Downer EDI Rail Pty Ltd v John Holland Pty Ltd; John Holland Pty Ltd v QBE Insurance (Australia) Ltd (No 5); Kellogg Brown & Root Pty Ltd v John Holland Pty Ltd (No 4)

1. [1]

   The Auburn Maintenance Centre lies adjacent to the main western railway line between Auburn (to the east) and Clyde (to the west). Its function is to provide maintenance services to the Waratah fleet of trains on the Sydney rail network.

2. [2]

   The Maintenance Centre is located on land owned by Rail Corporation of New South Wales (“RailCorp”). It is a major piece of infrastructure. It is some 2 km in length and between 100 m and 200 m wide. It consists of 7 maintenance roads (rail lines) with a capacity for 1,000 cars, an automatic wash plant and an underfloor wheel-polishing lathe. Within the Maintenance Centre is a maintenance building that is some 200 m long and 80 m wide.

3. [3]

   Auburn City Council required that there be incorporated into the Maintenance Centre a stormwater detention system (the “Detention System”) to accommodate a 1 in 50 year storm event. The Detention System was to capture water falling onto the site and divert it, in a controlled manner and at a specified maximum discharge rate, to the nearby Duck River at the western end of the site.

4. [4]

   These proceedings are concerned with efficacy of the Detention System.

5. [5]

   RailCorp contracted the design and construction of the Maintenance Centre to Reliance Rail Pty Ltd, which now has a licence from RailCorp to operate the Maintenance Centre. Reliance Rail owns the fixtures and most of the equipment associated with the Maintenance Centre.

6. [6]

   Reliance Rail sub-contracted design and construction of the Maintenance Centre to the first plaintiff, Downer EDI Rail Pty Ltd (“Downer”) and the provision of “Through Life Services” (in effect, the maintenance of the Maintenance Centre for 30 years) to the second plaintiff, a wholly owned subsidiary of Downer, EDI Rail PPP Maintenance Pty Ltd (“EDI Rail”).

7. [7]

   Downer sub-subcontracted the design and construction of the Maintenance Centre to the first defendant, John Holland Pty Ltd.

8. [8]

   The Detention System was to comprise a large detention tank under a carpark at the western end of the site with drainage in the rail area to be provided by slotted concrete pipes.

9. [9]

   Ultimately, an alternative system was adopted. The alternative system involved an “at source detention system” using a series of arrays of plastic cells made from panels made from recycled polypropylene. The panels were to be connected to each other horizontally and vertically, covered with geofabric, and buried at specified depths beneath the rail area and a carpark at the western end of the site.

10. [10]

    John Holland sub-contracted the design of this alternative system to the second defendant, Kellogg Brown & Root Pty Ltd (“KBR”) and the manufacture of the plastic cells to the third defendant, Atlantis Corporation Pty Ltd. Atlantis is now in administration. The fourth defendant, QBE Insurance (Australia) Ltd, is its insurer.

11. [11]

    I will return to the detail of these contractual relationships.

12. [12]

    There were to be two aspects to the Detention System as designed by KBR.

13. [13]

    The first aspect was one large tank, comprised of 33,000 cells, laid underneath the carpark.

14. [14]

    The second aspect is a series of linear tanks, comprised of 45,000 single height cells, laid underneath the rail area. These cells are divided into 136 rows of varying width.

15. [15]

    The large tank underneath the carpark has now been replaced with a concrete structure following the collapse of the carpark in early 2013. Before the collapse, the tank had been intended to control water runoff from the carpark and from a neighbouring site known as the Auburn Stabling Yard.

16. [16]

    The tanks underneath the rail area are still in place. They are intended to provide longitudinal drainage and detention storage for stormwater that falls on the rail area. The tanks then release the stormwater downstream into outlet pipelines which run to a stormwater trunk main some 1.5 km in length on the northern boundary of the site. The stormwater trunk main discharges downstream of the rail area, ultimately to Duck River.

17. [17]

    In February 2013, progressive subsidence and cracking were observed in the carpark. It became severe. Grout was used to arrest progress of the collapse, cutting off the collapse and preventing it spreading to the rest of the carpark. Ultimately, the Atlantis tank under the carpark was exhumed and replaced with a concrete tank.

18. [18]

    Downer contends that the cells under the carpark would not have lasted their design life (said to be 100, or alternatively, 50 years) had they not been replaced following the carpark collapse.

19. [19]

    A short time later, in May 2013, surface depressions were observed in the ballast overlaying the rail area. These have progressed. Some have been investigated.

20. [20]

    Downer contends that the observed depressions may well bespeak systemic failure of the Detention System in the rail area and that the Detention System will not last its design life. I will return to the question as to whether surface depressions indicate failure in the underlying cells ([89] to [107] below).

21. [21]

    Downer contends that:

22. [22]

    EDI Rail alleges that, if it has any obligation to rectify the Detention System, the loss it will thereby suffer is also by reason of misleading or deceptive conduct of John Holland, KBR or Atlantis.

23. [23]

    John Holland contends that if it has any liability to Downer (or EDI Rail) it is entitled, on various bases, to pass this liability on to KBR and Atlantis (and thus QBE).

24. [24]

    KBR makes a similar claim against Atlantis (and thus QBE), assuming it is liable to either Downer or John Holland.

25. [25]

    In its Technology & Construction List Statement, Downer also alleged that each of John Holland, KBR and Atlantis owed it a duty of care and that it has suffered loss as a result of a breach of those duties. The claim was abandoned during the course of the hearing.

Decision

1. [26]

   The first conclusion to which I have come is that, on the pleadings, it is not open to Downer to make any complaint of John Holland concerning the manner in which the Detention System was constructed. This is no idle point. I was told by John Holland’s senior counsel that John Holland saw no complaint about defective construction on its reading of the List Statement and for that reason did not join the construction sub-contractor as a cross-defendant.

2. [27]

   So far as concerns the design of the Detention System, I have concluded that Downer has not proved on the probabilities that:

3. [28]

   Those conclusions mean that there is no relevant consequence to whatever shortcomings there may have been in the design of the Detention System.

4. [29]

   It follows that the proceedings must be dismissed.

The contractual framework

1. [30]

   A contractual hierarchy was created for the purpose of the design and construction of the Maintenance Centre.

2. [31]

   To a very large extent, the contracts are “back to back” and in the same, or similar, terms.

3. [32]

   In December 2006, RailCorp entered into a contract with Reliance Rail to design, construct and commission the Maintenance Centre.

4. [33]

   By that contract, Reliance Rail also agreed to provide Through Life Support for the Maintenance Centre for 30 years.

5. [34]

   The contract defines Through Life Support to mean:

6. [35]

   No party took me through the various defined terms incorporated within this definition.

7. [36]

   However, I understand an obligation to provide Through Life Support under this contract (and in contracts lower in the hierarchy in which the same expression is used) to mean everything necessary to ensure that the Maintenance Centre continues to operate; including remediation of the Detention System, should that be necessary.

8. [37]

   Also in December 2006, Reliance Rail entered into a contract with Downer to design, construct and commission the Maintenance Centre.

9. [38]

   Downer did not assume any obligation under the Reliance Rail/Downer contract to provide Through Life Support of the Maintenance Centre.

10. [39]

    The obligation to provide Through Life Support was assumed by EDI Rail in a contract made between it and Reliance Rail on the same day.

11. [40]

    By the Reliance Rail/EDI Rail contract, EDI Rail agreed to provide Through Life Support of the Maintenance Centre for 30 years, consistently with the corresponding provision in the RailCorp/Reliance Rail contract.

12. [41]

    EDI Rail did not subcontract its obligation to provide Through Life Support obligations to any of the defendants; or at all.

13. [42]

    On 3 December 2006, Downer entered a contract with John Holland to design, construct and commission the Maintenance Centre.

14. [43]

    Consistently with the Reliance Rail/Downer contract, the Downer/John Holland contract did not impose on John Holland any Through Life Support obligations.

15. [44]

    On 10 April 2007 John Holland entered a contract with KBR to design the relevant parts of the Maintenance Centre, including the Detention System.

16. [45]

    KBR designed the Detention System to incorporate into that design the use of the Atlantis Cells.

17. [46]

    On 15 August 2008 about six weeks after the installation of the cells had commenced, John Holland contracted with Atlantis for the manufacture, supply and certification of the cells.

18. [47]

    The contractual hierarchy created for the purpose of the design and construction of the Maintenance Centre can be depicted as follows:

19. [48]

    As the above diagram makes clear, there is no contractual relationship between EDI Rail and any of the defendants.

20. [49]

    I will return to the detail of the relevant contractual provisions as necessary later in these reasons.

What complaint about John Holland is open to Downer on the pleadings?

1. [50]

   In its opening submissions, Downer summarised its complaint concerning John Holland as follows:

2. [51]

   In oral opening, senior counsel for Downer said:

3. [52]

   An issue arises as to whether it is open to Downer to make complaint in these proceedings against John Holland about the construction of the Detention System; as opposed to the design of the Detention System and the design and use of the Atlantis cells themselves.

4. [53]

   As I have said, John Holland contends that, had it appreciated that Downer was intending to allege the defective construction of, as well as the defective design of the Detention System, it would have joined as a cross-defendant the party to whom it sub-contracted that work.

5. [54]

   John Holland submits that the construction damage case foreshadowed in opening by senior counsel for Downer, and referred to at [51] above is “not available”.

6. [55]

   That submission directs attention to the particular allegations of contractual breach made in the List Statement.

7. [56]

   Downer makes many allegations against John Holland concerning the design of the Detention System. I did not understand John Holland to contend that, assuming it can be shown that the Detention System will fail during its Design Life, and that such failure is attributed to its design (specifically, to the use of Atlantis cells, rather than slotted concrete pipes), the necessary allegations of breach of the Downer/John Holland contract are missing from the List Statement.

8. [57]

   John Holland’s point is, as I understood it, that there is no allegation in the List Statement that the manner in which the Detention System was constructed, that is, the manner in which the Atlantis cells were actually installed at the Maintenance Centre, constituted a breach of the Downer/John Holland contract.

9. [58]

   The relevant allegations of breach of the Downer/John Holland contract appear in pars C13B, C14, C15, and C16 of the List Statement.

10. [59]

    Paragraph 13B alleges that John Holland acted in breach of its obligation under cl 10.2 of the contract because it “failed to carry out its activities so as to protect persons and property”.

11. [60]

    That allegation is particularised by reference to the collapse of the carpark and alleged failures of the Atlantis cells in the rail area.

12. [61]

    In my opinion, these contentions misstate and reveal a misunderstanding of the nature of the obligation imposed on John Holland by cl 10.2.

13. [62]

    Clause 10.2 provides:

14. [63]

    Clause 10.2 is therefore concerned with safety. It is directed to the safe manner in which John Holland’s activities are required to be carried out, so as to protect persons and property from risk.

15. [64]

    The clause is not directed to the protection of property from damage generally.

16. [65]

    The clause does not, contrary to the contention in the List Statement, impose an obligation on John Holland to “carry out its activities so as to protect persons and property”. Rather, it imposes on John Holland an obligation to act “safely and so as to protect persons and property”. There is no suggestion in the evidence that John Holland acted otherwise than safely.

17. [66]

    Paragraph C14 of the List Statement contains an allegation that in breach of cl 13.1(a) of the Downer/John Holland contract, John Holland did not design the Detention System “in accordance with the relevant Specifications”. Clearly, the allegation is directed to design and not to construction.

18. [67]

    Paragraph C15 of the List Statement contains an allegation that in breach of cl 14.1 of the Downer/John Holland contract, John Holland did not construct the Detention System “in accordance with the Maintenance Facility Specifications, the Final Design Documentation and the other requirements of [the contract]”. However, as John Holland submitted, this is not an allegation of poor construction or installation. Rather, it is an allegation of non-compliance with the design and specifications.

19. [68]

    Paragraph C16 of the List Statement contains an allegation that in breach of cl 14.2(a) of the Downer/John Holland contract, the construction of the Detention System “did not satisfy the requirements of that [contract]”.

20. [69]

    That allegation is not particularised in par C16 itself.

21. [70]

    However, par C23 of the List Statement contains a lengthy list of “further particulars” of the contractual breaches earlier alleged, including in par C16. These are, in fact, the only particulars given of the allegation in par C16.

22. [71]

    Of the 30 “further particulars” of breach given in par C23, almost all are, in terms, directed to the design of the Detention System or alleged inadequacies in the Atlantis cells.

23. [72]

    The “further particulars” that are directed otherwise than to design of the Detention System or to the cells themselves are:

24. [73]

    The “Cardno Report” was a report prepared by a firm of engineers, Cardno Low & Hooke Pty Ltd, retained by Downer in January 2008. I discuss it in some detail below (see [455] ff below).

25. [74]

    During the hearing, senior counsel for Downer referred only to these particulars as being capable of relevance to a faulty construction case. Counsel also mentioned (dd), which I have not set out, but that is a particular of damage.

26. [75]

    Particulars (h), (t) and (bb) are directed to aspects of construction of the Detention System. Only (t) is directed to the question of the actual installation of the cells but falls well short of an allegation that the cells were damaged during installation.

27. [76]

    On the final day of the trial, in reply, senior counsel for Downer made the surprising submission that John Holland’s “complaints…in relation to this aspect of the case are feigned”, that “it is highly unlikely [John Holland] was caught out” upon realising it had to meet a case concerning “construction mishaps”, that John Holland “simply had no answer” and that Downer “was entitled to proceed upon the construction warranties”.

28. [77]

    I do not accept that submission.

29. [78]

    Downer’s case concerning poor construction against John Holland is confined to the matters particularised at C23 (h), (t) and (bb). I see no allegation there, or elsewhere in the List Statement, that John Holland, through its subcontractor, caused to the cells to be damaged during their installation.

30. [79]

    John Holland raised this point in opening submissions. I made clear during the hearing that I was not prepared to allow Downer to make out a case beyond the allegations in the List Statement as those allegations were particularised. Downer made no application to amend the List Statement or to expand the particulars to which I have referred.

31. [80]

    I do accept, however, that part of Downer’s design case is that John Holland did not ensure the capacity of the Atlantis cells was “sufficient for the likely load conditions” at the Maintenance Centre (see C23 (b)) including loads imposed on the cells during construction.

32. [81]

    In final supplementary written submissions, Downer referred to the allegations in par C21 and C22 of the List Statement of breaches by John Holland of cl 13.2(b) of the Downer/John Holland contract. By that clause, John Holland warranted that all design documentation would satisfy the requirements of the contract and would “be fit for its intended purposes”. Those allegations relate to the design of the Detention System. They do not amount to an allegation that the Downer/John Holland contract imposed on John Holland an obligation to construct the Detention System so that it was fit for purpose.

What is said to have gone wrong?

1. [82]

   Installation of the Atlantis cells at the proposed location of the carpark commenced in March 2009 and was completed in July 2009.

