Bonny Glen Pty Ltd & Anor v Country Energy

CATCHWORDS: Tort - negligence - claim for pure economic loss - contract - breach of contract for supply of electricity - damages - future economic loss

Civil Liability Act, 2002 s.5B LEGISLATION CITED: Electricity Supply Act 1995 (NSW) Electricity Supply (Safety and Network Mamangement) Regulations 2002

Allen v Tobias (1957 - 8) 98 CLR 367 Biscayne Partners Pty Ltd v Valance Corporation Pty Ltd & Ors [2003] NSWSC 874 BP Refinery (Westernport) Pty Limited v Shire of Hastings (1977) 16 ALR 363 Caltex Oil (Australia) Pty Ltd v The Dredge Willemstad (1976) 136 CLR 529 Chappell v Hart (1998) 195 CLR 2 Codelfa Constructions Pty Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 CASES CITED: Gharibian v Propix Pty Lts t/as Jamberoo Recreational Park [2007] NSWCA 151 Harriton v Stephens (2004) 59 NSWLR 694 Hawkins v Clayton (1988) 164 CLR 539 Perre v Apand Pty ltd (1999) 198 CLR 180 Podrebersek v AIS Pty Ltd (1985) 59 ALR 529 Pyrenees Shire Council v Day (1998) 192 CLR 330 The Moorcock (1889) 14 PD 64

Bonny Glen Pty Ltd PARTIES: Parkwood Orchard Pty Ltd Country Energy

COUNSEL: Plaintiff: C R C Newlinds SC / P T Newton Defendant: M A Elkalm SC / J J Ryan

SOLICITORS: Plaintiff: Bruce Stewart Dimarco Defendant: Colin Biggers & Paisley

The first plaintiff (hereafter referred to as "the plaintiff") is the registered proprietor of "Bonny Glen" at Woodward Road, Orange, New South Wales. The Hall family has operated a successful apple orchard on these premises since 1973. The second plaintiff (hereafter referred to as "Parkwood") is the property adjoining Bonny Glen. Proceedings between the second plaintiff and the defendant have settled but Mr Hawke, who lives on the Parkwood property, gave evidence in these proceedings.

The defendant ("Country Energy") supplies electricity and is the owner of power lines running parallel to, and more or less on top of, pine trees on the Parkwood property. It has been conceded that Country Energy has the power of entry onto private property over which their power lines run in order to maintain those power lines.

The plaintiff brings proceedings for damages for negligence and breach of contract arising from the circumstances in which a row of 61 pine trees on Parkwood, which operated as a windbreak for both properties, burned down as a result of a fire caused by contact between the trees and the wires. It had been the practice of Country Energy to attend the premises every few years for the purpose of trimming back these trees if necessary; their last visit before the fire on 10 November 2002 had been approximately 18 months beforehand.

Part of the claim for damages is relatively straightforward. The fire on 10 November 2002 not only destroyed 49 of the 61 pine trees on Parkwood, but also destroyed and damaged Gala and Granny Smith apple trees on Bonny Glen. Approximately 28 Gala trees in the field adjacent to the pine trees were destroyed. A further 67 Gala trees suffered fire damage in that their fruit, leaves and shoots were damaged. In addition, 8 Granny Smith trees were destroyed and a further 24 Granny Smith trees suffered fire damage. The fire also destroyed fencing and irrigation systems on Bonny Glen. The principal issue in relation to this claim for damages (which the parties referred to in submissions as "Category 1 damages', in the event of the plaintiff succeeding on liability, is the issue of quantum and whether past and future economic loss are claimable.

The plaintiff's additional claim for damages (which the parties in submissions called "Category 2 damages" arises from the plaintiff's decision to cut down the rest of the apple trees in this orchard because of spraydrift problems after the pine tree windbreak was destroyed by the fire. There is unchallenged evidence that this orchard, immediately adjacent to the 61 pine trees, was what could be called the star performer in the plaintiff's orchard. This was in part because the presence of the pine tree buffer was beneficial to the growing of fruit trees in this orchard, because they prevented spray drift. If apple trees cannot be sprayed, the many pests that are attracted to apple trees will quickly devour the fruit and destroy the commercial viability of the apple trees. However, this highly poisonous spray drift may harm not only flora and fauna but also people in the surrounding areas and expose the person spraying the poisons to penalties. The plaintiffs received a report to this effect from two experts, Mr Collette and Mr Kidd, and by reason of these experts' advice about the risk of spray drift going onto the Parkwood property, they removed the remaining 190 Gala trees and 72 Granny Smith trees (see the evidence of Mr Fred Hall at T-16-22, Mr Bernard Hall at T-119-123 and Mr Timothy Hall at T-263-268).

The first issue in these proceedings is the question of liability.

On Sunday, 10 November 2002, while David Hawke was in his home at Parkwood, Woodward Road, Orange, his stepson, who had been playing cricket on the property, came running in to him and told him that there were flames and smoke coming from one of the trees along the drive. The weather was hot and dry with a stiff south west breeze. It was the height of the bushfire season. Mr Hawke asked his wife to call 000, got his water tanker and pump and arrived at the scene about four minutes later, by which time four to five pine trees were well ablaze. His first instinct was to stop the fire proceeding up the drive towards the cold storage facility, which had a 700 litre above ground tank of diesel fuel approximately 20 metres away from the last pine tree at the top of the driveway.

Mr Hawke and his wife did their best to wet the unburned trees near the cold storage facility until they lost electrical power due to the fire. By this stage the fire was spreading quickly through the remaining pine trees down the drive.

As this fire had occurred during a particularly dangerous period, there were fortuitously a lot of resources available, and the emergency services were able to spring into action. The New South Wales Rural Fire Service, with aerial support, arrived with a number of fire trucks, a helicopter and a plane to fight the fire. A southerly breeze was driving the fire down through the row of trees and the fire was very intense. The heat set an adjoining row of radiata pines alight. This was the second windbreak on the other side of the east-west access to Parkwood. Due to the intensity of the fire from the pine tree windbreak and the separate radiata pine windbreak, and because the fire spread into the paddocks at Parkwood, the Rural Fire Service was unable to obtain vehicle access. A number of grass fires developed in Parkwood over the fields.

A total of eight Rural Fire Service units helped fight the fire. Three additional units were sent to Orange Airport to assist with the re-watering of water bombing aircraft. The fixed wing aircraft had been deployed to Orange late on Friday when the Central West was identified as a potentially hazardous area for fires because of the hot weather. A State Forests helicopter, which was fortuitously en route from Bathurst, was called to the scene and also helped carrying out swoops of the area, scooping water from nearby dams. Orange Fire Brigade crews placed themselves between fire and the nearby houses.

According to a newspaper report entitled "Bush Fire Tests Emergency Staff" (page 457 of the Agreed Bundle): "At one stage the fire appeared to take hold as it engulfed tall pine trees close to one house, with flames leaping high into the air".

The local Inspector of Operations Support, Mr Smith, said that humidity readings under 30%, combined with dry conditions, were conducive to fires, and the current level of about 7% had created a hazardous situation during the past few days. He urged residents to be vigilant about using power tools during the heat of the day and to take steps to ensure safety around houses. The source of the blaze, according to the newspaper report, was a fault in a power pole. This power pole was one of the poles located in the line which ran above the 61 pine trees on Parkwood.

On Friday, 29 November 2002 a tree surgeon, Mr Bruce Smith, was retained by Mr Hawke to provide a professional assessment of the trees and their condition. He provided a report concerning the two windbreaks. He noted the trees in both windbreaks had been in place for many years (60 years for one windbreak and 80 years for the other) and that apart from nine trees in the 61 pine tree windbreak, all had effectively been destroyed. He made a number of recommendations for their removal.

Following receipt of this report, Mr Hawke made a number of enquiries about suitable trees. He wanted to find the fastest growing trees. In August 2003 he obtained a number of saplings of a different variety (less attractive but faster growing) and he later planted these. However, as Mr Hawke notes in his affidavit of 23 March 2005, although he had planted the fastest growing pine trees he could obtain, it would be 10 to 15 years' time before they reached the kind of 6-7 metre height that would make an effective windbreak and noise insulation.

Although the trees in question were on the property of Mr Hawke, they also operated as a windbreak for the apple farm next door, "Bonny Glen". The present owners have run an apple orchard on this site since 1973. Although some other fruit is grown, it is a specialist apple orchard, producing Gala and Granny Smith apple trees. The Granny Smith apple trees were planted more than 30 years ago on seedling root stock, while the Gala apple trees were planted seven years ago on dwarfing root stock. The apple trees in the orchard immediately adjacent to the pine trees were in 21 rows running north to south. The pine trees provided a windbreak for the apple orchard and thereby produced a constant microclimate for apple trees, allowing them to produce apples of very high quality and also permitting the spraying of these trees without the spray penetrating into the adjoining property belonging to the Hawke family.

Above the 61 pine trees which grew on Parkwood, there was a power line. It was the job of the Defendant to lop the pine trees from time to time, to ensure that they were not touching against the power lines. Country Energy had been doing this work for decades. According to the statement of David John Thorn of 9 August 2005, as long ago as 1979 it was noticed that pine trees were growing close to high voltage overhead lines and to minimise the sway of the line, a second pole was put in on Bonny Glen to shorten the span (page 702 of Tender Bundle).

According to a statement of Mr Peter Thorncraft, of 6 July 2005, Country Energy went to Bonny Glen in January 1993 to lop a row of pines along the boundary using a bucket truck, as the fruit trees were very young. Although it was obvious to Mr Thorncraft that the apple trees were going to get bigger, and that there were already some problems (page 706 of the Tender Bundle) nobody appears to have returned to check the height of the pines, or whether they were brushing against the power lines until approximately 2000, when Mr Thorncraft said he thought he spoke to a person in the orchard who was not Mr or Mrs Hall. He indicated he was checking the trees to see whether they needed lopping, that they did not need lopping at the time, but that at some time in the future "we will have to look at that" (page 707 Agreed Bundle).

There is no evidence that there was any difficulty in 2000, either in access to the property, or need to use a bucket truck. Some of the defendant's witnesses referred to a history of concern by members of the Hall family about how to go about the cutting back of the trees. In fact, there is very little evidence at all about this 2000 visit and there is no diary entry in relation to whether it was made or what recommendations, if any, were made was produced in evidence.

All of this changed as a result of a helicopter inspection report filed by Mr Christopher Ronald White on 21 October 2002. Once a year, for about one month, Country Energy engages the services of a helicopter pilot to inspect its line from Blayney through Orange and on to Molong, to identify any defects in the line and any area in which works need to be undertaken to prevent bush fires, such as where trees grow into the lines (Agreed Bundle 718). The crew of the helicopter consists of a pilot, a spotter and a third person who sits with the pilot and navigates from the maps where the pilot is to fly. The spotter focuses on the lines and the poles. If the spotter notices anything, the helicopter pilot swings the helicopter around and returns to that spot so that Mr White can mark exactly on the map where it is located. If there is evidence that the tree may have contacted the power line, such as browning of leaves, he marks the location of that tree on the map and indicates the position with the words "tree burning". This does not mean that the tree is actually burning, but rather that the tree has previously contacted the line and there are brown leaves. The presence of browning on trees is urgent, but not as urgent as evidence of smoke or fire. If smoke is observed, then a call is put through on the two-way radio for the situation to be dealt with immediately.

