Council of the Shire of Noosa v JE Farr Pty Ltd

SUPREME COURT OF QUEENSLAND

CITATION: Council of the Shire of Noosa v Farr & Ors [2001] QSC 060

PARTIES: COUNCIL OF THE SHIRE OF NOOSA
(plaintiff)
v
J E FARR PTY LTD – (ACN 010 035 622)
(first defendant)
AND
E T EVRAT PTY LTD – (ACN 010 035 631)
(second defendant)
AND
FARR EVRAT & ASSOCIATES PTY LTD
(CAN 010 804 903)
(third defendant)
AND
JACK ERRINGTON FARR
(fourth defendant)
AND
ERNEST THOMAS EVRAT
(fifth defendant)

FILE NO: SC No 2017 of 1993

DIVISION: Trial Division

DELIVERED ON: 8 March 2001

DELIVERED AT: Brisbane

HEARING DATE: 15 January 2000 – 7 February 2000

JUDGE: Chesterman J

ORDER: That there be judgment in the action for the defendants against the plaintiff

CATCHWORDS:
TORTS – NEGLIGENCE – REASONABLE FORESEEABILITY OF DAMAGE – PARTICULAR CASES – AFFECTING PARTICULAR PROFESSIONS OR OCCUPATIONS – Where defendant engineers design a water intake system for the plaintiff – Where there is a risk siltation levels will increase in the river – Whether design of intake system was negligent

TORTS – NEGLIGENCE – WHERE ECONOMIC OR FINANCIAL LOSS - Whether imposition of duty to take care to avoid economic loss – Meaning of “vulnerability” – Whether there was an assumption of responsibility by the fourth and fifth defendants – Whether liability for economic loss would be indeterminate

TRADE AND COMMERCE – CONSUMER PROTECTION – MISLEADING AND DECEPTIVE OR UNCONSCIONABLE CONDUCT – RELIANCE – CAUSAL CONNECTION BETWEEN CONDUCT AND LOSS – Whether the statements made by the fourth defendant were either honestly and actually held or made with reasonable basis – Whether the action was brought in time

CONTRACTS – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – OTHER CASES – Where contract negotiated by laymen – Where the contract contained exclusion clauses – Whether exclusion clauses limit liability – Meaning of phrase “commence any claim”

CONTRACTS – PARTIES – RIGHTS AND LIABILITIES OF THIRD PARTIES – Whether the fourth and fifth defendants can rely on the exemption clause in a contract to which they are not a party – Rule in The Eurymedon

Fair Trading Act 1989 (Qld) s.38, s.99
Trade Practices Act 1974 (Cth) s.52, s.82

Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99, referred
Celthene Pty Ltd v WKJ Hauliers Pty Ltd [1981] 1 NSWLR 606, applied
Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500, followed
Edgeworth Construction Ltd v N D Lea & Associates Ltd 3 SCR 206 (1993), followed
Fangrove Pty Ltd v Tod Group Holdings Pty Ltd [1999] 2 Qd R 236, referred
Greaves & Co. (Contractors) Ltd v Baynham Meikle & Partners [1975] 1 WLR 1095, referred
Hawkins v Clayton (1987 – 1988) 164 CLR 539, referred
Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503, referred
JuneMill Ltd (in liq.) v FAI General Insurance Company Ltd [1999] 2 Qd R 136, referred
Life Savers (Australasia) Ltd v Fridgmobile Pty Ltd [1983] 1 NSWLR 431, referred
London Drugs Ltd v Kuehne and Neagle International Ltd 97 DLR (4th) 261 (1992), referred
Pan Foods Company Importers and Distributors Pty Ltd & Ors v Australia and New Zealand Banking Group Ltd & Ors (2000) 74 ALJR 791, followed
Perre v Apand Pty Ltd (1999) 198 CLR 180, followed
Photo Production Ltd v Securior Transport Ltd [1980] AC 827, followed
Port Jackson Stevedoring Pty Ltd v Salmond and Spraggon (Aust) Pty Ltd (1977 – 1978) 139 CLR 231, applied
Pullen v Gutteridge Haskins & Davey Pty Ltd [1993] 1 VR 27, applied
Rogers v Whitaker (1992) 175 CLR 479, followed
San Sebastian Pty Ltd v The Minister (1986) 162 CLR 340, referred
Sutherland Shire Council v Heyman (1984 – 1985) 157 CLR 424, referred
The Eurymedon [1975] AC 154, applied
The Mahkutai [1996] AC 650, referred
Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107, applied
van der Stern v Cibernetics (Holdings) Pty Ltd [1970] ALR 751, followed
Voli v Inglewood Shire Council (1962 – 1963) 110 CLR 74, referred
Wardley Australia Ltd v Western Australia (1992) 175 CLR 514, referred
Williams v Natural Life Health Foods Ltd & Mistlin [1998] 1 WLR 830, applied
Wilson v Darling Island Stevedoring and Lighterage Co Ltd (1955-1956) 95 CLR 43, distinguished

COUNSEL: Mr. S. Doyle SC with Mr. C. Francis for the plaintiff
Mr. S. Couper SC with Mr. J. Gooley for the defendants

SOLICITORS:
Wakefield Sykes for the plaintiff
Gadens Lawyers for the defendant
Summary of Judgment

The first and second defendants were negligent, and therefore in breach of contract, in their design of the water intakes.

The plaintiff did not make a claim or commence an action within the time allowed by the contract between the plaintiff and the first and second defendants.

The first and fourth defendants by representations made on 22 April 1986 contravened s 52 of the Trade Practices Act and s 38 of the Fair Trading Act.

The plaintiff suffered no loss by reasons of the contravention referred to in paragraph 3. Further, the loss which the plaintiff complains was caused by the contravention occurred more than three years before the action was commenced.

The third defendant was not negligent, nor did it contravene s 52 of the Trade Practices Act or s 38 of the Fair Trading Act.

The fourth and fifth defendants are not liable in negligence in respect of the intake design. Further, the plaintiff did not make a claim or commence an action against them within the time allowed by the contract.

The first and second defendants are not liable to repay the fees paid to them by the plaintiff pursuant to the contract.

CHESTERMAN J:

Liability I

By 1983 the plaintiff had become concerned about the provision of adequate town water for its growing population. The existing supply came from Lake MacDonald, a large, shallow lake located just east of Cooroy but demand was fast approaching the limit of the lake’s capacity. An alternative source of supply was investigated but quickly rejected because the resumptions necessary for its implementation would have been politically unpalatable. The plaintiff looked instead to take water from the upper reaches of the Mary River which lay outside its boundaries. To that end it requested the Department of Local Government (“DLG”) early in 1984 to investigate the feasibility of a scheme by which water could be drawn from the river and piped to the plaintiff’s existing water treatment plant near Lake MacDonald to augment supply taken from the lake. In January 1985 the DLG reported (“the DLG report”) that it had examined

“ . . . staged schemes to augment the existing Noosa Shire water supply headworks at Lake MacDonald with sufficient capacity to satisfy demand to the year 2005. Sufficient work has been done to enable a choice to be made of . . . the next immediate augmentation step.”

The report identified a suitable location on the right bank of the Mary River about 30 kilometres from Lake MacDonald where a pump station could be constructed to extract water and transport it through a network of pipes to the treatment plant.

By letters dated 4 October 1985 the plaintiff invited a number of consulting engineers to express interest in designing the water augmentation scheme (“the scheme”) as outlined in the DLG report. Replies were to be by way of a submission outlining the design concept. The first and second defendants were among those invited. They responded by letter dated 22 November 1985 enclosing their submission. It was innovative and overcame a particular concern the plaintiff entertained about the deleterious effect the admixture of Mary River water could have on the waters of Lake MacDonald. The defendants’ proposal, because of the design innovation, was able to achieve substantial savings (amounting to some millions of dollars) to the cost of the scheme.

The fourth and fifth defendants were the only shareholders and directors of the first and second defendants which carried on business, in partnership, as consulting engineers under the name of Farr Evrat & Associates until 15 July 1988 when the practice was sold to the third defendant. I shall refer to the first and second defendants as “FEA”. The fourth defendant prepared the submission in response to the plaintiff’s invitation. It was he who had devised the means of preserving the purity of Lake McKenzie and of achieving the savings.

The scheme was eventually built for a cost of about $10,000,000.00. It was satisfactory except for one respect which is the subject matter of the present litigation. That concerns the means by which water was to be taken from the river to the pumps for transport through the pipework. The intakes designed by FEA were never able to supply water to the pumps and thence into the pipes. Eventually another consulting engineer was commissioned to design a different intake system which, when built at a cost of about $500,000.00, has enabled the plaintiff to enjoy an augmented water supply.

The plaintiff claims substantial amounts by way of damages against all the defendants. It asserts that

(i) FEA was in breach of the contract made between them by which those defendants promised to exercise reasonable care and skill in the design of the intakes;
(ii)all defendants failed to discharge a duty imposed on them to exercise reasonable care and skill to avoid causing economic loss to the plaintiff;
(iii) FEA and the third defendant engaged in conduct that was deceptive and/or misleading in contravention of s 52 of the Trade Practices Act 1974 (“TPA”) and s 38 of the Fair Trading Act 1989 (“FTA”);
(iv) the fourth and fifth defendants were knowingly concerned in FEA’s contraventions.

Pursuant to orders made by Moynihan SJA issues of liability were tried separately and before questions of damages are to be addressed. The present trial is to determine whether any of the defendants are liable to pay damages to the plaintiff in respect of any of the pleaded causes of action.

The defendants deny that the intakes were negligently designed and, in addition, plead that the action was brought beyond the time allowed by the TPA and FTA and by specific provisions of the contract.

It is necessary to describe the system of water intake which FEA designed and which proved unsatisfactory.

It utilised two Johnson passive screens set on pipes rising vertically out of the riverbed. Each screen (manufactured by Johnson, a long established American company) consists of a metal cylinder about 4 metres long and 1.2 metres in diameter made by winding stainless steel wire onto an armature, thereby creating circumferential apertures giving a high proportion of opening to total surface area.

The wire is trapezoid in cross-section and is wound with the broad side out, so the apertures are narrowest at the outer face of the screen. As a consequence any particles in suspension which pass the outer opening will pass the full depth of the aperture and will not lodge. Conversely any particles that do not pass through the outer opening will remain largely outside the screen and can be easily dislodged. The screens are positioned longitudinally in the direction of river flow. Water flowing through the slots into the cylinder then passes into the pipe on which the cylinder is set and then into a pipe set in the riverbed which connects to the pumps located in the base of a concrete tower on the adjacent bank. The tower rests on rock below the level of the riverbed. The pumps are also at that level.

An attractive feature of the screens is that the large area of opening compared to total surface area allows water to penetrate into the cylinder easily thereby reducing the velocity of the flow. Reduced velocity means reduced suction. The benefits are that aquatic life is not drawn into the pumps and that particles too large to pass into the screen are removed by the action of the river current flowing along the screens. Hence the description, “passive”.

In order to allow a sufficient volume of water to pass into the screens to replenish that taken by the pumps the manufacturer recommended that when installed the screens be clear of all obstructions by a distance equal to their radius ie 600 millimetres. The screens thus had to be set at least 600 millimetres above the riverbed and 600 millimetres below the level of the water surface. A minimum depth of water of 2.4 metres was necessary.

FEA’s design called for two screens set parallel but separated longitudinally as well as laterally in the riverbed.

If the level of the riverbed rose after the screens were installed, sand or fine gravel might be drawn into the cylinder and thence to the pumps the moving parts of which would abrade and eventually break. If the level of sand rose so as to touch the circumference of the screens, in addition to the problem just mentioned, insufficient water would flow into the cylinders to replenish the volume extracted by the pumps.

In outline, this is what happened. After their installation sand deposits built up on the bed of the river adjacent to the screens. On occasions they were buried. Attempts were made to remove the sand by dredging but relief was always temporary: the river continued to deposit sand.

The screens were installed and the scheme commissioned late in 1988. The intake was never able to provide a sufficient flow of water for the station to run continuously for more than short periods. In 1990 their use was abandoned and an attempt was made to find an alternative system of drawing water from the river. This result was achieved late in 1992 or early in 1993 since when the supply of water to the plaintiff has continued uneventfully.