2. [83]

   In late 2012, Laing O’Rourke Australia Constructions Pty Ltd (not a party to these proceedings) commenced excavation on the adjoining Stabling Yard site for a large stormwater drain. Excavation took place along the boundary to the south of the Maintenance Centre (and north of the Stabling Yard), very close to the carpark which, by then, had been built over the Atlantis cell tank.

3. [84]

   Laing O’Rourke undertook these works pursuant to a contract with RailCorp, which owns the Stabling Yard site.

4. [85]

   In early 2013 the southern part of the carpark collapsed.

5. [86]

   Over one third of the carpark could not be utilised and the Atlantis cell tank under the carpark was rendered ineffective. The Atlantis cell tank was removed in 2014, replaced with a concrete tank, and the carpark rebuilt.

6. [87]

   The question is whether the collapse of the carpark was caused by a shortcoming in the Atlantis cells, or as a result of the work done on the adjoining site by Laing O’Rourke.

7. [88]

   I will return to this question after dealing with the position in the rail area.

8. [89]

   Depressions were first observed in the ballast overlaying the rail area in May 2013. Over time, 64 surface depressions have been observed.

9. [90]

   In its List Statement, Downer alleges that “depressions and voids above Atlantis Cells” demonstrate failure of the Detention System in the rail area. That failure is said to arise from John Holland’s breach.

10. [91]

    Downer submits that the depressions “represent a reliable guide” to failure of the underlying tanks.

11. [92]

    I am unable to reach either conclusion on the evidence before me.

12. [93]

    Downer did not establish the cause of the depressions; let alone that there is a correlation between the depressions and any underlying cell failure.

13. [94]

    Downer accepts that “there can be no certainty as to what has caused an individual surface depression without a physical excavation of the area to determine the condition of the underlying Atlantis Cell and geofabric”.

14. [95]

    The surface depressions appear above 37 tanks. However only some parts of 12 tanks (comprised of 2,444 cells) have been excavated. Of those 2,444 cells, only 135 cells were exposed and examined. Of those 135 cells, in a system of some 45,000 cells, only 32 were shown to have collapsed or partially collapsed. To my mind this cannot be conclusive of systemic cell failure.

15. [96]

    Further, Downer accepts that depressions have occurred in areas where there is no underlying cell failure.

16. [97]

    There is no expert opinion that the depressions are caused only by a failure in the underlying cells.

17. [98]

    Downer retained Aecom, a firm of consultant engineers, to prepare a number of reports and photographs documenting the site.

18. [99]

    Aecom appears to have appreciated that there may not be a connection. In September 2014, it reported to EDI Rail:

19. [100]

    Dr Christopher Haberfield, Mr Garry Mostyn, and Mr Patrick Wong (expert geotechnical engineers called by KBR, John Holland and QBE respectively) gave evidence that they had experience of ballast in rail areas. Each said that the mere movement of ballast does not itself indicate any problem with the Atlantis cells in the rail area.

20. [101]

    Dr Haberfield observed that “in coarse granular materials like this, you can’t correlate any little service depressions with what’s at depth. It just doesn’t work that way”.

21. [102]

    In these circumstances I am not persuaded of a correlation between surface depressions and underlying cell failure.

22. [103]

    Downer submitted that depressions may be caused by the movement of sand into the Atlantis cells caused “by a failure of one or more of the Atlantis cells and/or tearing of the geofabric”.

23. [104]

    In making that submission, Downer referred the evidence given by Mr Wong:

24. [105]

    Immediately before this evidence, the following exchange occurred:

25. [106]

    Thus, Mr Wong did not say that surface depressions, caused by the movement of sand below ground, were caused by a “failure of one or more of the Atlantis cells”. Rather, he said they were likely caused by a defect in the manner in which cells were installed; represented by torn or cut geofabric.

26. [107]

    I am not able to come to any conclusive view as to what is causing the depressions. I am certainly not persuaded that a shortcoming in the Atlantis cells or in the design of the Detention System has caused the depressions to occur.

27. [108]

    The other matter in the rail area to which Downer draws attention is a presence in many of the inspected cells of water and sand.

28. [109]

    After heavy rain, the Detention System is intended to hold back water for around three hours. When it is not raining, the cells are intended to be in a dry condition.

29. [110]

    The presence of water in the cells shows that the Detention System is not always behaving in this way and that water is remaining within the system.

30. [111]

    The presence of sand in the cells may show that the surrounding geo-fabric has torn, on occasion, allowing sand ingress. This may show that there was a problem with the manner in which the some cells were actually installed. As I have said, that is not a matter open to complaint on the pleadings.

31. [112]

    In its reply submissions, Downer described this as being a “serious problem with the functionality of the cells”.

32. [113]

    But there is no suggestion that, overall, the Detention System is not working. There is, for example, no evidence that the Maintenance Centre regularly floods or that there is some ongoing problem with the manner in which stormwater is drained away to Duck River.

33. [114]

    On one occasion, on 21 April 2015, parts of the rail area experienced flooding due to substantial rainfall in the preceding 36 hours. But there is no evidence before me as to how the Atlantis cells performed on that occasion, nor to suggest that the flooding was the result of any failure by the Detention System to operate in accordance with its intended design.

34. [115]

    Each of Mr Mostyn and Mr Wong, as well as one of the experts called by KBR, Mr Fred Gassner, agreed that sand and water in some cells did not bespeak a failure of the cell.

35. [116]

    A small number of cells exposed during the inspections have been found to have collapsed or partially collapsed. But there is no evidence to show that these cells collapsed as a result of any shortcoming in the cells themselves. All of the engineering experts, including Downer’s expert Mr Steven Wilson, agree with this.

36. [117]

    Mr Wilson gave this evidence:

37. [118]

    I am not persuaded that Downer has established that the existence of depressions in the ballast, the collapse of a small number of cells, and the presence of sand and water in some of the cells can lead to the conclusion that the Detention System is failing and needs to be replaced.

38. [119]

    Downer contends, however, that other evidence shows the Atlantis cells will not perform for the duration of their design life, that the Detention System is bound to fail during its design life, and must for those reasons be replaced.

39. [120]

    Before considering the evidence about whether the cells will continue to function throughout the design life of the Detention System I will deal with the question of what that design life is.

The design life of the Detention System

1. [121]

   There was debate before me as to whether the design life of the Detention System was 50 years or 100 years. It is common ground that not much turns on this. That is because it is agreed that if the Atlantis cells are capable of bearing their design load for 50 years, it is very likely that they are also capable of bearing their design load for 100 years.

2. [122]

   In my opinion, the correct conclusion is that, according to the KBR design, the Detention System had a design life of 50 years.

3. [123]

   KBR’s final design was contained in a “Critical Design Review” document dated 26 February 2008.

4. [124]

   Appendix B to that document was entitled “Specifications and Catchment Plan” and provided, under the heading “Design Criteria” that:

5. [125]

   Earlier in the 26 February 2008 document, KBR stated:

6. [126]

   When read in the light of the earlier references to the need for the system to last 50 years, I accept, as John Holland submitted, that this statement was merely a way of explaining that the design requirement of 50 years had been satisfied, and that there was, in effect, a 50 year margin of safety.

7. [127]

   In its submissions in reply, Downer did not say anything to the contrary.

8. [128]

   As emerges below, most of the engineering experts perform their calculations as to the long term strength of the Atlantis cells by reference to a 50 year design life (rather than a 100 year design life).

Did, and/or will, the cells fail during their design life?

1. [129]

   The central issue in these proceedings is whether the Atlantis cells in the rail area will last their design life, and whether the Atlantis cells in the carpark would have lasted their design life had the carpark not collapsed.

2. [130]

   Resolution of this issue will determine whether there is any consequence to any criticisms of the design of the Detention System that might be made good.

3. [131]

   Eleven experts gave evidence before me addressed to this question.

4. [132]

   Two plastics engineers, Dr John Scheirs and Prof Robert Burford (called by Downer and John Holland respectively) gave evidence as to the quality of the material used in the Atlantis cells.

5. [133]

   Dr Scheirs and Prof Burford gave their evidence concurrently for a number of hours.

6. [134]

   Nine structural and geotechnical engineers also gave evidence. I have already mentioned some of them. They were Mr Steven Wilson and Dr Peter Redman (called by Downer), Mr Garry Mostyn, Mr Robert Davies and Mr Anthony Wood (called by John Holland), Dr Christopher Haberfield and Mr Fred Gassner (called by KBR) and Mr Patrick Wong and Mr Lonnie Pack (called by QBE).

7. [135]

   These experts gave their evidence concurrently over three days.

8. [136]

   The engineers also conducted a conclave on 17 and 18 October 2017 and produced a joint report.

9. [137]

   Each of Dr Haberfield, Mr Mostyn, Mr Pack and Mr Wong expressed the opinion that “[w]ith the information available today, we are of the opinion that the [Detention System] tanks as installed will be adequate for 50 and 100 year service life”.

10. [138]

    Mr Wilson and Mr Davies expressed the opinion that they would not expect that all cells would remain serviceable for 50 years. That opinion was based upon testing carried out the Transport Research Laboratory in the United Kingdom (the “TRL tests”) and evidence given by Dr Scheirs as to the quality of the material used in the cells. I will return to this below.

11. [139]

    Further, each of Dr Haberfield, Mr Mostyn, Mr Wood, Mr Davies, Mr Wong and Mr Pack concluded that the Drainage System had not failed to an extent where it needs to be replaced or remediated.

12. [140]

    Only Mr Wilson expressed the different view that, although failures have not yet occurred in areas that would impact on rail operations, “they could occur in the future”.

13. [141]

    The experts agreed that there had been evidence of “failures of Atlantis cells” but agreed that these were as documented in two of Dr Haberfield’s reports. Those reports show that only 32 cells (out of a total of approximately 45,000 in the rail area) had failed. These are the 32 cells exposed to during the excavations and inspections referred to at [95] above.

14. [142]

    Downer emphasised in the course of these proceedings that it does not contend that all the Atlantis cells in the rail area, or even a majority of them, will fail. Its case is that a “sufficient number” of cells will fail such that it is necessary to take remedial action and preferable to do so in a single operation.

15. [143]

    The issues which arise are:

16. [144]

    Leaving aside construction loads (to which I will return) the cells must bear the static load of the soil under which they are buried.

17. [145]

    The cells in the rail area are buried between 0.6 m and 2.3 m below ground level. They are covered with earth, sand and ballast. The cells are thereby subject to a sustained load. It is agreed that such load is between 12 kPa for cells buried at 0.6 m and 46 kPa for cells at 2.3 m.

18. [146]

    The Atlantis cells are made from mixtures of polypropylene and polypropylene-ethylene block copolymers together with fillers such as calcium carbonate (chalk) and magnesium silicate (talc) in various proportions. For simplicity I will refer to the cells as being made of “plastic”.

19. [147]

    The experts spoke of the short term and long term strength of the cells and of the “characteristic” short term strength of the cells.

20. [148]

    The “characteristic” short term strength is the strength that most examples of the product will have. The experts also spoke of the “ultimate” short term strength of the cells. That is the peak short term strength that the cells will have.

21. [149]

    Plastic is susceptible to “creep”. Creep is the technical term for the rate at which plastic will lose strength over time when under load.

22. [150]

    The experts agreed that this tendency should dominate design considerations. The long term strength of plastic can be very much less than its short term strength. Eventually plastic will suffer “creep rupture”. Dr Scheirs described “creep rupture” as “a point at which you will get a fracture surface that is brittle, and the failure will go from ductile, above the creep rupture point, ductile meaning the deformation, bending, whitening, to a brittle fracture which is a clean crack”.

23. [151]

    Thus, the Atlantis cells will lose strength over time.

24. [152]

    To ascertain how much strength the cells will lose over time, it is necessary to ascertain a characteristic short term strength of the cells and then to calculate the rate at which their long term strength will decline over the 50 years of their design life.

25. [153]

    Atlantis advertised the cells as having a “strength” of 263 kPa.

26. [154]

    The experts agreed that Atlantis’s reference to “strength” was ambiguous but that it referred to short term strength of some nature.

27. [155]

    Atlantis and KBR had access to tests conducted in Japan by an organisation known as Oike which showed that the cells had a “breaking load” of 244 kPa; somewhat less than the Atlantis advertised “strength” of 263 kPa.

28. [156]

    In April 2008, after KBR had submitted its design in February 2008, and after Downer had approved it (subject to various conditions to which I will return), Atlantis engaged the University of Technology Sydney (“UTS”) to perform further tests that show the cells to have a “capacity” of around 222 kPa.

29. [157]

    In final submissions, Downer accepted that “nearly all experts [including its expert, Mr Wilson] agree that Atlantis’s advertised short term strength of 263 kPa should have been reduced to about 200 kPa to represent the “characteristic” short term strength, and calculations [for long term strength] carried out from that starting point”.

30. [158]

    Ultimately, all the engineers agreed that, once a short term strength was ascertained, that question determined long term strength. That is, the experts were agreed as to the rate at which cells would lose strength over time. I will return to this below.

31. [159]

    The engineers also expressed opinions about the adequacy of KBR’s design.

32. [160]

    KBR accepted Atlantis’s “strength” figure of 263 kPa, equivalent to 26.8 t per m2, and described that figure in final design report as the “ultimate compressive strength” of the cells.

33. [161]

    KBR contends that it made clear in its design report of 28 February 2008 that it had assumed the correctness of Atlantis’s stated “strength” and did not warrant the correctness of that assumption. I return to this below.

34. [162]

    However, the majority of the engineers, including Dr Haberfield who was called by KBR, agreed that KBR:

    1. (1)

       had made no adequate allowance for appropriate “strength reduction factors” (i.e. creep);

    2. (2)

       should have stipulated that the cells be tested for long term strength; and

    3. (3)

       in the absence of information as to the long term strength of the cells, should have, as a part of their design approach, applied what Mr Pack described as a “reduction factor” to reflect such matters as product uncertainty and creep reduction to achieve (again using Mr Pack’s language) a “Factored 50 Year Characteristic Long Term Compressive Strength” of the cells: being the strength a prudent designer would attribute to the Atlantis cells if the designer did not have any information about their long term strength.

35. [163]

    Such a calculation would have produced a “Factored 50 Year Characteristic Long Term Compressive Strength” for the cells in the order of 17 kPa (Mr Wong’s figure), 18.2 kPa (Mr Pack’s figure) or 41 kPa (Dr Redman’s figure). These design strengths were those which, the experts agreed, a designer of a system such as the Detention System should have stipulated in the absence of any information concerning the long term strength of the product comprising the system. These design strengths are, of course, well below Atlantis’s advertised “strength” of 263 kPa.

36. [164]

    Downer contends that, had this emerged at the time KBR submitted its design in February 2008, neither RailCorp nor it would have proceeded to use Atlantis cells in the Detention System and would have reverted to the concrete pipe system originally envisaged (see [8] above). I will return to this below.

