Ritchie v Advanced Plumbing and Drains Pty Ltd

1. [1]

   This is a representative proceeding commenced pursuant to Pt 10 of the Civil Procedure Act 2005 (NSW). The claim is brought by a landowner, representing a number of other landowners, that were affected by the Carwoola bushfire which commenced on 17 February 2017.

2. [2]

   The cause of the Carwoola bushfire was alleged to be sparks produced by the cutting of reinforcing steel falling into dry grass. The person cutting the steel is alleged to have been an employee of the first defendant, Advanced Plumbing and Drains Pty Ltd (“APD”).

3. [3]

   By a further amended statement of claim filed 25 August 2021, the plaintiff seeks damages for the losses caused by the bushfire on her own behalf and on behalf of group members. In this iteration of the statement of claim, the claim is made against the second defendant, (Insurance Australia Ltd t/as CGU Insurance), on the basis that the first defendant had an insured liability to the plaintiff and group members within the meaning of s 4 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) (“the TPC Act”). The first defendant went into voluntary liquidation on 19 December 2017. Leave was granted to the plaintiff to proceed against CGU on 16 August 2019.

Background

1. [4]

   The director of APD prior to its liquidation was Jason Hooper. Mr Hooper and his wife jointly owned a property at 78 Brindabella Place, Carwoola. Carwoola is a short distance east of Queanbeyan.

2. [5]

   Mr Hooper founded APD in 2010. It initially undertook domestic plumbing work, but quickly evolved to take on small commercial plumbing contracts and then large commercial projects such as schools and apartment complexes. By 2017, almost all of its work was large commercial projects on which it provided plumbing, hydraulic and civil infrastructure services. Its larger projects in 2016 and 2017 included a ten-floor office tower conversion, a six-floor apartment complex and a public school. In each case, APD provided excavation and in-ground civil works, in addition to the installation of plumbing infrastructure. In the course of installing large scale commercial hydraulics, APD's work included cutting concrete and bitumen outside the boundaries of the property under development, to install sewer, water or stormwater infrastructure, and cutting steel before the pouring of concrete for those installations.

3. [6]

   In 2017, APD had approximately 40 employees, and used a broad range of tools and heavy equipment to provide its services. These included excavators, jackhammers, saws and cutting tools, in addition to welding equipment for pipes.

4. [7]

   In mid-2016, Mr Hooper engaged a licensed builder, Ivan Pirjac, of National Build Pty Ltd to construct a dwelling, shed and stables at the property. Mr Hooper said that he arranged with Mr Pirjac that he (Mr Hooper) would take responsibility for building the works up to slab level, and that he would engage APD to do those works.

5. [8]

   The work at the property commenced in about late 2016, and initially involved APD employees clearing and establishing a building envelope. An earth pad had been prepared on the construction area and, on Mr Hooper’s instruction, an APD employee had cleared an area of about 15 metres around the perimeter of the footings. There is a dispute about whether this was simply to provide ease of access, or was a fire break, or both.

6. [9]

   Mr Hooper and his foreman, Shannon Orford, had also excavated and installed water and electrical conduits up the driveway, and installed taps. APD employees also excavated for the installation of a 120,000 litre concrete water tank.

7. [10]

   Mr Hooper had organised the installation of the reinforcing steel into the trenches to commence on Saturday, 11 February 2017. The work was cancelled on that day because there was a total fire ban, and because the temperature was to reach 40° centigrade, above the 38° limit for APD employees to be working under their Enterprise Bargaining Agreement.

8. [11]

   Mr Hooper then spoke to Mr Orford the following Monday to let him know the tasks he had for the week. That work included the installation of the reinforcement. The preparation of footings included forming reinforcing steel into cages and, where necessary, cutting the steel to length.

9. [12]

   On Friday 17 February 2017, three APD employees, Mr Orford, Murray McNeil and Mark Kelly, were working at the property. In addition, a former apprentice, Harrison Elliott, was working there. Mr Elliott had been called by Mr Orford the night before and asked if he could come and work the following day. Mr Elliott had started as an apprentice with APD in September 2015. He left APD in November 2016 to go to work for Natural Gas and Water, where he remained until March 2017, when he returned to work for APD.

10. [13]

    During the morning of 17 February 2017, Mr Orford was working on the steel reinforcement of the footings. He was using a Husqvarna K970 power cutter fitted with a grinding wheel to cut reinforcing steel to size. At some time during the morning, Mr Elliott was asked by Mr Orford to assist him.

11. [14]

    At around 11.40am, Mr Orford was attending to the steel frame in the trench on the south-eastern side of the construction area. Mr Orford directed Mr Elliott to cut the steel mesh. Mr Elliott made the first cut facing towards the paddock in a south to south-easterly direction. As a result, sparks from the cut were directed behind him onto Mr Orford in the trench.

