Summit Rural (WA) Pty Limited v Lenane Holdings Pty Ltd - [2024] WASCA 122

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT :   THE COURT OF APPEAL (WA)
CITATION:   SUMMIT RURAL (WA) PTY LIMITED -v- LENANE HOLDINGS PTY LTD [2024] WASCA 122
CORAM:   QUINLAN CJ
BUSS P
LUNDBERG J

HEARD:   20 MARCH 2024
DELIVERED          :   8 OCTOBER 2024
FILE NO/S:   CACV 52 of 2023
BETWEEN:   SUMMIT RURAL (WA) PTY LIMITED
Appellant
AND
LENANE HOLDINGS PTY LTD
Respondent

ON APPEAL FROM:
Jurisdiction              :   DISTRICT COURT OF WESTERN AUSTRALIA
Coram:   SHEPHERD DCJ
Citation: LENANE HOLDINGS PTY LTD v SUMMIT RURAL (WA) PTY LTD [2023] WADC 42
File Number            :   CIV 23 of 2021

Catchwords:

Contract - Destruction of hired equipment by fire - Breach of contract - Measure of damages - Causation - Remoteness of damage

Torts - Negligence - Breach of duty - Risk of harm - Foreseeability - Precautions against risk of foreseeable harm - Factual causation - Scope of liability

Courts and judicial system - Appeal - New point raised on appeal which was not taken at trial - Whether new point should be permitted to be raised on appeal

Legislation:

Civil Liability Act 2002 (WA), s 3, s 5B, s 5C

Result:

Appeal dismissed

Category: B

Representation:

Counsel:

Appellant	:	M D Cuerden SC and A P Hershowitz
Respondent	:	J M Healy

Solicitors:

Appellant	:	Gillis Delaney Lawyers
Respondent	:	Barry Nilsson Lawyers

Case(s) referred to in decision(s):

Adeels Palace Pty Ltd v Moubarak [2009] HCA 48; (2009) 239 CLR 420
Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570
Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310
Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344
Banque Commerciale SA, en liquidation v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279
Bennett v Minister of Community Welfare [1992] HCA 27; (1992) 176 CLR 408
Burns v MAN Automotive (Aust) Pty Ltd [1986] HCA 81; (1986) 161 CLR 653
C Czarnikow Ltd v Koufos [1969] 1 AC 350
Castle Constructions Pty Ltd v Fekala Pty Ltd [2006] NSWCA 133; (2006) 65 NSWLR 648
Cessnock City Council v 123 259 932 Pty Ltd [2024] HCA 17; (2024) 98 ALJR 719
Chappel v Hart [1998] HCA 55; (1998) 195 CLR 232
Clark v Macourt [2013] HCA 56; (2013) 253 CLR 1
Comcare v Martin [2016] HCA 43; (2016) 258 CLR 467
Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64
Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1
Cox v Fellows [2013] NSWCA 206
Digiacinto and Fredericton Aviation Ltd v Aircadia Ltd [1978] 21 NBR (2d) 366
Erickson v Bagley [2015] VSCA 220
European Bank Ltd v Evans [2010] HCA 6; (2010) 240 CLR 432
Fisher v Nonconformist Pty Ltd [2024] NSWCA 32
Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145
Heskell v Continental Express Ltd [1950] 1 All ER 1033
Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125
Hunt & Hunt Lawyers v Mitchell Morgan Nominees Pty Ltd [2013] HCA 10; (2013) 247 CLR 613
Hunter and New England Local Health District v McKenna [2014] HCA 44; (2014) 253 CLR 270
Koehler v Cerebos (Australia) Ltd [2005] HCA 15; (2005) 222 CLR 44
Lightfoot v Rockingham Wild Encounters Pty Ltd [2018] WASCA 205
March v Stramare (E & MH) Pty Ltd [1991] HCA 12; (1991) 171 CLR 506
Neindorf v Junkovic [2005] HCA 75; (2005) 80 ALJR 341
Norton Australia Pty Ltd v Streets Ice Cream Pty Ltd [1968] HCA 61; (1968) 120 CLR 635
Oikos Constructions Pty Ltd t/as Lars Fischer Construction v Ostin [2020] NSWCA 358
Park v Brothers [2005] HCA 73; (2005) 80 ALJR 317
Reg Glass Pty Ltd v Rivers Locking Systems Pty Ltd [1968] HCA 64; (1968) 120 CLR 516
Robinson v Harman (1848) 1 Ex 850; 154 ER 363
Shaw v Thomas [2010] NSWCA 169
Sibraa v Brown [2012] NSWCA 328
Siegwerk Australia Pty Ltd (in liq) v Nuplex Industries (Aust) Pty Ltd [2016] FCA 158; (2016) 334 ALR 443
Simonius Vischer & Co v Holt & Thompson [1979] 2 NSWLR 322
Skelton v Collins [1966] HCA 14; (1966) 115 CLR 94
State of New South Wales (Department of Justice ‑ Corrective Services) v Huntley [2017] FCA 581
Stenning v Sanig [2015] NSWCA 214
Strong v Woolworths Ltd [2012] HCA 5; (2012) 246 CLR 182
Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 236 CLR 272
Tapp v Australian Bushmen's Campdraft & Rodeo Association Ltd [2022] HCA 11; (2022) 273 CLR 454
Travel Compensation Fund v Tambree [2005] HCA 69; (2005) 224 CLR 627
Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 38; (1998) 192 CLR 603
University of Wollongong v Metwally [No 2] [1985] HCA 28; (1985) 59 ALJR 481
Vairy v Wyong Shire Council [2005] HCA 62; (2005) 223 CLR 422
Wallace v Kam [2013] HCA 19; (2013) 250 CLR 375
Water Board v Moustakas [1988] HCA 12; (1988) 180 CLR 491
Waverley Council v Ferreira [2005] NSWCA 418; [2005] Aust Torts Reports 81‑818
Wenham v Ella [1972] HCA 43; (1972) 127 CLR 454
Whisprun Pty Ltd v Dixon [2003] HCA 48; (2003) 77 ALJR 1598
Wilson v Nilepac Pty Ltd t/as Vision Personal Training (Crows Nest) [2011] NSWCA 63
Wylie v The ANI Corporation Ltd [2000] QCA 314; [2002] 1 Qd R 320
Wyong Shire Council v Shirt [1980] HCA 12; (1980) 146 CLR 40
Young v Chief Executive Officer (Housing) [2023] HCA 31; (2023) 97 ALJR 840

QUINLAN CJ:

I have had the considerable advantage of reading, in draft, Buss P and Lundberg J's reasons for decision. I agree with everything that their Honours have written and agree that the appeal should be dismissed.
I only wish to add the following observations, which relate to the issue of causation (raised by grounds 1 and 4).
The respondent brought its action for damages in connection with the destruction, by fire, of its loader, in both contract and the tort of negligence. The relevant breach of contract and duty of care alleged by the respondent with respect to each cause of action was the appellant's failure to turn the master key of the loader into the 'off' position overnight between 4 and 5 October 2018.
A significant issue at trial was whether the alleged breach of contract and duty of care relevantly 'caused' the damage sustained to the loader. The learned trial judge concluded that they did. Her Honour reached those conclusions applying both the common law test of causation (in relation to the contract claim) and s 5C of the Civil Liability Act 2002 (WA) (in relation to the negligence claim).
In challenging those conclusions, by grounds 1 and 4 in the appeal, the appellant focused on what it submitted was the 'serendipitous' connection between the failure to turn off the master key and the fire. In that context, the appellant submitted that the purpose of the master key on the loader (by which it meant design purpose) was not fire prevention and so a failure to turn it off could not be a legal 'cause' of harm by fire.
For the reasons given by Buss P and Lundberg J in relation to grounds 1 and 4, the appellant's challenges to the learned trial judge's conclusions as to causation must fail.
In that context, as Buss P and Lundberg J have explained, the common law principles in relation to causation have undergone some refinement since the High Court's decision in March v Stramare (E & MH) Pty Ltd,[1] particularly in relation to the role played by the concept of 'common sense' as a touchstone of causation at common law.[2]
[1] March v Stramare (E & MH) Pty Ltd [1991] HCA 12; (1991) 171 CLR 506 (March v Stramare).
[2] See Travel Compensation Fund v Tambree [2005] HCA 69; (2005) 224 CLR 627 [45] (Gummow & Hayne JJ); Comcare v Martin [2016] HCA 43; (2016) 258 CLR 467 [42] (French CJ, Bell, Gageler, Keane & Nettle JJ); Young v Chief Executive Officer (Housing) [2023] HCA 31; (2023) 97 ALJR 840 [60] (Gordon & Edelman JJ).
Nevertheless, one principle emphasised by Mason CJ in March v Stramare that has remained unchanged by those subsequent refinements, is that the legal concept of causation (in any context) is to be distinguished from scientific or philosophical notions of causation. That is because, as Mason CJ explained:[3]
In philosophy and science, the concept of causation has been developed in the context of explaining phenomena by reference to the relationship between conditions and occurrences. In law, on the other hand, problems of causation arise in the context of ascertaining or apportioning legal responsibility for a given occurrence.
[3] March v Stramare, 509 (Mason CJ).
The significance of the purpose for which problems of causation arise in the law (namely, the attribution of legal responsibility) remain critical to the concept of causation in the law. Indeed, if anything, the significance of that purpose has become even more pronounced in the cases decided since March v Stramare. In Wallace v Kam, for example, the High Court more clearly articulated the two distinct questions involved in the determination of legal causation at common law:[4]
(a)a question of historical fact as to how particular harm occurred; and
(b)a normative question as to whether legal responsibility for that particular harm occurring in that way should be attributed to a particular person.
[4] Wallace v Kam [2013] HCA 19; (2013) 250 CLR 375 (Wallace v Kam) [11] (French CJ, Crennan, Kiefel, Gageler and Keane JJ).
These two questions, one factual and one normative, are in turn reflected in the two distinct elements of causation identified in s 5C(1)(a) and (b) of the Civil Liability Act.
In the present case, the question of factual causation (whether at common law or pursuant to s 5C(1)(a) of the Civil Liability Act), was readily satisfied, as the appellant accepted on the appeal.[5] The loader would not have been damaged if the appellant had turned off the master key overnight, as the contract for the hire of the loader obliged it to do.
[5] Appellant's Submissions [10] - [11] (ground 1), [45] (ground 4) (WAB 9 - 10, 17).
The appellant's reliance on what it submitted was the 'serendipitous' connection between the failure to turn off the master key and the fire was directed to the second of the distinct questions that arise in relation to causation: what is referred to as the 'normative' question (at common law) or the 'scope of liability' question (pursuant to s 5C(1)(b) of the Civil Liability Act).
That normative question, being concerned with the attribution of legal responsibility, calls attention to the purpose of the relevant causes of action and the nature and scope of the defendant's relevant obligations in the particular circumstances of the case.
In the present case, in relation to the contract claim, as Buss P and Lundberg J have explained, the relevant obligation (namely, to turn off the master key) arose in the context, inter alia, of a contract of hire obliging the appellant to return the loader at the end of the hiring period and in which leaving the loader's electrical circuitry 'on' overnight gave rise to a risk that it would be damaged or destroyed. In that contractual context, the particular harm, in my view, fell squarely within harm for which legal responsibility should be attributed to the appellant.
Similarly, in relation to the negligence claim, the relevant breach of duty was the failure to take a precaution against the very risk that materialised, namely damage to the loader by fire. As the Court said in Wallace v Kam, the scope of liability is often coextensive with the content of the duty of the negligent party that has been breached.[6] That is because:[7]
the policy of the law in imposing the duty on the negligent party will ordinarily be furthered by holding the negligent party liable for all harm that occurs in fact if that harm would not have occurred but for breach of that duty and if the harm was of a kind the risk of which it was the duty of the negligent party to use reasonable care and skill to avoid.
[6] Wallace v Kam [26] (French CJ, Crennan, Kiefel, Gageler and Keane JJ).
[7] Wallace v Kam [26] (French CJ, Crennan, Kiefel, Gageler and Keane JJ).
The present case was such a case. The policy of the law in imposing the duty on the appellant to take the relevant precaution to guard against the risk of fire damage to the loader is furthered by holding the appellant liable for that very harm when it materialised from the failure to take that precaution. There is no countervailing policy consideration that would take this case out of that 'ordinary' situation.

