BHP Billiton (Olympic Dam) Corporation Pty Ltd v Steuler Industriewerke GmbH

Supreme Court of Victoria|2011-12-16|Before: HABERSBERGER J

TRADE PRACTICES - Misleading or deceptive conduct - Loss and damage - Proof thereof - Comparison with position if not misled - Supervening event - Onus of proof if several causes - Trade Practices Act 1974 (Cth) ss 52, 82.

1 This judgment is concerned with the question of the assessment of damages in two related proceedings where I have previously given judgment on liability ("the first judgment").[1] For a complete understanding of the issues involved in the two proceedings, it is necessary to refer to both judgments as I have tried in this judgment to keep repetition of matters dealt with in the lengthy first judgment to a minimum.

2 However, by way of introduction it is helpful to repeat what I said at the commencement of the first judgment:

The dispute involved in these two proceedings concerned the suitability of a high density polyethylene ("HDPE") lining material for the concrete tanks forming part of the new copper and uranium solvent extraction plant constructed at the Olympic Dam mine at Roxby Downs in South Australia in 1998 and 1999. The mine is owned by BHP Billiton Olympic Dam Corporation Pty Ltd, formerly known as WMC (Olympic Dam Corporation) Pty Ltd ("WMC"). The HDPE lining material was manufactured by a German company, Steuler Industriewerke GmbH ("Steuler") and marketed under the trade name "Bekaplast". It was sold by Steuler to an Australian company, Protec Pacific (NSW) Pty Ltd, and installed by that company or by a related company, Protec Pacific Pty Ltd, pursuant to one or more agreements with WMC. WMC alleged that the Bekaplast was not a suitable lining material for use in the solvent extraction tanks and that it had failed, or was about to fail, prematurely, with the result that it had been replaced with a fibreglass lining at considerable cost to WMC.[2]

(a) Steuler represented to Protec Pacific (NSW) Pty Ltd ("Protec NSW") and WMC that:

(i) Bekaplast HDPE lining systems supplied and manufactured by Steuler had been installed and sold in extraction plants in other parts of the world and had been in service for more than 20 years ("the second representation"); and

(ii) Bekaplast HDPE was suitable for use as a long term containment membrane for the concrete solvent extraction tanks at Olympic Dam[3] ("the third representation");

(b) Protec NSW repeated the second and third representations to WMC;[4]

(i) WMC decided to enter into the On-Site Service Agreement ("the OSS Agreement") with Protec Pacific Pty Ltd ("Protec") and install the Bekaplast HDPE lining system; and

(ii) Protec entered into the OSS Agreement with WMC;[5] and

(d) the second and third representations were misleading and deceptive conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth) ("TPA"), and were made negligently in breach of Steuler's duty of care to WMC and Protec.[6]

4 Following a ruling given early in the first hearing that the questions of liability and quantum be split, I decided, with the concurrence of the parties, that the first judgment would determine all issues other than:

(a) the question of the assessment of WMC's loss (if any) as alleged in paragraph 56 of the fourth amended counterclaim against the second defendant by counterclaim, dated 30 April 2008;

(b) the issue of betterment pleaded in paragraph 29 of Steuler's amended defence to counterclaim, dated 28 May 2007; and

(c) possibly the issue of the reasonableness of Protec's settlement with WMC.[7]

5 It was agreed that in the first judgment I would decide the factual and legal issues necessary to determine whether any and which of the categories of loss claimed by WMC in paragraph 56 were recoverable, but not determine the actual amount recoverable in any particular category or part thereof. At the start of the first hearing, WMC's amended particulars of loss and damage were as follows:

Payments made to Protec for supply of HDPE lining material and initial offsite installation costs

Payments made and costs incurred by WMC in completing the installation and attempting to rectify or repair defects in the HDPE lining system[8]

Payments made and costs incurred by WMC in removal of the HDPE lining system, decontamination and replacement with a fibreglass lining system

Less the reasonable cost for the design, supply and installation of a fire retardant (conductive) FRP lining system in 1997-1998

6 In the first judgment, however, after discussion of the competing submissions,[9] I concluded that:

it would be premature to exclude any part of WMC's claimed heads of loss and damage. These issues, together with the issue of betterment, will have to be considered in the quantum hearing.[10]

7 With respect to Protec's claim for judgment in the sum of $15 million, being the amount for which it settled WMC's claim against it and the amount of the consent judgment entered against it pursuant to that settlement, in the first judgment I rejected various arguments advanced by Steuler against the reasonableness of that settlement.[11] Nevertheless, I decided that I would "defer any final conclusion to the second hearing, when I will have a better understanding of the real quantum of WMC's loss".[12]

8 During the course of the second hearing an issue arose as to whether, if I was minded to do so, I could revisit my earlier reasons and give different reasons. Steuler submitted that I could do so given that no order or judgment had yet been perfected. Reference was made to the Court of Appeal decision in Fletcher Construction Australia Limited v Lines McFarlane & Marshall Pty Ltd[13] where Chernov JA said:

In the case of a superior court of record, judgment is not relevantly finalised until it is entered in the records of the court. Hence, until that occurs, the judge can recall the order and the reasons and make a different order and give different reasons.[14]

Reference was also made to the judgment of Brennan, Dawson, Toohey and Gaudron JJ in Smith v New South Wales Bar Association, where their Honours said:

It has long been the common law that a court may review, correct or alter its judgment at any time until its order has been perfected.[15]

9 WMC submitted that there was no occasion for me to revisit my earlier reasons. Further, it referred to the judgment of the plurality in Smith where the proposition in Ritchie's Supreme Court Procedure that the power to review a judgment in a case where the order has not been entered will not ordinarily be exercised "to permit a general re-opening"[16] was said to be correct "as a general statement".[17]

10 As far as I am concerned I have not in the second judgment given reasons different to those found in the first judgment. However, if and insofar as any reasons in the second judgment might be thought to differ from views more or less tentatively expressed in the first judgment, this would be because the reasons in the second judgment dealing with the damages issues have been given after I have had the benefit of hearing and considering detailed submissions specifically addressing those issues.

11 By an amendment following an order made on 9 April 2010, WMC's claim for the cost of replacing the HDPE lining system with an FRP lining system was deleted. This substantially reduced the quantum of WMC's overall claim and meant that the issue of betterment disappeared. Thus, at the start of the second hearing, WMC's claim was expressed to be as follows:

Cost of supplying the HDPE lining and the initial off site installation costs

Labour hire

- Beltreco $199,305.24

- Merit Lining Systems $130,772.47

- RM Lee $469,327.36

- BSA Engineering $488,744.88

Material costs

- Steuler $44,238.00

- HRL Materials ETRS $ 7,540.00

- Dotmar EPP $74,809.00

- Parbury Technologies $ 2,003.20

- Blackwood & Son $ 320.70

- Industrial Vacuum Services $ 2,188.00

- JR Engineering Services $13,278.50

Cost of removing the HDPE and costs of preparing/reinstating the settler/mixer tanks

Removal

- York Civil $460,026.54

- Olympic Dam Maintenance $114,548,48

- Ron Gee Enterprises $1,293,591.18

- Ron Gee Enterprises $1,211,241.78

- BSA Engineering $ 5,564.61

- Monadelphous Engineering $ 35,992.36

- Diversified Industrial Services $ 124,622.16

- Industrial Vacuum Services $ 123,497.50

- Stevens Resources $ 10,300.21

- Ron Gee Enterprises $ 269,358.14

- Ron Gee Enterprises $1,006,595.83

12 In addition, WMC claimed interest on the above amount. It was agreed that the calculation of that claim would have to await the determination of the amount of WMC's damages, if any, as the date from which interest might be recoverable would differ depending on when the particular entitlement in respect of each of the various categories of loss arose.

13 The central issue for determination in the second hearing was the amount of the loss or damage, if any, that WMC suffered as a result of Steuler's contravention of s 52 of the TPA. At the relevant time, s 82 (1) of the TPA provided as follows:

... [A] person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV or V may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.

