Optus v Leighton - [2002] NSWSC 327

No judgment structure available for this case.

CITATION: Optus v Leighton & Ors [2002] NSWSC 327

CURRENT JURISDICTION: Equity Division
Construction List

FILE NUMBER(S): SC 55059/97

HEARING DATE(S): 12/2/01-15/02/01; 20/02/01-22/02/01; 26/02/01-28/02/01; 5/03/01-8/03/01; 12/03/01-15/03/01; 19/03/01-22/03/01; 29/03/01; 2/04/01- 5/01/01; 9/04/01; 10/04/01; 23/04/01; 24/01/01; 30/04/01; 1/05/01; 14/05/01; 15/05/01; 28/05/01-31/05/01; 4/06/01-7/06/01; 12/06/01-14/06/01; 18/06/01-21/06/01; 25/06/01-28/06/01; 2/07/01-6/07/01; 6/07/01-12/07/01; 16/07/01; 17/07/01; 20/07/01; 23/07/01; 27/07/01; 30/07/01-1/08/01; 13/08/01; 19/10/01; 22/10/01-25/10/01

JUDGMENT DATE: 24 April 2002

PARTIES :

First Plaintiff: Optus Networks Pty Limited
Second Plaintiff: Optus Systems Pty Limited
Fourth Plaintiff: Optus Vision Pty Limited
Fifth Plaintiff: Optus Communications Pty Limited
First Defendant: Leighton Contractors Pty Limited
Second Defendant: Norman Disney & Young & Partners Pty Limited
Third Defendant: Tyco Australia Pty Limited
Sixth Cross-claimant: EMAE Pty Limited
Fifth Cross-claimant: The WorkCover Authority of New South Wales

JUDGMENT OF: Hunter J

COUNSEL : Plaintiffs: P Greenwood SC; P Durack; S Climpson
First Defendant: P Garling SC; R Pepper
Second Defendant: S Robb QC; G Ellis
Third Defendant: N Hutley SC; J Lockhart
Sixth Cross-claimant: G Downes QC; N Kidd
Fifth Cross-claimant: S Donaldson SC

SOLICITORS: Plaintiffs: Minter Ellison Lawyers
First Defendant: Moray & Agnew
Second Defendant: Colin Biggers & Paisley
Third Defendant: Blake Dawson Waldron
Sixth Cross-claimant: Allen Allen &Hemsley
Fifth Cross-claimant: Phillips Fox

CATCHWORDS: Contract - negligent performance of contract for fire suppressant system - accidental discharge of foreign matter from system - contamination of computer bank - liability of principal contractor - of subcontractors - professional negligence - liability of statutory authority in system testing - misleading conduct - negligent misrepresentation in certification of works - contributory negligence of principal - Damages - whether property damage or econmic loss - principles applicable - whether principle of betterment part of assessment of damages - whether benefits to principal in rectification work to be taken into account - onus of proof where issue of betterment raised - whether costs of rectification incremental - statutory contribution - contractual indemnity - liability in contribution of insolvent subcontractor - principles of apportionment.

LEGISLATION CITED: Boiler and Pressure Vessel Regulations 1942 (NSW)
Factories, Shops And Industries Act 1962 (NSW)
Law Reform (Miscellaneous Provisions) Act 1946 (NSW)
Law Reform (Miscellaneous Provisions) Act 1965 (NSW)
Occupational Health and Safety Act 1983 (NSW)
Trade Practices Act 1974 (Cth)
WorkCover Administration Act 1989 (NSW)

CASES CITED: Astley v Austrust Ltd (1999) 197 CLR 1
British Westinghouse Electric and Manufacturing Company v Underground Electric Railways Company of London [1912] AC 673
Bryan v Maloney (1994 - 1995) 182 CLR 609
Bulk Materials (Coal handling) Pty Ltd v Compressed Air & Packaging Systems (NSW) Pty Ltd (1997) 14 BCL 109
Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520
Carslogie Steamship Co Ltd v Royal Norweigian Government [1952] AC 292
Cashfield House Ltd v David & Heather Sinclair Ltd [1995] 1 NZLR 452
Chaplin v Hicks[1911] 2 KB 786
Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-operative Assurance Co. of Australia Ltd (1931) 46 CLR 41
Crimmins v Stevedoring Indurstry Finance Committee (1999 - 2000) 200 CLR 1
Daniels v Anderson [1995] 37 NSWLR 438
Fisher v C.H.T. Ltd (No. 2) [1966] 2 QB 475
Frankcom v Woods (NSWCA 1 October 1980 (unreported))
Hadley v Baxendale (1854) 9 Ex 341
Haines v Bendall (1991) 172 CLR 60
Harbutt's "Plasticine" Ltd v Wayne Tank and Pump Co. Ltd [1970] 1 QB 447
Hawkins v Clayton (1988) 164 CLR 539
Hill v Van Erp (1996 - 1997) 188 CLR 159
Hoad v Scone Motors Pty Ltd [1977] 1 NSWLR 88
Hodge and Another v Clifford Cowling & Co [1990] 46 EG 120
Hollis v Vabu Pty Ltd [2001] HCA 44 (9 August 2001)
Hussey v Eels [1990] 2 QB 227
Hyder Consulting (Australia) Pty Ltd v Wilh Wilhelmsen Agency Pty Ltd [2001] NSWCA 313
IT walker Holdings Ltd v Tuf Shoes Ltd [1981] 2 NZLR 391
J & B Caldwell Ltd v Logan House Retirement Home Ltd [1999] 2 NZLR 99
Johns v Prunell [1960] VR 208
Johnson v Perez (1988 - 1989) 166 CLR 351
Joyner v Weeks [1891] 2 QB 31
Lavarack v Woods of Colchester [1967] 1 QB 278
Modbury Triangle Shopping Centre Pty Ltd v Anzil (2000) 176 ALR 411
Monroe Schneider Associates Inc v No1 Raberem Pty Ltd (1991) 33 FCR 1
Murphy v Brown [1985] 1 NSWLR 131
Northern Sandblasting Pty Ltd v Harris 1996 - 1997) 188 CLR 313
NRMA Ltd v Morgan (1999) 31 ACSR 435
Pacific Associates Inc v Baxter [1990] 1 QB 993
Peake v Steriline Manufacturing Pty Limited (1988) Aust Torts Reports 80-154Performance Cars Ltd v Abraham [1962] 1 QB 33
Perre v Apand Pty Ltd (1991) 198 CLR 180
Pyrenees Shire Council v Day (1998) 192 CLR 330
Romeo v Conservation Commission (NT) (1998) 192 CLR 431
RW Miller & Co Pty Limited v Krupp (Australia) Pty Limited (1995) 11 BCL 74
Sea Containers Ltd v ICT Pty Ltd [1998] NSWSC 474
Simonious Vischer & Co v Holt Thompson [1979] 2 NSWLR 322
Sutherland Shire Council v Heyman (1985) 157 CLR 424
Taylor v Rover Co. Ltd [1966] 2 All ER 181
Tepko v Water Board [2001] HCA 19 (5 April 2001)
The Habersham Grange [1905] P 307
Theiss Watkins White Construction Limited v The Commonwealth (1992) 14 BCL 61
Voli v Inglewood Shire Council (1962 - 1963) 110 CLR 74
Watts v Rake (1962) 108 CLR 158

DECISION: Judgment for first, second and fourth plaintiffs against first and third defendants - otherwise proceedings dismissed: judgment for cross-claimant under third cross-claim against second cross-defendant - otherwise cross-claims dismissed - save for seventh cross-claim. Final orders as to the seventh cross-claim, quantum and costs deferred pending presentation of short minutes by parties at time of publication of reasons.

- 1 -

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

HUNTER J

WEDNESDAY 24 APRIL 2002

55059/97 OPTUS NETWORKS PTY LIMITED & ORS -v- LEIGHTON CONTRACTORS PTY LIMITED & ORS

JUDGMENT

1 These proceedings arise out of damage to premises and equipment at Rosebery (the Rosebery centre) which occurred on 3 January 1997 when contaminated water was accidentally discharged onto parts of the building and equipment stored within it (the incident). The Rosebery centre was owned by the first plaintiff, Optus Networks Pty Limited (Networks) which also owned some equipment referred to as the Tandem Equipment. The second plaintiff Optus Systems Pty Limited (Systems) owned the equipment with which most of the controversy in these proceedings was concerned. The fourth plaintiff Optus Vision Pty Limited (Vision) owned a cabinet which was the subject of a minor claim for damage arising out of the incident. The third plaintiff, Optus Mobile Pty Limited (Mobile) has been given leave to discontinue its proceedings in accordance with reasons separately published. The fifth plaintiff Optus Communications Pty Limited (Communications) has been included as a party to the proceedings on the basis of the following contention:

2 That case is not being pursued by Communications.

3 In order to understand the complexity of the liability and quantum issues that arose in this case, a simple description of the incident and the parties involved would, I think, be useful.

4 In these reasons I have endeavoured to avoid unnecessary distinctions amongst the plaintiffs, referring to them as Optus as a matter of convenience.

5 From 19 November 1991 Optus was awarded the second telecommunications licence by the Australian Government. For the purpose of exploiting those licences, Optus acquired the Rosebery centre at a time, in 1992, when it was nearing completion. By a Building Works and Services Agreement dated 6 March 1992 between the first defendant Leighton Contractors Pty Limited, (Leighton), and Communications (the building agreement) Leighton undertook to perform building services and supplies under a purchase order mechanism for the fit out of the building as a telecommunications centre. The building works so carried out by Leighton permitted Optus to commence operations in the Rosebery centre in November 1992.

6 At the time of the incident, located on the ground floor of the Rosebery centre was a Switch and Transmission room which contained equipment relating to Optus’ Long Distance telephone business and other rooms variously described as the IFMC room, the Inergen Storage and Heat Exchanger area, the UPS room, the Power room, the Switch Board room, and the PABX room.

7 On the first floor there was a computer data centre (the data centre) which housed a computer system made up of some 180 cabinets, 70 different computer systems involving 83 business applications. (These figures have differed in evidence.) This equipment included what has been described as the Global Service Mobile Information System (the GSMIS) which represented a critical component of Optus’ operations. The Tandem room was also situated on the first floor. Within it was situated computer equipment which provided services known as EFTPOS and Smart Pay: they being services which permitted bank customers to pay bills by telephone, or to pay for goods on purchase by electronic transfer of funds.

8 During the hearing, the data centre and the Tandem/EFTPOS room were known as zone 3, the Switch and Transmission Room as zone 1, the Power Switch Board and PABX room, zone 2, and the IMFC room as zone 4. That fit-out had been performed by Leighton under the building agreement. On 13 August 1993, under the building agreement, Networks raised a purchase order on Leighton to install an Inergen Fire Suppression System to protect those four zones from fire damage (the Leighton contract).

9 Inergen is an inert gas. The system was designed to separately feed gas under pressure into each of the four zones. The gas was to be housed in banks of pressurised cylinders and a heat exchanger (the Heat Exchanger) was installed in association with the Inergen system, the function of which was to minimise the drop in temperature of gas emitted into the atmosphere when the fire suppression system was activated. The circumstances in which the Heat Exchanger was introduced into the Inergen system is a matter of particular moment in these proceedings.