In all of the circumstances, the purpose for which, as a matter of engineering design, the master key formed part of the loader's electrical circuitry, had little, if any, relevance to the attribution of legal responsibility. At best it raised a philosophical question as to the telos (or Aristotle's final cause) of the master key rather than a question of significance in the attribution of legal responsibility for the appellant's breach of contract and breach of its duty of care.
The appeal should be dismissed.

BUSS P & LUNDBERG J:

The appellant appeals against a District Court judgment entered for the respondent as plaintiff against the appellant as defendant in the amount of $245,500 together with interest and costs.
Shepherd DCJ entered the judgment after the trial before her Honour of the respondent's action for damages in connection with the destruction by fire of the respondent's Caterpillar 938K Wheel Loader (the Loader).
The appeal should be dismissed.

Overview of the background facts and circumstances and the primary proceedings

On or about 24 October 2017, the respondent and the appellant entered into a written agreement (the Contract) for the hire of the Loader. The hire was for a period of four years commencing in October 2017.
It was an express term of the Contract that the appellant would '[t]urn off master key every night'. The 'master key' was a switch or key that, when placed in the 'off' position, had the effect of isolating the battery in the engine compartment of the Loader.
Pursuant to the Contract, in or about October 2017 the respondent delivered the Loader to the appellant at the appellant's premises in Picton East (the Premises).
The appellant operated a fertiliser plant at the Premises. The Loader was to be and was in fact used in an environment where fertilisers were handled.

On 4 October 2018, while the appellant was in possession of the Loader at the Premises pursuant to the Contract:
(a)Benjamin Parsons, an employee of the appellant, operated the Loader at the Premises;
(b)Mr Parsons completed work at about 4.30 pm and parked the Loader at the Premises;
(c)when he alighted from the Loader, Mr Parsons left the master key of the Loader in the 'on' position; and
(d)Mr Parsons left the Premises at about 5.30 pm.
Between about 9.30 pm on 4 October 2018 and about 2.00 am on 5 October 2018, the Loader caught fire at the Premises and was destroyed.
The respondent's action against the appellant was brought in contract and in tort.
The respondent pleaded in relation to its claim in contract that:
(a)in breach of the express term of the Contract to which we have referred at [23] above, Mr Parsons left the master key of the Loader in the 'on' position when he parked the Loader at the end of his shift, and consequently the electrical circuit in the Loader remained energised;
(b)the fire was caused by an electrical event in or on the Loader;
(c)the fire would not have occurred had the master key been placed in the 'off' position when Mr Parsons parked the Loader at the end of his shift because the electrical circuit in the Loader would not have been energised; and
(d)the appellant's breach of the express term of the Contract caused the respondent to suffer loss and damage as a result of the Loader being destroyed.
The respondent pleaded in relation to its claim in tort that:
(a)the appellant owed the respondent a duty to exercise the degree of skill, care and diligence which could reasonably be expected of an experienced loader operator to ensure that the master key of the Loader was turned to the 'off' position when not in use in order to prevent an electrical event causing the Loader to catch fire;
(b)the respondent was vulnerable in that it relied upon the appellant's skill and experience to ensure that the day‑to‑day requirements for operating the Loader were complied with because the Loader was not in the respondent's possession;
(c)the discharge of the appellant's duty required the appellant to adopt practices and procedures to ensure that the master key was turned to the 'off' position when not in use in order to prevent an electrical event causing the Loader to catch fire, including implementing procedures to ensure that the master key was turned to the 'off' position at the end of each shift;
(d)the appellant breached the duty by, amongst other things, failing to place the master key in the 'off' position at the end of the shift on 4 October 2018;
(e)the fire was caused by an electrical event in or on the Loader;
(f)the fire would not have occurred had the master key been placed in the 'off' position when Mr Parsons parked the Loader at the end of his shift; and
(g)the appellant's breach of duty caused the respondent to suffer loss and damage as a result of the Loader being destroyed.

Overview of the trial judge's findings and conclusions on the claim in contract

The trial judge held that:
(a)Mr Parsons did not place the master key in the 'off' position at the end of his shift on 4 October 2018;
(b)that failure constituted a breach of the Contract by the appellant;
(c)even if the purpose of the installation of the master key was not specifically to prevent fires, the expert evidence was clear that the effect of placing the master key in the 'off' position was to de‑energise the starting circuit of the engine compartment;
(d)had the master key been placed in the 'off' position at the end of Mr Parsons' shift on 4 October 2018, the Loader would not have caught fire;
(e)the appellant's breach of the Contract was a cause of the fire;
(f)the appellant's failure to place the master key in the 'off' position on 4 October 2018 materially contributed to the destruction of the Loader; and
(g)the appellant's breach of the Contract caused the respondent to suffer loss and damage as a result of the Loader being destroyed.
The respondent's claim in contract therefore succeeded.

Overview of the trial judge's findings and conclusions on the claim in tort

The trial judge held that:
(a)the appellant as the hirer of the Loader owed a duty to the respondent to exercise reasonable care to avoid any foreseeable risk of harm to the Loader;
(b)Mr Parsons' failure to place the master key in the 'off' position at the end of his shift on 4 October 2018 constituted a breach by the appellant of its duty of care;
(c)had the master key been placed in the 'off' position at the end of Mr Parsons' shift on 4 October 2018, the Loader would not have caught fire;
(d)the appellant's breach of its duty of care was a cause of the fire;
(e)the appellant's failure to place the master key in the 'off' position on 4 October 2018 materially contributed to the destruction of the Loader; and
(f)the appellant's breach of its duty of care caused the respondent to suffer loss and damage as a result of the Loader being destroyed.
The respondent's claim in tort therefore succeeded.

The relevant provisions of the Contract

The relevant provisions of the Contract were these:
(a)By clause 3.2: '[The Loader] is to be used solely for [the appellant's] purposes and on [the appellant's] premises, including premises rented by [the appellant]'.
(b)By clause 4.2: 'All daily checks and servicing and minor running repairs (see Appendix B) are the responsibility of [the appellant] and should be carried out as per the manufacturer's specifications'.
(c)By clause 6.0, the appellant was obliged to 'Complete daily checks and servicing'.
(d)Appendix A stipulated, in effect, that the respondent would '[prepare the Loader] to ensure that it is suitable for use with fertilizers' and that the respondent would supply a fire extinguisher with the Loader.
(e)Appendix B stipulated, in effect, that the appellant was obliged to 'Turn off master key every night'.
(f)Appendix B stipulated, in effect, that the appellant was obliged to 'Blow fertilizer off [the Loader] daily'.
(g)Appendix B stipulated, in effect, that the appellant was obliged to 'Keep denso tape in place - retape when required - Check for other corrosion prone areas and apply tape'.

The trial judge's relevant findings of fact and conclusions in her reasons for judgment

