Downer EDI Rail PL v John Holland PL

[2018] NSWSC 326

Supreme Court

New South Wales

• Summary available

Medium Neutral Citation:

Downer EDI Rail Pty Ltd v John Holland Pty Ltd; John Holland Pty Ltd v QBE Insurance (Australia) Ltd (No 5); Kellogg Brown & Root Pty Ltd v John Holland Pty Ltd (No 4) [2018] NSWSC 326

Hearing dates:

6–28 November, 1-8 and 12 December 2017; further submissions 31 December 2017 and 24 January 2018

Decision date:

20 March 2018

Jurisdiction:

Equity - Technology and Construction List

Before:

Stevenson J

Decision:

Proceedings to be dismissed

Catchwords:

CONTRACTS — Remedies – Damages – Proof of loss or damage – contract to design and construct water detention system – where design used plastic cells placed in underground tanks – whether there has been “loss” – whether detention system has failed – whether detention system will last its design life – whether detention system requires remediation or replacement

 

CIVIL PROCEDURE — pleadings – whether plaintiffs’ case as developed in submissions is within Technology & Construction List Statement – whether it is open to the plaintiffs to assert deficient construction of water detention system in light of the pleadings - ambit of claims available for misleading or deceptive conduct

 

CONTRACTS — Construction – Interpretation –hierarchy of construction contracts – whether risk passed from first plaintiff to second plaintiff

 

CONTRACTS — Construction – Interpretation – where contract defines “loss” with certain exceptions – whether reference to specific clause includes reference to chaussette to that clause

 

CONTRACTS — Remedies – Damages – Measure – alternative transaction case – proof of counterfactual

 

CONSUMER LAW — Misleading and deceptive conduct – whether representations were in fact made – whether any reliance – indirect causation

  INSURANCE — Liability insurance – construction of insuring clause – “in respect of” property damage – whether policy would have responded

Legislation Cited:

Law Reform (Miscellaneous Provisions) Act 1946 (NSW)
Transport Administration Amendment Act 2010 (NSW)
Trade Practices Act 1974 (Cth)

Cases Cited:

ABN AMRO Bank NV v Bathurst Regional Council (2014) 224 FCR 1; [2014] FCAFC 65
Banco de Portugal v Waterlow [1932] AC 452
Chowder Bay Pty Ltd v Paganin [2017] FCA 332
Digi-Tech (Australia) Pty Ltd v Brand (2004) 62 IPR 184; [2004] NSWCA 58
Finishing Services Pty Ltd v Lactos Fresh Pty Ltd [2006] FCAFC 177
Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1; [1986] HCA 3
Henville v Walker (2001) 206 CLR 459; [2001] HCA 52
Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653; [2008] NSWCA 206
Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526
Jones v Dunkel (1959) 101 CLR 298
Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313
London & South of England Building Society v Stone [1983] 1 WLR 1242
Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; [1998] HCA 69
McNee v P-Value Pty Ltd [2016] VSCA 223
Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388; [2004] HCA 3
Protec Pacific Pty Ltd v Steuler Services GmbH & Co KG [2014] VSCA 338
Re HIH Insurance Ltd (In liq) [2016] NSWSC 482
Sacher Investments Pty Ltd v Forma Stereo Consultants Pty Ltd [1976] 1 NSWLR 5
Segenhoe Pty Ltd v Akins (1990) 29 NSWLR 569
Siegwerk Australia Pty Ltd (in liq) v Nuplex Industries (Aust) Pty Ltd [2013] FCAFC 130
SMA Solar Technology AG v Beyond Building Systems Pty Ltd (No 5) [2012] FCA 1483
Tesco Stores Ltd v Constable [2008] EWCA Civ 362

Texts Cited:

H McGregor, McGregor on Damages (14th ed 1980)
J Powell, R Stewart, M Cannon, D Turner, Jackson & Powell on Professional Liability (6th ed 2007)

Category:

Principal judgment

Parties:

In proceedings 2015/120806:
Downer EDI Rail Pty Ltd (First Plaintiff)
EDI Rail PPP Maintenance Pty Ltd (Second Plaintiff)
John Holland Pty Ltd (First Defendant/Cross-Claimant)
Kellogg Brown & Root Pty Ltd (Second Defendant)
Atlantis Corporation Pty Ltd (Third Defendant)
QBE Insurance (Australia) Limited (Fourth Defendant/Cross-Defendant)

  In proceedings 2017/69950:
Kellogg Brown & Root Pty Ltd (Plaintiff)
John Holland Pty Ltd (Defendant)

Representation:

Counsel:
In proceedings 2015/120806:
S J Rushton SC with B McManus (Plaintiffs)
P S Braham SC with S Gray (First Defendant/Cross-Claimant)
D T Miller SC with M J Smith (Second Defendant)
M T McCulloch SC with T Marskell (Fourth Defendant/Cross-Defendant)

 

In proceedings 2017/69950:
D T Miller SC with M J Smith (Plaintiff)
P S Braham SC with S Gray (Defendant)

 

Solicitors:
In proceedings 2015/120806:
Colin Biggers & Paisley (Plaintiffs)
HWL Ebsworth Lawyers (First Defendant)
Squire Patton Boggs (Second Defendant)
Gillis Delaney Lawyers (Fourth Defendant)

  In proceedings 2017/69950:
Squire Patton Boggs (Plaintiff)
HWL Ebsworth Lawyers (Defendant)

File Number(s):

SC 2015/120806; SC 2017/69950

table of contents

Judgment

Decision

The contractual framework

The RailCorp/Reliance Rail Contract

The Reliance Rail/Downer contract

The Reliance Rail/EDI Rail contract

The Downer/John Holland contract

John Holland/KBR contract

KBR/Atlantis contract

The contractual hierarchy

What complaint about John Holland is open to Downer on the pleadings?

What is said to have gone wrong?

The carpark

Depressions in the rail area

Water and sand

Collapsed cells

The design life of the Detention System

Did, and/or will, the cells fail during their design life?

The testing by Dr Scheirs

Loss of strength over time

The TRL testing

The short term testing

The long term “creep” testing

Conclusion as to the Detention System in the rail area

The collapse of the carpark

Conclusion thus far

The competing claims

Downer’s claim in contract against John Holland

Clause 34.3

Clause 34.5

Clause 35

Has there been a “claim” for the purposes of cl 35?

The limitation in cl 35.2

The “no loss” point

The design of the Detention System

The 10 April 2007 “Agreement for Engagement of Consultant for Design and Documentation”

The process leading to the KBR design

The final design - KBR’s Critical Design Review

The meaning of the design drawing

The KBR report was not prepared in a manner that accorded with widely held peer opinion at the time as competent professional practice

KBR’s failure to take account of creep

The counterfactual

KBR’s failure to specify strength testing

Downer’s retainer of Cardno

The Cardno report

The nature of John Holland’s obligations concerning the Cardno recommendations

John Holland’s “implementation” of the Cardno recommendations

Information to back up a design life of 50 years

Testing before and during installation

Construction loading: crane point loads

The Loffel revelation

Misleading or deceptive conduct

The cross-claims

QBE issues

Would the policies have responded?

Quantum

Carpark

Rail area – investigation costs

Rail area – cost to replace the Detention System

Rail area – “zone of influence”

Rail area – additional costs

Downer overhead recovery

Conclusion

Judgment

1. The Auburn Maintenance Centre lies adjacent to the main western railway line between Auburn (to the east) and Clyde (to the west). Its function is to provide maintenance services to the Waratah fleet of trains on the Sydney rail network.

2. The Maintenance Centre is located on land owned by Rail Corporation of New South Wales (“RailCorp”). It is a major piece of infrastructure. It is some 2 km in length and between 100 m and 200 m wide. It consists of 7 maintenance roads (rail lines) with a capacity for 1,000 cars, an automatic wash plant and an underfloor wheel-polishing lathe. Within the Maintenance Centre is a maintenance building that is some 200 m long and 80 m wide.

