Administrative Decisions Tribunal New South Wales

• Medium Neutral Citation: Charalambous v Yeung (RLD) [2013] NSWADTAP 44
• Hearing dates: 9 August 2013
• Decision date: 27 September 2013
• Jurisdiction: Appeal Panel - Internal
• Before: M Chesterman, Deputy President; P Molony, Judicial Member; J Butlin, Non-judicial Member

Decision

1. The appeal is dismissed.

2. Any application by the Respondent for the costs of these appeal proceedings must be filed and served within 28 days, along with supporting submissions and any additional submissions he may wish to make as to the costs of the proceedings at first instance. Any submissions in reply by the Appellant must be filed and served within a further 28 days. These matters of costs will then be determined 'on the papers', pursuant to section 76 of the Administrative Decisions Tribunal Act 1997, unless the Appeal Panel decides that a hearing is required.

• Catchwords: Retail lease - whether lessee liable for damage caused by fire in premises - Civil Liability Act 2002 - identification of relevant risk of harm
• Legislation Cited: Administrative Decisions Tribunal Act 1997; Civil Liability Act 2002; Retail Leases Act 1994
• Cases Cited: Chapman v Hearse (1961) 106 CLR 112; Charalambous v Yeung [2013] NSWADT 86; Garzo v Liverpool/Campbelltown Christian School [2012] NSWCA 151; Jolley v Sutton London Borough Council [2000] 3 All ER 409; Manley v Alexander (2005) 223 ALR 228; [2005] HCA 79; Overseas Tankship (UK) Ltd v Miller Steamship Co Pty Ltd [1967] AC 617; Pitt Son & Badgery Ltd v Proulefco SA (1984) 153 CLR 645; Shoalhaven City Council v Pender [2013] NSWCA 210; Sibraa v Brown [2012] NSWCA 328; Tame v New South Wales; Annetts v Australian Stations Pty Ltd (2002) 211 CLR 317; [2002] HCA 35; Wyong Shire Council v Shirt (1980) 146 CLR 40; [1980] HCA 12
• Category: Principal judgment
• Parties: Neophytous Charalambous (Appellant); Eric Au Yeung (Respondent)
• Representation: N Allan (Appellant); R Perla (Respondent); Bicknell & Moneith Lawyers (Appellant); Turks Legal (Respondent)
• File Number(s): 139019

Decision under appeal

• Citation: Charalambous v Yeung [2013] NSWADT 86
• Date of Decision: 2013-04-24 00:00:00
• Before: Retail Leases Division
• File Number(s): 125083

reasons for decision

Introduction

1 In this appeal, the Appellant, Neophytos Charalambous, challenges a decision in the Retail Leases Division of the Tribunal (Charalambous v Yeung [2013] NSWADT 86) dismissing his claim for damages against the Respondent, Eric Au Yeung.

2 On 1 May 2009, the Appellant granted to the Respondent a lease ('the Lease') relating to premises ('the Premises') on the ground floor of a building that he owned in Matraville. The Lease had a term of three years, with an option to renew for a further three years, and was governed by the Retail Leases Act 1994 ('the RL Act'). The monthly rent was $1,584.92.

3 In accordance with the terms of the Lease, the Respondent operated a laundromat in the Premises. Late in the evening of 5 July 2010, or in the early hours of the following morning, a fire broke out at the Premises. It caused extensive damage, rendering them unusable for a considerable period. The Respondent did not return to them in order to recommence his business. After repairing them, the Appellant granted a lease to a new tenant commencing on 16 May 2011.

4 In an Application for Original Decision filed in the Tribunal on 14 June 2012, the Applicant-Appellant claimed the amount of $62,688.24 from the Respondent for expenses allegedly incurred on account of the fire. The principal components of this amount were the cost of the repairs ($28,926.00) and the rent lost between 2 August 2010 and 15 May 2011 ($15,031.18).

5 The hearing before the Tribunal took place on 5 and 6 February 2013. On 24 April 2013, the Tribunal delivered its decision in favour of the Respondent.

6 The Appellant filed a Notice of Appeal on 21 May 2013. The appeal was heard before us on 9 August 2013. Mr Allan of counsel appeared for the Appellant and Mr Perla for the Respondent.

7 At this hearing, we indicated that, in our decision on the appeal, we would give directions as to the filing of submissions regarding the costs of the hearings at first instance and on appeal.

The legal basis of the Appellant's claim

8 In paragraph 16 of his Application, the Appellant outlined as follows the basis of his claim against the Respondent:-

16. The fire was caused by the actions of the Respondent, his servants, employees or agents.

PARTICULARS

a. Heated articles which had not sufficiently cooled were left in a container

b. Those articles self ignited causing the fire.

c. The Respondent failed to take proper steps to ensure that heated items were sufficiently cooled before placing them in a container.

d. The Respondent left the container in a place and a container which was not sufficient to enable the heated items to cool down.

e. The Respondent left the heated items in place in close proximity to other items which could catch fire.

9 In its decision at [8], the Tribunal indicated that during the course of the hearing and in submissions, the Applicant's claim was confirmed as being based upon a breach by the Respondent of both his common law duty to take reasonable care in the operation of his business at the premises ('the common law claim') and certain conditions of the Lease ('the contractual claim').

10 The Tribunal held that the provisions of the Lease that might support the contractual claim were paragraphs (a) and (m) of clause 3 (it considered two other provisions, but ruled that they were irrelevant). This clause appeared under the heading 'Special Covenants by Lessee'. The significant passages within paragraphs (a) and (m) are as follows:-

Repair of Premises during Lease

(a) The Lessee shall at his expense keep and maintain the demised premises and appurtenances... in good and tenantable repair and in good and efficient working order and condition and in a state of cleanliness fair wear and tear and damage by fire lightning storm flood tempest earthquake act of God riots civil commotions or act of war and without any neglect or default on the part of the Lessee or by any agents invitees or persons authorised by the Lessee excepted and shall effect repairs to the demised premises and appurtenances including the above as may be necessary...

Lessee to indemnify Lessor against damage etc

(m) That the Lessee will indemnify and save harmless the Lessor from all loss and damage to the demised premises... caused... by the Lessee's negligent use or misuse... or by or through any other means neglect or default happening in the demised premises...

11 The Tribunal held that while it had jurisdiction to determine the contractual claim based on these two paragraphs, it did not have jurisdiction to deal with the common law claim. Its reasoning was as follows: (a) a common law claim for damages for negligence, arising between a lessor and a lessee of retail shop premises, does not fall within the definition of 'retail tenancy dispute' in section 63 of the RL Act, even though this definition is acknowledged in the case law to be broad in scope; and (b) a claim of this type is therefore not a 'retail tenancy claim' as defined in section 70.

12 We agree that the Tribunal has jurisdiction to deal with the contractual claim, but would respectfully differ from its ruling regarding the common law claim. Our reasons are as follows.

13 The definition of 'retail tenancy dispute' in section 63 is in the following terms:-

retail tenancy dispute means any dispute concerning the liabilities or obligations (including any obligation to pay money) of a party or former party to a retail shop lease or former lease, being liabilities or obligations which arose under the lease or former lease or which arose in connection with the use or occupation of the retail shop to which the lease or former lease relates...

14 In paragraph (a)(i) of section 70, the term 'retail tenancy claim' is defined so as to include -

a claim in connection with a liability or obligation with which a retail tenancy dispute is concerned, being:

(i) a claim for payment of money (whether or not stated to be by way of debt, damages, restitution or refund)...

15 As we see it, the Appellant, in maintaining the common law claim, sought to enforce a liability that 'arose in connection with the use or occupation of the retail shop' to which the Lease related. The dispute between the parties regarding this claim was therefore a 'retail tenancy dispute' and the claim, being a claim for damages, fell within the scope of paragraph (a)(i) of the definition of 'retail tenancy claim' in section 70.

16 The fact that our opinion on this question diverges from that of the Tribunal is not of significance for the outcome of this appeal, because the principles to be applied in determining the common law claim are for practical purposes the same as apply to the contractual claim. They derive (as the Tribunal held) from the Civil Liability Act 2002 ('the CL Act').

17 For present purposes, the important provisions of this Act are sections 5, 5A(1), 5B and 5C. So far as relevant, they state:-

5 Definitions

In this Part:

harm means harm of any kind, include the following:

(a) personal injury or death,

(b) damage to property, and

(c) economic loss

negligence means failure to exercise reasonable care and skill...

