McDonald v Girkaid Pty Ltd - [2004] NSWCA 297

No judgment structure available for this case.

Reported Decision:
(2004) Aust Torts Reports 81-768

Court of Appeal

CITATION: Barry Edward McDonald (t/as B.E. McDonald Transport) v Girkaid Pty Ltd & 4 Ors; Robert Bryce & Co Ltd v Girkaid Pty Ltd & 4 Ors; Hudson Resources Pty Ltd & 5 Ors v Robert Bryce & Co Ltd [2004] NSWCA 297

HEARING DATE(S): 16 June 2003
17 June 2003

JUDGMENT DATE:
31 August 2004

JUDGMENT OF: Beazley JA at 1; McColl JA at 2; Young CJ in Eq at 240

DECISION: McDonald's appeal: (1) Appeal allowed. (2) Judgment entered by Adams J on 8 March 2002 on Girkaid and Inghams' claim set aside. (3) Girkaid and Inghams' claim dismissed. (4) Girkaid and Inghams to pay McDonald's costs of the appeal and of the proceedings below including such costs as McDonald is ordered to pay to Bryce, Hudson and SLE. Hudson's appeal: (1) Appeal allowed. (2) Judgments against Hudson set aside. (3) Cross-claims against Hudson dismissed. (4) McDonald to pay Hudson's costs of the appeal and of the proceedings below. Bryce's appeal: (1) Appeal allowed. (2) Orders 4 to 7 inclusive, 12 and 15 of Adams J's orders of 8 March 2002 set aside. (3) McDonald's cross-claim against Bryce dismissed. (4) McDonald to pay Bryce's costs of the appeal and of the proceedings below. SLE's cross-appeals: (1) Cross-appeals dismissed. (2) McDonald to pay SLE's costs of the cross-appeals.

CATCHWORDS: CAUSATION - whether conclusion of causation open - inference of probable connection - expert evidence of possible cause of fire - absence of scientific theory refuting scientific theory advanced by plaintiffs - sequence of events - APPEAL - evidence - appellate review of trial judge's acceptance of expert witness - STATUTORY CONSTRUCTION - whether Dangerous Goods Regulation 1978 (NSW) created private cause of action - whether statute imposes a duty to take specific precautions or measures for the safety of others - no private cause of action where statute prescribes the end but not the means - content of statutory duty - whether absolute obligations imposed - what constitutes "practicable steps" or "practicable precautions" - BREACH - foreseeability - DAMAGES - evidence of value. (D)

LEGISLATION CITED: Dangerous Goods Act 1975 (NSW) s 4
Dangerous Goods (General) Regulation 1999 s 341(1)
Dangerous Goods Regulation 1978 (NSW) clauses 4, 16, 18, 18(e), 19(e), 19(g), 31, 248, 249(3), Schedule 1
Interpretation Act 1987 (NSW) s 30
Law Reform (Miscellaneous Provisions) Act 1946 (NSW) s 5
Trade Practices Act 1974 (Cth) s 52, s 53(a), s 87

CASES CITED: Abalos v Australian Postal Commission (1990) 171 CLR 167
Adelaide Stevedoring Co Ltd v Forst (1940) 64 CLR 538
Adsett v K & L Steelfounders and Engineers Ltd [1953] 1 WLR 773; [1953] 2 All ER 320
Ahmedi v Ahmedi (1991) 23 NSWLR 288
Astley v Austrust Limited [1999] HCA 6; (1999) 197 CLR 1
Australian Iron and Steel Pty Limited (1957) 97 CLR 89
Beckwith v The Queen (1976) 135 CLR 569
Bennett v Minister for Community Welfare (1992) 176 CLR 408
Brear v British Paints Ltd [1978] 2 NSWLR 253
Bull v Attorney-General (NSW) [1913] HCA 60; (1913) 17 CLR 370
Byrne v Australian Airlines Limited (1995) 185 CLR 410
Chappel v Hart [1998] HCA 55; (1998) 195 CLR 232
Chugg v Pacific Dunlop Limited (1990) 170 CLR 249
Commercial Union Assurance Co of Aust Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389
Commissioner of State Revenue (Vic) v Royal Insurance Australia Ltd (1994) 182 CLR 51
Commonwealth v McLean (1996) 41 NSWLR 389
Dovuro Pty Limited v Wilkins [2003] HCA 51; (2003) 77 ALJR 1706
Dovuro Pty Limited v Wilkins [2000] FCA 1902; (2000) 105 FCR 476
EMI (Australia) Ltd v Bes [1970] 2 NSWR 238
F D R Pty Ltd v Gilmore; Gilmore v Cecil Bros (1998) 80 IR 411
Fernandez v Tubemakers [1975] 2 NSWLR 190
Forbes v Selleys Pty Limited [2004] NSWCA 149
Fox v Percy [2003] HCA 22; (2003) 214 CLR 118
General Constructions Pty Ltd v Peterson (1962) 108 CLR 251
Girkaid Pty Limited & 1 Ors v McDonald & Ors [2001] NSWSC 1202
Graham Barclay Oysters Pty Limited v Ryan [2002] HCA 54; (2002) 211 CLR 540
ICI Australia Operations Pty Ltd v WorkCover Authority of New South Wales [2004] NSWCA 55; (2004) 1 DDCR 259
He Kaw Teh v R (1985) 157 CLR 523
Jayne v National Coal Board [1963] 2 All ER 220
John Pfeiffer Pty Limited v Canny (1981) 148 CLR 218
J Sperling Ltd v Bradshaw [1956] 2 All ER 121
M38/2002 v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCAFC 131; (2003) 199 ALR 290
Makita (Australia) Pty Limited v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705
Maloney v Commissioner for Railways (NSW) (1978) 52 ALJR 292
March & E & M H Stramare Pty Limited (1991) 171 CLR 506
Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494
Marshall v Lindsay County Council [1935] 1 KB 516
Murphy v Farmer (1988) 165 CLR 19
Nicholson v Heaven & Earth Gallery Pty Ltd (1994) 126 ALR 233
O'Connor v S P Bray Limited (1937) 56 CLR 464
Overseas Tankship (UK) Limited v Miller Steamship Co Pty Limited (The Wagon Mound [No 2]) [1967] 1 AC 617
Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd [No 1] ("The Wagon Mound") [1961] AC 388
Pioneer Concrete Services Ltd v Yelnah Pty Ltd (1986) 5 NSWLR 254
R v Stanley John Miller [2001] NSWCCA 209; (2001) 127 A Crim R 344
Rogers v Whitaker (1992) 175 CLR 479
Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434
Seltsam Pty Limited v McGuiness [2000] NSWCA 29; (2000) 49 NSWLR 262
Sheen v Fields Pty Limited (1984) 58 ALJR 93
Shorey v PT Limited [2003] HCA 27; (2003) 77 ALJR 1104
Slivak v Lurgi (Australia) Pty Limited [2001] HCA 6; (2001) 205 CLR 304
Storozuk v Commissioner for Railways (1963) 63 SR (NSW) 581
Sutherland Shire Council v Heyman (1985) 157 CLR 424
Tubemakers of Australia Ltd v Fernandez (1976) 50 ALJR 720
Uebergang v Australian Wheat Board (1980) 145 CLR 266
Utah Construction & Engineering Pty Limited v Pataky [1966] AC 629
Warren v Coombes (1979) 142 CLR 531
Waugh v Kippen (1986) 160 CLR 156
Wilsher v Essex Area Health Authority [1988] AC 1074
Wright v T I L Services Pty Limited (1956) SR (NSW) 413
Wyong Shire Council v Shirt (1980) 146 CLR 40
X and Y (by her Tutor X) v Pal (1991) 23 NSWLR 26

PARTIES :

CA 40215 of 2002
A: Robert Bryce & Co Ltd
1R: Girkaid Pty Ltd
2R: Inghams Enterprises Pty Ltd
3R: Barry Edward McDonald (t/as B.E. McDonald Transport)
4R: S.L.E. Industrial Supplies Pty Ltd
5R: Hudson Resources Ltd
CA 40225 of 2002
A: Hudson Resources Ltd
1R: Barry Edward McDonald (t/as B.E. McDonald Transport)
2R: Robert Bryce & Co Ltd
3R: S.L.E. Industrial Supplies Pty Ltd
4R: Girkaid Pty Ltd
5R: Inghams Enterprises Pty Ltd
Cross Appeal
C-A: S.L.E. Industrial Supplies Pty Ltd
1C-R: Hudson Resources Ltd
2C-R: Robert Bryce & Co Ltd
3C-R: Barry Edward McDonald (t/as B.E. McDonald Transport)
4C-R: Girkaid Pty Ltd
5C-R: Inghams Enterprises Pty Ltd
CA 40253 of 2002
A: Barry Edward McDonald (t/as B.E. McDonald Transport)
1R: Girkaid Pty Ltd
2R: Inghams Enterprises Pty Ltd
3R: Robert Bryce & Co Ltd
4R: S.L.E. Industrial Supplies Pty Ltd
5R: Hudson Resources Ltd
Cross Appeal
C-A: S.L.E. Industrial Supplies Pty Ltd
1C-R: Barry Edward McDonald (t/as B.E. McDonald Transport)
2C-R: Girkaid Pty Ltd
3C-R: Inghams Enterprises Pty Ltd
4C-R: Robert Bryce & Co Ltd
5C-R: Hudson Resources Ltd

FILE NUMBER(S): CA 40215/02; 40225/02; 40253/02

COUNSEL: S G Finch SC/P S Braham (McDonald)
I D Faulkner SC (Girkaid & Inghams)
M A Ashhurst (Bryce)
I Wales SC (Hudson)
J D Hislop QC/D R Pritchard (SLE)

SOLICITORS: Hicksons (McDonald)
Minter Ellison (Girkaid & Inghams)
Michael Samios (Bryce)
Moray & Agnew (Hudson)
PricewaterhouseCoopers Legal (SLE)

LOWER COURTJURISDICTION: Supreme Court - Common Law Division

LOWER COURT FILE NUMBER(S): SC 20335/98

LOWER COURT
JUDICIAL OFFICER : Adams J

CA 40253/02;
40215/02;
40225/02
SC 20335/98

BEAZLEY JA
McCOLL JA
YOUNG CJ in Eq
Tuesday, 31 August 2004

BARRY EDWARD McDONALD (t/as B.E. McDONALD TRANSPORT) v GIRKAID PTY LTD & 4 ORS

ROBERT BRYCE & CO LTD v GIRKAID PTY LTD & 4 ORS

HUDSON RESOURCES PTY LTD & 5 ORS v ROBERT BRYCE & CO LTD

BACKGROUND

A fire broke out at a warehouse. It badly damaged the structure which was subsequently demolished to the concrete slab. Girkaid Pty Limited (“Girkaid”) owned the land on which the warehouse was constructed. The warehouse was internally partitioned into two areas, one leased by Inghams Enterprises Pty Limited (“Inghams”), the other by Barry Edward McDonald t/as B. E. McDonald Transport (“McDonald”).

Containers of tall oil, known by its trade name “Brytall”, had been delivered to McDonald’s warehouse for on-delivery by him. Brytall was classified as dangerous goods pursuant to Schedule 1 to the Dangerous Goods Regulation 1978 (NSW). Girkaid and Inghams claimed the fire had been caused by the spontaneous combustion of Brytall which had been mixed with a mineral absorbent, known by the trade name “attapulgite”, after a large quantity of Brytall spilled in McDonald’s warehouse. Attapulgite was marketed as an absorbent material and was commonly used for absorbing oil spills. The mixture had been left in two containers inside McDonald’s warehouse during the 6 days prior to the fire. The evidence demonstrated that McDonald’s actions in relation to the clean-up complied with Material Safety Data Sheets prepared by both the manufacturer and importer of Brytall.

