Pacific Resources International Pty Ltd v UTI - [2012] NSWSC 1274 - NSWSC 2012 case summary — Zoe

NSWNSWSC

Pacific Resources International Pty Ltd v UTI

[2012] NSWSC 1274

Supreme Court of NSW|2012-08-30|Before: Stevenson J

View original source

At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2012-08-30

Before

Stevenson J

Catchwords

BAILMENT - warehouse destroyed by fire - cause of fire - duties and liabilities of bailee - whether duty discharged

Source

Original judgment source is linked above.

Catchwords

BAILMENT - warehouse destroyed by fire - cause of fire - duties and liabilities of bailee - whether duty discharged

Judgment (49 paragraphs)

[1]

Introduction 1On 2 January 2006 a warehouse at Botany, and its contents, were destroyed by fire. 2The defendant, UTI (Aust) Pty Ltd ("UTI"), was the lessee of the warehouse. It conducted a warehousing services business for reward. The lessor of the warehouse was GTA Industrial Custodian Pty Ltd ("GTA"). 3The plaintiffs, Pacific Resources International Pty Ltd ("PRI") and Brackley Industries Pty Ltd ("Brackley") had goods stored in the warehouse: PRI stored fish oil and Brackley stored CD and DVD cases. 4PRI and Brackley seek damages from UTI for the damage caused by the loss of their goods. 5It is agreed that the value of PRI's lost goods was $892,339 and the value of Brackley's lost goods was $560,767 and that, if they are successful, interest accrues on those figures.

[2]

Issues for determination 6It is common ground that UTI, as bailee of the goods, owed each of PRI and Brackley a duty to safeguard the goods with reasonable care and that UTI has the onus to show that such duty was discharged. 7The issues which arise are: - (a)What caused the fire? (b)In particular, was the fire caused by the spontaneous combustion of PRI's fish oil, which was spilled in the warehouse in an accident on 21 December 2005 (12 days before the fire) and inadequately cleaned up by UTI? (c)Was the fire caused by any want of care by UTI? (d)On their proper construction, and if they were incorporated into the relevant contract, were UTI's standard terms and conditions (which the parties have referred to as the "STCs") effective to exclude UTI's liability to PRI and Brackley? (e)Were UTI's STCs incorporated into the contracts of bailment between UTI and each of PRI and Brackley? (f)Did UTI make misleading or deceptive representations to PRI and Brackley concerning its storage of their goods and did PRI and Brackley detrimentally rely on those representations? (g)Were UTI and its lessor, GTA, "concurrent wrongdoers" for the purposes of s 34 of the Civil Liability Act 2002 such that, assuming UTI is otherwise liable in damages to PRI or Brackley, it has a "proportionate liability" defence under s 35 of that Act?

[6]

How much of the fish oil was spilled? 20PRI and Brackley submitted that the fire was caused by spontaneous combustion of the inadequately cleaned up fish oil. An issue arose as to how much fish oil was spilled. That question is relevant to the probability of the spontaneous combustion of the fish oil. 21Mr Ball, the Warehouse Manager, was in Melbourne at the time of the fish oil spill. 22In Mr Ball's absence, Mr David Grupe, UTI's Account Manager at the warehouse, was in charge. 23At 8.46am Mr Grupe sent an email to Mr Frank Ruckriegel, a director of PRI: - "We have had an accident in the warehouse. And bumped one of your large drums of fish oil. The slight bump caused the seal at the bottom to open and we have lost half of the contents on the floor. We are in the process of cleaning it all up now. When you get a chance we have flipped and quarantined the drum for inspection." 24In his witness statement, Mr Grupe estimated that approximately five to six litres of fish oil was spilled from the drum and that the spill area was between 1.5 metres and 2.5 metres in diameter. 25In cross-examination he said that his statement that "half of the contents" was on the floor was "an exaggeration" and that he had sent the email "in panic". He said that it was a "mistake" to say that "half of the contents" had been lost and that: - "I don't agree that I said I lost 85 litres of oil. I agree that I'd sent an email possibly in haste at that stage. The term was 'half'; there is no actual measurement on there". 26Mr Grupe also gave evidence that when he endeavoured to move the drum after the accident, it was still heavy and that there was "no way" that he could move it himself. He said it was "too full for that". 27In my opinion, I must exercise some care in accessing Mr Grupe's evidence. He gave his evidence openly and I have no doubt he was endeavouring to give the best of his recollection. However, he candidly accepted that his memory was not good. He said that since December 2005 he had been concussed six times in the course of his mountain bike riding activities. 28Ultimately he accepted that he no longer had much recollection of what happened on the day of the fish oil spill. 29About half an hour after Mr Grupe sent his email to PRI, PRI reported to its insurer: - "Forklift driver at UTI Botany reversed into a drum of fish oil...causing the drum to break open and spill much of the contents." 30Mr Jonathan Volkwien from CB Richard Ellis, GTA's Managing Agent, gave evidence. Mr Volkwien said that after the spill, Mr Ball said to him words to the effect that oil had spurted out of the drum, had gone everywhere, all over the adjacent racks and had drenched the forklift driver. Mr Volkwien also said that when inspecting the drum after the incident, he saw a puncture near the bottom of the drum. Mr Ball denied this conversation, but it is consistent with Mr Grupe's email of 21 December 2005. 31The clean up started straight away and involved five or six people. The clean up was still in progress when Mr Ball returned from Melbourne at around 5.00pm. The time taken to clean up the spill, and the number of people involved, suggest that a substantial quantity of fish oil was spilled. 32Whether or not "half of the contents" of the drum was spilled, it appears clear, and I find, that a substantial quantity of fish oil was spilled.

[12]

Cause of the fire - theory of spontaneous combustion 54In the Post Incident Summary Report, a theory of spontaneous combustion was developed. The report read: - "The absence of a conventional ignition cause leads FIRU Fire Investigators to consider spontaneous combustion, otherwise known as non-piloted ignition, to be a possible cause of ignition. The building's contents and known prior events also give weight to this theory. During the canvassing of interviews, the NSWFB became aware of a fish oil spill occurring inside the building on Tuesday 20th December 2005 [sic: the spill was on 21 December 2005], 12 days prior to the fire. The single 200 litre drum (of 24 stored) was accidentally pierced by a forklift, resulting in an unknown quantity of oil spilling over stock and onto the floor. This oil spill was cleaned by staff using sawdust as an absorbing agent, which was then removed from the site. It is possible that oil remained in-situ, particularly in inaccessible areas around the racking, and absorbed by linen stored in the same area. Four separate events must take place for spontaneous combustion to occur in a porus solid material, and develop into an open flaming fire: 1. the material must be capable of self heating, 2. the self heating must be sufficient to lead to thermal runaway, 3. thermal runaway must initiate self sustained smouldering, 4. the smoulder front must reach the exterior or have free access to air to establish flaming...". 55The day before the fire, 1 January 2006, was one of the hottest days ever recorded in Sydney, with ambient air temperature nearing 45 degrees Celsius. According to the report of the fire brigade, the temperature inside the warehouse was likely to have been in excess of 70 degrees Celsius as all doors were shut, no air flow was present and the metal exterior surface of the warehouse conducted and trapped heat. This factor led the fire investigators to consider the theory of spontaneous combustion as being "very plausible". 56Inspector Bailey said he developed the theory that the fire was caused by the spontaneous combustion of fish oil spilled onto the linen. He said that "all the elements necessary to cause spontaneous combustion were present at the warehouse". 57Inspector Bailey accepted that the fire brigade: - "...did not definitively establish a cause of fire but that was due to the extensive damage to the premises and subsequently the lack of any obvious further physical evidence. To take the enquiry to the next level would have involved sample testing and this was beyond the scope of my investigation, which is typically confined to observation of the immediate physical evidence."