The trial judge made these findings and observations in relation to the purpose as distinct from the effect of the master key:
(a)At the trial the expert witnesses were asked questions about why a battery isolator switch (that is, the master key) is installed in machinery such as the Loader [313]. Counsel who asked those questions apparently considered that the expert witnesses were able to give opinion evidence 'on what would, at first blush, appear to be a question for the manufacturer' [314]. No representative of the manufacturer of the Loader gave evidence at the trial.
(b)Her Honour said [315] ‑ [316]:
Even if I proceed on the basis that the witnesses could give evidence about the purpose of the installation of a battery isolator switch [that is, the master key], that is not the real question to be determined in this trial. In my view the real question is not why the manufacturer installed the [master key], but what in fact is the effect of the [master key] being turned on or off.
To the extent that both parties asked questions of the witnesses about the purpose for the installation of the [master key], I have taken into account all of the witnesses' evidence on this point. (original emphasis) (footnotes omitted)
Although her Honour said at [316] that she had taken into account 'all of the witnesses' evidence' about the purpose for the installation of the master key, her Honour did not make a definite finding about the relevant purpose or purposes. Her Honour noted the evidence of Grant Gatland, an expert witness called by the appellant, that a reason for the master key was 'to remove any parasitic loads and small leakages of current from either after‑market equipment or faults within the machine that could possibly drain the battery' [333]. Her Honour also noted that Guy Tomlinson, an expert witness called by the appellant, accepted, in part, that a purpose of the master key was 'to prevent the battery being drained overnight' [350]. However, her Honour did not make a definite finding as to whether a purpose of the master key was in fact to prevent battery drainage.
At the trial, the appellant also called expert evidence from Sean Jones. Mr Jones is a director of a company that undertakes fire investigation work, and he has expertise in that area. Her Honour said that Mr Jones was a very impressive witness [413]. Her Honour made the following findings of fact based upon Mr Jones' evidence [432] ‑ [434], [440] ‑ [446]:
The origin of the fire was in a narrow area contained within the left side of the engine compartment near the starter motor.
The ignition source for the fire was the result of an electrical interaction with the loader's starter motor and/or associated solenoid or relay.
The area of electrical interaction of the main supply cable was over a very narrow area of the starter motor, solenoid and relay.
…
Because the [master key] was in the on position, all of the cables that ran from the batteries at the back up to the secondary steering solenoid were energised.
Had there been a fire anywhere else along that chassis, one would have expected to see arcing somewhere else along the cable that ran from the batteries to the secondary steering solenoid. No such arcing was found. There was therefore no evidence of the cabling outside of the area of the starter motor being exposed to the fire earlier.
The [master key] was not the cause of the fire, however, turning it off would have removed the electrical circuitry within the loader and would therefore have prevented the fire.
…
Asking the question: 'But for the failure to turn the [master key] into the off position, would the fire have occurred that evening?' the answer to that question from Mr Jones' evidence must be 'no'.
That the [master key] itself did not cause the fire and that there must have been a fault in one of the components or wiring, does not detract from Mr Jones' evidence that had the [master key] been in the off position, no fire would have occurred that evening.
I therefore conclude that the [appellant's] failure to turn the [master key] into the off position failed to prevent the fire from occurring.
But for the [appellant's] failure to isolate the machine by turning the [master key] into the off position, the fire would not have occurred that evening. (original emphasis) (footnotes omitted)
The trial judge's findings and conclusions in relation to the effect of the master key were, relevantly, as follows:
(a)The real question for determination was not what the purpose of the installation of the master key was, but what the effect of the master key remaining in the 'on' position was and, conversely, what the effect of placing the master key in the 'off' position was [523].
(b)The effect of placing the master key in the 'off' position was that the electrical circuit in the engine compartment of the Loader would be de‑energised [524].
(c)There could be no arcing event or electrical interaction in the starting circuit of the Loader if the master key was placed in the 'off' position [525].
(d)The appellant's failure to place the master key in the 'off' position enabled circumstances to exist for the fire to occur [526].
(e)The fact that there may have been other unidentified faults within the Loader that caused the fire when the engine was energised; that is, when the master key was in the 'on' position, did not detract from the evidence of all of the expert witnesses that if the master key had been placed in the 'off' position the fire would not have occurred [527].
(f)The master key alone was not the cause of the fire, but 'the effect of turning off the [master key] leading to no energised cables within the engine compartment [was] significant' [529].
(g)The fact that the master key was left in the 'on' position materially contributed to the Loader catching fire [530].
(h)On the balance of probabilities, but for the appellant's failure to place the master key in the 'off' position at the conclusion of Mr Parsons' shift, the fire would not have occurred [531].
(i)There was no evidence of an identified fault within the Loader that would enable her Honour to find on the balance of probabilities that there was concurrent wrongdoing [532].
Her Honour's findings and observations in relation to the area of origin of the fire were these:
(a)The area of origin of the fire was to the left side of the engine compartment in a narrow area near the starter motor where the earth strap intercepts with the positively energised cable [534]. The area of origin was directly associated with the starter motor [534].
(b)The master key was in the 'on' position and, because of that, the starting circuit was energised [535]. The evidence of an electrical interaction or an electrical fault was 'on or near the starter motor and/or its associated cabling' [535].
(c)Had the master key been in the 'off' position, the starting circuit in the engine compartment would not have been energised and no arcing event could have occurred [536].
(d)The relevance of the origin of the fire was that 'it is part of the componentry of the starting circuit which is directly affected by the [master key]' [537].
(e)There was a direct correlation between the origin of the fire and the fact that the master key was in the 'on' position [546].
The trial judge gave numerous reasons for concluding that the appellant was under a contractual obligation to place the master key in the 'off' position every night [618] ‑ [636]. It is unnecessary to set out the reasons.
Her Honour noted that it was not contentious that Mr Parsons did not place the master key in the 'off' position when he completed his shift [637]. Her Honour therefore concluded that the appellant had breached the contractual requirement to place the master key in the 'off' position every night [638].
The trial judge referred to the submissions of the appellant and the respondent in closing at the trial on the issue of causation. The respondent argued that, but for the appellant's failure to place the master key in the 'off' position and thereby to isolate the starting circuit, the Loader would not have caught fire [650]. The appellant argued that the failure to place the master key in the 'off' position was not, and could never have been, the cause of the fire [651]. Her Honour said that the appellant's argument did not address the relevant question in determining causation [651]. Her Honour then said [652]:
The question is whether, but for the failure to turn off the master key, would the fire … have occurred that evening? Put differently, did the [appellant's] failure to isolate the machine by turning the master key off materially contribute to the harm caused to the loader that evening?
Her Honour concluded, for the following reasons, that but for the appellant's failure to place the master key in the 'off' position, the fire would not have occurred and the Loader would not have been destroyed [655] ‑ [663]:
First, the expert evidence was unanimous that the fire would not have started in the evening of 4 October 2018, or the early hours of 5 October 2018, if the master key was off because there would have been no ignition source.
Second, the effect of turning off the [master key] was to remove all positive charge within the starting circuit of the engine compartment.
Third, the electrical event or the arcing on the negative earth strap near the starter motor flange was the area of the origin of the fire.
Fourth, no arcing or electrical event could have occurred had the starting circuit been isolated.
Fifth, no arcing or electrical event could have occurred had the … master key been in the off position.
Sixth, even if the purpose of the installation of the [master key] was not specifically to prevent fires, the expert evidence was clear that the effect of turning the [master key] off was to de‑energise the starting circuit of the engine compartment.
In conclusion I find from the entirety of the expert evidence at trial that had the [master key] been turned off on 4 October 2018 [the Loader] would not have caught fire that evening.
I am satisfied on the balance of probabilities that turning the [master key] off would have prevented the fire from occurring that evening.
Put differently, I am satisfied on the balance of probabilities that the [appellant's] failure to turn the [master key] off on 4 October 2018 materially contributed to the damage sustained to [the Loader] that evening. (footnotes omitted)
The trial judge concluded that the respondent had established that the appellant's breach of contract caused the damage to the Loader and consequently the respondent's claim in contract succeeded.
Her Honour said there were five reasons for her finding that the appellant owed the respondent a duty of care in tort. First, the appellant was 'a commercial operator hiring [the Loader] to work in a fertiliser plant'. The appellant operated 'complex machinery relying on energised circuits'. A reasonable person in the appellant's position was under 'a duty to take reasonable steps to ensure that [the Loader] was safely stored overnight' [674]. Secondly, the respondent relied upon the appellant to take reasonable care of the Loader and the appellant assumed responsibility to do so [675]. Thirdly, the appellant knew of the circumstances in which the Loader would be used and stored and the appellant, by Mr Parsons, knew that 'the machine had to be "isolated" at the end of each shift' [676]. Fourthly, the respondent depended upon the appellant to exercise 'reasonable care of [the Loader]'. The respondent was 'to an extent vulnerable to harm from [the appellant's] conduct given that [the Loader] was operated and stored at [the Premises] … away from [the respondent]' [677]. Fifthly, 'the physical, geographical, and commercial propinquity of the parties, in the activities of each in which one suffered, and the other caused, the harm' [678].
The trial judge said that the standard of care owed by the appellant was 'to take reasonable precautions to ensure that [the respondent] did not suffer harm' [681]. Her Honour added that the standard of care owed by the appellant was 'coexistent with its contractual obligations to utilise, store, maintain and keep [the Loader] in a manner which would avoid the risk of harm to [the Loader]' [682]. Her Honour then explained that, by 'harm', her Honour referred to 'damage to [the Loader] as a result of failing to store [the Loader] safely overnight in all the conditions as [the appellant] knew them to be' [683].
Next, her Honour addressed the question of whether there had been a breach of the duty of care which her Honour had identified. After referring to s 5B of the Civil Liability Act 2002 (WA) (CLA) and numerous authorities which have construed and applied that provision, her Honour's findings and conclusions were as follows.
As to whether the risk of harm was foreseeable (that is, a risk of which the appellant knew or ought to have known) within s 5B(1)(a), the trial judge found that the appellant ought to have known of the risk of harm (that is, the risk of damage to the Loader) if the master key was not placed in the 'off' position when the Loader was stored at the end of the day [700]. Her Honour arrived at that conclusion for the following reasons. First, the experts were agreed that the effect of leaving the master key in the 'on' position was that 'the positive circuits within the starting engine would remain energised' [702]. Secondly, 'that has to be viewed in the context of [the Loader] being used, operated and stored within a commercial fertiliser plant' [703]. The combination of fertilisers and heat generated from an energised starting circuit creates 'a risk of harm that is foreseeable' [705]. Thirdly, the Loader remained at risk of harm in that the Loader was unattended by the appellant overnight and was beyond the respondent's supervision [706]. Fourthly, it was reasonably foreseeable that a failure to remove any energised circuits within the engine compartment at the conclusion of a shift would give rise to a risk of harm; that is, a risk of damage to the Loader [707]. Although the precise harm that was caused did not need to be foreseen, in the circumstances of the present case leaving the Loader with an energised starting circuit in the vicinity of fertilisers stored in the fertiliser plant created the foreseeable risk of fire [708] ‑ [709]. Fifthly, Mr Parsons knew that 'the machine had to be isolated' and that knowledge established that the appellant knew that 'it had a duty to turn [the master key] off at the conclusion of each shift' [710].
The risk of harm (that is, damage to the Loader) by failing to place the master key in the 'off' position was therefore 'a foreseeable risk, that is a risk of which [the appellant] knew or ought to have known' [711].
As to whether the risk of harm was not insignificant within s 5B(1)(b), the trial judge found that the risk of damage to the Loader, by leaving the master key in the 'on' position, and the resultant effect that the starting circuit remained positively energised, 'in the circumstances of being used in connection with fertilisers, meant that the risk of damage to the loader was not insignificant' [713]. Her Honour observed that the effect of leaving the master key in the 'on' position, and the resultant effect that the starting circuit remained positively energised, 'created the circumstances for an electrical event in the starting circuit to occur' [715]. The failure to place the master key in the 'off' position involved a failure 'to prevent the harm occurring' [716]. The risk of an electrical event occurring was a risk that was not insignificant [717].
As to the precautions against the risk of harm that a reasonable person in the appellant's position would have taken in the circumstances within s 5B(1)(c), the trial judge made the following findings and observations:
(a)If the master key was left in the 'on' position, so that the starting circuit remained energised and therefore at risk of an electrical event, 'the probability that [the Loader] would suffer damage [was] high' [720].
(b)If the master key was left in the 'on' position, in the context of the Loader being used in connection with fertilisers and stored overnight and unattended in the appellant's shed, 'the likely seriousness of the harm to [the Loader] [was] high' [721].
(c)The likely seriousness of the harm or damage to the Loader of an electrical event, in all the circumstances, was therefore high [722].
(d)The burden of taking precautions to avoid the risk of harm was low in that it merely involved turning the master key to the 'off' position before the Loader was stored overnight [723].
(e)The social utility of the activity that created the risk of harm, namely the failure to turn the master key to the 'off' position, was zero [724].
(f)The appellant entered into a contract with the respondent, at arm's length, in which the appellant agreed that one of its obligations to the respondent in respect of the Loader was to turn the master key to the 'off' position every night [725].
(g)Mr Parsons, as an employee of the appellant, knew that the Loader 'had to be isolated at the end of each shift' [726].
The trial judge said that all of those factors '[spoke] to the steps that a reasonable person in the position of [the appellant] would have taken' and those steps were no more than 'what [the appellant] had agreed contractually to do' [727] ‑ [728].
Her Honour was satisfied that the precaution of turning the master key to the 'off' position at the end of each shift was a precaution that a reasonable person in the appellant's position would have taken [729] ‑ [734].
The trial judge concluded that the appellant failed to take the precaution that a reasonable person in the appellant's position would have taken in respect of a risk of harm of which the appellant knew or ought to have known and in respect of which the risk was not insignificant [735].
Her Honour held that the appellant breached the duty of care it owed to the respondent [736].
Next, the trial judge addressed the question of causation having regard to s 5C of the CLA and the numerous authorities which have construed and applied that provision.
Her Honour said that [760]:
(a)the relevant 'fault', for the purposes of s 5C, was the appellant's failure to place the master key in the 'off' position after Mr Parsons' shift ended on 4 October 2018; and
(b)the relevant 'harm', for the purposes of s 5C, was the damage caused to the Loader; in particular, the destruction of the Loader by fire on the evening of 4 October 2018 or in the early hours of 5 October 2018.
The trial judge found that the respondent had proved on the balance of probabilities that had the master key been turned to the 'off' position at the end of Mr Parsons' shift on 4 October 2018, the Loader would not have caught fire later that evening [762]. In other words, but for the appellant's failure to turn the master key to the 'off' position, the fire would not have occurred that evening and the harm would not have arisen [762].
Her Honour elaborated that turning the master key to the 'off' position would have prevented the fire occurring that evening because, consistently with the expert evidence that her Honour accepted, there was an 'electrical event' in the area where the fire originated and the electrical event would not and could not have happened had the master key been placed in the 'off' position [763].
The trial judge then made these observations [764] ‑ [768]:
The [appellant] knew that the machine 'had to be isolated'. So much was clear from the evidence of Mr Parsons, the [appellant's] employee.
Whilst the prevention of fires may not be the reason why a machine such as this has a battery isolator switch [that is, the master key], it is clear from the evidence of the expert witnesses that the effect of turning the [master key] off would be that the electrical circuitry within the starting circuit were not … full[y] energised.
As a result, the effect of turning the [master key] off is that there could not have been any electrical events within the starting circuit, such as arcing on the negative earth strap.
The effect of not turning the [master key] into the off position was therefore to create the circumstances, in combination with any other unidentified fault within [the Loader], for an electrical event to occur and [the Loader] to catch on fire.
I am satisfied on the balance of probabilities, consistent with the expert evidence on this point, that but for the [appellant's] failure to turn the [master key] off, [the Loader] would not have caught fire that evening. (original emphasis) (footnote omitted)

Her Honour held that the appellant's failure to place the master key in the 'off' position, and thereby 'isolate the [Loader]', was 'a necessary condition of the occurrence of the harm' within s 5C(1)(a) [769].
Next, the trial judge considered whether it was appropriate for the scope of the appellant's liability to extend to the harm caused by the appellant's breach of duty. Her Honour was of the view that the present case was 'a case in which the scope of liability for the consequences of the harm should be, and are, coextensive with the content of [the appellant's] duty which has been breached' [773]. Her Honour said there was 'no reason why the scope of [the appellant's] liability should not extend to the harm caused to [the respondent] in the destruction of [the Loader] by the fire' [774].
Finally, her Honour said that the parties had agreed that, in the event of a finding for the respondent on liability, damages of $245,500 should be awarded [783].