Girkaid and Inghams sued McDonald in negligence and for breach of statutory duty said to have been created by regulation 19 of the Dangerous Goods Regulation 1978 (NSW). The proceedings gave rise to nine cross claims between, and respectively against, McDonald and the importer of the Brytall, Robert Bryce & Co Ltd (“Bryce”), the supplier of the attapulgite, SLE Industrial Supplies Pty Limited (“SLE”) and the manufacturer of the attapulgite, Hudson Resources Pty Ltd (“Hudson”). The primary judge held that spontaneous combustion of the Brytall/attapulgite mixtures had caused the fire as Girkaid and Inghams contended. He also held that McDonald had acted in breach of statutory duty and negligently in storing the mixture of Brytall and attapulgite on his premises without making inquiries which, the primary judge concluded, if made, would have identified the risk of spontaneous combustion. He resolved the cross claims in such a way that Bryce and Hudson were each found liable to bear a portion of McDonald’s liability in damages to Girkaid and Inghams. SLE was found not to have been liable and its cross-claims were dismissed. McDonald, Bryce and Hudson appealed challenging the judgments they had suffered. SLE cross-appealed defensively in each of the appeals complaining of the dismissal of its cross-claims.

There were, essentially, three issues on the appeals:

1. Whether the primary judge’s finding that the fire was caused by the spontaneous combustion of the Brytall/attapulgite mixture could be sustained;

2. Even if the causation finding stood, whether Girkaid and Inghams had established that McDonald had acted in breach of any statutory or common law duty; and

3. A quantum issue going to the value of Girkaid’s real estate consequent upon the destruction of the improvements erected upon it.

HELD per McColl JA (Beazley JA and Young CJ in Eq agreeing), allowing the appeals:

1. The primary judge had not erred in concluding that the fire was caused by spontaneous combustion having regard to the expert evidence that it was possible that a mixture of Brytall and attapulgite could undergo spontaneous combustion, the fact that no alternative cause of the fire was demonstrated and taking into account the sequence of events.

Adelaide Stevedoring Co Ltd v Forst (1940) 64 CLR 538; EMI (Australia) Ltd v Bes [1970] 2 NSWR 238; Fernandez v Tubemakers [1975] 2 NSWLR 190; Tubemakers of Australia Ltd v Fernandez (1976) 50 ALJR 720; Warren v Coombes (1979) 142 CLR 531; Wilsher v Essex Area Health Authority [1988] AC 1074; March & E & M H Stramare Pty Limited (1991) 171 CLR 506; X and Y (by her Tutor X) v Pal (1991) 23 NSWLR 26; Ahmedi v Ahmedi (1991) 23 NSWLR 288; Bennett v Minister for Community Welfare (1992) 176 CLR 408; Commonwealth v McLean (1996) 41 NSWLR 389; Chappel v Hart [1998] HCA 55; (1998) 195 CLR 232; Seltsam Pty Limited v McGuiness [2000] NSWCA 29; (2000) 49 NSWLR 262; Makita (Australia) Pty Limited v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705; Fox v Percy [2003] HCA 22; (2003) 214 CLR 118; Shorey v PT Limited [2003] HCA 27; (2003) 77 ALJR 1104; Forbes v Selleys Pty Limited [2004] NSWCA 149 referred to.

2. The question whether a statutory duty confers a correlative private cause of action turns on the nature of the statute and its scope including whether the statute imposes a duty to take specific precautions or measures for the safety of others. No private cause of action is created where the statue prescribes the end but not the means. Applying those tests, regulations 18(e) and 19(e) of the Dangerous Goods Regulation 1978 (NSW) created a private cause of action, but regulation 19(g) did not.

O’Connor v S P Bray Limited (1937) 56 CLR 464; Utah Construction & Engineering Pty Limited v Pataky [1966] AC 629; John Pfeiffer Pty Limited v Canny (1981) 148 CLR 218; Slivak v Lurgi (Australia) Pty Limited [2001] HCA 6; (2001) 205 CLR 304 applied. Wright v T I L Services Pty Limited (1956) SR (NSW) 413; Australian Iron and Steel Pty Limited (1957) 97 CLR 89; Storozuk v Commissioner for Railways (1963) 63 SR (NSW) 581; Byrne v Australian Airlines Limited (1995) 185 CLR 410 referred to.

3. Regulations 18(e) and 19(e) of the Dangerous Goods Regulation 1978 (NSW) imposed a penalty, and a corresponding private cause of action, only in circumstances where the occupier of the relevant premises knew or ought to have known that the course of conduct being taken involved a risk proscribed by the regulations. They did not impose absolute obligations.

Chugg v Pacific Dunlop Limited (1990) 170 CLR 249; Slivak v Lurgi (Australia) Pty Limited [2001] HCA 6; (2001) 205 CLR 304 applied. Bull v Attorney-General (NSW) [1913] HCA 60; (1913) 17 CLR 370; Adsett v K & L Steelfounders and Engineers Ltd [1953] 1 WLR 773; [1953] 2 All ER 320; Jayne v National Coal Board [1963] 2 All ER 220; Beckwith v The Queen (1976) 135 CLR 569; Brear v British Paints Ltd [1978] 2 NSWLR 253; Uebergang v Australian Wheat Board (1980) 145 CLR 266; Sheen v Fields Pty Limited (1984) 58 ALJR 93; He Kaw Teh v R (1985) 157 CLR 523; Waugh v Kippen (1986) 160 CLR 156; Pioneer Concrete Services Ltd v Yelnah Pty Ltd (1986) 5 NSWLR 254; Murphy v Farmer (1988) 165 CLR 19; Nicholson v Heaven & Earth Gallery Pty Ltd (1994) 126 ALR 233; F D R Pty Ltd v Gilmore; Gilmore v Cecil Bros (1998) 80 IR 411; R v Stanley John Miller [2001] NSWCCA 209; (2001) 127 A Crim R 344; M38/2002 v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCAFC 131; (2003) 199 ALR 290 referred to.

4. The primary judge erred in concluding that McDonald knew or ought to have known, or ought to have foreseen, the risk of the Brytall/attapulgite mixture undergoing spontaneous combustion if stored on his premises.

Wyong Shire Council v Shirt

Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd [No 1] (“The Wagon Mound”)

Overseas Tankship (UK) Limited v Miller Steamship Co Pty Limited (“The Wagon Mound [No 2]”)

Maloney v Commissioner for Railways (NSW)

Rosenberg v Percival

Graham Barclay Oysters Pty Limited v Ryan

5. The fact that McDonald’s method of mopping up the Brytall spill was consistent with practice and with the Material Safety Data Sheets was powerful, although not decisive, evidence that he did not act negligently.

Dovuro Pty Limited v Wilkins

Marshall v Lindsey County Council

Rogers v Whitaker

6. The primary judge erred in accepting the registered valuer’s evidence as to the value of the land post fire. Its actual sale price within five months of the fire was the best evidence of value.

Commercial Union Assurance Co of Aust Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 referred to.

ORDERS

McDonald’s appeal:

1. Appeal allowed.

2. Judgment entered by Adams J on 8 March 2002 on Girkaid and Inghams’ claim set aside.

3. Girkaid and Inghams’ claim dismissed.

4. Girkaid and Inghams to pay McDonald’s costs of the appeal and of the proceedings below including such costs as McDonald is ordered to pay to Bryce, Hudson and SLE.

Hudson’s appeal:

1. Appeal allowed.

2. Judgments against Hudson set aside.

3. Cross-claims against Hudson dismissed.

4. McDonald to pay Hudson’s costs of the appeal and of the proceedings below.

Bryce’s appeal:

1. Appeal allowed.

2. Orders 4 to 7 inclusive, 12 and 15 of Adams J’s orders of 8 March 2002 set aside.

3. McDonald’s cross-claim against Bryce dismissed.

4. McDonald to pay Bryce’s costs of the appeal and of the proceedings below.

SLE’s cross-appeals:

1. Cross-appeals dismissed.

2. McDonald to pay SLE’s costs of the cross-appeal

CA 40253/02;
40215/02;
40225/02
SC 20335/98

BEAZLEY JA
McCOLL JA
YOUNG CJ in Eq
Tuesday, 31 August 2004

BARRY EDWARD McDONALD (t/as B. E. McDONALD TRANSPORT) v GIRKAID PTY LTD & 4 ORS

ROBERT BRYCE & CO LTD v GIRKAID PTY LTD & 4 ORS

HUDSON RESOURCES PTY LTD & 5 ORS v ROBERT BRYCE & CO LTD

Judgment

1 BEAZLEY JA: I agree with McColl JA.

2 McCOLL JA:

Introduction

3 On 29 January 1998 a fire broke out at a warehouse at Lot 2 Durie Road Cardiff. The warehouse was badly affected by the fire and, in due course, the structure was demolished to the concrete slab.

4 Girkaid Pty Limited (“Girkaid”) owned the land on which the warehouse was constructed. The warehouse was internally partitioned into two areas, one leased by Inghams Enterprises Pty Limited (“Inghams”), the other by Barry Edward McDonald trading as B. E. McDonald Transport (“McDonald”).

5 In January 1998 containers of tall oil, known by its trade name “Brytall”, were delivered to McDonald’s warehouse by Robert Bryce & Co Ltd (“Bryce”) for on-delivery by McDonald. Brytall is used in the manufacture of alkyd resins, detergents, cleansers, soaps, emulsifiers and lubricants, and as an ore flotation agent. Bryce imported the tall oil from New Zealand where it was manufactured by EKA Chemicals (Australia) Pty Limited (“EKA”) under the name “Pinechem 327”. Tall oil is extracted from pine trees. It is an organic oil.

6 Girkaid and Inghams claimed the fire had been caused by the spontaneous combustion of Brytall which had been mixed with a mineral absorbent, known by the trade name “attapulgite”, after a large quantity spilled in McDonald’s warehouse on 23 January 1998. The mixture had been left in two containers (referred to in the proceedings as containers “A” and “B”) inside McDonald’s warehouse during the 6 days prior to the fire.

7 McDonald obtained the attapulgite from SLE Industrial Supplies Pty Limited (“SLE”). SLE, in turn, had obtained the attapulgite from Hudson Resources Limited (“Hudson”). Attapulgite was a river clay which Hudson mined and sold. Attapulgite was marketed as an absorbent material which “readily absorbs oil [and] substantially reducing [fire] risks … [and] is non-flammable”. It was commonly used for absorbing both organic and inorganic oil spills.

8 The label on the Brytall containers identified their contents both as “Pinechem 327 Brytall 29/5 EN” and “distilled tall oil”. It referred to its net weight and its lot number. It stated in large letters “NON HAZARDOUS”. That meant that Brytall had been identified as not being hazardous to health. It listed first-aid instructions in the event that the product came into contact with the eyes or skin, or was ingested or inhaled. A telephone number, apparently in New Zealand, was provided for “specialist advice in emergency only”. The manufacturer was identified as EKA Chemicals (NZ) Limited whose address, telephone number and fax number, all in New Zealand, were provided.

9 Schedule 1 to the Dangerous Goods Regulation 1978 (NSW) classified liquids with a flash point above 150ºC as dangerous goods in class 3.4: see also s 4, Dangerous Goods Act 1975 (NSW), cl 16 Dangerous Goods Regulation 1978 (NSW). Dangerous goods within class 3.4 were “combustible liquids”: cl 4, Dangerous Goods Regulation 1978 (NSW). Brytall was classified as dangerous goods because it had a flash point of 220ºC. This means that at 220ºC, there would be sufficient vapour evaporating off the oil to sustain a temporary flame if exposed to a naked flame or flash.

10 Despite its classification, containers of Brytall were not required to carry a label warning that they contained dangerous goods: see Dangerous Goods Regulation 1978 (NSW). This may be explicable if it is understood that the reason why it is subject to the dangerous goods regime is because it is combustible i.e. it can burn in the circumstances to which I have referred. Mr Ashhurst who appeared for Bryce explained, without contradiction, that it was no different in that respect to any form of vegetable oil.