[13]

Professor Gray's evidence 58"Sample testing" of the kind referred to by Inspector Bailey was carried out by Professor Brian Gray, an Emeritus Professor of Chemistry at Macquarie University. Professor Gray attended the scene of the fire on 28 February 2006 (some eight weeks after the fire). 59Professor Gray found a sample of absorbent material, contaminated with fish oil, within the area of origin identified by Inspector Bailey. This sample had survived the fire and still showed exothermic reaction. 60Professor Gray said: - "The thermal activity I measured during my site visit on February 28th 2006...some weeks after the fire and its extinction, was indicative of heat producing (exothermic) chemical reaction still taking place in a localised area of the site. This was in the area designated as the 'area of origin' of the fire (by the Fire Investigation and Research Unit of the NSW Fire Service). It was in the region of a point 50m from the eastern wall and 20m from the northern wall. Given the presence of residual fish oil in this area and the properties of fish oil, I conclude that the exothermic reaction was a residual of a much more intense spontaneous combustion reaction which had taken place earlier." 61Professor Gray took a temperature probe reading of this material, showing it was 36 degrees Celsius. 62Professor Gray continued: - "The fact that fish oil in the solid sample was still heating indicates that in at least one location in the area of origin it was dispersed in such a way as to facilitate self heating. That is, there must have been a suitable absorbent material (e.g. linen or sawdust) to allow the self heating to occur". 63Professor Gray said that: - (a)if the linen stored adjacent to the fish oil spill was contaminated by fish oil and not removed, it would have acted as a medium for the dispersion of fish oil such that it would spontaneously combust; (b)if the fish oil spilled on the floor was absorbed with absorbent material (for example the "pillow stuffing" or sawdust) which was not removed from the premises, this would also produce spontaneous combustion under the temperature conditions occurring at that time in the warehouse; and (c)in his opinion, the cause of the fire was spontaneous combustion of absorbent material contaminated by fish oil. 64There were two potential sources of absorbent material: the linen surrounding the site of the spill and the absorbent material used to clean up the fish oil spill (sawdust and the other material from the spill kits).

[17]

UTI's standard terms and conditions (the STCs) 77UTI contended that it is not liable for any loss claimed by PRI or Brackley because the claims of those parties are excluded by clause 15, clause 17 and clause 18 of the STCs. 78Those clauses are in the following terms: - "15. Exclusion of Liability: Subject only to clauses 14 and 20, the Goods are at all times at the risk of the Customer and not UTi and UTi shall not be responsible in tort or contract or otherwise for any loss or damage to or deterioration of the Goods or misdelivery or failure to deliver or delay in delivery of the Goods either in transit or in storage for any reason whatsoever including without limitation the negligence or breach of contract or wilful act or default of UTi or others and this clause shall apply to all such loss or damage or to deterioration of the Goods or misdelivery or failure to deliver or delay in delivery of the Goods whether or not the same occurs in the course of performance by or on behalf of UTi of the Services or in events which are in the contemplation of UTi and or the Customer or in events which are foreseeable by them or either of them or in events which could constitute a fundamental breach of contract or a breach of the fundamental term of the contract. 17. Notice of Claim: Any claim for loss or damage must be notified in writing to UTi within seven days of delivery of the Goods or the date upon which the Goods should have been delivered. 18. Time bar: UTI shall be discharged from all liability unless suit is brought in the proper forum and written notice received by UTi within nine months after the delivery of the Goods or the date when the Goods should have delivered. In the event that such time period shall be found contrary to any international convention or other compulsorily applicable law, the period prescribed by such convention or law shall then apply, but in that circumstance only." 79Two issues arise. First, what is the proper construction of these clauses in the STCs. Second, were the STCs incorporated into the contracts between UTI and PRI, and UTI and Brackley.

[19]

Clause 15 80Clause 15 is drawn in very broad terms. It states that subject only to clause 14 (which deals with "an international convention or other law compulsorily applicable" to the relevant services) and clause 20 (which refers to warranties under the Trade Practices Act 1974 (Cth) incapable of exclusion), UTI "will not be responsible" for loss or damage to goods that it stores "for any reason" whether caused by negligence, breach of contract or wilful act of default. 81PRI pointed to clause 17 and clause 18 and submitted that those clauses would be otiose if clause 15 had the effect of excluding all liability of UTI. I do not accept that submission. Clause 17 and clause 18 (to which I shall return below) could have work to do in relation to the two circumstances excepted from clause 15, namely the circumstances contemplated by clause 14 and clause 20. 82PRI submitted that a "literal" reading of clause 15 leads to an absurd result. PRI submitted: - "It would mean that if UTI personnel wilfully burnt down the warehouse, all customers, whether or not they had insurance, would be precluded from recovering from UTI." 83PRI drew attention to the observations of Macfarlan JA in Jireh International Pty Ltd t/as Gloria Jean's Coffee v Western Exports Services Inc [2011] NSWCA 137 at [55]: - "If after considering the contract as a whole and the background circumstances known to both parties, a court concludes that the language of a contract is unambiguous, the court must give effect to that language unless to do so would give the contract an absurd operation. In the case of absurdity, a court is able to conclude that the parties must have made a mistake in the language that they used and to correct that mistake." 84PRI further submitted that if a contractual clause excludes "the very obligation the purpose of the contract" relevant "absurdity" arises. PRI referred to the judgment of Barwick CJ in MacRobertson Miller Airline Services v Commissioner of State Taxation [1975] HCA 55; (1975) 133 CLR 125 at 133: - "The exemption of the ticket in this case fully occupies the whole area of possible obligation, leaving no room for the existence of a contract of carriage." 85In my opinion, the circumstances in MacRobertson are distinguishable from those in the present case. In MacRobertson the exemption on the airline ticket allowed the airline to abandon any flight, or cancel any ticket or obligation and simply refund the fare. 86In this case, nothing in the exemption removed UTI's obligation to warehouse the relevant goods. What the clause purports to do is exclude UTI's liability for any mishap that might befall the goods while so warehoused. 87The clause is broad and has harsh operation. However I do not conclude that it is so "absurd" as to suggest that the parties "must have made a mistake in the language that they used". 88In my opinion, if clause 15 is applicable to either of the warehousing contracts with which these proceedings are concerned, the clause is effective to exclude UTI's liability to the extent that the clause so states.

[21]

