Optus v Leighton & Ors [2002] NSWSC 325 | Case summary

(ii) advising or warning the plaintiffs of the matters referred to in (a) and (b). (d) failed to advise or warn the plaintiffs that the precaution of installing tile clips on the ceiling tiles in the CDC may not be sufficient to prevent gypsum dust contamination of the computers in the CDC. 7 Although not apparent on the face of the applications, their subject matter was related and, in respect of which, an amendment of Tyco's defence had some bearing. I directed that an amended defence be filed in accordance with my reasons for judgment of 27 June 2001. Those reasons for judgment were given in disposing of an application by Optus, namely, that: "The defendants should not be entitled to advance a positive case that there was gypsum dust contamination on the plaintiffs' equipment which would have caused cleaning of the plaintiffs' equipment independently of any contamination by the solution of iron oxide: that if the defendants plead such a positive case by leave, as a condition of leave the plaintiffs be given leave to reply to such a pleading [and] that the plaintiffs be entitled to advance alternative cases against the defendants arising out of that aspect of the defendant's case….." 8 The amendment which Tyco was directed to make was that effected by Tyco in paragraphs 12, 23 and 30 of its further amended defence which were in similar terms. Par 12 was as follows: "12. Tyco denies paragraph C134 and C135 and further denies that any act or neglect of Tyco caused any loss to the plaintiffs and says that as at and from 4 January 1997 the computers in the Computer Data Centre at Rosebery were so contaminated by gypsum dust as to have necessitated the cleaning of those computers, as in fact it occurred, regardless of the presence of iron oxides or any contaminants associated with the discharge of water through the Inergen system. " (The gypsum dust case) 9 The gist of the issue raised by the gypsum dust case, was an issue of causation only, Tyco expressly disavowing any reliance on contributory negligence or failure to mitigate in respect of that defence. 10 Mr McLachlan's evidence, was given by him on 20 June 2001. It is not a coincidence that these issues came to a head in June 2001. Although Tyco took on the responsibility of arguing an entitlement to raise the gypsum dust case, it was supported by both Leighton and NDY. 11 In the case of NDY, counsel readily conceded that NDY had not proposed to run a positive gypsum dust case prior to Mr McLachlan's cross examination and that the raising of a positive gypsum dust case should have been pleaded and particularised. Counsel for Leighton conceded, not so readily, that Leighton had not proposed to run a positive gypsum dust case prior to Mr McLachlan's evidence, but did not concede that it was required to be particularised. I remain indebted to counsel for NDY for his frankness in conceding what in my view was clearly the practice of matters conducted in the Commercial List. 12 It was my firm view at the time that it was indefensible to run the gypsum case without alerting Optus to that, either by pleading it specifically (not simply relying on a general denial of causation), or by supporting such a contention with the filing of statements of expert evidence. 13 Paradoxically, it cannot be asserted fairly that Optus was taken completely by surprise in relation to this issue in June 2001. It was clear in Tyco's running of the case from early in the proceedings that a causation issue was being explored by Tyco in cross-examination of some of Optus' expert witnesses. I think it was equally clear that in the course of that cross-examination, Tyco's positive gypsum dust case was not put squarely to any witness called in Optus' case. 14 Tyco denied that it had any obligation to put Optus on notice of the gypsum dust case by its pleading, or by the filing of statements of expert evidence prior to hearing. On its behalf it was asserted that it was entitled to raise such a case through cross-examination and to rely on its general denial of causation in its defence. 15 In support of those submissions, a detailed outline of Tyco's conduct of this issue of causation was provided to the Court which particularised cross-examination on behalf of Tyco of expert witnesses called in Optus' case. I have examined the numerous passages relied upon in those written submissions and nowhere in the course of that cross-examination was it put to a witness that the contamination of the computer equipment by calcium sulphate alone (the gypsum dust case) would have required Optus to clean the equipment. 16 In the extensive references provided by counsel of his conduct of the case on behalf of Tyco, the closest the cross-examination reached to putting the gypsum dust case squarely to the witness was at transcript 480 and 823 where it was put to Mr Hubble that "Had there been no rust water in the heat exchanger and had the Inergen system discharged, it could well be the case that these computers would have required cleaning because of the contamination they were subjected to by reason of that discharge" [at 480:48] and the suggestion that "isn't it likely that you would have held the view, setting aside the iron and zinc contamination, that this board ought to be cleaned in any event because of those levels of ionic contamination" [at 823:46] as put to Professor Hibbert. The substance of the cross-examination of Professor Hibbert, Mr Hubble and Mr Flynn was directed to sources of contamination, the nature of discharge of Inergen gas, the possible association of calcium sulphate with ceiling tiles and, in relation to contamination other than from the iron oxide, questions were put as to the possibilities that flowed from that contamination. 17 Counsel for Tyco directed my attention to an exchange which took place with me on 27 February 2001 as follows: HIS HONOUR: At the end of the day you will be saying that the calcium sulfate didn't require cleaning of the equipment at relative humidity of 40 to 60 per cent. MR HUTLEY: Your Honour, our position is this -- HIS HONOUR: Doesn't that follow? MR HUTLEY: I want to explain our position. Our position is that these things didn't require cleaning, but if they required cleaning because of the iron, they required cleaning because of the -- HIS HONOUR: At the end of the day, though, you say they didn't require cleaning? MR HUTLEY: Quite. But if they did, on the analysis we have been confronted with, they required it in any event, and we didn't contribute to it. (T842:4 - 26) 18 Counsel relied upon that, with some justification, as evidencing a recognition of the causation issue as being pursued by Tyco. However, it should be noted that, at that point, I had assumed that the matter had been adequately particularised and been the subject of expert evidence served upon Optus. No objection had been taken to that line of cross-examination. Further, the nature of the defence was such that my comments were not completely devoid of scepticism at that point of the hearing. The matter was referred to in my reasons for judgment of 27 June 2001 which was expressed as follows: "(b) my remarks in relation to this issue when first raised should not be read too literally. They were borne partly out of an appreciation of the unusualness of the defence of parties if found guilty of ruining the plaintiffs' equipment, that substantially the same damage would have resulted from other contamination for which those parties were not responsible. That is not a defence that has frequently found favour in this Court. That is not to say that this is not a case that may prove to be the exception." 19 I would add that those remarks were also fortified by the fact that the cross-examination had not put squarely to a witness the positive assertion that cleaning of the equipment would have been required, regardless of the incident, as against mere possibilities being explored in cross-examination. However, as appears from my reasons for judgment of 27 June 2001, the causation issue in relation to contamination by calcium sulphate had been explored to such an extent, without objection prior to 21 June 2001, that it was an issue that the Court was required to adjudicate upon, as far as it was consistent with the efficient conduct of the hearing to do so. 20 There is no doubt that the catalyst for the issue surfacing as one that had not been pleaded or particularised, nor made the subject of statements of evidence by Tyco, was the evidence given by Mr McLachlan. The matter arose on 21 June 2001, the day after Mr McLachlan commenced his evidence: the Court being informed that Mr McLachlan was unable to continue due to ill health. 