14 WMC submitted that it was entitled to recover from Steuler:

(a) the entire cost of installing the liners in the concrete tanks in the new copper and uranium solvent extraction plant ("the SX") in 1998 and 1999, not just the cost of installing the Bekaplast HDPE lining, and including the costs of repair work even if such work related to problems caused not by the defective Bekaplast lining but by other companies' poor workmanship, plus

(b) the cost of returning the SX area to its original condition in 2002 by removing the Bekaplast lining and curing its detrimental effects (principally the contamination of the concrete) so that the tanks were prepared for the installation of a second lining.

15 WMC relied on the High Court's decision in Henville v Walker in seeking to claim all of the costs of installing the Bekaplast HDPE liner on the first occasion. In that case, the appellant, an architect, was induced by false and misleading representations made by a real estate agent to undertake a development project involving the purchase of land and the construction of three units in Albany, Western Australia. The representations made by the agent overestimated the likely selling price of the units and also the demand for such units in the area. The project was delayed and the costs proved to be well beyond what the appellant had estimated. Contrary to what the respondent had stated, there was little to no demand for such units in the area, and the three units eventually sold for much less than had been suggested by the estate agent.

16 Although the appellant had also contributed to the loss he suffered in preparing an inaccurate feasibility study, which the Court found severely underestimated the costs of the project, the High Court ultimately held that both factors - the representations as to selling price and the likely demand for such units, and the inaccurate feasibility study - were causes of the loss suffered and as such the majority held that the appellant was entitled to recover the whole of the amount lost on the project, on the ground that this was what he had suffered by way of prejudice or disadvantage in consequence of altering his position by reason of the breach of the TPA.[18]

17 Accordingly, WMC submitted that the correct approach was to include all of the costs incurred by it in respect of supplying, installing, repairing and removing the HDPE lining in the settler/mixer tanks in the SX and all of the costs of preparing or reinstating those tanks to be ready for the installation of a new lining. WMC submitted that Steuler was liable under s 82 for all of those costs because, as a result of being misled about the suitability of Bekaplast, WMC had gone "down the wrong path". If it had not done this, it would not have incurred these costs. Therefore, WMC submitted that all of the costs were recoverable even if:

(a) it had not been shown that the costs resulted from the unsuitability of the Bekaplast lining; or

(b) it had been shown that the costs had been incurred in respect of work related to non-Bekaplast material in the SX area; or

(c) it had been shown that the costs had been incurred in respect of work performed before the tanks had been commissioned.

18 Steuler submitted that WMC had failed to prove that it had suffered any loss which was caused by Steuler's contravention of s 52 and that, accordingly, WMC's claim should be dismissed.

19 Steuler's first overriding or overarching argument, as it was variously referred to in final submissions, was that WMC should not recover any damages from Steuler, because:

(a) it had not established what it would have done if Steuler had not engaged in misleading conduct;

(b) thus WMC could not demonstrate the required comparison between the situation brought about by the contravening conduct and the situation as it would have been without the contravening conduct; and

20 Steuler submitted that the facts in this proceeding were what were described as an "alternative transaction" case as opposed to a "no transaction" case. The present case was said to be an "alternative transaction" case because had the contravening conduct not occurred, WMC would still have proceeded with the expansion of the site and the lining of the tanks, but would have done so by entering into an alternative arrangement with a different supplier. On the other hand, a "no transaction case", such as Henville v Walker, was one where the plaintiff argued that but for the contravening conduct which caused it to be misled, it would not have embarked on the project or transaction at all.

21 Steuler submitted that in a "no transaction" case a plaintiff could theoretically recover all of the loss it suffered as a result of entering the transaction, so that it was, in effect, put in the position it was in before it entered into the transaction. Steuler submitted, however, that in an alternative transaction case the Court was required to compare the position the plaintiff was in now with the position it would have been in had the representation not been made. It further submitted that as no evidence had been led as to what WMC would have done if not misled by Steuler, WMC had failed to prove that it had suffered any loss or damage as a result of the contravention.

22 Steuler's second overriding or overarching argument was that even if one could speculate about what course WMC might have followed in the absence of Steuler's misrepresentation, WMC would have still had to replace the favoured alternative lining, following the second fire in October 2001, because of the need to install a fire retardant and conductive lining in order to reduce the risk of yet another fire occurring.

23 In order to recover damages under s 82 of the TPA a plaintiff must prove that the loss or damage alleged was caused "by" conduct in breach of the Act. Whilst the requirement to establish causation is not specifically set out in that section, it is apparent from the authorities that the use of the word "by" in s 82 signifies that the common law principles of causation are relevant to the question of whether or not a plaintiff recovers under the section. In Wardley Australia Limited v Western Australia,[19] Mason CJ, Dawson, Gaudron and McHugh JJ stated that the use of the word "by" in s 82 clearly expressed the notion of causation and that the section "should be understood as taking up the common law practical or common-sense concept of causation recently discussed by this Court in March v Stramare (E & MH) Pty Ltd [20] ...".

24 Although the "but for" test has a role to play in the determination of s 82 damages, the High Court has made it clear that it may not be the sole and exclusive test for determining whether a contravention caused the loss or damage.[21]

25 While there is no specific measure of damages prescribed by s 82 of the TPA, it is apparent from the authorities that the usual measure of damages applied in cases where misleading and deceptive conduct is alleged, is the measure of damages applicable in tort. In Gates v City Mutual Life Assurance Society Ltd, Mason, Wilson and Dawson JJ, said that:

[T]here is much to be said for the view that measure of damages in tort is appropriate in most, if not all, Pt V cases, especially those involving misleading or deceptive conduct and the making of false statements. Such conduct is similar both in character and effect to tortious conduct, particularly fraudulent misrepresentation and negligent misstatement.[22]

26 In Henville v Walker, McHugh J summarised the correct approach to the measure of damages as follows:

This Court has addressed the question of assessment of damages under s 82 on several occasions. The Court has concluded that in most cases the measure of damages in tort is the appropriate guide in determining an award of damages under s 82. However, in assessing damages under s 82, courts are not bound to choose between the measure of damages in deceit or other torts or contract. In Marks v GIO Australia Holdings Ltd, the Court said that the central issue under s 82 is to establish a causal connection between the loss claimed and the contravening conduct. Once such a connection is found to exist, nothing in s 82 suggests that the recoverable amount should be limited by drawing an analogy with contract, tort or equitable remedies although they will usually be of great assistance. As Gummow J said in Marks, "[a]nalogy, like the rules of procedure, is a servant not a master".[23] [Footnotes omitted]

27 Steuler submitted that WMC could not prove any loss because WMC had submitted at the liability hearing, in its counsel's words, that it was "impossible to predict" what it would have done had it not entered into the transaction with Steuler.

28 Steuler went further and submitted that in paragraph 528 of the first judgment I had accepted WMC's submissions at the liability trial that the Court was unable to make any decision about what WMC would have done if Steuler had not engaged in misleading conduct. The relevant passage is as follows:

Secondly, in my opinion, WMC also relied on the singular 20 year representation, to some extent, and the suitability representation (the second and third representations) made directly by Steuler, and repeated by Protec NSW, in deciding to enter into the OSS Agreement and install the Bekaplast HDPE lining system. Obviously, WMC did favour HDPE, but I agree with the plaintiffs' submission that if Steuler had not been prepared to represent that its HDPE material was suitable, then WMC would have looked at the issue again. Perhaps it would have stuck with HDPE by contracting with Beltreco to install Serrot's HDPE material as the liner for the tanks. Or it may have abandoned HDPE and changed to FRP, as it did some four years later. Whatever course it might have followed, I am satisfied that if Steuler had not represented that its Bekaplast HDPE lining system was suitable, WMC would not have proceeded to enter into the OSS Agreement with Protec.[24]

29 Contrary to Steuler's submission, I do not consider that in the above paragraph I accepted that it was impossible to know what WMC would have done. I merely made the comment that there were a number of possible options that WMC may have taken had the contravention not occurred. The paragraph relied upon by Steuler was concerned with the question of reliance. I was not there dealing with or considering the question of what position WMC would have been in had the contravention not occurred.

30 However, the meaning of paragraph 528 is an unnecessary distraction because it was not disputed that WMC's position was that it was not possible to say what would have happened if Steuler had not made its representation about the suitability of the Bekaplast lining, other than that some other lining would have been used.