Incorporation by Notice 93I now turn to the question as to whether the STCs, and clause 15 in particular, were incorporated into the relevant contracts. If it was, the clause provides a defence to UTI in relation to the claims brought against it under the contract of bailment (although not any claim under s 52 of the Trade Practices Act). 94It is common ground that neither PRI, nor Brackley signed a document by which they agreed that the STCs would be part of the contract. 95In these circumstances, the general principle is stated by Carter On Contract, vol 1 at [10-160] as follows: - "Where there is no document signed by the parties, the usual way by which terms are incorporated is by one of the parties giving the other notice of the terms of the contract. It is difficult to state the legal requirements here beyond saying that the notice must be 'reasonable' and given prior to (or at the time of) contract formation. That is, the party relying on the terms must show that, in the circumstances of the case, reasonable steps were taken to bring the terms to the attention of the other party before that party became bound." 96Thus, in Oceanic Sun Line Special Shipping Co Inc v Fay [1988] HCA 32; (1988) 165 CLR 197, Brennan J said at 228: - "If a passenger signs and thereby binds himself to the terms of a contract of carriage containing a clause exempting the carrier from liability for loss arising out of the carriage, it is immaterial that the passenger did not trouble to discover the contents of the contract. But where an exemption clause is contained in a ticket or other document intended by the carrier to contain the terms of carriage, yet the other party is not in fact aware when the contract is made that an exemption clause is intended to be a term of the contract, the carrier cannot rely on that clause unless, at the time of the contract, the carrier had done all that was reasonably necessary to bring the exemption clause to the passenger's notice." 97In Norman Palmer, Palmer on Bailment, 3rd ed (2009) it is stated at 38-010: - "To the general question, whether the defendant has done what would normally and reasonably suffice to bring the conditions to the notice of the claimant, the courts have added the important corollary that the degree of notice required may vary in proportion to the breadth or savagery of the clause itself. Clearly, the more ambitious, unreasonable or unusual the clause, the less likely the claimant may be (in the absence of direct knowledge) to assume that it has been incorporated." (citations omitted) 98One of the cases referred to by the authors of Palmer on Bailment, and on which both Brackley and PRI placed emphasis, was Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163. In that case the plaintiff drove his car into an automatic car park. A notice on the outside of the car park building stated that all cars were "parked at owner's risk". The plaintiff took a ticket as he entered the car park, on the reverse of which it was stated that the ticket was "issued subject to conditions...displayed on the premises". The relevant conditions were displayed on a pillar opposite the ticket machine. One condition was that the garage would not be liable for any injury to the customer's car occurring when his or her car was on the premises. 99Lord Denning MR said at 170 that the clause: - "is so wide and so destructive of rights that the court should not hold any man bound by it unless it is drawn to his attention in the most explicit way. ...In order to give sufficient notice, it would need to be printed in red ink with a red hand pointing to it - or something equally startling." 100In Remath Investments No. 6 Pty Ltd v Chanel (Australia) Pty Ltd [1992] NSWCA 208, Kirby P, and Handley and Cripps JJA considered a warehouse case where perfumes and cosmetics had been stored, and were stolen by burglars. Remath's "storage conditions", which relieved it from liability, were displayed on notices in the office at its bond store and in the waiting room at its head office. Its invoices contained a statement referring to those terms and conditions. 101The Court said at 9: - "Remath made no attempt to introduce the storage conditions into any contract with Chanel at or about the time the contract was made...why should [the customer] ... be expected or required to do anything to find out more about Remath's conditions of contract? Why should he do what Remath itself could not be bothered doing? In particular why should the law allow Remath to introduce restrictive conditions by stealth when it had made no attempt to introduce them openly and directly at the time the contracts were made. In our opinion in the circumstances of this case there was no onus whatever on [the customer] to make any inquiry of Remath simply because he had received and read invoices in this form." 102These cases provide examples where the Court has not been satisfied that reasonable steps were taken to draw restrictive conditions to the attention of the relevant party. However, they do not gainsay the proposition that the question must be, in each case, what, in all the circumstances was reasonably required. 103It seems to me that, as UTI submitted, one fact of which is of importance is the amount of time available to the relevant party to consider restrictive conditions sought to be imposed by the other party. 104At one extreme is the limited amount of time available to Mr Thornton, driving his car into an automatic car park, to consider terms and conditions written on the adjacent pillar. 105At the other end of the spectrum would be a circumstance where a commercially sophisticated party is provided with terms and conditions and allowed time to consider them and who, thereafter, elects to proceed. 106It is that kind of circumstance that McHugh JA referred to in Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 at 535: - "A more accurate statement is that where an offeree with a reasonable opportunity to reject the offer of goods or services takes the benefit of them under circumstances which indicate that they were to be paid for in accordance with the offer, it is open to a tribunal of fact to hold that the offer was accepted according to its terms." See also Hyder Consulting (Australia) Pty Ltd v Wilh Wilhelmsen Agency Pty Ltd [2001] NSWCA 313 per Meagher JA at [16].

[25]

Mr King's evidence on the voir dire 124On the voir dire, Mr King said he interviewed Mr Bennett on 17 January 2006 (15 days after the fire). 125In his affidavit read on the voir dire, Mr King said: - "5. Mr Bennett provided me with a bundle of documents. He did not go through the documents or identify them individually to me. 6. I later reviewed the documents while preparing my first investigative report, which was dated 2 February 2006. I inserted some of those documents as attachments to my report, including a copy of the document entitled 'terms and conditions'. 7. I identified those documents at page 12 of my first investigative report as '8. Copy of UTi's Agreement with the insured company [PRI], dated 1 June 2004'. I did this based on the face of the documents." 126The terms of the affidavit suggested that Mr King had received from Mr Bennett a copy of the document including the STCs, but had simply included that document in his report without comment other than listing it as one of a number of documents provided to him by Mr Bennett. 127However, Mr King's "investigative report" and his evidence in cross-examination on the voir dire, revealed that the situation was not so simple. 128During cross-examination Mr King was shown notes that he had prepared before his meeting with Mr Bennett. He described the notes as points that he had made that he intended to raise with Mr Bennett. Mr King had ticked various items on that list. 129One of the points read "agreement/contract/copy". Mr King had ticked that item. When asked what the tick against those words signified, Mr King said: - "I've covered the topic and asked for documents". 130In his report, Mr King stated: - "The insured [Mr Bennett] has provided the writer with a full copy of the current agreement between UTi and [PRI]. We enclose same for your perusal." 131The document enclosed was a "Warehouse and Distribution Proposal" addressed to PRI which bore the endorsement: - "Presented to: Lloyd Bennett & Nick Blake By: Kym Carruthers 1st June 2004". 132This was the four page document to which Mr Ruckriegel and Mr Blake referred to in their evidence. 133However the copy attached to Mr King's report also included the STCs. 134Mr King's report also included a statement that Mr King had taken from Mr Bennett. In cross-examination, Mr King explained that he took the statement from Mr Bennett using a dictaphone. Mr King said, so far as he could tell, Mr Bennett could hear what he was dictating and that there were occasions where Mr Bennett asked Mr King to pause and to correct something he had said. Mr Bennett did not sign the statement Mr King prepared. 135Mr Bennett swore an affidavit on 7 September 2012, two days after the evidence was taken on the voir dire. In that affidavit, Mr Bennett gave evidence as to the current state of his memory. I shall return to that shortly. He said he had no "specific recollection" of his meeting with Mr King. 136The form of the statement that Mr King prepared for Mr Bennett suggests Mr King may have polished the draft, as dictated, before finalising it. Nonetheless, based on the above evidence, I am satisfied that the statement records the substance of what Mr Bennett told Mr King. 137Included in the statement was the following passage: - "I've provided Mr King with a copy of the current form of agreement in place with UTI, which is dated 1 June, 2004". 138In regard to that entry, Mr King gave the following evidence: - "Q: Did Mr Bennett provide you, Mr King, with something he called the current form of the agreement? A: Yes." 139The document to which Mr King was referring was the Warehouse and Distribution Proposal, including the STCs. 140As I have mentioned, Mr Bennett said he had no recollection of meeting Mr King. He said he did not recall handing the STCs to Mr King, or where in the office they were located. 141In 2008, Mr Bennett was diagnosed with a brain lesion. As a result, he suffers some memory loss. He said: - "I can remember some things very well, including many aspects of PRI's business. However, there are gaps in my memory of some events that occurred in the past." 142Mr Bennett's specialist neurologist, Dr Ronald Joffe, said that Mr Bennett: - "...suffers from complex partial seizures and there are changes in his temporal lobes. He is well controlled, but still continues to have absences and his memory is certainty abnormal. While he is quite happy to appear in Court, it is my opinion that his memory would not be considered reliable for events occurring prior to 2008." 143So far as concerns the STCs, Mr Bennett said: -

the first time he saw the STCs was when shown the document by PRI's solicitors "about two years ago";
before then, he did not recall ever seeing the STCs or any terms and conditions stapled together with the four page document entitled "UTI Warehouse and Distribution Proposal" dated 1 June 2004;
he had never considered the STCs to be part of the agreement between PRI and UTI for warehousing and distribution services;
he "would never have agreed to any terms and conditions whereby PRI's warehousing provider is absolved for any liability for damage to PRI's goods while in their storage and care". 144Mr Bennett was not challenged about any of these matters. 145In submissions, Mr Williams SC, who appeared with Mr Chiu for PRI, placed great emphasis on this and on the fact that UTI did not call Ms Carruthers as a witness despite the fact that, as was common ground, she was available to give evidence. Indeed, she had made a statement served in the proceedings. It was common ground that I could take that fact into account. I infer that Ms Carruthers' evidence would not assist UTI: Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298. 146I take all those matters into consideration.

