Design
75 Olivaylle complains that the primary judge failed to have any, or any sufficient, regard to the complete absence of design work or calculation by Flottweg. Olivaylle contends that the evidence established that maintaining oxygen levels of less than 1% in a nitrogen blanketing system was a more complicated endeavour than a gas tight system, requiring a greater degree of design and calculation. It says that the atmospheric processes within the Olive Oil Line, from the malaxeurs onwards, were highly complex and that for an effective nitrogen blanketing or flushing system there needed to be engineering design and calculation, which neither Flottweg nor Mr Nieuwkerk undertook.
76 Olivaylle says the effect of the evidence at trial was that it was a matter of considerable complexity to achieve sufficient nitrogen blanketing or flushing to produce an atmospheric level of oxygen in the Olive Oil Line as low as 1% v/v. Olivaylle refers specifically to the evidence of:
· Professor King to the effect that the system was one of some complexity;
· Mr Carey to the effect that the system required complex regulation mechanisms to respond to the continuous process of the Olive Oil Line; and
· Mr Nieuwkerk as to the practical obstacles he discovered, which highlighted the complexity of the process.
Olivaylle says that since the Olive Oil Line was built and supplied with no material design work, it could only comply with the oxygen level specification by "pure happenstance" and that that should not be presumed.
77 Olivaylle asserts that the primary judge failed to address its case that Flottweg did nothing of substance in the nature of engineering, planning, design or calculation. It complains that his Honour erred in concluding that Flottweg discharged its contractual obligation in respect of design.
78 No complaint of want of design and calculation was made in the Statement of Claim. While the primary judge referred to Flottweg's responsibility for the design of various parts of the Olive Oil Line, no particular design term or breach of such a term was alleged or mentioned in the Statement of Claim. Neither the existence of a promise to undertake planning, design or calculation nor a breach of such a promise was alleged in the Statement of Claim. Flottweg contends that, therefore, allegations concerning defective design or lack of design and calculation can play no part in the appeal. Rather, Flottweg says, Olivaylle's case was founded solely upon alleged breaches of the so-called essential terms, including the Process Guarantee.
79 Olivaylle asserts that it proved positively that the Olive Oil Line did not perform to the oxygen level specification on the occasion of the test of 25 May 2006. It says that, having regard to the complexity of the Olive Oil Line and the absence of any proper engineering design or calculation, an inference should be drawn that the Olive Oil Line did not comply with the Process Guarantee, in that it was incapable of satisfying the oxygen level specification. Olivaylle says that it thereby established a prima facie breach of the Process Guarantee. Olivaylle says that Flottweg sought to answer that by asserting that Olivaylle had not met its obligation to supply sufficient nitrogen. However, Olivaylle says that Flottweg carried either a legal or an evidential onus on that question, but it failed to discharge that onus with any adequate evidence.
80 Olivaylle says, first, that Flottweg had a legal onus to establish that there was a level of nitrogen that it was feasible to supply and that would have achieved the 1% v/v oxygen level specification. The legal onus was said to arise from construing the proviso or qualification to the Process Guarantee as if it were an exception to an exclusion clause or, by analogy, an exception to the insuring clause in an insurance policy.
81 Alternatively, Olivaylle says, there was a deficiency in the design of the Olive Oil Line, by reason of the absence of adequate nitrogen outlet valves, such that there would be a build up of pressure. The effect was that the plant was never capable of achieving the 1% specification because it was impossible to supply the appropriate level of nitrogen. Olivaylle says that that, by itself, cast an evidentiary onus on Flottweg to prove that the oxygen level term was met.
82 Olivaylle's case depends upon establishing that, by either of those routes, Flottweg had the onus of demonstrating that Olivaylle had failed to supply sufficient nitrogen gas of sufficient purity to the plant to make the relevant levels of oxygen feasible. The primary judge found that Flottweg had discharged that onus through the evidence of Mr Nieuwkerk. Olivaylle therefore needed to impugn Mr Nieuwkerk's evidence. Not having objected to the admissibility of Mr Nieuwkerk's opinion evidence, Olivaylle relied on the proposition that his evidence should have been given no weight. If neither legal nor evidentiary onus passed to Flottweg, Mr Nieuwkerk's evidence becomes irrelevant, since the onus was on Olivaylle to establish a breach of the Process Guarantee.
83 There was no legal onus imposed on Flottweg to demonstrate that the proviso in the Process Guarantee was not satisfied. The better view of the Process Guarantee is that it is conditional. That is to say, it applies only if a condition is satisfied, namely, that sufficient nitrogen gas of sufficient purity was supplied by Olivaylle. It was therefore incumbent upon Olivaylle to establish that the condition was satisfied. It failed to do so. It therefore failed to establish that there was a failure to comply with the Process Guarantee. That was the conclusion reached by the primary judge.