3. Auburn City Council required that there be incorporated into the Maintenance Centre a stormwater detention system (the “Detention System”) to accommodate a 1 in 50 year storm event. The Detention System was to capture water falling onto the site and divert it, in a controlled manner and at a specified maximum discharge rate, to the nearby Duck River at the western end of the site.

4. These proceedings are concerned with efficacy of the Detention System.

5. RailCorp contracted the design and construction of the Maintenance Centre to Reliance Rail Pty Ltd, which now has a licence from RailCorp to operate the Maintenance Centre. Reliance Rail owns the fixtures and most of the equipment associated with the Maintenance Centre.

6. Reliance Rail sub-contracted design and construction of the Maintenance Centre to the first plaintiff, Downer EDI Rail Pty Ltd (“Downer”) and the provision of “Through Life Services” (in effect, the maintenance of the Maintenance Centre for 30 years) to the second plaintiff, a wholly owned subsidiary of Downer, EDI Rail PPP Maintenance Pty Ltd (“EDI Rail”).

7. Downer sub-subcontracted the design and construction of the Maintenance Centre to the first defendant, John Holland Pty Ltd.

8. The Detention System was to comprise a large detention tank under a carpark at the western end of the site with drainage in the rail area to be provided by slotted concrete pipes.

9. Ultimately, an alternative system was adopted. The alternative system involved an “at source detention system” using a series of arrays of plastic cells made from panels made from recycled polypropylene. The panels were to be connected to each other horizontally and vertically, covered with geofabric, and buried at specified depths beneath the rail area and a carpark at the western end of the site.

10. John Holland sub-contracted the design of this alternative system to the second defendant, Kellogg Brown & Root Pty Ltd (“KBR”) and the manufacture of the plastic cells to the third defendant, Atlantis Corporation Pty Ltd. Atlantis is now in administration. The fourth defendant, QBE Insurance (Australia) Ltd, is its insurer.

11. I will return to the detail of these contractual relationships.

12. There were to be two aspects to the Detention System as designed by KBR.

13. The first aspect was one large tank, comprised of 33,000 cells, laid underneath the carpark.

14. The second aspect is a series of linear tanks, comprised of 45,000 single height cells, laid underneath the rail area. These cells are divided into 136 rows of varying width.

15. The large tank underneath the carpark has now been replaced with a concrete structure following the collapse of the carpark in early 2013. Before the collapse, the tank had been intended to control water runoff from the carpark and from a neighbouring site known as the Auburn Stabling Yard.

16. The tanks underneath the rail area are still in place. They are intended to provide longitudinal drainage and detention storage for stormwater that falls on the rail area. The tanks then release the stormwater downstream into outlet pipelines which run to a stormwater trunk main some 1.5 km in length on the northern boundary of the site. The stormwater trunk main discharges downstream of the rail area, ultimately to Duck River.

17. In February 2013, progressive subsidence and cracking were observed in the carpark. It became severe. Grout was used to arrest progress of the collapse, cutting off the collapse and preventing it spreading to the rest of the carpark. Ultimately, the Atlantis tank under the carpark was exhumed and replaced with a concrete tank.

18. Downer contends that the cells under the carpark would not have lasted their design life (said to be 100, or alternatively, 50 years) had they not been replaced following the carpark collapse.

19. A short time later, in May 2013, surface depressions were observed in the ballast overlaying the rail area. These have progressed. Some have been investigated.

20. Downer contends that the observed depressions may well bespeak systemic failure of the Detention System in the rail area and that the Detention System will not last its design life. I will return to the question as to whether surface depressions indicate failure in the underlying cells ([89] to [107] below).

21. Downer contends that:

1. the alleged deficiencies in the Detention System are a result of its poor construction (there is a dispute as to whether this case is open on the pleadings) and design: particularly the use of the Atlantis cells;

2. it has suffered loss as, under the contract between it and Reliance Rail, it is obliged to replace the Detention System, using slotted concrete pipes, as was originally planned, at a cost of some $28.6 million; and

3. under the contract between it and John Holland, and by reason of John Holland’s allegedly misleading or deceptive conduct, John Holland must indemnify it for this loss and, in addition, must indemnify it for some $4 million it has expended investigating problems in the rail area, for further costs in the order of $4 million it has incurred concerning the rail area, and some $10.6 million it says it incurred remediating the carpark following its collapse.

22. EDI Rail alleges that, if it has any obligation to rectify the Detention System, the loss it will thereby suffer is also by reason of misleading or deceptive conduct of John Holland, KBR or Atlantis.

23. John Holland contends that if it has any liability to Downer (or EDI Rail) it is entitled, on various bases, to pass this liability on to KBR and Atlantis (and thus QBE).

24. KBR makes a similar claim against Atlantis (and thus QBE), assuming it is liable to either Downer or John Holland.

25. In its Technology & Construction List Statement, Downer also alleged that each of John Holland, KBR and Atlantis owed it a duty of care and that it has suffered loss as a result of a breach of those duties. The claim was abandoned during the course of the hearing.

Decision

26. The first conclusion to which I have come is that, on the pleadings, it is not open to Downer to make any complaint of John Holland concerning the manner in which the Detention System was constructed. This is no idle point. I was told by John Holland’s senior counsel that John Holland saw no complaint about defective construction on its reading of the List Statement and for that reason did not join the construction sub-contractor as a cross-defendant.

27. So far as concerns the design of the Detention System, I have concluded that Downer has not proved on the probabilities that:

1. the carpark collapse was the result of the design of the Detention System;

2. the Detention System under the rail area will not last its design life (which I find to be 50 years); or

3. the Detention System under the carpark would not have lasted its design life had it not collapsed.

28. Those conclusions mean that there is no relevant consequence to whatever shortcomings there may have been in the design of the Detention System.

29. It follows that the proceedings must be dismissed.

The contractual framework

30. A contractual hierarchy was created for the purpose of the design and construction of the Maintenance Centre.

31. To a very large extent, the contracts are “back to back” and in the same, or similar, terms.

The RailCorp/Reliance Rail Contract

32. In December 2006, RailCorp entered into a contract with Reliance Rail to design, construct and commission the Maintenance Centre.

33. By that contract, Reliance Rail also agreed to provide Through Life Support for the Maintenance Centre for 30 years.

34. The contract defines Through Life Support to mean:

“[T]he Car maintenance services, presentation services, operations services, technical services, logistics support services, Simulator support services, Maintenance Facility support services, Reimbursable Through Life Support services and other services required to be provided by or otherwise contemplated by the Through Life Support Specifications.”

35. No party took me through the various defined terms incorporated within this definition.

36. However, I understand an obligation to provide Through Life Support under this contract (and in contracts lower in the hierarchy in which the same expression is used) to mean everything necessary to ensure that the Maintenance Centre continues to operate; including remediation of the Detention System, should that be necessary.

The Reliance Rail/Downer contract

37. Also in December 2006, Reliance Rail entered into a contract with Downer to design, construct and commission the Maintenance Centre.

38. Downer did not assume any obligation under the Reliance Rail/Downer contract to provide Through Life Support of the Maintenance Centre.

The Reliance Rail/EDI Rail contract

39. The obligation to provide Through Life Support was assumed by EDI Rail in a contract made between it and Reliance Rail on the same day.

40. By the Reliance Rail/EDI Rail contract, EDI Rail agreed to provide Through Life Support of the Maintenance Centre for 30 years, consistently with the corresponding provision in the RailCorp/Reliance Rail contract.

41. EDI Rail did not subcontract its obligation to provide Through Life Support obligations to any of the defendants; or at all.

The Downer/John Holland contract

42. On 3 December 2006, Downer entered a contract with John Holland to design, construct and commission the Maintenance Centre.

43. Consistently with the Reliance Rail/Downer contract, the Downer/John Holland contract did not impose on John Holland any Through Life Support obligations.