Structure of the proceedings

11 Girkaid and Inghams sued Mr McDonald in negligence and for breach of statutory duty said to have been created by regulation 19 of the Dangerous Goods Regulation 1978 (NSW). They were successful. Adams J held that the fire had been caused by the spontaneous combustion process for which Girkaid and Inghams contended, using the term “spontaneous combustion” as meaning self-heating to the point of spontaneous ignition.

12 The primary judge entered judgment in Girkaid’s favour against McDonald for $543,014.84. He entered judgment in Inghams’ favour against McDonald for $709,913.91.

13 The relative simplicity with which the proceedings were commenced belied the pleading complexity which emerged. The statement of claim spawned nine cross-claims which I describe below in the order in which they were filed. I have also sought to identify the outcome of the cross claims, although in some respects the orders entered did not appear to reflect the judgment.

14 McDonald denied it was liable to Girkaid and Inghams, but cross-claimed against Bryce claiming the fire and any resulting loss were caused by its breach of a term implied into the contract of bailment to give McDonald such information as would enable him to store and deliver Brytall safely. McDonald also claimed the fire and any loss Girkaid and Inghams suffered were caused by Bryce’s breach of statutory duty under regulations 18, 248 and 249(3) of the Dangerous Goods Regulation and its breach of its common law duty of care. McDonald sought to recover damages as well as contribution and/or indemnity for any judgment he might suffer pursuant to the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) (the “first cross-claim”). The primary judge found that Bryce had breached the contract of bailment in failing to inform McDonald of the propensity of Brytall to undergo spontaneous combustion when mixed with a substance such as attapulgite. As the damages for breach of contract were not susceptible to reduction for contributory negligence (Astley v Austrust Limited [1999] HCA 6; (1999) 197 CLR 1) he ordered Bryce to indemnify McDonald in respect of his liability to Girkaid and Inghams. He also entered judgment on the first cross-claim in McDonald’s favour for $179,940.00 in respect of losses McDonald suffered in the fire.

15 McDonald also cross-claimed against SLE claiming the fire and any resulting loss were caused by its breach of contract, breach of statutory duty and breach of its duty of care. He also sought contribution and/or indemnity for any judgment he might suffer pursuant to the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) (the “second cross-claim”). Adams J dismissed the second cross-claim.

16 Bryce cross-claimed against McDonald for breach of the contract of bailment of the goods McDonald held on its behalf at the warehouse on the night of the fire. It also claimed the fire and any loss Girkaid and Inghams suffered were caused by McDonald’s breach of his duty of care and statutory duty (the “third cross-claim”). The primary judge entered judgment in Bryce’s favour against McDonald in respect of the lost goods for $384,701.00 being their agreed value of $272,173.00 (see [52]) plus interest (see transcript 8 March 2002 at Black 247F). Bryce also sued EKA Chemicals in a fourth cross-claim but that claim was discontinued (see judgment at [57]).

17 SLE cross-claimed against Hudson seeking damages for breach of contract, breach of duty of care and breach of s 52 and s 53(a) of the Trade Practices Act 1974 (Cth). It also sought contribution and/or indemnity pursuant to s 87 of the Trade Practices Act and s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) (the “fifth cross-claim”). The primary judge dismissed the fifth cross-claim.

18 SLE also cross-claimed against Bryce seeking indemnity and/or contribution pursuant to the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) (the “sixth cross-claim”). The primary judge dismissed the sixth cross-claim.

19 Hudson cross-claimed against McDonald, Bryce and SLE seeking contribution and/or indemnity pursuant to the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) (the “seventh cross-claim”). The primary judge gave judgment for SLE on the seventh cross-claim and dismissed the seventh cross-claim against Bryce.

20 Bryce cross-claimed against Hudson and SLE seeking damages in respect of the loss of its containers of tall oil as well as contribution and/or indemnity pursuant to the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) (the “eighth cross-claim”). The primary judge gave judgment for SLE on the eighth cross-claim. He entered judgment for Bryce against Hudson for $153,880 (40% of $384,701).

21 McDonald cross-claimed against Hudson seeking damages as well as contribution and/or indemnity pursuant to the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) (the “ninth cross-claim”). The primary judge entered judgment in favour of McDonald against Hudson in the sum of $179,940 as well as ordering Hudson to indemnify McDonald for 40% of the judgments in favour of Girkaid and Inghams and for 40% of the judgment in favour of Bryce.

22 In summary, Girkaid and Inghams succeeded against McDonald. Bryce succeeded against McDonald in its claim for the loss of its goods. McDonald recovered a complete indemnity for his liability to Girkaid and Inghams from Bryce and a 40% indemnity from Hudson. He recovered a contribution of 40% from Hudson in respect of his liability in bailment to Bryce. McDonald recovered judgment against Hudson and Bryce in relation to his lost goods. SLE escaped liability entirely.

The appeals

23 McDonald, Bryce and Hudson appealed challenging the judgments they had suffered.

24 Girkaid and Inghams filed a Notice of Contention contending that the primary judge ought to have found that McDonald was liable on the basis that regulation 19 of the Dangerous Goods Regulation 1978 gave Girkaid and Inghams a private right of action against McDonald which he had breached.

25 McDonald filed a Notice of Contention in Bryce’s appeal asserting that the primary judge’s decision in relation to the first cross-claim should be affirmed on the basis, inter alia, that his Honour should have found that Bryce breached its duty of care to McDonald by failing to warn him of the danger of spontaneous combustion.

26 SLE cross-appealed in each of the appeals complaining of the dismissal of its cross-claims against Bryce, Hudson and McDonald. I could not locate any cross-claim SLE had filed against McDonald which would ground its cross-appeal in this respect.

Outline of the issues on appeal

27 There were, essentially, three issues on the appeal. They were, first, whether the primary judge’s finding that the fire was caused by the spontaneous combustion of the Brytall/attapulgite mixture could be sustained. Secondly, even if the causation finding stood, whether Girkaid and Inghams had established that McDonald had acted in breach of any statutory or common law duty. Finally, there was a quantum issue going to the value of Girkaid’s real estate consequent upon the destruction of the improvements erected upon it.

28 McDonald assumed the principal burden of challenging the primary judge’s causation and breach conclusions. As the other parties’ liabilities were consequent upon the primary judge’s rulings adverse to McDonald, save as to one matter, the consequence of McDonald’s appeal succeeding was that judgments on the cross-claims would be reversed. The one exception is Bryce’s claim for breach of its bailment contract. Bryce sought to retain its judgment against McDonald on this issue saying it was entitled to do so unless McDonald could prove that Bryce’s loss was not caused as a consequence of his failure to use such care and diligence as a prudent man would in relation to his own property: J Sperling Ltd v Bradshaw [1956] 2 All ER 121 at 125.

The facts

29 The core facts were set out by the primary judge in a manner which was not the subject of any complaint on appeal. For convenience I adopt that account (see Girkaid Pty Limited & 1 Ors v McDonald & Ors [2001] NSWSC 1202):

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

2 Mr McDonald operated a transport business, which first started trading in about 1972. The firm focused on short hauls around the Newcastle area and from Newcastle and Sydney. Mr McDonald owned several trucks of varying sizes and used two forklifts in the warehouse. Mr McDonald himself manages and organised the business including, especially, taking responsibility for the warehouse premises, which were leased from Girkaid. Mr McDonald's business was relatively modest, employing only five persons. Amongst the items transported were alcohol products of various kinds, which were kept in the warehouse overnight and distributed the next morning. Chemicals and bagged material were also stored at the warehouse for a relatively short time before transportation to their destinations. Mr McDonald had been using the warehouse since about 1991. One of its customers was Bryce & Company Limited (Bryce) whose products were frequently stored and transported by Mr McDonald. Some of the goods handled by Mr McDonald are "dangerous goods" within the meaning of the Dangerous Goods Act 1975 (the Act) and the Dangerous Goods Regula t ion 1978 (the Regulation) and he possessed the necessary licence.

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

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

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

30 Professor Gray gave evidence that in his opinion the fire had been caused by the spontaneous combustion of the tall oil/attapulgite mixture. McDonald and the cross-defendants disputed that conclusion. The primary judge recorded the challenge to Professor Gray’s thesis of spontaneous combustion in the following terms:

whether it had done so to the point of ignition spontaneously or because of the heat from the fire otherwise caused was, it was argued, speculative and, in the end, unproved.

Brytall

31 The following evidence should also be noted.

32 Material safety data sheets (“MSDSs”) are prepared by companies such as Bryce and Hudson in accordance with the Worksafe Australia National Code of Practice for the purpose, inter alia, of warning persons dealing with the product of any dangers that might be associated with its use, including fire risk, accidental spillage, and procedures for clean-up (at [30]).

33 McDonald called Mr Underwood to give expert evidence. Mr Underwood had thirty years’ experience as a professional engineer, with ten years of “fair involvement” in warehousing, and was an accredited consultant for WorkCover in relation to dangerous goods. According to Mr Underwood the National Code required the following information to be given in an MSDS in relation to spills:

· Steps to be taken to minimise a spill or leak.

· Methods used to clean up the spill or leak.

· Precautions to be observed by the clean-up crew, and

· Any special equipment required for clean up.

34 The National Code required the following matters to be dealt with in relation to the fire/explosion hazard of substances:

“Fire and explosion hazards under any reasonably foreseeable conditions of use and storage should be defined, and any dangerous decomposition or combustion products listed”, and

“… any potentially dangerous interaction with other substances should be included.”

35 Both EKA and Bryce had produced an MSDS in relation to Pinechem/Brytall. Neither MSDS had been supplied to McDonald. There was no evidence that the EKA MSDS had been supplied to Bryce or that a copy of it was in Australia at the time of the fire. Bryce’s MSDS had been prepared by a third party, Kilford & Kilford Pty Ltd, in August 1997. Neither MSDS warned of the risk of Pinechem/Brytall undergoing spontaneous combustion.

36 The Bryce MSDS relevantly stated:

"IV SAFE HANDLING INFORMATION

Storage and Transport:

Containers should be kept closed in order to minimise contamination. Keep from extreme heat and open flames, and make sure the material does not come into contact with water or acids.
Spills and disposals:

In event of a major spill, alert fire brigade and advise of nature & location of spill. Prevent spillage from entering drains or water courses.

Stop leak if safe to do so, and contain spill. Absorb onto vermiculite, sand, sawdust or other absorbent material. Sweep up and shovel or collect recoverable product into labelled containers for recycling or salvage.

Recycle containers wherever possible

After spills, wash area, preventing run off from entering drains. If material enters drains, advise emergency services

This material may be suitable for approved incineration or landfill. Dispose of only in compliance with local, state and federal regulations.

Launder all contaminated clothing before re-use.” (emphasis supplied)

37 The EKA MSDS (Blue 111) relevantly stated:

“7. Handling and storage …

Materials to Avoid: None

Fire and explosion protection: No special measures necessary …

Stability and reactivity:

…

no hazardous polymerisation will occur

…

Conditions to Avoid: Avoid prolonged contact with porous materials.”

38 Professor Gray said that polymerisation is part of the process of spontaneous combustion.

39 Attapulgite is a natural mineral which is mined in Western Australia. According to exhibit F, which was a document Hudson had provided to SLE, attapulgite:

Reduces Fire Hazards

40 There was nothing of any significance in the attapulgite MSDS. Professor Gray said that attapulgite was incombustible.

41 McDonald had been in the transport business since 1972 and in the business of carrying dangerous goods since the early 1980s. He had never heard of the propensity of any kind of oil to undergo spontaneous combustion. McDonald said that he was unaware that Brytall was a dangerous substance because there was no notification on the container to that effect, that he did not know it was classified as dangerous goods, and that the notion of oil spontaneously combusting was completely unknown to him. No one put to McDonald that he should have known Brytall was classified as dangerous goods. No one cross-examined McDonald to suggest he should have known there was a risk of the mixture undergoing spontaneous combustion or that he should have rung Brytall or EKA to determine whether the course he was pursuing in cleaning up the spilt tall oil was safe.

