Optus v Leighton & Ors

First Plaintiff: Optus Networks Pty Limited Second Plaintiff: Optus Systems Pty Limited Fourth Plaintiff: Optus Vision Pty Limited Fifth Plaintiff: Optus Communications Pty Limited PARTIES : First Defendant: Leighton Contractors Pty Limited Second Defendant: Norman Disney & Young & Partners Pty Limited Third Defendant: Tyco Australia Pty Limited Sixth Cross-claimant: EMAE Pty Limited Fifth Cross-claimant: The WorkCover Authority of New South Wales JUDGMENT OF : Hunter J

Plaintiffs: P Greenwood SC; P Durack; S Climpson First Defendant: P Garling SC; R Pepper COUNSEL : Second Defendant: S Robb QC; G Ellis Third Defendant: N Hutley SC; J Lockhart Sixth Cross-claimant: G Downes QC; N Kidd Fifth Cross-claimant: S Donaldson SC Plaintiffs: Minter Ellison Lawyers First Defendant: Moray & Agnew SOLICITORS : Second Defendant: Colin Biggers & Paisley Third Defendant: Blake Dawson Waldron Sixth Cross-claimant: Allen Allen &Hemsley Fifth Cross-claimant: Phillips Fox CATCHWORDS : Contract - negligent performance of contract for fire suppressant system - accidental discharge of foreign matter from system - contamination of computer bank - liability of principal contractor - of subcontractors - professional negligence - liability of statutory authority in system testing - misleading conduct - negligent misrepresentation in certification of works - contributory negligence of principal - Damages - whether property damage or econmic loss - principles applicable - whether principle of betterment part of assessment of damages - whether benefits to principal in rectification work to be taken into account - onus of proof where issue of betterment raised - whether costs of rectification incremental - statutory contribution - contractual indemnity - liability in contribution of insolvent subcontractor - principles of apportionment. Boiler and Pressure Vessel Regulations 1942 (NSW) Factories, Shops And Industries Act 1962 (NSW) Law Reform (Miscellaneous Provisions) Act 1946 (NSW) LEGISLATION CITED : Law Reform (Miscellaneous Provisions) Act 1965 (NSW) Occupational Health and Safety Act 1983 (NSW) Trade Practices Act 1974 (Cth) WorkCover Administration Act 1989 (NSW) Astley v Austrust Ltd (1999) 197 CLR 1 British Westinghouse Electric and Manufacturing Company v Underground Electric Railways Company of London [1912] AC 673 Bryan v Maloney (1994 - 1995) 182 CLR 609 Bulk Materials (Coal handling) Pty Ltd v Compressed Air & Packaging Systems (NSW) Pty Ltd (1997) 14 BCL 109 Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520 Carslogie Steamship Co Ltd v Royal Norweigian Government [1952] AC 292 Cashfield House Ltd v David & Heather Sinclair Ltd [1995] 1 NZLR 452 Chaplin v Hicks[1911] 2 KB 786 Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-operative Assurance Co. of Australia Ltd (1931) 46 CLR 41 Crimmins v Stevedoring Indurstry Finance Committee (1999 - 2000) 200 CLR 1 Daniels v Anderson [1995] 37 NSWLR 438 Fisher v C.H.T. Ltd (No. 2) [1966] 2 QB 475 Frankcom v Woods (NSWCA 1 October 1980 (unreported)) Hadley v Baxendale (1854) 9 Ex 341 Haines v Bendall (1991) 172 CLR 60 Harbutt's "Plasticine" Ltd v Wayne Tank and Pump Co. Ltd [1970] 1 QB 447 Hawkins v Clayton (1988) 164 CLR 539 Hill v Van Erp (1996 - 1997) 188 CLR 159 Hoad v Scone Motors Pty Ltd [1977] 1 NSWLR 88 Hodge and Another v Clifford Cowling & Co [1990] 46 EG 120 Hollis v Vabu Pty Ltd [2001] HCA 44 (9 August 2001) Hussey v Eels [1990] 2 QB 227 Hyder Consulting (Australia) Pty Ltd v Wilh Wilhelmsen Agency Pty Ltd [2001] NSWCA 313 IT walker Holdings Ltd v Tuf Shoes Ltd [1981] 2 NZLR 391 CASES CITED : J & B Caldwell Ltd v Logan House Retirement Home Ltd [1999] 2 NZLR 99 Johns v Prunell [1960] VR 208 Johnson v Perez (1988 - 1989) 166 CLR 351 Joyner v Weeks [1891] 2 QB 31 Lavarack v Woods of Colchester [1967] 1 QB 278 Modbury Triangle Shopping Centre Pty Ltd v Anzil (2000) 176 ALR 411 Monroe Schneider Associates Inc v No1 Raberem Pty Ltd (1991) 33 FCR 1 Murphy v Brown [1985] 1 NSWLR 131 Northern Sandblasting Pty Ltd v Harris 1996 - 1997) 188 CLR 313 NRMA Ltd v Morgan (1999) 31 ACSR 435 Pacific Associates Inc v Baxter [1990] 1 QB 993 Peake v Steriline Manufacturing Pty Limited (1988) Aust Torts Reports 80-154Performance Cars Ltd v Abraham [1962] 1 QB 33 Perre v Apand Pty Ltd (1991) 198 CLR 180 Pyrenees Shire Council v Day (1998) 192 CLR 330 Romeo v Conservation Commission (NT) (1998) 192 CLR 431 RW Miller & Co Pty Limited v Krupp (Australia) Pty Limited (1995) 11 BCL 74 Sea Containers Ltd v ICT Pty Ltd [1998] NSWSC 474 Simonious Vischer & Co v Holt Thompson [1979] 2 NSWLR 322 Sutherland Shire Council v Heyman (1985) 157 CLR 424 Taylor v Rover Co. Ltd [1966] 2 All ER 181 Tepko v Water Board [2001] HCA 19 (5 April 2001) The Habersham Grange [1905] P 307 Theiss Watkins White Construction Limited v The Commonwealth (1992) 14 BCL 61 Voli v Inglewood Shire Council (1962 - 1963) 110 CLR 74 Watts v Rake (1962) 108 CLR 158 DECISION : Judgment for first, second and fourth plaintiffs against first and third defendants - otherwise proceedings dismissed: judgment for cross-claimant under third cross-claim against second cross-defendant - otherwise cross-claims dismissed - save for seventh cross-claim. Final orders as to the seventh cross-claim, quantum and costs deferred pending presentation of short minutes by parties at time of publication of reasons.

• 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CONSTRUCTION LIST

55059/97 OPTUS NETWORKS PTY LIMITED & ORS -v- LEIGHTON CONTRACTORS PTY LIMITED & ORS JUDGMENT 1 These proceedings arise out of damage to premises and equipment at Rosebery (the Rosebery centre) which occurred on 3 January 1997 when contaminated water was accidentally discharged onto parts of the building and equipment stored within it (the incident). The Rosebery centre was owned by the first plaintiff, Optus Networks Pty Limited (Networks) which also owned some equipment referred to as the Tandem Equipment. The second plaintiff Optus Systems Pty Limited (Systems) owned the equipment with which most of the controversy in these proceedings was concerned. The fourth plaintiff Optus Vision Pty Limited (Vision) owned a cabinet which was the subject of a minor claim for damage arising out of the incident. The third plaintiff, Optus Mobile Pty Limited (Mobile) has been given leave to discontinue its proceedings in accordance with reasons separately published. The fifth plaintiff Optus Communications Pty Limited (Communications) has been included as a party to the proceedings on the basis of the following contention: "In the event that the first, second or fourth plaintiffs, or any one of them are, for whatever reason, precluded from or are unsuccessful in recovering the loss and damage which they have sustained from the first, second or third defendants, or any one of them, the fifth plaintiff will sustain loss and damage by reason of its ownership of the issued capital in the first, second and third and the fourth plaintiff being detrimentally affected." 2 That case is not being pursued by Communications. 3 In order to understand the complexity of the liability and quantum issues that arose in this case, a simple description of the incident and the parties involved would, I think, be useful. 4 In these reasons I have endeavoured to avoid unnecessary distinctions amongst the plaintiffs, referring to them as Optus as a matter of convenience. 5 From 19 November 1991 Optus was awarded the second telecommunications licence by the Australian Government. For the purpose of exploiting those licences, Optus acquired the Rosebery centre at a time, in 1992, when it was nearing completion. By a Building Works and Services Agreement dated 6 March 1992 between the first defendant Leighton Contractors Pty Limited, (Leighton), and Communications (the building agreement) Leighton undertook to perform building services and supplies under a purchase order mechanism for the fit out of the building as a telecommunications centre. The building works so carried out by Leighton permitted Optus to commence operations in the Rosebery centre in November 1992. 6 At the time of the incident, located on the ground floor of the Rosebery centre was a Switch and Transmission room which contained equipment relating to Optus' Long Distance telephone business and other rooms variously described as the IFMC room, the Inergen Storage and Heat Exchanger area, the UPS room, the Power room, the Switch Board room, and the PABX room. 7 On the first floor there was a computer data centre (the data centre) which housed a computer system made up of some 180 cabinets, 70 different computer systems involving 83 business applications. (These figures have differed in evidence.) This equipment included what has been described as the Global Service Mobile Information System (the GSMIS) which represented a critical component of Optus' operations. The Tandem room was also situated on the first floor. Within it was situated computer equipment which provided services known as EFTPOS and Smart Pay: they being services which permitted bank customers to pay bills by telephone, or to pay for goods on purchase by electronic transfer of funds. 8 During the hearing, the data centre and the Tandem/EFTPOS room were known as zone 3, the Switch and Transmission Room as zone 1, the Power Switch Board and PABX room, zone 2, and the IMFC room as zone 4. That fit-out had been performed by Leighton under the building agreement. On 13 August 1993, under the building agreement, Networks raised a purchase order on Leighton to install an Inergen Fire Suppression System to protect those four zones from fire damage (the Leighton contract). 9 Inergen is an inert gas. The system was designed to separately feed gas under pressure into each of the four zones. The gas was to be housed in banks of pressurised cylinders and a heat exchanger (the Heat Exchanger) was installed in association with the Inergen system, the function of which was to minimise the drop in temperature of gas emitted into the atmosphere when the fire suppression system was activated. The circumstances in which the Heat Exchanger was introduced into the Inergen system is a matter of particular moment in these proceedings. 10 The Inergen system and Heat Exchanger were installed by the third defendant, Tyco Australia Pty Limited (Tyco), under a subcontract with Leighton of 26 May 1994 (the Tyco subcontract). 11 Throughout these reasons I have used the term "Tyco" without distinction between the third defendant, Wormald Australia Pty Ltd, Tyco Grinnell Asia Pacific Pty Ltd, O'Donnell Griffin Pty Ltd or their related corporations. O'Donnell Griffin was acquired by Wormald International Pty Ltd in 1992 and Wormald was subsequently acquired by Tyco International, the parent company of the third defendant. Grinnell Asia Pacific Pty Ltd was the developer of the technology for Inergen and along with Wormald was a subsidiary of Tyco International. It was also the ultimate holding company of Grinnell Asia Pacific. Total Walther Feuerschutz Gmbh was also part of the Tyco group. No evidence has been led placing any significance on the different corporate entities involved within the Tyco group, nor have any submissions been presented based on any such distinction. 12 Tyco subcontracted the design, testing and fabrication of the Heat Exchanger to Metropolitan Engineering and Fabrications Pty Ltd (MEF), by subcontract dated 30 May 1994 (the MEF subcontract). MEF subcontracted the thermal design of the Heat Exchanger to ABB Lummus (Lummus), by agreement dated 30 May 1994 (the Lummus subcontract) and subcontracted the mechanical design and drawings for the Heat Exchanger to EMAE Pty Limited (EMAE). The drawings for the Heat Exchanger had been approved by the WorkCover Authority of New South Wales (WorkCover). 13 Engineering consultancy advice was provided by NDY Management Pty Limited (NDY), the second defendant, under contractual arrangements with Leighton, in terms of a statement of works letter of NDY dated 5 August 1992 as dealt with in Leighton's letter to NDY of 25 November 1992 and NDY's response of 26 November 1992 (compendiously referred to for convenience as the statement of works agreement), a consultant agreement of 29 January 1993 (the 1993 consultant agreement) and one in similar terms of 9 February 1994 (the 1994 consultant agreement). There is a substantial issue as to the applicability of the terms of the consultant agreements to the design, specification, fabrication and installation of the Heat Exchanger. In addition to approving EMAE's calculations and drawings for the Heat Exchanger, WorkCover witnessed and certified satisfactory hydrostatic testing of the Heat Exchanger. The shell side was satisfactorily tested on 16 August 1994, with the tube side being successfully tested on 18 August 1994. 14 The testing took place in the presence of Mr William McColl, the senior inspector in the Fabrications section of WorkCover. The testing took place at MEF's premises with the Heat Exchanger loaded onto the tray of a truck. Following testing it was transported to the Rosebery centre on 18 August 1994. After delivery of the Heat Exchanger, it was inspected by a WorkCover licensed boiler inspector, Mr A Bruce on 19 August 1994, who certified on 23 August 1994 that it may be used be used for its maximum allowable safe working pressure of 500KPa on its shell side and 600KPa on its tube side. 15 It was not until a discharge test was carried out on the night of 8/9 July 1995 that certificates relating to completion were provided by Tyco, NDY and Leighton in August 1995. 16 The circumstances which gave rise to the incident were described by Mr Luis Angel Valledor (Valledor), a security guard in the employment of Chubb Security, who was on duty at the Rosebery centre on 3 January 1997. His evidence was as follows: "3. At 6.30pm on 3 January 1997 I commenced a patrol of the Sydney Technical Centre. I left my office on the ground floor and walked up to level 1. I entered level 1 where the Security Facilities Control Centre was located ('SFCC'). The SFCC was Optus' Control Centre for all its facilities nationwide. On 3 January 1997 the SFCC Controller present at Rosebery was Livio Rosso. I was walking towards the computer room which was situated on level 1 when I heard the fire alarm.

4. I went to the SFCC office and I asked Livio Rosso to come with me.

5. Livio Rosso and I walked from his office to the computer room. We entered the computer room but found nothing unusual. We couldn't smell any smoke and we couldn't see any fire. We didn't go into the EFTPOS room, which was a small room on the side of the computer room, at that time.

6. Livio Rosso and I made a mutual decision to press the 'Stop Gas' button in the computer room to stop release of the gas system because we could [see] there was no evidence of any fire.

8. After the button had been pressed I returned to my office on the ground floor and Livio went back to his office. In my office I checked the alarm panel. The fire alarm was still sounding. I found that only the Very Early Smoke Detection Alarm (VESDA) panel 1 in the computer room had been activated. I was not able to stop the fire alarm.

9. At approximately 6.40pm the fire brigade arrived on site in response to the fire alarm.

10. Livio unlocked the electronic doors and let the fire brigade into the building. I accompanied the fire bridge (sic) to the Computer Data Centre room and to the Tandem/EFTPOS room. In the Tandem/EFTPOS room I smelt burning.

11. I said to the fire brigade words to the following effect: 'We pressed the "Stop Gas" button before you arrived. We decided to do that because we could see no smoke or fire. It is your decision whether we dump the gas. We don't know whether to do that.' 12. One of the fireman replied in words to the following effect: "Let's dump the gas. Restart the Inergen release.' 13. I went to the fire panel in the Computer Data Centre room and presses (sic) the button marked "Release Inergen ".

14. I then sent a page around the building advising all staff to evacuate the building. The Computer Data Centre room was manned on a 24 hour basis. There were many people in the building at that time.

15. All staff who were working at the time were evacuated from the Sydney Technical Centre.

16. I went into the Computer Data Centre room and the Tandem/Eftpos room later that evening. I saw a rusty brown liquid mess all over the walls, the floors, the ceilings and all of the equipment in those two rooms.

17. The fire brigade left at about 9.18pm." 17 The "rusty brown liquid mess" observed by Valledor was the product of water that had been left lying in the Heat Exchanger after the August 1994 hydrostatic tests, resulting in corrosion within the Heat Exchanger which was emitted into the atmosphere, principally of the data centre and the Tandem room (zone 3), with some escape into the Switch and Transmission room (zone 1): the latter, the result of a rupture of a partition plate intended to separate discharge in zone 3 from zone 1. In comparative terms, the damage in the Switch and Transmission room was quite minor. 18 For a full understanding of the relevant matters relating to the Heat Exchanger and the various designated zones within the Heat Exchanger and the Rosebery centre I think it is useful to have some pictorial and diagrammatic representation of the Rosebery Centre, of the various zones within the Rosebery centre, of the Heat Exchanger and of the damage to it. As a schedule to these reasons I have included the following:

A. A diagram of the floor plan of the Rosebery centre identifying the four zones by colour code.

B. Photographs and diagrams of the Heat Exchanger, depicting the tube and shell side of the Heat Exchanger. The same colour code is used to demonstrate the passage of gas into and out of the bonnet chambers of the tube side and into and out of the shell side.

C. Figure 4 is a photograph of the tubesheet looking in the direction of the shell side with the inlet and outlet zones marked eg. Zone 4 outlet as "Z40" and zone 4 inlet as "Z4I". Arrows identifying "well-defined 'tide'" indicate levels of water damage.

D. Figure 6 consists of two photographs showing a close up of the tide mark on the tubesheet surface at zone 3 top inlet designated "Z3TI", it being necessary to differentiate between the top and bottom compartments within the bonnet chamber which comprised zone 3. The bottom inlet and outlet are respectively referred to as "Z3BI" and "Z3BO".

E. Figure 7 consists of two photographs showing the tide mark on zone 3 top outlet.

F. Figure 8 consists of two photographs showing the tide mark on the tubesheet surface at zone 3 bottom inlet and outlet.

G. Figure 9 is a photograph showing the tide mark in zone 2 inlet.

H. Figure 10 consists of two photographs showing the tide mark in zone 4 inlet and outlet.

I. Figure 12 is a photograph showing corrosion within the bottom chamber in the zone 4 outlet.

J. Figure 14 consists of two photographs showing the presence of corrosion in the piping spool in the zone 3 outlet.

K. Figure 17 consists of two photographs showing the presence of corrosion in the piping spools for the zone 4 inlet and outlet.

L. Figure 3 consists of two photographs which show both sides of the bonnet and identify the various zone inlets and outlets

M. Figure 5 consists of one photograph of the rupture of the plate in the bonnet separating the bottom zone 3 outlet chamber from zone 1. There was plastic deformation in the vertical plate in the bottom zone 3 inlet section, dishing of the horizontal partition plate between the inlet and outlet sections of the top zone 3 separating it from zone 1, and similar dishing of the vertical plate between zone 4 outlet chamber and the adjacent zone 1 chamber, and also of the plate between the zone 4 inlet section and zone 1, which are not readily observed from figure 41.

N. Figures 42 and 48 are diagrams showing the non-self draining sections of the Heat Exchanger in the portions colour shaded. 19 In simplistic terms the function of the shell side of the Heat Exchanger was to heat gas by means of water contained within the shell as the gas passed in tubes from the various inlet zones of the bonnet into the shell and returning to the outlet components of the bonnet before passing through pipes servicing the various zones within the Rosebery centre. 20 Dr Ian Dracup Doig (Doig) is a highly qualified mechanical and chemical engineer who was retained by Optus shortly after the incident. He gave evidence in a careful and intelligent manner without any favour or bias, showing a willingness to make concessions freely. His hypothesis of the things which gave rise to the incident was unchallenged. He calculated the volume of water that would remain trapped in the non-draining zones of the bonnet chambers as being 8.602 litres in zone 3 top inlet and also in zone 3 top outlet; 1.945 litres in each of zone 2 inlet and zone 4 inlet; 0.658 litres in each of zone 2 outlet and zone 4 outlet; 2.532 litres in zone 1 inlet and 3.70 litres in zone 1 outlet. 21 It was Dr Doig's opinion as to the presence of water within the bonnet section of the Heat Exchanger as follows: "1.3 Observations and generally accepted evidence

In my view, water had been present in the heat exchanger and associated Inergen piping, in the following areas:

1. In heat exchanger Zone 3 (top and bottom Inergen gas-side or tube-side sections).

2. In the piping attached to both the inlet and outlet sides of Zone 3.

Corrosion deposits s Major corrosion deposits on the tube-sheet face and within the U tubes of Z3TI and Z3TO (Figures 4, 6, and 7), and minor corrosion deposits on the surfaces of these Bonnet chambers (Figure 5). s Minor corrosion deposits on the tube-sheet face of Z3BI and Z3BO (Figures 4 and 8). s Minor corrosion deposits at bottom of tube-sheet face and within the U tubes of Z41 and Z40 (Figures 4, and 10) and minor corrosion deposits on the surfaces of these Bonnet chambers (Figure 5). s Minor corrosion deposits at bottom of the tube-sheet face and within the U tubes of Z21 (Figures 4, and 9) s The pattern of corrosion and/or corrosion deposits within both piping spools (each of which connects of a nozzle at Z3TI and at Z3TO of heat exchanger gas-side or tube-side Bonnet (Figure 13)) indicates these piping spools were flooded by water up to a level corresponding to the bottom of the inside of the pipe tee and the horizontal spool piece which connects the vertical spool pieces to the Z3TI (or Z3TO) nozzles (Figures 24, 26 and 31). There is a distinct change in the pattern of corrosion deposits on the inside surfaces of the piping at this level: above this level the corrosion and corrosion deposits exhibit a different appearance more typical of corrosion by water vapour in the presence of air - see Figure 45. s Water containing corrosion deposits was sprayed into the Optus Zone 3 computer room when the Zone 3 Inergen system was activated on 3/1/97.

Deformation of Partition Plates s When examined three Zone 3 horizontal partition plates were deformed (Z3TI, Z3TO and Z3BI) (see Figures 38(a), 38(b) and 37 respectively) and one (Z3BO) had been burst open (see Figure 41). This undoubtedly resulted from the very rapid rise in pressure of the Inergen gas in the heat exchanger following its release from its 15 MPa steel storage bottles on 3/1/97. On release the gas met water contained in the system and accelerated this through the piping. It emerged from the Inergen gas system delivery nozzles spraying equipment in the Zone 3 room with water containing corrosion products. During the Inergen gas pressure rise the water would be rapidly accelerated through the system's changes in direction and available flow area. The inertia of the water, exacerbated by deceleration at each change (of direction or flow area within the piping) would cause the Inergen gas pressure in the heat exchanger and piping to rise rapidly. As a result three of the Zone 3 partition plates deformed towards their neighbouring Zone 1 chambers, while the partition plate between Z3BO and Z1I ruptured, releasing the Zone 3 Inergen gas into the Zone 1 heat exchanger chamber and piping. This rupture relieved the pressure in the Zone 3 system. s Two vertical partition plates between Z40 and Z10 (see Figure 39), and between Z41 and Z1I (see Figure 40) were also deformed (domed towards Z10 and Z1I respectively). These deformations are considered in Section 3.0 below."

(Ex 10.023) 22 Dr Doig considered a number of hypotheses and that which he favoured and which was not challenged was expressed in the following way: "2. HYPOTHESES CONSIDERED AGAINST RESULTS OF INVESTIGATIONS 2.1 Water was residual water left in the non-draining pockets of the he (sic) bonnet chambers Two hydrostatic tests were reportedly performed: the first on 16 August 1994 on the heat exchanger shell at 750kPag and the second on 18 August 1994 on the Bonnet and U tubes at 9 MPa. See the two page Work Cover Authority Hydrostatic Test Certificate, Approval No. 3644-P-94. A copy of this Work Cover Authority Certificate is included in this report as Appendix 8. The heat exchanger is labelled by its manufacturer as a TEMA Class R. Type BEU- ie a (Petroleum) Refinery Class heat exchanger with a Bonnet (Type B) gas-side or tube-side end closure, single shell pass (Type E) and U tubes. The Bonnet contains ten chambers separated by flat plate partitions. The arrangement of the ten chambers inside the Bonnet is unusual. The more common arrangement is that the Bonnet has only one inlet and one outlet nozzle, and the same gas-side or tube-side fluid passes through all the chambers in sequence in what is termed a ten tube pass arrangement. It is common practice in this arrangement to provide small drain and vent holes, typically 3 to 5mm bore, which are drilled through the partition plates so that no partition entraps liquid or gas in pockets during draining or filling operations. This heat exchanger has ten gas-side or tube-side nozzles and is arranged to have five separate, two-pass gas-side or tube-side zones. Each pair of chambers directs flow through an inlet nozzle to flow through one of five banks of U tubes and out through an outlet nozzle. Where it is essential to avoid contamination between the fluids in each of these five zones no drain or venting holes between the partition plates which separate the five zones can be permitted: only the partition plate between each separate zone inlet and outlet chamber may have vent and/or drain holes in these cases.

In the Optus, Rosebery location, the top pair of chambers and the bottom pair (two distinct zones) together serve Zone 3. Each of the chambers is served by a vertical 50mm bore nozzle. The two inlet chamber nozzles and the two outlet chamber nozzles, are linked by external piping. Zones 2 and 4 are each served by two 50mm bore nozzles which enter the heat exchanger horizontally (see Figures 3 and 4). The top and bottom heat exchanger chambers serving Zone 3 each have two vertical 50mm bore nozzles, while the centrally located heat exchanger chambers serving Zone 1 have two 150mm bore nozzles which enter the Bonnet end inclined at 15 degrees to the horizontal.

The heat exchanger stands on saddle supports with its main axis horizontal. This provides the natural orientation in service and during hydrostatic testing and transportation. In this orientation:-

The absence of drain holes in the partition plates allows non-draining zones to form in the Bonnet chambers of Z3TI, Z3TO, Z2I, Z20, Z4I, Z4O, Z1I and Z1O - see Figures 42 and 48.

The absence of vent holes in the partition plates allows non-venting zones to form in the Bonnet chambers of Z3B1, Z3BO, Z2I, Z2O, Z4I, Z4O, Z1I and Z1O - see Figures 43 and 47.

It follows that during hydrostatic testing, the absence of vent holes allows air to be trapped and compressed in the non-venting zones of the Bonnet chambers of Z3B1, Z3BO, Z2I and Z2O, Z4I and Z40 and also in Z1I and Z1O, and in the associated heat exchanger U-tubes and nozzles of Zones Z3BI and Z3BO. The volumes of these non-vented zones (calculated from the dimensions of the heat exchanger on the manufacturer's (Metropolitan Engineering & Fabrications Pty Ltd of Smithfield, NSW drawing no. 94-1161) are 8.602, 8.602, 0.658, 1.945, 0.658, 1.945, 3.70, 2.532 L respectively - see Figures 43 and 47, the table below, and Appendix 9 for detailed volume calculations.

It also follows that on completion of the hydrostatic test that water will remain in the non-draining zones in the Bonnet chambers of Z3T1, Z3TO, Z2I, Z2O, Z4I, Z1I and Z1O unless personnel conducting the test realise these chambers will not drain naturally, and introduce process to drain them. The volumes of water that would remain in these non-draining zones (calculated from the dimensions of the heat exchanger on the manufacturer's drawings (cited above) are 8.602, 8.062, 1.945, .658, 1.945, 0.658, 2.532 and 3.70 L respectively. See Figures 42, 48, the table below, and Appendix 9 for volume calculations.

Additional calculations (see Appendix 9) of the volumes of residential water in the two bottom Zone 3 chambers (Z3BI and Z3BO), the external piping, and in the top Zone 3 (Z3TI and Z3TO) chambers, indicate that the level of water was approximately 14cm below the top face of the two nozzles on these chambers before evaporation began - see Appendix 9 for these calculations.

Table showing calculated sizes of non-draining and non-venting pockets in the various heat exchanger chambers and U tubes. Chamber Z3TI Z3TO Z3BI Z3BO Z2I Z2O Z4I Z4O ZII ZIO Non-draining pocket (mL) 8602 8602 Neg Neg 1945 658 1945 658 2532 3700 Non-venting pocket (mL) Neg Neg 8602 8602 658 1945 658 1945 3700 2532

Sizes are given in millilitres (mL). For calculation details see Appendix 9.

Distribution of water in Zone 3 system while in service

The top and bottom Bonnet inlet nozzles of Zone 3 are connected by a C shaped piping spool. It consists of straight pipe lengths screwed together using a tee at the top left hand corner of the C and two elbows along the base of the C, with one elbow at the top Zone 3 inlet nozzle. The arrangement is shown in Figure 44, where the Inergen gas inlet piping described is that shown to the left of the vertical centre line through the heat exchanger: piping shown to the right hand side is that connecting the top and bottom outlet nozzles of the upper and lower Zone 3 chambers.

Flanges at both tips of the C connect the top and bottom inlet Zone 3 nozzles on the heat exchanger Bonnet. The bore within the C piping is 50 mm NB (NB= Nominal Bore; actual bore is 48.3 mm). A 65 mm NB vertical straight pipe, which delivers Inergen gas to the heat exchanger, extends from the vertical leg of the C. A corresponding piping spool, also shown in Figure 44 (on the right hand side), is the mirror image of the (left hand side) inlet spool: it connects the top and bottom outlet Bonnet nozzles of Zone 3. The 65 mm NB vertical extension of this (right hand side of Figure 44) spool delivers Inergen gas exiting the heat exchanger.

During standby the water in the shell of the heat exchanger is maintained at 68 C. Water trapped in the top Zone 3 Bonnet chambers will also be maintained at 68 C and will produce vapour. This vapour ascends the vertical 65mm NB straight pipe on both the inlet and outlet sides where it condenses on the air-cooled walls of those two pipes. Condensate descends into both the inlet and outlet C piping sections filling them, and partly filling the Z3B1 and Z3BO Bonnet chambers. Note that air trapped in both the Z3BI and Z3BO chambers and their U tubes will compress (due to the head, 0.97m, of condensate in the vertical leg of each C) and limit the rise of condensate.

The sequence of events is illustrated by Figures 44 and 45. Note that in Figure 44 the transfer of water by evaporation and condensation from the top Zone 3 chambers into the external piping is only partly complete, while Figure 45 shows the transfer complete with all further condensation from the vertical 65mm NB inlet and outlet pipes returning to the top Zone 3 chambers.

The segmental etched area on the Tube-sheet surface at the bottom of Z3BI and Z3BO (Figure 8) show the extent of this rise. Once the vertical legs on both sides of the heat exchanger are level with the bottom of the horizontal upper piping of the C spool any further condensate will return to the Z3TI and Z3TO chambers.

Continuous re-evaporation with return of condensate will occur. The pattern of corrosion, corrosion deposits, and surface etching provide convincing evidence that this mechanism occurred while the heat exchanger was in service on standby duty at the Optus, Rosebery premises.

Calculation of the submerged volumes in both C piping spools and the submerged volume in the bottom Zone 3 chambers and its nozzles show this volume to be 9.884L. Calculated volume of the top Zone 3 chambers, its U-tubes and nozzles when completely full is 17.204L. These calculations are provided in Appendix 9 . Corrosion deposits on the Tube sheet of Z3TI and Z3TO are most pronounced in these two Bonnet chambers and show a distinct horizontal transition, or corrosion produced 'tide mark', between the top and bottom row of U tubes (see Figures 6 and 7). As indicated in these figures, corrosive attack is more pronounced above this tide mark. Corrosion in the colder external piping where condensate has collected, and in the bottom Bonnet chambers, Z3BI and Z3BO where condensate has entered, is only superficial (see Figure 8). Note that the water in the upper Zone 3 chambers is at 68°C and contains concentrated dissolved solids, whereas the condensate is relatively pure and colder.

The calculated submerged volume for the residential water below the Z3TI and Z3TO 'tide mark' is 6.804L. Note that the sum of the Zone 3 top residual water plus the condensate is 16.688L (6.804 +9.884) is less than that calculated for the Zone 3 top chambers and nozzles when completely full.

These calculations reinforce the hypothesis that the Z3TI and Z3TO chambers were less than full of water when the heat exchanger was installed. The most probable source is the original hydrostatic test water reduced by movement of the heat exchanger between the hydrostatic test and completion of installation at the Rosebery site.

Note that the heat exchanger and its immediate piping are remote from the protected room Inergen gas delivery nozzles - ie the system 'vent'. Hence any loss of water vapour from the heat exchanger and immediate piping evaporation-condensation system would be by diffusion through 42 metres of piping before it branched into the room of Zone 3 distribution (through Inergen gas delivery nozzles) piping. The behaviour is thereby analogous to a closed evaporation-condensation system and diffusive loss of water vapour from the system would be negligible."

(Ex 10.023) 23 The incident and its consequences have left a multiplicity of claims. By its further amended summons presented on 26 June 2001 which is the subject of an application for leave to amend and which is dealt with in the separate reasons, Networks, Systems, Vision and Communications seek damages against Leighton, NDY and Tyco. NDY cross-claimed against Leighton, Tyco, WorkCover and EMAE in the first, second, tenth and eleventh cross-claims respectively. Leighton cross-claimed against NDY and Tyco in the third cross-claim and against EMAE and Lummus in the eighth cross-claim and against WorkCover in the twelfth cross-claim. Tyco brought clams against EMAE, NDY, Leighton, Lummus and WorkCover in the fourth cross-claim, against MEF in the seventh cross-claim and against EMAE, Lummus and WorkCover in the ninth cross-claim as assignee of MEF's cause of action. In the fifth cross-claim WorkCover brought an action against Leighton, NDY, Tyco, Lummus and EMAE. In the sixth cross-claim EMAE claimed against Leighton, NDY, Tyco, Lummus, WorkCover and MEF. The proceedings against Lummus have not been proceeded with. 24 In the principal proceedings Networks claims $7,423,071, Systems claims $19,903,526 (T5450.35), and Vision claims $18,167.00 together with interest. Networks claims damages against Leighton for breach of the Leighton contract, as incorporating the terms of the building agreement. The nature of the breaches were particularised in par 16 of the Contentions as follows: "16. The first plaintiff claims that the first defendant breached the above terms of the Agreement- Particulars of Breach (a) The first defendant failed or omitted to design and construct the Project in accordance with the Contract Documents or thoroughly, skilfully or diligently in that it allowed the heat exchange unit to be designed, constructed, tested and installed with the following faults and defects: (i) the partition plates within the heat exchange unit which were to isolate each of the four Inergen system zones from the other zones were not properly designed and would have failed at the design pressure and did fail in service on 3 January 1997;

(ii) the partition plate thickness complied with the minimum TEMA Standards of required thickness. However, as the permitted TEMA stress was 1.5 times the allowable pertinent pressure vessel code stress the plate thickness separating zones should have been, but were not, more than twice the minimum thickness as designed and constructed;

(iii) the heat exchange unit chambers included non-trivial, non-draining or non-venting zones in all chambers which was contrary to good engineering practice and introduced uncertainties, and a potential compromise of safety, in conducting hydrostatic testing; and

(iv) the heat exchange unit design pressure of 6mpa was unsafe; (b) The first defendant failed to arrange and co-ordinate the design and engineering of the System;

(c) The first defendant failed to arrange for material testing of the heat exchange unit as necessary in that: (i) in the testing of the heat exchange unit the first defendant failed to ensure that the heat exchange unit was thoroughly and properly drained of all water after testing; and

(ii) in contravention of clause 5.10.2.3 of AS 1210 1989 the first defendant failed to hydrostatically test each Inergen gas zone of the heat exchange unit when it should have; (d) The first defendant failed to exercise its duty of care to a standard normally expected of a design professional doing the work of the kind underhand. The design of the heat exchange unit was deficient in that: (i) the partition plates within the heat exchange unit which were to isolate each of the four Inergen system zones from the other zones were not properly designed and would have and did fail at the design pressure;

(ii) the partition plate thickness complied with the minimum TEMA Standards of required thickness. However, as the permitted TEMA stress was 1.5 times the allowable pertinent pressure vessel code stress the plate thickness separating zones should have been, but were not, more than twice the minimum thickness as designed and constructed; and

(iii) the heat exchange unit chambers included non-trivial, non-draining or non-venting zones in all chambers which was contrary to good engineering practice and introduced uncertainties, and a potential compromise of safety, in conducting hydrostatic testing; (e) The first defendant failed to design, construct, test and install a heat exchange unit which was suitable for the purpose and consistent with the nature, character and intended use of the works in that the heat exchange unit and associated pipework contained water where the heat exchange unit and associated pipework should have been totally free of water;

(f) The first defendant failed to plan, implement and manage an appropriate quality assurance management scheme for the execution of the works in that it failed to allow for the proper testing and draining of the heat exchange unit;

(g) The first defendant failed to comply with Australian Standard 1210-1989 in that it failed to: (i) ensure that provision was made for complete drainage (section 8.16); and

(ii) ensure that on completion of testing the heat exchange unit was cleaned and free from loose scale and other foreign matter (section 9.1)

(iii) perform the hydrostatic test in accordance with Australian Pressure Vessel Standard, AS 1210-1989 (section 5.10); (h) In conducting the hydrostatic test, water was introduced to the heat exchange unit. The first defendant failed to ensure that the water from the heat exchange unit and associated pipework was properly drained. The result of this failure was that on activation of the System on 3 January 1997 the released Inergen gas forced much of this water together with a rusty sludge mixture produced by corrosion caused by the presence of the water towards and through the Inergen gas piping to delivery nozzles in the Computer Data Centre and certain other areas of the Premises and further forced contaminated water into the switch and transmission room and the UPS room (i) The Works were not executed using the best practices of the relevant trades to a standard required of the Contract Documents and free of defects. The partition plates within the heat exchange unit, which should isolate each of the four Inergen system zones from the other zones, were not properly designed and would have and did fail at the design pressure;

(j) The materials incorporated into the Works by the first defendant were not suitable for the purpose and consistent with the nature, character and intended use of the works. The first defendant overlooked the need to provide plates of more than the minimum TEMA Standards required thickness. The plate thickness separating zones should have been more than twice the minimum 10mm thickness of the heat exchange unit;

(k) The heat exchange unit chambers included non-trivial, non-drained or non-venting zones in all chambers. This was contrary to good engineering practice and introduced uncertainties and a potential compromise of safety when conducting the hydrostatic test; and

(l) The finished product was not fit for its intended purpose.

(m) The first defendant failed to comply with AS3788-1990. AS3788-1990 is the Australian Standard relating to Boilers and pressure vessels - In-Service inspection. The first defendant failed to ensure that the heat exchanger was inspected on commissioning and in particular failed to check that no extraneous material was left in the heat exchanger, as required by AS3788-1990 and the first defendant failed to ensure that the heat exchanger was properly inspected after its first year of service and in particular failed to carry out an internal inspection of the heat exchanger as required by AS 3788- 1990.

(n) The first defendant failed to provide a suitable Operations and Maintenance manual for the heat exchange unit. The first defendant failed to include within the Operations and Maintenance manual a reference to the obligations imposed by AS3788-1990. The first defendant failed to recommend an internal inspection of the heat exchange unit after the first year of service as required by AS 3788-1990 or to ensure that the Operations and Maintenance Manual refer to AS3788-1990.

(o) The facts and matters particularised by the Second Defendant ("NDY") in paragraphs 11(a), (c), (d), (e), (f), (g), (h) and (i) in paragraph 11 of NDY's Amended First Cross-Claim, namely: (i) failing to properly supervise the design, construction and testing of the heat exchanger;

(ii) failing to require NDY to participate in the preparation of the heat exchanger specification;

(iii) failing to provide a copy of the heat exchanger specification to NDY;

(iv) failing to request or allow NDY to participate in the testing or installation of the heat exchanger;

(v) failing to act in response to NDY's qualified stamp consequent upon NDY's inspection of plans and documents in relation to the heat exchanger by way of request of further review by NDY;

(vi) accepting NDY's qualified stamp consequent upon NDY's inspection of plans and documents in relation to the heat exchanger;

(vii) failing to advise NDY of the date and place of the hydrostatic testing of the heat exchanger; and

(viii) failing to request NDY to attend the hydrostatic testing of the heat exchanger. " 25 The core problem was a failure to completely drain and thoroughly dry the tube side of the Heat Exchanger after hydrostatic testing: that is not intended to unduly minimise the allegations of under-design of the partition plates in the bonnet chambers. 26 The grossness of the breach may be gleaned from the fact that it was specified in the written specification of the MEF sub-contract that, prior to shipment each inlet of the Heat Exchanger was to be completely drained and thoroughly dried. A similar note was endorsed on the working drawings. This activity was not carried out. The probabilities are that no attempt was made to carry out that essential task. At the very best it may be conjectured that some perfunctory attempt may have been made, but that is highly unlikely. As it happened, the water lay there for some two and a quarter years before being ejected into zone 3 with some escape into zone 1. 27 An alternative basis of claim against Leighton is founded on s 52 of the Trade Practices Act 1974 in which Networks, Systems and Vision claim damages arising out of representations said to be incorporated in Leighton's certification of 21 August 1995 that the project had achieved completion in accordance with the "Contract Documents" on 21 August 1995. It was contended that Networks, Systems and Vision relied upon those representations and "operated the [Rosebery centre] and their equipment" on the basis that the system had been properly installed. 28 A companion cause of action is brought by Networks, Systems and Vision, in tort, on the basis that the alleged representations were negligently made. 29 Systems also brings an action in negligence against Leighton for breach of a duty of care in relation to: "(a) installation, testing, commissioning and maintenance of the System in the computer areas of the Premises; and

(b) preparation and issue of the Operation and Maintenance Manual for Building Services: Fire." 30 The circumstances said to give rise to the duty of care were set out in the contentions as follows: "39. The duty of care arises by reason of the fact that it was reasonably foreseeable that a breach by the first defendant of its obligations under the Agreement and the Contract Documents would result in damage to the Premises and to equipment situate [sic] in the computer data centre and the owners and users of such equipment would thereby sustain loss and damage. Moreover, the duty of care arises by reason of the proximity of the relationship between the second plaintiff and the first defendant." 31 The breaches relied upon are those particularised under the contract count. 32 The nature of the relationship between Systems and Leighton was particularised in the Contentions as follows: "34. At all material times the second plaintiff owned and had installed equipment in the computer data centre situate [sic] in the Premises and operated such equipment for the purposes of its operations and business.

…… 35. The first defendant knew that the System was to be installed in the Premises from where Optus was conducting its telecommunications business. Particulars (a) the work was of a retrofit nature that would be conducted in a "live building" environment. A work permit detailing a concise method statement was required to be submitted to the second defendant and in turn agreed with Optus before commencement of the works in any given area, or any given work activity;

(b) work permits were required to ensure that the working equipment in the rooms in which work was being undertaken would not be affected; and

(c) discussion occurred in August 1993 in relation to the working equipment which might be affected by the installation of the System. 36. On 24 November 1993 the criticality of the Sydney Technical Centre to the second plaintiff's network, as well as the need for site protection and the nature of the equipment situate in the Premises was made clear to the first defendant.

37. At a meeting on 7 April 1994, representatives of the first defendant were warned that water being introduced into the computer data centre and the switch and transmission room was totally abhorrent to the second plaintiff.

37A. On 18 August 1994 the heat exchanger was delivered to the site and was subsequently installed and placed into service." 33 Vision relies upon a like cause of action in negligence against Leighton. 34 Networks also brought an action in negligence against NDY. The relationship between Networks and NDY which was said to give rise to a duty of care was particularised in the Contentions as stemming from NDY's obligations under either the 1993 or 1994 consultant agreement (it is not specified which): the preparation of a technical specification for the system which included a requirement, in effect, that should Tyco's subcontract include the provision of a heat exchanger it was to be designed in accordance with the requirements of AS 1210-89 an Australian Standard relating to "Unfired Pressure Vessels Code": NDY knew that the system was to be installed at the Rosebery centre where the telecommunication business of Optus was being conducted in circumstances as particularised in the negligence action by Systems against Leighton as quoted above and the fact that NDY "reviewed and commented on drafts of the Operation and Maintenance Manual" which pertained to the Heat Exchanger. 35 The duty of care alleged was expressed by Networks as follows: "68. The first plaintiff contends that the second defendant owed it a duty to take reasonable care in the provision of engineering services related to the design, specification, construction, installation, testing and commissioning (including the provision of suitable maintenance manuals) of the System, and the heat exchange unit, to be installed by the first defendant at the Premises including the commissioning of the heat exchange unit and the checking of the suitability, content and accuracy of the Operation and Maintenance Manual prepared by the first defendant." 36 The particulars of negligence relied upon were contended as follows: "The second defendant was negligent in the performance of the engineering services in that it failed to: (a) review or properly review the drawing of the heat exchange unit which identified and detailed the partition plates;

(b) properly check that the partition plates as depicted on the drawings of the heat exchange unit referred to in its amended specification as pleaded in paragraph 5 66 were properly designed;

(c) ascertain that partition plates within the aforesaid heat exchange unit which it had specified as pleaded in paragraph 5 66 would have failed at the design pressure;

(d) object to the design of the heat exchange unit including, contrary to section 8.16 of AS1210-1989, non-trivial, non-draining or non-venting zones in all chambers. This failure was contrary to good engineering practice and introduced uncertainties and a potential compromise of safety when conducting hydrostatic testing of the heat exchange unit;

(e) specify, direct or ensure that water placed in the heating exchange unit chambers for the purpose of hydrostatic testing be removed or drained before the heat exchange unit was installed and commissioned for use at the Premises;

(f) ensure that the design of the heat exchange unit was in accordance with AS1210-1989;

(g) attend the hydrostatic testing and ensure that the requirements of AS 1210-1989 and the manufacturer's requirement to drain and dry the heat exchange unit after hydrotesting were complied with;

( h) ensure that the specification (Ref A1317), the subsequent addenda (ref AD1-1, ADD-49, ADD-84, ADD-88, ADD-90) and the first plaintiff's requirements were complied with and negligently issued the certificate dated 18 August 1995;

(i) object to the heat exchange unit's design pressure of 6 MPa when that design pressure was unsafe; and

(j) ensure that as required by AS 1210-1989, clause 5.10.2.3 each Inergen gas zone of the heat exchange unit was hydrostatically tested.

(k) check the suitability, content and accuracy of the Operations and Maintenance Manual. The second defendant failed to advise the plaintiffs of the existence of AS3788-1990 or its requirements in relation to the heat exchange unit. The second defendant failed to recommend the internal inspection of the heat exchange unit after the first year of service or to require that the Operations and Maintenance Manual be amended to refer to AS3788-1990;

(l) failed to ensure that the heat exchanger was inspected on commissioning, and in particular failed to ensure that no extraneous material was left in the heat exchanger, as required by AS3788-1990;

(m) failed to identify the omission of a heat exchanger thermal test procedure and a pipe system purge procedure as referred to in the Tyco work method statement; and

(n) failed to take steps to enable NDY to know that the Inergen System in fact complied with Australian Standards, the Specifications and the requirements of Optus." 37 Alternative causes of action under the Trade Practices Act 1974 and in negligence were brought by Networks, Systems and Vision against NDY, as in the representation case against Leighton, based upon NDY's certification of 18 August 1995, as to the compliance of the system with specification and the requirements of Networks and Communications. 38 Systems and Vision also brought proceedings in negligence against NDY in the form of a companion cause of action to that raised against NDY by Networks. 39 Networks' claim in damages against Tyco relied upon a relationship arising out of the obligations of Tyco under the Tyco subcontract: the knowledge of Tyco that the system was to be installed in the Rosebery centre where Optus conducted its telecommunications business as particularised in the negligence actions against NDY: knowledge of the "criticality" of the Rosebery centre and its equipment to the Optus Network and in particular that the introduction of water into the equipment areas was "totally abhorrent to Optus": knowledge that Tyco's work related to interests of the "Optus Group": the preparation by Tyco of a specification for the Heat Exchanger in April 1994 that required it to be manufactured in accordance with Australian standards, in particular AS 1210-1989, and that "each item of equipment was to be "completely drained and thoroughly dried so that no moisture remained in any part of the heat exchange unit": the subcontracting of the manufacture of the heat exchange unit: the preparation in 1994 and 1995 of an Operation and Maintenance Manual, which it provided in draft form to Leighton in September 1994 and between June and August 1995, and the provision of a certificate on 4 August 1995 as to the compliance of the system with Australian Standard 4214 and the requirements of the NDY drawings and specifications. 40 The particulars of negligence relied upon by Networks were stated in the Contentions as follows: "132. In breach of its duty of care to the first plaintiff the third defendant designed, manufactured, supplied, installed, tested and commissioned the System and prepared the Operation and Maintenance Manual in a negligent fashion. Particulars of Negligence (a) The third defendant failed to ensure that the provisions of its specification were complied with in that it failed to: (i) comply with AS1210-1989 as no provision was made for the complete drainage of the unit as required by section 8.16 of AS1210-1989 in that the heat exchange unit was designed to include non-trivial, non-draining or non-venting zones in all chambers of the unit;

(ii) comply with AS1210-1989 as the heat exchange unit was not completely cleaned before despatch as required by section 9.1 of AS 1201-1989;

(iii) design the heat exchange unit for the most severe coincident conditions of pressure as the rise in pressure which occurred after activation of the System caused 3 or 4 partition plates within the unit to deform and rupture;

(iv) comply with section 5.10 of AS1210-1989 in conducting the hydrotest;

(v) ensure that the heat exchange unit was completely drained and thoroughly dried so that no moisture remained before shipment; and

(vi) ensure compliance with note 5 on its sub-contractor's as-built drawing No. 94-1167 Rev 1. (b) The third defendant failed properly to design the partition plates within the heat exchange unit;

(c) The third defendant failed to ascertain that partition plates within the heat exchange unit would have failed at the design pressure;

(d) The third defendant failed properly to design the heat exchange unit as the design of the heat exchange unit included non-trivial, non-draining or non-venting zones in all chambers of the unit;

(e) In performing the third defendant's works the third defendant failed to ensure that heat exchange manufacturer's requirement that the heat exchange unit be drained and dried after hydrotesting was complied with; (f) The third defendant failed to ensure that its subcontractor complied with the third defendant's specification;

(g) The third defendant supplied, delivered and installed a defective heat exchange unit and associated pipework in that: (i) the unit was incorrectly designed as it failed to provide for complete drainage;

(ii) the unit did not have a proper system for drainage;

(iv) the unit contained water which it should have not contained; (h) the third defendant designed the heat exchange unit with a design pressure of 6 Mpa when that design pressure was unsafe;

(i) the third defendant certified that it had installed the System in accordance with AS 4214 Part 2 when the provisions of AS 4214 Part 2 had not been complied with; and

(j) the third defendant failed to ensure that each of the Inergen gas zones of the heat exchange unit was hydrostatically tested, when it should have. (k) the third defendant failed to provide a suitable maintenance manual for the heat exchange unit. The third defendant failed to require that the Operation and Maintenance Manual be amended to refer to AS 3788-1990. The third defendant failed to recommend an internal inspection of the heat exchange unit after the first year of service as required by AS 3788-1990, or to amend the Operations and Maintenance manual to refer to AS 3788-1990; and

(l) failed to ensure that the heat exchanger was inspected on commissioning, and in particular failed to ensure that no extraneous material was left in the heat exchanger, as required by AS 3788-1990 and failed to ensure that the heat exchanger was properly inspected after its first year of service, and in particular, failed to carry out an internal inspection of the heat exchanger required by AS 3788-1990.

(m) The facts and matters particularised by the Second Defendant ("NDY") in paragraphs 13(a), (b), (c) and (d) of NDY's Amended Second Cross-Claim, namely: (i) the third defendant's ("Tyco") failure to forward a copy of the heat exchanger specification to NDY;

(ii) Tyco's failure to notify NDY of the time and place of the hydrostatic testing of the heat exchanger;

(iii) Tyco's failure to attend the hydrostatic testing of the heat exchanger; and

(iv) Tyco's failure to ensure that there should have been a hold point in its subcontractor's inspection and test plan in relation to draining and drying. " 41 In addition Networks, Systems and Vision made claims under the Trade Practices Act 1974 and in negligence against Tyco in similar terms to the representation case which had been brought by them against NDY, relying upon a Notice of Completion given by Tyco on 4 August 1995 certifying completion in accordance with AS 4214 and compliance of the Inergen system with NDY's drawings and specifications. 42 Systems and Vision also brought proceedings in negligence against Tyco based upon breach of a duty of care alleged to have arisen out a relationship much the same as that alleged by Networks against Tyco. The claim for damages by Communications has not been pursued. 43 Further causes of action in breach of contract and in negligence, in the case of Leighton, and in negligence against Tyco relating to the alleged presence of gypsum dust contamination within the Rosebery centre were the subject of leave to amend in terms of par 178 of the proposed amendment. For reasons which are stated in the separate reasons, that application has been rejected. 44 In relation to the various defences raised by Leighton, NDY and Tyco, the following is indicative only of the nature of those defences, leaving particular consideration to the issues so raised in addressing the matters raised in final addresses by the parties. Leighton admitted the Leighton agreement and denied breach and liability under the Trade Practices Act 1974 cause of action which was asserted to be time barred: denied knowledge of corporations within the Optus Group: denied owing a duty of care in tort outside of its duty of care to Networks under the Leighton contract and raised an issue of contributory negligence, particularised as follows: "60. Further, in answer to so much of the claim against Leighton which is based on the tort of negligence, Leighton says that any loss or damage suffered was contributed to or caused by the negligence of the Plaintiffs.

(a) Mr Dodds did not properly commission the System.

(b) the presence of water was not detected by the Plaintiffs.

(c) the Plaintiffs did not reactivate the air-conditioning system to affected areas,

(d) the Plaintiffs failed to allow proper commission testing of the Inergen system

(e) the Plaintiffs failed to provide adequate procedures and safeguards to ensure that water was not introduced to the Inergen system following installation.

(f) the Plaintiffs failed to detect or put into place any adequate procedures for detecting the presence of water in the Inergen system.

(g) the Plaintiffs failed to test the Inergen system after its installation at the premises.

(h) the Plaintiffs failed to reactivate the air-conditioning system in zone 3 of the premises immediately after discharge of the system.

(i) the Plaintiffs failed to maintain prudent or any backup of the computer equipment located in zone 3 of the premises on the applications operated on that equipment. " 45 NDY denied any liability in negligence or under the Trade Practices Act. It too raised an issue of contributory negligence, particularised in much the same terms as were particularised by Leighton in respect of that issue. 46 Tyco by its further amended defence denied liability in negligence or under the Trade Practices Act and by amended pars 23 and 30 pleaded a defence in the following terms: " Tyco… further says 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. " 47 That further amended defence was filed in court on 25 October 2001 in circumstances that are dealt with in separate reasons. Tyco also relied upon the defence of contributory negligence in terms similar to those relied upon in the defence of Leighton and NDY with the additional contention namely: "(c) The plaintiffs decided to clean or replace the computer equipment in the Computer Data Centre and the EFTPOS/TANDEM room without undertaking proper investigations to determine whether or not there was a need for that cleaning or replacement.

The investigations are those referred to in paragraphs 22-26 of the report of Paul Lunsmann dated 22 July 1999." 48 By the amended first cross-claim NDY seeks contribution from Leighton under s 5(1)(c) Law Reform (Miscellaneous Provisions) Act 1946 (LRMP Act). In addition NDY brought a claim in negligence particularised as follows: " 11. The cause of any such loss and damage suffered by NDY is the negligence of Leighton. PARTICULARS OF NEGLIGENCE (a) failing to properly supervise the design, construction and testing of the heat exchanger,

(b) allowing the Third Defendant to have sole control of the design, specification, manufacture and installation of the heat exchanger (save only for the qualified review required of NDY in paragraph (f) below);

(c) failing to require NDY to participate in the preparation of the heat exchanger specification;

(d) Failing to provide a copy of the heat exchanger specification to NDY;

(e) failing to request or allow NDY to participate in the testing or installation of the heat exchanger;

(f) failing to act in response to NDY's qualified stamp consequent upon NDY's inspection of plans and documents in relation to the heat exchanger by way of request of further review by NDY;

(g) accepting NDY's qualified stamp consequent upon NDY's inspection of plans and documents in relation to the heat exchanger;

(h) failing to advise NDY of the date and place of the hydrostatic testing of the heat exchanger;

(i) failing to request NDY to attend the hydrostatic testing of the heat exchanger." 49 In its defence to the first cross-claim Leighton denied any liability and in the alternative raised a claim of contributory negligence particularised as follows: " (a) failing to properly advise upon and review the design construction, commissioning and installation of the Inergen gas fire system, including the heat exchanger ("the Project");

(b) failing to participate in the preparation of the heat exchanger specification;

(c) failing to request a copy of the heat exchanger specification;

(d) failing to participate or request to participate in the testing or installation of the heat exchanger; and (e) failing to attend or request to attend the hydrostatic testing of the heat exchanger. " 50 In the second amended cross-claim NDY also brought a claim for statutory contribution under the LRMP Act and a claim in negligence against Tyco particularised as follows: " 13. The cause of any such loss and damage suffered by NDY is the negligence of Tyco. PARTICULARS OF NEGLIGENCE (a) Tyco's failure to forward a copy of the heat exchanger specification to NDY.

(b) Tyco's failure to notify NDY of the time and place of the hydrostatic testing of the heat exchanger.

(c) Tyco's failure to attend the hydrostatic testing of the heat exchanger.

(d) Tyco's failure to devise or follow adequate quality assurance procedures.

(e) Tyco's certification of the heat exchanger on 4 August 1995. " 51 Tyco denied those allegations. 52 In the third further amended cross-claim Leighton claimed damages (particularised as the legal costs of these proceedings together with any damages for which it was found liable to Optus) in contract and in tort against each of NDY and Tyco: statutory contribution from both in respect of any damages for which it was found liable to Optus: indemnification in respect of such damages under contractual indemnities given in the Tyco sub-contract: contribution from both "under an obligation at law and/or equity" in respect of any liability Leighton may be found to have under the first cross-claim (by NDY), the fourth (by Tyco) the fifth (by WorkCover) and the sixth (by EMAE). I have treated that claim as one claiming equitable and statutory contribution. It has not been necessary to examine the circularity of those claims. 53 The contractual breaches alleged against NDY were in terms of the 1994 consultant agreement as follows: "24. In breach of the Consultant Agreement NDY failed to: 1. provide services pursuant to the Consultant Agreement in a proper, thorough, skilful and professional manner;

2. ensure the adequacy of its services and make whatever further enquiries necessary to satisfy this obligation;

3. review services, design development drawings and other documentation against the requirements of the brief and to revise documentation to ensure compliance;

4. regularly inspect the Project works during construction and observe critical tasks as they were executed to establish that the work was being constructed in compliance with all Project service requirements." 54 The particulars of negligence alleged by Leighton were as follows: "26. In breach of its duty to Leighton, NDY failed to exercise all due skill and care in carrying out its obligations under the Consultant Agreement. Particulars

NDY failed to: i. ensure that the partition plates in the heat exchange unit did not fail at design pressure;

ii. ensure that the heat exchange unit complied with AS1210-89, and in particular, clause 8.16 of that standard by not including non-trivial, non-draining or on-venting (sic) zones in all chambers;

iii. ensure that water placed in the heating exchange unit chambers for the purposes of hydrostatic testing be removed or drained before the heat exchange unit was installed and commissioned for use at the Premises; iv. ensure that clause 5.10.2.3. of AS1210-89 was complied with by ensuring that each Inergen gas zone of the heat exchange unit was hydrostatically tested. NDY issued the certificate dated 18 August 1995 when AS1210-1989 had not been complied with; v. check the suitability content and accuracy of the Operations and Maintenance Manual. NDY failed to advise Leighton of the existence of AS 3788-1990 or its requirements in relation to the heat exchanger unit. NDY failed to recommend the internal inspection of the heat exchange unit after the first year of service or to require the Operations and Maintenance Manual be amended to refer to AS3788-1990.

vi. ensure that the heat exchanger was inspected on commissioning and in particular by AS3788-1990;

vii. identify the omission of a heat exchanger thermal test procedure and a pipe system purge procedure as referred to in the Tyco work method statement; and viii. take steps to know that the Inergen system in fact complied with Australian Standards, the Specifications and the requirements of Optus. " 55 Leighton claimed in contract against Tyco under the Tyco subcontract and in negligence in carrying out its obligations under that subcontract. The particulars of breach relied upon were as follows: "46. In breach of the Subcontract Tyco failed to:

Particulars i. No provision was made for the complete drainage of the heat exchange unit as required by clause 8.16 in that the unit included non-trivial, non-draining or non-venting zones in all chambers of the unit;

ii the heat exchange unit was not completely cleaned before despatch as required by clause 9.1;

iii the heat exchange unit was not completely drained and thoroughly dried so that no moisture remained in it before despatch as required by clause 5.10;

iv each Inergen gas zone of the heat exchange unit was not hydrostatically tested as required by clause 5.10.2.3; b. ensure that the System was fit for the purpose for which it was intended; Particulars

The System did not protect the equipment in the Premises from damage when activated but rather exposed it to damage. Leighton refers to paragraphs 19 and 20 above. c. ensure that the System released only clean Inergen gas and not water when activated; Particulars

When activated the System released water. Leighton refers to the matters contained in paragraph 19 above. d. Comply with Australian Standard AS3788-1990: (i) no provision was made for inspection upon commissioning of the heat exchanger ;

(ii) no provision was made to ensure that no extraneous material was left in the heat exchanger ;

(iii) no provision was made to ensure that the heat exchanger was properly inspected after its first year of service ;

(iv) no internal inspection of the heat exchanger was carried out; and

(v) no recommendation was made to Leighton for an internal inspection of the heat exchanger after the first year of service. e. provide to Leighton suitable maintenance manuals and operating instructions for the heat exchange unit : (i) Tyco failed to require that the Operations and Maintenance Manual be amended to refer to AS3788-1990; and

(ii) Tyco failed to recommend the Operations and Maintenance Manual be amended to require an internal inspection of the heat exchanger after the first year of service as required by AS3788-1990 . 47. In breach of its duty to Leighton Tyco failed to exercise all due skill and care in carrying out its obligations under the Subcontract.

Tyco was negligent in that: i. no provision was made for the complete drainage of the heat exchange unit in that the heat exchange unit included non-trivial, non-draining or non-venting zones in all chambers of the unit;

ii. the heat exchange unit was not completely cleaned before despatch;

iii. the heat exchange unit was not completely drained and thoroughly dried so that no water remained in it before despatch;

iv. each Inergen gas zone of the heat exchange unit was not hydrostatically tested;

v. failed to ensure that the partition plates in the chambers of the heat exchange unit did not rupture under pressure when the System was activated.

vi. failed to provide a suitable Operations and Maintenance Manual in that Tyco failed to require the Manual to be amended to refer to AS3788-1990;

vii. failed to ensure that no extraneous material was left in the heat exchanger as required by AS3788-1990 ;

viii. failed to carry out an internal inspection of the heat exchanger as required by AS3788-1990; and

ix. failed to ensure that the heat exchanger was properly inspected after its first year of service as required by AS3788-1990." 56 By its defence NDY denied any liability to Leighton and relied upon its particulars of negligence against Leighton in the first cross-claim as founding a defence of contributory negligence. 57 By its defence Tyco denied liability and raised an issue of subrogation in the following terms: "25. Tyco denies the allegations in paragraph C56, and further says that in the event that Tyco is held to be liable to Leighton pursuant to one or more of clauses 8.5(b), 10.2 or 16.2 of the Sub-Contract, Tyco is entitled to be subrogated to any claims that Leighton may have against any third parties in respect of any losses that Leighton is able to recover from Tyco pursuant to one of more (sic) of the aforementioned clauses, including the claims Leighton has brought against NDY in its Amended Third Cross Claim and against EMAE in its Amended Eighth Cross Claim. " 58 By the further amended fourth cross-claim Tyco brought proceedings against EMAE, NDY, Leighton and WorkCover. 59 Tyco's claim against EMAE in negligence was based on an alleged duty of care: "(a) to carry out the mechanical design with due professional skill and care and in accordance with good engineering practice;

(b) to ensure that the heat exchanger, when fabricated in accordance with the mechanical design, would be suitable and safe for the purpose for which it was intended namely, for incorporation in a gas flooding fire suppression system at the premises; and

(c) where an aspect of the design involved uncommon features or features necessitating special precautions, it warn MEF, Tyco, Leightons and Optus as to those features and the precautions necessary." 60 The duty of care was said to arise out of EMAE's obligations as mechanical designer of the Heat Exchanger, of its expertise in that regard, of its knowledge that the Heat Exchanger was required by Tyco pursuant to the Tyco subcontract, of the reliance by Tyco, Leighton and Optus upon EMAE's expertise and EMAE's knowledge of the consequences of the failure to carry out the design with due professional skill and care. The particulars of breach alleged were as follows: "42. In breach of its duty of care to Tyco, Leightons and Optus, EMAE: (a) did not carry out the mechanical design with due professional skill and care and in accordance with good engineering practice;

(b) did not ensure that the heat exchanger, when fabricated in accordance with the mechanical design, would be suitable and safe for the purpose for which it was intended;

(c) failed to warn MEF, Tyco, Leightons or Optus of the need to take special precautions following hydrostatic testing of the heat exchanger to ensure that all water was drained from the gas side of the heat exchanger;

(d) failed to warn MEF that the separate chambers in the heat exchanger necessitated separate hydrostatic testing; and

(e) failed to ensure that the partition plates between the zones in the bonnet of the heat exchanger were of adequate thickness given the design pressure." 61 The damages sought from EMAE were the legal costs of the proceedings and the amount of any judgment against Tyco in favour of Optus, NDY or Leighton. In addition Tyco sought contribution pursuant to the LRMP Act and contribution under EMAE's "obligation at law and/or equity to contribute to any liability Tyco may be found to have under the Amended Summons, Second Cross-claim (by NDY), Amended Third Cross-claim (by Leighton) and Amended Fifth Cross-claim (by WorkCover)." 62 Tyco also contended it was entitled to be subrogated to any claims that Leighton may have against EMAE "in the event that Tyco is held to be liable to Leighton pursuant to one or more of clauses 8.5(b), 10.2 or 16.2 of the (Tyco) Subcontract". 63 The claim against NDY was based on an alleged duty of care of NDY "to use due professional skill and care to ensure the Heat Exchanger was suitable and safe for incorporation in [the system]". The basis of that alleged duty of care was expressed to lie in the expertise in NDY in the provision of engineering services and the terms of the 1997 consultant agreement together with NDY's knowledge of the circumstances under which the Heat Exchanger was being supplied to Optus. 64 The breaches relied upon were as follows: "53. In breach of its duty of care to Tyco, Leightons and Optus, NDY: (a) failed to ensure that the design, fabrication and testing of the heat exchanger accorded with good engineering practice, the Heat Exchanger Specification, the Unfired Pressure Vessels Standard, the Quality Standard and the Boiler and Pressure Vessels Regulations;

(b) approved the design of the heat exchanger and failed to warn MEF, Tyco, Leightons or Optus of the need for special precautions to ensure that all water was drained from the gas side of the heat exchanger following hydrostatic testing;

(c) approved the design of the heat exchanger when the partition plates in the bonnet of the heat exchanger were not of adequate thickness given the design pressure;

(d) failed to ensure that each pressure chamber of the heat exchanger was hydrostatically tested separately and without pressure in the adjacent chamber;

(e) failed to ensure that following the hydrostatic testing, the gas side of the heat exchanger was completely drained; and

(f) failed to ensure that the Inergen system was commissioned upon installation at the premises and in accordance with product commissioning practice.

(g) failed to ensure that the mechanical designer, the manufacturer of the heat exchanger and the regulatory authority understood the nature of the heat exchanger with independently operating zones; and

( h) failed to ensure that an internal inspection of the bonnet on the heat exchanger was undertaken following the hydrostatic testing ." 65 The damages claimed were particularised as the legal costs of the proceedings and the amount of any judgment awarded against Tyco in favour of Optus, NDY and Leighton. The inclusion of NDY in those particulars of damage appears to be inadvertent. 66 Tyco sought contribution under the LRMP Act: contribution under an alleged obligation of NDY "at law and/or equity" to contribute to any liability Tyco may be found to have in the principal proceedings and under the third, fifth or sixth cross-claims by Leighton, WorkCover and EMAE respectively. Tyco also claimed it was entitled to be subrogated in respect of any claims that Leighton may have against NDY as follows: " 60B. In the event that Tyco is held to be liable to Leighton pursuant to one or more of clauses 8.5(b), 10.2 or 16.2 of the Sub-Contract between Leighton and Tyco, Tyco is entitled to be subrogated to any claims that Leighton may have against NDY in respect of any loses that Leighton is able to recover from Tyco pursuant to one or more of the aforementioned clauses ." 67 As against Leighton, in addition to a claim contribution under the LRMP Act, Tyco sought relief in the following terms: " 63A. In the event that Tyco is held to be liable to Leighton pursuant to one or more of clauses 8.5(b), 10.2 or 16.2 of the Sub-Contract between Leighton and Tyco, Tyco is entitled to be subrogated to any claims that Leighton may have against any third parties in respect of any losses that Leighton is able to recover from Tyco pursuant to one or more of the aforementioned clauses, including the claims Leighton has brought against NDY in its Amended Third Cross Claim, and against EMAE in its Amended Eighth Cross Claim and any claims that Leighton may have against WorkCover. 63B. Tyco seeks a declaration that upon Tyco paying to Leighton whatever, if any, amount Tyco is held liable to pay to Leighton pursuant to one or more of clauses 8.5(b), 10.2 or 16.2 of the Sub-Contract, the obligation, if any, of any third party to pay Leighton any amount pursuant to claims that Leighton may have against any third party, is to be discharged by making payment of that amount to Tyco." 68 Tyco's claim against WorkCover included a claim for breach of statutory duty arising out of WorkCover's role as Inspecting Authority in respect of pressure vessels, in particular, a statutory duty: "(a) to ensure that the heat exchanger complied with: (i) the requirements of the Boiler and Pressure Vessel Regulations in respect of design; and

(ii) the conditions prescribed by the Boiler and Pressure Vessel Regulations in respect of construction and fitting; (b) to ensure the heat exchanger was of good construction, sound material, adequate strength, free from patent defect and suitable and safe for the purpose for which it was intended namely, for incorporation in a gas flooding fire suppression system at the premises; and

(c) to ensure the heat exchanger in its design, testing and fabrication complied with the Unfired Pressure Vessels Standard and / or the Quality Standard." 69 Breaches of that alleged duty were particularised as follows: "(a) it approved the design of the heat exchanger which contained areas on the gas side of the heat exchanger which were not self draining without warning MEF, Tyco, Leightons or Optus of the need for special precautions following hydrostatic testing of the heat exchanger to ensure that all water was drained from the gas side of the heat exchanger; Particulars

Letter dated 3 August 1994 from WorkCover to MEF. (b) it certified the hydrostatic testing of the heat exchanger as being in accordance with the Unfired Pressure Vessel Standard when MEF had failed to test each pressure chamber of the heat exchanger separately and without pressure in the adjacent chambers; Particulars (i) hydrostatic test certificate dated 18 August 1994; and

(ii) the marking applied to the heat exchanger on 18 August 1994; (c) it approved the design of the heat exchanger despite the fact that the partition plates in the bonnet of the heat exchanger were not of adequate thickness given the design pressure; Particulars (i) letter dated 3 August 1994 from WorkCover to MEF; and

(ii) manufacturer's data report dated 18 August 1994. (d) It gave final approval in respect of the fabrication of the heat exchanger despite the matters referred to at (a), (b) and (c) above.

Particulars (i) the manufacturer's report dated 18 August 1994; and

(ii) the marking applied to the heat exchanger on 18 August 1994." 70 It was contended that as a consequence of that breach of duty, the Heat Exchanger was not completely drained of water on the bonnet side, following testing and was fabricated with inadequately designed partition plates. 71 A second claim in negligence was brought by Tyco against WorkCover based on an alleged duty of care of WorkCover to use due skill in "reviewing and approving the design, construction, testing and inspection of the Heat Exchanger and to ensure that it complied with relevant regulations and standards and good engineering practice." Particulars of that practice were given in the following terms: "(i) if the tubesheet and flange layouts did not accord with good engineering practice, to refuse approval of the design and otherwise to warn MEF, Tyco, Leightons and Optus that the tubesheet and flange layouts were such that the gas side of the heat exchanger was not self draining and that special precautions were required after hydrostatic testing to ensure all water was drained from the heat exchanger;

(ii) to warn that as the heat exchanger had separate pressure chambers that each pressure chamber had to be hydrostatically tested separately and without pressure in the adjacent chambers; and

(iii) if each pressure chamber of the heat exchanger was not tested separately and without pressure in the adjacent chambers to refuse to certify that the heat exchanger had been satisfactorily hydrostatically tested." 72 The duty of care was said to arise out of WorkCover's role as the Inspecting Authority and the terms of the relevant regulations and quality standards, together with WorkCover's knowledge of the proposed use of the Heat Exchanger by Tyco. It was alleged that WorkCover breached that duty in the following respects: "(a) it failed to ensure that the design, fabrication and testing of the heat exchanger accorded with good engineering practice, the Heat Exchanger Specification, the Unfired Pressure Vessels Standard, the Quality Standard and the Boiler and Pressure Vessels Regulations;

(b) it approved the design of the heat exchanger and failed to warn MEF, Tyco, Leightons or Optus of the need for special precautions to ensure that all water was drained from the gas side of the heat exchanger following hydrostatic testing; Particulars

Letter dated 3 August 1994 from Workcover to MEF. (c) it failed to ensure that each pressure chamber of the heat exchanger was hydrostatically tested separately and without pressure in the adjacent chamber; Particulars (i) hydrostatic test certificate dated 18 August 1994; and

(ii) the marking applied to the heat exchanger on 18 August 1994; (d) it approved the design of the heat exchanger when the partition plates in the bonnet of the heat exchanger were not of adequate thickness given the design pressure; Particulars (i) letter dated 3 August 1994 from WorkCover to MEF; and

(ii) manufacturer's data report dated 18 August 1994; (e) it gave final approval in respect of the fabrication of the heat exchanger despite the matters referred to at (a), (b), (c) and (d) above. Particulars (i) the manufacturer's data report dated 18 August 1994; and

(ii) the marking applied to the heat exchanger on 18 August 1994. (f) it failed to query the nature of the heat exchanger given the manner in which the manufacturer must have set up the heat exchanger for the hydrostatic testing. (g) it failed to ensure that the internal inspections of the bonnet of the heat exchanger were undertaken following the hydrostatic testing; and

(h) it failed to question the manufacturer in respect of the proposed draining of the heat exchanger following the hydrostatic testing in the circumstances which occurred ." 73 The damages claimed included the amount of any judgment against Tyco in favour of Optus, NDY or Leighton. Statutory contribution was sought in addition to equitable contribution and a right of subrogation as claimed against EMAE and NDY. 74 By its defence, EMAE asserted that it carried out the mechanical design of the Heat Exchanger in accordance with instructions given to it by MEF or Lummus: denied that it owed a duty of care to any party other than MEF and further asserted as follows: "11. In answer to paragraph 39 42 of the Further Amended Fourth Cross Claim, EMAE:

(a) says it carried out the mechanical design of the heat exchanger in accordance with the Instructions;

(b) says that the Instructions given to EMAE were given on the basis that the design was "very urgent";

(c) says that the Instructions included little information as to the purpose for which the heat exchanger was intended; (d) says that the Instructions did not specify that the heat exchanger would be required to operate without pressure in adjacent chambers;

(e) says that the Design Drawing included the following note:

(f) " 5. After hydrotest, thoroughly drain and dry…" (g) says that the absence of self draining drains or nozzles in the gas side of the heat exchanger was known to and approved by …[MEF];

(h) otherwise denies the matters alleged in paragraph C 39 . 42." 75 EMAE denied that Tyco was entitled to the relief claimed and asserted that "if Tyco… suffered any loss and damage… then such loss and damage was caused … by the negligence of Tyco…" 76 NDY's defence was, essentially, one denying the allegations against it and asserting a claim of contributory negligence in the following terms: " 17. In further answer to paragraphs C50 to C60 inclusive (ie the paragraphs containing Tyco's Cross Claim against NDY), NDY says that any loss or damage suffered by Tyco was caused or contributed to by the negligence of Tyco. Particulars of Negligence (a) Tyco's failure to forward a copy of the heat exchanger specification to NDY.

(b) Tyco's failure to notify NDY of the time and place of the hydrostatic testing of the heat exchanger.

(c) Tyco's failure to attend the hydrostatic testing of the heat exchanger.

(d) Tyco's failure to devise or follow adequate quality assurance procedures. (e) Tyco's certification of the heat exchanger on 4 August 1995. " 77 Leighton, in its defence, relied upon the allegations raised by it against Tyco under the third cross-claim. 78 By its defence, WorkCover admitted the particular operation of specified regulations and standards: the role of the Inspecting Authority under those provisions: its approval of the design subject to specified conditions - a design which contained a provision that "after hydro test thoroughly drain and dry": hydrostatic testing of the Heat Exchanger took place in the presence of WorkCover which was satisfied with that test and admitted that it did not warn any of Tyco, Leighton or Optus "of any need for specific precautions following hydrostatic testing of the Heat Exchanger to ensure that all water was drained from the gas side of the Heat Exchanger". Otherwise, WorkCover denied the allegations against it and raised an allegation of contributory negligence, relying upon the allegations in the cross-claims of Optus and Leighton against Tyco. 79 By the amended fifth cross-claim WorkCover sought relief against Leighton, NDY, Tyco and EMAE in the form of statutory contribution in respect of any liability "to any party in [the] proceedings to which all or any of the Cross Defendants [were] also liable". Leighton denied any liability in contribution as did NDY. Tyco denied any liability on the basis that the contribution was claimed as a statutory contribution. EMAE also denied liability to contribute and alleged that any loss or damage suffered by WorkCover was the consequence of its own negligence. 80 Under the further amended sixth cross-claim, EMAE sought relief against Leighton, NDY, Tyco, WorkCover and MEF seeking statutory contribution against all cross defendants (other than MEF) in respect of any liability EMAE may have to any party in the proceedings. 81 In the case of MEF, EMAE claimed damages in negligence for breach of an alleged duty of care particularised as follows: "(a) to ensure that the Cross Claimant was provided with all necessary information and specifications in relation to the Heat Exchanger and that such information and specifications were accurate, sufficient and appropriate to enable the Cross Claimant to undertake the mechanical design of the Heat Exchanger; and

(b) where any aspect of the design or proposed function of the Heat Exchanger involved particular or unusual features to advise and/or warn the Cross Claimant as to those features." 82 The damages claimed consisted of the amount of any judgment against EMAE in the proceedings. MEF was in liquidation at the time of the hearing and took no part in the proceedings save as appears in the form of the amended ninth cross-claim, referred to later in these reasons. 83 EMAE's defence raised the same issues in its defence to Tyco's fourth cross-claim, as did WorkCover. Leighton's defence to the sixth cross-claim was essentially one which denied EMAE's claimed entitlement to contribution as was the defence of NDY and WorkCover. Tyco also denied liability on the understanding that the contribution sought was statutory contribution. MEF's defence raised issues along the lines of the allegations raised by Tyco in the ninth cross-claim, as assignee of MEF's alleged causes of action against EMAE. 84 The seventh cross-claim was brought by Tyco against MEF pursuant to leave, MEF having gone into liquidation. The claim was brought in contract, the particulars of breach being as follows: "a) MEF failed to use all due professional skill and care in performing its obligations;

b) MEF supplied a heat exchanger that was not suitable and safe for the purpose of being a heat exchanger incorporated in a gas flooding fire suppression system at the premises in that there was water on the gas side of the heat exchanger at the time the heat exchanger was delivered to Tyco;

c) MEF failed to properly hydrostatically test the heat exchanger in that it failed to test each pressure chamber of the heat exchanger without pressure in the adjacent chambers;

d) MEF failed to ensure that each part of the heat exchanger was completely drained of water and thoroughly dried following the hydrostatic test and completely dried and cleaned prior to dispatch; and

e) MEF supplied a heat exchanger that was not of good construction, sound material, adequate strength, free from patent defect and suitable and safe in that the partition plates between the zones in the bonnet were of inadequate thickness given the design pressure." 85 It was also alleged that MEF owed a duty of care to Tyco, Leighton and Optus arising out of its expertise in the subject discipline, the nature of the MEF subcontract and MEF's knowledge of the required use of the Heat Exchanger. Particulars of the breach were similar, although not the same, as those alleged under the contract count. 86 The third cause of action was brought pursuant to s 52 of the Trade Practices Act based upon MEF's alleged execution of a Tyco Manufacturer's Data Report certifying that the Heat Exchanger satisfied certain regulations governing pressure vessels. A related cause of action sounded in negligent mis-statement. The damages claimed included any judgment awarded against Tyco in the proceedings in favour of Optus, NDY or Leighton. Statutory contribution was also claimed. MEF by its defence, admitted that it was a party to the MEF subcontract: its part in the design, fabrication and testing of the Heat Exchanger, in addition to signing the Manufacturer's Data Report. 87 By the amended eighth cross-claim Leighton claimed statutory contribution against EMAE in respect of any liability of Leighton to any party in the proceedings to which EMAE was also liable as tortfeasor. EMAE's defence was by way of denial and an allegation that any damage suffered by Leighton was the result of its own negligence. 88 The amended ninth cross-claim was brought by Tyco styled as "assignee of MEF's causes of action" against, EMAE and WorkCover. Against EMAE a claim was brought in contract for breach of the EMAE subcontract raising allegations which included, but were not limited to the allegations raised by MEF in its defence to EMAE's sixth cross-claim against it. 89 Breaches alleged by Tyco were particularised as follows: "(a) EMAE designed a heat exchanger that was not suitable and safe for the purpose of being a heat exchanger incorporated in a gas flooding fire suppression system at the premises in that the inlet and outlet flanges for the Load 4 top zone in the heat exchanger pointed directly upwards and there were areas on the gas side of the heat exchanger in respect of all zones which were not self-draining;

(b) EMAE designed a heat exchanger that was not suitable and safe for the purpose of being a heat exchanger incorporated in a gas flooding fire suppression system at the premises in that the partition plates between the zones in the bonnet of the heat exchanger were of inadequate thickness given the design pressure; and

(c) EMAE failed to use all due professional skill and care when performing its obligations under the Mechanical Design Agreement and failed to carry out the design in accordance with good engineering practice in that: (i) the partition plates between the zones in the bonnet of the heat exchanger were of inadequate thickness given the design pressure;

(ii) the inlet and outlet flanges for the Load 4 top zone in the heat exchanger pointed directly upwards and there were areas on the gas side of the heat exchanger in respect of all zones which were not self-draining; and

(iii) EMAE failed to warn MEF of the need to take special precautions following hydrostatic testing of the heat exchanger to ensure that all water was drained from the gas side of the heat exchanger." 90 The cause of action in negligence arose out of an alleged duty of care based upon EMAE's expertise in the subject discipline, its obligations under the EMAE subcontract, its knowledge of the required use of the Heat Exchanger and the need for it to be hydrostatically tested before installation and commissioning. The alleged breaches by EMAE were particularised as follows: "(a) did not carry out the mechanical design with due professional skill and care and in accordance with good engineering practice in that: (i) the partition plates between the zones in the bonnet of the heat exchanger were of inadequate thickness given the design pressure; and

(ii) the inlet and outlet flanges for the Load 4 top zone in the heat exchanger pointed directly upwards and there were areas on the gas side of the heat exchanger in respect of all zones which were not self-draining. (b) did not ensure that the heat exchanger, when fabricated in accordance with the mechanical design, would be suitable and safe for the purpose for which it was intended in that: (i) the partition plates between the zones in the bonnet of the heat exchanger were of inadequate thickness given the design pressure; and

(ii) the inlet and outlet flanges for the Load 4 top zone in the heat exchanger pointed directly upwards and there were areas on the gas side of the heat exchanger in respect of all zones which were not self-draining. (c) failed to warn MEF, Tyco, Leightons or Optus of the need to take special precautions following hydrostatic testing of the heat exchanger to ensure that all water was drained from the gas side of the heat exchanger;

(d) failed to warn MEF that the separate chambers in the heat exchanger necessitated separate hydrostatic testing; and

(e) failed to ensure that the partition plates between the zones in the bonnet of the heat exchanger were of adequate thickness given the design pressure." 91 The damages sought included the amount of any judgment against MEF by any other party in the proceedings. In addition, statutory contribution was claimed. The claim against WorkCover mirrored Tyco's fourth cross-claim against that Authority, adapted to interpose MEF as the injured party, with the damages sought including the amount of any judgment awarded against MEF in favour of any other party in the proceedings. A claim for statutory contribution was also made. 92 EMAE and WorkCover, in their respective defences, relied upon the matters raised in defence of the fourth cross-claim. 93 The tenth cross-claim was made by NDY against WorkCover seeking statutory contribution in the event that NDY was held liable to Optus. It was further contended that any liability of WorkCover under the fourth, sixth or ninth cross-claims would be liability in respect of the same damage, in respect of which NDY would also be entitled to statutory contribution. A similar cross-claim was brought by NDY against EMAE in the eleventh cross-claim. The cross-claim sought statutory contribution on the basis that if sued by Optus or in respect of its liability under the fourth, fifth or sixth cross claims, the damages for which it was liable were the same damages as those for which NDY may be held liable. 94 The twelfth cross-claim by Leighton was made against WorkCover seeking statutory contribution, in this case, relating to damages for which Leighton may be held liable to the plaintiffs and WorkCover held liable under the fourth or ninth cross-claims. 95 Tyco has been at pains to distinguish between the right to equitable contribution and statutory contribution. The principles upon which contribution under the statute is ordered, save for the case of an insolvent tortfeasor, are uncontroversial and, as outlined in the following submissions on behalf of Tyco, are not in dispute: "81. In determining contribution under the statute, the amount of the contribution recoverable from any person shall be such as may be found to be just and equitable having regard to the extent of that person's responsibility for the damage (Section 5(2) of the Act).

82. The trial judge has a wide discretion in determining what is just and equitable². In assessing the relative share of responsibility of two or more defendants, while all the circumstances must be taken into account, the two principle factors are: (a) the relative causal potency of each defendant's acts; and

(b) where relevant, the degree to which each of them departed from the standard of conduct required by the particular tort on which each is liable. 83. The proportion which each must pay depends upon the extent to which each fell below the standard of care expected of the reasonable person (Dare v Dobson [1960] SR (NSW) 474; McFarlane v Neshauscm [1952] NZLR 292) . The principle is the same as in determining the amount of reduction of damages to be suffered by a contributorily negligent plaintiff (James Hardie v Roberts (1999) 47 NSWLR 425 at 446, NSWCA; Pantalone v Alaouie (1989) 18 NSWLR 119 at 141-1 per Giles J). In relation to that determination, in Podrebersek v Australian Iron & Steel Pty Limited (1985) 59 ALR 529, the High Court stated: "The making of an apportionment as between a plaintiff and a defendant of their respective shares and the responsibility for the damage involves a comparison both of probability, ie, of the degree of departure from the standard of care of the reasonable man (Pennington v Norris (1956) 96 CLR 10 at 16) and the relative importance of the acts of the parties in causing the damage: Stapley v Gypsum Mines Limited [1953] AC 663… it is the whole conduct of each negligent party in relation to the circumstances of the accident which must be subjected to comparative examination. The significance of the various elements involved in such an examination will vary from case to case; for example, the circumstances of some cases may be such that a comparison of the relevant importance of the acts of the parties in causing the damage will be of little, if any, importance."

84. Further matters: (a) where the damage in respect of which the plaintiff sues is damage to which the plaintiff's own negligence has contributed, the plaintiff's damages are reduced in the same amount against each tortfeasor. The responsibility of the plaintiff is compared to the total responsibility of all the defendants and the amount the plaintiff can recover is scaled down equally in respect of each defendant. The reduction is independent of any apportionment of damages between the tortfeasors themselves on the basis of contribution ( Fitzgerald v Lane [1989] AC 238; Daniels v Anderson (1995) 16 ACSR 607 ); (b) where a tortfeasor is insolvent, in the case of only two tort tortfeasors, the risk of insolvency of one of them is borne wholly by the other. Amongst three or more tortfeasors; the share of one insolvent should be distributed proportionately among the remainder ( Fisher v CHT [1966] 2 QB 475 )." 96 In addition Tyco, claims in certain events to be entitled to rights of subrogation in relation to any rights of actions Leighton may have against any other parties in the proceedings, basing that entitlement to be subrogated upon the operation of "one or more of clauses 8.5(b), 10.2, 16.2 of the [Tyco] subcontract". It is not suggested that any of Leighton's claims in these proceedings have been brought by Tyco by way of subrogation, rather Tyco seeks orders that "upon Tyco paying to Leighton whatever, if any, amount Tyco is held liable to pay to Leighton pursuant to one or more of those clauses [EMAE, NDY and/or WorkCover] pay to Tyco an amount equivalent to the amount which EMAE, NDY and/or WorkCover is found to be liable to Leighton". 97 In the examination of the facts giving rise to these proceedings, one starts with the observation that there can be no excuse for delivery of the Heat Exchanger and its installation with the bonnet section filled with water to the extent earlier noted in these reasons. The specification for the Heat Exchanger and its related drawings emphasised the need to completely drain and thoroughly dry the Heat Exchanger prior to shipment. Apart from a belated submission in final addresses on behalf of Tyco that the evidence supported a finding that some effort had been made to, at least, drain the bonnet section of the Heat Exchanger, I think the evidence is overwhelming that no attempt, or, at best, a perfunctory attempt had been made to drain and no attempt had been made to dry the bonnet section of the Heat Exchanger. I regarded Tyco's submissions as imaginative rather than persuasive and they were found to be based upon an unwarranted premise. 98 EMAE and WorkCover did not know that the Inergen system was intended to operate in each zone at the Rosebery centre, independently of each other, with separate feed lines for each zone and, most significantly, without the Heat Exchanger being fully charged with Inergen gas at all times. 99 No evidence was adduced from Lummus personnel, nor from MEF's personnel, in the latter case, notwithstanding the assignment of its alleged causes of action to Tyco. By reason of the evidence adduced in EMAE's case, it is unlikely that MEF understood that the Heat Exchanger was intended to operate in that fashion. The evidence does not permit me to make any finding as to Lummus' understanding of this aspect of design. 100 It is clear that it was no part of the responsibility of EMAE or WorkCover at law or in the case of EMAE, in contract, to draw anyone's attention to the fact that the chambers of the bonnet section of the Heat Exchanger were not self-draining, or of the need for special steps to be taken to ensure that the bonnet was completely drained and thoroughly dried after hydrostatic testing. 101 The most compelling reason for the ignorance of those parties in the intended operation of the Heat Exchanger in the manner outlined above lay in the seriously inadequate specification provided by Tyco to MEF and, in turn, through MEF to EMAE. It was no mere coincidence that WorkCover, EMAE and, on the evidence, MEF were unaware of this design concept of the Heat Exchanger. 102 Perhaps, more significantly in any event, while knowledge of that intended function of the bonnet chamber would undoubtedly have led to the design of an increased strength in the partition plates in the bonnet and may have resulted in multiple hydrostatic tests of the bonnet chambers, rather than a single test as, in fact, took place, it is a matter of speculation only to suppose that, had MEF known of this intended manner of function of the bonnet section of the Heat Exchanger, it would have made the slightest bit of difference to the failure of its personnel to completely drain and thoroughly dry the Heat Exchanger after hydrostatic testing. 103 Equally significantly, it would have made no difference to the fact that no personnel of Tyco attended at MEF's premises prior to hydrostatic testing to inspect the "internals" of the Heat Exchanger before "final closure" or to witness the test or to witness the activity of completely draining and thoroughly drying the Heat Exchanger as was contemplated under the Tyco specification for the MEF subcontract. 104 In a very real sense of the colloquialism, the Heat Exchanger was Tyco's baby. It had not been called for in the original specification of the Inergen system. It had been produced only after Tyco found itself in the embarrassing position of being unable to meet specification in relation to maximum temperature drop of Inergen gas on discharge: a matter examined in some detail later in these reasons. Tyco was forced to provide the Heat Exchanger at its own cost and in circumstances in which it had been made explicitly clear to Tyco that the presence of water in the suppressant system, capable of coming into contact with the equipment of Optus, was an anathema. 105 The conclusions I have reached are that neither EMAE, nor WorkCover are responsible for the under-design of the partition plates in the bonnet chamber for the intended mode of operation of the Heat Exchanger, nor for the presence of water in the bonnet chambers at the time of the installation of the Heat Exchanger at the Rosebery centre in August 1994. I am also of the view that it has not been proved that the under-design of the partition plates contributed in any way to the damages sustained in the incident. 106 For the presence of contaminated water in the tube side of the Heat Exchanger MEF must bear responsibility as must Tyco. How far up the contracting line that responsibility should be carried is less clear. In the case of Leighton, in contract, it has no answer to its failure to deliver the system with the Heat Exchanger in accordance with the Leighton contract. 107 For reasons later expressed, I am satisfied that Leighton had a duty of care to Systems and Vision, whether or not it was aware of the property interests of those particular members of the Optus group in the Rosebery centre. I think Leighton's liability in negligence comes down to a consideration of the question of whether it should have ensured that in the MEF inspection and test plan (the ITP) for the Heat Exchanger, an activity and hold point was included for the activity of completely draining and thoroughly drying the Heat Exchanger after hydrostatic testing and before installation and commissioning and whether it should have ensured that, in the quality assurance manual provided to Optus, provision was made for the periodic internal inspection of the Heat Exchanger in accordance with the relevant Australian Standards. 108 I am of the view that it was incumbent upon Tyco to be present at the hydrostatic testing and to supervise the subsequent specified activity of completely draining and thoroughly drying the Heat Exchanger. I also am satisfied that, in any event, it was incumbent upon Tyco to include in the ITP an activity and hold point for the activity of completely draining and thoroughly drying the Heat Exchanger prior to shipment to the Rosebery centre. 109 While one should not read too much into the fact that the hydrostatic testing was carried out at the MEF premises after the Heat Exchanger had been loaded onto the tray of a truck presumably preparatory for transportation to the Rosebery centre it does lend some weight, however, to the context of urgency of supply which surrounded the final days of fabrication and delivery of the Heat Exchanger and to the unlikely presence of suitable equipment to manipulate the Heat Exchanger so as to permit individual drying and draining of the bonnet chambers after completion of that testing and before delivery to the Rosebery centre. 110 The responsibility of Leighton should be viewed in the context of its contractual role which, I think, is best characterised as that of project manager. 111 NDY in my view was one step further removed from the sphere of responsibility for the presence of water in the bonnet of the Heat Exchanger at the time of installation and for its design with under-strength partition plates. In my view, NDY was largely sidelined by Leighton in negotiations leading up to the decision to include the Heat Exchanger as part of the fire suppressant system and virtually excluded from the design, fabrication and pre-installation testing of it. 112 In my view NDY bore no responsibility for the inadequacy in the ITP and it clearly had no obligation, in my view, to supervise the hydrostatic testing or the draining and drying of the bonnet chambers prior to delivery of the Heat Exchanger to the Rosebery centre. 113 Any liability of NDY I think turns upon consideration of its conduct in certification of compliance with specification and Optus' requirements for the Inergen gas system when it was not in any position, in my view, to give an unqualified certificate in relation to the Heat Exchanger, having regard to its very limited role in the design, fabrication and commissioning of that equipment. I do not understand NDY to dispute its duty of care to members of the Optus group whose interests lay in the safe installation of the Heat Exchanger. 114 The approach I have adopted to these matters is to examine the contractual relations amongst the parties and then to trace the activities that led to the design, manufacture, installation, commissioning, testing and inspection of the Inergen system and the Heat Exchanger for the purpose of determining the respective liabilities of the parties in accordance with the appropriate principles as understood by me. 115 The building agreement was entered into on 6 March 1992 and superseded a service supply deed entered into by Leighton with the consortium which formed Communications "to enable Optus to achieve rapid deployment of Network infrastructure and to contribute to industry development" in the event that the bid for a second telecommunications licence in Australia was successful: that deed being varied and assigned to Optus prior to its being superseded by the building agreement. 116 The nature of the building agreement entered into by Leighton was to "Design and Construct the Project" and in that regard Leighton agreed as follows: "3.1 Leighton shall execute and complete the design and construction of the Project: (a) in conformity with its obligations under the Contract Documents;

(c) thoroughly, skilfully, diligently, expeditiously without avoidable delay;

(d) using competent, efficient and economical practices and methods; and

(e) always with the primary goal of completing the Project on or before the Date for Completion and within the Project Price."

(Ex 1.003) 117 "Project" was defined to mean "the project specified in a Purchase Order comprising the Services and Works to be executed and completed by Leighton". "Purchase Order" was in turn defined to mean one "for a Project … issued by a Purchaser under Cl 3.3." That clause was in the following terms: "3.3 Purchase Orders

This Agreement contemplates the future issue from time to time by any company of the Optus Group to Leighton of Purchase Orders for various office and building fitout works and general building works likely to be involved in the rollout of the Optus Telecommunications Network during 1992-1996.

Subject to Clause 3.4, the issue of any Purchase Order is at the discretion of the Purchaser. Each properly issued Purchase Order will be deemed upon issue to be incorporated into the Contract. The terms and conditions of the Contract (not including the Purchase Order) will prevail over any inconsistency, conflict or ambiguity with the Purchase Order except where the Purchase Order specifies revisions (including additions and deletions) to the Contract." 118 "Purchaser", as used in the definition of "Purchase Order" was defined to mean "any Optus Group company that issues a Purchase Order." Under clause 3.4 an Optus company could not issue a Purchase Order until terms and conditions had been agreed between it and Leighton. 119 Clause 4.5 contained the following warranty: " 4.5 Resource and Expertise Warranty

Leighton warrants that it has and agrees that it will at all times have, use and apply the experience, expertise, skill, competence, capacity, plant, equipment and other resources necessary to execute and complete the Project and properly discharge the other obligations of Leighton under the Contract Documents.

Leighton shall whenever reasonably requested by the Purchaser demonstrate to the reasonable satisfaction of the Purchaser its ability to comply with this clause." 120 The design services undertaken by Leighton were required to be performed in ways that included the following: "(a) arrange and co-ordinate the design, engineering and environmental activities of the Project; … (f) develop, review and finalise the design; … (j) effectively co-ordinate all consultants' services."

121 In addition, as part of its general services Leighton was required by cl 6.2 to: "(d) plan, implement and manage an appropriate quality assurance management scheme for the Services: [and to] (e) arrange for material testing as necessary…" 122 Cl 6.4 imposed a duty of care upon Leighton in the following terms: "Leighton's duty of care in execution of the Services shall not be less than that normally expected for a design professional doing work of that kind". 123 By cl 6.5 a warranty was provided as follows: "The giving of copies of designs and related documents to the Purchaser or its Personnel or the approval, acceptance or inspection thereof will not relieve Leighton from or reduce responsibility for the integrity, effectiveness and suitability for purpose of the design of the Project. 124 It was further provided that:

The Purchaser is relying upon Leighton's knowledge, skill and judgment in the provision of the Services to result in a finished product which is fit for its intended purpose." 125 Under cl 8.2 it was the obligation of Leighton to "…plan, implement and manage an appropriate quality assurance management scheme for the execution of the Works". 126 Its obligation in relation to the provision of maintenance manuals was expressed in the following terms: "Leighton shall provide to the Purchaser not later than 20 days after issue of the Certificate of Completion suitable maintenance manuals, operating instructions and as-built plans in respect of hydraulic, mechanical, electrical and fire services and other building services installed by Leighton." (cl 8.12) 127 Cl 9.2 required Leighton, in executing the services and Works, to comply with all relevant Australian standards issued by Standards Australia "…except as otherwise specified in the Contract Documents or as expressly waived by the Purchaser…" 128 By cl 10.2 it was provided that "Leighton [would] be liable to the Purchaser for all acts or omissions of Subcontractors as if they were acts or omissions of Leighton". 129 The purchase order issued under the building agreement was the Networks order of 13 August 1993 which called for the following: "INSTALLATION OF AN INERGEN FIRE SUPPRESSION SYSTEM IN THE EQUIPMENT POWER AND COMPUTER AREAS AT STC AS PER LCPL PROPOSAL DATED 2 AUGUST 1993". 130 The delivery date was stipulated as 31 December 1993 and the contract price was $1,151,000. 131 The Leighton proposal of 2 August 1993 was directed to Communications "for the Inergen Fire Extinguishing System" in accordance with NDY's specification dated 27 July 1993 Ref A1317-23996-7F Amendment No. 1 together with associated drawings SCO-NDY-3319-D, 3320/2,3321/2 and 3322/2". 132 The Inergen proposal was expressed to be as follows: "Installation, testing, commissioning and maintenance of the Inergen system with ownership of the Inergen Storage Cylinders by Optus as per attached cost plan and Wormald schedule:" 133 The Tyco tender was that dated 30 July 1993, the terms of which do not aid the reaching of a clear construction of the Leighton contract, although the ambiguity that existed did not emerge as a live issue in the proceedings. The problem arose out of Leighton's proposal of 2 August 1993 being in accordance with NDY's specification and the Tyco tender. There is an inconsistency between NDY's specification and Tyco's tender in relation to temperature control of Inergen gas on discharge. 134 The NDY specification was one for the "SUPPLY, DELIVERY, INSTALLATION OF AN INERGEN SYSTEM". However, the body of the specification concerned "the manufacture, supply, installation and testing of the Inergen system pipework and accessories specified (therein) and as shown on the accompanying drawings". Those drawings were described in terms similar to those expressed to in the Leighton proposal. 135 Cl 11 of the specification described the Inergen system and called for the discharge into the facility of 80% of the required quantity of gas within one minute. It was further provided in relation to commissioning as follows: "On completion of the installation a full function test shall be carried out of all circuitry, and logic.

A discharge test shall be conducted for one of the smaller risks hazard zone 2.

The tests shall include temperature recording equipment including air sampling equipment to measure gas level concentration in the hazard zone for testing. Temperature variations with the risk shall not vary by O.14ºC/minute throughout the initial discharge mixing cycle and soak time." 136 However, in the Tyco tender of 30 July 1993, reference is made to this provision as follows: "As detailed in previous discussion and literature the expected temperature drop will be 4 C for the one minute, 80% discharge." 137 No reference to this discrepancy was made by Leighton in its 2 August 1993 proposal upon which the Leighton contract was based. As appears from these reasons, the discrepancy was far from being insignificant. Included in the specification were schematic diagrams depicting the "four hazard risks" as zones 1 to 4 and the "logic" was described in terms of four separate detectors and release of Inergen gas into the affected space within the Rosebery centre. 138 The specification was amended by amendment number 1 dated 18 April 1994 by which cl 11 of the NDY specification was amended to permit 80% of the required quantity of Inergen being discharged into the facility in three minutes and the commissioning clause was rewritten in the following terms: "On completion of the installation of the Works a full function test shall be carried out on all circuity and logic.

After satisfactory completion of all function tests, discharge tests shall be carried out on hazard zone 2. Leighton may direct that further discharge tests be carried out in the other specified hazard zones.

The purpose of the discharge tests is to demonstrate that the Works satisfy all the requirements of the specification in each of the hazard zones.

In addition to the other specified requirements, the maximum permissible temperature change from initiation of gas discharge to 80% of gas discharged shall not exceed 1ºC ambient air temperature.

The permissible maximum change in temperature in each hazard zone shall be measured at a height of 1.6m from the floor at any point within the hazard zone selected by Leighton and shall take into account the normal operating conditions including the normal heat output of the equipment installed in that hazard zone at the time of the discharge test.

Function tests and discharge tests shall be repeated, as necessary, until the Subcontractor has conclusively demonstrated to the satisfaction of Leighton and Optus that the Works satisfy all the specified requirements.

All costs associated with the performance of the function testing of the Works and the discharge testing in hazard zone 2 shall be borne by the Subcontractor. Such costs shall include the recharging of the gas cylinders after a discharge test.

If Leighton directs discharge tests in hazard zones 1, 3 and 4, the Subcontractor shall be reimbursed the reasonable cost of recharging the gas cylinders provided that the discharge tests demonstrate that the Works satisfy all specified requirements. Otherwise all costs associated with the conduct of such discharge tests shall be borne by the Subcontractor." 139 The following provision was added to cl 11: " HEAT EXCHANGER

Should the Subcontractor's design of the Works, to comply with the performance requirements of the specification, include a heat exchanger, such heat exchanger shall be designed in accordance with the requirements of AS 1210-89." 140 The circumstances which led to that amendment have particular significance in relation to the involvement of Leighton, NDY and Tyco in the inclusion of the Heat Exchanger in relation to the Inergen system and which impact on their respective liabilities in these proceedings. 141 Leighton admits that it was in breach of the Leighton contract, without identifying the breach. Notwithstanding that concession, it will be necessary to identify the breaches which, in fact, occurred. In making that concession Leighton accepted liability to Networks only, it being submitted that it owed no duty of care to either Systems, or to Vision. 142 By cl 3 of the Tyco sub-contract, Tyco was obliged to perform the subject works "thoroughly, skilfully, diligently, expeditiously…..". 143 By cl 6.4 Tyco acknowledged responsibility for the project being fit for its purpose in the following terms: "The giving of copies of designs and related documents to Leighton or its Personnel or the approval, acceptance or inspection thereof will not relieve the Subcontractor from or reduce responsibility for the integrity, effectiveness and suitability for purpose of the design of the Project.

Leighton is relying upon the Subcontractor's knowledge, skill and judgment in the provision of the Works to result in a finished product which is fit for its intended purpose." 144 The Contract was defined to include the "Attachments" to it. Attachment 1 listed contract documents as being the "Contract, [the] Project Plan & Schedule [and] Specifications." Attachment 2 identified the project as the "Optus Sydney Technical Centre, Rosebery, NSW" and the subject works were defined as "the supply, delivery, installation, testing and commissioning of an Inergen System to the Optus Sydney Technical Centre". The specification and drawings were identified as follows: "Technical specification for EPICENTRE, 65 Epsom Road, Rosebery, NSW (OPTUS SYDNEY TECHNICAL CENTRE, ROSEBERY, NSW) for Supply, Delivery, Installation of Inergen System - NDY Specification No. 23996-7F, including Addendum No. 1 AD1-1 (A1317) 27/7/93 and Amendment No. 1 dated 18/4/94. The Subcontract drawings are:

SCO/NSY/3319/WD/D SCO/NDY/3320/DD/2 SCO/NDY/3321/DD/2 SCO/NDY/3322/DD/2" 145 Attachment 3 to the contract made provision for a quality system in the following terms: "A Quality System in accordance with Category C of AS 2990 - 1987, Quality Systems for Engineering and Construction Projects, is being implemented by Leighton on the project.

The Subcontractor shall co-operate with and provide access and reasonable facility for the purposes of inspection and testing to persons implementing the Quality System to any place where work under the Subcontract is being or is to be carried out.

The Subcontractor shall establish, implement and maintain a Quality System to provide assurance to Leighton that the work under the Subcontract complies with the requirements of the Subcontract.

The Subcontractor shall nominate and maintain at all times a Quality Representative satisfactory to Leighton who has defined authority and responsibility for ensuring that the requirements of this contract condition are implemented and maintained to the satisfaction of Leighton. If the Quality Representative does not perform his duties in a proper and timely manner to the satisfaction of Leighton, the Subcontractor shall forthwith nominate a replacement Quality Representative satisfactory to Leighton. The duties of the Quality Representative shall include but are not necessarily limited to:- (a) Familiarisation with the Standards specified for the work and the requirements of the documented Inspection and Test Plans; (b) Review of all essential subcontract documents, if applicable, to ensure that adequate standards, against which quality can be measured, are provided; (c) Documenting inspection and test plans; (d) Carrying out inspection and tests to verify conformance to specified requirements; (e) Completion of checklists as developed from Inspection and Test Plans; (f) Maintenance of copies of checklists, certificates, test results and all other records of inspections and tests and submission of originals to Leighton; (g) Identification, indexing and filing of copies of all quality records and retaining same until advised otherwise by Leighton; (h) Reporting all instances of non-conformance to Leighton for acceptance or rejection; (i) Re-inspection of the Works following corrective action and obtaining acceptance of same from Leighton. The implementation of the Quality System does not alter the Subcontractor's obligation to perform the work under the Subcontract in accordance with the requirements of the Subcontract." 146 By cl 8.2 Tyco was obliged to "plan, implement and manage an appropriate quality assurance management scheme for the execution of the Works in accordance with Category B, AS 2990 which [outlined] Quality Assurance requirements". (Attachment 3 called for Category C.) 147 Under cl 8.5 Tyco indemnified Leighton in the following context and terms: "The Subcontractor shall:- a) take all reasonable steps to keep the Works and Materials free from loss or damage and shall promptly make good any loss or damage incurred as a result of a failure to take those steps; and

b) at all times indemnify and hold Leighton harmless against all damages, claims, actions howsoever arising from loss or damage to Works or materials." 148 Under cl 8.11 Tyco was obliged to provide Leighton with suitable maintenance manuals as follows: "The Subcontractor shall provide to Leighton prior to the issue of the Certificate of Completion suitable maintenance manuals, operating instructions and as-built plans in respect of hydraulic, mechanical, electrical and fire services and other building services installed by the Subcontractor. The format of the maintenance manual shall be as the standard format available for inspection at Leighton Contractors Pty Ltd offices." 149 By cl 9.2 Tyco was required to comply with "all relevant Australian Standards issued by Standards Australia…" 150 Tyco assumed responsibility for the acts of its agents in the following terms: "The Subcontractor will be liable to Leighton for all acts or omissions of subcontractor's employees and persons authorised to act on behalf of the Subcontractor as if they were acts or omissions of the Subcontractor." (cl 10.2) 151 That obligation is to be read in the context of cl 10.1 which required Tyco to first obtain the written approval of Leighton before the engagement of any subcontractor. Accordingly 10.2 should be read as rendering Tyco liable for "all acts or omissions of [its] subcontractor's employees", as if they were its own acts. 152 Tyco also undertook to indemnify Leighton in the following terms: "The Subcontractor shall have care of the Works and shall indemnify Leighton against all loss, damage, claims, and/or suits whatsoever and howsoever arising therefrom. The Subcontractor shall arrange with reputable Insurers approved by Leighton, Professional Indemnity Insurance, Public Liability and Contract Damage to Works Insurance for each Project and will effect Workers' Compensation insurance for its own employees and will ensure that Workers' Compensation insurance is effected by The Subcontractor Personnel for their employees." (cl 16.2) 153 I read "therefore" to refer to "care of the Works". 154 Although proceedings against NDY have been based upon the terms of the 1994 consultant agreement, the contractual relationship between NDY and Leighton I think should also be viewed in the context of the Statement of Works agreement and the 1993 consultant agreement. 155 On 5August 1992 NDY reported to Leighton on the aspects of the system which had been the subject of a quotation by Tyco. Further to that report, NDY submitted a scope of works letter to Leighton also dated 5 August 1992 in the following terms: "Further to our report on the Inergen system for the Epsom Road premises.

Should Optus choose to proceed with the system, below is listed the scope of works and fee proposal for the complete system.

a) Prepare drawings. b) Prepare specification incorporating; i) Modifications to the existing detection system. ii) Modifications to the existing fire indicator board. iii) interfaces between FFE and ODG, iv) Definition of limits to scope of work. v) Interfaces with contractor supplying exhaust fans/ductwork. c) Review of ODG workshop drawings.

j) Oversee testing and commissioning of the exhaust fans.

For the aforementioned scope of works we propose that out fees are as per the original fee structure of 5.5% of the actual contract value." The reference to ODG may be taken as a reference to Tyco. 156 In response to a request by Leighton of 25 November 1992 for a "fee submission for the Inergen proposal", on 26 November 1992 NDY forwarded a facsimile to Leighton which was expressed to be "further to … [NDY's] letter of 5th August" which confirmed fees for "INERGEN DOCUMENTATION" as follows: "OUR FEE PROPOSAL IS BASED ON THE STANDARD 5.5% OF FINAL CONTRACT VALUE, BUT BECAUSE THERE IS A POSSIBILITY THAT THE WORK MAY NOT COMMENCE FOR SOME TIME WE PROPOSE THAT THE DESIGN COMPONENT BE CONVERTED TO A FIXED FEE OF 67% x 5.5% x $650,000 = $24,000.00

THIS FEE HAS BEEN CALCULATED ON THE BASE INERGEN SYSTEM COST, ON THE UNDERSTANDING THAT ELECTRICAL AND MECHANICAL DOCUMENTATION IS ONLY MINOR (A PC SUM BEING INCLUDED FOR EXHAUST SYSTEMS DUE TO THE POSSIBILITY OF THEIR NOT BEING REQUIRED). SHOULD THIS SITUATION CHANGE IT MAY BE NECESSARY TO INCREASE THIS FEE TO REFLECT THE VALUE OF THE RELEVANT SERVICES WORK. FOR CONTRACT ADMINISTRATION THE PROPOSED FEE IS: 33% x 5.5% x FINAL CONTRACT VALUE

WHERE "FINAL CONTRACT VALUE" INCLUDES THE VALUE OF ASSOCIATED SERVICES MODIFICATIONS (SUCH AS EXHAUST SYSTEMS). 157 The 1993 consultant agreement was, for practical purposes, the same as the 1994 consultant agreement, save for amendments affecting the annexures and schedules. The 1994 consultant agreement recited the building agreement and the agreement of NDY as a specialist consultant, to provide their services to Leighton in accordance with the 1994 consultant agreement. 158 Cl 4 stipulated, as a matter of construction, the order of precedence as being the agreement document, any special conditions and annexures A to E respectively. 159 Annexure A referred to the building agreement as being "in the nature of a project management agreement". The subject "project" was defined as "Miscellaneous Building Works" at "OPTUS SITES AUSTRALIA WIDE". The consultant's fee was identified as being on a schedule of rates basis and, under the provisions of cl 7, the information to be provided to NDY by Leighton was expressed to be "BRIEFING INFORMATION AS PARTICULAER TO EACH PROJECT". Clearly, the ambit of NDY's retainer for a particular project was dependant upon that briefing. 160 The principal source of NDY's obligation to provide services is to be found in cl 8 which, so far as is relevant, was in the following terms: "The Consultant shall provide Services pursuant to the Agreement in a proper, thorough, skilful and professional manner with all due expedition. The Consultant shall submit progressively to the Company as applicable all documents required under the Agreement in sufficient time to enable the company and, where relevant, the Principal and Authorities to approve such documents for each phase of the Project by the Dates for Completion set out in Schedule 1 or as extended pursuant to the provisions of Article 20.

The Consultant's Services shall comply with the requirements of Annexure C: Brief all relevant Authorities, legislation, regulations and ordinances and Australian Standards, the Company's standards for the project are set out in Annexure D and the requirements of Annexure E: Consultant's Services.

Without limiting the generality of the foregoing the Consultant's Services shall provide effective, efficient and economical solutions to satisfy the performance objectives and other requirements set out in the Brief. Where appropriate, the Consultant shall provide details of alternative proposals that satisfy these objectives and requirements.

The Consultant shall ensure the adequacy of its Services and shall make whatever further enquiries are necessary to satisfy this obligation and shall report to the Company on any further investigations or information required which the Consultant cannot obtain from its own enquiries and which are reasonably necessary to ensure the adequacy of its Services as soon as such requirements become known to the Consultant.

Minor services not expressly mentioned which are necessary for the satisfactory completion of performance of the Services shall be carried out without adjustment to the Consultant Fee." 161 Annexure C, described as "the Brief" was struck out. Annexure E, described as "CONSULTANT'S SERVICES : BUILDING SERVICES CONSULTANT " was divided into five stages described, respectively, as follows:

"PHASE FOUR: PROCUREMENT AND CONSTRUCTION PHASE" "PHASE FIVE: PRACTICAL COMPLETION AND FINAL COMPLETION PHASE" 162 In respect of those phases, Phase One was struck out of the annexure, while Phases Two, Three, Four and Five contained the following further description of the respective phases, namely, in the case of Phase two "As specified for project at Brief" and in the case of the other three phases "As specified for project in Brief." One assumes that the use of the term "Brief" is intended as a reference to the nature of documents contemplated by Annexure C. 163 I have reproduced in Schedule O to these reasons the description of the services to be provided by NDY as set out in Annexure E, partly, because of the difficulty in deciphering the content of those phases from the only documents in evidence and, partly, as a contrast to what services NDY was actually called upon to give Leighton in relation to the Inergen system and, more particularly, in relation to the design, fabrication and installation of the Heat Exchanger. 164 In Leighton's case against NDY, Leighton particularised the "Brief" as follows: "We refer to your facsimile dated 8 June 2001 concerning particulars of the brief.

Without abandoning the position that particulars of the brief having regard to the evidence which has been given are otiose, the brief, as the term is used in paragraph 24.3 of the further amended cross claim comprises:- 1. The NDY fee proposal dated 5 August 1992 (exhibit 1.018) and facsimile from Steve Laffer of NDY to Phil McDonald of Leightons dated 26 November 1992 (exhibit 1.040) as stated by Mr Tribbia in evidence (Tp. 3015.30) and in addition,

2. The documents contained in the annexed table entitled "Transmittals Leighton to NDY" together with the documents attached to the documents referred to in the table.

3. Although our client maintains that the documentary brief was supplemented by oral instructions from time to time, our client is unable to provide particulars of those conversations having regard to the lapse of time since the conversations took place.

In any event we will be submitting, based upon the evidence of Messrs Tribbia and Raddatz, that, independent of the actual brief from our client, your client assumed obligations to advise our client arising out of your client's consideration of documents forwarded to it." 165 It will be noted that, although Leighton has relied only upon the 1994 consultant agreement in its pleading in contract against NDY, it has incorporated the statement of works agreement in those particulars. The table annexed to that facsimile of particulars consisted of a five page table of communications between Leighton and NDY, or copied to NDY, between 17 June 1993 and 26 July 1995. It is apparent from those particulars that Leighton accepted that an understanding of the services to be provided by NDY entailed reference to communications between Leighton and NDY identifying the subject works or brief to which the required services related. That is the position which NDY accepted and contended that the brief, as so particularised, in that manner takes precedence over the terms of Annexure E to the extent of any inconsistency as a consequence of the order of precedence provided for in the 1994 consultant agreement. 166 In the final address of counsel on behalf of Leighton the services which it was said NDY was required to provide in relation to the Inergen system, including the Heat Exchanger, was described as follows: "(c) To determine and ensure design compliance with all Authority requirements: Annexure E clause 1.2(iv); (d) To investigate and advise on the suitability of equipment, construction details, prototypes and samples: Annexure E clause 1.2(viii);

(e) To review services, design development drawings and other documentation against the requirements of the brief and revise documentation as required to ensure compliance: Annexure E clause 1.3(ii);

(f) To investigate and advise suitability of equipment, construction details, prototypes and samples: Annexure E clause 1.3(v);

(g) To review and approve for compliance with all Project services requirements and the design intent of the contract documents, all shop drawings, product data, samples, prototypes, workshop details and temporary works documentation: Annexure E clause 1.4(v);

(h) To advise on and assist in matters relating to equipment and materials testing and quality control: Annexure E clause 1.4(vi);

(i) To regularly inspect the Project (and, where appropriate, shop) works during construction and observe critical tasks as they were executed to establish that the work was being constructed in compliance with all Project service requirements, the design intent of all approved documentation, samples and prototypes and to the specified quality and promptly furnish inspection reports and a monthly Certificate of Compliance as evidence of such compliance: Annexure E clause 1.4(vii);

(j) To verify the commissioning and testing of the Project and approve all testing data: Annexure E clause 1.5(v); and

(k) To inspect the Project to ensure all equipment installation and completed construction was in accordance with all Project service requirements, the design intent of all approved documentation samples and prototypes and to the specified quality and certify the compliance of the completed works: Annexure E clause 1.5(vii)." 167 The MEF subcontract was in the form of a purchase order in the following terms: "CARRY OUT THERMAL DESIGN, DRAWING, STATUTORY BODY APPROVALS, SUPPLY, FABRICATE, TEST, PRIME, PAINT AND LOAD ONTO GRINNELL VEHICLE.

TO SUIT A GAS FLOODING EXTINGUISHING SYSTEM AS PER YOUR QUOTATION Q4032R1 DATED 30/5/94 AND TYCO SPECIFICATION APRIL 1994 REV. 2. BUDGET PRICE $79,185". 168 The quotation referred to was mainly indecipherable. It was described as a quotation and specification: "To carry out thermal and mechanical design, drawing, statutory body approvals, supply, fabricate, test, paint (primer only) and load onto your vehicle ex-works Smithfield: One(1) only Gas Flooding Exchanger". 169 Tyco was requested to note as follows: "Design is based on a BEU style TEMA R Exchanger… Tube Side design 60 Bar @ 50 C … Shell side design 5 Bar at 100 °C".

Delivery was noted as "10-12 weeks from receipt of order and thermal design from Lummus". 170 The Tyco specification was entitled "SPECIFICATION FOR THE SHELL AND TUBE HEAT EXCHANGER FOR THE GRINELL CONTROL ATMOSPHERE GAS FLOODING SYSTEM TO PROTECT OPTUS SYDNEY TECHNICAL CENTRE." Although the MEF contract referred to revision 2, the specification was noted as "REV 1 ISSUE 2". It was dated April 1994 and was divided into two parts, namely: "PART A SCOPE OF WORK PART B TECHNICAL DATA". I have incorporated as Schedule P to these reasons the Tyco specification as its form and content had particular significance in these proceedings so far as it operated upon the responsibilities of Tyco and, in turn, MEF, Lummus, EMAE and WorkCover. 171 The preparation of this specification is the subject of detailed consideration in these reasons. For the moment it may be noted that it was a specification that called for only one test of the shell side and of the tube side respectively. It was something of a scissors and paste production. It showed significant signs, either of haste, or inattention in preparation. It did not disclose that the partition plates were required to be full pressure bearing plates. 172 Conventionally, partition plates in a pressure vessel are not full pressure bearing elements because all chambers separated by the partition plates are subjected concurrently to similar pressure, either in a dormant state, or when activated. The Heat Exchanger required for the Inergen system was such that when the Inergen system was dormant, the gas was retained in banks of gas cylinders, with the consequence that the Heat Exchanger was not charged with gas and was subjected to atmospheric pressure only. Further, since the Inergen system was not designed so that, if one zone was activated, all other zones were activated in sympathy, there would not be similar pressures experienced in each zone on discharge. Each zone was intended to operate from its own dedicated bank of gas cylinders and independently of each of the other zones with the consequence that, if only one zone was activated, gas under pressure would pass through one zone while other zones remained under atmospheric pressure. A considerable amount of evidence was directed to these matters. In the end, I have come to the conclusion that they were matters of no relevant significance in determining responsibility for the consequences of the incident. 173 The EMAE subcontract consisted of EMAE's acceptance of MEF's order dated 14 June 1994 which was in the following terms: "CARRY OUT MECHANICAL DESIGN DRAW 1 ONLY GAS FLOODING EXTINGUISHING EXCHANGER FOR …TYCO CLIENT ORDER NO M02955

DELIVERY REQUIRED IN/BY ASAP." 174 Sheets 1 and 8 of Lummus thermal data sheets which MEF had procured, were provided initially, to EMAE. 175 On 23 June 1994 MEF provided EMAE with revised sheets 1 and 8 of the Lummus data together with sheet 2 of that data. The Lummus data sheets consisted of eight pages. They are schedule Q to these reasons. 176 The circumstances in which MEF failed to provide Part B to EMAE and in which sheets 1, 2 and 8 of the Lummus data were provided to EMAE are the subject of detailed reasons. 177 The facts leading up to the incident and the incident itself are essentially uncontroversial. Dispute mainly lies in the inferences to be drawn from those events. Perhaps the most notable area of dispute arose out of Tyco's defence in contributory negligence which was founded on an assertion that Optus lacked a proper business recovery plan at the time of the incident. 178 That case was founded upon the evidence of Mr James Alexander Carlisle, a "consultant in the areas of business continuity planning and information technology disaster recovery planning". He had been consulting in "those areas generally since 1980 and exclusively since 1990", presumably from Wellington, New Zealand. His clients included several major corporations in New Zealand. He was the managing director for New Zealand of a group known as "Survive! Business Continuity Group" which was an international organisation "of users of business continuity services". He was a Fellow of the Business Continuity Institute. He is a chartered accountant. He had been a full time lecturer at the University of Zimbabwe between 1977 and 1981. He had been an auditor within PriceWaterhouse in London and Zimbabwe between 1970 and 1976. He was a consultant with KPMG in Zimbabwe between 1980 and 1985 and with KPMG at Wellington between 1985 and 1989. He spent a year in 1990-91 with PriceWaterhouse as a senior consultant. His practice appeared to have been, save for a retainer from a Singaporean client, based upon New Zealand clients. He gave the following opinion evidence in his statement of 5 November 1999: "In my opinion, given the nature of their businesses and their reliance on computers and information technology, the Optus companies should as a matter of normal business prudence and risk management have conducted business impact analysis in 1992 either before the Computer Data Centre was established or immediately after and repeated the business impact analysis annually as the business changed and developed. They should then have reviewed the results of these analyses, developed a comprehensively documented business recovery strategy, and developed and implemented a disaster recovery plan in accordance with the strategy. That plan should have included the establishment of back up sites for critical equipment in the Computer Data Centre and Tandem/EFTPOS room with adequate equipment installed to allow applications which ran on that equipment to be recovered within the timeframes identified in the business impact analyses. Finally, the plan should have been tested using walk-through exercises, simulations and live exercises. Given that the business was established in 1992, a prudent business would have conducted business impact analyses in 1992 and developed a disaster recovery strategy and plan during 1993. The plan would have been implemented at least by the end of 1993 and tested shortly thereafter (during 1993 or 1994). A prudent business in the Optus companies' position would have developed and implemented a disaster recovery plan, and established adequate back up sites for any applications which ran on equipment in the Computer Data Centre and Tandem/EFTPOS room well before 1997. As stated above, in my experience as a consultant in business continuity and disaster recovery planning in the period from 1992 to 1997, it was usual for businesses which were heavily reliant upon computers to have a tested disaster recovery plan and to have backup facilities in place. This was particularly true of telecommunications companies which were heavily reliant on information technology. The Optus companies considered that the computer applications which ran on equipment in the Computer Data Centre and the Tandem/EFTPOS room since 1992 were critical to their businesses. However, they did not carry out business impact analyses until 1995 and 1996. Having carried out business impact analyses and confirmed that failure of equipment in the Computer Data Centre and Tandem/EFTPOS rooms would result in substantial revenue losses the plaintiffs then failed to develop and implement any adequate disaster recovery plan or establish a back up site to protect against the contingency. In my opinion, the plaintiffs failed to exercise reasonable care, firstly, in not carrying out business impact analyses at a much earlier date and secondly, having carried out the analyses, in failing to develop any adequate disaster recovery plans and failing to establish a back up site." (pars 41-43) 179 In a supplementary statement of 6 June 2001 he offered the further opinion evidence of the Optus IT Business Recovery Plan of 19 December 1996 as follows: "I refer to paragraph 38(a) of my report dated 5 November 1999. I also refer to the diagram in the Optus draft IT Business Recovery Plan that shows the level 2 equipment which was to be stored in a warehouse (Ex 1.609 page 3957). In my opinion it would not have been possible to supply and install the computer equipment, being the level 2 equipment, and migrate applications to that equipment within 5 days." (par 11) 180 It will be seen that Tyco's criticism of Optus is not that it was indifferent to self protection, but that its efforts in that regard were inadequate. In my view, there are a number of serious flaws in Tyco's approach, not the least of which was Mr Carlisle's willingness to offer opinions without having any regard to the cost of implementing what he offered as an appropriate strategy. However, there may have been more relevance in his evidence had this been a claim for business interruption with which Mr Carlisle seemed to be mostly concerned. In observing him as a witness I noticed that he was given to advocacy which, on occasion, was marked. 181 Peter Michael Berents was the "Risk Manager of the Optus Group of Companies" commencing as a contractor with Optus in February 1992, and then as an employee from 1 April. He was a Bachelor of Economics from the Australian National University, majoring in Economics, Statistics and Computer Science. He held a Diploma in Risk Management from the University of Technology, Sydney. He had been a service manager with Wormald between 1983 and 1985 and then for the following two years the risk manager for Wormald International (Australia) Pty Ltd. Then, between 1987 and 1990, he had been the international risk manager for Wormald International (Ltd) responsible for the Wormald Group's risk management and insurance programs. In that same period he had been President of the Building Industry Specialist Contractors Organisation of Australia and between 1989 and 1992 he had been the Chairman of the National Building and Construction Council. Between 1990 and 1991 he had been Risk Manager for Tyco Laboratories Inc. 182 He described his earlier activities in the capacity of risk manager for Optus as follows: "I joined Optus at a very early stage in its development. In 1992 Optus was emerging as a developing company in the highly competitive telecommunications industry. Optus was attempting to position itself and to break into this competitive, and at that time, monopolistic, market. At this crucial stage in its development, Optus could not afford to have a breakdown of any of its services, as that would undoubtedly lead to a loss in consumer confidence. The same can be said of Optus' position in 1997. Certainly a breakdown of a major service would have a severe, if not fatal, impact on customer confidence in Optus as a service provider, and therefore on Optus' chances of survival in this very competitive marketplace. In 1992 I identified that Optus had a number of single point failure risks in its facilities. These were risks which, if eventuated, would cause an Optus facility to fail and would present a significant risk to the continuation of Optus' business. The risks included the Computer Data Centre (' CDC') , which formed part of the Sydney Technical Centre at 65 Epsom Road, Rosebery, the switching and transmission facilities in all Australian Capital cities, and satellite and cable connections. I identified that Optus needed to develop contingency plans to protect its businesses and assets in the event of an occurrence at any one of these single point failure risks.

As a result of my identification of these issues, a Contingency Planning Group was established to provide contingency and recovery plans in the event of certain risks becoming reality. I was Deputy Chairman of that group. Optus appointed a consultant, Mr Dick Healy, to assist in the development of methodology for developing contingency plans for the Optus group of companies. Later Optus employed Mr Paul Gardiner to further develop contingency planning. In July 1994 Optus appointed Colin Maslen as the Contingency Planning Manager for the Optus Group, to develop specific contingency plans for Optus data centres. In November 1996, Paul Viciulis replaced Colin Maslen.

I attended frequent Contingency Group meetings through 1994 to 1996 which related to the development of contingency plans for Optus.

The Contingency Planning Group identified that the probability of a loss of the CDC was low. However, the impact of a loss of the CDC was enormous. Because of this, the loss of the CDC was identified as the most significant risk exposure to Optus. Optus' risks and their consequences are summarised as at 25 August 1994 in the document Ex 1.425A. The Contingency Planning Group identified that the GSMIS system (which was located within the CDC) was one of Optus' most critical systems in providing services to the public and generating revenue to Optus.

The GSMIS provides digital mobile services to customer, including billing, activation of new customers' mobile equipment, allocation of new customers' mobile numbers and customer changes to telephone numbers or telephone services.

In or about February 1996 the Contingency Planning Group estimated that a failure of the GSMIS system would cause a loss to Optus of approximately $6.9 million over three days and $27.6 million over eight days (Ex 1.596A). These figures did not take into account the loss of credibility of Optus as a telecommunications provider with customers and businesses alike, that would no doubt occur on a failure of the GSMIS. Fire Suppression

I identified the lack of fire suppression systems in the design of the Optus facilities nationwide for either equipment or personnel as a critical risk. The Optus facilities house very sensitive computer and telecommunications equipment which is critical to the various components of Optus' business." 183 He was instrumental in initiating, on behalf of Optus, discussions with Tyco for the installation of a fire suppressant system. The relevant details of the dealings with Tyco which led to the installation of the system are addressed later in these reasons.

184 Prior to the incident, Digital Equipment Corporation Australia Pty Ltd (a member of the Digital Group to whom I refer in these reasons as "Digital" without differentiating amongst the various member corporations) had produced in conjunction with Optus, a document entitled "Draft I.T Business Recovery Plan" dated 19 December 1996 identified as "Draft 1b" and a document entitled "Statement of Work to Optus Systems Pty Ltd for Operations Management Services" dated 20 December which had four components, one of which was described as "Business Recovery Services". 185 The draft recovery plan was a major work divided into three parts. Part A was a forty seven page "Overview". Part B comprised "Technical Recovery Procedures" which ran to approximately one hundred and ten pages divided into eleven sections in what I perceive to be a highly detailed technical analysis. It contained sections such as one for "Application Recovery Deadlines", another for the "Proposed Strategy for Recovery of Top Optus Applications", "Procedures for Disaster Notification", "Infrastructure Recovery" and so on. Part C was an "Action Plan", which ran to one hundred and sixty seven pages and provided for the role of the Business Recovery Manager, who at the time of the incident was a Mr Maslen. 186 The statement of work contained a proposal to Optus to provide services in relation to Optus' Business Recovery Plan which included an obligation by Digital to "develop and agree the Optus Business Recovery Plan" and to regularly audit and test it each year. The method of dealing with Optus' applications was proposed in the following way: "Supply of equipment in a disaster situation: Disaster Configurations consist of the basic system required by Optus to run critical applications in the event of a disaster. Disaster Configurations will be pre-agreed and detailed in writing between Digital and Optus.

Applications in Optus that will be catered for in a disaster will fall into two categories: (a) Current - Applications that will run on the latest/current platform available (Hardware and System Software)

(b) Obsolete - Applications that will NOT run on the latest/current platform available.

Digital will forward order and hold in inventory in Sydney, any agreed computer equipment needed for Disaster Recovery purposes to allow timely restoration of critical Optus systems in the event of a disaster that fall [sic] into the 'Current' category (a). Digital will provide this service at a cost of 13% per annum calculated on the Optus purchase price ( at the time of initial stocking) of the goods. This charge does not include any installation, delivery or staging charges that will apply in the event of a declared disaster.

Disaster Configurations for Current applications will be held in DIGITAL's inventory in Sydney. Equipment will be stored in individual items as per DIGITAL's normal stocking process with the exception of VAX systems (detailed below). As the individual items move towards no longer being offered for sale', Digital will fulfil current orders for these items from the above inventory held for Optus BRS purposes prior to them being removed from sale. Digital will then order in their place the replacement item (or item of similar functionality) so that the Disaster Configuration is always held in inventory.

VAX systems held in inventory as part of the Disaster Configurations for Current applications may be new or used. Should the VAX systems be used, they may be located in DIGITAL's disaster recovery facilities initially located at 119 Parramatta Road Homebush rather than as part of DIGITAL's inventory. The annual charge for VAX systems will be based on 13% of the Optus list price for new equipment.

Platforms for 'Obsolete' applications will be managed as a separate activity. Digital and Optus will develop a strategy to ensure that Disaster Configurations for Obsolete applications are available in the event of a disaster.

The obligations associated with Supply of equipment in a disaster situation as detailed in this Statement of Work will commence after the execution of this SOW and initial delivery lead times (to local Digital warehouse) for the Disaster Configurations.

The specific configurations Optus requires to be held in stock and the commercial arrangement of this service (Supply of equipment in a disaster situation) have not been concluded other than agreement on the annual fee. Optus and Digital will finalise the 'Business Recovery Services Configuration details' document and have it included as part of this Statement of Work as soon as practical. In the event of a disaster being declared, Digital will provide priority ordering of Optus computer equipment not held in storage. All orders so placed in a disaster will be subject to any manufacture, delivery and transit times necessary to provide the equipment at the recovery location.

Digital will make available to Optus pre-emptible computer room space of up to three hundred square metres at a cost of $250/sqm per annum commencing the 1st July 1996. Upon notification of a Disaster Event, Digital will make this space available to Optus within the time frames specified in the Business Recovery Plan either on a phased basis or whole as the Plan so requires. The pre-emptible space is to initially be located at 119 Parramatta Road Homebush, and subsequently at any suitable Digital facility in Australia with appropriate approval from Optus and at no additional cost to Optus." 187 In Part B of the recovery plan it was proposed that the equipment described as "LEVEL 1 KIT", that being various test and development equipment, would be installed at Homebush while equipment described as "LEVEL 2 KIT" would be held in inventory by Digital for use in a disaster. 188 Mr Carlisle was questioned on his experience by counsel on behalf of Optus. In his evidence in chief he stated that he no longer occupied the position of Managing Director of Carlisle Consulting Limited, the company through which he had acted as a consultant from 1990: that he no longer held a similar office with Survive!. In cross-examination he stated the following: MR DURACK: Q. Just on that last matter, when did you cease to be managing director of Carlisle Management Limited? A. That was in March this year. Q. With what organisation are you now involved? A. I am now involved with a company called Draymar Holdings Limited. Q. Is that a New Zealand company? A. That is a New Zealand company. Q. Based in Wellington? A. Based in Wellington, yes. Q. What is the business activity of that company? A. Well, I am employed by that company and the work I am performing is in a similar nature to that performed by Carlisle Consulting in terms of consulting in the areas of business continuity planning and disaster recovery planning. Q. Is it correct to say that your practical experience as a business continuity planner has been largely carried out in New Zealand? A. For the last 15 years I have been in New Zealand. Before that I was a partner with KPMG for five years in Zimbabwe. Q. Just stop you there for a moment. Were you carrying on the activity with business consulting and planning when you were in Zimbabwe? A. I was in charge of and carrying out general consulting, management consulting and specifically in the area of IT which sometimes related to business continuity. So I had some involvement with business continuity, but it wasn't exclusively, as it has been for the last sort of eight years in New Zealand. Q. So your exclusive specialisation with the field of business continuity planning over the last eight years, at least, has been carried out in New Zealand; correct? A. Yes, but, sorry, there was one other client where I consulted to a banking client in Singapore for a period of about six months and I commuted there. Q. That was Deutsche Bank, was it? A. Deutsche Bank, yes. ….. Q. In the years before those last eight years when your business consultancy was as a business consultancy planner, that was exclusively carried out in New Zealand; is that correct? A. During the last 15 years, yes, but as a partner with KPMG I certainly did one assignment for a bank that involved assessment of business continuity planning. That was for Zimbank and there were also related services to other banks, banking environments in the area of business continuity. ….. Q. Is that a Zimbabwean bank? A. It is actually the Zimbabwe Banking Corporation. ….. MR DURACK: Q. Mr Carlisle, just before lunch you were telling us that in March this year you ceased being managing director of Carlisle Consulting Limited and commenced as an employee with Draymar? A. Yes. Q. What happened to the business of Carlisle Consulting Limited? A. Carlisle Consulting has been wound up. ….. Q. Was that a creditors' winding up? A. Yes, it was. (T2946:4-57; T2947:25-35; T2947:43-45; T2950:28-37; T2950:57-58) 189 I think it would be fair to describe Mr Carlisle's status as an expert to some extent compromised by a distinct lack of experience. 190 In general, I regarded Mr Carlisles' evidence as bordering on the simplistic. On occasion he appeared to find it difficult to apply his mind to the question, as may be illustrated from the following: Q. This was the applicable Australian standard, wasn't it? A. This was one standard. This standard was developed for information security, so one aspect of that was business continuity. I mean, obviously there are other standards that I've referred to as well, such as those of the Business Continuity Institute, the Disaster Recovery Institute and other organisations that were being publicised in Australia before this time. Q. This is the only standard published in Australia by Standards Australia concerning business continuity that was applicable at the times that we are concerned with; is that right? A. I guess it depends which way you look at it. In the industry and the practitioners that I'm involved with, through Survive, through the Business Continuity Institute and so on, we have been waiting a number of years for a standard to come out and so there are other standards we have been using before this. HIS HONOUR: Q. Mr Carlisle, I think the question you were asked was whether this was the only standard published in Australia by Standards Australia. A. Oh, yes, my understanding is that this is the only one published by them. (T2961:32 - T2962:03) 191 The standard referred to was ASNZS4444, published on 5 November 1996. I think he was also prepared to offer an opinion on, to say the least, shaky grounds, as may be illustrated by the following cross-examination on his statement of evidence in chief: Q. Do you recall that that priority of equipment was to be supplied within five days? A. Yes. Q. As to the balance of equipment or systems that were needed to be restored, there was to be an arrangement with Digital under which there could be priority ordering of any necessary equipment. A. Yes. Q. Is that right? A. Yes. Q. The obvious attraction of that plan was, wasn't it, that Optus, by that means, minimized its upfront capital expenditure on computer equipment? A. Yes. Q. In paragraph 38 you have expressed some views about what you call shortcomings - major shortcomings with that particular plan; is that right? A. That's right. Q. In paragraph 38(a) you've been dealing with what you call the top computer applications. A. Yes. Q. Do you agree with me that that needs to be strictly broken down between priority 1 applications and priority 2 applications? A. Yes. Q. And that there was a fixed period of time for each of those - restoring each of those applications? A. Yes. Q. In the penultimate sentence of paragraph 38 you've said that in your opinion it would not have been possible to successfully supply and install computer equipment and migrate the applications in such a short time. A. Yes. Q. That's a very technical matter, isn't it - just what period of time might be required to restore those priority applications? A. Yes. This is based on my experience with clients in advising them what plans and times as I've seen, it takes to actually do this. The supply isn't such a problem, but installing them is more of a problem. Q. But that's not an area in which you have any expertise, is it? A. Well, I'm not a specialist in installing equipment, but I know that tests, for example, that I've done with Deutsche Bank, where they tried to migrate their applications for a test from their primary site to their recovery site - it took them some five days to migrate those applications when the hardware was already there, humming away. Q. Yes, but that's a different exercise, isn't it? That's migrating from one live site to another live site - that's a different exercise to what we are talking about here, isn't it? A. It gives me some indication of how long it takes, even if you've got the equipment there already, and how much longer it would take if in addition to that you have to install it, install the cabling, the network, the operating software and so on. Q. This is an exercise that you've never been directly involved in, isn't that right? A. I certainly have been involved, for example, with Deutsche Bank, where they were migrating some of their applications across. HIS HONOUR: Q. Are you familiar with migrations, what software was involved at Deutsche Bank? A. Yes, yes. Q. What was it? A. Well, that was banking software and there were various applications there. Q. That doesn't tell me very much. A. Sorry, it doesn't -- Q. Tell me very much. A. Yes, your Honour. Well, the thing is that it's - without background experience on this, it might seem if Digital have undertaken to provide this equipment -- Q. No, no, I'm trying to find out what your experience is and what your knowledge of the software was in the Deutsche Bank migration. A. We were running a test there and I was consulting on that and they started on the Tuesday to migrate certain applications by the Sunday. Q. I don't think you understand the question. I'm trying to find out your understanding of the migration, the subject of the migration, as distinct from it being just bank software. A. Well, I'm familiar with experience with that client and other clients, how long it takes to actually move the software. Q. Tell me what the software was that was the subject of the migration? A. Oh, well, it was their normal banking software. They had software for their current accounts. They had software for their wholesale banking. Q. Don't you understand the question? A. No, I'm sorry, I don't, your Honour. Q. I've been faced with some very technical evidence about the software involved in the migration of various software formulations in this case and I wondered what your knowledge of that subject matter was in expressing a view that the migration of programs could not have been done within a specific time? A. Well, I know, your Honour, in terms of having to set up the - if they are installing the equipment, having to install the hardware, the networking, the cabling, the routers, and so on, and also the operating software for those, restoring the databases across, restoring the applications software across, and whatever software there is, if it's running on Digital or equipment like this, there is some basic software that has to be loaded and so on. I know this all takes time and it's just based on my experience of working - advising clients and with testing with clients such as Deutsche Bank, that this would take too long. (T2963:03-T2965:35) 192 The unreliability of his opinion evidence is also illustrated by the following extract from his cross-examination: Q. Did you know at the time that you prepared your opinion, that Optus had conducted a test of restoring its GSMIS application? A. I can't say I can recall knowing that at the time, no. Q. In paragraph 38(d) you say, as one of the major shortcomings of this disaster recovery plan, that the plan did not cover non-Digital applications. A. Yes. Q. Did you know that Optus's critical business computer systems were all contained on Digital applications and equipment? A. My understanding - and from documents I've seen - was that there were other systems running on the Tandem computers, which were not included in this. Q. Did you assume for the purposes of your opinion that they were regarded by Optus as part of its critical business applications? A. My understanding from their documentation was that they did consider it critical. Q. And systems that it was critical to restore in the event of a disaster - did you understand that? A. My understanding was that it was critical. Q. In your conclusions section, in paragraph 41, you have said: The plan should have included the establishment of back-up sites for critical equipment in the computer data centre and Tandem/EFTPOS room with adequate equipment installed to allow applications which ran on that equipment to be recovered within the time frames identified in the business impact analysis. A. Yes. Q. Have you costed such a plan? A. No, I haven't. Q. Have you prepared a plan that identifies precisely what critical equipment you're talking about? A. Sorry, do you mean have I costed the Optus plan? Q. No -- A. Have I costed - yes, I have costed plans, yes. Q. No, my question was in relation to the plan that you are referring to in paragraph 41. In paragraph 41 you are referring to a plan that should have been in place for Optus, aren't you? A. Yes, that's right. Q. Have you costed such a plan? A. As an example of my own clients and so on? Q. No. Have you costed the plan that you say Optus should have had in place? A. No, I haven't costed this plan. Q. Have you identified precisely what is the critical equipment that they should have had in place as part of that plan? A. No. HIS HONOUR: Q. Have you addressed your mind at all to the question of cost? A. Sorry? Q. Have you addressed your mind at all to the question of the cost of this plan? A. I have in terms of the costs of potential losses they have from the business impact analysis and borne in mind, you know -- Q. No, that's the cost which would be the consequence of not having a plan. I am asking have you addressed your mind to the question of the cost of having this plan? A. No, I haven't. I haven't really been given sufficient information for that. (T296717-T2968:51) 193 It is sufficient to state that I would need far more reliable material than was offered in the opinion evidence of Mr Carlisle to reach a finding that Optus was delinquent in looking after its own interests by the absence of a recovery plan, such as that advanced by Mr Carlisle. When one is reminded that this alleged delinquency was submitted on behalf of Tyco as reflecting a failure of Mr Berents in the performance of his duties: as his motivation in instigating a recovery strategy following the incident designed to obscure his alleged failure, I think it is necessary to be very critical of such a submission that was not put to Mr Berents in cross-examination. 194 Mr Carlisle accepted the need for weighing a number of factors before determining the reasonableness of the conduct of the enterprise in relation to a recovery plan as appears from the following cross-examination: Q. Insurance which you have just mentioned is one matter that a company would have in mind as protecting itself against the risks that are the subject of any disaster plan; is that right? A. That's right. Q. At some stage in this procedure that you've referred to in these paragraphs, the decision-makers in the corporation are going to have to come to a view on just how much money they are going to spend on disaster recovery; isn't that right? A. That's right. Q. And in that regard, they are going to have to have consideration to priority needs of the business. A. Yes. Q. And what are the priority uses of scarce capital within the business. A. Yes. ……. Q. One of the somewhat unattractive aspects of spending too much money on disaster recovery is that you don't make any money out of it, do you? A. That's true. Q. It really is just one aspect of risk management questions that the company faces from time to time, isn't it? A. It is, yes. Q. In examining the question of risk management, the company needs to have consideration to the prospects that a disaster will actually occur. A. Yes, it does. Q. And would have to give consideration to questions such as how likely it is that there would be a flood that might infiltrate a computer data centre and offices in Sydney. A. Yes, that would be part of risk management. …..… Q. When relevant decision-makers within a corporation are deciding how much money to spend on disaster recovery planning, they are having to have consideration to the wider aspects of risk management, aren't they? A. Yes, they are. Q. One of the those preventative measures would be fire suppression systems, of course. A. Yes. Q. Other preventative measures would be appropriate security procedures against vandalism. A. Yes. …….. Q. But insurance is a good protection against business interruption losses, isn't it? A. Where you can insure, yes. Q. It is a very well recognised protection against business interruption losses? A. Yes, it is, where you can insure. You can't insure against loss of market share. (T2952:13-34; T2953:04-24; T2954:11-25; T2954:48-55) 195 These were matters that were not foreign to Mr Berents, as appears from his following evidence in chief: "18. In my role as Risk Manager I was, in 1997, and still am responsible for arranging insurance cover for the Optus Group of Companies.

I was also involved in setting in train the necessary activity to ensure that Optus had in place an effective Business Recovery Plan (' BRP '), although I was not responsible for the development of the BRP. Peter Cearns had that responsibility.

The Optus BRP and insurance position had a close relationship to one another. For example, one option open to Optus was to have no BRP procedures and to rely entirely on insurance in the event of a disaster. However, that approach would have attracted insurance premiums that were unsustainable. On the other hand, as part of BRP, it was an option for Optus to have created a 'hot site'. That is an alternative data centre that replicated the Computer Data centre (' CDC ') at the Sydney Technical Centre and which could have taken over the function of the CDC in the event of a disaster. However, in 1997 (and today), that is an extremely expensive option for Optus. As a result it was not, in 1997, a realistic option for Optus.

The BRP was intended to operate in conjunction with Cable & Wireless Ltd's insurance programme that, in 1997, Optus was part of. This included cover for business interruption which had a four year indemnity period. This cover was in existence in January 1997 and provided Optus with a four year indemnity period. In addition Optus had cover, as part of the programme, for material damage. It covered Optus for the full replacement value or the cost of repair of equipment damaged or destroyed and the associated costs of repairing or installing new equipment.