31 Thus, Steuler submitted that, as it was not possible for the Court to decide what alternative route WMC would have taken, it was therefore impossible for the Court to compare WMC's present position with the position it would have been in had the representation not been made by Steuler. It followed, in Steuler's submission, that WMC had not and could not establish whether it had incurred any loss or suffered a detriment, as a result of entering into the transaction with Steuler.

32 WMC accepted that the Court must compare the position the claimant was in subsequent to the contravention, with the position it would have been in had the contravention not occurred. In Henville v Walker, for example, Hayne J stated that:

The conclusion that the appellants suffered loss requires comparison between the position in which the appellants found themselves after the project was finished, and the position they would have been in if, instead of relying on what they were told by the respondents, they had not undertaken the project.

33 This follows what was said earlier in the joint judgment of McHugh, Hayne and Callinan JJ in Marks v GIO Australia Holdings Limited:

a comparison must be made between the position in which the party that allegedly has suffered loss or damage is and the position in which that party would have been but for the contravening conduct.[25]

34 In a no transaction case, the comparison is rather easier for the plaintiff to establish because the alternative course of action is simply that the plaintiff would not have entered into the transaction at all, but for the representation. However, in the alternative transaction case, the plaintiff will need to have evidence of what it could and would have done had the contravention not occurred, in order to prove that it has suffered loss in consequence of the contravention As Mason, Wilson and Dawson JJ said in Gates:

Because the object of damages in tort is to place the plaintiff in the position in which he would have been but for the commission of the tort, it is necessary to determine what the plaintiff would have done had he not relied on the representation. If that reliance has deprived him of the opportunity of entering into a different contract for the purchase of goods on which he would have made a profit then he may recover that profit on the footing that it is part of the loss which he has suffered in consequence of altering his position under the inducement of the representation. This may well be so if the plaintiff can establish that he could and would have entered into the different contract and that it would have yielded the benefit claimed: ... The lost benefit is referable to opportunities foregone by reason of reliance on the misrepresentation. In this respect the measure of damages in tort begins to resemble the expectation element in the measure of damages in contract save that it is for the plaintiff to establish that he could and would have entered into the different contract.[26] [Emphasis added]

35 I therefore consider that Steuler was correct in submitting that WMC had not proved that it had suffered any loss because it did not prove what it would have done had it not been misled.

36 In reaching that conclusion I am not ignoring the evidence given at the first hearing by Mr Blizzard and Mr Starcevich that possibly WMC would have contracted with Beltreco Limited ("Beltreco") to install the HDPE lining supplied by Serrot Corporation.[27] On the other hand, there was evidence from Mr Weir that if WMC had decided not to proceed with HDPE, a FRP lining may have been chosen because it was known to perform satisfactorily and was cheaper than another possibility, namely high grade stainless steel.[28]

37 However, in my opinion, this evidence did not cure the gap in WMC's proof. It would only have done so if I had been satisfied on the balance of probabilities which option WMC would have chosen had Steuler not misled it. It is hardly surprising that I was not persuaded that I should be so satisfied because, as I have previously said, the position adopted by WMC in its final submissions in the first hearing was that it was "impossible to predict" what WMC would have done.

38 Nevertheless, in case I am wrong in reaching this conclusion it is appropriate to consider what WMC's position would have been, assuming first that it had been established by WMC that the Beltreco option would have been chosen by it in 1997. I agree with Steuler's submission that in that case WMC would have been in the same position as it now was. There would still have been a finding that the HDPE lining was not suitable to act as a containment membrane for the liquids used in the SX tanks at Olympic Dam. There would also have been a finding that Beltreco had misled WMC about the suitability of its HDPE lining at the meeting on 14 May 1997.[29] Thus, WMC would have suffered no loss on this scenario because once again it would have installed an unsuitable HDPE lining. It seemed to me that WMC never satisfactorily met the argument that on this assumption WMC would in all probability have the same claim for damages but this time against Beltreco instead of Steuler and that therefore it would have been no better off if it had not been misled by Steuler.

39 There is a further argument why WMC would have been no better off as a result of selecting Beltreco to provide the HDPE lining rather than Steuler. This is Steuler's second overriding argument referred to above about the need to replace even a satisfactory lining with a fire retardant and conductive lining to reduce the risk of fire. Steuler submitted that as a result of the second fire in October 2001, WMC had to replace the HDPE lining in the SX tanks in order to satisfy its statutory and common law obligations in relation to the safety of the plant, and to obtain insurance cover for the plant.[30]

40 In the first judgment I stated that Steuler's contravening conduct was a cause of WMC's loss, which would have resulted, at some time, without the second fire occurring.[31] But the fact is that the second fire did occur and it is clear, in my opinion, that even if the Beltreco installed HDPE lining had been operating satisfactorily at that time, it would have been a non-fire retardant and non-conductive lining which would have been replaced by WMC with a fire retardant and conductive lining. Therefore, WMC would have suffered no loss because it would still have incurred the cost of installing the first lining and the cost of removing that lining and preparing the tanks for the installation of the second lining after the second fire. (In all of these hypothetical comparisons one has to assume that the various costs are the same for each lining. Certainly, no attempt was made by WMC to suggest otherwise.)

41 The second assumption to consider is that it had been established by WMC that it would have chosen to install a FRP lining in 1997 if it had not been misled by Steuler. There was no suggestion that in such a case the lining would not have been a non-fire retardant and non-conductive lining. However, once again there is the argument that even a satisfactorily operating lining would have been replaced by WMC after the second fire with a fire retardant and conductive FRP lining. WMC sought to meet this argument by relying on the evidence of Mr Derek Gee that the initial FRP lining could have been modified rather than being completely replaced and thus the cost would not have been as great as that which WMC in fact incurred in replacing the Bekaplast HDPE lining.

42 Steuler tendered an expert report prepared by Peter Groch, the Operations Manager of RPC Technologies Pty Ltd ("RPC"). Mr Groch had a Masters degree in Engineering. He had worked for over 25 years in the construction industry "along with 15 years experience with all aspects of industrial GRP equipment including design, manufacture, supply, installation, commissioning and project management". Mr Groch said in his report that RPC was

the leading Australian supplier of corrosion resistant, structural FRP (fibre reinforced plastic) fabrications, piping and ducting systems, acid resistant heavy duty linings and specialist composite products.

43 In his expert report, Mr Groch gave the following answer to the question whether the initial FRP lining could have been modified to meet the new fire prevention requirements:

The technical specification STSP-61 Rev 1 is very specific on the requirement for conductivity and fire retardance. Clauses 7.11.2 and 7.12.3 details out the requirements for fire retardance and conductivity and clause 7.12.5.5 stipulates the performance requirements for conductivity. The non conductive and non fire retardant FRP liner proposed in 1997 would not comply with the above requirement and could not be modified to achieve the specified requirements and would need to be removed and replaced.

45 Mr Gee gave evidence that he was appointed the Operations Manager for Ron Gee Enterprises Pty Ltd ("RGE") prior to that company performing work at the Olympic Dam site. After the second fire in October 2001, he visited the site with his uncle, Ron Gee, the chairman of RGE, in order to prepare a quotation of the cost of replacing the HDPE lining with a FRP lining in the uranium mixer/settler tanks. RGE was awarded that contract on 26 April 2002. It mobilised to site on or about 12 May 2002. Mr Gee said that he was the most senior RGE representative on site performing the role of construction/operations manager in charge of the day to day operations.

46 In his certificate dated 29 May 2010, Mr Gee said that if the SX tanks had been lined with non-fire retardant and non-conductive FRP in 1997-1998, the lining could have been modified to make it fire retardant and conductive in conformity with the intent of WMC's specification STSP-61. However, in cross-examination, Mr Gee agreed that the specification was "a much more stringent document" than, and an improvement on, the trial and error procedures he had used in the past. He agreed that his proposed method did not satisfy the specification because it would not result in an FRP lining in which all layers were both fire retardant and conductive in accordance with that specification. Further, Mr Gee agreed that on his proposed methodology, it was not possible to spark test both the concrete surface and each layer of the FRP lining as required by section 7.13.7 of the specification. He agreed that this meant one could not know whether or not the FRP liner was defective. Steuler therefore submitted that on his own admission, Mr Gee's suggested methodology for making the initial FRP lining fire retardant and conductive failed to satisfy the WMC specification in two respects.