The grounds of appeal

The appellant relies upon four grounds of appeal.
The grounds read:
1.The learned trial judge erred in fact and in law in concluding that the appellant's failure to turn off the [master key] in breach of contract was a cause of the fire, in that the evidence before the learned trial judge was to the effect that the [master key] was not installed for fire prevention purposes but, rather, was to prevent drainage from the battery of the loader while the loader was not being used and other purposes unrelated to avoiding damage to the loader by fire, such that the connection between the appellant's failure to turn off the [master key] and the fire was purely serendipitous (PJ [654] ‑ [658]).
2.Further and alternatively to ground 1, the learned trial judge erred in law in failing to conclude that in circumstances in which the [master key] was not installed for fire prevention purposes but, rather, was to prevent drainage from the battery of the loader while the loader was not being used and other purposes unrelated to avoiding damage to the loader by fire, the fire and the consequent damage to the loader was too remote a consequence of the appellant's breach of contract in failing to turn off the [master key].
3.Further, the learned trial judge erred in fact and in law in finding that the appellant breached its duty of care to the respondent by failing to turn off the [master key] overnight (PJ [736]), in that:
(a)the learned trial judge:
(i)identified the relevant risk of harm for the purposes of s 5B of the Civil Liability Act 2002 (WA) (the CLA) as a risk of damage to the loader, however caused, by the appellant's failure to store the loader with the [master key] in the off position (PJ [698]);
(ii)found that the risk of damage to the loader by leaving the [master key] turned on, and the resultant effect that the starting circuit remained positively energised, in the circumstances of being used in connection with fertilisers, meant that the risk of damage to the loader was not insignificant within s 5B(1)(b) of the CLA (PJ [713]); and
(iii)found that the probability that the loader would suffer damage if the [master key] was left on was high within s 5B(2)(a) of the CLA (PJ [720]);
(b)whereas:
(i)the evidence before the learned trial judge was to the effect that the [master key] was not installed for fire prevention purposes but, rather, was to prevent drainage from the battery of the loader while the loader was not being used and other purposes unrelated to avoiding damage to the loader while it was left unattended overnight;
(ii)there was no evidence that the fact that the loader was being used in connection with fertilisers contributed in any way to the fire which occurred (and in fact the evidence was positively to the opposite effect), such that it was not open to the learned trial judge to find that the risk of damage to the loader was not insignificant within s 5B(1)(b) of the CLA; and
(iii)there was no evidence as to the probability that the loader would suffer damage if the [master key] was left on, such that it was not open to the learned trial judge to find that the probability that the loader would suffer damage if the [master key] was left on was high within s 5B(2)(a) of the CLA.
4.Alternatively to ground 3, the learned trial judge erred in fact and in law in concluding that the appellant's negligence in failing to turn off the [master key] was a cause of the fire, in that:
(a)the evidence before the learned trial judge was to the effect that the [master key] was not installed for fire prevention purposes but, rather, was to prevent drainage from the battery of the loader while the loader was not being used and other purposes unrelated to avoiding damage to the loader by fire while it was left unattended overnight, such that the connection between the appellant's failure to turn off the [master key] and the fire was purely serendipitous;
(b)the learned trial judge accordingly erred in concluding that it was appropriate for the scope of the appellant's liability to extend to the harm caused, namely the damage to the loader, within s 5C(1)(b) of the CLA (PJ [770] ‑ [774]), and in failing to find that it was not appropriate for the scope of the appellant's liability to extend to that harm.

The respondent's notice of contention

The respondent relies upon a notice of contention.
The notice reads:
1.The primary judge supported the findings at PJ[713] by reference to the loader being operated in a fertiliser factory. In additional support for that finding the respondent relies on the following additional matters which were in evidence and / or were the subject of consideration and findings by the primary judge.
2.Firstly, the loader was to be operated in a fertiliser factory, which was a corrosive operating environment: PJ[548] ‑ pages 87 and 90 (Contract clauses 4.2 and 4.5 Appendix 'Daily Checks' Item 12 and Appendix 'Regular Checks' Items 2, 3 and 4), PJ[639], PJ[702] ‑ [704]; Ex 16 para 5.3; Ex 36 paras 17.6, 17.8 and 17.18; XXN Manser Ts 154; XN Jones Ts 249; XXN Tomlinson Ts 486.
3.Secondly, Denso tape was wrapped around the terminals to prevent corrosion from the fertiliser dust and the appellant was required to keep that Denso tape in place: PJ[4], [100], [548] ‑ page 90 (Ex 1 Contract Appendix 'Regular Checks' Item 4); Ex 2; Ex 16 para 5.3; Ex 36 para 17.6, 17.8 and 17.18; XXN Manser Ts 154; XXN Tomlinson Ts 486.
4.Thirdly, the loader could develop electrical faults which could drain the battery if the [master key] was left 'on': PJ[319], [350(b)], [535].
5.Fourthly, if the loader was energised and there was a 'faulty connection' there could be an 'arcing event' or heat build up that could cause pyrolysis through the flow of electricity within the loader: PJ[24], [292], [355], [358], [359], [464], [525], [536], [658], [705], [766], [767]; Ex 64 para 6.56.
6.Fifthly, if there was fertiliser build up or an electrical fault in the loader when the loader was energised it could possibly be an ignition source for a fire: PJ[318], [344], [358], [433], [705], [721]; Ex 64 paras 6.14.4, 6.64 and 7.1.2.
7.Sixthly, the loader was supplied with a fire extinguisher, which was located on the outside of the loader's cabin: PJ[212]; Ex 4; Ex 36 Para 12.12; PJ[Annexure 1] page 129 Ex 58; Ts 281. If a fire started when there was someone present, then that fire extinguisher may have been able to be used to extinguish the fire: Exhibit 64 para 6.57; Ts 487.
8.Seventhly, Appendix B, Term 9 of the Contract provided that the [master key] was to be turned 'off' every night: Ex 1.
9.Eighthly, if the [master key] was left 'on' it would mean the loader would remain energised: PJ [24] ‑ [25], [440], [475], [479], [505], [524], [535], [674], [702], [714].
10.Ninthly, if there was an electrical fault that caused a fire in the loader and it was parked up overnight there would be no one able to raise the alarm or attempt to put out the fire with the fire extinguisher attached to the loader's cabin: Ts 487.
11.Finally, an additional unchallenged finding of fact by the primary judge, was that the loader operator knew that he was required to turn the isolator switch 'off', and he left it 'on': PJ [9], [10], [710], [726], [730], [764]; Ts 55.
12.Each of those matters establish that the scope of the appellant's duty extended to prevent the loss of the loader caused by fire resulting from an electrical fault within the loader.

Counsel for the appellant's submissions on the grounds of appeal

Counsel for the appellant acknowledged that for the appeal to be allowed the appellant had to establish either ground 1 or ground 2 in respect of the respondent's claim in contract and either ground 3 or ground 4 in respect of the respondent's claim in tort (appeal ts 2).
As to ground 1, counsel for the appellant emphasised that, as the trial judge recognised [660], the evidence at the trial was to the effect that the purpose of the master key was not to prevent fires. Rather, the evidence was in essence that the purpose of the master key was to prevent depletion or drainage from the battery or for safety reasons if someone was to carry out work on the Loader. It was submitted that the connection between the appellant's failure to place the master key in the 'off' position, on the one hand, and the fire, on the other, was 'purely serendipitous'. In the circumstances, so it was submitted, although the 'but for' test was satisfied, the appellant's breach of contract was not, as a matter of law, a cause of the fire and the consequent damage to the Loader. Her Honour should have held that the appellant's breach of contract did not cause the respondent's loss of $245,500. The respondent was entitled to an award of nominal damages against the appellant for breach of contract, but its claim should otherwise have been dismissed.
As to ground 2, counsel submitted that the issues raised in the context of ground 1 could also be analysed in terms of remoteness of damage in contract. It was argued that the fire and the consequent damage to the Loader was too remote a consequence of the appellant's breach of contract in failing to place the master key in the 'off' position. Counsel submitted that the appellant's contractual obligation was, relevantly, to 'turn off master key every night'. However, given the evidence as to the purpose of the master key (and the absence of any evidence that the master key was directed to fire prevention), the objectively ascertainable purpose of the contractual obligation was to prevent drainage from the battery while the Loader was not being used overnight or for longer periods. Counsel emphasised that it was not directed to preventing the Loader from catching fire. In the circumstances, it could not be said that damage to the Loader by fire was loss which arose naturally (that is, according to the usual course of things) from the breach of contract or which might reasonably be supposed to have been in the contemplation of both the appellant and the respondent, when they made the Contract, as the probable result of the breach. Similarly, it was submitted that it could not be said that on the information available to the appellant when the Contract was made, the appellant, or a reasonable person in its position, would have realised that damage to the Loader by fire was sufficiently likely to result from the appellant's breach of contract in failing to place the master key in the 'off' position, so as to enable it to be concluded that the loss flowed naturally from the breach or that loss of that kind should have been within the appellant's contemplation.
As to ground 3, counsel accepted that the trial judge correctly formulated the relevant duty of care at the appropriate level of abstraction, namely a duty to exercise reasonable care to avoid any foreseeable risk of harm to the Loader [679]. Counsel also accepted that her Honour correctly analysed the appellant's failure to ensure that the master key was placed in the 'off' position, when the Loader was not in use, as an issue going to breach of duty, in accordance with s 5B of the CLA, rather than an issue going to the formulation of the scope of the duty. However, it was argued that her Honour erred in concluding that the appellant breached its duty of care in accordance with s 5B. Counsel submitted that her Honour identified the relevant risk of harm, within s 5B, as a risk of damage to the Loader, however caused, by the appellant's failure to store the Loader with the master key placed in the 'off' position [698]. However, the evidence before her Honour was to the effect that the master key was not installed for fire prevention purposes.
Further, counsel noted that her Honour found that the risk of damage to the Loader, by leaving the master key in the 'on' position in the circumstances of being used in connection with fertilisers, meant that the risk of harm to the Loader was not insignificant within s 5B(1)(b) [713]. However, it was submitted that there was no evidence that the fact the Loader was being used in connection with fertilisers contributed in any way to the fire which occurred. Indeed, there was evidence to the opposite effect, namely there was no connection. Her Honour did not find (and could not have found) that it did. Accordingly, so it was submitted, her Honour's conclusion that the risk of damage to the Loader was not insignificant, within s 5B(1)(b), was erroneous.
Further, counsel noted that her Honour found that the probability that the Loader would suffer damage if the master key was left in the 'on' position was high, within s 5B(2)(a) [720]. It was submitted that there was no evidence to that effect and, the master key not having been installed for fire prevention purposes, that finding was not open.
Counsel submitted that her Honour should have held that the respondent had not established that the appellant had breached its duty of care.
As to ground 4, counsel submitted that even if the appellant breached its duty of care, it was necessary for the respondent to establish that the breach caused the respondent's loss as determined in accordance with s 5C of the CLA. It was argued that, in circumstances in which the purpose of the master key was not to prevent fires, the connection between the appellant's assumed breach of duty and the fire was 'purely serendipitous'. Counsel noted that her Honour was of the view that, in the present case, the scope of liability for the consequences of the harm should be, and were, coextensive with the content of the appellant's duty which had been breached [773], and that there was no reason why the scope of the appellant's liability should not extend to the harm caused to the respondent by the destruction of the Loader by fire [774]. It was submitted that the trial judge erred in concluding that the 'scope of liability' question under s 5C(1)(b) should be answered in favour of the respondent. Her Honour should have concluded that it was not appropriate for the scope of the appellant's liability to extend to the harm caused by the fire, and that any negligence of the appellant did not cause the respondent's loss, within s 5C.