12. [15]

    Mr Orford called out to Mr Elliott and told him to turn around. Mr Elliott did so, without thinking, he said, because they were in a rush. As a result, sparks were directed towards the paddock, although no one realised that had happened until Mr Elliot had finished the cut, grabbed the two bits of steel that he had cut and put them in the trench, climbed into the trench, lifted the steel up and tied them. At that point, both he and Mr Orford saw flames in the paddock.

13. [16]

    The paddock was vegetated with long, dry, fully cured, grass. The area of origin of the fire was at least five metres from the edge of the cleared area.

14. [17]

    On that day there was a total fire ban declared for the area in which the property was located. At about 11:40am on that day, the temperature at Canberra Airport, the nearest weather station to Carwoola, was 31.6° centigrade, there was low humidity and the wind was from the north-west, gusting to 37 kph.

The issues and common questions

1. [18]

   The questions of law or fact common to the claims of the plaintiff and each of the group members are:

Duty and breach

1. [19]

   The following matters are agreed between the parties:

2. [20]

   Putting aside the insurance issues identified in para (6) of the common questions, two issues remain in dispute in relation to the plaintiff’s allegations that APD and the workers are liable to her and the group members in negligence.

3. [21]

   The first issue is the existence of a duty of care owed to the group members. Although CGU admits that the workers owed the plaintiff a duty of care, breached that duty, and that the breaches caused her loss and damage, it does not admit such duty and breach with respect to the group members. The basis for the non-admission is that some group members may seek to advance personal injury claims based on pure psychiatric injury.

4. [22]

   The second issue is whether APD is liable in negligence to the plaintiff and group members. The question is whether APD was performing the works at the property, or whether the people working there were working for Mr and Mrs Hooper.

5. [23]

   Following resolution of those issues, it is then necessary to consider what I have described as the insurance issues.

6. [24]

   The plaintiff and CGU have separately agreed the quantum of the plaintiff’s loss.

7. [25]

   As to the first issue, the basis for the second defendant not admitting any duty of care or breach toward the other group members arises from the pleading in para 3(a) of the further amended statement of claim, that the group members consist of:

8. [26]

   It is the inclusion of the words “or psychiatric injury” which gives rise to the problem. The plaintiff does not claim psychiatric injury. At the present time it is not known whether other group members have in fact suffered psychiatric injury. As a result of the different principles which apply to claims for mental harm because of ss 30 to 33 of the Civil Liability Act 2002 (NSW) the second defendant will not admit duty and breach generally to the group members.

9. [27]

   Question (2) of the common questions was:

10. [28]

    The parties agreed that the issue of psychiatric injury should be put to one side for the determination of the issues before me. Any determination that a duty of care was owed to the group members in relation to any of the matters in (a), (b) and (c) does not result in a duty to avoid mental harm.

11. [29]

    It is not otherwise suggested that there is any difference between the position of the plaintiff on the one hand and the group members on the other in respect of claims for loss or damage to property or for personal injury other than psychiatric injury. In those circumstances, it is clear that, as the workers owe the duty of care to the plaintiff, so they owed that duty of care to the other group members. In the same way, the failure of the workers to take the reasonable precautions alleged constituted a breach of that duty of care to the other group members in the same way as they constituted a breach of the duty of care to the plaintiff.

12. [30]

    Although this issue of any duty of care and breach by APD is closely related to the first of the insurance issues, that is, whether the work formed part of the Business of APD (as defined in the Policy), the two issues are not identical because a determination of the latter issue involves a construction of the Policy. In other words, a finding that APD is liable to the plaintiff and the group members for acts and omissions of Mr Orford and Mr Elliot is not determinative of whether APD is entitled to claim on the Policy in respect of any liability it has from the defendant. If it is found that APD was not liable, it is then necessary to determine if the liability of Mr Orford and Mr Elliott is covered under the Policy by reason of their work on the site being private work for Mr Hooper. That involves a consideration of the term insured liability in s 3 of the TPC Act.

13. [31]

    In relation to the issue of whether the work was being done by APD, CGU submitted the building work was not an APD project. There was no meeting to discuss the plans, work out what needed to be done by whom and when, and for the preparation of Safe Work Method Statements as Mr Hooper said occurred on APD’s other projects. CGU submitted that it was just Mr Hooper getting some work done by labourers on the side when they were otherwise available.

14. [32]

    Before considering whether APD was carrying out the works, it is necessary to say something briefly about the credibility of Mr Hooper, because his evidence is crucial to this issue.