47 WMC submitted that Mr Gee's two aspects in which the modified liner would not comply with the specification were that:

(a) there would be four layers of a chopped strand mat instead of two, and

(b) the concrete surface could not be spark tested as required by section 7.13.7.

Nevertheless, WMC submitted that Mr Gee was correct in stating that the modified FRP lining would meet the intent of WMC's specification STSP-61 because the requirements for conductive linings and non-conductive linings indicated that the first four layers for both were identical. It was only the final two layers that were different - carbon fibre surface veil and resin topcoat with carbon powder for the conductive lining and two resin topcoats for the non-conductive lining.

48 However, WMC did not explain to my satisfaction how Mr Gee's method of modifying the FRP lining could overcome the inability to spark test the concrete and the layers of the lining. Although Mr Gee was generally an impressive witness, I am not persuaded that his method of modifying the FRP would be satisfactory or that WMC would have been prepared to take this short cut given that there had been two serious fires at the SX plant. I prefer Mr Groch's evidence on this point.

49 I have therefore concluded that on this assumption, it would have been necessary to remove the existing FRP lining (assuming it was installed in 1997-1998) in order to install a new fire retardant and conductive lining. Therefore, once again WMC would have suffered no loss because it would still have incurred the cost of installing the first FRP lining and the cost of removing that lining and preparing the tanks for the installation of the second FRP lining after the second fire. In any event, Mr Gee said in cross-examination that there would be "very little cost difference" between modifying the initial FRP lining to make it fire retardant and conductive and removing the initial FRP lining and replacing it with a fire retardant and conductive FRP lining.

50 The result is, therefore, that in my opinion WMC has not made out its claim that it has suffered loss or damage by conduct of Steuler done in contravention of s 52 of the TPA. This means that this claim must fail. The same conclusion applies to WMC's claim in negligence.

The Quantum of WMC's Claim if Contrary Conclusion Reached

51 Nevertheless, because of the amount of attention given both before and during the second hearing to the details of the various categories of loss making up WMC's claim, which may become relevant if my above conclusion is held on appeal to be wrong, I propose to go on to consider what the quantum of WMC's claim would be in that event.

52 There were many issues in dispute between the parties as to the correct approach to calculating WMC's alleged loss. Several should be mentioned now. First, there was the issue already discussed about whether WMC could recover all of the costs it had incurred in installing and removing the first lining. This was WMC's approach to quantification of its damages claim ("WMC's approach"). On the other hand, Steuler submitted that the correct approach to calculating WMC's alleged loss was to ascertain the reasonable costs which had been incurred by WMC as a result of the unsuitability of the Bekaplast lining ("Steuler's approach").

53 Secondly, there was the question of onus of proof in situations where the cause of the incurring of costs may have been the unsuitability of the Bekaplast HDPE lining or it may have been other factors such as defective design, construction or installation of various parts of the tanks, poor workmanship and even blasting by WMC.[32] Steuler submitted that the onus lay on WMC to prove that its loss was caused by Steuler's breach whereas WMC submitted that the onus was on Steuler to prove that the cost was not caused by its breach.

... under s 82(1) of the Act, it is for the person whose contravening conduct materially contributed to the loss or damage to establish what component of that loss or damage is referable to some act or event other than his or her contravening conduct and not for the person who suffers loss or damage to establish the precise component or components referable to that conduct.[33]

Arguably, once a plaintiff demonstrates that a breach of duty has occurred that is closely followed by damage, a prima facie causal connection will be established. It is then for the defendant to show that the plaintiff should not recover damages. In the words of Dixon CJ in Watts v Rake,[34] it is the defendant who must disentangle, so far as possible, the various contributing factors.[35]

56 Hayne J said that he did not need to decide the point, although his Honour commented:

For the moment, it is enough to say that it seems to me that such questions must find their answers within the Act rather than in analogies with common law.[36]

57 Despite what was said by Gaudron J and McHugh J, in the circumstances of this case it seems to me that the correct approach is that WMC has to show on the balance of probabilities that it had incurred a particular cost "by" the conduct of Steuler in contravention of the TPA. I consider that this approach is in line with what was stated by Hayne J. That is, Steuler should not have to pay the cost of a particular piece of work unless WMC can establish on the balance of probabilities that it was caused by Steuler's contravention of the Act.

58 Thirdly, Steuler submitted that it was entitled to a credit in respect of the theoretical cost of whatever lining WMC would have installed in the SX tanks in 1997-1998 if it had not installed the Bekaplast lining. Such a credit was properly included when, at the start of the first hearing, WMC was seeking to recover as part of its damages the cost of installing the new liner in 2002 (see paragraph 5 above). What this really meant was that WMC was seeking to recover the cost differential between the two liners, because the new liner was inevitably going to be more expensive, less some allowance for betterment. But the cost of the initial liner was deleted by WMC when it amended its claim to exclude the cost of the new liner (see paragraph 11 above). Steuler submitted that if WMC chose not to pursue some part of its claim, that did not affect what had to be taken into account as a matter of law in calculating the damages.

59 I do not agree with Steuler's submission. In my opinion, it was not necessary for WMC to include a claim for the cost of installing the new liner in 2002 in order for it to be offset against the theoretical cost of installing that liner in 1997-1998. As WMC submitted, its reformulated claim assumed that these two costs would have been the same and therefore they could both be excluded. This was to Steuler's advantage as the cost of the new liner would inevitably be greater. Therefore, what WMC chose not to pursue as part of its claim was only this cost differential and there was no unfairness in not allowing Steuler a credit for the cost of the initial lining.

60 Finally, there is the issue of nominal damages. On a few occasions, Steuler's submissions in respect of a particular claim concluded with the statement that WMC was only entitled to nominal damages. In JLW (Vic) Pty Ltd v Tsiloglou, Brooking J (as his Honour then was) stated:

Loss or damage is the gist of the statutory cause of action for which s 82(1) provides, and accordingly there is no cause of action until actual loss or damage is sustained. ... Nominal damages cannot be awarded under s 82.[37]

I have therefore treated such references as a submission that WMC is not entitled to recover any damages in respect of the particular claim.

61 Because some points raised by Steuler were conceded by WMC during the second hearing, it is helpful to set out how the final claim by WMC was expressed:

Indirect costs on HDPE removal and preparatory costs

62 I turn then to consider what amount should be allowed for each of the above items under WMC's approach and under Steuler's approach.

Supply of HDPE and Initial Off-Site Installation Costs Charged by Protec

63 The first category contained the single claim of $1,157,154.92 for payments made by WMC to Protec for the supply of the HDPE lining and the initial off-site installation costs. I am satisfied from WMC's Purchase Order 4000-MRE-2456-MAC revision no 3 dated 25 January 1999 and other relevant documents and from Mr Smith's evidence in the first hearing that WMC paid this sum to Protec. However, Protec's reconciliation of the relevant invoices and payments stated that it had been overpaid $1,383.32 and that the "total revised purchase order value" was $1,155,771.60. Although WMC did pay the larger sum to Protec, a repayment of this overpaid amount could have been taken into account in agreeing the figure of $15 million in the settlement between WMC and Protec. Therefore, I consider that the correct amount for this category under both WMC's approach and Steuler's approach, would be $1,155,771.60.

HDPE Installation and Repair Costs Charged by Protec

64 The second category contained the claim for payments made by WMC to Protec for installing the HDPE lining and repairs to that work under the OSS Agreement. The amount originally claimed by WMC for this item was $4,141,811.41. Various WMC documents, including Contractors Progress Payment Certificate no 23 dated 30 June 1999, support that this amount, or more accurately $4,141,811.45, was paid to Protec. Moreover, Protec admitted receiving this sum in its reply dated 21 September 2005. However, Mr Smith's evidence in paragraph 139 of his witness statement was that under the OSS Agreement Protec was paid only $4,028,672.15. The difference between the two amounts is explained by the fact that WMC had retained the sum of $113,149.30 from the total amounts otherwise payable to Protec. Therefore, it appears that the arithmetically correct figure which Mr Smith should have stated was $4,028,662.15.

65 Nevertheless, during the second hearing WMC reduced its claim for this item to $3,529,056.61 after deducting certain items totalling $499,605.54 and the retention monies of $113,149.30. The calculation of the amount of $499,605.54 was as follows:

WMC deducted the above items because it conceded that it could not press claims where, on the face of the documents, it could be shown that the work did not relate to the SX area.