37. [165]

    Now that information as to long term strength is available from TRL test data (to which I refer below), Mr Pack would have arrived at a design strength of 62.9 kPa. This is the strength a prudent designer of this system would have attributed to the Atlantis cells as a part of the design process; as opposed to the strength that an expert such as Mr Pack would conclude that the cells, as installed, in fact had.

38. [166]

    For the moment, however, the question is whether Downer has shown that the Detention System, as installed, will not adequately perform during its design of 50 years.

39. [167]

    Now that information is available from the TRL tests concerning the rate at which the Atlantis cells will lose strength over time, and as the experts all agree about that rate, the question of whether the Detention System will adequately perform during its design life depends in large part on the correct conclusion as to the characteristic short term strength of the cells. In view of Downer’s submission that I have set out at [157] above, there appears to be less controversy about this than might have first appeared.

40. [168]

    Dr Scheirs is an expert in the failure analysis and compositional analysis of plastics and plastic products.

41. [169]

    Dr Scheirs was provided with 36 panels from a number of Atlantis cells; 20 panel “offcuts” from under the carpark and 16 panels from the rail area.

42. [170]

    The 16 panels from the rail area were from two tanks (A8A and A7A) exhumed in 2015. They comprised all eight panels from two cells: one from each of those tanks. There were 125 cells in those 2 tanks, with a total of 1,000 panels. As I have mentioned, there are some 40,000 cells in the rail area. The cells Dr Scheirs examined thus represented a tiny proportion of the total.

43. [171]

    Dr Scheirs conducted an analysis of the material in those panels.

44. [172]

    In its advertising material, Atlantis had asserted that the cells were made from “recycled polypropylene consistent with the virgin Shell polypropylene” (an industry accepted polypropylene standard).

45. [173]

    Dr Scheirs concluded that the samples he analysed did not meet that standard but instead:

46. [174]

    Dr Scheirs also concluded:

47. [175]

    Dr Scheirs was not testing the characteristics of the cells themselves. Rather he was testing the plastic (polypropylene) of which the panels provided to him were made.

48. [176]

    Further, Dr Scheirs was not asked to undertake a forensic failure analysis of the cells.

49. [177]

    Dr Scheirs acknowledged that the failure of a geometric structure, such as an Atlantis cell, might not coincide with the creep rupture of any particular part or element of the structure.

50. [178]

    Dr Scheirs gave this evidence:

51. [179]

    Accordingly, while Dr Scheirs’s tests are a good reflection of the quality and composition of the elements of the panels from the two cells he tested, they are not and did not purport to be an assessment of the strength or other qualities of the Atlantis cells themselves.

52. [180]

    Further, it turns out that Dr Scheirs was not testing a representative sample of the cells in the rail area.

53. [181]

    As I have mentioned, Dr Scheirs was given all 8 panels from 2 cells (cells 85 and 87) of the 125 cells exhumed in 2015 from tanks A8A and A7A.

54. [182]

    Aecom, engineers retained by Downer (see [98]), prepared a “Defect Summary” in respect of those 125 cells.

55. [183]

    That summary identified only 2 cells (from the 125 cells in those 2 tanks) within which there were panels which had collapsed or partly collapsed (being cells 78 and 87).

56. [184]

    Thus half the panels that Dr Scheirs analysed from the rail area were from 1 of the only 2 cells (out of 125) in the exhumed area that had failed.

57. [185]

    The panels that Dr Scheirs examined were thus not representative of the manner in which the cells, overall, had performed in the exhumed area.

58. [186]

    Understandably, Dr Scheirs assumed the cells he examined were representative of all the cells in the rail area.

59. [187]

    Dr Scheirs gave this evidence:

60. [188]

    Later, Dr Scheirs agreed that he had not been asked to give an opinion as to why the cells had failed.

61. [189]

    Dr Scheirs was seeking to examine a representative sample of Atlantis cells to derive conclusions about all cells in the rail area.

62. [190]

    However, seemingly by accident, Dr Scheirs was not given a sample of panels that was representative of those exhumed from the tanks in question. In those circumstances, I see no basis on which I could safely conclude the samples he was given are representative of those throughout the Maintenance Centre (the rail yard in particular).

63. [191]

    The inclusion of cell 87 in Dr Scheirs’s analysis had a significant impact on the analysis. The panels displaying high levels of inorganic filler and other characteristics bespeaking weakness were for the most part from cell 87.

64. [192]

    Dr Scheirs gave this evidence:

65. [193]

    That evidence suggests that the panels in cell 87 collapsed or partially collapsed due to impact damage during or after installation, and not as a result of creep rupture due to imposed loads.

66. [194]

    Further, the evidence given by the engineers suggested that the structure of the Atlantis cells is such that there might be no critical point at which weakened plastic will cause failure. In that regard Mr Pack said:

67. [195]

    Dr Haberfield gave evidence to the same effect.

68. [196]

    In these circumstances, I am cautious about the conclusions that can be drawn from Dr Scheirs’s analysis.

69. [197]

    Certainly, his analysis of the material used to make the panels that he analysed may be accepted. That analysis shows that those panels were not manufactured of the material claimed by Atlantis. The material in the tested samples was highly variable, with a large range of stiffness, ductility, strength and with voids and bubbles.

70. [198]

    Mr Gassner, who was called by KBR (see [134]), said that cells containing material of the kind analysed by Dr Scheirs would perform variably and manifest differences in settlement when subject to soil loads.

71. [199]

    Professor Burford, called by John Holland (see [132]), said that there is “a compelling argument that recycled, commingled [polypropylene] admixtures will have inferior creep performance”.

72. [200]

    However, as I cannot conclude that the samples provided to Dr Scheirs (on which these other experts’ views were based) were necessarily representative of those at throughout the Maintenance Centre, I have concluded that the use to which I can make of Dr Scheirs’s analysis is limited.

Loss of strength over time

1. [201]

   As I have discussed, the engineering experts agreed that the critical question is the likely long term strength of the cells; and that this depends in large part of their susceptibility to creep and thus lose strength over time.

2. [202]

   The engineers agreed on the rate that these cells will lose strength over time. What divided them was the short term strength that should be adopted as the starting point for that analysis.

The TRL testing

1. [203]

   As I have mentioned, Downer organised for Atlantis cells, exhumed in 2014 and 2015 from the carpark and rail yard areas, to be tested for short term and long term strength at the Transport Research Laboratory in the United Kingdom.

2. [204]

   The purpose of the TRL testing was to determine the short term compression strength, long term creep and behaviour under cyclic loads of the Atlantis cells.

3. [205]

   For the short term tests, the cells were subjected to pressure by a metal plate lowered onto the cells until the cells failed by one or more of the panels in the cells suddenly buckling, breaking free of other panels explosively, and ejecting from the cell structure.

4. [206]

   The result of the short term tests was that the cells from the rail yard failed at a mean “failure pressure” of 144 kPa, and the cells from the carpark at a mean failure pressure of 182 kPa: considerably less than the cell “strength” of 263 kPa asserted in the Atlantis brochures.

5. [207]

   There was disagreement between the engineers as to how these results should be interpreted and whether they were representative of the cells as installed.

6. [208]

   During their concurrent evidence, I asked the engineers to prepare for me a short note setting out their views as to what conclusions I should draw from the TRL testing.

7. [209]

   Dr Haberfield, Mr Mostyn, Mr Pack and Mr Wong prepared a document in which they stated, so far as concerns the short term strength of the cells that:

   1. (1)

      there is some utility in the TRL data, notwithstanding concerns about the testing regime;

   2. (2)

      the TRL test data was, however, not a true reflection of what would have been the short term compressive strength of the cells for a number of reasons. First, the TRL testing occurred on cells that were unrestrained. Cells that are in the ground are not unrestrained as they are supported by each other and by the surrounding soil. An unrestrained cell is likely to be much weaker (in compression) than a restrained cell. Second, it is likely that the cells that were tested by TRL would have been significantly stronger when they were new given that at the time they were tested by TRL, they showed signs of bowing and may (at least in the case of the carpark cells) have been damaged by the process of dismantling and reassembly. The tested cells also exhibited cracks and defects in form in some places;

   3. (3)

      the TRL test data showed that the test results from the cells exhumed from the rail yard were less strong than those exhumed from the carpark (notwithstanding the fact that the cells in the carpark had been subject to greater loads); and

   4. (4)

      for these reasons, the short term strength obtained from the TRL tests was likely to represent no more than a “lower bound” of the strength of the majority of the cells actually installed.

8. [210]

   Based on the opinions of Mr Wilson and Dr Redman, Downer submitted that these short term results “represent close to the strength when the cells were put in the ground”.

9. [211]

   Dr Redman was of the opinion that the TRL tests could be considered as representative of all the cells presently in the rail yard and not merely as representing a general lower bound applicable beyond the cells that were tested. Dr Redman appears to have come to this conclusion based upon Dr Scheirs’s testing. I have expressed some caution as to the extent to which I should draw general conclusions concerning the cells from Dr Scheirs’s analysis.

10. [212]

    As for Mr Wilson, I gained the strong impression that he saw his role as being to defend the results of the TRL testing and to argue for the correctness of those conclusions, notwithstanding the different opinions being expressed by his professional colleagues. For the reasons I explain below, I am cautious about the extent to which I should accept Mr Wilson’s objectivity as an expert witness.

11. [213]

    In the circumstances, I accept the correctness of the views expressed by Dr Haberfield, Mr Mostyn, Mr Wong and Mr Pack in the memorandum to which I have referred.

12. [214]

    Mr Wilson also arranged to test the rate at which the strength of the cells would decrease over time by reason of “creep”.

13. [215]

    These tests involved applying to the cells a constant load of between 10% and 80% of their maximum intended loads, ascertaining when the cells failed and thus their long term compressive strength. These tests took place over 200 days.

14. [216]

    The results of these tests were depicted on a graph. The failure pressure that the cells could withstand was depicted on the vertical or “y” axis. The decreasing pressure that the cells could bear (by reason of creep) was depicted on the horizontal axis or “x” axis, and measured in hours. As the Detention System has a design life of 50 years (some 438,000 hours), the horizontal axis depicts time (hours) logarithmically by increasing powers of 10: 0.1, 1.0, 10.0, 100.0, 1,000.0, 10,000.0 and so on.

15. [217]

    All the experts agreed that this trend line, if correctly plotted, gave an indication of how the strength of the cells would decline over time by reason of creep.

16. [218]

    Ultimately, all the experts agreed on the gradient of the trend line on this graph; that is, the rate at which “creep failure” would occur over time.

17. [219]

    Accordingly, as I have mentioned, all that appeared to divide Mr Wilson from the other experts (particularly Mr Wong and Mr Pack) was the assumption that should be made as to the strength of the cells at the beginning of the time measured on the x axis (which I will call “day 1”) and thus where, on the y axis, the trend line should start.

18. [220]

    I say “appeared to divide” Mr Wilson from the other experts because, as I have mentioned (see [157] above) in final submissions Downer accepted that that “nearly all experts” (and Downer included Mr Wilson in this) agreed that Atlantis’s advertised short term strength of 263 kPa “should have been reduced to about 200 kPa to represent the ‘characteristic’ short term strength, and calculations [for long term strength] carried out from that starting point”.

19. [221]

    In his original plotting of where, on the y axis, the trend line should start, Mr Wilson adopted 128.66 kPa based, he said, on the TRL creep rupture tests (although those tests produced a result slightly higher than this: see [206] above).

20. [222]

    Although Mr Wilson did not intend this result, his “day 1” position of the creep line on the y axis also took account of some irrelevant short term load tests. As Mr Mostyn pointed out, Mr Wilson plotted the results of the short term load tests “to give an indication of the likely variation in long term strength” of the cells. But he did not intend, as occurred, that those results would affect the location of the “day 1” of his creep line on the y axis.

21. [223]

    In the result, Mr Wilson plotted time to failure as follows:

22. [224]

    The red line is Mr Wilson’s creep line “of best fit”. It assumes a strength of the cells at “day 1” of 144.26 kPa and predicts that after 100,000 hours (around 11.4 years) the long term strength of the cells would be around 40 kPa (below that needed to sustain the soil load). The blue dots near the vertical access on the left hand side of the graph represent the results of the short term tests.

23. [225]

    In a report produced shortly before the concurrent evidence commenced, Mr Mostyn showed that Mr Wilson had incorrectly used the short term load tests (and not just the creep tests) to plot his trend line and had, in any event made errors in his plotting of those short term load tests.

24. [226]

    In response, on the morning the concurrent evidence commenced, Mr Wilson produced a revised graph that, he said, accounted for those errors.

25. [227]

    The resultant graph was in the following form:

26. [228]

    That plotting produced a steeper trend line that predicted that the cells would be unable to sustain the static soil load, and would fail, at around 100 hours (4 days); an unsustainable conclusion entirely inconsistent with all observations on the site.

27. [229]

    Mr Wilson was challenged about this by counsel for John Holland:

28. [230]

    I see nothing in Mr Wilson’s response to these questions that could support the result depicted in the graph at [227].

29. [231]

    I think it more likely that, as John Holland submits, Mr Wilson realised that if he correctly accounted for the error to which Mr Mostyn drew attention, it would produce a trend line predicting that the cells would last several centuries: a result inconsistent with Downer’s case.

30. [232]

    Mr Wilson was challenged about this:

31. [233]

    The conclusion to which I have come is that what was put to Mr Wilson in this passage is likely to reflect the true position. Mr Wilson realised that if he had correctly accounted for this original error, it would have produced a trend line that modelled the cells in the rail area lasting long after their design life.

32. [234]

    For these reasons, I conclude that I need to exercise caution in relation to Mr Wilson’s evidence. As John Holland submitted, Mr Wilson appears to have been driven to offer an unsustainable conclusion because, if he corrected his error, a less favourable outcome for Downer would result.

33. [235]

    In closing written and oral submissions, John Holland developed these matters in detail and with some force.

34. [236]

    Nothing was said on behalf of Downer or EDI Rail about these matters in reply. No attempt was made to justify Mr Wilson’s position.

35. [237]

    In any event, as the majority of the experts ultimately agreed that the TRL test represented the lower bound of the strength of the cells, those cells do not, in my opinion, represent a safe assumption to make as to the strength of the cells when they were installed.

36. [238]

    A more reliable guide, in my opinion, is represented by the test conducted by Oike (244.3 kPa) and UTS (222 kPa). Those results were the ones adopted by Mr Pack and Mr Wong as the starting point of their analysis.

37. [239]

    I found Mr Pack to be a most impressive witness. He gave his evidence calmly and clearly. His evidence was corroborated by the equally impressive evidence of Mr Wong.

38. [240]

    Although counsel for Downer and EDI Rail offered some criticisms of Mr Pack’s and Mr Wong’s conclusions in submissions in reply, no attempt was made during the concurrent evidence to challenge those conclusions.

