Pacific Resources International Pty Ltd v Uti (Aust) Pty Ltd; Brackley Industries Pty Ltd v Uti (Aust) Pty Ltd - [2012] NSWSC 1274

Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: Pacific Resources International Pty Ltd v UTI (Aust) Pty Ltd; Brackley Industries Pty Ltd v UTI (Aust) Pty Ltd [2012] NSWSC 1274
Hearing dates: 28 August - 30 August 2012, 3 September - 6 September 2012, 10 September - 13 September 2012 and 20 September 2012
Decision date: 25 October 2012
Jurisdiction: Equity Division - Commercial List
Before: Stevenson J
Decision:
Each plaintiff entitled to damages

Catchwords:
BAILMENT - warehouse destroyed by fire - cause of fire - duties and liabilities of bailee - whether duty discharged

CONTRACT - contract of bailment - whether standard terms and conditions incorporated into contract - whether standard terms and conditions exclude liability

TRADE AND COMMERCE - trade practices - misleading or deceptive conduct - representations
PROPORTIONATE LIABILITY - concurrent wrongdoer
Legislation Cited: Civil Liability Act 2002
Trade Practices Act 1974 (Cth)
Cases Cited: Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523
Hyder Consulting (Australia) Pty Ltd v Wilh Wilhelmsen Agency Pty Ltd [2001] NSWCA 313
Jireh International Pty Ltd t/as Gloria Jean's Coffee v Western Exports Services Inc [2011] NSWCA 137
Jones v Bartlett [2000] HCA 56; (2000) 205 CLR 166
Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298
Laws Holdings Pty Ltd v Short (1972) 46 ALJR 563
MacRobertson Miller Airline Services v Commissioner of State Taxation [1975] HCA 55; (1975) 133 CLR 125
Mitchell Morgan Nominees Pty Ltd v Vella [2012] NSWCA 390
Oceanic Sun Line Special Shipping Co Inc v Fay [1988] HCA 32; (1988) 165 CLR 197
Pacific Resources International Pty Ltd v UTI (Aust) Pty Ltd [2012] NSWSC 1083
Perpetual Trustee Company Ltd v CTC Group Pty Ltd [2012] NSWCA 252
Perpetual Trustee Company Ltd v Milanex Pty Ltd (in liq) [2012] NSWCA 367
Remath Investments No. 6 Pty Ltd v Chanel (Australia) Pty Ltd [1992] NSWCA 208
Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163
Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387
Waterman v Gerling Australia Insurance Co Pty Ltd [2005] NSWSC 1066; (2005) 65 NSWLR 300
Texts Cited: Carter on Contract, vol 1
Norman Palmer, Palmer on Bailment, 3rd ed (2009)
The Macquarie Dictionary, 5th ed (2009)
Category: Principal judgment
Parties: 2008/290394:
Pacific Resources International Pty Ltd (plaintiff)
UTI (Aust) Pty Ltd (defendant)
2008/290441:
Brackley Industries Pty Ltd (plaintiff)
UTI (Aust) Pty Ltd (defendant)
Representation: Counsel:
M L Williams SC with H Chiu (Pacific Resources International Pty Ltd, plaintiff)
H J A Neal (Brackley Industries Pty Ltd, plaintiff)
I G B Roberts SC with A C Casselden (defendant)
Solicitors:
2008/290394:
Holman Webb (plaintiff)
Norton Rose (defendant)
2008/290441:
Colin Biggers & Paisley (plaintiff)
Norton Rose (defendant)

File Number(s): SC 2008/290394; SC 2008/290441
Publication restriction: Nil

Judgment

Introduction

On 2 January 2006 a warehouse at Botany, and its contents, were destroyed by fire.

The defendant, UTI (Aust) Pty Ltd ("UTI"), was the lessee of the warehouse. It conducted a warehousing services business for reward. The lessor of the warehouse was GTA Industrial Custodian Pty Ltd ("GTA").

The plaintiffs, Pacific Resources International Pty Ltd ("PRI") and Brackley Industries Pty Ltd ("Brackley") had goods stored in the warehouse: PRI stored fish oil and Brackley stored CD and DVD cases.

PRI and Brackley seek damages from UTI for the damage caused by the loss of their goods.

It is agreed that the value of PRI's lost goods was $892,339 and the value of Brackley's lost goods was $560,767 and that, if they are successful, interest accrues on those figures.

Issues for determination

It is common ground that UTI, as bailee of the goods, owed each of PRI and Brackley a duty to safeguard the goods with reasonable care and that UTI has the onus to show that such duty was discharged.

The issues which arise are: -

(a) What caused the fire?

(b) In particular, was the fire caused by the spontaneous combustion of PRI's fish oil, which was spilled in the warehouse in an accident on 21 December 2005 (12 days before the fire) and inadequately cleaned up by UTI?

(d) On their proper construction, and if they were incorporated into the relevant contract, were UTI's standard terms and conditions (which the parties have referred to as the "STCs") effective to exclude UTI's liability to PRI and Brackley?

(e) Were UTI's STCs incorporated into the contracts of bailment between UTI and each of PRI and Brackley?

(f) Did UTI make misleading or deceptive representations to PRI and Brackley concerning its storage of their goods and did PRI and Brackley detrimentally rely on those representations?

(g) Were UTI and its lessor, GTA, "concurrent wrongdoers" for the purposes of s 34 of the Civil Liability Act 2002 such that, assuming UTI is otherwise liable in damages to PRI or Brackley, it has a "proportionate liability" defence under s 35 of that Act?

Decision

In my opinion, for the reasons that follow, the answers to these issues are:-

(a) see (b);

(b) yes;

(d) yes;

(e) as to PRI, yes; as to Brackley, no;

(f) yes;

(g) no.

The lease between UTI and GTA

UTI leased the premises from GTA.

The lease: -

(a) prohibited the storage of fish oil;

(b) prohibited the storage of "thermoplastic materials", including polypropylene;

UTI called Mr Wayne Schwebel as an expert on warehousing standards. Mr Schwebel agreed that a competent warehouser would carefully read the lease of the warehouse premises, and would not store goods that the lease prohibited.

There is no evidence that anyone at UTI read the lease.

Mr Carl Cruceanu, the Chief Financial Officer of UTI, said that although he was aware of the existence of the lease, he was not aware of its detailed provisions or rules regarding the use of the premises. He had no idea that there was any provision in the lease prohibiting the storage of fish oil.

Mr Peter Ball, who was UTI's Warehouse Manager, said that he had never been shown a copy of the lease and did not know that fish oil was prohibited.

The 21 December 2005 fish oil spill

How did the fish oil spill occur?

The warehouse was divided so that goods were stored in racks. The racks were identified as being racks AA, AB, AC and so on from east to west. The racks were divided by 16 aisles.

PRI's fish oil was stored in racks BB and BC adjacent to the third aisle from the west of the building. The fish oil was stored in 170 litre drums.

On 21 December 2005, an employee of UTI was moving one of these drums on a forklift between aisles AM and AN, the seventh aisle to the east of the aisle adjacent to which PRI's fish oil was stored.

Linen was stored on either side of aisles AM and AN. The linen was stored in plastic bags, inside cardboard boxes on shelves on the adjacent racks.

Due to a mishap, the forklift driver caused the drum to rupture at the bottom. The seal split and separated at the junction between the side and base of the drum. Fish oil escaped onto the floor of the warehouse. There is no dispute that this accident was caused by the negligence of the forklift driver, for which UTI is responsible.

How much of the fish oil was spilled?

PRI and Brackley submitted that the fire was caused by spontaneous combustion of the inadequately cleaned up fish oil. An issue arose as to how much fish oil was spilled. That question is relevant to the probability of the spontaneous combustion of the fish oil.

Mr Ball, the Warehouse Manager, was in Melbourne at the time of the fish oil spill.

In Mr Ball's absence, Mr David Grupe, UTI's Account Manager at the warehouse, was in charge.

At 8.46am Mr Grupe sent an email to Mr Frank Ruckriegel, a director of PRI: -

"We have had an accident in the warehouse. And bumped one of your large drums of fish oil. The slight bump caused the seal at the bottom to open and we have lost half of the contents on the floor. We are in the process of cleaning it all up now. When you get a chance we have flipped and quarantined the drum for inspection."

In his witness statement, Mr Grupe estimated that approximately five to six litres of fish oil was spilled from the drum and that the spill area was between 1.5 metres and 2.5 metres in diameter.

In cross-examination he said that his statement that "half of the contents" was on the floor was "an exaggeration" and that he had sent the email "in panic". He said that it was a "mistake" to say that "half of the contents" had been lost and that: -

"I don't agree that I said I lost 85 litres of oil. I agree that I'd sent an email possibly in haste at that stage. The term was 'half'; there is no actual measurement on there".

Mr Grupe also gave evidence that when he endeavoured to move the drum after the accident, it was still heavy and that there was "no way" that he could move it himself. He said it was "too full for that".

In my opinion, I must exercise some care in accessing Mr Grupe's evidence. He gave his evidence openly and I have no doubt he was endeavouring to give the best of his recollection. However, he candidly accepted that his memory was not good. He said that since December 2005 he had been concussed six times in the course of his mountain bike riding activities.

Ultimately he accepted that he no longer had much recollection of what happened on the day of the fish oil spill.

About half an hour after Mr Grupe sent his email to PRI, PRI reported to its insurer: -

"Forklift driver at UTI Botany reversed into a drum of fish oil...causing the drum to break open and spill much of the contents."

Mr Jonathan Volkwien from CB Richard Ellis, GTA's Managing Agent, gave evidence. Mr Volkwien said that after the spill, Mr Ball said to him words to the effect that oil had spurted out of the drum, had gone everywhere, all over the adjacent racks and had drenched the forklift driver. Mr Volkwien also said that when inspecting the drum after the incident, he saw a puncture near the bottom of the drum. Mr Ball denied this conversation, but it is consistent with Mr Grupe's email of 21 December 2005.

The clean up started straight away and involved five or six people. The clean up was still in progress when Mr Ball returned from Melbourne at around 5.00pm. The time taken to clean up the spill, and the number of people involved, suggest that a substantial quantity of fish oil was spilled.

Whether or not "half of the contents" of the drum was spilled, it appears clear, and I find, that a substantial quantity of fish oil was spilled.

The clean up of the fish oil spill - use of absorbent material

The fish oil was supplied to PRI by Ocean Nutrition Canada.

Ocean Nutrition Canada provided PRI, and PRI provided UTI, with a Material Safety Data Sheet ("MSDS") in relation to the fish oil.

The instructions in the MSDS in relation to fish oil

The MSDS specified that fish oil was flammable at: -

"High temperatures or with an absorbent (i.e. paper) exposed to air for 6-8 + hours".

It also stated that the fish oil: -

"May auto ignite with high surface compounds for long periods of time, exposed to air".

Under the heading "Accidental Release Measures" the document stated: -

"Leak and Spill Procedure: Collect major quantity; never use porous material as absorbent, clean with water and detergent. (If absorbent is used, immediately after clean up, wet absorbent with water and seal in garbage bag.) Dispose of according to local laws."

Despite this clear warning ("never use porous material as absorbent") absorbent material was used to clean up the spill; namely sawdust and what Mr Grupe described as material that looked like "pillow stuffing".

No one involved in the clean up was aware of the instructions in the MSDS.

