Whether BHE's arguments on appeal were run below
136 The consideration of this issue requires an analysis of how the case was pleaded and run. This is no easy task given the size of the case. The matters to which I will make reference are by no means exhaustive. A convenient starting point is the application made by BHE at the conclusion of the evidence to amend the summons. The application was opposed, but allowed: see the primary judge's extempore reasons: [2005] NSWSC 1339.
137 The Further Amended Summons prior to the amendment in December 2005, only pleaded insuring clause 1. There had been pleaded, however, in an amended reply filed by BHE during the hearing, a claim under special provision 2. It was located in a part of the reply which made its terms unresponsive to the relevant iteration of the defence. It might be thought to have been an attempt to tack on to the proceedings an issue to be run, however disconnected its context. The Second Further Amended Summons, brought forward late in the trial in 2005, made a claim under special provision 2. Schedule 3 to the Second Further Amended Summons claimed indemnity under special provision 1 (not now relevant), special provision 2, insuring clause 1, the costs extension (insuring clause 2) and extension 6. The particulars in Schedule 3 referred to BHE's outline of submissions at the commencement of the trial. In those submissions, there was clearly reliance on special provision 2. These submissions reflected, in part, Professor Ingold's evidence, and in part Professor Leshchinsky's; they contained the following:
(e) the failure on the part of the designer to identify that the introduction of creases, wrinkles or folds into the geotextile could lead to sand loss through, and around, the geotextile in the absence of gluing the geotextile strip all along its length on either side of the joint.
(f) the failure to specify, in respect to the compactive effort (Density Index) to be applied, or the manner by which compaction of the fine uniform sand fill behind the reinforced walls was to be achieved, the precautions which should be taken to avoid the introduction of wrinkles, creases or folds into the geotextile in the absence of gluing the geotextile strip all along its length on either side of the joint.
138 BHE relied on these passages (in particular (f) above) to support the proposition that the argument on appeal was before the primary judge.
139 Further, these submissions set out what was referred to as a "secondary case". This secondary case made references to a number of asserted design flaws and then referred to certain "background matters" which included the following assertion:
RE and CW failed to advise BHE that there was a risk of sand loss, through and around the geotextile affixed to the rear of the wall panels of the Millstream Walls and Seawall, by the introduction of folds, creases or wrinkles into the geotextile by:
(a) compaction to a density less than 80%.
(b) compaction to the specified density of 80% by the use of hand held equipment in the 1 m zone immediately behind the wall panels.
140 None of these references states the matter with the clarity with which it was stated on appeal - that the design mandated the layer heights of uncompacted backfill.
141 Some light is thrown on the debate in the transcript of the amendment application on 15 December 2005. The insurers argued that the design case based on mechanism 2 had not been in the case before the Second Further Amended Summons came forward. The primary judge rejected this. During this debate Mr Robb QC, Senior Counsel for RE P/L and CW said:
We would have been presented with the rights that the defendants are entitled to, to actually investigate properly what is involved in the claim that RE had the obligation to tell this immense contracting company BHE as to how it should compact sand.
142 Nevertheless, the primary judge allowed the amendment. No appeal was brought from this.
143 Before looking at what was said in addresses at the conclusion of the hearing, it is useful to note what was put in the various written submissions. I have already referred to parts of BHE's submissions at the commencement of the trial that were picked up in the amendment application in December in Schedule 3 to the Second Further Amended Summons. Also, I have referred to some of the detailed final written submissions set out by the primary judge in his reasons.
144 In BHE's skeleton outline of submissions served after the oral evidence, an outline of argument was given which was said to be based on:
… [t]he evidence given by Professor Ingold, Professor Leshchinsky and Mr Boyd as to the cause of sand loss around the geotextile applied to the rear of the joints of the reinforced earth walls, [and which was] to explain how it is that each of the insuring clauses contained within the HIH Contract responds to the common integers of the evidence given by each of those witnesses.
In that outline of argument the following propositions were put:
Wrinkles, folds or creases were introduced into the geotextile by the compaction of the sand backfill in layer lifts which exceeded 150mm.
There is such common ground between each of Professor Ingold, Professor Leshchinsky and Mr Boyd that there is no need for the Court to prefer the evidence of one witness over another - the relevant task is to consider which theory, or which combination of them, best fits with what has been observed about sand loss in regard to the Millstream Wall and Seawall as a matter of fact.
Irrespective of whether the Court concludes that sand is lost around the edge of the geotextile consistent with Professor Ingold's theory, or Professor Leshchinsky's theory, or a combination of them both, each of Gordian and CGU is liable to indemnify BHE under the Gordian Contract and CGU Contract respectively.
145 Also, in final written submissions in chief in dealing with the alleged inadequate compaction and exclusion 1(p), a seven staged argument was put, which concluded as follows:
Seventhly, even if the Court were to accept that Professor Leshchinsky's first mechanism explained sand loss at one or more locations behind the reinforced earth walls (which locations have never been identified, and which theory should be rejected for the reasons previously stated), the Court would find that his first mechanism was not the proximate cause of the claim made by SACL against BHE, in circumstances where sand loss was inevitable if the reinforced earth walls were constructed in accordance with the design.
(emphasis added)
146 In submissions in reply in answer to a claim that there had been a "u-turn" in BHE's case, the following was put in writing:
At the commencement of its Submissions, Gordian criticises BHE for a "forensic u-turn". There has been no forensic u-turn on the part of BHE (Gordian's Closing Submissions, at para [4(a)]). BHE's case has always been from the outset that, if the Court accepted Professor Leshchinsky's evidence, the Court would find that there was an act, error or omission in design, engineering or construction management, and that the defence based on Exclusion 1(p) would be rejected: BHE's Outline of Submissions dated 11 October 2005, at paras [127]-[138], [445]-[448], and [506]-508].
