Firefighters were wrong to try to douse an enormous chemical blaze with water but are not liable for damages, a court has found.

A court has found a massive chemical fire was mishandled by Queensland firefighters, but the state has avoided paying millions in compensation.

The Supreme Court of Queensland on Thursday dismissed a $12.3 million damages claim by the owners of the factory destroyed in the 2005 fire.

The toxic blaze, at the Binary Chemicals factory at Narangba, north of Brisbane, was so intense flames leapt dozens of metres into the sky and more than 70 firefighters were called in.

Site owner Hamcor Pty Ltd and the directors of Binary Chemicals sued the State of Queensland, arguing firefighters’ use of large quantities of water on the chemical fire was negligent.

They claimed the strategy greatly increased the site’s contamination from toxic fluids that soaked into the ground.

Under state law the area must be remediated – at a cost of more than $9 million – before it can be used again.

A trial in late 2013 heard both water and foam would have been largely useless in fighting the huge blaze and it should have been left to burn out.

The Supreme Court of Queensland found the Queensland Fire and Rescue Service was only justified in dousing some areas with water as a preventative measure, including an LPG cylinder and a solvent tank.

“In my view the QFRS breached its duty to the plaintiffs in applying large amounts of water to areas of the plaintiffs’ land other than the LPG cylinders and solvent tank, and other than the firewall and drums under, and in front of, the awning,” Justice Jean Dalton wrote in a recently published judgment.

However, Justice Dalton found the firefighters’ actions were covered under the Fire and Rescue Service Act which granted them immunity from liability.

Justice Dalton noted the owners’ loss was probably made worse by the fact the factory’s overflow dams were uphill and there was only one small bund wall on the entire grounds.

The judge also dismissed a claim by the owners against their insurance brokers, who they blamed for inadequate insurance cover.