Demtech v Brambles

[2004] NSWSC 242

CITATION:	DEMTECH v BRAMBLES [2004] NSWSC 242
HEARING DATE(S):	22/3/04, 23/3/04, 24/3/04, 25/3/04, 26/3/04
JUDGMENT DATE:	26 March 2004
JUDGMENT OF:	McDougall J at 1
DECISION:	See paras [99] & [100] of judgment
CATCHWORDS:	CONTRACT - subcontract - where demolition works not done in accordance with WorkCover permit but in accordance with unapproved work plan - where contaminated materials not properly removed from the work site - whether works done in contravention of Occupational Health and Safety Act 2000 and the Occupational Health and Safety Regulation 2001 - whether serious breach of subcontract - whether breach gave rise to contractual right to issue show cause notice - whether breach incapable of remedy - no issue of principle
LEGISLATION CITED:	Occupational Health and Safety Regulation 2001 Occupational Health and Safety Act 2000 Protection of the Environment Operations (Waste) Regulation 1996
CASES CITED:	Yendex Pty Ltd v Prince Constructions Pty Ltd (1988) 5 BCL 74
PARTIES :	Demtech Pty Limited (plaintiff/cross-defendant) Brambles Australia Limited (defendant/cross-claimant)
FILE NUMBER(S):	SC 55057/02
COUNSEL:	Mr G Banks/Mr J Britton (litigants in person - directors of Demtech) Mr B W Collins QC/Mr J I Parker (for Brambles)
SOLICITORS:	No solicitors on the record (for Demtech) Allens Arthur Robinson (for Brambles)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
TECHNOLOGY AND CONSTRUCTION LIST

McDOUGALL J

26 March 2004 (Revised 30 March 2004)

55057/02 DEMTECH PTY LIMITED v BRAMBLES LIMITED

JUDGMENT

HIS HONOUR:

Introduction and background

1 In March 2001 a "head contract" was made between BHP Ltd (as it was then known) ("BHP") and the cross-claimant ("Brambles"). The scope of work under the head contract was described as follows:

“Demolition and removal of all buildings, structures, offices, services and the like in the areas generally referred to as the coke ovens and power plant boilers located on the BHP Newcastle main site. Removal includes the removal of all forms of contamination found in those buildings, structures and equipment and services and as generally described in the attached specification.”

2 The reference to "power plant boilers" is a reference to some seven boilers known as boiler 1 to boiler 7 and their associated plant, buildings and equipment. For convenience, I will refer to those boilers and their associated buildings and equipment as "the boiler equipment".

3 On 16 July 2001, Brambles and the cross-defendant ("Demtech") entered into a subcontract whereby Brambles subcontracted to Demtech the removal of the boiler equipment. The terms of the subcontract incorporated the terms of the head contract. The scope of works under the head contract, as well as the terms of the head contract including its attached specifications (so far as they were applicable), therefore applied to the removal of the boiler equipment.

4 For convenience I will refer to the area within which the boiler equipment was located, and where Demtech was to work, as "the site" and to Demtech's works as "the boiler demolition works".

5 The boilers - at least, relevant to these proceedings, boiler 6 - consisted of substantial steel structures. In boiler 6, the actual boiler with its associated equipment was suspended from suspension beams at the top of the structure. The whole was supported by four substantial "I" columns. The columns were braced by lateral beams and on the north face by a bracing truss.

6 The boilers - again, at least boiler 6 - included substantial quantities of asbestos (in different forms) and synthetic mineral fibres (“SMF”). Those substances were used, among other things, as lagging for pipe work and for insulation in and around the boilers and their associated pipes and equipment. Both asbestos and SMF are prohibited and notifiable for the purposes of Occupational Health and Safety Regulation 2001 (“OHS Regulation”). See clause 341.

7 The original plan of works was to demolish the boilers by starting with boiler 7, and continuing up until boiler 1, but at some stage that was reversed.

8 It is necessary to note that prior to the making of the head contract there had been an explosion in boiler 3. That explosion, among other things, liberated and deposited over a considerable area asbestos and SMF from within the boiler and its associated pipes and equipment.

9 I interpose - to jump ahead a little - that I am satisfied, on the evidence of Mr Geoffrey William Mason and Mr Andrew Peter Russell, both of whom I accept as witnesses of truth, that the asbestos and SMF that had been liberated in the explosion were thoroughly cleaned up and boiler 3 was securely encapsulated so as to ensure, so far as possible, that there was no further escape of asbestos or SMF. I am further satisfied that if, as a result of the explosion in boiler 3, any asbestos remained on the site thereafter, it was microscopic in size and minute in quantity - although, nevertheless, dangerous.

10 In any event, for reasons that will become clear, I think that the explosion in boiler 3 can be put aside as irrelevant. Under Appendix 2 of the contract, as carried forward in the subcontract, the explosion in boiler 3 was disclosed and Demtech was obliged to remove from the site any residual contamination resulting from the boiler 3 explosion. See clause 5.2.1.

11 On 18 September 2002, work commenced to prepare the induced collapse of boiler 6. It will be necessary to look in more detail at the events leading up to that. The following day, 19 September 2002, boiler 6 collapsed. One worker, Mr Gregory Rees, was killed in the collapse. Two other workers were injured.

