Mahony v Logan - [2019] VCC 1586

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

Revised
(Not) Restricted
Suitable for Publication

Case No. CI-16-04268

W & M Mahony Pty Ltd T/As Mahony's Transport Services	Plaintiff
v
Logan Contracting Pty Ltd	Defendant

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JUDGE:	HER HONOUR JUDGE MARKS
WHERE HELD:	Melbourne
DATE OF RULING:	6-7 February and 17-21 June 2019
DATE OF JUDGMENT:	4 October 2019
CASE MAY BE CITED AS:	Mahony v Logan
MEDIUM NEUTRAL CITATION:	[2019] VCC 1586

REASONS FOR JUDGMENT

TORTS – NEGLIGENCE – duty of care – causation – whether a shed fire was caused by failure to fix a hole in the side of the shed – whether hole was present before the fire – whether water entered the shed through the hole – whether water then wet hay in the shed causing the hay to spontaneously combust – whether spontaneous combustion caused shed fire – turns on own facts.

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APPEARANCES:	Counsel	Solicitors
For the plaintiff	Mr A. Davis	Walker Hedges & Co
For the defendant	Mr G. Dalton QC Mr J.B. Waters	Wotton & Kearney

HER HONOUR:

On 19 April 2014, a fire broke out in a large, steel shed on a rural property in Lake Bolac, Victoria. The fire burnt over several days. It destroyed a substantial quantity of hay, wheat and canola, as well as machinery and other items owned and leased by W & M Mahony Pty Ltd (Mahony).
Mahony subleased part of the shed from Logan Contracting Pty Ltd (Logan), which had leased the shed as a whole from Anthony John McMaster.
Mahony claims that Logan caused the fire by failing to fix a hole in the side of the shed, located towards the bottom of one bay of the shed’s seventeen bays on its north-west side. It claims that water came into the shed through the hole, which led to hay stored some metres away becoming wet, and which finally led to that wet hay spontaneously combusting. It says that this failure to fix the hole was a breach of contractual duties Logan owed Mahony, and a breach of Logan’s duty of care to Mahony. It seeks damages of $364,409.00 plus interest.
Mahony’s case depended – at the very least – on it establishing the following facts, on the balance of probabilities:
·
there was a hole in the side of the shed for some time, at some stage,


before the fire occurred;
·     water came into the shed through the hole;
·
some of that water then seeped along the soil and went into hay stored


near the hole; and
·
the water in the hay caused the hay to spontaneously combust, which led


to the shed burning down.