10 The Inergen system and Heat Exchanger were installed by the third defendant, Tyco Australia Pty Limited (Tyco), under a subcontract with Leighton of 26 May 1994 (the Tyco subcontract).

11 Throughout these reasons I have used the term “Tyco” without distinction between the third defendant, Wormald Australia Pty Ltd, Tyco Grinnell Asia Pacific Pty Ltd, O’Donnell Griffin Pty Ltd or their related corporations. O’Donnell Griffin was acquired by Wormald International Pty Ltd in 1992 and Wormald was subsequently acquired by Tyco International, the parent company of the third defendant. Grinnell Asia Pacific Pty Ltd was the developer of the technology for Inergen and along with Wormald was a subsidiary of Tyco International. It was also the ultimate holding company of Grinnell Asia Pacific. Total Walther Feuerschutz Gmbh was also part of the Tyco group. No evidence has been led placing any significance on the different corporate entities involved within the Tyco group, nor have any submissions been presented based on any such distinction.

12 Tyco subcontracted the design, testing and fabrication of the Heat Exchanger to Metropolitan Engineering and Fabrications Pty Ltd (MEF), by subcontract dated 30 May 1994 (the MEF subcontract). MEF subcontracted the thermal design of the Heat Exchanger to ABB Lummus (Lummus), by agreement dated 30 May 1994 (the Lummus subcontract) and subcontracted the mechanical design and drawings for the Heat Exchanger to EMAE Pty Limited (EMAE). The drawings for the Heat Exchanger had been approved by the WorkCover Authority of New South Wales (WorkCover).

13 Engineering consultancy advice was provided by NDY Management Pty Limited (NDY), the second defendant, under contractual arrangements with Leighton, in terms of a statement of works letter of NDY dated 5 August 1992 as dealt with in Leighton’s letter to NDY of 25 November 1992 and NDY’s response of 26 November 1992 (compendiously referred to for convenience as the statement of works agreement), a consultant agreement of 29 January 1993 (the 1993 consultant agreement) and one in similar terms of 9 February 1994 (the 1994 consultant agreement). There is a substantial issue as to the applicability of the terms of the consultant agreements to the design, specification, fabrication and installation of the Heat Exchanger. In addition to approving EMAE’s calculations and drawings for the Heat Exchanger, WorkCover witnessed and certified satisfactory hydrostatic testing of the Heat Exchanger. The shell side was satisfactorily tested on 16 August 1994, with the tube side being successfully tested on 18 August 1994.

14 The testing took place in the presence of Mr William McColl, the senior inspector in the Fabrications section of WorkCover. The testing took place at MEF’s premises with the Heat Exchanger loaded onto the tray of a truck. Following testing it was transported to the Rosebery centre on 18 August 1994. After delivery of the Heat Exchanger, it was inspected by a WorkCover licensed boiler inspector, Mr A Bruce on 19 August 1994, who certified on 23 August 1994 that it may be used be used for its maximum allowable safe working pressure of 500KPa on its shell side and 600KPa on its tube side.

15 It was not until a discharge test was carried out on the night of 8/9 July 1995 that certificates relating to completion were provided by Tyco, NDY and Leighton in August 1995.

16 The circumstances which gave rise to the incident were described by Mr Luis Angel Valledor (Valledor), a security guard in the employment of Chubb Security, who was on duty at the Rosebery centre on 3 January 1997. His evidence was as follows:

“3. At 6.30pm on 3 January 1997 I commenced a patrol of the Sydney Technical Centre. I left my office on the ground floor and walked up to level 1. I entered level 1 where the Security Facilities Control Centre was located (‘SFCC’). The SFCC was Optus’ Control Centre for all its facilities nationwide. On 3 January 1997 the SFCC Controller present at Rosebery was Livio Rosso. I was walking towards the computer room which was situated on level 1 when I heard the fire alarm.

4. I went to the SFCC office and I asked Livio Rosso to come with me.

5. Livio Rosso and I walked from his office to the computer room. We entered the computer room but found nothing unusual. We couldn’t smell any smoke and we couldn’t see any fire. We didn’t go into the EFTPOS room, which was a small room on the side of the computer room, at that time.

6. Livio Rosso and I made a mutual decision to press the ‘Stop Gas’ button in the computer room to stop release of the gas system because we could [see] there was no evidence of any fire.

...

8. After the button had been pressed I returned to my office on the ground floor and Livio went back to his office. In my office I checked the alarm panel. The fire alarm was still sounding. I found that only the Very Early Smoke Detection Alarm (VESDA) panel 1 in the computer room had been activated. I was not able to stop the fire alarm.

9. At approximately 6.40pm the fire brigade arrived on site in response to the fire alarm.

10. Livio unlocked the electronic doors and let the fire brigade into the building. I accompanied the fire bridge (sic) to the Computer Data Centre room and to the Tandem/EFTPOS room. In the Tandem/EFTPOS room I smelt burning.

‘We pressed the “Stop Gas” button before you arrived. We decided to do that because we could see no smoke or fire. It is your decision whether we dump the gas. We don’t know whether to do that.’

12. One of the fireman replied in words to the following effect:

“Let’s dump the gas. Restart the Inergen release.’

13. I went to the fire panel in the Computer Data Centre room and presses (sic) the button marked “Release Inergen ”.

14. I then sent a page around the building advising all staff to evacuate the building. The Computer Data Centre room was manned on a 24 hour basis. There were many people in the building at that time.

15. All staff who were working at the time were evacuated from the Sydney Technical Centre.

16. I went into the Computer Data Centre room and the Tandem/Eftpos room later that evening. I saw a rusty brown liquid mess all over the walls, the floors, the ceilings and all of the equipment in those two rooms.

17 The “rusty brown liquid mess” observed by Valledor was the product of water that had been left lying in the Heat Exchanger after the August 1994 hydrostatic tests, resulting in corrosion within the Heat Exchanger which was emitted into the atmosphere, principally of the data centre and the Tandem room (zone 3), with some escape into the Switch and Transmission room (zone 1): the latter, the result of a rupture of a partition plate intended to separate discharge in zone 3 from zone 1. In comparative terms, the damage in the Switch and Transmission room was quite minor.

18 For a full understanding of the relevant matters relating to the Heat Exchanger and the various designated zones within the Heat Exchanger and the Rosebery centre I think it is useful to have some pictorial and diagrammatic representation of the Rosebery Centre, of the various zones within the Rosebery centre, of the Heat Exchanger and of the damage to it. As a schedule to these reasons I have included the following:

A. A diagram of the floor plan of the Rosebery centre identifying the four zones by colour code.

B. Photographs and diagrams of the Heat Exchanger, depicting the tube and shell side of the Heat Exchanger. The same colour code is used to demonstrate the passage of gas into and out of the bonnet chambers of the tube side and into and out of the shell side.

C. Figure 4 is a photograph of the tubesheet looking in the direction of the shell side with the inlet and outlet zones marked eg. Zone 4 outlet as “Z40” and zone 4 inlet as “Z4I”. Arrows identifying “well-defined ‘tide’” indicate levels of water damage.

D. Figure 6 consists of two photographs showing a close up of the tide mark on the tubesheet surface at zone 3 top inlet designated “Z3TI”, it being necessary to differentiate between the top and bottom compartments within the bonnet chamber which comprised zone 3. The bottom inlet and outlet are respectively referred to as “Z3BI” and “Z3BO”.

E. Figure 7 consists of two photographs showing the tide mark on zone 3 top outlet.

F. Figure 8 consists of two photographs showing the tide mark on the tubesheet surface at zone 3 bottom inlet and outlet.

G. Figure 9 is a photograph showing the tide mark in zone 2 inlet.

H. Figure 10 consists of two photographs showing the tide mark in zone 4 inlet and outlet.

I. Figure 12 is a photograph showing corrosion within the bottom chamber in the zone 4 outlet.

J. Figure 14 consists of two photographs showing the presence of corrosion in the piping spool in the zone 3 outlet.

K. Figure 17 consists of two photographs showing the presence of corrosion in the piping spools for the zone 4 inlet and outlet.

L. Figure 3 consists of two photographs which show both sides of the bonnet and identify the various zone inlets and outlets

M. Figure 5 consists of one photograph of the rupture of the plate in the bonnet separating the bottom zone 3 outlet chamber from zone 1. There was plastic deformation in the vertical plate in the bottom zone 3 inlet section, dishing of the horizontal partition plate between the inlet and outlet sections of the top zone 3 separating it from zone 1, and similar dishing of the vertical plate between zone 4 outlet chamber and the adjacent zone 1 chamber, and also of the plate between the zone 4 inlet section and zone 1, which are not readily observed from figure 41.

19 In simplistic terms the function of the shell side of the Heat Exchanger was to heat gas by means of water contained within the shell as the gas passed in tubes from the various inlet zones of the bonnet into the shell and returning to the outlet components of the bonnet before passing through pipes servicing the various zones within the Rosebery centre.

20 Dr Ian Dracup Doig (Doig) is a highly qualified mechanical and chemical engineer who was retained by Optus shortly after the incident. He gave evidence in a careful and intelligent manner without any favour or bias, showing a willingness to make concessions freely. His hypothesis of the things which gave rise to the incident was unchallenged. He calculated the volume of water that would remain trapped in the non-draining zones of the bonnet chambers as being 8.602 litres in zone 3 top inlet and also in zone 3 top outlet; 1.945 litres in each of zone 2 inlet and zone 4 inlet; 0.658 litres in each of zone 2 outlet and zone 4 outlet; 2.532 litres in zone 1 inlet and 3.70 litres in zone 1 outlet.

21 It was Dr Doig’s opinion as to the presence of water within the bonnet section of the Heat Exchanger as follows:

“1.3 Observations and generally accepted evidence

Presence of Water

In my view, water had been present in the heat exchanger and associated Inergen piping, in the following areas:

1. In heat exchanger Zone 3 (top and bottom Inergen gas-side or tube-side sections).

2. In the piping attached to both the inlet and outlet sides of Zone 3.

3. In Zones 2 and 4 and in its attached piping.

Evidence for this is:

Corrosion deposits

§ Major corrosion deposits on the tube-sheet face and within the U tubes of Z3TI and Z3TO (Figures 4, 6, and 7), and minor corrosion deposits on the surfaces of these Bonnet chambers (Figure 5).

§ Minor corrosion deposits on the tube-sheet face of Z3BI and Z3BO (Figures 4 and 8).

§ Minor corrosion deposits at bottom of tube-sheet face and within the U tubes of Z41 and Z40 (Figures 4, and 10) and minor corrosion deposits on the surfaces of these Bonnet chambers (Figure 5).

§ Minor corrosion deposits at bottom of the tube-sheet face and within the U tubes of Z21 (Figures 4, and 9)

§ The pattern of corrosion and/or corrosion deposits within both piping spools (each of which connects of a nozzle at Z3TI and at Z3TO of heat exchanger gas-side or tube-side Bonnet (Figure 13)) indicates these piping spools were flooded by water up to a level corresponding to the bottom of the inside of the pipe tee and the horizontal spool piece which connects the vertical spool pieces to the Z3TI (or Z3TO) nozzles (Figures 24, 26 and 31). There is a distinct change in the pattern of corrosion deposits on the inside surfaces of the piping at this level: above this level the corrosion and corrosion deposits exhibit a different appearance more typical of corrosion by water vapour in the presence of air – see Figure 45.