UTI also arranged for its regular contract cleaner, Mr Steven Pace, to attend. Mr Pace said that when he arrived the spill had already been covered with "a loose absorbent material similar to kitty litter". He began cleaning using a scrubbing machine, water and later degreasing solvent.

Mr Pace said that when he arrived, the spill "covered an area of one to two pallets, and it was probably over two millimetres deep when it was spilled".

Mr Pace was not able to clean under the pallet racking. He said he saw oil, covered with sawdust, under a pallet that was pulled out from its normal position in a rack. He said his machine could not reach this material, that his task was to clean only the aisles, and that he did not look under other pallets.

UTI failed to take reasonable care

In my opinion, by using and not removing the absorbent material used to clean up the spill, UTI failed to take reasonable care.

In particular, as PRI submitted: -

(a) in August 2004, UTI's inventory controller, Mr Luke Condon, had raised concerns with various UTI personnel, including its Chief Executive Officer, Mr John Young, about obtaining MSDSs for PRI's goods for personal safety reasons;

(b) Mr Ball, the Warehouse Manager, knew that MSDSs contained information about the clean up of fish oil spills. However, the only system in place for dealing with MSDSs was for him, or a member of his staff, to read and file each MSDS for a new product upon arrival at the warehouse. There was no system to instruct personnel about the need to consult the relevant MSDS in the event of a spill;

(c) Mr Grupe, who supervised the clean up, admitted that he should have consulted the MSDS for clean up instructions, and that by failing to do so he "dropped the ball...in a big way". He said that there was no instruction to staff to consult the relevant MSDS in the event of a spill; and

(d) Mr Schwebel said that the failure to consult the MSDS before the clean up of a spill, and the absence of clear instructions to UTI personnel to do so, fell short of reasonable standards of a competent warehousing provider.

The fire

The fire was first detected by a heat detector above roller door four at the warehouse at 4.30am on 2 January 2006. The heat detector alarm was followed by the activation of a motion alarm in the north of the premises at 4.35am.

At 4.31am the Botany and Mascot stations of the fire brigade responded and arrived at the scene at 4.35am.

Other fire brigade stations responded thereafter. There was never any question of saving the building. The strategy adopted by the fire brigade was to contain and, eventually, control the fire.

Post Incident Summary Report

In due course the fire brigade prepared a Post Incident Summary Report. Inspector Paul Bailey, the Superintendent of the Hazardous Materials Response Unit from the fire brigade, was involved in its preparation.

Inspector Bailey gave evidence and was a most impressive witness. He has some 26 years experience within the fire brigade and has tertiary qualifications in arson and fire investigation.

The fire brigade's report eliminated electrical failure, arson and incendiarism as possible causes of the fire and located an "area of interest" where: -

(a) there was heavy sooting to the roof which suggested that the fire had not been burning cleanly in the area and had been smouldering causing black smoke and sooting;

(b) the roof sheets were warped suggesting prolonged heat exposure (rather than structural failure); and

Inspector Bailey also noticed linen in boxes in this area. He said there was some linen wrapped in plastic in cardboard boxes and that some of the linen boxes were open and some of them were burnt.

Based on that information, Inspector Bailey determined that the origin of the fire was a single point approximately 50 metres in from the eastern wall and 20 metres back from the northern wall of the premises. Inspector Bailey said that the evidence in the area of interest was atypical and could not be found elsewhere on the site and that the evidence of alarm activations placed the first alarm in the vicinity of this area. That fact, coupled with evidence of the most intense fire damage, led Inspector Bailey to conclude that the fire started in this area.

The point of origin identified by Inspector Bailey coincided with the location of the fish oil spill.

Cause of the fire - theory of spontaneous combustion

In the Post Incident Summary Report, a theory of spontaneous combustion was developed. The report read: -

"The absence of a conventional ignition cause leads FIRU Fire Investigators to consider spontaneous combustion, otherwise known as non-piloted ignition, to be a possible cause of ignition. The building's contents and known prior events also give weight to this theory. During the canvassing of interviews, the NSWFB became aware of a fish oil spill occurring inside the building on Tuesday 20th December 2005 [sic: the spill was on 21 December 2005], 12 days prior to the fire. The single 200 litre drum (of 24 stored) was accidentally pierced by a forklift, resulting in an unknown quantity of oil spilling over stock and onto the floor. This oil spill was cleaned by staff using sawdust as an absorbing agent, which was then removed from the site. It is possible that oil remained in-situ, particularly in inaccessible areas around the racking, and absorbed by linen stored in the same area.

Four separate events must take place for spontaneous combustion to occur in a porus solid material, and develop into an open flaming fire:

1. the material must be capable of self heating,

2. the self heating must be sufficient to lead to thermal runaway,

3. thermal runaway must initiate self sustained smouldering,

4. the smoulder front must reach the exterior or have free access to air to establish flaming...".

The day before the fire, 1 January 2006, was one of the hottest days ever recorded in Sydney, with ambient air temperature nearing 45 degrees Celsius. According to the report of the fire brigade, the temperature inside the warehouse was likely to have been in excess of 70 degrees Celsius as all doors were shut, no air flow was present and the metal exterior surface of the warehouse conducted and trapped heat. This factor led the fire investigators to consider the theory of spontaneous combustion as being "very plausible".

Inspector Bailey said he developed the theory that the fire was caused by the spontaneous combustion of fish oil spilled onto the linen. He said that "all the elements necessary to cause spontaneous combustion were present at the warehouse".

Inspector Bailey accepted that the fire brigade: -

"...did not definitively establish a cause of fire but that was due to the extensive damage to the premises and subsequently the lack of any obvious further physical evidence. To take the enquiry to the next level would have involved sample testing and this was beyond the scope of my investigation, which is typically confined to observation of the immediate physical evidence."

Professor Gray's evidence

"Sample testing" of the kind referred to by Inspector Bailey was carried out by Professor Brian Gray, an Emeritus Professor of Chemistry at Macquarie University. Professor Gray attended the scene of the fire on 28 February 2006 (some eight weeks after the fire).

Professor Gray found a sample of absorbent material, contaminated with fish oil, within the area of origin identified by Inspector Bailey. This sample had survived the fire and still showed exothermic reaction.

Professor Gray said: -

"The thermal activity I measured during my site visit on February 28th 2006...some weeks after the fire and its extinction, was indicative of heat producing (exothermic) chemical reaction still taking place in a localised area of the site. This was in the area designated as the 'area of origin' of the fire (by the Fire Investigation and Research Unit of the NSW Fire Service). It was in the region of a point 50m from the eastern wall and 20m from the northern wall. Given the presence of residual fish oil in this area and the properties of fish oil, I conclude that the exothermic reaction was a residual of a much more intense spontaneous combustion reaction which had taken place earlier."

Professor Gray took a temperature probe reading of this material, showing it was 36 degrees Celsius.

Professor Gray continued: -

"The fact that fish oil in the solid sample was still heating indicates that in at least one location in the area of origin it was dispersed in such a way as to facilitate self heating. That is, there must have been a suitable absorbent material (e.g. linen or sawdust) to allow the self heating to occur".

Professor Gray said that: -

(a) if the linen stored adjacent to the fish oil spill was contaminated by fish oil and not removed, it would have acted as a medium for the dispersion of fish oil such that it would spontaneously combust;

(b) if the fish oil spilled on the floor was absorbed with absorbent material (for example the "pillow stuffing" or sawdust) which was not removed from the premises, this would also produce spontaneous combustion under the temperature conditions occurring at that time in the warehouse; and

There were two potential sources of absorbent material: the linen surrounding the site of the spill and the absorbent material used to clean up the fish oil spill (sawdust and the other material from the spill kits).

Dr Green's evidence

UTI called evidence from another chemist, Dr Anthony Green.

Dr Green offered the opinion that it was likely that the exothermic reaction observed by Professor Gray in the material he found was caused by the fire, rather than the cause of the fire. One fact of which weighed heavily in Dr Green's opinion was an assumption he had made as to the first fire alarm activated.

Dr Green also offered the surprising observation that, although it had been over 40 degrees Celsius outside the warehouse, it was not likely to be significantly warmer inside the warehouse.

Dr Green expressed the opinion that although trace quantities of fish oil were found at the point which the fire brigade investigators identified as the origin of the fire, it could not be concluded that fish oil was present in that area immediately before the fire. Dr Green opined that the presence of those trace quantities was also explained by the rupturing of the 31 drums of fish oil stored in the warehouse during the fire.

Dr Green said: -

"Up to 5,200 litres of fish oil were dispersed from the points of rupture by forces such as natural flow, aided by directed flow of water from fire hoses. The oil was further dispersed by the actions of earthmoving equipment which was used to assist the Fire Brigade to extinguish spot fires and flareups. This dispersion would have mixed oil with other fire debris including absorbent materials. The exposure of debris containing traces of fish oil to atmospheric oxygen explains the heating of the debris detected by Professor Gray."

Dr Green did not visit the warehouse site and has had no previous experience with fires started by spontaneous combustion. He agreed that Professor Gray was eminent in the field of spontaneous combustion and had significantly more experience than he had.

Competing evidence of Professor Gray and Dr Green

I prefer Professor Gray's evidence to that of Dr Green.

As Brackley pointed out in its submissions, one particularly compelling reason to accept Professor Gray's opinion is that, in order for self heating to occur, the absorbent material must have been uniformly contaminated with fish oil (as Professor Gray found to be the case in the exothermic sample located at the site). If Dr Green's theory were correct, upon rupture of the drums of fish oil remote from the site of the spill, there would have had to have been absorbent material somehow under those drums so that the fish oil could run out and fall onto it. The drums of fish oil were stored a large distance away from where Professor Gray found the sample. There was no evidence that there was absorbent material under those drums.

Further, as PRI submitted: -

"Dr Green's alternative explanation for the presence of [exothermic] material (i.e. fish oil stored at the other side of the warehouse was blown or flushed over 50 metres through obstacles, in the middle of a catastrophic fire, to be uniformly absorbed into absorbent material that happened to be at the area of origin) is implausible. It relies upon unproved assumptions as to the effect of the fire-fighting actions, and the ability of the fish oil to move across distances without being combusted."

Conclusion as to the cause of the fire

In my opinion, the fire was caused by the following sequence of events. Fish oil spilled on the floor of the warehouse on 21 December 2005. Contrary to the instructions in the MSDS, absorbent materials (sawdust and the "pillow stuffing" identified by Mr Grupe) were used to clean up the spill. Not all of the absorbent material, now contaminated by fish oil, was cleaned up. In particular I have regard to Mr Pace's evidence that he observed oil with sawdust on it under the racking which he was not able to clean up. That absorbent material, contaminated by fish oil, and subjected to the extreme temperatures on 1 January 2006, spontaneously combusted. A combination of circumstances particularly conducive to, and characteristic of the phenomenon of spontaneous combustion existed. I accept Professor Gray's evidence that no other sources of ignition were likely in the area of origin as determined by the fire brigade.

Thus, the fire was caused by the inadequate clean up of the fish oil spill. That circumstance leads me to conclude that UTI did not act with reasonable care to safeguard the goods of PRI and Brackley. That want of reasonable care caused the fire which destroyed their goods.

For these reasons, my conclusion is that UTI has not discharged its onus of disproving its liability to PRI and Brackley for breach of the contract of bailment.