Mr White prepared a report (Agreed Bundle, page 720) setting out precisely where he saw evidence of "tree burning". In the box for "severity", he ticked the "Urgent" box and he handed it to his supervisor, Bill Venner, for further action the next day.

Mr Venner's affidavit of 14 July 2005 (Agreed Bundle, page 710) notes that following the helicopter inspection he received a number of maintenance work instruction sheets which he "separated into the various categories". Early in November 2002, he gave to Steve Hare and another lopping crew urgent tree loppings to be undertaken, referred to in this helicopter trip.

On or about 4 November 2002, three employees of Country Energy drove up to the property and parked on the road outside Bonny Glen and Parkwood. Mr Hare's evidence was that Mr Fardell, the linesman and driver, began boiling the billy for morning tea while he walked up what he called the "semi trailer access road" of Bonny Glen. He came across a person whom he could not identify, other than to say he was a young man. Having seen all the relevant members of the Hall family in the witness box, it would be fair to say that none of them could be described as looking like a "young man" (Agreed Bundle, pages 693, para 18 and 694, para 20) but it transpired that it was in fact a member of the Hall family.

This young man, whose name Mr Hare did not bother to note, said "You're not driving your truck in here. You'll damage my trees". Mr Hare says he said "I have to get in there. We have a report of the trees being the near the mains". The young man said "You won't get a big truck through here. I don't want you to damage the trees".

Mr Hare said "Okay, not a problem. I will go back and report it".

According to Mr Hare's affidavit, he saw a barbed wire fence near the substation and there was no gate in this barbed wire fence.

Despite the report being described as "urgent", Mr Hare did not pass this on, not did he remain on the property. He went back and told his two co-workers that "they" would not let the Country Energy truck down there (according to Mr Littlefield) and that they would not let "us" down there (according to Mr Fardel) (Agreed Bundle, pages 690, 698). The gang returned to the depot and at lunch time Mr Hare went to see Mr Venner.

Mr Bernard Hall gave evidence and identified himself as the person in the packing shed who spoke to Mr Hare. He said that two people came and he showed them three access points to the pine trees. He said he noticed that they were wearing Country Energy logos on their clothing. One of the men asked him "How do we get to the power lines?" He showed them the pathway to the power lines which were situated on Bonny Glen and run along the border of Bonny Glen and the neighbouring property of Parkwood. He said that one of the men said it was "a bit hard to get access to cut the pine trees back" and he asked why they did not get ladders. One of the men replied "We cannot because of OHS issues".

Mr Hall suggested long poles with saws, but the man said "It's all too hard". He replied: "They're your wires, do what you got to do [sic] I have to go".

The man said: "We have to go back to town to discuss it further".

During this conversation the Country Energy men pointed out to Mr Hall some burnt, singing and browning on the branches and needles of the pine trees but did not tell Mr Hall that they need for the work had been described as urgent. In fact it was Mr Hare's evidence that he did not believe that there was any risk that if he did not do the work that there would be a fire, and he denied that the situation was in fact urgent at all.

The following occurred at T-372-373: "Q. Then when you said "we have to get in there, we have a report of the trees being near the mains" had you formed your opinion that there wasn't a problem or not? A. No, well, the trees were near the mains. Q. Lots of trees are near mains. A. That's correct. Q. Weren't you trying to convey to this person that you needed to get in there urgently because there was a problem? A. I did explain that the trees needed to be lopped. Q. Did they need to be lopped or not? A. Yes, they did need to be lopped. Q. And the reason they needed to be lopped was because there was a real risk of them touching the wires? A. That's a possibility. Well, it is a possibility, it all depends if you've got weather factors-- Q. It's the only reason they need to be lopped, isn't it, you don't run around lopping trees if there is not a possibility of them touching wires, do you? A. Yes, we do. Q. Why do you do that? A. Because if there's a risk that they're within half a foot or say half a metre or a metre we still get a report to go and lop those trees. Q. Where did these trees stand, half a foot, half a metre, touching, what's the position? A. I can't really remember now. I don't know, I'm only surmising but it could be 300, I can't remember. Q. When you say you're only surmising that's because you don't remember at all, do you? A. Well, no, I can't remember that specific distance. Q. You're making up your evidence when you say that you formed some opinion that there wasn't urgency required? A. No, I'm not. Q. When you spoke to Mr Venner did you tell him, look, this urgent maintenance work instruction you've given us isn't really urgent? A. No, I didn't say that at all. Q. That's because you hadn't formed that opinion, I suggest to you? A. Yes. Q. You're just making it up now, aren't you? A. No, I'm not, no. HER HONOUR: I don't think he understood that question. NEWLINDS: Yes, I'll do it again. HER HONOUR: Q. Sir, look, you need to listen carefully to the questions otherwise you'll give an answer that will confuse us. NEWLINDS: Q. Can I do it this way, sir, can I ask you to go to paragraph 25 of your affidavit? A. Yes. Q. This is the conversation you say you have after you leave Bonny Glen and you speak to Mr Venner? A. Yes. Q. You don't in that conversation set out you saying anything like, by the way Bill, it's not a problem because the wires aren't anywhere near the trees, do you? A. No, I don't, no.

Q. And you don't say, by the way, Bill, even though the maintenance instruction report says this is an urgent job it's actually not urgent, do you? A. No. Q. That's because you hadn't formed that opinion at the time, isn't it? A. I formed the opinion that everything was okay at that stage. Q. Why didn't you tell Mr Venner that? A. I just - I don't know, I never said that. Q. You're just trying to, with the benefit of hindsight, explain why you didn't do something you should've at the time, aren't you? A. No. Q. You're making up an excuse, aren't you? A. No. Q. You knew that this was an urgent situation at the time, didn't you? A. No. Q. You knew that it was bushfire weather at the time, didn't you? A. In summer time, yeah, that's when most fires are prone. Q. And it was dry at the time? A. As far as I can remember. Q. And you knew that if the pine trees burnt down there would be significant damage caused to the orchard? A. No. Q. Why do you say that? A. Well who's to say the pine trees were going to burn down? Q. The question was, you knew that if the pine trees burnt down there'd be significant damage to the orchard? A. No."

Mr Hare's evidence about the trees was at times hard to follow. At one stage his evidence was that the trees were too close together for the trucks to get between them (T-373.45-.47) but on the other hand they were wide apart enough for fire not to jump from the pine trees to the apple trees (T-375-376).

When determining whose evidence to accept about what happened on this visit, I should have regard to what happened next.

On 7 November 2002 Mr Venner and Mr Thorn went to Bonny Glen. Mr Venner's evidence is that he had a conversation with Mr Fred Hall to the effect that Mr Hall refused to allow access because Mr Hall was not prepared to allow any lopping or pruning of the pine trees. Unlike Mr Hare, he said that he told Mr Fred Hall that the situation was dangerous.

Mr Thorncraft gave evidence he heard Mr Venner say to Mr Hall "We need to cut those trees back, can we get in?" to which Mr Hall replied: "If you cut the extremities of the branches, you'll leave a hole". When Mr Thorncraft said that they would not cut back as far as that, Mr Hall replied that what they were going to do would "look horrible". This version is inconsistent with the version of Mr Venner, as is the evidence of Mr Thorn. All of the defendant's witnesses give a version of events which is different to the version of the conversation given by Mr Fred Hall. Mr Hall said that Mr Venner complained of having trouble getting access past the tennis court to access the top section of the trees, to which Mr Hall replied "Well you have managed every other time" and that he said "Do what you've got to do" but went on to tell them that if they cut more than 18 inches off the trees, the trees would suffer from die back. Mr Venner then spoke on the mobile to someone who Mr Hall believed was David Thorn, and then said that David Thorn would come out.

Mr Thorn told Mr Fred Hall that he would have to speak to his boss, but that the pine trees had grown a lot since the last time he was out and that other solutions would have to be looked at. He then discussed some of those options with Mr Fred Hall. He then said he would go over to speak to David Hawke to see if he could put power lines on the other side of the pine trees. Tim Hall said to David Thorn words to the effect "Don't let those boys go until they finish cutting the pines back".

According to Mr Hawke's affidavit, either Bernard or Timothy Hall telephoned Mr Hawke to say a person from Country Energy was coming over to talk to Mr Hawke about the power lines near the pine trees. David Thorn then went to Mr Hawke's home and said to him: "I have an air surveillance report which was taken two weeks ago showing the close proximity of the power lines to a row of pine trees which are located on the north western corner of your property. These branches of the pine trees are touching the power lines and are posing a potential hazard, and I would like to know whether you would consider the re-routing of the power lines in through your property on the other side of the pine trees up the front drive of Parkwood."

Mr Thorn went on to say, and I find these words decisive: "At some stage we will need to re-route the power lines as the trimming of the branches is only a bandaid solution to the current situation".

Mr Hawke asked if there was any other option that was available, like insulated power lines, and was told these were not considered financially viable by Country Energy. Mr Hawke said he would think it over but if that was the only option he would probably agree. Mr Thorn said that he would get back to contact Mr Hawke in the near future and he would go from there. Later that day Mr Hawke spoke to his wife. Re-routing the wires would not look attractive, but they would not be able to see the wires from the house, so they agreed that this was what they would say when Country Energy got back to them.

Mr Hawke went on to say, in his evidence and in his affidavit, and again I find this persuasive, that "David Thorn never indicated to me that there was ever any urgency to decide whether I consented to the moving of the power lines". He believed that based on his conversation with David Thorn, Country Energy would leave the power lines in a safe condition in the interim until a decision on the re-routing of the power lines was made. As it happened, the fire occurred on Sunday, three days later.

There are number of reasons why I should prefer the evidence of Mr Hawke and the members of the Hall family to the employees of Country Energy. First of all, Mr Fred Hall said that the width between the pine trees and the tennis courts was about 15 feet wide. He never had a problem with trees encroaching upon his driveway because he kept them trimmed back, always ensuring he never cut back more than 18 inches to avoid die back (see Mr Hall's affidavit, pages 131-136).

In contrast, Mr Venner's evidence was that the pine trees were entirely blocking the path between the pine trees and apple trees (T-404), a position adopted by Mr Hare until it was pointed out to him that the fire could leap from the pine trees to the apple trees, whereupon he said there was a 2 metre gap. In other words, there was inconsistent evidence from employees of the defendant as to how wide this gap was - anywhere from almost no gap at all to a 2 metre gap.

There is nothing in any of the expert reports to support the contention that the base of these pine trees, or the size of the apple trees, could have increased so significantly in the 18 months between Country Energy's previous visit and November 2002.

