Adh Plumbing Pty Ltd v Glenashka Pty Ltd as Trustee of the Colin Henry Wilson Trading Trust trading as Wilsons Betamix Goonumbla Quarry and Wilsons Betamix Concrete

[2020] NSWDC 593

District Court

New South Wales

Medium Neutral Citation:

ADH Plumbing Pty Ltd v Glenashka Pty Ltd as Trustee of the Colin Henry Wilson Trading Trust trading as Wilsons Betamix Goonumbla Quarry & Wilsons Betamix Concrete and Another [2020] NSWDC 593

Hearing dates:

30 June 2020 – 3 July 2020; 13 August 2020 (last written submissions received); 3 September 2020 (oral submissions)

Date of orders:

7 October 2020

Decision date:

07 October 2020

Jurisdiction:

Civil

Before:

Dicker SC DCJ

Decision:

(1) Judgment for the defendant, K&H Geotechnical Services Pty Ltd.

(2) The plaintiff is to pay the costs of the defendant, K&H Geotechnical Services Pty Ltd, of the proceedings as agreed or assessed.

(3) Liberty to any party to make an application within 14 days to vary order (2) above.

(4) The exhibits are to be returned after 28 days.

Catchwords:

CONTRACT - contract for provision of professional geotechnical services – dispute as to terms of contract – whether contract between parties was to provide inspection and testing services including Level 1 inspection and testing services or only ad hoc geotechnical testing when requested – whether offer from the defendant to provide Level 1 inspection and testing services was accepted by plaintiff – whether road base in construction of roads was DGB 20 compliant – whether testing undertaken by defendant for plaintiff breached contract for provision of professional services

NEGLIGENCE – duty of care – what was the extent of retainer between the parties which was relevant to the duty of care owed – whether penumbral duty of care asserted was owed or able to be claimed on the pleadings – risk of harm – whether any duty of care found was breached – what warnings if any were given by the defendant – whether any warnings given complied with duty of care – whether testing undertaken complied with duty of care – whether any breach of duty caused any loss - whether third-party (former first defendant) was a concurrent wrongdoer with the defendant – mitigation of loss - contributory negligence

Legislation Cited:

Civil Liability Act 2002 (NSW)

Cases Cited:

APT SEA Gas Holdings Pty Ltd v ANP SEA Gas Holdings Pty Ltd [2010] NSWSC 1221

Astley v Austrust Ltd (1999) 197 CLR 1

Australian Medico-Legal Group Pty Ltd v Clareleigh Mosman Pty Ltd [2017] NSWCA 218

BP Refinery (Westernport) Pty Ltd v Hastings Shire Council [1977] HCA 40; (1977) 52 ALJR 20

Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153

Caringbah Investments Pty Ltd v Caringbah Business & Sports Club Ltd (in liquidation) [2016] NSWCA 165

Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337

David v David [2009] NSWCA 8

Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty (2017) 261 CLR 544; [2017] HCA 12

Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7

Fox v Percy [2003] HCA 22; (2003) 214 CLR 118

Hanna v Raoul [2018] NSWCA 201

Heydon v NRMA Ltd (2000) 51 NSWLR 1

Jefferis v Gells Pty Ltd [2018] NSWDC 288

Lawrence v Ciantar [2020] NSWCA 89

Lloyd v Thornbury [2019] NSWCA 154

Lym International Pty Ltd v Marcolongo [2011] NSWCA 303

Management Services Australia Pty Ltd t/as Peak Performance PM v PM Works Pty Ltd [2019] NSWCA 107

Shaddock & Associates Pty Ltd v Parramatta City Council [1981] HCA 59; (1981) 150 CLR 225

Strong v Woolworths Ltd [2012] HCA 5; (2012) 246 CLR 186

Trajkovski v Simpson [2019] NSWCA 52

Watson v Foxman (1995) 49 NSWLR 315

Winnote Pty Ltd & Anor v Page & Ors [2006] NSWCA 287; (2006) 68 NSWLR 531

Category:

Principal judgment

Parties:

ADH Plumbing Pty Ltd (Plaintiff)
K & H Geotechnical Services Pty Ltd (Second Defendant)

Representation:

Counsel:
P Wallis (Plaintiff)
D Elliott (Second Defendant)

Solicitors:
Hughes Co (Plaintiff)
Lander & Rogers (Second Defendant)

File Number(s):

2016/00214324

Table of contents

The pleadings - paragraph 6

General comment on the evidence - paragraph 10

Factual background - paragraph 13

Contractual documents between the plaintiff and RCC - paragraph 50

Relevant Australian Standards - paragraph 67

RTA specifications - paragraph 71

Affidavit and oral evidence for the plaintiff

Evidence of Adam Hewes - paragraph 76

Affidavit and oral evidence for the defendant

Evidence of Colin Miller - paragraph 130

Evidence of Francis John Kennedy - paragraph 140

Evidence of Edward Mead - paragraph 175

Evidence of Colin Berry - paragraph 201

Defendant’s tender bundle - paragraph 215

Contractual principles applicable - paragraph 216

Submissions of the parties - paragraph 227

Consideration

Credit and reliability issues - paragraph 230

Further factual findings

Hewes/Wilson dealings - paragraph 235

Hewes/Miller conversation - paragraph 237

Hewes/Kennedy alleged acceptance of quote conversation - paragraph 243

Mead/Hewes conversation relating to the source of material - paragraph 252

The alleged Kennedy/Hewes conversation about the RTA Wilson’s certificate - paragraph 255

The Berry/Hewes alleged conversation - paragraph 261

The 2015 tests - paragraph 263

The 18 June 2015 report - paragraph 264

The second stockpile test - paragraph 268

The third in situ test - paragraph 271

The pleaded causes of action - paragraph 277

The contract claim of the plaintiff - paragraph 278

Implied terms in fact - paragraph 293

The claim in negligence by the plaintiff - paragraph 301

Causation - paragraph 319

Concurrent wrongdoer pleading - paragraph 326

Failure to mitigate - paragraph 330

Contributory negligence - paragraph 332

Damages - paragraph 339

Disposition - paragraph 347

Judgment

1. These proceedings relate to the construction of roads and parking areas by the plaintiff at the Parkes District Hospital site (“the Site”) at Parkes in western New South Wales in 2014-2015. The head contractor for the construction at the Site was Richard Crookes Constructions Pty Ltd (“RCC”). The plaintiff, which was a company which provided earthworks and road construction services, in 2014 tendered for and was awarded a contract by RCC to carry out road construction civil works at the Site commencing in about August 2014. The contract between RCC and the plaintiff required the plaintiff to provide and use road base material in the construction of roads at the Site which complied with a standard known as DGB 20 for part of the road base. The defendant, K & H Geotechnical Services Pty Ltd (“KH”), previously the second defendant, was at all material times a company providing expert geotechnical and soil testing services. It was an approved testing authority known as a GITA (Geotechnical Inspection and Testing Authority). KH provided geotechnical services to the plaintiff during the performance by the plaintiff of its contract with RCC.

2. The previous first defendant in the proceedings was Glenashka Pty Ltd as Trustee of the Colin Henry Wilson Trading Trust trading as Wilsons Betamix Goonumbla Quarry and Wilsons Betamix Concrete (“Glenashka”). Glenashka provided road base material to the plaintiff for road works construction at the Site. Although proceedings between the plaintiff and Glenashka were resolved prior to the final hearing, what material was provided by Glenashka to the plaintiff and in what circumstances, remained relevant to the proceedings between the plaintiff and KH.

3. At issue between the parties in the proceedings was the precise contract for professional services entered into between the plaintiff and the defendant KH and, in particular, the terms of that contract and whether the defendant agreed to provide Level 1 inspection and testing services or only ad hoc geotechnical inspection and testing services. The plaintiff asserts that the contract was to provide Level 1 inspection and testing services with particular terms. The defendant KH, in substance, asserts that the contract entered into was only to provide ad hoc geotechnical inspection and testing services, as and when requested by the plaintiff.

4. A further issue in the proceedings is whether the defendant breached a duty of care which it owed to the plaintiff in relation to the provision of geotechnical inspection and testing services including in relation to the base material used by the plaintiff in road making. It was asserted by the plaintiff that certain testing undertaken by the defendant was negligently performed.

5. The defendant submits that if it is liable, the company which provided the road base material used by the plaintiff, Glenashka, breached its duty of care to the plaintiff and is a concurrent wrongdoer. Contributory negligence and a failure to mitigate are also alleged by the defendant against the plaintiff.

The pleadings

6. Proceedings were commenced by the plaintiff by a Statement of Claim filed on 15 July 2016. The defendants to that Statement of Claim are no longer parties to the proceedings.

7. The version of the pleading relied upon by the plaintiff at the final hearing was a Further Amended Statement of Claim filed on 18 December 2019. The Further Amended Statement of Claim, although it has formally deleted the previous first defendant, Glenashka, has not removed the pleadings against that defendant. This is a clear defect in the Further Amended Statement of Claim. Despite this, the case which is made by the plaintiff against KH is reasonably clear from the pleading.

8. The Further Amended Statement of Claim pleads, in summary, as follows:

1. In 2014, the plaintiff tendered for and was awarded a contract by RCC to carry out civil works at the Site commencing in around August 2014;

2. The contract required the plaintiff to provide and use road base material compliant with DGB 20 in the top 115mm base layer “under buildings and footpaths” in carrying out the works. DGB 20 is a recognised industry standard, used for base course and sub-base materials for roadway and pavement construction;

3. In about August 2014, the plaintiff and Glenashka entered into a contract for Glenashka to provide road base compliant with the DGB 20 industry standard to the plaintiff to be used by the plaintiff to fulfil the plaintiff’s obligations under the contract between it and RCC;

4. From about August 2014 to July 2015, Glenashka provided road base product to the plaintiff for use in the works required under its contract with RCC;

5. The defendant was a company which provided inspection and testing services including Level 1 inspection and testing services as provided by AS3798 “Guidelines on Earthworks for Commercial and Residential Developments” as an approved testing authority;

6. To meet its requirements under the contract with RCC, the plaintiff was required to contract with an organisation to provide Level 1 inspection and testing services to the plaintiff throughout the contract;

7. The defendant was aware of the plaintiff’s contractual obligation to require Level 1 inspection and testing services;

8. In or about August 2014, the plaintiff and the defendant entered into a contract for the defendant KH to provide to the plaintiff Level 1 inspection and testing services as an authorised testing authority and “to oversee all aspects of the Plaintiff’s works in the construction phases” of the contract with RCC (paragraph 14);

9. There were express terms in the contract between the plaintiff and the defendant KH for the defendant to provide to the plaintiff Level 1 inspection and testing services in order to certify the works and materials provided by the plaintiff under its contract with RCC conformed to the requirements of that contract. The defendant owed the plaintiff a duty of care to exercise due care and skill in providing Level 1 inspection and testing services under its contract with the defendant;

10. The defendant provided services to the plaintiff;

11. The defendant neglected and failed to properly test the road base supplied by Glenashka to the plaintiff and used by the plaintiff with the result that the road base supplied by Glenashka was non-compliant with DGB 20;

12. The testing which the defendant carried out incorrectly found that the road base supplied by Glenashka as used in the construction by the plaintiff did not comply with the specifications for DGB 20;

13. The defendant breached the terms of its contract with the plaintiff by failing to inspect properly, by failing to provide material quality verification services and by failing to advise on material suitability;

14. The defendant breached the duty of care which it owed to the plaintiff to exercise due care and skill in the provision of services under its contract with the plaintiff;

15. Further in situ testing by the defendant was carried out negligently and in breach of duty of care. Reports from the defendant incorrectly found that the works carried out by the plaintiff failed to comply with the plans and specifications under the contract with RCC;

16. As a result of the breaches of contract and duty of care, the plaintiff suffered loss and damage including the cost to the plaintiff of rectification works and a loss of profits due to RCC terminating the services of the plaintiff to provide asphalt surfacing to the roadworks.