[27]

Did UTI take reasonable steps? 152In these circumstances, the question is whether UTI took reasonable steps to draw the relevant clauses to PRI's attention. 153There is no suggestion in the evidence that Ms Carruthers referred to the STCs in the course of her presentation, let alone that she drew the terms of clause 15, clause 17 and clause 18 to the attention of Messrs Ruckriegel and Blake. 154However: -

As I have mentioned, the Warehouse and Distribution Proposal contains, within its first four pages, two references to the applicability of UTI's "normal" or "standard" terms and conditions. The second reference, on the page headed "Warehouse Information", is prominent.
The format of the STCs themselves is clear. The heading "Liability" is in large, bold print and clause 15, clause 17 and clause 18 commence with the words "Exclusion of Liability", "Notice of Claim" and "Time bar" in bold print. A cursory glance at the STCs would reveal these clauses.
The Warehouse and Distribution Proposal, with the STCs attached, was given to two of the directors of PRI; Mr Ruckriegel and Mr Blake. They struck me as experienced men of commerce.
The speed of the transaction was not such as to deprive Messrs Ruckriegel and Blake, and thus PRI, of a reasonable opportunity to read the STCs. The case is quite different to that considered in Thornton (where the terms and conditions were on the pillar of a ticket machine) or Remath (where the conditions were displayed on notices in the bond store and waiting room). Here, there is no suggestion that Messrs Ruckriegel or Blake were under any time constraint to consider whether to commit PRI to a contract with UTI. Indeed Mr Blake said that, prior to the 1 June 2004 meeting, PRI had received "unsolicited sales calls" from Ms Carruthers and that, prior to June 2004, she had attended PRI's premises "on about two occasions to speak to him and Mr Ruckriegel about potentially engaging UTI as a new service provider". It was only after those approaches that Ms Carruthers invited Mr Ruckriegel and Mr Blake to UTI's premises for the presentation. 155In all those circumstances, my opinion is that the simple provision of the STCs, annexed to the Warehouse and Distribution Proposal at the 1 June 2004 presentation was sufficient and reasonable notice by UTI to PRI of the STCs. 156In my opinion, the STCs were incorporated into the contract between PRI and UTI.

[32]

Negotiations prior to Brackley moving to UTI 169From around the end of 2002 Ms Ternen communicated with Mr Abrams with a view to soliciting Brackley's logistics and warehousing business. 170At that time Brackley was using Doug Hayes Transport ("DHT") for its logistics and warehousing needs. 171Mr Abrams declined to change warehousing provider, but did cause Brackley to engage UTI to provide some sea and air freight services. 172The contractual arrangements between Brackley and DHT contained no term excluding the liability of DHT in respect of damage to Brackley's goods. Although DHT had standard terms and conditions, which contained some exclusions, Brackley did not execute any contract with DHT. 173Ms Ternen continued to approach Mr Abrams in relation to Brackley's business. 174Mr Abrams said that, during one such approach, some time in 2003 or 2004, the following conversation took place: - "Mr Abrams: [The DHT rates] are the rates that you have got to manage [sic: I infer Mr Abrams meant "match" - see [181] below]. This is a service we want - you have to subcontract all freight distribution within Sydney to DHT on Brackley's account. If any stock is damaged, delayed or lost as a result of your conduct, you have to fully compensate Brackley for that stock, and very importantly, you have to ensure that there is nothing combustible stored within your warehouse. Our CD boxes are made out of polystyrene, and our DVD and video boxes are made out of polypropylene. Whilst polystyrene and polypropylene isn't combustible it contains oil-based resins. Should a fire occur, our stock is likely to burn for a long time. I will consider transferring our storage needs only when you can meet these terms. Ms Ternen: I cannot get UTI to accept those price terms." 175Ms Ternen denied this conversation. However, I accept it occurred. 176Overall, for the reasons that I set out below, I found Mr Abrams to be a more reliable witness than Ms Ternen. 177In any event, there are a number of factors which point to the probability that Mr Abrams would have said something to the effect he asserts. The first is that Brackley's then current warehouser, DHT, did not purport, in its contractual relations with Brackley, to exclude liability for damage caused as a result of its conduct. Second, Brackley's goods were, by their nature, susceptible to damage by fire. 178By mid 2004 Mr Abrams had become disenchanted with DHT. 179Mr Abrams said he had the following conversation with Ms Ternen "shortly prior to" Brackley contracting with UTI: - "You've been chasing my business for a long time. I'm ready to move my goods out of [DHT]. If you want to close the deal now is the time".

[33]

The "handshake meeting" 180Mr Abrams said that "very shortly after" the conversation referred to in [179], he met Ms Ternen, and Mr Young, then UTI's Chief Executive Officer, in Brackley's boardroom at Alexandria. The parties referred to this meeting as the "handshake meeting". 181Mr Abrams gave evidence that, at the "handshake meeting" he said: - "If you want my business, here's the [DHT] rate sheet that you have to match. I've previously told you the terms upon which I would move my business. You have to subcontract most of the freight distribution within Sydney to DHT on Brackley's account. There are to be no combustible goods stored with [sic] the warehouse because they are made of polypropylene and polystyrene and burn forever. In relation to the goods, if you lose them or break them, you pay for them." 182The significance of this evidence is that, according to Mr Abrams, he was making it clear that if UTI wanted Brackley's business, it would have to agree to be responsible for any damage it caused to Brackley's goods and thus, inferentially, that Brackley would not agree to any inconsistent term in the contract. 183Ms Ternen responded to this evidence in an affidavit sworn on 3 September 2012 in reply to Mr Abrams' affidavit in which he gave the evidence at [181]. This was in the second week of the trial, by which time the issues concerning the STCs had been well ventilated. 184Ms Ternen did not deny that Mr Abrams said the critical words "in relation to the goods, if you lose them or break them, you pay for them". 185What Ms Ternen said was: - "As to [the relevant paragraph of Mr Abrams' affidavit], I deny that the [DHT] rate sheet was given to me. I agree we were told to use DHT for distribution on the Brackley account. I deny that any discussion regarding the material composition or burning took place. I deny that UTI agreed to pay for any lost or broken goods as this was totally in contradiction to UTI standard terms of trading". 186Thus, Ms Ternen denied that UTI had agreed "to pay for lost or broken goods". She did not deny that Mr Abrams had made clear that this was his requirement. 187Ms Ternen also said that, at the "handshake meeting" Mr Young said: - "We have a standard warehousing contract that we can customise for you and annex the agreed rates that you would need to sign for us to transact." and: - "We have a standard warehousing agreement. We'll attach the rates to it and we'll get it through to you." 188The "standard warehousing agreement" did not contain the STCs. 189In cross-examination of Ms Ternen the following exchange took place about that passage: - "Q: That [the evidence at [188]] says nothing about UTI's standard terms and conditions for warehousing, does it? A: To my mind, it tells that there is a contract that needs to be signed. That's how I read it. Q: There was no discussion between Mr Abrams and Mr Young about UTI's standard terms and conditions for warehousing was there? A: There was. Q: You say it's in [the above passages] do you? Is that the conversation? A: It happened at those meetings. I wasn't obviously specific enough in what I've put here, but that conversation definitely took place. Q: You never were present at any discussion where UTI's standard terms and conditions for warehousing were discussed, were you? A: I was. Not all the terms and conditions but they were certainty mentioned. Q: Mr Young never said to Mr Abrams in your presence, did he, 'if we deliberately damage your goods, we're not liable'? A: No. Q: And he never said to Mr Abrams in your presence, 'we're not liable for damage to your goods under any circumstances at all'; do you agree? A: I agree." 190UTI did not call Mr Young to give evidence. Mr Young ceased to be employed by UTI in about June 2006. There was no suggestion that Mr Young was not available to give evidence. No explanation was given for his absence. I infer that Mr Young's evidence would not have assisted UTI: Jones v Dunkel. 191I am satisfied that Mr Abrams said words to the effect set out above. The matter for discussion was whether Brackley would change its business from DHT to UTI. The contractual terms between Brackley and DHT did not exclude DHT's liability in the event that it caused damage to Brackley's goods. There is no reason for Mr Abrams to accept more onerous terms from UTI. And bearing in mind the nature of Brackley's goods, it seems likely that Mr Abrams would insist that UTI be liable if anything happened to Brackley's goods. 192Ms Ternen did not, in her affidavit, deny the critical part of the conversation. The relevant paragraph from her affidavit cavilled with certain aspects of Mr Abrams' statement, but did not dispute its critical element. The comments she attributed to Mr Young dealt only with UTI's "standard warehousing agreement", and not the STCs.