Further, it emerged during the trial that the defendant had a number of reports concerning this incident which it had, for reasons unknown to me, elected not to discover. The one document it was prepared to discover is consistent with the version given by Mr Hall and not with the version given by the defendant's employees. I set out the text of Exhibit M in full:

" Richard Wake To: Rick Chilko/People/Country Energy@CountryEnergy cc Kevin McMillan/People/Country Energy@CountryEnergy 27/02/2003 08:48 PM Subject: Re: Fire at Woodward Rd, Orange Rick, Aerial patrols were carried out in the Orange area during September / October 2002. Subsequent to the patrols a defect was raised for "Tree near line" at the property concerned. Both customers share a common substation. The trees are on Mr Hawke's property, right on the boundary to Mr Halls. The 11KV power line supplying the substation runs parallel to the trees on Mr Halls property. On the other side of the power line Mr Hall has an extensive orchard and tennis court making access to the power line extremely difficult. Staff went out to clear the defect on about Thursday 8th November in an EPV (Bucket truck). They found that the only access to the defect site was to drive between the trees and Mr Halls tennis court. Mr Hall expressed concern about the need to clear some branches from the trees to enable access, advising staff that if they cut more than 300mm from the trees they would be severely damaged. Staff decided it was not worth the risk of offending the customer and advised their supervisor that alternative arrangements would need to be made. Orange design staff attended to site the next day (Friday 9th November) to try to work through options with both Mr Hall and Mr Hawke (EG line relocation, HV ABC etc) being aware that the trees had literally been of growing concern (pardon the pun) for a number of years. The outcome of this was for design staff to come back with firm options and quotes etc. On Sunday 11th November it appears that an arc was drawn between one of the 11kv conductors and one of trees approximately 50meters [sic] from the substation. It is believed that due to the drought conditions the trees had a high amount of sap on their leaves making them both more conductive and more flammable than usual. The arcing started a fire on one of the trees which, in a matter of minutes had spread to the entire row. The heat generated from the blaze was sufficient to melt the tar on an adjacent road and possibly caused damage to a small number of fruit trees on Mr Halls property. Rural Fire service volunteers attended and extinguished the fire before any other significant damage occurred, however it is also apparent that a number of other fruit trees belonging to Mr Hall were also damaged by fire fighters needing to gain access to the fire. Aside from the extensive damage to the trees Mr Hawke suffered from some damage to fences and lost approximately 5 hectares of pasture (however no stock were apparent). I met with both Mr Hawke and Mr Hall on site on Friday 16th. I explained (and still believe) that the fire could have been avoided had Mr Hall given access to the trees and allowed staff to do their job on the day. Mr Hall was adamant that he did not prevent staff accessing the trees, he merely advised them that by doing so would significantly damage the trees. Mr Hall has some history of being rather difficult and complaining frequently about our lopping methods (hence staff reluctance to gain access and the quick response from design staff). I further advised that we would pay to get the trees examined by a qualified tree surgeon to determine if the trees could be saved and depending on that look at further options. The tree surgeons report has been returned and he has advised that the trees are completely ruined. I have not yet had further contact with either Mr Hall or Mr Hawke. Attached are some photos of the site for your reference. Please phone if you need further details. -Richard Hawke Hall Fire Pictures.dc Rick Chilko

Rick Chilko To: Richard Wake/People/Country Energy@CountryEnergy cc Kevin McMillan/People/Country Energy@CountryEnergy 14/02/2003 10:01 AM Subject: Fire at Woodward Rd, Orange Richard, As discussed this morning, we are in receipt of Solicitors letters relating to potential claims from David Hawke and Frederick and Pamela Hall, Woodward Road Orange. The letters relate to a fire on their properties on 10 November 2002. Could you supply a report (email will be fine) on the matter and amongst other things, include coverage of the following points. • Details of Powerline inspections carried out in November. • Mettings [sic] held with the landowners in November to discuss vegetation clearing (I understand that one of them was difficult to deal with and refused entry to their property to trim the trees). • Details of the clearance between powerline and trees • Any details you have on the fire, including the extent of damage and our potential liability • Anything we have done since the fire including any meetings, discussions or correspondence we may have had with the landowners. • Any other reports associated with the matter. I realise your [sic] busy but if possible could I have your report by COB Wednesday, 19 February so we can supply a timely response. Thanks again, Rick Rick Chilko Manager Risk and Legal Services - Country Energy Ph 02 6214 9710 Facsimile 02 6214 9717 Mobile 0419 272 711 rick.chilko@countryenergy.com.au"

Thus, this document notes there is no record of Mr Hall having denied access in the emphatic version that is put forward. It accords with Mr Hall's evidence that he simply did not want the trees cut back too much. Mr Hall's concern was, of course, that if the trees were cut back too much, this would be bad for the trees because it would lead to die back. Furthermore, the problem with these trees was that they had been known to Country Energy as a 'growing concern' for some years and that the design team was therefore asked to look at alternatives to trimming the trees.

I also note the unchallenged evidence of Fred Hall that after the fire had been extinguished, a man named Philip, wearing Country Energy clothing, arrived at Bonny Glen and cut back some of the dead limbs on the burnt pine trees. He used a cherry picker to do this. Mr Fred Hall said this man said to him words to the effect: "I don't know what they [Country Energy] were going on about; I had no trouble getting access to cut the pines back".

In addition, both the Fire Brigade and Country Energy were able to obtain access to the trees and to trim the surviving pine trees, in circumstances where it is clear from the description of the fire that their access to Parkwood was blocked because of the fires and the burning of the other line of trees.

Finally, all of the witnesses were shown a hand-drawn map prepared on behalf of the plaintiffs, showing at least three methods of access to the line of trees. I do not propose to go into any more detail concerning the inconsistent and at times evasive answers given by the witnesses called by the defendant. It is sufficiently apparent from the transcript. On one occasion when I asked Mr Venner to say how close the apple and pine trees were, all he would say to me was "I wouldn't like to speculate", "I wouldn't like to guess" and when I asked him to hold up his hands to try to indicate how far apart they were, he refused even to do this (T-405-406).

The defendant, in written submissions, asked the rhetorical question: "Why would the defendant's employees have come out on two separate occasions if they simply did not want to do work?" The answer from the evidence is that there was a work requisition relating to urgent tree lopping that needed to be done because tree browning at a time of very great fire risk was a matter of urgency, so they had to be there. However, they were not just there to cut a browned pine tree back and to go away again. The reason that the more senior employee, Mr Thorn, was brought out to the scene on the second occasion was because Mr Thorn knew that the lopping of the trees was only a "bandaid" solution (to use the word he used to Mr Hawke) and ultimately what needed to happen was re-routing the power lines through the property on the other side. (This was Country Energy's preference. Mr Hawke wanted something more aesthetic, but Mr Thorn made it clear Country Energy's budget did not extend to this.)

In addition, although much was made by the defendant's witnesses of the question of whether or not there had been talk of cutting the apple trees in order to do the job, there is no reference to this in Exhibit M.

Country Energy knew it had a difficult problem on its hands. The branches of the pine trees were touching the power lines and there was browning. There were 61 trees, of roughly equal height and age. Given the height and length of the trees, Country Energy wanted to find another solution to the bandaid solution of trimming up to 61 trees. Unfortunately, before anything could be done, the trees in question burned down.

The trees in question were on Parkwood, not on Bonny Glen. It is apparent from Exhibit M, where there is talk of pleasing the customer (which is a reference to the Hall family, not to the Hawke family), that they knew the row of trees was important to both properties. If there really had been some resistance from Mr Hall to permitting entry to trim the trees, one wonders why this was not raised with Mr Hawke by Mr Thorn. However, it is clear from what Mr Thorn says to Mr Hawke that Country Energy was really looking to re-route the power lines, rather than trimming the trees, and this is the most likely explanation as to why the trimming of the trees was not done. This would also explain why Mr Hare did not think the job was urgent.

Exhibits 5 and 6 are two diaries which were not produced on discovery but which were belatedly provided during the hearing. Exhibit 6 is a diary which appears to have been used almost entirely for work roster notes and occasional reference to Country Energy activities, such as the "Big Breakfast" on 14 May. There are no entries at all between 5 June and 7 November. The entry for 7 November has clearly been written in at some later date and is a self-serving statement. The entry from the diary, which is Exhibit 5, contains no information of assistance, beyond confirming the identity of the three people who were working on 4 November.

I have referred elsewhere in this judgment to the problems caused by inadequate or belated discovery. I have also referred to the inference that may be drawn when documents that are not produced on discovery are documents which ought to be expected to be in existence. At least one of the defendant's witnesses referred to the preparation of a formal report on the fire. No such report was provided, either in discovery or during the trial.

The plaintiff invites me to find that Mr Hare, on his first visit, was simply being lazy. While I find that Mr Hare was not denied access on the day, and there was no physical impediment to the work being done, I find that Mr Hare went there without appreciating the urgency of the situation, as he himself conceded, and that he did nothing for this reason. In addition, if the trees were known as a 'growing concern' to Country Energy employees, he may not have seen the need to be trimming the trees.

On the second visit Mr Hall told the Country Energy employees not to cut the pine trees back more than 18 inches. They had been in touch with Mr Thorn and by this stage, Country Energy was looking for other alternatives to the difficult and risky task of cutting a very long line of very tall pine trees. In this regard, I accept as correct Mr Hall's version of what was said to him about occupational health and safety and other problems. It was in fact regarded as a job that was "too hard" and some alternative would have to have been found.

In fact, at all relevant times there were three points of access to the pine trees (see Exhibit A) and if any of these had been used to trim the pine trees around the power lines, as a short term measure, while looking into the long term measure, the fire would have been prevented.

It is not in dispute, and should not be in dispute, that Country Energy owed a duty of care as the owner of power lines and a retail supplier of electricity pursuant to the Electricity Supply Act 1995 (NSW). It has an obligation to remove dangers such as browning pine trees which are proximate to power lines, pursuant to s.9 of the Electricity Supply (Safety and Network Management) Regulations 2002. The obligation to minimise the possibility of fire included an obligation to trim pine trees in the manner that they had trimmed them over the 35 years that their officers had been entering Bonny Glen for this purpose. Country Energy in fact had a statutory right of entry, even if Bonny Glen's employees or owners refused to permit this. This is a clear case of 'general reliance' of the kind discussed by the High Court in Pyrenees Shire Council v Day (1998) 192 CLR 330.

The defendant's employees had surveyed the proximity of the trees to the power lines pursuant to this duty, and obtained surveillance reports showing there was an urgent problem with tree burning. They knew that there was not only a short term problem requiring a "bandaid" solution, but also a long term problem that the wires needed to be relocated.

The defendant's assertions that it was unable to trim the pine trees due to the conduct of the plaintiff's employees, either by allowing its fruit trees to grow to block the access, or by refusing access to the premises, or both, is an argument that I have rejected. Even if I had found that access was rejected, the defendant had a statutory right to enter Bonny Glen to maintain the power lines. In a country such as Australia, where bush fires are a grave danger, not simply to one property owner but to all those around them, that statutory right was available to be used and should have been used if in fact there had been a refusal. What is more astonishing than anything else is that Mr Hawke, the owner of the property in which the trees were growing, was never asked for his permission, nor was he ever told of any allegation of denial of access.

A submission has been made that Country Energy was absolved from accessing and pruning the trees due to economic constraints. Since I find that at all relevant times they were given access, and that there was at least one and probably three methods of access to the premises, this is not an argument that I need to consider, other than briefly.

First, I note that no evidence has been adduced by the defendant of its financial position or any financial constraints placed on it at the relevant time. Nor is there any information as to what financial burden would be incurred by the defendant's employees essentially just performing the work they had been employed to do.

Secondly, there had been no difficulty or significant expense involved in trimming the trees in previous years.

In addition, the defendant had the financial capacity to consider what must have been much more expensive options such as the re-routing of the whole power line. While I have no information as to the cost of this, commonsense would dictate that it would be more significant than the cost of trimming the pine trees. Accordingly I do not accept the contention that financial constraints meant that, if the Halls had in fact prevented them entering the property (which I find they did not do) the defendant's financial constraints prevented it from entering pursuant to its statutory obligation.