UTI's standard terms and conditions (the STCs)

UTI contended that it is not liable for any loss claimed by PRI or Brackley because the claims of those parties are excluded by clause 15, clause 17 and clause 18 of the STCs.

Those clauses are in the following terms: -

"15. Exclusion of Liability: Subject only to clauses 14 and 20, the Goods are at all times at the risk of the Customer and not UTi and UTi shall not be responsible in tort or contract or otherwise for any loss or damage to or deterioration of the Goods or misdelivery or failure to deliver or delay in delivery of the Goods either in transit or in storage for any reason whatsoever including without limitation the negligence or breach of contract or wilful act or default of UTi or others and this clause shall apply to all such loss or damage or to deterioration of the Goods or misdelivery or failure to deliver or delay in delivery of the Goods whether or not the same occurs in the course of performance by or on behalf of UTi of the Services or in events which are in the contemplation of UTi and or the Customer or in events which are foreseeable by them or either of them or in events which could constitute a fundamental breach of contract or a breach of the fundamental term of the contract.

17. Notice of Claim: Any claim for loss or damage must be notified in writing to UTi within seven days of delivery of the Goods or the date upon which the Goods should have been delivered.

18. Time bar: UTI shall be discharged from all liability unless suit is brought in the proper forum and written notice received by UTi within nine months after the delivery of the Goods or the date when the Goods should have delivered. In the event that such time period shall be found contrary to any international convention or other compulsorily applicable law, the period prescribed by such convention or law shall then apply, but in that circumstance only."

Two issues arise. First, what is the proper construction of these clauses in the STCs. Second, were the STCs incorporated into the contracts between UTI and PRI, and UTI and Brackley.

The proper construction of the relevant clauses of the STCs

Clause 15

Clause 15 is drawn in very broad terms. It states that subject only to clause 14 (which deals with "an international convention or other law compulsorily applicable" to the relevant services) and clause 20 (which refers to warranties under the Trade Practices Act 1974 (Cth) incapable of exclusion), UTI "will not be responsible" for loss or damage to goods that it stores "for any reason" whether caused by negligence, breach of contract or wilful act of default.

PRI pointed to clause 17 and clause 18 and submitted that those clauses would be otiose if clause 15 had the effect of excluding all liability of UTI. I do not accept that submission. Clause 17 and clause 18 (to which I shall return below) could have work to do in relation to the two circumstances excepted from clause 15, namely the circumstances contemplated by clause 14 and clause 20.

PRI submitted that a "literal" reading of clause 15 leads to an absurd result. PRI submitted: -

"It would mean that if UTI personnel wilfully burnt down the warehouse, all customers, whether or not they had insurance, would be precluded from recovering from UTI."

PRI drew attention to the observations of Macfarlan JA in Jireh International Pty Ltd t/as Gloria Jean's Coffee v Western Exports Services Inc [2011] NSWCA 137 at [55]: -

"If after considering the contract as a whole and the background circumstances known to both parties, a court concludes that the language of a contract is unambiguous, the court must give effect to that language unless to do so would give the contract an absurd operation. In the case of absurdity, a court is able to conclude that the parties must have made a mistake in the language that they used and to correct that mistake."

PRI further submitted that if a contractual clause excludes "the very obligation the purpose of the contract" relevant "absurdity" arises. PRI referred to the judgment of Barwick CJ in MacRobertson Miller Airline Services v Commissioner of State Taxation [1975] HCA 55; (1975) 133 CLR 125 at 133: -

"The exemption of the ticket in this case fully occupies the whole area of possible obligation, leaving no room for the existence of a contract of carriage."

In my opinion, the circumstances in MacRobertson are distinguishable from those in the present case. In MacRobertson the exemption on the airline ticket allowed the airline to abandon any flight, or cancel any ticket or obligation and simply refund the fare.

In this case, nothing in the exemption removed UTI's obligation to warehouse the relevant goods. What the clause purports to do is exclude UTI's liability for any mishap that might befall the goods while so warehoused.

The clause is broad and has harsh operation. However I do not conclude that it is so "absurd" as to suggest that the parties "must have made a mistake in the language that they used".

In my opinion, if clause 15 is applicable to either of the warehousing contracts with which these proceedings are concerned, the clause is effective to exclude UTI's liability to the extent that the clause so states.

Clause 17 and clause 18

These clauses provide that a notice of claim must be made within seven days "of delivery of the Goods or the date upon which the Goods should have been delivered" and that UTI is discharged from all liability unless suit is brought within nine months of that period.

In argument UTI accepted that, on the proper construction of clause 17 and clause 18, the reference to "delivery of the Goods or the date upon which the Goods should have been delivered" was a reference to the date upon which the goods were, or should have been, delivered to the customer (as opposed to the warehouse).

Here, the goods were not delivered to PRI or Brackley. The fire destroyed them. Further, there was no date "upon which the Goods should have been delivered" to PRI or Brackley. Neither had called for redelivery of the goods. The fire destroyed them.

In my opinion, neither clause 17 nor clause 18 is engaged. They provide no defence to UTI.

Incorporation by Notice

I now turn to the question as to whether the STCs, and clause 15 in particular, were incorporated into the relevant contracts. If it was, the clause provides a defence to UTI in relation to the claims brought against it under the contract of bailment (although not any claim under s 52 of the Trade Practices Act).

It is common ground that neither PRI, nor Brackley signed a document by which they agreed that the STCs would be part of the contract.

In these circumstances, the general principle is stated by Carter On Contract, vol 1 at [10-160] as follows: -

"Where there is no document signed by the parties, the usual way by which terms are incorporated is by one of the parties giving the other notice of the terms of the contract. It is difficult to state the legal requirements here beyond saying that the notice must be 'reasonable' and given prior to (or at the time of) contract formation. That is, the party relying on the terms must show that, in the circumstances of the case, reasonable steps were taken to bring the terms to the attention of the other party before that party became bound."

Thus, in Oceanic Sun Line Special Shipping Co Inc v Fay [1988] HCA 32; (1988) 165 CLR 197, Brennan J said at 228: -

"If a passenger signs and thereby binds himself to the terms of a contract of carriage containing a clause exempting the carrier from liability for loss arising out of the carriage, it is immaterial that the passenger did not trouble to discover the contents of the contract. But where an exemption clause is contained in a ticket or other document intended by the carrier to contain the terms of carriage, yet the other party is not in fact aware when the contract is made that an exemption clause is intended to be a term of the contract, the carrier cannot rely on that clause unless, at the time of the contract, the carrier had done all that was reasonably necessary to bring the exemption clause to the passenger's notice."

In Norman Palmer, Palmer on Bailment, 3rd ed (2009) it is stated at 38-010: -

"To the general question, whether the defendant has done what would normally and reasonably suffice to bring the conditions to the notice of the claimant, the courts have added the important corollary that the degree of notice required may vary in proportion to the breadth or savagery of the clause itself. Clearly, the more ambitious, unreasonable or unusual the clause, the less likely the claimant may be (in the absence of direct knowledge) to assume that it has been incorporated." (citations omitted)

One of the cases referred to by the authors of Palmer on Bailment, and on which both Brackley and PRI placed emphasis, was Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163. In that case the plaintiff drove his car into an automatic car park. A notice on the outside of the car park building stated that all cars were "parked at owner's risk". The plaintiff took a ticket as he entered the car park, on the reverse of which it was stated that the ticket was "issued subject to conditions...displayed on the premises". The relevant conditions were displayed on a pillar opposite the ticket machine. One condition was that the garage would not be liable for any injury to the customer's car occurring when his or her car was on the premises.

Lord Denning MR said at 170 that the clause: -

"is so wide and so destructive of rights that the court should not hold any man bound by it unless it is drawn to his attention in the most explicit way. ...In order to give sufficient notice, it would need to be printed in red ink with a red hand pointing to it - or something equally startling."

In Remath Investments No. 6 Pty Ltd v Chanel (Australia) Pty Ltd [1992] NSWCA 208, Kirby P, and Handley and Cripps JJA considered a warehouse case where perfumes and cosmetics had been stored, and were stolen by burglars. Remath's "storage conditions", which relieved it from liability, were displayed on notices in the office at its bond store and in the waiting room at its head office. Its invoices contained a statement referring to those terms and conditions.

The Court said at 9: -

"Remath made no attempt to introduce the storage conditions into any contract with Chanel at or about the time the contract was made...why should [the customer] ... be expected or required to do anything to find out more about Remath's conditions of contract? Why should he do what Remath itself could not be bothered doing? In particular why should the law allow Remath to introduce restrictive conditions by stealth when it had made no attempt to introduce them openly and directly at the time the contracts were made. In our opinion in the circumstances of this case there was no onus whatever on [the customer] to make any inquiry of Remath simply because he had received and read invoices in this form."

These cases provide examples where the Court has not been satisfied that reasonable steps were taken to draw restrictive conditions to the attention of the relevant party. However, they do not gainsay the proposition that the question must be, in each case, what, in all the circumstances was reasonably required.

It seems to me that, as UTI submitted, one fact of which is of importance is the amount of time available to the relevant party to consider restrictive conditions sought to be imposed by the other party.

At one extreme is the limited amount of time available to Mr Thornton, driving his car into an automatic car park, to consider terms and conditions written on the adjacent pillar.

At the other end of the spectrum would be a circumstance where a commercially sophisticated party is provided with terms and conditions and allowed time to consider them and who, thereafter, elects to proceed.

It is that kind of circumstance that McHugh JA referred to in Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 at 535: -

"A more accurate statement is that where an offeree with a reasonable opportunity to reject the offer of goods or services takes the benefit of them under circumstances which indicate that they were to be paid for in accordance with the offer, it is open to a tribunal of fact to hold that the offer was accepted according to its terms."

See also Hyder Consulting (Australia) Pty Ltd v Wilh Wilhelmsen Agency Pty Ltd [2001] NSWCA 313 per Meagher JA at [16].

Incorporation of STCs - PRI

Three directors of PRI made witness statements. They were Mr Frank Ruckriegel, Mr Lloyd Bennett and Mr Nicholas Blake.

1 June 2004 presentation

Mr Ruckriegel and Mr Blake (but not Mr Bennett) attended a presentation by an employee of UTI, Ms Kym Carruthers, on or about 1 June 2004.

Both Mr Ruckriegel and Mr Blake said that, at that presentation, Ms Carruthers gave them a document called "Warehouse and Distribution Proposal". This was a four page document which included a schedule setting out UTI's rates.

At the foot of the page on which the relevant rates were set out was the notation: -

"All rates subject to UTI normal Terms & Conditions".

The fourth page of the document was entitled "Warehouse Information".

That page dealt with such matters as "Standard Pallet Size", "Warehouse Operating Hours", "Distribution Requirements" and "Invoicing". The first item read: -

"Terms & Conditions:

* Standard Terms & Conditions Apply".

Mr Bennett, who did not attend the 1 June 2004 presentation, said that before the warehouse fire, he had "occasionally encountered" the Warehouse and Distribution Proposal "because it contained UTI's rates".

Mr Ruckriegel said that he did not remember Ms Carruthers, or any other UTI employee, in the course of the 1 June 2004 presentation, showing him or giving him a document containing the STCs. He said he first saw the STCs in 2010.

Mr Blake gave evidence to similar effect.