I say ‘at the very least’, because the way that Mahony pleaded its case arguably also required it to prove that the alleged hole was caused by a plastic downpipe, installed on the outside of the shed, being damaged or broken. However, Mahony’s case, as advanced by the end of the trial, was that it did not matter how the hole developed.
Mahony falls at the first hurdle in establishing its case, because I am not satisfied that there was the alleged hole in the shed before the fire.
I will dismiss the claim, and give judgment for Logan.
Logan brought a third party proceeding against the owner of the shed, McMaster. McMaster brought a counterclaim against Logan and its director, and when McMaster passed away, his executors were substituted as third parties. Just before the trial commenced, the third party proceeding, including the counterclaim, was settled. So the trial only involved the claims Mahony brought against Logan.
The trial began in February, but needed to be adjourned as the result of changes to pleadings. On the first day of trial, 6 February 2019, Logan made an application to withdraw an admission it had pleaded, to allegations contained in paragraph 9 of the statement of claim. It also sought leave to amend paragraph 11 of its defence to plead a clear denial. On the second day of the trial, I made a ruling allowing both applications and adjourned the trial part heard to 17 June 2019. Amended pleadings and further expert reports were subsequently filed, and the trial was continued, and completed, over five days in June.
Mahony called two witnesses. Leo Fluitsma, a loss adjuster, was called in relation to quantum. Neil Barnes, a forensic scientist specialising in fire and explosion investigation was called in relation to liability. Barnes attended the scene of the fire five days after the fire started, on 24 April 2014. He prepared five expert reports.
Mahony sought to call one further witness: John Grey, a metallurgist. Logan objected to his evidence on the basis that it was inadmissible. I ruled that it was inadmissible, because in it Grey was asked to give expert opinion premised on alleged facts that had not been pleaded, or established by any evidence.
Logan called two witnesses: John Marshall, a forensic engineer, specialising in fire/explosion investigations and metallurgical failure investigations; and Sean Conroy, a fire explosion investigator, engineering systems analyst and disaster recovery consultant.
In the original statement of claim, Mahony pleaded, relevantly:
10.Forensic examination establishes that the hay spontaneously combusted and the Plaintiff alleges that the spontaneous combustion was the result of the hay becoming wet due to the fact that in the area where it was stored, there existed a hole in the wall of the shed where previously a plastic downpipe had been situated
11. The Plaintiff alleges that the water which wet the hay and which in turn caused it to spontaneously combust had entered the shed from the hole where the downpipe had previously existed
The amended statement of claim states, relevantly:
14.The spontaneous combustion was the result of the hay becoming wet due to the fact that in the area where it was stored, there existed a hole in the wall of the shed where at some time prior to the fire occurring ~~previously~~ a plastic downpipe ~~which had been situated~~ which had previously been installed on the outside of the shed had been damaged or broken.
15.The absence of the downpipe resulted in the formation of the hole.
16.~~The Plaintiff alleges that~~ The water which wet the hay and which in turn caused it to spontaneously combust had entered the shed from the hole where the downpipe had previously existed.
…
19. ~~The Plaintiff alleges that~~ In breach of these implied terms and conditions, the shed was not safe for the storage of the Plaintiff's property and property for which the Plaintiff was responsible and the Defendant failed to repair the hole in the wall thereby allowing water to enter and wet the hay which in turn spontaneously combusted.
…
24.          The Plaintiff says that the Defendant was negligent as follows:
i.        In failing to detect the hole in the wall of the shed.
ii.        In failing to repair the hole in the wall in the shed.
iii.In failing to keep the shed in good order, condition and repair.
iv. Allowing water to enter into the shed and wet hay which was stored in the vicinity of the hole.
v.Storing hay in the vicinity of the hole in the wall in the shed when the Defendant knew or ought to have known that if the hay became wet, it was likely to spontaneously combust.
Mahony’s claims about the alleged hole, and the missing downpipe said to have caused it, arose because of Barnes’ observations and the opinion he reached when he attended the site five days after the fire started, on 24 April 2014. His initial observations and opinion were contained in the report he wrote four days later, on 28 April 2014. However, Barnes came to this opinion without making any enquiries of anyone as to the state of the shed before the fire occurred.