42 McDonald said he did not ring the emergency number shown on the Brytall label because he was not aware that Brytall was a dangerous substance as there was no notification to that effect on the container. He appears to have been fortified in his view that there was no risk associated with the Brytall by the fact that Mr Emerson provided the attapulgite to him in order to clean up the oil spill.

43 Mr Underwood said that McDonald had cleaned up the tall oil appropriately. He also expressed the opinion that on the basis of the information available to McDonald there was no reason for him “to foresee that there would be a risk of any adverse interaction between the Brytall and the attapulgite (clay) either immediately or overtime, should the mixed substances be kept in storage”. Mr Underwood said that he did not believe that people involved with the clean-up of goods would have anticipated a problem with using attapulgite to clean up the tall oil.

44 Mr Underwood drew attention to the Standards Australia Handbook, Dangerous Goods – Initial Emergency Response Guide, which provided immediate general information and advice for the handling of dangerous goods in emergency situations. It advised that an emergency response for a spill or a leak for highly flammable (low flashpoint) and flammable liquids was to absorb the spill with earth, sand or other non-combustible material. He said that that “strategy was followed in the Cardiff spillage incident”. It might be noted that, according to Professor Gray, Brytall was not in the category of highly flammable or flammable liquids. In other words, Brytall was less dangerous than the goods referred to in the passage Mr Underwood quoted.

45 Mr Bashford, who was the managing director of SLE, had been involved in the business of selling industrial supplies including oil absorbent materials for about fifteen years. He had never heard of the phenomenon of oils combusting spontaneously. He had sold products for mopping up oil spills for about sixteen years. None of those products had, to his recollection, borne any warning about the dangers of spontaneous combustion. No instances in which spontaneous combustion had occurred had come to his attention. Mr Emerson, another director of SLE, who had worked in the area of industrial supplies since about 1980, was not aware of the propensity of organic oil when mixed with attapulgite to undergo spontaneous combustion.

46 Professor Gray said that before he became involved in this case he had no real idea what tall oil was or what it was used for, nor any particular knowledge of its propensity to undergo spontaneous combustion.

Causation (Grounds 1 - 5)

47 McDonald’s challenge to the primary judge’s conclusion on causation was made in the following grounds of appeal:

“1. His Honour erred in finding that the fire was caused by the spontaneous combustion of the mixture of attapulgite and oil (“the mixture”).

2. His Honour ought to have found that the evidence before him, and his primary findings of fact, were capable of supporting an inference only that such spontaneous combustion was a possible, and not a probable, cause of the fire.

3. His Honour erred in finding in the absence of any probative evidence that the chances of the fire resulting from a cause independent of the mixture were very remote.

4. His Honour erred in finding in the absence of any probative evidence that the spontaneous combustion observed after the fire to have occurred in the mixture was more likely to have commenced prior to, and to have caused, the fire than to have occurred subsequent to, and to have been a result of the fire.

5. His Honour erred in adopting the conclusion of the expert witness Professor Gray that it was ‘next to impossible’ that the spontaneous combustion in container B was caused by heat from the fire (par. 14, 16) without forming an independent judgment of that matter based on the evidence”.

48 In order to understand these grounds of appeal it is necessary to consider Professor Gray’s evidence in detail.

Professor Gray’s evidence

49 Professor Gray was the Emeritus Professor of Chemistry at Macquarie University. He had an impressive curriculum vitae demonstrating a longstanding interest in, and study of, combustion, ignition and explosion theory. His studies included the prevention of spontaneous ignition. He had undertaken consultations involving researching fire and/or explosion issues. No other witness with his expertise was called.

50 Professor Gray expressed the opinion, in essence, that:

· the combination of tall oil with attapulgite created a mixture capable of spontaneous combustion;

· his observations at the warehouse approximately two weeks after the fire were consistent with the hypothesis that the mixture had spontaneously combusted;

· Tall oil had a propensity to undergo spontaneous combustion because of the presence in tall oil of linoleic acid;

· Spontaneous ignition of the oil-soaked absorbent material was, with a very high degree of probability, the cause of the fire in question.

51 Mr Finch SC who appeared with Mr Braham for McDonald argued that Professor Gray’s theory never rose above the level of possibility. In other words, it did not achieve the standard of probability required to enable Girkaid and Inghams to discharge their burden of proof on the issue of causation.

52 Professor Gray’s opinion was based on experience, observations at the site, tests and research.

Observations

53 Professor Gray inspected the scene of the fire on 16 February 1998. He set out the observations he made on that occasion in his report of 22 February 1998 (the “first report”). He used a diagram, apparently prepared by McDonald, to understand the distribution of chemicals in the warehouse before the fire occurred.

54 He found that the outside of Container A was “up against solid insulating non-flammable material”. He examined the remaining material in Container A by making a clean cut through it. He said that, having regard to the proximity of the container to the insulating non-flammable material, external flame from the fire could not have impinged on the container to cause the combustion pattern he observed. He observed “darkening, due to combustion, in the interior of the attapulgite”. Temperature readings in Container A read “close to ambient temperature” which meant, according to Professor Gray, “no significant thermal activity” was taking place. He concluded from his examination of Container A that its contents had undergone “subcritical spontaneous combustion” – a process which “takes place during the run up to fully fledged fire which occurs when the spontaneous combustion activity reaches the outside of the container usually on or close to the top”.

55 Preliminary excavations in the area of Container B revealed what Professor Gray described as “easily identifiable visually as oil soaked attapulgite”. Further excavation revealed “attapulgite which was showing signs of charring and darkening, an indication of oxidation of oil on the porous material”.

56 A temperature reading in the “general vicinity” of Container B showed a temperature of 162ºC (324ºF). Professor Gray expressed the opinion, in his first report, that:

“This kind of temperature existing no more than 30 – 35 cms above the ground level, which was awash with wet sludge from the extinguishing water and rain subsequent to the fire, indicated very clearly that chemical exothermic (heat generating) reaction must be taking place even though the fire had been ‘extinguished’ 2.5 weeks earlier.”

57 Container B had been “almost completely destroyed”. However, Professor Gray observed charring on container B which, he opined, was “more extensive on the inside … than on the outside”. He was in no doubt that the contents of Container B had undergone spontaneous combustion i.e. had burned from the inside out. He observed the contents of container B to be in an “advanced stage of combustion inside a virtually uncharred container wall”. There were also “localised variations in colour (and hence combustion degree of advancement)”. He said the variations were “characteristic of spontaneous combustion in packed materials of this sort”. He said his observations could not “be explained as the effect of a large scale fire occurring over a relatively short period” but were “strongly indicative of a relatively slow combustion process taking place over a period of days or weeks with a limited supply of oxygen”.

58 Professor Gray concluded that Container A was “an excellent representation of Container B with a time lag of a day or two” and that “the existence of Container A showing unquestionably the presence of spontaneous combustion is a highly unusual piece of evidence which gives us a picture of what Container B must have been like a day or two before the fire”.

59 According to Professor Gray the time taken for spontaneous combustion to reach the outside of a container and thus cause overt fire measured from the time of packing depended upon a variety of factors including the average ambient temperature during the period, the size and shape of the container and the density and packing of the materials. He said that “generally most materials of this type would be expected to ignite after a period of days rather than hours”. Accordingly, he expressed the opinion that “the time elapsed between the oil spill and the fire is entirely consistent with the cause being spontaneous combustion of a body (container) of around 1 cubic metre in volume such as the Brytall containers were”.

60 Professor Gray said one of the “major components” of tall oil was linoleic acid, “[an] unsaturated fatty acid … renowned for its propensity to undergo spontaneous combustion when distributed on any kind of porous material, in particular in this case attapulgite”. He said that linoleic acid was a major component of linseed oil “which itself has been responsible for many major fire losses due to its liability to undergo spontaneous combustion when distributed in such a way as to allow easy access for air (due to porosity)”.

61 Professor Gray referred to the Bryce MSDS and noted it did not mention any possible hazard due to spontaneous combustion. Referring to the recommendation that spills should be absorbed onto absorbent material, swept up and collected in labelled containers for recycling or salvage, he said that in cleaning up the spill of Brytall with attapulgite, McDonald had followed the instructions in the Bryce MSDS or at “least behaved in a way entirely consistent with them”. He expressed the view that such behaviour had “resulted in spontaneous ignition of the oil-soaked absorbent material which was, with a very high degree of probability, the cause of the fire in question”.

62 Professor Gray referred to the statement in the EKA MSDS, “[a]void prolonged contact with porous materials”. He said that it referred to the possibility of spontaneous combustion. He opined that if McDonald had followed that instruction “the spontaneous combustion and subsequent fire would not have occurred.”

63 Professor Gray concluded:

“With an extremely high degree of probability the cause of the fire of January 29th at Macdonald (sic) Transport was spontaneous combustion of “Brytall” oil absorbed on “Attapulgite” absorbent material and the fact that it was left to stand in approximately 1 cubic metre containers for a prolonged period during a period of hot weather.

Extremely strong evidence for this is summarised as

1- The physical condition of container “B” and the fact that it was still undergoing spontaneous combustion more than two weeks after the fire.

2- The physical condition of container “A” which was less well insulated and was in the early stages of spontaneous combustion at the time of the fire.

3- The presence of a known spontaneous combustion prone material (linoleic acid) in the oil which was spilled six days before the fire.

4- The absorption of this oil on a highly porous material and subsequent storage in a condition known to be highly favourable to spontaneous combustion of such products.

5- The time period elapsed between the spill and the fire, which is in the region expected for spontaneous combustion to develop in one cubic metre of such material.

this indicates that it is highly probable that the propensity for spontaneous combustion under these conditions was well known in the manufacturing industry for this product.”

Laboratory tests

64 On 9 March 1998 Professor Gray produced a supplementary report (the “second report”) which dealt (inter alia) with a test he undertook with a mixture of Brytall and attapulgite in order to detect the mixture’s ability to undergo spontaneous combustion. He said the test was intended as “quantification of the process” as “there is no question at all that [spontaneous combustion] occurs”.

65 The test involved packing a container with attapulgite onto which Professor Gray had absorbed a quantity of Brytall, allowing it to stand with the oil absorbed overnight and then placing it in an oven heated to 120ºC. Professor Gray said that the test mixture reached 120ºC within a little over an hour and self-heated another 113º to 223ºC four hours later. The oven temperature was maintained at 120ºC throughout the experiment which was conducted over 30 hours. The temperature of the test mixture did not rise above 223ºC.

66 According to Professor Gray subsequent observations of the mixture revealed “interior darkening” which “indicat[ed] a considerable degree of self-heating above oven temperature”. Professor Gray was struck by the similarity between the appearance of the tall oil/attapulgite in the test container after the test and the contents of containers A and B.

67 Professor Gray also undertook gas chromatographic tests of the tall oil which he said in the second report identified it as “largely linoleic acid”.

68 Professor Gray referred again to the Bryce and EKA MSDSs in his second report. He opined that the statement “none” in the Bryce MSDS under the heading “Unusual fire and explosion hazards” (sic – the word “unusual” was not in the relevant heading) was “positively misleading when the material contains a significant proportion of linoleic acid”.

69 Professor Gray concluded that the matters in his second report reinforced his conclusion that the fire was started by spontaneous combustion taking place in container B. He expressed the opinion that “there is a probability of 80% that this was the fire cause”.

70 Professor Gray said that in order to raise the probability closer to 100% it would be necessary to run:

“… a complete set of scale tests on a number of containers of various sizes in order to do the standard extrapolation to a 1 cubic metre container such as I observed in the warehouse after the fire. These tests would determine the lowest ambient temperature at which such a large container would undergo spontaneous combustion of sufficient intensity to ignite the cardboard container in which the material was housed.

