Intrend P/L v O'Halloran - [2006] SADC 95

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
INTREND P/L & ORS v O'HALLORAN & ORS
[2006] SADC 95
Judgment of His Honour Judge Muecke
25 August 2006
TORTS - NEGLIGENCE - ESSENTIALS OF ACTION FOR NEGLIGENCE - STANDARD OF CARE - PARTICULAR PERSONS AND SITUATIONS
Cigarettes smoked in premises just after midnight by employee of business occupying part of such premises and by a stranger - remains of cigarettes either left in coffee mug on employee's desk or tipped into waste paper bin there by him - fire occurred within half an hour causing significant damage to the building and to the property of tenants of the building and others - whether employee liable in negligence to plaintiffs - whether employer vicariously liable for any negligent act of employee.
Wyong Shire Council v Shirt (1980) 146 CLR 40; Blyth v Birmingham Waterworks Co (1856) 11 Exch 781; Overseas Tankship (UK) Ltd v The Miller Steamship Co Pty Ltd [1967] AC 617; Briginshaw v Briginshaw (1938) 60 CLR 336; Nesterczuk v Mortimore (1965) 115 CLR 140; Tubemakers of Australia Ltd v Fernandez (1976) 50 ALJR 720; Woolcock Street Investments Pty Ltd v CDG Pty Ltd & Anor (2003) 216 CLR 515; Ruddiman & Co v Smith (1889) 60 Law Times (NS) 708; Deatons Pty Ltd v Flew (1949) 79 CLR 370; New South Wales v Lepore (2003) 212 CLR 511, 519; (2003) 77 ALJR 558, 560, considered.

INSURANCE - GENERAL - POLICIES OF INSURANCE - CONSTRUCTION
Employee had Home/Contents Insurance Policy with RAA Insurance including cover for legal liability - Employer had Broadform Liability Policy with QBE Insurance which included cover for any employee but only whilst acting within the scope of their duties in such capacity - whether either or both policies respond where the employee is liable to the plaintiffs.
Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2006] NSWSC 223; H & E Van Der Sterren v Cibernetics (Holdings) Pty Ltd (1970) 44 ALJR 157; Johnson v American Home Assurance Company (1998) 192 CLR 266; Dickenson v Motor Vehicle Insurance Trust (1987) 163 CLR 500; Government Insurance Office (NSW) v R J Green & Lloyd Pty Limited (1966) 114 CLR 447; Walton v National Employers' Mutual General Insurance Association Ltd [1973] 2 NSWLR 73; Gray Brothers Engineering Ltd v The New Zealand Insurance Company Limited (1992) 7 ANZ Insurance Cases 61-124; Botany Fork & Crane Hire Ltd v New Zealand Co Ltd (1993) 116 ALR 473; Our Town FM Pty Ltd v Australian Broadcasting Tribunal (1987) 16 FCR 465; Re Nanaimo Community Hotel Pty Ltd [1944] 4 DLR 639, considered.

WORDS AND PHRASES CONSIDERED/DEFINED
"arising out of", "control", "in connection with", "use"

INTREND P/L & ORS v O'HALLORAN & ORS
[2006] SADC 95
Introduction

On land located at the corner of Rundle Street and The Parade West, Kent Town there stood a two storey office building and warehouse. Those premises were known as 66 Rundle Street, Kent Town. A number of businesses were operated from those premises. On the ground floor of part of the premises Bocksoffice Pty Ltd (“Bocksoffice”) conducted an advertising agency business. Kent O’Halloran (“Mr O’Halloran”) was an employee of Bocksoffice. Mr O’Halloran worked in an office which had a window facing north to Rundle Street.
After work on one Friday night in September 2000 Mr O'Halloran went to Rundle Street in the city of Adelaide with some acquaintances. He went to a number of places in the area of Rundle Street where he had some drinks and dinner. During the evening he met Anna Bryant (“Ms Bryant”) who was a friend of one of his companions. Mr O'Halloran and Ms Bryant ‘sort of clicked’, as Mr O'Halloran said in his evidence. The two of them spent some time together that evening. Towards the end of the evening they ended up together and lost contact with the rest of the group. They unsuccessfully tried to find their companions. When that happened Mr O'Halloran asked Ms Bryant if she was interested in going to his place to watch Roy and HG on their television programme “The Dump”. (These events occurred during the Sydney Olympics in 2000.) Ms Bryant agreed. It was past midnight by then.
At that time the two of them were near the Stag Hotel on the corner of Rundle Street and East Terrace. They walked from there towards Mr O'Halloran’s office at Bocksoffice’s premises in Kent Town. He had left his car parked nearby. The two of them had to walk past Bocksoffice’s business premises to get to Mr O’Halloran’s car.
Mr O'Halloran’s evidence was that when they were walking past the office he spontaneously asked Ms Bryant if she wished to look at where he worked. She said that she did. The two of them entered the building via a rear door off a car park that was at the rear of the premises. Mr O'Halloran used a security keycard he had to gain access to the building. He disarmed the alarm that was installed at the Bocksoffice premises by using his code. The time was forty-two minutes past midnight on Saturday 23 September 2000.
Mr O'Halloran showed Ms Bryant the Bocksoffice premises. Each of them smoked one cigarette whilst they were in the Bocksoffice premises. A china mug was used as an ashtray by both of them. They “butted-out” their cigarettes in the same china mug. The smoking of the two cigarettes and the butting-out of them did not occur in Mr O'Halloran’s office. Just before they left the premises Mr O'Halloran carried the china mug to his office. Ms Bryant did not accompany him at that time, although she had been shown his office during the course of the earlier tour. There was evidence to the effect that Mr O'Halloran either left the china mug with the cigarette ash and butts in it on a desk in his office, or that he tipped the contents of the china mug into a plastic garbage bin which may have contained waste papers and other waste before leaving the empty mug on a desk in his office. Not long after Mr O'Halloran did whatever he did with the mug and the remains of the two cigarettes he and Ms Bryant left Bocksoffice’s premises. When leaving he armed the security system using his code. That occurred at eight minutes past one o’clock in the morning of Saturday 23 September 2000. Mr O'Halloran and Ms Bryant had been in Bocksoffice’s premises for twenty‑six minutes.
At 1.23am that same Saturday morning (fifteen minutes after Mr O'Halloran and Ms Bryant had left the premises) a passive infra-red detector within the premises activated the security alarm installed at Bocksoffice’s premises. Twenty minutes later (at 1.43am and then at 1.44am) a further seven passive infra-red detectors within the premises activated. At 1.45am police were ‘tasked’ to attend the premises at Kent Town. A police officer attended the scene at 1.47am and observed flames coming from the building. The flames “appeared to be concentrated in one office and were lapping up under the verandah” of the building. The Metropolitan Fire Service was advised. An officer of the Metropolitan Fire Services attended the scene at 1.52am. He was the “First Arrival Officer”. Within half an hour of his arrival he observed that apart from the window through which the fire was venting, all doors and windows were locked and the building was secure. The fire was showing from a window on the northern face of the building. The fire was very visible through that window and was actually coming out through the window which had failed from fire action. It seemed to that officer that the seat of the fire had its origins in that office on the northern face of the building. That office was Mr O'Halloran’s office.
The Metropolitan Fire Service fought and extinguished the fire at the premises at 66 Rundle Street, Kent Town.
In the meantime Mr O'Halloran and Ms Bryant had watched television at Mr O'Halloran’s residence at Portrush Road, Payneham. Mr O'Halloran had then driven Ms Bryant to her home, returned to his home and gone to bed. He was awoken by a telephone call. As a result of that call he attended at the premises at 66 Rundle Street, Kent Town. There he saw the building on fire with “fire trucks everywhere and police running around everywhere”. He there spoke to police who then took him into the city. He was interviewed by police and the interview was recorded on video tape. He signed a Statement of Witness the same day, 23 September 2000.
The fire at 66 Rundle Street, Kent Town resulted in damage to property. It caused damage to property of the owner of the premises and to property of a number of companies that conducted business from the premises at 66 Rundle Street, Kent Town.
A number of those who suffered damage in the fire instituted proceedings against Mr O'Halloran claiming their losses from him. They each alleged that the fire was caused by his negligence. I refer to these entities as “the plaintiffs”. The losses alleged and claimed by the plaintiffs are significant.
As at September 2000 Mr O'Halloran had issued to him a Home and/or Contents Insurance Policy. That had been issued by RAA-GIO Insurance Ltd trading as RAA Insurance (“RAA Insurance”). By that policy (“RAA Policy”) RAA Insurance agreed to indemnify Mr O'Halloran for, inter alia, liability in respect of accidents which occur during the Period of Insurance. The policy insured Mr O'Halloran against such sums as he shall become legally liable to pay in respect of claims made against him arising from damage to property caused by any accident occurring anywhere in Australia. The policy provided that certain claims made against Mr O'Halloran were excluded by reason of certain exclusion clauses in the legal liability section of the policy.
As at September 2000 QBE Mercantile Mutual Insurance (“QBE Insurance”) had issued to Bocksoffice a Broadform Liability Policy (“QBE Policy”) by which it promised to pay Bocksoffice all sums which it became legally liable to pay by way of compensation in respect of property damage happening during the period of insurance and caused by an occurrence in connection with its business. Its business was described as “Advertsing (sic) Agency”. “Bocksoffice” was defined as meaning any employee of Bocksoffice “but only whilst acting within the scope of their duties in such capacity”.
In the six actions that were commenced following the fire Mr O'Halloran claims (in various ways) that if he is liable to any or all of those who have claimed against him he is entitled to be indemnified by either or both of RAA Insurance and QBE Insurance. In the case of RAA Insurance he claims that he is entitled to be indemnified pursuant to the Legal Liability section of the RAA Policy. In the case of QBE Insurance he claims that he is entitled to be indemnified pursuant to the Liability section of the QBE Policy. Further, he claims that he is entitled to be indemnified by Bocksoffice because Bocksoffice is liable vicariously for his negligence.
The preliminary issues
On 8 November 2005 a Master of this Court made certain orders by consent.
He ordered that the six actions be listed for trial together. Evidence in any one action would be admissible in any other action subject to the further order or directions of the trial judge.
He ordered that at the hearing of the trial the trial judge be asked to determine the following issues only (“the preliminary issues”):
1      Whether the fire that occurred on 23 September 2000 at 66 Rundle Street, Kent Town was caused or contributed to by the negligence of Mr O’Halloran.
2      If yes to question 1, whether Mr O’Halloran is entitled to indemnity for any liability he incurs as a result of that negligence under the RAA Policy.
3      If yes to question 1, whether Mr O'Halloran is entitled to indemnity for any liability he incurs as a result of that negligence under the QBE Policy.
4      If yes to question 1, whether Mr O'Halloran’s then employer, Bocksoffice, is vicariously liable for Mr O’Halloran’s negligence.
For the purposes of these four questions the parties agreed that the fire caused damage to property such that any liability incurred by either Mr O'Halloran and/or Bocksoffice to the plaintiffs (not including Mr O’Halloran in the action in which he is plaintiff) includes at least some liability in respect of claims for loss of, or destruction to, property within the meaning of the RAA Policy and/or the QBE Policy.
It was further agreed that the trial judge would not be required to determine:
1      Any issue relevant to a Counter-claim made by Bocksoffice against Mr O'Halloran in one action, save for the matters set forth above.
2      Any issue relevant to a Counter-claim made by Bocksoffice against RAA Insurance in one action, save for the matters set forth above.
3      Any issue relevant to the quantum of a claim by the plaintiffs (not including Mr O'Halloran in the action in which he is plaintiff) or any of the other parties.
4      Whether any specific item of loss is a loss which may attract cover under the RAA Policy and/or the QBE Policy.
It was further agreed by the parties that admissions made in any of the actions that are relevant to the preliminary issues will be taken to be admissions in any of the other actions.
Question 1 - Is Mr O'Halloran liable in negligence?
