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CITE

Notable Unreported Decision

BHP Coal Pty Ltd v O & K Orenstein & Koppel AG[2008] QSC 141McMurdo J
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BHP Coal Pty Ltd v O & K Orenstein & Koppel AG[2008] QSC 141

SUPREME COURT OF QUEENSLAND

CITATION:	BHP Coal Pty Ltd and Ors v O & K Orenstein & Koppel AG and Ors [2008] QSC 141
PARTIES:	BHP Coal Pty Ltd (ACN 010 595 721) First Plaintiff Mitsubishi Development Pty Ltd (ACN 009 779 873) Second Plaintiff UMAL Consolidated Limited (ACN 000 767 386) Third Plaintiff BHP Queensland Coal Investments Pty Ltd (ACN 098 876 825) Fourth Plaintiff QCT Investment Pty Ltd (ACN 010 487 831) Fifth Plaintiff QCT Mining Pty Ltd (ACN 010 487 840) Sixth Plaintiff QCT Management Pty Ltd (ACN 010 472 036) Seventh Plaintiff v O & K Orenstein & Koppel AG First Defendant Thyssenkrupp Engineering (Australia) Pty Ltd (ACN 000 515 333) (Formerly known as Krupp Engineering (Australia) Pty Ltd) Second Defendant Frank Thiel Third Defendant
FILE NO/S:	6288 of 2003
DIVISION:	Trial Division
PROCEEDING:	Trial
ORIGINATING COURT:	Supreme Court of Queensland
DELIVERED ON:	1 July 2008
DELIVERED AT:	Brisbane
HEARING DATE:	16, 18-20, 23-24, 26, 30 April 2007, 1-4, 8-11, 14-18, 21-24, 28-31 May 2007, 1, 4-7, 12-14, 20 June 2007, 16-20, 23-27, 30-31 July 2007, 1-3, 6-10, 16-17, 21-24, 27-31 August 2007, 4-6, 10-12, 17 September 2007, 1, 3-5, 8 October 2007, 29-31 January 2008, 1, 4-8 February 2008, 4-5 March 2008
JUDGE:	McMurdo J
ORDER:	Judgment for the first plaintiff against the first defendant in the amount of $22,932,881. Judgment for the second plaintiff against the first defendant in the amount of $8,311,497. Judgment for the third plaintiff against the first defendant in the amount of $401,392. Judgment for the fifth plaintiff against the first defendant in the amount of $6,422,276. Judgment for the sixth plaintiff against the first defendant in the amount of $8,445,293. Judgment for the seventh plaintiff against the first defendant in the amount of $2,456,520. Judgment for the plaintiffs, save for the fourth plaintiff, against the second defendant in the amount of $53,288,976. Judgment for the first plaintiff against the third defendant in the amount of $22,834,326. Judgment for the second plaintiff against the third defendant in the amount of $8,275,777. Judgment for the third plaintiff against the third defendant in the amount of $399,667. Judgment for the fifth plaintiff against the third defendant in the amount of $6,394,676. Judgment for the sixth plaintiff against the third defendant in the amount of $8,409,000. Judgment for the seventh plaintiff against the third defendant in the amount of $2,445,964. The fourth plaintiff’s claim against each defendant is dismissed.
CATCHWORDS:	TORT – ESSENTIALS OF ACTION FOR NEGLIGENCE – DAMAGE – Causation – Whether the collapse of the Bucketwheel Excavator was caused by modification of original design – Whether the collapse of the Bucketwheel Excavator was caused by use outside the operating parameters for which it was designed – Whether the collapse of the Bucketwheel Excavator was caused by the failure of the inspector to examine the entire machine TORT – ESSENTIALS OF ACTION FOR NEGLIGENCE – DUTY OF CARE –Whether engineer breached duty of care when designing stiffeners to reinforce the machine – Whether engineer should have had regard to the fact that the engineering standard was current but subject to academic and professional review when designing stiffeners TORT – ESSENTIALS OF ACTION FOR NEGLIGENCE – DUTY OF CARE – SPECIAL RELATIONSHIPS AND DUTIES – Professional persons – Engineer – Duty of skill and care implied into professional services contract – Separate duty of care in tort – Whether these duties are coextensive – Whether engineer was in breach of duty of care in failing to inspect the entirety of the machine TORT – CONTRIBUTORY NEGLIGENCE – Whether the use of the machine outside the operating parameters for which it was designed contributed to collapse of the machine – Whether the failure to inspect more often contributed to the collapse of the machine – Whether the failure to act immediately prior to collapse contributed to the collapse of the machine CONTRACT – BUILDING, ENGINEERING AND RELATED CONTRACTS – Contract for the inspection of a Bucketwheel Excavator – Interpretation CONTRACT – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – IMPLIED TERMS – In the context of a contract to inspect machinery – Whether it is an implied term that such inspection is limited to that which can be safely seen from walkways CONTRACT – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – CUSTOM AND USAGE – Incorporation into contract – Whether an instruction verbally given amounts to variation of contract – Whether previous inspections vary the terms of the contract CONTRACT – CONTRACT IMPLIED FROM CONDUCT OF PARTIES – Whether an instruction verbally given can amount to a variation of contract CONTRACT – ACCEPTANCE ADDING TO OR VARYING TERMS OF OFFER – Where both parties sought contract on their standard terms CONTRACT – BUILDING, ENGINEERING AND RELATED CONTRACTS – Implied duty to exercise skill and care in contract for the provision of professional engineer services DAMAGES – GENERAL PRINCIPLES – MITIGATION OF DAMAGES – PLAINTIFF’S DUTY TO MITIGATE – Where the plaintiffs purchased a shovel/sizer to replace collapsed Bucketwheel Excavator – Whether this was an appropriate effort at mitigation – Whether to purchase the shovel/sizer was reasonable when rebuilding the Bucketwheel Excavator was possible and less expensive DAMAGES – GENERAL PRINCIPLES – GENERAL AND SPECIAL DAMAGES – Where claims for general, special and “hybrid” damages made – Where those damages are claimed for loss of use of a profit-earning chattel whose contribution to profit cannot be specifically quantified DAMAGES – MEASURE AND REMOTENESS OF DAMAGES IN ACTIONS FOR TORT – DAMAGE TO CHATTELS – Damages for loss of use of a profit-earning chattel whose contribution to profit cannot be specifically quantified – Whether measured on the cost of repair or replacement – Whether replacement in these circumstances constitutes a betterment ENERGY AND RESOURCES – COAL – Bucketwheel Excavator used at coal mine – Collapse – Claim in negligence and for breach of contract TORT – ESSENTIALS OF ACTION FOR NEGLIGENCE – DAMAGE – Where damage is sustained upon joint venturers – Whether joint venturers should have separate or joint verdict CONTRACT – JOINT AND SEVERAL CONTRACTORS – Where joint venturers contract together – Whether their interests are joint or several – Whether joint venturers should have separate or joint verdict PROFESSIONS AND TRADES – OTHER PROFESSIONS, TRADES OR CALLINGS – ENGINEERS – Duty of skill and care implied into contracts for the provision of professional services Schedule 3, Audit Reform and Corporate Disclosure Act 2004 (Cth) s 1466, Corporations Act 2001 (Cth) s 5, s 10, Law Reform Act 1995 (Qld) s 47, Supreme Court Act 1995 s 52, s 53, s 53(aa), s 68, s 68A, s 74, s 74(1), s 74(2), s 82, s 82(1B), s 84(2), Trade Practices Act 1974 (Cth) r 63, r 67, Uniform Civil Procedure Rules Admiral Management Services Ltd v Para-Protect Europe Ltd [2002] 1 WLR 2722 Aerospace Publishing Ltd v Thames Water Utilities Ltd [2007] EWCA Civ 3 AHR Constructions Pty Ltd v Maloney [1994] 1 Qd R 460 Allianz Australia Insurance Ltd v GSF Australia Pty Ltd (2005) 221 CLR 568 Allstate Life Insurance Co v ANZ Banking Group Ltd Unreported, Federal Court, Lindgren J, 7 November 1994, BC9400129 Atlantis Properties Pty Ltd v Cameron [2005] QCA 97 Australia and New Zealand Banking Group Ltd v Pan Foods Company Importers and Distributors Pty Ltd [1999] 1 VR 1 Australian Securities Ltd v Western Australian Insurance Co Ltd (1929) 29 SR (NSW) 571 Bachelor v Burke (1981) 148 CLR 448 Banco de Portugal v Waterlow [1932] AC 452 Batiste v State of Queensland [2002] 1 Qd R 119; [2001] QCA 275 Birmingham Corporation v Sowsbery [1970] RTR 84 Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd & Ors (1987) 14 FCR 215 Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd (2006) 236 ALR 720 Bradburn v Botfield (1845) 14 M&W 559; 155 ER 597 Brickhill v Cooke [1984] 3 NSWLR 396; (1984) Aust Torts Reports 80-685 Bryan v Maloney (1995) 182 CLR 609 Caltex Oil (Australia) Pty Ltd v The Dredge “Willemstad” (1976) 136 CLR 529 Camm v Salter [1992] 2 Qd R 342 Chappel v Hart (1998) 195 CLR 232 Commissioners for Executing the Office of Lord High Admiral of the United Kingdom v Owners of the Steamship Valeria (“The Valeria”) [1922] 2 AC 242 Commissioner for Railways v Luya, Julius Limited [1977] Qd R 395 Cullen v Knowles [1898] 2 QB 380 Darbishire v Warran [1963] 1 WLR 1067 (CA) Davidson v JS Gilbert Fabrications Pty Ltd [1986] 1 Qd R 1 Davies v Taylor [1974] AC 207 Deutz Australia Pty Ltd v Skilled Engineering Ltd [2001] VSC 194 Dixons (Scholar Green) Ltd v J L Cooper Ltd [1970] RTR 222 Equus Financial Services Limited v Glengallon Investments Pty Ltd [1994] QCA 157 Financial Industry Complaint Services Ltd v Deakin Financial Services Pty Ltd (2006) 157 FCR 229; (2006) 238 ALR 616 Foley v Addambrooke (1843) 4 QB 197; 114 ER 872 Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 Gold Ribbon Accountants Pty Ltd (in liq) v Sheers [2006] QCA 335 Graham Barclay Oysters Pty Ltd v Ryan (2002) 211 CLR 540 Greer v Alstons Engineering Sales & Services Ltd [2003] UKPC 46 Grincelis v House (2000) 201 CLR 321 Hampic Pty Ltd v Adams (2000) ATPR 41-737; [1999] NSWCA 455 Hanave Pty Ltd v LFOT Pty Ltd (1999) 43 IPR 545; [1999] FCA 357 Harbutt’s ‘Plasticine’ Ltd v Wayne Tank & Pump Co Ltd [1970] 1 QB 447 Heydon v NRMA (2000) 51 NSWLR 1 Horace Holman Group Ltd v Sherwood International Group Ltd [2001] All ER (D) 83 I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526 Jones v Dunkel (1959) 101 CLR 298 Kendall v Hamilton (1879) 4 App Cas 504 King v Hoare (1844) 13 M&W 495 Lord Citrine (Owners) v The Hebridean Coast (Owners) [1961] AC 545 Malec v JC Hutton Pty Ltd (1990) 169 CLR 638 March v E & MH Stramare Pty Ltd (1991) 171 CLR 506 Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 Maxitherm Boilers Pty Ltd v Pacific Dunlop Pty Ltd [1998] 4 VR 559 McCarthy v McIntyre [1999] FCA 784 McDonald v Commonwealth (1945) 46 SR (NSW) 129 McDonald v Ludwig [2007] QSC 28 McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 Mersey Docks and Harbour Board v Owners of the SS Marpessa (“The Marpessa”) [1907] AC 241 Metropolitan Gas Co v Melbourne Corporation (1924) 35 CLR 186 Midland Bank Trust Co Ltd & Anor v Hett, Stubbs & Kemp (a firm) [1979] 1 Ch 384 Moloney v Bells Securities Pty Ltd [2005] QSC 013 Moore v State of Queensland [2005] QCA 299 National Insurance Co of New Zealand Ltd v. Espagne (1961) 105 CLR 569 National Mutual Property Services (Australia) Pty Ltd & Ors v Citibank Savings Ltd & Ors (1995) 132 ALR 514 Naxakis v Western General Hospital (1999) 197 CLR 269 Oceanic Crest Shipping Company v Pilbara Harbour Services Pty Ltd (1986) 160 CLR 626 Owners of the Steamship “Mediana” v Owners, Master and Crew of Lightship “Comet” (“The Mediana”) [1900] AC 113 Park v Allied Mortgage Corp Ltd (1993) ATPR (Digest) 46-105 Peabody v Barron (1884) 5 LR (NSW) 72 Perre v Apand Pty Ltd (1999) 198 CLR 180 Pollock v Mackenzie (1866) 1 QSCR 156 Pritchard v Race Cage Pty Ltd (1997) 72 FCR 203 R + D Versicherung AG v Risk Insurance and Reinsurance Solutions SA [2006] All ER (D) 209 Redding v Lee (1983) 151 CLR 117 Rickard Constructions Pty Ltd & Anor v Rickard Hails Moretti Pty Ltd & Ors (2004) 220 ALR 267 New South Wales v Fahy (2007) 236 ALR 406, [2007] HCA 20 Roberts v Holland [1893] 1 QB 665 Rogers v Whittaker (1992) 175 CLR 479 Sedgworth v Overend (1797) 7 Term Rep 279; 101 ER 974 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 Seltsam Pty Ltd v McGuinness (2009) 49 NSWLR 262 Serisier Investments Pty Ltd v English [1989] 1 Qd R 678 Standard Chartered Bank v Pakistan National Shipping Corporation [2001] EWCA Civ 55 Sunley (B) and Company Limited v Cunard White Star Limited [1940] 1 KB 740 Tate & Lyle Food and Distribution Ltd v Greater London Council [1982] 1 WLR 149 Tesrol Joinery Pty Ltd v Cefla Scri [2005] NSWSC 528 The Owners of No 7 Steam Sand Pump Dredger v The Owners of SS “Greta Holme” (“The Greta Holme”) [1897] AC 596 Queensland Independent Wholesalers Ltd v Coutts Townsville Pty Ltd [1989] 2 Qd R 40 Thompson v Hakewill (1865) 19 CB (NS) 713; 144 ER 966 Travel Compensation Fund v Tambree (2005) 224 CLR 627 Trendtex Trading Corporation & Anor v Credit Suisse [1982] AC 679 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 William Brandt’s Sons & Co v Dunlop Rubber Company Limited [1905] Woodman v Rasmussen [1953] St R Qd 202 Woolcock Street Investments v CDG Pty Ltd (2004) 216 CLR 515 Wyong Shire Council v Shirt (1979) 146 CLR 40 Yorke v Lucas (1985) 158 CLR 661 Zappulla v Perkins [1978] Qd R 92
	GA Thompson SC and JD McKenna SC with AW Duffy and CM Muir for the plaintiffs P Morrison QC and DJS Jackson QC with P Roney and G Thomas for the defendants
SOLICITORS:	Mallesons Stephen Jaques for the plaintiffs Baker & McKenzie for the defendants

TABLE OF CONTENTS

The case in outline……………………………………………………….....	[ 1]
The BWE…………………………………………………………………...	[ 12]
THE DESIGN CASE
Before 1984……………………...………………………………………….	[ 23]
The 1984 repair…………………………………………………………….	[ 28]
Dr Fleischhaker at Goonyella……………………………………………..	[ 32]
Dr Fleischhaker and welds………………………………………………...	[ 39]
The stiffeners are attached………………………………………………...	[ 51]
Which company owed the duty of care?.....................................................	[ 53]
Scope of the duty of care…………………………………………………...	[ 61]
To whom was the duty owed?......................................................................	[ 67]
What did Dr Fleischhaker consider?..........................................................	[ 87]
What should have been done?.....................................................................	[103]
Supervision....................................................................................................	[177]
Causation…………………………………………………………………...	[179]
The Design Case and Section 52…………………………………………..	[201]
The Design Case: outcome on liability…………………………………...	[219]
THE INSPECTION CASE	[225]
What constituted the contract?...................................................................	[230]
The *Trade Practices Act* terms……………………………………………..	[262]
What inspection did the contract require?.................................................	[268]
The walkways case…………………………………………………………	[273]
What did Mr Thiel inspect?.........................................................................	[286]
What could and should have Mr Thiel done?
Mirrors………………………………………………………………..	[301]
Manboats and cherry pickers…………………………………………	[321]
Ladders………………………………………………………………..	[328]
Scaffolding…………………………………………………………….	[329]
The inspector’s report……………………………………………………..	[336]
Was Krupp negligent?..................................................................................	[339]
Was Mr Thiel negligent?..............................................................................	[343]
The inspector’s report and s 52…………………………………………...	[351]
Section 52 and Mr Thiel…………………………………………………...	[357]
Would a fatigue crack have been seen in 1999?.........................................	[362]
Where was the crack in 1999?.....................................................................	[363]
Dr Jones’ opinion……………………………………………………..	[371]
Dr Maddox……………………………………………………………	[379]
Dr Potts………………………………………………………………..	[393]
Dr Munz………………………………………………………………..	[406]
Conclusions as to crack size……………………………………………….	[430]
What would Mr Thiel have seen?................................................................	[433]
Loss of a chance…………………………………………………………….	[451]
Conclusions on causation…………………………………………………..	[458]
The inspection case: outcome on liability………………………………..	[471]
CONTRIBUTORY NEGLIGENCE……………………………………...	[474]
Conduct outside the Design Operating Parameters
Removal of the gear box………………………………………………	[481]
Safety devices………………………………………………………….	[484]
Drop cutting…………………………………………………………...	[507]
Teeth and buckets……………………………………………………..	[543]
Production rates………………………………………………………	[586]
Other allegations of contributory negligence
Reporting systems……………………………………………………..	[613]
Maintenance and inspection practices………………………………..	[620]
Finite element analysis………………………………………………..	[642]
The alleged mismanagement by the plaintiffs of the 1999 inspection...	[647]
The days before the collapse…………………………………………..	[655]
Conclusion as to contributory negligence………………………………...	[668]
Other defences abandoned………………………………………………...	[669]
DAMAGES
Introduction………………………………………………………………..	[670]
Cost of a rebuild……………………………………………………………	[682]
The shovel/sizer cost – should it be allowed?..............................................	[750]
Additional expenses
Dismantling and removing the BWE in 2000…………………………	[792]
Dismantling and removal of damaged BWE…………………………..	[810]
Costs of Investigation of the Failure and the Assessment of Replacement and Repair Options……………………………………..	[816]
Additional Administrative Costs Incurred as a Result of the Failure…	[831]
Cost of Recommissioning Conveyor System…………………………..	[844]
System Commissioning and Spreader Shutdown Costs……………….	[859]
Additional Expenses: Summary………………………………………	[873]
Damages for loss of use – special damages……………………………….	[874]
Further claim for loss of use: general damages	[919]
Assessment of general damages	[940]
Interest	[950]
CONCLUSIONS	[960]

The case in outline

The Goonyella Riverside Mine is a coal mine near Moranbah in Central Queensland. It is an open cut mine, so that the coal is reached by the removal of the earth which is above it. This earth is called the overburden.

The overburden is removed by various kinds of machines. This case concerns one of them, which was called a bucket wheel excavator and which I will call “the BWE” or simply “the machine”. It worked at the Goonyella Mine from 1982 until 2000. It was in continuous operation during those 18 years until suddenly, in the early hours of 8 March 2000, it collapsed.

On any view its owners suffered a large loss, which they seek to recover by these proceedings. Subject to some qualifications which I will discuss, the plaintiffs are, and have been the members of the joint venture which, through the first plaintiff as the mine operator, has mined at Goonyella Riverside since the 1970’s.

The BWE was not repaired. It was replaced by machinery of a different kind. The plaintiffs claim the cost of that machinery together with other alleged losses, resulting in a total claim of just over $50 million. They have an alternative claim for what they say would have been the cost of a rebuild of the BWE, which taken with other losses, amounts to about $44.5 million. The quantification of each of these alternative claims is strongly disputed. There are many alternative arguments by the defendants as to quantum, but the defendants effectively concede losses of at least $12 million.

The BWE collapsed because of a fracture to its central tower or mast. It is common ground that this was the result of fatigue. A crack developed in a certain part of the tower which then grew with the effect of fatigue upon the structure. Undetected, the crack ultimately grew to a point where the various forces caused that part of the tower to break. Other components supported by the tower then collapsed with it.

The first defendant, which I will call O&K, designed and manufactured the BWE. There is no complaint about that however. The claim against O&K is from what happened a few years after the BWE had been in operation at the mine in late 1984. It then required some repair, and the chief designer of the BWE, O&K’s employee Dr Fleischhaker, came from Germany to the mine to assist. Part of his suggested repair involved the addition of lengths of steel, called stiffeners, to be welded on to the main tower. He returned to Germany and a few weeks later that work, including the addition of the stiffeners, was performed. O&K sent another of its employees, a Mr Tiedt, from Germany to the mine to do something in the supervision of that work.

The cracking which led to the collapse originated at the end of one of these stiffeners. In what the parties have called the design case, the plaintiffs allege three things against O&K, which is sued in negligence as vicariously liable for the alleged negligence of Dr Fleischhaker and Mr Tiedt. The first and principal claim is that Dr Fleischhaker negligently designed the stiffeners, and the detail of their welding. Secondly, it is alleged that Mr Tiedt did not properly inspect the affixation of the stiffeners and in particular the welding. Thirdly, it is said that O&K failed to warn of the risk that a crack would develop where it did at the top of a stiffener. The first and second of those breaches is each said to have caused the crack to develop with the ultimate consequence of the collapse of the machine. The third breach is said to have caused the collapse, by the relevant area not being inspected often enough to detect the crack before it could grow to the point it reached in March 2000. They further claim that O&K breached s 52 of the Trade Practices Act 1974 (Cth), by misrepresenting that Dr Fleischhaker’s design was the result of reasonable skill and care.

However, the machine was subject to regular inspections. In particular it was inspected every two or three years by the second defendant. Its former name was Krupp Engineering (Australia) Pty Ltd and I shall refer to it as Krupp. It is a member of a group of companies based in Germany. As it happens, O&K is now a member of that group. O&K, Krupp and the third defendant Mr Thiel (a former employee of Krupp) have the same representation in these proceedings.

The case against Krupp and Mr Thiel is what the arguments have called the inspection case. In March 1999 Krupp sent Mr Thiel to the mine to conduct an inspection of the BWE. He conducted an inspection and wrote a report. He saw nothing of a crack developing at the top of the stiffener. But he did not look at that part of the BWE. The plaintiffs say that it was a breach of the contract for this inspection that Krupp failed to inspect the entire machine, and in particular the place where they say this crack would then have been visible. Krupp says that, for various reasons, it was not obliged to inspect the whole machine and that it was not in breach of contract. Krupp and Mr Thiel are also sued in negligence, for which they say that reasonable care was taken in the inspection. They are also said to have contravened or been involved in a contravention of s 52 in that Mr Thiel’s report was misleading or deceptive. The plaintiffs say that a proper inspection would have detected the crack and they would then have repaired it and avoided the collapse.

The liability of each defendant is disputed. Further, the defendants say that the plaintiffs have caused or contributed to their loss in many ways. They are said to have misused the BWE in its operation in several respects and to have failed to have it more frequently and thoroughly maintained and inspected. They also say that in the last few days of its life, the BWE was showing unusual movements and the plaintiffs should have stopped its operation to investigate, in which case it would have survived.

Then there are a very many quantum issues. As will be seen, the arguments, like the bucket wheel itself, have left few stones unturned.

The BWE

The BWE was a very large excavator. It weighed about 2,500 tonnes and was about 40 metres high. It travelled on caterpillar-type wheels and above them there was a section (5 metres in height), over which there was a platform which I will call the turntable. It rotated horizontally, as in consequence did every part of the machine which was above it. Above the turntable was the main tower which was more than 30 metres in height but at an angle varying slightly from the vertical. Extending from one side or the other of the main tower were three arms or booms. On what is called the rear side of the tower there was the discharge belt boom. It was about 40 metres long and extended horizontally from the turntable. From a height just above it, but extending from the front side of the tower, was the bucket wheel boom. At the end of this was the bucket wheel itself, which was where the excavator engaged the face of the earth it was digging. The bucket wheel boom appears to have been about 35 metres long. Thirdly, and higher still there was the counter weight boom, which extended from the rear of the tower. From photographs it appears to have been of about the same length as the bucket wheel boom.

The BWE as a whole moved on its caterpillar-type wheels, called crawlers. The bucket wheel boom was moved laterally by the rotation of the turntable. It was moved vertically by a system of ropes. There was a rope support tower, which was a tower branching out from the main tower from about half-way up the front face of the main tower and above the bucket wheel boom. A pair of ropes ran from winches at the end of the counterweight boom, through the top of the main tower to the end of the rope support tower and then back again. An arm connected the rope support tower to the bucket wheel boom, so that as the ropes raised or lowered the rope tower, the bucket wheel boom moved with it.

The bucket wheel was a rotating wheel of about 10 metres in diameter. On the periphery of the wheel were fixed a total of 10 containers or buckets. With the rotation of the bucket wheel, each bucket became a scoop or shovel. The buckets were empty as they rotated through their lower arc towards the face of the earth to be excavated. They then engaged the face, as they moved upwards before rotating through the upper arc at the end of which their contents fell on to a conveyor on the bucket wheel boom. That material was then conveyed towards the main tower where it was dropped on to another conveyor on the discharge belt boom.

From the end of the discharge boom, the excavated material went to another system of conveyor belts which were distinct from the BWE itself. They were free standing belts moved from time to time as the BWE was moved to another pit. This system of conveyors was some kilometres in length. It took the material to another machine called the spreader. As the name suggests, its function was to disperse the material as it reached the end of the conveyor system. The free standing conveyors and the spreader, together with another machine called the tripper car, worked with the BWE in what the plaintiffs’ case describes at the BWE system.

The BWE was driven by an operator sitting in a cabin which was at the foot of the main tower on its front side. The operator faced the bucket wheel from this cabin underneath the bucket wheel boom.

The counter weight boom, as the name suggests, was to balance the machine. The combined weight of the bucket wheel and its boom tended to pull the top of the tower towards the bucket wheel, so the counter weight boom was to prevent that from happening by applying a force to the top of the tower in its direction. The result was a downward force through the main tower towards the turntable. I have mentioned that the main tower extended upwards but varying from the vertical. As the main tower rose in height it was angled slightly towards to the rear of the BWE.

In the operation of the BWE, these downward forces produced both tension and compression within the structure of the main tower. On the rear side of the main tower there was compression. On the front side of the main tower there was always tension. The crack which led to the collapse was on the front side of the tower. There are disputes about what caused the initiation of this crack but it is common ground that once it was there it grew as a result of fatigue. Fatigue cracks grow only where steel is in tension, or there is some cycle of tension and no tension. In effect the tension acts to open and further open a crack so it grows. Fatigue cracking does not occur where steel is in compression: there the steel is being compressed, rather than being stretched, so that it will not open up.

The main tower was a welded steel fabrication, consisting of two parallel I-beams. They were about 9.2 metres apart. Each I-beam consisted of a steel plate and a pair of flanges. The plate was called a web and was about 20 millimetres thick. The length of the webs defined the height of the I-beams and thereby the tower. The beams extended almost vertically from the turntable and their width decreased as they became higher. Along the entire length of each web, on each of its edges, was a flange, 490 millimetres wide and 40 millimetres thick. They were perpendicular to the web which joined the flanges half way across their width resulting in a so called “I” beam. The beams were connected to each other by horizontal ties and diagonal braces so that the tower constituted a single rigid structure.

These two beams were called respectively the left-hand side mast and the right-hand side mast. The left and right sides were according to the view looking to the rear of the BWE. So each side of the mast consisted of the web, a flange at its front edge and a flange at its rear edge.

In 1984 eight stiffeners were added to the tower. To each flange two stiffeners were welded perpendicular to it (and thereby parallel to the web). There was a stiffener on each side of the web on each flange. Each stiffener was 40mm thick, 200mm wide and 10.5 metres long. Therefore, the stiffeners did not extend up the full height of a flange. According to the plaintiffs’ case, that fact was critical. They say that the stiffeners should have been designed to extend to the full height of the tower, because by having the top of the stiffeners some metres short of the top of the tower, there was a concentration of forces at the top end of the stiffeners on the front side of the tower (the tension side) which made those points especially susceptible to fatigue cracking.

It is common ground that the crack which caused the collapse of the BWE began at the top of a stiffener on that front side. It was a stiffener on the left-hand mast and of the two stiffeners on that flange it was that which was inside the web.

THE DESIGN CASE

Before 1984

The BWE was designed and built by O&K pursuant to a contract made with Utah Development Company in 1978. O&K had made several bucket wheel excavators. They are not commonly used in Australian mines. Apart from this BWE, their use in Australia has been in brown coal mining in Victoria. They are more commonly used in Germany. O&K was a leading manufacturer of such excavators at its works at Lubeck in what was then the Federal Republic of Germany.

Utah Development Company was the name of the company which is the first plaintiff, now called BHP Coal Pty Ltd and which I will call BHP. The defendants pleaded that it was a different entity, which raised questions as to the effect of certain corporate mergers according to the law of the State of Louisiana. But ultimately the defendants conceded it was the former name of the First Plaintiff. It made that contract for itself and the other then members of the joint venture. I will refer to it as Utah when discussing events when it had that name.

Mr Brian Black is a retired engineer previously employed by Utah/BHP. His involvement with this BWE commenced in 1977-78 when he prepared part of the technical specification for the tender and ultimate purchase of the BWE. He was centrally involved in the 1984 repair by which the stiffeners were added. And after the collapse in 2000, by which time he had retired from BHP, he was brought back as a consultant to advise on the options for replacing or repairing the BWE.

In 1979 he was seconded to O&K at Lubeck to work as Utah’s representative in the design of the BWE. O&K’s chief structural designer for bucket wheel excavators was Dr Fleischhaker. He had first met him in Australia in about 1978 in connection with this project. Then when Mr Black was at Lubeck he developed a close working relationship with him.

The BWE was commissioned at Goonyella in 1982, by which time Mr Black was working there. He was the operations superintendent until early 1984 when he became the chief mechanical engineer of Utah and based in Brisbane, a position he held until 1994.

The 1984 repair

In October 1984 the BWE was damaged in what has been described as a “grounding” incident. This involved the bucket wheel boom grounding in the sense that its weight became supported by the ground rather than by the structure of the BWE itself. The result was that the turntable, the counterweight boom, the discharge boom and frame tipped backwards and there occurred severe structural deformation of some of the main tower. The deformation was on the upper left-hand mast: on some of its web and the flange on its rear side.

Mr Black went to the mine to assist in the rectification of this deformation, or as it has been described, buckling. At Goonyella he worked on this with Mr Tom Raleigh. He is a mechanical engineer who was then employed by Utah in the maintenance department at Goonyella.

Mr Black decided almost immediately to seek the advice of Dr Fleischhaker. Mr Black wrote two faxes which were sent to Dr Fleischhaker at O&K’s Lubeck office on 6 November 1984. One was a single page fax under the names of Mr Black and Mr Raleigh which summarised the grounding incident and the deformation. It said that sketches of the deformation would be forwarded to him. The fax concluded as follows:

“As can be seen we consider we have a serious structural failure and request assistance.

We advise that Utah will meet the costs of a site visit by yourself and would request advice as to your travel arrangements at your earliest convenience. The machine will continue to be shutdown pending your visit.”

The second fax contained three pages of sketches showing the damage.

Mr Black said that he went to Dr Fleischhaker for assistance because he believed that he was the person most able to advise on and design the necessary repairs. He said that he went to him also because O&K, as the original manufacturer, would have “all the necessary technical details, machine background and expertise to provide a permanent engineering repair solution”. I accept this evidence. I also accept, as Mr Black said, that when the BWE had been commissioned, very few of the design drawings had been handed over by O&K, apart from drawings which were contained within the operations manuals. I also accept Mr Black’s evidence that he was particularly concerned to obtain the expertise of the O&K Lubeck office, as well as that of Dr Fleischhaker, because of Mr Black’s experience of that expertise when working there in 1979. I accept that Mr Black believed that the appropriate engineering solution was beyond the scope of the in-house engineering expertise at Utah.

Dr Fleischhaker at Goonyella

In response to this request for assistance, Dr Fleischhaker came to Australia within a few days. Mr Black met him in Brisbane and they travelled together to the mine. They inspected the machine and then discussed the damage and what Dr Fleischhaker was proposing as the appropriate repairs. He advised on ways of removing the buckling by what was called a jacking and dogging system. And he further proposed the affixation of the stiffeners. Dr Fleischhaker’s evidence is that he first proposed stiffeners for the compression side, in order to “bring out the buckles”, (the buckling being on the rear or compression side) and then suggested that if there were to be stiffeners on that side, the same should be installed on the tension side “just to ensure symmetry”.

Whilst he was at Goonyella, and according to Dr Fleischhaker on his first night there, he arrived at a “solution”, which he then set out in five pages of handwritten notes and sketches which he gave to Mr Black.

First there was a page of notes which Dr Fleischhaker headed “BWE…Final Repair.” These were in the form of instructions or advice as to what should be done and they included the following:

“Straighten the buckled areas by fixing and clamping the new stiffeners (see details).

Stiffeners are to be welded by fillet welds.

The pieces of the stiffeners are to be connected by full penetration welding!”

Then there were three pages of sketches. On one page Dr Fleischhaker drew the stiffeners showing their shape and dimensions. That sketch also depicted a stiffener welded to a flange, but no dimension was there expressed for the distance between the stiffener and the end of the flange or between the stiffener and the web. On another page he sketched another type of stiffener to be affixed somewhere else and which need not be discussed. On a further page he sketched the “clamping” to which his notes had referred. Indisputably Dr Fleischhaker had thereby recommended the addition of the stiffeners and designed their shape and dimensions.

There is also another document which Dr Fleischhaker said that he provided to Mr Black when he was at Goonyella. On an engineering drawing of a section of the tower (part of the drawings prepared for the BWE’s manufacture) Dr Fleischhaker had drawn the stiffeners. By this document, Dr Fleischhaker made it clear where the stiffeners were to be affixed relative to the top of the tower. It is common ground that Dr Fleischhaker provided this marked up drawing, although Mr Black thought that he may have received it subsequently in that same month.

Based upon these notes and documents, Utah had stiffeners fabricated and delivered to the site. Dr Fleischhaker approved the grade of steel for the stiffeners. Mr Black says, and I find, that he accepted Dr Fleischhaker’s advice as an expert and that Mr Black did not assist or instruct Dr Fleischhaker in the design “or provide input into the measures which Dr Fleischhaker determined.” The method of repair and in particular the design of and specifications for the stiffeners came from Dr Fleischhaker. Mr Black has no memory about whether at this time there was any discussion with Dr Fleischhaker about extending the stiffeners to the top of the tower. Nor does he recall otherwise considering that matter.

In essence, the plaintiffs allege that Dr Fleischhaker was negligent in failing to do either of two things, each of which would have avoided the creation of this point at the top of the stiffeners which they say unduly exposed the structure to fatigue failure. They say he should have designed the stiffeners to extend to the top of the tower. Alternatively, he should have specified a certain type of weld at the top of the stiffener, which was a weld that was stronger than that which was used. The plaintiffs allege that the extraordinary concentration of stress at the location of these welds required a particularly strong weld to withstand those stresses and to avoid fatigue cracking. It is undisputed that each of these things would have made the structure significantly stronger. In particular in evidence from Dr Potts, who was called by the defendants, there are calculations showing that the use of the type of weld which the plaintiffs say should have been prescribed by Dr Fleischhaker, would have about doubled the life expectancy of the BWE. However there is a substantial issue as to what, if anything was prescribed by Dr Fleischhaker about welds at the tops of the stiffeners. And there is a further critical issue of what he should have prescribed.

Dr Fleischhaker and welds

What, if anything, did Dr Fleischhaker prescribe for the welds? In that one page of handwritten instructions, I have set out above, he wrote that the stiffeners were “to be welded by fillet welds”. He also wrote that “the pieces of the stiffeners are to be connected by full penetration welding”. Fillet welds required the stiffeners to be welded to the flange on each side of the entire length of the stiffener. The question is what, if anything was prescribed for the top of each stiffener, where its 40 millimetre wide end met the flange.

The plaintiffs allege that Dr Fleischhaker made no recommendation about any weld across the top of each stiffener. The defendants allege that by his drawing, Dr Fleischhaker did prescribe a weld, the same weld as he clearly required for the sides of the stiffener.

At that time there was an engineering standard published in The Federal Republic of Germany called BG 60. It was a standard for the design of “large machines in open cut mines”, which included bucket wheel excavators. It informed engineers of the relative strengths of different types of welds in such machines. Within BG 60 there were three types of welds which are central to this case. The least strong of them was the F_II. An F_II weld involves welding at the side of the component, in this case the stiffener, but with no weld across the top of the stiffener. The plaintiffs say that this is what Dr Fleischhaker recommended, by prescribing “fillet welds” but nothing else.

The next in ascending order of strength was the F_I. This is the weld which the defendants say was specified by Dr Fleischhaker. In this context, an F_I would involve the same welding across the top of the stiffener (and at its other end) as along its sides.

The third type was described as an E_I which was stronger still. Like the F_I, this required the fillet welds to join by a weld running across the top of the component (here the stiffener). But it further required that that weld be “tooled” and in this context, that the top (and bottom) ends of the stiffeners have a tapered shape. The plaintiffs say that an E_I (or its equivalent in another engineering standard) should have been prescribed by Dr Fleischhaker. This is denied by the defendants.

As I will discuss, Dr Fleischhaker has given different versions of what he did in deciding upon his recommendations for these repairs in 1984. Ultimately his evidence was that whilst he was at Goonyella, he performed certain calculations from which he satisfied himself that an F_I detail would be strong enough. The plaintiffs allege that he performed no calculations and indeed, that he did not turn his mind to whether the weld should be an F_II, an F_I or something else.

As it happens, the question of whether Dr Fleischhaker prescribed an F_I or an F_II is not critical for the outcome of this case. This because I am satisfied that on what engineers know, there was no material difference between the strength of an F_I and that of an F_II. BG 60, a standard which is no longer current, said otherwise and it quantified such a difference. According to the plaintiffs’ witness Professor Fisher and the defendants’ witness Dr Maddox, it is now recognised that there is no material difference. Referring to certain research and published data Dr Maddox said that for these stiffeners, it mattered not “whether there (was) a weld around the edge end or not”. The defendants do not seem to challenge this, and in their submissions in reply, they addressed only whether this had been disclosed by a text published by a Dr Gurney in 1979.

At the top of the stiffener where this fatigue cracking grew, no weld was applied. There were simply the fillet welds along the sides of the stiffener. In other words, what was applied by the welders here was the equivalent of an F_II weld. But as we now know, an F_I would have been no stronger. The issue of whether his sketches should have been understood as requiring F_I or F_II welds is still relevant, because it is related to the question of what thought Dr Fleischhaker did give to the stresses which would exist at the top of these stiffeners. Before going to that, I will discuss what his sketches objectively represented.

On the page of Dr Fleischhaker’s sketches on which he depicted the stiffeners and their dimensions, he showed the fillet welds and gave them a dimension. He did not draw a weld across the top of the stiffener. The defendants say that he nevertheless prescribed the use of an F_I detail in this way. On the same page, and underneath where he showed the fillet welds, he wrote “see DRG No 259486 sheet 1 989657 sheet 1”. As Mr Black said he then understood, they were existing drawings of the BWE. In turn, those drawings showed welded details equivalent to an F_I. When cross-examined Mr Black agreed that at the time, he understood that this cross-referencing by Dr Fleischhaker to the drawings was to import what was shown in them, including the F_I detail. This was not the understanding of Mr Raleigh however. Nor was it the understanding of Mr Graham Smith who worked for the contractor which did this welding. Mr Smith has no recollection of seeing those two drawings and he said he did not have copies of them during the course of the work. But looking at them now, he says that there is no indication to him that “end welds” were required.

It seems therefore that the drawings were not an entirely clear specification of an F_I detail. On one view of them, which is Mr Black’s view, Dr Fleischhaker effectively incorporated a requirement for “full closing” welds, or in other words an F_I detail. I was impressed overall by Mr Black as a witness. He is no longer employed by BHP and is an apparently independent witness. His understanding of these drawings cannot be ignored. I accept that on an objective view, the requirement for an F_I detail was conveyed by Dr Fleischhaker’s reference to these drawings.

But that is not to say that Dr Fleischhaker had that in mind. The drawings were relevant in other respects. In his first witness statement, Dr Fleischakker did not say that he intended by this reference to the drawings to import what they depicted of an F_I detail. But in the same statement he said that he “assumed that any competent welder would have carried out closing welds to the ends of the stiffeners and it would have been completely unreasonable to have carried out the work without that detail. If those closing welds were not carried out, it would have been the first time in my life that I had seen it”. If that evidence is true, it strongly suggests that Dr Fleischhaker was not intending to require an F_I detail by his cross references to those drawings. So whilst Mr Black reasonably understood them to incorporate F_I welds, I find that this was not what Dr Fleischhaker was intending by his reference to those drawings.

During the design and commissioning phases of the BWE, Mr Lothar Friedemann had acted as an independent structural engineer supervising the work. As at November 1984 he was still to deliver his final report as to the BWE’s design and commissioning. The defendants argue that in some way Utah relied upon Mr Friedemann in relation to these 1984 repairs. I accept Mr Black’s evidence that Utah did not contact or provide any material to Mr Friedemann about the 1984 grounding incident or the proposed repairs and nor did it ask O&K to do so. Mr Friedemann’s report as to the design and commissioning of the BWE was given in 1985. In his evidence, Mr Friedemann said that he did not perform fatigue calculations in relation to the 1984 modifications.

The stiffeners are attached

The stiffeners were attached by independent contractors and the work was completed by the end of 1984. By this stage, Dr Fleischhaker had returned to Lubeck. O&K sent Mr Tiedt from Germany to supervise at least some of the repair work. The extent of Mr Tiedt’s supervisory role is in dispute. There are different accounts between Mr Tiedt and Mr Raleigh as to the extent to which Mr Tiedt was involved in supervising the installation of the stiffeners and in particular the welding. However, it is unnecessary to resolve that issue. Because, as is now known, there is no difference in strength between the F_I and F_II details, any failure by Mr Tiedt to see that there was an F_I weld at the top of this stiffener (if he had been instructed that this is what Dr Fleischhaker wanted) would have no consequence. At one point the issue may have had another relevance, which was to whether the crack was initiated by what is called a cold crack. Cold cracking results from poor welding practice whereby hydrogen becomes present in the weld. According to some of the expert evidence, if the crack was initiated as a cold crack this has an impact upon the assessment of the likely size and appearance of the crack at the time of the Krupp’s 1999 inspection. However, it is common ground that whatever was the originating cause of the crack, its growth was caused by fatigue. So the fact that the crack was initiated by the presence of hydrogen would not affect the design case because that crack propagated and ultimately caused the collapse because of the high stresses at the top of the stiffener as against the strength of the weld at that point. There is no argument by the defendants that it is only a cold crack which could have grown to cause the collapse, and that the only cause of the collapse was that there was cold cracking. The fact or otherwise that this crack began its life as a cold crack is (perhaps) relevant as to the size of the crack at the time of the 1999 inspection.

O&K strongly disputes that Dr Fleischhaker was negligent, but before discussing that question, it is necessary to resolve issues affecting the existence of the alleged duty of care. One is that O&K argues that it is not vicariously liable for any negligence of Dr Fleischhaker, because although he was employed by it, he performed his work for the 1984 repairs under the control of another company which was O&K Australia Pty Ltd. It no longer exists but it was a subsidiary of O&K. It is pleaded that Dr Fleischhaker acted “in the capacity as servant or agent of O&K Australia” and that his participation was with the consent of, but not at the direction of O&K. Another issue is the scope of that duty: O&K pleads that Dr Fleischhaker was to provide only general advice and not “a considered engineering solution”. Then there is a third question, although not directly raised by O&K in its pleading, of whether a duty of care was owed only to the then owners of the BWE or also to future owners. Not all of the plaintiffs were joint venturers and thereby owners in 1984.

Which company owed the duty of care?

O&K is sued in negligence and not for breach of contract. Upon the plaintiffs’ case, the proof of a contract is unnecessary. Possibly here there was no contract, and any entitlement to be paid for Dr Fleischhaker’s services was in restitution. There is evidence of a payment by Utah to O&K Australia for those services. But there is no direct evidence that Utah contracted with O&K Australia. The fact that it was O&K Australia which sent the relevant invoice to Utah could have been simply the result of the way in which the O&K group preferred to record matters in its own accounts.

Significantly, Mr Black went straight to O&K in Lubeck and to Dr Fleischhaker when Utah was seeking this urgent advice. His faxes of 6 November were sent without any prior contact with O&K Australia. He went to Dr Fleischhaker because of his belief in his particular expertise and experience, together with Mr Black’s knowledge of the O&K design office at Lubeck and the fact that O&K held many drawings which had not been provided to Utah. And, of course, the BWE had been designed and built only a few years earlier by O&K and specifically under the direction of Dr Fleischhaker. In Mr Black’s view, O&K Australia did not have the required expertise or technical information. In these proceedings O&K does not suggest otherwise.

O&K Australia was managed by Mr Kogel. Mr Black did telephone Mr Kogel shortly after the grounding incident. But apparently this was before the extent of the damage, and particularly the buckling, had been noticed, and it was thought by those at Utah that some relatively minor repair would be needed, the parts for which could be ordered through Mr Kogel. Neither Mr Kogel nor his company was asked for advice. Mr Black simply asked him about the price and availability of a certain part for the BWE without explaining why it was required.

Mr Kogel recalls another call from Mr Black on or about 5 or 6 November 1984, in which Mr Black did describe the grounding incident, after which Mr Kogel received a copy of the one page fax of 6 November which Mr Black and Mr Raleigh had sent to Dr Fleischhaker. On that day Mr Kogel sent a telex to O&K, addressed to four people including Dr Fleischhaker. Mr Kogel has provided an English translation of that telex in which he says that he wrote that he had received “from Mr Brian Black confirmation that Dr Fleischhaker is requested as soon as possible to arrive in Goonyella”, and that “in accordance with discussion with Brian Black it looks that substantial repair work could be involved”. This does not provide particular support for the defendants’ argument. The fact that Mr Black was speaking to Mr Kogel about the problem and about his request for Dr Fleischhaker to come to Goonyella does not mean that Utah and its co-owners of the BWE were not relying upon Dr Fleischhaker and O&K. It is consistent with Utah having O&K’s Australian representative involved for reasons of convenience with travel arrangements and perhaps with parts. Mr Kogel agreed that one of the purposes for the existence of O&K Australia was to represent O&K here and that it had become difficult for customers of O&K to order parts directly from it in Germany. Within its own ranks it hardly had the engineering expertise to rival that of its parent’s Lubeck office. In correspondence earlier in 1984 concerning other matters, O&K Australia had referred to O&K as its “principal”.

In 1984 there was a practice whereby for work which it did in Australia, O&K invoiced O&K Australia. An example is an invoice for an inspection by O&K’s Mr Schander which was performed on the BWE in April 1984. But that says more of the arrangements within the O&K group than it does of the plaintiffs’ case that they sought advice from and relied upon O&K, and it far from indicates that Dr Fleischhaker provided his advice and design for the repair as the servant of O&K Australia.

O&K Australia was in no position to direct Dr Fleischhaker as to how to do his work. There was no semblance of “control” to indicate that he had become the servant of O&K Australia for the time being. The “relevant control” of Dr Fleischhaker remained with his employer, O&K.^[1]

Dr Fleischhaker remained the employee in all respects of O&K. He did not become effectively employed by O&K Australia whilst he was at Goonyella or otherwise working on the matter of the 1984 repairs. Accordingly, it is O&K which would be vicariously liable for his negligence. Further, it was O&K which owed a duty of care, because it was O&K, not its Australian subsidiary, which was asked to provide assistance in 1984 having regard to its particular resources and its experience and also because it was the employer of Dr Fleischhaker.

As to the plaintiffs’ alternative case that there was conduct in connection with this advice and design which contravened s 52 of the Trade Practices Act, the conduct was that of O&K, not O&K Australia.

Scope of the duty of care

O&K pleaded that any duty of care which Dr Fleischhaker or it owed for his work in 1984 was very limited. Indeed, O&K denied that Dr Fleischhaker designed any modification to the tower (including the stiffeners) and pleaded that instead he gave “brief advice on the most appropriate method for removing the buckling”. It further pleaded that this brief advice was given in relation to advice which Utah had received from Ahden Pty Ltd, which was the contractor which undertook the repairs and affixed the stiffeners. More specifically, in the original defence of O&K it was pleaded that:^[2]

“(ii)…Dr Fleischhaker did not advise as to the necessity to insert stiffeners on the front flanges in the position alleged in paragraph 30.2 or in any position on the front flanges. Such stiffeners as were inserted were inserted by the contractor of Utah, namely Ahden Pty Ltd at its suggestion. The introduction of stiffeners to the two front flanges was not necessary for the purpose of effecting repairs to any damage since the two front flanges had not been damaged.”

But the repairs, including the stiffeners, were not according to any proposal by Ahden, as O&K later acknowledged by deleting that reference to Ahden from its pleading.^[3]

Moreover, O&K pleaded that “Dr Fleischhaker was not required to provide a considered engineering solution to repair the damage and did not do so”. The second of those facts (that he did not provide a considered engineering solution) is indeed the plaintiffs’ case. The plaintiffs allege that he drew and recommended the stiffeners without any or any proper consideration of their effect on the strength of the tower, and in particular, without undertaking the necessary calculations of stress in order to assess the suitable welded detail at the top of the stiffeners. This is consistent with what Dr Fleischhaker said in his letter to the plaintiffs’ solicitors in September 2004, when he wrote:

“Utah did not expect from me to make any calculations etc during my stay in Australia. This would not have been possible on the site. Even after my return to Germany Utah did not request further engineering work to be done by me on this issue.”

He wrote also that his “personal involvement was limited to the visit of the Goonyella mine and to the provision of repair advice to the responsible staff of Utah” and that:

“In my recollection my visit to the mine was an emergency mission. Utah did not request from me to provide them with a comprehensive engineering solution, but to:

Review the damage to the tower frame,

Give them an advice how this damage could be repaired.”

As to the stiffeners he then wrote:

“It was only necessary to weld four stiffeners to the rear of the BWE tower frame for removing the bucklings, since only the rear tower frame was damaged. However, the introduction of additional steel at one place of a steel structure can have structural consequences. Utah wanted to strengthen the overall stability of the complete tower structure and that is why it was decided to add the four stiffeners to the front flanges of the tower frame. The addition of these stiffeners caused greater stability of the tower frame. Furthermore, the symmetry of the tower frame was maintained by the introduction of the four front stiffeners.”

Ultimately Dr Fleischhaker testified that he had performed calculations in the course of providing the advice and sketches which he provided to Mr Black at Goonyella. When cross-examined as to the inconsistency between that evidence and his letter of September 2004, and in particular the statement that no calculations had been expected or would have been possible, he said that his letter in those respects was a lie. O&K now argues that Dr Fleischhaker’s evidence should be accepted and that I should find that he did perform calculations by which he satisfied himself (and O&K says reasonably) that the welded detail at the top of the stiffeners on the front or tension side would be strong enough to withstand the maximum stress at that point.

He says these calculations related to an F_I detail which, as I have mentioned already, he said that he assumed that any competent welder would apply.

In the ultimate submissions for O&K, it appears to be accepted that a duty of care was owed by Dr Fleischhaker and by the company to whom his conduct is to be attributed. There was ultimately no argument that the duty of care did not extend to the provision of “a considered engineering solution”. Rather the argument was that Dr Fleischhaker has provided it and with reasonable care. In particular the argument appears to accept, as the plaintiffs plead, that there was a duty to exercise the level of skill and care reasonably to be expected of a competent structural engineer with expertise in the field of design and construction of bucket wheel excavators.

It was Dr Fleischhaker who advised that the stiffeners be placed on the rear side where there had been the buckling, and then on the front side. It was Dr Fleischhaker who prescribed the dimensions of the stiffeners, and their positions on the height of the tower. To ensure that his repair solution was implemented, he sent Mr Tiedt from Germany to supervise at least some of the work. There was no reason for him to think that it was Utah or some other adviser which would check his solution to see whether it was structurally sound. In particular, there was no reason for him to think that someone else would do the work of ensuring that the strength of the welded details by which these stiffeners were to be affixed was sufficient to withstand stresses on the front or tension side of the tower. He should have known that he was being relied upon to do that. More probably than not he did know that. It was Dr Fleischhaker who was to provide a considered engineering solution. In providing that solution, Dr Fleishhaker and O&K were obliged to exercise reasonable care and skill.

To whom was the duty owed?

The contract for the manufacture of the BWE was made by Utah (the first plaintiff) on behalf of the joint venture of which there were then three other members. The composition of the joint venture had changed by November 1984 and, as I will discuss, it has changed since then. By an amendment to the joint venture agreement in April 1984 it was agreed by the joint venturers that all of what constituted “The Joint Venture Property” (as there defined) should be owned by the joint venturers as tenants in common in proportion to their respective interests in the joint venture. It is admitted that the BWE was part of The Joint Venture Property.

Clearly a duty of care was owed at least to the then owners of the BWE. The defendants do not argue that no such duty could be owed because it would conflict with any contract (save perhaps for their argument as to the role of O&K Australia). Nor do they argue that a duty was owed only to the first plaintiff. In the defendants’ ultimate submissions, it is apparently accepted that there was a known reliance by the then owners upon Dr Fleischhaker to exercise reasonable skill and care in his advice and design for the 1984 repair.

As at November 1984 the BWE was owned by the then joint venturers in the following proportions:

First plaintiff	31.0%
Second plaintiff	12.0%
Third plaintiff	4.0%
Fifth plaintiff	12.0%
Sixth plaintiff	9.75%
Other Joint Venturers who are not plaintiffs	31.25%
TOTAL	100%

On the day of collapse, 8 March 2000, the owners of the BWE were as follows:

First plaintiff	42.85%
Second plaintiff	15.53%
Third plaintiff	0.75%
Fifth plaintiff	12.0%
Sixth plaintiff	15.78%
Seventh plaintiff	4.59%
Other Joint Venturers who are not plaintiffs	8.5%
TOTAL	100%

These were also the respective interests in March 1999, when the events the subject of the inspection case occurred.

The parties have agreed on a statement of facts as to the composition of the joint venture at various times. The plaintiffs submit that on the basis of those facts, the only plaintiff which was not a joint venturer in October 1984 is the seventh plaintiff. However according to that agreed statement of facts, the fourth plaintiff became a joint venturer only on 1 August 2002 when it acquired its 8.5 per cent interest. It was not a joint venturer at the time of the collapse.

The fourth plaintiff claims to be entitled to damages as an assignee of the rights of action against the defendants coinciding with the acquisition of its 8.5 per cent interest in the joint venture. The assignment of the share in the joint venture is admitted by the agreed statement of facts. The assignor was a company originally called General Electric Minerals Inc which held that share from 2 April 1984. However the defendants did not admit that there was an assignment of its rights of action. The plaintiffs do not rely upon the agreed statement of facts and its attachments to prove that assignment. One such attachment is the agreement dated 1 August 2002 by which the fourth plaintiff acquired its share in the joint venture. That agreement does not appear to provide for the assignment of rights of action and the plaintiffs did not argue that it did. Indeed the plaintiffs ultimately made no submission as to the means by which the fourth plaintiff is said to be entitled to any of these rights of action.

On day 39 of the trial the plaintiffs tendered this agreed statement of facts. At the same time counsel for the plaintiffs referred to the “further matter” of this assignment to the fourth plaintiff and then tendered a letter from the plaintiffs’ solicitors to the second defendant dated 2 June 2003 together with its enclosures, which were two notices of assignment.^[4] Counsel for the defendants then noted that this was not the document by which the alleged assignment was made and that the defendants were yet to be shown such a document. He said he was not objecting to the tender but “pointing out it doesn’t seem to prove what’s in issue”. Counsel for the plaintiffs said that “We’ll cure this. We’ll tender in due course the document evidencing the assignment”. No further document was tendered.

The letter which was tendered was addressed only to the second defendant, Krupp. It was in these terms:

“We act on behalf of the underwriters of the Central Queensland Coal Associates Joint Venture, a joint venture of BHP and others, in relation to the collapse of the BWE on 8 March 2000.

Please find attached two notices of the assignment of choses in action (“Notice”) as required under the provisions of the Property Law Act 1974 (Qld).

Attached to each Notice is a draft statement of claim relating to the matters arising as [a] result of the collapse of the BWE on 8 March 2000. We intend to commence proceedings in this matter in the near future…”

The first attachment was a purported notice of an assignment to the fourth plaintiff by BHP Queensland Coal Limited (formerly General Electric Minerals Inc) of its “right, title and interest in and to the choses in action against you referred to in the draft statement of claim annexed to this notice”. The second notice was in similar terms but in respect of an assignment by the first plaintiff to the seventh plaintiff of “two point one per cent (2.1%) of the assignor’s right, title and interest in and to the choses in action against you…”. This is apparently related to the assignment of a 2.1 per cent share in the joint venture between those companies which, according to the agreed statement of facts, occurred on 28 June 2001. This purported assignment of rights of action to the seventh plaintiff is not pleaded in the statement of claim or referred to in the arguments. Nor was it referred to when counsel for the plaintiffs tendered this letter and its enclosures. I will not consider it when assessing the seventh plaintiff’s loss. Its claims will be assessed upon the basis of its interest in the BWE as at March 2000, which was to the extent of 4.59 per cent.

Returning then to the alleged assignment of rights to the fourth plaintiff, the evidence is deficient in at least two respects. The first is that there is no evidence of the document by which the assignment was made. The statement of claim alleges that the assignment was made on 1 August 2002. Particulars were sought of that allegation and in response the plaintiffs said that they would provide the relevant document. As I have also said it is not the contract by which the share in the joint venture was assigned. As I have said the plaintiffs did not produce that document when this point was taken during the trial. Nor does the notice of that purported assignment refer to such document. Secondly, the notice is addressed only to Krupp and not to O&K or Mr Thiel. It refers only to an assignment of rights of action against Krupp. The draft statement of claim which was attached to the notice has not been tendered. It cannot be inferred from this notice that there was an assignment rights of action against O&K.

Moreover, the right of action against Krupp for damages under s 82 of the Trade Practices Act was not assignable, because the fourth plaintiff is not a person who has suffered loss or damage by Krupp’s conduct: Park v Allied Mortgage Corp Ltd;^[5] Allstate Life Insurance Co v ANZ Banking Group Ltd;^[6] National Mutual Property Services (Australia) Pty Ltd & Ors v Citibank Savings Ltd;^[7] Pritchard v Racecage Pty Ltd^[8] and Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd.^[9] The position with rights of action for damages for breach of contract or negligence is not so clear, and in Australia there is a difference of judicial opinion as to whether Trendtex Trading Corporation v Credit Suisse^[10] should be followed.^[11] That point need not be considered, however, because the plaintiffs have not proved the pleaded assignment to the fourth plaintiff.

That leaves the seventh plaintiff. The present point then affects its entitlement to damages under the design case.

The plaintiffs concede that at least “on one view” their claim is for economic loss, as in my view it is. The alleged losses are the cost of repairing or replacing the BWE itself together with losses from its unavailability in the mining operation. The collapse of the BWE did not result in damage to other property. The fact that there was physical damage to the BWE itself does not make this claim one which is not solely for economic loss: Woolcock Street Investments Pty Ltd v CDG Pty Ltd;^[12] Bryan v Maloney.^[13]

The plaintiffs argue that there was a sufficient connection between O&K and future owners of the BWE for a duty to be owed to present and future owners as joint venturers as a class. This is put on the basis of these matters:

(1) there was a determinate class constituted by the joint venturers as owners of the BWE from time to time, notwithstanding that every member of that class could not be nominated in November 1984;^[14]

(2) both future and present joint venturers were relevantly vulnerable;

(3) the imposition of liability upon O&K to such a class would not lead to unacceptable consequences in terms of policy. Unlike the position in Woolcock Street Investments, the existence of a duty owed to the then (1984) owners of the BWE to avoid economic losses of this kind is clear; and.

(4) O&K must have known that the structural failure of the BWE was inherently likely to produce economic loss.^[15]

It is argued that both existing and future owners of the BWE were relevantly vulnerable in the event that there was a failure to exercise due care and skill because:

(1) O&K “was better skilled to identify and guard against the risks posed by a failure of the (repairs) to the BWE and to identify the risk of fatigue cracking”;

(2) “The plaintiffs did not have the relevant engineering expertise” and in fact relied on O&K;

(3) the repairs were done urgently, with no opportunity for the negotiation of contractual terms which might have protected “the plaintiffs”;

(4) there was reliance “by the plaintiffs” on O&K as Dr Fleischhaker knew;

(5) “The plaintiffs” were unable to protect themselves from the consequences of negligence; and

(6) the condition of the stiffeners made it difficult for “the plaintiffs” to inspect them, other than by engaging the second defendant to conduct the type of inspection which is the subject of the inspection case.

Further, the plaintiffs argue that the distinction between economic loss and physical damage in the present case is “a very technical one”, as they say appears from the fact that personal injury was suffered by an employee of the first plaintiff in the collapse.^[16]

Apart from that last submission, the plaintiffs’ arguments are properly directed to the considerations indicated by the various judgments in Perre v Apand Pty Ltd^[17] and Woolcock Street Investments Pty Ltd v CDG Pty Ltd.^[18] In the plaintiffs’ favour is that the extension of the duty to future owners, as participants in the operation of this mine would not result in the duty being owed to an indeterminate class. The potential losses would be confined to those suffered by owners of the machine from its damage or destruction and its unavailability at this mine.

The plaintiffs’ arguments as to vulnerability are not as persuasive. The matters to which they refer are relevant in demonstrating the vulnerability of the owners as at November 1984. The position of future joint venturers is different. Apart from the suggested difficulty in inspecting the critical part of the BWE, none of the matters advanced by the plaintiffs seems to be directed to the vulnerability of them. The difficulty of an inspection is relevant. As I will discuss in relation to the inspection case, it was possible to inspect this critical area at the top of this stiffener. But it was relatively difficult to do so because for the inspector, there was no direct line of sight to that part of the tower from a position standing on the tower’s walkway.

When acquiring its share in the joint venture, the seventh plaintiff might have sought a warranty as to the condition of the mine’s plant and in particular the BWE. Alternatively, the seventh plaintiff might have conducted its own inquiries and taken its own professional advice as to the plant. No evidence was led by the plaintiffs as to why these were not realistic means for the protection of subsequent owners. And it was open to the seventh plaintiff to seek an assignment of any rights which the seller of this share may have had against third parties in respect of any defects in the plant. (As already discussed, there is no pleaded or agreed case that the seventh plaintiff took an assignment.)

In Woolcock Street Investments, Gleeson CJ, Gummow, Hayne and Heydon JJ said that:^[19]

“Since Caltex Oil, and most notably in Perre v Apand Pty Ltd, the vulnerability of the plaintiff has emerged as an important requirement in cases where a duty of care to avoid economic loss has been held to have been owed.”

In Perre v Apand Pty Ltd, McHugh J said:^[20]

“If the plaintiff has taken, or could have taken steps to protect itself from the defendant’s conduct and was not induced by the defendant’s conduct from taking such steps, there is no reason why the law should step in and impose a duty on the defendant to protect the plaintiff from the risk of pure economic loss.”

The seventh plaintiff has not proved, or sought to prove, that it could not have taken steps to protect itself from O&K’s conduct. In my conclusion, the duty of care owed to the joint venturers as at 1984 was not owed also to subsequent joint venturers and to the seventh plaintiff.

However, the position of the seventh plaintiff in the claim against O&K for damages under s 82 of the Trade Practices Act is a different question, and this is considered below.

What did Dr Fleischhaker consider?

Dr Fleischhaker provided two witness statements. The first was dated February 2007. The second was dated 19 August 2007, just a few days before he gave his oral evidence. In his first statement he said that he did “a rough calculation of the static loads whilst I was at Moranbah” on which he “spent approximately two hours”. He said he did this:

“because I’d chosen a limit on the end of the stiffener in the area where I expected the stresses would be rather low, but I wanted to know whether I was right about where the stiffeners ought end. I was satisfied with my conclusion. I do not remember the figures but I recall that they had been small enough to be reasonable.”

He also said that:

“My assessment of the effect on fatigue resistance involved a consideration of the operational loads which applied to the tower. I considered the likely maximum and minimum stresses which would be found in the area of the upper ends of the terminations of the stiffeners. I first considered this issue when I was at the Goonyella site looking at the repairs. I did the calculations on paper although I believe that no complete copy has been kept of this material. I believe I expected that on my return to Lubeck that a more comprehensive analysis of this would occur by my staff, however it appears that this did not occur … I believe the assessment that I did on site gave a reasonable indication of what the stress range was and I was satisfied that the introduction of the stiffeners did not have any significant consequences for fatigue.”

His second statement was somewhat different. Rather than not being able to remember the figures, in his second statement and in his oral evidence he purported to recall some figures and to reconstruct others, in discussing what calculations he did. Further, in his second statement, he did not say that he considered the minimum stresses but instead that:

“Theoretically one would then need the minimum stress. This wasn’t able to be calculated on site…”

As already noted each of these accounts of doing calculations, to satisfy himself that the introduction of the stiffeners would not have any significant consequence is inconsistent with his assertion in his September 2004 letter, that he performed no calculations because he could not have done so at Goonyella. They are also inconsistent with his assertion in the 2004 letter, effectively repeated in O&K’s pleading, that he was not asked for a comprehensive engineering solution. On his evidence, Dr Fleischhaker made his calculations broadly according to the German standard BG 60. It is necessary to go now to its relevant provisions.

The exercise of reasonable care required Dr Fleishhaker to consider the ability of what was being added to the tension side of the tower to withstand the likely stresses. In particular it required a consideration of the strength of the alternative welded details. BG 60 instructed engineers how to calculate the ability of certain welded details to withstand those stresses. That standard had been generally applied in the original design of this BWE. The contract had required the BWE to be constructed according to BG 60. But it had also provided, in Appendix 1 of the specification, as follows:

“The Load Assumptions stated in [BG60] shall be used except where modified by the specification and the following…

Where the BG and related Codes and Standards are under revision during the Contract the Contractor shall draw the attention of the Purchaser to any provisions of the proposed revisions which could have a significant effect on the strength stability and ground pressure of the excavator; but the Contractor shall not use any parts of the proposed revisions in his design and construction with-out the prior written approval of the Independent Expert (IE) and the Engineer.”

BG 60 was a standard which had been used in the Federal Republic of Germany since 1960. As at November 1984 the standard was under review there by a committee which included Dr Fleischhaker. Some members of the committee then considered that BG 60 was unreliable and that in several respects it should be changed. It was changed, but not until 1986 by the publication of the standard BG 86.

BG 60 required the designing engineer to calculate the maximum stress and the minimum stress at the relevant point. The level of stress was referred to by the Greek letter sigma. So the maximum stress was described as σ_max. The minimum stress was described as σ_min. The ratio of one to the other was described by the Greek letter kappa. The so called stress ratio, known also as the kappa factor (κ), was thereby calculated thus:

	σ_min
κ =	___
	σ_max

By 1984 the use of this kappa factor had been abandoned in the engineering standards of some countries, and most notably in the United States of America, where the relevant codes for steel structures were on the basis that the critical factor was not the proportion of the minimum stress to the maximum stress, but the “stress range”, that is to say difference between the two.

To be satisfied that a certain welded detail would be strong enough to withstand the stresses from the operation of a machine the engineer would measure the maximum allowable stress of that proposed weld. Under BG 60, that involved a calculation according to the data and formulae set out in the standard. One factor in that calculation was the kappa figure. Another was the so called probability factor which was called “W”. The calculation of “W” was also defined within the standard.

Once the engineer had calculated the maximum allowable stress of a certain welded detail at a certain point of the structure, that figure was compared with the maximum stress which was expected in the operation of the machine (σ_max). If it was less than σ_maxit was not strong enough. If it was greater than σ_max, in theory it would be an adequate welded detail to be employed, although there could be a judgment required of the engineer as to whether, in all the circumstances, it was safe enough. Dr Fleischhaker said that he would not have used a welded detail where the maximum allowable stress (or strength) of the detail exceeded σ_maxbut by less than ten per cent.

As noted already, in his first statement Dr Fleischhaker said that he considered the “likely maximum and minimum stresses which would be found in the area of the upper ends of the terminations of the stiffeners” (the likely σ_maxand σ_min). But in his second statement he said that the minimum stress was not able to be calculated on site but that he knew from his “memory…that the kappa at the approximate position of the stiffener end was .7”, so that “it was then a simple calculation to come to the allowable stress which under BG 60 was 215MPa [215 megapascals]”.

In his second statement he was a little more specific saying that he was able to assess the σ_maxat 163MPa and to calculate the maximum allowable stress of an F_I detail at that point as 215MPa and he provided a handwritten reconstruction of his calculations. But when cross-examined, and shown that the dimensions used by him to arrive at his 163MPa were incorrect, he conceded that his calculations should have resulted in a figure for σ_max of 208MPa. Overnight during his cross-examination, he was allowed the opportunity to look at drawings and to revisit his evidence about his calculations. He then produced another calculation, again a purported reconstruction of what he had done at Goonyella, which resulted in a σ_maxof 171MPa. Then it was pointed out to him, by further cross-examination, that he had made another error. Before the next day of his cross-examination he therefore attempted a further reconstruction of his 1984 calculations, this time reaching a σ_maxof 219MPa. But then he said that he had not applied the probability factor, W, and that allowing for this the allowable fatigue strength of an F_I weld at this point of the structure was 229MPa, which being more than his σ_max of 219MPa showed that the strength of the F_I would have been sufficient. But even so, the margin for error was less than ten per cent and the problem with this evidence was that in his second statement he had said “If the allowable stresses had been closer, for example ten per cent, I would have considered moving up to the class E_I”.

Then he added another qualification to his calculation of 219Mpa, saying that it could be reduced because, he now recalled, in 1984 he had taken into effect the nearby bracing on the tower, and that when that is done, his 219MPa becomes 186MPa. This is a matter to which he had not referred in his evidence until then, and in particular, in his witness statements, where he had purported to reconstruct his calculations or in his attempts over several days of oral evidence to show how he could have arrived at a figure under BG 60 with the information which he had at Goonyella.

Of course it must be remembered that Dr Fleischhaker was being asked to reconstruct what he said had been the calculations which he performed more than 20 years ago. That was always going to be difficult, assuming that he had performed those calculations. Nevertheless the fact that his evidence changed several times about this makes it even less persuasive. And what is significant is that after several attempts, made over several days, he was unable to show how, with the means and information available to him at Goonyella, he was able to measure the strength of an F_I detail at this point of the tower by a calculation according to the formulae in BG 60. Probably because he recognised that, he claimed (in cross-examination) that when he returned to Lubeck, he had his “co-workers” check his calculations and “they confirmed it”. There is no support for this from other evidence and it is inconsistent with his witness statements. As noted already, in his February 2007 statement he said that:

“I believe I expected that on my return to Lubeck that a more comprehensive analysis of this would occur by my staff, however it appears that this did not occur…”

O&K pleaded that “calculations as to the stresses, as a consequence of the stiffener terminations, on the tensile and compression members of the tower” were performed by another of its employees, a Mr To Baben. In his second statement Dr Fleischhaker suggested that Mr To Baben had checked Dr Fleischhaker’s calculations. He said that he did not receive any report of the result of Mr To Baben’s checking, but that he was not concerned because he was satisfied that his own analysis had been correct. Clearly Mr To Baben did make some calculations after Dr Fleischhaker’s visit to Goonyella. However they were not calculations checking calculations by Dr Fleischhaker and more generally, in relation to fatigue or the strength of the upper stiffener terminations and the welds.

It was conceded ultimately by O&K that Mr To Baben had not made any calculation in relation to this part of the tower and that his calculations had been of the static strength of the tower at a much lower and presently irrelevant point. I find that there was no work by way of calculations or checking calculations in relation to the point of these stiffener terminations by O&K after Dr Fleischhaker’s visit to the mine. Significantly, however, according to Dr Fleischhaker’s evidence, O&K could have done so.

In my conclusion, it is more probable than not that Dr Fleischhaker did not calculate the strength of an F_I detail at the stiffener terminations. His reconstructions of calculations effectively acknowledged that it was not then possible for him to perform the calculations required by BG 60 whilst he was at Goonyella. That is consistent with the evidence of Mr Friedemann, who said that he did not believe it would have been possible for Dr Fleischhaker to have conducted an assessment of the impact on the fatigue resistance of these stiffeners. Dr Fleischhaker could have attempted only some less precise and therefore less reliable calculation. As is shown by the evidence of other witnesses, such as Professor Hulsmann called by the plaintiffs or Dr Potts called by the defendants, a precise calculation of the adequacy of an F_I detail would have required more time and data than Dr Fleischhaker had available to him in his couple of days at Goonyella. Precisely calculated according to BG 60, it would have been necessary for Dr Fleischhaker to apply the probability factor, which he could have calculated only by knowing the various load combinations which would provide the figures from which probability factor was to be calculated under the equation set out on pages 12 and 13 of BG 60, and he does not suggest that he had all of this information on hand at Goonyella. He did not say that he had used the probability factor (W) in his calculations. The submission that I should find that he did use it, and from a memory of what it had been in his design of the BWE itself, has no basis in the evidence.

So whilst his duty was to provide a considered engineering solution, he did not do so at Goonyella, at least in respect of the strength of the upper terminations of these stiffeners was concerned. As his evidence acknowledges, he could have had O&K perform that analysis upon his return but that did not happen.

What should have been done?

The plaintiffs argue that upon those facts, that Dr Fleischhaker was negligent and that in consequence, there was an undue risk of fatigue cracking which would result in the structural failure of the tower, as did occur in 2000. They say that those facts are sufficient to make O&K, as vicariously liable for Dr Fleischhaker’s negligence, responsible for the damage from the collapse of the BWE.

However, the plaintiffs must go further. They must prove not only what O&K did or did not do, but also what a reasonably careful and competent engineer in Dr Fleischhaker’s position would have done. It is necessary to inquire further into the facts to identify “with some precision, what a reasonable person in the position of the defendant would do by way of response to the reasonably foreseeable risk”, as Gummow and Hayne JJ said in Graham Barclay Oysters Pty Ltd v Ryan,^[21] where their Honours cited the observation of Isaacs A-CJ in Metropolitan Gas Co v Melbourne Corporation^[22] that:

“[no] conclusion of negligence can be arrived at until, first, the mind conceives affirmatively what should have been done.”

As the defendants’ case ultimately accepted, Dr Fleischhaker was obliged to assess the fatigue strength of this weld detail. They say that this required no more than the application of BG 60. So if upon a proper analysis, an F_I detail would have proved sufficient according to BG 60, no more was required of the engineer.

The plaintiffs argue that the reasonable engineer was required to go further than simply the application of BG 60. They say that the reliability of BG 60 was then the subject of considerable professional doubt, as Dr Fleischhaker knew or should have known, such that no reasonable engineer in his position could have simply applied that standard. The reasonable response which was required was either the prescription of a stronger welded detail, and in particular the equivalent of an E_I under BG 60, or the design of the stiffeners so that they extended to the top or near the top of the tower, where the stress at the stiffener terminations would have been far less.