12 WorkCover intervened. I shall return to the detail of that.

13 On 24 October 2002, Brambles gave a "show cause notice", purported to be given under the terms of the contract, to Demtech. On 30 October 2002, Demtech responded. Brambles was not satisfied with the response and, accordingly, on 1 November 2002, purported to exercise its right to take over the site and the works.

14 On 4 November 2002, Demtech vacated the site. Thereafter, Brambles entered into a further subcontract with Moltoni Adams Pty Limited (“Moltoni Adams”) for the performance of the remaining boiler demolition works.

The issues for determination

15 Demtech commenced proceedings against Brambles claiming relief in relation to the ownership of certain scrap metals on, or obtained from, the site and in relation to the show cause notice and subsequent events. Demtech claimed that Brambles had repudiated the subcontract.

16 Brambles filed a cross-claim. By its amended cross-claim, it sought judgment for amounts paid by it to complete the boiler demolition works, in excess of the amount that would have been paid to Demtech had Demtech completed those works, or alternatively damages for breach of contract.

17 Demtech's claim was stayed because it did not provide security for costs in accordance with orders of the Court. Brambles amended cross-claim was heard by me.

18 As the hearing proceeded, the essential issues on the amended cross-claim were as follows:

(1) Did Demtech breach the subcontract either in relation to the collection, removal and disposal of hazardous waste materials (principally asbestos and SMF) or in relation to the attempted demolition and collapse of boiler 6?

(2) Did any breach of contract by Demtech trigger Brambles’ contractual right to give a show cause notice?

(3) If that right was triggered, were the breaches incapable or, alternatively, capable of remedy?

(4) Was Brambles contractually justified in taking over the site and completing the boiler demolition work through Moltoni Adams?

(5) Was Brambles entitled to recover, either pursuant to the subcontract or as damages, the amounts spent by it to complete the boiler demolition work and if so, what is the amount recoverable?

The terms of the subcontract

19 I shall refer only to the more significant of the relevant contractual provisions. The entirety of the contractual provisions relied upon by Brambles are recorded in the marked up version of its amended cross-claim forming part of its written submissions. That document will be placed with the papers.

20 As I have said, the terms of the head contract were incorporated directly, or back to back, into the subcontract. Relevant provisions included clauses 5, 7.2.1, 9.1.1, 12.1.1 and 13.1.2. I set them out:

“ 5. SUPERVISION OF WORKS
The Contractor shall nominate a responsible person on Site to whom the Contract Controller may refer in connection with the Works, and shall ensure that the Works are effectively supervised.
…
7.2.1 In executing the Works, the Contractor shall observe and comply with all relevant laws, regulations, codes and rules as well as the lawful requirements of all relevant authorities.
…
9.1.1 The Contractor shall take effective measures for the protection of and the prevention of injury, loss or damage to any person or property by himself, his employees or agents during the performance of the Contract.
…
12.1.1 The Contractor shall at his own expense provide all materials, tools, labour, plant equipment and all other items required for the completion of the works except those items stated as being the Principal’s Supply.
…
13.1.2 Without intending to limit or affect any other provision of this Contract, the Contractor shall ensure that all work carried out under or in relation to this Contract shall be performed in compliance with:-
a) The requirements of the WorkCover Authority of NSW and any other relevant regulatory authority;
b) The requirements of all relevant laws; and
c) The Principal’s safety conditions as set out in the Occupational Health and Safety Conditions (PART B of these Standard Conditions).
The Contractor shall, in the event of perceived conflict between these requirements, seek clarification from the Contract Controller and be bound by his direction.”

21 Clause 14 is of particular significance. I set out the relevant provisions:

“14.1.1 Without prejudice to any other rights the Principal may have, if the Contractor:-
a) suspends the Works or in the opinion of the Contract Controller neglects or fails to commence or to proceed with due diligence with the Works; or
b) fails to carry out the Works at a rate of progress or in a manner strictly in accordance with the Contract; or
c) neglects to carry out any instructions or requirements of the Contract Controller given or made in accordance with the Contract; or
d) fails to complete the Works within the time or times specified in or under the provisions of the Contract; or
e) commits any breach of or fails in any respect to comply with and observe the provisions of any other covenant, condition or stipulation of the Contract; or
f) intimates that he is unable or unwilling to complete the Works; or
g) commits either more than one significant breach or one serious breach (as those terms are defined in Clause 13.2.4); or
h) becomes bankrupt or makes an assignment of his estate for the benefit of his creditors or makes an arrangement or composition with his creditors or being a corporation goes into liquidation (except for the purpose of reconstruction) or commences to carry on business under a receivership;
then in such event the Principal shall as soon as reasonably possible give written notice thereof to the Contractor.
14.1.2 In the case of a breach which is incapable of remedy then the Principal may after seven calendar days from the giving of notice of such event and by further written notice immediately:
i. take the Works wholly or partly out of the control of the Contractor and adopt such means as may seem to it best to complete the same; or
ii. terminate the Contract.
…
14.1.4 No action taken by the Principal under this Clause shall operate to the prejudice of the right of the Principal to recover from the Contractor or to deduct from any money due or to become due to the Contractor all sums of money that may have become due to the Principal under the Contract whether as liquidated damages or otherwise.
…
14.2.2 The Principal may itself complete the Works or any portion thereof and may contract any person other than the Contractor to complete the Works or any portion thereof.
…
14.2.5 Should the cost to the Principal of completing the Works in accordance with this Clause exceed the amount which would have been paid to the Contractor if the whole of the Contract had been completed by him, the amount of such excess shall be a debt due by the Contractor to the Principal and may be recovered by the Principal from the Contractor.”