21 Optus raised the matter in the context of my exploration of the course of future cross-examination of Mr McLachlan as follows: HIS HONOUR: What further cross-examination is involved there, Mr Hutley? MR HUTLEY: Lengthy - significant. HIS HONOUR: What are the issues, in very brief terms? MR HUTLEY: There is firstly the issue which is what you might call the causation issue, in effect the gypsum issue. HIS HONOUR: Whether the cleaning would have been necessary in any event? MR HUTLEY: Yes, it is a causation point which your Honour has been in effect seized of many months ago. Allied to that there will be significant cross-examinations about the various reports about calcium, and we will have to go through the comparison. HIS HONOUR: How are you going to address the situation of calcium in other areas that were affected by the discharge but did not require the cleaning? MR HUTLEY: Well, there is no other relevant area. When your Honour says "other areas" - I am not sure - other areas within the Optus site? HIS HONOUR: Yes. MR HUTLEY: There aren't any other areas, any more than there is the area in the switch and transmission room which also wasn't affected by the iron oxide because there wasn't a full discharge into zone 1. HIS HONOUR: Full discharge of? MR HUTLEY: Inergen. There wasn't the explosive discharge. The only place where the full explosive discharge took place was in the CDC and the Tandem room. The Tandem room there really has been no investigation about, about calcium contamination, because, in effect, no-one really investigated the Tandem computer at all, it would appear, because of the evidence that Mr McLachlan gave yesterday. HIS HONOUR: I think you have answered the question. MR GREENWOOD: Just in relation to that -- HIS HONOUR: You mean in relation to the question I raised? MR GREENWOOD: Only in relation to what Mr Hutley said about it being a causation question. It is something that I mentioned to him outside, that it causes us some concern that the calcium question is being put in the way it is, on the basis that there is no allegation in the pleadings of any contributory negligence or of any failure to mitigate on Optus's part. HIS HONOUR: It is not a question of mitigation. MR GREENWOOD: It is said it is put as causation. I think the way it is being put is that, notwithstanding what might have been a breach by Tyco, in any event Optus would have -- HIS HONOUR: Yes, would have faced a cleaning exercise. MR GREENWOOD: In my submission if that is being put as a positive case, Optus would have cleaned in any event even. If there had been no negligence on the part of Tyco, then that ought to be something that is pleaded as it is being put as a positive assertion. Now, it is not pleaded, and there is no evidence from any witness on the part of Tyco that has been provided to date to suggest that Optus would have cleaned or it would have been necessary for Optus to. HIS HONOUR: Addressing the question of calcium. MR GREENWOOD: Because of calcium. So from that point of view it has been no part of our case so far to present any evidence in relation to it. I mention that for this reason: there are limitation periods that may relate to this. For example, on 22 June 1995, tomorrow six years ago, Tyco provided Optus with a certificate which is in the exhibits which specifically relates to the question of the tiles -- HIS HONOUR: When you say "a certificate", what are you referring to? MR GREENWOOD: I am referring to a certificate which expressly provides that the ceiling tiles within the computer room will not be upset by the Inergen discharge. This was following upon a minutes of meeting raising the particular question about the clipping of the tiles and dust coming from the tiles in the course of a discharge. So it was a live matter at the time between the relevant parties, advised upon by NDY, Leightons as well as Tyco. HIS HONOUR: May I see the certificate? MR GREENWOOD: Certainly. It is in exhibit 7, volume 2, page 269. HIS HONOUR: Were ceiling tile clips installed? MR GREENWOOD: Yes. HIS HONOUR: Mr Hutley, what is the situation in relation to it? Forget the pleadings point - if your client hasn't put on any expert evidence to support the proposition that the calcium deposits consequent upon an initiation of the suppression system would have caused a cleaning of the equipment, how do you propose to pursue that issue and why wasn't it made the subject of expert evidence, if that be the case? MR HUTLEY: Firstly, could I take that in two steps? The plaintiffs' case is that the discharge led to iron contamination, and iron contamination required the cleaning. There is no dispute that there would have been a discharge in any event - in other words, the presence of the water didn't cause the discharge. There would have been a discharge. If there would have been a discharge, there would have been an event which Mr Hubbell - and I am going back a long way, I haven't been given notice of this so-called pleading point before -- HIS HONOUR: Get to the point. MR HUTLEY: Mr Hubbell gave evidence that these are known explosive events and, in a situation where you have a roof tiling system with uncut edges, and I will set aside the certificate point -- HIS HONOUR: I understand the reasoning. What I am concerned about is the absence, I am told, of any expert evidence to support the proposition that this event would have resulted in a cleaning, absent the water. MR HUTLEY: The plaintiffs are calling witnesses - for example, the person who was closest to the event we have just heard from six months into the case, Mr McLachlan. On a causation point I don't have to put on expert evidence in the first place. I can be in a position, and it is perfectly legitimate, to ask questions of witnesses called by the plaintiff as the witnesses that they rely upon to establish the need to clean, that they perceived - and Mr McLachlan perceived. HIS HONOUR: Do you intend to adduce evidence that the calcium deposits found on these boards -- MR HUTLEY: As currently advised, no. We have a lot of documentary evidence, called by the plaintiff, of an enormous presence of calcium. HIS HONOUR: No, I am referring to whether you intend to call any witness to say that that deposit of calcium would have resulted in the cleaning of the equipment absent the intrusion of water. MR HUTLEY: No, the plaintiffs' witnesses, in our respectful submission, are telling your Honour that. (T3636:11 - 3639:33) 22 In fact, the supplementary statement of Dr Lunsmann of 6 June 2001 raising a positive gypsum dust case had been served on Optus in the week preceding this exchange: a matter which appeared to have escaped both counsel for Optus and for Tyco and was unknown to the Court. 23 I think the written submissions of counsel for Optus in opposing reliance by Tyco on the gypsum dust case, conceded that the evidence given by Mr McLachlan in cross-examination on 20 June 2001 had been the catalyst for the raising of the pleading and evidentiary point by counsel for Optus on 21 June 2001. The submission in reply was as follows: "……until the matter was raised again with Mr McLachlan, the plaintiff did not understand the defendants were pressing this claim. Having floated it with the plaintiff's experts and not succeeded, and it then not being put to Mr Berents in any way at all, and in the absence of any evidence from the defendants' experts to support such a claim, the matter seemed to be dead. It was a kite which had come to ground. On 13 June 2001 a further statement of Dr Lunsmann was served which referred to calcium but again repeated Dr Lunsmann's opinion that no cleaning of the computers at all was necessary. Only in the last paragraph, in a passing way, does he suggest that cleaning would have been dictated in any way by the levels of the other contaminants. The cross-examination of Mr McLachlan and the possible construction which could be put on some of his unexpected evidence by the third defendant in particular prompted further consideration of the matter, examination of the relevant evidence which implicated the defendants and the application to the court the following morning. Having had the opportunity to further consider the matter, the plaintiff does now not consider it necessary for leave to amend the summons against Leightons or NDY. The plaintiff reserves its rights in relation to the third defendant pending the receipt of a properly particularised pleading." 24 By the time of those submissions of 26 June 2001, the statement of Dr Lunsmann had come to counsel's attention. 25 It is appropriate then to examine the evidence of Mr McLachlan and the circumstances in which he was called as a witness as the context in which the par 178 amendment should be considered. 26 As a preliminary observation, with the benefit of hindsight, there is no doubt that Mr McLachlan should not have been submitted to rigorous cross-examination and the only question of substance is whether the whole or any part, of his evidence should be remain as evidence in the proceedings, having regard to the condition he was in at the time of giving evidence, the devastating effect of being subjected to cross-examination and the incompleteness of his evidence. 27 I think there is some utility in looking at the circumstances surrounding the calling of Mr McLachlan as a witness. Aspects of Mr McLachlan's involvement in the emergency work undertaken immediately following the incident and Relectronic's participation in the recovery program are outlined in the principal reasons for judgement. He was the managing director of Relectronic which he described as "an international disaster recovery company, specialising in the recovery and restoration of equipment……. subjected to catastrophic events [and which specialised] in the restoration of a wide variety of 'high-tech' equipment". In his statement of evidence in chief he said that early in the week following the incident he had the following conversation with Mr Cearns: "PC: "Is all this equipment contaminated?" AM: "Yes". PC: "Does this equipment need to be decontaminated?". AM: "Yes, absolutely, as well as the environment". PC: "Is there any other option?" AM: "Commercially, no." 28 He expressed the opinion that contamination of the kind relating to the incident "invariably [reduced] the long, medium and short term reliability of electronic assemblies." His statement detailed the work undertaken by Relectronic which took the form, mainly, of identifying the reports which were in the tender bundle. 