C & M Antoniou Pty Ltd v Baker & Co Ingredients Pty Ltd

1. [1]

   By summons filed on 24 May 2022 the applicants, C & M Antoniou Pty Ltd (“CMA”) and Irwin Packaging Pty Ltd (“IP”), seek preliminary discovery from the respondents, Baker & Co Ingredients Pty Ltd (“Baker & Co”) and the Trustee for the Baker Family Trust t/as Baker & Co. Ingredients (“the Trust”) under Rule 5.3 Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) for preliminary discovery.

The applicable rule

1. [2]

   UCPR 5.3 is in the following terms:

Background facts

1. [3]

   The evidence before me consisted of three affidavits of Rory Smith, the solicitor with carriage of the matter for the applicants under the supervision of the solicitor on record, affirmed on 17 May 2022, 15 September 2022 and 20 January 2023 respectively together with exhibited documents. An affidavit of the respondents’ solicitor, Leighton Hawkes, sworn on 16 November 2022 was not read after I ruled that Ms T Berberian of Counsel, who appeared for the applicants, should have leave to cross-examine him on a limited basis over the objection of Mr JC Lee of Counsel, who appeared for the respondents. Due to a conflicting professional commitment Mr Hawkes was not available to attend and Mr Lee elected not to read his affidavit.

2. [4]

   The possible claim of CMA and IP against Baker & Co and the Trust arises out of damage to the former’s premises and other property caused by the escape of fire from the adjoining premises at Moorebank occupied by the latter on 10 September 2019.

3. [5]

   CMA is the owner and an occupier of a commercial property situated at 7-9 Yulong Close, Moorebank. IP was the lessee of part of the property used as a warehouse or storeroom. A company related to Baker & Co and the Trust was the registered proprietor of the adjoining land at 11 Yulong Close, Moorebank. It appears that Baker & Co’s premises consisted of an industrial facility constructed of concrete tilt-slab walls and a flat sheet metal roof. Adjoining or abutting this structure was a two-storey office building used for the administration of the business conducted from the factory-type structure. (See report of Peter Jeffrey, Forensic Fire Examiner 8 October 2019 (CB 45 ff)).

4. [6]

   Notwithstanding the legal ownership of number 11, it is tolerably clear that the business operations conducted at the premises were carried on by Baker & Co (CB 27–29). It also appears that the business name, “Baker & Co. Ingredients” was held by the Trustee for the Baker Family Trust i.e. The Trust. And Baker & Co. is the Trustee. The Trustee is not a different and separate legal entity (CB 44).

5. [7]

   Other contemporaneous documents confirm this impression. The eAIRS report (CB 60ff) documenting the incident response of Fire & Rescue New South Wales (“FRNSW”) for 10 September 2019 and subsequent days refers to the property being occupied and used as a “process, manufacturing area” and names the business occupier as “Baker & Co”. An event report of the police investigation into the fire identifies the location as “Baker & Co. Ingredients” and records, “the factory makes specialty foods and has a large amount of vegetable/cooking oil within the warehouse” (CB 152–3). A person described as the owner of the business, Mr Bradley Baker, spoke with detectives providing a video-recorded statement relating to the business operations and confirming the business was in a sound financial position. Mr Baker was overseas when the fire broke out, returning immediately after he received the bad news.

6. [8]

   From the FRNSW field notes of the fire scene examination (CB 431ff), it appears that Mr Baker is described as the building owner and occupant. The “type and name of property” is described as “Baker & Co.”.

7. [9]

   By letter dated 15 February 2021, in response to an earlier request for information of Baker & Co, Mr Hawkes wrote to Mr Smith informing the latter that the former was instructed to act for Baker & Co. Ingredients Pty Ltd, which he shortened to “B&C”, stating that B&C’s employees were all wearing protective clothing and providing a copy of the New South Wales Police Report. Mr Hawkes also said he was seeking to obtain copies of any applicable Job Safety Analysis document (“JSA”) for the task being undertaken when the fire broke out and available photographs of the work site. Some questions about materials in use before ignition were not answered (CB 514).

8. [10]

   By letter dated 8 November 2021, (initially misdirected to the wrong email address), Mr Hawkes stated that all business records in Baker & Co’s possession, the subject of Mr Smith’s original request, had been stored “on site” and destroyed in the fire including the computer server located within the adjoining office building. Mr Hawkes also indicated that Mr Baker was willing to provide an affidavit to verify the destruction of relevant documents by the fire. This offer was subsequently repeated (with conditions as to the cost of preparation) but never taken up by Mr Smith.