Applying only BG 60, an F_I weld at the top of this stiffener would have been adequate. That was the evidence of Professor Hulsmann, called by the plaintiffs, and Dr Potts called by the defendants. Professor Hulsmann’s opinion about that was expressed in his report of July 2007. By then, this trial had been underway for some months when the plaintiffs, apparently as a result of that report, obtained leave to amend their case. The amendments were in the form of further particulars, the first draft of which were produced on 23 July 2007 and which in final form are dated 3 August 2007. Until then there was no specific plea that a reasonable engineer in Dr Fleischhaker’s position would have gone beyond BG 60. At least once Professor Hulsmann had made his calculations which showed that an F_I would have sufficed according to BG 60, the plaintiffs had to allege that Dr Fleischhaker knew or ought to have known that BG 60 may have overstated the fatigue strength of the F_I detail.

Professor Hulsmann undertook two sets of calculations, one involving a beams model and the other a finite element analysis. The beams model used a program which his firm, Schippke & Partners, had acquired and which he knew to be the same as that used by O&K in 1984 and earlier when it had designed this BWE. He undertook the finite element analysis to make a better comparison with the calculations undertaken by Dr Potts’ firm (AMOG). As appears from his July 2007 report, there is little difference between his finite element analysis figures and those of Dr Potts. Professor Hulsmann calculated on the finite element basis the σ_maxat 210.4MPa and the strength of an F_I detail for this stiffener end at 223.9MPa, with the result that the weld was strong enough according to BG 60. According to the AMOG calculations, the maximum stress was 191.1MPa and the strength of the detail was 219.8MPa. Professor Hulsmann’s calculations using the beams model resulted in a maximum stress of 216.1MPa against a strength of the F_I of 226MPa. This is the more relevant calculation because the beams model calculation is that which would have been performed in 1984.

So on Professor Hulsmann’s calculations, the maximum stress was more than 90 per cent of the fatigue strength of the F_I detail. Dr Fleischhaker said that had his (alleged) calculations produced a maximum stress within that range of the strength of the F_I, he would have prescribed a stronger detail.

Should the reasonable engineer with the results according to Professor Hulsmann’s calculations, have chosen a stronger detail than an F_I? This 10 per cent margin for safety was not suggested by the text of BG 60 itself. Nor was it suggested by Professor Hulsmann, upon the assumption that BG 60 was a reliable standard. Perhaps Dr Fleischhaker did have a practice of allowing for that margin for safety, although it is just as likely that he falsely claimed that he had this practice in order to represent that he had a conservative approach to these things. But whether he had such practice, I would not conclude that any reasonable engineer must have applied it. And it is not part of the plaintiffs’ pleaded case that if BG 60 was otherwise reliable, such a margin should have been allowed.

Accordingly, it is necessary for the plaintiffs to prove that any reasonable engineer in Dr Fleischhaker’s position ought to have thought that BG 60 was unreliable and that some more conservative solution should be designed in case BG 60 overstated the strength of the F_I detail.

The plaintiffs’ case in this respect, as set out in the particulars of 3 August 2007, is as follows:

“B.Alternatively, if the welded detail designed by the First Defendant was intended by Dr Fleischhaker to be an F_I detail under standard BG 60, which is denied by the Plaintiffs, Dr Fleischhaker knew or ought to have known at the time the welded detail was designed that:

[1]BG 60 overstated the fatigue strength of the F_Iwelded detail and that maximum stress in the region of the termination exceeded the fatigue strength of the F_I welded detail;

[2]further or in the alternative, there was a body of engineering opinion (including the papers and text particularised in (III) below) to the effect contained in the codes and standards and particularised in (IV) below which indicated that BG 60 may have overstated the fatigue strength of the F_I welded detail and there was a risk that the maximum stress in the region of the termination might exceed the fatigue strength of the F_I welded detail.

PARTICULARS

Particulars of the facts or matters by reason of which Dr Fleischhaker knew or ought to have known at the time the welded detail was designed that BG60 overstated the fatigue strength of the F_I welded detail and that maximum stress in the region of the termination exceeded the fatigue strength of the F_I welded detail, are:

Dr Fleischhaker participated in a committee which reviewed the adequacy of BG 60 from in or about 1976 to until BG 86 came into force in 1986;

in January 1984 that committee produced a draft of the standard that later became BG 86, which treated fatigue strength of welded details equivalent to the F_I detail in BG 60 as having a lower fatigue strength than the maximum stress in the region of the stiffener termination;

that experimental fatigue data indicating that the calculation of the fatigue strength of welded details by reference to a stress ratio, such as the method by which the fatigue strength of welded details was calculated under BG 60, might overstate the fatigue strength of welded details had been referred to in the following published papers and texts:

…

the method by which the fatigue strength of welded details was calculated under BG 60 (by calculating a stress ratio κ and applying a probability factor) had not been followed or adopted in standards introduced after 1978, that is AASHTO (1983), ISO 5049 (1980), DIN 15018 (1984) and DS 804 (1983), Sia 161 (1979), BS 5400 (1978), AS 1250 (1981) and Exhibit 401;

an F_I welded detail at the stiffener termination would not have had sufficient fatigue strength under any of those standards;

by reason of Dr Fleischhaker’s position as head of the department for design and development at the First Defendant in Lubeck and by reason of his membership of the committee referred to in (I), he ought to have been aware of the matters referred to in (III) to (V) above;

(iv)The matters referred to in paragraph 25(a)(i) to (iii) above would have been recognised by a reasonable [sic] competent structural design engineer.”

BG 60 had been used in the design of bucket wheel excavators in The Federal Republic of Germany for more than 20 years by 1984. With some qualifications, it had been used in the design of this BWE. It prescribed “principles of calculations” for “large machines in open cut mines”. As would be expected of such a standard, it was the product of considerable professional expertise and practical experience. And it was a standard specifically referable to machines such as these and the conditions in which they were expected to operate, rather than having a more general application, such as a standard for cranes. It did not have the force of law in The Federal Republic of Germany or elsewhere, but professionally it was for many years considered to be authoritative and reliable.

However the plaintiffs say that by November 1984 BG 60 had been discredited. Professor Hulsmann recalled that there had been some accidents involving the structural failure of bucket wheel excavators in The Federal Republic of Germany leading up to 1984 which he believed were significant in causing the reconsideration of BG 60. But nothing of that kind is alleged within the particulars. Undoubtedly BG 60 was being reconsidered by the relevant professional body in 1984 but apart from Professor Hulsmann, there appears to be no evidence that this was the result of the structural failure of machines. I accept that he has some recollection that there were accidents of the kind he described, but not surprisingly given the passage of time, his recollection was very general. He was unable to recall the particular cause of the incidents and what they indicated in particular about BG 60.

BG 60 was being reviewed by a professional committee in The Federal Republic of Germany of which Dr Fleischhaker was a member. It was under review at least by January 1984, when a draft of a proposed new standard was produced and provided to the committee for its consideration. That draft was not produced by the committee itself (as the particulars allege) but by one of its members, Professor Kaufmann. Professor Hulsmann was aware of the committee’s review of BG 60, and of at least some of the suggested changes to it, through his working with Professor Kaufmann at the time. The committee was made up of academic engineers and people such as Dr Fleischhaker, who represented leading manufacturers. Its members included Mr Friedemann and Dr Kowalewski, each of whom gave evidence.

Professor Kaufmann was advocating a change from the kappa based analysis of fatigue strength to one based on stress range. His January 1984 draft included that change. Another change he proposed was in the measurement of the relevant loads on a machine. BG 60 did not require that “dynamic loads” be taken into account. Broadly speaking these are loads resulting from the movement of the machine. As is now known, the disregard of dynamic loads had led to an understatement of the stress condition at points of these structures. Accordingly, as is now known, this was one respect in which BG 60 required amendment. The revision of BG 60 culminated in the publication of a new standard in 1986, called BG 86. This new standard brought dynamic loads into account.

Mr Friedemann had questioned the appropriateness of the loads under BG 60, suggesting that the loads which it assumed were too low. The load assumptions under BG 86 were higher then as a result of the inclusion of dynamic loads and, according to Dr Fleischhaker, research as to loads which had been done by Mr Friedemann.

The committee caused tests to be undertaken to assess the proposals of Mr Friedemann and Professor Kaufmann, the results of which showed that their proposals could not be immediately accepted and that there was much further work to be done. However, those tests were not conducted until 1985, and the plaintiffs’ argument is that, as Dr Fleischhaker conceded in cross-examination, the position in late 1984 was “inconclusive”. Dr Fleischhaker’s evidence was that according to the then opinions of Mr Friedemann and Professor Kaufmann, many machines designed to BG 60 by then should have broken, suggesting that they were wrong. But if that was so, it was not apparent by the end of 1984.

Had an engineer calculated the fatigue strength of an F_I detail for this stiffener termination on the BWE using the 1984 draft standard, an F_I would have been insufficient according to that draft. That is shown by Professor Hulsmann’s calculations. There was some dispute between the experts as to what detail within the 1984 draft was the equivalent of an F_I under BG 60. But that need not be resolved. On any of the relevant possibilities under this draft, an equivalent of an F_I would not have been strong enough, according to AMOG’s calculations. And the plaintiffs do not argue that the reasonable engineer should have applied the then untested 1984 draft standard. It could not be said that any reasonable engineer must have applied this draft rather than the BG 60 which still stood. Indeed, because in November 1984 the relevant tests had not been conducted in relation to the draft, and it had not otherwise received the consideration which necessarily would have preceded its adoption, the application of the draft then would have been unreasonable. But rather than arguing that an engineer should have used the draft standard, the plaintiffs argued that the draft suggested such a departure from BG 60 that overall the reliability of BG 60 should not have been assumed.

Mr Friedemann was called by the defendants. He gave his evidence by video link from Germany from where he had been unable to travel because of ill health. He described the regulatory regime in The Federal Republic of Germany for the approval of machinery in the mining industry, under which the regulatory authority would engage a so called independent expert to examine a machine and to analyse its design and construction. The expert would report to the authority on whether the machine was safe for its operations to be permitted. For many years Mr Friedemann worked as such an independent expert and his experience and expertise in relation to bucket wheel excavators was well established. He has written independent expert’s reports in relation to more than 20 bucket wheel excavators in Germany and elsewhere, as well as such reports on other heavy mining equipment such as other excavators, spreaders and reclaimers. He has written similar reports outside The Federal Republic of Germany although a similar regulatory regime in requiring the report of an independent expert, was not in place. He provided reports on certain machinery for the State Electricity Commission of Victoria, and on its recommendation he was introduced to Utah to advise it in relation to the then proposed BWE in 1978. He was engaged by Utah in that year to review the structural design of the main load frames and preliminary approval of drawings for the BWE, spreader and transfer conveyor. Subsequently he was engaged to provide an independent expert’s report concerning the BWE and its ancillary equipment in accordance with the German practice. He delivered this report to Utah in 1985.

Mr Friedemann was not told of the 1984 grounding before the repairs, involving the stiffeners, were effected. He became aware of the grounding when Dr Fleischhaker telephoned him after the repairs had been carried out. He later received some written material about the incident from O&K.

In his witness statement, Mr Friedemann said that he had “been called upon to propose a method to repair this tower in 1984 I would not have done it any differently”. He said:

“At that point in time [his 1985 report] I was not focussed on the fact that the welding around the ends of the stiffeners was not presented in detail. I don’t believe that anyone would have paid attention to a detail like that, considering that no information was available about any extent of strain that may have been present there. It was clear that the forces present in that location were not relevant, assuming the dredger [the BWE] was used in accordance with the regulations. The ends of the stiffeners were at that point in time not of great significance.”

Further, he said that he would “not have thought it appropriate to have the stiffeners extended any further than they were dimensioned in this repair”. He also wrote that he did not believe it would have been possible “in the given time frame to conduct an assessment of the impact on fatigue resistance of these modifications” and that he would not have been able to do so. By “given time frame” as he explained in his oral evidence, he meant that that those calculations would have required “another four months or so” whereas he understood that the damage had to be repaired “as soon as possible”.

In two respects this evidence seems at odds with the case for the defendants. First there is the statement that “the forces present in that location weren’t relevant, assuming the dredge was used in accordance with the regulations.” However Mr Friedemann was discussing his own position in writing his 1985 report, rather than the position of Dr Fleischhaker in designing the modifications. Understandably Mr Friedemann would be defensive, having vouched for the safety of the BWE in his 1985 report without having considered the fatigue strength of what had been added to the load carrying structure of the BWE in the 1984 repairs. In that way he was not an independent witness. But more importantly, it was not ultimately the defendants’ case that no one would have considered the forces at the top of these stiffeners or “paid attention to a detail like that”. Instead the defendants sought to demonstrate that Dr Fleischhaker had done so, by his evidence of calculations which he said he performed in the course of his producing his suggestions for repair. So upon the final arguments, it is common ground that the reasonable engineer would have considered those forces and made or caused to be made some assessment of the strength of the detail to withstand them.

Secondly there is Mr Friedemann’s point that calculations would have taken “another four months or so”. That was not Dr Fleischhaker’s evidence. Mr Friedemann was apparently referring to a finite element calculation which in 1984 could not be performed as quickly as it can be now. Importantly O&K does not argue that the appropriate calculations could not have been performed within any time limit imposed by Utah. At the foot of their written submissions in reply, the defendants suggested that the “pressure was on” and there was an “urgency”, but that is no submission that there was insufficient time for a proper design.

Remarkably, Mr Friedmann was not examined or cross-examined about the work of the committee reviewing BG 60 and in particular his contribution to it. The likely explanation for this is that Mr Friedemann was called on 12 June 2007, before the plaintiffs amended their case to allege that Dr Fleischhaker ought to have gone beyond BG 60. Mr Friedemann was not recalled.

Professor Kowalewski, also called by the defendants, did give evidence on this matter. His evidence-in-chief was by a witness statement given in September 2007 and his oral evidence was by telephone from Germany. He has had a long career in engineering both in academic and manufacturing work. From 1969 to 1974 he was a professor at a university in The Federal Republic of Germany before becoming head of the structural department of the mining machinery division of a manufacturer from 1974 to 1983, during which he supervised the design of and strength calculations for numerous bucket wheel excavators and other heavy mining equipment. In that period he was involved with bucket wheel excavators which were sent to mines in Germany, Spain, India and Turkey. In 1983 he was appointed as an independent expert by the West German regulatory authority for surface mining equipment. He has assessed bucket wheel excavators in Indonesia, Germany and one operated by the State Electricity Commission of Victoria. He has also worked as a consultant on numerous reconstructions and refurbishments of mining equipment including bucket wheel excavators. He retired last year.

During his work in the design of bucket wheel excavators, which was from 1974 to 1983, he said that the stress calculations were performed according to BG 60.

He referred to articles published in 1972 by Professor Kaufmann who had questioned whether BG 60 was up to date in comparison with other German standards. His recollection was that Professor Kaufmann had then concluded that BG 60 remained “a safe code and he (Professor Kaufmann) proposed only minor amendments”. He referred to the committee which was appointed to review BG 60, and Professor Kaufmann’s January 1984 draft standard. Professor Kowalewski said that this draft had no “official status” and did not “represent the state of the art as agreed or endorsed by the committee”. He said that until the issue of BG 86, BG 60 “was the applicable code and was the code according to which I designed the structure of bucket wheel excavators and modifications to bucket wheel excavators”. To his knowledge this was the practice of other designers of bucket wheel excavators in Germany. As to this the plaintiffs point out that Professor Kowalewski had no involvement in the design of bucket wheel excavators after 1983, from which they argue that his evidence as to engineering practice in 1984 is of no moment. However that is not a complete answer to his evidence. If it is accepted, then this evidence is inconsistent with the plaintiffs’ case that there was a growing body of professional opinion against the use of BG 60, for it is unlikely to have been the case that this emerged only after 1983 but before the November 1984 repairs.

Professor Kowalewski said that the January 1984 draft was very different from what the committee later agreed should be the new standard in 1986. In his view the draft would not have been “a sound or practical basis upon which to design a bucket wheel excavator”. He said that “[i]n the process of finalising BG 86, it was calibrated against a number of machines that had been designed to BG 60 in order to derive comparable solutions” and that when these machines, which had been operating successfully for more than 20 years, were assessed under the proposed BG 86 loading conditions, they were “shown to have a comparable fatigue life of the BG 86 permissible fatigue stress ranges.” This appears to have been well after November 1984 however, because I infer that BG 86 in draft was produced later than the testing in 1985 of Professor Kaufmann’s January 1984 draft.

Each of the parties led extensive evidence about codes or standards published after 1984 and about what these codes would have required for a welded detail at the end of this stiffener. The plaintiffs apparently did this to demonstrate that BG 60 was out of date by 1984 and that later codes have been more demanding of what welds are required. The defendants led evidence, mainly through Dr Potts and his report number 13, written in August 2007, that these subsequent codes were not so demanding compared with BG 60. At times the respective cases seemed to lose sight of the ways in which such evidence was or was not relevant.

As to the question of what the reasonable engineer would have done in 1984, evidence of the requirements of subsequent codes was of little relevance. Its only relevance to that issue could have been that the publication of a subsequent code, such as BG 86, could tend to prove, in conjunction with other evidence, the existence of a process of review of BG 60 being undertaken in November 1984. But that fact is uncontroversial. At one stage some of this evidence appeared to be relevant to another issue, which is causation. The standard or code which is now current might show what is now known to be the strength of certain welded details as against the stress range to be experienced on such machines. So if the equivalent of an F_I detail would not be strong enough according to the current code, this might assist in the proof that the use of an F_I (or an F_II, which is now known to be no weaker than an F_I) contributed to the fatigue cracking which caused the collapse of this BWE. However, as I discuss below, there is other and more direct evidence as to the effect of an F_I or F_II upon the life expectancy of the BWE. In particular there is the evidence of Dr Potts that with an EI weld, the BWE’s life expectancy would have been twice that which it had with its welded detail.

BG 86 has some relevance in showing that the January 1984 draft had not been accepted by the committee because in several respects it differed from the draft. But the plaintiffs do not suggest otherwise. Rather their case ultimately relied upon what Dr Fleischhaker said was the inconclusive position in the review of BG 60 as at late 1984. That fact is not disproved by evidence that subsequently there was published a code, and in particular BG 86, having requirements which may have been no more demanding than those of BG 60.

Professor Kowalewski also referred to other codes or standards, existing in 1984, which are pleaded by the plaintiffs as indicators of the unreliability of BG 60. He was aware in 1984 of the standard DIN 15018 which was used for the design of cranes. As Dr Fleischhaker accepted, this standard specified a lower fatigue strength for an equivalent of the F_I detail than according to BG 60, although he said that DIN 15018 was “a standard for cranes which classifies things completely differently”.

Professor Kowalewski was not then familiar with the East German codes pleaded by the plaintiffs.^[23] He said he had no reason to refer to those codes as the design of bucket wheel excavators in The Federal Republic of Germany was done in accordance with the West German code (BG 60) which he believed was “largely applied to bucket wheel excavators around the world”. He said that he had:

“no cause, nor saw a need, to make reference to other codes e.g. bridge design codes (for example AASHTO or BS 5400) which do not take care of the special operating and loading conditions of bucket wheel excavators.”

Of the code ISO5049, he said that this was:

“a standard that has been adopted from a document prepared by the FEM (Federation Europeene de la Manutention). It deals with the design of equipment for continuous handling of bulk materials and is not suited for design of bucket wheel excavators digging solid soil or in situ lignite.”

He said, and I accept, that at no stage did the committee issue any warning or notice as to any inadequacy in the design provisions of BG 60, including the F_I and F_II details.

In his witness statement, he said of Dr Fleischhaker’s sketches and his “final repair” document that:

“The type of stiffener and profile used by Dr Fleischhaker … was one which was commonly used not only on bucket wheel excavators but also on other mining machinery.”

He added that:

“If designing the modifications in accordance with BG 60, this type of detail would have corresponded with F_I detail if it had an all around closing weld of the same size as the fillet welds. If the structural stresses at that location detail met at the permissible stresses for the F_I detail under BG 60, I would see no reason not to have used it.”

In cross-examination Professor Kowalewski was taken to part of his witness statement in which he had said that:

“In consequence of measurements on bucket wheel excavators, or excavators and spreaders in operation, additional load assumptions for dynamic effects have been included in BG 86.”

He agreed that the “measurements” to which he referred were those made by Mr Friedemann in the late 1970s and that they had indicated that the maximum stresses in operation were higher than those calculated under BG 60 because it made no allowance for dynamic loads. He also agreed that he was aware of Mr Friedemann’s calculations when he was a member of the committee in 1984, this being “part of the information the committee had to consider”. He accepted that the committee received Professor Kaufmann’s January 1984 document which he said contained:

“sections which had been agreed by the committee already, sections that were still under discussion and sections which had not been discussed at all”,

and he confirmed his written evidence that there had been no discussion of the draft’s tables for allowable stress. He agreed that it was likely that he read the document as a whole in 1984.

When cross-examined he referred to the assessment of machines which had been designed according to BG 60 to assess the effect of adding the dynamic loads which Mr Friedemann had identified, and said that the result of this was:

“that the permissible stresses of the BG 60 were over stepped. Because these machines had been operating for 30 years without a major fatigue damage, it was concluded that the permissible stresses had to be increased.”

The defendants submit that he was referring to some assessment prior to 1984. As I understood from subsequent answers he agreed that in 1984 the committee was still considering Mr Friedemann’s data and more generally whether and if so, what changes needed to be made to BG 60. Dr Fleischhaker was clear that the committee’s assessment occurred after 1984.

In cross-examination, he conceded that in 1984, he would have taken dynamic loads into account, but then said that he would also have considered that there were machines which had survived for decades although designed under BG 60. This shows that he would not have simply and faithfully applied BG 60.

The plaintiffs’ submissions strongly attack the credibility of Professor Kowalewski, saying that his evidence has been tailored to support Dr Fleischhaker who they suggest is a friend. He said that Dr Fleischhaker was not a personal friend but that they were on friendly terms when they met at meetings or social events.

Professor Kowalewski made a short statement at the request of the plaintiffs which is dated 11 July 2007 and I infer, immediately provided by them to the defendants. It simply identifies some articles which he had written. But two days later Dr Fleischhaker rang him with “a few technical questions related to my statement and the attached articles”. Professor Kowalewski volunteered this exchange to the plaintiffs’ lawyers by an email of 15 July 2007, in which he added “I would have preferred to tell Dr Fleischhaker beforehand of my statement because I am on friendly terms with him”. His witness statement, tendered by the defendants, is dated 25 September 2007 and he gave his oral evidence on 1 October. After that statement had been provided to the plaintiffs’ lawyers, they contacted him and arranged a telephone conference, but shortly prior to that conference Professor Kowalewski sent an email cancelling it. He sent a copy of his email to the defendants’ lawyers. He said that he cancelled the conference because he was afraid that it would “become very complicated and very uncomfortable”. He said that in his conversation with Dr Fleischhaker, he had been told that none of the other terminations had fatigue cracks and that “the crack started at a point where the welding had not been conducted properly – carried out properly”. Apparently from then on, he decided he would not speak to the plaintiffs’ side.

He was re-examined about these matters and emails between him and a solicitor acting for the defendants were tendered. That solicitor had told him that he was under no obligation to speak to the plaintiffs’ lawyers but was free to do so if he wished. There is, however, some cause for concern about this exchange. In his email to the defendants’ lawyers, he referred to their recent conference and wrote: “I would be grateful if you would help me remembering who was your partner yesterday who fairly helped me realising your points and finding agreeable solutions for several paragraphs of the statement in question”. The defendants’ solicitor replied that “the participants at the telephone conference last night were myself, Mr Andrew Potts and Mr Uli Priester”. This is the same Dr Potts of AMOG, an expert through whom reports were tendered. He should not have been participating in that conference and, in particular, helping another witness to find “agreeable solutions” for a witness statement. However, as also emerged from this re-examination, when Professor Kowalewski was interviewed by the plaintiffs’ lawyers in July 2007, he was asked questions by the plaintiffs’ expert witness Professor Fisher.

I am not persuaded that Professor Kowalewski was dishonest. But I have the impression that he was sympathetic to Dr Fleischhaker’s position, which is not surprising given his long professional association with him and also perhaps because it seems that Dr Fleischhaker had given him a certain side of the story by suggesting that this was all the product of poor work by those who did the welding. As appears from his email, he received what he thought was some considerable assistance in the completion of his witness statement, and this much detracts from its weight. Further, the standard of English in his witness statement was quite different from that of his oral evidence. Indeed prior to the commencement of that evidence, counsel for the defendants argued that he should have the assistance of interpreters because of the standard of his English. Clearly enough he has been greatly assisted by others, including those with technical expertise, in the preparation of this witness statement.

The plaintiffs argue that in 1984, BG 60 did not represent the state of the art in the assessment of fatigue and that it was out of date in at least five ways, each of which was subsequently addressed in BG 86 and had been addressed in the January 1984 draft. First, BG 60 did not require dynamic loads to be taken into account. Second, the probability factor “W” under BG 60 is said to have been “an arbitrary figure, wrongly inflating the allowable maximum fatigue”. This probability factor was not used in BG 86. Third, BG 60 distinguished between steel strengths but the plaintiffs say it had been established by analysis of experimental data that the strength of the steel made no material difference to the fatigue strength of the detail. Fourth, BG 60 applied the kappa concept and not the stress range concept. Lastly, it is said that BG 60 overstated the allowable fatigue strength of welded details by comparison with more current standards but published by 1984, such as DIN 15018 and ISO 5049.

It is one thing to say that there were these elements of BG 60 which were not retained in BG 86. It is another to say that by November 1984, the relevant branch of the engineering profession in which Dr Fleischhaker worked had accepted that those elements were wrong and that BG 60 was out of date.

So going to the first of them, Dr Fleischhaker knew that Mr Friedemann, for one, was advocating the relevance and need for allowance for dynamic loads. But the plaintiffs have far from demonstrated that there was a prevalent opinion held by engineers that this should be done.

The probability factor “W” is not proved to have been rejected by the profession by 1984. Nor is it proved that it was, or is, an arbitrary figure. On the contrary, as would be expected, it was within BG 60 as the result of some considerable professional consideration. It did not reappear in BG 86 but, as several witnesses explained, BG 86 was not simply a repetition of the elements of BG 60 absent the probability factor. There was quite a different means of calculating the adequacy of a welded detail, but built into the figures which would result from the application of BG 86 was a multiple of 1.4. Several witnesses explained that the committee which drafted BG 86 considered it necessary to multiply by 1.4 what would otherwise be the fatigue strength of a weld because otherwise machines which had been operating successfully for years would have been unsafe according to that standard.

As to steel strengths, whilst many may have believed that this was not material, again it is not proved that in 1984 that this had become the prevalent professional opinion. Nor is it demonstrated that by 1984 the use of the stress ratio (kappa) was regarded as out of date and unreliable. For example the East German code published in 1982 used kappa as did ISO 5049. Professor Fisher was strongly critical of use of kappa, having developed the stress range concept to replace it, in his work in the United States in the late 1960s and early 1970s. But as at 1984, the stress range concept had not been employed within codes in Europe with the exception of a code in Switzerland (to which Professor Fisher contributed) and in what he described as the Euro code, which is not pleaded by the plaintiffs. The crane code, DIN 15018, used the kappa concept.

I have mentioned already Professor Kowalewski’s evidence as to that crane code. The plaintiffs have far from established that its content, even considered with other evidence, would have demonstrated to an engineer in 1984 that BG 60 was out of date. It suggested a lower fatigue strength of welded details by comparison with BG 60. But BG 60 was expressed to be relevant to large machines in open cut mines whereas DIN 15018 was in relation to cranes.

The plaintiffs’ argument in reliance upon ISO 5049 is stronger because that standard was expressed to apply to bucket wheel excavators. ISO stands for International Standards Organisation which is an association of national bodies responsible for formulating engineering standards. ISO 5049 is dated March 1981 but it recited that it was first presented to its member corporations in 1978. It also recited that 15 of those countries, including the Federal Republic of Germany, had approved it although three had rejected it “for engineering reasons”, they being the United Kingdom, Denmark and Australia.

Under the heading “Regulations for the Calculation of Structural Elements”, this ISO standard said this:

“Area of Application

These international standards shall be applied to mobile continuous handling equipment for bulk materials; spreaders and bucket wheel loaders with their conveyors, bucket wheel excavators and bucket chain excavators for open cut mines, ship loading equipment and ship unloading equipment etc.”

It went on to make particular provision for what were described as “storage yard machines”, which it distinguished for some purposes from other machines such as excavators and more generally machines “in which the digging resistance is mainly uncertain”.

I point to these references to stockyard machines as well as to things such as bucket wheel excavators because of evidence given by a current employee of the Krupp group, Dr Schneider. In his witness statement (dated 3 September 2007) Dr Schneider argued that ISO 5049 was too conservative in its assessment of the structure of a bucket wheel excavator. He wrote that because an excavator works in natural soil, which is not homogenous material, its drive has to provide sufficient reserves to cope with harder material whereas in contrast a machine such as a reclaimer operating in a stockyard, and moving materials which have already been excavated, has a more continuous application resulting in a different spectrum of digging forces compared with an excavator. He said, in effect, that ISO 5049 was apt for the stockyard machines but not for the bucket wheel excavators operating in a pit. Dr Schneider said that this had been recognised by subsequent amendments to the ISO standard and in particular in the 1994 edition of ISO 5049.

However, on its face the 1981 edition of ISO 5049 was clearly expressed to apply to, amongst other things, bucket wheel excavators. If it is now thought to have limited application to them, nevertheless it was a standard published only a few years prior to November 1984 and was approved by several countries including The Federal Republic of Germany. Dr Fleischhaker was aware of it and he accepted that he knew in 1984 that it specified lower allowable fatigue strengths than BG 60. In Dr Fleischakker’s first witness statement (dated 8 February 2007) he wrote:

“17.Until my involvement at the Goonyella excavator, the codes which were applied to these designs were in all cases either the BG 60, or FEM, (otherwise known as ISO 5049). One or other of these standards was specified in each contract for any excavator in which I was involved. These were the only codes applied by my professional colleagues.

In 1992 Krupp … took over the business of O&K Germany. Previously those two companies had been in competition. The only designers and suppliers of this kind of excavating equipment in the world until then were O&K Germany and Krupp outside of the East German states, and Takraf in East Germany. … Therefore the only persons experienced in the design of such equipment were those who had worked for either of those three organisations. I was familiar with the design practices which were used by O&K Germany and Krupp. O&K Germany and Krupp always applied, with one exception to which I shall refer later, either FEM, or BG 60 to the exclusion of any other standard of any kind. …

Subsequently the design codes applied were invariably either BG 86 (otherwise known as DIN 2261) once it came into operation in 1986 or the FEM as subsequently modified.”

So according to that, ISO 5049 did apply to bucket wheel excavators, and O&K and Krupp used it in that context. That witness statement, of course, was made prior to the plaintiffs widening their case to include this allegation that BG 60 should not have been followed, and to rely in that on the more conservative requirements of ISO 5049.

In his second statement (dated 19 August 2007) Dr Fleischhaker again referred to ISO 5049 as being “specifically for the design of bucket wheels”. He said that he was invited to join the committee which developed that standard and that he appointed a delegate to attend and participate on his behalf in that committee’s deliberations, from which he followed the progress of its work. He went on to say that the ISO code used the kappa concept and not the stress range concept, as an apparent rebuff to Professor Fisher. Yet in his oral evidence he denied that ISO 5049 applied to bucket wheel excavators, saying that instead it was “established for materials handling”. By another answer in cross-examination, he asserted that to his knowledge “nobody ever has ordered a bucket wheel excavator constructed by this ISO norm or an FE norm – FEM norm”. That evidence cannot be reconciled with his written evidence. As it happens there is evidence from Krupp’s Mr Scheid showing that in about 1992, Krupp designed and manufactured a bucket wheel excavator by the application of ISO 5049-1. And this was at a time when Dr Fleischhaker was employed as the head of Krupp’s design office at Lubeck. Perhaps Dr Fleischhaker had forgotten about this machine and its design. Regardless of that, the design of that machine adds to the evidence, which comes from the terms of the code itself, that ISO 5049 as published in 1981 was regarded by relevant engineers, including, I find, by Dr Fleischhaker, as a code applicable to bucket wheel excavators being used, as was the BWE, in a pit. And as he conceded, he knew that it specified lower allowable fatigue strengths than did BG 60.

It is not the plaintiffs’ case that the 1984 repairs should have been designed simply according to ISO 5049. Rather it is their case that this code should have alerted Dr Fleischhaker to the risk that BG 60 overstated the fatigue strength of the F_I detail. I accept that argument. ISO 5049 was then a relatively recent code, the product of considerable international research and specifically applicable to bucket wheel excavators. At the same time BG 60 was under review. The committee undertaking that review was investigating its adequacy and the position in November 1984 was “inconclusive”. The other codes pleaded in the plaintiffs’ case are not of the same relevance. But ISO 5049 should have alerted an engineer to the risk of using only BG 60.

In his report number 13, Dr Potts compared the requirements of BG 60 with those of other codes published before and after 1984. He concluded that

“Whilst BG 60 has higher permissible stress ranges than ISO 5049…, it is not inherently unconservative when compared with other codes [such as DIN 15018 (1974) and TGL 13500 (1972 and 1982), the East German codes] taking into account the consideration of the usage spectrum”.

The defendants say that this analysis was not seriously challenged and that I should conclude from it that the reasonable engineer in 1984 would not have been concerned about the application of BG 60, because that engineer would have understood that it was not at odds with other relevant codes. I accept the factual correctness of Dr Potts’ calculations within the report. I accept also that there is a plausible basis for a comparison of the requirements of these codes which is set out in that report. But it does not put paid to the plaintiffs’ argument based upon ISO 5049, because as appears from this report, ISO 5049 was far more conservative than BG 60 for the equivalent of an F_I detail. Dr Potts’ explanation for that difference was that ISO 5049 assumes “uniform load duty”, or in other words that “the ultimate stress occurs almost always for the repetition cycles on which the lifetime of the appliance is based.” The implicit suggestion within his report is that if ISO 5049 had not made that assumption, it would have been less conservative and its requirements would have been closer to those of BG 60. Be that as it may, ISO 5049 did make that assumption, and this was a code published only a few years prior to 1984 with specific reference to bucket wheel excavators. Dr Potts’ report does not lead to the conclusion that the reasonable engineer could disregard ISO 5049. I am unable to see how the reasonably careful engineer could have disregarded it and gone simply to BG 60, especially when BG 60 was being challenged by some and officially reviewed.

Some of the codes or standards pleaded by the plaintiffs are not in evidence. They are DS 804 (1983) and Sia 161 (1979). The others which are AASHTO (1983), BS 5400 (1978) and AS 1250 (1981) are not as important because they were not specifically referable to bucket wheel excavators. If as Dr Potts suggests, these codes were not more conservative than BG 60, that is of little moment because unlike ISO 5049, they were not specifically referrable to bucket wheel excavators.

Another point argued by the plaintiffs was that the reasonable engineer would have brought into account what is described as the significant “eccentricity” introduced by this detail. Professor Fisher was strongly critical of Dr Fleischhaker’s repair solution in many respects. One was that there was a “massive eccentricity” which increased the global stresses to which this particular stiffener termination was subjected. This was because the stiffeners were on one side of the flange but with no corresponding stiffener on its other side, with the result that the centroid of the force travelling the length of the flange was redirected towards the stiffeners so that the stress became higher still on the stiffener side of the flange, concentrating at the point of the end of a stiffener. Professor Fisher did not purport to calculate the effect of this eccentricity and nor had he referred to it in his reports. But in his oral evidence he claimed to have “difficulty thinking that an engineer would not think of this”. It is unnecessary to discuss the detailed response by Dr Potts to this eccentricity argument. I am not persuaded by Professor Fisher’s oral evidence about this to hold that any reasonable engineer in Dr Fleischhaker’s position would have not relied upon BG 60, absent some other reason for not doing so, because BG 60 would not have allowed for this eccentricity factor. Other witnesses such as Professor Hulsmann and Dr Jones accepted that there was some eccentricity. But apart from Professor Fisher, no witness seemed to say that any reasonable engineer would have disregarded BG 60 for this factor if it was otherwise reliable.

The plaintiffs’ case is not much advanced by the publications pleaded in the particulars. I accept that the effect of these publications would have been to suggest the unreliability of BG 60. But I do not accept that a reasonable engineer would have been obliged to disregard a long-standing code (BG 60), if otherwise considered to be reliable merely because some engineers, however eminent, were publishing an opinion suggesting otherwise. The fact of this engineering opinion is demonstrated by the formation by the relevant authority of the committee to review BG 60 and the contributions being offered by Professor Kaufmann and Mr Friedemann.

In all of this, of course, the benefit of hindsight must be kept in mind. What must be considered is that which was or should have been known or understood by an engineer in Dr Fleischhaker’s position in November 1984. I am not satisfied that such an engineer should have thought that BG 60 overstated the fatigue strength of an F_I detail. Some engineers in his position might reasonably have thought that it did so. But that is not to say that any reasonable engineer must have held that view.

However, any reasonable engineer in his position should have doubted the reliability of BG 60. After all there was a review of BG 60 which had been put in place by the relevant West German authority. A review committee had been constituted, made up of leading engineers from the major manufacturers and academics. Some eminent members of that committee had undertaken substantial research. Mr Friedemann had compiled a large database from his research. All of this amounted to more than a professional opinion being ventilated occasionally in published journals or seminars. This was an official process for the review of the code, not as a matter of routine, but because some leading engineers were providing substantial reasons for its necessity. The outcome of that review was unknown and could not have been safely predicted as of November 1984, as Dr Fleischhaker effectively conceded. And as he knew, the inclusion of dynamic loads as advocated by at least Mr Friedemann and by Professor Kaufmann in his January 1984 draft, would affect the stress condition of relevant parts of an excavator and thereby the ability of certain welded details to withstand that stress. The position was then “inconclusive”. In the midst of that review the reasonable engineer in Dr Fleischhaker’s position could not have said to himself at the same time that BG 60 was reliable.

Had Dr Fleischhaker or some other engineer at O&K performed calculations according to BG 60, as Professor Hulsmann did, and thereby arrived at Professor Hulsmann’s figures (or figures very close to them) he or she would have seen that the strength of an F_I detail, according to BG 60, was very close to the maximum stress at the point of this termination. In his Report no 11, Dr Potts challenged Professor Hulsmann’s FEA calculations as to BG 60, and suggested certain corrections. They are to his FEA calculations. The changes to the FEA analysis by Professor Hulsmann, if accepted, are not significant. Under Professor Hulsmann’s calculations, the maximum stress (210MPa) was 94 per cent of the strength (223.9MPa). As changed by Dr Potts, the percentage was 87 per cent. Because BG 60 was unreliable, that margin for error should not have been accepted as reasonable. And if the engineer had not performed calculations either according to BG 60 or to ISO 5049, it is difficult to see how he could have been satisfied that the F_I detail was strong enough.

Without being able to be satisfied that an F_I detail was adequate, what would the reasonable engineer have done?

The plaintiffs argue that the exercise of reasonable care required Dr Fleischhaker either to design the stiffeners to be much longer, so that they extended to the top or near the top of the tower, or to prescribe a stronger welded detail such as the E_I under BG 60.

In his first witness statement, Dr Fleischhaker said that if the stiffeners had been four or five metres longer, so as to extend to or near to the top of the tower, they would have been impossible to attach. The stiffeners which he designed were 10.5 metes long and very heavy and he said that it would have been too difficult to weld them given the limited space. He claimed that he gave considerable thought to this at the time but his solution “had to take account of practicalities”. Further, he said that it was simply impossible to extend the stiffeners to the upper most tower frame because they could not have been manoeuvred into position and they could not have been extended through the rope support at the top of the tower. At one point in his oral evidence he seemed to suggest that there was another reason for not having longer stiffeners which was “that you had to expect the machine to collapse at any minute”, although when pressed he was unable to explain that.

There was some cross-bracing which would have affected the extension of the stiffeners further up the tower which was about 2.3 metres (from its centre line) from the top of the stiffeners as installed. Mr Platzer, an engineer from Schippke & Partners, gave unchallenged evidence that the stiffener in question could have been extended approximately 2.1 metres up the tower without interfering with the cross-bracing between the two webs. On the other side of the web, that is on the outside of the web, of course there was no cross-bracing inhibiting the extension of the stiffeners. Mr Platzer performed some calculations from which he concluded that an extension of the stiffeners by 2.1 metres would have had the effect that the stress at their terminations would have been less than the permissible stress for an F_II detail under BG 60 (assuming that it accurately stated the fatigue strength of that detail) and its equivalents under the 1984 draft code (if relevant) and under BG 86. And on the assumption that BG 86 accurately stated the fatigue strength of the equivalent of an F_I detail, Mr Platzer said that it would have been necessary to extend the stiffener only a little more than one metre before the stress condition became less than the fatigue strength of such a detail. None of this was ultimately challenged.

Professor Hulsmann said that there would have been no imbalance created by extending the stiffeners higher, or by extending the outside stiffeners higher than the inside stiffeners (if their extension was impeded by the cross-bracing). He added that an extension of the inside stiffeners was not impeded by the cross-bracing because any interference with the cross-bracing to make way for the stiffener would not have affected “the stability of the machine”, but would have been merely a “problem from construction”. Nevertheless the cross-bracing might have seemed a significant impediment to a reasonably careful engineer considering this in 1984.

Ultimately the defendants did not appear to argue that the extension of the stiffeners at least to that cross-bracing as discussed by Mr Platzer, would have been impracticable. But they say an engineer could have been reasonably satisfied with that solution only by deciding that the stress condition at that point would have been met by the fatigue strength of a certain welded detail. This would have taken the engineer back to BG 60 and to a judgment of what margin should be allowed for the prospect that BG 60 overstated that fatigue strength.

Alternatively, the plaintiffs say that a stronger welded detail should have been prescribed. Again, the defendants do not appear to argue that this was impracticable. They argue that an F_I detail was strong enough and they say that if the engineer was not to rely upon BG 60, there was no logical means of measuring the adequacy of some alternative detail.

Dr Fleischhaker accepted that a stronger detail could have been selected and claimed that he would have done so if what he said were his calculations had revealed that the fatigue strength was within 10 per cent of the maximum stress. As I have said, that would have been the position had Dr Fleischhaker made the calculations which Professor Hulsmann made. That was not the result of Dr Potts’ calculations, although his were performed by a finite element analysis rather than the beam model which was available in 1984.

An E_I detail according to BG 60 was considerably stronger. Consistently with Professor Hulsmann’s calculations for F_I and F_II details (in his July 2007 report), and from the English version of BG 60, the maximum allowable stress of E_I at this location can be calculated as follows:

Maximum allowable stress	=	140 / (1-0.641 κ) W
	=	140 / (1-0.4070) 1.153
	=	272MPa

Dr Potts criticised Professor Hulsmann’s calculation, and would make the same criticism of this one. But it is valid in illustrating the difference between the F₁ and the E₁. And without calculations as performed by Professor Hulsmann, the engineer would still have seen that the E_I detail was much stronger than the F_I detail. So as Dr Jones confirmed when cross-examined, at an assumed kappa of 0.6, and without any allowance for the probability factor “W”, BG 60 indicated a maximum allowable stress for an F_I detail of 187MPa^[24] and for an E_I detail a comparable figure of 227MPa. So even without calculating the amount of the probability factor, the engineer would then have known that according to BG 60 an E_I would have had a maximum allowable stress considerably higher than 227MPa.

Whilst BG 60 was unreliable as providing a means of safely calculating the precise strength of a weld at a particular location, there appears to have been no professional doubt cast upon the proposition that the detail depicted as an E_I weld in that standard was much stronger than an F_I detail. The precise difference in that strength, according to BG 60 was not so important: what would have mattered to the careful engineer was that the E_I was obviously so much stronger that it could be safely used.

The defendants say that it is critical that no evidence has been called “from any practitioner in the category of Dr Fleischhaker, that is to say a designer of bucket wheel excavators, to suggest that Dr Fleischhaker’s approach was wrong” and that the evidence called from Mr Friedemann, Professor Kowalewski and another of their witnesses, Dr Dittrich, provides “cogent evidence that the subject conduct was not in breach of the practitioner’s duty of care”. They cite what was said by Muir J in McDonald v Ludwig^[25] and argue that the significance of the lack of evidence from a practitioner saying that he would not have applied BG 60 appears from Atlantis Properties Pty Ltd v Cameron.^[26] However, this is a factual question, and care must be taken in the use of statements made in other factual contexts. This was a particularly specialised expertise which was being called upon by Utah and the other owners in seeking Dr Fleischhaker’s assistance. They were entitled to expect that he would exercise due care and skill, having regard to what he knew. Dr Fleischhaker knew of the work of the committee of which he was a member and knew that the substantial challenges which had been made by some members of that committee to the accuracy of BG 60 raised critical questions which were then unanswered, and for which Dr Fleischhaker does not claim that he then had his own answer. It is in these particular circumstances, of course taken with others such as the relatively demanding requirements of the other relevant standard (ISO 5049), that Dr Fleischhaker could not reasonably have relied only upon BG 60. This is not a case in which the assessment of the reasonableness of a defendant’s conduct can be made simply against some long established professional practice. Further, it cannot be suggested that any prevalent professional practice should dictate the outcome of a professional negligence claim: Rogers v Whitaker.^[27]

As the defendants appeared to accept, a reasonable engineer in Dr Fleischhaker’s position should have foreseen that his design of these stiffeners and their welds involved a risk that if the design was deficient, the structure could crack with fatigue, with the ultimate consequence of the destruction of, or serious damage to, the BWE. In considering what should have been done in response to that risk, the magnitude of the risk and the degree of probability of its occurrence, along with the expense, difficulty and convenience of taking alleviating action and any other conflicting responsibilities which the engineer may have had, must be considered: Wyong Shire Council v Shirt.^[28] Neither the extension of the stiffeners, at least to the cross-bracing, nor the use of an E_I weld would have been problematic. There was sufficient time to have O&K undertake the necessary calculations according to BG 60 as Professor Hulsmann has done by his beam model. Those calculations would have shown a very large margin for error if the E_I detail was chosen or if the stiffeners were extended. A combination of the two could have been employed with yet more confidence. However with the benefit of such calculations, one of those courses could have been taken, and should have been taken in the exercise of reasonable care. The same applies if it is assumed that the engineer’s calculations resulted in the AMOG figures as set out in the Schippke report of July 2007. The unreliability of BG 60 should have made the engineer adopt one or other, if not both, of these courses. Alternatively, if those calculations could not have been done in the time available again, the reasonable response would have been to minimise the risk of fatigue failure by both extending the stiffeners at least to the cross-bracing and prescribing what could have been reasonably assumed to be the much stronger E_I detail.

The potential consequences from a structural failure should have been obvious and even putting to one side the risk to the persons working on or near the machine, the avoidance or reduction of the risk of economic loss from the structural failure of the machine warranted at least the stronger detail of the E_I or extension of the stiffeners. Because neither was required or recommended by Dr Fleischhaker in his design, there was negligence.

There is a further argument of negligence in that there is an alleged failure to warn of the prospect of fatigue cracking. Dr Fleischhaker agreed that he did not give any specific advice or warning about fatigue cracking in this area of the upper termination of the stiffeners. But overall this argument adds little to the plaintiffs’ case, because the longer stiffeners or E_I detail was reasonably required of this design, and as I am about to discuss, either measure would have made a difference. The owners knew that they should have the machine regularly inspected to detect, amongst other things, fatigue cracking. They needed a specific warning only if the engineer had doubts about the strength of the tower at this part of it. If he was entitled to rely on BG 60, he would have had no such doubts. Nor should he have had doubts if he had extended the stiffeners or prescribed an E_I.

Supervision

There is the further allegation that there was a negligent failure to supervise the welding of the stiffeners. As I have found, there was no material difference between the strength of an F_I and an F_II weld. Accordingly, a complaint that Mr Tiedt should have supervised the welding to ensure that the detail was an F_I and not an F_II is inconsequential.

O&K’s pleading still contains a denial that the structural failure was a consequence of a fatigue crack “on the basis that the structural failure was the consequence of the propagation of a cold crack…” As already discussed, cold cracking is no longer a causation issue. It is not argued that if this originated as a cold crack, that broke the chain of causation. The structural failure occurred because of fatigue cracking which was the result of the relevant stress conditions exceeding the strength in the region of the stiffener terminations.

Causation

The plaintiffs argue that it is sufficient for them to establish that the defendant’s conduct increased the risk of a failure occurring and that the risk eventuated. For this they cite Batiste v State of Queensland,^[29] Moore v State of Queensland,^[30] Gold Ribbon (Accountants) Pty Ltd (in liq) v Sheers^[31] and Seltsam Pty Ltd v McGuinness.^[32] They refer also to what was said by McHugh J in Chappel v Hart^[33] as follows:

“If a wrongful act or omission results in an increased risk of injury to the plaintiff and that risk eventuates, the defendant’s conduct has materially contributed to the injury that the plaintiff suffers whether or not other factors also contributed to that injury occurring.”

That passage was referred to with approval in Naxakis v Western GeneralHospital^[34]by Gaudron J^[35] and Callinan J^[36].

However, these passages guide the determination of what is a factual issue, and in each case there must be an assessment of the evidence relevant to that issue in deciding whether the plaintiff has discharged its onus. So in Gold Ribbon, Keane JA said:^[37]

“It must be emphasised that the approach of McHugh J is one of logical inference of a causal link, not of a legal presumption which obviates the need for proof of a casual link. As McHugh J himself said in Commissioner of Main Roads v Jones, the approach to causation which he explained in Chappel v Hart is appropriate to cases ‘where the only evidence concerning causation was that the defendant had breached his duty of care and that the injury that occurred was within the scope of the risk of injury arising from the breach of duty’. The inference of causation is a deduction which may logically be made in a case where the risk created or increased by the defendant’s breach of duty may operate, either alone or with other risks attending particular action or enterprise, to produce the loss. But it is not a logical deduction where the evidence, either shows that the removal of the risk created by the defendant’s breach of duty would not have prevented the occurrence of the loss by reason of the operation of the other attendant risks, or gives reason to regard the possibility of such a result as equally probable.” [footnotes omitted]

Here there is other evidence relevant to causation. In particular there is evidence from Dr Potts’ report number 11, the effect of which is that the life expectancy of the BWE would have been twice as long with an E_I detail at the end of this stiffener.

In that report Dr Potts was examining the likelihood that an E_I detail would have failed because of the manner in which the BWE is said to have been operated outside its “design operating parameters” or DOP. Under the heading “Assessment of Adequacy” Dr Potts set out in table 4 the results of his calculations of “calculated fatigue life” comparing the F_I and the E_I details. Upon the assumption that the BWE was operated by “exceeding DOP” (in the respects which the defendants had instructed Dr Potts to assume), he calculated that the “design life” of the BWE with an F_I detail was six years, but that with an E_I detail it was 12 years. On the same assumption he calculated that the “expected life” of the BWE with an F_I was 16 years, whereas with an E_I it was 32 years. The design life was calculated in each case upon a three per cent probability of failure whereas the expected life was upon a 50 per cent probability of failure. In other words, with an F_I detail there was a three per cent chance of failure within six years and a 50 per cent failure within 16 years. With the E_I detail there was a three per cent chance of failure within 12 years and a fifty per cent chance of failure within 32 years. From this it follows that more probably than not, and operated as AMOG had been asked to assume, the BWE was not going to last more than 16 years with the F_I detail or more than 32 years with the E_I detail. It also follows that more probably than not, the BWE would have lasted almost 32 years with an E_I, even assuming it was operated as AMOG was asked to assume. Dr Potts pointed out that this expected life of 16 years with the F_I corresponded with what happened here: the BWE failed at just over 15 years from the installation of the stiffeners.

His table 4 also showed his calculations for operating the BWE within its DOP, in which case its design life with an F_I was 41 years and with an E_I was 84 years, and its expected life with an F_I was 114 years and with an E_I was 232 years. In his view this indicated that under what he regarded as the expected operating regime, the F_I detail “would have ample factor of safety against fatigue failure at 41 years of life”.

On its face, this is evidence that the life expectancy of the BWE would have been about doubled by the use of the E_I detail. It would also prove that the particular operation of the BWE was a cause of its failing when it did. But nevertheless it would prove that the use of an F_I detail (or what is now known to be its equivalent, the F_II), rather than an E_I detail was also a cause of that. It appears to prove that the negligent failure to require the E_I detail caused the collapse.

In response to that proposition, counsel for the defendants argued that this evidence was not relevant in that way. Their argument is difficult to summarise. But for this point first it is necessary to explain an issue on which some of the experts differed, involving the interpretation of BG 86 and the current German code for bucket wheel excavators, which is DIN 22261-2:2006.

Professor Hulsmann calculated under BG 86 the adequacy or otherwise of what he saw as the equivalent of the F_I detail. On a page which is numbered sheet 47 of that code, there is a table which depicts what all relevant witnesses seem to say was the equivalent of the F_I detail under BG 60. However, in that table there are four subcategories, each having a different strength. According to Professor Hulsmann, the category into which an F_I would fall was “NBT4”. According to the defendants, and in particular their witness Dr Potts, it would be “NBT2”. The table directs the reader to another table which is numbered 10.1 on sheet 30. Professor Hulsmann said that a reference to that table shows that an F_I under BG 60 would be a NBT4. The defendants argue that it is a NBT2 because reference must be made also to another document^[38] which differentiates between NBT1, 2, 3 and 4 details when providing for different testing and inspection requirements. An NBT2 requires more testing and inspection than an NBT 4. Under BG 86 the NBT4 is weaker than the NBT2. The plaintiffs say that it is BG 86 itself, and by its table 10.1, which shows that the equivalent of an F_I under BG 60, was for BG 86, an NBT4.

It is probably unnecessary to resolve that debate, but my view is that the plaintiffs’ argument, based upon Professor Hulsmann’s evidence, is more likely to be correct. As the plaintiffs say, it would be unusual if a weld could be regarded as stronger, not because of any physical quality, but because it was subject to a more detailed assessment after it was executed. And the defendants’ argument did not appear to be able to explain away the fact that BG 86 differentiated between the different categories expressly by reference to table 10.1, rather than by reference to the document upon which the defendants rely. Dr Potts seemed to acknowledge that on its face, BG 86 has effect as interpreted by Professor Hulsmann, but said that this was “anomalous” and the mistake had not been repeated in the standard DIN 2261 (2006).

Then Professor Kowalewski said that for a detail to be an NBT2 the designer must give an instruction on the drawing. So, absent such an instruction in anything which Dr Fleischhaker provided (even if he required an F_I rather than an F_II detail), his design did not require the equivalent of an NBT2. On the basis of these matters, I would find that the equivalent of what was required by Dr Fleischhaker’s drawings (assuming that they required an F_I) under BG 86 would be the NBT4. If so, it is undisputed that it would have been inadequate under BG 86. (It is also undisputed that it would have been adequate had it been an NBT2.)

There is not an English language version of the current standard, DIN 22261 (2006) in evidence, and Professor Hulsmann was not asked about DIN 22261.

I return then to the defendants’ submission about Dr Potts’ calculations of life expectancy, comparing the F_I with the E_I detail. Dr Potts’ report seemed to make the comparison clearly enough as follows:

“The assessment indicates that under the recorded operations the design life of the machine, representing a 3% probability failure, would be exhausted for the F_I category after only six years, and for the E_I category after 12 years. The mean life, representing a 50% probability of failure, would be exhausted after 16 years for the F_I category. This indicates that under the recorded operation of the machine, the expected life of the machine predicts with a reasonable accuracy the actual life of the machine. Furthermore, under the recorded operation, an end termination detail in the E_I category would not have a reasonable factor of safety against fatigue failure beyond 12 years.”

In saying that “the expected life …predicts with a reasonable accuracy the actual life”, Dr Potts was commenting on the fact that there was a 50 per cent probability of failure at 16 years and that this coincided (approximately) with the actual point of failure, providing some support for his calculations.

So faced with the prospect that their evidence might be used in the plaintiffs’ favour to prove causation, the defendants developed an argument along these lines. It was submitted that what had to be remembered was that, as it happened, the quality of welding at this stiffener termination was poor, because there was no all round weld. Accordingly, this would fit into the weakest of the F_I categories under the more modern codes. Dr Potts had done his calculations upon the hypothesis of an NBT2, not an NBT4. The weaker category NBT4, corresponding with what was actually welded on to this stiffener, it should be thought would not have had the life expectancy represented by his table. Instead, it would have had a life expectancy of about the design life shown in that table. In the same way, so it was asserted, a correspondingly poor execution of an E_I weld would have meant that it had a lower life expectancy than shown by his table, again approximating its design life of 12 years rather than its expected life of 32 years.

In plainer terms, the submission was that a specification of an E_I detail would not have made a difference, because it would have been poorly executed and had a life expectancy indeed of less than the 16 years for which the machine survived.

There are at least two problems with this argument. The first is that it sets up a comparison, between a poorly executed F_I detail and a poorly executed E_I detail, which is not the comparison made by Dr Potts. It is a comparison which is said could be derived from Dr Potts’ report. But the precise evidentiary foundation for it is far from clear. For example, it is not clear from the evidence that a poorly executed E_I detail, whatever exactly that means, would have had a certain strength from which there could be calculated a certain life expectancy. This is not the comparison which Dr Potts saw fit to make. The comparison which he did make within table 4 was introduced as follows:

“This assessment addresses the issue as to even whether the UST [upper stiffener termination] end detail had fabricated as an E_I, was there a likelihood that it too would have failed due to the manner in which the BWE was operated.”

Had Dr Potts made a comparison between a poorly executed F_I and a poorly executed E_I, the life expectancy of the F_I would have been far less than 16 years, and it seems to follow from this argument that it was highly improbable that the machine lasted as long as it did.

Secondly, the argument assumes that had Dr Fleischhaker prescribed an E_I detail, that prescription would not have been followed, and instead there would have been a poorly executed weld. The basis for such an assumption is not apparent. Of course there is always the prospect of human error and there is a chance that an E_I detail, if prescribed, nevertheless would not have been applied. But I do not see why it should be inferred that this would have occurred. An E_I detail would have required a much more specific prescription by Dr Fleischhaker than is said to have been his prescription of an F_I. Had that occurred, more probably than not an E_I weld would have been applied which met the requirements for such a detail. That is the hypothesis which Dr Potts saw fit to address in his report. And had that occurred, it follows from his report that more probably than not the BWE would have survived almost twice as long as it did. The result is that the defendants’ attempt to explain away the impact of this part of Dr Potts’ evidence is unpersuasive.

The plaintiffs do not entirely accept Dr Potts’ analysis which is summarised in his Table 4. But whilst they would challenge the particular quantification within this comparison, they accept that it demonstrates that the additional strength of an E_I detail would have made a significant difference to the likely life of the BWE. In my view it is established by this evidence that the failure to use an E_I detail on the stiffener was a cause of the failure of the BWE at this point in its life.

More generally there is no dispute as to the proposition that the E_I detail was far stronger, from which it is likely that the life expectancy with that detail would have been years longer than with the F_I detail. Dr Potts sought to make the point that the design life of the machine, if it was to be operated in the way in which he assumed it was operated, would still have been too low with an E_I detail. Put another way the prescription of an E_I detail would not have put paid to an undue risk (a probability of failure of more than three per cent) of structural failure by the time at which the BWE did fail (on his assumptions about operations outside the DOP). But if that is so, causation is not thereby disproved. Causation is assessed on the balance of probabilities. According to his calculations, on the balance of probabilities this machine would have survived until at least 2015 with an E_I detail, whereas it was likely to fail when it did with an F_I detail.

This Table 4 in Dr Potts’ report does not affect what I have said about whether the reasonable engineer would have prescribed the E_I detail. There is no suggestion that the engineer would have undertaken the analysis represented by Table 4 and would have rejected the E_I detail.

Then there is the alternative that longer stiffeners should have been prescribed. Had that occurred, the weakness at this stiffener termination would have been removed. There is no similar analysis by Dr Potts as to the life expectancy of the machine on that hypothesis. But by designing this stiffener to end at the point on the tower stipulated by Dr Fleischhaker, an undue risk of failure was created, and what occurred in 2000 was within the scope of the risk which arose from that negligence.

In summary, the plaintiffs have proved that Dr Fleischhaker’s negligent design was a cause of the structural failure of the BWE and the losses which arose as a result.

The Design Case and Section 52

The plaintiffs plead that O&K engaged in conduct which was misleading or deceptive or likely to mislead or deceive in contravention of s 52 of the Trade Practices Act 1974 (Cth). They plead that O&K impliedly represented that it had exercised appropriate care and skill in designing the 1984 modifications and that:

“there was no aspect of that design of which the [joint venture] participants ought to have been informed which might:

introduce a welded detail having a low fatigue strength;

introduce additional stresses into the front flange of the tower frame;

concentrate stresses at the point of the upper terminations of the stiffeners;

have the effect that the stress range to which the front flange was exposed exceeded its fatigue strength;

cause fatigue cracks to develop at the upper weld toe terminations of the fillet welds attaching the stiffener and the front flange plate of the left tower frame in the location of the upper termination of that stiffener;

give rise to a risk of structural failure of the BWE tower;

diminish the operational life of the BWE or the BWE tower.”

Each of those representations is alleged to have been false on the basis of what the plaintiffs plead in their negligence case. Further, they plead that the design was misleading by the fact that it was not accompanied by any qualification.

Further or in the alternative, the plaintiffs plead that the same representations were false representations that the design services provided by O&K had been undertaken with appropriate care and skill, so that the representations contravened s 53(aa) of the Act.

Then they plead that “by reason of the conduct of O&K in contravention of ss 52 and 53(aa) of the TPA the plaintiffs have suffered and are likely to suffer loss and damage”, the particulars of which are those pleaded in the negligence case.

Accordingly, the case under the Trade Practices Act appears to closely follow the negligence case. Upon my conclusions that Dr Fleischhaker and O&K owed a duty of care which was breached, it would appear to follow that O&K misrepresented that, through Dr Fleischhaker or otherwise, it had exercised appropriate care and skill in this design. O&K itself owed a duty of care. And by reason of s 84(2), Dr Fleischhaker’s conduct is deemed to have been engaged in also by O&K because, as I have found, it was conduct engaged in on its behalf by one of its servants.

O&K admits that it was a corporation within the Act. It does not admit that if the conduct was its conduct (as opposed to the conduct being that of O&K Australia) it was conduct in trade or commerce. That non-admission is not explained. Ultimately there was no argument in support of it. The fact that the conduct involved the provision of the professional services of an engineer does not take it outside conduct in trade or commerce; see for example, Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd & Ors.^[39] The conduct here was in trade or commerce. But O&K makes a number of arguments as to why this alternative case under the Act should fail even if the negligence case should succeed.

The first of those arguments focuses upon what is pleaded as the relevant conduct. At paragraph 37 of their statement of claim, the plaintiffs plead that there were those implied representations “by the design referred to in paragraph 25.2”. That paragraph pleads as follows:

“25In November 1984 O&K by Dr Fleischhaker:

25.1…

“25Designed modifications to the tower frames (the 1984 modifications)

Particulars

The design for the 1984 modifications was contained in hand dimensioned sketches and a construction drawing of the tower frames.”

The plaintiffs say that there is a critical limitation upon the s 52 case by its reference only to paragraph 25.2 because:

“no part of the plaintiffs’ case relies upon any other conduct on the part of Dr Fleischhaker, or anyone else on the O&K side. Nor is the pleaded case one which seeks to characterise a piece of conduct by reference to other conduct or extraneous circumstances”.

O & K argues that “the sketches and the drawing by themselves could hardly convey those implied representations” and that all that they do is “show the shape, dimensions, weight and location of the stiffeners”. It is said that they say nothing as to whether this was a proper design or anything about the care and skill involved in their production, nor it is argued, do they say anything about stresses, fatigue, cracks or how the work was to be done.

This is too restricted a view of the pleaded case, and O&K cannot have been under any understanding of the s 52 case which corresponds with its submission. Where there is an alleged contravention of s 52, the subject of the complaint must be some conduct of the defendant. The conduct here involved the design, by Dr Fleischhaker on behalf of O&K, of the 1984 modifications as depicted in those documents. But of course, that conduct involved more than his production of those documents. As O&K would always have realised, the alleged conduct involved also his providing them to Utah. It was by O&K’s conduct in the circumstances that the alleged representations were made. The question is whether the plaintiffs had to plead particulars of those circumstances. But the plaintiffs have pleaded those matters elsewhere, and it was unnecessary to repeat them in the paragraph which alleged the fact that the representations were made. It is clear that the plaintiffs were relying upon the facts in their negligence case, and in particular those facts from which they alleged the existence of a duty of care, to allege that there were implied representations that appropriate care had been exercised. There was no room for surprise in any of this and no surprise is apparently claimed. In my conclusion, the plaintiffs have proved that O&K impliedly represented that its repair solution was the product of a professional opinion reached with appropriate care and skill.^[40]

The next point relates to the terms of the plaintiffs’ pleading of the falsity of the representations. By paragraph 38 the plaintiffs plead that each was false and that the particulars of that are “the matters particularised in paragraphs 31 and 35”, together with the absence of any adequate qualification of the representations. O&K says that paragraphs 31 and 35 are each expressly tied to the allegation of design in paragraph 30, which describes a detail without an end weld, and therefore an F_II detail, as that designed by Dr Fleischhaker. In effect, the argument is that there is no pleaded case under the Trade Practices Act upon the alternative factual premise that what Dr Fleischhaker designed was an F_I detail.

Again that argument unrealistically confines the plaintiffs’ pleading in a way which O&K and those conducting its case could not have thought to be so. Paragraphs 30 and 35 are the subject of extensive particulars. They include the particulars dated 3 August 2007, by which the plaintiffs set out their case as to why an F_I detail would not have involved the exercise of reasonable care. That was an amendment introduced by particulars and more correctly it should have appeared within the body of the statement of claim itself. But just as that matter of form did not prejudice O&K in its defence of that case, nor is O&K prejudiced by it on this alternative case under the Trade Practices Act. It should have been clear, and I infer that it was clear to O&K, that it had to meet a case under the Act which was advanced on the alternative premise that Dr Fleischhaker had, knowingly or otherwise, prescribed an F_I detail. Consistently with my findings as to negligence, I find that O&K misrepresented that it had exercised reasonable care in arriving at its recommended repairs, and it thereby breached s 52.

It is argued that there is a further difficulty for the plaintiffs in that “there is no pleading of reliance upon the alleged implied representations” and that “there is no allegation that the plaintiffs altered their position in any way as a consequence of the implied representation”. O&K argues that it is not sufficient for the plaintiffs to plead, as they have in paragraph 41, that “by reason of the conduct”, they have suffered loss. The plaintiffs’ pleading in this respect accords with the terms of s 82 which provides that a person who suffers loss or damage “by” the conduct of another person that was done in contravention of a provision of Part V may recover the amount of that loss or damage. In Wardley Australia Ltd v Western Australia,^[41] Mason CJ, Dawson, Gaudron and McHugh JJ said^[42] that the word “by” in s 82 expresses the notion of causation without defining or elucidating it, and it should be understood as “taking up the common law practical or commonsense concept of causation recently discussed by this Court in March v E & M H Stramare Pty Ltd”.^[43]

The plaintiffs must prove that they have suffered loss by this conduct, that is to say by the making of the misrepresentations. In this there is a potential difference between the position of those plaintiffs who were Joint Venturers in 1984, and that of the seventh plaintiff. For the moment I shall not include it in referring to the plaintiffs. Mr Black said that Utah relied solely on O&K in relation to the 1984 modifications. Mr Raleigh said that he regarded these drawings as final in the sense that they could be used for the repair. When challenged about his reliance on Dr Fleischhaker’s design, given that he had done some calculations of his own, Mr Raleigh said that he expected that Dr Fleischhaker had performed calculations and he relied upon Dr Fleischhaker as to “the way the repair was to be done”. I accept their evidence that they did rely upon Dr Fleischhaker’s design and upon that design having been produced with the skill and competence to be reasonably expected of Dr Fleischhaker.

It has always been the plaintiffs’ case that modifications which were made would not have been made absent Dr Fleischhaker’s design. That fact is established and it is by that installation that there was created this weakness in the structure from which the fatigue crack grew. That is so regardless of whether the design was for an F_II or an F_I detail because, as is now known, a F_I detail would not have been materially stronger. I infer that absent the making of these representations, Utah would have required an engineering design for the necessary repairs which was a design undertaken with due care and skill. After all, that is why Dr Fleischhaker was asked to come from Germany to Goonyella when repairs were required. It is inconceivable that, as O&K now suggests, the plaintiffs would have gone ahead with this design whether or not the implied representations were made. Had Dr Fleischhaker said to Mr Black and Mr Raleigh when providing this design that he had not exercised the appropriate care and skill for which they had gone to him and procured his visit to Australia, there would have been no serious possibility that they would have installed these modifications and not required O&K, or if necessary someone else, to provide a design which they had reason to believe had been made with appropriate care and skill. It is not necessary for the plaintiffs’ witnesses to swear to the facts that the conduct had that effect. Such direct evidence is common but is not required in every case. As Kiefel J said in Hanave Pty Ltd v LFOT Pty Ltd:^[44]

“The question of causation can sometimes be resolved not by direct evidence as to what part a misrepresentation played… but by a court determining what effect must be taken to have resulted. Indeed this course may sometimes be preferable to one which rested solely on evidence later given on the point.”

Accordingly, there was reliance upon the alleged representations and in particular upon the represented fact that Dr Fleischhaker had exercised appropriate care and skill in his design. The plaintiffs’ losses were caused by at least that misrepresentation because the provision of this design absent that implied representation would have resulted in the design not being accepted by Utah and its procuring a further design which was the result of due care and skill.

I return to the position of the seventh plaintiff. As a part owner of the BWE when it collapsed, it undoubtedly suffered losses of the same kind as those suffered by its co-venturers and for which they are entitled to be compensated pursuant to s 82 of the Act. There was no argument by the defendants that the seventh plaintiff is not entitled to damages under s 82 if its co-venturers are so entitled but the point must be considered. The question is whether the seventh plaintiff is a person which suffered loss or damage by the conduct of O&K which breached s 52. That conduct was in the nature of a misrepresentation but the seventh plaintiff was not a representee. However that need not be fatal. In Janssen-Cilag Pty Ltd v Pfizer Pty Ltd^[45] Lockhart J said:

“Section 82 is the vehicle for the recovery of loss or damage for multifarious forms of contravention of the provision of Pts IV and V of the Trade Practices Act. It is important that rules laid down by the courts to govern entitlements to damages under s 82 are not unduly rigid, since the ambit of activities that may cause contravention of the diverse provisions of Pts IV and V is large and the circumstances in which damage there from may arise will vary considerably from case to case.

What emerges from an analysis of the cases (and there are many of them) is that they do not impose some general requirement that damage can be recovered only where the applicant himself relies upon the conduct of the respondent constituting the contravention of the relevant provision.

Also, a perusal of the provisions of Pts IV and V, the contravention of which gives rise to an entitlement to an applicant for compensation for loss or damage, points to the conclusion that the applicants may claim compensation when the contravener’s conduct caused other persons to act in a way that led to loss or damage to the applicant.”

This passage was cited with approval by Gummow J in Marks v GIO Australia Holdings Ltd^[46] and has been applied in many cases: see e.g. Hampic Pty Ltd v Adams^[47]and McCarthy v McIntyre^[48]. In Australia andNew Zealand Banking Group Ltd v Pan Foods Company Importers and Distributors Pty Ltd^[49], Winneke P, referring to Janzen-Cilag, said that the burden of proving the causative link between the conduct and the loss is not as easily discharged where the claimant is not an entity which has relied to its detriment upon misleading representations made directly to it. In McCarthy v McIntyre, the Full Court of the Federal Court said that^[50]:

“All that is necessary, in our opinion, is that there be a sufficient and direct link (ie causation) between the loss or damage alleged to have been suffered by the claimant and the misleading or deceptive conduct.”

The notion of causation within s 82 is “to be understood by reference to the statutory subject, scope and purpose” as Gummow, Hayne and Heydon JJ said in Allianz Australia Insurance Ltd v GSF Australia Pty Ltd.^[51] An order under s 82 is made “in order to give effect to a statute with a discernible purpose; and that purpose provides a guide as to the requirements of justice and equity in the case”: per Gleeson CJ in I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd^[52] cited in Allianz Australia Insurance Limited v GSF Australia Pty Limited.^[53]

In the case of the seventh plaintiff, it is unlikely that anyone on its behalf knew of the 1984 repairs or of O&K’s conduct in relation to them. Unlike the other plaintiffs, the seventh plaintiff does not claim to have acted in some way, or not acted in some way, in reliance upon the exercise of due care and skill in O&K’s design of the repair solution. Nevertheless the connection between the conduct and the loss suffered by the seventh plaintiff is relatively close. The immediate consequence of O&K’s misleading conduct was, as I have found, that the then owners did not procure a careful repair solution and the BWE thereafter had an undue structural weakness. It was susceptible to a sudden and catastrophic collapse which is exactly what happened in 2000. When that occurred, the nature of the seventh plaintiff’s loss was identical to that suffered by the other plaintiffs. It is difficult to see that the statutory purpose would be served by compensating those other plaintiffs but not the seventh plaintiff. It has suffered an identical loss because its co-owners relied upon advice which was misleading or deceptive. Its loss is thereby from a reliance upon that conduct, although the reliance was not its reliance. Accordingly, the seventh plaintiff is entitled to damages against O&K pursuant to s 82.

The design case: outcome on liability

I have earlier set out the differing composition of the joint venture at relevant times. O&K is liable to the first, second, third, fifth and sixth plaintiffs in negligence, and to those plaintiffs as well as the seventh plaintiff under s 82 of the Trade Practices Act.

Those six plaintiffs suffered losses by reason of their ownership of the BWE when it collapsed and, it is argued, from its unavailability for operations in their mine in the two or three years following the collapse. The plaintiffs claim the same losses as damages for negligence and damages under s 82. And for O&K it is not argued that if it is liable under s 82, there should be a different assessment from the negligence case.

The plaintiffs owned the BWE in common in proportion to their respective participating interests in the Joint Venture. Because the BWE was owned in common, rather than jointly, each plaintiff has suffered its own loss and has a distinct cause of action. There is no claim for breach of contract in the design case as there is in the inspection case. As I discuss in the inspection case, the position in that respect is different because a contractual promise made to two or more persons jointly as in the contract for the 1999 inspection, creates but one obligation and its breach creates but one cause of action.

Little consideration was given by the parties to these points. Within the written submissions of the defendants, nothing is said of them. In their oral argument the plaintiffs referred me to the judgment of Finkelstein J in Financial Industry Complaint Services Ltd v Deakin Financial Services Pty Ltd.^[54] Finkelstein J there summarises the position in presently relevant respects in terms which I respectfully adopt:^[55]

“[67]The “legal rules” regarding claims and contract are as follows: joint claims cannot be “split” because a promise made to two or more persons jointly creates only one obligation: King v Hoare (1844) 13 M&W 495; Kendall v Hamilton (1879) 4 App Cas 504; Foley v Addambrooke (1843) 4 QB 197; 114 ER 872. Accordingly, a joint promisee has no several right of action: Australian Securities Ltd v Western Australian Insurance Co Ltd (1929) 29 SR (NSW) 571; Peabody v Barron (1884) 5 LR (NSW) 72; Cullen v Knowles [1898] 2 QB 380…

[68]The position regarding actions in tort is not so clear, but appears to be the same as in contract, in my opinion. Thus persons who suffer a joint loss have a single cause of action. A V Dicey in his treatise “A Treatise on the rules for a selection of the parties to an Action”, J Cockcroft & Co., New York, 1870 at p 380 writes that “persons who have a joint interest must sue jointly for an injury to it”. He gives an example (at p 382) of joint owners of a chattel – and partners generally – whom he says must join in an action for injury to their common property. See also Foley v Addambrooke, above. It is different if the injury is to a separate and distinct interest, as for example in the case of a chattel that is owned in common. Then each owner in common may bring a separate action for injury to his individual interst: Sedgworth v Overend (1797) 7 Term Rep 279; 101 ER 974; Roberts v Holland [1893] 1 QB 665.”