The BRP as it existed in January 1997 was intended to operate in conjunction with the insurance policies referred to above to provide Optus with an approach that balanced the cost of recovery, impact cost and recovery time. Annexed hereto and marked 'PMB1', is a document that I prepared for submission to Optus' insurers in London. Page 7 of that document sets out in diagrammatic form the measured approach to BRP adopted by Optus in December 1996.

The way in which the BRP was intended to operate in conjunction with Optus' insurance cover, as referred to above, allowed Optus in the event of a disaster to: (a) recover loss of business revenue through its insurance cover;

(b) recover the cost of hardware destroyed in a disaster via its insurance cover; and

(c) allow specific business functions to continue from the temporary Homebush Digital site in accordance with Optus' BRP which as at 3 January 1997 was a draft BRP as referred to in document Ex 1.609 P 3946 24. This was the state of Optus' BRP as it related to the CDC as at 3 January 1997. The incident of 3 January 1997 was not declared a disaster by Optus. Rather, it was an incident which was to be managed by Optus with the intention of eliminating all business disruption costs by prudent management of the incident." 196 That evidence was further supported by Mr Berents' statement of evidence of 10 April 2000 which contained the following : "9. In 1992 and 1993 Optus developed a policy of a business recovery strategy that was designed to cover all risks. Rather than duplicating its computer systems for the reasons set out above, Optus developed strategies to enable it to respond quickly to any event to enable Optus to maintain appropriate levels of customer service. This was supported by a comprehensive insurance program to protect the shareholder investment in Optus. As Optus developed it implemented a strategy to increase the redundancy and resilience of its computer systems which included, in some circumstance, arranging for 'warm' site backups. Hot site back ups, although discussed were never implemented.

Whilst, at the time of the incident, Optus was in the process of preparing a BRP, Optus had already for some years, retained a crisis management organisation, had completed risk assessments and developed recovery strategies in the event of a loss of the Computer Data Centre (' CDC ') (OPT312A 003-349, OPT 312B). I always continually review and attempt to improve disaster recovery plans. This review included the appointment of Bergman Voysey and also Digital to assist and advise Optus on the specific requirements for the CDC recovery. Because of the dynamic nature of the organisation, the plans had to be extremely flexible and reviewed on a regular basis.

The review and development of the BRP referred to by Mr Lonergan in paragraph 63 of the PWC report was one part of that continual and ongoing review process. In spite of this continuous review and expert advice, at no stage did I believe that it was reasonable for Optus to establish a hot site back up for all of its IT applications and computers. My view, as Risk Manager of Optus, has not changed since the incident and therefore remains Optus' considered position. That process of review was undertaken in December 1999 and I would expect that the strategies would be reviewed again in 2000. The fact that the disaster recovery strategies were being reviewed in 1995 does not, of itself, mean that they were inadequate at the time, merely that Optus' practice was to continually review its contingency plans.

I am currently involved in Optus' efforts to review its BRPs for its Information Technology. I know from my involvement in that exercise that the issues Mr Lonergan has discussed in relation to business recovery planning have been addressed in some detail. The committee undertaking that review has not resolved that Optus requires 'hot site' recovery strategy. The strategy that is being developed is similar to the BRP in the way in which is employs the use of a warm site and allows for reasonable upfront expenditure so as to provide business recovery planning that is at an appropriate level and at an expense that the organisation can maintain having regard to the risks.

In relation to paragraph 63(v) of the PWC report, in 1993 Optus recognised that one of its major risk exposures was loss of a computer data centre. It was because of that risk that Optus expended considerable sums of money installing the Inergen system. By 1994, Optus was working towards detailed recovery plans, the establishment of dual processing equipment for some applications and the establishment of a disaster recovery site. The issue of data centres, the number of them, their size and location has been subject to frequent reviews within Optus. The strategy proposed in December 1995 of migrating to a single, new data centre was not adopted, but a strategy of developing split data centres was established. The decision to adopt a dual data centre strategy led to the construction of Castle Hill Operations Centre (' CHOC ') with the establishment of Homebush as a contingency site. In developing this strategy, Optus ensured that it was able to maintain the appropriate level of environmental controls, security and fire protection to protect our critical business functions as identified at the relevant time.

In relation to paragraph 270 and Mr Lonergan's comments generally in relation to contributory negligence, I believe, based on my experience and knowledge as a risk manager, that the BRP was appropriate and adequate for Optus at its stage of development in late 1996. In deciding on the business recovery strategies such as the BRP, I had regard to factors such as the amount of money which would need to be expended initially, the amount of money which would need to be expended in the event of a disaster, the availability of insurance, the availability of our contingency plans, the testing of our crisis management capability and competency of our management. This continues to be Optus' practice with all these factors having been taken into account, I am of the view that, even with the benefit of hindsight, the BRP was the most appropriate plan for Optus at that time. In my view, this is evidenced by the fact that Optus did not, as a result of the incident, suffer any business or revenue loss and have made no claim for any such loss. Moreover, the incident was never declared to be a disaster in the terms of the BRP It was an incident which needed to be managed by Optus so that it did not develop into a disaster causing serious business disruption and financial loss to Optus' business." 197 Save for the adequacy of and the stage reached with the business recovery plan I do not understand that evidence of Mr Berents to be the subject of challenge. 198 The reference in that material to Mr Lonergan refers to the evidence of Mr Wayne Lonergan, managing director of Lonergan Edwards & Associates Limited, who, prior to 1 January 2001 was with Coopers & Lybrand. His evidence is addressed in dealing with quantum issues in these reasons. 199 The evidence of Mr Berents was supported by that of Mr Peter Robert Cearns. He was the Manager of Corporate Networks at the time of the incident. In his evidence in chief he gave the following evidence: "7. Optus' BRP as at 3 January 1997 was a draft document EX 1.609 P 3946. It set out Optus' business recovery strategy as at that time. It set out what would occur in the event of a disaster and by disaster it meant loss of the Sydney Technical Centre (' STC ') at Rosebery. By loss of the STC the BRP addressed the extended stoppage, for any reason, of all applications at that centre. In the event that a disaster occurred, Optus had business interruption insurance in place to compensate it for the loss of revenue arising out of a loss of the STC. Optus also had available to it insurance to cover the replacement of computer equipment destroyed or damaged in the case of a disaster. 8. In the event of a disaster the draft BRP in place at 3 January 1997 categorised each business functionality operated out of the STC for priorities of business recovery. Each priority recovered business functionality in time frames dictated by revenue loss. Priority one functionalities called for recovery of those functions within 24 hours. Priority 2 were planned to recover within four to five days. Priority 3 were planned to recover within two to three weeks and Priority 4 were planned to recover within 12 to 16 weeks.

9. The BRP was to operate in an atmosphere where Optus' business interruption insurance would compensate Optus for all loss of revenue in the period between the disaster and full recovery. Optus' equipment replacement insurance would have allowed Optus to purchase replacement equipment to that which would have been destroyed or lost in the disaster and to do so as soon as possible. The BRP contemplated use of space operated by Digital at Homebush to carry equipment brought in as a consequence of the disaster." 200 Tyco acknowledged that the establishment of a backup system would have involved an expenditure of several million dollars with on-going maintenance running into six figures per annum. In my view, it would take a compelling set of circumstances to warrant a finding of contributory negligence in failing to undertake such expenditure. Suffice to say I consider the evidence upon which Tyco has relied as unsatisfactory for the reasons given. 201 Digital, presumably, regarded the draft plan as appropriate. There was no suggestion by Digital that Optus was untimely in implementing such a plan, nor that Optus was aware of any shortcoming in its dedication of resources and funds in risk management. 202 Furthermore, the claim by Optus is not for business interruption but for rectification of equipment, an exercise which, in my view, Optus would have been entitled to undertake even if there was in place a backup system of the kind postulated on behalf of Tyco. Optus would have been entitled to, indeed, on the defendants' contributory negligence case, obliged to carry out the necessary rectification of the damaged equipment, so that once rectified there would remain in place the backup equipment for coping with a disaster within the meaning of the recovery plan. 203 The concept of contributory negligence at common law was explained in Astley v Austrust Ltd (1999) 197 CLR 1 at 11 et seq. as follows: [21] At common law, contributory negligence consisted in the failure of a plaintiff to take reasonable care for the protection of his or her person or property. Proof of contributory negligence defeated the plaintiff's cause of action in negligence. Although conduct amounting to contributory negligence may also constitute the breach of a duty which the plaintiff owes to the defendant, a plaintiff can be guilty of contributory negligence notwithstanding that he or she owes no duty to the defendant or any third person . In Nance v British Columbia Electric Railway Co Ltd [1951] AC 601 at 611, the Judicial Committee of the Privy Council said: "[W]hen contributory negligence is set up as a defence, its existence does not depend on any duty owed by the injured party to the party sued, and all that is necessary to establish such a defence is to prove to the satisfaction of the jury that the injured party did not in his own interest take reasonable care of himself and contributed, by this want of care, to his own injury." . A pedestrian, for example, owes no duty to a speeding driver to avoid being run down but is guilty of contributory negligence if he or she fails to take reasonable care to keep a proper lookout for speeding vehicles. Similarly, if a plaintiff fails to take care of its property, it may be guilty of contributory negligence although it owed no duty to the defendant in respect of the property. Thus, in Smith v Badenoch 33 [1970] SASR 9 where a fire started by the defendant damaged an adjoining property, the Supreme Court of South Australia held that the plaintiff was guilty of contributory negligence because he had failed to call out the local fire service promptly. A person may also be guilty of contributory negligence even though the negligence of the plaintiff did not contribute to the accident which caused the damage. That is because contributory negligence is concerned with the failure of the plaintiff to protect his or her person or property against damage and not with whether the failure contributed to the accident.

[30] A finding of contributory negligence turns on a factual investigation of whether the plaintiff contributed to his or her own loss by failing to take reasonable care of his or her person or property. What is reasonable care depends on the circumstances of the case. In many cases, it may be proper for a plaintiff to rely on the defendant to perform its duty. But there is no absolute rule. The duties and responsibilities of the defendant are a variable factor in determining whether contributory negligence exists and, if so, to what degree. In some cases, the nature of the duty owed may exculpate the plaintiff from a claim of contributory negligence; in other cases the nature of that duty may reduce the plaintiff's share of responsibility for the damage suffered; and in yet other cases the nature of the duty may not prevent a finding that the plaintiff failed to take reasonable care for the safety of his or her person or property. Contributory negligence focuses on the conduct of the plaintiff. The duty owed by the defendant, although relevant, is one only of the many factors that must be weighed in determining whether the plaintiff has so conducted itself that it failed to take reasonable care for the safety of its person or property." (Par 21, par 30 footnotes omitted) 204 There is nothing in the application of those considerations which, in my view, warrants a conclusion that any loss suffered by Optus as a consequence of the incident was contributed to by any conduct of Optus that could be characterised as imprudent or failing to take reasonable steps to protect or care for its property. At best, it is a bold position adopted on behalf of Tyco and one which was not independently advanced by any other party in the proceedings, other than, simply, to follow in Tyco's footsteps. 205 Daniels v Anderson [1995] 37 NSWLR 438, relied upon by Tyco, lends no support, in my view, for Tyco's case of contributory negligence against Optus, so far as that case is founded upon a complaint that Optus failed to properly protect its own property in failing to have in place a recovery plan of the type postulated by Mr Carlisle. 206 Consideration of a further issue of contributory negligence based upon the circumstances in which the system was tested after installation, is best left until the facts are established surrounding the selection, design, fabrication, installation, testing, commissioning and maintenance of the Inergen system and Heat Exchanger prior to the incident. From those circumstances the respective liabilities of the parties may be established. 207 By way of prefatory observations, although a considerable amount of evidence was addressed to the under-design of the partition plates in the bonnet chambers and to the failure to carry out multiple hydrostatic tests of the bonnet chambers and while, undoubtedly, there was failure in the partition plates in the course of the incident, that failure, the absence of multiple testing, or under-design of the partition plates had, in my view, nothing to do with the failure of MEF to completely drain and thoroughly dry the bonnet chambers after hydrostatic testing and prior to shipment. The conclusion I have reached is that the damage was caused by the failure to remove water from the Heat Exchanger chambers prior to installation. I have not been satisfied that any of that damage was contributed to by the under-design of the partition plates. 208 The discharge of corrosion contaminated water was, principally, into zone 3. The amount of discharge of contamination into zone 1 was minor and involved minimal expenses in rectification. The discharge into the switch and transmission room only occurred as a result of the rupture of the partition plate between zone 3 and zone 1. The switch and transmission room was zone 1. The data centre and the Tandem/EFTPOS room constituted zone 3 where the real damage took place. 209 The early history of the involvement of Tyco was given through the evidence of Mr Berents. As earlier noted, he had identified the lack of a fire suppressant as a critical risk in relation to the computer and telecommunications equipment of Optus. He took the following steps in relation to that matter: 18. In or about late March 1992, I began discussions with Wormald Australia Pty Limited (' Wormald '). I had been employed by Wormald for 10 years as its Risk Manager during 1982 - 1992. I was aware that Wormald were experts in the fire prevention field. My experience gained at Wormald meant that I was fully conversant with all types of fire suppression, prevention and detection systems and of the current status of development of those systems. I was aware that a range of gaseous or water fire prevention and suppression systems and a range of detection systems were available on the market. (In evidence that paragraph was corrected by Mr Berents to limit the period during which he was Tyco's risk manager to eight years)

During 1992 I undertook my own investigations into the various fire suppression systems which were then available worldwide. I collected various articles and promotional literature on the Inergen system and other fire prevention systems from corporations around the world. (OPT 334B 001 - 068, 073-079, 405-446).

I attended a conference on risk management and telecommunications facilities in New Orleans in May 1992. The official title of the conference was the International Symposium on Fire Protection for the Telecommunications Industry. The predominant discussion was of the investigation and development in fire suppression and detection systems in the telecommunications industry. (OPT334B376).

The issue of fire prevention was one which I, and Optus, took very seriously and therefore, on route to the conference, I stopped in London and met with Cable & Wireless, a major shareholder in Optus. One of the key issues I discussed with Cable & Wireless executives was fire suppression. I then travelled to Atlanta where I met with Bell South another major shareholder in Optus. I discussed Bell South's philosophy on fire prevention with Bell South's executives.

On 18 May 1992 Barry Lee [of Tyco] sent me a facsimile attaching two articles on fire suppression systems. OPT334B 362-372 is a copy of the facsimile and attachments.

On 28 May 1992 I met with Barry Lee at Optus' premises in Carrington Street (OPT 393-140). We again discussed generally the various fire protection and suppression options for Optus. At this meeting I said words to the following effect to Barry Lee: 'The Optus technical people will not allow any water based systems into the facilities at Rosebery as they believe that any water will have a severe adverse impact on the equipment at those premises.'

I was aware from my experience of working with Wormald of the potential damage to electrical and electronic equipment by the exposure of that equipment to water. I had seen water damage to electrical and electronic equipment on numerous other occasions on other sites such as the PTC telephone exchange at the Post Telecommunication Centre in Lae PNG.

As Risk Manager at Wormald I had been involved in the negotiation and settlement of numerous claims against Wormald for water damage to electrical and electronic equipment.

I was therefore fully aware of the importance of keeping water away from Optus' critical equipment.

I knew that temperature and humidity were (and are) critical factors in determining the type of fire suppression system to be installed by Optus. The operative parameters for those factors are determined by the nature of the equipment to be protected. The operating temperature of the system and the levels of humidity produced as a result of the operation of the fire system are critical to the continued function of the equipment.

At this meeting on 28 May 1992 Barry Lee and I agreed to view the Sydney Technical Centre. None of those facts are in issue. 210 The meeting of 28 May was the result of an invitation by Optus to Mr Lee to give a presentation of the Inergen system. In addition to Mr Berents, Richard John Bayley also attended. He was the Manager of the Services Delivery Group within Optus at the time of the incident. Prior to that he had been Network Service Manager "responsible for the construction of all major facilities required by Optus and for the ongoing management of those facilities". 211 In final addresses, counsel for Tyco conceded that it had a duty of care in tort to Optus. However, inconsistently with that concession, he adopted the submissions of counsel on behalf of Leighton to the effect that Leighton had no tortious duty of care to Systems or Vision. For those reasons I think it is of some utility to emphasise matters of Optus' "vulnerability" to the knowledge of Tyco and Leighton in Optus' dealings with the defendant. 212 The matters outlined above in relation to the introductory phase of Tyco are not in dispute. The presentation by Tyco consisted of some thirty six overheads which included: "ESSENTIAL USES". These were identified as circumstances where a "critical need [existed] to minimise danger due to fire …or existing agent application which would otherwise result in serious impairment of an essential service". Various "Synthetic Substitutes" as suppressant agents were listed and the characteristics of each noted. 213 In the case of Inergen it listed such characteristics as the reduction of conductivity, corrosivity, humidity, "no temperature drop", "no residue", and emphasised that Inergen "protects property". There is particular significance in the notation that it did not involve a temperature drop. In relation to Inergen and the environment it was claimed that it involved "no contamination [and] no residue except air". Its 'specific uses' included use as an "Alternative for CO² high pressure systems for customers with high safety needs". 214 In summarising the features of Inergen, it was noted that no decomposition products were formed, it did not present a corrosion risk, room temperature was reduced by less than 4ºC, it had very low electrical conductivity when discharged and, therefore, was a particularly suitable extinguishing medium for electrical/electronic installations. 215 There can be no dispute that Tyco held itself out as having expertise in relation to the Inergen system and was particularly aware that there was a "critical need" to avoid detrimental effects of the application of the Inergen agent, having regard to the sensitivity of the Optus equipment which it would be required to protect. In that respect it had been particularly emphasised to Tyco that the presence of water would have a "severe adverse impact on the equipment". That was not in dispute. 216 In relation to the claims by Tyco of the effect of the Inergen gas on temperature drop the evidence of Mr Bayley was that Mr Lee claimed that "the temperature drop caused by the gas once it was released would be less than 1 degree". That was not disputed.

217 With Tyco's tender to Communications of 3 July 1992 a brochure was included which contained the following material under the heading "PROPERTY PROTECTION". "INERGEN is stored as a non-liquid compressed gas. During discharge room temperature is reduced by less than 1ºC, thus dew point lowering and formation of condensation are prevented". 218 A substantial volume of technical material and material descriptive of Inergen gas accompanied Tyco's formal tender to Communications of 15 July 1992. It contained a summary similar to that provided at the 28 May display in that it claimed for Inergen that: "DURING DISCHARGE, ROOM TEMPERATURE IS REDUCED BY LESS THAN 1ºC. THUS DEW POINT LOWERING AND FORMATION OF CONDENSATION ARE PREVENTED.

INERGEN DOES NOT PRESENT A CORROSION RISK". 219 The unchallenged evidence of these communications between Optus and Tyco leaves no room for doubt that Tyco represented that discharge of the Inergen gas would not result in significant reduction of room temperature and would thus avoid condensation and the lowering of dew point. 220 In the tender of 3 July 1992 and repeated in the formal tender of 15 July 1992 there appeared the following: "Inergen is a truly unique extinguishing system that can replace Halon and still sustain the requirements of early discharge without endangering life, harming the environment or affecting sensitive equipment.

The gas mixture, made up of Nitrogen, Argon and carbon dioxide was especially developed for use in the field of sensitive electrical and electronic equipment." 221 Included in the material which accompanied the 15 July tender under the heading "COMMERCIAL CLARIFICATIONS", there appeared the following: "Clean Work

Our tender is based on the knowledge that the majority of areas where work is required to be carried out might be fully operational and therefore require extra care to be taken to avoid dust or contamination of valuable equipment. As a result we have allowed to provide dust covers over equipment in the immediate area and vacuum cleaners when drilling pipe fixings within the hazard. In addition all pipe cutting and threading would be carried out in a work place of mutual agreement outside the hazard." 222 I think that provision has significance in terms of Tyco's knowledge of the sensitivity of the electronic equipment in the Rosebery centre to the emission of a fire suppressant and it, also, drives home the fact that Tyco was well aware that the centre would be operational at the time of any installation of its fire suppressant system and of the fact that "extra care [was] to be taken to avoid dust or contamination of valuable equipment".

223 To the extent that Tyco allowed in its quotation for the provision of dust covers over equipment and "vacuum cleaners when drilling pipe fittings" on any view of it, that was an extraordinary requirement and one which leaves no room for any speculation as to the extent of Tyco's knowledge of the sensitivity of the area in which it would be required to work nor of the presence of Optus' electronic equipment in an operational state. 224 As appears later in these reasons, I have been left in no doubt that Tyco's concession that it owed a duty of care to the Optus corporations having an interest in that equipment was correctly made, notwithstanding Tyco's adoption of Leighton submissions to a contrary effect.

225 In relation to the claims for Inergen made by Tyco to Optus in the first half of 1992, it is pertinent to observe that the author of the 3 July and 15 July 1992 tenders which contained relevant representations was Tyco's fire protection manager, Roger Allan Thomas, who was called to give evidence in Tyco's case. His evidence in this context is examined later in these reasons. While the evidence of Mr Thomas is that the summary above referred to was prepared by Mr Lee, it was Mr Thomas who presented this material to Optus in written form and in a second presentation to Optus and to representatives of Leighton. 226 It has been submitted on behalf of Leighton that the Inergen fire suppression system was simply a gaseous installation about which there was nothing particularly hazardous. There was no evidence that Leighton "was made aware of the hazardous nature of the installation". I think that is missing the point that Leighton was involved at an early point in dealings between Optus and Tyco in relation to the Inergen system and, clearly, in my view, was made aware of the high concern of Optus that any system chosen for fire suppressant purposes was one which would pose no threat, when activated, to particularly sensitive electronic equipment, upon the efficient operation of which the Optus business was vitally dependent. 227 In that context it was submitted that there was "no evidence demonstrating that [Leighton was] aware of the significance of the Rosebery premises to Optus' operations". Given the recitals in the building agreement, its origins in the exploitation of the Telecommunications licence granted to Optus, it is difficult to imagine any circumstance in which the general significance of the Rosebery centre to Optus would have escaped the attention of Leighton. 228 I think the submissions on behalf of Leighton, emphasising the direct relationship between Optus and Tyco in a period prior to 15 July 1992 are of little moment in assessing Leighton's awareness of Optus' "vulnerability".

229 NDY's introduction appears to have been consequent upon a review of the Inergen system by NDY following the facsimile transmission to NDY from Mr Lee of 15 June 1992 which forwarded an information brochure and the summary of Inergen gas features, earlier quoted in these reasons, which represented that the room temperature was reduced by less than 1ºC during discharge without formation of condensation. 230 NDY was also present at the second presentation by Tyco of the system. NDY reported to Leighton on the system on 5 August 1992. NDY had received Tyco's specification of 4 August 1992 upon which the report also commented. NDY's statement of works agreement was contemporaneous with that report.

231 To the extent that it has any bearing on the issue of Optus' contributory negligence as addressed by Tyco, relating to the nature and circumstances of the discharge test commissioning of 8/9 July 1995 conducted on the Inergen system, it may be noted that NDY commented on the Tyco quote as follows: "Since it is not practical to test all systems, upon completion all areas will be tested to ensure that the enclosures are tight utilising a door mounted test fan arrangement which can be easily mounted in an existing door frame. A live discharge test has been allowed for in the ODG for one of the smaller areas". 232 In citing the characteristics of Inergen, NDY commented as follows: "Has virtually no effect on room temperature. Noncorrosive." 233 Clearly, NDY entertained no doubt about the nature of the representation by Tyco in the form presented both in writing and by Mr Thomas at the second Tyco representation. 234 The concern of Optus arising from the sensitivity of its equipment was further conveyed to Tyco in the undated Optus letter to Tyco, which, I think, must have been forwarded some time in October 1992. It reflected the fact that there had been several oral communications between Tyco and Optus following the tender and referred to the fact that Tyco's proposal had been examined by NDY, Optus' mechanical consultant for the 'STC project'. It sought further information which included the following: "Can ODG offer documented proof that the Inergen gas will not have adverse or residual effects on switching, transmission, power or computer equipment? … If Optus elects to use Inergen, the system would be installed over live equipment in a live environment. Installation of steel piping used in the discharge system could pose problems if dropped or if it was to come in contact with the equipment. With this in mind, can PVC piping be used in the gas distribution system instead of steel pipe?" 235 The response of Mr Thomas was to reassure Optus of the benign nature of Inergen and of the safety of Optus' equipment from any adverse effect of discharge of the Inergen on Optus' equipment.

236 Tyco's letter of response of 30 October concluded with a suggestion that "it might be of some assistance to Optus [if Tyco] was to prepare a short presentation on the concepts of Inergen with particular reference to … equipment… safety…" It might be noted that, in responding to Optus' October letter, Mr Thomas had the benefit of his involvement in a site survey of the Rosebery centre. Mr Thomas fixed that site survey time as following the 28 May presentation and prior to the submission of the tender. 237 As earlier noted, on 25 November 1992 Leighton called for a fee submission for the Inergen proposal from NDY, the latter responding by facsimile on 26 November 1992. On 18 November 1992 a meeting had taken place at Leighton's Lane Cove office attended by officers of Leighton, NDY and Tyco along with the structural engineers for the project. One of the Leighton representatives was Phillip Ross McDonald who had been involved in the Inergen system proposal since June of 1992. Mr McDonald described his later role in relation to the system as a "de facto Site Manager … responsible for liasing between Optus, [Tyco] and NDY". Leighton described its role as being retained by Optus "to project manage the design and the installation of the system" that Tyco would be "sub-contractor" and that "NDY [would] be responsible for the design". 238 While Mr McDonald's views of those relationships cannot control the contractual provisions governing Leighton's relationship with Optus, or for that matter its subcontract terms with Tyco, I think some significance does lie in McDonald's understanding of Leighton's role as project manager and, more particularly, the fact that that understanding was conveyed to Tyco at the first site meeting. 239 I think there is also some significance in the emphasis placed at the meeting upon the fact that Tyco would be required to carry out the installation in the form of a "retrofit nature [that] would be conducted in a 'live building environment' ": in keeping with the tenor of the communications between Optus and Tyco stressing the concern of Optus with the sensitivity of its electronic equipment during the construction stage and in the event of discharge of the Inergen system. 240 On 30 November 1992 a site meeting took place with representatives of Leighton, NDY and Tyco. Mr McDonald was one of the Leighton representatives and Mr Thomas was there for Tyco. Among the matters minuted at that site meeting were the following: 1.0 DESIGN 1.1 NDY advised they have met with the Fire Brigade and can report that the Brigade will accept Inergen exhaust via the existing main air conditioning system. The exception areas being the TFMC, L1 Computer Room, and the UPS Room that will require exhaust system documentation. …… 1.9 LCPL requested ODG to submit their work method statement as soon as is practicable.

1.10 LCPLl advised NDY that the inergen proposal Operation & Maintenance Manual would need to be in a form to be included in the same O & M package. 241 It is clear from the context of minute 1.9 that the work method was particularly required as a result of the knowledge of the parties of the need to perform the installation in the 'work environ' then prevailing at the Rosebery centre.

242 NDY prepared the technical specification for the Inergen system dated 2 December 1992, on the basis of which NDY submitted its proposal to Leighton in relation to the system on 7 December 1992 (clarified by letter of 11 December 1992). 243 Leighton submitted its proposal to Communications on 11 December incorporating the NDY specifications and much of the material forwarded in the Tyco proposal. I think it is not without some significance that the Leighton proposal was for a contract price of $1,266,698 which may be compared with Tyco's adjusted price for installation (leaving aside certain leasing costs) of $798,620, if only to signify that Leighton's level of responsibility, if measured by reference to those figures, was far from being superficial. Consistently with that, I think the submission on behalf of Leighton that it was "heavily reliant on NDY and Tyco in developing the first proposal for an Inergen system in December 1992" was a justified assertion. However, at that point there was no talk of a Heat Exchanger being necessary. 244 Tyco submitted a further proposal to Leighton dated 30 July 1993, to which reference has been made, for the price of $798,620 which was incorporated in Leighton's proposal to Communications of 2 August 1993. It was which proposal that was the subject of Networks' order of 13 August 1993. 245 Preceding that re-submittal by Tyco, NDY reported on 19 April 1993 on a system which was under consideration as a possible alternative to the Inergen system. NDY listed the following among the reasons why it had not been selected: "NAF-SIII … [leaves] a residue within the room [It] is also toxic on decomposition and can cause corrosion. NAF-SIII will also cause a temperature drop in a room where discharge is taking place of 15-20º. This will cause condensation.

NAF-SIII was not selected for the Optus project due to the above and also after considering the following: … 2. The delicate nature of the equipment and controlled temperature". 246 The significance of that material in the report lies in the fact that it was provided both to Mr McDonald and to Mr Thomas. 247 Further discussions took place between Optus and Tyco in 1993 leading to the Networks order of 13 August 1993, the general tenor of which was an attempt by Optus to obtain a more competitive quote from Tyco by inviting proposals from Tyco for the installation of Inergen at the Optus centres in Brisbane, Canberra, Adelaide and Perth. Those discussions resulted in a submission for such an installation by Tyco to Optus of 26 May 1993 in which there was submitted a "Budget cost break-up" and a discounted offer of $2,683,570 with further rebates up to 8% being offered. 248 It is not without interest, having regard to Tyco's contributory negligence case based upon the nature of their discharge test effected for Optus on 8/9 July 1995 proposal, Tyco, under the heading of "COMMISSIONING", provided for the following: "In addition, we have allowed to carry out a discharge test in accordance with the guidelines set out in AS 3689.1-1989 with particular attention paid to the monitoring of the final oxygen and carbon dioxide levels achieved. For this purpose we have selected and allowed in our proposal for zone 3, ie main switch room to be discharged". 249 A meeting held on 26 July 1993 at Optus' premises, the minutes of which describe it as "INITIAL CO-ORDINATION INERGEN PROJECT MEETING", was attended by Optus and Leighton, not attended by NDY, but NDY was on the distribution list for those minutes. It was noted that the project had moved from the design phase to construction phase. Optus informed the meeting that it was committed to Inergen. 250 The meeting was followed immediately thereafter with an "updated spec from NDY covering the amendments discussed". The NDY amendment provided for a limited discharge test in the following terms: "A discharge test shall be conducted for one of the smaller risks hazard zone 2". 251 The following specification in relation to commissioning tests was also included: "The tests shall include temperature recording equipment including air sampling equipment to measure gas level concentration in the hazard zone for testing. Temperature variations within the risk should not vary by 0.14ºC/minute throughout the initial discharge mixing cycle and soak time". 252 As earlier noted, although Leighton's proposal to Optus of 2 August 1993, which attached Tyco's 30 July 1993 quotation, described the quotation as one "in accordance with the Norman Disney & Young specification", the Tyco proposal contained the following: "The specifications provided in our previous quotation comply with the above NDY Specification and Addendum No 1 however we clarify a number of items as indicated below. … Clause 11-Page 7 (Commissioning) As detailed in previous discussions and literature the expected temperature will be 4ºC for the one minute, 80% discharge." 253 Shortly after the Networks order a meeting was held between representatives of Tyco and Leighton, the minutes of which were distributed to Optus and NDY. Under the heading "Test Data" it was noted that, at this meeting, Tyco "tabled a temperature graph from a discharge log". 254 On 9 September 1993 Tyco wrote to Leighton, in terms which were said to be further to the discussions of 3 September 1993, confirming Tyco's advice "regarding the expected temperature… characteristics during a system discharge". Accompanying the letter was a graph depicting temperature variation which was described in the following terms: "As indicated on the graph for a period of 2 to 3 minutes after discharge the temperature has been reduced by a maximum 4 degree's C and steadily increases during the next 5 to 6 minutes.

Whilst this is the reaction in open areas of the room we would anticipate that any reduction in temperature within switchboards and electrical cabinets would be less than 4 degree's C due to the restriction of the initial discharge by the limited openings in these cabinets.

A further consideration is the distance from the orifice plate/ valve to the room being protected. The maximum temperature drop occurs at the orifice plate where the pressure is reduced from 140 bar to 40 bar and as the gas proceeds along the feed main to the risk area the ambient atmosphere would tend to increase the temperature, the rate of increase governed by the length of travel.

The orifice valves for the 4 zones at the Rosebery Centre are to be positioned in the new staging area near the cylinders and therefore the temperature drop in the various risks will be minimised." 255 Leighton's response on being informed of this development was captured in the facsimile of 15 September 1993 in the following terms: "I'VE REVIEWED THE INERGEN MEETING NOTES FROM 10/09/93 AND THE LETTER THAT WORMALDS HAS SENT REGARDING THE TEMPERATURE DROP. LET ME SAY RIGHT NOW SO THERE IS NO MISTAKE, A TEMPERATURE DROP OF 4°C IN 2 TO 3 MINUTES IS COMPLETELY UNACCEPTABLE . IT IS WELL OUTSIDE OF THE TOLERANCE FOR TEMPERATURE CHANGES OF THE SWITCHING EQUIPMENT AND COULD PLACE THE WARRANTY AND THE OPERATION OF THE COMPUTER AND TELECOMMUNICATIONS SWITCHING EQUIPMENT IN JEOPARDY.

ONE OF THE PRIME REASONS THAT OPTUS DECIDED TO USE THE HIGHER PRICED INERGEN SYSTEM IN LIEU OF CO2 WAS THE PUBLISHED SMALL TEMPERATURE DECREASE (SEE ATTACHED SHEET PROVIDED BY O'DONNEL GRIFFIN). THIS PUBLISHED RATE WAS WELL WITHIN THE TOLERANCE OF OUR EQUIPMENT AND POSED A VERY LOW POSSIBILITY OF THERMAL SHOCK IN THE EVENT OF A GAS DISCHARGE.

IF THE INERGEN GAS NOW AS A RAPID TEMPERATURE DROP AS WORMALDS LETTER INDICATES, I SEE SO [sic] REAL ADVANTAGE IN PAYING FOR THE HIGHER PRICED INERGERN SYSTEM. ACCORDINGLY, UNLESS I CAN GET ASSURANCE THAT THE TEMPERATURE DROP WILL NOT EXCEED THE ACCEPTABLE RATE OF TEMPERATURE RISE FOR THE SWITCHING EQUIPMENT, 0.14°C PER MINUTE, BY MONDAY AFTERNOON, I WILL INSIST THAT WE CHANGE TO A CO2 SYSTEM. AFTER ALL, IF I'M GOING TO THERMAL SHOCK THE EQUIPMENT I WANT TO DO IT AS CHEAPLY AS POSSIBLE." 256 The facsimile was accompanied by material which included the Inergen summary sheet, earlier referred to in these reasons, which represented that, during discharge, room temperature was reduced by less than 1ºC and avoided condensation. When this response was conveyed to Tyco it sought the assistance of Total Walther Feuerschutz in a facsimile of 17 September 1993 which set out the following: "The client believes from information supplied to him by Wormald nearly 18 months ago that, at time of Inergen discharge, room temperature would drop less than 1°C. His transmission/switching equipment will tolerate (without auto-shutdown) a temperature variation of not more than 1.4°C over a 10 minute period. Therefore, he wants ambient not to drop more than 1°C. He has seen some Cologne room temperature charts which show a temperature drop of 4-6°C at time of Inergen discharge. This is not acceptable. If we cannot hold to 1°C the client threatens to cancel the order" 257 That facsimile arose directly out of a meeting held on 17 September 1993 attended by Optus, Tyco and Leighton with NDY being on the distribution list of the minutes which included the following under the heading "Test Data": "4.1 LCPL advise that the temperature [sic] performance data submitted is not in accordance with specification. Maximum temperature drop is specified at 0.14°C/minute.

Wormald to produce data supporting the ability of the Inergen system to perform within this temperature parameter by pm Wednesday 23/9/93

Should this information not be to the satisfaction of Optus then the contract will be reviewed. 258 I think the absence of NDY from that meeting, although on the distribution list of minutes, is some indication of the role that it was expected to perform in relation to the proposal for a heat exchanger which arose out of Optus' insistence upon adherence to the temperature specification of NDY: as distinct from NDY's role in relation to the Inergen system. 259 Even in the case of the Inergen system, the approach appears to have been adopted that NDY's presence was not required at meetings between Tyco and Leighton which were principally concerned with performance and contract administration matters. For example, NDY was not present at the site meeting between Tyco and Leighton of 27 September 1993 concerning the Inergen system, although it was on the distribution list of the minutes. 260 On 5 October 1993 there was a further site meeting concerning the Inergen system and that meeting was attended by Tyco, NDY and Leighton, the NDY representative being Mr Paul Raddatz. In the context of test data it was noted that Tyco's calculations validating compliance with specifications was still outstanding and that "NDY comment on previous temperature log during discharge was issued to Wormald". I assume that that was a reference to the subject matter of the graph that had been the object of concern by Optus when presented by Tyco on 3 September. 261 Consistently with my observations about NDY's role, at this meeting of 5 October it was noted that NDY was to "comment on the Wormald appendage [specification] to the cylinder order", an activity which I place in the category of Inergen system design matters. 262 The response of Total Walther Feuerschutz to Tyco's 17 September 1993, enquiry received on 21 September 1993, was not very comforting. It opened with the following comment: "After internal discussion we see a real problem to hold an ambient temperature of 1ºC during or after INERGEN discharge." 263 After referring to some test results the facsimile concluded with the following: "From this test data you can resume (sic) that as a rough prediction the room air temperature will drop between 2ºC and 6ºC and the material temperature will drop between 2ºC and 3ºC." 264 It is clear from the evidence of Mr Thomas that Tyco, at this stage, turned to the concept of the introduction of a Heat Exchanger. 265 Mr Robert Scott was a mechanical engineer employed by Tyco who, with Mr Andrew Brink appeared to have responsibilities for Tyco's quality assurance matters. On 8 October 1993 Mr Scott passed on to Leighton a Tyco technical Services summary "detailing OUR additional heat source method of limiting the temperature drop". It was a three page document enclosing a schematic arrangement of a Heat Exchanger with brief explanatory notes. 266 The concept found expression in the Heat Exchanger that was installed with the Inergen system, in that the method of heating the Inergen gas involved the passing of tubes containing the gas through water maintained at a high temperature in a shell. 267 Mr Thomas was aided in the consideration of a heat exchanger about this time by Mr MJK Dunn who described himself as a private consultant to Tyco Laboratories in his report 14 October 1993 entitled "ASSESSMENT OF HEATING REQUIREMENTS TO INERGEN FLOOD SYSTEM IN ORDER TO MINIMISE AMBIENT TEMPERATURE CHANGES DURING FLOOD" 268 He was the principal of Kryogas Technology Pty Ltd. Prior to setting up that consultancy business he had been employed by Commonwealth Industrial Gases Ltd as the head of its research and development department. 269 It was the evidence of Mr McDonald that he passed on Tyco's initial consideration of a heat exchanger to NDY. 270 I think that there is some point in stopping at this point to examine that evidence, as I think that it is representative of Mr McDonald's evidence in relation to the communications passing between Leighton and NDY. It is evidence that indicates the basis for my general approach to Mr McDonald's evidence on this subject matter; that is, communications between Leighton and NDY. 271 In my view Mr McDonald's recollection of those communications was almost non-existent in the absence of a record to assist his memory. He tended to rely upon a practice which he said he followed of passing technical material on to NDY. Whether such a practice existed, I think it is clear from Mr McDonald's evidence that it was certainly not an invariable practice. 272 Moreover, to the extent that such communications may have some importance in this litigation, where the evidence of NDY is that it has no record of a particular communication having been received from Leighton, I am not prepared to accept, on the basis of some practice of Mr McDonald, that such a communication was sent to NDY in the absence of a transmittal note. After all, a transmittal note is the conventional method of recording the passing of technical information from one enterprise to another in a construction context such as this and, indeed, Leighton, during the course of the hearing, in answer to calls, did produce various transmittal notes. 273 I emphasise that that approach to Mr McDonald's evidence is not aimed at his credibility. Rather it is an observation about the reliability of his evidence to the extent that it depends upon his memory of events unaided by contemporaneous material. As a witness, generally, he impressed me with being very open with his responses, showing no sign of self protection or of bias. On the third day of his cross-examination he showed an impressive willingness to accept responsibility for matters that were put against Leighton's interest. 274 Turning to the October 1993 facsimile from Mr Scott, in cross-examination by counsel on behalf of EMAE Mr McDonald gave the following evidence Q. May I take it that you read that when you received it? A. It would have come across my desk. Obviously I would have read it and passed it on to the appropriate people. ….. Q. Did you look at it sufficiently at the time to form a view? A. No, I wouldn't have. I was managing the process, not necessarily trying to interpret all the technical information. Q. This was a document that was sent to Leightons for your attention? A. That's correct. Q. Wouldn't you at least have read it through sufficiently to understand it before you handed it on to someone else? A. No, it contained technical detail. I would have passed that on to - certainly a copy on to NDY and I would have passed it on to others in our organisation. (T2476:5-9; T2477:1-17) 275 It was clearly a document the technical nature of which was not within his area of expertise. His answers were the subject of further cross-examination by counsel on behalf of Optus, as appears from the following: Q. Did you pass it on to anyone? A. I would have, yes. Q. Who? A. I would have passed it on internally to our design manager, Mr McKnight. Whether in fact I directly forwarded it to NDY at that stage or not, I can't answer. I think the discussions at that stage were more centred between Leightons and Optus because this was only a proposal. Whether, in fact, this proposal was going to be acceptable to Optus was something I wouldn't have known at the time and I think the first course of events, the most likely course of events is that this would have been discussed with Optus. Q. Do you believe you would have sent it on to NDY, or not? A. I can't say. I can't say at this point in time. If the proposal was totally unacceptable to Optus there would be no point in sending it on to NDY. Q. You did say at page 2477, lines 14 and 15:I would have passed that on to - certainly a copy on to NDY. A. Yes. Q. Do you wish to change that part of your answer? A. Well, I guess I am referring to the time frame that it is sent on to NDY. There is the issue that I have explained in that first, receiving this, our first course of events would have been to discuss it with Optus. At a point in time, as all technical information, it was my practice to forward it on to NDY. Q. When did that practice start? A. When we started receiving information from Wormalds. Q. Like this? A. Yes. Q. Technical information? A. Yes. Q. Technical information that you didn't feel competent to be able to really understand yourself? A. That's right. We didn't have, in our employ, design engineers. Q. Had you yourself had any prior experience with heat exchangers? A. No. Q. Pressure vessels like this at all? A. To the extent that those that are commonly used in the building industry, like chillers for airconditioning systems, those sort of proprietary items that are procured and delivered to the site. Q. Well, I just want to go back to your earlier answer and get a clear indication from you as to whether or not you wish to change it. Your earlier answer was: I would have passed that on to - certainly, a copy on to NDY. A. Yes. Q. You say you don't recall -- A. Okay, I think if I clarify it this way: this is a document in '93. Do I recall the circumstances and sending this on to NDY? I can't recall that sitting here but what I can say is that it was my practice to forward on matters of technical information on to NDY because, as I said to you previously in the questioning, my interest in this document was an overall schematic sense, that I would look at it and say, "Okay, they are proposing a heat exchanger, to warm the gas via a water bath, it has to go somewhere spatially." I would make no effort or attempt to understand the technical components of the submission. I would be relying on others to do that for me. Q. I will just hand you a copy of the transcript so that you can read what you said, Mr McDonald. A. Yep. Q. Page 2477, the answer starts at line 14. You will see your answer about this document included this comment: I would have passed that on to - certainly a copy on to NDY. A. Mmm-hmm. Q. My simple question to you is do you wish to change that answer, or not? A. No, I don't. Q. Do you say that you would have passed it on because, looking at it, you believe you should have passed it on? A. No. I am saying that it was a standard practice that was put in place through the project that I followed, that technical information was forwarded on to our consultant. Q. Was that a standard practice that you put in place because you thought that was the proper thing to do? A. Well, I thought it was the appropriate thing to do and it was a standard practice that we use on all our projects. In managing a design process, I think as I have said, we are not designers and we do not carry out the design - do not carry out any design work ourselves. We manage the process. So we rely on others to do the design. This technical information here, I would be passing it on. I have some uncertainty in saying here, in my earlier evidence in the last 10 minutes or so, the exact point in time that I sent it on, but there is no reason for me to believe that I wouldn't have forwarded this on to NDY. Q. You had no reason not to? A. What, not to forward it on? Q. Not to forward it on; correct? A. I had no reason not to, but I had a reason to forward it on. Q. Indeed. HIS HONOUR: Am I correct in my understanding that there is no evidence of NDY's involvement in this process at this stage? MR GREENWOOD: Yes. Thank you, your Honour. HIS HONOUR: Do you intend to come back to that? MR GREENWOOD: No, except to call, formally - I have given notice - for any document that demonstrates exhibit 1.127 being transmitted to NDY. HIS HONOUR: Upon whom are you making that call? MR GREENWOOD: On Leightons. MR MACONACHIE: Not produced. HIS HONOUR: Mr Maconachie, it is understandable that it is not produced at this stage. The difficulty I have with the witness's answer is two things, really. One is that I think he has stated on earlier occasions that documents of this kind, if passed on, would be accompanied by a transmittal notice and I am not aware of any such documents being in evidence. The other difficulty I have is that there doesn't appear to be any evidence that I am presently aware of NDY's involvement at this stage and I would have thought that if a document of this kind had been passed on to NDY, there would have been a response, in writing, of some kind or, alternatively, that if some response was required of NDY and none was forthcoming, that there would have been a follow-up in writing. There doesn't appear to be anything of that kind. When the witness says - I may be misquoting him - that there was no reason for him to think that he didn't send it on, I think what I have just covered are reasons why one might infer that it wasn't sent on." (T2683:7 - T2686:26) 276 The forgoing reflected my views then. Nothing has happened to cause me to alter that approach to communications between Leighton and NDY. It has been submitted on behalf of Optus that Mr McDonald failed to pass on this facsimile to NDY and that it was a mistake not to do so by depriving Optus of the protection against design error. However, having regard to the conceptual nature of the contents of the facsimile, I doubt if anything of consequence flows from any failure to pass the contents onto NDY. 277 I think it is worth spending a few moments on the detail of the report of Mr Dunn of 14 October. It is a 13 page report which previewed its contents in the following way: "PREVIEW

The TWF-INERGEN-Fire extinguishing System, involves the rapid flooding of the fire location area with INERGEN TM Gas from cylinders of gas held at a pressure of approximately 150 bar.

During the release of the high pressure gas, there is a resultant temperature drop in the gas, which normally results in a corresponding reduction in the temperature of the room into which it is sprayed. Depending on the nature of the room's contents and construction, the reduction in temperature is of the order of 2° to 5°C. For the 'Optus' project, due to the sensitive nature of the equipment housed, it has been specified that room temperature variations are to be kept to within 1°C. The purpose of the current project is to modify the INERGEN system to meet the Optus specification." 278 Mr Dunn considered that here were two possible ways of addressing the problem. One was to heat the gas in the cylinders and the other was to heat the gas after its initial expansion down stream of the restricting orifice plate prior to entering the "distribution network". In other words, the reduction in pressure from 150 bar was effected at an orifice before passing into the pipe work distribution into the areas to be protected. The first section of his report deals with "ESTIMATION OF HEAT REQUIREMENTS". 279 That was done by calculation of the volume of the cylinders, the contents of those cylinders with Inergen at a pressure of 150 bar and temperature of 15°. Mr Dunn applied a standard density of gas to that volume and by that means measured the mass of gas in a cylinder, multiplied that calculation by the number of cylinders to derive a total mass of gas held in the cylinder bank. He noted the intention to discharge 80% of the cylinder bank contents within one minute. He adopted an average flow rate for that per hour, from which he calculated the weight of the flow at "204,000 kg/h". Then followed highly technical tables and graphs showing the proposed flow rate and contents as discharged over a period. He then calculated the total mass to be heated in the first minute at 3400 kilograms. From that he derived the amount of "cold energy" which had to be supplied and, in turn, the quantity of water to be held at a particular temperature, which he initially worked out at a temperature of 80°C. 280 Accompanying these calculations were graphs and a "FLOW DIAGRAM OF COMPUTER MODEL" which showed in simple form a cylinder storage area with gas at a pressure of 150 bar at 20°C, flowing in the pipe leading from the cylinders and flowing through a restricting orifice reducing the pressure to 50 bar, then on through a heat exchanger heating the water at 80°C and from there the flow was depicted as gas at 48 bar 33.4°C prior to what is designated as a orifice but which must represent the nozzle as it depicts gas at 35 bar immediately before the nozzle/orifice and at 1.013 bar immediately after. 281 The description accompanying the computer model supports the view which I have expressed that the second insignia is not an orifice, but is in fact the emitting nozzle. The technical data that accompanied the description of the computer model included further graphs and then a table which confirmed the nature of the second orifice as being a "spray nozzle". The tables that completed the report were respectively described as "Output Valve Summary" and "Rigorous Heat Exchanger Summary", the latter being two tables identifying operating conditions on the "SHELL SIDE" and "TUBE SIDE" The second table was subtitled "SHELL AND TUBE EXCHANGER DATA SHEET FOR EXCHANGER 'HE1'" which again gave technical data for the shell side and the tube side of the Heat Exchanger. 282 What strikes me about Mr Dunn's report is that it envisaged a single operation of the system and appeared to take no account of any variable related to discrete separate activation of one or more of several zones. The technical data, it may be noted also followed the form in which the data was collected in the Tyco specification for the MEF subcontract. 283 The report of Mr Dunn was forwarded by Tyco to Leighton on 21 October 1993. An internal Tyco memorandum of that date by Mr Thomas noted that if Optus found the Heat Exchanger proposal acceptable then the matter could proceed "very quickly". He also stated that the specification for the Heat Exchanger was in the process of being prepared and would be ready by 29 October "to allow quotations for the manufacture of the unit to proceed". Mr Thomas' memorandum of 21 October 1993 also contained the following comment: "Finally, we have based our design estimates on the heat requirements for the main switching and transmission room only. If the other rooms also require heating it would prove technically extremely difficult and totally uneconomical. However, we need to clarify this point urgently." 284 Of some significance, I think, Mr Thomas raised the question of the cost of the Heat Exchanger in the following terms: "With respect to the cost of this unit, as you are aware, we have a small amount of "sundries" in the cost estimate for such purpose, however it may be worth considering asking Optus to share the cost, considering our contractual position, or for political reasons adding the cost of this unit to other tenders for Optus around Australia when they arise in the future"

285 The last suggestion seems in my view to be quite inappropriate, unless the proposal was intended to be made known to Optus, which does not appear to be entirely clear from the way in which it was raised by Mr Thomas. It was stated that Mr Dunn's report was to be "formerly submitted to Leightons immediately for review by both Optus and NDY". It is also apparent from the terms of the Thomas memorandum of 21 October 1993 that Mr Scott and another representative of Tyco, Mr Peter Hansen, were the persons sharing the responsibility of finalising "volume calculations and pipe distribution network calculations" for the Heat Exchanger. 286 Mr Dunn's report of 14 October was forwarded to NDY (Mr Raddatz) by Mr McDonald by facsimile of 22 October 1993. The events of late October and November 1993, in my view, leave no room for debate as to the knowledge of Tyco, Leighton and NDY as to the critical nature of the facilities in the Rosebery centre which the system was required to protect, nor any doubt as to the nature of the installation itself being of critical importance. The communication of Leighton to Tyco of 29 October 1993 is a good starting point for testing the appropriateness of those observations. The letter included the following: "We write to you to confirm and clarify the discussions held on 25 and 27 October 1993, between yourselves, Optus Communications, Norman Disney and Young and Leighton Contractors. These two meeting (sic) have centred on the technical performances and the early design information that you have provided for assessment.

At this time the design information and discussions have not provided sufficient data and design to satisfy Leighton or Optus Communications that the technical requirements of the specification and indeed of your tendered documents with regard to the Inergen system can be met.

You are advised that prior to commencing on site at this critical Optus facility further detailed and substantive evidence demonstrating compliance with the performance requirements of the technical specification is required. We also note the relaxation and assistance that Optus has offered to enhance the technical compatibility of the Inergen system to the environmental demands of the Optus facility in each area of risk.

The items required as a minimum to demonstrate technical compliance are: (i) Time plots and supporting calculations, algorithms and formulae for the temperature within the risk space during the full discharge period, presented for assessment by an independent consultant.

(ii) Variations for discharge rates reduced to 180 second, 360 seconds or longer periods as required so that the specification can be achieved for the equipment environment as well as meeting the fire suppression requirements.

(iii) Optus are concerned with system malfunction or performance out of the specified performance and look to Wormald for indemnification against equipment damage from such events and look to Wormald for comfort on this critical installation.

The issues that we feel are important to the calculations which need to be addressed in the demonstration of technical compliance and that have not been provided are: ….. ii) The incorporation of the known thermodynamic intention of the risk.

iii) The required differences between the entry gas temperature, the building heat load and thermal storage.

iv) Detail of heat exchange(s), safety requirements, the running costs, maintenance that is to be provided and certification of such items. …. It has been disappointing to date that only limited requests have been made to assist your design effort. Please advice Mr Phil McDonald of any information you require…….." 287 There was a meeting relating to the Inergen system between Tyco and Leighton on 12 November 1993. Messrs Scott, Hansen and Dunn were noted as attending on behalf of Tyco. Mr McDonald and others represented Leighton. The minutes of that meeting note that NDY was on the distribution list. The importance of the installation, in terms of the sensitivity of the equipment it was required to protect, was reflected in section 3 of the minutes which recorded the following: "Optus are seeking indemnity from Wormalds against damage caused by accidental discharge. The value placed on this indemnity by Optus risk managers is $50M, the calculated value of the loss of STC in the network." 288 Another item of significance in the light of subsequent events was section 5 which recorded as follows: "Commissioning and Test Procedure

Wormalds are to provide commissioning and test procedure indicating the points and methods to be used in the evaluation of the system performance on completion." 289 Finally, Mr Thomas' concern about the technical difficulties and economics of protecting all zones in the Rosebery centre was dealt with in the following terms at this meeting: "Gas Discharge Temperatures

Consideration should be gived [sic] to gas discharge temperatures in areas other than the switching area as the specification performance is required in all risks served by the system." 290 Those minutes were circulated on 16 November 1993. It is interesting to note Tyco's response to the contents of the minutes as circulated in relation to the indemnity. It was stated as follows: "We have relayed the Optus request of providing an indemnity to Head Office for consideration. We understand the indemnity is to cover thermal damage or losses caused by INERGEN temperature being other than that stated and agreed upon, in the case of an accidental discharge." 291 In relation to the critical path program for the Inergen system, it was noted that Mr Dunn was to calculate heat loading requirements of the Heat Exchanger, that Mr Hansen was to write a specification for the Heat Exchanger and Mr Scott had other responsibilities in relation to it. The specification requirement as to the temperature of emitted gas in all areas was acknowledged by Tyco in the following terms: "We agree that we are obliged to meet the specified temperature characteristics are [sic] working towards meeting the clients requirements. To date we have concentrated our efforts on controlling the gas temperature entering the switch and transmission area. We will prove this ability, size and cost equipment for this area and wish to further discuss the proposal for other areas." 292 In light of the Tyco specification prepared by Tyco for the MEF subcontract, I think there is some point in noting Tyco's response of 18 November 1993 to section 5 of the minutes of the 12 November 1993 meeting as follows: "We agree that it is Wormalds [sic] responsibility to nominate the testing requirements and we intend to nominate all facets of result measuring and recording and provide a written procedure prior to commissioning." 293 I think the examination of the Tyco specification demonstrated that Tyco fell far short of that intention, particularly in its nomination of hydrostatic testing of the shell and tube sides of the Heat Exchanger. 294 A meeting attended by Optus, Tyco and Leighton relating to the Inergen system was held on 24 November 1993, the minutes of which disclose that for some unexplained reason NDY was not on the distribution list. Mr Berents was one of Optus' representatives, Mr McDonald was one of three Leighton personnel present and Mr Thomas attended as one of several representatives of Tyco. 295 Optus has placed some emphasis on this meeting, with some justification. It was a lengthy one, lasting most of the morning of 24 November. The meeting was opened by Mr Michael Robinson of Optus providing a "brief history of the current status", in which he identified key issues as including the following : "The key issues being: s the criticality of the Sydney Technical centre to Optus network s the need for site protection and the nature of the equipment s the selection of the Inergen system as a fire suppression system on the strength of Tyco-Wormald information on the quoted 1C temperature drop for discharges in literature presented to Optus which was suitable to meet the technical demands of the installed communications equipment. s the critical operational tolerance being the rate of temperature change in the equipment space, measured 1.6m above the floor between cabinets, being less than 0.14C/minute s Optus has considered 1C drop as an acceptable risk for a discharge and wished to pursue the detail and had specified the requirements so as to protect the communications equipment.

…… s the notion of a large temperature drop (4C) on a discharge and then an upward temperature drift which was raised by Tyco, a possible worst case which had been recorded, this was not accepted by Optus and the specification was confirmed as originally required by Optus. s Tyco were asked to meet the specification and a water heater proposal was presented to heat the gas provided to the main risk. Optus in a meeting 6 weeks ago, expressed concern with maintenance, cost, area required for the system and risks associated with the system which effectively made this option unacceptable. Optus, at that time asked for alternative ways to solve the problems that Tyco had in meeting the specification.

….. s on the question of A/C system at STC, the existing characteristics were provided by Leighton, but element of the system is that it is designed to maintain 23.5C and less than 0.14C/min temperature change s Optus again stressed that the cost of the Inergen system would be a large portion of a system diversification and reduction risk to Optus network by the diversification would provide aspects of network protection that Inergen will provide." 296 Under heading "General Discussion" a wide range of technical matters were discussed on the subject matter of delay in meeting specification and the technical problems being encountered, during the course of which Optus made it clear that it did "not want a water heater". Mr Robinson was recorded as raising the following matters, which were responded to in the following manner: "2.37 MR [Mr Robinson] raised the issue of the areas of risk to be serviced outside the main switch room, being: A. Power Room, POI Room and main switchboard B. OSS computer facility C. FMC These areas being critical to the Optus operation. 2.38 RT [Mr Thomas] then clarified calculations will be for the switching and transmission risk only.

2.39 MR re-affirmed the character of these risks and that the requirements of the specification was for equal conditions and constraints on the operating environment in the switching and transmission. 2.40 BL [Mr Lee] stated this was a later addition to the specification and he had not been informed of this.

2.41 MR stated that this is not so, it had always been the requirement and the specification was identical for all areas.

2.42 RM - [Mr Robert Mann of Leighton] It may be possible in the small areas to install supplementary heaters to compensate for discharge.

2.43 RT agreed this may be a solution as heat outputs were less and he was not sure of them.

….. 2.62 PM [Mr McDonald] revised the contract requirement of a discharge test, this would test system function and also could confirm the calculations at that time. MR noted this will be a small area and it would limit the model value.

2.63 PM noted that test and QA will be part of the items required for the design and system installation. MR commented the test will be most probably POI, mainswitch (sic) and power room. 297 I think it is in point to note that the "Purpose" of the meeting was described as follows: "To review current status, engineering progress, programme and design issues to expedite works which have not been able to start due to design difficulties." 298 In that respect, I think it is somewhat surprising that NDY was not part of the meeting, or, at least, on the distribution list of the minutes. I think there is some significance in that absence of NDY from the process, in that almost the entire responsibility for formulating the design appears to have been undertaken by Tyco - not surprisingly, perhaps, since, on the view of Optus, it was Tyco's inability to meet specification requirements that led to this disruption to program and extensive difficulties in resolving design aspects of the Inergen system which translated, in time, into designing an effective heat exchanger for the Inergen system. 299 I have been left in little doubt that the problem of complying with specification was seen as Tyco's responsibility, not NDY's, and it was in that context that Tyco undertook the investigation and conducted the design calculations to meet the problem of temperature drop in the operation of the system, retaining Mr Dunn for that purpose. 300 Following the 24 November meeting Leighton was requested by Optus to consider the implications of terminating the Tyco subcontract. The situation was not improved by Mr Thomas' communication with Leighton of 7 December 1993 providing "TEMPERATURE DISCHARGE CALCULATIONS" for the project with an apology "FOR THE DISAPPOINTING RESULT". 301 Although Optus raised some criticism of Leighton's lack of involvement and in particular Leighton's failure to bring NDY into the exercise, I do not see that as a shortcoming of any significance, either on the part of Leighton, or NDY, given the nature of the problem which, I think, was entirely Tyco's. 302 Another aspect of the dealings between Leighton and Tyco, in this period in the last quarter of 1993, was reflected in the manner in which Tyco treated the exercise of complying with these specification provisions, which involved consideration of a heat exchanger, as being one within its expertise. There appeared no suggestion of which I am aware that Tyco protested to Leighton that they were operating in a field outside their sphere of expertise. Indeed, one of Leighton's complaints was that Tyco was not seeking sufficient, or any, assistance from Leighton in addressing this task. 303 It was not as though NDY was being ignored by Leighton for the provision of engineering advice. On 13 December 1993 NDY produced a highly technical report for Leighton "ON EQUIPMENT LOADS AT OPTUS CENTRAL OFFICES", they being the Optus offices in the mainland capital cities. As an indication of the nature of the report it was described as outlining: "the results of investigations into: s heat dissipation of Switch equipment and Transmission equipment. s space utilisation in the Switch and transmission area.

Present, medium term and long term equipment heat dissipation is estimated, and recommendations on modifications to the air conditioning systems are made." 304 I think NDY's position in relation to the introduction of the Heat Exchanger into the Inergen system may be gleaned from its non-involvement in the 24 November meeting and in Leighton's employment of its expertise in producing the report of 13 December. 305 A catalyst for some overdue performance by Tyco in relation to the Heat Exchanger came in the form of the facsimile from Leighton to Tyco (Mr Thomas) of 12 February 1994, which was in the following terms: "Optus have held internal meetings on the technical matters and solutions discussed at our last meeting.

Optus wish to meet next Wednesday 19.1.94 at 4pm at Leightons Lane Cove Offices.

At this meeting Optus require a report on the investigation and the final solution. This should be a 'return brief' on final system which will be installed with the gas heating system.

Optus require outlines on the operational costs including · Power consumption · Water Treatment Costs · Maintenance + others which may be intrinsic to the system as proposed" 306 The response of Tyco was that of 18 January 1994. It was accompanied by six appendices, namely: Appendix A - Assessment of heating requirements Appendix B - Energy transfer in pipe line and the theoretical temperature reduction in room model Appendix C - Computer generated flow calculations for the switch and transmission area. (non-temperature related). Appendix D - Equipment location sketch Appendix E - Draft heat exchanger specification Appendix F - List of recommended heat exchanger manufacturers 307 Appendix A included the report by Mr Dunn of 14 October 1995. The extent of technical material that accompanied the Tyco letter of 18 January 1994, gave no suggestion of a lack of expertise in the area in which Tyco was required to operate in assessing the requirements of the Heat Exchanger in relation to the Inergen system. 308 Section 2 of the letter summarised the "RELEVANT HEAT EXCHANGER DETAILS". The draft Heat Exchanger specification which accompanied this letter had its origins in material provided by Mr Dunn to Tyco. 309 On 19 October 1993, Mr Dunn sent to Mr Thomas a draft of a specification for a heat exchanger with a covering letter, hand written, in the following terms: " 19th Oct 1993

The attached specification is a draft of a CIG spec for one of their current projects. Please treat it with confidence. I do not have a copying machine at the moment, but would like the original returned to me. The contents should help Peter to draft up something for Tyco's own requirements. Some of the points are specific to CIG's project but most are general . It would be best if Peter modified the format and terminology, rather than copy as is.

For the Equipment data sheet, Peter can use the data from Fig 3 of my report. He will also need to either give the gas composition, or alternatively, Gas molecular wt, Density, Viscosity, Thermal conductivity and spec heat, which can be taken from the heat exchanger spec of my simulation model - Page 3. It would also be best to tell the heat exchanger supplier that the duty is for a 1 minute burst and is equivalent to a total energy input of 30kW. Solicit information/ideas from the potential suppliers for heating, insulation etc. & materials of construction. Due to the long standing of the unit - full of water, I would recommend S/S tubes in a C/S shell." (Emphasis added) 310 The reference to Peter is a reference to Mr Hansen. The draft CIG specification is in a format which makes it quite obvious that the draft specification provided by Tyco to Leighton on 18 January 1994 was a "general" one and that it was a scissors and paste version of Mr Dunn's draft CIG specification. The frontal piece of the Tyco draft is in precisely the same form of the frontal piece of the draft CIG specification. Each is divided into four parts with identical description, namely: "PART A CONDITIONS OF CONTRACT

PART D TECHNICAL DATA" 311 Each of PART B and PART D was subdivided into identical sections in each draft and the terminology is almost word for word and, in some cases, followed, slavishly, provisions in the CIG draft which had no application to the Inergen system Heat Exchanger. The most glaring example of a poor scissors and paste exercise is to be found in PART B in sections 10 and 11 identified, respectively, in each draft as "CLEANING AND PAINTING" and "INSPECTION AND TESTING". 312 In the body of the Tyco draft the heading of section 10 conformed with the 'contents' page as being in respect of cleaning and painting. However, the creator of this Tyco draft happened to miss the "cleaning and painting" provisions in the CIG draft and inserted, under that heading, the provisions from the CIG draft which belonged to the section "INSPECTION AND TESTING". Indeed, in the Tyco draft, the section numbering jumps from "10" to "12" and the clauses from 9.3 to 11.1. 313 As it happens cl 11.1 is of particular importance in the context of the issues raised in this litigation: particularly, so far as it touched upon the importance of hydrostatic testing of the Heat Exchanger, the need for a Tyco representative to be present and to be given the opportunity of prior inspection of "the internals". Cl 11.1 is repeated for ease of reference: "11.1 The Manufacturer is responsible for complete inspection in accordance with the stipulations of this specification and codes, however, the Principal reserves the right to inspect equipment at any time during fabrication to assure that the materials and workmanship comply with the above. The Manufacturer shall give the Principal ten (10) working days notice prior to making the final closure of the equipment prior to hydrostatic testing so that the Principal's representative may inspect the internals and witness the test." 314 As appears later in these reason, Tyco did not avail itself of the powers of inspection. I also note that the reference to "final closure" is at odds with Tyco's case in relation to the contention that the specification called for multiple tests. Mr Thomas was fairly extensively cross-examined on the circumstances in which this draft Tyco specification was prepared, Mr Thomas maintaining that it was the work of Mr Dunn. In my view, not much turns on whether, as Optus asserted, the draft specification was a poor scissors and paste version of the CIG draft and the handy-work of Tyco, or whether as Mr Thomas asserted, it was the product of Mr Dunn's efforts. 315 Mr Dunn was not called to give evidence. The objective fact is that the specification is a very poorly drafted document and one that an organisation of the standing of Tyco could not be proud of it bearing Tyco's imprimatur. Moreover, in the light of Tyco's stand in these proceedings, particularly in its contentions against MEF, EMAE and WorkCover, to the effect that separate hydrostatic tests should have been carried out on the several chambers in the bonnet of the Heat Exchanger, the specification is unquestionably misleading in its mindless copying of cl 9 of the CIG draft which is repeated for ease of reference: "9.1 The heat exchangers shall be hydrotested in the Manufacturer's shop prior to shipment. This test shall be conducted in accordance with the requirements of AS1210-1989 and local laws.

9.2 The water and exchanger metal temperature during testing shall be no less than 298 K. Hydrotest water shall have chlorides level below 10PPM (weight).

9.3 Hydrostatic tests shall consist of two separate tests. The shell and tube sides shall be tested independently without pressure on the adjacent side. All test pressures shall be maintained for at least twenty (20) minutes." 316 Those provisions were applicable presumably to a simple CIG heat exchanger such as one assumes from the reference throughout the specification to "heat exchangers" and the provision calling for "two separate tests", one on the shell side and one on the tube side. Tyco's case was not enhanced by efforts during the course of the proceedings to persuade witnesses to the view that cl 9 contemplated the multiple tests which Tyco contended were called for in the hydrostatic testing of the Heat Exchanger. 317 To the extent that any failure to carry out multiple hydrostatic tests had any part to play in the damage occasioned to Optus' property in the incident, Tyco, in my view, carried a very high level of responsibility for that failure: not assisted by its failure to witness the testing, notwithstanding the very specific specification provision obliging the manufacturer to notify Tyco prior to final closure of the equipment and prior to hydrostatic testing to permit inspection and to "witness the test". As it happens, the failure to carry out multiple hydrostatic tests, in my view, had no effect on the outcome of these proceedings. 318 Notwithstanding Mr Thomas' insistence that the draft specification was prepared by Mr Dunn, I am satisfied that it wasn't and that the scissors and paste exercise took place within Tyco's organisation. I think that is made evident from the form of the draft specification as well as the type script of the alterations which identified the source as being the Tyco Technical Services department. If some corroborative material was required for that conclusion outside of the draft document itself, it may be found in the fees rendered by Mr Dunn for his services which did not include preparation of a specification, as distinct from the process specification, part of the technical data incorporated in the draft specification. 319 Further, in Mr Thomas' supplementary statement of 21 June 2001, which was primarily concerned with design considerations in the Inergen system, his evidence was not as forthright on this subject as his evidence in cross-examination. In relation to the preparation of the Tyco specification for the Heat Exchanger, he stated that: "To the best of my knowledge, Peter Hansen, did not write the specification for the heat exchanger. That specification came about from a precedent heat exchanger specification which was provided to me by Joe Dunn….." 320 I do not regard Mr Thomas' evidence in this particular respect as a deliberate mis-statement. I do think it reflected an unwillingness to recognise objective facts which were, I think, contrary to his recollection. Generally, as a witness, I was not comfortable with the reliability of Mr Thomas's evidence, largely due to his willingness to be an advocate on behalf of Tyco and to what I perceived to be a faulty recollection. I thought his advocacy was marked and his memory quite faulty. 321 It was the evidence of Mr McDonald that Tyco's letter of 18 January, with its accompanying technical material setting out "the proposed heat exchanger requirements" was sent on to NDY. For the reasons earlier given, I am unable to accept that evidence which was not based on recollection, but on the practice to which he testified of passing on technical information to NDY. 322 However, NDY did not accept that it was provided with this material at that time and there was no independent record of material having been forwarded to NDY. Mr McDonald agreed that if it had not been sent to NDY that would have been an error. Mr McDonald's evidence was as follows: Q. It comprised, obviously, a whole lot of technical information? A. Yes. Q. Something you believe you would have passed on to NDY? A. Yes. Q. You said at page 2520: I would be surprised if a submission collated such as this wasn't forwarded to NDY. And you repeat later in the answer: It would be surprising to me if this wasn't, as a total document that summarised the issue, that it wouldn't have been forwarded on to NDY. A. Yes. Q. Why "surprise", Mr McDonald? A. What, surprised that it wouldn't have been? Q. Yes. A. Because, as a matter of course it was the intent or the practice, if you like, to forward on technical information to NDY. Q. The document, Mr McDonald, that the site manager should have forwarded on to NDY? A. Sorry, could you repeat that? Q. Yes. A document that the site manager should have forwarded on to NDY? A. No, what I was saying is that it is a - I guess I will put it in this fashion, and that is here is a document on 18 January 1994. Can I categorically remember, at this point in time, that I specifically sent this on to NDY? Honestly, I can't say that. But, what I can say is that it was a normal practice for us to forward documents of this type on to NDY. Q. Yes, and we have talked about why. A. Mmm-hmm. Q. Because it was the proper thing to do? A. Yes. Q. And what I'm putting to you is that this is a document that should have been sent on to NDY - don't you agree with that? A. I agree with that, yes. Q. If it wasn't sent on to NDY, that was an error. Do you agree with that? A. Yes, I would. Q. And it should have been sent on to NDY because it was the first time that you had got a form of technical heat exchanger specification from Tyco; correct? A. As far as a complete document, yes. Q. You said in your evidence that the detail of this document was explained to you - page 2481. You said: I should say I had this information explained to me via Wormalds or our consultants. In receiving this document I would have probably gone through the contents of it in a somewhat cursory manner and I would have had some of the more detailed concepts that you are describing explained to me by others. A. Yes. Q. You say, firstly, "explained to me via Wormalds or our consultants". Do you recall any explanation from any consultant or person other than Wormalds? A. No, I don't. Q. Who can you recall explaining something to you from Wormalds? A. I don't recall a particular person that the comment in the transcript was made in respect of. Obviously, there was an expectation of a submission. There would have been various informal discussions on when the submission was coming, what the submission was going to include, explaining the contents of it. By that I mean the general format - what does it mean in general terms. I wasn't, by that comment, inferring that the detailed knowledge was being explained. (T2692:52 - T2694:37) 323 I think that evidence is a very good illustration of Mr McDonald's openness in giving evidence. It is a matter of some surprise that there is no persuasive evidence that this material was given to NDY. It rather re-enforces the view that I have formed that the design responsibility for the Heat Exchanger, as distinct from the Inergen system, was treated by Leighton as the obligation and responsibility of Tyco in devising a means of achieving compliance with the specification as to temperature drop. 324 I think there is some significance in the nature of the material forwarded to various prospective subcontractors by Mr Scott during January 1994 in relation to the proposed heat exchanger. The sketch of the "U-TUBE HEAT EXCHANGER" forwarded to the prospective subcontractors on 24 January 1994, appeared to contemplate a single tube entering the shell side, although the "HEAT EXCHANGER HEAD CONFIGURATION" showed separate inlet and outlet "SEGMENTS" in the bonnet section accompanied by the note, "N.B. FOUR SEPARATE SEGMENTS PARTITIONED OFF". The thermal requirements originated from Mr Dunn. However, in my view, there was no sufficient indication that the proposed heat exchanger would not be charged with gas while the Inergen system was dormant. In fact, the material included notes of a single design pressure and a single "SYSTEM OPERATING PRESSURE". 325 It is common ground that the Heat Exchanger was required to operate in such a way that required full pressure bearing partition plates as it would not be charged with gas at all times and since each zone system was intended to operate independently of other zone systems. 326 However, I am not convinced that such a system was clear to the mind of Leighton at the time, as may be glimpsed in the evidence of Mr McDonald. Referring to the technical data forwarded to Leighton by Tyco on 18 January 1994, he gave the following evidence in cross-examination: Q. Is it your recollection that you would, at the time you were considering these matters in the first month of 1994, have informed yourself by reading this document of what I have just been putting to you? A. Not to the level that we are discussing it here, no. Q. Can I quickly take you to some -- A. I should say I had this information explained to me via Wormalds or our consultants. In receiving this document I would have probably gone through the contents of it in a somewhat cursory manner and I would have had some of the more detailed concepts that you are describing explained to me by others. (T2481:23 - 38) 327 He was further cross-examination on that evidence as follows: Q. Who can you recall explaining something to you from Wormalds? A. I don't recall a particular person that the comment in the transcript was made in respect of. Obviously, there was an expectation of a submission. There would have been various informal discussions on when the submission was coming, what the submission was going to include, explaining the contents of it. By that I mean the general format - what does it mean in general terms. I wasn't, by that comment, inferring that the detailed knowledge was being explained. Q. Well, may we take it that after you read this specification, and given what you had earlier learned in discussions about what was being proposed -- A. Yes. Q. -- you realised that what was being suggested was a heat exchanger which was divided into a number of zones? A. Yes. I was aware of that. Whether it was this time or soon after, I was aware of it. There were separate zones and they were to be operated independently. Q. If there was need, they could be operated simultaneously - all four zones; correct? A. Yes. Q. But a much more likely scenario was operation of one zone at a time? A. Yes. Q. That would involve, then, the gas being extruded from the Inergen cylinders through part of the heat exchanger to the relevant zone; correct? A. I presume so, yes. Q. Well, that is obvious, isn't it? Let me put it another way. A. Okay, I will retract that, yes. Q. It was obvious to you in January '94? A. On around that time, yes. Q. Obviously you knew that the gas was held under pressure in the cylinders? A. Yes. Q. Correct? A. Yes. Q. And that pressure would be reduced somewhere between the cylinders and coming out in the room? A. Yes. Q. And that the gas would be under pressure when it passed through the heat exchanger -- A. Yes. Q. -- or the relevant part of the heat exchanger? A. Yes. Q. And that the heat exchanger would be a pressure vessel? A. Yes. Q. And would need to be tested as such? A. Yes. Q. And, as you said yesterday, the vessel would need to be tested in the harshest expected conditions that it would be in in practice? A. Yes. Q. And so it would have been obvious to you, if you had thought about it - maybe you did, maybe you didn't - that what would need to be done is to test each part of the heat exchanger that serviced each of the zones in the STC? A. Yes. I don't believe that was my thinking at the time, but the logical explanation for what you are saying is yes. (T2694:25 - T2695:55) 328 Mr Scott had also noted on the technical data sheet the following: "BASED ON S.S WE REQUEST THE USE OF CARBON STEEL ANTICIPATING A COST SAVING" 329 That anticipation was misplaced having regard to earlier communications in which Optus made it clear that stainless steel was required because of the concern of corrosion. It is an indication, as submissions on behalf of Optus contended, that the circumstances that gave rise to the need for the Heat Exchanger prompted considerations of "cost saving" to enter into Tyco's approach to the design and fabrication of the Heat Exchanger. In that context it might be noted that the MEF quotation was for the price of $44,106.00 plus the cost of carrying out a thermal design review: a quotation that could be compared with a competitor's price of $69,200.00. 330 The level of development of the Heat Exchanger design I think was reflected in the letter from Tyco to Leighton of 4 February 1994, which, so far as is relevant, was in the following terms: "Further to our meeting of 2nd February 1994, we confirm below our advice re: the three (3) outstanding issues requiring resolution for the project to proceed past its current hold point. 1. Indemnity This issue was discussed at meeting of 19 January 1994 attended by Mr P. Berents (Optus), Mr B. Lee (Tyco) and Mr L Brown (Tyco). These parties reached agreement regarding indemnity. 2. Sequence of Operation Proposed sequence of operation is attached for discussion. This sequence has been drafted (i) to incorporate input from Optus and Leightons, whilst (ii) to maintaining the requirements of Australian Standards with only minimal deviation. 3. Proposal for Heat Exchanger As agreed the proposed heat exchanger is capable of heating all risks either simultaneously or separately. The units' size and performance has been based on a 3 minute discharge time.

The heat exchanger consists of a four way segmented head permitting gas passage for each zone through its own individual segment and U-Tube bundle. Each segment would have an inlet and outlet flanged connection eliminating the need for complicated directional valves as earlier discussed. This will also permit simultaneous operation of all four zones. …… Though full calculations for the three (3) remaining risks other than the switch and transmission area have not yet been completed, differences in the INERGEN temperature requirement for each risk can be accommodated by altering the flow rate through the tube bundle as well as via the number of tubes. ….. Wormald sketches 1 and 2 of 24 January 1994, which detail the unit, are attached. The feasibility of manufacturing such a unit has been confirmed by W E. Smith Engineering. Their correspondence of 25 January 1994 is also attached.

Based on our meeting of 2 February 1994 and the information detailed above, we seek your permission to proceed with the Contract in order that the following may be actioned immediately; - manufacture of the skid assembly, - finalisation of system pipework, design and calculations for all risks, and - development of a detailed specification in collaboration with LCPL for the manufacture of a heat exchanger.

Finally, we also enclose a summary of the costs associated with the development, design, manufacture and installation of the heat exchanger and would appreciate the opportunity to discuss with you the matter of these costs." 331 There was no evidence as to the terms of the agreement reached on 2 February 1994 on the indemnity requested by Optus. 332 The sketches referred to are those noted above as having been submitted to prospective subcontractors. The costs which Tyco wished to discuss with Leighton amounted to $111,914.00. Made up of $15,325.00 identified as "Labour to date developing proposal": $84,979.00, representing fabrication costs including electrical installation (based on the WE Smith Engineering quotation) and $11,610.00 for installation costs. There appeared to be no allowance made for thermal design costs as eventually incurred through Lummus. 333 The suggestion that the "development of the detailed specification in collaboration with LCPL for the manufacture of a heat exchanger" seems at odds with the way in which Tyco had been required to develop the proposal for the Heat Exchanger and it was not the recollection of Mr McDonald that "collaboration" occurred. 334 Tyco's 4 February letter was not sent to NDY until late in April in 1994. I think that is noteworthy as is the fact that a meeting took place on 14 February 1994 between Optus, Leighton and Tyco, the purpose of which was: "To Review Current Status, Engineering Process And Design Issues" 335 NDY was not present at that meeting and it was not on the distribution list of the minutes of that meeting. I think one is entitled to draw a strong inference that Optus and Leighton looked squarely to Tyco to come up with an appropriate design for the Inergen system and to implement the installation of a Heat Exchanger at Tyco's cost to enable it to meet specification requirements and did not look to NDY, generally, in that regard. 336 The site works construction meetings involving the Inergen system were minuted, the first of which is noted as having taken place on 18 March 1994. NDY was not involved in that process, either by attendance at any of those meetings, or as being on the distribution list of minutes. 337 It is not a case of NDY being completely sidelined, as may be illustrated by communications by Leighton to NDY respectively on 30 March and 6 April 1994 requesting engineering advice. In the first of those facsimiles NDY was requested to "comment" on a letter to Leighton by Tyco concerning technical details about "THREADED PIPE FITTINGS". The second of those communications also sought NDY's comment upon conformity with specification of certain "Quality Assurance details for the cylinders and valves". 338 Leighton's letter of 13 April 1994 to NDY forwarded a copy of Tyco's letter of 4 February. However, it appears to have been forwarded for information only, as nothing appears to have arisen out of the provision of that material to NDY. 339 On 31 March 1994 a meeting took place between Tyco and Leighton, the purpose of which was "To Discuss Execution of the Subcontract Agreement by Wormald". The meeting was minuted and NDY was neither present, nor on the distribution list for those minutes. It was recorded that the "occurrence" which had given rise to the meeting was the unwillingness of Tyco to sign the Tyco subcontract as they did not accept the subcontract price stipulated and wished to discuss the matters concerning the Heat Exchanger. 340 Mr Andrew Brink, on behalf of Tyco, explained its position in relation to the agreement and, not surprisingly, referred to Tyco's letter of 20 July 1993 in which it provided "clarification" in relation to "the temperature drop during discharge", a matter which found no reference in the proposed Tyco subcontract. 341 However, in the history of the dealings between Leighton, Tyco and Optus, Tyco had represented on several occasions that the temperature drop during discharge would not exceed 1°C. Tyco contended at this meeting that the "temperature constraint only applied to the main risk" area and that Optus had extended this requirement to all risk areas. Leighton agreed to take the matter up with Optus, Tyco having stated at the outset of the meeting that they were proceeding with the subject works and not awaiting resolution of contractual concerns. 342 The follow up meeting took place on 6 April 1994, again, attended only by representatives of Leighton and Tyco. The matters discussed at the meeting were minuted and NDY was not included in the distribution list. At this meeting the Tyco representative in discussing the specification provision for a "0.14°C temperature gradient" expressed the view that it was thought within Tyco to be a typographical error. It is of some significance, I think, that Mr Thomas is recorded as stating he "did not contest that the Head Office representations to Optus were for a temperature drop during discharge to be no greater than 1°C." However, he asserted that Tyco was "referring to the equipment temperature i.e. if you put a thermocouple on the equipment." He added that if Optus treated the statement as referring to "ambient temperature then (that was) a different issue". 343 Mr Thomas defended that statement during the course of his evidence and has been criticised by counsel for Optus for doing so: with some justification. During cross-examination by counsel for EMAE, Mr Thomas adhered to the contention that the representation concerning temperature drop did not refer to room temperature. In prior cross-examination by counsel for Leighton, Mr Thomas had given the following evidence: "Q. Is this the case, Mr Thomas, that at least up until the middle of 1992, in setting out the basis upon which Tyco would supply an Inergen system to Optus for the building at Rosebery, Tyco was conveying to Optus that the reduction in room temperature effected during the discharge of the gas was going to be less than 1 degree Celsius? A. Yes, I agree." (T3735:47 - 55) 344 In respect of that answer Mr Thomas was cross-examined by counsel for EMAE as follows: "Q. What you were saying was that right back to the middle of 1992, the specification in effect was a reduction in room temperature of not more than 1 degree Celsius? A. Yes. Q. Can I ask you to go to exhibit 1.233 in folder 5, page 1763? Do you have that? A. Not yet. Q. Do you have it now? A. Yes. Q. That's minutes of a meeting at which you were present? A. Yes. Q. If you go over to 2.2, it is referring to a statement made by you? A. Yes. Q. It is about this temperature drop, isn't it? A. Yes, it is. Q. It records that you said that Wormald were referring to the equipment temperature: that is, if you put a thermocouple on the equipment, rather than the room temperature? A. Yes. Q. Did you make such a statement on that day? A. Yes. Q. That's inconsistent with what you knew to be the fact, is it not? A. No, I don't think so. Q. You see you were saying there it wasn't about room temperature at all it was about equipment temperature, when you knew that in truth it was about room temperature? A. The temperature change with Inergen, we had demonstrated even on a discharge to Optus, in the room to be about 2 degrees, I think on that day - 2 or 3 degrees on that day. The head office overheads did have 1 degree - less than 1 degree, rather, but normally we would have measured that temperature in the equipment that we were protecting, rather than say near the nozzles, where of course it would be much colder. Q. But Mr Thomas, this was a meeting at which there were discussions about incorporating a heat exchanger and who would pay for it. Do you agree with that. A. Well, I'll take your advice on that, rather than read the whole document. Q. The following day you did agree to pay for it, didn't you? Would you like to look at the minutes of a meeting, namely, exhibit 1.234 at page 1768? A. 1768? Q. Do you have exhibit 1.234 at page 1768? A. Yes. Q. Have a look at page 1769, in 1.2. A. Right, yes. Q. Do you agree that at that meeting, I think on the following day, at which you were present, that Wormald agreed to bear the cost? A. Yes, I agree. Q. I am suggesting to you that at the meeting the day before you were trying to avoid responsibility by saying that the 1 per cent related to equipment temperature and not to room temperature? A. Well, I recall the specification from NDY or for Optus specifying 0.14 degrees and therefore that's a very difficult goal to achieve and because we had not allowed for this heat exchanger, yes, I believe that it was a fair claim to achieve that 0.14, that we would ask Optus to pay for the heat exchanger. However, of course, Tyco's head office agreed otherwise. Q. Can I ask you to go to exhibit 1.113 in volume 4 at page 1044? A. Yes. Q. That's your document, isn't it? A. Yes. Q. From September 1993? A. Yes. Q. Long before the two meetings that I have just been asking you about? A. Yes, that's right. Q. In that document, in line 5, you refer to ambient temperature not to drop more than 1 degree centigrade? A. That's right. Q. That's room temperature, is it not? A. Well, we measured that room temperature, as I said earlier, normally within the equipment. Q. But - I am sorry - in line 2 you actually refer to "room temperature dropping less than 1 degree centigrade"? A. Yes, that's correct. We referred to that as "room temperature" but, as I pointed out earlier, we measured that room temperature normally in proximity or inside the cabinet. It doesn't normally make much difference, but the difference, of course, is that the gas is warmed very slightly because the cabinet itself has some residual heat. HIS HONOUR: Q. With halon isn't there a very substantial drop? A. Yes, that's right and I think that's important to remember when we were drafting this, we had normally been dealing with temperature drops with halon of 15 degrees Celsius during a discharge, which is of course 10 seconds. With carbon dioxide, which has a discharge time of over a minute, we would be looking at temperature drops in excess of 20 degrees C, often going to the minus, and with Inergen, because it is a compressed gas and not a liquid, we are looking at temperature drops significantly less and whether it is 1 degree or 4 degrees or 5 degrees really depends on just the circumstances of the room and the amount of heat in the room. We have run a number of discharge demonstrations and on some days - warm days - the temperature drop was around 1 degree, on colder days it was more, but I do recall demonstrating Inergen for Optus and, as I said earlier, I think it was about 2 or 3 degrees on that particular day. Q. But doesn't that suggest that there is a very clear distinction between temperature drop, say in the case of halon - A. Mmm-hmm. Q. -- and the temperature of the equipment? A. Yes, which is why we would normally measure either just above the equipment or even in the equipment, because if you are talking about a temperature drop of 15 degrees in the room, then inside the cabinet is really important because there could be a greater differential with halon between the room temperature and the cabinet temperature than there is with Inergen because the temperature drop is not so significant." (T4375:18 -T4378:9) 345 Whatever Tyco intended to convey in pre-tender representations to Optus there is no doubt in my mind that what was, in fact, represented was a quality of Inergen gas that enabled it to be discharged with the consequent ambient temperature drop of less than 1°C. 346 There is virtually no room for debate about the nature of the assertions made by Tyco in its literature and in presentations to Optus. It was clearly referring to room temperature and was concerned with the effect of a drop in temperature in terms of condensation on the Optus equipment to be protected. Mr Thomas' evidence on this subject matter was one of the more unimpressive aspects of his evidence. 347 While I think that Tyco had a ground for some argument with Leighton over the permissible temperature gradient having regard to the terms of Tyco's 'clarification' of this aspect in its tender proposal, that was no justification for trying to avoid the responsibility for the unambiguous statements being made about the temperature drop to Optus during 1993. I think that, at the meeting of 6 April 1994, Mr Thomas recognised the misleading nature of the information given to Optus in the following exchange between him and the Leighton representative: "2.6 Roger (WFS) advised that Wormald promised 1°C temperature drop during discharge (of the equipment) and Optus took as 1°C ambient temperature drop. When asked by Leighton who he considered to be at fault over this misinterpretation Roger (WFS) considered this to be Wormald's fault. The 0.14°C gradient was never offered by Wormald according to Roger (WFS). Optus being an important client to Wormald, Wormald then proceeded with finding a solution to the problem and would discuss costs later. According to Roger (WFS) "later" is now." 348 There was further extensive discussion at this meeting over the permissible temperature gradient and the meeting ended with arrangements to have a meeting the following day with Optus. That meeting was not attended by NDY, nor was it on the distribution list of the minutes of the meeting. I think that the content of the discussion at that meeting is significant in the clear terms in which it was made apparent to Leighton and Tyco of Optus' concern for the safety of its equipment and in particular the sensitivity of its equipment to moisture. It also revealed Tyco in the role of expert, both, in relation to the Inergen system and in the provision of heat exchangers in conjunction with gas based suppressant systems. 349 In relation to cost, the position of Optus was that it should have no responsibility for the cost of the Heat Exchanger. Tyco was more conciliatory, proposing that Optus and Tyco should share that burden. The general discussion partly covered the history of communications concerning temperature gradient in relation to discharge of the Inergen gas: in particular, the relaxation by Optus of the specification requirement of 0.14°C per minute temperature gradient to a 1°C reduction in temperature and to an extension of the discharge time to three minutes. 350 Mr Bayley expressed Optus' aversion to the Heat Exchanger, in principle, in terms of its ongoing costs and the "additional risk" which it represented to the Optus equipment. 351 The following exchange then ensued between Mr Lee and Mr Bayley which, I think, is of importance: A. Barry Lee (WFS) admitted that the heat exchanger is Wormald's choice to comply with the spirit of the specification. Barry further stated that this principle (of the heat exchanger) is not new to Wormald Fire Systems. Both overseas and within this country Wormald have fitted similar heat exchangers to CO2 systems. Both the risk of the heat exchanger and its running costs should be minimal to Optus. B. Rick Bayley (Optus) responded that the Optus concern with the heat exchanger is that of the risk of a tube blowing out with subsequent water in the gas line. The thought of water being introduced to the risk areas is totally abhorrent to Optus." That is evidence which was not subjected to challenge. 352 I think it is very difficult for Leighton and Tyco to profess to having any doubt as to the particular sensitivity of the Optus equipment to moisture. Equally, the statement by Mr Lee as to Tyco's expertise in relation to heat exchangers is the context in which claims of Tyco's non-expertise in that area, as surfaced in these proceedings, should be viewed. 353 The concluding remarks at the meeting envisaged a requirement that Leighton was to confirm acceptance of the Heat Exchanger specification and Leighton was also to "schedule a meeting between Wormald and Norman Disney & Young to conclude any shop drawing issues that are holding up approval of these drawing (sic)" It was noted that no shop drawings had been approved. 354 Accordingly, on 13 April 1994 Leighton forwarded to NDY, for its "approval", drawings marked SCO/WFS/F5001 and SCO/WFS/F5002. Those drawings were drawings of the Inergen pipe work lay out. Revision A of the first drawing and revision B of the second carry a number of handwritten notations on them by NDY. 355 In the case of F5001 there is a notation by Mr Raddatz that the drawing was to be modified in accordance with amendments noted on it and was to be resubmitted for further inspection prior to construction. F5002 has a note by Mr Raddatz that it had been inspected for compliance with general arrangement and requirements specified under the contract with required amendments noted on it. It concluded with the following notification: "Dimensions, co-ordination with associated plant and all other services and site conditions, compliance with statutory regulations and compliance with specified requirements, remain the responsibility of the contractor." 356 The drawings are not concerned with the Heat Exchanger and I think this may be taken as an indication of the differentiation to be made in respect of NDY's consultancy responsibilities in relation to the Inergen system as distinct from the Heat Exchanger. Drawing 5008 was an "arrangement" for the water tank heat exchange and pump and showed NDY as a consultant. The 5000 series did not include construction drawings for the Heat Exchanger. 357 On 21 April 1994 MEF was again requested by Tyco to quote on the Heat Exchanger. I am not aware of any evidence explaining why the quotation of WE Smith Engineering, which made up Tyco's cost submission to Leighton of $111,914.00 in Tyco's 2 February letter, was dropped in favour of the request for a formal quotation from MEF in Tyco's letter of 21 April 1994. The quotation was "for design, WorkCover Authority Submission, Fabrication and Supply of one……Shell and Tube Heat Exchanger, in accordance with requirements detailed below and in the attached Technical and Process specifications Part A and B". 358 Among the matters "detailed below" was the following: "Overall period for unit fabrication is critical and time in days from receipt of official order to completion is to be noted in offer" 359 The nominated representative of Tyco was Mr Scott. The specification was a further scissors and paste production of the January 1994 draft with Part B from the January draft becoming Part A and the remainder of the documents being described as Part B. That was effected by a whiting out process on the January draft and by the handwritten insertion of Part A for what had been Part B and the handwritten substitution of Part B for what had previously been sections C and D. 360 The level of care taken by Tyco in re-casting this specification may be measured by the fact that the shortcomings, some of which were glaring, in the January draft were preserved in the April specification (Schedule Q). 361 On the same date as the request was submitted to MEF, Leighton communicated with NDY in the following terms: " As you are aware, lengthy discussions between Optus/Leighton/ and Wormald have taken place to discuss the issue of Wormald being unable to comply with specification requirements in respect to temperature change during discharge. Agreement has been reached between the parties, and as part of this agreement, Optus has approved a relaxation of the specification. Accordingly, the agreed changes to the performance requirements of the specification by Optus are appended to this memorandum. Can you therefore review the contents of this amendment for consistency with your document and prepare an amendment to the technical specification in accordance with the attached. Can you please provide on 22 April to allow issue of the Subcontract Agreement to Wormald." 362 The changes which were "appended" were in the form of an amendment to the NDY specification which became amendment No 1. It included provision for the inclusion of the Heat Exchanger with the Inergen system and the relaxation of the specification in relation to temperature change, as set out earlier in these reasons. For ease of reference the amendment in relation to the inclusion of a heat exchanger was in the following terms: "Should the Subcontractor's design of the Works, to comply with the performance requirements of the specification, include a heat exchanger, such a heat exchanger shall be designed in accordance with the requirements of AS 1210-89." 363 NDY was requested to respond by the following day. 364 It is a matter of some curiosity that there appears to be no response by NDY to Leighton's request of 21 April 1994 for a review by NDY of the proposed amendment in the NDY specification. Mr Raddatz had no recollection of having discussed it with Leighton, although it was his recollection that he reviewed the draft and "had no difficulty with it". 365 The Tyco request for the quotation from MEF departed from the January inquiry by calling upon MEF for a quotation to include both thermal and mechanical design. In responding to that, MEF sent the following facsimile to Lummus on 21 April: " Following is enquiry from Wormald for a heat/exch. This is an ongoing thing. Originally they gave us a firm (?) design except for material thicknesses. They had had the thermal design carried out by somebody. It was an ODD design - vertical 'U' tube unit. Now they have come back to us and asked us to do both thermal and mechanical design + the unit is now horizontal. Could you look at it and see that it is not too small for your scope of design. I will send with this fax all their relevant data and sketch of the original design…… " 366 The process specification of Mr Dunn (forming part of Part B of the Tyco specification) contained a description of loads required to be accommodated by the Heat Exchanger which have been the subject of considerable debate in these proceedings. The "Total Maximum Duty" was particularised in the process specification. Then followed a description of "Individual Loads" which is set out below for ease of reference: "The total duty is to be split into 4 individual loads, which may or may not occur at the same time, thus

Load 1 = 2539 sm3 (3681 Kg) In 3 minutes = 53.5 KWh Load 2 = 317 sm3 (458 Kg) In 3 minutes = 6.7 KWh Load 3 = 317 sm3 (458 Kg) In 3 minutes = 6.7KWh Load 4 = 477 sm3 (886 Kg) In 3 minutes = 10.0 KWh 3850 sm3 (5263 Kg) 76.9 KWh

Each gas flow must be kept separate from the others and appropriate manifolding of the gas inlet/outlet is required to achieve this.

3. None of the heat loads are constant during the 3 minute period, but are of varying flow and varying energy, and are of a decaying nature as illustrated by the attached Table 1 for Load 1. The total load and other individual loads are all proportional to Table 1. Flow variation is the result of the gas being released from banks of pressurised gas cylinders, which not only results in a falling pressure but also a reducing flow and initially a falling temperature.

4. It is proposed that the heating requirements be accomplished by passing the gas through a number of U-tubes contained in a water bath or Heat Exchanger shell (eg. TEMA type AEU). …… Average suggested conditions for design of Load 1 are shown at the bottom of Table 1. Total load and individual loads can be scaled appropriately for the same average temperature and pressure ranges, thus

Load 1: 846 sm3/min (73216 Kg/h) @ 33.52 bar(a) from -29° to + 33.3°C Load 2: 106 sm3/min (9152 Kg/h) @ 33.52 bar(a) from -29° to + 33.3°C Load 3: 106 sm3/min (9152 Kg/h) @ 33.52 bar(a) from -29° to + 33.3°C Load 4: 159 sm3/min (13728 Kg/h) @ 33.52 bar(a) from -29° to + 33.3°C TOTAL: 1217 sm3/min (105248 Kg/h)

Supplier to advise also the theoretical gas outlet conditions per 10 second interval for full 3 minute period for each individual loads operating time.

Shell or bath to be designed to accommodate the total water requirements, as no external water is to be supplied, other than make-up for evaporation losses, eg. 2210 kg of water with permissible temperature drop of 30° (80° start, 50° final) would be required for the total load duty of 76.9 KWh.

Suggested temperature range in water is 80° to 50° (T = 30°C). However, if this leads to storage of water greatly in excess of volume provided by normal heat exchanger shell design, then an alternative water temperature range 80° to 30° (T = 50° could be considered to reduce water storage volume. This will, however, result in a smaller MTD and correspondingly more heat transfer area. Design to be optimised.

If pump is recommended for close circulation of the water to enhance heat transfer, supplier is to specify the required pump head and circulation rate.

Customers preference is for no pump using the water content of the shell or bath as the heat sink.

Exchanger to include a 5 kW electrical heater and thermostat to heat the water and maintain water temperature at 80° whilst not in service.

Allowable gas pressure drop for each rospective (sic) bank of tubes not to exceed 2 bar, at average design flow conditions.

Maximum operating pressure in fced (sic) gas = 60 bar(g)."

Table 1 described "Average conditions during the Incremental timer period" and showed quantity and rate of feed of gas and associated pressure and temperature conditions on an incremental basis over a three minute period. Part B also envisaged inclusion of "DRAWINGS" and "DOCUMENTATION". However, Part B noted that no drawings were supplied and documentation simply invited reference to the "accompanying letter of invitation". 367 Under the April amendment of the NDY specification for the Inergen system the date for completion of the system, including "commissioning and testing, and including submission of all Operation Maintenance Manuals for the Works", was amended to 15 August 1994 with the Works being brought to a stage ready for testing by 31 July 1994. 368 Optus formally approved the amendment by facsimile of 28 April 1994 to Leighton and on the same date that amendment as approved was forwarded to Tyco by Leighton with a revision of the Tyco subcontract. 369 Whatever the contractual position between NDY and Leighton, it is apparent, in my view, from the foregoing that NDY was not called upon, nor was it expected, to contribute to the thermal and mechanical design of the Heat Exchanger prior to and at the time that the amendment of the Tyco subcontract took effect in April/May 1994. That much is evident, I think, from the form of the Amendment 1 to the specification as submitted to NDY by Leighton. It did not call upon NDY to have any input into the specification of the mechanical and thermal design of the Heat Exchanger, other than to approve the suggested amendment that it was to comply with AS1210-89. 370 It was not suggested that Tyco at any time provided the Tyco specification to NDY, keeping in mind that Tyco has a cross-claim in negligence against NDY. I think it is also significant that its specification had been prepared without reference to NDY and was submitted to MEF without any input or approval by NDY. 371 As earlier noted, subcontracts were entered into in May 1994 comprising the Tyco subcontract, the MEF subcontract and the Lummus subcontract. EMAE's followed on 14 June: a delay that exacerbated the urgency in which the MEF subcontract was let. 372 It was contended on behalf of Optus that Leighton had been neglectful in failing to provide the Tyco specification to NDY. Optus has some justification in offering that criticism in the context of evidence given by Mr McDonald in cross-examination. His evidence is another demonstration of Mr McDonald's willingness to make concessions against interest. His evidence was as follows: Q. And if you didn't get them to review it in this context, that would have been a very, very big mistake, wouldn't it? A. It would have been, yes. …… Q. Is it the fact, Mr McDonald, that following the meeting of 7 April, you went through this technical specification and read it? A. I don't have a distinct recollection one way or the other. Q. Notwithstanding the minute recording the fact that Leightons were to confirm acceptance of the specification by 12 April, do you say you are unsure whether or not you read it after the meeting? A. What I'm saying is that I don't have a recollection of doing so. HIS HONOUR: Q. Whose responsibility within Leightons would it have been to do that, are you able to say? A. As I wasn't a party to or heading up the group to resolve this issue, my design manager at the time was in a better position to resolve it than what I was. That was his task. MR GREENWOOD: Q. Do you mean by design manager, Mr McKnight, do you? A. Yes. Q. Are you aware of anybody within Leightons actually reading or considering this specification following the meeting and prior to 13 April? A. As I said, I can't recall the exact details referred to or all the details referred to in the meeting. The document was given at the meeting. When it was exactly reviewed - the document was issued at the meeting. Q. You can recall that, can you? A. No, no, I'm saying if it was, obviously it was there for the purpose of reading, but I don't have a recollection of it. I can't say something about it that I don't recall. Q. Well, would you not, following the meeting and having heard the concerns from Optus, have wanted to read this specification to check about the way in which you could be sure that water would not be introduced into the STC through this piece of equipment? A. I don't think that it would be at the forethought of my mind in drawing that link at that point in time in the project. A specification is given, you know, there's mechanical considerations, all sorts of things. I don't think I would zero in on something like that at the time. Q. Could you zero in now to page 1733 of this specification where it says, at 12.1: Each item of equipment shall be completely drained and thoroughly dried so that no moisture remains in any part of the unit. Do you have any recollection of reading that shortly after the meeting of 7 April and saying to yourself, "Gee, good, good to see it, that's what we need" or anything like that? A. There's obviously a lot of documents at this point in time. I can't honestly recall the specific details. That doesn't come to mind at the moment, no. Q. Does anything come to your mind about checking to see whether the specification adequately provided for testing or checking of the heat exchanger so that water would not be introduced into the Inergen system? A. That's this specification? Q. Yes, or anything else. A. Not immediately after this meeting, no. Q. Or at any time? A. The issue of cleanliness of pipework was an issue that was known to me and I think it was, how can I put it, intrinsic or common understanding that a performance requirement of the system was not such that water was to be sprayed out of the nozzles. I don't have a specific recollection at any point in time, but I had a knowledge and an understanding that - obviously I had a knowledge and understanding that a requirement of the system was not to have water spraying out of things. (T2714:19 - T2714:22; T2716:16 - T2717:52) 373 I think it is fairly clear that Leighton paid little attention to the Tyco specification, given that it was marked by poor and careless drafting that went un-commented upon by Leighton. I am not so satisfied that the fact that Leighton did not forward the Tyco specification to NDY was any dereliction of its responsibility to Optus in relation to the design and fabrication and installation of the Heat Exchanger. 374 I think the conclusion is inescapable that Optus was prepared to meet Tyco to the extent of agreeing to a relaxation of the NDY specification requirements in relation to temperature change in connection with discharge of the Inergen system. However, that relaxation was, in effect, conditional upon Tyco complying with specification, at its own cost, by supplying the Heat Exchanger within the contract price of the Tyco subcontract. 375 In other words, Leighton and Optus, I think, looked to Tyco to satisfy its obligations and to accept full responsibility for compliance with the NDY specification by providing an appropriate heat exchanger. In my view, it is an idle and artificial exercise to regard NDY's obligations to provide consultant services in relation to the Heat Exchanger, as distinct from the Inergen system, in terms of the services enumerated in annexure E to either the 1993 or the 1994 consultant agreement: given what I regard as the deliberate exclusion of NDY from the thermal and mechanical design considerations of the Heat Exchanger, by all parties, up to the stage of commissioning of the Inergen system and NDY's certification of the Inergen system in August 1995. 376 The role of EMAE, in considering the facts upon which the various parties have attributed liability one to the other for the consequences of the incident, I think, is pivotal in the correct approach to those respective cases. No witness from MEF or Lummus has been called, as to which Tyco I think must bear the brunt of any adverse consequence that may flow from that failure. It is the only party to raise a positive case in negligence and in contract as assignee of MEF's claims against EMAE. The other cross-claimants, namely WorkCover, Leighton and NDY bring cross-claims by way of contribution in the event that any one of those parties is found liable in these proceedings. In the case of NDY, it expressly made no submissions in relation to its cross-claim against EMAE. 377 Much of Tyco's case against EMAE was based upon a construction, in hindsight, of the Tyco specification, with all of its imperfections, which it was said, that the partition plates were required to be full pressure bearing plates. The simplest way of proving what the Tyco specification, in fact, conveyed to MEF was to call the officer of MEF charged with the responsibility of carrying out the MEF subcontract. 378 The principal of EMAE was John Edward Morrison. He founded the company some years ago. Prior to that he had spent most of his professional life employed by WE Smith Engineering and by CSR Chemicals in various design and management roles, spanning a period of approximately thirty years. 379 As a witness, he presented as one that was as open and frank as one could ever expect of a witness. He was straightforward in his replies without embellishment, his responses were prompt without any semblance of prevarication. His only interest appeared to be in giving truthful evidence, whether it was against, or in his interest. He also impressed as a highly experienced and competent professional person in his field. 380 If I had to offer a qualification on the reliability of his evidence, it would only be to suggest that forceful cross-examination on occasion produced concessions that I would not be prepared to act upon. Otherwise, I accept his expert opinion evidence. 381 In his evidence, he used terminology which, to some extent, varied from that which was adopted in the evidence. Amongst his definitions relating to a heat exchanger were the following: Bonnet Describes the entire outer casing of the channel, consisting of the barrel and the dished end. Channel is that part of a heat exchanger into which tubeside fluid ( in this case, gas) first flows before being directed into the tubes, and into which tubeside fluid flows after passing through the tubes. Both the tubeside inlet nozzle and the tubeside outlet nozzle are connected to the channel which is divided by a partition. ….. Shellside describes the area of the heat exchanger within the shell but outside the tubes. ….. Tubeside describes the area of the heat exchanger within the tubes and the channel.

382 The role of a designer such as EMAE was described by Mr Morrison as follows: "10. EMAE's role as the mechanical designer is to calculate the thickness of some of the components in the heat exchanger, design some of the components in the heat exchanger and arrange for a design drawing to be prepared depicting those calculations and designs. The calculations and designs are based on specifications supplied by EMAE's client and the applicable industry design standards. Emae's (sic) client is usually a manufacturer which has been engaged to design and construct a component to the instructions of a main contractor who is turn has been engaged by the end user or owner to oversee the overall design, manufacture, installation and commissioning of a system containing the component.

11. I rarely, if ever, see the manufactured component or the system into which it is incorporated nor do I usually have any contact with the main contractor, the process designer, the thermal designer or the end user.

Emae is also a verifier of the mechanical design of pressure vessels/heat exchangers that have been produced by other engineers. This involves Emae independently checking the mechanical design of pressure vessels/heat exchangers on behalf of the manufacturer or designer. Emae is also accredited by WorkCover NSW to approve designs on its behalf.

In my experience, a process system will usually comprise a number of different specialist components, each designed by different designers from different companies, each specialising in the design of different types of component. The main contractor will then fit the different pieces of the jigsaw together to complete and commission the system. Emae's role is therefore to provide one specific piece of an overall jigsaw, in accordance with the instructions of Emae's client and applicable industry standards.

Whilst the specification which Emae receives will sometimes contain sufficient information to enable me to identify the nature of the system into which the component will be incorporated, this is not usually the case. If there are any particular design or operational peculiarities of the system which impact on the component Emae is to design then it is imperative that this is drawn to my attention either by a clear statement in the specification or by my client directly advising me of these design considerations so that I can take them into account when I design the component." I regard that evidence as an authoritative description of the role of a mechanical designer of a vessel such as the Heat Exchanger. 383 The relationship between the mechanical designer and the thermal designer in relation to heat exchangers he described as follows: "18. The thermal designer's role is to design so much of the heat exchanger as is necessary to ensure that the required heat is exchanged. This requires the thermal designer to have knowledge of the quantities and properties of the fluids involved. The output from the thermal designer (some of which may be given to the thermal designer by its clients) includes the design pressures, the design temperatures, and the corrosion allowances which are to apply, the diameter of the shell, the diameter of the channel, the shell and tube configuration, the number of Tubeside Passes , the diameter, thickness, length, spacing and tube pattern of the tubes, the type, length and spacing of the baffles and the materials to be used. That output is usually presented to the mechanical designer in the form of a thermal design data sheet and a tube layout diagram." I regard that also as an authoritative description. 384 Mr Morrison had enjoyed a business relationship with MEF which dated back to the "early 1970's" in providing designs and drawings for heat exchangers and other pressure vessels, until 1992, when MEF established its own mechanical design department which resulted in commissions to EMAE dwindling. The method of communication between EMAE and MEF was by facsimile, they being situated some 100 kilometres apart. His point of contact with MEF was Mr Norbert Zahradnik. 385 Early in June 1994 Mr Morrison received a facsimile from Mr Zahradnik informing him that he was sending up an "URGENT JOB TO START NEXT WEEK TEMA R Class BEU". The facsimile described the proposed unit as complex and stated that Lummus was still working on the thermal design. Mr Morrison was requested to provide tube sheet thicknesses urgently. Some technical information followed which included a statement that the material was to be of carbon steel. 386 It is interesting to note that Tyco had been pressing for some months, without success, for acceptance of carbon steel in a cost saving exercise, as against the use of stainless steel which Optus required because of corrosion concerns. It is apparent from the material provided by Tyco to MEF that Tyco was still proposing the use of carbon steel. 387 The reference to TEMA is a reference to the Tubular Exchanger Manufacturers Association, an American based industry group which produced a quality standard for construction of heat exchangers. The description of the heater as being a BEU type meant that "it would have U-tubes, a single tube sheet and dished ends on both the shell and channel". 388 In general terms, Mr Morrison described the nature of the information supplied to him as follows: "The information supplied to me did not lead me to believe that the Wormald Heater was anything other than a standard type BEU unit which had some additional channel nozzles and a correspondingly complicated tube bundle arrangement. In my 40 years of experience, channels have always been fully pressurised simultaneously in all compartments. Neither the Tyco Specification nor the Lummus data sheet, tubeside layout diagrams or notes specified that all parts of the channel would not be simultaneously pressurised. Further Metropolitan gave me specific instructions regarding partition thickness." (Emphasis added) 389 Of the function of the partitions in the bonnet chamber the following evidence of Mr Morrison is of particular significance, namely: "71. I was completely unaware that some of the partitions were in fact primary pressure containing components and would be subjected to the full tubeside operating pressure, as there was nothing identifying this in the information supplied to me and it was contrary to my 40 years experience as a designer of heat exchangers.

72. Partitions in the channel are non-pressure internal plates whose function is to direct flow. In my experience, they are not pressure parts. This is illustrated by the section of the Australian Standards Manufacturer's Data Report form shown on page 280 of AS1210 . Here the details for the pressure parts of the channel are to be listed in the section from item 27 to 31 inclusive, but there is no reference to partitions either here or elsewhere on the form. The Wormald Heater is, as I was only later to become aware, an exception. A copy of page 280 of AS1210 is attached as Appendix 4 [EX 3.003 p0571]." (Emphasis added) 390 I accept that evidence of the conventional nature of pressure vessels, of the effect of AS1210 and the deficiencies in the Tyco specification. Australian Standard 1210 was the Australian Standard specified by Tyco in the Tyco specification in cl 7.4, that being the "MECHANICAL DESIGN" specification provision. To give added weight to the significance of the absence of any specification by Tyco that the partition plates would not be conventional "non-pressure internal plates" Mr Morrison drew attention to the provision of paragraph RCD-9.134 of the TEMA standard, upon which he commented as follows: "73. Paragraph RCB-9.314 of TEMA stipulates that: "Special consideration must be given to reinforcement or thickness requirements for internal partitions subjected to ….. extreme differential pressures….. specified by the purchaser". No special conditions concerning the partitions generally or concerning the differential pressures to which the partitions might be subject were specified by Tyco or Lummus in the specification or data sheet or in any other documentation provided to me, or mentioned by [MEF], during discussions. No numerical value was given for either the calculated pressure drop or for the allowed pressure drop, these and other quantities being merely indicated as "varies", so I did not expect them to be significant, especially with a low viscosity material like gas. I was not informed that some of the partitions were to be subjected to "extreme differential pressure"" That evidence is accepted as a reliable description of the content of the technical material referred to. 391 The purchase order of Tyco dated 14 June 1994, as accepted by EMAE, represented the EMAE subcontract. That included the Tyco letter to MEF of 21 April 1994 and Part A only of the Tyco specification. Mr Morrison described Part A as "a very broad one [which] could have applied to any number of heat exchangers in many industries [which] did not reveal that some of the partitions were intended to be subjected to the full tube side operating pressure". His evidence confirmed my view of Mr Dunn's draft CIG specification used by Tyco as one applicable to a conventional heat exchanger only. 392 This material was received by Mr Morrison on 16 June. On the following day he received a further facsimile with what was noted as revision 1 of page 1of the Lummus data sheet and the tube side lay out diagram. On 23 June the he received further revised sheets 1,2 and 8 of the Lummus material, page 8 being the tube side layout diagram (Sheets 1,2 and 8 being part of schedule Q to these reasons.) 393 Mr Morrison's evidence that page 1 of the thermal data sheet conformed "closely to that suggested by TEMA (comprising) two main sections, the upper section detailing the thermal data and the lower section specifying the mechanical design requirements". It was the lower section from which the mechanical designer drew for information. He stated that item 52 of the data sheet, "REMARKS", was the item in which it was "usual to find any special or unusual requirements". Under this item there appeared the following: "1) REFER NOTES ON SHEET 2 FOR OTHER DETAILS.

2. ESTIMATED PERFORMANCE FOR LOAD 1 ON SHEETS 3 TO 7" 394 Much emphasis has been placed by Tyco on the role of item 52 and on the information provided in relation to items 23 and 25 and, to a lesser extent, item 33. Item 23 is entitled "Inlet Pressure" expressed in kilograms per square centimetre and item 25 is entitled "Pressure Drop Allow. Calc.", also expressed in kilograms per square centimetre. 395 Under the particulars of "Performance" in relation to those two items, the data sheet noted for the shelf side .25 and for the tube side, "VARIES", in the case of item 23, and .09 and "VARIES" for the shell and tube side respectively for item 25. That information has also been the subject of extensive cross-examination in these proceedings. At no stage did Mr Morrison receive sheets three to seven of the Lummus material referred to under item 52 "REMARKS". Mr Morrison gave the following evidence concerning the information supplied to him: "41. Nowhere in the information supplied to me was there any indication that, contrary to usual practice, the channel of the Wormald Heater would at any time operate with only a portion of it pressurised, causing some of the partitions to be subjected to an immense differential pressure (the full operating pressure of the gas) and making them primary pressure containing components." 396 As to the notation in item 25 of a pressure drop as "varies", he stated as follows: "……..The use of the term varies is not usual. However, in the context of the Wormald Heater data sheet, I was not surprised to see this word as there were multiple tube bundles involved, each of which I assumed may have different pressure drops, making it awkward to list each of them on a data sheet that was intended for a standard heat exchanger having only one tube bundle. The use of that term suggested to me that the pressure drops were the typical small pressure drops caused by the movement of the gas through the tubes because if they had been unusually large drops, I expected that the thermal designer would have included them on the data sheet." 397 In a supplementary statement made in response to a statement filed on behalf of NDY, Mr Morrison elaborated upon this aspect of the Lummus data as follows: "20. Paragraph 12 - On the data sheet provided to me, Lummus used the word "varies" to denote the tubeside pressure drop, which seemed reasonable since I expected that the pressure drop would vary from tube bundle to tube bundle. However, the use of the word "varies" did make the magnitude of the tubeside pressure drops seem immaterial. If the pressure drops were to be material I would have expected Lummus to say so and to provide specific figures for the pressure drops. Because no specific figures were provided by Lummus for pressure drop, I raised the query with my client Metropolitan [MEF], as detailed in paragraph 47 of my Statement. My expectation, based on the information already provided, was that the pressure drops would be small, and so after being instructed to do so by Metropolitan [MEF], I was comfortable to use the standard thickness for partition plates tabulated in TEMA, which is a very conservative standard. I disagree with Mr Walker's assertion that I should have "followed up" the instructions given to me in this regard by my client Metropolitan [MEF]. Those instructions were clear, and seemed reasonable. There was nothing which I had seen or been told to lead me to believe that it was appropriate to "follow up" that instruction."

I accept as reliable the evidence of Mr Morrison as to the technical content of the subject material. 398 Mr Morrison reiterated his evidence in chief in cross-examination by counsel for Tyco as follows: Q. With the inlet pressure, what will cause that to vary? A. Normally it wouldn't vary but it can vary in service. Flow may change, depending where the gas - in that case, it's water - depending where it came from. Q. Sorry, that's on the shell side? A. On the shell side, yes. Q. But on the tube side -- A. If you have a fixed supply of gas, a tank, and part of it is discharged, then the pressure in the tank will drop, so you get the word "varies" because you've used some up. The next time you use it, if you haven't replaced the gas, then the pressure is lower than it was before, but it doesn't matter because you've designed for the higher pressure anyway. HIS HONOUR: Right. Thank you. MR HUTLEY: Q. Usually one expects to find in inlet pressure, a fixed figure, does one not? A. Yes. Q. That's the conventional -- A. You would expect to, yes. Q. And this was a departure from what you would usually expected; is that right? A. To see the word "varies", yes. Q. You took it to mean minor variations brought about by the act of discharge, in effect? A. Yes, or partial discharge. Q. Because you were not assuming, in effect, a wasting of pressure upon a discharge? A. No nothing, no. Q. Or a significant waste of pressure because of the need of the system which you assumed for all other zones to be ready to meet a conflagration if it occurred? A. Yes, whatever they needed; the fire people had designed to meet a certain amount of area, therefore they needed to see how much volume of gas. HIS HONOUR: Q. Whatever the variation, it would be the same for each point of entry A. As it states, yes. MR HUTLEY: Q. Is it fair to say that really you had come to that conclusion by 14 June 1994 when you did your sketch? A. Most likely. I probably didn't worry about the "varies" with regard to the inlet pressure at that stage. Q. You would have, as at 14 June, considered the variation because of the pressure drop over a return; is that correct? A. Well, I would have liked to have considered it. I couldn't consider it because there's a word there saying "varies". It didn't tell me what I wanted. Q. I see. By 14 June did you have any view as to the likely pressures which would operate upon the internal partition plates? A. Probably at 14 June I wasn't thinking of partition plates as such. I was more interested in working out the tubesheet. I'd say a day or two later I was probably thinking about partitions. Q. When you say "within a day or two" you think you were, why do you think you were within a day or two? A. It was carrying on. Once you've done your tubesheet, if you look at my calculations, you'll find I don't show partitions in that. Partitions would normally occur where that "check tube" is. I'd follow on from that, the next page would have been partitions. It's not there because there's no number. I couldn't do a calculation and I was told to use the TEMA standards. TEMA prints a standard thickness for a particular shell diameter for certain materials. Q. What were you told to do? A. I'll start again. TEMA has a table, or set of tables, for each style - TEMA R, TEMA C, TEMA B - each has its own table and for certain materials it shows the thickness you must have for certain diameters, because normally they are not pressure parts they are baffling, they are dividers or flow distributors, if you like. They're not pressure parts. (T4688:7 - T4689:51) 399 To like effect was the following evidence of Mr Morrison as to the tube side lay out diagram provided to him: "43. The tubeside layout diagram indicated to me that there were five zones within the tubeside and that those zones were intended to service four areas of the site. However, it did not indicate to me that it was intended that there would be independent sources of gas connected to the five tubeside zones and consequently that there was a possibility that not all tubeside zones would be simultaneously pressurised such that one or more partitions might be subject to the full tubeside operating pressure.

44. The tube layout diagram indicated to me that the five tubeside zones were not internally interconnected but did not indicate that these zones were not externally interconnected. In fact, it was physically impossible to connect the five zones internally due to the position of the tube bundles. The most convenient way to configure the heat exchanger with five interconnected inlets was by way of five external inlet nozzles.

45. Further because of the sub-zero gas design temperature, I expected that no water was to be allowed to enter the tubeside (because it would freeze and cause blockages), and assumed that it was intended that the tubeside would be constantly fully pressurised so that if a leak did occur (due to a manufacturing fault or future corrosion), the flow would be from the high pressure zone to the low pressure zone, so that gas would flow into the shellside, keeping water from entering the tubeside and at the same time, blowing the shell vent valve and alerting the operator to the fact that there was a leak." 400 Given Mr Morrison's experience, considerable weight should be given to this evidence, in my view. 401 In order to determine partition thickness, it was necessary for Mr Morrison to know what the "maximum allowable tube side pressure drop" would be. For this purpose he made a telephone call to Mr Zahradnik on the day this data was received, of which he gave the following evidence: "47. On or around 17 June 1994 I had a telephone conversation with Norbert Zahradnik of [MEF] in which I said words to the effect of: "I want to calculate the thickness of the partitions. To do that, I need to know the maximum allowable tubeside pressure drop. Lummus have indicated that the tubeside pressure drop varies but haven't given specifics. Can you find out the numbers and let me know." Norbert Zahradnik's response was in words to the following effect: "Just use the minimum thickness for the partitions plates tabulated in TEMA." 48. I can no longer recall whether Mr Zahradnik 's response occurred in the same conversation as that in which I made my request. The response may have been made in a later conversation on or about the same day. However, I am absolutely certain words to the effect of those set out above were said. I believe that I made my handwritten notation "Norbert says TEMA-R" appearing on document (E3) [EX1.295 p2016) at the time of the conversation but I am not certain about that." 402 The design thickness of the partition plate was changed following the receipt by Mr Morrison of a further facsimile from Mr Zahradnik of 17 June 1994, in which the specification of material as carbon steel was altered to stainless steel. That involved the selection of a different thickness in accordance with the TEMA table which resulted in EMAE specifying the partition plate thickness at 10 millimetres. 403 In relation to that design, Mr Morrison's evidence was as follows: "74. A curved plate is much stronger than a flat one. The barrel of the Wormald Heater channel is much thicker than the partitions because it has been designed to withstand pressure. Had any partition been designed to withstand the same pressure its thickness would have been greater than that of the channel barrel. The fact that all partitions are of equal thickness and are significantly thinner than the channel barrel clearly indicates that they have not been designed to retain the same pressure as the barrel. This should have alerted any engineer who had knowledge of the overall operation of the fire suppression system and who knew that some of the partitions would be subjected to the full tubeside operating pressure, that the channel had been designed to work on the basis of pressure being present simultaneously in all its zones such that none of the partitions would be subject to the full tubeside operating pressure." 404 Given the extensive experience with heat exchangers represented to Optus by Tyco as earlier noted in these reasons, I take the view that the opinion of Mr Morrison, as there expressed, bears heavily on the responsibility of Tyco for any suggested deficiency of the design thickness of the partition plates. Later in these reasons I consider the position of Leighton and NDY in that context. As to NDY it may be noted that the role of Mr Raddatz in relation to the system was overtaken by Carlo Tribbia who, in April 1994, was appointed as Fire Services Manager in NDY's Sydney office.

In relation to the omitted Part B of the Tyco specification and sheets 3 to 7 of the Lummus data which were not provided to EMAE, Mr Morrison's evidence was as follows: 19. "Metropolitan did not issue EMAE with Tyco Specification part B. (37) I am certain that I asked Norbert Zahradnik of Metropolitan for it after I noticed references to Part B in Part A of the Tyco specification with which I was provided. To the best of my recollection, the gist of the conversation was to the following effect: John Morrison: "You only gave me Part A of the Tyco specification but it makes reference to Part B. Please let me have a copy of Part B." Norbert Zahradnik: "Part B is only raw thermal data which is being worked on by Lummus. They are issuing a proper thermal data sheet." I am not a thermal designer, so raw thermal/process data is of no use to me. I rely on the information contained in the thermal data sheet provided by the thermal designer after he has processed the raw data. 20. I received Lummus data sheets 1 and 8. Metropolitan did not issue EMAE with Lummus data sheets 3-7. I cannot now recall the precise details, but am sure that I requested the balance of the data sheets from [MEF] and believe I was advised that they did not contain information needed for my design. The gist of the conversation which I had with Norbert Zahradnik of [MEF] in this regard was to the following effect: John Morrison: "You only sent me data sheets 1 of 8 and 8 of 8. Can I have the others?" Norbert Zahradnik: "They contain thermal information which is not relevant to you." I subsequently however received Lummus data sheet 2, ….. 21. Thermal design information of the type contained on the Lummus data sheets 1 and 8 is all that I usually receive. I had therefore received from [MEF] all of the information which I usually received when mechanically designing a heat exchanger for them. 22. The information conveyed to me by Tyco specification part A and Lummus data sheets 1 & 8 appeared to completely define the Wormald Heater except for the tube side pressure drop, which was given on line 25 of the Lummus data sheet 1 by the word "varies". I needed to know the tube-side pressure drop figures to calculate the partition thicknesses in the channel of the heat exchanger, so asked Norbert Zahradnik of [MEF] for the information. On asking Norbert Zahradnik for an actual pressure drop figure, I was told to apply the tabulated minimum thicknesses contained in TEMA for the partition thicknesses (47). I was not advised that any of the partitions would be subjected to the full tubeside pressure." I accept that evidence as a reasonable technical interpretation of the subject material. 405 The significance of the material set out on page two of the Lummus data sheets was described in the following terms by Mr Morrison: "57. On 23 June 1994, I received a three page facsimile from [MEF] consisting of Lummus data sheet Revision 2, a tubeside layout diagram and a page headed "Notes" (sheet 2 of 8) (E12-14) [EX 1.310]. Although the data sheet was still marked with the word "preliminary", I cross checked it against the earlier issue "Rev 1" which I had used for my calculations and made the appropriate modifications to my work.

58. I had not previously seen the page headed "Notes" (sheet 2 of 8). I assumed that it had been sent to me to advise, by its paragraph No. 4, that the straight lengths of the tubes were to be 2700 mm and 1270 mm, which were different lengths from those advised to me by Lummus in its reply fax of June 22."