Evidence on the voir dire

During the hearing, UTI tendered a letter dated 17 June 2008 from PRI's solicitors to UTI's solicitors providing particulars ("the Particulars Letter") as an admission by PRI that the STCs were incorporated into the contract between PRI and UTI.

For the reasons set forth in my judgment in Pacific Resources International Pty Ltd v UTI (Aust) Pty Ltd [2012] NSWSC 1083 I admitted the Particulars Letter as an admission.

In the course of argument about the admissibility of the Particulars Letter, evidence was received on the voir dire.

Included in that evidence was an affidavit sworn by an investigator, Mr Robert King.

The evidence was received on the voir dire upon the basis that it would not become evidence in the trial unless either party sought to read or tender it in the trial.

After the voir dire was concluded, and after delivery of the judgment referred to at [117], UTI tendered certain evidence from the voir dire. This included the evidence given by Mr King in cross-examination.

PRI objected to that tender, but I allowed it.

The evidence was probative and relevant. It came from witnesses called by PRI on the voir dire. As emerges from what I set out below, it turned out to be of critical relevance not only to the question of whether the Particulars Letter was an admission but also as to whether, as a matter of fact, PRI had notice of the STCs before contracting with UTI.

Mr King's evidence on the voir dire

On the voir dire, Mr King said he interviewed Mr Bennett on 17 January 2006 (15 days after the fire).

In his affidavit read on the voir dire, Mr King said: -

"5. Mr Bennett provided me with a bundle of documents. He did not go through the documents or identify them individually to me.

6. I later reviewed the documents while preparing my first investigative report, which was dated 2 February 2006. I inserted some of those documents as attachments to my report, including a copy of the document entitled 'terms and conditions'.

7. I identified those documents at page 12 of my first investigative report as '8. Copy of UTi's Agreement with the insured company [PRI], dated 1 June 2004'. I did this based on the face of the documents."

The terms of the affidavit suggested that Mr King had received from Mr Bennett a copy of the document including the STCs, but had simply included that document in his report without comment other than listing it as one of a number of documents provided to him by Mr Bennett.

However, Mr King's "investigative report" and his evidence in cross-examination on the voir dire, revealed that the situation was not so simple.

During cross-examination Mr King was shown notes that he had prepared before his meeting with Mr Bennett. He described the notes as points that he had made that he intended to raise with Mr Bennett. Mr King had ticked various items on that list.

One of the points read "agreement/contract/copy". Mr King had ticked that item. When asked what the tick against those words signified, Mr King said: -

"I've covered the topic and asked for documents".

In his report, Mr King stated: -

"The insured [Mr Bennett] has provided the writer with a full copy of the current agreement between UTi and [PRI]. We enclose same for your perusal."

The document enclosed was a "Warehouse and Distribution Proposal" addressed to PRI which bore the endorsement: -

"Presented to: Lloyd Bennett & Nick Blake

By: Kym Carruthers

1st June 2004".

This was the four page document to which Mr Ruckriegel and Mr Blake referred to in their evidence.

However the copy attached to Mr King's report also included the STCs.

Mr King's report also included a statement that Mr King had taken from Mr Bennett. In cross-examination, Mr King explained that he took the statement from Mr Bennett using a dictaphone. Mr King said, so far as he could tell, Mr Bennett could hear what he was dictating and that there were occasions where Mr Bennett asked Mr King to pause and to correct something he had said. Mr Bennett did not sign the statement Mr King prepared.

Mr Bennett swore an affidavit on 7 September 2012, two days after the evidence was taken on the voir dire. In that affidavit, Mr Bennett gave evidence as to the current state of his memory. I shall return to that shortly. He said he had no "specific recollection" of his meeting with Mr King.

The form of the statement that Mr King prepared for Mr Bennett suggests Mr King may have polished the draft, as dictated, before finalising it. Nonetheless, based on the above evidence, I am satisfied that the statement records the substance of what Mr Bennett told Mr King.

Included in the statement was the following passage: -

"I've provided Mr King with a copy of the current form of agreement in place with UTI, which is dated 1 June, 2004".

In regard to that entry, Mr King gave the following evidence: -

"Q: Did Mr Bennett provide you, Mr King, with something he called the current form of the agreement?

A: Yes."

The document to which Mr King was referring was the Warehouse and Distribution Proposal, including the STCs.

As I have mentioned, Mr Bennett said he had no recollection of meeting Mr King. He said he did not recall handing the STCs to Mr King, or where in the office they were located.

In 2008, Mr Bennett was diagnosed with a brain lesion. As a result, he suffers some memory loss. He said: -

"I can remember some things very well, including many aspects of PRI's business. However, there are gaps in my memory of some events that occurred in the past."

Mr Bennett's specialist neurologist, Dr Ronald Joffe, said that Mr Bennett: -

"...suffers from complex partial seizures and there are changes in his temporal lobes. He is well controlled, but still continues to have absences and his memory is certainty abnormal.

While he is quite happy to appear in Court, it is my opinion that his memory would not be considered reliable for events occurring prior to 2008."

So far as concerns the STCs, Mr Bennett said: -

the first time he saw the STCs was when shown the document by PRI's solicitors "about two years ago";
before then, he did not recall ever seeing the STCs or any terms and conditions stapled together with the four page document entitled "UTI Warehouse and Distribution Proposal" dated 1 June 2004;
he had never considered the STCs to be part of the agreement between PRI and UTI for warehousing and distribution services;
he "would never have agreed to any terms and conditions whereby PRI's warehousing provider is absolved for any liability for damage to PRI's goods while in their storage and care".

Mr Bennett was not challenged about any of these matters.

In submissions, Mr Williams SC, who appeared with Mr Chiu for PRI, placed great emphasis on this and on the fact that UTI did not call Ms Carruthers as a witness despite the fact that, as was common ground, she was available to give evidence. Indeed, she had made a statement served in the proceedings. It was common ground that I could take that fact into account. I infer that Ms Carruthers' evidence would not assist UTI: Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298.

I take all those matters into consideration.

Were the STCs handed over at the 1 June 2004 presentation?

The fact remains that, somehow, a copy of the 1 June 2004 Warehouse and Distribution Proposal, with the STCs attached, came into PRI's possession in circumstances which led Mr Bennett to tell Mr King that the document represented the "current form of the agreement".

That document is described, on its face, as having been "presented to" Mr Bennett and Mr Blake by Ms Carruthers on 1 June 2004. The evidence of Mr Ruckriegel and Mr Blake establishes that there was a presentation by Ms Carruthers on or about this date although attended by those two men, rather than Mr Bennett and Mr Blake. Each of Mr Ruckriegel and Mr Blake agree that they got the first four pages of the document.

The fact that Mr Bennett was able to produce the seven page document (including the STCs) on 17 January 2006, leads me to conclude that the whole of the document, including the STCs, must have been handed over by Ms Carruthers to Mr Ruckriegel and Mr Blake at the 1 June 2004 presentation.

PRI offered no other explanation as to how the document came into its possession.

It is PRI's submission that the contract between PRI and UTI was formed on or shortly after the 1 June 2004 meeting. Both Messrs Ruckriegel and Blake said that they received the Warehouse and Distribution Proposal document during Ms Carruthers' presentation. I infer, from their evidence, that that document was received before the deal was closed; that is before formation of the contract.

Did UTI take reasonable steps?

In these circumstances, the question is whether UTI took reasonable steps to draw the relevant clauses to PRI's attention.

There is no suggestion in the evidence that Ms Carruthers referred to the STCs in the course of her presentation, let alone that she drew the terms of clause 15, clause 17 and clause 18 to the attention of Messrs Ruckriegel and Blake.

However: -

As I have mentioned, the Warehouse and Distribution Proposal contains, within its first four pages, two references to the applicability of UTI's "normal" or "standard" terms and conditions. The second reference, on the page headed "Warehouse Information", is prominent.
The format of the STCs themselves is clear. The heading "Liability" is in large, bold print and clause 15, clause 17 and clause 18 commence with the words "Exclusion of Liability", "Notice of Claim" and "Time bar" in bold print. A cursory glance at the STCs would reveal these clauses.
The Warehouse and Distribution Proposal, with the STCs attached, was given to two of the directors of PRI; Mr Ruckriegel and Mr Blake. They struck me as experienced men of commerce.
The speed of the transaction was not such as to deprive Messrs Ruckriegel and Blake, and thus PRI, of a reasonable opportunity to read the STCs. The case is quite different to that considered in Thornton (where the terms and conditions were on the pillar of a ticket machine) or Remath (where the conditions were displayed on notices in the bond store and waiting room). Here, there is no suggestion that Messrs Ruckriegel or Blake were under any time constraint to consider whether to commit PRI to a contract with UTI. Indeed Mr Blake said that, prior to the 1 June 2004 meeting, PRI had received "unsolicited sales calls" from Ms Carruthers and that, prior to June 2004, she had attended PRI's premises "on about two occasions to speak to him and Mr Ruckriegel about potentially engaging UTI as a new service provider". It was only after those approaches that Ms Carruthers invited Mr Ruckriegel and Mr Blake to UTI's premises for the presentation.

In all those circumstances, my opinion is that the simple provision of the STCs, annexed to the Warehouse and Distribution Proposal at the 1 June 2004 presentation was sufficient and reasonable notice by UTI to PRI of the STCs.

In my opinion, the STCs were incorporated into the contract between PRI and UTI.

The Particulars Letter

As I have mentioned, the Particulars Letter was received in evidence as an admission by PRI that the STCs were part of the relevant contract.

The conclusion to which I have come is that it is the facts that led to the writing of the Particulars Letter, rather than the Particulars Letter itself, that are decisive on this issue.

If I am wrong about this and, in particular, if I am wrong to receive the voir dire evidence as evidence in the hearing, I would come to the same conclusion based on the Particulars Letter itself.

UTI's system

UTI led evidence from a number of witnesses to suggest that it had a "system" involving its customers signing a document acknowledging the STCs. The operation of the system was said to be effective to draw the STCs to its customers' attention.

The significance of this system was only faintly pressed in submissions.

In light of the conclusions to which I have come it is not necessary for me to express any opinion about it.

Payment by UTI of inventory loss claims without protest

PRI tendered a series of documents which showed that, from time to time, during 2005, PRI made various inventory loss claims on UTI, arising from damage caused to PRI's goods at the warehouse. Those claims were paid by UTI without demur and without reference to or reliance on the STCs.

There is no evidence from any PRI witness of reliance on that course of conduct. In any event, PRI has not pleaded an estoppel arising out of this conduct. That is a matter which would require specific pleading, e.g. Laws Holdings Pty Ltd v Short (1972) 46 ALJR 563 at 571.

Incorporation - Brackley

There is no evidence that Brackley signed any document acknowledging or agreeing to be bound by the STCs.

Further, there is no evidence that Brackley ever had a copy of the STCs until after the fire.

Brackley's Managing Director, Mr Gary Abrams, gave unchallenged evidence that he put important documents, such as the STCs, in a file and that after the fire he searched for, and could not find, any copy of the STCs amongst Brackley's records.

On 29 March 2006, some months after the fire, Mr Abrams asked Ms Sue Maherry (now Ternen), who was then UTI's New South Wales Sales Manager for a copy of the STCs. Mr Abrams said that was when he first saw them.

Negotiations prior to Brackley moving to UTI

From around the end of 2002 Ms Ternen communicated with Mr Abrams with a view to soliciting Brackley's logistics and warehousing business.