9. The defendant KH filed a Defence to Further Amended Statement of Claim on 21 January 2020. In summary, the Defence:

1. Admits that it carried on a business which included undertaking Level 1 inspection and testing;

2. Admits that it offered to provide to the plaintiff Level 1 testing;

3. Says that the services offered by the defendant to provide Level 1 testing were not accepted by the plaintiff and that the defendant was only retained by the plaintiff to provide inspection and testing services on an ad hoc basis;

4. Says that it provided numerous ad hoc testing services to the plaintiff in the course of the project at the Site;

5. Denies that any testing undertaken by it was negligently performed;

6. Denies that there was any breach of contract or duty of care by it;

7. Pleads, in the alternative, that if it is established that the defendant breached any duty of care owed to the plaintiff, the claim is an apportionable claim within the meaning of s 34 of the Civil Liability Act 2002 (NSW) and Glenashka is a concurrent wrongdoer which caused the loss or damage the subject of the claims made by the plaintiff against the defendant. It is pleaded that any liability of the defendant KH should be nil in the assessment of proportional liability;

8. Pleads contributory negligence. It is asserted that the plaintiff has been guilty of contributory negligence by failing to engage anyone including the defendant to conduct Level 1 supervision, by failing to ensure that the material was properly tested and adequately certified to a DGB 20 standard and by failing to obtain a second opinion in relation to the outcome of the defendant’s testing.

General comment on the evidence

10. Extensive affidavit evidence was relied upon by the parties. The affidavits read in some cases attached voluminous documentation including contract documentation, appropriate Standards applicable and test results.

11. Detailed affidavits were provided for the plaintiff by Mr Adam Hewes, the sole director of the plaintiff. A number of affidavits were read of Mr John Kennedy, a director and the General Manager of the defendant. In addition, a number of affidavits were read from employees of the defendant who were involved in dealings with Mr Hewes of the plaintiff or in testing at the Site.

12. It will be necessary to set out parts of the voluminous documentation relied upon in these reasons.

Factual background

13. It is necessary to set out the factual background to the matter. There are a number of disputed factual matters which the court is required to determine. These will be considered further below. However, a number of factual matters can be set out in relation to which there is not significant disputation. To avoid any ambiguity, the following matters constitute my factual findings, unless there is an indication to the contrary.

14. As stated above, RCC was the head contractor at the Parkes District Hospital project Site. The plaintiff was a company which provided earthworks and roadworks services. The defendant KH was a company which provided expert geotechnical services particularly in relation to soil and material testing.

15. In the first half of 2014, the plaintiff (“ADH”) became aware of a tender by RCC for civil works in connection with construction at the Site. Mr Hewes, the director of ADH, with some outside assistance, prepared a tender response in respect of certain works at the Site and lodged the tender response. This occurred in mid-2014.

16. Mr Hewes attended the office of KH and briefly discussed with Mr Colin Miller of KH the provision by KH of Level 1 geotechnical services (“Level 1 Services”) to the plaintiff. The precise form of the conversation is considered further below. It is clear that Level 1 Services were required to be utilised by the plaintiff ADH under the proposed contract for the works to be carried out by ADH for RCC at the Site.

17. On 30 May 2014, there was sent from KH (Mr Kennedy) to ADH a quote for KH to provide Level 1 Services to the plaintiff at the Site. The letter is incorrectly dated 25 July 2013. The documentation in evidence shows it was emailed on 30 May 2014. The letter, sent under the name of Mr Mead of KH, has within it the following: “Your Reference: Telephone Call – Dated 27th May 2014”.

18. The letter inter alia provides:

“In order for this, or any other NATA Accredited Testing Authority to Certify a project as conforming to Level 1 Supervision under AS 3798 - 2007, it is essential that ALL aspects of the construction phase are overseen. This includes but is not limited to:-

▪  Approval of topsoil stripping,

▪  Identification, removal and measurement of unsuitable materials.

▪  Proof Rolling of prepared natural surfaces.

▪  Compaction testing and certification to levels nominated in the above Standard or Project Specification.

▪  Material Quality Verification.

▪  Documentation and Records of Daily Construction.

▪  Full Time Supervision by a suitably qualified Technician.

▪  Reporting and Certification

In order for you to fully understand the requirements of the above, I have attached an electronic copy of AS3798 - 2007 for your perusal.”

19. Mr Hewes in paragraph 35 of his first affidavit claims that he had a conversation with Mr Kennedy of KH in which he accepted the quote dated 30 May 2014 for the provision of Level 1 Services. That is disputed by Mr Kennedy and KH. I will consider that matter further below. Mr Kennedy, the director of KH, states that he approved the quote before it was issued by Mr Mead. I accept that evidence.

20. On 28 July 2014, Mr Mead of KH sent an email to Mr Hewes of ADH attaching the Australian Standard Guidelines on Earthworks for Commercial and Residential Developments (AS3798-2007) which is referred to in, and attached to, the quote document sent on 30 May 2014.

21. In July 2014, RCC advised ADH that it was the successful tenderer in relation to the roadworks for the Site.

22. On 30 July 2014, ADH commenced site clearing at the Site and the stripping of topsoil for the purposes of the necessary works. No one from ADH was initially in attendance during this work.

23. On around 12 August 2014, Mr Berry, a geotechnician employed at KH, attended the Site, as KH had received a request from the plaintiff for an inspection of the topsoil stripping. When Mr Berry arrived at the Site, he noticed that the plaintiff had already undertaken part of the topsoil stripping works throughout the entire Site. Mr Berry thought this was unusual, as it was his understanding (from Mr Kennedy) that KH was retained to undertake Level 1 Services and he believed he would need to supervise the entirety of the stripping works and that they should not have commenced until he was on Site. Mr Berry undertook an inspection of the works and began to set himself up for fulltime supervision. I accept his evidence on this issue although it was unclear where he commenced to set himself up. Mr Hewes came to Mr Berry and said words to the effect that he would give Mr Berry a call when the next task for checking by KH was ready. Mr Berry from that point onwards only attended the Site as and when requested by Mr Hewes directly or through the KH office.

19. Mr Mead claimed that on or about 13 August 2014, Mr Hewes attended the KH office and had a conversation with him in which Mr Hewes asked Mr Mead where he could get road base for the specification requiring DGB 20 road base material. Mr Mead claims he informed Mr Hewes that the only local sources of certified DGB 20 material of which he was aware, were the Westlime Quarry in Parkes and the Millers Metals Quarry in West Wyalong. Mr Hewes disputes this conversation.

20. At about and before this time, Mr Hewes had discussions with Mr Colin Wilson of Wilsons Quarry (owned by Glenashka) about the quarry supplying road base in connection with the construction required by ADH. Mr Wilson indicated to Mr Hewes that Wilsons Quarry could supply the road base to DGB 20 standard. The discussions between Mr Hewes and Mr Wilson are set out in detail in Mr Hewes’ first affidavit. Mr Hewes informed Mr Wilson that he would need some independent certification that the road base to be supplied was DGB 20 compliant and Mr Wilson indicated that he would arrange for a test certificate.

21. At some time in August 2014, on or before 13 August 2014, Mr Wilson delivered to Mr Hewes a road base sample test report which Mr Hewes scanned into ADH’s computer system on 13 August 2014.

22. The test certificate report supplied by Mr Wilson to Mr Hewes (which Mr Hewes thereafter supplied to RCC) has on it the logo of the Roads and Traffic Authority (“RTA”) and is headed “Roads and Traffic Authority, New South Wales Parkes Regional Laboratory”. It is addressed to “Wilsons Betamix Concrete” and the project description is “Miscellaneous Private Testing”. The work details are described as “private testing on Wilson’s: Check testing on DGB 20”. The materials tested are indicated to have been received on 20 July 2012, more than two years before the certificate was apparently supplied by Mr Wilson to Mr Hewes. The certificate is signed by a Mr Simon Ellis on 8 August 2012. It is three pages in length and does not expressly and precisely indicate where the sample came from or expressly in summary what the result of the test was.

23. There were no records in evidence to indicate that KH was asked by Mr Hewes or anyone from the plaintiff to verify that any road base held by Mr Wilson was DGB 20 compliant before it was brought to the Site for use.

24. On 25 August 2014, an employee of the plaintiff (Ms Rebecca Martyn, the Office Manager) sent an email to Mr Berry of KH. This email stated as follows:

“Col,

Attached is geotech report for material to use onsite at Parkes Hospital. A copy of this has already been forwarded to Richard Crookes Constructions.

Please email copies of the test results & findings from todays onsite visit to this email address.

Do we have copies from previous tests?

Also please ensure we are cc into all email correspondence from yourself to Richard Crookes.

Thank you

Bec”.

30. Attached to the email were two documents, one of which was the three page RTA test certificate dated 8 August 2012 which was provided by Mr Wilson to Mr Hewes.

31. Mr Kennedy of KH received a copy of the email to Mr Berry from Mr Berry. Mr Kennedy read the email and understood that the plaintiff intended to rely on the RTA certificate to establish that the stock pile material from Wilsons Quarry was DGB 20 compliant. Mr Kennedy states in his affidavit that this concerned him because based on his industry experience, the only supplier of DGB 20 compliant road base locally was Westlime Quarry. This was one of the suppliers referred to by Mr Mead in his alleged conversation with Mr Hewes on about 13 August 2014.

32. The plaintiff asserts that the contract between the plaintiff and the defendant was for the defendant KH to provide Level 1 Services and that this should be objectively determined to be the contract by a combination of the quote, the conduct of the parties in the proceedings and the conversation in paragraph 35 of Mr Hewes’ first affidavit. In particular, it is said that KH continued to provide services without indicating anything to the contrary.

33. There is a disputed conversation between Mr Kennedy and Mr Hewes in mid-August 2014 where Mr Hewes is said to have stated to Mr Kennedy that he did not want to pay for a technician to be on site fulltime as he did not need it and Mr Kennedy indicated that that would no longer be a Level 1 Service but it would be on a “do and charge basis” to which Mr Hewes agreed. Mr Kennedy states that KH then proceeded to undertake inspection and testing at the Site as and when specifically requested by Mr Hewes and that, accordingly, ADH did not accept the quote sent on 30 May 2014 and did not engage KH to provide Level 1 Services in respect of the project at the Site: see paragraphs 32-34 of Mr Kennedy’s 26 July 2019 affidavit. This is generally consistent with paragraphs 14-16 of Mr Berry’s 27 July 2019 affidavit.

34. Further, Mr Kennedy states that in late August 2014 he had a conversation with Mr Hewes in which he informed him that the RTA certificate forwarded to KH was not adequate to verify that the Wilsons Quarry stockpile was DGB 20 compliant because “it is outdated and not specific to the stockpile being used for the Hospital Project”. Mr Kennedy asserts in his first affidavit that he informed Mr Hewes that the only supplier of certified road base material that he knew of in the Parkes region was Westlime Quarry and if Mr Hewes wanted the DGB 20 compliant product he should use the product from Westlime. Mr Kennedy claims that Mr Hewes stated that he “created the job on Wilson’s material”, that he forwarded the RTA certificate to RCC, they had accepted it and that was the material which the plaintiff would be using. Mr Kennedy states that from the conversation, Mr Hewes did not follow his recommendation and proceeded to use the material from Wilsons Quarry: paragraphs 49-50 of Mr Kennedy’s 26 July 2019 affidavit.

35. The plaintiff and Mr Wilson, on behalf of Wilsons Quarry (Glenashka), entered into an agreement for the supply by Wilsons of 10,000 tonnes of road base said to be DGB 20 compliant to the plaintiff for use on the works at the Site. From 4 August 2014, Wilsons Quarry delivered loads of the road base to the Site.

36. Between August 2014 to July 2015, ADH carried out base and sub-base construction of roadworks at the Site using the road base material supplied by Wilsons Quarry. In the same period, KH carried out density and compaction sampling testing of the work undertaken by the plaintiff.