59. The comments in the page headed "Notes" (sheet 2 of 8) about "water" and "loads" appeared to have significance for the thermal design alone. They did not convey to me any indication that there were to be independent sources of tubeside fluid or that that fluid would not always fill all zones of the channel (even if only one of the zones was flowing) which is in my long experience the usual situation." 406 I think the method by which Mr Morrison's design and calculations were provided to MEF has some significance. It was his practice to provide details in the form of drawings and calculations in electronic form on disks to enable MEF through the use of a "computer package and plan plotter" to "edit the drawings" in MEF's own design department. The drawings and calculations so provided by Mr Morrison to MEF did not contain any calculations of the basis of the design of the partition plates. I understand that to suggest that MEF, in turn, would have realised that the TEMA minimum thickness had been adopted and that no special calculation had taken place for the design of the partition plates as full pressure bearing elements. 407 Tyco called Professor Klaus Bremhorst who was assisted in his reports that went into evidence by Dr Jeffrey Gates. The reports were furnished through UniQuest Pty Ltd which I understand to be an offshoot of the University of Queensland in which Professor Bremhorst was the Professor of Mechanical Engineering and head of the Department of Mechanical Engineering. He was in the witness box over a period of four days. His background was essentially in academia. He had gained high academic honours graduating with a Bachelor of Engineering with first class honours from the University of Queensland, where he also obtained a Doctorate in Philosophy and in Engineering. He chaired the Board of Professional Engineers in Queensland with which he had been associated for several years. His specialist knowledge lay in the area of heat transfer and thermo dynamics. He was the author of numerous learned articles in the field. 408 There was no doubting Professor Bremhorst's academic qualifications. The particular difficulty with his evidence was that he chose to offer expert opinion evidence of contractual matters with little experience, if any, in commercial contractual relations to support those opinions. He, along with a number of other expert witnesses, gave evidence as to the operation of the relevant contracts which, speaking broadly, I admitted as evidence of the commercial nature and operation of the agreements, or as assumption. At times the distinction between that area of evidence and interpretation of terms was inevitably blurred. 409 The general nature of the opinion evidence which Professor Bremhorst was requested to provide was described by him as follows: "I have been requested to offer opinion on the responsibilities of the various parties involved in the design, approval, manufacture, testing and installation of the heat exchanger in the circumstances, on the assumption that the rusty water discharged by the Inergen system on 3 January 1997 originated from the hydrostatic testing of the tube side of the heat exchanger on 18 August 1994 as postulated by Unisearch." 410 As a consequence of stepping into the commercial arena, I think Professor Bremhorst got himself in some difficulty in the opinion evidence that he expressed. At times it was not free of inconsistency, which was not removed in re-examination. On the contrary, his evidence in re-examination, I think, tended to rob his evidence, of reliability. Part also of the difficulty with Professor Bremhorst's evidence is that he embarked upon speculative observations that simply did not accord with the facts. To illustrate this, in considering the position of EMAE, he made no mention of the fact that, as a matter of course, partition plates are not pressure bearing plates within the bonnet chambers. In considering the circumstances of the mechanical design of the partition plates, he approached EMAE's position as follows: "I can envisage three possible explanations (not necessarily mutually exclusive) for the mechanical designer's failure to calculate the correct design thickness. The first is that, having noted in the TEMA Standard the minimum thickness figure for this diameter of vessel, the designer merely accepted this minimum figure and overlooked the need to calculate a thickness using the provided equation. The second is that the mechanical designer actually believed or assumed that there was negligible differential pressure across the partition plates - an assumption which if true would have rendered the designer correct in adopting the minimum plate thicknesses. The error of such an assumption has been noted above in relation to the independent operation of the zones of the heat exchanger. The third possible explanation is that the mechanical designer was using a computer-based design tool which simply had no provision for the possibility of multi-chamber vessels with independently operating zones, so that the mechanical designer was not prompted to consider the design of the partition plates." 411 Of those speculative observations, the first "possible explanation" does not apply to Mr Morrisons' design work. The second has little bearing on Mr Morrison's design, it having been performed in accordance with instructions as distinct from some incorrect assumption. The third explanation has nothing to do with this case. 412 In fairness to Professor Bremhorst, some of the difficulties created by that approach to his evidence may have been avoided by him being asked to make relevant assumptions. In his evidence in chief he also appeared to have assumed that EMAE had been furnished with all of the Lummus thermal design material, which was not the case. Even so, he offered the following opinion of the effect of sheet 2 of the design data of Lummus as follows: "Sheet 2 of the thermal design (being the first page of the notes) indicates clearly that the zones of the heat exchanger are intended to operate independently. That is, the heat exchanger is a multi-chambered vessel with the chambers intended to have the capacity to operate independently such that one or more zones may be in operation while the others are not. Such independent operation would give rise to very significant pressure differentials across the partition plates between the zones. In preparing the mechanical design and the mechanical design drawing the mechanical designer should certainly have taken note of the multi-chamber nature of the vessel. Even if, for whatever reason, details of the independent operations of the zones had not been passed on to the mechanical designer (which is certainly not the case here), it is incumbent upon the mechanical designer to consider whether the chambers separated by partition plates would always be pressurised to equal levels. That is, even if the mechanical designer assumed that the chambers were intended to be pressurised equally, he or she ought to have considered whether there were possible circumstances under which a differential pressure could develop - for example if the flow to one of the zones failed. For the following two reasons I believe that even a cursory consideration of this question would have led to the conclusion that it was likely that the chambers could experience significant differential pressure. · Within the HE the design clearly maintains the zones separate from each other, so that if one was pressurised there would be no internal path for pressure equalisation. · Given that there are 5 separate pairs of inlet/outlet nozzles, there must be regarded to be a substantial probability that the inlet nozzles are associated with separate Inergen gas sources, and that therefore there is substantial potential for differential pressures to arise. Notwithstanding the fact that the inlet pressure specifications are all the same, it is difficult to imagine what justification could be advanced for the assumption that external to the HE all of the inlet nozzles must be connected together." 413 Contrary to the difficulty that Professor Bremhorst had in imagining Mr Morrison's justification for his understanding of the partition plates as not being full pressure bearing partition plates, Mr Morrison's evidence was convincing, based as it was upon thirty or forty years of experience and upon Australian Standard 1210, that the usual function of partition plates is not as pressure bearing elements. 414 The absence of stipulations in the material provided to Mr Morrison of special conditions demonstrating that in this heat exchanger the partition plates were required to be full pressure bearing plates and, for that matter, the misleading nature of the information provided to Mr Morrison in the form of the Tyco specification, in my view, facilitate acceptance of Mr Morrison's evidence. 415 In the above quoted evidence Professor Bremhorst stated that "even if the mechanical designer assumed that the chambers were intended to be pressurised equally, he or she ought to have considered whether there were possible circumstances under which a differential pressure could develop - for example if the flow to one of the zones failed." If that observation held true, it would apply to all partition plates in the chamber even if there was only one inlet and one outlet where there has been a failure, for example, of gas to re-enter through the outlet chamber. On that approach all partition plates would be required to operate as pressure plates. 416 As earlier noted, the re-examination of Professor Bremhorst did not, in my view, assist in removing inconsistencies in his evidence, nor did it have the effect of addressing matters that I think are important in Mr Morrison's description of the manner in which the mechanical design of the Heat Exchanger was carried out. 417 As an example, I take his evidence in re-examination concerning the effect of AS 1210 and the general concept of a heat exchanger chamber where the partition plate is usually not a pressure bearing plate. The following evidence in re-examination related to that aspect: " Q. The second matter for this designer, of whom we speak now, is what appears in the next assumption - which I think is the fourth, having already dealt with the third - that this designer understood that if any of the internal partitions were pressure-bearing, the system would be unusual or almost unique. Do you see that? A. Yes. Q. What relevance would that have to a designer confronted by the task of designing this heat exchanger on the basis of the information he obtained, namely, the part A of the specification and the ABB Lummus material which he received? A. Sorry, can you repeat that question? Q. It says -- A. Are you reading from a line in the transcript? Q. Yes, I am sorry, line 35. Mr Downes asked you to assume that this designer, of whom we speak, had an understanding that if any of the internal partitions of the proposed heat exchanger were pressure-bearing, the system - that is this heat exchanger - would be unusual and almost unique. Do you see that? A. What page is that, please? Q. Page 4274. A. Yes. Q. We are dealing here, I want you to assume, with a designer who has seen part A of the specification which you have been shown. A. Yes. Q. He is not sent part B, but he is sent the ABB Lummus material, namely, pages 1 of 8, 2 of 8 and 8 of 8 that you were taken to. If you want to look at them, just tell me. I think you were shown them many times? A. Yes. Q. In your opinion, what would be the relevance of the understanding referred to in the matter, being the fourth assumption on page 4274, to a prudent designer embarking upon the design of the heat exchanger called for in this case? A. He recognises that the system is unusual and that would alert the designer to the fact that extra care has to be taken to be very clear on the requirements of the heat exchanger. Q. So what would be the relevance of his understanding? A. The understanding of the internal partition plates? Q. No, that if they were pressure-bearing, the system would be unusual. What would be the relevance of that to him? A. In the design of the partition plates as well as subsequent specification of test procedures. Q. How would it be relevant? A. First of all, for the definition of the - or the determination of the plate thickness using the appropriate formulae, but then subsequently after the design is completed, as I have already pointed out, the designer specifies the hydrostatic test on the drawing which is used as the primary document for workshop purposes and the pressure-bearing aspect of it means that the sections that are pressure-bearing have to be tested separately. Q. I am sorry, I may not have made myself clear, and it is not easy because of the way you were asked to make these -- HIS HONOUR: Just ask the question. MR HUTLEY: I am sorry, your Honour -- HIS HONOUR: Q. What you are being asked is whether there is any relevance in the unusualness of the internal partitions being pressure-bearing? A. There is a subtlety that is escaping me, I think, if I haven't answered the question. The designer is recognising that the internal partitions are pressure-bearing -- MR HUTLEY: No. Q. It is the form of the assumption. Maybe you didn't understand. What you are being told in this assumption is you are being asked to assume that this designer has an understanding that in the usual circumstances, pressure-bearing partition plates are unusual; right? A. Yes. Q. Assume he has got that understanding about the usual case -- A. Yes. Q. -- what's the relevance of that understanding in approaching the design of this particular heat exchanger - given the information which I have asked you to assume he had? A. I'm struggling to interpret the question, I am sorry. Q. I will move on. I will come back to it. A. Mmm-hmm. (T4341:20 - T4343:26) 418 There was one other area of Professor Bremhorst's evidence which I found extremely unsatisfactory. In cross-examination by counsel for EMAE he gave evidence about the effect of the communication of Mr Zahradnik to Mr Morrison concerning the thickness of the partition plates, as follows: Q. I want you to assume that Mr Morrison, the actual designer at EMAE, had a conversation with someone representing Metropolitan - MEF - and said: "I want to calculate the thickness of the partitions. To do that I need to know the maximum allowable tube side pressure drop. Lummus have indicated that the tube side pressure drop varies, but haven't given specifics. Can you find out the numbers and let me know?" And he was told by the MEF representative: "Just use the minimum thickness for the partition plates tabulated in TEMA." I want you to assume that that question was asked and that answer given. Do you follow? A. Right, yes. Q. I suggest to you that it would be reasonable for a mechanical design engineer designing the relevant heat exchanger to act on and be satisfied by that answer? A. Well, he specifically asked for the pressures because he clearly recognised that "varies" does imply something different and he realised that the pressures were the key element, but he was then given an answer in terms of linear dimensions which virtually jumped the gun at what was needed, namely, to use the pressure information in the formulae given in the appropriate standard to determine the lineal dimension. Q. The answer he was given on this assumption was a very clear instruction as to what to do, wasn't it? A. Certainly, yes. Q. "Use the minimum thickness" is what I have put to you. A. Yes. Q. And it was reasonable for a mechanical design engineer to act on such an instruction, was it not? A. Seeing he specifically raised the question and was acutely aware of the effect of the pressure on the design, if - my advice to anyone in that situation is get it in writing. So I don't know what form of communication that transferral of the information of the lineal dimension took, but I would have insisted on having that in writing. Now, whether that existed or not, I don't know. Q. Surely, Professor, whether or not it was in writing is really just a matter of proof. If that is what he was instructed, whether in writing or orally, it was reasonable for him to act on it, wasn't it? A. Well, I repeat that I have been brought up with this very specific notion, right back when I worked at ICI - get those sort of details in writing and it has never changed. So I stand by that. Q. I put this to you - if he had got that instruction in writing, then it was reasonable for him to act on it, was it not? A. Yes. Q. So far as part B is concerned you have offered the observation, have you not, on a number of occasions in your first and in any event second report that EMAE did not seek the part B specification. A. That's correct. Q. Have you seen any statement of Mr Morrison on that topic? A. Yes, I saw the statement. Q. I think his statement asking about the part B statement is dated two days, I think, after your second statement - are you aware of that? A. I can't remember that detail. Q. In any event I am just, in fairness, Professor -- A. Yes. Q. -- drawing your attention to the fact that at the time you made your second statement you could not have been aware of what Mr Morrison said? A. Yes, otherwise I would have taken that into account, I guess - I assume. Q. I want to ask you to assume that Mr Morrison said to the representative of MEF: "You only gave me part A of the Tyco specification but it makes reference to part B. Please let me have a copy of part B." And he was told: "Part B is only raw thermal data which is being worked on by Lummus. They are issuing a proper thermal data sheet." And he then received the sheet 1 of 8 and 8 of 8 which are the first and last of those sheets in exhibit 1.339. Do you want to look at those again? A. I think I know which ones you mean, yes. Q. You remember them? Mr Morrison then said: "You only sent me data sheets 1 of 8 and 8 of 8. Can I have the others?" And he was told: "They contain thermal information which is not relevant to you." A. Right. Q. I want to ask you to assume that those two conversations took place and to ask you, if they did, whether you agree that it was reasonable for Mr Morrison to act on those statements as satisfying the need for further inquiry? A. Well, it certainly satisfies the need to get back and inquire and, taken in the context of the conversation of your question a moment ago with a Mr Zahradnik, and taking your assumption that the instructions were sufficient to satisfy legal requirements, if you like, then he certainly has been very conscientious in discharging his obligations as a designer. (T4277:14 - T4279:26) 419 In my view that evidence left little room for doubt as to the position taken by Professor Bremhorst in cross-examination on those matters. In re-examination he was taken to this evidence and elaborated upon it as follows: Q. You were then asked some questions over the next two pages about conversations with Mr Zahradnik. Do you recall that? A. Yes, I do. Q. You were asked to assume certain conversations between Mr Morrison and Mr Zahradnik? A. That's right. Q. There were two conversations you were asked to assume, namely, one which is set out at page 4277, line 14, and following. A. Yes. Q. And the one which you will see at page 4278, line 52 and following, over on to page 4279. A. Yes. Q. Do you see that? A. Yes. Q. You were then asked a question which starts at page 4279 line 14. A. Yes. Q. It was: Q. I want to ask you to assume that those two conversations took place and to ask you, if they did, whether you agree that it was reasonable for Mr Morrison to act on those statements as satisfying the need for further inquiry. Do you see that? A. Yes. Q. What further inquiry did you understand that question to relate to? A. The question that I understood was being addressed was the statement on page 4277, line 17: I want to calculate the thickness of the partitions. Is what Mr Morrison questioned. So that at this stage of the design, Mr Morrison was applying his mind to the thickness calculation of the partition plate. He recognised that the process specification spoke about varying conditions, varying flow conditions, hence varying pressure conditions. So he recognised that the pressure situation would be unusual. And in order to be able to calculate the thickness, he needs pressure information and I believe that that's the question he put to MEF. The response from MEF was, I think the words were "use just the minimum to the TEMA standard", or words to that effect. Here it is in line 50: "use the minimum thickness". That was the question that I was addressing and it relates purely to determining the thickness of the partition plate. Q. The view which you express at page 4279 in answer to the question which commenced at line 19 - your answer - were you intending in that answer to express an opinion solely in relation to the question of the thickness of the partition plates? A. That's all that was in my mind at the time, yes. Q. Are you of the view that on the basis of those communications, a prudent designer would have obtained the necessary information to satisfy the need for further inquiry which you refer to in answer to the question on page 4276 which I asked you about which came at the end of the consideration of the detailed assumptions. MR DOWNES: I object. HIS HONOUR: What is the objection? MR DOWNES: There comes a time when my learned friend has to be bound by the answer his witness gave. I mean, the question I asked at line 14 on page 4279 said, "Satisfying the need for further inquiry". It didn't say anything about limiting it to this, that, or the other thing. The witness answered the question. I will certainly be putting submissions to your Honour at the end of the day as to where one goes with the re-examination which delves into somebody's mind as to the precise thing a witness was thinking about. At the end of the day, it is a question and answer. My learned friend is now going further into the area of seeking, frankly, in re-examination, to recast what the evidence is. In my submission, re-examination questions of the kind "did you really mean what you said and didn't you mean something else" are not allowable and your Honour should reject this question. MR HUTLEY: I have not asked any such question. HIS HONOUR: I am just trying to read the transcript. Yes. I will allow the question. Mr Downes, I am allowing it on the basis that the way in which the questioning was approached was to, in the first instance, satisfy the inquiry so far as it concerned the thickness of the partition plates. I think you got a clear admission from the witness in relation to that. MR DOWNES: Yes, your Honour. HIS HONOUR: What flows from that, in relation to other matters concerning pressure and the like, differential pressure, no doubt will be a matter for submissions. MR DOWNES: Yes. I can still put my submission as to what the words "need for further inquiry" and the answer "it certainly satisfies the need" -- HIS HONOUR: I really wasn't inviting a response, I was just indicating my reasoning for allowing the question. MR DOWNES: If your Honour pleases. HIS HONOUR: Then when you came to the further communication concerning the part B specification, you then combined the two conversations and there is room, in my view, for the witness's understanding still referring to the thickness of the partition plates. Anyway, it is on that basis that I allow the re-examination. MR DOWNES: If your Honour pleases. HIS HONOUR: Q. The question you have been asked is that are you of the view that on the basis of those communications, that a prudent designer would have obtained the necessary information to satisfy the need for further inquiry which you refer to in answer to the question on page 4276, which Mr Hutley asked you about, which came at the end of the consideration of the detailed assumptions. Do you recall - have you got that question? A. That's the list of 11 assumptions? Q. At the end. Have you got in your mind now the question that Mr Hutley has put to you? I will put it again. Would you listen carefully. A. It is fairly complex, yes. Q. Are you of the view that on the basis of those communications - that is involving part B and the thickness of the plates, partition plates -- A. Yes. Q. -- a prudent designer would have obtained the necessary information to satisfy the need for further inquiry which you referred to in answer to the question at the end of the assumptions. A. Yes. Q. Are you able to answer that? A. The problem - the conversation with Mr Zahradnik concerned the plate thickness and the information that was given was the plate thickness. That's the information - and having obtained that information in an acceptable way, satisfied the need for the designer's question at the time. MR HUTLEY: I'm not sure that's an answer. I think because it has been a while, I should reformulate the question for the benefit of the witness. Q. You said in answer to a question I asked you a while ago that in relation to the consideration of the assumptions that a designer of the heat exchanger in the position of the person you are asked to assume here who had no experience in relation to fire suppression systems and heat exchangers -- A. Yes. Q. -- could not proceed to design it, acting prudently, without making further inquiries? A. You can't, you can't proceed, no. Q. You have said in relation to the communications with Mr Zahradnik that you were answering the question about the need for further inquiry in that context only in relation to the thickness of the plates. Do you remember that? A. That's correct, yes. Q. What I want to ask you is, in your opinion, with the information from Mr Zahradnik which you were asked to assume -- A. Yes. Q. -- would a prudent designer be in a position to go on and design this heat exchanger and determine whether the heat exchanger should be based upon four zones which were constantly pressurised, as opposed to four zones which were independently pressurised? A. No, there is no relationship between the two. Q. Why do you say there is no relationship between the two? A. Because the proposition being given that the plate thickness automatically leads to certain pressures in the chambers simply doesn't follow, given the plate thickness does not, in any way, indicate whether the pressures are there all the time; whether they are there simultaneously; whether they are there individually or only at times. It leaves a whole series of questions open. HIS HONOUR: Q. But that is inconsistent with your answer in cross-examination, Professor? A. Sorry, which one, your Honour? Q. You were asked specifically whether it would be reasonable for the design engineer to act on that information and you accepted that it was a clear instruction and it was a clear instruction to use minimum thickness. A. That's correct. Q. And you went on at page 4278 to say that it was reasonable to a designer to act on that, and, I assume, put in minimum thickness in the partition plates? A. That's correct. Q. That, surely, is inconsistent with there being differential pressures and for these partition plates to withstand differential pressures; do you agree with that? A. No, I don't, because simply being given the thickness of the plate does not automatically give the pressure without having to go through the calculation. Q. I appreciate that. You accept that what was installed could be described as minimum thickness partitions, don't you? A. Yes, according to the Doig reports, yes. MR HUTLEY: Q. So what further decisions or undertakings did a prudent designer have to do in relation to the design, the preparation of the design drawings and other materials for this heat exchanger, once being told that the minimum thickness was 10mm of the partition plates? What more should the designer have done in relation to the design of this heat exchanger? A. He was clearly in a position to accept the 10mm thickness for the partition plate, but at a later stage in the design he needed to devise the hydrostatic test procedure, and that is a separate decision. It is not related to the thickness of the partition plate at all, as I see it. So that seeing a separate decision is required for the hydrostatic test purposes - and remember in AS1210 it very specifically deals with various options for hydrostatic testing - any assumption or understanding or reasoning used to find the answer to what sort of hydrostatic test to apply has to be in the context of AS1210. So that when getting to that appropriate section, a decision is required as to whether it is a single chamber hydrostatic test or multiple chamber hydrostatic test. That is a decision that is not linked to the instruction on the plate thickness. Q. Why not? A. Because the pressures, if they act independently, will have a different effect on the partition plates to if they acted in many of the models that I was taken through yesterday. In other words, one can easily have the situation where on one side of a partition plate there is virtually no process pressure, whereas on the other side there is the full process pressure. With 10mm thickness - I haven't performed the calculations, seeing I haven't been asked that question before - but 10mm plate thickness - from the figures quoted during the hearing - it is pretty clear will take several megapascals at least. So that it is not a case of equating that to a situation of the normal partition plate where you might typically only get 20 kilopascals. There is an order of magnitude - two orders of magnitude difference in the pressures. So that one has to clarify what the pressure situation is before being able to decide which hydrostatic test option to take. That's a separate decision, after the design has been completed, or, with foresight, clarified before the design is started. (T4348:45 - T4354:27) 420 That is a lengthy extract from Professor Bremhorst's evidence, but it is probably necessary to illustrate the dissatisfaction which I expressed at the time with what I think was the clear inconsistency between his evidence in cross-examination and in re-examination. 421 Inconsistency in Professor Bremhorst's evidence was not only between his evidence in cross-examination and re-examination. I have difficulty in reconciling answers of Professor Bremhorst's during cross-examination. In cross-examination by counsel for NDY, Professor Bremhorst was asked about considerations that may have required Tyco to attend the hydrostatic testing of the Heat Exchanger. He gave the following evidence: A. As I explained before, there are a number of factors that come into it. One, how they view the contractor who is undertaking the task; the other, how critical the task is viewed and how reliable the personnel involved are, keeping in mind that for the hydrotest, which is the most critical aspect - the hydrostatic test - I should use the proper term - that's the most critical task. That was already being witnessed by a statutory inspector as well as an internal representative of the manufacturers. Then there's the risk associated with it not being completely dry, keeping in mind that the draining is part of the hydrotest, and it would be incredibly unusual for a heat exchanger manufacturer to not drain it unless it was specifically called for in an inspection and test procedure. Of course, in the drawing - on the drawing it states that it has to be drained anyway. So they're just some of the factors. Then, if it's viewed as particularly critical that this be of the highest quality, the engineer would, if he believes there is still an element of risk and there's no further subsequent inspection - there is another aspect which I didn't mention this morning, of course and that is it also depends what happens downstream because the heat exchanger, once it leaves the factory, still has to be inserted into an operating system, and so it depends on what goes on after that as well in making this decision. (T4106:9 - 42) 422 As an observation on that evidence, one thing I think has been established in these proceedings, namely, that the specification requirement that the Heat Exchanger "be completely drained and thoroughly dried so that no moisture [remained] in any part of the unit" was certainly not part of the "hydro-test" as ventured by Professor Bremhorst. That requirement was also noted on the Heat Exchanger drawing and, quite clearly in my view, it was a separate specification independent from the requirement of hydrostatic testing. 423 Tyco throughout its case endeavoured to place this specification requirement as part of the hydrostatic test and that was a futile task in my view. Professor Bremhorst sought to support Tyco's position in his supplementary statement of evidence in chief as follows: " To require, in hindsight, an independent line item for draining and drying of the heat exchanger in my view ignores the reality that draining and drying is an obvious and integral part of the hydrostatic test procedure itself, which is a line item in this inspection and test plan. Further it requires the preparer of the inspection and test plan (MEF), or the party accepting the inspection and test plan (Tyco) to have some expectation that the mechanical designer would not understand the intended nature of the heat exchanger, would incorrectly design the heat exchanger such that the design did not reflect that the heat exchanger was intended to have independently operating zones and that the mechanical designer would fail to properly identify the testing procedures on the drawing. In my view, it is incumbent upon the mechanical designer to correctly specify the number of tests required on the drawing (see my further comments in paragraph 4.3 below) In my view, MEF in preparing the inspection and test plan and Tyco in accepting it could not have foreseen these extraordinary errors." (Emphasis added) 424 Having regard to the clear notation on the drawing which I have earlier noted and, more particularly, having regard to the specification provision 12.1 which provided under the heading "PREPARATION FOR SHIPMENT" "EACH ITEM OF EQUIPMENT SHALL BE COMPLETELY DRAINED AND THOROUGHLY DRIED SO THAT NO MOISTURE REMAINS IN ANY PART OF THE UNIT.", 425 I have great difficulty in understanding the logic of Professor Bremhorst's assertion in his evidence in chief quoted above. 426 That difficulty was not removed by Professor Bremhorst's lack of experience in the manufacture of heat exchangers, in the hydrostatic testing of heat exchangers and from the fact that he had never operated as a practising engineer under a standard with which he was not particularly familiar, referring to the Australian Standard 2990. As it happened he did not adhere to that evidence during cross-examination. 427 Counsel for NDY pursued that aspect in the following cross-examination with Professor Bremhorst: Q. Do you accept that it is proper and reasonable in these circumstances to treat the thorough draining and drying as a second step being separate to the hydrostatic test? A. As a separate step - in the manufacture it's a separate step. You're referring to the inspection and test plan now or the manufacture, or a simple inspection? HIS HONOUR: Q. There is a specification to be found in the drawing which I suspect you've seen and there's a provision in the specification itself that calls for the thoroughly drying and cleaning. A. Yes, it's very clear, the process specification initiates the design process for the heat exchanger. The critical product from that next design process is the drawing, which is then the primary document from which all other actions follow unless there's some reason to introduce other documents for whatever reason. On the drawing, it's very clear that it's to be hydrostatically tested and it's to be drained and dried. MR ROBB: Q. And a reasonable party in the position of Tyco would regard the draining and drying as an issue to be considered separately to the hydrostatic test. A. It's almost beginning to split hairs, because I view the draining and the drying as separate, even though it's used as a combined expression, because the draining is an essential component of the hydrostatic test. One simply does not do a hydrostatic test without draining. Q. Perhaps my question is not precise enough. Do you say to his Honour that, if you start with a hydrostatic test, assuming that the tubes are going to hold gas and not water, then draining at least will be a necessary concomitant of the hydrostatic test? A. That's correct. Q. When it comes to thoroughly draining and drying, drying is the separate issue in the sense that it requires separate thought. A. Yes. Q. Do you agree that a reasonable party in the position of Tyco, considering whether the technical specification for the heat exchanger had been adequately performed, would focus on the issue of whether the drying had been adequately performed? A. They should certainly think about it, seeing it's called for from the manufacturer to give 10 days notice. Q. Yes. A. That helps to focus the mind, that's correct. Q. If that 10 days notice had been given as required by the specification, do you accept that a reasonable principal in the position of Tyco would have considered the drying component in relation to the decision whether to attend the hydrostatic test? A. Yes, it would have exercised the minds simultaneously. Q. Do you accept that the issue in relation to the drying component that would have motivated a reasonable principal in Tyco's position was the likely consequence of inadequate drying, given the particular use to which the component heat exchanger was going to be put? A. On the drying issue, I've given a lot of thought to that. It's agonised my mind for quite a few hours because of the criticality of the issue. Looking at the situation as I see it, I find that the drying is not a critical - not a particularly critical operation, provided that the draining is not done on the basis that if we get - if we take only half the water out, that's considered draining. To me, a draining operation is to get as much water out as possible without necessarily getting in there with compressed air or hot air or opening it up and sponging it out. So that given that scenario, which I believe is perfectly reasonable in an engineering context in an engineering workshop, the amount of water that's left in there, when considered in the context of the project, is a relatively minor issue, even though the process specification clearly said "drain and dry". HIS HONOUR: Q. No, it doesn't, it says "thoroughly"? A. I'm sorry. Q. It's there as a separate -- A. Thoroughly drain and dry. Q. Yes. A. I stand corrected there. Q. It is important, I think. Also, I think it is important that it's a separate specification provision and not expressly stated as part of the hydrostatic testing. A. Mmm-hmm. Q. I come back to my hobbyhorse, and that is when you say it's not particularly important, I think one has to take into account the extraordinary care that goes into keeping a computer pristinely clean, to the extent of people using dust mats on their feet and so forth. So I think one can't exclude those sorts of considerations when looking at the importance of a requirement such as that. You add to that a principal who won't have a bar of water in the system and needs an inert gas - I think that adds some meat to the context of the importance of this particular provision. A. Given that scenario, it becomes a much more critical item, I agree. Q. These are early days, you may be surprised to hear. I think we still have a couple of months to go in this case, so views change. But that's the way my mind is working at the moment. A. Your Honour, you see, when I considered the amount of gas that's involved and the small amount of water -- Q. Yes. A. -- that would remain if it was just drained in the normal sense, then the amount of moisture that's ejected would merely increase the humidity of the atmosphere. Q. Yes. A. This is the rust issue aside. HIS HONOUR: Yes. MR ROBB: Q. You can't separate the rust issue from the moisture issue, can you? A. In the way it happened, of course not, no. (T4107:8 - T4109:48) 428 Counsel for WorkCover also challenged this and related material offered by Professor Bremhorst in his evidence in chief, to some effect in my view, as it appears from the following: Q. You say in your second supplementary statement in paragraph 2.6, when dealing with the draining being an essential element of the testing procedure: In my view this is reflected in AS1210/1989, which does not specifically stipulate the draining and drying of the vessel after the test. Clause 5.10.5.2 appears to be the only reference to draining the vessel following the hydrostatic test. That states: "Care shall be taken to vent the vessel adequately when draining the vessel after test." A. That's correct. That's the association I was referring to. Q. You were saying in clause 2.6 the standard doesn't specifically address draining and drying after the test? A. As a separate issue. Q. Clause 5.10.5.2 specifically identifies draining as something that's done after the test, doesn't it? A. Yes. It can't be done before it. Q. It suggests, as I would suggest to you, commonsense suggests draining is something that's carried out after the test is completed? A. Yes. Q. It's not part of the test? A. Not for testing the pressure, no. Q. It's not part of testing whether the vessel is capable of withstanding the stipulated pressure? A. That's correct. Q. Indeed, on one view of it, draining a heat exchanger which isn't intended to contain water is covered by section 9 of the standard, isn't it? A. Sorry? Q. Section 9, "Provisions for Dispatch". Could the witness please be shown exhibit 3.003. I take it you don't have another copy of AS1210 with you? A. No, I don't. Q. You will find section 9 with the page numbers stamped on the bottom - it is page 0554 of the exhibit. A. Yes. Q. Item 1 in section 9, cleaning: On completion of the vessel prior to dispatch all vessels shall be cleaned and shall be free from loose scale and other foreign matter. A. Can you just excuse me for a moment? I have cut myself on this lever arch file. HIS HONOUR: What should I be looking at - the exhibit? MR DONALDSON: Exhibit 3.003, folder 2 of 2, page 554. Q. Insofar as we are dealing with heat exchangers where it is important that they not contain water, it would be proper to regard water in the heat exchanger as foreign matter, wouldn't it? A. That would not my be association. When water is specifically dealt with in a separate sense, then foreign matter, to me, is other material. But if water - if you wish to associate water with that, then let's proceed. Q. Even if it was intended in the standard to include water potentially as foreign matter, you wouldn't expect water to be specifically identified in the cleaning section, because some vessels might comfortably contain water. There was water in the shell side. It was contemplated that, in service, there would be water in the shell side of this heat exchanger. MR HUTLEY: I object. That's a multiple question. MR DONALDSON: Q. It was contemplated that there would be water in the shell side of this heat exchanger; correct? A. That's correct. Q. And you wouldn't expect whoever was responsible for drafting the standard to impose a uniform requirement to get water out of the shell side or which would require the manufacturer to take water out of the shell side of this heat exchanger or ensure that it was thoroughly dried, would you? A. I'm a bit confused by that question. I don't see the connection - what the end use has to do with the generality of the standard. Q. You wouldn't regard a small quantity of water in the shell side of this heat exchanger as foreign matter which needed to be removed as a matter of good practice, would you? A. The bulk of the water would have been drained out as part of the hydrostatic test, so that other foreign matter, typically, would include swarf, leftovers from the welding processes, rust and so on - any loose scale. Q. Leaving aside whether or not in the usual course you'd expect hydrostatic test water to be drained out of the shell side anyway, you wouldn't regard, would you, a small amount of water in the shell side of this heat exchanger as foreign matter which needed to be removed? MR HUTLEY: I object. He assumes the very point - the witness is at odds with the cross-examiner because the witness considers that water is not intended to comprehend foreign matter. HIS HONOUR: I think that is right. MR DONALDSON: That's the proposition I was seeking to test, your Honour. HIS HONOUR: Put the question again. MR DONALDSON: Q. You wouldn't regard a small quantity of water left in the shell side of this computer as a problem? A. It would be of no consequence. Q. I'm sorry, I said "computer", I meant the heat exchanger. A. I assumed that. Q. It would be of no consequence? A. That's correct. Q. And you wouldn't regard it as material which needed to be carefully removed as a matter of good practice? A. I think, in order not to lose perspective, the manufacturer, unless given other information, may not know that the shell side usage of this exchanger will contain water as part of its normal use. Q. Section 9 of the standard -- HIS HONOUR: Q. Would you repeat that? A. I can't verbatim, but the intent is that I can't think immediately of any reason why the manufacturer of a heat exchanger would necessarily know what fluid is going to be on the shell side in normal operation. Q. I don't think you said that. I thought you said no water on the shell side? A. Water or whatever fluid. Q. It would be fairly obvious, wouldn't it? A. If it's a water heater, then from the title it would be suggestive, yes. MR DONALDSON: Q. Section 9 of the standard is entitled "Provisions for Dispatch". It is clearly directed, isn't it, towards identifying prudent steps to be taken by the manufacturer of a heat exchanger before delivering it to its customer; correct? A. Taken in its full generality to make sure there's nothing left in the heat exchanger. Q. "Foreign matter", as a matter of plain English interpretation, means anything -in this context in the heat exchanger - which is not intended to be there? A. Yes. Q. If one was dealing with a heat exchanger which was intended to use a fluid other than water on the tube side, water in the tube side would properly be regarded as foreign matter. A. Yes. Q. A manufacturer taking careful steps to ensure a proper and prudent manufacturing process on completion of the vessel would check to ensure that the tube side of such a vessel was free of water. A. Free of anything. Q. Yes. A. Yes. Q. And take steps to ensure that any foreign materials were removed if found there? A. That's right. Q. And that would include draining the gas side of the heat exchanger if you found it had water in it. A. Yes. Q. So that draining the heat exchanger is covered by section 9 of the standard. A. As a second step, actually - as a second check. Q. There may be steps in the manufacturing process between hydrostatic testing and the final preparation for dispatch contemplated by section 9 of the standard; correct? A. Yes. Q. And prudence doesn't require that the heat exchanger be drained and dried necessarily at any particular point in time earlier than preparation for final dispatch, does it? A. Well, that's a matter of opinion with regard to the draining. The drying, as I said yesterday, I see as a separate issue. So the draining I consider simply part of the hydrostatic test. It's like cleaning up after you've made a mess. HIS HONOUR: Q. But that's not the question you were asked. A. Sorry what was the question, your Honour, then? HIS HONOUR: Would you like to repeat it. MR DONALDSON: Q. There may be steps in the manufacturing process between hydrostatic testing and the final preparation for dispatch contemplated by section 9 of the standard. And prudence doesn't require that the heat exchanger necessarily be dried and drained at any point in time earlier than preparation for final dispatch. A. That's certainly an option that's available to the manufacturer, to decide when the draining takes place. (T4152:1 - T4156:30) 429 The evidence in this case that the concept of water coming into contact with the Optus equipment was abhorrent to Optus, clearly did not form part of Professor Bremhorst's approach to leaving a "small amount of water" in the system and it is a view with which I could have no agreement. 430 In further cross-examination counsel for NDY took Professor Bremhorst to the "abhorrent" aspect of water in the Heat Exchanger in the following way: Q. Do you accept that, on the assumption that those statements were made, a reasonable contractor in Tyco's position would have insisted upon being given notice of the proposed hydrostatic test, and having received notice, would have attended on the test and ensured at the end of the process that the heat exchanger was thoroughly dried? A. Taken in isolation, I agree that would have been an appropriate precaution to take, but keeping in mind that there are a number of very significant downstream processes that take place before the vessel is put into service, and during any of which water could in fact be or anything could be introduced into the heat exchanger, there are a number of other steps that have to be taken to ensure that foreign matter doesn't get into the system. It's a matter of balance in the particular case. As I indicated, it's impossible to assess as an external person what went through the minds of those more closely associated with the totality of the project. Q. In answering the question I just put to you, do you accept that, as a first step, a reasonable contractor would have attended to ensure the drying of the heat exchanger? A. A wise contractor - I don't know about "reasonable". Certainly it would have been a very wise precaution to take. (T4111:43 - T4112:16) 431 Again, I think it is necessary to draw issue with Professor Bremhorst's reasoning, although, possibly not his conclusion. Where his reasoning is, in my view, quite faulty is in failing to appreciate the obligation to have the Heat Exchanger completely drained and thoroughly dried, as emphasised in Section 12 of the Tyco specification entitled "PREPARATION FOR SHIPMENT". This was something that was required to be done before installation of the Heat Exchanger in the Rosebery centre. It has nothing to do with subsequent "downstream processes". 432 Professor Bremhorst may have had in mind discharge testing. If that is so, then I think one would have to be extremely critical of the view that such "downstream processes" lessened the importance of Tyco's presence to witness the hydrostatic testing and to ensure that the Heat Exchanger was completely drained and thoroughly dried before shipment. Implicit in that line of reasoning is that water could be removed from the Inergen system during discharge over the Optus equipment which was in operation at the Rosebery centre. That only has to be stated to reveal the impracticality of such an approach. In passing, that is the approach of the defendant in raising one issue of contributory negligence against Optus. For reasons later given, that has not been an approach that has found any favour in my line of reasoning. 433 Professor Bremhorst was further cross-examined by counsel for NDY as to the relationship of WorkCover's certification of 18 August 1994 on hydrostatic testing with compliance by MEF of the specification requirement to drain and dry the Heat Exchanger as follows: Q. Do you agree that a reasonable principal in Tyco's position, in those circumstances, would not have reasonably adequate evidence or confirmation that the heat exchanger had been thoroughly drained and dried? A. Based on the statutory certification? Q. Yes. A. That's correct. To me, that's not evidence that it's been drained and dried. Q. If I add to those assumptions the assumption that I asked you to make earlier about Optus's statement that water in the heat exchanger was abhorrent, do you agree with me that a reasonable contractor in Tyco's position would have understood there was a risk of inadequate drying of the heat exchanger? A. Yes - Mr Grono, is it? Q. Yes. A. He could very well have decided then that there is an alternate path to ensuring that the heat exchanger is dried, namely, when it gets on to site. The thing that I'm very aware of and which hasn't been mentioned so far is that this whole exercise of hydrotesting was done on the back of a truck in a great hurry - at least that's the scenario that has emerged in my reading of the documentation and the evidence. Given that situation the principal, in this case Tyco and Mr Grono, would have been aware that it was less than ideal conditions under which the heat exchanger was hydrostatically tested. They could very well have decided we can't afford a further hold-up. I don't know how critical, time wise, the whole situation was, but if an engineer in that position were faced with a decision to make, it would be perfectly reasonable to say, "We won't worry about that aspect. We will wait until it comes on site. Then we'll check it out." I don't know whether Mr Grono thought that way. Q. If he thought that way, it would then require, if he was acting reasonably, for him to institute some inquiry which would validly confirm that the heat exchanger was thoroughly drained and dried? A. Subsequent to the manufacturing, yes. HIS HONOUR: Mr Robb, you put an assumption to the Professor that I think was a distortion of the evidence. MR ROBB: I'm sorry, your Honour. HIS HONOUR: It is the question at 14:33. Have you got it? "Do you agree with me that in those circumstances" - then you say, "If I add to those assumptions the assumptions that I asked you to make earlier", that Optus statement about water in the heat exchanger was abhorrent. Have you got that? MR ROBB: Yes. HIS HONOUR: That's not the evidence. The evidence is that water being introduced into the risk areas was totally abhorrent. I think there is a difference. MR ROBB: I have jumped a step, I apologise. HIS HONOUR: I take it that's the material you are relying upon? MR ROBB: It was, and I probably have, at best, paraphrased it. HIS HONOUR: Q. Do you recall the question, Professor? A. Can I be reminded? MR ROBB: I will put it to you again: if you add to that the assumption about Optus's statement that water in the heat exchanger was abhorrent, do you agree that a reasonable contractor in Tyco's position would have understood there was a risk of inadequate drying of the heat exchanger, and you agreed, "yes". Then, if the assumption was that Optus's statement was that the introduction of water to the risk areas was totally abhorrent to Optus, would that change your answer? A. Well, that supports what I said, I believe, that the engineer - in this case Mr Grono, I believe - was entitled to adopt a change of tack in the procedures and knowing that it's not going to be dried on site at the manufacturer's, that he could introduce steps subsequently to catch up, if you like, or to remedy the missing-out of that step, because there is a risk of water or any other foreign material being introduced during the subsequent operations anyway, so if time really was that critical, a reasonable engineer could have made the decision to delay the final check on that basis. Q. Either way, a check was required? A. Yes. (T4113:5 - T4115:1) 434 Another significant area of dissatisfaction with Professor Bremhorst's approach was his understanding of the nature and operation of the NDY consultant agreement. That evidence was given on the basis that the consultant services stipulated in Annexure E were required of NDY in relation to the Heat Exchanger. For reasons earlier given and that are expressed later in these reasons, I am critical of that approach to Annexure E. It cannot be justified in my view. 435 Another aspect of Professor Bremhorst's evidence which did not fit into the way in which a construction contract operates appears from the following: HIS HONOUR: Q. Just to take an example, the audit aspect in relation to the heat exchanger being designed for 15MPa - how would that be done? A. By looking at the drawing which is the final contract document, and seeing if the specification on the heat exchanger in fact matches the known process, or the supposedly known process specifications. Q. But not going into the mechanical structure of the equipment? A. That's correct, not - redesigning, let's be quite specific, the partition plates. But it would be, I believe, a critical function for a design audit to ensure that the process specifications were interpreted correctly into the final design that was incorporated in that design drawing. Q. As expressed in that design drawing? A. As expressed in the design drawing - not incorporated, that's correct, as expressed. I have come back to that point many times in my career, that the drawing is the number 1 document. Q. I rather got that impression. I am not so sure I agree with you. A. If it is wrong on the drawing, the mistake will most probably be propagated throughout the system. Perhaps, in enlarging on that answer, your Honour, I could add that the hydrostatic test is a very good example. The most recent Australian standard on testing of pressure vessels very specifically says that "as noted on the construction drawing" for the hydrostatic test pressure, which is an interesting observation because that's been implicit in all previous versions, but never actually spelt out. (T4119:42 - T4120:25) 436 The pre-eminence in Professor Bremhorst's mind of the drawings in construction contractual documents is not one that I could agree with. 437 It was an aspect that Professor Bremhorst touched upon in describing the misleading nature of the Tyco specification, as appears in the following cross-examination by counsel for NDY:

MR ROBB Q. But you accept, don't you, assuming your proposition that NDY was an auditing engineer, that the circumstances didn't require them to look at the drawing and think, "What we must check is the partition plates"; correct? A. That's correct. Q. Because the fact is that you've got to know what happened subsequently and can go back and say it's the partition plates that were the problem. A. No, what the design auditor should have picked up, assuming they had the design audit role, is the fact that the hydrostatic test pressures were specified incompletely or - not incorrectly, because that suggests the numbers were incorrect - but incompletely in the sense that a separate hydrostatic pressure was not specified on the drawing for each zone on the tube side. Q. All of them were the same were they not? A. The same pressure, but not applied simultaneously. That is the critical aspect. To me, it stands out as the defining moment where this project went off the rails, that people did not realise, for the purpose of preparing the drawing, that the zones - that the tube side had different zones and each one could operate independently of the other. That's the bit that's missing in the drawing. HIS HONOUR: Q. On the specification? A. On the drawing. The drawing is the defining document for the hydrostatic test pressure. Q. We will put that proposition aside. Certainly you'd criticise the absence of specification on the drawing -- A. Mmm. Q. -- in express terms? A. Yes. Q. That's what you are referring to? A. Yes. Q. And the same would apply to a specification that lacked that specificity? A. It may be that 9.3 was the very point that misled everything downstream - I'm not in a position -- Q. In terms of conveying the information, leaving aside priorities of importance, the specification lacked the same specificity as you say the drawings lacked? A. That's correct. (T4133:28 - T4134:28) 438 EMAE does not dispute that had it been disclosed to Mr Morrison that the partition plates were to be full pressure bearing elements, plates of greater thickness would have been designed. However, it contended, I think with justification, that partition plates are not normally intended to function that way. Mr Morrison's evidence in this respect was corroborated by Maurice Benjamin Pisano, the principal of Contract Design & Management Services Pty Limited, a specialist in the mechanical design of pressure equipment and storage equipment in the petro-chemical and mining industries. He gave evidence in EMAE's case. 439 His formal qualification was that of an Associateship in Mechanical Engineering in the Western Australian Institute of Technology. He described his company as a "small engineering consulting firm….. employing 8 staff plus subcontractors" which he founded in 1986. Prior to that, he had been employed as a project engineer by various manufacturing companies where a significant part of his involvement concerned the manufacture and design of pressure vessels. He gave every impression of being unaccustomed to the witness box. He was very careful in his answers. He did not hold himself out as a process designer. There was no semblance of advocacy in his evidence which was given carefully and thoughtfully without any indication of guile. His answers were prompt and, I thought, sensible. His formal qualifications were not outstanding. However, I regarded him as an extremely good practical engineer. His mechanical design work, as a consultant, involved an impressive client list of major mining enterprises. 440 The matters upon which he was asked to comment in his report which constituted his evidence in chief were identified as follows: "24. I have been asked to comment on the following allegations: a) that the partitions in the channel of the heat exchanger which ruptured or warped were of inadequate thickness to withstand the pressure conditions called for in the specifications (the inadequate thickness allegation). b) that EMAE failed to provide adequate warning that the separate chambers in the heat exchanger necessitated separate hydrostatic testing (the inadequate number of hydrotests warning allegation). c) that EMAE failed to provide warning of the need to take special precautions following hydrostatic testing of the heat exchanger to ensure that all water was drained from the gas side of the unit (the inadequate hydrotest drainage warning allegation). d) that the heat exchanger design was inadequate in that it included non-trivial, non-draining or non-venting zones in all chambers of the unit (the inadequate venting and draining allegation)." 441 In his supplementary report, he addressed the relationship between the mechanical designer, the manufacturer and the relevance of the thermal data to the mechanical designer. As to the matters reported on in his first statement, only the first has any continuing relevance, in my view. The other matters raise considerations that are no longer pressed, or have no substance. 442 In my view, there is no obligation upon the mechanical designer to provide warnings to those associated with the fabrication of the Heat Exchanger of the nature of hydrostatic testing required, nor to take particular precautions to comply with a specification for completely draining and thoroughly drying the Heat Exchanger after hydrostatic testing, nor any obligation to design so as to avoid "non-trivial non-draining or non-venting zones in all chambers". 443 Mr Pisano supported the evidence of Mr Morrison as to the function of a partition in the channel as not being a pressure bearing element. That appeared from the following: "25. It is extremely rare for a mechanical designer of heat exchangers to be requested to design a shell and tube heat exchanger that includes a partition in the channel intended to act as a primary pressure containing component. The essential function of the channel of a heat exchanger is to act as the receptacle of tubeside fluid before and after that fluid passes through the tubes. The essential function of partitions is to direct the flow of tubeside fluid into and out of the tubes. Apart from the relatively small pressure drop associated with the passing of the tubeside fluid through the tubes, the areas on either side of a partition are equally pressurised." 444 Where a "customer", such as Tyco, required a heat exchanger to operate with pressure bearing partitions in the chamber he gave the following evidence: "26. If a customer requires a mechanical designer to design a heat exchanger that includes partitions intended to act as a primary pressure containing components (sic), in my opinion it is essential that that requirement be clearly stated. In the context of this case, it would be necessary in my opinion that such a statement include as a minimum one or more of the following: a) a statement that the relevant partitions are intended to contain the full tubeside operating pressure with no pressure in adjacent zones; or b) a statement that the zones in the channel are not intended to be simultaneously pressurised; or c) a statement that there are intended to be independent sources of tubeside fluid to the zones in the channel."

I accept that evidence as a reliable description of the responsibility of a trade "customer" to a mechanical designer. 445 It was his opinion, which I accept, in relation to the documents provided to EMAE, that no such statement had been given to Mr Morrison, as appears from the following: "27. I have reviewed all of the documents located in EMAE's file. There is nothing in any of those documents which would convey to a reasonable mechanical designer any one or more of those statements. In my opinion, a reasonable mechanical designer in receipt of those documents would be justified in assuming that: a) in accordance with their usual functionality and usual industry practice, the channel partitions are intended to contain only the usual small pressure drop associated with the tubeside fluid passing through the tubes; b) in accordance with the usual functionality and usual industry practice, all zones within the channel are intended to be simultaneously pressurised; and c) in accordance with usual industry practice, there would be a common source of tubeside fluid feeding the channel." 446 He differed markedly from the opinion of Professor Bremhorst as to the input of sheet 2 of the Lummus data. He gave the following evidence in chief, which is set out in full as I think it reflected the voice of an experienced and highly competent practitioner which should be given considerable weight: "28. The Bremhorst Report ref [14] section 5.2.1 second paragraph states that sheet 2 of the thermal data sheet indicates clearly that the zones of the heat exchanger are intended to operate independently. I have reviewed what I understand to be the same document from the EMAE file (page 19 of Appendix 6) [EX 1.310 p2066] although a copy of that same document has not been provided to me as an annexure to the report of Professor Bremhorst. 29. That document would not, in my opinion, indicate to a reasonable mechanical designer: a) that some partitions are intended to contain the full tubeside operating pressure with no pressure in adjacent zones; or b) that the zones in the channel are not intended to be simultaneously pressurised; or c) that there are intended to be independent sources of tubeside fluid to the zones in the channel. 30. The references in that document to the possibility of any one load operating at any one time is perfectly consistent with the assumptions that I believe a reasonable mechanical designer would make in the circumstances of this case based on heat exchanger functionality and usual industry practice (referred to in paragraph 27 above). The fact that only one Load may be operating does not mean that the other loads, although not operating, are not simultaneously pressurised. It may simply mean that the tubeside fluid may be allowed to flow out of the inlet/outlet nozzle of one zone but remain static in the other zones. The statements in the document are not sufficient to indicate to a reasonable mechanical designer that the assumptions that such a mechanical designer would make are incorrect.

31. Further, the information contained in the document (particularly in paragraphs 5 to 8 inclusive) relates to the thermal duties and resulting fluid temperatures. That is, the information concerns the thermal performance of the unit. That information is not relevant to the task of a mechanical designer. It would be quite reasonable for a mechanical designer to consider that the document was prepared for use by the process designer, not the mechanical designer.

32. The fact that the thermal designer's tubeside layout diagram specified five pairs of inlet/outlet nozzles, would not in my opinion indicate to a reasonable mechanical designer that it was intended that there be five independent sources of tubeside fluid. That fact is also consistent with there being a common source of tubeside fluid. It is extremely rare for a heat exchanger to be fed by independent tubeside fluid sources. In fact, I have never encountered such a design in my twenty four years of experience. On the rare occasions that I have encountered a heat exchanger fed by separate tubeside fluid sources, those sources have been banked or manifolded together with the effect that they become a common source of fluid (rather than an independent source). The nozzle design of the channel is not sufficient to indicate to a reasonable mechanical designer that the assumptions that I believe such a designer would be justified to make in the circumstances (referred to in paragraph 27 above) are incorrect.

33. In my opinion, if either MEF or Tyco reviewed the design drawing prepared by EMAE and was aware of the intended operation of the heat exchanger (that is that some of the partitions were intended to act as primary pressure containing components), then the reviewer should immediately have seen that the barrel (the cylindrical part of the outer casing of the channel) was designed at least twice as thick as the partition plates. In the engineering profession, it is very well known that the thickness of a component is proportional to the pressure that that component is intended to bear and that curved surfaces can bear greater pressure relative to straight surfaces. The reviewer should therefore have immediately noticed that the thickness of partition plates was under-designed.

34. If the mechanical designer knew that some of the partitions were intended to act as primary pressure containing components, then the whole design concept of all the channel components (that is, not only the partition plates but the cylindrical shell, dished end and fittings) could not be analysed using the conventional formulae in AS1210-1989 or any other standard due to the complexity of the stress geometry within the channel. The mechanical design engineer would have had to use computer-aided design tools such as Finite Element Analysis (FEA) to determine the stresses on each component. FEA software calculates stresses of each element within a complex vessel containing numerous significant pressure differentials. That would have entailed a much more time consuming and more expensive job. The design formula in AS1210 is only valid if the entire channel is pressurised (that is, if all zones within the channel are simultaneously pressurised)." 447 In his supplementary statement I think he put at rest the attempt to read into item 25 of the Lummus thermal data, earlier quoted in these reasons, a proposition that the reference to "varies" indicated a discrete operation of any one zone while other zones were not charged with gas. His evidence was as follows: "8. Paragraph 102 - I disagree that the term "varies" at line 25 of the ABB date (sic) sheet conveys the meaning that the heat exchanger was not a "steady state" heat exchanger. Pressure drop refers to the drop in pressure associated with the passing of fluid through the tubes. The extent of pressure drop depends on the tube configuration. If the tube configuration for each of the zones was not identical, as was the case here, it would be expected that the pressure drop in each of the zones would not be identical. In my opinion, the term 'varies" at line 25 of the ABB data sheet would only convey to a mechanical design engineer in the position of EMAE that the pressure drop in each of the five zones would not be identical. It would not convey that the zone partitions were intended to contain the full tubeside operating pressure with no pressure in adjacent zones." 448 Mr Pisano's evidence in relation to item 33 in the Lummus data sheet, accorded with my reading of the Lummus data and was in the following terms: "….. I disagree that the notation "5x2" at item 33 of the ABB data sheet means that the 5 chambers were intended to operate separately. It simply means that there were five chambers and that tubeside fluid flowing into each chamber would flow along the length of a tube twice before flowing back into the chamber……" 449 When read in conjunction with Mr Morrison's evidence concerning that information, it presented a compelling case against the attempt to use that information as putting the mechanical designer on notice that separate operation of a particular zone was intended, while adjacent zones were uncharged with Inergen gas. It is evidence which I accept. 450 Graham Walter Walker, a consulting engineer called in NDY's case, specialised in "pressure equipment design, ……. and inspection". He held a graduate diploma in Mechanical Engineering from the University of New South Wales and held a boiler inspector's licence from Work Cover and other trade certifications. He had attended a Boiler Inspector's Course conducted by the Department of Technical Education. After becoming licensed by Work Cover he set up a business providing services in the nature of inspection of boilers and pressure vessels and design checking of such vessels. 451 In my observation of him as a witness he, while lacking high formal qualifications, had valuable experience in the inspection of pressure vessels and he was down to earth in his evidence in that particular context. However, in terms of any expertise in mechanical design, I think that both his qualifications and experience would not warrant placing too much emphasis on that aspect of his opinion evidence. Certainly, to the extent that his views in relation to mechanical design were at variance with those of Mr Pisano, or of Mr Morrison, there was no question about the preference that should be given to their views. 452 It was Mr Walker's experience that he had never encountered a pressure vessel in the form of a heat exchanger which had partitions which were full pressure bearing elements. That was also the evidence of Professor Bremhorst. Who's evidence was as follows: HIS HONOUR: Q. Professor, is there a class of use of heat exchanger where they are constantly kept in operation under pressure? A. Certainly under pressure and there is a large number that would fall into that category. Q. Are there classifications of use that you could identify? A. Just a general area of processing or petrochemical. ……. MR DOWNES Q. Would you agree, Professor, that partition plates in shell and tube heat exchangers are not usually pressure-bearing in the sense of having the full pressure at which the heat exchanger is operating bearing on the side of the plate? A. That's true for the normal class of heat exchanger - shell and tube heat exchanger - met when designing to the TEMA or ASME or Australian Standards because they deal predominantly with a single zone. Q. Professor, do you agree that independently pressurised zones make this heat exchanger unique? A. I don't know if it makes it unique, it certainly makes it different. Q. Does it make it very unusual? A. I'm not sure what degree you attach to "very unusual". HIS HONOUR: Q. Have you experienced one before? A. I haven't come across one of these before, no. Q. You have seen numerous heat exchangers? A. I have seen many at Queensland Alumina, yes. Q. In a variety of uses? A. Yes, and the ones I have seen there are the single zone type. MR DOWNES: Q. It would be an unusual heat exchanger in the experience of heat exchanger designers, would it not? A. Certainly, yes. HIS HONOUR: Q. Have you heard of a multizoned, separately pressurised heat exchanger, apart from this one? A. No, I haven't, your Honour. (T4262:16-25; T4262:51 - T4263:35) 453 In line with Mr Pisano's opinion and that of Mr Morrison, in my view, it would take the clearest of statements identifying the nature of this Heat Exchanger as one intended to operate as Optus required, to put a designer, mechanical or thermal, or a manufacturer of the Heat Exchanger on notice of that requirement. Clearly, that was not done in this case. 454 In fact, the Tyco specification, for reasons earlier given, was misleading in that respect. 455 In considering the conduct of Mr Morrison, one starts with the proposition that it was EMAE's duty to design the Heat Exchanger pursuant to the MEF order which identified Tyco's order M02955. The MEF order contained the notation "REFER LUMMUS DATA SHEET + CLIENT SPEC". As earlier noted in these reasons that "CLIENT SPEC" was Part A of the Tyco specification. Section 9 of that specification, in my view, specified that only two hydro tests were to be carried out, namely, one on the shellside and one on the tubeside. That instruction or specification was only consistent with the partition plates for the various zones in the bonnet not being pressure bearing plates. That was the evidence of Mr Pisano and of Mr Morrison which I have earlier set out. 456 In addition to that earlier quoted material, Mr Morrison's further evidence in chief was to the following effect: "75. Para 9.3 of the Tyco specification calls for only two separate tests, one being the shellside and the other being the tubeside, or channel. The Tyco Specification gave absolutely no indication that the individual zones of the channel were to be hydrostatically tested separately. As only one hydrotest was required to be performed on the channel, this reinforced my belief the Wormald Heater was intended to operate with all zones pressured simultaneously in the conventional manner. 76. Because I fully expected that the different zones of the channel of the Wormald Heater would be pressurised at all times, I did not consider it necessary that the zones of the channel be separately hydrostatically tested." 457 Mr Morrison added to those views in his evidence in chief as follows: "26. I expected that the gas flow into the channel would come from a single source at 6 MPag, entering each zone via a common manifold, with the flow of the individual loads controlled on the outlet side of the Wormald Heater depending on which zone or zones within the premises experienced a fire. My expectation of a uniformly pressurised channel was reinforced by paragraph 9.3 of Tyco specification part A which specified only a single hydrostatic test for the channel. The Tyco specification part A did not identify or point to the unusual operating conditions of the Wormald Heater." 458 Mr Morrison adhered to that evidence in the following cross examination by counsel for Tyco: Q. What I want to ask you is this: you were told at line 23 that the inlet pressure varied; correct? A. Yes. Q. You did not know how much it varied, did you? A. No. Q. The variations could be great, could they not? A. I wouldn't have thought so, but they could have been. Q. And you didn't know if the variations were variations which applied equally across all zones or variations between zones, did you? A. No, I assumed they were variations over all zones - it was one pressure, one gas supply, one variation. Q. Would you agree with me that that assumption was wrong -- HIS HONOUR: In hindsight? MR HUTLEY: I was about to stop. I take your Honour's point. Q. What was the basis for your assumption, prior to your conversation with Mr Zahradnik, that the inlet pressure variations referred to in line 23 were variations across all zones, equally? A. I assumed a single inlet pressure connected to all zones, no restriction, and if the pressure changed because of use of the gas, they would all change, together, common. Q. So it was your assumption that there was a common source of gas which led to your conclusion that the inlet pressure variations were common to all zones? A. Yes. Q. As at 17 June 1994, what was your basis for assuming there was a common source of gas? A. Paragraph 9.3. Q. Solely on paragraph 9.3? A. Basically, yes. Firstly, that's normal - all heat exchangers have only a single pressure on any channel. This is the rare one. It doesn't have it. (T4698:26 - T4699:21) 459 As earlier stated in these reasons, the evidence of Professor Bremhorst on this and other subject matters was seriously tainted with inconsistency, in my view. However, I note his evidence in relation to some aspects of the Tyco specification which, in my view, reflected the serious inadequacy of the specification. In cross-examination by counsel for EMAE, Professor Bremhorst gave the following evidence concerning aspects of the Lummus data sheet and cl 9.3 of the Tyco specification: Q. I only want to ask you about one document. Did you understand that the designer was given the document at page 2172? A. Yes. Q. Can I draw your attention to the line 23 "Inlet pressure" - do you see that? A. Yes. Q. It has under the heading "Tube side varies"? A. That's correct. Q. Line 25, which is "Pressure drop allowance calculation" and again it says "varies". A. That's correct. Q. That is the point in this document, is it not, where one would put the relevant statement that the pressure differential across the partitions could be the full amount of the pressure? A. The specific numbers would certainly be better than just a verbal reference. HIS HONOUR: Q. I would have thought the question warranted a more positive response than it being better. "Varies" tells you nothing specific, does it? A. That's correct, your Honour. Q. And here we are speaking of megapascal differentials? A. That's correct. Q. Would you not expect some specifics to be provided at that point? A. That certainly would have been my number 1 preference, yes, without a doubt. Q. More than a preference - would you accept the view that it should have been there? A. In this complex set of documents where there is so much indirect information it's hard for me to judge because I don't have the overview. Q. There is nowhere where it is stated, is there? A. Not that I have seen, your Honour, that's correct. MR DOWNES: Q. Professor, "varies" suggests minor differentials, doesn't it? A. Well, I don't know. Q. It suggests, may I put to you, the sort of variation that you would expect in any heat exchanger between the inlet and the outlet partition? A. That could be read into it at first glance, seeing there is only one tube side column. Q. Professor, I think I am taking you back to another matter that I have already asked you some questions about. Can I suggest to you that to the designer of a heat exchanger, the instruction relating to hydrostatic testing in 9.3 of part A conveys the information two tests, total? A. Yes, shell side and tube side, you mean? Q. Yes. A. Yes. Q. But I'm suggesting it conveys one test tube side? A. Tube side, yes. Q. If you go to the document that is at page 2173, would you agree that there is nothing there which tells anything more to a mechanical designer than you could get from part B of the specification? A. The problem with that part is the item 5, how is that to be interpreted with load 1 operating only. I have had difficulty interpreting this specification. I have read it and re-read it. I must say to me it is ambiguous. Q. It could easily mean a heat exchanger pressurised in all zones with one of the thermal loads being in operation heating a moving column, I suppose. A. To put it in very simple terms, yes, that's one possibility. Q. But apart from that, can I suggest to you there is nothing here that could be regarded as informing a mechanical designer that there would be separate pressurisation or could be separate pressurisation, independent pressurisation of individual zones. I am just at the moment asking you about the one page, 2173. A. Right. Q. Do you agree with that? A. There is nothing that states that directly, no. Q. I just want to ask you about one further page, the one at page 2179 - there is nothing there, is there? A. I can't see anything that I can identify with separate operations of the loads. Q. It comes down to interpreting point 5 on page 2173, does it? A. Well, that's not the only one. Point 7: "Design is based on only one load operates at any one time", et cetera. So there is -- Q. In a sense it says the same thing? A. It reinforces the notion for 5 because 5 has the implication that it is talking merely about the thermal load and that the load 1 is operating at all times which, of course, doesn't make sense. So that clearly this is an artificial situation that isn't - well, it certainly can't be related to the design as we now know it - well, as I now know it. I don't know what the court knows. (T4270:22 - T4272:40) 460 Counsel for Optus also took professor Bremhorst to cl 9.3 of the specification in the flowing cross-examination: Q. A technical specification, in the usual course of events, one assumes is an important document for the purposes of the people upstream communicating requirements to people downstream? A. Yes. Q. It's a document in which special or unusual requirements need to be or ought to be clearly spelt out. A. Unusual requirements - I'm hesitating on that one as I did with four. The specification ought to be clear on what's required. Q. Where something such as four or five separate hydrostatic tests on the tube side of a shell and tube heat exchanger need to be carried out, that's something which ought to be clearly communicated in a document such as this, isn't it? A. Well, that depends on how you read the specification. I read it in its entirety, parts A and B, and read it as such and interpreted, so taking part A alone, there's no reference to four separate tube side tests. That's very clear. Q. But my question was whether a requirement for four tube side tests is something which, in accordance with good practice, ought to be clearly spelt out in a document such as this? A. It would certainly help, yes. Q. Anyone undertaking the task of communicating requirements to a designer through the medium of a document such as this ought to, as a matter of good practice, spell out a requirement like that in clear terms. A. I have no problems with that proposition. Q. At page 1732 of the document, under the heading "Shop testing" we find, don't we, the place where that requirement ought to have been clearly spelt out by the preparer of this document, if it was being prepared in accordance with good practice? A. There's no question that if it had been stated there, then maybe downstream processes that occurred may not have occurred. Q. But there's also no question that someone undertaking the responsibility of preparing a document such as should have spelt out the requirement for four separate hydrostatic tests in clear terms in the section of the document which expressly deals with shop testing. A. When you say "ought to" I really see this is as one of the outcomes of this proceedings, as to the extent of the obligations, so I'm very hesitant to agree with the proposition "ought to". I do agree that it would have been a good opportunity to have it here and there's a probability that subsequent events would have unfolded differently. But I don't want to put myself in a position of making that judgment. HIS HONOUR: Q. Professor, you haven't held back in your reports on this. You've expressed plenty of views about what ought to have happened, haven't you? A. Oh, yes. Q. I don't understand your hesitation now. A. Because on this issue I see that there are other places in what I consider as the one specification -- Q. Yes. A. -- where the extra information is presented. Q. Yes. A. So that, to me - but then I'm very familiar with fluid mechanics and heat transfer - I read this document, this total document differently to someone who has less familiarity with the more technical aspects. Q. I don't think you've answered the question yet, whether this is where - "this" being section 9 - you find the requirement clearly stated for the extended testing required. A. That's the only section that refers to that testing and, therefore, if there was - if there, at this stage, was a requirement for four separate tests, it would have been very helpful to have it there. Q. No, no, this is the section that you'd expect to find it in - that's the question. A. If this is the final specification, then, yes. (T4180:58 - T4182:42) 461 Professor Bremhorst was requested to revisit this subject matter in re-examination as follows: MR HUTLEY: Q. Do you hold any opinion as to the effect of a provision such as 9.3 upon the activities of a competent designer of a heat exchanger in determining whether the design of the heat exchanger requires multiple independent zones or a single zone for a heat exchanger? A. It is very clear that 9.3 is not a defining statement as far as the designer is concerned, because the legal requirement is set out in AS1210/1989. Q. Where, in a specification, would you expect to find information concerning the number of zones and, for that matter, how and if they are to be pressurised? A. Sorry, which particular specification? HIS HONOUR: The Professor did answer a question which I put directly to him that it was in this very section that the number of tests one would expect to find are provided for. MR HUTLEY: With respect, it will be a matter for address at the end of the day, but we say the whole of this line of cross-examination departed from the tail, rather than the dog. HIS HONOUR: I don't understand that expression? MR HUTLEY: The question is, we say, this: if the specification calls for a multiple independently zoned heat exchanger, it calls for it. If that exists, the requirement of 9.1 is independent testing. That is simply what is required. The presence or absence, or however one wants to construe the ambiguous clause 9.3, we will say is utterly irrelevant. HIS HONOUR: I have heard that, but I have also heard the witness accept the proposition that this is where you would find a provision, if you are going to have one, for multiple testing. MR HUTLEY: If you are going to have one, quite. HIS HONOUR: Anyway, I have noted my point. MR HUTLEY: Your Honour has made the point. HIS HONOUR: I think the witness wanted you to repeat the question. MR HUTLEY: Thank you. Q. Where, in a specification, would you expect to find information concerning the number of zones and, for that matter, how and if they are to be pressurised? A. The process specification would be one and any detailed specification sheet given to the designer of the heat exchanger, that would be another source. Keeping in mind that a process specification can be very general when it comes to the manufacture of a particular item. HIS HONOUR: Q. Do you intend by that answer to qualify your earlier evidence that testing by performing multiple tests, one would expect to find in this section? A. I think there has been -- Q. Forget about what might have taken place, I am only interested to know whether you have qualified, by your last answer, the evidence you have earlier given in relation to the operation of clause 9? A. To me, the overarching requirement is AS1210. I think I explained during cross-examination -- HIS HONOUR: Q. I am sorry, Professor, I will have to interrupt you. I want to know whether the answer you have just given to Mr Hutley I should take as qualifying the evidence you gave in cross-examination concerning where one would expect to find provided the number of tests to be carried out in the documentation? A. Well, I need to qualify it in that case. (T4330:14 - T4331:45) 462 As may appear from that quoted passage I was less than impressed by the inconsistencies which emerged throughout Professor Bremhorst's evidence. 463 Much emphasis has been placed by Tyco upon the reference in the Lummus data sheet of separate loads indicating separate zones, experiencing separate discrete pressures and indicating that the partition plates were intended to be pressure bearing plates. In essence, I think this approach suffered from a strained hindsight interpretation and, in any event, is a construction which I think is an erroneous one. 464 Mr Morrison himself in his evidence in chief explained the nature of this material in the passages which I have quoted from evidence and his basic approach to that subject matter, I think, is clearly correct and is fully supported by the evidence which I have also quoted from Mr Pisano. 465 It was also Mr Pisano's evidence in cross-examination by counsel for Tyco, that the information contained in Part B of the Tyco specification, which included the "Process Specification for Water Heater" and which contained data concerning separate loads in the Heat Exchanger, was not the information that was of utility to a mechanical designer. That specification had not been provided to EMAE. 466 The evidence of Mr Morrison and of Mr Pisano, I think, indicated the failure on the part of Tyco to recognise the dichotomy between the material required by the mechanical designer and other material involved in the manufacture of the Heat Exchanger and underlined Tyco's failure to accept what I regard as its fundamental responsibility of making clear to MEF through its Tyco specification and, in turn, to the mechanical designer of its requirement to have a heat exchanger designed with discretely operating zones calling for pressure bearing partition plates. 467 Not only did Tyco fail to stipulate that, it adopted a scissors and paste specification of a common heat exchanger which contained contra-indications that a pressure bearing partition plate was required. Mr Pisano's evidence contained in cross-examination, included the following: MR HUTLEY: Q. You considered, did you not, when you read the document entitled "Process Specification for Water Heater", between pages 1735 and 1738, that you considered that material which, in the usual case, a competent mechanical designer would require for the purposes of undertaking his task; correct? A. He wouldn't require contents between 1735 to 1738. Q. He would not? A. No. ……. MR HUTLEY: Q. So would you not expect to receive the material between pages 1735 and 1738? A. No. Q. Would you not agree that reading that material it tells you a number of matters about the process which is proposed to operate in respect of this heat exchanger? A. Yes. Q. Would you not agree that those would be material matters to know if one was embarking upon the design of this heat exchanger? A. Not the mechanical design. Q. Would it not be material to know, in respect of this heat exchanger, with the multiplicity of zones, that the source of the material which was going to operate in respect of any given zone was canisters of gas under pressure? A. It would not interest a mechanical design engineer. Q. Would it not interest a mechanical designer of this proposed heat exchanger with five separate zones that the intended operation of any one zone was over a period of up to three minutes, with reducing pressure over that time? A. The mechanical design engineer does not focus on variations of pressure and time. Q. Why not? A. Because he - as I stated before, his aim is to design for the maximum condition of pressure and temperature, not the operating conditions. Q. If he were told that there were a multiplicity of zones, firstly - correct - and secondly, that one zone at a time might operate - correct? A. By "operate" do you mean "pressurised"? Q. Yes, be pressurised. A. Yes. Q. In the course of its individual operation as an individual zone the pressure might decrease significantly. Would not a mechanical designer wish to know what happened in respect of the pressure in other zones? A. If he was aware that they could be pressurised independently, yes, but if he wasn't aware that they could be - if his view was that they were all pressurised simultaneously, then it wouldn't be of interest to him as to what the conditions were within each zone. Q. How would he form the opinion that they were all intended to be pressurised simultaneously? A. Because he wasn't given any other information to tell him otherwise. So his immediate reaction is that he has got a heat exchanger with a pressure, it is on the tube side and he would just design it for that pressure. Q. Even if he were told that in respect of an operating zone the pressure in that zone would diminish significantly over the period of its operation? A. Well, it could, it could happen, but that same could happen with adjacent zones. Q. Have you considered how it could happen with adjacent zones? Have you, for the purpose of giving evidence, been asked to consider how such a situation could maintain? A. Well, if, for instance, in this instance, if they were all interconnected then obviously what happens in one zone will happen in the other zone. Q. What do you mean by "interconnected"? A. Well, if they had a common source of fluid, if the pressure in one zone diminished so will the pressure in the adjacent zone. (T4768:58 - T4769:11; T4769:23 - T4770:53) 468 Professor Bremhorst also gave evidence as to the import of the Lummus data sheets as quoted earlier in these reasons and I treat that evidence as supporting the approach to that matter by Mr Morrison and Mr Pisano. 469 NDY called in its case Ian Maxwell Anderson, a mechanical engineer whose formal qualifications included a Bachelor of Engineering (Mechanical) from the University of Sydney and whose experience as a mechanical engineer traversed some thirty years "in all aspects of air conditioning and engineering services in buildings". The thrust of Mr Anderson's evidence was opinion evidence on the responsibilities of NDY in the matters raised in the various claims against NDY in these proceedings. In my observation Mr Anderson showed a good practical approach to those issues and reflected the significant experience he has had as a mechanical engineer. His responses to cross-examination reflected a very quick mind, if not one that may have been a little vulnerable to the occasional flirtation with advocacy. 470 I think Mr Anderson's evidence in cross-examination contained warnings against too imaginative an interpretation of the Lummus data sheets in examining the position of the mechanical designer. In cross-examination by counsel for EMAE, it was his evidence as follows: Q. You've not seen four other documents as well covering other aspects of the heat exchanger, so it must, I'm suggesting to you, refer to the totality of the heat exchanger. A. The document does, I agree, but I'm considering your question about "varies". I'm afraid I haven't got an answer to that because I don't understand what it refers to there. Q. In a conventional tube-shaped heat exchanger where there is one partition dividing the gas when it enters from the gas when it leaves, there will be variations in the pressure between the two sides, will there not? A. Yes, due to the pressure drop through the tubes. Q. But, in fact, as we have said, they're minor differences and are covered by the use of a partition plate which is not designed to withstand the full pressure. A. That's true. Q. Did not, to your mind, the heading "Pressure Drop Allowance Calculation" in line 25 address that issue? A. It could be referring to the pressure drop on the division plate between - if we go back to that gasket drawing in exhibit 5.001 that you have referred me to before where we have two compartments labelled A, that "varies" could relate to the division plate between the two compartments labelled A, whereas there is another division plate between the compartments labelled A and the compartments labelled B. I think they were B. Q. It is implicit, is it not, in what you are saying that "varies" means small differences? A. Yes, but I think as you pointed out to me the title says "Pressure Drop Allowance". Now, pressure drop allowance is in relation to the pressure drop through to the flow in the tubes. Q. You were asked some questions by Mr Hutley about the heat exchanger operating with what he called multiple independent zones. A. Yes. Q. He suggested to you that reference to I think what is the next page of the document that's in front of you at the moment made that clear. A. Yes. Q. A number of times he used expressions like "multiple independent zones" - I think he said at line 30 on page 3288 "it was a heat exchanger with multiple independently operating zones". On page 3289 he said "a heat exchanger designed to operate in four zones" and I think he used a similar expression again. I want to suggest to you that the kind of heat exchanger that I postulated to you a moment ago, which was fully pressurised at all times, such a heat exchanger would still be a heat exchanger that had multiple independently operating zones, would it not? A. I think it would have to be. I mean, I'm still assuming we have separate gas sources for this heat exchanger for each zone, because I can't see any other way of controlling the gas otherwise. But I agree, it would have to have separate zones. Q. But your thinking is there is associated, is it not, with the 15MPa pressure reduced by an orifice plate? A. But also by the manner in which you would ensure that only sufficient gas discharged into one zone, which is a calculated quantity required. If you had sufficient gas in the gas bottles for all zones and you only wanted to discharge into one zone, because that was the one that had the fire in it, then you wouldn't be able to differentiate which zone it went to, unless you had separate sources for each zone. Q. Would you agree that that sort of knowledge is not the sort of knowledge that you would expect a mechanical engineer who specialised in designing pressure vessels and who had no particular experience with fire suppression systems would have? A. No, you wouldn't, you wouldn't expect him to have it unless he understood the fire suppression system. Q. What I want to put to you is this: a hypothetical system which has some means of stopping the flow of gas after it has begun as part of its system. It has a system to turn on the gas and, when enough has been released, to turn it off again. It is a system which feeds from one common source, but that source is divided into five at the point it enters the heat exchanger. There is a system, whether it be in the actual room itself as with the water system here, or closer to the room, which actually turns on the different zones. Do you understand the system I'm putting to you? A. I can conceptualise it, but it's not -- Q. I think you are saying it is not a system you would design - is that what I hear? A. I don't believe it's one envisaged by any of the codes either, but, yes. Q. Such a system would still be a system that operated through multiple independently operating zones. A. Are we talking pressure zones or are we talking thermal zones? Q. I think that's another complication we are going to come to, Mr Anderson. Pressure zones for the moment. A. Well, if the heat exchanger is pressurised from a common source and the zoning is achieved by some sort of valving system downstream from the heat exchanger, you don't really need to have separate pressure zones in the heat exchanger. Q. The point is that there isn't going to be any change in the pressure between the zones, as you've indicated in an answer you gave earlier. A. In that system? Q. Yes. A. No. Q. But it is still something that you would describe, to use precisely Mr Hutley's language, at having multiple independently operating zones. A. Yes, because the word "pressure" doesn't appear in that description. Q. Can I ask you now to go to that sheet 2 of 8, page 2173, and you would then be able to say of it that it was capable of an operation under which load 1 only would operate to take you to point 5. A. In those circumstances, that would be a possible interpretation. Q. And also 7 "Design is based on only one load operates at any one time". A. Yes, I agree that's a possible interpretation. (T3378:57 - T3381:43) 471 Graeme Maxwell Peck was a consulting construction engineer called in Leighton's case. He was the founding member and chairman of Evens & Peck Management. Prior to the establishment of that consultancy he had extensive construction experience as engineering director of Pearson Bridge Pty Ltd. Mr Peck is a highly experienced construction engineer with formal qualifications in the form of a Bachelor of Engineering with First Class Honours in Mechanical Engineering. His expertise lay in the construction field with significant experience in contract administration. He did not profess expertise in relation to heat exchangers. He was called to give evidence on the commercial relation ships amongst the parties with emphasis upon Leighton as a party occupying the role, essentially, as a project manager utilising specialist subcontractors. Inevitably, he was drawn into areas that were not his particular expertise and which he freely acknowledged. 472 Notwithstanding, his evidence on the Lummus data sheets, is not without significance, in my view, as appears from the following cross-examination by counsel for EMAE: Q. I've taken you to the second page of the document. I think you've seen that before. A. Yes. Q. I think you've noticed in particular line 25 which says "pressure drop allowance calculation". A. Well, I can see what it says. I can't say that it struck me as particularly significant earlier. Q. Under the heading "Tube side" it says "varies". A. Yes. Q. Have you looked at that previously? A. I've seen the piece of paper, yes. Q. Have you looked at that line previously? A. I've not - I would have, but I've not considered it as of any particular importance. Q. Do you not consider that the word "varies" there would inform the expert reader not that there was a difference between full pressure and no pressure at all, but something that fell within the description of a variation in pressure? A. As I understand it, this is a heat transfer calculation. I mean, my reading of those calculations previously was that this was a heat transfer calculation by ABB Lummus and all they're sort of saying there is that's the way it operates, but they're not drawing any particular conclusions as to what the pressures are. I don't see that as particularly relevant to the heat transfer calculation. That's why I read past it. Q. It doesn't deal with heat transfer, it deals with pressure drop, does it not? A. Well, it's describing - the section headed "Performance of one unit" is describing the performance, in general terms, of one unit. That's how I've read it in the past, anyway. Q. You see this document, then, do you, as a document associated primarily with heat transfer? A. If you carry on down to line 31 you'll see where it says what the tube side pressure is, what the shell side pressure is, but yes is the answer to your question. I'm sorry, maybe this is -- Q. When you say "yes" you mean it would suggest to the expert reader that one had differences or variations in pressure rather than some parts fully pressurised and others not at all? A. You're back on 25 now, are you, line 25? Q. Yes. A. I don't know that it makes any suggestion at all. The words say what they say. If you read on a little bit further down the page it says what the tube side is designed for and what the shell side is designed for. Q. There's nothing on this page that positively tells the reader that there are chambers within the tube side which are fully pressurised on one side and have no pressure on the other, is there? A. On that particular page, no. Q. The word "varies" at best would suggest that there were no such differentials, would it not? A. Well, it doesn't suggest anything to me. It is a statement that says it varies. (T3993:50 - T3995:14) 473 In the course of that cross-examination he was also asked about the operation of cl 9.3 of the Tyco specification and he gave the following evidence: Q. I think these are the Tyco specifications? A. Yes. Q. You've seen them before. A. Yes. Q. In particular, you have seen 9.3. A. Clause? Q. "Shop testing" on page 1732 and in particular clause 9.3 relating to hydrostatic tests. A. Yes. Q. You've been asked some questions about that. A. Yes. Q. That plainly talks about two tests. A. Yes. Q. Two separate tests. A. Yes. Q. The expert reader of that would not conclude that there should be four or five tests, would he? A. That clause does not convey that, no. Q. In terms of the store of knowledge of the expert reader of this document, that would be contraindicative to four or five tests, would it not? A. Well, I can't contemplate on - the clause indicates to me, read alone, two tests. I can't contemplate on someone else's store of knowledge. Q. Can I ask you to go to -- HIS HONOUR: Q. I must say I read it as saying two tests only and in order to carry out two separate tests, there has to be an independent test of the shell side without pressure from the tube side. A. Yes. I made reference to this in my original report, your Honour. (T3995:30 - T3996:18) 474 He was further questioned about the data concerning separate "loads" in the Lummus material and he also distinguished between thermal concepts and pressure, as appears from the following: MR DOWNES: Q. If I could ask you to go to the process specification in that document at 1735. A. Yes. Q. This document is also a document, is it not, substantially concerned with issues associated with thermal transfer? A. I guess - yeah, I guess I'd agree with that. Q. If you look at the heading "Individual loads", heading number 2 on page 1, the loads that are there described are thermal loads, not pressure. A. Yes. Well, yes. Q. I think they are associated with the transfer of heat that can be anticipated within three minutes, measured in accordance with kilowatt hours? A. Yes. Q. Can I ask you, then - I think you have to move back to volume 6 - to go to 1.339? A. Could you give me the page number, please? Q. 2173. A. Yes. Q. When you see the word "load" in numbered paragraph 4, in numbered paragraph 5 -- A. Which one am I looking at? Q. Page 2173. In paragraph 4 it says, "Tube lengths for each load zone" and then there are four zones. Do you see that? A. Yes. Q. Then the word "load" appears in 5? A. Yes. Q. In 6 and also in 7, I think. A. Yes. Q. And 8 as well. Where the word "loads" appears in each case, it is referring to thermal loads, is it not? A. That's as I understand it, yes. Q. Not to pressure. A. No. Q. So that the expert reader of this document would not assume that there are four, or whatever, loads other than thermal loads. A. That's a reasonable interpretation. Q. And you could have different thermal loads, although you had the same pressure. A. I suppose so, yes. (T3996:20 - T3997:22)

I think weight should be given to Mr Peck's evidence as that of a highly experienced engineer, notwithstanding his limited experience in relation to the subject matter of that cross-examination. 475 Mr Walker gave evidence to like effect in cross-examination which distinguished the data concerning loads from concepts of differential pressure, as appears from the following cross-examination by counsel for EMAE: Q. Would you agree with me that, having regard to the knowledge of my hypothetical engineer, having regard to the information that is on the sheets that I showed you, having regard to the fact that heat exchangers conventionally operated in every part simultaneously, having regard to the fact that heat exchangers are usually fully charged, and having regard to the fact that at least one fire suppression system involves water pipes being fully charged, that a reasonable heat exchanger designer with the material I've taken you to would be likely to form the view that the heat exchanger would be constantly charged and only one load released from the constant charge at a time. A. In other words, there's sufficient gas available to keep the flow rate pressure up the same on each side of the baffles -- Q. Yes. A. -- with one load off. Q. Yes. A. In that case, yes. Q. I want to suggest to you that, for the reasons I've put to you, a mechanical designer would conclude that that was how this heat exchanger would operate. A. He could have, yes. Q. And that would be a reasonable conclusion? A. A reasonable one, yes. Q. And that would be a conclusion that the heat exchanger would be charged at all times. A. Yes. Q. Even although one load might operate separately from the other. A. Yes. Q. And if you had the heat exchanger fully charged and, let's say, an alarm went off in zone 2 and zone 2 operated, on the assumption that there was gas coming in at the same pressure for the gas going out, there would be no problem with differential differences in pressure in the system, would there? A. It would be negligible because the flow rate would be the only difference. Q. In other words, you would describe the pressure differential as a variation? A. Yes. (T3511:56 - T3512:52) 476 Mr Ambrose was a self employed pressure equipment engineer who was called to give evidence in WorkCover's case. He held a degree in Mechanical Engineering from the University of Melbourne. Since 1950 his work involved quite extensive experience in connection with the design, manufacture and testing of pressure vessels. I found him to be an experienced and what I would describe as an old style engineer, whose evidence was given spontaneously with no prevarication and in a direct way which reflected the mind of a very practical engineer with a good grasp of his subject and quite conscientious in his application to any particular task. He freely made concessions. 477 The evidence of Mr Ambrose, I think, during cross-examination by counsel for Optus, reflected the artificiality of an approach which sought to extract mechanical design implications from the thermal data to be found in the Lummus sheets. Although not the most illuminating passage of evidence, I think it does reflect the artificiality inherent in Tyco's approach to this subject matter, as follows: Q. I think you gave an opinion as to "varies"? A. That's right. I said "varies". Q. You said perhaps the obvious, that it would vary. Is there a term of art in engineering in this context? A. No, nothing special in that. MR HUTLEY: Q. So it could refer to large variations, small variations - one just can't tell from "varies"? A. Correct. ……. Q. And "vary" could be from -- A. Zero to the - to anything within the capability of the supply system. Q. When you say "within the capability of the supply system" what are you referring to? A. Well, where does this gas come from. Q. If you then move down to line 23, there is a reference to "inlet pressure"? A. Yes. Q. What's inlet pressure? What would a competent designer understand "inlet pressure" to refer to? A. It is the inlet to the shell in the case of the shell side, which is 0.25 kilograms per square centimetre. I am not sure of the units. It is not a very high pressure. And on the tube side it says that it varies. Q. Just in that regard, could you jump down, if you would be so kind, to number 33 which is I think "number passes of shell"? A. Yes. Q. This then goes across to "shell side: 1" and "tube side: 5 by 2". Are you able to see that? A. Yes. It suggests that on the tube size there is five passes. ….… Q. So would a competent designer interpret it to mean that there are really going to be five banks of U-tubes? A. Yes, I would think that's what I would interpret looking at it now. Q. And such a competent designer would draw from that that there were intended to be five zones of some variety of U-tube? A. Probably, but you would have to read the whole document and everything that was supplied, but that's what you would go by, that "5". Q. If I could go back to 23, to "inlet pressure" -- A. Yes. Q. -- keeping in mind that a competent designer would have interpreted or been likely to have interpreted that there was a requirement for five separate zones, including banks of U-tubes, would a competent mechanical designer of a heat exchanger know whether the variations there referred to were across all banks, or between banks of U-tubes -- HIS HONOUR: Before you answer that, the answer you obtained from Mr Ambrose a moment ago was that there was intended to be five zones of some variety of the U-tube. MR HUTLEY: Yes. HIS HONOUR: In the question you have just put you have described them as five separate zones, which I think is not an insignificant distinction. MR HUTLEY: Thank you, your Honour. Q. When I asked you the earlier question to which his Honour has referred and you said there were likely to be five zones, were you referring to five separate zones? A. Five separate zones or there might be some other - I would ask the question what were those five? I don't know what they would be and I wouldn't - I would like to know more information before I - to determine whether they were five separate zones or five. Almost certainly they would be five separate zones but you would need to check. Q. Going back to line 23, to "inlet pressure", again asking you from the point of view of a competent mechanical designer, would the competent mechanical designer, being aware there were variations of inlet pressure, be able to ascertain from that document how those variations were manifested in the ordinary operating conditions of this heat exchanger? A. No. Q. What should a competent designer, in your opinion, do in that circumstance? A. I would expect that the designer, in this case, would be relying on further information besides this document. Q. I will come back to the further information. Stopping at that point, then I would like you to have a look at the rest of that page and turn over to the next page, if you would. Read both to yourself if you would be kind enough. In that material which I have asked you to read is there anything which, in your opinion, would indicate to a competent mechanical designer of a heat exchanger how the inlet pressure varies as contemplated in line 23. A. Look, I just can't see it at the moment. No, I couldn't see it. In fact, I'm a bit confused because you have got - introduced the term "loads" in this case and I'm not sure what that would normally mean. I would think it is the heating load and they are only talking about four loads - wondering where the fifth one has gone. Q. Could you go over to page 2179 -- HIS HONOUR: At the bottom of the page. MR HUTLEY: Q. It is in the loose one that you have. A. This one here? Yes. Q. I want to add to your consideration that the designer gets that document? A. Yeah, that makes a hell of a difference. Q. What is the "hell of a difference"? A. Well, it suggests where the loads are and what the loads mean and how the tubes are going to be arranged and the flow through those groups. Q. Would that assist the competent mechanical designer to ascertain how the inlet pressure was to vary as specified in line 23? A. No, it doesn't give a clue. Q. So a competent designer would be confronted by the possibility that the variation was referring to, one, between the zones -- A. It is the amount of heat to be transferred in that zone. I think that's what the load is. That's probably independent of pressure, if you like. It is purely and simply talking about the heat transfer that takes place, not the pressure. Q. Going back to line 23 on the first page? A. Yep. Q. -- the competent designer is told, is he not, that there is variation on inlet pressure? A. Correct. Q. And if the competent designer, reading page 2179, knows that there are a number of inlets -- A. Yes. Q. -- to a number of zones -- A. Yes. Q. -- would a competent designer be able to make any assumption as to what the variation in pressure contemplated by line 23 related to? A. Sorry, I have not been able to see in the document what's the maximum pressure that's likely to get on to the -- Q. Assume it is 6MPa? A. 6MPa, say. He can't tell from this diagram or from this diagram (indicates) whether they are operating singly or separately or at different pressures. He can't tell from this diagram. Q. The variation could be over time? A. Over time. Q. It could refer to surges? A. It could be surges; it could be to the whole lot; it could be individually. HIS HONOUR: Q. I notice that it refers to "pressure", singular. It talks of inlet pressure. A. Inlet pressure. Q. If the source is a singular source, what does that indicate? A. That indicates that all of the passes are - all of these flow conditions are getting the same pressure, but it will vary depending on time. It will be zero if it is not activated and if the gas activation is required for gas flooding, it will go up to its maximum pressure of say 6MPa. MR HUTLEY: Q. His Honour referred to a possibility that there was a single source. A. Yes. It doesn't - from this you can't tell whether it is - the impression here is an inlet pressure and the inference is, on the shell side, there is only one source and probably from the tube side you might indicate that there is going to be one source from there, but it is going to vary in pressure. It doesn't really - the pressure is the same in - is the way you might look at it. On the other hand, because it varies it might be that it does vary down the passes. I wouldn't know. From the diagram here and from this, I wouldn't know. But my guess would be that it would be one pressure coming in and that's the way I would be looking at it. Q. Would you be confident in designing this on that guess? A. No. Q. What would you do? A. Well -- Q. I am sorry, I withdraw that. Since you wouldn't be confident in relying on that, can his Honour take it that, in your view, a competent designer of a heat exchanger would not be acting competently in relying on that guess? A. I would think that to rely on that guess alone might be stretching the limits, but not knowing the whole circumstances - there is usually a whole lot of circumstances behind contracts. If you are going to get this done, you want it done tomorrow. For example, there is a hell of a lot of pressure. The guy you talk to is away, or sick, or something like that. There is a whole lot of actions that can affect your decisions on doing this. The query would come up in your mind and then you have to take a risk assessment, if you like - use the term you have used before - in deciding which is the better way to go. Q. Can I take you down to the next matter at line 25 on page 2172 - the first one. A. Yes. Q. That refers to pressure drop allowance calculation - do you see that? A. Yes, I understand that. Q. How would a competent mechanical designer of a heat exchanger interpret that entry? A. On the shell side he is expecting that the pressure drop, across the shell, in water flowing at 54,000 kilograms an hour, the pressure drop across the heat exchanger on the shell side would be limited to 0.09. When you get to the tube side, being consistent with all the information above there, you would expect that the pressure drop is going to vary. There would be no pressure drop when there is no flow, it is obvious, but when there is full flow at 6MPa maximum pressure, you would get a maximum - you would get a maximum drop there and it, therefore, would range from a high pressure drop to a low pressure drop and that's what I would be assuming and that's what the word "varies" means. HIS HONOUR: Q. Is the drop in pressure a product of the - merely the product of the passage of the material -- A. The gas. Q. -- through the exchanger? A. Yes, your Honour. When you pass water down a pipeline, for example, it won't flow from here to there unless there is a pressure pushing it and therefore, if there is no pressure between the two of them, it stops. Therefore, it will vary, in this case, when the gas flows through the pipeline. When there is no gas flowing, there will be no pressure drop. When there is maximum flow through the tubes, you will get the maximum pressure drop. All it says there is it is going to vary and it is leaving it to the designer to contend with it. There is no limits on the pressure drop. Sorry, I see in 31 where you have the 6MPa design pressure. (T4521:30 - 41; T4521:53 - T4522:25; T4523:25 - T4527:58) 478 Later, in cross-examination by counsel for Tyco, Mr Ambrose was taken to the Tyco specification. Having read through to section 8 of that specification he stated that he could "see no indication that there would be differential pressures between the zones". Which prompted the following questions and answers: HIS HONOUR: Q. I am sorry, does that mean that it indicates no differential pressure? A. Yes, all those, the whole of what I have reviewed, which doesn't give you a clue that there could be a differential pressure between the zones. Q. Do you think the use of the standard specification was appropriate for the design of five separate zones? A. For a unique vessel I would have thought that they might have been more specific. That's my own impression. I would have thought you would - I have to go back and see what the title is. Yes, it is for the Grinnel controlled atmospheric gas flooding system, so it could be for a number of installations that Tyco were utilising, so it could be a number of heat exchangers, but for this particular contract it would be under certain circumstances atmospheric, but it doesn't indicate that there is differential pressures across there. (T4534:49 - T4535:12) 479 That evidence lead to the following further cross-examination which in my view only tended to emphasise the futility of the exercise undertaken on behalf of Tyco: MR HUTLEY: Q. Would you agree with me it does nothing to resolve the issue as to the meaning of "varies" in the page of the data sheet I took you to? A. I agree with that. Q. A competent designer of a heat exchanger would still be in a position of uncertainty -- A. That's right. Q. -- as to how it was intended this heat exchanger be affected by pressure? A. This might even dispel a little bit of that uncertainty because there is no mention in it at all. Q. But, in your opinion, a competent designer would still be in a situation of uncertainty? A. I would think he would have a question mark, yes, and he has got to resolve it some way himself. Q. What, in your opinion, is the appropriate way to resolve it? A. Normally there are personal discussions which take place either over the phone or directly when you get this. You don't suddenly get a piece of paper out of the blue, there are other discussions, so much would depend on what information and how it was presented to him and what was presented there. That may have been sufficient to dispel all doubts in his mind. As an example, "We want it quickly. Do the design within a week because it is urgent. It is just a standard shell and tube heat exchanger. We will give you an update as you design it". If that was presented to him he would probably not bother checking any further; but it depends on the communication. Just looking at this alone, in my mind, and particularly in hindsight, you are a little bit unsure of what way to go and how to handle that; but the figure that you had on that sketch showing the loads 1 to 4, for example, that clarified, from a mechanical designer, the layout of the tubes and hence, the sizing and the pitching and that type of thing. So that would give him enough to keep going and he could design the whole system on that and probably not refer back, but he wouldn't know whether he had to design for the differential pressures in the different zones. Q. But without knowing that, he couldn't design it, could he? A. No, he can. He can assume that there is no differential pressures. If he made that assumption, then the design would go ahead and that's the standard sort of way of doing it. Q. Would that be, in your opinion, a prudent way of -- A. Well, as I said before, it would be prudent if the information that he had been given to [sic] him, plus this - and I don't know what transpired beforehand but if all that was reasonable, then he would go ahead with it. But if he didn't have that - if I were presented with this information alone, I would be asking a few questions. I would ring Bill. "What is this about?" That's what I would probably be doing, unless someone told me that it is just a standard heat exchanger. Q. But there is nothing standard about this heat exchanger, is there? A. It is standard - everything is standard, except the partitions and hence the nozzles. So - but each nozzle is standard and each partition is standard. Everything is standard except the number that has been put together into the channel: that's unusual. (T4535:14 - T4536:39) 480 In further cross-examination of Mr Ambrose by counsel for Tyco, emphasis was given to that last observation, as appears from the following evidence concerning the Tyco specification: Q. When you said, "There is nowhere in here to indicate there was a differential pressure" -- A. Yes. Q. -- what you were referring to was the document I am taking you to now, part A? A. That one there, and the other one, it didn't indicate there were differential pressures. There were varying pressures, but it didn't indicate there were differential pressures between zones. Q. There could be, or there - there may be or there may not be, one simply doesn't know? A. Doesn't know. This document doesn't help you. Q. I would like to take you to clause 9 of this document. A. Yes. Q. There would be nothing in that paragraph which would resolve the query raised by the ABB Lummus data sheet in relation to pressures, would there? A. No, I can't see in my interpretation - I can't see that it would clarify whether there was a differential pressure across the division plates. Q. What is your interpretation of the document? A. My interpretation is that each heat exchanger and this particular heat exchanger, there is only one shell side and one tube side - that's what I would take it as - they shall be tested independently without pressure on the adjacent side. That's the worst case for both of them. That's why they are done that particular way. Q. In giving that answer are you assuming "heat exchanger" is each zone? A. No, I am treating - the specification suggests, the way it is written, that the heat exchangers in 9.1 - it refers to "heat exchangers", plural. I can see from the title of the document it is dealing with a number of heat exchangers because it could be supplied for different contracts. Therefore, it is quite a legitimate document in that sense, it is no problem, but here it is saying that the shell and tube sides of various - of all of the heat exchangers as supplied - and I would take that as the shell and the tube side of this particular heat exchanger, and there would be only two tests. Q. But I think you agreed with me it wouldn't serve to resolve the question in your mind raised by the varying pressures, the reference to "varying pressure" in the ABB Lummus document? A. It would -- Q. Is that correct? A. No, I would have thought that you have been told in that other document that you are to test it at say 9MPa and hence, that's all this test is talking to you about. I would say that would tend to suggest that that's all you needed to do and it might in fact confuse you about - and help to resolve the problem in your own mind that there was no differential pressure across the division plates. It doesn't really help or doesn't solve the problem, but it could confuse you a little bit more and lead you down the wrong way. Q. Because what you have here a prudent designer would consider is what appears to be a standard form document? A. Correct, yes. Q. Some parts of which are appropriate and some parts of which may not be appropriate -- A. Correct. Q. -- to the heat exchanger? A. That's right. Q. And a prudent designer would realise that the thermal designer had remarked upon variation of pressure in the document which I took you to, referring to inlet pressure? A. Yes. Q. And that would be a concern for the prudent designer; correct? A. I would have interpreted that it was going to vary depending on the operations, somewhere between zero and 6MPa. Q. And possibly between zones? A. And, as I said before, it could be between zones - until you start reading the whole document. When we started out it was -- Q. Having read the whole document would you agree with me that a prudent designer, having read the pages of ABB Lummus which I took you to - those three pages - together with the Tyco Technical Service Group specification, part A, would be in a position where, to satisfy himself as to how pressure varied within this vessel, he had to make further inquiries? A. I would think some mechanical designers might go ahead and, when they looked at the 9.3, they said, "That's probably all that was needed to be done" and others might think about that there could be - if he found out more about the process and how the heat exchanger was to be used, he might find out that there could be some differential pressure. But in most cases I would think that the designer is not thinking about differential pressure across the division plates. That's my feeling from all the documents here. But a really competent designer might query - and I would agree with you - he might query that, even after reading all these documents here. Q. When you say "really competent", are you saying a prudent designer? A. Well, I thought most designers were prudent but I don't know the difference. I think that - I mean there are degrees of competence, there are degrees of experience with people's knowledge and it depends on the circumstances, the conditions of the contract, if you like. Is it to be done in a heck of a hurry and all of those things sort of influence the way the designer tackles his job, and other information that must have gone on verbally between parties in this case. I can't conceive that this just went on without any discussion between anyone. Q. Don't you think a prudent designer would just ask, "How is this thing going to operate?" A. Yep, I would have thought that in this case - but again, if -- Q. And -- HIS HONOUR: Q. You were going to add something? A. I was going to say that it depends on the circumstances. If you have been dealing with a company before, or there is something special, or the words that have been passed over to you and the urgency of the job, all of those things, and just some simple words, "Look, she is a standard job but it has got 10 nozzles in it", for example, that would be enough sometimes to just flip the balance for a person to decide whether that was right or not. (T4537:31 - T4540:22) 481 That evidence underscored an approach of Tyco which, in my view, bordered on desperation at times. In cross-examination by counsel for EMAE, Mr Ambrose was taken to some earlier evidence in cross-examination and clarification of it was obtained as follows: Q. I will read it again. Perhaps I will read more: The impression here is an inlet pressure and the inference is, on the shell side, there is only one source and probably from the tube side you might indicate that there is going to be one source from there, but it is going to vary in pressure. Do you remember that now? A. I remember saying that, I think, yes. Q. Then you said, about four lines further down, as appears in the transcript: From the diagram here and from this I wouldn't know, but my guess would be that it would be one pressure coming in. Do you remember that? A. Yes. Q. If there is only one source for all the zones, if there is only one pressure coming in, to use your words, then the gas will arrive at the nozzle for each zone at the same pressure? A. Yes. Q. It follows that any variations between the zones, in this hypothesis, would be associated with flow? A. Variations with flow, yes. Q. I think you said this also yesterday, that variations in pressure associated with flow are present in every heat exchanger, are they not? A. Correct. Q. In every heat exchanger, because of the physics of flow of fluid, there will be lower pressures at the outlet nozzle than at the inlet nozzle? A. Correct. Q. These are found in pressure differentials across the partition plate in every heat exchanger? A. Yes. Q. Even in the most conventional heat exchanger there will be a pressure differential across the partition plate? A. Yes. Q. These pressure differentials are provided for in the TEMA standards and tables, are they not? A. I haven't seen the latest TEMA, but they have been in there. Q. And competent mechanical designers go to the TEMA tables to work out what is the appropriate thickness for partition plates, having regard to the pressure differentials that will exist in all heat exchangers? A. All the heat exchangers which are dealt with within the TEMA system, yes. Q. The TEMA standards are tables calculated, are they not, to deal with this very pressure differential associated with flow through the system? A. I am sorry, I haven't got the tables in front of me and I haven't seen them for a number of years and I don't know which ones these were designed for. Q. However, the pressure differentials of this kind - that is, associated with flow through the heat exchanger - are relatively small pressure differentials? A. Correct. (T4596:1 - T4597:27) 482 Questioned about the implications of cl 9.3 of the Tyco specification to a competent mechanical designer of a heat exchanger, Mr Ambrose expressed the view that the clause conveyed the implication that "the pressure differentials across the partition plate will be minor" (T4603:40) 483 It will be noted from this evidence that Mr Ambrose had picked up the standard nature of the draft CIG specification which had been adapted by Tyco, in his reference to the fact that, throughout the Tyco specification, it referred to "heat exchangers." This is just another example of how inappropriate the standard specification used by Tyco was for the design of a heat exchanger intended to have full pressure bearing partition plates. 484 From that evidence of Mr Ambrose one could not safely conclude, in my view, that the Lummus thermal data had any significance to a mechanical designer other than that to be drawn from the evidence of Mr Morrison and Mr Pisano and which I have accepted. 485 It was Mr Morrison's evidence that the specification of "five individual tube bundles" indicated that "each bundle could flow separately". However, that did not mean that "any part of the tubeside would be un-pressurised while the shellside was pressurised". With that I entirely agree and would add that the information provided in the form of the Tyco specification, read separately, or in conjunction with the Lummus data sheets, did not convey the intention to have separately pressured zones, each one capable of operating without pressure, other than atmospheric pressure, being present in adjacent zones. 486 In my view, it is almost a contradiction in terms for Tyco, having suppled a scissors and paste version of a standard specification applicable to unspecified "heat exchangers", providing for two separate tests only, one for the tube side and one for the shell side, to say that there was some indication in the specification of the design requirement for pressure bearing partition plates sufficient to put a manufacturer or mechanical designer, or for that matter the thermal designer, on notice occasioning inquiry which would have exposed the true design intent of the Tyco Heat Exchanger. 487 The foregoing observations on the evidence paid no regard to the steps taken by Mr Morrison to obtain further information concerning the Tyco specification. The views I have so far expressed are based purely on the evidence so far as it concerned the technical implications of the Tyco specification read in conjunction with, or separately from the Lummus data sheets. 488 However, the evidence is compelling that Mr Morrison made appropriate and adequate enquiries of MEF to satisfy himself as to the sufficiency of the information he had been given to carry out the mechanical design of the Heat Exchanger. That is so whether or not one has regard to the fact that Tyco placed significant time constraints upon MEF and, in turn, through MEF on EMAE, in carrying out necessary design and fabrication work. 489 The enquiries that Mr Morrison made were of Mr Zahradnik. It is part of Tyco's case that Mr Morrison had no right to rely on that information in the face of his knowledge that Mr Zahradnik was not a qualified engineer. I regard that submission as lacking any semblance of practicality and that is an observation which I think was shared by Mr Pisano whose evidence in cross-examination by counsel for Tyco was as follows: Q. What I want you to agree with me is that a competent mechanical designer, confronted by that situation, would have been astute enough to require production of all the information set forward in the "Remarks" section of the ABB Lummus data sheet. Do you agree with that? A. He should have looked at it, yes. Q. He should have, would you agree with me, acting competently, required its production to satisfy himself that there was nothing in them material to his decision as to how to design this heat exchanger - do you agree with that? A. Again, I will say that it would depend on his client - how competent they were. Q. Do you agree with me he should have asked for the material? A. I believe you should ask for that information that is on that sheet, yes. HIS HONOUR: Q. That information being? A. The items in the remarks, yes. MR HUTLEY: Q. I want you to assume that he says words to this effect to someone at MEF, the company which has engaged him, "You only sent me data sheets 1 of 8 and 8 of 8" - that is, the first page and the diagram, and you are familiar with that diagram, are you not -- A. Yes. Q. -- which I think is referred to at page 17 of your statement. I want you to assume Mr Morrison said this to a Mr Zahradnik: "You only sent me data sheets 1 of 8 and 8 of 8. Can I have the others?" He is told, "They contain thermal information which is not relevant to you". I am asking you to assume that's the conversation. I want you to assume that Mr Morrison knew that Mr Zahradnik wasn't a trained mechanical engineer. He, in fact, held the position of a cost estimator at MEF. Would you agree with me that a competent mechanical engineer of the proposed heat exchanger would, in those circumstances - namely, having received only the ABB data sheet, together with part A of the specification, and not having seen a process specification such as you have described from the process designer - have been not acting in accordance with good practice to embark upon the design of this heat exchanger until he had seen the sheets referred to in note 2 on the "Remarks" column? A. No. Q. You say that. Why? A. Because his client, if he was in the business of manufacturing heat exchangers, would know whether or not that information is relevant: should know. Should know and would know. Q. When you speak of "should know", do you make it on the assumption that the person one is speaking to is trained to make those judgments - that is, within your client? A. My experience has been that estimators for companies manufacturing this sort of equipment are very familiar with what they are dealing with and, in a lot of cases, have a lot of knowledge, in fact more knowledge in what the design should be like than, say, a graduate engineer. So it really depends on the company that you are dealing with. If you are dealing with a company which has never manufactured a pressure vessel before and an estimator who doesn't know what a pressure vessel is, then I would imagine that the design engineer should be more forceful. Q. When you give that answer are you assuming that one is dealing with the usual case where one has received a process specification from the process designer? A. When you say "one", are you talking about the mechanical design engineer? Q. Yes, the mechanical design engineer. A. Yes. (T4778:54 - T4780:28) 490 As noted earlier in these reasons the commercial relationship between MEF and EMAE had been very long standing and it is not disputed that MEF was a specialist manufacturer in the field. It also possessed a design department. I have quoted earlier in these reasons the evidence in chief of Mr Morrison of the communication with Mr Zahradnik in which he was told "Just use the minimum thickness for the partition plates tabulated in TEMA" and that he was "absolutely certain that words to that effect" had been stated. 491 In cross-examination Mr Morrison was prepared to accept that the word "minimum" may not have been used. I regarded that as more of an indication of his basic honesty rather than any basis upon which to regard his evidence in chief in this particular aspect as unreliable. In any event, as explained by Mr Morrison in cross-examination whether the word "minimum" was used is of no significance in the context of the communication between him and Mr Zahradnik. It is obvious that Mr Morrison was being informed that he did not need pressure values in order to calculate plate thickness. It was sufficient to simply use TEMA R, which could only refer to the minimum thickness in the absence of the provision of pressure values. 492 In this, Mr Morrison was supported by the evidence of Mr Pisano. Mr Morrison's evidence in cross-examination was as follows: Q. So does his Honour take it that what occurred was this: when Mr Zahradnik said, "Use TEMA R" you concluded that the pressure drop calculation called for by line 25 -- A. 23 - 25, you are right. Q. -- 25, I think, of the ABB Lummus data sheets, justified you in concluding that the minimum thickness was all that was required? A. Yes. Q. And you didn't do any calculations because you made the assumption that the minimum thickness was all that was required? A. No, I didn't do a calculation because there was no numbers with which to do a calculation. It was not possible to calculate the number. Q. Weren't you concerned that you hadn't received the response "Here are the numbers"? A. No, I wasn't concerned. I would rather have had the numbers. Q. Right. A. But the fact that I was instructed to use TEMA R, I was happy, that's fine; it wasn't unreasonable. Q. The thickness called for by TEMA R depends upon the numbers, doesn't it? A. No. In the tabulation it is a minimum based on history, if you like. It has been found that in most cases this particular thickness is good enough. Q. Good enough for what? A. For use. Q. For what? A. The TEMA R. Sorry, the tabulation in TEMA is all there was until a year or two back before that. Prior to that there was no calculation. TEMA R has changed over years. Q. What would have happened if the pressures were significant? A. I would expect the significant number to be in there. HIS HONOUR: Q. Referring to the Lummus sheet? A. I would expect it to be on the Lummus sheet and I would have expected Norbert to have told me. MR HUTLEY: Q. When you received the response you did from Norbert Zahradnik, you knew you hadn't received an answer to your question about what the pressures were; correct? A. Yes. HIS HONOUR: Q. That is, in the sense of express numbers? A. Mm. Q. Quite -- A. Its answer was to use TEMA. MR HUTLEY: Q. You hadn't got the figures; correct? A. Mmm-hmm, but I wasn't worried about that, because the figures were not that critical. He gave me the thickness. That's all I wanted. Q. But he didn't give you the thicknesses? A. Yes, he did. He said "use TEMA R." He meant the thickness in TEMA R. Q. You interpreted it to mean use the minimum thickness in TEMA R? A. What else could I do? HIS HONOUR: Not an unfair question. MR HUTLEY: Q. You could have asked that Lummus supply you the figures, couldn't you? A. Well, that's getting a bit of a prima donna. I had asked the question once. I got an answer. I used the answer. It was a normal question and a normal sort of answer. There is nothing very special about the answer. It indicated that the figures weren't very important, that they weren't very high. Going back to the sheets that I have heard about since in the part B, there are pressure drops mentioned in there on some of the Tyco data sheets and they are very low figures. Q. But they are pressure drops across the cycle? A. Across the U bundle -- Q. Yes. A. Yes. That's all I was talking about because I didn't know there were pressure drops between zones. You see, there are two different pressure drops. You're usually talking about a pressure drop which is the flowing pressure drop between the two ends of the bundle. The other pressure drop is not a pressure drop, it is a pressure differential, which didn't exist in my theory. (T4703:18 - T4705:13) 493 Mr Pisano's evidence in cross-examination by counsel for Tyco was as follows: Q. In that regard, would you not agree with me that a competent mechanical designer would have understood that the reference in note 2 to the "estimated performance for load 1 on sheets 3 to 7" was likely to be the place where that designer would find an answer to the question as to the pressure drop allowance calculation in line 25? A. No. Q. You don't think so? A. No, I don't think so. Q. In the ordinary course would you have asked for such calculations -- HIS HONOUR: You are referring to? MR HUTLEY: Line 25. THE WITNESS: On line 25? MR HUTLEY: Q. Yes. A. I would have requested that information. Q. I want you to assume that such a request was made in these terms by Mr Morrison of a Mr Zahradnik at MEF: I want to calculate the thickness of the partitions. To do that I need to know the maximum allowable tube side pressure drop. Lummus have indicated that the tube side pressure drop varies, but haven't given specifics. Can you find out the numbers and let me know? That's the question that's asked, I want you to assume. I want you to assume that the answer was "just use TEMA R", just those words. Would you agree with me that to a competent mechanical designer that response was inadequate? A. Not necessarily. Q. What would be the factors which would make it adequate? A. If the person you are having this conversation with, or requested this information from, was familiar with the type of equipment being designed, then I would have accepted that. If he wasn't, then you may need to explain the importance of it. Q. What would you take from the reference "just use TEMA R"? A. TEMA R provides information on the minimum thicknesses and if someone asked me that - told me to do that, I would say, "Well, use the minimum thicknesses." Q. You would infer the minimum thickness? A. Yes. Q. If you were to know that the person you were speaking to was not a mechanical designer, was not a qualified designer of heat exchangers, would that affect your attitude to the response you received from him? A. Not necessarily, no, it wouldn't. Q. Why not? A. Because he would be familiar with the manufacture of heat exchangers, I would imagine, and if he was, then he would know what the minimum thickness for a partition plate was, just through experience. Q. Have you ever designed a heat exchanger without receiving the pressure drop calculations? A. Yes. (T4761:32 - T4762:55) 494 Further, this criticism offered on behalf of Tyco failed to take account of the fact that MEF had its own mechanical design department capable of providing reliable information to Mr Morrison through Mr Zahradnik. 495 It was submitted on behalf of Tyco that Mr Pisano's evidence was, at times, confused. I found his evidence anything but that and I have accepted his evidence and that of Mr Morrison, as quoted, as reliable. I have referred to some inconsistency in the subject matter in the evidence of Professor Bremhorst whose evidence eventually made it clear that he accepted the reasonableness of Mr Morrison's conduct. Messrs Ambrose, Peck and Walker gave evidence to like effect. Mr Peck's evidence was as follows: Q. I want to ask you to assume that Mr Morrison said to the person he was dealing with at MEF, "I want to calculate the thickness of the partitions. To do that, I need to know the maximum allowable tube side pressure drop. Lummus have indicated that the tube side pressure drop varies but haven't given specifics. Can you find out numbers and let me know?" Mr Morrison received the following reply: "Just use the minimum thicknesses for the partition plates tabulated in TEMA." A. That seems to me a matter of evidence. If that's the advice he got, he would proceed that way, I assume. Q. It would have been reasonable for him to act on it? A. Yes. Q. And I want you further to assume that the same Mr Morrison said to the same other person: "You only gave me part A of the Tyco specification, but it makes reference to part B. Please let me have a copy of part B." And he was informed: "Part B is only raw thermal data which is being worked on by Lummus. They are issuing a proper thermal data sheet." And then, subsequently, Mr Morrison said: "You only sent me data sheets 1 and 8 of 8. Can I have the others?" And he was told: "They contain thermal information which is not relevant to you." Again, assuming those facts are proved, it was reasonable for Mr Morrison to rely on the answers he got as a resolution of the query that you say might have caused him to go back to the specifier? A. Yes. (T4059:21 - 57) 496 Tyco has relied, I think with some justification, upon the evidence given by Mr Morrison in cross-examination to the effect that, had he received all of the information it would have indicated that differential pressures had been contemplated between the various zones. 497 I propose to set out an extensive part of that cross-examination for a number of reasons. One is that I think it provides a context in which the material relied upon by Tyco may be evaluated. The second is that it is clear that the evidence upon which reliance is placed is evidence given with hindsight and not evidence of what Mr Morrison's state of mind would have been at the time he was called upon to carry out the mechanical design of the Heat Exchanger. The evidence was as follows: Q. In the middle of the page, Mr Morrison. That's the specification of which you received part A; do you recall that? A. Yes. Q. I'll come back later on during my cross-examination to part A. You didn't receive the second part of the specification? A. No. Q. I want to ask you, had you received the second part, whether there was information in it inconsistent with the assumptions that you worked on in designing the heat exchanger? A. There was, yes. Q. There was, was there not? A. Oh yes. There's mention of bottles, mention of individual racks of bottles. Q. Yes. There were a number, will you agree with me - and I'll takes [sic] you through in due course - there were a whole series of things in that specification which were at odds with your assumptions? A. Yes. Q. I want to take you through them in detail. It would be fair to say had you got that, you would never have designed this heat exchanger in the way you did? A. No. Q. Do you agree with me? A. I agree with you. Q. Had you got it, you wouldn't have been able to design it in the way you did because it would have been clear that the operating conditions in which this heat exchanger was anticipated to work necessitated differential pressures between the zones contemplated in the heat exchanger; correct? A. I understood that one part could work while the other section was completely empty. Q. Quite. A. Yes. Q. In other words, one zone - and if you would like to look at board 2 again it might assist you to visualise it -- A. Yes. Q. -- what you're telling his Honour is had you received part B, you would have realised that the intended operation of this heat exchanger could be that one of those zones identified on board 2 could be fully charged at the design pressure, namely, 6MPa, whilst all the other zones were free of gas? A. Yes. Q. That would have necessitated the design of a heat exchanger with pressure bearing - in a significance sense - partitions between those zones? A. Yes. Q. It would have been clear from reading part B of the specification that what the person who was being asked to design this was required to design was a heat exchanger with multiple zones independently pressurised? A. Yes. Actually, four heat exchangers. Q. Notionally, four heat exchangers? A. Four separate ones. Q. Could I then take you to exhibit 1.339, which you'll find at page 2172, I think. It is in volume 6. Just before I go there, would you just have part A of the specification open. A. All right. Q. You referred in answer to questions by my learned friend Mr Robb in evidence yesterday to clause 9 -- A. 9.3? Q. 9.3, yes. I think in the transcript Mr Robb tells me that's referred to as 8.3 but it was in fact 9.3. I would like you to agree with me that had you received part B of the specification, what appears in 9.3 would have in no way influenced your conclusion that you had to design this on multiple independent zones? A. Sorry, could you repeat that? Q. It wasn't an elegant question. What I'm saying is, you've agreed with me if you'd received part B of the specification, you would have known that what was being required was the design of a heat exchanger with four independently operating and independently charging zones; correct? A. Yes, which is at odds to 9.3 really. Q. Sorry? A. That's at odds with 9.3. Q. Quite, but 9.3 is at odds with that? A. It's at odds with it, accepting that it does apply individually to each one, mmm. Q. Had you got the whole specification, you would have said 9.3 means individually pressurise each of the zones? A. Yes. Q. So if you had been provided with the entire specification, it would have been clear to you that 9.3, read in that context, was quite clear? A. Yes. Q. I'd just like to take you to -- HIS HONOUR: I thought you were going to take Mr Morrison to the particular parts in part B? MR HUTLEY: In part B? I thought I would, but it seems we are completely ad idem. Would your Honour -- HIS HONOUR: I don't appreciate that. MR HUTLEY: Sorry, your Honour? HIS HONOUR: You've assured the witness that you'll take him to particular parts of it -- MR HUTLEY: I intend to do that your Honour. HIS HONOUR: I think it is appropriate. MR HUTLEY: Sorry, your Honour? HIS HONOUR: I think it is appropriate. MR HUTLEY: As your Honour pleases. Q. Could you open 1.228 and could I take you to part B, page 1735. I said I would, and I didn't, take you to the parts of part B and ask you about the parts of it which would have been inconsistent with your assumptions on the basis of which you designed this heat exchanger. A. Mmm-hmm. Q. Could I take you through it and ask you if this would be one of the number of things which were inconsistent. Firstly, in the first sentence: The unit has to heat a maximum quantity of 3,650 square metres of Inergen gas in a three minute period. A. That is meaningless to me. Q. If you go down from that -- HIS HONOUR: Q. What were the parts, what was the material in part B that would have alerted you to the fact that -- A. Somewhere in part B they mention bottles, I'm not quite sure where. I'm just quickly looking for it actually. MR HUTLEY: Q. Would you go to note 3 on the first page, under "Individual Loads"? Do you see that? A. Here we are, yes the last sentence: Flow variation is as a result of gas being released from banks of pressurised gas cylinders. HIS HONOUR: Q. What's the significance of that to you? A. I understood reading that, with hindsight, knowing what I know, I realised that there are bottles available, individual bottles. Q. Is it possible to put yourself in the position you were in back in 1994? A. If I knew that? Q. Yes. A. Mmm actually, even reading that I don't think I could - without knowing what's happening, even reading that, I would think that I could still possibly expect it to be fully pressurised. It's not clear. HIS HONOUR: It just demonstrates the unfairness of the advocacy you've followed. MR HUTLEY: I accept that. I didn't understand it to be unfair. I will now take the witness through each part in detail. HIS HONOUR: In doing so, I think it is important that it is clear in the witness's mind that what he is being asked is the significance of that material if it had been received at the time, and not what he might think now in hindsight. MR HUTLEY: Thank you, your Honour. Q. Could I take you to the third page of the document? A. The tabulation? Q. Yes, the tabulation. Again, mindful of what his Honour said, if you had read that table, that would have told you things about the likely operation of the system, would it not? A. Not really. Not - it would be of no interest to me. Q. Have you studied it? A. I've seen it. I haven't studied it. Q. Have you read it? A. Oh, I read what it is. It is just telling you about the various loads over time, but that's unimportant to the mechanical design. Q. Does it not also tell you about pressure drops in relation to those loads? A. Oh, truly it does, yes. Q. Yes. Is that not of importance to you? A. It would have been, yes. Q. You see, what I want to ask you is if you'd received part B, you'd have read it carefully, would you not? A. Mmm. Q. And you would have -- A. I would see that you've got quite a large pressure drop because of the gas. Q. Yes. Just to put you back to the time in 1994, that's how you would have read it in 1994, would you not? A. Yes, upstream and downstream. Q. And that's vital information to you, is it not, or it would have been in 1994? A. Yes. Q. And it would have been vital because it tells you about changes of pressure in the gas; correct? A. It does. Q. It tells you, does it not -- HIS HONOUR: I don't think --. THE WITNESS: Just give us a moment to read it. HIS HONOUR: Q. What you [are] asked was whether it would be vital information and there were two questions being put to you. A. I'm sorry your Honour? Q. Mr Hutley really put two questions to you? A. That's why I'm a bit confused with him. Q. Involved in it is this would have been vital information. A. Could we start again? MR HUTLEY: I will withdraw the question and ask it again. Q. Do you tell his Honour that in 1994 you would have read this information if you'd received it? A. If I'd received it, yes. Q. I'll take you through it line by line and I'll ask you: you would have read the headings to the various columns, would you not? A. Right. Q. Yes? A. Yes. Q. And you would have realised that the heading to the first column is a time increment; is that right? A. Yes. Q. And it refers to the position over time; do you see that? A. Yes. Q. And you would have read, would you not, moving across, that there was a reference to mean downstream orifice pressure, do you see that? A. Yes, falling from 60 down to 56. Q. In the first 10 seconds? A. Mmm. It wasn't falling from 60, I don't think, but I would expect it to be falling from 56. Q. So you would have believed in operation this system was intended to have an operating condition whereby pressure of gas reduced overtime when it was operating? A. Yes. Q. And you would have understood, would you not, within the first 10 seconds the pressure was 56 bar; do you see that? A. Yes. Q. And after that 49 bar? A. Because your bottles are emptying. Q. Because your bottles are emptying. A. Yes. Q. And that's the bottle in respect of the zone which has been activated? A. Yes. Q. On the assumptions that you made about this heat exchanger, that would be information inconsistent with those assumptions, would it not? A. Yes. Q. Because you would have assumed that all the other zones remained at about 6MPa? A. No. Q. 60 -- A. If the pressure was going to vary I would expect the others would have varied with it. Q. They couldn't vary because -- A. They are joined together. Q. But there would be no flow through them? A. But they are joined together. So if the pressure is coming in a supply pipe going to four different places, then if this one is dropping in pressure, all the others will drop with it. Q. So you would say this would be consistent with your assumption? A. That would be consistent, yes, not for the reason we're talking about, though. It is just because they are joined together. Q. You would say that this system would be consistent with your assumption? A. Yes. Q. Because you would say that each and every zone would be continually pressurised at the same rate? A. On the inlet side, yes. Q. On the inlet side? A. If they are not flowing, the outlet side would be the same rate, the same pressure as well. Q. The difficulty with that is what happens if another zone discharged, that is, what happens if the fire moved to another zone? A. It depended how big their storage bottle was, how big - they don't tell me how big the storage is. It may be gigantic, I don't know. Q. If you read this and made the assumptions about your system, would it not have told you that what you were assuming was completely inconsistent with this? A. If I had read about the bottles I would have asked the questions straight away "What are the bottles doing?" They are banks of bottles. The first thing you think of is what are they are doing. Q. Would you look at the second board -- A. By the way, a pressure drop that you're seeing there, looking at the bottom end, the 9.5 pressure, that would be in relation to pressure on the inlet of probably 12, not 60. Q. I understand. Would you put board 2 up at a convenient point to you? A. Mmm-hmm. Q. I want you to assume that in 1994 you became aware of the information in this schedule which you have looked at, namely, the tabulation? A. Mmm-hmm. Q. I want you to assume you were seeking to design the heat exchanger that you were asked to design. Do you see, put yourself back in 1994? A. Mmm-hmm. Assuming I was then given this? Okay. Q. Prior to being given this information, on the basis of the other information, the information you had in truth, you believed that the whole of the heat exchanger had to be equally pressurised over time; correct? A. Yes. Q. And you believed that because you believed that there would be a constant pressure from a gas source into the heat exchanger? A. Yes. Q. And you believed that that would charge the heat exchanger such that if one zone was activated, gas could flow to do its work? A. Yes. Q. And then if, for example, the fire spread to another zone, there would be gas in the heat exchanger at 6MPa and gas could flow to meet the needs of that fire and so on? A. Yes. HIS HONOUR: Mr Hutley was prompting that by inserting the words "at 6MPa". Of course that may not be the case, the second zone, for example, was activated at some stage after the first. MR HUTLEY: Your Honour, that's what I'm coming to - on the assumptions the witness had -- HIS HONOUR: It's one thing to come to it. It is another thing to insert it into a question. It involves multiple questions by doing that. MR HUTLEY: I am sorry, your Honour. If your Honour thinks it's unfair, that's sufficient, of course. Q. I understood that you assumed, when you designed this heat exchanger, that the heat exchanger would be charged essentially at 6Mpa constantly? A. Yes, something less than 6. Q. Slightly less? A. Say, 55 or 56. Q. But it would be equally and constantly charged with that pressure of gas, whatever the pressure was, about 60 megapascals; correct? A. Yes, and I would expect the pressure to drop a little bit when they used some of the gas. Q. Exactly, because of the flow characteristic, there would be some minor drop in the zone activated because of the flow, the characteristics of the flowing gas? A. Yes. Q. But you then assumed that the other zones were charged at the pressure which you assumed they started at, say 55 -- A. Call it 55. Q. 55, what's that, bar? A. Bar. Q. Yes, 55 bar. If we stay in bar it may be easier? A. It's easier to say. Q. So you assumed that all the other zones were charged at 55 bar? A. Yes. Q. In effect, charged ready to extinguish a fire should one develop in the zone to which those zones related? A. Yes. Q. You assumed that when the system was activated, there was relevantly an unlimited quantity of gas behind it? A. Maybe not unlimited, but a very large quantity, yes. Q. Very large, but relevantly from your design point of view, without limit? Do you see what I mean? A. My design point of view, an adequate quantity for the fire people's needs, they would provide enough gas to do the job. Q. I see. A. The fact that the pressure fell wouldn't concern the mechanical design. HIS HONOUR: Q. Why is that? A. If you design something for 6MPa and it's only filled halfway, it's only carrying 3MPa, it doesn't matter. Q. So that I can understand this table that you've been shown, does that mean that after three minutes the gas supply has been depleted so that there's only a pressure of -- A. They talk of 9 bar. Q. 9 bar. A. It's empty. Q. As I understood your earlier evidence, if only one zone was activated, that would have the effect of reducing the pressure in the other -- A. To the same figure. Q. I see. A. Because they are all connected back to the same supply point. Q. The same supply point, yes. A. Yes. MR HUTLEY: Q. To take up what you said in answer to his Honour's question, this table indicates, does it not, that over a period of three minutes or thereabouts, the pressure is exhausted; correct? A. Yes. Q. What I want to ask you is, isn't that fundamentally at odds with the assumptions that you made at the time of designing the heat exchanger, in respect of, to tell you the area I would like you to concentrate on, the zones not activated-- HIS HONOUR: Could you explain why? MR HUTLEY: Q. I would like you to make this assumption: assume zone 1 was activated because there was a fire in zone 1. A. All right. Q. And the system is activated. Assume the fire spread over the next two and a half minutes later to zone 2. A. Mmm-hmm. Q. If this table were to represent the characteristics of the entire heat exchanger at all times, it would necessitate, would it not, that when the fire activates zone 2, two and a half minutes later, the amount of gas which will be available to extinguish zone 2 will be the amount which is left in the cylinders; is that right? A. You're assuming that all of the - that one bank of cylinders has supplied zone 1 and is supplying the whole of the exchanger, which is not true. Q. I see. If you had read this would you have assumed there were different banks of cylinders? A. Yes. Q. Supplying each -- A. I believe I would have. I may not have. That's the thing, I don't know. HIS HONOUR: Q. Could you explain why? A. Well, for the very reason that you're using up all of the gas on one fire and, as he said, the other fires couldn't work - sorry, the other units couldn't work, so there must be more than one lot of gas. MR HUTLEY: Q. If there's more than one source of gas feeding the several units, they must operate at differential pressures when a fire takes place, must they not, because if there's a fire in some -- A. Are we talking about the system as I saw it, or the system as it is? Q. The system as you would have seen it had you read this document. You see, what I'm asking you about is had you read this document, just this table, would it have been contrary to the assumptions you made in 1994? I'm not criticising the assumptions you made in 1994 -- HIS HONOUR: Forget about the assertions of statements. MR HUTLEY: As your Honour pleases. HIS HONOUR: Put the question, and if I may ask you to remind the witness that you're asking him about his state of mind in 1994. MR HUTLEY: As your Honour pleases. Q. I'm asking you about your state of mind in 1994, you appreciate that? A. Mmm. Q. What I'm asking you is this: if you read this table and you had the assumptions that you in fact had when you came to design it in 1994, what I'm trying to get you to agree with is that you would have realised that your assumptions had to be wrong; that is, your assumption of constant equal pressurisation of every zone had to be wrong and the reason why it had to be wrong is because it would have been apparent to you that the system was designed that when activated in respect of a given zone, gas would be discharged over a period of time at reducing pressure to the point of exhaustion? A. Mmm. Q. Correct. You would have realised that? A. From a bank of bottles. Q. From a bank of bottles? A. So there must have been more banks for the other units. Q. Quite, but how would the other banks of bottles operate, such that the pressure reduction in respect of the zones to which they related mirrored the pressure reduction in respect of a zone which was activated? A. That - I don't understand what you mean. Q. This would have told you, back in 1994, that what was contemplated by this system was that on a fire occurring in respect of any one zone, the gas flow would be activated? A. Yes. Q. And it would be activated over a period of time? A. A short period of time, yes. Q. And the process of activation would result in gas originally being at a high pressure and, as it was depleted, going down to a low pressure; correct? A. Yes. Q. And that would be for a zone which was activated; correct? A. Zone 1 in this case, yes. Q. What I'm trying to suggest to is, assume zone 1 and after three minutes the pressure is about 9.5 bar? A. It's virtually empty. Q. Correct? A. Yes. Q. What would be the pressure, upon your assumptions, in the other zones at that moment? A. With independent supplies of gas? Q. Yes? A. Nil. The pressure in the bottle would be the pressure of the bottle and the pressure in the exchanger would be nil. Q. Can you tell me how you can conceive of a system which had the characteristic of this system, as disclosed in this page which I've taken you to, would be consistent with your assumed system? Do you see, the problem would be, would it not - I'm sorry? A. It would be a different system all together. Q. It would be a different system all together, wouldn't it? A. Yes. Q. You would know - and this is going back to 1994 - from reading this document alone -- A. I'd have enough knowledge from this to ask a few more questions. Q. What would be the questions you would be asking? A. What's going on? How is the gas supply arranged? Q. You see -- A. Because it is not really clear. It's there if you delve, but it's not clear. Q. Could we go back two pages? The reason it is there, is it not, is because there is no way one can conceive of a system which had a characteristic involving the pressure drop described there which could do other than give rise to differential pressures between the zones; that's right, isn't it? A. If the - yes, if you discharge your quantity of gas from a single source through this, the whole thing will come to a stop. Q. Quite. That would have been an irrational system, would it not? A. If you'd let that happen, yes. Q. Because -- A. It wouldn't be -- Q. It would be irrational, wouldn't it? A. Mmm. Q. Because the only way -- HIS HONOUR: I didn't understand that. MR HUTLEY: Could I take it up, your Honour? HIS HONOUR: Mr Hutley interrupted you. I think. Could I just read what the transcript reads at the moment. You were asked: Q. That would have been an irrational system would it not? A. If you'd let that happen, yes. Q. Because -- A. It wouldn't be -- Q. -- and you were then stopped. What were you going to say? A. I was getting confused, actually. Q. That's what I thought. A. It's trying to put the 1994 with now. Q. Exactly. A. It's two different things. (T4645:13 - T4658:36) 498 In re-examination, Mr Morrison, I think, put into context the concessions that are now relied upon by Tyco as follows: Q. You said, "Section 2 clearly says that each gas flow must be kept separate" and then you also said - page 4660, line 33 - "there were four supplies of gas" and at line 46, it says -- A. Can you go back to that last one. Q. You said at page 4660, at line 33 - I am not asking you to look at that. This is just a transcript reference for the record? A. Sorry, that's why I couldn't find it. Q. You are not going to see this. "I would have known that there were four supplies of gas." You said that earlier today? A. In regard to this page here. Q. If you had had this page. A. I think so. Q. You say, "It says that in writing clearly". Do you remember saying those things? A. Yes. It says that each flow must be kept separate for the others. Q. You were saying that as something that would lead you to a conclusion if you had ever been shown this document; is that right? A. That's how I felt, yes. Q. I want you to look at the balance of the sentence, after the words "kept separate from the others" and to read these words "and appropriate manifolding of the gas inlet/outlet is required to achieve this"? A. Yes. I'm -- Q. Do you see that? A. I'm reading that. Unfortunately, I am now cursed with hindsight, so I sort of read it and see it. I may not have seen it if I had seen it the first time. Q. Consistently with what you said a moment ago, what does that tell you about whether there is one or more sources of gas? A. Going back to 1994, and reading "manifolding", I guess I could still manifold that to give one supply in to each of the five or four different nozzles. Mmm, I could. I could. It is not clear. I keep reading it now because I know there are several - four different loads: I know. I didn't know it then. (T4731:13 - T4732:7) 499 That evidence I think should be read in conjunction with evidence which I have quoted earlier in these reasons and from which I think it should be concluded that the information given to EMAE was misleading in that the Tyco specification, even had it included Part B and/or the Lummus data, did not reveal, nor put EMAE on notice, that the partition plates were required to be full pressure bearing plates. 500 The difficulty that Mr Morrison had in putting himself back in the position that he was in 1994 and ridding himself of the effect of hindsight, I think, was obvious in the evidence I have quoted extensively above and emerged in the other evidence of Mr Morrison as follows: Q. Did you place any reliance upon that analogy of water-based systems? A. In what way? I don't follow the question. Q. Well, you refer in your statement to the fact that you had regard to your knowledge of water-based fire suppression systems? A. Well, no - my understanding of, yes. Q. How did that assist you? A. I was trying to clarify in my own mind, what was happening with this exchanger. What was it doing? Just that it is a strange looking thing, but it clarified that pretty well. The gas came into the channel, it had to come into more than one nozzle, the way they had laid out the bundles, you couldn't have less than three, so therefore, five was a reasonable sort of figure. It was convenient. So I could understand why they had selected five inlets. You had to have five outlets. So it all sort of had a logical sequence to it. Q. Why, at the end of the day, didn't you take the simple step of asking somebody how it all worked? A. People were busy; they weren't interested in talking about things. Q. Did you consider asking people how it worked? A. No. I think I probably asked Norbert. I would have asked him what it was and he mightn't have known either. It was just a case of just get down and do it to the specification which was set out there on paper - with only that one number that was missing. Q. And you didn't consider asking -- A. Everything else seemed clear. Q. You didn't consider asking ABB Lummus -- A. No. Q. -- how it would operate? A. No. I didn't normally deal with them. The problem really is that the Tyco specification was pretty poor. Q. Why do you say that? A. Well, it didn't answer the question. It left the thing wide open. It didn't tie it down. It is a very critical part and it should have said so straight away. Q. But you have agreed with me had you received sheet 3 of 8 -- A. It would be much better. Q. -- you would have known that it was intended to operate as multiple -- A. Even there it is not clearly stated. It still has to be determined by reading and studying it. It is not a clear statement. Q. Thinking about it -- A. You have got to work it out, yes. It can be misinterpreted. Q. You wouldn't have misinterpreted it, would you? A. I don't think so, in the long term. Q. In 1994? A. It is not a good document. (T4719:3 - T4720:19) 501 I have examined, in some detail, the position of Mr Morrison, not for the reason that it exposed any shortcoming on the part of EMAE in carrying out the mechanical design. I am firmly of the view that EMAE bears no responsibility for any deficiency in the design of the Heat Exchanger. The value of examining EMAE's position, however, in the absence of any witness from MEF or Lummus, lies in the fact that it provides the most informative backdrop to examine the role of Tyco and to a lesser extent that of Leighton and NDY in relation to the supply of the Heat Exchanger. 502 That material evidenced a substantial and serious shortcoming in the conduct of Tyco in arranging the design, fabrication and testing of the Heat Exchanger. The consequences of that failure on the part of Tyco are examined later in these reasons when considering the consequences of these findings in terms of the issues raised against each of the litigants in these proceedings. 503 For the moment, I think it is sufficient to observe that the deficiencies in the mechanical design of the Heat Exchanger are to be attributed to the misleading and inadequate content of the Tyco specification, which did not disclose the design intent to have full pressure bearing partition plates in the bonnet chamber and, to the contrary, indicated that the operation of the Heat Exchanger was of a standard type not requiring full pressure bearing partition plates. 504 That was certainly the effect of that portion of the Tyco specification provided to EMAE. I think it is clear from the foregoing reasons that EMAE acted reasonably in accepting the information as provided by Mr Zahradnik in response to Mr Morrison's enquiries. I think that finding is justified whether one takes into account or ignores the urgency imposed upon MEF by Tyco in carrying out the design and fabrication of the Heat Exchanger. 505 I think it is also true that even if the whole of the process specification forming part of part B had been provided to EMAE, it would not have removed the import of the written specification provided to EMAE that the operation of the Heat Exchanger was founded on the conventional concept of the chambers being fully charged at all times and so not requiring full pressure bearing partition plates. 506 One is fortified in those findings when it is recognised that WorkCover, both in approving the mechanical design drawings and in witnessing the hydrostatic testing of the Heat Exchanger clearly did so on the basis that the intended operation of the Heat Exchanger did not call for a design of the bonnet chambers which incorporated full pressure bearing partition plates. 507 That approach in my view was fully justified having regard to the Tyco specification requirements. On the face of it WorkCover, EMAE and, I think, MEF acted on the common understanding that the operation of the Heat Exchanger was conventional, in so far as it envisaged the chambers to be charged with gas whilst in service. It is not an approach explained by coincidence and, in my view, points squarely at the failure of Tyco to properly specify what it required. 508 Given the claimed expertise in relation to heat exchangers expressed on behalf of Tyco during negotiations with Optus, one, I think, is entitled to ask whether Tyco itself even directed its mind to this necessary operation of the Heat Exchanger. There is certainly no indication of it in the adoption by Tyco of a standard type specification for conventional heat exchangers with a scissors and paste approach to the CIG draft supplied by Mr Dunn. 509 Not that it is necessary to one's consideration of this issue, it is nevertheless difficult to dissociate the findings which I have made with the somewhat unwanted status of the Heat Exchanger which was required to be designed, tested, installed and commissioned, wholly at the expense of Tyco and under significant restraint as to time occasioned by the unacceptable delay in 1993 arising out of Tyco's inability to meet temperature specification provisions in the NDY specification. 510 As earlier noted in these reasons, NDY's role in the development of considerations for the Heat Exchanger was extremely limited. I noted that, at the meeting of 6 April 1994 to discuss execution of the Tyco subcontract, NDY was not present, nor was it on the distribution list of the minutes of that meeting, notwithstanding the extensive discussions that took place concerning temperature criteria for the Inergen system and the method by which that could be achieved. That approach towards NDY maybe contrasted with Leighton's request to NDY of 30 March 1994 requesting comments on Tyco's letter of 28 March 1994 concerning "THREADED PIPE FITTINGS". 511 There was a further meeting of 7 April 1994 attended by representatives of Optus, Tyco and Leighton. NDY was neither present nor on the distribution list of the minutes of that meeting which dealt extensively with the implications of including a heat exchanger in the Inergen system. This was the meeting in which Mr Bayley made it clear that the "thought of water being introduced to the risk areas [was] totally abhorrent to Optus". 512 On 14 April 1994, Tyco submitted to Mr Dunn an order for the "WRITING OF SPECIFICATION ON THE HEAT EXCHANGER FOR THE OPTUS INERGEN GAS FLOODING SYSTEM". That resulted in a data sheet being provided by Mr Dunn dated 16 April 1994 described as "APPROXIMATE DESIGN ONLY" and followed a format similar to the Lummus data sheet. Three alternatives were provided. 513 As earlier noted in these reasons Tyco's letter to Leighton of 4 February 1994 was not forwarded by Leighton to NDY until 18 April 1994. That was the letter which contemplated the development of a "detailed specification in collaboration with [Leighton] for the manufacture of a heat exchanger". There was no suggestion that NDY should participate in that "collaboration". 514 I think it is significant in considering Tyco's claims against NDY to note that Tyco looked to Mr Dunn for technical and engineering input in the design requirements of the proposed heat exchanger: a matter that was reinforced by Tyco's facsimile to Lummus of 20 May 1994 with which was forwarded the process specification for the Heat Exchanger and in which Lummus was directed to obtain any clarification of that data from Mr Dunn. The urgency of the matter was emphasised in that facsimile in which "the lead time for the heat exchanger" was described as "vital to our contract". The same facsimile recorded Tyco's adherence to the use of carbon steel instead of stainless steel, presumably for cost saving purposes. 515 By the end of April the Inergen system was being installed. On 20 April 1994 Leighton issued a "NONCONFORMANCE" notice which provided details of "Internal Contamination of pipe work by dust oil from cutting operation…..". Notwithstanding that notice, on 4 May 1994, Optus forwarded a memorandum to Leighton in which it confirmed "advice that upon inspection of the pipe work prepared for installation on 4th May [Optus] found an unacceptable level of dust and reside within the pipe". The conduct of Tyco in relation to the installation prompted Optus' request that Leighton "review [its] Q A procedures and advise as to what measures [were] being taken to ensure that the pipe work [was] clear of grease and dust reside". 516 This material has some bearing on the approach one should adopt to the evidence of Mr Hugh Gilchrist, a retired fitter, who was called in Tyco's case to give evidence of his involvement in the installation of the Heat Exchanger at the Rosebery Centre. He had served five years as an apprentice sheet metal worker in Scotland before coming to Australia in 1954 and commenced employment with Tyco in 1979 as a sprinkler fitter. That involved installation of pipe work for Inergen systems. He had no experience with a heat exchanger. It was his responsibility to ensure that the pipes were cleaned internally prior to installation. 517 He presented as a solid tradesman and gave his evidence directly and without hesitation. However, as appears later in these reasons, in considering his evidence concerning the installation of the Heat Exchanger, I was left with the strong impression that there was a significant element of reconstruction in his evidence. His role in May 1994 in relation to the quality control of pipe installation was explained during cross-examination by counsel for Optus as follows: Q. At the beginning of the job, wasn't it left on the driveway? A. The larger pipework would have been left on the driveway. After that, it was left on the driveway to be painted. Q. Were you aware that the pipework was going to four different zones within the building? A. Yes. Q. Do you not recall there was a particular problem with the zone 2 pipework discovered in about May 1994? A. No, no. Q. Was there anybody from Tyco, apart from you and your son, of course, who were actually looking at the pipework to check it was clean before it was installed? A. No, no. Q. Did you have to fill out any documents at all? A. Yes. Q. What kind of documents did you have to fill out? A. Usually I wrote all the numbers of the pipes down on a sheet of paper, Leighton's contractor countersigned them and took the paperwork away. Q. What did you have to write on the piece of paper? A. The number of pipes, the zone they belonged to and the fact they had been cleaned and were ready to be installed. (T3706:25 - T3707:3) 518 Of the failure in quality control in the installation of the Inergen pipe work in April 1994 Mr McDonald gave the following evidence in cross-examination by counsel for Optus: Q. You didn't actually have any QA procedures, did you; you were entirely reliant upon Wormalds. A. We were reliant on Wormalds to have the pipework cleaned. Our - what can I say? We weren't providing a level of checking ourselves of that pipework at that stage. Q. Apart from issuing the non-conformance report back on 20 April, you hadn't put anything in place to ensure that the pipework would be properly cleaned when installed, prior to 4 May, had you? A. I was requiring Wormald Fire Systems to clean the pipework and evidence through their QA system that the work had been done. Q. So you were just relying upon Wormalds still? A. We were relying on Wormalds. At a stage, and I can't recall what time it was, I made a decision to have one of our people do 100 per cent verification checking, because I was concerned that the information I was getting from Wormald was being questioned by Optus. Q. Not just being questioned, was inadequate; correct? A. That's their words, yes. Q. You thought it was also unacceptable, didn't you? A. It was. I was faced with this situation: I had Wormald saying to me and producing pieces of paper saying they'd inspected, that it had been tested and cleaned. There's this situation that's brought to my attention that there was belief that it wasn't, so the solution to that was change the process, and we had one of our people do a 100 per cent check on pipework, irrespective of the paperwork, to see that it was in fact clean - double-check it. Q. In other words, you realised you couldn't rely solely upon Wormalds and whatever pieces of paper they wanted to produce by way of QA documents. You needed to make sure that it was right yourself on behalf of Leightons; correct? A. Because there was a concern with that part of the QA material, yes. I wouldn't say I wouldn't rely on their QA system. There was a QA system in place. There was concern about it and I acted on that concern. Q. It had failed, hadn't it? A. Certain aspects of it had failed, yes. Q. And so you introduced the system which is embodied in this exhibit tendered yesterday, 1.266A, where Mr Cook, himself, was to be on site and inspect; correct? A. Yes. Q. That was an extra fix that you introduced because you were not happy relying upon Wormald; correct? A. Yes, for that component of the work, yes. (T2722:7 - T2723:15) 519 Tyco was under pressure from Leighton over delay in proceeding with the design and manufacture of the Heat Exchanger in the weekly site meetings held at this time. 520 There was a curious record of the site works meeting of 27 May 1994 which noted that "the subcontract for the heat exchanger [had] been let to MEF [and that the] mechanical design [was] complete and thermal design [was] being finalised with the manufacturer". Mr McDonald was questioned by counsel for Optus and by counsel for EMAE about that entry and confirmed that Tyco provided that information and was not asked to explain how that information could have been justified given the state of the design as at the 27 May meeting. 521 There was a meeting between Tyco, Lummus and MEF on 31 May 1994 at which specific requirements of the system involving the Heat Exchanger were raised with Tyco. There is no suggestion of involvement by Leighton, or, perhaps more particularly, by NDY in those considerations. That has some significance in Tyco's claims against NDY in that there appears to have been no reliance by Tyco, throughout, on any involvement of NDY in this process of determining upon the need for a heat exchanger and settling its design and fabrication. 522 There was nothing in that record of the meeting with Lummus to indicate that any of the enquiries raised with Tyco concerned the special nature of the operation of this pressure vessel. More particularly, there was no indication that Tyco revealed to Lummus, or MEF that the operation of the pressure vessel was not conventional, in that each zone would not be constantly charged. 523 On 20 June 1994 calculations for the Heat Exchanger were produced by EMAE for MEF. It is a ten page document containing detailed calculations of elements required for the proposed heat exchanger. It was not provided to NDY until, in all probability, 11 July 1994, according to the evidence of Mr Raddatz. That is not suggestive of reliance by Leighton upon NDY's contribution to the mechanical design development of the Heat Exchanger. 524 At a meeting on 10 June 1994, attended by representatives of Tyco and Leighton, Tyco was recorded as informing Leighton that the Heat Exchanger design was "finalised". From other records it is clear that that could not possibly be a correct reflection of the state of the design at that time. The representatives of Tyco at these meetings were Mr Scott and Mr Brink, neither of whom were called. 525 One is left to wonder what Mr Scott's evidence may have been in relation to these matters and, in particular, his understanding of the intended operation of the Heat Exchanger as involving full pressure bearing partition plates: a matter that may have had some bearing on what information would have been provided to MEF, or Lummus and, in turn, EMAE had enquiries been made to Tyco's representative concerning the Heat Exchanger design requirements. 526 On 21 June 1994 Tyco forwarded to Mr Dunn revised thermal data calculations of Lummus for Mr Dunn to check. Again, I think this evidence provided a contrast to the case of Tyco against NDY. There had been a meeting between Lummus and Mr Dunn on 20 June 1994 and the combined effect of that meeting and the calculations submitted on 21 June was the instruction of Tyco to Lummus of 22 June 1994 to proceed on the basis of the revised data, as the "calculations [had] been discussed with Joe Dunn" and were believed to be "satisfactory". It is also instructive to note that Lummus sent its design details to Tyco for the attention of Mr Dunn on 22 June 1994. According to the evidence of Mr Morrison, he did not forward his calculations and drawings for the Heat Exchanger to MEF until 27 June 1994. 527 The EMAE calculations and the EMAE/MEF drawing for the Heat Exchanger, being drawing number 94-1167 revision 0, were forwarded by MEF to WorkCover as part of an application for registration of the design. WorkCover approved that design in terms of its letter to MEF of 3 August 1994 which emphasised the approval as being "subject to compliance with [certain] drawings and conditions", included in which was the abovementioned drawing on which there was noted the requirement that "AFTER HYDROTEST, THROUGLY [sic] DRAIN AND DRY". 528 The circumstances in which the design was so approved was evidenced by Mr Virendra Pal, a Bachelor of Mechanical Engineering who was called in WorkCover's case. He had been employed in 1994 by WorkCover in its Engineering Services Branch - Pressure Systems Unit with responsibilities to advise members of the public in relation to regulatory requirements applying to pressure vessels, to investigate failures in pressure equipment and to approve designs for pressure vessels. 529 He had no specific recollection of the application of MEF nor of registration of the design of the Heat Exchanger. Based on his calculations he was satisfied with the "mechanical integrity of the vessel". He was responsible for the terms of the WorkCover letter of approval of the design. It is clear from his evidence that Mr Pal did not envisage the Heat Exchanger operation as calling for the provision of full pressure bearing partition plates. The role of WorkCover is considered later in these reasons in more detail. 530 On 1 July 1994 the EMAE/MEF drawing of the Heat Exchanger and Mr Morrison's calculations were sent to Leighton by transmittal note which noted that the "ACTION REQUIRED" was "FOR YOUR APPROVAL". It was Mr McDonald's evidence that they were required by Leighton to be "on-forwarded" to NDY. 531 It appeared that MEF proceeded with fabrication before any approval of the drawing was provided by NDY, or for that matter by Leighton. 532 According to Mr Thomas, he relied upon EMAE, Lummus and, presumably MEF, along with Leighton and NDY, in the last mentioned case, to provide "a final check of the work of MEF [Lummus] and EMAE". I have particular difficulty in accepting that evidence, especially given the almost complete absence of NDY from the design process and the conduct of Tyco in proceeding with the manufacture of the Heat Exchanger prior to any notification of any approval by Leighton or by NDY. 533 Moreover I regard that evidence, to the extent that it reflected the attitude of Tyco, as one which abrogated Tyco's responsibilities. I think there is an element of the absurd in suggesting that there was any reliance upon either Leighton or NDY by Tyco. To the extent that there was, in fact, such reliance, I do not regard it as reasonable in the circumstances. Tyco had held itself out as expert in the field of the Inergen system and the use of heat exchangers in connection with fire suppressant systems. 534 On 6 July 1994 Leighton forwarded to NDY Tyco's letter to Leighton of 1 July 1994 in which numerous variation quotations were submitted relating to the system. None of them related to the Heat Exchanger. I think this is another example of specific consultancy services being sought from NDY in relation to the Inergen system, as distinct from the Heat Exchanger, from which NDY, for all practical purposes, had been excluded. 535 The record of discussion of the site works meeting of 8 July 1994 established the progress in the manufacture of the elements of the Heat Exchanger well before any comment on the subject drawing or calculations had been made by Leighton, or NDY. The minutes also recorded Leighton as undertaking "to expedite NDY comment on heat exchanger drawing and calculation". NDY was not present at that meeting and it was not on the distribution list of the minutes of that meeting. 536 That material was forwarded to NDY by Leighton on 11 July 1994. The MEF drawing 94-1167 was the subject of extensive cross-examination, primarily in regard to the notation requiring the thorough draining and drying of the Heat Exchanger after hydrotesting and, second, to establish that the drawing disclosed the absence of full pressure bearing partition plates. This is a matter that will require more detailed consideration later in these reasons in considering the involvement of Tyco, Leighton and NDY in the under-design of the partition plates. 537 So far as reliance is placed by any party upon NDY's approval of this material it is relevant to note that the drawings bore a Norman Disney & Young endorsement in printed form, signed by Mr Raddatz on 20 July 1994, in the following terms: "This drawing has been viewed only in respect to general arrangement. Design and system performance remains the responsibility of others [and in manuscript] Wormald Fire Systems." 538 On the EMAE calculations and the Lummus thermal data may be found similar endorsements signed by Mr Raddatz, also dated 20 July 1994. In the case of EMAE's mechanical design calculations, the endorsement was in the following terms: "This document has been viewed only in respect to general arrangement. Subject to approval by Authorities. Design and system performance remains the responsibility of others. Wormald Fire Systems." 539 In the case of the Lummus thermal data, the endorsement read as follows: "This document has been viewed only in respect to general arrangement. Design and system performance remains the responsibility of others. Wormald Fire Systems." 540 The drawings bear a number of notations by NDY. Of particular note in the case of drawing number 94-1167 was the following: "Approval of these items of equipment will be by Work Covers [sic] pressure vessel Depts including design calculation." 541 Other notations on that drawing are in the nature of comments by NDY that I think are consistent with the terms of NDY's endorsement stamp. The same may be said of the notations accompanying the NDY stamp on the Rheem Australia Limited drawing. It is necessary to examine these aspects in more detail as appears later in these reasons. However, I think it is inescapable that the terms of the NDY endorsement clearly put the recipient of the endorsed drawings on notice as to the limited function performed by NDY in considering these drawings and that design and performance were excluded from consideration and remained Tyco's responsibility. 542 Much the same may be said of the endorsements on the calculations and data sheets, respectively, of EMAE and Lummus, with the qualification that the reference to limiting consideration to general arrangement does not appear apposite, unless one views the terms of those stamps as limiting consideration of the calculations so far as they may have any bearing on general arrangement. 543 On 21 July 1994 Tyco (Mr Scott) forwarded to Leighton MEF's ITP (inspection and test plan). Tyco had received it on 8 July. There did not appear to have been any urgency in forwarding it to Leighton. The ITP failed to include as an activity or as a hold point the specification requirement of clause 12.1 of the Tyco specification: the provision for the complete draining and thorough drying of the Heat Exchanger prior to shipment to the Rosebery centre . The circumstances in which it was reviewed by Leighton are examined later in these reasons. The omission of the activity and the failure to include it as a hold point in the ITP was, in my view, a serious mistake. 544 On 26 July 1994 Leighton requested NDY's advice on a request of Optus by letter of that date, for a report on the stability of pressure bottles in the event of fire. The request, I think, may be examined in the context of how Leighton retained NDY's services from time to time in relation to the Inergen system, as distinct from the design, fabrication and commissioning of the Heat Exchanger. 545 Hydrostatic testing of the Heat Exchanger took place on 16 and 18 of August 1994, the first test not being successful. NDY was not advised that fabrication of the Heat Exchanger had been completed, nor of the arrangement for the hydrostatic testing and it was not requested by any party to attend on that testing. 546 The site meetings and communications between the parties in the second half of July 1994 and the first two weeks of August are essentially taken up with programming matters and reflect the pressure to complete placed on Tyco by Leighton and, in turn, upon MEF. One should not be surprised that hydrostatic testing of the Heat Exchanger on 18 August took place, on the back of a truck, preparatory to transport to the Rosebery centre. No explanation has been offered by Tyco for its absence from the hydrostatic testing of the Heat Exchanger, especially after the failure of the hydrostatic test of 16 August: remembering that the Tyco specification called for prior notice to be given to Tyco in order to enable Tyco to conduct internal examination before "final closure" of the Heat Exchanger. 547 If no notice was given by MEF in accordance with the specification requirement, one has to ask why Tyco did not require compliance with that specification requirement and, if notice was given, then there was just no justification, in my view, in Tyco failing to avail itself of the opportunity to inspect and in absenting itself from the hydrostatic testing. That failure was compounded by Tyco's failure in its quality assurance program to ensure that an activity was included in the ITP for complete draining and thorough drying of the Heat Exchanger prior to shipment and failing to make such an activity a hold point in that ITP to ensure compliance with Clause 12.1 of the Tyco specification. 548 As earlier noted, the hydrostatic testing was conducted by WorkCover's William McColl who, in 1994, was a Senior Inspector - Fabrications, in WorkCover's Engineering Services Division. He was a qualified Tradesman Welder. It was he who signed the test certificates. He was called in WorkCover's case to evidence his witnessing of the hydrostatic test and certification of the Heat Exchanger. 549 I think it is fair to observe that in cross-examination it was difficult to extract any concessions from him and, although he gave very positive evidence that the testing took place with the tubes outside the shell, I was less than convinced that Mr McColl had a clear recollection of the tests that were carried out. His evidence is examined more carefully in considering the case made against WorkCover. 550 Mr McColl did not witness the hydrostatic testing on 16 August 1994, that appeared to have been done by another employee of WorkCover. Of the 18 August 1994 testing Mr McColl did not "remember the sequence of events of what [he] actually did on that day" other than that he "followed a fairly usual practice". It is clear from Mr McColl's evidence that that practice involved a principal role by the party requiring the test in setting up the conditions for the testing. The WorkCover inspector's role, primarily, was that of checking the pressure gauge and satisfying himself that it accorded with the test requirements initially imposed by WorkCover. He did not carry out any internal inspection of the Heat Exchanger, nor was he present when any draining or drying of the vessel took place. 551 The Heat Exchanger was delivered on the day of the 18 August 1994 hydrostatic testing. The site works meeting of 19 August 1994, attended by Tyco and Leighton recorded the delivery of the Heat Exchanger as having been effected on 16 August 1994. That record goes on to note that this was "two days late due to non-compliance with Work Cover Pressure Test". I think from that note it is clear that the delivery referred to is 18 August, the two lapsed days being the two days following the failed test of 16 August. 552 There is some irony I think in the fact that when the Heat Exchanger was delivered to the Rosebery centre, Mr Grono and Mr Scott together with Mr Hugh Gilchrist and his son Mr Bruce Gilchrist, were present along with a representative of Leighton, believed to be Mr Cook. I refer to the presence of the Tyco representatives as being ironical when it is remembered that there was no attendance at the hydrostatic testing and presumably no interest in ensuring that the specification requirements for the complete draining and thorough drying of the Heat Exchanger had been effected prior to shipment to the Rosebery centre. 553 I think that the importance to be placed upon the specification requirement does not gain any additional import by resort to hindsight. Variously, Tyco's case has emphasised the obvious nature of the requirement to comply with this specification, at other times treating it as part and parcel of the hydrostatic testing and attributing the importance placed upon its compliance, in this case, to the benefit of hindsight. I am unable to agree. 554 Optus could not have made it clearer to Leighton and Tyco that extreme care had to be employed in relation to the selection of the Inergen process and in its installation, once chosen, because of the highly sensitive nature of the equipment it was designed to protect. Nowhere was that emphasised more than in the threat to the integrity of the equipment which the incidence of moisture presented. 555 The inert gas was selected as one, which, on discharge, did not involve any significant temperature drop associated with condensation. When compliance with temperature provisions of the specification led to consideration of the introduction of a heat exchanger, Optus spelt out to Tyco that the threat of water to the Optus equipment was "totally abhorrent". 556 For its part, Tyco did not regard the Heat Exchanger as necessary, failed in its attempt to share the cost of the Heat Exchanger in negotiations with Optus and incurred substantial delays in the installation of the Inergen system as a consequence of its problems in complying with the specification. These things eventually led to a request for a quotation from MEF of a budget price and to an urgency in settling design and carrying out fabrication of the Heat Exchanger at Tyco's cost. 557 The evidence concerning the installation of the Heat Exchanger at the Rosebery centre was in some important respects unsatisfactory so far as one is able to ascertain what, if any, steps were taken by Tyco to ensure the absence of water or moisture in the Heat Exchanger chambers. Of particular moment I think is the absence from the witness box of Mr Grono and Mr Scott both of whom were present on the day the Heat Exchanger arrived at the Rosebery centre. There has been no satisfactory explanation for their absence from the witness box, although evidence was adduced as to some efforts made to locate Mr Scott: evidence which I think left a considerable amount to be desired if I was to be persuaded to a finding that all reasonable attempts had been made to obtain his evidence. 558 The evidence adduced in Tyco's was that of Mr Hugh Gilchrist. The reliability of that evidence has been challenged, principally by Optus. He was called in Tyco's case to give evidence of the installation of the Inergen pipe work system and of the arrival and installation of the Heat Exchanger. I think it is fair to observe that the clarity of his evidence in chief in statement form was in contrast with what I perceived to be an unclear recollection of events, as evidenced in cross-examination. I was left with the very strong impression that his statement of evidence in chief was the product of hindsight and reconstruction, rather than recollection. 559 The circumstances of the arrival of the Heat Exchanger were described in his evidence in chief as follows: "8. The heat exchanger was delivered by the transport company, Johnstons' Transport, on the back of one of its semi-trailers. The semi-trailer was a flat top one with no sides nor a back. Johnston's had a special crane which was able to manoeuvre the heat exchanger into the Optus premises at Rosebery. Once the heat exchanger had arrived, it was lifted horizontally off the back of a semi-trailer by the crane and was placed on the ground next to the semi-trailer. The heat exchanger was not tipped in this process. The semi-trailer was then moved out of the way.

Bruce Gilchrist, Robert Scott and I then proceeded to prepare the heat exchanger for installation. This involved stripping the plastic covering which covered the entire heat exchanger off the machine. I did not see any evidence of water on any of the plastic covering.

The only covering which remained on the heat exchanger after that time was the plastic covers over the flanges of the heat exchanger. These covers protected the flanges from any damage to the face of the flange and also stopped any debris from getting into the heat exchanger. The flange covers were made out of plastic and were round plastic dishes with four knobs attached to them which held the flange covers in place on the flange ends.

After the plastic covering was removed, the crane again lifted the heat exchanger to place it into position in the Rosebery premises ready for installation. I recall that the crane did not place the vessel in exactly the correct position. Bruce Gilchrist and myself were required to move the vessel approximately two feet to place it in exactly the right position. We achieved this by placing pipes under the vessel and rolling it into position. In the course of moving the heat exchanger I heard nothing to suggest that there was any water moving inside the vessel. Once the heat exchanger was in place and the pipework had arrived, Bruce Gilchrist and I took the covers of the flanges, put the gaskets on and bolted the flanges of the heat exchanger and the pipework together.

When I pulled off the flange covers with my hand, I had the opportunity to observe the condition of the flanges and the flange covers closely. I recall removing the covers from the flanges of the nozzles that faced upwards on the top of the heat exchanger. There was no sign of any water being present in the nozzles, on the flanges or on the plastic covers. They appeared to be completely dry. I estimate that one could see approximately 8 inches into the flanges before there was no visibility inside the vessel. I did not see any water. If I had noticed water, I would have drawn this to Robert Scott's attention. I knew that the Inergen system was a dry gaseous system.

