BHP Coal Pty Ltd v O & K Orenstein & Koppel AG

[2008] QSC 141

SUPREME COURT OF QUEENSLAND

CITATION:

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

PARTIES:

BHP Coal Pty Ltd (ACN 010 595 721)
First Plaintiff

Mitsubishi Development Pty Ltd (ACN 009 779 873)
Second Plaintiff

UMAL Consolidated Limited (ACN 000 767 386)
Third Plaintiff

BHP Queensland Coal Investments Pty Ltd (ACN 098 876 825)
Fourth Plaintiff

QCT Investment Pty Ltd (ACN 010 487 831)
Fifth Plaintiff

QCT Mining Pty Ltd (ACN 010 487 840)
Sixth Plaintiff

QCT Management Pty Ltd (ACN 010 472 036)
Seventh Plaintiff

v

O & K Orenstein & Koppel AG
First Defendant

Thyssenkrupp Engineering (Australia) Pty Ltd (ACN 000 515 333) (Formerly known as Krupp Engineering (Australia) Pty Ltd)
Second Defendant

Frank Thiel
Third Defendant

FILE NO/S:

6288 of 2003

DIVISION:

Trial Division

PROCEEDING:

Trial

ORIGINATING COURT:

Supreme Court of Queensland

DELIVERED ON:

1 July 2008

DELIVERED AT:

Brisbane

HEARING DATE:

16, 18-20, 23-24, 26, 30 April 2007, 1-4, 8-11, 14-18, 21-24, 28-31 May 2007, 1, 4-7, 12-14, 20 June 2007, 16-20, 23-27, 30-31 July 2007, 1-3, 6-10, 16-17, 21-24, 27-31 August 2007, 4-6, 10-12, 17 September 2007, 1, 3-5, 8 October 2007, 29-31 January 2008, 1, 4-8 February 2008, 4-5 March 2008

JUDGE:

McMurdo J

ORDER:

1.   Judgment for the first plaintiff against the first defendant in the amount of $22,932,881.

2.   Judgment for the second plaintiff against the first defendant in the amount of $8,311,497.

3.   Judgment for the third plaintiff against the first defendant in the amount of $401,392.

4.   Judgment for the fifth plaintiff against the first defendant in the amount of $6,422,276.

5.   Judgment for the sixth plaintiff against the first defendant in the amount of $8,445,293.

6.   Judgment for the seventh plaintiff against the first defendant in the amount of $2,456,520.

7.   Judgment for the plaintiffs, save for the fourth plaintiff, against the second defendant in the amount of $53,288,976.

8.   Judgment for the first plaintiff against the third defendant in the amount of $22,834,326.

9.   Judgment for the second plaintiff against the third defendant in the amount of $8,275,777.

10.  Judgment for the third plaintiff against the third defendant in the amount of $399,667.

11.  Judgment for the fifth plaintiff against the third defendant in the amount of $6,394,676.

12.  Judgment for the sixth plaintiff against the third defendant in the amount of $8,409,000.

13.  Judgment for the seventh plaintiff against the third defendant in the amount of $2,445,964.

14.  The fourth plaintiff’s claim against each defendant is dismissed.

CATCHWORDS:

TORT – ESSENTIALS OF ACTION FOR NEGLIGENCE – DAMAGE – Causation – Whether the collapse of the Bucketwheel Excavator was caused by modification of original design – Whether the collapse of the Bucketwheel Excavator was caused by use outside the operating parameters for which it was designed – Whether the collapse of the Bucketwheel Excavator was caused by the failure of the inspector to examine the entire machine

TORT – ESSENTIALS OF ACTION FOR NEGLIGENCE – DUTY OF CARE –Whether engineer breached duty of care when designing stiffeners to reinforce the machine – Whether engineer should have had regard to the fact that the engineering standard was current but subject to academic and professional review when designing stiffeners

TORT – ESSENTIALS OF ACTION FOR NEGLIGENCE – DUTY OF CARE – SPECIAL RELATIONSHIPS AND DUTIES – Professional persons – Engineer – Duty of skill and care implied into professional services contract – Separate duty of care in tort – Whether these duties are coextensive – Whether engineer was in breach of duty of care in failing to inspect the entirety of the machine

