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[2013] NSWADT 86
respondent. The Application is dismissed. Costs orders deferred pending any submissions filed within 14 days, otherwise no order as to costs pursuant to s 88 of the Administrative Decisions Tribunal Act 1997.
A landlord sued his laundromat tenant for the cost of fire damage, claiming the tenant had left hot washed-and-dried clothes in a trolley where they caught alight by themselves. Experts agreed this self-heating was the most likely cause, but the tribunal ruled the landlord had not proved the tenant should have known this was a real risk. The tenant had run the business for years without any fires using the same routine. Because the law (under the Civil Liability Act) only makes someone liable if the danger was one they knew or should have known about and could reasonably have guarded against, the claim failed and was dismissed. The tribunal could decide the lease-based part of the claim but not a pure negligence lawsuit.
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The applicant, Neophytos Charalambous, owned a mixed-use building at 460 Bunnerong Road, Matraville containing a ground-floor shop and first-floor residence. He leased the shop to the respondent, Eric Au Yeung, who operated it as a laundromat—an activity expressly listed in Schedule 1 to the Retail Leases Act 1994, rendering the premises a “retail shop”. Late on 5 July 2010 or in the early hours of 6 July 2010 a fire occurred inside the shop, causing extensive smoke and structural damage that rendered the premises unusable for many months.
The respondent had paid rent in advance until 1 August 2010 but made no further payments and never resumed trading, although the lease did not expire until 30 April 2012. The applicant carried out repairs himself and through contractors, then re-let the shop to a new tenant from 16 May 2011. He commenced proceedings in the Retail Leases Division of the Administrative Decisions Tribunal seeking $62,688.24, itemised as repair costs ($28,926), lost rent for nine-and-a-half months ($15,031.18), legal fees, expert fees, inspection costs, fire brigade and water charges.
The applicant’s case was that the fire originated from heated laundered items that had not been allowed to cool and were placed in a yellow plastic trolley left against the southern wall. Particulars alleged failure to cool items properly, use of an unsuitable container, and storage near other combustible materials. Both common-law negligence and breach of several lease covenants (cll 3(a), 3(b), 3(m) and 4(a)) were pleaded. The respondent contested jurisdiction, denied that he had caused the fire by negligence, and pointed to alternative possible causes including electrical malfunction or arson.
Expert evidence was called from forensic investigators Gregory Kelly (for the applicant) and James Munday (for the respondent) together with electrical engineer John Gardner (for the respondent). Photographic evidence, including a post-fire photograph (no 104) showing burn patterns on the southern wall matching the height and shape of the yellow trolley, assumed central significance. After a two-day hearing in February 2013 and the receipt of late supplementary submissions from both sides, Judicial Member Rickards delivered judgment on 24 April 2013 dismissing the application.
The Tribunal first separated the jurisdictional and substantive questions. Relying on the Appeal Panel’s reasoning in Lyons Road Pty Ltd v The Owners Strata Plan 38722 [2008] NSWADTAP 28 at [83] and [87], it held that while a pure common-law negligence claim fell outside the statutory definition of “retail tenancy dispute” in s 63 of the Retail Leases Act 1994, the contractual claim based on the lease covenants did fall inside jurisdiction because those covenants expressly turned on whether the lessee or his agents had caused damage by “neglect or default”. Paragraphs 23–28 of the reasons carefully trace this distinction and note that cl 3(a) (maintenance obligation) is displaced only where fire damage is shown to result from the lessee’s neglect; hence the same factual inquiry into negligence was required for the contractual claim.
On the merits the Tribunal applied the Civil Liability Act 2002 in full. Section 5A brought both tortious and contractual claims for harm (including property damage and economic loss) under the Act’s negligence principles. Sections 5B and 5C supplied the governing test: a risk is not actionable unless it was foreseeable, not insignificant, and a reasonable person would have taken precautions after weighing probability, likely seriousness, burden of avoidance and social utility. Section 5D required both factual causation and appropriate scope of liability, assessed prospectively.
The Tribunal accepted, on the balance of probabilities, that the fire originated from self-heating of laundered items stored in the yellow trolley ([42], [53]–[54]). Mr Kelly’s reconstruction of burn patterns, the trolley’s deformed state, and the respondent’s own concession that it was occasionally used for dried clothes combined to make spontaneous combustion more probable than electrical failure or arson. Nevertheless, that factual finding did not translate into legal liability. There was simply no evidence that a person in the respondent’s position—operating an incident-free laundromat for approximately seven years using conventional methods—knew or ought to have known that recently dried towels (even those possibly retaining trace massage oil from a weekly commercial customer) carried a material risk of spontaneous combustion after hours ([60]–[76]). The expert literature cited by Mr Kelly appeared to reflect knowledge that had crystallised only in “recent years” after the 2010 fire itself.
The Tribunal expressly rejected hindsight reasoning. It quoted Adeels Palace Pty Ltd v Moubarak [2009] HCA 48 at [30]–[31] to emphasise that s 5B(2) factors must be weighed before the event, not by reference to the fire that in fact occurred ([80]). Suggestions that the respondent should have separated loads, checked power boards, switched off appliances or quarantined flammable contents were either unrelated to the accepted cause or classic examples of reasoning backward from the accident. Because the risk was not shown to be foreseeable, the precondition in s 5B(1)(a) was not met and breach could not be established. The contractual claim therefore failed and the application was dismissed ([82]).