After removing the flange covers and attaching the pipework, I had no further involvement with the heat exchanger." 560 As a general observation of that material, apart from the difficulty I have in accepting the particularity of that evidence as representing Mr Gilchrist's recollection, the manner of expression of the events said to have occurred at the time of installation was not Mr Gilchrist's form of expression in oral form. Although Optus' submissions, critical of Mr Gilchrist's evidence, are found under the heading "Mr Gilchrist's Credit", I do not think that the difficulty I have with his evidence goes to his credit, as distinct from the reliability of his evidence. 561 He had not been asked to reflect on the events of 18 August 1994 until three or four months prior to 25 June 2001. In re-examination it was put to him that his first contact with Tyco solicitors "could have been last year", referring to 2000. There was no reference in Mr Gilchrist's evidence in chief of having made any investigation of the interior of the Heat Exchanger, by placing his hands or fingers into openings in the bonnet. In cross-examination he gave the following evidence: Q. Can you remember whether you in fact used the small ladder to get up and look into those top spigots? A. Yes, that was done before the thing - before the rest of the pipework was installed. It was all checked to make sure it was dry, et cetera, et cetera. Q. How did you check to make sure it was dry inside? A. Put your hand in as far as you can. If it comes out dry, it's dry, if it comes out wet, it's wet. (T3712:27 - 39) 562 I have had the benefit of a view of the Heat Exchanger and as a general observation the size of the internal diameter of the nozzles are such as to render internal observation of the presence of water by hand by an adult person almost futile. 563 Moreover, the capacity to see into the internal sections of the inlet and outlet pipes, unaided by artificial lighting, would also be fruitless in ascertaining the presence of moisture, other than in the immediate vicinity of the extremity of the pipe work. The idea of being able to inspect that internal section for some 8 inches or so into the pipe work, I think, is not the product of Mr Gilchrist's clear recollection. That much was demonstrated during the course of his cross-examination. 564 His recollection of the various failures of quality control under his supervision of the works in May 1994, which had resulted in closer involvement of Leighton in supervision of this work, was also the subject of cross-examination. Mr Gilchrist had no recollection of that failure, nor of the introduction of additional inspecting activities of Leighton as a result of the inadequate cleaning of the pipe work. 565 He was cross-examined about instructions received at the time of installation as follows: Q. But did they give you any instructions, before you started connecting the pipework, as to how you should do it or what you should do? A. Basically just to keep the flanges clean and make sure they don't get damaged and they use a special gasket on stainless steel, so we had to be careful of the gaskets. Q. I will ask you about those. You said that they basically told you just to keep the flanges clean and make sure they don't get damaged. A. Yes. Q. Who told you that? A. Robert Scott mainly, because he's the engineer. Q. What about these special gaskets of stainless steel? Where were the stainless steel gaskets? A. They were going between the flanges and the pipework. Q. Can you recall any other instructions being given to you about, in particular, keeping things clean? A. Yes, yes, that's all part of the standard practice, to keep them clean and dry and make sure there's no foreign bodies in the pipework. …... Q. How did you in fact check to see that the elbow which went round at a 90 degree corner was clean? You couldn't just look in it, could you, and see through to the other end, obviously? A. You are limited as to how far you can see into these things. Most of these spigots would be 6 to 8 inches long. Q. When you just said that, you are talking about the bit of pipe that comes out of the heat exchanger up to the flange? A. Yes. Q. I was asking you a moment ago about how you checked that the elbow that you're connecting to the top there is clean. A. Physically look into the thing as far as you can and put your hand in with a piece of rag and clean it, make sure there's nothing in there. Q. In terms of the spigot at the top of the heat exchanger, did you look into that? A. Yes. Q. How did you do that? A. You get up and you look in. You can't see very far in because you're looking into a dark hole - that's all you're doing. Q. When you say you get up and look in, did you get on the top of the heat exchanger and look in? A. I had a small ladder. Q. Can you remember whether you in fact used the small ladder to get up and look into those top spigots? A. Yes, that was done before the thing - before the rest of the pipework was installed. It was all checked to make sure it was dry, et cetera, et cetera. Q. How did you check to make sure it was dry inside? A. Put your hand in as far as you can. If it comes out dry, it's dry, if it comes out wet, it's wet. Q. Do you remember putting your hand into either of these top spigots for zone 3? A. You can only put your hand in so far, but -- Q. I am asking can you remember whether you actually did it? A. Yes. Q. You remember you did it? A. Yes. Q. You remember you did it on both? A. Yes. Q. And just show us how you did it? A. They are reasonably small things, you can only get your hand in so far. Q. You have a large hand? A. Yes. Q. How far do you reckon you got your hand in? A. Up to here. Q. Up to your wrist, you think? A. About that. Q. Do you say you can recall getting your hand up to your wrist down one or both of these top spigots for zone 3, do you? A. I can recall getting my hand as far as I could. How far it went down - those pipes are only 2 or 3 inches in diameter. You wouldn't get your hand in very far at all. Q. That's what I was going to say to you. Do you actually tell his Honour that you can remember getting your hand in up to your wrist? A. Well, I wouldn't agree with - although I agreed I said up to my wrist, you get it in as far as you can. Q. Maybe to the fingertips, where the fingers join the palm of your hand. A. Yes. Q. With your fingers -- A. Three or four inches. Q. Do you know how far down that pipe went? A. No, no. I just assumed it was into the heat exchanger. When you look in you can't see much. Q. What about these side ones on either side? Do you remember actually trying to put your hand into them? A. Yes, we had to do that with every orifice on that to make sure there was nothing in there. Q. Is that something you were told to do, or something you knew to do? A. Something that tradespeople know. Tradesmen know that. Q. When you found you could only stick your hand in a little way, did you get a stick to poke it down and see if there was anything in it? A. No. Q. That was something I guess that would have been pretty easy to do? A. But if you put a piece of stick with a rag on it, you can lose the rag, so you don't do that. Q. Could you just dipstick it? A. No. Q. What about the big ones on the end that went into zone 1? Do you remember putting your hand into there? A. They are large pipes, yes. Q. How far did you put your hand into them? A. Probably so far (indicated). Q. So halfway up your forearm? A. Yes. Q. How far would you say that is? A. Ten inches. Q. Did you personally do all of that putting hand into pipe, or did your son do some of that? A. No, I don't recall who actually - I recall myself doing some of it, but fitters are curious, they stick their hands in different places. Q. Can you remember your son doing it at any stage? A. No. Q. There are 10 of these spigots coming out of the bonnet? A. Mmm-hmm. Q. Can you remember now which ones you did put your hand into and which ones you didn't? A. I'd have put my hand into the larger ones as far as I could, which is 8 to 10 inches. Q. The larger ones being the ones on the ends, the zone 1, ones? A. The smaller ones would be something like 3 to 4 inches. Q. I suppose what I'm getting at is, are you able to say to his Honour that you're sure that you put your hand in 3 or 4 inches in every one of those eight around the side? A. No, I wouldn't swear to that, probably the ones in the top and the ones on the side. Q. Why do you think them? A. Well, because the ones that are facing down, it's too awkward to get under there. The ones that face down - they're facing down and there shouldn't be any foreign bodies there if the thing is facing down. Q. Did you have a torch with you? A. No. (T3711:9 - 37; 3711:50 - T3715:2) 566 As to his evidence of the use of the ladder in this inspection he gave the following further evidence: Q. You said in your evidence a little while ago that you remember using a little ladder and looking into these? A. Mmm-hmm. Q. Is that something you think you would have done or something you actually can remember now doing? A. I think it's something everybody would have done anyway. Q. Do you think it's something that your son might have done? A. Yes, it's possible. Q. Have you talked to your son about what happened? A. No. Q. And tried to remember? A. No. Q. Do you say to his Honour you could swear that you actually climbed up on a ladder and looked into them, can you? A. Yes, yes. (T3715:46 - T3716:13) 567 On that evidence I am far from satisfied that anything other than a cursory inspection was undertaken to ensure cleanliness at the flanges was satisfactory, prior to connecting the heat exchanger to the Inergen pipe system. I also am of the view that there was no instruction given to Mr Gilchrist to carry out any internal inspection of the Heat Exchanger to ascertain the presence of water or moisture within it and I am not satisfied that any examination of the Heat Exchanger for the presence of moisture or water was present in the mind of Mr Gilchrist at the time of installation. 568 A certificate of inspection by WorkCover evidenced that Mr A Bruce a licensed boiler inspector inspected the Heat Exchanger at the Rosebery centre on 19 August 1994 and that he was satisfied that, along with its fittings, it could "be used for a maximum allowable safe working pressure" as stipulated and that the certificate would "remain in force until the 19 Aug 1995". 569 As it happened it was not until August 1995 that various certificates of completion or of compliance with contract were issued in respect of the Inergen fire suppressant system. Tyco gave notice of completion on 4 August 1995 in which Tyco certified that it had "completed on 13 July 1994 an INERGEN IG-52.40.08 Total Flooding System installation designed by WORMALD FIRE SYSTEMS and installed in accordance with AS 4214, Part 2, Automatic inert gas fire extinguishing systems, Part 1: Nitrogen/argon/carbon dioxide total flooding systems". In handwriting at the foot of the certification appeared the following: "WE CERTIFY THE INERGEN SYSTEM AT STC HAS BEEN INSTALLED IN ACCORDANCE WITH THE NORMAN DISNEY & YOUNG DRAWINGS & SPECIFICATION AS AMENDED" 570 It is common ground that that certification was initialled by an officer of Tyco [T2915:29]. 571 On 18 August 1995 Mr Tribbia for NDY issued the following certificates to Leighton: "OPTUS STC ROSEBERY - FIRE DETECTION SYSTEM We hereby confirm that after undertaking witness testing of the fire detection system, the system is capable of operating to the requirements nominated by Optus Communications.

We note that Norman Disney & Young have not undertaken any witness testing of the system after the electrical failure which occurred in late July. Hence, our certification does not include any works associated with the rectification of the panel." 572 A second certificate was in the following terms: "OPTUS STC ROSEBERY - INERGEN INSTALLATION We hereby certify that the Inergen gas installation of the above property complies with the specification (ref A1317), the subsequent addenda (ref AD1-1, ADD-49, ADD-84, ADD-88, ADD-90) and to the requirements of Optus Communications." 573 On 21 August 1995 the construction manager for Leighton, Mr Gerald Lewis, provided the following certificate of completion: "WORMALD FIRE SYSTEMS This is to certify the Inergen Fire Suppression Installation at the Sydney Technical Centre, Rosebery for Optus Communications reached the Stage of Completion, in accordance with the Contract Documents on Monday 21st August 1995, subject to completion of defects on the attached list.

The Defects Liability Period under the Contract will commence on 22nd August 1995." 574 Attached to that certificate was a defects list which included the following: "Provide Heat Exchanger Inspection Certificate as requested (Leighton letter 17 August 1995)" 575 That letter contained the following: "We acknowledge your advice regarding the problems associated with the pressure gauges for the Inergen Cylinders. Our client has been informed and is not impressed. Notwithstanding this problem it is proposed to commission the Inergen System on Monday 21 August 1995.

Because of the absence of the pressure gauges it is a requirement that Wormald pressure test each cylinder prior to commissioning and from that point forward each two weekly interval until the gauges are installed. The test results are to be logged and provided to Optus on the day of the test." 576 NDY's certificate had been furnished as a consequence of Leighton's facsimile to NDY of 17 August 1995 as follows: "Following our discussion of 16 August 1995, regarding the commissioning of the Inergen system and the Pre-action Sprinkler System at the above premises, we confirm the need to have your certification that the systems have been inspected by Norman Disney & Young and through witness testing conform to the necessary standards and design documentation. To this end it would be appreciated if these certification [sic] could be available for tabling at a meeting with out Client [sic], at Rosebery on 21 August 1995 at 8.00a.m." 577 It is clear from that request that NDY was made aware that its certification was required, inter alia, to satisfy Optus that the Inergen system had been properly installed. In the absence of any express qualification of the terms of those certificates, NDY, in my view, has to stand by those express terms in the consideration of Optus' case against it. The position may be otherwise in considering NDY's position in relation to other parties. 578 The uncontroverted evidence, was that Optus relied upon these certificates as issued by Tyco, NDY and Leighton. It was a specific arrangement with Optus and Leighton "that the Operation and Maintenance Manuals would include certificates of completion which warranted that the work had been properly carried out in accordance with all appropriate specifications and standards [and that the] provision of such certificates [would be] mandatory". That was the evidence of Mr Bayley and it was corroborated by Mr Andrew James Kennewell who was a project manager employed within Optus and who's duties included the installation and commissioning of the Inergen system. He held a Bachelor degree in Science. He presented as an intelligent witness with a good recollection of events. His answers were given with confidence and without any indication of bias. He was very careful in his answers in cross-examination. It was his evidence as to the role of these certificates as follows: " Certification 19. Optus required certification for all forms of work performed for it by contractors. This was standard operating procedure and a basic part of my responsibilities was to ensure such documentation was obtained.

20. I considered certification to be particularly important in relation to the Inergen project for several reasons. Firstly, the system was to protect Optus' major exchange. Secondly, the Inergen system involved the application of new and complex technology. Thirdly, a practical test had only been conducted in Hazard Zone 2.

21. Certification of the Inergen system at STC Rosebery was to be provided by Leightons, NDY and Wormalds." 579 There is no dispute that the certificates were in fact provided to Optus as evidenced by both Mr Bayley and Mr Kennewell. It was also their evidence that each relied upon the certifications in forming the belief, in the case of Mr Kennewell, that the "system was fit for the purpose for which it was installed and that the system complied with the Technical Specifications for the Inergen Project as prepared by NDY": in the case of Mr Bayley, to the effect that they were "important statements by the contractors that Optus could rely upon and which future contractors working in the particular area could also rely upon". 580 The proceedings were conducted on the basis, as I understood it, that, so far as that evidence of reliance went, it reflected the reliance of companies within the Optus group whose interests were at stake in the subject matter of those certificates. In any event, that is how I would interpret the evidence. 581 Moreover, Communications and Networks operated in a way which reflected that their activities were undertaken on behalf of companies within the group with property interests at Rosebery. There does not appear to have been any form of documentation amongst those corporations spelling out that relationship. However, I would regard that as unnecessary in the context of the issues raised in these proceedings. 582 I also regard it as a matter of little or no relevance that entities such as Leighton, NDY, Tyco and other subcontractors involved in the Inergen system may not have been aware of the precise property interests within the Optus group in the Rosebery centre and in the equipment which the Inergen system was intended to protect - irrelevant when considering any question of duty of care that any of those parties may have owed to any of the Optus companies. 583 Prior to the commissioning of the system, a discharge test was carried out on 8/9 July 1995 which involved zone 2 only. A claim of contributory negligence has been raised against Optus for its part in limiting the discharge test to that zone, as distinct from a full discharge test into all zones, in particular zone 3, which comprised the data centre and the Tandem/EFTPOS room. It is an unattractive defence: the concept being, had water been discharged over the computer system in July 1995 instead of January 1997, things would have been different. 584 However, it is necessary to trace the events that led to the limited discharge test undertaken on 8/9 July 1995. The discharge test history dated back to Tyco's tender of 15 July 1992 which was accompanied by a technical specification which provided as follows: "A test of all system components would be carried out on completion of the installation by discharging a portion of the nominated cylinder battery." 585 In its report to Leighton of 5 August 1992 NDY reported as follows: "SYSTEM TEST ON COMMISSIONING Since it is not practical to test all systems, upon completion all areas will be tested to ensure that the enclosures are tight utilising a door mounted test fan arrangement which can be easily mounted in an existing door frame.

A live discharge test has been allowed for in the ODG quote for one of the smaller areas." 586 The NDY technical specification for the Inergen system, dated 7 December 1992, provided for commissioning as follows: "Commissioning On completion of the installation a full function test shall be carried out of all circuity, and logic.

A discharge test shall be conducted for one of the small rooms e.g. UPS room." 587 In NDY's revised technical specification of 27 July 1993, commissioning of the system was provided for in the following terms: "Commissioning On completion of the installation a full function test shall be carried out of all circuity, and logic.

A discharge test shall be conducted for one of the smaller risks hazard zone 2.

The tests shall include temperature recording equipment including air sampling equipment to measure gas level concentration in the hazard zone for testing. Temperature variations with the risk should not vary by 0.14C/minute throughout the initial discharge mixing cycle and soak time." 588 After installation on 18 August 1994 a discharge was planned for 30 August 1994. That arose out of a submission by Tyco of 28 July 1994 in the form of a requested authorisation to permit work described as follows: "INERGEN SYSTEM COMMISSIONING TEST AND GAS DISCHARGE FOR ZONE 2 (POWER, SWITCH, PABX) ROOM ONLY" 589 Tyco's installation representative was identified as its project manager, Mr Scott. That proposal was submitted to NDY by Leighton on 1 August 1994. NDY responded to that request in the following way, so far as is relevant: " Discharge Test · The use of zone 2 as the test zone is acceptable. · We believe that the gas concentrations should be tested throughout the risk instead of just the one room. That is, two recorders should be located in each of the three rooms as nominated. · Temperature recorders, similarly, should be located in each room as well as inside equipment modules. · In order to demonstrate the procedure as well as the extinguishment capabilities of the gas, a realistic test should be undertaken. As such, personnel should not be artificially restricted from the test zone by means of a directive or barrier tapes. The warning signs should be sufficient to evacuate the area. · The means of initiating the system should represent a fire and not be an artificial method of operating the system. I suggest that the test be initiated via a hurricane lamp (or similar) with visible smoke introduced for the benefit of the cameras and Optus. · The A/C (exhaust) system Should [sic] only be operated after the concentration levels have been determined. Note that Wormalds [sic] have not mentioned whether the tests shall include any video recording or noise or turbulence testing. The latter two were of concern to Optus and therefore should be measured. Video recording, I believe would be a matter of course for a significant installation such as this.

Further to our conversation, Optus should be encouraged to accept the Wormald offer of additional testing as a result of the 'spare' cylinders available. These tests could incorporate those mentioned above as well as for test without the heat exchanger, noise and temperature which could be tested in the staging area." 590 The "three rooms….. nominated" were the switch, power and PABX rooms. On 8 August 1994, a similar authorisation request to that of 28 July 1994 was submitted by Tyco in respect of work described as follows: "SYSTEM COMMISSIONING TEST AND RELEASE OF INERGEN INTO THE BATTERY, INTERFACE, AND ELECTRICAL SWITCH ROOMS". 591 At the site works meeting of 12 August 1994 it was noted that the discharge work permit was yet to be approved and that approval was being sought for discharge on 30 August 1994. The work method statement submitted by Mr Grono to Mr Thomas of 24 August 1994 set out the details of the proposed discharge testing, still programmed for 30 August, and limited to "INERGEN zone 2 switch, power and Telecom Interface Rooms". 592 In a memorandum from Mr McDonald to Leighton's Mr Mike Robinson of 31 August 1994, entitled "INERGEN RISK ANALYSIS REPORT AT THE SYDNEY TECHNICAL CENTRE", Mr McDonald provided the following information concerning a discharge test of the Inergen system: " Discharge Test

In accordance with their Subcontract Agreement, Wormald is scheduled to carry out a trial discharge test on completion of their work. This trial is proposed to be conducted in the unmanned areas of the Power/AC switch/POI rooms.

The draft code (FP/11 Committee - Gaseous Fire Extinguishing Systems) requires that the system be subject to a full discharge test unless otherwise "not required by the appropriate Authority". Clarification of the meaning of this clause is currently being sought from the standards committee.

Irrespective of the Committee clarification, Normal Disney and Young have advised that a full discharge test be carried out. Their reasons include: - Commissioning testing in accordance with industry practices - Demonstration that the design concentrations for both oxygen and carbon dioxide levels are maintained for the required soak times. These conformance limits are specified by the draft code - General demonstration that the system as a whole meets the specified performance requirements.

I can also report from discussion with Tyco that they are in agreement with the Norman Disney and Young advice." 593 The report concluded with the following recommendation: "In accordance with the advice from both Norman Disney and Young and Tyco we recommend that a full discharge test for the works proceed as specified as by Norman Disney and Young" 594 The planned test for 30 August 1994 did not proceed due to the necessity to revise the "control logic" of the system. That involved a revision of the specification. 595 On 20 September 1994 installation of the Heat Exchanger was completed and on 13 October Leighton requested NDY to "advise whether the Inergen discharge test [was] a code requirement. If not what [was] NDY's recommendation". It seems a similar enquiry had been made by Leighton of Tyco as was reflected in the letter to Leighton of 18 October which was in the following terms: "In response to your inquiry regarding whether the discharge commissioning testing of the INERGEN system installed at OPTUS STC Rosebery is or is not mandatory, we should clarify certain points: 1) A commissioning test is mandatory but a discharge commissioning test is at the discretion of the authority having jurisdiction. 2) The draft Australian Standard for Gaseous Fire Extinguishing Systems to which we have been referring still remains as a draft at this stage. The most recent copy of this draft Standard Part 2 referring to INERGEN is dated June 1994 (copy is attached) which states in section 9 b): "Where a full discharge test using INERGEN is not required by the appropriate authority" etc The "appropriate authority" in this case is OPTUS, the owner of the premises. However Tyco recommends discharge commissioning testing especially for smaller systems where there was always a problem with Halocabons holding the extinguishing concentrations for the allocated 10 minute period due to high ratio of wall surface area in relation to the enclosure volume. 3) As a suggestion and in order to satisfy OPTUS that the INERGEN system will function satisfactorily, a full operation test could be carried out by installing temporary pipework from zone 2 manifold and discharging these 2 bulk cylinders outside to atmosphere through nozzles fitted in the driveway above the staging area roller shutter. This would not cause any disruption to OPTUS' operation and permit pressure readings and discharge times to be recorded." 596 By letter of 4 November 1994 to Leighton, NDY responded to Leighton's request and to Tyco's comments in the last mentioned letter, as follows: "The TYCO International letter and attached draft code clause correctly indicates a full discharge test is not necessary subject to approval of the authority having jurisdiction. TYCO are of the opinion that Optus are the authority in this case since the installation of this system is not a mandatory item for the building and therefore can except either method for commissioning. However, it is our opinion that, since there is no requirement to install a gaseous system in any building of this type under any legislation, the authority having jurisdiction should be independent to the building owner/occupant. As the engineers that have documented the system, we behave [sic] that our specified commissioning procedure should be maintained to ensure that all aspects of the system are fully functioning. The draft code requires that the system be subjected to a full discharge text [sic]. We are of the opinion that every system should be tested. However, due to the sensitivity of the equipment within the building, we would accept (as specified) a full test in the Power, Switch and POI rooms only with a test complying with Cl. 9(b) of the draft code for all other risks. We dismiss the suggested test method (item 3) as an alternative as this only tests a cylinder discharge. There is no test of soak time, gas concentration levels or of gas discharge temperature. Then [sic] three items are critical to the effectiveness of the suppression system as well as the warranties of the switching transmission equipment and we believe they are a minimum test criteria for this project.

We make the above comments and recommendations on the basis that without a full discharge test in any risk, we Would be unable to confirm whether the system will meet all requirements for system effectiveness under the draft code and Optus operational requirements.

We trust that the above outlines our advice on the matter and should you require further clarification do not hesitate to contact the undersigned." 597 I read that material, which was the subject of cross-examination on several occasions, as evidencing that NDY approved a full discharge test limited to zone 2, while preferring all zones to be subjected to the discharge: rejected as inappropriate the suggestion of discharging cylinders into an external driveway at the Rosebery centre: accepted the reasonableness of the underlying concern of Optus as to the effect of discharge into zone 3 "due to the sensitivity of the equipment" within that area. That information was passed on to Optus by Leighton on 19 November 1994 with the following comment: "In short, NDY's recommendation is for a discharge test to the power/POI/AC Switch to validate the operation of the system plus integrity testing of the remaining risks (refer to Cl 9.B of the draft standard appended to Tyco letter - copy attached)." 598 It was the evidence of Mr Bayley that zone 2 had been the preferred area for discharge as it was "slightly more robust than the equipment in the other zones in the event of a testing mishap": the concern being for other more sensitive areas, if there was a physical failure of the system, or airborne dust impacted onto the equipment during discharge. 599 Mr Bayley was cross-examined by counsel for Tyco on the position taken by Optus in the limiting to the full discharge test to zone 2, as follows: Q. So there was a delay. During that delay you received advice, did you not, from NDY - that is Norman Disney & Young. Can I refer to it as NDY? A. No - quite comfortable. Q. That the discharge test should extend to all the zones, not just the zone 2; correct? A. That advice was provided to us through - from Leightons on the basis of advice from NDY to Leightons. Q. Did you have a belief, at the time you received that advice, as to why Leightons, or NDY, perceived that as advisable? A. That advice was provided to us on the basis of a draft Australian Standard which was then being contemplated. Q. Did you have any understanding as to the reason why it was perceived that such was advisable? Are you saying it is just the standard, or was there any other reason as to why it was perceived to be advisable to go through that? A. As a general statement, it has - it is advisable to test any system, whether it be a fire system or anything else, before putting it into operation. Q. To check whether the system performs in accordance with specifications? A. That's correct. Q. To test whether there have been any unperceived defects in the installation or manufacturing process? A. Yes. Q. And because, in the best of all possible worlds, errors on behalf of individuals at some point in the chain of manufacture and installation can occur; correct? A. That's correct. Q. You perceived, did you not, the general advisability of complying with a requirement for a general discharge test; correct? A. Could you be more specific? Q. Well, all other things being equal - and I will come to the other things in due course - it is better than not to have a full discharge test? A. Yes. Q. A full test of any system? A. Of any system. Q. Because it gives one comfort that the risks which I have referred to have not come to pass? A. That's correct. Q. You opposed a complete discharge test; correct? A. I did. Q. Why? A. Because a full discharge test into the live switch and exchange environment, or the live data centre environment, could have created airborne material which could have impacted operations and if there had been any failure of components during that test, then the damage could have been catastrophic. Q. So from your point of view, did you make the decision on behalf of Optus to reject that suggestion? HIS HONOUR: What suggestion? MR HUTLEY: Q. Was it within your responsibility to make the decision, on behalf of Optus, to oppose a full discharge test? A. No, it was not. Q. Who did? A. The decision was -- Q. Whose decision was it to oppose the full discharge test? A. The director of network operations and the director of IT at the time agreed the [sic] recommendation not to proceed with full discharge tests. HIS HONOUR: Q. What recommendations are you speaking of? A. I made a recommendation that the discharge test be restricted to one zone only and that was the least risk zone in this facility. MR HUTLEY: Q. Your assessment was that the risk posed by a full discharge test was such that Optus wasn't prepared to take it - correct - should not take it? A. That's correct. Q. Was that the risk, as you perceived it, that the system, even if properly manufactured and properly installed, might adversely affect the computers? A. The principal cause of concern was that the air flow created by the discharge would create airborne material which would impact the operation of equipment. Q. When you say "create", what, throw up dust for example? A. Throw up dust or any other bits of material that might be lying around. Q. You said a while ago that you were conscious that one of the aims of a full test of the system - in this case I will call it a discharge test - is to determine whether there has been some unperceived defect in the manufacture of the system; correct? A. Yes. Q. And, obviously, had there been such, some way along, that might be shown up by the discharge test; correct? A. Yes. Q. And was it one of your considerations in rejecting the discharge test that if there was such an unperceived defect, it could cause interference with your sensitive computers? A. That was a consideration. Q. Now, you received also, did you not, a recommendation from Tyco that a full discharge test ought take place, but the Inergen gas should not be discharged into the sensitive rooms containing the computers, but, rather, - it should be connected to pipes and, in effect, discharged outside the rooms. Do you recall receiving that suggestion? A. Yes, I do. Q. Now, that suggestion would have overcome the risk, if put in place, that the gas would throw up dust within the sensitive rooms. Do you agree with that? A. I agree. Q. It would also, would it not, have tended to establish whether there was some inadvertent defect within the system which might, on an ultimate discharge, cause loss within the rooms; correct? A. Yes. Q. You rejected that suggestion, did you not? A. I did. Q. Could you tell his Honour why? A. Certainly. The reason for having a discharge test is largely to establish that the system - that the system functions correctly and that the gas, when released, will perform the function it is designed to perform. A large part of any of these tests is ensuring that the airconditioning plant shuts down appropriately; that the sealing of the room is sufficient to retain the gas in the protected area for the length of time required to ensure that the fire is extinguished. Q. They are some of the purposes of a full discharge test; correct? A. Yes. Q. They are not all the purposes of a full discharge test; correct? A. That's correct. Q. I think you agreed with me that a discharge test such as put forward by Wormald would have served to effectuate some of the purposes of a full discharge test; correct? A. That's correct. Q. Did you think achieving those other purposes was not worth it? A. No, I didn't think that at all. If I may expand upon that, the consideration in the planning of this activity was to have a very high degree of quality assurance during the manufacture and the installation of the equipment, and I had a high level of confidence that Wormald was competent to install a system which would function correctly when called upon to do so. Q. But one of the purposes of a discharge test, in the best of all possible worlds, is to disclose the sorts of errors which could occur with nobody's fault; correct? A. Yes. Q. And you understood, when Wormald suggested that you do a discharge test such as it put forward, that it would effectuate one of those purpose, wouldn't it? A. It would have. Q. And you understood that? A. Yes, I did. Q. And you rejected it, you say, on the basis that you, what, could not believe that a defect could happen in this system? A. No, I rejected it on the basis that it would not satisfy the primary requirement of a discharge test which is the functioning within the protected area. Q. But knowing that it would satisfy the function of ensuring that there was nothing in the system, through inadvertence of one person or another, which put your equipment at risk? A. Yes. Q. And you were prepared to take that risk on behalf of Optus? A. That's correct. (T223:8 - T227:14) 600 In my view, the stance adopted by Optus was clearly reasonable, supported by NDY, and there was no connotation in Leighton's conduct, nor that of Tyco, that the consequence of such a decision would be on Optus' head. Further, the rejection of a discharge of the system into an adjoining laneway was properly rejected, in my view, particularly having regard to NDY's advice. 601 That is not the only difficulty with this defence of contributory negligence. No witness, expert or otherwise, has been called to evidence an opinion that Optus' decision was reckless, or imprudent, or represented a lack of care in protecting its own property. 602 In my view, the evidence was to the contrary effect and showed an extremely keen awareness on the part of Optus of the need for caution to be exercised in any discharge of foreign material in the form of Inergen gas into the atmosphere where its most sensitive equipment was situated. 603 The almost complete lack of reality in this defence is also reflected in the fact that the testing was not designed to detect the presence of water in the gas pipes, but to ascertain whether the system worked as designed. Further, it could hardly be described as a fortuitous consequence that, if all parts of the system had been activated, water which had been lying in the system for approximately twelve months would have been sprayed onto the sensitive equipment in zone three. 604 I am not aware of any evidence that water lying for that period in the Inergen system would have been free of the type of contamination that in fact beset the equipment in zone 3 in the incident. 605 When it comes to considering the liability of any of the parties for the damage occasioned to the Optus property in the incident, there is no difficulty in identifying MEF as the culprit in failing to comply with the WorkCover condition of approval and the direction in drawing 94-1167 requiring MEF to thoroughly drain and dry the Heat Exchanger after hydrostatic testing and, in the case of the Tyco specification, to completely drain and thoroughly dry the Heat Exchanger prior to shipment. 606 In a belated attempt to diffuse any responsibility on the part of Tyco for failing to include that activity as a hold point in the MEF ITP it was contended in final addresses on behalf of Tyco that an attempt by MEF employees to drain the Heat Exchanger had taken place at some time after the hydrostatic testing. 607 As submitted by counsel on behalf of WorkCover, how such an attempt could have been so spectacularly unsuccessful challenged credulity. More to the point, that was a submission made without any evidence being called from MEF, was not founded upon any such suggestion having been put to any witness and was based upon an unsound premise. 608 Having regard to the extensive amount of water left in the Heat Exchanger chambers, I think it is highly imaginative to suggest that any attempt was made to drain the Heat Exchanger, let alone that any attempt to dry it was made. Reliance was placed upon Mr Gilchrist's evidence as to the absence of any water from his inspection of the nozzles and flanges of the Heat Exchanger. For reasons earlier outlined I have considerable difficulty in regarding that evidence as reliable, given my overall impression, that Mr Gilchrist's evidence was essentially an exercise in reconstruction and where his recollection of events proved to be seriously faulty. That was further illustrated by Mr Gilchrist's inability to recall quite significant failures in quality assurance in maintaining the cleanliness of pipes installed by him. 609 Submissions on behalf of Tyco were substantially based upon Dr Doig's findings of areas affected by rust. However, that basis of analysis was unsound as it failed to take account of the presence of water in the vicinity of stainless steel connections and moreover overlooked Dr Doig's finding of corrosion as shown in figure 48 (Schedule N). 610 Tyco has walked a very narrow line in its position in relation to MEF, occasioned by its triple role as defendant, cross-claimant against MEF and as assignee of MEF in claims against EMAE. As noted earlier in these reasons, I am firmly of the view that Tyco's specification was lamentably deficient and misleading: that it failed to ensure the inclusion in the MEF ITP of an activity to completely drain and thoroughly dry units of the heat exchanger prior to shipment in accordance with clause 12.1 of the Tyco specification: that it failed to ensure that such an activity was included as a hold point on the ITP: that it failed to attend the MEF premises to inspect the "internals" of the Heat Exchanger prior to "final closure", as contemplated by section 11 of the Tyco specification and to witness the hydrostatic testing. 611 Tyco acknowledged that MEF was in breach of its contract with Tyco and contended that it owed a duty of care to Optus and Tyco to "ensure reasonable care in the performance of its obligations as manufacture …. including the hydrostatic testing." 612 However, it submitted that: a) MEF, in carrying out the hydrostatic testing, relied upon EMAE's drawing for the Heat Exchanger which misled the "workshop floor" of MEF into thinking that only one test was required. b) Had the workshop floor been alerted to the need to perform multiple hydrostatic tests, that would have exposed the under-design of the partition plates and probably resulted in draining and drying the Heat Exchanger. c) MEF probably attempted to drain the Heat Exchanger prior to shipment. 613 In other words, EMAE was at fault and since MEF undertook some activity in cleaning the Heat Exchanger, any failure by Tyco to include the cl 12.1 activity as a hold point in the ITP had no relevant consequences in relation to the incident. 614 There are so many holes in that case. To begin with, it is postulated in the absence of any witness from MEF, bearing in mind that Tyco has claimed damages from EMAE as assignee of MEF's causes of action. 615 Further, it relied upon Professor Bremhorst's attribution of primacy amongst contractual documents to the EMAE drawing which I do not accept. It skates over the fact that, if the EMAE drawing does not indicate the need for multiple hydrostatic testing, a very good reason for that, if it be the case, would be found in cl 9.3 of Tyco's specification. 616 The suggestion that MEF probably undertook some activity of draining the Heat Exchanger prior to shipment is, I think, fanciful and flawed in the manner outlined in these reasons. 617 It is an approach which is spectacularly silent as to the failure of Tyco to inspect the "internals" of the Heat Exchanger prior to "final closure" and to witness hydrostatic testing as contemplated by cl 11 of the Tyco specification and it says nothing about the seriously deficient, misleading and inadequate specification which Tyco supplied to MEF and fails to recognise the probable consequence of the imposition of urgency upon MEF in carrying out the design and fabrication of the Heat Exchanger: an urgency which Tyco had enacted through its inability to live up to its representations of temperature characteristics of Inergen gas on discharge. 618 In its approach to the legal issues of liability in tort, Tyco submitted that the loss that Optus claims to have suffered was consequent upon physical injury to property, as distinct from pure economic loss: the contention being that different principles apply to the determination of liability in respect of those two categories of loss. I have no difficulty with either of those propositions. 619 In contrast to the position as asserted in relation to Optus' loss, Tyco contended that any loss suffered by it, Leighton, NDY or MEF was in the nature of economic loss because, in each case, "the loss claimed by each of these parties is the amount of any liability such parties are found responsible for, plus legal costs in the proceedings". That proposition was followed by submissions based upon, Perre v Apand Pty Ltd (1999) 198 CLR 180, detailing considerations as to the circumstances in which a defendant will owe a plaintiff a duty of care to avoid causing economic loss. 620 That distinction may be true in considering, for example, any tortious liability of EMAE to MEF, or of any to Tyco in tort, where each would be seeking to recover damages for which each of MEF or Tyco may be found liable. However, that position should not be confused with the liability of the parties under the LRMP Act which is concerned with the construction of a statute and the determination of any liability in tort of one or another party for property damage to the plaintiff which could give rise to an obligation to make contribution or indemnify a co-tortfeasor. 621 In general terms, the view I have formed in this case is that nothing really turns on whether one characterises the damages at stake as being the measure of some pure economic loss as distinct from damages representing injury to property, largely as a result of the intermingling of dealings amongst the parties to these proceedings. Especially is that so in the case of Optus, Leighton, NDY and Tyco and, to a lesser extent, MEF, EMAE and WorkCover. Where one has regard to the subject matter of those dealings, namely, installation of a fire suppressant system and heat exchanger to protect highly sensitive banks of electronic equipment, in operation during that installation, that does not present a particular challenging analytical exercise in determining what was within the contemplation of the parties, the proximity of the parties to each other, the relationship between the parties, the vulnerability of one or other party to the consequences of the act of another or the reliance of one such party upon the careful conduct of another. 622 In principle, EMAE does not join issue with Tyco that it owed Tyco a duty of care. Indeed, EMAE does not dispute that it owed duties of care to each of MEF, Leighton and Optus. So far as NDY's cross-claim for contribution against EMAE, it was noted that NDY, expressly, made no submissions in relation to that cross-claim. 623 EMAE, however, submitted, I think correctly, that, in examining the cause of action against it in tort, a distinction has to be drawn between the allegations of negligent design, on the one hand, and allegations concerning negligent advice in failing to warn parties of the method of hydrostatic testing required of the Heat Exchanger. 624 In respect of the cause of action based on negligent design, EMAE accepted that it had a duty to perform its contractual design obligations in a proper and professional manner, in accordance with the instructions given to it. EMAE does not dispute that the partition plates were under-designed in face of the Optus requirement that they be full pressure bearing plates. I am satisfied that EMAE did not perform its design duties in any negligent way. In summary: a) The material provided to EMAE by MEF, limited to Part A of the Tyco specification and pages 1, 2 and 8 of the Lummus data i) did not disclose that full pressure bearing partition plates were required: ii) conveyed the contrary requirement that partition plates were not to be full pressure bearing plates by use of a standard form of specification for "heat exchangers": iii) contained no information which should have alerted EMAE to the Tyco requirement for full pressure bearing partition plates: iv) was misleading in its description of hydrostatic testing required of the Heat Exchanger. b) Even had MEF provided EMAE with the full Lummus data material that position would not have been altered. c) In any event, the instructions given to EMAE by MEF, so far as it related particularly to the design thickness of the partition plate and so far as it responded to EMAE's enquiries concerning Part B of the Tyco specification and the Lummus thermal data, was such that EMAE reasonably relied upon those further instructions in performing its design obligations. 625 Moreover, I am not satisfied that the damage occasioned to zone 1 as a result of the rupturing of the zone 1 partition plate which separated it from zone 3 and allowed the discharge of the contaminated water into zone 1, was the result of the under-design. 626 I am not aware of any evidence specifically directed to the proposition that, had the partition plate been designed to withstand its design, the rupture would not have occurred. The evidence disclosed that the blockage of the gas tubes by the contaminated water would have resulted in an instantaneous build up of pressure within the chambers of the bonnet, approaching a pressure of 15 bars. 627 The mechanics of the build up of pressure in the bonnet chambers that probably occurred at the time of the incident was described by Dr Doig in the following way: "24. The dispersal of the water into tiny mist particles during the Zone 2 commission testing is to be contrasted with what occurred in the incident on 3 January 1997. Whereas, on 8 July 1995, eleven of the thirteen U-tubes were dry and unobstructed and the amount of the water in Zone 2 chamber was relatively small and could be pushed through the system and dispersed without any significant build-up of pressure, a quite different situation pertained in relation to Zone 3 on 3 January 1997. 25. As has been referred to in my earlier report, during the incident on 3 January 1997: a) the 50 ml piping branch leading the Inergen gas into the Zone 3 inlet chamber of the heat exchanger was full of water; b) in the two Zone 3 outlet chambers water was flooding the five lower U tubes; and c) gas flow through the upper row of 5 U-tubes in the chambers was obstructed by considerable internal corrosion deposits. 26. Accordingly, the rapidly expanding high pressure Inergen gas had to accelerate both the water in the U-tubes and the water already filling the bottom Zone 3 chamber inlet and outlet piping, through the U-tubes and into the 65mm vertical exit pipe leading from both the upper and lower zone chambers. As a result, the exit pipe became filled with water being accelerated by the emerging high pressure gas towards the protected Zone 3 room.

27. To accelerate this water, the gas pressure in the heat exchanger and the piping had to rise very rapidly. Moreover, each bend (or rapid change in direction of the path of the water along the piping), would have produced a shock retardation of the water flow. These shocks are likened to hammer blows - indeed they are termed "water hammer" shocks. Each of these shocks would decelerate the water and further increase the Inergen gas pressure needed to drive the water through the Inergen piping. These shocks, and the intense shearing that would occur during passage of the water through the piping and on emergence of this water through the holes in the distribution nozzles in the protected Zone 3 rooms, would fracture any entrained solid corrosion products so that they would emerge as fine particles transported in the water spray emerging into the protected Zone 3 room.

28. In the absence of a pressure relief device, the pressure of the driving Inergen gas could be expected to rise above the 6 mpa heat exchanger design pressure and towards the higher pressure in the gas supply bottles (15mpa). The orifice plate flow control device would be incapable of preventing that.

29. Accordingly, the significant distinction between the Zone 2 commissioning test discharge on 8 July 1995 and the discharge through the Zone 3 Inergen piping on 3 January 1997 is that in the latter case a much larger volume of water was transported in a "slug flow" thereby reducing the velocity of the driving Inergen gas with a consequent increase in the pressure within the heat exchanger until the bottom Zone 3 partition plate ruptured." 628 Against that experience, which resulted in the rupture of the partition plate between zone 1 and zone 3, may be contrasted the effect of the discharge test which was limited to zone 2 on 8/9 July 1995. 629 Dr Doig gave further evidence on that subject matter during cross-examination by counsel for EMAE as follows: MR DOWNES: Q. Dr Doig, the last question and answer I asked you were as follows: And even if it had been properly designed for 6MPa, it might well have failed if subjected to a pressure of 15MPa. And you said, "Yes". I suggest to you that if follows [sic], that if it had been properly designed for 6MPa, it might well have failed in any event in the January situation. A. Yes. Q. I suggest to you that if it had been designed properly for 6MPa, it is likely to have failed in any event in the January situation? A. Yes. (T97:10 - 27) 630 Then, in explaining the significance of the zone 2 testing in July 1995, Dr Doig gave the following evidence: Q. So does that not teach, as a matter of practice, that at any event for zone 2, the partitions would operate without any ill effect in operating conditions? A. For zone 2, yes, it does. Q. It does not teach, necessarily, that they would operate right up to the design pressure? A. No, it does not. Q. It says nothing at all about whether they would operate up to the design pressure; would you agree with that? A. No. I would agree with that, yes. Q. But one thing it does teach is that the system would work, in ordinary circumstances at any event as to zone 2, in operating conditions? A. Yes. Q. If it would so work in zone 2, there is no reason to imagine that it wouldn't work in operating conditions without failure in each of the other zones? A. I have examined this in relationship to the areas between the - the flow areas allowed by the nozzles in zone 2 relative to the others. In all circumstances I noticed the designer has allowed the area of the tubes to be larger than the area available for flow in the bore. So this would suggest that there would not be very much difference in operating another zone, under normal circumstances, to what you observed in zone 2. (T100:3 - 36) 631 As to the likely pressure that would have been created in the chambers of the bonnet during the incident, Dr Doig gave this following further evidence in cross-examination: Q. What is your best estimate as to what level of MPa pressure would have been applied to the partition plates in the bonnet on the occasion it failed? A. I haven't attempted to make an estimate of that at all. I haven't attempted to estimate the pressure at which the partition plates failed. Other witnesses -- Q. What pressure would they have been subjected to if they hadn't failed? A. There was potential, in this system here (indicates), with the slugs of water going in the system here, for the pressure in the system to have risen towards, as I have said in my report, the 15MPa available. Q. What I am asking you to do is to define your description "towards". Is that between 14 and 15? A. I would say between 10 and 15. (T91:46 - 92:8) 632 Although Professor Bremhorst would not be drawn on the precise figure of pressure build up in the bonnet chambers during the incident, in cross-examination by counsel for EMAE, he accepted that the lesson from the discharge test of July 1995 in zone 2, indicated "in ordinary operating conditions" the partition plates would not have failed. His evidence to this effect was as follows: Q. Do we not have this position, that the pressure in ordinary operating conditions in this heat exchanger would be likely to be not more than 3 or 4MPa? A. Overall or in a particular zone? Q. In any of the zones. A. Yes. Q. Consistently with your proposition that they could withstand pressure of 5.3MPa or thereabouts, whether that's a good design approach or not, the conclusion is that, in ordinary operating conditions, there would not be a rupture of these partitions. A. That's correct. Q. The discharge test at zone 2 is a practical confirmation of that, is it not? A. Was the water present when zone 2 was discharged? Q. I think according to Dr Doig, there was some water present, but not so much in that zone. A. Yes. Q. What I am suggesting to you is that the reasonable conclusion from your calculations and the discharge test is that, in fact, in ordinary operating conditions, the pressure vessel would not fail. A. It's highly likely that it would not have failed, that is, the partition plates would not have failed. (T4303:10 - 44) 633 As to the actual build up during the incident he gave the following evidence: Q. Thank you. On the day of the catastrophe, the blockage of water which was in zone 3 led to a rapid rise in the pressure of the gas upstream of the blockage? A. That's correct. Q. One can assume that the pressure of the gas would rise to 15MPa. A. No. Q. At least 15MPa. A. If it were completely blocked, then the potential is there because the orifice plate would cease functioning and you would reach no-flow conditions and the system would be pressurised to the pressure of the gas in the bottles, right up to the blockage - the total blockage. Q. I thought in a total blockage it would rise to 15. A. Yes. …… Q. You are saying, I think, there is only a partial blockage - so does it follow from that that it mightn't get as high as 15MPa? A. It may or it may not. It's speculation. Q. It very quickly would have gone up very high. A. I'm conscious of the existence of the orifice plate where exactly the same phenomenon takes place as I described for the bursting disc and which I described for the nozzle in the Dunn design - that's the nozzle V2. The orifice would initially operate in a choke flow condition and during that period, the pressure would rise relatively slowly and start pushing the water out. So that there will be a time delay before anything significant happens. Q. But, again, when we are talking about time, we are talking about small fractions of a second, aren't we? A. Yes. Q. So very quickly I want to suggest to you that the pressure in the bonnet of the Heat Exchanger is going to rise to towards 15MPa? A. Without calculation, I could not agree to any speculative figure with regard to that pressure rise. Q. It is certainly going to be more than 5.3MPa, isn't it? A. I can't - without calculation, I can't tell you that. Q. If the ordinary pressure in this heat exchanger is 3 or 4MPa, would you not agree that the water blockage is going to cause the pressure to go up, without putting a precise figure on it, very substantially? A. Yes. ….. Q. I will put this to you, Professor: is not the appropriate conclusion that the pressure in zone 3 bottom out, as a result of the water blockage, increased to a point which in fact caused the rupture of the partition plate? A. That's correct. Q. Although this is the bottom out chamber, as the water was being moved forward through the system it was still presenting a blockage, was it not? A. Correct. Q. It would still have carried behind it increased pressure? A. Correct. Q. So would you not agree that the pressure in zone 3 bottom out, when it burst, was likely to have been something - I say again - substantially higher than the 5.3 that you calculated? A. Yes. ….…. Q. If I can just draw this together, and for the moment set aside the weld complication, if this system has been shown to operate without breach or failure in correct operating circumstances save only for the fact that there was some water in zone 2 -- A. Yes. Q. -- and if its failure was at a pressure exceeding the design pressure, then the only conclusion is that it was the water and not under designing that caused the failure, is it not? A. Yes. (T4303:46 - T4304:9; T4304:26 - T4305:8; 4305:44 - T4306:8; T4306:56 - T4307:11) 634 So far as causes of action rely upon a failure by EMAE to designate the need for multiple testing of the chambers in the bonnet, that is a courageous submission on the part of Tyco having regard to its own specification calling for one hydrostatic test of the tubeside of the Heat Exchanger. However, I think there is a more significant difficulty in Tyco's case against EMAE, in that it was not the function of the mechanical designer to prescribe the number of tests and the manner of hydrostatic testing of the Heat Exchanger. In my view, that was clearly the domain of Tyco as evidenced by the inclusion of such a provision in the Tyco specification. 635 MEF was responsible for the fabrication and hydrostatic testing prior to delivery of the Heat Exchanger in accordance with Tyco's specification and, for its part, Tyco carried responsibilities for ensuring that the test, installation, commissioning and maintenance of the Heat Exchanger conformed with the Tyco subcontract. Tyco relied upon the evidence of Professor Bremhorst, Mr Walker and Mr Stanley Bruce Parrish. 636 Mr Parrish was called in Optus' case, he being the engineering and quality assurance manager of Baipini Engineering Pty Ltd, a designer and manufacturer of heat exchangers and pressure vessels. He described that company as small to average. He had been with it for some 13 years and he had been responsible for the preparation of numerous inspection and test plans relating to the manufacture of pressure vessels and heat exchangers. I gathered that his formal qualifications were modest. He described himself as a holder of a higher national certificate in mechanical engineering. 637 In my observation of Mr Parrish as a witness, he struck me as a good practical engineer who was unfamiliar with the witness box, but nevertheless concentrated well on his answers which were given in a plain-speaking authoritative careful way. His answers were simple, but clear. I regarded his evidence as reflecting a responsible and reliable engineer, who had been very thorough as a quality assurance manager. Optus called him to establish that the requirement for draining and drying the Heat Exchanger after hydrostatic testing and before shipment was a completely separate exercise from the testing and, further, that it should have been a line activity and a hold item on the ITP covering activities relating to the Heat Exchanger. 638 Tyco, in its submissions, relied on his evidence for the proposition that it was the "responsibility of the mechanical designer in EMAE's position, had the mechanical designer appreciated the independently operating nature of the zones within the vessel, to provide on the drawing explicit instructions for the manner of conduct of the hydrostatic testing". The evidence cited from Mr Parrish in support of that proposition was as follows: Q. You say in your experience it is important that it is made clear to the workshop staff that there is a special requirement for draining and drying where there is such a requirement. That's what you say; correct? A. Yes. Q. You would agree with me that where the drawing does not indicate any special requirement for draining and drying, that it is more important in those circumstances for the inspection and test plan to indicate that matter; correct? A. It is normal for the note to be on the drawing for the people to read the drawing. The drawing will tell what you [sic] to do. The inspection and test - will tell you to sign off when you've done it. (T4872:33 - 50) 639 It will be apparent from that quotation that Mr Parrish's evidence was no support for the proposition for which it was cited. 640 I have earlier commented on Professor Bremhorst's evidence and my difficulty with treating it as reliable by reason of internal inconsistencies and, in particular, his lack of commercial experience in an area in which he had been minded to venture. 641 In the case of Mr Walker, his qualifications and experience were such as to compel a preference for the evidence of Mr Morrison and Mr Pisano's. 642 It was further submitted on behalf of Tyco, that "EMAE appreciated [the validity of the above quoted submission] to some extent because EMAE did include instructions for hydrostatic testing upon the drawing [and that the] instructions were wrong: the instructions implied only one tubeside test". It was further submitted in "circumstances where multiple tubeside tests were required due to independently operating zones, an explicit instruction to that effect was necessary". Given the adoption by Mr Morrison of Tyco's own specification in this regard, one can only regard that submission as being put formally. The submissions represent a damning admission that its own specification was misleading. 643 In submissions in reply, Tyco relied further upon the evidence of Mr Pal, the WorkCover engineer responsible for the approval of the MEF drawing to the effect that, as an engineer, he would expect to have some note on the drawing as to the hydrostatic testing involved as appears from the following: Q. Did you understand whether on the tube side it was going to be all tubes full at the same time? A. Yes, that's correct. Q. Where did you get that understanding from? A. Because it is not - nowhere to the contrary is it written on the drawing or anywhere that it is not going to be pressurised all at once. Q. The drawing doesn't tell you, does it, that it is going to be pressurised all at once? A. That's correct, but that is a standard heat exchanger. Q. The drawing doesn't tell you whether it will be or won't be pressurised all at once, does it? A. It does. Q. Where does it tell you that? A. It says in hydrostatic pressure 9,000kPaG. Q. Where is that? A. Under the tube side. If you see in the hydrotest column, it says tube side to be tested at 9,000kPaG. Q. Yes. A. It does not define whether it is one component of the tube side or the complete and wherever it is not defined that way, it is assumed to be a complete test at 9,000kPaG. Q. You say that is what you assumed it to be? A. Not assumed to be: that is an engineering norm Q. Engineering -- A. In the sense that is the way it is to be interpreted. Q. So what you say, from looking at it when you got it, applying your mechanical engineering training, what you could interpret from this drawing was that there was to be only one consistent pressurisation of the tube side? A. That's correct. Q. That was immediately apparent to you from this drawing, was it? A. That's correct. Q. So you proceeded from that? A. Yep. Q. It is apparent from this drawing, isn't it, that there are internal partitions within the tube side of the heat exchanger? A. Yes. Q. It is apparent that there are different zones within the tube side of the heat exchanger? A. Yes. Q. If you were, as an engineer, to understand this drawing as demonstrating a heat exchanger which had independently operating zones - do you follow that? A. Yes. Q. What would you expect to see on the drawing? A. Well, I would expect it to be clearly marked out as a note, for one. I would expect that, in the hydrostatic test, there would be a test specification to a certain - the mode of testing, which would involve testing one chamber. I would expect it to be clearly stated that the process requirement states that one pressure - one chamber or one zone could be pressurised as an operational requirement. Q. When you say the process requirement, where would you expect to see that on this drawing? A. Basically, I would expect it to be seen as a note. Q. On a note under where the notes numbered 1 to 10 are? A. Yes, and it should be also a note listed to the test pressure for the hydrostatic -- Q. That's down at the bottom where those various columns and information is -- A. That's correct. Q. -- to the left of the title "Gas Flooding Heater." A. That's right, yes. Q. You would expect that material, I take it, to be put on the plan, on this drawing, at the time it is drawn by the author of the drawing? A. I would, yes. (T4399:22 - T4401:11) 644 Again, I think, Tyco has endeavoured to extract too much from this evidence of an engineer who, in any event, could not be put forward as the most authoritative expert that was called in these proceedings. The difficulty with reliance upon that evidence, in part, arises from the fact that it assumes that the design intent for the Heat Exchanger was to provide full pressure bearing partition plates, where as it was designed by EMAE, in accordance with instructions, as not providing full pressure bearing partition plates. Mr Pal offered no criticism of the content of the EMAE/MEF drawing. Indeed, I think it is significant, that Mr Pal understood the drawing as conveying a design concept of a fully charged pressure vessel, when commissioned. 645 Reliance was also placed upon Mr Pisano's evidence as follows: Q. Would you agree then that good practice would have required a competent mechanical designer of this heat exchanger to have, in a note on the drawing, made reference to that fact -- HIS HONOUR: I am sorry, to what fact? MR HUTLEY: Q. The fact of multiple tests - a number of tests of the separate primary pressure-containing components. A. If there were a number of compartments that were to be designed as separate pressure containing compartments, what would happen is that you would have five - say, four pressure vessels -- Q. Call them five, I think. A. Four, five compartments - I think there's only four pressure vessels as such in there, because some are linked. Q. I think you are referring to zone 3 top and bottom on board 2? A. Yes. Q. But you see that zone 3, top and bottom, are separated by the presence of the other zones; correct? A. Yes. Q. So for practical purposes, would you agree with me, there are really five pressure zones rather than four, because of that separation? A. But aren't they connected in the piping? Q. Not within the heat exchanger. A. Yes, but within the piping. Q. Within the piping, yes. A. Then they are classified as one. Q. They are classified as one. A. Yes. So if, in effect, you had four different zones that are the subject of pressure, you would have four lots of data on the drawing representing each zone. In fact, you would have to classify each one of those as a separate heat exchanger and provide information for each item, for each zone. Q. So it would have been made clear on the drawing that there was a requirement for four independent tests of the four zones? A. Well, that would be brought about by tabular format, yes. (T4777:13 - T4778:10) 646 Again, I think Tyco endeavoured to extract too much from Mr Pisano's evidence. It was not his evidence that the drawing should stipulate the number of tests to be carried out. It was his evidence that the manufacturer and those responsible for the testing would be aware of that requirement from the tabular material appearing on the design drawing in respect of each separately pressured area of the Heat Exchanger. 647 As in the case of Mr Pal's evidence, that material is of little assistance to Tyco, given the design intent of the Heat Exchanger as specified by Tyco and implemented by EMAE, namely, a heat exchanger, which when commissioned, would be fully charged and so not call for full pressure bearing partition plates. 648 In any event, it was the evidence of Mr Pisano, that it is not the function of the mechanical designer to advise or instruct on the number of hydrostatic tests to be carried out. The task of the mechanical designer is to advise on the pressure at which any hydrostatic test was conducted. It was his evidence in chief, as follows: "35. EMAE notified in its design drawing that the shell side and the tube side be hydrotested (see page 46 of Appendix 6 [EX 1.313 p 2091). This information is entirely in accordance with standard design drawing notations for heat exchangers and, in my opinion, complies with the Code requirements applicable to the heat exchanger specified in EMAE's design drawing. Further, the Tyco Specification states at paragraph 9.3 that only two hydrostatic tests would be conducted (that is, a tubeside test and a shell side test).

36. In my opinion, having regard to: (a) the assumptions that I believe a reasonable mechanical engineer in receipt of the documents located in EMAE's file would be justified in making (referred to in paragraph 27 above); and (b) the fact that the Tyco specification specifies only two hydrostatic tests, the number of hydrostatic tests notified by EMAE was not inadequate.

The inadequate hydrotest drainage warning allegation 37. In my experience, the mechanical designer almost never becomes involved in advising on the method of carrying out a hydrostatic test. Decisions relating to how the hydrostatic test should be conducted and how the vessel should subsequently be drained are left entirely to the manufacturer.

38. Since manufacturers have the experience and expertise in the conducting of hydrostatic tests, there would be little reason for them to seek advice from the mechanical designer as to the manner of testing or of draining." 649 EMAE submitted, to some effect, that, in any event, there is no evidence that MEF, Tyco or WorkCover, relied upon the EMAE drawing in determining the nature and number of tests to be carried out. In that regard, EMAE pointed to the fact that no witness from MEF, or from Tyco, in particular Mr Grono, was called to say that such reliance had been placed upon the EMAE drawing. 650 Tyco accepted that there was no such evidence, but submitted that it was not necessary and relied upon the evidence of Mr McColl that only a single test was carried out and that he was governed by what was on the approval letter. It was submitted, that what was on the approval letter had been taken from the drawing. The evidence of Mr McColl relied upon by Tyco was as follows: Q. Mr McColl, if you had been told when you arrived at a test on a heat exchanger that the heat exchanger had four independently operating chambers, would you have done four separate tests, one for each chamber? A. Again, I'm governed by what's on the letter. I can only assume, as I said, you're telling me there's four independent zones. I don't know what independent zones are. I can only test to what I'm told to test as to the drawing and the approval letter. So if the approval letter stated there were four zones and each had to be hydrostatically tested, then it would have been done. Q. Let me go back to that, then. The only test you supervise is the test or tests nominated by the approval letter? A. Yes. (T4423:47 - T4424:8) 651 Further cross-examination of Mr McColl on this subject matter was as follows: Q. If the approval letter tells you to supervise one test, that's all you do? A. Yes. Q. If the approval letter tells you to do multiple tests, you do that? A. Yes. Q. What if there's a disconformity, a discrepancy between the approval letter and the drawing or what the manufacturer tells you, what do you do? A. We're governed by the letter. There shouldn't be any problems with the drawing and the letter because in the design section of the letter, in the viewing, they stipulate on the letter, so the two of them should always match up. Q. Do you recall seeing the particular letter in this case? A. Yes. Q. I'll just show you a copy of it, Mr McColl. It is exhibit E, your Honour, to the earlier witness's statement. I'm showing you a copy of the approval letter, Mr McColl. Do you recall actually reading that on 18 August or not? A. Yes. Q. You do remember reading that specifically, do you? A. Yes. Q. What that letter does tell you is the pressure to which the tube side needs to be tested? A. Yes. Q. And it also tells you the design pressure? A. Yes. Q. It doesn't actually specify the number of tests, does it? A. No, but it is standard practice, you have a got a shell and you've got a tube so you do a shell side and you do a tube side test. Q. Is it not a matter for you to determine in light of the pressure specified in the letter of approval and your observation of the heat exchanger on the ground, what test is appropriate for the purpose of AS1210? A. No. (T4424:10 - T4425:5) 652 The information relied upon by Mr McColl was that set out in condition two of the approval letter which included the following and which is reproduced for ease of reference: "The design of the above boilers/vessels is approved subject to compliance with the following drawings and conditions: Drawings Number/s: 94-1167 Rev 0 1 Design Pressure: Shell side: 500 kPa @ 100C Tube side: 6000kPa @ minus 50C to 100C 2 Hydrostatic test pressure: Shell side: 750 kPa Tube side: 9000 kPa

653 I think it takes some imagination to conclude that WorkCover relied upon EMAE's drawing for the purpose of conducting the test. The reality is that the conditions for the test were set up by MEF and Mr McColl witnessed that hydrostatic testing. The notion of him being reliant upon EMAE's drawing, I think, is tendentious. 654 Moreover, I think I should infer from the absence of Mr Grono and of Mr Scott, or of any witness from MEF, that no evidence could have been given to support Tyco's case of reliance upon EMAE's drawing. Tyco disputed the entitlement to draw such an inference on the basis that Mr Grono was not present at the hydrostatic testing and that, although it sues as assignee of MEF's rights against EMAE, that assignment was effected by MEF's liquidator. Neither proposition, in my view, has any substance. 655 It does not follow from the fact that Mr Grono was not present at the hydrostatic testing that he was not in a position to state matters upon which Tyco relied in relation to the manner of testing which was performed. Similarly, I think it is a non sequitur to point to the source of the assignment of MEF's rights to Tyco as a ground for excusing Tyco from carrying the responsibility of calling evidence from within MEF, if any such witness was in a position to assist Tyco's case. 656 There is a further difficulty in Tyco's case against EMAE, in so far as it asserted that, had EMAE prescribed multiple hydrostatic testing, in all probability MEF would have been alerted to the need for separately carrying out the activity of completely draining and thoroughly drying the Heat Exchanger before delivery to the Rosebery centre. 657 I think the most generous description of the evidence on this subject, that was explored through cross-examination, is that it involved speculation to a degree that would not permit a positive finding to the effect that Tyco sought. If anything, the evidence justified a finding that if separate tests had been conducted it would still have been necessary to have undertaken a full tubeside test, possibly after the multiple test, with no greater likelihood that water would have been drained from the vessel, as specified, after the conduct of the hydrostatic testing. 658 Mr Ambrose was one of several witnesses who gave evidence on that subject matter and who had not turned their minds to the subject prior to questioning in the witness box. I doubt that any clear view was held by those witnesses as to the likely sequence of testing, let alone the existence of any required sequence of testing. 659 I do not regard it as a rewarding task to examine in detail the evidence on the subject, given the speculative nature of the views expressed. Mr Abrose's evidence in cross-examination by counsel for WorkCover was as follows: MR DONALDSON: Q. Mr Ambrose, don't put that board away. Could I clarify a few matters? Mr Hutley asked you some questions this morning yesterday [sic] about the testing of those outer perimeter zones and of the requirement to remove water from outer perimeter zones to permit the testing of other zones to be carried out. Do you remember that? A. Yes. Q. In the course of giving your answers yesterday afternoon you made reference to the fact that there may be a difference arising from the nature of the welds as to the side from which you wished to test the welds. Do you remember that? A. Correct. Q. And then this morning you told Mr Hutley that you thought that the welds associated, for example, with zone 3 top would be most arduously tested by a test with pressure in zone 3 top rather than in zone 1. Do you remember that? A. Correct. Q. Can I take it from the answers that you've given that you don't regard it as necessary to test for welds from two sides? A. That's correct. Q. Mr Downes suggested to you - and I think you agreed with him - that it may not be regarded as necessary to test the performance of that small section of boundary between zone 3 top and zone 2, or zone 3 top and zone 4, for example - that short length? A. Correct. Q. And you agreed under some circumstances you might agree, you wouldn't do that? A. Correct. Q. I think you agreed with him that in those circumstances you could test all four outer zones at once? A. Yes. Q. Even if one decided that it was appropriate or prudent to test those small boundaries, for example, between zone 3 top and zone 4, it would be permissible, I take it from your answers, to test those welds from one side only? A. Yes. Q. And it would be appropriate and possible then, wouldn't it, to test zone 3, that is top and bottom? A. Yes. Q. And then to test zones 2 and 4 without removing water from zone 3? A. Sorry, you've tested -- Q. You test zone 3 top and bottom without water in zones 2 and 4? A. Yes, correct. Q. You could test zones 2 and 4 without removing water from zone 3 top and bottom? A. Correct. Q. So that the individual testing of the outer perimeter chambers, even if one decided to test those small sections that you've been discussing, wouldn't involve the emptying of water from zones that had been tested necessarily? A. Correct. Q. And I think when you were answering questions from Mr Hutley this morning you indicated that the sequence of testing would probably be dictated by questions of efficiency? A. Yes. Q. And the manufacturer's desire to get the tests done in the minimum possible time? A. Yes. (T4622:42 - T4624:13) 660 The following cross-examination of Mr Parrish on behalf of Tyco was to a similar effect: MR LOCKHART: On the assumption that it is designed for differential pressures. Q. On that assumption? A. Yes. Q. On that assumption, how would you go about hydrostatically testing this vessel? A. I would have to prepare a program of which zone I would test first so that I can make sure that I can get access to the adjacent zone and we'd get access - that two-inch nozzle is sufficient to get access with a mirror and a torch to see what's going on. If I couldn't find access to that, I'd get a boroscope and have a look inside, if the access wasn't sufficient through the nozzle. So I would use one or the other method and then I would pressure test one compartment and slowly bring it up to pressure, very slowly, to check for deformation of the other - the partition plate. Then I would reduce the pressure on that if it passed, take it off and then repressurise the next compartment and do it in sequence. After I'd finished all individual sequencing, I would be wanting to do a full test on the full lot together. (T4895:9-37) 661 Professor Bremhorst in cross-examination gave the following evidence which also undermined the Tyco proposition that multiple testing of the Heat Exchanger would have resulted in the draining (not drying) of the chambers: Q. In paragraph 2.19 of your second supplementary statement, you refer to the procedure that would have been undertaken in relation to multiple tube side tests and to the subsequent checking of the seal of a gasket for leaks, "although it is my view that leak testing in this case is not essential". Do you see that? A. Yes. Q. If five hydrostatic tests had been carried out of each individual chamber in the bonnet, it would have been at least prudent to carry out a test of all of the chambers simultaneously pressurised, wouldn't it? A. It's something I hadn't considered up to this point. I don't know what result or what defect it could test that the other tests don't reveal. Q. As far as the performance of the gasket is concerned, it wouldn't have been tested with pressure in all five chambers; correct? A. That's correct. Q. And with pressure in all five chambers, the sort of elastic behaviour of the vessel which we were discussing a few moments ago could be expected to be different from having merely individual zones pressurised? A. That's correct. Q. And that could affect the performance of the gasket? A. Yes. Q. So if the manufacturer wanted to have a reasonable level of assurance that when all chambers were pressurised, the gasket would perform as expected, it would be prudent to carry out a test to establish that? A. As I said, that's a matter of choice. If the manufacturer wanted to do that or it were called for by the designer, then certainly. But I've got no stance on that. Q. It would be reasonable for a manufacturer to regard it as a most unsatisfactory situation to have this heat exchanger installed in Optus's premises and to find, for example, on a discharge test that the gasket wasn't performing? A. That would be most embarrassing (T4171:5 - 57) 662 Earlier in these reasons I rejected the submission advanced on behalf of Tyco, although not put to any particular witness, that an attempted draining of the Heat Exchanger had been affected by MEF. That was a submission that was made without calling any evidence from MEF and given the volume of water calculated to have been left in the Heat Exchanger after hydrostatic testing, I am satisfied that no attempt at draining was undertaken. 663 I am equally satisfied that, whether one, or several hydrostatic tests were carried out, the conduct of MEF in relation to draining and drying the Heat Exchanger would have been no different. 664 There is some misconception in the approach of Tyco in attributing liability to EMAE for the damage sustained by Optus. EMAE's submission has addressed this question under the heading of reasonable foreseeability of the damage contending, I think correctly, that the damage sustained as a result of the failure to completely drain and thoroughly dry the Heat Exchanger was not damage of a kind reasonably foreseeable as a consequence of any failure by EMAE to specify multiple hydrostatic tests. Particularly must that be so, when viewed in the context of the note on the EMAE drawing, to thoroughly drain and dry the Heat Exchanger after hydrostatic testing. 665 Once it is established that Tyco failed to establish a causal link between the absence of multiple tests and the failure to remove water from the Heat Exchanger after those tests, it is even more difficult to treat the damage sustained by Optus as reasonably foreseeable as a consequence of the non specification of multiple hydrostatic testing. 666 The strongest evidence in favour of Tyco's case is to be found in the evidence of Mr Morrison which I have quoted earlier in these reasons in which he, at one stage, conceded the presence of material in the Lummus thermal data indicated the design intent of full pressure bearing partition plates. However, as I have indicated, that evidence has to be addressed in the context of the entirety of Mr Morrison's evidence and particularly that in re-examination. 667 For my part, I am satisfied that, it takes a significant amount of imagination to reach a conclusion that, had EMAE been provided with the full Lummus thermal data, it would have been put on notice of the need for full pressure bearing partition plates. The reality is that information of that kind is not information used by a mechanical designer. Mr Morrison and Mr Pisano, I think, were quite convincing in their evidence in that respect and I think there existed an element of confusion in the hindsight construction of references to "loads", and the like, with pressures relevant to mechanical design. 668 I am satisfied that the single most significant factor resulting in the misconception of the design intent of the Heat Exchanger is to be found in the misleading nature of the Tyco specification and in its adoption of a draft standard type specification for heat exchangers which was quite inappropriate. 669 In any event, I have found that there was no sufficient evidence that the partition plate failed as a consequence of the under-design, as distinct from having been subjected to the pressures which could have approached fifteen bar at the time of the incident. 670 For the reasons upon which I have concluded that EMAE has no liability to any party arising out of its mechanical design of the Heat Exchanger, I think it follows that WorkCover has no liability, particularly having regard to my firm view that the failure to drain and dry the Heat Exchanger was something in respect of which WorkCover had no responsibility of any kind. 671 In my view, there is no plausible basis for ascribing to WorkCover any responsibility for the failure to completely drain and thoroughly dry the Heat Exchanger. I have earlier in these reasons addressed Tyco's attempt to embrace that specification requirement within the activity of hydrostatic testing the Heat Exchanger. That case is not sustainable. 672 Counsel's submissions on behalf of WorkCover identified evidence which established the separation of the activity of testing from the specification requirement of draining and drying, citing the evidence of Professor Bremhorst, Mr Anderson, Mr Walker and Mr Parish: none of which has been addressed in these reasons. I think it is sufficient to say that the evidence compels the conclusion that the specification requirement of draining and drying was not part of the function of testing the Heat Exchanger and was not a matter in respect of which WorkCover owed any duty to any party in these proceedings. 673 Tyco advanced against WorkCover a case based upon the existence of a statutory duty imposed upon WorkCover under the legislative provisions by which WorkCover was established under the WorkCover Administration Act 1989. Under s12(1) of that Act, WorkCover's functions are identified as those conferred either under that Act or the workers compensation or occupational health and safety legislation, or any other (undesignated) legislation. Under s 35 of the Occupational Health and Safety Act 1983, the Factories, Shops And Industries Act 1962 and regulations and orders made under it are to be regarded as associated occupational health and safety legislation. Under ss 65 and 65A of the Factories, Shops And Industries Act 1962 the Governor is empowered to make regulations in respect of the manufacture and testing of pressure vessels. The relevant regulations are the Boiler and Pressure Vessel Regulations 1942 which, were promulgated under the Factories and Shops Act 1912 which by virtue of the provisions of the Factories, Shops and Industries Act 1962 are deemed to be regulations made under the last mentioned Act. 674 Those regulations provided as follows: "2. A person shall not manufacture or cause, permit or allow to be manufactured, or use or cause, permit or allow to be used any boiler or pressure vessel unless- (a) Such boiler or pressure vessel conforms with the requirements prescribed by this Part of these Regulations in respect of design, and (b) The conditions as to the construction and fitting prescribed by this Part of these Regulations are complied with and observed. 21. In respect of matters relating to design, construction and fitting of boilers and pressure vessels or any part thereof not herein provided for, the provisions of the SAA Boiler Code or the SAA Refrigeration Code as the case may be or the requirements of any other authority approved by the Chief Inspector shall be observed and complied with. 22. In respect of matters herein provided for each shall be a sufficient compliance with the requirements of this Part of these Regulations if the provisions of the SAA Boiler Code or the SAA Refrigeration Code as the case may be or the requirements of any other authority approved by the Chief Inspector in relation to such matters are observed and complied with. 26. Before a boiler or pressure vessel or valve, fitting or appurtenance used in connection with a boiler or pressure vessel is placed in service for the first time, the manufacturer or owner thereof shall hydrostatically test such boiler, pressure vessel, valve, fitting or appurtenance. …Any hydrostatic test required by this regulation shall be carried out with conformity with the provisions of the SAA Boiler Code or the requirements of any other authority approved by the Chief Inspector." ( P144 Tyco Submissions) 675 The relevant Code under those regulations is to be found in AS 1210-1989 under which the Inspecting Authority may be taken to be WorkCover. Clause 5.10.1 of AS 1210 provides as follows: "Each vessel after final welding and heat treatment shall pass satisfactorily the standard hydrostatic test as prescribed in this clause (5.10)…". Cl. 5.10.2.3 provided as follows: "Clause 5.10.2.3 - Vessels consisting of more than one pressure chamber shall have each chamber hydrostatically tested as follows: (a) For chambers designed to operate independently each chamber shall be tested at the test pressure for internal pressure or vacuum as appropriate (see clauses 5.10.2.1) and 5.10.2.2), without pressure in the adjacent chamber;" (Emphasis added) 676 Clause 6.1.1 provided as follows: "Clause 6.1.1- Each vessel shall be inspected in accordance with this Section to ensure that the design, material, construction and testing comply with the requirements of this Standard;" 677 It was further provided by 6.1.2.2 as follows: "Clause 6.1.2.2- The Inspecting Authority concerned shall satisfy itself that the vessel has been designed, constructed, tested and inspected to the requirements of this Standard;"(Tyco's liability submissions P38) 678 Tyco relied upon the last mentioned clause as representing the statutory duty of WorkCover: the standard of care said to have been owed by WorkCover to Optus, Tyco and MEF in the exercise of that statutory duty being that expressed in Sutherland Shire Council v Heyman (1985) 157 CLR 424. The breach relied upon by Tyco was a failure "to ensure that each zone of the tubeside of the Heat Exchanger was tested separately and without pressure in the adjacent chamber." based upon clause 5.10.2.3 (a) and Clause 6.1.2.2 of AS 1210. 679 Given my rejection of any proposition that WorkCover owed a duty to any body in relation to the draining and drying of the Heat Exchanger after hydrostatic testing, Tyco is left with a case against WorkCover, similar to the case sought to be made against EMAE, in that it relied upon evidence to the effect that WorkCover's inspector was put on notice by the configuration of the bonnet chambers that the Heat Exchanger was intended to operate with full pressure bearing partition plates. Tyco asserted that the WorkCover inspector was obliged to check (with whom is not made clear) how the system was intended to operate and further that, had such check being made (again from whom is not stated), it would have revealed the need for full pressure bearing partition plates and, hence, for separate hydrostatic tests of the tubeside. 680 There are considerable factual difficulties with that case, not the least of which is the fact that the mechanical designer of the Heat Exchanger did not design it to operate with full pressure bearing partition plates. On the heels of that difficulty lies another, in that, given the information provided by MEF to EMAE, had inquiry been made of MEF one should infer that the information would have come back to the inspector that full pressure bearing partition plates were not part of the concept of the Heat Exchanger. 681 One ventures to say that, given the nature of the specification chosen by Tyco which resulted in the mechanical design produced by EMAE, any inquiry from Tyco could not be guaranteed to provide the information that the partition plates were required to be full pressure bearing elements. In that respect it should be born in mind that it is not WorkCover upon whom any obligation is placed to test the subject vessel. That rests upon the manufacturer who sets up the requisite testing for witnessing by the WorkCover inspector. Each of Mr Walker, Professor Bremhorst and Mr Ambrose gave evidence capable of supporting the Tyco contention that the WorkCover Authority inspector should have checked the intended operation of the vessel. 682 Mr Ambrose's evidence, which I accept, made it clear where he stood in relation to Mr McColl's conduct. He gave the following evidence: "12 It is apparent from Professor Bremhorst's Second Supplementary Report that he is of the view that workshop staff could not reasonably be expected to appreciate that multiple tube-side tests were required because the drawings (and ITP) appear to require only one shell-side and one tube-side test and because workshop staff responsible for manufacturing and testing are unlikely to see the process specification and "are not usually trained to interpret the information contained in it. 13 I agree with Professor Bremhorst that workshop staff responsible for setting up hydrostatic tests, would be likely to rely upon the instruction in the drawing and adopt usual and proper industry practices. 14 However, I disagree with Professor Bremhorst's further suggestion that Mr McColl having noted multiple nozzles 'failed properly to fulfil his functions' by failing to take some step to check the intended operation of the vessel and, in particular, whether there were chambers in the vessel which would be independently pressurised. 15 In my opinion, Mr McColl carried out his duties satisfactorily. These are virtually the same as for the workshop staff as he is similarly skilled. Both parties are required to check for compliance with the approved drawing, the ITP and the Standard - not to check an unseen process specification. Both parties are required to ensure that the testing specified in the approved drawing and the ITP is carried out properly in accordance with the Standard, not check an unseen process specification. 16 It was not McColl's role to consider whether the heat exchanger was suitable for any particular process. His task was to witness a pressure test which was for the purpose of demonstrating that the vessel could withstand pressure conditions stipulated by the process designers. It was the responsibility of the process designers to determine and to inform WorkCover of the pressure conditions to which the vessel was going to be exposed. 17 It is also important to appreciate that the design and method of operation of this particular heat exchanger is extremely rare and possibly unique. In the course of my many years of professional practice, as far as I am aware, I have never encountered a heat exchanger with multiple separately pressurised chambers in the channel (bonnet). Although I do not disagree with the suggestion that clause 5.10.2.3(a) of the Standard would apply to such a vessel if the chambers could be differentially pressurised, it is quite unreasonable to suggest that this WorkCover field inspector ought to have appreciated that, contrary to the clear indication on the drawings and long-established good practice, five tube-side tests were required. 18. Hundreds of tubular heat exchangers have been manufactured and tested in New South Wales and the procedures for hydrostatic testing of such vessels are well known. It is those procedures which are described in the drawing. I would expect the WorkCover field inspector witnessing the tests to make decisions regarding the adequacy of the test by reference to the drawing, ITP, AS1210 and standard good practice." 683 By contrast Tyco relied on the following evidence from his cross-examination as supporting its contention that the WorkCover inspector should have inquired of others as to the design intent of the Heat Exchanger. Q. What I wanted to ask you is if a WorkCover inspector came upon a hydrostatic test which was set up in the way you have indicated, with the number of tubes moving from the nozzles, he was asked to observe that in the performance of his duties - that is one thing, do you understand? A. Yes. Q. Secondly, he observed that this test was taking place on the back of a truck? A. Yes. Q. Thirdly, he observed that the shell and tube side had not been separated for the purposes of the defendant? A. Yes. Q. Would you agree with me that concerns would be raised in his mind as to whether appropriate testing procedures were being followed? A. He would query it, yes, in his mind. …… Q. Acting competently, such a WorkCover inspector would want to be satisfied that this test was not being undertaken without due consideration by the manufacturer as to what was appropriate in the circumstances of that heat exchanger, wouldn't he? A. Correct, yes." (T4585:28-48; T4586:55 - T4587:3) 684 That evidence, in my view, fell well short of the case Tyco sought to make. 685 Tyco's case turned upon acceptance of evidence that the test carried out by Mr McColl involved a simultaneous testing of all chambers which, it was asserted, could, only be achieved by a 'daisy chain' system of connecting nozzles one to the other. I would not be comfortable in making a positive finding that that was the way the test was carried out. Mr McColl really had no independent recollection of the test other than that a single test was carried out. In my view, the evidence of Mr Ambrose is to be preferred to that of Professor Bremhorst or Mr Walker. In the case of Professor Bremhorst I think I have indicated sufficiently the difficulties I experienced with his evidence and Mr Ambrose's evidence is to be preferred to that of Mr Walker, having regard to their respective qualifications and experience. 686 In keeping with the views of Mr Ambrose, it was not disputed that the test was set up by MEF employees without any initial involvement of WorkCover and it has not been disputed that, in carrying out the test, it was one, however performed, which conformed with the conditions of approval of the design by WorkCover, and with the design requirements of the EMAE drawing. In those circumstances, I have considerable difficulty in accepting a proposition that WorkCover, by any standard, could be regarded as careless in supervising a test carried out in accordance with the mechanical design concept of the Heat Exchanger drawing and in accordance with its own conditions of approval which takes one back to the inadequacies of the Tyco specification. 687 In any event, nothing flows from the fact that separate hydrostatic tests were not performed on the separate zones of the Heat Exchanger, as noted in considering EMAE's position. It simply does not follow that the conduct of separate tests would have drawn attention to the specific need to drain and dry the Heat Exchanger: particularly where, as has been earlier noted, separate tests could well have concluded with a full test of all zones, similar to the one which Tyco contended was, in fact, conducted under WorkCover's supervision. 688 It has been submitted on behalf of WorkCover that the evidence justifies the conclusion that separate tests were carried out. I am not prepared to make any finding in that regard and find it unnecessary to do so. Further, as earlier noted in EMAE's case, it is not been established in my view that any under-design of the partition plates resulted in the rupture of the partition plate separating zone 3 from zone 1 at the time of the incident, in the light of the evidence which indicated that the pressure could have built up towards 15 bars. That evidence, when contrasted with the successful discharge test carried out on 8/9 July 1995 in zone 2, provides a further reason for declining to find that the under-design of the partition plates contributed to the damage consequent upon the incident. 689 The reasoning which I have expressed on the ground of causation or foreseeability in EMAE's case has equal application to the nature of the damage to Optus's property which it is asserted was the consequence of WorkCover's alleged breach. The parties are really not in dispute as to the principles to be applied in the consideration of any liability of WorkCover in relation to the exercise of any statutory powers or duties. Each party has relied upon Crimmins v Stevedoring Industry Finance Committee (1999-2000) 200 CLR 1 and that of Sutherland Shire Council v Heyman (1985) 157 CLR 424 as commented upon in Pyrenees Shire Council v Day (1998) 192 CLR 330. 690 Where there is a tendency to diverge in their respective submissions stems from the characterisation of the subject conduct of WorkCover as an act or omission. 691 In so far as WorkCover's conduct may be characterised as one of omission, counsel for WorkCover drew analogous support from the facts in Modbury Triangle Shopping Centre Pty Ltd v Anzil (2000) 176 ALR 411 a case arising out of a claim for damages for personal injury caused by assault at night in an unlit car park occupied by the defendant. The cause of action was founded on an alleged breach of duty to properly illuminate the car park area. The following observations of Gleeson CJ, I think, bear upon any consideration of WorkCover's conduct, if it be characterised correctly as one of omission: "Leaving aside contractual obligations, there are circumstances where the relationship between two parties may mean that one has a duty to take reasonable care to protect the other from the criminal behaviour of third parties, random and unpredictable as such behaviour may be. Such relationships may include those between employer and employee, school and pupil, or bailor and bailee. But the general rule that there is no duty to prevent a third party from harming another is based in part upon a more fundamental principle, which is that the common law does not ordinarily impose liability for omissions. This was explained by Lord Goff of Chieveley in Smith v Littlewoods Ltd [1987] AC 241 at 270. His Lordship said, with reference to a general duty of an occupier to take reasonable care for the safety of neighbouring premises: Now if this proposition is understood as relating to a general duty to take reasonable care not to cause damage to premises in the neighbourhood… then it is unexceptionable. But it must not be overlooked that a problem arises when the pursuer is seeking to hold the defender responsible for having failed to prevent a third party from causing damage to the pursuer or his property by the third party's own deliberate wrongdoing. In such a case, it is not possible to invoke a general duty of care; for it is well recognised that there is no general duty of care to prevent third parties from causing such damage." (at 417 footnotes omitted) 692 However, in my view, WorkCover's conduct should be characterised as one of commission in complying with 6.1.2.2 of AS 1210 which called upon the Inspecting Authority (WorkCover) to satisfy itself that the Heat Exchanger had been tested to the requirements of that standard. 693 The requirement of the standard relied upon was cl 5.10.2.3 which, in the case of "vessels consisting of more than one pressure chamber" required hydrostatic testing of "each chamber without pressure in the adjacent chamber". However, this applied to "chambers designed to operate independently". The undisputed evidence in this case is that the Heat Exchanger was designed not to operate independently, one chamber from another: rather as one that would be fully charged upon commissioning. EMAE did not design this Heat Exchanger to operate independently and, as found in these reasons, did so on the instructions of MEF and based upon the Tyco specification. 694 Further, I fail to see how WorkCover could be regarded as having a duty of care to MEF in inspecting the test as designed and performed by MEF in accordance with the EMAE design. It involves the proposition that WorkCover had a duty of care to protect MEF from its own antecedent, identified negligence. 695 In considering the relationship between WorkCover and Tyco, much the same observations apply. As noted earlier in these reasons, Tyco failed in its responsibility to attend the hydrostatic testing and, in particular, to carry out any internal inspection before "final closure" of the Heat Exchanger, as contemplated under cl 11 of the Tyco specification. It failed to ensure that the step of completely draining and thoroughly drying the Heat Exchanger was effected prior to shipment by that means, or by including that activity in the ITP and by designating it as a hold point. 696 Moreover, the damages claims of MEF and Tyco against WorkCover sound as pure economic loss and, whatever construction may be put upon the statutory duty of WorkCover, in my view, its duty should not be construed as requiring WorkCover to avoid economic loss to third parties. The whole focus of the litigation is in occupational health and safety. 697 However, I am firmly of the view that WorkCover had no duty of care to protect MEF or Tyco from their own negligence or contractual failures. For those reasons I see nothing in the relevant statutory provisions nor in the relationships between WorkCover and the parties to these proceedings which would give rise to a duty of care to require a hydrostatic testing of the Heat Exchanger, not as designed, but as required by Optus, or calling upon WorkCover to warn any of the parties of the divergence of the design from Optus' requirements. 698 On those findings, while EMAE and WorkCover have no liability to any party in these proceedings, MEF would, if sued, have been liable to Optus in negligence for its failure to drain and dry the Heat Exchanger before the shipment to the Rosebery Centre. The extent of that liability is considered later in these reasons. It then remains to consider the position of Tyco, NDY and Leighton. 699 In my view, the disclosed sensitivity of the equipment to foreign substances, in particular water, called for a high degree of care in avoiding damage to Optus' property in the manner in which the various contracts relating to the Inergen system and the Heat Exchanger were carried out. The high degree of care to which I have referred should be seen as falling short of a guarantee of safety. The test to be applied is that espoused in the joint judgment of Mason CJ, Deane, Dawson, Toohey and Gaudron JJ in Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520 at 554 as follows:- "Where a duty of care arises under the ordinary law of negligence, the standard of care exacted is that which is reasonable in the circumstances. It has been emphasized in many cases that the degree of care under that standard necessarily varies with the risk involved and that the risk involved includes both the magnitude of the risk of an accident happening and the seriousness of the potential damage if an accident should occur. Even where a dangerous substance or a dangerous activity of a kind which might attract the rule in Rylands v Fletcher is involved, the standard of care remains "that which is reasonable in the circumstances, that which a reasonably prudent man would exercise in the circumstances'. In the case of such substances or activities, however, a reasonably prudent person would exercise a higher degree of care. Indeed, depending upon the magnitude of the danger, the standard of "reasonable care" may involve "a degree of diligence so stringent as to amount practically to a guarantee of safety"." (footnotes omitted) 700 I think the approach I have expressed is the appropriate one for the circumstances in which the Inergen system and the Heat Exchanger were supplied by Tyco. It reflects the very high level of importance explicitly stated by Optus in a series of its communications involving Leighton, NDY and Tyco aimed at ensuring that moisture and other deleterious substances were kept away from the electronic equipment in operation at the Rosebery centre. None of the defendants may be heard to say, in my view, that they were unaware of this. 701 Although I think a high level of care was required from each of Leighton, NDY and Tyco, what that entailed in the case of each will markedly differ when one has regard to the particular relationships that were established as between Optus on the one hand and, respectively, Leighton, NDY and Tyco. 702 At the same time, I think the application of such a high degree of care is not essential to the findings which are reached in these reasons. The adoption of a high standard goes more to the confidence with which one may express what was required of each of the defendants rather than as determinative of the particular steps which each was required to take to satisfy its duty of care to Optus. 703 I express that view on the basis that, given the existence of a duty of care, which is not disputed by Tyco, nor by NDY, nor by Leighton (so far as it applies to Networks), whatever standard one adopts as the appropriate level of duty of care, I am reasonably satisfied that each of the defendants was called upon to take steps to protect Optus's equipment as expressed in these reasons. 704 One thing, I think, may be stated with confidence in relation to Tyco's general approach to this question, as evidenced by Mr Thomas, is that that approach is indefensible. For ease of reference his evidence was as follows:- "48. Throughout the process of manufacture of the heat exchanger we reported on its status to Leighton. I did visit MEF on occasion with Allen Grono. However, once Tyco had subcontracted the design and manufacture to MEF, I relied on MEF to manufacture the heat exchanger in accordance with Optus' requirements, as provided in the specification and as approved by Leighton and NDY. I also relied on those subcontracted by MEF to properly design the heat exchanger. I believed that the thermal design of the heat exchanger prepared by ABB and the mechanical design (and drawing) prepared by EMAE were submitted to Leighton and onto NDY for comment and approval. I relied on NDY as providing a final check of the work of MEF, ABB and EMAE." 705 As stated in these reasons, I am unable to accept that Tyco reasonably relied upon any review by NDY and, so far as the above quoted passage reflected Mr Thomas's understanding, it was one which, on the evidence before me, was erroneous, so far as it related to the extent of NDY's involvement in the design, fabrication and installation of the Heat Exchanger. 706 However, it was not open to Tyco simply to rely on "MEF to manufacture the heat exchanger in accordance with Optus's requirements." That approach by Mr Thomas appears to ignore quality assurance obligations of Tyco and its role in establishing an appropriate inspection and test plan which would have provided an appropriate assurance that the Optus requirements were, in fact, met. 707 Regard should be had to the comparative ease with which the requisite standard of care could have been met. It did not call for unrealistic or uneconomic procedures: rather, just a keen awareness of the importance of ensuring compliance with Optus's requirements. 708 I see little point in recapturing the numerous communications, mainly between Optus, Leighton and Tyco, which have been outlined earlier in these reasons. It is sufficient to repeat that Optus stressed the importance of protecting its equipment from any contamination in the choice of a fire suppressant and underlined its deep concern about any possible damage to the equipment by water from the Inergen system. The awareness of this on the part of Tyco may be extracted from the work permit produced by Mr Scott which called for the provision of a dust extraction device and use of a vacuum cleaner in association with the drilling involved in installing the Inergen pipework. 709 While Tyco accepted the statement of principle in Burnie Port Authority it contended that, in effect, the application of the principle should be tempered in the circumstances of this case by the principles governing liability of a principal for the negligence of an independent contractor: citing what was said by Dixon J in Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-operative Assurance Co. of Australia Ltd (1931) 46 CLR 41 at 48 as follows: "In most cases in which a tort is committed in the course of the performance of work for the benefit of another person, he cannot be vicariously responsible if the actual tortfeasor is not his servant and he has not directly authorized the doing of the act which amounts to a tort. The work, although done at his request and for his benefit, is considered as the independent function of the person who undertakes it, and not as something which the person obtaining the benefit does by his representative standing in his place and, therefore, identified with him for the purpose of liability arising in the course of its performance. The independent contractor carries out his work not as a representative but as a principal." 710 That passage was adopted by Brennan CJ in Northern Sandblasting Pty Ltd v Harris (1996-1997) 188 CLR 313 at 330 in the following terms: "When this rule applies, no vicarious liability for the independent contractor's negligence is imposed on a defendant who requested the performance of the task in the course of which the relevant negligent act was done or the relevant negligent omission was made. In such a case, there is no basis for sheeting home to the defendant either liability for the independent contractor's tort or responsibility for the independent contractor's act or omission". (footnotes omitted) 711 Reference was also made to the decision of Nicholson J in Peake v Steriline Manufacturing Pty Limited (1988) Aust Torts Reports ¶80-154 which considered the liability of a manufacturer of machinery for a defective hydraulic component supplied by a specialist in hydraulic equipment and in which the manufacturer's duty of care to the user was said to have been discharged "by the engaging of the reputable and specialist manufacturer of hydraulic equipment" (at 67,383). 712 To like effect was the following passage in Taylor v Rover Co. Ltd [1966] 2 All ER 181: "What, however, is reasonable care? The second defendants were entitled to assume, in my view, having got competent hardeners to do the hardening of this guilty chisel for them, that the work was properly done, and it was no part of their duty in law or in good sense to set about the chisel when they received it from the hardeners and to examine it and test it by hardness test to see that the top was no more than Vickers 350, and that the tip was Vickers 700. I cannot think that they are liable for the hardening by their hardening agents or their independent contractors, or call them what one may." (at 186) 713 To understand the import of that passage, the plaintiff was injured when using a chisel in the course of his employment with the first defendants who were responsible for the design of the chisel, manufactured by the second defendants, from steel purchased from a third party and who heat-treated the chisel with the consequence that it was supplied in too hard and brittle a condition for safe use. 714 Reference was also made to Cashfield House Ltd v David & Heather Sinclair Ltd [1995] 1 NZLR 452, relying on the observations of Tipping J as follows:- "The principal may well also owe a primary duty of care to those who could foreseeably be damaged by the acts or omissions of the independent contractor. That duty may include a duty to select, instruct and sometimes to supervise the independent contractor with reasonable care. The greater the expertise of the independent contractor and the more specialised the task the less call there may well be for the involvement of the principal beyond selection and instruction. If the principal has selected and instructed the independent contractor with the skill and care appropriate to the occasion, the principal should generally be entitled to leave the task to the independent contractor without further supervision. If the principal does so there will be no liability unless, of course, the principal owes a non-delegable primary duty to those damaged by the independent contractor's negligence." (at 466) 715 In my view, this is not a case of "non-delegable primary duty" and, as a general observation, I have no difficulty with the emphasis placed upon the expertise of the independent contractor as a factor in considering the principal's liability for acts of the independent contractor. However, in my view, the general law of liability of a principal for the acts of an independent contractor has little bearing on any liability of the defendants to Optus and, in particular, to the liability of Tyco, having regard to its central role in the provision of the Heat Exchanger in order to meet temperature specification requirements of Optus. 716 I do not wish to repeat the facts relating to Tyco's involvement in the process of deciding upon a heat exchanger, in then providing a specification for such a heat exchanger and the subsequent activities relating to the design and fabrication testing, installation, commissioning and maintenance of the Heat Exchanger. However, as a general observation, I think it is fanciful to suggest in this case that, once a competent manufacturer of heat exchangers had been selected, there ended Tyco's responsibility for ensuring that Optus' requirements would be satisfied by whatever resulted from the MEF subcontract. 717 That is not a reflection of the standard required by the law, in my view, nor does it have much to do with the particular facts governing the various relationships amongst the entities involved in the design and supply of the Heat Exchanger. 718 Such an approach ignores the on-going responsibilities of contractor and subcontractor under a performance subcontract such as the Tyco subcontract and the MEF subcontract, so far as the former related to the Heat Exchanger. 719 Leighton relied upon similar propositions in final addresses. 720 In examining Tyco's responsibility for the design of the partition plates but more particularly the failure to completely drain and thoroughly dry the Heat Exchanger before shipment to the Rosebery Centre, I think one starts with Tyco's specification. 721 To a large extent I have dealt with this in considering the responsibility of EMAE in the case. I think one is entitled to express the strongest criticism of the Tyco specification , a criticism which may be summarised in the following way: a) It adopted the draft CIG specification for unidentified "heat exchangers" from which it may be safely inferred was a draft specification applying to standard heat exchangers (the evidence in this case is that this heat exchanger, as required by Optus, was anything but a standard heat exchanger). b) It was the product of a cut and paste exercise which was conducted, either in haste, or with indifference to care in the spelling out of the design requirements. c) It included provisions which were quite inappropriate to the subject heat exchanger. d) It failed to clearly state, if it was stated at all, that the required heat exchanger departed from the conventional and, contrary to practice, required that the partition plates were to be full pressure bearing plates. e) It included provisions which were misleading as to the design requirements of the proposed heat exchanger. 722 The Tyco specification is a useful starting point in the consideration of Tyco's position qua Optus, in that it explains why the entities involved in the design, fabrication and testing of the Heat Exchanger failed to apprehend that it would not be fully charged when in operation and, hence, required full pressure bearing partition plates. 723 It also is a very strong indicator of the approach adopted by Tyco to the provision of the Heat Exchanger at its expense and under significant pressures as to time of performance. It also provides something of the measure of Tyco's continuing responsibilities to ensure that the Heat Exchanger was provided in a form and condition that satisfied Optus's requirements both in relation to achieving temperature control of the discharged Inergen gas and operating without threat to the integrity of the Optus equipment. 724 At the forefront of those obligations must be, in my view, the recognition in clause 11 of its specification of the need to monitor fabrication and to be involved in inspection and testing.

725 In the face of those provisions it is, I think, idle for Tyco to invoke concepts of principal and independent contractor relationships as entitling Tyco to assume due performance of the MEF subcontract, once it had let the design and fabrication work to a reputable contractor in the form of MEF. Tyco itself recognised the importance of its continuing responsibility, through inspection and the witnessing of hydrostatic testing, to avoid the consequences of human error or inattention to obligations in the fabrication and testing of the Heat Exchanger and through requirements for an acceptable ITP from MEF. Obligations of that kind in overseeing the MEF subcontract were owed in contract to Leighton and in tort to Optus to ensure the provision of the Heat Exchanger in a condition that did not pose a threat to the Optus equipment. 726 So far as I am aware the evidence did not disclose whether notice was given in accordance with cl 11.1 of the Tyco specification. Whether notice was given is not material, in that the records of late July/early August show that Tyco was well aware of the state of progress of the fabrication of the Heat Exchanger. The instruction from Leighton to Tyco of 26 July 1994 recorded the fact that Tyco had informed Leighton that "the heat exchanger (would) not be finished until the 10th August". To like effect was the record of the site meeting of 28 July 1994. 727 At a meeting of Tyco representatives, who included Messrs Thomas, Grono and Scott, on 1 August 1994, it was recorded that the Heat Exchanger was to be the subject of daily monitoring by Tyco and a "Punch List" was to be produced identifying major items of outstanding work and program of works for the completion of the Inergen system. The Punch List of 3 August 1994 provided for the WorkCover inspection which was programmed for 10 August 1994, which was the planned date for installation of the Heat Exchanger. 728 The facsimile from Tyco (Mr Grono) to Leighton (Mr McDonald) of 9 August 1994 enclosed a works program for the Heat Exchanger in which Mr Grono stated that he would "personally visit MEF every second day to status this program i.e. "(1) Check on the completion of each activity. (2) Check if item has activity taking place. (3) Estimate if an activity will be completed per program." 729 That sequence of events underscores the lack of reality in Tyco's contention that it had discharged its obligations, for all relevant purposes, once it had let the design and fabrication contract to a reputable subcontractor. It may be noted, also, that these exchanges between Tyco and Leighton point up the time pressures under which the work was being performed and the concentration by Leighton and Tyco upon programming activities. 730 Leighton's position was reflected in the site construction meeting of 9 August 1994 at which the program which had been submitted by Tyco was rejected as "unacceptable". Tyco was put on notice that it would be accountable for damages sustained by Leighton or Optus as a consequence of any failure to complete the works in a timely way. 731 Mr Grono and Mr Scott were present at the Rosebery Centre on 18 August when the Heat Exchanger was delivered. There has been no evidence from Tyco that it performed the inspection contemplated by cl 11 of the Specification: no acceptable explanation why any such inspection was not carried out and no acceptable explanation why its representatives failed to witness the testing of 18 August and, following that, failed to ensure that the obligation to completely drain and thoroughly dry the Heat Exchanger was carried out. 732 Tyco's conduct should be viewed in the context of its quality assurance activities, in particular its involvement in an inspection and test plan for the Heat Exchanger work. The ITP that was produced by MEF, as accepted by Tyco, so far as is relevant, provided for the following activities namely: "Final Inspection Post Weld Heat Treatment Testing Hydro Test Shell Side Hydro Test Tube Side Air Test Cleaning and Painting Check for all Stamping Check for all opening covered Grit Blasting Painting Fitting of Insulation, if applicable Shipping Nameplate Fixing Packing Protection of Spare Parts/Gaskets Documentation" 733 The ITP noted that the location of particular activities would be at the MEF site works and I think it is not without interest that the "ACCEPTANCE CRITERIA" for the testing was identified as the "Dwg" which, presumably, referred to the drawing which noted single tests on each of the tube and shell sides of the Heat Exchanger. Of particular note, however, is the absence of any work activity as noted on the drawing and more particularly called for in cl 12.1 of the Specification under the heading "PREPARATION FOR SHIPMENT" for the complete draining and thorough drying of the Heat Exchanger. An extraordinary aspect of that omission, lies in the fact that the ITP, under the heading "SHIPPING", provided for nameplate fixing and the protection of gaskets as falling under cl 12: far less important, in my view, than the requirement to completely drain and thoroughly dry the Heat Exchanger "so that no moisture (remained) in any part of the unit". Yet that activity was omitted. 734 During the course of proceedings Tyco sought to meet the criticism of the omission of that requirement from the ITP by contending that it fell within the concept of hydrostatic testing. As earlier noted in these reasons, the attempt to show and characterise the activity of draining and drying as part of the hydrostatic testing was without foundation and, in my view, contrived. 735 The basis of Tyco's contention was I think discredited. Professor Bremhorst's evidence- in-chief in his supplementary report, midway through the hearing, was that the requirement of draining and drying of the Heat Exchanger was "an obvious and integral part of the hydrostatic test procedure itself, which (was) a line item in (the) inspection and test plan." 736 Quite apart from the fact that it was plain from the notation on the drawing that the draining and drying activity was after hydrostatic testing and apart from the fact, in my view, that the Tyco specification plainly contemplated that the requirement of completely draining and thoroughly drying the Heat Exchanger was an activity to be performed prior to shipment and not a concurrent activity of hydrostatic testing, that view was of little value having regard to Professor Bremhorst's lack of experience. He had no previous experience with the manufacture of heat exchangers: no experience in the hydrostatic testing of heat exchangers: had never operated as a practising engineer under a quality assurance contract: Australian Standard 2990 was not one with which he was routinely involved. 737 Finally, it became apparent that he did not hold the view that drying was an integral part of the hydrostatic test procedure. He conceded that it was open to the manufacturer to decide when draining took place. He accepted that the activity of draining was complex and took place after hydrostatic testing and, in the passages earlier quoted in these reasons, he accepted that the activity of thoroughly draining and drying was "a much more critical item". 738 The limited brief upon which Professor Bremhorst was to express any opinion as to Tyco's obligation in respect of MEF's ITP was exposed during cross-examination by counsel for WorkCover. In his second supplementary report Professor Bremhorst had argued that the draining of the pressure vessel was "an essential element of the hydrostatic testing procedure" and that it was "an obvious requirement" so that "there was no need to include this obvious requirement as a separate line item or hold point in the inspection and test plan". The illogicality of that argument was reflected in the following cross-examination: Q. The hydrostatic test itself is an obvious requirement in the construction of the pressure vessel, isn't it? A. It is. Q. But that's not a reason not to include it in an inspection and test plan? A. There's other reason for including it there, because it has a statutory requirement and it's very specially identified in codes as a statutory requirement, so that sets it aside as a specific item. Q. You mentioned before that there are practices that develop in the industry which come to be embodied in standards. You don't suggest, do you, that the requirements of the quality assurance standard, insofar as they are clear requirements for the preparation of inspection and test plans, are in some way modified by industry practice that existed prior to publishing the standard? A. Sorry, I don't fully understand that question. Q. In clause 2.10 -- A. 2.10 - is this in my statement? Q. Of your second supplementary statement, which is exhibit 13.05A, you refer to clause 4.6 of AS2990. A. Sorry, 2.10, I beg your pardon. Yes. Q. AS2990 requires that the contractor state how he will verify the subcontractor's conformance to specified requirements by one of the following methods; correct? A. Yes. Q. In order to comply with clause 4.6.2 of AS2990, where it is applicable, it is necessary for the contractor to identify what are important specified requirements for the purpose of the particular project; correct? A. Yes, yes. Q. And it is necessary, then, for the contractor to verify conformance with those requirements by one or more specified methods. A. Yes. Q. If it was accepted that draining and thoroughly drying the heat exchanger so that no moisture remained in any part of the heat exchanger was a significant specified requirement, you wouldn't suggest that any industry practice qualified the obligation of Tyco to identify how it would verify conformance with that specified requirement? MR HUTLEY: I object. If "obligation" is used there in the sense of contractual obligation, one can understand it. The use of the word "obligation" raises a range of possible legal inquiries. MR DONALDSON: I will refine that. Q. When I referred to the obligation of Tyco, I meant its obligations in the sense of the requirements of this standard insofar as it had an obligation to apply this standard. A. Right. I have a real dilemma on this issue, because there are two sides to it, as I see it from a distance. The ITP is drawn up by the manufacturer, as you described before, to ensure that the various steps of importance are identified and checked. So from a manufacturer's point of view, it would be wise to have everything there that's needed to fulfil the contract. But where Tyco's obligation, for want of a better word now, comes in, as far as being compelled or forced under some legal requirement, for example, to identify a missing element of that nature is not - I'm not in a good position to judge that." (T4147:23 - T4148:50) 739 In further cross-examination by counsel for WorkCover on Tyco's quality assurance performance, including its involvement in an inspection and test plan procedure, Professor Bremhorst gave the following evidence: Q. If you have a look at clause 4.6, it doesn't compel Tyco, in these circumstances, to ensure that the thorough drying and draining of the heat exchanger is included in the manufacturer's inspection and test plan. A. Right. Q. It's simply an option that was available to Tyco. A. That's correct. Q. Tyco had four methods by which it could ensure conformance with the specified requirements. A. Yes. Q. And inspection and test by the subcontractor as defined in the subcontractor's inspection and test plans was just one of them; correct? A. Yes. Q. So that if the manufacturer didn't see fit, for some reason, to include the draining and thorough drying of the heat exchanger in its inspection and test plan, it was still open to Tyco, in compliance with the standard, to state how it was to verify compliance with that requirement by inspection by Tyco at MEF's facility. A. Yes. Q. By surveillance by Tyco. A. Yes. Q. Or by incoming inspection? A. Correct. Q. You haven't been provided with any material that shows that Tyco stated or recorded in any of its own inspection and test plans that it was to verify that requirement by any of those means. A. No. Q. Nor did it verify that requirement by the subcontractor's inspection and test plan. A. I've got no information on that to comment on that. Q. Nothing that you've seen would suggest that Tyco produced an inspection and test plan stating that it would rely upon the subcontractor's inspection and test plan to verify draining and thorough drying of the heat exchanger? A. No. Q. Given the contents of MEF's inspection and test plan, it couldn't reasonably do so, could it? A. Couldn't do what? Q. Rely upon that inspection and test plan as verifying that the heat exchanger had been drained and thoroughly dried. MR HUTLEY: I object. At this point it becomes two questions. HIS HONOUR: I will allow it. THE WITNESS: The answer is no, from that ITP they can't rely on it having been dried by the manufacturer. MR DONALDSON: Q. So it follows, doesn't it, that whatever view you take as to the factors relevant to the exercise of a professional judgment as to what should be included in an inspection and test plan, since Tyco had an obligation to establish and administer a quality assurance plan complying with category B of AS2990, it failed to do that, or to discharge that obligation insofar as verification of draining and thorough drying of the heat exchanger is concerned. A. Well, I've got no information on Tyco's internal procedures at all. I've had no opportunity at all to see what steps Tyco took from when it received the heat exchanger, so, I'm sorry, I can't answer that. Q. So you're unable to say whether they did it by some other thought? A. Yesterday, for example, a new element was introduced for me through the extensive reference to a Mr Grono and his role, so I'd have to make it quite clear that I've had no part in assessing Tyco's quality processes. (T4148:52 - T4150:35) 740 That limitation on the value of Professor Bremhorst's evidence was emphasised in further cross-examination as follows: Q. Indeed, where you say - I think it will be on page 24 of the document that you have, your first report under the heading 5.6: The standards do not make clear what responsibilities apply to an entity which supplies a fire protection system but is neither the designer nor the manufacturer of a heat exchanger incorporated in it. If you include in your reference to the standards AS2990, in this case the standards make very clear what responsibilities apply to Tyco; correct? A. Yes, that reference isn't accounted for in that statement. Q. I take it from your previous answers, and from the concluding words in section 5.6 of your statement, that you haven't been given the material necessary for you to make an assessment of whether or not those very specific obligations were discharged by Tyco. A. That's correct. (T4160:47 - T4161:13) 741 In any event, I would prefer the evidence of Mr Parish and Mr Peck on this practical subject matter. The evidence-in-chief of Mr Parish was as follows: "(a) Whilst draining of a heat exchanger was something that will routinely take place after hydrostatic testing, complete draining and thorough drying so that no moisture is left following the hydrostatic test is a completely separate operation; (b) The only way the heat exchanger could be completely drained and thoroughly dried so that no moisture was left in it would be take the bonnet off after the hydrostatic testing, wipe the separate chambers in the bonnet with a rag, blow warm air or nitrogen through the tubes, and then re-assemble the unit. I would expect this work to take at least two hours; (c) In my experience WorkCover would never be present to witness and inspect such a complete draining and thorough drying operation. Workcover inspectors attend for the hydrostatic testing and are not concerned with the subsequent preparations of the vessel as required by the standards and any specification requirements; (d) A specification requiring complete draining and thorough drying so that no moisture is left within the unit is a relatively uncommon requirement for heat exchangers. I would estimate that in my experience with the manufacturer of heat exchangers approximately 90% would be hydrostatically tested and drained without any requirement for drying or special cleaning; (e) Where such a draining and drying requirement is specified I would expect an experienced manufacturer to include the requirement as a line item and a hold point on the inspection and test plan. The inspection and test plan accompanied by the drawing are the documents that workshop staff will work from in manufacturing the heat exchanger. In my experience it is, therefore, important that it be made clear to the workshop staff that there is such a special requirement for draining and drying; (f) Based on my experience, where such a special requirement for draining and drying has been specified, if the manufacturer has not included it as a line item on the inspection and test plan then I would expect an experienced contractor to insist that the manufacturer include it on the inspection and test plan both as a line item and as a hold point." 742 I think it is also of interest to note that Mr Parish's experience was such that usually the "clients of manufacturers will attend and inspect the hydrostatic test procedure". 743 Mr Peck was of a like opinion to Mr Parish. In cross-examination by Counsel for WorkCover, Mr Peck gave the following evidence: MR DONALDSON: Q. At the end of the hydrostatic testing procedure, the heat exchanger could be left full of water, couldn't it? A. Yes. Q. And, in those circumstances, it would be inappropriate to regard a line item in the inspection and test plan for hydrostatic testing as sufficient verification of draining and drying the heat exchanger? A. Yes. Q. Yes. A. Yes. Q. Bearing those matters in mind, it would be imprudent to regard the MEF inspection and test plan as a sufficient basis for verifying compliance with clause 12.1 of the Tyco technical specification? A. Yes. HIS HONOUR: Q. I must say I have had a lot of difficulty with the proposition that the hydrostatic testing verification covers the requirement to thoroughly drain and dry because provisions such as that in the technical documents deal with draining and drying quite separately from it? A. That's been my position since -- Q. From the hydrostatic testing? A. That's been my position since March 1999. It is set out fairly clearly in my first report. (T3598:17- 51) 744 In his evidence-in-chief, addressing the quality assurance matters reflected in the MEF and Tyco documents Mr Peck gave the following evidence: "QUALITY ASSURANCE DOCUMENTATION 10.1 MEF Quality Assurance (QA) Records The MEF QA records are contained in both the Leighton and Wormald discovered documents. MEF produced an Inspection and Test Plan(ITP) dated 8/7/94 [Ex.6.030] (copy attached hereto as Appendix 6). The MEF Inspection & Text Plan includes a set of columns headed "Inspection". The three categories are included - MEF, C (=Customer), and IA (=Inspection Authority). There is no item in the ITP which includes "Customer" inspection. A limited number require either Review or Witness testing by the Inspection Authority. The great majority of items call for inspection by MEF alone. It would appear from the MEF Inspection and Test Plan that they considered it was totally up to them to supply a conforming product. ITP, Purpose & Scope, Item (2) refers to …. "manufactured to AS1210-1989, and as per Clients' Specifications". 'Detail design' and 'Shop Drawings' are both identified on sheet 3 of 15 of the ITP as "by M.E.F." with Review by Inspection authority. [It is not known what documentation and approvals exist for the various subcontractors used by MEF (refer diagram at Appendix 5 hereto]. Workmanship and fabrication items in the ITP appear to me to be reasonably comprehensive. I am not in a position to express an expert opinion as a fabrication expert, but I have reviewed many such ITP's in the past and there is certainly nothing obvious omitted from these two categories. The notable exception in the ITP is the absence of reference in the 'final inspection' sections at pages 12 and 13 to Wormald specification Clause 12.1;viz: "Each item of equipment shall be completely drained and thoroughly dried so that no moisture remains in any part of the unit". I note also that this same requirement appears as part of Note 5 on MEF drawing no. 94-1167 REV 0… [AFTER HYDROTEST, THOROUGHLY DRAIN AND DRY]. It seems to me that given the declared importance of the complete absence of water from the gas mixture to be injected (refer eg [Ex. 1.161] minutes of meeting 24/11/93, item 2.12) this specification requirement was of sufficient importance to warrant insistence by Wormald that it be included in the ITP as a "Hold Point" - ie a step which required verification and signoff prior to further progress in the manufacture and installation process. At the very least, the omission of this specification requirement altogether from the ITP prepared by MEF should reasonably have been picked up by Wormald." 745 I think the evidence to which I have referred warrants a firm conclusion that there should have been a line activity in the ITP for the complete draining and thorough drying of the Heat Exchanger before shipment and that activity should have been a hold point before delivery to the Rosebery Centre to provide a safeguard that the work floor personnel of MEF would have had their attention specifically directed to this requirement. 746 The absence of that line activity and hold point was, in my view, compounded by the failure of Tyco to inspect the "internals" of the Heat Exchanger prior to "final closure" and to be present at the hydrostatic testing in the manner envisaged in cl 11 of the Tyco specification. I think it is apparent that Tyco's personnel simply did not direct their minds to the importance of the requirement to completely drain and thoroughly dry the Heat Exchanger as may be gleaned from their failure to carry out any such inspection, or, for that matter, to direct Mr Gilchrist to carry out any such inspection at the time of delivery of the Heat Exchanger to the Rosebery centre. 747 I think the evidence established that, to discharge this duty of care to Optus, Tyco was obliged to take reasonable steps to ensure that the Heat Exchanger was not delivered to the Rosebery Centre in a condition which represented a danger to this equipment, in particular by the presence of water within the bonnet chambers. 748 Those reasonable steps included, in my view, inspecting the "internals" before "final closure": attendance at the testing of the unit: witnessing the complete draining and thorough drying of the Heat Exchanger, in circumstances in which it had failed to include that activity as a line item and hold point in the ITP activities preceding shipment. In each respect Tyco failed in its duty of care to Optus. 749 Tyco has argued that there was no reason to conclude that such a step would have made any difference to the failure of MEF to carry out this essential requirement. There is no substance at all in that proposition and if one needed evidence to reject it, that may be found in the evidence of Mr Parish and of Mr Peck. 750 I have reached those conclusions without recourse to the Australian Standards relating to quality assurance systems and commissioning requirements so far as they related to pressure vessels. Tyco rejected the validity of recourse to Australian Standard 2990-1987 as a measure of the reasonableness of the standard of its duty of care to Optus. I am unable to agree with that general proposition. If the Standard does nothing else it identifies the respective roles of the "contractor", in this case MEF and of the "customer", in this case Tyco and the continuing role of each where resort is had to the tool of an inspection and test plan. However, I think the Standard has more utility than that. Clause 8.2 of the Tyco subcontract was in the following terms: "8.2 Quality Assurance The Sub-contractor shall plan, implement and manage an appropriate quality assurance management scheme for the execution of the Works in accordance with Category, B, AS2990 which outlines Quality Assurance requirements." 751 In my view, Tyco's acceptance of that Standard under the Tyco subcontract entitles, if not requires, one to go to that Standard to ascertain what steps, if any, relevant to the Heat Exchanger, the Standard would require of Tyco and then to examine those requirements in the context of whether any of those requirements fall within "that which is reasonable in the circumstances, that which a reasonable prudent man would exercise in the circumstances". (Adelaide Chemical & Fertilizer Co. Ltd v Carlyle (1940) 64 CLR 514 at 523 as cited with approval in Burnie at 554.). 752 Determining what was required of Tyco in discharging its duty of care to Optus does not involve a blind application of the Australian Standard. The category B system, referred to in clause 8.2 of the Tyco subcontract, was the category which, in the opinion of Mr Peck, which I accept, was the appropriate system for the Tyco subcontract subject matter. Of significance, I think, in the Standard is the inclusion in the stated purpose of compliance with its provisions of one to "place on the contractor the responsibility for achieving the required quality and then demonstrating that it has been provided". 753 The Standard also identifies the responsibility of the contractor to develop a system which will "assure" that the specified requirements are met and that "Non-conformances are detected and their disposition is controlled". The same clause includes in the contractor's responsibilities, one to "submit…and resubmit the quality system documents" to the customer as required by cl 2.3. 754 The process of submitting and resubmitting the quality system documents to the customer, so far as it involved an inspection and test plan, was explained in the evidence of Mr Parrish and Mr Peck. I think it is sufficient to note the process of review, as explained in re-examination by Mr Parrish as follows: Q. I was referring to an answer that you gave in the context of the question about a contractor reviewing a manufacturer's inspection test plan. You said that you found in your experience that contractors mark up inspection test plans. Could you describe to us what is the process of marking up that you were referring to in that answer? A. Yes. When we get a contract we submit drawings, calculations, inspection and test plans and welding procedures to the client saying, "This is our interpretation of your requirements; is that correct?" They normally will mark them up, and any specific points that we've overlooked they would bring to our attention and say, "You haven't complied with this section of the specification" or, "You haven't complied with that section of the specification." So before the inspection and test plan is issued to the workshop, it goes through a number of reviews and then it's modified and sent back to the client, and when he's happy with the inspection test plan then it's issued to the workshop. Q. Is the marking up that you're referring to there some marking up that's actually physically done in writing on the inspection test plan? A. They physically mark up the test plan and normally whether they want a hold point or a weakness point or new items added or items deleted. They physically mark it up and normally stamp it as being reviewed. (T4905:34 - T4906:9) 755 Given the failure of Tyco to attend the hydrostatic testing, witness an exercise of drying and draining the Heat Exchanger before shipment and its failure to carry out any useful internal examination of the Heat Exchanger chambers upon delivery to ascertain that it was free from foreign material and, in particular, the presence of water, I think it was essential for Tyco to employ the tool of an inspection and test plan and, in that process, ensure that it contained safeguards which would protect the Optus equipment from delivery of a heat exchanger containing water within the bonnet chambers. 756 The standard contemplated implementation of an inspection and test point which was defined as follows: "1.5.11 Inspection and test point- a location or stage in the manufacture/ construction cycle where inspection and testing are performed by personnel whose responsibility is to determine the acceptability of products or services and to record inspection and test data." 757 Prescribing the standard for inspection and test plans (Section 4.6) the Standard required the contractor to submit the plan to the customer "for acceptance" and to update it during the life of the contract (4.6.1). Section 4.6.2 set out what was required in the inspection and test plan in order to, inter alia, provide verification of compliance with specified requirements. It would be idle to challenge the good sense of recourse to a quality assurance tool, such as an inspection and test plan, especially where compliance with specified requirements are so important so as to avoid extremely serious consequences in the event of failure to meet those requirements. 758 It is my view that it was incumbent upon Tyco to see to it that an inspection and test plan was produced by MEF and approved by it in terms which would assist Tyco in being assured that compliance with the specification for the Heat Exchanger had been effected, particularly in relation to the requirement to have the Heat Exchanger completely drained and thoroughly dried before shipment to the Rosebery Centre, if it was to act reasonably in relation to its duty of care to Optus: putting aside any contractual obligations it may have had to Leighton. 759 It is not entirely without significance that Professor Bremhorst's second report of November 1999 reviewed Mr Peck's March 1999 report which, among other things, found fault with the inspection and test plan and in Tyco's failure in not requiring MEF to include as a line activity and hold point the requirement for draining and drying the Heat Exchanger. Professor Bremhorst's second report made no mention of Mr Peck's criticism of the inspection and test plan and it was not until the hearing was some four months underway that his second supplementary statement addressed the matter. 760 When Professor Bremhorst did address the matter it did not stand the test of cross-examination, as observed earlier in these reasons. 761 It has been submitted on behalf of Tyco that Optus had not particularised the failure to carry out an internal inspection of the Heat Exchanger on delivery to the Rosebery Centre as an act of negligence on the part of Tyco. In my view, there is no substance in this contention having regard to the way in which the proceedings were conducted and the full extent to which this issue was explored without objection. 762 It is also part of Optus' case against Tyco that an internal inspection should have taken place in accordance with Australian Standard 3788-1990 which is the Australian Standard for "Boilers and pressure vessels - In-service inspection". The relevant section of the Standard is Section 4 "PRESSURE EQUIPMENT INSPECTION", the purpose of which was to set "out the requirements for the commissioning or recommissioning inspection, operational surveillance, and periodic inspection of pressure equipment". 763 The genesis of the Standard was stated to be the recognition that "there was a need to give guidance to users, inspectors, and statutory authorities on the inspection of in-service pressure equipment". It was further noted as follows: "Existing Standards on pressure vessels, while specifying requirements for the safe design, construction, and installation of pressure equipment, do not provide information for its in-service inspection or maintenance." 764 The inspection requirements of the Standard were stated to have been formulated so as "to ensure the continued safe operation of the pressure equipment". Users of the Standard are "reminded that it has no legal authority in its own right, but acquires legal standing where adopted by government or other authority having jurisdiction, or if specified as part of a commercial contract." The Tyco subcontract provided by cl 9.2 that: "In executing the Works, the Subcontractor, shall comply with:

(a) all relevant Australian Standards……" 765 It is not disputed that a heat exchanger falls within the concept of a pressure vessel within the meaning of the Standard. So far as is relevant, Section 4 of the Standard provided that on "being placed in service for the first time" the vessel "shall be inspected to ensure that the work is properly executed, that all necessary documentation has been completed, and that the pressure equipment is safe to operate". It further provided as follows: "The owner should ensure that inspection includes, but is not limited to, the following: (a) all necessary safety devices are fitted and operated correctly.

(b) Supervision, witnessing or verification of pressure tests.

(d) updating existing files or setting up new files as appropriate.

(h) checking that no extraneous material is left in the pressure equipment……." (cl 4.2) 766 Provision was made in cl 4.3 for regular "operational surveillance" and ,under cl 4.4, for periodic inspection "to ensure safe operation until the next inspection". Under cl 4.4.1 it was stated that "Inspection may be both internal and external" and could be performed with the equipment operating or depressurised. Cl 4.4.2 provided as follows: "4.4.2 First in-service inspection Where required by Column 3 of Table 4.1, new pressure equipment shall be inspected internally and externally after its first year of service, the frequency of subsequent inspections may then be determined……." 767 Under the amended table 4.1 it was noted in relation to "PROCESS VESSELS" (it was accepted that heat exchangers fell within the description of a process vessel), that a commissioning inspection was required and that a first yearly inspection was also required. 768 I think it is relevant to note that table 4.1 of the Standard, in providing for inspection of pressure vessels, did not require a first yearly inspection of compressed air vessels, nor for "STATIC STORAGE VESSELS WHICH CONTAINED GASES THAT WERE NON-CORROSIVE". Vessels of that kind which contained corrosive inducing gases did require a first yearly inspection. 769 Presumably in anticipation of commissioning taking place later in August 1994, an accredited inspector of WorkCover, Mr Bruce, carried out an inspection of the Heat Exchanger on 19 August 1994, which he certified on 23 August to the effect that he had carried out an inspection of the Heat Exchanger at the Rosebery centre on 19 August 1994 and satisfied himself that it may be used for a maximum allowable safe working pressure of shell 500 KPa…. tubes 600 KPa" and that the certificate would remain in force until 19 August 1995. The owner was designated as Optus and the previous owner, Tyco, under the heading "GENERAL REQUIREMENTS…." It was noted that the owner was "to have the boiler or pressure vessel suitably prepared for inspection". I note that the certificate was in what appears to be a standard printed form. 770 Optus relied on this Standard as imparting an obligation upon Tyco to "have carried out a careful internal inspection of the heat exchanger" at the time of the inspection by Mr Bruce to check "that no extraneous material [was] left in the pressure equipment". There has been very little evidence about this inspection and I have some significant doubt as to the operation of the Standard. Assuming in favour of Optus that the inspection was in fact one of the kind contemplated by Cl 4.2 as a commissioning inspection, I think it is imposing far too high a standard upon Tyco to ensure that the accredited inspector conducted an internal examination such as would have revealed the presence of the water in the bonnet chambers. 771 In the first place, I think, there must be considerable doubt whether Tyco was "owner" within the meaning of Section 4 of the Standard, as at 19 August. Mr Bruce certainly didn't treat Tyco as standing in that position. Moreover, assuming against Tyco that it did have an obligation of some kind in relation to Mr Bruce's inspection, I would have expected that such an obligation would have been discharged by arranging for an inspection by a WorkCover accredited inspector and that Tyco would have very little role to play in overseeing the method of inspection adopted. 772 Noting that the 1992 amendment to Section 4 of the Standard substituted "recommissioning" for "initial inspection", the obligation, if any, of Tyco in relation to adherence to this Standard, would have to be approached, in my view, as though it was a commissioning inspection. Even so, I would not regard adherence to the Standard as necessarily requiring an internal inspection on commissioning, particularly where the vessel, when commissioned, would not be charged with gas and would only experience conditions of pressure beyond atmospheric pressure when the system was initiated, noting that the gas was not corrosive. 773 In any event, whether an internal inspection on 19 August, of the kind envisaged in this Standard, would have revealed the presence of water in the bonnet chambers, is by no means clear. I think in a Standard of this kind, how it will operate will depend to some extent on matters that are subjective. In this case I think such a judgment would be significantly affected by the knowledge that upon commissioning, the Heat Exchanger would not be subjected to pressure above atmospheric pressure except when the system was initiated, would not be charged with gas and, that the gas was non-corrosive. 774 Optus also maintained that an internal inspection of the Heat Exchanger should have been undertaken in about December 1994, following a leaking of the Heat Exchanger which was first noted in November 1994. Mr McDonald was alerted to the occurrence by facsimile of 14 November 1994 from an Optus employee, Mr Bob Reeve. Mr McDonald passed its contents on to Tyco by site instruction of 19 November 1994. Neither the content of Mr Reeve's facsimile, the delay in passing it on to Tyco and the covering comments of Mr McDonald, suggest that the problem was one of major concern. 775 Water had been leaking from the heater as a result of condensation being created when the water in the Heat Exchanger tank "actually boiled instead of just getting hot causing steam to escape into the tank insulation and leak around the joints". It resulted in action in the nature of a "re-check" prior to the planned discharge test, to ensure that "joints and pipes [were] checked for tightness" and, presumably, that was the way in which the problem was, in part, overcome. 776 I have not been persuaded that Tyco should have been prompted to conduct an internal inspection of the tubeside, such as may have revealed the presence of water in the bonnet chambers as a consequence of this problem. Moreover, I do not regard Tyco's response to the problem as reflecting any breach of a duty of care to Optus that is relevant in these proceedings. It is not suggested that the water leakage through the insulation has any relationship to the problem created by the failure to remove water from the bonnet chambers and to thoroughly dry that area prior to shipment of the Heat Exchanger to the Rosebery centre. 777 A related argument by Optus based upon AS 3788 raised against Tyco relied upon Tyco's quality assurance conduct under cl 8.11 of the Tyco subcontract which provided as follows: "8.11 Maintenance Manuals The subcontractor shall provide to Leighton prior to the issue of the Certificate of Completion suitable maintenance manuals, operating instructions and as-built plans in respect of hydraulic, mechanical, electrical and fire-services and other building services installed by the Subcontractor. The format of the maintenance manual shall be as the standard format available for inspection at Leighton Contractors Pty Ltd offices." 778 It was the contention of Optus that the Tyco quality assurance records produced in purported compliance with this obligation failed to include in the manual of maintenance provision for internal inspection of the Heat Exchanger after its first year of service as contemplated by AS 3788. 779 The amended clause 4.4.2 of the Standard is not expressed in the clearest of language, in my view, in that it calls for internal and external inspection after the first year of service where required by Column 3 of Table 4.1, that being the amended table. However, I think the way the Standard works in relation to process vessels is to provide for internal and external inspection after the first year of service and thereafter it seems, every four years. 780 It is not disputed that a first yearly inspection was carried out by a duly accredited inspector, nor that Tyco prepared the relevant operations and maintenance manual for the Inergen system, including in that the Heat Exchanger, and that, in that section of the manual, provision was made for periodic inspection. 781 That section of the manual, ran to several pages and prescribed monthly, three monthly and yearly checks and, in respect of all inspections, set out details of precautions to be taken and provided in some detail the numerous steps to be taken on the monthly and yearly inspections. Seventeen separate activities are specified for each of the monthly and yearly inspections. 782 The importance of maintenance for the installation was noted as "essential that regular maintenance of Gaseous Total Flooding Systems is undertaken to prevent leakage or inadvertent discharge". None of the specific activities called for in express terms an internal inspection of the Heat Exchanger. The activities are centred upon the due operation of the suppressant system as distinct from the heating operation of the Heat Exchanger. 783 In the monthly inspection provisions a check of the water level of the Heat Exchanger was advised as well as the water temperature in the Heat Exchanger. The same applied to the three monthly check which also included an inspection of the quality of the water in the Heat Exchanger. The manual does not, nor would I expect it to, address an inspection required to reveal failure on the part of the supplier to perform its supply obligations, as in this case removing all water from the bonnet chambers of the Heat Exchanger. The inspection was aimed at testing the continued safety and design function of the Inergen system, including the Heat Exchanger. 784 Of particular note however, is the following provision in relation to the yearly inspection: " Three Monthly (a) Check the water level of the heat exchanger assembly from the water gauge located on the end of the water storage tank.

(b) Check the water temperature by reading the L E D on the pump control panel marked "temperature".

(c) A sample of heating water to be taken from the tank approximately 50ml for analysis of the water additive. The water additive is CC15 supplied by Water control Engineering which is an anti corrosive and anti bacterial. The total quantity of water in the system is 1750 litres which requires 19 litres of additive

Yearly (a) Carry out the three monthly tests for the water system.

(b) The heat exchanger to be inspected by a N.S.W Work Cover approved boiler inspector. 1. Maintenance should be carried out only by persons having qualifications and experience suitable for the particular work on which they are engaged.

2. The arrangements for maintenance should ensure that a person is available on call at all times to provide service in the event of any fault developing at the installation." 785 Provision in the manual was made for keeping of records of system attendances, precautions to be taken prior to inspection and the activities to be carried out in the course of the maintenance procedures. 786 In Optus' case against NDY, Optus called Mr Neil Whitten Wyles, a consulting engineer, who was the senior manager of Gutteridge Haskins & Davey Pty Ltd. He held a degree in Electrical Engineering from the University of Sydney and was a Master of Building Science from the University. He was a fellow and member of various institutions and professional associations and was clearly a very experienced engineer. I observed that he exhibited no inhibitions from being required to express his opinions in the witness box. He demonstrated a high degree of acuity in understanding the nuances of questions in cross-examination. 787 Mr Wyles, in the course of cross-examination expressed the following views as to the sufficiency of a maintenance manual in relation to inspections to be undertaken in accordance with the Standard: MR ROBB: With respect, I would accept that. Q. You said a moment ago that the need for a pressure vessel to be opened up in the first couple of years of service is sufficiently important that there should be something in the maintenance and operations manual on that subject. A. I believe it's a very disruptive task to take place. This is a large vessel and it required (a) during the period of that being done the risk areas would not be protected. So that was a fairly serious issue. The external inspection that was carried out by WorkCover is a fairly token type of task as far as the user of the equipment is concerned, but if you are going to open the vessel up, you have to disconnect all of the gas systems. HIS HONOUR: Q. What is the rationale for this inspection? A. The rationale is to - I understand - to note any deterioration that may have occurred inside the vessel during the year in service and this code, of course, applies to a very wide range of pressure vessels, many of which are always working at their design pressure, whereas this particular vessel only had to work at design pressure in the unlikely event of a fire requiring a discharge. So there's a certain degree of difference in operation, but nevertheless, the issues insofar as corrosion, insofar as contamination would, I think, probably be part of the criteria that would be used in this first year of opening up. The code is quite specific, in my interpretation of it, of a special purpose vessel being able to - should be opened up after the first year in service. MR ROBB: Q. As you understand it, AS3788 requires that the inspection be carried out by a licensed inspector. A. Yes. Q. Nobody else is allowed to do it, or to supervise the exercise? A. A licensed inspector has to be involved because of the statutory nature of it. Q. Yes. Do you not accept that it is reasonable for a competent consulting engineer to proceed upon the basis that a duly authorised WorkCover inspector will be able to interpret the standard, AS3788 and carry out a competent inspection, where necessary, opening up the heat exchanger? HIS HONOUR: At what stage are you speaking of? MR ROBB: Whenever required by the standard. THE WITNESS: I think it's reasonable for an engineer to rely on such an inspector being able to carry out his duties in a specialised way, but I believe in this particular case the issues in relation to the potential of opening up needed to be highlighted so that all parties were warned of that. Now, I have no - I don't know what was in the mind of the WorkCover inspector when he carried out a visual inspection only. MR ROBB: Q. You are adverting to the fact that it appears after the event that a WorkCover inspector did inspect the vessel at a time when it should have been opened up, but didn't do so - that is, didn't open it up? A. That's my understanding. HIS HONOUR: Was this after it was in service? A. After it was in service, that's my understanding. MR ROBB: Q. Indeed, at one stage there was an inspection immediately after the installation in August 1994 - are you aware of that? A. I'm aware of the WorkCover certification at MEF's factory on I think it's 16 and 18 August '94. I'm not aware of there being any other inspection or certification by WorkCover immediately after installation on site at Rosebery. Q. You are aware, are you not, of an inspection that occurred at about the time of the commissioning in August 1995? A. I believe I am, but I can't - it's some time since I referred to that. Q. Your understanding, is it not, from your reading of AS3788, is that if a WorkCover inspector carried out an inspection of the heat exchanger in October 1995, then the vessel should have been opened up? A. That's my understanding of the intent of 3788. Q. Do you not accept that if parties responsible for the manual insert a requirement that there be an annual inspection by a WorkCover-accredited inspector, that they could reasonably assume that the inspector would perform with accuracy, the requirements set out in the standard? A. There could be a reasonable assumption along those lines. (T1991:57 - T1993:57) 788 I agree with the main thrust of that evidence and take the view that the manual as provided by Tyco reflected adequate compliance with the inspection requirements of the Standard and reflected no lack of any duty of care it may have owed to Optus. Further, I am not satisfied that a more specific reference to clause 4.4.2 of the Standard would have resulted in an internal inspection which would have detected the presence of the water left in the Heat Exchanger after hydrostatic testing. 789 It was the evidence of Mr Wyles that inspections by WorkCover were limited to external inspections and certification. However, that is not my reading of the Standard. 790 It was also part of Optus' case that Tyco should have observed the discharge test conducted on 8/9 July 1995. It has been submitted on behalf of Tyco that this allegation has not been particularised. I would not be prepared to determine the issue on that basis, having regard to the related issues raised and the evidence covering this aspect of the case. 791 The cornerstone of Optus' contention was that a video of the discharge test into Zone 2 showed a discharge of mist into the atmosphere at the commencement of the test. This interpretation of what was depicted in the video was supported in the evidence of Dr Doig in his second report of 30 September 1999 which formed part of his evidence in chief. He calculated that there was something between 179 and 260 mL in the Zone 2 chamber and that this would have been expelled into Zone 2 area during the course of the discharge test in July 1995. He had been shown a video of that commissioning discharge and it appeared to him "that the video [depicted] the release of the moisture at the commencement of the discharge as [he] would have expected". 792 According to the evidence of Mr Thomas, both Mr Grono and Mr Scott were present to witness the discharge. Mr Thomas was cross-examined about his involvement as follows: Q. Where were you standing when the gas actually came out of the nozzles? A. I was looking at two things - one was the cylinder bank, and, secondly, was the room itself. There were glass windows, I think, in the room of discharge. Or maybe I was watching it on a video. Q. Do you remember where you were standing when it started? A. Not exactly, no. Q. The Inergen gas bottles are in the staging area? A. That's right, yes. Q. Whereas the discharge was over in the power room? A. That's right, mmm-hmm. Q. You don't remember where you were? A. Well, I was interested in the cylinders so I do recall listening to what was happening at the cylinder bank. I'm just trying to recall whether my observation of what was happening in the room was through a TV monitor. I just don't recall. I would have to refresh my memory there. Maybe you can help. (T3802:12 - 39) 793 In re-examination, he was taken to that evidence as follows: Q. I think at approximately line 37 you said: I just don't recall. I would have to refresh my memory there. And there were some further questions asked about that. What is your best recollection as to where you were at the time of the discharge test? A. Yes, I do recall where I was now. After this questioning, walking back to my car, I was able to remember more thoroughly exactly where I was standing. I recall that Optus marshalled all of us into the cylinder staging area, that we weren't able to witness the discharge in front of the particular risk that we were discharging and commissioning and that in the staging area up at the open door end was a TV monitor, a large screen put there by CSIRO for their benefit and that at the discharge I was watching that large screen for the initial discharge. Then I recall walking back to the cylinders to see how they were fairing. Q. At the time that you were observing the discharge from the TV monitor, what did you observe? A. I watched the first part of the discharge, probably 30 seconds, and I do recall the discharge operating as intended. But I also do recall that the dust was visible during the initial part of the discharge, very early in the piece, and I do recall discussing that after the commissioning test. Q. Do you recall where the dust was? A. From memory, on the video you couldn't actually see where the dust emanated from, but you just saw a very quick turbulence with the dust moving around. HIS HONOUR: Q. It has been described as misting. A. Yes. Q. Would you disagree with that description? A. Yes, I would, particularly because I observed that during the initial part of the discharge, but I also recall discussing that after the commissioning test with my colleagues, and particularly with Allen Grono who was in the room at the time. Obviously I remember that part of it because it was a surprise that so much dust was on top of the cabinets. (My emphasis) (T4387:51 - T4388:46) 794 To say the least, I find that evidence most surprising, having regard to its particularity, the fact that "the dust" was observed in such detail and was the subject of discussion between Mr Thomas and Mr Grono and the absence of any reasonable explanation as to why that clarity of recollection would have returned to him having regard to his obvious absence of any recollection of the discharge at the time of cross-examination. That concern has not been assisted by the absence of Mr Grono from the witness box. 795 Moreover, the reference to "the dust" without any earlier reference to having observed 'dust' does not sit well with an acceptance of the accuracy of Mr Thomas's evidence. The evidence was given at a time when there was a live issue concerning the possible contamination of the Optus equipment with gypsum dust at or prior to the incident. That has not assisted acceptance of the reliability of Mr Thomas' evidence. Further, there was no record made at the time of any such observation by any person involved in the discharge test. 796 The only related matter in the discharge report of Tyco was that a "false decrease in temperature due to 'windage' factor from the Inergen" had been registered by the thermo couple installed to measure temperature changes upon discharge. I also note that it was a condition of the work permit for the conduct of this test that Zone 2 was to be 'cleaned to minimise circulation of any dust". From my observation of the video and as commented upon by Dr Doig there is a fleeting presence of particles in the atmosphere at the commencement of the discharge which I would have regarded as misting of some kind and would not have identified as a dust disturbance. 797 Nevertheless, I am not satisfied that any such observation would have put Tyco on notice as to the presence of moisture in the bonnet chambers or in the Inergen system, to such a point that Tyco was required to carry out an internal examination to identify the source of such moisture. I am not aware of any representative of any party involved in the discharge test, other than referred to in Mr Thomas' evidence, observing this misting, or, having observed it, regarding it as a warning sign of any kind. For those reasons, I reject the proposition that Tyco failed in its duty of care to Optus in its conduct in and about the 8/9 July 1995 discharge test. 798 Optus alleged, that there was a further breach of Tyco's duty of care in its failure to observe from the WorkCover hydrostatic test certificates that "proper testing had not been carried out". It was submitted that Tyco had an obligation to verify that proper testing had been conducted and, in the absence of its attendance at the testing, Tyco was obliged to obtain verification of appropriate testing from the WorkCover certificate. A corollary to those propositions was that appropriate certification would have required certification of some five hydrostatic tests of the tubeside to a large extent. 799 In my view this allegation is subsumed in the consideration of Tyco's failure to inspect the "internals" of the Heat Exchanger, to witness the hydrostatic testing and to ensure that the complete draining and thorough drying of the Heat Exchanger chambers had been carried out, by witnessing that activity and/or including it as a hold point in the ITP. 800 The misrepresentation case raised by Optus against Tyco was founded on Tyco's certificate of 4 August 1995 in which it certified that the Inergen system had been "installed in accordance with the [NDY] drawings & specification as amended". It was submitted that the content of the notice was misleading in that: "The NDY specification and drawings referred [sic] in this certificate specified a system that discharged gas into; the risk areas that it was designed to protect ether separately or simultaneously. The specification and drawings did not specify a system that: (a) contained water in the tube side of the heat exchanger which would be evacuated into any or all of the risk areas upon activation of the system; (b) did not permit the separate and independent operation of its respective zones." 801 It was contended that Tyco did not have reasonable grounds for the making of that statement and, hence, it was misleading and proscribed conduct within the meaning of the Trade Practices Act. Acceptance of Tyco's contention that it had reasonable grounds for offering that statement involves acceptance of the reasonableness of Tyco's conduct, as evidenced by Mr Thomas, that Tyco relied upon the expertise and assurances of MEF in and about the supply of the Heat Exchanger. That is a position which I have rejected. 802 In considering Tyco's conduct, I think it is necessary to distinguish between the under-design of the partition plates and the presence of water in the bonnet chambers of the Heat Exchanger on delivery. 803 In view of the conclusion reached in these reasons that the evidence did not establish that any damage to Optus in the incident was the result of the under-design, there is no necessity to consider that aspect further. 804 In relation to the presence of water in the bonnet chambers, if the Tyco certification applied to the Heat Exchanger, then, in my view, Tyco deprived itself of the entitlement to claim that it acted reasonably in so certifying by reason of my findings in considering Optus' negligence case against Tyco. However, it is not clear to me that the certificate applied to the Heat Exchanger. The certificate related to the "Inergen system" and was appended in handwritten form to Tyco's notice of completion. 805 The notice of completion was given in accordance with Australian Standard 4214.2-1995-APPENDIX C and was expressed to be in relation to the Inergen system, identified as the "Inergen IG-52.40.08 Total Flooding System installation designed by WORMALD FIRE SYSTEMS". I entertain some doubt whether the notice of completion, strictly read, applied to the Heat Exchanger. However, I prefer the view that the certificate extended to the Heat Exchanger. 806 Primarily, the Tyco certificate, or more accurately its notice of completion, was given pursuant to cl 5.2 of the Tyco subcontract which called upon Tyco to give notice to Leighton when it considered that the works had reached the stage of completion, ready to be handed over to Leighton after satisfactory commissioning and where only minor omissions and defects were extant. 807 Mr Gerald Richard Lewis, a project manager with Leighton, was called in Leighton's case. Mr Lewis presented as a very experienced building administrator, who gave his evidence, to my observation, promptly and without any indication of bias or contrivance. He had some 40 years experience in the building industry. 808 At the time of the Tyco subcontract he was a construction manager for Leighton with a spasmodic connection with the project. He did not "become involved with the project until early 1995". It was his evidence that, as construction manager, he was responsible for the "certification" of the Inergen system and it was he who signed Leighton's certificate of completion of 21 August 1995 in relation to the Inergen system. 809 In his evidence in chief, Mr Lewis referred to that certificate as a "qualified certificate". Presumably, that refers to the fact that it was noted as having been given subject to completion of defects "on the attached list". 810 He stated that he would not have given such a certificate without similar certification from Tyco and NDY. There is no evidence as to the circumstances in which the handwritten certification was added to the Tyco notice of completion. Mr Lewis was unable to assist. He had not requested such a certificate, as distinct from a notice of completion, and he expressed surprise upon seeing it. He was unaware of any other person from within Leighton who had requested that written certification. He did not appear to have placed any reliance upon it, as to which his evidence was as follows: Q. When you read those additional words, is it the kind of sign-off that you wanted from Wormald before you signed off your notice of completion to give to Optus? A. I really can't say. I can't recall ever asking for it and I don't know whether I would even ask for it today if I was in the same situation, frankly. (T2938:28 - 35) 811 On the issue of reliance upon Tyco's certificate, Optus has relied upon the evidence of Mr Bayley and Mr Kennewell. The Tyco notice of completion and certificate along with the certificates provided by NDY and Leighton, were included in the operation and maintenance manual produced through Leighton. 812 It was Mr Kennewell's evidence that he "read the certifications in the manual and as a result [he] believed that the system was fit for the purpose for which it was installed and that the system complied with the Technical Specifications for the Inergen project as prepared by NDY". 813 Mr Bayley's evidence was to like effect, in that he "regarded those certificates as important statements by the contractors". That evidence, I think, must be read in the context of Mr Kennewell's cross-examination as follows: Q. That folder may be returned. In paragraphs 19 and following of your 9 November 1998 statement you deal with certification. Mr Kennewell, was it your role, as project manager, to make a personal decision about the adequacy of the certification that Optus received in relation to the Inergen system? A. Yes. Q. It wasn't the case that you were simply required to ensure that relevant certificates were available for consideration by your superiors? A. It would be - it would be odd for the superior generally to review the operations and maintenance manuals within which the certificates were contained. So generally we would receive the operations and maintenance manuals which contained the certificates, the as-built documents, et cetera, and we would generally check those after they had been checked by our consultants for adequacy and fullness. We would check that indeed they had done their job and provided those to us and ensured that the manuals were complete. It would be unusual for anybody else, unless the need absolutely arose, to then review the manuals and look at certificates themselves, that is, senior management. Q. You may have made this clear enough in what you have just said, but is it your evidence, from your recollection, that in the case of the Inergen system, Optus received the certificates as part of the package of operations and maintenance manual? A. I believe they were contained within the manuals. Q. You, as you have said, reviewed the manual, for present purposes, at least in relation to the sufficiency of the certificates that were part of it. A. I wouldn't say for the sufficiency. I would say for the completeness of the manuals, to make sure there was a certificate in there. We were relying on our consultants to ensure that the certificates were worded correctly and related to the correct elements and that they were also complete in their technical requirements. Q. Is it fair to say that you looked at the certificates and read them to ensure that you appeared to have a full set? A. Yes. Q. But when it came to the wording of the certificates or what they actually ultimately meant, you relied upon the company, Optus's consultants? A. There is a reliance to ensure they are complete and refer to all the elements of the installation, yes. (T1041:40 - T1042:45) 814 From that evidence I take it that it was a requirement by Optus that the subject certifications be provided by Leighton, NDY and Tyco and that its officers responsible for the administration of the project ensured that those certificates were provided and included in the operations and maintenance manual. There is little doubt , in my view, that in the absence of those certificates Optus would not have been prepared to 'sign off' on the Leighton contract. At the time of the issuing of the notices of completion by Tyco and Leighton, the Inergen system had satisfied commission testing. It has not been suggested that the Inergen system would not have been commissioned in the absence of the issuing of these notices of completion. 815 The view I have formed is that the Tyco notice of completion with its accompanying certificate did not address compliance by MEF with the Tyco subcontract requirement to completely drain and thoroughly dry the Heat Exchanger prior to shipment to the Rosebery centre and that the reliance to which the Optus witnesses referred should not be taken as reliance upon a statement that that activity had been carried out. 816 The certificates fall into the area of contract administration. As such, I think one is obliged to examine closely the nature of the reliance of Optus upon those certificates, rather than concentrating on the question of whether the certificates were relied upon. The reliance was such that Optus would not have fulfilled its contractual obligations to Leighton, mainly of payment, without such certifications, nor would it have treated the Leighton contract as having been fulfilled by Leighton. 817 It is difficult, in my view, to determine what non-certification would have led to other than the with-holding of final payment under the Leighton contract. It is more difficult to determine that it would have resulted in Optus discovering the presence of water in the bonnet, other than fortuitously. Optus has not led any evidence of any positive steps that would have been taken in the absence of Tyco's notice of completion and certificate. The same applies to the certificates of NDY and Leighton. For those reasons, although Tyco had no reasonable grounds for issuing its certificate, I am not satisfied that Optus' reliance upon it was such that the damage sustained in the incident was caused by Tyco's misleading conduct. 818 So far as Optus has raised claims against Leighton, Leighton does not dispute that it was in breach of the Leighton contract. However, Leighton does not specify what breaches are admitted and I think it is necessary to examine the allegations of breach to the extent that established breaches throw light on Leighton's liability in negligence. 819 In respect of Optus' case in negligence, Leighton denied that it owed any relevant duty of care to Systems or Vision. 820 The Leighton contention is founded on the following principal submissions: a) There was no contractual relationship between Leighton and Systems or Vision. b) The case in negligence advanced on behalf of Optus against Systems and Vision is premised on contractual obligations which were only owed to Networks. c) The negligence relied upon may be characterised as acts of omission and as such will not give rise to the imposition of a duty of care. d) Mere foreseeability is insufficient alone to give rise to a duty of care for pure economic loss. e) In substance, the loss suffered was not in the nature of property damage f) The negligence relied upon is essentially that of independent subcontractors, for whose conduct Leighton is not vicariously liable. g) There was not a relationship of "vulnerability" which would give rise to a duty of care in the manner considered in Perre . h) Leighton was not aware of the identity of corporations in the Optus group other than Communications and Networks. 821 It was submitted that, having regard to those matters and to "questions of policy including any undue burden on the commercial autonomy of a tortfeasor", no duty ought to be held to arise. For the most part, in findings earlier made in these reasons, I have rejected that position by Leighton. I think it is unarguable that Leighton owed a duty of care to Optus in the performance of its contractual duties to avoid damage to Optus' equipment from the choice of a fire suppressant to which the equipment was obviously sensitive and, in particular, from the discharge of water into the environment of the equipment. In viewing what was reasonably required of Leighton in that respect, it is appropriate to adopt a high standard having regard to the "abhorrent" consequence of a discharge of moisture into the environment of that equipment, as made known to Leighton. 822 The damage occasioned by the incident was, in my view, property damage as was conceded by Tyco. The costs incurred in cleaning substituting or replacing equipment so damaged fell within the concept of property damage as considered in the joint judgment of Mason CJ, Deane and Gaudron JJ in Bryan v Maloney (1994 - 1995) 182 CLR 609 at 617. There the distinction between pure economic loss and injury to personal property was identified as damage distinct from such injury to personal property as against loss consequent upon such and injury. The same distinction may be found in the judgment by Gummow J in Perre of perceived limitations upon liability for pure economic loss (Perre at 243 pars 172 and 173). Both Tyco and Leighton accept the applicability of that distinction. I am satisfied that the relevant damages suffered by Optus fell into the category of property damage. 823 Further, I am of the view that, even if the correct characterisation of the subject damage was that of pure economic loss, no different result obtains from the application of the principles examined in Perre for liability in respect of such loss. That Leighton may not have known of the details of ownership of equipment within the group is immaterial in the circumstances of this case. What it did know was that the fire suppressant system was intended to operate to protect the equipment at the Rosebery centre and it mattered not by whom particular items of equipment were owned within the Optus group. Optus could not have made clearer to Leighton the particular significant concern of the vulnerability of the equipment to contaminants, especially that of water being discharged from the Heat Exchanger, or from the presence of condensation created by a sudden drop of temperature in the discharge of gas into the environment of the equipment. 824 So far as reliance has been placed upon the absence of liability for the acts of Leighton's independent contractor, for reasons earlier advanced, resort to that well travelled line of authority is of limited application in this case. Leighton cited the recent decision of the High Court in Hollis v Vabu Pty Ltd [2001] HCA 44 (9 August 2001). The case concerned personal injury caused by the negligence of a bicycle courier in which the issue arose whether the courier was an employee of the defendant or occupied the role of an independent contractor, for whose conduct the defendant would not be vicariously responsible: a case in which the "general rule" was not challenged, as appears from the following extract from the joint judgment of Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ. "In Northern Sandblasting Pty Ltd v Harris , McHugh J referred to the force of arguments which would justify the imposition of liability on employers for the acts of independent contractors. It has long been accepted, as a general rule, that an employer is vicariously liable for the tortious acts of an employee but that a principal is not liable for the tortious acts of an independent contractor. That general rule was not challenged in this appeal. This fact and the availability of a full answer to the appeal within current doctrine makes this an unsuitable case in which to explore the larger question reserved by McHugh J and Kirby J in Northern Sandblasting . The foundation case for the present authorities is considered to have been Quarman v Burnett . In that case, Parke B, speaking for the Court of Exchequer in banc, settled the difference of opinion in Laugher v Pointer in favour of the views of Lord Tenterden and Littledale J."(at par 32 footnotes omitted) 825 However, my rejection of Leighton's contentions, so far as they rely upon the exclusion of liability for the acts of independent contractors, does not involve ignoring the relationship that existed between Leighton and Optus, NDY and Tyco. I think it is necessary to examine that relationship in determining the existence, nature or standard of any duty of care owed to Optus. 826 No question of policy, in my view, arises such as would preclude recognising the existence of a duty of care by Leighton to Systems or Vision, particularly where there is no question of indeterminate liability of unlimited nature and where the potential damage was well understood, defined, and foreseeable by Leighton. 827 Further I see no difficulty in identifying the nature of Leighton's duty of care to System or Vision by recourse to Leighton's contractual relationship with Network. As I have indicated, there is some value in examining the particular contractual breaches relied upon by Networks to see if any of those breaches are of a kind that fall within what may be considered to be a failure on the part of Leighton to take reasonable steps in the exercise in its duty of care to Optus corporations possessing proprietary interests at the Rosebery centre at the relevant times. 828 On the issue of "vulnerability", it was submitted on behalf of Leighton that it was open to both Systems and Vision to have entered into a contractual relation with Networks, or for that matter with Leighton, and that there was no evidence going to any inability of those entities to "protect their economic interests by the usual commercial means": presumably, referring to some resort to contractual arrangements. 829 In my view, evidence of that kind was unnecessary. Communications had been, what may be described as, the principal under the building agreement, in respect of which purchase orders were capable of being placed upon Leighton by any of the entities within Optus. I think it is reasonable to infer that Networks, as a principal entity involved in the Rosebery centre, was the appropriate party to enter into the Leighton contract. 830 It was contended that the claims of Systems and Vision were such as "avoid the commercial requirements of a contract, including questions of risk distribution and the payment of consideration, to avoid any question of freedom to negotiate by the parties as to the terms of commercial dealings and seek to have the law in effect via the tortious process impose obligations identical with contract". I do not think that is the case at all. To the extent that the Optus case may intrude into that area, it will be seen that such claims have not been entertained. 831 Except in conceding liability for breach of its contract with Networks, Leighton did not address the contractual case raised against it by Networks. For ease of reference that case was summarised in final submissions on behalf of Optus as follows: "7. Leighton breached the following terms of its contract with Optus Networks : (a) to supply and install an Inergen system as specified which was fit for its intended purpose (clause 6.5 of Ex 1.003 or an implied term); - the defects in the heat exchanger referred to above made the Inergen system wholly unfit for the purpose for which it was intended; (b) to execute and complete the Inergen installation thoroughly and with reasonable care and skill (clauses 3.1(c), 4.5 and 6.4 or implied term); - the breaches of this obligation are the same as the breaches of the tortious duty of care referred to below; (c) to arrange and co-ordinate the design activities of the project (Clause 6.1(a)): - Leighton failed to: (i) obtain NDY's approval of the Tyco specification; (ii) ensure a proper review by NDY of the Emae drawing and calculations for the heat exchanger; (d) to effectively co-ordinate all consultants' services (Clause 6.1(j)) : - Leighton failed to : (i) obtain NDY's approval of the Tyco specification (ii) ensure a proper review by NDY of the Emae drawing and calculations for the heat exchanger; (e) to plan, implement and manage an appropriate quality assurance management scheme for the Inergen project (Clause 6.2(d) and 8.2); Leighton failed to : (i) correct the omission of the draining and drying requirement on the MEF - ITP; (ii) correct the inadequacy of NDY's review of the Emae drawing and calculations; (iii) obtain verification that the draining and drying requirement had been carried out; (iv) obtain verification that proper hydrostatic testing had been carried out; and (v) obtain appropriate quality assurance verifications from Tyco in respect of the procurement of the heat exchanger. (f) to arrange for material testing (Clause 6.2(e)); - Leighton failed to arrange for proper hydrostatic testing of the heat exchanger; (g) to provide a suitable maintenance manual for the Inergen system (Clause 8.12); - the maintenance manual failed to advise Optus of the requirement to conduct an internal inspection of the heat exchanger after its first 12 months of service; (h) to comply with Australian Standards in executing the works (Clause 9.2(a)); - there was non-compliance with AS1210-1989 and AS3788-1990. 8. In relation to each of the breaches referred to in sub-paragraphs (b) to (h) we rely on the submissions concerning breaches of the duty of care set out below." 832 Such an approach gave some credence to Leighton's criticism of the Optus analysis of Leighton's conduct in terms of Leighton's contractual obligations to Networks. 833 As I understand Optus' position, Optus does not join issue with the evidence adduced on behalf of Leighton that its role under the building agreement and the Leighton contract was in the nature of a de-facto project manager. That was the analysis offered by Mr Peck of the nature of the commercial relationship created under the Leighton contract. The way in which Mr Peck expressed it was as follows: "While technically the head contractor, the Leighton role in the process would ……. Be more appropriately described in industry terms as that of Project Manager or Construction Manager" 834 This was reflected in the fact that Leighton could not be expected to have within its resources all of the skills required in the services contemplated under the building agreement and the Leighton contract. Mr Peck pointed to the manner in which services were, in fact, performed as illustrating that role. Within that concept, Leighton undertook the obligations set out in cll 6, 8, 9 and 10 as set out earlier in these reasons. 835 I regard the description of Leighton's role as project or construction manager as an apt commercial description of its relationship with Optus and Leighton's subcontractors. I think that the nature of that role calls for a fresh look at each of the breaches relied upon, notwithstanding that such an approach involves an overlap with Optus' case against Tyco, as, in my view, it does not follow that where culpability is found against one, the other will be culpable or equally culpable. 836 By making a general concession of liability in contract to Networks, Leighton failed to address seriatim the breaches of contract relied upon by Optus. The way it was expressed in Leighton's submissions was as follows: 95. The claims in tort made by Networks against Leightons are identical with and rise no higher than the claims in contract. Leightons concede a breach of contract. There is no need to further analyse the tortious position, since damages are identical. This includes, so far as Networks is concerned any cause of action for negligent misstatement and misleading and deceptive conduct. 837 This approach is unsatisfactory, in that one needs to examine the nature of the contractual breaches in relation to Optus' negligence case. Furthermore, when the time comes to examine Leighton's case against Tyco, I think it is necessary to ascertain the respective faults of Tyco and Leighton both in contract and in tort: in particular, in determining the operation of the indemnity clauses upon which Leighton relies under the Tyco subcontract and to make some determination upon any rights of contribution that one may have against the other in relation to their respective liabilities, to Optus. 838 In considering responsibility for the presence of water in the bonnet chambers before and after commissioning and the supply of a heat exchanger with non-full pressure bearing partition plates, I think one starts with the proposition that Leighton was, at least, one step removed from the events giving rise to the incident. As noted in these reasons, the specification in the Networks contract, in the form of Amendment One, bordered on cryptic. It simply provided that: "Should [Tyco's] design of the Works, to comply with the performance requirements of the specification, include a heat exchanger, such heat exchanger shall be designed in accordance with the requirements of AS 1210-89." 839 The actual design of the Heat Exchanger had been left almost entirely to Tyco. The NDY specification did not require the installation of a heat exchanger with the Inergen system. It being a performance specification, it was up to Tyco to provide an Inergen system that conformed with the temperature requirements of the specification. 840 As a consequence, it was Tyco who drafted the Tyco specification for the Heat Exchanger and subcontracted its design, fabrication and supply under the MEF subcontract. Nevertheless, the inclusion of a heat exchanger, its design, fabrication, testing and commissioning, remained wholly Tyco's responsibility: one which was not diminished by passing the Tyco specification and, later, the MEF drawings and calculations before Leighton for comment. 841 The two points of contact between Tyco and Leighton which, I think, bear the closest scrutiny are the conduct of Leighton in relation to any examination of the Tyco specification and, to a lesser extent, the EMAE/MEF drawing and, second, its role in quality assurance, particularly in relation to the establishment of an appropriate inspection and test plan as a tool in quality assurance. 842 As I have earlier observed in relation to Tyco, I regard the operations maintenance manual as adequate, notwithstanding its failure to specifically call for an internal inspection after the first year in service. So far as that was adopted by Leighton, I have no reason to express different views about that manual as provided by Leighton to Optus. 843 Leighton was at fault in its failure to comment on the sloppy quality of the Tyco specification with its omission of sections, mislabelling of sections and adoption of inappropriate terminology. Leighton, of course, was not privy to the way in which the Tyco specification was put together with the use of a CIG draft, standard type specification for heat exchangers. Further, it was entitled to rely upon the professed expertise of Tyco in relation to the Inergen system and, in particular, in relation to heat exchangers as outlined earlier in these reasons. I think what needs to be done is to examine whether Leighton should have picked up what I regard as glaring deficiencies in the Tyco specification, either with or without recourse to other expertise, particularly in the form of NDY. 844 Such an approach should not ignore the genesis and circumstances surrounding the introduction and supply of the Heat Exchanger in connection with the Inergen system. Repeating earlier observations in very brief form, that introduction came about as a consequence of Tyco's inability to meet the NDY specification either in its original or relaxed form as to temperature control requirements. It was a performance specification calling for the installation of Tyco's Inergen system. The cost, design, fabrication and supply of the Heat Exchanger in connection with the Inergen system was entirely the responsibility of Tyco. Given the comparative exclusion of NDY from the process of determination of design, fabrication, testing and commissioning of the Heat Exchanger, the question is raised, whether Leighton's failure to involve NDY more in the process was itself an act of delinquency. 845 The further area of contact relating to the quality assurance obligations of the various parties, I think, requires a different approach in considering Leighton's position, as against the way in which I have approached that of Tyco. As earlier stated, I am firmly of the view that Tyco failed badly in a variety of ways in not ensuring that a critical activity of completely draining and thoroughly drying the Heat Exchanger after hydrostatic testing and prior to shipment had been performed. Involved in that consideration was the deficiency in the MEF inspection and test plan which Tyco left unaltered. 846 Leighton's quality assurance obligations did not end with Tyco's approval of the MEF inspection and test plan. That document had been passed onto Leighton [Mr McDonald] by Tyco [Mr Scott] and drew no relevant response of any kind from Leighton. One has to consider the conduct of Leighton's quality assurance obligations in that context. Assistance may be gained from the evidence of Mr Peck, whose opinions I would lean to, having regard to his considerable experience in contract administration. His evidence depicted Leighton's role in relation to quality assurance and certification as akin to that of an auditor, as was explained in illustrative form by him in cross-examination by counsel for NDY. 847 He had been asked in the most general terms to express a view about the role of the engineer in "vetting the quality assurance procedures adopted by design and construct subcontractors……". That led to clarification of the line of questioning and an invitation to speak generally about the quality assurance mechanism and how it worked, as appears from the following: A. In the time we are talking about, contractor QA was relatively new. It commenced in the late '80s but it really has only taken off in the last seven to eight years. So we are at a period in time when quality assurance by manufacturers, as distinct from quality control by the procurer, is relatively new to the industry.