84 The matters that are said to cause the evidentiary onus to pass to Flottweg are as follows:
· According to the data log for the test run of 25 May 2006, nothing like the oxygen level was achieved, except for one malaxeur;
· The nitrogen supply for the test run was at a level recommended by Mr Nieuwkerk, Flottweg's own expert, to whom Flottweg had delegated or abrogated the task to create an effective nitrogen supply system although, Olivaylle admitted, he was acting at that point as adviser to Olivaylle.
· The Olive Oil Line is a dynamic system, which admitted oxygen in two unexpected ways and also permitted communication between atmospheres of the malaxeurs;
· There are no proper outlet valves to permit the release of pressure building up, so there could be no effective nitrogen flushing of the malaxeurs; and
· There was no proper engineering design for the Olive Oil Line and the relevant oxygen level cannot be achieved by mere happenstance. In particular:
- The Olive Oil Line will not permit the flow of nitrogen because of the inadequacy of the outlet valves.
- The Olive Oil Line permits the ingress of oxygen from the hammermill.
- The Olive Oil Line permits the ingress of oxygen from the outlet for the paste in the event that pressure is reduced.
85 Olivaylle says that, in the test run of 25 May 2006, oxygen levels in the gas phase of parts of the Olive Oil Line, starting at the malaxeurs were not under 1% v/v. The thrust of Olivaylle's complaint appears to be that, because of the inadequacy of the outlet valves, the oxygen level specification could never be met because sufficient nitrogen could not be introduced into the system to flush out the oxygen. It says that there is simply nowhere for the introduced nitrogen to go, with the consequence that, as more and more nitrogen was introduced, the pressure would build up to the extent that the generator forcing the nitrogen in could not create sufficient pressure.
86 The primary judge accepted the evidence of Mr Nieuwkerk, who said that, if the available supply of nitrogen was 40 cubic metres per hour, that may be sufficient to maintain oxygen levels below 1% v/v. Olivaylle says that Mr Nieuwkerk's evidence should not have been accepted and that his evidence should be given no weight.
87 Olivaylle contends that Mr Nieuwkerk's assertion that the doubling of the nitrogen supply would have achieved compliance with the oxygen level specification was, on a proper analysis and appreciation of the technical evidence, no more than a guess. It says that that guess was incapable of answering the evidence of failure to satisfy the oxygen level specification adduced by Olivaylle, which, it said, demonstrated a complete absence of any engineering design or calculation.
88 There is no ground of appeal concerning the admission of Mr Nieuwkerk's affidavits into evidence. Further, none of the grounds of appeal is directed specifically to the treatment by the primary judge of Mr Nieuwkerk's opinion evidence. However, considerable attention was given to that matter during the course of argument. Olivaylle contends that no weight should have been given to Mr Nieuwkerk's opinion evidence because the evidence did not satisfy the requirements of s 79 of the Evidence Act (see Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705). Flottweg contended, on the other hand, that, since several findings made by the primary judge that were critical to the appeal were based on the acceptance of the evidence of Mr Nieuwkerk and Professor King and a preference for their evidence over that of Mr Carey, the Full Court should be slow to interfere with any such finding made by the primary judge on the basis of Mr Nieuwkerk's evidence.
89 While Mr Nieuwkerk may have had specialised knowledge concerning nitrogen blanketing, based on his training, study and experience, it is not entirely clear how the opinions just recorded are based on that specialised knowledge, as would be required by s 79 of the Evidence Act. The question is whether Mr Nieuwkerk has specialised knowledge based on his training, study or experience and whether his opinion can be shown to be wholly or substantially based on that knowledge. There can be little doubt that Mr Nieuwkerk has specialised knowledge based on his training, study and experience. However, there is little in his affidavits to demonstrate how or in what way the opinions he expressed in his first affidavit and in his second affidavit are wholly or substantially based on his specialised knowledge.
90 On the other hand, as indicated above, no objection by Olivaylle was based on s 79 of the Evidence Act. Had there been an objection and the objection had been upheld, Flottweg may have been able to adduce further evidence to overcome any such objection. In the absence of objection, and in the absence of a ground of appeal, there is no basis for departing from the findings and conclusions of the primary judge in relation to Mr Nieuwkerk's opinion evidence.
91 Mr Nieuwkerk said that the effectiveness of the design of the nitrogen flushing system was a function of the amount of nitrogen being pushed into the system and the amount of oxygen being drawn in with the olive paste. He said that, provided nitrogen introduced into the system created a positive internal pressure, and was of sufficient quantity to displace oxygen, the specified levels of oxygen could be achieved. Thus, he said, compliance with the oxygen level specification would be achieved if a greater volume of nitrogen gas were introduced into the Olive Oil Line during a longer period, particularly prior to commencement of operation. He conceded that a higher pressure would slow the rate of delivery of nitrogen into the malaxeurs but that the problem could be solved by turning on the supply of nitrogen prior to commencement of operation, in order to allow time for the oxygen level to reduce to less than 1% v/v.
92 Mr Carey's evidence was that while the inlet valves that admit nitrogen to the malaxeurs are true inlet valves, the only outlet valves were to allow egress of atmospheric gas for measurement purposes and did not have a true pressure control function or capacity. Olivaylle complains that, while Mr Nieuwkerk disputed Mr Carey's description, the primary judge failed to make a finding to resolve that conflict.