22 The concept of "serious breach" refers back to clause 13.2.4(c) and I set it out:

“A serious breach is one that is required by law to be notified to the WorkCover Authority or any other relevant regulatory authority.”

23 It is also necessary to consider clause 26. I set it out so far as it is relevant:

“ 26. DEDUCTIONS
All losses, costs, charges and expenses which the Principal shall have incurred or sustained by reason of any act default or omission of the Contractor in the performance of the Contract together with any sum or sums payable to the Principal under the Contract whether as liquidated damages or in consequence of any indemnity or otherwise may be deducted from or offset against any moneys that may be then or may thereafter become due or payable to the Contractor whether under the Contract or otherwise.
If such deduction is not made or the moneys then due or thereafter becoming due to the Contractor are less than the amount so deductible the amount due or the amount of the deficiency shall be a debt due by the Contractor to the Principal and may be sued for and recovered in any Court of competent jurisdiction.
… “

24 Part B of the Standard Conditions of the contract related to occupational health and safety matters.

25 Part C of the Standard Conditions related to "environmental conditions". It is necessary to bear in mind clauses 1.1, 1.2 and 4.2 of the environmental conditions and clauses 5 and 8 of the Specification. I set them out:

“1.1 All Works carried out by the Contractor on the Site shall be in accordance with current editions of all relevant codes, standards, local ordinances, statutory obligations, the Principal’s licences and the requirements of this document.
1.2 In the event of any perceived conflict between the documents listed in Clause 1.1 above and the Specification, then the Contractor shall, prior to commencing the Works, refer such conflict to the Contract Controller for resolution.
…
4.2 The Contractor shall remove and disposed [sic] of all Asbestos or SMF material in accordance with the provisions of the Worksafe Code of Practice.
Such materials shall be removed by a Licensed Removalist approved by the Principal.”


“5. HAZARDOUS MATERIALS
…
Unless otherwise nominated in this Specification the Contractor shall be responsible for the collection and disposal of all hazardous substances located in the Areas covered by this Contract. All disposals of hazardous substances shall be made strictly in accordance with the requirements of the EPA, Newcastle City Council and BHP’s Environment Protection Licence No. 1708 (Appendix 5).
The Contractor shall have procedures in place to confirm that all hazardous substances have been removed from saleable materials such as tanks, structural sections, pumps, scrap etc etc before these items leave the site. The items shall be cleaned to a level that allows their transportation without invoking the requirements of Hazchem transportation regulations or EPA reporting.
…
8. DISPOSAL OF CONTAMINATED MATERIALS, SPOIL & RUBBLE
The Contractor shall collect and dispose of all contaminated materials and substances contained within the Assets areas in accordance with the requirements of the EPA and the Newcastle City Council.
…
The Contractor shall dispose of contaminated spoil and rubble in accordance with the requirements of the EPA and the Newcastle City Council.”

26 Finally, the documents that form the subcontract included a letter dated 10 July 2001 from Demtech to Brambles (under another name) which included a schedule of progress payments. I set out from that letter the detail relating to payment number 8:

“ Payment No. 8 will correspond with the completion of the :
Asbestos removal and disposal to Boiler No. 6
Synthetic mineral fibre removal and disposal to Boiler No. 6
Asbestos removal and disposal to Boiler No. 7
Synthetic mineral fibre removal and disposal to Boiler No. 7
Asbestos removal and disposal to Boiler No. 1
Synthetic mineral fibre removal and disposal to Boiler No. 1”

The Legislative Requirements

27 Brambles relied upon s 8 of the Occupational Health and Safety Act 2000 ("OHS Act") and a number of the provisions of the OHS Regulation.

28 Section 8(1) requires that an employer must ensure the health, safety and welfare at work of its employees. It provides, among other things, that that duty extends to ensuring that systems of work, and the working environment of the employees, are safe and without risk to health.

29 The provisions of the OHS Regulation on which Brambles relied included:

(1) Clause 51, relating to exposure to atmospheric contaminant.

(2) Clause 247, requiring demolition work to be carried out in accordance with Australian Standard AS 2601-1991 and the requirements of Pt 8.6 of the OHS Regulation.

(3) Clause 259(1), relating to control measures necessary to be undertaken when asbestos work is carried out and referring in particular to the requirements of a Guide to the Control of Asbestos Hazards in Buildings and Structures and a Code of Practice for the Safe Removal of Asbestos, both published by the National Occupational Health & Safety Commission (“NOHS Commission”) in August 1998.

(4) Clause 259(3), requiring the identification and implementation of measures to prevent the uncontrolled disturbance of asbestos whilst construction work is being carried out.

(5) Clause 259(4), requiring the implementation of procedures for cleaning etc when asbestos work is carried out.

(6) Clause 332(1), requiring demolition work and friable asbestos removal work to be done only in accordance with a permit (see also clause 332(3), making it an offence to contravene or allow another person to contravene the conditions of such a permit).