TORT – CONTRIBUTORY NEGLIGENCE – Whether the use of the machine outside the operating parameters for which it was designed contributed to collapse of the machine – Whether the failure to inspect more often contributed to the collapse of the machine – Whether the failure to act immediately prior to collapse contributed to the collapse of the machine

CONTRACT – BUILDING, ENGINEERING AND RELATED CONTRACTS – Contract for the inspection of a Bucketwheel Excavator – Interpretation

CONTRACT – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – IMPLIED TERMS – In the context of a contract to inspect machinery – Whether it is an implied term that such inspection is limited to that which can be safely seen from walkways

CONTRACT – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – CUSTOM AND USAGE – Incorporation into contract – Whether an instruction verbally given amounts to variation of contract – Whether previous inspections vary the terms of the contract

CONTRACT – CONTRACT IMPLIED FROM CONDUCT OF PARTIES – Whether an instruction verbally given can amount to a variation of contract

CONTRACT – ACCEPTANCE ADDING TO OR VARYING TERMS OF OFFER – Where both parties sought contract on their standard terms

CONTRACT – BUILDING, ENGINEERING AND RELATED CONTRACTS – Implied duty to exercise skill and care in contract for the provision of professional engineer services

DAMAGES – GENERAL PRINCIPLES – MITIGATION OF DAMAGES – PLAINTIFF’S DUTY TO MITIGATE – Where the plaintiffs purchased a shovel/sizer to replace collapsed Bucketwheel Excavator – Whether this was an appropriate effort at mitigation – Whether to purchase the shovel/sizer was reasonable when rebuilding the Bucketwheel Excavator was possible and less expensive

DAMAGES – GENERAL PRINCIPLES – GENERAL AND SPECIAL DAMAGES – Where claims for general, special and “hybrid” damages made – Where those damages are claimed for loss of use of a profit-earning chattel whose contribution to profit cannot be specifically quantified

DAMAGES – MEASURE AND REMOTENESS OF DAMAGES IN ACTIONS FOR TORT – DAMAGE TO CHATTELS – Damages for loss of use of a profit-earning chattel whose contribution to profit cannot be specifically quantified – Whether measured on the cost of repair or replacement – Whether replacement in these circumstances constitutes a betterment

ENERGY AND RESOURCES – COAL – Bucketwheel Excavator used at coal mine – Collapse – Claim in negligence and for breach of contract

TORT – ESSENTIALS OF ACTION FOR NEGLIGENCE – DAMAGE – Where damage is sustained upon joint venturers – Whether joint venturers should have separate or joint verdict

CONTRACT – JOINT AND SEVERAL CONTRACTORS – Where joint venturers contract together – Whether their interests are joint or several – Whether joint venturers should have separate or joint verdict

PROFESSIONS AND TRADES – OTHER PROFESSIONS, TRADES OR CALLINGS – ENGINEERS – Duty of skill and care implied into contracts for the provision of professional services

Schedule 3, Audit Reform and Corporate Disclosure Act 2004 (Cth)
s 1466, Corporations Act 2001 (Cth)
s 5, s 10, Law Reform Act 1995 (Qld)
s 47, Supreme Court Act 1995
s 52, s 53, s 53(aa), s 68, s 68A, s 74, s 74(1), s 74(2), s 82, s 82(1B), s 84(2), Trade Practices Act 1974 (Cth)
r 63, r 67, Uniform Civil Procedure Rules

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AHR Constructions Pty Ltd v Maloney [1994] 1 Qd R 460
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GA Thompson SC and JD McKenna SC with AW Duffy and CM Muir for the plaintiffs

P Morrison QC and DJS Jackson QC with P Roney and G Thomas for the defendants

SOLICITORS:

Mallesons Stephen Jaques for the plaintiffs

Baker & McKenzie for the defendants

TABLE OF CONTENTS

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

The case in outline

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

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

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

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

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

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

1. The cracking which led to the collapse originated at the end of one of these stiffeners.  In what the parties have called the design case, the plaintiffs allege three things against O&K, which is sued in negligence as vicariously liable for the alleged negligence of Dr Fleischhaker and Mr Tiedt.  The first and principal claim is that Dr Fleischhaker negligently designed the stiffeners, and the detail of their welding.  Secondly, it is alleged that Mr Tiedt did not properly inspect the affixation of the stiffeners and in particular the welding.  Thirdly, it is said that O&K failed to warn of the risk that a crack would develop where it did at the top of a stiffener.  The first and second of those breaches is each said to have caused the crack to

   
   

   develop with the ultimate consequence of the collapse of the machine.  The third breach is said to have caused the collapse, by the relevant area not being

   
   

   inspected often enough to detect the crack before it could grow to the point

   
   

   it reached in March 2000. They further claim that O&K breached s 52 of the Trade Practices Act 1974 (Cth), by misrepresenting that Dr Fleischhaker’s design was the result of reasonable skill and care.