§ Water containing corrosion deposits was sprayed into the Optus Zone 3 computer room when the Zone 3 Inergen system was activated on 3/1/97.

Deformation of Partition Plates

§ When examined three Zone 3 horizontal partition plates were deformed (Z3TI, Z3TO and Z3BI) (see Figures 38(a), 38(b) and 37 respectively) and one (Z3BO) had been burst open (see Figure 41). This undoubtedly resulted from the very rapid rise in pressure of the Inergen gas in the heat exchanger following its release from its 15 MPa steel storage bottles on 3/1/97. On release the gas met water contained in the system and accelerated this through the piping. It emerged from the Inergen gas system delivery nozzles spraying equipment in the Zone 3 room with water containing corrosion products. During the Inergen gas pressure rise the water would be rapidly accelerated through the system’s changes in direction and available flow area. The inertia of the water, exacerbated by deceleration at each change (of direction or flow area within the piping) would cause the Inergen gas pressure in the heat exchanger and piping to rise rapidly. As a result three of the Zone 3 partition plates deformed towards their neighbouring Zone 1 chambers, while the partition plate between Z3BO and Z1I ruptured, releasing the Zone 3 Inergen gas into the Zone 1 heat exchanger chamber and piping. This rupture relieved the pressure in the Zone 3 system.

§ Two vertical partition plates between Z40 and Z10 (see Figure 39), and between Z41 and Z1I (see Figure 40) were also deformed (domed towards Z10 and Z1I respectively). These deformations are considered in Section 3.0 below.”

22 Dr Doig considered a number of hypotheses and that which he favoured and which was not challenged was expressed in the following way:

HYPOTHESES CONSIDERED AGAINST RESULTS OF INVESTIGATIONS

Appendix 8.

The heat exchanger is labelled by its manufacturer as a TEMA Class R. Type BEU- ie a (Petroleum) Refinery Class heat exchanger with a Bonnet (Type B) gas-side or tube-side end closure, single shell pass (Type E) and U tubes. The Bonnet contains ten chambers separated by flat plate partitions. The arrangement of the ten chambers inside the Bonnet is unusual. The more common arrangement is that the Bonnet has only one inlet and one outlet nozzle, and the same gas-side or tube-side fluid passes through all the chambers in sequence in what is termed a ten tube pass arrangement. It is common practice in this arrangement to provide small drain and vent holes, typically 3 to 5mm bore, which are drilled through the partition plates so that no partition entraps liquid or gas in pockets during draining or filling operations.

This heat exchanger has ten gas-side or tube-side nozzles and is arranged to have five separate, two-pass gas-side or tube-side zones. Each pair of chambers directs flow through an inlet nozzle to flow through one of five banks of U tubes and out through an outlet nozzle. Where it is essential to avoid contamination between the fluids in each of these five zones no drain or venting holes between the partition plates which separate the five zones can be permitted: only the partition plate between each separate zone inlet and outlet chamber may have vent and/or drain holes in these cases.

Zones 2 and 4 are each served by two 50mm bore nozzles which enter the heat exchanger horizontally (see Figures 3 and 4). The top and bottom heat exchanger chambers serving Zone 3 each have two vertical 50mm bore nozzles, while the centrally located heat exchanger chambers serving Zone 1 have two 150mm bore nozzles which enter the Bonnet end inclined at 15 degrees to the horizontal.

The heat exchanger stands on saddle supports with its main axis horizontal. This provides the natural orientation in service and during hydrostatic testing and transportation. In this orientation:-

The absence of drain holes in the partition plates allows non-draining zones to form in the Bonnet chambers of Z3TI, Z3TO, Z2I, Z20, Z4I, Z4O, Z1I and Z1O – see Figures 42 and 48.

The absence of vent holes in the partition plates allows non-venting zones to form in the Bonnet chambers of Z3B1, Z3BO, Z2I, Z2O, Z4I, Z4O, Z1I and Z1O – see Figures 43 and 47.

It follows that during hydrostatic testing, the absence of vent holes allows air to be trapped and compressed in the non-venting zones of the Bonnet chambers of Z3B1, Z3BO, Z2I and Z2O, Z4I and Z40 and also in Z1I and Z1O, and in the associated heat exchanger U-tubes and nozzles of Zones Z3BI and Z3BO. The volumes of these non-vented zones (calculated from the dimensions of the heat exchanger on the manufacturer’s (Metropolitan Engineering & Fabrications Pty Ltd of Smithfield, NSW drawing no. 94-1161) are 8.602, 8.602, 0.658, 1.945, 0.658, 1.945, 3.70, 2.532 L respectively – see Figures 43 and 47, the table below, and Appendix 9 for detailed volume calculations.

It also follows that on completion of the hydrostatic test that water will remain in the non-draining zones in the Bonnet chambers of Z3T1, Z3TO, Z2I, Z2O, Z4I, Z1I and Z1O unless personnel conducting the test realise these chambers will not drain naturally, and introduce process to drain them. The volumes of water that would remain in these non-draining zones (calculated from the dimensions of the heat exchanger on the manufacturer’s drawings (cited above) are 8.602, 8.062, 1.945, .658, 1.945, 0.658, 2.532 and 3.70 L respectively. See Figures 42, 48, the table below, and Appendix 9 for volume calculations.

Additional calculations (see Appendix 9) of the volumes of residential water in the two bottom Zone 3 chambers (Z3BI and Z3BO), the external piping, and in the top Zone 3 (Z3TI and Z3TO) chambers, indicate that the level of water was approximately 14cm below the top face of the two nozzles on these chambers before evaporation began – see Appendix 9 for these calculations.

Chamber	Z3TI	Z3TO	Z3BI	Z3BO	Z2I	Z2O	Z4I	Z4O	ZII	ZIO
Non-draining pocket (mL)	8602	8602	Neg	Neg	1945	658	1945	658	2532	3700
Non-venting pocket (mL)	Neg	Neg	8602	8602	658	1945	658	1945	3700	2532

Sizes are given in millilitres (mL). For calculation details see Appendix 9.

Distribution of water in Zone 3 system while in service

The top and bottom Bonnet inlet nozzles of Zone 3 are connected by a C shaped piping spool. It consists of straight pipe lengths screwed together using a tee at the top left hand corner of the C and two elbows along the base of the C, with one elbow at the top Zone 3 inlet nozzle. The arrangement is shown in Figure 44, where the Inergen gas inlet piping described is that shown to the left of the vertical centre line through the heat exchanger: piping shown to the right hand side is that connecting the top and bottom outlet nozzles of the upper and lower Zone 3 chambers.

Flanges at both tips of the C connect the top and bottom inlet Zone 3 nozzles on the heat exchanger Bonnet. The bore within the C piping is 50 mm NB (NB= Nominal Bore; actual bore is 48.3 mm). A 65 mm NB vertical straight pipe, which delivers Inergen gas to the heat exchanger, extends from the vertical leg of the C. A corresponding piping spool, also shown in Figure 44 (on the right hand side), is the mirror image of the (left hand side) inlet spool: it connects the top and bottom outlet Bonnet nozzles of Zone 3. The 65 mm NB vertical extension of this (right hand side of Figure 44) spool delivers Inergen gas exiting the heat exchanger.

During standby the water in the shell of the heat exchanger is maintained at 68 C. Water trapped in the top Zone 3 Bonnet chambers will also be maintained at 68 C and will produce vapour. This vapour ascends the vertical 65mm NB straight pipe on both the inlet and outlet sides where it condenses on the air-cooled walls of those two pipes. Condensate descends into both the inlet and outlet C piping sections filling them, and partly filling the Z3B1 and Z3BO Bonnet chambers. Note that air trapped in both the Z3BI and Z3BO chambers and their U tubes will compress (due to the head, 0.97m, of condensate in the vertical leg of each C) and limit the rise of condensate.

The sequence of events is illustrated by Figures 44 and 45. Note that in Figure 44 the transfer of water by evaporation and condensation from the top Zone 3 chambers into the external piping is only partly complete, while Figure 45 shows the transfer complete with all further condensation from the vertical 65mm NB inlet and outlet pipes returning to the top Zone 3 chambers.

The segmental etched area on the Tube-sheet surface at the bottom of Z3BI and Z3BO (Figure 8) show the extent of this rise. Once the vertical legs on both sides of the heat exchanger are level with the bottom of the horizontal upper piping of the C spool any further condensate will return to the Z3TI and Z3TO chambers.

Continuous re-evaporation with return of condensate will occur. The pattern of corrosion, corrosion deposits, and surface etching provide convincing evidence that this mechanism occurred while the heat exchanger was in service on standby duty at the Optus, Rosebery premises.

Calculation of the submerged volumes in both C piping spools and the submerged volume in the bottom Zone 3 chambers and its nozzles show this volume to be 9.884L. Calculated volume of the top Zone 3 chambers, its U-tubes and nozzles when completely full is 17.204L. These calculations are provided in Appendix 9 . Corrosion deposits on the Tube sheet of Z3TI and Z3TO are most pronounced in these two Bonnet chambers and show a distinct horizontal transition, or corrosion produced ‘tide mark’, between the top and bottom row of U tubes (see Figures 6 and 7). As indicated in these figures, corrosive attack is more pronounced above this tide mark. Corrosion in the colder external piping where condensate has collected, and in the bottom Bonnet chambers, Z3BI and Z3BO where condensate has entered, is only superficial (see Figure 8). Note that the water in the upper Zone 3 chambers is at 68°C and contains concentrated dissolved solids, whereas the condensate is relatively pure and colder.

The calculated submerged volume for the residential water below the Z3TI and Z3TO ‘tide mark’ is 6.804L. Note that the sum of the Zone 3 top residual water plus the condensate is 16.688L (6.804 +9.884) is less than that calculated for the Zone 3 top chambers and nozzles when completely full.

These calculations reinforce the hypothesis that the Z3TI and Z3TO chambers were less than full of water when the heat exchanger was installed. The most probable source is the original hydrostatic test water reduced by movement of the heat exchanger between the hydrostatic test and completion of installation at the Rosebery site.

23 The incident and its consequences have left a multiplicity of claims. By its further amended summons presented on 26 June 2001 which is the subject of an application for leave to amend and which is dealt with in the separate reasons, Networks, Systems, Vision and Communications seek damages against Leighton, NDY and Tyco. NDY cross-claimed against Leighton, Tyco, WorkCover and EMAE in the first, second, tenth and eleventh cross-claims respectively. Leighton cross-claimed against NDY and Tyco in the third cross-claim and against EMAE and Lummus in the eighth cross-claim and against WorkCover in the twelfth cross-claim. Tyco brought clams against EMAE, NDY, Leighton, Lummus and WorkCover in the fourth cross-claim, against MEF in the seventh cross-claim and against EMAE, Lummus and WorkCover in the ninth cross-claim as assignee of MEF’s cause of action. In the fifth cross-claim WorkCover brought an action against Leighton, NDY, Tyco, Lummus and EMAE. In the sixth cross-claim EMAE claimed against Leighton, NDY, Tyco, Lummus, WorkCover and MEF. The proceedings against Lummus have not been proceeded with.