Some other features of the pumping station should be noted. The river bank on which it was located is high and steep. The pumps, as I noted, were positioned at a level below the bed of the river. They were required to pump water to the top of the bank and thence to a holding reservoir. The Mary River, as is well known, floods frequently, sometimes to a depth of 20 metres at the pump station site. It is necessary to have access to the pumps at all times. Consequently the height of the tower, about 40 metres, was such that its top was level with the highest part of the bank. In times of low river flow the tower stands on the bank but in flood the river channel widens and deepens and flows around the tower. Access to it is provided by the span of a concrete bridge between the bank and the tower.

The water intake system which was designed and built to replace the screens was what is called a “river bank intake” or an “in-bank intake”. It is a large structure built into the bank of the river. It has a concrete sill below water surface level over which water flows into a settling chamber and thence past a baffle to a second chamber where pump intakes are located. The height of the sill can be adjusted by means of stop logs which adjust to variations in water surface level and prevent silt, deposited near the intake, rising to a height where it could flow over the sill and into the pumping chamber. The stop logs are positioned on top of the sill.

Johnson screens are considerably cheaper than the cost of constructing an in-bank intake. As a means of water intake they are simple, robust and almost maintenance-free. The plaintiff’s case is that they were unsuitable for use in the Mary River at the location of the pumping station, and that FEA were negligent to have chosen them for that application. The defendants maintain that their choice was reasonable in light of all facts then known to them. This view is supported by expert evidence called on their behalf. It is agreed by those experts, and the plaintiff’s, that an engineer designing the intake for the pumping system could choose between two systems only: screens of the Johnson type or an in-bank intake. The plaintiff’s case is that only the latter was suitable.

The DLG report had suggested the use of Johnson screens located in a deep, permanent, stable waterhole adjacent to the bank at the site selected for the pumping station. Indeed it was a combination of a rock bank which could provide satisfactory foundations for the pumping station and the proximate waterhole which accounts for the choice of site. According to the report:

“5.02 . . . the choice of a pumping station site on the Mary River at an adequately sized natural waterhole may eliminate the need for construction of a weir to form a pumping pool. An investigation has been carried out for this purpose . . .

7.01 The system adopted comprises the following major elements:
(a)a pumping station on a natural waterhole in the Mary River . . .
(b)a low concrete weir on the Mary River approximately 100 metres downstream of the pumping station. Construction of the weir is not expected to be required until amounts greater than 4,000 ML/a are pumped;

(c) . . .
(d) . . .

7.03The alluvial nature of the stream and relatively unstable, highly timbered banks have been observed to produce high gravel bed loadings and large floating trees and debris during floods. This presents several problems in choosing a river intake design. . . . Pairs of Johnson . . . screens, mounted in mid water of the existing waterhole were selected as most appropriate . . .

8.02. . . One could . . . reasonably expect not to need a weir at any stage if the waterhole at the pumping station does not silt up and is adequately sized to the pump capacity.

9.01The essential criteria used in choosing the pumping station and weir sites were (ranked in order):
(a)location of a large natural (stable) waterhole in the Mary River downstream of Yabba Creek to act as a pumping pool, so that releases from Borumba Dam could be intercepted;
(b)rocky outcrops or evidence of rock at shallow depth in conjunction with (a) on the right hand side of the river for pumping station foundation;

(c)       . . .
  (d)      . . . good access during flooding . . .
  (e)       other considerations . . .

9.02. . . Only three reasonably deep, stable, natural pools were
located by sounding the . . . river.   . . . These were:
(a)       . . .
(b)       . . .
(c)       at AMTD 213km approximately
-4m average maximum x 250 metres long x 15 metres wide;
-strong rock outcrop for several hundred metres on right hand, also indicates a quite stable stream configuration;
-weir site was chosen at narrow point 100 metres downstream;
-high level access above flood level for pumping station access.

This site met all necessary criteria and was accepted.”

The reference “AMTD 213km” is to the distance downstream from the surveyed source of the Mary River. It fixes precisely the location of the chosen site. The adjective “stable” is used technically. It refers to the riverbed and indicates that the bed level will not vary over time.

As part of its investigation the DLG commissioned a geologist, Mr Denaro, to undertake a survey of the site to determine its suitability for the structures planned to form the pumping station. Part of the work done by Mr Denaro was a survey of the river banks and bed conducted in March 1984. This survey identified the waterhole and found the deepest part to be at RL 47.28. The water surface level was at RL 51.2 giving a depth of water of just over 3.9 metres. It should be noted that in low (ie non flood) flows the water surface level could be expected to remain constant at RL 51.2 because of the controlled release of water from Borumba dam noted in the DLG report.

Drawing 83203 which formed part of the DLG report was described as a preliminary design of the pumping station layout. It proposed that the intake screens should be installed with their central point at RL 49.5. The bed level at the position chosen for their location was shown on the survey to be at RL 47.8. Johnson screens centred at RL 49.5 would have .7 metres of water above their circumference and 1.1 metres below, complying with the manufacturer’s recommendations, though barely so in the one case.

On the point of present interest FEA’s submission said merely that it had

“ . . . examined the proposed pumping station layout and arrangement as shown on the DLG Drawing No. 83203 and agree generally with the proposed configuration.”

Submissions were received from nine consulting engineers. FEA was eventually chosen, largely because of the environmental safeguards and economies developed by its concept. On 14 January 1986 the plaintiff resolved to adopt FEA’s scheme and authorised its staff to negotiate with FEA “regarding fees for design and construction supervision”. On 21 February 1986 the plaintiff wrote to FEA to confirm that it had been selected as the consultant “commissioned for the design documentation and construction supervision of the (scheme)” for a lump sum fee of $700,000.00. Agreement was subject to execution by both parties of a formal contract document “detailing the scope of the works proposed and the basis of design”. In the meantime FEA was asked to prepare a pre-design report. This was done and delivered to the plaintiff on 7 April 1986. Its stated purpose was

“To furnish as much as is possible, at this time, of the design proposals for (the scheme) for consideration by (the plaintiff) and its Engineering Department. This will enable (the plaintiff) to make policy decisions where . . . called for . . . and also to allow consideration by (the plaintiff’s) Engineering Department of the various technical proposals all with the object of allowing the scheme detail design to proceed . . . after approval of the Pre-Design Report . . .”

With respect to the pump station the report said

“The DLG-proposed location for the pumping station is on a natural waterhole in the Mary River at approximately AMTD 213 kilometres this being approximately 15 kilometres from the junction with Yabba Creek (on which Borumba Dam is constructed) and 800 metres down stream of the Skyring Creek junction.
The investigation carried out as part of this Pre-Design Report has confirmed that as being the best location. This site is on the outside, and in approximately the middle, of a long curved reach of the Mary, a situation which would naturally tend to minimise the possibility of subsequent siltation at the site. This topographically suitable situation has been undoubtedly responsible for the existence of the deepest section of the waterhole along this particular reach.”

Between 31 January 1986 and 29 April 1986 the plaintiff and FEA negotiated the terms of the agreement. As noted, FEA prepared the pre-design report, which was included in the services contracted for, prior to the making and execution of the agreement.

It is necessary to leave the narrative to explain a feature of the proposals to augment the plaintiff’s water supply. It may be recalled that the DLG report, part of which was quoted earlier, referred to the construction of a weir which was “not expected to be required until amounts greater than 4,000 ml/a (were) pumped”. The augmentation scheme was planned to occur in stages as demand increased over many years. The infrastructure was to be designed to have an ultimate capacity that would enable 10,000 ml/a to be taken from the river and supplied to the plaintiff but, initially, a lesser annual quantity was to be taken. The agreement between FEA and the plaintiff was for the provision of professional services in connection with stage one of the scheme. The pre-design report reflects the implementation of the scheme in stages. It said:

“8.1 Construction Stages.
8.1.1Provision has been made for the recommended Scheme 1 to be implemented in three separate construction stages, as follows:-

Stage One:
-This is to be implemented by 1988, . . . to provide a … capacity of 335 litres per second … until the year 2000.

Stage Two:
-This comprises the construction of the pondage weir on the Mary River. The time scheduling of this stage is somewhat indefinite, . . . a weir will be required when water allocations … exceed 4,000 4000 ML/a.
-This is expected to occur in the year 1993.

Stage Three:
…”

The purpose of the weir was to raise the water level in the reach on which the pump station was to be constructed so as to increase the volume of water available for pumping.

On 22 April the fourth defendant spoke to the pre-design report at a general meeting of the plaintiff. What he said assumes importance in the plaintiff’s case for damages for contravention of the TPA and FTA and it is necessary to discuss the meeting in some detail.

At the time the Mayor was Councillor Wansley. He recalls the purpose of the meeting was to discuss the general concept of FEA’s design and to finalise terms of the contract to be made with FEA. The council of the plaintiff resolved to go into committee in order to allow informal discussion and questioning of Mr Farr. Mr Wansley recalls the meeting was a lengthy one “as all councillors were interested and concerned in a variety of matters which included the effect of the pipeline on land owners (depending upon which particular route was taken), access to the site, the use and acquisition of private land at the site, the suitability of the site for pumping and the effect of river flooding on the intake.” Mr Wansley’s recollection is that the councillors discussed with Mr Farr the suitability of the location selected by the DLG. Mr Farr expressed his concurrence with the choice of site. In that context there was discussion about the possibility that the waterhole might fill with silt, but Mr Farr said he thought that eventuality was very unlikely and he explained why. That view had also appeared in the DLG report and councillors and Mr Farr “agreed . . . that it was certainly most unlikely . . . the configuration of the river and the water flow was unlikely to cause siltation at that point.”

Another Councillor, Mr Piggott, appeared to have a particular interest in the topic. He had had experience 30 years earlier with the problem of trying to extract water from a shallow alluvial river for the operation of water supply and sewerage schemes. He had become “familiar with the problem of sand and gravel washed down in the pipes from alluvial streams”. He remembers the meeting of 22 April during which many aspects of FEA’s design were discussed. His recollection is that Mr Farr was asked specifically whether there would be any problems with gravel or silt in the river to which a firm negative answer was given. The present mayor of the plaintiff, Mr Abbott, was then a councillor. He believes that when he attended the meeting he entertained some doubts that the proposed intake system because of concerns which Mr Piggott had expressed. He recalls Mr Piggott raising his concern with Mr Farr and being told, in effect, “that the scheme would definitely work, that the waterhole was the best suitable location and that it was self scouring because of the bend and the current of the river.”

A fourth councillor, Mr Bettens, has an imprecise recollection of Mr Piggott asking “a number of questions . . . about the suitability of the waterhole” and being told “that the hole was the best location for the inlet (because it) was self cleaning and would remain nice and deep . . .”.

Mr Farr’s recollection of what he said is a little different. He agrees that he was asked (he thinks by Mr Abbott) about the possibility of change in the stream bed. His answer was

“ . . . the possibility existed that siltation of the bed could occur, and that this was a very indeterminate matter on which no firm conclusion could be reached . . . (FEA) had examined the aerial photographs of the reach on which the pump station was located. (It) . . . was . . . on the inside of a long bend forming the waterhole from which water was to be pumped and that this indicated the probability of a self-scouring action that would keep the waterhole reasonably free of silt. . . . no guarantee could be given that the waterhole would not silt up. . . . in engineering there were times when a definite solution could not be achieved and in some cases it was necessary to “suck it and see”. ”

This version differs from that to which Mr Farr had committed himself in his defence and answers to interrogatories. Those accounts did not include his statement that no guarantee could be given that the waterhole would not silt up.

There can be no doubt that the possibility of siltation affecting the intakes was discussed. I am satisfied that the fourth defendant said that, in effect, it was very unlikely that the water hole would fill with silt because of the topographical features which he identified. In its context this was a representation that the intakes “would work”. I think Mr Wansley’s account is the most balanced. I do not think that the discussion occupied much time or assumed any great importance. It was one item among many to be talked about. I do not accept Mr Farr’s account of the conversation. In particular I reject his statement that he explained that definite solutions may not be achievable, and it might be necessary to proceed by “trial and error”. The four councillors deny any such statement was made and claim that, had it been, they would have been alarmed. I accept their denials. As well as the late addition to Mr Farr’s statement his account of the meeting in cross-examination was most implausible. He remembered that his last comment prompted “a muted laugh” from the councillors though such an occurrence had not been put to any of them in cross-examination. His explanation of what aerial photographs he had examined to conclude that the waterhole was permanent was evasive.