So each plaintiff (other than the fourth plaintiff who has no standing) has a several cause of action in tort under the design case, and for the same reasons, under the inspection case. In the same way each of those plaintiffs has its own cause of action under the Trade Practices Act: its loss is several because its interest in the BWE and in the profits of the joint venture was in common.

The outcome is that apart from issues of contributory negligence, the plaintiffs (other than the fourth plaintiff) are severally entitled to judgments in differing amounts according to their respective proportions in the joint venture as at March 2000. At that date there was another joint venturer which is not a plaintiff. It was the company formerly called General Electric Minerals Inc which merged into Utah Queensland Coal Limited, the former name of BHP Queensland Coal Limited. It assigned its 8.5 per cent interest to the fourth plaintiff. So it suffered a loss in March 2000, to the extent of 8.5 per cent of the overall loss from the collapse and unavailability of the BWE. But because it is not a plaintiff and because the rights of the plaintiffs are several and not joint, it follows that the total liability of O&K to the various plaintiffs is 91.5 per cent of the losses suffered by the then owners.

THE INSPECTION CASE

On the plaintiffs’ case, the terms of the contract for the 1999 inspection were in writing. On the defendants’ case, the terms were partly written and partly oral. But the alleged oral terms of the contract (before an alleged variation) are inconsequential. They relate only to payment for the inspector’s accommodation and they were not part of the original terms because the alleged conversation post-dates the inspection and the inspector’s report.

The substantial disputes concern what constituted the relevant writing, whether an exclusion clause relied upon by the defendants was an agreed term, and if so, whether it excluded the implication of warranties under s 74 of the Trade Practices Act 1974 (Cth). There are issues about the proper interpretation of the terms which defined the scope of the inspector’s duties. And there is an argument by the defendants that the agreed scope was varied, by a conversation during the course of the inspection.

Before going to these questions, I should mention one point pleaded by the defendants which was not argued. They had denied that Krupp made the contract with the joint venturers, rather than with BHP alone. An explanation for that denial was not pleaded. It is clear that BHP did contract on behalf of its joint venturers as its co‑owners of the equipment. It does not matter whether that agency was disclosed within the contractual documents or at all.

As discussed in the design case, the fourth plaintiff was not an owner of the BWE at any material time. Its owners were the other plaintiffs together with the company which assigned its 8.5 per cent share to the fourth plaintiff in August 2002. The joint venturers’ rights to the BWE were as owners in common. But it does not follow that Krupp’s promise to inspect the machine was made to them severally, rather than jointly. It is implicit in the plaintiffs’ case that Krupp’s promises were made to the then joint venturers as joint promisees, and there is no argument to the contrary. Indeed there is no argument at all by the defendants as to whether for any of the claims in these proceedings, there is one cause of action to which the plaintiffs are jointly entitled, or several causes of action.

The question of whether the promisees are joint promisees, meaning that there is but one promise made to them jointly, or several promisees, meaning that there is a promise made to each of them severally, depends upon the wording of the contract and on the interest of the parties in enforcing it.^[56] In this case the joint venturers had the same interest in the performance of the contract although they had separate interests in the property which was affected. The position is analogous to a covenant to repair given by a tenant in favour of a number of lessors who hold the reversion as tenants in common, for which it has been held that the lessors are jointly entitled to performance: Bradburne v Botfield;^[57] Thompson v Hakewill.^[58] Joint promisees do not have several rights of action. Their (one) cause of action will merge when it is pursued to judgment.^[59] Ordinarily all persons who are jointly entitled to the relief sought by a plaintiff must be parties to the proceeding,^[60] however an action will not fail for want of parties and it is apparently conceded that the absence of one of the then joint venturers should not preclude recovery by the others for breach of contract.^[61] There is then but one cause of action and one award of damages which can be made upon it, in which case the defendants are protected by that cause of action merging in the judgment. Accordingly, if the plaintiffs^[62] establish that Krupp breached its contract and is liable for damages, the amount of the damages is not to be reduced because one of the three joint venturers is not a party.

What constituted the contract?

On the plaintiffs’ case, the contract was contained in these documents:

BHP Purchase Order No L77359 dated 19 February 1999;

a fax from Krupp to BHP dated 22 February 1999;

an attachment to that fax entitled “Comprehensive Inspection Service”, which I will call the “scope document”;

BHP’s Contractor/Supplier General Onsite Conditions No F001 (Revision 4 1998); and

BHP’s General Order Terms and Conditions RBSU 100/4.

The defendants say that the relevant writing consists of:

that BHP Purchase Order;

that fax;

the scope document;

a further attachment to that fax entitled “General Conditions for Service Contracts”; and

such of the BHP’s Onsite Conditions and General Order Terms and Conditions as were not excluded by that last mentioned attachment.

Accordingly, the substantial contest concerns Krupp’s “General Conditions for Service Contracts”, which I will call the Service Conditions. Undoubtedly they were attached to Krupp’s fax of 22 February 1999. But the plaintiffs say that these conditions, or at least the warranty and exclusion clauses within them, did not become part of the contract.

The defendants rely upon earlier dealings between the parties, including their contract for the inspection of the same equipment in 1996, as affecting the proper interpretation of this 1999 contract. I will return to those matters after discussing the effect of the 1999 documents.

BHP sent a fax to Krupp on 19 February 1999, attaching the BHP Purchase Order, which described the required work as:

“Krupp Engineering Personnel to carry out a complete inspection of the bucketwheel, tripper and spreader forwarding a report on all repairs required.”

BHPC said that its order would be governed by BHP’s General Onsite Conditions and its General Order Terms and Conditions. But the order did not specify a price. The fax asked Krupp to do that, by a fax to be sent to BHP’s Mr Nixon.

On 22 February 1999 Krupp’s Mr Reiter sent a fax to Mr Nixon. It consisted of a front sheet and two annexures. On the front sheet, Mr Reiter advised that Krupp’s price was $27,000 for “on site inspection, induction, travel time, report preparation, accommodation, airfare and car hire” with the provision that “any time delay will incur an additional charge of $95 per hour”. He wrote that Krupp’s “earliest starting date” would be 16 March 1999 and asked whether that was suitable. The front page referred to the attachments as follows:

“Attached is our inspection service scope and conditions.

Also attached are our General Conditions for Service Contracts.”

Consistently with that, what was attached was the scope document and the Service Conditions.

However, in the scope document, which it is common ground became part of the contract, one of the expressed terms was:

“1.All conditions pertaining to and associated with the work shall be as per our Standard Conditions of Sale and Contract for Inspections and Servicing of Machinery and Equipment No SCI0989 (copy attached).”

These conditions were not the same as the Service Conditions. Instead, they were conditions which, at least on Krupp’s understanding, had been part of the contract for Krupp’s previous inspection of the BWE, which was in 1996. I will call them the Inspection Conditions.

A further complication is that on the following day, 23 February 1999, Krupp sent another fax to BHP but with yet a further set of conditions. This fax, although also addressed to Mr Nixon, was sent to a different number and was intended for Mr Grant at BHP. It comprised the same front page of the fax of the previous day and the scope document, but in lieu of the Service Conditions (to which the front page still referred), it attached what were entitled “General Conditions for Supply Contracts”, which I will call the Supply Conditions.

BHP made no specific response to those faxes. In particular, it said nothing about whether it accepted all or any part of Krupp’s Service conditions, its Inspection conditions, or its Supply conditions. Possibly someone from BHP rang Krupp to confirm that the inspection would go ahead, but there is no direct evidence of that. What apparently happened next was that on 11 March 1999, Krupp sent a fax to Mr Grant advising that Mr Thiel would be arriving to start the inspection on 16 March 1999. Mr Thiel arrived on that date and after talking to Mr Grant, went to work.

In these circumstances, the defendants say that the plaintiffs must be taken to have agreed that Krupp’s Service conditions would be part of the contract. The plaintiffs deny that on several grounds.

First, they say that Krupp’s faxes were at least ambiguous in what was said about the conditions upon which Krupp was prepared to contract. The scope document specified another set of conditions, the Inspection Conditions, which were just as likely to have been intended by Krupp (on an objective view), because they were expressed to be Krupp’s conditions for inspections of machinery and equipment and they had been the only conditions which Krupp had included or purported to include in the 1996 contract. Accordingly, BHP should not have understood Krupp’s reference to these Inspection conditions to be an error: it was at least equally likely that the error was in attaching the Service Conditions and (on the next day) the Supply Conditions, an impression which would be fortified by the difference between those two.

Secondly, the plaintiffs argue that BHP had shown an intention to contract only upon its standard conditions, which were those identified in the BHP Purchase Order. So in that context, BHP’s silence in response to Krupp’s faxes, and its subsequent conduct should not have been understood as an acceptance of Krupp’s conditions.

Thirdly, they say that the Service Conditions, and in particular the exclusion clause upon which Krupp relies, were so inappropriate to the provision of the service of an inspection, and so unreasonable if applied as Krupp now argues, that Krupp could not have reasonably assumed that BHP had agreed to them.

Further, the plaintiffs say that those provisions of the Service Conditions upon which Krupp relies, if agreed, would be void as inconsistent with warranties implied by s 74 of the Trade Practices Act.

The Service Conditions included the following:

"12.0WARRANTY

Krupp's liability for the Services shall be limited to the rectification of deficiencies in the Service. Krupp shall make good by repair within a reasonable time after notification by the Purchaser, defects which appear in the Services, arising from Krupp's faulty design, material or workmanship, provided always that:

The equipment on which the Services have been performed has been properly handled and used and has been properly operated and maintained; and
Such deficiencies are not caused by incorrect use of operational material or lubricants, faulty civil or mechanical work, unsuitable soil conditions and all other chemical, electrochemical and/or electrical influences which have not been provided for in the Contract; and
Such defects (whether apparent or not) occur within a warranty period of six (6) months after the risk has been transferred to the Purchaser
Krupp is notified in writing within seven (7) days of the alleged defect occurring; and
The Purchaser has fulfilled his Contractual obligations.

For repaired or replaced supplies of Krupp which form part of Services a new warranty period of six (6) month shall begin after finalisation of the remedial action.

However, Krupp's warranty obligations shall expire at the latest twelve (12) month after the risk has been transferred to the Purchaser.

If Krupp fails to remedy a defect for which it is solely responsible under this clause within a reasonable time, the Purchaser may determine in writing a reasonable time for remedying the deficiency. If Krupp then fails to fulfil its obligations, the Purchaser may carry out the work himself or by qualified others and shall then to the exclusion of other rights be entitled to recover from Krupp all reasonable direct costs.

Krupp shall not be liable for goods of a consumable nature, goods having a low rated service life, goods or part of goods which are subject to wear and tear and where any unauthorised repair or alteration to the Services has been performed by the Purchaser.

This express warranty is in lieu of any rights that would otherwise be conferred on the Purchaser under statute and law save that this express warranty does not exclude any conditions of warranties implied into this Contract by the provisions of the Trade Practices Act 1974 or by any other Federal or State Laws to the extent that such conditions or warranties may not be excluded by express agreement.

LIMITATION OF LIABILITY

Subject to clause 5.0, paragraph 3 Krupp shall not be under any liability whether in Contract, tort or otherwise from any cause whatsoever, whether occasioned by negligence or otherwise, for any injury, damage or loss, including indirect and/or consequential damages or losses whether to persons or property, arising out of this Contract or the Services performed pursuant hereto including any defects therein or anything connected therewith or any other work related thereto. Krupp does not assume any liability for equipment, parts, tools etc. or labour provided to Krupp by the Purchaser. Any liability of Krupp shall expire at the end of the warranty period."

The evident intention in the drafting of these conditions was to have clause 13 limit Krupp's liability to the discharge of Krupp's obligations under the warranty provision, cl 12: hence the last sentence of cl 13.

The Service Conditions defined “Services” widely as “the work to be performed by Krupp under this contract”. But the terms of cl 12 appear to be apt only for services in the nature of something which is done to the equipment or machinery: something which physically affects the equipment, rather than an inspection of it. More generally, the Service Conditions appear to have been drafted with that kind of work in mind. For example, in cl 5.0 headed “Date for completion”, it was provided that the Services should be deemed to be completed on the earliest of several alternative dates, one being “one calendar month after it has been put into commercial use.” Clause 8.0 provided that Krupp would:

“insure at the Purchaser’s expense the plant on which the Services are to be performed in the joint names of Krupp and the Purchaser … for its full value against damage or destruction … from the date of commencement of the Services until completion,”

and that “all moneys received under any such policy shall be applied in or towards the replacement or repair of the Services lost, damaged or destroyed …”. Clause 11.0 provided that absent some express payment terms specified in an offer, there should be progress payments according to the percentage of the “completion period” which had elapsed.

Krupp argues that the Service Conditions were intended to apply to a variety of contexts, so that the fact that some of these provisions appear to be intended for the provision of services by way of work done to a machine does not mean that they cannot apply to a service such as this inspection and the inspector’s report. Perhaps some of these conditions could be sensibly applied to this service. I go now to whether cl 12 is one of them.

Clause 12 began by limiting Krupp’s liability “to the rectification of deficiencies in the Services”. It continued:

“Krupp shall make good by repair within a reasonable time after notification by the Purchaser, defects which appear in the Services, arising from Krupp’s faulty design, material or workmanship …”

I shall endeavour to summarise Krupp’s argument as to how these words could be applied to the present context. The essence of Krupp’s argument is that the “defects” are those “which appear in the services, not the object of the service”. The argument proceeds:

“This can contemplate a circumstance in which what is observed is the defective character of the service, in which case Krupp can be notified and it can remedy the defect. Alternatively the defect in the services might become apparent by some physical characteristic which might be the subject of repair. ...The reference is to ‘defects which appear in the services’, not to ‘defects which result from Krupp’s breach of liability [sic] and provision of the services’.”

As to what Krupp must do under cl 12, its submission is that a “defect” in the [inspection] service

“could be rectified by the re-supply of services and/or the further provision of services, independently of whether any repair is required to any physical defects.”

Alternatively, if there was “some physical manifestation of the consequences of the defective service”, then

“a defective inspection could indeed be made good by a repair, or alternatively by some other means which falls within the description of ‘rectification of the deficiencies’.”

As those submissions indicate, it is very difficult to explain how the words of cl 12 could be construed in a way in which it could operate in the context of a contract such as this one. The essential reason for that is that the services in this case are in the nature of professional advice and they did not involve anything being done which physically affected the machine. For this service, things such as rectification, making good by repair, defects and faulty workmanship have no logical place. Upon Krupp’s premise that the “deficiencies” or “defects” are things which were wrong with the services themselves, rather than things that went wrong with the machine in consequence, the end point of the argument is that cl 12 limited Krupp’s liability to the supply or re-supply of its services: in other words that Krupp’s liability would be limited, in the first place, to the performance of an inspection and the provision of a report as the contract had already required. I say in the first place because cl 12 provides that:

“if Krupp fails to remedy a defect for which it is solely responsible under this clause within a reasonable time…the Purchaser may carry out the work himself or by a qualified others and shall then to the exclusion of other rights be entitled to recover from Krupp all reasonable costs.”

So consistently with Krupp’s argument, if it failed to inspect or properly inspect and report on this machine, the customer’s remedy was to conduct the inspection itself or have others do so at Krupp’s cost. It hardly seems apt, in the context of a contract for an independent engineer’s inspection of equipment, including for its structural soundness, that the customer’s remedy should be to itself inspect the equipment.

In my view the words “deficiencies” and “defects”, which are apparently used synonymously, cannot be read as referring to some shortcoming in the provision of a service, rather than as the physical consequences of Krupp’s performance or non-performance. That is fortified by, for example, the second of the provisos within cl 12, which is that:

“such deficiencies are not caused by incorrect use of operational material or lubricants, faulty civil or mechanical work, unsuitable soil conditions and all other chemical, electrochemical and/or electrical influences which have not been provided for in the Contract”.

Similarly there is the next proviso which presents a particular difficulty in Krupp’s argument. The proviso is that:

“such defects, whether apparent or not, occur within a warranty period of six (6) months after the risk has been transferred to the purchaser.

And the further proviso is that “Krupp is notified in writing within seven (7) days of the alleged defect occurring”. Upon Krupp’s interpretation, the defect is in the provision of the service so that the occurrence of the defect would be when the service was provided or purportedly provided. It is nonsensical then to speak of a “defect” in this sense occurring or not occurring within a further six months. It is also nonsensical to suggest that Krupp was not liable unless within a week of its non-performance it was notified of such.

Krupp does not argue that where a crack went undetected by an inspection, the crack itself was a “defect which appear[ed] in the Services” so that Krupp was obliged to “repair it”. That would not be a defect “in the Services”, but rather a pre-existing defect which the services should have detected.

Accordingly, cl 12 could not be interpreted in a way which would make it applicable for the provision of the services required by this contract. If upon an objective view BHP must be taken to have accepted the inclusion of the Service Conditions, it does not follow that cl 12 could be interpreted so as to have any effect upon this contract. If BHP accepted an offer which included the Service Conditions, it accepted only so much of those conditions as could be applied to this contract. As the defendants submit, the Service Conditions are drafted for many contexts so that some of them might have no operation in some contracts.

That has consequences for the operation or otherwise of cl 13. Clauses 12 and 13 were evidently intended to operate together. Absent the operation of cl 12, the effect of cl 13 would be absolve Krupp from any responsibility for not performing its contract. So if BHP is to be taken to have accepted the Service Conditions, again it has accepted only those which could be read as applying in this context. Absent cl 12, cl 13 could not be applied without having the effect that Krupp could breach its contract as it pleased.

The defendants also rely upon these clauses of the Service Conditions:

“18.0 … The Purchaser’s right to sue Krupp shall expire at the latest six months after expiration of the warranty period.

These express rights and remedies of the Purchaser shall be lieu of any rights that would otherwise be conferred on the Purchaser under statute and law save that those rights and remedies do not exclude any conditions or warranties implied into this contract by the provision of any Federal or State statutes except to the extent that such conditions or warranties may not be excluded by express agreement.”

“These express rights and remedies of the Purchaser” is a reference to those under the warranty provision, cl 12. Absent cl 12, these provisions would have no sensible operation.

Some of the Service Conditions, at least considered alone, might be thought to be capable of application to such an inspection contract. But none of them expressly refers to the service of an inspection, or indeed to any “service” which does not involve something being done to the equipment. Consequently, Krupp’s attachment of the Service conditions to the fax of 22 February, on an objective view, could have appeared as a mistake, considered also with the fact that a different set of conditions was referred to within the scope document. And Krupp’s difficulty is compounded by the fact that on the next day, Krupp sent a different attachment, comprising the Supply Conditions.

The question is not whether the parties should be taken to have agreed to include the Inspection Conditions or the Supply Conditions, because Krupp has no alternative case which relies upon them.

As the plaintiffs argued, the inclusion of the Service Conditions would be inconsistent with the terms of the BHP General Order Terms and Conditions, of which condition 1 provides, in part as follows:

“(c) Orders when accepted by the Supplier, shall constitute the entire contract with reference to the subject matter and subject to the following terms and conditions shall not be altered, amended, supplemented or cancelled without written approval of the Supplier and company. Either supplier’s written acceptance of the order or the delivery of any article or commencement of performance hereunder shall constitute acceptance of the order and no contrary or additional terms or conditions shall apply, notwithstanding any oral or written statement made by the Supplier.”

Krupp admits that these BHP conditions were part of the contract. So the plaintiffs say that the parties could not be thought to have agreed to the addition of other terms and in particular Krupp’s Service Conditions. Krupp argues that after receipt of BHP’s order, Krupp said in effect, that it was prepared to contract but only on its terms, so that BHP should be understood to have accepted Krupp’s terms by going ahead with the inspection.

The fact that BHP said it would contract only on the BHP conditions did not prevent the parties reaching a different agreement by what they subsequently wrote or did in relation to each other. But in my view that fact makes it more difficult to accept, that without anything being said by BHP about the Service Conditions, BHP did agree to them.

Under the payment provisions of the Service Conditions, an initial payment of 10 percent of the price would be payable “within ten (10) days after confirmation of the order”. That was an event described in cl 2 of the Service Conditions as follows:

“Unless previously revoked by written notification to the Purchaser, Krupp’s offer shall remain valid for the period as stated in the offer or, where no such period is stated, for ninety (90) days from the date hereof.

… Krupp reserves the right to decline any order which includes deviations from Krupp’s offer. An order shall only be deemed to be accepted after Krupp has submitted to the purchaser a written order confirmation.”

So according to the Service Conditions, there was not to be a contract unless the Purchaser had “ordered” the services in response to an offer containing those conditions, and Krupp had “accepted” that order by a written “confirmation”. But there was nothing by Krupp in the nature of “a written order confirmation”. This makes it yet more difficult to accept that on an objective view, the parties agreed to include the Service Conditions.

The Trade Practices Act terms

Section 74 of the Act provides in part as follows:

“(1) In every contract for the supply by a corporation in the course of a business of services to a consumer there is an implied warranty that the services will be rendered with due care and skill and that any materials supplied in connexion with those services will be reasonably fit for the purpose for which they are supplied.

(2) Where a corporation supplies services (other than services of a professional nature provided by a qualified architect or engineer) to a consumer in the course of a business and the consumer, expressly or by implication, makes known to the corporation any particular purpose for which the services are required or the result that he or she desires the services to achieve, there is an implied warranty that the services supplied under the contract for the supply of the services and any materials supplied in connexion with those services will be reasonably fit for that purpose or are of such a nature and quality that they might reasonably be expected to achieve that result, except where the circumstances show that the consumer does not rely, or that it is unreasonable for him or her to rely, on the corporation’s skill or judgment.”

The plaintiffs were “consumers” because the price of the services did not exceed the prescribed amount of $40,000.^[63] Accordingly, and subject to its possible exclusion by a provision which would engage s 68A, there was a warranty of due care and skill in terms of s 74(1).

The plaintiffs also rely upon s 74(2). They say that by implication from the documents which contained the contract, they made known to Krupp a particular purpose for which the services were required or a result which they wished to achieve, which was the detection of any cracks in the structure of the BWE. So they say there was an implied warranty that the services would be reasonably fit for that purpose and of such a nature and quality that the services might reasonably be expected to achieve that result. As I will discuss, Krupp’s scope document required Krupp to carry out a visual inspection to check for the presence of cracks. But because not every crack is visible, Krupp did not promise to find every crack. The implication from the documents was that the services were required for the detection of any cracks which were able to be detected by a visual inspection. And within that qualification was the circumstance that some parts of the structure would be relatively difficult to see at close range. But with that qualification, I accept that by implication such a purpose was known to Krupp.

However, s 74(2) does not apply where the services are of a professional nature provided by a qualified engineer. That was the case here. The contract expressly required the inspection to be conducted by an engineer. And the report of the inspector was likely to have required the specialist advice of an engineer on such matters as the relative urgency of remedial work and the detail of that work. The plaintiffs argue that the exception in s 74(2) operates only where the services are provided “by persons carrying on the profession of architect or engineer” and that “the second defendant did not carry on that profession”. But the exception applies according to the nature of the services and the qualifications of the natural person through whom the corporation supplies them. The exception applies here because the services were of a professional nature supplied through Mr Thiel as a qualified engineer. So no warranty was implied by s 74(2).

Section 68 provides:

“Application of provisions not to be excluded or modified

(1)Any term of a contract (including a term that is not set out in the contract but is incorporated in the contract by another term of the contract) that purports to exclude, restrict or modify or has the effect of excluding, restricting or modifying:

(a)the application of all or any of the provisions of this Division;

(b)the exercise of a right conferred by such a provision;

(c)any liability of the corporation for breach of a condition or warranty implied by such a provision; or

(d)the application of section 75A;

is void.

(2)A term of a contract shall not be taken to exclude, restrict or modify the application of a provision of this Division or the application of section 75A unless the term does so expressly or is inconsistent with that provision or section.”

If contrary to my conclusion, the parties had agreed in terms of the Service conditions, then subject to s 68A, each of cl 12, cl 13 and cl 18 would have been void by s 68(1), because it would have had the effect of excluding, restricting or modifying Krupp’s liability for breach of the warranty implied by s 74(1). Section 68A provides, in part, as follows:

“(1) Subject to this section, a term of a contract for the supply by a corporation of goods or services other than goods or services of a kind ordinarily acquired for personal, domestic or household use or consumption is not void under section 68 by reason only that the term limits the liability of the corporation for a breach of a condition or warranty (other than a condition or warranty implied by section 69) to:

(a)in the case of goods, any one or more of the following:

(i)the replacement of the goods or the supply of equivalent goods;

(ii)the repair of the goods;

the payment of the cost of replacing the goods or of acquiring equivalent goods;
the payment of the cost of having the goods repaired; or

(b)in the case of services:

(i)the supplying of the services again; or

(ii)the payment of the cost of having the services supplied again.

(2) Subsection (1) does not apply in relation to a term of a contract if the person to whom the goods or services were supplied establishes that it is not fair or reasonable for the corporation to rely on that term of the contract.”

Krupp ultimately argued that s 68A(1) was engaged by the warranty in cl 12. But cl 12 could not be thought to have been agreed, because on any rational interpretation, it could have no operation in this contract. Because cl 12 was not a term, it follows that cl 13 and cl 18, if otherwise agreed, would be void by s 68, because they would not engage s 68A.

The result is that a term of due care and skill was implied by s 74(1). And because this was a contract for the provision of the professional services of an engineer, an equivalent term was also implied by the common law.^[64]

What inspection did the contract require?

This was defined by the scope document. The plaintiffs also rely upon their Purchase Order which described the work as “a complete inspection of the bucketwheel … forwarding a report on all repairs required”, which although relevant, adds nothing to the effect of the scope document.

Under its heading, which described the inspection service as “comprehensive”, the scope document began by describing the inspection as an assessment of the condition of the plant by way of a structural inspection and a mechanical inspection. Then followed descriptions of what those inspections should involve. Under “Structural” was this:

“The structural inspection would be done visually for the entire primary load carrying structure to check for the following :

Damaged, loose or missing structural members
Firm fit of bolts in their connections
Missing and corroded bolts
Soundness of welds
Slippage of joints
Visible changes in cross sectional area of joints and members due to corrosion or wear
Condition of the corrosion protection system
Presence of cracks in sections and plates

Structure of a secondary nature including handrailing, walkways and ladders would be assessed for damage and corrosion.”

[emphasis added]

It is common ground that the main tower and the stiffeners were part of “the primary load carrying structure”.

After a description of what the mechanical inspection should involve was this note:

“Any structural and/or mechanical defects shall be clearly marked by the Krupp Engineer using coloured spray paint or marking pen. In the event that structural cracking is detected, more detailed NDT inspection may be required. As the extent to which this may be required cannot be assessed at this stage, we have not allowed for ultrasonic/magnetic particle testing in this proposal.”

The document then described what was required of the inspector’s report as follows:

“REPORTS

All fault descriptions, locations and routine repair procedures will be fully detailed in an Inspection Report for the plant item.

The report format includes separate sections that deal with each of the structural and mechanical assemblies. Photographs will be incorporated where necessary for fault location and clarification.

All faults will be assigned a priority level with regard to urgency of repair, based upon the nature and location of each fault.

Any repair procedures of an extra‑ordinary nature which may involve detailed investigation and design, computations, machine trestling and off-loading, and critical structural member replacement shall be dealt with as additional work on a cost plus basis.

The Inspection Report will be compiled and written as a document capable of clear interpretation for fault rectification work.”

That was followed (again within the Scope document) by some 10 conditions which it is necessary to set out in full:

“CONDITIONS

All conditions pertaining to and associated with the work shall be as per our Standard Conditions of Sale and Contract for Inspections and Servicing of Machinery and Equipment No SCI 0989 (copy attached).

If machine access cannot be provided, a stand‑by rate of $94.00/hour applies.

Prior to arrival of the Engineer on site and the commencement of inspection work, the structure of each plant item must be cleaned to allow proper identification of defects.

To enable inspection of all elevated structure not serviced by walkways, you need to provide (free of charge) an elevating platform (“cherry picker”) and operator as required by the Engineer during the inspection period.

We would require your assistance in the provision of fitters and electricians to remove cover plates and housings as may be required by the Engineer for inspection purposes.

All electrical drives on the plant shall be isolated under permit conditions during the inspection period in accordance with standard procedures.

To prepare reports, we require all necessary drawings and technical manuals which are not in Krupp’s possession.

Any other equipment which may be required during the course of inspection shall be made available to the Engineer, [for example]:

Scrapers and brushes for cleaning
Spray paint for fault marking
Crack testing compounds
Extension ladders
Battery torch
Lead lights
Safety harness and lanyard

We have made no provision in our proposal for NDT such as ultrasonic, radiograph etc, nor for diagnostic techniques such as shock pulse monitoring, spectrometric oil analysis etc, as the extent to which these may be required cannot be assessed.

Krupp will submit duplicate copies of the Inspection Report within four calendar weeks after the inspection period.

You will be notified during the inspections of any faults of a serious nature that require immediate repair or other actions.”

The walkways case

The defendants’ case is that the inspector was not obliged to leave the walkways, accessways or ladders which were affixed to the BWE (which I will call the walkways). Although the “entire primary load carrying structure” was to be inspected, they say that if some part of it could not be seen from the walkways, it was not to be inspected and nothing had to be written about it in the inspector’s report. The relevance of this is that the defendants say that the likely location of the crack at the time was such that it was not visible from the walkways.

As I will discuss, it would have been possible for Mr Thiel to look at what the defendants say was the location of the crack, without his leaving the walkways, but with the use of a mirror. But first I will discuss the arguments that the contract originally, or by a variation, contained this qualification.

The scope document required a visual inspection of the entire primary load carrying structure. It was not in terms which required the inspector to stay on the walkways. It expressly provided to the contrary. Condition 4 provided that “to enable inspection of all elevated structure not serviced by walkways”, BHP had to provide an elevating platform and an operator as required by the inspector. Condition 8 provided that any other equipment required by the inspector should be made available to him and it gave as examples extension ladders and a safety harness and lanyard. Had the inspector required such an item of equipment to inspect part of the structure, and had BHP not made it available, the inspector would have been relieved of the obligation to inspect that part. And as the plaintiffs concede, the contract did not require the inspector to do anything which was not reasonably safe. In particular, he was not obliged to leave the walkways unless he had available to him some reasonably safe means of doing so. But with these qualifications, the express terms of the contract are inconsistent with the defendants’ “confined to the walkways” case.

For this argument the defendants rely upon what happened in Krupp’s 1996 inspection of the BWE. Although that inspection was subject to identical terms so far as the scope document is concerned, the defendants point to the fact that on that occasion, as in 1999, Mr Thiel did not leave the walkways. To this they add the faxes exchanged by Mr Grant and Mr Reiter in December 1997, some fourteen months prior to the 1999 contract. Mr Grant faxed to Mr Reiter on 8 December 1997 in these terms:

“2 YEARLY INSPECTIONS BWE

Reiner,

It is that time again BUDGET time. Can you please forward me a quote to have the Bucketwheel, Spreader and Tripper examined by one of your engineers as part of its 2 yearly inspection the same as Frank did the last time.”

Mr Reiter replied as follows:

“Dear Martin

We wish to advise that the price for the inspection will remain as per your last order No L02362, $25,600.

We thank you for the enquiry and will be pleased to carry out the inspections for you when required. Please advise us one month prior to inspections so that we can schedule Frank’s workload.”

The defendants argue that the contract made in February 1999 has to be read subject to those faxes in 1997: the 1999 documents are to be understood as requiring “the same as Frank [Thiel] did last time”.

On their face, the 1997 faxes were not intended to conclude a contract or to have any contractual effect. As Mr Grant’s fax made clear, BHP’s interest was in knowing, for budgetary purposes, the likely cost of the next inspection. He described the proposed inspection as “the same as Frank did the last time” apparently to assist Mr Reiter to provide an estimate. In referring to what was done “last time”, he should not have been understood as indicating something less than what had been the agreed inspection in 1996. The exchanges were on the basis that what had been required by the contract in 1996 would be again required. Consistently with that, Mr Reiter gave the same price.

It may be accepted that BHP knew that Mr Thiel had not used equipment such as a cherry picker or a harness and lanyard in 1996. But it is not demonstrated that BHP, and specifically Mr Grant, knew that in 1996 Mr Thiel had been unable to inspect from the walkways the entire primary load carrying structure.

In the cross‑examination of Mr Grant, it was suggested that he had told the Mining Warden’s inquiry into the BWE collapse that he knew that the critical area at the top of this stiffener could not be seen from the nearby walkway. He did not agree that he had said that and his evidence to the Warden’s inquiry was not tendered in this trial. He was involved in the investigative process undertaken by BHP after the collapse but he said here that he remained unsure as to whether the critical area would have been visible from the walkway. I accept that evidence. I find that in 1999 he did not have any particular belief about the visibility of the end of this stiffener.

Mr Grant agreed with the suggestion that in the 1996 inspection he told Mr Thiel “to stay on the walkways and ladders”. He also agreed that in 1996 he had “no expectation that Thiel would go outside the walkways if he was on the tower if the machine was operating”. When it was put to him that he had “no expectation that he would go outside the walkways and ladders on the tower without a harness”, he agreed, saying “correct, he would need to have a harness, yes”. At that point there was a further question in which this was put: “and in fact, your expectation was exactly the opposite; you’d expect him not to do that, not to go outside?” to which Mr Grant answered “that’s correct”. But in context this meant that Mr Grant had not expected him to go outside the walkways without something such as a harness. It was not an admission of an expectation that he would not leave the walkways at all. At about the same point in his cross‑examination, Mr Grant said that “if (Mr Thiel) needed any equipment or any assistance, he needed to ask myself, the operators or the operations supervisor”. A little further on in the cross‑examination occurred this exchange:

“All right. You see, I want to suggest to you that as with ’96, so with ’99, in this respect at least, that he was told, “Stay on the stairways” – “on the walkways and ladders”?-- The instructions would have been the same as in 1996, to stay within the walkways and ladders.

And your expectation of what he would do was even stronger in ’99 because of the way safety changes had gone in the three years since ’96. That is to say, you didn’t expect him to go off the walkways or ladders when the machine was operating at all. So you see the – while the machine’s operating, not off the walkways, ladders at all?-- The expectation was that he would do all his work from the handrails and walkways.”

And a little further on in the cross‑examination was this:

“All right. And your anticipation or your expectation of what Mr Thiel had actually done during his inspection was, can I ask you to agree with me, if you do, that he had followed what you’d said, namely, he hadn’t gone outside the walkways and ladders?-- Correct.”

In his statement tendered as evidence-in‑chief, Mr Grant said:

“[47] I can recall I specifically told Mr Thiel that he should not stray from the walkways and ladders of the BWE. I also told Mr Thiel that if he needed to work outside these constraints and needed access, I could arrange this, as he needed to have a safety harness. The Mine’s safety motto had changed from “if it is not safe – don’t do it” to “if it is not safe – make it safe” and I believe I told Mr Thiel this as part of his induction. I recall also mentioning to Mr Thiel that if he needed to talk to an operator about when the BWE would be down for the day he could do so.

…

[58] Mr Thiel has full access to the BWE, it was entirely up to him how the inspection was to be undertaken.”

Two things should be said about the evidence of Mr Grant’s expectations. The first is that any expectation, or more generally his state of mind, as to what Mr Thiel would do is not relevant to the interpretation of the terms of the 1999 contract, although it may be relevant to other issues, such as whether Mr Thiel’s report was misleading or deceptive. Secondly, from this evidence taken as a whole it can be seen that it was not his expectation that Mr Thiel would stay on the walkways, if leaving the walkways was reasonably safe, such as with a harness, and was necessary for an inspection of the entire structure. It was not that he thought that Mr Thiel would in no circumstances leave the walkways or ladders, but rather that he would do so only with the necessary equipment and when the machine was not operating.

Then there is a conversation between Mr Grant and Mr Thiel in the course of the 1999 inspection upon which the defendants rely, in the alternative, as amounting to some variation or waiver. On this occasion, Mr Thiel was climbing from a walkway to stand on top of a hand rail to see some part of the structure. At this point, his feet were on the top of the hand rail, his hands were holding on to another part of the structure and he was not wearing a harness or other safety device. The machine was operating. Mr Grant called out to him words to the effect of “Stay on the stairways and platform walkways. Stay on them”. I accept Mr Thiel’s evidence in that respect. Mr Grant does not recall the incident but does not deny that it occurred.

The defendants argue that this incident had an impact on the contract. They say that at least from that time, the contract required the inspector to keep to the walkways and that the provisions about cherry pickers and other equipment such as a harness became irrelevant. I do not accept the argument. On no objective view could the parties be understood to have been varying their contract by what Mr Grant called out to Mr Thiel. Nor in this was there any waiver by BHP of its entitlement to an inspection of the entire structure. The incident was simply an instruction that Mr Thiel was not to leave the walkways and ladders as he had done: without safety equipment and while the machine was operating. It should not have been understood as saying anything about the use of equipment provided for by the scope document.

The defendants also argue their walkways case in the language of an estoppel by convention. They plead that the plaintiffs, Krupp and Mr Thiel had these common assumptions, from which the plaintiffs should be estopped from now departing:

“(i)that the inspection carried out [in 1999] was that which was requested by the Plaintiffs;

that the inspection carried out [in 1999] was one which was carried out in accordance with contract, duty and statute;

that the Plaintiffs did not require the inspection on the BWE itself to be performed otherwise than visually and from walkways, access ways, and ladders;

that the Plaintiffs did not require the stiffeners to be inspected more than they had been;

that the Plaintiffs did not require any further inspection performed.”

According to my findings concerning Mr Grant’s state of mind, the defendants have not proved the factual foundation for this estoppel. It may be accepted that at the time BHP believed that the 1999 inspection had been carried out in accordance with the contract and any other legal obligation, and for that reason, did not ask Krupp to do anything further. But to establish an estoppel by convention which alters the effect of the express terms of a contract, a party must prove more than that each party believed on the basis of the facts known to or assumed by that party and according to its own understanding of the contract’s requirements, that the contract had been performed. To establish this estoppel, the defendants must show that the parties acted in this transaction upon an agreed and certain premise. In whatever form, this estoppel case requires a common premise that an inspection from the walkways was sufficient, whether or not the entire structure had been inspected. Mr Thiel may have thought that but BHP, and Mr Grant in particular, did not. So that was not commonly assumed and quite apart from any legal difficulty of such an argument in the face of the express terms of the contract^[65], the argument fails on the facts.

In summary, I reject the defendants’ walkways case. The contract obliged Krupp to inspect the entire structure, if that could be done safely and if the necessary equipment was made available by BHP. Krupp was obliged to ask for that equipment if the inspector was not able to see part of the structure, or to see it well enough to detect any apparent cracking.

What did Mr Thiel inspect?

The answer appears from Mr Thiel’s own evidence which in this respect is unchallenged. As to the structural inspection of the tower, he first went to the top of the tower to look at the sheaves and the wear on the ropes. These were at the very top of the tower where there was a platform alongside the ropes running across the rear of the tower. He then inspected some mechanical parts before returning to the tower. This time he walked slowly up the stairways and ladders looking at structural parts. His structural inspection took him about three days, of which he spent about four hours inspecting what he describes as “the structural aspects of the tower”. He says he walked up the stairway very slowly “looking at all the areas that I could get access to”. When he reached the top, he looked down both sides of the tower as far as he could and on his way down he again looked at whatever he could see.

He was able to inspect the full length of the outer stiffener (the stiffener on the same flange as the critical stiffener but on the outside of the web) and the weld affixing that stiffener to the flange. He was so close to this that he could touch it. As to the critical stiffener and its equivalent on the right hand side of the tower, he said that

“The only way I could see the inside stiffeners was from the counter‑weight boom level. I could touch the bottom end of the inside stiffeners from the counter‑weight pivot level platform. I was approximately eight metres away from the top of the inside stiffener at that point i.e. at the counter‑weight boom level. I could not see the top of the inside stiffeners from the walkways at the top of the tower as the walkway was too far from the flange and the stiffeners were hidden by the flange.”

I accept that Mr Thiel looked up from the counterweight boom platform as he described. The defendants argue that this constituted an inspection of the area which is where the top of the stiffener met the flange. But it was no such thing, because standing on the counterweight platform Mr Thiel could not have seen most of it and whatever view he had of the rest of it was of no use. This explains why he endeavoured to inspect the area from a walkway near the top of the tower. This appears from his evidence in cross‑examination:

“And you couldn’t see the top of the inside stiffeners from that location? [the counterweight platform]-- You can see the top but not the top where the weld is.

All right. So you can see up along the side of them?-- The side. Right to the top.

Yes. But you can’t see------?-- The actual top.

------the actual top?-- No.

Nor could you see that area, I suggest to you, between the stiffener and the web?-- Partly you can. Down near the bottom end, maybe, but not right at the top.

No. Because in fact along the web there’s a bracket or a stiffener-----?-- That’s right.

--------that intersects?-- That’s right.

So the area that you couldn’t see from that location at the counterweight boom was across the top of the stiffener, and then that further distance across to where the flange intersected with the web at that level?-- Mmm. But only up near the top. Mainly near the top.

Yes. Sorry, what do you mean ‘mainly near the top’?-- Because at the bottom I could see it, I could even touch it.”

With the benefit of other evidence, it is clear that from the counterweight boom platform, Mr Thiel could not have seen the top of the stiffener, the welding (if any) between the end of that stiffener and the flange or the adjacent area on the flange. As is now known, this was the critical area because the crack which caused the collapse grew from where the top of the stiffener met the flange, and as it grew it extended along the flange in each direction from the stiffener: towards the web and (in the other direction) towards the end of the flange. There is an issue as to whether by March 1999 it had grown to the end of the flange.

So most of the critical area was simply not seen and therefore not inspected. Accepting that Mr Thiel had a direct line of sight to some part of the critical area, he was in no position to inspect it, because what little he could have seen of that part from so far away and at such an awkward angle, (as he stood almost directly beneath it looking up eight metres,) was not sufficient to enable him to say anything reliable about the soundness of the weld at the top of the stiffener or the presence or absence of cracks. That this was not an inspection of the critical area was effectively conceded by Mr Thiel in this evidence:

“This area at the top of the stiffener on the inside of the tower was an area where you couldn’t tell if there were any indications of cracking? You couldn’t see if there was any rust marks, or paint cracking, that’s correct, isn’t it?-- I couldn’t see that end, no.

No. So the position was that you were not in a position to form any view about whether or not in that location there were features which might call for a closer inspection?-- No, because I could not see that area.”

There was a series of ladders or steps on the left hand side of the tower and running up the outer face of that web. They led to a walkway which linked the left hand side to the right hand side of the tower. The walkway passed immediately in front of the tower and underneath the ropes which were between the tower and the rope support tower. Mr Thiel said that to move along this walkway which I will call the relevant walkway, and beneath these ropes, he had to move on his knees.

I have the benefit of what the parties agree is an accurate scale model of the top of the tower, including most of the length of the stiffeners, the relevant walkway and other parts of the structure, including the supports of that walkway which extended horizontally underneath it from each side of each web. From the model, it appears that the ropes were not above the relevant walkway for its entire length, so that there were several metres at each end on which Mr Thiel would have been able to stand up. That includes the part of the relevant walkway which was closest to the critical area.

A person standing at that point would be close to the critical area because, as the parties seem to agree, the top of the critical stiffener was about 1.3 metres below the platform of the walkway. The walkway had a steel handrail of a metre or perhaps a little more above the platform with another rail beneath it at about half that height. The handrail did not obscure the view below.

The difficulty was that the view from the relevant walkway of the critical area was blocked by the flange. The walkway was on the front side of the flange and the stiffener was on its other side. So the front of the flange and its side or edge could be seen from the walkway but not the stiffener side.

Mr Thiel says that from the relevant walkway, he looked at the edge of this flange from about one and a half metres away. He says that he knelt on the platform and looked “as far as I could but I couldn’t see anything”. He believes that had there been a crack 15mm long or more on that edge of the flange (as some evidence suggests), he would have seen it.

Clearly then Mr Thiel did not see that part of the flange against which was welded the top of the stiffener. Nor did he see the welds connecting the stiffener to the flange at or near the top of the stiffener.

According to the evidence of several experts, it is likely that by then there was a fatigue crack of at least 100mm in length in a horizontal line across the flange at the top of the stiffener, and that it was this crack which continued to grow to where it caused the fracture of the tower and the collapse of the BWE within a year.

I will come to the question of whether an inspection of the critical area was likely to have detected that crack. But from Mr Thiel’s own account, it is proved that he did not “check…the soundness of (all) welds” or inspect “the entire primary load carrying structure”.

According to the contract, the entire structure had to be inspected if that could be done safely and with the necessary equipment which BHP was to provide at the inspector’s request. Mr Thiel made no such request. He was obliged to do so unless the use of that equipment would have been futile or unsafe.

Before going to those matters however, two points which occupied some considerable time in the evidence should be mentioned. The first concerns whether the inspector was obliged to give priority to certain parts of the structure, even if that compromised the inspection of other parts. The defendants’ case seemed to be that Mr Thiel was told to concentrate on an inspection of other parts of the machine, so that he could be excused for not inspecting all of it and the critical part in particular. But in that respect there was nothing proved which involved any variation or waiver of BHP’s entitlement to an inspection of the entire primary load carrying structure. Moreover, it is clear from Mr Thiel’s evidence that he intended to inspect this part of the structure and would have done so had he been able to see it from where he tried to see it on the relevant walkway. As he said, he regarded it as something which he should inspect if possible.

The second point concerned whether Krupp, and specifically Mr Thiel, should have realised that the top of this stiffener was especially vulnerable and particularly warranted an inspection. This involved a debate about what an inspector should study and know about the equipment and its history, and what he should be told about that by its owner. This point also extended to a debate about the appropriate level of experience and qualifications of an inspector, such as whether the engineer required by this contract should have been a structural engineer. For the breach of contract case, these are irrelevant issues because the contract required the inspector to inspect the entire load carrying structure. And any duty of care owed by Krupp or Mr Thiel was surely to be consistent with that contractual obligation. Again, Mr Thiel well understood that it was important to inspect the top of this stiffener if possible. He said it was his practice when conducting a visual inspection to check any areas prone to stress or failure, including welds and joints between sections and plates, and between members. He said that he understood the difference between the tension side and the compression side so far as the chance of fatigue cracking was concerned. The reason why he did not inspect the critical area was not that he had to do other things or that he did not know what to inspect.

What could and should Mr Thiel have done?

Mirrors

Some inspectors use mirrors to look at things which are not within a direct line of sight. These are mirrors with either a fixed length or a telescopic handle attached to the mirror face by a pivot.

Mr IR Newnham is the principal engineer at a firm which provides engineering consultancy services for the operation, maintenance and development of large bulk handling and continuous mining equipment. He carries an inspection mirror in his toolkit for inspecting such equipment. Inspection mirrors are also kept in his firm’s workshop. He says that inspection mirrors are available for purchase in a variety of sizes with the mirror itself ranging from 30 to 54mm in diameter and the handle from 300 to 450mm. His firm has used them for the past 15 years.

Another inspector, Mr Cheney, says that his firm (CCI Pope Pty Ltd) uses mirrors on inspections and he has recently purchased another one. It cost $30. He has seen inspection mirrors with faces 70mm x 130mm and handles of 750mm to 1 metre.

The defendants called Mr Russell, from CW Pope & Associate Pty Ltd, who undertook an inspection of some parts of the BWE later in 1999. He said that it was not unusual for inspectors to carry mirrors so that they can see around and behind pieces of steel and other obstructions. During the cross-examination of Mr Russell the plaintiffs tendered an inspection mirror which he agreed was an example of extendable mirrors he had seen carried by inspectors. It has a telescopic handle extending to about 90cm and a rectangular mirror pivoting at the end of the handle which is about 90mm x 50mm.

Dr Dittrich, also called by the defendants, said that he has used inspection mirrors although he would use a mirror only if there was

“solid indication of any risk at a particular site point, or if my experience showed that there was a high risk there, and that would be the case for an F_II detail”.

He was not critical of Mr Thiel for not using a mirror because he said there was no particular indication to Mr Thiel that there might be a crack in the critical area. But as I have said Mr Thiel understood that he should inspect the critical area if possible.

Another German engineer but with extensive experience in Australia, Mr Haberler, said that he was aware of the availability of extension mirrors although he “would not consider them to have any particular use in the machine inspection context.” He did not use them and he said that they gave the risk of producing a deceptive or misleading impression.

Mr Schander was the inspector, who from O&K and later Krupp, conducted the 1984, 1986, 1990 and 1994 inspections of the BWE. He said that he had never seen mirrors used for inspections of bucket wheel excavators although he agreed that they could be used.

BHP’s Mr Grant had no recollection of the use of mirrors save for a conversation with someone at CCI Pope who said that they could be used to look at various parts of the machine. The defendants say that it is significant that he appears to have had no experience with the use of mirrors by mine staff. Apparently the point here is that if the use of mirrors was so obvious, someone within BHP would have thought of it.

So undoubtedly in 1999 some inspectors used such mirrors and some did not. They were readily available and inexpensive. The present question is not whether any competent engineer should carry an inspection mirror. It is whether the use of such a mirror was a realistic means of inspecting the critical area, as Krupp was obliged to do if that could be done safely.

No witness was called to provide precise dimensions of the distance between the platform of the relevant walkway or the height of its handrail and the top of the stiffener. The plaintiffs’ witness Mr Platzer calculated a distance of 1.32 metres from the top of the stiffener to another stiffener running horizontally along the web. The defendants say that this horizontal stiffener was “below and supports” the relevant walkway. But as I understand Mr Platzer’s evidence, he was referring to a horizontal stiffener which is below the top of the (vertical) stiffener on the flange, and his measurements do not assist on this point. Yet looking at the model of the tower, which it is agreed is on the scale of 1:20, 1.3 metres seems to be a fair estimate of the distance from the platform of the walkway to the top of the stiffener. As already mentioned, the handrail seems to have been about 1 metre or a little more above the platform. There was another rail below it at about half that height. The top of the stiffener would have been almost directly underneath one edge of the walkway platform. These matters are helpfully represented in images within Dr Potts’ report no 1,^[66] one of which is below. As that indicates, an inspection mirror of the dimensions of that which was tendered would not have provided a reliable view of the top of the stiffener if held by an inspector who was standing upright on the walkway because the critical area would have been too far below him.

BHP Coal Pty Ltd v O & K Orenstein & Koppel AG [2008] QSC 141

In a written statement tendered in chief, Mr Thiel said that he would not have been prepared to lie down on the walkway with any part of him outside the railings or to lean out over or through the handrails, because of “the risk of the handrail failing or one stumbling or falling, or evening losing one’s hard‑hat and endangering others below”. He there wrote that “lying on the walkway necessarily involves altering the body’s attitude from upright to lying down, which involves the risk of slipping and falling, either when getting down, or when getting up again. In addition, there is nothing to grip onto when lying down, unlike when one is upright and able to use the handrails, and therefore there is risk of falling off if the machine moved”. In oral evidence, he also said that he would not have been prepared to “support himself on the bracket that is the support for the walkway”. This was in response to a suggestion that he could have climbed over or through the handrails and stood on the bracket which extended horizontally from the web to support the walkway. He said that this would have been unsafe because “any horizontal surface under the sheaves is likely to have grease spatter on it and the risk of slipping is high”.

In my view the risk of the handrail failing was not significant, at least as long as most of the inspector’s weight was still on the walkway platform. Nor was there a significant risk of someone being injured by a falling hard hat. After all, the inspector was already walking around this machine, and crawling along the relevant walkway, whilst he carried things such as a notebook, binoculars and a camera. I accept that without any safety harness, the inspector should not have been expected to stand and lean between the handrails so that his upper body was outside them. The image from Dr Potts’ report (the Figure above) represents an inspector in that very position, but contrary to a submission for the plaintiffs, Dr Potts was not offering a considered opinion about the safety of that. However, with the use of a properly secured safety harness, in my view this would not have been unsafe. But had that been done, I am not satisfied that the mirror, with a handle of 900mm to 1 metre long, would have been sufficient to give the inspector a reliable view.

Had the inspector used the mirror, not from a standing but from a kneeling or crawling position, the mirror would have provided a reliable view. This would have required the inspector to kneel on the walkway and to have at least his head and his arm holding the mirror outside the handrails, between the lower rail and the platform, but with his body inside the handrails and his weight entirely upon the walkway platform. With a properly secured harness, that would not have involved an undue risk. Not everyone would be comfortable doing this but then not everyone would be comfortable working at this height on a structure like the tower of the BWE. Mr Thiel described how he crawled along this walkway to pass underneath the ropes for a distance of what must have been at least 5 metres each way and, according to his evidence, at least twice. And he described his attempts to see the top of the stiffener as he knelt on the walkway platform. That was no more safe than the position I have described when it is considered that he could have used a safety harness.

The defendants say that it would have been unsafe to have attached a harness to the handrail because the handrail was not strong enough. This is said to come from something within BG 60, although it was not explored with any witness. At cl 2.4 of BG 60, it was provided that

“staircase, landings and walkways must be assessed for an individual load of 300kg…and top rails or balustrades for a horizontal force of 50kg”.

But I accept, as the plaintiffs say, that the harness could have been attached to something else, such as the bracket supporting the walkway. In this position the inspector would have been almost directly above that bracket. The defendants argued nothing against that. As already discussed, the inspector was entitled to a harness if required. I accept Mr Grant’s evidence that a harness would have been provided if requested. BHP had provided a harness to Mr Schander.

Mr Cheney, who was called by the plaintiffs, said that he would not have been prepared to lean out over the rails or to lean out from a position lying on the walkway, in order to look behind the flange, although he was not asked to say whether his attitude would have been different with the use of a safety harness. Mr Cheney also said that he would not lie on a walkway and put his head outside the balustrade using an inspection mirror. But again as I understood that evidence it did not assume the use of a harness.

Krupp’s previous inspector, Mr Schander, was described by the defendants as one of the most experienced inspectors ever to have practised in this field. According to his witness statement his practice on the BWE was as follows:

“54.No one from Utah BHP ever asked me to pay any particular attention to the tower or the flanges on the tower nor anyone from ThyssenKrupp or O&K Germany. I would inspect from the walkways or possibly leave the walkways and improvise a little. There was a possibility that one could use a safety rope and improvise to some degree. So you could get a metre or 2 metres away from the walkway if one wanted to look down the corner for example. You would lean over the handrail with a safety rope attached.

That would only be done if there was down time with the machinery. I always specified that I needed a certain number of days downtime and so many other days for inspection during operation. I never had any problems with the machine being stood down for that part. Additionally I sometimes make use of a short ladder where there is ease of access to a certain point simply by climbing up. I always adopted that practice in inspecting the tower of any BWE. I did not use binoculars for my inspections at Goonyella.”

Mr Schander also said that he “did not climb through the tower or access the upper stiffener area either with or without a harness and it would have been both unsafe and impossible for me to do so.” But that is not the exercise which I have described. The extracts which I have set out show that Mr Schander felt safe enough using a safety rope “to improvise to some degree”, such as by leaning over the handrail or leaving the walkways for a metre or two.

Mr Newnham said that harnesses “have been used fairly frequently now to access areas off walkways” compared with his earlier experience where there were less safe practices of leaving walkways without a harness. He said that

“that doesn’t necessarily mean that everybody else does it, but I have a harness which will hook on to a walkway. So if I want to go over a handrail and inspect something over there, I can do that safely.”

Looking at the model of the tower, he said that he would not have been prepared to leave the walkway with a harness and walk along a horizontal bracket which extended from the tower and supported the walkway. But his evidence as to his confidence in the use of harness is relevant for what is now being considered, which is an inspector who is still on the walkway.

Looking at the model Mr Russell said that

“one would get a fairly clear view of the edge of the flange in the vicinity of the top termination of the stiffener, that is the side part of the flange”,

from a position lying on the walkway. He would not have been prepared to lean out and support himself on the bracket which supported the walkways. He was not asked whether the rear side of the flange in the area of the top of the stiffener could have been seen from that position. Nor was he asked whether it could have been seen from the position with the aid of a mirror. But significantly he expressed no reservation about lying on the walkway, even without a safety harness.

I am satisfied that the critical area could have been safely inspected with a mirror by an inspector lying or kneeling on the walkway and secured by a safety harness. It follows that at least for this reason, Krupp breached the contract, even if Mr Thiel was to keep to the walkways.

Manboats and cherry pickers

Mr Haberler said in cross‑examination that if an inspector has to move outside the walkways, scaffolding is one means and a cherry picker is “a good one” which he used extensively. Whilst he agreed that there were some cherry pickers which could be used at this height, his view was that the inspector would be “better off with a crane lift” by which he meant “a manbox and a crane”. This is a box suspended from a crane in which “one is lowered from the top down into the area of investigation”.

Mr Thiel’s evidence on the use of cranes or cherry pickers was inconsistent. In his witness statement signed in March 2007 he said:

“It was my practice, when conducting structural inspections, unless specifically directed otherwise by the client, to use the following methodology: …

(b)My observations, especially in elevated areas, would be made from designated walkways. I would only call for special equipment, such as a crane or cherrypicker, to inspect particular inaccessible or unobservable parts of the machine structure if there was a specific reason to do so and it was shown to be safe and legal to do so. Such reasons might include the presence of rust, peeling paint, deformation or other damage to a particular area. A man boat had never been required for such areas.”

However in his further statement signed in September 2007, he said that he had never used such equipment or seen other inspectors using it, which he repeated in oral evidence. The more recent version is more likely to be true, because it provides something of an explanation, but not an excuse, for his not asking for such equipment to be made available.

In cross‑examination Mr Thiel asserted that an inspector using a manboat would not have been close enough to the top of the stiffener to get a reliable view. Had he used a manboat, Mr Thiel said it would have been lowered behind the rear side of the main tower and he said that he would have been no closer than “three or three and a half metres”. With the benefit of the scale model, it appears that the distance would have been more than that, perhaps about six metres. But Mr Thiel could have used the binoculars which he said he carried in his inspector’s bag. As mentioned, he had used these binoculars to look some eight metres up the tower from the bottom of the stiffeners. From a manboat he would have had a direct line of sight and he would have been looking at the critical area from the same height. A cherry picker would have provided him with yet a better view because it could have moved him sideways from the rear of the tower closer to the stiffener. I infer that this would have brought him at least two metres closer and perhaps Mr Thiel had this position in mind when he gave his estimate of three or three and a half metres.

Had Mr Thiel told BHP that it was necessary to have a manboat or a cherry picker to view parts of the load bearing structure, and in particular the welds at the tops of the two inside stiffeners on the front side of the tower, it is more probable than not that BHP would have provided one or other device. The submissions for the defendants were critical of Mr Grant for not offering things such as a harness or a manboat but they do not seem to challenge his evidence that these things would have been provided had Mr Thiel asked for them. A crane and manboat were provided to Mr Russell for an inspection of part of the BWE which he undertook in August 1999.

Mr Patroni is a former employee of the mine. He left in January 2000 and had no involvement with the BWE system after early 1999. But during the 1996 inspection he was Mr Grant’s supervisor and he was then responsible for overseeing all aspects of the maintenance and operation of the BWE system. He says that if a crane had been needed, it would have been arranged, together with a dogman and a crane operator.

As several witnesses say, the use of a cherry picker or manboat would have required some organisation. Mr Patroni said that it could not have been provided on the day it was requested. But there seems to be no suggestion that after some planning, a cherry picker or manboat could not have been used and safely. Several witnesses said that a “risk assessment” would have been necessary but not that these things would have been unsafe.

So had Mr Thiel not been able to see the end of this stiffener otherwise, he should have requested a cherry picker or manboat, again because the contract required Krupp to inspect the entire structure. And as to the implied contractual duty to take care, Mr Thiel should have known that an inspection could have revealed cracking even from three to six metres away.

Ladders

The plaintiffs’ argument that Mr Thiel could have used an extension ladder to climb from the counterweight boom is less persuasive. Mr Schander said it would have been impossible to use a ladder to inspect the stiffener ends because of the required length of the ladder and the difficulty of securing it. Mr Schander was not challenged about that. Mr Thiel said in cross‑examination that “maybe a means (of securing the ladder) would have been found” and that “probably” he and Mr Grant could have found a safe way to secure it. Mr Haberler said no more than a general comment that an extension ladder can be used in some cases if it is properly secured. There was no evidence called by the plaintiffs to explain how an extension ladder could have been secured and how it would have been reasonably safe for an inspector to have climbed a ladder of at least eight metres in height, without any protective railings behind him. Despite Mr Thiel’s concession, I am not satisfied that the extension ladder would have been a reasonably safe alternative.

Scaffolding

Undoubtedly, scaffolding could have been erected in a way which enabled Mr Thiel to see this area at close range.

The defendants complain that there is no pleaded case that a gantry or scaffold should have been requested by Mr Thiel. I accept that this explains why these matters were not explored with many relevant witnesses, although by the time Mr Thiel gave evidence, the scaffold argument must have been anticipated because he addressed it in his evidence‑in‑chief, when he said that he had not used scaffolding or seen it used by other inspectors, although he agreed that it could have been built.

Mr Habeler has used scaffolding on inspections, although the defendants say for an “engineering audit or inspection” and not a “general condition inspection”, a distinction of little moment in the context of this contract.

The defendants argue that having regard to the time and cost likely to have been involved, it is improbable that BHP would have built scaffolding had Mr Thiel requested it. Mr Haberler said that the use of scaffolding would take a machine out of operation for three or four days in “complex areas”. I accept that BHP would not have built scaffolding if there was another means of inspecting the critical area. So BHP would not have erected scaffolding without first providing Mr Thiel with the use of a manboat or cherry picker.

As I have found, BHP would have provided a manboat or cherry picket if requested. Had this occurred, and had Mr Thiel seen some indication of cracking in the critical area (such as rust marks) but not been able to properly diagnose the problem in order to provide the required advice about its repair, then the contract effectively obliged Krupp to use scaffolding, unless BHP declined to erect it. More likely than not, in those circumstances BHP would have erected the scaffolding. The reason is that this would have been the sensible course. This was a machine which had been continuously used by the mine for many years, and at this time it was proposed that its output would be increased. And after all, BHP had requested this inspection for which it was paying at least $27,000, and from which it was to be given professional advice as to any required repairs. Faced with a request for scaffolding, to more closely inspect signs of fatigue cracking on the tension side of the main load carrying structure, it would have been irrational for BHP to have refused it.

It follows that Krupp breached its contract because it did not inspect the entire primary load carrying structure and in particular the critical area. It was obliged by an express term to inspect all of the structure, subject to the necessarily implied qualifications that it would be reasonably safe to do so and that BHP had provided the necessary equipment. It was for the inspector to request what equipment he required. Because he failed to require the necessary equipment which would have provided him with a means of inspecting this part of the structure with reasonable safety, Krupp cannot claim that it was relieved of its obligation to inspect the entire structure. It is no answer for Krupp to say that the use of such equipment was not specifically proposed by BHP.

Its services were not rendered with due care and skill, contrary to the warranty implied by s 74(1), because Mr Thiel knew that he had not inspected or indeed seen part of the structure which he knew should be inspected. His attempt to look at the critical area from eight metres below on the counterweight boom platform did not constitute an inspection of that area. He had no good reason to believe that he should stay on the walkways rather than requiring a harness and (if necessary) a manboat or cherry picker.

The inspector’s report

The report was signed by Mr Thiel and commenced with this executive summary:

“The accompanying report is in response to the BHP Coal Pty Ltd, Goonyella Riverside Mine order for Krupp Engineering (Australia) Pty Ltd to carry out an independent inspection of Excavator 1367.

This report lists the major and medium defects found, together with recommended remedial measures required. Very minor defects have not been commented on as this would not be of any assistance.

Defects reported in the 1996 report that have not been repaired are listed under 1.4 Inspection Report 1996 and have not been detailed again in this report.

In our opinion, the Excavator does not have any major defects which would prevent the operation of the machine.”

Section 2.1 of the report contained four pages containing a description with drawings and photographs of a buckled web plate on the right hand tower and near the counterweight boom. This was the only fault found in the tower.

Krupp was obliged to report on the inspection required by the contract, which was an inspection of the entire structure. Krupp’s report was of an inspection of part of the structure. Thus Krupp failed to provide the report which the contract required. Further, the report was in breach of the term implied by s 74. Again, Mr Thiel knew that he had not inspected part of the main load carrying structure which ought to have been inspected. He should have known that his report would convey the impression that he had inspected the entire structure. If he had not inspected the critical area, reasonable care required him to say so in his report, because otherwise there was at least a risk that the reader would understand that he had inspected it and that it contained no visible defect.

The defendants argue that the reader, and in particular Mr Grant, must have known that the whole structure had not been inspected so there was no need for that to be said in the report. As I have found, Mr Grant and more generally BHP did not know that fact. And Mr Thiel had no good reason to think that it was so. Mr Thiel could not have reasonably assumed that Mr Grant or BHP knew what was visible from the walkways, or that Mr Thiel had not used an inspection mirror. So the fact that some important part of the structure had not been inspected was not so obvious that it went without saying.

Was Krupp negligent?

The plaintiffs plead that Krupp and Mr Thiel owed a duty to them “to exercise a level of skill and care:

reasonably to be expected of those [defendants];

alternatively, reasonably to be expected of a competent structural engineer with expertise in the field of inspecting bucketwheel excavators.”

In substance there appears to be no difference between those two alleged duties, or between them and Krupp’s contractual duty of due care and skill from the warranty implied by s 74(1). The defendants did not argue that no concurrent duty of care was owed by Krupp. Nor did they argue that no duty of care was owed by Mr Thiel to the then owners.

It follows that Krupp was negligent in the respects in which its inspection and report were in breach of the term implied by s 74(1). As against Krupp, the negligence case seems to add nothing to the contract case. It was the contract which defined what Krupp had to do, and with reasonable care and skill. If a concurrent common law duty of care was owed, it is difficult to see how it could have affected the scope of what Krupp had to do. Much of the evidence and some of the arguments on the inspection case seemed at times to ignore the contract. It is not to the point to look at what inspectors, under different contracts and in some cases, under different laws, consider to be “prudent inspection practices” unless this can be related to the specific requirements of this contract. Evidence of inspection practices was potentially relevant to what could or could not have been done to inspect the critical area. But reference to the practices of other inspectors cannot affect the scope of the duties owned by Krupp here, according to the unambiguous terms of the scope document. And it was not Krupp’s pleaded case that the terms of the contract had some particular meaning, from accepted inspection practices, which was different from their ordinary meaning.

Was Mr Thiel negligent?

Mr Thiel’s position, of course, must be considered separately.

The content of Mr Thiel’s duty of care was affected by the contract, although he was not a party to it. Mr Thiel may not have understood the extent of Krupp’s obligations. As it happened, he had signed one of the faxes to BHP which had enclosed the scope document. He said he did not recall whether he read the enclosures or simply signed the document. I am not prepared to infer that he read and understood the scope document. But if he did not, he ought to have read it, because it defined clearly and concisely, the work he was to do on Krupp’s behalf.

Mr Thiel knew that he had not inspected the critical area. He well knew that whatever view he had gained from looking up from the discharge boom was inadequate to provide any basis for an opinion. He understood that the critical area was something which should be inspected and in particular that there were welds there.

I do not accept that he thought he was bound to keep to the walkways. In one of his statements tendered in chief^[67] he said: “I understood that I was entitled under the contract that we had with the mine operator to request that I be provided with a manboat”. In his oral evidence he said that he understood that the inspection contract contained conditions to the effect of 4 and 8. Yet he says that he was told by Mr Reiter, and later by Mr Grant, to stay on the walkways. I have discussed already the incident with Mr Grant upon which he relies. That could not have provided any reasonable basis for thinking that he should not request such equipment as was necessary for him to inspect from outside the walkways. It is unlikely that he believed that to be the case. Nor do I accept that he went to the site in 1999 believing, as a result of something Mr Reiter had said, that he was not to leave the walkways although the contract entitled him to request the necessary equipment. It is unlikely that Mr Reiter would give such an instruction to Mr Thiel, which was inconsistent with the contract and which Mr Reiter had not discussed with Mr Grant or anyone else at BHP. And the necessary equipment was to be provided by BHP at its cost according to the relevant conditions of the scope document.

It was not his practice to use an inspection mirror. But many inspectors do use such mirrors. Whether reasonable care requires their use depends upon the circumstances of a particular case. As I have found, an inspection mirror, at least if used by an inspector wearing a harness, would have provided a ready means of inspection of the critical area.

In my conclusion, he failed to exercise reasonable care by not following any of the courses which I have said would have provided him with a sufficient vantage point for inspection of the critical area. The foreseeable consequences of an undetected fatigue crack were very serious and the taking of one or more of these steps to endeavour to inspect the area would not have occasioned any expense to his employer.

As he had not inspected the entire structure, there was no reasonable basis for the opinion which he expressed. Objectively his report conveyed the opinion that from a visual inspection of the entire structure only the things specified in the report required attention. He may have understood that the report did not convey that opinion or represent that he had inspected everything. But the reasonable engineer would not have written in these terms. If he had not inspected the entire structure, reasonable care required that he express that in his report. He ought not to have thought that his report would be understood as referring only to what he had inspected rather than the entirety of the structure.

In my conclusion, he breached his duty of care.

The inspector’s report and s 52

The report represented that there had been an independent inspection of the BWE. In context it was a representation that the inspection had included a structural inspection of the entire primary load carrying structure including all welds on that structure. That was not true because not all of the structure had been inspected.

The defendants say that it was not misleading and deceptive, or likely to mislead and deceive, because of what Mr Grant knew. BHP, and in particular Mr Grant, must be taken to have known that Mr Thiel had not used any equipment such as a harness, a manboat and crane or a cherry picker because BHP had not been asked to make it available. But as already discussed, BHP, and specifically Mr Grant, did not know that Mr Thiel had been unable to inspect the critical area by standing on the nearby walkway. According to my findings of what was known and not known by Mr Grant, there was nothing to qualify the effect of what was represented by the inspection report. I accept Mr Grant’s evidence that he expected and assumed that Mr Thiel would and had inspected the entire structure. The contents of his report contributed to that assumption.

The report also contained an express statement of an opinion, which was that the BWE did not have any major defects which would prevent the operation of the machine. That statement is relevant to the representation that the entire structure had been inspected because it would fortify the impression of the reader that the whole had been inspected. Further, this express statement was misleading and deceptive, because, in the circumstances, it impliedly represented that there was a reasonable basis for that opinion. It was not a representation of fact that there were no such defects. But it was a representation that the defendants held the opinion that there were no major defects, and that this was a considered professional opinion which had been reached in a reasonable way. Because Mr Thiel had not inspected the critical area, and insofar as he had seen any of it, he had been unable to make any reliable assessment about defects, there was no reasonable basis for this opinion. For this reason also the report contravened s 52.

The defendants submitted that “there may be cases in which a provision of an opinion may convey a representation that the opinion is based on reasonable grounds but there is no basis for such a conclusion here”. In my conclusion, the expression of this opinion in the circumstances, did convey a representation that it had a reasonable basis. After all, Krupp was engaged as an independent professional adviser with a vast experience in machinery of this kind and in particular bucket wheel excavators. It is nonsensical to treat Mr Thiel’s statement of opinion as simply a representation of what he thought, without any indication that the opinion was worth anything.

Of course, this question of reasonable basis does not arise in relation to the representation that the entire structure had been inspected. That was a misrepresentation of fact.

I should note that there was no submission that if cl 12 of the Service Condition was a term of the contract for the inspection, it affected the plaintiffs’ rights against Krupp under s 82 of the Trade Practices Act for a report in contravention of s 52, or against Mr Thiel in any respect.

Section 52 and Mr Thiel

The plaintiffs claim damages pursuant to s 82 of the Trade Practices Act against both Krupp and Mr Thiel. He is alleged to be a person who was involved in the contravention (by Krupp) and thereby liable for it.

The plaintiffs plead that he was “knowingly concerned in or a party to” Krupp’s contravention and thereby rely upon s 75B(1)(c). They plead that this follows from matters earlier pleaded within a certain three paragraphs of the statement of claim. The first of those simply pleads the price of the inspection and report, a matter of relevance to the implication of the s 74 warranty but of no relevance to this point. The second is the paragraph alleging that Mr Thiel did not inspect the critical area. The third is the paragraph alleging that Krupp and Mr Thiel breached common law duties of care in the inspection and report, and in particular by a failure to inform the plaintiffs that the purported inspection was incomplete and inadequate to detect the presence of fatigue cracking. In none of these paragraphs was there any allegation about Mr Thiel’s state of mind.

The written submissions for the plaintiffs upon this claim against Mr Thiel are simply in these terms:

“444Mr Thiel knew what was expected by the contract and knew that he had not done it. He knew that when the report said that there were no defects, that he had not in fact inspected at least the critical area in question.

445He had the requisite knowledge of the elements of the contravention such as to satisfy (s 75B).”

In Yorke v Lucas^[68] Mason ACJ, Wilson, Deane and Dawson JJ said of subparagraph (c) of s 75B(1):^[69]

“There can be no question that a person cannot be knowingly concerned in a contravention unless he has knowledge of the essential facts constituting the contravention.”

The plaintiffs do not plead, as they should have pleaded, that Mr Thiel knew of the necessary elements of Krupp’s contravention and, if they proposed to prove that knowledge by inference, the facts from which that knowledge is to be inferred^[70]. The plaintiffs argue that his knowledge was sufficient, because he knew what the contract required, what he had and had not inspected and what he had written in his report. The second and third of those matters are established. The first is not established and in any case, knowledge of that would not be sufficient. The plaintiffs must prove that he knew that his report conveyed the relevant representations and that they were misrepresentations.

The report represented that the entire structure had been inspected because that is what the contract had required. Absent that requirement, the case that the report contained that representation would not be as strong. I am not prepared to infer that Mr Thiel understood that his report contained that representation when it is not established that he understood what the contract required. Of course he knew what he had written, but that is not to say that he knew of the fact that it contained that representation. Nor is it established that Mr Thiel knew that he had not exercised reasonable skill and care, so that it is not established that he knew it had misrepresented that matter. Accordingly, the plaintiffs have not proved that he was aware of the elements of Krupp’s contravention of s 52. He is not liable under the Act.

Would a fatigue crack have been seen in 1999?

In broad terms, there are two questions here. The first involves the likely size and location of the crack in March 1999. The second is whether such a crack would have been seen had Mr Thiel inspected that part of the tower.

Where was the crack in 1999?

This question occupied much of the trial. It was the subject of complex opinion evidence, given by engineers of very high standing. For the most part, it involved the application of the science of fatigue crack growth analysis. Three of these witnesses made calculations of the likely length and location of the crack. They are Dr Jones, who was called by the plaintiffs, and Dr Maddox and Dr Potts, who were called by the defendants.