15. [33]

    There is an obvious conflict between Mr Hooper’s evidence and that of Mr Elliot in relation to assertions made by Mr Elliot about discussions that occurred on the day following the fire between Mr Hooper, Mr Orford, and Mr Elliot. I have no hesitation in rejecting Mr Elliot’s evidence to the effect that it was agreed amongst those three persons that the story to be put forward was that it was Mr Orford who was cutting the steel and was responsible for the sparks starting the fire. Determining who is to be believed about these discussions does not directly affect any issue in the proceedings because there is now no doubt that it was Mr Elliot who was responsible for performing the cuts to the steel that led to the fire. However, if I had accepted Mr Elliot’s evidence about those discussions, that would have been a matter that threw doubt on Mr Hooper’s evidence generally, because it would have affected his credibility.

16. [34]

    I reject Mr Elliot’s account of those events for a number of reasons. First, Mr Elliot was prepared to lie to the police in the first instance about what occurred on the day in question. Secondly, he was not fully prepared to take responsibility for the lie that he told not only to the police but also to the fire investigator Richard Woods and, arguably, he compounded the lie in the evidence he gave.

17. [35]

    In his evidence, Mr Elliot was not prepared to admit that he had not told the truth to Mr Woods:

18. [36]

    What Mr Woods recorded in his report of 15 September 2020 was this:

19. [37]

    Plainly, that account of what occurred was not true, but Mr Elliott was prepared to say on oath that it was.

20. [38]

    Thirdly, I also found his evidence generally to be given in an unsatisfactory manner which pointed to prevarication on the one hand and reconstruction of events on the other. An example of his prevarication about the lie is the following evidence.

21. [39]

    He was asked about his statement to the police, and the fact that the statement began by saying that it was true:

22. [40]

    Mr Greenwood of Senior Counsel for CGU criticised Mr Hooper for what he described as Mr Hooper’s constant attempts to refashion or reframe matters, such as whether the cleared area around the building envelope was at least partly done to create a firebreak. There was no evidence to suggest that Mr Hooper’s evidence in that regard was not truthful.

23. [41]

    Another criticism in the same vein was made about what Mr Hooper said in his Electronically Recorded Interview with a Suspected Person (ERISP), concerning the workers only cutting the steel with bolt cutters. A reading of the whole passage leads me to the conclusion that by the time of that ERISP (at 12.04pm the day after the fire started), Mr Hooper was not fully aware of what had occurred. He certainly did not know that Mr Elliott was the person who had used the power cutter. Mr Hooper’s surprise that power tools would have been used and his statement “so I can’t really say how else he might, may or may not have cut it” suggests that his knowledge in that regard was incomplete.

24. [42]

    I accept that Mr Hooper’s putting APD into liquidation shortly after the fire and incorporating another company to do the same work leaves a poor impression, but Mr Hooper gave evidence that he did so because indemnity had been declined by the insurer, he had large legal bills, and these proceedings had begun, and he did not have the wherewithal to defend them.

25. [43]

    Nevertheless, having observed Mr Hooper give his evidence, and having read his ERISP, I am satisfied that Mr Hooper was an honest witness who was doing his best to recall matters that were put to him.

26. [44]

    Mr Hooper’s evidence in relation to APD’s involvement with the building work at the property was as follows:

27. [45]

    Mr Hooper also gave evidence that he told Mr Ivan Pirjac of National Build that APD would be doing the works up to slab level.

28. [46]

    There was also evidence of APD’s sign being affixed to the front gate of the property, with the company’s full name, phone number, email address and the words, “Residential and Commercial Plumbing, Drainage and Gas” on it.

29. [47]

    A strong indication that the work was being performed by APD was the evidence of Mr Hooper that he had cancelled the same work on the previous Saturday, because the temperature was forecast to be 40 degrees “and our EBA [Enterprise Bargaining Agreement] will not allow my employees to work on a 40-degree day outside”. It is plain that if the workers were only on site for Mr and Mrs Hooper, the EBA would have no relevance.

30. [48]

    Mr Hooper was challenged about whether APD had any time sheets for the work that was carried out at the property, and whether they were provided to the liquidator of APD. I accept his evidence that there were time sheets for the job. It does not seem likely that such documents would have been sought by the liquidator because, as Mr Hooper said, they were not pay slips.

31. [49]

    Mr Hooper was also challenged about whether a Safe Work Method Statement was completed in relation to the building work. Mr Hooper said that it was, and he believed it had been provided to his lawyer. Ultimately, after a call for that document, no such document was produced. I do not consider the absence of that document casts doubt on Mr Hooper's evidence.