39. [241]

    Mr Pack:

40. [242]

    Mr Pack’s results were depicted as follows:

41. [243]

    In that graph, the vertical broken line to the right represents 50 years. The upper trend line is located in accordance with Mr Pack’s view. That assumes a “characteristic UTS and Oike short term” strength of 208 kPa and predicts a long term compressive strength of 138 kPa at 50 years (far more than the actual load on any of the cells).

42. [244]

    Mr Pack said in cross-examination that the 138 kPa was a “cautious estimate of value” and that “most cells would be greater than 138”.

43. [245]

    The lower creep line on Mr Pack’s graph is located in accordance with Mr Wilson’s opinions.

44. [246]

    No expert (except Mr Wilson) disagreed with Mr Pack’s analysis. It was not challenged by Downer in cross-examination. I accept it.

45. [247]

    Mr Wong came to a similar conclusion which he depicted as follows:

46. [248]

    In that figure, the unbroken vertical green line near the right of the graph represents 50 years. The red creep line is that favoured by Mr Wong and predicts that the cells would have a long term compressive strength at 50 years of 150 kPa.

47. [249]

    Dr Haberfield generally agreed with Mr Pack’s approach.

48. [250]

    Mr Mostyn agreed with Mr Pack’s approach, although he differed slightly in regard to matters of detail.

49. [251]

    Dr Redman did not accept that Mr Pack’s figure was reasonable bearing in mind the variability that Dr Scheirs reported in cell quality. However, Dr Redman had not done any relevant calculations in his report which was limited to matters of design methodology and process.

50. [252]

    Mr Wilson adhered to his views as to the appropriateness of the TRL tests.

51. [253]

    The other experts, Messrs Davies, Wood and Gassner expressed no view about these matters.

52. [254]

    Mr Wilson agreed that if Mr Pack’s views were correct, “there wouldn’t be a creep failure in the rail yard”.

53. [255]

    I am satisfied that Mr Pack’s view (with which Mr Wong and Mr Mostyn agreed, and in respect of which Dr Haberfield’s opinion is consistent) is more likely than not to be correct.

54. [256]

    To put the matter another way, I am not satisfied that Mr Wilson’s view (upon which Downer’s case depends) is more likely than not to be correct.

Conclusion as to the Detention System in the rail area

1. [257]

   Accordingly, I am not satisfied that Downer has established that the strength of the cells in the Detention System is insufficient to bear the static load of the soil above during the design life of the Detention System. On the contrary, I am satisfied on the probabilities that the cells have now, and will have throughout the design life of the Detention System, sufficient compressive strength to bear the load to which they are subject.

2. [258]

   That is, perhaps, an unsurprising conclusion bearing in mind the weight of expert opinion favouring the conclusion that the Detention System has not failed to the extent that it needs to be replaced or remediated (see [139] above) and will be adequate for its design life (see [137] above).

3. [259]

   The evidence shows, in my opinion, that the cells are not defective in any way that is relevant. Although, as I will discuss below, KBR’s design of the Detention System did not take into account creep, it is not relevantly deficient, as the probabilities are that the cells are now, and will over their design life, be more than strong enough to bear the load to which they are subject.

The collapse of the carpark

1. [260]

   I have outlined the circumstances in which the carpark collapsed in 2013 (see [82] to [87] above).

2. [261]

   The engineers gave evidence concerning the cause of the carpark collapse.

3. [262]

   Each of Mr Mostyn, Dr Haberfield, Mr Wong and Mr Pack agreed that the primary cause of the failure of the carpark was the drainage trench excavation carried out by Laing O’Rourke on the adjacent Stabling Yard site.

4. [263]

   Each agreed that a heavy rainfall event, which occurred a few days prior to the carpark collapse, triggered the failure.

5. [264]

   In his expert reports, Dr Haberfield drew attention to warnings that a firm of engineers, Aurecon, gave Laing O’Rourke in September 2012.

6. [265]

   For example, on 12 September 2012 Aurecon wrote to Laing O’Rourke:

7. [266]

   The following day, Laing O’Rourke replied:

8. [267]

   Aurecon replied on 13 September 2012:

9. [268]

   On 19 September 2012 Aurecon added:

10. [269]

    Dr Haberfield opined that Laing O’Rourke undertook the excavation on the Stabling Yard site “without providing any protection works” for the Detention System under the adjacent carpark. This resulted in both lateral and vertical movement of the ground supporting the Detention System, which caused distortion of the Atlantis cells and ultimately caused the cells to fail.

11. [270]

    Dr Haberfield also expressed the opinion that Laing O’Rourke’s erection of temporary trench shields was inadequate, that over-excavation of the Stabling Yard site removed ground support to the cells under the carpark, both laterally and below and that it was likely that Laing O’Rourke’s method of removing trench shields via progressing back filling resulted in an increase in ground instability and a further reduction in the lateral and vertical support of the cells.

12. [271]

    Mr Mostyn expressed the opinion that the trenching operations conducted by Laing O’Rourke were the major cause of collapse of the carpark. Mr Mostyn opined that the original removal of fill between a shoring box used by Laing O’Rourke and the Maintenance Centre site severely compromised the site support necessary for the structural integrity of the cells under the carpark.

13. [272]

    Mr Mostyn said that the significant rainfall event immediately before the collapse reduced the stiffness of the soil that was placed as backfill in and around the trench such that the lateral support provided to the cells would have been further compromised.

14. [273]

    Mr Wong and Mr Pack expressed similar opinions.

15. [274]

    Each of Dr Haberfield, Mr Mostyn, Mr Pack and Mr Wong expressed the opinion, at the conclave, that any loss of strength in the Atlantis cells themselves, since their installation, could not be the probable cause of the carpark failure “because of the temporal and physical location of the failure to the [Laing O’Rourke] excavation”.

16. [275]

    In conclave, those experts expressed the opinion that “other contributing factors” may have included “poor quality uncontrolled backfill above the tank” and what the parties described as the “Saw Tooth Change” in the boundary of the Atlantis cell tank adjacent to the Stabling Yard site.

17. [276]

    During the concurrent evidence, each of the experts emphasised that the poor quality fill and saw tooth design were secondary factors, and only in the limited sense that they contributed to the progression of the collapse (that is its rate of growth) but did not cause it.

18. [277]

    Ultimately, only Mr Wilson expressed a contrary view.

19. [278]

    In the conclave joint report, he expressed this opinion:

20. [279]

    Each of Mr Mostyn, Mr Wong, Mr Pack and Dr Haberfield disagreed with Mr Wilson’s conclusion that was, in large part, derived from Mr Wilson’s interpretation of the TRL tests.

21. [280]

    I have concluded that the results of the TRL tests are of limited value in assessing the likely strength of the Atlantis cells (see [213] ff above).

22. [281]

    In those circumstances, I am persuaded that I should accept the opinion of the majority of the engineering experts.

23. [282]

    Overall, I am persuaded of the correctness of the submissions offered by KBR on this subject, namely that the conclusion to be drawn from the expert evidence is the excavation activities of Laing O’Rourke caused the collapse of the carpark. Had that excavation not occurred, or at least not occurred in the manner to which the experts referred, the carpark would not in all probability have collapsed.

24. [283]

    Factors such as the saw tooth design and poor backfill may have contributed to the manner in which the collapse ultimately occurred, but did not, in my opinion cause it.

25. [284]

    Had the Laing O’Rourke excavation not caused the carpark to collapse, it is more likely than not that the Detention System beneath it, as originally installed, would have lasted its design life.

Conclusion thus far

1. [285]

   I find that Downer has not established that the Detention System will not function adequately throughout its design life. Nor has Downer established any need to repair the Detention System so that it may continue to function properly, let alone any need to replace the system in whole or in part.

2. [286]

   It is therefore not necessary to address the numerous other issues that are raised in the proceedings. However, in deference to the detailed submissions of the parties, and in case I have erred in coming to these conclusions, I will deal with the most significant of those issues.

3. [287]

   What follows assumes that, contrary to my findings, the Detention System requires repair now, or is likely to fail during its design life, and must be replaced.

The competing claims

1. [288]

   Downer brings a claim against John Holland under the Downer/John Holland contract. John Holland brings corresponding contractual claims against KBR under the John Holland/KBR contract and against Atlantis under the John Holland/Atlantis contract.

2. [289]

   Downer also alleges that John Holland has engaged in misleading or deceptive conduct within the meaning of s 52 of the Trade Practices Act 1974 (Cth). Downer also alleges that KBR and Atlantis have engaged in misleading or deceptive conduct. Downer claims to have suffered loss by the allegedly misleading or deceptive conduct of each of those parties.

3. [290]

   EDI Rail, which, as I have said, has no contractual relationship with any of John Holland, KBR or Atlantis, alleges that each of those parties has engaged in misleading or deceptive conduct (constituted by representations each is said to have made to Downer) and that it has suffered loss by that conduct.

4. [291]

   I will turn first to Downer’s claim in contract against John Holland.

Downer’s claim in contract against John Holland

1. [292]

   Downer contends that John Holland is liable to indemnify it for any loss it has suffered as a result of any shortcoming in the Detention System under three clauses of the Downer/John Holland contract. I shall deal with each in turn.

2. [293]

   In the Downer/John Holland contract cl 34.3 is in this form:

3. [294]

   The clause allocates to John Holland the “risk of any damage to or loss or destruction of” the Maintenance Facility Works (which includes the Detention System) prior to the Date of Practical Completion of the Maintenance Facility Works.

4. [295]

   It is common ground that that date was 18 June 2010.

5. [296]

   The Date of Practical Completion of the Maintenance Facility Works is also one of the dates on which EDI Rail was obliged to commence provision of the Through Life Support under the Reliance Rail/EDI Rail contract. It will be recalled (see [36] above) that Through Life Support is defined sufficiently widely to include rectification of the Detention System, should that be necessary.

6. [297]

   There is a clause corresponding to cl 34.3 in each of the RailCorp/Reliance Rail, Reliance Rail/Downer, and Reliance Rail/EDI Rail contracts.

7. [298]

   In the RailCorp/Reliance Rail contract, Reliance Rail bore the risk of damage to or loss or destruction of, the Maintenance Facility works both “prior to” and “after” the Date of Practical Completion of the Maintenance Facility Works on 18 June 2010.

8. [299]

   But in the subsequent tier of contracts between Reliance Rail, Downer and EDI Rail, the corresponding clauses imposed that risk on Downer “prior to” 18 June 2010 and on EDI Rail “after” that date.

9. [300]

   The allocation to John Holland of the relevant risk “prior to” (and not “after”) 18 June 2010 in the Downer/John Holland contract reflects the fact that Downer’s obligation to Reliance Rail was also so confined. Downer passed onto John Holland the risk that, vis-à-vis Reliance Rail, it agreed to bear.

10. [301]

    The risk of “damage to or any loss or destruction of” the Detention System “after” 18 June 2010 that remained with Reliance Rail under its contract with RailCorp was passed onto EDI Rail under its contract with Reliance Rail.

11. [302]

    Assuming, contrary to my findings, that the Atlantis cells were defective in some relevant way when they were installed, it does not follow that there was any “damage to or loss or destruction of” the Detention System at the time of installation. Such “damage” or “loss” or “destruction” would only have occurred once the cells had failed or caused the Detention System to fail. Assuming, again contrary to my findings, that this has occurred at some point, there is no evidence to suggest it occurred prior to 18 June 2010.

12. [303]

    It follows that, for present purposes, John Holland vis-à-vis Downer, and also Downer vis-à-vis Reliance Rail, are “off risk” for the purposes of cl 34.3 in each of the relevant contracts.

13. [304]

    Clause 34.5 in the Downer/John Holland contract is in the following terms:

14. [305]

    This clause imposes on John Holland an obligation to repair damage to the property of “third parties” or “affected” persons if their property is damaged by a breach by John Holland of its obligations under the Downer/John Holland contract or by the “Subcontractor’s Activities”.

15. [306]

    The property that is said to have been damaged in this case is the Detention System which is the property of RailCorp.

16. [307]

    There are numerous references in the Downer/John Holland contract to RailCorp. For example, RailCorp is referred to in terms in the following clause of the contract, cl 35, which provides a separate indemnity for damage to RailCorp’s property. There are also over 20 defined terms in the contract which include the name RailCorp.

17. [308]

    The language in the contract thus makes clear that where the parties intended to refer to RailCorp, they did so in terms. The language adopted by the parties in cl 34.5 makes clear, in my opinion, that they meant the expression “third parties” to refer to parties other than those named in terms in the contract; in particular RailCorp.

18. [309]

    For those reasons, Downer has no rights against John Holland under this clause.

19. [310]

    Clause 35.1 of the Downer/John Holland contract relevantly provides:

20. [311]

    Clause 35.2 relevantly provides:

21. [312]

    John Holland accepts that the allocation of risk provision in cl 34.3 of the Downer/John Holland contract does not operate to limit the breadth of John Holland’s obligations under cl 35 of the contract.

22. [313]

    Subject to the limitation in cl 35.2, and to KBR’s “Pure Economic Loss” point (with which I deal below), John Holland accepts that this clause would operate to give Downer an indemnity (in accordance with terms) if there were shown to be a “claim” against Downer caused or contributed to by a breach of the Downer/John Holland contract by John Holland.

23. [314]

    John Holland submits that whatever rights Downer has against John Holland arise from the application of this clause and the indemnity it contains. I agree.

24. [315]

    On 23 April 2015 Reliance Rail sent Downer a letter in the following terms:

25. [316]

    John Holland submits that this letter did not constitute a “claim” for the purpose of cl 35 but merely recorded that Downer was required (and is required by Reliance Rail) to meet its contractual obligations, and that to the extent that Reliance Rail has suffered any loss or damage as a result of the alleged failure in the Atlantis cells, Reliance Rail held Downer responsible.

26. [317]

    John Holland points out that the letter does not identify what liability, if any, Reliance Rail has to RailCorp, nor that it had paid any money to RailCorp or spent any money itself.

27. [318]

    In oral submissions, John Holland submitted that the letter amounted to no more than Reliance Rail stating to Downer something to the effect of “we expect you to comply with your contract”.

28. [319]

    I do not accept these submissions. In my opinion, Reliance Rail’s letter of 23 April 2015 can be characterised as a “claim”. It does recite a requirement by Reliance Rail that Downer meet its “contractual obligations” and thus, in part, has the characteristic the subject of John Holland’s submission. But it also “seeks damages and compensation from [Downer] for the loss and damage” that Reliance Rail asserts it “has suffered” (as well as loss and damage it “may in the future suffer”) as a result of the alleged failure of the Detention System.

29. [320]

    This is sufficient, in my opinion, to characterise the letter as a “claim” for the purposes of cl 35.