Prior to this decision the Retail Leases Act 1994 had been construed broadly but not infinitely. The Appeal Panel in Lyons Road had already drawn the line between disputes “between the parties to a lease” and those involving strangers, and had warned against turning the Tribunal into a generalist common-law court. This judgment applies and reinforces that boundary at [19]–[23], confirming that a retail landlord cannot simply plead negligence and expect the Tribunal to adjudicate it unless the claim is anchored in a lease covenant that itself requires proof of neglect.
On the negligence side, the Civil Liability Act 2002 had been in force for a decade. Wyong Shire Council v Shirt (1980) 146 CLR 40 and Australian Safeway Stores Pty Ltd v Zaluzna (1987) 162 CLR 479 supplied the pre-Act common-law backdrop, but the Tribunal was careful to note that those authorities must now be read through the statute. The decision at [67]–[70] integrates Sibraa v Brown [2012] NSWCA 328, which had emphasised the prospective nature of the s 5B inquiry. The present reasons add an illustration from the retail-tenancy context: even a remote risk of self-heating in commercial laundries is not actionable if the evidence does not show that an ordinary operator in the tenant’s position ought to have known of it.
After the decision, the law remained unchanged in its textual formulation. However, the judgment supplies a concrete forensic template for laundromat and similar high-fuel-load retail cases: plaintiffs must adduce positive evidence of the operator’s actual or constructive knowledge of spontaneous-combustion risks at the relevant time, not merely general expert assertions formed after the event. The costs presumption in s 88 of the Administrative Decisions Tribunal Act 1997 was left undisturbed, with the Tribunal inviting further submissions but ultimately making no order.
Paragraph [31] quotes ss 5B and 5C of the Civil Liability Act in full. In plain English: you are only negligent if the danger was one you should have seen coming, it was more than a trivial chance, and a sensible person in your shoes would have done something about it. The Tribunal uses this as the lodestar for the entire liability analysis.
At [42] the Tribunal draws an inference from physical evidence: “the physical characteristics of the shape and height of the burnt yellow trolley … the burn marks on the southern wall … and the concession of the Respondent … combine to create a reasonable inference that this yellow trolley was located in the position … at the time immediately prior to the occurrence of the fire.” Translation: the scorch marks and melted plastic told the real story even if the respondent’s memory was imprecise.
Paragraph [60]–[61] is critical: Mr Kelly’s experience of laundry fires “appears to have largely arisen in ‘recent years’” and “the extent to which Mr Kelly’s knowledge has been imparted to commercial laundry operators such as the Respondent is unknown.” The Tribunal’s plain-English point is that expert hindsight cannot be attributed to the tenant without evidence of dissemination.
The dispositive passage at [82] states that the risk of spontaneous combustion “has [not] been shown to be reasonably foreseeable by a person in the position of the Respondent in the period prior to the onset of the fire. Negligence … has therefore not been established.” Translation: no proof the tenant should have seen this coming, so he is not legally responsible.
This decision is triggered whenever a retail landlord seeks to recover fire-damage losses from a tenant under a lease that contains a “neglect or default” exception to the landlord’s repair obligation. The fact pattern must involve a retail shop (here a laundromat), damage by fire, and a causal hypothesis of self-heating or spontaneous combustion of stock or laundry. The landlord will fail unless affirmative evidence is led that the risk was one the tenant knew or ought reasonably to have known about before the fire. Years of incident-free operation using the same systems is powerful evidence against foreseeability. Claims that mix pure tort with lease covenants will be severed: only the latter survives jurisdictional scrutiny. Expert evidence that a particular ignition mechanism is “more probable than not” after the event is insufficient if it does not address the tenant’s pre-fire state of knowledge. Suggested precautions that could only be identified with the wisdom of hindsight are disregarded.
The judgment has been treated as a straightforward application of Lyons Road and the Civil Liability Act template rather than a law-changing decision. Subsequent Retail Leases Division decisions have cited the jurisdictional analysis at [19]–[23] when declining to entertain standalone negligence suits between landlords and tenants. The prospective-assessment reasoning drawn from Adeels Palace at [80] has been followed in other retail-damage cases to exclude hindsight arguments about fire-prevention measures. Because the Tribunal grounded every proposition in the expert reports and the respondent’s own evidence, later benches have accepted its factual finding that spontaneous combustion can be the probable origin of a laundromat fire while still requiring separate proof of foreseeability. No appellate court has reversed or criticised the reasoning; it remains a reliable first-instance illustration of the interaction between the Retail Leases Act’s limited jurisdiction and the statutory negligence principles.
Several questions remain unanswered on the face of the reasons. First, what degree of dissemination of scientific or industry knowledge is required before a risk becomes “foreseeable” to an ordinary laundromat operator? The Tribunal notes the absence of evidence on this point but does not articulate a general test. Second, would a different outcome follow if the lease contained an absolute indemnity against fire regardless of cause, or if the tenant had received specific warnings from insurers or suppliers about oil-laden towels? The judgment turns on the particular clauses before it and the evidentiary vacuum; different covenants could shift the analysis. Third, the precise interplay between s 5D “scope of liability” and the economic-loss heads claimed (lost rent, expert fees) was not reached once breach failed; the limits of recoverable heads in a successful retail-tenancy fire case therefore remain untested in this Tribunal. Finally, the decision leaves open whether a landlord’s own failure to install sprinklers or smoke alarms could ever constitute contributory negligence or break the chain of causation in a case where tenant negligence is established—issues not engaged on these facts.