29 His company was also engaged in the ongoing sampling and testing of equipment on a "random sampling basis" carried out under internationally recognised sampling procedures. He identified how the samples were sent to Mr Flynn at Unisearch for analysis and the receipt of reports back from Mr Flynn. His explanation for this exercise of testing was "to establish an objective and accurate record of contaminants found on equipment….. to verify that the equipment was contaminated". His statement of evidence identified each of the reports so received from Mr Flynn. He described how, under instructions from Optus' solicitors, he carried out tests on other facilities of Optus than that situated at Rosebery. He also was instrumental in the carrying out of environmental monitoring at Rosebery during the latter part of 1997 and 1998. His statement outlined his personal involvement which included the following: "33. I reviewed the workshop files on equipment from the Computer Data Centre at the STC cleaned by Relectronic. I also reviewed the reports on swab testing and wash sampling provided by Unisearch and the other reports from Unisearch. I also visually examined a large proportion of the computer equipment and components decontaminated by Relectronic. Every item of computer equipment that I inspected was contaminated with iron oxides to some degree, prior to decontamination." 30 He expressed the general view of the state of the equipment as experienced by him as follows: "40. As appears from the reports that were issued shortly after the incident, I believed at the time that the contamination presented a very real threat to Optus' equipment. Having examined the equipment, the micrographs and the test results over many months, I strongly maintain that view." 31 Finally, Mr McLachlan evidenced the cost of the cleaning program undertaken by Relectronic on the instructions of Optus. Mr McLachlan had an extensive experience in electrical and mechanical engineering over 30 years. 32 In a supplementary statement of evidence of 17 March 2000, Mr McLachlan responded to the contents of a statement of evidence of Dr Lunsmann of 22 July 1999, which had been served on Optus by Tyco. In particular, he challenged Dr Lunsmann's figures on "allowable residual contamination levels" as relating to flux residues and not ionic residues which he said should be expressed in units of weight per area and not in dimensional units, as apparently, Dr Lunsmann adopted in his statement. 33 He also took issue with the view that solder alloy was inert, voicing his experience of corrosion in the presence of "water and electrical energy, or ionic contamination". It was also his opinion that computer cabinets are not "usually fitted with fine air filters" as apparently asserted by Dr Lunsmann. He also offered corroborative evidence of opinions expressed by Professor Hibbert and Mr Flynn regarding the capacity of conductive material to track across electronic connections. 34 He also challenged the view, apparently expressed by Dr Lunsmann, of the limited life of commercial computer equipment, stating that it was his experience that equipment of the kind in use by Optus would "almost invariably be utilised for periods well in excess of three years. Ten years' service life, as a minimum, would realistically reflect that 'real world' situation". He described Relectronic's use of aqueous-based decontamination chemicals and not "chlorinated solvents or other hydrocarbon-based chemical formulations" which apparently Dr Lunsmann had referred to in his statement. 35 Mr McLachlan was due to give evidence on 2 April 2001. It was the twenty-fifth day of the hearing. Up to that point Dr Doig, Mr Thompson, Dr Basden, Mr Bayley, Mr Hubbell, Mr Flynn, Mr Berents, Professor Hibbert, Ms Gunasekera, Mr Harrison, Mr Kennewell and Mr Cearns had given evidence. On 2 April the proceedings were adjourned in the following circumstances: MR GREENWOOD: Your Honour, I am sorry, I am forced to apply for an adjournment today. HIS HONOUR: Yes, I just received a message. MR GREENWOOD: Mr McLachlan who is due to give evidence this morning, I saw this morning. He came to chambers and was very unwell. He asked that he be allowed to go and see his doctor and I thought I had no alternative but to allow him to do that. He is going to see the doctor hopefully today in St Ives. He will then call us and let us know what the position is and hopefully we will be able to call him tomorrow. HIS HONOUR: If not, Mr Wyles? MR GREENWOOD: If not, Mr Wyles, yes. We are just checking his availability because we thought he would be Wednesday, but we will try and move him forward to tomorrow. If for some reason there is a problem with that, I will let everybody know. HIS HONOUR: Has any party anything to say about the application? MR ROBB: No. MR HUTLEY: No. HIS HONOUR: Then I will adjourn until 10 o'clock tomorrow. It is unavoidable but obviously every effort should be made to ensure that the matter proceeds tomorrow. MR GREENWOOD: Indeed. (T1889:1 - 37) 36 On 3 April 2001 Senior counsel for Optus informed the Court that Mr McLachlan was unable to attend and the case proceeded with the evidence of Mr Wyles. On 4 April at the conclusion of hearing, the Court was informed that counsel for Optus had "some optimism about Mr McLachlan next week". In endeavouring to keep the case moving I enquired as follows: HIS HONOUR: ……. Now, there is no point or possibility of getting Mr McLachlan? MR GREENWOOD: For tomorrow? HIS HONOUR: Yes. MR GREENWOOD: No. HIS HONOUR: Is that on the basis of his ill health? MR GREENWOOD: Yes. (T2066:29 - 41) 37 At the conclusion of evidence on 5 April, the position relating to Mr McLachlan was treated in the following way: MR GREENWOOD: Mr McLachlan I mentioned yesterday. We are hoping to call him next week. Can I just raise with your Honour and the other parties that it may be necessary to take Mr McLachlan's evidence in short periods of time, rather than one continuous sitting. HIS HONOUR: What is his problem? MR GREENWOOD: He is under particular stress. His company has gone into voluntary administration. He is on medication and he has been advised medically not to give evidence for three months. He has contacted us and said, "I would like to try and do it." HIS HONOUR: I don't like the sound of that. MR HUTLEY: Can I say, your Honour, some of the things I wish to ask Mr McLachlan about might be very stressful in that regard. I should say that. HIS HONOUR: I was thinking overnight, you are coming to the end of your case, aren't you? MR GREENWOOD: Yes, I am. HIS HONOUR: The defendants have a very good understanding, I expect by now, as to the detail of the plaintiff's case. If the calling of Mr McLachlan is a problem, then it occurred to me that if there is to be a threatened gap in the hearing, the defendants could, by arrangement with the plaintiff, commence calling evidence in their respective cases and that way time won't be lost. I must say that I think it is highly undesirable to involve Mr McLachlan in cross-examination in the circumstance outlined by Mr Greenwood, both from his and your point of view. MR HUTLEY: I understand, your Honour. (T2113:2 - 44) 38 The reference to the undesirability of calling Mr McLachlan as there expressed by me was out of concern for the witness and also the unfairness to cross-examining counsel, in this case Mr Hutley S.C., in being faced with cross-examination of a person who had suffered some form of mental breakdown. 39 During the course of considering the future conduct of the case on 30 April 2001, counsel for Optus informed the court that Mr McLachlan had been "spoken to" and that the prospect had been raised with him of giving evidence "in a couple of weeks" and when it was said he expressed the view "he thought he would be able to do that". That did not eventuate and it was not until 19 June 2001, well into the case of the first and second defendants that the Court was informed as follows: MR GREENWOOD: Tomorrow Mr McLachlan is available to give evidence, the manager from Relectronic-Remech who was unwell. Once Mr Peck is completed we will look at calling Mr McLachlan. (T3541:41 - 45) 40 Mr McLachlan was not called until late in the afternoon of 20 June 2001. There were no objections to the statements of evidence of Mr McLachlan which became exhibits 10.044 and 10.045. He was examined very briefly in chief and that examination concluded in the following way: MR GREENWOOD: Q. Earlier this year did the company Relectronic-Remech Pty Ltd go into voluntary administration? A. Yes, it did. Q. I take it that's been a source of some stress and upset for you? A. Yes, it has. Q. Have you been receiving some medical support since that occurred? A. Yes. Q. Are you continuing to be treated by a Dr Alan Carless? A. Mmm-hmm. MR HUTLEY: I just wonder the relevance of this material. HIS HONOUR: I don't see the necessity for this at all. MR GREENWOOD: As your Honour pleases. One matter that I wish to ask is as to whether Mr McLachlan is currently on any form of medication. HIS HONOUR: And he is? MR GREENWOOD: Just so that your Honour is aware of the fact. HIS HONOUR: I'm aware that Mr McLachlan has been deferred because of ill health. If there is any particular matter that needs to be addressed to accommodate any continuing medical matter, then that can be dealt with other than by asking Mr McLachlan questions. MR GREENWOOD: As your Honour pleases. HIS HONOUR: Is there anything that needs to be addressed, or don't you know? MR GREENWOOD: Not so far as I'm aware specifically, your Honour. HIS HONOUR: Q. Mr McLachlan, if there is some matter that you wish to have some indulgence by way of an adjournment or the like, you will let me know. A. I will. (T3604:34 - 3605:28) 41 My purpose in taking that course may be obvious. While having significant concern for Mr McLachlan's well-being, he appeared very subdued and with a heightened complexion, it was not apparent to me that the health of Mr McLachlan was strictly relevant and, as earlier noted in these reasons, I regarded it as potentially very unfair to a cross-examiner to present a witness with a stated vulnerability due to ill-health. 