66 WMC produced a reconciliation by cost code of all of these payments to Protec which showed that the amounts for cost code 4441 (which related to the uranium tanks or USX) was $773,342.09 and for cost code 4711 (which related to the copper tanks or CuSX) was $2,557,878.75 - a total of $3,331,220.84. But this document raised more questions than answers. For example, what justification was there then for the remaining items in WMC's original claim totalling $349,455.71 that were not within the relevant cost codes? And, how reliable were the cost codes when 4711 included $40,700 for the dump pond liner which WMC had conceded could not be recovered from Steuler? This analysis by WMC was therefore not that helpful.

67 Steuler also claimed that there was an overpayment of $232,828.31 in respect of three items which appeared in paragraph 27 of WMC's particulars of loss and damage. WMC submitted that there was no evidence before the Court of any such overpayment and that the claims had been made at a time when WMC was resisting Protec's claim for an extra $2.1 million. In any event, I consider that the above adjustments meant that the issue of overpayment disappeared.

68 As I am satisfied that WMC paid Protec $4,028,662.15 as discussed above, I consider that on the balance of probabilities the correct figure for this item under WMC's approach is the amount claimed, namely $3,529,056.61.

69 Steuler still submitted that WMC had not established a relevant causal connection between Steuler's contravening conduct and the items of loss claimed. It submitted that Steuler's contravening conduct must be the real, direct or effective cause of WMC's loss.[38]

70 Steuler argued that, insofar as the items constituting this claim related to repairs of Protec's own work, there was no relevant causal connection with Steuler's contravening conduct about the suitability of the Bekaplast because:

(a) this work was all performed by August 1999 before the tanks had been commissioned and used in the treatment of the process solutions at the SX plant; and

(b) the repair work would have been equally required even if Bekaplast were an ideal product.

71 Steuler prepared a list of the various items which it said could not be claimed against it because they did not relate to the unsuitability of the Steuler Bekaplast product. They were said to total $2,287,764.63. In the second version of the list the total was reduced to $2,119,287.22, after three items (CCD Tunnel, Additional SX raffinate area and Repairs to lasta filter area) were deleted and one reduced (Lasta filter area). However, there was some overlap between the items conceded by WMC in reducing its claim to $3,529,056.61 and the items sought to be deducted by Steuler. This meant that the following amounts had to be deleted from Steuler's second version of the list to avoid double counting:

72 In addition, other items were recorded twice in the first version but only one entry per item was omitted from the second version. It seems to me that both entries should have been. These items were:

Further, another item, Lasta filter area, was recorded twice in both versions of the list, although in different amounts. It seems to me that the second entry for $81,501.93 was a partial repetition of the first entry (which itself should be deleted as discussed above) and therefore it should also have been deleted:

Finally, it also seemed to me that Steuler had included some items twice in both versions of the list when they should only have appeared once. These items were:

These six items, which totalled $207,477.41, should also be deleted from Steuler's second version of the list of deductions.

73 Then there was the item for "Additional out of scope welding on hinged weir plates in settlers". When I pointed out to Mr Cosgrave in the hearing that the description of this item in the relevant "Daywork Summary" dated 31 December 1998 contained a reference to Bekaplast material being used, he conceded that it might not be an appropriate deduction. Later, however, he returned to this item and submitted that given the size of the sheets of material in question the reference to Bekaplast must have been a mistake and that it must have been smooth HDPE. I agree with this submission as the Bekaplast material was quite different in size.

74 However, WMC also made submissions dealing specifically with some of the items in Steuler's list of deductions. Two should be mentioned. First, Protec variation notice 45 (42) dated 7 December 1998 claimed "return airfares for German welders". WMC paid Protec $21,471.68 in respect of this claim, which was included in Steuler's list as "Air Fares". I consider that this cost was one incurred as part of the cost of installing the HDPE lining, which should be recoverable by WMC. The same conclusion applies to item 45(43) in Steuler's list "German Welders". WMC paid Protec $206,593.20 in respect of this claim. These two items, which totalled $228,064.88, should therefore be deleted from Steuler's second version of the list of deductions.

75 The total amount of the deletions considered above is $756,765.62:

This means that Steuler's list of deductions would total $1,362,521.60 rather than $2,119,287.22. Thus, I consider that the correct figure for this item, under Steuler's approach, would be $2,166,535.01. (WMC's claim of $3,529,056.61 less Steuler's list of deductions totalling $1,362,521.60).

76 The third category of costs claimed by WMC was for the costs of completing the installation of the HDPE. The first sub-category under this heading was for supervision costs. This claim was for payments made by WMC to five of its supervisors between 14 May and 27 August 1999 as follows:

77 Mr Hannan gave evidence that although he was based in Adelaide he routinely spent two days a week on site. He said that when he was on site in about June or July 1999 he asked the others to start recording the amount of time they had spent, and were spending, in supervising and managing Protec issues because he could see there was going to be a "commercial discussion" with Protec about the extra costs. There were timesheets for the relevant period for Messrs Lawton, Godfrey and Ryan. Mr Hannan said that he did not fill out timesheets. There was no explanation given for there being no timesheets for Mr Malcolm. (He could not be called to give evidence because he had been severely incapacitated by a stroke.) Nevertheless, Mr Hannan gave evidence that he believed that the number of hours claimed represented a fair assessment of the time spent by each of them on the Protec completion and repair issues.

78 Steuler submitted Mr Hannan's calculations assumed the accuracy of the other men's estimates. It submitted that as none of them gave evidence on this issue, Mr Hannan's evidence was hearsay. However, in cross-examination Mr Hannan said that whilst Mr Godfrey had worked in other areas it was his "recollection" that Mr Godfrey was "100% focussed on HDPE repair work and nothing else" in the relevant period. He was then asked whether that was the same position with respect to each of Mr Malcolm, Mr Ryan and Mr Lawton and answered "yes" on each occasion. He then said that he based his "fair assessment" statement both on the information given to him by the other men and on "my observation of what was happening at the time when I was on site". It therefore seems to me that this evidence was admissible.

79 However, Steuler pointed out other problems with the timesheets of the three supervisors. The first problem raised by Steuler was that it was not apparent from the timesheets precisely what repairs were supervised, or where, within the SX tanks. Steuler submitted that it should not be liable for repairs to non-Steuler HDPE on weirs or other parts of the SX tanks, and yet such work was equally consistent with the description on the timesheets. Moreover, the descriptions on the timesheets were not consistent. One supervisor referred to "engineering process" and the other two to "commissioning". Further, the project numbers on each of the three timesheets are different. Next, the hours and payments in WMC's claim differed from the following figures contained in the timesheets:

Thus, the claimed amounts for Messrs Lawton and Godfrey were based on more hours than were included in the timesheets. In my opinion, in the absence of any explanation for the difference, the greater claim is unsustainable. There was no explanation for why the number of hours recorded in the timesheet of Mr Ryan was more than that claimed, but obviously WMC's claim should be limited to the amount it had sought. Therefore, if this claim is otherwise recoverable it would be as follows:

80 Steuler submitted that all of the above problems meant that WMC had not made out its claim for the costs of supervision.

81 I consider that the correct amount for this item, under WMC's approach, would be $199,266.40. But under Steuler's approach I consider that the correct amount for this item would be nil because I am not satisfied that all of the time spent by the supervisors related to problems caused by the unsuitability of the Bekaplast HDPE lining, rather than by other unrelated problems.

82 The next sub-category of the costs of completing the installation of the HDPE was the claim for the labour and associated costs charged to WMC by four separate contractors. Mr Hannan gave evidence that the arrangements with the labour hire companies were usually on a reimbursable rate basis. According to Mr Hannan, each contractor was to keep timesheets in respect of the labour supplied, the timesheets were to be signed off by the relevant WMC supervisor, copies of the timesheets were then attached to the invoice or payment claim, WMC checked to see that the invoice matched the timesheets and if the documentation was in order it went to Mr Hannan for approval and then to WMC's accounts department for payment by cheque.