37. On 21 August 2014, Mr Hewes of ADH sent an email to RCC proposing a variation to the plans of the thickness of the sub-base by using 200mm of DBG 20 material instead of 265mm of DGS 40 material, a lesser quality material. In due course, in 2015 RCC agreed that the sub-base may be provided to 200mm using DBG 20 in the sub-base. The plaintiff intended to use DBG 20 compliant material supplied by Wilsons Quarry for both the base and sub-base. On 20 March 2015, RCC approved the amendment to provide for a sub-base layer of 200mm constructed with road base compliant DGB 20 material.

38. Mr Hewes replied to the RCC approval in an email: “[The plaintiff] will proceed with 200mm sub-base layer and comply with all other contract requirements as specified”. A plan revision was issued by Mott MacDonald, engineers, on behalf of RCC.

39. In relation to various geotechnical testing work undertaken by KH for the plaintiff ADH, Mr Miller, who was responsible at KH for invoicing and related matters, issued various invoices to the plaintiff directed to “Hewes Earthmoving”. A number of these invoices had as a description “Level One Testing Parkes Hospital Site”. This was used on invoicing from the defendant to the plaintiff from 18 August 2014 until 16 January 2015. Thereafter, the invoices did not have this description on them. Mr Miller states in his 26 July 2019 affidavit as follows:

1. He was not involved in the detail of the quotation process. In accordance with the ordinary practice adopted at KH, once a quote had been issued, Mr Miller would have been provided with a copy to be placed on the file and which would be used for the purpose of generating invoices;

2. As office manager at KH, he was responsible for preparing and issuing invoices to clients on behalf of KH;

3. No invoice was ever issued by KH to the plaintiff for a Level 1 Testing Report;

4. He remembered other jobs where invoices started out as being charged on a Level 1 basis but were changed by the customer to a lower level. In those cases, he would simply delete the reference to “Level 1 Supervision” from the job description as he did in the later invoices to the plaintiff.

40. As stated, between August 2014 and June 2015, KH provided various inspection and testing services to the plaintiff. These are summarised in paragraph 23 of Mr Mead’s 26 July 2019 affidavit. The reports prepared and issued to the plaintiff by KH in relation to those services are exhibited to Mr Mead’s affidavit. The various inspections and services were provided by Mr Mead and Mr Berry. KH did not have a technician on the Site fulltime when work was completed as was required for Level 1 Services under the quote sent on 30 May 2014.

41. In relation to the inspections and testing undertaken by KH, the evidence establishes that prior to June 2015 all the testing of materials undertaken by KH did not involve any assessment of the materials’ conformance with DGB 20 and any testing of the road base material undertaken by KH was in relation to the density to which the material had been compacted. All testing was undertaken in situ and not at the Wilson Quarry site: paragraph 33 of Mr Mead’s affidavit. Mr Mead states that the plaintiff did not directly inform him of the source of the stockpile it chose to use and never requested that he test it for compliance with DGB 20. There is no evidence that any other officers such as Mr Berry or Mr Kennedy from KH were requested to undertake testing of the material for compliance with DGB 20 prior to June 2015.

42. On 18 June 2015, there was a conversation between Mr Hewes and Mr Mead in which Mr Hewes requested KH to undertake a material evaluation report to confirm DGB 20 product conformance. Mr Hewes directed Mr Mead to stockpiles in the bottom northern car park at the Site. Mr Mead indicated to Mr Hewes that in his opinion the product would not meet DGB 20 specification. Mr Hewes appeared to be surprised by that and wanted a speedy test. Mr Mead stated that this was the first time Mr Hewes had asked him, or as far as he was aware, anyone at KH, to test the quality of the road base material that the plaintiff had used in the project. Mr Mead states in his affidavit that he made the comment that the road base would not meet the DGB 20 specification on the basis of his visual appraisal of the Site observed during attendances and his prior experience: paragraph 37 of his affidavit.

43. On 18 June 2015, Mr Hewes sent an email to Mr Mead attaching documents which included the three page RTA test certificate dated 8 August 2012 supplied to Mr Hewes by Mr Wilson.

44. On 18 or 20 June 2015, Mr Bullock of KH took a sample of material from the stockpile at the Site. A report number ASM:W15/2787 was prepared and signed by Mr Mead. It was addressed to Mr Hewes of the plaintiff. The source of the material was said to be “Wilsons Quarry” and the description was said to be “Proposed Road base”. The document stated that the material was sampled from “Stockpile” and the location was “Material Evaluation – Wilson’s”. The sample method was “Hand”. Mr Mead says he informed Mr Hewes of the results of the test. Mr Hewes disputes that.

45. On 20 July 2015, RCC requested KH to conduct the testing of stockpiled material at the Site to check for compliance with DGB 20. As a result of this request, Mr Berry of KH attended the Site on 20 July 2015. A report numbered MAT:S15/1770 was produced by KH and signed by Mr Berry. The date sampled was 20 July 2015. The source was said to be “Wilsons Quarry” and the sampling method was “Hand”. The comments part of the report provides as follows: “Material was sampled from onsite stockpile at Parkes Hospital site. Testing on Material was done prior to Repeated Compaction (T102)”. Whether there was material present to be sampled as KH asserts is disputed by the plaintiff.

46. A written report from KH to RCC dated 28 July 2015 found that the stockpile sampled was non-conforming to DGB 20. See the penultimate paragraph of the 28 July 2015 letter signed by Mr Berry from KH to RCC.

47. On 30 July 2015, RCC requested KH to conduct in situ testing of the road base used by the plaintiff to check for compliance with the DGB 20 standard. Mr Bullock of KH, supervised by Mr Kennedy, undertook testing in situ of the road constructed by the plaintiff at seven locations. A report dated 7 August 2015 from KH to RCC, indicated that the samples in the material delivered and placed at the Site failed to meet the criteria set down for DGB 20 material and was not of a quality fit for use as the base course material on the project. As a result, on 7 August 2015, RCC sent a letter to ADH containing a contractor’s direction requiring necessary rectification work to the currently installed material.

48. Following this direction, rectification work was undertaken by the plaintiff involving in situ stabilisation comprising the addition of a stabilising agent which was blended and mixed through the base course layer before being levelled and re-compacted to form a modified base course layer suitable for traffic use. The stabilisation involved the introduction of lime as a stabilising agent. An independent engineer, GDK Keighran Geotechnics, provided a report to RCC saying that the lime stabilisation was suitable. By report dated 10 September 2015, GDK found that there was adequate stabilisation by the work. Thus this report confirmed that the remediation work was completed in accordance with GDK’s earlier report.

49. On 16 September 2015, RCC advised Mr Hewes that asphalting works were to be removed from the ADH contract with RCC. On 21 September 2015, RCC purported to terminate the works contract with the plaintiff. A deed of release was entered into between the plaintiff and RCC. As a result of the purported termination of the contract by RCC, the plaintiff did not carry out the asphalting works and did not receive any payment for that work. The agreed cost of the asphalt works was $355,861 including GST. Mr Hewes gave evidence that his understanding was that the profit after the cost of materials and the cost to carry out the works was $152,695.40. This evidence was not admitted as evidence of the plaintiff’s damages. Mr Hewes states that prior to the termination of the contract, the plaintiff had commenced purchasing the materials necessary for it to fulfil its contractual obligations in relation to the asphalting works including the purchase of materials for the primer seal to the roadworks costing $22,000.

Contractual documents between the plaintiff and RCC

50. The contract between the plaintiff, ADH, and the head contractor, RCC, is of relevance to the obligations of the plaintiff in relation to its roadworks which it agreed to undertake. The Subcontract Deed between RCC and the plaintiff was in evidence. It is dated 30 July 2014. Under the Subcontract, the plaintiff was to execute the works under the contract in accordance with the Subcontract Deed and the appendices and attachments to it and the general conditions of subcontract. See Clause 2 of the general conditions of subcontract. The subcontract sum for the works to be performed by the plaintiff including GST was over $1.490 million.

51. Attachment 17 to the Subcontract Deed was a Schedule of drawings and specifications pursuant to which the works were to be conducted. One of those listed was a document entitled “4828–MM–CV–DWG–PM–5011 Pavement Details A”. This plan was later revised by agreement.

52. Attachment D to the Subcontract Deed was the trade conditions of subcontract. The plaintiff was obliged to provide all labour, materials, plant and equipment required to complete the works in accordance with the subcontract documents as set out in the attached specification and documentation. This included excavation, earthworks and civil works including roads, kerbs and gutters.

53. In evidence were the pavement details drawings including that referred to above ending with “5011 Pavement Details A”. These drawings showed a requirement for a sub-base course in road construction at the Site of 265mm of material classified as DGS 40 with a base course of 115mm of material classified as DGB 20. Both materials had to be compacted to certain percentage requirements. There were also requirements for sealant on top of the roadworks and then asphalt. The diagram showed that the sub-base had to be placed and compacted before the concrete kerb near the road was constructed.

54. As stated above, the pavement requirements were later varied in 2015 at the request of the plaintiff with the agreement of RCC. This is shown in another diagram in evidence with the number “4828–MM–CV–DWG–PM–5011 E”. This diagram showed that the plaintiff had an option of paving the road either in the method in the previous diagram or paving the road with a sub-base course of 200mm of material classified DGB 20, with a base course of 115mm also with material classified as DGB 20. The evidence of Mr Hewes on behalf of the plaintiff is that all the sub-base course and base course material was paved with DGB 20 compliant material: see paragraphs 42 to 45 of Mr Hewes’ first affidavit. As far as the plaintiff was concerned, all of its construction for the sub-base course and the base course of roadworks at the Site was completed with DGB 20 compliant material in accordance with the “Pavement Type I” on the drawing ending with “5011 E”. The defendant submits that this strictly was a breach of the contract with RCC by the plaintiff which was obliged to construct the roads in accordance with either Pavement Type 1 or Pavement Type 1A in the drawing ending with “5011 E”, but not Pavement Type 1 all with DGB 20 compliant material. However, it is conceded by the defendant that this did not impact its position. Ultimate approval was given to the plaintiff by Mott MacDonald engineers on behalf of RCC in an email dated 24 March 2015 which was in evidence.

55. One of the Subcontract Deed documents was a document entitled “Civil Specification” with the document number “4828–MM–SPC–PM–0010 Civil Specification”. This is dated 19 March 2014. This document sets out the specifications for the works to be undertaken by the plaintiff.

56. Also in evidence was a plan approved for construction showing an overall view of the Site with the roadways to be constructed by the plaintiff. The defendant asserts that stockpiles of the material used by the plaintiff for the roadworks were placed in the car parks being constructed in the top right and bottom left of the construction map. The map is incorporated by reference into the Subcontract Deed between the plaintiff and RCC.

57. The Civil Specification which has been referred to was also incorporated as a relevant contractual document: Exhibit A Court Book pages 341 and 400.

58. The Civil Specification is a lengthy and detailed document. Section 3.1 related to “Earthworks”, which were the initial works to be undertaken by the plaintiff in relation to the Site. This section refers to the standards to be used and the requirement for a geotechnical consultant including that the plaintiff was to “engage at [its] own cost a geotechnical consultant to monitor any excavation works” with a stated minimum role to be undertaken. Clauses 3.1.1-3.1.3 of the Civil Specification state the following in relation to earthworks:

“3.1.1  SCOPE

The works covered by this Section of the Specification comprise the formation by excavation or filling of the earthworks in all types of material for roadways, paths, building platforms, and all incidental works other than underground services. Requirements are also laid down for the final trimming and finishing of surfaces for various purposes.

Ancillary works, such as temporary drainage and soil conservation measures are also specified for the protection of permanent works during construction and the prevention of damage to the site and adjacent areas as a result of soil erosion.