The allegations of negligence pleaded against Mr O'Halloran are that he:
(a)    failed to ensure that a cigarette or cigarettes that he and/or Anna Bryant had been smoking was/were properly extinguished.
(b)    failed to properly dispose of a cigarette or cigarettes which he and/or Anna Bryant had been smoking.
(c)    placed the remains of a cigarette or cigarettes which he and/or Anna Bryant had been smoking in a waste paper basket without ensuring that the cigarette or cigarettes was/were properly extinguished.
(d)    placed the remains of a cigarette or cigarettes which he and/or Anna Bryant had been smoking in a waste paper basket which contained waste which was likely to be ignited by the remains of the cigarette or cigarettes which he and/or Anna Bryant had been smoking.
(The above allegations are reproduced from the Statement of Claim in Action No. 209 of 2003. The allegations of negligence against Mr O'Halloran are almost identical in Action Nos. 1360 of 2003, 115 of 2004, 868 of 2004 and 1961 of 2004. There are slight variations in the pleadings in those other actions. Some of them have not used the alternative pleading in (a), (b) and (d) between the references to Mr O'Halloran and Ms Bryant. I do not consider these variations important.)
There are some important admissions made in the Defences to some of the actions which are not made in others. These are important, at least potentially, because of the agreement by all parties that admissions made in any of the actions that are relevant to the preliminary issues will be taken to be admissions in any of the other actions. The admissions in this category include:
(1)An admission by Mr O'Halloran in Action No. 209 of 2003 that “cigarette remains were placed in a waste paper bin”. (Mr O'Halloran says further to that admission that all cigarette remains were properly extinguished and properly disposed of by him prior to exiting the premises.)
(2)It is possible to infer that Mr O'Halloran has admitted in Action No. 1360 of 2003 that he had placed cigarette remains in a waste paper bin. Such an inference is possible from Mr O'Halloran’s denial “that the origin of the fire was a waste paper bin in which he had placed cigarette remains”.
(3)In Action No. 115 of 2004 Mr O'Halloran admits entering the premises in the company of Ms Bryant and says further “that he was permitted to enter the premises by his employer and did so on his own business”.
(4)In Action No. 1961 of 2004 Bocksoffice admitted (but Mr O'Halloran did not) an allegation by the plaintiffs in that action that the “fire started no later that 1.23am on 23 September 2000 and originating (sic) in or near a waste paper bin”.
It appears clear, and I find, that in the twenty-six minutes that Mr O'Halloran and Ms Bryant were in the Bocksoffice premises in the early morning of Saturday 23 September 2000 each of them smoked one cigarette. The remains of these two cigarettes (comprising ash and butts) were in a china mug that Mr O'Halloran was holding. Before they left the premises Mr O'Halloran walked to his office and left the mug and the cigarette remains in his office. What he did with them and where he left them was the subject of evidence at the trial. A fire commenced in the building no more than an hour after Mr O'Halloran and Ms Bryant left it. The seat of the fire was in Mr O'Halloran’s office.
Mr O'Halloran’s obligation that night was to take reasonable care, in the circumstances, to avoid causing foreseeable harm to persons to whom he owed a duty of care in disposing of the cigarette remains after he and Ms Bryant had each smoked a cigarette. If he omitted to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or if he did something which a prudent and reasonable man would not do then he would be liable in negligence if damage was caused to persons to whom he owed a duty to take care. (See Wyong Shire Council v Shirt (1980) 146 CLR 40; Blyth v Birmingham Waterworks Co (1856) 11 Exch 781 at 784 per Alderson B.)
The standard of care applicable to Mr O'Halloran is to be assessed objectively by determining what a reasonable person would do by way of response to a given risk. Such assessment is made by considering the magnitude of the risk and the degree of probability of its occurrence, along with the expense, difficulty and inconvenience of taking alleviating action and other conflicting responsibilities which Mr O'Halloran may have. The measure of care increases in proportion to the damage and danger involved. (See Wyong Shire Council supra at 47; Overseas Tankship (UK) Ltd v The Miller Steamship Co Pty Ltd [1967] AC 617).
The contentions of the parties at trial concentrated on at least two issues. First, what did Mr O'Halloran do with the cigarette remains in the china mug when he took them into his office before leaving the Bocksoffice premises that early morning. Secondly, what was the cause of the fire that occurred shortly after Mr O'Halloran and Ms Bryant left the premises and was anything Mr O'Halloran did with the cigarette remains and the china mug causally connected with the fire. The first is a matter of fact whilst the second involves inferences and conclusions from facts. Evidence from expert witnesses, and other documentary evidence tendered at trial relating to the matters about which expert evidence was given, will be relevant as to that issue.
The plaintiffs contended that I should find that Mr O'Halloran disposed of the cigarette remains in the china mug in a plastic waste paper/garbage bin in his office which bin contained a plastic bin liner and general office waste, including screwed up papers. The plaintiffs contended that all the circumstances, including the order and timing of events, fairly lead to the conclusion that the most likely cause of the fire was the action of Mr O'Halloran throwing unextinguished cigarette remains into a bin in his office. The plaintiffs contended that of particular significance to the process of inferential reasoning contended for was that the evidently benign state of Mr O'Halloran’s office (and, in particular, the electrical equipment in it) had remained so for many years prior to the fire. There was nothing in the evidence to suggest that anything in that respect had changed. It was contended that electrical equipment of the type that was in Mr O'Halloran’s office does not, on the evidence, spontaneously cause fire at night. The possibility of an intruder causing the fire was so negligible it could be ignored. The only new element on the night was the depositing of cigarette remains by Mr O'Halloran in his office, less than fifteen minutes before the fire in that room was detected.

Against those contentions it was submitted that I should find that two cigarette ends were butted out (and thereby extinguished) into a mug. Mr O'Halloran did not detect any smoke or odour emanating from the mug for about a minute after that had occurred. Mr O'Halloran carried the mug to his office and put it on his desk (with the cigarette remains in it) and he, again, did not then detect smoke or other odour coming from the mug. It was contended that in those circumstances Mr O'Halloran’s duty of care had been fulfilled and he was not in breach of it. Further, it was contended that the plaintiffs had failed to prove a connection between anything done by Mr O'Halloran and any loss suffered by them or any of them. Alternatively, the plaintiffs had failed to prove, by their expert evidence, any connection between anything done by Mr O'Halloran and the point of commencement of the fire in the premises on the morning of 23 September 2000. It was contended that it was open to me to find that the cause of the fire is unknown because there was no proof of any connection between the point of ignition as opined by Mr Kuteck and the fire which occurred, or that the fire was caused by a point or source of ignition that is unknown because of the failure of the plaintiffs to establish any connection between the alleged point of ignition as opined by Mr Kuteck and the actions of Mr O'Halloran or any other cause.
Before dealing with the two central and critical issues for determination, viz: whether Mr O'Halloran did in fact dispose of the cigarette remains in a china mug in a plastic bin in his office and, if so, did such disposal cause the fire that occurred, I deal with the less controversial evidence. Although I do not always expressly say that I find what follows to be my findings of fact, what now immediately follows does comprise my findings of fact. (I here express my gratitude to all counsel for their very careful written and oral submissions as to the evidence, and as to the law.)
As at September 2000 Intrend Pty Ltd (“Intrend”) owned the building at 66 Rundle Street, Kent Town. Partington Agencies Pty Ltd (“Partington”) occupied a portion of the premises. Eudunda Farmers Pty Ltd (“Eudunda Farmers”) owned some fixtures on the premises. Iceberg Media Pty Ltd (“Iceberg Media”) occupied the first floor of the premises. DIY Products Pty Ltd trading as Wallspan Kent Town (“Wallspan”) occupied a portion of the premises. Oddlot Shares & Securities Pty Ltd (“Oddlot”) and Bridge Finance Australia Pty Ltd (“Bridge”) shared premises with Iceberg Media. Australian Kitchen Industries Pty Ltd (“Kitchen Industries”) leased a part of the premises and was the franchisor of a business carried on from the premises pursuant to a franchise agreement with DIY Products Pty Ltd.
Bocksoffice was the occupier of the ground floor of the premises and had been for some years prior to 23 September 2000. The business conducted by Bocksoffice was that of an advertising agency. Mr Brenton Bock was the managing director of that business. There were a number of employees of the business, including Mr O'Halloran. Mr O'Halloran had been employed by Bocksoffice or its predecessor, Charterhouse Advertising Pty Ltd for a number of years. He was employed under the title of “Creative” (Exhibit OH58). Mr O'Halloran described his role at Bocksoffice as an art director. That involved him creating, concepting and designing for various advertising media or clients of Bocksoffice and its predecessor.
Mr O'Halloran had an office at the Bocksoffice premises. It was in the north-east corner of the premises used by Bocksoffice. The layout of Bocksoffice’s premises was as generally depicted in Exhibit OH59. The layout of Mr O'Halloran’s office was as generally depicted in Exhibit OH60. Two desks were in Mr O'Halloran’s office before the fire. Mr O'Halloran had shared that office with someone but that other person had left that office prior to the fire. As at 23 September 2000 Mr O’Halloran had that office to himself. That had been the position for several months prior to the fire. The two rectangular desks that were in the office were positioned such that the long sides furthest from the occupiers of the desks abutted each other. That is, if there were two people occupying chairs at each of the desks the two people would face each other. Mr O'Halloran used the more easterly desk in his office.
Mr O'Halloran had had issued to him a security card to access that part of the building that comprised the Bocksoffice premises. He had a keycard and he had been allocated a unique four digit code. He had such a keycard and code to allow him access to Bocksoffice’s premises if he wished to work outside ordinary business hours. It was also issued to him so as to enable him to secure the premises if he should be the last employee to leave work on any evening or night. Bocksoffice’s normal business hours were between 8.30am and 5.30pm, Monday to Friday. Mr O’Halloran’s contract of employment contemplated that he would sometimes work outside those hours but he would not be paid overtime for doing so. He did sometimes work outside those hours and was not paid overtime.
The Bocksoffice premises were fitted with passive infra-red detectors as part of the security system installed at the premises. The security system was monitored twenty-four hours a day by RAA Security. The system allowed the monitor to record whose code it was that activated and deactivated the system. That is, it recorded which officer or employee of Bocksoffice it was that did so. When activated, the passive infra-red detectors monitored, by heat and movement, the presence of any person or thing within Bocksoffice’s premises.
Bocksoffice’s premises were cleaned twice a week. That was on Wednesday and Saturday of each week. Cleaning included the emptying of rubbish and waste paper bins within the offices that were at Bocksoffice’s premises.
Between about 5.30pm and 6.00pm on Friday 22 September 2000 Mr O'Halloran and some of his work mates went from the Bocksoffice premises into the east end of Rundle Street. They there attended at an oyster bar, a café and another bar at which they had some dinner. At some stage of the evening the group was joined by a girl friend of the girlfriend of one of the group. That was Ms Bryant. She and Mr O'Halloran “sort of clicked, chatting-wise” (or at least that was Mr O'Halloran’s view).
Mr O'Halloran consumed some alcohol during the course of the evening, probably between four and six stubbies of beer. That consumption had no relevant effect on him in relation to the events that happened, with one exception to which I shall refer later.
During the course of the evening Mr O'Halloran and Ms Bryant became separated from the rest of the group. They tried to find the rest of the group without success. They finished up at or outside the Stag Hotel on the corner of Rundle Street and East Terrace in the city of Adelaide. Upon Mr O'Halloran’s invitation the two of them decided to go to the place at which Mr O'Halloran lived to watch Roy and HG on the show “The Dump”. They walked from the Stag Hotel towards the Bocksoffice building at Kent Town. Mr O'Halloran’s car was parked past the building.
At Mr O'Halloran’s instigation they decided to go into the building. They entered the Bocksoffice premises via the rear door, on the southern face of the building. Mr O'Halloran deactivated the security system and the two of them entered at forty-two minutes past midnight on Saturday 23 September 2000. They left the premises at 1.08am that same morning, at which time Mr O'Halloran reactivated the security system at the premises.
