A provisional $18 million court settlement is very much in the interests of residents affected by the devastating 2013 Blue Mountains bushfires, a judge has found.

Winmalee resident Sean Johnston launched a NSW Supreme Court class action against Endeavour Energy, claiming it failed to take action to remove a rotting tree that fell onto power lines and sparked the fire that razed 196 homes.

In granting provisional approval for the proposed settlement, Justice Clifton Hoeben concluded that the lawsuit against Endeavour would have had poor prospects of success and it was unlikely Mr Johnston would have been able to establish liability by the company.

About 700 residents were involved in the class action against the company.

The fire is believed to have started in Linsview Road, Springwood and spread to other suburbs, including Winmalee, where many of the homes were destroyed.

The residents alleged the fire was started by a tree that had fallen on a power line and that the company should have taken steps before the fire to remove the tree.

The class action claimed that Endeavour was negligent in failing to clear dangerous trees.

Endeavour has denied there was any vegetation within 1.5 metres of its power lines.

Cause of the fire remains in dispute: judge

In handing down his judgement, Chief Justice Clifton Hoeben said the origin and cause of the fire remained in dispute.

The provisional approval for the proposed settlement was given last month, with Justice Hoeben handing down the reasons for his decision this morning.

He said the most compelling reason was that the plaintiffs had poor prospects of proving Endeavour was liable.

NSW RFS firefighters battle a bushfire burning close to homes on in the Blue Mountains in October, 2013. ( AAP: Dan Himbrechts, file photo )

"It was common ground that Endeavour engaged contractors to carry out an inspection of vegetation near power lines throughout its large area of responsibility, which included the power lines on Linksview Road," he said.

"At no time did Endeavour or any of its contractors detect the fact that the tree was rotten and therefore at substantially increased risk of failing and falling onto the power lines."

'Considerable disagreement amongst the experts'

Justice Hoeben also cited evidence the tree had internal rot, which could not have been seen looking at the tree and would have required more testing.

"There was considerable disagreement amongst the experts as to the existence, prominence and significance of the signs [if any] which were present," he said.

If approved a Settlement Distribution Scheme to pay the plaintiffs will be established.

The settlement is listed to be finalised on the September 26.

The provisional order said Endeavour Energy should pay the settlement, and they were allowed to do so without an admission of liability.

A NSW Rural Fire Service firefighter assesses a fire burning in Springwood in October 2013. ( AAP: Dan Himbrechts, file photo )

A scheme of distribution for the funds has also been set out.

A chief investigator told a coronial inquiry into the fires in 2015 that the blaze was an act of God.

Last year, a Winmalee schoolteacher who lost everything when the bushfire ripped through his suburb, said he was appalled to hear Endeavour Energy has underspent on its maintenance budget.

A hearing into the matter was held in the NSW Supreme Court over 10 weeks last year.

In his opening remarks before the hearing, the barrister representing the residents, Tim Tobin SC, described how the Blue Mountains was in a state of "high vulnerability" on that October day, with high temperatures, gusting winds and low humidity.

The fire went on to burn for close to month, destroying more than 3,500 hectares, Mr Tobin said.

ABC/AAP