3.1.2  STANDARDS

Work carried out under this Section of the Specification shall comply with the requirements of all current Australian and industry accepted Standards to the extent that they are relevant and that they are not exceeded by this Specification. This will include but is not necessarily limited to:

▪  AS 1289   Methods of Testing Soils for Engineering Purposes

▪  AS 1348   Road & Traffic Engineering-Glossary of Terms

▪  AS 3798   Guidelines on earthworks for commercial and residential development

A Testing Authority shall be employed by the Contractor to carry out all testing. Compaction control testing shall be carried out to conform to Level 1 testing as defined in AS 3798. The Authority shall hold a current NATA (National Association of Testing Authorities) Registration for the relevant tests, and a copy of results shall be forwarded to the Superintendent without delay.

3.1.3  GEOTECHNICAL CONSULTANT

The contractor shall engage at his own cost a geotechnical consultant to monitor any excavation works. The consultant’s role is to include, as a minimum, the following:

▪  Inspect excavation batters, provide guidance to the Contractor and the Superintendent on any modifications deemed necessary to maintain stability. Submit a written report to the Superintendent within 24 hours of inspection either confirming the suitability of the proposed batters or the modifications deemed necessary to maintain stability.

▪  Oversee compaction testing by the Testing Authority stated in clause 3.1.2 above. Review and confirm in writing to the Superintendent the suitability of test results within 24 hours of receipt.

▪  Supervise backfilling, CBR testing and proof rolling of any excavations and confirm that these have been undertaken in accordance with the requirements of this Specification. Also confirm that all filling material utilised conforms to the Specification. Submit a written report to the Superintendent within 24 hours of each inspection confirming his findings.

Details of the proposed consultant are to be submitted in the Contractor’s Tender.”

59. It should be noted that AS 3798 relating to “Guidelines on earthworks for commercial and residential development” is specifically referred to in clause 3.1.2 of the Civil Specification.

60. Section 3.3 of the Civil Specification (Exhibit A page 423) relates to the sub-base and base courses of roadworks. This is relevant to the use of DGB 20 compliant material by the plaintiff in its construction works at the Site.

61. Clauses 3.3.1-3.3.3.2 of the Civil Specification relating to the sub-base and base courses are as follows:

“3.3.1  SCOPE

The works covered by this Section of the Specification comprise the construction of fine crushed rock, gravel and suitable pavement layers

3.3.2  STANDARDS

Work carried out under this Section of the Specification shall comply with the requirements of all Australian and industry accepted standards to the extent that they are relevant and that they are not exceeded by this Specification

A Testing Authority shall be employed by the Contractor to carry out all testing The Authority shall hold a current NATA (National Association of Testing Authorities) Registration for the relevant tests, and a copy of results shall be forwarded to the Superintendent

3.3.3  BASE. SUB-BASE AND SELECT MATERIAL

3.3.3.1  GENERAL

Pavement “Base course” is defined as the highest course of any pavement below the final surfacing layer or concrete pavement or footing.

Base course shall be constructed of fine crushed rock equal to the performance and characteristics of quarry product DGB20 unless shown otherwise on the drawings.

Pavement “Sub-Base” is defined as the second highest course of any pavement below the surfacing layer or as the highest course below the Base course layer.

Sub-Base shall be constructed of fine crushed rock equal to the performance and characteristics of quarry product DGS20 or DGS40 unless shown otherwise on the drawings.

3.3.3.2  MATERIALS

Prior to the delivery of any material to the site, the sources of all materials and certificates that the material satisfies the specified requirements shall be provided for approval

HOLD POINT: Submit documents verifying the conformance of the material at least 2 weeks prior to the material being delivered to site.

When requested, testing of pavement materials shall also be performed on samples taken at the site and in their final conditions after placement and compaction in the pavement. Properties specified and acceptance for inclusion in the works remains subject to the materials in their final condition in the pavement.

Acceptance for inclusion in the works will be conditional compliance with the specified performance and geotechnical characteristics.

i)  Fine Crushed Rock Base Material

Fine crushed rock shall conform to the requirements of Class DGB20 material and shall be hard, durable stone free of clay lumps, organic matter and objectionable quantities of deleterious substances. The material may be crusher run or screened and recombined.

All the material requirements apply both prior to and after placement in the pavement.

ii)  Sub-Base Materials

Sub-base materials shall be crushed rock sub-base or suitable natural gravels and conform to the requirements of Class DGS40 or DGS20 materials.

Stone shall be hard, durable and the materials shall be free of clay lumps, organic matter and objectionable quantities of deleterious substances.

All material requirements will apply both prior to and after placement in the pavement.”

62. Accordingly:

1. Work carried out under Section 3.3 of the Civil Specification was required to comply with the requirements of all Australian and industry accepted standards to the extent that they are relevant and they are not exceeded by the Specification;

2. A testing authority was obliged to be employed by the plaintiff to carry out all testing. The testing authority was required to hold proper registration for relevant tests and a copy of the results were to be forwarded to the Superintendent in charge of the Site;

3. Base course was obliged to be constructed of fine crushed rock equal to the performance and characteristics of quarry product DGB 20;

4. Prior to the delivery of any material to the Site, the sources of all materials and certificates that the material satisfies the specified requirements shall be provided for approval. These were to be provided at least two weeks prior to the material being delivered to site;

5. When requested, testing of pavement material was also to be performed on samples taken at the Site and in their final conditions after placement and compaction in the pavement;

6. Acceptance for inclusion in the works will be conditional compliance with the specified performance and geotechnical characteristics.

63. These contractual provisions are important as testing was to occur prior to the delivery of any material to the Site. Further, there does not appear to be any requirement for testing on the base or sub-base unless requested under clause 3.3.3.2. These requirements are of course subject to the agreed variation in March 2015 providing the plaintiff with two options as to the material to be used in the sub-base and base course layers.

64. Clause 3.9.1 related to site inspections during construction.

65. Clause 3.9.1.2 related to inspections of underground services including “Proposed material samples and test certificates submitted and approved” (Exhibit A page 486). These appear to be the certificates submitted before the material arrives at the Site. This is one of the items to be checked off by the head contractor.

66. The clauses in the Civil Specification do not appear to require the testing authority to confirm that the materials delivered comply with the DGB 20 specification. As stated, there is also no reference to testing of the sub-base and base layers in situ unless that is requested pursuant to clause 3.3.3.2 of the Civil Specification.

Relevant Australian Standards

67. Clause 3.1.2 of the Civil Specification refers to “AS3798 – Guidelines on earthworks for commercial and residential development”. Work carried out for earthworks by the plaintiff at the Site was to comply with the requirements including AS3798. AS3798-2007, which is the Standard applicable at the relevant time, was in evidence: Exhibit 4 Tab 5 page 93. Section 8 of AS3798-2007 deals with inspection and testing. Sections 8.1-8.3 relate to the levels of inspecting and testing and provide as follows:

“8.1  GENERAL

To assess whether the quality of materials and workmanship provided on a project are consistent with the design requirements, the earthworks for a project should be inspected and tested at regular and appropriate intervals, having regard to the nature of the work, its required function and the specification. The specification should detail the level of inspection and testing required as detailed in Clauses 8.2 and 8.3.

Adequate control of earthworks will require appropriate inspection and should not rely on test results alone. These inspection measures may include visual assessment of fill or foundation materials, test rolling, surveillance of compaction procedures and compaction trials. Relative compaction testing may be supplemented by other testing.

8.2  LEVEL 1 INSPECTION AND TESTING

The primary objective of Level 1 Inspection and Testing is for the geotechnical inspection and testing authority (GITA) to be able to express an opinion on the compliance of the work. The GITA is responsible for ensuring that the inspection and testing is sufficient for this purpose.

The GITA needs to have competent personnel on site at all times while earthwork operations are undertaken. Such operations include the following:

(a)  Completion of removal of topsoil.

(b)  Placing of imported or cut material.

(c)  Compaction and adding/removal of moisture.

(d)  Trenching and backfilling, where applicable.

(e)  Test rolling.

(f)  Testing.

The superintendent should agree on a suitable inspection and testing plan prior to the commencement of the works.

On completion of the earthworks, the GITA will usually be required to provide a report setting out the inspections, sampling and testing it has carried out, and the locations and results thereof. Unless very unusual conditions apply, the GITA should also be able to express an opinion that the works (as far as it has been able to determine) comply with the specification and drawings.

8.3  LEVEL 2 INSPECTION AND TESTING

A geotechnical testing authority (GTA) will be appointed to carry out sampling and testing as required or specified. The GTA is responsible for selecting the location of sampling and testing operations within each visit made to the site. The superintendent is responsible for advice as to when such visits are required and is responsible for ensuring that sufficient samples and tests are taken over the project.

On completion of the earthworks, the GTA may be required to provide a report, setting out the sampling and testing it has carried out, and the locations and results thereof. The GTA will not be in a position to express any opinion beyond this as to the compliance of the works with the specification or their suitability for any particular purpose.”

68. Importantly, Section 8.2 relates to Level 1 inspection and testing. The section requires the testing authority “to have competent personnel on site at all times while earthwork operations are undertaken”. Section 8.3 relates to Level 2 inspection and testing and requires the testing authority “to carry out sampling and testing as required or specified”.

69. The wording of Sections 8.2 and 8.3 of AS3798-2007 indicates that the obligation of the testing authority is for testing at the Site not of materials before they arrive at the Site. Accordingly, the defendant submits, correctly, that Level 1 inspection and testing did not require the defendant to test off-site the proposed material to be used even if it was contracted to provide Level 1 inspection and services. Further, Section 8.2 relates to the earthworks including completion of removal of topsoil and compaction.

70. The submission of the defendant is that it was only contracted with the plaintiff to provide Level 2 inspection and testing which in substance is ad hoc testing services. In other words, the defendant was required to do specific testing only when requested by the plaintiff.

RTA specifications

71. It was not disputed that certain specifications of the former Roads and Traffic Authority of New South Wales applied to the construction of surfaced roads including relating to the requirements for base and sub-base materials. The relevant specification was RTA QA Specification 3051 relating to “granular base and sub-base materials for surfaced road pavements” dated October 2010. The material specifications which were relevant in the proceedings, particularly DGB 20, are set out in Section 3.2 of RTA Specification 3051. In relation to DGB 20, the specification provides: “Unbound base and sub-base materials are designated as follows: … DGB 20 20mm nominal size Densely Graded Base”. The specification provides the basis for acceptance of materials and the requirements for assessment of materials (see Sections 5.2 and 8). In particular, Section 8.1 sets out the requirements for assessment of particle size distribution in materials with percentage ranges where used in the base and sub-base. There are also specific requirements for plasticity and permeability of the graded materials proposed to be used. In addition, there are requirements for cohesion, soundness and strength for dense graded materials. Accordingly, the sections of the specification set out a series of tests to be met in determining whether materials are compliant. Section 11 of the RTA Specification 3051 sets out the details of requirements for sampling and testing for certification.

72. In paragraph 42 of his first affidavit, Mr Kennedy states that in order to certify that road base materials conform with DGB 20, project specific stockpiles “must be created and undergo an extensive sampling/testing regime, to ensure that the entire stockpile conforms to the requirements of RMS Specification 3051. Stockpiles are usually sampled and certified at the quarry they are prepared at, ahead of a specific job or specification. Further testing occurs after the stockpile has been transported to the site in order to confirm that it continues to meet the required standard.” The importance of the RTA standard is that it sets out the requirements before material can be certified as DGB 20 compliant. The relationship between RTA QA Specification 3051 and other more detailed specifications is set out on page 2 of QA Specification 3051 in a diagram in Section 1.2 (Exhibit 4 page 228).

73. Specification R71 which is referred to relates to the construction of unbound and modified pavement courses and covers the transport, delivery, sampling and testing, placement, compaction and acceptance of unbound and modified materials in the pavement course.

