(b) That's wrong. State and territory legislation sets out the principles to be applied to decide whether the necessary causal link exists between the defendant's conduct and the harm suffered by the plaintiff. The principles are consistent with those established by the common law. As an example, s 5D Civil Liability Act 2002 (NSW) says that, to decide whether negligent conduct caused particular harm it must be shown:
(a) that the negligence was a necessary condition of the occurrence of the harm and
(b) that it is appropriate for the scope of the negligent person's liability to extend to the harm so caused.
The common law sometimes decides the question by asking: "Would the harm have occurred but for the defendant's conduct?" If not, it can be concluded that the defendant's conduct was the cause of the harm: March v E & MH Stramare Pty Ltd.
In the case study, it is clear that the factory would not have caught fire but for Peter's failure to check the wiring and find the fault before switching on the power. Put another way, Peter's negligence was a condition of the occurrence of the fire, and because this result was not too remote, it is appropriate that Peter be held liable for that harm.