At that time Brackley was using Doug Hayes Transport ("DHT") for its logistics and warehousing needs.

Mr Abrams declined to change warehousing provider, but did cause Brackley to engage UTI to provide some sea and air freight services.

The contractual arrangements between Brackley and DHT contained no term excluding the liability of DHT in respect of damage to Brackley's goods. Although DHT had standard terms and conditions, which contained some exclusions, Brackley did not execute any contract with DHT.

Ms Ternen continued to approach Mr Abrams in relation to Brackley's business.

Mr Abrams said that, during one such approach, some time in 2003 or 2004, the following conversation took place: -

"Mr Abrams: [The DHT rates] are the rates that you have got to manage [sic: I infer Mr Abrams meant "match" - see [181] below]. This is a service we want - you have to subcontract all freight distribution within Sydney to DHT on Brackley's account. If any stock is damaged, delayed or lost as a result of your conduct, you have to fully compensate Brackley for that stock, and very importantly, you have to ensure that there is nothing combustible stored within your warehouse. Our CD boxes are made out of polystyrene, and our DVD and video boxes are made out of polypropylene. Whilst polystyrene and polypropylene isn't combustible it contains oil-based resins. Should a fire occur, our stock is likely to burn for a long time. I will consider transferring our storage needs only when you can meet these terms.

Ms Ternen: I cannot get UTI to accept those price terms."

Ms Ternen denied this conversation. However, I accept it occurred.

Overall, for the reasons that I set out below, I found Mr Abrams to be a more reliable witness than Ms Ternen.

In any event, there are a number of factors which point to the probability that Mr Abrams would have said something to the effect he asserts. The first is that Brackley's then current warehouser, DHT, did not purport, in its contractual relations with Brackley, to exclude liability for damage caused as a result of its conduct. Second, Brackley's goods were, by their nature, susceptible to damage by fire.

By mid 2004 Mr Abrams had become disenchanted with DHT.

Mr Abrams said he had the following conversation with Ms Ternen "shortly prior to" Brackley contracting with UTI: -

"You've been chasing my business for a long time. I'm ready to move my goods out of [DHT]. If you want to close the deal now is the time".

The "handshake meeting"

Mr Abrams said that "very shortly after" the conversation referred to in [179], he met Ms Ternen, and Mr Young, then UTI's Chief Executive Officer, in Brackley's boardroom at Alexandria. The parties referred to this meeting as the "handshake meeting".

Mr Abrams gave evidence that, at the "handshake meeting" he said: -

"If you want my business, here's the [DHT] rate sheet that you have to match. I've previously told you the terms upon which I would move my business. You have to subcontract most of the freight distribution within Sydney to DHT on Brackley's account. There are to be no combustible goods stored with [sic] the warehouse because they are made of polypropylene and polystyrene and burn forever. In relation to the goods, if you lose them or break them, you pay for them."

The significance of this evidence is that, according to Mr Abrams, he was making it clear that if UTI wanted Brackley's business, it would have to agree to be responsible for any damage it caused to Brackley's goods and thus, inferentially, that Brackley would not agree to any inconsistent term in the contract.

Ms Ternen responded to this evidence in an affidavit sworn on 3 September 2012 in reply to Mr Abrams' affidavit in which he gave the evidence at [181]. This was in the second week of the trial, by which time the issues concerning the STCs had been well ventilated.

Ms Ternen did not deny that Mr Abrams said the critical words "in relation to the goods, if you lose them or break them, you pay for them".

What Ms Ternen said was: -

"As to [the relevant paragraph of Mr Abrams' affidavit], I deny that the [DHT] rate sheet was given to me. I agree we were told to use DHT for distribution on the Brackley account. I deny that any discussion regarding the material composition or burning took place. I deny that UTI agreed to pay for any lost or broken goods as this was totally in contradiction to UTI standard terms of trading".

Thus, Ms Ternen denied that UTI had agreed "to pay for lost or broken goods". She did not deny that Mr Abrams had made clear that this was his requirement.

Ms Ternen also said that, at the "handshake meeting" Mr Young said: -

"We have a standard warehousing contract that we can customise for you and annex the agreed rates that you would need to sign for us to transact."

and: -

"We have a standard warehousing agreement. We'll attach the rates to it and we'll get it through to you."

The "standard warehousing agreement" did not contain the STCs.

In cross-examination of Ms Ternen the following exchange took place about that passage: -

"Q: That [the evidence at [188]] says nothing about UTI's standard terms and conditions for warehousing, does it?

A: To my mind, it tells that there is a contract that needs to be signed. That's how I read it.

Q: There was no discussion between Mr Abrams and Mr Young about UTI's standard terms and conditions for warehousing was there?

A: There was.

Q: You say it's in [the above passages] do you? Is that the conversation?

A: It happened at those meetings. I wasn't obviously specific enough in what I've put here, but that conversation definitely took place.

Q: You never were present at any discussion where UTI's standard terms and conditions for warehousing were discussed, were you?

A: I was. Not all the terms and conditions but they were certainty mentioned.

Q: Mr Young never said to Mr Abrams in your presence, did he, 'if we deliberately damage your goods, we're not liable'?

A: No.

Q: And he never said to Mr Abrams in your presence, 'we're not liable for damage to your goods under any circumstances at all'; do you agree?

A: I agree."

UTI did not call Mr Young to give evidence. Mr Young ceased to be employed by UTI in about June 2006. There was no suggestion that Mr Young was not available to give evidence. No explanation was given for his absence. I infer that Mr Young's evidence would not have assisted UTI: Jones v Dunkel.

I am satisfied that Mr Abrams said words to the effect set out above. The matter for discussion was whether Brackley would change its business from DHT to UTI. The contractual terms between Brackley and DHT did not exclude DHT's liability in the event that it caused damage to Brackley's goods. There is no reason for Mr Abrams to accept more onerous terms from UTI. And bearing in mind the nature of Brackley's goods, it seems likely that Mr Abrams would insist that UTI be liable if anything happened to Brackley's goods.

Ms Ternen did not, in her affidavit, deny the critical part of the conversation. The relevant paragraph from her affidavit cavilled with certain aspects of Mr Abrams' statement, but did not dispute its critical element. The comments she attributed to Mr Young dealt only with UTI's "standard warehousing agreement", and not the STCs.

The 15 July 2004 email

On 15 July 2004, Ms Ternen sent an email to "Jack" at Brackley. The email was cc'd to Mr Abrams. The subject of the email was "Warehouse Rates".

The email read: -

"Dave called and asked for the attached - I couldn't get through to his email. Can you please forward."

What was attached was described in the email as: -

"Brackley's warehousing quote July 2004.xls".

The attachment was an excel spreadsheet which contained three pages, accessible by pressing a tab at the foot of the spreadsheet. The first tab was marked "Brackley's rates", the second "Terms and Conditions" and the third "General Info".

If the recipient of that email had opened the attachment, and pressed the tab marked "Terms and Conditions", a copy of the STCs would appear.

The significance of the email is that, if received, it comprised some notice of the STCs.

Brackley accepts that it received the email. However, Mr Abrams said he could not remember seeing the email, and could not remember reading the attachment.

This is not surprising. The email was addressed to "Jack". Its subject was "Warehouse Rates". Ms Ternen agreed that she had never spoken to Mr Abrams about the STCs (or "Terms and Conditions" as they are described in the attachment to the email).

There was no direct evidence as to whether the 15 July 2004 was sent before or after the "handshake meeting" to which I have referred.

On 1 September 2004, Ms Ternen sent a copy of the email to a colleague at UTI and described the 15 July 2004 email as one sent "in July prior to us taking the biz on". That suggests the email was sent before any agreement was reached between UTI and Brackley.

Mr Abrams placed the "handshake meeting" as being "in or about August 2004" by reference to an email exchange he had with Ms Ternen on 11 August 2004.

On that date, Ms Ternen emailed Mr Abrams: -

"We have been advised by Basil at [DHT] that there is one load left to move, which we are doing now. This gives us in the region of 550 pallets (will confirm on stock report tonight) moved over. Can you confirm this is okay."

Mr Abrams replied: -

"There is still a heap of stock at DHT but slow moving. Will leave there until all is bedded down in a week or so".

That exchange suggests that, by 11 August 2004, agreement had been reached between Brackley and UTI and that movement of Brackley's goods from the DHT warehouse to UTI's warehouse was almost complete. That would place the "handshake meeting" as occurring some days prior to 11 August 2004.

In my opinion, it is immaterial whether the relevant conversation took place before or after Ms Ternen sent the 15 July 2004 email.

The conversation clearly took place before contract and in it Mr Abrams made plain that he would not accept a condition to the effect of clause 15 of the STCs.

In those circumstances, in order to give Brackley reasonable notice of the STCs, it was not sufficient for Ms Ternen, without comment, to simply email a copy of the STCs, as one part of an excel spreadsheet to "Jack" at Brackley and to "cc" it to Mr Abrams.

Indeed, the form of the 15 July 2004 email suggests that Ms Ternen sent it, and the attachment, to "Jack" to notify him of information he had requested (namely "Warehouse Rates": the heading to the email) rather than to notify Brackley of the STCs.

Ms Ternen knew that Mr Abrams was the person at Brackley she had to convince in order that Brackley change its business from DHT to UTI. In view of Mr Abrams' clear statement of his position, it was necessary for Ms Ternen, or someone else from UTI, to draw Mr Abrams' attention, in terms, to the relevant provisions of the STCs.

That did not happen. Brackley did not otherwise agree to be bound by the STCs.

It follows, in my opinion, that the STCs were not incorporated into the contract between Brackley and UTI.

UTI's system

I have referred to the evidence led by UTI concerning its system, the object of which was said to be to draw to customers' attention UTI's reliance on the STCs.

There was no suggestion that it was any part of that system that customers' attention be drawn, in terms, to the provisions of the STCs (particularly clause 15, clause 17 and clause 18).

In view of the conclusion to which I have come concerning the conversations between Mr Abrams and Ms Ternen, any system UTI may have had concerning such generalised references to the STCs cannot avail it.

In any event, as I have said when discussing PRI's position, the relevance, and the effect of UTI's system was only faintly pressed in submissions.

Competing evidence of Mr Abrams and Ms Ternen

I have stated (at [176] above) that I found Mr Abrams to be a more reliable witness than Ms Ternen.

In fairness to Ms Ternen, I should state that I found that both she and Mr Abrams gave evidence in a confident and, for the most part, responsive manner. They both struck me as competent and professional people who were doing their best to give their best recollection of what had happened.

However, there were a number of aspects of Ms Ternen's evidence that have led me to conclude that, overall, she was the less reliable witness.

First, in her affidavit evidence, she placed the "handshake meeting" as being within a few days of 27 November 2003. Faced with Mr Abrams' affidavit evidence that the meeting took place in August 2004, she conceded that she was wrong in her recollection and accepted that Mr Abrams was correct.

Second, she asserted in cross-examination that she was present when there was a discussion with Mr Abrams about UTI's STCs. When pressed, in cross-examination, to point to where she had given evidence about this in her affidavits, Ms Ternen pointed to the passages which I have set out at [187] above. However, as the cross-examination I have set out at [189] revealed, those passages in Ms Ternen's affidavit did not deal with the STCs; but rather with UTI's warehousing contract.