74. A form of Specification R71 was in evidence: Exhibit 4 page 173. However, the form in evidence was Edition 5 and dated 23 August 2018, after the relevant period in issue. Clause 2 related to unbound material or material to be modified and clause 2.2 related to “Certified Stockpiles”. Section 2.2 in the version provided (which appears not to have been relevantly amended) stated: “Stockpiles that have been tested, and shown to conform to the requirements of RMS 3051, are classified as Certified Stockpiles”. It continues: “Prior to the release of material from a Certified Stockpile, provide the Principal with a statement signed by you, verifying that the material from the Certified Stockpile meets the requirements of this Specification and the relevant properties stated in RMS 3051. Attach NATA endorsed test results to the statement. Indicate clearly in the statement the quantity of material represented by the test results”.

75. The stockpiles of material used by the plaintiff in the present case came from Wilsons Quarry. As indicated above, the certificate provided by Mr Wilson relates to testing in 2012, some two years before, but it is unclear what were the stockpiles referred to in the certificate. There was no apparent testing which showed Certified Stockpiles within specification R 71, Section 2.2.

Affidavit and oral evidence for the plaintiff

Evidence of Adam Hewes

76. As indicated above, Mr Adam Hewes is the sole director of the plaintiff, ADH. For the purposes of the proceedings, Mr Hewes swore two affidavits dated 16 August 2018 and 28 April 2020.

77. Mr Hewes’ first affidavit had exhibited to it voluminous documentation relating to the contract between the plaintiff and RCC and other relevant documents. Mr Hewes provides much background detail in relation to the contract and the works undertaken by the plaintiff at the Site.

78. In paragraph 8 of his first affidavit, Mr Hewes states that in preparing the bill of quantities for the tender response to RCC, he made enquiries about the materials and services that the plaintiff needed to purchase from third party providers to complete the works. This included pricing of road base, asphalt and primer seal to be laid on the road base.

79. In paragraph 11 of his first affidavit, Mr Hewes states that DGB 20 is a recognised standard for road base used by RMS New South Wales and used and accepted in the construction industry.

80. In paragraph 21 of his first affidavit, Mr Hewes states that an important part of the tender costings was the road base. He sets out in his affidavit that he approached Mr Wilson of Wilsons Quarry. He said he was of the view that Wilsons Quarry could be a possible source for the road base as it was relatively conveniently located to the Site. He had had previous business dealings with Wilsons Quarry. In paragraphs 22 to 23 of his affidavit, Mr Hewes sets out conversations he had with Mr Wilson about the tender and the fact that the specifications stated that part of the road base had to be DGB 20 compliant. Mr Wilson is stated to have informed Mr Hewes that Wilsons Quarry could provide DGB 20 compliant road base. After informing Mr Wilson in about August 2014 that he needed independent certification that the road base was DGB 20 compliant, Mr Hewes sets out in paragraph 25 of his first affidavit that Mr Wilson informed him that he would arrange for a test certificate. Soon after, Mr Wilson delivered the RTA test report on about 13 August 2014. This is the test report dated August 2012 which has been referred to above. Mr Hewes states that he emailed the Wilson’s test certificate to RCC on 21 August 2014 and to KH on 25 August 2014.

81. Mr Hewes agreed on behalf of the plaintiff to enter into an agreement with Mr Wilson to purchase from Wilsons Quarry the DGB 20 road base at $11 a tonne collected by the plaintiff from the quarry. It was indicated by Mr Hewes that 10,000 tonnes were needed.

82. Mr Hewes sets out in his first affidavit that as a result of numerous requests made by him, invoices issued from February 2015 by Mr Wilson identified the material supplied as DGB 20.

83. In paragraph 34 of his first affidavit, Mr Hewes gives evidence about attending the offices of KH in May 2014 and speaking to Mr Colin Miller, the Office Manager of KH, in relation to KH providing “Level 1 geotech supervision and reporting”.

84. In paragraph 35 of his first affidavit, Mr Hewes sets out a conversation which he says he had with Mr Kennedy in the following terms:

“35.  On or about 30 May 2014, John Kennedy emailed to me the rates for Level 1 supervision and testing. I had a conversation with him after receiving the rates and said to him words in or to the effect of:

“I will use K&H’s services for the Level 1 supervision for the Hospital bulk earthworks and road works as per your rates on a do and charge basis”.

He said words in or to the effect of:

“That will be fine”.”

85. In paragraph 37 of his first affidavit, Mr Hewes states that he emailed all the plans for the works to be completed by the plaintiff, noting the requirement for DGB 20 road base, to Mr Mead of KH on 13 August 2014.

86. Mr Hewes then sets out the details of testing undertaken by KH at the Site. He notes that the first pickup of DGB 20 road base material from Wilson’s by the plaintiff was on or about 4 August 2014 and that on 25 August 2014 he emailed the Wilson’s DGB 20 test report to Mr Berry of KH.

87. In paragraph 42 of his first affidavit, Mr Hewes states that the plaintiff constructed all building bases, pathway bases and roadways and car parks using only the DGB 20 road base provided by Wilson’s Quarry. Mr Hewes states that he decided to use the higher quality DGB 20 material throughout “as this would save surveying costs to survey the sub-base and base separately” and he believed that it would provide a stronger pavement and reduce the risk of non-conformance due to clay contamination.

88. In paragraphs 45 to 46 of his first affidavit, Mr Hewes gives evidence of proposals between the plaintiff and RCC to alter the sub-base layer from 265mm to 200mm on the basis that DGB 20 material would be used throughout.

89. From paragraphs 49 of his first affidavit, Mr Hewes refers to the placement of the final road base stockpile of DGB 20 material from Wilsons Quarry in the lower northern car park and a smaller stockpile at the rear southern side of the hospital site with a final footpath base layer construction. He also refers to disputes which had arisen with RCC in relation to variations.

90. In paragraph 51 of his first affidavit, Mr Hewes refers to a conversation with Mr Mead of KH on 18 June 2015 about a final DGB 20 road base material evaluation which he requested. He states that Mr Mead informed him that the road base would not meet DGB 20 specification. This gave rise to concerns in Mr Hewes that Mr Mead had immediately indicated that the stockpile would not comply with DGB 20 even before the required testing had been carried out.

91. In paragraphs 53 and following of his first affidavit, Mr Hewes gives evidence about the three tests which were undertaken by KH in June and July 2015. In relation to the first stockpile test, Mr Hewes states that he was not contacted by anyone from KH and did not see where the KH representative took road base sampling from or who supplied the sample to KH. He states that he was later advised that the DGB 20 stockpile test was carried out on 20 June 2015 when he was not present. In paragraph 55 of his first affidavit, Mr Hewes states that this was the only time out of all tests taken by KH where he was not present and did not witness the carrying out of samples requested by him to be taken. He exhibits email correspondence about the various testing: Exhibit ADH 15.

92. In relation to the second stockpile test, Mr Hewes states at paragraph 57 of his first affidavit that he did not witness the sampling nor was he informed that sampling had taken place. Mr Hewes later gave evidence that there was no stockpile available at the time the second test samples were taken.

93. In paragraph 59 of his affidavit, Mr Hewes refers to a conversation with Mr Wilson in which Mr Wilson said that the material supplied by him was DGB 20 compliant.

94. Also in paragraph 59 of his first affidavit, Mr Hewes gives detail of his observations of Mr Kennedy, Mr Mead and Mr Bullock of KH undertaking in situ road samples on 30 July 2015. He states that he noted the samples were taken to a depth of 400mm and included a mixture of both layers including layers that had to be DGB 20 and layers that had to be only DGS 20. He notes that the results of this test stated that the road base was non-conforming in relation to DGB 20 material. Mr Hewes expresses the opinion in paragraph 61 that he did not believe the report was accurate as it did not test the top 115mm of road base separately from the sub-base layer below. In substance, he states that the testing could not adequately identify the relevant material to state whether the top 115mm base complied with the contractual requirements: paragraph 62.

95. Mr Hewes then goes into considerable detail from paragraph 63 of his first affidavit concerning orders from RCC to rectify the road base based on the KH sampling and tests undertaken on 30 July 2015. He notes that in order to remedy the roadways in accordance with the remediation report prepared by GDK, he undertook the mixing into all of the roadways of a slime lag blend to a depth of 250mm. After the remediation works were undertaken, there was a certification that the roads were remediated satisfactorily. In due course, there were disputes between the plaintiff and RCC which involved a settlement by way of deed of release and a claimed termination of the contract between RCC and the plaintiff. Mr Hewes states that at the time of termination of the contract works by RCC he was not aware that the testing of the completed road base works carried out by KH had not been done in a manner to show compliance with the Pavement Type 1 in “MM Plan 5011”: paragraph 80.

96. Mr Hewes gives evidence that as a result of the termination of the contract works, the plaintiff did not carry out the asphalting works. The plaintiff had previously bought some materials to undertake these tasks.

97. In his second affidavit sworn 28 April 2020, Mr Hewes expresses the opinion that the Wilsons Quarry test report dated August 2012 is the “only conclusive test result that shows a DGB 20 test result”: paragraph 4. In paragraph 12 of his affidavit, Mr Hewes asserts that KH failed to test the stockpile as requested on 18 June 2015 but rather used contaminated samples. It is asserted that the first test involved an in situ material test and not a stockpile test. He was not present when the samples were apparently taken by Mr Bullock of KH.

98. In his oral evidence in chief, Mr Hewes was taken to the photographs which were annexed to his second affidavit. He gave evidence that all of the photographs were taken by him at the Site and had been downloaded from his phone which showed the date when the photographs were taken. Mr Hewes marked on a map, which became Exhibit B in the proceedings, where the photographs were taken and the direction where they were taken from at the Site. Mr Hewes gave evidence about contamination of the road from red material as shown in the photograph at page 8 of the photographs in the Court Book and of stockpiles of material at the Site. The evidence was to establish that there was no stockpile remaining when the second test was purportedly undertaken by Mr Berry of KH.

99. In cross-examination, Mr Hewes agreed that following preparing his first affidavit he had received the affidavits prepared by the defendant’s witnesses and had considered them prior to preparing his second affidavit: T72.6.

100. Mr Hewes confirmed that the plaintiff had been undertaking earthworks including the construction of roads and pavements for local councils in the central west of New South Wales for 15 years. He said he was a qualified plumber by trade and he had been so for 26 years. He stated that the plaintiff’s businesses included plumbing, gas fitting and transportation as well as earthworks. In August 2014 he stated that the plaintiff had approximately nine employees with approximately three employees being employed in earthworks and road construction. Mr Hewes agreed that he had no formal qualifications in relation to road construction and that he had learnt on the job and through experience. As at August 2014, Mr Hewes stated that the plaintiff had undertaken at least two road construction jobs and not more than four or five of such jobs: T74.36. He accepted that he had limited experience in the construction of roads at the time, although he had employees with experience in these areas.

101. In relation to road specifications and standards, Mr Hewes said that as at August 2014 he had read RTA Specification QA 3051 carefully and also drew on his prior construction knowledge which he had in undertaking previous work with the plaintiff. He did not recall reviewing Specification R 71 as at August 2014 and did not consider that it applied to this project as this project involved internal roads. He agreed that he was familiar with AS3798-2007 as at August 2014.

102. Mr Hewes accepted that he had executed on behalf of the plaintiff the Sub-contract Deed with RCC: T80.22. He also agreed that he had reviewed carefully the contract and the plans and specifications which were attached to the contract. This included the Civil Specification which is attached to the Sub-contract Deed: T81.7.

103. Initially, Mr Hewes gave evidence that the roads as built by the plaintiff at the Site were built in accordance with Pavement Type 1 in the drawing ending “5011 Issue A”: T81.50; T82.7; Exhibit 4 pages 1-2. This was inconsistent with his affidavit evidence where he states that all roadways were built by the plaintiff using DGB 20 road base provided by Wilsons: first affidavit paragraph 42. He confirmed that as far as he was aware, the plaintiff was obliged to carry out the works under the contract in accordance with the sub-contract documents which included the plan “5011 Issue A” and the Civil Specification annexed to the Sub-contract Deed. This was the relevant drawing for the roadway construction at the time the contract between the plaintiff and RCC was executed on behalf of the plaintiff: see T84.34-.40; T85.15-.30.