Counsel for the respondent's submissions in response

Counsel for the respondent submitted that the appellant's admission that the respondent had proven that the appellant breached the contract and that the respondent was entitled to damages (albeit only in a nominal amount) constituted an insurmountable obstacle to the appellant's case in the appeal because at the trial the appellant admitted that, in the event of a finding for the respondent on liability, damages of $245,500 should be awarded. It was submitted that the appellant should not be permitted to advance a different case on appeal and the appellant should not be permitted to withdraw the admission it made at trial.
Counsel then submitted that if the court did not decide the appeal solely on that basis, the central question underlying each of the grounds of appeal was whether the respondent had proved, on the balance of probabilities, that the destruction of the Loader by fire would not have occurred if the appellant had not breached the Contract or its duty of care in tort. Counsel argued that the central question was not answered by the appellant's assertion that leaving the master key in the 'on' position was not a cause of the fire because the fire was caused by an electrical fault elsewhere in the Loader. It was submitted that the necessary condition which caused the destruction of the Loader by fire was leaving the master key in the 'on' position. The fire was 'directly traceable to the [appellant's] breach of contract and negligence' in that leaving the master key in the 'on' position caused or materially contributed to the damage suffered by the respondent.
As to ground 1, counsel submitted that the ground confused 'serendipity' of circumstances with the question of whether the appellant's breach of contract was a necessary condition for the loss. It was submitted that the damage to the Loader by fire would not have occurred 'but for' the breach of contract. The trial judge made a common sense appraisal of the evidence and accepted the evidence of each expert that a fire would not have occurred on the evening of 4 October 2018 or in the early hours of 5 October 2018 if the master key had been placed in the 'off' position as required by the Contract. The destruction of the Loader by fire was the result of the appellant's breach in that, applying a common sense approach, 'but for' the breach the damage would not have occurred. It was submitted that no question of 'serendipity' arises because the appellant's action in leaving the master key in the 'on' position was a necessary condition for the loss.
Counsel argued that the purpose of placing the master key in the 'off' position was connected to the avoidance of the risk of loss of the Loader by fire. The risk of fire and the risk of battery drainage were both linked to the same physical circumstance that existed within the Loader. There was evidence at the trial that battery drainage might occur where there was an electrical fault. See her Honour's reasons at [319], [350(b)] and [535]. It was therefore obvious that an electrical fault may be both a potential ignition source for a fire and the source of battery drainage if the master key was left in the 'on' position.
It was submitted that the purpose of placing the master key in the 'off' position must be viewed in the context in which the Contract was made. The relevant context includes what was in the contemplation of the parties in respect of the potential loss flowing from breach. That issue was dealt with by counsel in response to ground 2.
Counsel argued that her Honour was entitled to find, on the balance of probabilities, that an electrical fault in the Loader could not have occurred if the master key had been placed in the 'off' position because in those circumstances there would have been no electrical charge within the Loader. The appellant's conduct, in breach of contract, exposed the respondent to the danger of an electrical fault within the Loader. It was therefore to be inferred that the destruction of the Loader by fire was the result of the appellant's breach because, applying a common sense approach, 'but for' the breach the damage would not have occurred.
As to ground 2, counsel submitted that the question of remoteness of damage in contract was not pleaded or raised at the trial. The appellant defended the respondent's claim in contract on the basis of, relevantly, causation rather than remoteness. Consequently, the trial judge did not refer in her reasons to the question of remoteness of damage in contract (appeal ts 79). Counsel argued that the appellant was seeking to raise a new issue on appeal. It was submitted that whether loss is too remote and not recoverable depends on a consideration of the context in which the Contract was made. If remoteness of damage in contract had been pleaded or raised at the trial, the respondent could have led specific evidence about what was in the contemplation of the parties when the Contract was made. It was submitted that the appellant is therefore unable to establish that if the question of remoteness of damage in contract had been pleaded or raised at the trial, the respondent could not possibly have met the issue by calling evidence.

Counsel then submitted that, on the assumption that the appellant is permitted to raise in the appeal the question of remoteness of damage in contract, the appellant knew or should have known that there was a risk that the Loader could be damaged by an electrical event causing a fire if the master key was left in the 'on' position. Counsel acknowledged that a loss caused by a breach of contract is a necessary prerequisite to the recovery of damages because remoteness of damage marks out the boundary beyond which a plaintiff is not entitled to recover damages. It was submitted that, in the present case, the terms of the Contract in combination with the trial judge's unchallenged findings of fact were sufficient to establish, on the balance of probabilities, that the risk of destruction of the Loader by fire was within the contemplation of the parties when they made the Contract.
Counsel argued that the terms of the Contract and the matrix of unchallenged findings made by the trial judge (in particular, the findings at [700] ‑ [711] of her Honour's reasons) established, on the balance of probabilities, that the risk of destruction of the Loader by fire was within the contemplation of the parties at the time the Contract was made. Counsel referred to the following:
(a)The Loader was to be operated in a fertiliser factory which meant that fertiliser dust could accumulate on the Loader and cause corrosion.
(b)Denso tape was wrapped around the terminals to prevent corrosion from the fertiliser dust. The appellant was required to keep that Denso tape in place.
(c)If there were electrical faults within the Loader they could drain the battery if the master key was in the 'on' position.
(d)If the Loader was energised and there was a 'faulty connection' there could be an 'arcing event' or heat buildup that could cause pyrolysis through the flow of electricity within the Loader.
(e)If there was a buildup of fertiliser dust or an electrical event in the Loader when the Loader was energised, that could possibly be an ignition source for a fire.
(f)The Loader was supplied with a fire extinguisher, which was located on the outside of the Loader's cabin.
(g)It was a term of the Contract that the master key be placed in the 'off' position every night.
(h)If the master key was left in the 'on' position, the Loader would remain energised.
(i)If there was an electrical fault that caused a fire in the Loader and it was parked overnight, there would be no one able to raise the alarm or attempt to put out the fire with the fire extinguisher attached to the Loader's cabin.
It was submitted that the destruction of the Loader by fire can fairly and reasonably be considered to arise both naturally, in the usual course of things, from the breach and, also, as being within the specific knowledge and contemplation of the parties when the Contract was made. It would have been obvious, based on common sense, when the Contract was made that an electrical fault within the Loader could potentially be an ignition source for a fire. The destruction of the Loader by fire as a result of the appellant, in breach of contract, leaving the master key in the 'on' position was or should have been within the reasonable contemplation of the appellant or a reasonable person in its position, when the Contract was made.
As to ground 3, which relates to the scope of the duty of care in tort and the risk of harm, counsel submitted that it is necessary to consider matters that are similar to some of the matters relevant to ground 2.
As to ground 3(a)(i) and (b)(i), counsel submitted that it is necessary to consider the 'relevant risk of harm', for the purposes of s 5B of the CLA, when considering the purpose of the master key. It was submitted that battery drainage was not the relevant risk. Rather, the relevant risk was the act or thing which enabled battery drainage to occur. It was submitted that the expert evidence at the trial was to the effect that the act or thing which enabled the battery drainage to occur was an electrical fault within the Loader. The presence of an electrical fault was at least equally sufficient to establish that placing the master key in the 'off' position would prevent a potential ignition source for fire as well as preventing battery drainage.
As to ground 3(a)(ii) and (b)(ii), counsel submitted that the trial judge's findings at [713] must be read in the context of the reasons as a whole. It was submitted that when her Honour's findings at [713] are read in that context it is apparent that her Honour's reference to the Loader being 'used in connection with fertilisers' meant there was not 'insignificant harm' for the purposes of s 5B(1)(b) because fertiliser dust could accumulate on the Loader and potentially cause corrosion which may lead to an electrical fault. It was then submitted that if this court accepted the appellant's submission that her Honour did not find (and could not have found) that the fact the Loader was being used in connection with fertilisers contributed in any way to the fire, then the respondent relied on the matters raised in its notice of contention to establish that there were other sufficient reasons to conclude there was not an insignificant risk of harm to the Loader.
As to ground 3(a)(iii) and (b)(iii), counsel submitted that the duty to avoid any foreseeable risk of harm extended to the loss of the Loader by fire because the circumstances giving rise to the probability of that risk of loss would not have existed 'but for' the appellant's breach in leaving the master key in the 'on' position. It was submitted that it was in that sense that the trial judge held at [720] that the risk of fire was 'high' for the purposes of s 5B(1)(b). In particular, the risk was 'high' when compared to the 'nil' risk if the master key had been placed in the 'off' position.
Ground 4 relates to causation and foreseeability of loss.
As to ground 4(a), counsel submitted that the application of the principles of causation overlaps with ground 1. Counsel reiterated his submissions on ground 1.
As to ground 4(b), counsel submitted that the question of the scope of liability by reference to s 5C(1)(b) of the CLA presented little difficulty because this was not a novel case and precedent normatively establishes that the damage to the Loader was foreseeable and within the scope of the appellant's liability. In particular, the scope of the appellant's liability extended to the destruction of the Loader, for the purposes of 'harm caused' within s 5C(1)(b), because the Loader catching fire due to an electrical fault was within the foreseeable risk of injury resulting from a breach of duty in failing to turn the master key to the 'off' position. Accordingly, the trial judge did not err in making the findings at [770] ‑ [774].

Counsel for the appellant's submissions in reply

Counsel for the appellant submitted that counsel for the respondent's argument that the appellant's admission that the respondent had proven the appellant breached the Contract and that the respondent was entitled to damages (albeit only in a nominal amount) constituted an insurmountable obstacle to the appellant's case in the appeal (because, as counsel for the respondent asserted, the appellant admitted at the trial that, in the event of a finding for the respondent on liability, damages of $245,500 should be awarded) was misconceived (appeal ts 16 ‑ 17, 20).
Counsel noted the trial judge's statement at [783] that the parties had agreed that 'in the event of a finding for [the respondent] that damages in the amount of $245,500 ought to be awarded'. In a footnote to that statement, her Honour referred, relevantly, to [34] of the appellant's written opening submissions at the trial dated 3 June 2022. In [34] of those submissions, trial counsel for the appellant stated:
It is not in dispute that the replacement cost of the Loader, alternatively its then current market value, is the sum of $245,500.
Counsel for the appellant submitted that the admission by trial counsel for the appellant was merely as to the replacement cost of the Loader or its then current market value. Significantly, the appellant did not admit or agree at the trial that if her Honour made a finding that the appellant had breached the contract then the appellant was liable for damages of $245,500 (appeal ts 17, 20).
Counsel accepted that, subject to one qualification, the parties ran the trial, relevantly, on the basis of causation but not remoteness. The qualification was that in [53] of the appellant's written closing submissions at the trial dated 31 August 2022, trial counsel for the respondent submitted (appeal ts 8):
There was no foreseeable risk that a fire would occur if [the master key was not placed in the 'off' position]. That is not the purpose of such a [master key].
Counsel for the appellant accepted that [53] of the appellant's written closing submissions appeared in a section of the submissions headed 'Causation' (appeal ts 9).
However, counsel submitted that the onus was upon the respondent as plaintiff to prove that it had suffered recoverable loss and damage and that the onus included proving that the loss and damage was caused by the breach and also was not too remote. Counsel argued that [53] of the appellant's written closing submissions raised the issue of remoteness by referring to the 'foreseeability of the damage' because there was no foreseeable risk that a fire would occur if the master key was not placed in the 'off' position in that the purpose of placing the master key in the 'off' position was not to avoid the risk of a fire (appeal ts 10, 24).

Did the appellant make an admission at the trial that, in the event of a finding for the respondent on liability, damages of $245,500 should be awarded?