24 In the principal proceedings Networks claims $7,423,071, Systems claims $19,903,526 (T5450.35), and Vision claims $18,167.00 together with interest. Networks claims damages against Leighton for breach of the Leighton contract, as incorporating the terms of the building agreement. The nature of the breaches were particularised in par 16 of the Contentions as follows:

“16. The first plaintiff claims that the first defendant breached the above terms of the Agreement-

Particulars of Breach

(a) The first defendant failed or omitted to design and construct the Project in accordance with the Contract Documents or thoroughly, skilfully or diligently in that it allowed the heat exchange unit to be designed, constructed, tested and installed with the following faults and defects:

(i) the partition plates within the heat exchange unit which were to isolate each of the four Inergen system zones from the other zones were not properly designed and would have failed at the design pressure and did fail in service on 3 January 1997;

(ii) the partition plate thickness complied with the minimum TEMA Standards of required thickness. However, as the permitted TEMA stress was 1.5 times the allowable pertinent pressure vessel code stress the plate thickness separating zones should have been, but were not, more than twice the minimum thickness as designed and constructed;

(iii) the heat exchange unit chambers included non-trivial, non-draining or non-venting zones in all chambers which was contrary to good engineering practice and introduced uncertainties, and a potential compromise of safety, in conducting hydrostatic testing; and

(b) The first defendant failed to arrange and co-ordinate the design and engineering of the System;

(i) in the testing of the heat exchange unit the first defendant failed to ensure that the heat exchange unit was thoroughly and properly drained of all water after testing; and

(d) The first defendant failed to exercise its duty of care to a standard normally expected of a design professional doing the work of the kind underhand. The design of the heat exchange unit was deficient in that:

(i) the partition plates within the heat exchange unit which were to isolate each of the four Inergen system zones from the other zones were not properly designed and would have and did fail at the design pressure;

(ii) the partition plate thickness complied with the minimum TEMA Standards of required thickness. However, as the permitted TEMA stress was 1.5 times the allowable pertinent pressure vessel code stress the plate thickness separating zones should have been, but were not, more than twice the minimum thickness as designed and constructed; and

(e) The first defendant failed to design, construct, test and install a heat exchange unit which was suitable for the purpose and consistent with the nature, character and intended use of the works in that the heat exchange unit and associated pipework contained water where the heat exchange unit and associated pipework should have been totally free of water;

(f) The first defendant failed to plan, implement and manage an appropriate quality assurance management scheme for the execution of the works in that it failed to allow for the proper testing and draining of the heat exchange unit;

(i) ensure that provision was made for complete drainage (section 8.16); and

(ii) ensure that on completion of testing the heat exchange unit was cleaned and free from loose scale and other foreign matter (section 9.1)

(h) In conducting the hydrostatic test, water was introduced to the heat exchange unit. The first defendant failed to ensure that the water from the heat exchange unit and associated pipework was properly drained. The result of this failure was that on activation of the System on 3 January 1997 the released Inergen gas forced much of this water together with a rusty sludge mixture produced by corrosion caused by the presence of the water towards and through the Inergen gas piping to delivery nozzles in the Computer Data Centre and certain other areas of the Premises and further forced contaminated water into the switch and transmission room and the UPS room

(i) The Works were not executed using the best practices of the relevant trades to a standard required of the Contract Documents and free of defects. The partition plates within the heat exchange unit, which should isolate each of the four Inergen system zones from the other zones, were not properly designed and would have and did fail at the design pressure;

(j) The materials incorporated into the Works by the first defendant were not suitable for the purpose and consistent with the nature, character and intended use of the works. The first defendant overlooked the need to provide plates of more than the minimum TEMA Standards required thickness. The plate thickness separating zones should have been more than twice the minimum 10mm thickness of the heat exchange unit;

(k) The heat exchange unit chambers included non-trivial, non-drained or non-venting zones in all chambers. This was contrary to good engineering practice and introduced uncertainties and a potential compromise of safety when conducting the hydrostatic test; and

(l) The finished product was not fit for its intended purpose.

(m) The first defendant failed to comply with AS3788-1990. AS3788-1990 is the Australian Standard relating to Boilers and pressure vessels – In-Service inspection. The first defendant failed to ensure that the heat exchanger was inspected on commissioning and in particular failed to check that no extraneous material was left in the heat exchanger, as required by AS3788-1990 and the first defendant failed to ensure that the heat exchanger was properly inspected after its first year of service and in particular failed to carry out an internal inspection of the heat exchanger as required by AS 3788- 1990.

(n) The first defendant failed to provide a suitable Operations and Maintenance manual for the heat exchange unit. The first defendant failed to include within the Operations and Maintenance manual a reference to the obligations imposed by AS3788-1990. The first defendant failed to recommend an internal inspection of the heat exchange unit after the first year of service as required by AS 3788-1990 or to ensure that the Operations and Maintenance Manual refer to AS3788-1990.

(o) The facts and matters particularised by the Second Defendant (“NDY”) in paragraphs 11(a), (c), (d), (e), (f), (g), (h) and (i) in paragraph 11 of NDY’s Amended First Cross-Claim, namely:

(i) failing to properly supervise the design, construction and testing of the heat exchanger;

(ii) failing to require NDY to participate in the preparation of the heat exchanger specification;

(iii) failing to provide a copy of the heat exchanger specification to NDY;

(iv) failing to request or allow NDY to participate in the testing or installation of the heat exchanger;

(v) failing to act in response to NDY’s qualified stamp consequent upon NDY’s inspection of plans and documents in relation to the heat exchanger by way of request of further review by NDY;

(vi) accepting NDY’s qualified stamp consequent upon NDY’s inspection of plans and documents in relation to the heat exchanger;

(vii) failing to advise NDY of the date and place of the hydrostatic testing of the heat exchanger; and

(viii) failing to request NDY to attend the hydrostatic testing of the heat exchanger.

25 The core problem was a failure to completely drain and thoroughly dry the tube side of the Heat Exchanger after hydrostatic testing: that is not intended to unduly minimise the allegations of under-design of the partition plates in the bonnet chambers.

26 The grossness of the breach may be gleaned from the fact that it was specified in the written specification of the MEF sub-contract that, prior to shipment each inlet of the Heat Exchanger was to be completely drained and thoroughly dried. A similar note was endorsed on the working drawings. This activity was not carried out. The probabilities are that no attempt was made to carry out that essential task. At the very best it may be conjectured that some perfunctory attempt may have been made, but that is highly unlikely. As it happened, the water lay there for some two and a quarter years before being ejected into zone 3 with some escape into zone 1.

27 An alternative basis of claim against Leighton is founded on s 52 of the Trade Practices Act 1974 in which Networks, Systems and Vision claim damages arising out of representations said to be incorporated in Leighton’s certification of 21 August 1995 that the project had achieved completion in accordance with the “Contract Documents” on 21 August 1995. It was contended that Networks, Systems and Vision relied upon those representations and “operated the [Rosebery centre] and their equipment” on the basis that the system had been properly installed.

28 A companion cause of action is brought by Networks, Systems and Vision, in tort, on the basis that the alleged representations were negligently made.

29 Systems also brings an action in negligence against Leighton for breach of a duty of care in relation to:

“(a) installation, testing, commissioning and maintenance of the System in the computer areas of the Premises; and

30 The circumstances said to give rise to the duty of care were set out in the contentions as follows:

“39. The duty of care arises by reason of the fact that it was reasonably foreseeable that a breach by the first defendant of its obligations under the Agreement and the Contract Documents would result in damage to the Premises and to equipment situate [sic] in the computer data centre and the owners and users of such equipment would thereby sustain loss and damage. Moreover, the duty of care arises by reason of the proximity of the relationship between the second plaintiff and the first defendant.”

31 The breaches relied upon are those particularised under the contract count.

32 The nature of the relationship between Systems and Leighton was particularised in the Contentions as follows:

“34. At all material times the second plaintiff owned and had installed equipment in the computer data centre situate [sic] in the Premises and operated such equipment for the purposes of its operations and business.

35. The first defendant knew that the System was to be installed in the Premises from where Optus was conducting its telecommunications business.

Particulars

(a) the work was of a retrofit nature that would be conducted in a “live building” environment. A work permit detailing a concise method statement was required to be submitted to the second defendant and in turn agreed with Optus before commencement of the works in any given area, or any given work activity;

(b) work permits were required to ensure that the working equipment in the rooms in which work was being undertaken would not be affected; and

36. On 24 November 1993 the criticality of the Sydney Technical Centre to the second plaintiff’s network, as well as the need for site protection and the nature of the equipment situate in the Premises was made clear to the first defendant.

37. At a meeting on 7 April 1994, representatives of the first defendant were warned that water being introduced into the computer data centre and the switch and transmission room was totally abhorrent to the second plaintiff.

33 Vision relies upon a like cause of action in negligence against Leighton.

34 Networks also brought an action in negligence against NDY. The relationship between Networks and NDY which was said to give rise to a duty of care was particularised in the Contentions as stemming from NDY’s obligations under either the 1993 or 1994 consultant agreement (it is not specified which): the preparation of a technical specification for the system which included a requirement, in effect, that should Tyco’s subcontract include the provision of a heat exchanger it was to be designed in accordance with the requirements of AS 1210-89 an Australian Standard relating to “Unfired Pressure Vessels Code”: NDY knew that the system was to be installed at the Rosebery centre where the telecommunication business of Optus was being conducted in circumstances as particularised in the negligence action by Systems against Leighton as quoted above and the fact that NDY “reviewed and commented on drafts of the Operation and Maintenance Manual” which pertained to the Heat Exchanger.

35 The duty of care alleged was expressed by Networks as follows:

“68. The first plaintiff contends that the second defendant owed it a duty to take reasonable care in the provision of engineering services related to the design, specification, construction, installation, testing and commissioning (including the provision of suitable maintenance manuals) of the System, and the heat exchange unit, to be installed by the first defendant at the Premises including the commissioning of the heat exchange unit and the checking of the suitability, content and accuracy of the Operation and Maintenance Manual prepared by the first defendant.”

36 The particulars of negligence relied upon were contended as follows:

(a) review or properly review the drawing of the heat exchange unit which identified and detailed the partition plates;

(b) properly check that the partition plates as depicted on the drawings of the heat exchange unit referred to in its amended specification as pleaded in paragraph 5 66 were properly designed;

(c) ascertain that partition plates within the aforesaid heat exchange unit which it had specified as pleaded in paragraph 5 66 would have failed at the design pressure;

(d) object to the design of the heat exchange unit including, contrary to section 8.16 of AS1210-1989, non-trivial, non-draining or non-venting zones in all chambers. This failure was contrary to good engineering practice and introduced uncertainties and a potential compromise of safety when conducting hydrostatic testing of the heat exchange unit;

(e) specify, direct or ensure that water placed in the heating exchange unit chambers for the purpose of hydrostatic testing be removed or drained before the heat exchange unit was installed and commissioned for use at the Premises;

(f) ensure that the design of the heat exchange unit was in accordance with AS1210-1989;

(g) attend the hydrostatic testing and ensure that the requirements of AS 1210-1989 and the manufacturer’s requirement to drain and dry the heat exchange unit after hydrotesting were complied with;

( h) ensure that the specification (Ref A1317), the subsequent addenda (ref AD1-1, ADD-49, ADD-84, ADD-88, ADD-90) and the first plaintiff’s requirements were complied with and negligently issued the certificate dated 18 August 1995;

(i) object to the heat exchange unit’s design pressure of 6 MPa when that design pressure was unsafe; and

(j) ensure that as required by AS 1210-1989, clause 5.10.2.3 each Inergen gas zone of the heat exchange unit was hydrostatically tested.