Following the meeting the plaintiff resolved

“ . . . subject to there being no proven design error advised by the DLG . . . Council adopt the Pre-Design Report for the . . . Scheme as prepared by FEA dated April 1986 . . . Further, FEA be authorised to proceed forthwith with detailed survey and design.”

The DLG detected no design error. The contract between FEA and the plaintiff was signed in June. In December 1986 FEA delivered its design report. Section 7.10.6 advised that
“The intake screens have been set at a level of RL 49 which provides the 600 mm clearance to the riverbed recommended by the manufacturer. Based again on the suppliers’ advice in regard to minimum depths of submergency the screens should allow pumping down to a water level of RL 50.2.”

This level is half-a-metre lower than that suggested in the DLG report. According to Mr Farr the lower setting level was adopted for two reasons:
“(a)to increase the volume of water which could be pumped from the waterhole whilst maintaining the same surcharge over the top of the screens; and
(b)on the recommendation of . . . Johnson Screens in an attempt to prevent the formation of vortices.”

The first point needs no elucidation. The second point is that if the upper circumference of the screens should approach too close to the water surface level air as well as water might be sucked into the screens. This could lead to cavitation, the formation of water vapour droplets, which can cause severe damage to pumps.

A contract for the construction of the pump station, including the intakes, was made between the plaintiff and J B Davies Enterprises Pty Ltd (“JBD”) on 8 April 1987. Part of the work involved excavating through the sand and gravel lying over the bed rock beneath the riverbed to make a trench into which the pipes connecting the pumps to the screens would be laid. To allow it to plan and lay out its works, as well as to permit calculation of quantities of material to be removed (and charged for), JBD commissioned Mr Liddle to survey the levels of the riverbed and bank at the site of the pump station and intakes. The work was done in May 1987 and showed that the riverbed level had risen by about half-a-metre, on average, throughout the waterhole. The level where the screens were to be sited was now RL 48.3. The depth was still adequate to allow the screens to function in accordance with the manufacturer’s recommended clearances as long as they were centred at RL 49.5. At the lower level required by FEA’s design there would have been only 100 mm clearance between the bottom circumference of the screen and the riverbed. FEA did not commission a survey of the waterhole or adjacent riverbed as part of its design or prior to the commencement of construction. It was not aware of the change in bed level until receipt of the information contained in the Liddle survey. At no time did FEA change the design level of the screen intakes, RL 49.

JBD proposed to lay the pipes and install the screens by building a substantial earth bund wall from the riverbank into midstream. At its extremity the bund would increase in length and breadth. The plan was to excavate through the earth along the length of the bund into the riverbed and underlying rock, the earth preventing the ingress of water into the excavation. At the end a larger excavation would be made through the enlarged bund which would therefore form a cofferdam, the walls of which would be earth. The screens would be installed in the cofferdam.

The proposal was unsuccessful. In fact JBD turned out to be an inefficient and dilatory contractor. Delays were occasioned as well by floods which more than once washed away the bund wall. In the end the trench and cofferdam had to be protected by steel piling driven into bedrock. In all likelihood the earth removed from the bund by the floods was deposited along the riverbed, including the waterhole.

In June 1988 when the contractor was belatedly moving to install the screens it was observed that the sand in the riverbed had risen to RL 50. If the screens had been installed at the designed level and the cofferdam removed the sand would have entirely covered them. Nevertheless the contractor was directed to install the screens and complete its contract. No criticism is made of this decision. It is accepted that prudent contract administration required that an unsatisfactory contractor be encouraged to finish and quit the site as soon as possible. The problem of siltation was reasonably believed to have been caused, wholly or in part, by the contractor’s inept building of the earth bund which repeatedly washed away. It was thought that if the silt were removed by dredging the riverbed would return to its former levels.

The screens were installed late in September 1988. JBD handed over the pump station work to the plaintiff on 19 October 1988. The mechanical and electrical equipment for the pump station (including the pumps) were handed over on 1 December 1988. There had been an earlier commissioning of the station and its equipment on 24 November 1988.

The river had been dredged in October. A survey conducted at the conclusion of the dredging indicated that the bed level at the vicinity of the screens was RL 48.5. There was a substantial flood in the river late in December 1988 and an even bigger flood in April 1989. When it receded sand was observed to cover the top of the screens to a depth of 150 mm.. This was thought to be a consequence of the first flood. A more extensive dredging of the river occurred in November 1989. There was a subsequent, small, flood in March 1990. Two months later the screens were again covered in sand and were inoperable. In December 1990 the plaintiff sought advice from three consulting engineers (other than FEA) about alternative systems of water intake. In May 1991 it commissioned Gutteridge Haskins and Davey Pty Ltd (“GHD”) to design an in-bank intake which commenced to operate on 13 April 1993 (or September 1992. The evidence refers to both dates). It has worked satisfactorily ever since.

The plaintiff’s contention that the Johnson screens should never have been regarded as an appropriate form of intake was most articulately advanced by Mr Lawler, an engineer retained by the plaintiff as an expert for the purposes of the litigation.

He pointed out that a permanent waterhole with a stable bed level at the particular location chosen for the Johnson screens was vital to the FEA design. A rise in the bed level above RL 48.3 (if the screens were centred at RL 49.5) or above RL 47.8 (if the screens were centred at RL 49) would have compromised their function. The results of the survey conducted by Mr Liddell compared to bed contours revealed in the earlier DLG report showed that the bed was not stable: in just over three years it had risen by about half a metre. The basic assumption underlying the design choice of the screens was therefore invalid. A change in bed level of lesser dimensions, perhaps to the order of 200 mm, would have been a sufficient concern to cast doubt on the efficacy of the screen intake. Such a change would have shown that the bed of the river was mobile and thus prone to fluctuations in level. Indeed such mobility was to be expected in an alluvial river. The waterhole itself could move 30 or 40 metres along the river after floods. The stream was “unpredictable”.

Mr Lawler is critical of FEA because it did not undertake any surveys of the river bed. In his opinion surveys should have been conducted when detailed design work commenced in April 1986 and again immediately prior to calling tenders for construction in January 1987. It is likely, though not certain, that surveys taken at these times would have revealed rises in bed level above those shown in the DLG survey. Certainly the second survey would be likely to have shown levels approaching those found by Mr Liddle. I base this finding on two considerations. The first is that the engineers’ report commissioned by the defendants for the litigation states (exhibit 1 v12 p 1996)

“It is probable (but by no means certain) that a new survey would have revealed that the riverbed level had changed significantly . . .”

The second is Dr Connor’s description (mentioned later) of the river hydraulics at work prior to the May 1987 survey. The Mary River was subjected to a very substantial flood in June 1983, the effect of which would have been to scour out the waterhole, thereby increasing its depth. In the ensuing periods of low flows silt would gradually have washed into the waterhole decreasing its depth. This process would be reversed by the next flood. There were no floods between June 1983 and December 1987.

Mr Lawler thought that a designer could not be confident that future rises in bed level would not exceed the half metre that in fact occurred between the surveys of March 1984 and May 1987. Accordingly the assumption on which the selection of screens was based could not be justified. The demonstrated mobility of the bed should have indicated that the screens were unsuitable.

The point is too obvious to require emphasis but it must be noted that an operable intake system was essential to the efficacy of the entire scheme for the augmentation of the plaintiff’s water supply. Unless water could reliably be supplied to the pumps the whole infrastructure was useless and the plaintiff would have insufficient water to supply the reasonable requirements of its area’s inhabitants. Mr Lawler’s opinion, as I understand it, was that FEA should not have chosen an intake system with respect to which there was a risk of siltation rendering it inoperable when there were no means of ascertaining the magnitude of the risk. The design of an alternative, riverbank, intake would have removed that risk. In the circumstances that was the proper choice. Without reliable evidence that the bed level was stable the screens could not be regarded as appropriate. There was no such evidence. It was known that the bed moved, but the upper and lower limits of movement were not known.

Mr Lawler discounted the indications on which Mr Farr relied to be confident that the waterhole at the screen location was deep, permanent and stable. The aerial photographs reviewed by Mr Farr showed that there was always a pool of water in the relevant reach. It was formed by a stone bar about 100 metres downstream of the pump site and was between 40 and 50 metres wide and about 2 kilometres long. The bar acted as a natural dam causing the water to bank up behind it. Mr Lawler’s criticism was that although, as the photographs revealed, there was always water in the vicinity of the pump station, the photographs did not show its depth or where the deepest part lay. The particular waterhole where the depth was sufficient for the operation of the screens was only about 250 metres long x 20 or 30 wide. This was not shown in the photographs. Nor was there any guarantee that it would always be in the one place, ie exactly where the screens were located.

The second feature relied on by Mr Farr was that the deep waterhole was located on the outside of a bend in the river and the outside (or right hand) bank was rock, resistant to erosion. The point of these features is that the river when in flood would naturally tend to scour at the outside of the bend which is fixed by the rocky bank. The bend was, however, a wide gentle one (the technical description was “large radius bend”) so that the differential velocities of water flow during floods would not be great. Differential velocities are more pronounced on tight bends. Thus the scouring effect would be reduced. This coupled with the alluvial (mobile) quality of the riverbed indicated to Mr Lawler that the scouring action could not be relied upon because of mobility of the bed material. It was not safe, Mr Lawler thought, for a designer to rely upon the river bend to provide a permanent stable waterhole at a precise location.

Substantially similar opinions were expressed by Mr Manning, a consulting engineer in the same company which employed Mr Lawler, until his retirement in July 2000. He has had 30 years experience in designing and supervising the construction of water supply schemes. He was the co-author with Mr Lawler of a report commissioned by the plaintiff and put into evidence in support of the plaintiff’s case. Mr Manning pointed out that the Mary River varies in the volume and velocity of its flows which run over silt beds and sand banks. This phenomenon, he thought, would cause the profile of the riverbed to change over time. He agreed that because the bend on which the pump site was located was large in radius the scouring effect of flood waters would be gentle. He pointed out that the depth of water was critical to the operation of the screen intake but that no soundings of the waterhole were undertaken by FEA which, therefore, made no investigation of the suitability of the waterhole as a permanent reliable source for the scheme.

He thought it significant that the waterhole was confined by sand banks both upstream and downstream. The river had a moving bed and there was thus no basis for expecting that the waterhole, an indentation in a large expanse of sand, would not move over time.

The designer was, in his view, confronted by the need to take water from a river with a mobile bed and a likelihood that sand would move in the vicinity of where the screens had to be placed. There was insufficient information to conclude that water depth and bed level would remain constant at that particular location so that there was no justification for thinking the Johnson screens would operate reliably over the life of the scheme. An alternative design was obvious: a river bank intake.

Mr Manning was particularly critical of FEA for designing the screen position to be centred at RL 49 when it did not know, at the time of design, what the bed level was. In his opinion unless the designer had compelling evidence that the bed of the waterhole would remain at a particular level the designed intake had to be able to accommodate fluctuations. The screens could not.

Mr Manning emphasised the point that the screens were sensitive to the proximity of the riverbed. The exact position of the screens had to be fixed before their installation. Once construction was complete and the cofferdam removed a major effort would be required to alter their height. The position required at least 600 millilitres between the bottom of the screen circumference and the bed. A position could not be fixed if the bed fluctuated in height by half a metre or more. This consideration, in Mr Manning’s opinion, made the screens inappropriate.

Both Mr Lawler and Mr Manning were subjected to a rigorous cross-examination but I accept the basic thrust of their evidence: that FEA’s task was to design an intake system that would reliably deliver the necessary volume of water to the pumps year after year. Although cost was relevant, the dominant consideration was to produce an intake that would not fail. The screens should not have been chosen because there was a recognisable (and recognised) risk that siltation in the riverbed adjacent to the screens would prevent their performance and the magnitude of that risk could not be gauged. The work necessary to overcome the risk of siltation, should it eventuate, was unacceptably large. It would entail shutting down the augmentation plant, perhaps imposing water restrictions on the shire. A weir would have to be built to raise the water level in the pond. The screens would have to be removed and additional length of pipe inserted and the screens replaced. For that to happen a cofferdam would have to be erected around the screens in the riverbed. The work could not be done realistically in less than six months and might take as much as a year. The cost would be in excess of $1,000,000.00.