[34]

The 15 July 2004 email 193On 15 July 2004, Ms Ternen sent an email to "Jack" at Brackley. The email was cc'd to Mr Abrams. The subject of the email was "Warehouse Rates". 194The email read: - "Dave called and asked for the attached - I couldn't get through to his email. Can you please forward." 195What was attached was described in the email as: - "Brackley's warehousing quote July 2004.xls". 196The attachment was an excel spreadsheet which contained three pages, accessible by pressing a tab at the foot of the spreadsheet. The first tab was marked "Brackley's rates", the second "Terms and Conditions" and the third "General Info". 197If the recipient of that email had opened the attachment, and pressed the tab marked "Terms and Conditions", a copy of the STCs would appear. 198The significance of the email is that, if received, it comprised some notice of the STCs. 199Brackley accepts that it received the email. However, Mr Abrams said he could not remember seeing the email, and could not remember reading the attachment. 200This is not surprising. The email was addressed to "Jack". Its subject was "Warehouse Rates". Ms Ternen agreed that she had never spoken to Mr Abrams about the STCs (or "Terms and Conditions" as they are described in the attachment to the email). 201There was no direct evidence as to whether the 15 July 2004 was sent before or after the "handshake meeting" to which I have referred. 202On 1 September 2004, Ms Ternen sent a copy of the email to a colleague at UTI and described the 15 July 2004 email as one sent "in July prior to us taking the biz on". That suggests the email was sent before any agreement was reached between UTI and Brackley. 203Mr Abrams placed the "handshake meeting" as being "in or about August 2004" by reference to an email exchange he had with Ms Ternen on 11 August 2004. 204On that date, Ms Ternen emailed Mr Abrams: - "We have been advised by Basil at [DHT] that there is one load left to move, which we are doing now. This gives us in the region of 550 pallets (will confirm on stock report tonight) moved over. Can you confirm this is okay." 205Mr Abrams replied: - "There is still a heap of stock at DHT but slow moving. Will leave there until all is bedded down in a week or so". 206That exchange suggests that, by 11 August 2004, agreement had been reached between Brackley and UTI and that movement of Brackley's goods from the DHT warehouse to UTI's warehouse was almost complete. That would place the "handshake meeting" as occurring some days prior to 11 August 2004. 207In my opinion, it is immaterial whether the relevant conversation took place before or after Ms Ternen sent the 15 July 2004 email. 208The conversation clearly took place before contract and in it Mr Abrams made plain that he would not accept a condition to the effect of clause 15 of the STCs. 209In those circumstances, in order to give Brackley reasonable notice of the STCs, it was not sufficient for Ms Ternen, without comment, to simply email a copy of the STCs, as one part of an excel spreadsheet to "Jack" at Brackley and to "cc" it to Mr Abrams. 210Indeed, the form of the 15 July 2004 email suggests that Ms Ternen sent it, and the attachment, to "Jack" to notify him of information he had requested (namely "Warehouse Rates": the heading to the email) rather than to notify Brackley of the STCs. 211Ms Ternen knew that Mr Abrams was the person at Brackley she had to convince in order that Brackley change its business from DHT to UTI. In view of Mr Abrams' clear statement of his position, it was necessary for Ms Ternen, or someone else from UTI, to draw Mr Abrams' attention, in terms, to the relevant provisions of the STCs. 212That did not happen. Brackley did not otherwise agree to be bound by the STCs. 213It follows, in my opinion, that the STCs were not incorporated into the contract between Brackley and UTI.

[36]

Competing evidence of Mr Abrams and Ms Ternen 218I have stated (at [176] above) that I found Mr Abrams to be a more reliable witness than Ms Ternen. 219In fairness to Ms Ternen, I should state that I found that both she and Mr Abrams gave evidence in a confident and, for the most part, responsive manner. They both struck me as competent and professional people who were doing their best to give their best recollection of what had happened. 220However, there were a number of aspects of Ms Ternen's evidence that have led me to conclude that, overall, she was the less reliable witness. 221First, in her affidavit evidence, she placed the "handshake meeting" as being within a few days of 27 November 2003. Faced with Mr Abrams' affidavit evidence that the meeting took place in August 2004, she conceded that she was wrong in her recollection and accepted that Mr Abrams was correct. 222Second, she asserted in cross-examination that she was present when there was a discussion with Mr Abrams about UTI's STCs. When pressed, in cross-examination, to point to where she had given evidence about this in her affidavits, Ms Ternen pointed to the passages which I have set out at [187] above. However, as the cross-examination I have set out at [189] revealed, those passages in Ms Ternen's affidavit did not deal with the STCs; but rather with UTI's warehousing contract. 223Ms Ternen was also asked questions about a draft "Warehousing and Distribution Agreement". That document was in "revision" or "track changes" mode. It appeared to be a draft of a document intended by UTI to be executed by Brackley and to be a modification of an earlier agreement between UTI and another customer (the footer reads "ENZA draft 18/11/03"). 224Clause 2 of the draft document read: - "This Agreement is subject to the normal Trading Terms of UTI. In the event of an inconsistency between the UTI Trading Terms and this Agreement, the Trading Terms will prevail to the extent of the inconsistency." 225At first, Ms Ternen asserted that she had given this document to Mr Abrams. Mr Abrams denied receiving it. Then Ms Ternen agreed that she would not have given Mr Abrams a document in "revision" or "track changes" form. Ms Ternen then said that she had given Mr Abrams a version of the document without the "track changes". However, the draft did not contain, at the appropriate place, the rates that UTI would charge. The only reference in the "track changes" document to rates were rates (presumably in relation to the customer "ENZA") which were deleted. Ms Ternen resorted to saying that the rates "may well have been on the final document". 226As Brackley submitted, if the "track changes" on this document had been "accepted" one would expect there to be a version of the final document on UTI's hard drive. However, Ms Ternen said that she was not aware of any such version. None was produced by UTI in the proceedings. The only hard copy version of any Warehousing and Distribution Agreement between UTI and Brackley was the "track changes" version. 227Two things emerge. First, that Ms Ternen's evidence about this document demonstrated that she did not, as she asserted, actually have a recollection of giving any such document to Mr Abrams. I am satisfied she did not. 228Second, Ms Ternen's preparedness to assert that she had given the document to Mr Abrams casts doubt on the reliability of her recollection generally.

[37]