(k) check the suitability, content and accuracy of the Operations and Maintenance Manual. The second defendant failed to advise the plaintiffs of the existence of AS3788-1990 or its requirements in relation to the heat exchange unit. The second defendant failed to recommend the internal inspection of the heat exchange unit after the first year of service or to require that the Operations and Maintenance Manual be amended to refer to AS3788-1990;

(l) failed to ensure that the heat exchanger was inspected on commissioning, and in particular failed to ensure that no extraneous material was left in the heat exchanger, as required by AS3788-1990;

(m) failed to identify the omission of a heat exchanger thermal test procedure and a pipe system purge procedure as referred to in the Tyco work method statement; and

37 Alternative causes of action under the Trade Practices Act 1974 and in negligence were brought by Networks, Systems and Vision against NDY, as in the representation case against Leighton, based upon NDY’s certification of 18 August 1995, as to the compliance of the system with specification and the requirements of Networks and Communications.

38 Systems and Vision also brought proceedings in negligence against NDY in the form of a companion cause of action to that raised against NDY by Networks.

39 Networks’ claim in damages against Tyco relied upon a relationship arising out of the obligations of Tyco under the Tyco subcontract: the knowledge of Tyco that the system was to be installed in the Rosebery centre where Optus conducted its telecommunications business as particularised in the negligence actions against NDY: knowledge of the “criticality” of the Rosebery centre and its equipment to the Optus Network and in particular that the introduction of water into the equipment areas was “totally abhorrent to Optus”: knowledge that Tyco’s work related to interests of the “Optus Group”: the preparation by Tyco of a specification for the Heat Exchanger in April 1994 that required it to be manufactured in accordance with Australian standards, in particular AS 1210-1989, and that “each item of equipment was to be “completely drained and thoroughly dried so that no moisture remained in any part of the heat exchange unit”: the subcontracting of the manufacture of the heat exchange unit: the preparation in 1994 and 1995 of an Operation and Maintenance Manual, which it provided in draft form to Leighton in September 1994 and between June and August 1995, and the provision of a certificate on 4 August 1995 as to the compliance of the system with Australian Standard 4214 and the requirements of the NDY drawings and specifications.

40 The particulars of negligence relied upon by Networks were stated in the Contentions as follows:

“132. In breach of its duty of care to the first plaintiff the third defendant designed, manufactured, supplied, installed, tested and commissioned the System and prepared the Operation and Maintenance Manual in a negligent fashion.

Particulars of Negligence

(a) The third defendant failed to ensure that the provisions of its specification were complied with in that it failed to:

(i) comply with AS1210-1989 as no provision was made for the complete drainage of the unit as required by section 8.16 of AS1210-1989 in that the heat exchange unit was designed to include non-trivial, non-draining or non-venting zones in all chambers of the unit;

(ii) comply with AS1210-1989 as the heat exchange unit was not completely cleaned before despatch as required by section 9.1 of AS 1201-1989;

(iii) design the heat exchange unit for the most severe coincident conditions of pressure as the rise in pressure which occurred after activation of the System caused 3 or 4 partition plates within the unit to deform and rupture;

(iv) comply with section 5.10 of AS1210-1989 in conducting the hydrotest;

(v) ensure that the heat exchange unit was completely drained and thoroughly dried so that no moisture remained before shipment; and

(b) The third defendant failed properly to design the partition plates within the heat exchange unit;

(c) The third defendant failed to ascertain that partition plates within the heat exchange unit would have failed at the design pressure;

(d) The third defendant failed properly to design the heat exchange unit as the design of the heat exchange unit included non-trivial, non-draining or non-venting zones in all chambers of the unit;

(f) The third defendant failed to ensure that its subcontractor complied with the third defendant’s specification;

(i) the unit was incorrectly designed as it failed to provide for complete drainage;

(ii) the unit did not have a proper system for drainage;

(iii) the unit was not properly drained; and

(h) the third defendant designed the heat exchange unit with a design pressure of 6 Mpa when that design pressure was unsafe;

(i) the third defendant certified that it had installed the System in accordance with AS 4214 Part 2 when the provisions of AS 4214 Part 2 had not been complied with; and

(k) the third defendant failed to provide a suitable maintenance manual for the heat exchange unit. The third defendant failed to require that the Operation and Maintenance Manual be amended to refer to AS 3788-1990. The third defendant failed to recommend an internal inspection of the heat exchange unit after the first year of service as required by AS 3788-1990, or to amend the Operations and Maintenance manual to refer to AS 3788-1990; and

(l) failed to ensure that the heat exchanger was inspected on commissioning, and in particular failed to ensure that no extraneous material was left in the heat exchanger, as required by AS 3788-1990 and failed to ensure that the heat exchanger was properly inspected after its first year of service, and in particular, failed to carry out an internal inspection of the heat exchanger required by AS 3788-1990.

(m) The facts and matters particularised by the Second Defendant (“NDY”) in paragraphs 13(a), (b), (c) and (d) of NDY’s Amended Second Cross-Claim, namely:

(i) the third defendant’s (“Tyco”) failure to forward a copy of the heat exchanger specification to NDY;

(ii) Tyco’s failure to notify NDY of the time and place of the hydrostatic testing of the heat exchanger;

(iii) Tyco’s failure to attend the hydrostatic testing of the heat exchanger; and

(iv) Tyco’s failure to ensure that there should have been a hold point in its subcontractor’s inspection and test plan in relation to draining and drying.

41 In addition Networks, Systems and Vision made claims under the Trade Practices Act 1974 and in negligence against Tyco in similar terms to the representation case which had been brought by them against NDY, relying upon a Notice of Completion given by Tyco on 4 August 1995 certifying completion in accordance with AS 4214 and compliance of the Inergen system with NDY’s drawings and specifications.

42 Systems and Vision also brought proceedings in negligence against Tyco based upon breach of a duty of care alleged to have arisen out a relationship much the same as that alleged by Networks against Tyco. The claim for damages by Communications has not been pursued.

43 Further causes of action in breach of contract and in negligence, in the case of Leighton, and in negligence against Tyco relating to the alleged presence of gypsum dust contamination within the Rosebery centre were the subject of leave to amend in terms of par 178 of the proposed amendment. For reasons which are stated in the separate reasons, that application has been rejected.

44 In relation to the various defences raised by Leighton, NDY and Tyco, the following is indicative only of the nature of those defences, leaving particular consideration to the issues so raised in addressing the matters raised in final addresses by the parties. Leighton admitted the Leighton agreement and denied breach and liability under the Trade Practices Act 1974 cause of action which was asserted to be time barred: denied knowledge of corporations within the Optus Group: denied owing a duty of care in tort outside of its duty of care to Networks under the Leighton contract and raised an issue of contributory negligence, particularised as follows:

“60. Further, in answer to so much of the claim against Leighton which is based on the tort of negligence, Leighton says that any loss or damage suffered was contributed to or caused by the negligence of the Plaintiffs.

Particulars

(a) Mr Dodds did not properly commission the System.

(b) the presence of water was not detected by the Plaintiffs.

(c) the Plaintiffs did not reactivate the air-conditioning system to affected areas,

(d) the Plaintiffs failed to allow proper commission testing of the Inergen system

(e) the Plaintiffs failed to provide adequate procedures and safeguards to ensure that water was not introduced to the Inergen system following installation.

(f) the Plaintiffs failed to detect or put into place any adequate procedures for detecting the presence of water in the Inergen system.

(g) the Plaintiffs failed to test the Inergen system after its installation at the premises.

(h) the Plaintiffs failed to reactivate the air-conditioning system in zone 3 of the premises immediately after discharge of the system.

(i) the Plaintiffs failed to maintain prudent or any backup of the computer equipment located in zone 3 of the premises on the applications operated on that equipment.

45 NDY denied any liability in negligence or under the Trade Practices Act. It too raised an issue of contributory negligence, particularised in much the same terms as were particularised by Leighton in respect of that issue.

46 Tyco by its further amended defence denied liability in negligence or under the Trade Practices Act and by amended pars 23 and 30 pleaded a defence in the following terms:

Tyco… further says that any act or neglect of Tyco caused any loss to the plaintiffs and says that as at and from 4 January 1997 the computers in the Computer Data Centre at Rosebery were so contaminated by gypsum dust as to have necessitated the cleaning of those computers, as in fact it occurred, regardless of the presence of iron oxides or any contaminants associated with the discharge of water through the Inergen system.

47 That further amended defence was filed in court on 25 October 2001 in circumstances that are dealt with in separate reasons. Tyco also relied upon the defence of contributory negligence in terms similar to those relied upon in the defence of Leighton and NDY with the additional contention namely:

“(c) The plaintiffs decided to clean or replace the computer equipment in the Computer Data Centre and the EFTPOS/TANDEM room without undertaking proper investigations to determine whether or not there was a need for that cleaning or replacement.

Particulars

The investigations are those referred to in paragraphs 22-26 of the report of Paul Lunsmann dated 22 July 1999.”

48 By the amended first cross-claim NDY seeks contribution from Leighton under s 5(1)(c) Law Reform (Miscellaneous Provisions) Act 1946 (LRMP Act). In addition NDY brought a claim in negligence particularised as follows:

“ 11. The cause of any such loss and damage suffered by NDY is the negligence of Leighton.

PARTICULARS OF NEGLIGENCE

(a) failing to properly supervise the design, construction and testing of the heat exchanger,

(b) allowing the Third Defendant to have sole control of the design, specification, manufacture and installation of the heat exchanger (save only for the qualified review required of NDY in paragraph (f) below);

(c) failing to require NDY to participate in the preparation of the heat exchanger specification;

(d) Failing to provide a copy of the heat exchanger specification to NDY;

(e) failing to request or allow NDY to participate in the testing or installation of the heat exchanger;

(f) failing to act in response to NDY’s qualified stamp consequent upon NDY’s inspection of plans and documents in relation to the heat exchanger by way of request of further review by NDY;

(g) accepting NDY’s qualified stamp consequent upon NDY’s inspection of plans and documents in relation to the heat exchanger;

(h) failing to advise NDY of the date and place of the hydrostatic testing of the heat exchanger;
(i) failing to request NDY to attend the hydrostatic testing of the heat exchanger.”

49 In its defence to the first cross-claim Leighton denied any liability and in the alternative raised a claim of contributory negligence particularised as follows:

“ (a) failing to properly advise upon and review the design construction, commissioning and installation of the Inergen gas fire system, including the heat exchanger (“the Project”);

(b) failing to participate in the preparation of the heat exchanger specification;

(c) failing to request a copy of the heat exchanger specification;

(d) failing to participate or request to participate in the testing or installation of the heat exchanger; and

(e) failing to attend or request to attend the hydrostatic testing of the heat exchanger.

