Hardchrome Engineering Pty Ltd v Kambrook Distributing Pty Ltd [2000] VSC 359

1735. At common law contributory negligence was a complete defence. However, now by reason of statute, contributory negligence does not defeat a plaintiff's claim but results in a reduction of the amount of damages recoverable.

1738. See Wrongs Act 1958 s.26.

1741. In determining whether a plaintiff has failed to take reasonable care for his or its safety and well-being, factors such as moral blameworthiness of the parties involved, the degree of departure from what is expected from the reasonable man and the responsibility for causing the damage are to be considered. See Davies v Swann Motor Co (Swansea) Ltd (1949) 1 All ER 620 and Melbourne and Metropolitan Tramways Board v Postneck [1959] VicRp 6; (1959) VR 39. In the end it is a question of determining what is just and equitable having regard to the claimant's share and responsibility of the damage and this should be determined in accordance with common sense and experience.

1744. In my opinion Hardchrome was guilty of contributory negligence. It failed to protect its own interests by adopting the simple step of turning off the fryer over the weekend. Leaving an electrical appliance on in a deserted factory over a three day period where the fryer could attain temperatures in excess of 200°C with much combustible material about it, establishes negligence beyond doubt.

1747. In Podrebersek v Australian Iron and Steel Pty Ltd [1985] HCA 34; (1985) 59 ALJR 492 at 494 the High Court stated the principles as follows -

"The making of an apportionment ... involves the comparison both of culpability, ie the degree of departure from the standard of care of the reasonable man ... and of the relative importance of the acts of the parties in causing the damage."

1751. In carrying out the comparison and consideration of the relevant importance of the acts of both Hardchrome and Kambrook in causing the damage, the matters of substance are that Kambrook was negligent in supplying a defective product in circumstances where it should have investigated and checked the units before sale. A supplier selling electrical appliances which have a potential of doing great harm if defective carries a heavy burden to ensure the product is safe to use. It is a continuing duty which rests upon suppliers such as Kambrook to ensure that the products are not only safe at the time of sale but remain safe to operate thereafter.

1754. On the other hand, it is not an unfair expectation of a supplier such as Kambrook that those who use the product will use it with some degree of care in order to protect their own interests. But equally, Kambrook, like all other suppliers, must anticipate that there will be people in the community who may act carelessly in using the product. In my opinion the apportionment of liability is 60% against Kambrook and 40% against Hardchrome. Accordingly, the damages recoverable by Hardchrome should be reduced by 40%.

1759. Julias Investments at all relevant times was the registered proprietor of the factory premises which were damaged by fire on 9 March 1992. The parties have agreed that the loss suffered by Julias was in the sum of $87,000 inclusive of interest pursuant to statute and any liability for GST.

1762. At the time of the fire the premises were leased to Hardchrome pursuant to a lease dated 24 October 1991 for a period of two years, four months and 14 days commencing 16 December 1991.

1765. Julias Investments has relied upon two causes of action against Hardchrome. First, alleging a breach of the lease between the parties which caused the landlord damage and secondly, a claim in common law negligence arising out of the activities of Hardchrome in leaving the fryer on unattended over a long weekend.

1768. It was a term of the lease that Hardchrome would not carry on any dangerous activity at the premises.

"1. The lessee HEREBY COVENANTS with the lessor: ...

(e) not to use the premises save for the purpose set out in the schedule ... and not to carry on or allow or suffer to be carried on any noxious offensive or dangerous activity or trade nor do any act which is an annoyance or nuisance to the lessor or adjoining owners or occupiers ... "

1778. It is submitted by Julias Investments that the operation of the deep fryer heating Crocell to a temperature in excess of 200°C over a long weekend in an empty factory was a dangerous activity.

1781. Many witnesses in this case expressed the view that it was dangerous, extremely risky and was an accident waiting to happen.

1784. It did not need any witness to express that view because in my opinion the tribunal of fact is entitled to rely upon life's experiences, general knowledge and common sense and taking those matters into account, in my opinion it is clear that Hardchrome was indulging in a dangerous activity and was in breach of clause 1(e) of the lease.

1787. Julias Investments also relies upon an implied term of the lease, namely, that Hardchrome would use the premises in a tenant-like manner and would therefore conduct the business in a reasonably safe manner and with due care.