30 Brambles also relied on a number of other documents and guidelines, including AS 2601-1991 (since reissued as AS 2601-2001), the NOHS Commission documents referred to earlier, the Protection of the Environment Operations (Waste) Regulation 1996, and the conditions of consent imposed by Newcastle City Council on the work under the head contract, and therefore, the subcontract.

The relevant facts

31 Demtech was licensed by WorkCover to undertake demolition activities and asbestos removal. There was a requirement for a "competent person" approved by WorkCover to be personally responsible for activities done under any WorkCover licence for such works. Mr Jeffrey Britton, a director of Demtech, performed that role.

32 The site was a fenced off portion within the larger site relevant to the head contract. I am satisfied on the evidence that at all material times Demtech had the control of the site and was responsible for the performance of all relevant works on that site. It should be noted, however, that from time to time other people, including consultants from a company known as HLA Enviro-Sciences Pty Limited (“HLA”), were present on the site.

33 The payment schedule that forms part of the subcontract contemplated that the boiler demolition works would be completed within 48 weeks. However, by mid September 2002 - more than 48 weeks from commencement - those works had not been completed. Boilers 6 and 7 remained standing and there was a significant quantity of scrap metal on the site.

34 One significant aspect of the boiler demolition works was the removal of asbestos and SMF from the boilers and their associated equipment. Demtech prepared a protocol for that work. That protocol and, I add, good practice and the OHS Regulation required that work to be done before the final demolition of the boilers took place.

35 On 30 August 2002 Demtech submitted a work plan to WorkCover setting out the way that it proposed to induce the collapse of boiler 6 (“the August work plan”). The August work plan was the basis of Demtech's application for a permit under clause 331 of the OHS Regulation.

36 On 16 September 2002, the permit was granted. The permit included the following conditions:

“1. That an unrestricted qualified person in control of the site supervises all the work, and who’s [sic] name appears on the WorkCover asbestos and demolition data bank as a competent person.
…
3. That the machine be attached to the steel structure prior to and during the cutting of the structure to ensure that the structure doesn’t fall back, or until such time as the stability of the structure is established.
…
You are advised that this PERMIT in no way waives or modifies your obligation and duty of care under the Occupational Health and Safety Act 2000, and Occupational Health and Safety Regulation 2001.
… “

37 I interpose to note that the evidence showed that Demtech did not propose to comply with the requirements of condition 3. The evidence of Mr William Porta, an engineering consultant who prepared the August work plan and whose job was, apparently, to supervise the demolition of the boilers, said that this decision was a function of the lack of resources: T 171.2; T 171.6.

38 Demtech did not perform the demolition works in accordance with the August work plan or the permit. It submitted a new work plan (“September work plan”) to WorkCover on 18 September 2002. That work plan differed from the August work plan in a number of respects. It was proposed to drop the boiler 6 structure in a different direction to that contemplated by the August work plan. Different equipment was to be used. The boiler was not to be detached from some of its hangers prior to its collapse.

39 On 18 September 2002, Demtech undertook work in preparation for the intended induced collapse of boiler 6. I am satisfied that that work was done not in accordance with the August work plan or the permit granted in respect of that plan, but in accordance with the unapproved September work plan. The work that was undertaken included removing a number of lateral beams and cutting another. The work did not include any steps to stabilise boiler 6. Mr Porta said that work had become urgent because Demtech had fallen behind in its project: T 122.5. I do not understand how this could justify commencing the work without approval and otherwise than in accordance with the conditions of the existing approval.

40 On 19 September 2002, the boiler collapsed as I have said. The collapse resulted in death and injury. After the collapse WorkCover closed the Demtech site. It gave Demtech a notice preventing further demolition and notices relating to any further work to be carried out. The latter notices related both to risks caused by the structural instability of boilers 6 and 7 and risks relating to asbestos and SMF. To the extent that it matters, those notices included a statement of WorkCover's opinion that Demtech had breached relevant provisions of the OHS Act.

41 Further, WorkCover caused the site to be sealed for about three weeks following the collapse of boiler 6 to enable investigations to be carried out.

42 At this stage I interpose, that during the course of the hearing before me, Demtech sought to assert that Brambles was in some way at fault for removing, or refusing the use of, a 100 tonne capacity excavator that it had provided or permitted Demtech to use at an earlier stage of the boiler demolition works. There was, however, no obligation on Brambles to provide any equipment. On the contrary, clause 12.1.1 of the General Conditions of the subcontract required Demtech to provide all materials and equipment necessary to enable it to carry out the boiler demolition works.

43 On 24 October 2002, Brambles gave Demtech what I have had called the show cause notice. Demtech responded on 30 October 2002. Brambles took over the site on 4 November 2002.

44 It will be necessary to consider in a little more detail in due course the terms of the show cause notice. It will be also be necessary to consider the terms of Demtech's response. At this stage I need only record that Demtech's response included material from HLA which purported to show that available and accessible asbestos had been removed from certain parts of the site. The areas that HLA had inspected, and were the subject of its certification, were limited in extent. They did not include scrap stockpiles, nor did they include the immediate vicinity of boiler 6.

45 As I have already indicated, Brambles subcontracted the performance of the demolition of the boiler work to Moltoni Adams. Shortly after Moltoni Adams started work on the site, it was found that the site was heavily contaminated with asbestos. Thereupon, in November 2002, Brambles retained Davis Langdon Australia (“DLA”), a firm of quantity surveyors, to record work undertaken by Moltoni Adams as a consultant. The work undertaken by DLA was intended to show, and did show, how much asbestos was found on and removed from the site.

