contained significant proportions of linoleic and oleic acid. Accordingly, the cross-claim by Mr McDonald against Hudson succeeds.

53 Mr McDonald's losses comprise the judgment in favour of the plaintiffs, its liability to Bryce in respect of bailed goods, agreed at $272,173 and other losses agreed at $179,940.41.

54 SLE cross-claimed (the fifth cross-claim) against Hudson and (the sixth cross- claim) against Bryce. As SLE is not liable to McDonald, these cross-claims are dismissed.

55 Bryce cross-claims (the third) against Mr McDonald claiming that he was liable in contract for loss of the goods bailed, in negligence and for breach of reg 18 of the Dangerous Goods Regulation, the terms of which have already been sufficiently set out above. The Brytall that was destroyed fell into two categories. First, there was the Brytall lost when the containers fell from the forklift. There can be no doubt that Mr McDonald is entirely liable to Bryce for these two containers. The other containers were lost in the fire that was due both to Mr McDonald's and Bryce's (and, indeed, Hudson's) failings. This is complicated by the circumstance that, as between them, both Bryce and Mr McDonald were in breach of the contract for bailment. My assessment of their proportionate liability is that Bryce's is two-thirds and Mr McDonald's is one third. Accordingly, there must be a verdict for Bryce on the third cross-claim. Not surprisingly, no submissions have been made as to how such apportionment should affect the amount of the judgments ultimately to be made. If the parties are unable to agree on this matter, having regard to my findings, I give liberty to apply on fourteen days’ notice to have this question set down for argument and determination.

56 Hudson has cross-claimed against SLE, McDonald and Bryce (the seventh cross-claim). For reasons which reflect in essence the findings made in respect of the second cross-claim brought by Mr McDonald the cross-claim against SLE is dismissed. The cross-claims against McDonald and Bryce must succeed.

57 Bryce has also cross-claimed (the eighth) against SLE and Hudson. The cross- claim against SLE is dismissed. The cross-claim against Hudson succeeds for the reasons given in respect of the cross claim by Mr McDonald against Hudson's.

58 I was informed during the hearing that the fourth cross-claim by Bryce against EKA has been discontinued.

59 In the result, McDonald, Bryce and Hudson have each contributed by their negligence to the loss suffered by the plaintiffs. Strictly speaking, of course, the latter two are liable to contribute to the loss that Mr McDonald suffers because of his liability to the plaintiffs and also to Bryce, their liability being to him. This does not, in substance, matter. The appropriate apportionment depends on an assessment of their relative culpability and their respective contributions to the loss resulting from the fire. I consider that Bryce and Hudson should each contribute 40 per cent of the total verdict payable by McDonald to the plaintiffs.

60 I have not finally determined the amounts that the defendant and cross- defendants must pay. I give liberty to the parties to apply for determination of this issue if they are unable to agree.

61 Girkaid called evidence as to the loss of the warehouse from a Mr Irving, who is a registered valuer having a wide range of associated experience. He has practiced as a valuer mainly on the Central Coast for the last twenty years or so. As at January 1998, he considered that the unimproved value of the land upon which the warehouse was situated was $130,000. The concrete slab on which the warehouse was erected is still in situ, valued as an improvement at $10,000. A future purchaser would probably need an environmental audit which would cost approximately $10,000 and which would therefore be deducted from the sale price. The freehold market value of the land, with the existing tenancies (Inghams' and Mr McDonald's) before the fire was, in Mr Irving's opinion, $460,000. The loss suffered by Girkaid flowing directly from the loss of the building (apart, of course, from loss of rent) is therefore, it is submitted, $330,000.

62 The evidence disclosed that the subject land is one of two blocks of about the same size that were subdivided some years ago, on both of which similar buildings were erected. The other block was superior, however, because it had two frontages to the street, a more regular shape and almost twice as much more usable land by virtue of its physical attributes because of the location of the building. That other block sold during 1996/1997 for about $456,000, though the sale was subject to a successful application by the purchaser to subdivide, at a cost of $56,000. Values had not appreciably changed between that time and January 1998. Mr Irving conceded all these facts but considered that the circumstances of the suggested comparative sale were such that his valuation of the plaintiff's land and buildings was still valid. In particular, he thought that the crucial element was the rent income that might be expected from the block and, as the buildings would attract comparable rents, the physical attributes of the blocks were not so significant. He pointed out, also, that the other block was untenanted at the time of sale. These considerations seem to me to be reasonable.

63 More important is the fact that, in August1998, the land was sold for $270,000, over twice the value ascribed to it by Mr Irving as at January 1998. His evidence was that, although such a sale was relevant, its true importance could not be weighed unless the circumstances surrounding the sale were known, for example, a premium might have been paid for some special value that was attributed to the land by the particular purchaser. Although this sale has led me to doubt Mr Irving's valuation, at the end of the day, I do not think it of such significance as to demonstrate more probably than not that Mr Irving's valuation as at January 1998 is wrong when placed in the scales against his judgment as an experienced valuer in the area.

64 Accordingly, I accept that the loss arising from the destruction of the building, exclusive of the loss of rent, is $330,000.

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Last Modified: 02/22/2002