The linear shrinkage issue
31 The Council's grounds of appeal with respect to this issue were as follows:
"(a) His Honour erred by failing to consider himself bound by the express finding of the Court of Appeal that the Appellant had proved the matters in paragraph 157(b) and paragraph 157(d) of the Court of Appeal's judgment of 4 August 2005 and by the order that the outstanding matters remitted to his Honour be dealt with in accordance with the Court of Appeal's findings.
(b) His Honour ought to have concluded that his Honour was bound by the Court of Appeal's conclusion that the Appellant had proved the matters in paragraph 157(b) and 157(d) of the Court of Appeal's judgment.
(c) Further, or in the alternative, his Honour erred in concluding that the Court of Appeal 'was under misapprehension' when making its finding at paragraph 157(b) of the Court of Appeal's judgment of 4 August 2005."
32 I have already referred to the Specification's requirement that the material used in the construction of the levee embankment have a maximum linear shrinkage value of 12%. At [147]-[159] of his judgment of 4 August 2005, Ipp JA referred to tests conducted in October 2001 at the request of the then Council appointed superintendent, Mr Komp, to the subsequent tests carried out in April 2002 by Barnson on the one hand and Douglas Partners on the other and the further tests carried out by Golders in September 2003.
33 On the basis of those tests, the primary judge had found that it was difficult to conclude that there had not been some breach of the Specification. However, he had found that there had been substantial compliance with the Specifications with respect to linear shrinkage and that he was satisfied that in respect of that issue the levees were fit for their intended purpose. However, Ipp JA concluded (at [153]) that it was not to the point that the levees might be fit for their intended purpose: rather, the correct question was whether, in consequence of the breaches of the Specifications and, therefore, the contract, the Council had suffered damage.
34 His Honour then referred to the primary judge's finding that, apart from the northern levee, the test results were indicative of the 12% standard not having been achieved in the majority of cases. However, the question which the primary judge then asked himself was whether those results, given their small number, were sufficient to lead one to conclude that all of the levees did not meet the Specification's requirement. The answer to that question depended upon whether one could extrapolate such a result from the small number of tests. Ipp JA then observed:
"The Master, having found that there had been a variety of failures and a variety of occasions when the specified tests were not met, said that the question to be asked was 'whether or not one can extrapolate any result across the whole levee in respect of these results'. He found that the tests were insufficient in number to draw any inference as to shrinkage over an area greater than the specific areas where the failed tests were conducted."
35 His Honour continued in these terms (noting that in the present appeal the Council relied on [157(b) and (d)]:
"157 In my opinion, however, the correct approach in regard to the linear shrinkage issue is as follows. The onus was on the Council, as cross-claimant, to prove that Beckhaus breached the Contract by failing to comply with its obligation to construct the levee system with clay material having a maximum linear shrinkage value of 12%. In attempting to discharge this onus the Council proved:
(a) Beckhaus did not comply with its obligation to add 3% lime to all the material (Mr Rudge accepted that the addition of lime to soil can have an effect on its linear shrinkage).
(b) Although the linear shrinkage tests carried out during the course of the Contract showed that the 12% limit was met, certain of those tests, initially, would have failed had lime not been added to the areas tested and those areas reworked. This practice indicated that some areas did not, without reworking, qualify and detracted, generally, from the inference of contractual compliance that might otherwise have been drawn from the fact that the linear shrinkage tests required by the Contract passed.
(c) After Beckhaus had left the site, 53 linear shrinkage tests were carried out and a little over half of them failed.
(d) Professor Fell and Dr Truscott expressed the opinion that material, the linear shrinkage of which exceeded 12%, was not as effective as material where the linear shrinkage was 12% or less (although they could not quantify the difference). While Professor Fell and Dr Truscott could not say that the risk of failure of the levees was significantly changed by reason of the linear shrinkage being higher than 12%, they also could not say that the risk was not significantly changed.
(e) While Dr Burman and Dr Truscott accepted that there had been substantial compliance with linear shrinkage requirements, as regards the northern levee, it is by no means clear that they were aware of the fact that some of the testing that passed was based on test areas where lime had been added and the area reworked.
158 By reason of the matters referred to in the previous paragraph, an evidentiary onus shifted to Beckhaus to prove that, despite them, the Council had sustained no damage. This was not the approach of the Master and, in my opinion, he erred in consequence thereof.
159 Accordingly, I would remit to Macready AsJ the issues involving the extent to which the levee system was constructed with material having a maximum linear shrinkage value of more than 12% and an assessment of the damages suffered by the Council in consequence of the levee system not being constructed with material that consistently complied with the 12% linear shrinkage requirement.
160 I reiterate that it will be entirely a matter for Macready AsJ as to whether any fresh evidence should be led on this issue, should any party wish to do so. There seems little doubt that the task of determining these questions will not be easy. There was no evidence that explained how and to what extent one could infer that a failed test in one particular place could be indicative of a failure in an area greater than that tested. In the end, Macready AsJ may simply have to do his best to determine these issues."
36 The practice referred to by his Honour in [157(b)] appears to be a reference to what he had earlier written in the following paragraphs of his judgment:
"119 The integrity of the entire levee system is a matter of great importance to the town of Brewarrina. A whole levee bank might be breached by water penetration around a culvert and a levee might fail at any location where fill is sufficiently loose or cracks are sufficiently deep. Professor Fell, an expert witness for the Council, testified that only one layer of poorly compacted soil might give a path for seepage and initiation of erosion. This is common sense.