The draft Abrams affidavit 229During cross-examination of Mr Abrams, and in the course of UTI's submissions, much was made of a draft affidavit allegedly prepared for Mr Abrams. For some reason, that draft was discovered by Brackley. That draft contained the following paragraphs: - "10. I have been shown a document marked 'T&C - Undated - Received 27/03/06' and that is a copy of a document which I gave to Barry Cunnigham on 27 March 2006. I have also been shown a copy of document marked 'T&C Version Dated 18 April 2012'. Those two documents appear to be similar. I have also been shown a document marked 'T&C - Version Dated 18 April 2002 - Highlighted Sections'. 11. In the document marked 'Highlighted Sections' Paragraph 8 has the words 'without notice' at the end of the third last line, Paragraph 12 has the word 'thirty' (days) on the second line and Paragraph 17 has the word 'seven' (days). In the document marked 'T&C - Undated' (which is a copy of the one I gave Barry Cunningham on 27 March 2006) 'without notice' has been deleted in Paragrpah 8, 'sixty' days has replaced 'thirty' days in Paragraph 12 and 'ten' days has replaced 'seven' days in Paragraph 17. The deletion and the amendments in 'T&C - Undated' were made at my request." (emphasis added) 230The three relatively minor changes to the STCs referred to in these extracts from the draft affidavit were ones which were favourable to Brackley (albeit modestly). They were also incorporated in the STCs included in the excel spreadsheet attached to Ms Ternen's 15 July 2004 email. 231UTI submitted that the only plausible explanation for this was that Mr Abrams must have negotiated these changes to UTI's STCs and must, therefore, have been aware of them. 232However, Mr Abrams denied that these changes had been made at his request and said that he had never seen the draft affidavit. 233Significantly, in my opinion, Ms Ternen gave no evidence that she conducted any negotiations with Mr Abrams concerning these changes. She said that at no time prior to Brackley engaging UTI to carry out warehousing services had she ever discussed the STCs with Mr Abrams. In fact, she had never read them. 234The reference on the draft affidavit was "AXB:DJC". It was common ground that this reference refers to that of Mr Adam Butson, Brackley's solicitor and that Mr Butson was present in Court during the hearing and was available to give evidence. Mr Roberts SC, who appeared with Mr Casselden for UTI, submitted that I should infer from Brackley's failure to call Mr Butson, that he would be unable to give evidence to assist Brackley's case on this issue (see Jones v Dunkel). Mr Roberts' submitted that such privilege as would otherwise attach to any relevant communications between Mr Abrams and Mr Butson had been waived by the discovery of the draft affidavit and that, in any event, as Brackley had waived privilege in respect of the draft affidavit, it could also waive privilege in relation to any such communication. The inference I draw is that Mr Butson was not able to give any evidence which would assist Brackley's case on this point. 235The circumstance of the draft affidavit is certainly curious and, as I have set out, not explained. However, I accept Mr Abrams' denial of any involvement in it. I found him to be a credible and careful witness. 236It seems improbable that he would negotiate such relatively insignificant variations to the STCs without making clear to UTI his refusal to accept the exclusions of liability in clause 15 of the STCs. Although the draft referred to clause 15 (and Mr Abrams' attitude to it) there is no suggestion in the evidence that, in 2004, Mr Abrams had any communication with UTI about that matter. 237My finding is that Mr Abrams had no involvement in the relevant passages of the draft affidavit.

[38]

Brackley's estoppel claim 238Brackley pleaded that, even if the STCs were incorporated into the contract between it and UTI, UTI is estopped from:- (a)asserting that the exclusion terms form part of the agreement; and (b)denying that it is liable to Brackley for losses to its goods caused by UTI's negligence. 239In view of my conclusion that the STCs were not incorporated into the relevant contract, it is not necessary for me to decide this issue. 240However, I will deal with Brackley's submissions briefly. 241Brackley asserted both a promissory and conventional estoppel. 242For present purposes, it is only necessary for me to deal with Brackley's submissions concerning promissory estoppel. The estoppel is said to arise from the fact that, on numerous occasions before the fire, Brackley made claims on UTI for lost stock, which claims were approved by UTI. Those claims were paid by UTI without demur and, in particular, without any assertion that UTI's liability was excluded by reason of the STCs. 243The credits claimed and granted related to lost or damaged goods. As UTI has submitted, the amounts involved were relatively small, compared to the size of Brackley's business. For the most part, the claims and credits were in the order of hundreds of dollars. 244In relation to those credits, Mr Abrams gave this evidence, which was not challenged: - "Had UTI [in response to the claims for credits] said to me that...it was storing Brackley's goods on the basis of UTI's standard terms and conditions, or that there were terms limiting UTI's liability for Brackley's lost stock due to UTI's negligence, I would never have engaged UTI for the purposes of warehousing Brackley's goods." 245In this regard, Mr Neal, who appeared for Brackley, submitted: - "It is difficult to think of a clearer case of estoppel in respect of exclusion clauses in a bailment contract. By Brackley making claims for lost goods, and UTI not raising the exclusion clauses, but instead paying the claims without demur, the parties adopted an assumption, and conducted their relationship on basis of the assumption, that there were no terms limiting liability, and that if UTI negligently lost Brackley's goods, UTI would pay for them. UTI also made a clear and unambiguous representation to that effect. Brackley relied on the representation by continuing to warehouse its goods at the premises. Brackley will clearly suffer detriment if the assumption is departed from. The result is that UTI is estopped, by representation and by convention, from asserting that its exclusion terms formed part of the Agreement, and indeed from denying that it is liable to Brackley for its negligent loss of the goods." 246I accept that submission. 247Mr Roberts, for UTI, submitted that the mere act of allowing Brackley a credit in relation to relevantly modest claims for lost or damaged goods could not amount to an unequivocal representation that the STCs would not apply. 248I do not agree. This was a contract of bailment. UTI was storing goods on behalf of Brackley which were susceptible to damage, for example by fire. The payment, without demur, of claims for loss of goods carried with it an implicit representation by UTI that there was no term in the contract between UTI and Brackley which protected UTI from liability in relation to the claims made. Mr Abrams' evidence was that he would have moved his business away from UTI, had these claims been met with a denial of liability and a reference to the STCs (particularly clause 15). In my opinion, this evidence is credible, and accords with the probabilities, bearing in mind the circumstances in which he was persuaded to change Brackley's business from DHT to UTI. In any event, his evidence was not challenged. 249I accept that all the elements necessary to establish an equitable or promissory estoppel are established: - (a)Brackley has adopted an assumption as to the terms of its legal relationship with UTI, namely that there was no contractual basis upon which UTI could deny liability for damage caused by negligence; (b)UTI induced or acquiesced in Brackley's adoption of that assumption by paying the claims without question; (c)Brackley has acted in reliance on its assumption, by continuing to warehouse its goods with UTI; (d)UTI knew or intended that Brackley would so act (in the absence of any evidence from UTI as to the circumstances in which it paid the amounts in question, I am prepared to draw this inference); and (e)it will occasion detriment to Brackley if the assumption is not fulfilled; that is obviously so if UTI is permitted to rely upon the STCs, and in particular clause 15. (Per Brennan J in Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387, at 428-429; and see the discussion by Brereton J in Waterman v Gerling Australia Insurance Co Pty Ltd [2005] NSWSC 1066; (2005) 65 NSWLR 300 at [83-84].)

[40]

First Representation: No combustible goods 255Brackley alleged that UTI represented that it did not store combustible goods at the warehouse. 256That case is based on the conversations between Mr Abrams and Ms Ternen, to which I have referred. 257In the first of those conversations Mr Abrams said to Ms Ternen: - "...you have to ensure that there is nothing combustible stored within your warehouse". 258Mr Abrams went on to explain that Brackley's CD and DVD cases "is likely to burn for a long time" should a fire occur. 259In the conversation at the "handshake meeting" in August 2004, Mr Abrams said: - "There are to be no combustible goods stored with [sic] the warehouse because [Brackley's CD and DVD cases] are made of polypropylene and polystyrene and burn forever." 260Ms Ternen denied this conversation and denied making the representation. 261However, Ms Ternen agreed that, had a potential customer asked her in 2004 whether UTI was storing combustible goods, she would have said no. 262I have found that the conversations alleged by Mr Abrams took place. I also find that Ms Ternen either said nothing, and thus implicitly represented that no combustible goods were stored at the warehouse or, consistent with that evidence, actually said that no combustible goods were stored at the warehouse. 263The ordinary meaning of combustible is capable of catching fire and burning, or flammable (The Macquarie Dictionary, 5th ed (2009)). 264In cross-examination, Mr Abrams said he understood "combustible" to mean "goods that could burst into flames" or "chemicals that could burst into flames". 265As UTI pointed out, at one level, many things stored in any warehouse would be combustible; for example cardboard cartons. However a fair reading of what Mr Abrams said was that he would not store his goods in a warehouse where there was also stored goods which were likely to themselves cause a fire, or to a significant or practical degree, exacerbate the spread and intensity of a fire otherwise caused. 266At all material times, UTI stored gas cylinders at the warehouse. 267In my opinion, gas cylinders were "combustible" in the sense of that word as used by Mr Abrams in his conversations with Ms Ternen. 268In my opinion the no combustible goods representation was made. It was false and was thereby misleading or deceptive for the purposes of s 52 of the Trade Practices Act. 269Mr Abrams said that in changing Brackley's warehousing from DHT to UTI, he relied on what Ms Ternen had told him about the non-storage of combustible goods, and that had he known the true position he would not have entered into the agreement with UTI. His evidence is consistent with the concerns he expressed to Ms Ternen about the propensity of Brackley's stock to burn for a long time in the case of fire. I accept his evidence. 270Obviously, had Brackley not entered into a warehousing contract with UTI, and stored its goods at the warehouse, the goods would not have been destroyed. 271In my opinion, these findings provide an independent basis upon which Brackley is entitled to succeed against UTI.