Most practitioners assume that once experts agree on the physical cause of a fire the liability battle is largely won; this judgment demonstrates the opposite. The real battle is almost always on the s 5B foreseeability gateway, which demands evidence of what the particular operator ought to have known at the time, not what the forensic community later discovered. Another trap is treating the Retail Leases Division as a cheap surrogate for the District Court; the jurisdictional line drawn from Lyons Road is sharper than many realise, and pleading “in the alternative” does not automatically confer power. Finally, late submissions are dangerous—even though the Tribunal was forgiving here, the reasons at [14]–[15] make clear that unexplained delay risks procedural prejudice and could easily produce a different procedural outcome in a less indulgent forum.
Background to Dispute 1The Applicant is the owner of a building located at 460 Bunnerong Road, Matraville, New South Wales which consists of a ground floor shop and a first floor residence. The Applicant leased the shop located on the ground floor ("the premises") to the Respondent. 2The premises were used at all relevant times as a Laundromat. This use is listed within Schedule 1 of the Retail Leases Act 1994 (the "RL Act"); accordingly the premises are deemed to be a "retail shop". 3Late in the evening of 5 July 2010, or in the early hours of the following morning, a fire occurred at the premises which caused extensive damage and caused the premises to be unusable for a significant period of time. 4The Respondent did not return to operate his business at the premises following the fire. The term of the subject retail lease agreement was until 30 April 2012. The Respondent had paid rent in advance up to 1 August 2010, but paid no further rent after that time. 5Following the fire, the Applicant proceeded to repair the premises. The building was subsequently leased to a new tenant on 16 May 2011. 6The Applicant claims the sum of $62,688.24 from the Respondent for expenses said to have been incurred because of the fire. The components of this amount are set out in paragraph 19 of the Application and are as follows: (a)the cost of repairs $28,926.00 (b)The loss of rent at $1,584.92 per month incl. GST from 2 August 2010 to 15 May 2011 being 9 months and 15 days $15,031.18 (c) legal fees for JSZ $7,795.35 (d)Greg Kelly & Associates $8,766.80 (e)Tyrrells Property Inspections $1,716.00 (f)NSW Fire Board $ 30.00 (g)Sydney Water - water usage $ 422.91 TOTAL $62,688.24 7The basis of the Applicant's claim against the Respondent is set out in paragraph 16 of the Application as follows: "16. The fire was caused by the actions of the Respondent, his servants, employees or agents. PARTICULARS a. Heated articles which had not sufficiently cooled were left in a container b. Those articles self ignited causing the fire. c. The Respondent failed to take proper steps to ensure that heated items were sufficiently cooled before placing them in a container. d. The Respondent left the container in a place and a container which was not sufficient to enable the heated items to cool down. e. The Respondent left the heated items in place in close proximity to other items which could catch fire." 8The above pleading does not specify the nature or basis of the legal duty owed to the Applicant which is said to have been breached by the Respondent. However, during the course of the hearing and then in submissions, the Applicant's claim was confirmed as being based upon a breach by the Respondent of his common law duty to take reasonable care in the operation of his business at the premises (this is later referred to within this decision as the "common law claim"), and also upon breach by the Respondent of the conditions of his retail lease agreement with the Applicant (which is later referred to in this decision as the "contractual claim"). 9In response, the Respondent's preliminary contention is that the Tribunal has no jurisdiction to determine the Applicant's claim. If the Tribunal does determine that it has jurisdiction, the Respondent alternatively submits that the Tribunal cannot be satisfied that the fire was caused by the Respondent, as is alleged by the Applicant, or that the Respondent's negligence caused the fire.
The Hearing 10Each party provided expert evidence as to the likely cause of the fire. 11Both of the parties and each of their respective experts gave evidence at the hearing which extended over two days commencing 5 February 2013. 12Following completion of the evidence, even though initial submissions from both parties had been handed up, each party sought an opportunity to lodge further submissions. After hearing from Counsel for each party, orders were made that each party was to file and serve any further submissions by 13 February 2013, including submissions as to costs, and that each party was to then file and serve any submissions in reply by 20 February 2013. 13In response to the orders set out in paragraph 12 above, the following occurred:
Jurisdiction and Applicable Law 16Pursuant to Section 71 of the RL Act, the Tribunal has jurisdiction to determine a "retail tenancy claim". Section 70 of the RL Act provides that the term "retail tenancy claim" means: "a claim in connection with a liability or obligation with which a retail tenancy dispute is concerned ..." 17The term "retail tenancy dispute" is in turn defined by Section 63 of the RL Act to be: "any dispute concerning the liabilities or obligations (including any obligation to pay money) of a party or former party to a retail shop lease or former lease, being liabilities or obligations which arose under the lease or which arose in connection with the use or occupation of the retail shop to which the lease or former lease relates." 18The Applicant's common law claim and his contractual claim against the Respondent must be separately considered in relation to the issue of jurisdiction. 19The observation that a dispute may be based only upon negligence but may still possibly fall within the Tribunal's jurisdiction, provided that the dispute is between parties to a retail lease agreement, was made by the Appeal Panel in Lyons Road Pty Ltd v The Owners Strata Plan 38722 (RLD) [2008] NSWADTAP 28: "(83) Our view as to the proper scope of 'retail tenancy dispute' in section 63 and 'retail tenancy claim' in section 70(a) is consistent, we believe, with the observation by Kirby J at [37] in Taylor Farms (see [28] above) that 'negligence by the landlord impacting upon the tenant, where damage was foreseeable, may be enough' to fall within the definition in section 63. .........For present purposes, the crucial element of Kirby J's observation is that he was referring to a dispute or claim arising between the parties to a lease, not (as in the present case) between a party and a 'stranger'." 