In his first report on 28 April 2014, Barnes recorded his observations made when he attended the fire scene four days earlier. He said, relevantly:
To the south of the opening in the west wall there was a hole in the bottom of the galvanised sheets which had been caused due to the development of rust from water attack on the steel in this area. The bottom purlin next to hole had also rusted through and the same section of the purlin above was extensively rusted. The examination of this area and the wall and roof above showed there had not been a plastic downpipe in in this area before or during the fire.
…
As the wall and a bottom purlin had rusted through in combination with the fact that the plastic downpipe in this area had been missing for what appeared to be some considerable time then I consider that the hay near the wall where the clinker was located had been made damp due to water ingress through the wall and up from the ground, [sic] This moisten hay at the time of the fire had been between 12-22% water, which is the moisture range at which the spontaneous combustion of the hay starts depending on the hay type and bale size.
…
The examination of the scene showed that the fire had started in the hay located next to the hole in the rear wall caused by water ingress due to a plastic downpipe having been missing in the area of origin for what appears to be some considerable time.
Logan then filed and served a report of Sean Conroy, of 23 April 2018. Conroy’s report referred to a photo taken on the day of the fire, when the fire was in its early stages, and rejected Barnes’ conclusion that the down pipe was missing before the fire. Conroy concludes in his report that this evidence ‘directly contradicts Barnes’ finding that the downpipe had been missing for some considerable time before the fire’.
In his third report, of 9 July 2018, Barnes responded to Conroy’s report. He said, relevantly:
Even if the downpipe was present, even though the evidence I found showed that it was missing at the time of the fire, then how does he explained the severe rusting to the bottom of the galvanised sheets, to the bottom purlin and to the one above and also to the nearest upright to this rust damage without there being water egress. His scenario indicates that at least there was some type of leakage in the area of the downpipe. There had been rain several days before the fire as there were still large puddles on the property where the fire occurred.
Logan then filed a report of John Marshall, on 20 August 2018. Marshall disagreed with Barnes’ conclusions, including his conclusion as to where the fire started. In Barnes’ fourth report, of 26 October 2018, Barnes commented that Marshall:
… appears to have failed to take in account that the ground was fine dirt which would have allowed the water from the missing downpipe to seep into the dirt and then spread away from this area to the area under the hay bales close to the wall.
Barnes further commented about the ‘hole rusted through the wall’ in his fifth report, on 27 February 2019:
…In this fire I placed the origin inside the stack between one to two bails [sic] in the [sic] from the west wall in the vicinity of the hole rusted through the bottom of the wall approximately 18 metres away from the north west corner of the shed.
Under the heading ‘The Missing downpipe’, he continued, relevantly:
If the photograph provided is correct then I must assume that at the time of the fire a downpipe was present or had been damaged between when the fire occurred and when the photograph was taken.
At the time of my examination the remains of the downpipes were found at all of the location [sic] of the other downpipes except for the one near the [sic] where I placed the area of origin. Therefore, if the pipe was present I consider that the fire had spread through the hole in the wall so destroying the plastic pipe. However I would still expect to find the remains of the angles part of the pipe to be present which it was not.
Whether the downpipe was present or not at the time of the fire at some time before the fire the pipe was missing or faulty longer enough for the rust damage to the cladding, the purlin and the steel upright to have occurred. Therefore, the pipe in situ at the time of the fire does not change my opinion as to the cause of the fire.
The damage to the wall cladding, to the interior purlins and to the adjacent steel upright clearly show that the steel of these items had been exposed to water for some considerable time, therefore it is possible that the pipe had been damaged at sometime before the fire before it was supposedly fixed.
At trial, Barnes came up with an entirely new hypothesis as to the cause of the hole in the wall. He said that he considered that the hole in the wall had rusted from the inside of the shed and not from the outside in. He was cross-examined by Mr Dalton QC. His evidence under cross-examination was:
Okay. 'Therefore, if the pipe was present I consider that the fire had spread through the hole in the wall, so destroying the plastic downpipe.' Is the hole in the wall that you are referring to in that sentence, the same hole in the wall that you identified as the hole through which water came to ultimately start the spontaneous combustion?---Yes. The water came through - the rusting to the wall was from the inside of the wall, not the outside in.
I am sorry, could you repeat that?---The rusting to the wall around the hole was from the inside of the shed, not from the outside in.
Sorry, so are you saying - - -?---Nobody's asked me this question before. I am saying that the rust, the hole in the wall, was rusted from the inside of the shed not the outside.
So let me understand this clearly. Your evidence is that that hole was rusted from the inside out, not from the outside 20 in?---Yes.
Okay?---So there was water inside the shed.
You don't say that in your first report, do you?---No.
You don't say that in your second report, do you?---No.
You don't say that in your third report, do you?---No.
And you don't say it in your fourth report, do you?---No.
You don't say it in your fifth report?---But I'm saying it now.
Mahony argued, in final written submissions:
14. The pleading of how the hole formed is included in the Amended Statement of Claim for the purpose of providing an explanation, based on Mr Barnes theory as to how the hole developed. However, the critical point in the plaintiff’s case is not how the hole formed. It is the fact that the hole existed prior to the fire; that this was something of which the defendant was or should have been aware by virtue of its occupation of the part of the shed and that in those circumstances, the defendant should have taken steps to prevent its hay becoming wet.
15. It is therefore what happened after the hole developed that the plaintiff says constitutes the breach of the implied terms and the acts of negligence, not that the defendant was negligent in allowing the hole to develop.
16. The plaintiff acknowledges that the shed was not owned by the defendant and hence does not assert that the defendant should be or was responsible for the drain pipes on the side of the shed.
17. Accordingly, although the plaintiff does not abandon the explanation provided by Mr Barnes as to how the hole occurred, despite the fact that when giving evidence he said that the rust occurred from the inside, rather than the outside, it nevertheless says that it really doesn’t matter how the hole developed. If the court finds that, however it developed, whether due to a missing down pipe or not, that the hole nevertheless existed at the time of the fire and that this allowed water to enter the shed, wet the hay and that the hay spontaneously combusted, then the plaintiff says that it was the failure on the part of the defendant to deal with the presence of the hole that breached the implied terms of the contract on which the plaintiff relies and also constituted negligence on the part of the defendant.
When Barnes attended the scene a few days after the fire had started he saw the hole in some oxidised galvanised sheeting at the scene. His photo of it was in evidence. But there is nothing to satisfy me on the evidence that the hole was there before the fire.
The shed was less than 10 years old. Photographs tendered showing the shed before the fire, show it to be in good condition, with the relevant downpipe intact and in place. In particular, a photograph taken on 10 April 2014 – just nine days before the fire – shows that there was a plastic downpipe running down the side of the shed in approximately the location where Mahony alleges the hole in the shed wall was situated.
About eight and a half months before the fire, an insurance assessor visited the property and assessed it for fire risks. It is clear from his report that he looked carefully at the shed. He noted, for example, the absence of fire extinguishers. He made notes as to its condition. I am satisfied on the balance of probabilities that had the hole been there when he inspected the shed – or the rust damage to the western wall, purlins and steel upright that Barnes described seeing after the fire – he would have commented on it in his report.
By the time Barnes attended the fire site and saw the galvanised sheeting with the hole in it, the sheeting had been attacked by fire on both sides, and subjected to very high temperatures in the course of the fire which had burnt out over some days.
I accept the evidence of John Marshall, that in those circumstances, it is not possible, in looking at the hole in the sheeting, to distinguish between oxidation damage caused by fire, and oxidation damage caused by water ingress. Fire related oxidation damage looks the same as pre-existing corrosion. He also said that the likelihood the alleged hole could have developed by rusting over a period of about 10 years is ‘remote in the extreme’.
I am satisfied on the balance of probabilities that the hole in the sheeting, observed after the fire, occurred because of oxidation damage caused by the fire.
Mahony’s case depended on proving on the balance of probabilities that the hole existed before the fire, and then that because of it, the hay became wet and spontaneously combusted.
As I am not satisfied the hole existed before the fire, the case must fail.
I note that even if I had been satisfied the hole had existed before the fire, I would not have been satisfied that water came into the shed through the hole, then seeped along the soil and went into the hay stored near the hole, and that the hay then spontaneously combusted.
I am satisfied on the evidence that the relevant downpipe was in place on the shed until the fire destroyed that part of the shed. There is nothing to suggest otherwise, and Mahony did not press any claim to the contrary. The downpipes ran down the side of the shed, sloping away from the shed near the ground, thus directing any water which flowed down the pipes away from the shed. It follows that water that was coming from the roof of the shed would generally have been channelled down through the downpipes running down the side of the shed, including the relevant downpipe, and away from the shed. How then did water enter the shed through a hole – about the size of a grapefruit – near the bottom of one part of the shed? No evidence was led about this, and counsel for Mahony said (properly) that it was not appropriate for him to speculate given the absence of evidence.
No evidence was advanced by Mahony that there had been, at any time prior to the fire, a source of water inside the shed which could have caused the fire.
There was no evidence regarding for how long water was allegedly getting into the shed through the alleged hole. If Barnes’ evidence is accepted, that the hay was stacked about half a metre from the rear wall, then the water had to travel at least that far after coming in through the hole. It then had to travel a further four to eight metres to get towards the middle of the haystack, in order to be able to cause spontaneous combustion, on Barnes’ evidence. There was no evidence of how much water would be required to do this or that any water flowed in that direction along the floor and into the hay.