83 The first item in this sub-category was the claim of $199,305.24 in respect of work performed by Beltreco. By a facsimile dated 6 June 1999 from Vince Pansini of Beltreco to Mr Hannan, Beltreco advised that "experienced operators and supervisor to assist in the welding of HDPE linings at Olympic Dam" were then available. A handwritten note on the facsimile indicates that on 7 June 1999 Mr Hannan confirmed by telephone that Beltreco was to proceed. WMC submitted that the unchallenged and uncontradicted evidence was that Beltreco was engaged to weld HDPE linings under Purchase Order OAC-14387 dated 15 June 1999 and that from 9 June to 20 August 1999 Beltreco carried out work totalling this amount under the contract. The description of the work required in Purchase Order OAC-14387 was "Welding of HDPE linings on site ..." The value of the order was then said to be $100,000. However, I reject Steuler's submission that this figure raised doubts about the claimed amount of $199,305.24. It seems to me that the $100,000 figure was a nominal or preliminary one subject to increase or decrease depending on the quantity of labour supplied.

84 An amended witness statement of Mary Ock Noons was tendered in evidence by WMC. Ms Noons said that she was the credit manager for Sandvik Mining and Construction, which presumably was a reference to Sandvik Mining & Construction Perth Pty Ltd ("Sandvik"), which entity acquired Beltreco in 2001. Prior to that she had been employed by Beltreco since July 1992 and had been its Group Credit Controller. She explained that the financial records of Beltreco were imported into the computer database of Sandvik in 2001 and that although it was possible to reproduce that information it appeared in the current proforma Sandvik invoice style. The documents produced by Ms Noons purported to show that Beltreco had invoiced WMC the total sum of $199,305.24 and been paid that amount by it in respect of the work referred to above.

85 Mr Hannan gave evidence that "all the work done under Purchase Order OAC-14387 was related to HDPE repairs". This evidence was not challenged. However, Steuler submitted that the records did not show any "necessary connection with the representation as to the unsuitability of Bekaplast" and did not disclose whether the welding was of Bekaplast or smooth HDPE. The job description on most field service reports ("FSRs"), "HDPE Welding", did not assist.

86 Steuler also made a number of criticisms of the source documents. First, it pointed out that sometimes the hours and charges recorded on the FSRs did not match the charges on Beltreco's invoices. For example, invoice no 58073 dated 31 August 1999 charged an amount of $5,280.48 for FSR 22517, an amount of $654.00 for FSR 22523 and an amount of $806.00 for FSR 22524. Yet the number of hours recorded on FSR 22517 is 72 which even at the overtime rate of $63.00 per hour is only $4,536.00, and the number of hours recorded on FSRs 22523 and 22524 is 12, between 0700 and 1900 hours, which at the normal rate of $44.00 per hour is $528.00, plus $50.00 each day for the hire of the extruder welder. In the absence of anyone from Beltreco giving an explanation for this discrepancy I consider that WMC's claim must be reduced by the following amounts:

87 Next, it was submitted that the fact that FSR 22506 was missing was significant because of the amount involved. In order to make up the amount charged on invoice no 58320 dated 31 August 1999, the charge for the number of hours recorded on FSR 22506 would have to be $6,805, which would be about twice the normal weekly amount. However, when the extra $3,396 for hours recorded but not charged on FSRs 22507, 22508 and 22509 is taken into account, the amount of $3,409 for the missing FSR 22506 is well within the range of the other FSRs in that week.

88 Finally, in respect of four invoices, nos. 56883, 57332, 57334 and 57337, totalling $129,287.78, Steuler pointed out that the only description given was "T/UP Balance" and in respect of a fifth invoice, no 58319, in the sum of $29,898.74, the only description given was "FSR Details as per in 57527" and no such FSR was discovered. Steuler submitted that the Court could not be satisfied on this meagre information that the five invoices related to the unsuitability of Bekaplast.

89 I am satisfied that these five invoices did relate to this work of "welding of HDPE linings on site" because each of them referred to WMC's Purchase Order OAC-14387. But the point remains that the work may have related to Bekaplast unsuitability for which Steuler was responsible or to smooth non-Bekaplast HDPE which was not Steuler's responsibility. No one from Beltreco was called to give evidence about this point.

90 WMC submitted that the amount should still be allowed despite precise reconciliation between the FSRs and the invoices not being possible on the basis that:

(b) none of the deficiencies were put to Mr Hannan who may have explained the inconsistencies;

(d) the critical evidence was the amount of the invoices issued under the contract, and which the evidence showed had been paid by WMC.

91 Most of these arguments relate to the question of the quantum of Beltreco's claim against WMC and the amount paid to it by WMC. Apart from the unexplained discrepancy of $1,048.48 which reduced WMC's claim to $198,256.76, I am satisfied that at least the latter amount was paid by WMC to Beltreco. The more difficult issue is that already highlighted, namely whether the work performed by Beltreco related to problems caused by the unsuitability of the Bekaplast HDPE. Mr Hannan's evidence does not assist in this regard. Saying the Beltreco work "related to HDPE repairs" does not resolve the difficulty facing WMC.

92 Thus, I consider that the correct amount for this claim, under WMC's approach, would be $198,256.76. But under Steuler's approach I consider that the correct figure would be nil because I am not satisfied that all of the work performed by Beltreco related to problems caused by the unsuitability of the Bekaplast HDPE lining, rather than by other unrelated problems.

93 The second item in this sub-category was the claim of $130,772.47 in respect of work performed by Merit Lining Systems Pty Ltd ("Merit"). Stephen Hollier, the managing director of Merit, gave evidence that during the period from 12 July to 20 August 1999 Merit performed work and supplied labour in relation to the welding of HDPE corrosion protection linings for the mixer and settler tanks in the SX area. The scope of the work under contract OEP-1067 between WMC and Merit was for Merit to "provide supervision, technicians and equipment directed by WMC to carry out HDPE welding work". The contract set out a schedule of rates. It was sent by Mr Hannan to Merit by facsimile on 20 July 1999 and was accepted by a facsimile dated the same day. Mr Hollier said that during this period he was "actively involved in the management of Merit's operations and finances" under its contract with WMC "including the rendering of invoices and payment of invoices by WMC". Merit's four invoices for a sum totalling $130,772.47 in respect of the periods from 12 July to 31 July 1999 and 6 August to 20 August 1999 were identified by Mr Hollier as accurate and relating to the work described above. He further said that whilst he had been "unable to locate any confirmation of payment of the invoices from Merit's computerised or source document records", he was confident that Merit had been paid for all of the amounts invoiced to WMC. The fact of payment was also supported by WMC's Contractors Progress Payment Certificate for Merit dated 3 September 1999 which stated that the first two invoices for $57,551.87 and $19,061.00 respectively had been paid and that the remaining amounts of $36,128.70 and $18,030.90 had been approved for payment.

94 Steuler submitted that the source documents did not make clear what area was being worked upon and whether the work concerned the unsuitability of Bekaplast. For example, Merit's Daily Field Report for 14 July 1999 records 50 man hours on the "Copper SX". However, the following was written in the "Comments" part of the document:

Working in Copper SX attaching and welding top to weir.

Some initial problems getting familiar with German techniques, recutting shoes etc. but managed to get approx 70% of weir top plate welded.

Merit's Daily Field Report for the following day records 40 man hours on the "Copper SX". The first comment was:

Crew completed first weir top started yesterday in reasonable time.

Moved all welding equipment over to next section in Train B.

These comments suggest that the work was related to smooth non-Bekaplast HDPE. Steuler also sought to make something of a second comment about "TG" meeting Leigh Cowan about evaporation ponds, but as TG was not one of the workman whose time was included in the 40 hours it seems to me that this comment is not relevant.

95 Another example of the source documents not making it clear whether the work being charged for related to Bekaplast unsuitability was a document listing the hours being charged under the heading "OEP Tank Remediation". One column in the document contained a description or place of the work. For the days from 9 to 15 August 1999 the relevant entry was "Copper Raffinate". Steuler submitted that other evidence showed that the work done in this area may have related to a different product, Oxydure PTBE, and not Bekaplast. A second document headed "OEP Tank Remediation" showed the description or place of work for the days from 16 to 20 August 1999 was "Copper Raffinate". The Merit charges concerning "Copper Raffinate" totalled $44,566.30. If they are all deleted, WMC's claim in respect of Merit is reduced to $86,206.17.