John Holland/KBR contract

44. On 10 April 2007 John Holland entered a contract with KBR to design the relevant parts of the Maintenance Centre, including the Detention System.

45. KBR designed the Detention System to incorporate into that design the use of the Atlantis Cells.

KBR/Atlantis contract

46. On 15 August 2008 about six weeks after the installation of the cells had commenced, John Holland contracted with Atlantis for the manufacture, supply and certification of the cells.

The contractual hierarchy

47. The contractual hierarchy created for the purpose of the design and construction of the Maintenance Centre can be depicted as follows:

48. As the above diagram makes clear, there is no contractual relationship between EDI Rail and any of the defendants.

49. I will return to the detail of the relevant contractual provisions as necessary later in these reasons.

What complaint about John Holland is open to Downer on the pleadings?

50. In its opening submissions, Downer summarised its complaint concerning John Holland as follows:

“John Holland did not deliver what it was paid to deliver. Whether through breach of its design obligations or a combination of a breach of both its design and construction obligations the [detention system] has failed…

The question is whether John Holland failed to deliver what it was contractually bound to deliver to [Downer].”

51. In oral opening, senior counsel for Downer said:

“Presumably, the issue of construction damage versus design failure will be a matter that is hotly debated between John Holland and KBR. From our point of view, as I have said earlier, [Downer’s] claim is that it has a contract. It did not get what it paid for, and John Holland is bound to provide a full indemnity, whether our loss is because of its faulty design or its faulty construction or a bit of both.”

52. An issue arises as to whether it is open to Downer to make complaint in these proceedings against John Holland about the construction of the Detention System; as opposed to the design of the Detention System and the design and use of the Atlantis cells themselves.

53. As I have said, John Holland contends that, had it appreciated that Downer was intending to allege the defective construction of, as well as the defective design of the Detention System, it would have joined as a cross-defendant the party to whom it sub-contracted that work.

54. John Holland submits that the construction damage case foreshadowed in opening by senior counsel for Downer, and referred to at [51] above is “not available”.

55. That submission directs attention to the particular allegations of contractual breach made in the List Statement.

56. Downer makes many allegations against John Holland concerning the design of the Detention System. I did not understand John Holland to contend that, assuming it can be shown that the Detention System will fail during its Design Life, and that such failure is attributed to its design (specifically, to the use of Atlantis cells, rather than slotted concrete pipes), the necessary allegations of breach of the Downer/John Holland contract are missing from the List Statement.

52. John Holland’s point is, as I understood it, that there is no allegation in the List Statement that the manner in which the Detention System was constructed, that is, the manner in which the Atlantis cells were actually installed at the Maintenance Centre, constituted a breach of the Downer/John Holland contract.

53. The relevant allegations of breach of the Downer/John Holland contract appear in pars C13B, C14, C15, and C16 of the List Statement.

54. Paragraph 13B alleges that John Holland acted in breach of its obligation under cl 10.2 of the contract because it “failed to carry out its activities so as to protect persons and property”.

55. That allegation is particularised by reference to the collapse of the carpark and alleged failures of the Atlantis cells in the rail area.

56. In my opinion, these contentions misstate and reveal a misunderstanding of the nature of the obligation imposed on John Holland by cl 10.2.

57. Clause 10.2 provides:

“[John Holland] must carry out the Subcontractor’s Activities [defined to include “all things or tasks which [John Holland] is…required to do to design, construct and commission the Maintenance Facility Works”] safely and so as to protect persons and property.

If [Downer’s] Representative considers there is a risk of injury to people or damage to property arising from the Subcontractor’s Activities, [that] Representative may direct [John Holland] to change its manner of working or to cease working and [John Holland] must comply with any such direction at its cost”. (Emphasis added.)

63. Clause 10.2 is therefore concerned with safety. It is directed to the safe manner in which John Holland’s activities are required to be carried out, so as to protect persons and property from risk.

64. The clause is not directed to the protection of property from damage generally.

65. The clause does not, contrary to the contention in the List Statement, impose an obligation on John Holland to “carry out its activities so as to protect persons and property”. Rather, it imposes on John Holland an obligation to act “safely and so as to protect persons and property”. There is no suggestion in the evidence that John Holland acted otherwise than safely.

66. Paragraph C14 of the List Statement contains an allegation that in breach of cl 13.1(a) of the Downer/John Holland contract, John Holland did not design the Detention System “in accordance with the relevant Specifications”. Clearly, the allegation is directed to design and not to construction.

67. Paragraph C15 of the List Statement contains an allegation that in breach of cl 14.1 of the Downer/John Holland contract, John Holland did not construct the Detention System “in accordance with the Maintenance Facility Specifications, the Final Design Documentation and the other requirements of [the contract]”. However, as John Holland submitted, this is not an allegation of poor construction or installation. Rather, it is an allegation of non-compliance with the design and specifications.

68. Paragraph C16 of the List Statement contains an allegation that in breach of cl 14.2(a) of the Downer/John Holland contract, the construction of the Detention System “did not satisfy the requirements of that [contract]”.

69. That allegation is not particularised in par C16 itself.

70. However, par C23 of the List Statement contains a lengthy list of “further particulars” of the contractual breaches earlier alleged, including in par C16. These are, in fact, the only particulars given of the allegation in par C16.

71. Of the 30 “further particulars” of breach given in par C23, almost all are, in terms, directed to the design of the Detention System or alleged inadequacies in the Atlantis cells.

72. The “further particulars” that are directed otherwise than to design of the Detention System or to the cells themselves are:

“(b)   John Holland failed to ensure that the vertical and lateral loading capacity prescribed for the Atlantis Cells in the information made available by Atlantis and utilised by the KBR in the design, was applicable and sufficient for the likely load conditions at the AMC.

…

(h)   John Holland failed to ensure adequate load testing was carried out before and during construction to verify load information provided by Atlantis and to replicate the intended design and load conditions at the AMC site.

…

(t)   Contrary to section 3.5 of the Final Design Report, appropriate supervision and verification was not carried out during installation of the Atlantis Cells.

…

(bb)   John Holland failed to ensure that throughout the installation of the AMC project, random samples of Atlantis Cells were collected and tested as detailed in the Cardno Report recommendations, as represented in the 1 July 2008 Atlantis letter provided by John Holland to Downer.”

73. The “Cardno Report” was a report prepared by a firm of engineers, Cardno Low & Hooke Pty Ltd, retained by Downer in January 2008. I discuss it in some detail below (see [455] ff below).

74. During the hearing, senior counsel for Downer referred only to these particulars as being capable of relevance to a faulty construction case. Counsel also mentioned (dd), which I have not set out, but that is a particular of damage.

75. Particulars (h), (t) and (bb) are directed to aspects of construction of the Detention System. Only (t) is directed to the question of the actual installation of the cells but falls well short of an allegation that the cells were damaged during installation.

76. On the final day of the trial, in reply, senior counsel for Downer made the surprising submission that John Holland’s “complaints…in relation to this aspect of the case are feigned”, that “it is highly unlikely [John Holland] was caught out” upon realising it had to meet a case concerning “construction mishaps”, that John Holland “simply had no answer” and that Downer “was entitled to proceed upon the construction warranties”.

77. I do not accept that submission.

78. Downer’s case concerning poor construction against John Holland is confined to the matters particularised at C23 (h), (t) and (bb). I see no allegation there, or elsewhere in the List Statement, that John Holland, through its subcontractor, caused to the cells to be damaged during their installation.

79. John Holland raised this point in opening submissions. I made clear during the hearing that I was not prepared to allow Downer to make out a case beyond the allegations in the List Statement as those allegations were particularised. Downer made no application to amend the List Statement or to expand the particulars to which I have referred.

80. I do accept, however, that part of Downer’s design case is that John Holland did not ensure the capacity of the Atlantis cells was “sufficient for the likely load conditions” at the Maintenance Centre (see C23 (b)) including loads imposed on the cells during construction.