30. [321]

    The effect of cl 35.2 is that John Holland’s liability under cl 35.1 is to be “reduced to the extent that”, relevantly, the claim made by (or the loss suffered by) Reliance Rail arises from a “wrongful (including negligent) act or omission” of Downer, RailCorp, or one of their “Associates”.

31. [322]

    “Associate” is defined very broadly to include, in relation to a person, “any Related Body Corporate of that person and any officer, employee, agent, contractor, consultant, nominee, licensee or advisor of that person or that Related Body Corporate”.

32. [323]

    Laing O’Rourke is an “Associate” of RailCorp. The reasoning is complicated, but not disputed by Downer in closing submissions.

33. [324]

    The expression “Related Body Corporate” in the Downer/John Holland contract (and also in the various upstream contracts) provides that the Related Bodies Corporate of RailCorp include the Transport Infrastructure Development Corporation. By the Transport Administration Amendment Act 2010 (NSW), the name of the Transport Infrastructure Development Corporation was changed to Transport Construction Authority. That was the entity that entered into the contract with Laing O’Rourke to do the work that I have found caused the collapse of the carpark. Thus Laing O’Rourke was a contractor to a Related Body Corporate of RailCorp and thus an “Associate” of RailCorp.

34. [325]

    As I discuss below, in January 2008, Downer engaged Cardno to review KBR’s design of the Detention System. Cardno is thus an “Associate” of Downer.

35. [326]

    Assuming contrary to my findings that there is a need to repair or replace a Detention System, and assuming that John Holland is otherwise liable to indemnify Downer in relation to any loss that Downer has suffered as a result, John Holland’s liability to do so “will be reduced” to the extent that such loss arises from the negligence of either Laing O’Rourke or Cardno.

36. [327]

    If that were established, it would have been necessary to consider what apportionment of liability should take place by reason of cl 35.2.

37. [328]

    A similar exercise would have been required had Downer established that one or other of John Holland, KBR or Atlantis was liable to pay damages to Downer by reason of misleading or deceptive conduct (discussed below).

38. [329]

    In closing submissions, John Holland made a suggestion as to how such apportionment should take place in the hypothetical circumstance of Downer succeeding.

39. [330]

    There are many imponderables associated with such an exercise. As I have not found it necessary to deal with the cross-claims between the (successful) defendants (see [552] and [553] below), I do not propose to express any opinion about those matters.

The “no loss” point

1. [331]

   “Loss” is defined in the Downer/John Holland contract as follows:

2. [332]

   The “no loss” point arises by reason of the intersection between sub-par (b) of the definition of “loss” and cl 56A.1 of the contracts which provides, relevantly:

3. [333]

   There are corresponding provisions in the John Holland/KBR contract.

4. [334]

   The first question is whether the words “indirect, consequential or pure economic loss of any kind” in sub-par (b)(ii) of the definition of “loss” are apt to include Downer’s claim against John Holland for damages for breach of the Downer/John Holland contract (and thus John Holland’s consequential claim against KBR for damages for breach of the John Holland/KBR contract).

5. [335]

   Assuming that the answer to that question is “yes”, the second question is whether the reference in cl 56A.1(g) to “[l]oss within paragraph (b)(i) or paragraph (b)(ii) of the definition of ‘Loss’” refers only to the words adjacent to “(i)” (“loss of revenue etc”) and “(ii)” (“any indirect, consequential etc”), or refers also to the words in the chaussette (to adopt the language of Perram J in SMA Solar Technology AG v Beyond Building Systems Pty Ltd (No 5) [2012] FCA 1483 at [79]) to sub-par (b), namely the words commencing “unless and to the extent that…”.

6. [336]

   KBR submits that the reference in cl 56A.1(g) was not intended to include the chaussette. John Holland made the same submission, but with considerably less enthusiasm.

7. [337]

   I do not agree. In my opinion, the reference to sub-pars b(i) and b(ii) in cl 56A.1(g) includes the chaussette.

8. [338]

   The natural reading of sub-par (b) of the definition of “loss” is that the chaussette operates as an exception to the whole of sub-par (b); that is as an exception to the exclusion in sub-par (b).

9. [339]

   That is how it the paragraph is structured. The left hand margin of the chaussette is the same marginal position as both “(i)” and “(ii)”; suggesting the parties’ intention that it operates to qualify both of sub-pars (i) and (ii).

10. [340]

    The chaussette is an integral part of sub-par (b).

11. [341]

    That reading makes commercial sense. Its effect is that, to the extent that there is insurance of the requisite character relevant to the type of loss in question, the exception to the exclusion is enlivened and “pure economic loss” is included as “loss” for the purposes of the definition.

12. [342]

    It is true that in cl 56A.1(g) the parties referred to any loss “within paragraph (b)(i) or paragraph (b)(ii)” of the definition of loss rather than simply to loss “within paragraph (b)”.

13. [343]

    But to attribute to the parties the intention that they did not thereby intend to refer to the chaussette to sub-par (b) and thus intend to exclude liability for any “loss” of the kind referred to in sub-pars (b)(i) and (ii) would be to re-write, dramatically, the definition of “loss”.

14. [344]

    A remarkable result would follow. The only loss that Downer or John Holland could suffer by reason of a breach by John Holland or KBR of the Downer/John Holland or John Holland/KBR contracts is economic loss. Neither owns the land on which the Maintenance Centre was to be erected nor any infrastructure at the site.

15. [345]

    Clause 56A.1(g) must be taken to refer also to the chaussette. Otherwise, even if Downer could demonstrate that John Holland was in breach of its obligations so as to oblige it to indemnify Downer, John Holland would not be obliged to compensate Downer for the only kind of loss it could possibly suffer. The same would apply under the John Holland/KBR contract. That would be a commercially impractical result that the parties cannot possibly have intended.

16. [346]

    In any event, the language that the parties have used shows that this was not their intention.

17. [347]

    First, cl 56A.1 itself shows that the parties contemplated that John Holland might have a liability to pay damages to Downer; hence the provision in cl 56A.1(a) that such liability be “limited to 50% of the Subcontract Price”.

18. [348]

    Second, the better reading of cl 56A.1(g) is that the reference to “paragraph (b)(i) or (b)(ii) of the definition of ‘Loss’” is to the whole of sub-par (b) of the definition, including the chaussette.

19. [349]

    So read, and assuming that “pure economic loss” in sub-par (b)(ii) should be read as including a claim by Downer for damages for breach of the contract, the effect of cl 56A.1(g) is to confine John Holland’s liability to the amount recoverable by it “under any Insurance”.

20. [350]

    John Holland accepts that it is insured for the purpose of this provision.

21. [351]

    KBR appears to be in the same position and has agreed with John Holland that it “has a policy of insurance that appears on its terms to respond to the claim made against it”.

22. [352]

    Further, as I have set out above, sub-cl 35.1(c) imposes on John Holland an obligation to indemnify Downer against “any reasonably foreseeable economic loss” of the kind referred to in sub-cll 35.1(d) and (e) to the extent that such economic loss could be seen as “arising directly” from the circumstances there described. Those provisions also point against a construction of the definition of “loss” that excludes any economic loss, no matter how directly connected with a breach by John Holland of its obligations under the contract.

The design of the Detention System

1. [353]

   I turn now to the shortcomings that are alleged to exist in the design of the Detention System.

2. [354]

   Those shortcomings are said to be, first, that KBR did not account for the possibility of plastics to “creep”; second, that KBR relied on information from Atlantis as to the strength of the cells and did not specify that the cells be tested for strength; and third that the design took no account of loads likely to be encountered during construction.

3. [355]

   To understand this aspect of the case, it is necessary to have regard to some of the events leading up to the submission by KBR to John Holland of its final design in February 2008.

4. [356]

   On 10 April 2007, John Holland and KBR entered the John Holland/KBR contract. It was entitled “Agreement for Engagement of Consultant for Design and Documentation”.

5. [357]

   The agreement was stated to be effective from 2 February 2007.

6. [358]

   Under the John Holland/KBR contract KBR was obliged to:

   1. (1)

      “provide the Services in a proper, thorough, skilful and professional manner with all due expedition” (cl 3.1(a));

   2. (2)

      “achieve a standard of work consistent with other top tier consultants” (cl 3.1(b));

   3. (3)

      “exercise good faith in the best interests of [John Holland] and keep [it] fully and regularly informed about all matters affecting or relating to the Services and the Project” (cl 3.1(f));

   4. (4)

      ensure that the services it provided were adequate, and to make whatever further enquiries were necessary to satisfy that obligation and to report to John Holland any further investigations or information required which KBR could not obtain from its own enquiries and which were reasonably necessary to ensure the adequacy of its services (cl 3.2);

   5. (5)

      warrant that the design for the construction of the Maintenance Centre, including the Detention System would:

   6. (6)

      warrant that the Project would be free from defects caused by KBR’s design or the KBR services (cl 3.25).

7. [359]

   KBR’s liability to John Holland arising out of the performance or non-performance of the services under the contract was limited to $20 million unless, relevantly, any claim or loss brought against or suffered by John Holland was due to a “wilful”, that is “an intentional and conscious”, breach by KBR of its obligations under the agreement.

8. [360]

   One requirement of the contract was that “on site detention” was required, was expected to be below ground and could take the form of “plastic lattice void formers”. The design was required to comply with Auburn Council’s requirement of a maximum discharge rate from the detention storage (to Duck River) of 80 L per second per ha.

9. [361]

   As I have mentioned, the original design of the Detention System involved the use of slotted concrete pipes to divert stormwater to stormwater drains leading to Duck River.

10. [362]

    On 13 April 2007, Mr Adam Gaffney, a Senior Civil Engineer at KBR and the principal author of the design, wrote to Mr David Polkinghorne, a civil engineer and the Design Manager at John Holland for the design and construction of the Maintenance Centre enclosing “the complete package for the Storm Water Detention Alternative Option (with source detention and collection using Atlantis Cells)”.

11. [363]

    The attachment stated:

12. [364]

    The document set out the advantages and disadvantages “of using Source Detention” and stated:

13. [365]

    Mr Gaffney attached with his email, amongst other things, brochures from Atlantis showing, in relation to other projects, tanks with a “crush strength” of 26.8 t per m2.

14. [366]

    On 17 April 2007 Ms Natalie Roxburgh, from Atlantis, sent Mr Navneet Kaur, from KBR, drawings of cells and referred to the configuration of the cells “that the crush strength of the boxes has been tested on”.

15. [367]

    On 28 May 2007 Ms Roxburgh sent Mr Gaffney “the results of the testing carried out last week”.

16. [368]

    Ms Roxburgh said:

17. [369]

    The testing to which Ms Roxburgh referred was that carried out by Oike to which I have referred earlier. That testing stated that the Atlantis cells had a “breaking load” of 244 kPa.

18. [370]

    On 21 May 2007 Mr Gaffney and Mr John Lewis from KBR, Mr Polkinghorne and Joseph Faidino from John Holland, Mr Rick Moore from Downer, met with representatives of RailCorp.

19. [371]

    According to a note prepared by Mr Fiadino:

20. [372]

    According to Mr Fiadino’s note:

21. [373]

    On 14 September 2007 KBR provided John Holland with a “Preliminary Design Report” (“PDR”) of the proposed Detention System.

22. [374]

    The PDR was passed up the line to Downer, Reliance Rail and, ultimately RailCorp.

23. [375]

    On 23 October 2007 RailCorp wrote to Reliance Rail and stated:

24. [376]

    RailCorp made a number of requisitions in a Technical/Design Submission Sheet.

25. [377]

    On 17 December 2007 RailCorp wrote to Reliance Rail repeating that the “alternate approach to storm water drainage and detention” did not “satisfy RailCorp’s Standards”.

26. [378]

    On 17 December 2007, Mr Shawn Rippon from Downer wrote to a number of colleagues stating:

27. [379]

    It was that thought that, ultimately, led to the retainer by Downer of Cardno as a consultant. I will return to this below.

28. [380]

    The next day Mr Rippon wrote to John Holland:

The final design - KBR’s Critical Design Review

1. [381]

   On 27 February 2008 KBR submitted to John Holland its Critical Design Review (“CDR”) for the “Storm Package” and certified that “this package complies with the relevant requirements of the Agreement for the CDR stage”. This document represented KBR’s final design for the Detention System.

2. [382]

   The CDR specified that:

3. [383]

   Under the heading “Design Life/Durability Issues” the CDR stated:

4. [384]

   Under the heading “Adopted Design Methodology” the CDR stated:

5. [385]

   The emphasised passage asserts that, in fact, the cells have an “ultimate compressive strength” of 26.8 t per m2; i.e. 263 kPa. As I set out at [148], the experts agreed that “ultimate” strength is short term strength and represents the peak short term strength of the cells.

6. [386]

   Under the heading “Loading on Atlantis Cells” it was stated:

7. [387]

   The emphasised passage referred to the “ultimate capacity” of the cells; that is their “ultimate” strength. The reference “the manufacturer’s testing” was, evidently, a reference to the Oike tests that Atlantis had sent KBR in May 2007 (see [367] ff above). KBR stated that testing showed the “ultimate capacity” of the cells “to be 26.8 tons per square metre” (equivalent to 263 kPa, not 270 kPa as stated in the CDR). In fact, the Oike tests showed a “breaking load” (that is, ultimate strength) of 244 kPa.

8. [388]

   KBR’s report contained no suggestion that there was any reason to doubt that the cells’ capacity had been so “assessed by the manufacturer’s testing” or to doubt that the cells in fact had the “ultimate capacity” as so assessed.

9. [389]

   Appendix G to the CDR was entitled “Loading on Atlantis Cells” and prepared by Mr Gaffney. It described its “scope and objectives” as being to “ensure that the Atlantis cells have the capacity to withstand the calculated pressure”. It included what was described as a “load distribution and sensitivity analysis” of the vertical pressures on the cells.

10. [390]

    Appendix G concluded with the following table:

11. [391]

    Mr Gaffney’s conclusion was that the likely “ULT Vertical Load” (ultimate vertical load) was likely to be between 207 and 245 kPa whereas the “ULT Vertical Capacity” (that is the ultimate vertical capacity) of the cells was 270 kPa. Thus, the conclusion was that the cells, if laid 600 mm below the surface, had an “ultimate vertical capacity” exceeding the likely “ultimate vertical load”. That conclusion was based on the assumption made by KBR, which appears in this part of the report as an assertion, that the Atlantis cells did in fact have an ultimate vertical capacity of 270 [sic: 263] kPa.

12. [392]

    Again, there is no suggestion in the KBR report that there was any reason to doubt, or occasion to check, the correctness of the premise of KBR’s calculations; namely that the “ultimate vertical capacity” of the cells was 270 [sic: 263] kPa.

13. [393]

    These calculations took no account of the phenomenon of “creep” in polypropylene based products such as the Atlantis cells. I will return to this below.

The meaning of the design drawing

1. [394]

   KBR’s design specified that “Drainage Cells Shall Be Atlantis Type in Plate Configuration at a Strength of 26.8 tons/sqm” (see [382] above).

