Ritchie v Advanced Plumbing and Drains Pty Ltd

Background

1. The director of APD prior to its liquidation was Jason Hooper. Mr Hooper and his wife jointly owned a property at 78 Brindabella Place, Carwoola. Carwoola is a short distance east of Queanbeyan.
2. Mr Hooper founded APD in 2010. It initially undertook domestic plumbing work, but quickly evolved to take on small commercial plumbing contracts and then large commercial projects such as schools and apartment complexes. By 2017, almost all of its work was large commercial projects on which it provided plumbing, hydraulic and civil infrastructure services. Its larger projects in 2016 and 2017 included a ten-floor office tower conversion, a six-floor apartment complex and a public school. In each case, APD provided excavation and in-ground civil works, in addition to the installation of plumbing infrastructure. In the course of installing large scale commercial hydraulics, APD's work included cutting concrete and bitumen outside the boundaries of the property under development, to install sewer, water or stormwater infrastructure, and cutting steel before the pouring of concrete for those installations.
3. In 2017, APD had approximately 40 employees, and used a broad range of tools and heavy equipment to provide its services. These included excavators, jackhammers, saws and cutting tools, in addition to welding equipment for pipes.
4. In mid-2016, Mr Hooper engaged a licensed builder, Ivan Pirjac, of National Build Pty Ltd to construct a dwelling, shed and stables at the property. Mr Hooper said that he arranged with Mr Pirjac that he (Mr Hooper) would take responsibility for building the works up to slab level, and that he would engage APD to do those works.
5. The work at the property commenced in about late 2016, and initially involved APD employees clearing and establishing a building envelope. An earth pad had been prepared on the construction area and, on Mr Hooper's instruction, an APD employee had cleared an area of about 15 metres around the perimeter of the footings. There is a dispute about whether this was simply to provide ease of access, or was a fire break, or both.
6. Mr Hooper and his foreman, Shannon Orford, had also excavated and installed water and electrical conduits up the driveway, and installed taps. APD employees also excavated for the installation of a 120,000 litre concrete water tank.
7. Mr Hooper had organised the installation of the reinforcing steel into the trenches to commence on Saturday, 11 February 2017. The work was cancelled on that day because there was a total fire ban, and because the temperature was to reach 40° centigrade, above the 38° limit for APD employees to be working under their Enterprise Bargaining Agreement.
8. Mr Hooper then spoke to Mr Orford the following Monday to let him know the tasks he had for the week. That work included the installation of the reinforcement. The preparation of footings included forming reinforcing steel into cages and, where necessary, cutting the steel to length.
9. On Friday 17 February 2017, three APD employees, Mr Orford, Murray McNeil and Mark Kelly, were working at the property. In addition, a former apprentice, Harrison Elliott, was working there. Mr Elliott had been called by Mr Orford the night before and asked if he could come and work the following day. Mr Elliott had started as an apprentice with APD in September 2015. He left APD in November 2016 to go to work for Natural Gas and Water, where he remained until March 2017, when he returned to work for APD.
10. During the morning of 17 February 2017, Mr Orford was working on the steel reinforcement of the footings. He was using a Husqvarna K970 power cutter fitted with a grinding wheel to cut reinforcing steel to size. At some time during the morning, Mr Elliott was asked by Mr Orford to assist him.
11. At around 11.40am, Mr Orford was attending to the steel frame in the trench on the south-eastern side of the construction area. Mr Orford directed Mr Elliott to cut the steel mesh. Mr Elliott made the first cut facing towards the paddock in a south to south-easterly direction. As a result, sparks from the cut were directed behind him onto Mr Orford in the trench.
12. Mr Orford called out to Mr Elliott and told him to turn around. Mr Elliott did so, without thinking, he said, because they were in a rush. As a result, sparks were directed towards the paddock, although no one realised that had happened until Mr Elliot had finished the cut, grabbed the two bits of steel that he had cut and put them in the trench, climbed into the trench, lifted the steel up and tied them. At that point, both he and Mr Orford saw flames in the paddock.
13. The paddock was vegetated with long, dry, fully cured, grass. The area of origin of the fire was at least five metres from the edge of the cleared area.
14. On that day there was a total fire ban declared for the area in which the property was located. At about 11:40am on that day, the temperature at Canberra Airport, the nearest weather station to Carwoola, was 31.6° centigrade, there was low humidity and the wind was from the north-west, gusting to 37 kph.

The issues and common questions

1. The questions of law or fact common to the claims of the plaintiff and each of the group members are: (1) What was the cause of the ignition of the Carwoola bushfire? (2) Did the first defendant and/or Messrs Orford and Elliott (and, if so, which of them) owe a common law duty to the plaintiff and group members to exercise reasonable care in relation to the works to avoid: 1. personal injury; 2. physical damage to property; and/or 3. economic loss resulting from damage to property? (3) Did the first defendant and/or Messrs Orford and Elliott (and, if so, which of them) breach their common law duty of care to the plaintiff and group members? (4) If the first defendant and/or Messrs Orford and Elliott breached their common law duty of care, was such breach a cause of any of the losses suffered by the plaintiff (and if so, which breach)? (5) Is the first defendant vicariously liable for any breach by Mr Elliott in using the power cutting wheel at the property on 17 February 2017? (6) Do the first defendant and/or Messrs Orford and Elliott (and if so, which of them) have an insured liability to the plaintiff and group members within the meaning of s 4 of the Third Party Claims Act and, in particular: (a) was the Carwoola bushfire an occurrence happening in connection with the Insured's Business within the meaning of the Schedule and cl 1.1 and 4.4 of the Policy; (b) did the Welding Endorsement apply to the use of the power cutting wheel on 17 February 2017 and, if so: i. were the first defendant and/or Messrs Orford and Elliott required to strictly comply with AS 1674 Part 1 1997 Safety in Welding and Allied Processes - Fire Precautions (Standard); ii. did the first defendant and/or Messrs Orford and Elliott strictly comply with the Standard; and (c) did the first defendant and/or Messrs Orford and Elliott fail to take "reasonable precautions to prevent or minimise liability" within the meaning of cl 7.3.1 of the Policy?

Duty and breach

1. The following matters are agreed between the parties:
2. The workers owed the plaintiff a duty to exercise reasonable care in respect of the risk of loss and damage resulting from fire caused by sparks from the use of a power cutting wheel to cut steel at the property.
3. A reasonable person in the position of either APD or the workers would have taken the reasonable precautions alleged.
4. The workers breached their duty of care owed to the plaintiff by failing to take the reasonable precautions against the risk of fire.
5. The spark or sparks discharged by Mr Elliot's use of the power cutting wheel to cut steel at the property caused the Carwoola bushfire.
6. The plaintiff owned the real property situated at 358 Widgiewa Road, Carwoola, and suffered loss and damage as a result of the negligence of the workers.
7. Putting aside the insurance issues identified in para (6) of the common questions, two issues remain in dispute in relation to the plaintiff's allegations that APD and the workers are liable to her and the group members in negligence.
8. The first issue is the existence of a duty of care owed to the group members. Although CGU admits that the workers owed the plaintiff a duty of care, breached that duty, and that the breaches caused her loss and damage, it does not admit such duty and breach with respect to the group members. The basis for the non-admission is that some group members may seek to advance personal injury claims based on pure psychiatric injury.
9. The second issue is whether APD is liable in negligence to the plaintiff and group members. The question is whether APD was performing the works at the property, or whether the people working there were working for Mr and Mrs Hooper.
10. Following resolution of those issues, it is then necessary to consider what I have described as the insurance issues.
11. The plaintiff and CGU have separately agreed the quantum of the plaintiff's loss.