50 In the second amended cross-claim NDY also brought a claim for statutory contribution under the LRMP Act and a claim in negligence against Tyco particularised as follows:

13. The cause of any such loss and damage suffered by NDY is the negligence of Tyco.

PARTICULARS OF NEGLIGENCE

(a) Tyco’s failure to forward a copy of the heat exchanger specification to NDY.

(b) Tyco’s failure to notify NDY of the time and place of the hydrostatic testing of the heat exchanger.

(c) Tyco’s failure to attend the hydrostatic testing of the heat exchanger.

(d) Tyco’s failure to devise or follow adequate quality assurance procedures.

(e) Tyco’s certification of the heat exchanger on 4 August 1995.

51 Tyco denied those allegations.

52 In the third further amended cross-claim Leighton claimed damages (particularised as the legal costs of these proceedings together with any damages for which it was found liable to Optus) in contract and in tort against each of NDY and Tyco: statutory contribution from both in respect of any damages for which it was found liable to Optus: indemnification in respect of such damages under contractual indemnities given in the Tyco sub-contract: contribution from both “under an obligation at law and/or equity” in respect of any liability Leighton may be found to have under the first cross-claim (by NDY), the fourth (by Tyco) the fifth (by WorkCover) and the sixth (by EMAE). I have treated that claim as one claiming equitable and statutory contribution. It has not been necessary to examine the circularity of those claims.

53 The contractual breaches alleged against NDY were in terms of the 1994 consultant agreement as follows:

“24. In breach of the Consultant Agreement NDY failed to:

1. provide services pursuant to the Consultant Agreement in a proper, thorough, skilful and professional manner;

2. ensure the adequacy of its services and make whatever further enquiries necessary to satisfy this obligation;

3. review services, design development drawings and other documentation against the requirements of the brief and to revise documentation to ensure compliance;

54 The particulars of negligence alleged by Leighton were as follows:

“26. In breach of its duty to Leighton, NDY failed to exercise all due skill and care in carrying out its obligations under the Consultant Agreement.

Particulars

i. ensure that the partition plates in the heat exchange unit did not fail at design pressure;

ii. ensure that the heat exchange unit complied with AS1210-89, and in particular, clause 8.16 of that standard by not including non-trivial, non-draining or on-venting (sic) zones in all chambers;

iv. ensure that clause 5.10.2.3. of AS1210-89 was complied with by ensuring that each Inergen gas zone of the heat exchange unit was hydrostatically tested. NDY issued the certificate dated 18 August 1995 when AS1210-1989 had not been complied with;

v. check the suitability content and accuracy of the Operations and Maintenance Manual. NDY failed to advise Leighton of the existence of AS 3788-1990 or its requirements in relation to the heat exchanger unit. NDY failed to recommend the internal inspection of the heat exchange unit after the first year of service or to require the Operations and Maintenance Manual be amended to refer to AS3788-1990.

vi. ensure that the heat exchanger was inspected on commissioning and in particular by AS3788-1990;

vii. identify the omission of a heat exchanger thermal test procedure and a pipe system purge procedure as referred to in the Tyco work method statement; and

viii. take steps to know that the Inergen system in fact complied with Australian Standards, the Specifications and the requirements of Optus.

55 Leighton claimed in contract against Tyco under the Tyco subcontract and in negligence in carrying out its obligations under that subcontract. The particulars of breach relied upon were as follows:

“46. In breach of the Subcontract Tyco failed to:

a. comply with Australian Standard AS1210-89:

Particulars

i. No provision was made for the complete drainage of the heat exchange unit as required by clause 8.16 in that the unit included non-trivial, non-draining or non-venting zones in all chambers of the unit;

ii the heat exchange unit was not completely cleaned before despatch as required by clause 9.1;

iii the heat exchange unit was not completely drained and thoroughly dried so that no moisture remained in it before despatch as required by clause 5.10;

b. ensure that the System was fit for the purpose for which it was intended;

Particulars

c. ensure that the System released only clean Inergen gas and not water when activated;

Particulars

Comply with Australian Standard AS3788-1990:

(i) no provision was made for inspection upon commissioning of the heat exchanger ;

(ii) no provision was made to ensure that no extraneous material was left in the heat exchanger ;

(iii) no provision was made to ensure that the heat exchanger was properly inspected after its first year of service ;

(iv) no internal inspection of the heat exchanger was carried out; and

no recommendation was made to Leighton for an internal inspection of the heat exchanger after the first year of service.

provide to Leighton suitable maintenance manuals and operating instructions for the heat exchange unit

(i) Tyco failed to require that the Operations and Maintenance Manual be amended to refer to AS3788-1990; and

Tyco failed to recommend the Operations and Maintenance Manual be amended to require an internal inspection of the heat exchanger after the first year of service as required by AS3788-1990

47. In breach of its duty to Leighton Tyco failed to exercise all due skill and care in carrying out its obligations under the Subcontract.

Particulars

i. no provision was made for the complete drainage of the heat exchange unit in that the heat exchange unit included non-trivial, non-draining or non-venting zones in all chambers of the unit;

ii. the heat exchange unit was not completely cleaned before despatch;

iii. the heat exchange unit was not completely drained and thoroughly dried so that no water remained in it before despatch;

iv. each Inergen gas zone of the heat exchange unit was not hydrostatically tested;

v. failed to ensure that the partition plates in the chambers of the heat exchange unit did not rupture under pressure when the System was activated.

vi. failed to provide a suitable Operations and Maintenance Manual in that Tyco failed to require the Manual to be amended to refer to AS3788-1990;

vii. failed to ensure that no extraneous material was left in the heat exchanger as required by AS3788-1990 ;

viii. failed to carry out an internal inspection of the heat exchanger as required by AS3788-1990; and

failed to ensure that the heat exchanger was properly inspected after its first year of service as required by AS3788-1990.”

56 By its defence NDY denied any liability to Leighton and relied upon its particulars of negligence against Leighton in the first cross-claim as founding a defence of contributory negligence.

57 By its defence Tyco denied liability and raised an issue of subrogation in the following terms:

“25. Tyco denies the allegations in paragraph C56, and further says that in the event that Tyco is held to be liable to Leighton pursuant to one or more of clauses 8.5(b), 10.2 or 16.2 of the Sub-Contract, Tyco is entitled to be subrogated to any claims that Leighton may have against any third parties in respect of any losses that Leighton is able to recover from Tyco pursuant to one of more (sic) of the aforementioned clauses, including the claims Leighton has brought against NDY in its Amended Third Cross Claim and against EMAE in its Amended Eighth Cross Claim.

58 By the further amended fourth cross-claim Tyco brought proceedings against EMAE, NDY, Leighton and WorkCover.

59 Tyco’s claim against EMAE in negligence was based on an alleged duty of care:

"(a) to carry out the mechanical design with due professional skill and care and in accordance with good engineering practice;

(b) to ensure that the heat exchanger, when fabricated in accordance with the mechanical design, would be suitable and safe for the purpose for which it was intended namely, for incorporation in a gas flooding fire suppression system at the premises; and

60 The duty of care was said to arise out of EMAE’s obligations as mechanical designer of the Heat Exchanger, of its expertise in that regard, of its knowledge that the Heat Exchanger was required by Tyco pursuant to the Tyco subcontract, of the reliance by Tyco, Leighton and Optus upon EMAE’s expertise and EMAE’s knowledge of the consequences of the failure to carry out the design with due professional skill and care. The particulars of breach alleged were as follows:

“42. In breach of its duty of care to Tyco, Leightons and Optus, EMAE:

(a) did not carry out the mechanical design with due professional skill and care and in accordance with good engineering practice;

(b) did not ensure that the heat exchanger, when fabricated in accordance with the mechanical design, would be suitable and safe for the purpose for which it was intended;

(c) failed to warn MEF, Tyco, Leightons or Optus of the need to take special precautions following hydrostatic testing of the heat exchanger to ensure that all water was drained from the gas side of the heat exchanger;

(d) failed to warn MEF that the separate chambers in the heat exchanger necessitated separate hydrostatic testing; and

61 The damages sought from EMAE were the legal costs of the proceedings and the amount of any judgment against Tyco in favour of Optus, NDY or Leighton. In addition Tyco sought contribution pursuant to the LRMP Act and contribution under EMAE’s “obligation at law and/or equity to contribute to any liability Tyco may be found to have under the Amended Summons, Second Cross-claim (by NDY), Amended Third Cross-claim (by Leighton) and Amended Fifth Cross-claim (by WorkCover).”

62 Tyco also contended it was entitled to be subrogated to any claims that Leighton may have against EMAE “in the event that Tyco is held to be liable to Leighton pursuant to one or more of clauses 8.5(b), 10.2 or 16.2 of the (Tyco) Subcontract”.

63 The claim against NDY was based on an alleged duty of care of NDY “to use due professional skill and care to ensure the Heat Exchanger was suitable and safe for incorporation in [the system]”. The basis of that alleged duty of care was expressed to lie in the expertise in NDY in the provision of engineering services and the terms of the 1997 consultant agreement together with NDY’s knowledge of the circumstances under which the Heat Exchanger was being supplied to Optus.

64 The breaches relied upon were as follows:

“53. In breach of its duty of care to Tyco, Leightons and Optus, NDY:

(a) failed to ensure that the design, fabrication and testing of the heat exchanger accorded with good engineering practice, the Heat Exchanger Specification, the Unfired Pressure Vessels Standard, the Quality Standard and the Boiler and Pressure Vessels Regulations;

(b) approved the design of the heat exchanger and failed to warn MEF, Tyco, Leightons or Optus of the need for special precautions to ensure that all water was drained from the gas side of the heat exchanger following hydrostatic testing;

(c) approved the design of the heat exchanger when the partition plates in the bonnet of the heat exchanger were not of adequate thickness given the design pressure;

1777 I also note that, while re-testing was associated with the feed problem, the status tests do not, in the detailed recording of tests performed and outstanding, reflect such an activity of retesting. In my view, that indicated the level of importance of that retesting in the overall schedule.

1778 For those reasons I am satisfied that the delay in the critical path of the project on the evidence before me, attributable to the removal of resources of the GSMIS test team was in the order of two months and was the subject of the Kenan invoice and the Optus order form in respect of that delay.

1779 The rectification of the feed problem, in my view, was not shown to be on the critical path and I think the evidence of Mr Taylor should be accepted to the effect that resolutions of that problem would have been addressed had it become necessary to do.

1780 In addition to the Kenan invoice amount, Tyco also put in issue two further amounts of $1,150.00 as recorded under System Index 503 and $5,765.00 under System Index 504, on the basis that Optus had failed to show that the subject matter of the invoices captured by Optus in its cost recovery system was not “assistance that would have been provided regardless of the incident”. There was no cross-examination of any witness in relation to either of those items and in my view, having regard to the nature of the system, both items should be allowed. I note that in each case the subject invoices were approved as costs of rectification by the representative of Optus’ insurer.