2. [395]

   There is an issue as to the content of the design so specified.

3. [396]

   The question is whether that specification required that John Holland, as the party known to KBR to be responsible for implementing the design, use the Atlantis cells:

4. [397]

   During submissions, I endeavoured to capture the essence of the debate as follows:

5. [398]

   In my opinion, John Holland’s contentions are correct.

6. [399]

   First, as John Holland submits, its construction of the stipulation is a natural reading of the design requirement. It is akin to asking for the “Dulux guaranteed five-year paint”. As John Holland put it: “[a] person to whom that direction is given satisfies the direction by buying paint identified as five-year paint. He [or she] does not need to take testing equipment to the hardware shop with him [or her], and test the paint”.

7. [400]

   Second, the passages from the CDR that I have emphasised at [384] and [386] are, as a matter of language, assertions that the cells in fact had the strength stated, and contain no suggestion that there was any reason to doubt, or check that that was so.

8. [401]

   Third, the design report did not specify any testing regime for John Holland to confirm the design strength. That was despite the provision in the John Holland/KBR contract (see [358] above) imposing on KBR an obligation to report to John Holland any further investigations or information required which it could not itself obtain from its own enquiries and which were reasonably necessary to ensure the adequacy of its services.

9. [402]

   At a meeting on 28 February 2008 attended by representatives from Downer, John Holland, RailCorp and Cardno, KBR and Atlantis made a slide presentation as to the strength of the cells.

10. [403]

    The slides said that the cells had “Ultimate Vertical Capacity” of 244 kPa and a factor of safety of 2.9.

11. [404]

    The figure of 244 kPa reflected the Oike result.

12. [405]

    The presentation also included an “Atlantis Cells Loading Comparison”.

13. [406]

    That slide concluded:

14. [407]

    KBR relied on that slide as showing that its design assumed, but did not assert or warrant, that the cells would meet their “as-tested strengths”.

15. [408]

    I do not accept this. KBR’s design report speaks for itself and, for the reasons set out above, stated, clearly in my opinion, that, as a matter of fact, the cells had the strength asserted. Absent any qualification in the design report to the statements made as to the strength of the cells, and absent any suggestion by KBR that there was any need to test the cells to check that they did have that strength, the statement made at the 28 February 2008 meeting that the cells “will not fail should they meet their as-tested strengths” cannot operate as some kind of qualification of the opinions expressed in the report. As John Holland put in in final address, the statement made on 28 February 2008 was “of no moment, legally”.

The KBR design report was not prepared in a manner that accorded with widely held peer opinion at the time as competent professional practice

1. [409]

   The expert engineers were virtually unanimous in concluding that the KBR design report was not prepared in a manner that accorded with widely held peer opinion at the time as competent professional practice in two respects.

2. [410]

   First, the KBR design report took no account of the susceptibility of plastic to creep. The KBR design report spoke only of “ultimate”, that is short term, strength and did not address the question of creep or long term strength.

3. [411]

   Second, the KBR design report failed to specify a regime whereby the strength of the cells be tested. All of the experts consider that KBR should have included a testing regime in design.

4. [412]

   KBR was contractually obliged to make “whatever further enquiries” were necessary to satisfy its obligation to ensure that its services were adequate and to report to John Holland any further investigations or information required which it could not obtain from its own enquiries and which were necessary to ensure the adequacy of those services (see [358] above).

KBR’s failure to take account of creep

1. [413]

   As I have mentioned (see [150] above), the experts agreed that the tendency of plastic to creep should dominate design considerations because the long term strength of plastic can be very much less than its short term strength.

2. [414]

   The majority of the experts agreed that in the absence of information about the long term strength of the Atlantis cells, KBR should have sought to achieve a “Factored 50 Year Characteristic Long term Compressive Strength” for the cells (see [162] above).

3. [415]

   If KBR had sought this information, it is likely it would have reached conclusions similar to those of Mr Wong, Mr Pack and Dr Redman as set out at [163] above. That is, that a Factored 50 Year Characteristic Long Term Compressive Strength for the cells was in the order of 17 kPa (Mr Wong), 18.2 kPa (Mr Pack) or 41 kPa (Dr Redman).

4. [416]

   Downer submits that “had RailCorp known what is now known of the Atlantis Cells it is inconceivable that it would have approved of their use or that Downer would have recommended them”. It submits that “knowledge in 2008 that the design strength of the cells was in the order of a mere 18 kPa would have been enough to close out any further consideration of the Atlantis Cells”.

5. [417]

   So much may be accepted. But the question is, what would then have happened? What is the “counterfactual”?

The counterfactual

1. [418]

   Downer does not advance a “no transaction” case here.

2. [419]

   It advances an “alternative transaction” case; namely that but for KBR’s failure to take account of the possibility of creep, and its failure to perform or recommend the making of tests of this nature, it would not have agreed to use Atlantis cells and would have insisted instead on the use of slotted concrete pipes.

3. [420]

   In final written submissions, Downer described KBR’s submission that this was in substance Downer’s case, as “simply mumbo jumbo”. I did not find that submission helpful. In any event, it is not correct.

4. [421]

   As KBR pointed out:

5. [422]

   Downer was contractually obliged to incorporate a stormwater facility into the Maintenance Centre. Thus, had it decided not to use a detention system incorporating Atlantis cells, it would have had to adopt an alternative system. It does seem likely that, in that hypothetical circumstance, it would have reverted to use of the slotted concrete pipe system originally proposed.

6. [423]

   What would have happened in that counterfactual situation? What would a concrete slotted pipe system have cost? Would it have operated differently from, and more satisfactorily than, the Atlantis system?

7. [424]

   As to cost, Downer points to the proposal made between October 2015 and April 2016 by engineers, retained by Downer, Arup Pty Ltd, to replace the Atlantis cell system in the rail area with a slotted concrete pipe system.

8. [425]

   Downer submits that “there is no rational reason why RailCorp would not have adopted the Arup design proposal Option C in 2008 or 2009” and that “it would have done so, just as Sydney Trains did on 21 September 2017”.

9. [426]

   Downer submits:

10. [427]

    The likely cost of implementing the Arup Option C is the subject of expert evidence, which I discuss below when dealing with quantum. For the reasons there set out, I conclude the likely reasonable cost of implementing Arup’s Option C is $19 million (see [610] – [619] below).

11. [428]

    But that is not the cost Downer would have incurred in 2008 had it decided to eschew the Atlantis cell system and implement a concrete slotted pipe system.

12. [429]

    Option C is not concerned with simply installing a slotted concrete pipe system. It involves replacing the Atlantis cells in the rail area with concrete pipes.

13. [430]

    As the Arup report states, Option C “consists in replacing all of the Atlantis cells arrangements with…225mm diameter Class 4 slotted pipe, wrapped in geotextile and covered with large aggregate material”.

14. [431]

    The process envisaged by Option C was summarised by Arup as follows:

15. [432]

    Further, it appears that Arup was proposing a “new storm water drainage system” which differed from that envisaged in 2008. Thus, in its Executive Summary, Arup said:

16. [433]

    This appears to be because Arup had “revisited some of the fundamental assumptions relating to flooding and stormwater management” at the Maintenance Centre and “revisited the regional flood model”. That led Arup to conclude that, contrary to earlier views, the Maintenance Centre site “does not contribute to the peak levels within Duck River”, that the site could “theoretically discharge 100% of its stormwater into Duck River (i.e. without storage/retention) without affecting the Duck River peak levels” and that “there is no benefit from adding storage on the [Maintenance Centre] site with regards to reducing flooding downstream of the Site”.

17. [434]

    Thus, Arup’s Option C is a very different proposal than would have been in play had Downer decided, in 2008, to use a concrete pipe system rather than Atlantis cells.

18. [435]

    In those circumstances, I think KBR is correct to submit that:

19. [436]

    Further, the evidence suggests that implementation and maintenance of a slotted concrete pipe system of the kind contemplated in 2008 would have involved expenses which would not arise in relation to the Atlantis system.

20. [437]

    On 20 February 2008, John Holland wrote to Downer outlining what it said were the virtues of the Atlantis cell system. In that letter, John Holland pointed out that the concrete pipe system involved “a proposed location for the detention storage…under the carpark”. John Holland said that this would have the result that “the full detention volume stored below the invert level of the main concrete carrying pipe would [be] significantly below the level of Duck Creek” and that “this would [have] necessitated a fully pumped system with significant operating and running costs to [Downer]/Reliance Rail.” Those costs would have included, John Holland stated, “labour and supervision to ensure that pumping was carried out 24 hours per day at a rate not greater than 80 litres/second per hectare” and “rigorous maintenance regimes for a pumped system”. John Holland’s letter also spoke of “reduced maintenance costs [with the Atlantis system] compared with a traditional slotted pipe system”.

21. [438]

    I am not satisfied that Downer has established this counterfactual. It has not shown what installation of a slotted concrete pipe system in 2008 would have cost, nor compared that cost to implementation of the Atlantis system.

22. [439]

    Downer would also have to show that implementation of a slotted concrete pipe system would have led to an outcome no worse, or better, than that which has been achieved using the Atlantis cells.

23. [440]

    I have found that although there have been a small number instances where the Atlantis cells have collapsed, where sand has entered the cells and where water has not drained from the system, the Detention System will last its design life, and does not need to be repaired or replaced.

24. [441]

    Would use of slotted concrete pipes have led to a better outcome?

25. [442]

    Arup appear to have assumed that the concrete pipes to be used in Option C would themselves last 50 years without any diminution in function.

26. [443]

    That same assumption appears to have been made by Downer in these proceedings. Downer’s position appears to be that it goes without saying that concrete pipes would last longer, and better than plastic cells. Thus, Downer pointed to the fact that the use of such pipes would comply with RailCorp’s requirements, as specified in its “TMC 421 Track Drainage Manual”.

27. [444]

    If concrete slotted pipes have been used by RailCorp in other track drainage systems, evidence would presumably have been available to show how long they last without diminution in function. But no such evidence was adduced. There is no evidence before me as to how long concrete pipes can survive in a track drainage system.

28. [445]

    I raised this with Downer’s senior counsel during final submissions:

29. [446]

    I do not think I can conclude from the fact that Arup proposed Option C that “it had expert opinion that it would work”, let alone that it would work better than the Atlantis system. My attention has not been drawn to any statement made by Arup to this effect. Arup certainly stated that its hydraulic modelling forecast that the Option C system could cope with a 50 year storm event. But it expressed no view about the longevity of concrete pipes, save to say that the pipes proposed in Option C are those “traditionally used in track drainage”.

30. [447]

    Indeed, under the heading “Disclaimer”, Arup stated:

31. [448]

    My conclusion is that the true position is as I suggested to Downer’s senior counsel; namely that Downer’s case proceeded upon the assumption that a slotted concrete pipe system would have operated without substantial fault, and better than the Atlantis system. I do not think Downer have proven the correctness of that assumption.

32. [449]

    Overall, I am not satisfied that Downer has established the necessary counterfactual, namely that had KBR drawn attention to the need to test the Atlantis cells in the manner I have discussed, Downer would have procured the installation of an alternative system which would have operated better and at no more cost than the Atlantis system.

KBR’s failure to specify strength testing

1. [450]

   There is an issue as to whether KBR’s failure to specify a regime to test the strength of the cells is of any moment, given that Downer also retained and received advice from Cardno. The recommendations made by Cardno as to testing the strength of the cells, and the manner in which those recommendations were implemented by John Holland, become relevant.

2. [451]

   I now turn to examine those questions.

3. [452]

   On 24 January 2008 Downer retained Cardno to provide it:

4. [453]

   As I set out above, it appears Downer retained Cardo because of its concerns about the use of Atlantis cells in the Detention System, especially in light of RailCorp’s repeated statement that this “alternative approach to stormwater detention…does not fully satisfy RailCorp’s standards” (see [375] above).

5. [454]

   On 20 February 2008 Mr Polkinghorne from John Holland wrote to Mr Proops at KBR stating Downer had engaged Cardno “to undertake further technical review”.

6. [455]

   On 7 March 2008, Cardno prepared a “Structural Engineering Risk Assessment” report addressed to Downer.

7. [456]

   In the Executive Summary to the Cardno report, Cardno stated:

8. [457]

   Cardno continued:

9. [458]

   The critical recommendations made by Cardno were that:

10. [459]

    Cardno stated that even if confirmation of a 50 year design life could not be achieved, such “testing could be used to provide the level of confidence required”.

11. [460]

    Downer did not adduce evidence as to the precise nature of the testing regime that it contends KBR should have advised. I see no reason to conclude that KBR should have advised a testing regime any more rigorous than the subject of Cardno’s recommendation. Evidently, Downer was content with the testing regime that Cardno recommended, as it insisted that John Holland comply with it (see below).

12. [461]

    In the circumstances, I fail to see how Downer could show that it has suffered any loss (assuming, contrary to my findings, it has suffered a loss) by reason of KBR’s failure to recommend testing of the cells. Although KBR did not recommend that the cells be tested, the party that Downer engaged to review the design (Cardno) did. Whatever loss Downer might have suffered by reason of KBR’s omission to specify testing was averted by reason of Cardno’s intervention.

13. [462]

    Thus, on 14 March 2008 Downer wrote to John Holland:

14. [463]

    John Holland replied on 27 March 2008 as follows:

15. [464]

    John Holland submits its letter should not be read as an unconditional acceptance of the Cardno report and agreement to implement all of the recommendations in the report; but rather as a counteroffer whereby John Holland offered to comply with all of the Cardno recommendations but only on the bases set forth in sub-pars (i) to (vi) of its letter.

16. [465]

    I do not accept that submission. I read John Holland’s letter as constituting its acceptance of Downer’s requirements, its agreement to comply with all of the Cardno recommendations and a statement of the manner in which John Holland then proposed to comply with the recommendations.

17. [466]

    Thus, John Holland responded to Cardno’s critical recommendations by saying that Atlantis was preparing a certificate as to the longevity of the cells, and was “organising testing to be done in the next few weeks” for Vertical Ultimate Compressive Strength.

18. [467]

    In its List Statement, Downer alleges that John Holland failed to ensure that “random samples of Atlantis Cells were collected and tested as detailed in the Cardno Report recommendations”, and submits this constituted a breach of John Holland’s obligations.

19. [468]

    John Holland submits that the Downer/John Holland contract did not require it to comply with the Cardno recommendations and that:

20. [469]

    Thus John Holland submits:

21. [470]

    My attention has not been drawn to any response that Downer makes to this submission.

22. [471]

    It may be that the exchange of correspondence between Downer and John Holland constituted by the letters of 14 and 27 March 2008 itself constitutes a contract pursuant to which, in consideration of Downer agreeing to adopt the Atlantis system, John Holland agreed to implement the Cardno recommendations.

23. [472]

    However, no such agreement is pleaded.