Notwithstanding that - and that is not in any way a criticism; it is just a statement of where we are at in time - the process that was in place as I understand it on this project was that each of the players in that tree was required to have an approved quality system. So, if we go to MEF, they had a quality system. They are an approved manufacturer of pressure vessels. My understanding at the time was part of the approval by WorkCover - which is how you get the certificate in the beginning - required that you had a certified quality system in place. In other words, within MEF they had a quality system verified by WorkCover or some similar organisation that was acceptable - considered to meet the Australian Standard.

So, where MEF went, I don't know in terms of people that did the work for them but ABB Lummus or ABB has certainly been a client of mine for years and I can assure you that in 1994 they had an Australian Standard quality system in place. I don't know anything about EMAE.

I would expect that each of the players had a quality system which, in effect, meant the work they performed met accepted standards of quality and verification - internal verification, not external verification.

As you go up the line the process goes from checking, detailed checking, to auditing. By the time you get to Leightons, you would expect their role as totally audit. If I can use an example that I have been directly involved in as an audit participator, the M2 motorway construction was undertaken, as you will be well aware, on a design/construction/operate/maintain basis as a BOOT project - build, own, operate and transfer process.

My company was retained by the RTA to do a number of tasks - the Roads and Traffic Authority - to do a number of tasks on that job, one of which was to undertake audits of the quality systems in place by the BOOT operator by that the turnkey contractor, if you like. Those audits required that every key aspect of the project be audited once in six months. In other words, the procedures in place for earthworks got an audit once every six months. The procedures in place for bridgeworks got an audit once every six months, and so on, which means a lot of work, a lot of water passed under the bridge on each of those areas between audits, which was never picked up.

The process is designed to ensure that each party is operating its quality system in the way that it says it will, or it intends to, and you give the quality system a tick or not. Our own company has an approved quality system - have had for many years. We get audited by Lloyd's once every year and in order to maintain a certification we have to get a tick in a box. It is not to say we don't have problems within our system and we don't make mistakes, but the process that we say we apply to our activities is audited and we get a pass or a fail, and if we fail we lose our registration.

So, that is the way the system works. MEF had detailed inspection and test plans in relation to the fabrication. Wormalds, as the direct contractor, the direct player to whom they were subcontracting, in my view, had the primary responsibility for auditing and checking the MEF work, and insofar as hold points are concerned, making sure that they were verified and witnessed at that point in time.

Once you get to Leightons, I would see that as much more of an audit role only, a broad audit role, in other words, to satisfy themselves that Wormald's quality B system was in fact being operated as it should have been. You get to Norman Disney & Young - they had obligations, as I see it, in relation to their design service but their audit role, when it comes to people down the bottom of the tree, I would see as absolutely minimal. (T2860:4 - T2861:48) 848 Mr Peck elaborated upon that evidence in further cross-examination by counsel for WorkCover, in which he emphasised the "primary responsibility" of Tyco "for auditing and checking the MEF work, and in so far as hold points are concerned, making sure that they were verified and witnessed at that point in time." Mr Peck's opinion was that the MEF inspection and test plan was significantly deficient by the omission of the line activity of completely draining and thoroughly drying the Heat Exchanger before shipment and its omission as a hold point. 849 I think the evidence of Mr Peck well illustrated the different approaches that should be adopted in considering the certification conduct of Leighton, NDY and Tyco, respectively, and in examining the conduct of Tyco and Leighton in the quality assurance process, so far as it employed the tool of the inspection and test plan. 850 I have earlier firmly stated my views about Tyco's breach of duty to Optus in and about its conduct in not ensuring that the activity of completely draining and thoroughly drying the Heat Exchanger had been performed. It remains to be considered whether Leighton's quality assurance obligations to Optus required it to scrutinise the MEF inspection and test plan as presented to Leighton by Tyco so as to detect the deficiency and to call upon Tyco for a correction of it. 851 It will be recalled that the process of formulating an inspection and test plan involved an exchange between, MEF and Tyco, with the latter being called upon to make any changes required by it of the plan submitted by MEF. The view I have come to is that, having regard to: (a) the importance of securing the Heat Exchanger system, so as not to leave it as a threat to the integrity of Optus' equipment, in particular, through the discharge of water into the equipment environment; and (b) the time at which the MEF inspection and test plan was provided to Leighton by Tyco Leighton's role as auditor called for an examination of the ITP against the Tyco specification and EMAE/MEF drawing. To vet the plan against the NDY specification would be almost meaningless, given the cryptic provision in that specification for a heat exchanger if one was to be supplied. The evidence disclosed that the ITP was sent in an uncompleted form by Tyco to Leighton via a transmittal note dated 21 July 1994 along with several other documents namely a "WELD MAP" and several "WELDING PROCEEDURES". No comments accompanied the transmittal note, so that one could treat the communication as merely one of record. At the site meeting of 22 July 1994 under the heading "QA" it was simply noted that "QA Plan on heat exchanger submitted". The evidence disclosed that the document so submitted was in an uncompleted state and no completed inspection and test plan was ever submitted by Tyco to Leighton. 852 Mr McDonald when cross examined by counsel for Tyco as to his practice in passing technical material onto NDY gave the following evidence: Q. Whenever you received that, you read it, can his Honour take it? A. I reviewed it, yes. Q. Did you pass it on to NDY for review, or not? A. I can't recall. Q. In accordance with your practice, would it be the sort of document that you would have wished to pass on to NDY? A. I would have expected that it would have been, or if I did in fact not send it on, I would have relied on the point of issue if NDY felt they required to review it, they would ask to review it. HIS HONOUR: Q. But wasn't your system one of using transmittal notes? A. Yes, it was. Q. Well, I'm a little surprised at the absence of transmittal notes when documents of this kind are suggested to be sent to NDY? A. If it was forwarded to NDY it would be forwarded under transmittal letter asking for their comments. MR HUTLEY: Q. If there is no such document, can his Honour take it that the likelihood is that you didn't on-forward it for one reason or another? A. Could have been, yes. (T2586:4 - 36) 853 His evidence of the form of review that he would have undertaken in respect of such a plan was described as follows: A. I think my object was twofold: firstly, I was keenly interested to see in fact the quality assurance plan was implemented at an early stage and not a rearguard action which is like put together after the manufacture of the goods, is completed. So -- Q. Stopping there, you were satisfied that that seemed to be occurring? A. Yes, yes, the time that I went out to the plant and the reason why I went out to the plant, which is referenced in the meetings there over programming issues, to satisfy myself that the information that Wormald was reporting in terms of program was correct, and that is that certain components we were told were coming from overseas, there was a manufacturing process at Smithfield, at MEF's premises and I went out there to have a look and satisfy myself, program-wise, that the delivery date that Wormald was advising me of would in fact be achieved. At that time I took the opportunity to ask MEF and have a look at some of their NATA testing certificates for the welding to see that it was in place. So, yes, I satisfied myself of the existence of the plant and whether or not it was generally up to date. The second level of review I would have done was just gone through the plan in its uncompleted stage, because these items get filled out and checked and signed and initialled as the work progresses, that, in a complete sense, the plan was generally complete. (T2586:40 - T2587:15) 854 In earlier evidence he had noted that the test plan included the hydrotest as a hold point. Mr McDonald also stated that he had seen the test plan "at various stages of its development" (T2585:33). In further cross-examination by counsel for Optus, Mr McDonald gave the following evidence as to his treatment of the MEF inspection and test plan: Q. Did you do that when you read it - go through each of the columns and look at the legend and understand what it all meant? A. I did, to this extent, that the meanings are not entirely clear of whose responsibility it is for the tests until you read the legend. Q. I agree with that. So you did do that, did you, when you got this document in late July? A. I recall satisfying myself that, if you like, H was the hold point. Q. Sorry? A. H represented the hold point. W represented the witness point and the like. Q. Do you say that you actually went and checked on what was in here about testing? A. Yes, in terms of the hold point requirement of the testing and that it was to be done by inspection authorities. Obviously discussions with Wormald took place and that inspecting authority would be WorkCover. I guess WorkCover is referenced here as well. WCA, I presume, is WorkCover Authority. Q. I want to understand. Do you say you actually went to this page, page 12 of the inspection test plan, to specifically look at whether or not testing had been provided for and in what detail? A. Yes. Q. Did you look to see where they were going to do the draining and the drying? A. I would have looked through here and I would have been interested in the fact that there was a test carried out and that it would be the hold point and that there would be a test certificate issued. Q. Where did you see it? A. 2.0 and 2.1. Q. What about draining and drying? A. Draining and drying - as far as I'm aware, it's not there. Q. Did you notice that when you looked at the document? A. Look, I can't say. My primary focus at that time, what I can say - my primary focus was on a hydrostatic test that represented a hold point and that test was going to be certified by an independent testing authority and there would be certificates produced to evidence such. That was my primary focus at the time. …….. MR GREENWOOD: Q. The question was: as you read down the document, wasn't it obvious to you that there was no provision for ensuring draining and drying so there was no water in the heat exchanger after the hydrostatic test had been performed? A. I think I answered that my primary focus was on the test and that's already recorded in the transcription. By that, I assume that that process, before it came to site, would be completed. The quality assurance plan, I think as I said before, does not necessarily record every complete step that's done. Admittedly, as you've said to me, it's an important step, but the fact there was a hold point and there was a test done, I relied on that process. Q. But quite apart from the testing, after the testing was done, something had to be done about ensuring that it was drained and dried. MR HUTLEY: I object. HIS HONOUR: I will allow it. MR GREENWOOD: Q. Wasn't that the case - wasn't that the simple fact? A. The heat exchanger, to satisfy its functional requirements, had to be drained and dried in some form or fashion. I was expecting that to be done before the unit was put in service. As I said to you, when I reviewed this, I went to the testing sections, item 2.0, 2.1 and took that as being satisfactory to answer any concerns that I had at the time. Q. And am I right in saying that, frankly, you just did not think for a moment about draining and drying of this heat exchanger after hydrostatic testing? A. Well, I assumed the draining and drying of the heat exchanger would be an item that would be completed. (T2738:9 - T2739:7; T2739:45 - T2740:29) 855 The evidence on that subject, I think, is a further illustration of Mr McDonald's frankness under cross-examination. The evidence does not sit comfortably with Mr Peck's opinion evidence of the role of Leighton in relation to the MEF inspection and test plan. Mr Peck's evidence was as follows: "The notable exception in the ITP is the absence of reference in the 'final inspection' sections at pages 12 and 13 to Wormald specification Clause 12.2; viz:

"Each item of equipment shall be completely drained and thoroughly dried so that no moisture remains in any part of the unit".

I note also that this same requirement appears as part of Note 5 on MEF drawing no. 94-1167 REV 0….. [AFTER HYDROTEST, THOROUGHLY DRAIN AND DRY].

It seems to me that given the declared importance of the complete absence of water from the gas mixture to be injected (refer eg [Ex. 1.161] minutes of meeting 24/11/93, item 2.12) this specification requirement was of sufficient importance to warrant insistence by Wormald that it be included in the ITP as a "Hold Point" - ie a step which required verification and signoff prior to further progress in the manufacture and installation process.

At the very least, the omission of this specification requirement altogether from the ITP prepared by MEF should reasonably have been picked up by Wormald.

Its omission would become less obvious when (for example) comparing the ITP against AS 1210-1989. The ITP refers to conformance with the latter, which would tend to give comfort to a party checking it against a specification which called only for that requirement. The latter was the case for the Leighton subcontract with Wormald. As already noted herein, the standard itself is voluminous and contains many provisions unrelated to the heat exchanger manufacture. Identification of specific provisions of particular importance would require special knowledge in the pressure vessel field which in my opinion would be unlikely to be found in individuals whose particular function is the administration of quality management systems or inspection and test plans." 856 I think it is clear from Mr McDonald's evidence that Leighton went well beyond checking the ITP against the NDY specification. 857 As to NDY's role, Mr McDonald was further pressed by counsel for Optus as to the likelihood of the test plan having been sent onto NDY and the consequences of not having done so. Mr McDonald frankly accepted that if it had not been presented to NDY it would have been "an oversight" as distinguished from an error. Mr McDonald had not seen a completed version of an MEF inspection and test plan prior to his leaving the project. 858 As earlier stated, while having commented favourably on the evidence of Mr McDonald, I also observed that, in matters of this kind concerning the transfer of documents to NDY, I would not be prepared to accept that such documents had been sent onto NDY in the absence of a transmittal note or some other contemporaneous record, or a clear recollection of a Leighton witness. In this instance it is apparent that Mr McDonald had no independent recollection of having forwarded the MEF plan to NDY and I am not prepared to accept that any such plan was forwarded. 859 However, so far as it concerned the omission of an activity of completely draining and thoroughly drying the Heat Exchanger prior to shipment, I do not regard any failure to submit the plan to NDY for comment as having any relevance to Leighton's liability, when account is taken of NDY's role in the design and fabrication of the Heat Exchanger. 860 As noted, the evidence disclosed that Mr McDonald did address his mind to the adequacy of the activities designated in the plan and took the view that it was adequate to the extent that it had the hydrostatic test as a hold point. 861 However, that is not an approach that was favoured by Mr Peck in his evaluation of the MEF inspection and test plan. It may be in other circumstances that the approach adopted by Mr McDonald would have been sufficient. However, just as I have fixed Tyco with knowledge of the importance of this vessel coming onto site in a condition which would not jeopardise the Optus equipment, particularly in the matter of discharging moisture or water, I think that element in the supply of the Heat Exchanger required a close scrutiny by Leighton of the MEF inspection and test plan. 862 At the same time, there is a difference, a significant difference, in examining Tyco's conduct in relation to the ITP with Leighton's failure to pick up MEF's omission of the cl 12 specification activity from the ITP and, in turn, Tyco's failure to detect that omission. Leighton was entitled to expect Tyco to implement the cl 11 specification provision for inspection by Tyco of the "internals" of the Heat Exchanger before "final closure" and for Tyco to witness the hydrostatic testing before shipment. Leighton had been given to understand by Tyco that it was closely monitoring performance by MEF upon a daily basis. 863 I regard Leighton's failure to require an evaluation of the ITP as a failure which reflected a breach of its duty of care to Optus in the performance of its quality assurance obligations. However, it is a failure of far less significance than that of Tyco whose primary responsibility it was to ensure that the MEF inspection and test plan was adequate and who compounded its failure to do so by ignoring the cl 11 provision for inspection of the internals of the Heat Exchanger and for witnessing the hydrostatic test. 864 To the extent that it has not been clearly stated, I am of the view that the failure to present the draft or uncompleted MEF inspection and test plan to NDY did not represent a breach, either in contract or in tort, as against Leighton. From Leighton's perspective, it had a contract in the nature of a performance contract with Tyco and, essentially, it was a matter for Tyco to provide a heat exchanger, if one was required to meet NDY's performance specification of temperature control of discharged Inergen. While it may have been prudent on the part of Leighton to have submitted the Tyco specification to NDY, I do not see that as required of Leighton under any tortious or contractual obligation to Optus. 865 In essence, if a heat exchanger was required to enable Tyco to satisfy the NDY specification for the Inergen system, it being in the nature of a performance specification, it was up to Tyco to ensure that the Heat Exchanger was designed and fabricated by it in conformity with that specification. In particular, I would not have expected any examination of the Tyco specification by Leighton to have picked up the misleading nature of it. I would have expected the glaring mistakes within the Tyco specification to have been brought to Tyco's attention. However, that would not have had any relevant bearing upon the matters that surrounded the incident. As earlier noted in these submissions, I do not accept Tyco's position that it had no expertise in the field of heat exchangers. That did not accord with assurances given by Tyco representatives during the negotiating stages. 866 Returning then to the summary of contractual breaches relied upon by Optus: having regard to Leighton's acceptance of responsibility for the acts or omissions of its subcontractors, I think it follows that Leighton was in breach of clauses 3.1(c), 4.5, 6.2(d), 6.4, 6.5 and 9.2(a) in providing a heat exchanger that was not fit for the purpose for which it was intended, in that it contained water locked within the bonnet chambers and was designed with non-full pressure bearing partition plates. 867 I do not regard it as being in breach of the obligation to arrange material testing, nor as having failed to provide a suitable maintenance manual for the reasons earlier given. The allegations that Leighton failed to properly coordinate design activities and consultant services, in breach of clause 6.1(a) and (j) are not so easily disposed of. However, on balance, I think Leighton was entitled to look to the expertise of Tyco in coming up with a design and to fabricate a heat exchanger which would enable Tyco to satisfy the temperature requirements of the NDY specification. 868 A very strong indication of that sphere of responsibility, was that, if a heat exchanger had to be provided, it was to be Tyco's decision and at Tyco's cost. That element of responsibility is strongly emphasised in the NDY specification relating to the Heat Exchanger, which as noted on more than one occasion in these reasons was a cryptic, performance provision, placing the full burden on Tyco of compliance with the temperature requirements of the NDY specification. So, to the extent that NDY was not brought into the process of approving the design and in the fabrication stage of the Heat Exchanger, I do not regard that as a breach of Leighton's management obligations to Optus. 869 A more difficult question arises out of Leighton's conduct in submitting to NDY the MEF/EMAE drawings and calculations in July 1994. 870 I am far from satisfied that Leighton was in breach of the Leighton contract in failing to engage NDY more fully in relation to the design and supply of the Heat Exchanger. In retrospect, it would have done no harm to have done so. However, I have formed the strong view that Leighton was justified in regarding the provision of the Heat Exchanger as essentially Tyco's concern. It was something that was not wanted by Optus and resort to it by Tyco was only in the event that it was not able to achieve the temperature requirements of the NDY specification, or was not in a position to give an assurance that the Inergen system, standing alone, could so achieve Optus' requirements. 871 In my view, that explains to a very great extent the way in which the burden of preparing a specification (the Tyco specification) and the fabrication and testing of the Heat Exchanger and its commissioning was, in effect, Tyco's problem. I hold that view, notwithstanding Mr McDonald's concession in cross-examination that any failure to provide the Tyco specification to NDY was an oversight if not an error. 872 Earlier in these reasons I outlined the facts which disclosed that in July 1994 the EMAE/MEF drawings and related calculations for the Heat Exchanger had been presented to Leighton by Tyco and later forwarded to NDY by Leighton for comment. Given the comparative exclusion of NDY from the design process and the fact that the works had already been undertaken, it is not too much of a distortion of the facts to treat that submission of documents by Leighton to NDY more as a reflex action rather than one in keeping with the logic of the role of NDY in relation to the Heat Exchanger. 873 For those reasons, one should not be surprised at the terms of NDY's response to Leighton's request. The NDY endorsement on those documents are in similar form and, for convenience, the following is repeated, being that which appeared on drawing 94-1167, namely: "This drawing has been viewed only in respect to general arrangement. Design and system performance remains the responsibility of others Wormald Fire Systems. Norman Disney & Young Consulting Engineers" 874 That endorsement was signed by Mr Raddatz and dated 20 July 1994. While that endorsement, in my view, was a very clear statement of limitation upon the nature of the task undertaken by NDY, the use of a similar stamp on the calculations makes less sense. The way I have interpreted it has been to treat the stamp as a re-affirmation of the limited role accepted by NDY in reviewing those documents. To the extent that such a limitation could have any application to a set of calculations it could only mean that, when examining those calculations, that examination was limited to the extent to which they could impact on general arrangement and nothing else. 875 One might add that, given the dealings between Optus, Leighton and Tyco that had been going on virtually since December 1993 involving the possible need to introduce a heat exchanger: the production by Tyco in January 1994 of a draft specification relating to the Heat Exchanger: the entry into the Tyco, MEF, Lummus and EMAE subcontracts in May/June 1994 and the commencement of work under those contracts, including fabrication, NDY acted prudently in highlighting the limited role it could reasonably perform in July 1994. 876 The question arises whether from the standpoint of Leighton's obligations to Optus, in contract, that was good enough: whether Leighton should have sought earlier and far more extensive advice from NDY on this subject matter. On one view, that should be answered in the affirmative: particularly when there is taken into account the deep concern of Optus about the threat to the integrity of its equipment that could be posed by the introduction of a heat exchanger. 877 I have reached the conclusion that, while, with hindsight, all parties would have acted differently in relation to the supply of the Heat Exchanger, I think that the reality at the time requires a finding that Leighton (and I think Optus) relied heavily upon Tyco to get it right so far as compliance with the NDY specification was concerned and, in that respect, if getting it right meant the introduction of a heat exchanger, that would have to perform in accordance with that NDY specification and it would be to the cost of Tyco. 878 For those reasons I would not treat Leighton as in breach of its quality assurance obligations, or of its management commitments to Optus in the limited way in which it recruited NDY's services in relation to the introduction and supply of a heat exchanger by Tyco to enable it to comply with NDY's specification. 879 I have earlier dismissed contentions that Tyco was in breach of its quality assurance obligations in failing to provide expressly for internal inspections at either the initial inspection or after the first year of service. For much the same reasons, the Optus complaint against Leighton based on this matter also fails. 880 Looking at those acts which I found represented a breach of contract in the context of Leighton's tortious liability to Optus, the standard of care to be applied is that as I have examined in relation to Tyco's liability, probably, for identical reasons, arising out of the knowledge of the importance of protecting the property of Optus from contaminants, in the form of a fire suppressant and from moisture or any humidity. I have been left in no doubt, in the case of both Tyco and Leighton that each carried a particularly high standard of care to protect the Optus property from injury arising out of the release of contaminants, particularly moisture, into the environment surrounding Optus' equipment in the course of, or in relation to, the work being undertaken with the introduction of the Inergen system and, later, in conjunction with the Heat Exchanger. 881 It is not necessary on the facts of this case to hang one's hat on liability arising out of such a high standard of care, as the view I have formed is that applying a lower standard of care would not lead to a different conclusion when viewing the respective failures of Tyco and Leighton in relation to the presence of water in the Heat Exchanger bonnet on delivery to the Rosebery centre: accepting, as earlier indicated, that what was required of each of them differed markedly. 882 Optus also criticised Leighton's quality assurance performance in collating quality assurance records before certification of completion which did not include a "completed and signed-off [Tyco] inspection and test plan". No such completed plan had ever been presented to Leighton by Tyco, although I think the evidence established that such a plan had been completed and, presumably, held by Tyco. 883 Mr Peck agreed in cross-examination that he would have expected such a plan to from part of Leighton's quality assurance records. Be that as it may, it would have accorded no better protection for Optus, in so far as any failure to include the draining and drying activity as a hold point and a line activity in the MEF inspection and test plan had long since passed. Inclusion of the completed plan in the quality assurance records would have, in my view, added little to the events which led up to the incident. 884 The other contractual breaches relied upon by Optus, as summarised above in counsel's submissions, in my view, either do not represent breaches of Leighton's duty of care to Optus, or have no continuing relevance: an example of the latter class being the under-design of the partition plates. For reasons earlier given nothing turns upon this under-design in relation to the incident and its consequences. 885 Had I been of a different view, I would not have regarded such a contractual breach as sounding in a breach of Leighton's duty of care to Optus, mainly for two reasons: one is the entitlement of Leighton to rely upon assurances in the form of quality assurances and certifications of compliance by Tyco and second, the design of the Heat Exchanger was squarely within Tyco's court and as head contractor or construction manager or project manager, however one wishes to describe Leighton's position, it could not be expected in my view, to do a complete check of all of the design features of the Heat Exchanger, particularly when one has in mind the limitation in Leighton's expertise in such a field and the claimed expertise of Tyco in that area. That was a factor, which justified Leighton in placing great reliance upon certification of completion by Tyco. 886 In any event, for the reasons expressed in relation to the Tyco notice of completion and certificate, I do not regard the certification by Leighton, on 21 August 1995 as sounding in damages under the Trade Practices Act or for negligent mis-statement. 887 Leighton has conceded its liability to Networks in contract and in tort for damages suffered by Networks as a consequence of the incident I am also of the view that Leighton was guilty of negligence to Optus in the performance of its contractual obligations to the extent identified in these reasons. 888 While finding both Leighton and Tyco liable to Optus for the damages sustained in the incident I am of the view that Leighton is entitled to a full indemnity from Tyco under the LRMP Act and independent of any contractual indemnity. My reasons for so concluding are two-fold.

a) The negligence for which I have found Leighton liable was, essentially, one in failing to correct Tyco's negligent performance of the MEF subcontract and only in a limited respect in re-checking the MEF ITP. Normally, as evidenced by Mr Peck, that auditing evidence would not have involved such a re-checking. That arose out of i) the special circumstances of this case and ii) Tyco's submission of the draft specification to Leighton against which the MEF plan could be scrutinised, much in the manner evidenced by Mr McDonald.

b) The strong views which I have formed as to the very high level of responsibility that Tyco had in providing this Heat Exchanger, the serious deficiencies for which it was solely responsible in adapting a draft CIG standard form of specification for "heat exchangers", accentuated by its almost complete failure to ensure compliance with its specification through an appropriate inspection and test plan, a witnessing of important activities, none more important than the activity of completely draining and thoroughly drying the elements of the Heat Exchanger and carrying out an internal inspection of the Heat Exchanger prior to final closure. 889 In my view, Tyco must also shoulder responsibility for the under-design of the partition plates: although that is a defect that has had no consequences relevant to the incident in my view. 890 Optus' case against NDY relied upon the following matters as summarised in counsel's submissions: "2. The principal allegations of breaches of duty of care by NDY are: (a) negligent misrepresentations in the certificate dated 18 August 1995 (paras 72(h)(n) and 82 FAS);

(b) failure to ensure that the heat exchanger was free of water (para 72(a), (e),(g),(j),(l),(m), (n) FAS);

(c) failure to ensure suitable and accurate Operations and Maintenance Manual (para 72(k) FAS).

(d) failure to identify inadequate partitions plate thickness (para 72(a)-(c) FAS). 3. The Plaintiffs also claim that the representations in the NDY certificate were misleading and deceptive (paras 76-80 FAS) and were in contravention of section 52 Trade Practices Act ." 891 In viewing the existence of a duty of care of NDY to Optus I think the correct approach is that to be found in Voli v Inglewood Shire Council (1962 - 1963) 110 CLR 74 as explained in Hawkins v Clayton (1988) 164 CLR 539, and Bryan v Maloney (1994 - 1995) 182 CLR 609; see also Hill v Van Erp (1996 -1997) 188 CLR 159. I do not understand there to be any dispute between the parties to that approach. Although in the cases cited consideration was given to the question whether contractual terms may limit the liability of the contracting party in tort to third parties, that is a question that does not have to be considered in this case. 892 Optus' case in negligence against NDY relied upon NDY's obligations which were said to arise out of the terms of the 1994 consultant agreement: leaving aside for the moment the implications of NDY's certificate dated 18 August 1995. There is some difficulty in that approach by Optus in that it is not axiomatic that a breach by NDY of contractual obligations to Leighton equates to a breach of NDY's duty of care to Optus. It is necessary to examine the alleged contractual breach in terms of the nature of the relationship between NDY and Optus. 893 In this case, the task is not particularly difficult, given the knowledge of NDY of the relationship between Leighton and Optus and the importance to Optus of ensuring that its equipment was not exposed to unacceptable risk from contamination associated with the installation of the Inergen system and the Heat Exchanger. The approach I have adopted may be shortly stated as follows: a) NDY owed a duty of care to Optus in the performance of its consultancy services to perform those services skilfully so as not to cause injury to Optus' property. That is not disputed. However, in the determination of the nature or content of that duty regard should be had to the terms of NDY's retainer to ascertain, precisely, what task was undertaken by NDY ( Voli at 84, 85; Hawkins at 544, 552; Bryan at 620, 622 and 624; Hill at 166, 182 and 196). b) The standard of care should be measured in the context of NDY's knowledge of the danger of contamination of Optus' equipment through a malfunction of the Inergen system and in accordance with Burnie . I think that calls for a comparatively high standard of care to be exercised by NDY. 894 Save for NDY's conduct in providing the 18 August 1995 certificate of compliance, I am satisfied that NDY was neither in breach of any contractual or tortious duty it owed to Leighton, nor in breach of its duty of care to Optus. 895 The position of NDY in respect of that certificate presents a more difficult question. 896 I think one should approach the role of NDY as a consultant (so far as the Inergen system is concerned) in relation to a performance contract in which a specialist in the field was providing its own system, compendiously referred to as the "INERGEN IG-52.40.08 Total Flooding System". 897 In examining the liability of Leighton and Tyco to Optus it has not been necessary to give particularly detailed consideration to the construction of the respective contracts under which Leighton and Tyco operated. The position with NDY is different, partly because of the role in which it was cast and partly, and mainly, because of the significant doubt that existed in these proceedings as to the scope of NDY's contractual obligations, particularly in regard to the Heat Exchanger. 898 Recounting the contractual position so far as it was committed to writing, one starts with a consultancy agreement between NDY and Leighton of 13 March 1992 which related to the "Central Office Fit-out …..[at] Campbellfield Victoria" and at "Central Office, NOC + OSS Fit-out ……[at] Epicentre Rosebery". In the light of subsequent contractual arrangements with Leighton, this consultancy agreement could be described as being project specific. 899 A director of NDY, Mr Denis O'Brien, who was also its deputy chief executive officer, described the method of allocation of projects under contract by NDY as follows: "6. NDY allocates a unique job number for a particular site. It is allocated by street address. If NDY has previously worked on particular (sic) site for a different client, the original reference number will be used and a suffix number is allocated to the site number to indicate it is a different project. For the Rosebery site where the Sydney Technical Centre for Optus was located, NDY allocated job no. 23996.

7. NDY had undertaken 59 separate projects at the Rosebery site. Some of the projects undertaken were comparatively small, varied in scope and were generally required to be expediently carried out. Leightons implemented a system whereby a general agreement was put in place for a period of time under which these works were to be performed and this was known as the Miscellaneous Works Contract." 900 It was Mr O'Brien's evidence that, to generally cover this miscellany of works, NDY entered into a "MISCELLANEOUS WORKS" consultancy agreement (the 1993 consultant agreement) in respect of such works at sites which might be "NOTIFIED FROM TIME TO TIME". The consultancy fee was to be agreed and the information to be provided by Leighton to NDY was described simply as "VARIOUS BRIEFS AS PROVIDED BY OPTUS COMMUNICATIONS FROM TIME TO TIME". It was in a form similar in terms to the 13 March 1992 agreement, certainly in relation to the printed terms. There were some significant differences. 901 Schedule 1, dealing with dates of completion of the consultant's services, was ruled out as not applicable in the 1993 document. Schedule 2, relating to the documents to be provided by the consultants, differed in that the 1992 agreement identified documents by reference to annexure 'E' of the agreement, while the 1993 document simply noted that that was to be agreed on a project basis. Similarly, the second section of that schedule was more specific in relation to the documents to be provided by Leighton under the 1992 agreement whereas, in the 1993 document, that section was ruled out, presumably as not applicable. Schedule 3 in the 1992 document, relating to costs of variations, set out in some detail NDY's entitlements whereas in the 1993 document the provision for those details was ruled out and the note made that it was "TO BE AGREED ON PROJECT BY PROJECT BASIS". 902 Annexure C to the conditions specified what documents would be included in the Brief. In the 1992 document that Brief is spelt out by reference to particular briefs. Whereas in the 1993 document that section is struck out, as is annexure 'D', dealing with the required standards for the project. That was also deleted as not applicable in the 1992 document. 903 Each had an Annexure 'E' describing consultant's services divided into five phases, the headings of which and the printed portions of which were identical with the Annexure E to the 1994 consultant agreement, earlier referred to in these reasons. There followed the 1994 consultant agreement also related to miscellaneous building works at Optus sites Australia wide. There is a great similarity between the 1993 consultant agreement and the 1994 agreement. The provision for the consultant's fees in each case in the printed form was geared to the five phases of services recognised in Annexure E. In the 1993 agreement the fee was noted as one to be agreed without any reference to the various phases of work. In the 1994 agreement the reference to the five phases was noted as not applicable and the fee was noted as a schedule of rates: suggestive of indeterminate services to be notified to NDY by Leighton from time to time. This was in keeping with the nature of the information to be provided by Leighton which was described as "BRIEFING INFORMATION AS PARTICULAR TO EACH PROJECT". I am not aware of any differences in the 27 printed conditions in each agreement. Schedule 1, dealing with completion of the consultant services, had been struck out of the 1993 agreement, while, in the 1994 agreement, it was noted in respect of each the five phases as follows: "As per Annexure E 31/12/94" 904 As earlier noted in these reasons, Annexure E was concerned with the five phases, namely, concept development, design development, documentation, procurement and construction, and, finally, the practical completion and final completion phase. Phase 1 has been struck out, phase 2 along side the phase heading has the words "As specified for project at Brief". A similar heading appears in each of the following three phases, except, instead of a reference to the matter being specified "at Brief", it refers to matters specified "in Brief". 905 On the face of it, the 1994 consultant agreement was a one year agreement and was intended to supersede the 1993 agreement. It may be noted that the 1994 agreement was erroneously expressed to be with Norman Disney Young (NSW) Pty Ltd. The true contracting party was NDY. 906 It is instructive to look at the statement of works agreement in the context of the two miscellaneous works consultant agreements of 1993 and 1994. It will be recalled that the letter of 5 August 1992 from NDY to Leighton was a scope of works letter on a fee basis of 5.5 per cent of the actual contract value for the Inergen system, should Optus proceed with that project. The scope of works addressed the preparation of drawings and a specification relating to the modifications to the existing fire suppressant system: interfaces between various contractors: a "review of [Tyco] workshop drawings….. installation manuals: site installation testing and commissioning". A separate scope of works was identified in relation to mechanical services. 907 In the letter of NDY to Leighton of 26 November 1992 the fee based on value was dropped and a lump sum fee of $24,000.00 was substituted for it, noting that it had been "CALCULATED ON THE BASE INERGEN SYSTEM COST…..". A contract administration fee was based upon 33 per cent of 5.5 per cent of the final contract value. 908 Consequently, at 1994 at the time of the letting of the Tyco subcontract, NDY had entered into a series of agreements which, in the case of the 1992 consultant agreement and the statement of works agreement related to specific projects, whereas the 1993 and 1994 consultant agreements were in respect of unstated miscellaneous works relating to Optus sites throughout Australia. Whilst the fee under the 1993 consultant agreement was one "TO BE AGREED", in the case of the 1994 agreement, it was on a "SCHEDULE OF RATES" basis: a fee structure that did not apply to the fees struck in the statement of works agreement. The 1993 and 1994 consultant agreements in relation to miscellaneous works have the air of an annual consultancy agreement about them, although the 1994 agreement made no reference to the earlier agreement. 909 It is clear, I think, that the parties acted on the basis that the statement of works agreement governed the terms of NDY's services in relation to the Inergen system, in that a memo for the fixed fee that was referred to in it was submitted by NDY on 22 December 1992 and paid for by Leighton in March 1993. 910 Moreover, immediately preceding NDY's scope of works letter of 5 August 1992, it had received a facsimile from Tyco, attaching a specification which was "for the design, supply, installation, testing, commissioning and maintenance of" the Inergen system. I think it is reasonable to treat NDY's 5 August 1992 proposal in the context of the Inergen system being designed and provided by Tyco. That is the way I understand the description of the scope of works in NDY's 5 August letter, and certainly not involving NDY in the design of the Inergen system. It is apparent that the scope of works contemplated did not embrace a heat exchanger, but related to the Inergen system: something in the nature of a proprietary product of Tyco. 911 Much of the evidence directed against NDY proceeded on an assumption that all of its work in relation to the Inergen system and the Heat Exchanger, was governed by the 1994 consultant agreement and, in particular, that the services required of NDY were to be gleaned from Annexure E. In my view, such an approach lacks reality and has little, or no foundation in law. 912 In my view, it is essential to distinguish between the Inergen system and the Heat Exchanger in considering NDY's contractual position. When it comes to the Inergen system itself, clearly, I think, the statement of works agreement identified what may be described as both the 'project' and the 'brief' for the purposes of the consultant agreements of 1993 and 1994. That approach still needs to explain the different fee structures under those agreements from the fee structure in the statements of works agreement. However, in order to ascertain what, if any, level of services were required of NDY in relation to the Heat Exchanger, it is necessary to look outside of the statement of works agreement. The starting point in understanding any obligation of NDY under the 1993 or 1994 consultant agreement must be found in identifying the 'project' for the purposes of these agreements and identifying the 'brief', as that expression is used in the consultancy agreements. 913 Unfortunately, that task is more easily expressed than carried out. 'Brief' is defined to mean the "documents set out in or referred to in Annexure C which describes the nature, extent, requirements, quality, cost and timing of the project". For the purposes of this exercise that leads the construer into a blind alley, as annexure C is struck from the agreement. So, within the document, one simply has no idea what the relevant "Brief" is. Identification of the services by recourse to the definition section is no more instructive. It simply defines the services to mean "the services to be provided, obligations to be fulfilled and all things to be supplied or provided by the Consultant under the terms of the Agreement". 914 Turning to Cl 8, encouragingly entitled "CONSULTANTS OBLIGATIONS", one is informed that the "Consultant's Services shall comply with the requirements of Annexure C Brief…… [Leighton's] Standards for the Project as set out in Annexure D, and the requirements of Annexure E: Consultants' Services". The construer knows that there is no Annexure C, there is no Brief identified in the agreement and the construer should not be disappointed when seeking instruction from Annexure D to find that there is no Annexure D either. It has been struck out of the agreement. So that leaves Annexure E from which one finds phase one has been excised and each of the remaining four phases are accompanied by an enigmatic caption "As specified for project at Brief", or "in Brief" as the case may be. 915 NDY, in the face of this obscurity in the documents, sought particulars from Leighton's solicitors on 8 June 2001 and received the following response which is repeated for ease of reference: "We refer to your facsimile dated 8 June 2001 concerning particulars of the brief.

Without abandoning the position that particulars of the brief, having regard to the evidence which has been given are otiose, the brief, as the term is used in paragraph 24.3 of the further amended cross claim comprises:- 1. The NDY fee proposal dated 5 August 1992 (exhibit 1.018) and facsimile from Steve Laffer of NDY to Phil McDonald of Leightons dated 26 November 1992 (exhibit 1.040)as stated by Mr Tribbia in evidence (Tp. 3015.30) and in addition,

2. The documents contained in the annexed table entitled "Transmittals Leighton to NDY" together with the documents attached to the documents referred to in the table.

3. Although our client maintains that the documentary brief was supplemented by oral instructions from time to time, our client is unable to provide particulars of those conversations having regard to the lapse of time since the conversations took place.

In any event we will be submitting, based upon the evidence of Messers Tribbia and Raddatz, that, independent of the actual brief from our client, your client assumed obligations to advise our client arising out of your client's consideration of documents forwarded to it." 916 The annexure to that facsimile comprised some 67 communications passing between Leighton and NDY, sometimes in the form of a copy of a communication from Tyco, sometimes internal documents from Leighton that were sent on to NDY, some of which, at the time of the provision of the particulars, were in evidence and some of which were not. None, when viewed separately, immediately struck me as satisfying the notion of 'project' or 'brief'. The same may be said of the numerous communications viewed collectively. 917 What I think may be extracted from that facsimile is that Leighton itself had significant difficulty in coming to terms with just what obligations had been cast upon NDY. Further, I think the miscellaneous nature of the subject matter of the numerous communications, suggests and, I think it is the case, so far as it concerned the Heat Exchanger, that NDY was required to do no more, nor less, than what it was specifically requested to do by Leighton on a schedule of rates basis of remuneration. 918 It would be completely unreasonable, unrealistic, not to say completely unfair to stamp upon NDY's obligations in respect of its compliance with Leighton's instructions, all of the services laid down in Annexure E of the 1994 consultant agreement. To take an example: NDY was requested to take no real part in the design of the Heat Exchanger, save mainly for the submission to it of the specification amendment requiring compliance with AS1210 and of the MEF working drawings and related calculations. Another illustration may be seen in the non-participation of NDY in site meetings or construction meetings involving the Heat Exchanger. For present purposes, the closest NDY got to design of the Heat Exchanger was in the amendment to the specification, that is the NDY specification, which was furnished by Leighton for NDY's comment and simply required compliance with AS 1210. 919 For those reasons phase 2, described as the "Design Development" phase, has no relevant application to the Heat Exchanger. Phase 3, referred to as the "Documentation Phase", in my view has no application of any relevance to the Heat Exchanger. Phase 4, also in my view, had little application to the Heat Exchanger. One only has to select at random from this phase of procurement and construction to appreciate this. Item (ix) calls upon NDY to "Prepare additional designs and all documentation necessary for construction of authorised design changes, variations or the correction of errors or deficiencies in work executed by trade contractors." Item (x) required NDY to: "Assist in the revision of detailed cost plans and programmes, adjust documentation as required to maintain Project targets." 920 These concepts of services are foreign, in my view, to the role NDY was called upon to play in relation to the Heat Exchanger. Similarly, the final phase, Phase 5, "Practical Completion and Final Completion" (as qualified by whatever "As specified in Project in Brief" means) is in no different category, in my view, in the sense that it is speaking of a level of services that had no automatic application to anything NDY was obliged to perform. It envisaged the preparation of a detailed program for all five phases of consultant activities: the checking of all as built drawings: the checking of equipment to "provide a complete accurate and indexed set of as-built documents": checking operation and maintenance manuals "for those elements of the Project for the which the Consultant prepared construction documentation in accordance with Project requirements……": obtaining guarantees, warranties and certificates from manufacturers, suppliers and fabricators: the verification of the commissioning and testing requirements of the project: inspecting the project, to ensure all equipment installation had been compliant with project services requirements and so on. 921 That level of services is speaking of another world in which, so far as the Heat Exchanger was concerned, NDY was not invited to enter, except in the most specific ways to which reference is made in these reasons. The point to be made, I think, is that it is a completely erroneous exercise to view NDY's role as a consultant in relation to the Heat Exchanger as one calling upon NDY to provide all of the services that are set out in the 1994 consultant agreement. That is not the way it was intended to work and Leighton may not be heard to suggest otherwise. 922 What I think needs to be done in examining NDY's position is to look at particular instructions, so far as they are relevant, in order to determine whether those instructions were satisfied by reasonable conduct on the part of NDY having regard to normal professional standards. In that exercise there is little to be gained from resort to the terms of the 1994 consultant agreement. Even in the case of the Inergen system, it would be inappropriate to equate NDY's obligations with the obligations set out in the 1994 consultant agreement. In my view, any application of the terms of that agreement would have to be read subject to the statement of works agreement and NDY's 'Brief'. 923 Returning to the claims made against NDY by Optus: the burden of the evidence against NDY in Optus' case is to be found in that of Mr Wyles. In summary form Mr Wyles gave the following opinion evidence as to the failures of NDY to satisfy professional standards in the performance of their engineering services to Leighton as follows: "4. I disagree with the conclusions of Mr Anderson and I am of the opinion that NDY failed to act in accordance with the standards of ordinary, competent consulting engineers in the performance of their engineering services in the following respects: (a) the failure to require notification of the hydrostatic testing, to attend the hydrostatic testing or inquire how the testing had been performed;

(b) by accepting without question the manifestly inadequate WorkCover hydrostatic test certificate,

(c) by failing to take steps to check that an appropriate procedure for removal and drying of test water was planned or undertaken during the commissioning and test procedure sign off,

(d) by not requiring compliance with the appropriate Australian Standard after installation of the heat exchanger;

(e) by failing to properly review the MEF Drawing and calculations relating to the heat exchanger;

(f) by failing to identify the omission of a heat exchanger thermal test procedure and a pipe system purge procedure in the Tyco Work Method Statement;

(g) providing certification when NDY had not taken the proper ancillary steps to be able to know whether the system did in fact comply with the Standards, specification and the requirements of Optus.

(h) failing to ensure that the Operation and Maintenance Manual included appropriate information, including referral to the relevant Australian Standard, applicable to maintenance of the heat exchanger. 924 It is apparent from Mr Wyles' statement of evidence in chief of 5 April 2000 that he proceeded on the premise that the 1994 consultant agreement applied to NDY's obligations in relation to the Heat Exchanger. After a review of the provisions of that agreement, which included a detailed review of Annexure E, (without, I should mention, any reference to the caption relating to each phase in Annexure E calling for information to be provided "As specified for Project in Brief", Mr Wyles expressed the following view: "14. As I understand those terms, NDY was to have a high level of input and provide technical safeguards and assurance to Leighton against such issues as possible error, lack of judgment, omission or malpractice by the subcontractor appointed under the terms of documentation provided by NDY. So far as I am aware, no qualifications to the 9 February 1994 Consultant Agreement were negotiated." 925 I am unable to accept the validity of that conclusion in relation to NDY's role concerning the Heat Exchanger. I have earlier expressed very favourable views about the value of Mr Wyles' experience and qualifications. However, I think there is a significant difficulty in accepting his conclusions, given his unqualified application of the terms of the 1994 consultant agreement to the level of services, which in his opinion, NDY was called upon to deliver and their adoption by Mr Wyles as the measure of NDY's alleged failure to comply with appropriate professional standards. 926 In a supplementary statement of 3 April 2001, Mr Wyles expressed the following alternative approach: "2. I hold the same views as to the deficiences (sic) of NDY's work as summarised in paragraph 4 of my statement, if it be assumed that NDY's engagement was pursuant to the letter from NDY dated 5 August 1992 referred to in paragraph 7 of my statement. I do so because of: (a) the letter dated 5 August 1992 describes services which I would regard as usual services of a consulting engineer on a fire systems project such as the Inergen system, and includes such services as: s review of workshop drawings s review of installation manuals s oversee the site installation s oversee testing and commissioning (b) the work done by NDY in reviewing the Operations and Maintenance Manual as reflected in the following documents: s memorandum from NDY to Leighton dated 19 April 1994, Ex 1.401 s Leighton Site Instruction to NDY dated 1 September 1994,Ex 1.441 s NDY memorandum to Leighton dated 2 September 1994, Ex 1.441" 927 Again, there is some difficulty in applying that statement of works agreement to the level of services required of NDY in relation to the Heat Exchanger. Further, in the light of the extensive reliance by Mr Wyles in his first statement upon the terms of the 1994 consultant agreement, in particular annexure E, I think this transition to the statement of works agreement is much more complicated than might appear from the supplementary statement of Mr Wyles. 928 I think there is some utility in re-stating NDY's involvement in relation to the Heat Exchanger and expanding upon it to some extent. The performance specification for the Inergen system together with its addendum number one was the work of NDY. Following the disclosure by Tyco to Leighton on 9 September 1993 that a temperature drop of 4C might occur on discharge of the Inergen, NDY was consulted by Leighton and reported on 24 September 1993 that the anticipated temperature variation exceeded Optus' requirements. NDY attended a meeting of 27 September 1993 in which Tyco was required to produce data showing the ability of the Inergen system to perform within the NDY specification requirements. 929 In October NDY was involved in further discussions concerning Tyco's obligation to demonstrate capacity to comply with the NDY specification. I think it is of some significance that, after NDY's provision of certain data to Leighton on 2 November 1993, further discussions concerning the ability of the Inergen system to perform only involved Tyco, Leighton and Optus. These discussions continued throughout the rest of November and December into January 1994. It was in that period that Tyco produced the draft specification for the Heat Exchanger, which did not call for involvement of NDY. 930 Design data for such a heat exchanger remained the province of Tyco with input from Mr Dunn in conjunction with Tyco's Mr Scott and Mr Hansen. Further communications concerning this matter in February did not involve NDY and were limited to Optus, Leighton and Tyco. 931 The first site meeting took place on 18 March 1994 and NDY was neither a party to this construction meeting, nor subsequent construction meetings, nor was it on the distribution list of such minutes. I regard that history as demonstrating a virtual absence of involvement by NDY in the phases described as "DESIGN, DEVELOPMENT PHASE……. DOCUMENT PHASE…….. [and] PROCUREMENT AND CONSTRUCTION PHASE" so far as it concerned any inclusion of a heat exchanger in conjunction with the Inergen system. 932 In contrast with that role, while NDY was not part of the construction meetings concerning the Inergen system, NDY was retained by Leighton for advice on specific aspects of the Inergen system. For example, on 30 March 1994 NDY was requested by Leighton to advise on design aspects of threaded pipe fittings as presented by Tyco. On 6 April 1994, NDY was requested by Leighton to provide advice in relation to quality assurance matters concerning certain cylinders and valves, as put forward by Tyco. I draw from these and other similar communications that NDY was not called upon by Leighton to involve itself in consultancy services, other than in respect of specific matters presented to NDY from time to time by Leighton. 933 A significant meeting took place on 7 April 1994 in the nature of a construction meeting attended by Optus, Tyco and Leighton, the distribution of the minutes of that meeting did not include NDY. This was a meeting which I have commented upon extensively earlier in these reasons. Notable amongst matters covered was the statement by Mr Bayley that the "thought of water being introduced to the risk areas [was] totally abhorrent to Optus": this in the context of the introduction of a heat exchanger. Probably of equal moment is the statement attributed to Tyco's Mr Lee at that meeting at which he claimed on behalf of Tyco expertise in the area of heat exchangers: a statement which is repeated for ease of reference as follows: "2.4 Barry Lee (WFS) admitted that the heat exchanger is Wormald's choice to comply with the spirit of the specification. Barry further stated that this principle (of the heat exchanger) is not new to Wormald Fire Systems. Both overseas and within this country Wormald have fitted similar heat exchangers to CO2 systems. Both the risk of the heat exchanger and its running costs should be minimal to Optus." 934 From Optus' involvement in direct negotiations with Tyco which did not involve NDY, I think Optus should be treated as being, to some extent, aware of NDY's limited role in relation to the Inergen system and in particular in relation to the Heat Exchanger. 935 As earlier noted in these reasons, the Tyco specification was not submitted to NDY, the strongest of indications that NDY was not involved in the design phase of the Heat Exchanger. I think it is also of some relevance to note that the Tyco letter to Leighton of 4 February 1994, which among other things provided "advice re: the three (3) outstanding issues requiring resolution for the project to proceed past its [then] hold point", which related to a proposed "Indemnity", the proposed "Sequence of Operation" and the "Proposal for Heat Exchanger", was forwarded to NDY by Leighton in mid April 1994. That also is strongly indicative of NDY's limited consultancy role. 936 Then, on 21 April 1994 Leighton forwarded to NDY the proposed amendment to the NDY specification for the Inergen system which stipulated that any heat exchanger incorporated in the Inergen system was required to comply with AS1210-89. To the extent that NDY might be seen to have involvement in the design phase or document phase relating to the Inergen system, particularly the Heat Exchanger, that involvement was extremely limited. 937 In May 1994 the Tyco subcontract was let without any involvement of NDY. It was not until 11 July 1994 that Leighton involved NDY in the MEF drawings and related calculations for the Heat Exchanger. NDY had been requested earlier that month by Leighton to comment on the reasonableness of a variation claimed by Tyco under the Tyco subcontract: a request which underlined the role of NDY to respond to specific requests for advice as presented to it from time to time by Leighton. 938 It was contended by Optus as against Leighton, that Leighton was in breach of its duty to Optus in failing to engage NDY in consultative services in relation to the Tyco specification for the Heat Exchanger. I have rejected that contention and, in doing so, concluding that Optus was aware, generally, of NDY's limited role as consultant in relation to the Inergen system and the Heat Exchanger. 939 Leighton's submission to NDY of the MEF drawings and related data on 11 July 1994 should, in my view, be looked at in the context of the responsibility which Tyco carried in relation to the provision and design of the Heat Exchanger to enable it to meet the NDY specification for temperature control of the Inergen gas. 940 The express terms of NDY's review of the MEF material clearly disclosed that it had not involved itself in a design review and was only concerned with general arrangement matters. That must have been obvious to Leighton and it is equally apparent that Leighton did not draw issue with the limited response by NDY in the nature of that review of the drawings and related data. I am firmly of the view that, in so responding, NDY was not in breach of any contractual obligations it may have had to Leighton. I am also of the view that NDY was not in breach of a duty of care to Optus in so reviewing that material for its general arrangement content, having regard to its limited role as a consultant in relation to the Heat Exchanger. 941 Mr McDonald's evidence was to the effect that he noted the nature of the NDY endorsement on this material and understood that NDY's review had been limited. His evidence on this subject was as follows: Q. When you read that you understood, did you not, that NDY had made only a limited review of the calculations in the bulk of the document? A. Yes. Q. You understood at the time that when a consultant to Leighton in the position of NDY used the expression "in respect of general arrangement only" that referred to the way a particular component might fit into the whole system? A. That's the literal interpretation of that stamp which I would hold, but I still hold, also, that under the general responsibilities in, again, the general conditions of the consultancy agreement that they are to satisfy themselves that their level of review that the item being provided is capable of meeting the design intent. And, in saying that, the level of investigation that they have done, from what you have just explained, I said I agree with. (T2534:55 - T2535:17) 942 That evidence is another example, I think, of the frankness of Mr McDonald in giving evidence, although I am unable to accept that it was reasonable to read into the NDY endorsement the "general conditions of the consultancy agreement". 943 I am satisfied that Leighton looked to Tyco to discharge its responsibility in providing a system that satisfied the NDY performance specification and looked to NDY to provide consultancy services in relation to the Heat Exchanger only in a very limited respect. I am also satisfied that NDY complied with Leighton's requests in that respect from time to time. In keeping with what I have perceived to be NDY's limited role in relation to the Inergen system and, in particular, the Heat Exchanger, NDY was not informed of the completion of fabrication of the Heat Exchanger, nor of the holding of the hydrostatic tests. 944 In view of the extensive submissions and the large body of evidence adduced in relation to the conduct and liability of NDY I feel obliged to give more particular attention to those issues: more than I believe they deserve. As earlier expressed in these reasons I do not regard the Leighton operations and maintenance manual as deficient in its failure to refer to AS3788. It follows that I reject criticism of NDY's conduct in failing to draw attention to that alleged omission in the manual. 945 Further, to the extent that it may be established, contrary to my views on the matter, that NDY should have detected that the partition plates were under- designed, in my view nothing flows from any such failure. It has not been established to my satisfaction that the escape of the contaminant at the time of the incident into Zone 1 was related to that under-design. The huge increase in pressure, well above design pressure due to the water blockage in the Heat Exchanger was estimated to have been anything between 10 and 15 bars. That may be contrasted with the discharge test into Zone 2 on July 1995 without rupture of the partition plates. 946 So far as it is alleged that NDY failed in its obligations to vet quality assurance programs: for practical purposes, NDY was not called upon to take part in that phase of development of the Heat Exchanger. Quality assurance programs were not submitted to NDY by Leighton in relation to the Inergen system, save as mentioned in these reasons. 947 Even if my views are wrong as to the consequence of the very limited role of NDY in quality assurance, NDY should not be held responsible, in my view, for Tyco's failure to avail itself of the power of inspection of the "internals" of the Heat Exchanger before "final closure" and to witness hydrostatic testing as contemplated by Cl 11 of the Tyco specification. Furthermore, I think it is fanciful to suggest that NDY was delinquent in discharging any quality assurance obligations in relation to the Heat Exchanger. There is no way that a consultant in NDY's position should have picked up the omission from the MEF inspection and test plan of the Cl 12 activity as laid down in the Tyco specification. The main problem area concerning NDY lies in its certification of 18 August 1995. 948 NDY's conduct as consultant in relation to the Inergen system was mainly evidenced through Mr Tribbia. Mr Tribbia held a degree in Mechanical Engineering from Sydney University and a Masters in Engineering Management from the University of Technology. He was the Fire Services Manager of NDY and, from the time of his graduation as an engineer, his employment involved the practice of engineering in relation to fire services. I found him to be an impressive expert with a very good understanding of his discipline. He was careful, but direct and prompt in his responses to cross-examination. While he showed an awareness of the issues, he displayed no bias of any kind to me during the course of his evidence. 949 His credibility has been attacked in final submissions on behalf of Tyco to the point that I have been invited to conclude that his evidence in one respect was the result of recent invention. That was an extremely serious accusation that was not squarely put to Mr Tribbia and was one which, in my view, was not justified. 950 It arose out of the fact that Mr Tribbia gave four statements spanning a period from March 1999 to 21 May 2001, which formed the preponderance of his evidence in chief. In his first statement he explained the circumstances in which he provided the NDY certificate dated 18 August 1995 as including the WorkCover certificates covering the hydrostatic testing. In his oral evidence in chief he corrected that statement and stated that the only certificate he had sighted was the certificate of inspection by Mr Bruce of 23 August 1994. That matter was taken up in the first questions put to Mr Tribbia in cross-examination as follows: MR HUTLEY: Q. I would just like to ask you a few questions about an answer you gave to my learned friend in your evidence-in-chief. On 29 March 1999, Mr Tribbia, you signed your first statement in these proceedings; is that correct? A. Correct. Q. Can his Honour take it that the process which led you to sign that statement was that you attended upon the solicitors for NDY and were taken through various documents and asked about your knowledge of those documents. A. That's correct. Q. Can his Honour take it that a statement was then prepared for you? A. That's correct. Q. And then you studied the statement with some care; correct? A. Yes. Q. Where it referred to documents, you cross-referenced the statement to the documents? A. Yes. Q. And satisfied yourself that, where your statement referred to a document, that was document [sic] that you wanted to refer to? A. In general, yes. Q. In general or invariably? A. Yes. Q. Invariably? A. Yes. Q. Can his Honour take it that your recollection of these events on 29 March 1999 was somewhat better than your recollection as it is today in early June 2001? A. I don't believe that's the case. Q. I see. So it's the same - you don't feel that your recollection of events has waned over the passage of years at all? A. No. Q. Could the witness be shown exhibit 1.392? Do you see 1.392? A. Yes. Q. It is a two-page document. Do you see that? A. Yes. Q. That was a document which was shown to you at about the time of the preparation of your statement in March 1999; correct? A. Yes. Q. Is it fair to say that at that time you had no doubt that you'd seen those documents during the course of the performance of your duties - yes or no? A. At that time the notation of a document as being called a hydrostatic test certificate or a final certificate of inspection - the importance of the difference between the two was not recognised by myself. Q. Just address my question. Did you think you'd seen those documents when you signed your statement of 29 March 1999? A. I recollect that I saw the certificate, the final inspection certificate. I do not recall seeing the hydrostatic test certificate during the course of the project, although that my statement does lead - could lead people to understand that I had. Q. Please, address my question and answer it? You were shown those documents -- A. Yes. Q. -- at the time you prepared your statement; correct? A. Yes. Q. And you told your solicitors, the solicitors for NDY, you'd seen them; correct? A. That's the implication, yes. Q. That's the fact, isn't it? HIS HONOUR: Q. Did you consciously intend to say that, that you'd -- A. Yes, yes. Q. That you'd seen the hydrostatic certificates? A. Your Honour, I was shown these documents. I believe that they were actually the WorkCover final inspection certificates and I took these to be those. MR HUTLEY: Q. Do you tell his Honour you may have seen those documents during the course of the performance of your duties, but you don't recall? A. I do not recall seeing these documents during the course of my duties. Q. You may have but you are not able to assist his Honour? A. I do not recall seeing them. Q. You don't deny you haven't seen them? I want to get this clear. Do you say you've never seen these documents prior to during the course of the performance of your duties or not? A. I do not believe that I've seen them before. (T2977:9 - T2979:15) 951 At that point counsel turned to another topic. 952 Counsel returned to that subject on the following day in cross-examination as appears from the following: Q. And in your first statement you said, at paragraph 114 that you reviewed during the course of the project relevant quality assurance certification including the WorkCover certificates referred to in paragraph 36. Do you see that? A. Correct. Q. And you've corrected that, haven't you? A. That's correct. Q. And you say that you didn't review the WorkCover certificates; correct? A. That's correct. Q. The WorkCover certificates are produced upon the testing -- MR ROBB: Which WorkCover certificates? MR HUTLEY: Q. Of the hydrostatic tests? A. Correct. Q. And we will just make sure so there is no doubt between us. If you could have exhibit 1.392 before you. You knew, did you not, from early in your involvement, that there would be a heat exchanger - you have agreed; correct? A. Correct. Q. You knew it would be tested by WorkCover; correct? A. No, it would be certified by WorkCover. Q. Please. You knew there would be hydrostatic tests? A. That's correct. Q. And you knew they'd be overseen by WorkCover? A. That's correct. Q. So you knew there would be hydrostatic tests overseen by WorkCover; correct? A. That's correct. Q. You knew there would be tests of the heat exchanger; correct? A. Correct. Q. And you knew the heat exchanger was part of the project; correct? A. Correct. Q. And you knew, I suggest to you, that part of your brief was to oversee the testing of the project; correct? A. Correct. Q. And you knew that it was part of your brief to oversee the testing of the heat exchanger; correct? A. Incorrect. Q. You see I suggest to you, you knew it was part of your responsibility to look at these certificates; correct? A. Incorrect. Q. And I suggest to you that what you wrote in your first statement was correct, and you did look at those certificates? A. That's incorrect. Q. You knew WorkCover would produce certificates about its tests, didn't you? A. I knew that WorkCover would provide certification - a certification document. (T3019:41 - T3021:2) 953 That was how the matter was left. In Mr Tribbia's third statement of 30 April 2001 he gave the following evidence: "10. Prior to issuing NDY's certificate of 18 August 1995 (exhibit 1.585) I had read:

(a) Wormald's report on discharge commission testing (a copy of which is part of exhibit 1.579, commencing from page 3555);

(b) a WorkCover certificate in relation to the heat exchanger (exhibit 1.409); and

(c) Wormald Fire Systems installation certificate, being a document which was shown to me at a meeting held 21 August 1995. That document was in the form of exhibit 1.574. I am unable to now recall whether the handwriting appearing below the reference P3539 was on that document when I saw it at that meeting." 954 The WorkCover certificate there referred to was Mr Bruce's certificate. It will be noted that while not specifically referring to the evidence in his earlier statement, Mr Tribbia made no reference to the hydrostatic test certificates of WorkCover in his 30 April 2001 statement. Clearly, it operated as a correction of his earlier miss-statement as to the documents sighted by him prior to the issue of the NDY certificate dated 18 August 1995. There was absolutely nothing in the material revealed in cross-examination of Mr Tribbia on this matter which, in my view, could reasonably be justified as attributing to him a deliberate falsehood. That submission should not have been made. 955 On one view of the issues, it was against interest of NDY to assert that it had not sighted the WorkCover certificates of August 1994 prior to providing its own certification of 18 August 1995: not overlooking the allegation that a close reading of the certified hydrostatic test would have revealed only one test had been carried out on each the shell and tube sides. 956 Mr Tribbia's evidence in chief consisted, essentially, of a chronology of NDY's involvement in the Inergen system. It was his evidence that an operation and maintenance manual was in existence for the Rosebery centre prior to the Tyco subcontract and that the fire services section needed to be updated to refer to the Inergen system. In this context he received a communication from Leighton on 17 August 1994 to comment on such a proposed revision, which he did on 19 August 1994. 957 On 1 September 1994 Mr Tribbia received an amended draft manual from Leighton with a request that he review it, which he did the following day with the comment that the manual provided by Tyco appeared to "cover the Inergen system well". 958 On 15 May 1995 Tyco sent direct to NDY a copy of the Inergen training manual which NDY approved, in principle, on 19 May 1995 with the further note that the document had been viewed only in respect to "general arrangement and conformity with contract documents. Design and system performance [remained] the responsibility of others": another example of the dichotomy between professional services as contemplated by Annexure E of the 1994 consultant agreement and the limited consultancy role of NDY. 959 On the same date, NDY commented on the "Shift Operators Training Manual" by facsimile to both Tyco and Leighton. On 15 June 1995 NDY forwarded to Leighton a memorandum enclosing marked up copies of the operation and maintenance manual of the Inergen system. On 29 June 1995 NDY forwarded a marked up copy of the training manual to both Tyco and Leighton. 960 Mr Tribbia attended the discharge test on 8-9 July 1995. Then in August 1995 Mr Tribbia provided comments on Tyco's report on the commissioning test. There followed the NDY certificate of 18 August 1995. 961 In support of the Optus case that NDY failed to ensure the establishment of a "suitable and accurate Operations and Maintenance Manual" it was submitted that NDY was actively involved in commenting upon the various drafts and the criticism was made that NDY failed to advise that the manual should contain a reference to AS 3788. This repeated the criticism made of the manual in the Optus case against Leighton. In my view, there was no failure on NDY's part in its contractual obligations to Leighton to require reference to AS 3788 for the reasons earlier given concerning my view as to the adequacy of the inspection provisions that were contained in the manual. 962 Further, I see no basis outside of NDY's contractual obligations to Leighton, to impose a duty of care on NDY to Optus to alert it to the specific provisions of AS 3788. However, if contrary to my view that Annexure E to the 1994 consultant agreement has scant application to NDY's obligations in relation to the Heat Exchanger, Optus gains little comfort from its provisions. Cl 1.5(iii) obliged NDY to "Check suitability, content and accuracy of Operation and Maintenance Manuals detailing commissioning, operations and maintenance procedures for those elements of the Project for which the Consultant prepared construction documentation in accordance with Project requirements and quality standards". NDY did not prepare the construction documentation for the Heat Exchanger. 963 Mr Wyles did not advert to this limitation in Annexure E in expressing his opinion about NDY's responsibilities in relation to an operations and maintenance manual. As earlier noted, Mr Wyles seemed also to have proceeded on the assumption that the inspection by an accredited WorkCover inspector under AS 3788 would only apply to an external inspection and certification. That is not my reading of the Australian Standard which I think covers both external and internal inspection by an accredited inspector. 964 The Optus submission also appears to proceed on the assumption that the inspection in fact carried out by Mr Bruce on 19 August 1994 was an external inspection only. I am not so sure that that is so. There were two certificates in evidence by Mr Bruce, one dated 23 August 1994 the other 5 October 1995. The latter inspection of the Heat Exchanger was expressly identified as being external and did not note when the "Next internal inspection" was due: there being provision in the certificate for such a notation. There is no such limitation expressed on the face of Mr Bruce's certificate of 23 August 1994 which is in unqualified terms that he was satisfied that the Heat Exchanger could be used to its "maximum allowable safe working pressure" as stipulated. As far as I have been able to ascertain one simply does not know what was the full extent of Mr Bruce's 1994 examination of the Heat Exchanger. However, one is entitled to assume that it conformed with AS 3788.

It was Mr Wyles' further view that there were several bases upon which NDY was in breach of its duty of care to Optus by failing to ensure that the Heat Exchanger had been completely drained and thoroughly dried in accordance with the Tyco specification. His evidence in chief may be summarised in this way: a) NDY had a number of opportunities to identify the potential for incorrect hydrostatic test procedure through; (i) the review of the MEF drawing 98-1167; (ii) witnessing the hydrostatic test; (iii) enquiring about that test procedure; and (iv) when reviewing the WorkCover test certificates. b) NDY was required to "observe critical tasks"; a reference to a requirement in Phase 4 of Annexure E to the 1994 consultant agreement. c) NDY should have ascertained the nature of the tests performed when it had not witnessed the tests. d) NDY should have verified the "Commissioning and testing of the Project and check and approve all testing data"; referring to clause 1.5 (v) of Annexure E. e) NDY should have sighted the WorkCover test certificates and in this fashion informed itself that multiple testing of the tubeside had not been carried out. f) A failure to incorporate in the maintenance and operation manual the requirements of Australian Standard 3788. 965 There were a number of other matters raised by Mr Wyles which do not appear to have been pressed in final submissions on behalf of Optus. Generally, however, I think the evidence of Mr Wyles must be viewed in the context of the actual involvement of NDY in the process that led to the installation of the Heat Exchanger. For the reasons I have earlier given, I am satisfied that NDY was not required to attend the hydrostatic testing, nor to attend at the performance of the activity of completely draining and thoroughly drying all elements of the Heat Exchanger prior to shipment: as distinct from Tyco's responsibilities in those areas. 966 It follows that it was not incumbent upon NDY to take any steps after delivery to cause the chambers of the Heat Exchanger to be inspected for the presence of moisture or other contaminants. NDY was present at the discharge test conducted in respect of the Inergen system, and I think this underlines the distinction that is necessary to be drawn between NDY's obligations in relation to the Inergen system and its limited role in relation to the Heat Exchanger. 967 In keeping with my view of NDY's limited consultancy role in relation to the Heat Exchanger, I regard the NDY review of the MEF drawings only for their general arrangement as being in conformity with its contractual consultancy responsibilities to Leighton. 968 In view of the expressly limited function of NDY in reviewing the MEF drawings and related calculations, no inference adverse to NDY should be drawn from the fact that NDY failed to observe that the form of hydrostatic tests noted in that material only called for a single test of each of the shell and tube sides or that the partition plates were not full pressure bearing plates. 969 In that respect Mr Tribbia gave quite persuasive evidence of his observance of the different thickness of the partition plates and of the bonnet. In reviewing the MEF drawing he understood NDY's "involvement" as obtaining "an understanding of the way [the Heat Exchanger] fitted into the [Inergen] system - into the site and the system rather than the design of the Heat Exchanger" [T3003:06]. In reviewing the MEF drawing at that level he noticed the difference in dimensions between the bonnet and the partition plates in respect of which he gave the following evidence: A. I believed - in terms of the design of the bonnet, if the designers or the mechanical designers of the heat exchanger required the thickness of the bonnet to be there, I didn't question that. In terms of the thickness of the plates, again, I also didn't question that matter. In review of the two together, I viewed the bonnet as a whole, where there are some 10 penetrations into that bonnet and assumed that the number of penetrations that go into that bonnet would have an impact on the strength of the construction.

In addition to that, the number of partition plates that were in there and the arrangement of those partition plates and their attachment to each other may have contributed to its strength, and therefore I believed that the designers had taken that into account inasmuch as that they were aware of the pressures that were available and the thicknesses of the materials were sufficient to carry out their duties. (T2989:27 - 49) 970 He recalled discussing that matter with Mr Raddatz. That evidence arose in cross-examination by counsel for Tyco. Mr Tribbia was further questioned about that evidence follows: Q. Did you discuss that with Mr Raddatz? A. In terms that the designers were obviously aware of the pressures that were available because there is a note on the drawing advising of the pressures that are there, it was a case that they were - the designers were obviously aware of what they needed to design to and they would have taken that into account. Q. Just so that I can be clear, you said words to the effect, you say to his Honour, to Mr Raddatz, that the designers were obviously aware of the pressures that were available, because there was a note on the drawing advising of the pressures that are there. A. Yes. Q. And the designers were obviously aware of what they needed to design to and they would have taken that into account. A. Correct. Q. Just so that I can understand it, in forming the view that you did that the external thickness might be explained by the presence of the various nozzles, you were bringing to bear your appreciations of concepts in mechanical engineering; correct? A. Not fully. The issue in regards to the number of penetrations that go through a particular material obviously has an effect on its strength. That is a fundamental issue of mechanical engineering in structure of solids, or the mechanics of solids. The more holes you have in a material, the weaker it becomes. Q. And you brought to bear that knowledge in coming to the conclusion that you did that there could well be a justification for the disparity between the plates and the external shell - do you tell his Honour that? A. There could be other issues that take - that are needed to have a particular thickness in the bonnet and the designers would have taken the issues regarding the number of penetrations in the construction of the bonnet into consideration to determine the thickness of the bonnet. Q. I would just like to concentrate if we can, to make sure you are, on what your thought processes were at the time, if you wouldn't mind. At the time did you think there could be other issues which could impact upon the disparity of thickness between the shell and the plates beyond the presence of 10 nozzles in the shell? A. In the bonnet? Q. In the bonnet, I'm sorry. A. At the time we considered, or I considered that the designers of the heat exchanger knew what they were doing, were experienced in what they were doing and designed the facility to cater for the pressures that were required of the gas system, which was requested by Wormald. Q. Sorry. My question may not have been clear. I will just ask it again. At the time did you consider that other issues could have impacted upon the determination of the designers to design the internal plates at half the thickness of the external shell beyond the fact that there was present in the bonnet the number of nozzles to which you have referred? A. I'm not experienced in design of a heat exchanger, nor of the bonnet of the heat exchanger. I have some basic fundamental knowledge of mechanics of solids. I expected that the designer would be experienced in doing their work correctly and understanding that the pressures are there - I'm sorry, the pressure that are nominated are required to be met by their design. (T2997:25 - T2998:50) 971 In his evidence in chief Mr Tribbia did not agree with Mr Morrison's opinion, to which I have referred earlier in these reasons, that any engineer, in effect, would realise from the thickness of the partition plates that they were not designed to take full pressure. As earlier stated, I have been impressed by the quality of Mr Tribbia's engineering opinions in this matter. In accepting his evidence as quoted above, I think one should conclude that Mr Morrison attributed a level of expertise to other engineers that a person of his particular experience and qualification had gained. 972 If I am correct in concluding that NDY was not in breach of any contractual duty to Leighton in respect of those matters it is difficult to erect from that material any breach of a duty of care to Optus. In making that observation, I have reserved for separate consideration any obligation of NDY to Optus in issuing the NDY certificate of compliance dated 18 August 1995, which is repeated here for ease of reference: "OPTUS STC ROSEBERY - INTERGEN [sic] INSTALLATION

We hereby certify that the Inergen gas installation of the above property complies with the specification (ref A1317), the subsequent addenda (ref AD1-1, ADD-49, ADD-84, ADD-88, ADD-90) and to the requirements of Optus Communications." 973 NDY accepted that it owed a duty of care to Leighton and Optus in the issuing of the certificate based upon the principle in Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 and, if representations in the certificate were misleading, then NDY could be held liable for contravention of section 52 of the Trade Practices Act. 974 Leighton's contractual claim against NDY, so far as it related to NDY's certification of compliance, reflected the provision in Annexure, E Phase 5 of Clause 1.5 (vi) which was in the following terms: "The Services to be provided by the Consultant in accordance with Company Standards during Phase Five shall without limiting the generality of the Consultant's obligations under this Agreement include the following Services:

……. (vii) Inspect the Project to ensure all equipment installation and completed construction has been in compliance with all Project services requirements the design intent of all approved documentation, samples and prototypes and to the specified quality and promptly furnish report(s) listing any defects for rectification and certifying compliance of completed works;" 975 For reasons earlier stated given the very limited role by NDY in relation to the Heat Exchanger it could not reasonably have been asked to provide a certification in terms of that clause for the Heat Exchanger: The position is otherwise in relation to the Inergen system. NDY's certificate was given by Mr Tribbia with knowledge of the contents of Tyco's report on the discharge test for the purposes of commissioning; the WorkCover certificate, being Mr Bruce's certificate of 23 August 1994 and the Tyco certificate of 21 August 1995. 976 The circumstances in which NDY's certificate pre-dates the last mentioned certificate arose in circumstances in which Mr Tribbia was requested by Leighton to attend a meeting for the purpose of providing certificates in relation to the system. With that in mind he had prepared the certificate of 18 August 1995 and brought in an unsigned certificate to the meeting of 21 August. There he was shown the Tyco certificate of 21 August 1995, whereupon he provided the NDY certificate to Leighton. 977 The difficulty with the NDY certificate is the absence of any qualification in relation to the Heat Exchanger. In reality NDY had taken virtually no part in the design, development, documentation, procurement and construction phases and as a consequence was not in a position to comply with the provisions of clause 1.5 of Annexure E so far as it related to the Heat Exchanger. 978 Notwithstanding the unqualified terms of the 18 August 1995 certificate, I am unable to accept that Leighton treated that certificate so far as it embraced the Heat Exchanger, as being a certificate of compliance in accordance with cl 1.5 (iii) of Phase 5 Annexure E. To Leighton's knowledge, NDY was not in a position to give such a certificate in relation to the Heat Exchanger. 979 In that context, I think the Leighton request which preceded the provision of the NDY certificate is of some interest. On 17 August 1995 Leighton requested the certificate in the following terms: "Following our discussion of 16 August 1995, regarding the commissioning of the Inergen System and the Pre-action Sprinkler System at the above premises, we confirm the need to have your certification that the systems have been inspected by Norman Disney & Young and through witness testing conform to the necessary standards and design documentation."

980 The form of Leighton's request fixed Leighton, I think, with knowledge that the NDY certificate related to what Leighton knew of NDY's inspection and witness testing and could not have been reasonably treated as going beyond such a certification. Leighton has no cause for complaint against NDY based upon the terms of its certification. That conclusion is reached whether NDY's obligations to Leighton arise in contract or in tort. 981 Optus was in a somewhat different position from that of Leighton: although as earlier stated, Optus was also fixed with knowledge eof NDY's limited role in relations to the Heat Exchanger. 982 I have earlier referred to the evidence of Mr Lewis, Mr Bayley and Mr Kennewell in relation to the three August certificates issued by Tyco, NDY and Leighton and that was evidence which I accepted. Mr Bayley also made it clear that he accepted the NDY certificate as one which, on its face, certified that "the Inergen system per se [met Optus'] requirements" [T364:23]: see also [T365:9]. 983 Optus' misrepresentation case against NDY based upon the NDY certificate of compliance, relied upon assertions that NDY failed to observe installation of the Heat Exchanger: made no enquiries as to observance of AS3788 in its installation: took no steps to ascertain whether the Heat Exchanger had been drained and dried prior to, or at installation: failed to sight the WorkCover certificate of 18 August 1994, or to otherwise ascertain the nature of testing witnessed and so certified by WorkCover: failed generally to inform itself as to the level of quality assurance that had been put in place. 984 For the reasons given, I am satisfied that in none of those respects was NDY guilty of contractual breaches and I fail to see why NDY should have been under any tortious liability to Optus to take any of those steps: accepting that NDY had a high standard of care imposed upon its duty to Optus as a result of its knowledge of the danger to Optus' equipment that contamination from the Inergen system's operation could pose. 985 The real problem confronting NDY lay in NDY's failure to qualify its certificate. NDY was not in a position to give a certificate of compliance in relation to the Heat Exchanger. NDY must have realised that its certification was required by Leighton for the purposes of the Leighton contract and would end up in the hands of Optus. In that case, NDY was obliged, I think, to qualify its certificate by noting, in some compendious way, that, in relation to the Heat Exchanger, the certificate was based upon specified matters consistent with its limited consultancy role. As it happened NDY simply relied upon Tyco's certification of compliance of 21 August 1995 and the WorkCover certificate of 23 August 1994. In my view, that was not a sufficient basis for its certificate when the extent of NDY's non-involvement in the Heat Exchanger is taken into account. 986 NDY does not dispute that reliance was placed upon its certificate. However, it is necessary I think to understand the nature of Optus' reliance, as expressed particularly by Mr Bayley. For my part, I cannot take the reliance beyond one operated in the sphere of contract administration. One is left to infer, in the absence of direct evidence on the point, that some steps would have been taken by Optus in the face of a qualified certificate. It may have led to non-acceptance of the installation. However, I think it is extremely difficult and highly speculative, if not fanciful, to read into Optus' reliance a consequence that an accurate certificate relating to the Heat Exchanger would have directed attention to the failures which were the cause of water being left in the bonnet chambers: they being a failure by MEF to comply with cl 12 of the Tyco specification; Tyco's failure to have that specification activity as a line activity and a hold point in the inspection and test plan; to attend the hydrostatic testing and the subsequent activity under cl 12; to carry out an inspection on installation, Tyco having neither attended the testing and having made no provision in the inspection and test plan to ensure performance of the activity under cl 12. 987 While I accept that Optus relied upon the August 1995 certificates of Tyco, NDY and Leighton, the nature of that reliance lay in an acceptance, for contractual administration purposes, that the subject works were completed in accordance with the Leighton contract. 988 If a finding is required in relation to NDY's certification I am not satisfied that an appropriately qualified certificate would have resulted in Optus taking any relevant further steps to satisfy itself that Leighton had complied with its contractual obligations, particularly when Optus had in its possession the Leighton and Tyco certificates. 989 If I am wrong in the conclusion I have reached that NDY was not liable in damages to Optus for the misleading nature of its certificate of compliance, I would be firmly of the view that NDY was entitled to full indemnification from Tyco under the LRMP Act for reasons, in substance, given in considering Leighton's entitlement to indemnity from Tyco. 990 In examining any tortious duty of care as may be owed one to the other by Leighton, NDY or Tyco it is common ground that the subject damages claimed are in the nature of a pure economic loss and that, apart from any misrepresentation case, the law concerning liability for such loss is to be found within Perre and Tepko Pty Ltd v Water Board [2001] HCA 19 (5th April 2001) (So far as such principles involved the three tier approach forwarded by Kirby J see also Pyrenees Shire Council v Day (1998) 192 CLR 330 at 419; Romeo v Conservation Commission (NT) (1998) 192 CLR 431 at 476 and Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1 at 80. 991 In Perre, Gleeson CJ criticised "the three-stage" approach and examined the restraints upon liability for pure economic loss in the following terms. "In Caltex Oil (Australia Pty Ltd v The Dredge "Willemstad" (1976) 136 CLR 529 all the members of the court, except Murphy J, accepted that there is no general rule that one person owes to another a duty to take care not to cause reasonably foreseeable financial harm. The consequences of such a rule would be intolerable. However, as the decision in that case showed, and as had previously been shown in Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465, there are circumstances in which the law recognises a duty of care such as will permit recovery of pure economic loss. There are at least three considerations which have been, and will remain, influential in restraining acceptance of such a duty of care in particular cases, or categories of case. First, bearing in mind the expansive application which has been given to the concept of reasonable foreseeability in relation to physical injury to person or property, a duty to avoid any reasonable foreseeable financial harm needs to be constrained by "some intelligible limits to keep the law of negligence within the bounds of common sense and practicality". Secondly, to permit recovery of foreseeable economic loss, which may or may not occur in a commercial setting, for any negligent conduct, may interfere with freedoms, controls and limitations established both by common law and statute in many legal contexts. Thirdly, in those cases where the loss occurs in a commercial setting, a third party, C, may suffer financial harm as a result of conduct which is regulated by a contract between A and B. It may be that the consequences of such conduct, as between A and B, are governed and limited by the contract. This is a problem which commonly occurs in relation to maritime claims, and may help to explain the strictness with which an exclusionary rule has been applied in shipping cases. Another matter of concern is the lack of precision in the concept of financial or economic loss. Physical injury to person or property is usually readily identifiable, even if it may take time to manifest itself. However, the concept of financial or economic loss or harm is wide enough to comprehend a variety of circumstances or contingencies, some of which may be indirect and difficult to identify or measure. Suppose, for example, that a child's parents are killed as a result of the negligent conduct of another. In many jurisdictions there are statutory provisions which govern entitlement to compensation. However, if the matter were at large, how would a court set about identifying, and estimating, the kinds of financial loss which might sound in damages? What kinds of detriment, harm, or disadvantage, would be treated as "financial loss"? The law of tort is a blunt instrument for providing a remedy for many kinds of harm which may be suffered as a consequence of someone else's carelessness, and which are capable of being described as financial. If there once was a bright line rule which absolutely prevented recognition of a duty of care in any case where the negligent conduct of one person caused financial loss to another, not associated with injury to the other's person or property, and which assigned claims to recover such loss to the field of contract rather than tort, the line gave way in an area where there is a clear potential for carelessness to cause financial harm: negligent misstatements made to a person who, to the knowledge of the maker of the statement, relies upon the advice or information provided. However, there is no convincing reason why conveying advice or information should be treated as the solitary exception to an otherwise absolute exclusionary rule. Once the exclusionary rule ceased to be a bright line rule, it lost one of its principal justifications. Nevertheless, the considerations underlying the rule remain cogent, even if they are no longer seen as absolutely compelling. Courts have found difficulty in proposing an alternative general rule which makes better sense and which, at the same time, pays due regard to the problems earlier mentioned. The solution does not lie in what is sometimes described as the three-stage "test" said to have been formulated by Lord Bridge of Harwich in Caparo Industries Plc v Dickman [1990] 2 AC 605. Lord Bridge never said it did. He said it did not. In the much quoted passage in his Lordship's speech where he referred to the necessary ingredients of foreseeability, proximity, and a situation in which the court considers it fair, just and reasonable that the law should impose a duty, he immediately went on to say that "the concepts of proximity and fairness ... are not susceptible of any such precise definition as would be necessary to give them utility as practical tests, but amount in effect to little more than convenient labels to attach to the features of different specific situations which, on a detailed examination of all the circumstances, the law recognises pragmatically as giving rise to a duty of care of a given scope". He also quoted with approval an observation of Brennan J concerning incremental development of the law. In the same case, Lord Oliver of Aylmerton, whose speech has been equally influential in later cases, said that "to search for any single formula which will serve as a general test of liability is to pursue a will-o'-the wisp". In Caparo , Lord Oliver emphasised that, in this field of discourse, the mere foreseeability of possible damage, without some further control (which he summarised as "proximity", after explaining what he meant by that term), would not be useful as the test of liability. At the same time, however, his Lordship made it clear that "in some cases the degree of foreseeability is such that it is from that alone that the requisite proximity can be deduced". In relation to the giving of advice or information, questions of reliance and actual foresight of the possibility of harm (or, what is the same thing, the foresight that a reasonable person would have) are closely related. Moreover, knowledge (actual, or that which a reasonable person would have) of an individual, or an ascertainable class of persons, who is or are reliant, and therefore vulnerable, is a significant factor in establishing a duty of care. Vulnerability can arise from circumstances other than reliance. In Caltex, the obvious vulnerability of a specific plaintiff was influential in a number of the judgments. This was not merely an arbitrary method of solving the problem of potentially indeterminate liability. It was an application of what Lord Oliver later discussed as the idea that in a given case, the degree (and nature) of foreseeability may have an important bearing on whether there is a duty of care."(at 192 footnotes omitted ) 992 The importance of the nature of the relationship between parties in cases which give rise to questions of recovery of economic loss was illustrated in the following passage from the judgment of Gummow J with whose reasons Gleeson CJ agreed: "The question in the present case is whether the salient features of the matter gave rise to a duty of care owed by Apand. In determining whether the relationship is so close that the duty of care arises, attention is to be paid to the particular connections between the parties. Hence what McHugh J has called the "inherent indeterminacy" of the law of negligence in relation to the recovery of damages for purely economic loss. There is no simple formula which can mask the necessity for examination of the particular facts. That this is so is not a problem to be solved; rather, as Priestley JA put it in Avenhouse v Hornsby Shire council (1998) 44 NSWLR 1 at 8, "it is a situation to be recognised. … I prefer the approach taken by Stephen J in Caltex Oil . His Honour isolated a number of "salient features" which combined to constitute a sufficiently close relationship to give rise to a duty of care owed to Caltex for breach of which it might recover its purely economic loss. In Hill v Van Erp (1997) 188 CLR 159 at 233-4 and Pyrenees Shire Council v Day (1998) 192 CLR 330 at 389, I favoured a similar approach, with allowance for the operation of appropriate "control mechanisms". In those two cases, the result was to sustain the existence of a duty of care."(at 253, 254 footnotes omitted) 993 I think I have said enough to dispose of any case of breach of duty by NDY as alleged against it by Leighton. There was no contractual breach under NDY's retainer, nor was there anything misleading to Leighton in the terms of NDY's certification of compliance of 18 August 1995. 994 Essentially, the Tyco case against NDY is based upon characterising NDY's role as one of the consulting engineer engaged to review plans, including drawings relating to the Heat Exchanger. It was asserted that, in that role, in the knowledge that "Tyco was in a position of vulnerability to NDY" and having regard to Tyco's alleged reliance upon NDY "in respect of its review of the drawings/documents", it was foreseeable that, if NDY was negligent in its role as consulting engineer, Tyco, as the supplier of the system, could be exposed to liability to other parties. 995 I am satisfied that no such duty of care was owed by NDY to Tyco. It is incongruous to speak of NDY as having a duty of care to Tyco in respect of what I have characterised as significant breaches by Tyco of contractual and tortious obligations: as much as I think it is far fetched to see Tyco in the position of reliance upon NDY's review of any documentation relating to the Heat Exchanger. I would take that view even if NDY's role as consulting engineer was far more involved than as set out in these reasons. As it happens, NDY's distant relationship with the Heat Exchanger design, fabrication, testing, commissioning and maintenance was, to the knowledge of Tyco as outlined in these reasons, such as to negate, in my view, any notion of reliance by Tyco upon NDY's so called review. 996 I think what Giles J, as his Honour then was, had to say in R W Miller & Co Pty Limited v Krupp (Australia) Pty Limited (1995) 11 BCL 74 at 147 echoes something of the reasoning which has caused me to reject Tyco's claim in tort against NDY as appears from the following passage: "It is difficult to see how any relevant reliance on the part of Krupp could be justified, or any relevant assumption of responsibility on the part of Minenco.

Further, the economic loss in question is the loss suffered by Krupp by reason of its breach of the contract. Krupp's submissions required that Miller's agent for the purposes of supervising Krupp's performance of the contract owed to Krupp a duty to take care to prevent Krupp from failing to properly perform: a duty to save it from breach of the very contract it had to perform to Minenco's satisfaction. ... In my view there was not the requisite proximity, a view confirmed by notions of what is fair and reasonable ... To what I have said in the preceding paragraphs may be added that it is quite plain that Krupp represented itself to be, and was thought to be, the expert in the field of equipment such as the reclaimer, and the supplier of a tried and tested Krupp design. Minenco was not an expert on which Krupp relied." 997 Purchas LJ expressed a similar difficulty in accepting the liability of an engineer, in performing the engineer's supervisory role under a construction contract, to the contractor for damages suffered as a result of the contractor's breach under the subject contract, as was the case in Pacific Associates Inc v Baxter [1990] 1 QB 993 at 1011. Purchas LJ expressed the "central question" in such cases as follows: "The central question which arises here is: against the contractual structure of the contract into which the contractor was prepared to enter with the employer, can it be said that it looked to the engineer by way of reliance for the proper execution of the latter's duties under the contract in extension of the rights which would accrue to it under the contract against the employer? In other words, although the parties were brought into close proximity in relation to the contract, was it envisaged that a failure to carry out his duties under the contract by the engineer would foreseeably cause any loss to the contractor which was not properly recoverable by the contractor under its rights against the employer under the contract? ... it may be argued that it would not be just and reasonable to impose on the engineer by way of liability in tort rights in favour of the contractor in excess of those rights which the contractor was content to acquire against the employer under the contract." 998 For somewhat different reasons I doubt that Tyco owed a duty to NDY in issuing its certificate of 21 August 1995, notwithstanding an expectation that NDY would rely upon it. While I accept that NDY did rely upon the Tyco certificate in issuing the NDY certificate dated 18 August 1995, it does not follow that the relationship of Tyco to Leighton and NDY was such as to require Tyco to avoid loss to NDY in performing its contractual duties. 999 The flaw in NDY's case, in my view, is revealed in considering the nature of NDY's reliance, which in effect, is an examination of the relationship between Tyco, Leighton and NDY. As part of its consultancy retainer by Leighton, NDY was called upon to provide an engineer's certificate of compliance. That obligation I accept, would involve consideration of and reliance upon Tyco's certificate: if it was reasonable for NDY to issue such a certificate, based upon Tyco's certification, whatever the latter's shortcoming, no liability of NDY to third parties outside of contract arises, in my view. If it was not reasonable for NDY so to act, then, any damages suffered by NDY in relying upon the certificate would fall at the door of NDY's negligence: not that of Tyco. 1000 Of the three "restraining" considerations referred to by Gleeson CJ in Perre it is difficult to read into Tyco's relationship with NDY any concept of reasonable foreseeability of economic loss to NDY by issuing the notice of completion and appended certificate of compliance. Second, Tyco, I think, was entitled to expect NDY to apply its engineering expertise so far as it was called upon to do so, independently of the terms of Tyco's notice of completion, having regard to NDY's contractual obligation to Leighton. 1001 Similarly, I doubt that any relevant duty of care was owed to NDY by Leighton in the performance of Leighton's contractual obligations. 1002 During the course of these reasons I have deferred consideration of MEF's liability to Optus, had it been sued for negligently performing its contractual obligations under the MEF subcontract and I have considered Leighton's entitlement to indemnity from Tyco without reference to that liability. 1003 MEF's liabilities and entitlements in these proceedings had relevance to a) a determination of claims for contribution against MEF b) the determination of its liability to Tyco in contract and ex-contract and c) the determination of Tyco's claims, as assignee of MEF's causes of action, against EMAE and WorkCover. 1004 Having concluded that EMAE and WorkCover have no liability to any party arising out of the performance of their respective roles in relation to the Heat Exchanger, it is not necessary to consider further Tyco's claims as assignee nor Tyco's claims against MEF, the only relevance of which lay in Tyco's related claims as assignee. 1005 Had it been necessary to do so, I would have concluded that, under the LRMP Act, Tyco would have been entitled to thirty percent contribution from MEF. I regard that apportionment as consistent with my findings that Leighton was entitled to complete indemnity from Tyco under that Act. 1006 In the course of final submissions I have been referred to the decision in Fischer v C.H.T. Ltd (No. 2) [1966] 2 QB 475 as authority for the proposition that where a concurrent tortfeasor is insolvent (as was the case of MEF) the co-tortfeasors should bear, proportionately, the liability of the insolvent tortfeasor. That was the factual situation in Fischer, where the Court, as amongst three tortfeasors, apportioned liability on the basis of 10%, 30% and 60%, with the third being the percentage liability of the insolvent tortfeasor. Damages were apportioned as between the other two tortfeasors on the ratio of 10:30, with one bearing one quarter and, the other, three quarters of the total damages. 1007 The application of that approach to the facts of this case was not argued. 1008 However, without further examination upon that approach to apportionment, it is my view that it has no application where, as here, Leighton is entitled, in my view, to a complete indemnity from Tyco. 1009 Although it is not necessary to determine the question, I think it is appropriate that I address contractual issues raised, as between Tyco and Leighton, based upon indemnities contained in the Tyco subcontract. In respect of its liability to Optus, Leighton looked for protection from Tyco under the Tyco subcontract which relevantly provided that Tyco would "at all times indemnify and hold Leighton harmless against all damage, claims, actions howsoever arising from loss or damage to Works or materials" (Cl 8.5). A further indemnity was provided by cl 16.2 under which it was stipulated that Tyco "shall have care of the works and shall indemnify Leighton against all loss, damages, claims, and/or suits whatsoever, and howsoever arising therefrom." 1010 The 'Works' is defined to mean "all of the works to be executed and completed by [Tyco] in respect of a Project as specified or referred to in the Contract Documents and Attachment 2 and includes any variation under cl 11". 1011 'Materials' was defined to mean "all supplies, goods and other materials, for incorporation into the Works……". 1012 It was argued on behalf of Leighton that the Optus claim is one within the meaning of cl 8.5, as are the claims by NDY, Tyco, WorkCover and EMAE under their respective cross-claims against Leighton. It was argued that the "loss or damage to Works" is comprised in the damage associated with the failure to remove water from the Heat Exchanger chambers prior to commissioning: that the respective claims arise from that damage. 1013 I do not understand there to be any issue between Tyco and Leighton so far as those claims relate to things for which Tyco was responsible by reason of its own acts, or of those for whom it was responsible, in particular MEF. Where issue was joined was where Leighton sought to be indemnified in respect of things for which Tyco contended Leighton itself was responsible. This has become an academic question as a consequence of my finding that Leighton's liability to Optus stemmed from Tyco's breaches of its contractual and tortious obligations to Leighton and of its duty of care to Optus, with the consequence that Leighton, in my view, is entitled to full indemnity from Tyco under the LRMP Act. 1014 However, it may be of some utility to express my views about the operation of the clauses in the event that it be found that my findings on the respective liabilities of the parties are mistaken. 1015 It is common ground that the amendment to the Law Reform (Miscellaneous Provisions) Act (1965), providing for the apportionment of liability in cases of contributory negligence in both tort and in contract, has no application to these proceedings. Accordingly, the relevant law as to contribution is to be found in the 1965 Act as applied in Astley v Austrust Ltd (1999) 197 CLR 1, to the effect that an award of damages for breach of contract may not be reduced under apportionment of liability legislation such as the Law Reform (Miscellaneous Provisions) Act (1965), notwithstanding, that the plaintiff could have sued under a concurrent tortious duty of care. 1016 It was argued on behalf of Tyco that the damages for which Leighton has been found liable to Optus are too remote to fall within either limb of the rule in Hadley v Baxendale (1854) 9 Ex 341 at 354. I think on the findings I have made, it is not open to Tyco, or Leighton to deny that it was well understood by each, in acting upon the Tyco subcontract, that special care had to be taken to ensure that foreign matter was not accidentally discharged into the environment in which the Inergen system was to operate. I am satisfied that the damages for which Leighton has been found liable as a consequence of the incident fell within the second limb of the rule in Hadley v Baxendale and may well be regarded as damages which could be reasonably regarded as arising in the usual course of things from Tyco's breach. It is really just a question of determining what "may reasonably be supposed to have been [within] the contemplation of both parties" [at 354]. 1017 Tyco's position, in any event, is that cl 8.5 does not operate in the circumstances of this case. Tyco's starting point is the submission that, when read as a whole, cl 8.5 "is concerned with an imposition of an obligation upon Tyco in respect of the care and protection of the Works and Materials". Accordingly, it was argued that the clause is concerned with indemnification in respect of Tyco's failure to take due care of the Works and materials and, in particular, does not address losses arising from Leighton's own negligence or breach of the Trade Practices Act. 1018 Cl 8.5 provided as follows: "8.5 Care and Protection The Subcontractor shall:-

a) take all reasonable steps to keep the Works and Materials free from loss or damage and shall promptly make good any loss or damage incurred as a result of a failure to take those steps; and

b) at all times indemnify and hold Leighton harmless against all damages, claims, actions howsoever arising from loss or damage to Works or materials. 1019 I think par (a) is addressed to Tyco's obligation to take reasonable steps to care for the works and carries with it a liability to make good any loss or damage that occurs to the Works, resulting from that failure. However, par (b) is not so limited, applying as it does to "all damages, claims, actions howsoever arising from loss or damage to Works or materials". 1020 I think it is equally plain that cl 8.5 (b) is concerned with loss or damage to works arising out of Tyco's failure to take reasonable steps to keep the works free from such loss or damage. The first question which requires attention is whether the presence of water and its associated corrosion of the Heat Exchanger chamber constituted loss or damage to the works as a consequence of Tyco's failure to take reasonable steps to protect the works. On the findings made in the course of these reasons, that question must be answered affirmatively. Leighton argued that the damage was constituted by the corrosion of the chamber and the presence of corrosion contaminated water within the chamber. It was Tyco's position that the only damage within the meaning of cl 8.5 was the corrosion of the elements of the chamber and that the claim by Optus against Leighton did not arise out of that damage. 1021 In my view, Tyco's submission involves too limited a construction of cl 8.5 (b) and tends to equate "howsoever arising" with "resulting". In my view, it is not necessary to show that the subject damage caused claims to be made in respect of which Tyco is required to indemnify Leighton. It is sufficient that, in some definable way, the claim may be demonstrated to have arisen out of the subject damage to the works. 1022 On that construction, whether one regards the loss or damage as being limited to the corrosion is immaterial: taking the view that Optus' claim does arise out of the corrosion damaged Heat Exchanger. 1023 It is also my view that the true damage should not be limited to the physical corrosion damage to the elements of the Heat Exchanger chambers, but should also include corrosion compounds suspended in the water in various sections of the chambers. 1024 Tyco further contended that, in any event, the indemnity does not extend to cover claims arising out of Leighton's own breach of duty, be it in contract or in tort, or conduct contravening the Trade Practices Act 1974. That general proposition, in my view, is not sustainable. 1025 It is necessary to identify the nature of the breach attributed to Leighton in order to determine whether that breach represented a novus actus, such as to break the chain of causation between Tyco's breach of its duty to protect the Works from such loss or damage and the damages suffered by Optus. On the findings made in these reasons, no such break in the causation chain has arisen. 1026 Cl 16.2 so far as is relevant, provided as follows: "[Tyco] shall have care of the Works and shall indemnify Leighton against all loss, damage, claims, and/or suits whatsoever and howsoever arising therefrom." [p1937] 1027 It was contended by Tyco that the claim by Optus does not attract the indemnity as it was not attributable to Tyco's care of the Works or the absence of it. Further, that the claim arose out of the introduction of water at a time when Tyco did not have the care of the Heat Exchanger. In my view, neither proposition is sound. 1028 As to the factual question of care of the Works, I entertain little doubt that Tyco had the "care of the Works" throughout the life of the Tyco subcontract. Presumably, Tyco suggests that the MEF subcontract in some way took the care of the Works out of the hands of Tyco. In a sense that is so, but not within the meaning of the Tyco subcontract and, in particular, cl 16.2. 1029 Similar to Tyco's approach to the construction of cl 8.5, implicit in Tyco's construction of cl 16.2 is too narrow an application of the words "loss….. whatsoever and howsoever arising therefrom": referring to Tyco's care of the works. However, some reading down of that phrase is necessary as, in my view, it could not have been intended to cover acts properly performed by Tyco in performance of its contractual obligations to Leighton. I would read the phrase "arising therefrom" as referring to claims arising from a lack of due care of the Works by Tyco: a concept not dissimilar from Tyco's obligation to "take all reasonable steps to keep the Works….. free from loss or damage", within the meaning of cl 8.5. In any event, so construed, the indemnity would operate under cl 16.2 in much the same way as I have construed the indemnity under cl 8.5. 1030 It follows from those findings that Leighton is entitled to an indemnity from Tyco in respect of its liability to Networks in contract and under the LRMP Act in respect of its liability to Optus. It follows from these findings that there should be judgment for Optus in the proceedings against Leighton and Tyco and that the summons against NDY be dismissed. 1031 In respect of the cross-claims there should be judgment in favour of Leighton against Tyco under the third cross-claim by way of a full indemnity and judgment in favour of NDY: the first, second, fourth, fifth, sixth, eighth, ninth, tenth, eleventh and twelfth cross-claims should be dismissed. The seventh cross-claim is otiose and should be disposed of accordingly, subject to the submission of short minutes of order as to the appropriate means of disposing of it in accordance with these reasons. 1032 Submissions and short minutes of order as to costs are to be presented in accordance with directions given to enable the making of final orders at the time of publication of these reasons.

Quantum 1033 The damages claim of Optus is made up of the costs of acquiring equipment to enable some eighty three business applications in use with the seventy five computer systems at the Rosebery centre to be transferred to the equipment, so that, once transferred, the contaminated equipment could be removed for cleaning, used for further migration, before being recommissioned. These costs, after making allowances for the value of certain 'left-over' equipment represents the bulk of the Optus damages claim. (The evidence of the number of cabinets, systems and applications involved in the rectification program varied during the proceedings. Nothing turned on that discrepancy.) 1034 Tyco has led the defence on quantum and has been the only party, opposed to Optus, to present detailed submissions on quantum. Tyco's basic position was expressed as follows: "Had the plaintiffs acted reasonably in the time known to be available to obtain from appropriate experts considered and objective assessments of the level of contamination within the computers and the potential for that contamination to affect the operation of those computers, it would have discovered, as was the fact in our submission, that the level of contamination was not significant and that the computer equipment was not at practical risk in the environmental conditions of the Data Centre and Tandem Room and did not require to be cleaned." 1035 As a fall-back submission, in the event that it is found that Optus acted reasonably in purchasing equipment for the transfer of the business applications from affected equipment, it was contended that it was not reasonable to clean all of the equipment after the transfer of the applications. This alternative case was not advanced during the course of the proceedings, prior to final addresses. 1036 A further alternative submission was as follows: "In the third defendant's alternative submission, if the Court finds that the plaintiffs' computer equipment was at real or practical risk of failing as a result of the contamination of it, the plaintiffs have not proved that that risk was due to the contamination by the material unintentionally discharged by the Inergen system rather than other contamination, and therefore they have not proved that it was caused by the alleged wrongful acts of the defendants." 1037 Those submissions are not without evidentiary support. They should be firmly rejected, given the extent of the damage to Optus' property: the opinion of respected experts as to the need for cleaning the equipment: the consequences to Optus of failure of the equipment and the quality of the expert evidence upon which Tyco relied. It will be necessary to address those issues in some detail. 1038 So far as Tyco depended upon expressions of opinion by experts that the cleaning of the equipment was unnecessary, one is left to speculate whether such courageous opinions would have been expressed on or shortly after 3 January 1997. In brief, I regard the defence as lacking in reality. 1039 Tyco, also, attacked the reasonableness of Optus' conduct on the basis that it was premature and, accordingly, ill-considered. I thought at the time when that issue was explored and remain of the view that charges of undue haste in committing Optus to the remedial measures undertaken were only of value to the extent that, with hindsight, it might be reasonably said that more restraint and mature consideration would have led to a different remedial course. It does not follow, by any means, that to have acted prematurely means to have acted wrongly. 1040 As it happened, Optus has been able to rely upon expert evidence given at the time of the incident and confirmed during the course of these proceedings as to the reasonableness of the remedial measures undertaken by Optus. It is not entirely without significance that no steps were taken by Optus of any moment without the concurrence of Optus' insurer, who monitored the incurring of costs under a system put in place by Optus designed to quarantine costs of remedying the damage occasioned by the incident. 1041 The task of unravelling these issues has not been made any easier by the inability of the parties to agree on the nature of the damages claimed, nor where the onus of proof lies in respect of numerous issues relating to quantum. 1042 Professor David Brynn Hibbert is a Professor of Chemistry and holds the Chair in Analytical Chemistry at the University of New South Wales. He gained a degree with first class honours in Chemistry from Kings College, University of London and obtained his Doctorate in Physical Chemistry from the same institution. Professor Hibbert has most impressive qualifications. 1043 He described himself as an electro-chemist (corrosion is an electro-chemical phenomenon). He is the co-author of something approaching 200 articles as at the end of 1998 and had presented papers at some 90-odd conferences held at various places around the world. He holds patents in the electronic field and has participated in numerous studies in the field of electro-chemistry. Through the University's research arm Unisearch he gained extensive experience in consultancy in analytical chemistry. He is a member or fellow of several professional institutes or societies. 1044 It is not without utility to set out parts of his oral evidence in chief in which he was invited to elaborate upon his expertise:

Q. On the third page of your curriculum vitae you set out the funding that you have received for research projects. In relation to those projects, are there specific projects that bear upon the topic that you were called upon to advise in 1997? A. Yes. I believe the - in fact the first grant under "Large grant ARC projecting organic electrochemistry at transition metal oxide electrodes". This particular project was looking at metallic oxides which in fact included iron - some of the iron oxides which of course is important in this case - and the types of chemical and electrochemical reactions that happen on those surfaces. If we go down, the grant labelled "Surface Analysis Facility" was some money we got to buy equipment for looking at a variety of surfaces, including the catalysts that I was interested in and some of these also were metal oxides. The grants 1991, 1992 and 1993, "Electrochemically Deposited Fractals", relates to my research on the formation of dendrites - long chains of material that, again, will come up - has come up in my statement to do with these matters. Also in 1994, "Pattern Formation and Growth". This also relates to the formation of dendrites; and in 1995, the same title; and in 1996. …….. Q. I think corrosion has been an area of particular interest to you in study? A. Yes. I am an electrochemist and corrosion is an electrochemical phenomenon and therefore I have had some concerns with corrosion. In my consulting from a practical point of view, obviously the effects of corrosion are quite important in life. Also, I have published two papers on the theory of how, in particular, iron corrodes. Those are in my publication list. ……. A. Perhaps if I can draw your attention to the papers on page 6 of my revised CV. Under "Catalysis", it says "preparation of high surface area mixed oxide powders". Q. Those numbers refer across to the particular publications, do they? A. Yes, and to some extent "Reaction of SO2 and CO on perovskites". All of this research that I did was involved with metallic oxides, like the iron oxides that we are going to be talking about, but also other metal oxides as well that were semiconductors and had catalytic activity. During this research, I invented a way of making these oxides in a very high surface area form. So this has a bearing on particle size and surface areas and so on. Q. It sounds a little funny to say that you invented a way of making the oxides. Can you tell us what you mean by that? A. Yes, it used freeze drying, if you have come across that term for food. It turns out that you can make these oxides in a very similar way by taking solutions and rapidly freezing them and then eventually you get out very high surface area powders. In catalysis, if we want a chemical reaction to go more quickly, a good way of doing it is to make the particles very small because then they have a lot of outside, compared to inside, if you like. In order to get the maximum surface area we try and make particles with very small radii. On the whole these particles try and clump together if they can and so from the point of view of a technology trying to keep them apart, there was an interest in how one can do that and eventually make a catalyst that was active. So in a way it was the opposite, I suspect, of what is at issue here. …… Q. What is your work on fractals, then? A. This is some work that I have done more recently. We are interested in the way that structures in nature grow, and the structures I am thinking of could be anything from a tree to the blood vessels in your retina, to perhaps the dendrites that may form in certain chemical reactions. It turns out that there are universal laws that govern how many structures form and the tree shape is very ubiquitous in nature, both from trees and also river deltas, for example. People who research into fractals are trying to explain the shape of these structures, in terms of the underlying physical laws. I published a number of papers looking at the way that you can form small metallic trees using electrochemistry. But, in the process of doing that, we developed a number of models of growth of dendrites, I shall call them, which I believe has a bearing on this case. ……. Q. Have you also given a lecture series, or a course on corrosion to corrosion technologists? A. Yes, I was asked by the Australasian Society for Corrosion - the Australasian Corrosion Society to, as you say, give a course over a number of weeks to people who work in industry who have to have some appreciation and knowledge of corrosion. I gave about six hours of lectures and shared the course with a colleague, Professor Young at the University of New South Wales. This was both a theoretical and practical course for people who would have to deal with the possibility of corrosion in their work. Q. And, finally, you have also authored a book "Introduction to Electrochemistry"? A. Yes. Q. That includes a chapter specifically devoted to the topic of corrosion? A. Yes. (T762:35 - T763:8; T764:8 - T764:17; T765:19 - T766:1; T766:7 - T766:26; T766:35 - T766:56) 1045 Professor Hibbert was an extremely impressive witness whom I found reliable, responsive in cross-examination and without any apparent bias in his answers which were given promptly and with authority. His evidence in chief included the following: " Initial Advice 4. On 9 January 1997 I attended the Sydney Technical Centre at about 10.00am. The incident that had occurred on 3 January 1997 was described to me and I inspected the facility. I was also shown the results of analyses prepared by Mr Terry Flynn of Unisearch Limited. 5. It was apparent that a quantity of water containing iron oxide particles had been discharged from the fire suppression system into the Computer Data Room and the Tandem/EFTPOS Room and that material had been deposited extensively in those rooms. 6. I attended a meeting at the Sydney Technical Centre on 9 January 1997. I was invited to give an account of the likely consequences of the contamination on the electronic equipment in the Computer Data Centre and The Tandem/EFTPOS Room. 7. After giving a resume of my experience in chemistry, electro-chemistry and corrosion, I outlined the chemistry of iron oxide and the mechanisms whereby contamination of computer boards by small particles of iron oxide could lead to complete failure. 8. I explained that the existence of iron oxide was likely to have adverse effects on computers, firstly because of corrosive activity and secondly, because of the conductivity of iron oxide particles. 9. I explained that the combination of iron oxide with water, ions and oxygen would lead to corrosion within the computers which could "eat" away metallic parts of the computer boards. The electrical current from this process could also cause failure of sensitive electrical components. I explained that, over time, there was a risk that the particles would "clump" or "agglomerate" and thus cause a "bridge" between parts of the boards through which a current could flow and thus adversely affect the operation of the boards. 10. I was asked to advise if Optus could leave the computers as they were without cleaning to remove the iron oxide or without replacing the equipment. I said that whilst a definite time scale for failure could not be given, the potential for failure would increase over time and, if Optus considered the computer equipment to be critical to their operation, the equipment would have to be cleaned or replaced. 11. I was asked to prepare a written report. A copy of my report dated 9 January 1997 is Appendix 2 . 12. My advice to Optus to immediately clean or replace was based on: (a) evidence of serious contamination of rooms and equipment; (b) knowledge that the effects of the contaminants would be deleterious to computer equipment; and (c) knowledge that if cleaning was delayed, failure could occur catastrophically across a number of computers as the corrosion developed." 1046 Professor Hibbert was engaged in further work on the nature and extent of the contamination of the electronic equipment, from which he drew the following conclusions: 26. ……. A. The concentrations of iron and zinc found in samples taken from the Computer Data Centre, the Switch and Transmission Room and the UPS Room were highly correlated which leads to the conclusion that those elements came from a common origin. B. There is a very strong inference that the contamination of iron and zinc in the Computer Data Centre, the Switch and Transmission Room and the UPS Room came from the heat exchanger and the galvanised Inergen pipes during the incident on 3 January 1997. ……. 31. The relevance of this analysis is that it demonstrates that the contamination of iron (and accordingly zinc) was extensive and significant, whether the particles size was tiny or very tiny. Small particles have a greater potential for corrosion because they have a proportionately larger surface area. They are more mobile and, as a result, can agglomerate to make larger particles. "Larger" particles have a greater potential for bridging circuitry." 1047 The extent to which that evidence has been tested in these proceedings will need to be examined. It may be noted at this point, however, that there was an enormous gap between that opinion evidence (and other evidence to the like effect in the Optus case) and that upon which Tyco relied for its contention that cleaning of the equipment was unnecessary. 1048 Earlier in these reasons I referred to the description of the pollution of the Rosebery centre as observed by Mr Valledor on 3 January 1997, in which he described seeing "a rusty brown liquid mess all over the walls, the floors, the ceilings and all of the equipment in those two rooms", referring to the data centre and the Tandem/EFTPOS rooms. These were rooms in which Optus had a regime in place prior to the incident for the control of the environment which included dust extraction, maintenance of humidity levels at about 50 per cent and dust pads for the extraction of unwanted material from the soles of shoes. Included in the schedule is Schedule R which are photographs taken on 3 January and 5 January 1997. It is that contamination to which Professor Hibbert's evidence was directed. 1049 It has been necessary to examine in some detail the events immediately following the incident as, in relation to Tyco's charge that Optus acted prematurely in the acquisition of equipment and in the decision to clean the equipment, submissions have been made that the decision was motivated by Mr Berents in an attempt to conceal his alleged failure, prior to the incident, to have in place, or cause to be implemented an appropriate business recovery plan. Moreover, the motivation of advisers to Optus was challenged as tainted by self interest. 1050 For reasons that follow, I have found it necessary to be critical of Tyco's conduct of the case in raising matters in submissions which were not put to witnesses and, as a matter of fairness, most certainly should have been. 1051 There was an associated submission on behalf of Tyco that it was kept out of the information loop as a result of a 'strategy' by Optus to direct activities towards the recovery of losses from Tyco and to compromise Tyco's ability to involve itself in the decision making process of recovery from the incident. 1052 Mr Cearns was called urgently into the Rosebery centre on the night of the incident and his observation was of a rust coloured "sludge ……. splattered over equipment, the ceiling, floor and walls of the data centre and the Tandem/EFTPOS room……… [He] observed dry, rust-coloured dust on the computer cabinets, on the floor and on the walls of both rooms". 1053 On 4 January 1997, Mr Cearns contacted Mr Robert Ballard of Relectronic-Remech Pty Ltd (Relectronic) to assist urgently in the cleaning up exercise. Relectronic was described as a disaster recovery company operating internationally which specialised in the recovery and restoration of equipment subjected to such catastrophic events as fire, chemical spills and like contamination of 'high-tech' equipment. Relectronic commenced cleanup on Sunday 5 January 1997. Thereafter in circumstances that are set out in these reasons, Relectronic provided several reports to Optus the first of which was that of 24 January 1997, by which time Professor Hibbert had produced his report of 9 January 1997. 1054 At an early morning conference of Optus staff on 6 January 1997, it was determined that Mr Berents and Mr Bayley would be jointly responsible for the coordination for the recovery from the incident. Mr Bayley's responsibility related to the restoration of facilities while Mr Berents was to attend to financial recovery, insurance and legal issues. A support team, including Mr Cearns, was also appointed and an operations room was set up.

1055 There were several meetings of interested parties on 6 January 1997. One took place with representatives of Leighton and Optus and another with Tyco and Leighton. In the case of Tyco, its representatives included Mr Grono who was not called in these proceedings. At that meeting the parties inspected the affected areas. A further meeting took place involving Optus directors who were informed of the current situation in relation to investigation of the incident and the steps being taken by way of recovery. A meeting also took place with representatives of Relectronic including Mr Ballard, a representative of Digital and several representatives of Optus who included Messrs Berents, Cearns, Bayley and Mr Paul Viciulis. Mr Viciulis was a risk manager who reported to Mr Berents. 1056 On 6 January Mr Ballard contacted Mr Terrence Michael Flynn the manager of the University Analytical Laboratory within the University of New South Wales. He was a scientist with a degree in Science from the University of New South Wales. His professional life was almost exclusively taken up in laboratory work, mainly of a research nature. He was deeply involved in the production of numerous Australian standards relating to chemical analysis. The notion of him providing advice to Optus only in the form that Optus wanted to hear has no substance. It was not clear to me whether Tyco's attack on Optus' integrity in this respect involved Mr Flynn. He presented as a completely open witness, a conscientious scientist. His reports were down to earth. In cross-examination he remained polite and was direct and firm in his responses. I regarded his evidence as reliable, although making concessions, possibly beyond those which I would readily accept. 1057 Mr Ballard informed him on 6 January of the incident, requested his assistance as a matter of urgency to identify the substance that had been injected into the environment of the Rosebery centre equipment and forwarded to him a tile which had been taken from the affected area. 1058 It is apparent from the minutes of the meeting of 6 January involving Relectronic, Digital and Optus, that Mr Flynn's initial advice of the nature of the contamination was then available as appears from the following record: "Contaminating substance is initially identified as a red oxide by Dr Terry Flynn of the University of NSW Unisearch Group" 1059 In his evidence in chief, he described the chemical nature of the particles found on the sample as follows: " Chemical nature of the particles Approximately 70% of the mass of the material isolated was magnetic indicating that a large amount of Fe3O4 and Fe was present in the material which had been sprayed from the Inergen nozzles into the computer room. The physical characteristics of the particles, the colourimetric test and the Scanning Electron Microscopy results indicated that the particles were mainly oxides of iron (Fe3O4 and Fe2O3), with some metallic iron and zinc present." 1060 On the same date Mr Flynn was provided by Optus with an Inergen nozzle and pipe which had been taken from the Rosebery centre. He caused that material to be analysed and his opinion as to the results of that analysis was as follows: "The results of the analysis of the sample taken from the Inergen nozzle pipe from Area 301 in the Data Centre ( Appendix 5 ) clearly showed high concentrations of iron and zinc indicating that the product was a mixture of iron oxide and zinc oxide, the corrosion products of steel and galvanised pipe.

The large amount of zinc and iron in the sample indicated to me at the time that the material contaminating the Inergen pipe system probably originated from the corrosion of galvanised piping and iron piping in the system.

The high concentrations of both iron and zinc in this sample are consistent with the high concentrations of iron found in brown substances removed from the tube side of the heat exchanger and with the high concentrations of zinc found in the ancillary piping samples (see below).

It is highly likely that the iron oxide in the tube side of the heat exchanger became mixed with the corrosions products (iron oxide and zinc oxide) of the ancillary piping at the time of the Inergen gas discharge and produced a mixture of iron oxide and zinc oxide corrosion products found at the Inergen nozzle pipe in the Data Centre." 1061 Mr Flynn also visited the Rosebery centre on 6 January 1997 and inspected the affected areas. Between 6 and 8 January he received "swab, tape and filter samples from Relectronics……[which] were primarily from the Computer Data Centre, but also included samples from the Switch and Transmission Room, the Tandem/EFTPOS Room and the UPS Room". Of those samples he observed as follows: "In the initial sampling, both anions and cations were determined (see Appendix 6 and 7 ). From these results it was obvious that the major contaminant was not anionic in nature but was particulate iron oxide and iron. Subsequent analyses were therefore limited to the quantification of the cation content of the swabs. …… The results clearly showed that the major contaminants in the Computer Data Centre, the Switch and Transmission Room and the UPS room were iron and iron oxide. The majority of the contamination appeared in high concentrations on the computer cabinets, on the ceilings, concrete floors, on fan impellers and on air conditioning filters. Examination of the air filters on some of the computers showed that a substantial amount of iron oxide had passed through the computers and over the circuit boards. The particle size distribution of the iron oxide contaminant of the computer room indicated that the material was very fine and mobile. Particles of size less than 10 m are be [sic] easily carried on natural air convection currents and would pass through the computer filters. Iron and some forms of iron oxide have magnetic and conductive properties. A particle of iron or its oxides can align with the currents passing through the electronic circuitry and be attracted to metal surfaces such as computer chip terminals and metal heat sinks. In addition, the metallic and magnetic particles can form long strings on the circuit boards and promote tracking between metallic and conductive components." 1062 There is no doubt that the offending substances were iron oxides and zinc and not any other material that turned up in Mr Flynn's analysis: a matter of some significance in considering Tyco's contention that other materials, than those related to the corroded Heat Exchanger, contaminated the Optus equipment to such an extent that it would have been necessary to clean the equipment, in any event. 1063 On 7 January there were a number of meetings with Optus, including meetings with Mr Flynn and Mr Allan Gilfillan McLachlan, the managing director of Relectronic which was known to Mr Berents from the latter's period of employment with Tyco. Both Mr McLachlan and Mr Berents had been involved in a recovery exercise in New Guinea and, subsequently, on an occasion in 1996, when Optus' facility in Canberra had been damaged by fire. Later that morning Mr Berents instructed Minter Ellison to act on behalf of Optus in relation to the incident. In the course of those meetings Mr McLachlan, according to the evidence of Mr Berents, informed Optus that the level of contamination, even with reduced humidity, was such as may cause failure and he recommended that the equipment be cleaned without delay. 1064 The reliability of that advice and related advice by Relectronic is challenged by Tyco on the basis that the advice was compromised by Relectronic's conflict of interest a likely cleaner of the equipment. 1065 As a consequence of the advice received, Mr Bayley directed that the staff at the Rosebery centre lower the humidity in the data centre to the "lowest extent possible and to target relative humidity [at] 38.5 per cent" - humidity had been maintained prior to that at 50 per cent. 1066 Digital also advised Optus at this time that it would be unwilling to warrant the performance of the computer equipment, given the extent of its contamination. The significance of that information lay in the fact that Digital operated the data centre equipment under an agreement with Optus. It was clearly a matter of importance that Digital's obligations under that agreement be not avoided by a failure to respond appropriately to the incident. 1067 On 8 January 1997 a meeting took place between representatives of Optus included in which were Messrs Berents, Cearns and Viciulis, and a representative of Cunningham Australasia Chartered Loss Adjusters (Cunningham) acting for the insurer of Optus. Out of that meeting came an undertaking by Cunningham to contact the London insurer to obtain the insurer's view on covering Optus' replacement of the GSMIS equipment. A further meeting was arranged for the following day to discuss the matter further. A separate meeting with Mr Murray of Cunningham and Optus on 8 January was attended by Mr Ballard who produced a preliminary analysis report from Unisearch. An internal meeting of Optus was held that day, also. 1068 A meeting took place with representatives of Optus at the Rosebery centre on 9 January 1997. Mr Flynn's contribution to that meeting was expressed in summary form as follows: "I attended a meeting at the Sydney Technical Centre on 9 January 1997. I was asked to describe the results of my analysis of the material that had been discharged into the Computer Data Centre. I advised that the product was essentially rust (iron oxide), containing high levels of zinc. I explained that 71% of the material removed from the ceiling tile above the Computer Data Centre was magnetic and that, over time, non-magnetic/non-conductive Fe2O3 could absorb moisture and could also convert to magnetic/conductive Fe3O4.

Professor Brynn Hibbert also attended this meeting. Professor Hibbert is a specialist in corrosion chemistry. I had showed [sic] Professor Hibbert a copy of the preliminary results and on 9 January 1997 he spoke at the meeting about the the [sic] presence of iron oxide and iron initiating corrosion at the interface of dissimilar metals on the printed circuit boards (PCBs). In addition, he noted that as time passed the oxides of iron would hydrate by contact with the natural moisture in the air and lead to acidic films being formed on the printed circuit boards. I concurred with Professor Hibbert that any iron and iron oxide contamination of PCBs should be removed as a matter of urgency." 1069 The representatives of Optus at that meeting included Messrs Bayley, Berents and Cearns. Mr Bayley's account of the information and advice given to Optus at this meeting was as follows: "73. On 9January 1997 a meeting took place between representatives of Unisearch, Relectronics and Optus. Terry Flynn of Unisearch reported on the results of analysis of samples taken from the Data Centre. In particular, Mr Flynn stated that the contamination in the Computer Data Centre was predominantly iron oxide. He further stated that 71% of the material tested was magnetic and, therefore, conductive with the potential to agglomerate. Mr Flynn advised that humidity was a major factor in the conversion of non-conductive iron oxide elements into conductive iron oxide elements. Dehumidifying equipment had been installed to reduce the risk of accelerated conversion. 74. Professor Brynn Hibbert from Unisearch stated that, over time, the iron oxide would hydrate and would agglomerate with the potential to cause increasing failure rates of printed circuit boards (PCBs) and other computer components." 1070 Mr Berents' account of the information and advice tendered at that meeting was as follows: "86. Rick Bayley & I confirmed that Unisearch should continue to provide technical and scientific support to Optus at Optus' request to support Relectronic-Remech in the work that it was carrying out for Optus. A copy of handwritten notes of the meeting is EX 2.018 P 0041-0044 Terry Flynn said words to the following effect: 'I have asked Professor Brynn Hibbert to speak to you today on the potential effect of the contaminant on your equipment. Professor Hibbert is an expert in electro-chemistry.' and '71% of the material we have tested so far is magnetic,' Terry Flynn also said words to the following effect: 'Haematite, which is Fe2O3, can be converted to magnetite, which is Fe3O4 by moisture'. and 'There are other corrosive elements present in the contamination - sodium, calcium and magnesium. These elements are not significant compared with the iron levels.' and 'We cannot quantify the levels of surface contamination unless all the computers are turned off and we can access all the pcb's. I know that that isn't possible. However, everything we have seen so far tells us that the contamination is on the boards. I have seen contamination on the boards, and it appears to be the same as that in the room and on the cabinets. We know the particle size is extremely small and is unlikely to be caught by the filters.' At 10.30 am Professor Brynn Hibbert arrived at the meeting. 87. I recall that Professor Hibbert said words to the following effect: 'Some forms of iron oxide are semi-conductive. I am not aware of an incident like this occurring anywhere else in the world. The environment is basically stable in the immediate short-term. As the potential risk of failure will increase all the equipment should be cleaned.' 88. I said to Professor Hibbert: 'Can you provide Optus with a report confirming your advice?' He said that he would do so. 1071 I am satisfied as to the accuracy of that evidence of the developments after the incident. 1072 It was Mr Berents' evidence in cross-examination that it was about this time that he had come to the view that the GSMIS computers had to be cleaned [T923:11]. 1073 Professor Hibbert's evidence in chief of his involvement in this subject matter on 9 January 1997 was as follows: " Initial Advice 4. On 9 January 1997 I attended the Sydney Technical Centre at about 10.00am. The incident that had occurred on 3 January 1997 was described to me and I inspected the facility. I was also shown the results of analyses prepared by Mr Terry Flynn of Unisearch Limited. 5. It was apparent that a quantity of water containing iron oxide particles had been discharged from the fire suppression system into the Computer Data Room and the Tandem/EFTPOS Room and that material had been deposited extensively in those rooms. 6. I attended a meeting at the Sydney Technical Centre on 9 January 1997. I was invited to give an account of the likely consequences of the contamination on the electronic equipment in the Computer Data Centre and The Tandem/EFTPOS Room. 7. After giving a resume of my experience in chemistry, electro-chemistry and corrosion, I outlined the chemistry of iron oxide and the mechanisms whereby contamination of computer boards by small particles of iron oxide could lead to complete failure. 8. I explained that the existence of iron oxide was likely to have adverse effects on computers, firstly because of corrosive activity and secondly, because of the conductivity of iron oxide particles. 9. I explained that the combination of iron oxide with water, ions and oxygen would lead to corrosion within the computers which could "eat" away metallic parts of the computer boards. The electrical current from this process could also cause failure of sensitive electrical components. I explained that, over time, there was a risk that the particles would "clump" or "agglomerate" and thus cause a "bridge" between parts of the boards through which a current could flow and thus adversely affect the operation of the boards. 10. I was asked to advise if Optus could leave the computers as they were without cleaning to remove the iron oxide or without replacing the equipment. I said that whilst a definite time scale for failure could not be given, the potential for failure would increase over time and, if Optus considered the computer equipment to be critical to their operation, the equipment would have to be cleaned or replaced. 11. I was asked to prepare a written report. A copy of my report dated 9 January 1997 is Appendix 2 . 12. My advice to Optus to immediately clean or replace was based on: (a) evidence of serious contamination of rooms and equipment; (b) knowledge that the effects of the contaminants would be deleterious to computer equipment; and (c) knowledge that if cleaning was delayed, failure could occur catastrophically across a number of computers as the corrosion developed." 1074 Professor Hibbert's report of 9 January, the purpose of which was stated as being "to offer an opinion as to the likely effect of the spraying a rust-laden solution over the computers and equipment", was in the following terms: " The deposit Rust is hydrated iron oxide having a composition approximating to FeOOH. On heating - Fe2O4 may be produced and magnetite (Fe3O4) may also be associated with the deposits. When sprayed about a room in the manner described to me I would infer that small particles of iron oxide would be distributed widely on any surface available. Following evaporation of the liquid, a fine dust of iron oxide would then be transported into equipment via cooling fans. Chemical analysis has confirmed this, with Fe (iron) being present in swabs of internal and external surfaces of electronic cabinets.

Effect of rust deposits on electronic equipment Iron oxide is non toxic and reasonably non-reactive. Forms of iron oxide are semiconducting, and the iron ion (Fe 3+) reacts with water to form acidic solutions. There is, however, no immediate risk to personnel. Electronic boards and components may be encapsulated in a plastic coating and therefore are protected from external contamination. If the equipment has not failed immediately from the ingress of the rusty water, it is my opinion that there is no present danger of failure. However, there is a longer term risk from the presence of chemical species that may degrade the performance of the equipment. Particularly: 1) The presence of iron oxide on metallic components may initiate corrosion by the interface of dissimilar materials. 2) Interaction of the rust with water vapour may lead to acidic films being formed on the equipment and result in accelerated corrosion. 3) The electrical properties of iron oxide may allow tracking across electrical connections.