Factual findings - asbestos and SMF

46 I am satisfied that immediately prior to the collapse of boiler 6, there were substantial quantities of asbestos and SMF still in boiler 6. I am satisfied that, after and as a result of the collapse of boiler 6, substantial quantities of asbestos and SMF were released and were dispersed over the site.

47 Indeed, the evidence on this point is overwhelming. Ms Wirepa of DLA kept records of her detailed, virtually daily, inspections of the site. Her records referred to numerous observations of substances that were believed to be asbestos or SMF. The identification of those substances was confirmed by laboratory analysis performed by HLA, whose analyses Ms Wirepa produced. Ms Wirepa's evidence was further supported by detailed field notes (including both notes kept by her and notes made by others under her supervision and control) and by photographs taken by her.

48 I should say that no objection was taken to the records of the analyses performed by HLA, so that it was not necessary for the person or persons who had performed those analyses to be called to prove them.

49 Ms Wirepa's evidence was further corroborated by Mr Russell (of HLA) who undertook preparation of the hazardous materials operational plan and environment monitoring for Moltoni Adams.

50 In my view, the evidence is clear that the site was free of observable or detectable unconfined asbestos prior to the collapse of boiler 6. Asbestos, in substantial quantities, was observed on the site after the collapse of boiler 6. It could only have been generated by that collapse: particularly having regard to the intervention of WorkCover (see paras [40] and [41] above).

51 Demtech sought to suggest that boiler 6 was, relevantly, free of asbestos prior to its collapse. However, this suggestion involved what might at best be called a misinterpretation of the certification provided by HLA that formed part of Demtech's response to the show cause notice. The effect of that certification was that, to the extent that visual inspection could reveal, boiler 6 had been stripped of asbestos; but there were parts of the boiler equipment that could not be inspected, and it was possible that there was further asbestos to be found. Mr Russell so explained the certification and I accept his evidence. I do so the more readily because what he said is completely consistent with a fair reading of the certification. That reading, in my view, is inconsistent with the interpretation propounded by Demtech.

52 Further, Mr Russell said that, prior to the collapse of boiler 6, he had discussed with Mr Britton of Demtech the possibility that there was still asbestos in boiler 6 and that Mr Britton accepted this. I accept Mr Russell's evidence: particularly since, although Mr Britton was present throughout the hearing (he and another director, Mr Gregory Banks, having been given leave to represent Demtech), he did not give evidence.

53 Further, Mr Russell said that after the collapse of boiler 6, Mr Britton confirmed to him that there were significant quantities of loose asbestos on the site. I accept this evidence. There has been no evidence that could have showed that the asbestos that was observed on the site after the collapse (and which was not present in an unconfined state prior to the collapse) came from anywhere other than boiler 6. Specifically, Mr Britton, the "competent person" approved by WorkCover and the person in Demtech who had the responsibility for the removal and disposal of the asbestos, gave no evidence.

54 Ms Wirepa's evidence showed that some 55.58 tonnes of asbestos contaminant were removed from the site between 29 November 2002 and 7 February 2003, and that a further 20.74 tonnes were removed between 5 March 2003 and 4 July 2003. Her evidence also showed that some 778.3 tonnes of contaminated soil were removed from the site between 20 January 2002 and 28 January 2002, and that a further 2034.77 tonnes of contaminated soil and rubble were removed from the site between 4 April 2003 and 20 June 2003. It will be necessary to consider later the nature of the contaminated soil and rubble and the necessity for its removal.

55 In setting out those quantities, I should make it quite clear that not all the asbestos contaminant that was removed between 20 November 2002 and 4 July 2003 could be said to have come from boiler 6. I have no doubt that at least some came from boiler 7 (the demolition of which had not commenced when boiler 6 collapsed). However, it is clear that some of the asbestos contaminant did come from the collapse of boiler 6. It is also clear that, when Demtech vacated the site, there was a substantial quantity of bagged asbestos material left behind. The evidence of Ms Wirepa and of Mr Ian Gregson, an asbestos expert in the employ of the GHD consulting engineers, was that some, at least, of the asbestos was not bagged securely.

Conclusions - asbestos and SMF

56 Before I set out my conclusions, I must make it clear that, in expressing views on possible contraventions of the OHS Act or OHS Regulation, I am not to be taken as saying that offences have been made out on the criminal standard of proof.

57 My conclusions are based upon the evidence before me. I have no doubt that that evidence is but a small part of the evidence available to WorkCover. Because Demtech did not have legal representation, the evidence before me was not thoroughly tested by cross-examination. My conclusions also reflect the civil standard of proof. That is because the real question is not whether Demtech breached relevant legislation (so as to be exposed to penalties) but whether it has failed to comply with relevant provisions of the subcontract that required it to comply with relevant legislation. The former question is one that would require decision by application of the criminal standard of proof. The latter, in my view, requires decision by application of the civil standard of proof.

58 On the evidence been me, and on the civil standard of proof, I conclude that Demtech, by allowing unconfined asbestos to be dispersed over the site, by failing to remove asbestos as quickly as possible from the site, and by failing to take appropriate steps (whether by safely bagging, spraying or other means) to render asbestos harmless, has:

(1) Not ensured the safety of its employees at the site: s 8 of the OHS Act.