120 In the light of the potential vulnerability of the area above and around culverts and the importance of the impermeable quality of the system as a whole, the relevance of the contractual requirements for testing at the culverts is self-evident. The purpose of these testing requirements was to give an appropriate degree of satisfaction to the Council as to the quality of the work done and the integrity of the system.
121 I accept the submission made by Beckhaus that the failure to carry out some of the tests does not necessarily mean that the works, when complete, do not substantially comply with the contractual standard. But, once it is established that there has been a failure to comply with the testing requirements, the evidentiary onus passes to Beckhaus to provide - by other evidence - the same degree of assurance as to the integrity of the system as would have been forthcoming had satisfactory test results been obtained in accordance with the frequency of testing under the Contract. Whether that assurance is to be derived from tests carried out subsequently, or from some other source, would be a matter for Beckhaus to establish.
122 Furthermore, due regard has to be paid to two other matters. Firstly, the failure by Beckhaus to comply with the obligation to add 3% lime to all material. This must give rise to at least a prima facie doubt that the levees had the qualities that the addition of lime to that extent would achieve.
123 Secondly, the circumstances under which the compaction tests (known as the "CETS" tests) were performed while Beckhaus was carrying out work under the Contract cast some doubt on the conclusions that otherwise would be drawn from the results of those tests. Some 340 CETS tests were carried out, in accordance with the Contract, in random places relating to the compaction levels on the levee system. All these tests passed, and Beckhaus submitted that these results, alone, provided a high degree of assurance that contractual standards had been met generally. After all, the Contract provided for the kind and quantity of compaction tests that would show, to the extent required by the Council, that the compaction work had been done properly, and these tests had been performed and satisfactory results had been achieved.
124 But, some of those tests only passed after the persons testing had indicated to Beckhaus that, in their view, a test at the particular place was likely to fail; Beckhaus then added lime and reworked the area; the test was then carried out and passed successfully. Mr Rudge explained:
'There was contested evidence before [the Master], which he accepted, that the CETS testers did not issue failing certificates. They were sufficiently experienced to tell, when they were on site, doing the in situ tests, that something was not properly compacted because of some deleterious material within the area, and that it would fail. They would then tell the foreman that that area was not going to pass, and the foreman would then arrange for it to be reworked, and then an adjacent or nearby area would be retested. If it looked as if it was going to pass, that sample was then taken back to the laboratory and, generally speaking, it did.'
125 This practice detracts from the degree of assurance that the successful CETS testing would otherwise have provided.
126 These two matters emphasise the need for Beckhaus to rebut the inference that arises from its failure to provide satisfactory test results as required by cl 3.8 and cl 8.9.3 of the specification."
37 The above paragraphs of his Honour's judgment were written under the heading "The culverts". Clauses 3.8 and 8.9.3 of the Specifications referred to by his Honour in [126] related to the question of compaction. Neither related to linear shrinkage.
38 However, under the heading "Linear shrinkage", his Honour observed:
"146 The Contract required testing of linear shrinkage. These tests were carried out by CETS. I have referred to CETS' practice not to issue failing certificates and to alert Beckhaus if they believed the soil was such that a test might fail. Thus, each of the tests of linear shrinkage required by the Contract passed."
39 It will be noted from [124] that Mr Rudge's explanation which his Honour set out related only to the CETS testers not issuing failing certificates with respect to compaction tests. On the other hand, the observation by his Honour in that paragraph immediately prior to his quoting of Mr Rudge's explanation, that where the testers considered that a test at a particular place was likely to fail, Beckhaus Civil would then add lime and rework the area after which the successful test was carried out, involved according to the primary judge in the first judgment on the remitter a misconception on the part of Ipp JA in that the first part of the first sentence of [124] related to compaction testing, whereas the second part related to linear shrinkage testing. The primary judge remarked at [13]-[15] that areas were not reworked where the 12% maximum linear shrinkage value was not met and that, as was described by Mr Rudge in the passage from his submissions recorded in [124] of Ipp JA's judgment, the practice of CETS related only to compaction tests. In particular, the primary judge observed (at [14])
"Because of the nature of the tests carried out in the field the tester was able to tell whether there would be a compaction failure. This procedure was not available in respect of tests for linear shrinkage because those tests required a sample to be taken back to the laboratory to be worked upon over a period of 24 hours to determine the result of the test. There was no possibility of ascertaining in the field whether or not the soil was likely to fail the linear shrinkage tests. If an area had failed a linear shrinkage test, then the relevant fill had to be excavated and reworked with more lime added in order to achieve an appropriate linear shrinkage."
40 The Council submitted that the effect of the primary judge's remark that the Court of Appeal was under a misapprehension as to the trial evidence on the issue of reworking areas to improve their linear shrinkage value, constituted a rejection by his Honour of Ipp JA's finding at [157(b)] of his judgment that the Council had proved the practice with respect to the CETS tests which indicated that some areas did not, without reworking, qualify and thus detracted generally from the inference of contractual compliance which might otherwise have been drawn from the fact that the linear shrinkage tests performed by CETS and required by the contract, had all passed. Whether Ipp JA's finding to that effect in [157(b)] was right or wrong, the primary judge was bound by it.
41 Whether or not the primary judge was correct in his observation that Ipp JA had misapprehended the practice in question by wrongly assuming that the CETS compaction test methodology also applied to the linear shrinkage tests performed by it, in my opinion a consideration of the primary judge's reasons on the issue of linear shrinkage reveals that those observations played no part in his determination of the issue. In this respect [13]-[15] of his judgment to which I have referred in [40] are preceded by the heading
" The extent to which the levees constructed by Beckhaus did not comply with the requirement of 12% maximum linear shrinkage, and the costs of rectifying the work that was defective in this respect "