I shall deal later with the evidence as to what happened in the twenty-six minutes that Mr O'Halloran and Ms Bryant were inside the Bocksoffice premises.
After leaving the premises Mr O'Halloran and Ms Bryant went back to his residence at Portrush Road, Payneham and watched television. Later Mr O'Halloran drove Ms Bryant to her home. After dropping her off, Mr O’Halloran returned to his residence and went to bed.
At 1.23am on the same night an alarm registered in security zone 6 of the Bocksoffice premises. RAA Security registered that alarm as a burglary activated by a passive infra-red detector located in “PASSAGE NTH/EAST ADJACENT OFFICE 1”. Further alarms in other security zones at the Bocksoffice premises were recorded as being activated at 1.43am. They were in four different zones within the premises. At 1.44am three further alarms in different zones were activated by passive infra–red detectors within the Bocksoffice premises. RAA Security arranged for a police patrol to attend the premises. At 1.45am police were tasked to the premises. A police officer who arrived at 1.47am saw flames coming from the building. I have already referred to what else she saw. She advised police communications and requested them to contact the Metropolitan Fire Service.
The Metropolitan Fire Service fought and subsequently extinguished the fire at the premises. The fire caused significant damage. The area of most significant damage was in Mr O'Halloran’s office. The ceiling of that office and the floor of the office above it collapsed into Mr O'Halloran’s office. The window of Mr O'Halloran’s office and the aluminium shutter on the outside of the window were damaged or destroyed. Some of the contents that had been inside the building were strewn on the footpath underneath the verandah outside the window of Mr O'Halloran’s office.
Mr O'Halloran returned to the Bocksoffice premises after being contacted by telephone at his residence. This was when the fire was raging. He met police at the scene and he later accompanied them to an interview room at the Adelaide CIB. An interview with him was recorded. It commenced at 4.11am on the morning of the fire. Later that same day Mr O’Halloran signed a Statement of Witness.
What Mr O'Halloran and Ms Bryant did inside the Bocksoffice premises
Mr O'Halloran gave oral evidence at the trial of what happened when he and Ms Bryant were in the Bocksoffice premises early in the morning of Saturday 23 September 2000. Mr O'Halloran’s Record of Interview with police which commenced at about 4.11am on that morning was tendered (Exhibit RAA62) as was a document that purported to be a transcript of that interview (Exhibit RAA62A). A Statement of Witness signed by Mr O'Halloran on 23 September 2000 was also tendered (Exhibit RAA63). Tables of Admissions were tendered (Exhibits N4 and B53) and some Interrogatories dated 25 July 2005 and Mr O'Halloran’s sworn Answers dated 26 August 2005 were tendered (Exhibit N3). A Legal Liability Claim form dated 8 February 2001, by which Mr O'Halloran made a claim against RAA Insurance, was tendered (Exhibit OH55). On that form some Particulars of the Accident, in which a clear statement of how the accident occurred was sought, is completed. It was completed by a solicitor then acting for Mr O'Halloran. It is of no assistance in resolving any factual findings as to what occurred in the Bocksoffice premises that early morning.
When he was interviewed by police a few hours after the fire Mr O'Halloran told police that he and Ms Bryant were walking from Rundle Street. He said that they walked to his work and they stopped in at his work. He used his key and his security code and they entered the premises using the back door. He said that when they walked in “Anna went to the toilet, then I went to the toilet, because we were busting to go”. I am satisfied that the words “we were” were used rather than the words “I was” as is recorded on the transcript RAA62A. Mr O'Halloran told police that he then showed Ms Bryant around the agency. She said words that indicated she was impressed. He said that they were walking around and they had a cigarette. He showed her Brenton Bock’s office. He said that in the receptionist area (to Mr Bock’s office) there were cups that were to give to clients. He took a paper tag off one of them and took that cup with the two of them and used it as an ashtray. They were sitting in Mr Bock’s office and chatting. He told police that they then walked down to his office. He said he remembered at that stage putting his cigarette “out in the porcelain cup”. He said he was not sure what Ms Bryant did, although he said he was “pretty sure she put it in the cup too”. From there he showed her around and then they walked back to where they had entered the premises. He remembered checking the toilet door, making sure that it was locked, and then he locked the place up and they left.
Police asked Mr O’Halloran why they went there in the first place. He replied: “We were walking past, my car was the next block over, so we were walking past, so yeah, I just showed her the office and we used the toilets”. He said that he and Ms Bryant were sharing the cup during the tour of the premises. He was asked where it was that he “actually left the cup with the cigarette in it”. He replied: “I think it was in my room, in my office which is the front of the building”. When asked whereabouts in his office did he leave it he replied: “On the table. On the desk, I think”. He said that on his desk was a lot of “loose papers and stuff, because I do visuals and things”. He said there was a heap of books behind where he sat and underneath the books there were papers and other material that they used for catalogues and things. He said there was a can of aerosol there that was “sort of behind the desk”.
Mr O'Halloran told police that the two of them spent more time talking in Brenton Bock’s office than the time they were in his own office. They did not sit down in his office. They were chatting and he showed Ms Bryant awards on his wall. They were not in his office for “even five minutes”.
Mr O’Halloran told police that the building was secure when they entered it and he secured the building when they left. When they left he did not notice anything smelling, or burning inside the premises.
When questioned further about putting his cigarette into the cup he said that there was nothing in the cup, from what he remembered. He added: “Well, sort of butted on the side, so I, yeah, I’d say it’d be dry”.
In his signed Statement of Witness dated 23 September 2000 Mr O'Halloran said that when he and Ms Bryant entered the premises they “both went to the toilet, Anna first”. After that he showed Ms Bryant around the building. He said that they first went into Mr Bock’s office where they both had a cigarette. He picked up a porcelain cup and used it as an ashtray. They sat for a while in Mr Bock’s office before walking around. They smoked as they were walking around. Ms Bryant did not have a cup and they were using the same one as an ashtray.
Mr O'Halloran’s signed statement included this: I’m pretty sure I put my cigarette out in the cup which had nothing in it. I’m not sure what Anna did. I assume she did the same. I left the cup on my desk in my office. On the desk there were lots of loose papers and bits of papers lying around. There was nothing flammable in the office I can think of other than an aerosol can I use for magic marking. There are heaps of books in the back of the office area. Mr O'Halloran’s statement included a statement that on leaving the building he could not smell anything on (sic) notice anything untoward.
In the Statement of Claim filed by Intrend, Partington and Eudunda Farmers the following fact was pleaded: Prior to exiting the premises at or about 1.08am on 23 September 2000 (Mr O'Halloran) placed the remains of the cigarettes which he and (Ms) Bryant had smoked in a plastic waste paper bin. By a Defence dated 9 July 2003 and filed 10 July 2003 on behalf of Mr O'Halloran, it was pleaded that Mr O'Halloran admits cigarette remains were placed in a waste paper bin but says further that all cigarette remains were properly extinguished and properly disposed of by him prior to exiting the premises.
Mr O'Halloran swore Answers to Interrogatories on 26 August 2005. In answer to separate Interrogatories asking him to describe into what receptacle the butt(s) were placed, by what means he ascertained that the butt(s) were in fact extinguished, and by whom the butt(s) of the cigarettes were extinguished and discarded, Mr O'Halloran swore to the following:
I lit a cigarette when I was in Brenton Bock (“Bock”)’s office. I also lit a cigarette for Ms Bryant. I obtained a china mug from an area directly outside Bock’s office usually occupied by his secretary. I smoked my cigarette and then extinguished the butt of my cigarette in the china cup I was carrying. Shortly after I extinguished my cigarette I discarded it in a waste paper bin in my office. I established that my cigarette butt was extinguished by sight, and because no smoke was coming from the cup to suggest otherwise.
I lit a cigarette for Ms Bryant when I was in Bock’s office. Ms Bryant smoked her cigarette and extinguished the butt of her cigarette in the china mug I was carrying. Shortly after Ms Bryant extinguished her cigarette I discarded it in a waste paper bin in my office. I established that her cigarette butt was extinguished by sight, and because no smoke was coming from the cup to suggest otherwise.
On 8 November 2005 a Master of this Court made orders that included an agreement by the parties that admissions made in any of the actions that are relevant to the preliminary issues will be taken to be admissions in any of the other actions.
When Mr O’Halloran gave evidence at the trial he said that he and Ms Bryant had to walk past Bocksoffice’s premises to get to his car. Whilst they were walking past he almost spontaneously asked Ms Bryant if she was keen to have a look at where he worked. She replied that she was. They entered Bocksoffice’s premises from the rear door using his access card and security code.
Mr O’Halloran described what happened when they were in the premises. He said he began to show Ms Bryant around. He described his best recollection of the route they took. He described taking her down to the reception area, to see an office of someone who was indirectly known to Ms Bryant, and to the Board Room where he showed her “some pieces of work that were framed in there”. He said they “ducked” into his office. He showed her his working space. The two of them then walked back to where the toilet was. He said he was pretty sure that he opened the door leading to the toilets and Ms Bryant went to the toilet. He went to the toilet after her. He then showed her into Mr Bock’s office and the two of them sat on some seats there, chatting for a while. That was where and when they had a cigarette each. He said he grabbed a porcelain cup from the office of Mr Bock’s secretary. He held that cup whilst the two of them had a cigarette. They both used the one cup as an ashtray.
Mr O’Halloran said that the two of them butted their cigarettes out in the cup. He said his best recollection was that Ms Bryant butted hers out in the cup and he said he remembered feeling a bit of pressure on the cup. He then butted his out in the cup … on the side of the cup, I think. He said he used like normal force to do that. (Mr O’Halloran said that he was more of a social smoker, rather than a regular smoker. He said that when he used to go out and have a couple of drinks he would probably end up smoking. He would not smoke during the week.) Mr O’Halloran said that it appeared to him that both cigarettes were fully extinguished because there was no smoke coming out of the cup.
Mr O’Halloran said that once they had finished the cigarettes they discussed going to his house to watch Roy & HG. He was still holding the cup. He said that the two of them remained in Mr Bock’s office after they had finished the two cigarettes, for what he imagined to be a minute or so. He then walked down to his office. He said, on reflection, he did not think that Ms Bryant accompanied him. He said he did not want to leave a cup laying around with a cigarette butt in it; or butts in it, so I thought I’d take it down to my office. My best recollection is that I went to the - there was a bin that I had, which was on the eastern wall and my best recollection is that I think I would have thrown the butts in that bin. The bin that he was describing was “bin 1” which was depicted in the south- eastern corner of his office as seen on Exhibit OH60. Mr O’Halloran said that his best recollection was that it was in that bin that he would have thrown the butts, rather than in the bin in the position marked “bin 2” or the bin in the position marked “bin 1 (alternative position)” on Exhibit OH60. He said that he thought he left the mug on the desk, or I could have put it on the shelf.

Mr O’Halloran said that his bin in his office was more often in position marked “bin 1” rather than in the alternative position for “bin 1”. He said that the bin was just a plastic garbage bin, like a household one. It had two metal handles and would normally have a plastic garbage bin liner in it. He said he had no recollection of whether there was anything in “bin 1” or “bin 2” on the night that he was at the Bocksoffice premises. His recollection was that cleaners would normally clean his office on a Saturday. He did not know of any other time during the week it was cleaned. He said that when he came to work on a Monday the bins were clean.
Mr O’Halloran said that after going to his office he walked back up the hall towards Mr Bock’s office. He checked the toilet area. He and Ms Bryant left the premises, went to his car and he drove to his residence.
In his evidence‑in‑chief at the trial Mr O’Halloran was referred to the interview and the statement he had given to police. He said that at that time he was in shock. He had been to the scene of the fire which he had described as like walking into a war zone. He there had found Mr Bock who had taken him over to the police. He said he was distraught when speaking to police in the interview. He said that he had thought a lot about the matter since being interviewed by police and had reflected on the events of the night and the sequence of events. He said that the sequence of events which he described in his evidence was his best effort to put everything in sequence. He acknowledged that there were differences in what he told police compared to when he gave his evidence at trial.