20The Appeal Panel in Lyons Road also emphasised the restricted and special area within which the legislature intended the Tribunal to operate: (87) We attach some importance, as Rein AJ did in Pascoe v Holyoake [2006] NSWSC 64 at [20], to the notion that the legislature would appear to have envisaged the Tribunal (or more specifically, its Retail Leases Division) as 'a specialist forum in which retail tenancy disputes should be heard'. If the Appellant's contentions in this appeal were accepted, the range of issues that the Tribunal would be required to determine would go beyond such specialist knowledge and experience, as it possesses. 21The mere fact that parties in proceedings before this Tribunal are respectively the lessor and lessee of retail shop premises does not then, of itself, mean that the subject matter of their dispute falls within the jurisdiction of this Tribunal even though, as pointed out by the Applicant, there is ample authority for the proposition that the jurisdiction of this Tribunal is widely framed. 22The Tribunal has wide powers under section 72 of the RL Act to make orders in relation to a "retail tenancy claim", which must relate to a "retail tenancy dispute" which, in turn, must arise in some real and tangible way from the retail lease agreement itself. 23The Tribunal is not empowered to stray into determination of the common law claim which is brought in these proceedings by the Applicant, but it does have jurisdiction to determine the extent of any liability of the Respondent arising under the subject retail lease agreement between the parties; this is the contractual claim brought by the Applicant. 24In determining the contractual claim, the Tribunal has considered the submissions made by the parties as to the construction of clauses 3(a), 3(b), 3(m) and 4(a) of the retail lease agreement. 25Clause 3(a) of the retail lease agreement provides that the lessee is responsible for the maintenance of the premises in "good and efficient working order and condition ..." unless, as is relevant to these proceedings, there has been damage by a fire which has not been caused by any neglect or default on the part of the lessee or his agents. 26The Tribunal does have jurisdiction to consider whether the Respondent is liable to compensate the Applicant pursuant to clause 3(a) which requires determination as to whether the subject fire was caused by negligence on the part of the Respondent. The damages which are claimed by the Applicant are for loss of rent claimed to be payable pursuant to the lease agreement, together with expenses claimed to have been incurred by the Applicant as a result of the fire. 27It should be noted at this point that, in the event that it is not established that the fire was caused by negligence on the part of the Respondent, the Tribunal considers that none of the provisions of clauses 3(a), 3(b) or 4(a) impose liability upon the Respondent for any loss arising from the fire. The provisions of clause 3(a) of the lease agreement override those of clause 3(b) in the circumstances of these proceedings. Clause 4(a) relates to removal of fixtures and fittings, and is not considered relevant. 28The indemnity provided by the Respondent to the Applicant pursuant to clause 3(m) of the lease agreement is also based upon negligence, and the Tribunal accordingly has jurisdiction to determine whether such negligence exists and whether it has caused loss to the Applicant; clause 3(m) imposes liability upon the Respondent for any "loss and damage to the demised premises ... caused by ... the lessee's ... neglect or default happening in the demised premises." 29In determining whether the lessee has been negligent, the Tribunal is bound by the provisions of the Civil Liability Act 2002 (the "CL Act"). Section 5A of the CL Act provides as follows:- 5A Application of Part (1) This Part applies to any claim for damages for harm resulting from negligence, regardless of whether the claim is brought in tort, in contract, under statute or otherwise. 30In turn, the term "harm" is defined by section 5 to include damage to property and economic loss, and the term "negligence" is defined to mean a failure to exercise reasonable care and skill. 31The relevant principles which the Tribunal must apply in determining whether the Respondent has been negligent are set out in sections 5B and 5C: 5B General principles (1) A person is not negligent in failing to take precautions against a risk of harm unless: (a) the risk was foreseeable (that is, it is a risk of which the person knew or ought to have known), and (b) the risk was not insignificant, and (c) in the circumstances, a reasonable person in the person's position would have taken those precautions. (2) In determining whether a reasonable person would have taken precautions against a risk of harm, the court is to consider the following (amongst other relevant things): (a) the probability that the harm would occur if care were not taken, (b) the likely seriousness of the harm, (c) the burden of taking precautions to avoid the risk of harm, (d) the social utility of the activity that creates the risk of harm 5C Other principles In proceedings relating to liability for negligence: (a) the burden of taking precautions to avoid a risk of harm includes the burden of taking precautions to avoid similar risks of harm for which the person may be responsible, and (b) the fact that a risk of harm could have been avoided by doing something in a different way does not of itself give rise to or affect liability for the way in which the thing was done, and (c) the subsequent taking of action that would (had the action been taken earlier) have avoided a risk of harm does not of itself give rise to or affect liability in respect of the risk and does not of itself constitute an admission of liability in connection with the risk. 32If, after applying the above principles, the Tribunal is satisfied that the Respondent has been negligent, it must then apply the principles set out within section 5D of the CL Act in order to determine whether the Respondent's negligence caused the fire: 5D General principles (1) A determination that negligence caused particular harm comprises the following elements: (a) that the negligence was a necessary condition of the occurrence of the harm ( "factual causation"), and (b) that it is appropriate for the scope of the negligent person's liability to extend to the harm so caused ( "scope of liability"). (2) In determining in an exceptional case, in accordance with established principles, whether negligence that cannot be established as a necessary condition of the occurrence of harm should be accepted as establishing factual causation, the court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party. (3) If it is relevant to the determination of factual causation to determine what the person who suffered harm would have done if the negligent person had not been negligent: (a) the matter is to be determined subjectively in the light of all relevant circumstances, subject to paragraph (b), and (b) any statement made by the person after suffering the harm about what he or she would have done is inadmissible except to the extent (if any) that the statement is against his or her interest. (4) For the purpose of determining the scope of liability, the court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party