42 Senior counsel for Tyco had led the defence throughout the proceedings. His cross-examination, which is recorded in some twenty-seven pages of transcript, covered the nature of Relectronic's business and its profitability. It will be remembered that on one occasion the Court had been informed that part of Mr McLachlan's mental health problems was related to the collapse of his business. Part of the cross-examination included the following: Q. What was your financial investment in Relectronic-Remech at that time? A. My financial investment? Q. Yes. A. My original investment was $200,000. Q. I am talking as at 1997. A. I can't recall. Q. When the company went into liquidation you were owed, according to the accounts, some $2m; correct? A. Yes. Q. Between 1997 and early 2000, had you invested further capital in the business? A. We invested loan moneys. Q. How much? A. Approximately $2m. Q. So when did you commence to commit your own capital by way of loan to this group? A. 1998. Q. So prior to that time had you not loaned money to the group? A. I don't think so. Q. Can his Honour take it, then, the extent of your capital investment as at the beginning of 1997 was $200,000? A. Yes. Q. It was your sole source of earnings; correct? A. Yes. (T3610:57 - 3611:36) 43 That was the business that presumably had gone into liquidation. The relevance of that evidence presumably lay in the implication that Mr McLachlan's advice and opinion that the contamination of the equipment was so bad as to require cleaning was tainted by self interest. 44 As appears in the principal reasons for judgment, Tyco has submitted that the Relectronic costs were not reasonable, although it has called no evidence from an expert in the field as to the suggested reasonableness of the costs of cleaning. Tyco has relied on onus of proof considerations and a calculation by Mr Lonergan of an alternative cost of cleaning based upon a document included in Optus' discovery. It is not evidence of the reasonable cost of cleaning as distinct from a calculation based on the documents disclosed by Optus. 45 Towards the latter part of Mr McLachlan's short cross-examination, the questions turned to the presence of gypsum dust on the contaminated equipment. As appears from the following: Q. Just in that regard, if you look at the wash solution there, you will see that it shows a large presence of calcium. A. Yes. Q. Did you notice during your performance of your duties that the boards the subject of wash solutions regularly showed high levels of calcium contamination? A. Yes, we did. (T3617:43 - 52) 46 There was further cross-examination concerning contamination levels, during which I think it became increasingly obvious that it was extremely difficult to gauge whether Mr McLachlan was conscious of the answers he was giving. He was clearly very submissive and subdued. There then followed a series of concessions which I noted at the time as being of very doubtful reliability. The following evidence fell into that category: Q. Did you think about whether that white powder contamination might, of itself, require the cleaning of the boards? A. Not really, in this case. Q. Did you think about it - did you think about it? A. The boards were being cleaned. Q. Did you think about it? A. Under normal circumstances we would clean them, yes. Q. So what you are saying is under normal circumstances the level of white powder contamination you found on the boards would have required cleaning; correct? A. Correct. Q. That white powder contamination, you have agreed with me, is in all probability calcium - gypsum dust; correct? A. Correct. Q. So you would agree with me, would you not, that in all probability, even if there had been no iron oxide contamination through the heat exchanger, and a discharge had occurred in this computer room, the contamination to these computers would have required cleaning; correct? A. Depending on the customer. Q. Depending on the customer? A. Yes. Q. What, a prudent customer concerned to protect critical systems such as in this room would have required cleaning; correct? A. Correct. Q. Did you talk about that matter with Mr Berents? A. About? Q. The white powder contamination -- A. Yes, it was discussed. Q. -- of itself justifying cleaning - did you talk about that? A. I can't recall. Q. Do you believe you would have? A. Yes. Q. Because you had been duty-bound to have told a person such as Mr Berents, "You have got a contamination in there which is white powder which would have justified cleaning in any event." That's correct, isn't it? A. Yes. Q. You would have told him that? A. Yes. Q. And you told him that, didn't you? A. I can't recall. Q. You are pretty sure you did, didn't you? A. I can't recall. Q. Well, performing your duties, you would have told him; correct? A. I don't really recall. Q. Would you agree with this -- A. Mmm-hmm. Q. -- performing your duties you would have considered it incumbent upon you to have told him that; correct? A. Correct. Q. Do you tell his Honour that you were assiduous in seeking to perform your duties to Optus in respect of this contract? A. Yes. Q. Can his Honour take it that, conformably with your performance of those duties, you would, you believe, have told him? A. I would have pointed out the contamination. Q. And pointed out that that contamination of itself would have justified cleaning; correct? A. Perhaps. Q. Undoubtedly; correct? A. I don't recall. Q. I would just like to ask you this afternoon about the Tandem room. Do you recall having any association with the Tandem room? A. We eventually did the equipment, yes. Q. I am sorry -- A. Eventually we decontaminated the equipment, yes. Q. Did you become associated in any way with the testing of the equipment for the purposes of determining whether decontamination should take place or not? A. I can't recall. Q. Do you recall at some stage getting a report from Mr Flynn from Unisearch -- A. Mmm-hmm. Q. -- that such testing as he had done indicated little, if any, contamination on the Tandem room computers? A. That's correct. Q. Did you become aware that at some stage a suggestion was forthcoming from the Tandem organisation that further testing should take place in relation to those computers? A. I recall that Tandem was very, very specific and the equipment had to be replaced - we weren't allowed to do any testing. Q. I am sorry? A. Tandem wasn't in the least bit cooperative. Q. You would agree with this, wouldn't you, that it is frequently the case that the principal motivating pressure for replacement emanates from a supplier, but is channelled through the insured? A. Sure. Q. Issues such as warranties and the refusal of the manufacturer to offer support, or supply spare parts if repair is undertaken, are frequently used to enforce the stance that replacement is the only option that will be considered? A. That's correct. Q. That is notorious in your industry; correct? A. It is. Q. In other words, the one person you don't go to for advice about what you need to do in respect of computers which may or may not have been contaminated is the person who may want to sell you a new computer; correct? A. Correct. Q. Because of the obvious conflict of interest which they have; correct? A. Yes. Q. When you heard that Tandem was taking the approach it was taking -- A. Mmm-hmm. Q. -- did you tell anybody at Optus, "Look, Tandem is up to the sort of -- A. I did. Q. Who did you tell about that? A. Mr Berents. Q. Did you tell Mr Berents words to this effect: "Mr Flynn says there is hardly any contamination in this computer at all"? A. Mmm-hmm. Q. You told him that? A. Yes. Q. Did you tell him: "We don't know if it requires cleaning at all." Did you tell him that? A. Yes. Q. Did you tell him: "The one thing you shouldn't do is succumb to the obvious device which Tandem was undertaking of requiring you to buy a new computer, rather than having it checked in any way." Did you tell him that? A. I think we had that conversation. Q. Because you told him, in effect, that Tandem was engaging in blackmail? A. Correct. Q. Did you advise him that Optus should take the course of not succumbing to that blackmail? Did you tell him that? A. No, I didn't - it is very hard for a customer to resist that sort of blackmail. Q. Because that is what it was in respect of the Tandem computers, to your perception, wasn't it? A. Yes. Q. To your perception they didn't require cleaning; correct? A. Yes. Q. You told Mr Berents that; correct? A. I believe so. …… Q. What Tandem said, in effect, is: "If you want to clean them, we want them over in Scotland for six months." Do you recall that? A. Yep. Q. You knew that was standard blackmail? A. Standard practice. Q. Standard blackmail; correct? A. Yes. Q. It is completely unreasonable of Tandem to require that; correct? A. Yes. Q. And you knew that; correct? A. Yes. Q. You told Mr Berents that; correct? A. Yes. (T3627:45 - 3631:28……3632:35 - 54) 47 That evidence concluded Mr McLachlan's cross examination on that day and I was left with very serious reservations concerning the reliability of Mr McLachlan's answers, given his appearance in the witness box and the nature of the cross-examination. I was satisfied that Mr McLachlan had no real capacity to resist pressure in the witness box. He showed signs of resisting and then would appear to give in mentally. 