32. [50]

    CGU submitted that Mr Elliot was not an employee of APD at the time but had been co-opted by Mr Orford to work on that day. Mr Elliot said, and I accept this aspect of his evidence, that he expected to be paid for working that day although nothing had been said in the conversation he had with Mr Orford about the matter. It might be asked rhetorically why he would not have expected to be paid. He was an apprentice who had worked for APD previously. There was nothing to suggest that he owed Mr Orford any favours to explain why he would agree to perform a day’s heavy work in very hot conditions without being paid for it. However, by reason of what follows, it does not matter whether Mr Elliott was paid for the day or not.

33. [51]

    From the point of view of any liability to the plaintiff and the group members, whether or not Mr Elliot should be regarded as an employee of APD is not important. Mr Orford was a foreman engaged by APD and there is no suggestion that it was not open to him to have engaged Mr Elliot to assist in the work. Indeed, in his ERISP, Mr Hooper said that Mr Elliot was someone that Mr Orford engaged on a casual basis.

34. [52]

    Mr Elliot was under Mr Orford's supervision, and it was Mr Orford who directed him to change position while he was cutting the steel so that the sparks would not hit Mr Orford. Any breach of duty that led to the fire was principally a breach by Mr Orford in the direction he gave to Mr Elliot. APD is liable for Mr Orford.

35. [53]

    Mr Orford did not give evidence in the proceedings, nor was any statement or police interview with him put into evidence. In the somewhat unusual way the proceedings were run, probably because of the insurance issues, with both Mr Hooper and Mr Elliot giving evidence for the plaintiff, I do not consider that any inference can be drawn from the failure of either party to call Mr Orford. It cannot be said that he was in either party's camp. In any event, although evidence may have been able to have been obtained from him in relation to certain aspects of Mr Hooper's evidence and Mr Elliot's evidence, important matters about which Mr Orford could give evidence were not seriously in doubt.

36. [54]

    I am satisfied, from the nature of the work ordinarily carried out by APD and from Mr Hooper’s evidence about the arrangements for the work carried out at the property, that the work was being carried out by APD, and that APD is liable to the plaintiff and the group members for the breach of its duty of care.

The insurance issues

1. [55]

   The plaintiff and the members of the group can only recover any loss against CGU if they have the right to recover the amount of any insured liability with CGU, in accordance with s 4 of the TPC Act, having regard to the definitions in s 3 of that Act.

2. [56]

   Section 3 of the TPC Act relevantly provides:

3. [57]

   Section 4 provides:

4. [58]

   For the plaintiff to recover on the basis of the insured liability, she must show, in the first place, that the bushfire was an occurrence happening in connection with the Insured’s Business.

5. [59]

   The Policy Schedule relevantly provided:

6. [60]

   The Policy wording relevantly provided:

7. [61]

   The definition of Business is a broad one, particularly when the Policy Schedule provides that the insured’s business is “Principally Plumbing and any other activities incidental thereto”, and cl 4.4.10 includes “any other occupation ancillary or incidental to the Business stated in the Schedule”.

8. [62]

   To CGU’s knowledge from the Aon Quotation Slip, the plumbing business involved “Plumbing on commercial sites”, it had construction equipment including excavators and minor construction plant, and it used sub-contractors for trenching electrical work. This common knowledge is admissible to understand the commercial circumstances of the policy: Horsell International Pty Ltd v Divetwo Pty Ltd [2013] NSWCA 368 at [176].

9. [63]

   The work that APD had done on the site prior to this time included was the excavation for, and installation of, the conduits for both water and electricity up the driveway, and the excavation for the installation of the 100,000 litre water tank. Regard must also be had to the type of work APD ordinarily carried out, which included,

10. [64]

    Mr Hooper said also that 98% of APD’s work was made up of large commercial projects where APD would provide plumbing hydraulic and civil infrastructure works.

11. [65]

    CGU submitted that although the word “principally” in the Policy Schedule suggested that the parties understood that APD’s business was not exclusively plumbing, there is nothing to suggest that they envisaged that the business would include construction of footing for a home. CGU submitted that what was being done by Messrs Orford and Elliott could not be seen as ancillary or incidental to plumbing works.

12. [66]

    In Australian Casuality Co Limited v Federico (1986) 160 CLR 513 Gibbs CJ said (at 520):

13. [67]

    It is clear from the definition of Business, that what was being insured was a great deal wider than actual plumbing work, even if the matters identified in sub-cll 4.4.2, 4.4.3, 4.4.4, 4.4.7, 4.4.8 and 4.4.9 are read down (as CGU submits they should be) to have some connection to plumbing work.

14. [68]

    The work that APD had done on the site up to that time had included works related to plumbing and drainage, including the work for the installation of the water conduits on the driveway and the excavation works for the in-ground water tank. For that reason, and on the basis of what CGU knew about APD’s business, the work that was being carried out on the land was an activity ancillary or incidental to the plumbing business.