24. [473]

    Nor does Downer plead that John Holland’s letter of 27 March 2008 constituted a representation that it would implement the Cardno recommendations on the basis set out in the letter; or at all.

25. [474]

    What Downer does plead is that, by passing on the letters John Holland received from Atlantis in June and July 2008 to Downer – in which Atlantis set out the steps it proposed to take to implement the Cardno recommendations, including as to the testing of cells during installation – John Holland itself made to Downer the representations in those letters. I will return to this below.

John Holland’s “implementation” of the Cardno recommendations

1. [475]

   In its letter to Downer of 27 March 2008, John Holland stated that “the recommended certificates are being prepared by Atlantis and will be made available shortly”.

2. [476]

   On 10 July 2008 Atlantis wrote to John Holland enclosing a number of articles concerning polypropylene pipes and stating:

3. [477]

   Installation of the Atlantis cells in the carpark had commenced the day before, 9 July 2008.

4. [478]

   The “articles” that Atlantis provided John Holland related products quite different from the Atlantis cells. John Holland did not take the matter further. I do not see this as compliance with the Cardno recommendation.

5. [479]

   Atlantis arranged for UTS to conduct compression testing on the cells. The tests were carried out on 5 April 2008 on nine cells. The evidence does not reveal whether those cells were from “different production batches” as specified by Cardno.

6. [480]

   UTS produced a report dated 10 April 2008 stating that the cells collapsed when subject to a pressure of 23.16 t per m2 (compared to 26.8 t per m2 as stated in Atlantis’s publications and assumed by KBR in its design).

7. [481]

   Over two months later, Atlantis forwarded the UTS results to John Holland under cover of a letter of 16 June 2008 in which Atlantis stated:

8. [482]

   The following day, 17 June 2008 Mr Polkinghorne wrote to Mr Richard McMillan and Ms Roxburgh at Atlantis:

9. [483]

   Mr Polkinghorne’s notes attached to that email concluded that the “test results are marginally less than the capacities used in the KBR [calculations] presented to Cardno/[Downer] in PowerPoint presentations” but that “adequate factors of safety still exist”.

10. [484]

    On 1 July 2008 Atlantis wrote to John Holland, again enclosing the UTS report:

11. [485]

    This appears to be the only response Atlantis made to John Holland’s enquiry of 17 June 2008.

12. [486]

    My attention has not been directed to any other step John Holland took to establish a “reference” Vertical Ultimate Compressive Strength of the cells as recommended by Cardno.

13. [487]

    In its letter of 1 July 2008 Atlantis also said:

14. [488]

    This is the only reference in the evidence to any proposal to implement Cardno’s recommendation that cells be tested during installation.

15. [489]

    John Holland points to no other evidence suggesting it took steps to ensure that this recommendation be put into effect.

16. [490]

    John Holland points to the fact that on 7 August 2008 it forwarded to Downer the correspondence it had received from Atlantis concerning these matters, invited comment and received none. In those circumstances, John Holland submits that “Downer cannot now complain” that the Cardno recommendations were not put into effect.

17. [491]

    I fail to see how the lack of complaint from Downer affects John Holland’s obligations. The fact appears to be that John Holland did not cause either of these critical recommendations to be given effect.

18. [492]

    As I have mentioned, Downer contends that by forwarding the Atlantis correspondence to Downer, John Holland repeated the representations made in that correspondence, including as to the UTS results.

19. [493]

    However, assuming (contrary to my conclusions) that there is now a problem with the Detention System that requires its repair or remediation, my attention has not been directed to any evidence which suggests that faithful implementation of the Cardno recommendations would have had any impact on the current state of the Detention System.

20. [494]

    I see no reason to suppose that testing carried out in accordance with the Cardno recommendations would have revealed results any different than those in the UTS report of 10 April 2008.

21. [495]

    Further, as John Holland has pointed out, the experts agree that random testing would not have identified problems that are related to long term creep. Random testing during construction would only provide information about short term strengths.

22. [496]

    All in all, I find it impossible to reach any conclusion as to what different result would have ensued had John Holland ensured that of the Cardno recommendations were implemented.

Construction loading: crane point loads

1. [497]

   Part of Downer’s design case is that John Holland did not ensure that the capacity of the Atlantis cells was “sufficient for likely load conditions” at the Maintenance Centre (see [80] above).

2. [498]

   During the experts’ conclave, three experts - Mr Davies, Mr Wood and Dr Redman - expressed the opinion that a further shortcoming of KBR’s design was that it gave inadequate consideration to construction loads.

3. [499]

   KBR’s design stated, in section 6, that the design took account of all hazards in the “Safety Risk Register”.

4. [500]

   Downer drew attention to appendix D to the Report which is entitled “System Hazard Analysis” which, Downer submitted (I am not able to read the copy in the Court Book because of poor printing quality) included as a “risk reference”:

5. [501]

   In its reply submissions, Downer referred to an acknowledgement said to have been made in an affidavit sworn by Mr Gaffney about this matter. KBR served an affidavit by Mr Gaffney but did not call him or read the affidavit. Downer did not seek to tender any part of the affidavit as an admission by KBR. It was therefore quite inappropriate for Downer to refer to the affidavit in its submissions. I propose to take no account it.

6. [502]

   Assuming that the KBR design should have taken account of crane point loads, my attention has not been drawn to evidence which shows that any of the cells had been damaged by such means.

7. [503]

   As I have said, Mr Wilson agreed that the failed cells that he had seen were in “low loaded areas” and appeared to be the result of “construction damage” (see [117] above).

8. [504]

   In these circumstances, I cannot see that any significance attaches to any failure by KBR to take account of crane point loads in its design.

The Loffel revelation

1. [505]

   As I have set out above, a deficiency in KBR’s design of the Detention System was that it took no account of reduction in long term strength caused by creep in plastics. Evidently, this was because KBR was not aware of that phenomenon.

2. [506]

   However, in late 2009, it was alerted to this possibility by communications it received from a Mr Trevor Loffel. Mr Loffel was associated with one of Atlantis’s competitors, Cubic Solutions Pty Ltd.

3. [507]

   In September and October 2009, Mr Loffel sent emails to employees of KBR, who passed on the information in them to Mr Gaffney.

4. [508]

   That information included that:

5. [509]

   As both Downer and John Holland have pointed out, the reaction within KBR to these revelations shows that KBR regarded them as being serious and relevant to the services KBR had supplied to John Holland.

6. [510]

   Thus;

7. [511]

   John Holland submitted that these matters are significant for two reasons.

8. [512]

   First, that by reason of a number of provisions in the John Holland/KBR contract, KBR was obliged to pass this information on to John Holland.

9. [513]

   John Holland submitted that had that happened, investigations into the state of the Atlantis cells would have commenced in 2009 rather than, as has happened, in late 2013, with the result that the cost of remediating such problem as was shown to exist would have been less than it is now.

10. [514]

    Second, John Holland submitted that KBR’s failure to pass on this information was “wilful” for the purposes of cl 16.1 of the John Holland/KBR contract, with the result that KBR’s liability to John Holland would not be capped at $20 million (as would otherwise be the case by reason of cl 16.1).

11. [515]

    In view of the conclusions to which I have come as to the need to rectify or repair the Detention System, these questions do not arise.

12. [516]

    However, I will deal briefly with certain aspects of them.

13. [517]

    I accept John Holland’s submission that KBR was contractually obliged to pass on these matters to John Holland.

14. [518]

    The John Holland/KBR contract obliged KBR to:

15. [519]

    Those provisions, taken individually or together imposed on KBR an obligation to pass on to John Holland the information it had received in the circumstances I have set out above.

16. [520]

    Clause 16.1 of the John Holland/KBR contract provided that a “wilful breach” was an “intentional and conscious breach” of the John Holland/KBR contract.

17. [521]

    KBR has not explained why it did not pass this information on to John Holland. The obvious witnesses who could have provided such an explanation were Mr Taylor and Mr Gaffney. Mr Gaffney swore an affidavit in the proceedings which, ultimately, KBR did not read. The inference may readily be drawn that Mr Gaffney’s evidence would not have assisted KBR’s case: Jones v Dunkel (1959) 101 CLR 298. The same can be said for Mr Taylor (although he did not swear an affidavit in the proceedings).

18. [522]

    The entry by KBR in its Register and Contingency Model for Discreet Risks persuades me that it must have occurred to both Mr Taylor and Mr Gaffney that they should pass on to John Holland the matters there recorded. That they did not do so, in my opinion, must have been a result of an intentional and conscious decision to remain silent.

19. [523]

    That silence constitutes a “wilful breach” of the contractual provisions. If it had been relevant for me to do so, I would therefore have concluded that KBR would not have been entitled to rely upon the $20 million limitation of liability in cl 16.1 of the John Holland/KBR contract.

20. [524]

    Had KBR passed on to John Holland the information it received in September and October 2009 I am satisfied that, in all probability, John Holland would have passed the information on to Downer and that, as a result, investigations into the state of the cells in the Detention System would have occurred in the years before such investigation in fact commenced.

21. [525]

    As I have concluded that Downer has not proved that the Detention System requires repair or replacement, I conclude that earlier investigation would have made no difference to the result.

Misleading or deceptive conduct

1. [526]

   Downer’s closing submissions on this topic were not directed to, or confined by, the manner in which this aspect of its case was pleaded in its List Statement. In those submissions Downer did not address, in terms, if and how the pleaded case was made out.

2. [527]

   It is therefore important to pay attention to Downer’s pleaded case.

3. [528]

   With one exception, Downer’s allegations in the List Statement concerning misleading or deceptive conduct are that each of John Holland, KBR and Atlantis made express representations to it.

4. [529]

   The making of those express representations is said to be misleading or deceptive because, to the extent the representations were about present matters they were wrong, and to the extent they were about future matters they were made without reasonable grounds.

5. [530]

   EDI Rail does not allege that any of John Holland, KBR or Atlantis made any representation to it.

6. [531]

   Downer alleges that each of John Holland, KBR and Atlantis represented to it that:

7. [532]

   Downer also alleges that:

8. [533]

   The only allegation made by Downer of misleading or deceptive conduct by silence, is directed to KBR and concerns what I have called the “Loffel revelations”.

9. [534]

   In that regard Downer alleges that:

   1. (1)

      in the circumstances I have outlined concerning the Loffel revelations, it was incumbent on KBR to act on those revelations by amongst other things:

   2. (2)

      in failing to carry out those steps it represented to Downer by silence that its design of the Detention System was, and continued to be “appropriate to meet the specifications for the project”; and

   3. (3)

      such conduct was misleading or deceptive.

10. [535]

    Downer alleges that:

    1. (1)

       induced by the express representations, it agreed to the inclusion of Atlantis cells in the design and construction of the Maintenance Centre and that, but for those representations, “the Atlantis cells would not have been used”;

    2. (2)

       induced by KBR’s representation by silence, it did not take various steps in 2009 including requiring short and long term strength testing of the cells and remediation of the Detention System by removal of the Atlantis cells;

    3. (3)

       had the misleading or deceptive conduct not occurred the Atlantis cells would not have been used at all, or would not have continued to be used (because, presumably, concrete slotted pipes would have been used instead or would somehow have been substituted in 2009); and

    4. (4)

       thus the carpark would not have collapsed and the Detention System in the rail area would not have failed.

11. [536]

    Each of Downer and EDI Rail claim that it has thereby suffered loss and damage.

12. [537]

    I have found that:

13. [538]

    It follows that Downer has failed to show that the representations, assuming they were made, were false in any respect that is relevant; nor that either Downer or EDI Rail has suffered loss thereby.

14. [539]

    It is, in any event, hard to see how EDI Rail could have suffered loss or damage by reason of these representations, assuming that they were made to Downer, that they were false, and that they induced Downer to use the Atlantis cell system.

15. [540]

    Downer contented itself with submitting that EDI Rail had suffered loss “indirectly’ but did not develop how this could be so.

16. [541]

    However, as John Holland submits, the causation inquiry required for the purposes of s 82(1) of the Trade Practices Act is whether the plaintiff suffered loss or damage "by" the contravening conduct. That entails a determination of whether the loss or damage is the "real or direct or effective cause of the applicant's loss"; "it must have been 'brought about by virtue of' the conduct which is in contravention of s 52": ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1; [2014] FCAFC 65 at [1376], citing Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526 at 530-531.

17. [542]

    In order for a party to be able to establish "indirect causation" on the basis of third party reliance, there must be a "sufficient and direct link" or a "requisite element of proximity": Finishing Services Pty Ltd v Lactos Fresh Pty Ltd [2006] FCAFC 177 at [31]; McNee v P-Value Pty Ltd [2016] VSCA 223 at [114]; Chowder Bay Pty Ltd v Paganin [2017] FCA 332 at [379].

18. [543]

    The indirect causation cases speak of the misleading or deceptive conduct being "a link in the chain of causation": for example, Digi-Tech (Australia) Pty Ltd v Brand (2004) 62 IPR 184; [2004] NSWCA 58 at [156]; Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653; [2008] NSWCA 206 at [12]-[13]; ABN AMRO Bank NV at [1377]-[1380]; Re HIH Insurance Ltd (In liq) [2016] NSWSC 482 at [56], [74]-[75]; Chowder Bay Pty Ltd v Paganin at [381].

19. [544]

    Where conduct by the applicant forms a link in the chain of causation, the applicant must plead and prove that the applicant was in fact induced by the misleading or deceptive conduct of the respondent to proceed with the transaction: Digi-Tech (Australia) Pty Ltd v Brand at [148]-[149] and [155]-[159]; Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd at [12]-[13].

20. [545]

    A case based on the indirect theory of causation is a matter to be specifically pleaded: Digi-Tech (Australia) Pty Ltd v Brand at [163]-[164]. No such case is pleaded in the List Statement.

21. [546]

    EDI Rail is committed, by the RailCorp/EDI Rail contract to provide Through Life Support in respect of the Maintenance Centre in accordance with that contract. There is no suggestion in the evidence, or the List Statement that EDI Rail entered the Reliance Rail/EDI Rail contract in reliance on any representation made by any of John Holland, KBR or Atlantis. That contract was entered into in December 2006, well before the conduct said to be misleading or deceptive.

22. [547]

    The loss that EDI Rail contends that it has suffered is an increase in its anticipated liability under the Reliance Rail/EDI Rail contract.

23. [548]

    But any such loss appears to me to be entirely a function of EDI Rail’s contractual liability to Reliance Rail pursuant to its obligations under the Reliance Rail/EDI Rail contract rather than “by conduct of” John Holland.

24. [549]

    As John Holland submits, a successful claim by EDI Rail would be “ground breaking conceptually” as an application of the provisions of ss 52 and 82 of the Trade Practices Act (and the various the analogues).