5A Application of Part

(1) This Part applies to any claim for damages for harm resulting from negligence, regardless of whether the claim is brought in tort, in contract, under statute or otherwise.

5B General principles

(1) A person is not negligent in failing to take precautions against a risk of harm unless:

(a) the risk was foreseeable (that is, it is a risk of which the person knew or ought to have known), and

(b) the risk was not insignificant, and

(c) in the circumstances, a reasonable person in the person's position would have taken those precautions.

(2) In determining whether a reasonable person would have taken precautions against a risk of harm, the court is to consider the following (amongst other relevant things):

(a) the probability that the harm would occur if care were not taken,

(b) the likely seriousness of the harm,

(c) the burden of taking precautions to avoid the risk of harm,

(d) the social utility of the activity that creates the risk of harm.

5C Other principles

In proceedings relating to liability for negligence:

(a) the burden of taking precautions to avoid a risk of harm includes the burden of taking precautions to avoid similar risks of harm for which the person may be responsible...

18 In his written submissions for the Appellant in the appeal, Mr Allan suggested that the CL Act might not after all be applicable to the contractual claim. He pointed out that the issue of negligence was not a component of this claim, but only arose because the Respondent, relying on the phrase 'neglect or default' in clauses 3(a) and (m), sought to introduce it. In his oral submissions, however, Mr Allan did not press this proposition.

19 In our judgment, the clear intent of section 5A(1) is to bring within the purview of the CL Act any contractual claim for damages in which the question whether the respondent or defendant is liable depends upon a finding as to whether he or she was negligent. The contractual claim, as well as the common law claim, must therefore be determined under this Act.

Relevant conclusions of the Tribunal

20 A substantial proportion of the Tribunal's decision was devoted to explaining lay and expert evidence relating to the likely cause of the fire in the Premises.

21 Its findings with regard to the lay evidence included the following (at [35], [40], [49], [51 - 52] and [62]):-

35 In cross examination, the Applicant agreed that there had never before been any fire-related incidents in the years since 2003 when the Respondent had first commenced occupation of the premises...

40 The Respondent also recalled that on the night of the fire he took some washing out of the dryers at some time before 7.00 pm and took some of these items to the back of the shop. He agreed that there was quite a lot of clothing within the premises on the night of the fire. He could not agree or disagree as to whether 5 or 6 nylon bags containing clothing or other laundered items, were left within the shop for collection at a later time.

49 Another relevant factor which emerged from cross-examination of the Respondent was that one of the customers of his laundromat business was a massage studio and that the towels left by the massage studio for laundering could from time to time contain massage oil. The Respondent's evidence was that any such oil would of course be removed in the course of the towels being laundered, washed with detergent and rinsed, but his evidence did not exclude the possibility that there could still be oil present within the laundered material when it was placed in the dryers or later left for collection within the premises.

51 There was no evidence to establish that such towels were in fact laundered, dried and then left at the premises on the evening in question, that oil was likely to still remain in those towels after they had been laundered, the likely composition of such oil, or whether such oil was especially flammable or likely to induce spontaneous combustion.

52 The dryers at the premises did not have a cooling process. The Respondent agreed that clothes would... sometimes contain heat when they were removed from the dryers. He also gave evidence that he would usually fold clothes and other items after removing them from the dryer because otherwise they would be creased, and that they would then be stacked...

62 Some relevant factors which emerge from the evidence are that the Respondent had been operating his laundromat business at the premises for quite a number of years, that he had been consistently adopting the same work methods, including methods of washing, drying and storing clothes, and that there had been no incidence of any fire.

22 The Tribunal gave consideration to reports prepared by three expert witnesses. The sole expert called by the Appellant was Mr Kelly, a forensic investigator. He inspected the Premises on 23 August 2010 and wrote two reports, dated 24 August 2010 and 7 November 2011 respectively. The Respondent called Mr Munday, who was also a forensic investigator, and Mr Gardner, an electrical engineer. Mr Munday wrote two reports, dated 22 September and 11 December 2012 respectively. Mr Gardner inspected the Premises on 7 July 2010 and wrote a report dated 9 July 2010.

23 In these reports, three possible causes of the fire were discussed: spontaneous combustion (or 'self-ignition') of items that had been laundered, dried and stacked in an identified yellow trolley (which itself suffered substantial fire damage); an electrical malfunction; and arson committed by an intruder. The Tribunal observed that the first of these explanations, for which Mr Kelly argued, attracted support from Mr Munday in his second report.

24 At [53 - 54], the Tribunal arrived at a finding in line with Mr Kelly's explanation for the fire (and indeed with the particulars set out in paragraph 16 of the Appellant's Application for Original Decision):-

53 Having considered all of the evidence, the Tribunal is persuaded that spontaneous combustion of items which had been laundered and left in the premises is a more probable cause of the fire than the other causes suggested by the experts.

54 The above finding, that self-heating laundered items is a more likely cause of the fire than the other two alternative factors suggested, does not necessarily then lead to a finding that it is more probable than not that this was the cause of the fire; however, the available evidence is so weak in support of any other possible causes that the Tribunal is also persuaded that it is more probable than not that this was the cause of the fire.

25 At [56 - 60], the Tribunal referred, adding some observations of its own, to passages within Mr Kelly's second report that are of significance in this appeal:-

56 The expert Mr Kelly has set out, within paragraphs 8.1, 8.2 and 9.1 of his second report dated 7 November 2011, that his experience has been, and that knowledge has also been acquired by him from others in his field, that spontaneous combustion of laundered items has occurred in commercial laundries as a result of sheets, towels and other materials self-heating and that (at paragraph 8.1) "in more recent years" such fires have occurred "far more readily as a result of the laundering of materials and especially towels that have been associated with either cafes or massage centres where oils are used".

57 Mr Kelly also relates in paragraph 8.1 of this second report that, as at the time of making this report in November 2011, there had been two recent fires in commercial laundries and that preliminary investigations by officers had indicated that these fires had "developed as a result of ignition of towelling materials following them being heated in a dryer". He also relates that this situation has "in more recent years" more readily occurred "as a result of the laundering of materials and especially towels that have been associated with either cafes or massage centres where oils are used".

58 Paragraphs 8.2 and 9.1 of Mr Kelly's second report go on to describe that commercial laundry operators commonly continue to remove laundered materials "folding them or even stacking them straight out of a dryer into a washing basket", and that "it has been well reported by others and on numerous occasions by myself that fire has developed as a result of heated material, and particularly towel, that has not be (sic) allowed to cool before it has been stacked or placed in containers which has later led to self heating/ spontaneous combustion."

59 Mr Kelly also states at paragraph 9.1 of his second report that such fires "tend to occur after hours when the laundry is unoccupied" and suggests that "the scenario..... tends to indicate more readily" a special role of massage oil in the subsequent process of spontaneous combustion; unfortunately, no factual or empirical information is supplied to support this assertion. An evidentiary conclusion cannot be made, without acceptable proof, that the fact that a fire occurs due to spontaneous combustion after a laundry is closed suggests that massage oil played a role in the onset of that fire.

60 The knowledge which has been acquired by Mr Kelly in the course of his experience investigating fires as to the incidence of apparent spontaneous combustion in commercial laundries appears to have largely arisen in "recent years". Apparently, Mr Kelly may only have become aware of this incidence in the period following the date of his first report on 24 August 2010 because it was not mentioned in his first report; this was, of course, after the fire. Further, and perhaps more importantly, the extent to which Mr Kelly's knowledge has been imparted to commercial laundry operators such as the Respondent is unknown.

26 The Tribunal then stated as follows at [61]:-

61 The available expert evidence does not of itself establish that spontaneous combustion of laundered items represented a foreseeable risk in respect of which the Respondent failed to take reasonably available steps.

27 In the ensuing paragraphs, the Tribunal summarised an argument put by the Appellant in the following terms: (a) in view of the manner in which the Respondent carried on his business, the risk of a fire starting in the Premises was 'reasonably foreseeable' at all times, even though the possibility that this might actually occur was 'remote'; (b) the Respondent could have averted this risk by taking relatively simple precautions, but failed to do so: (c) it followed, having regard to the 'general principles' stated in section 5B of the CL Act, that the Respondent's conduct involved a failure to exercise reasonable care and therefore constituted negligence as defined in section 5.