81. In final supplementary written submissions, Downer referred to the allegations in par C21 and C22 of the List Statement of breaches by John Holland of cl 13.2(b) of the Downer/John Holland contract. By that clause, John Holland warranted that all design documentation would satisfy the requirements of the contract and would “be fit for its intended purposes”. Those allegations relate to the design of the Detention System. They do not amount to an allegation that the Downer/John Holland contract imposed on John Holland an obligation to construct the Detention System so that it was fit for purpose.

What is said to have gone wrong?

The carpark

82. Installation of the Atlantis cells at the proposed location of the carpark commenced in March 2009 and was completed in July 2009.

83. In late 2012, Laing O’Rourke Australia Constructions Pty Ltd (not a party to these proceedings) commenced excavation on the adjoining Stabling Yard site for a large stormwater drain. Excavation took place along the boundary to the south of the Maintenance Centre (and north of the Stabling Yard), very close to the carpark which, by then, had been built over the Atlantis cell tank.

84. Laing O’Rourke undertook these works pursuant to a contract with RailCorp, which owns the Stabling Yard site.

85. In early 2013 the southern part of the carpark collapsed.

86. Over one third of the carpark could not be utilised and the Atlantis cell tank under the carpark was rendered ineffective. The Atlantis cell tank was removed in 2014, replaced with a concrete tank, and the carpark rebuilt.

87. The question is whether the collapse of the carpark was caused by a shortcoming in the Atlantis cells, or as a result of the work done on the adjoining site by Laing O’Rourke.

88. I will return to this question after dealing with the position in the rail area.

Depressions in the rail area

89. Depressions were first observed in the ballast overlaying the rail area in May 2013. Over time, 64 surface depressions have been observed.

90. In its List Statement, Downer alleges that “depressions and voids above Atlantis Cells” demonstrate failure of the Detention System in the rail area. That failure is said to arise from John Holland’s breach.

91. Downer submits that the depressions “represent a reliable guide” to failure of the underlying tanks.

92. I am unable to reach either conclusion on the evidence before me.

93. Downer did not establish the cause of the depressions; let alone that there is a correlation between the depressions and any underlying cell failure.

94. Downer accepts that “there can be no certainty as to what has caused an individual surface depression without a physical excavation of the area to determine the condition of the underlying Atlantis Cell and geofabric”.

95. The surface depressions appear above 37 tanks. However only some parts of 12 tanks (comprised of 2,444 cells) have been excavated. Of those 2,444 cells, only 135 cells were exposed and examined. Of those 135 cells, in a system of some 45,000 cells, only 32 were shown to have collapsed or partially collapsed. To my mind this cannot be conclusive of systemic cell failure.

96. Further, Downer accepts that depressions have occurred in areas where there is no underlying cell failure.

97. There is no expert opinion that the depressions are caused only by a failure in the underlying cells.

98. Downer retained Aecom, a firm of consultant engineers, to prepare a number of reports and photographs documenting the site.

99. Aecom appears to have appreciated that there may not be a connection. In September 2014, it reported to EDI Rail:

“…in one particular inspection in early 2014, carried out as part of the visual monitoring program, [EDI Rail] personnel spray painted marks on the ballast where they believe[d] they saw any evidence of depressions or surface ballast disturbance no matter how minor. It is considered that very few of these marks are likely to actually be associated with issues with underlying Atlantis cell tanks”.

100. Dr Christopher Haberfield, Mr Garry Mostyn, and Mr Patrick Wong (expert geotechnical engineers called by KBR, John Holland and QBE respectively) gave evidence that they had experience of ballast in rail areas. Each said that the mere movement of ballast does not itself indicate any problem with the Atlantis cells in the rail area.

101. Dr Haberfield observed that “in coarse granular materials like this, you can’t correlate any little service depressions with what’s at depth. It just doesn’t work that way”.

102. In these circumstances I am not persuaded of a correlation between surface depressions and underlying cell failure.

103. Downer submitted that depressions may be caused by the movement of sand into the Atlantis cells caused “by a failure of one or more of the Atlantis cells and/or tearing of the geofabric”.

104. In making that submission, Downer referred the evidence given by Mr Wong:

“[T]hat when sand enters the cell you will get depression from the surface due to loss of the bedding material overlying the tank”.

105. Immediately before this evidence, the following exchange occurred:

“HIS HONOUR: I think the question is what does sand and or water in the cells tell me about any failure of the cells?

MR MOSTYN: Nothing about failure of the cells in terms of a durability or service life.

HIS HONOUR: Mr Wong?

MR WONG: Yes, I agree with that. It doesn’t reflect on anything about the structural integrity of the cell. The fact that there is sand and water in the cells reflects that there are some defects in the construction, most likely torn or cut geofabric or geofabrics that have not been laid properly, with the appropriate overlap, enabling the sand, water and silt to get in.

106. Thus, Mr Wong did not say that surface depressions, caused by the movement of sand below ground, were caused by a “failure of one or more of the Atlantis cells”. Rather, he said they were likely caused by a defect in the manner in which cells were installed; represented by torn or cut geofabric.

107. I am not able to come to any conclusive view as to what is causing the depressions. I am certainly not persuaded that a shortcoming in the Atlantis cells or in the design of the Detention System has caused the depressions to occur.

Water and sand

108. The other matter in the rail area to which Downer draws attention is a presence in many of the inspected cells of water and sand.

109. After heavy rain, the Detention System is intended to hold back water for around three hours. When it is not raining, the cells are intended to be in a dry condition.

110. The presence of water in the cells shows that the Detention System is not always behaving in this way and that water is remaining within the system.

111. The presence of sand in the cells may show that the surrounding geo-fabric has torn, on occasion, allowing sand ingress. This may show that there was a problem with the manner in which the some cells were actually installed. As I have said, that is not a matter open to complaint on the pleadings.

112. In its reply submissions, Downer described this as being a “serious problem with the functionality of the cells”.

113. But there is no suggestion that, overall, the Detention System is not working. There is, for example, no evidence that the Maintenance Centre regularly floods or that there is some ongoing problem with the manner in which stormwater is drained away to Duck River.

114. On one occasion, on 21 April 2015, parts of the rail area experienced flooding due to substantial rainfall in the preceding 36 hours. But there is no evidence before me as to how the Atlantis cells performed on that occasion, nor to suggest that the flooding was the result of any failure by the Detention System to operate in accordance with its intended design.

115. Each of Mr Mostyn and Mr Wong, as well as one of the experts called by KBR, Mr Fred Gassner, agreed that sand and water in some cells did not bespeak a failure of the cell.

Collapsed cells

116. A small number of cells exposed during the inspections have been found to have collapsed or partially collapsed. But there is no evidence to show that these cells collapsed as a result of any shortcoming in the cells themselves. All of the engineering experts, including Downer’s expert Mr Steven Wilson, agree with this.

117. Mr Wilson gave this evidence:

“Q: Do you accept, then, that no other collapsed cells observed in the rail yard collapsed due to creep rupture?

MR WILSON: I'm not certain about one of the cells. No, that's not collapsed, actually, no. The cells that have collapsed, they appear to be under low loaded areas, so, as I said in the conclave report, the causes of failure could be construction damage. There are two others in there, but creep, I can't specifically say that any of the ones that I've seen have been caused by creep failure at the moment, no.”

118. I am not persuaded that Downer has established that the existence of depressions in the ballast, the collapse of a small number of cells, and the presence of sand and water in some of the cells can lead to the conclusion that the Detention System is failing and needs to be replaced.

119. Downer contends, however, that other evidence shows the Atlantis cells will not perform for the duration of their design life, that the Detention System is bound to fail during its design life, and must for those reasons be replaced.

120. Before considering the evidence about whether the cells will continue to function throughout the design life of the Detention System I will deal with the question of what that design life is.

The design life of the Detention System

121. There was debate before me as to whether the design life of the Detention System was 50 years or 100 years. It is common ground that not much turns on this. That is because it is agreed that if the Atlantis cells are capable of bearing their design load for 50 years, it is very likely that they are also capable of bearing their design load for 100 years.