I would, in particular, accept the opinions of Mr Manning and Mr Lawler that unless there was a negligible risk (and the risk was known to be such) that siltation would prevent the screens performing, they should not have been selected as the method of intake. They need to ensure that water was available to the pumps at all times the scheme might have to operate was the overriding consideration. A design that put that requirement at risk was obviously unsuitable. If the risk of siltation could not be confidently assessed to be negligible it should have been avoided.

The expert witness with particular experience in designing water supply schemes called by the defendants, did not, in the end, disagree markedly with the opinions of Messrs Manning and Lawler. Mr Lavery is the manager of the Water and Waste Water Division of Brown and Root Services Asia Pacific Pty Ltd in Western Australia. His qualifications and early experience were both gained in Queensland. His expertise is in the area of planning, designing, constructing and operating water supply, sewerage and drainage works.

He agreed with the description of the Mary River as one in which the riverbed would rise and fall from time to time during floods and between floods. As well the bed would rise and fall differently in differing places. He believed that there were some parts of the river that were “more permanent” than others but even there variations in riverbed level would occur from time to time. The waterhole at the pump station he placed in the category of a “more permanent” feature.

Mr Lavery had expressed the opinion in the report which he wrote jointly with Dr Connor that

“The selection by FEA of a submerged intake screen . . . was a reasonable choice provided that the expectation that the waterhole was both stable and permanent was also reasonable.”

By stability he meant “no change in the riverbed which would significantly impact upon the operation of the screens.” He accepted that it was impossible to quantify the extent to which the bed level in the waterhole would change from time to time. Aerial photographs were obviously inadequate for that task. The configuration of the river at the site, ie on a bend, was likely to produce a waterhole from scouring during flood events but one could not with complete confidence predict the location or bed level of the deep part of the waterhole after floods or between floods. He accepted the fundamental point that the design choice of the screen depended upon an assessment of the stability of the riverbed at the particular place where the screens were to be located. He accepted that none of the information available to FEA when designing the intake indicated to what extent the deep part of the waterhole would vary in depth or position, either laterally or longitudinally in the riverbed, over time. Mr Lavery would have expected such variations despite there always being a waterhole at the bend. Significantly Mr Lavery agreed that there was no way of knowing whether the surveys found in the DLG survey indicated the highest or lowest level the bed might attain.

Importantly also, Mr Lavery agreed that there was no reasonable body of evidence to suggest that the waterhole was stable. He thought there was no evidence either way. There was, in other words, no basis for assuming that the level of the bed in the waterhole was stable or unstable.

It was Mr Lavery’s opinion that the change to bed levels revealed by the Liddle survey should have prompted a reassessment of the intake design. The reassessment required a determination whether or not those changes were due, wholly or in part, to construction work. On the assumption that the changes were due to natural events in the river the retention of screens as the designed intake method would depend upon an assessment of how often the riverbed might rise to the May 1987 levels, or higher. This assessment was one that could not be made. Mr Lavery accepted that a prudent response would have been to change the intake method but would not go so far as to say that it was the only prudent course. He thought that if the designer thought that the rise in bed level was “only temporary” it would be appropriate to continue with screens. The answer begs the question whether the designer had any basis for believing that the phenomenon was temporary, and would not recur.

Mr Lavery pointed out that the choice of an intake in an alluvial river is difficult. Problems may beset whatever form of intake is thought best. He considered, however, that an in-bank intake would have been suitable though he identified some potential problems. All but one of the problems are well known and means are readily available to overcome them. The exception is the possibility that siltation could occur in front of the in-bank intake thereby diminishing or blocking the flow of water to it. No other expert witness suggested that this problem could not be overcome by the provision of stop logs which, as I have described, allow for the intake level to move to accommodation siltation. Mr Lavery was aware of only one in-bank installation in the whole of the country which failed because of siltation. That was on the Burdekin which, as Dr Connor described, is very different in its behaviour to the Mary because of its size.

Mr Farr who was responsible for FEA’s design of the pump station and intakes explained the steps he took to confirm the DLG’s choice of the waterhole and suitability of the Johnson screens. He said (exhibit 26) that he examined the site and confirmed that it had the advantages set out in para 9.02 of the DLG report. He obtained aerial photographs of the reach of the Mary River on which the site was located and

“ . . . observed that the site was located on the outside, and in approximately the middle of a long curved reach of the river, a situation which would naturally tend to minimise the possibility of subsequent siltation at the site. (He) considered that this topographically suitable situation had been undoubtedly responsible for the existence of the deepest section of the waterhole along that particular reach.”

When contemplating the design of an intake Mr Farr thought there were difficulties because the river was relatively shallow even in the deepest part during low flow conditions but that during floods the river would reach a depth of 20 metres or more and flow at high speeds. As well the stream carried high levels of sediment particularly during floods which also carried large amounts of debris downstream. The intakes were required to provide a high rate of extraction: up to 520 litres per second. Mr Farr was familiar with the Johnson screens recommended in the DLG report. He had designed other water supply schemes which had utilised such screens. He discussed their suitability for the plaintiff’s scheme with the manufacturer and obtained details of the environment the screens would need to function satisfactorily. He was aware of the considerable cost advantage the screens afforded over any alternative.

In his statement Mr Farr explained the reasoning which led to the choice of screens. The site made the choice of a suitable intake difficult. In particular those conditions ruled out any intake other than screens or one built in-bank. The advantages of the screens was their considerably lower cost, their self cleaning characteristic which made maintenance unnecessary, and the “relatively easy adjustability of screen level”. Mr Farr explained that “the level of the screens could, in the event of a rise in the bed level . . . be raised by the provision of flange and flange riser pipes . . .”. As well the screens would present a minimal obstruction to the flow of the stream. He identified the major disadvantage of the screen as its sensitivity to rises in the bed level due to sedimentation and the reduction in the recommended 600 mm clearance. However he thought that “an immediate solution” to such a rise was afforded by the construction of the weir “which was in any case programmed for construction in the next augmentation stage”.

The advantages of the riverbank intake were seen to be its tolerance to rises in riverbed level. Its disadvantages were the substantial extra cost, the requirement for regular cleaning due to debris floating into the intake and the problem of the settling chamber filling with sand and gravel during floods.

The screen intake was chosen because

“On . . . balance . . . (it was) considered that the potential maintenance problems associated with a river intake were less tolerable than the situation which would occur as a result of excessive siltation of the riverbed with a screen intake. Allied with the extra cost of the riverbank intake, and the fact that a downstream weir was programmed for the next scheme augmentation, (it was) decided to adopt the Johnson screens intake as proposed in the DLG report.”

Mr Farr’s opinion and his approach to the choice of intake is supported by Dr Connor, the Deputy State General Manager of Brown and Root Services Asia Pacific Pty Ltd, formerly Kinhill. He has degrees in engineering (as do Mr Manning and Mr Lawler) and a doctorate in philosophy. He was made an Officer of the Order of Australia in 1999 for services to engineering and, in particular, for water management and the development of flood mitigation techniques. His expertise has particular relevance to the question in issue. Since about 1983 he has been involved in developing new technology to predict and understand the behaviour of rivers in flood and the transportation of flood sediments. He has helped to develop computer modelling techniques to simulate river flows.

Dr Connor’s evidence differs from the other experts’ which was that of engineers principally concerned with design. Dr Connor’s focus was on the hydraulic flows in the river and their consequence for its bathymetrey. There were two critical aspects of his evidence. The first was that there was sufficient evidence available to FEA to conclude that the waterhole was stable. The second was that the siltation problem that rendered the screen inoperable was an unforeseeable consequence of the construction of the pump station itself. It has altered the river hydraulics and caused substantial sedimentation to occur at the screens. This would not have occurred in the absence of the tower. The significance of this testimony is that it is Dr Connor’s opinion that the screens would have worked but for siltation which FEA could not have foreseen.

The basis for Dr Connor’s opinion as to the stability of the waterhole is found in his description of the river:

“At the pump station site, the Mary River course has been stabilised by the concave alignment and low erodibility of the right bank. In flood events the flow is held against this bank . . . (which) is erosion resistant (so) it produces broadly similar flow patterns from flood to flood leading to the persistence or recurrence of sandbars and waterholes at specific locations along the reach. It is likely that the original waterhole was formed as a result of the shape of the channel which produces a convergence of flow at the waterhole location. The effect of the convergence is to produce scour at high flows as the ability of the river to transport sediment with high velocities at this location then exceeds the sediment supply from upstream. At lower flows the scoured out section would tend to partially refill with finer sediments. The extent of refilling depends upon the shape of the flow hydrograph. Floods with a long recession would result in a shallower residual scour. Small floods, subsequent to scouring floods, would also tend to carry sediment into the waterhole.”

It may be noted that Messrs Manning and Lawler agreed with this description, and that the features described would be expected to produce a water hole. Although Mr Manning later tended to cavil with it his basis for doing so was shown to be untenable.

Dr Connor accepted, as did the others, that the bathymetry of an alluvial riverbed is inconstant. Where he differed was in his opinion that a designer could confidently predict the parameters of bed movement. He thought that in 1987, knowing of the substantial flood in June 1983 and of the absence of flood events in the interim, one would have expected the waterhole to have been partly filled in but would not have expected the rise to be greater than two or three hundred millimetres. The change in level of half-a-metre revealed by the Liddle survey would have been surprising but he would not have rejected the possibility that it was due to natural causes uninfluenced by the contractors’ works. He would have thought that the rise of 500 mm was the “upper end” of expected movement.

If this evidence were accepted it would follow that FEA had a rational basis for fixing the screen at RL 49.5 because the bed of the waterhole would not rise enough above RL 48.3 to compromise the intakes. The reservation I have about the evidence is that it is intuitive: accepting Dr Connor’s undoubted knowledge and experience of alluvial river flows his assessment is a “best guess” as to the limit of the outcome wrought by the forces of nature. I am sure it is an educated guess, but it is just that. My reservation is increased by the fact that the river bed did not behave as Dr Connor would have predicted.

Utilising a computer program that was not available at times relevant to the design of the scheme Dr Connor simulated mathematically “a two dimensional vertically averaged hydrodynamic model . . . to examine the pattern of flow which would have existed in a major flood prior to construction of the pump station and to estimate changes to the flow pattern which would have eventuated due to . . . permanent works associated with the pump station”. He found “the effect of the permanent works as predicted by the model is to reduce velocities on the right hand side of the channel and to increase velocities on the left. This suggests a tendency for sediment to accumulate adjacent to the pump station and for scouring to occur on the left bank. In addition, displacement and curvature of the thalweg (the centre line of flow of a river) has occurred due to the obstruction to the flow caused by the permanent works. . . . these conditions induce a helicoidal flow pattern which tends to sweep sediment towards the inside of the bend. This causes further accumulation of sand and reinforces the deflection of the main flow current as floods recede”. Dr Connor concluded that “the flood pattern so created was conducive to the formation and growth of a sandbar against the bank, extending out into the channel and for a short distance upstream and downstream of the pump station”.

He explained

“Computer modelling . . . is attempting to be a representation of what’s happening in reality . . . it can’t be perfect (its use) . . . was to try to understand why there had been an accretion at the site . . . by using a thorough survey of the reach. . . . we were able to model differences in flow across the channel during flood and along the channel during flood . . . as it accelerates and or decelerates. . . . it assumes an average velocity of flow . . . and we recognise that that’s not representing a reality because on these bends you do get a spiral effect on the outside . . . tending to scour and deposit material on the inside . . . it showed . . . a decrease in velocity at the pump station and surrounding the pump station . . . it showed . . . an increase in velocity (and) a shift in the centre line of the flow away from the pump station . . . the increase in velocity is not totally consistent with what’s happened, in that there has also been accretion across the full width of the channel . . . our belief is that what has happened . . . is that the bend in the river . . . is normally self scouring . . . imposed on here is the man-made tower and riverbank changes have triggered a change that is the equivalent of what’s called an alternate bar mechanism. Because you’re getting a slowing and an accretion occurring at one point the river pattern in that whole bend has been changed and you’re getting a bar formation which is causing an accretion across the whole of the area.”