1. Liability to group members
2. As to the first issue, the basis for the second defendant not admitting any duty of care or breach toward the other group members arises from the pleading in para 3(a) of the further amended statement of claim, that the group members consist of: All those persons who suffered personal injury (whether physical injury, or psychiatric injury) as a result of the Carwoola bushfire.
3. It is the inclusion of the words "or psychiatric injury" which gives rise to the problem. The plaintiff does not claim psychiatric injury. At the present time it is not known whether other group members have in fact suffered psychiatric injury. As a result of the different principles which apply to claims for mental harm because of ss 30 to 33 of the Civil Liability Act 2002 (NSW) the second defendant will not admit duty and breach generally to the group members.
4. Question (2) of the common questions was: Did the first defendant and/or Messrs Orford and Elliott (and if so, which of them) owe a common law duty to the plaintiff and group members to exercise reasonable care in relation to the Works to avoid: (a) personal injury; (b) physical damage to property; and/or (c) economic loss resulting from damage to property? This question does not include psychiatric injury.
5. The parties agreed that the issue of psychiatric injury should be put to one side for the determination of the issues before me. Any determination that a duty of care was owed to the group members in relation to any of the matters in (a), (b) and (c) does not result in a duty to avoid mental harm.
6. It is not otherwise suggested that there is any difference between the position of the plaintiff on the one hand and the group members on the other in respect of claims for loss or damage to property or for personal injury other than psychiatric injury. In those circumstances, it is clear that, as the workers owe the duty of care to the plaintiff, so they owed that duty of care to the other group members. In the same way, the failure of the workers to take the reasonable precautions alleged constituted a breach of that duty of care to the other group members in the same way as they constituted a breach of the duty of care to the plaintiff.