Ms Ternen was also asked questions about a draft "Warehousing and Distribution Agreement". That document was in "revision" or "track changes" mode. It appeared to be a draft of a document intended by UTI to be executed by Brackley and to be a modification of an earlier agreement between UTI and another customer (the footer reads "ENZA draft 18/11/03").

Clause 2 of the draft document read: -

"This Agreement is subject to the normal Trading Terms of UTI. In the event of an inconsistency between the UTI Trading Terms and this Agreement, the Trading Terms will prevail to the extent of the inconsistency."

At first, Ms Ternen asserted that she had given this document to Mr Abrams. Mr Abrams denied receiving it. Then Ms Ternen agreed that she would not have given Mr Abrams a document in "revision" or "track changes" form. Ms Ternen then said that she had given Mr Abrams a version of the document without the "track changes". However, the draft did not contain, at the appropriate place, the rates that UTI would charge. The only reference in the "track changes" document to rates were rates (presumably in relation to the customer "ENZA") which were deleted. Ms Ternen resorted to saying that the rates "may well have been on the final document".

As Brackley submitted, if the "track changes" on this document had been "accepted" one would expect there to be a version of the final document on UTI's hard drive. However, Ms Ternen said that she was not aware of any such version. None was produced by UTI in the proceedings. The only hard copy version of any Warehousing and Distribution Agreement between UTI and Brackley was the "track changes" version.

Two things emerge. First, that Ms Ternen's evidence about this document demonstrated that she did not, as she asserted, actually have a recollection of giving any such document to Mr Abrams. I am satisfied she did not.

Second, Ms Ternen's preparedness to assert that she had given the document to Mr Abrams casts doubt on the reliability of her recollection generally.

The draft Abrams affidavit

During cross-examination of Mr Abrams, and in the course of UTI's submissions, much was made of a draft affidavit allegedly prepared for Mr Abrams. For some reason, that draft was discovered by Brackley. That draft contained the following paragraphs: -

"10. I have been shown a document marked 'T&C - Undated - Received 27/03/06' and that is a copy of a document which I gave to Barry Cunnigham on 27 March 2006. I have also been shown a copy of document marked 'T&C Version Dated 18 April 2012'. Those two documents appear to be similar. I have also been shown a document marked 'T&C - Version Dated 18 April 2002 - Highlighted Sections'.

11. In the document marked 'Highlighted Sections' Paragraph 8 has the words 'without notice' at the end of the third last line, Paragraph 12 has the word 'thirty' (days) on the second line and Paragraph 17 has the word 'seven' (days). In the document marked 'T&C - Undated' (which is a copy of the one I gave Barry Cunningham on 27 March 2006) 'without notice' has been deleted in Paragrpah 8, 'sixty' days has replaced 'thirty' days in Paragraph 12 and 'ten' days has replaced 'seven' days in Paragraph 17. The deletion and the amendments in 'T&C - Undated' were made at my request." (emphasis added)

The three relatively minor changes to the STCs referred to in these extracts from the draft affidavit were ones which were favourable to Brackley (albeit modestly). They were also incorporated in the STCs included in the excel spreadsheet attached to Ms Ternen's 15 July 2004 email.

UTI submitted that the only plausible explanation for this was that Mr Abrams must have negotiated these changes to UTI's STCs and must, therefore, have been aware of them.

However, Mr Abrams denied that these changes had been made at his request and said that he had never seen the draft affidavit.

Significantly, in my opinion, Ms Ternen gave no evidence that she conducted any negotiations with Mr Abrams concerning these changes. She said that at no time prior to Brackley engaging UTI to carry out warehousing services had she ever discussed the STCs with Mr Abrams. In fact, she had never read them.

The reference on the draft affidavit was "AXB:DJC". It was common ground that this reference refers to that of Mr Adam Butson, Brackley's solicitor and that Mr Butson was present in Court during the hearing and was available to give evidence. Mr Roberts SC, who appeared with Mr Casselden for UTI, submitted that I should infer from Brackley's failure to call Mr Butson, that he would be unable to give evidence to assist Brackley's case on this issue (see Jones v Dunkel). Mr Roberts' submitted that such privilege as would otherwise attach to any relevant communications between Mr Abrams and Mr Butson had been waived by the discovery of the draft affidavit and that, in any event, as Brackley had waived privilege in respect of the draft affidavit, it could also waive privilege in relation to any such communication. The inference I draw is that Mr Butson was not able to give any evidence which would assist Brackley's case on this point.

The circumstance of the draft affidavit is certainly curious and, as I have set out, not explained. However, I accept Mr Abrams' denial of any involvement in it. I found him to be a credible and careful witness.

It seems improbable that he would negotiate such relatively insignificant variations to the STCs without making clear to UTI his refusal to accept the exclusions of liability in clause 15 of the STCs. Although the draft referred to clause 15 (and Mr Abrams' attitude to it) there is no suggestion in the evidence that, in 2004, Mr Abrams had any communication with UTI about that matter.

My finding is that Mr Abrams had no involvement in the relevant passages of the draft affidavit.

Brackley's estoppel claim

Brackley pleaded that, even if the STCs were incorporated into the contract between it and UTI, UTI is estopped from:-

(a) asserting that the exclusion terms form part of the agreement; and

(b) denying that it is liable to Brackley for losses to its goods caused by UTI's negligence.

In view of my conclusion that the STCs were not incorporated into the relevant contract, it is not necessary for me to decide this issue.

However, I will deal with Brackley's submissions briefly.

Brackley asserted both a promissory and conventional estoppel.

For present purposes, it is only necessary for me to deal with Brackley's submissions concerning promissory estoppel. The estoppel is said to arise from the fact that, on numerous occasions before the fire, Brackley made claims on UTI for lost stock, which claims were approved by UTI. Those claims were paid by UTI without demur and, in particular, without any assertion that UTI's liability was excluded by reason of the STCs.

The credits claimed and granted related to lost or damaged goods. As UTI has submitted, the amounts involved were relatively small, compared to the size of Brackley's business. For the most part, the claims and credits were in the order of hundreds of dollars.

In relation to those credits, Mr Abrams gave this evidence, which was not challenged: -

"Had UTI [in response to the claims for credits] said to me that...it was storing Brackley's goods on the basis of UTI's standard terms and conditions, or that there were terms limiting UTI's liability for Brackley's lost stock due to UTI's negligence, I would never have engaged UTI for the purposes of warehousing Brackley's goods."

In this regard, Mr Neal, who appeared for Brackley, submitted: -

"It is difficult to think of a clearer case of estoppel in respect of exclusion clauses in a bailment contract. By Brackley making claims for lost goods, and UTI not raising the exclusion clauses, but instead paying the claims without demur, the parties adopted an assumption, and conducted their relationship on basis of the assumption, that there were no terms limiting liability, and that if UTI negligently lost Brackley's goods, UTI would pay for them. UTI also made a clear and unambiguous representation to that effect. Brackley relied on the representation by continuing to warehouse its goods at the premises. Brackley will clearly suffer detriment if the assumption is departed from. The result is that UTI is estopped, by representation and by convention, from asserting that its exclusion terms formed part of the Agreement, and indeed from denying that it is liable to Brackley for its negligent loss of the goods."

I accept that submission.

Mr Roberts, for UTI, submitted that the mere act of allowing Brackley a credit in relation to relevantly modest claims for lost or damaged goods could not amount to an unequivocal representation that the STCs would not apply.

I do not agree. This was a contract of bailment. UTI was storing goods on behalf of Brackley which were susceptible to damage, for example by fire. The payment, without demur, of claims for loss of goods carried with it an implicit representation by UTI that there was no term in the contract between UTI and Brackley which protected UTI from liability in relation to the claims made. Mr Abrams' evidence was that he would have moved his business away from UTI, had these claims been met with a denial of liability and a reference to the STCs (particularly clause 15). In my opinion, this evidence is credible, and accords with the probabilities, bearing in mind the circumstances in which he was persuaded to change Brackley's business from DHT to UTI. In any event, his evidence was not challenged.

I accept that all the elements necessary to establish an equitable or promissory estoppel are established: -

(a) Brackley has adopted an assumption as to the terms of its legal relationship with UTI, namely that there was no contractual basis upon which UTI could deny liability for damage caused by negligence;

(b) UTI induced or acquiesced in Brackley's adoption of that assumption by paying the claims without question;

(d) UTI knew or intended that Brackley would so act (in the absence of any evidence from UTI as to the circumstances in which it paid the amounts in question, I am prepared to draw this inference); and

(e) it will occasion detriment to Brackley if the assumption is not fulfilled; that is obviously so if UTI is permitted to rely upon the STCs, and in particular clause 15.

(Per Brennan J in Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387, at 428-429; and see the discussion by Brereton J in Waterman v Gerling Australia Insurance Co Pty Ltd [2005] NSWSC 1066; (2005) 65 NSWLR 300 at [83-84].)

Misleading or deceptive conduct

Both Brackley and PRI claimed that UTI made representations, in trade or commerce, that were misleading or deceptive for the purposes of s 52 of the Trade Practices Act (the provision in force at the relevant time).

It is common ground that the STCs provide no answer to such claims, if they are made out.

Brackley claimed that UTI made two representations which were misleading or deceptive for the purposes of s 52 of the Trade Practices Act. First, that UTI did not store combustible goods at the warehouse; second, that UTI was permitted to store Brackley's goods at the warehouse.

PRI also claimed that UTI made two representations which were misleading or deceptive for the purposes of s 52 of the Trade Practices Act. First, that it was permitted to store PRI's goods at the warehouse; second, that it complied, and would comply, with relevant contractual, statutory and regulatory conditions for the storage of PRI's goods.

I will deal with these matters in turn.

Brackley's misrepresentation claims

First Representation: No combustible goods

Brackley alleged that UTI represented that it did not store combustible goods at the warehouse.

That case is based on the conversations between Mr Abrams and Ms Ternen, to which I have referred.

In the first of those conversations Mr Abrams said to Ms Ternen: -

"...you have to ensure that there is nothing combustible stored within your warehouse".

Mr Abrams went on to explain that Brackley's CD and DVD cases "is likely to burn for a long time" should a fire occur.

In the conversation at the "handshake meeting" in August 2004, Mr Abrams said: -

"There are to be no combustible goods stored with [sic] the warehouse because [Brackley's CD and DVD cases] are made of polypropylene and polystyrene and burn forever."

Ms Ternen denied this conversation and denied making the representation.

However, Ms Ternen agreed that, had a potential customer asked her in 2004 whether UTI was storing combustible goods, she would have said no.

I have found that the conversations alleged by Mr Abrams took place. I also find that Ms Ternen either said nothing, and thus implicitly represented that no combustible goods were stored at the warehouse or, consistent with that evidence, actually said that no combustible goods were stored at the warehouse.

The ordinary meaning of combustible is capable of catching fire and burning, or flammable (The Macquarie Dictionary, 5th ed (2009)).

In cross-examination, Mr Abrams said he understood "combustible" to mean "goods that could burst into flames" or "chemicals that could burst into flames".

As UTI pointed out, at one level, many things stored in any warehouse would be combustible; for example cardboard cartons. However a fair reading of what Mr Abrams said was that he would not store his goods in a warehouse where there was also stored goods which were likely to themselves cause a fire, or to a significant or practical degree, exacerbate the spread and intensity of a fire otherwise caused.

At all material times, UTI stored gas cylinders at the warehouse.