Future action In my opinion all equipment contaminated by material from the fire suppression system should be thoroughly cleaned or replaced. The risk from long term action of the (mostly) iron oxide deposits is too great not to initiate a clean up operation. That the system has not already failed suggests that the immediate danger is [sic] passed. However that presence of foreign chemicals in the system must indicate that amelioration should be sought as a matter of urgency." 1075 In his further statement of evidence of 19 November 1999, Professor Hibbert adhered to his opinion "that it was necessary to clean the equipment to avoid the risk of corrosion and catastrophic failure". That was an opinion given with the knowledge of the results of analysis of material contaminating the equipment, undertaken after his 9 January report, and of the contrary views of experts retained on behalf of Tyco. 1076 It is also noteworthy, I think, to observe at this point that the opinions expressed by Professor Hibbert in his report of 9 January 1997 were commented upon and agreed with by Michael Francis Hubbell, an electronics recovery consultant, specialising in the recovery of electronic equipment involved in catastrophic events. He had developed a specialisation in relation to the corrosion of commercial computer equipment. He held the degree of Bachelor of Science in Mechanical and Ocean Engineering from the University of Rhode Island and a Master of Science in corrosion engineering from the same institution. He was the author of several publications in his discipline and his professional experience well qualified him to express the opinions given by him. He was not devoid of advocacy. However, he gave his evidence carefully and maintained a very high level of discrimination amongst the various factors involved in the questions put to him in cross-examination. I think he exhibited a high degree of intelligence and appeared to enjoy the intellectual challenge of cross-examination. I valued his opinions along with those of Professor Hibbert. 1077 Cross-examination of Optus witnesses who where involved in the meeting of 9 January with Mr Flynn and Professor Hibbert concentrated on the circumstances of Professor Hibbert's involvement and in particular the circumstances that gave rise to his report of the same date. This was in the context of the Tyco contention that Optus was only interested in advice that suited it and supported the cleaning of the equipment. I think that contention should be soundly rejected. 1078 What possible significance there could have been in the precise circumstances which involved having Professor Hibbert at the meeting has entirely escaped me. Yet, it was the subject of persistent and prolonged cross-examination. He is a person of undisputed qualification and undoubted professional integrity. Who arranged his presence at the meeting and in what circumstances, I think, can only have a significance in the mind of Tyco. It relates to criticisms of Mr Berents that were not put to him in cross-examination and which, I think, impugned the professional integrity of Professor Hibbert as an expert available to provide a report which did not reflect his opinion, simply to please Optus. 1079 In any event, the experts towards whom Optus turned at that time left Optus, in my view, with no other sensible alternative than to put in place a system of cleaning the equipment over time, accepting evidence of Professor Hibbert and of Mr Hubbell, that the immediate danger had passed. It would have been quite irresponsible on the part of Optus not to have acted otherwise. 1080 One may only speculate what would have been Tyco's position had Optus acted in the manner that Tyco maintained in these proceedings it should have acted, with the result that the contamination led to a collapse of the computer system. In the face of the advice Optus had received, the strongest criticism would have been justifiably levelled at it for failing to act on that advice of highly qualified experts: leaving Relectronic aside, only for the sake of argument. 1081 In relation to Relectronic's position in the matter, it provided the report to Optus of 24 January 1997, which contained an "EXPANATORY PROLOGUE" in the following terms: "EFFECTS OF IONIC CONTAMINATION The effects of ionic contamination are not always easily separable from non ionic types, as the borderline as to the causes is not well defined. CORROSION Corrosion is one of the most feared effects of contamination. When it occurs, the results are usually catastrophic, so it is advisable to understand the causes and take any necessary prophylactic measures, especially if it is foreseen that further damage will occur in poor climatic conditions (high temperature, humidity etc) or if contaminants are not effectively removed. ELECTROLYTIC CORROSION This will occur when an electric current passes through an electrolyte between two metallic electrodes. It should be noted and understood that it is not necessary for a printed circuit to be connected to a power supply for electrolytic corrosion to take place. This is because it is common for many different metals to be used in the construction of a printed circuit , such as copper, tin, tin/lead (solder) gold, nickel etc. Any two of these metals in electrical contact and bridged by moisture, with a small quantity of ionic contamination present, will form a short circuited voltaic cell, creating ideal conditions for corrosion to occur. LEAKAGE CURRENTS Leakage currents can present a very serious problem for high impedance applications, such as may be represented by an impedance of say 100 megohms or more between adjacent conductors. However, even impedances in the order of 1 megohm can cause problems, particularly with close conductor spacings. This kind of problem was relatively rare, until recently because semi conductors were originally essentially low impedance devices, typically between 10 and 10,000 ohms. A leakage resistance of one megohm would cause practically no error in the functioning of a typical circuit. However, the introduction of various families of field effect transistor devices (CMOS) has changed this and impedances of between one and one million megohms are now commonplace. Furthermore it would seem that progress has not stopped there and that there is a continual striving towards yet higher impedances in order to reduce power consumption. To illustrate this point, to drive a fan, utilising 10TTL logic circuits requires a packaged device drawing current of approximately 20 mA from a 5 volt line. To perform the same function with a COS/MOS circuits [sic], a current of about 0.2 A is more than sufficient, and a leakage current of 6 pA (represented by a leakage impedance of 8.3 X1011 ohms at 5 volts) may be sufficient to cause a "gate" to malfunction. EFFECTS OF NON-IONIC CONTAMINATION LEAKAGE CURRENTS Non-ionic contamination is a frequent cause of leakage currents, in a similar way to ionic contamination. Obviously, a short circuited pair of conductors is the worst possible example. PARTICULATE CONTAMINATION Particulate contamination can also cause serious problems. For example, the danger of a metallic sliver of iron oxide or ferrous oxide, existing on surfaces which are highly populated by critical devices, should be obvious to the least technically aware personnel. 1082 That material is included only to emphasise the nature of the information or advice that Optus was receiving at that time, which, clearly, could not be ignored. It is not set out as anything other than information received by Optus at that time. 1083 Included in that report was one by Mr Flynn which set out the sampling process that had been undertaken throughout January, the analytical methodology employed in relation to that material and which concluded with the following statement of the results so produced and the implications of that information: "5.0 DISCUSSION OF RESULTS

The results clearly showed that the major contaminants of the computer room and the switchroom were iron and iron oxide. The majority of the contamination appeared in high concentrations on the computer cabinets, on the ceilings, concrete floors, on fan impellers and on air conditioning filters. The analytical results to date indicate that there has not been any significant contamination of iron or iron oxide on the printed circuit boards themselves [sic] However, examination of the air filters on some of the computers showed that a substantial amount of iron oxide had passed through the computers and over the circuit boards. The particle size distribution of the iron oxide contaminant of the computer room indicates that the material is very fine and mobile. Particles of size less than 10 m would be easily carried on nature air convection currents. A second factor to be considered in this type of contamination is the fact that the contaminant has magnetic and conductive properties. Any particle of iron or its oxides would align with the currents passing through the electronic circuitry and be attracted to metal surfaces such as computer chip terminals and metal heat sinks. In addition, the metallic and magnetic particles would form long strings on the circuit boards and promote tracking between metallic and conductive components. Professor Hibbert in his statement (see Appendix B) points out that the presence of iron oxide and iron may initiate corrosion at the interface of dissimilar metals on the printed circuit boards. In addition, he noted that as time passes the oxides of iron will hydrate by contact with the natural moisture in the air and lead to acidic films being formed on the PCBs. There is no doubt that any iron and iron oxide contamination of PCBs must be removed as a matter of urgency. 1084 As earlier noted, the concern of the experts was the presence of iron oxides from the corroded Heat Exchanger: not other particulate matter on the computers, although not ignoring the other material. 1085 In the light of advice of that kind and several reports to like effect received in the following months, it makes it extremely difficult to extract any substance from Tyco's attack on the remedial measure adopted by Optus as being premature and unnecessary. 1086 To the extent that such a criticism depends on the urgency with which Professor Hibbert's report was provided, that leads nowhere, in my view, in the light of Professor Hibbert's later adherence to those opinions of 9 January 1997: confirmation of that advice being given in the knowledge of the material that Tyco relied upon in support of this aspect of its case. 1087 Neither should it be ignored that Optus' insurer was being kept abreast of what was in progress at the Rosebery centre following the incident. So far as there was an element of urgency in obtaining Professor Hibbert's report, that can hardly be the subject of criticism. It was always open to Professor Hibbert to qualify his opinion at the time if it was in some way compromised by the urgency of the situation. He did not. Perhaps a reasonable criticism could be levelled at Optus if it had not requested the report as a matter of urgency. In my view, there is an unnerving level of unreality in the way in which Tyco has seen fit to conduct its case. 1088 The decision to clean was made on 10 January 1997, at a meeting of the directors of Optus attended by Messrs Bayley and Berents, which accepted Mr Berents' advice to clean the equipment, a recommendation that was accompanied by a slide presentation and an address to the meeting by Mr Bayley, lasting approximately half an hour. The directors approved continuing investigations and complete de-contamination of the equipment. Mr Cearns was appointed to manage the operation of cleaning the equipment in the Data Centre and the Tandem/EFTPOS Room in respect of which daily meetings were held, as one might expect. 1089 On 9 January 1997, Cunningham had contacted Mr Timothy John Milne Cousins, a director of ExCEL Consulting Services Pty Ltd (ExCEL) which was a consultancy company specialising in representing insurers in relation to claims involving electro-mechanical and computer equipment. The purpose of the communication was to retain ExCEL to represent the interest of Optus' insurer in relation to the incident, as a consequence of which Mr Cousins attended a meeting at Optus on 10 January 1997. 1090 The instructions that Mr Cousins received on 10 January 1997 were to act on behalf of the insurer "to scrutinise the decisions made by Optus in the Data Centre Recovery Project in case Optus proceeded to make a claim under its insurance policy…… that ExCEL [was] to determine whether the costs incurred by Optus in the DCRP at Rosebery were fair and reasonable and were costs that arose as a result of incident." 1091 A formal letter of retainer was given to ExCEL by Cunningham on 13 January 1997. It was expressed in the following way: "The scope of your Company's involvement should include, but is not limited to:- 1. Review and comment on procedures adopted by Optus to reinstate their computer systems.

Assist and advise on the scope of repair/replacement to computer systems.

Assist and advise on the quantum and cost effectiveness of all matters pertaining to the repair/replacement of the computer system." 1092 Mr Cousins understood ExCEL's role as follows: "9. I understood Excel's [sic] role was essentially to act as an independent watchdog over potential insurance claims which Optus might have in the future under its insurance policy. Accordingly, I believed my role was to protect the insurer's position by: a) keeping costs as low as possible; b) ensuring recovery costs were fair and reasonable; c) ensuring the costs incurred were related to the incident." 1093 Mr Cousins was a consultant with considerable experience "in the recovery of businesses suffering a loss or disaster". ExCEL enjoyed an impressive client list which represented something in excess of $100,000,000 in insurance losses in active files at any one time between July 1998 and December 1999. The clients were distributed amongst insurers, loss adjustors and insured parties. He had extensive experience in "disaster recovery exercises involving particularly fire contamination of computer equipment" [T2129:52] He had frequently been involved with both Digital and Relectronic in such matters. 1094 As appears latter in these reasons, the manner in which ExCEL carried out its instructions had some limitations. However, at this point I think it is useful to observe that, virtually from the outset, Optus subjected its decisions to the scrutiny of the representatives of its insurer and put in place an independent costing system designed to isolate and identify expenditure incurred by Optus in effecting its planned recovery from the incident. 1095 Tyco does not challenge the system as a record of expenditure. Rather, its challenge lay in the gap said to exist between that record of costs, as monitored by ExCEL and later "audited" by KPMG, and the true measure of damages to which Optus may be entitled in these proceedings. That 'gap' will be addressed better in examining individual issues as to quantum. 1096 Those issues are underpinned by a dispute between the parties that appeared to have severely interfered with the procedure for simplifying quantum issues as requested of the parties by me and never achieved. That has resulted in the adversaries on the issue of quantum treading almost completely separate courses. If a note of regret is detected in those observations it would not be misplaced. While one cannot criticise the assiduousness of all parties in exercising their litigious rights, one may be entitled to be strongly critical of the extent to which that appears to have prevented the parties from adopting a far more time saving and rational approach to issues, particularly those of quantum. As for the system, I found it to be an extremely reliable one for the recording and identification of expenditure incurred in rectifying the damage to Optus equipment and one which was subject to a high level of verification for its reliability within Optus. 1097 Following the authorisation by the directors of Optus on 10 January 1997 of the purchase of GSMIS equipment, subject to the approval of Optus' insurer, to enable migration of applications from the contaminated GSMIS equipment, Mr Berents was informed by Cunningham that the purchase had been approved by the insurer. 1098 During the course of these proceedings, Tyco challenged the purchase of new equipment as being unreasonable, as second hand equipment would have served the purpose. That submission is rejected. I do not understand that case to be now pursued. However, significant attention was given to the issue during the proceedings and I think it has relevance to the level of Optus' response to the incident. 1099 Mr Berents explored leasing, acquisition of second hand equipment and purchase of new equipment with availability of equipment kept in mind. He was dissuaded from the acquisition of second hand equipment on advice from Digital that it was "all but impossible" to use second hand equipment having regard to the time required to set it up and the availability of such equipment. Mr Berents also considered that using second hand equipment carried with it inherent risks "for high risk applications". I have not found any difficulty in accepting that evidence. 1100 In relation to leasing, Mr Berents' enquiries resulted in the receipt of quotations which indicated a monthly cost of $1,240,000 over a six month period. That may be compared with the anticipated capital cost at that time of $8,260,000. He had been advised by Mr Larry Routt of Digital that new equipment should have a residual value of between "30 - 40 % of the purchase price". It was not a particularly challenging exercise to conclude that the purchase of equipment offered the best solution and, on 10 January 1997, a preliminary order was placed with Digital. 1101 As earlier noted, Relectronic had been engaged by Optus immediately after the incident to assist in the clean-up work and were engaged in reporting on the extent of the damage suffered by Optus in the months following. On 6 January 1997, Mr Ballard had been requested by Mr Berents to provide estimates, both as to time and costing for the cleaning of the equipment and, at a meeting later that day, a procedure for decontamination of the equipment was produced by Relectronic. 1102 There was an extensive period of negotiation between Optus and Relectronic over the terms of cleaning the equipment and it was not until 7 May 1997 that a formal agreement was reached between Optus and Relectronic. Tyco challenged the reasonableness of selecting Relectronic and contended that there was no evidence that the costs charged by Relectronic were reasonable: that Optus should have accepted a quotation from BMS Catastrophe Australia (BMS) based on "Hours required" and expressed in "Estimation cost" for each of numerous stipulated items of equipment. 1103 The submission by BMS of 10 February 1997 was a very carefully worded document and is expressed to be the consequence of its "examination [of the equipment] to ascertain the cost and time structure involved". It will be necessary to address the detail of Tyco's challenge to the reasonableness of Relectronic's costs later in these reasons. It is sufficient to note at this point that, in my view, there is little or no substance in that aspect of Tyco's case. 1104 The committee under Mr Cearns' chair produced a report dated 30 January 1997 entitled "EQUIPMENT RECOVERY STRATEGIES". As background, it described the Rosebery Data Centre, the state of Optus' operations at the Castle Hill Operations Centre (CHOC or Castle Hill), the steps taken since the incident and recommendations from Unisearch as follows: "The Optus Data Centre is composed of some 170 equipment cabinets in 350 sqm of computer room made up of 75 computer systems delivering services needed for 68 business applications. It is Optus' primary computing centre. Optus is currently building a second Data Centre at our Castle Hill Operations Centre. This centre will not be complete until the 1st of May 1997. Optus has a Business Recovery Plan for its Data Centre using contracted pre-emptible computing facilities located at the Digital Homebush site. The EFTPOS room contains some 30 cabinets in 50 sqm of computer room made up of [sic] and provides electronic commerce services. This rooms is adjacent to the Data Centre and is in the same Inergen zone as the Data Centre. Since the incident, both rooms have been cleaned of contaminant to the ceiling, underfloor, underfloor cabling and the externals of each equipment cabinet. No contaminant cleaning has been conducted within the equipment cabinets. The humidity within the rooms has been maintained below 40% and is in the process of being reduced to 30%. Recommendations from Unisearch, who have examined the site and performed analysis of the contaminant both external and internal to the equipment, is that all equipment within the rooms must be cleaned." 1105 The cleaning process was approached in the paper in the following way: " Cleaning Process

The base assumption is that all equipment in the Data Centre must be cleaned of all contaminate. Two periods of time over which the cleaning process will be complete have been chosen; a 7 month period and a 3 month period. The 7 month cycle will be used where expert recommendations identify that his period does not present an immediate hazard to equipment operation and where Optus does not experience an increase in failure rates. The 3 month cycle will be used should recommendations be that equipment be decontaminated immediately or where an increase in failures within the Data Centre force a more rapid rate. Recommendations are that cleaned kit can not [sic] be returned to the Data Centre until such time as all contaminated equipment is removed from the area or an area is made clean through further environmental decontamination. Use will be made of the Optus Data Centre Business Recovery Site at Homebush for the re-establishment of computing services prior to turning off services at Rosebery to allow equipment cleaning." 1106 The reference to the Homebush data centre (Homebush) was a reference to Optus' data centre leased from Digital at Homebush. It may be noted that, in relation to cleaning 'cycles', the report in the form of schedules, contained a "7 Month Model" and a "3 Month Model" with schedules of recovery costs which revealed an excess of costs for the 3 Month Model over the 7 Month Model of some six to ten million dollars. It was noted that over the seven month period "considerable….. co-operation [would] be required" within Optus and that for "the 3 Month Cycle to be accomplished, very aggressive outage planning [would] be necessary". The methodology was described as follows: " 2.2 Methodology

The Data Centre is composed of some 170 equipment cabinets grouped into 68 application systems. In order to clean kit without incurring unacceptable downtimes of up to 2 weeks on applications, Optus must first establish an image of the application at an alternative site and then transfer our customers to the new application site. Only then can the original equipment be released for cleaning. Once cleaning is completed, this equipment can then be released back into a pool at the alternate site to carry the next application released from Rosebery. An initial cleaning pool of equipment must therefore be established to allow this cycle to commence. This cleaning pool will reflect the minimum kit needed from the various models of equipment found in the Data Centre to accomplish the cleaning cycle in the time agreed. The shorter the total cleaning cycle, the more pool equipment must be procured in order to satisfy the increased number of units in the cleaning process at any one time. ……. The great bulk of equipment in the Data Centre is supplied and maintained by Digital Equipment (DEC). Following thorough international inspection, DEC has certified the Relectronic-Remach [sic] company as providing cleaning services able to restore fully, the warrantee [sic] and maintenance status of equipment following such an incident. Optus will approach the remaining vendors in the Data Centre and ensure that they also recognise the cleaning process as performed by Relectronic. With every cabinet to be cleaned, Optus will ensure that it is cost effective to clean the equipment rather than replacement from either new or second hand stocks. Decisions such as this will be made on the basis of quoted cleaning costs, age of equipment and written down value. Optus will ensure that every part purchased is tracked to ensure full accountability of this equipment at completion of the project." 1107 The technical state of Homebush and its use in the recovery system was described as follows: "Currently the Homebush site is network connected to Rosebery via an 8Mb microwave link. This link will be upgraded to a 16Mb microwave in early February. If Optus is to migrate critical application to this site with minimal business risk, it is proposed that the site have network diversity beforehand. Optus is in the process of installing a second 34Mb microwave and a fibre connection into this site. It is therefore proposed that, while GSMIS be made ready to take over operation at Homebush in the case of contaminant failures at Rosebery, cutover not take place until full network diversity is accomplished. This diversity, whether microwave or fibre, is expected to be available late March.

On the basis that a minimum cleaning pool will be necessary whatever the scenario, it is further proposed that the remaining cleaning pool kit be procured immediately in the most cost effective fashion. This kit will then be installed at Homebush, made ready and used to establish those critical systems possible using priorities identified in the Data Centre Business Recovery Plan. As with GSMIS, these systems will not be made operational until full network diversity is available unless equipment failures at Rosebery dictate otherwise.

Once network diversity is achieved, the initial Homebush cleaning pool equipment will be brought into operation which will allow release of equipment for cleaning at Rosebery. The Data Centre Business Recovery Plan will then be used to decide those systems next migrated from Rosebery to Homebush. The process will then continue using the methodology already described.

Ultimately all services transferred to Homebush will require migration have [sic] to either the Castle Hill Data Centre (CHOC) or back to the Rosebery Data Centre after full decontamination. Current application strategies call for approximately one half of all Homebush systems to ultimately reside at Rosebery and one half at Castle Hill. Given this situation, the strategy is to swing application migration from the Homebush site to CHOC as soon as CHOC is available.

The final step once full decontamination of Rosebery is achieved is to restore a balance of applications over both Optus Data Centres. This will involve migration of approximately one half of systems found in both the Homebush and CHOC Data Centres back to Rosebery. 1108 It was assumed in the case of the Tandem equipment "that the equipment…. [could] be cleaned and that the vendor [would] accept this cleaning and full restoration of any warrantee [sic] or maintenance status [and that]equipment must be removed and the room must be thoroughly cleaned before any cleaned equipment [could] be placed back into the room." That assumption proved to be unfounded. 1109 The migration of applications contemplated was, unquestionably, an immensely complicated task and one which the uninitiated has considerable difficulty in comprehending. Those who are conversant with the technology involved had considerable difficulty in articulating the detail of that complexity. In summary form, the simplest description of it was given by Byron Lister a Systems Architect as follows: "1. I have been asked to provide a short description of the magnitude and complexity of the DCRP.

2. The DCRP involved the recovery of about 70 systems. 180 cabinets had to be relocated and there were 83 migrations of applications.

3. There were constraints which required that it be completed within the shortest possible timeframe, whilst expending the least amount of money and causing minimal disruption to a company that was growing and competing in very [sic] dynamic market.

To manage this task a high level schedule was created that mapped what was believed to be the most optimal way of relocating the cabinets whilst spending the least amount of money. Six parallel migration streams were run, with some interdependency between streams.

The task of relocating all these systems was an incredibly complex one, where the variables of hardware availability, human resource availability and changing business priorities created an environment where the schedule of relocations was changing on an almost daily basis. ….. 7. Vendor, business, datacentre, Relectronic and DCRP staff availability affected when migrations could occur even once the hardware issue was resolved. A single weeks delay (for whatever reason) in a migration could have a cascade effect that affected months of migrations. These sorts of problems necessitated that sometimes quick decisions had to be made to ensure the whole migration process was kept on track. In some cases this meant a purchase of hardware to mitigate the delay, in others it meant slotting in another migration and reconfiguring the hardware to suit.

8. The planning for an individual migration started some 6-8 weeks before the actual migration was set (dictated by the hardware), and a detailed plan containing every single task relating to the relocation down to the minutest [sic] of details was created. This plan required input from vendors, support staff, datacentre staff and could run to hundreds of tasks for a complex migration. The GSMIS migration plan included 370 tasks. As well, there were hundreds of testing tasks that vendors and support staff had to carry out before the migration and many low level tasks that the datacentre staff needed to carry out." 1110 At the time of the January strategy paper, Castle Hill was in the stage of development and was not expected to be available until towards the middle of the year. 1111 As outlined in Mr Cearns' strategy paper of 27 April 1997, there was a marked change in the recovery strategy following the acquisition by Optus of Vision which operated a data centre at Blacktown (BLOC or Blacktown). The methodology described in the 30 January paper and its format continued to be used in the April paper. It outlined the efforts that had been put into migrating applications to Homebush as follows: "The GSMIS application performs all activation's and provides customer support for all of Optus' mobile telephony services. It is Optus' largest and most complex applications. Given the size of this application, migration to another site will take up to 18 hours to complete. During this time, all activation's and customer services are unavailable.

Optus has been attempting to perform this migration during business long weekends so as to minimise disruption to services to its customers. Unfortunately, as a result of delayed bandwidth availability into Homebush and technical difficulties experienced while establishing and testing this extremely large system, migration has missed both the Easter and Anzac [sic] long weekends. As already identified, a successful GSMIS migration was to release the considerable equipment inventory needed to commence the migration of applications to follow." 1112 The effect of the acquisition of Vision on the existing strategy was described in the April strategy paper in the following way: "On the 1st of April, Optus Communications announced the decision to purchase 100% of Optus Vision. Optus Vision operated a 250 sqm Data Centre at its Blacktown site. Immediately following this announcement, Optus Communications re-examined the futures [sic] of the Rosebery Data Centre and recognised that cost and application migration risk could be reduced by adopting the Blacktown site as its second Data Centre to Castle Hill rather than Rosebery. Use of the Blacktown Data Centre would significantly reduce recovery costs and business disruption through the elimination of application double handling from Homebush and Castle Hill back into Rosebery. Further movement of equipment into Homebush has now ceased and applications will be migrated into both Blacktown and Castle Hill based upon future operational considerations and optimal Business Recovery strategies. As with the Homebush site however, equipment migration into Blacktown would wait upon establishment of the necessary network bandwidth. The GSMIS production application will now be migrated to Castle Hill as soon as possible rather than Homebush. Optus, together with its hardware and software support vendors, is working to develop techniques to minimise the service disruption period and permit this very large application to be moved in periods other than a long weekend." 1113 The diagram accompanying that paper was based upon the movement of 170 cabinets from Rosebery through the off-site cleaning location, through to the 110 cabinets going to Castle Hill and 60 to Blacktown, with none returning to the Rosebery centre. Three detailed tables accompanied that paper, providing costs respectively for the three alternative strategies, namely: "- The current strategy for use of only Blacktown and Castle Hill. Rosebery Data Centre to be closed down.

• The original strategy using Homebush and Castle Hill. Continued use of Rosebery as our Second Data Centre.

• A baseline strategy where all applications are migrated to Homebush to permit cleaning of Rosebery with subsequent migration back to Rosebery." 1114 Each of those tables followed the format of the "7 Month Model" and "3 Month Model" costings and, in each case, showed a range reflecting the "Initial Costs" and "Final Costs" respectively. The basic difference between those 'costs' categories reflected what was estimated to be recovered in disposing of the equipment after the decontamination process had been completed, along with the effect of depreciation allowances [T 1781:11 - 1784:55]. 1115 In relation to the strategy to use Blacktown and Castle Hill rather than return cabinets to the Rosebery centre, the cost was estimated at $33,974,000 representing the Initial Costs and $28,018,000 for the Final Costs. Those estimates may be compared to the estimates of $36,890,000 and $30,961,000 for the original strategy and $40,194,000 and $34,269,000 estimated in relation to the base line strategy. That change in strategy, as set out in Mr Cearns April paper, was the manner in which the recovery process then proceeded. It represented a saving in costs over the costs of returning the equipment to the Rosebery centre after cleaning, of approximately $3,000,000. The revised strategy has given rise to several issues which are addressed under specific headings later in these reasons. 1116 In the case of the Tandem equipment, the assumption made in the January paper of Mr Cearns was not realised. Chitrani Champika Gunasekera was a technical specialist employed by Optus from 1994 to September 1999. Ms Gunasekera was a member of a team created for the recovery of the Tandem equipment which was headed by Mr Emanuel Alfris to whom Mr Stephen John Harrison reported, he being the Manager of Technologies. Ms Gunasekera reported to Mr Harrison. Ms Gunasekera was a Bachelor of Science in engineering from the University of Moratuaa, who specialised in electronics and telecommunications. Her employment in Optus was, initially, as a senior engineer with responsibilities in the forecasting and planning division. Following the incident she joined the Enhanced Engineering Division in Optus. She described her role in this capacity as follows: "7. My role in the technical design aspects of the recovery project involved close liaison with Jon Turnbull, the Tandem project manager seconded from the manufacturer, who was assisting the team. It was my responsibility to consider the implications of incremental removal (for cleaning purposes) of equipment and its ongoing functionality. Therefore, it was not only the units or consoles that I had to consider, but also the data links and the means of linking peripherals attached to those units. I also had to consider who would be affected and how different strategies for the incremental removal of various items would impact on the system as a whole.

8. I was peripherally involved in the decision making as to strategy and I would study and give recommendations on certain aspects. Where a large amount of expenditure was involved, Emanuel Alfris and Steve Harrison would make the final decisions." 1117 She presented as a competent engineer who responded in cross-examination directly and without any appearance of bias. Ms Gunasekera was no longer in the employment of Optus at the time of the proceedings. Her evidence as to the comparative costs of various strategies involved in the cleaning or replacing of equipment in the Tandem/EFTPOS Room was not challenged in cross-examination. As in the case of Mr Harrison, cross-examination was directed, mainly, to the knowledge of the witness of any testing of that equipment for contamination and the use to which the equipment was put by Optus after the incident. Neither was able to provide any assistance as to the extent of any examination of the contamination of equipment in the Tandem/EFTPOS Room. 1118 It is Tyco's principal case that there was no need to replace or clean the Tandem equipment, on the basis that there was no evidence of independent testing of the equipment in that room. Optus relied upon the evidence of general contamination in the data centre, the assumption being that the Tandem EFTPOS equipment was affected in much the same way as the equipment in the data centre. The need to clean equipment is addressed later in these reasons, as are issues relating to the use to which the affected equipment was put subsequent to the incident and costs associated with a change in the location of the Tandem/EFTPOS room following the incident. 1119 However, I think it is appropriate at this point to deal with the contention that no finding of a need to replace, or clean the Tandem equipment is justified, in view of the absence of independent testing of that equipment. In my view, if one concludes, as I do, that the nature of the contamination observed on inspection by lay and expert people and as expressed by experts upon the basis of analyses of samples of contamination taken from the Rosebery centre was such that there was a need to clean the equipment in zone 3, no distinction should be drawn between equipment in the data centre and the Tandem/EFTOPS room on the basis of the lack of specific analyses of material taken from the latter room. 1120 In particular, I note from the evidence of Professor Hibbert that his inspection of the Rosebery centre included inspection of both the data centre and the Tandem/EFTPOS room and he drew no distinction between the nature and extent of the contamination affecting both areas: one is tempted to add 'as one might expect'. No plausible basis for distinguishing between the two areas was put forward by any party or witness. Although Professor Hibbert's report of 9 January 1997 appears to limit his observation and opinions to the data centre, it is clear from his evidence in chief that he was concerned with both the data centre and the Tandem/EFTPOS room and that his advice, tendered at the meeting of 9 January 1997, was general advice which, in my view, should be taken as applicable to equipment in both the data centre and the Tandem/EFTPOS room. 1121 Professor Hibbert's report was directed to the data centre for the reason only that the immediate concern of Optus was the protection of the equipment in the data centre. 1122 I am not aware of any cross-examination of Professor Hibbert aimed at differentiating the contamination in the tandem/EFTPOS room from that in the data centre. Moreover, it appears that Tandem Computers Pty Ltd (Tandem) had carried out an inspection of the tandem equipment on 6 January 1997 by its Senior Support Tandem Engineer, Mr Michael Rogers, who, it was recorded, "found evidence that both the external cabinetry and internal components had been contaminated by rust particles". This was recorded in a letter from Tandem to Mr Alfris of 30 January 1997. The terms of the letter follow: " Subject : Contamination of Optus' K10000 & K1000 Himalaya Processors

Based on consultation with our manufacturing plant in Stirling Scotland, plus investigation by our engineers in Australia and Professor Hibbert's report, we are now in a position to make an initial recommendation to Optus Communications regarding the contamination of the K10000 and K1000 Himalaya processors that occurred on Friday the 3rd of January 1997.

It should be noted that without more extensive investigation, it is impossible at this stage to make a formal recommendation to Optus.

On Friday the 3rd of January, the Rosebery Technical Centre has a false fire alarm. During this alarm, the inert gas fire prevention system was activated. Instead of gas only being expelled, an amount of water containing rust was also sprayed into the computer room. These rust particles were widely distributed and were deposited over the K10000/K1000 cabinetry as well as being further and continuously transported into the K10000/K1000 internals via cooling fans. In addition all peripherals (consoles, printers, IVRs etc) were affected by rust contamination.

Actions to Date. s Optus commissioned a report by Professor Hibbert of the Department of Analytical Chemistry, University of New South Wales on the impact and foreseeable consequences of the rust contamination on the systems in question. Professor Hibbert stated that long term risks from the contamination were as follows:

3. Tracking occurring across electrical connections in computer equipment. s Mr Mike Rogers, Senior Support Tandem Engineer, carries out an inspection of the K10000 and K1000 Himalaya processors on Monday the 6th of January 1997. Mike found evidence that both the external cabinetry and internal components had been contaminated by rust particles. s Mr Phil Hepworth, Northern Region Support Manager, forwarded Professor Hibbert's report plus Mike Rogers' observations to Mr Terry Smith, Quality Manager for Tandem's Manufacturing Plant in Stirling Scotland.

The following initial recommendation comes from our Stirling Manufacturing Plant and is based on Mike Rogers' examination plus Professor Hibbert's report. Prior to making a formal recommendation, Stirling has requested further investigation be carried out on the extent of the rust contamination.

Professor Hibbert in his report of the 9th of January recommended that all contaminated equipment (which includes the K10000 and K1000 Himalaya Processors) be thoroughly cleaned or replaced and that this be done as a matter of urgency.

Tandem has carefully investigated the option of cleaning the equipment. This would involve stripping the system down to component level and cleaning with deionised aqueous solution. Many components (disks, power supplies etc) would have to be replaced rather than cleaned. The cleaning procedure would require the system to be removed from the Rosebery Technical Centre for a minimum period of six weeks.

Our Stirling Manufacturing Plant has stated that despite thorough cleaning, there would not only remain the uncertainty of future function and reliability of the system components, but also future electrical safety of the systems. Due to the grave concerns regarding ongoing reliability of the systems, and more importantly, the safety aspects, Tandem is not in a position to take any risks by recommending the cleaning of the systems.

In addition, the Stirling Plant has stated that in their present 'contaminated' condition, these same concerns remain. That is, the future function and reliability of the systems cannot be guaranteed, nor can the electrical safety of the equipment be guaranteed.

Consequently, based on the considerations outlined above, Tandem's current position is that the future performance and electrical safety of the K10000 and K1000 processors cannot be warranted in either the present contaminated state or a 'cleaned' state.

In summary, based on the information provided and inspections made, Tandem's initial recommendation is that the K10000 and K1000 Himalaya Processors plus all associated peripherals be replaced as a matter of urgency.

Prior to formalising this recommendation, Tandem would require that an inspection be carried out on the K10000 and K1000 by an electrical engineering environmental specialist from our head office in Cupertino, California.

I would appreciate the opportunity to discuss our initial recommendation with you and to determine actions to move towards a formal recommendation regarding the K10000 and K1000. 1123 Tyco relied upon the statement in that letter that "without more extensive investigation it [was] impossible at [that] stage to make a formal recommendation to Optus" and that prior to formalising its initial "recommendation, Tandem would require that an inspection be carried out on the K10000 and K1000 by an electrical engineering environmental specialist from [Tandem's] head office in Cupertino, California". 1124 However, it may be noted that the "initial recommendation" was based upon Professor Hibbert's report, on investigations made by Tandem's engineer and consultations with the Scotland manufacturing plant and that it recommended that the "Himalaya Processors plus all associated peripherals be replaced as a matter of urgency". 1125 Given the absence of any justification for distinguishing between the nature and extent of the contamination affecting the data centre and the Tandem/EFTPOS room respectively, the absence of a "formal" recommendation by Tandem is no sufficient basis for rejecting Optus' case in relation to the Tandem equipment. In any event I would regard the need for "more extensive investigation" to have been satisfied by Optus in the months following 30 January 1997 with the involvement of various experts, including Professor Hibbert. 1126 The closest cross-examination on this subject matter was directed to Mr Flynn. His evidence in chief as set out in his report of 19 November 1998 was expressed to relate "to the chemical analysis of samples from the heat exchanger, associated pipe work and various rooms within the Sydney Technical Centre between January 1997 and December 1997". In summary, in relation to testing of those samples, he observed that they "revealed high concentrations of iron and zinc which led [him] initially [that is, in January 1997] to the view that the source of those elements was the corrosion of galvanised piping and iron piping in the Inergen piping system [and that subsequent] testing [had] confirmed that view". 1127 Appendices 13 to 16 of Mr Flynn's report contained the analytical results of samples from the data centre the switch and transmission room, the UPS room and the tandem room respectively. His conclusions in relation to those analytical results were expressed as follows: "In relation to product taken from the Computer Data Centre during 1997, the results in Appendix 13 indicate overall that iron oxide had entered the Computer Data Centre and appeared on the cabinets and the computer [sic] themselves, (including the computer circuit boards). The contamination was accompanied by iron, zinc from the galvanized Inergen piping surfaces and high levels of chloride which was most likely associated with the water discharged from the heat exchanger.

Similarly, in relation to product taken from the Switch and Transmission Room and the UPS Room, the result in Appendix 14 and 15 also demonstrate the existence of high levels of iron oxide and zinc on the cabinets and within the PCB computer circuit boards themselves.

In relation to product taken from the Tandem Room, the samples I received did not reveal significant gross contamination. This presumably relates to the position of the sampling ." (emphasis added) 1128 A review of appendix 16 would not justify a conclusion that iron and zinc were absent from the samples in the Tandem room with levels up to 0.54 micrograms per square centimetre of the area swabbed and 3.81 micrograms from the element removed from the board. In the case of zinc, levels up to 7.98 micrograms were identified. Those figures may be contrasted with the cross-examination relied upon by Tyco as follows: Q. If I could take you over to page 16 of that where you deal with the samples from the Tandem room. They are also the subject of appendix 16. A. Yes. Q. That has also been recalculated as appendix 16? A. Yes. Q. You expressed the view that there was really no significant gross contamination. Do you see that? A. Yes, I was referring to iron mainly. Q. In contradistinction to the views you expressed about other things, you considered that there was no real contamination, significant contamination in the Tandem room; correct? A. That's true, yes. (T998:35 - 54) 1129 My first comment is, that what was put to Mr Flynn was not quite what was expressed in his report. His report was expressed in terms of "the absence of "significant gross contamination"". The second comment is that that finding was explained in the report as "presumably [relating] to the position of the sampling". It was not put to Mr Flynn that there would be some other justification for distinguishing results between those relating to the data centre and to the Tandem/EFTPOS room respectively. 1130 In my view, based on my findings in these reasons, no distinction should be drawn between the need to clean the equipment in the Tandem room and any need to clean equipment in the data centre. 1131 I think the most convenient summary of the evidence of the nature of the equipment in the Tandem/EFTPOS room and of the steps taken by Optus in replacing that equipment may be found in the written submissions on quantum on behalf of Tyco, as appears from the following:

"164. The Tandem system is a computer used by Optus for the provision of its Smartpay, Transact, Eftpos, Messaging, Insight and ICCS products. The Tandem and its associated hardware was located in the EFTPOS room at Rosebery STC. The Tandem machines at the time of the incident consisted, in a hardware sense, of a K10006 system and a K1002 system. The K10006 system was so called because there were 6 K1000 central processing units ("CPU's"). The K1002 system was so called because there were 2 K1000 CPU's. The K10006 system was used for production purposes and the K1002 system was used for development purposes. 165. Following the incident Optus replaced both of these Tandem machines with new Tandem machines. It is Optus' contention that it was necessary to replace these machines on the basis that the contamination was such that Tandem was not prepared to warrant the machines, and accordingly Optus contends that Tandem recommended replacement. Tyco disputes this contention, and submissions in respect of that matter are dealt with elsewhere in the submissions on the plaintiffs' response to the incident and the need to clean the computers due to the malfunction of the Inergen system. 166. Optus replaced the existing Tandem machines with 2 new Tandem machines as follows: (a) A new production machine, being a K2008; and (b) A new machine acquired for the purposes of development, be a K2002. 167. The new K2008 cost approximately $1,654,000 and the new K2002 cost approximately $441,000. Optus also purchased new K2008 discs at a cost of approximately $234,000. 168. The K2002 development system was subsequently upgraded to a K2004 development system at a further cost of $39,371. Optus contends (which is not disputed) that the new Tandem K2002 which had been installed in the new Tandem room did not have sufficient capacity to service the backlog of work that had built up since 3 January 1997 pending the establishment of the new Tandem room and installation of the new K2002. 169. In deciding to purchase the new K2008 and new K2002 Optus also considered the possibility of second hand equipment as well as the possibility of cleaning the allegedly contaminated equipment, rather than purchasing new equipment. Tyco does not dispute the reasonableness of the decision to purchase new equipment (leaving aside for one moment the reasonableness of taking any of these steps at all, dealt with in the submissions on the plaintiffs' response to the incident and the need to clean)." 1132 The reference to the evidence in that summary consists of the evidence in chief of Ms Gunasekera, from which it may be taken that there was no challenge to Ms Gunasekera's evidence in this area. It will be necessary to return to her evidence when examining other issues raised by Tyco in relation to the use to which the Tandem equipment was put. 1133 The position in relation to the switch and transmission room is that there was limited escape of contamination into zone 1 and the claim of Optus in regard to that area is one for the "decontamination of the environment in and around Zone 1 and Zone 2". There is a dispute as to the reasonableness of the costs claimed by Optus for this rectification work. It does not involve a substantial amount of money. 1134 During the course of final addresses, counsel for Optus presented a table of monetary claims which differentiated claims by the respective plaintiffs as set out below, noting that during the course of submissions Optus accepted the need for further adjustment. First Plaintiff IT Ref Particulars Amount 1.1 Cleaning of the environment - Relectronic-Remech 70,060.00 1.2 Cleaning of the environment - Relectronic-Remech 140,707.00 1.3 Cleaning of the environment - Relectronic-Remech 144,666.30 1.4 Cleaning of the environment - Relectronic-Remech 11,732.17 1.5 Cleaning of the environment - Relectronic-Remech 43,254.85 1.6 Cleaning of the environment - Relectronic-Remech 152,166.12 1.7 Storage of heat exchanger etc 57,186.30 5.1 Cleaning of the environment - Relectronic-Remech 146,716.00 5.2 Cleaning of the environment - Relectronic-Remech 1,720.00 10.2 Establishment fibre services - Homebush 32,180.62 17.1 Blacktown upgrade 2,422,055.00 17.4 Blacktown upgrade 522,722.00 17.6 Blacktown upgrade 25,148 17.7 Blacktown upgrade 16,591.54 18.1 Transmission facilities 56,482.00 50.1 Cleaning of the Tandem equipment 83,013.00 51.1 Purchase of new Tandem equipment 2,328,806.00 51.2 Purchase of new Tandem equipment 266,030.26 52.1 Establishing alternative environment 80,250.45 52.2 Establishing alternative environment 34,005.00 52.5 Establishing alternative environment 73,107.54 52.6 Establishing alternative environment 10,433.80 53.1 Deinstall/reinstall costs 66,910.20 54.1 Testing and migration, management 122,000.00 55.1 Replacement tapes 11,009.25 57.1 Optus staff costs 15,673.34 100.3 Site investigations 19,279.96 120.1 Incidental disbursements 533.26 120.2 Contract staff 104,938.44 130.3 Securing Data Centre - Chubb 208,756.70 200.1 Circuit rack testing, freight and insurance 3,056.00 200.2 Cleaning of the environment - ADR 151,880.00 Total: $7,423,071.10

Second Plaintiff: IT Ref Particulars Amount 11.1 Establishment of power and network feeds 5,133.18 12.1 Digital computer and staff space at Homebush 48,280.00 12.2 Accommodation of GSMIS at Homebush 19,890.00 12.3 Security guard at Homebush 16,376.18 13.1 Preparation of GSMIS for production 28,878.00 15.1 Establishment of band width 55,070.04 15.2 Establishment of network infrastructure capacity 296,301.01 15.3 Establishment of network infrastructure capacity 29,566.24 15.4 Establishment of Wide Area Network 166,849.04 16.1 Blacktown operations costs 68,325.00 16.2 Network Support at Rosebery 158,136.01 16.3 Additional management systems 91,938.89 17.2 Blacktown upgrade 30,990.00 20.1 Cleaning of equipment 2,471,542.33 21.1 Purchase of pool kit 7,989,790.60 21.2 Purchase of pool kit 4,710,009.68 21.3 Leasing of pyramid 9,120.00 21.5 Replacement system 1,432.00 21.8 Replacement costs of equipment 11,667.88 22.2 Establishment of alternative network facilities at Rosebery 25,290.00 23.1 Equipment maintenance policy increased costs 309,000.00 23.2 Equipment maintenance policy increased costs 746,417.42 23.3 Increase in maintenance costs for pool equipment 258,776.15 24.1 Migration of equipment 256,435.00 25.1 Digital costs on migration 127,260.00 26.1 Digital costs on migration 214,655.00 27.1 Digital costs on migration 34,700.00 28.1 Migration management costs 178,040.00 28.2 Migration management costs 67,440.00 28.3 Migration costs 581,550.30 28.5 Engineering resource 285,000.00 28.6 Pool equipment documentation resources 51,573.48 28.7 Management of Data Centre changes 75,720.00 29.1 Test and application support resources 59,413.72 30.1 Test and application support resources 595,905.73 30.2 Software delay costs 223,691.00 31.1 Digital costs of tracking costs 86,687.50 31.2 Migration costs 30,000.00 32.1 Replacement tapes 53,705.00 32.2 Miscellaneous consumables 9,846.97 34.1 Pool equipment cabling 66,871.68 35.1 Replacement Computer boards 231,804.83 36.1 Staff costs 1,196,532.27 36.2 Staff costs 66,250.00 37.1 Transport of staff to and from Data Centres 9,836.50 100.1 Unisearch fee 24,600 130.1 Couriers 603.68 130.4 Miscellaneous administrative charges 9,214.08 Payroll and related expenses 168,462 : Total $22,254,578.39

IT Ref Particulars Amount Cost of cleaning cabinet $18, 167.14

1135 Tyco's case that there was no need to clean the equipment acknowledged that rust contaminated water was splattered throughout the data centre and Tandem/EFTPOS room on the walls, on the cabinets housing sensitive electronic equipment and on the internal areas of those cabinets. 1136 Its starting point was to accuse Mr Berents of moving Mr Bayley aside, almost immediately after the incident, in the decision making process and who for personal selfish reasons, decided upon a total clean up to protect his reputation from attack for an alleged failure to put in place and implement a satisfactory recovery plan for Optus prior to the incident. In the process it was, in effect, asserted that Professor Hibbert's report of 9 January 1997 was one provided in terms that suited Optus and, specifically, at the request of Optus. 1137 However, one should not lose sight of the fact that Mr Berents was not given the opportunity in cross-examination to meet such charges. He was in the witness box over 4 days and was the last witness to be called in the case in reply. Tyco's submission involved a number of assertions about Mr Berents that, perhaps, should not be left uncommented upon, although it may be sufficient for me to say that I reject completely the construction Tyco has attempted to put upon Mr Berents' conduct in relation to the decision making process within Optus. I am comforted in that conclusion by the fact that much of the material assertions were not put to Mr Berents. 1138 Generally speaking I found Mr Berents' evidence reliable. However, it would have been far better if he had not seen his role as advocating Optus' position as strongly as he did. In a couple of respects I found his evidence unsatisfactory, although not such as to taint the general reliability of his evidence. He was obviously a dedicated and hard working staff member of Optus. While the practice of the Commercial List does not require all propositions of the opposing case to be put to a relevant witness where the opposing cases have been well delineated in the evidence, Tyco's criticisms of Mr Berents would have enjoyed some credibility had some of the more serious criticisms been put to him in cross-examination. 1139 It was submitted that Mr Berents had "sought to downplay his role in the decision making". That was far from my impression. If anything, I think that Mr Berents accepted that he played a leading part in the decision making process and acknowledged that, from the start, he had been of the view that a clean up of the equipment was required along with acquisition of GSMIS equipment to enable migration of applications to take place. 1140 It may be noted that almost all of the material relied upon by Tyco for its attack upon Mr Berents was that contained in the cross-examination by counsel for NDY. I also note that although NDY, along with Leighton, left submissions on quantum to Tyco, neither NDY nor Leighton have made submissions as to the credibility of Mr Berents in the manner put forward by Tyco, as I would have expected to be done had either adopted Tyco's position. 1141 It was also put on behalf of Tyco that, presumably as part of this self protective process, Mr Bayley was "moved aside in relation to the plaintiff's response to the incident", on the basis that he did not support Mr Berents in the decisions taken. In my view, there is no substance of any kind in that submission, nor was it put to either Mr Bayley or Mr Berents. It was submitted on behalf of Tyco that: "Mr Bayley had been of the view as at 9 January that decisions as to Optus' response to the incident should be delayed while a lot more testing was done." 1142 The evidence relied upon for that submission was as follows: A. And/or whether we had to clean everything - that was my view and I know there was other people within the group who had slightly different views because they were of the belief that we should delay some of the decision-making. Q. Would you be good enough to tell his Honour who it was within the group who expressed views of that nature? A. I thought Mr Bayley was - wanted a lot more testing done. (T645:34 - 44) 1143 I will be seen that what Mr Berents was referring to was the existence of "slightly different" views within Optus in relation to "some" aspects of the decision making process. It was not evidence, that in my view, supported the proposition advanced on behalf of Tyco and, in any event, is at odds with the evidence given by Mr Bayley as follows: Q. There was no need to purchase the $8.5m-odd worth of GSMIS pool equipment on 10 January 1997, as opposed to deferring that order until such time as may have been closer to the need for actually having the equipment. A. The timing of the likely impact of the contamination on our equipment at that time was clearly uncertain, because this was an unprecedented event for which we had not been able to establish any benchmarks overseas. As an organisation, we felt that there was an immediate need to proceed to mitigate our risk, and the decision in respect of purchase was taken in that context. Q. That meant, did it not, that the decision was made to commit the company to the purchase of over $8m worth of equipment, before it was known with any certainty when that equipment would actually be required? …… MR ROBB: Q. Mr Bayley, I am putting to you that Optus's [sic] decision to purchase the GSMIS equipment was precipitate, given, first, the lack of objective information as to how early you would have to have that equipment in the data centre in order for it to be installed in a timely manner. A. I don't agree with that statement. Q. You didn't have to act within seven days of the incident. A. My view at the time, and the view of my colleagues and the directors of the company who were responsible for these operations, was that we did have to act as expeditiously as possible to start the cleaning process. Q. Do you not accept that the more efficient order for approach of the matter was to first find out, by making appropriate inquiries, (a) of the likes of Relectronics as to a program for turnover; and (b) as to final considered advice as to the need for cleaning, before committing the company to a purchase of that magnitude? A. I don't concede those points. Q. Did you take part, before the order was placed on Digital, in any internal Optus discussion as to whether there were any alternative cleaning strategies to a strategy which involved purchasing the $8m-plus worth of equipment? A. There was considerable discussion between 6 and 10 January, both as recorded in my notes and in the core team environment as to the types of cleaning strategies which could be adopted and the approach that we should take to that. At the end of the day, it was a given, on the basis of advice from Unisearch, that we would need to clean the equipment. We had not decided on who was going to clean the equipment and what cleaning method would be used, and what the cycle of cleaning would be, other than that the GSMIS equipment would be the first equipment to be cleaned, because it provided the optimum pool of equipment to enable rotation out of the data centre for further cleaning. Q. When you say "rotation" was it your understanding, coming from the discussions in which you participated, that, first, the GSMIS applications would be migrated to the new equipment? A. That is correct. (T307:10 - 30; T307:51-308:46) 1144 Clearly Mr Bayley was a concurring party in the decision making process criticised by Tyco. The matter was elaborated upon in re-examination of Mr Bayley, as appears from the following: A. In the period up to 8 January, there had been discussion in the core team, or the tiger team, whatever you care to call it, about the immediate risk and the need to replace - or to get a starter kit and the GSM equipments or application was the ideal candidate for that. On 8 January there was discussion with our loss adjustor, Andrew Murray from Cunninghams, about the views of Cunninghams as to proceeding with the purchase and, to the best of my recollection, without my notes in front of me, Andrew Murray was charged with ringing London on the night of 8 January, to seek their views. There was some feedback from that, the details of which I do not recall precisely, and as a result of that we sought out more expert opinions to support that purchase. HIS HONOUR: Q. That expert opinion was sought from whom? A. From Unisearch, as to the likely effects of this chemical - this contamination. Q. That gave rise to this meeting at which Professor Hibbert arrived, did it? A. That's correct. Q. Then I don't understand your answer to the question that the decision had been made to purchase the replacement equipment at that stage? A. In the circumstances we were in, your Honour, we had taken the view that we needed to proceed with cleaning of this environment, come what may, because of the advice we had had up to 8 January from Relectronics and the like. To start that cleaning process we needed that kit and, therefore, as a first step we had ordered the kit at the earliest possible - we had made a decision in principle to proceed with the purchase of that kit. HIS HONOUR: Q. But that purchase order was not placed until the 10th? A. Because there was some further clarification required with insurers and the like. So the insurers were involved in this and they were, to a certain extent, party to the decision (question from his Honour above). MR GREENWOOD: Q. The meeting with the directors, Mr Bayley, in relation to the directors determining whether or not to proceed with the purchase of the replacement kit, do you recall when that was? A. I believe that was the 10th. That was when we were getting the final ratification of that decision. (T401:9 - T402:8) 1145 In my view, there is an element of the absurd in the proposition that Mr Bayley had been brushed aside, inferentially because of his inability to support Mr Berents' selfishly motivated decision making process. 1146 It was put on behalf of Tyco that Mr Berents avoided classifying the incident as a "disaster" under the "Disaster Recovery Program because of the publicity that would entail and because he wanted to be able to keep control". It is odd, in that circumstance, that Mr Berents had referred to the incident in his evidence in chief as a "disaster". 1147 This attack on Mr Berents, as not being frank and by seeking to avoid responsibility for the alleged deficiency in Optus' disaster recovery plan, is at odds with the evidence of his responsibilities as follows: Q. Mr Berents, you have been the risk manager of the Optus Group of companies since 1992. I wonder if you could just give a brief description to the court of what that job entailed? A. It would be my pleasure. Optus started business in 1992 and I have been employed as its risk manager responsible for the assessments of risks which face the organisation, determination of programs and policies to try to either manage or eliminate those risks and/or develop financing arrangements to provide financial protection to the organisation, normally via insurance. I am directly responsible within the organisation for contingency planning, for security, for environmental risk management, and the insurance program, as well as all claims administration - that is, claims made against the organisation from outside parties or claims which the company makes against parties who cause damage to us. (T611:37 - 57) 1148 It was also at odds with the passages cited by Tyco in support of this submission. The evidence establishing that Mr Berents was not the person responsible for the development of the recovery program, nor for that matter to know the status of the plan. Mr Cearns had the responsibility to ensure the establishment of an effective recovery plan, while Mr Maslen was the business recovery manager, whose responsibility it was to be informed of the state of such a plan. The evidence cited by Tyco was as follows: "18. In my role as Risk Manager I was, in 1997, and still am responsible for arranging insurance cover for the Optus Group of Companies.

19. I was also involved in setting in train the necessary activity to ensure that Optus had in place an effective Business Recovery Plan ( 'BRP' ), although I was not responsible for the development of the BRP. Peter Cearns had that responsibility." Q. You had a responsibility for all this, didn't you; correct? You were a senior executive in Optus responsible for risk management? A. Correct. Q. It was your business to know the status of the business recovery plans? A. No. Q. Whose business was it? A. The manager who worked for me who was our business recovery manager. Q. Who was he? A. At that stage, Mr Maslen. (T895:43 - 58) 1149 Tyco has cited a volume of evidence that reflected the fact that Optus' officers were of a mind "from the start" to embark upon a cleaning of the equipment which, in turn, involved an obtaining of the GSMIS pool kit. It cited a passage from Mr Cearns' cross-examination by counsel for NDY as an 'admission' to this effect, namely: "A. ……. our goal right from the start was to get ourselves back to a situation where we had a decontaminated environment and decontaminated equipment. Whilst we had any equipment out there that had contamination, then there was a likelihood of problems. (T1320:8 - 13) 1150 I think the evidence, generally, did establish that those charged within Optus with the recovery from the incident had formed a view early in the week following the incident that the equipment would need to be decontaminated and, having regard to the nature of the GSMIS equipment involved, that would require a pool kit for the migration of applications. There is nothing particularly surprising about that in the light of the material I have outlined earlier in these reasons. It is difficult to envisage a different response. 1151 However, the evidence disclosed that this was not a case of Optus blindly careering into a recovery program that could not be justified rationally. Immediately after the incident, Optus engaged highly qualified experts who confirmed, what I think must have been comparatively obvious to everyone, that a major recovery by way of the clean up of the equipment was necessary, with particular emphasis, because of its importance, upon the GSMIS equipment. It is surely not without significance that there is not one dissident voice recorded at the time in relation to the undertaking, by way of recovery, embarked upon by Optus. 1152 As to Professor Hibbert's independence in providing his report of 9 January, Tyco relied upon the diary entry of Mr Bayley of that date which noted the following: "Statement by Hibbert to be provided identifying need to clean regardless of contamination levels. Also statement to identify further testing + analysis required to determine risk/time relationship." 1153 Of that entry the following submission was made: "Having determined on the course of cleaning all of the equipment without any analysis of the extent or nature of the contamination within the computer equipment, Mr Berents sought to support that strategy. What he required was, as noted in Mr Bayley's diary entry for the meeting with Professor Hibbert on January 1997…… a "statement by Hibbert to be provided identifying need to clean regardless of contamination levels"." 1154 I think it is instructive to set out the full note of Mr Bayley which follows: "Analysis Results s No cross contamination from heat exchanger into data centre including floor samples (1b) s 71 % of material tested was magnetic conductive s Fe2O3 converted to Fe3O4 by moisture. s Rates of concern - Relectronics have overseas standards. s Corrosive elements - Na - Calevels not significant - Mg

s Unisearch not able to quantify levels of surface contamination which are normal or acceptable.

s Prof Brwyn [sic] Hibbert - electro chemistry expert @ UNSW.

s Particle size 0.5 micron up to 125 micron agglomerated. 1155 I think it is evident from that record of the meeting that the experts had provided bad news to Optus which confirmed the fears within Optus that serious remedial steps were required, having regard to the nature of the material contaminating the highly sensitive equipment upon which the business of Optus depended. The suggestion that Professor Hibbert provided a report at the behest of Optus and which, inferentially, did not reflect his views is one which I find unacceptable and completely at odds with the impression I had of Professor Hibbert. Again I think it is worthy of emphasis that the concern of the expert was, clearly, contamination from the iron oxides - not from the other particulates, such as sodium, calcium or magnesium, although their presence was known to the expert. 1156 I note in the exhibit from which the above material has been taken that, immediately following the above entry in the diary of Mr Bayley, there is a note of a meeting attended by Mr Flynn, Mr Keith Thompson, both of Unisearch, two representatives of Tyco and its insurers, representatives of Optus and its solicitors along with representatives of Leighton. The contents of that meeting are not in evidence as it is noted as a without prejudice meeting. 1157 In this context there is, an extraordinary submission advanced on behalf of Tyco in relation to a record in the form of an email of Mr Viciulis of 17 March 1997 which was said to be "eloquent of subterfuge in relation to the early course of the plaintiff's response to the incident and the reasons for it." It was an internal Optus email that went to Messrs Berents, Bayley and Cearns and a Mr Routt. The material in the email upon which that submission was made was as follows: "... when the incident occurred I circulated a note on the need not to have comprehensive notes and the reasons for the action. As the incident has now moved on in time and we are even now in a different stage of development viz recoveries and justification for decisions, it is necessary to now FULLY document all decisions and the reasoning process behind the strategy." 1158 Given the involvement of legal representatives immediately in the aftermath of the incident, one should not be too shocked by such an over-cautious approach. However, that is not the problem with Tyco's submissions. The problem arises out of the way in which this material was addressed during the course of the case. Mr Cearns was cross-examined by counsel for Tyco upon the contents of this email as follows: Q. Do you remember receiving a message or a note or email from Mr Viciulis shortly after the incident dealing with the practice which should be observed in keeping notes in relation to the events? A. No - well, there were a number of exchanges of emails and documents. Q. Do you recall getting a note from him that he circulated a note on the need to not have comprehensive notes? A. No, I don't recall that one. Q. You don't recall that document? A. No. Q. Do you recall receiving a document on 17 March 1997 - I hand up one for the witness and one for his Honour. I would ask you not to read it at the moment, if you would be so kind. Turn it over in front of you when it comes and don't look at it. If you could now look at it and look at to whom it is addressed at the top. Don't look at the balance of it at the moment. That's a note from Mr Viciulis to yourself and Mr Routt? A. Yes. Q. Did you receive that document? A. I can only imagine that I did. Q. Could you turn over to the second page. Look under paragraph 3, if you would. A. That's the documentation paragraph? Q. Yes. Have you read that paragraph? A. Yes, I have. Q. You see, that refers to the fact that Mr Viciulis, when the incident occurred, circulated a note on the need to not have comprehensive notes and the reasons for the action. Do you see that? A. Yes, I do. Q. Having read that, does that refresh your memory as to receiving a note in relation to that topic? A. No, it doesn't. MR HUTLEY: I call for the note referred to in that subject. As we understand it, it has not been discovered. MR GREENWOOD: I will make some inquiries. I don't know, your Honour. MR HUTLEY: Q. You see, Mr Viciulis did send a note, didn't he, at about the time of the incident, advising people not to keep detailed and comprehensive notes of what was occurring, didn't he? A. No, as I had said, I don't have any recollection of that note, no. Q. Sitting here now, that's a pretty extraordinary note to send around, isn't it? A. I can't comment. I don't know what the note said. You are talking about four years ago. I can't recall that note. (T1695:25 - T1696:36) 1159 Cross-examination then followed on other aspects of the email. That cross-examination took place on 21 March 2001. At the commencement of proceedings on the following day the call made by Tyco, as noted above, was answered with the production of the note referred to in the 17 March email of Mr Viciulis. The document was marked for identification and made available to Tyco. There was no further cross-examination of any witness in relation to that material. In those circumstances I think it is extremely unsatisfactory for a party to found a serious submission such as has been presented on behalf of Tyco on the material relied upon. 1160 Further submissions were advanced in terms of the manner in which Optus' solicitors acted in the matter. I think it is unnecessary to make any further comment, other than, in part, it is based upon a misunderstanding of the evidence. In any event, it related to a subject matter which is innocuous in determining relevant issues in these proceedings. 1161 In cross-examination of Mr Bayley, the reliability of Relectronic's advice to clean the equipment came under some form of attack in the suggestion that Relectronic had a significant conflict of interest in providing advice to clean the equipment. That was the foundation of a submission that was as follows: "The advice given by Relectronic to clean all of the equipment has to be seen against both the background of its own interest and against the background already in Mr Berents' mind from as early as 6 January 1997 to clean the equipment. Mr Berents and Mr McLachlan of Relectronic had know each other for a long time. Relectronic had been informed at the early point of the recovery strategy" 1162 Later in these reasons it is necessary to address the challenge to the reasonableness of Relectronic's cleaning costs, in the course of which it will be relevant to refer to evidence relating to Relectronic's expertise and reputation in the field, which, in turn, bears upon the reliability of the advice received by Optus from Relectronic following the incident. It is sufficient to observe, at this point, that the suggestion of collusion, or of dishonest, or improper conduct on the part of Mr Berents and Mr McLachlan should be rejected emphatically, notwithstanding the inability of Tyco to complete cross-examination of Mr McLachlan. 1163 There were further submissions on behalf of Tyco that information was withheld from Tyco on the advice of Optus' solicitors. I have not found it necessary to examine closely the implications of that complaint. However, I think it is appropriate to observe that Tyco was involved in the aftermath of the incident as I think was apparent from the diary note of Mr Bayley referred to above, the evidence of Dr Doig and in the cross-examination of Mr Berents as follows: Q. In fact, you received correspondence from Tyco's solicitors complaining about the failure of Optus to give any access to such material to Tyco, didn't?[sic] A. I did not, no. Q. Your solicitors did, didn't they - Mr Ferguson did, didn't he? A. I found out about that some time later, but not at the time the letter -- Q. I see, who would Mr Ferguson have been in contact with at Optus in relation to such matters? A. Our corporate counsel, I presume. Q. That is Mr Hambrett, or is that someone else? A. At that stage it wouldn't have been Mr Hambrett, I believe. Q. Who would that person have contact with in respect of the executives who had the oversight of the dealing with the incident; would that be you? A. It would have been at that stage, yes. Q. Were you ever told that Tyco were complaining about the fact that they were not getting access to material? A. We were going through lengthy negotiations with Tyco's representatives through the period of February through to May, June. Q. Did you understand my question? A. Yes. Q. What is the answer to it? A. That -- Q. Were you told that Tyco was complaining, through its solicitors, that Optus was not delivering to it data which would enable it to assess what was occurring? Were you told that? A. I was. Q. And that was the fact, wasn't it? A. It is not the full facts, no. Q. Well, you weren't sending them the reports, correct? A. We were negotiating with Tyco on the basis of sharing information. Q. Were you sending them the reports? A. Not at that stage, no. Q. You were holding them within Optus; correct? A. Not just within Optus, but we did not give copies at that stage to Tyco. Q. Without information, it is pretty heart [sic] to form a view as to how your organisation was behaving; you would agree with that, wouldn't you? A. Partially. Q. Well, wholly, that is correct, isn't it? A. No, because you could only do this sort of thing in terms of relationships and partnerships, and that was not occurring. Q. You weren't delivering information to Tyco and Tyco took the view, to your knowledge, that they were incapable of participating in what was going on in any meaningful way, absent that information. That was your understanding of their position; correct? A. No. Q. Do you recall, in about late February 1997, Mr Ferguson was in contact with you as a result of a request which he had received from the solicitor from Tyco concerning the absence of adequate information? Do you recall Mr Ferguson being in contact with you because of difficulties he had experienced from Tyco's end in not receiving information? A. Can you give me a date for that please? Q. Late February. A. I don't remember that. Q. That could have happened; correct? A. I'm trying to - because that's - in February I actually went overseas and it may have happened while I was overseas. Q. You came back at the end of February; that's correct? A. That's correct. I don't remember the dates exactly. Q. Do you recall being in contact with Mr Ferguson shortly after that date, in which Mr Ferguson communicated to you the concerns of Tyco expressed through their solicitor, Mr Murray, about the failure of Optus to supply information to Tyco about what they were doing and why they were doing it? A. I don't remember that precisely because we were having various meetings with Tyco at that stage, talking about a lot of issues. (T924:7 - T926:4) 1164 Quite obviously there were extensive communications amongst the parties at that time and, due to claims of privilege, the details of those communications are unknown. However, I note that Tyco's submissions in relation to the communication, said to have been made to Mr Hambrett, appear to be based on a mis-reading of the evidence above quoted. 1165 It is hard to avoid a reaction of discomfort with a series of submissions, in many important respects not put to relevant witnesses, that throw a net of collusion and subterfuge over officers of Optus, Relectronic and Professor Hibbert. Those submissions represent an approach to the issues in these proceedings that has not contributed to the concentration on real issues nor to an expeditious resolution of the proceedings. 1166 It was submitted on behalf of Tyco that some evidence of this alleged collusion may be extracted from Optus' facsimile to Relectronic of 17 April 1997. It was submitted that the facsimile of Optus made it clear that it was "seeking reports to support the strategy they were pursuing. They were not seeking objective, independent advice as to the extent of contamination. They wanted evidence that "some boards" were contaminated. It was a selective, directed process not an open minded assessment of the position." The particular passage relied upon for that assertion was as follows: "If your sampling and examination processes cannot provide the indicators intended out of these activities then we would wish to be advised asap." 1167 I think it is necessary to set out the whole of that facsimile in order to test the substance of that submission: "Copies of your reports RRAS4508 dated 3 March and 82,91 dated 2 April were received yesterday 16 April. To say the least, given our previous discussions and written direction on the subject, the content of the reports leaves much to be desired. Particular comments are provided below.

RRAS4508 1. No statement as to purpose or the particular sampling methodology used in this activity. Our fax of 9 February refers. The context of this activity is not clear. No dates of activity. 2. No floorplan or equipment diagrams or description to identify sampling locations for the equipments and cards used for micrographic examination or chemical samples. 3. Unisearch report covers both switch sampling and equipment from data centre - different activity - confusion. Wipe samples were required from the Switch Room equipments. No reference to wipes only to solutions analysis. Were cards subject to solution analysis after micrographic examination as agreed? 4. Para 3.2 refers to swab analysis - not referenced in Unisearch report. 5. Objective of tests was to get categorical statement as to whether iron oxide contamination was present inside cabinets and on boards. Para 3.1 alludes only to observed results. No overall conclusion tying together micrographic and chemical.

Report 82,191 1. Issues 1 and 2 above also apply to this report. Context, dates, location, specific methods. 2. Objective of examination and analysis was to verify specifically that iron oxide contaminant was present on some boards to the extent that it would have potentially caused problems. The report is not conclusive in this regard. Micrographics largely deal with water ingress issues which may or may not be directly attributable to incident. Iron oxide contamination is identified in non-critical locations such as on cables, cabinets or containment surfaces but not in situations where it could cause shorts etc. Does this mean that there was no such evidence or simply that it was not photographed? 3.Wash samples 7 & 8 in Unisearch report are not cross referenced to cards micrographically examined. Total confusion. 4. Sections 2-4 of report deal with R-R routine processes and were agreed to be removed. Sections 5 & 6 are very weak as conclusions not well supported by evidence. Again - no drawing together of appropriate micrographic and chemical results.

Request these matters be rectified at no cost to Optus at your earliest convenience and that we be advised of your timetable for rectification. If your sampling and examination processes cannot provide the indicators intended out of these activities then we would wish to be advised asap.

Finally, the report for Melbourne Exchange still not received some 2+ months after the event. Please advise delivery intentions." 1168 I have been far from persuaded that the terms of Optus' criticism or the provision of replacement reports by Relectronic in response to those criticisms reflected anything more than insistence by Optus that the reports should follow a requisite format and that Relectronic acknowledged its failure to do so. 1169 Tyco strongly inferred in submissions on its behalf, without specifically asserting it, that, on 9 January 1997 Professor Hibbert was told what Optus intended to do and simply provided a report in conformity with that decision, noting that it was produced "over lunchtime and submitted…… that afternoon". The submission on behalf of Tyco was as follows: "Mr Bayley also admitted that Professor Hibbert had said during the meeting, as recorded in Mr Bayley's notes, that he understood the need for cleaning. In our submission, the implications of such a statement are obvious in the circumstances. Professor Hibbert had been informed of what the plaintiffs were proposing to do." 1170 Examining the evidence on which that submission was based, is not without its utility. The transcript reference relied upon on behalf of Tyco was that of Mr Bayley, cited at T284:16 - 18 and of Professor Hibbert T785:55 - 786:10. I think it is useful to see that reference in the context in which it was given. The cited passage from Mr Bayley's evidence was given in the course of the following cross-examination: Q. And what I want to suggest to you is that you knew at that time that Professor Hibbert had been involved in this problem for just a matter of minutes, or at most half an hour; that's correct, too, isn't it? A. As I have indicated previously, I can't - I am not aware of whether he had been prebriefed. Q. Let it be assumed he hasn't been prebriefed and let it be assumed the scenario I put to you was that he had been asked to come along during the course of this meeting, cold - and you understand what I mean by "cold"; correct? A. Yes, absolutely. Q. With no preparation; correct? A. Yes. Q. You had just been told, you would agree with me, by that expert that in his opinion your problem was medium to long term; correct? A. Yes. Q. You would agree with me that commonsense dictated that you give Professor Hibbert, or any other experts you had, a further reasonable period of time to fully investigate what had occurred and bring themselves up to speed; that's correct, isn't it? A. That would be reasonable. Q. And I suggest to you that is precisely what you didn't do; correct? A. I believe we did give Professor Hibbert the opportunity to do some further investigation and provide us with a report. Q. You asked for a report that day, didn't you? A. We asked for a report in the shortest possible time frame and whether it was that day, I can't recall. Q. And the report you asked for from Professor Hibbert was a statement to be provided, identifying the need to clean regardless of contamination levels. That is what you asked him for, wasn't it? A. Yes, because he had previously stated that the equipment must be cleaned. Q. I will come to that in a moment. Once he stated that, you didn't need to give him any further time to consider the position; is that correct? A. We were much more concerned about the time scale over which this contamination would have a deleterious effect on the equipment, and that was the tasking that we gave Professor Hibbert, either then or subsequently. …… Q. You see, you wanted advice from Professor Hibbert on that day whether you had to clean or not; that's correct, isn't it? A. Yes. Q. You wanted it because you had made a decision to purchase the replacement kit which you had received a quote from Digital for on the preceding day; that's correct, isn't it? A. Yes. Q. And you asked Professor Hibbert, in effect, on the basis of the information he had, was it his opinion that you had to clean; correct? A. Yes. Q. You gave him no opportunity, I suggest to you, to further investigate the matter; that's correct, isn't it? A. On that occasion he stated a definitive opinion as to the likely effects of the contamination. Q. You made it clear to him that you wanted, from him, an opinion as to yes or no, do we have to clean on the basis of what you know now; correct? A. He offered up that opinion. Q. You made it clear, at that meeting, that that is what you wanted; correct? A. I cannot recall the precise words that were spoken in respect of requesting that information from Hibbert. Q. That is what you wanted; that's correct, isn't it? A. Yes. Q. You are not, and neither to your knowledge were any other of the executives of Optus, timid about indicating what you want; correct. HIS HONOUR: I think there is some scope for cross-purposes. MR HUTLEY: I am sorry, I will come back. HIS HONOUR: No, I think I should indicate it. When you say "that is what you wanted", that could be a statement from the expert, or it could be, "We want a statement, right or wrong, that the equipment must be cleaned." There is room for misconception. MR HUTLEY: I take your Honour's point. Q. Can I go back to the note? HIS HONOUR: Q. Perhaps I would like to ask this question. At page 150 there is a note "all equipment must be cleaned - potential risk will increase". Did somebody say that? A. Yes, your Honour. Q. Who was that? A. That was Professor Hibbert. MR HUTLEY: Q. At the top of that page, page 150, it says "opportunity for further corrosion based on existing rust". Do you see that? A. Yes. Q. It then says "need for cleaning understood". Who said that? A. This is largely the words of Professor Hibbert. Q. So he said he understood there was a need for cleaning; correct? A. Yes, well, that is my interpretation of those words. Q. Had somebody told him, to your perception, that there was a need for cleaning? A. I am not aware of any prior discussion with Professor Hibbert at that stage. Q. Is it your evidence that he said he understood there was a need for cleaning? A . My interpretation of the notes, and my recollection of that particular point, was that we already had rust in the system; that there were opportunities for further corrosion to be caused in the vicinity of those rust particles deposited on to electro or electromechanical equipment, and that cleaning was a given . Q. Is it your evidence that he said that he understood there was a need for cleaning? A. Yes. (T281:3 - 282:4; T282:33 - 284:18 emphasis added) 1171 Professor Hibbert's evidence, upon which Tyco' relied, was included in the following evidence in cross-examination: Q. You arrived - what happened when you arrived? A. I was met by representatives from Optus who I believe signed me in in some way, took me up to a conference room where there was Mr Flynn and a number of other people. Shall I continue? Q. Yes. A. The nature of the incident was outlined to me. I was then taken on a tour of the facility, which included the data centre, the Inergen gas room, heat exchanger and so on. I was then taken back to the conference room where we had a discussion about the incident and I was asked my opinion as to what should happen. I gave it and eventually I was asked to give my opinion as to the form of a written report. I said I would do this as soon as possible. Eventually, after two or three hours, perhaps, at Optus, I got a cab back to my office where I spent over lunchtime writing my report which I submitted that afternoon. Q. Can we just come back, then. You arrived, and as you have told his Honour you were taken up to a conference room and introduced to some people? A. Yes. Q. Then you were taken on a tour. Who took you on a tour? A. I cannot -- Q. Was it Mr Ballard? A. I don't know. I believe it was an Optus representative. Q. What were you told during the course of the tour? A. I believe I was - the circumstances of the actioning of the Inergen system were explained to me; that there had been a discharge in the rooms and I was - as we went through the rooms various things were pointed out to me - splashes on the walls, ceiling tiles, computers. I inspected a computer and so on. Q. When you say you "inspected a computer" what did you do? A. I was shown computers. I, as it were, looked at them from afar. I didn't go into the middle of them, as it were. Q. Sorry? A. I wasn't shown, say, a computer board. I was shown a computer. Q. Just a cabinet? A. Yes. The doors, I believe, were opened. I could see filters; some contamination in one computer, I think, was pointed out to me. Q. Had you ever seen a computer contamination scenario like this before in your life? A. No. Q. Did you have an understanding that there are, sort of, experts in this field about contamination of computers - disaster recovery experts? A. I believe there are, yes. Q. Did you know that at the time? A. Yes. Q. Were you accompanied on the tour by somebody who you understood to have those qualifications? A. No. Q. Did you assume that Optus was getting independent advice from such a person? A. I didn't know whether they were or not. Q. Did you have any discussions with the person from Optus who took you around, or with anybody, about what Optus was proposing to do? A. Yes. The possibility of cleaning or replacing the computers was mentioned. Q. What were you told, if you can recall? A. I was asked my opinion as to whether I believed that the computers should be cleaned or replaced. Q. Were you told anything about what they were proposing to do? A. No. Q. Were you told anything about the programs or applications which were operating on the system? A. I believe they explained the data centre was part of their operation, but I wasn't told in detail what it was. I understood there was a telephone exchange somewhere in the building and that the computers had something to do with the Optus work, but they were very important to their operation. (T784:28 - T786:21) 1172 I note, in passing, that both Mr Bayley and Professor Hibbert were asked questions by counsel on behalf of Tyco concerning the inspection of the Rosebery centre of 9 January 1997 and that it was not put to Professor Hibbert that his inspection had not included the Tandem/EFTPOS room: that no questions were put to either witness that would suggest a distinction to be drawn between the extent of contamination in the Tandem/EFTPOS room and the data centre respectively. 1173 I think it is fairly obvious that the introduction of Professor Hibbert into the situation, which was one calling for an urgent response by Optus, was conventional and in no way compromised the integrity of Professor Hibbert's advice. To suggest otherwise is, in my view, unacceptable. I think the key to the meaning of Mr Bayley's note, that "need for cleaning understood", was caught in his answer quoted above which I have emphasised. 1174 I also note that the submissions by Tyco in relation to the steps it contended should have been taken by Optus included a submission that the "discharged rusty water was of a small volume only, approximately 16 - 17 litres" and that most of it was on the ceiling, nozzles and walls as well as the underfloor: emphasising the limited dispersal of the contaminated water over the "Data Centre and Tandem Room [which] had a large combined floor area of 380 square metres and contained approximately 200 computer cabinets……. [and that] the water from the discharge would have evaporated quickly after the discharge in the controlled atmosphere…… of the Data Centre and the Tandem Room." There was no suggestion in those submissions of any distinction to be drawn between the distribution of the contamination between the Tandem room and the Data Centre. 1175 Further, the submissions represent, in my view, an extraordinary understatement of the nature of the damage to the Optus property as a consequence of the incident. I have referred earlier in these reasons to the evidence of a number of witnesses, including that of Mr Valledor, who described the presence of "rusty brown liquid mess all over the walls, the floors, the ceilings and all of the equipment in those two rooms", referring, I emphasise, to the data centre and the Tandem/EFTPOS room. 1176 Mr Bayley gave evidence of similar contamination in those two areas. Mr Cearns' evidence was that he "observed that a rust coloured "sludge" had been splattered over equipment, the ceiling, floors and walls of the Computer Data Centre and the Tandem/EFTPOS Room……[and that he] observed dry, rust coloured dust on the computer cabinets, on the floor and on the walls of both rooms." 1177 Mr Howard Douglas Perkins, by occupation a computer engineer with some 25 years experience in the computer industry, was the managing director of Computer Extras Pty Ltd which specialised in the cleaning and maintaining of computer room environments. His clients included major corporate enterprises and included Optus. Prior to the incident the cleaning of the Rosebery centre was performed by his company under a contract with Digital, in relation to the data centre, and in the Tandem room under a contract with Networks. His evidence in chief included the following: "14. I attended the CDC and the Tandem room shortly after the incident. Mr Phillip Roussell contacted me on the evening of 3 January 1997 at approximately 10.00pm. He requested my urgent assistance in relation to the cleaning of the CDC and Tandem room. I and three other Computer Extra employees attended the Rosebery Data Centre at 7.00am the following morning, 4 January 2001[sic]. I observed that rusty water had been sprayed on the ceilings, on the walls, on the computer cabinets, on the floors and into the sub-floor of both rooms." 1178 There has been no cross-examination of any of these witnesses to the effect that there respective descriptions of the nature and extent of the damage to Optus' property was in any way exaggerated and incorrect. Again it may be noted that no distinction was drawn between the nature and extent of damage that occurred in the Tandem/EFTPOS from that in the Data Centre. 1179 Mr McLachlan's evidence in chief was as follows: "5. On Tuesday morning, 7 January 1997 I went to the STC and inspected the premises for approximately two hours. I was aware that Terry Flynn had reported to Bob Ballard the previous day that the contaminants were iron oxide and the individual particle size was quite small.

When I inspected the Computer Data Centre, I observed considerable splattering on the ceiling tiles, walls, computer cabinets and equipment, floors and underfloor area. I was able to open cabinets and look inside although I was instructed that all the equipment was operating and could not be switched off in order to allow further examination of the componentry in the cabinets. I was able to see the entry filters and exit filters of cabinets and some of the horizontal and vertical faces of the componentry.

On the entry and entry [sic] filters I saw considerable brown staining and on the internal, horizontal and vertical surfaces I saw a distinctive brown sheen consistent with iron oxide contamination." 1180 That evidence should be accepted in accordance with my separate reasons for judgment in relation to the admissibility of Mr McLachlan's evidence. 1181 When the evidence of these and other witnesses, including experts, to whom I have earlier referred is taken into account, it is extremely difficult to take seriously Tyco's submission that the consequence of the incident was comparatively innocuous. 1182 As to the effect of the advice received in the aftermath of the incident, I think the evidence of reliance by Optus is compelling. Optus had the advice and expertise of Professor Hibbert, in addition to the advice from Relectronic and Mr Flynn. 1183 Mr McLachlan gave the following evidence of his advice to Mr Bayley subsequent to his two hour inspection of the affected area on 7 January 1997: "9. I then attended a meeting with representatives from Optus and Digital. At that meeting I (and Bob Ballard) recommended to Peter Cearns and Rick Bayley of Optus that, in addition to the decontamination of the Computer Data Centre environment, all computer equipment within the Computer Data Centre should also be professionally decontaminated and restored as quickly as possible using aqueous-based chemicals in order to avoid damage by way of failure of the sensitive electrical and electronic equipment housed at the STC. Contamination of this kind invariably reduces the long, medium and short term reliability of electronic assemblies. I recall that the following conversation took place between myself and Mr Peter 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 options?" AM: "Commercially, no." 1184 I accept that evidence consistently with my separate reasons for judgment. Mr Bayley gave the following evidence of advice received from Mr Ballard on 6 January 1997: Q. On that morning, did Mr Ballard say to you, "Optus should clean all the equipment immediately; you have to respond urgently or you could have major problems," or words to that effect? A. I can't recall precise words. There was certainly cleaning of all equipment was mentioned, but by whom I can't be precise. Q. What I want to ask you is from almost immediately after you came into contact with Relectronic, they were asserting you had to clean all the equipment, weren't they? A. Yes. Q. And they were also pushing for themselves to clean all the equipment, weren't they? A. That would be a normal commercial desire. Q. And your smile there indicates that, being an experienced man of business, you know that a person in the position of Relectronic would have some sort of a conflict of interest in coming to Optus to give advice as to whether to clean or not, when it also wishes to acquire a very valuable contract to do that very thing; that's correct, isn't it? A. Absolutely. Q. So it was apparent to you from day one that anything that came from Relectronic had to be treated with a very substantial pinch of salt; correct? A. I think we had to - no. I don't think that is correct at all. Q. Well, you knew that you couldn't rely upon their advice in relation to the need to clean; correct? A. If I can rephrase that, I believe their advice would have been tempered with their commercial interests, but, nevertheless, they were world-recognised experts in contamination clean-up of computers and we had to take their advice seriously. (T229:28 - 230:14) 1185 Mr Bayley also spoke of his reliance on Professor Hibbert's advice in passages earlier quoted in these reasons: evidence that was reinforced in re-examination as follows: MR GREENWOOD: Q. The question was did you have the impression, from what Professor Hibbert said, that there was time up your sleeves? A. The impression that I had from Professor Hibbert was that any immediate damage - sorry, that because there was no immediate damage, we had some time to proceed with the cleaning operation and any related activities. However, it was absolutely indeterminate at that stage, and nobody could shed any light on it, as to what that time was. And so, from an Optus perspective, there continued to be a significant sense of urgency about needing to do something to get the cleaning operation underway. (T398:1-14) 1186 Digital's position was essentially no different. It was not prepared to adhere to its existing contractual commitments for the maintenance of the Optus equipment as recorded by Mr Bayley in a meeting of 2 April 1997 as follows: " Cleaning Requirements s Cabinets need to be taken off line for 4 - 5 days to examine for contamination. s Need to quantify potential impact if cleaning were not to proceed. s DEC uplift on maintenance contract - 25% of $2.4 M increasing to 40% after 6 months." 1187 That record was explained in re-examination by Mr Bayley as involving an annual increase in cost in the order of $600,000.00 after six months. 1188 The 'need to clean' issue, in my view may be resolved in the determination of the question whether Optus' conduct in cleaning the contaminated equipment was reasonable. If that question is answered affirmatively it then becomes a question of quantifying Optus' loss reflected in that recovery exercise. On that issue there, in my view, can be no room for doubt that Optus acted reasonably in embarking swiftly on the acquisition of a pool kit for the GSMIS and undertaking an extensive migration of applications and subsequent cleaning and relocation of equipment. 1189 Conversely, I think a very strong case of contributory negligence could have been mounted against Optus had it not so acted and it suffered a catastrophic breakdown of its equipment, particularly that of the GSMIS. The attitude of Optus' insurer in approving the steps taken by Optus has something to say about the reasonableness of Optus' conduct. 1190 However, I think this area of dispute may be disposed of by positive findings that the damage to the Optus equipment was of a nature and extent that, in the absence of a remedial cleaning program being implemented, the contaminated equipment, over time, would be subjected to degradation through corrosion and breakdown through "tracking across electrical connections". No party has disputed the serious consequences that would have ensued from such a failure. While the extent of that process was never quantified, its likelihood of occurrence may be gained from the description of the risk in the opinion of Professor Hibbert as being "too great not to initiate a clean up operation". 1191 He was not alone in this expression of opinion, as was evidenced by Mr Hubbell. It is of some interest to note that Mr Hubbell had been initially brought into the matter by Digital when he was consulted in January 1997. He responded to that request for advice in his email of 28 January 1997. Of particular importance, in my view, is the opinion which he expressed at that time, having informed himself of the results of the analyses of samples taken from the Rosebery centre. Mr Hubbell's evidence in chief was a follows: " Recommendation by Professor Hibbert 6. I have read the report of Professor David Brynn Hibbert dated 9 January 1997. I agree with Professor Hibbert's conclusions and recommendation.

7. On 9 January 1997 Professor Hibbert was shown the site of the incident. Professor Hibbert made several conclusions based on the situation at the facility at that time, and provided several recommendations regarding longer term issues.

Professor Hibbert concluded "that there is no present danger of failure. However there is a longer term risk". I agree, on the sixth day following the event with no free water present, the computer hardware appeared to be problem free, and the Relative Humidity (RH) maintained at an extremely depressed level, there was an undefined window of opportunity to restore the hardware to pre-event condition to avoid the long-term effects of the contamination.

Professor Hibbert concluded: "1) The presence of iron oxide on metallic components may initiate corrosion by the interface of dissimilar materials." I agree with this statement as it is the basis of one of the simplest forms of corrosion referred to as Galvanic Corrosion. Corrosion processes simply require an anode, a cathode, an electrolyte, and a return electrical path. If any one of these is removed the corrosion process is halted. The "dissimilar materials" represent the required anode and the cathode. The simple contact between the iron oxide and another conductive metal creates the return electrical path. The last ingredient, the one that computers normally lack, is the presence of an electrolyte, a conductive liquid.

Professor Hibbert concluded: "2) Interaction of the rust with water vapour may lead to acidic films being formed on the equipment and result in accelerated corrosion." I agree with Professor Hibbert's concern of condensation as well as the potential for acidic pH levels due to the predominant contaminant present. Digital's recommendation to keep the relative humidity at an extremely depressed level, decreased the likelihood of condensation of water vapour. It is important to note that a monolayer of condensation, a single layer of water molecules, is sufficient to support corrosion processes. The hygroscopic tendencies of contaminants, their propensity to promote condensation even at lowered Relative Humidity levels, is another important factor in understanding the risk of corrosion reactions. A knowledge of all the forms of surface contamination and their concentrations is required to fully assess the likelihood of hygroscopic contamination promoting condensation.

The maintenance of the Relative Humidity at levels less than 50% RH is expensive and not a long term solution to avoiding corrosion of contaminated electronics. The threat of computer hardware damage due to electrostatic discharge (ESD) increases with the decrease in RH. Therefore ESD concerns also dictate that depressed RH levels are not a long-term solution to avoiding corrosion of contaminated electronics.

Professor Hibbert concluded: "3) The electrical properties of iron oxide may allow tracking across electrical connections." I agree with this statement. There are however varying degrees of electrical and magnetic properties across the many forms of iron corrosion products, commonly and collectively called rust. The tracking between electrical conductors within a computer may however be independent of the electrical properties of contaminants that are present. The mere presence of a hygroscopic contaminant that promotes condensation between adjacent electrical conductors is sufficient for damage to occur. Additionally, any particulate contaminant can act as a surface feature that promotes the deposition and retention of additional airborne contamination that can subsequently result in the degradation of the computer hardware over time.

Professor Hibbert concluded: "In my opinion all equipment contaminated by material from the fire suppression system should be thoroughly cleaned or replaced. The risk from long term action of the (mostly) iron oxide deposits is too great not to initiate a clean up operation." I agree with this statement. In addition to the electronics restoration of affected computer hardware, it was also necessary to have a coordinated effort to professionally clean the computer room environment. Cleaning the computer room environment is required to minimize further contamination of the already impacted computer hardware. It is important to remove this room contamination as the small particles can be continuously recirculated through the computers via air currents from the process cooling fans and the computers own cooling fans.

In addition to concerns about the corrosion of the computers electronic circuits and components, there is a significant danger of connector system and backplane failures when significant particulate contamination events contaminate computer systems. Particulate contamination, as in this situation, can contribute to open circuit conditions, mechanical wear and "fretting corrosion" in the computers connector systems. Fretting is a term used to describe small amplitude relative motion between two surfaces which results in wear of one or both surfaces. When a corrosive environment is present, the combination of wear and corrosion is called "fretting corrosion". In a computer room there are numerous sources of vibration that can contribute to the fretting in connector systems. Computer cooling fans as well as process coolers are the largest sources of vibration in typical data centres.

Connector systems may experience open circuit problems when particulate contamination prevents electrical connectors from seating properly on circuit board contacts. Open circuit conditions can manifest themselves as intermittent or continuous problems. The particles size and its mechanical properties are important factors in how effective the particles is in reaching the connector system and causing problems. The recirculation of contaminants in the computers from the cooling air, combined with vibrations generated by the computer cooling fans contribute to the connector system contamination and the particles getting into the electrical contact areas. Once in the contact area the particulate contamination can contribute to open circuit conditions, mechanical wear of the gold plated contact surfaces, and fretting corrosion if the wear takes place in a corrosive environment. Report of Professor Hibbert dated 18 November 1998

I have read the report of Professor Hibbert dated 18 November 1998. At paragraph 31 of the report Professor Hibbert concludes that the contamination of iron and zinc was extensive and significant, and could lead to both corrosion and the bridging of circuitry. I agree with this conclusion. The contamination exhibited in Schedule Item #3 photographs provided for my review, illustrate very significant and extensive contamination throughout the Computer Data Centre. Numerous Unisearch and Relectronic-Remech reports document significant and extensive contamination, throughout the computer hardware, including the printed circuit boards. Clear photographic evidence of the iron oxide contamination deposits located on and between electronic component leads is well documented. There is no denying the potential for corrosion and bridging of circuitry.

It is important to note that the iron oxide contamination present on the printed circuit boards visually appears to exist in streaks and spatters in many of the documented photographs. In other words, the contamination is concentrated in small localized sites in many cases. The contaminant concentrations at these sites are not well represented as reported in g/cm2 when an entire circuit board is decontaminated and the total amount of contamination is divided by the area of the entire board. Nor is the contaminant concentrations well represented with wipe samples that average the concentration over a fixed surface area. These approaches produce a significantly lower concentration result compared to removing a streak or splatter of contamination and dividing the mass collected by the area that it occupied on the PCB. As a result, the reported contaminant concentrations can be and are in many case significantly lower than truly exist on the boards, simply due to technique. I would like to note that this kind of sampling and reporting is an industry standard, that obviously requires an informed interpretation.

From a component failure perspective as well as a decision to clean or not to clean the electronics, this anomaly in the reported contaminant concentrations versus the actual localized concentrations is very significant. Initial failures will typically occur at the most contaminated sites assuming that equally vulnerable components and connector systems are being compared. Analysis of samples showed cleaning or replacement justified

I have read the statement of Allan Gilfillan McLachlan dated 29 November 1999. The results of the analysis of samples conducted by or under the supervision of Mr McLachlan support Professor Hibbert's recommendation and Optus Networks Pty Limited's decision to clean or replace the contaminated equipment.

I have read all of the associated Unisearch and Relectronic-Remech reports referenced in the statement of Allan Gilfillan McLachlan dated 29 November 1999. These reports document significant contamination in the forms of iron oxide particulate uniformly distributed, iron oxide in localized concentrated deposits, water residue or staining, crystalline residue, as well as measurable contamination from the corrosion inhibitors used in the Inergen hydrotest. This documented evidence of widespread contamination at levels with a potential for the degradation of the computer hardware's reliability and availability clearly justifies the decision to clean or replace the contaminated equipment. (The contents of this last paragraph were corrected by Mr Hubbell in the course of his oral evidence in a way that is not particularly significant.) 1192 Again, it may be emphasised that the concern of the experts, with full knowledge of the extent of contamination of the equipment, related to the presence of iron oxides. 1193 In his 28 January 1997 communication concerning Professor Hibbert's report Mr Hubbell had expressed the view that it "appeared to be accurate and straight forward" and that he concurred "in spirit with the Unisearch analysis and recommendations". However, he was not in a position to support the "wholesale restoration of all of the hardware in the facility" without "seeing Relectronic's final report". 1194 In cross-examination counsel for Tyco sought to explore this qualification as appears from the following: Q. I am sorry. Could you explain, then, what your expertise involved? A. My role in 1997 was extremely limited. Q. How was it limited in 1997? A. I was not directly involved in the technical analysis at this customer site in 1997. Q. You weren't involved in this customer site at a technical level? A. Not at the level I normally would be involved in if it was a site where I was considered to be playing the role that you are purporting that I may have played and did not in fact play. Q. You did have some role in this event in 1997; didn't you? A. I did. Q. In fact, you were consulted by Digital about this event? A. I was, in a manner of speaking, at a much different level than typical customer events. Q. What I want to ask you about is, had you been involved in this event at the level of advising what, if any, response should be undertaken to this event. You see, I am asking you about that level of involvement. I want to ask you what, in your expert opinion, ought to have been done as a means of forming a view as to what should be done, because you have expressed an opinion that Professor Hibbert's opinion of 9 January 1997 to clean all the equipment, and clean it urgently, was reasonable in the circumstances; that's correct, isn't it? A. May I take this opportunity to clarify that? HIS HONOUR: Yes. THE WITNESS: I respectfully request the opportunity to clarify the context of paragraph 6 of my statement as follows: the context of paragraph 6 of my statement in May of 2000 was developed within a context of the information available to me in May of 2000. The information available to me in May of 2000 included many forms of information. There was written information, verbal conversations, visual material such as photographs, and my experience up until May of 2000. I may have inaccurately, in a confused response, indicated that statement 6 - I am sorry, paragraph 6 in my statement - was in some way limited to information available to Professor Hibbert and others on 9 January 1997. HIS HONOUR: I haven't read that statement in that way. I have assumed that you have used the knowledge which you had when you made your statement in expressing that opinion. MR HUTLEY: Q. You recall yesterday that I asked you whether you were expressing an opinion as to whether Professor Hibbert's opinion was a reasonable one in the circumstances maintaining as at 9 January 1997. Do you recall me asking you that question? A. Yes. Q. You said to me on that occasion - yesterday - that that is what you were seeking to do; correct? A. Yes. Q. You told me yesterday that the material you brought to mind in forming that material was the material which was in existence as at 9 January; that is what you told me. A. That's correct. Q. What you are telling his Honour now is that was wrong? A. What I am telling his Honour today is the material available on 9 January 1997 included additional things other than what is in the schedule here and reports associated with reports in the schedule. Q. I just want to get this clear, because it will affect the questions I ask you. Many of the reports which you refer to in your schedule, which refers to statements, for example from people from Relectronic - do you see that - and they exhibit reports which were brought into existence from time to time, you say in the body of your statement that you had regard to those; correct? A. Yes. Q. That is right, isn't it? A. I believe it is. Q. And many of those reports relate to information which became available a long time after 9 January; correct? A. That's a subset of the information I am referring to, yes. Q. In expressing your opinion in paragraph 6, did you have regard to the information in all the Relectronic reports which you have read? A. When written in May of 2000, I believe that is an accurate statement. Q. So in expressing your opinion as to the appropriateness of the conclusions and recommendations of Professor Hibbert on 9 January, you are judging that by reference to all the information you have had regard to, whether it was in existence as information on 9 January or not; correct? A. That is correct. It includes information available prior to the 9th as well as information available after the 9th. Q. So can his Honour take it that you are not expressing any opinion as to whether the recommendation of Professor Hibbert was a reasonable recommendation in the circumstances of the information which he had available to him at the time he expressed his opinion? A. I believe the confusion that is existing here surrounds this very topic. I believe that on 9 January 1997 Professor Hibbert made a good decision based on the information available to him and, in part, my thoughts are predicated on information that was available to me at that point in time. (T 427:8 - T429:33) 1195 At that point I raised with counsel for Tyco the utility of establishing a premature judgment on the part of Professor Hibbert if, in the light of subsequent events, Mr Hubbell was of the view that Professor Hibbert had correctly assessed the situation in January, albeit prematurely. That did not lead to any curtailment of cross-examination and the subject was resumed as follows: MR HUTLEY: Q. Just to get clear between us, are you telling his Honour that you are not, in this report, purporting to judge Professor Hibbert's opinion of 9 January on the basis of information which was available to him on 9 January? A. That is what my statement covers, yes. Q. And does it follow from that that you simply haven't turned your mind as to whether his recommendation was a reasonable recommendation, having regard only to what he knew on 9 January; is that correct? A. That approach to looking at this subject was brought to light yesterday and I have considered it as a result of that coming up yesterday. Q. But your statement doesn't purport to deal with that? A. At the time of writing the statement, it did not purport to deal with that limited data. Q. So overnight you turned your mind to that question; is that correct? A. That's correct. Q. And the fact is, is it not, that in late January 1997, you received Professor Hibbert's report and the report from Relectronic of 24 January; didn't you? A. I do not recall the date of the Relectronic report. I believe I received Professor Hibbert's report and I received what was termed a "preliminary" Relectronic report. Q. You were very concerned, at the time of receiving that material, that that report from Relectronic had no investigation at all of what was in the computers; correct? A. That is correct. It was a preliminary report. Q. You were of the view, in late January, that really you could not know what, if any, response was necessary to this event until you knew what was inside the computers; that's correct, isn't it? A. That is incorrect. My references to the Relectronic reports were just that. They positioned limitations on judgments based solely on that information. That was not the extent of available information. Q. But you were concerned, were you not, that it was not possible to judge what the appropriate response was until you had a substantial knowledge about the extent and properties of the contaminant; correct? I mean, that is just obvious, isn't it? A. That is partially correct. Q. Well, it is completely correct, isn't it? A. No, it is not and I will be happy to explain why not. Q. Please do? A. The specific information regarding how to proceed on an entire data centre is not something you can do on a preliminary report. However, information available through verbal conversations and on-site observations can lead me to believe that something of the order of some level of restoration or replacement is required. Q. The extent of that restoration would be the matter of investigation; correct? A. That's correct. Q. That investigation might establish that the extent of restoration of the computers might be minimal, if at all; correct? A. There are many forms of investigation that can lead to many conclusions. Q. Well, the answer to my question, then, is yes, isn't it - it must be? A. Investigations as simple as looking at the intake filters, looking at the boards and the exhaust filters, without laboratory analysis, can lead to conclusions. Q. Until a proper investigation has been made of the concentration of contaminant in the computers, the level of response, if any, cannot be determined; that's correct, isn't it? A. That is correct. However, the level of contamination could be simply a visual observation. Q. You would agree with me that it would be quite unreasonable to ask a person to express an opinion that the computer data centre computers required complete cleaning, irrespective of the level of contamination in the computers - that would be asking a completely unreasonable question, wouldn't it? A. If sufficient information was available to identify the distribution of the contaminant as being widespread, and visually apparent that it was widespread, that may be sufficient information to make a decision. (T430:39 - T432:35) 1196 I understand that evidence to be adverting to the fact that Professor Hibbert would have been entitled to rely upon a site inspection in addition to any other technical material available to him at the time of providing his report of 9 January 1997. Professor Hibbert confirmed the importance of his inspection as described in his cross-examination as follows: Q. ……. I would just like to return to the meeting of the 9th if I could. Were you told at that meeting that they wanted an opinion from you identifying the need to clean regardless of contamination levels; were you told that? A. No, I was asked my opinion as having seen the data centre and seen the effects of the incident and received information concerning particles and so on. Did I advise them to clean their computers? Q. Dr Hibbert, you didn't know what level of contamination there had been of any individual computer, did you? A. I had seen the room covered in iron oxide. …... Q. Did you tell Optus that you couldn't decide to clean all the computers until you had worked out what the average level of contamination was? A. No, I didn't believe that that was necessary. My opinion was to clean the contaminated computers. That was my opinion. (T794:12 - T795:10) 1197 At another point in his cross-examination, Professor Hibbert gave the following evidence: A. I had no regard as to the urgency of the matter, in terms of forming my opinion. I gave that opinion because I had seen the extent of the contamination across the room and that I believed that that contamination had gone into the computers and therefore I believed that if you saw iron in those computers, then this was the result of the incident and therefore they should be cleaned. Q. Did anybody ever revert to you afterwards to sort of ask your formal opinion prior to the cleaning taking place? A. I attended a meeting at Optus on the North Shore in about July, I believe, that year, where I was asked if my opinion had changed and I said "no". (T811:41 - 57) 1198 In relation to Professor Hibbert's evidence, his involvement did not end with the provision of his report, although the submissions on behalf of Tyco might suggest otherwise. In April 1998, he carried out a statistical analysis of the results of the testing of samples from the Rosebery centre as provided by Mr Flynn using the tables prepared by Mr Flynn in that context. His conclusion from that analysis was as follows and confirmed his earlier opinion as conveyed to Optus: "31. The relevance of this analysis is that it demonstrates that the contamination of iron (and accordingly zinc) was extensive and significant, whether the particle size was tiny or very tiny. Small particles have a greater potential for corrosion because they have a proportionately larger surface area. They are more mobile and, as a result, can agglomerate to make larger particles. "Larger" particles have a greater potential for bridging circuitry." 1199 Had contamination of the sample by other than iron and zinc particles been a matter of concern, as with earlier observations by experts, they would have been the subject of comments. They were not. 1200 There were adjustments to the analyses originally performed through Unisearch which were the subject of subsequent reports by Professor Hibbert which did not, for relevant purposes, qualify the opinion which is quoted above. 1201 Professor Hibbert attended a meeting at Optus' premises in July 1997 in which he confirmed the advice which he had previously given to Optus. At that meeting he had been brought up to date by the provision of further reports which he was not able to identify with particularity in the course of cross-examination. 1202 He also conducted "an extensive literature survey" in relation to computer disasters and problems with corrosion on computers and that was the subject of a further meeting with Optus. As at the time of his being called as a witness in these proceedings, Professor Hibbert had not altered his views. Rather than thinking that Optus acted prematurely, I prefer the view that it was obvious to all interested parties that the damage to the Optus equipment was serious and required urgent and substantial recovery action. 1203 Tyco also challenged the credibility of Professor Hibbert's opinion evidence as that of an expert who had acted prematurely and had then been forced to adhere to an untenable position. I reject that submission completely. There was no semblance of self interest, or bias in Professor Hibbert's evidence and he did not stand alone in the views held about the need to clean this equipment: views which I accept. 1204 The issue raised by Tyco is one which calls for an examination of conflicting evidence of experts. Professor Hibbert, Mr Hubbell, Mr Flynn and Dr Kenneth Spencer Basden gave evidence in Optus' case. Dr Basden was an expert in applied chemistry whose areas of expertise included "air pollution and control and the analysis of air pollutants (including particles)". In Tyco's case Dr Paul David Herman Lunsmann and Dr Richard Austin Blanchard gave evidence. Dr Lunsmann was an electrical engineer who held a Bachelor of Science degree, a Bachelor of Engineering degree and a doctorate in solid state physics; a discipline of particular significance in relation to "most integrated circuits". Dr Blanchard, also an electrical engineer, specialised "in the reliability and failure analysis of electric and electronic systems and components, as well as power electronics and semi-conductors". 1205 My observation of Dr Basden was that he was extremely authoritative, was prepared to accept qualifications as put to him and was very forthright in his expression of views. I regarded his expertise and level understanding of his subject matter as impressive and reliable. 1206 He held a Science degree in applied chemistry and his doctorate was in chemical and mining engineering. He had been a member or fellow of several institutes in Australia and overseas, in which he held senior positions. Up until 1987 he was principally involved in academic pursuits and, from March of 1987, had been the principal in an engineering and environmental consultancy. His field of expertise involved investigations into atmospheric contamination. Most of his consultancy activities were performed through Unisearch. Since the mid-1980's he was more particularly concerned with environmental problems involving particulate and gaseous contamination. He was the author of numerous learned papers. 1207 Between January 1997 and November 1999 he had been retained to undertake various tests in relation to the Rosebery centre, commencing with a request of 9 January 1997 from Mr Flynn to undertake atmospheric monitoring in the Rosebery centre. He was involved in the taking of samples of particulate matter. It was his opinion as follows: "24. The work carried out by me has led, in my opinion, to the inescapable conclusion that the iron oxide (including magnetite) contamination occurring in the CDC and in other parts of the STC was the result of the incident. The presence of the ferrihydrite depositions, magnetite dendrites, cenospheres and other iron oxide particles are spread in significant quantities throughout the air conditioned part of the STC and in much less significant quantities through the non-air conditioned part of the STC. I am not aware of, and cannot envisage, any other explanation for the presence of these particles in the STC other than from the incident." 1208 It was also his evidence in chief that as follows: "In my investigations, I was not specifically looking for, or testing at the STC for the presence of magnetite. However, the presence of magnetite in the STC (and the CDC in particular) was readily apparent to me in the various investigations I carried out."

1209 Dr Basden's evidence may be seen as yet another example of the investigating experts' concern with iron oxide and not other particulate matter that showed up in analyses of samples taken from the contaminated equipment.

1210 During cross-examination he repeated his opinion that there was widespread evidence of magnetic ions in the form of magnetite as appears from the following: Q. Do you recall that in one of your earlier reports you formed the view that the presence of magnetite was about 10 per cent? A. I can't recall that one specifically, but it is varied from virtually 100 per cent to virtually nothing, depending on which samples came from where. This particular one I was referring to in paragraph 16 refers to the specific one that was received from Minter Ellison solicitors. Q. The presence of magnetite as an iron oxide - do you consider yourself qualified to explain to his Honour by what process magnetite would be present in the corrosion scenario, which I think you understood to have taken place in this case? A. Yes, I could do that as a matter of fact, because I have had some experience in connection with another case about this. The magnetite could have come from two sources. Firstly, from the residues of construction work which we have been referring to up till now with these shards and cenospheres and slivers of metal which have been partially oxidised. There is also another one as well which I haven't been actually concerned with in this particular case but I know about it through talking to some other people, but it is related to another situation involving a fire on a dragline in the Hunter Valley. That is, that in closed systems where the iron is present, it can rust and initially forms the ordinary red rust that we are familiar with, which is a mixture of goethite and maghemite and a bit of lepidocrocite. As the oxygen within the system gets used up, the oxidation potential in the environment changes from plus 2 to minus 4 volts. Under these circumstances, these initially formed oxyhydroxides which I have just referred to - which is the goethite, and lepidocrocite - do convert to magnetite. This is symptomatic of oxide formation within a closed system where water is present. ……. Q. As a proportion of the product of this incident, you can't express an opinion as to whether there was a lot or little magnetite, can you? A. I can say a lot. There was a very substantial amount. It was in all of the samples that I looked at to a greater or lesser degree. There was certainly not a trace of quantity, not a quantity that would show up in only one of every half dozen samples. It was there all the time. Q. In greater or lesser degree? A. Yes. Q. Is it fair to say that you aren't able to express an opinion as to what you would expect to be the proportionate amount of magnetite from a corrosion process which took place in the gas exchanger, heat exchanger, because you really haven't studied the circumstances which pertained within it? A. That's quite true, yes. Q. All you are able to say is, that in the examples you observed, you saw greater or lesser amounts of particles which you believe to be magnetite? A. Yes Q. The one proportion you refer to in your statement is some 30 per cent? A. Yes. Q. You would agree with me in another report which you put forward, you found it was about 10 per cent? A. I can't remember the exact one, but I won't deny it. Q. I will show you the exact one so I can satisfy you that that is what was said. It was your eighth report. Can you recall that? A. I can't recall what's in it at this stage. I recall report number 8. Q. Rather than tender it, I will give it to you. I show you your eighth report, a report of 15 February 1998. I will ask you to look at paragraph 2.3. A. Yes, I'd agree. (T 131:36 - 132:21; T133:26 - 134:18) 1211 The evidence is significant in conjunction with the evidence of Professor Hibbert and Mr Hubbell as to the consequences of the magnetic properties of magnetite. Dr Basden's evidence in cross-examination is relied upon in submissions by Tyco as supporting a proposition that the magnetite in the data centre "was about 10%" and that it was his evidence that only "about 10% presumed magnetite" had been revealed. That submission failed to take into account the evidence in chief to which I have referred and, for that matter, the evidence in cross-examination by counsel for Tyco. Even if one allows the bias that may occur from the particular locations from which Dr Basden obtained samples, I am satisfied that his general views, as so expressed as to the presence of haematite, were reliable and applicable to the data centre and the EFTPOS/Tandem room, given the source of the "rust" involved in Dr Basden's samples. 1212 Dr Lunsmann obtained his degrees and doctorate from Sydney University. He was the author of many publications of a highly technological and esoteric nature which were never really explained in terms of their significance to the issues in these proceedings, but which appear to have, from their titles, a technological bias in relation to the manufacture of such things as an electrolytic capacitor for use in "implantable defibrillators". His qualifications in relation to the subject matter of these proceedings has some bearing on the approach one should adopt to the evidence of Dr Lunsmann. 1213 His employment history disclosed that between 1968 and 1982 he was on the staff of the Microelectronics Division of Amalgamated Wireless Australasia Ltd, where his duties concerned the manufacture of integrated circuits, parts and their assembly. That work included design and testing work with Telectronics Ltd which he joined in 1982. He was initially involved in the design of computer chips for integrated circuits and the design of printer circuit boards; Telectronics being a manufacturer of heart pacemakers and defibrillators - hence, presumably, his bent in relation to his publications. The circuit boards with which he was involved, were actually purchased by Telectronics and its staff then carried out the assembly. 1214 Dr Lunsmann was responsible in more recent years in that employment for research and development in relation to capacitor technology and investigations and analysis of failure mechanisms of integrated circuits. 1215 Dr Lunsmann took up consultancy in 1996 when his employer was acquired by a United States corporation which then retained Dr Lunsmann as a consultant. 1216 As a starting point in the evaluation of his evidence, I think it is not entirely irrelevant to observe that Dr Lunsmann did not have a facility of communicating matters of a highly technological and complex nature in terms readily understood by the uninitiated. To illustrate the point, during the giving of evidence he wished to change a statement in his evidence in chief in which he expressed the view that "Contaminant must be conductive in order to give rise to leakage currents". Dr Lunsmann wished to qualify the opinion as one referring to "significant leakage". In his oral evidence in chief he gave the following further evidence by way of purported explanation:

Q. What do you mean by "significant leakage current"? A. Well, I would have to explain how a computer operates in terms of sensing logic levels if you wanted me to explain the difference between significant leakage current and insignificant leakage current. MR HUTLEY: With your Honour's leave? Q. Would you explain that to his Honour? A. All computers work by sensing the voltage at every node within the circuit. Those nodes are driven by other power supplies or power sources and each node has a capacitance and a resistance associated with it. Some of that resistance is to the ground terminal associated with those sensors and the speed with which the computers work determines the size of the power supply that is driving those nodes and it determines how quickly that a particular node can charge and discharge. The circuits are designed such that they are balanced to the degree where they will rise up to the voltage where the node decides whether it is a one or a zero in the time that's given that particular node to operate. In a computer of the type that was operating here, that might be 100-millionth of a second. So you would need a current that will charge a particular capacitance and resistance at that node supplied by the circuit that's driving it. In the case of all of the integrated circuits that are soldered on to the pins of these boards, the mere fact of a physical pin will give you a capacitance that is about two picofarads - two one-millionths of one millionth of a farad, two to the minus 12 of a farad. That, when you charge it in the 100-millionth of a second, takes about a milliamp of current so that the impedance that's driving that has to supply a milliamp of current at usually 5 volts and so its impedance is much lower than the leakage path from the sensing node to any other terminal within the circuit. A drawing would be much easier to explain it to you. Should I do a drawing? HIS HONOUR: Q. I think not. A. I will continue then. Q. Continue. I think it will be obvious to you that I have considerable difficulty in following what you have just explained. A. Okay, if you would like further explanation I could do it with a drawing but what I am trying to say is that the driving force that provides the power to any particular node in the circuit is important in that it can supply any stray leakage current that is required by the foreign material, by any other surface mechanism that would take current that would not normally be required by the circuit and that value is why I changed the wording to "significant leakage current". (T3928:27 - T3929:37) 1217 Dr Blanchard was a highly qualified scientist who held a Bachelor of Science degree in Electrical Engineering from Massachusetts Institute of Technology from which institution he obtained a Master of Science degree and from Stamford University a doctorate in Electrical Engineering. He practised as a consultant, specialising in failure analysis in electric and electronic systems. He had "extensive experience in advising in relation to the potential failure of computer equipment in circumstances of accident or catastrophe and advising as to what steps, if any, should be taken in response to such accident or catastrophe." He held a number of patents and was co-author of textbooks and of numerous learned papers. He had extensive experience in litigation related issues in his field and that was confirmed by my observation of him in the witness box. One of Dr Blanchard's consultancies was in the form of an ongoing retainer for one of Tyco's subsidiaries. 1218 In the evidence in chief of Dr Lunsmann, as set out in his statement of 22 July 1999, Dr Lunsmann set out the steps that he would have followed "in determining whether there was any threat to the computer equipment from the discharged material" as a consequence of the incident, namely: a) He would ascertain that the equipment was still working. b) He would implement a system to monitor continuing performance by a comparison of "problems" before and after the incident. c) He would inspect a sample of "printed circuit boards from inside the computer to ascertain the extent to which, if any, the discharged material had entered the computer cabinets and settled on the computer circuit boards." d) The sample "should be examined under a microscope with a magnification of 4x to determine whether the boards have been contaminated by the discharged material and if so, to what extent". e) If particulate matter was evident on the boards, he would arrange for that to be analysed and determine its properties and potential to affect electrical or electronic equipment. f) Depending on the amount of contamination "tests could be initiated to determine empirically whether the contaminant had the potential to affect electrical or electronic equipment". In that context he offered the opinion that "(f)oreign material which is non-conducting would not cause the computers to fail". g) He would examine the filters on the computer cabinets to determine the size and quantity of the contaminant particles which had been filtered out. 1219 Of those steps the following observations may be made. Dr Lunsmann makes no reference to any steps that he would take if the system, in the course of that exercise, collapsed as a result of the contamination. His method of examination under a microscope magnification of '4 x', according to Dr Basden, whose evidence on this subject I would accept, is quite inadequate and magnification necessary would be 40 x. 1220 Dr Blanchard also gave evidence of the steps he would have taken namely: a) Check to determine whether the computer equipment was still functioning. b) Take steps to reduce the humidity and remove any obvious pools of water. c) Assemble a team of experts with expertise in the fields of electronics and chemistry to assess the nature of the material discharged and its potential to affect computer equipment and possible consequences. d) Determine how much of the material discharged had been deposited on the computer equipment and in particular the circuit boards. e) Cause an analysis to be conducted of the material discharged to determine, in particular, whether it contained "one or more species of iron oxide". f) Conduct testing to determine the potential effects of the material on computer equipment which would include monitoring the equipment by removing selected equipment from service but maintain it in operation. g) Inspect computers in other computer data centres to get a comparative measure of level of contamination. h) With that information in hand, form an assessment of the likely effect on normal functioning of the equipment. 1221 It is apparent from that description that a principal cause of concern was the possible presence of iron oxides. 1222 It was his view that Optus initially carried out the correct steps, but he considered that the decision to clean was not a reasonable decision "as it was not based on proper information as to the identity, nature and potential effects of the material discharged". Dr Blanchard also considered that the continued operation of the equipment after the incident "was strong evidence that the material was not going to have an adverse effect on the computer equipment." As in the case of Dr Lunsmann's suggested protocol, Dr Blanchard did not include a step that he would take in the event that, during the conduct of his protocol, there was a significant failure in the system occasioned by the contamination. Dr Blanchard conducted a test during 1998 using "two samples of the contaminant that was present in the" Rosebery centre. 1223 The areas of dispute amongst the experts involve comparatively complex technological processes. Two principal questions emerged, namely, the nature and extent of magnetic material in the contaminant and its capacity to cause tracking, or in layman's terms, short circuiting of the circuit board connections and second, the capacity of particulate matter to behave in such a way as to agglomerate and so cause failure of connections on the circuit board. 1224 In resolving those questions I would regard the evidence concerning the chemical properties and propensities of particulate matter to be the principal area of expertise and the significance of those things on electronic equipment, such as computer circuit boards, as secondary to that. Optus has advanced its case through experts in disciplines in both fields, the evidence so adduced on the nature of the particulate matter contaminating Optus' equipment and the propensity for it to degrade that equipment was compelling. 1225 Dr Blanchard's approach was empirical by resort to two principal matters, namely, the results of his experiment with the contamination samples from the Rosebery centre and the fact that the Optus equipment continued to operate in the Rosebery centre without failure until migration of applications was completed and the equipment decommissioned and transported to the cleaning centre under Relectronic's control. Therefore, Dr Blanchard concluded, Optus' conduct acquiring a GSMIS pool kit, migrating the applications from the equipment at the Rosebery centre, decommissioning that equipment and cleaning it was premature and, as events transpired, unnecessary. 1226 Clearly, a great deal depends upon the reliability of the experiment conducted under Dr Blanchard's direction if one is to accept his conclusion that the contaminant effects on the equipment was merely "cosmetic". The various views expressed by Dr Blanchard in his evidence in chief, included the following: "Based on these laboratory results and the actual on-site performance of the Optus equipment, the contamination that occurred in the Computer Data Center of the Optus Sydney Technical Center presented no threat to the electrical and electronic equipment in the computer systems based on the actions taken immediately after the event to control both the temperature and the relative humidity in the Computer Data Center." 1227 Of the results of Dr Blanchard's experiment he expressed the following view: "These results indicate that no difference in electrical or electronic performance exists between the control computer and the contaminated computers. These results support the conclusion that the effects of the incident that occurred in the Computer Data Center at the Optus Sydney Technical Center were only of a cosmetic nature." 1228 Given the authority of the expertise of Mr Hubbell and of Professor Hibbert, I think it is significant that they were not so easily impressed with the empirical approach of Dr Blanchard in his reliance upon his experiment upon the continued operation of the equipment after the incident: bearing in mind that the level of risk of degradation of the equipment from the iron oxide-bearing water contaminant was expressed by Professor Hibbert as "too great not to initiate a clean up operation". That was a view to which Professor Hibbert adhered and in which he was supported by Mr Hubbell. 1229 It was submitted on behalf of Tyco that Professor Hibbert's expertise was deficient, in that it is "not in electronics or electrics" and that he did not consult with any electronics experts to ascertain the full extent of the risk of tracking. Certainly Professor Hibbert acknowledged that he was not a computer expert, but the relevance of that, in my view, is difficult to unearth. His cross-examination on this matter was as follows: Q. Did you tell them that you weren't an expert in computer electronics? A. Yes. Q. Did you tell them that they really should speak to somebody who was an expert in that field about the questions thrown up in relation to electronics by what had occurred? A. I advised that they should consult a computer person, computer expert, in regard to the aspects of cleaning, how they would do it and how they would manage the system and so on. I believed that my corrosion experience was sufficient to advise them to clean. How they then went about that I believed they should have expert advice from the computer side. Q. So you didn't say to them, "You really ought to see somebody who's an expert in electronics about deciding whether to clean or not"? A. No. Q. You didn't think that was necessary? A. No. (T792:8 - 32) 1230 With that last answer I would find myself in agreement with Professor Hibbert who had, in my view, extraordinarily high qualifications in electro-chemical analyses so important in the dispute in these proceedings. 1231 As I understand the evidence, there was no dispute as to the presence in the iron oxides of magnetite and its magnetic qualities in the samples taken from the contaminated equipment and that the real dispute rested upon the extent of the particulate matter on Optus' equipment and the capacity of the iron oxides, in particular, to cause tracking, or to agglomerate so as to cause failure. In cross-examination, Professor Hibbert accepted the following matters as put to him on behalf of Tyco:

Q. Did you have a view as to the likely concentrations at all of magnetite, or did you just think some was likely to be there? A. I believe there would be some, yes. Q. And would it accord with your expectation from the events, as you understood them on 9 January, that they would be a relatively small proportion? A. From the corrosion of the rust, I would expect that magnetite would be the smaller proportion compared to the other iron oxides - iron hydrates. Q. Would you expect it to be in the order of 5 to 10 per cent? A. It may have been that, yes. Q. That's about the likely order, having regard to what you would have expected? A. Yes, it could be higher. I have seen it higher, but it was certainly less than half. (T844:40 - T845:3) 1232 It was put to Professor Hibbert during cross-examination that his expertise really fell short of the specific field of expertise required by Optus for an opinion as to the need to clean the equipment. Professor Hibbert rejected that approach as follows: Q. Is it fair to say that, really, from your point of view there was a theoretical possibility of tracking taking place, but the reality of that problem was not so much within your specific field of expertise but was rather an [sic] electronics expert? A. No. As it happens, it is in my field of expertise, because of the fractals that I was explaining earlier. I actually know about the conducting properties of iron oxides, because of the work I had done on oxides previously, and I also knew about the way that they could join together to form the track that we were referring to. Q. Did you express to them over what time frame that sort of problem would arise? A. No. I explained how it would occur, by the movement of particles on the board, and that when a gap, the pitch, was bridged by particles, then there would be failure. How long it takes to build up that bridge would depend on the ability of the particles to move and anything that happened in the data centre to create movement of air that would cause particles to move on the board. Q. Did you conceive of any time frame over which that problem, if it was a real problem, in your view, was likely to manifest itself? A. Specifically, no, but I would have had in my mind, again, time periods of the order of months to a year or two. (T813:28 - 814:2) 1233 Professor Hibbert also explained his inability to accept the pragmatic approach of Dr Blanchard by expressing no surprise that there had been no failure prior to the commencement of the cleaning up of the equipment, as appears from the following: Q. Did that surprise you, from the point of view of the risk of tracking? A. No. Again, I felt this was a long-term - because you have to build up the tracks in a similar way to corrosion. It doesn't happen immediately. So you have to have enough events to build up the particles in order to cause the tracking. (T814:38 - 45) 1234 Professor Hibbert also put into context the challenge to his opinion evidence based upon the size of the particulate matter as appears from the following cross-examination: Q. I'm simply asking 0.01 micrograms per square centimetre is a very small amount of iron; correct? A. Well, if you look at appendix 8 in my statement, I show that at that sort of level, particles of 10 micron diameter, one could have, was it, 13,000 of them on a board. So whether that's a small amount or not really depends on the context in which you find it, I think. (T816:38 - 46) 1235 At another point in his cross-examination, Professor Hibbert impliedly rejected the pragmatic approach of Dr Blanchard in the following way: Q. So, in essence, your two reasons for advising cleaning was risk of corrosion? A. Yes. Q. And tracking? A. Yes. Q. Corrosion risk was dependent upon your view that the relative humidities, even as low as 38.5 per cent, could promote corrosion; correct? A. Yes. Q. And that the conditions described by Mr Sinclair were so altered that, even at normal operating conditions, corrosion was likely; correct? A. Yes. Q. And, secondly, that there existed a tracking risk; correct? A. Yes. Q. What I want to suggest to you is that if the tracking risk had been in any way real, you'd have seen some manifestation of it over the next seven months, wouldn't you - 190 computers running 24 hours a day, seven days a week? A. Mmm. Q. Wouldn't you have expected, if it was a real risk, that you'd get some evidence of that occurring? A. I don't know, because I don't know the likely speed of growth of the dendrites that we are talking about. It wouldn't be a particularly fast thing, which is why, again, I was of the opinion that if it hadn't failed in a certain time, the risk was there and continuing. So I'm not sure I can help answer your question. Q. If you hadn't seen the evidence of one component failure, let alone some catastrophic failure, wouldn't that suggest to you that, really, the risk of this dendritic growth is insignificant? A. No, I believed it was still present. (T848:42 - T849:30) 1236 I think it is a reasonable general observation to make of Professor Hibbert's cross-examination that it did not serve to cause Professor Hibbert to make any significant qualification of the opinions which he expressed in his evidence in chief which included confirmation of the opinions expressed in his report of 9 January 1997. That was evidence which I have found both persuasive and reliable. Professor Hibbert left no room for conjecture as to his adherence to the 9 January opinion during the course of his cross-examination. 1237 I regard both the cross-examination and the expert evidence called in the Tyco case as not effectively challenging the opinion evidence of Professor Hibbert as to the chemical properties of the oxides found on the computer board, nor the propensity of those elements to act as conductors. It comes down to a question of whether the characteristics of those oxides and the extent of that contamination was in sufficient quantities to justify Professor Hibbert's view of the significant risk of failure from tracking. I accept Professor Hibbert's view that the quantities, as observed by him, justified the opinion he expressed. In that respect I think he is supported by the evidence of Dr Basden. 1238 In relation to the capacity of the non-conductive iron oxides to congregate and so cause a failure in the circuit board system, the opinion evidence of Professor Hibbert is predicated on the capacity of that material to move and gather into a contiguous position, so as to cause a failure by creating contact between nodes on the circuit board. 1239 The direct challenge to that opinion evidence, apart from Dr Blanchard's pragmatic approach, rested in the contention that there would be little likelihood of sufficient movement, having regard to the quantity of contamination on the circuit board, to cause the particles to act in that way. He was cross-examined on this subject as follows: Q. And the air is the principal source, is it not, of particles into and out of the computers? A. Yes. Q. So it follows, does it not, that the relative movement of particles would tend to decrease over time; correct? A. The relative movement where? Q. Within the computers. A. Not necessarily. Are we talking on the computer boards or on the surfaces? Q. On the computer boards? A. So once the board had a burden of particles, they would continue to move? Q. Wouldn't they move until they reached a point where they rested against something and weren't moving any further? A. Until the next, as it were, gust of wind caused them to move again, or disturbance of the board, if you know what I mean. Q. Wouldn't you agree with me that the relative likelihood of agglomeration leading to a tracking event would decrease over time? A. No, I think it's the opposite. It would increase, wouldn't it? Q. Why? A. Because as one started to form these dendrites, they tend to accrete more material and so, over time, they would build up and cause the tracking that we are talking about. Q. But the material which would be moving around would be decreasing over time, would it not? A. No, once the material is on the board it is quite difficult to get it off if you don't clean it. Q. It is pretty firmly attached to the board, isn't it? A. It is mobile on the board, but it won't come off the board easily. Q. I'm sorry, what do you mean "It is mobile on the board but it won't come off the board easily"? A. The force required to detach a particle from a board is much greater - about 100 times greater - than the force required to move a particle on a board or a surface. So my contention is that the particles on the board would be mobile on the board, but they would not be detached from the board. Q. So, in effect, atmospheric movement of particles would become relatively insignificant to the risk of tracking over time; is that right? And the risk as you see it, is the risk of lateral movement on the boards by particles on the boards? A. Yes. Q. Why is that? What's the electrical condition which promotes movement along the boards but not off the boards? A. It's not an electrical condition. It's the force - if you think about it, the force required to roll a ball along a surface is less than the force required to move it off. (T847:7 - T848:22) 1240 Tyco's submissions drew attention to Mr Flynn's report of 22 January 1997 which was analysed in terms of the range in particle sizes revealed in that report. While relevant, it is not a particularly significant component in the reasoning upon which Professor Hibbert has expressed his opinion as to the effect of magnetite and other iron oxides in the contaminant. 1241 Mr Hubbell had something to say about this issue in his evidence in chief as follows: "48. At paragraphs 27 to 41 of the Lunsmann report, Dr Lunsmann comments on Professor Hibbert's report dated 18 November 1998 and the reports of Mr Terry Flynn dated 19 November 1998 and 12 May 1999 respectively. In particular, at paragraph 33 Dr Lunsmann states that the possibility of any tracking being caused as a result of contamination from the event was extremely remote. I disagree with this conclusion. The bridging of fine pitch conductors can occur simply from the accumulation of particulate matter over time with the aid of the continuous movement of the fine iron oxide particulate in the computer room air currents. There is not necessarily any requirement for conductive or magnetic properties in the contaminant for this to occur. When bridging creates leakage currents or momentary short circuits it can manifest itself in the form of unexplained intermittent errors." 1242 In that section of his evidence Mr Hubbell addressed both the conductive characteristics of the magnetite and the particulate capabilities of iron oxide, generally, to create tracking or leakage. 1243 Similarly, there was no challenge to the evidence of Professor Hibbert as to the corrosive propensity of iron oxide. The main thrust of the case of Tyco was that the conditions under which the Optus equipment was operating after the incident in circumstances of reduced humidity and temperature, were conditions which were not conducive to the formation of the chemical process of corrosion. In this context, reliance was placed upon expressions of view in an article in the Journal of the Electrochemical Society on the subject of "Corrosion of Electronics". The cross-examination of Professor Hibbert on this subject matter included the following: Q. If you go back to 90C in the second column under "External Environmental Characteristics" you see in effect a statement to the same effect? A. Yes. Q. So do you agree with the view there expressed, that the critical relative humidity is usually somewhere between 70 and 80 per cent? A. Yes. Q. Will you agree with this proposition, that even with the presence of such contaminants as there were after this event, the critical relativity to promote corrosion -- A. Relative humidity? Q. -- relative humidity to promote corrosion would be well above 50 per cent? A. No, I don't think I can an agree with that one way or the other. I don't have a view. Q. So is it consistent with that, that running these computers at an environmental humidity of 50 degrees plus or minus 5 per cent may well have not promoted corrosion after this incident? A. I don't know. Q. You have no view one way or the other? A. No in terms of relative humidity, no. Q. Did you consider that the presence of hydrated iron oxide alone was sufficient to promote corrosion, irrespective of the level of humidity? A. I believed that at all practical humidities that were likely to be achieved in the data centre, that corrosion was still a possibility. What I'm saying is if you could get the relative humidity down to zero, then there may not be the corrosion, but 35 per cent, or whatever, humidity is still a third of a saturated atmosphere. There is still water there. Q. Quite. A. And, as you said, the presence of the iron oxide particles which would have their own moisture content anyway, I believed was a threat still. Q. Just so that I understand, when you say, "was a threat", do you mean that there was a logical possibility that there might be corrosion, or that it was likely that there would be corrosion? A. I believed that corrosion was still likely. Q. You believed that because of the relative humidity being maintained at 38 per cent or 38.5 per cent, or for some other reason? A. I believe there was enough water in the system to cause corrosion. Q. And by "water in the system", what were you including? A. I was including the water that was, as it were, left over from the discharge itself, plus the effects of lowering the relative humidity afterwards. Q. The water which was in the system there would have been, to some extent, free water? A. Yes. Q. Would you agree with me, having regard to the temperature conditions applying within computers, that would have rapidly evaporated? A. I don't know. It may do, yes. Q. Did you take into account in forming your opinion that it might not evaporate or was likely not to have evaporated? A. It may have evaporated. I didn't know the extent to which free water was contaminating the computers. Q. Did you, in forming your opinion that there was a risk of corrosion, take into account of [sic] likelihood that free water remained in the system? A. If free water had remained in the system, the corrosion would have been considerably more likely than if it had evaporated. Q. Did you make an assumption one way or the other, that it had or had not evaporated, or you didn't consider it necessary? A. No, I considered it, but I considered the case where it would have evaporated, because that is not the worst case. If it had not evaporated, it would have been even worse. Q. Can his Honour take it that your analysis took place from the worst-case scenario? A. No, the best-case scenario in which the water had evaporated. Q. The best case - what was that assumption of best-case scenario that you made? A. That there was no free water in the computers. Q. But there was hydrated iron oxide? A. Yes. Q. And a relative humidity of what? A. I didn't - excuse me. I took into account the measured relative humidity after the event - after the humidity had been brought down to the high 30s per cent. Q. Mr Sinclair's article was of the view that really the critical relative humidity to promote corrosion was about 70 to 80 per cent? A. In normal circumstances, yes. Q. In normal circumstances. And normal circumstances in the running of a computer over time involves the introduction of foreign matter, does it not? A. In what respect? Q. Environmental dust in the general wherewithal of life; correct? A. Yes. Q. Did you understand that Mr Sinclair was considering, as it were, a pristine computer, or the average computer after normal wear and tear? A. He may say here, but I presume computers in a normal working environment. Q. So "a normal working environment" would have with it differing levels of contaminants; correct? A. Yes. Q. He was of the view that in normal circumstances, about 70 or 80 per cent humidity was necessary to promote corrosion; correct? A. Yes. HIS HONOUR: Is that right? MR HUTLEY: I am just asking the witness. HIS HONOUR: I am asking you. I read that slightly differently. Perhaps I am misunderstanding some of the evidence, but I read that to refer to electrolytic corrosion. MR HUTLEY: I think that's what we are talking about. Q. We are speaking about electrolytic corrosion due to the presence of water which acts as an electrolyte to promote the corrosion reaction; correct? A. Yes. Q. That's what you understood I was asking you about? A. Yes. HIS HONOUR: With iron? MR HUTLEY: Q. With any. I am sorry you are shaking your head? A. Your Honour, this is the difference: the presence of the iron particles I believe increased the risk to the point - excuse me - increased the risk. Sinclair is not considering that there are conducting particles on any of these systems. I take the point that a working computer system may have dust in it, and who knows what it has, but, really, I believe, when I gave my advice to clean, that there was - the presence of so much iron in the room was a very big difference to what one might call "conventional approaches" to assessing risk in computers. (T836:45 - T840:3) 1244 In the light of that evidence I think one would need to strongly qualify the submission on behalf of Tyco that "Professor Hibbert …..agreed with the view of Mr Sinclair in the article "Corrosion of Electronics"…..that the critical relative humidity level for corrosion of electronic equipment was usually somewhere between 70 and 80 per cent RH [and that he] understood Mr Sinclair to be referring to computers in a normal working environment with differing levels of contaminants". As appears from the quoted cross-examination of Professor Hibbert, I think he is saying far more than that. 1245 It was also submitted on behalf of Tyco that "Professor Hibbert tried to be equivocal in his oral evidence about the presence of free water, but conceded that this may have rapidly evaporated and admitted that he based his opinion on the presumption that it had." A reading of the evidence does not justify such a charge. In my view, there was absolutely no element of equivocation or evasion in Professor Hibbert's cross-examination at any stage. 1246 It was submitted on behalf of Tyco, in effect, that in respect of Professor Hibbert's view of corrosion occurring in operating conditions of less than 50 per cent humidity, he was not supported by Mr Hubbell. I do not regard that as a sound proposition. 1247 Mr Hubbell's expertise stemmed principally from his degree of Master of Science in Corrosion Engineering and his experience which included an impressive involvement in the field of corrosion of electronics. He had been a consultant to the Naval Underwater Systems Centre performing the role of corrosion engineer specifically in relation to electronics in torpedo systems. His work with Eastman Kodak also was that of a corrosion engineer involved in various activities within that organisation relating to electronics, including computers of various magnitude. His work in relation to those computers involved failure analysis and the behaviour of computers in various environments. He was engaged by Digital as a corrosion consultant and his consultancy extended to areas of disaster recovery and data centre mechanical problems. His activities were world wide. 1248 In general terms, although his cross-examination was detailed and extensive, I think it is fair to so say it did not involve any significant qualification of the opinion evidence expressed by Mr Hubbell in his evidence in chief. 1249 There have been a number of submissions put on behalf of Tyco concerning Mr Hubbell's evidence which I regard as highly selective and which do not, in my view, convey the substance of his evidence. He was cross-examined repeatedly in a line of questions which were designed to elicit an opinion that all of the particulate matter on the computer boards, not just that of zinc and iron oxide, may well have required the remedial measures undertaken by Optus. That was part of Tyco case that Optus failed to discharge its onus of proof in that it was not shown that particulate matter other than the iron oxides and zinc would not have required the remedial measures undertaken. However, Mr Hubbell, I think, expressed the reality of the situation well and in layman's terms as appears from the following: Q. Were you seeking to convey by that that all you needed to know about this contaminating event is that it involved particulate contamination involving iron oxide to determine whether to clean or not? A. That could be sufficient to determine whether to clean or not. Q. Are you saying it was sufficient in this case? A. In this case I was not on-site to make that determination. Q. So is this just a general theory of possible circumstances? A. No, it is not. It is a practical explanation of how simple the problem actually can be. Q. Are you suggesting it was simple in this case? A. I was not on-site to assess how simple it was. However, I have indicated that if I had walked into the data centre and seen the distribution of particulate and iron compounds as illustrated in numerous photographs - if I had assessed the hardware on intakes, outlets, fans circulating air and looked at internal components, and understood them to be iron oxides of one form or another, all of which have hardness characteristics, I could assess, based on a visual observation, that there was potential for backplane problems and connector issues that creates a level of risk where I would recommend restoration or replacement. (T564:23 - 57) 1250 Nothing that emerged from Mr Hubbell's cross-examination should be regarded as qualifying his opinion corroborating that of Professor Hibbert in respect of the capacity for tracking of iron oxide in the form of haematite: the agglomeration of iron oxides causing bridging, notwithstanding the reduction in humidity and temperature effected after the incident in order to minimise corrosive processes. 1251 Further, Mr Hubbell was of the view that, leaving aside the cost and environmentally unsatisfactory elements associated with such a reduction in humidity, it did not remove the incidence of corrosion that might be expected with iron oxide and condensation associated with the hygroscopic characteristics of the particulate matter on the circuit board. 1252 An example of submissions which, in my view, represented something of a distorted view of Mr Hubbell's evidence was one in which the view was attributed to Mr Hubbell "that there was no risk of corrosion of electronic equipment at relative humidities below 50 % RH because of the lack of water as hygroscopic condensation would not occur". That is not a fair summation of Mr Hubbell's evidence. It is necessary to examine Mr Hubbell's evidence in relation to the reduction in humidity levels in the Rosebery centre in more detail than I would prefer to quote. His evidence was as follows: Q. When you say your concerns were primarily with condensation, what concerns did you have about condensation? A. Particulate material, in general, and contaminants, can individually have different propensities to absorb water vapour from the air and promote condensation at relative humidities lower than a clean surface. Q. Was that your primary concern about the consequences of this event? A. No, it was not. It was one of the primary concerns about the potential for corrosion associated with this event. Q. Was your concern this, that there may be contaminant present which would promote condensation out of the atmosphere, which in turn would promote corrosion? A. Yes, which in turn may provide one of the factors required for corrosion reactions. Q. And that fact being? A. A conductive electrolyte. Q. The conductive electrolyte being the water? A. That's correct, the water and once it is contaminated with the environment that it is condensed on. Q. And the propensity of substances to promote condensation is what is called the hygroscopic tendency; is that right? A. That is a common term used to describe it. Q. And that reflects your concern, which I asked you about earlier, when there has been a contaminating event, to find out the hygroscopic tendencies of the particular particles involved; correct? A. That is one of the bits of information that is very nice to have. Q. Do you have a view as to the hygroscopic tendencies of iron oxide? A. I believe I have the view that iron oxides have varying properties, depending on which oxides they are. I do not have an opinion or knowledge of the varying hygroscopic tendencies from one oxide to another. That is not a typical property that is well understood. Q. So you don't know whether they are hygroscopic or not? A. I do know that iron oxides in general are hygroscopic. Q. The potential to corrode depends upon the presence, as you have said, of atmospheric water; correct? A. It relies on the presence of condensed water. Q. The possibility of corrosion occurring is dependent upon, substantially, the humidity levels which maintain [sic] in a computer data centre; does it not? A. Yes, and the humidity levels in the computer data centre is a very complex subject. Q. At what level of humidity do you say that there is a risk of such condensation taking place? A. A guesstimate of approximately 50 to 60 per cent relative humidity may be a threshold above which hygroscopic condensation could occur. Now, in a data centre there are many locations where one can find high levels and low levels of relative humidity. But if you quantify the relative humidity of the room, it is typically done by an average of measurements at a certain height throughout a data centre. Q. Is it your view that a humidity level maintained under 50 per cent removes the prospect of condensation of water vapour in the data centre? A. I do. However, when you refer to a relative humidity of 50 per cent, it must be the relative humidity at the surface in question. …….. Q. I will put it a different way. If you are seeking to achieve a relative humidity in your computer room of 50 per cent, the air coming in to the computer room which carries the moisture cannot have a relative humidity of greater than 50 per cent, can it? A. Yes, it can. Typically the make-up air, as we call it, if in fact make-up air is used, can have whatever the external ambient conditions are, and it must be conditioned along with the rest of the air in the computer room. Q. But the conditioning takes place before it enters the computing room, doesn't it? A. Typically, it does not. Q. Are you telling his Honour that if you are seeking to get a relative humidity of 50 per cent in this computer data centre, you would bring in air from the atmosphere into the computer data centre at whatever the relative humidity was in the open air? A. That is exactly what I am saying. A good example of that is at the Australian Stock Exchange. The make-up air that contributed to the gaseous contamination was outside ambient air, unconditioned, and it happened to be a make-up air source located directly over a burning building. So whatever was outside came into the data centre, unconditioned. ….... A. The relative humidity, when describing a data centre, is typically a measurement made at eye level in numerous locations around the room and averaged. Now, in a data centre, if it is properly configured, there are cold aisles and hot aisles, each of which has a different relative humidity because of the difference in temperature. If you look at the cycle of air moving through a data centre, it is very similar to air in the outside atmosphere. It has a complete cycle. Air entering a process cooler - the term used for the airconditioning unit in a data centre - is low relative humidity, high temperature air entering at the top of a HVAC process cooler. As it goes through the cooling coil in the HVAC unit, the temperature drops and, depending on the dewpoint of the surface of the coil it may reach 100 per cent relative humidity at the surface of the coil. After being conditioned at the coil, it is exhausted to the subfloor. If it leaves the coil at 100 per cent and it mixes with the subfloor environment, the relative humidity goes from 100 per cent to something less; depending on the computer system's proximity to the exhaust of a process cooler will dictate what the relative humidity of the air coming through the floor tile is. …….. Q. Did you assume that the relative humidity in this computer data centre at relevant points could be in excess of the relative humidity which you consider necessary to promote corrosion? A. Yes. Q. And you assumed that point to be 50 per cent relative humidity, or above; is that correct? A. I believe that is correct. Q. Just so that his Honour can know, is what we are talking about here something that you turned your mind to? A. Most definitely. Q. So your concern about the possibility of galvanic corrosion depends upon the existence of a real risk that the relative humidity at an appropriate surface will exceed 50 per cent; correct? A. That's correct. Q. And for how long has it to exceed 50 per cent to create a real risk? A. It depends on the total of all of the contaminants present and their hygroscopic nature. …..… A. My choice of lower than 50 per cent is predicated on a general knowledge that particulate contamination can be hygroscopic regardless of molecular species. As a result, a standard recommendation is to decrease the relative humidity to minimise condensation. I have also indicated that I could not specifically articulate the hygroscopic tendencies of iron compounds. ……. Q. What I want to suggest to you is that that range of up to 60 per cent reflects the reality that, for all intents and purposes, corrosion is not perceived to be a risk to computers below a relative humidity of 60 per cent; that's correct, isn't it? A. No, it is not. HIS HONOUR: Q. Why is that? A. Depending on the cleanliness of the product. A computer that is very clean and doesn't have contaminants on its surface has a low likelihood of condensation occurring. A contaminated computer, depending upon the contamination sources, may have a high likelihood of condensation occurring and, as a result, in that situation when there is contamination present, we suggest depressing the relative humidity dramatically. Now 40 per cent is not an operating range - 40 to 60 is not an operating range where we would like to see the computers operated. 50 is where - 50 is a compromise between corrosion and electrostatic discharge issues at lower relative humidities. In addition to ESD, electrostatic discharge concerns, there are concerns for the humans within that environment. Long-term exposure to a relative humidity of 40 per cent is not anything typical humans enjoy. 50 per cent is better. …….. A. Not necessarily. The mechanical properties of the particulate play a large role in fretting and fretting corrosion, and if you were to contrast the particulate, sodium particulate or iron particulate, their mechanical properties are considerably different and therefore have differing impact in fretting or fretting corrosion issues. HIS HONOUR: Q. What do you mean by "fretting corrosion". MR HUTLEY: I was going to come to that, your Honour. Q. You speak of fretting corrosion in your report. A. I do. Q. Could you explain that process to his Honour? A. I'd be happy to. Fretting is a term that speaks of relative motion between two surfaces resulting in the wear, mechanical wear of one or both of the surfaces. If that mechanical wear takes place in a corrosive environment, and in fact there is wear accompanied by corrosion, it's typically called fretting corrosion as a way of describing it. As I've indicated, the mechanical properties of particulate contribute to that wear component of the process. Some materials have mechanical properties like hardness and shape that may contribute to wear more than other particles. Now, on the subject of the composition of the board and the measured constituents purported to be from the board, those are modified during the analysis process, potentially during the washing process. Those are compounds that dissolve, where the iron does not. So drawing conclusions on the source of things like calcium and sulfate can be impacted by the analysis techniques. …….. Q. So, what we really have here is a theoretical possibility of wear on connectors which no-one has ever observed, is that what we are dealing with? A. No, I would suggest that it is commonsense and there is no theoretical aspect to it at all. Abrasive, hard particles in a connector system lead to wear. If there is corrosive environments present, it can lead to fretting corrosion. There is nothing theoretical about it. It's something that occurs in data centres and it is commonsense to know that. Q. These particles of iron, so far as you observed them, were not mobile at all in this computer system, were they? They weren't moving around at all; that's correct, isn't it? A. I don't have any evidence of that. Q. You have no evidence that they were moving at all; correct? A. I have no evidence that they were not moving. Q. Have you any evidence that they were? A. I believe I do. Q. What? A. Exit exhaust filters were replaced after the event. Exhaust filters were analysed at a later date and contaminants were found on exhaust filters that were replaced after the event. That tells me there was a movement of contamination in the computer room. (T447:37 - T449:10; T450:40 - T451:11; T451:52 - T452:23; T452:49 - T453:19; T460:29 - T460:37; T462:10 - T462:39; T481:13 - T481:56; T548:5 - T548:38) 1253 What I think may be said of Mr Hubbell's evidence is that there is no issue that the reduction of humidity minimises the potential for condensation: that a standard of 50 per cent is acceptable within the industry: that below 50 per cent the incidence of condensation on the "clean" board is either insignificant, or in ideal conditions prevented: that contamination on a circuit board has the capacity to act in an hygroscopic way and be conducive to condensation: that even in a controlled environment where the room humidity is reduced to, say, 40 per cent, that will not exclude variations through movement of the air or in activities in operation: that continued operation of a computer system at a humidity level of 40 per cent, or less, is not practical as a long term measure for reasons of cost, environmental and operator considerations: that there are significant differences in the relevant characteristics of iron oxides and the sulphates, particularly in terms of hardness, magnetic and hygroscopic quality, corrosion potential and the like. 1254 The parties have raised an issue whether a recorded failure of the equipment due to tracking could be attributed to the incident. It was raised with a number of witnesses, in the case of Mr Hubbell as follows: Q. In your examination of these Relectronic-Remech reports, did you see one example which indicated that tracking had occurred? A. I believe I did. Q. Could you tell us which report? A. Not by number, but I can recall reading evidence of tracking and it was visually illustrated, I believe in a resin or some material that's normally on the board - I believe the word used was "a resin". Q. Was that important to you, that you had seen evidence of this risk which you were referring to coming to pass? A. "This risk"? Q. The risk of tracking is one of the risks that you refer to in your report as a reason why this should be cleaned; correct? A. That is correct. Q. You are telling his Honour that you saw in the Relectronic report, evidence that that had come to pass; correct? A. That's correct. Q. You made no reference to it in your report; correct? A. That's correct. Q. Did Relectronic say in their report, "Look at photograph X, there's been tracking"? A. Yes, I believe that is the case. Q. It wasn't the report which I took you to of cabinet 57 that I was referring to a while ago, was it? A. I don't know. I will go back to that report. Q. That is exhibit 4.14. A. No, I believe it was not this report. Q. Do you believe that this Relectronic report to which you were making reference, but which you can't identify, stated that what appeared in a photograph in that report evidenced tracking; is that right? A. I believe that is correct. I'm not 100 per cent sure if it was in photographic evidence, but I believe it was. Q. You see, what I want to suggest to you is that your recollection is just wrong and there simply is no statement in any Relectronic report that there has been tracking at all in respect of these computers; that's right, isn't it? A. No, I believe it's incorrect because it stood out to me as something unique. …….. A. I believe the report implied that the tracking was associated - the report identified tracking. Q. What sort of tracking? A. Electrical tracking. Q. What, particulate or water induced or what? A. I believe it was evidence of electrical current being passed. Q. Passed through the resin? A. I believe that's the case. Q. What has that got to do with the incident of 3 January 1997? A. The resin may have been contaminated by the event. Q. The resin may have conducted the electricity on its own account? A. A resin by nature is a non-conducting polymer. (T533:54 - T535:48) 1255 Mr McLachlan in his cross-examination confirmed this evidence of Mr Hubbell as follows: MR HUTLEY: Q. This is the case, is it not, that throughout the period of your association with the cleaning of these computers, you did not find one confirmed occurrence where a failure of a computer or a component of a computer was traceable to this event - is that correct? A. No, that's not correct. Q. How many occasions do you say that you found such an occurrence? A. We found two boards that had suffered flashovers. Q. Are they referred to in any reports? A. Yes, somewhere. Q. Could you tell me where they are referred to in any reports? A. I can't remember exactly, but they are referred to. Q. Flashovers, you mean? A. Between components. Q. You had found tracking? A. We found some tracking, yes. Q. Which you deduced was traceable to this event? A. Yes, it was symptomatic of that sort of fault. Q. Do you state in the report: "We found occasions of tracking and it is related to this event"? A. I believe so. (T3614:30 - T3615:8) 1256 The report that was produced by Optus on notice to produce, became exhibit 4.014. I have treated Mr McLachlan's evidence in the manner indicated in separate reasons for judgment. However, I am not prepared to find that these cases of "tracking" were the consequence of the incident. I prefer to leave that question open. They may have been a consequence of the incident. 1257 Dr Lunsmann provided three reports which formed his evidence in chief. The first being a statement of 22 July 1999, the second of 12 October 2000 and the third of 6 June 2001, the last being mid-way through the proceedings, which sought to associate deposits particularly the calcium sulphates with the building materials used in the data centre and concluded as follows: "15. Given the overall small amounts of Ca, Na, Cl, SO4, Fe, Zn, and other ions from all sources detected in the analyses after the incident in my opinion cleaning of the equipment was unnecessary.

16. There was no risk of corrosion of the metal parts of the printed circuit boards in the Computer Data Centre or the Tandem Room at the Relative Humidity level maintained in those rooms after the incident (<40%RH). Further, the Relative Humidity levels within the computer cabinets would have been lower than the bulk room level of less than 40% because of the heat generated by the equipment. Any water in the air within the Computer Data Centre or the Tandem Room would not condense within the computer cabinets.

17. There was no practical risk of open circuit problems occurring in the connection systems of the computers as a result of the particulate contamination from the incident due to the nature of the connectors which I described in paragraph 26 of my second report. The action of inserting the edge connectors of a printed circuit board into the backplane of the computer would tend to sweep away any particulate contamination and prevent an open circuit occurring. I am not aware of any open circuit problems being reported. I am also not aware of there being zero insertion force connectors in the computers in the Computer Data Centre and the Tandem Room. There was also no practical risk of abrasion causing failure of the printed circuit boards.