2. Liability of APD
3. Although this issue of any duty of care and breach by APD is closely related to the first of the insurance issues, that is, whether the work formed part of the Business of APD (as defined in the Policy), the two issues are not identical because a determination of the latter issue involves a construction of the Policy. In other words, a finding that APD is liable to the plaintiff and the group members for acts and omissions of Mr Orford and Mr Elliot is not determinative of whether APD is entitled to claim on the Policy in respect of any liability it has from the defendant. If it is found that APD was not liable, it is then necessary to determine if the liability of Mr Orford and Mr Elliott is covered under the Policy by reason of their work on the site being private work for Mr Hooper. That involves a consideration of the term insured liability in s 3 of the TPC Act.
4. In relation to the issue of whether the work was being done by APD, CGU submitted the building work was not an APD project. There was no meeting to discuss the plans, work out what needed to be done by whom and when, and for the preparation of Safe Work Method Statements as Mr Hooper said occurred on APD's other projects. CGU submitted that it was just Mr Hooper getting some work done by labourers on the side when they were otherwise available.
5. Before considering whether APD was carrying out the works, it is necessary to say something briefly about the credibility of Mr Hooper, because his evidence is crucial to this issue.
6. There is an obvious conflict between Mr Hooper's evidence and that of Mr Elliot in relation to assertions made by Mr Elliot about discussions that occurred on the day following the fire between Mr Hooper, Mr Orford, and Mr Elliot. I have no hesitation in rejecting Mr Elliot's evidence to the effect that it was agreed amongst those three persons that the story to be put forward was that it was Mr Orford who was cutting the steel and was responsible for the sparks starting the fire. Determining who is to be believed about these discussions does not directly affect any issue in the proceedings because there is now no doubt that it was Mr Elliot who was responsible for performing the cuts to the steel that led to the fire. However, if I had accepted Mr Elliot's evidence about those discussions, that would have been a matter that threw doubt on Mr Hooper's evidence generally, because it would have affected his credibility.
7. I reject Mr Elliot's account of those events for a number of reasons. First, Mr Elliot was prepared to lie to the police in the first instance about what occurred on the day in question. Secondly, he was not fully prepared to take responsibility for the lie that he told not only to the police but also to the fire investigator Richard Woods and, arguably, he compounded the lie in the evidence he gave.
8. In his evidence, Mr Elliot was not prepared to admit that he had not told the truth to Mr Woods: Q. Mr Woods spoke to you and you told him your account of what had occurred. A. Okay, yes. Q. You told him that you had seen Mr Orford using the quick cut saw with his back to the grassland, didn't you? A. On one occasion, I do recall seeing that while he was on the left-hand side before I had joined him working whilst I was up on the main plateau where the foundations that I were - I was digging out, I do recall taking a look over at Shannon and seeing exactly that, yes. HIS HONOUR Q. You weren't asked what happened. You were asked what you told Mr Woods. GREENWOOD Q. I'll ask the question again. You told Mr Woods, didn't you, that you saw Mr Orford using the quick cut with his back to the grassland? A. Yes, that's right. Q. You told Mr Woods that you saw Mr Orford using the quick cut saw and it throwing sparks out to near the edge of the cleared site, didn't you? A. Yes, towards, yes, that's right. Q. Do you tell his Honour that that was the truth? A. Yes, that's right. I would still say that's true.
9. What Mr Woods recorded in his report of 15 September 2020 was this: 15. I initially spoke with Mr Harry ELLIOTT, who described that he was assisting Mr Shannon ORFORD who was using a Husqvarna petrol powered quick cut grinding saw to cut steel reinforcing bar to be placed in the foundation trench of the building under construction. He stated that Mr Orford was using the quick cut grinding saw with his back to the grassland (facing north-west) and that he saw the quick cut grinding saw throwing sparks, out to near the edge of the cleared site while the unit was cutting the sections of steel bar. He stated he and Mr Orford moved the cut reinforcing bar to the trench area and subsequently heard the 'crackling' of a fire and saw smoke to the south-east of the building site. (Emphasis in original)
10. Plainly, that account of what occurred was not true, but Mr Elliott was prepared to say on oath that it was.
11. Thirdly, I also found his evidence generally to be given in an unsatisfactory manner which pointed to prevarication on the one hand and reconstruction of events on the other. An example of his prevarication about the lie is the following evidence.
12. He was asked about his statement to the police, and the fact that the statement began by saying that it was true: Q. But despite that, you deliberately told the police lies when you made that statement didn't you? A. Which one is the particular lie that you're referring to? … Q. Isn't it the fact that you lied in the statement that you gave to the police on 18 March 2017, and then went later to the police in June 2017 to correct that? A. I can say that potentially the story was changed. I need some point of reference. I do apologise, it's been a number of years between now and then. If, if I recall, I do recall altering the story because what I had originally set out was not the truth, and so when I did go back and discussed with the police, I came clean in regards to the particular errors that had occurred in regards to what had been told in the first instance. Now whether I lied or not is a pretty, pretty big different story. I don't recall the actual details of what had been altered. If we had reference to that, that'd be a lot of help. … Q. … And at some stage, you told the police that Mr Orford had been doing the cutting on the day shortly before the fire occurred, correct? A. Correct. Q. And then you changed your story to the fact that you were doing the cutting shortly before the fire occurred, didn't you? A. I, I, I would say that this is where - this is good. Okay, so as far as I can tell, we may have - okay, so, this is the point where the story has changed from - in my both police statements, is this correct? Q. You tell us how the story changed. A. Yeah, so as far as I'm aware, I told the story to the police in the first instance that Shannon had made the cut, if I'm, I hope I'm accurate, I do apologise, the final cut between when the fire had occurred and the incident occurring, and then on my second statement, I came clean and told them that I made the cut, and the reason why that was the case is because originally, I suppose I was being protected and covered by Jason and Shannon because I suppose I was a person at risk and, you know, deep down they do care somewhat, yes. Q. Did Shannon and Jason tell you to tell the police that you hadn't done the cuts, that Shannon had done the cuts before the fire? A. In the discussion on Saturday, that was a topic that was brought up and it was primarily - it was, it was discussed on the Saturday and when I had my first original police interview, that was the story that I told, and it didn't sit right with me, so the second time I changed it to the truth, because, yeah, it wasn't true.
13. Mr Greenwood of Senior Counsel for CGU criticised Mr Hooper for what he described as Mr Hooper's constant attempts to refashion or reframe matters, such as whether the cleared area around the building envelope was at least partly done to create a firebreak. There was no evidence to suggest that Mr Hooper's evidence in that regard was not truthful.
14. Another criticism in the same vein was made about what Mr Hooper said in his Electronically Recorded Interview with a Suspected Person (ERISP), concerning the workers only cutting the steel with bolt cutters. A reading of the whole passage leads me to the conclusion that by the time of that ERISP (at 12.04pm the day after the fire started), Mr Hooper was not fully aware of what had occurred. He certainly did not know that Mr Elliott was the person who had used the power cutter. Mr Hooper's surprise that power tools would have been used and his statement "so I can't really say how else he might, may or may not have cut it" suggests that his knowledge in that regard was incomplete.
15. I accept that Mr Hooper's putting APD into liquidation shortly after the fire and incorporating another company to do the same work leaves a poor impression, but Mr Hooper gave evidence that he did so because indemnity had been declined by the insurer, he had large legal bills, and these proceedings had begun, and he did not have the wherewithal to defend them.
16. Nevertheless, having observed Mr Hooper give his evidence, and having read his ERISP, I am satisfied that Mr Hooper was an honest witness who was doing his best to recall matters that were put to him.
17. Mr Hooper's evidence in relation to APD's involvement with the building work at the property was as follows: 5. APD assigned a job number to the work at the Property, as it did with all of its projects, so that costs such as wages, plant, equipment and supplies could be properly allocated and accounted for. Although I do not specifically recall, the job number was probably A100, which was the number typically used for any products or services which APD supplied for the benefit of my family. 6. Each APD employee filled in a timesheet for their hours worked at the Property by reference to the job number and was paid by APD, in the same manner as any other project. 7. The plant and equipment for the excavation and footings works at the Property was supplied by APD. It included 3 excavators (4.8, 6 and 12 tonnes), a bobcat, a roller, jack hammers, handheld electric grinder and the Quick Cut power saw. With the exception of the roller (which was hired by APD), all of the plant and equipment was owned by APD and was equipment used in the ordinary course of its business. 8. The works at the Property started in about late 2016. The works i nitially involved APD employees using excavators and other machines to clear, cut, fill and level a building envelope on which the house, shed and stables were to be built. The works included creating the fire break referred to in paragraphs 24 and 25 of my First Statement: excavating for the construction of a 100,000-litre concrete water tank; and creating the trenches for the footings of the dwelling, shed and stables. 9. This work was done over the course of a number of months by available APD employees, including myself, Murray McNeil, who was an experienced machine operator, Mr Orford and others. 10. Once the footing trenches were prepared, it was necessary to fit them with steel reinforcement before the concrete slab could be poured. The reinforcing steel mesh was purchased by APD from one of its regular steel suppliers and delivered to the Property. The steel then needed to be made into cages to be placed into the trenches. Some of the steel would need to be cut to length. This is work commonly done by APD in the course of its business. 11. I had planned to have some workers commence on the reinforcement on Saturday, 12 February 2017, but I cancelled it because there was going to be 40-degree heat and total fire bans had been declared throughout NSW. There were a number of reasons why I cancelled the work. In addition to the increased risk of bushfire, when the temperature is that high, the steel becomes incredibly hot and almost impossible to handle and I was not keen on my employees working outside in that sort of heat, particularly on a weekend. 12. On about 15 February 2017, I instructed Mr Orford to work on installing the steel reinforcement into the footings at the Property. I told him that I had booked a certifier to look at the footings at 4.00 pm on 17 February 2017, prior to a concrete pour scheduled for the following Monday. … 13. Mr Orford started working on the reinforcement at the Property on 16 February 2017, together with Mark Kelly, a labourer employed by APD.
18. Mr Hooper also gave evidence that he told Mr Ivan Pirjac of National Build that APD would be doing the works up to slab level.
19. There was also evidence of APD's sign being affixed to the front gate of the property, with the company's full name, phone number, email address and the words, "Residential and Commercial Plumbing, Drainage and Gas" on it.
20. A strong indication that the work was being performed by APD was the evidence of Mr Hooper that he had cancelled the same work on the previous Saturday, because the temperature was forecast to be 40 degrees "and our EBA [Enterprise Bargaining Agreement] will not allow my employees to work on a 40-degree day outside". It is plain that if the workers were only on site for Mr and Mrs Hooper, the EBA would have no relevance.
21. Mr Hooper was challenged about whether APD had any time sheets for the work that was carried out at the property, and whether they were provided to the liquidator of APD. I accept his evidence that there were time sheets for the job. It does not seem likely that such documents would have been sought by the liquidator because, as Mr Hooper said, they were not pay slips.
22. Mr Hooper was also challenged about whether a Safe Work Method Statement was completed in relation to the building work. Mr Hooper said that it was, and he believed it had been provided to his lawyer. Ultimately, after a call for that document, no such document was produced. I do not consider the absence of that document casts doubt on Mr Hooper's evidence.
23. CGU submitted that Mr Elliot was not an employee of APD at the time but had been co-opted by Mr Orford to work on that day. Mr Elliot said, and I accept this aspect of his evidence, that he expected to be paid for working that day although nothing had been said in the conversation he had with Mr Orford about the matter. It might be asked rhetorically why he would not have expected to be paid. He was an apprentice who had worked for APD previously. There was nothing to suggest that he owed Mr Orford any favours to explain why he would agree to perform a day's heavy work in very hot conditions without being paid for it. However, by reason of what follows, it does not matter whether Mr Elliott was paid for the day or not.
24. From the point of view of any liability to the plaintiff and the group members, whether or not Mr Elliot should be regarded as an employee of APD is not important. Mr Orford was a foreman engaged by APD and there is no suggestion that it was not open to him to have engaged Mr Elliot to assist in the work. Indeed, in his ERISP, Mr Hooper said that Mr Elliot was someone that Mr Orford engaged on a casual basis.
25. Mr Elliot was under Mr Orford's supervision, and it was Mr Orford who directed him to change position while he was cutting the steel so that the sparks would not hit Mr Orford. Any breach of duty that led to the fire was principally a breach by Mr Orford in the direction he gave to Mr Elliot. APD is liable for Mr Orford.
26. Mr Orford did not give evidence in the proceedings, nor was any statement or police interview with him put into evidence. In the somewhat unusual way the proceedings were run, probably because of the insurance issues, with both Mr Hooper and Mr Elliot giving evidence for the plaintiff, I do not consider that any inference can be drawn from the failure of either party to call Mr Orford. It cannot be said that he was in either party's camp. In any event, although evidence may have been able to have been obtained from him in relation to certain aspects of Mr Hooper's evidence and Mr Elliot's evidence, important matters about which Mr Orford could give evidence were not seriously in doubt.
27. I am satisfied, from the nature of the work ordinarily carried out by APD and from Mr Hooper's evidence about the arrangements for the work carried out at the property, that the work was being carried out by APD, and that APD is liable to the plaintiff and the group members for the breach of its duty of care.