15. [69]

    The position here is not distinguishable from the situation in Watts v Perry [1972] 1 NSWLR 73, where the injury sustained by the plaintiff occurred in the course of the insured employer performing work associated with the insured business. The description of the business in the Policy Schedule in that case was “the business of scrap-metal dealer and no other”. At the time the plaintiff was injured, he was helping to demolish a boiler which was to be cut up for the scrap metal business. Justice Asprey (with whom Jacobs and Holmes JJA agreed) said (at 82-83):

16. [70]

    Indeed, the position in the present case is a stronger one for the insured. Not only do the words “and no other” not appear, the policy schedule adds the words “and any other activities incidental thereto”, and the definition of Business includes “any other occupation ancillary or incidental to the Business stated in the Schedule”.

17. [71]

    If I am wrong in that conclusion, and if APD was not itself carrying out the work on the site, what was happening was undoubtedly private work undertaken by APD’s employees for a director, Mr Hooper. No basis is shown for reading down the words “private work” in either of sub-cll 4.4.5 or 4.11.10 to mean “private plumbing work” as CGU impliedly contends. Sub-cll 4.4.1 and 4.4.10 are the only sub-clauses which link the Business to what is specified in the Policy Schedule. The focus in both sub-cll 4.4.5 and 4.4.10 is on the relationship between the Named Insured and its employees, rather than on the nature of the work they are carrying out.

18. [72]

    If CGU had intended to confine the activities listed in cl 4.4 to the description in the policy Schedule, it could easily have said so. The fact that the Schedule is not mentioned in the sub-clauses other than 4.4.1 and 4.4.10 (or in sub-cl 4.11.10 for that matter), tends against a restrictive construction of the clause generally and, in this case, of sub-cl 4.4.5.

19. [73]

    On either basis, the Occurrence (the fire) happened in connection with the insured’s Business.

20. [74]

    Clause 7.3 of the Policy provides:

21. [75]

    In Fraser v B. N. Furman (Productions) Ltd; Miller Smith & Partners (A Firm) Third Party [1967] 1 WLR 898, Diplock LJ said (at 906):

22. [76]

    In Legal & General Insurance Australia Ltd v Eather (1986) 6 NSWLR 390, the New South Wales Court of Appeal said that Fraser ought to be followed. Justice Kirby said (at 397):

23. [77]

    In VACC Insurance v BP Australia Ltd (1999) 47 NSWLR 716; [1999] NSWCA 427, Brownie AJA said at [58] (albeit in dissent):

24. [78]

    In Barrie Toepfer Earthmoving and Land Management Pty Ltd v CGU Insurance Ltd [2016] NSWCA 67 Meagher JA (with whom Ward JA and Sackville AJA agreed) said at [80]:

25. [79]

    CGU submitted that in the present case the risk of fire was very obvious to everyone:

26. [80]

    CGU submitted in the face of that, to use equipment that shot sparks around was reckless, foolhardy and courting danger, especially when the work could have been done without that equipment. CGU submitted that Messrs Hooper, Orford and Elliott did things which they knew were inadequate responses to the danger, and that they did not take any measures at all when they appreciated that the taking of some measure was required.

27. [81]

    CGU drew attention to the requirement to use reasonable endeavours to comply with all statutory obligations and regulations imposed by any authority for the safety of persons or property. CGU submitted that relevant statutory obligations included s 99(11) and s 100(1) of the Rural Fires Act 1997 (NSW). Section 99(11) provides a penalty for a person who fails to comply with total fire ban order, and s 100(1) creates an offence (relevantly) of setting fire or causing fire to be set to the land or property of another person.

28. [82]

    CGU also pointed to cl 22(2)(b) of the Rural Fires Regulation 2013 (NSW), which provides a penalty for a person who, in connection with land, carries out welding operations or uses an angle grinder or any other implement that is likely to generate sparks, unless the person has in the vicinity prescribed safety equipment. It may be accepted that the prescribed fire safety equipment (defined in sub-cl 22(3) of the Regulation) was not in the vicinity of the work being carried out by APD.

29. [83]

    CGU submitted that APD (through Mr Hooper), Mr Orford and Mr Elliott recognised that a risk of fire existed and took no proper measures to address the risk. Rather, they were more focused on the task of getting the job done before the scheduled engineer’s inspection of the footings took place.

30. [84]

    In my opinion, in determining whether cl 7.3.1 was complied with, the focus is a relatively narrow one, being on the actions of Mr Orford and Mr Elliott. The work itself, the positioning of steel in the footings, was not inherently either a fire hazard or risky. Any risk and fire hazard arose only from the method used to cut the steel. There is no evidence that Mr Hooper directed the cutting method, nor that he even knew it was being done in the way it was with the power cutter. In Mr Hooper’s ERISP he gave this evidence:

31. [85]

    When he was asked by Mr Greenwood SC,

32. [86]

    He said that he knew there would be a battery grinder on site because they were owned by the employees. It was put to Mr Hooper that he anticipated that Mr Orford “may well use the quick cut out there on site” but Mr Hooper denied it. I accept his denial.