The Hearing 33The Applicant swore an affidavit on 24 August 2012 which was admitted into evidence. He was also cross examined. His affidavit evidence established the identity of the premises and the existence of a valid retail lease agreement between the parties as at the date of the fire. He confirmed that the fire and attendant smoke had caused extensive damage to the premises; he outlined the necessary repairs which he had either effected himself or had caused to be undertaken by other parties. 34Of relevance to the questions of where the fire may have started and how it had then spread, the Applicant described the layout of the shop as had been observed by him on the occasions when he had visited in order to check and read the water meters. He also described his observations of the location of various items within the premises at the various times that he visited, and also provided a narrative of what he observed on 6 July 2010 when he attended at the premises following the fire. Various documents were annexed to the affidavit of the Applicant substantiating his claim for damages and compensation. 35In cross examination, the Applicant agreed that there had never before been any fire-related incidents in the years since 2003 when the Respondent had first commenced occupation of the premises. He also agreed that he had never had reason to spend any extended time within the shop during the years of occupancy by the Respondent, and that he was unaware of the system or processes used by the Respondent in the operation of the laundromat. 36No serious challenge was made to the accuracy or credibility of the Applicant's evidence. 37Conversely, the accuracy and credibility of the Respondent were placed in issue by the Applicant's counsel in the course of cross-examination about his recollections of his activities and the location of various items within the premises on the evening preceding the fire. Having observed the Respondent and considered the content of his evidence, he is accepted to have been a generally honest and reliable witness who was endeavouring to relate events to the best of his ability. He was inclined on occasions to describe his activities and the location of items within the premises in the period prior to the fire in terms of his normal routine rather than as a consequence of an exact recollection, but this does not detract from the credibility of his evidence in the Tribunal's view; rather, the Tribunal would have entertained much more suspicion about the quality of his evidence had he purported to have a clear memory of these things. 38Within his affidavit which was admitted into evidence, the Respondent related that he would usually place freshly washed and dried laundry in the front section of the shop and that the laundry which was meant for ironing was kept in plastic crates in the back room and then returned to the front room after ironing. In cross examination, he stated that after clothes had been dried they would usually be folded and then put into a basket. He conceded that if he was very busy he could not always fold everything as it came out of the dryers and that from time to time he would pull clothes out and make room wherever he could within the premises. 39 A yellow trolley came to be of some significance within the expert evidence in these proceedings; further reference will be made below to this evidence. The Respondent stated that it was not his usual custom to put clothes into this yellow trolley after removal from the dryers, but he also conceded in cross-examination that he and his wife may have occasionally placed clothes or ironing into it. 40The Respondent also recalled that on the night of the fire he took some washing out of the dryers at some time before 7.00 pm and took some of these items to the back of the shop. He agreed that there was quite a lot of clothing within the premises on the night of the fire. He could not agree or disagree as to whether 5 or 6 nylon bags containing clothing or other laundered items, were left within the shop for collection at a later time. 41With specific relevance to a possible cause of the fire as propounded by the experts, the proposition was put to the Respondent that he had placed or left the yellow trolley in a certain position on the southern wall of the premises on the evening prior to the fire. He disagreed with this, and stated that he recalled that there was a pile of loose clothes in that position. 42Having considered all of the expert evidence as well as the evidence of the Respondent, the Tribunal agrees with the Applicant's submission that the physical characteristics of the shape and height of the burnt yellow trolley which is shown in photograph number 104 annexed to the affidavit of the expert Gregory Kelly, the physical characteristics of the pattern and height of the burn marks on the southern wall of the premises as shown on that and other photographs, and the concession of the Respondent that the trolley was used from time to time to store dried items, combine to create a reasonable inference that this yellow trolley was located in the position on the southern wall of the premises as shown in that photograph 104 at the time immediately prior to the occurrence of the fire. 43Evidence in the form of reports and affidavits was admitted from the forensic investigator Gregory Kelly on behalf of the Applicant, the forensic investigator James Munday on behalf of the Respondent, and from the electrical engineer John Gardner on behalf of the Respondent. 