1790. I accept that it was an implied term of this lease that Hardchrome would use the premises in a tenant-like manner.

1793. In Warren v Kean [1953] EWCA Civ 1; (1954) 1 QB 15 at p.20, Denning LJ said -

"Apart from express contract, the tenant owes no duty to the landlord to keep the premises in repair. The only duty of the tenant is to use the premises in a husband like or what is the same thing, a tenant like manner."

1797. His Lordship went on to consider what is meant by the phrase "in a tenant like manner". He discussed a number of illustrations. One of them was in the following terms -

"He must, if he is going away for the winter, turn off the water and empty the boiler."

"In short he must do the little jobs about the place which a reasonable tenant would do. In addition, he must, of course, not damage the house wilfully or negligently."

1805. I am satisfied that Hardchrome in leaving on the deep fryer over the long weekend in a deserted factory was in breach of its obligation to use the premises in a tenant-like manner.

1808. I am satisfied that the breaches of the terms of the lease caused the damage suffered by Julias Investments and it is entitled to recover the agreed sum of damages.

1811. It is unnecessary to consider the question of negligence against Hardchrome. However, in case this matter goes further it is necessary to briefly summarise my views.

1814. I am satisfied that Hardchrome owed a duty of care to Julias Investments based upon the principles established by Donoghue v Stevenson. I am satisfied that Hardchrome was negligent in leaving the fryer on over the weekend, that the negligence was a cause of Julias Investments damages and it is accordingly entitled to damages in the agreed sum.

1819. The claim by Julias Investments against Kambrook is in tort. The claim is one of negligence against Kambrook.

1822. In my opinion, based upon the principles of Donoghue v Stevenson, Kambrook as the company involved in the design and manufacture of the fryer and the vendor of the unit in Australia owed a duty of care to Julias Investments as an entity which foreseeably could suffer damage as a result of a defective product. In this regard Kambrook owes a duty to all those who may suffer damage as a result of the use by a consumer of a defective product. See Norton Australia Pty Ltd v Streets Ice Cream Pty Ltd [1968] HCA 61; (1968) 120 CLR 635 at pp. 642 and 651.

1825. I am not concerned with economic loss. The defect in the fryer caused property damage to Julias Investments. It is reasonably foreseeable that if care is not taken a defective product can cause a fire which can cause damage to entities other than the user. Further, in my opinion there is that degree of proximity necessary between Kambrook and Julias Investments to establish the relationship requiring a duty of care.

1828. For reasons that I have already stated it is my opinion that Kambrook was negligent and its negligence was a cause of the damage suffered by Julias Investments.

1831. Julias Investments is entitled to recover the agreed sum for damages from Kambrook.

Hardchrome's indemnity for damages payable to Julias Investments

1836. Hardchrome submit that it is entitled to recover from Kambrook the amount which it has to pay to Julias Investments. It is put that the amount which Hardchrome has to pay to Julias Investments is part of the damages it suffers as a result of the breach of contract by Kambrook and that the damages are not too remote.

1839. In my opinion the damages directly and naturally result from the breach.

1842. In my opinion the chain of causation for the reasons already stated has not been broken by any conduct on the part of Hardchrome and accordingly it is entitled to be indemnified by an award of damages equivalent to what it has to pay to Julias Investments.

1845. The cases establish that a plaintiff who has been sued by another for damages arising out of the same set of circumstances and is suing another, is entitled to recover as part of its damages, the damages that it has to pay to the other party.

1848. In Mowbray v Merriweather (1895) 2 QB 640 the defendant breached a contract of supplying a crane by supplying a defective crane which broke while being used by the plaintiff and in consequence one of the plaintiff's workmen was injured. The workman brought an action for compensation and the plaintiffs settled the proceeding by paying out the workman. It was held that the plaintiffs' liability to pay compensation to their workmen was the natural consequence of the defendant's breach of contract, and such as might reasonably be supposed to have been within the contemplation of the parties when the contract was entered into and the damages claimed were not, therefore, too remote.

"What is the rule of law on the subject? The test is rightly layed down by Charles J when he says that the question is whether the damages can 'be regarded as a natural consequence of the defendant's breach of contract, or, in other words, a consequence which might reasonably be supposed to have been within the contemplation of the parties'. I think that the plaintiffs' contention is correct, and that, if the defendant, having contracted to supply a sufficient chain, supplies a rotten chain for the purposes of the work which he knows will be done by the plaintiffs' workmen, it may reasonably be supposed to have been in his contemplation that injury might result to a workman in respect to which the plaintiffs would be liable to pay damages. The plaintiffs owed no duty to the defendant to examine the chain before allowing it to be used by their workmen. The only duty they owed in that respect was to the workmen."