33. [87]

    Mr Hooper had given instructions before the work commenced that the clearing around the site was to be 15-20 metres as both ease of access and a fire break. Although challenged about whether it had been cleared for a firebreak, he maintained his assertion that it had been. Although I accept his evidence in that regard, it scarcely matters what the original purpose of clearing the area was. As at the time the impugned work was being carried out, it was being done at a point some distance from the edge of the cleared area. The safety of what was being done in terms of the precautions, must be considered by what the employees were doing in the circumstances as they existed, and not whether those circumstances had been brought about by one particular purpose or another.

34. [88]

    The question is, therefore, whether the use by Mr Orford and Mr Elliott of the cutter in the position they used it and with the weather conditions being what they were, amounted to recklessness in the sense that they courted the danger.

35. [89]

    Whilst there is no doubt that the use of the power cutter was negligent in the circumstances that prevailed on the day, I do not consider that the actions of Mr Orford and Mr Elliott amount to recklessness. I do not consider that there is any evidence that they had actual recognition that a danger existed from the sparks. Although Mr Elliott knew that there was a total fire ban that day, there was no evidence to show that he knew he ought not to be using the power cutter. He used that device because he had been instructed to do so by Mr Orford. As Mr Woods’ report makes clear, they were doing so some 17 metres from where the fire started and within the cleared area between excavated footings and the grass, approximately 12 metres from the edge of the clearing.

36. [90]

    Mr Orford should have realised that sparks which were being emitted from the power cutter were likely to travel some considerable distance, particularly given the prevailing north-westerly wind. In that way, he ought to have directed Mr Elliot to a different position to continue cutting, rather than telling him to turn around so that he was facing the footings where Mr Orford was.

37. [91]

    Those failures are, however, a long way from demonstrating recklessness, and the courting of a danger of which Mr Orford was aware. It does not appear that Mr Elliott or Mr Orford gave any consideration to the fact that sparks being emitted by the cutter might set fire to the grass. Both of them ought to have given consideration to that. In the case of Mr Elliott, he was in the position of a casually hired apprentice, acting under the direction of Mr Orford, a foreman with whom he was familiar from his previous employment with APD. Mr Hooper had described Mr Orford as being very experienced and competent, and Mr Elliot’s position and behaviour must be seen in the light of Mr Orford’s position and competence.

38. [92]

    It may also be accepted that, by Mr Orford and Mr Elliot acting in the way they did with the power cutter, they may well have breached s 99 of the Rural Fires Act and cl 22 of the Rural Fires Regulation. There is, however, certainly no evidence that they were aware that they were doing so, so that their behaviour in that way would amount to recklessness. The evidence all points to a considerable lack of care on their part, but does not point to any awareness of a danger which they disregarded or which they considered could be ignored.

39. [93]

    I am not satisfied that there has been a failure on the part of APD, whether directly or vicariously, to take reasonable precautions in accordance with cl 7.3.1 of the Policy.

40. [94]

    CGU submitted that the Policy does not respond to the liability because there was not strict compliance with Australian Standard 1674.1 ‘Safety in Welding and Allied Processes – Fire Precautions’. CGU submitted that the requirement to comply with that Standard derived from the Welding Endorsement to the Policy.

41. [95]

    That endorsement, contained on the Policy Schedule, provided:

42. [96]

    Australian Standard AS 1674, Pt 1 relevantly provides:

43. [97]

    The short point in relation to this endorsement is whether the Husqvarna K970 power cutter that Mr Elliott was using was spark producing equipment within the meaning of the endorsement. The onus is on the insurer to show that the endorsement applies in the circumstances. It is not disputed by the plaintiff that, if the endorsement applies, the workers did not comply with the Standard.

44. [98]

    CGU submitted that “spark producing equipment” has been included in the endorsement because the very act of producing sparks is a fire hazard. CGU submitted that the emission of sparks is a fire hazard regardless of whether those sparks result from the direct application of heat or the application of friction.

45. [99]

    CGU submitted that if a piece of equipment is being used in such a way that it will produce sparks, the requirements of AS 1674.1 must be strictly complied with for cover to be available. If that same piece of equipment is being used in such a way that it won't produce sparks, then the requirements of AS 1674.1 need not be strictly complied with for cover to be available. In that way, “spark producing equipment” does not have to be equipment that always and necessarily produces sparks.