The defendant submits that the presence of negligence must include a finding of unreasonable conduct by reason of s.5B of the Civil Liability Act. It was submitted that any delay on behalf of Country Energy (which was effectively a delay of several weeks following receipt of the urgent report of tree burning) must be weighed against "the environment in which they work" (written submissions paragraph 15), in particular, dealing with customers whose wishes they take into account. It is submitted that Country Energy could not, acting reasonably, ignore the wishes and property of its customers.

This submission is easily defeated when one considers the total failure of Country Energy to consider the wishes and property of the owners of the property on which the pine trees were situated. They were never consulted about these access problems, nor were they ever told about the urgency of the situation. The unchallenged evidence of Mr Hawke is a strong answer to any argument of unreasonableness. Further, I have indicated that I have accepted the evidence of the Hall family that they did not prevent the access to the property, and that there was at least one and probably three means of access to the trees. All that the Hall family members were concerned about was that the trees be trimmed in an appropriate manner so that the trees did not develop die back, as the defendant's internal email subsequent to the fire noted.

It is further submitted that assessing the relative culpability of the parties (Podrebersek v AIS Pty Ltd (1985) 59 ALR 529) that the plaintiff's share of the responsibility is not less than the defendant's.

I have indicated that I prefer the evidence of members of the Hall family to the evidence of the defendants. I am satisfied that at all relevant times not only were the defendant's employees given access to the property, and that there were at least one and probably three methods of access to the pine trees, but that the only condition that was ever placed on a cutting of the pine trees was that they should not do so in such a way as to endanger the pine trees by causing them to suffer die back. Since this could have led to the same or a similar result to the trees burning down in a fire, this was not an unrealistic or unreasonable expectation on the part of the plaintiff.

Finally, it is submitted that there must be a finding that the fire was caused by contact with the wires. It is conceded that the evidence to this effect comes from the Wildfire investigation report (Exhibit L) and the Country Energy investigation (Exhibit M) which raise clear inferences as to the cause of the fire.

The defendant has noted in written submissions at paragraph 19 the criticism that has been made during the hearing of the inadequacy of its documents and discovery. It is noted that no challenge was made to the adequacy of discovered documents before the matter came to court. However, in practical terms, the bringing of an application for further and better discovery is always a difficult task. The fact remains that the two documents which conclusively establish the cause of the fire were produced only during the hearing and not on discovery. The obligation to give discovery arises from the obligations that parties have to discover documents in accordance with obligations placed not only on parties who litigate, but also upon legal practitioners who advise them. The system of discovery in adversary litigation is often referred to by researchers as being one of the strengths of the adversarial system and one of the reasons why it should be preferred to the inquisitorial system, where the Courts can compel the production of documents and use methods of evidence gathering upon the parties (see for example Posner "An economic approach to the law of evidence" (1999) 51 Stanford Law Review 1477). It is all the more regrettable, then, that a party possessing documents clearly relevant to the issue of liability should not discover them and then, when the issue is raised at trial, disgorge them during the hearing one by one, like Atalanta's apples.

The defendant in written submissions appears to concede the cause of the fire was contact by the tree with the wires. This obviates the need for me to draw an Allen v Tobias (1957 - 58) 98 CLR 367 inference in relation to this issue. If I have erred in my interpretation of the defendant's submissions, I would draw the inference by presuming the facts against the defendant in the manner explained by Dixon CJ, McTiernan and Williams JJ at 375 that the defendant is "without the corroboration which might have been expected in his case". I also note the circumstances in which such documents were produced only at the trial is an issue that is relevant to costs.

The plaintiff further claims that the plaintiff and defendant entered into a contract for supply of electricity. In order for the defendant to comply with that contract, it has to run power lines across its customer's land. This includes not only the plaintiff's land, but also the adjoining property. It is submitted it must be an implied term of such a contract that the power is provided to the customer in a safe manner so as not to cause damage to the customer's property.

The plaintiff submits that in order for a term to be implied into a contract, it needs to satisfied the four criteria set out in Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337. The defendant submits that a term will not generally be implied into a contract unless the five conditions set out in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 16 ALR 363 are made out. The defendant submits that the terms sought to be implied fall outside the established conditions referred to and are "too broad" to be implied into the contract (written submissions paragraph 11).

In Chappell v Hart (1998) 195 CLR 2 McHugh J at [23] notes: "Proof of a cause of action in negligence or contract requires the plaintiff to prove that the breach of duty by the defendant caused the particular damage that the plaintiff suffered. In civil cases, causation theory operates on the hypothesis that the defendant has breached a duty owed to the plaintiff and that the plaintiff has suffered injury; but causation theory insists that the plaintiff prove that the injury is relevantly connected to the breach of duty. The existence of the relevant causal connection is determined according to commonsense ideas and not according to philosophical or scientific theories of causation."

While at times claims brought under the Civil Liability Act for negligence are coupled with claims brought in contract, both the parties and the courts tend to treat the contract claim somewhat informally as being an alternative claim for the same sort of damages. In Gharibian v Propix Pty Ltd T/as Jamberoo Recreational Park [2007] NSWCA 151 Ipp JA at [75] noted that "there was no difference in substance between the appellant's claim in negligence and her claim in contract" and if the claim in negligence failed, so did the claim in contract. This was a case where the plaintiff had purchased a ticket to ride on a toboggan run and not only was the existence of the contract admitted, but no challenge was made to any implied term that the toboggan run had to be conducted in a safe manner so as not to cause damage or injury. In Harriton v Stephens (2004) 59 NSWLR 694 at [208] the Court of Appeal noted the similar position concerning the heads of damages claimed. The parties in their submissions to me in this case did not differentiate between the damages claimed for breach of contract and for negligence so I have not done so either.

There are two kinds of implied terms. The first is the kind of term which the law would find to be a part of a particular class of contract, either by common law or statute, although those terms may not find specific expression in contractual statements or documents of the parties, and terms which are to be implied into a contract to give effect to the presumed intention of the party. Terms which can be implied to give effect to the presumed intention of the parties can be further subdivided into four groups. These are terms implied by custom or usage in a particular trade, industry or locality; terms implied from a prior course of dealing; terms implied where the principal terms have been settled but subsidiary terms are absent; and terms which are implied to give efficacy to the particular contract.

The onus for showing that the criteria has been of the kind set out in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 282-283 lies on the party asserting the implied term. The more detailed and comprehensive the contract, the less ground for supposing the parties have failed to address their minds to the question at issue. In addition, there is the question of identifying with any degree of certainty the terms which the parties would have settled upon had they considered the question (Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 346).

77. Such a requirement refers to fairness as between the parties and is to be judged by reference to the benefits and burdens each party can expect to enjoy or undertake under the contract. In BP Refinery, the majority of the Privy Council rejected a proposed implication of a term into a rating agreement requiring a continuity of corporate identity on the basis that this would deprive the appellant of a benefit which induced it to make a major capital investment in the council's activities. It needs to be said that the provision of electricity is not something that the plaintiff could have obtained from any other source. In terms of reasonableness and equitableness, the plaintiff would be entitled to assume that the electricity was supplied in a safe fashion.

(b) Necessity to give business efficacy to the contract

78. The case law does not offer much in the way of analysis of the phrases "effective operation" or "business efficacy" and perhaps the best test is to look at the statement of Bowen LJ in The Moorcock (1889) 14 PD 64 at 68 that the idea is to give such business efficacy to the transaction "as must have been intended at all events by both parties who are businessmen". In other words, the term must not be so necessary that without the term the contract would to all purposes be ineffective but that the term must be necessary to make the contract effective and workable, having regard to the presumed intention of the parties.

79. The requirement for obviousness is best tested by asking whether the parties would readily have agreed on the imposed implied term if it had been suggested to them in the course of their negotiations: Codelfa at 374 per Aickin J.

80. This has two elements. First, the parties would have agreed if it had been drawn to their intention (see Codelfa at 356) and, second, that it would be a reasonable provision capable of being formulated with a sufficient degree of precision. I note the helpful summary of authorities by Einstein J in Biscayne Partners Pty Ltd v Valance Corporation Pty Ltd and Ors [2003] NSWSC 874 at [52] on this issue. An implied term that services be provided to a customer in a safe manner so as not to cause damage to a customer or the customer's property is clearly such a term.

81. There is no evidence before me of any term in the contract for supply of electricity which would be inconsistent with an implied term to provide the electricity in a safe manner so as not to cause damage to the customer or his property.

82. Further, in relation to the obligation to co-operate in a performance of contractual obligations as part of the law of New South Wales, I note the cases collected by Einstein J in Biscayne at [64].

83. For Country Energy to supply electricity, it has to run power lines across land that is owned by its customers. It has statutory obligations as to how to go about this task. Electricity is highly dangerous. In those circumstances, given its statutory obligations, the requirement that it do so in a safe manner must be so obvious that it goes without saying.

84. Finally, I note that statutory counts referred to in the statement of claim are not relied upon as giving rise to a statutory cause of action, but rather that breaches of the Electricity Supply Act 1995 are relied upon to establish breach of duty of care in relation to negligence.

85. I find that Country Energy breached its duty of care by failing to take reasonable care and that this failure related not only to failure to trim the pine trees, but failure to take other steps to prevent the fire. I also find that the defendant is in breach of its contractual obligations to the plaintiff in that there was an implied term that the provision of power occur in a safe manner so as not to damage the customer's property.

86. The plaintiff's claims in negligence and breach of contract are therefore made out, and I now consider the issue of damages.

87. The principle governing damages in relation to breach of duty is to restore the plaintiff to its former position and the principle in relation to damages in contract is to put the plaintiff in the position as he would have been had the contract been performed. I have referred elsewhere to the tendency of courts to come to the same result for each cause of action when considering claims under the Civil Liability Act with an alternative claim in contract. What the plaintiff must establish is that the defendant's negligence caused or materially contributed to injury or damage suffered by the plaintiff. In the present case, that includes not only repairing and replacing lost or damaged property, but also recovering economic loss as a consequence of injury to the property where that property is income producing.

88. The plaintiff submits firstly that it was reasonably foreseeable that the pine trees represented a fire hazard that could and should have been remedied by cutting the trees back. If the fire hazard was not remedied it was reasonably foreseeable that the trees would burn and that property, including the property of the first plaintiff, would suffer damage. This would include not only damage to the apple trees, but also any consequential loss. This includes damaged irrigation pipes and fittings, replacement of damaged fencing and the replacement of apple trees. This was the immediate consequence of the fire. In addition, a claim is made for past and future economic loss on the basis that the destruction of the pine trees, which created a windbreak and a climate conducive to apple growing, effectively destroyed the value of this apple field, resulting in the need for the apple trees to be cut down.

89. As senior counsel for the defendant points out in his concise and helpful submissions on quantum, the damages flowing from any established negligence fall into two categories (category 1 and category 2 damages). The first of these is the direct effect of the fire such as the burnt apple trees, their future value, the fruit lost in the fire and the cost of repairing fire damage. Apart from issues of quantum, this was not the subject of substantial dispute. A second category is the indirect effect of the fire, including the loss arising from the plaintiff's alleged inability to spray the apple trees which was asserted to be the reason for their consequent removal from the field. Such loss should probably be regarded as pure economic loss, argues the defendant, given that it is not causally related to any property damage suffered by the plaintiff.

90. The ambit of each of the damages claims has been set out in an equally helpful schedule prepared for the plaintiff. I see no point in restating the contents of this schedule, as it would be difficult to do so in any shorter form, because the evidence involved is considerable. Accordingly, I now set out the plaintiff's schedule of damages in full.