1781 Item 29.1 Test and application support resources; Item 36.1; Item 57.1 Optus staff costs: In respect of these items of claim, Tyco has put in issue the amount of $221,250.00 based upon an analysis by Mr Lonergan of the cost records relating to these items which formed part of the records maintained by Optus in its recovery costs system. I think it is of some importance to note that in the confirmation exercise carried out by Mr Cearns, referred to earlier in these reasons, these records were the subject of his confirmation.

1782 The records are voluminous and are maintained under System Indices running from 400 to 435, each with supporting records, 531 to 754 with supporting records and System Index 815 to 848 with supporting records which occupy several volumes. I observe that Mr Lonergan’s analysis involved a comparison of the total amount confirmed by Mr Cearns with the total amount revealed by Mr Lonergan’s analysis and that the differences were “minor”. Tyco has not disputed the nature of this claim which it summarised in the following way:

“191. Optus has not claimed for time, if any, spent on the recovery project by its permanent staff. Optus has claimed for costs representing what it alleges is time spent on the recovery project by its external contractor staff. Optus had a general practice that when it required staff it would seek the supply of staff required from organisations which regularly supplied Optus with staff. The usual method was that when Optus needed staff from time to time it issued a service order which would state the staff requirement and the time period for which the staff was required. Staff were engaged generally on a daily rate. …..”

1783 Mr Lonergan was requested to carry out an analysis of the subject records to identify the following:

1784 The cost of the pre-incident personnel and the cost of the services of the personnel in category (b) was then calculated by Mr Lonergan from the recovery cost records. He quantified that cost in the sum of $38,681.00 in relation to pre-incident personnel and $182,569.00 in relation to category (b) personnel, making a total of $221,250.00.

1785 It was Tyco’s contention that this amount should be deducted from the recovery costs claimed by Optus on the basis that they had not been shown to be incremental and that, on the face of it, they are costs that Optus would have incurred in any event. The logic of that argument and of the assumption made by Mr Lonergan was that, if the contracted personnel had been performing tasks for Optus prior to the incident, or were shown, on any particular invoice, to be engaged in discrete periods on recovery program work and on other Optus work in discrete periods, then those personnel would have been engaged by Optus regardless of the incident and should not be designated as incremental and therefore recoverable personnel costs.

1786 Optus has not made claim for recovery of costs of its permanent executive personnel engaged in the recovery program and that matter is not in issue in these proceedings. It is not disputed that, on the face of the records, hours of engagement are recorded separately in respect of recovery program work and non-recovery program work. At the same time, Tyco complained that the records were “opaque” and that they were the product of a system, substantiated, in part, by Mr Cearns’ own knowledge of the recovery program, but only in part, and that his confirmation of the costs as recovery program cost was, in part, based upon his examination of the records produced by the system.

1787 To illustrate that point, Tyco referred to the time sheet of a Mr Steven O’Brien for the week starting 12 January 1998 which identified one hour on 15 January 1998 as engaged in the recovery program activity. The entry is cost coded 396 and is described as “DCRP – liase with Softway” for which Optus claimed the sum of $65.62 in accordance with system index 716. The cross-examination on this subject matter was as follows:

I have just chosen it really at random, just to make a point. There it is a claim for a small amount of money and if you go over to what appears to be a time sheet and you go to Thursday, 15 January 1998 - this is OPT314G310 - you go LAN or project 396, that seems to be the work the person did. Do you agree with that?

1788 Another example taken by Tyco related to an illustration chosen by Tyco involved a claim of $181.75 as recorded under System Index 726. It was said by Tyco to represent one hour of the personnel’s performance of recovery program work in a six week period [T1717:46 – 1719:52]. Given the complexity of the task of recording the costs of the recovery program, the confirmation task undertaken by Mr Cearns and the approval of these costs by the insurer’s representative, it is extremely difficult to know what else Optus could have done to identify its costs of rectification.

1789 It was submitted that Mr Cousins did no more than clerical work in his overseeing of these costs, relying upon his cross-examination as follows:

1790 However, I think that evidence has to be viewed in the context of the circumstances in which the system was established, its reliability and the initial involvement of the insurer in that process: a context which, I think, notwithstanding Mr Cousins’ description of his role, reflected a role that was more than “purely clerical”.

1791 I note also that Mr Cousins saw his role as having a relationship to the “auditors” of Optus. I am also of the view that one ought not disregard the experience of Mr Cousins in exercises of this nature which, one would expect, would give him a “feel” for the extent of costs involved.

1792 I have some considerable difficulty in Tyco’s general approach to these costs as not being incremental. On the face of the records and as substantiated, I think, by Mr Cearns, these costs were directly incurred for the sole purpose of rectification, of the contaminated equipment and of other damage to Optus’ property. No dispute existed as to the payment for that work by Optus. I find it extraordinarily difficult to accept that such direct costs of rectification should not be treated as recoverable on the basis that they are not shown to be incremental. Of their nature, in my view, being the costs of contracted personnel, they are incremental costs of rectification.

1793 I think the assumptions which Mr Lonergan was asked to make in relation to pre-incident personnel and those the subject of category (b) as being personnel whose costs would have been incurred in any event are far from reasonable and should not be accepted.

1794 I have been referred to what was said by his Honour Giles J as is Honour then was in NRMA at 804 – 805 in which his Honour examined certain internal costs of the plaintiff in which it was contended on behalf of the defendants that “there [was] no evidence of incurrence of abnormal or additional expense” in relation to work undertaken by the plaintiff in anticipation of a corporate restructuring which in the event did not occur. In the course of considering that question his Honour referred to his decisions in Thiess Watkins White Construction Limited v The Commonwealth (1992) 14 BCL 61 at 77-8 and Bulk Materials (Coal handling) Pty Ltd v Compressed Air & Packaging Systems (NSW) Pty Ltd (1997) 14 BCL 109 at 134-5. Neither NRMA, nor the earlier decisions of his Honour, in my view, are in point factually, having regard to the nature of these costs as costs of contracted personnel who were engaged in the rectification work of Optus and whose costs are direct costs of that program. The mere fact that personnel who were engaged in the rectification work included a few personnel who had been contracted to perform work for Optus prior to the incident is not material, in my view, from which one could draw an inference reasonably that, in some way, these costs of rectification were not incremental.

1795 A similar observation should be made in respect of contracted personnel whose time sheets record work while engaged in the recovery program for discrete periods and also record work separately performed on other Optus activities. In my view, it is quite illogical to draw the inference, such as Tyco made and which formed the basis of the assumption made by Mr Lonergan, that the costs of those personnel engaged in the recovery program would have been incurred in any event, regardless of the incident. The illogicality of that suggested inference lies in the fact that, presumably, if some other person was engaged to perform only this work of rectification, those costs would be recoverable. It also runs against the nature of the engagement of the contracted personnel on time related bases. For those reasons I am of the view that the costs as claimed by Optus are recoverable as costs of the recovery program.

1796 In a series of submissions presented on 14 and 17 December 2001 Optus and Tyco continued their disputation over the credit to be allowed for left-over equipment, cleaned and retained by Optus which was equivalent to the equipment acquired by Optus in the course of its recovery program.

1797 The evidence of valuing that equipment with “DCRP equivalents” which was effected by Mr Keaveny was based upon two schedules prepared by Mr Quodling as part of his statement of evidence in chief of 10 April 2001. In his earlier statement of evidence in chief of 31 March 2000, Mr Quodling had identified a list of residual contaminated equipment which was “still in storage at Relectronic” (the residual contaminated equipment list). In relation to the Equivalence Spreadsheet, as earlier noted in these reasons, some of the DCRP equipment retained by Optus did not have an equivalence in the Equivalence Spreadsheet.

1798 Prior to Mr Quodling giving evidence, Mr Lister was called, and in his oral evidence in chief, he identified from the Optus stock list items of equipment omitted from the Equivalence Spreadsheet but which appeared in the stock list as equipment equivalent to the DCRP acquired equipment. His evidence was as follows:

1799 Mr Quodling was not cross-examined upon those omissions nor upon the state of the equipment in the stock list. Subsequently to Mr Lister and Quodling being called, Mr Ogbourne gave evidence which led to cross-examination suggesting that he was in error in his identification of equipment and, in particular, as can be seen in Schedule U, the attention of Tyco’s solicitors was drawn to the inclusion in the Optus stock list of equipment which, in error, had been omitted from the Equivalence Spreadsheet, namely, equipment identified as that equivalent to the two AS4100’s and storage works forming part of the equipment acquired by Optus in the DCRP. This was acknowledged by Mr Ogbourne after further information was provided by Optus’ solicitors in their letter to Tyco’s solicitors of 8 August 2001, also part of schedule U.

1800 In its submissions on quantum, Tyco submitted that, in addition to the valuation effected by Mr Keaveny there had to be included the equipment identified by Mr Lister which had been omitted, in error, from the Equivalence Spreadsheet and as listed in the correspondence forming part of Schedule U to these reasons. In relation to the two AS 4100’s that equivalent equipment was valued by Tyco in the sum of $97,497.07, based upon Mr Keaveny’s comparable valuations.

1801 In relation to storage works, that equivalent equipment was valued in the same manner in the sum of $62,639.69. That was related to a storage works cabinet identified as cabinet 54. In addition, Tyco sought inclusion of the value of residual equipment known as cabinet 40 which it contended was equivalent to equipment acquired in the DCRP and listed in the Equivalence Spreadsheet as cabinet 800. The valuation for that residual equipment based on Mr Keaveny’s comparable valuation was calculated in the sum of $102,559.45.

1802 Optus disputed the entitlement of Tyco to the addition of those valuations to the valuation of Mr Keaveny. Optus’ opposition to these additional valuations was on the basis that, in Mr Quodling’s evidence in chief, he listed residual equipment which had been cleaned and either used or in store by Optus and which did not include these additional items of equipment, the value of which Tyco sought to be brought to account.

1803 Optus submissions were rather dismissive of the exchange of material between solicitors as set out in Schedule U. It was further contended on behalf of Optus that in relation to cabinets 54 and 40 they appeared in the residual contaminated equipment list from which it should be inferred that being contaminated and left in storage at Relectronic no real value could be attributed to it. While accepting that the two cabinets appeared in the residual contaminated equipment list, Tyco rejected the inference that, being left in a contaminated state in storage, did not lead to the inference that the equipment had no value.

1804 Tyco’s response in relation to the two AS4100s was that the equipment in the stock list equivalent to the two AS4100s did not appear in the residual contaminated equipment list and did appear in table C of Mr Quodling’s statement of evidence in chief of 10 April 2001, that being “Left-over equipment cleaned and stored/not used at BLOC or CHOC (with no DCRP equivalence)”.

1805 The difficulties with this series of submissions are not dissociated from their belated nature: by the failure of Optus to draw Mr Quodling’s attention to Mr Lister’s evidence of errors by way of omission from the Equivalence Spreadsheet and by Tyco’s failure to cross-examine Mr Quodling upon the accuracy of his statement.