28 The following extracts from the Tribunal's decision (at [63], [66], [68], [77], [78] and [81]) set out the main components of this argument put by the Appellant:-

63 The Applicant submits that:

"The Respondent conducted a business clearly at risk of fire, full as it was of flammable clothes in plastic dry cleaner's bags. Those clothes were side-by-side with power boards and electrical devices, some of the fabrics contained oil, and some of the fabrics hung above fuel in the form of plastic washing baskets. Those fabrics were industrially heated so as to dry.

In summary, there was heat and fuel all around the laundromat." (emphasis added in the Tribunal's decision)

66 That a risk may be remote yet still foreseeable was stated In Wyong Shire Council v Shirt, where the point was also made that a foreseeable risk may nevertheless involve a low duty of care; Mason J also made this observation:

"(15) The considerations to which I have referred indicate that a risk of injury which is remote in the sense that it is extremely unlikely to occur may nevertheless constitute a foreseeable risk. A risk which is not far-fetched or fanciful is real and therefore foreseeable but, as we have seen, the existence of a foreseeable risk of injury does not in itself dispose of the question of breach of duty. The magnitude of the risks and its degree of probability remain to be considered with other relevant factors."

68 The Applicant submits that "running the laundromat (for a number of years) brought with it the foreseeability of loss by fire. Indeed, all of the particular fire risks identified by the experts were also foreseeable, as was the risk of a significant spread of the fire given the available fuel."

77 The Applicant contends that there was also a risk of significant spread of the fire given the available fuel, and that the Respondent failed to take reasonably available steps such as dividing and sectioning the shop's flammable contents in order to prevent the fire's spread. The Applicant asserts that "clothes, linen and nylon bags were everywhere and upon (and underneath) one another"; this assertion is based upon the state of the premises after the fire when there had been considerable disruption caused by attending fire personnel, and is disputed by the Respondent...

78 It is also submitted on behalf of the Applicant that "plugs should have been regularly checked to see that they were properly seated in power outlets. Electrical equipment should have been switched off when not in use and it should not have been allowed to run unattended. Items which had to run unattended should have been electrically checked to see that they were fit for such use ... these were all costless measures. The fact that the fire occurred in itself suggests strongly that controls were missing."

81 The Applicant also submits that "It would have cost little in time and money not only to let the clothes cool down but to keep... clothes isolated from one another"...

29 The Tribunal rejected this line of argument, essentially on four grounds.

30 First, it pointed out (at [69]) that the Court of Appeal, in Sibraa v Brown [2012] NSWCA 328 at [41], stipulated that Section 5B 'requires risks to be assessed prospectively' since 'as a matter of ordinary language a "risk of harm" relates to harm that has not yet happened'.

31 Secondly, it rejected in the following manner (at [71]) the submission that a risk of 'loss by fire' was the relevant 'risk of harm' in these proceedings:-

71 The Applicant submits that the simple fact of running a laundromat for a number of years creates the foreseeability of loss by fire; this bald proposition is not supported by any evidence. What needs to be examined is whether there is evidence to establish that the Respondent knew, or should reasonably have known, that the stacking of clothes after removal from the dryer at the premises carried with it a risk of spontaneous combustion.

32 Thirdly, having formulated the 'risk of harm' in this different way - i.e., as the risk of spontaneous combustion occurring in clothes stacked after removal from a dryer - the Tribunal held that the evidence fell short of demonstrating that the Respondent should reasonably have been aware of it. The Tribunal stated this conclusion in different ways more than once: for example, at [73]:-

73 There is no evidence to establish that the Respondent knew, or that a person in the Respondent's position should reasonably have known, of the risk of spontaneous combustion occurring in commercial laundries, or the steps available to avoid or minimise that risk.

33 Fourth and finally, the Tribunal, at [77], [79] and [81], rejected submissions identifying specific precautions that the Respondent (according to the Appellant) should have taken, but failed to take. These are the precautions that the Tribunal described in the extracts from paragraphs [77], [78] and [81] that we have just quoted:-

77 There is ... no evidence to identify exactly what "flammable contents" should have been quarantined nor any expert evidence as to how this should have been done in order to prevent spread of a fire...

79 The suggested preventative steps set out above in paragraph 78 do not relate to the cause of the fire as urged by the Applicant, and accepted in this decision, that self-heating of clothing was a more probable cause of the fire than electrical malfunction. Those steps, combined with the suggested steps set out in paragraph 77, also appear to contain a significant proportion of hindsight rather than foresight.

81... there is no evidence to show that, even if self-heating was a reasonably foreseeable risk, such a step as dividing clothes into separate piles would have averted or minimised loss to the Applicant.

34 The Tribunal summed up its principal conclusions at [82]:-

82 The risk that there would be a fire in the premises caused by spontaneous combustion of laundered items, or the risk that such fire would be accelerated by the manner in which items were located or left by the Respondent within the premises, are not risks which have been shown to be reasonably foreseeable by a person in the position of the Respondent in the period prior to the onset of the fire. Negligence on the part of the Respondent as a cause of the fire has therefore not been established; the contractual claim must therefore fail, and the Application dismissed.

The parties' submissions

35 In the Notice of Appeal and the submissions put by Mr Allan, it was claimed that the Tribunal erred in law in two respects, namely, in stipulating that evidence was needed to demonstrate foreseeability of the relevant risk of harm and in defining the risk of harm too narrowly. Three other matters also received his attention: the onus of proof, the Tribunal's interpretation of a part of Mr Kelly's evidence and an observation by the Tribunal as to the foreseeability of loss by fire.

36 The role of evidence in establishing foreseeability. The first alleged error by the Tribunal, as formulated in paragraph 16 of Mr Allan's written submissions, was that of treating the question whether the relevant risk of harm was reasonably foreseeable to a person in the Respondent's position as a matter to be 'proved' or 'demonstrated' by a 'piece' of evidence. Mr Allan argued that the Tribunal should instead have regarded all the evidence in the case, 'to every last piece of information', as relevant to this question. It should have made a 'determination' on foreseeability based on a 'global' look at all the circumstances. These circumstances should have included the following (to quote again from paragraph 16 of the submissions):-

... the fact the respondent was running a business, the fact his lease specifically adverted to fire, the fact dryers were being used on the shop floor, the acknowledged heat of that process, the absent cool cycle compared to domestic drying machines, the number of dryers working to maximise business, the push to get through as much clothing as possible (and a same day service) the hanging and storing of clothes everywhere, using flammable dry cleaning bags, dealing in flammable clothes, and taking on the peculiar responsibilities of a bailee for reward.

37 In making this submission, Mr Allan referred to a statement by the Privy Council, in Overseas Tankship (UK) Ltd v Miller Steamship Co Pty Ltd [1967] AC 617 at 641, that a decision as to reasonable foreseeability is 'not a primary finding of fact but an inference from the other findings'. He also cited the following dictum of Lord Steyn in a House of Lords case, Jolley v Sutton London Borough Council [2000] 3 All ER 409 at 415:-

The issue whether an accident of the particular type was reasonably foreseeable is technically a secondary fact but perhaps it is more illuminating to call it an informed opinion by the judge in the light of all the circumstances of the case.

38 In response, Mr Perla relied on a passage in a recent Court of Appeal case decided under the CL Act, Shoalhaven City Council v Pender [2013] NSWCA 210. In this case, the appellant was employed by a company that operated a car ferry service between Nowra and an island nearby. He slipped and fell on a ramp forming part of a wharf at Nowra owned and occupied by the appellant council. His evidence included an allegation that at the time of his accident the ramp was dry and smooth and a 'surmise' that this was because dry algae was present on it. The trial judge held that the ramp was slippery, that the appellant, which knew that it regularly became slippery, should have taken (but did not take) the simple and inexpensive precaution of cleaning it from time to time and that liability was therefore established under the CL Act.

39 The Court of Appeal upheld the council's appeal and entered a verdict for the appellant. The passage cited by Mr Perla as showing that evidence may be required to establish the foreseeability of a risk under the Act appears in the judgment of McColl JA at [88], [89] and [91 - 93]:-

88 In some cases, it can be inferred as a matter of common sense and common knowledge, that particular surfaces will ordinarily be slippery, particularly when wet: see Indigo Mist Pty Ltd v Palmer [2012] NSWCA 239 (at [6]) per Macfarlan JA (Beazley JA agreeing); see also Neill v NSW Fresh Food & Ice Pty Ltd [1963] HCA 4; (1963) 108 CLR 362 (at 368) per Taylor and Owen JJ. The same cannot be said about dry surfaces.