Plaintiff's summary of damages LIQUIDATED DAMAGES 1. The purchase price of apple trees on seedling, semi dwarf or dwarf root stock is approximately $20 per tree (Part 2.4 of Report by Mr Collett 9.10.06 vol 2, tab 31 page 632 ).

2. The total cost of replacing the apple trees totally destroyed in the Fire: a. 28 gala trees x $20 per tree = $560.00; b. 30 granny smith trees x $20 per tree = $600.00;

3. The total cost of replacing: a. all the gala apple trees in the Affected Area: 218 trees x $20 per tree = $4,360.00; b. all the granny smith apple trees in the Affected Area (note to produce the same annual fruit yield as 80 seedling rootstock granny smith apple trees, an orchardist would need to plant about 300 semi dwarf rootstock granny smith apple trees): 300 trees x $20 per tree = $6,000.00;

4. The Fire destroyed the fence that ran between Bonny Glen and Parkwood. The fence has been replaced (Affidavit Timothy Hall 24.7.06 vol 1, tab 18 para 38,39 page 178) for the sum of $1,200 (Part 4.3, table 8 Report by Mr Collett February, 2004 Vol 2, tab 31 page 650; Exhibit O paragraph 54 page 47 ).

5. The Fire destroyed some sections of irrigation pipes that ran between each row of apple trees in the Affected Area (Affidavit Timothy Hall 24.7.06 vol 1, tab 18 para 40 page 178) . The total cost of materials and labour to replace the irrigation pipes destroyed in the fire was $800.00 (Affidavit Timothy Hall 24.7.06 vol 1, tab 18 para 41 page 178 ).

Loss of Yields 6. The following table sets out the total yield of gala apples lost as a result of the destruction of the 28 gala apple trees and the damage to 55 gala apple trees. The figures in the following table assume that the windbreak provided by the Pine Trees had not been destroyed or was immediately replaced (Table 1 report by Mr Collett 9.10.06 vol 2, tab 31 page 633):

Year Trees kg/tree Total kg Notes 2002 40 58.5 2,340 28 trees destroyed plus 12 with 100% fruit loss 2002 21 35.1 737 60% fruit loss due to heat damage 2002 22 23.4 515 40% fruit loss due to heat damage 2002 12 11.7 140 20% fruit loss due to heat damage 2003 28 67.0 1,876 Yield of similar trees in 2003 2004 28 77.1 2,157 15% increase in production from 2003 2005 28 84.8 2,373 10%increase in production from 2004 2006 28 62.3 1,744 5% increase in prod from 2005, new trees 30% prod 2007 28 40.0 1,121 New trees 55% production 2008 28 22.2 623 New trees 75% production 2009 10.7 299 New trees 88% production Total kg 13,926 Total cases 1,161 12kg/3 layer case

7. The following table sets out the total yield of granny smith apples lost as a result of the destruction of the 8 granny smith apple trees and the damage to 8 granny smith apple trees. The figures in the table assume that the windbreak provided by the Pine Trees had not been destroyed or was immediately replaced (note: to produce the same annual fruit yield as 80 seedling rootstock granny smith apple trees, an orchardist would need to plant about 300 semi dwarf rootstock granny smith apple trees: Table 2 report by Mr Collett 9.10.06 vol 2, tab 31 page 633

Year Trees kg/tree Total kg Notes 2002 16 320.0 5,120 8 trees destroyed and 8 with 100% fruit loss 2002 8 160.0 1,280 50% fruit loss 2002 8 80.0 640 25% fruit loss 2003 30 85.0 2,550 New trees 0% production 2004 30 85.0 2,550 New trees 0% production 2005 30 85.0 2,550 New trees 0% production 2006 30 59.5 1,785 New trees 30% production 2007 30 38.3 1,148 New trees 55% production 2008 30 21.3 638 New trees 75% production 2009 30 10.2 306 New trees 88% production Total kg 30 18,566 Total cases 1,547 12kg/3 layer case

8. The following table sets out the total yield of processed fruit lost as a result of the destruction of and damage to the gala and granny smith apple trees assuming that the windbreak provided by the Pine Trees had not been destroyed or was immediately replaced (Table 3 report by Mr Collett 9.10.06 vol 2, tab 31 page 633):

Variety kg/tree Total kg Type Notes Gala 1,393 557 peelers Of additional 10% processed 40% to peelers 836 juice Of additional 10% processed 60% to juice G S 1,857 1,671 peelers Of additional 10% processed 60% to peelers 186 juice Of additional 10% processed 60% to juice

Quantification of Costs 9. There are two main markets for apples: a. the wholesale market is the market for the sale of fully matured premium quality apples; b. the manufacturer's market is the market for apples of inferior quality that can be used for or are made into juices, preserves, pies, dried fruits etc (Part 2.6 of Report by Mr Collett 9.10.06 vol 2, tab 31 page 636 ).

10. During the period from in or about 1990 to 2002 granny smith apples were sold in 18 kilogram cases. Since 2003 all granny smith apples have been sold in 12 kilogram cases. Gala apples have always been sold in 12 kilogram cases (Affidavit of Timothy Hall 24.7.06 paragraph 24 vol 1, tab 19 page 176 ).

11. As at the date of the Fire, the granny smith apple trees on the Affected Area were fully matured and approximately 50 to 60 years old. The gala apple trees in the Affected Area were approximately 9 years old (Affidavit Frederick Hall 4.7.06 paragraph 31 vol 1, tab 14 page 140 ). These apple trees were picked once a year and: a. the granny smith apple trees produced approximately 320 kg of apples per tree per year (Affidavit Frederick Hall 4.7.06 paragraph 32 vol 1, tab 14 page 140; Affidavit of Timothy Hall 24.7.06 paragraph 12(a) vol 1, tab 19 page 173 ); b. the gala apple trees produced between approximately 58.5 kg (Affidavit Frederick Hall 4.7.06 paragraph 32 vol 1, tab 14 page 140; Affidavit Frederick Hall 24.3.05 paragraph 359 vol 1, tab 11 page 48; affidavit of Timothy Hall 24.7.06 paragraph 12(b) vol 1, tab 19 page 173) of apples per tree per year.

12. The costs per case incurred by Bonny Glen in relation to treating, picking, storing packing, transporting (freight and levies) and selling (commissions) of gala and granny smith apples for the wholesale market: a. Gala $10.87 per case; b. Granny smith $10.09 per case (Part 2.5 of Report by Mr Collett 9.10.06 vol 2, tab 31 page 636; affidavit of Timothy Hall 24.7.06 paragraphs 19 - 28 vol 1, tab 18 pages 175 - 177 ).

13. The costs per bin incurred by Bonny Glen in relation to treating, picking, storing packing, transporting (freight and levies) and selling (commissions) of gala and granny smith apples for the manufacturers is $60.00 (Part 2.5 of Report by Mr Collett 9.10.06 vol 2, tab 31 page 636 ).

QUANTIFICATION OF LOSSES IN RELATION TO THE TOTALLY DESTROYED AND DAMGED APPLE TREES

14. The income and costs per case for apples and the net total loss in relation to the destruction of the 28 gala apple trees and the damage to the 55 gala apple trees and the destruction of the 8 granny smith apple trees and the damage to the 8 granny smith apple trees (for the period from 2002 to 2009 and assuming no loss of the windbreak) (Part 2.7 of Report by Mr Collett 9.10.06 vol 2, tab 31 page 636 ):

Variety Gross Income Costs Net Income Number of Cases Net Loss Gala $36 $10.87 $25.13 1,161 $29,176 GS $28 $10.09 $17.91 1,547 $27,706 Total $56,882

15. The income and costs per bin for processed fruit and net total loss in relation to the destruction of the 28 gala apple trees and the damage to the 55 gala apple trees and the destruction of the 8 granny smith apple trees and the damage to the 8 granny smith apple trees (Part 2.7 of Report by Mr Collett 9.10.06 vol 2, tab 31 page 637) :

Type Gross Income Costs Net Income Number of Cases Net Loss $135 $60 $75 1,28 $96 Peelers - Gala Peelers - GS $ 74 $60 $14 3.71 $52 Juice Fruit

$ 60 $60 $0 2.33 $0 Total $148

16. Accordingly, the past and future economic loss in relation to the destruction of the 28 gala apple trees and the damage to the 55 gala apple trees and the destruction of the 8 granny smith apple trees and the damage to the 8 granny smith apple trees (for the period from 2002 to 2009 assuming no loss of the windbreak) is as follows:

Year Variety Calculations Notes 02-06 Gala 11,882/12 x $25.13 = $24,882.88 GS 16,475/12 x $17.91 = $24,588.93 07-09 Gala 2,043/12 x $25.13 = $ 4,278.38 GS 2,092/12 x $17.91 = $3,122.30 $49,471.81 Past Economic Loss 2002 - 2006 $7,400.68 x 0.943 = $6,978.84 Future Economic Loss 2007 - 2009 Present Lump Sum Equivalent for 2 years calculated at 3% $56,450.65 Total Economic Loss

QUANTIFICATION OF LOSSES IN RELATION TO THE AFFECTED AREA (1 HECTARE) OF BONNY GLEN TO THE WEST OF THE PINE TREES

17. On the assumption that spraying on the Affected Area of the orchard ceased in 2002/2003, the annual loss of income from the wholesale market in respect of the loss of saleable apples produced in the Affected Area of Bonny Glen is as follows (Part 2.8 of Report by Mr Collett 9.10.06 vol 2, tab 31 pages 638, 639 and Part 2.1 of Report by Mr Collett 11.2.07 vol 2, tab 32 page 674 ):

Variety Trees kg/tree Total kg Cases Loss/case Total Gala 218 89 18,402 1,617 $25.13 $40,635 GS 300 85 25,500 2,125 $17.91 $38,059 Total $78,694 p.a

18. On the assumption that spraying on the Affected Area of the orchard ceased in 2002/2003, the annual loss of income from the manufacturing market is $150.00 p.a (Part 2.8 of Report by Mr Collett 9.10.06 vol 2, tab 31 pages 638, 639 and Part 2.1 of Report by Mr Collett 11.2.07 vol 2, tab 32 page 674 ).

19. The Pine Trees will take 10 years to grow sufficiently to operate as an adequate wind break (for fully matured apple trees). The replacement pine trees were planted in or about July 2003 (Affidavit Mr Hawke 19.7.06 vol 2, tab tab 23, para 13 page 464) .

20. The semi dwarf yearling root stock for both gala and granny smith apple trees will take approximately 8 - 10 years to achieve optimal fruit production.

21. The yearling semi dwarf rootstock apple trees can be planted and treated within approximately 6 - 7 years after new or replacement pine trees have been planted (Part 2.8 of Report by Mr Collett 9.10.06 vol 2, tab 31 page 639 ).

22. The time it will take for the Affected Area to return to optimal production will be between 14 - 17 yeas from the date the replacement trees are planted (Part 2.8 of Report by Mr Collett 9.10.06 vol 2, tab 31 page 639) .