96 However, I consider that, under WMC's approach, the correct amount for this item is the whole of the amount claimed, namely $130,772.47. Under Steuler's approach, I consider that the correct figure would be nil, because the evidence did not demonstrate that any of Merit's charges related to the unsuitability of Bekaplast.

97 The third item in this sub-category was the claim of $469,327.36 in respect of work performed by Ralph M Lee Pty Ltd ("RML"). WMC submitted that RML carried out a variety of works at the Olympic Dam expansion project site pursuant to contract OEP-1035. It submitted that the documents showed that under Work Code 9154, "HDPE Repairs Post 18 May 1999", RML invoiced WMC the sum of $419,042.29 for work performed between 10 May and 29 August 1999. However, this figure was only reached after a confusing series of adjustments based on unverified assumptions. RML also charged WMC a 12% Overhead and Fee charge, thus leading to the claim of $469,327.36. WMC's Contractors Progress Payment Certificates 19, 20 and 21 showed that the sum of $367,642.29 had been paid by WMC in respect of work code 9154 for work performed up to 1 August 1999. WMC submitted that the claim and supporting documents had been proved by Ms Maddern and Mr Hannan. The latter had deposed to the work performed by RML.

98 Steuler pointed out that none of the documents purportedly emanating from RML was proved by any representative of that company. Again the principal issue was whether the work charged for had anything to do with the unsuitability of Bekaplast. Steuler submitted that the RML documents did not identify with any precision what was being done in respect of the Bekaplast and how that claim was referable to the unsuitability of Bekaplast.

99 In the absence of anyone from RML explaining how the figure of $419,042.29 referred to above was calculated and justified, I am not prepared to allow WMC to recover, under WMC's approach, any more than the amount of $367,642.29, which I am satisfied has been paid by WMC to RML in respect of work code 9154. But under Steuler's approach I consider that the correct amount would be nil.

100 The fourth item in this sub-category was the claim of $488,744.88 in respect of work performed by BSA Engineering Pty Ltd ("BSA"). Robert Edwards, the former General Manager (Operations) and a director of BSA gave evidence that during the period from 2 February to 27 August 1999 BSA supplied labour and equipment in connection with the welding of HDPE in the mixer and settler tanks in the SX area. He said that during this time he was "actively involved in the management of BSA's operations and finances" under its contract with WMC including "the rendering of invoices and payment of invoices by WMC". Although he was based in Adelaide he visited the Olympic Dam site once or twice a month for an average of two or three days at a time. He produced 24 invoices issued by BSA to WMC which he said were accurate and were in respect of the work described above. Mr Edwards further said that whilst he had been "unable to locate any confirmation of payment of the invoices from BSA's computerised or source document records", he was confident that BSA had been paid for all of the amounts invoiced to WMC and that no amounts remained outstanding.

101 WMC's Contractors Progress Payment Certificate no 30 dated 10 September 1999 showed the following information:

Relying on the details contained in BSA's weekly "Hours Summary by Task Code" forms, WMC submitted that the correct figure for travel and equipment hire should be $7,542.28 and not the third amount listed above. Adding this figure to the first two gave a total of $488,744.67.

102 Steuler mounted a number of criticisms about the documents, such as limited detail, uninformative descriptions, transposed item numbers and handwritten changes.

103 However, I am satisfied by WMC's analysis of BSA's weekly "Hours Summary by Task Code" forms, BSA's invoices, BSA's timesheets and its Contractors Progress Payment Certificates and by the evidence of Mr Edwards and Mr Hannan that the quantum of this claim is made out, if it is otherwise recoverable.

104 Thus, I consider that the correct figure for this claim, under WMC's approach, would be $488,744.88. But under Steuler's approach the correct figure would be nil, because once again the evidence did not demonstrate that any of BSA's charges related to the unsuitability of Bekaplast.

105 The third sub-category of the costs of completing the installation of the HDPE was the claim for the costs of materials paid by WMC to seven suppliers.

106 The first item in this sub-category was for the charge by Steuler of $44,328 for Bekaplast material supplied to WMC. WMC produced four Field Requisitions, two, nos 41027 and 41028 both dated 7 June 1999, and two, nos 41031 and 41032 both dated 10 June 1999. They related to orders for Bekaplast material for use in the tanks in the Copper SX Trains A and B and the Uranium SX. WMC relied on what were said to be four Steuler invoices, two, nos 60/20242 and 60/20243 both dated 7 September 1999, one of uncertain number dated 9 July 1999 and another one of uncertain number dated 25 August 1999. However, I consider that the latter two documents, which were in a different format to the invoices, may well have been statements or repeat invoices.

107 It was clear from the contents of Steuler invoice no 60/20242 that it related to WMC's Field Requisitions Nos. 41027 and 41028. It was in the sum of DM 10,229 for goods sent by air freight on 25 June 1999. Steuler invoice no 60/20243 was in the sum of DM 8,034 for goods sent by air freight on 6 July 1999 and although it probably related to WMC's Field Requisitions nos 41031 and 41032 this was not clear as there was no cross references. Steuler also made the point that invoice no 60/20243 referred to WMC order no 14358 which was not one of the order numbers listed in WMC's particulars of claim. Further, the Steuler invoice/statement dated 9 July 1999 in the sum of DM 6,695 appears to relate to the same types and quantities of goods as those sent on 6 July 1999 although the amounts charged are different. However, this invoice also contained no cross reference to Field Requisitions. The Steuler invoice/statement dated 25 August 1999 in the sum of DM 28,953.80 relates to goods sent on 25 August 1999.

108 Steuler submitted that there was no evidence explaining how the documents interrelated and justified the claim and therefore that the Court could not be satisfied that the claim was related to the dispute between WMC and Steuler. On the other hand, WMC submitted that in the absence of any cross-examination of Mr Hannan and the failure to call any witness from Steuler or provide any document contradicting WMC's claim, the claim should be accepted. In my opinion, the failure by Steuler to call any evidence about these orders means that one can more confidently conclude that they all related to work in the SX area. But I would not conclude that it had been established that the extra Bekaplast material was required because of the unsuitability of the earlier liner. For example, it might have been required to replace lining damaged by workmen's ladders and dropped tools.

109 A second objection raised by Steuler was the lack of evidence about applicable currency conversion rates. However, Mr Hannan gave evidence that the amount of $44,328 had been paid in respect of these invoices from Steuler. If Steuler regarded that amount as an inaccurate conversion of DM 53,911.80 then it could have led evidence on that topic.

110 Accordingly, I am satisfied that the correct amount of this claim, under WMC's approach, would be $44,328. But under Steuler's approach the correct amount would be nil for the reason given above.

111 The second item in this sub-category was for the charge by HRL Materials ETRS Pty Ltd ("ETRS") of $7,540 for a report dated 31 August 1999 which it prepared. The report was related to work in the SX area and Steuler accepted that Mr Hannan had given evidence of payment of this charge. However, Steuler submitted that the ETRS report was in respect of welding problems, not the suitability of Bekaplast per se. This was supported by the quotation from ETRS dated 10 July 1999 which referred to questions about "the suitability of welding Bekaplast material to the weir cap". No one from ETRS was called by WMC to clarify this issue.

112 I therefore consider that the correct amount for this claim, under WMC's approach, would be $7,540. But under Steuler's approach the correct amount would be nil because I am not satisfied that the commissioning of the report was caused by the unsuitability of the Bekaplast HDPE lining.

113 The third claim in this sub-category was one for the sum of $74,809 for materials supplied by Dotmar EPP Pty Ltd ("Dotmar"). Invoices from Dotmar of various dates in the period from 5 May to 26 August 1999 were produced. Mr Hannan gave evidence that these amounts were paid. Steuler submitted that none of the payments to Dotmar were recoverable from Steuler because the references in the Dotmar documents to "black HDPE", "polystone", "blackstrips", "HDPE weir plates" and "HDPE welding rod" were not concerned with Bekaplast or its suitability. WMC acknowledged that the overstripping was as a result of installation difficulties but submitted that this was not relevant.

114 I therefore consider that the correct amount for this claim, under WMC's approach, would be $74,809. But under Steuler's approach the correct amount would be nil.