1806 I am not prepared to infer, as Optus has contended, that, since equipment equivalent to the two AS4100s does not appear in Mr Quodling’s statement of evidence in chief as equipment cleaned and stored by Optus with DCR equivalence that therefore it should be treated as contaminated uncleaned equipment. That inference is not supported by the stock list and ignores the error acknowledged in the material the subject of Schedule U. I think its value should be added to Mr Keaveny’s valuation representing the value of the equivalent material in the stock list to the two AS4100s. Optus has not challenged the method by which Tyco has calculated that value and, accordingly, the amount of $97,497.07 should be added to Mr Keaveny’s valuation.

1807 In relation to the storage cabinet (cabinet 54) and cabinet 40, there was no dispute that that equipment was contaminated and remained in storage at Optus in that state. In those circumstances, I am not prepared to attribute any value to that equipment said to be equivalent to the DCRP equipment in the Equivalence Spreadsheet.

1808 Accordingly, the damages to be allowed are as set out and apportioned by Optus amongst the first, second and fourth plaintiffs subject to the adjustment of $118,252 as conceded by Optus in final addresses :the abandonment of cost item 881 in the sum of $1,376.40 and the further adjustment of the sum of $97,497.07 in accordance with these reasons. I have required the parties to being in short minutes of order in anticipation of the publication of these reasons with the view to making final orders at that time.

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Schedule A

Diagram of floor plan of Rosebery centre

Schedule B

Figure 2 – The Heat Exchanger

Schedule C

Figure 4 – Tubesheet

Schedule D

Figure 6 from Bundle of Colour Photographs filed for Plaintiffs

Schedule E

Figure 7 from Bundle of Colour Photographs filed for Plaintiffs

Schedule F

Figure 8 from Bundle of Colour Photographs filed for Plaintiffs

Schedule G

Figure 9 from Bundle of Colour Photographs filed for Plaintiffs

Schedule H

Figure 10 from Bundle of Colour Photographs filed for Plaintiffs

Schedule I

Figure 12 from Bundle of Colour Photographs filed for Plaintiffs

Schedule J

Figure 14 from Bundle of Colour Photographs filed for Plaintiffs

Schedule K

Figure 17 from Bundle of Colour Photographs filed for Plaintiffs

Schedule L

Figure 3 from Bundle of Colour Photographs filed for Plaintiffs

Schedule M

Figure 5 from Bundle of Colour Photographs filed for Plaintiffs

Schedule N

Figures 42 and 48 from Bundle of Colour Photographs filed for Plaintiffs

Schedule O

Description of Services to be provided by NDY as set out in Phases two, three, four and five of Annexure E

Schedule P

Tyco Specification [Ex1.228]

Schedule Q

Revision 1 of the Lummus data sheets and the tubeside layout diagram

Schedule R

Photographs of Computer Data Centre

Schedule S

Equivalence Spreadsheet

Schedule T

Ex 10.048 [response of Mr Quodling] Paragraphs 22 - 54

Schedule U

Requests by Optus’ solicitors to Tyco’s solicitors

Schedule V1

Equipment Recovery Strategies 27 April 1997

Schedule V2

Equipment Recovery Strategy and Cost Review

Schedule W

Exhibit 18.005 BillA Daily Status Reports

17 March 1997 (1), 1 April 1997 (2), 3 April 1997 (3)

Last Modified: 05/07/2002

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Citations

Optus v Leighton [2002] NSWSC 327

Most Recent Citation

Cameron v Cavric P/L T/a Cavalier Homes Mackay [2010] QCAT 114

Cases Citing This Decision

5

In the matter of Ming Tian Real Property Pty Ltd [2020] NSWSC 212

Lovric & Anor v WorkCover Authority of New South Wales & Ors [2007] NSWSC 898

Roberts v Rodier [2006] NSWSC 282

Cases Cited

22

Statutory Material Cited

7

Brownett v Newton [1941] HCA 14

Astley v AusTrust Ltd [1999] HCA 6

Bird v DP (a pseudonym) [2024] HCA 41

CITATION:	Optus v Leighton & Ors [2002] NSWSC 327
CURRENT JURISDICTION:	Equity Division Construction List
FILE NUMBER(S):	SC 55059/97
HEARING DATE(S):	12/2/01-15/02/01; 20/02/01-22/02/01; 26/02/01-28/02/01; 5/03/01-8/03/01; 12/03/01-15/03/01; 19/03/01-22/03/01; 29/03/01; 2/04/01- 5/01/01; 9/04/01; 10/04/01; 23/04/01; 24/01/01; 30/04/01; 1/05/01; 14/05/01; 15/05/01; 28/05/01-31/05/01; 4/06/01-7/06/01; 12/06/01-14/06/01; 18/06/01-21/06/01; 25/06/01-28/06/01; 2/07/01-6/07/01; 6/07/01-12/07/01; 16/07/01; 17/07/01; 20/07/01; 23/07/01; 27/07/01; 30/07/01-1/08/01; 13/08/01; 19/10/01; 22/10/01-25/10/01
JUDGMENT DATE:	24 April 2002
PARTIES :	First Plaintiff: Optus Networks Pty Limited Second Plaintiff: Optus Systems Pty Limited Fourth Plaintiff: Optus Vision Pty Limited Fifth Plaintiff: Optus Communications Pty Limited First Defendant: Leighton Contractors Pty Limited Second Defendant: Norman Disney & Young & Partners Pty Limited Third Defendant: Tyco Australia Pty Limited Sixth Cross-claimant: EMAE Pty Limited Fifth Cross-claimant: The WorkCover Authority of New South Wales
JUDGMENT OF:	Hunter J

COUNSEL :	Plaintiffs: P Greenwood SC; P Durack; S Climpson First Defendant: P Garling SC; R Pepper Second Defendant: S Robb QC; G Ellis Third Defendant: N Hutley SC; J Lockhart Sixth Cross-claimant: G Downes QC; N Kidd Fifth Cross-claimant: S Donaldson SC
SOLICITORS:	Plaintiffs: Minter Ellison Lawyers First Defendant: Moray & Agnew Second Defendant: Colin Biggers & Paisley Third Defendant: Blake Dawson Waldron Sixth Cross-claimant: Allen Allen &Hemsley Fifth Cross-claimant: Phillips Fox
CATCHWORDS:	Contract - negligent performance of contract for fire suppressant system - accidental discharge of foreign matter from system - contamination of computer bank - liability of principal contractor - of subcontractors - professional negligence - liability of statutory authority in system testing - misleading conduct - negligent misrepresentation in certification of works - contributory negligence of principal - Damages - whether property damage or econmic loss - principles applicable - whether principle of betterment part of assessment of damages - whether benefits to principal in rectification work to be taken into account - onus of proof where issue of betterment raised - whether costs of rectification incremental - statutory contribution - contractual indemnity - liability in contribution of insolvent subcontractor - principles of apportionment.
LEGISLATION CITED:	Boiler and Pressure Vessel Regulations 1942 (NSW) Factories, Shops And Industries Act 1962 (NSW) Law Reform (Miscellaneous Provisions) Act 1946 (NSW) Law Reform (Miscellaneous Provisions) Act 1965 (NSW) Occupational Health and Safety Act 1983 (NSW) Trade Practices Act 1974 (Cth) WorkCover Administration Act 1989 (NSW)
CASES CITED:	Astley v Austrust Ltd (1999) 197 CLR 1 British Westinghouse Electric and Manufacturing Company v Underground Electric Railways Company of London [1912] AC 673 Bryan v Maloney (1994 - 1995) 182 CLR 609 Bulk Materials (Coal handling) Pty Ltd v Compressed Air & Packaging Systems (NSW) Pty Ltd (1997) 14 BCL 109 Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520 Carslogie Steamship Co Ltd v Royal Norweigian Government [1952] AC 292 Cashfield House Ltd v David & Heather Sinclair Ltd [1995] 1 NZLR 452 Chaplin v Hicks[1911] 2 KB 786 Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-operative Assurance Co. of Australia Ltd (1931) 46 CLR 41 Crimmins v Stevedoring Indurstry Finance Committee (1999 - 2000) 200 CLR 1 Daniels v Anderson [1995] 37 NSWLR 438 Fisher v C.H.T. Ltd (No. 2) [1966] 2 QB 475 Frankcom v Woods (NSWCA 1 October 1980 (unreported)) Hadley v Baxendale (1854) 9 Ex 341 Haines v Bendall (1991) 172 CLR 60 Harbutt's "Plasticine" Ltd v Wayne Tank and Pump Co. Ltd [1970] 1 QB 447 Hawkins v Clayton (1988) 164 CLR 539 Hill v Van Erp (1996 - 1997) 188 CLR 159 Hoad v Scone Motors Pty Ltd [1977] 1 NSWLR 88 Hodge and Another v Clifford Cowling & Co [1990] 46 EG 120 Hollis v Vabu Pty Ltd [2001] HCA 44 (9 August 2001) Hussey v Eels [1990] 2 QB 227 Hyder Consulting (Australia) Pty Ltd v Wilh Wilhelmsen Agency Pty Ltd [2001] NSWCA 313 IT walker Holdings Ltd v Tuf Shoes Ltd [1981] 2 NZLR 391 J & B Caldwell Ltd v Logan House Retirement Home Ltd [1999] 2 NZLR 99 Johns v Prunell [1960] VR 208 Johnson v Perez (1988 - 1989) 166 CLR 351 Joyner v Weeks [1891] 2 QB 31 Lavarack v Woods of Colchester [1967] 1 QB 278 Modbury Triangle Shopping Centre Pty Ltd v Anzil (2000) 176 ALR 411 Monroe Schneider Associates Inc v No1 Raberem Pty Ltd (1991) 33 FCR 1 Murphy v Brown [1985] 1 NSWLR 131 Northern Sandblasting Pty Ltd v Harris 1996 - 1997) 188 CLR 313 NRMA Ltd v Morgan (1999) 31 ACSR 435 Pacific Associates Inc v Baxter [1990] 1 QB 993 Peake v Steriline Manufacturing Pty Limited (1988) Aust Torts Reports 80-154Performance Cars Ltd v Abraham [1962] 1 QB 33 Perre v Apand Pty Ltd (1991) 198 CLR 180 Pyrenees Shire Council v Day (1998) 192 CLR 330 Romeo v Conservation Commission (NT) (1998) 192 CLR 431 RW Miller & Co Pty Limited v Krupp (Australia) Pty Limited (1995) 11 BCL 74 Sea Containers Ltd v ICT Pty Ltd [1998] NSWSC 474 Simonious Vischer & Co v Holt Thompson [1979] 2 NSWLR 322 Sutherland Shire Council v Heyman (1985) 157 CLR 424 Taylor v Rover Co. Ltd [1966] 2 All ER 181 Tepko v Water Board [2001] HCA 19 (5 April 2001) The Habersham Grange [1905] P 307 Theiss Watkins White Construction Limited v The Commonwealth (1992) 14 BCL 61 Voli v Inglewood Shire Council (1962 - 1963) 110 CLR 74 Watts v Rake (1962) 108 CLR 158
DECISION:	Judgment for first, second and fourth plaintiffs against first and third defendants - otherwise proceedings dismissed: judgment for cross-claimant under third cross-claim against second cross-defendant - otherwise cross-claims dismissed - save for seventh cross-claim. Final orders as to the seventh cross-claim, quantum and costs deferred pending presentation of short minutes by parties at time of publication of reasons.