104. Mr Hewes then agreed that the drawing ending “5011 Issue A” was later revised at his request and a new issue E was issued in March 2015: see Exhibit 4 page 2; T85.32-.36. He accepted that was the document at page 2 of the defendant’s tender bundle (Exhibit 4) and was issued by Mott MacDonald on behalf of RCC at his request: T85.44. He said that the new issue E gave an option for the construction of the roadways: T85.48; T89.12.

105. There was then detailed cross-examination of Mr Hewes in relation to the difference between Pavement Type 1 and Pavement Type 1A in issue E of the approved pavement drawings: T86.11-T88. Mr Hewes agreed that the only difference between Pavement Type 1 and Pavement Type 1A in issue E was the difference in the thickness of the sub-base course and the materials to be used: T88.12-.30. Issue E reduced the thickness of the sub-base course from 265mm to 200mm and the materials to be used in the sub-base course from DGS 40 materials to 200mm of DGB 20 materials. Mr Hewes gave evidence that despite the two options available under issue E, the plaintiff constructed the roadways using DGB 20 materials but to the sub-base course depth of 265mm: T89.25; T90.3; T90.43. Whilst not conceding that he did not comply with Pavement Type 1 as in issue E (T91.2 cf T91.6), Mr Hewes accepted that the sub-base materials used in his opinion were of DGB 20 standard rather than DGS 40 standard: T91.13.

106. Mr Hewes gave evidence that he went to Wilsons Quarry and met with Mr Wilson in relation to the supply of base material by Wilsons Quarry. He believed he attended after the contract was executed by the plaintiff when he was aware of the plans and specifications: T92.15. At this time, Mr Hewes conceded that he was aware that he had to obtain DGB 20 compliant material for the base course and to provide a compliance certificate to the head contractor RCC before the material was moved onto the Site: T92.23-.33. Mr Hewes agreed that he asked Mr Wilson for a complying certificate (T92.37) but rejected the proposition that he only asked to purchase 20mm standard material and did not ask Mr Wilson that the material be DGB 20 compliant: T92.42. He agreed that he was careful to ensure that he purchased DGB 20 compliant material for the roadway construction: T93.40. He accepted that he had reservations in relation to the Wilson Quarry road base without a certificate and asked for the certificate to meet the plaintiff’s contractual obligations. He agreed that he relied on the certificate provided by Wilson’s but only for the obligation to provide certification under the contract of the road base material’s compliance: T93.42-T94.50.

107. Mr Hewes believed he received the certificate from Mr Wilson on or about 13 August 2014 when he scanned it into his company records: T94.20. He said he was satisfied with the certificate and forwarded it to RCC on 25 August 2014: T94.37. He said that RCC indicated no objection to the certificate: T94.46. Significantly, he agreed that following receipt of the certificate, he entered into a contract with Mr Wilson to purchase 10,000 tonnes of DGB 20 road base to be used at the Site from Wilsons Quarry: T95.1-.9.

108. Mr Hewes agreed that in May 2014 he called at the office of KH: T95.12. He believed he attended in person: T95.19. He agreed he had a short interaction with Mr Miller of KH in which he gave instructions to Mr Miller that the plaintiff required testing services at the Parkes Hospital contract site. He accepted that this was in substance the extent of the conversation: T95.33. Mr Hewes accepted that on 30 May 2014 he received an email from Mr Kennedy providing a quote which was under the name of Mr Mead: T95.37.

109. It was put to Mr Hewes that he had a conversation with Mr Kennedy relating to the quote on 15 August 2014. He said he did not recall a conversation on that date and initially said that he never spoke with Mr Kennedy in relation to the quote: T96.1-.4. This is inconsistent with paragraph 35 of his first affidavit in which he refers to having a conversation with Mr Kennedy on or about 30 May 2014. Mr Hewes then stated that he was informed that KH could not provide a fixed quote but only a quote on a do and charge basis: T100.48; T102.48. Mr Hewes conceded that he only had a vague recollection of the conversation with Mr Kennedy as it was a long time ago: T102.40. He could not confirm that the conversation occurred on 15 August 2014 but agreed that it was possible: T101.38. Mr Hewes said that he could not remember the precise words used but only that an engagement was only possible on a do and charge basis as KH could not provide a fixed quote for the provision of services: T102.44.

110. Mr Hewes was cross-examined in relation to the progress of the works from 30 July 2014 and agreed that Mr Berry of KH was at the Site when testing was undertaken including in relation to compaction: T96.26. He agreed that he called KH to undertake the testing: T97.29. It was put to Mr Hewes that in relation to the earthworks component of the contract that a representative from KH was not on site every day. He agreed that an employee of KH was not on site from 9am to 5pm: T97.45. He said that an employee of KH was present every day in the two to four week earthworks period undertaking testing but accepted that they were only there for testing if Mr Hewes called them to undertake the testing: T98.25-.35.

111. Mr Hewes was taken to paragraphs 51-52 of Mr Kennedy’s first affidavit and agreed that that was an accurate summary of the work performed by KH in testing with the possible exception of the tests undertaken in 2015 in relation to the stockpile tests and in situ test: T103-T104.

112. In relation to the first stockpile test dated 18 June 2015 Mr Hewes agreed that this was taken at his request because RCC was raising concerns in relation to the base and sub-base at around that time: T103.40-.49. Mr Hewes also agreed that he did not request the second stockpile test or the 30 July 2015 in situ test: T104.1-.10. He agreed that the latter was requested by RCC.

113. Mr Hewes was then cross-examined in relation to the email correspondence he had with representatives of RCC in relation to the variation to the pavement requirements. He agreed that the first request from him to vary the plans was in August 2014 and that he pursued the proposed variation. He said this request was referred to Mr Robert Deep, an engineer, who approved the variation of the sub-base course from 265mm of DGS 40 material to the alternative option of Pavement Type 1A of a sub-base course of 200mm of DGB 20 material. See the emails dated 17 March 2015. Mr Hewes accepted that notwithstanding the approval on behalf of RCC of the option with a 200mm DGB 20 sub-base course that he laid 265mm of DGB 20 materials on the sub-base layer: T106.35. He agreed that he elected to thicken the sub-base layer by 65mm without approval and said that there was no need for approval: T106.41-T107.6. He understood at that time that all of the product which was obtained from Wilsons Quarry complied with DGB 20 because of the certificate provided by Mr Wilson in August 2014: T107.17.

114. In relation to the first stockpile test dated 18 June 2015, Mr Hewes conceded that he did not see Mr Perry Bullock of KS take the sample as he did not see him on site. He agreed that as at 18 June 2015 there was a stockpile of the material on the Site which was sufficient to finish the roadworks and the car park: T107.24. He stated that to his knowledge, as at 20 July 2015 there was no stockpile left as all the roadworks had been finished: T107.28. He said it was “impossible” that as at 20 July 2015 there was still a small stockpile present of the material in the car park: T107.49.

115. Mr Hewes gave evidence that he was present on site on 30 July 2015 when the in situ road material testing was undertaken by KH and that the testing took the majority of the day: T108.15. He said he was only briefly present with Mr Kennedy and Mr Bullock for about half an hour initially but he was monitoring the testing by them at a distance of between 20m and 100m: T108.18-40. He agreed that he could not see up close what they were doing: T108.33. Mr Hewes gave evidence that he measured the depth of the holes drilled using a tape measure but did not have any photographs of the measurements. He said the holes were 400mm deep but he did not raise this as being a problem with anyone at the time. This was despite the fact that he knew the in situ testing was for RCC to determine whether the sub-base and the base were DGB 20 compliant: T109-T110.7; T112.18; T113.21-.47.

116. Mr Hewes accepted that RCC was entitled under the contract with the plaintiff to test the in situ roadworks for conformance: T112.19.

117. Mr Hewes accepted that in relation to the 30 July 2015 tests prepared by KH for RCC that he on behalf of the plaintiff could have obtained his own geotechnical expert report. He said this was an option and he did not at the time challenge KH’s report results due to the prior results: T113.29-T114.17.

118. Mr Hewes confirmed that he had a number of disputes with RCC in relation to variations and that RCC disputed their liability for these: T114. He agreed that on 21 September 2015 a deed of release was executed between the plaintiff and RCC pursuant to which he was paid money and the parties to the deed released each from their obligations and liabilities including in relation to the laying of the asphalt level on the road: T114.46-T115.10.

119. Mr Hewes accepted that there was a dispute with RCC also in relation to laying the asphalt as to whether there should be one single 40mm layer of Class AC 10 or two 25mm layers.

120. Mr Hewes was asked a number of questions about an invoice number 7459 which he forwarded to Wilsons Betamix Goonumbla Quarry which became Exhibit C in the proceedings. Mr Hewes agreed that he issued this to Mr Wilson’s company as he had been informed that the road based used by the plaintiff was not DGB 20 compliant. He said at that time he believed that Wilsons was liable for the rectification work which had to be undertaken by the plaintiff: T129.13-.27.

121. Mr Hewes was asked a number of questions about the workers referred to in the invoice and the ownership of the various pieces of equipment used for the work mentioned. He stated that the equipment referred to was used in the remediation of the roads constructed by the plaintiff. When asked about the comparison between the rates charged and the salary/contractor rates of the various workers, Mr Hewes said that the difference related to running costs and the costs of purchase of the vehicle: T131.36. He accepted that all works undertaken by the plaintiff had a small profit margin: T132.19. He said that at that time whilst no other job was lined up there was always other work: T132.46; T133.10. He said the usual profit component for this type of construction work undertaken by the plaintiff was 5%-10%: T133.13.

304. The claim in paragraph 16 of the Further Amended Statement of Claim that KH owed the plaintiff a duty of care to exercise due care and skill in providing the Level 1 inspection and testing services under the contract of retainer alleged therefore must be rejected. I have found that there was no contract to provide Level 1 inspection and testing services between the plaintiff and KH but only a contract to provide ad hoc services when requested. I equally reject for the same reasons the slightly different formulation of the duty of care in paragraph 94 of the plaintiff’s written submissions. This also seems to be inconsistent with the plaintiff’s claim as limited in the particulars: Exhibit 5 page 35 paragraph 9a).

305. In paragraph 22 of the Further Amended Statement of Claim, it is alleged that KH neglected and failed to test properly or at all the road base supplied by Wilson’s to the plaintiff and used by the plaintiff on 18 June 2015 and as a result, found without a proper basis that the road base supplied by Wilson’s was non-compliant with DGB 20. In my factual findings above, I have found that the first stockpile test was conducted by Mr Bullock on behalf of KH. As to the allegation that KH found without a proper basis that the road base supplied by Wilson’s was non-compliant with DGB 20, there is no satisfactory evidence, particularly expert evidence, to establish this.

306. It is true that the RTA Wilson’s certificate dated 8 August 2012 was relied on by the plaintiff through Mr Hewes in establishing that the road base was compliant with the DGB 20 specification. However, the certificate was about two years old and did not clearly state on its face what material it related to. Alone, it is not sufficient to establish that the road base supplied by Mr Wilson to the plaintiff and used by it which was tested by KH on 18 June 2015, was compliant with DGB 20 or that KH breached any duty of care in coming to the opposite view. There was no expert evidence tendered to establish that KH found without a proper basis that the road base supplied by Mr Wilson as tested on 18 June 2015 was non-compliant with DGB 20. In the absence of expert evidence, I am not satisfied that the RTA Wilson’s certificate can be used for this purpose.

307. Similarly, the allegation in paragraph 23 of the Further Amended Statement of Claim that the further testing of the road base on 20 July 2015 incorrectly found that the road base supplied by Mr Wilson did not comply with the specifications for DGB 20 and the plans and specifications under the contract with RCC is not established on the evidence. The particulars in (d) of paragraph 23 of the Further Amended Statement of Claim assert that the testing carried out was of 200mm deep road samples which mixed the DGB 20 base layer and an underlying DGS 20 compliant sub-base layer. However, this testing on 20 July 2015 was of a stockpile at the Site according to Mr Berry (which I have accepted), not of the compacted road bases. It is accordingly difficult to see how the particular of negligence can be established. There was also no satisfactory evidence that the top layer of the road base was DGB 20 compliant.