Professor Fisher gave evidence going to the likely location of the crack, which whilst not involving any fatigue crack growth calculations of its location, was to the effect that the crack was further advanced in 1999 than was suggested by any of those who had made calculations. Professor Fisher did not claim to have experience or expertise in such calculations and indeed at one point he seemed to suggest that such calculations were unreliable. Professor Fisher closely examined the fractured remains of the tower and placed particular reliance upon what was revealed by his study of their surfaces. These revealed striations, which are marks on the surface not visible to the naked eye and which record the steps by which the crack had advanced. He made a qualitative judgment that probably the crack would have been through the entire thickness of the flange and apparent on the front side of the flange, i.e. the side facing Mr Thiel on the walkway.

However the plaintiffs did not seek a finding to that effect. Ultimately they argued that there is a range of likely crack locations, which is effectively defined by the evidence of Dr Jones, Dr Maddox and Dr Potts, and that the crack was somewhere within that range. None of these three witnesses said that the crack would have been entirely through the thickness of the flange so that it would have appeared on the front face of the flange. Mr Thiel said that had there been a crack even half‑way along the edge of the flange he believes he would have seen it and that when he was looking at the flange edge from the walkway “there was definitely nothing there”. This evidence indicates at least that the crack had not reached the front of the flange. Had the crack reached the front of the flange it would have been visible not only because of its location but also because by then it would have broken the paint and had obvious corrosion.

There is no dispute between these three engineers as to the path in which the crack grew. They agree that this crack began its life as two cracks: one around each corner of the top of the stiffener. They disagree as to the initiating cause of these cracks. Dr Potts and Dr Maddox (adopting the view of his colleague Mr Pargeter) said that the cause was probably hydrogen (cold) cracking. Dr Jones did not agree but said that it did not matter. All agreed that what happened after the initiation of this crack is that it grew as a result of fatigue. Its origin would not then have affected its rate of growth as a fatigue crack. But cold cracking would have made for a relatively larger initial crack, providing something of a head start, and said Dr Jones, resulting in a relatively more advanced crack as at March 1999.

This pair of cracks grew in depth, from the rear or stiffener side of the flange towards the front side, and in length, along the surface of that rear side. Eventually the two cracks coalesced. The engineers agree that this occurred when the crack depth was part way through the 40mm thickness of the flange, that is, before the crack tip had reached the front side of the flange, and before the length on the surface of the rear side had reached the edge of the flange.

Thereafter the crack continued to grow horizontally through the flange towards its front face, and along the rear side of the flange. Its shape was semi-eliptical. Along the rear face of the flange it grew at the same rate at each end, as those ends grew away from the stiffener. One end, of course, was growing towards the web, and the other towards the end of that side or edge of the flange. Where the rear side of the flange reached the edge, I will describe as “the corner”. When the crack reached the corner, its length on the rear face of the flange was 120mm, because its middle point was half way along the top of the stiffener, which had a width of 40mm, and there was 40mm from the side of the stiffener to the edge of the flange.

After then, the crack tip continued its advance through the flange towards its front side, the crack continued to grow along the rear side towards the web and at the other end, having turned the corner, it became a crack moving along the 40mm edge of the flange towards its front side. As I will discuss, there is some evidence, particularly from Dr Jones, that the crack had progressed this far by March 1999. The relevance of that would be in the possibility that the crack was evident to an inspector looking at the edge of the flange. Even from a position of standing on the relevant walkway, Mr Thiel would have had a direct line of sight to the edge of the flange. According to other evidence, the crack had not turned the corner by then, so that it would have been visible, if at all, only on the rear side of the flange.

After penetrating the full thickness of the flange, the direction of its growth changed. It made a right turn and grew along the flange towards the outside of the tower. It spread towards and past the web and also branched sideways into the web.

Dr Jones’ opinion

His approach was to apportion the crack growth over the life of the stiffener, which was 15.3 years, to the period prior to the 1999 inspection (14.3 years) and the period after it (1 year). He assumed that the crack length at the commencement of the life of the stiffener was nothing or effectively nothing. And the point to which the crack had grown by the time of the collapse of the BWE is known. So that there is a length of crack growth which he was able to apportion in order to find its location in March 1999. He assumed that the machine had been operated in effectively the same way throughout those 15.3 years so that there was a uniform imposition of load cycles and stresses. On that assumption it was unnecessary for him to arrive at figures which were in fact the stresses which would have resulted from the operation of the BWE, and in particular what are called stress cycles and the stress intensity range. Whatever had been the number of stress cycles over the 15.3 years were effectively apportioned as a result of his calculations.

The apportionment exercise was not simply a matter of taking the total crack growth and multiplying it by 14.3 over 15.3 (years). The rate of crack growth varies over time, even assuming that the loads and stresses to which the structure is subjected are uniform. The crack itself has a stress raising effect: the stresses are intensified at and near the tip of a crack. The extent to which this occurs is a function of the length of the crack. The further the crack grows, the more the stresses are intensified and accordingly, the faster is the crack growth at any point. So as each of Dr Jones, Dr Maddox and Dr Potts agree, the rate of growth was very much higher late in the life of the crack and most of the crack growth occurred after Krupp’s 1999 inspection.

As discussed in the design case, the tower of the BWE was subjected to considerable stress from its operations. As also discussed, the more modern standards or codes recognise that the relevant measure of stress is the range of stress, that is to say the difference between maximum and minimum stress. It is that alternation between high and low stress which contributes to fatigue crack growth. These events of alternating high and low stress are called stress cycles, and in the day to day operation of the BWE they occurred very often. For example, Dr Jones calculated a total of 11.2 million stress cycles over the 15.3 years in question.

A widely used measure for calculating the rate of crack growth is the Paris-Erdogan Law. It calculates the crack growth rate according to a stress intensity range together with two constants. The stress intensity range is effectively a function of the stress range, the difference between maximum and minimum stress and the length of the crack. The constants are derived from databases based upon the results of laboratory fatigue tests. There are several sources from which different figures for those constants can be derived, as appears from Dr Potts’ first report, and each of the engineers who undertook these calculations adopted different figures for them.

The Paris-Erdogan crack growth equation permits a calculation of the incremental crack growth per cycle. Proceeding from the premises of certain crack growths at certain locations of the flange, Dr Jones was able to calculate, by using the equation to work backwards, the number of cycles which would have produced that amount of growth. That first required a calculation of a crack growth rate, which was different according to what was its then size and location. So he divided the growth of this crack from its commencement to its ultimate position (upon collapse) into five stages. Three were within the phase when it was a semi-elliptical crack growing through the thickness of the flange. Two were when it was a crack advancing along the length of the flange in the direction of the outside of the tower. In the first phase the crack depth grew from 0 to 4mm, in the second from 4 to 13mm and in the third from 13 to 40mm (the thickness of the flange). Once the crack was through the flange, and it had thereby changed direction as it advanced towards the outside of the tower, its depth was measured by the distance between the inside edge of the flange and the crack tip. As it began this advance, that distance was 130mm according to Dr Jones. So his fourth phase was from a crack depth of 130mm growing to 260mm. His fifth and last phase was from 260mm to 340mm which is where the crack was when the BWE collapsed. He calculated for each stage the number of cycles which had caused that defined amount of crack growth. Those calculations gave him what he described as his time-line. On the assumption that the incidence of stress cycles was effectively uniform throughout the life of the BWE, he was then able to apportion those cycles between the period to the March 1999 inspection and the period after it. Then on the basis of his calculations of the number of load cycles in those stages, he was able to calculate the crack depth at various times but most importantly as at March 1999.

He calculated that as at 24 March 1999, the crack had a depth of 28mm and a surface length along the rear face of the flange of 112mm. But his opinion was that the surface length of the crack must have been somewhat longer than he had calculated. He reached that opinion by reference to what are called beach marks. These are marks left behind on the surfaces of the fractured remains of the tower. In his first report Dr Jones worked from photographs of them but subsequently he worked from an examination of the pieces themselves. These beach marks indicate the path which the crack took as it grew. Importantly, they also indicate the shape of the crack. So when the crack was the semi‑elliptical crack progressing through the thickness of the flange, it made beach marks which show certain surface lengths at certain crack depths. The standard crack growth calculation is a calculation of the growth in crack depth (called a), which in this case is relevantly the depth of the semi-elliptical crack through the flange. As Dr Jones explained, his calculations of the crack surface length for a certain crack depth resulted in an understatement. This was because the shape of the crack, as evidenced by the beach marks, was different from that which was the basis for his calculations of the surface length corresponding to a certain crack depth. So he revised his opinion about the surface crack length by reference to what the beach marks showed for his calculated crack depth of 28mm. In consequence he thought that the surface crack length was 125mm in March 1999, so that the crack had turned the corner and was progressing along the edge of the flange. In the same way he assessed its length along that edge at 15mm.

In a later report, Dr Jones revised these calculations, not for any reason of principle, but because of an algebraic error which he had discovered. His revised calculations resulted in a calculated crack depth at 14.3 years of 31mm and a calculated crack surface length of 118mm. But again by reference to the beach marks, the surface crack length corresponding to that depth was assessed as 127mm and the crack had progressed along the edge of the flange, not by 15mm but by 28mm.

At the same time he calculated the depth and length upon alternative hypotheses involving cold cracking and drop cutting. On the hypothesis that the crack began as a 2mm cold crack, its calculated depth at March 1999 was 33mm, its calculated surface length was 121mm and its “observed” length (i.e. its length by reference to the beach marks) was 128mm on the rear side of the flange with a length along its edge of 32mm. On the hypothesis of an activity known as “drop cutting” occurring, but only within the final year of operation (as Dr Potts had hypothesised), the numbers were reduced but only slightly. The calculated crack depth became 29mm, the calculated crack length 114mm, the observed crack length 125mm and the length along the flange edge became 22mm. Dr Jones’ use of the beach marks to revise his calculations of crack length from a certain crack depth was persuasive. According to Dr Jones’ evidence then, the crack had turned the corner and was at least half way along the edge of the flange.

Dr Maddox

Dr Maddox had the same approach as Dr Jones, which was to apportion a certain crack growth to the periods before and after the inspection. In his first report he undertook six alternative fracture mechanics growth calculations.

The first assumed that the crack grew from something which was “nominally defect‑free”. He said that:

“as is well established … even defect‑free welds in steel contain minute flaws at the weld toe and these provide the sites for fatigue crack initiation. They are a consequence of welding and range in depth up to 0.4mm, with an average (based on the rather limited data available) of 0.15mm. Such inherent flaws are not detectable and therefore it is necessary to assume their size in fracture mechanics calculation. For the purpose of the present analysis, an initial depth of 0.15mm with a surface length of 2c = 0.5mm was assumed.”

As Dr Maddox thereby explained, this fatigue cracking need not have resulted from an initial defect in the stiffener weld, although his opinion, based upon the work of his colleague Mr Pargeter (who gave evidence to this effect), was that this crack began as a cold crack.

For this first case he assumed a nominal stress range^[71] of 40N/mm², equivalent to 40MPa compared with Dr Jones’ assumed 50MPa. And Dr Maddox explained a difference in what are called the stress intensity factors assumed in their respective calculations. The stress intensity factor is a parameter which quantifies the stress intensity in the region of the crack tip which is a function of the applied stress and the crack length. In turn the stress intensity range, used in the Paris-Erdogan Law, is a function of the stress intensity factor. Dr Jones used a technique which I will describe as the Taylor technique to meet the difficulty in calculating a reliable stress intensity factor for the early period when the crack has not grown far from the initiation site. To meet that difficulty, Dr Maddox used what he described as established solutions which he derived from a British Standard BS 7910. As I will discuss, another engineer called by the defendants, Dr Munz, was particularly critical of Dr Jones’ use of the Taylor technique. It is unnecessary to discuss other differences between the Jones and Maddox calculations, only some of which result in differences in the calculated results which are potentially significant.

Dr Maddox said that he was more closely following available experimental data and it was ultimately submitted by the defendants that Dr Maddox had applied “accepted fracture mechanics principles” from which Dr Jones, it was said, had departed.

The results of the Maddox calculation for this “base case” of a defect‑free weld with an applied stress of 40MPa was that in March 1999, the crack depth was 15mm and the surface length was 103mm.

His second calculation was upon the same assumed applied stress but with an initiating defect (from cold cracking) of 1mm x 10mm. This resulted in a crack depth of 29mm and a surface length of 122mm. The same figures were said to come from a third calculation which was the same as the second but with the initiating crack being 2mm rather than 1mm.

The three other calculations were on the premise of there having been “drop cutting” in the final year of operation, for which there were certain assumptions as to the number of cycles and their MPa, amongst another number of the cycles from the BWE’s other operations, and an assumed applied stress of 40MPa. Under the first of these “drop cut alternatives”, the weld was assumed to be defect‑free and the results were a depth of 15mm and a surface length of 103mm. Under the second, a 1mm initiating crack was assumed resulting in a depth of 29mm and a length of 122mm. Under the third, the initiating crack was assumed to be 2mm, resulting in a depth of 30mm and a surface length of 125mm. Drop cutting is a type of operation of the BWE which is described below^[72] in relation to allegations of contributory negligence. It is said to have placed especially high stresses upon the tower and contributed to fatigue. Upon one of the defendants’ arguments, its practice was particularly heavy in the last year of the BWE’s life.

In his second report^[73] Dr Maddox revised those calculations. This involved some concession of the correctness of Dr Jones’ approach to an issue concerning the stress concentration effect of the stiffener, although Dr Maddox remained of the view that Dr Jones had underestimated that matter. And as he there detailed, there continued to be some differences between them as to how these calculations should be made. Dr Jones had been critical of his first set of calculations because they did not accord with the shape of the growing crack as indicated by the beach marks. Dr Maddox said that his revised calculations “very closely” matched the beach marks.

Yet he agreed that the calculated lengths could be adjusted to accord with the shapes demonstrated by the beach marks, and he explained that the calculations would tend to underestimate the surface length “since one side of the crack is close to or at the flange edge and … this is not taken into account in the assumed stress intensity factor solution”. He concluded that “overall the agreement between calculated and actual crack sizes add support to the present analysis”.

His re‑calculations involved the same six alternatives. The defect‑free weld had a depth of 22mm and a length of 95mm and the same result with drop cutting. The calculations for a 1mm initial crack resulted, in each case, in a depth of 23mm and a length of 96mm. Those for a 2mm initial crack resulted in a depth of 26mm and a surface length of 98mm.

There appears to be an error here in that the calculations result in the same crack sizes with or without drop cutting. Yet as Dr Maddox explained in the text of each report, if there had been drop cutting but only in the final year, the crack size at the commencement of that year would have been less than with no drop cutting (because the crack growth in the last year would have been higher). The level of drop cutting assumed for his second report was greater than that for his first, and there were other differences in the calculations as Dr Maddox explained in his second report. It is surprising that his calculated depth and length should be the same with or without an assumption of drop cutting only in the last year.

But as I find below, there was no significant difference between the incidence of drop cutting before and after the 1999 inspection, so that calculations such as these which are upon the premise of this significant drop cutting only within the last year are not so relevant. More generally, the assumption that the manner and extent of the operations of the BWE over the 15.3 years was consistent is reasonable.

There was effectively no exploration of these calculations in the cross‑examination of Dr Maddox, no doubt because by then the plaintiffs were content to rely upon them as part of the proof of their case of the likely range of crack sizes. I do not see any basis for questioning Dr Maddox’ figures under the “no drop cutting” calculations. Because drop cutting was not limited to the last year of operations, its incidence does not affect the “time line” method which underlies the calculations of both Dr Maddox and Dr Jones.

In his second report, Dr Maddox then compared those calculated sizes with the beach marks. For his first case, the beach marks indicated that for the crack depth of 22mm the actual surface length was 108mm. The next beach mark was at a crack depth of 31mm (giving a surface length of 128mm). Thus from his report, it can be inferred that if there was a cold crack of 1mm or 2mm, with a calculated depth of 23 or 26mm, the actual surface length would have been a little longer than 108mm but perhaps not as long as 120mm.

Dr Potts

Dr Potts had quite a different approach from the “timeline” approach of Dr Jones and Dr Maddox. Instead of apportioning a certain amount of crack growth to a certain time period, he calculated the crack growth over that time period. He calculated backwards from the position of the crack at 15.3 years, by using the standard crack growth rate equation with certain alternatives for the appropriate stress range, the number of cycles and the crack growth relation factor. This meant that he was not concerned with the rate of growth before March 1999 and did not have to meet the difficulties addressed by Dr Jones and Dr Maddox in calculating the rate of growth when the crack was very small. But necessarily the results of his calculations are a function of his assumptions and opinions about cycles and stress range.

His initial calculations involved some eight different calculations but effectively four different factual scenarios. The differences in the factual scenarios are in the assumed number of slews per terrace and the amount of operational up‑time, which is the percentage of any given time for which the BWE was actually digging. Later in relation to drop cutting as alleged contributory negligence, I discuss the methods of excavation used in the operation of the BWE. Although the use of the BWE was much the same from year to year, some drivers had different practices from others in some ways. There are other variables, such as the relative hardness of the material. Recognising that, Dr Potts chose alternatives according to the number of slews per terrace. The bucket wheel was slewed as it cut into the face of the overburden, and it progressed by cutting the overburden in terraces. Before going to those alternatives and the calculations for them, it should be noted that there are several assumptions common to all scenarios. One is that drop cutting commenced from 14.3 years and particular assumptions were then made as to the incidence of that drop cutting.

Scenario number one involved 24 slews per terrace and an up‑time of 45 percent. This calculation used mean crack growth parameters, or what is called the “mean line” of an SN graph. SN graphs plot the endurance or life of a structure against a stress range. Scenario number two involved no difference to the assumed facts but the calculation by Dr Potts was based on the so called “design line” of the SN graph. The mean SN curves represent the fatigue test data obtained from experiments without any added safety margin, or in other words the mean life expected at different levels of stress, those levels being measured by the stress range (the difference between maximum and minimum stress). The design SN curves are lower in terms of stress range for a given life, so that in practice designers can avoid failures by designing conservatively.

Dr Potts was not challenged for using the mean SN curves but the plaintiffs say that it was inappropriate to alternatively use the design SN curves. It appears that Dr Potts presented these alternative calculations based on the design curve in order to represent what he described as the “lower bound” of the scatter. However the use of parameters from the design SN curve would misrepresent a realistic range. The mean SN curve informs of the mean life from a certain stress range: that there is a 50 per cent probability of survival to that life. The design curve shows the (lower) life for which there is about a 97 per cent probability of survival at that stress range.^[74] Therefore, the design curve results in parameters according to which the structure is treated as very much weaker, so that the crack growth rate is very much faster. Working back from the crack size at the collapse, the calculated growth in the final year would be much higher, and the size of the crack at March 1999, much lower. When challenged in cross‑examination, Dr Potts said that “you might expect that the mean value is the more probable, but it doesn’t preclude that within the scatter band that the others could occur”. Of course where this BWE actually was within that scatter could never be discovered. But in determining where this crack was most likely to have been in March 1999, it is logical to calculate by reference to the mean SN curve rather than the design curve.

The third scenario was for 24 slews per terrace but with 60 percent up‑time, the fifth scenario for 8 slews per terrace with 45 percent up‑time and the seventh scenario for 8 slews with 60 percent up‑time. Each of those calculations was on the mean SN curve. Scenarios four, six and eight corresponded respectively with three, five and seven but were calculations on the design SN curve. The results ranged from a crack depth of 7.8mm and surface length of 18.2mm for scenario four to a depth of 37mm and surface length of 129mm for scenario five. The lowest involving the mean SN curve was scenario three with a depth of 21mm and a surface length of 108.6mm.

In his report number eight, Dr Potts revised the calculations for each of those scenarios. The lowest was still scenario four, with a depth of 19.6mm and a length of 51.6mm and the highest was scenario five with the same dimensions as previously. The lowest of the calculations using the mean SN curve was still scenario three but the result of the revised calculations was a depth of 29.8mm and a length of 119mm. The three other calculations using the mean SN curve resulted in a crack length which had the crack as having turned the corner.

In that same report, Dr Potts undertook further alternative calculations. One was to employ, as Dr Maddox had suggested, what is described as the Hobbacher parametric solution which demonstrated that this had no impact upon Dr Potts’ calculations because the impact of the Hobbacher solution is on the early stages of crack growth and Dr Potts, working backwards from the position of the crack in 2000, was not much concerned with those stages.

Perhaps more relevantly, in report number 8 he made some calculations to represent the effect of small stress cycles. Professor Fisher and Dr Jones had challenged the load duty spectrum used in his earlier reports as simplistic by not taking into account small stress cycles. In essence their point was that in practice, there is a variable load spectrum involving many different stress cycles and that once there is fatigue growth from the larger cycles, there is a further contribution to fatigue growth from the smaller cycles which, operating alone, would not have had that impact. So in this report Dr Potts made some calculations which endeavoured to take into account the effect of small stress cycles. He said that because the actual magnitude of such cycles was unknown and difficult to quantify, he considered three alternatives, which were small stress cycles with stress ranges respectively of 50 per cent, 25 per cent and 10 per cent of the normal slew operational stress range. Using his scenario three, the calculations including the effect of these cycles showed that the size of the crack in 1999 reduced in its surface length from 119mm (for scenario three without small cycles) to 117.2mm (cycles of 10 per cent of normal), 111.6mm (cycles of 25 per cent of normal) or 93.4mm (cycles of 50 per cent of normal).^[75]

Also in his report number eight, Dr Potts looked at the effect of assuming drop cutting, but not limited to the last year of operations but instead occurring throughout the life of the machine. Again by his scenario three, and upon this alternative premise of drop cutting, nevertheless he reached the same size for the crack in 1999. (What changed was the calculated initial crack size, that is, at the commencement of the 15.3 years.)^[76]

In his report number 12, Dr Potts made calculations of further alternatives. The first of these resulted from his correcting two errors in his previous assessments. He had assumed that the distance from the relevant stiffener to the edge of the flange was 35mm (as indicated by an O & K drawing) instead of the 40mm as built. Secondly, he had assumed that the longitudinal weld leg was 14mm whereas in fact it was 10mm. He recalculated for his scenarios four and five, which he chose because they had provided what he said were the “lower and upper bound predicted crack sizes respectively”. For scenario four, the result was to increase the calculated depth from 19.6mm to 21mm and the length from 51.6mm to 101.6mm. For scenario five the result was to decrease the depth from 37mm to 35.9mm and the length from 129mm to 120.8mm. For scenario five this still involved the crack turning the corner but its length along the edge of the flange was thereby decreased from 19.6mm to 4.1mm.

Also within report number 12, he revisited the effect of small stress cycles and drop cutting throughout the 15.3 years. But the small stress cycles used in these calculations were different from those assumed previously. In this report he said that in the light of his further investigations on the dynamic loading experienced by the BWE, it was more realistic to work from a certain number of small stress cycles per slew with certain stress ranges for those cycles depending upon the relative hardness of the material. As for drop cutting, Dr Potts thought that he should revise his calculations, explaining why drop cutting throughout the entire life might be a significant variation from an assumption that it occurred only in the last year. He then recalculated his scenario three to give effect to these assumptions of small stress cycles and drop cutting. The effect was to change his calculated crack depth to 21.8mm and his calculated crack length to 100.8mm.

The result is that the lower bound of his calculations is scenario three with a depth of 21.8mm and a length of 100.8mm, and the upper bound is his scenario five, with a depth of 35.9mm and a length of 120.8mm. And for that crack depth of 21mm it would be appropriate to make the adjustment which Dr Jones and Dr Maddox each made to take account of what was demonstrated by the beach marks. The effect would be to increase Dr Potts’ surface crack lengths. But regardless of the beach marks, it can be seen that there is a fair correlation between the results from the respective calculations of Dr Jones, Dr Maddox and Dr Potts. Of course in one sense a difference of a few millimetres in crack depth or length is substantial because at that stage of its development the crack would take some time to grow that few millimetres. But for present purposes, which is to assess whether the crack would have been visible had Mr Thiel inspected the critical area, such differences are unlikely to be significant.

The defendants argue that from Dr Potts’ evidence there is a prospect of a smaller crack, of a depth of 15mm. In their written argument they contend that Dr Potts’ calculations:

“arrive at a crack depth of 21mm under scenarios four and five in no.8, or two thirds (15mm) of that using their most reasonable parameters after re‑analysis taking into account the adjusted weld leg dimensions, and the distance between the stiffener and the flange edge on the basis that the as‑installed stiffener was 40mm from that edge, rather than the 35mm as‑designed figure”.

But this misstates the evidence. As already discussed, in report number 12, Dr Potts re‑calculated his scenarios four and five to take into account those very matters, and I have set out the results of those re‑calculations. It is wrong to say that they result in a crack depth of 15mm. In that same submission, the defendants rely upon some oral evidence given by Dr Potts, where Dr Potts referred to his “lower bound values” as being “about a third less” than other values. But he was not saying that his 21mm calculation, or any other calculation, should in turn be reduced by a third. Instead, he was there referring to the difference between his calculations based on the mean SN curve compared with those on the design SN curve for which the difference was, for each of his scenarios, roughly one‑third.

Dr Munz

Dr Dietrich Munz, who was called by the defendants, wrote two reports and gave extensive oral evidence about the calculations by Dr Jones and, to a lesser extent, the calculations by Dr Maddox and Dr Potts. Dr Munz did not offer calculations of his own as to the crack length as at March 1999. He expressed the opinion that more probably than not the crack had not reached the edge of the flange and that otherwise it is “not possible to make a reliable statement about the location of the crack at the 1999 inspection”. In that last respect, his evidence effectively challenged the opinions of each of the three engineers who had made such a statement. The defendants argue that I should reject the evidence of Dr Jones but they do not make the same argument based on the evidence of Dr Munz about Dr Maddox and Dr Potts who, of course, were called in their case.

Dr Munz described the two approaches taken to calculate the crack size in 1999, the first being that of Dr Jones and Dr Maddox and the other that of Dr Potts. I have described that difference already. Dr Munz explained that each approach has advantages and disadvantages.

The advantages of the first approach were that it was independent of the selection of a certain stress range, the constant factor of crack growth relation or a certain number of cycles over any period. As Dr Jones explained, a change to the components of stress range and the constant factor of crack growth relation would result in his calculations producing a different number of stress cycles over the 15.3 years, but it would not affect the relativity of one period of growth to another: his time line approach. A higher or lower number of cycles overall would be apportioned in the same way.

Dr Munz said that the disadvantages were that the number of cycles for crack initiation has to be known, the crack growth rate for small crack sizes cannot be properly calculated by lineal elastic fracture mechanics principles, what he described as the magnification factor has to be in some way quantified and the difficulty in quantifying a proper stress intensity factor for the crack in its various shapes as it travels through what he described as phases one and two. Dr Munz described phase one as when the crack depth was 0‑19mm, phase two from 19‑40mm (i.e. until it was to front side of the flange) and phase three, the final stage, where the crack was progressing towards and past the web.

He described the advantage of Dr Potts’ approach as being that it is not necessary to have any information about phase one. He said that because phase one had the most uncertainties, the results from this approach should be more reliable than by the first approach. The disadvantages are that the results depend upon an assumed stress range, a number of cycles per year and an assumed crack growth relation factor.

As already mentioned, the plaintiffs ultimately rely not only on Dr Jones but upon the calculations of Dr Maddox and Dr Potts. They say that the evidence of these three presents a range within which was the location of the crack. The defendants ultimately argued that “a conclusion cannot be reached on the state of the evidence as to the probable state of the crack”, which appears to go past the evidence of their witnesses Dr Maddox and Dr Potts and to rely upon the evidence of Dr Munz. But I do not understand Dr Munz to have said that none of the evidence of any of these three was relevant. Instead, in providing his opinion that more likely than not the crack had not reached the flange edge, Dr Munz was making use of at least some of these calculations. That opinion was expressed in a report as follows:^[77]

“Allowing for all the incomplete information about stress intensity factors, stress cycles and cycles in one year and considering the information and calculations of the different experts I can make the following statement:

If one considers all this information in a qualitative way, the probability that the crack has extended to the edge of the flange, so that it could have been seen during the inspection in 1999, is less than 50 percent.”

Similarly in his oral evidence, in answer to the question “Where was the crack at the 99 inspection?” Dr Munz said:

“First of all, I don’t know exactly. However, if I consider all these unknown or not accurately enough [sic] facts such as stress intensity factor, number of cycles in one year and stress ranges, and if I take into account the calculations made by Dr Jones, by (Dr Potts), by (Dr Maddox) and my own calculations, and to take into account in a qualitative way these unknown facts, then I come to the conclusion that the probability that the crack has not penetrated the edge of the flange is less than 50 percent.”

Those calculations of his own were based upon various calculations by Dr Jones and Dr Potts. They were done to demonstrate the effect of certain variables. He did not put them forward as showing where the crack was in March 1999.

Dr Munz was strongly critical of Dr Jones’ work in many respects, contending that Dr Jones had made errors in principle in his calculations. He did not make the same criticism of the work of Dr Maddox or Dr Potts. Of their work, he described the limitations on the reliability of their results because of the many variables or inputs which would affect the calculated result. But he was not saying that the calculations by Dr Maddox and Dr Potts did not provide some indicative range or as Dr Potts described it, “the bounding of what the likely outcomes would be”. With that observation I will discuss the evidence of Dr Munz in relation to each of Dr Jones, Dr Maddox and Dr Potts.

I will start with the work of Dr Potts. As already mentioned, Dr Munz said there were disadvantages in his approach because it depended upon an assumed stress range, an assumed number of cycles per year and the adoption of a certain crack growth relation. I accept that in theory they qualify the reliability of any calculations under this approach.

Dr Potts did provide alternatives as to the number of cycles, by his different scenarios. Of course there are many other alternatives which he could have adopted but Dr Munz did not suggest that those used by Dr Potts were likely to produce some misleading result. The method by which these alternative scenarios were chosen and the cycles were calculated under each of them was set out in Dr Potts’ first report and appears to be thorough and persuasive (putting on one side his alternative calculations for the scenarios based upon the design SN curve). Dr Potts said of his chosen scenarios:^[78]

“Since there is no machine log detailing the exact way in which the machine was operated over its lifetime, it is prudent to assume some variability in the parameters and key assumptions used for crack growth assessments. Table 36 describes the various scenarios considered in the crack growth assessments. Bounded solutions, which take into consideration variability in the assumptions made on the operational behaviour of BWE, for both initial and likely crack sizes at the time of inspection will be presented in the ensuing section.”

In his first report, Dr Munz referred to the Potts estimate of the number of cycles, and described them as more reliable than those of Dr Jones or Professor Fisher “because they are based on the operational conditions of the excavator”.

In his report no 1, Dr Potts had calculated on the basis of a stress range of 40MPa for the load cycles involving changes in the stresses between slews of the bucketwheel. This was not simply an assumed figure. It was reached after extensive analysis. Dr Potts’ firm had obtained a stress range by a finite element calculation and from BG 60 resulting in a stress range of 57.21MPa which was reduced to 75 percent or 43MPa by a judgment which Dr Munz described as “realistic”. After further analysis, then Dr Potts settled on 40MPa and 125MPa for drop cutting. Again Dr Munz suggests no error in any of the calculations or the professional judgments which were involved in reaching those figures. Clearly, there were in his analysis instances of judgment by Dr Potts so that the precise accuracy of these figures cannot be assured.

Dr Munz^[79] agreed with Dr Jones that:

“this (Potts) approach contains so many uncertainties that the results could well be in error by an order of magnitude. In practice, there are many different stress ranges and frequencies, and deriving these from the assumed duty of the BWE would be a complex task … the only feasible way to obtain an accurate remote spectrum for the flange is to attach strain gauges to the surface, and log data over a period of time while the BWE is in operation. Even then, there are practical and theoretical difficulties in determining the average crack growth rate from a complex stress spectrum.”

Dr Munz said there was a further problem with load cycles and stress ranges which he said affected the calculations of all three engineers. It was that they had not included the effect upon fatigue of smaller stress cycles. As several witnesses confirmed, the stress spectrum was complex involving many different causes of stress, each involving different stress ranges. And as Dr Munz emphasised, as did Professor Fisher and Dr Jones, these smaller stress cycles can have an impact when added to the impact of the larger load cycles although they would not have had that impact upon fatigue if operating alone. Now under the Jones/Maddox approach, Dr Munz agreed that there was an advantage in not having to assume a particular stress range. However, Dr Munz went on to say that this particular effect of smaller stress cycles occurred only in relatively larger cracks. Accordingly, because it does not have an effect over the entire “timeline”, it had to be considered even under the Jones/Maddox approach.

Dr Potts did allow for small stress cycles. As already discussed, he did so first in his report no 8. This was written in March 2007, after the Munz first report and before the subsequent Munz report (May 2007), wherein Dr Munz offered no criticism of Dr Potts’ treatment of the effect of small cycles in report no 8. In his oral evidence he referred to what Dr Potts had said in report no 8 about small stress cycles (apparently without criticism). Then in his report no 12, Dr Potts revised his calculations for the effect of small stress cycles. He assessed the effect of small stress cycles from vibrations, that is, from “boom resonance vibration” caused by the oscillation of the bucket boom. So it seems that Dr Potts has met Dr Munz’s concern about the inclusion of small stress cycles. I do not have the opinion of Dr Munz about the Potts report no 12, because it was written a few days after the completion of the oral testimony of Dr Munz. Presumably, the defendants tendered this evidence because it was thought to answer Dr Munz’s concerns in this respect. Ultimately, what Dr Munz said about the limitations in the Potts approach by the adoption of certain stresses does not mean that the Potts’ analysis provides no valuable indication of the crack sizes.

Next there is the crack growth relation factor. Dr Munz is clearly correct in saying that a disadvantage of the Potts’ approach is that it requires the selection of the crack growth parameters, to be used in the application of the Paris-Erdogan Law. But what is the significance of that uncertainty? In his report no 1, Dr Potts set out the results of his survey of various publications revealing a range of these Paris‑Erdogan constants recommended for an assessment for this type of steel. Dr Munz does not suggest that the range is unrepresentative or that there are others which should have been included. Nor does he suggest that Dr Potts did not make a reasonable selection from that range. As it happened, Dr Potts’ selections were the highest in that range, with the consequence that they would result in a faster crack growth rate and, on his approach of working backwards from the crack size at the collapse, a relatively smaller crack size in 1999. The range of possible crack growth parameters thereby indicate that the Potts’ calculations might understate the crack size, but it does not make the calculations unreliable.

In summary, I accept that there are these uncertainties in the Potts approach, but the ways in which Dr Potts addressed those matters is logical and those uncertainties do not detract rom the value of his calculations. They have probative value and are unlikely to overstate the crack size in 1999.

I turn then to what Dr Munz has said of the approach of Dr Jones and Dr Maddox. In the evidence of Dr Munz, led by the defendants, he not surprisingly directed his attention to Dr Jones’ work. There seemed to be no particular criticism of the Maddox calculations, except to the extent that the Jones/Maddox “timeline” approach had inherent limitations.

The first of those was related to the initiation of the crack. Because a fatigue growth analysis is concerned with the growth of a crack, Dr Munz says that it does not assist with the question of how much of the 15.3 years was taken up with the initiation of the crack. If, as the defendants sought to prove, these cracks were originally cold (hydrogen cracks), then none of that 15.3 years was taken up with crack initiation. But it is unnecessary to determine whether there was cold cracking, because assuming there was none, still it would be probable that there were some small cracks from the outset, as Dr Maddox said. In cross‑examination, Dr Munz was shown publications by the International Institute of Welding and by an eminent engineer in fracture mechanics, Dr Gurney,^[80] which were to the effect that the crack initiation phase could be ignored in fracture mechanics analysis because either the majority of fatigue cracks develop from cracks existing from the outset or because any initiation phase is very small compared to the life of the welded joint. Faced with this material, Dr Munz accepted that what he had said about the crack initiation phase would be “confined to exceptionally a small number of cases”. Accordingly, it is of little weight here.

The next uncertainty, said Dr Munz, was as to the crack growth rate for very small crack sizes. Dr Jones said that this difficulty could be met by a crack modelling technique described as the Taylor method. Dr Munz was strongly critical of Dr Jones in that respect. Dr Munz said that the Taylor method was not yet accepted professionally and had been published in only two papers. However during his cross‑examination, it was demonstrated that it was more widely published, which he was prepared to accept. Dr Munz said also that the Taylor method is “only accurate within 20 to 30 percent”, which he derived from one of the papers he had seen. When other publications were put to him in cross‑examination, he effectively agreed that the 20 to 30 per cent figure was not representative of all data, but was more confined to a particular case. Also in cross‑examination, he was forced to withdraw his assertion that the Taylor method “has never been applied for fatigue crack growth calculations”. In his oral evidence‑in‑chief, given by reference to what he described as his powerpoint presentation, Dr Munz had made made two further points in criticism of the use of the Taylor method. But as he conceded in cross‑examination, one of those had been effectively disavowed by him in his second report, where he had said that “because it is so small … it doesn’t make sense to discuss this point further”. His other point was that the Taylor method depended upon the selection of a range of distances from the point of crack initiation. But when it was suggested to him that this would not have a significant effect on the result, Dr Munz could say only this:

“I don’t know, because I didn’t try out this method. But there is some arbitrary [sic] in this method and so far I could see, Taylor did not say – or give any hint where these two values (maximum and minimum distance from the point of crack initiation) should be … and therefore, you can maybe adjust his values just to get a good agreement.”

In all, Dr Munz’s criticism of the Taylor method and its use by Dr Jones was unpersuasive and has no weight.

As mentioned earlier, Dr Maddox did not use the Taylor method but instead used what he described as “the established solutions available in BS 7910”. He said that there was “good agreement” between these two solutions when the crack depth was very small. No particular criticism was offered by Dr Munz of Dr Maddox other than to say that there was an uncertainty involved in measuring the growth of very small cracks.

Next there was the uncertainty involved in the so‑called magnification factor. This involves a complication which results from the effect of the stiffener on the stress intensity range in the area in the flange close to the stiffener. In his first report, Dr Munz saw fit to plot the different magnification factors then used by Dr Jones, Dr Maddox, Professor Fisher and a line of his own. It appeared that he was there adopting a magnification factor somewhat higher than Dr Jones was then using but less than that of Dr Maddox or Professor Fisher. Then in his oral evidence he asserted that all of these lines, including his own plotted magnification factor, were wrong, because none of them had been based upon a proper understanding of the relevant stress distribution. Yet none of Dr Jones, Dr Maddox or Dr Potts had a difficulty in this respect. Each felt able to bring this magnification effect into account (although for Dr Potts the point was less important because of his different approach). I am not persuaded that this factor significantly affects the reliability of the respective calculations of Dr Jones and Dr Maddox.

Then there is the Dr Munz’s point that the crack changes shape before it is in his phase three, although the calculations have been made on the basis of a semi‑elliptical shape. He pointed out that it is not semi‑elliptical during the transition period from two cracks to one. Secondly, after the crack turned the corner and was extending along the edge of the flange but before its tip reached the front of the flange, it was no longer semi‑elliptical. Thirdly, he pointed to the period of its transition from a surface crack to an edge crack, that is to say a crack advancing towards the web and beyond. He said that all experts had neglected:

“the special situation when the surface crack penetrates the end of the flange (interaction with the end of the flange) and the complicated shape, when the crack size has penetrated the end of the flange”.

He said that these different shapes result in different stress intensity factors. He does not suggest that they can be calculated. Nor did he offer an estimate of the likely effect of these changes in shape. For example, whilst he said that there would be some cycles taken up with the coalescence of the two cracks, he said this was something that he took “qualitatively” into account, adding that “it hasn’t had a major effect (on) my mind (as) to the critical crack size, but I just would like to have mentioned it”.

In his final report Dr Jones said that the effect of the crack changing in shape as it reached the end of the flange and in turn from a curved to a straight edge crack would be insignificant. The interaction between the crack and the edge of the flange would result in a small decrease in the number of fatigue cycles, and the change from a curved to a straight edge crack would result in a small increase. The two effects, he said, would tend to “cancel one another out to a certain extent”. To investigate their effects, he modelled his analysis by using a three times faster crack growth rate for a crack depth in the range of 27 to 40mm and inserted an additional 10mm of crack growth at the start of the edge crack phase (to estimate the additional cycles required to rotate the crack into a straight edge crack). The result was a 1999 crack depth of 27mm, a crack length on the flange rear face of 122mm and a crack length on the flange edge of 15mm. I am persuaded that these points of Dr Munz as to crack shape do not have any significance for what is indicated by the Jones calculations.

Dr Munz said that linear elastic fracture mechanics “breaks down for small cracks less than 5.3mm”. This was not supported by another witness and I am not persuaded to accept it. His point was that the plastic zone around the crack tip affects the rate of growth and he said that this would distort the result of linear elastic fracture mechanics when the crack depth is either very small or is relatively close to being through the steel through which it is growing. In cross‑examination he was directed to a paper by Dr Maddox which suggested a correction factor which can be applied to allow for crack tip plasticity and which suggested that the correction factor was very small. Dr Munz seemed to have no effective response to what Dr Maddox had there written. Further, when directed to something Dr Jones had written in his first report relevant to this, he agreed that it would bring down his limit of 5.3mm “to a small value, and that then maybe in the lower part of linear elastic fracture mechanics maybe not give a large error”.

There are other matters on which Dr Munz was critical of one or more of the reports of Dr Jones. I have discussed the points which Dr Munz offered as criticism of the approach taken by Dr Jones and Dr Maddox, because Dr Munz was not otherwise critical of what had been done by Dr Maddox, and the plaintiffs do not submit that I should find that the crack was the size calculated by Dr Jones rather than by Dr Maddox.

Conclusions as to crack size

Clearly there is no means of precisely calculating the size and location of this crack as at March 1999. But I am persuaded that the application of the principles of fracture mechanics, by each of Dr Jones, Dr Maddox and Dr Potts, is able to provide a probative approximation of its size and location. Two eminent engineers in this field, called by different sides of the case, saw fit to adopt the same approach and expressed confidence in the reliability of their results. The third engineer, Dr Potts, had quite a different approach but yet reached results which I do not see as significantly different from the others. Of his results, the more useful are those upon the mean SN curve because they represent the most probable result.

The respective results of the calculations of these engineers are not so far apart. Dr Jones reached a surface length of 120mm and a crack along the surface of the flange edge of 28mm (with some alternatives for cold cracking). His and others’ calculations upon the premise of drop cutting, but only in the last year of operations, are not useful because as I find below, drop cutting was not confined to the last year. Dr Maddox reached a range (like Dr Jones with the benefit the beach marks) for the surface length of between 108mm and 120mm. Dr Potts’ alternatives suggest a range from about 105mm to about 130mm (with a length on the flange edge of more than 32mm in that event), again once the beach marks are considered.

From this evidence it would be unrealistic to make a finding about the precise crack size and location. More probably than not, the crack had progressed beyond the stage of coalescence of the two original cracks and was at least half‑way through the thickness of the flange. At the half-way point, its depth was 20mm and by the beach marks, its surface length would have exceeded 100mm.

What would Mr Thiel have seen?

I accept, as many witnesses have said, that a visual inspection will not detect every fatigue crack. As Dr Potts said, detection is affected by, amongst other things, the ability of the inspector to have close access to the location of the crack, the illumination of the surface, the cleanliness of the structure in that location, the size of the defect and whether the crack is “open”, which can occur under certain loading conditions. Dr Maddox identified the same matters in his first report.

There would have been no problem with illumination here. As to the cleanliness of the structure, this should not have presented a significant obstacle to detection for at least two reasons. The first is that the contract entitled Krupp to require the machine to be cleaned if that was necessary for its inspection. Mr Habeler and Mr Newnham each said that if a machine was not clean enough, an inspector asked for it to be cleaned. The contract expressly required that the structure of each item be “cleaned to allow proper identification of defects”. Secondly, Mr Thiel said that dust was not a problem for inspecting the tower above the counterweight pivot because dust did not accumulate there. Consistently with that, Mr Thiel did not ask for the tower or any part of it to be cleaned. Other witnesses (Mr Clews, Mr Wood, Mr Grant and Mr Newnham) said that this part of the structure was clean, although another witness, Mr Allen suggested otherwise. The defendants suggest that I find there was dust from some photographs. The more likely position is that Mr Thiel is correct about this point, supported as he is by those other witnesses. At one point it also seemed to be suggested by the defendants that grease dropping from the ropes might have been at the top of the stiffener and affecting the visibility of the crack. But the critical area was not directly underneath the ropes. The possibility that there was grease is not significant. Overall, the relative cleanliness of this part of the tower was unlikely to have affected the detection of the crack.

Several witnesses said that the crack would have “opened up” because of the load on the structure as a result of the tensile dead loads. In Dr Jones’ view, because the stress on the stiffener side of the flange was greater than the stress on the front of the flange, the opening of the crack at the surface would have been relatively wide. He said that a crack of a surface length as Dr Maddox had calculated in his first report would have been revealed as a “gaping toe crack”. In his most recent report Dr Jones wrote:

“… because the centre of the ligament is offset from the centre of the cross section of [the] whole strip, the point of application of the applied load is offset from the point of application of the reacting load in the remaining ligament. In turn, this ‘load eccentricity’ applies a bending movement to the ligament, and this tends to move the crack faces apart like a pair of scissors being opened – the crack faces rotate around the crack tip (the hinge pin in the scissors), and the mouth of the crack gapes open (the outer ends of the scissors moving apart). In addition to this hinging movement, the crack faces are also pulled apart in a parallel manner by the applied tensile load. Overall, the crack surfaces move apart with a combination of both hinging and parallel movements.”

Professor Fisher wrote that “the tension flange cracks were all subject to high dead load stresses which would open them and make them easy to see”.

Dr Maddox seemed to agree in this passage from his cross‑examination:

“Now, in relation to this particular detail on the bucketwheel excavator where you can see we’ve got a model in Court, the detail was located on the front flange of the bucketwheel tower?-- Right.

And that front flange was under tension?-- Yes.

And it was under a dead load of somewhere around about 180 megapascals, is that your understanding?-- Stress, that is. Right.

And crack closure was not occurring, do you agree with that?-- It’s circumstances where you might expect crack closure not to be occurring.

Yes. And the dead load condition, I suggest to you, would have had the consequence that the crack surfaces would have been open?-- If the cracks don’t close, they would be open.”

In re‑examination he said that whilst “there’s more chance of seeing them if they’re open than if they’re closed”, nevertheless “cracks could be open by a fraction of a millimetre which, in terms of visibility, doesn’t make a lot of difference, really.”

The size of the crack affects its visibility not simply because something large is easier to see. It is also because the crack is more likely to fracture the paint as it becomes larger. A fractured painted surface makes for a more apparent crack, and what follows shortly after the fracture of the paint is the onset of corrosion which would clearly signal a problem. All of that seems common ground but the question then is: what would be the size of the crack before it would fracture the paint?

Professor Fisher provided answers to that question in an instruction manual he wrote for inspectors employed by the United States Federal Highway Administration. Professor Fisher has given courses to inspectors instructing them in the detection of fatigue cracks and still gives those courses occasionally although he has retired from his university. In this manual, which is entitled “Inspecting Steel Bridges for Fatigue Damage”, he wrote:

“The usual and most reliable sign of fatigue cracks are the oxide or rust strains that develop after the paint film has cracked.…Experience has shown that cracks have generally propagated in depth to between one fourth and one half the plate thickness before the paint film is broken, permitting the oxide to form. Smaller cracks are not likely to be detected visually unless the paint, mill scale, and dirt are removed by blast cleaning the suspect area. Furthermore, at weld terminations, very small cracks are very difficult to detect by other non-destructive inspection techniques, unless the crack depth is between ¹/₈ in and ¹/₄ in.”

In another part of the manual, he wrote:

“There are several levels of inspection that can be carried out. A visual examination can be made of the suspect details often from the ground. It is recommended that binoculars be used to see the details focusing on the location where cracks will be likely to grow.…cracks can often be identified from the oxide (rust) lines that form after the paint film has broken. Only large cracks will be detected at this level of inspection.

The next level of inspection is a close visual inspection of the detail. Careful attention should be given to the weld toe of attachments to the flange or web … Generally any visual crack will likely be several inches long and at least ¹/₄ in [about 6mm] deep in order to break the paint film.”

Therefore Professor Fisher has given a few measures for correlating the size of the crack and the breaking of the paint film. One is that the crack depth is between one‑fourth and one‑half of the plate thickness. As found above at paragraph [432] it is likely that the crack depth was at least half of the plate (flange) thickness. The second is that the crack depth was at least one‑quarter of an inch deep. Here it was much deeper. The third was that its length was “several inches” as was the case here. At more than 100mm, it would have been at least four inches long.

The basis for these measures does not appear from the manual or other evidence. Nevertheless Professor Fisher wrote this manual from his considerable experience in the investigation of the effects of fatigue on steel structures. His high qualification in this area is illustrated by the fact that he is the author of this manual of which he says 20,000 copies or so have been distributed throughout the United States. Importantly the defendants did not suggest that this information was out of date or otherwise unreliable. Professor Fisher was cross‑examined in a way which suggested an acceptance of the correctness of this information. He gave some answers during that cross‑examination to the effect that the paint would have fractured earlier in this case because of the particular stress conditions and because these are transfer seal welds which would have cracked relatively quickly. He said that “it would have been detectable. There’s no question in my mind that it wouldn’t be detectable”. This and some other general statements in his oral evidence have limited value, at least because Professor Fisher was probably premising those remarks upon the existence of a much larger crack than, say, one of 100mm. Perhaps not surprisingly for someone of his eminence and achievements, Professor Fisher was very sure of his own opinions. His answers were often given in emphatic terms which could give the impression of exaggeration. I found his evidence in the design case to be of less weight than that of some other witnesses. Probably because he had pioneered the changes to the strength assessment of steel structures at least in his own country, he was particularly critical of the use of BG 60.

However, what Professor Fisher wrote in his instruction manual has considerable weight. It was, of course, not written for this litigation and, as already mentioned, the defendants appeared not to challenge it. I do not see that Professor Fisher in this manual was saying that there was a precise mathematical relationship between, say, a certain crack depth and the paint being broken. But these passages from the manual provide a strong indication that a crack which was about half‑way through the flange and at least about four inches long would have broken the paint film and that, with the prompt onset of corrosion, it would have been seen in 1999.

In his first report Dr Potts wrote at some length on the subject of the detection of fatigue cracks. Under the heading “Effect of Crack Size upon Detectability” Dr Potts wrote:

“The ability of the naked eye to detect a crack in its early stages is very difficult, whereas other forms of NDT (non‑destructive testing) can to a better degree, depending on the technique employed, the quality of the equipment and the operator’s skill. The figure below presents the measured range of the probability of detection (POD) of a defect offered by the Magnetic Particle Inspection (MPI) NDT technique in comparison with Visual Inspection as a function of defect size (ie crack length).”

He then presented a graph plotting the purported probabilities of the detection of a crack by a visual inspection and an inspection using the magnetic particle inspection technique. The origin of this graph and of the information conveyed by it was not identified. The graph specifies particular probabilities and crack lengths and represents, as he discussed, that there is a 75 percent probability of detecting by visual inspection a crack of a length of 17mm. He said that this particular graph was not “universally applicable” but that it illustrates that “any visual inspection offers a significant probability of crack detection only when the crack has propagated along a relatively large distance”. By reference to the graph it can be seen that by this he meant a distance of about 10mm. This hardly assists the defendants’ case or detracts from Professor Fisher’s evidence on this question.

In the same report, Dr Potts extensively discussed the results of a study by the United States Federal Highway Administration’s Non‑destructive Evaluation Validation Centre published in 2001. After reference to the results of that study, Dr Potts said that the study:

“… indicates that whilst visual inspection is a commonly used technique for assessing the condition of large welded steel plate structures, including the intent to detect weld defects such as cracks, the process is inherently unreliable, even for experienced inspectors and qualified engineers”. He added that “this finding is not intended to suggest that visual inspection should not be undertaken, but that the expectations from such an inspection should not be one of 100% detection of weld defects.”

I accept those propositions but otherwise the results of that US study are of little value here. The study no doubt indicates the limitations upon the value of visual inspections which is to say that had Mr Thiel looked at the critical area, it is not 100 per cent certain that he would have detected the crack. But that is not the question.

Dr Potts then referred to his various scenarios and possibilities for the crack size before concluding that “these analyses suggest that the assertion that a crack of a visually detectable size must have been present a year prior to the failure is flawed”. Since his first report, his range of crack sizes has been recalculated, as I have discussed, and the lower end of that range has tended to become higher. His conclusion in that first report, under the heading “Overall likelihood of crack detection during 1999 BWE Inspection” was that “it is doubtful that a competent inspector could have reasonably detected the crack”. And this was an opinion affected by the premise that the inspector had been restricted to the walkways and lacked a line of sight to the critical area.

In his second report, Dr Maddox concluded that “the chances of detection would have been either zero or very small”. But that conclusion was reached as follows:

“In the present context, the crack size and its visibility at the time of the last inspection in 1999 is of particular relevance. It is not possible to state with any certainty how easy it is to detect a fatigue crack in a real structure. Detection will depend on many things, including the crack size, the extent to which it opens under cyclic loading, the surface condition of the steel, the distance from the observer, the lighting and of course whether or not the view of the relevant area is obstructed. As a general comment, many years of experience testing welded steel components in the laboratories at TWI confirms that, even for relatively clean surfaces, fatigue cracks are extremely difficult to see without the aid of a microscope or penetrant testing. Further, if (Dr Potts’) estimate of the areas that could be viewed during the 1999 inspection … is correct, the inner surface of the flange was completely obscured. Consequently, the cracking state that is most likely to have been visible is the presence of a crack that extends right through the flange thickness and across to the edge of the flange. According to the present fracture mechanics analyses this was effectively the state at the end of stage two, when the semi‑elliptical crack growing through the flange thickness changed into an edge crack. On this basis it will be evident from [his calculations] that the proportion of the total fatigue life remaining was very small, ranging from around 2.3% for the case of a 2mm deep defect [at the outset] to under 2% for the defect‑free case. These proportions may be compared with a proportion of the actual life remaining at the time of the inspection in 1999, namely 6.5%. In fact, according to the results of the fracture mechanics analyses, the fatigue crack that led to failure was still less than 65% of the way through the flange thickness one year before failure, and had not reached the flange edge. Thus depending on whether or not the flange surface was obscured … the chances of detection would have been either zero or very small”.

In context, his opinion as to the chance of detection was upon the two premises that probably the crack had not turned the corner and started to move along the edge of the flange and that it was impossible to see a crack on the stiffener side of the flange. This was consistent with his calculations set out in that report, where under each of his alternatives, the calculated crack length would not have resulted in the crack being then on the edge of the flange. Accordingly, the assessment of the chances of detection by Dr Maddox does not assist, because he was not asked to address the chances of detecting a crack (of the order of his calculations) on the premise that the inspector had looked at the place where that crack would have been.

The defendants argue that the invisibility of the crack is indicated by the facts that Mr Thiel did not see it when looking up to the top of the stiffener with his binoculars from the counterweight level and that no other person had seen it. As to Mr Thiel, I accept that as he says in his supplementary statement, he stood on the counterweight level and used his binoculars to look at the “area” of the top of the stiffener and the welds at the length of the stiffener. But from that angle and some eight metres or so below the top of the stiffener he could not have seen all of the surface where a crack of, say, 100mm would have been. The fact that he did not see from that angle and distance any sign of corrosion does not strongly suggest that it was not present. No doubt it was because Mr Thiel realised that his view from the counterweight level was not sufficient to assess the top of the stiffener and the welds at that point, that he tried to see it, as he described, by kneeling onto the walkway platform and looking as far as he could.

The fact that others did not notice cracking or corrosion at the top of this stiffener is not significant unless any of them had been in a position to see the top of the stiffener. Mr Russell from CW Pope undertook an ultrasonic inspection of all pivot points and pins on the BWE during 1999 and after Mr Thiel’s inspection. Most of the pins could be inspected by him from the walkways but there were some at the top of the tower which did not have adequate access, so he used a crane and a manboat to get close enough to them. He arranged with BHP for these to be available a week or so prior to his inspection. But he used the manboat only to inspect these pins at the top of the tower and he did not at the same time undertake an inspection of the BWE frame and in particular the critical area. He performed a visual inspection and magnetic particle inspection on the BWE frame structure. He says he then conducted a visual inspection as far as he could from the walkways and saw no cracking. So the fact that he did not detect this crack does not give any strong indication that it was not visible in March 1999 by the use of a mirror, cherry picker or manboat. Mr Newnham went up the tower in 1999 looking for cracks. The context was that he was visiting the site endeavouring to persuade BHP to retain his firm for his inspection services. His journey up and down the tower was not in the course of an inspection. He did not leave the walkways.

Ultimately I am persuaded that had Mr Thiel used a mirror, a cherry picker or a manboat as I have discussed, it is more probable than not that he would have detected the presence of this crack. Of course there are many uncertainties and possibilities, including those involving the size and location of the crack. But more probably than not, it was at least 20mm deep and 100mm long. I am persuaded that what appears in the manual written by Professor Fisher provides a reliable basis for assessing the relative probability that a crack of that order would have cracked the paint. The visibility of the crack is also indicated by the evidence of Dr Jones and Dr Potts. I conclude that more probably than not, this is a crack which would have been seen had Mr Thiel inspected its location.

Loss of a chance

An alternative argument by the plaintiffs was that this was a loss of a chance case, so that they did not have to prove that on the balance of probabilities, the performance of the contract or the discharge of the defendants’ alleged duties of care would have revealed the crack. The argument is that they were denied the chance of the crack being detected and repaired, for which they should be compensated in the amounts claimed but discounted according to the relative probability that the crack would have been detected.

I was asked to consider this argument only if I was not satisfied on the balance of probabilities that the crack would have been detected and repaired. In my view, that would not have been a legitimate approach. If this is a loss of a chance case, then it remains so whether or not the relative probability is more or less than 50 percent.

The defendants complained that this point was not pleaded. But they also argued that there were many contingencies affecting the relative probability of detection of the crack and the avoidance of the collapse of the BWE.

By this alternative argument, the plaintiffs say that what must be proved on the balance of probabilities is not that the crack was visible, but that it was present. The detection of that crack was a possibility, affected by the relative probability that it was visible. It is said that the failure to inspect the stiffener termination, and the failure to tell Mr Grant that it had not been inspected, deprived the plaintiffs of “a valuable chance to detect the crack and to repair it, and to avoid the loss which was suffered as a consequence of the collapse of the machine”. The argument seeks to rely in particular on passages from Sellars v Adelaide Petroleum NL^[81] and Naxakis v Western General Hospital.^[82]

In my view this is an incorrect characterisation of the plaintiffs’ claim and the issues which it raises. In substance the plaintiffs’ claim is that their BWE was
effectively or partially destroyed because of the defendants’ defaults. It is
artificial to characterise this as a claim for compensation for the deprivation of a chance or business opportunity. In rejecting the loss of a chance argument in Chappel v Hart^[83], Gummow J said^[84]:

“… However, this is not a case in which Mrs Hart seeks damages for the loss of an opportunity or chance to acquire or receive a benefit with the value to be ascertained by reference to the degree of probabilities or possibilities. As is explained in Sellars v Adelaide Petroleum NL, in Australia this generally is what is involved in the “loss of a chance” cases. Similarly, in Athey v Leonati the Supreme Court of Canada observed:

‘The [loss of chance] doctrine suggests that plaintiffs may be compensated where their only loss is the loss of a chance at a favourable opportunity or of a chance of avoiding a detrimental event.’

Rather, Mrs Hart claimed damages for the injuries she sustained.” [footnotes omitted]

In this context it is necessary to distinguish between past events and events which allegedly would have occurred or might occur. In Malec v JC Hutton Pty Ltd^[85], Deane, Gaudron & McHugh JJ said^[86]:

“When liability has been established and a common law court has to assess damages, its approach to events that allegedly would have occurred, but cannot now occur, or that allegedly might occur, is different from its approach to events which allegedly have occurred. A common law court determines on the balance of probabilities whether an event has occurred. If the probability of the event having occurred is greater than it not having occurred, the occurrence of the event is treated as certain; if the probability of it having occurred is less than it not having occurred, it is treated as not having occurred. Hence, in respect of events which have or have not occurred, damages are assessed on an all or nothing approach. But in the case of an event which it is alleged would or would not have occurred, or might or might not yet occur, the approach of the court is different. The future may be predicted and the hypothetical may be conjectured. But questions as to the future or hypothetical effect of physical injury or degeneration are not commonly susceptible of scientific demonstration of proof. If the law is to take account of future or hypothetical events in assessing damages, it can only do so in terms of the degree of probability of those events occurring.”

Their Honours there cited Davies v Taylor^[87] where Lord Reid said^[88]:

“When the question is whether a certain thing is or is not true – whether a certain event did or did not happen – then the court must decide one way or the other. There is no question of chance or probability. Either it did or it did not happen. But the standard of civil proof is a balance of probabilities. If the evidence shows a balance in favour of it having happened, then it is proved that it did in fact happen. … You can prove that a past event happened, but you cannot prove that a future event will happen and I do not think the law is so foolish as to suppose that you can. All you can do is to evaluate the chance.”

The distinction here is described in McGregor on Damages (17^th Edition) at 8‑029:

“With matters past, therefore, the court has to determine on the balance of probabilities whether the defendant’s act caused the claimant’s loss, and if the answer is in the affirmative there is full recovery, while if in the negative there is none. We are in the realm of causation and liability, not in the realm of chance and quantification.”

The existence of the crack is a past event in this sense. But so too is its location and its visibility. Those matters are facts although the evidence relevant to them is complex and does not consistently provide a single answer. I have found that in fact, the crack was then visible. It follows that an inspector who had looked at the critical area by any one of the available means should have detected the crack. On the other hand, had I not found that the crack was visible, it would have followed that it would not have been seen by an inspector doing what was required of him.

Conclusions on causation

By the contract, Krupp was obliged to inspect the entire structure and the welds. It failed to do so. Had it inspected the critical area the crack would have been detected. As I discuss below, in that event the crack would have been repaired and the collapse avoided. So this breach of contract was a cause of the plaintiffs’ losses from the collapse.

There is the further case that Krupp breached its contract by breaching the term implied by s 74(1), which was that it would inspect with due care and skill. I have found that it breached that term just as it and Mr Thiel breached their common law duties to exercise reasonable care. These duties were breached by failing to inspect the critical area. So again, in consequence of a breach of contract, and also in consequence of negligence for which Krupp and Mr Thiel are liable, the crack was not repaired and the collapse and consequent losses followed.

The negligence by the terms of the report raises a different question. It is the same question which arises in the s 52 case. Had the report not represented that the entire structure and relevant welds had been inspected, what would BHP have done? I accept Mr Grant’s evidence that he expected and assumed that Mr Thiel would and had visually inspected the entire structure. I accept also that had he known before the collapse that Mr Thiel had not inspected the entirety, he would have taken this up with Mr Thiel or someone else from Krupp and he would have insisted that a full inspection occur. It is inherently likely that this is so, because I see no reason why Mr Grant would wish to take the risk of an inspection of only part of the machine. At least some of the potential consequences for BHP and its joint venturers from a structural failure of the BWE would have been appreciated by him. The performance of an entire inspection would not have been unduly disruptive. And it was for an entire inspection that the agreed price was to be paid. Further, the inspector’s report was not only for Mr Grant’s use. It is likely that someone from BHP would have demanded that the entire structure be inspected on reading that it had not been, and accordingly, that nothing could be said of the soundness of part of it. It is indicative that BHP provided a crane and a manboat to Mr Russell for his inspection in 1999. And the evidence shows also that there was considerable downtime in the operations of the BWE during the period when Mr Thiel was there in 1999, putting paid to the suggestion that the BWE was too busy to undergo a proper inspection.

It follows that in consequence of Krupp’s negligence, its contravention of s 52 and Mr Thiel’s negligence constituted by the terms of the inspection reports, BHP did not cause the entire structure to be inspected within the year prior to its collapse. Had it been inspected, this crack would have been detected.

The defendants argue that BHP was unlikely to have repaired this crack had Mr Thiel identified it. They submit that “this was not a mine in which there was a culture or history of identified and significant defects on the BWE structure being repaired in a timely way or at all.”

The evidentiary basis for this argument is what they say was BHP’s failure to remedy several matters identified by earlier inspectors’ reports. There is evidence within the sequence of Mr Schander’s reports which, on its face at least, shows that cracks which were identified in a report were still present at the time of subsequent reports. Witnesses for the plaintiffs such as Mr Raleigh and Mr King said that they believed that these cracks had been remedied but had reappeared. Their evidence was strongly challenged and was criticised for an absence of documentary support. It must be remembered however that these were events, in some cases, of more than 20 years ago.

It is more relevant to look at BHP’s response to inspection reports in the years close to 1999. This is especially so because it was from 1995 that Mr Grant, in his position as BWE system maintenance planner, was responsible for the maintenance and long term planning of the BWE system. But the defendants are critical of BHP’s response to Krupp’s 1996 report, upon which they heavily rely in this argument.

In the 1996 report by Mr Thiel, there were 10 items relating to the structure for which repairs were advised. None of them was said to require immediate repair, but seven required repair within three months and the others within 12 months. In the 1999 report, four of those 10 were shown as still not repaired and two of those four were within the three month category. One was a missing bolt in the bucket wheel boom about which Mr Grant said that it was not critical. The other was an item in the operator’s cabin support. This was not the cracking in that area which was also identified in the 1996 report. As to that crack, Mr Thiel wrote in his 1999 report that “the crack reported in the previous two inspection reports had been repaired but has now reappeared”. I find that it had been repaired, accepting as I do Mr Grant’s evidence as to that, which is supported by that reference by Mr Thiel to it in 1999. Another of the four structural items said to be unrepaired was fault no 2.1.7.1. However no such item appeared in the 1996 report.

There were three items in the 1996 report which involved cracking in the structure. None of those reappeared in the 1999 report, supporting Mr Grant’s evidence that they were repaired. Mr Grant engaged Preventative Maintenance Services to address the defects identified by Mr Thiel in his 1996 report. It also appears from a memorandum by Mr Grant to other mine staff in 1997 that BHP was then attending to the list of outstanding work identified in the 1996 report. These documents demonstrate that the 1996 report was indeed taken seriously. The fact that there were some matters still unrepaired by 1999 is relevant. But overall BHP appears to have accepted Mr Thiel’s recommendations. Importantly each of the items of cracking was repaired.

Further, there is the fact that in 1999 BHP engaged G&S Engineering and CW Pope to perform various maintenance and inspection services under a regime which strongly indicates that BHP did not have the “culture” which the defendants now attribute to it. Mr Russell performed some structural inspections in the middle of 1999.

Had Mr Thiel identified this crack in 1999, the inspection contract required him to assign “a priority level with regard to urgency of repair”, based upon its nature and location. In this case that would have required him to recommend its urgent repair or at the very least its repair within three months. That repair would have been costly but it would have been irrational for Mr Grant and others to ignore such a recommendation. And after all, BHP had commissioned this inspection. It was not obliged by law to do so. It was wanting to be advised as to the condition of the machine so that the necessity for repairs, particularly urgent repairs, could be identified and those repairs effected.

Had the crack been detected, the tower would have been repaired and the collapse avoided. Professor Fisher and Dr Jones said that the crack could have been repaired and their evidence in that respect was not contested. Nor do the second and third defendants plead that it could not have been repaired. Instead, they plead that the repair would have cost $160,000, of which they provided particulars by reference to an expert report of RWE Power International, which is in evidence. The plaintiffs’ Reply admits that cost.

In summary, I find that the breach of contract by the second defendant, the negligence of the second and third defendants and the second defendant’s contravention of s 52, caused the tower to go unrepaired and in consequence the collapse occurred.

The inspection case: outcome on liability

Krupp is liable to the plaintiffs (save for the fourth plaintiff) for damages for breach of contract. That is upon one cause of action to which they are jointly entitled and the award is not to be reduced for the absence in these proceedings of another joint venturer.

Krupp is liable for damages for negligence and damages under s 82. Mr Thiel is liable for damages for negligence. They are several liabilities to the plaintiffs (again save for the fourth plaintiff), so that each plaintiff is entitled to a judgment in differing amounts according to its interest in the joint venture as at March 2000. Because the principal claim against Krupp was for the one judgment in favour of the plaintiffs jointly, and because that will be in an amount which exceeds the aggregate of the several awards to which the plaintiffs are alternatively entitled against Krupp, there will be one judgment against Krupp in favour of the plaintiffs.

There will be several judgments for those plaintiffs against the third defendant.

CONTRIBUTORY NEGLIGENCE

The defendants plead in answer to the design and inspection cases that the matters alleged against them, if established, were not causes of the collapse of the BWE, on the basis that the cause was the operation of the BWE outside its design operating parameters or “DOP”. The same matters are pleaded as part of the contributory negligence case raised against both the design and the inspection cases. As the matter was ultimately argued for the defendants, it is only in relation to contributory negligence that these matters were pressed. That concession was rightly made, because if the BWE was operated outside its DOP in all the respects alleged, nevertheless the negligence, breach of contract or s 52 misconduct attributable to a defendant was at least a cause of the collapse. Accordingly, the case in relation to the DOP is relevant only, if at all, to contributory negligence. As I will discuss, there are additional matters pleaded by the defendants as contributory negligence.

However, before going to those factual issues the relevance of any contributory negligence must be addressed. Undoubtedly contributory negligence can be raised in response to the plaintiffs’ claims in negligence against O&K, Krupp and Mr Thiel. However, each of O&K and Krupp is liable under s 82 of the Trade Practices Act and Krupp is liable for breach of contract.

Contributory negligence is pleaded in response to the claims under the Trade Practices Act. By s 82(1B), contributory negligence can now be raised in response to a claim for s 82 damages. But it does not assist the defendants because in neither case did the cause of action under s 82 accrue after 26 July 2004.^[89] Absent the application of s 82(1B), contributory negligence cannot reduce an award of damages under s 82: I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd.^[90] Because O&K is liable for damages under s 82, contributory negligence cannot reduce its liability. Nor can it reduce Krupp’s liability under s 82.

Damages for breach of contract in some cases can be reduced for the plaintiffs’ contributory negligence. Section 10 of the Law Reform Act 1995 (Qld) provides as follows:

“10Apportionment of liability in case of contributory negligence

(1)If a person (the claimant) suffers damage partly because of the claimant’s failure to take reasonable care (contributory negligence) and partly because of the wrong of someone else –

(a)a claim in relation to the damage is not defeated because of the claimant’s contributory negligence; and

(b)the damages recoverable for the wrong are to be reduced to the extent the court considers just and equitable having regard to the claimant’s share in the responsibility for the damage.”

The term “wrong” is defined by s 5 as follows:

“wrong means an act or omission that-

(a)gives rise to a liability in tort for which a defence of contributory negligence is available at common law; or

(b)amounts to a breach of a contractual duty of care that is concurrent and coextensive with a duty of care in tort.”

Krupp was in breach of a contractual duty of care which it owed by the implication of the term from s 74(1) of the Trade Practices Act. In my view that was concurrent and coextensive with its duty of care in tort and neither party suggested otherwise. But it was also in breach of its contract by failing to inspect the entire structure. In my view that did not amount to a breach of such a contractual duty of care.

In some cases the dividing line between a contractual promise to do something and a promise to do it with reasonable care will be a fine one. That dividing line was discussed by Oliver J (as his Lordship then was) in Midland Bank Trust Co Ltd & Anor v Hett, Stubbs & Kemp (a firm)^[91] as follows:

“The classical formulation of the claim in this sort of case as ‘damages for negligence and breach of professional duty’ tends to be a mesmeric phrase. It concentrates attention on the implied obligation to devote to the client’s business that reasonable care and skill to be expected from a normally competent and careful practitioner as if that obligation were not only a compendious, but also an exhaustive, definition of all the duties assumed under the contract created by the retainer and its acceptance. But, of course, it is not. A contract gives rise to a complex of rights and duties of which the duty to exercise reasonable care is but one.

If I employ a carpenter to supply and put up a good quality oak shelf for me, the acceptance by him of that employment involves the assumption of a number of contractual duties. He must supply wood of an adequate quality and it must be oak. He must fix the shelf. And he must carry out the fashioning and fixing with the reasonable care and skill which I am entitled to expect of a skilled craftsman. If he fixes the brackets but fails to supply the shelf or if he supplies and fixes a shelf of unseasoned pine, my complaint against him is not that he ahs failed to exercise reasonable care and skill in carrying out the work but that he has failed to supply what was contracted for.”

Because Krupp failed to inspect the entire structure this crack was not detected and the collapse occurred. Had the critical area been inspected, there is a possibility that by carelessness the crack would not have been detected, although having regard to my findings as to its visibility that is a very small possibility. In that event, the breach of contract would not have been a “wrong” as defined. In my view the breach constituted by a failure to inspect the critical area should not be characterised as simply a breach of a contractual duty of care, notwithstanding that the obligation to inspect was one to be discharged with the exercise of reasonable care. Accordingly, s 10 does not apply to this breach of contract and contributory negligence could not be raised in response to it.

Contributory negligence is available in relation to each defendant’s liability in tort, and on my findings, it could assist only the third defendant Mr Thiel. For that reason, and in case the other defendants are not liable under s 82 or in contract, I go now to the extensive case of contributory negligence.

Conduct outside the Design Operating Parameters

Removal of the gear box

In July 1999 the gear box of the BWE was removed. It was then walked without its gear box for a distance which various witnesses estimated as between 30 and 70 metres. The gearbox had been removed because of the failure of the main bearing, and Krupp’s Mr Armstrong was sent to the site to supervise the replacement of the bearing. Not a little time was spent on exploring with the relevant witnesses whether Mr Armstrong actually watched whilst the BWE was walked without its gearbox. But in any case there appears to have been no objection by Mr Armstrong to this course, who was aware at least that it had occurred, and more generally, there was nothing said about it by Krupp at the time.

Originally, the defendants’ point deemed to have been that this would have damaged the structure, by the BWE being imbalanced through the loss of its gear box. But there is no basis for concluding that this had some causative effect on the collapse of the BWE. Ultimately the defendants simply argued that “it is almost certain that it had a contributing affect”, whilst conceding that none of the experts, including their witness, Dr Potts, had been able to quantify that contribution. Indeed it appeared that Dr Potts had done some modelling and calculations in 2004 to investigate whether this walking incident contributed to the collapse and that the exercise established nothing to support this allegation.

Further, the plaintiffs’ walking the BWE without its gearbox on this occasion is not proved to have been negligent. The defendants’ argument went no further than saying that “the description of the machine shaking and rocking (during the walking) and the absence of any suggestion in the operating manual that such a course was recommended or permitted, strongly suggests the inappropriateness of what was done.” As that submission shows, the operating manual contained no instructions to the user that this was not to be done. I am not satisfied that the evidence about its “shaking and rocking” demonstrates that the plaintiffs were negligent.

Safety devices

The bucket wheel boom was raised and lowered by two ropes extending from the rear end of the counter-weight boom through the top of the main tower to the rope support tower and back again. One end of each of the ropes was connected to a winch so that there were two parallel winches at that end of the counter-weight boom. The other end of each rope was connected to an hydraulic cylinder. The two cylinders were connected so that the pressure in each cylinder could be kept the same. Devices called manometers monitored the pressure in the cylinders. When the pressure reached a set high point or a set low point, that triggered an electrical device which automatically limited the movement of the bucket wheel boom. In particular, if the pressure was measured by the manometer at higher than the set limit, then further hoisting or raising of the bucket wheel boom would be prevented. Similarly if the pressure fell below the set low point, further lowering of the bucket wheel boom would be prevented. In each case the boom could still be slewed but the manometers and the associated electrical components acted as a safety measure to prevent the bucket wheel boom from suddenly falling and grounding.