[41]

Second Representation: Permission to store Brackley's goods 272Brackley also alleged that UTI represented to it that it was "permitted" to store Brackley's CD and DVD cases at the warehouse. 273Brackley submitted that by agreeing to store Brackley's CD and DVD cases, UTI implicitly represented that it had the permission of its lessor to do so. 274Mr Abrams did not give direct evidence that he knew or understood that UTI was leasing the premises, although this is implicit in his evidence, both in affidavit and in cross-examination. 275In any event, in my opinion, it was not necessary that Brackley prove that it knew of the lease. As PRI submitted, in the context of a similar representation alleged by it, the critical element of this representation is that UTI had facilities capable of storage of Brackley's goods. 276Such a capacity was fundamental to UTI's business as a storage provider. Lack of such capacity might have arisen in ways other than from a prohibition in any lease. There may have been local council restrictions, prohibitions in environmental legislation, or other regulations. UTI's customers were not in a position to know what obstacles UTI needed to overcome in order to perform the services for which it charged payment. Those customers, including Brackley, were entitled to rely on UTI to overcome all such obstacles. 277I accept the submission that, by agreeing to store Brackley's goods, UTI implicitly represented that it had overcome whatever obstacles might exist in relation to its storage of Brackley's goods; including, as it happened, prohibitions in its lease with GTA. 278Clause 10.1(g) of the lease between UTI and GTA, required UTI to comply with all of the Rules in Annexure 1 of the lease. Brackley's DVD cases were made of polypropylene. Some of the CD cases were made of polypropylene; others were made of polystyrene. 279The Rules prohibited the storage of "thermoplastic materials in bulk, e.g. polyethylene, polypropylene etc, other than for the purposes of packing or wrapping". 280The lease thus prohibited, expressly, storage of such goods. 281The permission representation was thus false. 282Mr Abrams gave evidence, which was not challenged, that had he known that it was a term of UTI's lease with GTA that Brackley's goods were not to be brought onto the premises, he would not have caused Brackley to enter into the contract with UTI. 283Mr Abrams did say that it did not occur to him that there might be provision in the lease forbidding UTI from storing Brackley's goods. No doubt this was because Mr Abrams assumed that UTI would not solicit the storage of goods it was not permitted, by its lease, to store. In any event, as Brackley submitted, there is no reason to doubt Mr Abrams' evidence that, had he known the true position, he would not have proceeded. 284Had Brackley not entered into the agreement with UTI, its goods would not have been destroyed. 285In these circumstances I find that UTI engaged in misleading or deceptive conduct by making the permission representation, that the representation was relied on by Brackley and has caused the damages of which it complains.

[42]

First Representation: Permission to store PRI's goods 286PRI submitted that, by entering into the bailment agreement with PRI, and accepting PRI's fish oil to be stored at the premises, UTI represented that it was permitted to store fish oil at the premises. 287For the reasons set out above concerning Brackley, in my opinion, it was not necessary for PRI to prove it knew of the lease between UTI and GTA. 288Further, for the reasons I have set out concerning Brackley, I find that, by accepting PRI's goods for storage, UTI implicitly made the representation alleged. 289The lease between UTI and GTA contained an express provision prohibiting UTI from storing fish oil. 290In this regard, PRI submitted: - "A necessary precondition of engaging in the business of a warehousing storage provider is to have facilities capable of storing customers' goods. This is such a fundamental assumption underlying UTi's business dealings with its customers that it was incumbent upon UTi: (a) to ensure that this was true; and (b) to inform PRI and other customers of any restrictions or prohibitions." 291Consistently with this, as I have said earlier, UTI's warehousing standards expert, Mr Schwebel, agreed that a competent warehouser would carefully read its lease and not store goods prohibited by it. 292PRI called no evidence in relation this aspect of the matter. In particular, it called no evidence to show that PRI had relied upon UTI's implied representation that it was permitted to store fish oil at the premises. None of its directors said, in terms, that if they had known UTI's lease prohibited the storage of fish oil, they would have caused PRI to store its goods elsewhere. 293PRI submitted that such reliance can be inferred. 294I accept that submission. It appears obvious to me that had any of the directors of PRI been told that UTI's lease prohibited it from storing the very goods that PRI was entrusting to UTI, PRI would have arranged for its goods to be stored by a warehouse operator content, and able, to store fish oil. 295That such alternative warehouse operators were available was revealed by UTI's evidence that its usual procedure was that goods of a flammable or dangerous nature were stored offsite at the premises of a competitor, Golden Brothers at Matraville. Indeed, the evidence of UTI's Warehouse Manager, Mr Ball, was to the effect that if a customer wanted UTI to store dangerous or flammable goods, UTI itself arranged for those goods to be stored with Golden Brothers. The reason that did not happen with PRI's fish oil was because neither Mr Ball, nor anyone else involved in the day to day handling of goods in UTI's warehouse, had read the lease, or otherwise knew that it prohibited the storage of fish oil. 296As with Brackley, had PRI's goods not been stored at the warehouse, the goods would not have been destroyed in the fire. 297I find that PRI has established this cause of action against UTI.

[44]