Mahony’s case that water in the hay caused spontaneous combustion relied solely on Barnes’ evidence that he had observed a ‘hay clinker’ at the site and his expert opinion as to the significance of hay clinkers.
In Barnes’ first report of 28 April 2014, he stated:
The examination of the area inside the shed near the rear wall about 18 metres from the rear northwest corner led to the detection of a hay clinker, which are only formed when a fire is started by the spontaneous combustion of the hay in the area where the clinker is located. Some of this clinker is seen in photographs 17 and 18 and the detection of this item showed that the cause of the fire was the ignition of the hay stored near the wall in this area due to the spontaneous combustion of the hay.
As the wall and a bottom purlin had rusted through in combination with the fact that the plastic downpipe in this area had been missing for what appeared to be some considerable time then I consider that the hay near the wall where the clinker was located had been made damp due to water ingress through the wall and up from the ground.
In his third report, of 9 July 2018, Barnes said:
… hay clinkers do not necessarily occur in all hay stack fires. This is correct however in many cases I have examined hay clinkers have been located at the area of origin of a number of fires. No clinkers were found in deliberately started fire and what was detected in all hay fires were conglomerates of inorganic matter that was formed when hay burns. These conglomerates range in colour from white when the carbon from the hay has been destroyed to black when carbon is still present. Also in these cases there was evidence of the hay stalks still present in most of the conglomerates. Clinkers do not have this latter evidence.
…
Other authors such as J Dehaan, R Chandler and N Dalid (all reputable authors and investigators) give clinkers acknowledgement as being indicators of spontaneous combustion in haystack fires.
The formation of hay clinkers is still being argued about in the field of hay stack fires. However this indicator was only one a [sic] numerous used to determine the area of origin and therefore the cause of the fire.
In his fourth report of 26 October 2018, Barnes said:
In all hay fires inorganic materials such as silicates form masses of crystalline material, however as is mentioned in a number of references hay clinkers which are different to these types of formations are sometimes found in fires that have been started by spontaneous combustion of hay. Three such references are:
1. Kirks Fire Investigation, John De Haan, Chapter 6 Sources of Ignition,