9. [11]

   Mr Jeffrey’s report confirmed that the factory structure and the office areas were completely gutted by fire. The same conclusion is confirmed by the police report (CB 154). Mr Jeffrey also confirmed that the computer server was badly damaged by the fire and the police report stated (CB 159) that the computer server which inter alia stored CCTV recordings was “heavily damaged by heat and flame”. Forensic officers determined, “It was highly unlikely they could recover any data from the device” (CB 159) which was, therefore, left in the custody of Baker & Co’s insurer.

The industrial process in operation when the fire occurred

1. [12]

   From the evidence before me, it appears that the Baker & Co employee carrying out the process from which the fire arose made a video-recorded statement to detectives (CB 155). He had been directed by his supervisor to heat solidified camphene to liquify it for dispensation into smaller containers. Camphene is a flammable constituent of fragrances and food additives. The camphene was contained in a stainless steel 44 gallon drum. Two heat bands were applied to the drum and connected to a power point. The heat bands, themselves destroyed in the fire, are thermostat controlled.

2. [13]

   The process of melting the camphene took from about 8 am to 9 am until “shortly after lunch”. The police report continued as follows:

Available information about the cause of the fire

1. [14]

   Police investigators liaised with fire investigators at the fire scene. Viewed from their perspective as criminal investigators, detectives concluded that there was “no indication of any deliberate cause of the fire or gross negligence on any part” (CB 159). From the eAIRS report, FRNSW concluded in the entry styled “material ignited first – additional information”, “heating of powdered material to liquify and decanting into smaller containers”. The ignition source was referred as “static discharge” (CB 61). By reference to the companion field notes (CB 431ff), the expression “static discharge” may be put in context from the following entry relating to possible causes (CB 435):

2. [15]

   Returning to the eAIRS report (CB 61), in that document the entry for “cause determination” identified three possible matters:

3. [16]

   Taking an objective view of this information, while the cause of the fire has not been precisely identified, the ignition source has. An obvious available conclusion is that the fire started during an industrial process which involved the application of heat to a flammable compound when it was being dispensed from a stainless-steel drum into smaller plastic containers which process involved the use of a forklift, a mechanical device. While there is no suggestion of spontaneous combustion a spark or some other means of ignition set the camphene alight during the process. It appears that during this process the tilted drum and open tap were left unsupervised for the probably short time it took to place a filled container on the trolley. It also appears, perhaps in circumstances of urgency, the employees fighting the fire neglected to turn off the tap from which the flammable liquid was decanting immediately upon detecting the fire.

The potential basis for the legal liability of Baker & Co

1. [17]

   Since the decision of the High Court of Australia in Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520; [1994] HCA 13 (“Burnie Port Authority”), the liability of an occupier of land for damage caused to adjoining property by the escape of fire brought on to the land has principally been governed by the general law of negligence (Burnie Port Authority pp 555–557).

2. [18]

   It should also be emphasised that where work involving a dangerous substance or activity is being performed by an independent contractor, the occupier’s duty to exercise reasonable care owed to the neighbour will be non-delegable and accordingly the occupier will be liable for the negligence of the contractor without the need for the neighbour to establish personal fault on the part of the occupier (Burnie Port Authority at p 555).

3. [19]

   A further point to be borne in mind is that while all duties of care involve the universal standard of the reasonable person, what reasonable care requires varies with the circumstances. As the plurality said in Burnie Port Authority (p 554):

4. [20]

   Naturally, like all cases in negligence, the previous common law is modified by the provisions of the Civil Liability Act 2002 (NSW) to the extent to which they apply to the case at hand. There was no reason to suppose that the Act diminishes the potential legal responsibility of Baker & Co in the known circumstances.

5. [21]

   These considerations are relevant to an objective assessment of whether CMA and IP have “sufficient information to decide whether or not to commence proceedings against” Baker & Co (UCPR 5.3(1)(a)).