23. Accordingly, the loss of income in relation to the Affected Area from 2002 is as follows:

Year Amount Notes 2002/2003 Gala: 5,608 kg /12 x $25.13 = $11,744.00 Replacement Pine Trees Planted 2003 GS: 9,590kg/12 x $17.91 = $14,313.13 Replacement Pine Trees Planted 2003 2004 $78,694 + $150 = $78,844.00 2005 $78,694+ $150 = $78,844.00 2006 $78,694+ $150 = $78,844.00 2007 $78,694+ $150 = $78,844.00 2008 $78,694+ $150 = $78,844.00 2009 $78,694+ $150 = $78,844.00 2010 $78,694+ $150 = $78,844.00 Plant and begin treating gala & gs trees 2011 $78,694+ $150 = $78,844.00 New trees 0% production 2012 $78,694+ $150 = $78,844.00 New trees 0% production 2013 $78,694+ $150 = $78,844.00 New trees 0% production 2014 $55,085.80 + $135 = $55,228.80 New trees 30% production 2015 $35,412.30 + $67.50 = $35,479.80 New trees 55% production 2016 $19,673.50 + $37.50 = $18,711.00 New trees 75% production 2017 $ 9,443.48 + $18.00 = $9,461.48 New trees 88% production 2018 Nil New trees 100% production Total $262,589.13 Past Economic Loss 2002 - 2006 $679,788.91 x 0.722 = $490,807.60 Future Economic Loss 2007 - 2017 Present Lump Sum Equivalent for 11 years calculated at 3% $753,396.72 Total Economic Loss

Scenario 1 - 24. On the assumption that the defendant is only liable for the losses in relation to the destruction of the 28 gala apple trees and the damage to 55 gala apple trees and the destruction of the 8 granny smith apple trees ad the damage to 8 granny smith apple trees the first plaintiff's loss and damage is as follows: a. total cost of replacing trees: $1,160.00 b. replacement of fence: $1,200.00

c. total cost to replace irrigation pipes: $ 800.00

h. Interest on liquidated damages and past economic loss

i. Costs Scenario 2 - 25. On the assumption that the defendant is liable for the losses in relation to the Affected Area caused by the loss of the windbreak, the first plaintiff's loss and damage is as follows: a. total cost of replacing trees: $6,360.00 b. replacement of fence: $1,200.00

c. total cost to replace irrigation pipes: $ 800.00

f. Total $761,756.73 g. Interest on liquidated damages and past economic loss

Having set out the plaintiff's schedule, I now make the following general comments about the category 1 and category 2 damages: Category 1 damages (a) The burnt apple trees had not been replaced but cut down. The defendant submits that the cost of replacement cannot be recovered. This is not correct because if they had not been replaced now, they would be in the future. Accordingly, it becomes a question of whether the appropriate cost is $20 per tree or $7.50 or $7.70; whether the trees have been replaced yet or not, as the unchallenged evidence is that this was an apple tree orchard which the plaintiff, but for the fire, would have continued to operate. (b) There is a dispute on the sales and costs prices. This is based on information provided to the expert by Mr Tim Hall. It is asserted that there is little if any documentation to support the plaintiff's contention, but in fact the cost of apples, and in particular gala apples, is the subject of prior sales and is relatively straightforward. Category 2 (a) The plaintiff submits, and I accept, that there is no real disagreement between the experts as to the appropriate methodology (see T-459.5-.55). The real focus is on prices, yields, pack out rates and sales price and costs per case with the plaintiff's expert (Mr Collette) relying on actual figures provided by Tim Hall, while the defendant's expert relies on industry averages as opposed to specific sales from Bonny Glen (T-459-460). (b) In addition, there is now no issue between the experts except that the pack out rates and sales prices and costs were at the top of the range and that the costs incurred by Bonny Glen were towards the lower end of the range, although not out of the range. (c) It was the unchallenged evidence of members of the Hall family that this was the "star" field which produced the best apples in the orchard. (d) Although an enormous amount of time was spent on the erection of a temporary windbreak or artificial structure, I accept the submissions of the plaintiff that this is a false issue. The unchallenged evidence of Mr Reg Kidd was that he had travelled most of the world looking at apple growing areas, including apple growing areas through Australia, and he had never seen an artificial windbreak anywhere, including on a research station (T-230). In addition, there was unchallenged evidence that a development application would be necessary for such a windbreak to be constructed, and there was unchallenged evidence by a member of the local council that such a construction was unlikely to be granted a development application in these days of environmental awareness. (e) Finally, and most conclusively, there is no evidence that Mr Hawke, upon whose property this windbreak would need to be built, would ever consent to the construction of such an eyesore on his property. Mr Hawke's affidavit makes it clear that the beauty of the pines was a significant plus for him, particularly since he wants to sell his two 5 acre blocks to persons who want to have hobby farms or otherwise live in a country on a large block. Finally, it was never made clear to me whether the building of this structure was even possible, given that there is a range of pines that has been growing on the spot since 2003. Accordingly, I have had no regard to the evidence concerning the construction of an artificial structure as a windbreak either on the subject of contributory negligence or failure to mitigate, or as a sensible alternative to the growing of new trees in the site of the trees destroyed by the fire. Senior counsel for the plaintiff draws to my attention the failure of the defendant to produce any evidence describing what the particular structure would look like, or to provide a plan or explain how it was to be built or the precise materials to be used. In those circumstances, the failure to replace the damaged or destroyed trees until the new pine trees have produced an adequate windbreak needs to be looked at in the light of the unchallenged evidence that it will take approximately 10 years from July 2006 before the replacement pine trees will reach the height and density required to produce a sufficient buffer.

I propose to deal with the problems in the category two claim for damages first, as many of the disputed issues concerning quantum and costing were canvassed during the evidence on this issue, and it is easier to consider the respective arguments on this issue first.

The real issue is, in my view, whether the plaintiff can first make out the factual basis upon which it is asserted that it was necessary for the trees to be destroyed.

The evidence of Mr Hawke about his attitude to the spraying is crucial, because the plaintiff's contention essentially is that the trees had to be cut down because of spray drift coming from their property onto Parkwood could lead to the plaintiff being the subject of complaints or prosecution. Without the windbreak to absorb the poisons used to spray on apples, it was the evidence of the plaintiff's witnesses that the informal relationship and friendship between the owners of Bonny Glen and Parkwood, which had continued when Mr Hawke decided to cease operating orchard operations on Parkwood and graze cattle instead, would be no barrier to complaint or prosecution.

The history of this relationship, and the circumstances in which some changes were made to the row of pine trees, is as follows. The orchard had the benefit of the pine tree windbreak from 1973 to 1988. In about 1988 some of these trees were removed to make way for a bigger shed. That shed was, however, never actually extended as planned and there was a gap between Parkwood and Bonny Glen as a result. This gap did not concern Mr Hawke because at the time those properties were being operated as orchards so they were spraying the same sort of chemicals. After Mr Hawke decided to graze cattle instead, in 2001, he came to an alternative arrangement with the Hall family so that he could graze his top and bottom paddocks during the spraying season and only graze them opposite the portion of the property without a windbreak during Winter while Fred Hall was not spraying. This arrangement was put in place and operated thereafter. However, following the fire there was a much larger gap. Following this event, Mr Hawke's affidavit of 27 March 2007 states: "10. Following the fire on 10 November 2002 to which I have deposed in my previous Affidavits, there is now also a much larger gap in the pine trees or about 150 metres at the northern most part of the common boundary between Bonny Glen and Parkwood ("the Destroyed Windbreak"). According to the arrangement I have with Mr Hall, the area immediately to the east of the Destroyed Windbreak is part of the land upon which I graze my cattle during Bonny Glen's summer spraying season, the balance being to the south of the Removed Pine Trees. 11. After clearing the orchard on Parkwood after 2001, although I do not now recall how, I do recall that I had been told that the Orange City Council ("the Council") might soon stop approving subdivisions of land in the Orange District. 12. At about this time, so as not to miss out on my opportunity to subdivide the land on Parkwood in case I ever decided to sell part of the land for residential development, I had Parkwood surveyed and submitted a development application to the Council. There were two (2) subdivisions, one for the land on which my house is built, and the [sic] for a five acre block next to Destroyed Windbreak and a residual block. 13. Annexed and marked " A " is a copy of the development approval dated 16 July 1998. 14. Annexed and marked " B " is a copy of a Subdivision Certificate for the land to which Annexure A refers dated 23 May 2002. 15. At about the time of the fire in late 2002, I recall that the issue of spray drift had become a widely discussed topic and I attended at several community meetings on the subject with other orchardists in the Orange district, during which, I learned that the Environmental Protection Authority was going to start imposing severe penalties upon orchardists if their business practices caused pesticide sprays drifting unto other properties. 16. After the fire and the loss of the windbreak in November 2002, I became concerned about spray drift from Bonny Glen in light of the Development Approval, so I had a conversation with Mr Timothy Hall, during which i said to him words to the following effect: Me: " Tim, spray drift is a real issue now as you know. You won't be able to spray that block since I got that DA. I think you'd better tell Fred to stop spraying that block until the new pines re-grow. " Tim Hall: " Yes, I know - I'm worried about it too. I'll talk to dad about it. " 17. As well as for the reasons that I have given in my previous Affidavits, it is also because I am concerned about spray drift that I immediately replanted replacement pine trees to replace the Destroyed Windbreak. 18. I plan to continue using Parkwood as a farming property for the moment. In light of mine and my father's arrangement with Mr Hall not to graze my cattle on the Parkwood adjacent to the Removed Pine Trees, I cannot also agree not to graze my stock on the land next to the Destroyed Windbreak during Bonny Glen's spraying season because I will have almost not [sic] land left on Parkwood to use for farming purposes. 19. If, however, I choose to sell the subdivided land next to the Destroyed Windbreak then, for environmental reasons, I believe that Bonny Glen will not be able to spray its north-eastern block until the pine trees grow to an effective windbreak."

Paragraph 19 was read only on the basis of Mr Hawke's personal belief.

Attached to this affidavit is a list of conditions for the subdivision of the block. There is a reference to the existing pine trees, but only on the basis that these pine trees are to be pruned to be 3 metres clear of the proposed access road (see paragraphs 13 and 14). It was not a condition of the development application that the pine trees remain in place, merely that they be pruned.

The evidence of the Hall family was that if they were to spray the trees in question, they had received advice from Mr Kidd and others that they could be prosecuted because the poisonous spray could carry not only across Parkwood but even further. There was talk of it going as far as the local hospital. It was asserted that it was open to Mr Hawke to make a complaint to the relevant authorities which might lead to prosecution of members of the Hall family.

The following questions were asked of Mr Hawke in cross-examination: "Q. Do you not have any concerns about spray drift coming through those deciduous trees to your place? A. Well, look, to be perfectly frank I'm fourth generation in the industry, my house was exposed when we were growing fruit trees to the same sorts of conditions, probably in - to a greater degree than what I'm exposed to now and I've never had any objections as far as it coming onto my house itself, but I certainly take precautions, I don't use rain water I use bore water for the drinking water. ... Q. In respect of your wife's children, do you have a concern about spray coming through those deciduous trees into the house? A. No. Q. So as far as you're concerned, Mr Hall, ... it is perfectly acceptable to live some matter of metres from an area where there may be spraying going on and there isn't a total buffer? A. No... it would be one thing that wouldn't concern me because our house is virtually fully protected right through the spraying season... Q. Did you ever tell or say to Mr Hall, Fred, Tim or Bernard, that he should not or must not spray any part of his apple orchard? Did you ever say that to them or one of them? A. No, I voiced my concerns when we didn't have that windbreak there and I voiced my concerns of the consequences of spray contamination with cattle because that's obviously of concern to everyone. Q. Did you ever say to them other than about the cattle... A. I certainly voiced my concern in strong terms, yes. Q. You said you were concerned about it. Did you ever say "I do not want you to spray in that field"? A. Certainly while I've got cattle and I want to be notified if you are spraying, if you are doing any spraying. Q. So you [sic] concern was, if you are going to spray, let me know because I don't want my cattle getting mixed up with your spray? A. That's correct." (T-247-250)

It was the evidence of the plaintiff's witnesses that spraying could not occur because Mr Hawke would not allow it (T-111). However, that is not the effect of Mr Hawke's evidence. All Mr Hawke wants is to be told when they are spraying so that he could move his cattle. He did not, in the witness box, come up to proof of the words in paragraph 16 of his affidavit.