44Consideration of all of the experts' evidence leads to the conclusion that there are a variety of plausible reasons for the fire, but the opinion of Mr Kelly, supported to an extent by Mr Munday, that self-heating of stored items is a more likely cause of the fire than other possible causes, is preferred over the opinion of Mr Gardner that electrical malfunction was more likely than other possible causes of the fire. There is a lack of physical evidence to support the proposition that the source of the fire was a malfunctioning electrical item or switch as compared to the physical evidence displayed by the state of the southern wall and the yellow plastic container as outlined above. Specifically, in his first report dated 24 August 2010, Mr Kelly reached the following conclusion: 6.1 From the examination conducted based on the known circumstances and the physical evidence that was available, it appeared that the fire had not developed as a result of any electrical breakdown within the premises that had been associated with the premises equipment. The light fittings which had primarily been florescent light fittings through the premises and the GPOs did not reveal any fire damage that could be attributable to the breakdown of the electrical circuits or equipment that was associated with the landlord's premises. 45In this first report, Mr Kelly then went on to say that faulty electrical equipment could possibly have been involved if there had been a malfunction on the shelf high up on the southern wall and then had dropped burning material down on to clothing or flammable items sitting below. 46Later, having considered the report from the electrical engineer Mr Gardner, Mr Kelly then utilised Mr Gardner's observations and findings of to conclude that there was no evidence of any electrical malfunction to support Mr Gardner's hypothesis that this was the most likely cause. As outlined above in paragraph 42 of this decision, Mr Kelly pointed to the burn patterns and the reconstruction which he had undertaken in the area of the southern wall as indicating that it was this area which was the most probable source of the fire and that the burn patterns suggested that the cause was self heating of cloth located in a bin or in a similar container (such as the yellow trolley) adjacent to the southern wall. With reference to the possibility that the yellow trolley or a similar "container" was not the source of the fire and was merely a conduit, Mr Kelly opined in paragraph 10.4 of his second report dated 7 November 2011 that: "an alternate ignition could be linked to ignited material being introduced into the container however there is no evidence to indicate smoking or other ignition source was available or present. In the absence of that evidence, it is my opinion the most probable ignition is linked to self heating as outlined above." 47The expert Mr Munday's affidavit sworn 19 December 2012 annexes two reports. The first report is dated 7 July 2010 and concludes (at paragraphs 6.13 and following) that the hypothesis of Mr Gardner that electrical malfunction ignited the fire is not supported by physical evidence unless the power board had originally been located in a different area to that where it was found after the fire, and that two alternative causes of the fire at the premises are that there was a smouldering fire which developed in the stored fabrics and transferred to the shelf on the southern wall or that there was an illegal entry followed by arson. 48In this first report, Mr Munday relied quite heavily upon the information obtained from the Respondent that there had been no stacking of recently dried laundry in coming to the conclusion that this was a less probable cause of the fire than the other two alternatives proposed by him and which are set out above in paragraph 47. Mr Munday then maintained this opinion in his second report dated 7 July 2010 (see paragraph 15), but in the course of giving evidence, and having been shown the photograph number 104 annexed to the report of Mr Kelly (discussed above in this decision at paragraphs 42 and following), he agreed that a container with a bundle of clothes located near the southern wall was a more likely source of the fire than the other two possible causes which he had listed. 49Another relevant factor which emerged from cross-examination of the Respondent was that one of the customers of his laundromat business was a massage studio and that the towels left by the massage studio for laundering could from time to time contain massage oil. The Respondent's evidence was that any such oil would of course be removed in the course of the towels being laundered, washed with detergent and rinsed, but his evidence did not exclude the possibility that there could still be oil present within the laundered material when it was placed in the dryers or later left for collection within the premises. 50What can be concluded from the above evidence is that it was possible that massage oil may have still been present in some of the towels after they had been washed and dried; however, there is certainly no direct evidence of this, such as actual observation or testing. The Respondent agreed in cross examination that he would receive towels from the massage studio business approximately once per week. He was asked whether those towels would be oily or dirty and he answered that these were "blue towels" and that they would be "already washed"; by this answer, it appears that the Respondent was seeking to indicate that any oil or dirt within such towels was already washed and removed before going into the dryers. 51There was no evidence to establish that such towels were in fact laundered, dried and then left at the premises on the evening in question, that oil was likely to still remain in those towels after they had been laundered, the likely composition of such oil, or whether such oil was especially flammable or likely to induce spontaneous combustion. 52The dryers at the premises did not have a cooling process. The Respondent agreed that clothes would be sometimes contain heat when they were removed from the dryers. He also gave evidence that he would usually fold clothes and other items after removing them from the dryer because otherwise they would be creased, and that they would then be stacked.
What Caused the Fire? 53Having considered all of the evidence, the Tribunal is persuaded that spontaneous combustion of items which had been laundered and left in the premises is a more probable cause of the fire than the other causes suggested by the experts. 54The above finding, that self-heating laundered items is a more likely cause of the fire than the other two alternative factors suggested, does not necessarily then lead to a finding that it is more probable than not that this was the cause of the fire; however, the available evidence is so weak in support of any other possible causes that the Tribunal is also persuaded that it is more probable than not that this was the cause of the fire.