89 This was not a case where common experience enabled the primary judge to infer that the respondent's injury arose from the appellant's negligence: cf Jones v Dunkel (at 305) per Dixon CJ. It was not a shopping centre case where the presence of a greasy substance on a floor in an area adjacent to a food court but in respect of which there was no system for periodic inspection and cleaning, there being thereby admitted breach, enabled a conclusion on the probabilities as to when the greasy substance was dropped on the floor: cf Strong v Woolworths Ltd.

91... The risk posed by the dry ramp was, in my view, a matter which required evidence as to the nature of the risk posed and the steps the appellant ought reasonably have taken to obviate it: see Arabi v Glad Cleaning Service Pty Ltd [2010] NSWCA 208 (at [40] - [41]) per Sackville AJA (Hodgson JA and Harrison J agreeing).

92 Further, the evidence did not, in my view, establish that the appellant was aware that there was a foreseeable risk of persons slipping on the dry ramp. There was no evidence that anyone had slipped on the ramp's dry surface prior to the respondent's fall. The evidence relating to Mr Wallace's falls did not afford any evidence as to why he slipped.

93 There was no explanation as to the nature of dry algae, why, if it was present, it was imperceptible to view and why apparently imperceptible dry algae might be slippery. It was by no means apparent on the evidence, in my view, that the appellant knew, or ought to have known, that a dry surface of the ramp which to all intents and purposes appeared to be merely concrete posed a foreseeable risk of harm.

40 Relying on this statement of principle, Mr Perla argued as follows: (a) there was no evidence that the Respondent knew of the risk that stacked clothes might self-ignite spontaneously following their removal from a dryer; (b) the question to be resolved was therefore one of constructive knowledge, i.e., whether the Respondent ought to have known of this risk; (c) the phenomenon of self-ignition in these circumstances was not a matter of common knowledge; (d) accordingly, it was appropriate for the Tribunal to treat this question as one to be determined after considering relevant evidence on the matter.

41 Defining the 'risk of harm'. The second alleged error by the Tribunal was one on which Mr Allan placed greater emphasis. It was that the Tribunal formulated the relevant 'risk of harm' in unduly narrow terms. The risk that it identified was, to quote from its decision at [82], that 'there would be a fire in the premises caused by spontaneous combustion of laundered items'. The relevant risk should, according to Mr Allan, have been formulated in distinctly broader terms: namely, as the risk of damage to the premises by fire.

42 Mr Allan submitted that in the common law of negligence it was well accepted that even 'remote' risks may have to be regarded as 'reasonably foreseeable'. He quoted the following dictum of Mason J in Wyong Shire Council v Shirt (1980) 146 CLR 40 at 48 (which the Tribunal also quoted): 'A risk which is not far-fetched or fanciful is real and therefore foreseeable...' He also referred to the following passage in the judgment of Murphy J in that case (at 49):-

Most traffic and industrial accidents result from circumstances in which the chance of an accident occurring is extremely slight. Under modern urban conditions, most people habitually drive carelessly. One only needs to observe peak-hour traffic in and out of a city to notice that almost every car is driven unsafely close to the car in front; speed limits are also habitually exceeded. The chances of an accident from any breach of traffic rules is very slight, but, if harm does result (and if the court concerns itself with "foreseeability"), it is treated as foreseeable.

43 Mr Allan further argued that if the relevant risk was formulated too narrowly, the 'second stage' of determining a negligence claim - that of deciding whether a breach of the duty of care had occurred - might not be reached. The court would not be required to adopt what he described as the 'Shirt calculus', whereby it weighs up the following factors listed by Mason J in Wyong Shire Council v Shirt at 48:-

The magnitude of the risk and the degree of the probability of its occurrence, along with the expense, difficulty and inconvenience of taking alleviating action and any other conflicting responsibilities which the defendant may have.

44 By way of illustrating the need to define the 'relevant risk' in broad terms, Mr Allan relied on four further cases on common law negligence. The relevant features of these cases are as follows.

45 First, in Pitt Son & Badgery Ltd v Proulefco SA (1984) 153 CLR 645, a wool broker retained wool that it had sold to a buyer in a wooden store. An intruder set fire to the store and destroyed the wool. He or she had gained access through a gap in the surrounding fence. The High Court affirmed a decision of the Court of Appeal holding the broker liable to the buyer on the basis that, as a bailee for reward, it was obliged to take reasonable care of the wool. At 648, Gibbs CJ said:-

Secondly, Mr Staff [counsel for the broker] pointed to the evidence which showed that arson was a rare occurrence in wool stores - indeed, it may have been quite unknown - and submitted that it was not unreasonable to fail to guard against it. However, the duty of the appellant was not simply to guard against arson. It was to take reasonable care to keep the wool safe, and therefore to prevent damage from any sort of intruders, whether thieves, vandals or the unexpected arsonist.

46 Secondly, in Jolley v Sutton London Borough Council [2000] 3 All ER 409, the defendant council left a boat on council property where young children could gain access to it. Two young boys propped up the bow of the boat with a car jack, got underneath it and tried to repair it. One of them was injured when the boat fell on him. He sued the council. The Court of Appeal reversed the primary judgment in his favour on the ground that it was not reasonably foreseeable that an accident would occur as a result of the boys deciding to work under a propped up boat. But the House of Lords restored the judgment, saying that neither 'the precise manner in which the injury came about' nor its 'extent' had to be foreseeable (Lord Steyn at 417) and that 'the foreseeability is not as to the particulars but the genus' (Lord Hoffmann at 418).

47 Thirdly, in the High Court case of Tame v New South Wales; Annetts v Australian Stations Pty Ltd (2002) 211 CLR 317; [2002] HCA 35 at 386 [203], Gummow and Kirby JJ said, in the context of proceedings for damages in negligence on account of psychiatric injury, that 'liability does not depend upon "the capacity of a reasonable man to foresee damage of a precise and particular character or upon his capacity to foresee the precise events leading to the damage complained of"'. (The phrase in quotation marks is extracted from Chapman v Hearse (1961) 106 CLR 112 at 121.)

48 The fourth and final case of common law negligence on which Mr Allan relied was Manley v Alexander (2005) 223 ALR 228; [2005] HCA 79. Here the driver of a tow truck ran over and seriously injured a man early one morning. The man was intoxicated, dressed in dark clothing and lying on the road. The High Court affirmed by majority a decision of the Court of Appeal of Western Australia holding the driver liable in negligence. The majority judges (Gummow, Kirby and Callinan JJ) said at 231 [12]:-

It may readily be accepted that the possibility that someone would be found lying on a roadway like Middleton Beach Road at 4.00 am is properly to be described as remote. But the reasonable care that a driver must exercise when driving a vehicle on the road requires that the driver control the speed and direction of the vehicle in such a way that the driver may know what is happening in the vicinity of the vehicle in time to take reasonable steps to react to those events.

49 Mr Allan acknowledged that in the present proceedings the applicable principles relating to negligence were those laid down in the CL Act, not in the common law. He maintained, however, that according to the cases decided under this Act, it was similarly recognised that a 'risk of harm' should not be defined too narrowly. In this connection, he referred to two decisions of the Court of Appeal.

50 The first of these was Garzo v Liverpool/Campbelltown Christian School [2012] NSWCA 151. In this case, the appellant sued the respondent school for damages for injuries suffered as a result of slipping and falling on one of the broad painted strips on a 'zebra' crossing of a road within the school grounds. In July 2007, about five months before her accident, the crossing had been repainted with a line-marking paint that was commonly used for painting narrow lines on sporting fields. Its slip-resistance was below the level recommended for a pedestrian crossing in a Slip Resistance Handbook (HB 197:1999) published by Standards Australia. There was evidence to suggest, however, that the painted strip had become weathered and therefore more slip-resistant by the time of the accident.

51 The appellant failed at first instance, on the ground that the relevant 'risk of harm' was not one of which the school or its maintenance knew or ought to have known, and was therefore not foreseeable as required by section 5B(1)(a) of the CL Act.

52 As noted in Tobias AJA's judgment in the Court of Appeal at [119], the trial judge identified the risk of harm as 'the risk of a person, such as the [appellant], when using the particular pedestrian crossing by walking normally, in its then condition, slipping on the painted surface and suffering personal injury'. In their judgments in the appeal, however, both Meagher JA and Tobias AJA indicated that in their opinion this formulation was too narrow.