18. If the levels of iron oxide and/or zinc contamination on the printed circuit boards gave rise to concerns about the future reliability of the boards, either from the point of view of corrosion, open circuits or tracking, the levels of the other contaminants including the ionic contaminants such as chloride and sulfates and the other particulate contamination such as the calcium compounds should have been of more concern. If the level of the iron oxide and/or zinc contamination dictated the cleaning of the printed circuit boards, that cleaning would have been dictated anyway by the levels of the other contaminants." 1258 The last mentioned paragraph was the first evidence put on by Tyco seeking to attribute a need to clean the equipment as a consequence of the presence of contaminants other than those associated with the discharge of contaminated water at the time of the incident. Pars 28 - 33, in Dr Lunsmann's first report were as follows: "28. Both Professor Hibbert and Mr Flynn state that minute particles of iron or iron oxide on printed circuit boards may adversely affect those boards by bridging the spacings between leads or connectors as a result of the formation of strings or agglomerates of those particles. This would allow tracking across electrical connections if the particles were conductive.

29. For example, in his report entitled "Incident of Contamination at Optus 3 January 1997" dated 9 January 1997 ("the January 1997 Report") which is Appendix 2 to his report filed in these proceedings, Professor Hibbert advised Optus that: "The electrical properties of iron oxide may allow tracking across electrical connections."

Further, in paragraph 9 of his report filed in these proceedings, Professor Hibbert states: "I explained (to Optus) that over time, there was a risk that particles would "clump" or "agglomerate" and thus cause a "bridge" between parts of the board through which a current could flow and thus adversely affect the operation of the board." In section 3.3 of his report filed in these proceedings, Mr Flynn, he [sic] states that: "A particle of iron or its oxides can align with current passing through the electronic circuitry and be attracted to metal surfaces such as computer chip terminals and metal heat sinks. In addition, the metallic and magnetic particles can form long strings on the circuit boards and promote tracking between metallic and conductive components".

30. Minute particles of iron oxide do not themselves have significant magnetic force. Hence, they would not be expected to clump together, form long strings or be attracted to metal surfaces in the absence of some external force. If the particles have not clumped together on printed circuit boards around the time of initial deposition they are not going to move subsequently without the intervention of some external force additional to the usual forces acting on the boards.

31. Electrical current flowing in a wire creates a magnetic field. The size of the magnetic field is proportional to the current and when a number of currents are flowing in an area the magnetic field at a point is the integral of all of the currents, their direction and their distance from the point. Printed circuit boards do not generate significant magnetic fields. The electric current in a printed circuit board is of two types. Direct Current (referred to as "DC") is used to supply power to the board through the buried or innermost copper layers of the board called the power and ground plans (refer to paragraph 11 above). The currents in these planes are in opposite directions and are in close proximity and thus any net magnetic field would be negligible. The other type of current in a printed circuit board are Alternating Currents (referred to as "AC") which are switching signals representing the data and control signals in the computer. As this current is continuously alternating there is no consistent magnetic field to cause particulars to agglomerate or form strings. 32. Accordingly, in my opinion, particles of iron oxide would not agglomerate or form strings on a printed circuit board after initial deposition. Hence, those particles would not subsequently cause tracking between connectors or leads on the printed circuit boards if they did not do so initially. I understand from Professor Hibbert's report that the particles had not caused tracking upon initial deposition or in the period which followed. Further, I have been informed and asked to assume that the computers continued to operate properly after the incident for a number of months before being cleaned. If there had been any propensity for agglomeration of particles to cause tracking it would have been apparent in that time.

33. Further, no single particle of the size apparently associated with this event would be sufficiently large to bridge the distances between connectors or leads on the printed circuit boards. As discussed in paragraph 19 above, the distances or clearances between exposed metal or leads on a printed circuit board are usually greater than 0.2mm or 200 micrometres (m). Hence, for one particle to cause tracking it would need to be at least 200 micrometres (m) in length or diameter. The report of Mr Flynn filed in these proceedings states that particles removed from the ceiling cover in the Computer Data Centre ranged in size from 0.5 m to 125 m. Further, any particles which might have found their way to the printed circuit boards would be at the smaller end of that range since (as discussed in paragraph 23 above) computer cabinets are fitted with fine filters to prevent entry of dirt and particulate matter. A standard complete cabinet filter will protect computer equipment from particles with a diameter of 5 micrometers or more. Accordingly, the possibility of any tracking being caused as a result of contamination from this event was extremely remote." 1259 Dr Lunsmann expressed the view in his evidence in chief that the decision taken by Optus in the aftermath of the incident was "unnecessarily hasty and apparently without proper investigation as to the need for that cleaning or replacement……. [and that he did] not believe that that decision was warranted". 1260 During the course of his cross-examination Dr Lunsmann was not able to adhere to many of the views expressed in his evidence in chief. Moreover, the value of his evidence, I think, is severely qualified by his limited expertise in the chemical behaviour and qualities of substances. He was subjected to cross-examination as to the limitation of his expertise in matters about analytical chemistry, as appears from the evidence: Q. As Mr Hutley said when you started, your training is in electrical engineering; correct? A. That's correct. Q. Am I right in saying you are not an analytical chemist? A. I'm not an analytical chemist. Q. May we take it you don't say to his Honour that you are an expert on corrosion? A. No, I'm not an expert on corrosion. Q. You do have a Bachelor of Science which you completed in 1960? A. That's correct. Q. And am I right in saying you majored in physics and maths in that Bachelor of Science? A. I studied chemistry as part of that course as well. Q. That was in first year of your Bachelor of Science? A. Correct. Q. Did you do it in second year? A. No. Q. May we take it that you are not particularly familiar with the hygroscopic qualities of particular substances? A. That's true. (T3932:28 - T3933:1) 1261 Dr Lunsmann's limitation in the subject disciplines involved in this litigation was also reflected in the following cross-examination: Q. Now, in terms of the proposition you put that you haven't seen information which would satisfy you that there could be significant leakage, you have seen information that the particles were measured immediately after the incident as being up to 125 micrograms - microns -- A. Micrometres. Q. Which is a length measurement? A. Correct. Q. I think you refer to the spacing between some of the components as being 200 micrometres. A. Correct. Q. So if we get two of those particles together, bingo, we bridge? A. We create the possibility of some leakage current but we still have to get to leakage current of the order that will upset the circuitry. Q. Right, like one megohm? A. Below that. Q. Do you agree, if you can, that it would be reasonable to expect magnetite to be a component of the contamination, given that the contamination had come from metal pipes and chambers that had stagnant water in them for some 18 months? A. Magnetite could well be part of the iron oxide chain of elements that were there - compounds that were there. Q. Do you say that having regard to the stagnant water aspect I am mentioning or does that not come into your consideration? A. It doesn't come into my thinking. I am not an expert on the formation of rust, apart from the fact it eats away some of my motor cars. Q. Would you agree, then, that immediately after the incident there was some risk from the iron oxide and zinc contamination, there being an adverse impact on the printed circuit boards in the computer room and Tandem room? A. I always express the opinion that you should look at the printed circuit boards before you decided whether there would be a risk. Q. Well, the reason for looking was because a risk was screamingly obvious, wasn't it? A. Yes - there was external contamination of the computers. Q. But if you look at the exit filter in the computer and see it has got brown sludge on it, then you would say there is a real risk that the rust has got on to the printed circuit boards; correct? A. Correct. Q. And you would say there is a real risk of an adverse impact; correct? A. Yes. Q. We don't know how great it is, but it is certainly there; correct? A. There is a risk, yes - but it can be monitored. (T3943:11 - 3944:24) 1262 Dr Lunsmann's experience with computers of the kind the subject of these proceedings was quite limited as appeared from the following evidence: Q. Did you, between 1993 and 1996, have any experience with mid-range computers of the type that were in use at the computer data centre and Tandem room as at January 1997? A. Only being a user - Telectronics made devices which were similar to a personal computer for programming the pacemakers and defibrillators and I had experience in their construction and manufacture. Q. What machines were they? A. They were a dedicated machine for programming the implanted pacemakers and defibrillators. They contained about up to six printed circuit boards and they were of state-of-the-art density and devices. Q. What kind of machines were they? A. As I said, a thing that looks -- Q. I am sorry, who made them? A. Telectronics made them. Q. Telectronics made their own computer. A. Programmer, yes. It looked very much like a laptop computer and it communicated with the pacemaker and the defibrillator. Q. Have you seen any of the machines that were in the computer data centre or Tandem room at the time of the incident in January 1997? A. No, I have not - apart from the sample of the printed circuit board that I was shown at Relectronic. I was not given the opportunity to examine the actual machines. Q. Did you ask for that opportunity to occur? A. I was never offered the opportunity. Q. That's not what I asked. I said did you ask for that opportunity to occur? A. No, I did not ask - I did ask - yes, I did ask to see the computers which was why, in the end, I was offered to see the piece of the Barracuda board. Q. Who did you ask? A. Blake Dawson and Waldron. (T3946:51 - T3947:40) 1263 Dr Lunsmann had referred in his evidence to a report entitled "Generic Requirements for Reliability Qualification Testing of Printed Wiring Assemblies Exposed to Airborne Hygroscopic Dust" produced by Bell Communications Research Inc. It was known in the proceedings as the Bell Cor (sometimes the Bellcore) Document. Dr Lunsmann was cross-examined on this document. He had relied upon this report for the proposition that corrosion would not occur at 35 per cent relative humidity or at 50 per cent humidity. It was a document produced to "solicit industry comment" [T3952:30]. His cross-examination on the document included the following: Q. It depicts on figure 1.2 a typical loss of surface insulation resistance measured on a telecommunications printed wiring assembly, contaminated by airborne hygroscopic dust; correct? A. Yes. Q. This is the figure that you refer to as providing some support for the opinion that you have expressed that there would not be any corrosion occurring if relative humidity was kept below 40 per cent; correct? A. Correct. Q. And similarly for the opinion that it was below 50 per cent or 50 per cent; correct? A. Correct. Q. What, to your understanding, Dr Lunsmann, is the nature of the contaminant that is being referred to in this particular diagram or figure on the telecommunication printed wiring assembly? A. Airborne hygroscopic dust. Q. Comprising what? A. I can't say from memory how they simulated the test that produced that curve. Q. Well, the next section refers to dust accumulation rates and it refers to the size of particles. You see average size of particles of 0.5 microns and then 1.85 times 10 to the eighth particles would be needed to provide a 90 per cent chance of connectivity in a square centimetre; right? A. Yes. Q. Then they take an example, with NH4HSO4. Do you know what that is? A. Sodium hyposulfate. Q. No. A. Sorry, ammonium hyposulfate. Q. Ammonium hydrogen sulfate? A. Hydrogen sulfate - I thought that was typically referred to as hypo. It is a long time since I did chemistry. (T3956:18 - T3957:8) 1264 In further cross-examination I think Dr Lunsmann emphasised the limitations on his expertise in commenting upon chemical properties and their propensities as follows: Q. Appendix C at page C-1 refers to a number of different types of hygroscopic salts? A. Yes. Q. And the impact they will have on resistance? A. Yes. Q. Do you see that? A. Yes. That is why it is difficult but not impossible to relate the ionographic measurement to the actual effect upon the printed circuit board. Q. You don't purport to do that in your report, do you? A. No, but it relates to the degree of the relevance of the level of leakage current. Q. And the relevant leakage current that this document is directed towards is one megohm, isn't it? A. Correct. Q. And this document is indicating, at least in appendix C, that different particular hygroscopic salts will provide different resistance measures at different relative humidities? A. That's correct. Q. The results are heavily dependent upon the hygroscopic characteristic of the substance; correct? A. Yes. Q. Do you have any knowledge at all about the hygroscopic characteristic of hydrated calcium sulfate? A. I don't know about its hygroscopic nature but I do know that it is insoluble and therefore it would be closer to the calcium chloride figure of figure C-1. In fact it would be higher than calcium chloride because it is insoluble. Calcium chloride is soluble but calcium sulfate isn't, in normal chemical terms. Q. Calcium chloride has a much greater hygroscopic tendency than calcium sulfate, doesn't it? A. Yes. Q. And, indeed, about -- A. They don't mention calcium sulfate's hygroscopic nature. HIS HONOUR: I don't understand that. Q. How are you able to answer the question that was put to you? A. I would have to withdraw the answer to the first question and say that calcium sulfate is not reported in the documents - figure C-1.

(T3958:34 - T3959:38) 1265 Limitations on his expertise in relation to corrosion also emerged in the following evidence, again with reference to the Bell Cor Document: Q. I will withdraw that aspect. This document, even in relation to telecommunications equipment, does not say that a relative humidity of less than 40 per cent will not lead to failure of the equipment, does it? A. It doesn't talk about failure of the equipment generally. It treats the equipment in terms of testing it for airborne dust. Q. It has no application at all to iron oxide, does it? A. It has application to iron oxide because it provides us a measure of the surface insulation resistance for various types of mobile dust particles in terms of the physical quantity of the material on the board relating to the surface insulation resistance. HIS HONOUR: Q. Does that take into account any magnetic qualities? A. No, it doesn't mention magnetic qualities. MR GREENWOOD: Q. It is expressly dealing, is it not, with material which is non-conductive until such time as, as a result of relative humidity, an electrolyte can form which renders the material thereby conductive? A. Correct. Q. So it has no application to a conductive substance, does it, without needing relative humidity to make it conductive? A. Correct. Q. Am I right in saying that since you completed your science degree you have had no further training in corrosion? A. That's correct. Q. Aggregation of particles? A. Correct. Q. Aerosols? A. Yes. Q. X-ray diffraction? A. I have done some courses on scanning electron microscopy and EDAX. Q. Are you familiar with the expression "fretting corrosion"? A. Yes. Q. What do you understand "fretting corrosion" to be? A. I would understand it being delamination of material by the corroding particles, the product of corrosion being larger than the original source material, therefore causing fracture of the device. Q. When you referred to "corrosion" in your opinions, did you intend to include the notion of fretting corrosion? A. Yes. Q. Would you agree that it is a basic fact of corrosion of iron that in the pits and crevices, the electrolyte can become acidic? A. I am not an expert in the corrosion of iron. Q. Do you have any knowledge of fractals? A. No. (T3961:49 - T3963:6) 1266 Dr Lunsmann's evidence concerning the relationship of calcium sulphate particles on the circuit board with the ceiling tiles in the data centre was significantly less than compelling. Dr Lunsmann expressed the following view in his evidence in chief: "6. Such a ceiling is inappropriate for a computer data centre because the gyprock tiles will continuously shed gyprock particles and dust. The Australian Standard for Computer Accommodation AS2834-1995 requires at paragraph 2.3.2 that ceiling linings should not give rise to the production of dust." 1267 Cross-examination on the nature of that opinion was as follows: Q. You have told us in relation to paragraph 6 that you weren't familiar with the standard for computer accommodation prior to being provided with it by Blake Dawson Waldron? A. That's correct. Q. Did you look at the Australian Standard which applied prior to 1995 at all? A. No. Q. The suggestion in the first sentence of paragraph 6, Dr Lunsmann - was that your own opinion or was that something that was suggested to you? A. It was my own opinion once I had been made aware of the computer standard. Q. The suggestion that gyprock tiles "will continuously shed gyprock particles and dust" - upon what basis do you express that opinion, Dr Lunsmann? A. Home building experience. Q. Are you aware of how the gyprock tiles -- HIS HONOUR: Q. I don't quite follow - do you mean your own home building? A. Yes. I could modify that answer. I do recall the ceiling tiles at the Telectronics facility were similar to the tiles described in this case where they were just cut-edged gyprock sheeting. MR GREENWOOD: Q. Where were they? A. They were in the general office area. Q. Were they in the place where the computers were kept? A. No. Q. What was in there, can you remember? A. I believe it was a caneite-type material sealed with a sprayed paint. Q. How was it held up? A. By aluminium batons. Q. You said "caneite". Is that what you meant? A. A material other than gyprock. Q. Caneite - that fibrous stuff that is used when you use pinboards for putting drawing pins into? A. I believe that was the type of material that was in there. However, that room was not necessarily constructed to the Australian Standard for computers. Q. The notion of continuous shedding - how did you understand the gyprock tiles were held in the computer data centre in place? A. I understood that they were suspended by aluminium-type angle section bracketing. Q. So that on all four sides of it it is constrained? A. On - could you explain "constrained"? Q. Did you understand that on all four sides it was held in place by an aluminium right-angle bracket? A. Supported by an aluminium bracket, yes. Q. How far did you think was the gap between the bracket and the ceiling tile that it sat in? A. That would be a function of the fitting and I would - from experience, I have no particular idea of the standards that the Optus room was built to, but typically I would imagine that the distance would be of the order of several millimetres. Q. A fairly tight fit; correct? A. They are able to be removed. Q. Of course. And the right-angle bracket would provide an effective prevention of continuous shedding of gyprock particles and dust, in your experience, wouldn't it? A. No. Q. Have you ever worked under a gyprock ceiling like that? A. Yes. Q. Where? A. At Telelectronics, in the general office area. Q. In the general office area. And in that area, do you say that you used to find continuous shedding of gyprock particles and dust from that ceiling? A. I could believe that, yes. Q. I'm not asking what you could believe. Is that what you are telling his Honour on oath you experienced? A. There is certainly evidence that such material comes down, yes, and I would say that it occurred during that period that I was under such ceilings, yes. Q. Do you say not that it would, you say it did, do you? You tell his Honour that that is something that you observed where you were working, that there was continuous shedding of gyprock particles and dust, where you were working? A. I don't think I say that in my report, do I? HIS HONOUR: I don't think you are being asked that. MR GREENWOOD: Q. I am asking you -- HIS HONOUR: Q. Mr Lunsmann, you are not being asked that. A. I can't say that I could specifically associate dust with the tiles that were in the roof. (T3963:31 - T3965:47) 1268 I found that evidence not particularly edifying in assessing the value of Dr Lunsmann's expert opinion. Dr Lunsmann's approach to the existence of risk should be looked at in the context of the following evidence: MR GREENWOOD: Q. Mr Lunsmann, when you have expressed opinions about what ought to have been done after the incident on 3 January, did you have any understanding of the possible financial loss which Optus could suffer if there was a catastrophic problem with one of its critical systems? A. Yes. Q. What was the understanding you had as to the magnitude of the financial loss Optus could suffer? A. My understanding was - sorry, I do not have a figure for the volume of revenue being collected or being accounted for by the computers that were in that area. I took the opinion that all of the computers would be of a nature that would have a finite useful life, probably three to five years, they were well into that life and that if there were any need to do anything to them, it would be just as economic to replace them. Q. So did you have any understanding as to the possible magnitude of the financial loss Optus could suffer if there was a problem with one of its critical systems? A. No. (T3970:3 - T3970:30) 1269 Dr Lunsmann expressed the following opinion in his evidence in chief: "Accordingly, in my opinion, particles of iron oxide would not agglomerate or form strings on a printed circuit board after initial deposition. Hence, those particles would not subsequently cause tracking between connectors or leads on the printed circuit boards if they did not do so initially." 1270 He further expressed the opinion that "no single particle of the size apparently associated with this event could be sufficiently large to bridge the distances between connectors or leads on the printed circuit boards". During cross-examination, Dr Lunsmann, I think, departed from that position, as appears from the following: Q. One of the other bases for your opinion is that the particles of contaminant, once settled on the boards, would not move; correct? A. To any degree where they would clump together and join pins of the circuitry. Q. Well, that involves a few notions: firstly, do you say that, once settled, they would not move at all? A. No, I did not say that. Q. Do you accept the proposition that they may well move? A. Yes. Q. Next, you brought in the notion of them clumping together? A. No, that was a notion proposed by Professor Hibbert. Q. I am sorry, in your answer a second ago you said that you wouldn't say they would move and clump together to cause tracking. I am dealing with the moving, the clumping and the tracking separately. Firstly, you accept that they may well move? A. Yes, I accept they move. Q. If they move, they might clump, mightn't they? A. I don't know what "clumping" means, but I was referring to the statement of Professor Hibbert that magnetic fields would cause them to align and clump. I don't think that particles of their own accord will agglomerate, otherwise we would have a Maxwell demon in there. Q. So your view is they might move, but they wouldn't necessarily agglomerate? A. Right. Q. But they could; is that right? A. Statistically, they could. Q. But the third element, then, in terms of tracking in your answer, you said they couldn't move, agglomerate, and track - do I take it that what you mean is they could move, they could agglomerate, but it is not particularly likely in your opinion, and so it is unlikely the tracking would occur? A. That's correct. Q. But, if they did agglomerate in a particular place, tracking could occur - is that right? A. If they were all conductive. (T3937:11 - T3938:10) 1271 As to corrosion, his evidence included the following: Q. Given your earlier answers, I am not sure whether or not you say now, Dr Lunsmann, that there was no possibility of corrosion occurring on these printed circuit boards in the computer data centre and Tandem room? A. I'm saying that the likelihood of corrosion is extremely low. The way that one would ascertain the risk or the reliability of these machines would be to monitor how often they fail and look for any particular cause of failure and certainly do that for a period of time after the incident. (T3939:25 - T3939:36) 1272 I am far from satisfied that Optus enjoyed the luxury of waiting for its system to fail. 1273 The cross-examiner returned to the subject of the process of corrosion and the capacity of the particles to be mobile in the following way: A. I am looking for the steps. In one of my reports I suggested the procedures that I thought would be a relevant mechanism to determine whether there was any problem with the computers. Q. And the reason why you suggested those steps is because you couldn't exclude the possibility of corrosion occurring on the boards straightaway, could you? A. That's correct. Q. And you couldn't exclude the possibility of tracking on the boards straightaway, could you? A. You would expect any tracking to have shown up - any significant amount of tracking to have shown up immediately. With your proposition that the dirt might be mobile, then, of course, it could occur at a later time. But the time period would certainly be of the order of a week or a month. Q. Right. Now you just referred to it as my proposition - "The dirt may be mobile". It is not my proposition; it is your proposition. A. No, Hibbert's proposition. Q. With which you now agree? A. I agree that there is the possibility that some of the particles could move. Q. Do you also agree that the presence of conductive material on a printed circuit board is a cause for concern? A. Yes, because we go through the process of washing them to see whether there is any conductive material. (T3940:8 - 44) 1274 Dr Lunsmann also appeared to accept a process of cleaning contaminated circuit boards by removal and washing equipment as appears from the following: Q. Do you agree that in order to test how much contamination is on a printed circuit board it is necessary to remove it and wash it? A. That is one technique, yes. Q. Is there any other? A. One could monitor the failure rate of the board. Q. No, to determine how much contamination is on a board you have to remove it and wash it, don't you? A. Yes. (T3941:24 - 36) 1275 It is difficult to see how that could be achieved without first migrating applications from the affected computer. 1276 A final point of interest in Dr Lunsmann's evidence, which is a convenient introduction to the pragmatic and experimental approach of Dr Blanchard, emerged from his following evidence in cross-examination (part of which is repeated for ease of reference): A. I always express the opinion that you should look at the printed circuit boards before you decided whether there would be a risk. Q. Well, the reason for looking was because a risk was screamingly obvious, wasn't it? A. Yes - there was external contamination of the computers. Q. But if you look at the exit filter in the computer and see it has got brown sludge on it, then you would say there is a real risk that the rust has got on to the printed circuit boards; correct? A. Correct. Q. And you would say there is a real risk of an adverse impact; correct? A. Yes. Q. We don't know how great it is, but it is certainly there; correct? A. There is a risk, yes - but it can be monitored. Q. Okay. Well, there are a couple of options. One, of course, is you just leave everything alone and monitor it and see what happens? A. Yes - which is what Optus did for three months. Q. Is that your considered opinion? A. That is my understanding of what happened. Q. Do you accept that an alternative way and an alternative experiment which could have been performed would be to take some of the cabinets and spray material over them and see what happened? A. I think that determining the level of material on the outside of the cabinets is not relevant as to what was on the printed circuit boards. Q. I am sorry, when I said "cabinets", I was referring to take a couple of the computers intact and spray contaminant on to the printed circuit boards and then see what happens. A. If you were trying to emulate the same material and see whether that caused a failure, that may be one technique, but I would think that it would not necessarily duplicate the rate that any foreign material was arriving on the boards and it wouldn't duplicate the service life of the computers in terms of all of the foreign material that arrives on a board. Q. It would be impossible to reproduce the conditions from the incident, wouldn't it? A. Exactly, yes. Q. Let alone using the same computers, using little personal computers like these down the front - can you see these four computers down here? A. I can. Q. Testing on those by spraying some contaminant on them and seeing what happened, you would regard as a complete waste of time, wouldn't you? A. It might give you one data point. Q. Are you aware that such an experiment was done by a Dr Blanchard? A. I do think that in my list I had a report from Dr Blanchard. (T3944:1 - T3945:19) 1277 Dr Blanchard provided three reports which constituted his evidence in chief. The principal report, being that of 25 March 1999, summarised the instructions received from Tyco as one commissioning a study by Exponent Failure Analysis Associates (Exponent) "to duplicate the contamination of computer equipment as occurred at the Optus Sydney Technical Center and to monitor the effects, if any of the contaminants on the computer equipment performance." 1278 I think it is beyond argument that the experiment that was undertaken by Exponent could not be described as one that duplicated the contamination of the Optus equipment which occurred at the time of the incident. The nature of the test in fact carried out was summarised as follows: "A small sample of the mixture of both iron and zinc oxides and other inorganic materials that had been collected by Optus personnel was provided to the representatives of Tyco Australia Pty Limited ("Tyco"). Tyco commissioned a study by Exponent Failure Analysis Associates (FaAA) to duplicate the contamination of computer equipment that occurred at the Optus Sydney Technical Centre and to monitor the effects, if any, of the contaminants on the computer equipment performance.

A total of four computers were purchased for the test. Three of the computers were contaminated using a sample of the material that had been collected from the Computer Data Center at the Optus Sydney Technical Center. The sample was added to deionized water prior to being discharged above the three computers. The contaminated computers and an uncontaminated or "control" computer were placed in an environmental chamber and operated for three months. All computers were executing a diagnostic test program designed to capture and record any computer failures that occurred. The environmental chamber was set to provide a temperature and relative humidity close to, but slightly above the temperature and relative humidity that was implemented in the Optus Data Computer Center after the incident. (The selection of temperature and relative humidity values that were higher than those in the Computer Data Center provided a more severe environment, since higher temperature and higher relative humidity both accelerate the effects of contamination on electrical and electronic components.) Initially the environmental chamber was not able to maintain the target temperature and relative humidity for the first three weeks of the three month test, thereby subjecting all of the computers to conditions that were significantly more severe than those that occurred in the Optus Computer Data Center for this period of time. During the remainder of the three-month test, the target temperature and relative humidity were maintained.

At the end of the three-month period, the computers were removed from the environmental chamber, and the results from the diagnostic test program that had been running on each computer were recorded. No failures occurred on the control computer or on the three contaminated computers. All four computers were examined for signs of corrosion or other anomalies by eye and using a binocular optical microscope. Similar areas of each computer were compared and photographs were taken. No corrosion was present on any of the computers. In addition, the only evidence of any visible difference in the appearance of any computer was cosmetic in nature and was attributed to the contamination that had been purposefully introduced. Based on these laboratory results and the actual on-site performance of the Optus equipment, the contamination that occurred in the Computer Data Center of the Optus Sydney Technical Center presented no threat to the electrical and electronic equipment in the computer systems based on the actions taken immediately after the event to control both the temperature and the relative humidity in the Computer Data Center." 1279 Of the test conditions, Dr Blanchard considered that the protocol for the test resulted in the computers being subjected to the same, or more severe operating conditions than those prevailing in the Rosebery centre. 1280 The procedure was initiated on 30 October 1998 by spraying three of the four computers that had been purchased using water as a carrier with the fourth computer being reserved as a "control" computer. The computers were placed in an environmental chamber with conditions that were "close to, but slightly higher than the temperature and relative humidity ranges imposed upon the equipment" in the Rosebery centre after the incident. The computers were then put into operation with the diagnostic test program running. 1281 The control conditions were disrupted by the inability of the diagnostic chamber to provide the necessary temperature and humidity control and by a power failure: this over a period of several weeks from the commencement of the test to mid-November. The test was terminated on 1 February 1999. 1282 As earlier noted in these reasons, Dr Blanchard considered that the results supported the conclusion that the effects of the incident "were only of a cosmetic nature". 1283 As a starting point, given the evidence of Mr Flynn, Dr Basden and Professor Hibbert, as supported by Mr Hubbell, I am unable to accept the proposition that the damage to the Optus equipment was only cosmetic. Judging by Dr Lunsmann's evidence about such a test procedure, I doubt he would have been quite so positive about attributing to the test a status that justified a conclusion such as that drawn by Dr Blanchard. 1284 It is not appropriate to be off-handed in rejecting the opinion evidence of Dr Blanchard. He is a very highly experienced expert, including in the field of engineering-legal disputes. However, I am firmly of the view that the experiment conducted by Dr Blanchard has extremely limited value and is limited to evidencing the fact that a contaminant of the kind carried into the data centre, Tandem/EFTPOS room and Zone 1 during the incident, when applied to three desk top computers, which were kept for some three months in conditions as to temperature and humidity which, for the most part, matched those levels at the Rosebery centre after the incident, did not, except possibly on one occasion, cause the computers to malfunction and did not corrode the computers during the period of the experiment. 1285 It is the sort of experiment that, in my view, may have had probative value if it demonstrated excessive failures of the test computers and an incidence of corrosion, tracking or aggregation of particles. It simply does not follow that, given the disparity between the circumstances of the incident and those consisting of the spraying of the desk top computers by Exponent, the absence of such failures and degradation evidences the fact that the effect of the incident was only cosmetic. 1286 Apart from Dr Lunsmann's evidence, there was a body of evidence called in the Optus case criticising the value of Dr Blanchard's exercise and his cross-examination by counsel on behalf of Optus rather re-affirmed my difficulty in accepting Dr Blanchard's opinion. 1287 It is interesting, I think, to note that Dr Blanchard's first report of 25 March 1999 was taken up with this experiment. His second report of 3 August 1999, I have earlier referred to in these reasons. It was that which set out the steps that he considered should have been undertaken by Optus after the incident and in which, on "the empirical evidence which Optus [had] that the computer equipment had continued to operate after the……incident for ….. months", he expressed the opinion that it "was strong evidence that the material was not going to have an adverse effect on the computer equipment [and that the] reduction of the humidity which was undertaken was a sufficient safeguard for the equipment until a proper investigation was completed." 1288 Dr Blanchard's third report was taken up with responding to criticism made of his experiment by Professor Hibbert, Dr Jayasooriah and Mr Hubbell. Dr Jayasooriah held degrees as a Bachelor of Engineering and a Master of Engineering. His Doctorate was obtained in 1986 from the University of New South Wales. He had spent his professional life in academia and at one time was head of the Department of Computer and Systems Technology of the University of New South Wales. 1289 The statement of evidence of Dr Jayasooriah was admitted by consent with the exception of the last sentence of paragraph 15 which was not tendered. He was not cross-examined. However, his statement was replied to in detail in the third report of Dr Blanchard. He was retained essentially to comment upon the experiment conducted under Dr Blanchard's directions and the opinion expressed upon those test results. For that purpose he inspected the Rosebery centre equipment where it was situated at that time at Castle Hill and at Relectronic's premises. His expertise lay in computer science and engineering. He expressed to be experienced in the "supervision management and maintenance of computing and engineering laboratories which contained clusters of computer work stations and servers". He had also designed and built computers. 1290 Dr Jayasooriah was familiar with the computers that had been in operation at the Rosebery centre. He was also familiar with the personal computers which Dr Blanchard had used in his experiment. They were, incidentally, four desktop, old fashioned computer cabinets which had been purchased for the purpose of the experiment for less than $1000.00. They were described more technically by Dr Jayasooriah as "general purpose computers and quite different in structure and composition to the computers that were in use in the" Rosebery centre, being single board computers with "all critical interconnects [other than for memory] on the same board [and which were] well insulated from being affected by contaminants". They operated at a "reasonably slow" level namely 33 MHz. He compared these with the "high performance server computers used in the [data centre which] operate at much higher speeds [in excess of 100 MHz] and are usually designed to be operated in a 'computer room' environment." More significantly he observed that "they are usually designed to be configured to meet varying operational requirements, and thus are composed of many circuit boards, interconnected by special boards with matched impedance wiring circuit boards called back-planes". 1291 The relevance of the speed of operation he described as follows: "20. There is sufficient margin for variations in timings brought about by contaminations in slow computers before these may affect their correct operation. On other [sic] hand, computers with high speed back-plane architectures, such as the CDC computers, are far more likely to be affected by contamination in comparison to single board PCs boards designed for home use, such as the Blanchard PCs." 1292 I think it is also significant to note further peculiarities in the Optus equipment as observed by Dr Jayasooriah on his inspection and which he described as follows: "21. The PCBs that I inspected at Castle Hill had a large number of exposed circuit tracks where the boards had not been loaded (that is, components added). These exposed circuit tracks are more likely to be affected by contamination than unexposed circuit tracks which are covered by solder resist. Solder resist is the green material used to protect the copper tracks from corrosion and picking up solder during assembly of components on the circuit boards. I refer to photographs on pages 34, 35, 36, 38, 42 and 46 of Dr Blanchard's report which show that there are not as many exposed circuit tracks on the Blanchard PC's. The critical paths tracked on the mother boards on the Blanchard PC's are protected by solder resist." 1293 Given the mechanism of failure as advanced by the Optus experts which brought into focus the particulate sizes and 'bridging', or 'tracking' distances on the circuit board, the evidence of comparison of "Pitch" between the Rosebery centre computers and those personal desktops used by Dr Blanchard had the following significance: "22. Pitch is the gap between adjacent pins of electronic components on a PCB. The pitch on many of the components on the PCB's that I inspected at Relectronic were in the 0.5mm category. The Blanchard PC's contained older style boards. These boards contain technology that stopped being manufactured about 6 or 7 years ago and contain technology that is now 10 years old. From the photographs in Blanchard's report, the pitch on many of the components of the PCB's appear to be 2.5mm. The distance between the pins in the Blanchard PC's was therefore considerably larger than the distance between the pins in the computers in the CDC. This means it would be easier for a contaminated particle to bridge the gap between the pins of the computers in the CDC and conduct electricity, thus causing a myriad of problems." 1294 In illustrating the significance of speed of operation of a computer, Dr Jayasooriah observed that the desktop low speed computers such as used by Dr Blanchard were "designed to accept variations in the manufacturing processes without affecting the correct operation of the computers", whereas higher speed computers were less tolerant. With higher speed computers he expressed the view "parasitic capacitants or transmission line impedance characteristics [needed to] change only by a small extent to cause the system to fail". In making that comparison, Dr Jayasooriah compared the 33 MHz desktop cabinet of Dr Blanchard's experiment with computers running at 200 MHz. The Rosebery centre computers which operated at "much higher speeds [in excess of 100 MHz]" would bear similar comparison. 1295 It was Dr Jayasooriah's view as follows: "28. Consequently, it is not appropriate to speculate on the effect of contaminants on a 200 MHz computer from experiments conducted on a 33 MHz computer. Similarly, it is not appropriate to speculate on the effect of contaminants on the CDC computers from experiments conducted on a 33 MHz computer." 1296 He also expressed doubts about the validity of the use by Dr Blanchard of what he described as a "PASS-FAIL type test" the details of which need not be examined. He also criticised the use of de-ionised water in Dr Blanchard's test. There were other criticisms of Dr Blanchard's experiment which I think need not be examined, partly, because I am of the view that Dr Blanchard addressed them adequately in his report in reply. Dr Jayasooriah's general conclusion was that the "results reported by Dr Blanchard [could not] be used to deduce the effect of contamination on the computers in the CDC at the time of, or following, the incident, ……". 1297 Although not at the high technical level of Dr Jayasooriah, Mr Hubbell expressed similar criticism of the exercise conducted at the direction of Dr Blanchard. He also challenged the notion that the temperature and humidity conditions put in place by Dr Blanchard were more severe than the conditions in which the Rosebery centre operated after the incident. Included in those observations was the following: "28. Dr Blanchard's target test conditions were no more severe than the actual temperature and relative humidity target conditions in the Optus Data Center after the event. It is important to note that in any data center the bulk room temperature and relative humidity target conditions are just that, a bulk room target condition. The actual conditions vary significantly throughout any data center due to many factors such as; proximity to the process cooler discharge, cooling air distribution outlets, system hot air exhaust, walls or windows adjacent to unconditioned air spaces etc." 1298 Mr Hubbell elaborated upon the movement of air in data centres such as the Rosebery centre and the protection of equipment from particulate matter as appears from the following: "38. At paragraph 9 of the Second Blanchard Report, Dr Blanchard states that as the equipment in the Computer Data Centre and EFTPOS Tandem Room was housed in computer cabinets, it would, to a large extent, be protected from the material discharged and further that computer cabinets are usually fitted with filters which provide a degree of protection to the computer equipment from airborne substances.

39. These statements are inaccurate in relation to data center computers in general and the particular Digital equipment contained in the Optus Data Center, with which I am familiar. Data center computers are very high volume air-moving devices which cannot afford to have effective filtration slowing down the airflow used to cool the circuitry. The capture rate of these filters is insignificant due to the iron oxide particle size distribution. The filters are typically a wire mesh or a foam like material which is for aesthetic purposes and does not restrict the passage of air in high volume.

40. Air intakes can be found in the top, bottom and mid-height locations on various systems. The air velocities at these intake locations are sufficiently forceful to draw in airborne contaminants, significantly larger and heavier than atomized water droplets and 0.5 to 125 micron-sized iron oxide particles." 1299 It may be noted that these opinions of Mr Hubbell bear upon his adherence to the view that maintenance of reduced humidity levels at around 40 per cent does not preclude the incidence of condensation on the circuit board of the computer. 1300 It was submitted on behalf of Tyco that the evidence of Mr Perkins undermined the expression of opinion by Mr Hubbell as to the intake of air into the Rosebery cabinets. That is not my reading of Mr Perkins' evidence. 1301 Professor Hibbert was equally critical of the test in its use of 33 MHz desktop computers and, generally, in its failure to replicate the "Optus situation". He also criticised the utility of the three months test as follows: "1.2 In my opinion a test on three computers for three months cannot allow a conclusive negative inference in regard to the Optus computers over a longer period. Using the appropriate statistics it may be possible to put an upper bound on the rate of failure, but this would require the equivalence between the Optus situation and any test system to be established and an appropriate failure distribution to be agreed." 1302 Dr Blanchard has given a detailed answer to each of the criticisms that have been raised by the experts in the Optus case. Where I think Dr Blanchard fell well short of establishing any semblance of reliability of the results of the test for the opinions which he has expressed, lay in the choice of equipment which, in my view, had only passing resemblance to the equipment in operation at the Rosebery centre. I also have some significant doubts about the attempted replication of the nature of the contamination of the Optus equipment in the experiment, by the application of the sample contaminants in a de-ionised water carrier by use of an air brush. Professor Hibbert shared that view. 1303 Professor Hibbert was also critical, I think with good reason, of the test procedure which involved the following step: "Several large particles were too large for the aerosol dispersal, so they were removed prior to spraying. This reduced the spray samples by less than 5%" 1304 Dr Blanchard dismissed criticism of this step as one essentially of weight and on the basis that the percentage involved was not material. Professor Hibbert rejected Dr Blanchard's opinion on the following bases: "a. there are a number of significant differences between the Optus contamination and the tests making it impossible to establish what the results of the tests can tell us about the Optus incident.

b. errors in the calculation of the coverage of iron and zinc of the test boards.

c. the lack of chemical analysis of the test boards and computers.

d. the short time (3 months) and small sample (3 computers) of the test." 1305 The cross-examination of Dr Blanchard was essentially directed to criticisms of his experiment as evidenced by the expert witnesses called in Optus' case. I have been unconvinced by Dr Blanchard's explanation for the use of de-ionised water. In my view, it would have been far more preferable to have endeavoured to match the particulate residue on the circuit boards in the Rosebery centre by the use of a water carrier in Dr Blanchard's exercise which more closely matched the stagnant tap water containing the contaminations mostly associated with iron oxide and zinc which lay in the Heat Exchanger at the time of the incident. 1306 Dr Blanchard's opinion evidence in chief was qualified somewhat during cross-examination as, I think appears from the following: Q. In that context, even with the temperature and the relative humidity lowered and controlled, may we take it that your reference to "no threat", based on the results and the onsite performance, is limited to the computers that were not directly sprayed or affected - I'm sorry, not directly sprayed on by the rusty sludge deposits? A. I believe that the answer is no, and I believe that the tests I did showed that the computers that would have been contaminated by airborne iron oxide or zinc and not as a direct result of the spray were not presented - would not have reduced performance. In terms of the units that had received a direct splash or spray, the data at that time also indicated that the iron oxide presented no threat, but I did not perform any tests to replicate that. I did not have enough material. Q. And so your laboratory results teach nothing about the computers that were directly splashed by the contaminant; correct? A. Right, and by "directly splashed" I am talking about getting contamination on the printed circuit boards as opposed to on the cabinet, so there is no misunderstanding. Q. Do you agree with my proposition that your laboratory results teach nothing about the computers that were directly splashed by the contaminant? A. Correct. Q. And your answer a moment ago where you referred to data at the time indicating something, was merely the fact that you had been told that there had been no failures of the computers in the computer data centre which could be positively attributed to the incident - is that right? A. No. Q. What was the data, then, that you referred to in your answer a moment ago? A. The fact that there had been no increase in failure rate over the period since the incident. Q. Is that all - the totality? A. That's more than enough. If you don't see a change in failure rate over an extended period of time, that says there is no change in failure rate. That is very conclusive proof. There were apparently 200 boxes in the room, several thousand printed circuit boards, with no increase in failure rate. That is a significant event of its own and the additional small work that I did just corroborated it. HIS HONOUR: Q. You used, I think in the earlier answer, "conclusive proof". I don't think you adhere to that, do you? A. I beg your pardon, could you say that again, your Honour? Q. I think in the immediately preceding answer you used the words "conclusive proof" I don't think you adhere to that, do you? A. Conclusive meaning - is my opinion, yes. Q. Actually the expression was "very conclusive proof". I would have thought it was far from very conclusive if the cause of failures, even though not involving an increase, could be attributed to the incident. A. If one or more failures could clearly be attributed to the incident then that would be a different story, your Honour, you're correct, yes, sir, absolutely correct. (T3914:14 - T3915:34) 1307 Dr Blanchard's evidence in cross-examination has not caused me to alter my view that his opinion evidence, based on the results of that exercise, should not be accepted for the reasons advanced in Optus' case through its experts. 1308 There remains one matter in this context that bears comment. Relectronic conducted a test known as the 85/85 test on "a group of PCB modules, which were installed within the Data Centre and Switch Room at the time of the Inergen accident". The nature of that test was to accelerate processes by subjecting the subject modules to severe conditions beyond that normally encountered. It represented conditions of 85C and 85% RH which are said to "accelerate the effects of ionic corrosion, promote crystals growing over external surfaces and penetration of humidity into different devices, such as integrated circuits". The samples for the test were taken from a module installed within a DEC7000 unit which "represented a "medium contaminated" board, visibly affected by indiscriminate accumulations of contaminants distributed throughout the componentry". The other module selected was in "brand new" condition and had been additionally de-contaminated by Relectronic prior to testing. 1309 I think it is unnecessary to go into the detail of the test. The conclusions reached included the following: " 4.0 Conclusions

Subsequent to analysis of all data and evidence available, it was concluded that the presence of contaminants within the module has increased the surface degradation rate of components and solder alloy. This is particularly evident in the vicinity of more localised contamination areas.

It is also evident that the quantity of contaminants affecting the module was the principal determining factor in the degree of corrosion reached by the componentry contained within the module. This can be underlined with certainty by the fact that the uncontaminated module was, in relative terms, totally unaffected. (Refer to comparative sequential photographs in the Photographic Section). ….. Both modules subjected to the 85/85 regime were electrically tested. The decontaminated one passed the test and is at the present, in fully operational condition. On the other hand the module affected by ferrous oxide contamination failed a few seconds after being electrically energised.

This shows unequivocally that the visible and measurable degradation of components caused by the contaminants, affected negatively the electrical performance of individual components, circuit arrays, and ultimately the total reliability of the module." 1310 Dr Blanchard rejected the utility of such an exercise and I have found it preferable not to reach any findings on the matter in view of Mr McLachlan's unavailability for cross-examination. I have admitted the report in accordance with my separate reasons for judgment. While expert witnesses called in Optus' case were available for cross-examination on the utility of this test I think the preferable course is to refrain from making any finding. 1311 It has been submitted on behalf of Tyco that Optus has failed to discharge its onus in failing to show that the condition of the circuit boards of the Optus equipment, apart from contamination by the water discharged during the incident, was such that it didn't require remedial measures of the kind in fact undertaken by Optus following the incident. It is not a particularly attractive defence. 1312 The general approach by Tyco was to rely upon cross-examination of experts called in Optus' case evidencing that their respective advices or opinions were based on all of the contaminant material on the computers: that their opinions were not based solely on the presence of the iron oxides and zinc: that they had not turned their minds to the incidence of matter on the circuit boards other than that deposited in the discharge of material from the corroded Heat Exchanger. 1313 As earlier noted, Tyco also raised a positive case, based, primarily, upon the 6 June report of Dr Lunsmann, that particulate mater on the circuit boards, other than that associated with the corroded Heat Exchanger, would have required the same remedial measured as those untaken by Optus following the incident. Prior to that report no expert statement of evidence had been served upon Optus by any of the defendants and no defence had been filed particularising such a defence. These matters are addressed in my separate reasons for judgment. 1314 On the 'onus' issue, both parties rely upon the observations of Dixon CJ in Watts v Rake (1962) 108 CLR 158. That was a case involving personal injuries in which the High Court considered the rule that a negligence defendant must take the injured plaintiff as that plaintiff is found. Dixon CJ approached the question in terms of the "shifting presumptions of fact in relation to proof of damage". The Chief Justice made the following of observations in respect of that shifting burden: "The case however contains a somewhat unusual problem in the shifting presumptions of fact in relation to proof of damage and on that subject I will add some observations of my own. The law of course places upon a plaintiff who sues in tort for unliquidated damages the burden of satisfying the tribunal of fact of the damages he has suffered both special and general and of the quantification in money that should be adopted in the sum awarded. That is the legal burden of proof which rests upon him throughout. Only in one respect is the burden of proof upon the defendant and this is when he sets up matter in mitigation of damages. If it appears satisfactorily that damage in a particular form or to a particular degree has been suffered by the plaintiff as a result of the wrong but the defendant maintains that the plaintiff might have avoided or mitigated that consequence by adopting some course which it was reasonable for him to take, it seems clear enough that the law places upon the defendant the burden of proof upon the question whether by the course suggested the damage could have so been mitigated and upon the reasonableness of pursuing that course. Probably in claims for damages for personal injuries a question of the burden of proof in mitigation of damages is unlikely to arise often in any serious form. But it may do so; for example if the plaintiff declines to submit himself to some surgical procedure or medical treatment. But while the foregoing are the burdens of proof which the law places upon the parties, states of fact may be proved by the evidence as the case advances or may appear as inferences which the evidence supports and those states of fact may authorize or even demand findings in favour of a party unless and until some further or other state of fact is made to appear by evidence. There are, in other words, presumptions of fact as well as presumptions of law. In the present case a proper application of the principles by which courts are guided in handling proof of facts of such a kind goes a long way to meet its difficulties. The plaintiff showed satisfactorily that, although not without disabilities, he was before the accident able to lead an active life both in work and in physical recreation and that his enjoyment of life was not impaired much, if at all. He proved further that the physical injuries he sustained in the accident had been a cause of the crippled condition in which he finds himself, a condition described in the judgment of Menzies J. [160] If no more appeared it needs no argument to show that he should receive a full award of damages assessed on the footing of what he has suffered and what he will endure in the future. But for the defendant it is answered, first that he was predisposed to many or at least some of the arthritic and other conditions which have so seriously and rapidly developed as a consequence of the accident considered at all events as a precipitating cause; second, that part of his present condition is traceable to causes other than the accident, and thirdly, that had there been no accident he would eventually and prematurely have been incapacitated by the seeds of disability within him. Now as to the first answer, it may at once be said that it is no answer. If the injury proves more serious in its incidents and its consequences because of the injured man's condition, that does nothing but increase the damages the defendant must pay. To sever the remaining leg of a one-legged man or put out the eye of a one-eyed man is to do a far more serious injury than it would have been had the injured man possessed two legs or two eyes. But for the seriousness of the injury the defendant must pay. As to the second and third of these answers, there is undoubtedly a presumptio hominis in the plaintiff's favour which any tribunal of fact should insist that the defendant should overcome. If the disabilities of the plaintiff can be disentangled and one or more traced to causes in which the injuries he sustained through the accident play no part, it is the defendant who should be required to do the disentangling and to exclude the operation of the accident as a contributory cause. If it be the case that at some future date the plaintiff would in any event have reached his present pitiable state, the defendant should be called upon to prove that satisfactorily and moreover to show the period at the close of which it would have occurred. For myself I do not think that he has proved more than that at an earlier time than other men the plaintiff would have reached a stage of disability but not the same disability." (at 159 - 160) 1315 It was a submitted on behalf of Tyco that the facts in these proceedings were analogous to the facts addressed in Performance Cars Ltd v Abraham [1962] 1 QB 33. That was a case in which the remedial steps required to rectify damage wrongfully inflicted on a motor vehicle were repairs which would have been necessary, in any event, as a result of an earlier incident involving damage to the vehicle. Unsurprisingly the cost of the remedial steps were not laid at the door of the second accident. The passage cited by Tyco in the judgments of Lord Evershed MR and of Harman LJ have nothing to say about the question of onus. It was a case concerned with causation. 1316 I was also referred to the The Habersham Grange [1905] P 307, an Admiralty matter involving damages in the form of the costs of dry docking where two separate acts of wrongdoing required docking, although for different periods of time. It has nothing to say about onus and is simply concerned with the apportionment of the dry docking damages between the two wrong doers. 1317 Carslogie Steamship Co Ltd v Royal Norwegian Government [1952] AC 292 was further cited by Tyco in support of its contention that Optus had failed to discharge its onus in this case. It is a decision of the House of Lords and concerned the entitlement of ship owners to recover damages in the form of detention while the vessel was under repair of damage wrongfully inflicted on the vessel. At the same time, the vessel was detained in the carrying out of repairs of storm damage. It is a decision on causation. 1318 However, the question of causation as raised in these proceedings, in effect, has two branches. One is the reasonableness of the remedial measures undertaken by Optus in remedying the damage occasioned to its equipment in the incident: an onus which, in my view, has been clearly discharged in this case. The other branch of the issue of causation required Optus to show that its equipment was working efficiently prior to the incident and, would have continued to do so had it not been for the incident. 1319 In most cases of this kind (and this case is no exception) that question of causation whether equipment would have continued to operate efficiently but for the wrong complained of is largely a matter of inference. 1320 Optus has satisfied the onus in relation to that issue of causation by evidencing that fact that the equipment at the Rosebery centre had operated effectively in the several years prior to the incident and by calling Mr Perkins to prove the level of cleanliness maintained at the Rosebery centre prior to the incident. The inference is compelling that the equipment would have been continued so to operate but for the contamination in the incident. 1321 I think in those circumstances it follows, in accordance with Watts, that, if it is to be asserted that the presence of particulate matter on the computer circuit boards, other than that discharged from the corroded Heat Exchanger, was such as would have required Optus to have undertaken the remedial measures pursued by Optus after the incident, either at the time of the incident or at some measurable time thereafter, that onus was squarely upon the shoulders of Tyco. Tyco, in my view, has fallen well short of discharging that onus. 1322 However, the issue may be readily disposed of, not on the basis of onus, but on the basis of a finding, which in my view is the correct finding, that the evidence disclosed that there was no need for Optus to undertake remedial measures had it not been for the discharge from the Heat Exchanger in the incident. Mr Perkins, as earlier noted in these reasons, had a contract with Digital for the cleaning of the data centre and with Optus for the cleaning of the Tandem Room. The data centre was cleaned twice a week and the Tandem room once a week. In addition, each was submitted to a major clean each six months. He was personally involved in the cleaning procedure and "regularly inspected the cleanliness of the environment" at the Rosebery centre. The thoroughness of the cleaning procedure and the general condition of the data centre and the Tandem room were described by Mr Perkins as follows: "9. The cleaning procedure in relation to the bi-weekly cleans of the CDC and the weekly cleans of the Tandem room in the relevant period including the following: s Horizontal and vertical surfaces of the computer cabinets and other furniture were thoroughly wiped with yellow lint free antistatic cloths (which were oil impregnated to pick up dust). s Blue dampened cloths were used to clean any finger marks and other stains that appeared on the glass fronts of computer cabinets or other furniture. The blue cloths were dampened with a solution containing alcohol and water which had been approved by Digital. s The external surface of the intake areas on the cabinets were vacuumed. In this respect, Digital cabinets generally had either louvres over filters on their front panels or a rubber element when the intake was on top of the cabinet. The vacuums were high efficiency vacuums fitted with special exhaust filters. s The floor was vacuumed with the high efficiency vacuums and then mopped with a damp mop using warm water without the addition of any soaps or chemicals. No sweeping was carried out in the rooms (to avoid causing airborne dust). Cleaning solutions and other chemicals (other than as referred to above) were avoided. Sprays and polishes were not used. I was aware of computer room cleaning procedures which were recommended by Digital and I ensured that all cleaning within the CDC was carried out in accordance with the procedures recommended by Digital. In the week before the incident, the CDC was cleaned by Computer Extras on Tuesday 31st December 1996 and Thursday 2 January 1997 and the Tandem Room was cleaned on Thursday 2 January 1997. 10. Each six monthly major clean involved the thorough vacuuming of the sub-floor area and the scrubbing of the floor tiles. It also included the dusting and damp mopping procedures described above. The six month cleans involved four to six hours work with a team of four to six men. I attended each of the six monthly major cleans of the CDC and the Tandem room. The last major clean prior to the incident at the CDC and the Tandem room was in August 1996.

11. Computer Extras provided sticky entrance mats on the doorways to the CDC and the Tandem room. The entrance mats operated to take dust off the soles of peoples [sic] shoes before entry into the rooms through sealed doors. I recall that entrance to both rooms was restricted to authorised personnel only.

12. Throughout the whole of the relevant period, the CDC and Tandem rooms were maintained and cleaned regularly and thoroughly. From my experience and my knowledge of the cleaning routines within those rooms, there would have been very little dust within those environments immediately before the inergen discharge on 3 January 1997.

13. In the relevant period, I had regular contact with Digital representatives who worked out at the Rosebery site. I reported to these gentlemen on a regular basis. During the second half of 1996, Mr Phillip Rousell was my Digital contact at Rosebery. Prior to that, the Digital representative on site was Mr Geoff McQueen and before him, Mr David Blumanis. If they had any concerns in relation to the work that was being carried out by Computer Extras, they would indicate it to me. At no time in the relevant period was any concern expressed to me in relation to the cleanliness of the CDC or the Tandem Room." 1323 During the course of his cross-examination he gave the following evidence to questions from the Bench: HIS HONOUR: Q. Mr Perkins, I notice that you have been in this industry for a long time and you have amongst your customers some very large organisations; is that so? A. That's correct. Q. Are you able to generally compare the state of cleanliness of the Optus's [sic] computer centre with those major organisations such as Qantas or Westpac? A. Yes. Q. Could you do so? A. I would say that it was - it was in what I would consider an average condition. It was not - I would say it was average, from my -- Q. Average with the average being those -- A. Comparing with my other customers, over a broad range. (T2055:28 - 47) 1324 The evidence of Perkins as to the manner in which the Rosebery centre was maintained along with its equipment; the common ground as to the time it had operated without significant failure, together with its comparability in standards of maintenance or cleanliness with other major, like entities is compelling evidence that this centre would have continued to operate efficiently at that level of maintenance had it not been for the incident. 1325 Any fair reading of the evidence of the experts called in Optus' case, particularly that of Mr Hubbell or Professor Hibbert, compels a conclusion: a) that the overwhelming influence in the contamination of the equipment in the incident was the presence of iron oxides and zinc; b) that the characteristics of the iron oxides, in terms of conductivity in the case of the magnetite, in terms of corrosion, in terms of the hardness of the particulate matter and in terms of insolubility distinguished the contamination from any other particulate matter on the circuit boards and c) because of those characteristics, it was necessary to remove the iron oxides and the zinc by a cleaning process as undertaken by Optus. 1326 It is significant that the only positive case in Tyco's evidence was founded upon Dr Lunsmann's report of 6 June 2001 and that was no support at all when understood in the context that Dr Lunsmann really did not hold the view that the calcium sulphates on the circuit boards required the remedial measures undertaken by Optus after the incident. His view was that they did not. His view was that, if Optus experts were right in their views as to the nature of the damage to the equipment from the iron oxides, then no distinction should be drawn between the iron oxides and the calcium sulphate. In one sense, Tyco was hoist with its own petard once it relied upon a case that the damage to the equipment in the incident was "only cosmetic", or that any damage to the equipment by the iron oxides did not require cleaning, only monitoring. 1327 Dr Lunsmann's report of 6 June 201, failed to take account of the markedly different characteristics of the iron oxides from those of the calcium sulphates. This may be explained by his limited experience in that area. 1328 In my view, it is fanciful to suggest that the particulate matter of calcium sulphate called for the remedial measures of the kind carried out by Optus. While it was accepted that particulate matter such as the calcium sulphates could have corrosive qualities, they were soluble and were distinguishable from the iron oxides in that report, both in relation to conductivity and hardness. These were all material factors in the risk of corrosion, of tracking, or bridging. The magnitude of the incident should not be overlooked in weighing Tyco's case that the remedial measures undertaken by Optus were not caused by the discharge from the corroded Heat Exchanger. 1329 Earlier in these reasons I have quoted the evidence of Optus' witnesses, both lay and expert, who inspected the damage, which made it clear that the mass of contamination on the outside of cabinets, on filters, both inlet and exit filters and on circuit boards left little room for speculation as to the extent of damage posed by the discharge. 1330 It is no criticism, in my view, to accuse the Optus experts of concentrating on the iron oxides, given the dramatic extent of the contamination associated with the discharge. It only emphasised the serious extent of the damage occasioned by the discharge rather than reflecting some deficiency in the analytical approach of those experts. 1331 On the evidence, in my view, there should be a finding that with the continued maintenance procedures in place in Optus at the time of the incident, with the maintenance of the environmental conditions prevailing at the time of the incident there was no measurable risk of failure in the system as a consequence of the presence of particulate matter other than that contained in the discharge from the corroded Heat Exchanger. 1332 I have not found it necessary to make any particular findings as to the source of other ions found on the circuit boards apart from that of iron oxide and zinc, other than to observe that much of that particulate matter may not be excluded from the discharge from the Heat Exchanger, particularly salts and chloride. However, for the purpose of these findings, I have confined my findings to the presence of the iron oxide and zinc. 1333 Earlier in these reasons I had occasion to offer some critical comment on the evidence of Mr Thomas. It will be recalled that in re-examination he gave evidence about his recollection of the discharge into zone 2 on 8/9 July 1995. The video of the discharge was commented upon by Dr Doig as showing, in the initial discharge, a slight mist. Having observed that video I would agree with that description, noting that it was of a fleeting nature. 1334 In re-examination, having had no recollection in his evidence in chief of the event, Mr Thomas recalled the display of a swirl of dust in the data centre. That does not accord with my observation of it. I have a particular difficulty in accepting the reliability of Mr Thomas' description, coming as it did in re-examination on top of the complete absence of recollection of the event in chief. By the time that evidence was given the issue as to the presence of other contamination on the circuit boards, partly based upon the disturbance of dust said to have been in the computer centre at the time of the incident, was a live one. I have been unable to disassociate that fact from the clear description of the event by Mr Thomas in re-examination. 1335 Professor Hibbert I think demonstrated the distinction to be drawn between the behaviour of the iron oxides and zinc, on the one hand, and other ions. In re-examination he gave the following evidence: Q. You were also asked a number of questions about the difference between iron and zinc contaminants versus other ions such as sodium and chloride and you started to give an answer about it and I'd just like to take you back to it, lest you didn't get through your answer. Mr Hutley asked you at about page 796: Q. What this report indicated, to you, was that the ionic contaminants, other than iron and zinc, could not be concluded to have anything to do with the incident; correct? A. No. I'm sorry, I'm going to get technical again, I apologise. The iron, particularly, is there as a solid iron oxide, we believe. The other ions, such as sodium and chloride, have come dissolved in the carrier water that was part of the discharge and perhaps ... from other sources. A. Yes. Q. And then you were taken away to what those other sources might be. Did you finish what you wanted to say about the conclusion that other ion contaminants other than iron and zinc could not be concluded to have anything to do with the incident? Can you pick up the thread of it? A. Actually, no, I can't. Q. You were distinguishing, on the one hand, between iron and zinc forms of contaminant and the other types of contaminant? A. Yes, one is solid particles and the other is dissolved in solutions. Q. But even if the calcium and the sulfate were in a solid form, as you were asked to assume by Mr Hutley, would there nevertheless be a difference between the iron particles and the calcium sulfate particles in terms of potential corrosion? A. Yes. Q. What is that? A. The iron particles, a fraction of them, are conducting and iron oxide is a solid particle that doesn't dissolve in water. A calcium sulfate particle does have solubility or a sodium chloride particle does have solubility in water and therefore their behaviour are really quite different. Q. As particles, though, both sitting on a PCB, is there a difference between their ability to cause corrosion? A. Only the conducting iron oxide particles can cause corrosion in the way that I described - that is, can become the cathode in a corrosion process. Any other particle such as calcium sulfate or sodium chloride cannot fulfil this function. HIS HONOUR: Q. What does it require, to be corrosive? A. Conductivity, your Honour -- Q. I'm sorry. The calcium sulfate can play a part in corrosion, can it not? A. It can play a part in corrosion by dissolving in water to form the electrolyte, which is why I said that calcium sulfate, sodium chloride and so on can be taken together as electrolyte materials, because ultimately, when they act in this way, it is the number of charged particles that are dissolved in water that gives their contribution to corrosion. But the corrosion process itself still needs an anode, that is, the material that is going to corrode, and a cathode somewhere for oxygen to be reduced. Q. This data that you have been referring to, the iron takes the part of the cathode? A. That's correct, your Honour. (T851:49 - T853:20) 1336 There are a number of other similar passages to be found in Professor Hibbert's evidence. 1337 A good illustration of the compelling nature of the contamination by iron oxides, mainly from visual observation may be found in the evidence of Mr Hubbell, which is repeated for ease of reference: Q. Were you seeking to convey by that that all you needed to know about this contaminating event is that it involved particulate contamination involving iron oxide to determine whether to clean or not? A. That could be sufficient to determine whether to clean or not. Q. Are you saying it was sufficient in this case? A. In this case I was not on-site to make that determination. Q. So is this just a general theory of possible circumstances? A. No, it is not. It is a practical explanation of how simple the problem actually can be. Q. Are you suggesting it was simple in this case? A. I was not on-site to assess how simple it was. However, I have indicated that if I had walked into the data centre and seen the distribution of particulate and iron compounds as illustrated in numerous photographs - if I had assessed the hardware on intakes, outlets, fans circulating air and looked at internal components, and understood them to be iron oxides of one form or another, all of which have hardness characteristics, I could assess, based on a visual observation, that there was potential for backplane problems and connector issues that creates a level of risk where I would recommend restoration or replacement. (T564:23 - 57) 1338 It is plain from the evidence of Professor Hibbert that he had not ignored the contaminants other than iron and zinc: Q. To be a little more exact on my part, in forming your opinions as to what should be done about these computers, did you consider the presence of contaminants other than iron and zinc as material, in concluding that which you have concluded? A. Yes. (T772:3 - 9) 1339 The difficulty of isolating the non-discharge particulate matter on the equipment following the incident is illustrated in the cross-examination of Professor Hibbert as follows: Q. So, does it follow that you can't express an opinion as to what the source of the contaminants other than iron and zinc was? A. Other than saying that if tap water was involved I can say how much of those contaminants, I believe, came from that tap water, because I know what is in tap water. Other than that, no. Q. Have you done the exercise, in relation to tap water - ie, determining how much of the other contaminants was sourced in tap water; yes or no, Professor? Have you done the exercise? A. I am trying to find a way of saying yes. Q. Well, you either did it or you didn't actually? A. Well, that's right, yes. Q. It is very simple, it is a factual question. Have you done it or haven't you? A. No, I haven't. Q. Why were you trying to find a way to say yes? A. I will tell you - because I have looked at this data extensively and there is a problem with numbers from wash solutions that are expressed in micrograms per square centimetre and trying to reflect the amount in Sydney tap water which is in milligrams per litre of tap water. In trying to come to some conclusion as to what the effect of tap water is on the boards, you have to know how many square centimetres, how many litres covered, and that, I believe, is rather difficult to do. So when you talk about what is a high level or a low level compared to tap water, I am not sure I can answer that question because I don't know how much tap water went on how many square centimetres. (T797:14 - 54) 1340 Professor Hibbert evidenced the fact that he was conscious of the presence of non-discharge particulate matter in forming his opinion about the consequences of the presence of the iron oxides in the equipment, as follows: Q. At what level of iron contamination did you think one had to clean a printed circuit board? Did you have any view as to what level of contamination of iron put a printed circuit board at risk such as one should clean? A. I believed that if we found the presence of iron on a printed circuit board - this is where the figure of 0.01 comes from - I believed that in the context of the Inergen incident this would have led me to say that they should have been cleaned because this would have been evidence that iron from the incident had gone into the computer. Q. Did you think about the presence of sulfates at all? A. I had, as I said before, regard to the totality of the data put to me. Q. Did you have a view as to what level of sulfates would require cleaning? A. No. Q. Do you have a view? A. Yes, I have a view. Q. Is it higher than 0.01? A. No. Sulfates have - sulfate, chloride, sodium, magnesium, calcium to some extent, are all soluble in water. They are different, therefore, from the iron oxides which are particles that are obviously part of this incident. So it seems to me you cannot say that - excuse me, 0.01 micrograms per square centimetre of iron is, as it were, a different kettle of fish than 0.01 micrograms per square centimetre of sodium chloride and other electrolytes. HIS HONOUR: Q. What is the significance of the solubility? A. Because, your Honour, in corrosion we have to have a number of elements before something will corrode. You have to have a metal that is capable of corroding. You have to have somewhere where oxygen, usually from the air, can be reduced - corrosion is a two-part process, an oxidation and a reduction. You need an electrolyte to, in a sense, bridge the gap between them. Sodium chloride and everything else provides that electrolyte. So when the computer industry specifies a certain amount of sodium chloride equivalent, what they are saying is that if that is on the surface under relative humidities found in computer installations, a film of electrolyte can be formed and this is one of the crucial components of a corrosion process. What I am saying is the presence of iron oxide on those boards now gives you another crucial element and that will, in a sense, augment the corrosion. So that perhaps you do not need quite so much of the other components in order to get a corrosion event. That went to our discussion earlier, of course. (T799:57 - T801:6) 1341 Again in cross-examination he gave the following evidence: Q. Is his Honour correct in this, in forming your opinion to clean or not to clean, you really ignored all the other elements which were present and concentrated on the iron and zinc. I think you told his Honour before lunch that's what you did; correct? A. On 9 January I had before me some analyses that had the totality of the elements. I said we discussed the level of boron and looked at other elements. But obviously it is true I was most concerned with the iron contamination, because that's in a sense what I was looking at. (T821:23 - 34) 1342 Finally, he responded to questioning on a technical article (of which the author was Mr Sinclair) as follows: Q. So "a normal working environment" would have with it differing levels of contaminants; correct? A. Yes. Q. He was of the view that in normal circumstances, about 70 or 80 per cent humidity was necessary to promote corrosion; correct? A. Yes. HIS HONOUR: Is that right? MR HUTLEY: I am just asking the witness. HIS HONOUR: I am asking you. I read that slightly differently. Perhaps I am misunderstanding some of the evidence, but I read that to refer to electrolytic corrosion. MR HUTLEY: I think that's what we are talking about. Q. We are speaking about electrolytic corrosion due to the presence of water which acts as an electrolyte to promote the corrosion reaction; correct? A. Yes. Q. That's what you understood I was asking you about? A. Yes. HIS HONOUR: With iron? MR HUTLEY: Q. With any. I am sorry you are shaking your head? A. Your Honour, this is the difference: the presence of the iron particles I believe increased the risk to the point - excuse me - increased the risk. Sinclair is not considering that there are conducting particles on any of these systems. I take the point that a working computer system may have dust in it, and who knows what it has, but, really, I believe, when I gave my advice to clean, that there was - the presence of so much iron in the room was a very big difference to what one might call "conventional approaches" to assessing risk in computers. Q. But you were assuming, as I understand it, in giving your opinion, that if there was any measurable level of iron upon the PCBs, then one had to clean; correct? A. Following the incident, yes. (T839:13 - T840:9) 1343 It is I think quite obvious that the dramatic extent of the damage, so far as it involved the iron oxides and zinc, left no room for conjecture on the part of experts such as Professor Hibbert and Mr Hubbell and that the extent of it simply overshadowed any possible degradation of the circuit boards by particulate matter other than that in the discharge from the Heat Exchanger. Further, the evidence established that the nature of that other particulate matter had not been ignored by experts retained by Optus and, in particular, did not cause either Mr Hubbell or Professor Hibbert to conclude that it required the remedial measures undertaken by Optus. 1344 In my view there is no substance in the position adopted by Tyco that the remedial steps taken by Optus were unnecessary because the damage to Optus' equipment in the incident was purely cosmetic. 1345 Similarly, I am of the view that there is no substance in Tyco's case that Optus has failed to prove that the remedial measures undertaken by it following the incident would not have been necessary because of the presence of calcium sulphates in the computers. 1346 As earlier noted Tyco has an alternative case that "even if it could be said that notwithstanding that the plaintiffs' computer equipment was not at practical risk, as a matter of reasonable prudence the plaintiffs were entitled to take steps to protect their GSMIS system because of its importance by ordering the new GSMIS system and migrating the GSMIS equipment to a new site, it cannot be said that it was reasonable then to clean all of the remainder of the equipment with the attendant costs." 1347 The argument runs that, once that process of migrating the GSMIS equipment had been carried out, Optus would only have been required to clean the GSMIS equipment after migration of applications and the cleaned equipment could then have been used "for backup of other systems as a contingency [and that there] would have been no need for [Optus] to purchase the additional cleaning pool equipment, upgrade Blacktown, clean equipment other than the GSMIS equipment or migrate applications other than the GSMIS." 1348 The view I have formed is that the nature of the contamination occasioned by the discharge was such as to call for a wholesale cleaning of affected equipment. As I think Mr Berents said in evidence, that does not involve the proposition that Optus embarked upon a cleaning program regardless of the extent of any contamination on a computer. I think the evidence of Mr Berents demonstrated that the cleaning program was an ongoing process, as evidenced by the periodical reports from Relectronic. 1349 One of the difficulties in accepting this alternative submission by Tyco is that it was not a matter raised at any time during the course of the proceedings prior to final addresses and, in particular, was not put to any witness who might have been in a position to specifically address those propositions. 1350 That aside, there are some real difficulties with this approach because it proceeds on the assumption that it was a reasonable step to take, in the first place, to migrate the GSMIS applications with the aid of new equipment, followed by a cleaning of the contaminated equipment. I think that involves acceptance of the case that cleaning was necessary, or at least a reasonable remedial step to take. It is difficult to see why that position should be different from other equipment similarly affected. In my view it suffers from one of the difficulties I found in the approach of Dr Lunsmann and Dr Blanchard which was essentially one calling for a monitoring system which counsel for Optus has daubed with the tag of 'wait and see'. 1351 Given the evidence of Professor Hibbert and Mr Hubbell and the extent of the contamination throughout the data centre and the Tandem Room, it is my view that it would be unreasonable to require Optus to sit back and wait for failure before acting. Once it is accepted that the equipment was damaged by the iron oxide and zinc contamination in the manner evidenced by Professor Hibbert and Mr Hubbell it is almost inevitable that the damaged equipment had to be cleaned and that involved the migration process and the like as evidenced in these proceedings. 1352 One may rhetorically ask - what is Tyco's position if there was a failure? Who pays for the consequences of that? Am I invited to assess some damages on the basis of the likely potential of loss as a result of degradation or failure of the other equipment? I think not. 1353 From its inception, these proceedings have been beset by widely diverging views as to the nature and application of the relevant principles upon which quantum should be assessed. Part of the problem has arisen from conflicting concepts of mitigation and, related to that, disagreement upon where the onus of proof lay in respect of particular areas of claim. Overshadowing those issues and intermingled with them was an inability of Tyco and Optus to reach any common ground as to a) the correct quantification of loss involving, what Tyco labelled, capital expenditures and b) whether the allowance of claims would result in a betterment to Optus: if so, whether that betterment was to be taken into account and, if betterment should be accounted for, where the onus lay in evidencing and quantifying such a betterment. The judicial exercise has not been particularly assisted by some undefined notions of the concept of benefit and mitigation and their treatment in some of the cases. 1354 Tyco's position put very broadly was that Optus must prove its loss and, in doing so, must take account of any benefits gained in the process of executing its recovery program. Optus, it was submitted carried the onus of evidencing and quantifying that betterment. In respect of items of capital expenditure, Tyco contended that such expenditures represented acquisitions of "enduring value" and, hence, were not a measure of loss. 1355 The position taken by Optus was that where any benefits were gained by Optus during the course of implementing the recovery program, then, a) those benefits must been seen to be other than "matters completely collateral, and merely raise inter alios acta" and, consequently, must be shown to be "caused" by the incident: b) the onus of proving and quantifying any such benefit rested upon Tyco. 1356 In relation to items of capital expenditure, Optus rejected the validity of such a distinction and contended that, in any event, its method of calculation of loss was in accordance with long established principle. 1357 That gulf between the principal parties remained until the end and may go part of the way to explaining why these proceedings could not have been resolved in some other manner and why these proceedings proved to be so protracted, studded with disputes ranging from several million to several dollars. 1358 Once it is established that Optus was entitled to undertake its recovery program to restore the contaminated system, there is little room for the conventional concept of mitigation as one involving issues of unreasonableness of conduct of the plaintiff and carrying with it the onus of the defendant to establish the existence and quantification of any failure to mitigate. Further, I am of the view that there is little assistance to be gained by segregating expenditure into capital and non-capital items, with the former said to be falling into a room full of enduring values and, hence, representing no loss. The correct approach, in my view, is to examine each expenditure, be it capital or non-capital in nature, in the circumstances in which it was incurred in order to determine whether such an expenditure represented a true loss, in whole or in part. 1359 To illustrate that point, there is little value in labelling items of expenditure as capital items and, therefore, not representing a loss if one is concerned with the replacement of a destroyed asset. Proof of loss will be satisfied by proof of the expenditure required to restore the plaintiff to the position the plaintiff was in prior to the destruction of the plaintiff's asset. Harbutt's "Plasticine" Ltd v Wayne Tank and Pump Co. Ltd [1970] 1 QB 447. 1360 Another illustration from the facts of this case: part of the cost of the Optus recovery program was the acquisition of equipment both new and second hand for the use in the migration of applications from the contaminated equipment prior to cleaning. The original program contemplated temporary acquisition of that equipment solely for the purpose of migrating the applications. The acquisition had no other purpose. The loss in such a case would be represented by the cost of equipment acquired for that purpose less its disposal value at the end of that process. The onus of proving the cost of the acquisition and of the residual value of the equipment would fall upon the plaintiff in such an example. 1361 I think the starting point in the consideration of these issues is to keep in mind the nature of damages to which Optus is entitled. In the broadest terms the task of determining damages requires the court to award "that amount in damages which will most fairly compensate [the plaintiff] for the wrong….. suffered" (Johnson v Perez (1988 - 1989) 166 CLR 351 at 355-356) per Mason CJ 1362 Mason CJ elaborated upon that general approach in the following terms:

"As the cases to which I have referred reveal, the principles governing the assessment of damages do not permit the application of rigid rules based on categories of actions. Instead, the injured party's intentions and the surrounding circumstances must be considered in light of the underlying principles in order to do justice between the parties." (supra at 360) 1363 Brennan J expressed the fundamental principle as follows:

"A plaintiff who has suffered damage as a result of a defendant's tort or breach of contract is entitled to such a sum as will, so far as possible, put him in the same position as he would have been in but for the tort or breach of contract." (supra at 371) 1364 In Haines v Bendall (1991) 172 CLR 60, in the joint judgment of Mason CJ, Dawson, Toohey and Gaudron JJ with Brennan J agreeing, the underlying concept of compensation in assessment of damages was expressed as follows: "The settled principle governing the assessment of compensatory damages, whether in actions of tort or contract, is that the injured party should receive compensation in a sum which, so far as money can do, will put that party in the same position as he or she would have been in if the contract had been performed or the tort had not been committed: Butler v Egg and Egg Pulp Marketing Board (1966) 114 CLR 185, at p 191.; Todorovic v Waller (1981) 150 CLR 402, at p 412.; Redding v Lee (1983) 151 CLR 117, at p 133.; Johnson v Perez (1988) 166 CLR 351, at pp 355, 386.; MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657.; Livingstone v Rawyards Coal Co (1880) 5 App Cas 25, at p 39.; British Transport Commission v Gourley [1956] AC 185, at pp 197, 212. Compensation is the cardinal concept. It is the "one principle that is absolutely firm, and which must control all else": Skelton v Collins (1966) 115 CLR 94, at p 128., per Windeyer J." (at 63 footnotes omitted) 1365 The principle was revisited by Mahoney JA, in a judgment with which Hope JA agreed, in Murphy v Brown [1985] 1 NSWLR 131 at 132 in the following terms: "It is well settled that, whether in contract or in tort, the injured party "should receive compensation in a sum which, so far as money can do so, will put him in the same position as he would have been if the contract had been performed or the tort had not been committed": Butler v Egg and Egg Pulp Marketing Board (1966) 114 CLR 185 at 191. This general proposition, which is taken from the speech of Lord Blackburn in Livingstone v Rawyards Coal Co (1880) 5 App Cas 25 at 39, has been applied on many occasions in Australia: see, eg, Pennant Hills Restaurants Pty Ltd v Barrell Insurances Pty Ltd (1981) 145 CLR 625 at 637; and in England." (at 132) 1366 However, it is my view that little is to be gained by reference to the authorities cited on behalf of Tyco which deal with items of capital expenditure in the particular cases, such as Frankcom v Woods (NSWCA 1 October 1980 (unreported)); J & B Caldwell Ltd v Logan House Retirement Home Ltd [1999] 2 NZLR 99; IT Walker Holdings Ltd v Tuf Shoes Ltd [1981] 2 NZLR 391 and Sea Containers Ltd v ICT Pty Ltd [1998] NSWSC 474, 19 May 1998 per Rolfe J. An issue of this kind was raised in NRMA Ltd v Morgan (1999) 31 ACSR 435 in the nature of items of expenditure which was said to be of "enduring value". The concept of items of capital expenditure of enduring value is one which I have not found particularly helpful in resolving disputes in relation to particular items of claim in this case. It appears to have been a concept that lacked some degree of clarity in NRMA, as appears from the following observation by Giles J as his Honour then was: "1518 The defendants submitted that all the services and work were of enduring value because, although they went to creation of the voting registers and entitlements database, they also went to the creation of a more accurate database for use inter alia in mailing the Open Road and for marketing campaigns, and also enabled the NRMA to produce the members registers required by law. 1519 The notion of enduring value, much spoken of in the course of the hearing, was never really made clear. It seemed to be a response to the NRMA's description of its loss as wasted expenditure. It made more sense in relation to wasted expenditure as claimed for free shares/disadvantages liability than in relation to the expenditure, also described as wasted expenditure, claimed for Gambotto liability. The latter expenditure was more correctly expenditure which would not have been incurred had the proposal been put on hold." (at 806) 1367 Some of the cases relied upon relating to the issue of betterment overlap this issue of the way in which items of capital expenditure are to be approached and it is more convenient to deal with cases such as Hoad v Scone Motors Pty Ltd [1977] 1 NSWLR 88 in that context. There is not much to be elicited from the cases cited, in my view, so far as any general principle of the treatment of capital expenditure is involved. Frankcom was an appeal from an award of damages for personal injuries to the plaintiff involving quadriplegia. Part of the damages awarded to him was $70,000.00 for "Provisions of special facilities in plaintiff's accommodation". The allowance of that sum was challenged on the basis that the cost of adapting the plaintiff's accommodation to meet his special requirements should be adjusted to provide "for the capital value of the improvements" represented by the subject alterations. 1368 In the course of considering that submission, Glass JA, after reciting some of the factual matters observed that he thought that it was "proper for the defendants to require the plaintiff to bring to account any capital gain which may have accrued to him in compensating for his needs." That was a judgment with which Hope JA agreed. A similar observation in that context was made by Mahoney JA in somewhat more guarded terms, however, as follows: "As to the cost of adapting a house to suit the plaintiff's requirements: I will assume without deciding that if it appeared that the sum awarded would result in a capital benefit to the plaintiff or his estate at the end of his life, it would be necessary to make an allowance for that, or for the present value of that capital benefit, in the award." 1369 The interesting aspect of those observations, in my view, lies in the fact that, having, in the case of Mahoney JA, assumed a capital benefit of the kind described and, in the case of Glass JA, considering it proper to bring to account any capital gain accrued in compensating the plaintiff, after reviewing the facts of the case, no credit was allowed by the Court against the damages suffered by the plaintiff. The case, in my view, is only of limited value in demonstrating that, in the particular facts of that case, no reduction in damages should be made by reason of the inclusion in the damages of expenditure of a capital nature. 1370 J & B Caldwell was a decision by Fischer J in which his Honour considered the measure of damages represented by the necessity to replace chattels as a consequence of breach of contract involving the transfer of a business and related chattels to the plaintiff. Fischer J approached the issue in the following way: "A plaintiff may be forced by the defendant's default to restore or replace a contracted item with something which has greater value than that which it had expected to receive under the contract. In some cases the substitute may be more efficient or useful than the original. In others, property of a wasting nature may be replaced by property with a longer lifespan. In either case the unexpected improvement in the plaintiff's position may be usefully described as ''betterment''. Plainly the plaintiff is entitled to damages for at least the value of the original. But is it entitled to the bonus of an increment in value as well?

In the past, two somewhat extreme positions have been taken over betterment. Both are referred to in McGregor on Damages (16th ed, 1997) para 17. The learned authors of that text appear to favour the view that the plaintiff is entitled to the full cost of replacement without deduction for betterment. Certainly, that approach finds support in Harbutt's ''Plasticine'' (supra), Bacon v Cooper (Metals) Ltd [1982] 1 All ER 397 and other cases collected in a case note on James Street Hardware (supra) by K A G Bridge [1989] 68 Canadian Bar Review 155 at pp 159 and 160. In Harbutt , for example, where the plaintiff's factory had been destroyed by fire, the plaintiff was held to be entitled to the full cost of rebuilding to modern specifications even though this would render the operation more efficient and thus would bring a windfall to the plaintiff. Discussing whether the Court should deduct anything for betterment, Widgery LJ stated at p 473 that ''To do so would be the equivalent of forcing the plaintiffs to invest their money in the modernising of their plant which might be highly inconvenient for them.'' Similarly in Bacon , the plaintiff received damages based on the full replacement cost of a machine part destroyed by the defendant's breach of contract despite the windfall to the plaintiff that only half the part's useful life of 15 years had remained by the date of destruction. In the latter case Cantley J acknowledged that this approach would be inappropriate where the result would be ''absurd'' but in view of the result in that case it is far from clear when that epithet would be invoked. Ignoring betterment would seem difficult to reconcile with other decisions and dicta to the effect that in assessing a plaintiff's net loss for damages purposes, the plaintiff must set off against his losses any gains incidentally derived by steps reasonably taken in mitigation and therefore arising naturally from the breach: British Westinghouse (supra) at p 691; Erie County Natural Gas and Fuel Co Ltd v Carroll [1911] AC 105; Hoad v Scone Motors Pty Ltd [1977] 1 NSWLR 88 at p 96; I T Walker Holdings v Tuf Shoes Ltd (supra) at p 399. But at the other extreme, the full value of the fresh asset, or increase in value of the restored or substituted one, has on occasion been deducted from the plaintiff's damages with little or no recognition of the cost of the unplanned and unwelcome investment of capital forced upon the plaintiff (eg Hide v Thornborough (1846) 2 Car & Kir 250; and see Canadian cases collected by Bridge (supra) at p 160).

Neither of those extremes fully accords with the fundamental object of damages referred to earlier, namely to financially restore the plaintiff to no more and no less than the position which it would have occupied if the contract had been performed. To give the plaintiff a full indemnity for the new or improved substitute over-compensates by giving it more than it would have received under the contract. To give the plaintiff only the depreciated value of the original under-compensates by overlooking the economic burdens of more immediate and more expensive replacement. For example if the default obliges the plaintiff to bring forward the replacement of a wasting asset the plaintiff must pay interest on borrowing, or forgo a return on capital, during the interval between actual and expected replacement.

The logical middle ground is to make a deduction for betterment but only after allowance to the plaintiff for any disadvantages associated with the involuntary nature of any additional investment. Where the substituted item is more valuable or efficient than the original, or will have a longer life, any deduction for betterment will need to be tempered with recognition of the added cost to the plaintiff of treating himself to that luxury or, if the investment would eventually have been required in any event, doing so prematurely. If a depreciating asset would ultimately have required replacement or repair in any event, damages should be the depreciated value of the original plus the cost of making the premature investment. This means that in addition to compensation for loss of, or repair to, the original in its depreciated condition, the plaintiff is entitled to the value of the use of its capital, or the interest upon equivalent borrowing, in order to fund the replacement or repair pending the date upon which it would otherwise have been required." (at 106-107) 1371 In my view that approach to damages does not accord with authority by which I am governed. It represents one approach to assessment of the reasonableness of damages in a particular case and should not and, in my view, could not be regarded as a statement of principle applying to all cases of capital expenditure. It does not accord with Harbutt's, nor with decisions referred to later in these reasons. 1372 I note that in the course of that judgment Fischer J treated the issue of betterment as one "not widely understood" and which his Honour addressed in the following way: "Perhaps because betterment is not widely understood, it frequently seems to be the case that no evidence is led quantifying betterment. Cases tend to be decided on the onus of proof (eg James Street Hardware (supra)) or are remitted for further evidence on the point (eg Walker Holdings v Tuf Shoes (supra); Andros Springs (Owners) v World Beauty (Owners) [1970] P 144 ( The World Beauty ); Hoad v Scone Motors (supra)). In this case too, there was little of significance on the point.

From the authorities to which I have already referred, it seems clear that the plaintiff has the onus of proving both the presence and quantum of the loss flowing from the unexpected expenditure caused by the defendant's default, while the defendant has the onus of showing that betterment has occurred: see, for example, The World Beauty (supra); James Finlay and Co Ltd v N V Kwik Hoo Tong Handel Maatschappij [1928] 2 KB 604 at p 614; James Street Hardware (supra) at pp 404 - 405. It is true that Cooke J (as he then was) said in Walker Holdings v Tuf Shoes (supra) at p 401:

''Chilwell J said that the onus of proof of the value of the Kingsland Terrace assets was on the defendant, citing The World Beauty [1970] P 144; [1969] 3 All ER 158. In that case, as in this, there was evidence warranting a prima facie inference that by steps taken in mitigation of damages a claimant had obtained something of considerable value. The Court of Appeal in England directed that the case be remitted to the Admiralty Registrar for inquiry and determination of the precise value on the basis which the majority of the Court thought appropriate, no evidence having been directed to a crucial point. We are taking a similar course here. The burden of proving mitigation is on the defendant but in a case like the present I think it is enough if he can point to evidence that the alleged loss is represented by a capital asset in the plaintiff's hands. The ordinary rule will then apply that the plaintiff must prove on the balance of probabilities not only that he suffered damage but also its amount. Putting the point in another and simpler way, the plaintiff does not prove a loss by merely giving evidence of expenditure which has apparently produced a capital asset.'' (Emphasis added.) McMullin J made similar comments at pp 396 and 397 as to the onus on the plaintiff to show the value of the leasehold interest and fittings which it had acquired as a result of the defendant's default.

I interpret the Walker Holdings decision as authority for the proposition that at least in a situation where the defendant's breach has not deprived the plaintiff of any asset which the plaintiff owned or had paid for, the plaintiff's purchase of an additional asset does not in itself indicate a loss. In those circumstances, once the defendant has shown that the unexpected expenditure has produced a fresh asset for the plaintiff, the onus returns to the plaintiff to rebut the inference that the expenditure has produced an asset of corresponding value and that the plaintiff is therefore in no worse position. As McMullin J put it at p 398, in that situation: ''. . . the question was not so much one of deciding whether a reduction should be made from the damages claimed to put the respondent in the same position as it would have been in but for the breach, but whether the amount claimed as the respondent's expenditure was a loss at all. As a result of the expenditure the respondent acquired a new, and what on its face was a substantial asset, the cost of which it sought to recover from the appellant.'' But that is to be contrasted with the situation in which the defendant's default caused not only the necessity for the subsequent purchase but also the loss of the asset which the plaintiff either originally owned or had already paid for. In that situation, there is no room for the possibility that the plaintiff may have suffered no loss. The plaintiff has in effect paid twice for the same object. For that reason, I do not think that Walker Holdings is in any way inconsistent with the approach taken in The World Beauty , James Finlay and James Street Hardware , namely that once the plaintiff has discharged the onus of proving the existence and amount of the unexpected expenditure caused by the defendant's default, the onus shifts to the defendant to prove not only the presence of betterment but also its quantum or value." (at 108 - 110) 1373 If a ratio decidendi is to be extracted from the case, it is that, on the facts of that case, there was no betterment and, hence, no allowance to be brought to account in the assessment of damages. 1374 However, the decision runs counter, in my view, to the observations of Samuels JA in his Honour's dissenting judgment in Hoad to which I refer later in these reasons on the question of some perceived doctrine of betterment. 1375 IT Walker Holdings Ltd is a decision of the Court of Appeal in New Zealand arising out of an agreement by the plaintiff to purchase a factory building and offices from the defendant. The building was in the process of construction at the time of the agreement which required the defendant to complete the building at its cost and within a stipulated time. This, the defendant failed to do. The plaintiff, as a consequence, moved into other premises which involved an outlay of some $38,000 to lease the premises and in out-fitting them. Part of the appeal involved a challenge to that cost as not representing a loss or damage arising out of the subject breach. Notwithstanding the absence of any evidence as to loss beyond proof of the actual expenditure, the case was remitted to the court of first instance for the assessment of damages as appears from the following passage from the judgment of Mahon J: "I share with the other members of the Court considerable regret that this case must go back for trial, but as I see it, the actual loss (if any) sustained by the plaintiff by reason of its expenditure of $ 37,938.86 was not proved. The plaintiff only proved that for this sum it purchased a valuable capital asset. As stated already, whether the whole or part of that sum can be retrieved was not inquired into and, in my opinion, this was due to the fact that counsel then appearing for the defendant seemed to have accepted that the expenditure in question prima facie represented a loss, but that approach to the matter, having regard to the special nature of the expenditure, was clearly incorrect."(at 400) 1376 To like effect was the observation by McMullin J in the following passage: "It is regrettable that proper evidence was not placed before the Supreme Court and that the Judge, who seems to have been troubled by the problem posed by the incomplete picture given in the evidence and was obviously anxious to make an award of damages on the merits, was left to reach a final adjudication on the matter without further assistance. I think that the only way in which the principles enunciated in British Westinghouse and Erie County Natural Gas can now be applied is to allow the appeal by vacating the judgment in favour of the respondent for $ 12,000 and $ 25,938.86 and remitting the case to the High Court to have the claims in respect of those amounts determined in the light of the principles stated. This will require an amendment of the pleadings, and further evidence will be required to be given. Leave to that end will be required to be given." (at 398) 1377 Given the onus on the plaintiff to prove its loss, it is difficult to see on what basis the matter was remitted to the lower court other than the fact that, in the proceedings in the court below, the cost of acquiring the alternative premises had been conceded by the defence to be prima facie evidence of loss. It is apparent from the passage quoted from the judgment of McMullin J that his Honour regarded the case as one calling for the application of the principles expressed in British Westinghouse Electric and Manufacturing Company v Underground Electric Railways Company of London [1912] AC 673, as did Mahon J. 1378 I have been unable to draw more from the case than one in which proof of expenditure, alone, did not reasonably equate to loss; the parties having failed to address that question of loss at first instance as a result of the defendant's acceptance "that the expenditures in question prima facie represented loss". It may or may not have done so. The question simply was not addressed. 1379 Sea Containers concerned recovery of costs incurred in relation to an undertaking given to the Court. The costs involved improvements to the claimant's vessel which the Court found increased the value of the vessel and, hence, no loss was incurred as a consequence of the undertaking given. It was an approach which did not involve considerations of compensation in the sense of resitutio in integrum. 1380 The cases referred to by Tyco in my view should be regarded as decisions on particular facts and not eliciting any principle by which this Court should be guided. They may be explained by their recognition of the obligation which remains upon a plaintiff throughout to prove the plaintiff's loss. 1381 As noted earlier, these cases overlap the questions that arise when called upon to consider Tyco's case of betterment said to have been derived by Optus in performing the recovery program. Paradoxically, the starting point, in my view, is to be found in the dissenting judgment of Samuels JA in Hoad. The facts of Hoad are important in understanding the observations of the Court on the questions of principle involved. 1382 The case involved the destruction of the plaintiffs' tractor and mower used in conjunction with a dairy farm business conducted by the plaintiffs. The market value of the tractor at the time of the subject damage was $1,500.00 and the three year old mower was valued at $350 second hand. At the time of hearing the plaintiffs had purchased new equipment to replace the destroyed equipment as they were unable to find suitable second hand replacement equipment in the locality of their farm. As a local service of equipment was needed, they did not attempt to obtain second hand replacement equipment elsewhere. It was not in dispute that such second hand equipment could have been located. Most significantly, the evidence also disclosed that, although the plaintiffs normally replaced their tractor every five years, they would not have replaced the one destroyed at the end of the five year period current at the time of the damage, as they intended to surrender the lease of the farm some 18 months after the damage had occurred. The method of assessment of damages by the trial judge was not supported by either party at the appeal, which concentrated upon the entitlement of the plaintiffs to the cost of replacement of the equipment. 1383 It was held by majority, Moffitt P and Hutley JA, Samuels JA dissenting, that the true measure of damages was not the cost of the replacement new equipment but the "net detriment" to the plaintiffs arising out of the acquisition of the equipment: an issue that had not been determined at first instance, nor was it thought properly litigated. As a consequence a new trial to assess damages was ordered. In so concluding the President applied the basic rule that the plaintiff was entitled to be compensated in accordance with the "overriding principle in assessing damages….. to compensate a plaintiff for his loss" (at 91) and, in applying British Westinghouse, distinguished Harbutt's as a decision "upon the particular facts of that case" (at 94). Hutley JA adopted the reasons of the President while treating the decisions in Harbutt's and British Westinghouse as being irreconcilable. 1384 It will be seen from Hoad that the Court concentrated on what was the "net detriment arising from acquisition of the new equipment". That was the issue which the Court considered had not been "properly litigated" and as a consequence required the matter to be remitted. It is implicit in the majority judgment that the Court accepted the reasonableness of acquiring new equipment in the situation where second hand equipment was not available in the locality of the plaintiffs' farm. 1385 In remitting the matter I think it is of some interest that the Court did not purport to define the issue leaving the question of "net detriment" open for determination as a question of fact by the Court at first instance. The majority decision in Hoad represents a 'special-facts' decision. In my view, it is a decision as to the reasonableness of damages. It is not a case based upon a principle that, in the replacement of destroyed used property with new, betterment is to be brought to account. It is a case where the new equipment replaced equipment which was likely to be disposed of some eighteen months after the time of its destruction, regardless of the defendants wrongful act. In working out the plaintiffs' loss, the true measure of loss would take account of the cost of new equipment replacing equipment that would have been disposed of in any event, some eighteen months after the events giving rise to the claim. The 'net detriment' would of necessity, in my view, have regard to the market value of the replacement equipment at the time of the deemed disposal after eighteen months and, possibly, the market value of the destroyed equipment at that time, had it not been destroyed. Neither exercise would result in a precise estimate. 1386 More interest in my view in Hoad's case emerges from passages in the dissenting judgment of Samuels JA (cited with approval by Sheller JA in Hyder Consulting (Australia) Pty Ltd v Wilh Wilhelmsen Agency Pty Ltd [2001] NSWCA 313) in considering the suggested principle of betterment and in his analysis of Harbutt's and British Westinghouse. 1387 As to the first aspect, although the passages dealing with this matter are lengthy, I think there is some utility in setting out what I think are the applicable principles involved in considering a case of so called betterment. The observations are as follows: "The object of an award of damages in tort is restitutio in integrum; to put the plaintiff (so far as money can) in the position he would have been in had the loss not been inflicted: Owners of Dredger Liesbosch v. Owners of Steamship Edison([1933] A.C. 449, at p. 459). Basic rules have been established which fix the measure of damages in particular cases. But in those cases "the dominant rule of law is the principle of restitutio in integrum, and subsidiary rules can only be justified if they give effect to that rule": Ibid.([1933] A.C. 449, at p. 463). A convenient starting point from which to approach the present problem is the statement made in Halsbury's Laws of England, 4th ed., vol. 12, p. 456, par. 1163: "The basic rule is that the measure of damages in the case of damage to a chattel is the cost of repair, but if it is unreasonable from the business point of view to repair the article, or if the article is damaged beyond repair, then the basic measure is the cost of replacement in an available market. If there is no available market and it is reasonable to take steps to have a substitute made, the cost of the substitute may provide the measure of damages;…." In my opinion, that proposition, for which there is ample authority, is correct; and I add only two comments. The use of the terms "market price" or "market value" in this context is misleading, because they tend to suggest as a measure the value of the chattel destroyed or the price for which the plaintiff could have sold it. But it is the market price of a replacement which is the primary amount recoverable: The Liesbosch([1933] A.C. 449, at p. 468). Secondly, the proposition itself indicates that the measure may vary with the circumstances of the case. ……. If the question is seen as one of mitigation, the defendants' attack on the learned judge's finding fails. But it seems to me that we are not primarily concerned with such a question. The plaintiffs' discharge of their duty to mitigate does not determine the matter. Rather, the existence of that duty is one of the factors which made the plaintiffs' conduct reasonable. The other was their need of a tractor to carry on their business. The two factors combined to make reasonable - as his Honour found - their purchase of a new tractor and mower, and thus to entitle them to recover the money spent. Their situation, after the fire, was in all relevant respects identical with that which faced the plaintiff in Harbutt's "Plasticine" Ltd. v. Wayne Tank and Pump Co. Ltd.( [1970] 1 Q.B. 447). …… In the present case, there was no way in which the plaintiffs could carry on their business save by acquiring another tractor and mower, and no means available to them of acquiring other than new equipment. This aspect of the decision in Harbutt's case([1970] 1 Q.B. 447). is of application here, and is consistent with principle and authority. In each case, the doctrine of restitutio dictated recovery of the sum reasonably required to restore the plaintiffs' business at the same capacity as it had operated before the loss. In the instant case the plaintiffs' need was for equipment to replace what had been destroyed. That must be the dominant consideration rather than any comparison between new and old. In my opinion, the plaintiffs here were entitled to recover the cost of the new machines. This raises the principal point in the case. Mr. Armitage, for the defendants, said that, assuming that measure of damages to be right, the plaintiff must still give credit for the supposed advantage which they have obtained by acquiring, at the defendants' cost, new machines for old. It seems to me that, in principle, the argument must fail. Since it assumes the correctness of the plaintiffs' initial recovery of the cost of the new machines, it is self destructive. If that was the proper measure, then it must be that sum to which the plaintiffs are entitled rather than some other sum, based on other considerations such as the age or the condition of the old equipment. It was to those very circumstances that his Honour's findings were directed, and it does not matter that Goran D.C.J. conceived himself bound in law to reject the measure of damages which those findings would have supported. If the plaintiffs did act reasonably in buying new machines, then that cost must prima facie represent their damages: cf. the reasoning in Darbishire v. Warran ([1963] 1 W.L.R. 1067; [1963] 3 All E.R. 310) and O'Grady v. Westminster Scaffolding Ltd.([1962] 2 Lloyd's Rep. 238). This must be so, unless there is some other and dominant principle which demands some reduction. If there is, it may take one of two possible forms. There may be a rule which requires a plaintiff to account for any advantage or betterment which he has obtained by repairing an old article with new materials, or by acquiring a new article for old in the case of replacement after total loss. Or there may be a rule which requires a plaintiff to bring to account, in reduction of his damages, any savings or profits which he has made by his use of the new article. There is undoubtedly a rule of the second kind which I will consider; but there is no rule of the first kind. …….. In The Gazelle((1844) 2 W. Rob. 279; 166 E.R. 759) Dr. Lushington rejected the application to cases of collision of the old marine insurance rule (now no longer applied) which required deduction of one third of the cost of repairs in consideration of new materials being substituted for old, on the ground that it had no application to collision cases. He said((1844) 2 W. Rob. 279, at p. 281; 166 E.R. 759, at p. 760): "The right against the wrongdoer is for a restitutio in integrum, and this restitution is bound to make without calling upon the party injured to assist him in any way whatsoever. If the settlement of the indemnification be attended with any difficulty (and in those cases difficulties must and will frequently occur), the party in fault must bear the inconvenience. He has no right to fix this inconvenience upon the injured party; and if that party derives incidentally a greater benefit than mere indemnification, it arises only from the impossibility of otherwise effecting such indemnification without exposing him to some loss or burden, which the law will not place upon him." In The Pactolus((1856) Swab. 173, at p. 174; 166 E.R. 1079, at pp. 1080, 1081) Dr. Lushington repeated the same view. He said: "… the parties are entitled to restitutio in integrum, to a complete repair of all the damage done, notwithstanding that the result may be to render the ship more valuable than she was prior to the collision…. In cases of insurance, one-third of the value of the material is deducted, because the new material is more valuable than the old, but it is not so where repairs are done in consequence of collision." The same views were expressed by Sir Robert Phillimore in The Halley((1867) L.R. 2 Adm. & Ecc. 3, at p. 8); by Sir James Hannen in The Bernina((1886) 6 Asp. M.L.C. 65, at p. 67) and by Sir Francis Jeune P. in The Munster((1896) 12 T.L.R. 264, at p. 265): and see East Ham Corporation v. Bernard Sunley & Sons Ltd.( [1966] A.C. 406). And finally in Harbutt's case([1970] 1 Q.B. 447) the court rejected any general doctrine of betterment arising from the substitution of new for old. The text writers view the matter in the same way: McGregor on Damages, 13th ed., pp. 10,11, par. 14; Halsbury's Laws of England, 4th ed., vol. 12, p. 458, par. 1168; Ogus, The Law of Damages, p. 165. No distinction is to be made between chattels or buildings, or between repairs and replacement. Nor, of course, is the age of the article repaired or replaced of any consequence. It follows that no deduction can be made by dint of any doctrine of betterment. It might be different if the new tractor had been of greater capacity than the old, or of superior performance: cf. British Westinghouse Electric and Manufacturing Co. Ltd. v. Underground Electric Railways Co. of London Ltd.( [1912] A.C. 673). But there was no such evidence. The new tractor was no more than a replacement for the old, and as nearly equivalent as the circumstances in which the plaintiffs were placed would permit." (at pp 99 - 103 emphasis added) 1388 In examining those observations it is my view that they are not at odds with the "particular facts" approach adopted by the President and I think supported by Hutley JA in the majority judgment. Moreover, I think the emphasised passage represents a correct statement of the law concerning "betterment". 1389 Where divergence emerges, I think, between the judgment of Samuels JA and the majority judgments lies in his Honour's treatment of British Westinghouse as follows: "The case relied upon is the British Westinghouse(1912] A.C. 673), which is said to authorize a general proposition, applicable in the present case, that, if any advantage accrues from an act of mitigation which the plaintiff himself undertakes, whether bound to or not, a deduction must be made from the damages to which the plaintiff might otherwise be entitled. The advantage asserted here was, in essence, that which the plaintiffs might have derived from selling their new tractor at a price greater than they would have got for the old one. (at 104) …… Several observations may be made about this decision. First, since it concerned the assessment of damages for breach of contract and not for a tort, the essence of the respondent's claim was for the loss of its bargain. In such a case, as Viscount Haldane pointed out([1912] A.C. 673, at p. 689), the respondent was entitled to recover the economic value of the bargain, that is, to be placed in as good a situation as if the contract had been performed. Secondly, the respondent's bargain was to have machines of a certain standard of efficiency and economy according to the stipulation in the contract. Thirdly, the respondent was entitled to recover the extra expense incurred in running the appellant's machines up to the time they were replaced by the Parsons machines. Fourthly, they did not replace them with comparable machines, but with more efficient and economical machines, and thus obtained for themselves a better bargain than that which the appellant had promised to provide; and fifthly, they did so at a time when the appellant's machines had become obsolete and due for replacement in any event. It seems to me that when the matter is analysed in this way, it becomes reasonably plain that the respondent could not have been entitled to an award of damages which would have given it a greater advantage than that which it would have enjoyed had the appellant's bargain been faithfully carried out. The basis of the decision can be readily understood; but the principle for which the case stands is of comparatively narrow application. This may be seen from the later cases in which that principle has been invoked. It is not a means of applying some doctrine of betterment, merely because a plaintiff gets new for old, and I can find no case in which it was employed for that purpose. I would suggest that the reason why the British Westinghouse case([1912] A.C. 673) was apparently not cited in Harbutt's case([1970] 1 Q.B. 447) was because it was irrelevant to the circumstances of that case, as it is, I think, to the situation of the present plaintiffs. The critical fact in the British Westinghouse case([1912] A.C. 673) was that the respondent had acquired improved machines of greater efficiency and economy, and had made profits from their use which it could not have achieved by using the old machines. Nothing of that kind occurred in Harbutt's case([1970] 1 Q.B. 447), where the new mill was of no greater capacity than the old; nor in the present case, there being no evidence that the new tractor was any more efficient than the old, and no evidence that it increased the plaintiffs' profit." (at 107 et seq) 1390 It is that distinction drawn by Samuels J in relation to British Westinghouse that resulted in his dissent. I think it is of particular interest that the judgment of Samuels JA was the subject of extensive citation by Sheller JA in Hyder. That case concerned an alleged betterment in the replacement of a pavement four years old with a new pavement, and in which cases which have grappled with "betterment" were extensively reviewed by Sheller JA. In rejecting the concept of betterment his Honour placed heavy reliance upon the fact that "the plaintiff had no reasonable choice, but to replace the defective pavement with new pavement". 1391 The passages from Samuel JA's judgment in Hoad were quoted by Sheller JA in Hyder without criticism and, I think, with implied approval. His Honour referred to the judgment of Samuels JA at 103 and 107. As to the latter, that, essentially, is the passage which I have quoted concerning the distinction to be drawn between British Westinghouse and Harbutt's. 1392 The reference to Samuel JA's judgment at 103 is in the following terms: "In Hoad Samuels JA in his dissenting judgment carefully reviewed the authorities and said at 103:

"It follows that no deduction can be made by dint of any doctrine of betterment. It might be different if the new tractor had been of greater capacity than the old, or of superior performance; cf British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd. But there was no such evidence. The new tractor was no more than a replacement for the old, and as nearly equivalent as the circumstances in which the plaintiffs were placed would permit."" (at page 16) 1393 The reference to the review of authorities by Samuels JA is a reference to the review of authorities referred to in these reasons and which predicated with the observation that there is no general doctrine of betterment requiring some benefit to be brought to account wherever new replaces old after total loss. It is this concept of a so called doctrine of betterment upon which Tyco has relied in this case, I think, erroneously. 1394 However, that is not to ignore the cases where a benefit is derived by a plaintiff in relation to the subject wrong which the law requires to be brought to account. Clearly, not all suggested benefits are to be brought to account. Benefits which may be described as completely collateral to the breach or as res inter alios acta are benefits with which the law has no concern. The exclusions of such benefits has been described differently in the various cases, but they, in my view, are all to the one effect that collateral benefits and those which are correctly described as being re inter alios acta are to be disregarded. 1395 In British Westinghouse Viscount Haldane justified the bringing to account of the benefit to the Plaintiffs of acquiring superior replacement equipment on the basis that such acquisition "was not re inter alios acta, but one in which the person whose contract was broken took a reasonable and prudent course quite naturally arising out of the circumstances in which he was placed by the breach": distinguishing the decision of the Court of Appeal in Joyner v Weeks [1891] 2 QB 31, partly on the basis that the subject "arrangement between the lessor and the new lessee was res inter alios acta with which the original lessee had nothing to do and which he was not entitled to set up". 1396 On that basis of distinction the Court of Appeal in Lavarack v Woods of Colchester Ltd [1967] 1 QB 278 declined to take into account one aspect of the plaintiff's investments in companies undertaken after his wrongful dismissal. The defendants sought to bring to account the suggested benefit that those investments represented on the basis that the plaintiff was only able to make the investment as a result of his wrongful dismissal. Lord Denning MR expressed the Court's rejection of that defence as follows: "In my opinion the master was wrong in requiring the plaintiff to give credit for his investment in Ventilation. He might have invested his money in any other company and made similar profits. It is sheer speculation whether he would do better in Ventilation than in others. I realise that the plaintiff was only at liberty to invest in Ventilation because his employment was terminated. But nevertheless the benefit from that investment was not a direct result of his dismissal. It was an entirely collateral benefit, for which he need not account to his employers."(at 290) 1397 Moffit P in Hoad required the plaintiff to account for a benefit on the basis that the "gain [was] causally connected with the damage" (at 95). Hussey v Eels [1990] 2 QB 227 was another decision which expressed consideration of benefits in similar terms, as follows from the judgment of Mustill LJ: "Ultimately, as with so many disputes about damages, the issue is primarily one of fact. Did the negligence which caused the damage also cause the profit, if profit there was? I do not think so. It is true that in one sense there was a casual link between the inducement of the purchase by misrepresentation and the sale two and a half years later, for the sale represented a choice of one of the options with which the plaintiffs had been presented by the defendants' wrongful act. But only in that sense. To my mind the reality of the situation is that the plaintiffs bought the house to live in, and did live in it for a substantial period. It was only after two years that the possibility of selling the land and moving elsewhere was explored, and six months later still that this possibility came to fruition. It seems to me that when the plaintiffs unlocked the development value of their land they did so for their own benefit, and not as part of a continuous transaction of which the purchase of land and bungalow was the inception." (at 246) 1398 In citing that case in Monroe Schneider Associates Inc v No1 Raberem Pty Ltd (1991) 33 FCR 1 at 11, Beaumont J expressed the concept of connection of the benefit with the breach as follows: "The authorities thus distinguish between a continuous dealing, on the one hand and an independent, collateral or disconnected transaction, on the other. Benefits from the former are to be brought to account in the assessment of damages, whereas an advantage accruing as a consequence of the latter are to be disregarded." (at 11-12) 1399 In the Victorian Supreme Court case of Johns v Prunell [1960] VR 208 Sholl J expressed the distinction in relation to benefits as follows: "The law, however, while it has thus imposed in the taking of such an account of loss quite strict limits upon a plaintiff's right to credits, has been more lenient (and a good deal less precise) in deciding with what items he is to be debited. It has declined to mitigate the burden on the wrongdoer by crediting him, and debiting the plaintiff, with "matter completely collateral, and merely res inter alios acta"; see Mayne on Damages, 11 ed., 1946, at p. 151; Shearman v Folland, [1950] 2 KB 43, at pp. 45-6; [1950] 1 All ER 976. In general, the law seems to me to have endeavoured to form a kind of moral judgment as to whether it is fair and reasonable that the defendant should have the advantage of something which has accrued to the plaintiff by way of recoupment, or other benefit, as a result of the defendant's infringement of the plaintiff's rights." (at 210 - 211) 1400 The Court of Appeal in Hodge and Another v Clifford Cowling & Co [1990] 46 EG 120 considered whether loss of goodwill should have been included in the damages of the plaintiff who, through the negligence of the plaintiff's solicitors, the defendants, lost the benefit of protected tenancy under the relevant English legislation. The plaintiff had, in fact, acquired another lease in the vicinity of the old tenancy and the defendants sought to have the plaintiff bring to bear the benefit of the goodwill derived from conducting the business in the newly acquired tenancy. Glidewell LJ considered the subject benefit in the following way: "Where a plaintiff, who has suffered or is likely to suffer loss as a result of some breach by a defendant, takes steps which he was not as a matter of law required to take, which nevertheless eradicate or reduce the loss he has suffered, difficult questions arise as to whether and how far this reduction of loss is to be taken into account in calculating damages for which the defendant is liable. The classic statement o principle in relation to such a case is to be found in the speck of Viscount Haldane LC in British Westinghouse Electric & Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673." (at 125) 1401 After referring to Mustill LJ's judgement in Hussey, Glidewell LJ addressed the question in the following way: "Applying these authorities to the present case, the question the judge had to answer was this, did the plaintiffs' acquisition of the "Hartley Fair" premises arise out of the consequence of the defendants' breach of their duty of care, or to put it as Mustill LJ did, was it part of a continuous transaction of which the negotiations for the renewal of the lease of the "Fresh Food" premises and the defendants' conduct in relation to those negotiations was the inception? In my view, the answer to this question, however framed, can only be "no". The fact that the "Hartley Fair" premises came on the market approximately eighteen months after the defendants failed to make the necessary statutory application for the new lease of the "Fresh Food" premises was purely fortuitous. In no sense was the plaintiffs' acquisition of the larger premises related to, or connected with, the defendants' breach. It was an acquisition which resulted from Mr and Mrs Hodge seizing an opportunity offered to them and using it to their own advantage, just as the plaintiffs in Hussey v Eels "unlocked the development value of their land . . . for their own benefit"." (at 127) 1402 I think it is partly for the reason that not all benefits are to be brought to account that the cases indicate that the onus lies on the defendant to establish and quantify the subject benefit, or, in the phraseology of one, "to disentangle the benefits". 1403 I think the way in which the courts have approached this question of onus is also a product of the principle of proof that the party asserting the fact carries the onus of proving it. I think it is that understanding of the approach to betterment that reconciles it with the continuous burden of proof on the plaintiff of proving the plaintiff's loss. Moffit P in Hoad cited with approval the following passage in Halsbury's Laws of England as follows: "Halsbury's Laws of England, 4th ed., vol. 12, p. 481, par. 1196, states: "The defendant may take advantage of steps which are a reasonable and prudent course naturally arising out of the circumstances in which the plaintiff was placed by the defendant's wrong, but not those which are res inter alios acta or collateral to the wrong. Thus account may be taken of transactions which form part of a continuous dealing with the situation in which the plaintiff finds himself, but not independent or disconnected transactions. If a transaction of which account may be taken produces a gain to the plaintiff that gain may be set against the initial loss. The burden of proving that the plaintiff's loss has been diminished or avoided lies on the defendant." " (at 92) (Emphasis added) 1404 I think that is an allusion to the "shifting presumptions of fact" considered by Dixon CJ in Watts. 1405 Similarly, in Munroe Schneider Burchett J observed the onus in the following terms: "As the Court of Appeal of New South Wales held in Vischer , the onus is on the appellants to disentangle from a composite transaction, so much of it as can be properly utilised in diminution of the damages they must pay. If they cannot do so, it is not possible for the transaction to be set-off against the damages otherwise due." (at 29) 1406 The reference to Simonious Vischer & Co v Holt & Thompson [1979] 2 NSWLR 322 is to the judgment of Samuels JA as follows: "The defendants' submission was that the plaintiffs, by receipt of the sum paid, had to that extent satisfied, mitigated or avoided the losses which they sought to recover from the defendants. It seems to me that the defendants must establish the ingredients of this defence: United Australia Ltd. v. Barclays Bank Ltd.( [1941] A.C. 1, at p. 20); The World Beauty([1970] P. 144, at pp. 154, 158); Roper v. Johnson((1873) L.R. 8 C.P. 167)."(at 361) 1407 In the nature of things, the issue relating to benefits collateral or otherwise are more likely to arise in the defendant's case as the party asserting the benefit that is to be taken into account and with that will come the onus of proving, at least, the nature and probably the extent and quantification of the benefits in most cases. 1408 There will be cases where the non-collateral betterment is patently inherent in the plaintiff's case. In such a case the plaintiff will be shown not to have evidenced its true loss and no question of a shifting burden will arise. 1409 A final observation on the approach to the question of loss. I think the approach that I have outlined is one in accord with the way in which similar questions of loss involving alleged benefits were addressed by Mahoney JA in Murphy. That was a case in which the question before the Court was described in the judgment of Priestly JA as follows: "Can a plaintiff in proving the quantum of damage he is entitled to recover from a defendant who has negligently damaged his motor car simply prove the reasonable cost of repair to the damaged car and, in the absence of any further evidence in the case claim to be entitled to that figure? Or, must the plaintiff also have evidence before the court from which the court can infer that the value of the plaintiff's car immediately before it was damaged by the defendant was greater than the amount reasonably required to repair it." (at 134) 1410 In examining the correct approach to such a question, as earlier noted in these reasons, Mahoney JA started with the principle of compensation by which the courts must be bound in awarding damages in tort. In discussing qualifications to the basic rule, Mahoney JA addressed the question in a manner which I think is the approach called for in this case in dissecting the opposing positions adopted by Tyco and Optus by treating the issue as one of determining the reasonableness of Optus' evidenced measure of loss. The observations of Mahoney JA were as follows: "But there is a further rule which operates by way of qualification of the general principle. Where a plaintiff claims the cost of the work necessary to put him or his property in the pre-injury condition, the work must not merely be necessary for that purpose but "it must be a reasonable course to adopt" to do that work: Bellgrove v Eldridge (1954) 90 CLR 613 at 618. And, as the defendant's argument here suggested, it will not normally be reasonable to spend, for example, $4,000 to restore a vehicle which, undamaged, was worth, say, $1,000. Against this background, what must be proved by a plaintiff claiming damages? What must be proved in a particular case will depend upon the issues which the evidence, as it is before the court, raises for decision. For example, in a case such as the present, the essential thing which a plaintiff must prove is the sum which will restore him, ie, his vehicle, to the condition it was in before the collision: without such evidence, his case on damages will fail. But whether evidence is necessary upon the questions whether the repairs would improve his financial position or whether the doing of the relevant repairs would be reasonable will depend on whether an issue has arisen in the case on such matters and the state of evidence in relation to them. In some cases, there will, in the relevant sense, be no issue as to such matters. Thus, if the evidence is merely that the plaintiff spent $1,000 to repair damage to his Rolls Royce vehicle, there will normally be no issue as to the improvement of the plaintiff's financial position or the reasonableness of doing the repairs. In other cases, an issue upon such matters may be raised specifically or the evidence may be such as to raise such issues. The plaintiff may have spent $5,000 on repairs to a Holden vehicle of such mature age that both of such matters may require consideration. In such a case, the court must decide, as a question of fact: Bellgrove v Eldridge (at 619); whether the plaintiff acted reasonably or unreasonably in so repairing the vehicle and whether he was advantaged by doing so. The court must then determine those issues, taking into account such evidence as there is before it relating to them. In doing so, it will follow the ordinary processes involved in the finding of facts. The fact that there is, for example, no evidence specifically directed to the reasonable-ness of the plaintiff's actions will not be conclusive against him. The possibility that, for example, the plaintiff may have acted unreasonably is not, of itself, a sufficient basis for concluding that the plaintiff has not made out his case on damages. The court must take into account the state of the evidence and the possibilities in determining whether, having regard to the ordinary civil standard of persuasion: Briginshaw v Briginshaw (1938) 60 CLR 336; the relevant issues are to be decided for the plaintiff or for the defendant. And, in making this decision, the onus of proof will, as such, play no part. There may, in principle, be cases in which the facts are so nicely balanced or the inferences so obscure that, in the classic sense, the court cannot determine the relevant issue. Such cases must, I think, be rare and, as I have said, the mere fact that "it may be" that the repairs improved the financial position of the plaintiff or that it was not reasonable for them to be done should not, as such, lead the court to decide these issues upon the onus of proof. However, in such cases as do arise where the court cannot determine such an issue one way or the other, then the issue will fall to be determined in accordance with the principles to which Priestley JA has referred. I do not think that the present is a case to be decided according to the onus of proof. There is, in my opinion, nothing in the facts to raise other than a possibility that the repairs put the plaintiff in an improved financial position or that the doing of them was unreasonable. The proper conclusion on the facts is that these two issues should be decided for the plaintiff. I agree with the orders proposed by Priestley JA." (at 133 - 134 emphasis added) 1411 Priestly JA concluded his examination of the issues with the following: "In my opinion, however, although the materials are not profuse they are sufficient for a sensible inference to be drawn from them. In the absence of any evidence to the contrary being led on behalf of the defendant it seems to me that the trial judge should have drawn the inference that the cost of repairs was no greater than the value of the car immediately before it was damaged and thus that the plaintiff had proved his damage…." (at 136 - 137) (Emphasis added) 1412 Once again I think the judgments of Mahoney and Priestly JJA on the question of onus relate to Dixon CJ's "shifting presumption of fact". Similar observations are to be found in Harbutt's per Cross LJ, in J & B Caldwell per Fischer J, in Simonious Vischer per Samuels JA and in Hoad as noted in the judgment of Moffit P. 1413 In the context of those cases the question of quantum may be approached. 1414 Following the incident Mr Cearns was responsible for the establishment of a method of recording costs incurred in the course of the recovery program instituted by the recovery committee which he chaired. I do not understand Tyco to challenge the accuracy of those records as ones recording expenditures in fact incurred by Optus. The principal challenge to the quantification of the Optus damages claim lay in disputing that the costs so recorded equated to the quantification of the damages so sustained by Optus. This dispute again turned on the chronic issue besetting these proceedings in which Optus and Tyco adopted diametrically opposed views as to where the onus lay in establishing the true quantum of loss. 1415 The system for the 'quarantining' of rectification costs put in place by Mr Cearns under the scrutiny of the insurer through Cunningham's appointment of ExCEL in the manner outlined earlier in these reasons, has been the subject of criticism by Tyco. The evidence of the system is, principally, that of Mr Cearns. His evidence in chief included the following: "D. ACTUAL COST DETAILS 41. After the incident on 3 January 1977 [sic], a database for collating all costs associated with cleaning, migration and repair of equipment because of the incident (known as the Data Centre Recovery Program - "DCRP") was established ("the System"). The system was set up on software known as Filemaker Pro. It was established at my instigation because the general ledger accounting system used by Optus to record costs did not adequately provide for the tracking of the many different categories of expenditure for the DCRP. Under my direction, expense codes (also known as IT reference numbers) were created for the different types of expenditure associated with the DCRP. The system was updated periodically and reconciled with expenses recorded in the general ledger to identify any inconsistencies. 42. The system contains the following information concerning each actual expense of the DCRP: s account number, being one of the three accounts, namely: (a) E020 - costs relating to recovery of the Computer Data Centre; (b) E015 - costs for recovery of the Tandem/EFTPOS room; (c) E017 - costs for cleaning by Relectronic-Remech and other incidental costs. s the invoice date and number; s the name of supplier; s the purchase order number and amount; s the relevant expense code. 43. There are eight broad categories of expense code. Each broad category was given an item number or numbers. Within the broad categories of expense were various sub-categories (beginning with the same expense code number) which more specifically identified the type of expense. The eight broad categories of expense were: (a) Decontamination (item number 1); (b) Rosebery site (item number 5); (c) Homebush site (item numbers 10 - 13); (d) Blacktown site (item numbers 15 - 18) (e) Data Centre recovery (item numbers 20 - 38) (f) Tandem/ EFTPOS room recovery (item numbers 50 - 57) (g) general recovery costs (item numbers 100 - 130); (h) Rosebery switch room (item number 200). 44. I developed the various categories and subcategories of expense and a description of the different expense codes." 1416 The breakdown of costs in this way represented a complex and highly developed record of the subject costs and generated an enormous quantity of records, methodically collated. Mr Cearns gave evidence of the instructions given for the creation of the expense codes and general ledger accounts as follows: "17. In early January 1997 I requested that Lynette Walsh, the Optus IT financial controller of the time, create expense codes and general ledger accounts to cover all of the expenditure related to the incident on 3 January 1997 at the Optus Rosebery CDC ( 'the incident' ). On 14 January 1997 I received an e.mail from Lynette confirming that this process had been completed. A true copy of that e.mail is OPT113 182 .

18. Each item of expenditure incurred on the migration of the affected equipment was assigned an IT reference and entered into an Optus database according to IT reference.

19. I was responsible for authorising costs which fell under the project number E020. Project E020 related to IT Business Assurance costs." 1417 The system was further explained by Mr Cearns in the following way: "8. In my first statement (paragraphs 41 - 44) I refer to the creation of the database for collating all costs associated with the cleaning , migration and repair of equipment because of the Incident on 3 January 1997. This database is referred to as 'the System' .

9. For an item to be added onto the System, it was necessary for it to be authorised by the manager of the particular project as being a costs which was incurred only as a result of the Incident. Any doubtful costs were to be referred to myself or Peter Berents before inclusion on the database. The database was maintained by Lisa Wallace, Peter Berents' team assistant. I gave explicit instructions to the project teams responsible to [sic] the Rosebery CDC Recovery Room and the Tandem Eftpos Room that all expenditure must be accompanied by substantiating documentation and that no expenditure should be posted to the incident unless it was the result of the Incident.

10. The database included information about each item of expenditure as part of Optus' business procedures of tracking and recording expenditure. The information included details about the actual item of expenditure as well as references to purchase orders, invoices received and dates of payment. This documentation was kept by Optus in addition to its standard accounting processes.

11. In addition, Excel became involved in checking whether items of expenditure were related to the Incident. 1418 In addition to his superintendence of the recording of the expenses under the recovery program, prior to the commencement of the hearing and during the course of the hearing Mr Cearns carried out further verification work which he described in his statement of evidence in chief, filed before the commencement of the hearing, as follows: " Confirmation Report 15. Over the past few weeks I have laboriously gone through each item of the System with a view to confirming that the expenditure listed resulted from the incident on 3 January 1997. I have prepared a table which lists each invoice and the supporting documents which relate to that invoice. Where invoices have been misposted in the System, I have noted that fact and reposted the invoice where appropriate.

16. The column entitled 'confirmed amount' indicates the extent to which I am able to confirm that the cost arose because of the incident either because of my own knowledge or from the supporting documentation as well as my own knowledge. With some invoices, I was unaware of the particular expenditure and could not locate any documentation to demonstrate to me that it arose out of the Incident. However given my knowledge of how the System was established and maintained and the people that were involved and the procedure that existed with Excel, I believe every item that is in my confirmation report was in fact incurred as a result of the Incident. A column indicates whether Excel has concurred with payment of the invoice. My confirmation report is Exhibit A ." 1419 That task was, by any standards, an enormous exercise as may be extracted from Annexure A to that statement which runs to fifty pages of closely typed expenses under index number, item number, the name of the supplier, the identification of the invoice documents, the amount involved and confirmed, the description of the subject matter and its relationship to the recovery program. It is quite a remarkable piece of work. 1420 In addition, the system was designed to take account of what Mr Cearns described as "betterment". I did not treat his evidence as necessarily reflecting the legal concept of betterment, certainly in the context in which it has been raised by Tyco. However, in relation to the costing of the recovery program, documents described as Evaluation Summaries were created, the intent of which was described by Mr Cearns as follows: "46. Throughout the Data Centre Relocation Project ( 'DCRP' ), under which equipment was migrated out of the CDC, Optus identified any betterment that it was receiving and discounted these amounts form the claim…..

47. The identification any betterment as part of the process of planning the migration of a system was to be done through a form called an evaluation summary. Examples of evaluation summaries have been collated into two folders which are exhibited hereto and marked PRCA and PRCB. The betterment identified in the evaluation summaries does not form part of the claim in these proceedings. The evaluation summaries were prepared by Rahul Sagal who worked for me. I approved their form. The evaluation summaries in Exhibits PRCA and PRCB address the alternatives available for each separate migration of hardware to CHOC or BLOC. The evaluation summaries also set out the rationale in choosing the particular course that was followed for the migration." 1421 Earlier in these reasons I noted the terms of the engagement of ExCEL and the evidence of Mr Cousins as to his perception of his function in overseeing the expenditures incurred by Optus as part of its recovery program. The evidence in chief of Mr Cearns which generally described the manner in which ExCEL operated in this context was as follows: "102. Excel's 'concurrence' was sought on whether the DCRP expenses resulted from the incident on 3 January 1997 and were fair and reasonable. Excel reviewed and concurred with all the expenses set out in PRC 5 . The only exception to this is the Relectronic-Remech expenses which were reviewed and concurred by Cunninghams. Excel did not review those expenses because of commercial sensitivity concerns expressed by Relectronic-Remech." 1422 In respect of ExCEL's role, a meeting was held with Optus on 6 March 1997 which resulted in a letter by ExCEL of 11 March 1997, confirming the outcome of that meeting. The terms of which follow: "This letter is in response to the meeting held at the Optus Centre, 1pm, 6/3/97. Its primary purpose is to clarify the role and position of ExCEL in the recovery project and to illustrate how our involvement can assist. Ultimately Optus will need to be able to demonstrate how they have mitigated their loss to an unsympathetic third party at the time a recovery of the cost is sought.

Out terms of reference as instructed by Cunningham Australasia

The scope of work should include but is not limited to:- s Review and comment on procedures adopted by Optus to reinstate their computer systems. s Assist and advise on the scope of repair/replacement to computer systems s Assist and advise on the quantum, and cost effectiveness of all matters pertaining to the repair/replacement of the computer system.

By way of general introduction ExCEL recognises three levels of discussion when considering the post loss recovery of electromechanical and electronic/computer equipment. The lowest level is technical and underpins all other levels. Discussions at this level generally centre around identifying the cause of and the nature and extent of damage. Consideration is given to the long term viability of the recovered equipment in the context of the events surrounding the loss which specifically includes the immediate recovery actions taken at the time. Although not as obvious the equipment's pre-loss history as well as its projected life span is often important and should also be considered.

The middle layer is the systems layer. Discussions at this level centre around the technical requirements of the business system and an assessment of the long term viability and suitability of the recovered equipment in the context of the business functions that the equipment is to perform. Highly critical business functions need to be well protected and where the risks have increased or are not quantifiable as a result of the loss then alternative strategies will need to be put into place to secure that risk. Strategies such as additional fault monitoring, implementation of improved backup systems, having stand by units and spare parts, replacement of components that commonly fail, replacement of components to facilitate fault diagnosis, moving doubtful equipment out of the highly critical areas to more fault tolerant areas etc.. Many of these options can ultimately prove to be far cheaper yet provide much better long term security that [sic] simply replacing the damaged units with new. The intention, however, is to return the insured to a position similar to that immediately prior to the loss with respect to both the equipment and the risk to business. Generally the most cost effective strategy put forward at this point tends to define the limit of the insurers liability.

The top layer is where commercial decisions as to how best to apply the funds released by the insurance policy are made. The funds are often supplemented by the insured to implement an entirely different strategy, one that may be more in line with current company policy or used to upgrade the damaged equipment to facilitate future growth. Considerations at this level are typically confused with the underlying layers and this fact alone opens up huge grey areas which can easily drive any disputes with the insurers or other parties when seeking to recover costs.

On the basis of the above discussion ExCEL accepts the following roles noted in the minutes of the meeting held at the Optus centre, 1pm, 6/3/97. s To ensure independent assessment, mitigate all costs, acting on and able to provide decisions on behalf of Cunninghams. s To ensure aspects are fair and reasonable, based on premise that the business is to be up and running as before the incident. s It is not ExCEL's role to authorise expenditure, s Role basis is to vet and ensure that all required information was available for each decision and that supporting facts are bundled with decision [sic].

A complication which has already arisen relates to the use and development of the Castle Hill site. This can be simplistically viewed in two contrary ways depending on your particular interest in the project. On the one hand "the development of this site is an opportunistic grab for advancement" and on the other "by utilising the future growth plans and the fortuitous availability of the Castle Hill site, the overall cost of the loss can be effectively mitigated."

A measure of the truth of the two opposing views can only be objectively realised by a direct comparison of the costs associated with a recovery performed in the absence of the Castle Hill site. This exercise needs to be performed in detail and without delay. It cannot and should not be performed retrospectively. Any recovery plan developed is done so on the best available information at the time. If the recovery plan should encounter difficulties and unforseen costs then a retrospective analysis may draw a different conclusion. This is hardly fair given the length of time involved and the sheer complexity of the decisions that need to be made.

It is not our intention to develop a cost threshold below which Optus has free reign to spend the Insurer's dollar. Optus has an overriding responsibility to mitigate their loss both legally and under the terms of the policy and every step and decision on the way must reflect this.

ExCEL will play the role of "Devil's Advocate" and will test the decisions and the level of documentation at the time they are made. This will assist Optus identify savings and demonstrate how they have mitigated their loss. Ultimately it will prove useful when viewed retrospectively by an unsympathetic third party at the time costs are recovered." 1423 Of particular note in respect of the content of that letter, in my view, is the approach to the use of Castle Hill in the recovery strategy. As earlier noted in these reasons, the use of Castle Hill and of Blacktown for the re-establishment of the Optus' data centre represented a significant saving of some millions of dollars in the costs of returning Optus to the position it was in prior to the accident by the re-establishment of the equipment at the Rosebery centre after cleaning. 1424 Optus could not have been required, as an act of mitigation, to re-establish the data centre by locating the cleaned equipment or replacement equipment at Castle Hill or at Castle Hill and Blacktown under the two strategies undertaken by Optus. The fact that it did so represented a saving of some millions in the damages flowing from the incident. 1425 In the course of carrying out its retainer, ExCEL furnished periodical reports the first of which is dated 14 July 1997. It is a detailed itemised report and in respect of each item of claim under consideration ExCEL provided comments on the expenditure. An example taken from the report at random illustrates the way in which the system worked: " Item 13.1 Homebush - Computer Support The incorporation of the GSMIS system into Castle Hill was always the preferred option. However as a result of the pressure of the unknown risk the decision to install the system into Homebush was made early on. There were several attempts to bring the GSMIS production system on-line. Unfortunately many difficulties faced the crew working to transfer the system and the two opportunities, on the Easter Weekend and Australia Day were missed. The end result is that the site has been successfully installed as a backup Hot Site to the production system and can be brought up to full production status within 20 hours of a failure at Rosebery.

These costs reflect the additional costs of computer support staff to [sic] required during the several attempts to migrate the production GHSMIS system.

These costs have been accepted as fair and reasonable by ExCEL and in-line with the technical degree of difficulty in migrating the system. If the transfer had been successfully completed and the production GSMIS system transferred then the resultant cost would have increased to around $86,000 per month. As it happens these costs have been limited to 1 month duration only. 1426 Many other items are noted as "fair and reasonable….. and were considered to be an integral part of the recovery process". It is clear from the report (which contained sections dealing with "Assumptions……. The Development of the Recovery Strategy…… The Preferred Recovery Strategy" referring to the use of Castle Hill and Blacktown) that it is a well reasoned document that demonstrated that ExCEL was well abreast of the way in which Optus was approaching the recovery program and the rationale of the program. 1427 During the course of the proceedings I gave an ex tempore judgment on the reliability of Optus' records, created and maintained by Optus as a discrete record of costs incurred in its recovery program. I remain firmly of the view that the record of expenditures incurred by Optus in re-establishing the data centre through the recovery program was at a very high level of reliability. 1428 I do not understand Tyco to persist in a challenge to the accuracy of the record, rather I understand its position to be one of disputing the record as representing the quantum of loss to Optus. The level of reliability I think is to be extracted from the involvement of Mr Cearns and the circumstances and manner in which the cost recording system was set up and implemented under Mr Cearns' direction. 1429 Further, that level of reliability was re-enforced by the very significant involvement of ExCEL in the process. To that may be added the decision by Optus to engage KPMG's partner Mr John Banks to report on its costing as follows: "1.1 You have requested KPMG to prepare a report commenting on the amount of monies expended by Optus Administration Pty Limited on behalf of the plaintiff companies (collectively, "Optus") in regard to the incident the subject of the above proceedings. We understand that this report is to be used in legal proceedings (reference number 55059) between Optus and other parties in the Supreme Court of New South Wales, Common Law Division - Construction List.

1.2 You have requested that we comment on the amount of monies expended by Optus, which are described broadly as direct costs of Rectification Works. You have requested that we also comment on certain assumptions used by Optus in its calculation of payroll costs. The scope of our work is discussed further below." 1430 The report of 26 November 1998 could not be regarded as superficial. It took the following form: "2.7 …… 3 Overview of Optus' accounting system…. 4 Scope of KPMG's work on Rectification Works costs…. 5 Analysis of costs incurred by Optus…. 6 Payroll…. 7 Overall conclusion…. 8 Responsibility…." 1431 In section 3 it reviewed the system, including the method of recording, authorisation and allocation of expenditure and the role of ExCEL. In section 4 Mr Banks described the scope of the review as follows: "4.2 On a sample basis (discussed below) we have undertaken three broad tests, being the review of : (i) the existence of documents corresponding to and supporting the amounts recorded on the Register; (ii) the existence of concurrence or internal Optus authorisation; and (iii) the disbursement of cash by Optus.

Basis of sample selection 4.3 Subject to further comments below, KPMG has verified the claimed costs to supporting documentation on a sample basis. The scope of our sample selection for verification is greater than we would ordinarily undertake if performing a statutory audit. For a statutory audit the auditor is required to form a view as to whether the accounts are true and fair. For such an audit, these costs would be considered in the context of the whole of Optus' business and may not be significant to the auditor in forming an opinion on the accounts. 4.4 In this matter, where we are performing a special purpose review for litigation, we consider a more precise opinion is required as to whether the monies claimed were in fact incurred. Further, we consider an opinion can be formed as to the accuracy of the total claimed costs by reference to sample testing. We have made our sample selection giving consideration to: s our experience in performing similar special purpose reviews for litigation; s KPMG's sample selection methodology used in statutory audits to determine individually significant costs; and s Our professional judgment. The sample selection basis was made without consulting the staff or management of Optus." 1432 In relation to authorisation in section 5, save for a portion of one invoice, Mr Banks concluded that no further adjustment to the register was required on the grounds of inadequate authorisation, either by ExCEL or Optus personnel. 1433 In addition to the costs recorded in the register Optus has claimed two additional items, namely, pay roll and related costs of $168,462.00 and a storage cost of $2,200.00. 1434 Mr Banks had been requested by Optus to comment on the payroll claim, which he did. For that purpose he was supplied with "a list of employees and the periods and hours during which they performed part of the Rectification Work" by Optus management. Based upon the record so supplied of the employees and the hours worked, with recourse to the wages records of Optus, Mr Banks performed a calculation of payroll costs which came to a total of $168,462.00. That included both direct and on-costs. 1435 Mr Banks was well qualified to carry out the exercise as a Master of Commerce from the University of New South Wales in addition to having the benefit of "over 35 years experience in valuation of business entities, forensic accounting and investment evaluation". There has been no challenge to his work. 1436 In relation to the apportionment of the amount of damages claimed by Optus amongst Networks, Vision and Systems, I do not understand there to be any issue raised by any party as to the appropriateness of Optus' apportionment. 1437 The approach by Tyco to the role of KPMG was to restrict it to one that "merely reviewed the internal accuracy of the register…….[and that there] was no independent consideration by KPMG as to whether the invoices included in the register did in fact relate to the cleaning strategy, nor did KPMG review the appropriateness of the moneys expended, the tasks performed or the use of resources." However, I regard the report as a significant one as a report verifying the reliability of the register as a product of the system: a verification which I think is particularly important having regard to the evidence of Mr Cearns as to the way in which the system was constructed, the rationale for the system and the method of allocation and authorisation involved in creating the register of expenditure. 1438 Tyco's broad position in relation to the record of expenditure was expressed in the following way: 6. This method of proving loss is clearly flawed. A number of comments can be made at the outset: 7. The plaintiffs have failed to take into account the fact that certain of the expenses entered into the system were expenses of a capital nature, giving rise to capital assets of enduring value to the plaintiffs; (a) No account has been taken of benefits actually received by the plaintiffs as a result of actions taken in response to the incident, being savings that would not have accrued to the plaintiffs were it not for the incident; (b) The system was a self-contained operation in the sense that it took account only of expenses incurred in connection with the recovery project, and paid no attention to the balance of Optus' business outside the DCRP. The system was treated as a self-contained operation in the sense that Optus' business other than the DCRP was outside the system, and treated as irrelevant. (c) In respect of claims for certain staff costs, and in particular staff other than those which were truly permanent employees, no analysis was undertaken as to whether or not these costs were in fact truly incremental; (d) The "system" was ruled off in 1998 ie. nobody went back to review the system after 1998 to see if, as events have turned out, Optus was not as badly off as the system would indicate." (footnotes omitted) 1439 The transcript reference referred to in paragraph (b) is evidence of Mr Cousins, However, I do not regard the way in which the system was created and the nature of the system as one which treated Optus' business outside of the recovery program as irrelevant. I think the evidence demonstrated that in the evaluation summaries, alone, Optus took into account the distinction between rectification costs and the costs of Optus' general business activities in the course of allocating expenditure to the recovery program. There are numerous examples of that throughout the evidence of Mr Cearns. 1440 The general observation that the expenses were of a capital nature "giving rise to capital assets of enduring value", standing alone, and without reference to particular items of claim, reflected an erroneous approach in principle, for the reasons earlier stated. 1441 Tyco's general approach to the damages claimed by Optus was set out in the following extracts from the final addresses on behalf of Tyco: "16. …….there is an antecedent question. That question is what loss has the plaintiff suffered as a result of the defendant's wrong doing. The onus is upon the plaintiff to prove that it has suffered loss. In Monroe Schneider v Number One Raberdem (Full Court Federal Court) Burchett J cited Grove J who said: "The plaintiffs having made out a prima facie case on damages, actual and prospective, to a given amount, the defendant should have given evidence to shew [sic] how and to what extent that claim ought to be mitigated". Monroe Schneider was concerned with a case where the defendant contended that the plaintiff had failed to properly mitigate its loss. What is clear from the above passage is that before one reaches the point of determining the defendant's contention about failure to mitigate (if such a question arises) there is an antecedent question; that being what loss, if any, has the plaintiff suffered. This question is particularly relevant in relation to the plaintiff's claim for reimbursement of monies spent on capital items. Because expenditure on a capital item cannot prima facie be a loss it is a matter for the plaintiffs to demonstrate that they have in fact suffered a loss arising out of an expenditure on a capital item (this is developed below). A plaintiff cannot prove that by expending money on a capital item that it has ipso facto suffered a loss equal to the amount expended. No loss is inferred merely from purchasing a capital item because prima facie the purchaser

has an asset of the same value as the amount expended upon the asset. The plaintiff must go further and demonstrate why, in all the circumstances it has in fact suffered a loss, and it must quantify that loss. 17. A further matter: the plaintiffs are running this case as a mitigation case in the sense that they seek recovery of losses incurred as a consequence of steps taken to avoid potential future losses to its business. If in fact each of the computers had been established to be contaminated by the rusty sludge discharge then the plaintiffs' claim would equally have been characterised as the recovery of losses incurred in taking steps to repair the harm. If the case had been run that way, then no "mitigation" would be involved. The plaintiffs cannot change questions of proof and onus in relation to whether they have suffered a loss simply by formulating its case in the way it has. This debate does not matter at the end of the day because for the reasons given in these submissions the plaintiff has the onus to prove that it has suffered a loss and the extent of that loss. 1442 The reference in paragraph 17 of those submissions include references to McMullin v ICI Australia Operations Pty Ltd (1997) 72 FCR 1 at 72 - 5 and Ranicar v Frigmobile Pty Ltd (1983) TasR 113 and to certain evidence of Mr Berents and Mr Cousins. The nature of the damage in the McMullin case was the ingesting of a chemical which affected the value of cattle and, in the case of Ranicar, the subjecting of scallops to a temperature that precluded the exportation of the food. In each case the Court was of the opinion that the condition affecting the subject personalty constituted damage to that property. That is the view that I have of the consequence of the contamination of the Optus property in the incident. I regard the case as one of property damage and the basic measure of damage being the cost of rectification of that damage. The threat of further damage through system failure was relevant to the reasonableness of the recovery program instituted by Optus to rectify that damage. 1443 To a large degree the debate between Tyco and Optus over the nature of the damages claimed was a matter of semantics: an observation that I think will be appreciated better in examining individual areas of claim. 1444 Tyco has reduced items of claim to schedules which accompanied final submissions on its behalf. The schedules are divided as follows: "29. Despite these flaws in the system and the plaintiffs' generally incorrect approach to damages, there are a number of items which are not disputed. If the plaintiffs are unable to demonstrate that they acted reasonably in deciding to clean or replace all of the computer equipment then Schedule A to these quantum submissions indicates which cost codes are not disputed on this basis. Schedule B indicates in respect of each cost code whether the item is disputed or not disputed on the basis that the plaintiffs' are able to demonstrate that they acted reasonably in deciding to clean or replace all of the computer equipment. In relation to Schedule B, the basis for the dispute is indicated on the schedule." 1445 Schedule A to Tyco's submissions was in the following terms:

"Schedule A On the basis that the plaintiffs are unable to demonstrate that they asked [sic] reasonably in deciding to clean or replace all of the computer equipment the following costs claimed by the plaintiffs are not disputed: Cost code Description Amount 1.1 to 1.7 Initial decontamination of premises at Rosebery and removal and storage of ceiling tiles 617,573 5.1 to 5.2 Rosebery site - final clean 146,716 33.1 Board testing 4,605 200.1 Nortel circuit pack testing 3,056 200.2 Switch Room clean 75,320 Total: 847,270

1446 In addressing the disputed items of claim, Tyco challenged the utility of the role of ExCEL in the vetting of expenditure. In final submissions there were several "shortcomings" listed in relation to ExCEL's role, which I have not found necessary to examine in detail. 1447 I think there was some legitimacy in the comment that Mr Cousins did not address the concept of acceleration as a basis of costing expenditure involved in the acquisition of the pool equipment. However, one would not expect him to have done so. 1448 It was submitted that no reliance could be placed upon ExCEL as an "independent" reviewer. It was contended that its interests as the insurer's representative, in reality, coincided with Optus' strategy. For this submission. Tyco relied upon the email of Mr Viciulis of 17 March 1997 to various persons within Optus. The communication was in the following terms: "Further to Larry's note on the GSMIS relocation and some conversations surrounding the issue it has become clear that there needs to be some clarity established on the involvement of ExCel and Cunninghams in the recovery process.

At this stage of development we are in two critical modes, that of keeping the IT hardware functional (now & for future) and to obtain financial recoveries from those responsible for the incident.

There are two main strategies being undertaken to obtain for Optus the recoveries of costs etc. Our primary strategy is to pursue Tyco (as the Principal) for all costs without having to resort to litigation. The further part of this action is to pursue redress through the courts.

The second strategy is to lodge a claim against our insurers who then would pursue recoveries against the other parties. The costs to Optus in this regard would involve substantial insurance premiun [sic] increases involving several million dollars. There are other issues involving our longer term plans of insurances and the adverse affects that a claim of this size would have on our plans is a major consideration.

We have placed our insurers on notice about the incident and in effect they have appointed Cunninghams to protect their interests. As there is no official claim at this time we have accepted Cunninghams to act on our behalf to assist with our actions to obtain recoveries direct from Tyco. Cunninghams have appointed ExCel as their experts to assist with the issues of strategies and provide expert witness if the need arises.

The issue with or strategy of obtaining recovery direct from Tyco is that we are well aware no Company is going to willingly part with money possibly in the order of $30-$40 million. In this regard it is vitally important that we have available all the necessary sign off for our actions to both justify our reasoning by independents and to assist in any court action. At this stage the first sign off experts are ExCel and to a lesser extent Cunninghams. Also as discussed with Peter I consider it vitally important to have Digital sign off our actions with particular emphasis on the facts in that with each of our actions we have no other viable alternative.

If at a later stage we need to pursue litigation or officially file a claim with the insurers the sign offs will clearly indicate our reasoned decision making and the third parties (ExCel, Digital) will be readily accepted in court as expert witnesses.

As far as the strategy on the financial recoveries is concerned there is no impediment to your strategies to keep the Optus IT fully functional now and in the future. We fully support your comments as to the need to have no compromise for a proper IT recovery process and that third parties should not be limiting deemed essential actions. However, at the end of the day our decisions need to take into account what effect there could be on our ability to obtain recoveries from Tyco etc. It is in this regard we have once again brought up the issue of ensuring for the sign off process. I fully realise the frustrations with the processors of sign off and that time is critical but if we miss the opportunity to get some form of acceptable third party concurrence we must then be prepared to fund internally within Optus the costs of the decisions - which may well run into millions of dollars.