115 The fourth claim in this sub-category was for the sum of $2,003.20 for materials supplied by Parbury Technologies Pty Ltd ("Parbury"). There were two invoices from Parbury dated 15 June and 28 July 1999 totalling that amount for the supply of grout. Mr Hannan gave evidence that the grout was supplied for the purpose of completing the overstripping and repair works. Steuler submitted that as there was no Parbury witness to explain how the supply of grout related to Steuler's misleading conduct, the claim was not proved. It submitted that although the grout may have been needed for repairs to the existing grout there was no necessary connection between that and the unsuitability of the Bekaplast and pointed out that both of the invoices related to the period before the tanks were put into use.

116 I therefore consider that the correct amount for this claim, under WMC's approach, would be $2,003.20. But under Steuler's approach the correct amount would be nil because I am not satisfied that the need to purchase the grout was caused by the unsuitability of the Bekaplast HDPE lining.

117 The fifth claim in this sub-category was for the sum of $320.70 for materials supplied by Blackwood & Son Ltd ("Blackwood"). There was an invoice from Blackwood dated 15 July 1999 in that amount for the supply of three boxes of foam ear plugs and three packages of dust masks. Mr Hannan gave unchallenged evidence that this claim related to the HDPE works and that the invoice was paid. Steuler submitted that as there was no Blackwood witness to explain how the supply of this equipment related to Steuler's misleading conduct, the claim was not proved.

118 I therefore consider that the correct amount for this claim, under WMC's approach, would be $320.70. But under Steuler's approach the correct amount would be nil because I am not satisfied that the need to purchase this equipment was caused by the unsuitability of the Bekaplast HDPE lining..

119 The sixth claim in this sub-category was for the sum of $2,188 for work performed by Industrial Vacuum Services (IVS) SA ("IVS"). There were three invoices from IVS dated 9, 10 and 12 June 1999 for vacuuming out tanks in the "B train". Mr Hannan gave unchallenged evidence that this claim related to the HDPE works and that the invoices were paid. Steuler submitted that as there was no IVS witness to explain how the vacuum services related to Steuler's misleading conduct, the claim was not proved.

120 I therefore consider that the correct amount for this claim, under WMC's approach, would be $2,188. But under Steuler's approach the correct amount would be nil because I am not satisfied that the vacuuming work was caused by the unsuitability of the Bekaplast HDPE lining.

121 The seventh and final claim in this sub-category was for the sum of $13,273.50 for labour and the hire of cranes from JR Engineering Services Pty Ltd ("JRE"). WMC relied on a number of Personnel Hire Dockets from JRE for the period from 15 June to 31 July 1999. The calculations of the various amounts charged by JRE totalled the above amount. The location of the work was said to be either "SX", "SX Area", "SX Plant" or "New SX Plant" and Mr Ryan had signed all of the dockets on behalf of WMC.

122 Steuler submitted that as there was no JRE witness to explain how the provision of cranes necessarily related to Steuler's misleading conduct, the claim was not proved. Descriptions on JRE's dockets such as "Move Agitators", "Work As Directed", "Refit Platforms and [Agitators]", "Refit Floor Plates to [Agitator] Platforms" and "Move Equipment" could apply to any work, not necessarily Bekaplast. Steuler further submitted that Mr Hannan was not of his own knowledge able to say whether or not a particular charge related to Bekaplast unsuitability or some other unrelated matter. He was simply interpreting the documents which, as stated above, were not particularly helpful in resolving that issue.

123 I therefore consider that the correct amount for this claim, under WMC's approach, would be $13,273.50. But under Steuler's approach the correct amount would be nil because I am not satisfied that these charges were caused by the unsuitability of the Bekaplast HDPE lining.

124 The final sub-category of the costs of completing the installation of the HDPE was the claim for the indirect costs incurred by WMC in respect of the sub-categories of supervision and labour hire costs. Based on WMC's figures, the amounts claimed were $79,743.65 and $502,893.74 respectively. Mr Hannan gave evidence that the indirect costs covered such matters as transport, accommodation, meals and clothing for those working at the site. He explained that he supplied all of the various categories of costs to Mr Jarver who then calculated the percentage add on of 39.04% by identifying those categories of costs which were relevant. All of the costs of the project were stored by WMC on its integrated project management system. From that list of categories of costs the following were identified as appropriate indirect costs. The break up was set out both individually and in groups:

Construction Services and Equipment, Fuel, Small Tools

125 As a matter of principle, this claim did not seem to attract any criticism by Steuler. Moreover, Steuler could have challenged or called evidence if it disputed the inclusion of any of the above categories in the calculation of indirect costs.

126 Therefore, I am satisfied that an indirect cost of a rounded 39% should be allowed on the total allowed for the costs of supervision and the costs of labour. By my calculations, the correct amounts for this claim, under WMC's approach, would be $77,713.90 for the indirect costs on supervision and $462,312.39 for the indirect costs on labour. But as nothing has been allowed for these sub-categories under Steuler's approach, the correct amounts for this claim under that approach would be both nil.

127 Before continuing the item by item analysis of WMC's claim under the two approaches, it is important to point out that the remaining claims, for the cost of removal of the lining HDPE and the costs of preparing the tanks for installation of the replacement lining, relate to work performed in 2002. The different nature of the work the subject of these claims meant that WMC adopted a different method of attempting to prove these costs. A report was prepared by Tracey Brunstrom & Hammond Pty Ltd dated 12 September 2007 which included a purported verification of all of the various categories of documents relating to the above work and to the installation of the new FRP lining. This became known as Appendix G. It contained 457 separate items, although many of these became irrelevant after WMC amended its claim to delete the cost of installing the new FRP lining. Each item was listed by number, with a brief description of the work, a reference to source documents and a statement of the amount claimed. In a later version of Appendix G, brief comments in respect of each item were added by Mr Richard Klaebe.

128 Mr Klaebe gave evidence that he was a mechanical engineer employed by Kellogg Brown & Root Pty Ltd ("KBR"). That company had been contracted by WMC to provide "Engineering, Procurement and Project Management" services in connection with the Extraction Plant Enhancement ("EPE") Project. Mr Klaebe said that the works in connection with the removal of the HDPE lining from the copper and uranium mixer/settler tanks, the preparation of those tanks for lining with FRP and the lining of those tanks with FRP were within the scope of the EPE Project. He said in his witness statement:

I started on the EPE Project as a mechanical engineer and became the KBR engineering manager responsible for KBR Engineering services of the EPE Project. My role included provision of design co-ordination, tender specification and drawings preparation, post tender technical evaluation and advisory services. At the early stages I worked from KBR's Adelaide office but once construction started I attended site at Roxby Downs regularly. For about 18 months I was seconded to WMC on the copper SX works. I wrote some of the scope of works personally, others I checked or had some involvement in preparing. I am familiar with the scope of works and the actual FRP works carried out for the EPE Project.

129 He then went on to describe in a little more detail what was involved in performing the FRP works. The various contracts comprising the original scope of works were also listed. Finally, Mr Klaebe referred to Appendix G. He said that his evidence with respect to each of the items contained in Appendix G was set out in the "Comments" column. What appeared there were statements such as:

Appropriate as part of FRP works.

Within scope of contract. Appropriate as part of FRP works.

Necessary and appropriate as part of FRP works.

Within revised scope of contract (Revision 1) as per Change Direction. Appropriate as part of FRP works.

130 Steuler was consistently critical of the way in which evidence was to be led from Mr Klaebe. In a preliminary ruling I rejected Steuler's submission that his evidence was inadmissible. Nevertheless, in its final submissions at the second hearing, Steuler renewed its criticisms of Mr Klaebe's evidence, in particular that he did not have personal knowledge of the matters about which he was giving evidence. I refer to these criticisms in dealing with particular items below.

131 The second point to note about the 2002 work is that Steuler was now submitting not just that WMC had not shown that the costs claimed were the result of the unsuitability of the Bekaplast but also that WMC had not shown that the costs had been necessarily incurred as part of the process of removing the HDPE lining and preparing the tanks for the installation of a new fire retardant and conductive FRP lining, rather than as part of some upgrade in order to meet the fire safety requirements. Nevertheless, as the analysis remains much the same I will continue to use the same shorthand labels for the differing approaches advanced by WMC and Steuler.

At a glance

Court

Decision date

Before

Source

Judgment (343 paragraphs)

Parties

Legislation Cited (4)