In our previous issue of Insurable Interest we reported on a recent decision of the Victoria Supreme Court arising from the Black Saturday bushfires of 2009. Justice Forrest found that the lead plaintiff in the Horsham bushfire class action was entitled to recover damages for farm fixtures (fences, sheds and stockyards) destroyed by fire where he has used his own labour and the labour of volunteers to reinstate the property. As we reported, Powercor appealed Justice Forrest’s decision on this point.
On appeal, Powercor again argued that the plaintiff should not be entitled to damages for his own labour unless he could establish that he suffered a loss to his income producing activities while he was carrying out the repairs. Powercor also argued that the plaintiff had an obligation to mitigate his losses by undertaking the repairs himself where he had the capacity to do so.
These arguments were comprehensively rejected by the Victorian Court of Appeal in a unanimous decision. The key finding is that the plaintiff was entitled to compensation for the damage directly to fixtures at the time of the fire. The loss crystallised at that time and is to be measured by the reasonable commercial cost of the labour. His claim was not for consequential loss. It follows that the question of mitigation is irrelevant. The Court contrasted the plaintiff’s claim with a claim for the cost of agisting cattle while fences are repaired which is a claim for consequential loss and which may involve questions of mitigation.
It was also held that the key question in relation to voluntary labour is whether the volunteer undertook the work for the plaintiff’s benefit or in order to reduce Powercor’s liability. In this case, it was agreed by both parties that the volunteer labour was for the benefit of the plaintiff. Accordingly, the Court ruled that the voluntary labour should not be taken into account so as to reduce Powercor’s liability for the property damage.
Thomas v Powercor Australia Ltd  VSCA 87
The Court of Appeal has provided a ringing endorsement for the long established principle that liability for property damage crystallises the moment the damage is inflicted. If the plaintiff chooses not to repair the damage, or does the repairs himself, or a friend does the repairs at no costs, it will not reduce the defendant’s liability. The exception is where the damage is to a house owned and occupied by the plaintiff. In those circumstances a decision not to rebuild will mean the appropriate measure of damages may be the loss of property value caused by the destruction of the house.