In par 15 of its statement of claim the respondent pleaded, relevantly and in essence, that by reason of the breach of contract the respondent had suffered loss and damage as a result of the Loader being destroyed. The particulars of par 15 stated, relevantly, that the damages were 'the replacement cost of the Loader, alternatively $245,500 — being the then current market value of the Loader less the salvage value of $4,500'.
In par 15 of its defence the appellant did not admit the loss and damage alleged in par 15 of the statement of claim.
In par 21 of its statement of claim the respondent pleaded in respect of its claim in tort that the appellant's breach of duty caused the respondent to suffer loss and damage as a result of the Loader being destroyed. The particulars of par 15 of the statement of claim were repeated.
In par 21 of its defence the appellant pleaded, relevantly, that it did not admit that any breach of duty caused the respondent to suffer loss and damage.
In its prayer for relief the respondent claimed, relevantly, damages for 'breach of contract and/or negligence'.
In par 22 of its defence the appellant denied, in essence, that the respondent was entitled to the relief claimed in the statement of claim or any relief.
The trial judge stated in the part of her reasons dealing with the quantum of damages [783]:
The parties have agreed that in the event of a finding for the plaintiff that damages in the amount of $245,500 ought to be awarded.
In a footnote to that sentence her Honour noted:
See statement of claim (15(a)); Outline of Defendant's Opening submissions [34].
As we have mentioned, the particulars of par 15 of the respondent's statement of claim, asserted, relevantly, that the damages it had suffered were 'the replacement cost of the Loader, alternatively $245,500 — being the then current market value of the Loader less the salvage value of $4,500'.
Also, as we have mentioned, the appellant's written opening submissions stated at [34] that it was not in dispute that 'the replacement cost of the Loader, alternatively its then current market value, is the sum of $245,500'.
In our opinion, the appellant did not admit at the trial that, in the event of a finding for the respondent on liability, damages of $245,500 should be awarded. The appellant merely admitted at [34] of its written opening submissions that the replacement cost of the Loader, alternatively its then current market value, was the sum of $245,500. The appellant did not admit in its written opening submissions or at any stage of the trial that if the trial judge found that the appellant had breached the Contract or had breached its duty of care in tort, as alleged by the respondent, then the appellant was liable for damages of $245,500 or that judgment should be entered against the appellant in that amount. The focus of the appellant's defence at the trial was upon whether the appellant had breached the Contract or had breached its duty of care, as alleged by the respondent, and, if it did breach the Contract or its duty of care (which the appellant denied), whether the breach was a material cause of the respondent's alleged loss and damage. The appellant's admission at [34] of its written opening submissions is not, as counsel for the respondent submitted, an insurmountable obstacle (or, indeed, any obstacle) to the appellant's case in the appeal.
Similarly, the appellant's admission in the appeal that the respondent is entitled to nominal damages for breach of contract is not an insurmountable obstacle (or, indeed, any obstacle) to the appellant's case in the appeal. The admission merely reflects the well established principle that where a party to a contract breaches the contract the other party has a right to recover damages for the breach and, if the other party does not prove that the breach has caused any loss, the party in breach is liable to pay nominal damages. See Agricultural and Rural Finance Pty Ltd v Gardiner;[8] Chappel v Hart.[9]

Is the appellant seeking to raise the question of remoteness of contractual damages in the context of ground 2 as a new issue on appeal and, if so, should that be permitted?

[8] Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570 [58] (Gummow, Hayne & Kiefel JJ).

[9] Chappel v Hart [1998] HCA 55; (1998) 195 CLR 232 [93] (proposition 4) (Kirby J), [149] (Hayne J).

The general rule at common law in awarding damages for breach of contract was enunciated by Parke B in Robinson v Harman;[10] namely, 'where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed'. The High Court has accepted and applied Parke B's statement of principle. See, for example, Commonwealth v Amann Aviation Pty Ltd;[11] Tabcorp Holdings Ltd v Bowen Investments Pty Ltd;[12] Clark v Macourt.[13]
[10] Robinson v Harman (1848) 1 Ex 850, 855; 154 ER 363, 365.
[11] Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64, 80 ‑ 82 (Mason CJ & Dawson J), 98 ‑ 99 (Brennan J), 134 ‑ 136 (Toohey J), 148 (Gaudron J), 161 (McHugh J).
[12] Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 236 CLR 272 [13] (French CJ, Gummow, Heydon, Crennan & Kiefel JJ).
[13] Clark v Macourt [2013] HCA 56; (2013) 253 CLR 1 [7] (Hayne J), [26] ‑ [27] (Crennan & Bell JJ), [59] ‑ [61] (Gageler J), [106] (Keane J).
In Cessnock City Council v 123 259 932 Pty Ltd,[14] Gageler CJ emphasised that it was critical to the operation of the statement of principle in Robinson to distinguish between the 'damages' ultimately to be assessed, on the one hand, and the 'loss or damage' which the plaintiff has suffered by reason of the breach of contract, on the other.
[14] Cessnock City Council v 123 259 932 Pty Ltd [2024] HCA 17; (2024) 98 ALJR 719 [7].
A plaintiff in an action for breach of contract will not succeed in recovering damages for alleged loss or damage unless, first, the alleged loss or damage was caused by the breach and, secondly, the alleged loss or damage caused by the breach was not too remote. The concept of remoteness of damage is related to the concept of causation, but they are separate and distinct. See Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd;[15] Young v Chief Executive Officer (Housing).[16] The question of causation logically precedes the question of remoteness. See Reg Glass Pty Ltd v Rivers Locking Systems Pty Ltd.[17]
[15] Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 38; (1998) 192 CLR 603 [22] ‑ [25] (McHugh J).
[16] Young v Chief Executive Officer (Housing) [2023] HCA 31; (2023) 97 ALJR 840 [62] (Gordon & Edelman JJ).
[17] Reg Glass Pty Ltd v Rivers Locking Systems Pty Ltd [1968] HCA 64; (1968) 120 CLR 516, 523 (Barwick CJ, McTiernan & Menzies JJ).
The concept of remoteness of damage is an exclusionary rule. It is a limit on, rather than a ground of, liability and marks the boundary of the liability for loss or damage caused by the breach of contract. See Amann Aviation (174) (McHugh J); European Bank Ltd v Evans.[18]
[18] European Bank Ltd v Evans [2010] HCA 6; (2010) 240 CLR 432 [12] (French CJ, Gummow, Hayne, Heydon & Kiefel JJ).
The classic test for remoteness of damage was stated by Alderson B, delivering the judgment of the Court of Exchequer, in Hadley v Baxendale[19] as follows (354):
Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.
[19] Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145.
The High Court has held that, on the basis of Hadley v Baxendale, the plaintiff in an action for breach of contract may recover:
(a)such loss or damage as arises naturally, that is, according to the usual course of things, from the breach of contract (first limb); or
(b)such loss or damage as may reasonably be supposed to have been in the contemplation of both parties, when they made the contract, as the probable result of the breach (second limb).
See European Bank Ltd [13]; Clark [119] (Keane J).
In Baltic Shipping Co v Dillon,[20] Brennan J, after stating the rule in Hadley v Baxendale, observed that '[a]dditional or special knowledge known to both parties may widen or contract the scope of liability for breach'. His Honour then said, in essence, that the first and second limbs of the rule have been merged into a single principle that was expressed by Lord Reid in C Czarnikow Ltd v Koufos,[21] as follows:
The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realized that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation.
[20] Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344, 368.
[21] C Czarnikow Ltd v Koufos [1969] 1 AC 350, 385.
Lord Reid's formulation in Koufos has been generally adopted or approved by the High Court. See Wenham v Ella;[22] Burns v MAN Automotive (Aust) Pty Ltd;[23] Amann Aviation (92) (Mason CJ and Dawson J), (99) (Brennan J); Baltic Shipping (368) (Brennan J); European Bank Ltd [13]; Clark [120] (Keane J).
[22] Wenham v Ella [1972] HCA 43; (1972) 127 CLR 454, 471 (Gibbs J).
[23] Burns v MAN Automotive (Aust) Pty Ltd [1986] HCA 81; (1986) 161 CLR 653, 667 (Wilson, Deane & Dawson JJ).
In Burns (672 ‑ 673), Brennan J explained that the two limbs of the rule in Hadley v Baxendale treat remoteness according to whether the knowledge of the parties (or of the party who later commits the breach) is:
(a)knowledge of 'the usual course of things' (which is imputed); or
(b)knowledge of other circumstances which make a breach liable to cause more loss or damage (which must be actual knowledge).
See also Hungerfords v Walker;[24] Baltic Shipping (364 ‑ 365) (Mason CJ).
[24] Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125, 142 (Mason CJ & Wilson J).

In Young [60], Gordon and Edelman JJ said that, in the law of contract, 'the principles related to causation begin with a counterfactual, or "but for" test'.
In our opinion, refinements made by the High Court to the concept of causation in the common law of negligence, in decisions since March, apply by analogy to the concept of causation in an action for breach of contract.
If factual causation is established in an action for breach of contract, it will then be necessary to decide whether the defendant should be legally responsible for the alleged loss or damage. The normative question concerning legal responsibility directs attention to the purpose of an action for breach of contract, the nature and scope of the defendant's obligation that was breached, the nature of the claimed loss or damage and the relationship between the breach and the loss or damage. See Tambree [45]; Hunt [43]; Wallace [11]; Martin [42]; Siegwerk Australia Pty Ltd (in liq) v Nuplex Industries (Aust) Pty Ltd.[47]
[47] Siegwerk Australia Pty Ltd (in liq) v Nuplex Industries (Aust) Pty Ltd [2016] FCA 158; (2016) 334 ALR 443 [70] (Beach J).
In the present case, it was an express term of the Contract that the appellant was obliged to '[t]urn off master key every night'. The appellant breached the term in that Mr Parsons did not place the master key in the 'off' position at the end of his shift on 4 October 2018. The effect of placing the master key in the 'off' position was to de‑energise the electrical circuit in the engine compartment of the Loader. The fire originated within the left side of the engine compartment near the starter motor. The ignition source was the result of an electrical interaction with the starter motor, further or alternatively the associated solenoid or relay. The master key related, at least in a general way, to the electrical circuit in the engine compartment. The electrical circuit was directly affected by whether the master key was in the 'on' position or the 'off' position in that the position of the master key determined whether the electrical circuit was energised or not. Although leaving the master key in the 'on' position did not ignite the fire in that the fire was ignited by an electrical fault elsewhere in the Loader, the appellant's failure to place the master key in the 'off' position was a condition which enabled the fire to ignite. There was a direct correlation between the origin of the fire and the fact that the master key was in the 'on' position. If the master key had been placed in the 'off' position at the end of Mr Parsons' shift on 4 October 2018, the fire would not have ignited and the Loader would not have been destroyed. The appellant's breach of contract was a cause of the alleged loss or damage in the sense that the breach made a material causal contribution to the occurrence of the loss or damage. The 'but for' test of factual causation in relation to the appellant's breach of contract was satisfied in that, had the appellant not breached the Contract, the fire would not have occurred, the Loader would not have been destroyed and the respondent would not have suffered the alleged loss or damage.
However, as we have mentioned, the 'but for' test of factual causation is not the exclusive test. If factual causation is established, it is then necessary to decide whether the defendant should be legally responsible for the alleged loss or damage and that normative question requires a consideration of the purpose of an action for breach of contract, the nature and scope of the defendant's obligation that was breached, the nature of the alleged loss or damage and the relationship between the breach and the loss or damage.
The general common law rule is, of course, that a plaintiff who sustains loss or damage by reason of a breach of contract is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed.
A contract for the hire of a chattel between the owner of the chattel and a hirer of the chattel involves the owner giving possession, use and other rights in respect of the chattel to the hirer for a period in consideration of the hirer making a payment or payments to the owner and observing and performing other obligations in relation to the chattel. A contract for the hire of a chattel includes a promise (usually, but not necessarily, an express promise) to return the chattel when the period of the hire expires or the hiring has otherwise been lawfully terminated. See Digiacinto and Fredericton Aviation Ltd v Aircadia Ltd;[48] Palmer on Bailment (3rd ed, 2009) [21 ‑ 076].
[48] Digiacinto and Fredericton Aviation Ltd v Aircadia Ltd [1978] 21 NBR (2d) 366 [11] (Stevenson J).
In the present case, the appellant, as the hirer of the Loader, was obliged to return the Loader to the respondent, as the owner of the Loader, at the expiry of the hiring period specified in the Contract or upon the respondent lawfully terminating the hiring before the expiry date.
The appellant operated a fertiliser plant. The Loader was used and, at all material times, was intended to be used in an environment where fertilisers were being handled.
The appellant was obliged under the Contract to use the Loader solely for its purposes and on its premises (clause 3.2); to carry out daily checks and servicing in accordance with the manufacturer's specification (clause 4.2 and clause 6.0); to turn off the master key every night (Appendix B); to blow fertiliser from the Loader daily (Appendix B); and to keep Denso tape in place, to retape when required and to check for other corrosion prone areas and apply tape (Appendix B).
The trial judge did not make a definite finding about the purpose or purposes of the installation of the master key. The expert witnesses at the trial expressed different opinions as to the purpose or purposes of the master key. Her Honour said that, in her view, 'the real question is not why the manufacturer installed the [master key], but what in fact is the effect of the [master key] being turned on or off' [315] (original emphasis). Her Honour added that, to the extent that the witnesses were questioned about the purpose of the installation of the master key, she took into account all of the witnesses' evidence on that point [316]. Mr Gatland gave evidence that a reason for the master key was 'to remove any parasitic loads and small leakages of current from either after‑market equipment or faults within the machine that could possibly drain the battery' [333]. Mr Tomlinson accepted, in part, that a purpose of the master key was 'to prevent the battery being drained overnight' [350]. However, her Honour did not make a definite finding that a purpose of the master key was to prevent battery drainage.
In our opinion, even if the purpose of the installation of the master key was not to prevent fires, but merely to prevent battery drainage, the placing of the master key in the 'off' position was connected to the risk of a fire occurring in the engine compartment of the Loader in that the effect of placing the master key in the 'off' position was to de‑energise the electrical circuit. The fire originated in the componentry of the electrical circuit. An electrical fault may be a source for the ignition of a fire and may also be a source of battery drainage if the master key is left in the 'on' position.
Further, in our opinion, the risk of an electrical fault igniting a fire was exacerbated by the Loader being used in an environment where fertilisers were being handled.
As we have mentioned, her Honour found that:
(a)the Loader, having been used commercially in a fertiliser plant and then stored overnight in the appellant's shed, was 'at risk of harm if the starting circuit within the engine of the [Loader] remained positively energised' (emphasis added) [704];
(b)the combination of 'fertilisers and heat generated from an energised starting circuit … [created] a risk of harm that [was] foreseeable' (emphasis added) [705]; and
(c)leaving the Loader with an energised starting circuit after the Loader had been used with fertilisers and stored in the shed of a fertiliser plant created a foreseeable risk of fire [709] (emphasis added).
Those findings were supported by the evidence of Mr Gatland to which we have referred at [151] ‑ [152] above.
Mr Parsons knew that he was required to turn the master key to the 'off' position at the end of his shift.
In the circumstances, the connection between placing the master key in the 'off' position, as required by the Contract, and the occurrence of the fire in the Loader cannot properly be described as merely serendipitous or fortuitous.
The appellant's breach of the Contract and the destruction of the Loader by fire precluded the appellant, as the hirer of the Loader, from fulfilling its obligation to return the Loader to the respondent, as the owner of the Loader, at the expiry of the hiring period specified in the Contract or upon the respondent lawfully terminating the hiring before the expiry date.
The respondent's alleged loss or damage was the destruction of the Loader by the fire and the damages it claimed, namely $245,500, were the current market value of the Loader when it was destroyed less its salvage value.
In our opinion, the purpose of an action for breach of contract; the nature and scope of the appellant's breach of the Contract; the nature of the respondent's alleged loss or damage; and the relationship between the appellant's breach and the respondent's loss or damage, require the conclusion that the appellant should be legally responsible for the loss or damage. The application of the 'but for' test, in the circumstances of the present case, does not produce an unacceptable result. No value judgment or policy consideration indicates that this court should conclude that the trial judge erred in fact or in law in concluding that the appellant's failure to place the master key in the 'off' position in breach of contract was a cause of the fire in the sense that the breach made a material causal contribution to the loss or damage. The respondent established factual causation in its action for breach of contract and it established that the appellant should be legally responsible for the alleged loss or damage.
Ground 1 fails.