Spontaneous Combustion (Self Heating).
2. Ignition Handbook, Vytenis Babrauskas, Self-Heating pages 845 to 847.
3. Fire Investigation, Russell K Chandler, Sources of Ignition page 219.
This reference to Kirk’s Fire Investigation was to the sixth edition, by Kirk P.L. and De Haan, J.D. Barnes agreed in cross-examination that De Haan is one of the world’s most renowned fire investigators. In that sixth edition, De Haan had written:
external ignition would not appear capable of producing clinkers.
But those words do not appear in the seventh edition of the book, released in 2012, co-authored by De Haan and Icove. Instead, De Haan referenced, with approval, a paper published by Tinsley, Whaley and Icove called ‘Analysis of Hay Clinker as an Indicator of Fire Causes’, which stated:
Clinkers do not occur in all self-heating hay fires, so their absence cannot be taken as proof of incendiary cause, and their presence should not be taken as proof of spontaneous ignition.
In cross-examination, Barnes conceded that he had not been aware of this change when he wrote his reports. He also conceded that neither of the other two references he cited supported the proposition he relied on.
I did not find Barnes a persuasive witness. I agree with Logan’s submissions that:
The opinions on which he built his conclusions as to the cause and area of origin of the fire and as to the cause of the hole in the wall were variously speculative, changeable, demonstrably wrong, or contrary to accepted fire investigation knowledge.
I prefer the expert evidence of John Marshall and Sean Conroy. Both were clear, consistent and persuasive in their evidence. Neither considered spontaneous combustion of the hay likely.
Marshall gave the following evidence in cross-examination:
One of the possibilities for this fire is that it was started by spontaneous combustion, isn't it? --- Let me couch my answer to that question carefully. There is a possibility that this fire started by spontaneous combustion, but it would be extremely unlikely in my view because, in saying that, the spontaneous combustion would be from the excess moisture in the crop that had been baled. Now, in most cases spontaneous - or self-heating of hay and similar products occurs in a period of one to two months post baling. Beyond that point the risk of self-heating from the moisture, the excessive moisture in the hay when it was baled, diminishes significantly. In my view this fire, being some five months after the hay was baled, makes it extremely unlikely to be a self-heating type of fire. I can't rule it out entirely, but I think it's extremely unlikely. There is another possibility, which is the one that I believe Mr Barnes has been proposing, and that is that water has then - after the hay has been effectively stored for a period of time, water has come into contact with the hay and that has caused it to then self-heat. My view is that that form of self-heating is extremely unlikely in this case, as it is in all cases where hay is affected by stray water entering a stack, because in that situation the hay is essentially cured and safely - at a safe stage in its post-production storage. Where water comes in by some unusual means and infiltrates the hay after it's been stored for a period of time, the damage caused is damage that causes the hay to go mouldy. Because the hay is mouldy and necessarily wet from the water, the risk of self-heating and consequent fire -there is no risk of self-heating and a consequent fire from water that is incidental - makes incidental contact with the hay after it's past that high-risk period of one to two months.
Do you accept that it would not take much water to dampen the hay at the bottom of the stack and raise it to a level where spontaneous combustion could occur? --- I don't accept that that could happen at all.
I will dismiss the claim and give judgment for Logan.
I direct the parties to consider the costs orders that should be made as a result of these reasons and provide to me consent orders, or submissions as to costs, by 4 pm on 14 October 2019. If necessary, a costs hearing will be listed.

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Certificate

I certify that these 12 pages are a true copy of the reasons for ruling of her Honour Judge Marks, delivered on 4 October 2019.
Dated: 4 October 2019
Zeinab Ali
Associate to Her Honour Judge Marks