In my opinion, gas cylinders were "combustible" in the sense of that word as used by Mr Abrams in his conversations with Ms Ternen.

In my opinion the no combustible goods representation was made. It was false and was thereby misleading or deceptive for the purposes of s 52 of the Trade Practices Act.

Mr Abrams said that in changing Brackley's warehousing from DHT to UTI, he relied on what Ms Ternen had told him about the non-storage of combustible goods, and that had he known the true position he would not have entered into the agreement with UTI. His evidence is consistent with the concerns he expressed to Ms Ternen about the propensity of Brackley's stock to burn for a long time in the case of fire. I accept his evidence.

Obviously, had Brackley not entered into a warehousing contract with UTI, and stored its goods at the warehouse, the goods would not have been destroyed.

In my opinion, these findings provide an independent basis upon which Brackley is entitled to succeed against UTI.

Second Representation: Permission to store Brackley's goods

Brackley also alleged that UTI represented to it that it was "permitted" to store Brackley's CD and DVD cases at the warehouse.

Brackley submitted that by agreeing to store Brackley's CD and DVD cases, UTI implicitly represented that it had the permission of its lessor to do so.

Mr Abrams did not give direct evidence that he knew or understood that UTI was leasing the premises, although this is implicit in his evidence, both in affidavit and in cross-examination.

In any event, in my opinion, it was not necessary that Brackley prove that it knew of the lease. As PRI submitted, in the context of a similar representation alleged by it, the critical element of this representation is that UTI had facilities capable of storage of Brackley's goods.

Such a capacity was fundamental to UTI's business as a storage provider. Lack of such capacity might have arisen in ways other than from a prohibition in any lease. There may have been local council restrictions, prohibitions in environmental legislation, or other regulations. UTI's customers were not in a position to know what obstacles UTI needed to overcome in order to perform the services for which it charged payment. Those customers, including Brackley, were entitled to rely on UTI to overcome all such obstacles.

I accept the submission that, by agreeing to store Brackley's goods, UTI implicitly represented that it had overcome whatever obstacles might exist in relation to its storage of Brackley's goods; including, as it happened, prohibitions in its lease with GTA.

Clause 10.1(g) of the lease between UTI and GTA, required UTI to comply with all of the Rules in Annexure 1 of the lease. Brackley's DVD cases were made of polypropylene. Some of the CD cases were made of polypropylene; others were made of polystyrene.

The Rules prohibited the storage of "thermoplastic materials in bulk, e.g. polyethylene, polypropylene etc, other than for the purposes of packing or wrapping".

The lease thus prohibited, expressly, storage of such goods.

The permission representation was thus false.

Mr Abrams gave evidence, which was not challenged, that had he known that it was a term of UTI's lease with GTA that Brackley's goods were not to be brought onto the premises, he would not have caused Brackley to enter into the contract with UTI.

Mr Abrams did say that it did not occur to him that there might be provision in the lease forbidding UTI from storing Brackley's goods. No doubt this was because Mr Abrams assumed that UTI would not solicit the storage of goods it was not permitted, by its lease, to store. In any event, as Brackley submitted, there is no reason to doubt Mr Abrams' evidence that, had he known the true position, he would not have proceeded.

Had Brackley not entered into the agreement with UTI, its goods would not have been destroyed.

In these circumstances I find that UTI engaged in misleading or deceptive conduct by making the permission representation, that the representation was relied on by Brackley and has caused the damages of which it complains.

PRI's misrepresentation claims

First Representation: Permission to store PRI's goods

PRI submitted that, by entering into the bailment agreement with PRI, and accepting PRI's fish oil to be stored at the premises, UTI represented that it was permitted to store fish oil at the premises.

For the reasons set out above concerning Brackley, in my opinion, it was not necessary for PRI to prove it knew of the lease between UTI and GTA.

Further, for the reasons I have set out concerning Brackley, I find that, by accepting PRI's goods for storage, UTI implicitly made the representation alleged.

The lease between UTI and GTA contained an express provision prohibiting UTI from storing fish oil.

In this regard, PRI submitted: -

"A necessary precondition of engaging in the business of a warehousing storage provider is to have facilities capable of storing customers' goods. This is such a fundamental assumption underlying UTi's business dealings with its customers that it was incumbent upon UTi:

(a) to ensure that this was true; and

(b) to inform PRI and other customers of any restrictions or prohibitions."

Consistently with this, as I have said earlier, UTI's warehousing standards expert, Mr Schwebel, agreed that a competent warehouser would carefully read its lease and not store goods prohibited by it.

PRI called no evidence in relation this aspect of the matter. In particular, it called no evidence to show that PRI had relied upon UTI's implied representation that it was permitted to store fish oil at the premises. None of its directors said, in terms, that if they had known UTI's lease prohibited the storage of fish oil, they would have caused PRI to store its goods elsewhere.

PRI submitted that such reliance can be inferred.

I accept that submission. It appears obvious to me that had any of the directors of PRI been told that UTI's lease prohibited it from storing the very goods that PRI was entrusting to UTI, PRI would have arranged for its goods to be stored by a warehouse operator content, and able, to store fish oil.

That such alternative warehouse operators were available was revealed by UTI's evidence that its usual procedure was that goods of a flammable or dangerous nature were stored offsite at the premises of a competitor, Golden Brothers at Matraville. Indeed, the evidence of UTI's Warehouse Manager, Mr Ball, was to the effect that if a customer wanted UTI to store dangerous or flammable goods, UTI itself arranged for those goods to be stored with Golden Brothers. The reason that did not happen with PRI's fish oil was because neither Mr Ball, nor anyone else involved in the day to day handling of goods in UTI's warehouse, had read the lease, or otherwise knew that it prohibited the storage of fish oil.

As with Brackley, had PRI's goods not been stored at the warehouse, the goods would not have been destroyed in the fire.

I find that PRI has established this cause of action against UTI.

Second Representation: Storage compliance

PRI also pleaded that UTI represented that it complied, and would comply with relevant contractual, statutory and regulatory conditions for the storage of goods, including the storage of PRI's fish oil at the premises.

This representation was said to arise, implicitly, from the fact that UTI entered an agreement with PRI to store PRI's fish oil at the premises.

I accept the submission that this representation arose implicitly.

PRI made submissions as to the various factual issues which arose concerning the manner in which UTI had stored the goods.

UTI did not respond to the detail of those submissions, and I accept them.

What follows derives, with only minor changes, from PRI's submissions.

In essence, there are four questions for resolution: -

(a) What dangerous, flammable or combustible goods were stored in the warehouse at the time of the fire?

(b) How would a reasonable warehouseman have stored those goods by reference to applicable standards?

(d) Once the fire had started, did UTI's failure to store goods to a reasonable standard cause or substantially contribute to the destruction of PRI's goods?

As to (a), there was no serious dispute as to the types of goods that were stored in the warehouse at the time of the fire, the quantities of those goods, or the location of those goods within the warehouse. The combustible goods included the fish oil and the gas cylinders.

Disagreement between the experts

Many experts were involved.

The plaintiffs called three Fire Safety Engineers, Mr John DeLorenzo, Mr Per Olsson and Mr Blair Stratton. The plaintiffs also called Mr Peter Hunt, a Dangerous Goods Consultant.

UTI called Mr Donald Alexander, a Fire Safety Engineer, as well as Dr Green and Mr Schwebel.

The real issues of disagreement between the experts were as follows: -

(a) Whether combustible goods were stored beyond the height recommended in the applicable standards. Mr Olsson, Mr Stratton and Mr DeLorenzo were of the view that they were, because combustible goods such as linen and plastics were stored at heights of up to 9 metres, well in excess of the restrictions for combustible goods as set out in sprinkler standard AS2118. The maximum allowable storage height for the plastics stored in cartons in the warehouse was 3 metres to 4 metres in racks.

(b) Whether combustible goods were dispersed around the warehouse in accordance with applicable standards. Mr Hunt, Mr Olsson, Mr Stratton and Mr Schwebel were of the view that they were not, because the storage of up to 20 drums of fish oil (a C2 combustible liquid) within one area of the warehouse exceeded the concentration of combustible liquids allowed under sprinkler standard AS1940.

(c) Whether, once the fire started, the excessive height or inadequate dispersal of combustible liquids caused the sprinkler system to be overwhelmed. Modelling in support of this conclusion is set out in the report of Mr Olsson and Mr Stratton dated 10 September 2010. Their conclusion was that the sprinkler system in the warehouse would have been able to contain the fire once started, but for the non-compliant storage adopted by UTI.

UTI's attack on each component of this expert evidence was indirect at best.

Dr Green, a chemist, had limited expertise in storage methodology in warehouses. He had not been involved in the investigation of warehouse fires. He did not refer at all in his report or the joint report to the applicable sprinkler standard AS1940 for safe dispersal of C2 combustible liquids. His argument instead focused on storage heights. His opinion was that provided the maximum height of stored goods was 1.2 metres from the roof, storage was compliant with sprinkler standard AS2118.1.

Dr Green's approach to this issue was at odds with the other experts. The other experts took the sprinkler system in the warehouse as a given, and considered whether UTI's storage methodology of specified goods complied with applicable standards. Dr Green took the storage methodology as a given (based on a bare assertion that "there is nothing unusual about the storage of goods in this warehouse in that storage would have been below 1.2 metres from the roof line in compliance with the BCA and sprinkler standard"), and criticised the design of the sprinkler system (which was outside of UTI's control) as being inadequate for the storage of those goods.

Mr Olsson commented "whether the sprinkler system should have been re-designed or the storage arrangement complied with is in my opinion a question of law and not a question for a fire engineering expert". Or indeed a chemist. Underlying Dr Green's opinion was agreement with other experts that either the storage methodology or the sprinkler system had to be changed in order for storage to be in compliance with sprinkler standard AS2118.

Mr Alexander only dealt obliquely with the issue of storage heights. He said that: -

"...reference to excess storage heights throughout the warehouse needs to be moderated by view of the fact that a substantial amount of the stored goods in the warehouse at the time of the fire were extra high hazard category 1 goods. AS2118.1982 for the discharged density of 17.5mm/min has no limitation on the stacking height of category 1 goods, and the governing parameter then becomes maintaining a clearance of 1m below the sprinkler heads. I have therefore concluded that the storage of category 1 goods would have complied with the regulatory requirements."

Mr Alexander did not dispute the opinion of the plaintiffs' experts as to excessive storage heights of some goods. Rather, his opinion was that because most of the warehouse was compliant, reference to the excess storage heights of the non-compliant parts needed to be "moderated". What Mr Alexander meant by that is not clear to me.

On the issue of dispersal, UTI's experts were in conflict with each other. Despite opinions expressed in his report, in the expert witness conclave Mr Schwebel agreed with the plaintiffs' experts that storage was in excess of minor storage in sprinkler standard AS1940 for dangerous goods and C2 combustibles.

Mr Alexander did not dispute this opinion. Rather, his evidence was that the other experts were wrong and had "generalised" in their assumptions as to how the fish oil was stored in the warehouse. He insisted that all the fish oil drums were stored on the bottom tier of the racking and that there were only three pallets in the area. These assumptions have not been made out in the evidence.

On the question of causation, both Dr Green and Mr Schwebel agreed with the plaintiffs' experts that the types of goods stored and the manner of storage contributed to the spread and intensity of the fire.