48 I was not at all surprised by the following information conveyed to the Court on 21 June 2001 and which is repeated for ease of reference: HIS HONOUR: I have received an email referring to Mr McLachlan's indisposition. I must say my observation of him yesterday was that he was in trouble. MR GREENWOOD: Yes. We will liaise with Mrs McLachlan during the course of the day and try and find out what is happening and let your Honour know as soon as we can. HIS HONOUR: What further cross-examination is involved there, Mr Hutley? MR HUTLEY: Lengthy - significant. HIS HONOUR: What are the issues, in very brief terms? MR HUTLEY: There is firstly the issue which is what you might call the causation issue, in effect the gypsum issue. HIS HONOUR: Whether the cleaning would have been necessary in any event? MR HUTLEY: Yes, it is a causation point which your Honour has been in effect seized of many months ago. Allied to that there will be significant cross-examinations about the various reports about calcium, and we will have to go through the comparison. (T3636:1 - 33) 49 It was at that point that counsel for Optus raised the failure of Tyco to present a positive gypsum dust case, either in the form of a pleading, or by serving a statement of expert evidence. 50 Earlier in these reasons I have set out the exchange that took place on 21 June in which counsel for Tyco informed the Court that it was not Tyco's intention to call any witness to support the positive gypsum dust case. Later in that day counsel for Tyco had the following further to say: MR HUTLEY: I understand, your Honour. Can I say if your Honour were to take the view that, despite the passage of time and this issue being alive, this point now first being raised on the 51st day by the plaintiff, that they are in some way taken by surprise, and your Honour required of us to get some form of expert statement to deal with this point, I had not intended to do so because I did not consider it was necessary, it never having been suggested by my learned friend until this morning that this point was unavailable. It may have something to do with the fact that the first witness who was actually there on the spot finally gave evidence on the 51st day and disclosed to your Honour what his perception was. That may cause a situation where my client has been prejudiced because of a failure of any person to raise this point with us until this day. (T3642:30 - 50) 51 Unbeknown to counsel at that time, the supplementary statement of Dr Lunsmann had been served on Optus supporting a positive gypsum dust case. At the conclusion of the evidence on 21 June 2001 I again addressed the matter that, in the event that Tyco relied on a positive gypsum dust case, then that required attention to the pleading and the possibility of the need for the filing and serving of further statements of expert evidence. [T3671:31 - 3676:51] 52 Following that, counsel for Optus raised the matter of further amendment as appears from the following: MR GREENWOOD: Mr Durack has reminded me, as we are not sitting tomorrow and this question of limitation period arises, we formally seek leave now from your Honour to amend the further amended summons to provide for a pleading that, if it be found that the loss and damage alleged by the plaintiffs in these proceedings, or any part of such loss, would have resulted in any event from calcium sulfate or calcium contamination of computer equipment in the computer data centre at the Rosebery premises, then such loss and damage was caused by, firstly, the breach of contract and/or negligence of the first defendant and/or, secondly, the negligence of the second defendant, and/or the negligence of the third defendant. I should have raised this before Mr Hutley left. HIS HONOUR: Exactly. It is a case of on again, off again, but I will deal with that application at 2 o'clock. If you would let Mr Hutley know. (T3678:38 - 3679:4) 53 Following the resumption of the hearing that day, that matter was further discussed between the Bench and counsel. It was during the course of further discussion of the related issues of amendment of Tyco's defence and of Optus' causes of action that concessions were made on behalf of Leighton and NDY that it had not been intended to run a positive gypsum dust case prior to the evidence of Mr McLachlan [T3690:51 - 3691:33: 3692:34 - 58]. Later that afternoon counsel for Tyco corrected the statements earlier made that Tyco had not served an expert report in support of the positive gypsum dust case. 54 On the resumption of hearing on Monday 25 June I raised the question of the availability of Mr McLachlan to resume giving evidence. Up to that point counsel for NDY had described the concessions made by Mr McLachlan in cross-examination as a "moment of truth". Having regard to my observations of Mr McLachlan in the witness box and the manner in which he was cross-examined I regarded that description as singularly unfortunate and the medical evidence that was later adduced gave me no reason to change that view. It was not a submission that was repeated by counsel once the seriousness of Mr McLachlan's ill-health was established. 55 Because of the way in which counsel for Optus and for Tyco and NDY were taking up positions in the proceedings based upon the evidence of Mr McLachlan I took the step of informing counsel of the notes I had made in relation to Mr McLachlan and his evidence, as appears from the following: MR HUTLEY: The first witness this morning is Mr Gilchrist, your Honour. You have his statement. HIS HONOUR: Before we deal with that, what is the situation with Mr McLachlan? MR GREENWOOD: We haven't heard any more, your Honour. We don't know. HIS HONOUR: It occurred to me from statements from the Bar table that his condition was akin to some sort of nervous breakdown as a result of the collapse of his business which resulted in the postponement of him being called in the first place. I think it is important to know whether his recent hospitalisation is a consequence of his experience in the witness box, which one rather suspects it was. That will give rise, I think, to the desirability of him being recalled for further cross-examination, particularly since it has been indicated by Mr Hutley that there is extensive further cross-examination to be addressed to him. MR GREENWOOD: Yes. HIS HONOUR: That may lead to a situation where it would not be appropriate to recall him. That, of course, will depend upon medical evidence and the view that I have of that. If that situation arises, I then think I have to consider the effect of the Evidence Act and what discretion I have in terms of the evidence that has already been given. Have you anything to say about that at this stage? MR GREENWOOD: The only comments I can make would relate to the timing. We have taken the view that we ought just let Mr McLachlan be for the time being, see what is happening with the further progress of the case and, in particular, there are further outstanding reports from Mr Lonergan and the defendants' valuer. It is not clear to us when the evidence is likely to conclude. HIS HONOUR: I don't think it is quite as simple as that. I may be drawing inferences that will turn out to be incorrect, but if the facts are that he has had something akin to a nervous breakdown some months ago, or several weeks ago, that caused, initially, deferment of his being called, if the view of his experience in the witness box is that it has caused further damage, then I think one has to look at it not only in the interests of the litigants, but also the witness. MR GREENWOOD: We will make some inquiries of his medical practitioners, your Honour. HIS HONOUR: I think if it is done, it ought to be thorough and it ought to be such as to inform the court (a) as to the nature of his original condition; (b) the likely cause of it; (c) the condition he is in at the moment; (d) the likely cause of that, and the prognosis and the likely consequences of being subjected to further extensive cross-examination. MR GREENWOOD: If your Honour pleases. HIS HONOUR: Do you have any observations about that - the appropriateness of that, Mr Hutley? MR HUTLEY: Not at this time, your Honour. I think it is obviously a delicate topic and I can imagine that problems will arise about patient confidentiality, vis-a-vis whether we make the inquiry or whether Optus makes the inquiry and that may cause some difficulty in the short term. HIS HONOUR: I agree. MR HUTLEY: Perhaps it should be dealt with on a basis of representatives of both sides approaching the practitioners together such as to make the relevant inquiries -- HIS HONOUR: I don't think that's appropriate. MR HUTLEY: As your Honour please. I make that suggestion because I can conceive real difficulty arising with evidence of that variety - if any evidence is to be forthcoming and the capacity to get the evidence. HIS HONOUR: I raise it now because it seems to me to be pertinent to the issue that's been raised by the plaintiffs concerning your entitlement to run this case of inevitability of cleaning regardless of the contamination by iron oxide. I am pausing because I made some notes of Mr McLachlan's time in the witness box that I think I would have to disclose to the parties to enable them to consider their positions in relation to the evidence as it stands so far, particularly in relation to the exercise of any discretion that I have. They're notes that I would normally not refer to probably at least until submissions and possibly not even then, but I thought about the matter over the weekend and I think I would be compelled, in fairness to all parties, to disclose those matters in relation to Mr McLachlan's evidence. The only thing that makes me pause is whether now is the time to do that, or whether