…
There is ample evidence to prove that BHE constructed the reinforced earth walls in accordance with the design prepared by RE, CW, and supervised and reviewed by BHE. So much is evident from the thousands of documents tendered in the case, as summarised in BHE's Evolution of Design Document.
…
On the case put forward by Gordian and CGU, it was impossible to achieve compaction of sand to an 80% Density Index with "thick" layers in excess of 150mm using hand held equipment. The design, which included the specification of the construction method, prescribed compaction in thick layers using hand held equipment. It follows that the design was faulty. It can not be said that construction work was a cause of sand loss.
Furthermore, on the evidence propounded by CGU and Gordian, compaction to an 80% Density Index would have led to wrinkles, folds and creases in the compacted layers, which in turn would have led to sand loss. Therefore, their case is that compaction to 80% Density Index would have led to more sand loss, not less. In other words, regardless of whether there was compaction to 80% Density Index or not, the sand loss would have eventuated. It was inevitable. It follows that design was the effective cause of loss, not the construction work carried out to construct the walls in accordance with the design. The sand loss does not, therefore, "arise out of" construction.
147 Further illumination comes from final addresses. In final oral address before the primary judge, Mr Finch put the following:
And it is important for our case for the Court to appreciate that when read carefully there is no necessary inconsistency between the fundamental elements, as opposed necessarily [to] all the bells and whistles, but the fundamental elements of the theories of Professor Ingold and the second mechanism of Professor Leshchinsky , and reassuringly for the Court, those two approaches, which we say are fundamentally reconcilable are also consistent with the observations of Mr Boyd, both on site and deploying the expertise that he had and the earlier remarks which we have put, as your Honour has seen, in some appendices of Messrs Phillips and Shirley.
…
[I]t is our position that Professor Leshchinsky's second mechanism , Professor Ingold's theory, Mr Boyd's observations and the observations of Messrs Shirley and Phillips are all of them consistent with all of these following propositions.
…
Now, pausing there, there appears to be great excitement in the defendants' camp that we should adopt any part of Professor Leshchinsky's evidence, presumably because it came from one of their witnesses. The answer to this excitement of course is simple: if your Honour accepts Professor Leshchinsky's second mechanism , then that is simply evidence of a defective design like any other evidence, it doesn't matter who thought it up, nor is there any forensic U turn involved in appreciating and describing that evidence in a way which suits our case. If new evidence comes up which happens to be squarely in line with our theory we will accept it with gratitude and add it to our case, but we do not abandon other elements of our case, as has been indicated by the summary of the mechanisms of sand loss that I have just gone through.
…
More importantly perhaps, and in any event, Professor Leshchinsky's second theory is merely one of the particulars in which the design was defective and there are a whole range of these particulars, but it is important, as we have already said to observe there was a more fundamental design defect: that is, when constructed as designed in accordance with the instructions and specifications, the wall did not retain sand. That is the fundamental design defect. It is meant to be a retaining wall. It isn't. It doesn't and didn't retain sand. That is the defect.
…
I am still marching in the same direction and boringly in some of the same footsteps that I did some months ago. But that fundamental design defect is important to recall because it leads to the more important appreciation that the various experts are really simply attempting to give some reasons for the symptoms that one observes, but the design defect is that the wall doesn't retain sand and it is undoubtedly the fact that all of the witnesses say that the reason it doesn't retain sand is because it has been so designed that sand can and does go around the edge of the geotextile and out the joint. Where one sees the flowering of imagination is in the various mechanisms by which that highway is travelled by the sand. None of them, apart from the suggested lack of compaction mechanism, involve anything other than a design defect.
A major part of today's exercise will be devoted to attempting to persuade your Honour why that single mechanism of lack of compaction as a suggested mechanism can't possibly be accepted by the Court. Once that occurs, all other theories are species of design defect.
…
Because we have shown your Honour that there were objectively observable circumstances in which there was sand loss which was at least associated with areas where folds were observed, there is still room for the question well how did those folds or such folds as may equivalent in whatever numbers they do exist get there? As we have been at pains to emphasise since I started my remarks, it is very important to put that question in its context. That is not the answer to the case. This case is not about the answer to the question how do folds get there.
There is only one possible circumstance in which the answer to that question can have any effect upon your Honour's judgment and that is if folds were created caused by a lack of compaction in accordance with the design instructions, that being a matter entirely unattended by any proof, even if your Honour did accept that my questions we say, should come back to haunt all of us, if that is right, that is the compaction either did or could - lack of compaction either did or could result in folding, how much folding was there? How much did that contribute to the loss of sand compared to the places where we have seen there was no folding and loss of sand?
(emphasis added)
148 As Mr Robb conceded on appeal, by the time of oral address at the trial, Mr Finch was at least developing (though not without ambiguity and a certain opacity) a holistic way of putting the claim - that whatever the cause of the problem was, it was to be characterised as a design failure. BHE's primary case was, however, that 80% DI compaction was achieved; and Mr Finch's emphasis on the alternative case was on mechanism two. It was said that the above revealed that BHE's case in address was: mechanism one did not happen and mechanism two was a design defect. There is real force in that submission.
149 Later in his address, Mr Finch addressed the primary judge on the basis that a lack of adequate compaction (which of course, was denied) was also a result of a design defect. He said the following on 21 February 2006, in address:
Fourthly, it is undoubtedly the fact that the instructions as to what to do in respect of compaction stipulated layer departments in excess of what is now suggested as appropriate . One only needs to recall the cross-examination of Mr Boyd about the repeated instructions to that effect to appreciate that that is so. Even if there were some lack of compaction resulting from layer lifts in excess of 150 millimetres, that results from compliance with the manual, not departure from it, but of course our fundamental point is: Who said that happens?