The defendants allege that by some means the operation of the manometers was compromised. They say that this was done to facilitate “drop cutting”, which is a practice which they say was a negligent operation of the BWE and which greatly shortened its life. The suggestion is that operators of the BWE found that their work was being unduly inconvenienced by the frequent intervention of the safety system when they were drop cutting. It is said that the drop cutting resulted in a “partial grounding” of the bucket wheel boom, which would affect the loads on the ropes and thereby the pressure in the cylinders as measured by the manometers, and that had they been calibrated and operating correctly, the set limits would have been reached and the safety system of brakes on the winches would have been engaged. The defendants say that the operators then did something to negate the operation of the manometers to avoid the inconvenience of the interruption from this braking, and to enable them to engage in drop cutting as they pleased.

The ultimate relevance of all of this is in relation to the case that the drop cutting itself was contributory negligence. What was allegedly done to the manometers is really a particular of that case. It is said that it proves the high incidence of drop cutting, although as I will discuss, it is clear that drop cutting was a regular practice with this BWE. But if this interference with the manometers had to occur to facilitate the drop cutting which was undertaken, then this would support the defendants’ case that the operators knew or ought to have known that they should not be drop cutting. Operators should have realised that they were not using the machine in the manner for which it was designed, if they had to interfere with a safety device.

There is no direct evidence that the operation of the manometers was deliberately interfered with in any way. The defendants argue that an inference of that should be drawn from the following facts.

First, there was an incident in March 1993 in which there was a grounding of the bucket wheel boom. The ball race began lifting out of its normal position, causing another switch to activate and to cut power. This was a safety switch which had been placed on the ball race in 1984 after the grounding in that year (which led to the repair with the stiffeners). It appears that the manometers did not operate to cut out power in this 1993 incident. The defendants suggest that this was because the operation of the manometers had been compromised in some way. An internal report of the incident^[92] said that the rope tension had been checked and that the “pointer was below [the] bottom red line which indicated low rope tension”. This indicates that the manometers were showing that the pressure was below the minimum set level and is thereby inconsistent with one of the defendants’ theories, which is that the manometers were compromised by operators changing the set limits, so that they were not exceeded. The same report referred to the remedial steps as including the raising of hydraulic pressure for the rope tension to “bring indicator back into centre of the two (2) red lines. This brought ropes back to normal tension.” This seems to have been a resetting of the appropriate hydraulic pressure as then measured by the manometers, with its two red lines marking the upper and lower set limits. This is inconsistent with another of the defendants’ theories, which is that the oil line to the manometers had been closed (by shutting the oil line isolation valve) which would have prevented the manometers from measuring the pressure in the cylinders.

The defendants called Mr Brady, who was the operator of the BWE in this 1993 incident. In his witness statement he described how it occurred as follows:

“On maintenance day the hoist controls had been turned off by the electricians, so that the position of the bucket was fixed at about 1.5 metres from the ground. I was walking the BWE backwards over a slight decline. When the BWE went over the ledge the bucket wheel was grounded to a considerable degree. The machine shut down after walking a few metres with the bucket wheel on the ground. As a result, two of the buckets on the bucket wheel were damaged and had to be replaced. On this occasion, the light on the control panel which would indicate that the manometers had shut the machine down did not come on.”

The defendants argue that this shows that the manometers were “not effectively operational at the time”, although Mr Brady did not say so. What he said was that the hoist controls (an apparent reference to the hoisting of the bucket wheel boom) had been turned off by the electricians. It is not known what else had been turned off by them and whether the operation of the manometers was on that day affected by the fact that the machine was in a certain condition for the purposes of maintenance. What the evidence appears to show is that this grounding did not occur because of some sudden loss of tension in the ropes causing the bucket wheel boom to fall. Rather it seems that the BWE grounded because of its operation by Mr Brady.

Then in their written submissions, the defendants rely upon another part of Mr Brady’s statement, in which he had said that one of the jobs of the attendant assisting the BWE operator was that if the manometers caused the machine to be shut down, the attendant would “adjust the ropes, pump up the settings and reset the manometers to enable the BWE to resume working”. That evidence would not assist the defendants’ case because it is consistent with the manometers being in operation and occasionally shutting the machine down, rather than the manometers being made inoperative according to one of the defendants’ theories. But as it happened, that part of his statement was objected to by the plaintiffs and the defendants conceded that it should be ruled out, and so it was.^[93] So that part of the statement must be disregarded.

Next the defendants rely upon an incident in October 1996, about which the plaintiffs then sought assistance from Krupp, who engaged a Mr Edinger. He wrote as follows:

“The following is a brief description of the problems experienced by the customer [BHP]. The customer’s main concern was the consequences if failure of the hoist rope tension cylinder occurred. The boom would then drop, and catastrophic damage would result.”

Under the heading “Problem” Mr Edinger wrote:

“The left-hand side cylinder (looking to the front of the machine) piston is against the retainer, and the piston rod is fully extended. This condition cannot be permitted because it has lost its hydraulic cushion effect. The right-hand cylinder is in normal condition. The piston rod is 50 per cent (approximately 600 millimetres) extended.

A second problem is being experienced by the customer in that they have to readjust the system pressure continually to stay above the operational lower point of the hoist function.”

In that last sentence, “the operational lower point of the hoist function” is an apparent reference to the set lower limit on the manometers. This is inconsistent with the defendants’ theory that the settings themselves were being changed: rather the problem was that the pressure was falling below the lower setting and it was the pressure, and not the set limits, which was being “readjusted”. It is also inconsistent with the theory that the manometers were being isolated so that they were not actualling measuring the pressure.

Mr Edinger also referred to the “maximum set point of 113 bars” and to increasing the system pressure up to that maximum. Again, this is inconsistent with each of the theories which I have mentioned. Yet the defendants say that that there is some significance in this reference to a maximum of 113 bar, because photographs of the manometers in 2000 appear to show a maximum of something just under 110 bar. But this hardly suggests that the operators were changing the settings to give them more scope in their operations, because on this theory the maximum was reduced. In any event, the degree of change (from 113 to 110) seems inconsequential.

Of more significance is that Mr Edinger did not report any interference with the safety devices. And after all, as Mr Edinger wrote, it was because of concerns by BHP that he was brought in to investigate, which seems inconsistent with the notion that BHP was causing the problem by compromising the safe operation of the machine by affecting the operation of the manometers.

Next there is a reference to the ropes in Mr Thiel’s inspection report of 1999 (the subject of the inspection case). Mr Thiel did not report that any safety devices had been switched off or not working. But he wrote that:

“The RH cylinder and rope are slack and vibrate freely, while the LH cylinder and rope are very tight. It would appear that the two cylinders are not equally loaded as they should be.

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Readjust the cylinder to rope connections so that both cylinders are approximately mid-extension. This may need to be done more frequently than is the case up to the present.”

Mr Thiel said that he found one cylinder fully extended and, he assumed, bottomed out against the end of the cylinder and its rope was so slack that he could shake it. It is submitted that this suggests that the manometers were not then operating. Mr Grant said that when it was brought to his attention, the problem was fixed the following day.

Mr Thiel said that the manometer needles were then at the “12 o’clock position”. This would have put them beyond the maximum pressure point. Again this is inconsistent with the theory that the preset limits had been extended by the operators. It also appears inconsistent with the theory that the manometers were unable to record the pressure, and in particular that the isolating valve had been shut.

The defendants called Mr Grayson, who was from General Electric, which had been a subcontractor of O&K for the initial installation of the safety devices and which had remained involved in providing services for the BWE in its electrical components. Mr Grayson was personally involved from 1984 to 2000, frequently attending Goonyella and having responsibility for other General Electric employees who went there. Over all of that time, he saw no evidence of any interference with the safety devices and nor, to his knowledge, did anyone else from his company.

In his first witness statement, tendered when he was called by the defendants, he referred to the effect of one cylinder reaching the end of its travel and, in turn, both cylinders doing so. Where there was one cylinder in that condition, he said that “one rope could end up taking more load than the other” and that once both reached that point, “the manometer pressure would drop to zero”. In other words, according to this statement, whilst only one of the cylinders had become fully extended, there would still be oil pressure within the system and the manometers, if operating correctly, would measure that pressure as if both cylinders were under pressure. Put another way, having one cylinder in that condition with one slack rope, whilst the machine continued to operate, would not be inconsistent with the continued working of the manometers. It was when both cylinders were allowed to reach the end of their travel that the oil pressure would fall to zero. If both cylinders did so, and the machine still operated, this would indicate that something had been “bridged out somewhere in order for the machine to work like that.”

Mr Grayson made a supplementary witness statement, also tendered in his evidence-in-chief, in which he corrected some matters from his first statement. Relevantly he changed what he had said about the interaction between the two cylinders, by saying that it was not necessary for both cylinders to be fully extended “before the pressure will start to reduce in the system”, so that whilst there would be “for a short period” pressure in the cylinder which had not fully extended (where the other had), “as soon as any oil that leaks from the pressure side of the RAM to the non-pressure side, the pressure in that cylinder will quickly drop”, with the result that the system would be “unable to equalise, with the rope attached to the fully extended cylinder taking all the tension of the bucket wheel boom and the other rope taking none of the tension and becoming slack.” In cross-examination he was not entirely consistent on this issue but ultimately he seemed to hold to the view in his supplementary statement. And that view was supported by the evidence of Mr Bovell, an employee of Krupp, and by the evidence of Mr Black and Professor Hulsmann.

Mr Bovell suggested three ways in which the operation of the manometers could have been negated, two of which have already been mentioned. One was by closing the isolation valve while the pressure within the manometers was within the operating range. He explained that this would maintain the then pressure within the manometers no matter what became of the pressure in the cylinders. A second was to adjust the upper and lower limits of pressure on the manometers. The third, not yet mentioned, was by some electrical bridging of the contacts at some location in the circuitry, so that the manometers would not be in contact with the braking system for the ropes.

The defendants called another witness named Brian Black, Mr BH Black. He worked at the mine from 1971 until 2000 in various positions, and for a long time as an operator of the BWE. From the early 1990’s he trained other operators but still about half of his time was spent operating the BWE. He said he was familiar with the safety devices on the BWE, including the manometers, as to which he said:

“As a matter of course, I checked the manometers almost every shift when I was working on the BWE. I would often need to adjust the rope tension to bring them within the correct limits on the gauges. This was done by pressing the buttons on the pump until the tension was corrected and the needles on the gauges were in the middle of the set limits.”

Mr Bovell referred to this evidence and explained that the buttons to which Mr Black was referring were those which filled or drained oil in the cylinders. According to that evidence of Mr Black then, he would regularly adjust the rope tension by pumping oil with a consequent effect on the readings shown by the manometers. This seems to be inconsistent with Mr Bovell’s theory that the manometers had been isolated from the rest of the system.

Mr Max Clews worked at the mine from 1978 until the collapse of the BWE. From 1985 he worked as an operator of the BWE and in the following years he gained extensive experience in the operation of the entire BWE system. He was ultimately responsible for the training and assessing of many operators and crew members on that system. He was called in the plaintiffs’ case and was cross-examined over many days. As I discuss below, he gave significant evidence as to the nature and extent of drop cutting. He was an impressive witness. He was independent in the sense that he had left the mine’s employ. It might be said that he had some underlying interest in defending the manner of operation of this machine, but this defensiveness was not apparent. I accept his evidence that he had never seen anyone make any adjustments to the manometers and that there was no alteration of the set limits. I also accept his evidence that he had only ever seen the machine shut down perhaps three times from the operation of the manometers, although that is a point which, on one view, might be thought to assist the defendants.

I am unpersuaded that the manometers were interfered with by the first or second methods raised by Mr Bovell: the closing of the isolation valve or the resetting of the limits. Indeed more probably than not, neither occurred. That leaves the possibility that the electrical circuitry was changed. If that occurred it was not by some deliberate decision by somebody higher up than an operator. In the defendants’ favour is the record by Mr Thiel in his 1999 report about the ropes. As I have discussed, many witnesses seem to think that this was not possible, consistently with the continued operation of the machine, if the manometers were doing their work. But ultimately I am unpersuaded that they were interfered with in this way, or at all.

If the manometers were not working during Mr Thiel’s 1999 inspection, there may be many reasons for that. Mr BH Black recalled that “there was a lot of bridging out of electrical circuits on the BWE system” which:

“was done by the electricians when there was an electrical fault because it was quicker than investigating the problem and fixing it, and allowing the BWE to get back to digging more quickly”,

and he said that he was:

“often present when the electricians were working in electrical cupboards on the BWE and I saw the wires hanging from the circuits, which I knew to be bridging wires.”

So on the occasion of Mr Thiel’s inspection, there is room for speculation, for example, that there may have been some temporary bridging out of the circuits connected to the manometers, not because this had to be done to facilitate drop cutting, but because of some electrical fault.

From the evidence of Mr Clews and Mr BH Black, it does not appear that there was any stage at which the operation of the machine was being constantly interrupted by the operation of the manometers, which would then have made it likely that an operator would see fit to disengage them. Had there been such a constant shutting down by the manometers so that it was seriously affecting the work programme of the BWE system, it is likely that operators would have discussed that with one another, and that Mr Clews or another operator would recall it. And had there been some bridging out of the circuits attached to the manometers, or some other interference with their operation as suggested by Mr Bovell, it would be unlikely that none of the operators, called by one or the other side here, would know of it.

The defendants argue for a finding that the manometers “were regularly by-passed”, suggesting that sometimes they were in operation and sometimes not. It is quite possible that at some time or times they were not working, given that the period in question exceeded 15 years. It is another thing to say that they were deliberately interfered with so that drop cutting could occur.

The defendants argue that given the evidence of Mr Clews and others as to the frequency of drop cutting, it is likely that the manometers were “by-passed” because of the likely instance of a “partial grounding during drop cutting, that always ran the risk of creating enough of a slack rope situation that the manometers would trip”. But as that written submission appears to accept, it was not inevitable that drop cutting would cause such an interference with the rope tension that the manometers would shut down the operation of the boom. It far from appears that any drop cutting required the manometers to be by-passed in some way. As I will discuss, drop cutting was practised constantly over the entire life of the BWE. Consistently with the defendants’ argument, there was a need to isolate the manometers from the outset, and to keep them isolated. This makes it more remarkable that there is no direct evidence that it happened.

Drop cutting

Some witnesses distinguished between different types of drop cutting. But in essence drop cutting involves the bucket wheel engaging a horizontal ground surface, rather than an (almost) vertical face.

The BWE excavated “blocks” of overburden. A block was the term for a mass of earth, extending from the natural ground surface to a depth of 25 metres. Any block was defined, of course, by the excavation of the earth which had been next to it. As one block was excavated, the face of the next block became exposed. A block was about 40 metres wide, depending upon the arc of the bucket wheel as it slewed from side to side into the face. The face of the block would be divided into four or five terraces (or “benches”).^[94] The block with its terraces is represented in this figure.^[95]

BHP Coal Pty Ltd v O & K Orenstein & Koppel AG [2008] QSC 141

The operator would start at the top terrace and slew the bucket wheel across its face; the BWE would then move forward (by about a metre or less depending on the hardness of the material) and slew back across the face. This would be repeated in the top terrace until the BWE could advance no further because of the position of its wheels next to the foot of the lowest terrace. The BWE would then reverse and the bucket wheel boom would be lowered to the level of the next terrace, where that would be dug, and then the next terrace and so on. Throughout the bucket wheel was always turning but of course not always digging.

Mr Clews gave a detailed description of the use of drop cutting. His evidence as to this is apparently uncontroversial and I accept it. One situation in which drop cutting occurred, he said, was at the start of a new terrace (which he called a bench). When moving from one terrace to the next below it, the machine would be reversed to position the bucket wheel over that terrace, and whilst the boom was then being lowered, its wheel would begin to dig. This would involve a cut of about one metre or less before the BWE would commence its slewing action. Mr Clews described this downward cut as involving a “slice” of less than one metre into the face of the lower terrace. This was different from what he said was the usual method of operation which was to walk the machine back completely clear of the face of the lower terrace and then lower the boom before advancing into the (vertical) face to start slewing. As to how often this drop cutting might have occurred, Mr Clews estimated that during a 12 hour shift, there would be a maximum of about six terrace changes, that is a change about every two hours. He said that if there was drop cutting on each terrace change, there would have been no significant saving in time or increase in production. And drop cutting of this first kind could not have been used on the highest terrace, he said, because the wheel would not extend high enough to do so.

The second situation was where the machine could not be reversed a sufficient distance to start a new terrace by the usual advance into the vertical face. This might occur, for example, if there was insufficient room between the face and a conveyor belt behind the machine. But this would occur only at the start of a new “strip”. The BWE worked in a direction parallel to a conveyor belt behind it. A “strip” or “pass” was completed when the BWE had travelled the length of that conveyor belt. So this second situation, Mr Clews said, could occur only about every three months. Over the years, he said he had to use drop cutting in this situation “on several occasions”.

The third situation was when the lowest terrace was being cut by the BWE and it had to cut to a certain ground level. To achieve this precision, the operator sometimes had to lift or lower the boom slightly (a matter of inches) as it slewed.

Mr Clews also recalled a few occasions (three or four over his entire 16 years or so with the BWE system) when there was an electrical drive fault on the crawlers so that the machine could not be walked backwards. On these occasions a drop cut method was used for a short period of no more than an hour or so.

Mr Clews also described in cross-examination another context of drop cutting, which was where there was a cut in order to put in a drainage sump.

In cross-examination he also recalled seeing drop cutting where the operator dropped the wheel into the new terrace as the machine was being walked back before coming forward again to start digging it. He said that he “had seen one or two operators that did do that”.

There was also drop cutting if and when the BWE cut below the ground level on which it then stood. This was when it was excavating behind itself, that is to say, in the opposite direction form its usual (in the case of this mine) easterly path across the mine site. The conveyor system would remain in position but the bucket wheel would dig to the west of the conveyor. This was described in a report by Dr Hofmann and Dr Dittrich as a “deep cut in drop cut method”. Cutting at this lower level, they explained, “starts as a fully drop cut”. There was some excavation by the BWE of this kind, late in its life. Mr BH Black recalled that when it was trialled in 1999, and also that in an earlier trial about ten years earlier, this “shook the whole machine…[there was] a lot of shaking and bouncing”, which he attributed to the “tighter” and “harder” earth at that depth.

So of those situations, it is only the first, which some witnesses called an “initiating drop cut”, which could have involved drop cutting to any substantial extent. Mr Clews said that some operators more than others preferred the initiating drop cut. As a trainer of operators, he probably demonstrated the initiating drop cut as an option “to save a little bit on production time but that this depended on the material being dug and so forth.” Mr Clews said that this initiating drop cutting occurred from the “first three or four years of (the BWE’s) operation” and was “carried on throughout”. Drop cutting of the second situation would have occurred “from day one” as did the third type.

It appears to have been left to operators to decide if and when they would drop cut. Mr Clews said that operators “were really left to make up their own minds about how they would operate the excavator on any given shift” in this respect.

The defendants suggested that the frequency of drop cutting became greater in later years. This was the evidence of Mr BH Black who said it occurred because it meant that “a slightly faster overall digging rate could be achieved”; and that it occurred “just about every bench coming down”, although he did not use the drop cut.

Mr Bowater has been a fitter and turner employed by the plaintiffs since 1980. He was called by the defendants and in evidence-in-chief said that drop cutting in itself was “not really a problem done properly”, but that some operators “did not know what they were doing”. He then gave a description of what they were doing which is not easy to comprehend, but which seemed to describe a practice which occurred throughout the life of the machine. His evidence, on what was or was not “proper drop cutting” is of relatively little weight because at no time was he an operator.

It was suggested to Mr Clews that the frequency of drop cutting increased in late 1998 or early in 1999, with the introduction of the automation of the hopper car system. This involved a device which measured the distance between the BWE’s discharge conveyor and the hopper car into which its contents were emptied. If a certain distance was exceeded, then a switch prevented the BWE from walking until the discharge conveyor was automatically re-aligned, which took five or ten seconds. Mr Clews said that this probably resulted in “a slight increase in the amount of drop cutting” but it would not have been “very significant”.

Mr Brian Black, (the engineer) was asked about drop cutting and in particular the initiating drop cut. He knew of it but said “I don’t think you would drop very far”. When asked about the loads likely to be transmitted from drop cutting he said in effect that he did not know because he did not “claim to be an expert”.

Mr Graham Wood is an electrician employed at Goonyella since 1976. He was involved in the electrical maintenance of the BWE system from when it was commissioned until early 1985 and he later became supervisor of the system from 1998 until its collapse. He supervised operators of the BWE, the spreader and the conveyors. He attended the operator’s cabin on a daily basis. He said that drop cutting was “not encouraged but there were some incidents where it was done”. He instanced the commencement of a new “cut”, which was at the end of a complete pass. Otherwise it was not “part of everyday operation”. In my view, this understated the likely extent of drop cutting. And Mr Woods’ views about its desirability are of relatively little weight given that his expertise is as an electrician.

From this evidence several matters should be noted. The first is that drop cutting undoubtedly occurred and for effectively the entire life of the machine. Secondly, the significant context was the first situation, the initiating drop cut. Thirdly, whilst some operators such as Mr Clews did not see the benefit of it, other operators did see some point in the initiating drop cut, believing that it made some difference to productivity. Fourthly, apart from the somewhat difficult descriptions given by Mr Bowater and apart from the trials of digging the harder material below 25 metres as described by Mr BH Black, this drop cutting does not seem to have resulted in a particularly unusual or alarming movement of the machine.

The defendants’ case is that the use of drop cutting was largely responsible for the BWE’s demise. They rely upon detailed modelling and analysis by Dr Potts. On his evidence, drop cutting involved the effect of a “partial grounding”, by which some of the weight of the machine was taken off the bucket wheel boom, with the consequence that substantial vertical forces were transmitted up the tower, causing significant stress and substantially contributing to the growth of the crack.

Dr Potts was the only expert to undertake such a detailed analysis of the effects of drop cutting. Professor Fisher was adamant that there had been no drop cutting, or at least nothing of significance. Indeed he said that had it occurred the machine would have failed long before it did. His evidence as to this cannot be accepted consistently with the evidence which the plaintiffs themselves called from Mr Clews as to the extent of drop cutting. The same applies in relation to Dr Jones who argued in one of his reports that:

“AMOG [Dr Potts’ firm] produced no evidence to support the use of drop cutting [and] had drop cutting been used, and had it produced a significant upward force on the wheel, then the mast would have failed by a single overload earlier than 15.3 years.”

Professor Hulsmann said that in drop cutting there was something which was the equivalent of a “ten per cent grounding”, whereas Dr Potts’ modelling assumed various possibilities of between 30 and 70 per cent grounding, for which therefore the stresses would have been higher.

Whilst the nature and incidence of the drop cutting which did occur is known, the extent to which this resulted in an increase in stress in the main tower is far from clear. I accept Dr Potts’ evidence that in principle, a partial grounding (if any) caused by drop cutting would have resulted in vertical forces extending up the tower resulting in stress. But the quantification of those forces and in turn the additional stress is difficult, at least because it requires an assumption that the postulated drop cutting involved some particular extent of partial grounding. It is difficult to accept that for each and every occasion on which this wheel engaged the horizontal face of a terrace there was consistently a partial grounding and of a certain extent.

Was this drop cutting, and most importantly the initiating drop cutting, negligent? Should those operating the BWE or those instructing them have realised that there was such a risk of damage to the structure that drop cutting should not be performed?

Remarkably for the case which they now advance, neither O&K nor Krupp ever warned or advised the plaintiffs about drop cutting. The plaintiffs had no experience of a bucket wheel excavator apart from this one. The use of bucket wheel excavators in coal mines in this country had been limited to those used in the La Trobe Valley. There was hardly an established practice or body of experience in Australia which would have made it reasonably clear that drop cutting was to be avoided. And the conditions in Victoria were not in all respects comparable because the material there was much softer than at Goonyella. So it was not so obvious without saying that the plaintiffs were not to drop cut. The machine was capable of drop cutting, and someone without the benefit of the engineering evidence which I have heard may have thought that he was doing no harm operating the BWE in that way. And this was something done by an operator no more than a few times within his shift, if at all.

Save perhaps in one respect which I will explain, the written operating instructions provided by O&K with the BWE said nothing about drop cutting. That fact is at the heart of the defendants’ argument. They contend that because the instructions said nothing about drop cutting, the reader should have understood that he was not to do it.

In my view that was not how any reasonable person should have understood the instructions. The drop cutting in question was not a significant means of actually excavating. The initiating drop cut, when used, was merely something done at the very commencement of the slewing of a bench. The fact that O&K’s instructions described the slewing process, but did not mention the initiating drop cut, need not have suggested to the reader that the drop cut was to be avoided. The operating instructions endorsed the practice of slewing below the level of the ground on which the BWE was standing, which involved the so called “deep cut drop cut”. In his 1981 article about this machine, Dr Fleischhaker said that it was designed for a “deep cut” of 2.5 metres, apparently referring to this digging below the level on which the machine was standing.

Moreover, it would have been surprising had O&K warned the user against all drop cutting, because as the evidence demonstrates, drop cutting was considered to be an acceptable practice.

In a report by Dr Hofmann and Dr Dittrich, tendered by the defendants, they wrote that:

“Drop cut method is a frequently used operation method in all the mines over the world. Animations in this report show how it is used in German mines.

Drop cuts – especially in a wrong application – have to be observed carefully to avoid big machine vibrations.”

They referred to some pictures of the BWE and the mine site immediately after the collapse and described as “not really understandable and not explainable” the facts of “a drop cut in the second terrace face” and a “bogged dropped cut” in the ground. The translation from their native German in this report is awkward but in effect, their evidence was that drop cutting of itself is not dangerous and it is a frequently used method with bucket wheel excavators, but that it must be done carefully.

In a well known text by Dr Durst and Professor Vogt entitled “Bucket Wheel Excavator” (published 1988), instructions are given as to several methods of operation including not only the “terrace cut” and the “deep cut” (cutting below the level of the tracks) but also the “drop cut”. Dr Durst was formerly the chief of the design department at O&K and Dr Fleischhaker’s superior. He had some early involvement with the design of this BWE. Drop cutting is also the subject of instruction in an earlier text by Rasper.

Then there is the fact that O&K itself offered to train operators at Goonyella in drop cutting. In a letter dated 20 May 1981 from O&K to Utah, O&K proposed a training program with the BWE which would include instruction as to:

“Cutting methods

Terrace cut – dropping cut”

Mr Kogel was an employee of O&K in Germany until he came to Australia in May 1980 to act as project manager for the supply, construction, commissioning and handing over of the BWE. He remained employed by O&K. He was based in Brisbane and went to Goonyella monthly, and when O&K Australia commenced business in July 1981 he became its managing director remaining in that position until 1991. He confirmed that the term “dropping cut” is synonymous with drop cutting. And when asked about an initiating drop cut and whether a dropping cut can be used in that context, he replied, “You can”. Faced with this evidence, the defendants submitted, without any further evidence, that O&K might have been offering to train operators not to drop cut, rather than how to drop cut. I do not accept this submission.

So far as Australian experience is concerned, Mr Newnham ranks highly. He is an engineer who has been involved with the bucket wheel excavators used in the La Trobe Valley, where equivalent machines are sometimes referred to as dredgers. He was responsible for managing the repair of these machines and their operating procedures. From 1980 to 1983 he was employed at the Yallourn Mine as the mechanical maintenance superintendent, and was there responsible for maintenance of a wide range of equipment which included bucket wheel/bucket chain excavators. From 1983 to 1991 he held various positions at the Loy Yang Mine and then the Loy Yang Power Station in the employ of the State Electricity Commission of Victoria. In 1990 and 1991 he was the manager, mine improvements for the SECV, which provided engineering support for the Commission’s La Trobe Valley coal mines. For the next three years he was principal engineer of another group which provided plant design and support services to the La Trobe Valley coal mines and then from 1994 he has been in his own business, WBM Pty Ltd.

He discussed drop cutting as a common practice and referred to its reference in “Experience with Bucket Wheel Excavators in Australian Brown Coal” by Mr HCG Rodgers. He also referred to the publication by Rasper. Mr Newnham wrote in one of his reports as follows:

“Personally, I am unaware of any direction or caution by machine manufacturers, warning against the use of the dropping cut technique. Documentation for Dredgers 9 and 13 in La Trobe Valley depicts the drop cutting technique.”

It may be the case that the drop cutting with this BWE, or some of it, was a cause of its early demise. It may also be the case that O&K, and in particular Dr Fleischhaker, had not anticipated either the extent of that drop cutting or its impact given the particular conditions at Goonyella. Especially having regard to the evidence as to German practices, some drop cutting should not have surprised them. It is quite another thing to say that the owners of the machine should have understood that there was to be no drop cutting, and in particular none of the “initiating” kind. Not only was there no warning or instruction against it, O&K offered to train operators in drop cutting. It cannot be said that drop cutting of itself was obviously wrong.

It may be that the overburden in which some drop cutting was undertaken was damaging to the BWE and that the individual operator should have known that he was then working the machine too hard. But that is mere speculation, and it is not proved that such drop cutting occurred.

The fact of contributory negligence is not proved by Dr Potts’ extensive modelling and analysis. That evidence goes to the causative effect of drop cutting. It cannot be fairly used to reason to a conclusion of contributory negligence. And necessarily in his analysis Dr Potts had to make numerous assumptions. In particular he assumed an incidence of drop cutting which was not borne out completely by the evidence and in particular by that of Mr Clews.

In my conclusion, it is not shown that the drop cutting which did occur involved the absence of reasonable care.

Teeth and buckets

The defendants plead that the plaintiffs negligently “caused or permitted teeth of an improper or inadequate design to be used on the buckets”, with the consequence that vertical loads were increased which imposed loads outside “the parameters of BG 60” and unduly increased the stresses on the tower.

They further plead that the plaintiffs “failed to adequately act upon the expressed view of Dr Fleischhaker to the effect that the teeth being used were the wrong shape and were imposing excessive vertical forces”.

Thirdly, they plead that the plaintiffs wrongly “caused or permitted the BWE to be operated for periods with teeth missing from the buckets, and with buckets missing from the bucket wheel”.

That second allegation is really a particular of the first allegation: that the wrong teeth were used.

On each of the buckets were several metal protrusions, which would engage the earth ahead of its encounter with the bucket itself. These were its teeth. There were 160 teeth, eight on each of the 10 buckets and eight on each of the pre-cutters. (Originally the pre-cutters had six teeth but this was changed to fit the teeth in the same configuration as on the buckets.) Each tooth was attached to the wheel by an adaptor.

In essence the defendants’ case is that the plaintiffs used teeth which were too blunt and that this resulted in higher loads and stresses than those for which the machine had been designed. This is said to have contributed to the fatigue cracking which caused the collapse.

The BWE was supplied by O&K with teeth which it had designed and manufactured. But very soon they proved to be unsatisfactory. According to Mr Michael King, who was formerly employed as the mechanical maintenance superintendent at the mine, the O&K teeth failed within the first 25 hours of operation. So in conjunction with Mr Raleigh and a Mr Stahl, Mr King set about finding a solution. Many different types of teeth were trialled. O&K was involved to some extent in that process as were two other suppliers of teeth, which were Esco and Hensley. According to the defendants’ particulars, the plaintiffs’ use of both the Esco and the Hensley teeth was negligent.

Mr Gemballa was an employee of O&K who was at the mine site when the BWE was commissioned and for about 10 months afterwards. He had some involvement in this trialling of other teeth. Mr King recalls that when Mr Gemballa left the site he took with him a couple of the Hensley teeth.

While this trialling was occurring Utah was fast running out of O&K teeth. In about the middle of 1983, Utah started trialling Hensley teeth, firstly with tungsten carbide tips and later with other tips.

Dr Fleischhaker was well aware of the problems with the O&K teeth and of the search by Utah for substitutes. And he was well aware of what teeth were being used, as appears from, for example, an article about this BWE which he published in 1985. He sent a draft of that article to Mr Black in January 1985. In the published article he wrote of the performance of the BWE, detailing its output and the conditions in which it worked. Under the heading “Lifetime of Teeth” he wrote:

“Looking at the experience of about 30 months, it seems to be a question of economics whether or not extremely hard material should be preblasted.

[Utah] has conducted some experiments with various teeth. They have used:

O&K teeth- cast steel GS with hard metal

Esco teeth- hardened cast steel

Hensley teeth- tungsten carbide mounted on cast steel

The reported data show the following:

Esco teeth- 65 – 80 h average lifetime

Hensley/O&K teeth- 160 – 240 h average lifetime

The lifetime depends on the hardness of the material (ratio of minimum to maximum lifetime about 1:3) and on the position of the teeth in the bucket (ratio of minimum to maximum lifetime about 1:8).”

In 1989 Dr Fleischhaker wrote to Mr Black about teeth as follows:

“Dear Brian

As you will remember we are doing some trials to develop better wear resistant teeth for heavy duty operation. We have installed some special teeth in Bukit Asam, Indonesia, and we would like to ask you to do some other trials in your Goonyella mine.

If you could agree we would like to ask you for 4 teeth of your Australian fabrication (Hensley supply?). Please send them by airfreight , we will pay the bill. We will modify these teeth (another kind of wear resistant cover) and send them back to you. They should be installed on one bucket to observe their lifetime.

Hopefully we will achieve some good results for the future.

Thank you very much for your assistance.”

At no time did Dr Fleischhaker or anyone else from O&K write in terms which expressed any concern as to the teeth on this BWE. More particularly at no time did he or any other person suggest that the teeth which were being used could damage the structure, or that some engineering assessment of that risk (if any) should be undertaken.

There was nothing about teeth or missing buckets as part of the defendants’ original pleadings of contributory negligence. O&K pleaded these matters only by an amendment allowed at the commencement of the trial. And they were raised for the first time by parts of Dr Fleischhaker’s witness statement of February 2007. The lateness in the addition of this case about teeth is not satisfactorily explained. If, as Dr Fleischhaker says, he had always been concerned about teeth, it is remarkable that O&K did not plead this case earlier. Yet Dr Fleischhaker’s evidence is that he did warn against the use of these teeth, by “what was said to Black and Shepherd between 1982 and 1984, in Brisbane, and said to Black in November 1984 at Goonyella”.

In his first statement, Dr Fleischhaker sought to explain the unsuccessful O&K teeth as follows:

“…The responsibility for developing and specifying the shape of the teeth used in the bucket wheel itself was left to the mechanical department [of O&K]. In 1978, it was not as fully appreciated as it has become, that the shape of the tooth may be critical to where the vertical loads were being imposed upon the bucket wheel in its ordinary use.”

This suggests that there was some engineering advance which occurred after the design of the bucket wheel, although that is not otherwise indicated by the evidence.

In the same statement Dr Fleischhaker said that:

“It would have been inappropriate for the tooth specified for this excavator for use in hard material to have a tungsten tip because the result of that is that the tooth is not permitted to wear in a manner which is described as underwear. By this process, the teeth are quickly sharpened by the wearing process, and it is the sharpened edges which form the effective cutting task. If the teeth are not shaped in this way, it is possible for vertical loads to be imposed upon it.”

In this he appears to have been referring to the Hensley tooth, which had a cutting edge of tungsten carbide. But on Mr King’s evidence, which I accept, when the machine was first commissioned the O&K teeth were tungsten with carbide inserts. On the O&K teeth these inserts shattered or broke out and then the adaptors began to fail and break off. Mr King explained that with the Hensley tooth there were not the same tungsten carbide failures because a softer grade of tungsten carbide was used which avoided fractures.

Then in the same statement he said that when he was at the mine in October 1984, he discussed with Mr Black his “concern that the type and inclination of the teeth were wrong and that they were imposing vertical forces”. He continued:

“The geological conditions on the site required a special shape of teeth on the buckets to ensure the correct angle and the digging process. Although this was not known at the time of the original design, after my investigation on site following the distortion to the tower in October 1984, I formed the view that part of the explanation was that the wrong type and inclination of the teeth, which resulted in the operator of the machine in having a problem being unable to dig into the ground but just sliding on the surface with the result that vertical forces were increased.”

In the same statement he said that:

“Between 1982 and 1984 I told Mr Black and Mr Shepherd in Brisbane that the teeth they were using were the wrong shape. I informed them that immense forces were needed to bring these teeth through the hard material. I said that unless O&K designed teeth were used, the life of the machine would be significantly shortened and that the O&K teeth were specially designed for this process. One of those occasions I believe was a mining conference in Brisbane.”

He claims that he had no success in persuading them that they should come back to the O&K teeth, or teeth shaped like the O&K teeth.

He continued:

“The result of the use of the teeth referred to above, was, in my opinion, that there has been a load introduced for fatigue which is outside the load assumptions for the excavator and BG 60. The result is that we would expect cracks which would develop into the structure as the result of fatigue.”

Remarkably these strong concerns were not expressed in writing. And consistently with his claims in response to the design case, that he made various calculations of strength of the structure and applied BG 60, it seems he would have assumed in October 1984 that the higher loads introduced by these different teeth would not continue.

Mr Black and Mr Shepherd deny receiving this advice. Mr Black said he had no conversation with Dr Fleischhaker or anyone else from O&K about using only O&K teeth, or that tungsten teeth should not be used. Nor was he advised that the teeth had to be worn so that they became sharp. He accepted that he may have had some discussion with Dr Fleischhaker about teeth, but not in terms of those related within Dr Fleischhaker’s statement. He denied that it was suggested to him that the teeth were the wrong shape. Importantly he denied that Dr Fleischhaker said to him that the life of the excavator would be shortened if “O&K design teeth” were not used.

Mr Shepherd was the manager of engineering and construction with Utah from 1976 to 1982, and as such he was involved on the construction and commissioning of the BWE and other parts of the BWE system. When the construction and commissioning commenced in late 1979, he began to attend the mine site every one or two weeks for a day at a time. He denied having any conversation with Dr Fleischhaker about the teeth used in the BWE and he has no recollection of attending a mining conference in Brisbane with Mr Black or Dr Fleischhaker.

Mr Black was an impressive witness. So too was Mr Shepherd, who gave his oral evidence in an apparently considered and balanced way. He is no longer employed by BHP.

There are many reasons why I am not persuaded to accept Dr Fleischhaker’s evidence about teeth, and in particular his evidence of these conversations. The first is the view that I have of his credibility generally, which ought to be apparent from what I have written earlier on the design case. The second is that it seems at odds with his published article in 1985 and his 1989 correspondence, which suggest no misgivings about these teeth. Dr Fleischhaker said that the reference to teeth in his 1985 article:

“was simply to report information I had at that stage been provided by Utah, information about their attempts to obtain longevity in their teeth in experimentations. I was not provided with information about the shape of those teeth”.

Yet here was an article widely published where, as Dr Fleischhaker would have it, he was writing of the success of the BWE without knowing whether Utah had desisted in the use of the teeth about which he had strongly warned Mr Black in late 1984.

It is inherently unlikely that he had such strong concerns, in particular when at the mine in 1984, and yet he wrote nothing about them. He was then at Goonyella to advise on the repair of the machine which he had designed and which had been in operation for only a relatively short time. It had suffered substantial structural damage. On his version, he saw teeth were being used which would be likely to cause further structural damage, yet he wrote nothing about it, either to Utah or to anyone else.

And had Mr Black received such advice about teeth in 1984, it is likely that he would have acted upon it. After all he had arranged for Dr Fleischhaker to come to Australia to advise on the repair, because he thought that there was no other person with the same knowledge and experience. It is very difficult to see that Mr Black would have ignored such advice from Dr Fleischhaker.

There is also the lateness with which this teeth issue has been raised. As I have said that lateness is not satisfactorily explained. It is to be inferred that O&K’s pleadings were prepared from the outset with the benefit of information from Dr Fleischhaker.

But there is another matter which I think makes it likely that Mr Black would recall such advice about teeth had it been given. It is the fact that Utah had to find alternative teeth because the O&K teeth had failed. In that circumstance, had Dr Fleischhaker been bold enough to tell Mr Black to use only teeth designed by O&K,it is likely that Mr Black would remember that.

Then when cross-examined, Dr Fleischhaker conceded that he had no specific recollection of speaking with Mr Black about this. He claimed still to have spoken with Mr Shepherd and a Mr Brett at a mining conference in Brisbane. But when asked what was the subject of that conversation, he said that it was “the wear and tear of teeth” and the trials which were then being conducted. He conceded that at that stage he did not know what kind of teeth were being trialled, because he was in Brisbane and not at Goonyella. He also agreed that he did not say to them anything along the lines that the design of the teeth they were using would shorten the life of the machine. So if he had a conversation with Mr Shepherd or anyone else from Utah at this conference in Brisbane, it seems that the discussion concerned only the problems which Utah was having in finding teeth which were sufficiently durable, consequent upon the failure of the O&K teeth. Overall the effect of these concessions in cross-examination all but put paid to his evidence-in-chief (which was in the form of written statements), that he gave warnings to Mr Black and Mr Shepherd.

It follows that O&K offered no warning about the use of these other teeth. Strictly speaking that is not fatal to their claim of contributory negligence. In theory, the plaintiffs could have been negligent absent a warning. But it makes that claim more difficult to accept, particularly when Dr Fleischhaker himself was prepared to publish statements which gave apparent approval to what was being done.

Mr King was shown a photograph of the teeth at the time of the collapse in 2000 and said that the teeth had apparently the same sharpness as the O&K teeth. During the trials of the teeth, he did not notice that they dug in any way differently from the O&K teeth. And from his regular observations of the operation of the BWE, he did not see that it was vibrating in any way differently from its operation when it was first commissioned (with O&K teeth) and “if anything it probably ran smoother”.

Mr Clews said that some teeth dug the material more easily than others but that it depended upon the type of material. He said that there were some types of material where a “wedge-shaped tooth dug and cut better than a block-faced type tooth, whereas in other materials a block-faced tooth was much more wear-resistant and did a better job.”

Ultimately the teeth case came down to an argument that some people at the mine, in particular Mr Black and Mr King, understood that the use of particular teeth could add additional loads to the structure of the machine. As to Mr King, this went no higher than his concession in cross-examination that he may have discussed with Mr Black the possibility of additional loads. As to Mr Black, the argument relies upon a reference by him in a report in August 1985 where he considered whether a particular type of teeth (“pick” teeth) would “add additional loads to the main load frames.” However what he there wrote was that such teeth would not add loads to the main load frames (the structure). Further, Mr Black did not remember that this type of tooth was actually used on the BWE. When cross-examined Mr Black accepted that in principle, forces were transmitted through the bucket wheel boom and into the structure itself which were the result of, amongst other things, the shape and angle of the teeth. But this was hardly a concession that he knew or should have known that the teeth which were used were of the wrong design, or that their design might cause the premature demise of the BWE.

Professor Hulsmann explained why he had done no modelling on the effect of the shape of teeth. He said: “we do not really find out why the different teeth would change anything as far as the load of the machine is considered”, and that he did no calculation as to “whether different teeth would make a difference” because “there was nothing that referred to it in any of the BGs”. That evidence was strongly criticised in the argument for the defendants, which relied upon yet another analysis undertaken by Dr Potts and his firm (AMOG report no 10). Now Dr Potts’ opinion about that may be the better one. But it is of some significance, in considering whether any reasonable operator in the position of BHP would have used different teeth, that such an eminent engineer as Professor Hulsmann would not have seen some cause to do so.

As to what was the alleged effect on the life of the BWE of its teeth, the defendants say that “the fact of the matter is that the only expert to have attempted to quantify the resultant force from using the improper teeth is Dr Fleischhaker”, and that “even he did not suggest that there was a perfect figure, but an approximation in order to give some idea of the general impact.” I would not be prepared to accept his evidence as to this if there is no other analysis to support it.

I am unpersuaded that the plaintiffs were negligent in using the teeth which they did. And I am unpersuaded that these teeth were any different from the O&K teeth in their effect on the life expectancy of the BWE.

There is then the related plea that the plaintiffs used the machine sometimes with missing teeth from buckets, or missing buckets from the wheel. Undoubtedly these things occurred, although as the defendants concede, “it is difficult to be specific about it, either in terms of its duration or its impact”.^[96] The submission is, however, that this was “not good for the machine” and was likely to have resulted in increased loads transferring through to the tower.

Mr Clews remembered a time when the machine was operated for about four days with one of its buckets missing. This was found to be unsuccessful, as Mr Clews described in detail, and it resulted in one of the safety devices shutting the wheel down. He said that it was not done again.

Mr King said that from time to time the excavator operated without some teeth. The maximum teeth missing at any one time would have been a dozen. He did not think that this was the “best idea” because it placed additional work on other teeth.

Mr Bowater described instances where “a lot of times people didn’t change out a tooth” although “people [were] supposed to change out the teeth every shift”. He described his practice of promptly changing teeth when necessary.

Mr BH Black said that as soon as he found a broken tooth he changed it and he never operated the machine with missing teeth.

Unsurprisingly, none of these recollections is very precise. But the evidence does not give the impression that the owners paid no attention to missing or broken teeth. And nor does it appear that they were negligent in failing to do anything more promptly. More particularly, it is not shown that they should have seen a risk of structural damage to the machine from missing teeth and that the reasonable response to that risk was to not operate the machine for any time whilst any tooth was missing.

As to the case about missing buckets, this has no factual foundation, at least because it is not shown that this occurred except very rarely and perhaps only on the occasion recalled by Mr Clews. According to the defendants’ pleading about missing teeth and buckets, the particulars of this case were to be found in certain paragraphs of a statement of a Mr WJ McKee. But that statement was not tendered and nor was Mr McKee called.

It follows that these belated pleas of contributory negligence involving teeth, missing teeth and missing buckets are unsuccessful.

Production rates

In essence the case here is that the plaintiffs worked the BWE too hard. They caused it to dig too much by making it dig more earth in a given amount of time than it should have dug. It is claimed that the plaintiffs knew this and were thereby negligent, and that this shortened the machine’s life. It is pleaded that BHP directed the BWE operators to increase productivity, and established a system of reporting productivity levels, which encouraged “the overuse and overworking of the BWE and its use outside its DOP”.

It does appear that, not surprisingly, operators were encouraged to improve productivity. But the questions are whether the machine was overworked and if so, whether that was known or should have been known by BHP, either by its management or its operators. There are two parts to the pleaded case about those matters.

The first is that “in the years leading to March 2000”, the digging rate regularly exceeded what were said to have been established by BHP in earlier years “as the normal production figures”. As to what were the ‘normal’ figures, it is alleged that in the first four years of its operation, the BWE dug at a rate of about 2150 bank cubic metres (bcm) per hour, and when measured over the first 10 years of its operation, its rate was 1672 bcm per hour.

Secondly, it is said that the “BWE’s designed performance parameters … were such that the peak output of the BWE, which was not to be exceeded, was 6600 bcm per hour, and that this was often exceeded in the period from May 1999 to March 2000.

That first argument is an unusual case of negligence, because the alleged standard of reasonable care was that set by the party against whom negligence is alleged. It is not a standard which is said to have come from some wider practice in the operation of bucket wheel excavators. It is simply that if the machine dug at certain rates on average over a 10 year period, then digging at much higher rates in subsequent years must have been negligent. Such a disparity could be relevant, but does not of itself prove negligence.

The defendants’ case then focuses upon the so called designed performance parameters, and in particular, this so called upper limit of 6600 bcm per hour. According to the defendants’ argument, this and other figures as to digging rates were set out in the written operating instructions provided by O&K. That appears to be incorrect. The various figures relied upon, and in particular that 6600 bcm per hour, are derived from other documents as follows.

Clause 12 of the special conditions of the contract for the supply of the BWE required O&K to carry out performance tests prior to the issue of a final certificate. Clause 12.1.2 was in these terms:

“12.1.2[O&K will] carry out performance tests involving operation of the Works for a period of 30 days and establish, to the satisfaction of the Superintendent that for 26 working days of 3 shifts each the Works has an operation capacity not less than that warranted in special condition 13, and meets the conditions set forth in this contract provided that any such performance tests need not continue after the nominal warranted throughput for a 30 day period has been processed….

12.1.5If the contractor conducts the performance tests referred to in special condition 12.1.2 in the circumstances referred to in the preceding sub-clause then the contractor shall return to the erection Site at such time (during the 15 months Defects Liability Period) as the superintendent may direct to ascertain whether:

(a)the works when operated in conjunction with the associated conveyor system have the operating capacity warranted in special condition 13;

(b)the integrated system comprising the Works and the associated conveyor system is capable of performing at the rate warranted in the performance guarantee entered into by the principal, the contractor and the contractor constructing the conveyor system, pursuant to special condition 13.6 of this contract, and the like condition of the contract between the principal and the contractor constructing the conveyor system.”

The “contractor” was O&K, and the “Works” comprised the BWE and certain other things but not the conveyor system.

Special condition 13 contained or provided for several warranties by O&K. It was as follows:

“13.1The contractor warrants and guarantees to the principal that…the Works in all its parts shall achieve its guaranteed output and without undue wear, undue straining of parts and without undue vibration or noise…

13.2In the case of the excavator the contractor warrants the continuous output of the Works during the performance test referred to in special condition 12 as follows:

(a)in all material [of a certain geology]…1500m³/h (solid)

(b)in all material [of another classification]…1000m³/h (solid)

(c)in all material [of another classification]…1000m³/h (solid)

(c)for [a further classification]…750m³/h (solid)

(d)for[ a further classification]…500m³/h (solid)

in all material that has been blasted 2000 tonne per hour…

in all cases, the excavator’s output shall be determined by survey and when excavating and discharging at the guaranteed rate, the output during any 15 second period shall not exceed 11 cubic metres (solid) equivalent, at a swell factor of 1.5, to a throughput of 4,000 cubic metres per hour (loose).

The inability of the excavator to dig at more than a peak rate of 6600 cubic metres per hour (loose) shall be demonstrated during a short-time test of 10-15 minutes duration…

13.3In the case of the spreader and tripper/cable reel, the contractor warrants the continuous throughput of the Works to be at least 5200 cubic metres per hour (loose) with capacity to handle peak loads of 1 (one) minute duration of 6600 cubic metres per hour (loose) …

13.6.1It shall be a condition subsequent to this Agreement that the Contractor shall subscribe to a separate Guarantee of Performance of the integrated pre-stripping system comprising the Works and the conveyor system. Such guarantee in favour of the principal shall be given by the Contractor and the contract to whom the principal awards a contract for the constructor of the conveyor system (referred to in this special condition as “the Conveyor Contract”).

The prime terms of such guarantee shall be as follows:

(1)The Contractor and the conveyor contractor jointly and severally guarantee that the integrated
pre-stripping system comprising the works and the conveyor system (referred to in this special condition as “the integrated system”) is capable of performing at the following rates:

(a)for the higher setting of conveyor belt speed and in suitable digging;

1500 bank cubic metres per hour or better as the effective, average hourly output;

4800 loose cubic metres per hour as the nominal throughput of the system;

6600 loose cubic metres per hour as a peak load occurring for the duration of 1 (one) minute for up to 10 occurrences per hour.”

The defendants also refer to part of the tender documents for the supply of the BWE. In tender schedule J, in a table headed “Technical Data”, were these references:

“Guaranteed output	bank	m³/h 1500
Peak output (not to be exceeded)	loose	m³/h 6600”
In the same document, under the heading “Technical Particulars” was this:
“Theoretical output	1728 m³/h loose”
On another page, also under the heading “Technical Data” was this:
“Theoretical output	1728 to 5184 loose m³/h
Material to be handled opposite
that overburden bulk weight	ABT. 1.8t/m3”

The defendants’ argument proceeds from a misunderstanding of the effect of these contractual provisions, and in particular, what was said about a limit of 6600 cubic metres.

A bank cubic metre is a measure of unexcavated material. That which is measured by “loose cubic metres” is the excavated earth. The same earth has a larger volume once it is excavated and that increase in volume is quantified by the so called “swell factor”. So in special condition 13.2 as set out above, there was an assumed swell factor of 1.5, meaning that the unexcavated or “solid” figure of 11 cubic metres per 15 seconds (or 2640 cubic metres per hour) should be multiplied by 1.5 to arrive at the volume as excavated or “loose” material. It should be noted that this output of 2640 bcm per hour is nearly half as much again as the guaranteed output of 1500 bcm per hour, yet the defendants’ submissions appear to suggest that 1500 bcm was indicated by these documents as the normal and prudent output. At that swell factor of 1.5, the “peak output” of 6600 (loose) cubic metres per hour would equate to 4400 bcm per hour.

Further the sense in which the 6600 cubic metres was a “peak” must be considered. Within condition 13.2, O&K warranted that “the inability of the excavator to dig at more than the peak rate of 6600 cubic metres per hour (loose) shall be demonstrated during a short-time test of 10 – 15 minutes duration”. That appears to be a warranty about what the excavator was unable to do, and hence it was that inability which had to be demonstrated.

This must be read with the warranty in condition 13.3, which concerned not the excavator, but the spreader and tripper/cable reel. For that equipment, O&K warranted that the continuous throughput would be “at least 5200 cubic metres per hour (loose) with capacity to handle peak loads of 1 (one) minute duration of 6600 cubic metres per hour (loose)”. So this was a warranty as to the continuous throughput, and also as to the capacity of the spreader and tripper to handle loads of a certain order (up to 6600 cubic metres for one minute at a time).

It must also be read with condition 13.6.1, which was not a warranty as such, but a promise by O&K that on the occasion of the provision of “the integrated system”, it would join with the contractor which was providing that equipment (specifically the conveyors) in providing a warranty as to the system as a whole. That warranty was to be that the “system comprising the works and the conveyor system” would be capable of digging at 1500 bcm per hour, and of handling a nominal throughput of 4800 loose cubic metres per hour and 6600 loose cubic metres per hour as a peak load occurring for the duration of one minute for up to 10 occurrences per hour.

As I read these provisions, they were not some warning to or acknowledgement by the owners that the BWE was not to dig at a rate which would produce more than 6600 loose cubic metres per hour. These were warranties, and broadly speaking, they were directed to two concerns. The first was that there should be a guaranteed minimum output. The second was that because the excavator could dig at a faster rate, the output of the excavator should not be too fast for the rest of the system. This explains the warranty as to the inability of the excavator, that is that it was unable to dig at a rate equivalent to more than 6600 cubic metres. It explains why that inability was to be demonstrated at a test. It explains also the warranty that the spreader and tripper would be able to handle a throughput with peaks of up to 6600 cubic metres and the further warranty under clause 13.6 as to the capacity of the entire system. The reference in the tender document to “Peak output (not to be exceeded) loose m³/hr 6600” had the same meaning.

These warranties have to be read also with an understanding of other things about the design of this machine. The output of the excavator was a function of the speed of rotation of its bucket wheel. The wheel would and could turn only as fast as it was driven by the BWE’s motors. This was explained by Mr Black. When asked about this reference to 6600 cubic metres and whether it was “a warning that if you (exceeded that) the machine might suffer stress?” he answered:

“I am not too sure about that. What you have to bear in mind with this machine, that it had a direct current motor drive with regulated direct current. And it got to 100 per cent torque on the motors, and then it started to ramp off … [This] was another means of trying to ensure that it didn’t get loads into the drives and into the wheel that would wreck it prematurely.”

The speed with which the wheel could be turned depended upon the relative hardness of the material: hence the different amounts warranted as the minimum continuous output according to the geological quality of the material. But the motors themselves placed a limit on the speed of the wheel and in turn on the BWE’s output. So the “theoretical output” of 5184 cubic metres per hour was an estimate of how much could be excavated with the wheel turning as fast as it could in certain assumed conditions of relatively soft material.

This was also explained by Dr Fleischhaker. In his first witness statement he described how the operator is able to select the speed at which the wheel will rotate and “that were the wheel operating fast but encountering harder material, the speed will be automatically reduced to take account of those conditions”. In his oral evidence he agreed that the BWE was designed “based on the proposition that whatever power was provided by the machine would be used by the operators”.

In other words, the machine itself contained its own limitations on output. The power of its motors together with certain safety devices limited its capacity. Operators were expected to drive it hard and to use what power was available. This is then why, contrary to what the defendants now suggest, there was no warning about excessive rates of digging. The so called “peak” of 6600 cubic metres was not some kind of speed limit. It was a warranted as a maximum output, so that the components downstream from the excavator could cope with what it was delivering.

The defendants rely upon some answers of Mr Black in cross-examination to suggest a different meaning of these documents. He was taken to those parts of the warranty which I have set out above and asked whether he understood “that if those rates…were exceeded, then you were likely to get the undue wear and undue straining and undue vibration referred to (in the warranty)”. He replied “I understood that to operate above those capacities on a continuous basis was not a very smart thing to do”. The cross-examination continued:

“No. You could go up and out of it momentarily?--- Yes.

But if you did that hour after hour after hour,…its not a very smart thing to do, its unwise and would lead to, as you understood it, the very things referred to, that’s undue wear, undue straining?--- Undue wear and earlier wear out of components, bearings, what have you.

So in your understanding then, this was very much a warning to not exceed on a regular basis those limits?--- I think it was a way of expressing prudent operational capacity.”

Three things may be noted about that evidence. The first is that Mr Black was shown certain parts of the warranties as I have set out above, but he was not given the opportunity to read through them in context and reflect upon their effect as a whole. Secondly, he did not agree that these warranties or the guarantee constituted a “warning”. Rather, he said that they were expressions of an operational capacity, which is as I read them. Thirdly, he did not accept the suggestion that the continuous exceeding of these limits (if possible) would result in structural damage (if indeed that was suggested by the cross-examiner’s reference to “undue vibration”). He did accept that there would be “undue wear and earlier wear out of components, bearings”: in other words, the harder it was driven, the faster some components would wear.

I am fortified in my interpretation of these warranties, and in particular this “peak” of 6600 cubic metres, by Professor Hulsmann’s evidence in his report of July 2007 where he wrote:^[97]

“The upper limits of a continuous output rate of 4000m³/h or as peak of 6600m³/h (loose material) are given because you have to handle the output also with all other following machineries (conveyors, spreader) (see contract special conditions 13.3 …) – this is a question of integrating the overall system.”

The result is that the defendants’ case in this respect rests upon a number of misunderstandings of the effect of these documents and in particular the warranties. The warranted output of 1500 bcm was a warranted minimum. The peak of 6600 cubic metres was not a recommended maximum. It was a warranted upper limit on the capacity of the excavator: the manufacturer’s promise was that it would not exceed that level. And these were not “operating instructions”. Nor was the 1500 bcm “stated as an effective average hourly output”. The pleaded basis for this overworking case thereby fails.

But before leaving this allegation, some matters should be noted about the defendants’ case as to what in fact was the BWE’s output. They argued that it was worked too hard late in its life, and in particular they relied upon a spreadsheet which set out the production of the BWE from May 1999 until its collapse.^[98] This shows a number of tonnes per hour for each day in that period. Over the entire period the average production was 4197 tonnes per hour. The defendants say that the appropriate rate of conversion from bank cubic metres to tonnes is about 1.9. Accepting that, the average bcm was thereby about 2209 bcm per hour, hardly an unusual figure having regard to the contract documents. At a swell factor of 1.5 this would be about 3300 cubic metres (loose). But the defendants say that it is “critically important” to recall that these are average figures and that even for each shift, what appears is an average over that shift. So, for example, on 24 June 1999 when there was an average of 6407 tonnes per hour, they stress that “the rates at various points during that shift must have greatly exceeded 6407 tonnes”. It must be accepted that because that figure is an average, at times that rate was exceeded during that shift. It does not follow that it was “greatly exceeded”, whatever that should mean. And 6407 tonnes per hour would equate to 3372 bcm per hour, or as loose material about 5000 cubic metres per hour, which is well short of the so called “peak”. The defendants emphasise that within this spreadsheet, there were several shifts where the average rate was “clearly exceeding 6,000 tonnes per hour”. That is so, but it is not at all apparent that the so called peak was exceeded. The highest output in this period appears to have been on 21 July 1999 when a rate of 8439 tonnes was achieved, which divided by 1.9 would equate to 4441 bcm (at a swell factor of 1.5) or (as it happens) about 6660 tonnes. Yet this list of production figures for shifts during this period is the document pleaded by the defendants as demonstrating that the rate “often exceeded 6600 bcm per hour”. Accepting the defendants’ point about these being averages, nevertheless the document does not support that allegation.

Moreover average rates of output are relevant. The defendants’ thesis is that over time, the machine was worked so hard that the cumulative effect of this overwork contributed to its demise. It is not their case that an occasional excess was life shortening.

The defendants also refer to the evidence of the enthusiasm at the mine in later years to lift the output of the BWE. Mr Haegel was said to be responsible for much of this. Undoubtedly, BHP, and Mr Haegel in particular, were looking to lift the output of the BWE at this time. The defendants emphasise Mr Haegel’s evidence that he chose a target of 5000 tonnes per hour as an average production rate. But this is no more than about 4000 cubic metres of loose material or 2600 bcm. Again, these are not remarkable figures.

And as to the significance of the figures in the last nine months of operation, it should be noted that the machine was then working in the Red Hill North pit, where the material was softer than at the Cleanskin pit where it had operated in its first years and in the mid-1990’s. Clearly its output would have been greater in the softer material.

As to the effect of this suggested overwork, the defendants’ submission was put as generally as this:

“There is an abundance of evidence which shows that the machine was subject to vibrations, and rocking when operating. To operate adding increasing production rates, regardless of history, regardless of the operating manual, regardless of the technical specifications, and regardless of the condition of the machine beyond maintenance, is conduct…which is a material contributor to what occurred in March 2000.”

For this argument there is no particular support in Dr Potts’ evidence. In his oral evidence, he said that the problem was not so much that the machine had worked at “a faster rate than the contract provided for”, but more that “it was working lower down in harder material than it was apparently designed for”. Further, he agreed that production in excess of “the guaranteed production rates” did not involve any necessary departure from “the design operating parameters”.

For these reasons this allegation of contributory negligence by excess production must be rejected.

Other allegations of contributory negligence

Reporting systems

The defendants plead that BHP:

“failed to have in place any, or any adequate reporting system that recorded serious operational incidents involving the BWE which raised safety issues, so as to permit such issues to be investigated to ensure they did not recur”.

The “serious operational incidents” relied upon are the following:

the 1984 grounding;

the 1993 grounding;

the event investigated by Mr Edinger in 1996;^[99]

the discovery by Mr Thiel of a slack rope and one cylinder having (probably) bottomed out;^[100]

the movement of the excavator without the main bucket wheel gearbox in July 1999;

a suggested unusual rocking movement of the excavator in the few days before its collapse;

the “regular partial groundings as a result of the practice of drop cutting over the life of the machine”.

With one exception each of these matters has been discussed. The exception relates to the events of the few days prior to the collapse, to which I will return.

According to this plea, the plaintiffs were negligent because they did not properly report or record these things. The defendants advanced an extensive argument which criticised the way in which these things, or at least some of them, were or were not recorded or passed on to others such as inspectors or supervisors. But the defendants must demonstrate that these alleged deficiencies ultimately contributed to the collapse of the BWE and in no respect have they done so.

The reliance in this plea upon what are alleged to have been “regular partial groundings” as a result of drop cutting is curious. On the defendants’ case, the practice of an initiating drop cut was so prevalent that it considerably added to stress and shortened the life of the machine. The effect of this argument is that the mine should have kept records detailing the existence and extent of drop cutting, including the initiating drop cut. But there could have been no cause to keep such records unless it should have been understood that the drop cutting was significant, and in particular that it created a risk of premature structural failure. If that should have been understood, then it was the drop cutting itself which was negligent. If it need not have been understood, there would have been no reason to record the practice.

As to walking the machine without its gear box in 1999, again unless it ought to have been understood that this created the risk of structural failure, there was no reason to put in place some scheme for reporting and regularly reminding others of its occurrence.

In the written submissions in support of this plea, the defendants addressed the question of the causal connection between the alleged poor recording and the BWE’s collapse only in the general terms that:

“those in positions of responsibility (the Grants, Patronis and Haegels of this world) would have been in a position to have a better understanding that the excavator had undergone major incidents which were of importance to the supervisors as well as inspectors. There would have been a record that could be shown to inspectors: the likelihood is that inspectors would have been told specifically about the stiffeners. The likelihood is that inspectors would have been told more details about the buckling, the repeat grounding in 1993, the repeated partial groundings by drop cutting, and the fact that the stiffeners had been added as part of the repair. In the normal course, if matters were specifically raised with the inspectors, one could reasonably expect them to respond appropriately.”

So ultimately it was asserted that this would have made a difference to the inspectors such as Mr Thiel. But it would have made no difference to him in his 1999 or 1996 inspections. The knowledge or otherwise by Mr Thiel of any of these incidents was inconsequential. This was because, as already discussed in the inspection case, Mr Thiel well understood that it was important to inspect the top of this stiffener if possible and that it was his practice when conducting a visual inspection to check in the areas prone to stress or failure, including welds and joints between sections and plates and between members.

Nor does it appear that it would have made any difference to a previous inspector. Prior to Mr Thiel the inspector was Mr Schander, who conducted the 1984, 1986, 1990 and 1994 inspections. His evidence, called of course in the defendants’ case, hardly sits well with this argument. In his witness statement he said:^[101]

“…to a limited degree some information was also provided by Goonyella at my request. However most of the time my experience was that one had to start the inspection from scratch, without background information other than my own previous reports. This experience was not significantly different from my experience in Germany. In general, I will not have access to the owners’ historical inspection records and other history of the equipment. These reports could be asked for but to do so was not common practice. The task of the inspector is in effect to take a record of the machine at the time of his inspection.”

And as the defendants submit elsewhere,^[102] Mr Schander was aware of the character of the repairs which had been carried out in 1984, and that the stiffeners had been added then.

Maintenance and inspection practices

The defendants plead that BHP:

“did not have in place any, or any adequate, maintenance and inspection program for the BWE to adequately ensure its ongoing structural integrity, or any adequate plant management of maintenance and inspection procedures.”

They further plead that BHP:

“failed to cause monthly inspections by experienced personnel, or other periodic inspections of the tower by way of a main inspection by an independent expert familiar with the engineering associated with the BWE, and four monthly interim inspections of the tower, particularly in the less accessible areas”,

either between the 1996 and 1999 inspections by Krupp or between the 1999 inspection and the collapse.

I go first to the subject of maintenance. The defendants led a considerable amount of evidence going to whether the BWE was well maintained at various times over its life. They led evidence from Mr Bowater that when Mr Haegel was in charge towards the end of the machine’s life, it was poorly maintained and from Mr Thiel that the BWE was the worst maintained machine he had encountered. They led evidence from Mr Brady which was critical of the maintenance overall.

But it is for the defendants to show not only that the plaintiffs were negligent in maintaining their machine and but also that this was a material cause of the collapse. In certain respects, the defendants’ case was more specific. I have discussed those matters already, such as operating the machine with missing teeth or buckets. But apart from them, the evidence going to whether there was or was not a proper maintenance regime was inconsequential, because none of it could be causally related to the BWE’s collapse.

The subject of inspections is in a different category. If reasonable care required that the plaintiffs cause the tower to be inspected more often than biennially, and specifically between March 1999 and the collapse, it could be argued that such inspections could have made a difference.

There was evidence as to whether a complete structural inspection, as Krupp undertook or should have undertaken in 1999, was one which ought to have occurred annually rather than biennially. But as it happened, less than a year passed between Krupp’s 1999 inspection and the collapse. And had Krupp, and in particular Mr Thiel, conducted another inspection between 1996 and 1999, there is no reason to believe that the outcome would have been different.

The defendant’s case is that there was not a proper “inspection program”, and more specifically that BHP did not cause monthly inspections, or “four monthly interim inspections” of the tower to be undertaken. The four month interval is based upon the evidence of Mr Haberler and Mr Dittrich.

For many years, Mr Haberler was employed by Krupp as a project manager on major projects overseas and in Australia. He formed his own company in 1993 through which he provided engineering services to the mining industry including the performance of numerous plant inspections. He has developed systems and procedures designed for the management of heavy open cut mining/materials handling equipment. He said that an inspection interval of 12 months “used to be accepted practice in the Australian industry” and is also suggested in the German standard DIN 22261-1 (1997). He said that this code also makes reference to structural inspections of main load carrying members at shorter intervals, namely four months, if the main inspection interval is extended to 24 months. He added that the Australian practice in scheduling inspection intervals would not differ greatly from the practice overseas.

Dr Dittrich spoke of his German experience. He referred to the Standard DIN 22261-1 (1997) which he asserted was “accepted worldwide by suppliers, by owners and operating companies”. So in his opinion there were two types of inspections which ought to have been carried out: the “main” investigation to be carried out every 24 months, and an “interim” investigation every four months. Again relying upon the German standard, he said that this main investigation ought to have been performed “under the guidance and responsibility of an independent expert”, whereas the interim investigation could have been done by “an experienced employee of the owner and operator or by its consultants”. As earlier discussed,^[103] the role of the so called independent expert is a feature of the regulatory regime in Germany for which there is no Australian equivalent. So according to Dr Dittrich, there should have been at least six interim inspections carried out between 1996 and 1999 and the results of them should have been available to Mr Thiel in his 1999 inspection. And he was critical of the main inspection being carried out by someone who was not “independent of…the equipment manufacturer”, by which he was apparently suggesting that it should not have been conducted by Krupp.

The case for inspections at monthly intervals comes from clause 5.03 of the operating instructions supplied by O&K for this BWE, which were as follows:

“5.03Steel structure

The steel structure forms the carrying frame for the machinery elements and transmits all loads on to the track level via the travel gears.

Check

The steel structure and high tensile screwed connections at connecting points of the component parts should be checked at least once a month, when machine is inspected.

Any detected damage (cracks, loose bolts, bent parts, scaling-off of paint etc) has to be reported at once so that it can immediately be repaired. In order to protect the machine from corrosion, the coat of paint must always be in perfect condition.”

On its face this seems an onerous requirement. In the opening of the defendants’ case, it was apparently conceded that these monthly inspections need not have involved what was required in an annual or biennial inspection. Neither Mr Haberler nor Dr Dittrich seemed to maintain that structural inspections as often as every month should have been undertaken although each saw some general relevance in the operating instructions.

Mr Newnham was able to describe the inspection practices for similar machines in the La Trobe Valley. Under the regime in Victoria which he described, structural inspections do not have to be more often than annual. There are no required monthly or four monthly structural inspections. There is a practice of an independent structural inspection every two years and what is called an annual inspection in the interim which he said is less rigorous.

Mr Haberler suggested in a roundabout way that there were more frequent structural inspections in Victoria. Referring to the safety device testing to which Mr Newnham referred in his report, Mr Haberler wrote that this testing “also includes a structural inspection”. That was not Mr Newnham’s evidence. I accept Mr Newnham’s evidence as to the Victorian practice.

There is no Australian standard governing such inspections. And that was the premise upon which Mr Newnham was cross-examined by the defendants. However, in the report of Dr Dittrich,^[104] there is the suggestion of an Australian standard, AS 4324.1 – 1995. Dr Dittrich wrote:

“These practices have been implemented in the mines of RWE Power, in accordance with BG 1986 and its further development in DIN 22261. Both are German codes for structural design. The Australian Standard AS 4324.1 – 1995 is largely based on BG 1986. The application of these standards ought to have been part of the prudent practice in Australia by mine owners when this collapse occurred.”

A copy of the Australian standard was tendered. But it deals only with the design of the structures and in a preface, it refers to a proposal to develop another part to deal with, amongst other things, the inspection of these machines. So it appears that Dr Dittrich is mistaken in thinking that there was an Australian standard for inspection of bucket wheel excavators.

On all of this evidence I am not persuaded that reasonable care required BHP to have a structural inspection undertaken every four months, let alone monthly. But I do accept that it required more frequent inspections than according to this mine’s practice until 1999, which was an inspection every two or three years. BHP was not obliged to follow the Victorian practice. But behind that practice there was a long and considerable experience with bucket wheel excavators in Australia which there was no reason to ignore.

Reasonable care required that BHP assess the required frequency for structured inspections, and if necessary that it take professional advice as to that. The relevant risk, of course, was that some problem might develop and cause major damage to the structure in the interval between the inspections which BHP was having Krupp perform every two or three years. I am unable to see the basis upon which BHP could have dismissed that risk as being so small that the expense of some interim inspection was not warranted. The practice in Victoria, quite apart from the stricter practice in Germany, considered also with the operations manual at least as a more general advice for interim inspections, should have led to at least some “interim” inspection of the structure by mine staff in the intervals between the Krupp inspections.

BHP did not undertake interim inspections. At least in the five years prior to the 1999 inspection, there were effectively no structural inspections of the main load carrying structure, apart from the Krupp inspections.

However by 1999, the plaintiffs had apparently decided that there should be some inspection of the structure between the Krupp inspections. In the plaintiffs’ argument, much is made of the engagement of G&S Engineering at this time to assist in the maintenance and inspection of the machine. Particular reliance is placed upon the evidence of Mr Parfitt of G&S Engineering of his introduction of a comprehensive maintenance system whereby BWE operators and other crew were to undertake various inspections at different intervals, according to which parts of the BWE were to be inspected. There were 71 such parts of the BWE for which inspections were required, at intervals ranging from every week to every two years. But as Mr Parfitt explained, none of this involved a structural inspection of the tower. There was to be an inspection of the “frame”, but this was not a structural inspection. But as Mr Parfitt also explained, another firm was involved in structural inspection and testing. This was CW Pope.

Mr Russell of CW Pope was called by the defendants. In about the middle of 1999 he started to do new destructive testing on the BWE, the spreader and the hopper car. He worked on the BWE system about 10 times from then until the end of 1999. CW Pope was also involved with the “condition monitoring of the BWE system, including vibration monitoring”. The types of work which he performed on the system included a visual structural inspection. According to his witness statement, his “job on the BWE was to inspect the machine for cracks, mechanical damage, buckling, corrosion etc”, his focus being on the main load bearing parts of the machine. It was his practice to report on all visible cracking. In August 1999 he performed a visual inspection on the BWE frame structure during a maintenance shutdown. He limited his inspection to the walkways. His inspection of the BWE and the spreader took more than one day. But as appears from his cross-examination, he confined his attention, as he had been asked by his employer, to another part of the structure. He spent only about 20 minutes at the top of the tower and in evidence given by Mr Russell to the Mining Warden’s enquiry into this accident (which was tendered here), Mr Russell said that when he walked up the tower looking “for evidence of cracking in the structure in the tower”, he was unable to look underneath the walkway at what became the critical area at the top of this stiffener.

Mr Russell’s evidence is relevant to the inspection case, as I have discussed. He did not use a mirror on this inspection and he was not instructed to look specifically at this stiffener termination. Nevertheless he was instructed more generally to inspect the structure to look for evidence of any cracking, and I infer, this was because his employer had agreed or been requested by BHP to do work which included that task. By August 1999 then, the plaintiffs had put in place some system for more frequent structural inspections. The fact that this interim inspection might have been more thoroughly undertaken by CW Pope, and in particular, that it might have given its employee different instructions, does not matter. It was Mr Russell’s employer who told him to focus upon particular things. The plaintiffs had engaged CW Pope to provide, amongst other things, the service of a visual inspection of the tower. Had it been argued, I would not have been persuaded that the plaintiffs were negligent for not insisting that CW Pope conduct a more thorough inspection. To the extent that it was not thorough, that is not shown to have been the plaintiffs’ fault. This inspection was some five months after the Krupp inspection and six months before the collapse. I am not persuaded that reasonable care required the plaintiffs to undertake interim inspections at four monthly intervals and or that it was negligent for the plaintiff to have had but one of these interim inspections undertaken in the 11 months which passed between Krupp’s work and the collapse.