one should wait to see what emerges from the medical issue. I think I should indicate it now. I will leave aside notes which are simply descriptive - they are physical reminders for my benefit to recall the witness. I noted that he was very subdued, had a high complexion, that he was very submissive under what I have noted was excess pressure. I have noted the cross-examination was intimidatory and hectoring, and that the responses of the witness, in accepting assertions, was very doubtful whether he knew what he was accepting. I also noted I thought that this evidence had doubtful reliability in relation to concessions made and I've noted that the cross-examination was insensitive to Mr McLachlan's condition. That is not necessarily a criticism of the cross-examination, but it was a method of cross-examination that concerned me. I was tempted to intervene, decided against it because I thought it could operate unfairly to the third defendant. I didn't want to appear to be unduly protecting the witness. I am not sure that the decision was a sound one in retrospect. However, I think what I have had to say indicates, certainly, the impressions I had at the time of that Mr McLachlan's giving evidence. MR HUTLEY: Could I say one short matter? HIS HONOUR: Yes, about what I have just -- MR HUTLEY: Yes. HIS HONOUR: I think it is undesirable, Mr Hutley. It won't be the last of it. The matter, I'm sure, is bound to -- MR HUTLEY: I am concerned about one thing - any suggestion -- HIS HONOUR: Please, Mr Hutley. All I have done is to make public to the parties notes that may assist them in relation to their approach to the evidence of Mr McLachlan and, in particular, the exercise of one's discretion in relation to that material in the event he becomes unavailable to complete his evidence. It seemed to me important that that matter should be aired at this stage, rather than at some later time. (T3700:1 - 3703:6) 56 The medical evidence that was adduced in support of the application concerning the admissibility of Mr McLachlan's evidence only reinforced my impressions as conveyed to counsel. Senior counsel for Tyco has been critical of my exposing of those notes at that stage. However, it seemed to me that he failed to recognise the importance to both the defendants and Optus that the evidence of Mr McLachlan be placed into a realistic context and not necessarily, as constituting a 'moment of truth'. If I entertained very serious doubts about the reliability of Mr McLachlan's concessions it was clearly in the interest of the defendants that that be known. 57 Similarly, Optus' reaction to Mr McLachlan's evidence should, in my view, have regard to those observations of Mr McLachlan in the witness box. Optus at that point was pressing for an amendment which was the predecessor of the par 178 amendment as a condition to Tyco being permitted to run a positive gypsum dust case. That condition was dropped by Optus on 26 June 2001 [T3791:36]. 58 I think there is some utility in expressing some views about the potential problems confronting the future conduct of the case as at 27 June 2001. It was and remains my view that the defendants had not put Optus on notice by pleading or by serving a statement of expert evidence prior to the hearing that it relied upon a positive gypsum dust case. 59 The cross-examination of expert witnesses up to the point of calling Mr McLachlan, as earlier stated, did not advance to the point of putting such a case squarely to them. It was not until 13 June that such a statement of expert evidence was served upon Optus by Tyco. By requiring Tyco to plead a positive gypsum dust case, if that was to be advanced by it, the consequences of other parties, particularly Optus, responding with further statements of expert evidence and recalling expert witnesses was an unknown and, potentially, very serious problem. 60 Moreover, it was apparent that Tyco related the presence of calcium sulphate to the use of gyprock tiling in the Rosebery centre. That gave rise to the possible liability of Leighton in the installation of the tiles in the first place, and of Tyco and Leighton as to the appropriateness of the Inergen system in such an environment. 61 It was difficult to see how Optus could be excluded, fairly, from litigating such issues if a positive gypsum dust case was to be raised by Tyco. 62 As was submitted by counsel for Leighton, the implications of the raising of such further causes of action were such that they could not be accommodated within these proceedings without a complete dislocation of the hearing. 63 Consequently, it was essential, in my view, that the parties took whatever steps were perceived to be in the interest of their respective clients' with knowledge of my observations of the reliability of Mr McLachlan's evidence, so far as that evidence had been taken and at a time when there were strong indications that Mr McLachlan would not be returning to the witness box, although that matter had not been resolved. 64 One course which seemed to me to be open to Optus was to issue fresh proceedings in relation to those proposed fresh causes of action, subject to questions of limitation and Anshun estoppel. I suggested as much during the course of discussion on 27 June 2001 [eg T3922.33 - .48]. 65 The par 178 amendment was submitted by Optus during the course of proceedings on 28 June 2001 [T3975:37* note transcript error]. As it happened, the course of taking fresh proceedings had been implemented by Optus' solicitors a week previously. It was my view that in these circumstances, there remained only the question of Optus being protected against any Anshun estoppel in relation to those fresh proceedings, if Optus was not permitted to litigate the par 178 amendment in these proceedings. 66 It is common ground amongst the parties that such a fresh cause of action against the defendants could not be accommodated realistically, in these proceedings. The dilemma that posed was bound up with the fact that, in my view, Optus could not be criticised for failing to raise the par 178 amendment until a positive gypsum dust case was advanced by the defendants. As conceded by, at least, Leighton and NDY, it had not been their intention to advance such a case prior to Mr McLachlan's evidence. In the case of Tyco, having regard to the belated serving of Dr Lunsmann's supplementary report on 13 June and the nature of the cross-examination of Optus' experts to that point, I think it is fair to say that Tyco had not signalled such a positive case prior to mid-June 2001. 67 In those circumstances, any decision taken by the Court, in my view, should be one that did not preclude Optus from pursuing causes of action in the form of the par 178 amendment. If such causes of action could not be pursued in fresh proceedings without being confronted with an Anshun estoppel, the Court would be left with little alternative than to grant the amendment with the inevitable consequence that the proceedings would be derailed. 68 It was for that reason that I raised with counsel for the defendants whether they contended that such causes of action would be Anshun estopped in fresh proceedings. 69 On 9 July 2001, the position of Mr McLachlan was still outstanding and the matter was raised in the following circumstances: HIS HONOUR: Not at all. Mr Durack, the question of Mr McLachlan I don't think should be allowed to drift on without attention. Clearly, his evidence and the circumstances in which it was deferred and given are matters of some importance, in my view. It seems to me that I should have a medical report of his condition, its nature, prognosis and the effect of its relationship to his attendance in these proceedings and the likely effect of being recalled. It seems to me that without information of that kind one could not make a sensible adjudication on what is to be done about his evidence. Even if he was prepared to return to give evidence, I think I would still be advantaged by that medical evidence. I recall Mr Greenwood reminded me of the fact that it wasn't just a case of requesting such a report, but I think it would come down to this, that if an application was made, I would order his attendance in the absence of a medical report and that's not a course I would welcome following. Those seem to me to be the alternatives at this stage in trying to resolve that problem. MR DURACK: Your Honour, we are working on getting you a medical report. HIS HONOUR: It occurred to me over the weekend that it is something I should give some attention to in how one should approach the provision of a report and if it comes to it that an order is made. Perhaps Mr McLachlan and those who have the responsibility for his care should realise that something should be done. (T4447:46 - 4448:26) 70 On 16 July 2001, at the commencement of hearing, a medical report relating to Mr McLachlan was furnished to the Court, although, at that point, no formal application had been made by any party concerning Mr McLachlan's recall to the witness box. Later that day counsel for Optus stated from the bar table that Mr McLachlan was not going to be available for the remainder of the proceedings [T4813:31 - 50]. As a result of what passed between the Bench and counsel that day and on 17 July 2001 [T4826:1] I gave the following directions: HIS HONOUR: In those circumstances, I think in order to deal with the matter formally, I'll approach the matter as follows: in these proceedings Mr McLachlan gave evidence on 20 June 2001, his giving of that evidence having been deferred for several weeks, it having been stated from the Bar table that he was suffering from an illness that precluded him from giving evidence. His evidence was