(2) Not ensured that its employees were not exposed to atmospheric contaminant: clause 51 of the OHS Regulation.

(3) Not ensured that asbestos work was carried out appropriately in accordance with relevant NOHS Commission documents: clause 259(1) of the OHS Regulation.

(4) Not identified or implemented means to prevent the uncontrolled disturbance of asbestos-containing material whilst construction work was being carried out: clause 259(3) of the OHS Regulation.

(5) Not ensured that appropriate procedures were in place for the containment and disposal of the asbestos as required: clause 295(4) of the OHS Regulation.

(6) Not done friable asbestos removal (I interpose that I am satisfied on the abundant evidence on the point from Ms Wirepa, Mr Russell and Mr Gregson, that there was friable asbestos present on the site) in accordance with the terms of the relevant permits: clause 332(1) of the OHS Regulation.

(7) Failed to collect, cover and store and dispose of asbestos waste: clause 29 of the Protection of the Environment Operations (Waste Control) Regulation 1996.

(8) Not adopted demolition techniques which minimised the release of the dust: clause 1.6.2.2 of AS 2601-1991 and clause 1.7.2.2 of AS 2601-2001.

59 It follows in relation to asbestos, that Demtech has breached a number of provisions of the subcontract, including clauses 7.2.1, 9.1.1 and 13.1.2 (in each case of the general conditions of contract) and clauses 1.1, 1.4 and 4.2 of the environmental conditions forming part of the subcontract. Further, it follows, in relation to asbestos, that Demtech breached clauses 3, 5 and 8 of the Specification BHPMS 004 that forms part of the subcontract, and clause 2.5.1 of Appendix 2 to that Specification.

Factual finding: demolition work/collapse of boiler 6

60 There has been a deal of evidence and some submissions directed to the cause of the collapse. I do not intend to make any finding as to the cause of the collapse of boiler 6. Firstly, this is the subject of the WorkCover investigation and (because of the death of Mr Rees) a coronial inquiry. The investigations by WorkCover, and the coronial inquiry, will no doubt be far more extensive and produce a far greater body of evidence, than the proceedings before me.

61 Secondly, I do not think that it is necessary for me to seek to find a reason for the collapse of boiler 6. It is apparent that demolition work had begun and that the boiler collapsed whilst that demolition work was being carried out. If Demtech breached its contractual obligations in relation to the manner of carrying out that demolition work, then that is enough to show breach of contract and to lead to consideration of the validity of the show cause notice.

62 The original idea was, apparently, to induce the collapse of boiler 6 by the method described in the August work plan. In effect, that would have caused the structure to collapse towards the north. This could not be done because there was insufficient clear ground for machinery to operate as the August work plan, apparently, required.

63 As I have noted, the August work plan was submitted to and approved by WorkCover.

64 The September work plan differed from the approved August work plan including, as I have said, in relation to the direction in which the structure was to drop and the use of different equipment. It was also proposed to change the August work plan method which had, in substance, required the use of the boiler as a pendulum.

65 The work undertaken on 18 September 2002, and the work being carried out on 19 September 2002 when boiler 6 collapsed, was work done in pursuance of the unapproved September work plan. No permit had been obtained for that work plan. Further, as Mr Porta conceded in cross-examination, the September work plan did not include a risk avoidance plan: clause 331(i) of the OHS Regulation. See T 166.10 - .40.

66 The work that Demtech did on 18 and 19 September 2002 was not consistent with the approved August work plan and did not comply with the requirements of condition 3 of the permit for that August work plan (requiring stabilisation of the structure during demolition work). Nor, to the extent that it matters, did Demtech give seven days' notice to WorkCover as required by clause 333(i)(g) of the OHS Regulation.

67 Brambles relied on expert evidence given by Mr Terrence Roy Kershaw, a structural engineer. There is a difficulty with his evidence in that a number of the calculations that he performed are based on an assumed mass for the boiler (in boiler 6) of some 500 tonnes. This is an assumption that he sought to justify not by reference to any construction documents or other measurements but by reference to the mass of steel - said to be some 1,700 tonnes - collected from boiler 6 and boiler 7 (that included both the supporting structure and the boilers themselves). Mr Kershaw further relied upon his own, substantial, experience in the design and investigation of such equipment.

68 Mr Porta held the opinion, apparently based on calculations made by him, which themselves were based on drawings and his own observations, that the boiler in boiler 6 weighed some 250 tonnes. However, in documents made by him at the time of the collapse, he referred to a mass of 300 tonnes. I do not find Mr Porta's attempts to explain this discrepancy convincing. If it were necessary to make a finding I would conclude that the boiler in the boiler 6 structure weighed at least 300 tonnes at the time of the collapse. I note that Mr Kershaw's calculations assume, on an alternative basis, a mass in that vicinity.

69 However, because as I have said I do not intend to find what was the cause of the collapse, I do not think that it is necessary for me to reach a conclusion on the mass of the boiler. It is sufficient to note that, if this point were relevant, Mr Kershaw's calculations and opinion (which on this point I accept) would show that the proposed method of collapse was unsound even at an assumed mass of 300 tonnes.