53 In the judgment of Meagher JA, the following passage at [22 - 27] should be quoted:-

22... As the primary judge notes, the provisions of ss 5B and 5C of the Civil Liability Act 2002 are directed to questions of breach of duty: Adeels Palace Pty Ltd v Moubarak [2009] HCA 48; (2009) 239 CLR 420 at [13]; Harmer v Hare [2011] NSWCA 229; (2011) 59 MVR 1 at [194]. Those sections assume an allegation of breach of duty resulting from negligence which is or can be formulated in terms of a failure to take precautions against a risk of harm. The question which s 5B requires be answered favourably to the plaintiff is whether in the face of a risk of harm which was foreseeable and not insignificant, a reasonable person in the defendant's position would have taken those precautions having regard to, among other relevant things, the considerations in s 5B(2). To address the questions and considerations in s 5B, it is necessary to formulate a plaintiff's claim in a way which takes account of the precautions which it is alleged should have been taken and identifies the risk or risks of harm which the plaintiff alleges eventuated and to which those precautions should have been directed.

23 One way in which the appellant put her case at trial was that the respondents were negligent in failing to ensure that the crossing was surfaced with a non-slip paint or other material. The construction of the pedestrian crossing by painting a strip of the internal roadway within the School grounds, invited pedestrians to cross the roadway at that point. A risk which had to be addressed in relation to the installation and maintenance of the crossing was whether a person might slip on the painted or asphalt surface of the crossing when wet. It was argued that the respondents should have used a paint or other material, when repainting the surface of the crossing in July 2007, which complied with the recommendation in Table 3 of HB197:1999.

24 The relevant "risk of harm" for the purposes of the application of s 5B, taking into account the precaution which the appellant alleged should have been taken in July 2007 in relation to the repainting of the crossing, was sufficiently described as being that of a person slipping on the surface of the crossing when wet and thereby suffering injury.

25 The primary judge defined that risk of harm more narrowly and in a way which focused (by use of the words "in its then condition") on the condition of the pedestrian crossing at the time of the appellant's fall in November 2007: at [66]. In doing so, the primary judge excluded from the precautions which might have been taken against that risk, the precaution of using in July 2007 a paint which complied with the recommendation in Table 3. A consequence of the trial judge defining the risk of harm in this way was that he did not address one formulation of the appellant's case. Had he done so, his answers to the questions required to be addressed by s 5B(1)(a) and (b) are likely to have been different and favourable to the appellant in respect of that way in which her case was put.

26 I agree with Tobias AJA that the risk of harm to a person slipping on the wet surface of the crossing was foreseeable and not insignificant. Each of those matters, addressed to this broader formulation of the risk of harm, was conceded by the respondents in oral argument. The primary judge, addressing the more narrowly defined risk of harm, held that it was not foreseeable and that it could not be described as "not insignificant": at [98] and [115]. Each of those conclusions followed from the more narrow description of the risk that he adopted. For example, at [110] and [111] the primary judge addressed the question posed by s 5B(1)(a) by reference to what was known or ought to have been known by the respondents concerning the condition of the crossing in November 2007. In doing so he observed that there was "no obvious defect in the crossing in November 2007 at the time of Mrs Garzo's fall" and that there had been no "unusual external events, storms, road repairs, spillages of oil in the area of the crossing or the like, which meant that one might expect the crossing to be particularly dangerous".

27 I also agree with Tobias AJA that there was a failure to take reasonable precautions when repainting the surface of the crossing in July 2007...

54 At [123], after having quoted the trial judge's formulation of the 'risk of harm' and referred to alternative formulations suggested by counsel for the parties, Tobias AJA said:-

123 In my opinion the risk can be identified as that of a person slipping on the painted surface of the crossing and thereby suffering an injury. I do not think that the risk needs to be articulated in any greater detail than that.

55 At [7], the third member of the Court, Basten JA, suggested a formulation closer to that of the trial judge:-

7 Section 5B of the Civil Liability Act 2002 (NSW) requires identification of a risk of harm, against which a person has failed to take precautions. Given its context, the risk must be that which materialised in the case of the injured person seeking to claim in negligence. That is because s 5B is dealing with a breach of a duty of care, being the duty of care owed by the defendant to the injured plaintiff. The relevant risk in the present case was the risk which materialised when the appellant slipped and fell. The harm suffered by the appellant, if it arose from the condition of the crossing at all, arose from the condition of the crossing as at the date of her fall. To establish a breach of duty, she needed to establish that the crossing was unduly slippery on that date.

56 The appellant failed in her appeal. Basten JA held that she had not established that the crossing was 'unduly slippery' at the time of the accident or that the school should have realised that this was or might be the case and have taken precautions such as having it professionally tested or repainting it. Meagher JA and Tobias AJA held that the school, when repainting the crossing in July 2007 with unsuitable paint, had failed to take reasonable precautions against the 'risk of harm' as formulated by their Honours. But they held also that, having regard to the likelihood that the crossing had become more slip-resistant in the ensuing five months, the Appellant had not established that the school's breach of duty caused her to slip and fall.

57 Mr Allan's submission relating to this case was that the judgments of Meagher JA and Tobias AJA made it clear that for the purposes of section 5B of the CL Act a 'risk of harm' should be broadly defined.

58 The second case that Mr Allan mentioned was one to which we have already referred, Shoalhaven City Council v Pender [2013] NSWCA 210.

59 In her judgment in this case, McColl JA discussed at some length the question of how the relevant 'risk of harm' to the respondent should have been defined. Her discussion included the following passages, extracted from paragraphs [51] to [67]:-

Breach of duty

51 Acceptance that the appellant owed the respondent a duty of care did not answer the questions whether that duty was breached or whether any breach caused the respondent's injury...

52 Further, "[a] person does not breach his or her duty of care merely because there are steps that he or she could have taken to avert the risk that actually materialised": Thornton v Sweeney [2011] NSWCA 244 (at [131]) per Sackville AJA (Campbell JA and Tobias AJA agreeing); see also s 5C(b), Liability Act...

55 Despite its appearance in that part of the Liability Act headed "Duty of care", section 5B engages with the issue of breach of duty of care.

56 Thus, s 5B(1) sets out three preconditions that must co-exist before liability in negligence arises, while s 5B(2) provides a non-exhaustive list of factors the court is required to take into account in deciding whether the third of those preconditions exists: Roads and Traffic Authority of NSW v Refrigerated Roadways Pty Ltd [2009] NSWCA 263; (2009) 77 NSWLR 360 (at [173]) per Campbell JA (McColl JA agreeing); see also (at [443]) per Sackville AJA.

57 The effect of s 5B(1), accordingly, was that the appellant was not negligent in failing to take precautions against a risk of harm unless the risk was one of which it knew or ought to have known, the risk was not insignificant, and in the circumstances, a reasonable person in the appellant's position would have taken those precautions.

58 Section 5B(1)(c) invokes the notion of foreseeability as it is relevant to breach of duty of care. Reasonable foreseeability of the class of injury the plaintiff suffered is also an essential condition of the existence of the duty to take care for the benefit of another. However the nature of the foreseeability inquiry differs depending upon the stage at which it is being considered.

59 In Shirt v Wyong Shire Council [1978] 1 NSWLR 631 (at 639 - 640) Glass JA said that "[t]he inquiry to be made in relation to duty or no duty [of care] relates to the foreseeability of harm resulting to the plaintiff from the conduct of the defendant, considered quite generally", whereas "[t]he conduct relevant to the breach inquiry is the foreseeability of harm resulting from the acts or omissions of the defendant, or its servants, proved to have occurred." Thus, the foreseeability inquiry at the duty and breach stages raises different issues which progressively decline from the general to the particular: Minister Administering the Environmental Planning and Assessment Act 1979 v San Sebastian Pty Ltd [1983] 2 NSWLR 268 (at 295) ("San Sebastian") per Glass JA; see also Vairy v Wyong Shire Council (at [70] - [73]) per Gummow J...

62 At common law, the plaintiff did not have to establish the precise and particular character of the injury or that the precise sequence of events leading to the injury was foreseeable; it was sufficient if the kind or type of injury was foreseeable: Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434 (at [64]) per Gummow J. Nothing in the Act dictates any different approach when considering the requirement of s 5B(1)(b) that the risk be "not insignificant": Shaw v Thomas [2010] NSWCA 169 (at [43]) per Macfarlan JA (with whom Beazley and Tobias JJA agreed).