The defendants’ case went wider than a criticism of the frequency of structural inspections. It criticised the lack of any system for inspections. Ultimately that criticism is immaterial if the plaintiffs did take reasonable steps to have external engineering firms undertake inspections. As I have found, the plaintiffs had not done so prior to 1999 (leaving aside perhaps the very early years of the BWE). But the question is whether that failure was a cause of the collapse of the BWE. The purpose of these interim inspections was not to act as some check on the correctness of Krupp’s work. It was to protect against the risk that damage would result from cracking or something else which appeared only after the most recent major structural inspection. As it happened, there was an interim inspection (by CW Pope) within the relevant period.

Moreover, accepting as I do Mr Newnham’s evidence, I am not persuaded that inspections were required more often than annually. Had the plaintiffs considered it, they could have been reasonably satisfied with annual inspections on the basis of the extensive Victorian experience. The BWE collapsed within a year of the Krupp inspection.

Accordingly I reject the defendants’ case in relation to maintenance and inspection practices.

I should note here another matter pleaded as contributory negligence which concerns inspections. The plea is that having received Mr Friedemann’s 1985 report and its recommendations as to inspections, the plaintiffs failed to discuss them with Mr Friedemann and failed to give effect to them. He recommended that there be “main inspections of the BWE” annually. He also recommended that particular attention be paid to three nominated areas of the structure which he said should be inspected thoroughly three or four times a year. But as the defendants concede, none of these was the critical area which led to the collapse. It would have made no difference if those areas had been inspected as often as he recommended and as just discussed, his recommendation of annual inspections would have made no difference as it happened. It is pleaded that the plaintiff should have instructed Mr Thiel to inspect those three nominated areas. Again that is immaterial.

Finite element analysis

The defendants plead that the plaintiffs were negligent by not having a finite element analysis conducted in 1998, which they assert would have revealed the presence of the crack.

This case is based entirely upon what Krupp’s Mr Reiter is said to have told BHP’s Mr Haegel sometime in that year. They were then discussing the possibility that Krupp would be awarded a contract for the entire maintenance of the BWE. In the course of that, Mr Reiter says that he:

“suggested to Mr Haegel that it would be prudent, given that the BWE had by that stage been in operation for around 16 years, to do a finite element analysis (FEA) on the machine in order to obtain a clearer picture about the structural and mechanical integrity of the entire machine. While this was partly to enable Krupp to identify the risks it would be taking on through the maintenance contract, it was also my view that any responsible owner of such a machine would do an FEA after 16 years of operation. The current standard practice within the industry is to conduct an FEA every six years, however none had ever been done for the BWE. Mr Haegel, however, did not want to spend the money doing an FEA and did not agree to my proposal in this regard.”

Mr Haegel has no recollection of this matter being discussed with him and said that had he been asked about this by Mr Reiter, he would have found it to be “a most unusual request”. He explained this by saying that there are many pieces of equipment which are well in excess of 16 years old, and he had never heard of an equipment manufacturer suggesting that a finite element analysis be conducted. He added that the only time such an analysis is used is when there are significant modifications intended for a machine, such as where the carrying capacity of the equipment is to be increased and consequently there are new loads to apply to the structure.

In his oral evidence (in chief), Mr Reiter was taken to that part of his witness statement and he was asked whether in his conversation with Mr Haegel “there was any comment about others who do FEAs or the frequency of FEAs?”, to which he answered “at that time, no. But the frequency of – we had been asked by other clients to do FEAs after, say, a life of about 20 years on a machine.” There are two significant things in that answer. The first is that it seems at odds with his witness statement and its reference to an FEA every six years, unless his reference there to “the current standard practice” was to the present time rather than to 1998. Secondly, it confirms the impression from his statement that he did not suggest that BHP should do this for the purpose of detecting problems in the machine, or that it was something which other owners did with their machines. On his version, a finite element analysis was something he was suggesting if a total maintenance contract was to be awarded to Krupp.

The defendants’ case on this point goes no wider than this one conversation. It is not said that for some other reason, the plaintiffs should have known that a finite element analysis should be undertaken. From this conversation, if it occurred, Mr Haegel need not have understood that it was reasonably necessary in the interests of the safety of the machine for this analysis to be undertaken. Nor need he have understood that by not doing so, BHP would be at odds with some acknowledged safety standard or practice. Even on Mr Reiter’s version, contributory negligence is far from established.

The alleged mismanagement by the plaintiffs of the 1999 inspection

In a number of ways the defendants say that the plaintiffs failed to exercise due care in the instructions and information provided or not provided to Mr Thiel in 1999, and in the arrangements which were made or not made for his inspection.

The first of these is that they failed to “adequately inform” Krupp or Mr Thiel of what had happened in 1984 or the further grounding incident in March 1993. It is also argued that the construction drawings for the 1984 repairs should have been provided by BHP to Mr Thiel. The defendants say that these occurrences meant that the stiffener terminations warranted “particular” or “special” attention from the inspector. The argument is that had he been told of these things, some “additional attention would have been paid” with the result that he would have discovered the crack. Similarly, it is alleged that Krupp and Mr Thiel should have been provided with the drawings for the 1984 repairs.

For many reasons, it was not careless of BHP to have said nothing to Mr Thiel about these matters. Perhaps the most important is that Krupp had promised to inspect the entire machine. To suggest that something should have been said to Mr Thiel so that he would give special attention to some parts of the structure is at odds with Krupp’s promise to inspect the entirety of it and with reasonable skill and care. The plaintiffs were entitled to assume that Krupp would do that. Secondly, each of the major structural inspections since 1984 had been undertaken by an entity from the Krupp group or, when it was outside that group, some O&K entity. It was reasonable for the plaintiffs to assume that this continuity would have provided Krupp with information as to the 1984 grounding. Thirdly, some inspectors, and in particularly Mr Schander as discussed above, preferred to do the inspection “from scratch”.

In any case this alleged negligence is irrelevant because it would have had no effect. This is because Mr Thiel believed that it was important to inspect the stiffener terminations. The provision of that information could only have told him of the need to inspect areas which he already knew required particular attention.

The defendants say that it was negligent of the plaintiffs, through Mr Grant, to instruct Mr Thiel to inspect the slew bearings even if other tasks had not been finished. Mr Grant denied that he gave such an instruction. But even on Mr Thiel’s version that he did, this was inconsequential. Mr Thiel did not fail to inspect the critical area because of this instruction. He had ample time to do so and again, he believed that it was an area which should be inspected.

There was a distinct plea that the plaintiffs were negligent by failing “to identify and monitor areas of the BWE requiring special attention during any subsequent structural inspections”. This is really no different from some arguments already discussed. Again, the allegation goes nowhere because Mr Thiel well knew that he should inspect the critical area.

It is alleged that the plaintiffs were negligent by failing to provide Mr Thiel with equipment or assistance which may have enabled an inspection to be made of the critical area. However Mr Thiel conceded that he could have asked for the necessary equipment to be provided and that he knew that the plaintiffs were to provide it if required. He did not ask for any equipment or tell anyone that there was an area which he was unable to inspect.

Next it is pleaded that the plaintiffs failed to have the BWE immobilised and cleaned to permit Mr Thiel’s inspection to take place. The cleaning point was argued but nothing was pressed about immobilisation. The cleanliness or otherwise of the machine did not contribute to the result of the 1999 inspection. This is because Mr Thiel did not look at the critical area at all. And as I have discussed above in the inspection case^[105] most of the evidence, including that of Mr Thiel, was that dust was not a problem in the critical area.

The days before the collapse

Several witnesses described what they perceived was the unusual movement of the BWE within the few days prior to its collapse. The defendants say that these observations should have resulted in the cessation of operations and a thorough investigation of the machine, in which case the collapse would have been avoided.

One of these witnesses is Mr Allan, who was part of the maintenance crew on the BWE system. He said that about four days before the collapse he was doing some work on the BWE when he noticed an unusual movement of the machine: “It was giving a lurching or strange rocking motion which I had not noticed before.” He was then on the BWE beneath the slew deck. He left the machine to investigate this rocking and walked around it for about 10 minutes whilst it continued to work. He noticed that whilst the excavator was walking, its tracks were moving at a constant speed and there was no sign to him that they were moving unusually. He believes that had there been any damage to one of the tracks he would have noticed it. He thinks that he spoke to Mr Brady about his concern at the time. But otherwise he did nothing about it. He worked again on the following day and then on the night of the collapse. In re-examination, he said that he then understood that he could have shut the machine down but only “if I had found the problem” and that “I didn’t find a problem, so I had no reason to stop it”. There was then this question and answer:

“So, your understanding was you need to have identified a specific problem?—That’s right.”

At the time, Mr Allan did not think that this movement was sufficiently important for him to make a report or mention it to his supervisor.

Mr Cazzola was a fitter and turner at the mine and became the permanent fitter on the BWE in early 1999. He recalled that a day or so before the collapse, Mr Brady said to him that he was worried that the BWE was “walking in a funny way”. He recalls Mr Brady saying also shortly prior to the collapse that “that thing’s going to fall down in three days”. After this, and on the day before the BWE collapsed, he was watching it work and looking for anything out of the ordinary with the crawlers and the steering cylinders. He was watching it for about 15 or 20 minutes during which he did not see it do anything unusual in its digging work. He did not see it walk. He then answered a call to do some work elsewhere and did nothing further to see whether there was any problem as Mr Brady had described. He knew that he could immediately shut down the machine if he was sufficiently concerned about safety.

When Mr Cazzola was called away to that other work, he went to the workshop where he saw Mr Wood with Mr Kroemer, who had the responsibility for safety practices. Mr Kroemer was conducting a “safety audit”. Mr Cazzola told Mr Wood that he was waiting to see what was wrong with the machine. Mr Wood said to him that if it was up to him he would let him go back to the machine but that Mr Kroemer required other things to be done such as cleaning up a grease spill. As he finished his shift he mentioned the problem to Mr Allan who was taking over. This was on the night of the collapse.

Mr Brady was an operator of the BWE and had been for about five years prior to the collapse. A few days prior to the collapse, he said that the machine was “rocking very badly”. He was on the machine, standing on the catwalk, when:

“The whole machine seemed to be rocking really badly when it was walking that I had to hold on to the handrails to stop myself from losing balance. I had been on the catwalk when the machine was being walked on many times before and had never experienced it rocking about that badly or needed to hold on to the hand rails to stay on. The way it was rocking this time was not normal, in my experience.”

He remembers also that in these days leading to the collapse, there was “general discussion among the bucket wheel crew about the fact that it was rocking badly and that something was not quite right”. In his witness statement he recalled saying to someone around this time words to the effect that the BWE “was walking like a lame duck”. In the afternoon of 7 March, he was working as a belt serviceman when he saw that the BWE was walking with bad rocking at its front. He said that “the amount that the bucket wheel boom was going up and down” was more than he had ever seen. He radioed Mr Busk, who was the foreman on the machine that afternoon, and said words to the effect that the machine was rocking badly “with those square wheels on it”. He also remembers telling one of the other fitters (who appears to have been Mr Cazzola) that he was worried by its movements. At the end of this shift, he spoke to Mr Thomas who was the operator about to start the shift in which the collapse occurred. He told him to be careful and that there was something “not right”. He made a statement immediately after the collapse but that comment to Mr Thomas was not in it. He knew that he could have asked the BWE to be stopped but he did not do so.

Mr Bowater was a fitter based on the bucket wheel system. He had also been an operator from time to time. In a statement he made the day after the collapse he described the “rocking motion” of the machine as he boarded it on 7 March. He also described a gap between the shute baffle plate area and the top of the discharge conveyor hopper and he said that this gap was “opening and closing differently than usual”. He began checking welds on the side of the mast, feeling them with his hands to find out if welds were opening or closing. None were. He looked at the structure from other angles and saw nothing. He then left to do other work before he had checked everything on the tower. He told Mr Roberts, the BWE attendant then, of his concerns. He says that Mr Roberts did not see anything of concern. He knew that if he had a concern about safety, he was able to close down operations immediately but he said “that is okay in theory”. He agreed that he had not concluded “that there was something major wrong” and that he was just “very curious”. Mr Bowater said that ordinarily in the operation of the BWE it was “constantly nodding” and that “over a period of time the machine is constantly rocking”. So far as the rocking motion was concerned, the difference which he perceived was then one of degree.

Mr Clews was the BWE attendant on the shift during which the collapse occurred. He said that had Mr Bowater told him of his perceptions, he would have taken them seriously, but he would not have shut the machine down immediately because there would then be no symptoms to observe in order to identify any problem. Mr Clews saw an unusual flexing and movement of the BWE on this evening. But he put this down to the fact that one of the tracks was due to be replaced. He noticed nothing unusual in the walking of the machine until only minutes prior to the collapse and he has no recollection of unusual rocking. He noticed something about the discharge conveyor however, and at one stage said that he had wondered “how long this has to flex like this before it’s going to have a failure in the structure”. He explained this by saying that he was thinking of some fatigue cracking which would ultimately lead to some sort of breakage, but not the risk of immediate failure. I accept that. On my view of Mr Clews, he would have acted had he thought there was some immediate threat to safety. He was in radio contact with the operator Mr Thomas, but he did not ask him to stop the machine as he knew he could have done. He said he had seen rocking on a number of occasions which involved track problems but none of them had caused him concern that the structure might fail.

Mr BH Black (the BWE operator) said that there were problems in walking the machine but they had existed for five years. He described the movement as serious rocking or nodding so he would try to avoid walking it too quickly. He saw that “some of the BWE operators would ignore the serious rocking or nodding when it was walked and would go at full speed anyway”. He too knew that if he had any concern he could ask for the machine to be stopped.

Mr Wood was the operations supervisor, responsible for the overall supervision of the operators of the excavator and associated equipment. Although he was on the machine at some stage each day, he said he did not have what he described as “the intuitive understanding of the way in which to operate the excavator and as to the way it ordinarily moved”, so as to assess whether its movement was unusual. He said that Mr Bowater, Mr Clews or Mr Busk did have that knowledge and that if any of them had suggested to him that there was some unusual movement, that is something which he would have investigated. As to Mr Bowater’s observation of the shute gap, he agreed that if he had been contacted and told of that on the evening of 7 March, he would have shut the machine down. But as to that hypothesis, Mr Wood’s present thoughts are no doubt affected by what then occurred. What he would have done would have depended upon the particular information he then received and the particular advice of the informant. I accept, however, that if Mr Woods had been called at home on the night of 7 March, the fact that someone had seen fit to ring him out of hours would have given him some impression of urgency.

The defendants rely upon the opinion of Mr Friedemann that the appropriate course in these circumstances would have been to cease operations immediately and investigate the causing of the rocking. But amongst the facts which he was asked to assume, there was no reference, for example, to Mr BH Black’s recollection that there had been this excessive rocking for some five years.

The principal argument for the defendants in all of this is that there was a deficient system for the reporting and consideration of such problems, with the result that the various observations of these men (and perhaps others) were not made known to each other and to others at the mine. It is said that if those who had witnessed unusual movement had known of the same experiences of others, their reactions would have been different.

To some extent the experiences of one man were passed on to some others, as I have discussed. I am not persuaded that there was some significant defect in the system for the communication and recording of safety concerns. What happened was that some men saw things which were unusual, or in some cases, concerning to them. Others working with the machine at this time did not have the same impression. But no one thought that the problem was so serious that the machine should be stopped.

To an extent the recollection of some of these witnesses is likely to have been affected by the seriousness of what then occurred. It is natural that some would look back to the few days prior to the collapse and place more importance on what they saw than they gave to it at the time. To say that there was unusual rocking of the machine, of course, involves a question of degree. Ordinarily there was some rocking of the machine, as is shown by the evidence of Mr BH Black. I am not persuaded that those workers who were unconcerned about the machine’s movements were themselves negligent. And of those who were concerned, the level of their concern at the time is shown by what they did not do. I would not hold that they were negligent for taking no action. It is unrealistic now to attempt to find precisely how the BWE was then behaving because of the generality of these recollections. But overall, the impression which the BWE should have given, and the level of concern which should have resulted, is best indicated by the fact that of the many experienced and capable men who saw it working, not one then thought that the machine should be stopped. This plea of contributory negligence fails.

Conclusion as to contributory negligence

It follows that in no respect has it been proved that there was negligence which caused or contributed to the plaintiffs’ loss.

Other defences abandoned

There were other matters pleaded by each of the defendants in reliance upon alleged defaults by the plaintiffs. But they were not pursued in the defendants’ ultimate submissions. One was the plea that to the extent that the defendant was liable, the first plaintiff (BHP) was under a “co-ordinate liability” with that defendant “to make good the said losses”, so that the defendant was entitled to equitable contribution from it. Another plea was that the defendants were entitled to a reduction under the proportionate liability provisions of Part VIA of the Trade Practices Act, on the suggested basis that the plaintiffs were “concurrent wrongdoers”. There was a further curious plea by the second and third defendants that the plaintiffs were in breach of the inspection contract (by failing to advise of the history of the machine, failing to clean it and failing to provide any elevated structure or other mechanism “to allow for proper inspection of the BWE”), from which it was then pleaded that those defendants were exposed “to a risk of liability for the plaintiffs’ losses” so that they, the defendants, were entitled to be indemnified by the plaintiffs against their own liability to the plaintiffs.

DAMAGES

Introduction

As should already be apparent, the consequence of each of the wrongdoing of a defendant was ultimately the collapse of the BWE and the losses which resulted from that. As it happens there is no difference, save for one matter, as to the assessment of damages between the various causes of action. That qualification is that in the inspection case, there must be deducted the sum of $160,000 which is the cost of repairing the crack if detected in 1999.

The damages case has been argued one each side as if each defendant was liable under but one cause of action. In these reasons I will proceed upon that same assumption, initially disregarding the fact that the entitlements to damages against O&K and Mr Thiel are several entitlements. After the damages are assessed I will make the apportionment necessary to quantify the respective losses for which the plaintiffs are to be compensated severally by those defendants and I will use the expression “the plaintiffs” in that general sense, as if they were jointly entitled to damages against each defendant.

The plaintiffs did not repair the BWE. Instead they replaced it with a shovel and a mobile sizer or crusher. The alleged cost of the shovel was $18,455,459.33, of which all but $24,817.15 is admitted. The alleged cost of the sizer was $19,283,655.54, of which all but $37,868.65 is admitted. This required also the acquisition of a transformer, at an admitted cost $612,475. In total what was acquired to replace the BWE is conceded to have cost $38,288.911.07, and the plaintiffs claim $38,351,589.87.

They further claim that they should be awarded other expenses totalling $4,260,482.71. Then there are claims for damages for the loss of use of the BWE in the two and a quarter years between its collapse and its replacement by the shovel/sizer. All up the total is $50,166,920.58.

Alternatively the plaintiffs claim what they say would have been the cost of rebuilding the BWE. This claim is based on the second defendant’s tender to rebuild the BWE which it provided on 20 December 2000 (‘the December tender’). The total tender price for that rebuild (and it is argued, certain other things) was $29,174,182. The plaintiffs say that the likely ultimate cost, had that tender been accepted, was this amount increased by a factor of at least 20 per cent, resulting in a total of $35,009,018. To that they add additional expenses occasioned by the collapse (many of which are the same as those claimed for the acquisition of the shovel/sizer and (again) a claim for the temporary loss of use of the BWE.^[106] The total on this alternative basis of a repair or rebuild of the BWE is $44,496,646.12.

The ultimate cost of the shovel/sizer was more than had been expected when the decision was made to acquire it. It was expected to cost $36.9 million but it cost $38.35 million. The increase was partly due to movements in foreign exchange rates and also by a cost of $577,474 to purchase different components for the sizer.

The plaintiffs pleaded, by their amended reply to the defence of the first defendant,^[107] that ‘it was not feasible to repair the damaged BWE’ for a number of reasons. That was in response to a plea that the cost of repairing the BWE was no more than $11 million. The defendants reached that figure by an adjustment to an indicative price provided by Krupp in May 2000 for what has been described as the ‘minimal rebuild’. As I will discuss, this involved much less of a rebuild than that the subject of the December tender. Perhaps this allegation by the plaintiffs that a repair of the BWE was not feasible was meant to be limited to the minimal rebuild. But ultimately it was not pressed. In particular the plaintiffs did not argue that a rebuild according to the December tender was not feasible. Instead they pointed to uncertainties which they say existed in relation to that proposal and which made it reasonable for them to pursue the more expensive alternative of the shovel/sizer.

It was possible to rebuild the BWE to have it again do the same work. Its reliability and longevity would then have been dependent upon the extent of that rebuild. In particular it would have depended upon the extent to which parts were replaced rather than being repaired or simply left alone. But it was reasonable for the plaintiffs to consider the alternative of a rebuild of the BWE, and this they did before deciding on the shovel/sizer in about March 2001. The plaintiffs also say that there were risks of an increase in the cost of the rebuild (above that quoted by the second defendant) and of delay which could have led to increased costs in removing overburden by less economical means than the BWE whilst it was being rebuilt.

Neither side said that the plaintiffs’ loss should be measured by the cost of replacing the BWE with a new equivalent BWE. Nor was it suggested that there was a market from which the plaintiffs could and should have acquired a second-hand BWE, the cost of which would be the proper measure of their loss.

The defendants pleaded many things in response to these alternative cases. One is that ‘the market value of the BWE, and therefore the plaintiffs’ loss in consequence of the collapse, was not more than the sum of $8,800,000.’ The derivation of that figure will be discussed and it has become relevant for other parts of the case. (That is because the plaintiffs ultimately sought to rely upon this figure, as relevant in the assessment of general damages for the temporary loss of the BWE.) But the defendants did not make any final submission in support of this plea. Ultimately they abandoned any case that the plaintiffs should be compensated according to any suggested market value of the BWE. By their written submissions, they agreed that “if successful, the plaintiffs are at least entitled to the cost of repair, but they will also be entitled to more if they can lead “acceptable evidence” that (damages assessed by the cost of repair only) would deprive the plaintiff(s) of (their) right to restitution in the form of complete compensation for loss proved to have been sustained”, citing McPherson J in Davidson v JS Gilbert Fabrications.^[108]

The plaintiffs must prove that it is reasonable in all the circumstances that they should be awarded damages which exceed the cost of a repair. The defendants argued that this onus has not been discharged. That issue is affected by another question which was the subject of considerable evidence and argument, which is what would have been the cost of repair. At first that would seem to be a surprising controversy, because it was Krupp which submitted the December tender upon which the plaintiffs have based their case.

In order to compare the acquisition of the shovel/sizer with a repair or rebuild then, it is first necessary to consider the various alternatives for a rebuild which were presented to the plaintiffs and what would have been the likely costs of them.

Cost of a rebuild

On 17 May 2000 Krupp submitted three price estimates. The first was for the dismantling of the BWE and its relocation two kilometres away, for which the price given was $1,290,864. The second was for the minimal rebuild, for which the price was estimated at $12,171,647 (after dismantling). The minimum rebuild was to be to BG 60 and was estimated to take 15 months from dismantling. The third was for a more expensive rebuild, involving an entirely new superstructure and electrical systems. The price was $23,221,159 (again after dismantling). This was to be done to BG 86 “for all new work”, and the rebuilt BWE was to be “pre-accident” but with “more automation”. This was estimated to take 18 months from dismantling. For each of those rebuild proposals, the price estimate was expressed to be plus or minus ten per cent.

At this time Krupp had not conducted any extensive examination of the wreckage because for safety reasons, access had been limited. So it was not in a position to say what was the limit of the required work. In essence the minimal rebuild involved a repair or replacement of only those parts of the BWE which were then known to be damaged. The minimal rebuild proposal itself provided for a fuller inspection. But Krupp’s estimates of price and timing were upon the assumption that no further work would be required, and that items such as the tower could be re-used. The proposal provided that any changes to the scope of works would be treated as variations.

Shortly after the collapse Krupp had sent three men to inspect the damage. They were Mr Scheid, a structural engineer with the Krupp Group in Germany, and Mr Bovell and Mr Jones, each from Krupp. Mr Scheid was to inspect the load carrying structure to identify areas of structural damage and the extent to which it might be repaired or replaced. They were at the mine site for three days. Mr Scheid says that during that time he conducted a detailed inspection which involved a visual inspection of much of the structure, but that there were some areas, including the tower or mast, which he said could be “accessed ... by special request only”. It seems that he did not inspect them.

During this visit, Mr Scheid marked and made other notations on a drawing of the BWE showing the areas which he observed had been damaged. He also noted on that drawing the tonnage of the relevant section, to assist in the costing of its repair or replacement. His witness statement explained that his drawing showed a number of areas which had sustained damage and for which there was a requirement for replacement or repair and he listed some 18 areas. Curiously however, the drawing and Mr Scheid’s opinions were not reflected in the scope of the work the subject of the minimal rebuild. Seven of the “important areas” which he had identified did not appear in the minimal rebuild. And he had recommended replacement of several bent parts of the bucket wheel boom, but what was provided for them in the detailed scope of works in the minimal rebuild proposal was “straighten re-use”. There was the same description for the discharge boom, although again Mr Scheid had recommended the replacement of its damaged sections.

The defendants did not attempt to lead evidence from Mr Scheid by reference to the minimal rebuild proposal. His evidence hardly assists the defendants’ argument for an assessment upon the basis of that proposal. On the other hand, the plaintiffs made no challenge to his evidence and their short cross-examination related to matters apparently relevant only to the design case. I accept his evidence as far as it goes. But he had only limited access to the BWE and neither side asked him about the possibility that there were other components which, on closer inspection or testing, may have required repair or replacement. The defendants called Mr Bovell, but not in relation to this subject. And Mr Jones was not called.

The May 2000 proposals were sent under cover of a letter from Mr Reiter. He had attended a meeting on 26 April 2000 at BHP’s offices in Brisbane. Also present were Mr Peter Wagner of Krupp and Mr Kilgour and Mr Haegel from BHP. There was a discussion about alternatives for a rebuild and also the possible supply of either a new smaller BWE or a system involving an in-pit mobile crusher. It was that last alternative which was being promoted by Mr Wagner. Mr Reiter managed Krupp’s Melbourne office which was concerned mainly with after sales services, and Mr Wagner managed the Perth office, which was concerned with the supply of new equipment.

BHP did not ask for the minimal rebuild proposal. On 3 April 2000 Mr Haegel had written to Mr Wagner asking for four estimates. The first was for an “indicative price estimate” for the rebuilding of the BWE according to an Australian Standard, the second was for such a price estimate for its rebuilding according to the current German Standard, the third a ‘budget estimate’ for its rebuilding “according to the original standard which I understand was a combination of BG 60 and BG 86”, and the fourth a budget estimate for “alternative bucket wheel excavators capable of performing the required work”. For the third estimate, Krupp was to assume that all structural members above the first joint on the tower were to be replaced with new structures as well as the replacement of an extensive list of mechanical components. There were other specified assumptions for that alternative. It was Mr Wagner who decided to add the ‘additional option’ of the minimal rebuild.

Mr Reiter said that at this time,

“pricing the job was made extremely difficult by the fact that BHP would not allow access to the collapsed BWE so that a clear assessment could be made of the condition of the machine in order to determine which parts could safely be re-used”.

He said that it was

“never the intention of Krupp to re-use any of the structural components of the collapsed BWE and, nor was this meant to be part of the proposal put forward by Krupp. It was only ever intended that mechanical components of the machine which could be safely re-used would be re-used. It is a ludicrous suggestion that an engineering firm like Krupp would propose to re-use structural components which may be unsound.”

Those passages were from his witness statement tendered as part of his evidence in chief. In cross-examination he said that the basis of the minimal rebuild was always to extensively test whatever would be re-used, and structural steel would “obviously” be new. When asked whether that “included re-using some of the structural components”’ he said

“No. The basis of our proposal was always that the price was indicative because we cannot assess the extent of what had to be done. So most of our pricing was done on a cost per tonne basis, because we didn’t have enough data to really come down with anything as firm as that”.

So on his understanding, the minimal rebuild inevitably would have involved more than the work which was priced.

Mr Wagner proposed the minimal rebuild when on 5 April 2000 he wrote to others, including Mr Reiter, that

“there is one additional costing that we intend to submit which is not mentioned. This is the costing that repairs the bucket wheel excavator, re-using as much of the existing components as possible, replacing only damaged sections rather than whole structural elements”.

In an email he sent on 19 April 2000, again to others within Krupp, he described what became the minimal rebuild offer as a “minimalistic approach re-using some existing structural members and cutting out and replacing damaged sections.” Mr Wagner was not further involved in the preparation of the May proposals. But his understanding was different from that of Mr Reiter that it was not Krupp’s intention to re-use any of the structural components.

When the May offers were sent, Krupp did not have any structural or mechanical drawings from which a price could be calculated, as Mr Reiter in cross-examination conceded. He said

“we were asking for that information from Krupp in Germany. It was slow in coming; however, we did have enough information from the general arrangements to be able to say – make educated assessments to the tonnage and from similar machines ...”.

He said that this was one of the reasons these were just “indicative prices”.

The minimum rebuild allowed an amount of $42,169 for “inspections”. It is not certain whether this was to inspect other items, not within the minimal rebuild, which might require repair or replacement, or whether it involved simply an inspection of the work the subject of the minimal rebuild. Mr Frericks, who was called by the defendants, said that it was the former and consistently with that, he accepted that there may have been items damaged which were not then identified as such. At one point in his oral evidence, however, he seemed to accept that the sum might be for inspections of the latter kind. In any case, Mr Frericks, like each of the relevant witnesses, acknowledged the real possibility that further work beyond the scope of the minimum rebuild would have been required.

In discussing the design case, I have referred to the role in 1984 of Mr Brian Black. In August 2000, he was no longer employed by BHP, when he was engaged by it as a consultant by to advise on what should happen with the BWE. More specifically, he was asked to inspect the BWE machine and to advise on Krupp’s May estimates as well as another rebuild proposal which was from the firm WBM.

Mr Black’s evidence as to the minimal rebuild proposal is of particular weight. He had been closely involved with those in O&K who designed the BWE, when he was working in its office in Germany. He knew the history of the BWE’s operation and well understood the conditions under which it operated. He had a deep knowledge of the machine from which he was well placed to form a view as to what should be done in rebuilding it. And his evidence corresponds with what he was saying to BHP at the time, when he was not engaged to provide evidence but independent advice as to what should be done. .

He said:

“You could not trust the BWE’s structure after the failure ... .I would not re-use the steel even if it was not obviously damaged. It is difficult to re-weld pieces of steel as each piece is specifically designed for the BWE. Each and every individual weld on the structure would have to be examined, both visually and ultrasonically, to determine whether there was damage. Further, by the introduction of new welds where steel was replaced, it would have to be shown that the new welding was satisfactory for the load conditions.”

When cross-examined, he held to that view, and said that it was a reference “to the structure above the bolted joint on the turntable”, of which he said: “I felt that all of this – because of the way of the collapse, that all of this was suspect.” He said that it would not have been impossible to simply repair what then appeared to be damaged but that this would have left “too many grey areas using material that had gone through that collapse”, and to him “a conservative attitude was the best to adopt”. He said

“If the mine said ‘Look, we want it to last five years’, that’s a different matter. But my impression was – or my brief was that it went back to the original condition.”

By “original condition” he appeared to be referring to its condition when new. His reference to the alternative of it “lasting five years” indicates that he thought the BWE with the minimal rebuild would last only something of that duration. That was less than the plaintiffs had been entitled to expect as the total life of this machine. They are not to be limited to an award of damages in an amount which would have given them a machine for only that period.

Mr Black said that any mechanical parts which in any way contributed to the stability of the machine had to be replaced and that some of this would be “difficult to detect” so that the “risk (was) not worth taking.” He said that the damage may also have involved components such as brakes, bearings, drums and sheaves which “precluded their further use”. In relation to steel parts, he said that everything above the slew deck was too risky to re-use. He was critical of the assumption in the minimal rebuild proposal that major components such as the bucket wheel shaft and the ball race could be re-used.

Overall Mr Black believed that there had to be much more investigation by inspections and in some cases other testing, to assess what was reasonably required, after which it would be necessary to prepare a detailed specification upon which suppliers such as Krupp could be asked to tender. He reported in those terms to BHP at the end of August 2000. Then he was asked to and did prepare that specification, upon which Krupp provided the December tender. I accept Mr Black’s evidence, which even if taken alone, would establish that the amount quoted for the minimal rebuild underestimated the cost of an appropriate rebuild. But of itself it does not prove what was that cost.

In June 2000 the BWE was inspected by Professor Hulsmann and his colleage from Schippke & Partnesr Dr Remke. They spent just over a week examining the machine and making an assessment of the damage to those parts which they could see. This was a much longer inspection of the wreckage than was undertaken by any other witness. In October 2000 they produced for the plaintiffs a report of 27 pages entitled “Scope of Damage and Costs to Repair”. The opinions in that report have weight because they were given after a relatively extensive inspection and because, like Mr Black’s report, they were provided as independent advice to BHP as to what to do with the BWE, rather than in the context of the collection of evidence. Indeed this Schippke report was not tendered by the plaintiffs: it was tendered by the defendants in the course of the cross-examination of Professor Hulsmann. (Dr Remke was not called.)

They concluded that the cost to repair the BWE was in the range of US$12 million to US$14 million. They compared this to what they said would be the cost of a new BWE, which was in the range of US $20 million to US $24 million. The exchange rates with the US dollar for October 2000 are in evidence, and the rate was then approximately US 0.54 per Australian dollar. So in broad terms their estimate was that the cost of repair would be A$22 to A$26 million. Professor Hulsmann was asked a few questions in cross-examination of this report but there was no challenge to the opinions there expressed: as I have said, it was the defendants who tendered it. In that brief exchange within what was a very extensive cross-examination of Professor Hulsmann, he agreed that some of the items to be repaired according to that report were things which required repair not from the collapse, but from the pre-collapse condition of the machine. There were several items expressed to be within that category in the schedules in this report. There were also other items where the authors were unable to say whether a repair would be required, but where some inspection or testing was certainly required. For the most part however, what they priced as repairs were things which, in their opinion, had to be repaired.

I have set out in the table below a summary of their report. There are three categories: items definitely in need of repair or replacement; items requiring further inspection, the repair or replacement of which could prove to be necessary; and those where repair or replacement was required but for some reason other than the collapse. In that table there are some numbers which appear in parenthesis. This corresponds with their report, in which they showed in parenthesis an estimate for the repair of an item using the existing parts, alongside the cost of repair or replacement with new parts. (The amounts are expressed as multiples of US$1,000.)

Item

Definite repair or replacement

Further inspection

Replace or repair for other reasons

Total

Travel gear

875

895

Undercarriage

848 (654)

885 (691)

45 (25)

51 (31)

936 (722)

Turntable

806

198 (100)

60 (40)

1064 (946)

Tower frame

1306

Counterweight girder

777

100

920

Bucket wheel boom

1722 (1697)

44 (30)

37 (20)

11 (7)

30 (20)

139 (94)

119 (70% of

cutters)

136

1997 (1927)

Discharge equipment

430

95 (50)

60 (45)

290 (150)

445 (245)

891 (691)

Total for machine

5926 (5707)

1811 (1428)

272

8009 (7407)

Additional costs for transport, erection (15%)

889 (856)

271 (214)

1201 (1111)

Additional costs for electrical and electronic control and equipment

2770

Total

9585 (9333)

2082 (1642)

313

11980 (11288)

There was a rider in relation to the substructure within this report where the authors said:

“We discovered no essential damage at the substructure of the BWE. Therefore it is only necessary to make an extensive check of these parts as crack and ultrasonic test and inspections of the welds. We have calculated only the costs to (do) the check and some costs of repair. If the results of these checks should be very bad, we
must assume that the estimated cost to repair would increase (by) about 3-5 million US$.”

Apparently with that contingency in mind, the authors concluded that “the costs to repair are in a size of 12 to 14 million US$”.

So what appears from this table is that of the US$11.98 million as the estimated cost of repair, US$9.585 million was for items, in their view, requiring repair or replacement and a further US$2.082 million for items possibly requiring repair or replacement. It further appears that the use of existing parts would not have greatly reduced the overall cost.

This report thereby recommended much more extensive remedial work than was proposed by the minimal rebuild. It adds to the impact of Mr Black’s evidence in proving that an appropriate rebuild was much more extensive and it provides cogent evidence that a reasonable estimate of the likely cost of repair was at least of the order of A$20 million.

The defendants, having tendered this Schippke report, ultimately made no submission about it. Their written submissions noted it, without specifically arguing that it should or should not be accepted.

The defendants sought to support the minimal rebuild proposal by evidence from Mr Frericks. He is an engineer in the employ of the Krupp Group in Germany. It seems that the idea of procuring an opinion to support the minimal rebuild argument came fairly late to the defendants, because his report is dated 28 October 2007.

He had not inspected the BWE either before or after it was dismantled. He based his opinions upon photographs and, it emerged during his oral evidence, upon what he had been recently told by Mr Scheid. Unfortunately it is unknown what Mr Scheid said to him and at least for that reason the evidence of Mr Frericks has less weight. And as to the photographs, Mr Frericks agreed that he would have been assisted by inspecting the machine and at one point he seemed to concede that he could not make an assessment of the damage simply from looking at photographs, saying that “photographs provide a good first indication but they are not sufficient of themselves.”^[109]

In some respects Mr Frericks said that the minimal rebuild was more than was required. It provided for “a complete new bucket wheel and inner ring shute.” But Mr Frericks wrote that

“it would have been conceivable and technically reasonable not to replace the damaged bucket wheel in its entirety, but to repair it. Since the bucket wheel consists of several sections which are assembled and welded together on site, it would have been possible to remove and replace the damaged sections only”.

The proposal itself had specified that many items would be “inspected and re-used”, meaning that they would be re-used if the inspection revealed no need for repair or replacement. Yet Mr Frericks felt able to say from the photographs alone whether there was any damage. For example, one of those items was the bucket wheel shaft, about which Mr Frericks wrote:

“The bucket wheel shaft needs to be inspected in great detail and examined to ensure there are no cracks (dye penetration or magnetic powder test, ultrasound test). It can, however, be assumed that the shaft, being of solid construction, was not damaged by the forces arising from the boom grounding.”

So Mr Frericks seemed to be at the same time saying that the item should be thoroughly inspected and tested but that a favourable outcome from the inspection could be assumed.

He also suggested that the price of the minimal rebuild, or perhaps at least the cost to Krupp, could have been decreased by manufacturing the structural steel components in China, at a saving of 15 to 20 per cent. He said that this would have allowed Krupp “to offset additional expense for any additional deliveries which could have become necessary in the minimal rebuild” and then expressed his conclusion that “the overall price of $12.17 million was realistic and ... did not contain any price increase risks of significance.” The suggestion about the manufacture of components for this rebuild in China is surprising, because it does not seem to have occurred to anyone within Krupp when it was preparing and submitting this proposal in 2000. Now some seven or so years later, Mr Frericks felt that this would have provided a sufficient buffer for potential price increases from the discovery of further matters needing repair. Mr Wagner said that the May 2000 estimates followed his communications with Krupp in Germany, but again China does not seem to have been considered.

The minimal rebuild was to be performed according to BG 60. The complete rebuild of the superstructure proposed at the same time was to be according to BG 86. The plaintiffs, largely in reliance upon the evidence of their witness Mr Matz, were critical of the proposed use of BG 60, which by then of course had long been superseded. Mr Frericks wrote that because the BWE had been built according to BG 60 (modified by additional load assumptions), it was appropriate to rebuild it to the same standard because this would continue “to provide a suitable design basis which ensures the safety of a BWE”. He wrote that:

“Dimensioning the new superstructure components according to BG86, for instance, as provided for in the complete superstructure rebuild tender, would have resulted in increased connecting forces at the turntable and substructure, and these elements would not have been capable of absorbing these without additional measures. The substructure would probably have had to be reinforced for that reason. On the other hand, that measure would not have been very sensible considering that the machine had been running for 18 years without any problems.”

Mr Matz, said that any rebuild should have been done according to a current and not an outdated standard. On the other hand, Mr Black wrote in his report to BHP of August 2000 that even a rebuild of the entire superstructure should be on “the basic standard of BG 60 for design load cases”, but that “the welding detail in all areas carrying loads essential to the stability of the machine shall be stringently evaluated to the latest codes ...”. So there is some support for Mr Frericks on that point.

Mr Frericks was strongly challenged for the fact that a draft of his report had something else about BG 60, which was not in the report which was tendered. But read in context I do not think that the difference is significant.

Overall I am unable to accept Mr Frericks’ evidence that the minimal rebuild was appropriate. His contentions that in some respects the minimal rebuild was excessive and that some things could have been done at a lower price, make his evidence less persuasive. Unlike Mr Black and Professor Hulsmann, he was not independent and had not seen the BWE. I prefer their evidence, and find that the minimal rebuild would not have provided the plaintiffs with a reasonable repair.

In his report of August 2000 headed “Evaluation of Repair/Replacement of the O&K Bucket Wheel Excavator”, Mr Black was clearly of the view that a rebuild of the BWE was feasible. He wrote:

“The crawler and sub structure machine groups are intact and are reusable, subject to a thorough and satisfactory inspection to agreed criteria, of all load bearing structures and the load support points on the fixed and moving crawlers.

The main slew bearing should be replaced and the discharge conveyor support and luffing cylinder support bearings should be inspected and replaced if necessary.

The first bolted joint stubs of the main frame which are integral with the substructure would be the starting point for a replacement main frame.

All other machine groups, excepting the main frame, could be rebuilt using the original design criteria and load case detail.

These machine groups are:

-Bucket wheel boom with Stays to Rope Support

-Rope support structure

-Discharge Boom

-Counterweight Boom with Stays to Main Frame

Inspection shows that these structures, although damaged by the collapse of the machine and cut into manageable sections for dismantling, were not subject to structural distress prior to the collapse and were in operational condition after eighteen (18) years of use.”

He continued that “all replacement structure shall be from new materials. None of the original structural material is to be used”. All mechanical components supporting the weight of the machine and contributing to its stability were to be “replaced as new” and he there listed them. Further mechanical components which had been damaged were to be replaced, and again he listed them. Certain other listed mechanical components were to be refurbished. All electrical control systems and lighting, he said, should be replaced with “modern day equivalents.” Mr Black then prepared the tender documents for that rebuild and it was upon that documentation that Krupp submitted its December tender.

In the December tender, Krupp departed from the tender documents in that it requested the use of the current standard DIN22261, explaining that

“a major deviation between BG60 and BG86 and DIN22261-2 respectively is the introduction of dynamic effects for different construction elements and some modifications in loading combinations.”

The December tender was for a price of $27,893,461 plus the following:

“Supply and deliver ball path	$778,693
Installation PC sum	$143,373
Supply and deliver discharge boom slew bearing	$358,655”

making for a total of $29,174,182. Krupp toffered to reach practical completion within 108 weeks after the date of acceptance of the tender.

The plaintiffs claim that the probable cost of that rebuild was not $29,174,182, but rather that amount increased by a factor of 20 per cent. The defendants concede that if their case for the minimal rebuild is rejected, then it should be found that the reasonable cost of repair is $27,893,461 and that the amount which it tendered for the ball path should not be allowed because, it is argued, the plaintiffs have not proved that the collapse of the BWE was the cause of its required replacement.

Of the December tender that leaves the component which is “supply and deliver discharge boom slew bearing” for which the tender price was $358,655. In his August 2000 report, Mr Black wrote that

“all (mechanical) components which support the weight of the machine and contribute to stability are to be replaced as new”

and that they included the discharge boom slew bearing. At page 19 of the scope of works in the tender document he wrote:

“The contractor shall allow for the supply and fitting of a new main slew bearing and discharge conveyor slew bearing. These items should be shown as separate costs in the Tender Price Schedule”.

The discharge conveyor slew bearing had not been the subject of the same request in April 2000, when BHP had sought estimates from Krupp. On that occasion, Mr Haegel had written that

“the price should include the installation of a new and complete slew bearing. This should be itemised separately and will be subject to further inspection.”

This appears to be a reference to the main slew bearing and not the discharge conveyor slew bearing. Why then were these two components, the ball race and the discharge boom slew bearing, singled out and not treated simply as part of the rebuild of the BWE in BHP’s tender document?

The answer would appear to be that BHP did not consider that it was insured for the replacement of these components. I discuss below a document prepared by Mr Ellery in early 2001, entitled “Shovel crusher project case”, which explains most of the reasoning behind BHP’s decision to acquire the shovel/crusher instead of rebuilding the BWE. Mr Ellery referred there to the anticipated receipts from the plaintiffs’ insurers, according to whether the shovel/crusher was acquired or the BWE was rebuilt. For the rebuild, he wrote that it was expected that $30.14 million would be received made up of “BWE rebuild $27,894,000” together with “project costs” of $851,000 and a five per cent contingency sum of $1,394,700. The project costs were to cover project management as well as the provision of a large “special purpose construction pad”. So clearly at this time the plaintiffs were not expecting to be indemnified by their insurers for the loss of a ball race or discharge boom slew bearing. This appears to have been the reason why the plaintiffs asked for these items to be separately priced. An explanation for these items being in a separate category is that their costs did not represent the repair or replacement of something which had been damaged in the collapse, but instead of something which otherwise needed replacement.

As to the ball path, Mr Black’s opinion, as expressed in his witness statement, was that there was a “fair chance” that the ball path had been damaged in the collapse. This was because

“when the BWE collapsed ... the loading upon the ball race would have become uneven. This means that the loading where the balls meet the upper and lower rings of the ball race could have resulted in indentation of the surface of the rings in those locations. The ball race is designed as having hard balls and soft rings i.e. over time the rings are sacrificial elements. The ball race is replaced when the upper and lower rings are within a specified dimension. The hardness of the ring rolling surfaces decreases with depth and this results in an increasing rate of wear. ... (At para 5.12) From my recollection, the original life of the race was estimated to be 8-10 years. When machine collapse occurred the life of the bearing was 18 years. I think it would be very prudent to take the bearing apart and have a very close inspection of the components.”

In cross-examination he gave this evidence:

“And the existing ball path to be visually inspected and remain, that’s the point I was just talking to you about. The existing ball path might have been worn out, but it wasn’t obviously damaged? – Yep.

And so this quote proceeded on the basis that since it wasn’t damaged, you don’t get a new ball path when all that happened is you wore out the old one? – It depends upon the duty that’s envisaged for the machine afterwards.

Right? – Because the ball path for that machine at that time was about a good eight years beyond what was the original design life.

That is the point you make in 5.12, they’d already had a pretty good run with it? – Yes.

Really, almost double its life, in fact more than double its life? – Yeah.”

So Mr Black did not say that the ball path needed replacement probably as a result of the collapse. The highest he was prepared to put it was that there was a “fair chance” that it was damaged then. This is an example of where he was prepared to make concessions against the interests of the parties which had called him.

I discuss below the evidence of Mr Matz, including his evidence as to the ball path. As there appears, his evidence is unpersuasive on this and many other points.

The best evidence for the plaintiffs for the ball path replacement is in that Shippke report, where Professor Hulsmann and Dr Remke wrote that “ball path lower part ... with ball cage, steel balls ... and oil catching channel” had been “partially damaged and deformated ... by structural members which fell down” so that “no repair is possible”. They further wrote that “ball race with fasting, gearing cover and roller bearing” had been “partially damaged and deformated ... by structural members which fell down.” Professor Hulsmann was not asked about this when questioned about this report. And of course it was the defendants who tendered it.

Against this, Mr Frericks said that it was unlikely that the ball path was damaged by the collapse but he conceded that some measurement of the ball path would be necessary to exclude that possibility. For reasons earlier discussed, Mr Frericks’ opinion is of little weight and the opinion expressed in the Shippke report should be preferred.

Professor Hulsmann was an impressive witness. But unfortunately he was not asked about this matter at all. Mr Black’s evidence shows the real prospect that the ball path needed replacement in any event and indeed, that this was just as likely as that it was damaged in the collapse. Ultimately I am not persuaded that the plaintiffs have discharged their onus of proof in relation to this item.

As to the discharge boom slew bearing, the plaintiffs’ argument refers to no evidence in support of this component. And there is the fact that the tender document and Mr Ellery’s report treated this item, together with the ball path, as in a different category from the other items the subject of the December tender. The plaintiffs have not proved that this item had to be replaced because it was damaged in the collapse.

Accordingly the plaintiffs should be awarded at least $27,893,461, the price of Krupp’s December tender. The next questions are whether there are other sums to be added to that amount to represent the full cost of a rebuild of the BWE.

In order to prove their claim for an extra 20 per cent on the December tender, the plaintiffs called Mr Matz, a German engineer. He provided an opinion on many matters but of immediate relevance are his views on the likely cost of a rebuild. In his report of 19 October 2004, which with attachments extends to nine volumes, there are some three pages of text which discuss the December tender and the likely additional costs. In his view, those extra costs would have been of the order of $8.5 million, resulting in a total cost for the rebuild of the BWE of about $38 million. That report was supplemented by evidence in chief given orally. Nevertheless, this evidence was remarkably short of detail. He said that his estimates of the costs of these additional items did not come from any calculations, because he had no drawings or parts lists. Instead, he “benchmarked”. He claimed that each of his estimates was “based on experience of similar machines, of similar equipment, of similar work being done”. At another stage he was asked whether there was some spreadsheet which showed any calculations, to which he answered:

“Not any more … because I was only interested in the budget figures, I deleted everything … I probably came up with a more detailed calculation that backs up the figures said here.”

Mr Matz was called to prove a case for an allowance of a further 20 per cent on the December tender ($5.834 million). In the context of such a lengthy report, and the sums involved, the absence of any explanation for his estimates is remarkable.

Mr Matz said that the ball path required replacement “as a consequence of accident impact and long storage”. He said that a replacement with a reinforced ball path could be required, “including structural modifications to slew platform and substructure ring girder” because of the use of the current German standard (DIN 22261) and the addition on the structure of further access walkways. These changes to the slew platform and the ball path, with installation, were estimated by him to cost in total $2.75 million. Yet Krupp offered to replace the ball path for $922,000, of which the installation was a “PC” sum of $143,373. In its May 2000 estimates, Krupp had estimated the cost of a new ball path at $921,555.

Mr Matz failed to satisfactorily explain why there was such a difference between his estimates and the amount quoted by Krupp. He referred to what he saw as the need for some modifications because of the increased weight of the superstructure. But one reason for this increased weight was the application of the current German standard and Krupp seems to have allowed for that in its December tender in all respects. Mr Matz suggested that Krupp's December tender should be understood as providing for the current German standard for the superstructure but not for the ball path. That is not the effect of Krupp's tender. It would be remarkable if Krupp had tendered upon the basis of the current German standard for the entire superstructure but for the replacement of something beneath it on a different and outdated standard. Further, Mr Matz conceded that he had not done any analysis to identify just what differences there should be between the proposed ball path and the present one. In cross-examination there was this evidence:

“Would it be fair to say you haven't done any analysis of the actual elements that you are talking about to see what it was and what might need to be done to increase it?--- No, for sure not. I just go by the increased weight, and I know that the designer bids and puts so much money in the machine he's selling, there's profit, just to do the job. So, when you increase the task of doing the job, you have to increase the components.”

This is an example of what I see as the willingness of Mr Matz to exaggerate and to offer opinions, and in particular estimates of costs, without any apparent foundation. Because overall I think his evidence should be given very little weight, his opinion that the ball path needed replacement in consequence of the collapse is not persuasive.

Another of his extra items was described as “site installations, eg barracks, power and water supply, yard equipment, security services”. For this item his estimate was $500,000. As he had to concede in his oral evidence he had simply overlooked the fact that all of this had been included in the December tender.

Another item was for the:

“design, supply of materials and construction of civil works, including bulk earthworks, ground levelling and consolidation, drainage, trestle & equipment foundation, trestles, anchorage, plant access roads etc.”

This was not included in the December tender and there would have been some cost to the plaintiffs for the provision of the construction site and proper access to it. That is why it appears in Mr Ellery's “Project Case” document as part of the cost of a rebuild. As already noted, Mr Ellery referred there to “project costs” of $851,000 which covered project management as well as the provision of a construction pad. Beyond Mr Ellery's estimate however, I am not persuaded by Mr Matz that anything within this item was required. BHP was well placed to know the costs of whatever works were necessary for a construction site and access to it at its own mine, and Mr Ellery’s estimate is likely to have been correct.

Item no 3, estimated at $250,000, was for:

“interface hardware and software between new electrics and central mine control and communication system, especially with transportation system controls (conveyors, spreader and mine control centre).”

On this basis then, BHP, and in particular Mr Ellery, has overlooked this cost in its assessment of the cost of the rebuild against the alternative of the shovel/sizer. I am not persuaded by Mr Matz's evidence that there would have an extra cost. Nor am I persuaded by his so called “benchmark” estimate of $250,000. In this and in other instances, he sought to justify his estimates of costs as “benchmark estimates”, without at the same time explaining what the relevant benchmark was.

Another item was “supply of consumables and spares for modernised system components (electrical and mechanical)” for which his estimate was $750,000. However it appears that these spare parts were not needed for a rebuild of the BWE, but were required for the future maintenance of the machine. This machine had always needed spare parts.

Then there is an item described as “follow-up repair upon inspection findings on components not included for refurbishment e.g. gear-boxes, couplings, crawler steering, hydraulics etc”. Mr Matz allowed $1,250,000 for this. Again, the estimate lacks any apparent basis. But the existence of a risk of substantial extra costs from components still to be properly inspected was real and was considered by both BHP and Krupp at the time. In the Project Case Mr Ellery allowed five per cent for this contingency and others. When he was cross-examined, his attention was drawn to that figure but he was not challenged upon it. Similarly in the evidence of Mr Kilgour, there was this exchange:

“… The bucket wheel rebuild option which calculated the total cost of $30.1 million, including a contingency for unknown costs?--- That's right.

And that was an assessment which had been made in consultation with you and with which you agreed, I suggest?--- Yes.”

Krupp considered the risk of these further costs by ensuring that its tender did not oblige it to bear the cost. In section 10 of its December tender, it proposed amendments to the terms of the tender document provided by BHP to provide that “prices for all refurbished items provided in this Tender are conditional on inspection, at the time of refurbishment. Any unforeseen conditions will constitute a variation of the contract”. Similarly there were the frequent references, on pages in the tender dealing with gear-boxes and other mechanical items, that “worn or damaged parts will be quoted at the time of inspection”. The plaintiffs argue that Mr Reiter agreed that the price might vary by 15 to 20 per cent. On one view of that evidence, however, Mr Reiter was speaking of a potential variation in the cost to Krupp, rather than in the contract price. He spoke there of the uncertainty in the pricing of things which were known to be work required under the rebuild, rather than specifically in relation to items which upon further inspection would need repair or replacement. Nevertheless, Krupp was careful to ensure that the proposed terms placed the risk of further but then unknown defects upon the plaintiffs. I am satisfied that this risk was substantial and should be in some way recognised in the assessment of the likely cost of the rebuild.

His next item was the cost of the services of an Independent Expert, estimated by Mr Matz at $250,000. Mr Black had proposed such an expert in his August report writing that:

“Structural and stability design of new machines and modification of existing machines is subject by law in Germany to review by an Independent Expert. This is not a requirement under Australian law but is a subject the purchaser may wish to discuss with tenderers. Considering the main frame failure of the original machine it would be prudent to have the design of the replacement frame and the revised stability calculation reviewed by a recognised Independent Expert. … There are consultants within Australia who could review the main frame structural design but overall review, in my opinion, would be best performed by an Independent Expert knowledgeable of the process as carried out in Germany.”

I accept that such an expert was reasonably required. I do not accept Mr Matz's assertion as to the cost. Apart from his evidence, the plaintiffs rely upon what was charged by Mr Friedemann, acting as such an expert, when the BWE was constructed and commissioned more than 20 years earlier. The document recording his appointment seems to have provided for a fee of 140,000DM. I do not know what was the then equivalent in Australian dollars and in any case this hardly seems a reasonable way to prove the likely cost of an inspection in 2003. I am unable to quantify that, but it should be brought into account in assessing overall the likely extra cost beyond the December tender price. I infer that BHP did just that in reaching the five per cent contingency referred to by Mr Ellery and Mr Kilgour.

Mr Matz said that there was a further item involving a “complete supply of manufacturing documentation …, drawings …, part lists and spreadsheets”, together with a “complete supply of operation and maintenance manuals” in electronic form. In his report he said that the cost would have been $250,000. At the commencement of his oral evidence, he halved this, conceding that some drawings would have been provided under Krupp’s December tender. Mr Matz maintained that there would still be this additional cost of $125,000 for other drawings. It emerged that he had in mind drawings which did not relate to components provided under the rebuild, but components unaffected by the rebuild. Assuming that BHP did not have such drawings, the cost of their provision would not be part of the cost of a rebuild.

The next of his items was “function and performance tests of the rebuild (sic) machine, entire machine” for which the estimate was (again) $250,000. The December tender allowed for what was described as “dry commissioning” of the rebuilt machine, but specifically excluded “wet commissioning” and performance testing. There is no evidence as to the likely cost of that item alone, save for that of Mr Matz. I accept that this further testing was required in a rebuild and that its cost was not included in the December tender and it should be allowed for in some way. Again, however, it is likely that BHP did so within the five per cent allowance for contingencies.

The next item refers to the warranties to be provided, or not provided, under the December tender. Krupp proposed a warranty for new parts but not for re-used or refurbished parts. Krupp’s Mr Frericks said that had such a warranty been insisted upon, then a reasonable allowance for that would have been $260,000, being 10 per cent of the value of the re-used components. The warranty offered for new parts was for a period of 12 months. Mr Matz said 24 months was appropriate so that there should be an allowance for the cost of that warranty. Overall, the cost of these more extensive warranties was estimated by Mr Matz at $1 million. Again, this was explained simply as another “benchmarking” estimate.

At this point there are three things which must be noted about the warranties which Krupp offered. The first is that the plaintiffs do not plead that one of the factors justifying a 20 per cent increment is this matter of the warranties. The particulars of the relevant paragraph of the statement of claim refer to the 20 per cent as covering

“the cost of contract preparation and administration, principal superintendents and subcontractors, site services, contingency for repairs to principal supplied components (crawler frames and tracks), variations, costs increases and time over-runs.”

Secondly, the complaint that the warranties offered by Krupp were inadequate does not seem to have been of particular concern to BHP at the time. In particular, there is no reference to this in Mr Ellery's Project Case. There is a reference to the risk of the BWE being less reliable than the new shovel/crusher but there was nothing written of the inadequacy of the warranties. The Project Case does say that:

“This (rebuild) option was considered to contain considerable technical risk in relation to the mechanical reliability of the bucket wheel as the suppliers would not offer the machine productivity guarantees normally provided with new machines.”

This seems to accept that the warranties offered by Krupp were not unusual or unreasonable. Thirdly, Mr Black would not have considered a 12 month warranty on, and only on, the new components as unreasonable. In his witness statement, in discussing the minimal rebuild, he said that a 12 month warranty on all new components was reasonable and that for rebuilt components, such as gearboxes, there should be a six month warranty. In his August 2000 report he wrote that:

“Tenderers should be requested to advise the warranty period for the machine components supplied from and including the main slew race. A usual period would be 12 months although a major OEM (original equipment manufacturer) may offer extended warranty on the main ball race. Tenderers should evaluate the existing condition of the crawler and substructure machine groups and, after repair or replacement of components if necessary, include these groups in the warranty period. The costs associated with this could be treated as a provisional sum.”

Especially given the absence of any reference to the warranty in the Project Case document, or (apparently) in any other contemporaneous document, the claims by some witnesses such as Mr Kilgour, that the limitations on Krupp’s liability and the warranties proposed by Krupp were of concern, is difficult to accept. There was no response by BHP to the December tender. Had the extent of the warranties been a matter of concern as now related by Mr Kilgour, it is likely that BHP would have enquired about an extended warranty.

For these reasons, had the plaintiffs decided to rebuild, it is unlikely that they would have sought and obtained, but at a greater cost, more extensive warranties. There is no basis for increasing the assessed cost of the rebuild for this item.

The last of Mr Matz's items is for “miscellaneous”, for which he proposed the sum of $750,000. He gave no details of what this involved in his report or in his oral evidence. Its only relevance is as a further indicator of his unreliability.

As I have indicated in the course of discussing Mr Matz's evidence, there are some matters which require an addition to the amount tendered by Krupp in assessing the likely rebuild cost. The best indication of what should be added is what BHP, no doubt after proper consideration, thought should be added when considering whether to rebuild the BWE or acquire the shovel/crusher. Mr Ellery wrote that there should be added to the tender price the anticipated project cost of $851,000 and a five per cent contingency sum (which equalled $1,394,700). As already noted, Mr Ellery was not challenged on those estimates and nor was Mr Kilgour. An allowance of some amount for the cost of repairing or rebuilding what was not known to be damaged is necessarily imprecise. But the plaintiffs have not demonstrated why their own allowance of five per cent at the time was an under-estimate. On the other hand, a five per cent allowance does not seem an extravagant sum for the cost of the unknown and other things such as the Independent Expert and performance testing of the rebuilt machine.

The plaintiffs also argue that some amount should be allowed for exchange rate variations. The risk of adverse movements in currency values affected both the rebuild and the shovel/crusher alternatives, as Mr Ellery wrote in the Project Case. Had BHP accepted the December tender, the tender price would have been increased by a fall in the Australian dollar against the Deutschmark. In condition 9.4 of the tender, Krupp wrote:

“Our offer is based on the current exchange rate of A$1 equals DM 1.216. Any variations to exchange rate as date of invoice will be to BHP Coal account.”

Elsewhere in the tender, Krupp provided that the components to be supplied from overseas had prices totalling $2,937,440. Accordingly, the depreciation of the dollar against the Deutschmark would have led to an increase in that sum, thereby affecting the ultimate cost of the rebuild. Although this point does not appear to have been pleaded, the defendants knew that it would be argued. Indeed, it was a letter from the solicitors for the defendants which was tendered by the plaintiffs to prove the relevant exchange rates for the purpose of this argument. According to that letter, the exchange rate by May 2003 was A$1 to DM 1.0956. So, had the BWE been rebuilt according to the December tender, the price would have been increased by approximately $327,000. Measured by the exchange rate a month earlier (1 April 2003), the increase would have been about $356,000 but measured by the exchange rate a month earlier again, the increase would have been $280,511. Of course, the exact date for this purpose is unknown. The contract provided for a completion period of 108 weeks from the formation of the contract. In these circumstances, the sum of $320,000 will be allowed.

The result is that the plaintiffs have proved that the cost of the rebuild of the BWE would have been just what they were expecting when deciding between the rebuild and the shovel/crusher (together with that component for the movement in exchange rates). I find that the cost of the rebuild would have been a total of $30,459,161, made up of the December tender price of $27,893,461, a five per cent contingency sum of $1,394,700, Mr Ellery’s estimate of project costs of $851,000, and that component of $320,000.

The shovel/sizer cost – should it be allowed?

The next issue is whether the plaintiffs should be compensated upon the basis of this rebuild or upon the basis of the cost of the shovel/sizer system (which I will call the replacement claim). The plaintiffs must prove that it was reasonable for them to replace the BWE with this new system. But what is reasonable in this sense is concerned with the mitigation of damage. The question is what was reasonably necessary for the purpose of making good the plaintiffs’ loss.^[110] The question is not whether the acquisition of the shovel/sizer was reasonable as a business decision. Yet much of the evidence seemed to be concerned with that question, rather than with whether the acquisition of that system was reasonably necessary to put the plaintiffs in the position which they would have enjoyed but for the collapse.

In assessing what was reasonable in the relevant sense, a court will not scrutinise a plaintiff’s conduct “with an eye focussed for criticism”, and a plaintiff “ought not to be weighed in nice scales at the instance of the party whose [conduct] has occasioned the difficulty. It is often easy after an emergency has passed to criticise the steps which have been taken to meet it, but such criticism does not come well from those who have themselves created the emergency”: Banco de Portugal v Waterlow & Sons Ltd^[111] cited in Davidson v JS Gilbert Fabrications Pty Ltd^[112] and AHR Constructions Pty Ltd v Maloney.^[113]

Further to the cost of the shovel/sizer system, or alternatively the cost of the BWE rebuild, the plaintiffs claim a number of items as “additional expenses occasioned by the collapse”. As already noted, for the most part there is no difference between the replacement claim and the rebuild claim. There are two amounts claimed by the plaintiffs under the replacement claim which are not claimed under the rebuild alternative. They are $455,557 for the additional cost of “bunding” and $819,863 as the cost of the ultimate dismantling and removal of the BWE from the mine site. Those items are now relevant in comparing the alternative courses open to the plaintiff in 2001. However, apparently they were not so important to BHP at the time. So far as the respective costs of the alternatives were concerned, BHP’s assessment then was that there was an “incremental capital spend of $6.7M”. As set out in the Project Case, the comparison then was between the cost of the rebuild ($30,139,700) and the cost of the shovel/sizer system ($36,926,158).

Mr Kilgour was the general manager at Goonyella from 1996 to 2002. He was very much involved in the decision to acquire the shovel/sizer. In his witness statement he expressed several reservations which he said he held at the time about the rebuild proposal. He was concerned that the price might increase, depending upon what was discovered to be the actual condition of some components. He was also concerned, he said, by the warranty proposed in the tender. But as already discussed, the warranty did not so significantly depart from that which Mr Black had anticipated. Mr Kilgour acknowledged that the warranty may have been able to be further negotiated and that “detailed contractual negotiations between parties was relatively common in contracts of this type”. But he said that such negotiations did not occur because he and his colleagues were not “satisfied in the first place with the technical and commercial aspects of the tender”. He said that:

“as is invariably the case in any major machinery repair, further problems or previously unidentified damage emerges once the repair work has commenced. I therefore saw Krupp’s tender price as the minimum price, which might increase as the rebuild progressed.”

He said that the shovel/sizer was chosen over a rebuild for the following reasons:

the time involved in rebuilding was about two years (108 weeks according to the December tender) compared with about one year for the shove/sizer system;

the prospects that the rebuild costs would increase and that the time involved in rebuilding would exceed that 108 weeks;

the uncertainty attending what he described as “warranty, workplace health and safety issues and continuing operational performance which accompany the rebuild option”;

replacing the BWE with the shovel/sizer system enabled the plaintiffs to utilise the conveyor and spreader systems of the BWE which were not damaged in the collapse (although this seems not to have been a distinction from the rebuild alternative);

the anticipated cost of operating the shovel/sizer system “compared well” to the cost of operating other replacement systems; and

the overall cost (including capital costs and time involved in replacement) appeared to be less than the anticipated total cost of repairing the BWE.

Mr Ellery had been the Senior Mining Engineer (Operations) at Goonyella at the time of the collapse. From mid-2000 until June 2002, he was employed at the mine as the Project Manager of what was called the Red Hill Optimization Project, which in effect, was the project of the rebuild or the replacement of the BWE. He managed a group of mine employees and others (such as Mr Black) in the evaluation of the various alternatives. In early 2001, he prepared his Project Case document. It was a submission to more senior management of BHP for approval to acquire the shovel/sizer system. There are several versions of the document in evidence. Indeed it emerged at the end of the trial that the defendants had cross-examined Mr Ellery looking at a different version from that which was tendered during his evidence.^[114] As the parties seemed to accept, the differences are not significant and I will discuss the document in its ultimate form.

Mr Ellery there summarised the technical advantages of the shovel/sizer over the rebuilt BWE as follows:

it would be more reliable because it would be an entirely new system, whereas the BWE would use “the bucket wheel crawler frame, and crawlers and other key components which are more than 20 years old and have suffered severe shock loads as a result of the failure in March 2000”;

an unreliable pre-stripping system would have “major downstream impacts on our ability to schedule coal exposure operation of the mine”;

the shovel/sizer had an earlier start-up time, thereby requiring “less contract
pre-stripping and less constraints to the operation in terms of working around the existing conveyor belts”;

the shovel/sizer components, operations and maintenance requirements had more in common with existing machinery than the BWE, making for more efficiency in relation to the required levels of spare parts, and the crusher would be “much simpler to maintain and operate”;

the shovel would be interchangeable with other pre-stripping shovels so that it could be used to assist the truck/shovel fleet while the remainder of the system was down for conveyor belt moving;

the shovel/sizer could operate in blasted rock and could dig deeper than the BWE; and

the shovel/sizer would be able to operate closer to the advancing coal face “thereby reducing the pre-stripping inventory compared to the bucket wheel”.

He analysed the operating costs for the BWE which were calculated to be $1.26/bcm and for the shovel/sizer system which were calculated to be $1.06/bcm. He then discussed the financial advantage of the shovel/sizer (described there as the shovel/crusher system) in these terms:

“To understand the benefit of spending additional capital on the shovel crusher system over the lower capital cost of the bucketwheel rebuild, the incremental capital and operating costs between these two cases was analysed. The full cost of contract prestrip to make up for the late delivery of the bucketwheel during the next two years was not included because the insurance coverage for business interruption would significantly reduce this impact. The lower unit operating cost of the shovel crusher system alone is more than sufficient to offset the incremental capital spend of $6.7M. The analysis shows a NPV of $7.4M in 100% terms with a ROR of 20% in favour of spending the additional capital on the more efficient system. The value of the bucketwheel rebuild ($30.1M) was shown as a cost saving and the capital for the shovel crusher was shown as normal capital in the financial model in order to calculate the correct tax treatment of the insurance funds.

A hypothetical case of no insurance impact was run to demonstrate the validity of the decision and allow equitable comparison with other company capital expenditures that have no insurance claim. The results proved to be exactly the same as the case with insurance. This is because the insurance proceeds considered from either rebuilding the bucketwheel or installing a shovel crusher are assumed to be the same, and on a differential basis there is no net impact as shown in the input comparison tables above. A summary table of the financial results is shown below.

Case

NPV $M

ROR %

Ave

Increase

NOPAT pa

Shovel crusher v BWE No insurance

7.4

2.0

Shovel crusher v BWE Insurance Case

7.4

2.0

”

His conclusions were expressed as follows:

“Goonyella Riverside Mine have developed a carefully thought about plan, to combine the higher productive capacity of modern rope shovels, with the low operating cost of the existing conveyor spreader system to produce the stripping capacity lost, from the structural failure of the bucket wheel excavator.

Approval for this project to proceed with the order of shovel and crusher equipment is highly recommended as it represents a sound business decision for BHP and will be a valuable asset for Goonyella Riverside Mine”.

Mr Ellery was not the decision maker. Nevertheless the document provides a very useful description of the relevant considerations for the business decision which was to be made. As already discussed, however, the present question is not what was a reasonable business decision, but rather what was reasonably necessary to make good the loss. Some of those technical and financial considerations discussed in the Project Case were relevant to making good the loss and some were not.

So for example, the fact that the shovel/sizer could operate at deeper levels than the BWE was not a consideration which is relevant to the present question. To spend more for that advantage may have made perfect commercial sense but it was to obtain a benefit which the plaintiffs did not have prior to the collapse. Of these technical considerations set out above, all but the first three points are in the same category. The presently relevant considerations were the perceived greater reliability of a new system and the advantage of an earlier start-up time.

It was reasonable for BHP to believe that the new system would be more reliable because it was entirely new, rather than rebuilt from something which had suffered serious damage. Nevertheless, the fact that BHP investigated the alternative of rebuilding the BWE as it had, demonstrates that overall there was confidence in the performance of a rebuilt BWE. Mr Black had recommended the replacement of the entire superstructure and had written a detailed tender document upon which BHP had sought tenders. Further, BHP had the benefit of the Schippke Report of October 2000. The advice to BHP was that a rebuilt BWE would perform, although there was the possibility that other components would have to be repaired or replaced upon closer inspection. That was recognised by the five per cent contingency allowed in the Project Case. Of course there were risks that even after such an extensive rebuild and considerable testing and inspection, there might still be some failure because of undetected damage to some part of the sub-structure. But the extent of that risk, as BHP assessed or ought to have assessed it, was that it was not so high that an additional $6.7 million should have been spent to acquire the sizer/crusher on that ground alone.

Further, the extent to which the new system would have been more reliable was also considerably due to simply the difference between a new system and a machine which was, as Mr Ellery wrote, more than 20 years old.

Again the question for BHP in 2001 was different from the present question. If the BWE could be rebuilt so that it was as reliable overall as it should have been for its age, then the fact that a new system would be more reliable would not be relevant in assessing now what had to be spent to make good the plaintiffs’ loss. And the rebuilt BWE would have many new components in place of 20 year old components, which was likely to have enhanced its reliability.

The earlier start-up time of the shovel/sizer was more a financial than a technical consideration. Mr Ellery wrote that there would be savings from the earlier delivery of the shovel/sizer because it would perform work which would otherwise have to be performed by external contractors. According to his analysis, the operating cost of the shovel/sizer would be about one-half of the cost of contractors: $1.06/bcm for the shovel/sizer as against $2.00/bcm for contractors. In a schedule annexed to the Project Case, his calculations assumed that the shovel/sizer would remove 4.4 million bcm in the year to 30 June 2002 and 13 million bcm in the following year, with 8.6 million bcm being removed by contractors in the 2002 year. On the premise of a rebuild of the BWE, 13 million bcm would be removed by contractors in the 2002 year and 8.8 million bcm in the 2003 year, the remaining 4.2 million bcm being removed by the rebuilt BWE. In these calculations he appears to have assumed that the cost of contractors in these two years was $1.70/bcm. But still that was significantly higher than his assessed $1.06 bcm for the shovel/sizer or $1.26 for the BWE. The difference between the operating cost of contractors and the cost of the BWE or the yet lower expected cost of the shovel/sizer, had a large impact upon his financial assessment.

The Project Case assumed that the difference in timing between the shovel/sizer and the rebuild would represent a further 13.2 million bcm to be removed by contractors in the 2002 and 2003 years, which could be avoided by acquiring a shovel/sizer. That would result in a saving of $8.448 million, measured by the difference between $1.06/bcm for the shovel/sizer and $1.70/bcm for contractors. However, the more relevant comparison for present purposes was the extra cost according to the difference between the contractor’s rate and the BWE rate, which is a difference of $0.44 bcm and a difference overall of $5.808 million. Here, the relevant loss to the plaintiffs was the loss of use of the BWE with its capacity to excavate at less than the assumed contract rate.

So far as operating costs were concerned, the Project Case discussed two ways in which the shovel/sizer was the better alternative. One was that suggested avoidance of excavation by contractors would result in lower costs in the years 2002 and 2003. I will call this the interim saving. The other was because it was then expected that the operating costs of the shovel/sizer over its life would be less than those of the BWE. I will call this the long-term saving. According to the Project Case, although both savings were material, it was the long-term saving which was critical. This was because of what BHP understood would be made good by its insurer. It was insured for losses occasioned by the unavailability of the BWE until it was rebuilt or replaced. If it had to engage contractors to do the work which would have been done by the BWE, then BHP considered that it was insured for the extra cost. So by the interim saving from the earlier delivery of the shovel/sizer system, BHP would be no better off. What mattered to it was the long term saving: the difference between the operating cost of the shovel/sizer and that of the BWE. The Project Case assessed the net present value of the long term saving at $7.4 million. By itself, that made the shovel/sizer effectively the cheaper alternative. Mr Ellery there wrote:

As it happened, in its actual operation the shovel/sizer was more expensive than the Project Case had estimated. Indeed it was more expensive than the estimated cost of the BWE per bcm, or the use of the mine’s own fleet of trucks and shovels.