70 Mr Porta gave evidence that the proposed method of collapse of boiler 6 (ie, the method encompassed by the September work plan) was safe. Mr Kershaw said it was not. I prefer Mr Kershaw's evidence. Mr Kershaw demonstrated, and I accept, that there are fundamental flaws in Mr Porta's calculations. The effect of those flaws is to undermine completely the conclusions that Mr Porta sought to draw from his calculations. Mr Kershaw's evidence shows, and I find, that Mr Porta's calculations, when corrected (and I note that Mr Porta did not really dispute the criticisms made of his calculations by Mr Kershaw) show that the structure of boiler 6 was likely to fail as a result of the implementation of the method that was in progress when, in fact, boiler 6 did collapse.

71 In substance, the method finally chosen involved the removal of a number of the horizontal supporting beams and the cutting of another. The effect of those steps was to remove substantial (although not the entirety) of the lateral support from one column to another. The method then required the cutting of substantial triangular notches in one face of the flange of two of the columns, and the making of horizontal cuts opposite the notches in the opposite flange. There were three such sets of cuts to be made in each column, the effect being to create a "hinge". The intention was the columns would be pulled by slings attached to excavators and that they would, in effect, collapse around the central cuts acting as a hinge.

72 When the collapse occurred, cuts were being made in the south western column of the boiler 6 structure. Mr Porta's calculations purported to show that that column would, notwithstanding the cuts, retain sufficient axial strength to resist the load imposed upon it. However, as Mr Kershaw showed, Mr Porta's calculations were fundamentally flawed. The effect of making the cuts was that the column was carrying axial loads above the yield strength of the mild steel from which it was fabricated. I interpose that, in this instance, Mr Kershaw did not use his own assumed mass of 500 tonnes, but rather a loading derived from Mr Porta's assumed mass of 300 tonnes.

73 Further, no attempt was made to brace or stabilise the supporting structure forming part of boiler 6, either (as WorkCover had suggested) by supporting it with heavy machinery or through some system of guy ropes, or by any other system. In this context, I note that AS 2601-1991, in clause 3.3.1.2, requires structures to be kept in a safe and stable condition during the demolition process. That was not done, nor was there any attempt made to do it.

74 The result, in my opinion, is that the process of the demolition was inherently unsafe. The structure was being progressively destabilised by removal and cutting of the beams and by the making of cuts in the southwest column, without any alternative source of stability being provided. Mr Porta conceded that, in substance, his approach was to make a cut and to "observe how it goes". He said that sometimes, when this happens, the structure will move, which "frightens the hell out of everyone ... and we immediately reassess what we are doing" T 166.40 - .45. In truth, I think, Mr Porta's method was to keep reducing the stability of the structure until, in his judgment, it reached a point where it could easily be pulled down.

75 Further, the inherently unsafe nature of the process was exacerbated by the wholesale failure to comply with relevant requirements of AS 2601-1991. Those requirements include the performance of an initial examination (clause 1.7.1), dealing with the matters listed in clause 1.7.2, and the preparation of a work plan (again, clause 1.7.1) that complies with clause 1.7.3. Indeed, it became painfully obvious, in the course of Mr Porta's re-examination, that he had no real knowledge or understanding of the requirements of AS 2601-1991: T 173.30 - 177.30.

Conclusions: demolition work/collapse of boiler 6

76 I repeat the qualifications which precede my conclusions relating to asbestos and SMF.

77 I find that the demolition method propounded by Demtech in September 2002, pursuant to which work commenced on 18 September 2002 and finished on 19 September 2002, was inherently unsafe. Even if it be accepted (for the purposes of argument) that Demtech was entitled to rely upon Mr Porta's calculations and assurances, I find it inherently dangerous to carry out a demolition process which involved progressively weakening the structure without providing alternative support.

78 I find that the work that was being undertaken on 18 and 19 September 2002 was inconsistent with the existing approval from WorkCover and was not the subject of any other approval from WorkCover.

79 I therefore find, on the civil standard of proof, that in employing that method of demolition (to the extent it was done prior to the collapse) Demtech:

(1) Did not ensure the safety of its employees: s 8 of the OHS Act.

(2) Did not ensure that the demolition works were carried out in accordance with the requirements of AS 2601-1991 and, to the extent that they add anything, the requirements of Pt 8.6 of the OHS Regulation: Clause 247 of the OHS regulation.

80 Further, I repeat findings 6 and 8 set out in para [58] above relating to asbestos and SMF.

81 It follows that in relation to the demolition of boiler 6, Demtech breached clauses 7.2.1, 9.1.1 and 13.1.2 of the General Conditions of contract. It also breached the requirements of clause 3 of the Specification (which imposed a requirement for compliance with AS 2601-1991 and relevant legislation).

Serious breach

82 I refer to the definition of serious breach in clause 13.2.4(c). By s 86 of the OHS Act and clause 341 of the OHS Regulation, an occurrence that results in a person being killed and an event or circumstance presenting a risk to health or safety, gives rise to a notification obligation.