The insurance issues

1. The plaintiff and the members of the group can only recover any loss against CGU if they have the right to recover the amount of any insured liability with CGU, in accordance with s 4 of the TPC Act, having regard to the definitions in s 3 of that Act.
2. Section 3 of the TPC Act relevantly provides: insured liability means a liability in respect of which an insured person is entitled to be indemnified by the insurer. insured person means a person who is, in respect of a liability to a third party, entitled to indemnity pursuant to the terms of a contract of insurance, and includes a person who is not a party to the contract of insurance but is specified or referred to in the contract, whether by name or otherwise, as a person to whom the benefit of the insurance cover provided by the contract extends. liability means a liability to pay damages, compensation or costs.
3. Section 4 provides: Claimant may recover from insurer in certain circumstances (1) If an insured person has an insured liability to a person (the claimant), the claimant may, subject to this Act, recover the amount of the insured liability from the insurer in proceedings before a court. (2) The amount of the insured liability is the amount of indemnity (if any) payable pursuant to the terms of the contract of insurance in respect of the insured person's liability to the claimant. (3) In proceedings brought by a claimant against an insurer under this section, the insurer stands in the place of the insured person as if the proceedings were proceedings to recover damages, compensation or costs from the insured person. Accordingly (but subject to this Act), the parties have the same rights and liabilities, and the court has the same powers, as if the proceedings were proceedings brought against the insured person. (4) This section does not entitle a claimant to recover any amount from a re-insurer under a contract or arrangement for re-insurance.

(a) The insured's business

1. For the plaintiff to recover on the basis of the insured liability, she must show, in the first place, that the bushfire was an occurrence happening in connection with the Insured's Business.
2. The Policy Schedule relevantly provided: THE NAMED INSURED Advanced Plumbing and Drains Pty Ltd THE BUSINESS Principally Plumbing and any other activities incidental thereto. …
3. The Policy wording relevantly provided: 1. The Indemnity Coverage: In consideration of the Named Insured having paid or agreed to pay the Premium and subject to the terms, Definitions, Exclusions, Conditions, provisions and Limits of Liability set out in this Policy, the Insurer will indemnify the Insured against the legal liability of the Insured to pay: 1.1 Compensation in respect of: 1.1.1 Injury to any person; 1.1.2 Property Damage; 1.1.3 Advertising Injury; occurring within the Geographical Limits during the Period of Insurance as a result of an Occurrence happening in connection with the Insured's Business or Products. … 4. Definitions 4.4 The Business means: 4.4.1 the Business specified in the Schedule; 4.4.2 the provision and management of canteens, social, sports and welfare organisations, educational and child care facilities primarily for the benefit of the Insured's Employees; 4.4.3 first aid, medical, fire and ambulance services; 4.4.4 the maintenance of the Insured's premises or property for which such responsibility exists; 4.4.5 private work undertaken by the Insured's Employees for any director, partner or senior executive of the Insured; 4.4.6 any prior activities which have ceased or have been disposed of but for which the Insured may retain a legal liability; 4.4.7 participation in exhibitions; 4.4.8 hire or loan of plant to other parties; 4.4.9 conducted tours of the Insured's premises; 4.4.10 any other occupation ancillary or incidental to the Business stated in the Schedule. … 4.11 Insured means: 4.11.1 the Named Insured stated in the Schedule; … 4.11.4 any director, officer, Employee, partner or shareholder of the Named Insured or of a company designated in 4.11,2 and 4.11.3 above, but only whilst acting within the scope of their duties in such capacity; 4.11.5 any voluntary worker and any person whilst working for an insured party for the purpose of gaining work experience; … 4.11.10 any Employee of the Insured whilst undertaking private work for any director or senior executive of the Insured or of any partner designated in paragraph 4.11.11 of this Definition; … 5. References 5.1 Headings: Clause and other headings are for ease of reference only and shall not be deemed to form any part of the context or to affect the interpretation of this Policy.
4. The definition of Business is a broad one, particularly when the Policy Schedule provides that the insured's business is "Principally Plumbing and any other activities incidental thereto", and cl 4.4.10 includes "any other occupation ancillary or incidental to the Business stated in the Schedule".
5. To CGU's knowledge from the Aon Quotation Slip, the plumbing business involved "Plumbing on commercial sites", it had construction equipment including excavators and minor construction plant, and it used sub-contractors for trenching electrical work. This common knowledge is admissible to understand the commercial circumstances of the policy: Horsell International Pty Ltd v Divetwo Pty Ltd [2013] NSWCA 368 at [176].
6. The work that APD had done on the site prior to this time included was the excavation for, and installation of, the conduits for both water and electricity up the driveway, and the excavation for the installation of the 100,000 litre water tank. Regard must also be had to the type of work APD ordinarily carried out, which included, "extensive excavation and in-ground works. Installation of water, sewerage, storm water infrastructure and in-ground tank site preparation and installation, excavation of footings, concrete and steel work. This work would typically include responsibility for all in-ground civil works such as preparing and excavating sites, installing infrastructure such as storm water systems, sewerage pits, tanks and laying large pipework.
7. Mr Hooper said also that 98% of APD's work was made up of large commercial projects where APD would provide plumbing hydraulic and civil infrastructure works.
8. CGU submitted that although the word "principally" in the Policy Schedule suggested that the parties understood that APD's business was not exclusively plumbing, there is nothing to suggest that they envisaged that the business would include construction of footing for a home. CGU submitted that what was being done by Messrs Orford and Elliott could not be seen as ancillary or incidental to plumbing works.
9. In Australian Casuality Co Limited v Federico (1986) 160 CLR 513 Gibbs CJ said (at 520): The ordinary rules of interpretation apply to a policy of insurance. As in the case of any commercial contract, a court may depart from the strictly literal meaning of a particular expression to place upon it an alternative construction which is more reasonable and more in accord with the probable intention of the parties if the words will bear that construction:… . Further "the trend is, if anything, to adopt a liberal interpretation in favour of the assured, so far as the ordinary and natural meaning of the words used by the insurer permits this to be done". (Citations omitted)
10. It is clear from the definition of Business, that what was being insured was a great deal wider than actual plumbing work, even if the matters identified in sub-cll 4.4.2, 4.4.3, 4.4.4, 4.4.7, 4.4.8 and 4.4.9 are read down (as CGU submits they should be) to have some connection to plumbing work.
11. The work that APD had done on the site up to that time had included works related to plumbing and drainage, including the work for the installation of the water conduits on the driveway and the excavation works for the in-ground water tank. For that reason, and on the basis of what CGU knew about APD's business, the work that was being carried out on the land was an activity ancillary or incidental to the plumbing business.
12. The position here is not distinguishable from the situation in Watts v Perry [1972] 1 NSWLR 73, where the injury sustained by the plaintiff occurred in the course of the insured employer performing work associated with the insured business. The description of the business in the Policy Schedule in that case was "the business of scrap-metal dealer and no other". At the time the plaintiff was injured, he was helping to demolish a boiler which was to be cut up for the scrap metal business. Justice Asprey (with whom Jacobs and Holmes JJA agreed) said (at 82-83): The circumstance that a person engaged in the business of a scrap-metal dealer as an incident to that business does work which can also be performed in the course of carrying on a business of another description does not of itself change the essential nature of his business….This is not affected by the addition of the words "and no other" to the description of the business.
13. Indeed, the position in the present case is a stronger one for the insured. Not only do the words "and no other" not appear, the policy schedule adds the words "and any other activities incidental thereto", and the definition of Business includes "any other occupation ancillary or incidental to the Business stated in the Schedule".
14. If I am wrong in that conclusion, and if APD was not itself carrying out the work on the site, what was happening was undoubtedly private work undertaken by APD's employees for a director, Mr Hooper. No basis is shown for reading down the words "private work" in either of sub-cll 4.4.5 or 4.11.10 to mean "private plumbing work" as CGU impliedly contends. Sub-cll 4.4.1 and 4.4.10 are the only sub-clauses which link the Business to what is specified in the Policy Schedule. The focus in both sub-cll 4.4.5 and 4.4.10 is on the relationship between the Named Insured and its employees, rather than on the nature of the work they are carrying out.
15. If CGU had intended to confine the activities listed in cl 4.4 to the description in the policy Schedule, it could easily have said so. The fact that the Schedule is not mentioned in the sub-clauses other than 4.4.1 and 4.4.10 (or in sub-cl 4.11.10 for that matter), tends against a restrictive construction of the clause generally and, in this case, of sub-cl 4.4.5.
16. On either basis, the Occurrence (the fire) happened in connection with the insured's Business.