25. [550]

    As John Holland submitted:

26. [551]

    In any event, as John Holland also submits, EDI Rail can only have suffered loss because the continuing obligation it undertook when it entered the Reliance Rail/EDI Rail contract proved to be larger than it had anticipated: for example, Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388, [2004] HCA 3 at [66]. But EDI Rail has not led any evidence as to how larger that burden would have been had some other means been adopted for dealing with stormwater runoff at the Maintenance Centre.

The cross-claims

1. [552]

   John Holland brings cross-claims against KBR and Atlantis. KBR brings a cross-claim against Atlantis. Each seeks to pass on such liability as I found it had to Downer or EDI Rail.

2. [553]

   As I have found none of those parties has any liability to Downer or EDI Rail, it is not necessary for me to deal with these matters.

QBE issues

1. [554]

   Had I found that the Detention System required repair or replacement, it would have been necessary to deal with, amongst other things, Downer and EDI Rail’s misleading or deceptive conduct claim against Atlantis.

2. [555]

   One conclusion that does follow from my findings is that Atlantis represented that the cells had a “strength” of 263 kPa. It is clear they did not. However, I have found that neither Downer or EDI Rail has suffered any loss by reason of that misrepresentation.

3. [556]

   Atlantis is in administration and has played no role in the proceedings. Between 2008 and 2014 Atlantis was insured with QBE under a series of “Commercial/Retail/Industrial” liability policies. John Holland has leave under s 6 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) to bring these proceedings.

4. [557]

   Assuming Atlantis had been found to be liable to Downer, EDI Rail, John Holland or KBR on one or more of the bases in the various claims made by those parties, there is an issue as to whether the QBE policies would have responded to a claim made on it by Atlantis

5. [558]

   It is not necessary to resolve that issue. However, in deference to the detailed submissions made by both John Holland and QBE on the subject, I will deal with it.

6. [559]

   Each of Downer, John Holland and KBR brings proceedings against Atlantis to recover the economic loss they would suffer if liable to compensate parties further up the contractual hierarchy for property damage said to have been suffered by RailCorp, as the owner of the Maintenance Centre.

7. [560]

   None of Downer, John Holland or KBR alleges it had suffered damage to its property.

8. [561]

   There was a debate before me as to whether, in that circumstance, the QBE insuring clause responded to the claims made.

9. [562]

   In that regard, the debate focused on the words “in respect of” as they appear in the insuring clause.

10. [563]

    The insuring clause for each policy year reads:

11. [564]

    The insuring clause incorporates a number of defined terms, to which I will return.

12. [565]

    QBE drew attention to English authority in which the expression “in respect of” property damage in a liability policy was held to be equivalent to “for” property damage with the result that the policies were construed to be limited to a liability to the owner or lessee of the property alleged to be damaged.

13. [566]

    For example, in Tesco Stores Ltd v Constable [2008] EWCA Civ 362 the Court said:

14. [567]

    In Australia, there is authority to the opposite effect. Thus in Siegwerk Australia Pty Ltd (in liq) v Nuplex Industries (Aust) Pty Ltd [2013] FCAFC 130, the Full Court of the Federal Court accepted that, a claim for economic loss under a similar insuring clause could be a claim “in respect of” property damage where the economic loss was sufficiently causally connected to property damage.

15. [568]

    Robertson J (with whom Perram and Dodds-Streeton JJ agreed) said at [161]:

16. [569]

    Although it appears that the attention of the Full Court was not directed to English authorities such as Tesco, were it necessary for me to express an opinion about this question, I would have been inclined to follow the reasoning of Robertson J, which I consider more persuasive.

17. [570]

    However, on the view to which I have come concerning the proper construction of the insuring clause in the QBE policy, the question does not arise.

18. [571]

    As I have said, the insuring clause incorporates a number of defined terms; “You”, “We”, “Compensation”, “Property Damage”, “Period of Cover”, “Your Business” and “Occurrence”.

19. [572]

    The expressions “You”, “We” “Property Damage”, “Your Business” and “Period of Cover” have unexceptional definitions.

20. [573]

    “Occurrence” is defined to mean, relevantly, an “event” that is “neither intended nor expected” causing property damage.

21. [574]

    “Compensation” is defined, relevantly, to mean “monies paid or…to be paid by judgment…for…Property Damage” (emphasis added).

22. [575]

    Incorporation of the definition of “Compensation” into the insuring clause (leaving the other defined terms in place for simplicity) has this somewhat awkward result:

23. [576]

    The insuring clause, so expanded, thus uses the expressions “for”, “in respect of” and “caused by or arising out of” property damage.

24. [577]

    Omitting words which this process suggests are surplus to requirements, the effect of the insuring clause appears to me to be that QBE agreed, relevantly, to indemnify Atlantis for any legal liability Atlantis may have:

    1. (1)

       by reason of a judgment “for” property damage;

    2. (2)

       which judgment is “in respect of” property damage which;

25. [578]

    Thus, the effect of the insuring clause is that it is only enlivened if, relevantly, a judgment is entered against Atlantis “for” property damage. The judgment must also be “in respect of” property damage “caused by or arising from” an unintended and unexpected event.

26. [579]

    It was common ground before me that, with one qualification, the claims made by Downer, John Holland and KBR against Atlantis are not claims “for” property damage suffered by any one of those parties.

27. [580]

    The one qualification is that John Holland submits that if the correct conclusion was that the cells were damaged as soon as they were installed, it would follow that property of John Holland (namely the cells themselves, the geofabric, compressed sand and the like) was damaged and that John Holland’s claim against Atlantis would, in this respect, be a claim “for” property damage.

28. [581]

    As the evidence does not establish this hypothetical circumstance, I need consider the matter no further.

29. [582]

    It follows that, subject to that qualification, the claims made by Downer, John Holland and KBR against Atlantis are not claims “for” property damage and that, accordingly, the QBE policy would not have responded to them.

30. [583]

    QBE submits that, in any event, a number of exclusions in the policy are engaged. In view of the conclusion to which I have come concerning the insuring clause, I do not consider it necessary to deal with that question.

Quantum

1. [584]

   As I have concluded that the Detention System does not require repair or replacement and that, in any event, the collapse of the carpark was caused by Laing O’Rourke’s activities on the adjacent Stabling Yard site, it is not necessary for me to deal with quantum. However, I will do so, briefly, on the assumption that one or more of John Holland, KBR or Atlantis is liable to Downer or EDI Rail for the repair or reinstatement of the carpark and the rail area.

2. [585]

   In final submissions, Downer drew my attention to authorities dealing with mitigation of damages to this effect:

3. [586]

   There is no controversy about these matters.

4. [587]

   However, the question here is whether Downer (or EDI Rail) did act reasonably, for these purposes.

5. [588]

   The function of the Atlantis cell tank below the carpark was to control stormwater runoff from the neighbouring Stabling Yard and from the carpark itself.

6. [589]

   The collapse of the carpark commenced in April 2013. Approximately one third of the Atlantis tank below the carpark was destroyed. A grout wall was erected which, in effect, cut off the cells under the carpark that had collapsed from those which remained intact. The grouting stopped the ongoing collapse of the carpark. That had the effect that the undamaged cells beyond the grout wall no longer provided stormwater detention for the Stabling Yard.

7. [590]

   In July 2014, some 15 months after the collapse, EDI Rail (not Downer) called for tenders for repair of the carpark. That EDI Rail, rather than Downer, called for such tenders is consistent with it understanding that the “risk of damage to or loss or destruction of” the Maintenance Facility Works (including the Detention System) had passed to it under cl 34.3 of the Reliance Rail/EDI Rail contract (see [293] to [303] above). On 25 July 2014 EDI Rail awarded the contract to Ward Civil and Environmental Engineering Pty Ltd.

8. [591]

   Ward Civil replaced the Atlantis cell tank with a concrete structure. The entire cell system was replaced, including the areas beyond the grout wall behind which the Atlantis cells were still intact.

9. [592]

   That work was carried out between September 2014 and May 2015.

10. [593]

    It is common ground that the reasonable cost of effecting this work was $10,591,221.

11. [594]

    Of this sum, $788,839 was spent on piling. Dr Haberfield, who was called by KBR, expressed the opinion that it was incumbent on Laing O’Rourke, who performed the work on the Stabling Yard site that I have held caused the carpark to collapse, to shore up the carpark with piling before carrying out excavation on the Stabling Yard site in October 2012. As KBR has submitted, this was work to correct the fundamental failing in Laing O’Rourke’s works on the adjacent site. This work had to be performed before the carpark works could be embarked upon. I accept KBR’s submission that “these are costs that really fell to [Laing O’Rourke]” because they are “necessary to remedy another contractor’s defective works on an adjoining site, but…had to be [effected] prior to the carpark repairs beginning in earnest whatever be the necessary carpark repair works”.

12. [595]

    A further question arises as to whether it was either necessary or reasonable for Downer or EDI Rail to replace completely the Atlantis cell tank with a concrete tank rather than simply removing the damaged Atlantis cells and replacing them with engineered fill. It is agreed that the cost of repairing the carpark on that basis would have been $3,771,942.

13. [596]

    In this regard, KBR developed detailed submissions, supported by the evidence of Dr Haberfield, to show that:

14. [597]

    KBR also points to a hydraulic report prepared in January 2014 by Aecom which stated:

15. [598]

    Aecom performed detailed hydrological modelling which showed that, because the Stabling Yard was larger than was anticipated when KBR did its design, and because the Stabling Yard incorporated on-site water detention basins, the requirements of Auburn Council concerning the rate of discharge of stormwater into Duck River could be achieved whether or not there was a detention tank beneath the carpark.

16. [599]

    KBR developed detailed submissions concerning the implications of Aecom’s observations in its hydraulic report and concluded:

17. [600]

    Downer did not attempt to engage with these submissions.

18. [601]

    Rather, it referred to evidence given by Mr Robert Velins, a project director of Downer responsible for overseeing investigation into the carpark collapse, and its reinstatement.

19. [602]

    Mr Velins stated that it was necessary to remediate the carpark “quickly” because carpark capacity was needed, because Downer was concerned about the durability of the Atlantis cells and because RailCorp and Reliance Rail were insisting on reinstatement of the carpark as soon as possible.

20. [603]

    Mr Velins ceased to be involved in overseeing the remediation of the carpark shortly after Aecom’s report was made. In cross-examination, he appeared unaware of its contents.

21. [604]

    The carpark remediation did not commence until September 2014, well after the date of Aecom’s report. My attention was not drawn to any evidence suggesting that Aecom’s conclusions were taken into account when a decision was made as to how the carpark should be remediated.

22. [605]

    I am not satisfied that it was in these circumstances reasonable for Downer or EDI Rail to proceed to replace the whole of the carpark tank with a concrete structure.

23. [606]

    Were it relevant for me to do so, I would only have allowed Downer or EDI Rail $3,771,942 on account of the repair of the carpark.

24. [607]

    As at 30 September 2016, one or other or Downer and EDI Rail had incurred costs in the sum of $4,085,141.74 investigating the rail area, including conducting the excavations to which I have referred.

25. [608]

    John Holland accepted that that amount had been paid, and that it was a reasonable amount for the work done.

26. [609]

    I do not understand KBR or Atlantis to make a different submission.

27. [610]

    Three expert witnesses gave evidence of the likely cost to Downer or EDI Rail of replacing the Detention System with a concrete pipe system.

28. [611]

    It is now common ground that the task would likely take 106 weeks.

29. [612]

    Mr Dickinson, on behalf of Downer, and Mr O’Shea, on behalf of John Holland, both quantity surveyors, approached the matter on a “first principles” basis and estimated that the reasonable cost of effecting this work was $28,604,278 (Mr Dickinson) or $19,075,479 (Mr O’Shea).

30. [613]

    The questions that divided Mr Dickinson and Mr O’Shea were in relation to such matters as the appropriate labour rate, the amount that should be allowed for offsite storage of materials, the amount that should be allowed for double handling of materials, preliminaries, margins and other like matters.

31. [614]

    Each expert agreed that reasonable professional minds could differ in relation to most, if not all of these items.

32. [615]

    On the other hand, Mr Makin on behalf of KBR, also a quantity surveyor, formed his opinion based upon a tender actually put forward by the Brefni Group in 2016 following the call by Downer for tenders for rectification of the Detention System.

33. [616]

    Mr Makin formed the view that the Brefni tender was a “reasonable indication of the market value” of the work needed to replace the Detention System save that certain of the figures in the Brefni tender should be increased to take account of a number of uncontroversial matters raised by Mr Ng (a Senior Project Manager employed by Downer: see [426] below).

34. [617]

    After taking into account Mr Ng’s points, Mr Makin adjusted the Brefni tender figure to $18,960,775.

35. [618]

    That figure is only slightly below Mr O’Shea’s figure (calculated on the “first principles” basis).

36. [619]

    That suggests to me that, assuming replacement of the Detention System was required, a figure in the order of $19 million would be a reasonable allowance.

37. [620]

    The “zone of influence” is the zone adjacent to and beneath rail tracks which are subject to live load pressure of the trains on top of the tracks.

38. [621]

    Had the evidence established that Atlantis cells in the “zone of influence” required replacement, the average of the cost estimates of Messrs Makin, Dickinson and O’Shea is a fraction over $11 million.

39. [622]

    Those experts also agreed that the cost of rectifying a 3 m length of cells was in the order $50,000.

40. [623]

    Downer claims a further $3,980,182 being various items identified in Exhibit 24.

41. [624]

    The only dispute in relation to that sum was in respect of an amount of $266,705 claimed by Downer on account of “project specific insurance”.

42. [625]

    Downer’s submissions justifying this figure are barely developed.

43. [626]

    The figure $266,705 was formulated by Mr Dickinson. During concurrent evidence, he was not able to justify that particular figure or explain why Downer would need a separate level of insurance beyond that contained within the tender of the successful contractor.

44. [627]

    Had it been relevant for me deal with this question, I would not have made any allowance for insurance.

45. [628]

    Downer also claims an amount of 7% on various items as a recovery for “overheads”.

46. [629]

    Again, Downer’s submissions in relation to this matter are barely developed. The evidence does not identify to what the “overhead recovery” is said to relate to.

47. [630]

    Mr Ng deposed that, in his experience, contractors charge a percentage of the overall costs of work. So much may be accepted. However, in the hypothetical circumstance under consideration, Downer would be the principal and not the contractor and not be in a position to make any charge for overhead costs. Downer would incur its own overhead costs in any event, whether or not it was obliged to replace the Detention System. As John Holland submits, to allow Downer (or EDI Rail, as the case may be) to recover an amount on account of overheads would be to allow it to profit from performing work which it is obliged to perform in any event under the Reliance Rail/Downer, or Reliance Rail/EDI Rail contract, as the case may be. Presumably Downer and EDI Rail have allowed for recovery of overheads and profit.

48. [631]

    Had it been relevant for me to deal with this question, I would have made no allowance for Downer’s “overheads”.

Conclusion

1. [632]

   The proceedings must be dismissed.

2. [633]

   I will hear the parties as to costs.