Principles governing the application

1. [22]

   UCPR 5.3 has been subject of decisions in the Court of Appeal: Hatfield v TCN Channel Nine Pty Ltd (2010) 77 NSWLR 506; [2010] NSWCA 69 (“Hatfield”) and O’Connor v O’Connor [2018] NSWCA 214 (“O’Connor”). I am not intending to be exhaustive. Naturally the rule has been frequently considered at first instance. And I was referred to a number of first instance decisions, particularly by way of written submissions. To my mind Lindsay J, with respect, has well summarised the relevant considerations informing the exercise of the UCPR 5.3 discretion in Arnaout v Arnaout [2019] NSWSC 565 (“Arnaout”) (at [32]):

2. [23]

   I should add that some “fishing” is apparently permissible: Hatfield [136]–[138], Young JA. But perhaps only in littoral waters: St George Bank Limited v Rabo Australia Limited [2004] FCA 1360; (2004) 211 ALR 147 at 154 [26h].

The scope of the discovery sought

1. [24]

   The scope of the discovery sought is very extensive. I regret that there is no option other than setting it out in full:

Issues

1. [25]

   The issues were refined by the provision of detailed written submissions by each of Ms Berberian and Mr Lee (CB 613ff and 627ff). Each counsel agreed that there were five anterior conditions or elements necessary to be established before the question of the exercise of the Court’s discretion whether or not to grant discovery arose. The threshold for the establishment of those conditions is relatively low (see O’Connor at [23]; Arnaout at [32(c)]. It is sufficient “if it appears to the Court that” the conditions or elements have been made out by the applicant.

2. [26]

   Of those five pre-conditions or elements, Mr Lee conceded that on the material before me I should be satisfied that it appears that CMA and IP may be entitled to make a claim for relief against Baker & Co; and CMA and IP have made reasonable inquiries to obtain the requisite sufficient information referred to in UCPR 5.3(1)(a); but Baker & Co dispute that the inquiries already made by CMA and IP, viewed objectively left it without “sufficient information to decide whether or not to commence proceedings” against Baker & Co. To make good this submission, Mr Lee pointed to the information I have summarised above, all of which is derived from the evidence read by CMA and IP. He submitted that viewed objectively I would be affirmatively satisfied that CMA and IP had obtained sufficient information to make a decision about the commencement of proceedings.

3. [27]

   Were I against him on his principal submission, Mr Lee directed a number of submissions as to why the categories of discovery sought should not be allowed in the exercise of my discretion (Written Submissions [32]–[53]; CB 636–639).

4. [28]

   Ms Berberian’s argument that CMA and IP do not have the requisite sufficient information was set out at [32]–[41] of her written submissions (CB 620– 622). She went on to develop argument about the types of documents Baker & Co may have in its possession at [42]–[60] (CB 622–625). The latter part of the argument also addressed the question of whether the documents in category (a) (ii) were privileged.

5. [29]

   The essential points made by reference to ss 5B and 5D of the Civil Liability Act were that CMA and IP did not have sufficient information to determine whether or not the breach analysis required by s 5B would result in CMA and IP establishing breach of duty ([39], CB 621) and given the absence of evidence of a precise cause of ignition, CMA and IP were unable to determine “the causal connection”. Understanding the system of work and safety precautions “one can only assume” were in place were “fundamental” to the requisite decision whether or not to commence proceedings. She also submitted there was uncertainty about the identity of the correct prospective defendant. She submitted, for instance, that the police documents were provided in a partially redacted form and CMA and IP had not been able to obtain an unredacted copy which may be in the possession of Baker & Co. It was submitted that a copy of the police video interviews with Mr Baker and the employee must “surely” be within the possession of Baker & Co. It was known that the insurers had instructed fire investigators and an expert electrical engineer to determine the cause of the fire and that there were likely to have been documents brought into existence which would assist CMA and IP in deciding whether to commence court proceedings.

Decision

1. [30]

   In addition to the passage I have already set out from Arnaout (at [22] above) I think it apposite to set out the following from passage from the judgment of Lindsay J with which I agree (at [49]–[50]):

2. [31]

   It is also important to bear firmly in mind that the purpose of UCPR 5.3 is to facilitate a prospective plaintiff obtaining sufficient information, not evidence, to decide whether or not to commence proceedings.

3. [32]

   Accepting that the threshold or standard of satisfaction is low, I am not satisfied that CMA and IP have been unable to obtain sufficient information to decide whether or not to commence proceedings against Baker & Co. That is to say, it does not appear to me that is so.

4. [33]

   All of the information I have set out above (at [3]–[21]) is information that CMA and IP’s previous inquiries have produced.