During cross‑examination Mr O’Halloran acknowledged that he had said nothing to the police about having thrown the remains of the cigarettes that he and Ms Bryant had smoked into a bin. He acknowledged that there were other differences between what he had told police and his evidence at trial. He ultimately said that some of what he said in his evidence about the disposal of the remains of cigarettes, and what he had sworn to in his Answers to Interrogatories, was a reconstruction by him of what he must have done at the Bocksoffice premises before he and Ms Bryant left that early morning. He said that he had reconstructed what he had done with the remains of the cigarettes, partly as a result of what had actually happened shortly after he and Ms Bryant had left the premises. He said, in effect, that he must have flicked the remains of the cigarettes into his bin because a fire occurred shortly thereafter. He had agreed with the cross‑examiner that he did not want the cup lying around with remains of cigarettes in it because he did not want someone to happen into the premises over the weekend and see it. He said that he was aware of a “no smoking” policy at Bocksoffice. It was put to him that he knew that his bin would be emptied on Saturday and the butts would be gone if he put them in the bin. Mr O’Halloran answered that he did not recall thinking that. He said: I think when I flicked them in the bin, it was more of a spontaneous thing when I took it into the room. He said that when he took the cup into his room, having thought that when I put the cigarette butts out and they were out and there was no smoke, I think it was a spontaneous thing that I did when I flicked them in the bin.
Mr O’Halloran was cross‑examined about his being questioned by police. It was said to him that he had not told the police that he had put the cigarette remains in the bin in his office. He answered: At some point that evening I think they asked me. I don’t know when it was. They said ‘Is there a chance you may have put it in the bin?’ and that’s when I said ‘Yes’. He was asked if he was anxious about what would happen when he told the police that. He answered: Yes, if I had done that. I wasn’t completely - it is hard to recall, but at that time I wasn’t sure if I had flicked them in the bin and then some logic was saying to me ‘then why are you here?’, sort of thing ... Then I assumed or I thought to myself ‘Then I must have’. He was asked whether his best recollection then was that he did flick the butts into the bin. He answered: I think it’s the whole scenario, so I think I must have flicked them in the bin. Later, Mr O’Halloran said that was a reconstruction by him of what must have happened.
Ms Bryant did not give evidence at the trial nor was there any evidence about what she had or could say about the events of that night. No-one asked me to draw any inferences from her not giving evidence.
I am satisfied and find that as Mr O’Halloran and Ms Bryant were walking past Bocksoffice’s premises, heading towards Mr O’Halloran’s car to go and watch Roy and HG in “The Dump”, Mr O’Halloran spontaneously asked Ms Bryant if she wished to see where he worked. I find that his motive for doing so was primarily to impress Ms Bryant because he was proud of some of the achievements of Bocksoffice and of himself, which achievements would be evidenced by some things that were displayed within the premises. I find that a secondary motive, but a pressing one nonetheless, was that he at least wished to go to the toilet. He had had a number of beers in Rundle Street, he and Ms Bryant had walked some distance from the Stag Hotel and there was a drive to his residence at Payneham still ahead of them. I cannot say whether the subject-matter of that secondary motive was discussed between Mr O’Halloran and Ms Bryant.
I find that both Mr O’Halloran and Ms Bryant went to the toilet immediately upon entering the premises. Access to the toilets was gained through a locked door which was accessible from within Bocksoffice’s premises. I find that after both had been to the toilet Mr O'Halloran showed Ms Bryant around the Bocksoffice premises. Part of that tour included briefly showing her his own office. I find that the two of them then sat down in Mr Bock’s office. That was part of Mr O'Halloran’s plan to impress Ms Bryant. In that office they each smoked a cigarette. They used a china mug Mr O'Halloran obtained from the office of Mr Bock’s secretary as an ashtray. It was a promotional mug and was one of a number in that office. Mr O'Halloran and Ms Bryant talked for a while in Mr Bock’s office as they smoked their cigarettes and ashed them in the mug being held by Mr O'Halloran. When Mr O’Halloran had finished what he wished to smoke of his cigarette, he stubbed what was left of it on the side of the mug. By that motion he intended to extinguish the butt. I find that Mr O'Halloran then felt some pressure on the mug he was holding when Ms Bryant put what was left of her cigarette into the mug. I find that Mr O'Halloran thought that Ms Bryant was butting out what was left of the cigarette she had smoked.
I find that Mr O'Halloran was anxious not to leave the mug with remains of cigarettes in it in the Managing Director’s office. He knew there was a policy that prohibited smoking within Bocksoffice’s premises. Whilst he was aware of a couple of occasions when that policy may have not been observed, he knew that that had happened some years ago and that, far more often than not, the non‑smoking policy was observed within the building and was expected to be observed. Leaving cigarette remains in a mug in the Managing Director’s office was not something he thought that he, as an employee of Bocksoffice, should do anyway. In addition, he probably did not want it known that he had entertained a stranger in the premises, let alone in the Managing Director’s office, in the middle of the night.
I find that Mr O'Halloran walked to his office with the mug containing the remains of the cigarettes. I find that he knew that the bins in his office would be emptied by the cleaners later that same morning. I find that he tipped the contents of the mug (being the remains of two cigarettes) into a bin in his office. I am unable to find whether he probably tipped the cigarette remains into his bin in position “bin 1” or in position “bin 1 (alternative position)”, but I am satisfied and find that it was into bin 1 in one of those positions that he tipped the cigarette remains. I find that the bin into which Mr O'Halloran emptied the remains of cigarettes from the mug contained papers in a variety of different states, as well as other refuse, that had been put into the bin by Mr O'Halloran over the two days prior to that night. I am not satisfied that Mr O'Halloran remembers that he saw no smoke coming out of the mug before he tipped the remains into the bin. I consider that that part of his evidence is a reconstruction on his part, and an unreliable reconstruction. I am satisfied and find that he did not look to see whether or not smoke was coming out of the mug before he tipped its contents into the bin.
Mr O'Halloran’s Record of Interview with police and his Statement of Witness contain no reference to him tipping the cigarette remains into a rubbish bin in his office. I find that police did not ask him if there was a chance he may have done so, to which he replied yes. I am satisfied and find that Mr O'Halloran was frightened when he spoke to police. He was frightened about what had happened to the building, what might happen to him from the point of view of police involvement, and about his employment with Bocksoffice. I am not satisfied that he was in shock or that he was distraught. The video Record of Interview does not support such a finding. I am satisfied that when Mr O'Halloran spoke to police he thought that he had caused the fire. I am satisfied that he gave the police a reasonably full account about the fact that he and Ms Bryant had smoked cigarettes in the premises and about having left cigarette remains behind in his office. He did that because, as I am satisfied, he was and is basically an honest person. But because he was frightened of what might happen to him, he did not tell police that he had put what he thought (but wasn’t sure) were extinguished remains of cigarettes into a rubbish bin.
I am satisfied that as time went on and proceedings were instituted against him, Mr O’Halloran swore Answers to Interrogatories and instructed his solicitor that he had put cigarette remains into a waste paper bin in his office. I am satisfied those were honest answers and that his evidence at the trial that he did so was honest, accurate and reliable. Mr O’Halloran answered Interrogatories, gave instructions to his solicitor and gave evidence that he considered that the cigarettes had been properly extinguished before he put them in the bin in his office. What he said to police on this topic was at least equivocal and was unconvincing as to that matter. What he said to police on this topic was not influenced, in the same way as the topic of tipping the remains into a bin, by any fear of any consequences.
I accept that Mr O'Halloran believed then, and believes now, that the cigarettes were extinguished before he put their remains in his bin. I find that at least one of them was not extinguished when Mr O'Halloran put the cigarette remains in the bin in his office.
In the findings I have made on this aspect of the case I have not placed any reliance on the agreement by the parties as to admissions referred to in paragraph 3.10 of the Trial Orders.
The cause of the fire
The plaintiffs contended that the most likely cause of the fire at the Bocksoffice premises was the action of Mr O’Halloran throwing unextinguished cigarette remains into a waste paper bin in his office just before he left the building at eight minutes past one o’clock in the morning of Saturday 23 September 2000.
The other parties contended that if the evidence, in particular the evidence that might support the conclusion contended by the plaintiffs referred to above, and all the inferences that might properly be drawn from that evidence lead me to a position where I can do no more than speculate as to what happened on the night of the fire and as to the cause of the fire, then the plaintiffs have not proved a case in negligence against Mr O’Halloran.
It was submitted that it was open, on the evidence, for me to find that the cause of the fire, assuming acceptance of the opinion expressed by Mr. Kutek, is unknown because of the absence of proof of any connection between the point of ignition as opined by Mr. Kutek and the fire which occurred, or that the fire was caused by a point or source of ignition unknown to me due to the failure of the plaintiffs to establish any connection between the alleged point of ignition (as expressed by Mr Kutek) and the actions of Mr. O’Halloran or any other cause. It was submitted that there has been no proper exclusion of the source of the fire, or a point of ignition being involved with an electrical fault.
It was submitted that a case in negligence was not made out because, on the evidence of the experts, I cannot be satisfied about the point of ignition of the fire, the source of the point of ignition, the sequelae from the point of ignition and the sequelae of the fire once ignited. That was because of a lack of information arising out of the investigation at the time of and after the fire.
It was also submitted that “when the law requires the proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found”: Briginshaw v Briginshaw (1938) 60 CLR 336. It was submitted that “if the tribunal finds itself unable to form any opinion at all as to whether an allegation of fact is true, a decision which depends upon proof of that allegation obviously cannot properly be given … where the question at issue is whether A or B or both have been guilty of negligence the law neither requires nor permits the tribunal of fact to hold that both A and B were negligent unless the evidence engenders a belief ‘at least in some low degree’, a ‘feeling of probability’, that that is the truth of the matter”:Nesterczuk v Mortimore (1965) 115 CLR 140, at 149-150. It was submitted that the plaintiffs have not proved the origin of the fire to the requisite degree of satisfaction. It was submitted that the plaintiffs have not proved that the fire was caused by a cigarette. More specifically, it was submitted, the plaintiffs have not proved that the fire was caused by a cigarette discarded by Mr O’Halloran. The evidence adduced by the plaintiffs as to the cause of the fire does not go beyond speculation. Even taken as a totality the evidence adduced by the plaintiffs is not capable of producing an affirmative belief in the truth of the hypothesis on which the plaintiffs rely. In seeking to identify the cause of the fire, I cannot simply engage “in a mere mechanical comparison” of the probabilities independently or any belief in the reality or truth of the hypothesis advanced by the plaintiffs.
Before referring to some evidence and opinions of the experts, Mr Kutek and Mr Baghurst, I mention some events that occurred immediately after the fire was extinguished. I find that these events occurred.
During the cleaning up process by the Metropolitan Fire Service on 23 September 2000 a quantity of debris was moved from around and within Mr O'Halloran’s office. That included the remains of the ceiling of Mr O'Halloran’s office and the floor of the office above his office. It likely included the remains of some furniture that was within Mr O'Halloran’s office, including some remains of the two desks. It likely included the remains of at least one computer, if not two, that had been in the office. There was no evidence as to what ultimately happened with the debris that was removed from that office. It is impossible now to identify what was removed and the extent of the debris that was removed.
Between 23 and 28 September 2000 it is likely that various people attended at the fire scene. It cannot now be identified precisely who those persons were. It cannot now be said what those persons who did attend at the scene did there. The building was made secure by the erection of wooden hoardings over at least Mr O'Halloran’s window and the front door of the Bocksoffice premises.
By 27 September 2000 Mr Henry Kuteck had been instructed in relation to the fire. He opened a file. He attended at the Wallspan part of premises on that day. There were probably others at the scene at the same time as he was there.
On either 29 September 2000 or 30 September 2000 Mr Kuteck again attended at the scene of the fire and this time carried out a lengthy inspection and investigation of the Bocksoffice premises, such inspection and investigation lasting most of one day. Part of this inspection and investigation involved him in moving and sifting through the remains of the debris that had accumulated in and was still in Mr O'Halloran’s office. Mr Kuteck took a number of photographs.