The merits of ground 2

Ground 2 alleges, in essence, that the trial judge erred in law in failing to conclude that, the master key not having been installed for fire prevention purposes but, rather, to prevent battery drainage, the fire and the consequent damage to the Loader was too remote a consequence of the appellant's breach of contract.
We have concluded, for the reasons we have given previously, that the question of remoteness of contractual damages was not in issue at the trial and was not litigated between the parties.
We have also concluded, for the reasons that we have given previously, that the appellant should not be permitted to advance in the appeal its proposed new case based on the question of remoteness of contractual damages.
It follows that ground 2 must fail.

The merits of ground 3

Ground 3 alleges, in essence, that the trial judge erred in fact and in law in finding that the appellant breached its duty of care to the respondent by failing to turn off the master key overnight.
The appellant does not challenge in ground 3 (or any other ground) her Honour's finding that '[the appellant] owed [the respondent] a common law duty of care … to exercise reasonable care to avoid any foreseeable risk of harm to [the respondent's] loader as a lessee of the loader' [679].
Also, the appellant does not challenge in ground 3 (or any other ground) the trial judge's approach in analysing the appellant's failure to ensure that the master key was placed in the 'off' position as an issue relevant to breach of duty in accordance with s 5B of the CLA, rather than as an issue relevant to the scope of the duty.
The appellant's case in relation to ground 3 is that her Honour erred in concluding that the appellant had breached its duty of care in accordance with s 5B of the CLA.
Section 5B of the CLA provides:
(1)A person is not liable for harm caused by that person's fault in failing to take precautions against a risk of harm unless —
(a)the risk was foreseeable (that is, it is a risk of which the person knew or ought to have known); and
(b)the risk was not insignificant; and
(c)in the circumstances, a reasonable person in the person's position would have taken those precautions.
(2)In determining whether a reasonable person would have taken precautions against a risk of harm, the court is to consider the following (amongst other relevant things) —
(a)the probability that the harm would occur if care were not taken;
(b)the likely seriousness of the harm;
(c)the burden of taking precautions to avoid the risk of harm;
(d)the social utility of the activity that creates the risk of harm.
The term 'harm' is defined in s 3 of the CLA to mean 'harm of any kind, including', relevantly, 'damage to property'.
Section 5B(1) specifies preconditions for establishing a breach of duty.
In Tapp v Australian Bushmen's Campdraft & Rodeo Association Ltd,[49] Gordon, Edelman and Gleeson JJ made these observations about the proper assessment of an alleged breach of duty under s 5B [106]:
The proper assessment of the alleged breach of duty depends on 'the correct identification of the relevant risk of injury' (Roads and Traffic Authority (NSW) v Dederer (2007) 234 CLR 330 at 338 [18]), because it is only then that an assessment can take place of what a reasonable response to that risk would be (Roads and Traffic Authority (NSW) v Dederer (2007) 234 CLR 330 at 351 [59]). The enquiry is concerned with determining what person, thing or set of circumstances gave rise to the potential for the harm for which the plaintiff seeks damages (Perisher Blue Pty Ltd v Nair‑Smith (2015) 90 NSWLR 1 at 22 [98]). The characterisation of the relevant risk should not obscure the true source of the potential injury (Perisher Blue Pty Ltd v Nair‑Smith (2015) 90 NSWLR 1 at 22 [99], quoting Roads and Traffic Authority (NSW) v Dederer (2007) 234 CLR 330 at 351 [60]).
[49] Tapp v Australian Bushmen's Campdraft & Rodeo Association Ltd [2022] HCA 11; (2022) 273 CLR 454.
In the present case, the relevant 'harm', for the purposes of s 5B, was the destruction of the Loader.
The trial judge held that the relevant 'risk of harm', for the purposes of s 5B, was 'a risk of damage to the [Loader], however caused, by the [appellant's] failure to store the [Loader] with the [master key] in the off position' [698].
The respondent's case at trial was that the appellant was at fault in 'failing to take precautions' against the relevant risk of harm in that Mr Parsons failed to place the master key in the 'off' position when he parked the Loader at the end of his shift.
On the application of s 5B(1) to the present case, the appellant could not be found liable for the relevant 'harm' (that is, the destruction of the Loader) unless the respondent established that:
(a)the risk of harm to the Loader by the appellant's failure to store the Loader with the master key in the 'off' position was foreseeable (that is, it was a risk of which the appellant knew or ought to have known) (s 5B(1)(a));
(b)the risk of harm was not insignificant (s 5B(1)(b)); and
(c)in the circumstances, a reasonable person in the appellant's position would have taken the precaution of placing the master key in the 'off' position when the Loader was parked at the end of Mr Parsons' shift (s 5B(1)(c)).
Section 5B(2) specifies matters that the court must consider in determining whether, for the purposes of s 5B(1)(c), a reasonable person would have taken precautions against the relevant 'risk of harm'. Those matters include 'the probability that the [relevant] harm would occur if care were not taken' (s 5B(2)(a)).
In ground 3 the appellant challenges three aspects of her Honour's reasoning and findings that underpin her ultimate conclusion that the appellant breached its duty of care to the respondent by failing to place the master key in the 'off' position overnight.
First, the appellant alleges, in essence, that the master key was not installed for fire prevention purposes but, rather, to prevent battery drainage, and consequently it was not open to the trial judge to conclude that the relevant 'risk of harm', for the purposes of s 5B, was 'a risk of damage to the [Loader] … by the [appellant's] failure to store the [Loader] with the [master key] in the off position' [698]. Secondly, the appellant alleges, in essence, that there was no evidence that the use of the Loader in connection with fertilisers contributed to the fire, and consequently it was not open to her Honour to find that the risk of damage to the Loader was 'not insignificant', within s 5B(1)(b). Thirdly, the appellant alleges, in essence, that there was no evidence as to the probability that the Loader would suffer damage if the master key was left in the 'on' position, and consequently it was not open to her Honour to find that the probability that the Loader would suffer damage if the master key was left in the 'on' position was 'high', within s 5B(2)(a).
It is necessary, in evaluating the appellant's challenges to her Honour's reasoning and findings that underpin her ultimate conclusion that the appellant breached its duty of care, to consider whether the relevant 'risk of harm' that her Honour identified was foreseeable.
Whether the relevant 'risk of harm' was foreseeable must be considered prospectively, at the time when Mr Parsons parked the Loader at the end of his shift, and not with the benefit of hindsight. See Vairy v Wyong Shire Council;[50] Neindorf v Junkovic;[51] Adeels Palace Pty Ltd v Moubarak.[52]
[50] Vairy v Wyong Shire Council [2005] HCA 62; (2005) 223 CLR 422 [105], [126] ‑ [129] (Hayne J).
[51] Neindorf v Junkovic [2005] HCA 75; (2005) 80 ALJR 341 [93] (Hayne J).
[52] Adeels Palace Pty Ltd v Moubarak [2009] HCA 48; (2009) 239 CLR 420 [31] (French CJ, Gummow, Hayne, Heydon & Crennan JJ).
At common law, a risk of damage which is not far‑fetched or fanciful, is real and therefore foreseeable. A risk of damage that is remote, in the sense that the probability of the damage occurring is extremely unlikely, may nevertheless be a foreseeable risk. See Wyong Shire Council v Shirt;[53] Hunter and New England Local Health District v McKenna.[54] The common law test is undemanding. See Koehler v Cerebos (Australia) Ltd;[55] Vairy [213] (Callinan & Heydon JJ).
[53] Wyong Shire Council v Shirt [1980] HCA 12; (1980) 146 CLR 40, 48 (Mason J).
[54] Hunter and New England Local Health District v McKenna [2014] HCA 44; (2014) 253 CLR 270 [30] (French CJ, Hayne, Bell, Gageler & Keane JJ).
[55] Koehler v Cerebos (Australia) Ltd [2005] HCA 15; (2005) 222 CLR 44 [54] (Callinan J).
As we have mentioned, the trial judge did not make a definite finding about the purpose or purposes of the installation of the master key. The expert witnesses at the trial expressed different opinions as to the purpose or purposes of the master key. Mr Gatland said in evidence that a reason for the master key was 'to remove any parasitic loads and small leakages of current from either after‑market equipment or faults within the machine that could possibly drain the battery' [333]. Mr Tomlinson accepted, in part, that a purpose of the master key was 'to prevent the battery being drained overnight' [350]. However, her Honour did not make a definite finding that a purpose of the master key was to prevent battery drainage.
However, we are of the opinion, for the reasons we have given at [184] ‑ [185] and [187] ‑ [191] above that, in all the circumstances, it was foreseeable that if the appellant failed to store the Loader with the master key in the 'off' position when the Loader was parked each night there was a risk of an electrical fault occurring within the engine compartment of the Loader, igniting a fire and damaging the Loader. It was a risk of which the appellant ought to have known.