not completed, in that he was in the course of cross-examination when the court adjourned on 20 June and did not thereafter appear. It has been stated from the Bar table that the witness was hospitalised shortly after his departure from the court and I have been furnished with a specialist's report which I'll mark for identification 101. MFI #101 REPORT OF DR NAIDOO, DATED 13/7/2001 HIS HONOUR: It is conceded by all parties that Mr McLachlan is unavailable to give evidence in these proceedings due to a psychiatric condition, and that for practical purposes he will not become available during the anticipated course of these proceedings or any reasonable time thereafter. In those circumstances, I think it is necessary to address the status of the evidence that has been given by Mr McLachlan and, in this respect, I direct that the plaintiff file and serve a notice of motion seeking what appropriate orders it contends should be made in relation to that evidence, supported by any affidavit evidence, by -- MR GREENWOOD: By Friday, your Honour? HIS HONOUR: -- 20 July 2001; any affidavits in opposition are to be filed and served by -- MR HUTLEY: I haven't thought it through, your Honour. Would your Honour give us until the following Wednesday? If we have any difficulty with that, we'll immediately inform your Honour. HIS HONOUR: Yes - by 25 July and the parties' respective submissions are to be exchanged by 5pm on 26 July 2001 and a copy provided by facsimiles by that time to my associate and I will hear the application which should be returnable for 27 July. [T4831:56 - 4832:51] 71 That resulted in Optus' application that Mr McLachlan's evidence be admitted, notwithstanding his unavailability. It was common ground that the mental condition of Mr McLachlan was such that he was unfit to be recalled to the witness box [T4826:1 - 4833:5]. On 20 July 2001, pursuant to directions given on 17 July, Optus filed in Court the notice of motion in relation to the admissibility of Mr McLachlan's evidence. 72 On 27 July 2001 the application was heard. The principal evidence in support of the application was that of Dr Prem Naidoo together with his reports and clinical notes. Dr Naidoo is a medical practitioner who specialised as a consultant psychiatrist. He is a member of the Royal College of Psychiatrists London. 73 The evidence disclosed that Mr McLachlan had been referred to him for specialist psychiatric treatment by Dr Alan Carless on 11 April 2001. Mr McLachlan's condition at that time was described as follows: "He has been very distressed by the collapse of his business. He has been taking Prozac, Serepax and Temazepam to try and cope. So far he has been unable to give expert evidence in a long-standing court matter and on present indications I do not think he will be able to face cross-examination for three months without risking further deterioration of his health. He is extremely anxious today and cannot even sit comfortably in my surgery." 74 Mr McLachlan was seen by Dr Naidoo on 12 April 2001 and his history, condition, treatment and prognosis was contained in a report to Dr Carless of 19 April 2001 which was in the following terms: "Thank you for referring this man who has been having great difficulties coping with the collapse of his business over the last two months. He has been extremely nauseous and has been feeling that life is not worth living. His sleep varies greatly and his appetite is decreased. He has lost about six kilograms. He has no energy and is worst in the morning. There is no past medical or surgical history of significance. Three years ago the patient was in the Wesley Mission in Auburn for two weeks. He was treated for depression with Prozac and he has been on Prozac for the three years since. He saw a psychiatrist for a while after his hospital admission and has then been seeing his GP. He currently is on Prozac 2mg mane, Serepax 1 tablet and temazapam 1 - 2 nocte. He is not allergic to anything that he knows of. The patient's parents died in their eighties. He has six brothers and a sister is the oldest in the family. There is no family history of psychiatric illness or alcohol or drug problems. The patient was born in Glasgow and his family was very poor. He enjoyed his childhood though and was close to his parents. He attended school between the ages of 5 and 15. He then went into the railways as a cadet for three years and in the army for three years. He moved to New Zealand and has been involved in electrical engineering. He came to Australia in 1988 and since 1991 has been involved in a loss recovery business. Things started going downhill about three years ago and has terminated in the collapse of the business in the last few months. The patient married for the first time at the age of 23. This marriage lasted 27 years and the couple have three children who are currently aged 31, 35 and 38. He married for a second time in 1995, having been together with his current wife since 1989. His wife is 53 and has four children from her first marriage. Their relationship is said to be "fantastic". The patient does not smoke cigarettes. He drinks a couple of glasses of wine per night. He does not abuse illegal drugs. At interview the patient was clearly anxious and depressed. He had been feeling that life was not worth living but was not actively suicidal when seen. There was no evidence of psychosis or gross cognitive problems. My impression was that he was suffering with a relapse of his depression, secondary to his business collapse. I suggested that we review his haematological status. I have advised him to reduce his coffee intake and alcohol intake. In order to deal with the acuteness of his anxiety I have prescribed Olanzapine 5 mg nocte to him and will review his situation shortly. I certainly do not believe that the patient is in a fit state to give evidence on any court matter at present and would be in agreement with your feelings about this being best avoided for the next twelve weeks or so. I will let you know how things progress." 75 The history of being nauseous, as there referred to, was described in cross-examination by Dr Naidoo as "a symptom of anxiety [which was] often present in severe depression". 76 Dr Naidoo's clinical notes recorded that Mr McLachlan experienced dry wretching in the morning which Dr Naidoo identified as a common symptom of anxiety. The clinical notes also recorded that Mr McLachlan was required as an expert witness and that he couldn't cope with that at the time of the examination. 77 I think the evidence of Dr Naidoo in cross-examination is a little confused, in relation to these clinical notes. As I read them, Mr McLachlan was on medication for some three years after his admission to Wesley Mission consisting of Prozac, Serepax three times daily, and Temazapam. At the time of the examination, he was on medication of that kind, but, it seems, in different quantities. 78 In Dr Naidoo's report to Minter Ellison of 12 July 2001 he covered the examination of 12 April 2001 in more detail and it was expressed in the following way: "The patient presented with depression which had worsened considerably in the two-month period prior to seeing me. The depression was secondary to the collapse of his business. His business had been deteriorating in the two to three year period or so prior to seeing me. The patient had put an immense amount of time and all his capital into the business in order to rejuvenate it to no avail. In the end he lost all his money (several million dollars). He was absolutely a broken man, with feelings of extreme guilt in relation to his family. He felt an absolute and total failure and he felt that there was no way that he had any hope for the future at his age. He felt that life was not worth living. The patient was sleeping only a few hours and on some nights was not sleeping at all. His appetite was diminishing and he had lost 6 kg in weight. He had no energy and he had diurnal variation of mood, i.e. he was worse in the mornings (which is a clinical indicator of biological depression). ……. At interview the patient was socially appropriate and cooperative. He was very downcast and expressionless. He appeared very depressed and had been having passive suicidal ideation. The patient had been clearly very anxious and agitated. There was no evidence of psychotic symptomatology and there was no evidence of organic difficulties. My impression was that this man was suffering with a Major Depressive Disorder and in view of the acuteness of his illness I wrote to Dr Carless stating my opinion that he was not in a fit state to give evidence in Court for at least twelve weeks." 79 As further noted in Dr Naidoo's report of 12 July 2001, he continued to see Mr McLachlan weekly for the months following his first examination and thereafter two weekly until 23 May 2001. In cross examination of Dr Naidoo on the clinical notes of 19 April, he gave the following evidence: Q. Did you form the view that one of the reasons he was unfit to give evidence is because he anticipated that in the course of giving that evidence, he would have to, as it were, reprise some of the activities of that business which had failed? A. No, my - my reasoning for saying that he wasn't fit was because he was clearly very depressed at the time that he was seen and clearly I think he wasn't in a position to withstand the stress of cross-examination, et cetera. (T4922:23 - 34) 80 The clinical notes of 19 April 2001 recorded that Mr McLachlan's concentration levels were low and, when seen on 23 April, the history given included a description by Mr McLachlan that: "Brain goes back over the events of last week's woolly headed difficult to remember things."