Disagreement between the experts 306Many experts were involved. 307The plaintiffs called three Fire Safety Engineers, Mr John DeLorenzo, Mr Per Olsson and Mr Blair Stratton. The plaintiffs also called Mr Peter Hunt, a Dangerous Goods Consultant. 308UTI called Mr Donald Alexander, a Fire Safety Engineer, as well as Dr Green and Mr Schwebel. 309The real issues of disagreement between the experts were as follows: - (a)Whether combustible goods were stored beyond the height recommended in the applicable standards. Mr Olsson, Mr Stratton and Mr DeLorenzo were of the view that they were, because combustible goods such as linen and plastics were stored at heights of up to 9 metres, well in excess of the restrictions for combustible goods as set out in sprinkler standard AS2118. The maximum allowable storage height for the plastics stored in cartons in the warehouse was 3 metres to 4 metres in racks. (b)Whether combustible goods were dispersed around the warehouse in accordance with applicable standards. Mr Hunt, Mr Olsson, Mr Stratton and Mr Schwebel were of the view that they were not, because the storage of up to 20 drums of fish oil (a C2 combustible liquid) within one area of the warehouse exceeded the concentration of combustible liquids allowed under sprinkler standard AS1940. (c)Whether, once the fire started, the excessive height or inadequate dispersal of combustible liquids caused the sprinkler system to be overwhelmed. Modelling in support of this conclusion is set out in the report of Mr Olsson and Mr Stratton dated 10 September 2010. Their conclusion was that the sprinkler system in the warehouse would have been able to contain the fire once started, but for the non-compliant storage adopted by UTI. 310UTI's attack on each component of this expert evidence was indirect at best. 311Dr Green, a chemist, had limited expertise in storage methodology in warehouses. He had not been involved in the investigation of warehouse fires. He did not refer at all in his report or the joint report to the applicable sprinkler standard AS1940 for safe dispersal of C2 combustible liquids. His argument instead focused on storage heights. His opinion was that provided the maximum height of stored goods was 1.2 metres from the roof, storage was compliant with sprinkler standard AS2118.1. 312Dr Green's approach to this issue was at odds with the other experts. The other experts took the sprinkler system in the warehouse as a given, and considered whether UTI's storage methodology of specified goods complied with applicable standards. Dr Green took the storage methodology as a given (based on a bare assertion that "there is nothing unusual about the storage of goods in this warehouse in that storage would have been below 1.2 metres from the roof line in compliance with the BCA and sprinkler standard"), and criticised the design of the sprinkler system (which was outside of UTI's control) as being inadequate for the storage of those goods. 313Mr Olsson commented "whether the sprinkler system should have been re-designed or the storage arrangement complied with is in my opinion a question of law and not a question for a fire engineering expert". Or indeed a chemist. Underlying Dr Green's opinion was agreement with other experts that either the storage methodology or the sprinkler system had to be changed in order for storage to be in compliance with sprinkler standard AS2118. 314Mr Alexander only dealt obliquely with the issue of storage heights. He said that: - "...reference to excess storage heights throughout the warehouse needs to be moderated by view of the fact that a substantial amount of the stored goods in the warehouse at the time of the fire were extra high hazard category 1 goods. AS2118.1982 for the discharged density of 17.5mm/min has no limitation on the stacking height of category 1 goods, and the governing parameter then becomes maintaining a clearance of 1m below the sprinkler heads. I have therefore concluded that the storage of category 1 goods would have complied with the regulatory requirements." 315Mr Alexander did not dispute the opinion of the plaintiffs' experts as to excessive storage heights of some goods. Rather, his opinion was that because most of the warehouse was compliant, reference to the excess storage heights of the non-compliant parts needed to be "moderated". What Mr Alexander meant by that is not clear to me. 316On the issue of dispersal, UTI's experts were in conflict with each other. Despite opinions expressed in his report, in the expert witness conclave Mr Schwebel agreed with the plaintiffs' experts that storage was in excess of minor storage in sprinkler standard AS1940 for dangerous goods and C2 combustibles. 317Mr Alexander did not dispute this opinion. Rather, his evidence was that the other experts were wrong and had "generalised" in their assumptions as to how the fish oil was stored in the warehouse. He insisted that all the fish oil drums were stored on the bottom tier of the racking and that there were only three pallets in the area. These assumptions have not been made out in the evidence. 318On the question of causation, both Dr Green and Mr Schwebel agreed with the plaintiffs' experts that the types of goods stored and the manner of storage contributed to the spread and intensity of the fire. 319However, both Dr Green and Mr Alexander criticised the modelling undertaken by Mr Olsson and Mr Stratton. However, neither Dr Green nor Mr Alexander provided an alternative model to show how the matters which they say should be taken into account would affect the conclusions derived in the model. 320The evidence of Mr Hunt, Mr Olsson, Mr Stratton and Mr DeLorenzo as to non-compliance of storage methodology and the intensification of the fire as a result of this was neither seriously nor convincingly challenged. I accept their evidence. 321PRI called no evidence as to whether, and how it relied upon the storage compliance representation. It submitted reliance can be inferred. 322That inference is said to arise from the following circumstances: - (a)PRI's business practice was to pay its logistics provider to receive PRI's goods when they arrived from overseas, warehouse them and arrange delivery of those goods to PRI's customers. PRI had little, if any, direct contact with the goods in this process. (b)UTI's Chief Financial Officer, Mr Cruceanu, said that UTI operated in an extremely competitive market, and presented itself as a careful, responsible custodian of its customers' goods. (c)UTI's then National Sales Manager, Ms Joyce Campbell, said that UTI would not "have a differentiator in the market as far as our operational capability" offering "exactly the same" operational capability. (d)Ms Campbell said that UTI was a "solution-based company where we would talk about solutions rather than price". 323The effect of the evidence of Mr Cruceanu and Ms Campbell was that UTI operated in a highly competitive market where the price, and services offered by competing warehouse operators did not vary greatly. 324I accept PRI's submissions that, in these circumstances, it can be inferred that if a customer, including PRI, knew of any deficiency in UTI's storage compliance which would have endangered the customer's goods, then the customer would have simply moved its goods to another provider. 325As PRI pointed out, such inference may carry more weight than direct evidence of reliance given by a customer, given in hindsight after the loss of the goods. 326I find the representation alleged was made, that it was misleading or deceptive, that PRI relied on it and has suffered damage as a result.

[47]

Did GTA owe a duty to UTI's customers? 331The critical question is whether GTA, as UTI's lessor, owed a duty to take reasonable care to UTI's customers - PRI and Brackley. 332The duty owed by a lessor to a person lawfully on the premises is to take reasonable care to avoid foreseeable risk of injury: Jones v Bartlett [2000] HCA 56; (2000) 205 CLR 166 at [168]. Jones v Bartlett concerned a claim for personal injuries. However, the relevant principle must be the same in the case of damage to property. 333The nature and extent of duty will depend upon the circumstances of each case. As Gummow and Hayne JJ said in Jones v Bartlett, that is only the beginning of the enquiry and: - "The 'circumstances' to be considered may differ between landlord and tenant and landlord and other persons. There is no necessary correlation between the respective duties, although the latter is likely to be less stringent than the former." (at [169]) 334There is no suggestion in the evidence that GTA had any expertise in warehousing. It had leased the entire premises to UTI so that UTI could itself carry out a warehousing business. 335UTI pointed to no authority in which a duty has been held to exist in a circumstance analogous to that in this case. 336As PRI submitted, the proposition that the owner of property may, in certain circumstances, owe a duty of care to avoid foreseeable risks of personal injury to those who enter the property is not controversial; so much emerges from Jones v Bartlett. However it is quite another thing to suggest that a duty might arise where: - (a)the occupier (UTI), rather than the owner (GTA) was in the business of storing goods and put itself forward as a responsible custodian of goods; (b)the customers (PRI and Brackley) had no dealings with the owner (GTA) and relied entirely on the operator (UTI) to look after their goods; (c)the relationship between the owner (GTA) and the occupier (UTI) was governed by a detailed lease, whose terms included restrictions on the goods that could be stored at the warehouse and whose terms imposed no obligation on the owner apart from keeping its "plant and equipment...in good working order" (lease clause 14(c)); and (d)other than its rights under the lease, the owner (GTA) had no basis to control the day to day storage of the goods. 337Further, none of the elements normally required in order that a duty be imposed are present. 338Neither PRI nor Brackley were vulnerable to the harm from GTA. They could both protect themselves against loss of goods by bargaining for warranties with the party with whom they contracted, UTI. And there is no suggestion in the evidence that Brackley or PRI placed reliance on any act or omission of GTA. 339In my opinion, GTA owed no duty of care to either PRI or Brackley. For that reason alone UTI's proportionate liability defence must fail. 340In any event, any duty of GTA was "to exercise reasonable care", not to ensure that the premises were safe. 341In my opinion, there was no evidence that GTA failed to take reasonable care (assuming it had a duty to PRI and Brackley to do so). 342So far as the fire protection system at the premises is concerned, any duty of GTA would not extend beyond retaining experts to check, on a regular basis, the fire safety systems and to take steps to remedy any defects that those experts drew to its attention. 343The evidence established that GTA engaged FlameSafe Fire Protection Pty Ltd ("FlameSafe") to conduct weekly testing of the sprinkler system and a manual inspection for the purpose of checking and certifying essential safety matters. 344Mr Torrington, a mechanical engineer, conducted a survey of the site on 8 August 2005. That report was received by GTA's Managing Agent, CB Richard Ellis, on 25 October 2005. Mr Torrington's report identified some problems with water supply. On 16 November 2005, CB Richard Ellis engaged FlameSafe to test the pumps. A flow test was carried out on 6 December 2005. FlameSafe reported no problems. 345In all those circumstances, my opinion is that GTA's conduct, through its agent, CB Richard Ellis, was reasonable. 346In any event, there is real doubt that any breach by GTA of any duty to PRI or Brackley concerning the fire extinguishment equipment at the warehouse could have made any difference on the day of the fire. 347Inspector Bailey gave this vivid evidence: - "The fire was never going to be extinguished by active intervention. Essentially, before the fire brigade turned up, that building was a loss. Fire crews adopted a defensive strategy straight away. They were never going to actively fight the fire from inside, which was the only way you would extinguish it, and the poor water pressure wouldn't have contributed to any worse loss that we had...Defensive strategy means you defend your position; you don't allow the fire to spread from where it is, but you don't actively engage in extinguishing the fire. You simply provide enough resources to ensure the fire doesn't get any bigger and doesn't get out of the building that it's in. Essentially, this is a big box, and we kept the fire to the big box, but we were never going to save the box." 348In my opinion, for these reasons, UTI's proportionate liability defence fails.

Pacific Resources International Pty Ltd v UTI

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (49 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (22)

Cited By (1)