(b) Reasonable precautions

1. Clause 7.3 of the Policy provides: 7.3 Precautions by the Insured The Insured shall; 7.3.1 take reasonable precautions to prevent or minimise liability and take reasonable measures to maintain efficient ways, works, machinery, fencing and plant and shall make reasonable endeavours to comply with all statutory obligations and regulations imposed by any authority for the safety of persons or property; 7.3.2 at its own expense, take reasonable action to trace recall or modify any of the Products containing any defect or deficiency of which the Insured has knowledge or has reason to suspect, including (but not limited to) any Products subject to Government or statutory ban.
2. In Fraser v B. N. Furman (Productions) Ltd; Miller Smith & Partners (A Firm) Third Party [1967] 1 WLR 898, Diplock LJ said (at 906): What, in my judgment is reasonable as between the insured and the insurer, without being repugnant to the commercial purpose of the contract, is that the insured, where he does recognise a danger should not deliberately court it by taking measures which he himself knows are inadequate to avert it. In other words, it is not enough that the employer's omission to take any particular precautions to avoid accidents should be negligent; it must be at least reckless, that is to say, made with actual recognition by the insured himself that a danger exists, and not caring whether or not it is averted.
3. In Legal & General Insurance Australia Ltd v Eather (1986) 6 NSWLR 390, the New South Wales Court of Appeal said that Fraser ought to be followed. Justice Kirby said (at 397): It is therefore necessary, as the respondent primarily submitted, for the insurer to establish that the respondent acted recklessly, indifferent to the normal precautions that would be taken, relying on the comfortable reassurance that the insurance company will pick up the consequence of any loss.
4. In VACC Insurance v BP Australia Ltd (1999) 47 NSWLR 716; [1999] NSWCA 427, Brownie AJA said at [58] (albeit in dissent): The test is a subjective one, personal to the insured.
5. In Barrie Toepfer Earthmoving and Land Management Pty Ltd v CGU Insurance Ltd [2016] NSWCA 67 Meagher JA (with whom Ward JA and Sackville AJA agreed) said at [80]: In this context the notion of deliberately courting danger involves the taking of measures which are known to be an inadequate response to the recognised danger, or not taking any measures at all when it is appreciated that the taking of some measure is required: … An insurer bearing the onus of establishing non-compliance with an obligation to take reasonable precautions must prove that the insured has not taken such measures as it thinks are reasonable having regard to the danger which is recognised: Eather at 407 (per McHugh JA).
6. CGU submitted that in the present case the risk of fire was very obvious to everyone: There were hot, dry, windy conditions, with long, dry grass in surrounding paddocks, and a total fire ban day.
7. CGU submitted in the face of that, to use equipment that shot sparks around was reckless, foolhardy and courting danger, especially when the work could have been done without that equipment. CGU submitted that Messrs Hooper, Orford and Elliott did things which they knew were inadequate responses to the danger, and that they did not take any measures at all when they appreciated that the taking of some measure was required.
8. CGU drew attention to the requirement to use reasonable endeavours to comply with all statutory obligations and regulations imposed by any authority for the safety of persons or property. CGU submitted that relevant statutory obligations included s 99(11) and s 100(1) of the Rural Fires Act 1997 (NSW). Section 99(11) provides a penalty for a person who fails to comply with total fire ban order, and s 100(1) creates an offence (relevantly) of setting fire or causing fire to be set to the land or property of another person.
9. CGU also pointed to cl 22(2)(b) of the Rural Fires Regulation 2013 (NSW), which provides a penalty for a person who, in connection with land, carries out welding operations or uses an angle grinder or any other implement that is likely to generate sparks, unless the person has in the vicinity prescribed safety equipment. It may be accepted that the prescribed fire safety equipment (defined in sub-cl 22(3) of the Regulation) was not in the vicinity of the work being carried out by APD.
10. CGU submitted that APD (through Mr Hooper), Mr Orford and Mr Elliott recognised that a risk of fire existed and took no proper measures to address the risk. Rather, they were more focused on the task of getting the job done before the scheduled engineer's inspection of the footings took place.
11. In my opinion, in determining whether cl 7.3.1 was complied with, the focus is a relatively narrow one, being on the actions of Mr Orford and Mr Elliott. The work itself, the positioning of steel in the footings, was not inherently either a fire hazard or risky. Any risk and fire hazard arose only from the method used to cut the steel. There is no evidence that Mr Hooper directed the cutting method, nor that he even knew it was being done in the way it was with the power cutter. In Mr Hooper's ERISP he gave this evidence: Q138. Yeah. And what power, what, where was the power coming from? A. Power for? Q139. The, the tools used on site. A. I don't think they need any power tools. Q140. [17:00] Yeah. A. As in power tools. Um, would, should only be cutting it with boltcutters… Q141. Yeah. A. …um, which I know Shannon have [sic] been doing. So I can't really say how else he might, may or may not have cut it. Q142. Yeah. A. And I wouldn't want to assume it either.
12. When he was asked by Mr Greenwood SC, What equipment did you expect those people to use on the Friday? Mr Hooper said: Excavators and boltcutters, I would assume.
13. He said that he knew there would be a battery grinder on site because they were owned by the employees. It was put to Mr Hooper that he anticipated that Mr Orford "may well use the quick cut out there on site" but Mr Hooper denied it. I accept his denial.
14. Mr Hooper had given instructions before the work commenced that the clearing around the site was to be 15-20 metres as both ease of access and a fire break. Although challenged about whether it had been cleared for a firebreak, he maintained his assertion that it had been. Although I accept his evidence in that regard, it scarcely matters what the original purpose of clearing the area was. As at the time the impugned work was being carried out, it was being done at a point some distance from the edge of the cleared area. The safety of what was being done in terms of the precautions, must be considered by what the employees were doing in the circumstances as they existed, and not whether those circumstances had been brought about by one particular purpose or another.
15. The question is, therefore, whether the use by Mr Orford and Mr Elliott of the cutter in the position they used it and with the weather conditions being what they were, amounted to recklessness in the sense that they courted the danger.
16. Whilst there is no doubt that the use of the power cutter was negligent in the circumstances that prevailed on the day, I do not consider that the actions of Mr Orford and Mr Elliott amount to recklessness. I do not consider that there is any evidence that they had actual recognition that a danger existed from the sparks. Although Mr Elliott knew that there was a total fire ban that day, there was no evidence to show that he knew he ought not to be using the power cutter. He used that device because he had been instructed to do so by Mr Orford. As Mr Woods' report makes clear, they were doing so some 17 metres from where the fire started and within the cleared area between excavated footings and the grass, approximately 12 metres from the edge of the clearing.
17. Mr Orford should have realised that sparks which were being emitted from the power cutter were likely to travel some considerable distance, particularly given the prevailing north-westerly wind. In that way, he ought to have directed Mr Elliot to a different position to continue cutting, rather than telling him to turn around so that he was facing the footings where Mr Orford was.
18. Those failures are, however, a long way from demonstrating recklessness, and the courting of a danger of which Mr Orford was aware. It does not appear that Mr Elliott or Mr Orford gave any consideration to the fact that sparks being emitted by the cutter might set fire to the grass. Both of them ought to have given consideration to that. In the case of Mr Elliott, he was in the position of a casually hired apprentice, acting under the direction of Mr Orford, a foreman with whom he was familiar from his previous employment with APD. Mr Hooper had described Mr Orford as being very experienced and competent, and Mr Elliot's position and behaviour must be seen in the light of Mr Orford's position and competence.
19. It may also be accepted that, by Mr Orford and Mr Elliot acting in the way they did with the power cutter, they may well have breached s 99 of the Rural Fires Act and cl 22 of the Rural Fires Regulation. There is, however, certainly no evidence that they were aware that they were doing so, so that their behaviour in that way would amount to recklessness. The evidence all points to a considerable lack of care on their part, but does not point to any awareness of a danger which they disregarded or which they considered could be ignored.
20. I am not satisfied that there has been a failure on the part of APD, whether directly or vicariously, to take reasonable precautions in accordance with cl 7.3.1 of the Policy.