122. In my opinion, the correct conclusion is that, according to the KBR design, the Detention System had a design life of 50 years.

123. KBR’s final design was contained in a “Critical Design Review” document dated 26 February 2008.

124. Appendix B to that document was entitled “Specifications and Catchment Plan” and provided, under the heading “Design Criteria” that:

The Average Recurrence Interval (ARI) shall be 50 years.

Proposed variations to the design ARI due to site constraints or other factors shall be supported by a risk assessment and shall be approved by the Chief Engineer Bridges and Structures.

The minimum design life of all track drainage components shall be 50 years with consideration given to the site location and groundwater conditions.”

125. Earlier in the 26 February 2008 document, KBR stated:

“The stormwater drainage for the site has been designed to have a minimum operating life of not less than 100 years operating at the required capacities, and have the appropriate level of maintenance.”

126. When read in the light of the earlier references to the need for the system to last 50 years, I accept, as John Holland submitted, that this statement was merely a way of explaining that the design requirement of 50 years had been satisfied, and that there was, in effect, a 50 year margin of safety.

127. In its submissions in reply, Downer did not say anything to the contrary.

128. As emerges below, most of the engineering experts perform their calculations as to the long term strength of the Atlantis cells by reference to a 50 year design life (rather than a 100 year design life).

Did, and/or will, the cells fail during their design life?

129. The central issue in these proceedings is whether the Atlantis cells in the rail area will last their design life, and whether the Atlantis cells in the carpark would have lasted their design life had the carpark not collapsed.

130. Resolution of this issue will determine whether there is any consequence to any criticisms of the design of the Detention System that might be made good.

131. Eleven experts gave evidence before me addressed to this question.

132. Two plastics engineers, Dr John Scheirs and Prof Robert Burford (called by Downer and John Holland respectively) gave evidence as to the quality of the material used in the Atlantis cells.

133. Dr Scheirs and Prof Burford gave their evidence concurrently for a number of hours.

134. Nine structural and geotechnical engineers also gave evidence. I have already mentioned some of them. They were Mr Steven Wilson and Dr Peter Redman (called by Downer), Mr Garry Mostyn, Mr Robert Davies and Mr Anthony Wood (called by John Holland), Dr Christopher Haberfield and Mr Fred Gassner (called by KBR) and Mr Patrick Wong and Mr Lonnie Pack (called by QBE).

135. These experts gave their evidence concurrently over three days.

136. The engineers also conducted a conclave on 17 and 18 October 2017 and produced a joint report.

137. Each of Dr Haberfield, Mr Mostyn, Mr Pack and Mr Wong expressed the opinion that “[w]ith the information available today, we are of the opinion that the [Detention System] tanks as installed will be adequate for 50 and 100 year service life”.

138. Mr Wilson and Mr Davies expressed the opinion that they would not expect that all cells would remain serviceable for 50 years. That opinion was based upon testing carried out the Transport Research Laboratory in the United Kingdom (the “TRL tests”) and evidence given by Dr Scheirs as to the quality of the material used in the cells. I will return to this below.

129. Further, each of Dr Haberfield, Mr Mostyn, Mr Wood, Mr Davies, Mr Wong and Mr Pack concluded that the Drainage System had not failed to an extent where it needs to be replaced or remediated.

130. Only Mr Wilson expressed the different view that, although failures have not yet occurred in areas that would impact on rail operations, “they could occur in the future”.

131. The experts agreed that there had been evidence of “failures of Atlantis cells” but agreed that these were as documented in two of Dr Haberfield’s reports. Those reports show that only 32 cells (out of a total of approximately 45,000 in the rail area) had failed. These are the 32 cells exposed to during the excavations and inspections referred to at [95] above.

132. Downer emphasised in the course of these proceedings that it does not contend that all the Atlantis cells in the rail area, or even a majority of them, will fail. Its case is that a “sufficient number” of cells will fail such that it is necessary to take remedial action and preferable to do so in a single operation.

133. The issues which arise are:

1. How strong do the cells need to be to function efficiently over their design life of 50 years?

2. How strong were the cells when installed?

3. How strong will the cells be after 50 years?

144. Leaving aside construction loads (to which I will return) the cells must bear the static load of the soil under which they are buried.

145. The cells in the rail area are buried between 0.6 m and 2.3 m below ground level. They are covered with earth, sand and ballast. The cells are thereby subject to a sustained load. It is agreed that such load is between 12 kPa for cells buried at 0.6 m and 46 kPa for cells at 2.3 m.

146. The Atlantis cells are made from mixtures of polypropylene and polypropylene-ethylene block copolymers together with fillers such as calcium carbonate (chalk) and magnesium silicate (talc) in various proportions. For simplicity I will refer to the cells as being made of “plastic”.

147. The experts spoke of the short term and long term strength of the cells and of the “characteristic” short term strength of the cells.

148. The “characteristic” short term strength is the strength that most examples of the product will have. The experts also spoke of the “ultimate” short term strength of the cells. That is the peak short term strength that the cells will have.

149. Plastic is susceptible to “creep”. Creep is the technical term for the rate at which plastic will lose strength over time when under load.

150. The experts agreed that this tendency should dominate design considerations. The long term strength of plastic can be very much less than its short term strength. Eventually plastic will suffer “creep rupture”. Dr Scheirs described “creep rupture” as “a point at which you will get a fracture surface that is brittle, and the failure will go from ductile, above the creep rupture point, ductile meaning the deformation, bending, whitening, to a brittle fracture which is a clean crack”.

151. Thus, the Atlantis cells will lose strength over time.

152. To ascertain how much strength the cells will lose over time, it is necessary to ascertain a characteristic short term strength of the cells and then to calculate the rate at which their long term strength will decline over the 50 years of their design life.

153. Atlantis advertised the cells as having a “strength” of 263 kPa.

154. The experts agreed that Atlantis’s reference to “strength” was ambiguous but that it referred to short term strength of some nature.

155. Atlantis and KBR had access to tests conducted in Japan by an organisation known as Oike which showed that the cells had a “breaking load” of 244 kPa; somewhat less than the Atlantis advertised “strength” of 263 kPa.

156. In April 2008, after KBR had submitted its design in February 2008, and after Downer had approved it (subject to various conditions to which I will return), Atlantis engaged the University of Technology Sydney (“UTS”) to perform further tests that show the cells to have a “capacity” of around 222 kPa.

157. In final submissions, Downer accepted that “nearly all experts [including its expert, Mr Wilson] agree that Atlantis’s advertised short term strength of 263 kPa should have been reduced to about 200 kPa to represent the “characteristic” short term strength, and calculations [for long term strength] carried out from that starting point”.

158. Ultimately, all the engineers agreed that, once a short term strength was ascertained, that question determined long term strength. That is, the experts were agreed as to the rate at which cells would lose strength over time. I will return to this below.

159. The engineers also expressed opinions about the adequacy of KBR’s design.

160. KBR accepted Atlantis’s “strength” figure of 263 kPa, equivalent to 26.8 t per m², and described that figure in final design report as the “ultimate compressive strength” of the cells.

161. KBR contends that it made clear in its design report of 28 February 2008 that it had assumed the correctness of Atlantis’s stated “strength” and did not warrant the correctness of that assumption. I return to this below.

162. However, the majority of the engineers, including Dr Haberfield who was called by KBR, agreed that KBR:

1. had made no adequate allowance for appropriate “strength reduction factors” (i.e. creep);

2. should have stipulated that the cells be tested for long term strength; and

3. in the absence of information as to the long term strength of the cells, should have, as a part of their design approach, applied what Mr Pack described as a “reduction factor” to reflect such matters as product uncertainty and creep reduction to achieve (again using Mr Pack’s language) a “Factored 50 Year Characteristic Long Term Compressive Strength” of the cells: being the strength a prudent designer would attribute to the Atlantis cells if the designer did not have any information about their long term strength.