308. The limited retainer which I have found also negates the allegation of a breach of duty of care pleaded in paragraph 25 of the Further Amended Statement of Claim.

309. In relation to the allegation in paragraph 25A of the Statement of Claim, it is alleged that KH negligently carried out the in situ road base sampling in seven locations completed on 30 July 2015 and found incorrectly that the road base was not constructed in accordance with the plans and specifications under the RCC contract. It is said that the testing took samples to a depth of 400mm and mixed material and was not capable of testing the compliance. I have rejected this suggestion in my factual findings. There was no expert evidence before me which established that the testing undertaken by Mr Kennedy and Mr Bullock when extracting the sampling, involved a breach of the standard of care and skill which would reasonably be expected of professional geotechnicians undertaking the testing. I accept Mr Kennedy's evidence in relation to the manner in which the testing occurred. There is no satisfactory evidence before me that if the testing had been limited to the top 115mm layer that KH would have found that it was DGB 20 compliant. If, as Mr Hewes asserts, both layers were compacted of the same material it seems unlikely that the top layer would be different to the sub-base layer.

310. I approach the allegations of negligence having regard to the provisions in the CLA. Section 5 of the CLA makes clear that what is negligence is a failure to exercise reasonable care and skill. In negligence, what precautions against the relevant risk of harm were reasonable in the circumstances for a defendant to take is to be determined taking into account s 5B of the CLA: Lloyd v Thornbury [2019] NSWCA 154 at [44].

311. It is important to identify correctly the risk of harm in the present case.

312. In my opinion, the relevant risk of harm in the present case was that if KH did not exercise reasonable care and skill in undertaking the testing as requested that it may give rise to incorrect results which could cause the plaintiff to be obliged to undertake unnecessary and expensive replacement or remediation works.

313. Whether there has been negligence in the present case by the defendant KH must be determined in considering ss 5B and 5C of the CLA. These sections provide as follows:

“5B   General principles

(1)  A person is not negligent in failing to take precautions against a risk of harm unless—

(a)  the risk was foreseeable (that is, it is a risk of which the person knew or ought to have known), and

(b)  the risk was not insignificant, and

(c)  in the circumstances, a reasonable person in the person’s position would have taken those precautions.

(2)  In determining whether a reasonable person would have taken precautions against a risk of harm, the court is to consider the following (amongst other relevant things)—

(a)  the probability that the harm would occur if care were not taken,

(b)  the likely seriousness of the harm,

(c)  the burden of taking precautions to avoid the risk of harm,

(d)  the social utility of the activity that creates the risk of harm.

5C   Other principles

In proceedings relating to liability for negligence—

(a)  the burden of taking precautions to avoid a risk of harm includes the burden of taking precautions to avoid similar risks of harm for which the person may be responsible, and

(b)  the fact that a risk of harm could have been avoided by doing something in a different way does not of itself give rise to or affect liability for the way in which the thing was done, and

(c)  the subsequent taking of action that would (had the action been taken earlier) have avoided a risk of harm does not of itself give rise to or affect liability in respect of the risk and does not of itself constitute an admission of liability in connection with the risk.”

315. I consider the elements in s 5B of the CLA in the light of s 5C as applied to the facts of the present case:

1. The risk was foreseeable, that is, it is a risk of which the defendant knew or ought to have known – in my view, it was foreseeable, in the sense of being a risk of which the defendant KH ought to have known, that if it did not exercise reasonable care and skill in undertaking the retainer that it could give rise to an incorrect test result which may cause loss to the plaintiff;

2. The risk was not insignificant – the retainer was only to provide testing on an ad hoc basis when requested. The risk was insignificant in the present case if the defendant KH exercised reasonable care and skill in conducting the tests which it was requested to undertake.

3. Whether a reasonable person in the position of the defendant would have taken the steps pleaded – in my view, a reasonable person in the position of KH would not have undertaken more extensive testing including proactive testing of the material to be used by the plaintiff and supplied by Wilson’s Quarry having regard to the limited retainer. KH was a professional testing company. Mr Hewes had indicated to Mr Berry and Mr Kennedy that KH would be contacted when their services were required. A warning had been given by Mr Kennedy to Mr Hewes in relation to the adequacy of the RTA Wilson’s certificate.

4. The probability that the harm would have occurred if care were not taken – clearly if care was not taken in the testing there was a real probability that harm would have occurred. However, there is no satisfactory evidence in the present case that due care and skill was not exercised by the defendant in undertaking the testing it did;

5. The likely seriousness of the harm – testing without proper care may involve serious financial loss to the plaintiff;

6. The burden of taking precautions to avoid the risk of harm – there was not an extensive burden on the defendant in the present case in exercising reasonable care and skill in undertaking the professional services;

7. Taking into account all of the matters I have indicated, I confirm my view from the analysis further above that having regard to the limited retainer between the plaintiff and the defendant there was no breach of the duty of care owed as alleged in the Further Amended Statement of Claim. There was also no breach established in relation to the three tests in 2015. Accordingly, the action in negligence as pleaded is rejected.

316. In his opening, counsel for the plaintiff asserted that it was submitted that the defendant KH owed a penumbral duty of care, being a duty to exercise reasonable care and skill wider than in relation to the contracted retainer: T2.36-T3.4. This was rejected by the defendant. It was submitted that no penumbral duty of care was pleaded: T7.47.

317. No express penumbral duty of care is pleaded by the plaintiff. The duties pleaded all appear to be related to the allegation of Level 1 services and the tests undertaken in 2015. However, a much wider duty of care is set out in paragraph 94 of the plaintiff’s written submissions which was a duty of care to provide services under the contract with the plaintiff “to assist the Plaintiff to confirm compliance with its obligations under the Plaintiff’s contract with RCC.” It should be noted at the outset that this duty of care is framed in wide terms. The defendant submits that this duty of care cannot be allowed on the present pleading. See paragraph 11 of the defendant’s written submissions.

318. It seems clear that in some cases a penumbral duty of care may be owed: David v David [2009] NSWCA 8 at [76] and Hanna v Raoul [2018] NSWCA 201 at [114]-[117]. Those cases involved a solicitor giving independent legal advice. In my view, quite apart from the pleading point which has some force, no penumbral duty of care was owed which obliged KH to advise the plaintiff not to use the Wilson’s material without further independent testing or to independently undertake that testing of the stockpiles (including after the earthworks were completed) without instructions:

1. The contract of retainer was a limited one as set out above. There was no general retainer to provide advice as to contractual obligations of the plaintiff under the RCC contract;

2. The RTA Wilson’s certificate was two years old and not specific on its face as to the stockpile tested;

3. Mr Mead informed Mr Hewes of the quarries where DGB 20 material was available locally to his knowledge;

4. Mr Kennedy raised with Mr Hewes his concerns as to the adequacy of the RTA certificate yet Mr Hewes continued to rely on it and did not require further testing as he could have done;

5. For KH to have independently tested the material would have potentially undermined the RTA certificate. It also would have involved actions inconsistent with the retainer. Costs would have been incurred in the further testing;

6. While Mr Mead had doubts as to the compliance of the material, these doubts were formed without formal testing.

Causation

319. The principles in relation to causation which are applicable under the Civil Liability Act are set out in ss 5D and 5E which are as follows:

“5D   General principles

(1)  A determination that negligence caused particular harm comprises the following elements—

(a)  that the negligence was a necessary condition of the occurrence of the harm (factual causation), and

(b)  that it is appropriate for the scope of the negligent person’s liability to extend to the harm so caused (scope of liability).

(2)  In determining in an exceptional case, in accordance with established principles, whether negligence that cannot be established as a necessary condition of the occurrence of harm should be accepted as establishing factual causation, the court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party.

(3)  If it is relevant to the determination of factual causation to determine what the person who suffered harm would have done if the negligent person had not been negligent—

(a)  the matter is to be determined subjectively in the light of all relevant circumstances, subject to paragraph (b), and

(b)  any statement made by the person after suffering the harm about what he or she would have done is inadmissible except to the extent (if any) that the statement is against his or her interest.

(4)  For the purpose of determining the scope of liability, the court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party.

5E   Onus of proof

In proceedings relating to liability for negligence, the plaintiff always bears the onus of proving, on the balance of probabilities, any fact relevant to the issue of causation.”

320. As effectively negligent conduct is relied upon under both the contract (through the implied term as a matter of law and as a matter of fact) and negligence counts, these provisions are applicable.

321. The plaintiff in the present case has the legal onus of proving on the balance of probabilities any fact relevant to the issue of causation in the proceedings: Strong v Woolworths Ltd [2012] HCA 5; (2012) 246 CLR 186 at [18]. The determination of factual causation under s 5D of the CLA involves the application by the court of the “but for” test of causation. This involves a determination that in accordance with s 5D, negligence was a necessary condition of the occurrence of the harm. That involves a determination on the balance of probabilities that the harm in fact occurred to the plaintiff and would not have occurred absent the negligence: Strong v Woolworths Ltd, above, at [18]. In the present case, that involves a determination whether but for any breach of duty of care as pleaded, any loss or damage suffered by the plaintiff would not have occurred. There was no suggestion that s 5D(2) applied in the present case: see Lloyd v Thornbury, above at [82].

322. Even if the plaintiff establishes that the defendant breached any duty of care owed to it in undertaking the three tests which occurred in 2015, it is not established by the plaintiff that any different result would have been obtained even if in the third test the road base had been tested only to the level of 115mm. That is, it has not been established by the plaintiff that proper testing of the first 115mm of the road base would have established that the road base was DGB 20 compliant. See the first sentence in paragraph 10 of the defendant’s written submissions. Further, Mr Hewes asserts that both layers were compacted of the same material. It seems unlikely therefore that the top layer would be different to the sub-base layer.

323. The legal onus rests on the plaintiff to prove that the harm which in fact occurred to the plaintiff (the remediation costs and the additional expenses incurred) would not have occurred absent the negligence. To do this, the plaintiff in my view would need to establish that if proper testing had been undertaken in 2015 as it claims was not undertaken by KH, that a different result would have been obtained. The plaintiff called no expert evidence on this issue. I am not satisfied that causation has been established by the plaintiff on this aspect.

324. There is also a real question whether Mr Hewes would have accepted any recommendation by KH to undertake further testing of the Wilson’s stockpile material in August 2014 to May 2015. Mr Hewes firmly believed the RTA Wilson’s certificate was reliable. He had entered into a contract with Glenashka to purchase the material and RCC had indicated no opposition to the certificate. He took no action when Mr Kennedy expressed doubts as to the adequacy of the certificate.

325. The plaintiff claims it lost the opportunity to obtain alternative compliant material if it had been told of the results of the 18 June 2015 test. First, I have found Mr Mead did verbally tell Mr Hewes the results of the test. Secondly, even if I am in error as to that, what would Mr Hewes have done? He had a contract with Glenashka and had been supplied much road base material already. Further, he would have had to obtain alternative compliant material. There was no evidence whether it was obtainable in late June 2015 and what the cost of it would have been. Also he was aware of Mr Mead’s view of the material. Mr Hewes chose to go ahead with the work despite Mr Mead’s view.

Concurrent wrongdoer pleading

326. In paragraph 21 of the Defence to the Further Amended Statement of Claim the defendant pleads proportionate liability. It states that if it is established that KH owed and breached a duty of care to the plaintiff (which is denied), any liability found on the part of the defendant as a result of the breaches was a claim for economic loss or damage (whether in contract, tort or otherwise) arising from a failure to take reasonable care. It was therefore an “apportionable claim” within the meaning of s 34 of the CLA, and Glenashka, as the supplier of the road base material, was a “concurrent wrongdoer” within s 34.