(c) The welding endorsement

1. CGU submitted that the Policy does not respond to the liability because there was not strict compliance with Australian Standard 1674.1 'Safety in Welding and Allied Processes - Fire Precautions'. CGU submitted that the requirement to comply with that Standard derived from the Welding Endorsement to the Policy.
2. That endorsement, contained on the Policy Schedule, provided: WELDING ENDORSEMENT The liability of the Insurer to indemnify the Insured pursuant to Clause 1.1 and to pay other costs and expenses pursuant to Clause 1.2 shall not extend to any liability arising out of or in any way connected with any arc or flame cutting, flame heating, arc or gas welding, electric, oxyacetylene, laser cutting and/or spark producing equipment by or on behalf of the Insured or similar operation in which welding equipment is used, unless such activity is conducted in strict compliance with the: 1. Australian Standard AS 1674, Part 1 - 1997 'Safety in Welding and Allied Processes - Fire Precautions' issued by the Standards Association of Australia 2. AS 1674.2 Safety in Welding and Allied Processes - Part 2: Electrical, and/or 3. AS/NZS 2211.1:2004 Safety of laser products Equipment classification, requirements and user's guide.
3. Australian Standard AS 1674, Pt 1 relevantly provides: PREFACE This Standard was prepared by the Standards Australia Committee WD/4 on Welding Safety to supersede AS 1674.1 - 1990. … This edition includes general improvements as well as the following specific technical changes: … (c) 'Grinding' has been added to Clause 1.3.3. … Australian Standard Safety in welding and allied processes Part 1: Fire precautions SECTION 1 SCOPE AND GENERAL 1.1 SCOPE This Standard specifies precautions to be taken prior to and during hot work (including welding and allied processes), to prevent the possibility of fire or explosion, which may result in harm to persons or property. In particular, such precautions apply to hot work during manufacturing, construction, maintenance, repairs, demolition and where plant or equipment has contained flammable, combustible or explosive material. … 1.3 DEFINITIONS For the purpose of this Standard, the definitions given in AS 2812 and those below apply. … 1.3.3 Hot work - grinding, welding, thermal or oxygen cutting or heating, and other related heat-producing or spark-producing operations. … SECTION 2 GENERAL PRECAUTIONS 2.1 SUPERVISION Hot work shall be carried out under the control of a person who is responsible for the safe execution of all operations and has authority to enforce the requirements of this Standard with respect to other employees, outside contractors and other people in the area. Before hot work is commenced in any location, this person shall ensure that - (a) the hazards of the location are identified; (b) a means of managing the hazards is in place; (c) the equipment complies with the requirements of Section 4; (d) the equipment is located so that, in the event of malfunction of the equipment, a fire or explosion hazard is not created; and (e) there is no inherent hazard due to the nature of the item on which the hot work is to be performed. NOTE: Where hot work is being carried out by a contractor, the person responsible for the hot work should be approved by both the principal and the contractor, 2.2 HAZARDOUS AREAS Hot work in hazardous areas shall be carried out in accordance with Sections 2 and 3. 2.3 CONFINED SPACES Hot work in confined spaces shall be performed in accordance with AS 2865 and this Standard. 2.4 INSPECTION OF SITE Before hot work commences, the site shall be thoroughly inspected and made safe, or alternative methods of carrying out the work shall be adopted. On completion of hot work, a thorough inspection of the site shall be carried out to ensure that the site is safe. 2.5 LOCATION Where there exists a possibility of hot work causing an explosion or fire and no practical means of moving the work to a safe site exists, the provisions of Section 3 shall apply. … 2.7 OFF-CUTS AND ELECTRODE STUBS Before any hot work commences, arrangements shall be made to prevent any work off-cuts, hot metal, slag or electrode stubs from lodging in places where there is any possibility of starting a fire. … 2.11 GRASS FIRES AND BUSHFIRES Before hot work commences near dry grass or bush, the immediate area shall be cleared or wetted sufficiently to prevent the hot work from starting a grass fire or a bushfire. … SECTION 4 HOT-WORK EQUIPMENT … 4.4 GRINDING MACHINES Work that includes the use of grinding machines driven by either electric power or compressed air shall be regarded as hot work within the meaning of the Standard.
4. The short point in relation to this endorsement is whether the Husqvarna K970 power cutter that Mr Elliott was using was spark producing equipment within the meaning of the endorsement. The onus is on the insurer to show that the endorsement applies in the circumstances. It is not disputed by the plaintiff that, if the endorsement applies, the workers did not comply with the Standard.
5. CGU submitted that "spark producing equipment" has been included in the endorsement because the very act of producing sparks is a fire hazard. CGU submitted that the emission of sparks is a fire hazard regardless of whether those sparks result from the direct application of heat or the application of friction.
6. CGU submitted that if a piece of equipment is being used in such a way that it will produce sparks, the requirements of AS 1674.1 must be strictly complied with for cover to be available. If that same piece of equipment is being used in such a way that it won't produce sparks, then the requirements of AS 1674.1 need not be strictly complied with for cover to be available. In that way, "spark producing equipment" does not have to be equipment that always and necessarily produces sparks.
7. CGU submitted that both experts, Mr Hooper and Mr Rankin, accepted that the Husqvarna power cutter inevitably produces sparks when applied to metal.
8. CGU submitted that the words "spark producing equipment" in the endorsement stand independently of the earlier items, especially because it refers to equipment rather than a process. It submitted that the ejusdem generis principle does not apply to require that the words "spark producing equipment" should similarly involve direct application of heat to metal to shape, cut or weld, as the plaintiff submits. Although it may be a common characteristic of the processes referred to in the endorsement that they involve the "direct application of heat", that is not a dominant characteristic.
9. The plaintiff submitted that the specific terms in the endorsement relate to a genus to which cutting, using a power saw or quick cut, does not belong. Accordingly, the general expression "spark producing equipment" does not, on its true construction, include a power saw or quick cut, even if the result of that operation is the emission of sparks.
10. The plaintiff submitted that Mr Rankin's evidence was that the various processes specifically described in the endorsement involved the direct application of heat to material to create a cut or weld. By contrast, the operation of the Husqvarna K970 power cutter involves the application of friction to create a cut. The plaintiff submitted that with the exception of flame heating, each of their applications listed in the endorsement invariably produces sparks, while the operation of a power cutter only produces sparks in certain circumstances, that is, when cutting metal rather than concrete, wood or other materials.
11. The plaintiff relied on the title of the clause, which is concerned with welding. The plaintiff submitted that this limitation is reinforced by the expression following the listed specific and general categories, which provides "or similar operation in which welding equipment is used".
12. The plaintiff submitted that if CGU had intended that the endorsement correspond to all processes falling within the Standard, it was open to it to refer to "hot work" within the meaning of the Standard, or at least to refer specifically to "grinding" as the Standard does. The plaintiff submitted that the endorsement adopts conspicuously different language from the definition of "hot work", and that strongly indicates that it was not the parties' intention that what constitutes "hot work" in the Standard was thereby included in the endorsement.