We are also of the opinion, for the reasons we have given at [184] ‑ [185] and [187] ‑ [191] above that, in all the circumstances, Mr Parsons' failure to place the master key in the 'off' position, when he parked the Loader at the end of his shift, created a 'risk of harm' to the Loader. The relevant risk, as formulated by her Honour (see [210] above), included the risk of an electrical fault occurring within the engine compartment of the Loader, igniting a fire and damaging the Loader.
We are therefore satisfied that, even if the master key was not installed for fire prevention purposes but, rather, to prevent battery drainage, the trial judge was correct to conclude that the relevant 'risk of harm', for the purposes of s 5B, was 'a risk of damage to the [Loader] … by the [appellant's] failure to store the [Loader] with the [master key] in the off position' [698]. The first aspect of the appellant's challenge in ground 3 fails.
It is true that her Honour held that the cause of the fire could not be determined at the trial [16], [360]. That conclusion necessarily included, by implication, a finding that it could not be determined whether the use of the Loader in connection with fertilisers actually caused or materially contributed to the fire. However, it does not follow that it was not open to her Honour to find that the risk of damage to the Loader was 'not insignificant', within s 5B(1)(b) [713].
As we have mentioned, the trial judge found, and there was support in the evidence for her Honour to find, that:
(a)the Loader, having been used commercially in a fertiliser plant and then stored overnight in the appellant's shed, was at risk of harm if the starting circuit within the engine of the Loader remained positively energised [704];
(b)the combination of fertilisers and heat generated from an energised starting circuit created a risk of harm that was foreseeable [705]; and
(c)leaving the Loader with an energised starting circuit after the Loader had been used with fertilisers and stored in the shed of a fertiliser plant created a foreseeable risk of fire [709].
Her Honour was entitled to make those findings.
Section 5B(1)(b) requires that the relevant 'risk of harm' be 'not insignificant'. That requirement in s 5B(1)(b) imposes a more demanding standard than the common law test of foreseeability, but not by very much. See Shaw v Thomas;[56] Cox v Fellows;[57] Stenning v Sanig;[58] Erickson v Bagley;[59] Lightfoot v Rockingham Wild Encounters Pty Ltd.[60]
[56] Shaw v Thomas [2010] NSWCA 169 [44] (Macfarlan JA; Beazley & Tobias JJA agreeing).
[57] Cox v Fellows [2013] NSWCA 206 [145] (Gleeson JA; Basten & Ward JJA agreeing).
[58] Stenning v Sanig [2015] NSWCA 214 [32] (Hoeben JA; Macfarlan & Gleeson JJA agreeing).
[59] Erickson v Bagley [2015] VSCA 220 [36] (Kyrou & Kaye JJA).
[60] Lightfoot v Rockingham Wild Encounters Pty Ltd [2018] WASCA 205 [55] (Buss P, Murphy & Beech JJA).
In the present case, we are satisfied, for the reasons we have given at [184] ‑ [185], [187] ‑ [191] and [220] ‑ [222] above, that in all the circumstances the relevant risk of harm must be regarded as a risk that was 'not insignificant', within s 5B(1)(b). The second aspect of the appellant's challenge in ground 3 fails.
The question raised by s 5B(1)(c) is whether, in the circumstances, a reasonable person in the appellant's position would have taken precautions against the relevant 'risk of harm', namely the risk of damage to the Loader, however caused, by the appellant's failure to store the Loader with the master key in the 'off' position. As we have mentioned, the relevant risk included the risk of an electrical fault occurring within the engine compartment of the Loader, igniting a fire and damaging the Loader. The asserted precaution merely involved the appellant placing the master key in the 'off' position when the Loader was stored at the end of the day.
Section 5B(2) requires the court, in determining whether a reasonable person would have taken precautions against a risk of harm, to consider (amongst other relevant things):
(a)the probability that the harm would occur if care were not taken (s 5B(2)(a));
(b)the likely seriousness of the harm (s 5B(2)(b));
(c)the burden of taking precautions to avoid the risk of harm (s 5B(2)(c)); and
(d)the social utility of the activity that creates the risk of harm (s 5B(2)(d)).
In the present case:
(a)for the purposes of s 5B(2)(b), the likely harm, if the asserted precaution was not taken and a fire ignited as a result of an electrical fault within the engine compartment of the Loader, was very serious in that there would be significant damage to (if not the destruction of) the Loader; and
(b)for the purposes of s 5B(2)(c), the burden of taking the asserted precaution to avoid the risk of harm was insignificant in that it merely involved placing the master key in the 'off' position when the Loader was stored at the end of the day.
Section 5B(2)(d) gives expression to the notion that some activities are more worth taking risks for than others. For example, when an ambulance is speeding to take an injured or sick person to hospital, precautions that would ordinarily be considered reasonable need not be taken. See Waverley Council v Ferreira;[61] Sibraa v Brown.[62]
[61] Waverley Council v Ferreira [2005] NSWCA 418; [2005] Aust Torts Reports 81‑818 [50] (Ipp JA; Spigelman CJ & Tobias JA agreeing).
[62] Sibraa v Brown [2012] NSWCA 328 [72] (Campbell JA; Hoeben JA & Tobias AJA agreeing).
In the present case, loaders of the kind in question are plainly of value in the conduct of various kinds of business and commercial activities. However, loaders of the kind in question may be operated and stored easily without creating the relevant 'risk of harm' identified by the trial judge. In the present case, the 'activity', within s 5B(2)(d), that created the risk of harm was storing the Loader overnight and unattended in the appellant's shed, after it had been used in connection with fertilisers, with the electrical circuit in the Loader remaining energised. There was no 'social utility', within s 5B(2)(d), in that activity.
In the present case, there was no evidence as to the precise 'probability', for the purposes of s 5B(2)(a), that the Loader would suffer damage if the master key was left in the 'on' position when the Loader was stored at the end of the day.
The trial judge's finding was that if the master key was left in the 'on' position, so that the starting circuit remained energised and therefore at risk of an electrical event, 'the probability that [the Loader] would suffer damage [was] high' [720].
Her Honour's finding, that the probability that the Loader would suffer damage was 'high', assumed that an electrical fault may occur within the engine compartment of the Loader while the electrical circuit was energised.
As we have mentioned, the relevant risk of harm, as formulated by the trial judge (see [210] above), was 'a risk of damage to the [Loader], however caused, by the [appellant's] failure to store the [Loader] with the [master key] in the off position' [698]. That risk, as formulated by her Honour, included the risk of an electrical fault occurring within the engine compartment of the Loader, igniting a fire and damaging the Loader.
In our opinion, when her Honour's finding that 'the probability that [the Loader] would suffer damage [was] high' [720] is understood in the manner we have explained at [235] ‑ [236] above, her Honour was entitled to make the finding.
We are therefore of the opinion that the trial judge was correct in concluding that each of the sub‑paragraphs of s 5B(2) was satisfied.
In any event, it must be remembered that the factor specified in s 5B(2)(a) (namely, the probability that the harm would occur if care were not taken) is but one factor to be taken into account in determining whether a reasonable person would have taken the requisite precaution against the relevant risk of harm. The chapeau to s 5B(2) makes plain that each of the four sub‑paragraphs of s 5B(2) (amongst other relevant things) must be considered. See Wilson v Nilepac Pty Ltd t/as Vision Personal Training (Crows Nest).[63]
[63] Wilson v Nilepac Pty Ltd t/as Vision Personal Training (Crows Nest) [2011] NSWCA 63 [130] (Tobias JA; Beazley & Whealy JJA agreeing).
We are satisfied that, even if her Honour was in error in finding that the 'probability', for the purposes of s 5B(2)(a), was 'high', her Honour was nevertheless correct to conclude that, in the circumstances, a reasonable person in the appellant's position would have taken the precaution of placing the master key in the 'off' position every night, within s 5B(1)(c).
Ground 3 fails.

The merits of ground 4

Ground 4 alleges, in essence, that the trial judge erred in fact and in law in concluding that the appellant's negligence in failing to turn off the master key was a cause of the fire.
The appellant's case in relation to ground 4 is that:
(a)the evidence at trial was to the effect that the master key was not installed for fire prevention purposes but, rather, was to prevent battery drainage, so that the connection between the appellant's failure to turn off the master key and the fire was purely serendipitous; and
(b)her Honour therefore erred in concluding that it was appropriate for the scope of the appellant's liability to extend to the harm caused, namely the damage to the Loader, within s 5C(1)(b) of the CLA, and in failing to find that it was not appropriate for the scope of the appellant's liability to extend to that harm.
Section 5C of the CLA provides:
(1)A determination that the fault of a person (the tortfeasor) caused particular harm comprises the following elements —
(a)that the fault was a necessary condition of the occurrence of the harm (factual causation); and
(b)that it is appropriate for the scope of the tortfeasor's liability to extend to the harm so caused (scope of liability).
(2)In determining in an appropriate case, in accordance with established principles, whether a fault that cannot be established as a necessary condition of the occurrence of harm should be taken to establish factual causation, the court is to consider (amongst other relevant things) —
(a)whether and why responsibility for the harm should, or should not, be imposed on the tortfeasor; and
(b)whether and why the harm should be left to lie where it fell.
(3)If it is relevant to the determination of factual causation to determine what the person who suffered harm (the injured person) would have done if the tortfeasor had not been at fault —
(a)subject to paragraph (b), the matter is to be determined by considering what the injured person would have done if the tortfeasor had not been at fault; and
(b)evidence of the injured person as to what he or she would have done if the tortfeasor had not been at fault is inadmissible.
(4)For the purpose of determining the scope of liability, the court is to consider (amongst other relevant things) whether and why responsibility for the harm should, or should not, be imposed on the tortfeasor.
In Strong v Woolworths Ltd,[64] French CJ, Gummow, Crennan and Bell JJ said in relation to the New South Wales equivalent of s 5C(1)(a) [18]:
[t]he determination of factual causation under [the New South Wales equivalent of s 5C(1)(a)] is a statutory statement of the 'but for' test of causation: the plaintiff would not have suffered the particular harm but for the defendant's negligence. (footnote omitted)
In the assessment mandated by s 5C(1)(a), notions of 'common sense' have no place. See Adeels Palace [43]; Tapp [101].
[64] Strong v Woolworths Ltd [2012] HCA 5; (2012) 246 CLR 182.
In the present case, we are of the opinion, for the reasons we have given in dealing with ground 1, that the appellant's failure to place the master key in the 'off' position, when Mr Parsons parked the Loader at the end of his shift, satisfied the 'but for' test of causation. Mr Parsons' negligent failure to place the master key in the 'off' position was a 'necessary condition' of the occurrence of the relevant harm, within s 5C(1)(a). In other words, 'but for' his negligence, the relevant harm would not have occurred.
We are of the opinion, for the reasons we have given in dealing with ground 1, that the trial judge was correct in concluding that it was appropriate for the appellant's liability to extend to the harm caused, namely the damage to the Loader, within s 5C(1)(b). The application of the 'but for' test, in the circumstances of the present case, does not produce an unacceptable result. No value judgment or policy consideration indicates that this court should conclude that the trial judge erred in fact or in law in concluding that there was 'no reason why the scope of [the appellant's] liability should not extend to the harm caused to [the respondent] in the destruction of [the Loader] by the fire' [774]. As we have explained in the context of dealing with ground 1, the connection between placing the master key in the 'off' position and the occurrence of the fire in the Loader cannot properly be described as merely serendipitous or fortuitous. At the trial the respondent established both factual causation in its action for negligence and that the appellant should be legally responsible for the alleged loss or damage.
Ground 4 fails.

Conclusion

None of the grounds of appeal has been made out.
It is unnecessary, in the circumstances, to consider the respondent's notice of contention.
The appeal should be dismissed.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
ET
Associate to the Honourable President Buss
8 OCTOBER 2024