163. Such a calculation would have produced a “Factored 50 Year Characteristic Long Term Compressive Strength” for the cells in the order of 17 kPa (Mr Wong’s figure), 18.2 kPa (Mr Pack’s figure) or 41 kPa (Dr Redman’s figure). These design strengths were those which, the experts agreed, a designer of a system such as the Detention System should have stipulated in the absence of any information concerning the long term strength of the product comprising the system. These design strengths are, of course, well below Atlantis’s advertised “strength” of 263 kPa.

164. Downer contends that, had this emerged at the time KBR submitted its design in February 2008, neither RailCorp nor it would have proceeded to use Atlantis cells in the Detention System and would have reverted to the concrete pipe system originally envisaged (see [8] above). I will return to this below.

165. Now that information as to long term strength is available from TRL test data (to which I refer below), Mr Pack would have arrived at a design strength of 62.9 kPa. This is the strength a prudent designer of this system would have attributed to the Atlantis cells as a part of the design process; as opposed to the strength that an expert such as Mr Pack would conclude that the cells, as installed, in fact had.

166. For the moment, however, the question is whether Downer has shown that the Detention System, as installed, will not adequately perform during its design of 50 years.

167. Now that information is available from the TRL tests concerning the rate at which the Atlantis cells will lose strength over time, and as the experts all agree about that rate, the question of whether the Detention System will adequately perform during its design life depends in large part on the correct conclusion as to the characteristic short term strength of the cells. In view of Downer’s submission that I have set out at [157] above, there appears to be less controversy about this than might have first appeared.

The testing by Dr Scheirs

168. Dr Scheirs is an expert in the failure analysis and compositional analysis of plastics and plastic products.

169. Dr Scheirs was provided with 36 panels from a number of Atlantis cells; 20 panel “offcuts” from under the carpark and 16 panels from the rail area.

170. The 16 panels from the rail area were from two tanks (A8A and A7A) exhumed in 2015. They comprised all eight panels from two cells: one from each of those tanks. There were 125 cells in those 2 tanks, with a total of 1,000 panels. As I have mentioned, there are some 40,000 cells in the rail area. The cells Dr Scheirs examined thus represented a tiny proportion of the total.

171. Dr Scheirs conducted an analysis of the material in those panels.

172. In its advertising material, Atlantis had asserted that the cells were made from “recycled polypropylene consistent with the virgin Shell polypropylene” (an industry accepted polypropylene standard).

173. Dr Scheirs concluded that the samples he analysed did not meet that standard but instead:

“[A]re composed of comingled polypropylenes reinforced with varying levels and ratios of chalk and talc filler and also containing traces of lead residues (a legacy of the origin of the feedstock i.e. battery cases.”

174. Dr Scheirs also concluded:

“The test results show a very high variability in composition from sample to sample and this is reflected in the highly variable and inferior mechanical properties as compared with the Atlantis recycled [polypropylene] specification”.

175. Dr Scheirs was not testing the characteristics of the cells themselves. Rather he was testing the plastic (polypropylene) of which the panels provided to him were made.

176. Further, Dr Scheirs was not asked to undertake a forensic failure analysis of the cells.

177. Dr Scheirs acknowledged that the failure of a geometric structure, such as an Atlantis cell, might not coincide with the creep rupture of any particular part or element of the structure.

178. Dr Scheirs gave this evidence:

“Q: There is a difference - I might go back to Dr Scheirs for a minute - conceptually, isn't there, between the creep behaviour of a piece of material and the creep behaviour of a mechanical structure built out of that material, such as a ladder or a box?

DR SCHEIRS: You have the material to consider when you are looking at the actual product.

Q: But conceptually there is a difference because in one of them it is a mechanically built structure.

DR SCHEIRS: Geometric, that's right, but the material will still underscore the creep behaviour of the product.

Q: But it is possible, isn't it, once you are considering a geometric structure, that the structure might collapse before the creep rupture point is reached, because of some mechanical failure caused by deformation?

DR SCHEIRS: Yes, there are multiple scenarios. You could have the pins --

Q: Just dealing with them one at a time. It is also possible, isn't it, that the mechanical geometric structure might survive intact after the point at which one of its elements fails by creep rupture?

DR SCHEIRS: If it is sufficiently designed, yes.

Q: I think an example you have used is the example of a ladder where you might break one or any number of the rungs but still have a functional ladder.

DR SCHEIRS: Correct.

Q: The question about when creep rupture causes a mechanical failure of a geometric article, object, is a question distinct, conceptually, from the question you have investigated in your report, isn't it?

DR SCHEIRS: Well, I focus on the materials, not the end product.

Q: So it is conceptually different, isn't it?

DR SCHEIRS: To a degree.

Q: Do you agree, Professor Burford?

PROF BURFORD:   I think that's correct. I agree with the point that you do need to look at the material properties, which is the focus of Dr Scheirs' report, but there is also the issue of the larger holistic structure, the cubes themselves, and the types of failures that might sensibly occur in those cubes may be distinctive and distinguished from the types of deformations occurring in a single ASGM test.”

179. Accordingly, while Dr Scheirs’s tests are a good reflection of the quality and composition of the elements of the panels from the two cells he tested, they are not and did not purport to be an assessment of the strength or other qualities of the Atlantis cells themselves.

180. Further, it turns out that Dr Scheirs was not testing a representative sample of the cells in the rail area.

181. As I have mentioned, Dr Scheirs was given all 8 panels from 2 cells (cells 85 and 87) of the 125 cells exhumed in 2015 from tanks A8A and A7A.

182. Aecom, engineers retained by Downer (see [98]), prepared a “Defect Summary” in respect of those 125 cells.

183. That summary identified only 2 cells (from the 125 cells in those 2 tanks) within which there were panels which had collapsed or partly collapsed (being cells 78 and 87).

184. Thus half the panels that Dr Scheirs analysed from the rail area were from 1 of the only 2 cells (out of 125) in the exhumed area that had failed.

185. The panels that Dr Scheirs examined were thus not representative of the manner in which the cells, overall, had performed in the exhumed area.

186. Understandably, Dr Scheirs assumed the cells he examined were representative of all the cells in the rail area.

187. Dr Scheirs gave this evidence:

“Q: … if you were to discover that one of the two cells you were given had collapsed, and it was one of only two cells in the population of 125 that had collapsed, that would cause you to doubt, wouldn't it, whether you had been given a representative sample of cells?

A: In retrospection, perhaps. But when we test materials like this we are asked to do a forensic failure analysis, so we often want the ones that display failure.

Q: But that's not what you were doing here, was it? You weren't doing a forensic failure analysis here, were you?

…

A: I was asked to examine the cells in order to look at the properties and see how they compared to the data sheet values.”

188. Later, Dr Scheirs agreed that he had not been asked to give an opinion as to why the cells had failed.

189. Dr Scheirs was seeking to examine a representative sample of Atlantis cells to derive conclusions about all cells in the rail area.

190. However, seemingly by accident, Dr Scheirs was not given a sample of panels that was representative of those exhumed from the tanks in question. In those circumstances, I see no basis on which I could safely conclude the samples he was given are representative of those throughout the Maintenance Centre (the rail yard in particular).

191. The inclusion of cell 87 in Dr Scheirs’s analysis had a significant impact on the analysis. The panels displaying high levels of inorganic filler and other characteristics bespeaking weakness were for the most part from cell 87.

192. Dr Scheirs gave this evidence:

“Q: Just focusing on those two results, if both cell 85 and cell 87 were exposed to a sudden impact load, it would be consistent with your findings that cell 87 might break before cell 85?

HIS HONOUR: All other things being equal?

DR SCHEIRS: Yes, I was going to say ceteris paribus, because we have voiding, we have degradation - all other things being equal, yes, on that simple analysis.