Consideration

1. The first thing to notice about the endorsement is its ambiguity. Where it refers to "flame cutting, flame heating, arc or gas welding, electric, oxy-acetylene, laser cutting" it might be referring to processes or operations, with the "-ing" words being participles. On the other hand, those word combinations might also be compound adjectives, describing equipment including spark producing equipment. The plaintiff contends for the latter construction, so that, in substance, the endorsement reads: any liability arising out of or in any way connected with [the use or operation of] any arc or flame cutting equipment, flame heating equipment, arc or gas welding equipment, electric, oxy-acetylene, laser cutting equipment and/or spark producing equipment… CGU seemingly contended for the former construction, submitting that the words "spark producing equipment" refers to equipment whereas the earlier matters refer to processes.
2. If equipment is the focus, the plaintiff submitted that "spark producing equipment" has to be read down, because equipment quite unrelated to what the endorsement is intended to cover would be included, such as chainsaws or even hammers on metal. The plaintiff submits that the meaning and scope of the words derives from the context and the purpose of the endorsement.
3. The plaintiff's preferred reading of the endorsement does not really resolve the ambiguity, because the endorsement goes on to say, "or similar operation in which welding equipment is used". The term "similar operation" suggests a process is the focus, with equipment as the means of the process. In any event, whichever reading is adopted, it is still necessary to have regard to the words "and/or spark producing equipment".
4. The plaintiff relied upon a report from Dale Rankin who was an Australian Welding Institute inspector and supervisor, and a person with 40 years' experience in engineering as a boilermaker/welder. In his report Mr Rankin explained what was involved with the following processes, being those identified in the endorsement: (a) Arc cutting; (b) Flame cutting; (c) Flame heating; (d) Arc welding; (e) Gas welding; (f) Electric cutting; (g) Oxy-acetylene cutting; (h) Laser cutting; and (i) Electric welding.
5. Mr Rankin was then asked if the operation of a power cutter, specifically a Husqvarna K970 power cutter, was capable of being described as one of the processes set out in (a)-(i). He said: Welding processes involve the fusion or joining of metals and is a distinct process from cutting Therefore the use of the power cutter is not related to any of the welding processes described at (d), (e) and (i) The cutting processes described at (a) and (f) rely on an arc being created which the power cutter does not. The cutting processes described at (b) and (g) rely on a naked flame to create the heat which the power cutter does not. The cutting process described at (h) does not have an arc but relies on a highly focused beam of energy which the power cutter does not. Flame heating, described at (c) is not a cutting or welding process. Further, each of the processes at (a) to (i) involve the direct application of heat to the material being worked on in order to create the cut or the weld The power cutter involves a friction cut A friction cut is created by, in this case a wheel spinning at high speed, removing the unwanted material The contact of the cutting blade with the material being worked on creates friction which in turn creates heat It does not involve the direct application of heat, nor does it rely on this heat to create the cut The power cutter can be used with a coolant (such as water) to minimise the generation of heat through the friction process When used with a coolant it is still an effective cutting process None of the processes described at (a) to (i) are used with a coolant. When cutting with the processes described at (a), (b), (f), (g) and (h), the removal of the molten waste metal can be directed When welding, as described at processes (d), (e) and (i), the spatter or any molten waste metal is expelled indiscriminately When I refer to spatter and molten waste metal I am describing a small globule of molten metal generally no bigger than the head of a match. The power cutter would only create sparks when cutting metallic objects or material with metallic objects in it such as concrete with reinforcing steel The power cutter can be used to cut a wide range of materials which would not produce sparks eg. wood, plaster, concrete and plastic. …
6. Mr Rankin's opinion is only of assistance on the assumption that "spark producing equipment" is to be read ejusdem generis with either the processes or the equipment listed in the endorsement. If it is not to be construed in that way, it does not matter whether or not the operation of a power cutter was capable of being described as one of those processes or equipment, because the power cutter is capable of producing sparks.
7. CGU relied on a report from Mr Per Olsson who was a chartered professional engineer with qualifications in fire engineering.
8. Mr Olsson's conclusion in relation to AS 1674.1 was this: 3. In my opinion, the work done by Advanced on site using a petrol engine powered Husqvarna K970 II (QuickCut) to cut reinforcing steel (the Work) was both grinding and a spark-producing operation and therefore meets the definition of "hot work" in AS 1674.1-1997 (the Standard). The reasons explaining my opinion are given in Paragraphs 86 and 87 of my report. In fact, para 86 of his report merely sets out the definition of "hot work" in clause 1.3.3 of the Standard, and para 87 simply repeated para 3, while stating that it was based on the assumption that the use of the QuickCut on reinforcing mesh produces sparks which are generally projected in a backwards direction.
9. Mr Olsson also concluded that both sections 2 and 3 of the Standard were applicable to the hot work that was carried out at the property on 17 February 2017. He said that only if a total fire ban had not been in place on that day, should the QuickCut have been used to cut the steel reinforcing mesh.
10. Mr Olsson's conclusion that cutting reinforced steel met the definition of "hot work" in the Standard, is to view the matter the wrong way around. The enquiry is not, in the first instance, whether some particular work falls within the Standard, but whether, on the wording of the endorsement, cover would be excluded because, by the way the work was carried out and/or the equipment used, the Standard applied and was not complied with. However, that this Standard was chosen as what must be complied with in such circumstances, may be some objective evidence of the parties' intentions when construing the meaning of the relevant part of the endorsement. It makes it more likely that the use of spark producing equipment for cutting the steel fell within the endorsement.
11. The plaintiff relies on the maxim noscitur a sociis, which allows a court to give general expressions, which follow an enumeration of more particular things or matters, an application no larger than to things and matters ejusdem generis: Cody v JH Nelson Pty Ltd (1947) 74 CLR 629 at 647 per Dixon J.
12. In Australian Aviation Underwriting Pty Ltd v Henry (1988) 12 NSWLR 121 Hope JA (at 126) quoted what was said in McGillivray and Parkington on Insurance Law (6th ed, 1975), where the learned authors said (at para 1159) This maxim affords another illustration of the importance of context; in a list of words a word of uncertain scope may take its character from those surrounding it if they have a recognisable characteristic.
13. The important focus of that passage is "a word of uncertain scope". Further, as Dixon J went on to say in Cody (at 647): In the modern search for a real intention covering each particular situation litigated, however much help and guidance may be obtained from the principles and rules of construction, their controlling force in determining the conclusion is likely to be confined to cases where the real meaning is undiscoverable or where the court of construction, sceptical of the foresight of the draftsman or of his appreciation of the situation presented, is better content to supply the meaning by a legal presumption than subjectively. His Honour also said of the regulations he was construing (at 648): Beginning with the prima facie view that it should receive their ordinary meaning,… and (at 649) But the truth is that it is wrong to use the rule for an ejusdem-generis construction as a piece of abstract or mechanical reasoning. It must be applied not simpliciter but secundum quid. It should be used as a guide in a process of interpretation which takes into account the whole instrument and the subject matter.
14. In the same case, Starke J said (at 639): This "rule of construction is subordinate to the real intention of the parties, and does not control it", quoting from Hamilton J in Thorman v Dowgate Steamship Company Ltd [1910] 1 KB 410 at 419.
15. It does not seem to me that there is any "uncertain scope" about the words "spark producing equipment", nor is the real meaning of those words "undiscoverable". In the first place, there is no doubt that the Husqvarna K970 power cutter produces sparks, and inevitably does so, when used to cut metal. The fact, as the plaintiff submitted, that the cutter does not inevitably produce sparks because it is also designed to be used on masonry, is no answer to that. Nor is it an answer to point to other devices which may in some circumstances produce sparks, because the assumption made by the plaintiff in relation to those devices (a chainsaw was given as an example) is that they would not themselves be spark producing equipment within the meaning of the endorsement.
16. Whether the words "arc or flame cutting, flame heating, arc or gas welding, electric, oxyacetylene, laser cutting" are referring to processes or equipment, the words "spark producing equipment" are not referring to a process, but to equipment. There is no reason that such words should be read in a limited way.
17. No account can be taken of the heading to the endorsement because cl 5.1 of the Policy wording provides that headings are not to be deemed to affect the interpretation of the policy. The endorsement must be regarded as being part of the Policy in that regard. The plaintiff relied on what was said in SBJ Stephenson Limited v Keith Anthony Mandy [2000] FSR 286 at 297. In that case there was a clause which provided that headings were inserted for convenience only and were not to affect the construction of the agreement. The judge in that case (Bell J) rejected the argument that regard should not be had to the heading of the section in dispute, saying, …it seems to me that the convenience which they provide is to tell the reader at a glance what the clause is about. His Lordship then appeared to rely on the heading to construe the section of the agreement in dispute where the wording gave rise to an ambiguity.
18. It must be doubted that this decision would be followed in New South Wales, by reason of what was said by the Court of Appeal in Orleans Investments Pty Ltd & Anor v Mindshare Communications Ltd [2009] NSWCA 40; (2009) 254 ALR 81 at [68]. However, even if Bell J was correct in the approach he took in that case, for reasons I have already given, there does not seem to me to be an ambiguity in the words "spark producing equipment" to justify a resort to the heading of the endorsement.
19. The plaintiff relied, nevertheless, on the concluding phrase in the endorsement "or similar operation in which welding equipment is used" as pointing to the fact that the preceding words should be limited to the use of welding equipment.
20. In Foscolo, Mango and Company Limited v Stag Line Limited [1931] 2 KB 48, Greer LJ said (at 67): In applying the ejusdem generis rule it is not necessary to ascertain with exactitude what is the scientific definition of the genus to which the general words are supposed to be confined. I think it is sufficient if one can reasonably say that the event that has happened was of a like kind to some one or more of the specific events which precede the general words.
21. Despite the words in the concluding phrase relied upon by the plaintiff, it is apparent that the endorsement is concerned not only with welding but also with cutting, and Mr Rankin explained the difference in his report when he said: 7. …cutting processes involve removing metal whereas welding processes involves the fusion of metals.
22. Whether what is spoken of in the endorsement are processes or whether the words are identifying equipment, two separate operations are embraced by the endorsement, being cutting and welding. What the APD workers were doing was cutting, and in doing so they were using spark producing equipment.
23. If there is any genus to the processes or equipment referred to in the endorsement, it is not that the processes or equipment were heat producing, but rather that they were processes or equipment likely to result in a fire. Again, the fact that Pt 1 of the Standard speaks of "Fire Precautions" is an indication that that is so.
24. The evidence is clear that the Husqvarna K970 power cutter inevitably produces sparks in certain circumstances, including those which obtained by the work being carried out by APD on 17 February 2017. In the operator's manual the following appears: WARNING! Sparks from the cutting blade can cause fire in combustible materials such as: petrol (gas), wood, clothes, dry grass etc. … CAUTION! Sparks may appear and start a fire when you work with the machine. … Cutting metal generates sparks that may cause fire. Do not use the machine near ignitable substances or gases.
25. The liability of APD arose out of the use of that spark producing equipment, and the use of that equipment required compliance with the endorsement to the Policy.
26. This outcome may be accepted as very unfortunate for the plaintiff and those within the class, particularly because APD was placed into liquidation after the fire. However, it was the failure of APD to comply with the terms of the endorsement to the Policy issued by CGU which has deprived those parties of the benefit of what would otherwise have been the insured liability.