This investigation would be unusual in so far as the porous material on which the oil is dispersed is not itself flammable, i.e. it is simply clay. In standard investigations of eg. linseed oil disbursed on cotton rags, the rags themselves are flammable and ignition tends to occur at the centre of the container where the temperature is the highest. However in this case the highest temperature will occur in a region where there is NO flammable material. It would be necessary for the edge temperature (quite significantly lower than the centre) to be high enough to ignite the cardboard container, thus allowing ingress of fresh oxygen and the appearance of flame on the outside of the container. This kind of investigation has not to my knowledge been carried out.”

71 Professor Gray’s third report dated 9 September 1999 commented on what I infer were 2 expert reports served by other parties. He noted that the purpose of the test referred to in his second report was:

therefore under some conditions self ignite

72 Professor Gray said that tests could be undertaken to determine the ambient temperature at which ignition would be brought about to determine, as I understand his third report, the “critical ambient temperature for the keg” (referring to Container B). He annexed a publication entitled “Spontaneous Ignition Hazards in Stockpiles of Cellulosic Materials: Criteria for Safe Storage” said to demonstrate that testing procedure. Professor Gray was never asked to perform the tests set out in that annexure, nor any tests which would demonstrate under what conditions the self heating reaction in a tall oil/attapulgite mixture would lead to self ignition – although such tests were possible.

73 Professor Gray said:

“The (admittedly incomplete) evidence in my report [this appears to be a reference to his second report] is not meant to be obtained as ‘a simulation of service conditions’.

the very well understood theory of spontaneous combustion has

very strong implications as to what to expect under service conditions

That was as far as my instructions allowed me to go

74 In his fourth report dated 19 December 2000, Professor Gray set out the results of an analysis of Brytall which showed that “[t]he polyunsaturated fraction consisted largely of linoleic acid and the unsaturated fraction was largely oleic acid. The concentration of oleic acid was about 150% that of linoleic acid”. Mr Faulkner SC who appeared for Girkaid and Inghams agreed that that meant linoleic acid constituted about 6% of the Brytall. The significance of this percentage compared to Professor Gray’s earlier statement that the tall oil was “largely linoleic acid” was not explored at the trial.

75 Professor Gray noted that tall oil was not a “well defined chemical compound but a mixture (to some extent dependent on origin)”. There was no doubt, according to him, of the “substantial presence of the spontaneous combustion prone compounds oleic and linoleic acids”.

76 He then noted that linoleic acid was a major component of linseed oil. He said it was one of the components of linseed oil which was responsible for that oil’s propensity “to spontaneously ignite when suitable (sic) disbursed on porous material”. Professor Gray then opined that “all references to the spontaneous combustion of linseed oil are indirect references to the proneness of linoleic (and to a lesser extent oleic) acids to spontaneously ignite” (emphasis supplied).

77 Professor Gray attached to his fourth report what he described as a “typical MSDS for linseed oil”. That document stated under the heading “Stability and reactivity”:

“Materials to avoid: porous materials will absorb the oil and can cause spontaneous combustion.”

78 The linseed oil MSDS also showed that its constituent ingredients included oleic acid (20 – 30%), linoleic acid (15 – 20%) and linolenic acid (45 – 55%).

79 Professor Gray gave a number of references to literature concerning the spontaneous combustion of linseed oil which, he said, dated back to the nineteenth century. In what I understand to be a reference to a monograph dealing with “Self-heating: evaluating and controlling the hazards” by a P C Bowes, Professor Gray noted that the author referred to the oxidisation rate which is responsible for the self heating and combustion “of linoleic and oleic acids themselves individually” and then said “[l]inoleic acid has been shown to oxidise twelve times more rapidly than oleic acid”.

80 Professor Gray said that he had investigated seven incidents involving the spontaneous combustion of “linoleic acid (in combination with other substances)” in the past few years. He gave no details of those investigations.

81 Professor Gray also attached to his fourth report an MSDS and a technical bulletin relating to products containing tall oil fatty acids. Both documents refer to the possibility of spontaneous combustion in relation to materials soaked with the product. The first attachment, which related to a carbon remover, referred to spontaneous combustion in relation to “combustible materials soaked with this product”. The second, which related to a zone marking paint, appeared also to refer to combustible materials when it referred to avoiding spontaneous combustion by the safe disposition of “used rags…”. Professor Gray identified these documents after undertaking a web search using the words “tall oil spontaneous combustion”.

82 Professor Gray suggested that the manufacturers of the products referred to in those two attachments had made “the direct connection with tall oil products and spontaneous combustion … without necessarily identifying components common to linseed and tall oils.”

Professor Gray’s oral testimony

83 Professor Gray’s evidence-in-chief was short and added little to his written reports. His principal oral testimony was given under cross-examination.

84 Professor Gray said he was “virtually certain” that spontaneous combustion occurred in Container B. He accepted, however, that the questionable area was whether that spontaneous combustion caused the fire.

85 Professor Gray said it was possible to design and conduct experiments which so constructed the mixture and the temperature and the time and the volume that one could extrapolate from the test to an actual event to see whether or not the actual event was likely or not to have involved self heating. He said he had not done such an experiment in this case in the absence of instructions. He also said there was no reason, save for instructions, why a large-scale test which would give rise to close to incontrovertible results could not be done.

86 Mr Finch SC cross-examined Professor Gray about the significance of his laboratory test in the following exchange:

87 He returned to the utility of his experiment in a later passage as follows:

“[Professor Gray] … the experiment that I described shows that Brytall with Attapulgite is capable of self-heating….Now it follows from basic physical chemical principles that the material which can be shown to be capable of self-heating by chemical reaction can under some conditions, we don’t need to define what the conditions are, but there exist conditions in terms of the parameters outlined by counsel yesterday under which that self-heating can cause spontaneous ignition …

[I]t follows that my experiment shows that at temperatures higher than 120 degrees there will be significant self-heating and heat generated by this material in the bins. I am not trying to say that my experiment proves that under the conditions in the warehouse spontaneous ignition could have occurred but simply once we have agreed that this material is a self-heater capable of self-heating by chemical reaction, it follows from absolute basic principles of chemistry that there exist conditions under which samples of Attapulgite and tall oil can undergo spontaneous ignition.

88 Professor Gray was asked whether the most likely explanation of what was seen in the containers was that it was induced by the fire which took place in the warehouse. He resisted that proposition by explaining what Mr Finch SC described as the “deflagration wave theory”. As explained by Mr Finch SC on appeal that theory, in essence, was that if another fire had enveloped the container in which the mixture had been deposited a deflagration wave would occur which involved the outside skin of the container burning first, setting up a temperature gradient sufficient to burn from the outside into the container and eventually consuming the entirety of the container (the “onion skin effect”). Professor Gray rejected the “other fire” theory, because he did not observe the onion skin effect on either container A or B.

89 Professor Gray explained the deflagration wave theory in the following way (omitting what appear to me to be extraneous passages):

“[Professor Gray] … [L]et’s take a mental picture of bin B or bin A. The material that was placed in it and scraped off the floor of the warehouse probably the floor, the ground temperature even in Cardiff in January or February are not very high. They are usually around the low 20s or thereabouts so we can assume that the initial temperature of the stuff was around the low 20 mark if that’s agreeable. The rate of heat generation by this established thermogenetic reaction would be rather small at that temperature.

Now, the fire starts from some other source. It is very intense. There was a lot of oxygen producing material. There was hydrogen peroxide and Calcium hypochlorite. These materials produce pure oxygen.

We could have a very hot fire so we picture a bin of reactive material, potentially reactive material, which can generate heat we have already agreed. The exterior of the bin is subjected to 500 degrees centigrade for the sake of argument. That’s a reasonable figure I think so in a short time the thin exterior level of the material very quickly will reach 500 degrees centigrade …

So the very first thing that happens is that the outer layer is heated very quickly. We are only talking about an infinitesimal thin layer of reactive material. It is suddenly heated from [sic, “from” was probably “to”] 500 degrees to from 20, maybe 25 degrees.

…

… if we make the assumption that the temperature coefficient is in the same ball park as related reactions then it is a simple calculation to show that the ratio of the heat generation rates in the outer thin annulus at 500 degrees centigrade and the rest of the material which is at 20 degrees centigrade is one billion times approximately, maybe 100 million billion, something like that range, huge, so in a very small fraction of a second all the combustible material in that outer layer will be consumed because the reaction rate is very very rapid. Once you hit it with a very high temperature, you are then locked into very high reaction rates so all the oil in your outer layer is consumed. It is consumed in a way which is going to produce some heat because it is a thermo generating reaction, heat-generating reaction.

So the temperature increase resulting from that driven reaction now will be of the order of 300 degrees to completely combust the material in this layer. You are going to get a temperature rise of about 300 because I obtained a temperature rise of 113 as a combustible temperature.

… [I]t can be quantified so in the first microsecond of the temperature of the hot fire hitting the outer of the bin, the temperature of the outer sliver becomes 800 degrees centigrade. There is no fuel left there. Everything has gone black so we have a very thin sliver at 800 degrees centigrade and next to it we have got very nearly still 25 degrees or 20 degrees. …

One can use the heat conduction equation, given that knowledge which I have just outlined, and one can calculate what would be the approximate temperature in the centre after four hours assuming no chemical reaction. It gets its inflammation purely by heat conduction and the answer is about 20 degrees above so it would get up to about 40 degrees only centigrade, even though it has been exposed externally to 500 degrees for four hours …

The other side of that coin which is ultimately what demolishes this alternative theory is that the entry of heat to significantly affect a large body of this material is also very slow if it is purely by heat conduction. …

…[T]he reality of this situation is that this is reactive material. It is not simply a burnt cake. It is reactive material and at 800 degrees it is very reactive material. I have just indicated the rate of reaction which is a rate of heat generation itself so at 500 degrees and then the rate of reaction produces heat which heats it to the order of 800 degrees and in so doing consumes all of the oil in that sliver.

This reaction thereby produces a very large temperature gradient within the material. In the edge of the material in two directions it produces a very sharp spike of temperature close to the outside of the material so down the outside of the spike. …

…There is a large temperature spike generated which has a peak of 800 degrees. Three is a large gradient towards the outside of a factor of 500 so heat would be lost down that and there is an even larger gradient and it can be shown on the inside of the material. This is a very thin spike so as heat is conducted down that spike, down the gradient according to Fourier’s law.

…

Q. You have already dealt with the outside onion skin layer?
A. Yes.

The net result of this is that this wave travels inwards, the combustion wave or deflagration travels inwards from the faces on which the 500 degrees has impinged until they meet other waves coming from other sides. There is no fuel left so that’s it. The whole fuel contents of the bin has gone. …

[W]hat I am getting at is that where a material of this sort that suffered deflagration waves, these are not spontaneous ignitions. This is a proven deflagration wave caused by the high temperature.

The aftermath of that is absolute devastation. There is no fuel left. You can’t expose a combustible reactable material to an 800 degree temperature moving in without removing all the fuel. There’s nothing left so after this has finished and the fire has been put out it will be stone cold dead on February 15 when I went up to measure it.

There is a reason and maybe it is too elementary but I will see. The reason for this is that there is a conservation principle at work here which is conservation of energy which is a basic law of physics. This says that the amount of energy that can be released from a given amount of fuel is fixed. If you release that energy very quickly at a high temperature, you can’t maintain that for a very long time. If you release it relatively slowly at a relatively low temperature, you can maintain the reaction for weeks.