Mr Lawler who responded to this aspect of Dr Connor’s evidence for the plaintiff disagreed with the outcome of the modelling. He performed calculations which indicated that the river velocities generated in the flood event modelled by Dr Connor were such as to pick up rather than deposit the alluvium in the river so that the changes in velocity depicted by the model would not account for the observed siltation. Dr Connor described this as a false premise because any flow in excess of half-a-metre a second (which is very slow and occurs in non-flood conditions) will move alluvium. What happens, though, is that at any velocity sand will be deposited and picked up. An equilibrium between scour and deposit occurs during every flow. The model detects a change to the equilibrium imposed by the tower. The slight variations in velocity detected can account for the observed accretion. The lower flow is still sufficient to move sand but insufficient to move it at the same rate as the higher velocities upstream so there is a net deposit.

Counsel for the plaintiff has subjected Dr Connor’s modelling to a rigorous criticism. Not all the points made are valid. Some overlook Dr Connor’s interpretation of the model results. Others do have substance. It is pointed out that the model was predicated upon the 1984 river contours whereas in fact the contours have been altered by the construction work done in 1987 and 1988 and by the subsequent construction of the bank intake. Furthermore the model results would tend to indicate increased scouring at the screen location because of the increased velocities, rather than net siltation. Dr Connor supposes that the siltation adjacent to the pump station has caused secondary helicoidal flows (swirling cross currents) to develop, thus generating decreased longitudinal flows and hence siltation. The existence of such cross currents could have been investigated by a three dimensional model but was not.

Despite the criticisms I accept the thrust of Dr Connor’s evidence that the construction of the pump station has affected the pattern of river flows in its vicinity and these changes are a likely explanation of the siltation that has occurred. There is evidence that the river has changed since 1988. Mr and Mrs Sutton were farmers who owned the land adjacent to the river at the pump station site. Part of their land was resumed for construction. They have lived there since 1957. There has been a waterhole on the bend until “it silted up” after the tower was built. The Suttons could not, of course, be precise about its exact position or depth. They were in the habit of fishing in the waterhole and placed their fishing spot about 50 metres downstream of the tower. Nevertheless their evidence shows a change from the general configuration of the waterhole on the completion of the tower. Despite several substantial floods and many smaller ones since 1988 the waterhole opposite the tower has never returned to the levels observed in 1984. There is a waterhole upstream and one downstream but at the screen location there is a substantial sandbar. This is on the bend where all the experts agree one would expect to find a waterhole after the scouring effect of a flood.

It follows that the intake screens did not work because of changes to the river flow caused by the pump station. The question of particular importance is, however, whether they would have worked in the absence of that phenomenon. The modelling does not answer that question. It does not show (and was not intended to) that prior to human interference with the bank there would have been a waterhole with a bed of sufficient stability to allow Johnson screens to operate without impediment. For that conclusion Dr Connor was forced to rely upon the expectation engendered from the configuration of the bend and the immovable right bank, and the fact that surveys of the river taken subsequent to the work indicate waterholes, upstream and downstream of the intake, which have remained relatively constant in location and depth. The evidence is impressionistic. It may be accepted that there may not have been a sandbar of such dimensions as existed in the waterhole after 1988 but for the construction of the pump station, and it may also be accepted that there would have been a waterhole of varying dimensions in slightly differing locations at the pump station site but for its construction. The question is whether Dr Connor’s impressions gainsay the opinions of the design engineers that there was insufficient evidence of stability in the waterhole bed level to be able to fix the height of the screens, confident that they would not be affected by siltation over the life of the augmentation scheme. It must, I think, be answered in the negative.

The reasons for this answer are, in summary, the behaviour of river flows and sediment transportation in them are unpredictable. Sedimentation can take place in low flows and in the recession of floods in unexpected ways. The variation in bed level between 1984 and 1987 exceeded Dr Connor’s expectations. A deep waterhole depended upon effective scouring floods and, in particular, upon the occurrence of floods of an intensity that occurs, on average, once every two years. The frequency with which such floods will actually occur is quite unknown. A period of prolonged drought such as happened in the decade 1990-1999, could lead to substantial siltation above that experienced between 1983 and 1987. It is important to understand that the screens did not only require a minimum depth of water to operate. They required a bed that did not rise to within 600 mm of their circumference after they had been put in place. Stability of bed level was critical.

I am not satisfied that Mr Farr actually went through the process of analysis he described and which is set out earlier (para 41-43). The account which appears in his statement differs materially from his oral testimony. There he said that, at least until 1988 when the problem was manifest, he never contemplated raising the screens to overcome siltation, nor building the weir for that purpose (T 709.10; T 711.15; T 720.25). There is in the evidence no communication from any of the defendants to the plaintiff suggesting that a weir should be built in order to provide a sufficient pool of water to allow the screens to work. More significantly when asked for advice in 1989 about the cause of the siltation problem and a solution Mr Farr did not advert to “the immediate solution” he had foreseen in 1986. Instead he cautioned against building a weir because of its cost and the prospect that it would not, in any event, be efficacious. (ex 1.15 p 3039).

Moreover the relative ease with which the screens could be raised disappeared with the removal of the cofferdam protecting the intake location during construction. Once the screens were installed and under water the effort needed to raise them would have been considerable. Another cofferdam would have to be built; the water inside pumped out; a substantial crane brought to site to raise the screens after having first removed the protective cage; and the structure dismantled and taken away. The cost would have been in excess of $100,000.00 and the work may have taken as much as three months during which the pumping station would be deprived of water.

There is in the evidence no indication that FEA ever undertook more than a cursory estimate of the cost differential between the two intake systems. Yet the greater economy of the Johnson screens was said to be a substantial factor in their favour. There is no doubt that the screens were substantially cheaper but if (as the defendants claim) what was necessary was an assessment of the lower cost against the risk of siltation and need for subsequent construction, it was never done. When finally built the riverbank intake cost about $500,000.00. Initial estimates were much higher. It is likely that had a riverbank intake been built as part of the construction of the pumping station the cost over and above that of the screens would have been between $200,000.00 and $300,000.00. The cost of building a weir would have been in excess of $1,000,000.00. I accept the evidence of Mr Manning and Mr Lawler that it would have been wholly inappropriate to design an intake on the basis that it might only work if a very substantial part of a proposed second stage of the water augmentation scheme was built prematurely. FEA’s obligation was to exercise reasonable care and skill in designing a workable stage one.

Although it is clear that the plaintiff was concerned to reduce cost wherever possible it would not have been prepared to jeopardise a $10,000,000.00 project for the sake of a few hundred thousand dollars. The plaintiff’s attitude was, I think, epitomised by Mr Piggott’s evidence that it wished to save money wherever possible “but not at the expense of having a plant that (didn’t) work”.

I am not satisfied that Mr Farr gave any proper consideration to the type of intake that should be utilised. His attention, I suspect, was directed towards other aspects of his design. I think he accepted the DLG’s description of the waterhole as deep, stable and permanent, uncritically, as well as their suggested mode of intake. The factors on which he relied were probably sufficient to conclude that there should always be a waterhole at the site, but not enough to conclude that its bed level would remain constant.

In my opinion had he been conscious, as he should have been, of the need to determine the level for the setting of the screens that gave them the best chance of avoiding the effect of siltation he would not have designed them to be centred at RL 49 without, at least, commissioning a survey of the riverbed to ascertain whether that was still appropriate. To set the screens at a level where they were almost certain to fail is cogent evidence of a lack of care in design.

It was faintly argued for the defendants that they did not have the Liddle survey and did not know that the bed level had risen. The argument does them little credit. If they did not have the Liddle survey they should have made it their business to obtain a copy. They knew of its existence. Moreover there is no doubt that Mr Reeves, FEA’s site engineer, was given copies of river cross sections, drawn by Mr Liddle from his survey, which contained the relevant information. The defence initially admitted that FEA received a copy of the Liddle survey. The pleading was amended to withdraw the admission after both Mr Farr and Mr Reeves said they could not remember receiving the survey and no copy of it could be found amongst the defendants’ papers. Mr Evrat, however, recalled seeing it in 1987 and it would be surprising if Mr Reeves, who struck me as being a conscientious and thorough man, did not insist upon receiving a copy of it. As I say it does not matter. If the defendants had the survey they ignored it. If they did not have a copy it was foolhardy to assume there had been no changes in river bed level in three years, and to proceed without reference to the later survey. Mr Farr sought to justify his failure to conduct any river survey because the “very nature” of the river made it likely “that the depth of sand … would vary both from time to time and place to place. Therefore any variations from the (Denaro survey) would not have been … meaningful”. There is some substance in this point but it makes the case against the defendants. If it was pointless to ascertain the bed level of the river at any particular time because it would change over relatively short intervals, FEA had no basis for determining the level at which the screens should be set, or for thinking that the silt would not rise to be too close to the screens, or that the 1984 survey provided any indication of where the screens could be located.

Nor does it help to say that the waterhole may have partly filled with spoil dislodged into the river during the process of excavating and creating a terrace for the tower. The survey purports to plot the riverbed and banks on 7 May 1987 unaffected by the earthworks. It is likely, as the plaintiff submits, that levels were obtained prior to the displacement of the soil into the river. Even if there be some doubt about this it was clearly unsafe for FEA to assume that the levels were affected by the earthworks. They had no basis for knowing, not having conducted their own surveys earlier.

By the contract made between the plaintiff and FEA, the plaintiff engaged

“The professional services of the Consulting Engineer to provide services as specifically described in Annexure “A” in connection with: the works involved in Stage One of the . . . (Mary River Project) . . .”

FEA promised that
“The Consulting Engineer shall exercise reasonable skill, care and diligence in the performance of the services in accordance with the ethics of the engineering profession.”

The first and second defendants were together identified as “the consulting engineer”. The services were defined in these terms:
“To carry out preliminary investigations leading to the preparation of a . . . (Pre-Design Report) to the approval of the DLG and to the (plaintiff) and to carry out the design, contract administration and detailed supervision of the initial stage of the . . . (Mary River Project) as generally outlined in the (DLG report) . . . and comprising the following scheme units:
(1)Mary River Pumping Station . . . and any ancillary works . . .”

It will be noted that FEA did not warrant the performance of the scheme. It did not promise to bring about a scheme that worked. It promised to use reasonable care and skill in designing the scheme. The duty is thus indistinguishable from that imposed by the law with respect to negligence. See Greaves & Co (Contractors ) Ltd v Baynham Meikle & Partners [1975] 1 WLR 1095 at 1100; Voli v Inglewood Shire Council (1962-1963) 110 CLR 74 at 85.

I have found that Mr Farr did not undertake the analysis which appears in exhibit 26. An engineer, engaged to perform the task of designing the pumping station and exercising the reasonable care and skill required of a professional man would have done so. Carefully performed the analysis would have revealed that (as Mr. Farr concedes) a major drawback to the Johnson screens was their inability to work if silt should rise to within 600 mm of the circumference. The analysis would also have shown that this risk could not be overcome sensibly by building a weir, nor could it easily be overcome by raising the screens. A consideration of the factors discussed earlier would have led to the conclusion that the magnitude of the risk of siltation affecting the operation of screens could not be assessed. The designer could have no basis for deciding that the risk of silt affecting the screens at their particular location was likely or unlikely. The analysis would also have shown that a mode of intake unaffected by siltation was available though at a substantially greater cost. There were no other impediments to the choice of such an intake. The identified problems cause by floating debris and the ingress of silt could be overcome by means readily achievable.

Given that an efficient intake was essential to the successful operation of the entire augmentation scheme the exercise of reasonable care would have chosen the no risk intake and rejected the unknown risk of the screens.

Though it will be guided by the evidence of acceptable professional practice, it is for the court to adjudicate upon what is the appropriate standard of care and whether it has been complied with: Rogers v Whitaker (1992) 175 CLR 479 at 487. In my opinion the first and second defendants were negligent in their choice of Johnson screens as the mode of intake.

Liability II

In addition to alleging that FEA was negligent in the design of the intake the plaintiff also alleges that

(i) FEA engaged in conduct that was misleading or deceptive
(ii)the fourth and fifth defendants were knowingly concerned in that conduct
(iii)the fourth and fifth defendants were themselves negligent in designing the intakes and are personally liable
(iv)the third defendant made misleading or deceptive statements or negligent misstatements of fact in the period subsequent to July 1988.