63 Nevertheless, as Basten JA emphasised in Hoffmann v Boland [2013] NSWCA 158 (at [3]) "[t]he focus of [s 5B] is upon the 'risk of harm' and the 'precautions' which might be taken against such a risk."

64 Thus the breach inquiry required the primary judge to identify accurately the actual risk of injury the appellant faced as it was only through the correct identification of the risk that her Honour could determine what a reasonable response to that risk would be: Roads and Traffic Authority of New South Wales v Dederer (at [18], [59]) per Gummow J. As Gummow and Hayne JJ explained in Graham Barclay Oysters Pty Ltd v Ryan (at [192]), the inquiry as to breach "involves identifying, with some precision, what a reasonable person in the position of the defendant would do by way of response to the reasonably foreseeable risk". In so saying, their Honours referred with approval to Isaacs A-CJ's observation in Metropolitan Gas Co v City of Melbourne [1924] HCA 46; (1924) 35 CLR 186 (at 194), that "[n]o conclusion of negligence can be arrived at until, first, the mind conceives affirmatively what should have been done".

Identifying the risk of harm

66 The influence of Gummow J's statement in Roads and Traffic Authority of New South Wales v Dederer concerning the need to identify the relevant risk of harm accurately for the purposes of s 5B is apparent in recent decisions.

67 Shaw v Thomas concerned, relevantly, the question whether the occupiers of a home had breached their duty of care to a 10 year old visitor who suffered serious head injuries when he fell whilst descending from the top level of a bunk bed. The parties were at issue as to how the risk of harm should be characterised for the purpose of s 5B. Macfarlan JA held (at [45]) that the risk was sufficiently defined as one of the plaintiff "falling and injuring himself whilst descending from the top bunk of the bed", a risk his Honour regarded as "not insignificant [because] [t]here is always some risk of injury when children climb up to and down from elevated surfaces."

60 Her Honour then quoted (at [68 - 71]) from the passages in the Court of Appeal's judgment in Garzo that we have reproduced above. At [72], she added the following observation:-

72 As is apparent all formulations of the risk of harm in Garzo focused on the condition or particular nature of the surface (the painted strip of the pedestrian crossing) on which the appellant had slipped.

61 McColl JA's discussion of how the relevant 'risk of harm' in the proceedings before the Court should have been defined appeared in paragraphs [84 - 87] of her judgment:-

84 If the primary judge accepted the respondent's evidence in this respect, she then had to identify the risk of harm for the purposes of s 5B(1). That required her Honour, as I have said, to identify accurately the risk of harm of which the appellant knew, or ought to have known.

85 The primary judge identified the risk of harm merely as a slippery ramp. A formulation pitched at that level of generality failed, in my view, accurately to identify the risk of harm the respondent faced. It also distracted the primary judge from determining the significance of the risk and what a reasonable response to that risk was.

86 As is apparent from the previous discussion, in a case such as the present, identifying the risk of harm for s 5B purposes required focus on the nature of the surface on which the respondent slipped. Having regard to the respondent's evidence as to his observations of the surface of the ramp (and giving him the benefit of his surmise concerning the presence of dry algae), the risk of harm was, in my view, that of slipping and falling on dry algae on the ramp.

87 Had her Honour identified the risk of harm in the terms I propose, she would have realised that, save as to the respondent's allegation of his fall on dry algae, there was no evidence that there was a risk of slipping on the dry part of the ramp, even if dry algae was present.

62 At [151] and [153 - 158], Ward AJA dealt as follows with the question of identification of the 'risk of harm':-

151 It is not disputed that Mr Pender was required to establish that there was a "not insignificant" risk of harm of which the Council knew or ought to have known and to which it ought reasonably to have responded. In Roads and Traffic Authority of New South Wales v Dederer [2007] HCA 42; (2007) 234 CLR 330 Gummow J at [59]-[61] referred to the need for there to be a correct identification of the risk of harm in order for an assessment of the reasonable response to be made.

153 Ms Norton [counsel for the respondent] submits that the relevant risk of harm was the risk that a person would slip on the ramp and thereby suffer injury; and that there was no need to articulate it more clearly than that, referring to Garzo v Liverpool/Campbelltown Christian School [2012] NSWCA 151 [24] and [123]. In Garzo, Tobias AJA had considered at [123] that the risk of harm could be sufficiently identified as that of a person slipping on the painted surface of the crossing and thereby suffering an injury.

154 It is implicit in [the trial judge's] findings that the risk of harm her Honour had identified was, at its broadest, the risk that a person in the position of Mr Pender would slip on the ramp and suffer harm. The finding at [30.2] that it was not reasonably foreseeable that a person in Mr Pender's position would have gone onto the ramp for the particular purpose that he did, i.e. to check the underneath of the ferry for ferry clearances, is not necessarily inconsistent with the implicit finding that there was a risk that a person in his position might go onto the ramp, for whatever reason, and fall.

155 The Council was clearly on notice that ferry operators might from time to time walk on the ramp since it was on notice of at least two earlier incidents involving ferry operators falling on the ramp. Therefore, I do not accept the submission that the finding at [30.2] should have led to a finding of no negligence.

156 In oral submissions, it was argued by Mr Sexton that a more specific risk of harm (by reference to the state of the ramp's surface rather than by reference to the purpose for which someone might go onto the ramp) was the risk that had to be identified, namely the risk of a workman slipping on (imperceptible) dry algae, so as to enable focus to be made on the question what should have been done to prevent the risk or to take precautions against the risk. That accords more closely with the way in which the risk of harm was identified in Garzo and focuses attention on the relevant enquiry, which is what the Council ought reasonably to have done to address that risk. I would accept that finding such a risk of harm was necessary in order to give rise to a claim in negligence as contended for by Mr Pender.

157 Nevertheless, having regard to the measure her Honour referred to as available to remove the risk, i.e., pressure cleaning, it is implicit in her Honour's overall reasons that the risk of harm identified by her Honour was that of slipping on a ramp that was slippery because of dirt or some kind of covering, such as algae, on the ramp. Whether or not the Council could reasonably have foreseen that dry algae was slippery, there was clearly a basis for the finding that it was reasonably foreseeable by the Council that if the ramp became slippery by reason of slime or contaminants or algae growth of some kind, then someone in the position of Mr Pender could slip and fall.

158 Ultimately, although not precisely identified, the risk of harm was sufficiently clear from her Honour's reasons as a whole.

63 The third member of the Court, Barrett JA, expressed his agreement with the judgments of McColl JA and Ward JA and did not address the question of how the risk of harm should be identified.

64 Mr Allan put forward two submissions based specifically on the judgments in Pender. The first was that we should bear in mind McColl JA's statement (at [62]) that under the CL Act, as well as at common law, a plaintiff does not have to 'establish the precise and particular character of the injury or that the precise sequence of events leading to the injury was foreseeable', since it is sufficient that 'the kind or type of injury' is foreseeable. Secondly, he maintained that her Honour's observations as to formulation of the risk of harm, while warning against defining this risk 'in the abstract', also demonstrate that it should not be defined in excessive detail.

65 According to Mr Allan, the Tribunal's error in defining the risk of harm too narrowly induced it to ignore evidence of a substantial risk of fire within the Premises that it should have taken into account. This included evidence that during the Respondent's occupation of them the temperature was frequently very high and, as a number of photographs clearly demonstrated, much of the available space was occupied by garments and other flammable items. In this context, Mr Allan maintained (in paragraph 39 of his written submissions) that since the Respondent was a bailee for reward of the items entrusted to him by his customers, there were 'social and economic reasons for treating a reasonable person in his position as one who responds vigilantly to the mere possibility of fire'.

66 In response to these submissions, Mr Perla argued that in a number of paragraphs that we have quoted from McColl JA's judgment in Pender, her Honour was concerned to emphasise that the risk of harm should not be defined too broadly. He drew our attention specifically to paragraphs [66], [68 - 72] and [84 - 87].