90 Mr Finch SC put to Professor Gray that his deflagration wave theory could not be valid because, despite there having been “another fire” (the fire which consumed the warehouse), the onion skin effect was not observed on the containers. Professor Gray gave what the primary judge referred to (at [14]) as “a lengthy explanation, which I need not set out here, but which seemed to me (as a lay person) to be convincing, … [indicating] why [the professor] thought that this was not only unlikely but next to impossible.” Professor Gray’s response, in short, was that “getting into discussions of the way the fire develops, once it has developed in terms of fuel load and movement of air is extremely precarious and speculative”. While he was not prepared to speculate, an explanation was that the fire was not of sufficient intensity to create a destructive deflagration wave in the area of the containers.

91 Professor Gray also sought to explain the reason the onion skin effect was not observed on container B by reference to there having been an intermediate position. He said:

“HIS HONOUR: Q. Another question occurs to me: Assume that the fire commenced because of some spontaneous combustion in the mixture. As I understand you to say, that fire would have eventually resulted in temperatures of the order of 500 degrees.

FINCH: At the edge of the material, I presume?

HIS HONOUR: No. I am saying that you have spontaneous combustion which starts to consume B but moves elsewhere because other parts were burned -

Q. Is that right?

Q. And so it has other fuel available?

Q. Overall then the temperature would or could well, as I understood you to say, reach 500 degrees, perhaps even more?

182 Their Honours said (at 164 – 165) that in the event that the principles of interpretation referred to in Bull v Attorney General (NSW) and Beckwith v The Queen came into conflict then:

the process of construction must yield for all purposes a definitive statement of the incidence of an obligation imposed on the employer

183 The proposition that where a statute creates both a criminal offence and, properly construed, confers a private right to damages for breach of the statutory duty imposed, “the measure of the duty does not change with the character of the proceedings taken to enforce it” was reiterated by Brennan J in Chugg v Pacific Dunlop Limited (1990) 170 CLR 249 at 252.

184 Waugh v Kippen provides a useful illustration of the application of what I will term the remedial/penal approach to interpretation. It concerned the interpretation of a rule made under the Factories and Shops Act 1960 (Qld) providing that a male employee aged over eighteen should not be “permitted or allowed to lift carry or move by hand any object so heavy as to be likely to cause risk of injury”. The majority held (at 165) that the rule did not impose absolute liability. Rather, the words “permitted or allowed” imported the notion of actual or constructive awareness. Thus, the question of liability was to be judged “in the light of what the employer knew or ought to have known of [the] employee’s incapacity”.

185 Their Honours referred to Sheen v Fields Pty Limited (1984) 58 ALJR 93 where, in considering the interpretation of a rule requiring an employer to provide eye protection where there was a “likelihood of injury to the eyes of an employee”, Gibbs CJ (with whom Mason, Wilson and Dawson JJ agreed) said (at pp 95 – 96):

It would be unreasonable to construe the rule as casting an obligation

unless the employer could reasonably be expected to foresee that the employee might act in this way

186 Applying that reasoning, the majority held (at 166) that it would be unreasonable to construe the rule under consideration “as casting an obligation on an employer to protect his employee from a risk of injury of which he neither knew nor ought to have known”.

187 This approach was consistent with the common law presumption that knowledge (which may include constructive knowledge) is an essential element of criminal offences. In He Kaw Teh v R (1985) 157 CLR 523 at 567, Brennan J (as he then was) explained the rationale of this presumption in the following terms:

It requires clear language before it can be said that a statute provides for a person to do or to abstain from doing something at his peril and to make him criminally liable if his conduct turns out to be prohibited because of circumstances that that person did not know or because of results that he could not foresee.

A statute is not so construed unless effective precautions can be taken to avoid the possibility of the occurrence of the external elements of the offence

188 The requirement that clear words are required in interpreting penal provisions was emphasised in Murphy v Farmer (1988) 165 CLR 19 at 28, where Deane, Dawson and Gaudron JJ said:

189 That statement was applied by Giles JA (with whom James J and Badgery-Parker AJ agreed) in R v Stanley John Miller [2001] NSWCCA 209; (2001) 127 A Crim R 344 at [54] in construing s 73 of the Crimes Act 1900 (NSW). His Honour said it would not be “consonant with this approach so to interpret s 73 that it would have a wide and uncertain reach in place of that given in taking its words in their accepted meanings; nor should a purposive construction be given to it if that would depart from the accepted meanings”. (emphasis supplied)

190 Applying these principles to the interpretation of regulations 18(e) and 19(e), it is plain, in my view, that the obligations they imposed were not absolute: Chugg v Dunlop Limited (1990) 170 CLR 249 at 251 per Brennan J; Slivak v Lurgi (Australia) Pty Limited [2001] HCA 6; (2001) 205 CLR 304 at 332 [87] per Callinan J. Rather, the words requiring the occupier to take “all practicable steps” and “all practicable precautions” indicate that regulations 18(e) and 19(e) should be interpreted as imposing a penalty, and a corresponding private cause of action, only in circumstances where the occupier of the relevant premises (in this case McDonald) knew or ought to have known that the course of conduct he was taking involved a risk proscribed by the regulations.

191 Thus, the question whether McDonald took “practicable steps” or “practicable precautions” turned on what he knew or ought to have known or did or ought to have done, having regard to the hazard posed by the Brytall. It would, in my view, be an unreasonable construction of regulation 18(e) to find that it imposed an obligation on McDonald to give instructions in relation to a risk of which he was neither aware nor ought to have been aware.

192 In like vein, regulation 19(e) required McDonald to take precautions he knew or ought to have known were practicable to prevent, in this instance, the dangerous goods catching fire. Again, it would be an unreasonable interpretation of regulation 19(e) to find that it required McDonald to take precautions against a risk of which he was neither aware nor ought to have been aware.

193 A brief survey of authorities which have considered a statutory duty which turned on practicability bears out this conclusion. Thus, in Adsett v K & L Steelfounders and Engineers Ltd [1953] 1 WLR 773; [1953] 2 All ER 320 applied in Brear v British Paints Ltd [1978] 2 NSWLR 253 at 258, it was held that in determining whether a provision requiring “all practicable measures to be taken” has been complied with, regard must be had to the state of knowledge at the material time.

194 Authority also dictates that the question of practicability should be determined in a commonsense manner. All the circumstances of the case, including practice, should be taken into account: Jayne v National Coal Board [1963] 2 All ER 220 at 223 (where Veale J said it was “clearly impracticable to take precautions against a danger which could not be known to be in existence”); Nicholson v Heaven & Earth Gallery Pty Ltd (1994) 126 ALR 233 at 244 per Wilcox J; F D R Pty Ltd v Gilmore; Gilmore v Cecil Bros (1998) 80 IR 411. Something is “practicable” if it is capable of being put into practice or feasible: Uebergang v Australian Wheat Board (1980) 145 CLR 266 at 305 per Stephen and Mason JJ; Pioneer Concrete Services Ltd v Yelnah Pty Ltd (1986) 5 NSWLR 254 at 268 per Young J (as he then was); see also M38/2002 v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCAFC 131; (2003) 199 ALR 290 at [65].

195 Finally I note that the question whether a step or precaution is “practicable” requires making a value judgment in the light of all the facts: cf Slivak v Lurgi (Australia) Pty Limited, above, at 322 [53] per Gaudron J.

196 Girkaid and Inghams bore the onus of proving that McDonald had breached the statutory duty imposed by regulations 18(e) and 19(e): see Slivak v Lurgi (Australia) Pty Ltd, above, at [92] – [98] per Callinan J with whom judgment on this issue Gleeson CJ, Gummow and Hayne JJ (at [39]) and Gaudron J (at [58]) agreed.

197 This required them to demonstrate both that McDonald knew or ought to have been aware that the course he was going to undertake involved a risk against which practicable steps to ensure adequate instructions were available or precautions to avoid fire should be taken. Thus although, strictly speaking, actions for breach of statutory duty do not invoke the concept of foreseeability, in essence the same notion is imparted by the requirement to determine what McDonald knew or ought to have known.

198 I propose, therefore, to consider this aspect of the case under the general heading of foreseeability. Before I do so, however, I note that Girkaid and Inghams’ case on this issue turned on Professor Gray’s evidence that the propensity of a mixture of substances containing linoleic acid and other materials to undergo spontaneous combustion was a “well known scientific fact”, coupled with the proposition that McDonald ought to have become aware of the risks by making inquiries. That much might be accepted. I reject, however, Mr Faulkner SC’s submission that what McDonald would have discovered had he made inquiries was a “red herring”. That submission is inconsistent with the proposition that penal consequences will not be imposed upon a person in respect of results which he could not foresee.

Foreseeability

199 In Overseas Tankship (UK) Limited v Miller Steamship Co Pty Limited (The Wagon Mound [No 2]) [1967] 1 AC 617 at 643, Lord Reid, who gave the Advice of the Judicial Committee of the Privy Council, identified a “real risk” as being “… one which would occur to the mind of a reasonable man in the position of the defendant’s servant and which he would not brush aside as far-fetched”. This approach was adopted in Wyong Shire Council v Shirt (1980) 146 CLR 40 at 47 – 48, where Mason J (with whom Stephen J and Aickin J agreed) said:

whether a reasonable man

in the defendant’s position

200 In determining whether McDonald should reasonably have foreseen that his conduct might have involved a risk of injury it was not necessary that he should have foreseen the precise risk of injury or how it occurred. It was sufficient if the risk was one of a class of risk which, in a general way, he ought have foreseen: Graham Barclay Oysters Pty Limited v Ryan [2002] HCA 54; (2002) 211 CLR 540 at 578 [87] per McHugh J.

201 It is essential in determining the issue of breach to eschew “the use of increased knowledge or experience embraced in hindsight after the event”: Maloney v Commissioner for Railways (NSW) (1978) 52 ALJR 292 at 292, quoted by Gummow J in Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434 at 456 [68]. In Rosenberg v Percival at [16], Gleeson CJ warned about the danger of viewing the conduct of parties “through the prism of hindsight”, saying:

“A foreseeable risk has eventuated, and harm has resulted. The particular risk becomes the focus of attention. But at the time of the allegedly tortious conduct, there may have been no reason to single it out from a number of adverse contingencies, or to attach to it the significance it later assumed. Recent judgments in this Court have drawn attention to the danger of a failure, after the event, to take account of the context, before or at the time of the event, in which a contingency was to be evaluated.”

202 Thus, the question of whether McDonald was in breach of any relevant statutory duty or his common law duty of care turned on whether a reasonable holder of a dangerous goods licence in McDonald’s position would have foreseen that his conduct in mopping up the tall oil with attapulgite and placing it in containers for several days involved a risk of injury to Girkaid and Inghams.

203 In my view, the risk of injury from the exercise McDonald undertook was not reasonably foreseeable to the holder of a dangerous goods licence in his position.

204 At a very elementary level, this proposition can be tested by reference to the Dangerous Goods Regulation itself. The Regulation did not identify spontaneous combustion as a risk associated with dangerous goods. It might have been thought that if the regulatory authorities were of the view that spontaneous combustion was a risk associated with any class of dangerous goods, that fact would have been stated clearly in the regulations. The risk the regulations required McDonald to guard against in relation to Brytall was the risk that it might ignite if exposed to a naked flame.

205 I have already pointed out that McDonald was unaware that tall oil was classified as dangerous goods. His ignorance would not, of course, be something one would impute to the reasonable holder of a dangerous goods licence. It should be assumed that such a person would have been aware that Brytall was classified as dangerous goods because it had a flash point above 150º C. Accordingly, viewed within the regulatory framework, the question of what McDonald ought to have known would be resolved by saying he ought to have known that if Brytall was exposed to a naked flame it might have burst into flames.

206 It would, however, be an unreasonable interpretation of the regulations to find that they imposed penal consequences on McDonald in respect of a risk which the regulations did not attach to the statutory classification of Brytall. The fact that the Dangerous Goods Regulation 1978 was irrelevant to the risk of spontaneous combustion was made plain by Professor Gray who said that flash point had nothing to do with spontaneous combustion.