46. [100]

    CGU submitted that both experts, Mr Hooper and Mr Rankin, accepted that the Husqvarna power cutter inevitably produces sparks when applied to metal.

47. [101]

    CGU submitted that the words “spark producing equipment” in the endorsement stand independently of the earlier items, especially because it refers to equipment rather than a process. It submitted that the ejusdem generis principle does not apply to require that the words “spark producing equipment” should similarly involve direct application of heat to metal to shape, cut or weld, as the plaintiff submits. Although it may be a common characteristic of the processes referred to in the endorsement that they involve the "direct application of heat", that is not a dominant characteristic.

48. [102]

    The plaintiff submitted that the specific terms in the endorsement relate to a genus to which cutting, using a power saw or quick cut, does not belong. Accordingly, the general expression “spark producing equipment” does not, on its true construction, include a power saw or quick cut, even if the result of that operation is the emission of sparks.

49. [103]

    The plaintiff submitted that Mr Rankin’s evidence was that the various processes specifically described in the endorsement involved the direct application of heat to material to create a cut or weld. By contrast, the operation of the Husqvarna K970 power cutter involves the application of friction to create a cut. The plaintiff submitted that with the exception of flame heating, each of their applications listed in the endorsement invariably produces sparks, while the operation of a power cutter only produces sparks in certain circumstances, that is, when cutting metal rather than concrete, wood or other materials.

50. [104]

    The plaintiff relied on the title of the clause, which is concerned with welding. The plaintiff submitted that this limitation is reinforced by the expression following the listed specific and general categories, which provides "or similar operation in which welding equipment is used".

51. [105]

    The plaintiff submitted that if CGU had intended that the endorsement correspond to all processes falling within the Standard, it was open to it to refer to "hot work" within the meaning of the Standard, or at least to refer specifically to "grinding" as the Standard does. The plaintiff submitted that the endorsement adopts conspicuously different language from the definition of "hot work", and that strongly indicates that it was not the parties' intention that what constitutes “hot work” in the Standard was thereby included in the endorsement.

52. [106]

    The first thing to notice about the endorsement is its ambiguity. Where it refers to “flame cutting, flame heating, arc or gas welding, electric, oxy-acetylene, laser cutting” it might be referring to processes or operations, with the “-ing” words being participles. On the other hand, those word combinations might also be compound adjectives, describing equipment including spark producing equipment. The plaintiff contends for the latter construction, so that, in substance, the endorsement reads:

53. [107]

    If equipment is the focus, the plaintiff submitted that “spark producing equipment” has to be read down, because equipment quite unrelated to what the endorsement is intended to cover would be included, such as chainsaws or even hammers on metal. The plaintiff submits that the meaning and scope of the words derives from the context and the purpose of the endorsement.

54. [108]

    The plaintiff’s preferred reading of the endorsement does not really resolve the ambiguity, because the endorsement goes on to say, “or similar operation in which welding equipment is used”. The term “similar operation” suggests a process is the focus, with equipment as the means of the process. In any event, whichever reading is adopted, it is still necessary to have regard to the words “and/or spark producing equipment”.

55. [109]

    The plaintiff relied upon a report from Dale Rankin who was an Australian Welding Institute inspector and supervisor, and a person with 40 years’ experience in engineering as a boilermaker/welder. In his report Mr Rankin explained what was involved with the following processes, being those identified in the endorsement:

56. [110]

    Mr Rankin was then asked if the operation of a power cutter, specifically a Husqvarna K970 power cutter, was capable of being described as one of the processes set out in (a)-(i). He said:

57. [111]

    Mr Rankin’s opinion is only of assistance on the assumption that “spark producing equipment” is to be read ejusdem generis with either the processes or the equipment listed in the endorsement. If it is not to be construed in that way, it does not matter whether or not the operation of a power cutter was capable of being described as one of those processes or equipment, because the power cutter is capable of producing sparks.

58. [112]

    CGU relied on a report from Mr Per Olsson who was a chartered professional engineer with qualifications in fire engineering.

59. [113]

    Mr Olsson’s conclusion in relation to AS 1674.1 was this:

60. [114]

    Mr Olsson also concluded that both sections 2 and 3 of the Standard were applicable to the hot work that was carried out at the property on 17 February 2017. He said that only if a total fire ban had not been in place on that day, should the QuickCut have been used to cut the steel reinforcing mesh.

61. [115]

    Mr Olsson’s conclusion that cutting reinforced steel met the definition of “hot work” in the Standard, is to view the matter the wrong way around. The enquiry is not, in the first instance, whether some particular work falls within the Standard, but whether, on the wording of the endorsement, cover would be excluded because, by the way the work was carried out and/or the equipment used, the Standard applied and was not complied with. However, that this Standard was chosen as what must be complied with in such circumstances, may be some objective evidence of the parties’ intentions when construing the meaning of the relevant part of the endorsement. It makes it more likely that the use of spark producing equipment for cutting the steel fell within the endorsement.

