In my last post, The end of an era at the Australian National University (August 18, 2019) I announced that my position at the ANU was redundant and I was to leave the university. There I said ‘I will continue this blog at least whilst I see what other opportunities arise.’ Just to prove the point I follow that post with this blog post reporting on the decision in Margaret Ritchie v Advanced Plumbing and Drains Pty Ltd  NSWSC 1028.
Margaret Ritchie v Advanced Plumbing and Drains Pty Ltd is a class action arising out of ‘of a bushfire which spread from a property at Carwoola NSW, on the Southern Tablelands near the Australian Capital Territory, on 17 February 2017. The plaintiff alleges that the bushfire was negligently started by Advanced Plumbing.’ The problem is that Advanced Plumbing went into liquidation on 18 December 2017.
Ms Ritchie sought leave to continue the action against CGU, the insurers of Advanced Plumbing. Her right to proceed directly against the insurers, as well as the need to obtain leave of the court was contained in the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) (“the Act”). In order to be allowed to proceed, the plaintiff had to show ():
- That there is an arguable case of liability against the defendant (ie Advanced Plumbing and Drains Pty Ltd);
- That there is an arguable case that the insurer’s policy responds to that liability; and
- There is a real possibility that, if the plaintiff obtains judgment against the defendant, the defendant will not be able to meet it.
In a judgment delivered on 16 August 2019, Campbell J gave Ms Ritchie leave to continue the proceedings. There was no real issue on point 3, as Campbell J said (at ) ‘Advanced Plumbing is not a good common law defendant, it having gone into voluntary liquidation and the initial report to creditors indicating an excess of liabilities over assets.’ The issue was whether there was an arguable case that Advanced Plumbing was liable and whether CGU were on risk to cover that liability.
With respect to the fire the plaintiff’s allegations (at ) are:
… the essential act of negligence of Advanced Plumbing pertains to the actions of its employees, and another, who, on a total fire ban day, used a “power cutting wheel” to cut reinforcing steel. The use of this equipment produced a “shower of sparks” that ignited nearby long grass causing a large bushfire. This fire spread over about 3500 hectares and caused very extensive damage. The occurrence took place at a construction site on which a house was to be erected for the company’s director who had directed several employees to carry out with the works on his private property. The evidence read at the hearing suggests that the person operating the cutting tool was a sometime employee of Advanced Plumbing not then currently on its books who the foreman had enlisted for the day. He appears to have been subsequently, formally re-employed as an apprentice plumber.
CGU denied liability (at ) because they said that the conduct that caused the fire ‘did not arise “as a result of an occurrence in connection with [Advanced Plumbing’s] business”; and is caught by the “welding endorsement” excluding liability arising from work involving certain processes, or the use of specified equipment, unless specific safety measures are adopted.’ The machine being used was a ‘quick cut’ not a welder ().
His Honour held (at -) that there was an arguable case against the defendant. He said:
The material read before me clearly shows that there will be evidence available at the trial of the action demonstrating that Advanced Plumbing’s director and guiding mind, Jason Hooper, directed a number of employees to perform work on the construction site for his proposed private dwelling. Two persons were directly involved in the work using the quick cut. They were Shannon Orford, described as Advanced Plumbing’s “Civil Foreman”, and Harry Elliot who at that time probably was not employed by Advanced Plumbing.
The evidence seems to indicate that Mr Orford and Mr Elliot were working in a trench which had been previously dug for footings for a proposed retaining wall, near the construction pad for the dwelling. They were placing reinforcing steel for concrete footings which were to be poured on one of the following days. It was necessary to cut the steel in places where the footing dropped a level. The cutting was done using the quick cut, more formally a Husqvarna K 970 power cutter. The friction between the high speed cutting wheel and reinforcing steel ordinarily causes a shower of sparks. For this reason the usual method is to cut directing the shower of sparks into the trench. Half a dozen or so cuts had been made earlier without incident…
The men were apparently entirely oblivious to the total fire ban then in place. Mr Orford and Mr Hooper both agreed that had they been aware of the ban, bolt cutters would have been used to cut the steel, rather than the quick cut.
Initially Mr Orford claimed to be the person using the quick cut when the fire started. It later became apparent he had said that to protect the younger Mr Elliot. It appears to be the case that Mr Elliot was given the task of completing a particular cut. He had experience cutting with an angle grinder. Initially he directed the shower of sparks into the trench in the proper manner. However, the sparks rained on Mr Orford who yelled out for Mr Elliot to turn the machine around. It is apparent that Mr Elliot obeyed this yelled command directing the shower away from the line of the trench and in the direction of the long grass across the fire ring…
Whatever complexities there may be in deciding questions of the existence, nature and scope of duties of care in the modern law of negligence, generally speaking a person who undertakes the performance of work on land will be under a duty to exercise reasonable care in its performance to avoid foreseeable risk of harm to others: Voli v Inglewood Shire Council (1963) 110 CLR 74;  HCA 15. Where the work is hazardous work, including work involving a foreseeable risk of the escape of fire from the land, the landowner or other person authorising the work will be subject to a non-delegable duty of care extending to ensuring that the persons performing the work take reasonable care to avoid that occurrence: Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520;  HCA 13. For this reason, and given the relatively low threshold I have referred to, it is pointless to pause to consider whether Advanced Plumbing would be vicariously liable for any negligence on the part of Mr Elliot: cf, Sweeney v Boylan Nominees Pty Ltd (2006) 226 CLR 161;  HCA 19.