Q: Equally, if the two cells were both exposed to load over time, and creep, you would expect cell 87 to perform better than cell 85?

DR SCHEIRS: Because of the higher filler content?

Q: Yes.

DR SCHEIRS: Yes.”

193. That evidence suggests that the panels in cell 87 collapsed or partially collapsed due to impact damage during or after installation, and not as a result of creep rupture due to imposed loads.

194. Further, the evidence given by the engineers suggested that the structure of the Atlantis cells is such that there might be no critical point at which weakened plastic will cause failure. In that regard Mr Pack said:

“The point is that if you look at the box as a whole and test the box as one complete structure, then it doesn't matter if there is a chance of certain pieces having issues.”

195. Dr Haberfield gave evidence to the same effect.

196. In these circumstances, I am cautious about the conclusions that can be drawn from Dr Scheirs’s analysis.

197. Certainly, his analysis of the material used to make the panels that he analysed may be accepted. That analysis shows that those panels were not manufactured of the material claimed by Atlantis. The material in the tested samples was highly variable, with a large range of stiffness, ductility, strength and with voids and bubbles.

198. Mr Gassner, who was called by KBR (see [134]), said that cells containing material of the kind analysed by Dr Scheirs would perform variably and manifest differences in settlement when subject to soil loads.

199. Professor Burford, called by John Holland (see [132]), said that there is “a compelling argument that recycled, commingled [polypropylene] admixtures will have inferior creep performance”.

200. However, as I cannot conclude that the samples provided to Dr Scheirs (on which these other experts’ views were based) were necessarily representative of those at throughout the Maintenance Centre, I have concluded that the use to which I can make of Dr Scheirs’s analysis is limited.

Loss of strength over time

201. As I have discussed, the engineering experts agreed that the critical question is the likely long term strength of the cells; and that this depends in large part of their susceptibility to creep and thus lose strength over time.

202. The engineers agreed on the rate that these cells will lose strength over time. What divided them was the short term strength that should be adopted as the starting point for that analysis.

The TRL testing

203. As I have mentioned, Downer organised for Atlantis cells, exhumed in 2014 and 2015 from the carpark and rail yard areas, to be tested for short term and long term strength at the Transport Research Laboratory in the United Kingdom.

204. The purpose of the TRL testing was to determine the short term compression strength, long term creep and behaviour under cyclic loads of the Atlantis cells.

The short term testing

205. For the short term tests, the cells were subjected to pressure by a metal plate lowered onto the cells until the cells failed by one or more of the panels in the cells suddenly buckling, breaking free of other panels explosively, and ejecting from the cell structure.

206. The result of the short term tests was that the cells from the rail yard failed at a mean “failure pressure” of 144 kPa, and the cells from the carpark at a mean failure pressure of 182 kPa: considerably less than the cell “strength” of 263 kPa asserted in the Atlantis brochures.

207. There was disagreement between the engineers as to how these results should be interpreted and whether they were representative of the cells as installed.

208. During their concurrent evidence, I asked the engineers to prepare for me a short note setting out their views as to what conclusions I should draw from the TRL testing.

209. Dr Haberfield, Mr Mostyn, Mr Pack and Mr Wong prepared a document in which they stated, so far as concerns the short term strength of the cells that:

1. there is some utility in the TRL data, notwithstanding concerns about the testing regime;

2. the TRL test data was, however, not a true reflection of what would have been the short term compressive strength of the cells for a number of reasons. First, the TRL testing occurred on cells that were unrestrained. Cells that are in the ground are not unrestrained as they are supported by each other and by the surrounding soil. An unrestrained cell is likely to be much weaker (in compression) than a restrained cell. Second, it is likely that the cells that were tested by TRL would have been significantly stronger when they were new given that at the time they were tested by TRL, they showed signs of bowing and may (at least in the case of the carpark cells) have been damaged by the process of dismantling and reassembly. The tested cells also exhibited cracks and defects in form in some places;

3. the TRL test data showed that the test results from the cells exhumed from the rail yard were less strong than those exhumed from the carpark (notwithstanding the fact that the cells in the carpark had been subject to greater loads); and

578. The one qualification is that John Holland submits that if the correct conclusion was that the cells were damaged as soon as they were installed, it would follow that property of John Holland (namely the cells themselves, the geofabric, compressed sand and the like) was damaged and that John Holland’s claim against Atlantis would, in this respect, be a claim “for” property damage.

579. As the evidence does not establish this hypothetical circumstance, I need consider the matter no further.

580. It follows that, subject to that qualification, the claims made by Downer, John Holland and KBR against Atlantis are not claims “for” property damage and that, accordingly, the QBE policy would not have responded to them.

581. QBE submits that, in any event, a number of exclusions in the policy are engaged. In view of the conclusion to which I have come concerning the insuring clause, I do not consider it necessary to deal with that question.

Quantum

584. As I have concluded that the Detention System does not require repair or replacement and that, in any event, the collapse of the carpark was caused by Laing O’Rourke’s activities on the adjacent Stabling Yard site, it is not necessary for me to deal with quantum. However, I will do so, briefly, on the assumption that one or more of John Holland, KBR or Atlantis is liable to Downer or EDI Rail for the repair or reinstatement of the carpark and the rail area.

Carpark

585. In final submissions, Downer drew my attention to authorities dealing with mitigation of damages to this effect:

“(a)   An innocent party ‘is only required to act reasonably, and the standard of reasonableness is not high in view of the fact that (the defendant) is the wrongdoer’ [Segenhoe Ltd v Akins (1990) 29 NSWLR 569 at 583 (Giles J), Banco de Portugal v Waterlow [1932] AC 452 at 506; Sacher Investments Pty Ltd v Forma Stereo Consultants Pty Ltd [1976] 1 NSWLR 5; H McGregor, McGregor on Damages (14th ed 1980) at par 233];

(b)   the plaintiff will not be held to have acted unreasonably simply because the defendant can suggest other and more beneficial conduct if it was reasonable for the plaintiff to do what he did [Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313 at [187] (Giles JA); Banco de Portugal v Waterlow; Sacher Investments v Forma Stereo at 5];

(c)   the innocent party’s conduct in not taking steps to reduce the loss will ‘not be weighed in nice scales at the instance of the party who has occasioned the loss’ [Segenhoe v Akins at 583; London & South of England Building Society v Stone [1983] 1 WLR 1242];

(d)   the argument that the claimant has failed to mitigate his loss ‘always suffers from the disadvantage that it is advanced by the guilty party. It is put forward as a criticism of the manner in which the innocent party has extricated himself from a situation of the defendant’s making. Thus, in the majority of cases, the court tends to lean in favour of the claimant on this issue’ [J Powell, R Stewart, M Cannon, D Turner, Jackson & Powell on Professional Liability (6th ed 2007) at 11-327].”

586. There is no controversy about these matters.

587. However, the question here is whether Downer (or EDI Rail) did act reasonably, for these purposes.

588. The function of the Atlantis cell tank below the carpark was to control stormwater runoff from the neighbouring Stabling Yard and from the carpark itself.

589. The collapse of the carpark commenced in April 2013. Approximately one third of the Atlantis tank below the carpark was destroyed. A grout wall was erected which, in effect, cut off the cells under the carpark that had collapsed from those which remained intact. The grouting stopped the ongoing collapse of the carpark. That had the effect that the undamaged cells beyond the grout wall no longer provided stormwater detention for the Stabling Yard.

590. In July 2014, some 15 months after the collapse, EDI Rail (not Downer) called for tenders for repair of the carpark. That EDI Rail, rather than Downer, called for such tenders is consistent with it understanding that the “risk of damage to or loss or destruction of” the Maintenance Facility Works (including the Detention System) had passed to it under cl 34.3 of the Reliance Rail/EDI Rail contract (see [293] to [303] above). On 25 July 2014 EDI Rail awarded the contract to Ward Civil and Environmental Engineering Pty Ltd.