During his inspection and investigation Mr Kuteck exposed an area which he described as comprising six damaged tiles. He discovered these tiles whilst he was moving and sifting through the remaining debris in Mr O'Halloran’s office. He marked the position of those tiles on Figure 2 to his report dated 26 October 2000 (Exhibit N25). The tiles were depicted to be underneath where the western desk in Mr O'Halloran’s office is depicted to have been. An assessor from CGU Insurance brought a rubbish bin into that area. Mr Kuteck placed it over the area where he said he found the six damaged tiles. He photographed the bin (photographs 48 and 49 in N25). The area of the six damaged tiles cannot be seen in those photographs. It is likely that some person other than Mr Kuteck was in the room after Mr Kuteck had initially found these six damaged tiles and that other person(s) had moved some debris within the room such that the tiles were covered when the photographs in which a bin appears were taken.
On 28 September 2000 and 3 October 2000 Mr Andrew Baghurst, an electrical engineer, attended at the Bocksoffice premises to inspect the scene having been engaged by solicitors “to express an opinion on the possibility that the fire might have been of electrical origin”. Mr Baghurst reported by letter dated 17 October 2000 (Exhibit N38).
Both Mr Kutek and Mr Baghurst and their evidence were the subject of considerable criticism at the trial. I must say that I considered, with respect to each of them, that the criticisms made in the written submissions on behalf of RAA Insurance regarding these two expert witnesses were largely well-founded and generally justified. Their recording of important instructions and information given to them, the processes each adopted in their examinations of the scene, the photographs they took or did not take, their lack of preservation of “exhibits” which could fairly be described as vitally important to their conclusions were particularly unimpressive.
I considered that Mr Kuteck had the good grace to appear embarrassed about some things he did and did not do, his inability to give detailed, reliable evidence about his instructions and what he did at the scene of the fire when he did what he did, his lame explanation for why he did not photograph all aspects of his investigation and what he said happened to items he considered to be important enough to take away from the scene. I have considerable doubt about what items he did take away from the scene and what happened to them.
Mr Baghurst’s response to what he considered to be criticism of his investigation processes during cross‑examination was to take some umbrage that his investigation or his opinion might be questioned. He also had a disconcerting tendency of giving what he asserted to be a confident account of what he had done, even explaining why he was so confident, only later to resile from that account to give an equally confident (but different) account. In one instance he changed such an account yet again. This applied to his opinion evidence as well as to the manner in which he conducted his investigation for the purpose of expressing his opinions. I was left wondering what evidence of Mr Baghurst I could rely on with confidence.

Neither expert had, apparently, considered the possibility that the scene in Mr O'Halloran’s office had been altered significantly before they commenced their investigations. Both appeared to maintain their position as to that despite evidence that suggested to the contrary.
Neither expert made notes of what he was instructed to do and what he was instructed as to the circumstances of the fire. I consider that important because neither could give reliable evidence about those matters and because I consider it probable that both expert witnesses had considerable discussions with others about the circumstances of the fire and what might have caused it.
Mr Kuteck did not expose what he said were six damaged tiles and photograph that entire area which he said was the origin of the fire. Whilst he photographed what he said was a portion of a desk and he took that item away from the scene, he could not produce it at trial, nor could he produce a large plastic bin that he took from the scene. Mr Baghurst did not collect or photograph any of the remains of the wiring that he drew on Exhibit RAA47B.
Notwithstanding what I have just said, I have concluded that the conclusions and opinions of both expert witnesses were their own conclusions and were genuinely held by them when they wrote their respective reports which were both prepared in October 2000. I do not consider it necessary in these reasons to refer to all of their conclusions and opinions, or to their evidence. Their conclusions and opinions are of limited value to me in considering the question as to the cause of fire at 66 Rundle Street, Kent Town. Whilst their value, particularly as to matters of detail, are limited, I have relied on some of their evidence in the way to which I now refer.
The evidence of both of the experts in combination, when taken together with other evidence at the trial, leads me to have no doubt that the fire at 66 Rundle Street, Kent Town originated somewhere in Mr O'Halloran’s office. I so find. The other evidence supporting such a finding includes the evidence of the first police officer at the scene, the evidence of the fire officers who gave evidence, and the photographic evidence showing Mr O'Halloran’s office as being the area of greatest damage. I consider that this evidence, coupled with the evidence of Mr Kuteck and Mr Baghurst on this topic, makes such a finding inevitable. Added to that is the fact that the passive infra‑red detector that first activated at 1.23am that Saturday morning was either in (which is more probable) or immediately adjacent to Mr O'Halloran’s office. I find that that detector was activated by the fire that originated in that office. I find that the other detectors were activated when the wiring to them was destroyed by the fire as it spread from Mr O’Halloran’s office throughout the Bocksoffice premises.
The first mentioned of Mr Kuteck’s conclusions in his report Exhibit N25 was that the fire originated in what was Mr O’Halloran’s office. Mr Kuteck referred to other conclusions reached by him. One conclusion was that fire damage to a desk and the floor in (Mr O'Halloran’s) office suggest that the fire originated in a large plastic waste paper bin beneath the desk closest to the door to that office. I do not consider that I can rely on that conclusion to make any finding consistent with it. I consider that the basis for Mr Kuteck so concluding was so undermined by cross‑examination as to cause me to conclude that I cannot rely on it.
Another conclusion reached by Mr Kuteck to which I here refer is his conclusion that the evidence is consistent with a fire in the waste paper bin ignited by a discarded cigarette. Mr Kuteck was cross‑examined at length on the topic of cigarettes and fire. Whilst he had said that he was familiar with what he said were standard texts on fire and their causes, he initially said that he was not familiar with any studies that had been conducted regarding the topic of cigarette butts causing fires. His attention was drawn to one of the texts to which he had referred, which referred specifically to “Smoking as a Fire Origin”. That text (Kirk’s Fire Investigation, Fifth Edition, John D DeHaan, PhD - Exhibit RAA37) refers to the fact that cigarettes as a source of ignition have been studied. The text refers to the fact that One study showed that cigarettes discarded into crumbled paper trash transitioned to flames in only about 1 percent of tests. A footnote refers to a study by Sanderson “Cigarette Fires in Paper Trash”. That became Exhibit RAA36. Kirk’s text then refers to other studies and it then states: This has to be taken as an indication that cigarettes can cause ignition of such fuels….
During this cross‑examination Mr Kuteck said his understanding and learning as to the literature on the topic was to the effect that it was a difficult task to ignite, from a cigarette, a waste paper basket full of trash, and that that was an unlikely event. He said, however, that he had read no literature regarding fire occurring from a cigarette dropped into a waste paper bin that was to the effect that the likelihood was as low as the Sanderson article suggested. Mr Kuteck said that his understanding of the literature was that the likelihood was low, but not as low as suggested in the Sanderson article.
Mr Kuteck did not refer in his report dated 26 October 2000 to what he said in his evidence was his understanding and learning from the literature on this topic. That does not necessarily cause me to question his conclusion that the evidence was consistent with a fire in the waste paper bin ignited by a discarded cigarette, although I would have expected an expert, whose conclusions included such a conclusion, to have discussed in his report what he did know of the literature of the type to which I have just referred.
None of the articles and studies to which reference was made at trial suggest that discarded unextinguished, or partially extinguished, cigarettes do not cause fires where they make contact with a fuel of some sort. Indeed, the thrust of the texts and articles seems to be directed to the improbability or unlikelihood that will occur in every case, or even the majority of cases, contrary to what might have been considered a popular belief. Kirk’s text introduces the “Smoking as a Fire Origin” section by noting that: There is no question that many fires are started by smokers, both indoors and outdoors. Nor is there any question that the carelessness of the smoker is the primary reason for this high incidence. The text then goes on to refer to the learning that cigarettes as a source of ignition have been blamed in many more instances than they should.
If Mr Kuteck’s conclusion is regarded as saying no more than that the fire that originated in Mr O'Halloran’s room could have been caused by an unextinguished discarded cigarette in a rubbish bin containing fuel that could be ignited, then that is a conclusion with which I would agree as nothing in the literature would gainsay such a conclusion.
As to Mr Baghurst and the evidence he gave in his report and at trial, I have indicated that I consider much of the criticism that was made of his report and his evidence was justified. I am satisfied that he was, however, an expert electrical engineer. I accept his qualifications in that regard. What I am satisfied of, from his evidence, is that a fire in Mr O'Halloran’s office is unlikely to have spontaneously occurred and that cables, on their own, do not cause electrical fires. I am satisfied from Mr Baghurst’s evidence, coupled with Mr O'Halloran’s evidence as to what was in his office before the fire, that there was nothing in his office which Mr Baghurst described as an appliance or equipment that draws a heavy current such that might be identified as a possible cause of the fire. I am satisfied that Mr O'Halloran described nothing that was in his office that Mr Baghurst would opine to be a possible or usual cause. I found Mr Baghurst’s general evidence about the sort of electrical equipment, and the environment in which such electrical equipment was used, as possibly causing an electrical fire convincing, whatever I thought of his more detailed opinions relating to this particular fire, his investigations of it and what he told me about the scene of it. It is in that limited regard that I rely on Mr Baghurst’s expertise and his evidence.
I am satisfied and find that the possibility that any electrical equipment or item in the Bocksoffice premises, and in Mr O'Halloran’s office in particular, had anything to do with the fire on 23 September 2000 is so small as to be discounted.
Both counsel for the plaintiffs referred me to a number of authorities regarding the proper consideration of circumstantial evidence and the inferences that may properly be drawn therefrom. Those authorities assisted me in this matter.
I have considered the facts which I am satisfied are established and which I have found proved. I have considered these with the evidence of Mr Kuteck and Mr Baghurst that I consider important and to which I have just referred. I have also had regard to the fact that a fire broke out in Mr O'Halloran’s office in the Bocksoffice premises within about 15 minutes of Mr O'Halloran and Ms Bryant leaving the premises and after Mr O’Halloran had discarded at least one unextinguished cigarette in a bin containing ignitable fuel. I have concluded that the cause of the fire was the discarding of unextinguished cigarette remains by Mr O'Halloran in a bin containing waste paper in his office.
As Murphy J said in Tubemakers of Australia Ltd v Fernandez (1976) 50 ALJR 720 at 725:
If it is common knowledge that a relationship of cause and effect may exist between certain facts or events, a tribunal of fact does not need expert evidence to enable it to find this relationship in a particular case ... An observed sequence of events may therefore lead without expert evidence to a rebuttable presumption of fact, even on medical or other scientific subjects.
Although the expressions ‘common experience’ or ‘common knowledge’ are often used, they are intended to embrace or to be used as part of what Rich ACJ referred to in Forst’s Case (Adelaide Stevedoring Co. Ltd. v Forst (1940) 64 CLR 538 at 563) as a course of reasoning which combines common sense with application of logic to the facts.
I consider that the application of common sense and logic leads me to conclude, in the absence of other explanation, that the discarding of unextinguished cigarette remains in a waste paper bin containing fuel caused the fire that started about 15 minutes later. I consider that such a conclusion can and should be inferred, in the circumstances as I have found them, notwithstanding evidence that was put before me at trial to the effect that it is not as easy as one might think for a discarded cigarette to ignite waste paper. Whilst it may not be as easy as one may think, it occurs, and as the author of Kirk’s Fire Investigations says, at page 140: cigarettes can cause ignition of such fuels as tissue paper, cardboard and paper towels, and it only takes one ignition to start a fire!