I regard it as arguable that Advanced Plumbing owed Ms Ritchie and other neighbours a non-delegable duty of care … I am also satisfied that … cutting steel using a quick cut on an extremely hot day exposed the plaintiff and other group members to a reasonably foreseeable and not insignificant risk of harm by the escape of fire from Mr Hooper’s property. I am also satisfied that it is arguable that a reasonable person in the position of Advanced Plumbing would have taken the precaution of requiring the work of cutting the reinforcing steel to be performed using bolt cutters which, on the material read at the hearing, did not involve the risk of the ignition and escape of fire.
It is also arguable that use of the quick cut or the failure to use bolt cutters was a necessary condition, as a matter of fact, of starting the fire and of its escape … it is also at least arguable that no real question arises about the scope of Advanced Plumbing’s liability properly extending to the harm suffered by the plaintiff and other group members.
The burden to show that the insurance policy issued by CGU did not extend to cover this risk fell to CGU (). Determining this matter required careful consideration of the terms of the policy. CGUs argument was that the work being done was not part of the business of Advanced Plumbing. First the work was private work for the company’s director and second the work being done was ‘part of the preparation and laying of metal reinforcement mesh, in preparation for a concrete pour…’ and this ‘was not related to drainage or plumbing work’ ().
The business case argument failed as the definition of the defendant’s business, in the insurance policy included ‘private work undertaken by the Insured’s Employees for any director, partner, or senior executive of the Insured’ (see -).
The normal work of the defendant was () “[p]rincipally plumbing and any other activities incidental thereto” not only plumbing. His Honour accepted ‘the submission that Advanced Plumbing was not a typical residential plumbing service. Rather, on the evidence it is apparent that it was a business which undertook larger scale commercial projects.’ Further the evidence was (at ) that:
… the works conducted on his private premises were well within the scope of the usual business activities of Advanced Plumbing. There is no evidence that such work was any more complex than usual, or that that it was significantly different from the types of jobs typically undertaken by Advanced Plumbing.
At  His Honour concluded:
I am not satisfied that CGU has established that it is beyond argument that it is entitled to disclaim indemnity because Advanced Plumbing’s potential liability is not a result of an occurrence happening in connection with Advanced Plumbing’s business as required by the insuring clause.
With respect to the welding endorsement, the insurance policy said (at -):
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, oxy-acetylene, 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’…
CGU’s argument is that the Husqvarna K970 power cutter is “spark producing equipment” within the meaning of the welding endorsement. And that the work in question was not conducted in strict compliance with Australian Standard AS1674 Part 1 – 1997.
At  His Honour said:
In my opinion the general expression “spark producing equipment” in context in the welding endorsement should be read down to be limited to equipment of the type specified, all of which, as Mr Rankin explains, involve the direct application of heat in one form or another to perform their function. In my judgment “spark producing equipment”, in context, does not apply to equipment which may incidentally produce sparks depending upon the particular use to which it is being put on a particular occasion. It’s clear that the power cutter, or other grinders, can be used in a variety of industrial situations, all of which may depend upon friction to perform the equipment’s function, but not all of which produce sparks. I am not satisfied that it is beyond argument that the power cutter is caught by the endorsement.
Further even if the quick cut machine is covered by the endorsement (at ):
… the evidence indicates that certain precautions were taken including clearing the fire circle and the provision of fire-fighting equipment. It seems to be at least arguable if the endorsement applied that the standard was complied with at least in so far as the risk of grass or bushfire was concerned.
Accordingly it was arguable that CGU were on risk for the activity that caused the fire. His Honour was not saying that CGU were liable, only that they could not establish that they were not liable so the matter can proceed to trial so the parties can lead evidence and have more complete arguments based on that evidence. His Honour said (at ):
I am satisfied that it is arguable that Advanced Plumbing is liable to the plaintiff and other group members; that there is an arguable case that CGU’s policy responds to that liability; and there is a real possibility that if the plaintiff obtains judgment against Advanced Plumbing, that Advanced Plumbing will not be able to meet or satisfy that judgment.
Having reached those conclusions, His Honour made the orders allowing the action to proceed against CGU in the place of Advanced Plumbing. It now remains to be seen how the issues of liability are finally resolved should the matter continue to trial. Of course now that CGU know they are liable the matter may, like most cases, settle.
Thanks for your article on this case.
I was particularly interested in CGU’s liability to provide an indemnity even though its insured is in litigation. I wasn’t previously aware of a case where the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) had actually been applied. I regularly encounter claims where an insured has gone into liquidation, perhaps in a mistaken belief that placing a business into liquidation is a good way to avoid future claims, so the article was very useful.
I think you mean ‘even though its insured is in liquidation’. Damn autocorrect.