83 It must follow, in my opinion, that all the contraventions I have found in relation to uncontrolled release of asbestos and SMF were serious breaches because they were required, under s 86 and clause 341, to be notified to WorkCover. It also follows, in my opinion, that the breaches relating to the adoption of the method of demolition works were serious breaches. Even if it be correct to say that it cannot be concluded that they are serious breaches as a result of the death of Mr Rees (because I have specifically avoided stating any conclusion as the reason for the collapse of boiler 6), my findings mean that the inherently dangerous nature of the Demtech demolition process that was proposed and commenced gave rise to a notification obligation because that method, and its performance, each presented a risk to health and safety. That is so even if (contrary to what, in fact, happened) it could not be said to be "immediately threatening to life".

84 I therefore find that Brambles was justified, under clause 14.1.1(g) of the General Conditions, in giving the show cause notice to Demtech.

85 No submission was put that the form of the notice was inadequate or defective. The requirements for such notices have been stated in a number of the cases. It is necessary to refer only to the decision of the Full Court of the Supreme Court of Queensland in Yendex Pty Ltd v Prince Constructions Pty Ltd (1988) 5 BCL 74. The Full Court said, in substance, that such a notice was required to convey to the builder what was said to be amiss in the performance of its work, so that the builder could turn its mind to what was alleged and respond and show cause.

86 In the present case, I find the notice was sufficient in form. When read against the background of the collapse of boiler 6, it made crystal clear to Demtech what were the complaints, and allegations of breach, that Brambles were raising.

87 Further, I find that the serious breaches were incapable of remedy. As to the breaches relating to the demolition process; that is self evident. The structure has collapsed. Mr Rees has been killed. Neither of those events could be “remedied”, no matter how one construes that term.

88 Further, in my opinion, the same is true of the uncontrolled release of asbestos. It could be, and with considerable labour and expense was, cleaned up. However, whilst it was present on the site, and before it was cleaned up, it presented a risk to life and safety. The clean up that occurred did not retrospectively undo that risk or remove it. The breach, therefore, could not be remedied; at best its consequences could be ameliorated.

89 I am fortified in the conclusions that I have reached as to the serious nature of the breaches, because of the terms of Demtech's response to the show cause notice. That response was, in my view, evasive and in one respect dishonest. In substance, Demtech sought to offer no justification for what had happened. Insofar as it produced plans and analyses, these plans and analyses were supplied to Brambles after the collapse of boiler 6 had occurred, and related to work to be done in the future. They did not relate, and could not be seen to have related, to the work that had been done (including the work that led up to the collapse of boiler 6).

90 Further, insofar as Demtech submitted reports from HLA to Brambles under the cover of its response, it seriously misrepresented the true nature of those reports by omitting to provide a site plan that had been provided by HLA. The effect of omitting the site plan was to obscure the fact that the recommendations contained in HLA’s materials related only to a very small part of the site - a part that, as I have noted, did not include boiler 6 and its immediate environs.

91 Further, Demtech has not called any evidence, expert or other, that would justify its position. The only witness that it has called is Mr Porta. I have set out, to the extent it is necessary, my findings in respect of his evidence. It is sufficient to say that that evidence does not justify in any way the position taken by Demtech in its response to the show cause notice.

92 I therefore find that Brambles was entitled, pursuant to clause 14.1.2, to take the works out of the control of Demtech and to exercise its rights under clause 14.2.1 itself to complete the works. As clause 14.2.2 recognises, that right could be exercised by subcontracting the remaining works, as was done.

93 Clauses 14.2.5 and 26 entitle Brambles to recover from Demtech the amount expended by it including works after allowing any further amount that would have been payable to Demtech had the Demtech subcontract proceeded.

Quantum

94 Except in one respect, Brambles’ evidence as to the amount owed to it was not challenged. The one challenge that was made related to amounts claimed for the removal and disposal of contaminated soil.

95 Under the head contract, contaminated soil (ie, soil contaminated with heavy metal and other noxious substances as a result of the steel making and ancillary operations hitherto carried out on the site) was not to be removed. It was to be retained on site. BHP apparently proposed some method of sealing and capping it so that it would present no continuing danger to human life and activities.

96 Neither the head contract nor the subcontract required the removal of contaminated soil. Brambles claims that, as a result of the collapse of boiler 6 and the dispersal of the asbestos and SMFs that had then occurred, a substantial portion of soil and rubble was contaminated with asbestos. It said that the only safe method after dealing with the contaminated soil and rubble was to remove them in an approved manner and dispose of them safely. This, it said, it caused to be done.

97 I find that a substantial degree of soil and rubble was contaminated as a result of the dispersal of asbestos and SMF consequent upon the collapse of boiler 6. Again, I accept and rely upon the evidence of, in particular, Ms Wirepa, Mr Russell and Mr Gregson. Further, in accordance with Mr Gregson's evidence, I find that the only safe method of dealing with that soil was to remove it and dispose of it, as was done. The same applies to the contaminated rubble. I therefore find that Brambles is entitled to recover it as well as the other (unchallenged) components of its claim.

98 The total of the claim is $1,985,354. Interest to date by my calculations (and allowing for the offset of moneys owed but not paid to Demtech) is $100,166.

Conclusion and orders

99 The totality of Brambles’ claim including interest is $2,085,520.

100 I direct entry of judgment for the cross-claimant against the cross-defendant on the amended cross-claim in the sum of $2,085,520. I order the cross-defendant to pay the cross-claimant's costs of the cross-claim. I order that the exhibits be retained, dealt with and disposed of in accordance with the Rules.

******

Last Modified: 04/05/2004