Misleading and Deceptive Conduct

Many instances of representations are pleaded, but only one, in my view, is in fact a representation capable of constituting misleading or deceptive conduct. It consists of the statements made by the fourth defendant at his meeting with the plaintiff’s councillors on 22 April 1986. I have already set out my findings as to what was said. The substance was that despite the alluvial nature of the Mary River bed siltation was unlikely to affect the screens which would operate satisfactorily. Necessarily the representation was as to a future occurrence or was the expression of Mr Farr’s opinion about his design. His statements were misleading only if he did not in fact hold the opinion which he expressed, or if the statement was made without reasonable basis. The fourth defendant personally cannot be liable for a contravention of the TPA or FTA unless he was knowingly involved in a contravention of it: that is he knew that the representation was untrue.

There is no doubt that the fourth defendant honestly and actually held the opinion he expressed. I am satisfied that Mr Farr did believe that the waterhole would exhibit the necessary bed stability to allow the screens to work. However the finding I have made in the earlier section of these reasons has the consequence that there was no reasonable basis for the opinion. Consequently the first and second defendants and the fourth defendant engaged in conduct that was misleading or deceptive. There is no basis for a similar finding against the fifth defendant. Nothing he did constituted the making of a representation as to the capacity of the screens.

I have discussed these causes of actions rather summarily because proceedings were commenced out of time and cannot therefore result in a judgment in favour of the plaintiff. As well the representation did not cause any loss.

Section 82(2) of the TPA and s 99(2) of the FTA each prevent recovery of damages for a contravention of ss 52 or 38 respectively unless action is commenced within 3 years of the date on which the cause of action accrued, namely the time when the plaintiff suffered damage by reason of contravening conduct.

By letter dated 14 November 1989 the plaintiff accepted an offer from Moreton Diving and Marine Contracting to remove sand and debris from the immediate vicinity of the screens to allow them to operate, and in consequence of the advice to do so contained in the defendant’s letter of 5 July 1989. The work was done and the sum of $16,800.00 was paid in or about December 1989. Another contract was let by the plaintiff to M & A Corr for the dredging of the river, upstream and downstream of the screens. The sum of $23,600.00 was paid for this work in December 1989 and January 1990. Paragraphs 49 and 68 of the Further Amended Statement of Claim seek recovery, as damages, of these amounts on the basis that the work was necessary, and had been paid for, only because of the negligent choice of intake.

On 7 December 1990 the plaintiff wrote to three consulting engineers with a request that they

“. . . present all identifiable alternative (intakes) to (the plaintiff) and make a recommendation of the preferred option. Further, (the plaintiff) would intend to commission detailed design with recommendation to proceed once a concept is adopted. A limit of $3,000.00 would apply to the commission.”

In fact the consultants required a higher fee and the plaintiff paid each of them $5,000.00. However the evidence does not establish when the first of the consultants approached accepted the offer thereby making the plaintiff liable to pay the agreed sum. It is therefore impossible to know whether that liability was incurred more than 3 years prior to the institution of the action against the first, second and third defendants on 22 December 1993, or more than 3 years before the action was commenced against the fourth and fifth defendants on 2 March 1994. The loss occasioned by paying for dredging did occur more than three years before the action commenced.

This was the first intimation that the plaintiff intended to hold any of the defendants responsible for losses it had incurred or would incur arising out of the failure of the water intakes. It issued a writ a summons against the first, second and third defendants on 22 December 1993. The action against the fourth and fifth defendants was initiated on 2 March 1994.

Because the agreement provided for the arbitration of disputes “under or arising out of the agreement” the defendants submit that “commence an action or claim” should be understood as requiring the plaintiff to institute legal or arbitral proceedings. I do not think this is right. I would regard “commence any claim” as meaning to make a claim, in the same sense that the process is understood in the analogous cases in the law of liability insurance. There a claim is “the assertion by a (third party) against (the insured) of a right for some relief because of the breach by the insured of the duty referred to in the cover”. See JuneMill Limited(in liq.) v FAI General Insurance Company Limited [1999] 2 Qd R 136 at 150.

The plaintiff submits that a claim commences when the process of ascertaining whether there is a claim first begins. It argues that the letter of 12 March 1992 “was preceded by a very long process of identification of the problem, requesting advice in relation to it, and responding to that advice”. The submission has about it an air of desperation. Making a claim is not the same as wondering whether one has a claim. A claim is the assertion of a right or a demand for recompense of some sort. It requires a communication from the claimant to the person held responsible for the loss in respect of which the claim is made. Clause 4 predicates the existence of insurance obtained by FEA for a particular duration. For the clause to have effect FEA had to know during the currency of the insurance policy, whether it might be liable to the plaintiff. That required the plaintiff to give it notice that it was being held accountable.

It follows that the plaintiff did not commence an action or a claim within 12 months of the completion of the services.

The plaintiff has further points. The first of these is that the clause applies only to liability in respect of the services promised by the contract and therefore it does not preclude an action for damages for “pre-contractual negligence”. So much may be accepted but there is no basis for finding such negligence. For a start the plaintiff’s submissions do not identify what is meant by “pre-contractual negligence”. This is a serious deficiency in a case in which the evidence occupied 14 sitting days and the documentary evidence extends to 18 lever-arch files and 41 separate exhibits. The statement of Claim is convoluted and it is not easy to discover what conduct is relied upon as falling outside the purview of clause 4.3. It seems to be (para 59 of the Further Amended Statement of Claim) the preparation of the submission and the pre-design report. The point appears to be that FEA did not conclude when compiling those documents that Johnson screens were inappropriate, and their failure to do so was negligent.

There is a short answer. The submission was a preliminary concept given to the plaintiff for it to decide what scheme should be built and which consultant engineer should be engaged for the purposes of overseeing the construction of the scheme. The pre-design report was given for the purpose set out in paragraph 17. The two documents contain an overview only. They did not constitute, and were known by the plaintiff not to constitute, a detailed design of any part of the scheme. Mr Williams, the shire engineer admitted as much. He said (T 66.50-T67.1) that until FEA was engaged by the contract to design the scheme he did not consider that it had assumed any obligation to perform detailed design work or to conduct any survey of the waterhole to determine what sort of intake should be chosen. There is no basis for finding that, prior to undertaking a contractual obligation to perform that task, that FEA or Mr Farr assumed responsibility to conduct the necessary investigations and analyses to design the intake nor did the plaintiff rely on it to do so. Hence the “cornerstone” of liability for negligent misstatement, noted by the High Court in San Sebastian Pty Ltd v The Minister (1986) 162 CLR 340 at 357 is missing.

I should note that the plaintiff does not plead that any statement made by Mr Farr at his meeting with the plaintiff on 22 April 1986 amounted to a negligent misstatement of fact. His conduct at that meeting is relied upon only as contravening the TPA and/or the FTA.

Next it is argued that clause 4.3 only applies if the services were completed by the consulting engineer “and that did not occur”. Rather, it is said, the services were completed by the third defendant who is not protected by clause 4.3. The consulting engineer was defined to mean the first and second defendants. However clause 8 of the contract provided

“8.1 Transfer and Assignment.
The Consulting Engineer and the client each binds himself and his . . . successors . . . assigns . . . to the other party to this Agreement and to the . . . successors . . . assigns . . . of the other party in respect to all covenants and obligations of this Agreement.

8.2Neither the Consulting Engineer nor the client shall assign . . any right or obligation under the Agreement without the written consent of the other party.

8.3 . . .
8.4 . . .
8.5Nothing contained in this clause shall prevent the Consulting Engineer from employing within this fee such persons or companies as he may deem appropriate to assist him in the performance of the Agreement.”

On 1 June 1988 the fourth and fifth defendants attended a joint meeting of the first and second defendants which resolved

(i)that the engineering practice of FEA should be sold to Kaymouth Pty Ltd;
(ii)that the fourth and fifth defendants should resign from their employment as managers of FEA;
(iii)that the fourth and fifth defendants agreed to give, free, such of their time as was necessary to conclude “outstanding matters with the old practice”.

On 2 June 1988 the first and second defendants sold the business of FEA to Kaymouth Pty Ltd. The contract was settled on 15 July 1988. On 9 November 1988 Kaymouth Pty Ltd changed its name to become that of the third defendant. Its directors and shareholders are Messrs Loveday, Lord and Evrat (not the fifth defendant). Between 15 July 1988 and 9 November 1988 Kaymouth Pty Ltd carried on business under the name of Farr Evrat and Associates. After 15 July 1988 it carried on business under its own name.

Clause 22 of the contract of sale provided that Kaymouth Pty Ltd would provide “minor” secretarial services for the directors of the first and second defendant. Clause 25 provided that the first and second defendants

“in the specific instance of two major projects namely the Cressbrook and Noosa projects will make available the (fourth and fifth defendants) at no cost to (the third defendant) to complete any work which may be necessary in connection with the commissioning work of these projects. If such additional work involves the payment of . . . fees . . . the (first and second defendants) shall be entitled to receive such fees . . . the (first and second defendants) agrees to pay (the third defendant) . . . for any office work done by the (third defendant) that the (first and second defendants) may request . . . in relation to the commissioning of the said projects . . .”

On 30 June 1988 Mr Farr, on behalf of FEA, wrote to the plaintiff

“ . . . to advise that both principals of the practice (Ern. Evrat and myself) are proposing to retire from active participation in the present practice, the direction of which will be taken by three new principals Messrs D Lord, A Loveday and P Evrat. We shall, however, continue as consultants to the new organisation (which will now be known by the similar name of Farr Evrat and Associates Pty Limited) and the writer will remain responsible for the completion of the Noosa Towns Water Augmentation Scheme.
To all intends (sic) and purposes, therefore, the above-mentioned change in the practice hierarchy will not affect present arrangements with your Council.”

On 31 August 1988 the plaintiff replied
“Would you please advise the precise nature of the new partnership. The present arrangement is between the (plaintiff) and the (first and second defendants) trading under the business name of Farr Evrat and Associates.
Your letter would indicate that a new legal entity Farr Evrat and Associates Pty Limited will be the owner of the business which would indicate that a Deed of Assignment may be necessary in relation to the existing contract.
I look forward to your early reply. It may be appropriate if you arrange for your solicitors to contact (the plaintiff’s) solicitor . . .”

On 7 September 1988 solicitors acting for the fourth and fifth defendants wrote to the plaintiff. They said
“The engineering practice of Farr Evrat and Associates which comprised (the first and second defendants) is now Farr Evrat and Associates Pty Ltd comprising Mr P A Evrat, Mr A E Lord and Mr D R Loveday, and the practice is conducted under the corporate name.
The trading name was Farr Evrat and Associates, but is now Farr Evrat and Associates Pty Ltd.
Under our client’s contract with you, the agreement binds them and their . . . successors . . . and assigns. The new practice is our client’s successor and assign. There is no need, in our view, for any other formal documentation.
As a matter of practical convenience, (the first and second defendants) have agreed to make available (the fourth and fifth defendants) to complete any work which may be necessary in connection with your project.”

The letter misunderstood the effect of the transaction. The third defendant did not become the successor or assign of the first and second defendants with respect to the latters’ contract with the plaintiff. The first and second defendants merely sold their practice. The sale did not include the right to receive any fees that may become payable by the plaintiff. Nor did the sale oblige the third defendant to perform any part of the contract made between the plaintiff and FEA.

On 27 September 1988 the plaintiff replied to the solicitors:

“I note your advice that the (third defendant) is now conducting the previous partnership of Farr Evrat and Associates and it is the successor and assignee of the previous corporate entity.
Would you please forward legal documentation establishing (the third defendant’s) responsibilities under the contract with the Council.”

Those solicitors wrote again on 22 November 1988. They said
“We would have thought that our letter of the 7th September 1988 fully set out the position. The practice was sold . . . as we advised in our letter of the 7th September 1988.
The sale included all of the current work, and obviously that included the completion of the Noosa Shire job.
As we advised you in our letter Mr Farr and Mr Evrat are being made available by their own respective companies to complete anything necessary on the project, and as you know have attended to a number of matters during the last couple of months.
As you know . . . our client’s contract with you binds its successors.”

The last correspondence on the topic came from the plaintiff’s solicitor who wrote on 16 February 1989
“Despite your assurances it is quite apparent that without a novation having taken place, the (plaintiff) is unable to rely upon the agreement with (the first and second defendants) dated 22nd April 1986 in respect to the new ownership of (the third defendant).
I am instructed that there are still obligations outstanding under the contract before the consulting engineers’ responsibilities are discharged pursuant to clause 4.3. Consequently, unless your clients are prepared to enter into a Deed of Assignment with the (plaintiff) I am bound to notify you that the (plaintiff) shall continue to hold the original firm as a responsible party under the contract and hereby reserves all rights against those person or persons.”