5. [34]

   Without wishing to create the appearance of any degree of pre-judgment about any matter, the information obtained by CMA and IP appear to place them in a good position to decide whether or not to commence proceedings. It strongly appears that CMA and IP may be entitled to make a claim for damages for property damage and consequential losses caused by the escape of fire from Baker & Co’s premises. On that information there is no suggestion that anyone other than Baker & Co is the appropriate prospective defendant. On the information already available, it appears that Baker & Co is the trustee of the trust, rather than some other entity. There is no information or even any suggestion of any possibility that the registered proprietor is other than the bare repository of the legal title to the land. It appears quite clear that Baker & Co are at least an occupier of the premises and that the fire broke out in the course of its production operations melting or liquifying camphene and repackaging it in smaller containers for distribution or supply.

6. [35]

   Given what the plurality in Burnie Port Authority said about the non-delegable nature of the duty owed by an occupier engaged in operations creating a risk of damage by fire through its spread, even if another entity was involved CMA and IP would not be wrongfooted by suing Baking & Co. There are two other matters relevant here: first, as I have said UCPR 5.3 is not aimed at identifying the correct defendant: UCPR 5.2 does that work where necessary; and were CMA and IP to decide to commence proceedings against Baker & Co and Baker & Co had reasonable grounds to believe another party was a concurrent wrongdoer, it would have an affirmative duty to provide written notice of relevant information to CMA and IP under s 35A Civil Liability Act under pain of an adverse order for costs.

7. [36]

   Dealing with CMA and IP’s concerns about the sufficiency of information going to questions arising under ss 5B and 5D of the Civil Liability Act, it appears to me that the information available tends to suggest that the fire broke out in the course of a manufacturing process involving the application of heat to a flammable substance and the vessel containing the substance was tipped by mechanical means to decant its content into smaller containers. There may have been a foreseeable not insignificant risk of ignition of the flammable substance. Given its liquid form and the consideration that the premises contained a large amount of other flammable substances in the form of cardboard and various cooking oils, the risk extended to an accelerated spread of fire. To put it more succinctly, and perhaps more accurately, on the information obtained by CMA and IP, it appears to me that the operation of liquifying and decanting the Camphene by mechanical means involved the risk of harm by fire. This foreseeable risk was not insignificant.

8. [37]

   Viewed prospectively, having regard to the circumstances as they appear from the available information, the risk of damage by fire in the course of the operations of industrial production is one against which a reasonable person in the position of Baker & Co would have taken precautions. Ultimately, this of course, involves the application of a normative standard, whatever view Baker & Co may have formed “subjectively”. Moreover, certain precautions on the information available appear to have been taken. Once the camphene was liquified the heat bands were removed from the drum and placed some distance away from the drum to minimise the risk of ignition from that heat source. Powder fire extinguishers, it appears were on hand. It appears from this that some thought may have been given to the risk of fire involving various oils. It also appears that these precautions were in the event inadequate because of the nature of the fire and its rapid spread. What other precautions might have been available is likely, in the end, to be a matter for expert evidence, which one is entitled to know will doubtless be available to CMA and IP in the ordinary course of the preparation of contested litigation should they decide to commence proceedings.

9. [38]

   It is not accurate to say that CMA and IP have no information available about the cause of the fire. I have summarised that information at [14]–[16] above. It appears that the fire broke out during the industrial operation of decanting the camphene. The employee directly engaged in the process told police, “He saw a small fire coming from somewhere between the drum, the funnel and the container” (see [13] above). The drum, the funnel and the container were materials or equipment he was using in the operation. Police investigators were able to conclude there was no indication of any deliberate cause or gross negligence on the part of anyone. And the FRNSW investigators excluded natural causes and “incendiary” which, I understand, to be consistent with the police conclusion of no deliberate cause. The cause of the fire was therefore probably accidental; that is to say, not deliberate. And the accidental ignition source was referred to as “static discharge”. The eAIRS report (see [15] above) identified three possible factors, which it appears may have come together. These were: the cause was accidental, possibly involving product or equipment failure or deficiency and the escape of a spark.

10. [39]

    It appears from the information already available to CMA and IP that while the precise cause has not been established, the possibilities are not unlimited, and the most likely explanation is an unintentional ignition in the course of a potentially dangerous process under the direct control of Baker & Co. Assuming the s 5B conditions are established, viewed retrospectively it appears that both factual causation and, so far as it may arise, the scope of liability may be established at a future trial.