Foreseeability
I am of the view that it was reasonably foreseeable that the act of throwing, even apparently extinguished cigarette remains, into a garbage bin containing a bin liner and office waste, including papers, might cause a fire in the bin that might lead to a fire in the office and in the premises. It was reasonably foreseeable that might happen when throwing cigarette remains in such a bin without checking that they were completely extinguished. Foreseeability does not require the foresight of the particular event causing harm, or foresight of the extent of the harm caused by a particular event. I consider that the damage caused here falls into a class of damage which ought reasonably have been foreseen by Mr O'Halloran as a consequence of what I have found he did, without being satisfied that the cigarette remains were completely extinguished. I acknowledge the evidence that indicates that it is not as easy as it might be thought to create a fire in a waste paper bin with an unextinguished cigarette. Such is not common knowledge, although no-one suggests that such conduct cannot cause a fire. What is more commonly believed could be said to be more relevant when determining foreseeability.
In my view, the plaintiffs have established that the fire was a foreseeable risk of what Mr O’Halloran did early that morning. I conclude that in doing what he did Mr O'Halloran breached the duty of care he owed to plaintiffs to whom he owed a duty of care, causing them loss and damage.
Duty of care
Finally, as to Question 1, I have concluded that Mr O'Halloran owed a duty of care to the plaintiffs with the exception of Kitchen Industries.
At the time of the fire Kitchen Industries leased a part of the building and was the franchisor of a business carried on from the premises pursuant to a franchise agreement with DIY Products Pty Ltd. It had an expectation that it would receive franchise fees upon the continuing operation of its franchisee. They were calculated according to the turnover of the franchisee. Accordingly, what Kitchen Industries alleged it lost by the fire was its expected franchise fees and loss of gross profit due to a reduction in turnover. Alternatively, Kitchen Industries alleged it lost the value of its leasehold interest in the premises.
Kitchen Industries claimed losses were for pure economic losses. I do not consider that it has been proved that the relationship between Kitchen Industries and Mr O'Halloran fall into that special category of case such that a relationship of proximity and a consequent duty of care exists in respect of pure economic loss. Nothing in their relationship could be characterised as an assumption of responsibility on the one part and known reliance on the other (see Woolcock Street Investments Pty Ltd v CDG Pty Ltd & Anor (2003) 216 CLR 515).
Accordingly, I am not satisfied that the circumstances of Kitchen Industries’ interest in the premises at 66 Rundle Street, Kent Town and its claimed losses were such that it was owed a duty of care by Mr O’Halloran.
I would answer Question 1 of the preliminary issues: Yes, except that Mr O'Halloran owed no duty of care to Kitchen Industries.
Question 2 - Is Mr O'Halloran entitled to be indemnified under the RAA Policy?
I make some further findings that are relevant to this and to the remaining two questions that constitute the preliminary issues for determination.
I have earlier referred to the purposes (both primary and secondary) for which Mr O'Halloran entered the Bocksoffice premises with Ms Bryant. I have referred to what Mr O’Halloran said when interviewed by police. He said that the two of them walked from Rundle Street. He said: We walked to work, we stopped in at work. I’d used my key, used my security code, we walked in. He said that when they walked in Anna went to the toilet, then I went to the toilet, because we were busting to go. He then described to the police their sitting and chatting together, the tour of the office, the smoking of cigarettes and his locking up of the premises immediately before they left.
In an Answer to Interrogatories sworn by Mr O’Halloran on 26 August 2005 (Exhibit N3) he said: I entered the premises in the company of Ms Anna Bryant to show her the offices.
Mr O'Halloran’s contract of employment provided that business hours were from 8.30am to 5.30pm, Monday to Friday, with a normal lunch break. The contract provided that the employer did not pay overtime and that whilst overtime may be worked from time to time outside business hours, it was considered that Mr O'Halloran’s salary covered such overtime.
Mr O'Halloran gave evidence of times that he did work outside these business hours. That was when particular work demands required it, when, for example, particular work had to be finished in time for advertising to be ready for publication. He said that the hours sometimes worked outside business hours included time before and after those business hours. They sometimes included weekend work and he understood that to be the reason that he had a security keycard for the premises. He did not describe after hours work at his office in the middle of any night. He said that he had been to the Bocksoffice premises at around one o’clock in the morning on one previous occasion. He said that on that occasion he had had a few drinks at the Kent Town Hotel, his car was close and then he just dropped in there. That was the extent of his evidence about that occasion.
Mr O'Halloran described his duties at Bocksoffice. He said that they were principally to create and/or write advertisements and to design logos. He said he was not involved in selling any products at Bocksoffice. He was not involved with interviewing or with hiring or firing of staff.
There were attempts made during Mr O'Halloran’s cross‑examination from which I might infer that the taking of Ms Bryant into the Bocksoffice premises was, or could be said to be, to the benefit of Bocksoffice in that he was in some way promoting the business of Bocksoffice by showing her awards that had been won by Bocksoffice.
There was other cross‑examination of Mr O'Halloran from which I might infer that because he was permitted to enter and to be upon the Bocksoffice premises at any time that suited him, and that he could use his own discretion to enter and be on the Bocksoffice premises (in either case without restriction by his employer), that somehow authorised him to be there in the middle of that night, and that that was part of his employment with Bocksoffice.
None of this evidence persuades me that I should find that the reasons Mr O'Halloran entered the building that night was other than to impress Ms Bryant and to use the toilets. I find that it was not part of his employment with Bocksoffice for Mr O'Halloran to enter his employer’s premises in the middle of the night to impress a woman companion and for them to use the toilets, and it was not contemplated either by he or his employer Bocksoffice that such conduct was part of his employment. Nor was it part of his employment with Bocksoffice to smoke cigarettes with such a person in the Managing Director’s office after entering the premises for either or both of the purposes to which I have referred. Smoking of cigarettes in the premises was prohibited by Bocksoffice’s policy, that policy was expressly referred to in Mr O’Halloran’s contract of employment, and Mr O’Halloran was aware of that policy. Mr O'Halloran was only able to enter Bocksoffice’s premises because he had a security key which allowed him to do so. His employer provided him with that means of access so that he could use that key for out of business hours access to perform the duties that formed part of his employment contract, or to further those duties in some way such as, for example, to collect current work for him to complete at home. The fact that Mr O'Halloran was able to enter Bocksoffice’s premises, and did so with Ms Bryant, says nothing about why Mr O'Halloran was there, and nothing about his or their authority to be there.
Whilst it was the case that what Mr O'Halloran thought about his presence at his employer’s premises that early morning is not determinative of any issue, it is significant that in the Defence filed on his behalf in Action No. 115 of 2004, Mr O'Halloran admitted that he entered the premises in the company of Ms Bryant and said further that he was permitted to enter the premises by his employer and did so on his own business. I do not rely on that admission by Mr O'Halloran as being an admission binding on all parties as may appear to be contemplated in the Trial Orders made by consent of all parties. It does, however, reflect what I otherwise find to be Mr O'Halloran’s purpose for which he entered the premises with Ms Bryant that night.

As to the general principles applicable to the construction of a policy of insurance I adopt, with gratitude, a helpful statement of the principles or approaches set out by Einstein J in Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2006] NSWSC 223, 12 April 2006, at paras [796] to [805]:
The HIH Policy is to be construed in accordance with the principles which apply to the interpretation of contractual documents: Australian Casualty Co Ltd v Federico (1986) 160 CLR 513 at 520, per Gibbs CJ.
The primary duty of the Court is to endeavour to discover the intention of the parties from the words of the policy; Australian Broadcasting Commission v Australian Performing Right Association (1973) 129 CLR 99 at 109, per Gibbs J.
A policy of insurance is a commercial contract and ought to be given a business like interpretation, requiring attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure: McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579 at [22], per Gleeson CJ.
The task in construing a policy of insurance is to ascertain the objective intention of the parties from a consideration of its wording. Regard must be had to the fact that it is a policy of insurance. It must be read in its commercial setting in such a way as to fulfil and not restrain its commercial purposes: see MGICA Ltd v United City Merchants (Australia) Limited (1986) 4 ANZ Ins Cas 60-729 at 74,349 and 74,350; Darlington Futures Limited v Delco Australia Pty Limited (1986) 161 CLR 500 at 510.
A policy of insurance is to be construed in light of the matrix of the agreement that is, the factual background known to the parties at or before the date of the contract, including the aim and commercial purpose of the transaction: Prenn v Simmonds [1971] 1 WLR 1381; Legal & General Insurance Australia Ltd v Eather [1986] 6 NSWLR 390 at 394.
Each clause in dispute is to be interpreted according to its natural and ordinary meaning, read in the light of the policy as a whole, thereby giving direct weight to the context in which the clause appears, including the nature and object of the policy: see Darlington Futures Limited v Delco Australia Limited (1986) 161 CLR 500 at 510.
As Kirby P observed in Hide & Skin Trading Pty Limited v Oceanic Meat Traders Limited [1990] 20 NSWLR 310 at 313-314:
‘Whoever may be the parties to the agreement, it is the fundamental rule, that a Court should give the words of a written agreement the natural meaning that they bear. Subject to that rule, in giving meaning to the words of an agreement between commercial parties, Courts will endeavour to avoid a construction which makes commercial nonsense or is shown to be commercially inconvenient. This is because Courts will infer that commercial parties would not themselves normally agree in such a way.’
It is appropriate to resolve any ambiguity in the policy by reading it as a whole: see Zurich Australian Insurance Limited v Fruehauf Finance Corporation Pty Limited (1993) 7 ANZ Ins Cas 61-177 at 78,011.
In resolving ambiguities, a reasonable construction is to be preferred as representing the presumed intention of the parties: see Alex Kay Pty Limited v General Motors Acceptance Corporation and Hartford Fire Insurance Company [1963] VR 458 at 463.
As a rule of last resort and a principle for construction to remove ambiguities only when other more rational approaches fail, the insurance policy is subject to the contra proferentem rule of construction.
I add two other citations. In H & E Van Der Sterren v Cibernetics (Holdings) Pty Ltd (1970) 44 ALJR 157, at 158 Walsh J, with whom Barwick CJ and Kitto J agreed, said:
The terms of exception clauses must sometimes be read down if they cannot be applied literally without creating an absurdity or defeating the main object of the contract … But such a modification by implication of the language which the parties have used in an exception clause is not to be made unless it is necessary to give effect to what the parties must be understood to have intended.
In Johnson v American Home Assurance Company (1998) 192 CLR 266, at 272 Kirby J said:
An insurance policy is a species of commercial contract. It must be interpreted so as to give the words used their ordinary meaning. The primary duty of a court is to discern from the language, structure and apparent purpose of the document what it means. Subject to any special statutory rules governing the approach to interpretation and any interpretative rules lawfully contained in the policy itself, a court should give the words used their ordinary operation. But it should be an operation which takes into account the commercial and social purposes of an insurance policy. Wherever possible, an absurd or manifestly unjust result will be avoided upon the hypothesis that such would not have been intended by the parties. Because the primary search is for the ordinary and fair meaning to be attributed to the words used, no court is authorised, under the guise of construction, to make a new contract for the parties which is at odds with the terms of the contract to which they have agreed. In this respect, the primary rule for the construction of insurance contracts is no different from that which governs other written instruments. Maxims and rules of construction, developed by courts as tools to aid in the task of elucidation, are subordinate to the primary duty of construction. This is always to search for meaning of the words used. If, in those words, there is only one meaning, a court may not reject it simply because it regards the result as unfair or otherwise undesirable. (footnotes omitted.)
By the RAA Policy RAA Insurance agreed to indemnify Mr O'Halloran for loss of or damage to the Property Insured caused by any of the Defined Events, and for liability in respect of accidents which occur during the Period of Insurance. The property insured was the building situated where Mr O'Halloran resided and the contents of that building that belonged to Mr O’Halloran. RAA Insurance agreed to indemnify Mr O’Halloran for any legal liability he has, up to, but not exceeding $10M in respect of any one accident arising out of one event or against such sums as (Mr O'Halloran) shall become legally liable to pay in respect of claims against him arising from … DAMAGE TO PROPERTY (which expression includes loss of property) caused by any accident occurring ANYWHERE IN AUSTRALIA. If Mr O'Halloran is legally liable to pay in respect of claims made against him for damage and loss of property at 66 Rundle Street, Kent Town caused by the fire there, then RAA Insurance is liable to indemnify Mr O'Halloran under the RAA Policy.