207 Accordingly the question was whether McDonald ought to have foreseen the risk of spontaneous combustion of the tall oil/attapulgite mixture, applying common law principles. The primary judge appears to have been influenced by what he said was Professor Gray’s evidence that “there were a significant number of references in the literature to the propensity of tall oil to self-combust” (at [37]). However, with respect to the primary judge, Professor Gray’s evidence was that there were “voluminous” references to the spontaneous combustion of linseed oil (a substance principally composed of linolenic acid which is a more reactive substance than linoleic acid) and that such references were “indirect references to the proneness of linoleic (and to a lesser extent oleic) acids to spontaneously ignite”. Despite his undoubted expertise in the area of combustion issues, the fact was that Professor Gray had never heard of tall oil until this case – let alone of it undergoing spontaneous combustion. The reference in the two annexures to his fourth report to spontaneous combustion related to substances of which tall oil was a component, albeit in unknown quantities. The fact that an internet search using the combination “tall oil spontaneous combustion” turned up only two rather obscure references might be regarded as an indication that, in fact, tall oil was not renowned for its propensity to undergo spontaneous combustion. There was, furthermore, in my view, no evidence that the professed propensity of tall oil to undergo spontaneous combustion was “sufficiently known in industry” let alone in the warehousing industry. The evidence was to the opposite effect.

208 None of the lay witnesses had heard of the risk of an oil undergoing spontaneous combustion. McDonald’s evidence was that he had never heard of the propensity of any kind of oil to undergo spontaneous combustion. It was not suggested to him that he ought to have known of that propensity. Similarly, Mr Bashford and Mr Emerson, both of whom had lengthy experience in the area of industrial supplies, had never heard of the phenomenon of oils combusting spontaneously. Mr Underwood accepted that “with hindsight it could be argued that the porosity of the attapulgite was significant in that it may well have increased the physical risk associated with having the oil contact a material with a very high surface area”. It certainly does not appear that he was of the view that the propensity of oil to undergo spontaneous combustion was well known to those responsible for dangerous goods.

209 These witnesses all gave evidence with the benefit of hindsight. While not doubting their evidence, which was not challenged, its reliability may be tested by reference to the objective facts at the time of the events under consideration: cf Chappel v Hart [1998] HCA 55; (1998) 195 CLR 232 at 246, footnote 33 per McHugh J.

210 Those objective facts are found in the MSDSs produced in relation to Brytall by Bryce and EKA. Neither of those documents referred to there being any risk associated with mopping up a spill of Brytall with a porous material such as attapulgite and storing it in containers – let alone a risk of spontaneous combustion.

211 The Bryce MSDS recommended that after the spill was absorbed it be shovelled and collected into containers for recycling of salvage. It was implicit in that statement that there was no risk in keeping such a mixture in containers for a period of time. The six or so days the mixture had rested in the containers before the fire started was clearly not unreasonable in that light.

212 The Bryce MSDS also said there were no unusual fire or explosion hazards associated with the product. It might have been thought, therefore, that if one pursued the logic of the reasonable course of inquiry McDonald could be expected to have undertaken, it would have been concluded at that stage.

213 The primary judge found, however, that McDonald should have rung EKA’s emergency number. It should be recalled, however, that McDonald said and the primary judge accepted, that the situation with which he was dealing did not amount to an emergency. In such circumstances, it might be thought that a reasonable holder of a dangerous goods licence was not under an obligation to contact an emergency number.

214 Nevertheless, pursuing this course, had McDonald gone so far as to track the chain of information down to the EKA MSDS again he would not, on the primary judge’s finding, have been alerted to any risk in the course he was pursuing. Clause 6 of the EKA MSDS would have advised him in the event of a spillage to “collect as much as possible in a clean container”. It is true that it warned to “remove all sources of ignition”, but it did not identify mixing a spillage with absorbent material in that context as constituting a risk. Clause 7 would have advised him that no special measures were necessary in terms of fire and explosion protection while paragraph 10 would have advised him as to “hazardous reactions”, the “product is stable and no hazardous polymerisation will occur”.

215 Even if McDonald had obtained that MSDS and read the opaque entry “conditions to avoid – avoid prolonged contact with porous materials”, that entry would not, in my view, in light of the assurances in the remainder of the document, have prompted him to make further inquiry.

216 The primary judge’s conclusion that if he had telephoned EKA he would have been informed of the risk of spontaneous combustion associated with the course he was about to pursue has an air of unreality. Such advice would, at least, have contradicted the express passages in the MSDS to the effect that there were no fire hazards associated with the product. There was no evidence which justified the primary judge’s conclusion. It was, as Mr Finch SC submitted, an impermissible inference.

217 Finally, the fact that on all the evidence McDonald’s method of mopping up the Brytall spill was consistent with the practice at the time is powerful, although not decisive, evidence that he did not act negligently: Dovuro Pty Limited v Wilkins [2003] HCA 51; (2003) 77 ALJR 1706 at 1712 [34] per McHugh J; see also Marshall v Lindsey County Council [1935] 1 KB 516 at 540 per Maugham LJ (affirmed [1937] AC 94 cited by Finkelstein J in Dovuro Pty Limited v Wilkins [2000] FCA 1902; (2000) 105 FCR 476 at 507 [112]).

218 I accept that the evidence of practice does not dictate the outcome of the inquiry as to whether or not McDonald complied with the appropriate standard of care. There are some cases, of which Rogers v Whitaker was one, where the question of the standard of care involves no special skill unique to the occupation under consideration, where the Court will be prepared to reach a conclusion that a duty of care has been breached even though it may not accord with evidence given by specialists in the relevant field. However, in my view, that approach is not warranted in this case. The risk which the mixture of tall oil and attapulgite posed was one which, at best, might be known to Professors of Chemistry, but was not, apparently, known to the manufacturers of either tall oil or attapulgite. In such circumstances compliance with both the Bryce and EKA MSDSs was, in my view, evidence that McDonald did not breach his duty of care.

219 The primary judge’s conclusion, with respect, appears to have been reached more with the benefit of hindsight than by an assessment of McDonald’s position in January 1998 or the objective facts demonstrating that there was no perceived risk of spontaneous combustion in the exercise McDonald undertook.

220 The lack of any evidence that at the time of the events there was perceived to be a risk of spontaneous combustion of Brytall if a spill was cleaned up with a conventional absorbent material such as attapulgite and kept in containers prior to disposal indicates, to my mind, that that risk was not perceived as a real one in the Wyong Shire Council v Shirt sense by the regulatory authorities, the manufacturers or distributor of the product, or by those involved in handling such products and supplying materials for their absorption in the event of spills.

221 The case bears some similarity to Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd [No 1] [1961] AC 388 (“The Wagon Mound”) where the plaintiff’s case failed because there was no evidence that the defendant knew or could reasonably have been expected to know that furnace oil was capable of being set alight when spread on water.

222 In my view, Girkaid and Inghams’ case on breach failed because there was no evidence that McDonald knew or ought to have known, or ought to have foreseen, the risk of the tall oil/attapulgite mixture undergoing spontaneous combustion.

223 In my view, the primary judge erred in finding that McDonald breached his common law duty of care.

224 Accordingly, I would uphold grounds 7, 8, 9, 10 and 11 of the appeal.

Damages (grounds 12 – 13)

225 McDonald’s challenge to the primary judge’s conclusion on damages was made in the following grounds of appeal:

“12. His Honour erred in finding on the basis of the valuer’s evidence that the value of the First Respondent’s land after the fire was $130,000.00 when the evidence was that it sold seven months after the fire, in a stable market, for $270,000.00.

13. Alternatively, his Honour erred in not discounting the First Respondent’s damages by $140,000.00 being the amount by which it mitigated its loss by reason of the sale in August 1998.”

226 Most of the damages were agreed. The only matter of controversy was Girkaid’s claim for the value of the warehouse burnt down in the fire.

227 Girkaid called Mr Irving, a registered valuer. The gist of his evidence was that the unimproved value of the land on which the warehouse was situated at January 1998 was $130,000. The freehold market value of the land with tenancies before the fire was, in his opinion, $460,000. Accordingly, he opined that the loss suffered by Girkaid from the loss of the building (leaving aside loss of rent) was $330,000.

228 The defendants challenged Mr Irving’s opinion by pointing to the fact that Girkaid had sold the land in August 1998 for $270,000. Mr Irving rejected the proposition that that sale affected his valuation on the basis that he did not know whether there were any special circumstances surrounding it. He had made no enquiries to determine the circumstances of the sale. Girkaid led no evidence as to the circumstances of that sale, nor had it, apparently, briefed Mr Irving with the detail of those circumstances to permit him to assess its significance to the value of the land as at January 1998.

229 The primary judge accepted Mr Irving’s valuation (at [60] – [63]) and held that the loss arising from the destruction of the building, exclusive of the loss of rent, was $330,000.

230 McDonald submitted that it was not reasonably open to the primary judge to find that the value of the land after the fire was $130,000.

231 McDonald also submitted that even if Mr Irving’s valuation was accepted, to the extent that Girkaid recovered $270,000 by the August 1998 sale, Girkaid had mitigated its loss so that the amount of damages had been overstated by an amount of $140,000.

232 The evidence of valuation was unsatisfactory. Although the valuer was called to establish the value of the loss of the buildings erected on the land, he did not give direct evidence of their value. Rather, he took the view that the appropriate market value of the property was to be assessed by reference to the capitalisation of net rents and, therefore, had regard to what, in his opinion, were comparable sales of properties with such rentals. On this basis, he assessed the market value of the property at $460,000.

233 Mr Irving did not support the unimproved land value as at January 1998 by reference to the sale of identified properties at identified dates. There was no way of assessing, therefore, whether they were truly comparable or, at least, more “comparable” than the August sale of the subject land. In my view it was incumbent upon Girkaid, if it sought to deny the forensic value of the August 1998 sale, to call evidence that there were special circumstances which made it inapplicable. Absent such evidence, the primary judge was entitled to draw an inference adverse to it that such evidence would not have assisted: Commercial Union Assurance Co of Aust Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418 per Handley JA.

234 In such circumstances, I would accept McDonald’s submission that it was not reasonably open to the primary judge to accept Mr Irving’s evidence that the value of the land post fire was $130,000. Rather, on any view, its actual sale price within some five months of the fire was the best evidence of value. Accordingly, even if I was not of the view that the appeal should succeed on other grounds I would be of the view that Girkaid’s damages were overstated by an amount of $140,000.

235 As Bryce and Hudson’s liability turned on the primary judge’s finding adverse to McDonald, these conclusions dictate that the remaining appeals and cross appeals should be resolved, subject to one matter, in Bryce, Hudson and SLE’s favour respectively.

Breach of the bailment contract

236 The exception related to Bryce’s claim in bailment against McDonald. Ground 17 in McDonald’s Notice of Appeal challenged the primary judge’s finding that McDonald was liable to Bryce for its loss in the fire.

237 As I have earlier noted, Bryce sought to retain its judgment against McDonald for breach of its bailment contract on the basis that McDonald would remain liable for Bryce’s loss unless he could prove that his negligence was not a contributing factor.

238 As I have found that McDonald was not negligent it follows that he is entitled to succeed on this ground also.

239 I would make the following orders:

McDonald’s appeal

(1) Appeal allowed.
(2) Judgment entered by Adams J on 8 March 2002 on Girkaid and Inghams’ claim set aside.
(3) Girkaid and Inghams’ claim dismissed.
(4) Girkaid and Inghams to pay McDonald’s costs of the appeal and of the proceedings below including such costs as McDonald is ordered to pay Bryce, Hudson and SLE.

Hudson’s appeal

(1) Appeal allowed.

(2) Judgments against Hudson set aside.
(3) Cross-claims against Hudson dismissed.
(4) McDonald to pay Hudson’s costs of the appeal and of the proceedings below.

Bryce’s appeal

(1) Appeal allowed.