However, both Dr Green and Mr Alexander criticised the modelling undertaken by Mr Olsson and Mr Stratton. However, neither Dr Green nor Mr Alexander provided an alternative model to show how the matters which they say should be taken into account would affect the conclusions derived in the model.

The evidence of Mr Hunt, Mr Olsson, Mr Stratton and Mr DeLorenzo as to non-compliance of storage methodology and the intensification of the fire as a result of this was neither seriously nor convincingly challenged. I accept their evidence.

PRI called no evidence as to whether, and how it relied upon the storage compliance representation. It submitted reliance can be inferred.

That inference is said to arise from the following circumstances: -

(a) PRI's business practice was to pay its logistics provider to receive PRI's goods when they arrived from overseas, warehouse them and arrange delivery of those goods to PRI's customers. PRI had little, if any, direct contact with the goods in this process.

(b) UTI's Chief Financial Officer, Mr Cruceanu, said that UTI operated in an extremely competitive market, and presented itself as a careful, responsible custodian of its customers' goods.

(c) UTI's then National Sales Manager, Ms Joyce Campbell, said that UTI would not "have a differentiator in the market as far as our operational capability" offering "exactly the same" operational capability.

(d) Ms Campbell said that UTI was a "solution-based company where we would talk about solutions rather than price".

The effect of the evidence of Mr Cruceanu and Ms Campbell was that UTI operated in a highly competitive market where the price, and services offered by competing warehouse operators did not vary greatly.

I accept PRI's submissions that, in these circumstances, it can be inferred that if a customer, including PRI, knew of any deficiency in UTI's storage compliance which would have endangered the customer's goods, then the customer would have simply moved its goods to another provider.

As PRI pointed out, such inference may carry more weight than direct evidence of reliance given by a customer, given in hindsight after the loss of the goods.

I find the representation alleged was made, that it was misleading or deceptive, that PRI relied on it and has suffered damage as a result.

Proportionate liability defence

UTI submitted that its lessor, GTA, is a "concurrent wrongdoer" for the purposes of s 34(2) of Civil Liability Act. That is, UTI contends that GTA is a person who is "one of two" persons (UTI being the other) "whose acts or omissions...caused, independently of each other or jointly, the damage or loss that is the subject of the claim".

Accordingly, UTI sought an order under s 35(1) of the Civil Liability Act limiting the proportion of damage or loss for which it is liable.

Acts or omissions of GTA

UTI submitted that the following acts or omissions of GTA caused the damage claimed by each of PRI and Brackley: -

(a) a failure to ensure that the building was equipped with an adequate and operational fire protection system;

(b) a failure to ensure that the building's block plan accurately reflected the fire protection equipment and system recommended in a report by Mr Ross Torrington (referred to below); and

(c) a failure to act on the recommendations contained in Mr Torrington's report and to notify UTI of the stacking height restrictions that UTI contends it knew to be a potential risk.

It is common ground that in order for UTI to make out a proportionate liability defence it must show that both it, and GTA, owed each of Brackley and PRI a duty to take reasonable care in relation to each of the matters referred to in the preceding paragraph: see Perpetual Trustee Company Ltd v CTC Group Pty Limited [2012] NSWCA 252 at [5], Mitchell Morgan Nominees Pty Ltd v Vella [2011] NSWCA 390 at [34] and Perpetual Trustee Co Limited v Milanex Pty Limited (in liq) [2012] NSWCA 367 at [94].

Did GTA owe a duty to UTI's customers?

The critical question is whether GTA, as UTI's lessor, owed a duty to take reasonable care to UTI's customers - PRI and Brackley.

The duty owed by a lessor to a person lawfully on the premises is to take reasonable care to avoid foreseeable risk of injury: Jones v Bartlett [2000] HCA 56; (2000) 205 CLR 166 at [168]. Jones v Bartlett concerned a claim for personal injuries. However, the relevant principle must be the same in the case of damage to property.

The nature and extent of duty will depend upon the circumstances of each case. As Gummow and Hayne JJ said in Jones v Bartlett, that is only the beginning of the enquiry and: -

"The 'circumstances' to be considered may differ between landlord and tenant and landlord and other persons. There is no necessary correlation between the respective duties, although the latter is likely to be less stringent than the former." (at [169])

There is no suggestion in the evidence that GTA had any expertise in warehousing. It had leased the entire premises to UTI so that UTI could itself carry out a warehousing business.

UTI pointed to no authority in which a duty has been held to exist in a circumstance analogous to that in this case.

As PRI submitted, the proposition that the owner of property may, in certain circumstances, owe a duty of care to avoid foreseeable risks of personal injury to those who enter the property is not controversial; so much emerges from Jones v Bartlett. However it is quite another thing to suggest that a duty might arise where: -

(a) the occupier (UTI), rather than the owner (GTA) was in the business of storing goods and put itself forward as a responsible custodian of goods;

(b) the customers (PRI and Brackley) had no dealings with the owner (GTA) and relied entirely on the operator (UTI) to look after their goods;

(c) the relationship between the owner (GTA) and the occupier (UTI) was governed by a detailed lease, whose terms included restrictions on the goods that could be stored at the warehouse and whose terms imposed no obligation on the owner apart from keeping its "plant and equipment...in good working order" (lease clause 14(c)); and

(d) other than its rights under the lease, the owner (GTA) had no basis to control the day to day storage of the goods.

Further, none of the elements normally required in order that a duty be imposed are present.

Neither PRI nor Brackley were vulnerable to the harm from GTA. They could both protect themselves against loss of goods by bargaining for warranties with the party with whom they contracted, UTI. And there is no suggestion in the evidence that Brackley or PRI placed reliance on any act or omission of GTA.

In my opinion, GTA owed no duty of care to either PRI or Brackley. For that reason alone UTI's proportionate liability defence must fail.

In any event, any duty of GTA was "to exercise reasonable care", not to ensure that the premises were safe.

In my opinion, there was no evidence that GTA failed to take reasonable care (assuming it had a duty to PRI and Brackley to do so).

So far as the fire protection system at the premises is concerned, any duty of GTA would not extend beyond retaining experts to check, on a regular basis, the fire safety systems and to take steps to remedy any defects that those experts drew to its attention.

The evidence established that GTA engaged FlameSafe Fire Protection Pty Ltd ("FlameSafe") to conduct weekly testing of the sprinkler system and a manual inspection for the purpose of checking and certifying essential safety matters.

Mr Torrington, a mechanical engineer, conducted a survey of the site on 8 August 2005. That report was received by GTA's Managing Agent, CB Richard Ellis, on 25 October 2005. Mr Torrington's report identified some problems with water supply. On 16 November 2005, CB Richard Ellis engaged FlameSafe to test the pumps. A flow test was carried out on 6 December 2005. FlameSafe reported no problems.

In all those circumstances, my opinion is that GTA's conduct, through its agent, CB Richard Ellis, was reasonable.

In any event, there is real doubt that any breach by GTA of any duty to PRI or Brackley concerning the fire extinguishment equipment at the warehouse could have made any difference on the day of the fire.

Inspector Bailey gave this vivid evidence: -

"The fire was never going to be extinguished by active intervention. Essentially, before the fire brigade turned up, that building was a loss. Fire crews adopted a defensive strategy straight away. They were never going to actively fight the fire from inside, which was the only way you would extinguish it, and the poor water pressure wouldn't have contributed to any worse loss that we had...Defensive strategy means you defend your position; you don't allow the fire to spread from where it is, but you don't actively engage in extinguishing the fire. You simply provide enough resources to ensure the fire doesn't get any bigger and doesn't get out of the building that it's in. Essentially, this is a big box, and we kept the fire to the big box, but we were never going to save the box."

In my opinion, for these reasons, UTI's proportionate liability defence fails.

Conclusion

Both PRI are Brackley are entitled to succeed against UTI, albeit for different reasons.

The parties are agreed as to quantum (including interest).

I invite the parties to bring in short minutes to give effect to these reasons.

**********

Amendments

11 January 2013 - corrected paragraph numbering

Amended paragraphs: 37 onwards

Decision last updated: 11 January 2013

Medium Neutral Citation:	Pacific Resources International Pty Ltd v UTI (Aust) Pty Ltd; Brackley Industries Pty Ltd v UTI (Aust) Pty Ltd [2012] NSWSC 1274
Hearing dates:	28 August - 30 August 2012, 3 September - 6 September 2012, 10 September - 13 September 2012 and 20 September 2012
Decision date:	25 October 2012
Jurisdiction:	Equity Division - Commercial List
Before:	Stevenson J
Decision:	Each plaintiff entitled to damages
Catchwords:	BAILMENT - warehouse destroyed by fire - cause of fire - duties and liabilities of bailee - whether duty discharged CONTRACT - contract of bailment - whether standard terms and conditions incorporated into contract - whether standard terms and conditions exclude liability TRADE AND COMMERCE - trade practices - misleading or deceptive conduct - representations PROPORTIONATE LIABILITY - concurrent wrongdoer
Legislation Cited:	Civil Liability Act 2002 Trade Practices Act 1974 (Cth)
Cases Cited:	Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 Hyder Consulting (Australia) Pty Ltd v Wilh Wilhelmsen Agency Pty Ltd [2001] NSWCA 313 Jireh International Pty Ltd t/as Gloria Jean's Coffee v Western Exports Services Inc [2011] NSWCA 137 Jones v Bartlett [2000] HCA 56; (2000) 205 CLR 166 Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 Laws Holdings Pty Ltd v Short (1972) 46 ALJR 563 MacRobertson Miller Airline Services v Commissioner of State Taxation [1975] HCA 55; (1975) 133 CLR 125 Mitchell Morgan Nominees Pty Ltd v Vella [2012] NSWCA 390 Oceanic Sun Line Special Shipping Co Inc v Fay [1988] HCA 32; (1988) 165 CLR 197 Pacific Resources International Pty Ltd v UTI (Aust) Pty Ltd [2012] NSWSC 1083 Perpetual Trustee Company Ltd v CTC Group Pty Ltd [2012] NSWCA 252 Perpetual Trustee Company Ltd v Milanex Pty Ltd (in liq) [2012] NSWCA 367 Remath Investments No. 6 Pty Ltd v Chanel (Australia) Pty Ltd [1992] NSWCA 208 Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163 Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 Waterman v Gerling Australia Insurance Co Pty Ltd [2005] NSWSC 1066; (2005) 65 NSWLR 300
Texts Cited:	Carter on Contract, vol 1 Norman Palmer, Palmer on Bailment, 3rd ed (2009) The Macquarie Dictionary, 5th ed (2009)
Category:	Principal judgment
Parties:	2008/290394: Pacific Resources International Pty Ltd (plaintiff) UTI (Aust) Pty Ltd (defendant) 2008/290441: Brackley Industries Pty Ltd (plaintiff) UTI (Aust) Pty Ltd (defendant)
Representation:	Counsel: M L Williams SC with H Chiu (Pacific Resources International Pty Ltd, plaintiff) H J A Neal (Brackley Industries Pty Ltd, plaintiff) I G B Roberts SC with A C Casselden (defendant) Solicitors: 2008/290394: Holman Webb (plaintiff) Norton Rose (defendant) 2008/290441: Colin Biggers & Paisley (plaintiff) Norton Rose (defendant)
File Number(s):	SC 2008/290394; SC 2008/290441
Publication restriction:	Nil