1855. Paraphrasing what Lord Esher M.R. said, the use by Hardchrome of the defective fryer without any knowledge of its defect, resulted in the thermostat failing due to the defect, overheating and the fire, and it follows that that can be regarded as the natural consequence of the defendant's breach of contract. It also follows that if a fire occurs it is the natural consequence of the breach that the fire could cause property damage to another. In other words, a consequence which might reasonably be supposed to have been in the contemplation of the parties at the time of the contract.

1858. In Britannia Hygienic Laundry Company Limited v John I. Thornycroft (1925) 41 TLR 667 the plaintiff's vehicle was overhauled by the defendants. The repairs were carried out negligently. Very shortly after the lorry was returned it was in use on the highway, one of its wheels came off and damaged the van of another. The van owner sued and he won his action at the hearing but the decision was reversed on appeal. He was a man of straw and unable to pay the costs incurred.

1861. The plaintiffs sued the repairer for breach of contract and negligence and it was held that the plaintiffs were entitled to recover as special damages against the defendants, the costs of the previous litigation.

1864. An appeal against the decision was successful on the ground that the repairer was not negligent. But the statement of principle was not criticised. See (1926) 42 TLR 198.

1867. In my opinion Hardchrome is entitled to recover from Kambrook any amount that it has to pay to Julias Investments. The damage that flows is directly attributable to the defect of the thermostat probe and the fact that Hardchrome contributed to the damage suffered by Julias Investments by its negligence, does not preclude it from recovering the full amount.

1870. This is made clear by what the High Court said in Astley v Austrust Ltd (1999) 197 CLR 1 at p.37 where Gleeson CJ, McHugh, Gummow and Hayne JJ said -

"Absent some contractual stipulation to the contrary, there is no reason of justice or sound legal policy which should prevent the plaintiff in a case such as the present recovering all the damage that is causally connected to the defendant's breach even if the plaintiff's conduct has contributed to the damage which he or she has suffered. By its own voluntary act, the defendant has accepted an obligation to take reasonable care and subject to remoteness rules, to pay damages for any loss or damage flowing from a breach of that obligation. If the defendant wishes to reduce its liability in a situation where the plaintiff's own conduct contributes to the damage suffered, it is open to the defendant to make a bargain with the plaintiff to achieve that end. Of course, the result of such a bargain may be that the defendant will have to take a reduced consideration for its promise to take reasonable obligations. But the bargain will be the product of the parties' voluntary agreement to subject themselves to their respective obligations."

1874. Mr Gunst QC did not seek to argue any question of causation or remoteness of damage in respect of this category of loss in addition to the submissions put in relation to causation and remoteness in the claim brought by Hardchrome against Kambrook.

1877. It follows that Hardchrome is entitled to recover the amount payable to Julias Investments.

1882. Kambrook breached the contract of sale with Hardchrome by supplying a deep fryer which was defective and not of merchantable quality. The defect, the inadequate gap in the thermostat probe, caused arcing which ultimately led to the contact points being welded and a continuous supply of electricity to the fryer. The fryer overheated and reached very high temperatures, probably in excess of 400°C. The overheating caused a fire at the factory premises on the morning of 9 March 1992 which caused substantial damage to the building and the contents.

1885. I am satisfied that the breach of contract caused the fire which in turn caused the damage to Hardchrome. The damages it claims, namely, its own loss, together with the damages it is required to pay Julias Investments are recoverable from Kambrook.

1888. I am also satisfied that Kambrook was negligent in selling a defective article to Hardchrome, that the negligent act was a cause of Hardchrome's damages but its entitlement to damages is reduced by 40% for contributory negligence.

1891. Julias Investments has established its two causes of action against Hardchrome and also its cause of action against Kambrook and it is entitled to recover the amount of agreed damages.

1894. Two further questions have to be addressed. The first is a question of interest and failing agreement between the parties I will hear submissions on the question of interest pursuant to the Supreme Court Act 1986.

1897. The other question concerned the new GST which was introduced into Australia on 1 July 2000. The agreement between the parties concerning the quantum of damages is subject to any liability imposed by the new GST. As I understand the agreement, if GST is payable on the damages then it is expected that the party responsible for paying the damages is to pay the extra amount for GST.

1900. I will hear submissions from the parties in respect to the question of GST applying to the damages, interest and costs.