67 A further authority on which he relied was paragraph [41] of the judgment of Campbell JA in Sibraa v Brown [2012] NSWCA 328 (from which the Tribunal quoted an extract in its decision at [69]):-

41 Section 5B requires risks to be assessed prospectively. As a matter of ordinary language a "risk of harm" relates to harm that has not yet happened. That is consistent with the requirement in s 5B(1)(a) that the risk of harm be "foreseeable", which happens when a person knows or ought to know that there is a risk that harm might arise in the future. The "risk of harm" to which s 5B(1) refers is harm that might be suffered by anyone to whom the defendant owes a duty of care, as a consequence of the failure to take the precautions referred to in s 5B(1).

68 Finally, Mr Perla argued that the Tribunal, appropriately, had 'imported the articulation of the risk' that the Appellant had himself put forward in his Application for Original Decision, but now sought to abandon - namely, the risk that recently dried clothes that were left in a container might self-ignite.

69 The onus of proof. In paragraphs 4 and 11 of his written submissions in the appeal, Mr Allan raised the argument that in defending the contractual claim the Respondent bore the onus of showing that the fire was not attributable to negligence on his part. The relevant passages were as follows:-

4. Basically the premises were the respondent's responsibility while he remained tenant. He could only escape responsibility for damage if he could show that there was no 'neglect or default' on his part leading to that damage.

11. The covenant in the lease was an absolute promise to keep the premises in good repair. To not do so was to breach the lease, leading to a claim for damages. The respondent could exculpate himself by showing that disrepair was not a product of his neglect or default. In other words, the parties agreed that the respondent would carry an onus of proof should damage occur to the building.

70 In his oral submissions in the appeal, Mr Allan did not elaborate on this argument. This question of onus was not mentioned in Mr Perla's submissions, in the Tribunal's decision or (as far as we can ascertain) in the parties' submissions to the Tribunal.

71 The Tribunal's interpretation of evidence given by Mr Kelly. The passage in the Tribunal's decision to which this submission of Mr Allan was directed comprised the first two sentences of paragraph [60]:-

60 The knowledge which has been acquired by Mr Kelly in the course of his experience investigating fires as to the incidence of apparent spontaneous combustion in commercial laundries appears to have largely arisen in "recent years". Apparently, Mr Kelly may only have become aware of this incidence in the period following the date of his first report on 24 August 2010 because it was not mentioned in his first report; this was, of course, after the fire.

72 Mr Allan argued that the Tribunal misrepresented what Mr Kelly had said in the relevant part (paragraphs 6.2 and 6.3) of his first report. He had shown that at the time of this report he was fully aware of the risk of spontaneous combustion of heated cloth materials in commercial laundries.

73 Mr Perla did not respond to this argument in his submissions.

74 The Tribunal's observation regarding the foreseeability of loss by fire. The observation to which this submission by Mr Allan refers was the following statement in the Tribunal's decision at [71]:-

71 The Applicant submits that the simple fact of running a laundromat for a number of years creates the foreseeability of loss by fire; this bald proposition is not supported by any evidence...

75 In his oral submissions, Mr Allan described as 'odd' the proposition that there was no evidence that the conduct of a laundromat business created a foreseeable risk of loss by fire.

76 This was another argument to which Mr Perla did not respond.

Discussion and conclusions

77 In our opinion, this appeal must be dismissed, for the reasons that follow. In these reasons, we deal with all the significant points raised in the parties' appeal submissions, though not in the order in which we have just outlined them.

78 A major plank of the Appellant's case on appeal was his contention that the Tribunal, in applying the provisions of section 5B of the CL Act, defined the 'risk of harm' too narrowly.

79 In our opinion, however, the two authorities cited to us that bear most directly on this question - Garzo v Liverpool/Campbelltown Christian School [2012] NSWCA 151 and Shoalhaven City Council v Pender [2013] NSWCA 210 - indicate that a formulation such as the Tribunal adopted was entirely appropriate and that the formulation urged by Mr Allan - the risk of damage to the Premises by fire - would have been unduly broad. This is the case even though Mr Allan sought to rely on Garzo and claimed that according to McColl JA's judgment in Pender broad definitions of the 'risk of harm' should be formulated.

80 Undoubtedly, both Meagher JA and Tobias AJA in Garzo believed that the definition used by the trial judge in that case was too narrow. But they nevertheless adopted definitions that were not substantially broader and that focused on the specific risk alleged to have been created by the respondent school's conduct with regard to the pedestrian crossing. They did not define the risk simply as that of a person slipping while on the crossing. Instead, Meagher JA referred to 'a person slipping on the surface of the crossing when wet and thereby suffering injury' and Tobias AJA to 'a person slipping on the painted surface of the crossing and thereby suffering an injury'. Basten JA defined it as 'the risk which materialised when the appellant slipped and fell', adding that 'the harm suffered by the appellant, if it arose from the condition of the crossing at all, arose from the condition of the crossing as at the date of her fall'.

81 In Pender, McColl JA's comment (at [72]) on the formulations arrived at in Garzo is telling. She said that all of them 'focused on the condition or particular nature of the surface (the painted strip of the pedestrian crossing) on which the appellant had slipped'.

82 Her reasoning in defining the 'risk of harm' in the factual circumstances arising in Pender conveyed a similar message. This is well illustrated in the following extracts from paragraphs [85] and [86] of her judgment:-

85 The primary judge identified the risk of harm merely as a slippery ramp. A formulation pitched at that level of generality failed, in my view, accurately to identify the risk of harm the respondent faced...

86 ... identifying the risk of harm for s 5B purposes required focus on the nature of the surface on which the respondent slipped. Having regard to the respondent's evidence as to his observations of the surface of the ramp (and giving him the benefit of his surmise concerning the presence of dry algae), the risk of harm was, in my view, that of slipping and falling on dry algae on the ramp.

83 The formulation favoured by Ward AJA, at [185], was 'the risk of a workman slipping on (imperceptible) dry algae, so as to enable focus to be made on the question what should have been done to prevent the risk or to take precautions against the risk'. Her Honour added that this 'accords more closely with the way in which the risk of harm was identified in Garzo and focuses attention on the relevant enquiry, which is what the Council ought reasonably to have done to address that risk'.

84 This last observation by Ward AJA echoes a point made in the following extracts from paragraph [22] of Meagher JA's judgment in Garzo:-

[Sections 5B and 5C of the CL Act] assume an allegation of breach of duty resulting from negligence which is or can be formulated in terms of a failure to take precautions against a risk of harm... To address the questions and considerations in s 5B, it is necessary to formulate a plaintiff's claim in a way which takes account of the precautions which it is alleged should have been taken and identifies the risk or risks of harm which the plaintiff alleges eventuated and to which those precautions should have been directed (emphasis added).

85 According to the Application for Original Decision, the precautions that the Respondent should have taken, but failed to take, were described as follows, under the heading 'Particulars', in subparagraphs (c), (d) and (e) of paragraph 16:-

c. The Respondent failed to take proper steps to ensure that heated items were sufficiently cooled before placing them in a container.

d. The Respondent left the container in a place and a container which was not sufficient to enable the heated items to cool down.

e. The Respondent left the heated items in place in close proximity to other items which could catch fire.

86 Subparagraphs (a) and (b) gave the following description of the risk that these precautions would allegedly have averted:-

a. Heated articles which had not sufficiently cooled were left in a container

b. Those articles self ignited causing the fire.

87 The primary focus in these five subparagraphs is on a risk that a fire might start in a particular way, and on the precautions required to prevent this happening. Only subparagraph (e) refers to a different risk - that a fire, once started, might spread - and it does so only in relation to a fire starting amongst 'heated items' through self-ignition, as described in subparagraphs (a) and (b).

88 The Appellant's written submissions to the Tribunal included claims that the Respondent carried on his business in such a manner that any fire, no matter how it started, would spread throughout the Premises. The following passage, which the Tribunal quoted (at [63]) from page 7 of submissions filed by the Appellant before the Tribunal hearing, provides an example:-

The Respondent conducted a business clearly at risk of fire, full as it was of flammable clothes in plastic dry cleaner's bags. Those clothes were side-by-side with power boards and electrical devices, some of the fabrics contained oil, and some of the fabrics hung above fuel in the form of plastic washing baskets. Those fabrics were industrially heated so as to dry.

In summary, there was heat and fuel all around the laundromat.

89 Lower down on the same page of these submissions, the Appellant argued:-

It is important to recall that the respondent was under a duty to take reasonable care to avoid damaging the applicant's premises (emphasis in the original). Damage to the premises was as much a result of fuel sources above the trolley as it was the ignition and fuel in the trolley and the trolley itself. The respondent did not divide and section the shop's flammable contents in order to prevent the fire's spread. Clothes, linen and nylon bags were everywhere and upon (and underneath) one another.