Liability 55As set out above, the relevant provisions of the CL Act must be applied in order to determine liability. 56The expert Mr Kelly has set out, within paragraphs 8.1, 8.2 and 9.1 of his second report dated 7 November 2011, that his experience has been, and that knowledge has also been acquired by him from others in his field, that spontaneous combustion of laundered items has occurred in commercial laundries as a result of sheets, towels and other materials self-heating and that (at paragraph 8.1) "in more recent years" such fires have occurred "far more readily as a result of the laundering of materials and especially towels that have been associated with either cafes or massage centres where oils are used". 57Mr Kelly also relates in paragraph 8.1 of this second report that, as at the time of making this report in November 2011, there had been two recent fires in commercial laundries and that preliminary investigations by officers had indicated that these fires had "developed as a result of ignition of towelling materials following them being heated in a dryer". He also relates that this situation has "in more recent years" more readily occurred "as a result of the laundering of materials and especially towels that have been associated with either cafes or massage centres where oils are used". 58Paragraphs 8.2 and 9.1 of Mr Kelly's second report go on to describe that commercial laundry operators commonly continue to remove laundered materials "folding them or even stacking them straight out of a dryer into a washing basket", and that "it has been well reported by others and on numerous occasions by myself that fire has developed as a result of heated material, and particularly towel, that has not be (sic) allowed to cool before it has been stacked or placed in containers which has later led to self heating/ spontaneous combustion." 59Mr Kelly also states at paragraph 9.1 of his second report that such fires "tend to occur after hours when the laundry is unoccupied" and suggests that "the scenario..... tends to indicate more readily" a special role of massage oil in the subsequent process of spontaneous combustion; unfortunately, no factual or empirical information is supplied to support this assertion. An evidentiary conclusion cannot be made, without acceptable proof, that the fact that a fire occurs due to spontaneous combustion after a laundry is closed suggests that massage oil played a role in the onset of that fire. 60The knowledge which has been acquired by Mr Kelly in the course of his experience investigating fires as to the incidence of apparent spontaneous combustion in commercial laundries appears to have largely arisen in "recent years". Apparently, Mr Kelly may only have become aware of this incidence in the period following the date of his first report on 24 August 2010 because it was not mentioned in his first report; this was, of course, after the fire. Further, and perhaps more importantly, the extent to which Mr Kelly's knowledge has been imparted to commercial laundry operators such as the Respondent is unknown. 61The available expert evidence does not of itself establish that spontaneous combustion of laundered items represented a foreseeable risk in respect of which the Respondent failed to take reasonably available steps. 62Some relevant factors which emerge from the evidence are that the Respondent had been operating his laundromat business at the premises for quite a number of years, that he had been consistently adopting the same work methods, including methods of washing, drying and storing clothes, and that there had been no incidence of any fire. 63The Applicant submits that: "The Respondent conducted a business clearly at risk of fire, full as it was of flammable clothes in plastic dry cleaner's bags. Those clothes were side-by-side with power boards and electrical devices, some of the fabrics contained oil, and some of the fabrics hung above fuel in the form of plastic washing baskets. Those fabrics were industrially heated so as to dry. In summary, there was heat and fuel all around the laundromat." 64The Applicant points out that "reasonable foreseeability" takes into account even remote possibilities, and draws attention to the High Court decisions in Manley v Alexander [2005] HCA 79 and Wyong Shire Council v Shirt [1980] HCA 12. 65In Manley, the High Court was dealing with a factual situation where a driver ran over a drunken pedestrian who was lying on the roadway, and it held that despite this being quite an unusual situation it was reasonably foreseeable that this might occur on this roadway, and that therefore it was reasonably incumbent upon a driver travelling in the area to keep a reasonable lookout ahead. Each case must be considered on its own facts when considering what is reasonably foreseeable; although a drunken person lying on a roadway might be seen to be a remote possibility, it may still be a situation in certain situations that is not so far-fetched as to render a driver who strikes that person blameless. It is doubtful whether a useful comparison can be made between the foreseeability to a driver of such a situation, and the foreseeability to a laundry operator of dried and stacked laundry items spontaneously combusting. 66That a risk may be remote yet still foreseeable was stated In Wyong Shire Council v Shirt, where the point was also made that a foreseeable risk may nevertheless involve a low duty of care; Mason J also made this observation: "(15) The considerations to which I have referred indicate that a risk of injury which is remote in the sense that it is extremely unlikely to occur may nevertheless constitute a foreseeable risk. A risk which is not far-fetched or fanciful is real and therefore foreseeable but, as we have seen, the existence of a foreseeable risk of injury does not in itself dispose of the question of breach of duty. The magnitude of the risks and its degree of probability remain to be considered with other relevant factors." 67Of course, the above decisions preceded the advent of the CL Act. As set out above, Section 5B of the CL Act establishes that a person is not negligent in failing to take precautions against a risk of harm unless the risk was foreseeable, the risk was not insignificant and that, in the circumstances, a reasonable person in that person's position would have taken those precautions. Section 5B also provides that in determining whether a reasonable person would have taken precautions against a risk of harm, consideration must be had of the probability that the harm would occur if such care was not taken, the likely seriousness of the harm, the burden of taking precautions to avoid the risk of harm, and the social utility of the activity which creates the risk of harm. 68The Applicant submits that "running the laundromat (for a number of years) brought with it the foreseeability of loss by fire. Indeed, all of the particular fire risks identified by the experts were also foreseeable, as was the risk of a significant spread of the fire given the available fuel." 69Of relevance to this issue of foreseeability of risk are the observations of the Court of Appeal in Sibraa v Brown [2012] NSWCA 328 that: "(41) Section 5B requires risks to be assessed prospectively. As a matter of ordinary language a 'risk of harm' relates to harm that has not yet happened. That is consistent with the requirement in section 5B(1)(a) that the risk of harm be 'foreseeable', which happens when a person knows or ought to know that there is a risk that harm might arise in the future ...". 70In Sibraa, the Court went on to adopt the observations of Gleeson CJ in Australian Safeway Stores Pty Ltd v Zaluzna [1987] 126CLR 479 that: "(54) Very few occupiers keep their land in perfect repair. People are permitted to occupy, and some people can only afford to occupy, premises that are in state of some disrepair. Legislative and regulatory incursions upon the general proposition that a land owner may use land as the land owner sees fit, extensive as they have been, have never gone to the point of requiring people to remove all potential hazards from their land. It would not be possible to comply with such a requirement." 