The plaintiff argues that subsequent to the sale it was the third defendant who completed the services because when the fourth defendant corresponded with the plaintiff after July 1988 he did so on the third defendant’s letterhead. The plaintiff also emphasises the terms of the third resolution passed at the meeting of 1 June 1988 that

“In view of the resignation of (the fourth and fifth defendants) from their employment with Farr Evrat and Associates the directors of (the first and second defendants) agreed to give, without payment, such of their time as might be necessary to conclude outstanding matters with the old practice.”

The plaintiff points also to clause 25 of the sale agreement, and the fourth defendant’s answers to interrogatories which indicated his belief that in the relevant period he was acting as agent for the third defendant. It is conceded the admission is not conclusive. The answer itself contains a caveat that the belief might have been erroneous.

The plaintiff submits that the terms of the resolution are inconsistent with the first and second defendants completing their contract with the plaintiff but instead indicates that the fourth and fifth defendants will give their time to the third defendant to enable it to complete the contract. The submission may misread the resolution which does not mention the third defendant. It does not identify to whom the fourth and fifth defendants should give their time. It is more likely, or at least equally likely, that the resolution intends to record the fourth and fifth defendants’ commitment to assist the companies from which they had just resigned, ie the first and second defendants.

The defendants’ analysis of the facts is that the first and second defendants did complete the services by utilising the provisions of clause 8.5 which enabled them to employ, without additional fee, such companies as they deemed appropriate to assist in the performance of the agreement. It is said that the first and second defendants employed the secretarial services of the third defendant in their performance of their contract. This analysis is borne out by the correspondence. It is abundantly clear that the plaintiff insisted upon the first and second defendants remaining liable under the contract and completing their obligations contained in it. It categorically refused to accept the third defendant in substitution for the first and second defendants as its contracting party. See the concluding words of its solicitor’s letter of 16 February 1989. Moreover the correspondence makes it clear that despite the rearrangement effected by the sale the first and second defendants would make the fourth and fifth defendants “available . . . to complete anything necessary”. (See the letters of 7 September and 22 November 1988).

Clause 25 was presumably included to meet the situation which would arise if the plaintiff accepted the third defendant in substitution for the first and second defendants. In that case it could complete the services by calling upon the first and second defendants to make the services of the fourth and fifth defendants available to it. When the plaintiff refused to accept the third defendant the first and second defendants continued their role. The clause never operated.

There was a submission, which I think is without substance, that the fourth and fifth defendants individually, rather than as directors of the first and second defendants, undertook the completion of the services. This, too, is contrary to the correspondence and an unwarrantable inference from what evidence there is. It is impossible to accept that the fourth and fifth defendants would have chosen to abandon the contractual structure, and the protection given to their companies by the contract, and act on the their own behalf in completing the services. The overwhelming likelihood is that they acted, as they had done in the past, in their capacity as directors.

It is clear that the third defendant, unless as an unwitting principal to the activities of the fourth defendant, did not undertake any of the services required by the contract. None of its directors played any part in performing those services and none had any dealings with the plaintiff. Its activity was limited to making a small amount of office space and some minor secretarial assistance available to the fourth defendant.

The third defendant took over the office premises formerly occupied by the first and second defendants. The fourth and fifth defendants continued to have access to the building but were not provided with an office of their own or any specified assistance. They had access to the third defendant’s letterhead which the fourth defendant used to correspond with the plaintiff. The directors of the third defendant read the incoming correspondence from the plaintiff before it was passed to the fourth or fifth defendants for attention. None of them knew any of the detail about the scheme or its problems and it seems they were not consulted about any aspect of them by the fourth or fifth defendants. The files maintained by the first and second defendants relating to their contract with the plaintiff were physically in the building occupied by the third defendant but none of his directors ever looked at them. None of the personnel employed by the first and second defendants to assist with the administration of the contracts for the construction of the scheme were employed by the third defendant.

These circumstances do not make it reasonable to conclude that the third defendant took over the performance of the agreement from the first and second defendants. Allowing the fourth defendant to write on its letterhead is insufficient to constitute it the principal of any of the other defendants for the purposes of performing the agreement, or as establishing that the third defendant supplanted the first and second defendants in that role where the plaintiff expressly refused to deal with the third defendant. It follows that the services were completed by the fourth and fifth defendants. It is contrary to common sense to think they did so in their own right rather than on behalf of their respective companies, the first and second defendants.

It has been pleaded that the agreement was not completed because the first and second defendants abandoned it. This point was not addressed in submissions and is plainly unsustainable in point of fact.

The plaintiff’s next point is that clause 4.3 is ineffective to protect the fourth or fifth defendants. They were employees of the first and second defendants and so come within the intended scope of the clause but, not being parties to the contract, it is said that they cannot enforce it for their benefit. The defendants rely, in riposte, upon the well known cases which have conferred the benefit of exemption clauses on stevedores who were not parties to the contracts in which the clauses appeared. The plaintiff bases its argument on Wilson v Darling Island Stevedoring and Lighterage Co Ltd (1955-1956) 95 CLR 43 for the (hardly novel) proposition that someone not a party to a contract may neither sue nor be sued on it, and that a clause in a bill of lading which purported to exclude all liability in the carrier save for when the goods were actually on board ship, did not operate for the protection of the stevedore who had custody of them after they were unloaded. It may be noted that in Wilson the clause in question did not expressly purport to exempt the stevedore from liability. It did not even refer to the stevedore. Its import was to limit the carrier’s liability to losses occurring in particular circumstances. The importance of that point was explained by the Privy Council in The Eurymedon [1975] AC 154 at 166, another case involving the carriage of goods by sea and an attempt by the stevedore to avoid liability for damaged goods. The majority of the Council said (166)

“There is no need to question or even to qualify that case in so far as it affirms the general proposition that a contract between two parties cannot be sued on by a third person even though the contract is expressed to be for his benefit. Nor is it necessary to disagree with anything which was said to the same effect in the Australian case of Wilson . . . Each of these cases was dealing with a simple case of a contract the benefit of which was sought to be taken by a third person not even party to it, and the emphatic pronouncements in the speeches and judgments were directed to this situation. But Midland Silicones left open the case where one of the parties contracts as agent for the third person . . .”

Subsequently the High Court adopted the suggested approach in Port Jackson Stevedoring Pty Ltd v Salmond and Spraggon (Aust) Pty Ltd (1977-1978) 139 CLR 231. Barwick CJ said at 240
“ . . . the stevedore discharging the ship was entitled to the benefit of clauses . . . in the present bill of lading if,
(1)the bill of lading made it clear that the carrier intended by its terms to protect the stevedore,
(2)the carrier by the bill contracted for the stevedore’s protection as well as for his own,
(3)the authority of the carrier to act for the stevedore in this respect whether antecedently or by ratification was made out, and
(4)that there was consideration moving from the stevedore.”

Although the cases are concerned with the carriage of goods by sea the principle that a stranger to the contract may enforce exemption clauses in it expressed to be for his benefit so long as he authorised or ratified the making of the agreement is not restricted to maritime activity. In The Eurymedon itself the majority judgment concludes with a justification of the result that, in terms, is wider in application than the particular facts of the case. It was said (p 169)

“ . . . to give the appellant the benefit of the exemptions and limitations contained in the bill of lading is to give effect to the clear intentions of a commercial document, and it can be given within existing principles. (Their Lordships) see no reason to strain the law or the facts in order to defeat these intentions.”

In the High Court Barwick CJ said (139 CLR at 250)
“(The) decision in The Eurymedon was of great moment in the commercial world and, if I may say so, an outstanding example of the ability of the law to render effective the practical expectations of those engaged in the transportation of goods. It is not a decision of its nature to be narrowly or pedantically confined.”

In applying the principle to a case of road transport Yeldham J in Celthene Pty Ltd v WKJ Hauliers Pty Ltd [1981] 1 NSWLR 606 at 611, having referred to the remarks of Barwick CJ, went on
“I do not think . . . the passage . . . was intending to confine the principle to the transportation of goods, and certainly not to the transportation of goods by sea.”

There is no doubt that the first two conditions summarised by Barwick CJ have been satisfied. The contract made it clear that the first and second defendants by making the agreement with the plaintiff intended its terms to protect their employees and that the first and second defendants contracted for the employees’ protection as well as their own.

The fourth condition is equally clearly satisfied. The relevant employees are the fourth and fifth defendants. The plaintiff does not assert that any other employee was negligent. They provided consideration for the promise that they would not be liable unless a claim were made against them within the stipulated time by performing services which the first and second defendants contracted to supply. The fourth and fifth defendants were not obliged by the contract to do anything. The first and second defendants could have performed their agreement by utilising the services of others. The performance by the fourth and fifth defendants of services on behalf of the first and second defendants

“Supplie(d) the occasion for (clause 4.3) to operate and the consideration which (made) the arrangement contractual.”

Per Barwick CJ 139 CLR at 244.

The plaintiff argues that the third condition is not shown to be satisfied. It is said there is no evidence that the first and second defendants made the agreement as agent for the fourth and fifth defendants.

It is true that there is no direct evidence that the fourth and fifth defendants authorised the first and second defendants to contract, on their behalf, for the limitation contained in clause 4.3. The facts generally, however, make the inference irresistible. The fourth and fifth defendants were the directors and managers of both the first and second defendant companies. They prepared the draft agreement containing clause 4.3 and gave it to the plaintiff for its consideration. That clause protected them as employees. It does not seem sensible to conclude that they did not authorise their own private companies to bargain for their personal protection.

In this regard it is important to bear in mind what was said by the Privy Council on appeal from the High Court in Port Jackson Stevedoring (1980) 144 CLR 300 at 304-5:

“This (The Eurymedon) was a decision, in principle, that the . . . clause is capable of conferring upon a third person . . . defences and immunities conferred by the bill of lading . . . as if such persons were parties to the contract . . . But the decision was not merely a decision on this principle for it has made it clear that in fact stevedores . . . may come within it; and moreover that they normally and typically will do so. It may indeed be said that the significance of (The Eurymedon) lies not so much in the establishment of any new legal principle, as in the finding that in the normal situation . . . accepted principles enable and require the stevedore to enjoy the benefit of contractual provisions in the bill of lading. . . . Although, in each case, there will be room for evidence as to the precise relationship of carrier and stevedore . . . the decision does not support, and their Lordships would not encourage, a search for fine distinctions which would diminish the general applicability, in the light of established commercial practice, of the principle.”

There is also reference in the joint judgment of Mason and Jacobs JJ (139 CLR at 276) to the “bare facts of the case” from which the Privy Council was able to discern a contract for the protection of the stevedore.

In Celthene the authority of the carrier to contract for the protection of its independent contractors engaged to carry the goods was sufficiently established by evidence that the independent contractors knew that the head contractor habitually stipulated for their protection and, with this knowledge, they continued to deal with it. Here the fourth and fifth defendants knew that the first and second defendants were stipulating for the protection of employees, and with that knowledge they performed the services.

Accordingly I would find that the third condition is also satisfied and, consequently, that the fourth and fifth defendants are entitled to the time limitation.

The defendants argue they have an alternative basis, namely that they ratified the agreement purportedly made on their behalf by expressly relying upon its terms in paragraph 92(a)(j) and (k) of the Consolidated Amended Defence delivered 9 November 1999. I think the pleading can be understood as a ratification in the sense that the fourth and fifth defendants seek by it to rely upon the agreement made for their benefit by the first and second defendants. A ratification made in a defence is valid, at least if the defendants have already performed their part of the bargain in respect of which the contract was to confer exemptions or immunities upon them. In the circumstances ratification by defence occurs within a reasonable time. See Life Savers (Australasia) Ltd v Fridgmobile Pty Ltd (1983) 1 NSWLR 431 at 438.

Counsel for the defendants referred to a decision of the Supreme Court of Canada, London Drugs Ltd v Kuehne and Neagle International Ltd 97 DLR (4th) 261 (1992) in which the court held that an exception to the doctrine of privity of contract should be recognised in the case of exemption clauses negotiated by an employer for itself and its employees so as to enable the employees to obtain the benefit of the exemption. I was not invited to adopt the exception, and would not consider it appropriate for a judge at first instance to do so, having regard to the judgment of the High Court in Trident General Insurance Co Ltd v McNiece Bros. Pty Ltd (1988) 165 CLR 107 in which an exception to the doctrine was limited to insurance contracts only, and having regard to the reluctance of the Privy Council to recognise the exception where it was not necessary for the outcome of the case, despite recognising the attraction of that course. See The Mahkutai [1996] AC 650 at 665.