93 Olivaylle also says that the trial judge erroneously concluded that Mr Nieuwkerk's opinion was corroborated by Professor King. Olivaylle contends that, properly understood, the evidence of Professor King did not support Mr Nieuwkerk's opinion. Professor King identified a need for proper release valves in the malaxeurs to achieve dynamic stability. However, such outlets as there were, which were installed by Mr Nieuwkerk, were only measuring valves. Nevertheless, Professor King proceeded on the assumption that the outlets were true release valves. Professor King observed that periodic increases in the oxygen levels in the malaxeurs were likely to have been caused by a temporary dynamic event in the operation of the Olive Oil Line, for the reason that, in order for the ingress of air to occur, the atmospheric pressure inside the malaxeur must be less than outside it.
94 Olivaylle contends that Professor King's evidence, properly understood, undermines Mr Nieuwkerk's claim that turning on the supply some time prior to operating the Olive Oil Line would allow compliance with the oxygen level specification. It says that Professor King's evidence, so understood, accords with Mr Carey's conclusion that design work needed to be done to compensate for internal gas changes as product flows in and out of the malaxeurs. Olivaylle says that Professor King's evidence with regard to increase of the volume of nitrogen gas supply reinforces that conclusion: he said that any nitrogen supply causing positive pressure inside the malaxeur would prevent ingress of air through a hole or crack, but specifically excluded ingress by reason of "some dynamic event".
95 Olivaylle says that the necessary inference from Professor King's conclusion is that the fluctuations of oxygen levels inside the malaxeurs above 1%, during the operation of the Olive Oil Line, could not be overcome simply by turning on the supply prior to operating or by increasing the supply of nitrogen. Rather, it says, engineering design and planning was required in order to deal with the "dynamic" continuous operation of the malaxeurs. That, so Olivaylle says, explains why it was practically impossible to make the Olive Oil Line gastight and, moreover, explains why it was more difficult, not less difficult, to comply with the oxygen level specification by employing nitrogen flushing.
96 Olivaylle contends that the primary judge did not properly comprehend that the import of Professor King's evidence, as to the complexity of the nitrogen flushing system, was that a theoretical appraisal of such a system was a necessary starting point if the oxygen level specification was to be achieved. It says, therefore, that his Honour erred in concluding that Professor King's evidence tended to reinforce Mr Nieuwkerk's empirical observations of the performance of the Olive Oil Line. Significantly, Professor King recognised that the nitrogen system could not prevent an increase in the oxygen level in the malaxeurs upon the occurrence of a "dynamic event".
97 Olivaylle argues that the primary judge erred in accepting Mr Nieuwkerk's estimate of the additional volume of nitrogen necessary to satisfy the oxygen level specification, in circumstances where the estimate was given without the benefit of any theoretical engineering design or calculation. According to Olivaylle, Mr Nieuwkerk could not provide an answer to Professor King's "dynamic event"; nor could he give any evidence of design parameters according to which the system would have achieved compliance with the oxygen level specification in the course of the continuous process of the Olive Oil Line.
98 Mr Nieuwkerk was the only witness who proffered an estimate of the amount of nitrogen required to satisfy the oxygen level specification. Olivaylle submits that his estimates failed to address the complex design issues that were identified by Mr Carey and Professor King. The primary judge considered it significant that Mr Carey did not proffer an opinion as to the volume of nitrogen that might be necessary to achieve compliance with the oxygen level specification. Olivaylle complains that, while referring to Mr Carey's explanation that in order to do so it was necessary to perform design calculations, his Honour failed to reconcile that view with the design failures observed by Mr Carey. Mr Carey said that Mr Nieuwkerk did not ever show him any design calculations and Mr Carey formed the view that Mr Nieuwkerk was not capable of doing any. Mr Carey emphasised that the achievement of low levels of oxygen by nitrogen flushing or blanketing was not simply a function of the volume of nitrogen supply. Further, the problems that he observed in the Olive Oil Line related to failure to design the flow and pressure regulation systems. In light of that evidence, Mr Carey concluded that increasing the volume of nitrogen could not have overcome the design failures. Olivaylle said that the primary judge should have accepted that conclusion as being appropriate.
99 The apparent conflict between the views of Mr Carey and Mr Nieuwkerk about the nature of the outlet valves on the malaxeurs leads nowhere. Professor King referred to the potential for a pressure build up where the outlet valves are smaller than the inlet valves. However, he went on to identify a flow meter that would allow the operator to monitor the pressure. He then explained that he had not been informed that the malaxeur lids were held in place by stainless steel bolts. Accordingly, he did not consider it likely that an internal pressure sufficient to present a danger to the lids of the malaxeurs would be reached, given the limited capacity of the nitrogen generator in use. Finally, Professor King observed that a pressure regulator, commonly used on a similar plant, would usually be set at a pressure well below that which would risk damage to the plant.