(2) Orders 4 to 7 inclusive, 12 and 15 of Adams J’s orders of 8 March 2002 set aside.
(3) McDonald’s cross-claim against Bryce dismissed.
(4) McDonald to pay Bryce’s costs of the appeal and of the proceedings below.

SLE’s cross-appeals

(1) Cross-appeals dismissed.

(2) McDonald to pay SLE’s costs of the cross-appeals.

240 YOUNG CJ in EQ: I have read in draft the reasons for judgment of McColl JA and basically agree with them.

241 As to the question of causation I agree with her Honour's closely reasoned conclusion that the primary Judge's finding that Girkaid and Inghams had discharged their burden of proof should not be disturbed.

242 As to breach of duty, I would also agree with her Honour's conclusion.

243 It seems to me that a good check on the result is to ask oneself as a matter of common sense whether a carrier/warehouseman who spills pine oil and takes advice as to how to mop it up and follows that advice and who puts the waste product in two barrels could reasonably foresee, in the absence of any warning, that the mix would spontaneously combust and burn down the factory?

244 The answer is clearly "No".

245 In my view any construction of the regulations with respect to the storage of inflammatory goods which might produce a different result is, with respect, to those who hold that view, too strict and artificial an interpretation.

246 As to damages, I am surprised that anyone considers that they can value a building by taking away the value of the land content from the total value of land and building. The very fact that that particular type of building is on the land may well cause the land value to be greater or less.

247 However, the Judge having been asked by the parties to approach the valuation question in that way, I agree with McColl JA that he fell into error by deducting merely $130,000 from the total package. I agree with the orders proposed by McColl JA.

**********

Last Modified: 09/02/2004

Citations

McDonald v Girkaid Pty Ltd [2004] NSWCA 297

Most Recent Citation

Cases Citing This Decision

107

Boughey v the Queen [1986] HCA 29

Gallagher v The Queen [1986] HCA 26

Waugh v Kippen [1986] HCA 12

Cases Cited

57

Statutory Material Cited

6

Chappel v Hart [1998] HCA 55

Seltsam Pty Ltd v McGuiness [2000] NSWCA 29

Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305

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CITATION:	Barry Edward McDonald (t/as B.E. McDonald Transport) v Girkaid Pty Ltd & 4 Ors; Robert Bryce & Co Ltd v Girkaid Pty Ltd & 4 Ors; Hudson Resources Pty Ltd & 5 Ors v Robert Bryce & Co Ltd [2004] NSWCA 297
HEARING DATE(S):	16 June 2003 17 June 2003
JUDGMENT DATE:	31 August 2004
JUDGMENT OF:	Beazley JA at 1; McColl JA at 2; Young CJ in Eq at 240
DECISION:	McDonald's appeal: (1) Appeal allowed. (2) Judgment entered by Adams J on 8 March 2002 on Girkaid and Inghams' claim set aside. (3) Girkaid and Inghams' claim dismissed. (4) Girkaid and Inghams to pay McDonald's costs of the appeal and of the proceedings below including such costs as McDonald is ordered to pay to Bryce, Hudson and SLE. Hudson's appeal: (1) Appeal allowed. (2) Judgments against Hudson set aside. (3) Cross-claims against Hudson dismissed. (4) McDonald to pay Hudson's costs of the appeal and of the proceedings below. Bryce's appeal: (1) Appeal allowed. (2) Orders 4 to 7 inclusive, 12 and 15 of Adams J's orders of 8 March 2002 set aside. (3) McDonald's cross-claim against Bryce dismissed. (4) McDonald to pay Bryce's costs of the appeal and of the proceedings below. SLE's cross-appeals: (1) Cross-appeals dismissed. (2) McDonald to pay SLE's costs of the cross-appeals.
CATCHWORDS:	CAUSATION - whether conclusion of causation open - inference of probable connection - expert evidence of possible cause of fire - absence of scientific theory refuting scientific theory advanced by plaintiffs - sequence of events - APPEAL - evidence - appellate review of trial judge's acceptance of expert witness - STATUTORY CONSTRUCTION - whether Dangerous Goods Regulation 1978 (NSW) created private cause of action - whether statute imposes a duty to take specific precautions or measures for the safety of others - no private cause of action where statute prescribes the end but not the means - content of statutory duty - whether absolute obligations imposed - what constitutes "practicable steps" or "practicable precautions" - BREACH - foreseeability - DAMAGES - evidence of value. (D)
LEGISLATION CITED:	Dangerous Goods Act 1975 (NSW) s 4 Dangerous Goods (General) Regulation 1999 s 341(1) Dangerous Goods Regulation 1978 (NSW) clauses 4, 16, 18, 18(e), 19(e), 19(g), 31, 248, 249(3), Schedule 1 Interpretation Act 1987 (NSW) s 30 Law Reform (Miscellaneous Provisions) Act 1946 (NSW) s 5 Trade Practices Act 1974 (Cth) s 52, s 53(a), s 87
CASES CITED:	Abalos v Australian Postal Commission (1990) 171 CLR 167 Adelaide Stevedoring Co Ltd v Forst (1940) 64 CLR 538 Adsett v K & L Steelfounders and Engineers Ltd [1953] 1 WLR 773; [1953] 2 All ER 320 Ahmedi v Ahmedi (1991) 23 NSWLR 288 Astley v Austrust Limited [1999] HCA 6; (1999) 197 CLR 1 Australian Iron and Steel Pty Limited (1957) 97 CLR 89 Beckwith v The Queen (1976) 135 CLR 569 Bennett v Minister for Community Welfare (1992) 176 CLR 408 Brear v British Paints Ltd [1978] 2 NSWLR 253 Bull v Attorney-General (NSW) [1913] HCA 60; (1913) 17 CLR 370 Byrne v Australian Airlines Limited (1995) 185 CLR 410 Chappel v Hart [1998] HCA 55; (1998) 195 CLR 232 Chugg v Pacific Dunlop Limited (1990) 170 CLR 249 Commercial Union Assurance Co of Aust Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 Commissioner of State Revenue (Vic) v Royal Insurance Australia Ltd (1994) 182 CLR 51 Commonwealth v McLean (1996) 41 NSWLR 389 Dovuro Pty Limited v Wilkins [2003] HCA 51; (2003) 77 ALJR 1706 Dovuro Pty Limited v Wilkins [2000] FCA 1902; (2000) 105 FCR 476 EMI (Australia) Ltd v Bes [1970] 2 NSWR 238 F D R Pty Ltd v Gilmore; Gilmore v Cecil Bros (1998) 80 IR 411 Fernandez v Tubemakers [1975] 2 NSWLR 190 Forbes v Selleys Pty Limited [2004] NSWCA 149 Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 General Constructions Pty Ltd v Peterson (1962) 108 CLR 251 Girkaid Pty Limited & 1 Ors v McDonald & Ors [2001] NSWSC 1202 Graham Barclay Oysters Pty Limited v Ryan [2002] HCA 54; (2002) 211 CLR 540 ICI Australia Operations Pty Ltd v WorkCover Authority of New South Wales [2004] NSWCA 55; (2004) 1 DDCR 259 He Kaw Teh v R (1985) 157 CLR 523 Jayne v National Coal Board [1963] 2 All ER 220 John Pfeiffer Pty Limited v Canny (1981) 148 CLR 218 J Sperling Ltd v Bradshaw [1956] 2 All ER 121 M38/2002 v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCAFC 131; (2003) 199 ALR 290 Makita (Australia) Pty Limited v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705 Maloney v Commissioner for Railways (NSW) (1978) 52 ALJR 292 March & E & M H Stramare Pty Limited (1991) 171 CLR 506 Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494 Marshall v Lindsay County Council [1935] 1 KB 516 Murphy v Farmer (1988) 165 CLR 19 Nicholson v Heaven & Earth Gallery Pty Ltd (1994) 126 ALR 233 O'Connor v S P Bray Limited (1937) 56 CLR 464 Overseas Tankship (UK) Limited v Miller Steamship Co Pty Limited (The Wagon Mound [No 2]) [1967] 1 AC 617 Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd [No 1] ("The Wagon Mound") [1961] AC 388 Pioneer Concrete Services Ltd v Yelnah Pty Ltd (1986) 5 NSWLR 254 R v Stanley John Miller [2001] NSWCCA 209; (2001) 127 A Crim R 344 Rogers v Whitaker (1992) 175 CLR 479 Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434 Seltsam Pty Limited v McGuiness [2000] NSWCA 29; (2000) 49 NSWLR 262 Sheen v Fields Pty Limited (1984) 58 ALJR 93 Shorey v PT Limited [2003] HCA 27; (2003) 77 ALJR 1104 Slivak v Lurgi (Australia) Pty Limited [2001] HCA 6; (2001) 205 CLR 304 Storozuk v Commissioner for Railways (1963) 63 SR (NSW) 581 Sutherland Shire Council v Heyman (1985) 157 CLR 424 Tubemakers of Australia Ltd v Fernandez (1976) 50 ALJR 720 Uebergang v Australian Wheat Board (1980) 145 CLR 266 Utah Construction & Engineering Pty Limited v Pataky [1966] AC 629 Warren v Coombes (1979) 142 CLR 531 Waugh v Kippen (1986) 160 CLR 156 Wilsher v Essex Area Health Authority [1988] AC 1074 Wright v T I L Services Pty Limited (1956) SR (NSW) 413 Wyong Shire Council v Shirt (1980) 146 CLR 40 X and Y (by her Tutor X) v Pal (1991) 23 NSWLR 26
PARTIES :	CA 40215 of 2002 A: Robert Bryce & Co Ltd 1R: Girkaid Pty Ltd 2R: Inghams Enterprises Pty Ltd 3R: Barry Edward McDonald (t/as B.E. McDonald Transport) 4R: S.L.E. Industrial Supplies Pty Ltd 5R: Hudson Resources Ltd CA 40225 of 2002 A: Hudson Resources Ltd 1R: Barry Edward McDonald (t/as B.E. McDonald Transport) 2R: Robert Bryce & Co Ltd 3R: S.L.E. Industrial Supplies Pty Ltd 4R: Girkaid Pty Ltd 5R: Inghams Enterprises Pty Ltd Cross Appeal C-A: S.L.E. Industrial Supplies Pty Ltd 1C-R: Hudson Resources Ltd 2C-R: Robert Bryce & Co Ltd 3C-R: Barry Edward McDonald (t/as B.E. McDonald Transport) 4C-R: Girkaid Pty Ltd 5C-R: Inghams Enterprises Pty Ltd CA 40253 of 2002 A: Barry Edward McDonald (t/as B.E. McDonald Transport) 1R: Girkaid Pty Ltd 2R: Inghams Enterprises Pty Ltd 3R: Robert Bryce & Co Ltd 4R: S.L.E. Industrial Supplies Pty Ltd 5R: Hudson Resources Ltd Cross Appeal C-A: S.L.E. Industrial Supplies Pty Ltd 1C-R: Barry Edward McDonald (t/as B.E. McDonald Transport) 2C-R: Girkaid Pty Ltd 3C-R: Inghams Enterprises Pty Ltd 4C-R: Robert Bryce & Co Ltd 5C-R: Hudson Resources Ltd
FILE NUMBER(S):	CA 40215/02; 40225/02; 40253/02
COUNSEL:	S G Finch SC/P S Braham (McDonald) I D Faulkner SC (Girkaid & Inghams) M A Ashhurst (Bryce) I Wales SC (Hudson) J D Hislop QC/D R Pritchard (SLE)
SOLICITORS:	Hicksons (McDonald) Minter Ellison (Girkaid & Inghams) Michael Samios (Bryce) Moray & Agnew (Hudson) PricewaterhouseCoopers Legal (SLE)

LOWER COURTJURISDICTION:	Supreme Court - Common Law Division
LOWER COURT FILE NUMBER(S):	SC 20335/98
LOWER COURT JUDICIAL OFFICER :	Adams J