The plaintiff’s next point is that clause 4.3 cannot operate to protect the fourth and fifth defendants because they were directors as well as employees of their companies. There is no warrant for reading the clause as though the words “other than directors” appeared after the word “employees”. The fourth and fifth defendants were employees and the clause expressly applies to such persons. The fact that the fourth and fifth defendant had an additional role is immaterial.

For the reasons given earlier I do not consider that either the fourth or fifth defendants incurred any liability in negligence to the plaintiff. If that view is wrong clause 4.3 would exonerate them from liability unless a claim made against them or an action commenced before 22 June 1991. Neither occurred.

The plaintiff’s next argument is that the clause should be read as applying only to causes of action that had accrued prior to the expiration of the year commencing on the completion of the services. The argument in favour of the implication is that it would be “absurd” if the plaintiff could not commence proceedings in respect of such a cause of action at all: not within the year because it had not accrued and not after because of the limitation. The point is that the plaintiff submits it had no cause of action in negligence until it suffered loss in May 1991. I am not sure that the implication is necessary or appropriate. It is not obvious that this eventuality is not covered by the plain meaning of the clause, but it does not matter.

For the reasons given earlier I consider that the plaintiff suffered loss in December 1989 when it paid the dredging contractors. The cause of action was thus complete prior to the expiration of the contractual time limit so the implication would not assist the plaintiff.

The plaintiff’s last attack on the contractual limit takes the form of an estoppel. It is submitted that it failed to commence a claim within time because the defendants represented, in effect, that the cause of the inoperability of the screens was not their design but other, extraneous, factors. These representations are said to contain a further, implied, representation that the defendants had incurred no liability to the plaintiff with respect to the design. The plaintiff claims to have relied upon that representation to delay making a claim. The effect of the representation is said to be that the plaintiff was denied the opportunity, for some time, to discover that it had a claim.

I entertain grave scepticism that an estoppel of the kind described could ever operate to defeat a contractual limitation, in least in the absence of fraud. Part of my scepticism derives from the need to imply the critical representation and the necessity for the plaintiff to establish that officers charged with the serious responsibility of implementing a scheme of the magnitude of the one in question would be so feeble minded as to act upon such a facile and self serving representation. It is equally difficult to see how the representor could have thought that the implied representation had a tendency to induce the plaintiff to alter its position on the strength of it. If the representation lacked that character it was not material. See Actionable Misrepresentation by Spencer Bower and Turner 3rd ed Article 18. An estoppel, of course, prevents a representor denying the truth of the representation. Here the defendants do not deny it; they still maintain they were not negligent. An estoppel allows the representee to act on the basis that the representation was true. Here the plaintiff wants to say it is false. It is not necessary to ponder these matters too deeply because the evidence, perhaps not surprisingly, does not make out the requisite reliance by the plaintiff.

The plaintiff’s submissions put forward Mr Williams, the shire engineer, as the person whose “knowledge and belief” is relevant. The plaintiff did not explain why Mr Williams should enjoy this monopoly and why it is not equally relevant to look at the knowledge and belief of other senior employees or councillors.

In any event Mr Williams did not say that he acted in reliance upon the representation. What his statement does say is that in May 1990, following a letter from the plaintiff to FEA which advised that recent floods had again filled the river with sand and covered the screens, to which no reply was received, Mr. Williams “lost confidence in Farr Evrat providing an acceptable solution. (The plaintiff) started looking elsewhere for answers . . .”. It seems difficult to believe that, in that frame of mind, Mr Williams would have gullibly accepted the truth of the implied representation. In his supplementary statement Mr Williams explains that at the time he had no reason to suspect that FEA or Mr Farr had been negligent in the design of the intake, and notes that Mr Farr had suggested the contrary. It is significant that his statement does not contend that he acted upon that suggestion and refrained from advising the plaintiff to take action against the defendants. Mr William’s later assertion in his supplementary statement (para 10 of exhibit 5) that he did not believe that the defendants had been negligent “because of the advice Mr Farr had given as to there being other causes of the problem” does not sit happily with his earlier statement that he had lost faith in anything Mr Farr had to say about the intakes.

In oral testimony Mr Williams said that he did not begin to consider whether FEA might or might not have been negligent until June 1991 (T 73.15). It is hard to see, then, that he positively believed it had not been negligent because of a representation to that effect. In April 1991, prior to the expiration of the contractual time limit, Mr Williams met with the shire solicitor to consider, on a preliminary basis, whether FEA had been negligent and what investigations should be undertaken to ascertain if that were so. Again the inconsistency with the reliance necessary for an estoppel is obvious.

By letter dated 7 March 1990 FEA’s bank wrote to the plaintiff to inquire whether the bank guarantee provided to the plaintiff as an earnest of the defendants’ performance of their agreement could be released. Mr Steel discussed the response with Mr Williams in April 1990. They decided the guarantee should not be released because of the possibility that the design of the intake had been negligent and the plaintiff may look to recover some of the money it had spent and would spend to rectify the deficiency. Mr Steel’s opinion that FEA might have been negligent was not affected by anything said by FEA in their correspondence about the cause of the problem (T 319.20).

By October 1989 there was disquiet among the public and rate payers of Noosa about the failure of their very expensive scheme. The matter had attracted the attention of the local news media. The problem was well known though its cause was not obvious, and the defendants’ liability was only a possibility. Nevertheless one of the plaintiff’s councillors, Mr Abbott was adamant that by the end of 1989 he would not have accepted any statement by the defendant that they were not responsible. At least one other councillor shared that view.

The plaintiff does not establish that its lateness in making a claim was induced by any representation made by any of the defendants that they were not responsible for the failure of the intake.

Conclusion

The plaintiff has made out some of the causes of action it pleaded, but in respect of those clause 4.3 of the contract prevents the recovery of damages. There must, accordingly, be judgment in the action for the defendants.

Key Legal Topics

Areas of Law

Tort Law
Contract Law
Consumer Law

Legal Concepts

Negligence
Causation
Breach of Contract
Misleading and Deceptive Conduct
Exclusion Clauses
Third Party Rights

Actions

Download as PDF Download as Word Document

Citations

Council of the Shire of Noosa v Farr [2001] QSC 60

Most Recent Citation

Poralu Marine Australia Pty Ltd v MV Dijksgracht [2022] FCA 1038

Cases Citing This Decision

9

Tyrrell v The Owners Corporation Strata Scheme 40022 [2007] NSWCA 8

Baycorp Advantage Limited v Royal and Sun Alliance Insurance Australia Limited [2003] NSWSC 941

Tracey v Rodney Wagner Olindaridge Pty Ltd [2013] QCATA 48

Cases Cited

3

Statutory Material Cited

2

Jenyns v Public Curator (Qld) [1953] HCA 2

Warren F Ball and Co and Farrer [2007] FamCA 1005

CITATION:	Council of the Shire of Noosa v Farr & Ors [2001] QSC 060
PARTIES:	COUNCIL OF THE SHIRE OF NOOSA (plaintiff) v J E FARR PTY LTD – (ACN 010 035 622) (first defendant) AND E T EVRAT PTY LTD – (ACN 010 035 631) (second defendant) AND FARR EVRAT & ASSOCIATES PTY LTD (CAN 010 804 903) (third defendant) AND JACK ERRINGTON FARR (fourth defendant) AND ERNEST THOMAS EVRAT (fifth defendant)
FILE NO:	SC No 2017 of 1993
DIVISION:	Trial Division
DELIVERED ON:	8 March 2001
DELIVERED AT:	Brisbane
HEARING DATE:	15 January 2000 – 7 February 2000
JUDGE:	Chesterman J
ORDER:	That there be judgment in the action for the defendants against the plaintiff
CATCHWORDS:	TORTS – NEGLIGENCE – REASONABLE FORESEEABILITY OF DAMAGE – PARTICULAR CASES – AFFECTING PARTICULAR PROFESSIONS OR OCCUPATIONS – Where defendant engineers design a water intake system for the plaintiff – Where there is a risk siltation levels will increase in the river – Whether design of intake system was negligent TORTS – NEGLIGENCE – WHERE ECONOMIC OR FINANCIAL LOSS - Whether imposition of duty to take care to avoid economic loss – Meaning of “vulnerability” – Whether there was an assumption of responsibility by the fourth and fifth defendants – Whether liability for economic loss would be indeterminate TRADE AND COMMERCE – CONSUMER PROTECTION – MISLEADING AND DECEPTIVE OR UNCONSCIONABLE CONDUCT – RELIANCE – CAUSAL CONNECTION BETWEEN CONDUCT AND LOSS – Whether the statements made by the fourth defendant were either honestly and actually held or made with reasonable basis – Whether the action was brought in time CONTRACTS – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – OTHER CASES – Where contract negotiated by laymen – Where the contract contained exclusion clauses – Whether exclusion clauses limit liability – Meaning of phrase “commence any claim” CONTRACTS – PARTIES – RIGHTS AND LIABILITIES OF THIRD PARTIES – Whether the fourth and fifth defendants can rely on the exemption clause in a contract to which they are not a party – Rule in The Eurymedon Fair Trading Act 1989 (Qld) s.38, s.99 Trade Practices Act 1974 (Cth) s.52, s.82 Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99, referred Celthene Pty Ltd v WKJ Hauliers Pty Ltd [1981] 1 NSWLR 606, applied Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500, followed Edgeworth Construction Ltd v N D Lea & Associates Ltd 3 SCR 206 (1993), followed Fangrove Pty Ltd v Tod Group Holdings Pty Ltd [1999] 2 Qd R 236, referred Greaves & Co. (Contractors) Ltd v Baynham Meikle & Partners [1975] 1 WLR 1095, referred Hawkins v Clayton (1987 – 1988) 164 CLR 539, referred Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503, referred JuneMill Ltd (in liq.) v FAI General Insurance Company Ltd [1999] 2 Qd R 136, referred Life Savers (Australasia) Ltd v Fridgmobile Pty Ltd [1983] 1 NSWLR 431, referred London Drugs Ltd v Kuehne and Neagle International Ltd 97 DLR (4th) 261 (1992), referred Pan Foods Company Importers and Distributors Pty Ltd & Ors v Australia and New Zealand Banking Group Ltd & Ors (2000) 74 ALJR 791, followed Perre v Apand Pty Ltd (1999) 198 CLR 180, followed Photo Production Ltd v Securior Transport Ltd [1980] AC 827, followed Port Jackson Stevedoring Pty Ltd v Salmond and Spraggon (Aust) Pty Ltd (1977 – 1978) 139 CLR 231, applied Pullen v Gutteridge Haskins & Davey Pty Ltd [1993] 1 VR 27, applied Rogers v Whitaker (1992) 175 CLR 479, followed San Sebastian Pty Ltd v The Minister (1986) 162 CLR 340, referred Sutherland Shire Council v Heyman (1984 – 1985) 157 CLR 424, referred The Eurymedon [1975] AC 154, applied The Mahkutai [1996] AC 650, referred Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107, applied van der Stern v Cibernetics (Holdings) Pty Ltd [1970] ALR 751, followed Voli v Inglewood Shire Council (1962 – 1963) 110 CLR 74, referred Wardley Australia Ltd v Western Australia (1992) 175 CLR 514, referred Williams v Natural Life Health Foods Ltd & Mistlin [1998] 1 WLR 830, applied Wilson v Darling Island Stevedoring and Lighterage Co Ltd (1955-1956) 95 CLR 43, distinguished
COUNSEL:	Mr. S. Doyle SC with Mr. C. Francis for the plaintiff Mr. S. Couper SC with Mr. J. Gooley for the defendants
SOLICITORS:	Wakefield Sykes for the plaintiff Gadens Lawyers for the defendant

[2001] QSC 60

8 March 2001

Key Legal Topics

Areas of Law

Tort Law

Contract Law

Consumer Law

Legal Concepts

Negligence

Causation

Breach of Contract

Misleading and Deceptive Conduct

Exclusion Clauses

Third Party Rights