591. Ward Civil replaced the Atlantis cell tank with a concrete structure. The entire cell system was replaced, including the areas beyond the grout wall behind which the Atlantis cells were still intact.

592. That work was carried out between September 2014 and May 2015.

593. It is common ground that the reasonable cost of effecting this work was $10,591,221.

594. Of this sum, $788,839 was spent on piling. Dr Haberfield, who was called by KBR, expressed the opinion that it was incumbent on Laing O’Rourke, who performed the work on the Stabling Yard site that I have held caused the carpark to collapse, to shore up the carpark with piling before carrying out excavation on the Stabling Yard site in October 2012. As KBR has submitted, this was work to correct the fundamental failing in Laing O’Rourke’s works on the adjacent site. This work had to be performed before the carpark works could be embarked upon. I accept KBR’s submission that “these are costs that really fell to [Laing O’Rourke]” because they are “necessary to remedy another contractor’s defective works on an adjoining site, but…had to be [effected] prior to the carpark repairs beginning in earnest whatever be the necessary carpark repair works”.

595. A further question arises as to whether it was either necessary or reasonable for Downer or EDI Rail to replace completely the Atlantis cell tank with a concrete tank rather than simply removing the damaged Atlantis cells and replacing them with engineered fill. It is agreed that the cost of repairing the carpark on that basis would have been $3,771,942.

596. In this regard, KBR developed detailed submissions, supported by the evidence of Dr Haberfield, to show that:

1. by January 2014, eight months before the remediation construction commenced, the Stabling Yard had been constructed with large stormwater detention capacities which obviated the need for stormwater detention beneath the carpark; and

2. it would have been possible to remediate only the damaged portion of the carpark (by replacing the damaged Atlantis cells with fill) leaving the undamaged portion in place without affecting the stormwater drainage system.

597. KBR also points to a hydraulic report prepared in January 2014 by Aecom which stated:

“It is understood that the [Detention System] in the [Maintenance Centre] carpark was designed to detain runoff from a 6.6 ha [Stabling Yard] catchment area. The actual [Stabling Yard] catchment is now substantially larger, being 18.6 ha. To compensate for the additional catchment area, additional detention capacity has been provided on the [Stabling Yard] as part of the Aurecon design”.

598. Aecom performed detailed hydrological modelling which showed that, because the Stabling Yard was larger than was anticipated when KBR did its design, and because the Stabling Yard incorporated on-site water detention basins, the requirements of Auburn Council concerning the rate of discharge of stormwater into Duck River could be achieved whether or not there was a detention tank beneath the carpark.

599. KBR developed detailed submissions concerning the implications of Aecom’s observations in its hydraulic report and concluded:

“It transpires that this additional storage area within the [Stabling Yard] site has effectively rendered the storage capacity beneath the carpark obsolete”.

600. Downer did not attempt to engage with these submissions.

601. Rather, it referred to evidence given by Mr Robert Velins, a project director of Downer responsible for overseeing investigation into the carpark collapse, and its reinstatement.

602. Mr Velins stated that it was necessary to remediate the carpark “quickly” because carpark capacity was needed, because Downer was concerned about the durability of the Atlantis cells and because RailCorp and Reliance Rail were insisting on reinstatement of the carpark as soon as possible.

603. Mr Velins ceased to be involved in overseeing the remediation of the carpark shortly after Aecom’s report was made. In cross-examination, he appeared unaware of its contents.

604. The carpark remediation did not commence until September 2014, well after the date of Aecom’s report. My attention was not drawn to any evidence suggesting that Aecom’s conclusions were taken into account when a decision was made as to how the carpark should be remediated.

605. I am not satisfied that it was in these circumstances reasonable for Downer or EDI Rail to proceed to replace the whole of the carpark tank with a concrete structure.

606. Were it relevant for me to do so, I would only have allowed Downer or EDI Rail $3,771,942 on account of the repair of the carpark.

Rail area – investigation costs

607. As at 30 September 2016, one or other or Downer and EDI Rail had incurred costs in the sum of $4,085,141.74 investigating the rail area, including conducting the excavations to which I have referred.

608. John Holland accepted that that amount had been paid, and that it was a reasonable amount for the work done.

609. I do not understand KBR or Atlantis to make a different submission.

Rail area – cost to replace the Detention System

610. Three expert witnesses gave evidence of the likely cost to Downer or EDI Rail of replacing the Detention System with a concrete pipe system.

611. It is now common ground that the task would likely take 106 weeks.

612. Mr Dickinson, on behalf of Downer, and Mr O’Shea, on behalf of John Holland, both quantity surveyors, approached the matter on a “first principles” basis and estimated that the reasonable cost of effecting this work was $28,604,278 (Mr Dickinson) or $19,075,479 (Mr O’Shea).

613. The questions that divided Mr Dickinson and Mr O’Shea were in relation to such matters as the appropriate labour rate, the amount that should be allowed for offsite storage of materials, the amount that should be allowed for double handling of materials, preliminaries, margins and other like matters.

614. Each expert agreed that reasonable professional minds could differ in relation to most, if not all of these items.

615. On the other hand, Mr Makin on behalf of KBR, also a quantity surveyor, formed his opinion based upon a tender actually put forward by the Brefni Group in 2016 following the call by Downer for tenders for rectification of the Detention System.

616. Mr Makin formed the view that the Brefni tender was a “reasonable indication of the market value” of the work needed to replace the Detention System save that certain of the figures in the Brefni tender should be increased to take account of a number of uncontroversial matters raised by Mr Ng (a Senior Project Manager employed by Downer: see [426] below).

617. After taking into account Mr Ng’s points, Mr Makin adjusted the Brefni tender figure to $18,960,775.

618. That figure is only slightly below Mr O’Shea’s figure (calculated on the “first principles” basis).

619. That suggests to me that, assuming replacement of the Detention System was required, a figure in the order of $19 million would be a reasonable allowance.

Rail area – “zone of influence”

620. The “zone of influence” is the zone adjacent to and beneath rail tracks which are subject to live load pressure of the trains on top of the tracks.

621. Had the evidence established that Atlantis cells in the “zone of influence” required replacement, the average of the cost estimates of Messrs Makin, Dickinson and O’Shea is a fraction over $11 million.

622. Those experts also agreed that the cost of rectifying a 3 m length of cells was in the order $50,000.

Rail area – additional costs

623. Downer claims a further $3,980,182 being various items identified in Exhibit 24.

624. The only dispute in relation to that sum was in respect of an amount of $266,705 claimed by Downer on account of “project specific insurance”.

625. Downer’s submissions justifying this figure are barely developed.

626. The figure $266,705 was formulated by Mr Dickinson. During concurrent evidence, he was not able to justify that particular figure or explain why Downer would need a separate level of insurance beyond that contained within the tender of the successful contractor.

627. Had it been relevant for me deal with this question, I would not have made any allowance for insurance.

Downer overhead recovery

628. Downer also claims an amount of 7% on various items as a recovery for “overheads”.

629. Again, Downer’s submissions in relation to this matter are barely developed. The evidence does not identify to what the “overhead recovery” is said to relate to.

630. Mr Ng deposed that, in his experience, contractors charge a percentage of the overall costs of work. So much may be accepted. However, in the hypothetical circumstance under consideration, Downer would be the principal and not the contractor and not be in a position to make any charge for overhead costs. Downer would incur its own overhead costs in any event, whether or not it was obliged to replace the Detention System. As John Holland submits, to allow Downer (or EDI Rail, as the case may be) to recover an amount on account of overheads would be to allow it to profit from performing work which it is obliged to perform in any event under the Reliance Rail/Downer, or Reliance Rail/EDI Rail contract, as the case may be. Presumably Downer and EDI Rail have allowed for recovery of overheads and profit.

631. Had it been relevant for me to deal with this question, I would have made no allowance for Downer’s “overheads”.

Conclusion

632. The proceedings must be dismissed.

633. I will hear the parties as to costs.

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Decision last updated: 20 March 2018