62. [116]

    The plaintiff relies on the maxim noscitur a sociis, which allows a court to give general expressions, which follow an enumeration of more particular things or matters, an application no larger than to things and matters ejusdem generis: Cody v JH Nelson Pty Ltd (1947) 74 CLR 629 at 647 per Dixon J.

63. [117]

    In Australian Aviation Underwriting Pty Ltd v Henry (1988) 12 NSWLR 121 Hope JA (at 126) quoted what was said in McGillivray and Parkington on Insurance Law (6th ed, 1975), where the learned authors said (at para 1159)

64. [118]

    The important focus of that passage is “a word of uncertain scope”. Further, as Dixon J went on to say in Cody (at 647):

65. [119]

    In the same case, Starke J said (at 639):

66. [120]

    It does not seem to me that there is any “uncertain scope” about the words “spark producing equipment”, nor is the real meaning of those words “undiscoverable”. In the first place, there is no doubt that the Husqvarna K970 power cutter produces sparks, and inevitably does so, when used to cut metal. The fact, as the plaintiff submitted, that the cutter does not inevitably produce sparks because it is also designed to be used on masonry, is no answer to that. Nor is it an answer to point to other devices which may in some circumstances produce sparks, because the assumption made by the plaintiff in relation to those devices (a chainsaw was given as an example) is that they would not themselves be spark producing equipment within the meaning of the endorsement.

67. [121]

    Whether the words “arc or flame cutting, flame heating, arc or gas welding, electric, oxyacetylene, laser cutting” are referring to processes or equipment, the words “spark producing equipment” are not referring to a process, but to equipment. There is no reason that such words should be read in a limited way.

68. [122]

    No account can be taken of the heading to the endorsement because cl 5.1 of the Policy wording provides that headings are not to be deemed to affect the interpretation of the policy. The endorsement must be regarded as being part of the Policy in that regard. The plaintiff relied on what was said in SBJ Stephenson Limited v Keith Anthony Mandy [2000] FSR 286 at 297. In that case there was a clause which provided that headings were inserted for convenience only and were not to affect the construction of the agreement. The judge in that case (Bell J) rejected the argument that regard should not be had to the heading of the section in dispute, saying,

69. [123]

    It must be doubted that this decision would be followed in New South Wales, by reason of what was said by the Court of Appeal in Orleans Investments Pty Ltd & Anor v Mindshare Communications Ltd [2009] NSWCA 40; (2009) 254 ALR 81 at [68]. However, even if Bell J was correct in the approach he took in that case, for reasons I have already given, there does not seem to me to be an ambiguity in the words “spark producing equipment” to justify a resort to the heading of the endorsement.

70. [124]

    The plaintiff relied, nevertheless, on the concluding phrase in the endorsement “or similar operation in which welding equipment is used” as pointing to the fact that the preceding words should be limited to the use of welding equipment.

71. [125]

    In Foscolo, Mango and Company Limited v Stag Line Limited [1931] 2 KB 48, Greer LJ said (at 67):

72. [126]

    Despite the words in the concluding phrase relied upon by the plaintiff, it is apparent that the endorsement is concerned not only with welding but also with cutting, and Mr Rankin explained the difference in his report when he said:

73. [127]

    Whether what is spoken of in the endorsement are processes or whether the words are identifying equipment, two separate operations are embraced by the endorsement, being cutting and welding. What the APD workers were doing was cutting, and in doing so they were using spark producing equipment.

74. [128]

    If there is any genus to the processes or equipment referred to in the endorsement, it is not that the processes or equipment were heat producing, but rather that they were processes or equipment likely to result in a fire. Again, the fact that Pt 1 of the Standard speaks of “Fire Precautions” is an indication that that is so.

75. [129]

    The evidence is clear that the Husqvarna K970 power cutter inevitably produces sparks in certain circumstances, including those which obtained by the work being carried out by APD on 17 February 2017. In the operator’s manual the following appears:

76. [130]

    The liability of APD arose out of the use of that spark producing equipment, and the use of that equipment required compliance with the endorsement to the Policy.

77. [131]

    This outcome may be accepted as very unfortunate for the plaintiff and those within the class, particularly because APD was placed into liquidation after the fire. However, it was the failure of APD to comply with the terms of the endorsement to the Policy issued by CGU which has deprived those parties of the benefit of what would otherwise have been the insured liability.

Conclusion

1. [132]

   I answer the common questions as follows:

2. [133]

   There will be judgment for the second defendant. The plaintiff must pay the second defendant’s costs.