Conclusion

1. I answer the common questions as follows: Q: What was the cause of the ignition of the Carwoola bushfire? A: Sparks from the Husquvarna K970 power cutter operated by Harrison Elliott. Q: Did the first defendant and/or Messrs Orford and Elliott (and, if so, which of them) owe a common law duty to the plaintiff and group members to exercise reasonable care in relation to the works to avoid: personal injury; physical damage to property; and/or economic loss resulting from damage to property? A: Yes Q: Did the first defendant and/or Messrs Orford and Elliott (and, if so, which of them) breach their common law duty of care to the plaintiff and group members? A: Each of the first defendant, Messrs Orford and Elliott breached their duty of care to the plaintiff and the group members. Q: If the first defendant and/or Messrs Orford and Elliott breached their common law duty of care, was such breach a cause of any of the losses suffered by the plaintiff (and if so, which breach)? A: The breach in using the Husquvarna K970 power cutter was the cause of the losses suffered by the plaintiff and the group members. Q: Is the first defendant vicariously liable for any breach by Mr Elliott in using the power cutting wheel at the Property on 17 February 2017? A: Yes. (6) Q: Do the first defendant and/or Messrs Orford and Elliott (and if so, which of them) have an insured liability to the plaintiff and group members within the meaning of s 4 of the Third Party Claims Act and, in particular: (a) was the Carwoola bushfire an occurrence happening in connection with the Insured's Business within the meaning of the Schedule and cl 1.1 and 4.4 of the Policy; (b) did the Welding Endorsement apply to the use of the power cutting wheel on 17 February 2017 and, if so: i. were the first defendant and/'or Messrs Orford and Elliott required to strictly comply with AS 1674 Part 1 1997 Safety in Welding and Allied Processes - Fire Precautions (Standard); ii. did the first defendant and/or Messrs Orford and Elliott strictly comply with the Standard; and (c) did the first defendant and/or Messrs Orford and Elliott fail to take "reasonable precautions to prevent or minimise liability" within the meaning of cl 7.3.1 of the Policy? A: (a) Yes. (b) (i) Yes. (ii) No. (c) No. None of the first defendant, Mr Orford or Mr Elliott has an insured liability to the plaintiff and the group members
2. There will be judgment for the second defendant. The plaintiff must pay the second defendant's costs.

Amendments 10 June 2022 - Name of counsel amended on coversheet 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: 10 June 2022