71The Applicant submits that the simple fact of running a laundromat for a number of years creates the foreseeability of loss by fire; this bald proposition is not supported by any evidence. What needs to be examined is whether there is evidence to establish that the Respondent knew, or should reasonably have known, that the stacking of clothes after removal from the dryer at the premises carried with it a risk of spontaneous combustion. 72The reports of the various experts referred to above contain observations of the state of the premises after the fire had occurred, their state of knowledge as to historical causes of fire including spontaneous combustion, and their opinions as to the most probable cause of the subject fire. 73There is no evidence to establish that the Respondent knew, or that a person in the Respondent's position should reasonably have known, of the risk of spontaneous combustion occurring in commercial laundries, or the steps available to avoid or minimise that risk. 74Although there is comment from experts that the practice of stacking clothes and other items after coming out of the dryer carried a risk of spontaneous combustion occurring, there is also no evidence which demonstrates that, objectively viewed, the Respondent should reasonably have foreseen this risk and altered his work system within the laundromat. 75It is obvious that the conduct of the laundromat business involved supply of electricity, as well as convected heat emanating from and within dryers. It can be accepted that clothes and towels are flammable, but not that they are unusually flammable. These factors would of course have been reasonably known to the Respondent. 76Even though there had not been any fire incident in these premises over the years of occupation by the Respondent, there was a foreseeable risk that clothing might burn if exposed to external ignition, but the foreseeable risk which is put forward by the Applicant is the risk that clothing would self-ignite. To repeat, there is no evidence to establish that such a risk was or should have been reasonably foreseeable to the Respondent. The Applicant submits that the fact of the Respondent running the laundromat over the years inherently brought with it the foreseeability of loss by fire, but there is no evidence which satisfactorily establishes that there was a reasonably foreseeable risk to a person in the position of the Respondent, operating the business over a number of years without incident, that fire would spontaneously generate from towels or other items which had been inside a dryer, even if such towels or other items contained some type of massage oil. 77The Applicant contends that there was also a risk of significant spread of the fire given the available fuel, and that the Respondent failed to take reasonably available steps such as dividing and sectioning the shop's flammable contents in order to prevent the fire's spread. The Applicant asserts that "clothes, linen and nylon bags were everywhere and upon (and underneath) one another"; this assertion is based upon the state of the premises after the fire when there had been considerable disruption caused by attending fire personnel, and is disputed by the Respondent. There is also no evidence to identify exactly what "flammable contents" should have been quarantined nor any expert evidence as to how this should have been done in order to prevent spread of a fire. 78It is also submitted on behalf of the Applicant that "plugs should have been regularly checked to see that they were properly seated in power outlets. Electrical equipment should have been switched off when not in use and it should not have been allowed to run unattended. Items which had to run unattended should have been electrically checked to see that they were fit for such use ... these were all costless measures. The fact that the fire occurred in itself suggests strongly that controls were missing." 79The suggested preventative steps set out above in paragraph 78 do not relate to the cause of the fire as urged by the Applicant, and accepted in this decision, that self-heating of clothing was a more probable cause of the fire than electrical malfunction. Those steps, combined with the suggested steps set out in paragraph 77, also appear to contain a significant proportion of hindsight rather than foresight. 80That the correct approach to determination of liability for negligence is one of foresight and not hindsight, is emphasised in the unanimous decision of the High Court in Adeels Palace Pty Ltd v Mouvarak & Anor [2009] ACA 48: "(30) Whether any, and how many, security personnel should have been provided to satisfy the duty of Adeels Palace to take reasonable care depended upon the considerations identified in Section 5B(2) of the Civil Liability Act: the probability that the harm would occur, the likely seriousness of the harm, the burden of taking precautions to avoid the risk, and the social utility of the activity that created the risk...... (31) Many different matters were relevant to the questions that thus were posed. They included, but were not limited to, such matters as the number of patrons expected to attend the restaurant, the atmosphere that could reasonably be expected to exist at the function, and whether there had been any suggestion of violence or similar offence held in comparable circumstances, either at this restaurant or elsewhere. And all of those questions fell to be answered, and the probability of harm and other considerations mentioned in Section 5(b(2) assessed, prospectively, not with the wisdom of hindsight. That is, they were to be assessed before the function began, not by reference to what occurred that night." 81The Applicant also submits that "It would have cost little in time and money not only to let the clothes cool down but to keep.......clothes isolated from one another"; there is no evidence to show that, even if self-heating was a reasonably foreseeable risk, such a step as dividing clothes into separate piles would have averted or minimised loss to the Applicant. 82The risk that there would be a fire in the premises caused by spontaneous combustion of laundered items, or the risk that such fire would be accelerated by the manner in which items were located or left by the Respondent within the premises, are not risks which have been shown to be reasonably foreseeable by a person in the position of the Respondent in the period prior to the onset of the fire. Negligence on the part of the Respondent as a cause of the fire has therefore not been established; the contractual claim must therefore fail, and the Application dismissed. 83The presumption created by section 88 of the Administrative Decisions Tribunal Act 1997 is that each party is to bear its own costs unless the Tribunal considers it fair that a costs order be made, taking into account the various considerations set out within that section. Although an opportunity to make submissions as to costs has previously been afforded to the parties and not properly taken up, it is considered fair to permit further submissions at this point in time. If either party does not file and serve any submissions as to costs within the next 14 days, then there will be no order as to costs, given the statutory presumption.
ORDERS
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 April 2013
Lyons Road Pty Ltd
The Owners Strata Plan 38722
The Application is dismissed. Costs orders deferred pending any submissions filed within 14 days, otherwise no order as to costs pursuant to s 88 of the Administrative Decisions Tribunal Act 1997.