However, the cover RAA Insurance agreed to give Mr O'Halloran was subject to certain exclusions and limitations which were stated in the policy to be highlighted under Defined Events. In this case, RAA Insurance relies upon three such exclusions and limitations. If none of them apply in the circumstances of this case RAA Insurance is liable to indemnify Mr O'Halloran for any claim that he is legally liable to pay.
First, RAA Insurance relies on Exclusion (a) that relevantly provides as follows:
RAA Insurance shall not be liable for claims arising out of the ownership, possession or use by Mr O’Halloran of any land or buildings other than those Buildings described in the situation shown in the Certificate.
RAA Insurance pleaded that Exclusion Clause (a) applies as the claims against Mr O'Halloran arise out of the possession or use by him of a building other than the building that was his residence in that:
1.    the alleged act of negligence on the part of Mr O'Halloran occurred on premises occupied by Bocksoffice (‘the premises’); and
2.    the premises were only capable of being accessed by persons in possession of keys and a code to the security alarm system to the premises; and
3.    Mr O'Halloran as an employee of Bocksoffice had keys to the premises and his own personalised security code to the alarm system; and
4.    Mr O'Halloran accessed the premises on 23 September using his keys and personalised security code to the alarm system; and
5.    Mr O'Halloran was present on the premises on the occasion referred to in paragraph 4 above in the company of Ms Bryant at which time he:
(a)showed Ms Bryant artwork contained within the premises;
(b)sat in a chair with Ms Bryant on the premises;
(c)smoked a cigarette in company with Ms Bryant on the premises;
(d)engaged in conversation with Ms Bryant on the premises;
(e)used the toilet on the premises;
(f)permitted Ms Bryant to use the toilet on the premises; and
6.    the premises formed a secure part of the building located at 66 Rundle Street, Kent Town; and
7.    the building described in the Certificate of Insurance was described as Unit 6 58 Portrush Road, Payneham and not 66 Rundle Street, Kent Town; and
8.    the alleged act of negligence on the part of Mr O'Halloran occurred during the period of time that he had possession of the premises as set forth in paragraphs 1 to 4 above; and
9.    the alleged act of negligence on the part of Mr O'Halloran occurred during the period of time that he was using the premises as set forth in paragraph 5 above.
By these pleadings RAA Insurance contends that Mr O'Halloran was present in the Bocksoffice premises that night when he did the activities referred to in paragraph 5 above and that the alleged act of negligence occurred during a period of time when he had possession of or was using the Bocksoffice premises.
The “Buildings described in the situation shown in the Certificate” as referred to in Exclusion (a) is Mr O'Halloran’s residence at Payneham. The building(s) at 66 Rundle Street, Kent Town are, accordingly, not included in “those Buildings described in the situation shown in the Certificate”. The issue is whether the claims here made against Mr O'Halloran are claims arising out of the possession or use by Mr O’Halloran of the building at 66 Rundle Street, Kent Town. RAA Insurance does not rely on ownership or on land. It alleges that the Bocksoffice premises formed a secure part of the building located at 66 Rundle Street, Kent Town.
This exclusion relates to the liability of RAA Insurance for claims that arise out of the possession or use by Mr O'Halloran of any land or buildings (other than the building that was his residence at Payneham, but maybe not the land on which that building is erected). The exclusion relates to any claim arising out of the ownership, possession and use of land as well as of buildings. The word use appears in the exclusion in conjunction with the words ownership and possession. The words ownership, possession and use appear in the exclusion such that an ordinary reading of them is, ownership by Mr O'Halloran, possession by Mr O'Halloran, or use by Mr O'Halloran.
The words ownership and possession import some close relationship between Mr O'Halloran and the land or buildings other than the building that was his residence. Ownership is not relied on by RAA Insurance in this case. Possession was not strongly contended for by RAA Insurance although ultimately it was not abandoned. I agree that each of the words ownership, possession and use denotes a continuing state of affairs and not a transient or casual one. Such is consistent with the state of Mr O'Halloran’s position vis a vis his own residence which is the building “described in the situation shown in the Certificate”. The concept of possession can import either actual physical possession of something or the power or means to secure physical possession of it, knowledge of it, and an intention to possess or exercise or assert control of it. Insofar as such a concept relates to land or a building it leads, in my view, to a construction which does not envisage transient or casual possession. I do not consider that when Mr O'Halloran took Ms Bryant into the Bocksoffice premises at 66 Rundle Street, Kent Town in the early morning of 23 September 2000, he was in possession of the building in that sense. Was Mr O'Halloran using any of the land or buildings at 66 Rundle Street, Kent Town in the early morning of 23 September 2000. I do not consider that the fact that he was present in Bocksoffice’s premises and that he did certain things whilst there (including a negligent act) is sufficient to constitute use of that part of the building. Use of land or a building (in a similar way to possession of land or a building) connotes more than a casual, fleeting use by presence. Rather, it connotes occupation of or the exercising of some dominion over some land or a building. If I am wrong in that construction, it at least connotes, in my view, use by Mr O'Halloran of a building for the purpose for which he had some licence or authority to be there, viz for his employment.
If mere presence on any land or in any building where a negligence act is done is excluded from the policy (by Exclusion (a) or any other exclusion), then I consider that one would have expected that the insuring legal liability clause would not have referred to Mr O'Halloran being indemnified for any legal liability in respect of claims for damage to property caused by any accident occurring anywhere in Australia. Rather, it would have referred to anywhere outside the building that comprised his residence. I consider that such a construction would defeat the main object of this insurance contract, viz to provide broad legal liability cover to Mr O'Halloran, and would, in my view, make commercial nonsense of the policy and lead to an unjust result. There is a tendency by the authorities to read insuring clauses widely and exclusion clauses narrowly against the insurer if such can be achieved whilst fulfilling and not restraining its commercial purposes.
I agree with the submissions to the effect that Exclusion (a) is directed to excluding insurance cover to Mr O'Halloran arise out of his ownership, possession or use of land and buildings which would fall within occupier’s liability-type insurance cover. I do not consider that Exclusion (a) applies in the circumstances of this case to exclude insurance cover to Mr O'Halloran where he was neither in possession of the building (or part of the building) in the sense to which I have referred, nor was he putting the building, or some part of the building, to his use, either at all or as an employee of Bocksoffice, in contradistinction from merely just being present in the building and doing certain things in it.
If I am wrong as to the construction of possession and use to which I have just referred, each of the words ownership, possession and use are to be read in conjunction with the words arising out of. That phrase has been construed as involving a notion of at least some causal connection with some act or event, although it may be indirect rather than proximate (Dickenson v Motor Vehicle Insurance Trust (1987) 163 CLR 500 at 505). It carries a sense of consequence (Government Insurance Office (NSW) v R J Green & Lloyd Pty Limited (1966) 114 CLR 447), and an element of cause (Walton v National Employers’ Mutual General Insurance Association Ltd [1973] 2 NSWLR 73, 83). This means that RAA Insurance’s liability for claims for Mr O'Halloran’s negligent act must be consequential upon, caused by, or spring from his possession or use of part of the building.
I consider that a relevant causal or consequential relationship between Mr O’Halloran’s use of the land and building at Kent Town and the claims made against him arising out of such possession or use is lacking in the circumstances of this case. As previously mentioned, I do not consider that the words possession or use can mean or envisage, in the context of the whole exclusion clause and the whole of the RAA Policy, no more that simply a presence on or temporal connection with the Bocksoffice premises and the land upon which they stood such as to enliven the exclusion clause in the RAA Policy. I do not consider that the fact that Mr O'Halloran was in Bocksoffice’s premises when he committed his negligent act is sufficient to categorise a claim for such act as arising out of Mr O'Halloran’s possession or use of the building or land. I consider that this clause envisages more than mere presence in the building, even if Mr O'Halloran’s presence was permitted, or at least his access to the building was facilitated by his employer. I do not consider that claims made against Mr O'Halloran for disposal of cigarette remains, whilst that act occurred in a building and at a place on land other than at his residence at Payneham, are, in the circumstances of this case, claims that arise out of the possession or use by Mr O'Halloran of such other land or buildings. I do not consider that Mr O'Halloran was in possession of or was using the Kent Town building, or the land on which it was built, in any relevant sense at all.
Exclusion (a) is, in my view, intended to exclude claims that arise where there is a consequential or causal relationship between the ownership, possession or use of a building or land by Mr O'Halloran and the negligent act of disposing of cigarette remains. I conclude that, in this case, there was no such relationship.
My conclusion is that the plaintiffs’ claims against Mr O'Halloran are not excluded by Exclusion (a) of the RAA Policy.
Secondly, RAA Insurance relies on Exclusion (c)(i) that relevantly provides as follows:
RAA Insurance shall not be liable for claims in respect of damage to property belonging to or in the physical or legal control of Mr O'Halloran.
In its various pleadings RAA Insurance pleaded that the claim against Mr O'Halloran is in respect of damage to property which was in the physical control of Mr O'Halloran. RAA Insurance did not, in its pleading as to Exclusion (c)(i), particularise the property which it alleged was in the physical control of Mr O'Halloran which was damaged. It repeated some of the particulars it had given in support of its pleading on Exclusion (a), but they do not refer to damaged property. It repeated those particulars that are in paragraphs 1 to 6 referred to above. However, in Action No. 1376 of 2004 RAA Insurance added particulars that Mr O'Halloran was an Art Director or Creative employed by Bocksoffice at the time of the alleged act of negligence and that there was no prohibition or restriction on Mr O'Halloran accessing the premises outside of ordinary office hours. RAA Insurance did not plead particular numbered 6 referred to above in Action No. 1376 of 2004. I attach no significance to these changes.
I consider that Exclusion (c)(ii) relates to personal property and not to real property or interest in real property.
I do not consider that Exclusion (c)(i) applies in the circumstances of this case. I consider that no property that was damaged in respect of which claims are made against Mr O'Halloran could be said to have been in the physical control of Mr O'Halloran when he committed his negligent act in the middle of the night on 23 September 2000 and thus became liable for such damage. Much of the property damaged was outside the Bocksoffice premises to which Mr O'Halloran had no access and no right of access. I do not consider that, in the circumstances of this case, Mr O'Halloran had any degree of authority or dominion over any property that was damaged, including property within Bocksoffice’s premises, and, accordingly, none of it was in his physical control when as that phrase should properly be construed in the context of this insurance contract (see Gray Brothers Engineering Ltd v The New Zealand Insurance Company Limited (1992) 7 ANZ Insurance Cases 61‑124; Botany Fork & Crane Hire Ltd v New Zealand Co Ltd (1993) 116 ALR 473). The fact that he had the means whereby he could access part of the premises in which some property was damaged, and for which claims are made, does not, in my view, enliven Exclusion (c) of the RAA Policy. My conclusion is that the plaintiffs’ claims against Mr O'Halloran are not excluded by Exclusion (c)(i) of the RAA Policy.

Thirdly and finally, RAA Insurance relies on Exclusion (d) that relevantly provides as follows:
RAA Insurance shall not be liable for claims arising out of or in connection with any business profession or occupation of Mr O'Halloran.
RAA Insurance pleaded that Exclusion (d) applies as the claims against Mr O'Halloran arise out of or in connection with his business or occupation. The Particulars given are, to all intents and purposes, the same as those given in respect of Exclusion (c)(i) in Action No. 1376 of 2004.
I consider that the words arising out of in Exclusion (d) of the RAA Policy should be construed in the same way as in Exclusion (a). There must be some direct causal connection and relationship between Mr O'Halloran’s conduct or actions when conducting or pursuing his business or occupation and the event (his negligent act) giving rise to the legal liability.
I do not consider, in the circumstances of this case, that the claims could properly be said to arise out of Mr O'Halloran’s business or occupation. The claims do not “spring from” nor do they have any causal or consequential relationship to his business or occupation. I do not, in any event, consider that Mr O'Halloran could properly be said to have a business for the purposes of this exclusion, although he does have an occupation.