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

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

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

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

The BWE

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

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

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

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

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

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

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

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

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

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

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

THE DESIGN CASE

Before 1984

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

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

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

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

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

The 1984 repair

1. In October 1984 the BWE was damaged in what has been described as a “grounding” incident.  This involved the bucket wheel boom grounding in the sense that its weight became supported by the ground rather than by the structure of the BWE itself.  The result was that the turntable, the counterweight boom, the discharge boom and frame tipped backwards and there occurred severe

   
   

   structural deformation of some of the main tower.  The deformation was on the upper left-hand mast:  on some of its web and the flange on its rear side.

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

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

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

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

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

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

Dr Fleischhaker at Goonyella

1. In response to this request for assistance, Dr Fleischhaker came to Australia within a few days.  Mr Black met him in Brisbane and they travelled together to the

   
   

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

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

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

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

Stiffeners are to be welded by fillet welds.

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

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

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

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

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

Dr Fleischhaker and welds

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

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

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

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

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

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

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

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

1. On the page of Dr Fleischhaker’s sketches on which he depicted the stiffeners and their dimensions, he showed the fillet welds and gave them a dimension.  He did not draw a weld across the top of the stiffener.  The defendants say that he nevertheless prescribed the use of an F_I detail in this way.  On the same page, and underneath where he showed the fillet welds, he wrote “see DRG No 259486 sheet 1 989657 sheet 1”.  As Mr Black said he then understood, they were existing drawings of the BWE.  In turn, those drawings showed welded details equivalent to an F_I.  When

   
   

   cross-examined Mr Black agreed that at the time, he understood that this

   
   

   cross-referencing by Dr Fleischhaker to the drawings was to import what was shown in them, including the F_I detail.  This was not the understanding of Mr Raleigh however.  Nor was it the understanding of Mr Graham Smith who worked for the contractor which did this welding.  Mr Smith has no recollection of seeing those two drawings and he said he did not have copies of them during the course of the work.  But looking at them now, he says that there is no indication to him that “end welds” were required.

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

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

   
   

   cross references to those drawings.  So whilst Mr Black reasonably understood them to incorporate F_I welds, I find that this was not what Dr Fleischhaker was intending by his reference to those drawings.

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

The stiffeners are attached 

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

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

Which company owed the duty of care?

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

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

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

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

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

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

   [1]Oceanic Crest Shipping Company v Pilbara Harbour Services Pty Ltd (1986) 160 CLR 626 at 668 per Brennan J citing Jordan CJ in McDonald v The Commonwealth (1945) 46 SR (NSW) 129 in a passage set out by Ashley J in Deutz Australia Pty Ltd v Skilled Engineering Ltd [2001] VSC 194 at [105].

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

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

Scope of the duty of care

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

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

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

[2]At paragraph 23(a)(ii).

[3]Defence of the first defendant filed 3 March 2004.

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

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

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

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

1.          Review the damage to the tower frame,

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

As to the stiffeners he then wrote:

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

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

1. The damages under the inspection case must be reduced by $160,000, which is what the cost of repair of the tower would have been had the crack been inspected.  Accordingly, the damages are $37,070,593, which with interest of $16,218,384, amounts to $53,288,976.

1. There will be judgment for the plaintiffs, save for the fourth plaintiff, against the second defendant for $53,288,976.

1. There will be several judgments against the third defendant as follows:

For the first plaintiff	$22,834,326
For the second plaintiff	8,275,777
For the third plaintiff	399,667
For the fifth plaintiff	6,394,676
For the sixth plaintiff	8,409,000
For the seventh plaintiff	2,445,964

1. The fourth plaintiff’s claim against each defendant is dismissed.

Equus Financial Services Limited v Glengallon Investments Pty Ltd [1994] QCA 157

per McPherson JA citing William Brandt’s Sons & Co. v Dunlop Rubber Company Limited [1905] AC 454 at 462 and Uniform Civil Procedure Rules r 67.