327. Mr Hewes and the plaintiff on the evidence clearly relied heavily on the RTA Wilson’s certificate. The circumstances in which the certificate was provided, as established in the affidavit evidence of Mr Hewes, clearly constituted a statement by Mr Wilson on behalf of Glenashka that the material he intended to supply was DGB 20 compliant. Mr Wilson was aware that the certificate was provided on a serious occasion, was supplied on a commercial basis and that Mr Hewes and the plaintiff were relying upon it for the purposes of acquiring the road base material. In my view, therefore, Mr Wilson and his company Glenashka owed the plaintiff a duty of care in relation to the provision of the certificate: Shaddock & Associates Pty Ltd v Parramatta City Council [1981] HCA 59; (1981) 150 CLR 225 at 251. The duty of care can arise in the provision of advice or information and is not confined to those who carry on a professional business.

328. However, it is not clear to me that the defendant has established that there was any breach of duty of care by Glenashka. To do so, considerably more information would be necessary in relation to the circumstances in which Mr Wilson on behalf of Glenashka received the RTA certificate and what material it related to. This was not explored sufficiently in the evidence as it would have been if Glenashka had remained a party to the proceedings. In my view, considerably more evidence would have been necessary to establish a breach of duty of care by Mr Wilson on behalf of Glenashka. I reject paragraph 101 of the defendant’s written submissions for this reason.

329. I accordingly am not satisfied on the evidence that Glenashka is a “concurrent wrongdoer” for the purposes of s 34 of the CLA. This finding is in some ways irrelevant as no breach has been established by the plaintiff.

Failure to mitigate

330. The defendant relies on an alleged unreasonable failure to mitigate by the plaintiff through the plaintiff’s failure to obtain a second opinion in relation to the defendant’s testing and RCC’s direction: Defence paragraph 22(b)(iv). This was not further developed in the defendant’s written submissions.

331. In my view, this claim should be rejected as was orally submitted by the plaintiff. KH provided testing services to the plaintiff. It had advised that the relevant material was not DGB 20 compliant. It was an expert in geotechnical matters. I can see no unreasonable failure to mitigate by the plaintiff accepting its conclusions at the time.

Contributory negligence

332. Contributory negligence is pleaded in paragraph 22 of the Defence to the Further Amended Statement of Claim. The particulars of contributory negligence include a failure by the plaintiff to employ anyone (including the defendant) to conduct Level 1 supervision, which requires a fulltime supervisor, a failure to ensure that the material used at the project had been tested prior to its use and/or installation and a failure to obtain adequate certification from Wilsons or otherwise as to the conformance of the road base material with the DGB 20 specification. The failure to employ anyone including the defendant to conduct Level 1 supervision, which requires a fulltime supervisor, would appear to be irrelevant as I am satisfied on the evidence that Level 1 supervision only relates to the earthworks part of the works and not to the road construction part of the works.

333. Sections 5R and 5S of the CLA provides as follows:

“5R   Standard of contributory negligence

(1)  The principles that are applicable in determining whether a person has been negligent also apply in determining whether the person who suffered harm has been contributorily negligent in failing to take precautions against the risk of that harm.

(2)  For that purpose—

(a)  the standard of care required of the person who suffered harm is that of a reasonable person in the position of that person, and

(b)  the matter is to be determined on the basis of what that person knew or ought to have known at the time.

5S   Contributory negligence can defeat claim

In determining the extent of a reduction in damages by reason of contributory negligence, a court may determine a reduction of 100% if the court thinks it just and equitable to do so, with the result that the claim for damages is defeated.

334. In Lloyd v Thornbury, above, Gleeson JA stated as follows at paragraphs 92-94:

92.  The question of whether a person has been guilty of contributory negligence is to be determined objectively – whether the plaintiff has taken that degree of care for his or her own safety that an ordinary reasonable person would take: Boral Bricks Pty Ltd v Cosmidis (No 2) (2014) 86 NSWLR 393; [2014] NSWCA 139 at [54] (McColl JA); see also at [94] (Basten JA, Emmett JA agreeing).

93. Section 5S provides that, when apportioning responsibility, a court may determine a reduction of 100 per cent in the claimant’s damages by reason of contributory negligence.

The principles applicable in determining whether a person has been negligent, which include those in s 5B, also apply in determining whether the person who has suffered harm has been contributorily negligent in failing to take precautions against a risk of harm which materialised and resulted in injury: s 5R. Accordingly, the existence and extent of a claimant’s contributory negligence is to be assessed by reference to the risk of harm which is the subject of his or her claim for damages, and the precautions that a reasonable person in the claimant’s position would have taken against that risk: Gordon v Truong; Truong v Gordon [2014] NSWCA 97; (2014) 66 MVR 241 at [14]- [15] (Basten JA).”

335. The sections and the analysis in Lloyd v Thornbury require an assessment to be made objectively whether the plaintiff has taken that degree of care for its safety that an ordinary reasonable person would take in all the circumstances in the light of the requirements in ss 5B and 5C of the CLA. As Gleeson JA states in Lloyd v Thornbury, the existence and extent of a plaintiff's contributory negligence is to be assessed by reference to the risk of harm which is the subject of the plaintiff's claim for damages in the light of the precautions that a reasonable person in the plaintiff's position would have taken against that risk.

336. The RTA certificate obtained by Mr Hewes was dated 8 August 2012 and did not specifically refer in detail to the material that was tested. Mr Hewes relied on Mr Wilson's assertion that it accurately tested the material which he was proposing to sell to the plaintiff for use in the roadworks. On the face of the certificate, no reasonable satisfaction could be reached by Mr Hewes as to this matter or that the material was DGB 20 compliant. The certificate does not say that on its face. I accept the defendant’s submission on that issue: defendant’s written submissions paragraph 103.

337. I have also found that Mr Kennedy warned Mr Hewes in relation to the adequacy of the certificate. In the light of that, Mr Hewes and the plaintiff were clearly on notice that there were issues in relation to the certificate having regard to its date: see T135.45-T136.38.

338. If, contrary to my findings, there was a breach of duty of care or the implied terms as a matter of law of the contract by the defendant, in my view the defendant has established contributory negligence in the present case. Mr Hewes was aware that the RTA certificate was from 2012 (T136.2), he used it to order up to 10,000 tonnes of road base material (T136.5), he considered that the stockpile had been sitting at the Wilson’s Quarry for over two years (T136.9) and he was willing to take the risk of using the certificate for that amount of material in the light of Mr Kennedy's comments. In my view, applying s 5B of the CLA, the risk that the material was non-compliant was foreseeable, the risk was not insignificant having regard to the nature of the certificate, the volume of the material and the date of the certificate, a reasonable person in the position of Mr Hewes for the plaintiff would have been seeking a more precise certificate including the clear specification of the stockpile, there was likely serious harm which would result if the certificate was not accurate and there was a minimal burden in requiring further testing from a geotechnician. In my view, a reasonable person in the position of the plaintiff in the circumstances would have obtained further professional geotechnical testing in relation to the material before using it. Contributory negligence is therefore established. Taking into account all the circumstances including the details and date of the certificate and the quantum of material involved, I would reduce any damages awarded by 30% to take account of the contributory negligence.

Damages

339. In paragraph 27 of the Further Amended Statement of Claim the plaintiff claims as damages the cost of the rectification works, the sum paid to Glenashka for the road base which was not compliant and the loss of profits in relation to the asphalt works. See also paragraphs 100-103 of the plaintiff’s written submissions.

340. Liability for these amounts is denied in the Defence to the Further Amended Statement of Claim: paragraph 20. If I am in error in relation to my findings that there were no breaches of contract or duty of care, I proceed to consider the question of damages.

341. In relation to the alleged loss of profit concerning the asphalt works, the amount claimed in the Amended Statement of Claim is $171,165: paragraph 27. In his oral evidence, Mr Hewes stated that the margin of profit on the asphalt works was “30 plus percent”: T147.2. The amount of $97,053 is claimed in the plaintiff’s written submissions: paragraph 100 (ii). This is based on the amount tendered for the asphalting works and Mr Hewes’ assessment of the profit margin: Hewes first affidavit Exhibit ADH 2 page 384, of $323,510 x 30%. See also T146.49. Although the evidence is slight on this issue, I am prepared to allow the amount claimed as established. I reject the defendant’s submission that this evidence only constitutes “inadmissible opinion evidence”: written submissions paragraph 100. Mr Hewes was in my view able to give reliable evidence on this issue. He was the person in charge of the contract from the plaintiff. Further, I accept the plaintiff’s submission that the problems with the alleged DGB20 material appeared to be part of RCC’s decision to terminate the contract with the plaintiff. The decision to terminate was very close in time to the remediation works and the issue of the GDK certification: Hewes first affidavit paragraph 69. See also the statement of Mr Crookes of RCC in paragraph 74 of Mr Hewes’ first affidavit where he referred to the further costs caused to the plaintiff by the road base supplier. There was no evidence before the court as to the contents of the deed of release referred to in paragraph 82 of Mr Hewes’ first affidavit.

342. In relation to the claim for the sum of $52,063 for road base paid to Glenashka which was non-compliant with the DGB 20 standard, it is unclear how this was caused by any claimed breach of contract of retainer or breach of duty of care by KH. Any action of the plaintiff for this sum was against Glenashka not KH. The amount is not claimed in the plaintiff’s written submissions.

343. That leaves the costs of the plaintiff of the rectification works. Exhibit C in the proceedings was an invoice from the plaintiff to Wilsons Betamix Goonumbla Quarry dated 7 October 2015 in the sum of $128,800.54. There was considerable cross-examination of Mr Hewes by counsel for the defendant in relation to the invoice: T129 and following. This was in the context that the invoice related to the remediation works: T129.27; T131.18. Despite the difference between the hourly rates charged in the invoice and the amounts paid to the workers involved, Mr Hewes gave evidence that the balance was for running costs and payments on the expensive equipment: T131.36. I accept that evidence. The equipment referred to is extensive. At T133.13, Mr Hewes gave evidence that the usual profit component for work of that type was between 5% to 10% and he had other paying work available. It is clear that the remediation work was done as a result of the testing by KH which found that the material was not DGB 20 compliant. I reject the defendant’s submission that Exhibit C does not contain a sufficient description of the tasks undertaken in the light of Mr Hewes’ oral evidence.

344. Accordingly, if there was a breach as alleged, the expenses set out in the invoice which is Exhibit C would appear to be caused by the alleged breach. However, there should be a reduction having regard to the usual profit component as indicated by Mr Hewes. In my view, that reduction should be at the higher rate of 10%. I would accordingly allow $115,820.49 (90% of $128,800.54).

345. In paragraph 85 of his first affidavit, Mr Hewes also refers to the fact the plaintiff had purchased various materials necessary for it to fulfil its contractual obligations in relation to the asphalting works prior to the termination of the RCC contract. Primer seal was purchased costing $22,000. It seems that this money was wasted due to RCC terminating the contract. However, there were other issues in dispute between RCC and the plaintiff relating to alleged variations. Despite these, in my view this amount should be allowed as it was clearly an amount sought despite not being referred to in particulars to the Further Amended Statement of Claim. The defendant was aware of it as an amount claimed due to Mr Hewes’ first affidavit.

346. Accordingly, the amount allowed for damages is $234,873.49. Due to liability not being established this amount is not recoverable. Further, if liability was established it would need to be reduced by 30% for the contributory negligence found.

Disposition

347. For the above reasons, I make the following orders:

1. Judgment for the defendant, K&H Geotechnical Services Pty Ltd.

2. The plaintiff is to pay the costs of the defendant, K&H Geotechnical Services Pty Ltd, of the proceedings as agreed or assessed.

3. Liberty to any party to make an application within 14 days to vary order (2) above.

4. The exhibits are to be returned after 28 days.

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Decision last updated: 07 October 2020