The plaintiff further claimed that Mr Hawke wanted there to be no spraying because the 5 acre blocks had been decontaminated (T-111) and Mr Hawke gave evidence that he did not want to have to decontaminate again. However, Mr Hawke in fact lives in one of the subdivided blocks (T-243) the southern gap is as close to at least one of the blocks as the northern gap.

Secondly, the existence of the southern gap, although partially explained in a historical sense by Mr Hawke's affidavit, must fundamentally destroy the perception argument in relation to spray drift and objections by Mr Hawke as well as to claims that the spray could go as far as the new hospital (according to the evidence, apples have continued to be grown (and sprayed) on this block since 2001). Mr Tim Hall had to concede (T-323) that there was no difference between spray coming through either gap. His response was to say that if this was the case, he would have to get rid of apples in the south field as well.

Furthermore, the pine trees were on Parkwood and while Mr Hawke said he had no intention of removing trees, and this is something I am prepared to accept as unlikely, given his strong feelings about the attractiveness of the trees, the fact remains that if Mr Hawke and his family sold Parkwood tomorrow and the new owner wished to remove them, there would be nothing that the plaintiff could do. Part of the evidence was that, unlike the Hall family, where the sons were carrying on the business, Mr Hawke's family was unlikely to do so.

Accordingly, the factual basis for asserting it was necessary to remove the apple trees because of spray drift and objections by Mr Hawke cannot be made out. In addition, evidence from the experts about the dangers of spray drift from the northern apple orchard is a danger, but spray drift from the southern apple orchards is not, would be an inconsistency which I find impossible to reconcile.

I have noted these factual findings because, in my view, there is a break in the chain of causation. I find that the removal of the fruit trees was not as a result of any request from Mr Hawke. It was done on a recommendation by Mr Collette and Mr Kidd. However, if their advice is not foreseeable, or wrongly overcautious, or based on incorrect information (eg the belief Mr Hawke might report the Hall family for prosecution), or just simply wrong, it does not entitle the plaintiff to claim that this is damage flowing from the fire.

There are other evidentiary difficulties that stand in the way of the plaintiff's claim for damages for the total replacement of the apple trees in the field and the consequential economic loss. Many other orchards in the Orange district, and for that matter in other locations, do not have windbreaks. The presence or absence of a windbreak, while an advantage to an orchard, is not an essential pre-requisite to a successful apple orchard.

It was the evidence of Mr Fred Hall (T-57-59) that he received advice from Mr Kidd and Mr Collette but did not consult a lawyer because "what would he know about fruit trees?" (T-57.40). His concern was that he would "run foul" (T-57) of his neighbour and that his neighbour would "complain to law" (T-57.51-.52). Mr Fred Hall agreed he was aware that there were many orchards operating where there were no windbreaks and said "they're taking the risk" (T-57.9). Mr Hall agreed that he still sprayed on the southern block:

"Q. Do you still spray on it? A. Yes. Q. There's nothing to stop spray drift going out of that orchard, is there? A. That's right.

Q. What's the difference? A. Well down the front there's two five acre lots and there's an easement up there for a road for the two five acres and the house of David's next door and he has objected to that because his children go to school up that road and his wife. And when he sells those blocks of ground - we've had meetings in the area by a regional developer of all [sic] - because this is coming up to be a big thing, and they say if you want to subdivide you must have a barrier.

Q. Is the problem that's coming along I [sic] that area that oranges grow residentially and encroaching on you and your fellow orchardist? A. Stopping farming and it's quite a big thing in the district.

Q. So in reality, Mr Hall, your block alongside the burnt trees has always been at risk? A. No, because the pines were there.

Q. That's assuming they were fully effected [sic]? A. Yes.

Q. Are you aware of any of the orange orchardists that have actually been taking down- A. Yeah, had to push their orchard out, yeah…

Q. That had actually taken down windbreaks but yet carried on running orchard [sic]? A. Yeah." (T-57-58)

Mr Hall agreed that the spray in the paddock just south of the shed was capable of going out the fifty metre gap all over Parkwood (T-71).

I should pause to note that I accept the submission of the defendant that since Mr Hawke said he lived on one of the subdivided blocks (T-243) the markings of the subdivision on page 147A (which is in volume 1 of Exhibit O) are clearly wrong.

Essentially, what Mr Fred Hall was saying was that he took the advice of Mr Collette and Mr Kidd that the risk of spraying on the affected field was too great so that the apple trees should be removed. Neither of these experts was asked to comment on spraying generally at Bonny Glen and if their reports had looked at this issue it would have shown the difficulties of giving such advice when there was in fact spraying on the southern field. I can see no reason to distinguish the difference between spraying in the field opposite the gap south of the shed and spraying in the field next to the burnt down pines. I note that the gap between these fields is 169 metres.

In addition to Mr Hawke's evidence falling short of the conversations set out in his own affidavit and also referred to in the evidence of Mr Fred Hall and his sons, there is the difficulty of explaining how it is that the spray drift should not come across in the top field when it comes across through the southern field, especially in circumstances where there were errors in describing where the two five acre blocks and Mr Hawke's home was.

A third area of factual difficulty is that the evidence of both experts, and in particular Mr Kidd, concerning the distance that spray drift will travel and the willingness of public authorities to prosecute if it reaches the local hospital (one and a half kilometres away) is very difficult to accept. The experts retreated to make much of the issue of what was called "perception". In other words, in this time of environmental awareness, it was not so much that spray drift was a difficulty, but there was a perception that the spraying of poisonous chemicals could be an environmental or health hazard. However, Mr Collette said he would safely place a hospital 100-200 metres east of Bonny Glen (T-169.59). Mr Collette said at T-172 that he was concerned about spray drift coming out from the bottom gap as well (T-172.21). He then retreated from this position and said that the spray would not travel in that direction (T-172-173).

Mr Trevor Hall gave evidence that one of his neighbours, a Mr Dino Cunial, had trouble with spray drift going onto the road from where he was spraying 40 metres away (T-269). He was certain that the spray could reach as far as the new hospital one and a half kilometres away and could even go further (T-272), perhaps as far as seven kilometres. When asked if he was concerned that the spray drift from the southern apple orchard could travel the sixty metres to Mr Hawke's house, he responded firstly that this orchard had been taken out three years beforehand (T-274) but when shown the map, which indicated that Mr Hawke's house was about 130-140 metres from the gap, said that there was no concern about spray drift going from the southern gap across to the 130 or 140 metres to Mr Hawke's home. The following exchange occurred at T-275: "Q. So it's not so much a matter of safety, it's a matter of concern, is it? A. Well, it's a matter of safety. I can control that spray drift. He's got his house bound, as you can see, by trees and sheds so he's got buffers already there around his house. No, I don't see it as a problem.

Q. But you do see as a problem the hospital one and a half kilometres away, is that correct? A. As one of the problems, that's only one.

Q. So why is that we've got no problem with the house 140 metres away but we've got a problem with a hospital or some other building one and a half kilometres away? A. I've got a problem between my neighbour [sic]…

Q. So the question of a problem is one of neighbourly relations rather than any possible danger caused by spray, is that correct? A. No.

Q. Do you have a safety concern in relation to the new hospital? A. Yes I do.

Q. What I'm asking you sir is simply this. If you've got a safety concern about a hospital which is one and a half kilometres away how can you not have a safety concern about a residence with a man, a wife and two children in it which is 140 metres away? A. I do. I have a concern for everybody there. I have a concern with people buying the other block, yes I do.

Q. What have you done to allay your concern? A. We've pushed out, after much deliberation we've pushed out that block.

Q. Sorry, which block? A. The block that's had the buffer zone taken away, burnt.

Q. Yes, but you haven't done anything about the block down at the bottom, 140 metres from Mr Hawke's house? A. Mr Hawke has got a buffer zone around his house.

Q. Between the hospital and your property, what's the topography like? A. Rolling paddocks and there's some-

Q. Are there any trees? A. A few trees…" (T-275-276)

Mr Collette's evidence was different again. He agreed (T-163) that there was absolutely no buffer there, although he claimed that the buffer would be "low grass" (T-163.32-.33).

Mr Kidd is an expert in spray drift (T - 204). He agreed (T - 208) that in the Orange area there were a number of orchards that did not have buffers but that there was "a higher risk now and they are decreasing in acreage and size". When asked if this was because of the increase in environmental protection he replied that this was a "little bit of both" because "it's got a lot to do with perception also". There was the urban/rural interface, there were different expectations and there was a perceived risk all over the state in relation to farm practices such as spraying. Consequently "a whole range of factors" would determine what sort of crops to grow and a "whole host of variables" would determine the risk (T - 208, lines 15 - 26).

He was asked whether he would advise a hypothetical apple orchard purchaser to buy Bonny Glen, because on these criteria, he would have to advise such a person not to go ahead. His reply was, however, not "no", but that he would take the purchaser through the risks, which included spray application, public perception, being close to town, people breaking into the orchard and stealing fruit and trespassing. The closeness of the orchard to town and to other public facilities gave rise to "a whole range of risks" (T 208 lines 36 - 44).

Did these risks outweigh the benefits? If the price was right, Mr Kidd would say "go ahead and do it" because this is possible for vineyards. As to his advice to Mr Hall, he said "My advice …was I reckoned the risk was too high because of the things that were happening in that area with the encroachment of the dams, etcetera and so forth, where they were. Now, that's the advice. The decision then always comes back to the person who owns the business (T 209 lines 3 - 8).

A significant reason for giving that advice was the closeness of the hospital. However, like Mr Collette, he was not able to explain why it was that the escaping of spray from the northern field was dangerous to the hospital 1.5 kilometres away when spray from the southern field was apparently not even a danger to the property next door (T - 212 - 213). His answer appeared to be that it was "more visible" (T - 213 line 35). The following exchange occurred at T - 214: "Q. You're suggesting are you, that over a distance of 1 and a half or so kilometers it makes a difference whether the spray is coming out of the one gap or the other? A. No, the perception, or seeing, yes. The perception of seeing, yes."

It soon transpired that Mr Kidd had not measured these respective gaps (T - 215 - 216) and he then suggested that different apples might make a difference (T - 216 lines 30 - 55).

Mr Kidd was also not able to explain why it was that if buffers were essential for good spraying management there was no reference to them in spraying manuals (T - 219 - 220), although he proffered the opinion that these guides were mainly for pilots who sprayed. However, these manuals talked about the need to inform neighbours that you were spraying, and clearly if there were buffers to prevent spray drift this would impact on the mandatory need to warn. By T - 220 he was retreating into generalizations such as looking at the variables, including who are the neighbours and where are the water supplies.