According to Mr Ellery’s analysis in the Project Case, the acquisition of the shovel/sizer was clearly a reasonable business decision. However, the long-term saving is not presently relevant. By obtaining that benefit, the plaintiffs were not making good a loss from the collapse of the BWE. They were simply obtaining in that respect a better system than they had enjoyed with the BWE. The cost of acquiring that benefit was not a loss from the collapse of the BWE.

The interim saving was a different matter. If it was necessary to engage contractors to do what would have been done by the BWE before the expected completion of its rebuild, then the extent to which that excavation would have been more expensive than with the use of the BWE would constitute a loss resulting from the collapse of the BWE. It could have been reasonable for the plaintiffs to have tried to avoid that loss by a higher expenditure on a replacement system. As already discussed, according to the analysis in the Project Case, from the difference between the contract rate and the BWE rate multiplied by the extra volume to be removed by contractors, the interim saving would have been $5,808,000. This was less than the $6.7 million by which the capital cost of the shovel/sizer exceeded the cost of the BWE rebuild. But the risk of a price increase for the rebuild was greater than for the shovel/sizer, so that overall the acquisition of the shovel/sizer could be seen as a reasonable course to replace what was lost.

However, this is upon the premises that, as the Project Case assumed but did not analyse, the overburden which would have been removed by the BWE in those two years would have to be removed within that period, and removed by contractors. Neither of those premises is established. It is not demonstrated that absent the BWE, that amount of overburden had to be removed from where the BWE would have worked. Nor is it demonstrated that the work had to be done by contractors rather than by the mine’s own fleet of trucks and shovels.

The probable the reason why the Project Case did not consider those two matters is explained by the passage I have set out above, where Mr Ellery wrote that the interim savings were not so important because of the availability of insurance.

What is presently being considered, of course, is the claim to recover the capital cost of the shovel/sizer. There is a distinct claim by the plaintiffs for what they say was the actual difference in their operating costs over the two years ending 30 June 2002. The shovel/sizer began its operation in May 2002 and by 30 June it had removed 896,892 bcm. That overburden was removed from the area in which the BWE would have worked but for its collapse. But as I discuss below, apart from that excavation, there was not one cubic metre which was excavated by contractors, or by the mine’s trucks and shovels, between the collapse in March 2000 and the arrival of the shovel/sizer in May 2002 which would have been excavated by the BWE. In that period, the work done by contractors, and to a greater extent by the mine’s fleet of trucks and shovels, was done at other locations at the mine. It was all done closer to where excavated overburden was dumped, thereby avoiding the greater cost of hauling the material over a longer distance. And it was done at levels deeper than where the BWE would have worked, which for the most part was to a depth of 25 metres below the natural ground level. This 25 metres is described in the evidence as level 1.

Accordingly, the assumption in the Project Case that the lost capacity of the BWE would be replaced by the engagement of contractors does not correspond with what occurred. When the mine was without the BWE, it did not engage contractors to do the work which would have been done by the BWE.

The plaintiffs argue that to some extent they engaged both contractors and their own fleet of trucks and shovels to remove much of the volume which would have been removed by the BWE in this period. But they concede that in no case did that involve the removal of anything within level 1, and therefore anything which would have been removed by the BWE.

In theory it might have been reasonably assumed, in early 2001, that contractors would have to remove from Level 1 what the BWE would have removed, although subsequent events resulted in that not happening. However, there is no document which evidences BHP’s consideration of that assumption at the time. There are some documents which record discussions as to what was to be done to replace the lost capacity of the BWE in the interim. But there is no document which records any analysis of what had to be excavated from level 1, and what excavation might have been postponed at level 1 pending the rebuild or replacement of the BWE.

The Project Case assumed the removal of 13 million bcm in the 2002 year, 4.4 million bcm by the shovel/sizer and 8.6 million bcm by contractors. It predicted that with the shovel/sizer in operation for the whole of the 2003 year, it would then remove 13 million bcm. What occurred was that the shovel/sizer removed 897,000 bcm in 2002 and 8.909 million bcm in 2003. Of the projected 26 million bcm for those two years, about 9.8 million bcm was in fact excavated and none of it by contractors. Moreover, in the 2004 year, for which the Project Case had again assumed that the shovel/sizer would remove 13 million bcm, in fact it removed 9.844 million bcm. So less than half of the projected amount was removed in the 2002 and 2003 years, and the amount removed in 2004 indicates that BHP did not feel that it had to then make up the extent to which it had not reached this target in 2002 and 2003.

In the consideration below of the damages claimed for loss of use of the BWE, I discuss the Long Term Mine Plans. They show the intended quantities of excavation at various levels and by various types of excavation systems. But they do not necessarily demonstrate the amounts which needed to be excavated. The Project Case assumed that a rebuilt BWE would have excavated 4.2 million bcm in the 2003 year. As already mentioned, the quantity excavated in the 2002 and 2003 years from where the BWE had been working was about 9.8 million bcm. Therefore if it is assumed that everything which was excavated by the shovel/sizer in 2002-2003 needed to be then excavated, the extent to which that excavation could not have been performed by the rebuilt BWE was no more than about 6 million bcm. Therefore, a more realistic assessment of the extra cost from the later delivery of the BWE (compared with the delivery of the shovel/sizer) would have been 6 million bcm by $0.44. which is $2,640,000. That extra cost, considered with other matters relevant for the present question, could not have justified the expenditure of a further $6.7 million for the shovel/sizer. Moreover, the assumption that everything which was removed by the shovel/sizer in 2002 and 2003 had to be removed at that time is not shown to be valid.

Then there is a further difficulty for the plaintiffs, which is that any work which had to be done where the BWE would have worked did not have to be done by contractors rather than by the mine’s fleet of trucks and shovels. The BWE was used in only two pits in this mine and elsewhere that fleet excavated level 1 material, as well as deeper material. The cost of these trucks and shovels was less than excavation by the trucks and shovels belonging to contractors. According to what the plaintiffs claim for as damages for loss of use, the cost per bcm of their own trucks and shovels for the 2002 year was $1.49 and for contractors the actual cost was $2.00. In the 2002 year those trucks and shovels removed a total of 35.83 million bcm and contractors removed a total of 10.338 million bcm, so that most of the excavation (apart from draglines) was performed by the mine’s own fleet and at a much lower cost than $2.00/bcm. The basis for an assumption in Mr Ellery’s Project Case, that work which would have been performed by the BWE but for the collapse would then be performed by contractors, rather than to some extent at least, by the mine’s own trucks and shovels, is not demonstrated. Once the prospect that any gap would be made up by the mine’s trucks and shovels, rather than by contractors, is considered, the advantage from the earlier arrival of the shovel/sizer was less again. It is not demonstrated that the mine’s trucks and shovels could not have been employed where the BWE would have worked, had excavation at that place and at that time had been necessary.

In discussing below the claim for damages for interim loss of use, I consider the plaintiffs’ case that they decided to increase the rate of excavation of overburden at other places in the mine to make up for what was not excavated where the BWE would have worked. Overall the quantity of excavation undoubtedly was increased in the 2002 year and following, although for that there are explanations other than the unavailability of the BWE. But on no view could it be said that BHP made up for the loss of the BWE in 2002 and 2003 simply by the engagement of contractors. In the 2002 year, 10.338 million bcm were removed by contractors, but as the plaintiffs ultimately conceded, most of this was in an area of the mine called The Air Strip, where the excavation there had nothing to do with the lost BWE. At its highest there were 4.121 million bcm excavated by contractors in the 2002 year which the plaintiffs have sought to argue was the result of this need to make up for the unavailability of the BWE. But even then this is less than half of the amount assumed in the Project Case to be the required work of contractors in the 2002 year.

In summary, the assumption as to the use of contractors in the 2002 and 2003 years within the analysis in the Project Case was quite different from what actually happened. A basis for those assumptions is not proved. As what occurred in those years demonstrated, it would not have been necessary to have engaged contractors at all or to the extent which was assumed in the Project Case. At its highest, the case proved by the plaintiffs is that the extra year or so required for the rebuild, beyond the expected delivery of the shovel/sizer, meant there was some prospect of an increase in the cost of removing that overburden which the BWE would have removed but for the collapse. There was no reasonable basis for expecting that the amount of such an increase in costs could justify the expenditure of the higher price of the shovel/sizer.

It follows that the plaintiffs have not proved that it was necessary for them to acquire the shovel/sizer in order to make good their loss. The rebuild was undoubtedly cheaper in so far as the capital outlay was concerned.

The most important considerations for BHP’s business decision were the advantages of the shovel/sizer in what I have called the long term savings and the various technical advantages of that new system. The shovel/sizer was acquired because those benefits warranted the extra capital expenditure, not because that had to be spent for the purpose of making good the plaintiffs’ loss. The plaintiffs will therefore be awarded damages on the rebuild basis.

However, the prospect that some excavation would have been necessary where the BWE had been working, at least during the 2003 year, needs to be considered for another purpose. It is one thing to say that this prospect, and the likely extent of an increase in operating costs from it, were not sufficient to now allow the plaintiffs an award on the replacement basis rather than the rebuild basis. It is another question as to whether that prospect should not itself result in a further component of the award, as an additional expense which the plaintiffs would have incurred had the BWE been rebuilt.

When it collapsed the BWE was working in the Red Hill pit. The machine stood on a level which was the result of previous excavation. It dug material which was in front of it rather than which was below it. As it performed this operation gradually moving through Level 1 across the mine site, it was followed by the trucks and shovels which dug at the next level down, that is to say from below 25 metres below the natural surface. At this lower level, the ground was harder and it was blasted before it was dug. So there had to be a proper distance then between the operations of the BWE and those of the trucks and shovels following it across the pit. Because no excavation was done at Level 1 in the Red Hill pit from the collapse until May 2002, that gap between where the BWE had been operating (and where the shovel/sizer began to operate in May 2002) and the advancing trucks and shovels digging at the next level became narrower. Mr Ellery’s evidence was that by May 2002, the gap was so narrow that blasting activities were inhibited by the operation of the shovel/sizer and there were only some “tens of metres” of space available for it to operate. I accept that evidence. It follows that, had the BWE been rebuilt and delivered in (say) April 2003, some excavation would have been necessary at Level 1 in the Red Hill pit in order to allow for the trucks and shovels.

Because the mine had its own trucks and shovels, which were less costly than those of contractors, any work which had to be performed there would have been by the mine’s trucks and shovels. The forensic accountants called by the parties agreed that the cost per bcm of the truck and shovel excavation in the 2002 year was $1.4863. That included $0.2761 for blasting, which would not have been incurred at Level 1. Against that, I accept that trucks working from Red Hill would have had a relatively long trip, thereby increasing the cost. Overall I accept that the trucks and shovels at Red Hill in the 2003 year would have been at least $0.22 dearer than the BWE.

The actual volume removed by the shovel/sizer in 2003 was 8.908 million bcm. Accordingly, this measures the upper limit of what needed to be excavated from level 1 in that year. The same applies to 897,000 bcm which was removed by the shovel/sizer in the 2002 year. It is not alleged that proper planning and operations of the mine were significantly disturbed once the shovel/sizer had been commissioned. Apparently trucks and shovels were not used to assist the work of the shovel/sizer at level 1 in the 2003 year.

The working width of the area required for the BWE system was at least 100 metres. Mr Clews said that the shovel/sizer required a similar space in which to operate, as another witness, (Mr Maiden) also explained. Mr Clews said that when the shovel/sizer was commissioned, there was not enough space for its operations and that it was necessary to build a pad for the conveyor. It follows that by May 2002, there would have been insufficient space for the BWE. With the addition of that pad, the shovel/sizer was able to operate. Therefore, if the quantity removed by the shover/sizer had been removed by trucks and shovels whilst the BWE was being rebuilt, there would have been sufficient space for its arrival in May 2003. Had the BWE been available from the end of May 2003 (as predicted by the program of works in the December tender) the BWE would have removed at least one-twelfth of the overburden which was removed in 2003 or about 0.75 million bcm. It is probable then that the required work of trucks and shovels, pending the arrival of the rebuilt BWE, would have been about 9.05 million bcm. The loss to the plaintiffs then would have been for that quantity, $0.22 per bcm, or about $1.99 million. I am satisfied that this amount should be added to the award.

The defendants pleaded that if the BWE had been rebuilt it would have resumed operations by 16 August 2001, or alternatively by 26 September 2002 or alternatively by 20 December 2002. The first of those dates is 15 months from Krupps’ letter of 16 May 2000, the second is derived by adding 90 weeks to the date of the December tender and the third is said to be derived by adding “not more than 108 weeks to the date of that tender”. Ultimately none of this was argued by the defendants. By the December tender, Krupp proposed practical completion within 108 weeks of its acceptance and a program which had the commissioning completed at the end of May 2003.

I have not overlooked the extensive evidence given by Mr Maiden in the plaintiffs’ case and Mr Hyde Page in the defendants’ case, as to the scheduling of operations at this mine and the impact of various alternatives upon the rate of the recovery of coal. That evidence was directed more to the plaintiffs’ claim, considered below, for damages for the loss of use of the BWE between March 2000 and May 2002. But it was relevant to the component just discussed, because on one view at least, some of it could provide a basis for assessing how much had to be excavated in the 2002 and 2003 years at the relevant location to stay sufficiently ahead of the trucks and shovels working nearby. The more reliable indication however, is in what BHP actually did at the relevant location, which seems to have been sufficient to stay ahead of them (with the rider that the pad had to be constructed in May 2002 as Mr Clews explained). The plaintiffs claim the extra operating cost from the unavailability of the BWE during the 2003 year on the basis of calculations by Mr Van Homrigh. But those calculations are based upon a different comparison. Mr Van Homrigh was not asked to calculate the extra cost of a certain number of bcms at Level 1 in the Red Hill pit.

Before going to the claims under the heading of “Additional Expenses Occasioned by the Collapse”, it is convenient to say something of other arguments by the defendants.

In response to the replacement claim, the defendants argued credit should be given for the benefits which the plaintiffs have with the shovel/sizer, compared to their position prior to the collapse. They say that the shovel/sizer will require lower service and maintenance costs as well as lower operating costs, that it will have a longer useful life than the BWE would have had, that it is a depreciable asset of greater value than the BWE and that it provided other technical advantages over the BWE. None of those matters is said to be relevant to an assessment on the alternative basis of the cost of a rebuild. In particular there is no pleaded or argued case that the rebuilt BWE has a higher value than the pre-collapse BWE and that the difference should be deducted from the award.

In response to the replacement claim, but not the rebuild claim, the defendants also pleaded that the plaintiffs would have replaced the BWE with alternative equipment “in due course”, because they considered it to be “obsolete, or having served its effective useful life”.^[115] Should it be considered relevant to the assessment of damages upon the rebuild basis, this point should be considered. As it was argued, it went no higher than this:

“There is some evidence here that the plaintiffs had given consideration to the eventual retirement from service of the BWE. It is not contended though that the evidence shows that a decision to that effect had certainly be made to do that at the time of the collapse. But of course the fact is that it would have been retired eventually at the end of its effective service life, whether that be 50 years or less.”

This point had been raised in a report by Ms Wright, the forensic accountant called in the defendants’ case. She there referred to some documents which inspired this point, but the latest of them was July 1997 and none provides any strong indication of a likely retirement. The 1997 document was a discounted cash flow analysis indicating “that the plaintiffs have considered the possibility of ‘standing down’ the BWE system at various times in the period 1999 to 2003”. Ms Wright took this document and others to indicate, as she put it, that “the plaintiffs recognise certain limitations of the BWE (as compared with the use of shovels), including the fact that its usefulness is limited to only two pits (Cleanskin and Red Hill) within the mine, and that its useful life is limited by constraints on availability of dumping locations.” However, the BWE continued in constant operation until its collapse and indeed its production was being increased. The long term mine plans showed its use was proposed for many more years. In particular, the December 1999 plan showed its proposed use through to the end of the period the subject of that plan which was 2014. And the very detailed consideration which was given by BHP to the rebuild is inconsistent with the notion that it was likely to have been retired before long in any event. Had the plaintiffs established their case for the costs of the shovel/sizer, there would have been nothing in this point warranting some reduction of the award. In case it is relevant to the rebuild claim, there is nothing in it which would warrant the reduction of the award.

Additional expenses

Dismantling and removing the BWE in 2000

The plaintiffs’ claim $869,576.03, most of which is admitted. Disputed is the claim for labour costs of BHP’s own employees amounting to $135,572.15 and various other items totalling $16,171. Two points arise here which also affect other so called additional costs claims.

The first is the evidentiary value of documents which were “coded”, in that staff of BHP have recorded an expenditure as referable to the BWE collapse by the use of a certain number (varying from year to year). Mr Ellery supervised the relevant work and was responsible for approving plans to external contractors and the allocation of BHP resources to the acquisition of shover/sizer work. Most of that work would also have been required on a rebuild of the BWE, so that most of the amounts claimed as additional expenses are claimed also in the rebuild case. Mr Ellery explained that when an order was placed, or money was spent which was related to the replacement project, one of these costs codes was applied to the expense with the result that BHP’s electronic accounting system allocated that cost to the project. He did none of the allocation in individual cases. This was done by accounting staff and not surprisingly, he was unable to comment in most cases about a particular allocation. There is a vast amount of documentation which was tendered to prove these claims and it would be unrealistic to expect Mr Ellery or any other individual to be familiar with it and the very large number of transactions involved.

Evidence was given by Mr Carr who was employed at the mine as the Commercial Manager and as such was the most senior accountant there. He was responsible for overseeing the accounting records and systems. He explained the practice of allocation of codes to various projects, including this BWE replacement project. He reviewed the costs for this project monthly to identify any cost entries that appeared to him to be unusual or incorrectly allocated. This was not, however, a detailed audit. He accepted that there had been some miscoding but was confident that those entries had been corrected.

The defendants argued that it was significant that there were no written policy or procedure for staff working on the project about recording relevant expenditure. They argued that this tended to increase the risk of error. They also referred to other things affecting the reliability of this recording, such as teething problems experienced with a particular accounting system when it was introduced in 2001. They argued that it was significant that not one of the accountants who applied this coding was called to give evidence about it, and went so far as to submit that as a result, there was a Jones v Dunkel^[116] inference to be drawn that their evidence would not have assisted the plaintiffs’ case.

Over the defendants’ objection, documents relevant to these expenses were admitted pursuant to s 1305 of the Corporations Act 2001 (Cth) which provides as follows:

“Admissibility of books in evidence

(1)A book kept by a body corporate under a requirement of this Act is admissible in evidence in any proceeding and is prima facie evidence of any matter stated or recorded in the book.

(2)A document purporting to be a book kept by a body corporate is, unless the contrary is proved, taken to be a book kept as mentioned in subsection (1).”

The relevant “requirement” of the Act is from s 286 which provides, in part, as follows:

“Obligation to keep financial records

(1)A company, registered scheme or disclosing entity must keep written financial records that:

(a)correctly record and explain its transactions and financial position and performance; and

(b)would enable true and fair financial statements to be prepared and audited.

The obligation to keep financial records of transactions extends to transactions undertaken as trustee.”

The term “financial records” is defined by s 9 to include:

“(a)invoices, receipts, orders for the payment of money, bills of exchange, cheques, promissory notes and vouchers; and

documents of prime entry; and
working papers and other documents needed to explain;
1. the methods by which financial statements are made up; and
2. adjustments to be made in preparing financial statements.”

In objecting to the admission of these documents, the defendants accepted that for the most part these were financial records. Their principal argument was that they were not financial records of a company but instead were financial records of the joint venture. I held that they were financial records kept and required to be kept by the first plaintiff, which operated the mine on behalf of the joint venturers of which, of course, it was one. Secondly, it was argued that some documents were not of the type which were required to be kept, because they were not “records”. In relation to some documents, I upheld that submission. In particular there were some documents which were prepared not as a record of anything but to assist in the plaintiffs’ insurance claim. Thirdly, the documents were of no probative value because, in particular, their record of an expenditure described only as “BWE failure”, did not evidence “any matter”. As that submission was developed, the defendants’ counsel said that they wished to explore that matter with Mr Ellery. It was really an argument as to weight. The recording of an expense by the category “BWE failure” was, on its face, a record that this was expenditure made because the BWE had collapsed. According to s 1305(1) it is prima facie evidence of that fact. But it is now a question of whether, on the evidence as a whole, that fact is established. It is in that context that the defendants now argue that the records are unreliable as proof of that fact.

Clearly there is scope for error in this record keeping. The persons who may have made those errors were not called. But this does not warrant a Jones v Dunkel inference. Apart from simply the general prospect of human error, there seems to be no point raised as to the particular potential for errors in these records. It is said that there was no written policy or instruction document about this but I do not see that these were necessary. Most of the expenses incurred in relation to this collapsed BWE and its replacement are likely to have been easily identifiable as such by those who were keeping the records. There is the possibility that they have wrongly included other expenses. There is equally the possibility that they have wrongly excluded them. The defendants do not seem to suggest that the amounts recorded, taken individually or taken with other items, are well beyond some expected range. There is no suggestion that accountants and other employees were asked to falsely inflate the amount of these expenses. This system of coding is not unique to expenses from the collapse of the BWE. In general, the coding provides a sufficiently reliable basis for a finding that the expense was caused by that incident.

Many of the items in issue concern the cost of staff, both salaried and non-salaried staff, of BHP. There was a system whereby non-salaried employees would write a description of what they were doing on time sheets and if it related to the replacement, they would write “bucketwheel replacement” from which a foreman would then write the relevant code on the time sheet. By this means the costs of those employees were coded in the electronic records. Another argument was that the documents tendered were unreliable because the relevant supporting documents do not show the name of the employee. Something was said to come from the fact that Mr Ellery had no knowledge as to which employees referred to in his witness statement were the employees relevant for certain items or what indeed they were specifically engaged to do and how it related to the BWE failure. Nor in some cases was he able to determine from the supporting documents, how many hours were involved in the cost which was recorded. But this is not a basis for rejecting the evidence. There was a system which was likely to have been followed for the most part and to provide a reliable record of these labour costs. Again it is not suggested that the costs claimed are higher than could be expected or that there was some intention to inflate them and the records are not less reliable for the fact that none of the workmen was called to say that he was accurate in his time sheets. There were some of these employees who were called in the plaintiffs’ case about other matters. There is no basis for drawing an inference against the plaintiffs from the fact that they were not asked by the plaintiffs to give evidence about this matter. The absence of any particular indicator of unreliability of the records is no doubt the reason why the defendants asked them no questions about it.

There is also a claim for the cost of some salaried employees. Two of them were employed specifically for the BWE project. They were Mr Testrow and Mr Maher. Others, being Mr Ellery, Mr Hughes, Mr Crawford and Mr Cazzola, were BHP employees prior to the collapse. Mr Ellery said, and I accept, that he, Mr Hughes and Mr Crawford worked full-time on the project. The defendants conceded that the salaries for Mr Testrow and Mr Maher were recoverable, but for reasons to do with the argument about to be discussed, the others were not recoverable and that there was a difficulty in allocating the costs between those two categories.

A further and more substantial argument was that the plaintiffs have not established that the costs of non-salaried staff, and the salaried staff apart from Mr Testrow and Mr Maher, were incremental in that they were costs which would not have been payable in any event by BHP in the course of the operation of the mine. The plaintiffs did not lead evidence that they hired any additional staff to perform the work which would have been performed by these employees had they not been working on the BWE project. There is no suggestion that work on the BWE project was more costly than other work which would have been done by the same employee. So it was argued that if these claims for internal labour were upheld, the plaintiffs would not be compensated by them. Rather, they would be placed in a better position than if the BWE had not collapsed.

As to salaried employees, Mr Ellery said that his vacancy and those of Mr Hughes and Mr Crawford were “back filled” by somebody from within the department and then “somebody would have had to take his role and so forth and so on”. He said “this back filling process would be … of some months”, but he was unable to say who was involved. The defendants say that he was merely speculating. The evidence went further than speculation and I accept that in his case and in those of Mr Hughes and Mr Crawford, there was an incremental cost.

In response, the plaintiffs argue that in each case the labour costs, for both salaried and non-salaried employees are recoverable. They say that had they engaged new employees to do the same work and at the same cost, those costs would have been recoverable and that there is no reason in principle why they should be worse off because they diverted their existing workforce “from other
proper-earning activities”.

The Australian authority cited for this argument is Tesrol Joinery Pty Ltd v Cefla Scri,^[117] where the plaintiff recovered damages for breach of contract against a party which had sold it a defective machine for use in its factory. It continually broke down and the plaintiff’s staff were taken off other duties to deal with the problems which it caused. The damages sought included wasted employees’ costs, about which the defendant argued that those wages would have been paid in any event. Einstein J said:

“[26]In terms of CEFLA’s contention that no damages should be awarded because Tesrol was bound to pay the employees’ salaries and wages in any event, I accept that this contention ignores the fact that Tesrol received no benefit for these salaries and wages wasted, whereas if these salaries and wages had not been wasted on consequences of the CEFLA spray line non-performance, Tesrol would have been able to benefit from the productive capacity of the workforce in the time which would then have been available (see annexures M and N to exhibit P7).

[27]CEFLA’s contention entails the proposition, as the plaintiffs have submitted, that a contractual wrongdoer can cause the total loss of the plaintiff’s production capacity but have no liability for the labour cost incurred by the plaintiff while its workforce remains idle.

[28]The principle is that the innocent party is entitled to be put in the same position, as best as money can do it, as if the contract had not been broken. In the case of employees that means that the employer is entitled to be reimbursed for the cost of the employees’ productive time lost by reason of the breach of contract. Hence in McRae v Commonwealth Disposals Commission the Commonwealth was liable to pay as one head of damages, the wages of the crew of the “Gippsland” incurred in the futile search for the tanker contracted to be sold [see 84 CLR 377 at 418: See also Pollock v Mackenzie (1866) 1 QSCR 156, cited in McRae’s case at 413].”

Neither McRae v Commonwealth Disposals Commission nor Pollock v Mackenzie dealt with the present question. They were cases involving damages for non-delivery of a tanker in one case and cattle in the other, and the relevant expenditure was incurred on the faith of the promise of delivery, so that when that expenditure was wasted, there was a compensable loss.

The plaintiffs also cited Aerospace Publishing Ltd v Thames Water Utilities Ltd^[118] where the relevant English cases are discussed. A private archive owned by the plaintiff was partly lost and partly damaged by flooding for which the defendant was responsible. As part of a claim for special damage, the plaintiff claimed for the costs of some existing employees as well as two outsiders each of whom did work in consequence of the flood. There was an issue as to the recoverability of the costs of the existing employees. The plaintiff argued that absent the flood, they would have concentrated upon their usual work, out of which the plaintiff would have made money. But it was unable to prove any particular loss of revenue. In a passage upon which the present plaintiffs rely, the trial judge said:^[119]

“Had the claimants engaged temporary workers, there could have been no objection to the cost. As I see it, there can be no objection in principle to essentially the same claim because they took the easier and possibly cheaper course of diverting their existing workforce from profit earning activities to those arising from the flood.”

On appeal, the principal judgment on this point was given by Wilson LJ who discussed Tate & Lyle Food and Distribution Ltd v Greater London Council;^[120] Standard Chartered Bank v Pakistan National Shipping Corporation;^[121] Horace Holman Group Ltd v Sherwood International Group Ltd;^[122] Admiral Management Services Ltd v Para-Protect Europe Ltd^[123] and R + D Versicherung AG v Risk Insurance and Reinsurance Solutions SA.^[124] Wilson LJ, with whom Longmore and Pill L.JJ agreed on this question, said that those authorities established the following propositions:^[125]

“(a)The fact and, if so, the extent of the diversion of staff time have to be properly established and, if in that regard evidence which it would have been reasonable for the claimant to adduce is not adduced, he is at risk of a finding that they have not been established.

The claimant also has to establish that the diversion caused significant disruption to its business.

Even though it may well be that strictly the claim should be cast in terms of a loss of revenue attributable to the diversion of staff time, nevertheless in the ordinary case, and unless the defendant can establish the contrary, it is reasonable for the court to infer from the disruption that, had their time not been thus diverted, staff would have applied it to activities which would, directly or indirectly, have generated revenue for the claimant in an amount at least equal to the costs of employing them during that time.”

What was meant by “significant disruption to its business” was apparently a reference to Standard Chartered Bankv Pakistan National Shipping Corporation, where the plaintiff bank claimed the salary of an employee who was sent to work on the relevant problem for a total of four months. That claim was unsuccessful and in a passage set out by Wilson LJ, Potter LJ said:^[126]

“However it is not suggested that his trip abroad, as an employee engaged in the business of [the bank] and in respect of whose responsibilities his salary was in any event payable, led to any significant disruption in [the bank’s] business or any loss of profit or increased expenditure on [the bank’s] part…In certain situations, involving particular types of training concerned, such a claim may be appropriate. In particular, building contractors who, by reason of delay, suffer increased costs attributable to a particular job which costs are irrecoverable elsewhere, may claim for a proportion of their fixed overheads (including head office salaries) as part of their claim for consequential loss. However that is not this case. There is no suggestion that the business of [the bank], or the system of charging upon which its profits depend, were in any way adversely affected by the diversion [the employee].”

As that passage indicates, this is a similar issue to that arising in litigation from building contracts, and some of the authorities in that context are relevant here. In particular there is relevance in this passage from the judgment of Giles J in Thiess Watkins White Construction Ltd v The Commonwealth,^[127] concerning the recoverability of off site overheads by a contractor for the principal’s delay:

“Off site overheads are costs incurred by the contractor. In the sense that they are incurred in relation to the performance of all the contracts on foot from time to time, in part they are costs incurred in the performance of any given contract. It is common for a contractor to include in his price a percentage on the estimated direct costs in order to recover a share of the off site overheads (and often the percentage is intended to include profit as well). Hence the argument that where delays increase the time required for performance of a contract, the off site overheads referable to that contract are increased.

In this situation the contractor may well suffer loss by reason of the delay. The loss is not necessarily measured by a proportionate extension of the percentage (or the part of it originally intended to provide for recovery of off site overheads, if that is known) for the period of delay (the so called “Hudson formula”: see Hudson’s Building and Engineering Contracts, 10^th ed, at 598-600). The share of the off site overheads attributed to the contract must be justified (State of South Australia v Fricker Carrington Holdings Ltd (1987) 3 BCL 72), and in principle it must be otherwise shown that a true loss has been suffered. The problems are well stated in Abrahamson, “Engineering Law and the ICE Contracts”, at 3690: ‘The theory is that the contractor’s site and management resources are his revenue earning instrument, and that in so far as they are detained on a contract by delay he will lose the earnings he would have made with them on some other contract out of which he would have paid his overheads and pocketed his profit. The reality is that in many cases, particularly where the delay affects a small part of a large contractor’s total resources, the contractor’s organisation has sufficient flexibility to cope with the extra time on site without sacrificing any other contracts that may be available, so that the contractor’s total overhead return and profit is not in fact adversely affected by the delay, or not to the extent claimed on foot of the usual mathematical formula. On the other hand, where a major part of his resources are tied down on a site because of a delay, the ultimate length of which is not known, the contractor genuinely may be inhibited from tendering for other work at competitive rates: the edge may be taken off his tendering in a way not susceptible to very clear proof. The difficulty is to establish the real facts…’”

That passage is consistent with the reasoning in Aerospace Publishing. In particular it is a matter for a plaintiff to prove that there was such a significant disruption, that there was a likely impact upon its profit, although not in a way “susceptible to very clear proof”. In the present case, where it is not proved that there was, as Mr Ellery described it, some “back filling”, there is no proof of a “significant” disruption in this sense. Thus for the non-salaried employees, the impact upon the mine’s resources as a whole is not shown to have had the likely effect of inhibiting the mine’s operations. In my view proof of such a likely impact is necessary. It is not simply a matter of saying that the plaintiffs should recover as if they had incurred an incremental cost by engaging outsiders to do the same work.

I go now to the particular items of expenditure which are claimed.

Dismantling and removal of damaged BWE

A total of $869,576.03 is claimed, of which all but $151,743 is now admitted. Of that, $135,572 involves the costs of BHP employees. These result from allocating some of an employee’s time to this project. That component fails for the reason just discussed.

Of the balance, there are two items^[128] of a total of $3,036, for which there is no demonstrated connection to the BWE in the document (in each case an invoice) which is said to support the claim. These items will not be allowed.

The next is item 210, (from the spreadsheet of claims), which is for $2,226.50. The supporting documents show a connection to the BWE by the code. The supporting document in this case is not an invoice but a journal entry showing that an item was changed from another code to the relevant code in April 2000. The connection between this expense and those from the same contractor, which are evidenced by invoices in June and July 2000 and which are conceded by the defendants, does not appear. It is curious that there is no invoice in this case and given that fact and the difference in time from the other items involving this contractor, it will not be allowed.

Item 217, for which the contest involves some $25, will be allowed, the document having the BWE code. Item 218, involving $500, will be allowed because of Mr Ellery’s evidence that this involved the survey of the BWE in its failed state following its collapse. Items 220 and 221 are sufficiently established by Mr Ellery’s evidence about them. Items 222 and 223 will be allowed because they have the BWE code.

Item 225 is a catering bill for people from G & S Engineering (the contractor, whom I will refer to as “G&S”) which performed the dismantling, and some people from Monash University. These have been allocated by the code and they will be allowed. For the same reason items 226 through 229 will be allowed.

The result is that all items are proved save for those totalling $140,836. Under this heading then, the amount allowed is $728,740.

Costs of investigation of the failure and the assessment of replacement and repair options

The amount claimed is $402,878.54.

Items 324 through 329 involve BHP labour and will be disallowed. They total $62,543.52.

There are then many more items in dispute. Most of this was not the subject of oral argument but I have considered the extensive written submissions from each side, in some cases over very small amounts.

The first is item 242, involving $60 paid to Minserve which will be allowed because it is apparently associated with work it undoubtedly did in providing advice as to the options for rebuild or replacement. The same applies to items 246 and 248.

Items 252 through 263 are for the lease of the car used by Mr Ellery whilst he was working fulltime on this project. The defendants submit that these are “unsubstantiated”. But they are recorded in extracts from the books which I have admitted under s 1305 of the Corporations Act. They claim that they are non-incremental. As I have said, I accept that Mr Ellery was replaced by someone and that ultimately there was a net cost from his working fulltime on this project. The defendants might say that the other person did not have a leased car. As I see it, the cost is part of the cost of the employment of Mr Ellery.

Items 267 and 268 involve payments to a firm called JK Tech. The argument about 267 is that it was “not reasonable to incur expense because (work) was undertaken to assess unnecessary replacement equipment”. This argument is repeated in many items under this heading. I reject it. It is one thing to say, as I have held, that the plaintiffs could have made good their loss by rebuilding the BWE rather than acquiring the shovel/sizer. It is another thing to say that the costs of investigating these alternatives should be disallowed. Until the alternatives were investigated, the plaintiffs could not have made a proper assessment of what they should do to replace the capacity which they had lost. Such an investigation had to be extensive, as the trial of this case starkly demonstrates. All of this was in the context of the likely high cost of the rebuild of the BWE, which was certainly high enough to warrant an investigation of the alternatives. Item 267 will be allowed. The same applies to the objection to item 268. But for this, involving $270, it is said that there is no supporting documentation. There is Mr Ellery’s evidence about it which I accept, as well as the BWE code. It will be allowed.

Items 269 – 271 involve payments to MV Mining Consultants. Mr Ellery said that this was necessary as part of the evaluation and technical review of the replacement system. What I have said about JK Tech applies here and these amounts will be allowed.

Items 272 – 274 involve payments to Egis Consulting which provided advice in relation to the replacement system. This advice was provided, however, in March 2001 and subsequently. The position here is different, because by then the plaintiff should have appreciated that their loss would be made good by the rebuild. They were pursuing the replacement for other reasons. These amounts will be disallowed. They total $8,866.

Items 275 through 288 are objected to each on the basis that there is “no evidence of connection with BWE Project except a BWE code” and because “Ellery unaware of reason for cost”. This is covered by what I have said earlier about the codes. These items will be allowed.

Next are items 289-291 which involve the expenses of the overseas travel by Mr Ellery, Mr Grant and Mr Stringer to investigate possible replacements for the BWE. The defendants say that it was not reasonable to incur these expenses because, as it happened, this trip was undertaken “to assess unnecessary replacement equipment”. But again it was reasonable for the plaintiffs to investigate the alternatives and these items will be allowed. The same applies to another item from Mr Ellery’s travel overseas whilst involved in this project which is item 293.

Item 292 involves “staff accommodation” for which the evidence is documentation bearing the relevant code. This will be allowed. The same applies to items 294 and 295. Items 296, 297, 298, 300, 302, 303, 304, 306, 307, 313 and 314 involve expenses of overseas travel by one of Mr Grant, Mr Stringer and Mr Ellery and again I reject the defendants’ argument that these are not recoverable because the ultimate acquisition of the shovel/sizer was not reasonable.

There have been many low points in this litigation but item 301 probably represents the lowest. It involves a claim for $1.30 for stamp duty for which there is no supporting evidence. It is a good example of how written submissions are used to advance something which an advocate would not be prepared to say out loud. It is disallowed.

Items 303 and 321 concern expenses for Mr Kroemer for which the evidence is the BWE code attributed to the expense. These will be allowed on that basis. Items 305 and 315 involve travelling costs for Mr Spearling of Minserve, who were consultants in relation to the various alternatives. One has the BWE code. Given Minserve’s role, I am prepared to allow them. Item 299 is “payment for staff accommodation” which has the BWE code and the amount claimed, in all $60, is allowed.

Items 308-312 and 316-320 are challenged in each case on the basis that the supporting document shows no connection to the BWE project except for the code. In the absence of other relevant evidence, that is sufficient in my view. Item 312 is also challenged on the basis that it was in relation to the replacement. Again this involved the consideration of the alternatives including the replacement. Item 320 relates to travel costs from Mr Testrow who was employed specifically for the BWE replacement project. These will be allowed. Item 322 is a further expense of Mr Ellery but given that he was working fulltime on the project and that BHP was prepared to incur the expense, I infer that it was relevantly caused by the collapse. It will be allowed. The same applies to item 323.

In the result, the items disallowed are labour totalling $62,543.52, the amounts paid to Egis Consulting totalling $8,866 and that item of $1.30, in all $71,410.82. Deducting that amount, the sum which will be allowed for the costs of investigation of the failure and the assessment of the replacement and repair options is $331,467.72.

Additional administrative costs incurred as a result of the failure

The amount claimed totals $411,755.81 and covers the items numbered 330 to 404 inclusive.

The first item, which is 330, involves a claim for “BHP labour” of which there is no evidence and for which, in particular, it is not demonstrated that the cost was incremental. It will be disallowed. Items 331-333 are admitted.

Item 334 is the first of many items involving the expenses relating to Mr Buxton. He was employed by BHP but only for the purpose of compiling its insurance claim. The plaintiffs’ response to that point goes no further than to say that nevertheless the costs are reasonable and further that “such work would have been required to bring the present claim even if there had been no claim to insurers.” So it seems to be conceded that the expenses of Mr Buxton were related only to the insurance and not to making good the plaintiffs’ loss. The Buxton claims should be disallowed. They are items 334, 354-358, 361-366, 368-383 and 395-404.

Item 405 is a claim for $12,974.42 for “payment of portable long service leave entitlements”. The evidence does not explain this expense and the plaintiffs made no submissions specifically in support of it. It will be disallowed.

Item 336 relates to some incentive described as “sports bag provided to people employed on the shovel and sizer project” and which Mr Ellery explained as necessary “to encourage safety and to recognise the achievement of significant milestones on the project”. It is not otherwise explained or substantiated and I am not persuaded to allow it.

Item 337 is admitted.

Items 338-346 are described a “BHP internal legal costs”. Mr Ellery was unable to say for what work these costs were incurred. BHP’s in-house lawyers were involved in the Mining Warden’s inquiry into this collapse and a related claim by a person for personal injuries. He was unable to say whether lawyers also assisted with the insurance claim. Then there are some other documents which suggest, on one view, that these costs or some of them were incurred in relation to the present proceeding, rather than being recoverable as damages. Somewhat surprisingly the plaintiffs have advanced this claim without explaining the work to which these legal costs relate. But further, they were costs incurred within BHP and did not involve an incremental cost to it or to the plaintiffs. They were part of the salaries paid to BHP staff. In total they amount to $12,703.18 and they will be disallowed.

Items 349 and 350, totalling $553.20, are supported by the code and will be allowed. Item 351 is a coded expense in relation to Mr Grant and item 352 a coded expense for another employee. In each case they will be allowed.

Items 359 and 360 are for taxi fares and they are substantiated by the code and they will be allowed. Item 367 is $52.14 for expenses of Mr Carr. It is supported by the code and will be allowed.

Next come some items involving the costs of salaried employees. Items 384 to 387 involve the costs of Mr Ellery and Mr Testrow from July 2001 to February 2002. Item 388 involves Mr Ellery in March 2002. Items 391 and 392 again involve salary for Mr Ellery. As earlier discussed the defendants concede that the salary for Mr Testrow should be allowed but they dispute Mr Ellery’s salary. He was involved fulltime in the project, and as already discussed, his costs were relevantly incremental. But these were salaries paid after the decision was made not to rebuild. They appear to relate therefore to the replacement option. Perhaps something of this would have been paid under the rebuild option. It is likely that the rebuild also would have involved considerable time from BHP’s staff, including salaried staff. The plaintiffs have claimed these costs for each of their alternative cases, ie they claim these costs as what would have been the costs of the rebuild. Implicitly then there is an acceptance that costs of this order would have been incurred had there been a rebuild and the arguments for their disallowance are that Mr Ellery’s salary was not “incremental”. Because in my view it was, I am prepared to allow these items. Undoubtedly there would have been substantial involvement by Mr Ellery and others in the rebuild of the BWE had that occurred and it is reasonable to suppose that they would have been at least of the order of the costs involved for the acquisition of the shovel/sizer. Indeed the rebuild would likely have been the alternative which required more attention from BHP mine staff given the substantial construction which would have occurred at the mine site.

Items 389 and 393 involve salaries paid to Mr Hughes and Mr Cazzola. Mr Ellery said that the role held by Mr Hughes had probably been “back filled” but he did not say that about Mr Cazzola. Accordingly I will allow half these items, being $36,912.79 for item 389 and $2,397.98 for item 393.

Items 390 and 394 relate to the salaries paid to Mr Maher and Mr Crawford. I accept Mr Ellery’s evidence that Mr Crawford’s previous role had been “back filled” and it is conceded that Mr Maher’s salary should be allowed. Accordingly the full amounts will be allowed.

The result is that for these so called additional administrative costs, the total which will be allowed is $291,498.96.

Cost of recommissioning conveyor system

These are (allegedly) costs incurred when the shovel/sizer was commissioned. The plaintiffs claim the same amounts on the alternative basis of a rebuild of the BWE. They say that the cost of recommissioning the conveyors would have been no different according to whether they were working with the shovel/sizer or the rebuilt BWE. The defendants argue amongst other things that some items would not have been incurred with a rebuild.

The principal argument for the defendants for the claim under this heading is that a large part of it is likely to have been claimed twice in these proceedings. They suggest that the plaintiffs also claim part of these costs in their claim for special damages for the alleged increase in their operating costs for the year to 30 June 2002. The plaintiffs there compare the operating costs within that financial year to what would have been the BWE’s operating costs. The high operating costs of the shovel/sizer in the 2002 year tend to increase that claim. The defendants suggest that the costs of recommissioning the conveyor system, or at least part of them, have been included in those operating costs of the shovel/sizer for the 2002 year, so that the plaintiffs should not be allowed them effectively twice. However, that claim for special damages is not made out, as is discussed below. Accordingly, there is no risk of the plaintiffs being compensated twice for the same damage.

Apart from the collapse of the BWE, there was another reason for recommissioning part of this conveyor system. Conveyor number 2 had been flooded. The length of that conveyor was about 27 per cent of the total length of the conveyors. So the plaintiffs have limited their claim under this heading for several items to 73 per cent of what was actually spent. There is no apparent challenge to that apportionment but the defendants argue that the same apportionment should be applied to some other items under this heading.

The first of them is item 405, which involved earthworks at a cost of $4,934.50. The defendants say that only 73 per cent of that should be allowed. They say the same about the earthworks in item 406 for which $13,578.50. But it was not suggested to Mr Ellery that this 73 per cent apportionment should be made to these items. They will be allowed.

Item 407 is a claim for $3,547.80. The expense was for newspaper advertising, and specifically for the position of a supervisor for the shovel/sizer system. Against that item within the schedule to their written submissions, the defendants say that it was “not reasonable to incur expense because purchase of sizer and shovel not reasonable.” In effect the defendants say that this is a cost which was incurred with the shovel/sizer but which would not have been incurred upon a rebuild. The same submission is repeated for items 410-416, 420, 422 and 430-432. For each of those items then, the plaintiffs must prove that the same expense would have been incurred with a rebuild of the BWE.

For item 407 the plaintiffs have not discharged that onus. Items 408 and 409 also involve newspaper advertising expenses. There was no evidence as to the purpose of this but the supporting documentation does bear the BWE code. The use of the code is evidence of the connection between these expenses and the replacement project. It is not evidence that the same costs would have been incurred with a rebuild. Absent any evidence of the content of the advertisements, the plaintiffs have not proved that matter and these items will be disallowed.

Items 410-413 involve payments to electrical engineering consultants who, according to Mr Ellery, were engaged in relation to the electrical and data link co-ordinating the sizer with the rest of the system. The plaintiffs have not proved that the same costs would have been incurred with a rebuild of the BWE. These items will be disallowed.

Items 414-416 are for “training and a team building and development program” for the crews to operate the shovel/sizer. Again the plaintiffs have failed to prove that the same costs would have been incurred with the recommencement of operations of the BWE. They will be disallowed.

Items 417 and 418 are challenged on the above “double claiming” argument. They will be allowed.

Item 419 is conceded as is item 421. Item 420 is for setting up telephones for a project office for the shovel/sizer project. It is likely that such costs would have been incurred had the rebuild been pursued. It is also said that the claim is unsubstantiated but the documents do carry the BWE code. It will be allowed.

Item 422 is for the hire of the Moranbah Community Centre “for training, team building and development program”. The plaintiffs have not proved that this would have been required on the resumption of work by the BWE. It will be disallowed. Items 423-425 are accommodation expenses for employees and contractors. Mr Ellery said that they were working on the BWE replacement project, which I accept. These items will be allowed.

Items 426 and 427 are expenses in relation to Mr Ellery, paid through American Express and totalling just over $2,000. The defendants submit that these are “unsubstantiated and non-incremental”. But they relate to the BWE collapse because they are part of the expenses of employing Mr Ellery during the time which he was exclusively involved in this project. I am prepared to accept that costs of that nature and extent would have been incurred under a rebuild. They will be allowed. Then there are expenses paid for Mr Carr and Mr Connolly, who were not working full time. Nevertheless they have been attributed to the BWE project by the code. There is no submission that they were specific to the shovel/sizer acquisition and would not have been incurred under a rebuild. They are items 428 and 429 and will be allowed. Items 430-432 are for Mr Ellery’s travel to observe the progress of the construction of the sizer. They do not appear to be relevant n the rebuild basis and they will be disallowed.

The next items, numbered 437 and 438 (which constitute most of the amount claimed under this hearing), are opposed only on the double claiming argument. They will be allowed.

Item 439 will be allowed on the basis that the code shows its connection with the collapse. The same cannot be said for items 440 and 441 which will be disallowed.

The result is that $109,783.66 of the total claimed is disallowed. The amount which is allowed under this heading is thereby $815,977.08.

System commissioning and spreader shutdown costs

A total of $455,022 is claimed for “system commissioning” and a total of $222,727 for “spreader shutdown costs”. The same point arises for each of these claims and it is convenient to deal with them together.

They each relate to work done or parts supplied by G & S. Broadly speaking the charge in each case was for what could be described as maintenance. The amounts claimed are derived from invoices from G & S but the invoices are for amounts which are higher than those here claimed. The explanation for that is that the plaintiffs acknowledge that at least some of the charges were for work or parts which were probably required regardless of the collapse of the BWE. The plaintiffs’ case is that some of the components required maintenance because they had been idle for so long because the BWE was not operating. The plaintiffs must prove the extent to which the charges by G & S were increased because of maintenance of that kind. The defendants argue that the plaintiffs have failed to discharge that onus.

Mr Ellery examined the G & S invoices, and further details of the work and parts provided by them, and identified the items which in his view were the result of the relevant components being idle through the collapse of the BWE. So in relation to items 443 and 444 (the system commissioning items) he explained that:^[129]

“The deductions made from the total costs of system commissioning were made because it was assessed by me, in conjunction with Ian Kilgour, that some costs would probably have been incurred anyway in relation to the system, regardless of the collapse; that is they were things that would have needed to be done, regardless of the collapse of the BWE and the resultant idle state of the system. The idea was to identify and claim only those costs which were incurred because of the collapse of the BWE.

This was done by going through G & S’ itemised invoices on a line by line basis. In the case of identifiable parts, in relation to each part, an assessment was made as to whether it was necessary because of the collapse and the resultant idle state of the system, or whether they would have been incurred in any event if the BWE had continued its normal operation. In the case of labour, and other ‘non-divisible’ items (such as accommodation, mobilisation and general consumables, etc) an allocation was done by calculating the approximate percentage of labour that related to the work necessary only because the BWE collapsed and applying that percentage to the total charges for these items.”

For items 446 and 447 (the spreader shutdown items), he said that:^[130]

“Item 446 claims an amount of $180,039.00 for the spreader shutdown work. In fact, as can be seen from the documents referred to in the particulars, invoices from G & S Engineering Services for this work totalled $990,724.15. As with the other items (as discussed above), an assessment was made so as not to claim costs that would have been incurred for regular maintenance of the spreader system in any event. This resulted in the amount of $180,039.00, which was assessed by me and Ian Kilgour as being attributable to the collapse, that is costs that would not have been incurred but for the collapse. This assessment was done in the manner described above.

Document BHO.031.003.0241 is a list of parts used in the spreader shutdown. Those parts would not have been required but for the collapse, that is they were not part of the usual maintenance of the spreader. This list of parts for the spreader shutdown was generated in the same manner as described above for the system commissioning costs. The amounts listed in respect of those parts are in my view reasonable.”

In his oral evidence he said that Mr Maher was also involved in this process. Mr Maher was not called.

The plaintiffs called Mr Parfitt of G & S. He was closely involved with the maintenance of the BWE system. When cross-examined he was taken to the invoices which support item 446 which is part of the spreader shutdown costs. He was unable to identify particular items likely to have been caused by the collapse of the BWE apart from “the possibility [of] some of the electrical testing” and perhaps some items described as “cleaning, inspecting or testing”. As Mr Parfitt said, the invoices were not prepared for the purpose of distinguishing between regular maintenance and items which would have been unnecessary but for the collapse. In re-examination he said, in relation to the spreader shutdown costs, that “at the end of the day there was some items in there that would have been commissioning to a certain extent, and then yes, there is work in there that would be in just general maintenance”. (By “commissioning” he meant “not regular maintenance”.) But then when asked whether he was able to estimate “what the proportion of the additional work in that regard was?”, he said “not – not necessarily, no.”

Mr Parfitt was not asked about items 443 and 444 which make up the claim for “system commissioning” or item 447 which is that component of the spreader shutdown claim which concerns parts. (Item 446 relates to labour.) It may be assumed at least for item 447 that his evidence would have been the same.

The defendants argue that if Mr Parfitt was unable to distinguish general maintenance from things required as a result of the collapse, then Mr Ellery could not do so and that the allocation was “guesswork”. Mr Ellery was cross-examined about items 446 and 447 but not 443 and 444. When it was suggested that his exercise of allocation had been just a matter of guessing, he answered that “I think it was a bit better than a guess. It was done by maintenance – it was assessed by maintenance people as leakage that wouldn’t normally occur had the thing not been sitting there.”

Mr Ellery performed this allocation exercise from the invoices and the particulars of those invoices which G & S had provided. He did not do so from an examination of the relevant components before G & S did their work. Further, he did so with no great experience in the maintenance of mining equipment, prior to his work in this project. His qualification was originally as a geologist and he has worked in various areas of mine management including mine planning. Undoubtedly that is why he sought the assistance of Mr Maher. Mr Kilgour had no demonstrated experience to enable him to make a significant contribution to this exercise. As Mr Ellery explained Mr Kilgour’s involvement, it was that “Mr Kilgour reviewed the logic”.

The argument is not that Mr Ellery was doing this dishonestly in an attempt to inflate the insurance claim or perhaps the present claim. It is simply that his allocation exercise is not reliable.

But it is not unreliable for the fact that Mr Parfitt was unable, when confronted with the invoices for item 446 as he sat in the witness box, to do what Mr Ellery had done. In relation to item 446, Mr Parfitt was not taken to all of the supporting material and nor was he given the time that Mr Ellery must have spent in this exercise. And Mr Ellery did this at a time when he had been closely involved with the commencement of the new shovel/sizer system and related work upon the parts of the system the subject of these claims. Mr Parfitt was being asked to look at invoices many years after the event.

In item 443 there is a claim for parts for the system commissioning in a total of $119,190. In his evidence-in-chief^[131] Mr Ellery said that “those parts were necessary for the commissioning of the system.” He was not specifically challenged as to that statement or otherwise in relation to items 443 and 444. For item 444, he allocated $325,832 from the G & S invoices which totalled $558,103. For item 446 the claim is for $180,039 extracted from G & S invoices totalling $990,724.15. Item 447 involves $42,688 for parts.

Overall, Mr Ellery was an impressive witness and in this allocation exercise I have no doubt that he was endeavouring to be measured in his approach. He was not in charge of the maintenance, but by this stage he must have had a very considerable knowledge of the components of the BWE system.

In my conclusion, Mr Ellery’s evidence should be accepted as a reasonable estimate of the costs resulting from these parts of the system being idle for so long through the collapse of the BWE.

Accordingly, $455,022 will be allowed for system commissioning and $222,727 for spreader shutdown costs.

Additional expenses: summary

The amounts allowed are then as follows:

Dismantling and removal of the BWE	$728,740.00
Investigation of failure and assessment of replacement and repair options	$331,467.72
Additional administrative costs	$291,498.96
Additional cost of reconditioning conveyor system	$815,977.08
System conditioning	$455,022.00
Spreader shutdown cost	$222,727.00
Total	$2,845,432.60

Damages for loss of use – special damages

The BWE was replaced in May 2002 when the shovel/sizer was commissioned. So for about 26 months the plaintiffs did not have the use of the BWE or its replacement. For this loss of use, the plaintiffs claim to be compensated by an award of special damages or an award of general damages or, it was ultimately suggested, by some hybrid of the two. Before going to those claims it is necessary to discuss the ways in which overburden was removed at this mine.

At any time, overburden was being removed at various places at the mine and there were three systems which were being used. The first was the BWE system, comprising the BWE itself and the series of conveyer belts which transported its material from the BWE to the spreader some kilometres away. The second system comprised the mine’s fleet of trucks and shovels. There were two or three shovels which did the digging and a number of trucks which then drove the material to where it was to be dumped. Thirdly, there was a fleet of draglines.

Ordinarily the BWE excavated only to a depth of 25 metres from the surface, or as already described, within level 1. It was able to excavate about 11 metres deeper than this and had done so at times but its usual operation was in the level 1. Below that depth, overburden was removed by the shovels down to the level at which the draglines would operate. This was about the lowest 60 metres of the pit, so that when it was removed, the coal seam was exposed.

The mine is many kilometres in length. Its length and orientation as well as the depth of the excavation, corresponds with the location of the coal seam. In essence the coal seam and therefore the mine runs north to south. At the northern end was the Red Hill pit where the BWE was working when it collapsed. The BWE system was used in only two pits: the Red Hill pit and the Cleanskin pit, which was to the south. From time to time the BWE system would be moved from one of those pits to the other. That was an expensive process because of what was involved in moving the conveyer belts. Because of that expense the BWE system was used only in those pits. At other parts of the mine, level 1 (the top 25 metres) was removed by the trucks and shovels system. The plaintiffs’ case is put upon the basis that the BWE would have continued to work in the Red Hill pit during the period which is the subject of this claim, which is effectively the two years to 30 June 2002.

The excavation of overburden proceeded from the west to the east. Therefore the deepest excavation would be on the western side, where the draglines were working, and then moving east, the ground became higher with level 1, broadly speaking, on the eastern side. As already discussed, there had to be a distance between where the BWE was excavating and where the shovels were excavating of the order of 100 metres. The common view of the relevant expert witnesses is that this was the required width of what is described as the BWE bench.

Part of the planning for the mining operations was to ensure that the BWE was sufficiently ahead of the trucks and shovels. The BWE would be used in one pit so that it would build up a lead well in excess of the minimum, before being relocated to the other pit, and while it was operating there, the trucks and shovels would narrow the lead in the first pit. I will refer to this lead, as many witnesses including Mr Ellery did, as the “BWE inventory”. (That is a term also found in the mine’s records and Mine Plans, but in those contexts it has a different meaning.)

The BWE system was the most economical means of excavating at level 1. This was because it was cheaper to transport the earth by its series of conveyer belts than by trucks. The draglines were a relatively economical system for removing overburden, because there was no transportation of the material to where it was to be dumped. The draglines could simply dump the material behind them. They were excavating from close to the top of the coal seam and the dumped material would not be in the way of any further operations.

I have called the level at which the BWE operated level 1. The next level, excavated by the shovels can be called level 2, and the dragline level can be called level 3. Work had to be scheduled on these three levels so that the work on one level was not held up by the work above it. Some witnesses referred to this as the mine being in “balance”. But there was no single measure of this balance. What was important was that the level 1 work would not hold up the level 2 work, and that work the level 3 work. The planners allowed some scope for variation, in that one level did not have to be worked in precise proportion to the workings at other levels. It seems undisputed that, as Mr van Homrigh wrote in his first report, the BWE when it collapsed was about 34.4 million bcm ahead of the truck and shovel system, so that on an assumed output of 13 million bcm per year, the BWE was then more than two and a half years ahead. It is unsurprising then that during this two and a quarter years for which the mine was without the BWE or its replacement, none of level 1 of the Red Hill and Cleanskin pits was excavated.

Obviously, the removal of overburden is not of itself productive of income. The mine’s income is from the sale of coal. So the plaintiffs do not claim to have lost income by not having the use of the BWE. Their case is that their costs were increased. They claim that the costs of removing overburden during the two year period to 30 June 2002 became higher because they did not have the BWE.

They say that when the BWE was unavailable, it was decided that the excavation of overburden should proceed nevertheless at the same rate: the same amount of earth should be removed by trucks and shovels as would have been removed by the combined operations of the trucks and shovels and the BWE. At least as the case was originally advanced, it was that the plaintiffs put that into effect and that they suffered a loss because the excavation by trucks and shovels alone was more expensive.

As originally pleaded the claim was quantified as follows. Had the BWE not collapsed, it would have removed 26,405,723 bcm between the date of its collapse and 30 June 2002, at a cost of $34,049,015. The truck and shovel system would have removed in the same period 46,807,705 bcm at a cost of $71,736,807. The combined operations would have removed 73,213,428 bcm at a total cost of $105,785,822. It was pleaded that with the loss of the BWE, the plaintiffs nevertheless removed that quantity of 73,213,428 bcm but at a total cost of $120,130,195. Most of this was due to trucks and shovels at a cost of $93,138,442. There was also $22,016,245 paid to contractors who used their own fleet of trucks and shovels. The balance of the cost ($4,975,508) was said to be the cost of the 896,892 bcm excavated by the shovel/sizer in the first few weeks of its operations in May/June 2002. So the claim was for $14,344,373, being the difference between that alleged actual cost and what would have been the cost of removing precisely the same quantity of overburden.

As the case was ultimately argued this became a claim for $7,554,848. This was because the plaintiffs conceded that more than half of the excavation undertaken by the contractors during this period (6,216,971 bcm of a total of 10,338,400 bcm) was work which had no connection with the collapse of the BWE. It was work on another part of the mine described as the Airstrip pit. This weakened the plaintiffs’ case that they had seen it necessary to maintain the same amount of overburden removal despite the absence of the BWE. On their ultimate case they fell well short of that objective if they had ever held it. Still, their case remains that the cost of excavating what was removed (apart from the Airstrip) was higher than what would have been the cost of excavating that same quantity with the benefit of the BWE working in combination with the plaintiffs’ trucks and shovels.

At first sight that case would seem plausible. But two things must be understood. The first is that none of the overburden removed during this period was earth which would have been removed by the BWE. None of it was within level 1. The second is that all of it was earth which had to be removed in any case.

According to Mr Kilgour, BHP wished to maintain the same rate of excavation of overburden notwithstanding the loss of use of the BWE, but that it decided to use its trucks and shovels and its contractors at various locations, all at level 2, because it was less costly for them to work there than where the BWE would have operated. Those level 2 locations were closer to where the material had to be dumped. There were shorter distances for the trucks to travel from those locations than from where the BWE had been operating. So, Mr Kilgour said, the output from trucks and shovels was increased and contractors were engaged to make up for the loss of the BWE; but to mitigate the plaintiffs’ loss, they were employed elsewhere and at level 2.

Undoubtedly the output of the trucks and shovels was increased within this period from what had been planneed not long prior to the BWE’s collapse, according to the then latest Long Term Plan. These plans detailed, amongst other things, the amount of the proposed excavation by each of the three systems year by year for the next 15 years or so. The plans also detailed the proposed amount of coal recovery. They clearly evidence the intentions of the mine’s management about these things as at the time of their production. Of course they were being constantly revised as the result of some changes in circumstances such as the demand for and likely price of coal. The plaintiffs’ case relies upon them, and in particular upon the plan produced in December 1999. There are several of these plans which have been tendered and they are respectively dated December 1999, May 2000, September 2000, December 2000, March 2001, May 2001 and March 2002.

In the tables below I have gathered the projections from those plans for each of the three systems for the financial years (ending 30 June) 2001 through 2004. I have also included in those tables the actual quantity excavated. The amounts are in millions of bcm.

Trucks and Shovels

	Dec 1999 LTP	May 2000 LTP	Sept 2000 LTP	Dec 2000 LTP	Mar 2001 LTP	May 2001 LTP	Mar 2002 LTP	Actual
2001	24.647	24.647	26.317					26.147
2002	24.647	24.647	25.090	30.231 5.000* 35.231	24.889 8.126* 33.015	32.184 8.301* 40.485		46.578
2003	24.647	24.647	32.451	31.222 4.000* 35.222	32.754	34.404	43.881	31.283
2004	29.478	29.478	32.350	30.916	32.492	33.729	33.415

* Contract stripping

BWE

	Dec 1999 LTP	May 2000 LTP	Sept 2000 LTP	Dec 2000 LTP	Mar 2001 LTP	May 2001 LTP	Mar 2002 LTP	Actual (shovel/ sizer)
2001	13	0	0
2002	13	13	6.6	6.5	4.421	4.421		0.897
2003	13	13	13	13	13	13	12.903	8.908
2004	13	13	13	13	13	13	13.001	9.844

Draglines

	Dec 1999 LTP	May 2000 LTP	Sept 2000 LTP	Dec 2000 LTP	Mar 2001 LTP	May 2001 LTP	Mar 2002 LTP	Actual
2001	27.43	27.195	33.397					30.859
2002	26.989	26.889	29.550	28.964	24.712	26.334		32.348
2003	27.342	27.342	22.898	25.172	30.970	31.220	32.515	30.397
2004	29.197	29.197	27.858	26.078	29.258	30.425	29.247

So from the table relating to the BWE, it can be seen that the December 1999 plan projected 13 million bcm in each of those four years. The plaintiffs’ case is that the BWE would have excavated 12.7 million bcm, and not 13 million bcm, in each of 2001 and 2002. Relying on the 1999 plan, the plaintiffs say that in combination with the BWE, trucks and shovels would have removed 24.647 million bcm in the 2002 year, although they say 22.16 million bcm in the 2001 year (rather than 24.647 million bcm projected also for that year).

The quantity actually removed by trucks and shovels in 2001 was 26.147 million bcm and in 2002 was 46.578 million bcm, or excluding the Airstrip work, a total of 40.361 million bcm. Thus it is clear that the work done by trucks and shovels, both by the mine’s fleet and by contractors, in this period was well in excess of what had been intended when the BWE collapsed.

But the plaintiffs must prove that this increase was a deliberate response to the loss of the BWE. And if that is proved, there is a further question of whether the cost of performing that additional excavation by trucks and shovels, compared with the cost of removing an equivalent volume of earth but from elsewhere in the mine (at level 1), gives rise to a compensable loss. It is convenient to discuss that question first.

Not one clod of earth was removed during this period which did not have to be removed at some time. And as the plaintiffs accept, none of it would have been removed by the BWE, save for the relatively small amount removed by the shovel/sizer in May and June 2002. That particular work can be put on one side for the present question. The point is whether, assuming that a certain quantity of earth was moved by trucks and shovels and contractors within the period which would not have been moved within that period but for the BWE collapse, there was a compensable loss.

On that assumption, what changed was the timing of that (extra) work. Instead of that earth being removed in 2003 or later, it was removed within this period. The plaintiffs do not claim that the acceleration of the timing of this work made it more costly. Nor do they claim for the loss of use of the money spent on those works, by that expenditure being accelerated. And there is no claim that the acceleration of the works had some impact upon other operations of the mine, which caused those operations to be more expensive or less productive. So how then are the plaintiffs worse off for accelerating this work?

The plaintiffs say that their loss is to be measured by reference only to the period for which they were without the BWE or its replacement. The claim is for the amount by which the actual costs of removing a certain quantity within that period exceeded what would have been the costs of removing that same quantity within that period with the assistance of the BWE. The plaintiffs say that it is irrelevant to consider the effect beyond that period of removing that material. They say that only the period for which they were without the use of the BWE could be in any sense relevant.

The defendants argue that it is artificial to confine the inquiry to that period. They say that the plaintiffs’ overall position must be assessed. What the defendants say were the beneficial consequences of accelerating the removal of overburden from level 2 must be brought into account. To that end they led opinion evidence to the effect that the acceleration of this work in turn accelerated the recovery of coal and so overall the plaintiffs were better off. This led to an extensive factual contest, involving detailed opinion evidence of independent mining engineers called by both sides.

Undoubtedly the removal of overburden contributes to the profitable mining and sale of coal. The quantification of that contribution is another matter. But in my view it is unnecessary to investigate that question, and the effect on income in subsequent years from the removal of extra overburden in this period. There is a more obvious benefit to the mine from removing an extra cubic metre within a certain year, which is that it does not have to be removed in a subsequent year. The extra dollar spent in 2002 is the dollar which would have been spent, (probably) in 2003 or not much later than that. (The extra work by trucks and shovels and contractors within this period was less than the quantity for the 2003 year proposed for them by the 1999 LTP and it is not suggested that the sequence of work was affected.)

Once the inquiry as to the plaintiffs’ financial position is not confined to its cashflow within the period to June 2002, the flaw in this claim appears. The claim is for the loss of use of the BWE within a period, but the plaintiffs must demonstrate that they have a compensable loss, in that there is something which they should be paid now in order to put them in the position they would enjoy had the BWE not collapsed. Had the plaintiffs used trucks and shovels where the BWE would have worked in that period, and had the trucks and shovels been more costly than the BWE, the difference would be a loss for which the plaintiffs should be compensated. The plaintiffs say that instead they used the trucks and shovels elsewhere, in order to mitigate their loss and they should not be denied compensation for having done so. But if they have thereby avoided a loss by not digging at level 1 in the interim, they are not entitled to be compensated.

There is a further matter which underlines the artificiality of this claim. It involves the difference between digging at level 1 and digging at level 2. At level 1, the BWE dug material which had not been blasted. Generally, the material at level 2 dug was blasted. Early in its life the BWE had been used to dig blasted material but this proved unsuccessful, because the size of the pieces of earth after the blasting were often too large for the conveyer system. Mr Black described the attempts to use the BWE in blasted material and said that it was for this reason it was decided early in the life of the BWE that it would not dig below 25 metres because, he recalled, below that level the material would have to be blasted. That difference in the nature of the overburden between, broadly speaking, levels 1 and 2 features in the plaintiffs’ claim. In the evidence of Mr van Homrigh, he reached his costs per bcm for the truck and shovel system by including a component for the cost of what his report called drilling and blasting. In his first report Mr van Homrigh wrote:

“The T & S system requires overburden to be blasted before the T & S fleet can operate effectively. Hence a Drill and Blast (‘D & B’) cost per bcm is added to the T & S costs to determine the full costs of operating the T & S system.”

He went on to quantify them at $0.3064 for the 2001 year and $0.2761 for the 2002 year. Those costs are substantial because without them, Mr van Homrigh’s rates for trucks and shovels would be lower than his rates for the BWE. What follows is that it was more expensive to move a metre of earth from level 2 than a metre from level 1 by the BWE partly because of the cost of having to first blast the level 2 material. As appears from their own case then, what the plaintiffs are looking to recover is the cost of a particular operation (drilling and blasting) which was and is required by the geology of the mine site, rather than the cost of digging with one system rather than another.

In summary then, assuming that a certain amount of extra work was done by trucks and shovels and contractors within this period because the BWE was not operating, in my conclusion there was no compensable loss. To the extent that more dollars were spent within the period than would have been the case, there was a corresponding benefit in that the same amount did not have to be spent, as it would have been spent, in the year or so following that period.

Within this claim for interim use, there is an element which is the use of the shovel/sizer in May and June 2002. The cost of its operations beyond 30 June 2002 do not figure in this particular claim. The costs of its first couple of months of operation have been included because the claim is defined by the date of collapse of the BWE and 30 June 2002. So these costs are included within the actual costs, thereby increasing the claim. The shovel which became part of the shovel/sizer system was operated from October 2001 but the sizer did not begin to operate until 17 May 2002. According to Mr van Homrigh’s first report, the cost of operating the shovel/sizer system in 2002 was $4,975,502, which for the volume of 896,892 bcm was the equivalent of $5.5475 per bcm. The impact of the inclusion of this cost upon this loss of use claim, were it to succeed, is large. With its inclusion the ultimate claim was for $7,554,848. With its exclusion the claim would amount to $3,750,776.60^[132].

But this component, the cost of the shovel/sizer operation during the period, is inappropriately included within this claim because it is not a claim arising from unavailability of the BWE or its replacement. Instead, this component represents the costs of operating the replacement.

It also differs from the other costs because this work was done on level 1 and it was work which would have been done by the BWE. In that way the claim for a difference in the cost of removing this 896,892 bcm does not suffer from a fundamental flaw of the rest of this claim. However, it has the same problem that it confines the relevant investigation to the period ending 30 June 2002. This cost of $4,975,502 appears unrepresentative, because the shovel/sizer system was then being commissioned. Moreover, according to Mr van Homrigh’s first report, only about a third of these costs ($1,638,472) were “operating costs for shovel/sizer” and the balance ($3,337,030) was the “cost in reinstating the equipment required to operate the shovel/sizer system”. (Hence the submission referred to earlier at paragraph [845] that there was some double claiming with the items there discussed.) As to those operating costs of $1.6 million, they equate to $1.027 per bcm, and they may be compared with the rate of $1.01 per bcm for the full 2003 year, in which the volume was 8.908 million bcm. It is artificial to take this first six weeks of operation of the shovel/sizer in isolation from what happened after it was past its teething stage.

As it happened, the shover/sizer system became more expensive to operate on a per bcm basis in subsequent years. Mr van Homrigh has concluded that the operating costs of the shovel/sizer exceeded what would have been the BWE’s costs, in the four years ending 30 June 2006, by something in the range of $8.6 million to $16.4 million. However the plaintiffs do not claim for that difference. That evidence was led to rebut Ms Wright’s opinion that there was a betterment, through lower operating costs, from the substitution of the shovel/sizer for the BWE which had to be brought into account. Had the plaintiffs claimed that difference as damages, it would have raised issues such as what were the reasons for the relatively high costs in 2005 ($3.85 per bcm) compared to, in particular, the $1.01 per bcm for 2003.

The point in all of this is that for the plaintiffs to claim only for the first six weeks of this new system provides a misleading account of the plaintiffs’ position.

Should it become relevant I should express my findings as to the factual assertion that a certain volume of material was moved from level 2 within this period because the BWE was not working.

In his witness statement made in January 2007,^[133] Mr Kilgour said:

“85Over the life of the mine, a certain quantity of overburden has to be removed in order to expose the available coal. The coal has to be uncovered. The dirt has to be moved. If you don’t move it today, you have to move it tomorrow. All things remaining equal, any loss of capacity to continue the removal overburden will necessarily have the consequence that it will take longer to expose the available coal. The collapse of the BWE involved such a loss of capacity.

86Following the collapse of the BWE, in addition to evaluation of the rebuild/replacement options discussed above, one of my principal concerns was to maintain the rate of overburden removal. It was not possible to use the conveyor and spreader components of the BWE system in conjunction with a shovel, so as to continue to remove overburden where the BWE had been operating. Because of the way they dig overburden, shovels excavate larger chunks or pieces of dirt than the BWE did, and they are too big for the BWE’s conveyor unless first crushed by a crusher or sizer. Nor was it economically feasible to deploy trucks to transport overburden from the area where the BWE had been operating because of the transportation costs to which I have referred.

87There was a certain amount of truck and shovel capacity available to BHP using its own fleet, and using contractors. To maintain the rate of overburden removal, I decided to deploy additional BHP equipment and to use contractors (Henry Walker Eltin). It was more cost effective to deploy the additional equipment and the contractors in areas where the BWE had not operated because of the shorter haulage distances involved. I chose the most economic way to use the resources at our disposal. I basically looked at what dirt could be moved and selected the cheapest method of removal. The contractors were normally more expensive than our own fleet, so I deployed the contractors in places where their margin was the lowest – so we deployed them in shorter hauls. ...

88The steps which I implemented to maintain the rate of overburden removal were:

(a)temporarily moved Shovels 29 and 31 to a seven day roster;

(b)subsequently replaced Shovel 29 with the higher capacity Shovel 33 on or about 1 June 2001;

(c)temporarily deployed Shovel 22 (which would otherwise have been parked as a standby machine);

(d)temporarily engaged contract overburden removal services (from Henry Walker Eltin (‘HWE’)) between July 2001 and June 2002.”

I have extracted that evidence because it shows that Mr Kilgour’s evidence was that he caused steps to be taken to “maintain the rate of overburden removal”. That evidence corresponded with the plaintiffs’ then pleaded case. As discussed earlier at paragraph [884] this particular claim, as originally pleaded, was that the plaintiffs had acted by causing to be excavated the same volume of material in the subject period as would have been excavated with the contribution of the BWE and according to the 1999 LTP. For many reasons that is now shown to be false.

The first of them comes from the terms in which this loss of use claim was ultimately advanced, by which it is conceded that at least the “Airstrip” work had nothing to do with the BWE. This was not work by way of maintaining the rate of overburden removal.