Just as a driver must control her vehicle so she can reasonably react to remote possibilities (Manley, [11]), so too a tenant must organise his shop to reasonably prevent fire and its spread. This the respondent did not do. It would have cost little in time and money not only to let clothes cool down but to keep piles of clothes isolated from one another (ss 5B, 5C, Civil Liability Act 2002 (NSW)).

90 In submissions to the Tribunal filed after the hearing, the Appellant referred on a couple of occasions to this argument that the Respondent had failed to take steps to prevent the spread of fire, but did not further develop this theme.

91 Nothing in these passages quoted from the Appellant's submissions or in the Tribunal's decision suggests that the Appellant sought and obtained leave to add to the case pleaded in the Application a separate allegation that the Respondent failed to take reasonable precautions to prevent the spread of any fire occurring in the Premises, including fires originating from causes (such as an electrical fault) for which he would not be responsible. The submissions asserting that the Respondent failed to take precautions to prevent fires spreading were only concerned, as was subparagraph (e) of paragraph 16 of the Application, with fires originating through the self-ignition of 'heated items' in a container, as pleaded in subparagraphs (a) and (b).

92 It follows from this reasoning that the Tribunal, in defining the 'risk of harm' as the risk of spontaneous combustion occurring in clothes stacked after removal from a dryer, complied with the principle, stated by Meagher JA in Garzo at [22], that the risk should be formulated 'in a way which takes account of the precautions which it is alleged should have been taken and identifies the risk or risks of harm which the plaintiff alleges eventuated and to which those precautions should have been directed'.

93 Accordingly, we conclude that the Appellant's claim of error by the Tribunal in defining the 'risk of harm' is not made out.

94 Before leaving this topic, we would make one further observation. This is that we do not see how a legal concept mentioned in Mr Allan's submissions - namely, the duty of care owed by a bailee for reward - can be considered relevant to the duties owed by the Respondent under the contract contained in the Lease, under the general law of negligence or under the statutory version of these duties imported into these proceedings by the CL Act.

95 On the basis that the relevant risk of harm was the risk of spontaneous combustion occurring in clothes stacked after removal from a dryer, it is clear, in our opinion, that the Tribunal was correct in concluding that evidence was required to establish that the Respondent should have been aware of it. It had found that he had no actual knowledge of such a risk. There was no suggestion that at the time of the fire the existence of such a risk was 'a matter of common sense and common knowledge' (to quote from McColl JA's judgment in Pender at [88]). Accordingly, to adapt her Honour's words at [91], the risk was 'a matter which required evidence as to the nature of the risk posed' and the steps that the Respondent 'ought reasonably have taken to obviate it'.

96 Such evidence, we should add, would not necessarily be the sole material to be taken into account in deciding whether the Respondent should have foreseen this risk. But in the circumstances that we have outlined, a finding that he should have foreseen it could not be made (as indeed the Tribunal determined) in the absence of any evidence at all on the matter.

97 A proposition advanced but not pressed significantly by Mr Allan must be considered at this juncture. It is that in the context of the contractual claim brought by the Appellant under clauses 3(a) and 3(m) of the Lease, the onus lay on the Respondent to 'exculpate himself' by showing that disrepair was not a product of his 'neglect or default'.

98 We have given careful consideration to this proposition, on which we unfortunately did not have the benefit of sustained argument. Our conclusion is that it is not maintainable, for the following reasons.

99 As Mr Allan argued, the primary obligation imposed by clause 3(a) was an obligation on the lessee to 'keep and maintain' the Premises 'in good and tenantable repair and in good and efficient working order and condition'. But the repair of damage arising from fire, or from any one of a number of other occurrences, was expressly excluded from the scope of this obligation, unless there was 'neglect or default' on the lessee's part. The clause states in this fashion that prima facie, in the event of damage by fire, the lessee is not under any liability to effect or pay for the necessary repairs. It is only when the cause of the fire was the lessee's 'neglect or default' that the lessee is made liable for repairs. It appears to us that this phraseology implicitly requires the lessor to establish the facts that give rise to such a liability of limited scope.

100 Under clause 3(m), the onus more clearly lies on the lessor. He or she must establish that the loss or damage for which indemnity is claimed was caused by 'the Lessee's negligent use or misuse... or by or neglect or default happening in the demised premises'.

101 In the present case, the Appellant did in fact adduce evidence bearing to some degree on the question whether the Respondent should have foreseen and guarded against the risk of spontaneous combustion in materials that had recently been laundered and dried. This was the evidence in Mr Kelly's reports relating to the incidence of this phenomenon in commercial laundries.

102 As indicated above at [72], Mr Allan argued that the Tribunal misrepresented what Mr Kelly said in his first report, dated 24 August 2010, about the incidence of this phenomenon. Mr Allan disputed the Tribunal's statement, at [60], that Mr Kelly appeared to have only become aware of such 'incidence' in the period following this report.

103 The relevant passages in the report (paragraphs 6.2 and 6.3) appear at the end, under the heading 'Conclusion'. It was here that Mr Kelly first expressed the opinion that the likely cause of the fire was, as he expressed it in the latter paragraph, 'the actions of the tenants in... placing heated materials and piling them into some configuration which has led to the self heating ignition of that cloth...'

104 He did not, however, make any statement in this report regarding the incidence of this phenomenon of 'self heating ignition'. The Tribunal was correct in so indicating. As it said in its decision at [56 - 58] (quoted above at [25]) his observations on this specific topic were all contained in his second report, dated 7 November 2011.

105 The Tribunal's conclusion (at [61]) that the 'available expert evidence' did not 'of itself establish that spontaneous combustion of laundered items represented a foreseeable risk in respect of which the Respondent failed to take reasonably available steps' followed both from its evaluation of the foregoing aspects of Mr Kelly's reports and from the consideration that, as it said at [60], 'the extent to which Mr Kelly's knowledge has been imparted to commercial laundry operators such as the Respondent is unknown'.

106 We accordingly agree with Mr Perla's submission that the absence of evidence, expert or lay, to support the proposition that at the time of the fire a person in the Respondent's position ought reasonably to have known of this risk of spontaneous combustion constituted an 'evidentiary gap' in the Appellant's case.

107 Arguably, this gap would still exist even if, for the purposes of section 5B(1) of the CL Act, the correct formulation of the 'risk of harm' was, as submitted by Mr Allan, the risk of 'damage by fire'. In order to make good the case that the Appellant pleaded, it would still have been incumbent on him to establish, as required by paragraph (c) of section 5B(1), that the precautions that 'a reasonable person in the Respondent's position would have taken' included ensuring, so far as possible, that a fire would not start through spontaneous combustion - for example, by cooling laundered materials down after they had been dried or not leaving them stacked on top of each other in containers such as the yellow trolley. But in the absence of evidence that the Respondent knew or ought reasonably to have known of the risk of spontaneous combustion in piles of recently dried materials, the Appellant would have failed to satisfy this requirement.

108 At [71], as Mr Allan submitted, the Tribunal purported to identify another 'evidentiary gap'. It stated that a 'bald proposition' put forward by the Appellant - namely that 'the simple fact of running a laundromat for a number of years creates the foreseeability of loss by fire' - was 'not supported by any evidence'. We agree with Mr Allan that this statement is open to doubt. But any error of the Tribunal in making it is not of significance because 'the foreseeability of loss by fire' was not a question requiring determination.

109 For the foregoing reasons, the appeal should be dismissed.

110 As we indicated near the beginning of this decision, questions as to the costs of the proceedings at first instance and on appeal must still be determined. Submissions have already been filed relating to the costs of the former proceedings.

111 Having regard to the fact that the Respondent to the appeal has been successful in both sets of proceedings, we give the following directions regarding costs:-

Any application by the Respondent for the costs of these appeal proceedings must be filed and served within 28 days, along with supporting submissions and any additional submissions he may wish to make as to the costs of the proceedings at first instance. Any submissions in reply by the Appellant must be filed and served within a further 28 days. These matters of costs will then be determined 'on the papers', pursuant to section 76 of the Administrative Decisions Tribunal Act 1997, unless the Appeal Panel decides that a hearing is required.

 

**********

Decision last updated: 27 September 2013