It was submitted that the words in connection with have a wide connotation, requiring merely a relationship between one thing and another, and not necessarily a casual relationship (Our Town FM Pty Ltd v Australian Broadcasting Tribunal (1987) 16 FCR 465, at 479-480). The authority just referred to cites a decision of the British Columbia Court of Appeal (Re Nanaimo Community Hotel Pty Ltd [1944] 4 DLR 639) where the following was upheld:
One of the very generally accepted meanings of “connection” is “relation between things one of which is bound up with or involved in another”; or, again “having to do with”. The words include matters occurring prior to as well as subsequent to or consequent upon so long as they are related to the principal thing. The phrase “having to do with” perhaps gives as good a suggestion of the meaning as could be had.
My view is that Exclusion (d) should be read as arising out of any business or occupation of the Insured, and separately, arising in connection with any business or occupation of the Insured. I consider that is the natural and ordinary way to read Exclusion (d). (That is the way a similar clause was read by the trial judge in Baulderstone Hornibrook Engineering v Gordian Runoff Ltd (supra).) To read Exclusion (d) where the word arising does not qualify the words in connection with would, in my view, strain the ordinary and natural meaning of the clause. The clause as a whole would have to be read as providing: RAA Insurance shall not be liable for claims in connection with any business profession or occupation of Mr O'Halloran. Claims must arise out of something or arise in connection with something or be in respect of something. They are not simply claims in connection with something. Although the words arising in connection with should, presumably, be construed as meaning something different than the words arising out of, both phrases would, in my view, still connote some causal connection between the liability for a claim on the one hand, and the business or occupation of Mr O'Halloran on the other. On the basis of my findings in this case, it could not, in my view, properly be said that there was any such connection. Nor could it, in my view, properly be said that the negligent act was bound up with, or involved in, or having to do with, Mr O'Halloran’s business or occupation. I consider that there is no sense in which it could properly be said that these claims (by Mr O'Halloran’s negligent act) arose in any way from or out of his occupation.
I would reach the same conclusion even if I am wrong about the qualifying use of the word arising. The negligent act of Mr O'Halloran had nothing to do with, was in no way relevant to, and did not in any way relate to Mr O'Halloran’s business or occupation, notwithstanding the fact that his employment by Bocksoffice gave him the means to enter the building where he committed the negligent act. My view is that that alone is not enough to enliven Exclusion (d) of the RAA Policy.
I agree with those counsel who submitted that Exclusion (d) is directed to exclude claims of a professional liability nature. Exclusion (d) is intended to be limited to exclude claims that arise when Mr O'Halloran performs some act, or fails to perform some act, that is a part of his business or occupation. Where that happens the RAA Policy will not respond. Such a construction is, in my view, consistent with the aim and purpose of the RAA Policy.
My conclusion is that the plaintiffs’ claims against Mr O'Halloran are not excluded by Exclusion (d) of the RAA Policy.
Accordingly, as none of the exclusions apply in the circumstances of this case, I conclude that RAA insurance is liable to indemnify Mr O'Halloran.
Accordingly, I would answer Yes to Question 2 of the preliminary issues.
Question 3 - Is Mr O'Halloran entitled to be indemnified under the QBE Policy?
The QBE Policy was issued to Charterhouse Advertising Pty Ltd. It was a Broadform Liability Policy to which Bocksoffice was added as an insured on or about 12 April 2000.
The QBE Policy relevantly provides that QBE Insurance will insure certain persons and will pay all sums which such person become legally liable to pay by way of compensation in respect of property damage happening during the period of insurance and caused by an occurrence in connection with such persons’ business.
The business described in the schedule to the policy was “Advertising Agency”.
The QBE Policy provided that the persons insured included Bocksoffice and every director, executive office, employee, partner or shareholder of (Bocksoffice) but only whilst acting within the scope of their duties in such capacity.
There is no dispute that Mr O'Halloran was at all relevant times an employee of Bocksoffice and therefore was a person to whom indemnity under the QBE Policy would attach in certain circumstances. There is no dispute that the fire at Bocksoffice’s premises was an occurrence within the meaning of the QBE Policy and that it occurred during the period of insurance.
The issues are whether, if Mr O'Halloran caused the fire at 66 Rundle Street, he caused it only whilst acting within the scope of his duties in his capacity as an employee of Bocksoffice. Further, whether the claims made against Mr O'Halloran are in respect of Property Damage … caused by an Occurrence … in connection with (the) business described as Advertising Agency.
In Action No. 1376 of 2004 it is alleged by Mr O'Halloran that by the QBE Policy QBE Insurance agreed to indemnify him against the perils of legal liability in respect of damage to property including the cost of defending any claim brought against him. Certain provisions of the QBE Policy are set out. Mr O'Halloran’s pleading alleges that QBE Insurance is liable to indemnify him in respect of the actions because the losses fall within the perils insured under the QBE policy. No facts are alleged directly upon which Mr O'Halloran makes that plea. Although Mr O'Halloran’s Statement of Claim sets out some factual allegations made against him by other parties, none of those allegations allege that he was acting within the scope of his duties as an employee of Bocksoffice when he took Ms Bryant into Bocksoffice’s premises on Saturday 23 September 2000, smoked cigarettes with her and there discarded the remains of the cigarettes. I have previously referred to other pleadings in other actions in which Mr O'Halloran that whilst he was permitted by his employer to enter the premises, he did, on that night, enter them on his own business.
In its Defence to Mr O'Halloran’s claim QBE Insurance pleaded as follows:
(1)    the alleged act(s) of negligence on the part of the plaintiff occurred when he attended upon the (Bocksoffice) premises after business hours at approximately 12.45 am on 23 September 2000;
(2)    the plaintiff attended upon the premises for the purpose of socialising with a female companion;
(3)    whilst at the premises, the plaintiff and his companion each smoked one or more cigarettes in breach of the terms of the plaintiff’s employment with Bocksoffice … and in breach of a strict no smoking policy within the premises;
(4)    the plaintiff was not authorised by Bocksoffice … to be upon the premises at the time the alleged negligence occurred;
(5)    the plaintiff was not authorised by Bocksoffice … to bring guests onto the premises at the time of night when the alleged negligence occurred;
(6)    the plaintiff was not acting within the scope of his duties as an employee of Bocksoffice … when the alleged act(s) of negligence took place.
I have made certain findings of fact regarding Mr O'Halloran’s entry with Ms Bryant into Bocksoffice’s premises in the early morning of Saturday 23 September 2000. I find that what Mr O'Halloran did in the premises that night was not authorised or contemplated by his employer, nor was it, nor could it be said to have been, contemplated by his contract of employment. Indeed, the activity which led directly to the negligent act and damage was prohibited by his contract of employment. I do not consider that anything that Mr O'Halloran did in the premises that night was in furtherance of his duties as an employee of Bocksoffice, was reasonably required or authorised by his employer or by his employment contract, or was in any way connected with his employment or with Bocksoffice’s business. There was no nexus at all between what Mr O'Halloran did by entering the premises and doing what I have found he did in the premises and the business of Bocksoffice. In particular, Mr O'Halloran was not acting in any way connected with Bocksoffice’s business when he disposed of unextinguished cigarette remains after having smoked cigarettes with Ms Bryant whilst visiting the Bocksoffice premises for purposes which I find to be completely unrelated to its business and to his employment at its business. I consider that, when he entered and remained in Bocksoffice’s premises that night and when he did what he did, Mr O'Halloran was on a frolic of his own.
I conclude that none of what Mr O'Halloran did in the Bocksoffice premises that night (which could be events resulting in property damage) occurred whilst he was acting within the scope of his duties as an employee of Bocksoffice. I also conclude that none of what Mr O'Halloran did in the Bocksoffice premises that night were occurrences in connection with the business of an advertising agency conducted at those premises by Bocksoffice.
Accordingly, I conclude that QBE Insurance is not liable to indemnify Mr O'Halloran.
I would answer No to Question 3 of the preliminary issues.
Question 4 - Is Bocksoffice vicariously liable for Mr O'Halloran’s negligence
In Action No. 1376 of 2004 Mr O'Halloran alleges that Bocksoffice is liable to indemnify him in respect of the other actions because the losses arise from a tort for which Bocksoffice was vicariously liable. As was the position in respect of his claim against QBE Insurance, no facts other than what other parties allege against him are pleaded by Mr O'Halloran as to this plea of vicarious liability.
An employer is vicariously liable for the negligent act of its employee if, and only if, the act or omission is committed in the course or scope of that employee’s employment with the employer, or as an incident to the employment (Ruddiman & Co v Smith (1889) 60 Law Times (NS) 708, 710).
In Deatons Pty Ltd v Flew (1949) 79 CLR 370, 378 Latham CJ said:
An employer is liable for the act of his servant only if the act is shown to come within the scope of the servant’s authority either as being an act which he was employed actually to perform or as being an act which was incidental to his employment.
In New South Wales v Lepore (2003) 212 CLR 511; (2003) 77 ALJR 558, Gleeson CJ said (at pages 535-537, and 568-569):
An employer is vicariously liable for a tort committed by an employee in the course of his or her employment. The limiting or controlling concept, course of employment, is sometimes referred to as scope of employment. Its aspects are functional, as well as geographical and temporal. Not everything that an employee does at work, or during working hours, is sufficiently connected with the duties and responsibilities of the employee to be regarded as within the scope of the employment. …
The antithesis of conduct in the course of employment is sometimes expressed by saying that the employee was “on a frolic of his own”. The origin of that expression was explained by Diplock LJ in Morris v C W Martin & Sons Ltd:
‘… The immunity of the master from vicarious liability for tortious acts of a servant while engaged upon a frolic can be rationalised in a variety of ways. The master’s employment of the servant was only a causa sine qua non of the injury: it was not the causa causans. It was not ‘foreseeable’ by the master that his employment of the servant would cause injury to the person who sustained it. The master gave no authority to the servant to create an Atkinian proximity relationship between the master and the person injured by the servant’s acts. One or other of these rationalisations underlies the common phrase in which the test of the master’s liability is expressed: ‘Was the servant’s act within the scope or course of his employment?’”
To point to a vivid example of conduct by an employee that is not in the course of employment is a useful method of elucidating the concept, but it may be of limited assistance in resolving difficult borderline cases. It is clear that if the wrongful act of an employee has been authorised by the employer, the employer will be liable. The difficulty relates to unauthorised acts. The best known formulation of the test to be applied is that in Salmond, Law of Torts in the first edition in 1907, and in later editions: an employer is liable even for unauthorised acts if they are so connected with authorised acts that they may be regarded as modes - although improper modes - of doing them, but the employer is not responsible if the unauthorised and wrongful act is not so connected with the authorised act as to be a mode of doing it, but is an independent act.
… It is the nature of that which the employee is employed to do on behalf of the employer that determines whether the wrongdoing is within the scope of the employment.
I have already expressed a conclusion from the facts as I have found them to be that Mr O'Halloran was “on a frolic of his own” when he entered the Bocksoffice premises in the early morning of Saturday 27 September 2000, and when he did what I have found he did when he was in those premises. I have found that what he did there had nothing whatever to do with what he was employed to do on behalf of Bocksoffice, and that they were not authorised acts. In fact, smoking was expressly an unauthorised act. I am satisfied that nothing he did in the premises was in any way connected with his employment. Further, I am satisfied nothing he did in the premises were modes of performing acts authorised by his employment with Bocksoffice. I find that they were unauthorised acts unrelated to his employment. I am satisfied and find that Mr O'Halloran was acting independently of his employer when he entered his employer’s premises and did what he did there in the early morning of 23 September 2000.
Accordingly, I conclude that Bocksoffice is not vicariously liable for the negligence of Mr O'Halloran.
I would answer No to Question 4 of the preliminary issues.
Determination of the preliminary issues
The answers I give to the questions as to the preliminary issues are:
1Yes, except that Mr O'Halloran did not owe a duty of care to Kitchen Industries.
2Yes.
3No.
4No.
I shall hear the parties as to any orders as to costs.