At T - 225 Mr Kidd was asked whether, absent reckless or willful disregard, the EPA would in fact prosecute anyone for spray drift. He expressed the view that the EPA would do so. This is inconsistent with a statement in his report (T - 225) and he retreated behind the statement that he did not have a legal background (T - 226).

At T - 227 Mr Kidd was asked if a vegetative strip, as opposed to a row of pine trees, would be a sufficient buffer. This statement was contained in a government brochure which Mr Kidd agreed was aimed at farms that did not have a tree buffer (T - 227).

As an expert on spray drift, it was Mr Kidd's opinion that was the crucial report relied upon by the plaintiff in relation to the removal of the remaining apple trees in the field. The above summary of his evidence shows how far Mr Kidd retreated from his position. His explanation of why spray drift from the field affected by the fire was so dangerous while spray drift from the south field (where there is no buffer) was not is incomprehensible. Ultimately, what seems to have been the reason for removal of the trees was a cocktail of concerns which included such disparate matters as the dangers of theft and trespass with the increasing urbanization of the area. There is nothing in Mr Kidd's evidence to support the contention that it was reasonably foreseeable that as a result of the fire all of the trees in this field would have to be removed.

Legal issues relating to the second category damages

In addition to these factual problems, I must determine whether the claim of pure economic loss is capable of being causally related to the property damage suffered by the plaintiff.

Senior counsel for the defendant draws my attention to the article "Liability for pure economic loss: yes, but why" in Volume 28 (1999) University of Western Australia Law Review 84, which was referred to with approval by McHugh J in Perre v Apand Pty Ltd (1999) 198 CLR 180 at 218. The defendant submits that, even if the facts favoured the plaintiff's claim that the field had to be cut down because of spray drift, the claim would differ in material respects from those where courts have awarded damages for pure economic loss and the facts do not fall into any of the categories identified by Professor Feldthusen in the article referred to in paragraph 20(b) above. Category 2 damages here are not "Relational Economic Loss", as defined, given the absence of any contractual or other legal relationship between Bonny Glen and Parkwood. Furthermore, Bonny Glen and Parkwood are not in the equivalent positions of the plaintiffs in Caltex Oil (Australia) Pty Ltd v The Dredge Willemstad (1976) 136 CLR 529 given the absence of any contractual relationship or legal entitlement on the part of Bonny Glen to the benefit of the trees on Parkwood (see also Hawkins v Clayton (1988) 164 CLR 539 at 594 and 601 per Gaudron J). The defendant in the instant case, unlike the defendant in Perre v Apand, had no actual knowledge that its negligent conduct would lead to the damage of the loss of the entire field as a consequence. In Perre, the defendant had actual knowledge of the very risk that materialised and this was an important consideration - see Gleeson CJ at 194/5. Finally, the defendant submits that there was a breach in the chain of causation by the plaintiff's decision in 2005 to remove all of the trees.

The plaintiff submits that a person in the position of Country Energy may owe a duty to take reasonable care not to cause purely economic loss by his or her negligent acts or omissions and both parties agreed that the following factors were identified in Perre v Apand (1999) 198 CLR 180 as being relevant: (a) reasonable foreseeability is a necessary, though not sufficient condition relating to duty of care; (b) the defendant should have actual knowledge of the risk of the plaintiff, although constructive knowledge may sometimes be sufficient (and in this regard there is reliance on Mr Middleton's acknowledgment of the purpose of the trees as a buffer);

(c) liability must not be indeterminate but must be able to be reasonably calculated and the defendant must know or have the means to know who are the members of the ascertainable class affected by his conduct;

(d) the plaintiff's vulnerability to risk is relevant, and this is particularly of importance in relation to an electricity supply.

The plaintiff draws my attention to the statement of Brennan CJ in Hill v Van Erp (1997) 188 CLR 159 at 168-169: "The objection that no claim for economic loss lies in negligence unless it is in respect of damages to the existing right or interests is, in my opinion, erroneous … A benefit that the plaintiff would have received but for the negligence of the defendant is a loss, for which damage may be recovered, whether or not the benefit would have been gratuitous."

This principle applies in both tort and contract and, accordingly, it is submitted that when the defendant foresaw or contemplated loss as a general character of the loss in question, the plaintiff will recover damages, even if the defendant did not foresee or contemplate the precise manner in which the loss in question occurred.

While I do not have a problem with this statement of the law, to argue that it was not merely reasonably foreseeable but inevitable that if Country Energy did not prune the trees a fire may occur (which I do accept), this does not mean that the removal of other fruit trees by Bonny Glen is reasonable or foreseeable. The plaintiff submits it is not necessary to show that the precise manner in which its loss or damage was sustained was reasonably foreseeable; it is sufficient that some loss or damage of the same general character is sufficient.

In Pyrenees Shire Council v Day (1998) 192 CLR 330 the High Court carefully explained the circumstances in which the doctrine of general reliance applied in limited situations. It is clear, especially when one has regard to the statements of McHugh J at 370, that the facts in the present case clearly fall within those limited situations, as this is a classic example where an authority provides services which have supplanted private responsibility, such as fire control or controlling air traffic. It is also fair to say that the public authority must know or ought to know, to use the words of McHugh J at 371 that the plaintiff's property would suffer damage unless care was taken. However, there was no challenge to findings of fact that the losses that were claimed flowed from the conduct of the council in failing to take steps to ensure that a deficient fireplace and chimney in an adjoining building were repaired (see Kirby J at 406). This appears to have remained unchallenged despite some strong hints from the bench, reading between the lines of Kirby J at 406. Consequently, the principles discussed by the High Court in Pyrenees Shire Council do not relate to the kind of loss under present consideration. As McHugh J goes on to note, whether or not the loss in question is able to be claimed will depend upon the facts in each case.

Accordingly I am not satisfied that the plaintiff has made out that the category 2 loss flowed from the negligent acts or from the breach of contract by the defendant.

This brings me to the challenge to the method of calculation of the loss. It is appropriate that I should determine the quantum of this loss even though I have found that it does not flow from the negligent act or the breach of contractual obligations of the defendant, in the event that there are disputed issues for consideration on appeal.

The defendant complains that the only documentation relied upon is the profit and loss statements and a selection of invoices. However, there is sufficient information available from the profit and loss statements and invoices provided. It ought not to be necessary for a business to produce every invoice, or even most of its invoices, as well as to call its bookkeeper in order to establish what its general trading position was. This was a substantial apple orchard which had been running for over thirty years.

The first issue is the loss of yields. These figures are not in contention as far as I understand the evidence. Nor is the identity of the market in dispute, namely the wholesale market for the sale of fully matured premium quality apples, which is the market for which most of the apples in this particular part of the orchard were destined, and the manufacturer's market for apples of inferior quality which are made into juices, pies, dried fruits and the like. The reason for the high quality of the apples in this orchard was because of the existence of the buffer, which meant that what is called "branch rub" is at a minimum. As a result the fruit was rarely bruised and was in premium condition. Nor was there any challenge to the yield from the trees. The real questions boil down to the amounts for which the Gala and Granny Smith apples could be sold per case and the costs which were incurred.

The plaintiff has met each of these issues by providing a selection of invoices for prices for cases of apples and also for costs. I am satisfied that there is sufficient evidence in relation to the sale prices for Gala apples, and in particular the red Gala apples which were grown in his orchard and which are at the top of the market. In contrast, the defendant's evidence consisted essentially of referring to general prices for apples and general costs.

Finally, there is the question of how long it will take the pine trees to grow. Again, this was not the subject of dispute in the course of the trial.

Accordingly, while I reject the portion of the claim which relates to category two damages of $753,396.72 total economic loss, I should indicate if I have erred in this regard, it is my view that the plaintiff has established through the production of sufficient invoices concerning actual sales prices and costs that if the apple orchard had been able to continue the quantum of the loss is as claimed by the plaintiff.

I note that the amount claimed is in excess of the jurisdictional limit. Senior counsel for the plaintiff indicated that any excess would be waived. Accordingly, if I have erred in holding that the plaintiff is not entitled to category 2 damages, judgment for the plaintiff should be entered in the sum of $750,000.00

This is a comparatively straightforward matter. The plaintiff has provided a number of receipts and invoices concerning yield, pack out and price. There is no dispute that the 28 Gala apple trees and 8 Granny Smith apple trees that were destroyed and the 55 Gala apple trees and 8 Granny Smith trees were damaged as a result of the fire. The dispute in this regard is essentially limited to past and future economic loss and calculation methods. However, I accept the figures put forward by the plaintiff for the following reasons.

The defendant complains at paragraph 45 of the written submissions that there is insufficient documentation in relation to economic loss. In particular, there were no sales documents for selling any Gala apples over the 18 months before the fire. Mr Hall said that there must be further invoices "because we do sell [sic] every year". Given that the orchard sells Granny Smith and Gala apples in large quantities, this clearly must be the case. The yield for the trees in question makes it clear that these must have been sold. The most likely explanation is that these documents were given to Mr Collette. Whatever the explanation, Mr Collette was able to give evidence and be cross-examined about these costs as well as to review the documentary information he had in his report.

Mr Gordon in his evidence for the defendant made a number of concessions about apple prices. He conceded that apple prices were very high in 2006 and 2007 (T-500) and he conceded it was possible for another co-operative to obtain $42 for twelve kilogram three layer cases of Gala apples (T-500), although he said that this was a "spot market". Nor was he surprised to hear that others had obtained similarly high prices. He said "You might get the $36 or $32 or even higher than that in the top two size ranges, but I argue they won't be across the board and won't average that across the board…" (T-501). He was not surprised to hear that Bonny Glen had been selling twelve kilogram cases of Gala apples for $34.80 (T-501). Essentially what he was saying was that the plaintiff's claim was at the top end of the range: "Q. You're just saying top end of the range? A. That's correct."

In other words, he was not saying it was impossible, just at the top of the range. Yet the evidence was that this was the top field in what was clearly a very successful orchard. As for the costs, Mr Gordon thought that some of the costs set out by the plaintiff were in fact too low (T-502). He agreed it was necessary to know all of the details of the business structure that Bonny Glen was operating on to express an adequate view, and while he was not prepared to assume that they would get the yields and pack out rates that had been assumed by Mr Collette, he had to concede that he had not had the benefit of looking at the details of Bonny Glen's business structure. He conceded that if this was the premier lot in the Bonny Glen orchard, that might explain why some of these numbers were higher than he would otherwise expect (T-503.25).

In other words, there were substantial concessions from Mr Gordon which materially assisted the plaintiff's case, and in those circumstances the complaints of the defendant about alleged inadequate documentation must mean very little.

I have not dealt with the other items in the list, such as the removal of the dead trees. The quantum for these items is not in dispute. The essential difference between the category one damages as estimated by the plaintiff ($59,785.65) and the defendant ($18,918) relates to the past and future economic loss claims consequent upon the removal of the trees that were destroyed, plus an allowance for the trees that were damaged.

Accordingly, I accept the plaintiff's quantification of the category one damages and will award the plaintiff $59,785.65.

I was not addressed on the availability or otherwise of interest in relation to damages in the event of my finding that there was a breach of contract between the plaintiff and defendant as well as a breach of duty of care.

I have granted a liberty to apply, which the parties may exercise in relation to any outstanding matters, such as any application for indemnity costs.

Orders (1) Judgment for the plaintiff in the sum of $59,785.65. (2) Defendant pay plaintiff's costs. (3) Exhibits retained for 28 days. (4) Liberty to apply.

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