11. [40]

    Ms Berberian argued that CMA and IP are entitled to obtain information about defences that may be available to Baker & Co as relevant to a decision about whether to commence proceedings. She referred to s 5I of the Civil Liability Act which establishes that a person is not liable in negligence for harm suffered as a result of the materialisation of an inherent risk. An inherent risk is a risk of something occurring that cannot be avoided by the exercise of reasonable care and skill. There is nothing in the information before me to suggest that fire is an inherent risk in that sense of the process of decanting camphene in its heated liquid form. Were it otherwise, it remains that all necessary precautions would be taken by an occupier to guard against the spread of fire so arising.

12. [41]

    For these reasons, CMA and IP have not established the necessary pre-conditions for a consideration of the exercise of my discretion to order preliminary discovery.

13. [42]

    Were I wrong in the conclusions I have expressed so far; I should say that it seems obvious that Baker & Co at the very least would have had possession of a document or thing that could assist in determining whether or not the applicant is entitled to make a claim for relief. And in this regard although it appears that relevant documents may have been destroyed in the fire, discovery would have assisted in establishing whether that was so. Having said that, given the failure to accept the offer of the informal provision of an affidavit in that regard, there may have been a question about whether relief should have been denied.

14. [43]

    Using one’s common sense and having regard to Baker & Co’s obligations under work health and safety legislation, it appears that it may have had, for example, a JCA, analysing the risks involved in each step of the industrial process together with measures or precautions for their management and control. One would expect that this is the kind of document that would be on hand at the workplace so it may be consulted at toolbox meetings and the like before the task during which the fire broke out commenced. So, it seems likely that the documents would have been destroyed in the fire given the nature and extent of it. But this does not completely exclude the possibility that additional copies may have been in the hands of third-party consultants and within the control of Baker & Co. I would also accept that were the available information otherwise insufficient, documents of that nature would assist CMA and IP to make the decision whether or not to sue. It does not follow from these contingent findings that I would have exercised my discretion to grant the whole of the relief sought.

15. [44]

    Looking at the extensive categories put forward by CMA and IP the concern expressed by Lindsay J in the passage at [49]–[50] of his judgment in Arnaout is very much present in this present application. As I have stressed, while discovery inter partes is concerned with the disclosure of relevant documents, the central purpose of UCPR 5.3 is the obtaining sufficient information to enable an informed judgment about the commencement of proceedings to be made by a party not in possession of sufficient information because it is within the control of the prospective defendant. In my judgment it would be inimical to the interests of justice to require Baker & Co to disclose and produce through inspection all documents falling into the disparate categories sought in the summons before the formulation of any claim against it.

16. [45]

    Turning to the specific categories, on the evidence the documents falling within Category (a) were documents largely commissioned and obtained by Baker & Co’s insurer. On the evidence I would not be satisfied they were within its possession as opposed to the insurer’s possession, leaving aside any question of legal professional privilege that may be claimed were discovery ordered. Item (k) is entirely irrelevant for the reasons I have already addressed, having regard to the evident purpose of UCPR 5.3. For the reasons I have given, I can accept the relevance of item (d), if copies remain in existence. But each of the other categories really relate to the gathering of evidence rather than the obtaining of information. I accept there may not be a bright line division between the two concepts, which of course can be interrelated. But there must come a point where the former swamps the latter, and in my judgment that point has been reached in this case.

17. [46]

    I should also say that apart from (d) and perhaps (c), there is no evidence before me from which it appears that documents in the nature of those described may be or have been in the possession of Baker & Co. Additionally Category (f) relating to staff rosters would say nothing about whether CMA and IP may be entitled to make a claim. Instead, it is clearly a blatant and impermissible attempt to seek the identity of potential witnesses which would not be available even in discovery inter partes after the commencement of proceedings.

18. [47]

    For these reasons my orders are:

    1. (1)

       The summons is dismissed;

    2. (2)

       The applicants to pay the respondents’ costs of the proceedings;

    3. (3)

       Liberty to either party to apply for a different order for costs on or before 14 April 2023 by lodging any necessary evidence in affidavit form and written submissions, not exceeding two pages in length by hardcopy delivered to the chambers of Campbell J. The opposing party to lodge any evidence and submissions not exceeding two pages in length in opposition to the application on or before Friday 21 April 2023.