As to Ex 4.005, 4.008, 4.009, 4.010 and 4.011: it was noted that those "short reports" were not opposed other than the report of Dr Fuchs. It was submitted that the various reports added "nothing to the Unisearch report". 117 As to Ex 4.012: it was the second report of Dr Fuchs which I have already considered. 118 As to Ex 4.014: it contained an appendix A, being Relectronic photographs of various deposits. It was submitted that the "precise nature of the deposits shown and possible sources was to be the subject of cross-examination". Presumably, the same cross-examination could have been addressed to the relevantly qualified experts called in Optus' case. 119 As to Exs 4.016, 4.017, 4.018 and 4.019: these exhibits fell into the category of those which add "nothing to the Unisearch report". 120 As to Ex 4.020: it was contended that Tyco proposed to cross-examine Mr McLachlan on the application of standard MSI-JSTD-001. Presumably, the application of such a standard could have been put to other expert witnesses. It is not a persuasive basis for rejecting the report. 121 As to Exs 4.021 and 4.022: these do not appear to be in issue, as adding nothing to the Unisearch report. 122 As to Ex 4.023: it contained photographs of various deposits which were objected to on the same basis as Ex 4.014 and nothing further need be said about that. 123 As to Ex 4.025: it was noted that an area of contention was the source of contaminations recorded in this report as being found in the under floor area of the Rosebery centre. That was subject matter that could have been addressed to a number of witnesses, lay and expert, other than Mr McLachlan. It is not a sufficient basis for rejecting this report. 124 As to Ex 4.026 and 4.027: it is in the same category as the objection to Ex 4.020. 125 As to Ex 4.028: it does not appear to be in contention. 126 As to Ex 4.029: it is a Relectronic report on an "accelerated life testing" undertaken by Relectronic and which the objection noted "was dealt with by Dr Blanchard in his reports". That report was adduced in evidence through Dr Blanchard on 27 June 2001, without any reservation by Tyco as to the admissibility of the Relectronic report. The evidence of Dr Blanchard, if nothing else, in my view, rendered the reports admissible. In any event, the objection does not justify rejection of the report. 127 Any prejudice to the defendants arising out of the inability of Tyco to further cross-examine Mr McLachlan, in my view, is miniscule, if one is to gauge the substance of such a complaint against the subject matter of statements of expert evidence adduced in the defendants' cases. 128 Mr Berents in his evidence in chief testified to his reliance upon the Relectronic reports. However, apart from some cross-examination on those reports by counsel for NDY, the matter was not addressed further in cross-examination. 129 Mr Hubbell, whose evidence was in many respects based upon the Relectronic reports, was subjected to extensive cross-examination. 130 Dr Lunsmann, for the purpose of becoming qualified to give evidence in the proceedings, was provided with the Relectronic reports. He had regard to them in giving his statements of evidence in chief. 131 Dr Blanchard was in a similar category in his commenting upon the Relectronic accelerated life test report. 132 Mr Bayley was also cross-examined upon the contents of the Relectronic reports. 133 Subject to the rulings I have given in relation to Dr Fuchs' reports, the Relectronic reports shall remain in evidence both as material upon which Optus acted in the conduct of the rectification program and as evidence of the truth of their contents. 134 As to the evidence of Mr McLachlan, the basic position adopted on behalf of Tyco, was that the evidence disclosed that Mr McLachlan was not fit to give evidence on 20 June 2001 and his evidence, accordingly, should be treated as unreliable and struck out: further, that there were strategic areas in issue in the proceedings upon which it was proposed to cross-examine Mr McLachlan. 135 It is accepted that the admissibility of, or the weight to be given to, that evidence is now a question of discretion and that the nature of that discretion is to be found in the terms of ss 135 and 136 of the Evidence Act 1995 which are in the following terms: 135. The court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might: (a) be unfairly prejudicial to a party, or (b) be misleading or confusing, or (c) cause or result in undue waste of time. 136. The court may limit the use to be made of evidence if there is a danger that a particular use of the evidence might: (a) be unfairly prejudicial to a party, or (b) be misleading or confusing. 136 Of those provisions the only relevant provision that has been argued is the 'unfairly prejudicial' ground. It is common ground that this is not a case of incompetency within the meaning of s 13 of the Act. While that was so, I note that s 13 (6) contemplates an analogous situation to this case, in so far as it provides for the admissibility of evidence of a witness who ceases to be competent to give evidence prior to the conclusion of giving evidence by that person. 137 Tyco contended that the way in which the discretion should be approached was as follows: "5. The only fair outcome is to reject all of Mr McLachlan's evidence as set out above. Other than short examination in chief, Mr McLachlan's evidence in chief was by statement, not affidavit, in accordance with Construction List practice. The circumstances are that Mr McLachlan's evidence should be treated as if had [sic] never sworn to the truth of his statements when he entered the witness box on 20 June 2001. The matter should not be treated as a case in which the witness' examination in chief was led, and then it was only prior to the completion of the cross-examination that the witness' illness prevented the completion of the cross examination. The circumstances (which are now known following Dr Naidoo's report) are that Mr McLachlan should not have entered the witness box at all." 138 On that basis it was contended that the evidence "should be excluded under s135 of the Evidence Act, or pursuant to the Court's general discretion." I have not regarded this issue as involving any general discretion of the Court. 139 In Ordukaya v Hicks [2000] NSWCA 180, Mason P observed in relation to ss 135 and 136 that they were sections which conferred a very wide discretion and that having regard "to the likely common law position and the broad language of those sections, the notion that evidence might "be unfairly prejudicial to a party" should not be confined beyond that which emerges on a fair reading of the sections in context". The proposition that the whole of Mr McLachlan's evidence should be excluded on the basis that he "should not have entered the witness box at all" does not involve a logical exercise of discretion. The events have shown that he most certainly should not have been subjected to strenuous cross-examination. In the light of Dr Naidoo's evidence, if Mr McLachlan had been taken quietly, things may have ended up quite differently. 140 I have no hesitation in concluding that the evidence in chief of Mr McLachlan should be admitted. The only challenge to his credibility that has been advanced on behalf of Tyco was to the effect that, because of a conflict of interest arising out his fading business prospects, Mr McLachlan recommended full scale cleaning of Optus' equipment, when he didn't hold the view that such cleaning was necessary, or had no sufficient basis for expressing it to Optus. 141 There was also the related question as to the reasonableness of Relectronic's cleaning charges. That latter aspect is addressed in my principal reasons for judgment. However, as firmly as one may express it, that challenge would not cause me to reject any of Mr McLachlan's evidence. I think it is testing the patience of the Court to suggest that such an issue should have any measurable influence in the exercise of the discretion required in respect of Mr McLachlan's evidence. 142 In most areas of Mr McLachlan's evidence, there is the evidence of other witnesses, both lay and expert, against which the reliability of Mr McLachlan's evidence in chief may be gauged, remaining conscious of the fact that it has not been the subject of full cross-examination. 143 In my view, there is no unfair prejudice to the defendants in admitting Mr McLachlan's evidence in chief. 144 The real difficulty that Mr McLachlan's evidence has presented to me arises out of my observations of him during his cross-examination, as earlier noted. I was very concerned about the reliability of Mr McLachlan's answers in cross-examination in which he became very submissive, to the point where I doubted if he knew what he was agreeing to. 145 That impression was confirmed by the detailed history given to Dr Naidoo by Mr McLachlan and the opinion evidence of Dr Naidoo based on that history. At times I considered Mr McLachlan's responses in cross-examination as bizarre. One cannot point to a dividing line beyond which one can say the evidence is completely unreliable. I think it would be unfair to the defendants to treat the whole of the cross-examination as unreliable. 146 The approach I have adopted is to decline to exclude the whole, or any part of the cross-examination. In taking that approach I accept that there is an element of unfairness to the defendants, in that, whatever use they wish to make of Mr McLachlan's evidence in cross-examination, it will be done in the knowledge that the reliability of that evidence must be viewed in the context of the evidence adduced through Dr Naidoo, including the history given to him by Mr McLachlan. 147 In my view, that approach does not involve any unfairness to Optus. To the extent that the evidence given by Mr McLachlan in cross-examination related to communications made by him to Optus following the incident, Optus had the opportunity of responding to that in evidence in reply. 148 Having isolated what I think are the potentials for unfairness to one party or another, the firm conclusion I have reached is that it is not unfairly prejudicial to the parties to admit the whole of Mr McLachlan's evidence. However, in weighing the reliability of that evidence, I think, in fairness to the defendants, caution should be exercised in areas where there is no contemporaneous record, or where no other witness testified, or was capable of testifying, to the same or similar subject matter. 149 As to credibility, that will be addressed in the principal reasons to the extent that his credibility is brought into issue. 150 During the course of submissions, Tyco presented a written outline "indicating in a general way those parts of Mr McLachlan's statements…… which are contentious and which were proposed to be the subject of cross-examination". They included the following:

Optus v Leighton & Ors

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Judgment (32 paragraphs)

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