Secondly, the sequence of Long Term Plans is not consistent with Mr Kilgour’s evidence. The plans do not show some point at which a decision was made to increase the excavation by trucks and shovels and contractors to make up for the BWE. The relevant parts of the plans are extracted in the tables set out earlier at [889]. The May 2000 LTP shows no change for trucks and shovels from the 1999 LTP although, of course, it shows that there would be no excavation in the 2001 year by the BWE. The September 2000 LTP does show some revision of outputs for trucks and shovels, but only to a small extent: from 24.647 million bcm per year in 2001 and 2002 to 26.317 million and 25.09 million. The same plan showed no excavation by the BWE in 2001 and 6.6 million bcm projected for 2002. Next is the December 2000 LTP. It had no projection for the 2001 year (it being halfway through the year), but for the 2002 year the projected volume by trucks and shovels was 30.231 million and by contractors 5 million, and similar figures were also projected for 2003. The 2002 projection was thereby a very substantial increase over that in the September 2000 LTP. Nevertheless it does not appear that the mine was looking to make up for the lost output of the BWE. Then there was the March 2001 LTP which projected an increase in contract excavation to 8.125 million but a decrease (again for 2002) for trucks and shovels to 24.889 million (much the same as the 1999 LTP). That was followed by the May 2001 LTP in which the projected work of trucks and shovels for 2002 was increased to 32.184 million. Aggregated with the work to be done by contractors for that year, the projection for 2002 was 40.485 million. That was near to the end of the 2001 year in which the actual recovery by trucks and shovels became 26.147 million. So as at May 2001 it could be said that the mine was proposing in the 2002 year to take the two year total to about 66 million bcm. Nevertheless that would have fallen well short of what was required to maintain the rate as Mr Kilgour described it. And if this May 2001 plan could be thought to evidence a decision to make up for the BWE, it would appear that the decision was made at about that time, rather than the months following the collapse of the BWE.

The plans demonstrate at least two other significant things. The first is that there was the same trend in relation to draglines as there was for increased production from trucks and shovels. The various increases, through the sequence of plans, did not precisely correspond in percentage terms. But because the trucks and shovels had to do their work to make way for the draglines, the projected increase in dragline excavation strongly suggests a reason for at least some of the projected increase for trucks and shovels. Secondly, I have shown the projected figures also for 2003 and 2004, because they negate the suggestion that any increase for trucks and shovels and contractors was simply to fill the gap until the BWE or its replacement was in operation. So for example for the 2003 year, when the BWE was again projected to be excavating 13 million bcm, the May 2001 LTP projected 34.404 million bcm for trucks and shovels. This shows that at least much of the increase in the trucks and shovels activity was due to other things and not to the absence of the BWE. Some of these other things are suggested by the evidence. For example there is evidence of industrial disputes affecting other mines operated by BHP with the consequence that more resources were able to be employed in working this mine.

Then there is the timing of the of the work in fact at level 2. The actual recovery by trucks and shovels for 2001 was 26.147 million bcm, which was not so much higher than the 24.647 million bcm which had been projected by the 1999 LTP. The real increase was in the 2002 year. This suggests that the decision to accelerate this work was not made to preserve the rate of removal of overburden as Mr Kilgour had said.

Next there is the matter of what I described earlier^[134] as the balance between the various systems of excavation. It was necessary to maintain a sufficient “inventory” on level 1 for that level to be far enough ahead of the work at level 2. Yet, rather than doing some work on level 1 to maintain that balance, the trucks and shovels were put to work entirely at level 2, with the result in some cases of closing the gap between the two operations. Yet Mr Kilgour’s evidence did not seem to address that question of balance. According to his evidence, it was a matter of maintaining the overall volume of overburden removal. So the fact that none of the extra truck and shovel activity was employed at level 1 tends to suggest that it was not a response, or not alone a response, to the loss of the BWE.

But as to this the plaintiffs argued that it was a logical response in this way: by accelerating the work at level 2, the plaintiffs were able to create some excess capacity for the trucks and shovels in subsequent years, so that if there was a delay in replacing the BWE, trucks and shovels could be quickly brought to level 1 without having as much work to do at level 2. Mr Maiden, an independent expert in mine management called by the plaintiffs, said that this would have been a reasonable strategy. But it far from appears that this was the plaintiffs’ strategy. Mr Kilgour did not seem to refer to it. And it is inconsistent with what Mr Ellery wrote in his Project Case, where he considered the possibility of a delay in the repair of the BWE and what would be done at level 1 in that event. He there costed the removal of level 1 material by contractors, not by the plaintiffs’ own fleet of trucks and shovels.

Against all this, there is no persuasive evidence that the plaintiffs were acting as Mr Kilgour maintained. In particular, the contemporaneous records of BHP do not provide much support. There is some support in an email distributed by Mr Kilgour on 10 March 2000, where he wrote that:

“appropriate measures will be taken in the medium term to ensure adequate stripping volumes are maintained at the levels required to meet coal recovery targets, pending a decision on the future repair and use of the bucket wheel ...”

This was repeated in a press release. This was not exactly the same as maintaining the same rate of overburden removal. But this was not a record of a decision made within BHP. In a later document in March 2000, there is evidence that it was proposed to investigate “other short term replacement ideas”, that is to say the replacement of the BWE’s capacity. In a Powerpoint presentation by Mr Kilgour to the Joint Venture Board, probably made in about May 2000, Mr Kilgour said that a key objective was to “achieve lowest cost short-term makeup capacity (18-24 months)”, and he there summarised some alternatives under the heading “Interim Capacity Replacement”. Then there is a memorandum from Mr Kilgour to a Mr Honeychurch, who represented the plaintiffs’ insurer. In this memorandum Mr Kilgour represented that the plaintiffs had taken and would take further steps with the effect of “replacing the lost BWE capacity”. He told Mr Honeychurch that this would result in a loss of the order of $12.5 million. But this was a document written to an insurer to advance a claim against it, and it hardly provides the most reliable evidence of what had actually been decided and implemented. The defendants argued that I should find that the increase in level 2 excavation in 2002 was because the plaintiffs were looking to substantiate their interim loss of use claim against their insurer. I am not persuaded about that, particularly as I do not see that it was put as clearly to Mr Kilgour as it should have been.

It is for the plaintiffs to demonstrate that at least some of that level 2 excavation was then undertaken because of a concern about the loss of use of the BWE. Overall the plaintiffs have not proved that in any amount. And more probably than not, much of what they claim was this additional excavation was due to other things.

I have not disregarded the detailed evidence, presented by both sides of the argument, as to what happened with the use or replacement of various shovels in BHP’s fleet. There was some relevance in all of this evidence and it fairly appears that BHP changed the composition of its fleet in a way which would increase its capacity. As this evidence also shows, it would not have been such a simple matter to increase the extent of excavation by the fleet: it would have been something requiring some forward planning, and it seems, the acquisition of new equipment. But all of that begs the question: why was the truck and shovel activity being increased? Overall it suggests that BHP was looking to increase the activity in the long term, as indeed it did, rather than simply during the absence of the BWE.

It follows that the factual basis for this interim loss of use claim is not established and for that reason also it should be rejected.

Further claim for loss of use: general damages

The plaintiffs argue that they should be compensated by an award of general damages for their loss of use of the BWE between the collapse and its replacement by the shovel/sizer. Upon this basis, they seek an award calculated by applying an annual interest rate of, say, 10 per cent over 27 months, to what they contend was the “true worth” of the BWE. By that they mean, not its depreciated value. They argue that the value to them of the BWE system was “considerably more than its written down value” and that its true value was what had to be spent to replace it (or rebuild it if the acquisition of the shovel/sizer was not a reasonable course).

At first this seemed to be an alternative claim to that just discussed: the claim for special damages for increased operating costs during this same period. But ultimately counsel for the plaintiffs submitted that I could make an award which was something of a hybrid of the two. Because the special damages claim has failed, that particular submission need not be considered.

For this general damages claim, the plaintiffs do not seek to establish that the absence of the BWE affected their costs or otherwise affected their profits. As I have found, the plaintiffs have not demonstrated that their costs were affected. They do not seek to establish that their earnings were affected. In particular, they do not claim that by the unavailability of the BWE, they have extracted less and sold less coal. Although this was a chattel used in the course of an operation carried on for profit, this claim involves no allegation that their profits have been affected to some extent.

The plaintiffs say that they are worse off, because the BWE was a valuable part of their production process, and their loss is a loss of capacity. The argument cites several cases where general damages have been awarded for the loss of use of a chattel, and in particular, where those damages have been quantified by applying a rate of interest, representing a reasonable rate of return, to the value of the chattel. This is said to be a representation of the cost of the capital invested in the chattel, which is a cost thrown away whilst the chattel cannot be used.

The principal argument in response to this claim is that the plaintiffs must prove that they have suffered a compensable loss, and absent proof that the unavailability of the BWE has increased their costs or decreased their revenue, they have simply failed to prove their case. Because the purpose of the use of the BWE was to contribute to the generation of profits, the loss of use of the BWE results in no compensable loss absent an impact upon profits. They argue that cases in which such general damages have been awarded are distinguishable, because they involved chattels used in a non-profit activity.

Before going to the authorities, there is a feature of the present case which must be noted. It is in the way in which the BWE contributed to the operations of the mine and in turn to its profits. It was not an asset from which there could be derived any distinct profit. It would be impossible to assess the profitability of the BWE itself. In contrast to, for example, a car used as a taxi, this chattel had no distinct revenue attributable to its use. Undoubtedly it contributed to revenue, and thereby to profit, but not in that direct sense. Its indirect contribution to profit was undoubtedly valuable, as is demonstrated by its continued use at this mine for more than 17 years. This is why the plaintiffs invested capital in the BWE system. Unlike some other cases in which general damages have been claimed for loss of use of a chattel, this is not a chattel which would have been idle in any event and nor is it a chattel which, if available, would have been operated at a loss. Further, unlike some other cases, this is not one where it can be seen that probably there has been a loss of profits but where the amount of that loss has not been properly proved. Rather, as already noted, the plaintiffs do not say that their earnings were affected and the claim that their costs were increased has been rejected.

General damages can be recovered for the loss of use of property which would have been used, not to make a profit, but for other purposes such as the provision of a service to the public or simply for the plaintiff's own enjoyment. In The Greta Holme,^[135] the Mersey Docks and Harbour Board was deprived of the use of its dredger which it operated for public purposes and from which it derived no revenue. It did not hire a substitute. In response to its claim for damages for loss of use of the dredger, it was argued that the Board had suffered no loss. That argument was rejected by the House of Lords which held that the plaintiff was entitled to an award of general damages. The same conclusion was reached in two further cases brought by the same Board: The Mediana^[136] and The Marpessa.^[137]

In The Mediana, the plaintiff had lost the benefit of a lightship. It was argued that this distinguished it from its loss of use of a dredger in The Greta Holme, because the unavailability of the dredger in that case had resulted in a loss by the accumulation of further silt which was likely to increase the cost of its dredging operation overall. In rejecting that argument, Lord Halsbury LC said:^[138]

“My Lords, it is true that in that case there were two circumstances which I mention for the purpose of pointing out that I do not omit to consider them, namely, that the dredger was actually prevented from doing work which the particular corporation entrusted with the duty of doing it had intended to do; and further, as was pointed out by Lord Watson, the effect of not dredging during the period while the dredger was rendered incapable of doing its proper work was to set up an additional amount of silt which would itself of course be an injury which would properly sound in damages when the person responsible for taking away the dredger was called upon to pay. These two circumstances were not unnaturally pointed out by the learned counsel who challenged this judgment as shewing that there were grounds for the decision in that case which do not apply here. But, my Lords, I think it is impossible to read the judgments of those noble and learned Lords who took part in that case without seeing that it rests upon a much wider and broader principle than would be applicable to the particular circumstances which I have referred to in that case. Lord Herschell in terms did lay down a much broader principle, and I may say that I myself intended to lay it down, though I may have expressed myself imperfectly, namely, that where by the wrongful act of one man something belonging to another is either itself so injured as not to be capable of being used or is taken away so that it cannot be used at all, that of itself is a ground for damages.”

Lord Shand said:^[139]

“In those circumstances it appears to me that if the commissioners had hired a ship for the purpose of doing duty as a sixth lightship, finding that necessary in the course of their administration, there could have been no answer to their claim for the cost of hiring that ship. It appears to me that if there could have been no answer in that case, as little is there any answer here. Instead of waiting for an emergency suddenly occurring, they have thought fit to have a ship ready. It costs them 1000l a year to have it ready. It appears to me that the expense of having this ship ready instead of having to look for a ship when the emergency occurs, or rather a part of that expense, must properly fall upon the person who has been guilty of running down the lightship.”

The Marpessa was another claim for the loss of use of a dredger. In the speech of Lord Loreburn LC, this was said about the amount of such general damages:^[140]

“If the plaintiffs had hired another vessel to do this work they could have recovered the cost of doing it. They have not done so, no other vessel being available at so short a notice, and, perhaps, not being available at all; for the construction is peculiar. Failing that evidence, the plaintiffs were entitled to put their case in another way. They might say: The cost to us maintaining and working this dredger, while it is working, amounts to do much per day, and its depreciation daily amount to so much more. We take the total daily sum which it costs us as a fair measure of the value of its daily services to us. Those services are at least worth what we are habitually paying for them year after year, including what we sacrifice in depreciation.”

The threshold question here is whether general damages of this kind are recoverable where the chattel would have been used in an operation conducted for profit. The defendants argued that I am bound by the Full Court's judgment in Zappulla v Perkins^[141] to hold that such damages are not recoverable where the chattel was used for profit. In that case, the plaintiff, a practising solicitor, leased a Jaguar car at a monthly hire of $481. Through the defendant's negligence he was deprived of its use for six months and he claimed, successfully at first instance, damages equivalent to six months hire. Whilst he was without the Jaguar, the plaintiff had purchased a Ford which he used as a substitute and then resold it at a net cost of $198. The defendant's appeal was allowed and in substitution there was an award of that amount of $198. The plaintiff's argument was that the relevant loss was the loss of use of the Jaguar, which according to The Greta Holme, The Mediana and The Marpessa, was a loss to be measured by the cost of hiring a Jaguar. But Matthews J, with whom Wanstall CJ and Kelly J agreed, held that those cases were not applicable because the plaintiff had used the Jaguar for his legal practice. Matthews J said this:^[142]

“For the respondent it was argued that the hire which he continued to pay for the Jaguar was the proper measure of his loss. For this proposition counsel relied on statements in The Greta Holme … TheMediana … and The Marpessa … The third of these cases in the House of Lords went to establishing a measure of damages in respect of a principle accepted in the earlier two cases that the owners of a vessel could recover damages against a wrongdoer although the vessel made no money for its owners and merely rendered services. All three cases were concerned with vessels which were not profit earning and as such in my opinion are to be distinguished from the instant case just as they were distinguished in The Valeria … The facts in The Valeria are enlightening when one is seeking an appropriate principle in respect of the present appeal. The British Government had hired from the Dutch Government a steamer, the rate of hire being £342 per day. She was damaged by collision with the Valeria and it had been found that the Valeria was solely to blame. The damage done to the British vessel was capable of repair. The vessel was in fact repaired and the voyage completed but for a period, and because of the damage to her, she was detained and the Admiralty claimed a sum in respect of the loss of use during that period. The sum was in part calculated by multiplying the hire per day of the vessel by the number of days during which the use of her was lost. At p 247, in the course of dismissing the appeal from the Court of Appeal which had disallowed damages calculated byreference to the hire, Lord Buckmaster said:

‘What has to be considered is what would this vessel have earned for the period of the seven days that she was incapacitated owing to the accident; and that amount is the true measure of the damage which the vessel who was to blame is called upon to pay.’

In the case under appeal the respondent expended an extra $198.00 and thereby continued his practice as he had carried it on by using his Jaguar, and this $198.00 is the sum which represents his loss. I would therefore allow the appeal with costs and substitute for the judgment below, judgment for the plaintiff in the sum of $198.00 with no order as to costs.”

In the case of The Valeria,^[143] a ship which was costing in hire £342 per day was making a net income from its use of £142 per day and the House of Lords held that the plaintiff was entitled to demurrage only according to the net income lost, rather than the hire paid. So in that case there was a finding that there was a loss of profit and that it was able to be quantified at £142 per day. Because in truth that was the plaintiff's loss, the plaintiff would have been over-compensated by the equivalent of £342 per day. Similarly, in Zappulla v Perkins, the actual loss to the plaintiff was known: it was the sum of $198 as the net cost of the substitute car. Cases such as The Greta Holme are not authority for the proposition that where there was an actual and quantified monetary loss from the loss of use of a profit-earning chattel, nevertheless some larger amount could be recovered as general damages. So those cases were not applicable in Zappulla v Perkins, because they dealt with a different situation where there was no demonstrable financial loss from the loss of use of the chattel. That is what Matthews J was identifying as the point of distinction. His Honour was not considering the present type of case, where the chattel was used in a profit-making operation but where no loss of profit can be demonstrated. Zappulla v Perkins is not authority for a proposition that general damages are irrecoverable for the loss of use of a chattel which was an asset of a business carried on for profit.

This is probably the reason why Matthews J made no reference to an earlier decision of the Full Court, in which general damages were awarded for loss of use of a chattel used for profit, which is Woodman v Rasmussen.^[144] The plaintiffs there operated a sawmill and by the defendant's negligence they were deprived of the use of a planing machine. They claimed to have lost £1,800 in profits over a period of three months. They endeavoured to prove this loss by reference to evidence of their production and profitability, but the evidence fell short of what was required to prove the loss as claimed. The Full Court held that the trial judge's allowance of their claim should be set aside. Macrossan CJ said that it was impossible to ascertain from the evidence “what the loss of profits actually was”.^[145] But he then said:^[146]

“In my opinion the judgment so far as it gave the respondents damages for loss of profits cannot be sustained. It would, however, be in accord with authority to give the respondents damages by way of interest at the rate of five per centum per annum on the capital value of the machine for the period of three months during which they would have been deprived of the use of it whilst the necessary repairs were being made.”

Philp J and Townley J each agreed, Philp J citing The Greta Holme^[147].

Accordingly, Woodman v Rasmussen is authority for the contrary of the defendants’ argument. Counsel for the defendants conceded this, but submitted that of the two decisions of the Full Court, I should apply Zappulla v Perkins. As I have said, that was a different kind of case to the present, whereas Woodman v Rasmussen is not.

There is other authority against the defendant's argument. There is first the decision of the English Court of Appeal in Sunley (B) and Company Limited v Cunard White Star Limited,^[148] where a plaintiff was entitled to damages for breach of contract for a delayed delivery of machinery. The delay resulted in a loss of use for about a week. The machinery was a tractor and scraper used for profit in the plaintiffs' business. The plaintiffs attempted to prove an actual loss of profits which they had claimed as £577. The trial judge was unpersuaded about that claim, but nevertheless awarded a lump sum of £250, candidly admitting that his choice of that figure had no particular explanation.^[149] That award was set aside. The court substituted an award of general damages of £14, which it reached by making some allowances for depreciation, interest on the money invested in the machinery which was being wasted during that period and something for wasted expenditure on wages. In a joint judgment the court said:^[150]

“The machine here was a chattel of commercial value, but on the facts before us there are only four possible heads of damage: (1) depreciation which was running on, (2) interest on the money invested which was being wasted, (3) some trivial amount of maintenance which was no doubt involved, (4) some expenditure of wages which were thrown away. The plaintiffs could not complain if they are refused any relief whatever on heads (2), (3) and (4); for, having opened their mouth wide for a wholly illegitimate claim, they did not condescend to lead evidence on any of these three legitimate topics.”

There are obiter dicta in support of the plaintiffs' argument have in Lord Citrine (Owners) v The Hebridean Coast (Owners),^[151] within the judgment of Devlin LJ in the Court of Appeal and the speeches of Lord Reid and Lord Morton of Henryton. The plaintiff was a public utility supplying electricity on a not for profit basis. It owned the Lord Citrine, a collier which it used to carry coal for its generation plants. It failed to establish that there was an actual cost of replacing the temporary loss of capacity from the damage to its ship, but at first instance it recovered an award representing the interest on its capital value. Devlin LJ (as his Lordship then was) said:^[152]

“In the cases in which this general principle has been applied to ships, various ships, of different types have been considered – trading or profit-earning vessels, pleasure vessels, warships, utility vessels such as dredgers and lightships. But that does not mean that there are different rules for different categories of ships. I think with respect that the registrar was wrong in regarding the matter primarily as ‘a problem of classification’. The class of vessel is only one of the matters to be considered. Even the broad distinction between profit-earning and non-profit-earning vessels must be handled with care. The same type of car in the hands of a car-hiring concern has different potentialities from those which it has in the hands of a private owner. Likewise with ships: there are types of vessels, such as pleasure yachts, which are capable of earning a profit in some circumstances but not in others: one must inquire into all the circumstances and in particular into what the owner would probably have been able to do with the ship during the period of detention. I have not, therefore, studied the cases that have been cited to us in order to place the Lord Citrine in any particular category of vessel. I have looked for the broad statements of principle which show how the general rule has been made to work. There are, I think, two ‘working principles’ that are relevant to this case.

The first is that where there is ‘a reasonable certainty of employment,’ the owner is entitled to be compensated for the profit he has lost.

…

The other principle is that the owner of a vessel may get substantial, and not merely nominal, damages notwithstanding that he cannot show any loss of profit. He has lost the use of his vessel; and whether he would have used her for pleasure or business or some other form of service, such as dredging, he is entitled to compensation for the loss of use. Whereas in cases in the former class the award may best be calculated by starting at the top end, as it were, with charter rates or the like and working downwards, cases in this class may best be dealt with by beginning at the bottom, that is, by counting the costs. The owner will be entitled to recover running expenses in maintaining the vessel and paying the crew while they are of no use to him. In addition he must have something which in the last analysis can only be a lump sum as compensation for loss of use.

…

This second principle does not mean that the owner of a damaged vessel must inevitably be given something for loss of use. The facts may show that before the casualty occurred the owner was already saddled with the liability to maintain an idle vessel from which he could get no profit or pleasure or other form of service.”

Lord Reid said:^[153]

“I do not proceed on any supposed distinction in principle between a profit-earning ship and a non-profit-earning ship. The task of assessing damages is easier with a profit-earning ship and depends on the probability that she would have earned so much money if her owner could have used her. With a non-profit-earning ship there is no direct financial loss and one must ask what harm was done to the owner by his being deprived of the use of his ship. Then comes what may be a very difficult task, to put a value in money on the harm which the owner has suffered. But you must first prove the harm. If no harm is proved beyond the mere fact that the owner is deprived of the services of his ship during the period of repairs, the opinion of Lord Herschel in [The Greta Holme] appears to have given rise to the practice of awarding damages based on interest on the value of the ship.”

To the same effect, Lord Morton said that he could see no distinction “for this purpose, between a profit-earning body and a non-profit-earning body”.^[154]

Next there is the judgment of Lucas J in Commissioner for Railways v Luya, Julius Limited.^[155] The claim there was for the temporary loss of use of a locomotive and other vehicles. Lucas J did not accept the Commissioner's claim for loss of profits because there was no evidence that the Railways “in fact suffered any loss of revenue as a result of the absence from service of these vehicles”.^[156] But referring to Lord Citrine v The Hebridean Coast, Lucas J said that damages could be awarded by way of interest upon their value during the period for which the vehicles were out of service.^[157]

More recently, in Greer v Alstons Engineering Sales & Services Ltd,^[158] the Privy Council upheld an award of $5,000 for the temporary loss of use of a backhoe used commercially, by reference to The Greta Holme and The Mediana as well as to a decision of the English Court of Appeal in Dixons (Scholar Green) Ltd v J L Cooper Ltd,^[159] where a similar award had been made for the temporary deprivation of a commercial vehicle.

As already noted, a feature of the present case is that it would be artificial to attempt to assess the profitability of the BWE itself. Its operation was undoubtedly beneficial, but that could not be measured as a quantified contribution to the profit of the mine. The position is here analogous to that in the so-called non-profit cases, where, for example, the dredge in The Greta Holme was beneficial but not in a way which could be quantified in monetary terms. There is no basis in principle for distinguishing the present case from those where a chattel is not used in a profit-making operation. And to do so would be inconsistent with authority, and in particular the judgment of the Full Court of this court in Woodman v Rasmussen.

The defendants also rely upon Macgregor on Damages (16^th edition), which they say expresses the principle for which they contend. I am not sure that this is expressed within Macgregor, but other text writers have done so.^[160] In particular, Tettenborn, Wilby and Bennett, in The Law of Damages at paragraph [14.87] contains a criticism of the dicta in Lord Citrine v The Hebridean Coast on the basis that “if it were right, it would mean that the commercial owner of a profit-earning chattel who was running at no profit at all, or even at a loss, could nevertheless claim substantial sums for being deprived of its use”. In my view, that does not follow. In a case where a loss would have been made, or a direct or indirect contribution to profit would not have been made, general damages would be denied because there would have been no loss from the deprivation of a chattel. As Lord Devlin said in the passage which is set out above, general damages will not be awarded where:

“the facts … show that before the casualty occurred the owner was already saddled with the liability to maintain an idle vessel from which he could get no profit or pleasure or other form of service.”

Therefore, the availability of general damages in this context does not mean that a there is no need for a plaintiff to prove that it is worse off for not having the chattel. Consistently with the cases which I have discussed, it is an available remedy where the use of the chattel is beneficial in a profit making venture but where the plaintiff cannot or has not proved a certain loss of profit.

I turn then to the assessment of general damages.

Assessment of general damages

The plaintiffs argue that the starting point should be an allowance equivalent to 10 per cent per annum upon the then value of the BWE. That rate is chosen because it is the rate prescribed on outstanding judgments under the Supreme Court Regulation 1998 (Qld). The defendants seem to take no point about the rate.

The plaintiffs say that the then value of the BWE was about $8.8 million. They have not proved the value to which the BWE (rather than with other parts of the BWE system) had been depreciated in their accounts. Instead they argued for this amount upon the basis of something in the defendants’ pleadings. In responding to the plaintiffs’ case of a capital loss for having to replace the BWE, the defendants plead that the replacement equipment (the shovel/sizer) gave the plaintiffs an asset of significantly greater value than the BWE, the particulars of which included the statement that the “depreciable value of the BWE was $8.8 million”. Some further things were said in the particulars as to how that figure was derived. But for present purposes, the point is that it is part of the defendants' case that the BWE had that value. Further, the defendants tendered a report by Ms Wright in which she assessed the “estimated book value of the BWE at 30 June 2002” at $9.53 million.

Ultimately the defendants did not argue against the amount of $8.8 million being an appropriate value if general damages were to be allowed and quantified by an award of interest on the written down value of the BWE.

But the plaintiffs argue that this is only the starting point and that the award should be higher because of other factors. First, they say that the award should reflect the fact that the conveyors and other associated parts of the BWE system were rendered useless during this period. Secondly, they say that the $8.8 million does not reflect the particular value to the plaintiffs of the BWE system, demonstrated by the high cost of a new BWE, the high volume of the BWE system, the lower operating cost of the BWE compared with other systems and the amount which it was reasonable to spend in having the BWE rebuilt or replaced. Having regard to those considerations, the plaintiffs argued that the general damages should be an award of 10 per cent interest on the cost of rebuild or replacement of the BWE. The defendants say that this submission goes further than the plaintiffs’ pleaded case. But in any event I am not persuaded by it.

The plaintiffs rely upon what Lord Loreburn said in The Marpessa^[161] in the passage which I have set out above. They argue that this warrants an award which is assessed by the costs of working the BWE. But that was said in the context of an asset which was not used directly or indirectly to produce revenue. Whilst that difference does not in principle affect the availability of general damages, it can be relevant to their assessment. To allow general damages according to the BWE’s operating costs would be excessive, because it would ignore what would have been the benefit from those costs.

The explanation for awarding interest on the written down value of a chattel was explained by Geoffrey Lane J in Birmingham Corporation v Sowsbery:^[162]

“… The operators have been deprived during the relevant period of a valuable chattel, and therefore, at least notionally, of the use of the money expended on its purchase, or so much of that money as is represented by the value of the vehicle at the date of its loss …”

Similarly, Philp J in Woodman v Rasmussen said that the relevant loss which could be compensated in that case was the “loss of interest” on the cost of the relevant chattel.^[163] It is not appropriate to look at the cost of a rebuilt BWE or its replacement, because either cost is different from, and far higher than, the capital represented by the BWE at the date of its collapse. To say that $30 million was needed to rebuild the BWE is not to say that it was worth $30 million before it collapsed.

And as to the relatively low operating costs of the BWE system, that is not a relevant matter for this assessment. Had the plaintiffs used another system in place of the BWE system during this period (in doing work at level 1 which the BWE would have done) the difference in operating costs between that system and the BWE would be relevant, but as an element in a calculation of special damages. That difference in operating costs does not demonstrate that the capital invested in the BWE was higher than the $8.8 million.

The plaintiffs claim, correctly, that their damages should be awarded for the loss of use of the BWE system, not simply of the BWE. That system comprised the BWE, the conveyor, the tripper and the spreader. The defendants plead that the BWE was worth at least $8.8 million, but there is no pleaded value for the other parts of the system. However, there is evidence of the value of those parts. It is found in the Project Case, where Mr Ellery wrote that the conveyor/spreader system had a resale value of $6.0 million and that the written down value of the BWE and conveyor system was $11.9 million. This evidence was not, however, relied upon by the plaintiffs. There was no investigation in this trial of the depreciated value of the other components of the BWE system or of their resale value. And Mr Ellery gave his evidence well before the plaintiffs applied for leave to amend to add this general damages claim. No doubt because the plaintiffs wished to avoid arguments of prejudice from the lateness of this amendment, they limited their case to the value of the BWE because that came from something which the defendants had pleaded. The amended case was pleaded in terms of a loss of use of the BWE system, but it was not specifically alleged that the award of general damages should be higher for the fact that there was a certain value in the other components. In these circumstances it would be unfair to increase the award according to the value of those things as set out in the Project Case.

As to the evidence or otherwise of the amount of $8.8 million, there had been something in a report by Dr Hoffman and Mr Dittrich to that effect in which it was said that the BWE had a “residual value” of that amount.^[164] But I upheld the plaintiffs’ objection to that part of the report (before the plaintiffs raised this claim for general damages). Still, the plaintiffs have the defendant’s pleading for that value, and as noted, the defendants did not argue against it.

The plaintiffs will be awarded general damages at ten per cent per annum on $8.8 million for 26 months. That period ended with the commencement of the operations of the shovel/sizer system. (Earlier, I have allowed $1,990,000 in the rebuild case, for what would have been the extra costs of overburden removal in Red Hill to that same point in time.) Accordingly, $1,936,000 is allowed.

Interest

The plaintiffs claim interest pursuant to s 47 of the Supreme Court Act 1995 (Qld) as follows:

from 8 March 2000 to 31 October 2000 at the rate of 9 per cent;

from 1 November 2000 to 31 August 2001 of 10.5 per cent;

from 1 September 2001 to 31 March 2002 of 9.5 per cent; and

from 1 April 2002 to the date of judgment at 9 per cent.

An award of interest under s 47 is discretionary. The defendants rightly concede that the plaintiffs should have interest under s 47, but make a number of submissions as to why they should not have interest as claimed.

The first argument concerns the date from which interest should be awarded. Ordinarily it would be awarded from the date of the accrual of the cause of action. The defendants argue that the financial consequences of the collapse of the BWE were not immediate so that the plaintiffs should not have interest from that date. They argue that the losses claimed were incurred over a period of time. For example, the payments for the sizer were made on a periodical basis from June 2001 through to July 2002 and the payments for the shovel were made from April 2001 to November 2001. Similarly any damages for the loss of use of the BWE are to compensate for a loss incurred over a period rather than immediately on 8 March 2000. Their argument cites the joint judgment in Grincelis v House,^[165] and seeks to draw from it authority for the proposition that in a case such as the present, “the fair approach … is to halve the period for which interest is ordered”. The “halving” of interest is appropriate where, broadly speaking, a plaintiff suffers the relevant financial consequences relatively evenly between the period between the accrual of the cause of action and the judgment. That is not the case here.

Nevertheless the financial consequences of the collapse of the BWE were not felt immediately. The principal component of the plaintiffs’ damages is for the cost of a rebuild of the BWE, a cost which would not have been incurred in any amount earlier than about March 2001. It is reasonable to suppose that it would have been incurred between then and about May of 2003. Related to that is the amount of $1,936,000 allowed for a period of a year from May 2002. Then there are the large number of other amounts which I have allowed, which were expended at various times from 2000 over the next two or three years. There is the amount allowed for general damages for the loss of use of the BWE, over two and a quarter years from March 2000. So overall, an allowance of interest from 8 March 2000 would exceed what is reasonably necessary to compensate the plaintiffs. Mainly because most of the amount awarded to the plaintiffs involves the cost of a rebuild, which would have been incurred no earlier than 2001 and then over time, in all the circumstances it would be reasonable to award interest upon these awards from no earlier than 1 April 2002.

Necessarily there is much approximation in such an award of interest, especially where the principal component of the award of damages is calculated upon a hypothetical basis because in fact there was no rebuild. And although the plaintiffs have not proved that it is reasonable that they be awarded damages in the amount of the cost of the shovel/sizer, it is of some relevance to the present question that their substantial expense was incurred from June 2001 through to July 2002. Overall I conclude that interest should not be awarded from 8 March 2000 but it should be calculated from 1 April 2002.

The next argument concerns the rate of interest. The plaintiffs argue for the rates prescribed for the unpaid judgments. The defendants say that these rates bear no resemblance to “normal commercial rates” and that it is more appropriate to impose a “simple rate of five per cent”. For that rate they cite Moloney v Bells Securities Pty Ltd,^[166] but there is nothing said there about what should happen in any other case. There was no evidence here as to commercial rates of interest, but in that respect the parties were adhering to what was said by Thomas J, with whom the other members of the Court agreed, in Serisier Investments Pty Ltd v English.^[167] The claimed rates are high compared with commercial rates in this period from 2002. But it must be remembered that this will be an award of simple interest. In my conclusion, the rate allowed should be seven per cent.

The defendants argue that interest as claimed will be of such a magnitude that the Court should decline to allow it in full. Of itself this is not a persuasive submission: the magnitude of the interest would be simply a result of the magnitude of the plaintiffs’ losses and the period for which the plaintiffs have had to wait for their compensation. These submissions provide no basis for departing from the rates claimed. Again because this is a process of approximation, it is appropriate to allow interest at the one rate, and it will be allowed at seven per cent.

It was suggested that there should be some allowance for the fact that the plaintiffs have already received payments from an insurer for their losses, so that in a sense, the plaintiffs have not been without the funds claimed. For this they cite Harbutt’s “Plasticine” Ltd v Wayne Tank & Pump Co Ltd,^[168] when Lord Denning MR said:

“The plaintiffs say that the court should ignore the fact that they were insured, or have received insurance moneys, and should give them full interest as if they had paid the cost of replacement out of their own pocket or borrowed money for the purpose. I think this goes too far. In assessing damages, we ignore, of course, the fact that the plaintiffs are insured. But, in awarding interest, it is different. An award of interest is discretionary. It seems to me that the basis of an award of interest is that the defendant has kept the plaintiff out of his money; and the defendant has had the use of it himself. So he ought to compensate the plaintiff accordingly.

This reasoning does not apply when the plaintiff has not been kept out of his money but has in fact been indemnified by an insurance company. I do not think the plaintiff should recover interest for himself on the money when he has not been kept out of it. The receipt from the insurance company should go in relief of the defendants.”

There is evidence that the plaintiffs were indemnified by insurers. The defendants say that the evidence does not reveal

“whether a payment for interest to the plaintiffs will be in addition to any payment already received from the insurer, and hence represent an over compensation of the plaintiffs.”

There is no suggestion that the insurance was relevant to the assessment of damages. Plainly it is irrelevant for the reasons explained in, for example, National Insurance Co of New Zealand Ltd v Espagne.^[169] Nor is it disputed that the purpose of an award of interest is compensatory.^[170] It follows then that the insurance is irrelevant to the question of interest. That was the reasoning of each of the judges (Thomas, Ryan and Mackenzie JJ) in Camm v Salter.^[171] In that case the collateral benefit received by the plaintiff was an invalid pension, which according to Redding v Lee,^[172] was to be disregarded in an assessment of damages for personal injuries. In Camm v Salter, Ryan J said that:^[173]

“50… Invalid pensions are, in the words used by Dixon CJ in National Insurance Co of New Zealand Ltd v. Espagne (1961) 105 CLR 569 at 573, ‘not provided in relief of any liability in others fully to compensate’ the plaintiff. In my opinion, there can be no relief from the liability of a defendant to compensate the plaintiff for being kept out of his money because he has received an invalid pension during the pre-trial period.”

It was also said that there has been a “significant delay” in the commencement of these proceedings. It was suggested that the period of four years and four months between the commencement of these proceedings and the commencement of the trial was unduly long. But on any view this was very complex litigation, and made the more so by the defendants’ raising so many matters although unsuccessfully. This is not a case where there has been such an untoward delay either in its commencement or in its prosecution that the plaintiffs should be denied some of the interest which would otherwise be allowed. And in any case, interest has been allowed only from 1 April 2002.

The result is that interest will be awarded from 1 April 2002 at seven per cent to today’s date.

CONCLUSIONS

The losses from the collapse of the BWE have been assessed as follows:

Rebuild	$27,893,461
Plus 5 per cent contingency	1,394,700
Project costs	851,000
Currency movements affecting the rebuild cost	320,000
The extra operating costs pending a rebuild	1,990,000
Additional expenses from the collapse	2,845,432
General damages for loss of use	1,936,000
TOTAL	$37,230,593

This is the basis for the several judgments in the design case. Interest on that sum would be a further $16,288,384, resulting in a total of $53,518,977. This is then to be apportioned between the plaintiffs according to their respective interests in the BWE as at 8 March 2000. There will be the following judgments against the First Defendants:

For the first plaintiff	$22,932,881
For the second plaintiff	8,311,497
For the third plaintiff	401,392
For the fifth plaintiff	6,422,276
For the sixth plaintiff	8,445,293
For the seventh plaintiff	2,456,520

The damages under the inspection case must be reduced by $160,000, which is what the cost of repair of the tower would have been had the crack been inspected. Accordingly, the damages are $37,070,593, which with interest of $16,218,384, amounts to $53,288,976.

There will be judgment for the plaintiffs, save for the fourth plaintiff, against the second defendant for $53,288,976.

There will be several judgments against the third defendant as follows:

For the first plaintiff	$22,834,326
For the second plaintiff	8,275,777
For the third plaintiff	399,667
For the fifth plaintiff	6,394,676
For the sixth plaintiff	8,409,000
For the seventh plaintiff	2,445,964

The fourth plaintiff’s claim against each defendant is dismissed.

Footnotes

[1] Oceanic Crest Shipping Company v Pilbara Harbour Services Pty Ltd (1986) 160 CLR 626 at 668 per Brennan J citing Jordan CJ in McDonald v The Commonwealth (1945) 46 SR (NSW) 129 in a passage set out by Ashley J in Deutz Australia Pty Ltd v Skilled Engineering Ltd [2001] VSC 194 at [105].

[2] At paragraph 23(a)(ii).

[3] Defence of the first defendant filed 3 March 2004.

[4] All of which is Exhibit 358.

[5] (1993) ATPR (Digest) 46-105 at 53, 469 per Davies J.

[6] Unreported, Federal Court of Australia, Beaumont J, 7 November 1994, BC9400129.

[7] (1995) 132 ALR 514 at 539 per Lindgren J.

[8] (1997) 72 FCR 203 at 218 per Branson J.

[9] (2006) 236 ALR 720 at 732-733 per Rares J.

[10] [1982] AC 679.

[11] See in particular the discussion of the Australian cases by McDougall J in Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd & Ors (2004) 220 ALR 267.

[12] (2004) 216 CLR 515 at 529.

[13] (1995) 182 CLR 609 at 617, 657.

[14] Perre v Apand Pty Ltd (1999) 198 CLR 180 at 200 and 202 per Gaudron J and 255-256 per Gummow J.

[15] Caltex Oil (Australia) Pty Ltd v The Dredge “Willemstad” (1976) 136 CLR 529 at 576 per Stephen J.

[16] Which is not the subject of any claim here.

[17] (1999) 198 CLR 180.

[18] (2004) 216 CLR 515.

[19] (2004) 216 CLR 515 at 530.

[20] (1999) 198 CLR 180 at 225.

[21] (2002) 211 CLR 540 at 611-612.

[22] (1924) 35 CLR 186 at 194.

[23] In the Particulars they are referred to as “Exhibit 401” which is the East German standard TGL 13500/01 (1982).

[24] 1870kg per cm2 divided by 10 to arrive at the equivalent number of megapascals.

[25] [2007] QSC 28 at [76].

[26] [2005] QCA 297 especially at [9] per Keane JA.

[27] (1992) 175 CLR 479.

[28] (1979) 146 CLR 40 at 47, approved in New South Wales v Fahy (2007) 236 ALR 406, [2007] HCA 20.

[29] [2002] 2 Qd R 119; [2001] QCA 275.

[30] [2005] QCA 299 at [12] per Jerrard JA and at [37] per Keane JA.

[31] [2006] QCA 335.

[32] (2000) 49 NSWLR 262.

[33] (1998) 195 CLR 232 at 244 [27].

[34] (1999) 197 CLR 269.

[35] (1999) 197 CLR 269 at 278-279 [31].

[36] (1999) 197 CLR 269 at 312 [127].

[37] [2006] QCA 335 at [278].

[38] Exhibit 379.

[39] (1987) 14 FCR 215 at 220.

[40] Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 at 88; Heydon v NRMA (2000) 51 NSWLR 1 at [428], [431]-[433], [307].

[41] (1992) 175 CLR 514.

[42] (1992) 175 CLR 514 at 525.

[43] (1991) 171 CLR 506.

[44] (1999) 43 IPR 545 at 555-556; [1999] FCA 357 at [45].

[45] (1992) 37 FCR 526 at 529-530.

[46] (1998) 196 CLR 494 at 528 [101].

[47] (2000) ATPR 41-737; [1999] NSWCA 455 at [35] per Mason P and Davies AJA.

[48] [1999] FCA 784 at [48] per Hill, Sackville and Katz JJ.

[49] [1999] 1 VR 29 at 41-42.

[50] [1999] FCA 784 at [48].

[51] (2005) 221 CLR 568 at 597 [99]. See also Travel Compensation Fund v Tambree (2005) 224 CLR 627 at 639 [30] per Gleeson CJ and 643-644 [49] per Gummow and Hayne JJ.

[52] (2002) 210 CLR 109 at 119 [26].

[53] (2005) 221 CLR 568 at 598 [100].

[54] (2006) 157 FCR 229 at 248 [67] - [68]; (2006) 238 ALR 616.

[55] (2006) 238 ALR 616 at 634-345.

[56] Treitel, The Law of Contract, 10th edition, p 533.

[57] (1845) 14 M&W 559; 153 ER 597.

[58] (1865) 19 CB (NS) 713; 144 ER 966.

[59] Financial Industry Complaints Service Pty Ltd v Deakin Financial Services Pty Ltd (2006) 157 FCR 229 at 248 [67] – [68].

[60] A long standing requirement now within Uniform Civil Procedure Rules r 63.

[61] Equus Financial Services Limited v Glengallon Investments Pty Ltd [1994] QCA 157
per McPherson JA citing William Brandt’s Sons & Co. v Dunlop Rubber Company Limited [1905] AC 454 at 462 and Uniform Civil Procedure Rules r 67.

[62] Other than the fourth plaintiff.

[63] s 4B(1)(b), s 4(2).

[64] See for example, Brickhill v Cooke [1984] 3 NSWLR 396; (1984) Aust Torts Reports 80-685.

[65] See Queensland Independent Wholesalers Ltd v Coutts Townsville Pty Ltd [1989] 2 Qd R 40 at 46.

[66] Figures 59 and 60.

[67] Exhibit 513, paragraph 91.

[68] (1985) 158 CLR 661.

[69] (1985) 158 CLR 661 at 670.

[70] Uniform Civil Procedure Rules, r 150(1) and (2).

[71] A stress range before intensification of the stress by the crack.

[72] At [507]-[509].

[73] January 2006.

[74] The design parameters are at two standard deviations from the mean.

[75] His table 3, setting out these results within report number 8 (exhibit 31), wrongly describes the 10 percent and 50 percent alternatives as calculations on the design SN curve although it is clear that this is an error and, being variants of his scenario 3, they are calculations on the mean SN curve.

[76] Again, the same typographical error referring to this alternative calculation using the design SN curve is present.

[77] Exhibit 456 at 55.

[78] Report No 1, paragraph 7.5.1 at 68.

[79] In his first report at 24.

[80] The author of the text referred to above in the design case at [45].

[81] (1994) 179 CLR 332 at 348 and 355.

[82] (1999) 197 CLR 269 at 277-278 [28]-[29].

[83] (1998) 195 CLR 232.

[84] (1998) 195 CLR 232 at 260.

[85] (1990) 169 CLR 638.

[86] (1990) 169 CLR 638 at 642‑643.

[87] [1974] AC 207.

[88] [1974] AC 207 at 213.

[89] Section 82 was amended by Schedule 3 to the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (Cth). By s 1466 of the Corporations Act 2001 (Cth) it is provided that the amendments to the Trade Practices Act made by Schedule 3 apply to causes of action that arise on or after the day on which that Schedule commenced, which was 26 July 2004.

[90] (2002) 210 CLR 109.

[91] [1979] 1 Ch 384 -435.

[92] Dated 24 March 1993 from Mr Kraatz to Mr Raleigh.

[93] Transcript 2961-2962.

[94] Some witnesses used the term “bench” to refer to a block, but I will use it as meaning a terrace.

[95] Which is in Dr Potts Report no. 4 (Exhibit 26).

[96] Written submissions, paragraph 651.

[97] Page 4.

[98] Exhibit 186.

[99] Discussed earlier in relation to safety devices.

[100] Again discussed above in relation to safety devices.

[101] Exhibit 347, paragraph 33.

[102] Paragraph 250 of their written submissions on the inspection case.

[103] In the design case at paragraph [120].

[104] Exhibit 393.

[105] At paragraph [434].

[106] In this case measured over a longer period on the basis that the repair of the BWE would have taken longer than the delivery of the shovel/sizer.

[107] Further amended reply to the second further amended defence of the first defendant filed on 28 May 2007.

[108] [1986] 1 Qd R 1 at 4-5.

[109] Transcript 6218.

[110] Darbyshire v Warran [1963] 1 WLR 1067 (CA) at 1075 cited in McGregor on Damages (16th edn) at [298].

[111] [1932] AC 452 at 456.

[112] [1986] 1 Qd R 1 at 15.

[113] [1994] 1 Qd R 460 at 467.

[114] Exhibit 134, the original exhibit, which omitted one annexure and was later replaced by the complete document. The earlier draft from which the defendants had been conducting their case became Exhibit 588. Another draft is Exhibit 154.

[115] Third Further Amended Defence of the First Defendant, paragraph 27A, and Third Further Amended Defence of the Second and Third Defendants, paragraph 49A.

[116] (1959) 101 CLR 298.

[117] [2005] NSWSC 528.

[118] [2007] EWCA Civ 3.

[119] Set out at [2007] EWCA Civ 3 at [77].

[120] [1982] 1 WLR 149.

[121] [2001] EWCA Civ 55.

[122] [2001] All ER (D) 83.

[123] [2002] 1 WLR 2722.

[124] [2006] All ER (D) 209.

[125] [2007] EWCA Civ 3 at [86].

[126] [2001] EWCA Civ 55 at [49].

[127] Unreported, Supreme Court of New South Wales, Giles J, 23 April 1992.

[128] Items 208 and 209.

[129] Exhibit 123 paragraphs 80 and 81.

[130] Exhibit 123, paragraphs 82-83.

[131] Exhibit 123, paragraph 79.

[132] Present claim of $7,554,848 less shovel/sizer costs of $4,975,502 plus 896,892 bcm at $1.3061 (Mr van Homrigh’s rate for the BWE for 2002).

[133] Exhibit 209.

[134] At paragraph [881].

[135] The Owners of No 7 Steam Sand Pump Dredger v The Owners of SS “Greta Holme” (“The Greta Holme”) [1897] AC 596.

[136] Owners of the Steamship “Mediana” v Owners, Master and Crew of Lightship “Comet” (“The Mediana”) [1900] AC 113.

[137] Mersey Docks and Harbour Board v Owners of the SS Marpessa (“The Marpessa”) [1907] AC 241.

[138] [1900] AC 113 at 115-116.

[139] [1900] AC 113 at 122.

[140] [1907) AC 241 at 244.

[141] [1978] Qd R 92.

[142] [1978] Qd R 92 at 94-95.

[143] Commissioners for Executing the Office of Lord High Admiral of the United Kingdom v Owners of the Steamship Valeria (“The Valeria”) [1922] 2 AC 242.

[144] [1953] St R Qd 202.

[145] [1953] St R Qd 202 at 212.

[146] [1953] St R Qd 202 at 212.

[147] [1953] St R Qd 202 at 214.

[148] [1940] 1 KB 740.

[149] [1940] 1 KB 740 at 747.

[150] [1940] 1 KB 740 at 748.

[151] [1961] AC 545.

[152] [1961] AC 545 at 562-564.

[153] [1961] AC 545 at 577.

[154] [1961] AC 545 at 580.

[155] [1977] Qd R 395.

[156] [1977] Qd R 395 at 398.

[157] [1977] Qd R 395 at 398.

[158] [2003] UKPC 46.

[159] [1970] RTR 222.

[160] Tettenborn, Wilby and Bennett, The Law of Damages (2003) Butterworths, London, 289 [14.87] and SM Waddams, The Law of Damages (1983) Canada Law Book Ltd, Toronto, 114-120 [203]-[210].

[161] [1907] AC 241.

[162] [1970] RTR 84 at 86.

[163] [1953] St R Qd 202 at 217.

[164] The balance of the report became Exhibit 393.

[165](2000) 201 CLR 321 at 331.

[166] [2005] QSC 013; (2005) ATPR 057.

[167] [1989] 1 Qd R 678 at 681.

[168] [1970] 1 QB 447 at 468.

[169] (1961) 105 CLR 569 at 573 per Dixon CJ and at 599-600 per Windeyer J.

[170] Bachelor v Burke (1981) 148 CLR 448 at 455.

[171] [1992] 2 Qd R 342.

[172] (1983) 151 CLR 117.

[173] [1992] 2 Qd R 342 at 349-350.

Editorial Notes

Published Case Name:
BHP Coal Pty Ltd and Ors v O & K Orenstein & Koppel AG and Ors
Shortened Case Name:
BHP Coal Pty Ltd v O & K Orenstein & Koppel AG
MNC:
[2008] QSC 141
Court:
QSC
Judge(s):
McMurdo J
Date:
01 Jul 2008
White Star Case:
Yes

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited List of Cases Cited by this judgment

Case Name	Full Citation	Frequency
Aerospace Publishing Ltd v Thames Water Utilities Ltd	[2007] EWCA Civ 3	4 citations Jump To Cite 1 - [2007] EWCA Civ 3 Cite 2 - [2007] EWCA Civ 3 Cite 3 - [2007] EWCA Civ 3 Cite 4 - [2007] EWCA Civ 3
AHR Constructions Pty Ltd v Maloney	[1994] 1 Qd R 460; [1991] QSCFC 68	2 citations Jump To Cite 1 - [1994] 1 Qd R 460 Cite 2 - [1994] 1 Qd R 460
Allianz Australia Insurance Limited v GSF Australia Pty Ltd	View on:JADE(2005) 221 CLR 568	3 citations Jump To Cite 1 - (2005) 221 CLR 568 Cite 2 - (2005) 221 CLR 568 Cite 3 - (2005) 221 CLR 568
Atlantis Properties Pty Ltd v Cameron	[2005] QCA 297	1 citation Jump To Cite 1 - [2005] QCA 297
Australia and New Zealand Banking Group Ltd v Pan Foods Company Importers and Distributors Pty Ltd	View on:VR[1999] 1 VR 29	1 citation Jump To Cite 1 - [1999] 1 VR 29
Australian Securities Ltd v Western Australian Insurance Co Ltd	(1929) 29 SR (NSW) 571	2 citations Jump To Cite 1 - (1929) 29 SR (NSW) 571 Cite 2 - (1929) 29 SR (NSW) 571
Banco Pe Portugal v Waterlow and Sons Ltd	View on:ICLRUK(1932) AC 452	2 citations Jump To Cite 1 - (1932) AC 452 Cite 2 - (1932) AC 452
Batchelor v Burke	View on:JADE(1981) 148 CLR 448	2 citations Jump To Cite 1 - (1981) 148 CLR 448 Cite 2 - (1981) 148 CLR 448
Batiste v State of Queensland	[2002] 2 Qd R 119; [2001] QCA 275	3 citations Jump To Cite 1 - [2001] QCA 275 Cite 2 - [2001] QCA 275 Cite 3 - [2002] 2 Qd R 119
Batiste v State of Queensland	[2002] 1 Qd R 119	1 citation Jump To Cite 1 - [2002] 1 Qd R 119
Birmingham Corporation v Sowsbery	[1970] RTR 84	2 citations Jump To Cite 1 - [1970] RTR 84 Cite 2 - [1970] RTR 84
Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd	(1987) 14 FCR 215	2 citations Jump To Cite 1 - (1987) 14 FCR 215 Cite 2 - (1987) 14 FCR 215
Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd	(2006) 236 ALR 720	2 citations Jump To Cite 1 - (2006) 236 ALR 720 Cite 2 - (2006) 236 ALR 720
Bradburn v Botfield	(1845) 14 M&W 559	2 citations Jump To Cite 1 - (1845) 14 M&W 559 Cite 2 - (1845) 14 M&W 559
Bradburn v Botfield	(1845) 155 ER 597	1 citation Jump To Cite 1 - (1845) 155 ER 597
Brickhill v Cooke	(1984) Aust Torts Reports 80-685	1 citation Jump To Cite 1 - (1984) Aust Torts Reports 80-685
Brickhill v Cooke	(1984) Aust Tort Reports 80-685	1 citation Jump To Cite 1 - (1984) Aust Tort Reports 80-685
Brickhill v Cooke	View on:NSWLR(1984) 3 NSWLR 396	2 citations Jump To Cite 1 - (1984) 3 NSWLR 396 Cite 2 - (1984) 3 NSWLR 396
Bryan v Maloney	View on:JADE(1995) 182 CLR 609	2 citations Jump To Cite 1 - (1995) 182 CLR 609 Cite 2 - (1995) 182 CLR 609
Caltex Oil (Australia) Pty Ltd v The Dredge "Willemstad"	View on:JADE(1976) 136 CLR 529	2 citations Jump To Cite 1 - (1976) 136 CLR 529 Cite 2 - (1976) 136 CLR 529
Camm v Salter	[1992] 2 Qd R 342; [1991] QSCFC 120	3 citations Jump To Cite 1 - [1992] 2 Qd R 342 Cite 2 - [1992] 2 Qd R 342 Cite 3 - [1992] 2 Qd R 342
Chappel v Hart	View on:JADE(1998) 195 CLR 232	4 citations Jump To Cite 1 - (1998) 195 CLR 232 Cite 2 - (1998) 195 CLR 232 Cite 3 - (1998) 195 CLR 232 Cite 4 - (1998) 195 CLR 232
Citrine (Owners) v The Hebridean Coast (Owners)	View on:ICLRUK[1961] AC 545	5 citations Jump To Cite 1 - [1961] AC 545 Cite 2 - [1961] AC 545 Cite 3 - [1961] AC 545 Cite 4 - [1961] AC 545 Cite 5 - [1961] AC 545
Commissioner for Railways v Luya Julius Ltd	[1977] Qd R 395	4 citations Jump To Cite 1 - [1977] Qd R 395 Cite 2 - [1977] Qd R 395 Cite 3 - [1977] Qd R 395 Cite 4 - [1977] Qd R 395
Cullen v Knowles	View on:ICLRUK[1898] 2 QB 380	2 citations Jump To Cite 1 - [1898] 2 QB 380 Cite 2 - [1898] 2 QB 380
Darbishire v Warran	View on:ICLRUK(1963) 1 WLR 1067	2 citations Jump To Cite 1 - (1963) 1 WLR 1067 Cite 2 - (1963) 1 WLR 1067
Davidson v JS Gilbert Fabrications Pty Ltd	[1986] 1 Qd R 1	3 citations Jump To Cite 1 - [1986] 1 Qd R 1 Cite 2 - [1986] 1 Qd R 1 Cite 3 - [1986] 1 Qd R 1
Davies v Taylor	View on:ICLRUK(1974) AC 207	3 citations Jump To Cite 1 - (1974) AC 207 Cite 2 - (1974) AC 207 Cite 3 - (1974) AC 207
Deutz Australia Pty Ltd v Skilled Engineering Ltd	View on:JADE[2001] VSC 194	2 citations Jump To Cite 1 - [2001] VSC 194 Cite 2 - [2001] VSC 194
Dixons (Scholar Green) Ltd v J L Cooper Ltd	[1970] RTR 222	2 citations Jump To Cite 1 - [1970] RTR 222 Cite 2 - [1970] RTR 222
Equus Financial Services Limited v Glengallan Investments Pty Ltd	[1994] QCA 157	2 citations Jump To Cite 1 - [1994] QCA 157 Cite 2 - [1994] QCA 157
Financial Industry Complaint Services Ltd v Deakin Financial Services Pty Ltd	(2006) 157 FCR 229	3 citations Jump To Cite 1 - (2006) 157 FCR 229 Cite 2 - (2006) 157 FCR 229 Cite 3 - (2006) 157 FCR 229
Financial Industry Complaint Services Ltd v Deakin Financial Services Pty Ltd	(2006) 238 ALR 616	3 citations Jump To Cite 1 - (2006) 238 ALR 616 Cite 2 - (2006) 238 ALR 616 Cite 3 - (2006) 238 ALR 616
Foley v Addambrooke	View on:ICLRUK(1843) 4 QB 197	2 citations Jump To Cite 1 - (1843) 4 QB 197 Cite 2 - (1843) 4 QB 197
Foley v Addambrooke	(1843) 114 ER 872	2 citations Jump To Cite 1 - (1843) 114 ER 872 Cite 2 - (1843) 114 ER 872
Global Sportsman Pty Ltd v Mirror News Papers Ltd	(1984) 2 FCR 82	2 citations Jump To Cite 1 - (1984) 2 FCR 82 Cite 2 - (1984) 2 FCR 82
Gold Ribbon (Accountants) Pty Ltd (in liq) v Sheers	[2006] QCA 335	3 citations Jump To Cite 1 - [2006] QCA 335 Cite 2 - [2006] QCA 335 Cite 3 - [2006] QCA 335
Graham Barclay Oysters Pty Ltd v Ryan	View on:JADE(2002) 211 CLR 540	2 citations Jump To Cite 1 - (2002) 211 CLR 540 Cite 2 - (2002) 211 CLR 540
Greer v Alstons Engineering Sales & Services Ltd	[2003] UKPC 46	2 citations Jump To Cite 1 - [2003] UKPC 46 Cite 2 - [2003] UKPC 46
Grincelis v House	View on:JADE(2000) 201 CLR 321	2 citations Jump To Cite 1 - (2000) 201 CLR 321 Cite 2 - (2000) 201 CLR 321
Hampic Pty Ltd v Adams	View on:JADE[1999] NSWCA 455	2 citations Jump To Cite 1 - [1999] NSWCA 455 Cite 2 - [1999] NSWCA 455
Hampic Pty Ltd v Adams	(2000) ATPR 41 – 737	2 citations Jump To Cite 1 - (2000) ATPR 41 – 737 Cite 2 - (2000) ATPR 41 – 737
Hanave Pty Ltd v LFOT Pty Ltd	(1999) 43 IPR 545	2 citations Jump To Cite 1 - (1999) 43 IPR 545 Cite 2 - (1999) 43 IPR 545
Hanave Pty Ltd v LFOT Pty Ltd	View on:JADE[1999] FCA 357	2 citations Jump To Cite 1 - [1999] FCA 357 Cite 2 - [1999] FCA 357
Harbutt's 'Plasticine' Ltd v Wayne Tank & Pump Co Ltd	View on:ICLRUK(1970) 1 QB 447	2 citations Jump To Cite 1 - (1970) 1 QB 447 Cite 2 - (1970) 1 QB 447
Heydon v NRMA Ltd	View on:NSWLR(2000) 51 NSWLR 1	2 citations Jump To Cite 1 - (2000) 51 NSWLR 1 Cite 2 - (2000) 51 NSWLR 1
Horace Holman Group Ltd v Sherwood International Group Ltd	(2001) All ER D 83	2 citations Jump To Cite 1 - (2001) All ER D 83 Cite 2 - (2001) All ER D 83
I & L Securities Pty Ltd v HT W Valuers (Brisbane) Pty Ltd	View on:JADE(2002) 210 CLR 109	3 citations Jump To Cite 1 - (2002) 210 CLR 109 Cite 2 - (2002) 210 CLR 109 Cite 3 - (2002) 210 CLR 109
Janssen-Cilag Pty Ltd v Pfizer Pty Ltd	(1992) 37 FCR 526	2 citations Jump To Cite 1 - (1992) 37 FCR 526 Cite 2 - (1992) 37 FCR 526
Jones v Dunkel	View on:JADE(1959) 101 CLR 298	2 citations Jump To Cite 1 - (1959) 101 CLR 298 Cite 2 - (1959) 101 CLR 298
Kendall v Hamilton	(1879) 4 App Cas 504	2 citations Jump To Cite 1 - (1879) 4 App Cas 504 Cite 2 - (1879) 4 App Cas 504
King v Hoare	(1844) 13 M&W 495	2 citations Jump To Cite 1 - (1844) 13 M&W 495 Cite 2 - (1844) 13 M&W 495
Leibler v Air New Zealand Ltd (No 2)	View on:VR[1999] 1 VR 1	1 citation Jump To Cite 1 - [1999] 1 VR 1
Malec v J C Hutton Pty Ltd	View on:JADE(1990) 169 CLR 638	3 citations Jump To Cite 1 - (1990) 169 CLR 638 Cite 2 - (1990) 169 CLR 638 Cite 3 - (1990) 169 CLR 638
March v E & MH Stramare Pty Ltd	View on:JADE(1991) 171 CLR 506	2 citations Jump To Cite 1 - (1991) 171 CLR 506 Cite 2 - (1991) 171 CLR 506
Marks v GIO Australia Holdings	View on:JADE(1998) 196 CLR 494	2 citations Jump To Cite 1 - (1998) 196 CLR 494 Cite 2 - (1998) 196 CLR 494
Maxitherm Boilers Pty Ltd v Pacific Dunlop Ltd & Anor	View on:VR(1998) 4 VR 559	1 citation Jump To Cite 1 - (1998) 4 VR 559
McCarthy v McIntyre	View on:JADE[1999] FCA 784	3 citations Jump To Cite 1 - [1999] FCA 784 Cite 2 - [1999] FCA 784 Cite 3 - [1999] FCA 784
McDonald v Ludwig	[2007] QSC 28	2 citations Jump To Cite 1 - [2007] QSC 28 Cite 2 - [2007] QSC 28
McDonald v The Commonwealth	(1945) 46 SR (NSW) 129	2 citations Jump To Cite 1 - (1945) 46 SR (NSW) 129 Cite 2 - (1945) 46 SR (NSW) 129
McRae v Commonwealth Disposals Commission	View on:JADE(1951) 84 CLR 377	2 citations Jump To Cite 1 - (1951) 84 CLR 377 Cite 2 - (1951) 84 CLR 377
Mersey Docks and Harbour Board v Owners of the SS Marpessa	View on:ICLRUK(1907) AC 241	4 citations Jump To Cite 1 - (1907) AC 241 Cite 2 - (1907) AC 241 Cite 3 - (1907) AC 241 Cite 4 - (1907) AC 241
Metropolitan Gas Co v Melbourne Corporation	View on:JADE(1924) 35 CLR 186	2 citations Jump To Cite 1 - (1924) 35 CLR 186 Cite 2 - (1924) 35 CLR 186
Midland Bank Trust Co Ltd v Hett Stubbs and Kemp (a firm)	View on:ICLRUK(1979) 1 Ch 384	2 citations Jump To Cite 1 - (1979) 1 Ch 384 Cite 2 - (1979) 1 Ch 384
Moloney v Bells Securities Pty Ltd	[2005] QSC 13	2 citations Jump To Cite 1 - [2005] QSC 13 Cite 2 - [2005] QSC 13
Moore v State of Qld	[2005] QCA 299	2 citations Jump To Cite 1 - [2005] QCA 299 Cite 2 - [2005] QCA 299
National Insurance Company of New Zealand Ltd v Espagne	View on:JADE(1961) 105 CLR 569	3 citations Jump To Cite 1 - (1961) 105 CLR 569 Cite 2 - (1961) 105 CLR 569 Cite 3 - (1961) 105 CLR 569
National Mutual Property Services ( Australia ) Pty Ltd & Ors v Citibank Savings Ltd & Ors	(1995) 132 ALR 514	2 citations Jump To Cite 1 - (1995) 132 ALR 514 Cite 2 - (1995) 132 ALR 514
Naxakis v Western General Hospital	View on:JADE(1999) 197 CLR 269	5 citations Jump To Cite 1 - (1999) 197 CLR 269 Cite 2 - (1999) 197 CLR 269 Cite 3 - (1999) 197 CLR 269 Cite 4 - (1999) 197 CLR 269 Cite 5 - (1999) 197 CLR 269
New South Wales v Fahy	(2007) 236 ALR 406	2 citations Jump To Cite 1 - (2007) 236 ALR 406 Cite 2 - (2007) 236 ALR 406
New South Wales v Fahy	View on:JADE(2007) HCA 20	2 citations Jump To Cite 1 - (2007) HCA 20 Cite 2 - (2007) HCA 20
Oceanic Crest Shipping Company v Pilbara Harbour Services Pty Ltd	View on:JADE(1986) 160 CLR 626	2 citations Jump To Cite 1 - (1986) 160 CLR 626 Cite 2 - (1986) 160 CLR 626
Park v Allied Mortgage Corp Ltd	(1993) ATPR (Digest) 46-105	2 citations Jump To Cite 1 - (1993) ATPR (Digest) 46-105 Cite 2 - (1993) ATPR (Digest) 46-105
Peabody v Barron	(1884) 5 LR (NSW) 72	2 citations Jump To Cite 1 - (1884) 5 LR (NSW) 72 Cite 2 - (1884) 5 LR (NSW) 72
Perre v Apand Pty Ltd	View on:JADE(1999) 198 CLR 180	4 citations Jump To Cite 1 - (1999) 198 CLR 180 Cite 2 - (1999) 198 CLR 180 Cite 3 - (1999) 198 CLR 180 Cite 4 - (1999) 198 CLR 180
Pollock v Mackenzie	(1866) 1 QSCR 156	2 citations Jump To Cite 1 - (1866) 1 QSCR 156 Cite 2 - (1866) 1 QSCR 156
Pritchard v Race Cage Pty Ltd	(1997) 72 FCR 203	2 citations Jump To Cite 1 - (1997) 72 FCR 203 Cite 2 - (1997) 72 FCR 203
Queensland Independent Wholesalers Limited v Coutts Townsville Pty. Ltd.	[1989] 2 Qd R 40; [1988] QSCFC 146	2 citations Jump To Cite 1 - [1989] 2 Qd R 40 Cite 2 - [1989] 2 Qd R 40
R + D Versicherung AG v Risk Insurance and Reinsurance Solutions SA	(2006) All ER D 209	2 citations Jump To Cite 1 - (2006) All ER D 209 Cite 2 - (2006) All ER D 209
R v BAS	[2005] QCA 97	1 citation Jump To Cite 1 - [2005] QCA 97
Redding v Lee	View on:JADE(1983) 151 CLR 117	2 citations Jump To Cite 1 - (1983) 151 CLR 117 Cite 2 - (1983) 151 CLR 117
Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd & Ors	(2004) 220 ALR 267	2 citations Jump To Cite 1 - (2004) 220 ALR 267 Cite 2 - (2004) 220 ALR 267
Roberts v Holland	View on:ICLRUK[1893] 1 QB 665	2 citations Jump To Cite 1 - [1893] 1 QB 665 Cite 2 - [1893] 1 QB 665
Rogers v Whitaker	View on:JADE(1992) 175 CLR 479	2 citations Jump To Cite 1 - (1992) 175 CLR 479 Cite 2 - (1992) 175 CLR 479
Sedgworth v Overend	(1797) 7 Term Rep 279	2 citations Jump To Cite 1 - (1797) 7 Term Rep 279 Cite 2 - (1797) 7 Term Rep 279
Sedgworth v Overend	(1797) 101 ER 974	2 citations Jump To Cite 1 - (1797) 101 ER 974 Cite 2 - (1797) 101 ER 974
Sellars v Adelaide Petroleum NL	View on:JADE(1994) 179 CLR 332	2 citations Jump To Cite 1 - (1994) 179 CLR 332 Cite 2 - (1994) 179 CLR 332
Seltsam Pty Ltd v McGuiness	View on:NSWLR(2000) 49 NSWLR 262	1 citation Jump To Cite 1 - (2000) 49 NSWLR 262
Seltsam Pty Ltd v McGuinness	View on:NSWLR(2009) 49 NSWLR 262	1 citation Jump To Cite 1 - (2009) 49 NSWLR 262
Serisier Investments Pty Ltd v English	[1989] 1 Qd R 678	2 citations Jump To Cite 1 - [1989] 1 Qd R 678 Cite 2 - [1989] 1 Qd R 678
Standard Chartered Bank v Pakistan National Shipping Corporation	[2001] EWCA Civ 55	3 citations Jump To Cite 1 - [2001] EWCA Civ 55 Cite 2 - [2001] EWCA Civ 55 Cite 3 - [2001] EWCA Civ 55
State of South Australia v Fricker Carrington Holdings Ltd	(1987) 3 BCL 72	1 citation Jump To Cite 1 - (1987) 3 BCL 72
State of South Australia v Fricker Carrington Holdings Ltd	(2005) ATPR 57	1 citation Jump To Cite 1 - (2005) ATPR 57
Sunley (B) and Company Limited v Cunard White Star Limited	View on:ICLRUK(1940) 1 KB 740	4 citations Jump To Cite 1 - (1940) 1 KB 740 Cite 2 - (1940) 1 KB 740 Cite 3 - (1940) 1 KB 740 Cite 4 - (1940) 1 KB 740
Tate & Lyle Food and Distribution Ltd v Greater London Council	View on:ICLRUK(1982) 1 WLR 149	2 citations Jump To Cite 1 - (1982) 1 WLR 149 Cite 2 - (1982) 1 WLR 149
Tesco Supermarkets Ltd. v Nattrass	(1845) 153 ER 597	1 citation Jump To Cite 1 - (1845) 153 ER 597
Tesrol Joinery Pty Ltd v Cefla Scri	View on:JADE[2005] NSWSC 528	2 citations Jump To Cite 1 - [2005] NSWSC 528 Cite 2 - [2005] NSWSC 528
The Mediana	View on:ICLRUK(1900) AC 113	4 citations Jump To Cite 1 - (1900) AC 113 Cite 2 - (1900) AC 113 Cite 3 - (1900) AC 113 Cite 4 - (1900) AC 113
The Owners of No. 7 Steam Sand Pump Dredger v The Owners of SS "Greta Holme"	View on:ICLRUK(1897) AC 596	2 citations Jump To Cite 1 - (1897) AC 596 Cite 2 - (1897) AC 596
The Valeri	View on:ICLRUK(1922) 2 AC 242	2 citations Jump To Cite 1 - (1922) 2 AC 242 Cite 2 - (1922) 2 AC 242
Thompson v Hakewill	(1865) 19 CB (NS) 713	2 citations Jump To Cite 1 - (1865) 19 CB (NS) 713 Cite 2 - (1865) 19 CB (NS) 713
Thompson v Hakewill	(1865) 144 ER 966	2 citations Jump To Cite 1 - (1865) 144 ER 966 Cite 2 - (1865) 144 ER 966
Travel Compensation Fund v Tambree	View on:JADE(2005) 224 CLR 627	2 citations Jump To Cite 1 - (2005) 224 CLR 627 Cite 2 - (2005) 224 CLR 627
Trendtex Trading Corporation v Credit Suisse	View on:ICLRUK(1982) AC 679	2 citations Jump To Cite 1 - (1982) AC 679 Cite 2 - (1982) AC 679
Uniform Civil Procedure Rules Admiral Management Services Ltd v Para-Protect Europe Ltd	View on:ICLRUK[2002] 1 WLR 2722	2 citations Jump To Cite 1 - [2002] 1 WLR 2722 Cite 2 - [2002] 1 WLR 2722
Wardley Australia Ltd v Western Australia	View on:JADE(1992) 175 CLR 514	3 citations Jump To Cite 1 - (1992) 175 CLR 514 Cite 2 - (1992) 175 CLR 514 Cite 3 - (1992) 175 CLR 514
William Brandt's Sons & Co v Dunlop Rubber Company	View on:ICLRUK(1905) AC 454	1 citation Jump To Cite 1 - (1905) AC 454
William Brandt's Sons & Co v Dunlop Rubber Company Limited	View on:ICLRUK[1905] 2 AC 454	1 citation Jump To Cite 1 - [1905] 2 AC 454
Woodman v Rasmussen	[1953] St R Qd 202	6 citations Jump To Cite 1 - [1953] St R Qd 202 Cite 2 - [1953] St R Qd 202 Cite 3 - [1953] St R Qd 202 Cite 4 - [1953] St R Qd 202 Cite 5 - [1953] St R Qd 202 Cite 6 - [1953] St R Qd 202
Woolcock Street Investments Pty Ltd v CDG Pty Ltd	View on:JADE(2004) 216 CLR 515	4 citations Jump To Cite 1 - (2004) 216 CLR 515 Cite 2 - (2004) 216 CLR 515 Cite 3 - (2004) 216 CLR 515 Cite 4 - (2004) 216 CLR 515
Wyong Shire Council v Shirt	View on:JADE(1979) 146 CLR 40	2 citations Jump To Cite 1 - (1979) 146 CLR 40 Cite 2 - (1979) 146 CLR 40
Yorke v Lucas	View on:JADE(1985) 158 CLR 661	3 citations Jump To Cite 1 - (1985) 158 CLR 661 Cite 2 - (1985) 158 CLR 661 Cite 3 - (1985) 158 CLR 661
Zappulla v Perkins	[1978] Qd R 92	3 citations Jump To Cite 1 - [1978] Qd R 92 Cite 2 - [1978] Qd R 92 Cite 3 - [1978] Qd R 92

Cases Citing List of cases on Queensland Judgments citing this Judgment

Case Name	Full Citation	Frequency
BHP Coal Pty Ltd v O & K Orenstein & Koppel AG (No 2)	[2009] QSC 64	11 citations
Cape Byron Power I Pty Ltd v Downer Energy Systems Pty Ltd	(2022) 13 QR 390; [2022] QSC 294	4 citations
Exel Drilling P/L v GLB Quarrying & Logistics P/L	[2013] QDC 244	2 citations
French v QBE Insurance (Australia) Limited	[2011] QSC 105	1 citation
Herrod v Johnston	[2013] 2 Qd R 102; [2012] QCA 360	1 citation
Kuhne v Shastra Holdings Pty Ltd	[2009] QSC 91	2 citations
Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jaques (No 2)	[2017] 2 Qd R 456; [2016] QSC 242	5 citations
Meagher v McDonald	[2025] QSC 84	2 citations
Pix v Suncoast Marine Pty Ltd (No 2)	[2019] QSC 45	3 citations
Qantas Airways Ltd v BMD Constructions Pty Ltd	[2023] QSC 206	4 citations
QBE Insurance (Australia) Limited v Cape York Airlines Pty Ltd	[2012] 1 Qd R 158; [2011] QCA 60	1 citation
Rider v Pix	(2019) 2 QR 205; [2019] QCA 182	1 citation

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BHP Coal Pty Ltd v O & K Orenstein & Koppel AG[2008] QSC 141