In discussion with Peter recently the issue of documentation was raised and I consider it necessary to highlight some issues. Firstly when the incident occurred I circulated a note on the need to not have comprehensive notes and the reasons for the action. As the incident has now moved on in time and we are now in a different stage of developments viz. recoveries and justification for decisions, it is necessary to now FULLY document all the decisions and the reasoning process behind the strategy. This is of paramount importance in the IT recovery phase and to assist with the sign off by Digital and ExCel on each strategy. Minutes of your meetings should be comprehensive and followed up with a sign off of confirmation by the attending parties." 1449 I think it is sufficient to refer to the evidence of Mr Cousins and the terms of the appointment of ExCEL by Cunningham to justify a rejection of the contention that there was some identity of interest that robbed ExCEL's role of its independence. In cross-examination Mr Cousins gave the following evidence: Q. Yes. Do you understand the principle. I will withdraw it and ask it in a different way. You did not purport to audit, in any sensible way, that which Optus did; correct? A. Incorrect. Q. You were reliant, were you not, on what Optus told you; correct? A. Yes, I was. Q. And you were reliant upon them to be frank and honest with you? A. That's correct. Q. Did you ever see an example of where they weren't frank and honest? A. No. (T2147:49 - T2148:7) 1450 At another point he was cross-examined to the following effect: Q. So you tell his Honour that at all times during the disaster recovery program you thought you were acting solely on behalf of insurers? A. That's correct. Q. And were you paid by cheque from the insurers? A. Paid from Cunningham Australasia. When they did the currency conversion, they paid me. (T2136:29 - 37) 1451 In his oral evidence in chief he also gave evidence to like effect as follows: Q. I wanted to take you to one paragraph where you use an expression "looking over the shoulders" of certain people. It is paragraph 18. Can you just give his Honour some details about what you were doing in terms of looking over the shoulders of those people? A. Well, largely - I suppose we take a step back from that. Largely my role was one where I was representing insurers' interests. My role was, if you like, one of a watching brief. However, Optus had made an internal decision to ask their managers to refer to me -- MR HUTLEY: I object. HIS HONOUR: Yes, continue. THE WITNESS: -- to refer to me on issues to do with recovery. My involvement in looking over their shoulder really took a number of levels. The first level was to discuss with them in principle whether the recovery process that they had proposed was fair and reasonable, or whether it was not really related to the incident. So the first level was one of principle. When the principle had been agreed, they would then work more on the costings of that and present to me their costings of that exercise and I would review the costs. (T2128:39 - T2129:10) 1452 Under the heading "CAPITAL ITEMS" Tyco identified the following items of claim: "(a) Monies spent on the cleaning pool kit, other than leased items ($11,961,246); (b) Monies spent on the Blacktown upgrade ($3.59 million); (c) Monies spent building a new Tandem room ($119,430); (d) Monies spent on other miscellaneous items being some network facilities ($25,000), cables ($60,000), and sundry equipment - Cisco ($12,000)." 1453 In the formulation of its claim, Optus set-off what Optus contended was the value of equipment which was "left-over" at the end of the migration and cleaning process. It was described as constituting the following: " s the equipment that was in the CDC at the time of the Incident s from which applications or data were migrated, s which was then cleaned and, s at the end of the migration process, was not carrying applications or data that existed prior to the Incident, and s equipment of "equivalence" was purchased during the recovery project to enable the migrations to occur." 1454 Tyco's basic position was that by proving that expenditure, Optus has failed to prove any loss as each expenditure represents the acquisition of "capital assets": hence no loss. Without an examination of the nature of the expenditure, the purpose for which it was incurred, for example, replacement of destroyed assets, the nature of those assets and the nature of such replacements, the submission, in my view, was meaningless. 1455 In making those submissions, Tyco identified the Optus claim, as characterised by Optus, "for the recovery of moneys expended by the plaintiffs in mitigation of future losses". I note that in Tyco's case on liability, it characterised Optus' damage as property damage and the damage of the other parties as economic loss. I agree with that characterisation of the rectification costs of Optus. I also note that, in submissions in reply, Optus treated the claim as "in reality…… akin to the computers being destroyed as they were not fit for their ordinary use in the Computer Data Centre or Tandem Room and replacement was necessary". As I have stated a number of times in these reasons I think the correct approach to the acquisition of equipment in the pool for migration purposes is to treat it as an incident of cost in the rectification of the contaminated equipment subject to an allowance for its residual value at the end of the cleaning process. 1456 Under the heading computer purchases Tyco conveniently summarised this area of claim as follows:

" The Claim The plaintiffs claim $12,646,682 representing the cost of acquiring the pool equipment ($7,989,791 and Expense Code 21.1 and $4,656,892 under Expense Code 21.2). A portion of this sum, being $685,436, was for leasing costs and labour costs. That leaves a sum of $11,961,246 as the cost of acquisition by purchase of pool equipment. The plaintiffs' entitlement to costs incurred in respect of leasing pool equipment and labour costs, ie the $685,436, is not disputed in the event that the plaintiffs can demonstrate that they acted reasonably in deciding to clean or replace all of the computer equipment and that the Court is satisfied that Optus Systems has suffered a loss of at least that amount." 1457 In my view, the issue concerning "Computer Purchases" should be looked at in the context of the way in which equipment was used: the equipment that was "left-over" at the end of the recovery program and the way Optus has treated the value of the equipment left-over. 1458 Tyco took the position that Optus has failed to bring to account the "benefit" represented by the acquisition of pool equipment which was superior in some way to the damaged equipment and which was retained as part of the re-established data centres at Blacktown and Castle Hill: that Optus has failed to recognise the true nature of its loss as one involving an acceleration of acquisition and, hence, an acceleration cost as distinct from the cost of acquisition. 1459 In this context Tyco relied upon the expanding business of Optus at the time of the incident and thereafter. It is common ground that Optus was at the time of the incident and, in the aftermath, in a state of significant growth. For reasons that follow, I think that there is little or no substance in Tyco's position on either aspect, whether one looks at so called benefits, or views the activities of Optus in the context of its overall business so as to measure whether the acquisition of the pool equipment represented a true acceleration of acquisition. 1460 Where Tyco gained some credence for its contentions as to betterment or acceleration cost as a basis of assessment of loss lay in the fact that pool equipment, to which applications remained migrated at the end of the process, was retained by Optus and relocated at either Blacktown or Castle Hill. 1461 Further, there is justification for an examination of the position of Optus as a rapidly growing enterprise in order to ascertain whether the retention of pool equipment in that way should be seen as an acceleration of the acquisition of that equipment. Also, there is some superficial indication of betterment in the retention of the pool equipment in the replacement data centres when compared with the left-over equipment. As appears below, the pool equipment, in an number of instances, represented a later generation of the replaced equipment with greater capacity in memory or in memory units: the latter being referred to in terms of CPU. 1462 As a general proposition, although a considerable amount of time and resources was spent in these proceedings in endeavouring to link Optus' growth requirements with the acquisition of pool equipment, that exercise by NDY and Tyco failed. The evidence disclosed that the recovery program was set up deliberately as a separate exercise from the business requirements of Optus. Second, during the course of the recovery program, where there was an overlapping of business requirements and that of the recovery program, that was taken into account by Optus. Third, the evidence, did not disclose that the business requirements of Optus, in any particular way, called for the acquisition of the equipment in the pool. 1463 The evidence also revealed that the retention of the pool equipment with applications migrated from the contaminated equipment was dictated by considerations of cost saving and of avoidance of risk of damage in re-migrating the applications to the cleaned equipment. 1464 Had the applications been re-migrated, that cost outweighed any difference in the value of the pool kit on the second-hand market from the value off the left-over equipment, the value of which has been offset by Optus against this part of the claim. 1465 For that reason, alone, to the extent that the decision not to re-migrate the applications from the pool equipment may have resulted in the retention of equipment of greater value than the equipment left-over as a result of the non-migration, that 'betterment' should be counterbalanced by the substantial saving in migration costs. 1466 As a final general observation, in relation to this aspect of the case, weeks were spent in the proceedings in endeavouring to track the migration of applications, the history of numerous cabinets involved in the cleaning program and in endeavouring to relate acquisitions to Optus' general business requirements through a process of cross-examination on-the-run. 1467 This is a case in which the parties were specifically encouraged to arrange meetings of experts in the months prior to the commencement of hearing in order to facilitate the proof of the alleged loss and minimise issues. 1468 If Optus at the conclusion of the migration process had re-migrated the applications on remaining pool equipment back to the original cabinets, Optus would have been left with second hand pool equipment of some value and, would have been called upon to give credit for, the value of that pool equipment: much in the same way as it has given credit in the these proceedings for the value of the equivalent left-over equipment. 1469 As appears later in these reasons, an examination of the retained pool equipment with the left over equipment shows a rough approximation of the two categories of equipment involved. I think it shows some degree of improvement in the standard of equipment in the retained pool equipment over the left-over equipment, but not of such a kind that, in my view, could be realistically measured. Finally, the evidence does not justify a finding that the retained pool equipment would have been equipment acquired by Optus, having regard to its business growth, at some identifiable future time. It was not acquired for that reason, either in whole or in part: the recovery plan being kept quite separate from the business plan of Optus. Essentially, the pool equipment replaced comparable contaminated equipment. 1470 It is not as though the business plans of Optus were hidden from view in the proceedings. They were in evidence and the opportunity was there, if it was the case, to show that the pool equipment was equipment which was part of the business plan of Optus, or alternatively, was incorporated into that business plan at some later point. That was not the case. 1471 The issue involved a most complicated exercise in gaining comprehension of how the migration operation proceeded with the multiplicity of migrations involved and where the process was not simply one of moving one set of applications from a contaminated cabinet to a pool cabinet. Overlapping occurred to an extraordinary extent and I doubt if the extensive cross-examination of Optus witnesses revealed a completely clear picture of the multiplicity of applications that had taken place. 1472 However, after weeks of court hearing time involved in just such a process, one should be grateful for the fact that, in final submissions, Tyco and presumably the other defendants, none of whom presented independent submissions on quantum, accepted a comparative table of purchased pool equipment with left over equipment as representing a reasonable comparison. It is set out in what was described as an Equivalence Spreadsheet. It is one bearing the title "Optus DCRP Purchased vs Remaining Equivalent". It would be I think an unrewarding task to summarise that spreadsheet without the reader having the benefit of a copy of it which is included with these reasons as Schedule S. 1473 As a further preliminary observation about Tyco's case on quantum, in relation to the Equivalence Spreadsheet, Tyco relied on the fact that there were some specified pool kit cabinets that were not shown as having an equivalent piece of equipment in the left over equipment. That was evidence, it was submitted, which established that that pool equipment would have been acquired, in any event, in Optus' expanding business. Further, it was put that, because the evidence showed use of some left-over equipment by Optus other than in relation to the rectification program, that was evidence from which an inference should be drawn that that equipment would have been acquired, in any event, by Optus as part of its general business activities. 1474 These were also the foundation for submissions that the cost of rectification so far as it involved the acquisition of equipment should be dealt with on the basis of an acceleration cost of equipment that would have been acquired, in any event, by Optus in its general business activities. 1475 In aid of this approach, Tyco relied upon the opinion evidence of Mr Lonergan and the evidence of Mr Nicholas James Julian Ogbourne, an information technology consultant with expertise in computer systems. His qualifications have not been challenged, only the accuracy of the work performed by him which, I think, Mr Ogbourne accepted. His task was described as follows: "10.1 I have been asked to consider the following matters.

10.2 First, I have been asked to determine the cost of the cleaning pool equipment purchased by Optus that is equivalent to equipment left over at the end of the cleaning process and that was utilised by Optus. The total cost of this equipment is $7,710,491. This matter is discussed in paragraphs 11 to 23 below.

10.3 Second, I have been asked to determine the cost of some pool equipment for which there was no equivalent left over equipment. The total cost of this equipment is $1,121,090. This matter is discussed in paragraphs 24 to 28 below.

10.4 Third, I have been asked to compare the cost of some equipment listed in a quotation provided by Finplan Pty Limited ("Finplan") to Optus to equipment that was purchased by Optus from Digital for the GSMIS cleaning pool. Equipment purchased from Digital at a cost of $7,606,352 is the same as equipment offered by Finplan at a cost of $5,747,720 being $1,861,632 less. This matter is discussed in paragraph 29 below.

10.5 Fourth, I have been asked to compare the equipment identified as "Level 2 Kit" in the Optus draft IT business Recovery Plan to the cleaning pool equipment and to identify those items in the cleaning pool equipment that are equivalent to items in the Level 2 equipment. I have also been asked to identify the cost of that equipment. The total cost of equipment in the cleaning pool that is equivalent to Level 2 Kit is $3,060,359. This matter is discussed in 30 to 32 below." 1476 I think it should be noted in relation to this part of Tyco's case that it was not put to any witness that any particular computer that was acquired in the rectification exercise, be it new, second hand, or of even a later generation to the damaged equipment, would have been equipment that Optus would have acquired, in any event. That was the submission on behalf of Optus [T5175:43 - 56]: that accorded with my recollection of the evidence and it was not challenged by Tyco. 1477 Moreover, as earlier noted, Optus' business plans were in evidence against which the acquisition of the pool equipment might have been gauged. Exhibit 16.007 entitled "CAPITAL REPORTING PACKAGE DECEMBER 1996" was divided into the following sections: "1.0 CAPITAL SUMMARY & VARIANCE REPORTS 1.1 ASSET SUMMARARY 1.2 1996/97 CAPITAL WORKS PROGRAMME - ACTUAL VS PLAN 1.3 DECEMBER HIGLIGHTS 1.4 PROJECT SUMMARY & CONTACT LIST 1.5 BUDGET vs FORECAST - VARIANCE BY GROUP

2.0 CAPITAL EXPENDITURE BY PROJECT CATEGORY 2.1 CAPITAL FORECAST & EXPENDITURE SUMMARY REPORT 2.2 CAPITAL FORECAST & EXPENDITURE DETAIL REPORT (APPROVED) 2.3 CAPITAL FORECAST & EXPENDITURE DETAIL REPORT (PLANNING) 1478 As at December 1996 it was noted that the full year capital expenditure was forecast to be $623,000,000.00 which required capital expenditure of $397,000,000.00 in the second half of the financial year. Individual projects which made up this actual and anticipated expenditure were set out in detail in section two of the report. The detail of the planned and approved projects as set out in that report was such as to permit an extraction by conventional legal processes of projects pertinent to Rosebery and Castle Hill and, for that matter, Homebush, although they were leased premises from Digital. 1479 It is not suggested that the task was a simple one. Far from it, the point is though, that Tyco has not identified planned projects in hand at the time of the incident: extracted from those projects the type of equipment required and compared that with the pool equipment acquired in the rectification program. Rather, assumptions are made that if equipment was used, it was equipment that would have been acquired in any event. It does not follow. 1480 Mr Lonergan in his evidence in chief, gave the following evidence which was objected to and allowed as assumptions, although, on reflection, I think it goes beyond mere assumption: "64. To the extent that the original equipment has been used within the plaintiffs' ongoing business as well as the pool equipment which effectively replaced it, then in my opinion it is a reasonable assumption that the pool equipment which replaced it would have been purchased in any event. Further, to the extent that the plaintiffs purchased pool equipment, and there was no equivalent original equipment left over at the end of the cleaning process, then in my opinion it is a reasonable assumption that that pool equipment would have been purchased in any event…." 1481 However, they are not, in my view, reasonable assumptions. As to the first sentence in that paragraph, it would be necessary to ascertain the nature of the use to which the equipment had been placed. As to the second proposition, again, it would depend, in my view, upon the fate of the "equivalent to the original equipment", in effect, missing from the left-over equipment. 1482 As a starting point, it may be useful to recall the basic elements in the strategy adopted by Optus. The evidence of Mr Cearns in his statement of 8 February 2001 is a convenient reference point as follows: "3. before commencing it is appropriate to make clear that "pool kit" (equipment purchased to support Optus' recovery strategy from contamination caused by the Incident) was required for a extended period to allow the full cycle of equipment de-contamination and migration of Optus' software applications. Initially this was thought to be a 7 month period but was extended to 12 months. This is identified in my document Equipment Recovery Strategies at Ex 2.035.

At the time of the Incident Optus had a revenue stream of approximately $2.5 billion. A loss of 1% market share in the industry equated to a $25 million impact to revenue. These matters were considered when the Incident recovery plan was formulated by me. Should any form of business disruption occur, this would have not only impact directly upon Optus' business revenue but also indirectly through negative customer perception and lack of customer confidence.

The process called for the construction of a replacement (target) computer system using clean equipment at a non-contaminated data centre which was comparable in all aspects with original contaminated Rosebery CDC system.

Applications found on the contaminated system at Rosebery would then be migrated to the replacement system running on non-contaminated equipment. This migration was performed without altering the application mix in either the original or replacement systems since changes to this mix could lead to application sociability problems which can result in production performance problems or even failure of the replacement system.

The original contaminated computer system was then cleaned and placed back into the equipment pool to assist the migration of further applications. This process continued for the full period of the recovery project which began in February 97 and was finally completed in March 98.

Any proposal for substitution of this pool kit with equipment from other sources would also require this equipment to be dedicated to migration purposes for a period of 7-12 months." 1483 As a general statement of the process of acquiring equipment for the recovery program, Mr Cearns gave the following further evidence: "88. ……Prior to the purchase of cleaning pool equipment, Optus weighed up the costs and availability of both new and second hand equipment. The process followed by Optus is found at OPT103 155 (Ex 2.052A). This focussed on securing the most cost effective source of equipment needed for migration.

89. In practice, Optus chose to purchase second hand equipment in all cases apart from situations where: a) the original equipment was relatively new and the second hand market had not developed sufficiently to satisfy needs,

b) second hand equipment could not be sourced in the configurations needed and the timeframes required for migration purposes, or

c) the risk of extensive revenue loss as a consequence of failure outweighed the relatively small saving involved. 90. Analysis of all items of expenditure purchased for the cleaning pool indicates that some 50% was purchased second hand. …… 93. Notwithstanding the element of risk associated with purchase of second hand equipment, in the case of the GSMIS replacement purchase, I am aware that efforts were made to obtain the huge volume of equipment needed from second hand dealers. I had conversations with Rahul Sahgal prior to purchase of the GSMIS system where he said words to the effect that he was having great difficulty obtaining equipment from the second hand market given the volumes involved and the delivery times sought by Optus.

94. On 10 January 1997, Larry Routt made the decision to purchase the replacement GSMIS system from Digital Equipment who had quoted immediate delivery of all needed items." 1484 Mr Cearns also described the cleaning strategy, in the most general terms in his statement of evidence of February 2001 as follows: "98. The cleaning strategy called for purchase of cleaning pool equipment which, for each application migration, would be used to establish equivalent systems at alternate sites to those already existing at Rosebery. This would then allow migration of the application and the release of the original equipment for cleaning and use as cleaning pool for further migrations.

99. When all migrations were completed, the purchased cleaning pool was in use by migrated applications and what remained was the equivalent equipment that had been cleaned or which was not economic to clean.

100. The purchased cleaning pool could only be released to the defendants by performing a repeated series of migrations back to cleaned equipment. These migrations would have resulted in considerable additional staff expenditure in the areas of re-installation and de-installation of equipment, systems analysis, applications support and application test.

101. In addition these migrations would have resulted in even further disruption to the Business.

102. These migrations were not performed since newer equipment does not have a higher value than older equipment of the same type……" 1485 Mr Cearns further explained that process in his statement of 16 March 2000 as follows: "60. Although it is true that in some circumstances, applications were running on newer equipment after the DCRP than they had been running on before the DCRP, this was due to the fact that Optus purchased new equipment for the cleaning pool. Resale value of equipment is not influenced by the age of a particular unit within the same model number. It is correct that when new equipment ('pool kit') was purchased and delivered, it was set up in either CHOC or BLOC. Applications that were run on contaminated hardware situate [sic] at CDC were then migrated to the new hardware, thus freeing up the contaminated hardware for cleaning. This equipment was cleaned and moved to CHOC or BLOC to accept further CDC applications for migration. This cycle continued until all applications were migrated from CDC. At the close of the DCRP the original pool kit was in service operating applications in either BLOC or CHOC. Nevertheless equipment equivalent to the original pool kit was identified so that it could be made available to the defendants……….. In order to make available the original pool kit, Optus would have had to further migrate applications of the pool kit to the equivalent equipment. This additional migration would lengthen the project duration, risk further disruption to Optus services and increase claimable costs. It was determined by Optus and Excel that any perceived benefits would not offset risks and costs.

61. If more recent models of equipment were purchased, it was only because the original model was no longer readily available." 1486 I have understood Mr Cearns' evidence to the effect that "equivalent equipment" was identified so that it could be made available to the defendants as referring to the benefit to the defendants by way of set-off, of the value of the "equivalent equipment". His choice of terminology, however, underlined the approach of Optus to the acquisition of this equipment, not as part of its on-going business requirements, but as a temporary acquisition for the purpose of its utilisation in the rectification process developed in relation to the damaged equipment. 1487 The Equivalence Spreadsheet, Schedule S, was essentially the product of the work of Peter John Quodling, a systems architect in the employment of Optus. He was employed by Optus "as a configuration consultant, to organise and implement Optus' strategy to decontaminate the computer equipment contained in the" data centre. 1488 In his first statement of evidence he identified his role in the recovery program and produced a list of equipment that had been contaminated, then cleaned and which was used for Optus' year 2000 project (the Y2K project) and equipment that was used for general production purposes. He also identified equipment which remained in a contaminated state and was in storage at Relectronic. 1489 Included in the list that was used in the Y2K project, or for general production purposes, were some items of equipment which remained in storage at Castle Hill or Blacktown. Mr Quodling left Optus in mid 1998 upon joining Digital. 1490 He had been assisted in that compilation of equipment by Mr Lister. That involved the production of the document known as the "Optus DCRP Stock List 14/4/98". That document was generally referred to as the "stock list". The stock list was a 15 page document (each of which bears the ExCEL concurrence stamp of authorisation) which identified the equipment by cabinet number, type, contents, its location and an indication as to whether it had been cleaned or not. There were numerous items which had not been cleaned, which would suggest something less than an indiscriminate approach to cleaning by Optus. 1491 That document was divided into two categories: that which had not been cleaned, most of which was subsequently sent to Relectronic and left over equipment which had been cleaned and sent to Blacktown or Castle Hill and which was put to some use, or stored. That document list was cross-referenced to the Equivalence Spreadsheet. 1492 The left over equipment in the Equivalence Spreadsheet was identified by Mr Quodling in the stock list. He then went on to prepare three schedules, namely: "13. ….. A. Left over Equipment Cleaned and Used by Optus (with DCRP equivalence). B. Left over equipment cleaned and stored/not used at BLOC or CHOC (with DCRP equivalence). C. Left over equipment cleaned and stored/ not used at BLOC or CHOC (with no DCRP equivalence)." 1493 Mr Quodling was able to state that the tables were true of the position at the time he left Optus in mid 1998. In respect of the subsequent period, Mr Anthony Alexander Theodossiou, who was employed by what is now known as Compaq - previously Digital - gave evidence of his examination in situ of the equipment, the subject of schedule B. He confirmed the presence of that equipment with one qualification, that in relation to equipment known as RZ 29 and two RZ 28's. There were numerous such items of equipment in storage and he was unable to particularise which ones were the three pieces of equipment referred to in Schedule B by that description. 1494 Mr Quodling had also performed a cross-check of his list of equipment recorded as being stored at Relectronic and save for one piece of equipment he was able to confirm the accuracy of his list. 1495 Mr Quodling described Optus' policy in acquiring equipment for the recovery plan as follows: "20. The policy we applied to the acquisition of new equipment for the purpose of the migration exercise was to the best of our ability : (a) we should aim to acquire like for like. The objective was to ensure that applications were migrated to equipment that was no smaller or slower than the existing equipment but which at the same time provided no material improvement over the existing equipment;

(b) to the extent that there was any improvement then that was to be identified and justified (in documents known as "Evaluation Summaries");

(c) if the improvement was obtained for the purpose of satisfying a desire by Optus to upgrade then that was to be funded from Optus' own resources separate from the DCRP; and

(d) in other instances, where like for like was not obtained (but not because of a desire from Optus to obtain an upgrade) then this occurred because it was cheaper to obtain newer technology than to replicate the existing position or because an equivalent item was not available or could not be relied upon to be available, within the schedule for the migration. 21. The documentation of the alternatives that were considered for expenditures in the migration exercise was through evaluation summaries. I estimate that I was involved in the preparation of approximately 40% of the evaluation summaries. I did so as part of the policy referred to in the previous paragraph. In preparing these summaries I had in mind that there may be an insurance claim in respect of this expenditure. I did not have in mind that there would or may be legal proceedings to which the evaluation summaries may be of some relevance. I have inspected a folder of documents entitled "Evaluation Summaries" and marked those which I was involved in preparing by writing my initials in the top right hand corner." 1496 From those evaluation summaries and those produced by Mr Lister, I think it is fair to say that where the requirements of the recovery plan overlapped with Optus business plans, Optus endeavoured to disentangle those requirements. 1497 Mr Quolding's evidence in chief included his statement of April 2001 [Ex 10.048] which contained, among other things, a detailed examination of a migration plan advanced by NDY as an alternative plan to that pursued by Optus. 1498 That issue has been dropped, but not before a significant amount of time was occupied in these proceedings tracing through migration procedures. Although of no particular continuing relevance, I think it is of some value to identify Mr Quodling's response to that, for no other reason than to reflect one of the many unsatisfactory ways these proceedings progressed and also to reflect the extraordinary complexity involved in the process of migration. The way I have chosen to do that is to attach as Schedule T to these reasons the response of Mr Quodling to that alternative migration plan which clearly was impractical. 1499 ExCEL was also involved in the review of the Equivalence Spreadsheet and the stock list and in the decision not to re-migrate the applications on certain of the pool equipment on the ground, inter alia, of cost saving as appears from the following evidence of Mr Cousins: "36. A list of the left-over equipment was prepared by Peter Quodling. I saw a number of drafts of the list and spoke to Peter about the equipment and whether it had been replaced by the equipment which had been purchased as part of the DCRP. I also explored the possibility of further migrations being performed back onto the original equipment in the CDC at the time of the incident. I undertook a costing of that exercise, in conjunction with Byron Lister, and determined that the cost of that work would far exceed the benefit of having the "original" pool kit equipment released for re-sale. At the end of this protracted process, I literally signed off on three lists being: a) a spreadsheet of "Optus DCRP Purchased vs Remaining Equivalent" dated 19 March 1998; b) a listing of "OPTUS DCRP Cabinet Breakdown" dated 20 March 1998, and c) a coloured spreadsheet entitled "OPTUS DCRP Stocklist 14/4/98". The first list noted the differences between the equipment in the CDC at the time of the incident and the equipment which had replaced it as a result of the DCRP. I was satisfied that a fair and reasonable result in all the circumstances had been achieved." 1500 Prior to making a decision in relation to the way in which the residual equipment should be treated, the matter was raised with ExCEL in a letter from Optus of 18 February 1998, which was in the following terms: "I am writing to clarify Optus's position regarding the computer equipment that is remaining at Rosebery after completion of our Data Centre Recovery[sic] This equipment is left over as a result of Optus utilising new and leased equipment as our original "pool" after the incident of the 3-rd January 1997 in accordance with our recovery strategy. The work which has been done by Optus in conjunction with Excel shows quite claerly[sic] that the additional costs re relocating applications from curreent [sic] equipment to original equipment is uneconomic and high risk. Wetherefore [sic] believe that there are 2 viable options s Optus can sell all this equipment to a broker as is. However according to our legal advice we will have to clearly state the condition of this equipment and circumstances of the incident. Optus cannot provide any warranty in respect to this equipment. Our current advice is that in this conditions [sic] equipment will have very low if any market value. Professional cleaning and decontamination may add value to the equipment but only if the broker can obtain a manufacturers warranty. This would need to be arranged by the broker If the equipment is to be disposed of this will need to be managed by an outside professional who would need to provide Optus with a warranty that no claim could be made against us for any loss or damage suffered by the ultimate buyer. I have to reiterate that Optus cannot afford to expose itself to any claims related to the performance of this equipment as we cannot afford to have our credibility as a seller of 2nd hand equipment compromised. An indemnity by insurers for losses suffered by third parties will not be adequate. s Optus can acquire, clean and reuse this equipment on the other projects. The cost of this acquisition is to be determined and agreed between our organisations, but we would expect to pay for it the market value of this equipment after decontamination. We would accept the risks of failures in this equipment and negotiate the extension to our contract with Digital to service and warrant this kit. The cost of decontamination, increased service and certification costs, possible increased insurance premiums against catastrophic equipment failure, internal management costs, risk factoring should be considered during valuation. We need to determine the course of actions as soon as possible because there is a number of current projects awaiting decision on the hardware acquisition. For the projects like Y2000 the time frame for the hardware acquisition is crucial and price can change drastically. 1501 I do not understand it to be in dispute that equipment that was contaminated and did not have digital "MAQ" certification was worthless. To obtain any such certificate, it would have been necessary to "clean, test and burn" the equipment for the specified period and demonstrate its use for a period of three months without failure. That aspect of the evidence of Mr Cousins has not been disputed. 1502 Proceeding on the basis that it was uneconomic to release the pool kit by re-migrating applications which had been migrated to it during the recovery program, Optus raised with its insurer, through ExCEL, a use of residual cleaned equipment in terms of its letter to ExCEL of 31 March 1998 as follows: "OPTUS wishes to utilise the equipment described in the enclosed schedule, for the Year 2000 Compliance Project. This schedule contains: s An itemised list of all the hardware requested for redeployement s Serial number of all components s Valuation of each item, as valued by the two vendors, Australian Data Solutions and GE Capital The equipment is a subset of the DCRP leftover pool equipment. All of this hardware is currently located at the Castle Hill datacentre, and has already been de-contaminated by Relectronic-Remech as part of the DCRP project. In accordance with the agreed process, I request concurrence from EXCEL on the use of this hardware. I am looking to get agreement on using this hardware by close of business on 2/4/98, so as not to impact the Year 2000 compliance project milestones." 1503 Accompanying that letter was a document entitled "DCRP Pool Kit Process" the purpose of which document was expressed to be as follows: " Purpose The purpose of this document is to define a process that will allow the leftover pool of equipment from the DCRP project to be utilised by current OPTUS projects. This needs to be done in a manner that does not compromise the insurance claim/legal proceedings related to the Inergen incident that occurred at the Rosebery data centre in January 1997. The intention is also to ensure that any kit redeployed, can be effectively tracked in the future." 1504 In relation to the three schedules of Mr Quodling, Optus has allowed in its claim the benefit of the value of that equipment which, in substance, in my view, equates to the value of the retained pool equipment. A comparison of the left-over equipment with the pool equipment in the Equivalence Spreadsheet shows a substantial correspondence: with the left-over equipment, in some instances, being a "generation" older or lacking in a CPU when compared with the equivalent pool kit. On occasions the left-over equipment is superior in cabinet, or CPU, or in the number of disks in the equipment. 1505 In practical terms, there is a strong enough coincidence in the nature and size of the two categories so as to lend considerable support for the approach adopted by Optus in off-setting the value of the left-over equipment against the cost of rectification of the contaminated equipment. 1506 The manner in which Optus quantified its loss was structured around the three schedules (Ex 10.048A) created by Mr Quodling. The equipment left-over for which there was no recovery plan equivalence (schedule C) was not valued, essentially on the basis that there was no equivalent pool kit equipment to which it related. It was really a product of the multiplicity of migration of applications that took place, the cleaning of equipment, the repetition of the process of migration in a great multiplicity of activities. 1507 The final group identified by Mr Quodling of contaminated equipment uncleaned and in storage at Relectronic was of no value and there does not appear to be an issue about that. In any event, I agree with Optus' approach. 1508 The valuation of the left-over equipment which could be identified with equipment acquired for the pool in the recovery program was carried out by Mr Frank Keaveny. Tyco has expressly not disputed his valuation of $2, 745, 900.00 "as an appropriate valuation figure for that equipment". 1509 In allowing this valuation as a set-off, Optus took into account the cost of cleaning the left-over equipment in the sum of $513,100.00. It was correctly submitted on behalf of Tyco that that involved a duplication of charges, in effect, as Optus' cleaning costs included costs of cleaning cabinets involved in the valuation in the amount of $118,252.00 with the consequence that, if the Optus approach is adopted in terms of quantification of loss, the valuation of Mr Keaveny should be reduced, not by $513,100.00 but by $394,848.00. That is accepted by Optus. 1510 However, Tyco's opposition to Optus' method of assessment of loss goes far deeper than a correction of the calculation of set-off allowed by Optus. The fundamental position adopted by Tyco is that the pool equipment would have been acquired by Optus at a definable future time having regard to the growth of the Optus business: a growth which is really not in dispute. That has led to the following set of contentions and approach by Tyco as presented in final addresses: "(a) the plaintiffs' businesses were growing in 1997/8 at a fairly rapid rate which meant that at the relevant time the plaintiffs would need additional computing capacity. For example, in October 1997 Optus were acquiring 4 to 5 new computer cabinets per month. (b) the pool equipment that had been acquired continued to be utilised by the plaintiffs when the recovery process was complete; (c) as well as the newly acquired pool equipment, a substantial proportion of the equivalent equipment was in fact utilised by the plaintiffs in its businesses, after the completion of the DCRP (this is developed later); (d) accordingly, it is likely that the plaintiffs would have purchased the equipment or at least a proportion, being the proportion of equivalent equipment that was in fact utilised, regardless of the incident; (e) the loss suffered is the cost of the additional funding costs brought about as a result of the early purchase. That figure has been calculated on the assumption that, in the absence of the incident, the plaintiffs would have purchased the equipment by 30 June 1998. 30 June 1998 may be an appropriate date because the large majority of the equivalent equipment was used for year 2000 testing which began in approximately mid 1998." (footnotes omitted) 1511 In support of this aspect of its case, Tyco adduced the evidence of Mr Ogbourne to prove the "cost of equipment purchased as part of a cleaning pool that [was] equivalent to left-over equipment that was utilised". Mr Ogbourne's amended calculations for that equipment was $7,713,082.00. Mr Lonergan based an acceleration cost of the acquisition of this equipment on Mr Ogbourne's calculations and upon the assumption, as stated above, that the equipment would have been purchased, in any event, by Optus by 30 June 1998, regardless of the recovery program undertaken by Optus. 1512 Mr Ogbourne also costed the "items of pool equipment which did not appear on the Equivalence Spreadsheet and for which there was no equivalent equipment identified by Optus at the end of the cleaning process". This costing was also brought to account in Mr Lonergan's calculation of acceleration costs. Adjustments to Mr Ogbourne's costing of this equipment and hence Mr Lonergan's acceleration costs were necessary after cross-examination of Mr Ogbourne exposed some matters of oversight which he corrected. The final figures produced a total acceleration cost of $969, 350.00. 1513 In my view, Tyco's case based on an acceleration cost should not be accepted for the following reasons:

a) It ignores the clear evidence that the recovery program and the acquisition of the pool equipment was carried out independently of Optus' business plans and there is no evidence to justify a finding, in my view, that any of the items of equipment in the Equivalence Spreadsheet would have been acquired by Optus as part of its business plan at any identifiable point in the future. In this context, as earlier stated, the evaluation summaries established that where there was an overlap of business objectives and the recovery plan, that was observed and the business plan element excluded from the Optus costing. b) The evidence I think is also plain that the pool equipment was acquired as a temporary exercise as part of the cleaning regime which involved rectification of the contaminated equipment by first migrating its applications so that the equipment could be then cleaned and applications re-migrated to it at the end of the program. It is wrong in fact and in principle, in my view, to characterise that acquisition as a capital cost which does not express itself as a detriment: provided that the residual value of the pool equipment is taken into account. In fact, Optus has allowed that set-off in the form of the value of the equivalent left-over equipment.

c) The evidence of the circumstances in which the applications remained on pool equipment for which Optus retained equivalent equipment which had been contaminated does not justify, in my view, the inference that Optus would have acquired that pool equipment in any event. I have outlined the circumstances that gave rise to the decision, with the concurrence of Excel, not to re-migrate the applications from the pool equipment on the Equivalence Spreadsheet: namely, for reasons of cost of the re-migration, the extended period of the recovery program that would have been involved, together with the risk of interruption to Optus' business in that process. I think that evidence should be accepted as not in any way indicative that the pool equipment would have been acquired by Optus in any event. d) Tyco relied upon the fact that Optus used a portion of the left over equipment, mainly for its Y2K testing program. It was contended that it should be inferred from this that Optus would have required the equivalent pool kit equipment independently of the incident, either to maintain its data centre requirements that prevailed at the time of the incident, or for Y2K testing program. Either way, it was contended that it showed that the pool kit equipment equivalent to that left-over equipment which was used for Y2K testing would have been acquired by Optus regardless of the incident. 1514 The fallacy of that argument lies in the evidence that the left over equipment that was so used by Optus was used as a matter of convenience and not of necessity. The evidence disclosed that it was not necessary to have testing equipment the equivalent of the production machines that were the subject of the testing program. That evidence came from Mr Cearns and Ms Gunasekera. 1515 During cross-examination by counsel on behalf of NDY Mr Cearns gave the following evidence: Q. What you are saying to his Honour is that, by and large, for Y2K purposes, Optus required a machine of the same functionality but not necessarily the same power or performance as its production machines? A. Yes. Q. Does that mean that, subject to technical issues which perhaps we do not need to go into, it would be necessary or appropriate for Optus to have access to an alpha server 8000 series to do Y2K project in relation to applications that use an 8000 machine? A. Not necessarily, no. Q. Would it need 7000 series machines to do Y2K testing in relation to applications running on 7000 machines? A. No. As I stated earlier, all that would be required is that the target machine be capable of executing the same operating system and the same microcode as the production environment. Now the power, functionality that we were talking about earlier, does not necessarily therefore mean that you have to have an 8000 box to achieve a Y2K test. You could do it on a smaller box as long as it ran the same operating system and on the same microcode, of course, as the production box. (T1294:52 - T1295:22) 1516 Ms Gunasekera, who was a technical specialist with Optus, was involved mainly in the Tandem recovery program. However, she gave evidence similar to that of Mr Cearns in that Optus did not require equipment of the same order as the equipment to be tested under the Y2K test program. On 9 April 1998 she submitted a paper the purpose of which was to enable discussion to take place with Optus on the choice of the most "suitable platform for Year 2000 testing". In her evidence in chief she referred to this report and, in relation to one of its proposals, observed that "but for the incident, Optus would have most likely purchased a used K1000 system" for its year 2000 program. Ms Gunasekera was cross-examined upon this report, but not to suggest that that evidence in chief was unsound. It would be unsafe, in my view, to infer from the Optus use of some left-over equipment for its Y2K testing that the equipment was required for that purpose and that the equivalent pool kit would have been required by Optus by mid 1998, as suggested on behalf of Tyco. 1517 In response to a notice to produce served upon Optus which required production of documents relating to the use of left-over equipment from March 1998 to the date of the notice to produce, Optus produced a schedule which was described as a recent use schedule which only identified usage for the 9 months prior to Aril 2001. Records beyond that period could not be produced. 1518 In my view, the contents of the recent use schedule do not materially assist Tyco's case that any of the pool kit equipment would have been required by Optus as part of its business growth plan. If anything was to be drawn from the use by Optus of equipment which had been damaged in the incident, I think it needs to be extracted from the Equivalence Spreadsheet. Apart from the matters I have so far considered, the usage of left over equipment identified in the recent use schedule which has no pool kit equipment equivalence does little to assist me in reaching a conclusion that Optus would have required its pool kit equipment, independently of the incident, at a point suggested to be mid-1998. 1519 Mr Ogbourne has identified items of pool equipment which are not found on the Equivalence Spreadsheet and which do not correspond with any of the left over equipment. Initially, he identified that equipment as comprising "two AlphaServer 4100s (for DCS), a storage works cabinet, three VAX7800 central processing units and one AS4100 (for cabinet 32)." 1520 That analysis of Mr Ogbourne required re-consideration in the context of cross-examination which resulted in the following modification "(a) In relation to the two AS4100s purchased for the DCS migration the following items are equivalent to equipment in the DCRP Stocklist: One AlphaServer 2100, two BA350 shelves, 36 RZ29 disk drives and two TZ887 tape drives. The total value of these items is $270,652. Hence, the value of equipment for which there is no equivalent is the total value of equipment purchased for the DCS migration, being $469,205, less $270,652 which is $198,553. (b) In relation to the three VAX 7800 CPUs Mr Ogbourne agreed that there is one VAX 7800 CPU at page 13 of the DCRP Stocklist and that an adjustment of $91,326 (the cost of one VAX7800 CPU) should be made. Hence, the value of equipment for which there is no equivalent is $182,652 (the cost of two VAX CPUs) rather than $273,978 (the cost of three VAX CPUs)." (Tyco's submissions on Quantum par 83) 1521 As a consequence of those adjustments Mr Ogbourne priced the equipment for which there was no equivalent left over equipment in the sum of $759, 112.00. It is not clear to me whether that includes the storage works cabinet which Mr Ogbourne acknowledged as a consequence of cross examination had an equivalence in cabinet 54 which was the relevant storage works in the equipment stock list. He was prepared to make an adjustment to his costing, accordingly. However, it has not been necessary for me to clarify that. 1522 Optus has not attempted to address directly the lacuna of items in the pool equipment for which there is no equivalent left-over equipment save for supplementary submissions addressed at the conclusion of these reasons. One simply does not know why it is that Optus has been unable to identify completely from its left-over equipment the comparable equipment in the pool kit. 1523 However, I am not persuaded to draw the inference that that portion of the pool kit should be treated as equipment that Optus would have acquired, independently of the incident, mainly for the reason that there was an extraordinary complexity involved in the migration and cleaning process which involved a multiplicity of applications being migrated and a multiplicity of changes in cabinet usage that defied a clear description. 1524 I think that may be illustrated by including Schedule U which I think, in some small way, indicated the technical complexity involved in the subject process. I am not overly surprised by the absence of coincidence in any comparison between the pool kit equipment acquired from time to time with the left-over equipment of Optus. I am not prepared to draw the inference that the equipment so identified by Mr Ogbourne from the pool kit for which no left-over equipment can be identified as sufficient basis for drawing the inference that that pool kit would have been acquired by Optus independently of the incident. 1525 In my view, Optus' method of quantifying its loss in acquiring pool equipment for the migration process is the correct way of assessing loss and that its allowance for left over equipment as valued by Mr Keaveny is an appropriate one. It follows that the acceleration cost approach adopted by Tyco is not the appropriate manner of measuring loss for the reasons which I have given. However, as appear later in these reasons, I am of the opinion that Optus should make a further allowance of $97,497.07 in respect of two AS4100 computers. 1526 Part of the Optus claim comprises what has been described as the "Blacktown Upgrade Expenditure" which was made up as follows: Description Plaintiff's Claims Expense Code $55,070 15.1 Network Aggregation Units $296,301 15.2 Gigaswitch $29,566 15.3 FDD 1/10 Base T - Hubs $166,849 15.4 ATM wide area unit $2,422,055 17.1 Diesel Generator and UPS System $522,722 17.4 Redundant Sub-Station $25,148 17.6 Expansion of Floor Space $16,592 17.7 Additional Distribution Boards $56,482 18.1 Transmission Facilities $3,590,785 Total

1527 During the course of the proceedings Tyco raised an issue as to the reasonableness of acquiring the GSMIS pool equipment from Digital as against purchasing second hand equipment for which it had received a quotation. I have advanced that issue earlier in these reasons. However, I do not understand that issue to be pressed any longer. 1528 The evidentiary basis for Tyco's case in relation to this aspect of Optus' claim is that of Mr Lonergan. In simple terms it comes down to two propositions: a) that the items for which cost recovery is sought are capital items that do not represent a loss to Optus, in that they reflected the acquisition of assets and b) that, by abandonment of the re-migration and return of cabinets to Rosebery in favour of distributing the cabinets with the required applications between Castle Hill and Blacktown, Optus was provided with a valuable facility at Rosebery which Optus utilised, through the establishment of an Information Technology centre. 1529 Mr Lonergan took the view that the capital items related to the Blacktown claim did not represent a loss to Optus and further, that Optus, should bring to account the value of the Rosebery centre as an IT centre for which he provided an "indicative" value in the order of $5,000,000.00. Tyco reduced this to approximately $4,700,00.00 after allowing for the cost of $298,277.00 in bringing the Rosebery centre into a state of usefulness as an IT centre. It was acknowledged that there would be a double dipping if the capital items in relation to the Blacktown centre claim were rejected in addition to bringing to account $4,700,00.00 adjustment in the nature of a "saving". 1530 Mr Lonergan's estimate additionally assumed that the infrastructure for an IP centre equated to that of an IT centre. Doubt was cast upon that assumption by Mr Berents in evidence which is strongly criticised by Tyco. There is no need to resolve that question. 1531 In my view, the Tyco case is seriously flawed. It is erroneous reasoning, in my view, to treat Optus as having provided itself with a new data centre, in effect, at the expense of the defendants. Allied to that is what I believe to be the fallacy in treating the vacated Rosebery data centre as something in the nature of a benefit. 1532 The costs of the availability of Rosebery as an IT centre, on the evidence before me, are to be found in the establishment of a data centre at Castle Hill (something that was well under way at the time of the incident) and in the acquisition of Vision, which was unrelated to the incident and which carried with it control over the Blacktown property which Vision owned. 1533 Moreover, at the completion of the recovery program, Optus was not left with an improved data centre. The evidence disclosed that it carried out the recovery program with the objective, one successfully achieved I think, of re-establishing the data centre that existed at the time of the incident. What Optus was left with after completion of the recovery program was a data centre which had previously operated at Rosebery at the time of the incident, but following the incident was located at Blacktown and Castle Hill. 1534 When so understood, the availability of the Rosebery centre as an IT centre is the product of the acquisition and development of the Castle Hill data centre at Optus' expense and the acquisition of Vision and with it the Blacktown property, again at Optus' expense: acquisitions which gave Optus the area at Rosebery at which it established an IT centre a considerable time after the incident. 1535 In no respect, in my view, should Optus be called upon to make an allowance of some $4,700,000.00 for the privilege of having acquired Castle Hill and Blacktown and so freeing up Rosebery. 1536 The decision to avoid return of cabinets and the re-migration of applications to cabinets at Rosebery in favour of distributing the cabinets between Blacktown and Castle Hill was not taken for the purpose of enhancing the value of Optus' data centre as it existed at the time of the incident. The evidence established that the decision was recommended and implemented on the ground that to return the cabinets and re-migrate applications to Rosebery, either in conjunction with the distribution of cabinets to Castle Hill, or solely to Rosebery, would have involved a far more expensive recovery plan than in migrating applications and distributing cabinets between Castle Hill and Blacktown. It involved a saving of several million dollars in the recovery program. 1537 That may be understood in the context that the defendants could not have established that it was unreasonable for Optus to have implemented a recovery program that resulted in the return of all cabinets and applications to Rosebery, placing Optus in the position precisely it was in prior to the incident. The fact that Optus saw a cost saving opportunity in utilising Blacktown in the recovery program once Vision had been acquired with the avoidance of double handling costs should not be seen as representing some enhanced asset position of Optus which deprives Optus of an entitlement to the costs of so re-establishing its data centre. 1538 Blacktown was not acquired through Vision for the purpose of acquiring a data centre. At the time of the incident the only relevant business plan was one for the provision of a second data centre which took the form of Castle Hill. I note that the expenses other than migration costs and cabinet distribution in relation to Castle Hill has not been the subject of claim. 1539 The starting point for the understanding of the nature of Optus' loss as a consequence of the incident and the rationale for the introduction of Blacktown into the recovery plan after the acquisition of Vision is to be found in the documents earlier referred to in these reasons, respectively, as "EQUIPMENT RECOVERY STRATEGIES ROSEBERY DATA CENTRE AND TANDEM/EFTPOS ROOM" of 31 January 1997 and "EQUIMENT RECOVERY STRATEGY AND COST REVIEW ROSEBERY DATA CENTRE AND TANDEM/EFTPOS ROOM" of 27 April 1997, of which Mr Cearns was the author. 1540 These strategy recommendations are included in the schedules to these reasons as Schedule V. The evidence disclosed that Optus commenced implementation of the January strategy and then changed tack in conformity with the April review. Of those strategies I think the following observations may be made: a) The January strategy was clearly one to get Optus back into the position it occupied at the time of incident with the reinstatement of the data centre at Rosebery and Castle Hill which was then under construction. b) Equipment was being acquired for the migration process on a temporary basis as was reflected in the January consideration of leasing and its treatment of depreciation rates for "the period over which the equipment [was] required". It was further noted that the "requirement for [the pool] kit [was] relatively short and therefore lease or rental [was] an option which must be explored": a strategy which, in my view, was prima facie evidence that the cost of the pool kit was a true cost of the recovery program less its value on release of the equipment at the completion of the program. c) The method of migration was to establish an alternate site, namely Homebush, to take the initial application migration to free up equipment after migration and cleaning which could "them be released back into a pool at the alternate site to carry the next application released from Rosebery". d) The strategy was based on the most cost effective procedure ensuring that it was "cost effective to clean the equipment rather than replacement from either new or second hand stocks". e) The link from Rosebery to Homebush needed to be upgraded to a 16Mb microwave in order to permit the migration operation to take place. f) The objective of the strategy remained unchanged with the April review which concentrated solely on the costs associated with the recovery of the equipment contaminated by the incident. The objective of the January strategy of simply re-instating the equipment remained unchanged as appears from the following: " 3.3 Strategy

The strategy of the 30th January first called for purchase of equipment needed to migrate the GSMIS application from Rosebery to Homebush. Migration of GSMIS would occur only after sufficient network bandwidth and diversity had been established into Homebush. GSMIS successful migration would free equipment which, together with further purchased equipment, would provide the necessary pool kit for the complete cleaning process.

Applications were to be first migrated into Homebush until the Castle Hill Data Centre was ready. At this time all remaining applications would be moved into the new Castle Hill Data Centre. Once all equipment had been moved out of Rosebery and cleaned, the Rosebery Data Centre would be restored to a decontaminated state. Equipment and applications would then be balanced between Rosebery and Castle Hill to achieve optimal balance of critical applications and satisfy business recovery strategies." g) The availability of Blacktown as an alternate sight for migration purposes and ultimately for the retention of cabinets forming part of the data centre only emerged after the announcement of the decision to acquire Vision. That decision was based solely upon a recognition as expressed in the April strategy, "that cost and application migration risk could be reduced by adopting the Blacktown Site as its second Data Centre to Castle Hill rather than Rosebery……..[and that use] of Blacktown Data Centre would significantly reduce recovery costs and business disruption through the elimination of application double handling from Homebush and Castle Hill back into Rosebery." h) With that decision further movement of equipment into Homebush ceased with applications being migrated into both Blacktown and Castle Hill. In the case of Blacktown, however, that required establishing the necessary network bandwidth as had been the case with Homebush. Notwithstanding, the reviewed strategy represented a substantial cost saving. i) The cost details were reviewed in the April strategy document in terms which fixed upon the most cost effective means of achieving reinstatement of the damaged equipment. The cost analysis also recognised the need for adjustment of costs which previously had been charged to the Homebush activity. Moreover, the analysis, in my view, reflected a clear awareness of dissecting costs which were costs of recovery from other costs. j) The costs tabulated in the April review leave no room for conjecture as to the cost effectiveness of the April strategy over both the January strategy and over what was referred to as the baseline, being the cost of returning to Rosebery all the equipment at the end of the recovery program. 1541 Before allowing for recoveries at the end of the program the total cost of the baseline was $40,194,000.00; that of the January strategy $36,890,000.00 and that of the April strategy $33,974,000.00. It is not disputed that cost differentials of that magnitude were valid. 1542 On that approach to recovery at the end of the program, Optus should be seen as having re-instated its equipment, albeit at Castle Hill and at Blacktown, and, prima facie, the evidence of cost in effecting that recovery was the loss which Optus was entitled to recover by way of damages. 1543 It is not entirely without significance that these costs were subject to the concurrence of ExCEL. 1544 A review of the evidence relating to each of the items in dispute disclosed, in my view, that the items of cost reflect true cost of migration of the applications to Blacktown as the alternate site. 1545 Item 15.1 Network Aggregation units: This was equipment which was originally purchased to enable migration to take place at Homebush and with the introduction of Blacktown that equipment was applied to "support bandwidth into Blacktown" for migration purposes. 1546 In his evidence in chief Mr Cearns so described the rationale for this cost as follows: "In May 1997, I placed orders with Optus Provisioning for an upgrade of network bandwidth to 155Mb from Rosebery to BLOC. Until these orders were satisfied, I instructed Alan Rollinson, who worked for me, to re-deploy aggregation units originally purchased for Homebush into BLOC. These units boosted capacity from sub 2Mb to 8 Mb from Rosebery to BLOC. OPT102 007-012 provides full justification for their original purchase for Homebush." 1547 In cross-examination he emphasised the nature of the expenditure as follows: Q. There is what are called AB6100 aggregation units? A. Yes. Q. What are they? A. They are in network aggregation units to lift the capacity of bulk network into the Blacktown site to enable it to be used as data centre - as an Optus Communications data centre. Q. So, in other words, without expending that money, Optus couldn't have used Blacktown as the data centre it now uses it as? A. Yes. HIS HONOUR: Q. Would that have been a cost that would have been incurred after the incident in rehabilitating Rosebery? A. No, it was a cost of making use of the Blacktown site, Blacktown data centre. MR HUTLEY: I understand what your Honour is driving at. Can I ask a question? Q. It was the sort of cost which one has to expend to convert the Blacktown site into a data centre of the quality that Rosebery was before the event; correct? A. Not in this particular instance. In this particular instance it was needed to lift the network capacity and the bandwidth into that site to enable the networking of Rosebery to Blacktown and so assist the migration of applications. Q. One gigaswitch? A. Yes. Q. That's a cost -- HIS HONOUR: Before you do that -- MR HUTLEY: Can I ask this one, then I will go back and draw the distinction? HIS HONOUR: Yes, certainly. MR HUTLEY: Q. A gigaswitch is something you have to have at a data centre? A. Yes. Q. A computer data centre? A. Well, you don't have to, but yes, in this instance we needed it, yes. Q. And you had them at Rosebery before the event? A. Yes. Q. You put them in at Blacktown to upgrade Blacktown into a data centre of sufficient quality to operate in the same way that Rosebery had before the event; correct? A. I would just change the word "quality" to "capacity". Q. Are you saying in respect of the AB6100 aggregation units, that's an expense of a different character? A. Yes, it is. Q. Because that was an expense, as I understand it, which was incurred because one had to migrate from Rosebery to Blacktown? A. Yes. HIS HONOUR: Q. As part of the recovery process? A. Yes. MR HUTLEY: Q. If you go to the next item, the FDDI 10 base hubs -- HIS HONOUR: Q. I am sorry, why is the gigaswitch in a different category? A. It is since, as a result of using Blacktown and the selection of Blacktown as a migration centre, there was a requirement to put a lot more systems into that site than was the case previous to the incident and previous to Optus's [sic] purchase of Optus Vision and, therefore, there was a need for additional networking capacity within the site to accommodate those additional systems. Q. But not for the migration process? A. Yes and no. I see your Honour's confusion here. The capacity required -- Q. Could I ask you more directly, was the gigaswitch cost incurred because it was needed for the migration process? A. The answer is yes. All of these costs are driven from the incident and the migration. (T1792:15 - T1794:2) 1548 It is submitted on behalf of Tyco that, notwithstanding, the equipment was of "enduring value" and, therefore, expenditure on such an item did not represent a loss. In my view that ignores the nature of the cost and its role in the cost saving strategy employed by Optus under the April strategy review, from which the defendants benefited. The expenditure was part of a program to re-establish Optus' data centre to a level that existed at the time of the incident. 1549 Item 15.2 Gigaswitch: The item was described by Mr Cearns in his evidence in chief as follows: 211. Item code 15.2 was created to carry the cost of provisioning additional network ports in BLOC to satisfy network connection of additional computer systems migrated out of the Rosebery CDC as a result of the Incident. A network port is a connection point into the computer network.

212. The majority of systems in the Rosebery CDC prior to the Incident used a fibre network connection know as an FDDI port.

213. Initially, systems relocated out of the Rosebery CDC were to be migrated into the Homebush site. Insufficient FDDI ports existed in the Homebush cater [sic] for the volume of systems anticipated being migrated out of the Rosebery CDC. An expansion in FDDI ports at Homebush was therefore necessary.

214. In early January 1997, I instructed Alan Rollinson, who worked for me, to purchase additional FDDI capacity for Homebush. This was followed by additional capacity purchases in February 1997.

215. The equipment purchased against this item code was originally purchased for the Homebush site. In April 1997, following the decision to use BLOC rather than Homebush as Optus' migration site, an assessment was made of available FDDI ports at BLOC. In or about July 1997, resulting from an identified shortage of FDDI ports in BLOC and the successful migration of the GSMIS application from Homebush to CHOC, I instructed Alan Rollinson to relocate Homebush FDDI ports to BLOC. ……

217. …… If it were not for the Incident, these FDDI ports would not have been required at either Homebush or BLOC." 1550 It was contended on behalf of Tyco that the expenditure was one simply incurred to operate Blacktown as a computer data centre and accordingly it was a capital item of "enduring value" and did not represent a loss to Optus. For the reasons earlier given the proposition in my view is unsound. That may be further tested by the fact that this was equipment that was originally required for the migration process to Homebush and nobody has suggested that Homebush was required as a data centre by Optus, with the consequence that this equipment would have had enduring value to it at Homebush. 1551 Item 15.3 FDDI 1/10 Base Hubs: This is in a similar category to the previous item and was a cost originally associated with Homebush. It requirement was described by Mr Cearns in his evidence in chief as follows: "219. Invoice 12818 dated 16 September 1997 from JNA Network Services for $12,508 is for an X.25 box to allow an X.25 connection from Rosebery into BLOC. X.25 is the network protocol used to manage Optus' customer network equipment. The requirement for increased X.25 ports into BLOC was a result of migration of computer systems from Rosebery caused by Incident contamination.

220. Invoice 4695 dated 25 March 1997 from MCR Computer Resources for $13,859 is for additional terminal server ports in the Homebush migration site. These terminal server ports satisfied computer control capabilities for computer systems migrated out of the Rosebery CDC into Homebush. These ports are incremental on those ports established under the BRP prior to the Incident.

221. In or about March 1997, I authorised Lawton Fox, who worked for me, to purchase the necessary additional terminal server capacity for Homebush. OPT272A 177-181 provides the necessary justification. These ports were subsequently re-located to BLOC when the decision was made to use BLOC rather than Homebush as Optus' migration site.

222. In February 1997, I authorised Lawton Fox, who worked for me, to purchase an additional equipment rack for the installation of the domain name server services plus the set up of network cable infrastructure at the Homebush Recovery Site. OPT 137 010-013 provides the necessary justification for this purchase. This rack was originally installed at Homebush and subsequently moved to BLOC following the decision to use BLOC as a migration data centre. Generally anything of any value was moved from Homebush to BLOC. The relevant invoice no. 35958 is dated 27 February 1997 from Stowe Electrics Pty Ltd for $3,199.24. This equipment was purchased as a result of the Incident." 1552 Tyco presented no submissions in relation to this expenditure that differed from the submissions considered above. 1553 Item 15.4 ATM Wide area unit: The description of this item was given by Mr Cearns in his evidence in chief as follows: "31. In relation to item 15.4, this pertains to the ATM wide area network at Blacktown. In order to make the data centre at 25-26 Chicago Avenue, Blacktown ( 'Blacktown Site' ) ready for installation of equipment, it was necessary to install a wide area network and its redundant sub-system. To support the migration effort, the significant network traffic passed between the Rosebery CDC and CHOC data centres called for the establishment of redundant ATM 155Mb links and associated network infrastructure. When BLOC was identified as a data centre for migration purposes, identical network links and infrastructure were established into this site and triangulated between Rosebery CDC and CHOC. Only the network infrastructure within the BLOC site has been claimed. The establishment of BLOC as a data centre and the need for links and associated network infrastructure in BLOC were as a direct result of the Incident." 1554 One assumes that this form of network would have been required at any alternate site selected for the migration process and so constituted a true cost of the recovery program for the reasons earlier given. Tyco's position is that this is a capital item and since it is "of a capital nature….. it becomes a matter for the plaintiff to establish that is has in fact suffered a loss". I think that has been demonstrated by Optus. 1555 In my view, Tyco continued to overlook two factors: a) the April strategy was a cost saving exercise against returning all equipment to Rosebery and against a strategy of utilising Castle Hill and b) it resulted in Optus having no more than the data centre reinstated to the level that the Rosebery centre existed prior to the incident at a cost less than that of returning to the Rosebery centre. 1556 Concepts of enduring value simply have no meaning in that context, in my view. Had the data centre been re-established at Rosebery at greater cost, Optus would have had no greater enduring value in its data centre than it had with the reinstatement of the contaminated system at Blacktown and Castle Hill. 1557 Item 17.1 Diesel Generator and UPS System: The nature of this facility was described by Mr Cearns as follows: "236. In or about September 1997, I had a number of meetings with John Dodds and Rick Bayley regarding BLOC migration site facilities. The purpose of these meeting [sic] were to identify the facilities growth needed at BLOC to establish BLOC as a replacement for the Rosebery CDC. These meetings identified shortcomings in a number of areas, these being power, fire suppressant and floor space. The backup generator, Uninterruptable Power Supply (UPS) and power substations at BLOC did not have the redundancy provided at Rosebery. I authorised the upgrading of these facilities. The computer room space available at BLOC was far less than that space available in the Rosebery CDC and the BLOC computer room had no fire suppressant services". 1558 These facilities are the subject of system index 79 which included a document, dated 26 September 1997, by a member of the recovery program team Mr John Dodds, and which is entitled "INFROMATION TECHNOLOGY DATACENTRE MIGRATION SUPPORT DOCUMENTATION FOR SERVICES UPGRADE AT BLACKTOWN". It analysed the reason for the provision of these facilities in the following terms: "In summary by the use of BMS and Manual load shedding and documented procedures for Diesel Generator Plant control the critical loads at the Sydney Technical Centre at Rosebery can be supported by one diesel generator set thereby providing N + 1 redundancy. The further enhancement as detailed in (f) above will remove the major manual control functions.

Blacktown with one only Diesel Generator set of 1100kVA with an existing maximum demand of 840 kVA provides no redundancy and accordingly Optus considers that the provision of an additional unit is warranted in conjunction with the I.T. Data Centre exercise and the additional costs in the overall claim is justified.

On completion of the migration of the Data Centre Equipment to Blacktown and Castle Hill (CHOC) it is estimated that a load saving of 300 kVA will be possible due to a decrease in UPS and Air Conditioning loads. Taking a maximum demand of 1610 the load will then be in the order of 1310 kVA which will require BMS control of air conditioning (100 kVA saving) to bring the load down to below one diesel generator set capacity in the event of a failure of one unit. The further enhancement of automatic control of House Distribution and Rectifier Suites will enable a further drop in non essential load. Consideration of these facts draws the conclusion that Optus has no betterment in Standby Power Plant Redundancy following migration of the Data Centre Equipment. 1559 There was evidence to indicate that the facilities provided at Blacktown were comparable to those at Castle Hill, as distinct from at the Rosebery centre. That was Mr Bayley's view. It was not shared by Mr Berents, nor by Mr Dodds, nor by Mr Cousins, whose evidence in chief included the following: "32. In March 1998 I sent a further report to Cunninghams which included within it some of the comments which Cunninghams had sent back to me. In item 17.2 and following, reference is made to an 'Appendix A' that was the report prepared by Russell Lee referred to above. After evaluating the report and the details regarding the particular work performed at Blacktown, I concurred with certain expenses on the basis that they were reasonable to bring Blacktown to a standard equivalent to Rosebery and resulted from the incident." 1560 There had been a feasibility study prepared by NDY which contemplated the bringing of the facilities at Blacktown into line with Castle Hill. While the evidence is unclear, it does not warrant a finding that the Blacktown facilities did any more than bring the Blacktown system, so far as these facilities are concerned, into line with Rosebery. 1561 To the extent that the Blacktown expenditure reflected the costs of facilities superior to those at the Rosebery centre, prior to the incident those costs were excised from claim costs. 1562 I think this was reflected in the cross examination of Mr Cousins as appears from the following: Q. Did he say that it was his object to bring it to a level superior to that at Rosebery? Did he tell you that? A. If they did, then there is betterment. Q. Did he tell you that? Did Mr Bayley tell you that? A. He did and he actually itemised the betterment. There is a chart that he produced and the chart with the final infrastructure at Blacktown includes items in there which were listed as not claimed because they were in excess of Rosebery. There's a diagram of the Blacktown upgrade and the costings that I looked at were for only those changes required for equivalence with Rosebery. If Optus wants to flow in extra dollars and make it look better, that's up to them. Q. So is it your evidence that Mr Bayley told you that the object was to attain an improvement on Rosebery? A. The answer is yes. Q. What I want to suggest to you is that you weren't told that by Mr Bayley at all, were you? A. Well, yes, I was, because I had the chart showing the betterment. Q. You approved the entry of Blacktown into the cost system; correct? A. That's correct. Q. As I understand, that meant you approved that it ought be paid for by insurers - is that what you were intending to do? A. I concurred with it, yes. Q. I'm sorry, did you agree that insurers -- A. I agreed that it would be fair and reasonable for insurers to -- (T2150:29 - T2151:11) 1563 Accordingly, I take the view that these facilities were of a kind comparable with Rosebery. This and following items fall into a similar category of expenditure, namely the cost of bringing facilities at Blacktown into line with that of Rosebery, resulting, so far as is relevant, in the reinstatement of the data centre facilities at a level as existed prior to the incident and at a reduced cost than that of bringing cabinets and migrated applications back to Rosebery. For those reasons the concept of "enduring value" upon which Tyco relied has no significance, in my view. 1564 To the extent that the exercise left the Rosebery centre available for use by Optus as it saw fit, that was a function of the acquisition by Optus of Castle Hill, in the first place, and then Blacktown. Whatever benefits may have been derived by Optus in having that facility available is not one that Optus is required to account to the defendants for. 1565 Item 17.4 Redundant Sub-station: This is in the same category as the previous item. It was a provision of a standby facility at Blacktown to bring it into line with Rosebery and the same considerations apply to it as to item 17.1. 1566 Item 17.6 Extension of floor space: It is common ground that this was money spent with the objective of increasing floor space at Blacktown to bring it into line with the Rosebery centre. The amount of money involved was minor. To the extent that it remains a live issue, I think this claim is covered by the same reasons applicable to the last preceding items. 1567 Item 17.7 Additional distributions boards: This is in a somewhat different category to the last items as it was described in the evidence of Mr Cearns as follows: "255. This item code was established to carry the costs of installing additional power distribution boards in the BLOC Data Centre. Additional power boards were needed to provide power to the systems migrated from the Rosebery CDC as a result of the Incident" 1568 Described as such, they are direct migration costs. The amount in issue is $16,591.00 and should be allowed as part of the cost of recovery. The evidence did not establish that the expenditure resulted in Optus having additional data centre facilities than those existing at the Rosebery centre at the time of the incident. 1569 Item 18.1 Transmission facilities: The nature and purpose of this expenditure was described in the evidence in chief of Mr Cearns as follows: "258. Prior to the Incident Optus Vision had low bandwidth network links from Blacktown into Rosebery. Following the Incident and the selection of Blacktown as a migration data centre, these links required upgrade to a higher network bandwidth. Network bandwidth relates to the volume of data able to be sent and received.

259. In May 1997, I placed order for an upgrade of network bandwidth to 155Mb from Rosebery to BLOC. This order for increased bandwidth into BLOC required an expansion in the base transmission capacity from Rosebery to BLOC. This transmission capacity was provided through the installation of what is known as multiplexer equipment connected to the fibre cable passing between Rosebery and BLOC. This equipment is called an FLM and comes in various sizes. FLM 600 equipment was used between Rosebery and BLOC." 1570 The parties acknowledge that this item of claim falls within the same category as the preceding item. For the reasons given I think they should be included as part of the Optus damages. It may be noted that it was an expense concurred in by Excel [Ex 20.063A]. Its relationship, however, to the migration process is reflected in the letter of Mr Cearns to Mr Cousins of 4 May 1998 which included the following: "As per the attached paper, wide area links to Blacktown and Castle Hill which currently terminate in the Rosebery Data Centre must be re-terminated into the Rosebery Switch Room. The terminating equipment in the Switch Room does not have the level of resilience in the Data Centre. Further expenditure is therefore needed to upgrade the terminating equipment in the Rosebery Switch Room before the links could be moved allowing the old terminating equipment to be cleaned." 1571 In my view, the cost claimed in relation to Blacktown should form part of the damages to be assessed. The nature of Blacktown at the time of its acquisition through Vision was explained in re-examination by Mr Bayley. The explanation placed in context the nature of the cost saving strategy, so far as it involved Blacktown, as follows: MR GREENWOOD: Q. Mr Bayley, you were asked whether there were disadvantages in going to Blacktown? A. In my perspective, there were. Q. What were they? A. Firstly, that Blacktown had been initially designed as an exchange, and the data centre on level 1 of that exchange was an add-on during the course of construction and therefore the overall design of the facility had not specifically addressed the needs of a data centre. Secondly, the floor space available to us, or the primary floor space available to us in the existing data centre, was, as I recall it, some 250 square metres which was substantially less than that which was available at Rosebery. The third disadvantage was that Blacktown had been designed as an exchange and, therefore, the technological design for power and airconditioning systems was not specifically addressing the data centre needs, and when Optus Vision had taken over the construction management, partway through the construction activity, they had made decisions which had eliminated a number of the risk mitigation systems that we had initially designed into the Blacktown exchange. Q. What do you mean? A. Well, in respect of emergency diesels, they had reduced the number of diesels from two to one. In respect of the main switchboard, they had reduced the sizing and the flexibility of that switchboard to reduce costs, and in respect of uninterrupted power supplies, they had limited themselves to one unit only. (T387:28 - T388:9) 1572 To like effect it was the evidence of Mr Bayley in re-examination on the nature of Blacktown at the time of its acquisition, as follows: Q. From your knowledge of what was going on in Optus at the time - that is, in 1997 - what was your expectation as to how that would have been used by Optus, if it had not been used as a data centre; in other words if the incident hadn't occurred, Optus Vision had become part of the Optus Group, the Blacktown data centre then became available? How do you believe it would have been used? A. I believe it would have been used as an extension of the existing switch and transmission space which was a much more appropriate use for that area, since it was an extension of the existing area. (T390:25 - 38) 1573 I think that evidence lends weight to Optus' case that the costs incurred with Blacktown were properly characterised as rectification costs incurred in the reinstatement of the Optus data centre. 1574 Item 51.1; 51.2 Purchase of new Tandem equipment: Once it is accepted that there was a need to clean the equipment there is little room for dispute, in my view, that the course undertaken by Optus in replacing the Tandem equipment was the only course reasonably left open to it. At the time of the incident, the Tandem equipment consisted of a K10006 system and a K1002 system. The numeral at the end of the description of those systems designated the number of CPUs included in the respective systems. 1575 The K10006 system was used for what was known as production purposes and the other system was used for development of Optus' systems. They were both replaced, respectively, by a production machine known as a K2008 with accompanying disks and a development system known as a K2002 which was subsequently upgraded to a K2004: upgraded for the reason that the K2002 did not have sufficient capacity to perform the task confronting it after the incident. That particular aspect was not disputed by Tyco. 1576 In final addresses Tyco expressly did not dispute the reasonableness of the decision to replace the Tandem equipment with new systems, once it was accepted that the Tandem equipment needed cleaning at all. Although it may be unnecessary to go further into the acquisition of new replacement machines, it may be noted that, even if one concluded that it was not necessary to clean the contaminated equipment, the attitude of Tandem in relation to the contaminated equipment was such that it left Optus with no alternative other than to replace the equipment. This much may be gleaned from the letter of Tandem Computers Pty Ltd to Optus of 11 February 1997, which included the following: "Further to our meeting on Friday the 7th February, I have pleasure in providing you with the following information: Tandem's Recommendations on Hardware Contaminated: a) Tandem Himalaya Systems and Associated Perpherals.

Please refer to our letter addressed to Mr Emanuel Alfris dated 30/1/97 (find attached). Our initial recommendation (that the Himalaya systems plus associated Tandem peripherals be replaced) is unchanged. It should be noted that peripherals include printers, monitors, disk and associated cabling. Prior to taking a position on other manufacturer's hardware (but nevertheless supplied by Tandem eg voice response units, hubs, routers), we wish to liase with those specific manufacturers.

If Optus decide to clean the Himalaya systems (as outlined by Relectronic -Remech), the systems would have to be returned to our plant in Stirling for extensive testing. Stirling have advised they would require the systems and associated peripherals for a period of three months. In addition, Stirling has stated that any components with moving parts cannot be cleaned and will have to be replaced (eg disks, tapes, blower assemblies, switches). Prior to being accepted by Tandem for maintenance, the systems would have to pass Stirling's quality tests. Any components that failed these tests would be replaced by Stirling at Optus' cost. Optus will also have to bear all costs associated with the quality assurance procedures (eg install/deinstalls, freight , insurance and testing)." 1577 With that letter estimates were provided of the costs of replacing the equipment with new machines second hand machines and the cost of cleaning, all of which exceeded $3,000,000.00. In the case of cleaning, that estimate excluded the cost if any of the components failed. It was also I think significant that, in relation to the replacement of the equipment, Tandem had the following observation to make: " Buy Back of Himalaya Processors.

If Optus decide to replace the equipment, Tandem will offer scrap value only as a buy back position. This is because the equipment is unable to be placed on Tandem maintenance and therefore would have to be destroyed.

Cost for the deinstallation of the systems would be approximately $10,000." 1578 Of the option to clean, which was no real option at all, Tandem noted that the process would be quite complex and would require some 31 weeks to effect: further, that the cleaning cost was an 'open' ended cost in that components may need to be replaced to pass quality testing procedures. 1579 However, in respect of item 51.1 Tyco disputed some $440,910.00 by reason of the use to which Optus used the K10006 system since the incident for Y2K testing for a period of approximately six to eight months. 1580 Following reports by Ms Gunasekera to Mr Harrison, a manager of IT technologies within Optus, dated 9 April and 22 May 1998 respectively, Mr Harrison took the view that it was worth taking "the risk of using the [contaminated] equipment for Y2K testing purposes". 1581 Ms Gunasekera took issue with the assumptions made in the opinion of Mr Lonergan as in relation to this equipment, as follows: "100. At paragraph 208(ii) of the Lonergan Report, Mr Lonergan states that one of the alternatives open to Optus would be to rent a K1002 for in excess of $812,000. That statement is incorrect. The excess referred to would have been the difference between $110,000 for cleaning and installing the contaminated platform EX.2.088 P0668 and $135,000 which had been quoted for the purchase and installation of a new K1002 EX.2.085 P0621. Out of the sum of $812,000 referred to in the capital submission approval model EX.2.088 P 0666, $702,000 was budgeted for expenditure on software, project management costs etc for the Y2K testing, whatever option had been taken by Optus." 1582 In my view, the evidence of the use of the K10006 Tandem for the limited purpose of Y2K testing in its contaminated state does not warrant the conclusion that the contaminated equipment had the value of $440,910.00, the amount which Tyco put in issue because of this usage. 1583 In reality, the equipment had no more value than scrap value (that was worthless in the view of Tandem) and its cost of removal in the revised estimate by Tandem, exceeded $10,000.00. In my view, while Optus took the risk of using the equipment that does not have the effect of placing value on it and, to the extent that Mr Harrison decided to take the 'risk' of using it for Y2K testing, that does not warrant attributing a residual value to that equipment, nor should the benefit represented by avoiding the cost of acquiring a new K1002 for $135,000.00 operate as a reduction in Optus' damages. 1584 A benefit of that kind, in my view, is collateral to the consequences of the incident. It was a business risk to use the equipment for Y2K purposes which Optus undertook, in the event, successfully. It could just as easily have been a disaster. The fact that it wasn't in my view does not warrant attributing value to the contaminated equipment, nor reducing Optus' damages on the basis that, on taking that business risk, it saved the cost of a K1002 system for Y2K testing. 1585 Moreover, if such equipment had been acquired there has been no evidence presented as to its residual value after its temporary use for the Y2K test program. 1586 An alternative way of looking at the use of the contaminated equipment and its value to Optus for the Y2K program is to characterise the risk in deciding to use it in a contaminated state as one which avoided the reasonable cost of cleaning it, namely $110,000.00. In my view that saving of cleaning costs should be attributed to the risk saving decision of Optus and not treated as a benefit by way of reduction of damages. 1587 Additionally, Tyco relied upon a proposal dated 8 July 1998 to Optus management submitted by Ms Gunasekera to use the old 10006 system as a development machine following its use in the Y2K program and after removal for cleaning and relocation at Castle Hill. Her proposal was in the following terms: "This submission is for the establishment of a year 2000 test platform by brining forward the planned growth of the Optus Production Tandem Computer.

It is proposed to remove, clean and re-locate the currently contaminated Tandem Computer to Castle Hill Operations Centre. This Computer will be then re-configured to provide a test platform for year 2000 software compliance testing and with the proposed configuration a minimum of one square board each will be available on site.

When testing is completed, estimated to be six months, the year 2000 test system will replace the existing Development Tandem Computer." 1588 The report carried the signatures of several Optus staff members involved in the submission for approval of expenditure within Optus. That level of support suggested that the proposal was likely to go ahead. Ms Gunasekera's evidence on this proposal was as follows: Q. Sorry. To cut across you, you don't know and you are not able to tell his Honour, whether the proposal of applying the 2002/4 actually took place because you left too soon; is that right? A. I don't know if it was done. It's not because I left too soon, because I left only about six months after the testing was completed. Until then there was no urgency for the capacity. Q. But the capital expenditure which was approved was approved on the basis that that was available to Optus to be done -- A. That's right. Q. -- and the 10006 system was cleaned and installed at Castle Hill; correct? A. That's right. Q. And so far as you knew when you left, it was still being used; correct? A. No, because the year 2000 testing had stopped, the system was not used at that time. Q. But it was available there to be used by Optus in the way that had been described; correct? A. That's right. Q. And had been approved by those to whom you reported? A. That's right. Q. Could you go over to the last document in the bundle which I have given to you? This is a report by you first dated 24 February 1999? A. Which document is this one? Q. Go to the first page. Have you got it? Exhibit 2.093A - do you have that? HIS HONOUR: The last two pages. MR HUTLEY: Q. Do you see that? A. Yes. Q. In that you say the year 2000 testing had completed on 7 December 1998. Do you see that? A. That's right. Q. At that stage, if you go to the next paragraph, it was still the plan to shift all development functions from the current K2004 to the same K10006 located in Castle Hill? A. That's right. Q. So that remained the plan at February 1999. A. That's right. (T1020:01 - T1021:1) 1589 However the manager, of Enhanced Services Engineering within Optus between May 1999 to January 2001, Christopher Tjeng Sioc Lim, was called in Optus' case to prove that he was "responsible for the network design and network implementation for services which used the Tandem platform". It was Mr Lim's evidence that the K10006 system was not used for any purpose and, in particular, for use as a "development platform". 1590 Mr Lim was extensively cross-examined by counsel on behalf of Tyco. I am satisfied from that cross-examination that the proposal to use the K10006 machine as a development and test machine did not proceed and that it was located at Castle Hill, having been moved there to provide space at Rosebery. Further, I accept that it could not be used, as had been proposed, as there was "no support for it". 1591 Cross examination was directed at Mr Lim's personal knowledge of the operation of the equipment as follows: A. Actually I moved to the enhanced services engineering, then I became responsible for that platform. Q. That took place in May 1999? A. That was correct. Q. You remained in that position until January 2001? A. That is correct. Q. You say that the K10006 and the K1002 were not used as a development platform in that period? A. To my knowledge, yes. Q. When you say to your knowledge, I mean you would know, do you say, or you wouldn't know? A. I did not use that equipment at all during that - when I was still the manager for the enhanced services engineering. Q. Just so that I can understand, if it was used, you would have known about it - is that right - or it may well have been used and you didn't know about it. Which is correct? A. Well, I would say that I would not - because I did not use it and if other group [sic] used it for any purpose without telling me, then I would not know, yes. Q. In that period, where, physically, were these pieces of equipment? A. That piece of equipment was moved to Castle Hill data centre before I became the manager for that position. Q. Was it installed in the Castle Hill computer data room? A. That's correct, yes. Q. Does it remain so installed? A. Yes. Q. It sort of remains available for use by Optus if they want to use it? A. It is set up and it is plugged in but it is never used by anybody in Optus as far as I know because of the fact that there is no support for it and for - to use it, it cannot be without support. Q. It was used for Y2K testing, wasn't it? A. I wasn't aware of that. Q. I am sorry, and again, I really don't know and I am not being in any way accusative, I am just trying to explore this, it was plugged in and, as it were, switched on throughout the period you were the enhanced services engineering manager; is that right? A. That's correct, yes. Q. By "switched on", it sort of had programs or applications or programs running on it? A. Only the operating system is running. Q. You had no responsibility for the Y2K program - is that right - in respect of Tandem? A. That's correct. Q. Does Optus have any computers in its computer data centres which are switched on and going, but they are not using them? A. To my knowledge it was the only one that wasn't used. Other components, other equipment, there would be a specific purpose to -- Q. And is it fair to say that you are not responsible for the whole of the computers in the computer data centre out at Castle Hill? A. That was correct, yes. Q. There were other divisions of Optus out there who have responsibility for computers; correct? A. That's correct, depending on our responsibility for any particular system. Q. Is it your responsibility for leaving these two computers switched on, or is it somebody else's responsibility? A. It is not my responsibility for these computers at all, because I never included in [sic] my system that I am responsible for. Q. And you have never used it; correct? A. Correct. Q. But other people may have; correct? A. If they do that, I don't know about it. Q. Quite. But you see it is pretty extraordinary, would you agree with me, in an organisation such as Optus, that they would have two rather large computers sitting there, switched on for two or three years and nobody would use them at all? Is that odd? A. No, it is not, because if the computer is functional in some way that can be used for any particular purpose, then obviously someone would take that into account for the planning and then will use it for some purpose. But in this case, because the vendor was asked to evaluate the system and came back with the report that they would not support the equipment anymore because of the contamination, then it simply is logical to not include that in any system that would require a very high degree of reliability. Q. But Optus has systems which don't require that high degree of reliability; is that right? A. Not for the telecommunication networks. Q. What I am trying to understand is this: can you explain to his Honour why Optus, for the period of getting on now for three years, have left two large computers out at Castle Hill switched on, when they don't appear to be using them? A. I think I explained already that in order for any equipment to be considered for any use, it had to be able to be supported and we worked together with vendor [sic] for that, so that there is some kind of support agreement that they would fix if there is anything wrong with it and in this case -- (T2059 :17 - T2061:37) 1592 At that point Mr Lim was interrupted and cross-examination continued along the same lines. 1593 However, in addition to his evidence that the machine was not used for the reason that it had no support, Mr Lim gave the following further evidence in cross-examination: Q. Were you aware that there was a plan to make use of the K10006 machine, which you refer to in your statement, as a development and test machine? A. I was aware of the plan, but it was not - it never proceeded. Q. Are you aware it didn't proceed, or do you just think it might not have proceeded? A. No, I am quite aware that it doesn't proceed. Q. The 10006 and the 1002, collectively that amounts to about seven boxes, does it not? A. I think it would be only about four. Q. About four? A. Yes. Q. All of those, today, are plugged in and operating at the Castle Hill data centre? A. As far as I'm aware, yes. Q. Is the Castle Hill data centre full? A. There is still some space. Q. But is that space that has been left for the purposes of utilising it in the case of a disaster, or is it still expanding at Castle Hill? A. It is a data centre and the majority of equipment there is used for data processing. (T2063:12 - 43) 1594 I am satisfied that the development proposal did not go further and, for that reason, reject Tyco's contention that the cost of acquisition of the new K2002 machine should be reduced by the sum of $440,910.00. 1595 Items 52.1 - 52.6 Establishing Alternative Environment: In relation to the Tandem room, the evidence disclosed that the re-establishment of the Tandem system with the replacement equipment took place in an area on the ground floor of the Rosebery centre which became the designated Tandem system area. It had previously been located on the first floor. 1596 The circumstances in which that occurred were described in the evidence of Mr Bayley as follows: Q. …… in the proposal of December 1995 that was put forward, there was a suggestion that the Tandem equipment be moved out of the computer data centre, down to the ground floor of the STC. A. Yes. Q. Mr Hutley put to you: Q. That in fact actually happened after the accident, didn't it? A. It did. That was at page 167. Why did that happen? Why was the Tandem equipment moved out of the Tandem/EFTPOS room, down to the ground floor? A. There were two totally different scenarios applying. In the first scenario where it had been contemplated or suggested that the Tandem equipment should be moved on to the main exchange floor - in other words, the large switch and transmission room - that was because of the accountability for operation of that equipment. When it was investigated it was identified that the environmental conditions required by the Tandem/EFTPOS equipment, as being standard computer-type equipment, was different to that which applied to the switch and transmission equipment in the Rosebery exchange. So therefore, we did not proceed with that proposal. The second instance is where the Tandem/EFTPOS room had been contaminated as a result of this incident, and we had to identify a suitable alternative location for that equipment so that we could transfer the application in a similar way to what we were doing with all of the primary data centre equipment - in other words, establish a piece of equipment in a clean environment, to which we could transfer the application. As a result of our investigations of a number of alternative sites, we identified a room, a separate room on the ground floor of the Rosebery exchange, which was at that time the training switch equipment room. So we had a separate switch, your Honour, which we used for training purposes which was not part of our network infrastructure. Because we were moving that network - sorry, that training switch out of this particular room, it provided us with an opportunity to put additional facilities in that room so that the environmental conditions for the Tandem equipment would be suitable for that equipment and we could then establish that application in that environment. (T380:10 - T381:9) 1597 In relation to the cost of setting up the replacement Tandem system, Tyco disputed Items 52.1, 52.2 and 52.5 (which total $119,430.00) on the basis that this was the cost of establishing a new Tandem room which reflected "a asset of enduring benefit" to Optus, as a consequence of which it should be deducted from Optus' claims. 1598 There is some confusion in the submissions addressed by Optus and Tyco concerning the costs associated with the relocation of the Tandem equipment to the ground floor of the Rosebery centre. In Optus' table of claims, as apportioned amongst the plaintiffs there is no provision for item 52.3 or 52.4, whereas there is a claim for 52.1, 52.2 and 52.5 and 52.6. Tyco appears only to address the three items 52.1, 52.2 and 52.5. In Optus' submissions in chief in final addresses it addressed the submissions in relation to the Tandem room under items 52.1 - 52.4, although the evidence relied upon included evidence relating to items 52.5 and 52.6. In view of the omission of items 52.3 and 52.4 from Optus' table and the failure of Optus and Tyco to specifically address item 52.6, I propose to treat the items as generic in their relationship to the establishment on the ground floor at the Rosebery centre. 1599 From the evidence referred to above in which Mr Bayley generally described the circumstances in which the replacement equipment was situated in the ground floor in an uncontaminated area for the purpose of migration of applications from the contaminated equipment, I am satisfied that the costs of so establishing the relocated Tandem facilities are true costs of rectification incurred in reinstating the Tandem system. Further, that to the extent that the costs incurred could be said to have "enduring value" they are costs that have resulted in giving Optus no more than its reinstatement of the Tandem facilities, albeit in a different portion of the Rosebery centre. 1600 Mr Lonergan has expressed the opinion that this represented a benefit, in the sense that the area originally used for the Tandem facility had become available to Optus for other purposes. In my view that is a matter of irrelevance. The Tandem equipment had to be located somewhere in the Rosebery centre and whether it remained on the first floor or was located on the ground floor is, in my view, not material. 1601 What is material, in my view, is that at the end of the recovery program Optus had achieved reinstatement of its Tandem facility. Once it is accepted that the replacement Tandem systems had to be installed in an uncontaminated environment, then the costs which Tyco has put in issue should be seen as true costs of migration. 1602 To illustrate this matter, I think the evidence of Ms Gunasekera is of assistance, as follows: "84. Item 52.2 was not strictly speaking for the cost of an UPS. It was for the distribution of power from the main UPS to the new Tandem room. The cost related to power boards, circuit breakers and cabling.

85. The were 3-4 months in 1997 when both Tandems were operating, one in the old tandem room, the other in the new tandem room. Optus was migrating systems on a services by service basis. Distribution boards were necessary in the new Tandem room to direct power to the Tandem equipment. For this reason the distribution of power equipment was necessary for the proper operation of the new Tandem Room.

86. The Tandem equipment runs on AC power - that is, alternating current. While alternating current is available from a normal power supply, in running Tandem equipment, it was necessary to make arrangements for an uninterrupted source of power in case normal commercial electricity supplies were, for any reason, interrupted or cut off." 1603 In my view the basis upon which Tyco has disputed the subject items should be rejected as should the reasoning in Mr Lonergan's evidence which, in some way, attributed a benefit to Optus in relocating its Tandem system and, thus, freeing up the area that had previously been used for the Tandem system. I have been unable to accept the logic of that argument and, in any event, would not regard it as a benefit, however quantified, which should operate as a reduction in the damages sustained by Optus in reinstating its Tandem system. 1604 Other Capital Expenditure: Under this heading Tyco has put in issue item 22.2 (Establishment of alternative network facilities at Rosebery) except for an amount of $1,650.00: item 34.1 (Pool equipment cables) and item 21.8 2 (Catalyst Hubs): the last mentioned being for an amount of $11,667.88 and item 22.2 for $25,290.00. These are not substantial items of claim on any view of litigious disputes. Mr Lonergan was asked to assume that these items were capital items and were of enduring value and, on that basis, he expressed the opinion that they did not represent a loss to Optus. 1605 In relation to item 22.2 Mr Cearns evidenced that expenditure as relating "to the purchase of minimally configured network hub to provide services in the Rosebery Switch Room to allow for the cleaning of contaminated units found in the Rosebery CDC" [Ex 10.020 paragraph 64]. Similarly, in relation to item 34.1 Mr Cearns identified that cost as follows: "This item code relates to the costs of sundry cabling at the data centres of BLOC and CHOC that were needed to re-establish systems migrated from the Rosebery CDC. This cabling [sic] costs recognised that circumstances would exist where either the removal of cabling at Rosebery was not cost justified or where cables were required at the migrations centres before cabling could be removed from the Rosebery centre….." 1606 As part of his evidence in chief, Mr Cearns also identified the particular invoices as constituting the purchase of a "pool of cables used for the incident migration process". He further identified some $16,097.54 of cabling which had been acquired for Homebush but with the introduction of Blacktown was relocated at Blacktown: emphasising the integral nature of this cost as a migration cost. 1607 In my view, there is no justification for disallowing these costs as costs of migration which has conferred no greater benefit on Optus than that of reinstating its data centre. Item 21.8 is in the same category. 1608 Cabinet Cleaning Costs: Tyco identified the sum of $2, 471,542.33 as being the costs claimed by Optus for the cleaning of the computer systems. It was Tyco's submission that only "$1 million should be allowed in relation to the costs of cleaning computer equipment" on the basis that Optus was not entitled to engage Relectronic to carry out this work as there was a more competitive quote available to it from BMS which would have reduced cleaning costs, approximately, to $1,000,000. It was a submission unsupported by the calling of evidence from an expert in the field as to the reasonableness of Optus' cleaning costs. 1609 In support of that last submission Tyco took an onus point that "there was no evidence that the costs charged by Relectronic for the cleaning of computer equipment were reasonable". In my view, it is a defence bereft of any substance. 1610 The BMS letter of 10 February 1997 is an extremely weak read upon which to found a submission that the true reasonable cost of cleaning was "approximately" $1,000,000.00. Presumably the resort to "approximately" is a reflection of the terms of the BMS submission to Optus. However, I would not be prepared to treat the BMS letter as a binding quotation. It refers to an attendance at the Rosebery centre to check "various items of equipment…… to ascertain the cost and time structure involved in the aqueous cleaning of the units nominated". There then followed what was described as "equipment costing and time structure" in the following form, to take an example: "DEC 3000 Unit Restoration cost $12,500.00 Hours required 65 hours" 1611 On my mathematics that works out at $192.30 per hour. Another item appears to be costed at $187.50 per hour, several others at $200.00 per hour and another is $194.40 an hour and so on. It says nothing about how those costs were made up, nor what was the consequence if the estimate of required hours proved erroneous. It would be unsafe, in my view, to rely upon this material as evidencing a reasonable quotation for the work performed by Relectronic. 1612 Moreover, the evidence established that BMS was not acceptable to Digital and Digital was an essential player in the long term viability of the recovery program, given its role in relation to the Optus data centre. Add to that that Relectronic was an organisation of long standing with experience and expertise in the subject area of recovery, there would be no hesitation in accepting the reasonableness of the Relectronic costs without some individual entering the witness box to expressly proclaim its unreasonableness. 1613 Tyco has referred me to the observations of Mahoney JA in Murphy v Brown [1985] 1 NSWLR 131 at 133 which was as follows: "Against this background, what must be proved by a plaintiff claiming damages? What must be proved in a particular case will depend upon the issues which the evidence, as it is before the court, raises for decision. For example, in a case such as the present, the essential thing which a plaintiff must prove is the sum which will restore him, ie, his vehicle, to the condition it was in before the collision: without such evidence, his case on damages will fail. But whether evidence is necessary upon the questions whether the repairs would improve his financial position or whether the doing of the relevant repairs would be reasonable will depend on whether an issue has arisen in the case on such matters and the state of evidence in relation to them. In some cases, there will, in the relevant sense, be no issue as to such matters. Thus, if the evidence is merely that the plaintiff spent $1,000 to repair damage to his Rolls Royce vehicle, there will normally be no issue as to the improvement of the plaintiff's financial position or the reasonableness of doing the repairs. In other cases, an issue upon such matters may be raised specifically or the evidence may be such as to raise such issues. The plaintiff may have spent $5,000 on repairs to a Holden vehicle of such mature age that both of such matters may require consideration. In such a case, the court must decide, as a question of fact: Bellgrove v Eldridge (at 619); whether the plaintiff acted reasonably or unreasonably in so repairing the vehicle and whether he was advantaged by doing so. The court must then determine those issues, taking into account such evidence as there is before it relating to them. In doing so, it will follow the ordinary processes involved in the finding of facts. The fact that there is, for example, no evidence specifically directed to the reasonable-ness of the plaintiff's actions will not be conclusive against him. The possibility that, for example, the plaintiff may have acted unreasonably is not, of itself, a sufficient basis for concluding that the plaintiff has not made out his case on damages. The court must take into account the state of the evidence and the possibilities in determining whether, having regard to the ordinary civil standard of persuasion: Briginshaw v Briginshaw (1938) 60 CLR 336; the relevant issues are to be decided for the plaintiff or for the defendant. And, in making this decision, the onus of proof will, as such, play no part." 1614 Embracing those principles leaves no realistic room for a finding that Optus has failed to establish that its costs of cleaning were reasonable. 1615 In relation to the original BMS submission, the evidence also disclosed that it did not include such costs as those "associated with transporting the equipment to Melbourne, supervision costs associated with BMS performing the work in Melbourne or any costs associated with chemicals or accessories in arranging insurances for the move". Further, it was the opinion of Mr Berents that the "risk of damage to computer equipment associated with transporting that equipment is increased the longer the distance travelled". 1616 As a consequence Mr Lonergan's comparison of the BMS figures with Relectronic's charges is erroneous, in my view. Mr Lonergan is not entirely to be blamed for that as may be extracted from the following cross examination on the content of the BMS submission which began with his assumption that it was a quotation, as follows: Q. You've assumed it was a quotation? A. Yes. Q. Correct? A. Yes. Q. And you'll see it says in it that the examination was to ascertain the cost and time structure involved in the aqueous cleaning of the units nominated? A. Yes. Q. It then sets out the equipment costing and time structure? A. Yes. Q. It refers to an item, it mentions a cost and then it mentions the number of hours required? A. Yes. Q. Did you assume that the quotation was the labour costs only, or more than the labour costs for the work to be done? A. I assumed it was the cost of cleaning whatever that was. Q. Not just labour costs? A. I don't think so. I don't think I put my mind to it. It says for cleaning the 178 items. Q. Did you have regard at all to the fact that the costs quoted by BMS or set out by BMS did not include costs associated with transporting the equipment to Melbourne? A. That it did not? Q. Mmm. A. No. Q. Or that it did not include supervision costs associated with BMS performing the work in Melbourne? A. I think the answer to that is no as well. Q. Or that it did not include any costs associated with chemicals or accessories? A. No, it talks about a restoration cost. That's as specific as the document is. Q. And nothing in relation to insurance? A. There's nothing on the document to that effect. Q. Were you provided with an email of Mr Cearns where he actually identifies the fact that the per hour costs between BMS and Relectronic were really not very different at all? A. Not that I can recall. That doesn't mean I haven't seen it, but I just can't bring it to mind, Mr Greenwood. Q. Within the document I just showed you Mr Berents's statement, exhibit 10.012, you'll see that paragraph 18 of that statement sets out the fact that the BMS document did not include those expenses. A. Yes. Q. Was that just overlooked -- A. I don't know. Q. -- when you were preparing your report? A. I've been asked to make assumptions, that's what I've done. Q. I see. Thank you. Have you ever been asked to examine the reasonableness of the Relectronic-Remech charges? A. As to how long it would take someone to do it. Q. As to whether or not the charges that were in fact made by Relectronic-Remech on Optus were reasonable? A. No, not in that sense. Q. May we take it that also in this section you assumed that there were equivalent facilities being offered by BMS and Relectronic? A. Mr Greenwood, I was asked to make an assumption in summarising the document, that a quote to restore, which was what the document said, the thing cost this much. I didn't proceed beyond that. (T5032:3 - T5033:40) 1617 The assumptions upon which Mr Lonergan acted as to the content of that document are, in my view, erroneous. It is apparent that his opinions were based upon untested assumptions which he was "asked to make". If one adds the fact that Relectronic was an approved contractor of Digital and one whose costs were over sighted by ExCEL, it would not take a particularly difficult judicial exercise to determine the reasonableness of those costs. Moreover, Mr Berents gave the following evidence of his experience with Relectronic and of BMS: "150. There were two significant factors which caused us in May 1997 to appoint Relectronic over BMS Catastrophe Australia to clean the contaminated electronic equipment. They were that: (a) BMS Catastrophe had no agreement with Digital to maintain warranties on Digital equipment. Relectronic-Remech had an agreement with Digital Electronic Corporation whereby Relectronic warranted decontamination work carried out to Digital equipment;

(b) significantly, we did not consider that BMS Catastrophe had the necessary resources to handle a job of the magnitude required to decontaminate all of the equipment involved;

(c) my personal experience with Relectronic-Remech, for example, the Lae telephone exchange and the Optus Canberra facility. 1618 During cross-examination Mr Berents gave further evidence: Q. Well, they were, in effect, offering to do the job at a significantly lesser cost than Relectronic; that's correct, isn't it? A. My memory was their hourly rates were not that different. They were quoting significantly less hours. So on a like-and-like comparison, they weren't necessarily going to be cheaper. Q. Well, if they met their projected hours as opposed to Relectronic's projected hours, they were going to be significantly cheaper; correct? A. And if Relectronic achieved their hours, Relectronic would be significantly cheaper, which is what occurred. Q. Please. You do understand how to answer a question, don't you? At the time when you analysed these documents, the analysis indicated that the use of BMS Catastrophe would result in a significant saving to Optus; that's correct, isn't it? A. No. Q. You came to the conclusion that it would result in no savings, are you telling his Honour? A. No, I didn't say that. Q. What conclusion did you come to? A. That at this stage Relectronic-Remech's costs were much higher because the hours they quoted per cabinet were higher and we had discussed and had agreed in practice to put in a control mechanism to control the number of hours that they charged per cabinet, so we could manage the cost associated with this arrangement. (T938:51 - T939:29) 1619 In relation to a later proposal by BMS to set up a cleaning facility in Sydney, Mr Berents agreed in cross-examination that, after discussion with BMS, Optus was informed that the cost had not "changed dramatically" [T938:42]. In my view, it could not be suggested with fairness that Optus had acted unreasonably in the selection of Relectronic. Some of the steps taken by Optus are set out in the evidence in chief of Mr Cearns as follows: "34. At the time of the incident, the hardware in the CDC was maintained by Digital. 80% of the equipment in the CDC was Digital equipment. Digital would only agree to maintain, at reduced maintenance cost levels, equipment that had been certified by them, for maintenance. Digital would not certify for maintenance computer equipment that had been decontaminated by BMS. Digital would however certify for maintenance equipment that had been decontaminated by Relectronic. It was extremely important to Optus to have the certification renewed on the decontaminated equipment. If the equipment was not certified Optus would have carried all risks associated with the repair of future decontaminated equipment. In my experience as an IT operations manager, maintenance providers will only agree to service levels where the equipment has been certified by them. In cases where computer equipment has not been certified, it is either very difficult to obtain maintenance for that equipment or service levels are non-guaranteed. If maintenance is provided to equipment which had not been certified, very often the cost of that maintenance is extremely high.

In the months after the incident Relectronic emerged as the preferred organisation to carry out the decontamination of the computer equipment which had been contaminated in the incident and also to decontaminate the computer data centre and the other parts of the STC which had been contaminated in the incident.

Negotiations with Relectronic were going to be prolonged. I was involved in a consideration of Relectronic's ability to carry out the decontamination work in the timetable proposed.

As a matter of prudence, I took the view that it would be desirable to ascertain whether BMS Catastrophe could, as a back up, provide the same services as Relectronic were going to provide.

I recall raising this issue with Mr Peter Berents when I said words to the following effect: 'Peter, we should consider BMS Catastrophe as a contingency to Relectronic in the instance where we might have resource problems with Relectronic'.

Peter Berents responded to me words to the following effect: 'Yes I think we should. Would you please speak with BMS Catastrophe'.

I recall telephoning BMS Catastrophe. The person that I spoke to was Mr Keith Dovey.

On 7 April 1997, BMS Catastrophe Australia wrote to me (OPT 101 001) setting out information about its business and also providing information relating to the Rosebery clean up project.

Because the 7 April 1997 letter did not state that BMS Catastrophe had certification from Digital in Australia to clean Digital equipment, I telephoned Mr Keith Dovey from BMS Catastrophe. I recall stating to him words to the following effect: ' BMS Catastrophe can only be considered for this work in the instance where you obtain the necessary certification from Digital. This is a mater between yourself and Digital and for you to arrange.'

A couple of weeks later I called Mr Dovey from BMS Catastrophe again. I asked him whether he had been successful in obtaining certification from Digital. He told me that BMS Catastrophe had not proceeded to obtain certification from Digital.

Because BMS Catastrophe did not have certification from Digital and had not obtained it, I was unable to consider that organisation as an alternative to Relectronic for decontamination work on the computer equipment." 1620 That evidence was reaffirmed in a later statement of evidence of chief of Mr Cearns. In that statement Mr Cearns outlined the steps that he took in dealing with BMS as follows: "116. I then spoke with Keith Dovey where I said words to the effect that "if BMS Catastrophe was to be considered for Incident cleaning, they must have received certification from Digital Australia and it was BMS Catastrophe's responsibility to push this through Digital Australia".

117. I again spoke to Keith Dovey of BMS prior to the contract being awarded for clean and he said words to the effect that "no further progress had been made towards obtaining the certification sought".

118. To clarify the matter regarding certification it must be understood that Digital Equipment Corporation (DEC) would only accept equipment back under maintenance where equipment was cleaned by an organisation that was certified by it. There was no warranty given by either BMS Catastrophe or Relectronic-Remech. The cleaning processes, facilities and management employed by Relectronic-Remech were accepted by Digital as restoring the equipment to a state where it could be taken back under the maintenance agreement and at rates in place between Optus and Digital prior to the Incident." 1621 The importance of Digital in the Optus enterprise was also described by Mr Cearns as follows: "122. Prior to the Incident, Optus had a strong partnership with Digital for the supply, service and support of computer systems. As I have previously stated some 80% of equipment in the Rosebery CDC was Digital equipment. Digital provided a package of services, including an attractive equipment maintenance agreement that I negotiated. This agreement offered considerable discounts and included a dedicated Systems Engineer at Rosebery." 1622 Tyco placed some reliance upon an email of Mr Viciulis to Mr Cearns and others as appears from the following extract from the Tyco submissions: "225. There were concerns within Optus that the costs quoted by Relectronic were too high as evidenced in a series of emails between Paul Viciulis and Peter Cearns and others on 26 February 1997. An email from Paul Viciulis to Peter Cearns and Rick Bayley and copied to Peter Berents states: "Finally as mentioned by you both the costs of cleaning have now been projected by Relectronics close to the $5m mark. Are we being screwed and being taken advantage of? Of greater importance in my mind are the recovery repercussions of not having available alternative costings to justify the use of Relectronics. The solution seems to be to ensure that the parties we will be targeting for recovery need to fully sign off the use of Relectronics and the associated costs. Food for thought and some further discussion." Mr Cearns responded as follows in an email to Mr Viciulis and Mr Bayley copied to Mr Berents dated 26 February 1997: "Relectronics has been accepted by all parties. To move elsewhere would delay our strategy by months. Alternate quotes would indicate that while Relectronic scheduled rates are reasonable, resource quotes MAY be high. Our Insurers have therefore been asked to audit the process and hours consumed to ensure the dollars are justified. This should satisfy." Mr Viciulis then responded in an email to Mr Cearns copied to Mr Berents and Mr Bayley: "The issue of signing off the protocol and most importantly the agreement as to Relectronics is directed at the parties we are targeting for recovery not necessarily the underwriters. I am raising the issue from a recovery perspective and do not want to delay the process/timing of cleaning but want to ensure that we dot the i's and cross t's at this stage rather than having a protracted debate later that could extensively delay the financial recoveries for Optus. You indicate in your note that the other parties have fully agreed to the processes/Relectronics/costs etc, and as I have been out of the loop for a while I am just seeking confirmation on a vitally important issue". 1623 Mr Cearns was cross-examined on that subject matter which demonstrated an awareness within Optus of the need to exercise control over cost. The cross-examination included the following: Q. On Mr Viciulis expressing the opinion that you might be being screwed, did you undertake a consideration of whether you should seek to engage BMS, yes or no?

A. I think it's summed up in the second paragraph of my statement there, which says: At the time alternative quotes would indicate that the scheduled rates are reasonable, but that the resource times may be high. Q. Quite. In effect, if someone was overutilising resources, they may be screwing you, to use Mr Viciulis's terminology; correct? A. Yes, and hence we were going to do and charge. (T1865:10 - 26) 1624 He was also cross-examined on the relationship between digital and BMS as follows: Q. DEC told you that they really didn't - they didn't have a preference for Relectronic or BMS, all they wanted was, in effect, a person who was appropriately qualified. That's what they were telling you, wasn't it? A. No, this came from BMS Catastrophe and it came as a result of telephone conversations and, as I understood it, Keith Dovey made the comment that Digital US - I'm not sure of that comment, what it really meant, but I would suggest to you that it was simply one that Digital US didn't have a preferred arrangement with regard to BMS. Q. In your statements is it fair to say that your principal concern about BMS was that it wasn't certified by Digital? A. By Digital Australia, yes. Q. You became aware, did you not, by 16 April, that Digital said that such approval was in their opinion a mere formality - it was likely to be a mere formality? A. No. Q. Go over to a document marked exhibit 2.055D, which is an email of April 16, 1997. A. Right. Q. Have you got that? A. Yes. Q. That's from Mr Viciulis to, among other people, yourself. A. Yes. Q. BMS Catastrophe were at the stage of final sign-off of Digital approval for their services with a request from Digital to visit the BMS Cat facility in Melbourne? A. Yes I see that. Q. And it was suspected to be a mere formality. Do you see that? A. I see that, yes. Q. This was about the time that you knew that there was going to be an inevitable delay in the cleaning and migration process, isn't it - April 16 being close to Anzac day? A. Yes, it coincided with that date, yes. Q. Quite. So did you take any steps thereafter to seek quotations from BMS as to what they'd do on the job? A. What we did was - what I did was to seek assurances from both Digital and BMS that there was certification, yes. Q. When did you do that? A. The dates - I think they are in my statement, the dates are unclear as to whether they are before or after this particular email. Q. What I want to suggest to you is that there really was no problem with using BMS from Digital's point of view, was there? A. Yes, there was a problem. Q. Was it before you got that email, or after? A. The problem existed up until the very point where we signed agreements with Relectronics. Q. Did you communicate with BMS about that? A. Yes, I did. Q. In writing? A. No, I spoke with Keith Dovey at the time and I said, "Keith, under the circumstances where we require certification from BMS before selecting your company, we would require that you seek that certification from Digital". …… Q. What I want to suggest to you is that really Digital never had a certification process at all. A. Yes, they did.

[T1870:23 - T1871:45; 1872:3 - 6] 1625 Mr Bayley gave evidence to like effect. It was his opinion that BMS was an Australian based firm which did not have the same level of resources as Relectronic [T295:56]. 1626 The involvement of ExCEL was reflected in the evidence in chief of Mr Cousins as follows: "21. Prior to the incident on 3 January 1997, I had considerable dealings with Relectronic-Remech and other companies that undertook cleaning work of electronic components.

I was aware that Relectronic-Remech enjoyed a good reputation within the industry. As I stated in the Cleaning Audit Proposal dated 8 May 1977 page 3: "1.2.1 Relectronic-Remech have been industry leaders in the field of electronic and mechanical decontamination, cleaning and restoration within Australia for many years. They are able to demonstrate a history of successful outcomes with a broad range of electronic and mechanical equipment."

Central to the strategy of cleaning and reusing the contaminated equipment, was the fact that Digital would agree to issue an MAQ certificate for the equipment when it was reinstalled, and would thereafter maintain the equipment for a reasonable price. Accordingly it was necessary to ensure that Digital would accept equipment cleaned.

I had had experiences prior to January 1997 where Digital had refused to accept equipment cleaned by companies other than Relectronic-Remech.

I was aware that Digital had inspected the Relectronic-Remech premises and techniques and accepted equipment cleaned by Relectronic-Remech.

Prior to January, 1997 as part of my role in keeping costs as low as possible in recovery projects, I had obtained quotations from other cleaning companies so as to ensure that quotes given by Relectronic-Remech were competitive. ……… I had had discussions with BMS Catastrophe (herein "BMS") in regard to obtaining Digital approval so that I could procure alternative quotations for restoration work." 1627 It was not as though Relectronic was unknown to Mr Cousins. He had dealings with both Relectronic and Digital "probably twice a year in the years preceding the incident" [T2130:55]. During his oral evidence Mr Cousins also gave evidence of involvement with BMS, prior to the incident, as follows: MR GREENWOOD: I asked you did you do anything yourself about using BMS when Digital equipment was involved. Is the answer yes? A. The answer is yes. Q. My next question is when was that. When was the most recent incident prior to January 1997? A. I think it was in 1996. Q. Can you tell us what you did and what happened? A. We had a situation with a contaminated data room, contaminated by smoke. We had Relectronics involved producing quotes for the restoration. I sought to obtain quotes from BMS Catastrophe for the decontamination of the equipment. The problem arose where - but we were unable to use their quote in the restoration. Q. Why? A. Because they were not authorised by Digital to clean the equipment. HIS HONOUR: Q. Did you have dealings with Digital in relation to their quote? A. Well, we spoke about the quote with Digital, but they weren't going to look at it. Q. Did you deal with Digital in relation to the BMS quote? A. Yes, I did deal with Digital. Q. What was Digital's response to their quote? A. They were not interested in anyone other than Relectronics doing the work. MR GREENWOOD: Q. Did you do something subsequent to that about Digital inspecting BMS's premises? A. Yes. Q. What did you do and when was that? A. Around about the same time in '96 I spoke with BMS Catastrophe about getting certification with Digital so that Digital could - I could use their services for restoration of Digital equipment. I didn't speak with Digital, I spoke with BMS Catastrophe about if they had certification, then I could use them. Q. What came of that, if anything? A. Their premises were, I believe, inspected by Digital, but were not approved. I had requested BMS Catastrophe for me to be present during the inspection, but that didn't come about. HIS HONOUR: Q. Mr Cousins, I rather understand that last answer to refer to information you were given but not by Digital about approval of BMS. How did you ascertain the attitude of Digital to BMS as approved -- A. It was directly from BMS. MR GREENWOOD: Q. Who was it at BMS, can you recall? A. Oliver Threlfal. (T2131:40 - T2132:50) 1628 The relationship between Digital and Relectronic and BMS was the subject of evidence adduced in Optus' case through Mr Michael Patroni a service delivery manager with Compaq who was able to corroborate that Mr Cearns had raised with him the possibility of using BMS and of his undertaking that Digital would look into the capability and suitability of BMS to perform the task: that representatives of Digital journeyed to Melbourne for that purpose. His cross-examination revealed that he was not able to take the matter any further. 1629 I am satisfied that the cleaning costs claimed by Optus are reasonable and should be included in the damages to which Optus is entitled to recover. In reaching that firm conclusion I have been mindful of the fact that Tyco was precluded from completing the cross-examination of Mr McLachlan when he became unavailable to give further evidence during cross-examination. 1630 In any event, the body of evidence as to the reasonableness of Optus' conduct in retaining Relectronic was compelling evidence. If my reasons are seen as ones highly critical of Tyco's conduct of this aspect of the case, that would not be an inaccurate assessment. 1631 Item 12.1 Digital Computer and Staff Space at Homebush. Item 12.2 Accommodation of GSMIS at Homebush: These items represent rental from Digital of computer space at Homebush from March/April 1997 up to the time of the April review of the recovery strategy and then for the months of May to July in respect of a lesser area to house the new GSMIS system preparatory to migration of applications. 1632 It is the contention of Tyco that, against this claim there has to be allowed the sum of $17, 400.00 as rental of 60 square metres at Homebush which it is said Optus would have been obliged to pay Digital regardless of the incident. 1633 The facts are these. For the two months of March and April 1997 Optus leased 284 square metres for the purpose of the anticipated migration process and that this area was reduced to 78 square metres to house the GSMIS equipment for the months of May, June and July while the migration process under the reviewed strategy was being implemented. At the time of the incident Optus occupied 60 square metres at Homebush under a separate arrangement with Digital. No claim was made by Optus in these proceedings for the rental of that space at Homebush which was part of its business recovery plan in place at the time of the incident. Optus also accepted that while that space was occupied by Optus at Homebush it has not been charged rental for that space. 1634 The evidence in chief of Mr Cearns in relation to the use of Homebush (as to which there does not appear to be any real dispute) was as follows: "193. Prior to the Incident, Optus had negotiated a 60 m2 space within the Digital Disaster Recovery Plan (DRP) site at 119 Parramatta Road Homebush. This space allowed housing of minimal network equipment and systems for immediate recovery in the event of loss of Rosebery CDC. The cost of this space is outside Optus' claim for Incident costs.

Immediately following the Incident, in January 1997, I gave instruction to Kevin Dwyer of Digital to put aside the as yet unoccupied portion of Homebush for future migration of systems from the Rosebery CDC. The migration was driven from the need to relocate applications from contaminated systems at the Rosebery CDC.

This space equated to a further 284m2 and was negotiated by myself with Kevin Dwyer of Digital at a cost of $85 / m2 / month commencing March 1997. This space included equipment space, tape storage space, staff space and facility space. These costs are detailed in the document 'Recovery and Move to Multiple Site Operation Plan' OPT081 536-598.

Posted against item 12.1 is the invoice for $48,280 to cover agreed additional lease space in Homebush for the period March and April 1997. These costs were incurred as a direct result of the Incident and are incremental on the 60m2 negotiated with Digital prior to the Incident. Only costs for the months of March and April apply since in April the recovery strategy changed to not include Homebush. At this time I told Kevin Dwyer of Digital that 'Optus would no longer require the bulk of space in Homebush but would instead agree to pay for only the additional 78m2 occupied by the GSMIS system'. This space included both equipment space and staff space.

Item Code 12.2 - Continued Lease Space Amount Invoiced $19,890 Amount Confirmed $19,890

Following the decision not to use the Digital Homebush site for equipment migration in or about April 1997, I told Kevin Dwyer of Digital that Optus would 'only require continued use of the space occupied by the GSMIS system until it could be migrated to CHOC after CHOC building completion'. This equated to 78m2 of space at $85 / m2 / month.

Accordingly Digital invoiced Optus for an amount of $6,630 per month for the months of May through to July 1997 for the space occupied by the GSMIS system. These costs were incurred as a direct result of the incident." 1635 As I understand Tyco's submissions in its case claiming allowance for certain benefits said to be related to the incident, Tyco asserted that "Optus was obliged to pay Digital in respect of the business recovery services…… a further cost to Optus of $41,700 per annum in respect of an additional 60 square metres of space to be occupied on a permanent basis for the purposes of locating the test and development equipment which formed part of the Business Recovery Plan". That was based upon the contents of the Operations Management Services Statement of Optus of 20 December 1996. 1636 So far as I am aware, there is no document in evidence apart from that services statement recording the lease of the 60 square metres at Homebush. Optus was called upon during the proceedings to produce certain documents in relation to its occupation of the 60 square metres and the notice was answered in the following way: "I should say in relation to paragraph 1 that there was a call for invoices and payment records relating to Optus's occupation of an area at Homebush in the period from January 1997 to July 1997. I don't produce any such invoices or payment records because Optus was not charged for that occupation during the period called for in that notice." (T1118:27 - 34) 1637 As a consequence of that response to the call Tyco submitted as follows: "205. The plaintiffs submit that the cost of 60 square metres at Homebush is separate from the claim for costs of leasing space at Homebush resulting from the incident. This could only be correct if Optus leased the 60 square metres from Digital in the period following the incident in addition to the space leased as a result of the incident. This is not the case. In a Notice to Produce returnable 22 February 2001 Tyco called for all documents, invoices and payment records relating to the use by Optus of the 60 square metres of space at Homebush as referred to in paragraph 193 of Mr Cearns' sixth statement in the period from January 1997 to July 1997. In answer to this Notice Counsel for Optus informed the court that no invoices or payments were produced because Optus was not charged for occupation of that space in the period specified in the Notice." 1638 Optus does not dispute the fact that it was not charged for that occupation of Homebush, but contended that it remains liable for the rental of that area which "appears to have accrued through an oversight by Digital." 1639 In view of the evidence which is undisputed that Optus committed itself to a rental of the 60 square metres at Homebush and the evidence that that area was separate from the areas the subject of the items of claim in these proceedings, it does not follow that by reason of the absence of charges imposed by Digital that Optus does not remain liable for that rental. Accordingly, the amount sought to be set off against these two items of claim should be rejected. 1640 Migration Costs: Tyco disputed its liability for the whole of the migration costs involved in freeing up contaminated equipment preparatory to the removal of cabinets to the Relectronic premises for cleaning. It does so on the basis that, prior to the incident, Optus had in place a proposal, as outlined in its document entitled "Dual Data Centre Strategies" dated 18 December 1996, which contemplated the existence of dual data centres at Rosebery and Castle Hill with "Critical Systems to be split over both sites with Homebush continuing as a "fall back site for both Data Centres". It was envisaged that there would be 350 square metres of data space available at each of Rosebery and Castle Hill. 1641 It was significant, however, that the strategy envisaged that "Minimal relocation of hardware from Rosebery to CHOC" would occur and that new hardware would be installed, presumably, as growth dictated at Castle Hill. It also envisaged some "Existing applications" being reviewed and relocated to Castle Hill as hardware at Castle Hill became available from "new project funding". The section on "new project funding" identified the subject hardware and, one assumes, related applications required to accommodate growth in the Optus system beyond the existing GSMIS system as it then existed at the Rosebery centre: hence the anticipation that there would be a need for "Minimal relocation of hardware from Rosebery" to Castle Hill and, one assumes, minimal migration of applications. 1642 I think it follows from that analysis, that it is erroneous to consider that the migration of the existing applications during the recovery program to Castle Hill hardware involved any measurable or significant costs that would have been incurred by Optus in the long range establishment of Castle Hill as a data centre. 1643 The weakness of the Tyco position on this issue is probably best reflected in the manner in which it was presented through the evidence on Mr Lonergan. In my view, it reflected the absence of any cogent factual basis for the assumptions which Mr Lonergan was required to make for the calculations that flowed from it. Mr Lonergan's evidence was as follows: " Migration costs Migration cost - Castle Hill 146 I have been asked to assume that the plaintiffs would have moved certain equipment and certain applications to Castle Hill in any event regardless of the Incident. Consequently certain migration costs of equipment and applications should not be included in the claim as these costs did no arise solely as a result of the Incident.

147 I refer to the evidence of Mr Cearns who states that there would have been some migration of applications to Castle Hill but these would have been "minimal". At the time of the Incident the planning with regard to the migration of application had not been completed. Mr Cearns also stated that there would have been minimal relocation of equipment as new equipment would have been introduced to Castle Hill.

148 Since the planning for Castle Hill had not been completed at the time of the Incident it is not possible to identify precisely what applications or equipment may have been migrated had the Incident not occurred, nor is it possible to determine the precise meaning of minimal.

149 I have been asked to assume that if there had been minimal migrations of equipment and applications, then: (a) in relation to equipment, 5% of equipment would have been moved in any event

(b) in relation to applications, 10% of applications would have been moved in any event.

150 I have been asked to assume that the following cost categories relate to the migration of equipment and applications. I have not included Blacktown migration costs as I have been asked to assume that there was no intention prior to the Incident to move to Blacktown. Where cost categories included both Castle Hill and Blacktown migration costs, I have divided these in the same manner as set out in my report of 15 November 1999. Plaintiffs claims $000 Relates to Castle Hill $000 Expense code (a) Equipment Deinstall/reinstall - Rosebery/Castle Hill 215 215 26.1 Deinstall/reinstall - Homebush/Castle Hill 34 34 27.1 249 249 (b) Applications Project manager 256 128 24.1 Technical support 817 409 28.1/3 Document resource 52 26 28.6 Supervisor 76 38 28.7 Testing of migrated system 59 39 29.1 Application support 591 359 30.1 Digital administration 87 44 31.1 Additional administration support 30 15 31.2 1,968 1.058

151 It has not been possible, from the information that has been made available to me, to determine precisely what equipment or applications that were migrated would have been migrated in any event, nor what equipment or applications the above costs related to. Therefore I have not been able to determine the exact costs that would have been incurred regardless of the Incident.

152 In my opinion, given that it was the intention of the plaintiffs to migrate certain of the equipment and applications in any event, (or that growth would have required them to do so) then some of this cost would have been incurred regardless of the Incident. In order to determine this cost I have, in the absence of any better information, applied the percentages set out above to the overall migration cost.

153 On this basis the claim should be reduced as follows: $000 Equipment migration 12 Application migration 106 118

1644 At best, in my view that calculation reflected mere speculation and, at worst, it is unfounded, once it is realised that minimal migration of the existing applications was contemplated. This, I think, was the emphasis in the course of cross-examination of Mr Cearns as follows: Q. All right. Let me move on. You said, I believe, in evidence, that it was your understanding at the level of principle of which you've spoken, that if the incident had not occurred, systems would be added to CHOC just as and when future needs required? A. Yes, with new applications coming forward, yes. Q. Do you not agree, however, that at least in relation to some applications and computer systems, it would have become necessary to move whole systems to CHOC so that you wouldn't have an inefficient split of nodes within the whole system? A. No, no. We hadn't intended to migrate en masse any particular systems. This was to be done simply through the business acquiring, through RMG, the additional systems. (T1529:29 - 47) 1645 To like effect was his further evidence in re-examination as follows: Q. At transcript pages 1529, 1843, 1856 and 1857 you talked about the establishment of new applications at CHOC. What new applications as at 1996 were anticipated to come forward in 1997? A. Yes, there were always a number of applications, new applications being planned. A couple of them - there are CB2000, I think I mentioned in cross-examination ARBOR. Q. You mentioned them at 1301 and 1302. What are those applications? A. They are billing enhancement applications. They provided additional services to the customer in terms of billing and delivery of billing services. In fact, ARBOR goes beyond that. Q. I asked you what they are. Obviously they did come forward. As at November 1996 they were anticipated; is that right? A. Yes. Q. And they did come forward? A. Yes. Q. And where were they installed when they came forward? A. Yes, CB2000 and ARBOR went into CHOC. Q. Did that require new equipment? A. The project purchased the equipment, yes, that it did require. Q. And in terms of migration, did that involve a migration to establish it as Castle Hill? A. No. Q. Why not? A. Because it didn't exist in Rosebery in the first instance. Q. Mr Hutley asked you at pages 1849 and 1856 and following about the notion of significant migrations from Rosebery across to Castle Hill. He used the expression "a very significant program". You indicated that such a program would be very expensive. A. Yes. Q. That was at line 45. What program did you have in mind he was referring to when he talked about "a very significant program of migration of critical applications"? A. Well, I assumed he was talking of the migrations similar to that which in fact resulted from the incident and, as can be seen, that was a fairly expensive exercise. Q. In terms of undertaking not even a very significant program of migration, but in terms of undertaking migration, whose approval would be required for that to occur? A. That would require the business's acceptance of the risks involved in it, the disruption involved in it, and it would also include the sign-off by the company on the costs and ultimately, of course, if it is related to the business recovery, the approval of Peter Berents. (T2298:55 - T2300:27) 1646 It is clear from that evidence, in my view, that the concept of any overlap of migration of applications involved in the recovery program following the incident with anything that might have occurred during the long term establishment of Castle Hill as a data centre was minimal and called for no adjustment of the migration cost incurred in reinstating the system as it existed at the time of the incident at the Rosebery centre. 1647 This is not a case of doing the best one can with the evidence, in line with Chaplin v Hicks [1911] 2 KB 786, as contended on behalf of Tyco. That submission, really, is a recognition of the absence of factual material upon which its case in this respect needed to be founded. 1648 Item 32.1 Replacement Tapes; Item 32.2 Miscellaneous Consumables; Item 55.1 Replacement tapes: These three items of claim are dealt with by both parties as consumables. Tyco did not dispute the costs of $9, 847.00 the subject of item 32.2. It submitted that the claim for items 32.1 and 55.1 which amount to $64, 714.00 should be reduced to $37, 020.00. Again, the difficulty with Tyco's case lies in the absence of factual material upon which it needed to be founded and as reflected in the approach adopted by Mr Lonergan in his evidence in chief as follows: " Consumables Introduction 160 Included within the claims are certain costs for consumables such as tapes which, whilst said to have been replaced as a result of the Incident, would have been replaced in any event in the normal course of business as part of a regular asset replacement cycle of these items.

161 The costs included in this category are: Description Plaintiffs' claims $000 Expense code Consumables - tapes 54 32.1 Consumables - miscellaneous 10 32.2 Consumables tapes, Tandem 11 55.1 75

Description of costs 162 Mr Cearns claims that these costs are in respect of tapes purchased as a direct result of the incident. The costs relate to the purchase of small consumable items which have limited life and need to be periodically replaced in the normal course of business.

163 I have not seen any documentation from the plaintiffs detailing the period over which these assets would normally be replaced. I have assumed an asset replacement cycle of two years and on this basis the replacement occurred on average one year early.

164 On the assumption that the consumable equipment should have been replaced in my opinion allowances should be made in the claims for: (a) the fact that, on average, the consumable items were half way through their useful life at the time of replacement and on this basis 50% of the claim should not be allowed; and

(b) the fact that, on average, the replacement items were purchased one year early. On this basis the financing cost of funding the expenditure on the replacement items one year early should be allowed. For the purposes of this report I have assessed the financing cost at a rate of 9.25% per annum being the average of large business variable interest rates for the period February 1997 to June 1997. (Source: Reserve Bank of Australia Table F.4. Interest Rates: Banks - Business Indicators).

165 The adjustments to the claims which are required in respect of consumables, taking into account the matters set out above can be set out as follows: Adjustment Plaintiffs claims $000 Adjusted claim $000 Expense code $000 Consumables - tapes 54 27 27 32.1 Consumables - misc 10 5 5 32.2 Consumables - Tandem tapes 11 5 6 55.1 38 Time value of early expenditure (3) 35

1649 In the course of submissions Tyco made some adjustment to that method of calculation which does not need to be addressed in any detail. The shaky foundation of Mr Lonergan's evidence and the position of Tyco in this aspect of the case is highlighted in his assumption of a replacement cycle of two years on the basis that he had "not seen any documentation from the plaintiffs detailing the period over which these assets would normally be replaced." 1650 Item 32.2 which is accepted by Tyco indisputably involved costs associated with rectification in payment of an entity known as Salmat for programming and dumping charges of tapes contaminated in the incident. 1651 The evidence of Mr Cearns does not justify a concept of a two yearly life cycle for the subject tapes. While it is recognised that the life of the tapes is not inexhaustible, Optus had in place a method of cost accounting which ascribed an end-of-life component to consumables. However, in the real world, equipment was, in fact, only replaced as it "became worn out or obsolete". It is significant that the tapes the subject of item 32.1 were not tapes in operation. The evidence was that "these tapes were incremental to those needed for regular backups" [Ex 10.017]. 1652 In his further evidence in chief, Mr Cearns described the tapes at the Rosebery Centre at follows: " Item Code 32.1 - Tapes

Amount Invoiced $53,705 Amount confirmed $53.705 [sic] 141. At the time of the Incident, some 600-700 tapes were in the Rosebery CDC. These covered tapes found in two very large Tape Silos and tapes loaded in tape drives in the computer room at the time. See OPT307A 057 for a detailed breakdown.

142. Given the volume and nature of airborne contaminate in the room at the time of the Incident, I was of the opinion that the tapes in the room at the time should be thrown away and replaced. I spoke to David Smith from Digital and he agreed with that approach.

143. OPT307A 057 identified the number, type and cost of tapes purchased to replace those found in the room at the time of the Incident. I asked that the number tapes claimed against the Incident be reduced in volume by the amount of tapes expected to be replaced through end of life in that particular month.

144. Item code 32.1 therefore has an Incident related posting of $53,705 which is only for the purchase of replacement tapes for those contaminated by the Incident. 1653 In my view, that approach by Optus, given the nature of the tapes that were damaged in the incident, was an appropriate, albeit inexact, method of making allowance for the fact that the tapes could be regarded as consumables. 1654 Mr Cearns' evidence was supported by that of Ms Gunasekera as evidencing the fact that the tapes that were damaged in the Tandem room [being the subject of item 55.1] involved the backup tapes, as appears from the following: "68. In the EFTPOS/Tandem Room, the system's applications were run on disks. As a backup, tapes were kept also in the EFTPOS/Tandem Room, obtaining all the operating system configurations. In the incident on 3 January 1997, both the disks and the backup tapes were contaminated. It became necessary to transfer the backup configuration to uncontaminated tapes.

69. To achieve that result, it was necessary to purchase 1,575 new data cartridges at a cost of $6.99 each. At EX.2.057 P 0311 is a bundle of documents relating to the purchase of tape cartridges at a cost of $11,009.25. I raised the purchase order on 23 April 1997 for the purchase of these tapes and sent it to Emanuel Alfris and Peter Berents for authorisation. The sole reason for the purchase of these tapes was that the ones that had been contaminated by the incident could not be used with the new or cleaned equipment." 1655 While it is accepted that some adjustment would be warranted, having regard to the consumable nature of the items involved, and taking account of the fact that back up tapes were involved in the damage and the allowance made by Mr Cearns in relation to item 32.1, sufficient recognition of the "consumable" nature of this item of claim has been allowed for in Optus' claim. 1656 Benefits: Tyco contended that any damages awarded to Optus must bring to account, by way of set off against expenditures claimed as damages, the equivalent of expenditures which were not incurred by Optus but which Tyco contended would have been suffered by Optus had the incident not occurred. Assuming that there were expenditures of that kind avoided, it does not follow that Optus is obliged to bring those expenditures to account by way of set off against their proven costs of rectification. It is a question of causation and, if the avoided expenditures are "collateral and merely raise inter alios acta", I think the authorities are clear that Optus is not obliged to bring those avoided expenditures to account in the manner contended for by Tyco. 1657 The expenditures said to have been avoided have been quantified by Tyco through the evidence of Mr Lonergan in the sum of $1, 551, 000.00 and fall into five discrete areas. The foundation for Mr Lonergan's opinion evidence (and Tyco's case) rested on the existence of a business recovery plan involving Digital which pre-dated the incident and the termination of Digital's services under that plan. By notice of 28 July 1997 Optus gave three months notice of termination of Digital services under an Operations Management Services document of 20 December 1996. 1658 I am satisfied that the expenditures avoided as a consequence of that notice of termination should not be treated as savings causally related to the incident and should be regarded as purely collateral to Optus' loss. As a consequence, Optus should not be required to bring those avoided expenditures to account, principally for these reasons, namely: a) The termination of Digital's services was part of an undefined arrangement with Optus' insurer which called upon Optus to redirect its business recovery plans from the direction taken prior to the incident. b) The redirection of Optus' recovery plan consequent upon the arrangement with Optus' insurers involved an undefined engagement of other consultants namely Bergman & Voysey to "develop a revised business recovery plan following the incident". c) In addition to some $160,000.00 incurred by Optus with those consultants, Optus incurred costs which were described as "considerable", although not otherwise quantified, in the redevelopment of a business recovery plan after termination of Digital services. 1659 That emerged from the following evidence of Mr Cearns during the course of his cross-examination: THE WITNESS: Before I start, your Honour, I feel I should perhaps clarify a statement and misunderstanding that may have occurred from a statement I made yesterday, late in the piece, just before you adjourned. HIS HONOUR: Yes. THE WITNESS: I think there may have been an understanding that Optus has made claim on the redevelopment of the business recovery plan as a result of the incident. That was not the case. Whilst it was considered and it is considerable, there has been no claim on that. (T1754:8 - 21) 1660 That statement was volunteered at the commencement of hearing on 22 March 2001 in the midst of a very extensive cross-examination of Mr Cearns by counsel for Tyco who had pressed Mr Cearns on what was said to be cost savings effected by the termination of Digital services. 1661 That cross-examination revealed that a new plan in fact had been "settled" with Compaq [T1746:36 - :49] and, presumably, it is that plan to which Mr Cearns referred as one under which Optus incurred "considerable" costs. 1662 In my view, that only served to emphasise the unreality of treating the consequences of Optus' termination of digital services under the Statement of Work in July 1997 as a credit to be brought to account by way of reduction of rectification costs incurred by Optus as a consequence of the incident. 1663 I think it is of some note that counsel did not take up with Mr Cearns the nature of the "considerable" costs involved in the new recovery plan. 1664 Subject to Optus being required to act reasonably in the protection of its property, just how Optus managed its affairs in the way of business recovery plans, insurance and the risks it took in that context were all matters for Optus' independent exercise of business judgement. While those decisions may have been influenced by events such as the incident they should not in my view be treated as savings which have been "caused", in any relevant sense, by the negligence of the defendants. The consequence of those decisions in my view are purely collateral and represent neither a benefit, nor for that matter a cost which should be credited or debited to the defendants. 1665 The Statement of Work document, which is a foundation document in Tyco's submissions, was in the form of a "Proposal" which provided that the "terms of the Digital/Optus IT Supply Agreement dated 17 April 1996 [should] apply, subject to amendments outlined in [that] proposal" and was expressed to be a "Statement of Work" within the meaning of that agreement. As far as I am aware, that agreement is not in evidence and neither party has relied upon its terms in relation to these issues. 1666 The Statement of Work had four components which were identified as follows: " Network Management Services provide the day to day operation and management of the Optus Australia wide IT network.

Data Centre Management Services provides the day to day operation and management of the IT computer systems and associated facilities.

Business Recovery Services provides for managing and keeping current the Optus Business Recovery strategy and plan.

Management of Digital Maintenance Services is the management of the maintenance of the network equipment and data centre equipment operated and managed by OMS staff." 1667 The duration of the contemplated business recovery services was expressed as follows: "The BRS services will begin on an agreed date in 1996 and continue for a period of two years (Agreed date and ending 30th June 1998) and then may automatically renew for further terms of one year each." 1668 It was further provided as follows: "Optus has the ability to choose one or all of the following components (a) Network Management Services (b) Data Centre Management (c) BRS (Business Recovery Services) 1669 The significance of that provision, in my view, lay in the fact that it reflected the interrelationship of the various services contemplated in the Statement of Work. The business recovery services were described as having three components, namely: " s Business Recovery Plans s Supply of equipment in a disaster situation s Availability of Computer Room facilities for a disaster situation" 1670 The first component was described as follows: "The first component includes developing and keeping current the Optus Information Technology Business Recovery Plan. Digital will utilise its own resources or external specialised business recovery consultants to develop and agree the Optus Business Recovery Plan, regularly audit and test the plan, and maintain the currency of the plan each year. Digital will not accept any liability, contingency or otherwise, for any failure of the Optus Business Recovery Plan in test or use." 1671 The second component was described as follows: "Supply of the equipment in a disaster situation: Disaster Configurations consist of the basic system required by Optus to run critical applications in the event of a disaster. Disaster Configurations will be pre-agreed and detailed in writing between Digital and Optus. …… Digital will forward order and hold in inventory in Sydney, any agreed computer equipment needed for Disaster Recovery Purposes to allow timely restoration of critical Optus systems in the event of a disaster that fall into the 'Current' category (a). Digital will provide this service at a cost of 13% per annum calculated on the Optus purchase price (at the time of initial stocking) of the goods." 1672 The third component was identified in the following way: "Digital will make available to Optus pre-emptiable computer room space of up to three hundred square metres at a cost of $250/sqm per annum commencing the 1st July 1996. Upon Notification of a Disaster Event, Digital will make this space available to Optus within the time frames specified in the Business Recovery Plan either on a phased basis or whole as the Plan so requires. The pre-emptiable space is to initially be located at 119 Parramatta Road Homebush, and subsequently at any suitable Digital facility in Australia with appropriate approval from Optus and at no additional cost to Optus." 1673 Section 4 of the document entitled "Commercial Proposal" contained a section in relation to business recovery services which repeated the three components of that element and contained the following further statement: "Business Recovery plans will be developed, agreed and updated at a cost of $270,000 for the first year commencing 1st July 1996, and $190,000 for the second year. These charges will be subject to Change Management where alterations are made to the scope of the work required. Digital will not accept any liability, contingency or otherwise, for any failure of the Optus Business Recovery Plan in test or use." 1674 The costs in section 4 were expressed to be indicative costs and were "subject to change". 1675 In relation to the third component, this section divided the subject matter into two segments respectively entitled "Pre-emptiable space" and "Permanent space". The latter was subdivided into two further categories: "(a) Usage/occupance of 300 sqm of pre-emptiable space (b) Permanent space external to the 300 sqm of pre-emptiable space" 1676 It was recorded that there were "two situations whereby Optus would occupy part of, or all of the 300 sqm of pre-emptiable space - (i) a disaster or (ii) planned usage". In relation to each of those situations the charges were outlined and in the case of (ii) the proposed charges were expressed as follows: "(ii) Planned usage - Optus has the option to use up to 60 sqm of the 300 sqm of pre-emptiable space on a permanent basis. The rate for permanent usage of the 60 sqm will be $695/sqm per year on a pro-rata basis based on usage. The above price assumes that the equipment to be installed does not require local operation by site staff, and it is assumed that the use of this area is part of the Optus BRS plan. Optus will give Digital at least 7 days notice of intent to use the space." 1677 The section repeated the terms of the termination of any such services as quoted earlier in these reasons. However, in the case of the various services, provision was made in section 4 for early termination which in relation to business recovery services contained the following: " BRS: If Optus supply notice to terminate the BRS for business reasons, the following conditions will apply: a. Optus must supply 3 months prior written notice b. Optus will assume full financial responsibility for the early termination costs of all contractor contracts assigned to work on Optus' behalf for the BRS services from the date that termination occurs and may request that DIGITAL, with the consent of the contractors involved, assign those contracts to Optus or otherwise pay those contracts out." 1678 I have been unable to reconcile that provision and the stated duration of the business recovery services arrangement as continuing until 30 June 1998 with the notice of termination given by Optus on 28 July 1997. 1679 During the course of the proceedings I raised the question with counsel for Tyco whether Tyco's position was that the three months notice of termination could be given at any time [T1497:12]. That response was deferred and I have no recollection of Tyco returning to the matter. 1680 I have assumed that "business reasons" had a meaning known to both parties, possibly by dint of the Digital/Optus IT Supply Agreement of 17 April 1996. I am unaware of any description of that term in the Statement of Work and no party has presented submissions which cast doubt on the entitlement of Optus to give the July 1997 notice. It may be observed about that aspect that, if Optus was so entitled to terminate at any time without penalty, that adds emphasis to a characterisation of the so called savings as collateral ones. The notice of termination of 28 July 1997 was in the following terms: "It is with some regret that I must inform you of the decision taken by Optus to terminate our arrangements with Digital for provision of BRS services as specified in the Statement of Work to Optus for Operations Management Services, Version 13, dated 20th December 1996.

I would like you to regard this letter as formal notice of our intention to terminate these services on 31st October 1997, which provides for the required three month notice period.

Please contact me as soon as possible with details of costs which Digital regards will become payable during this notice period, especially for the provision of space at the Homebush facility." 1681 Based on the Work Statement and the termination notice of July 1997 Tyco contended that Optus should be required to bring to account the following: a) In relation to the component to "forward order and hold in inventory" equipment for disaster recovery purposes: the cost of that service was calculated as being $350,000.00 per annum based upon at 13% per annum of the value of equipment described as "LEVEL 2 KIT" in Digital's "Draft IT Business Recovery Plan to Optus" of 19 December 1996 (as costed by Mr Ogbourne). b) $150,000.00 as representing two years fee for the 300 square metres of pre-emptiable space. c) $83,400.00 representing two years fee for 60 square metres which, under the Statement of Works, Optus had the option to use on a permanent basis. d) $300,000.00 representing the indicated price in section 4 for Digital's provision of business recovery plan services of $270,000.00 in the "19996/97" year and $190,000.00 in the "19997/98" year, less the sum of $160,000.00 represented by costs of other consultancy services incurred by Optus in relation to business recovery plans subsequent to the incident. e) Costs of approximately $53,000.00 representing the costs that it is said Optus would have incurred in transferring from Rosebery to Homebush certain development systems equipment as contemplated in Digital's draft IT business recovery plan for Optus of 19 December 1996. 1682 As to sub-par (a) the 13% per annum benefit: The exercise called for the application of a 13% per annum fee on the value of equipment to be dedicated under the Statement of Work. At the time of the incident and at any time thereafter no equipment had been dedicated by Digital. So it was necessary for Tyco to identify some equipment upon the value of which the fee of 13% could be applied. For this purpose Tyco relied upon a series of documents which were brought into existence by Optus, each of which was entitled "PROPOSED STRATEGY FOR RECOVERY OF TOP APPLICATIONS". They were dated respectively 4 November, 18 November, 28 November 1996 and one dated 19 December 1996 which formed part of the draft IT business recovery plan of that date. 1683 No good purpose would be served by a detailed description of those draft strategies except I think to note that it followed a common format of dividing systems and cabinets into categories described as "LEVEL 1 KIT", which represented operational systems on site at Rosebery, "LEVEL 2 KIT", which represented equipment to be "Stored in warehouse" and "LEVEL 3 KIT", that was described as systems "To be priority ordered" which was explained in the documents as representing "hardware that will have to be priority - ordered….. to return performance to current levels" (Level 3 was not common to all of the draft proposed strategies). 1684 It was the LEVEL 2 KIT as at 19 December 1996 that Mr Ogbourne attempted to value and to which he attributed a total cost "in excess of $3,060,359.00" which, after addressing matters raised in cross examination, he reduced to $2,515,199.00. Tyco calculated the 13% per annum fee on that value for a period of twenty-one months. It did this on the basis that the Statement of Work "was expressed to last for two years in respect of the BRS Services". That however, ignored the express duration as ending at 30 June 1998. It deducted three months from two years to allow for time for Digital to dedicate the subject equipment: the latter on the basis that there was no suggestion that equipment had been dedicated at the time of the incident and some allowance would have to be made to acquire it. 1685 The time of three months was said to be based upon evidence given by Mr Cearns in cross-examination as follows: Q. So you were anticipating the warehousing costs would be commencing within a couple of months of that? A. No, within at least three months, the evidence is. (T1755:51 - 55) 1686 In re-examination Mr Cearns explained that evidence as follows: Q. Next, Mr Cearns, warehoused equipment. You were asked some questions about this at around page 1754 by Mr Hutley, about the arrangements with Digital to have some equipment which could be used, if needed, and at page 1755 you said, at line 42-43 that it would take at least three months - sorry, it would take three months at least to establish this plan. What's the "plan" you were talking about in that context? A. Yes, I'm really talking about before commencement of charging, given that Digital stated to me that there was a requirement for them to place orders on the equipment, to have it received, to have it then placed, you know, in a separate warehouse that was auditable by Optus and have all the systems needed to ensure that indeed that warehouse was available to Optus and was auditable, and what they had said to myself is that would require at least three months on their part to establish. Q. The evidence you gave immediately following the bit I read to you perhaps is a little confusing. You said at line 48: The warehousing costs would not commence immediately. This question was then put to you: So you were anticipating the warehousing costs would be commencing within a couple of months of that? Yours answer is recorded as: No, within at least three months. A. Yes, within at least three months after that. (T2321:43 - T2322:24) 1687 It is not entirely clear to me what timing sequence Mr Cearns had in mind. However, it is apparent that any decision on equipment to be dedicated was still in draft form and any dedication of equipment consequent upon any decision of Optus was some months down the track. 1688 The draft nature of the considerations then being contemplated by Optus at the time of the incident may be illustrated by the following cross-examination of Mr Cearns: Q. So you were anticipating the warehousing costs would be commencing within a couple of months of that? A. No, within at least three months, the evidence is. Q. And then it would be $480,000 per year? A. The final make-up of the kit is of course unknown, because we didn't get to a point of conclusion of that, but it would certainly have been less than that because I was driving costs lower. Q. Why would it have been less than that? A. The evidence shows here that even within a period of one month, the cost reduced from 650 to 460. Q. Yes, and at that stage you thought 460 was appropriate, did you not? A. No, at that point we were still reviewing the situation. It was a draft plan. As you can see, each of those are proposed strategies. The final strategy and the final costs were to be determined. Q. The final costs would have been a substantial sum of money on an annualised basis? A. What do you mean by "substantial"? Q. Well, you got to $460,000. A. Yes. Q. You were anticipating, at one stage, it would be as high as $1.4m? A. No. Well, that figure there, I'm not sure where that came from. Q. Please, you were anticipating at some stage it would be $1.4m; correct? A. I would have to refer to the document again because I'm not sure that that refers to the actual 13 per cent because at that point we were not talking about 13 per cent. Q. Look, there is a figure of $12m being the anticipated kit in that document. You can take it from me that that is the document which was prepared in 1996. A. And it is in here, isn't it? Q. Yes. A. Yes. Q. If you would like to look at it, please do. A. Yes, if I could. Can you reference that document? I have it here. That's fine. HIS HONOUR: Where should I be looking? MR HUTLEY: I am sorry. HIS HONOUR: 1.609? MR HUTLEY: It is 1.598, page 3827. Q. Do you see that? A. Yes, I do. Q. You were anticipating there $12m critical systems; correct? A. Yes, that's right. Q. $1.4m per annum? A. Yes, on the basis of service costs, yes. Q. That's about 13 per cent, isn't it? A. Yes. I haven't calculated it, yes. Q. Do you want to calculate it? A. I will have to calculate it. Q. It is slightly under 13 per cent. A. Right. I will assume that, yes. Q. The plan was developing; correct? A. Yes. Q. And you had got to the point where the plan which you swore in your evidence and which was to be implemented had got to the point where the kit was as in the schedule; correct? A. No, what I swore was that the first element of the business recovery plan, which was the migration of the first test and development systems, was to occur as of the week of the incident, yes. Q. Please, Mr Cearns. There was a level 2 kit that was going to go in, wasn't it - had to? A. Yes. Q. If this scheme meant anything, you had to get a level 2 kit; right? A. Yes. Q. It had to be a level 2 kit which was adequate to achieve the needs which you perceived he business recovery plan demanded; correct? A. Which the business required, yes. Q. The view of Digital, at the time when you had elected to commence to implement the plan, was that you needed a level 2 kit such as appears in at page 3957 of the bundle; correct? A. At the time, yes. Q. Now, you tell his Honour that you anticipated you would be able to significantly reduce that? A. That was still being reviewed. Q. Please. Answer my question. A. Yes. Q. How much - by what significant amounts do you say? A. I have no idea at this point. It required a good deal of detail and study and that was being conducted by Digital along with myself. Q. Did you think it was over the top at this time? A. I thought that it was high, yes. Q. How high? A. I have no idea. I have no idea. The situation, as you can see, was that there - if we look at just one month, we dropped off a 7840 -- Q. Mr Cearns -- HIS HONOUR: I won't stop the witness. Q. Finish what you were saying? A. Yes, in one month we have reduced the kit needed to satisfy business needs quite substantially. The final make-up of that kit, I have to say I am uncertain of. (T1755:51 - T1758:27) 1689 Tyco relied heavily upon the following evidence in cross-examination of Mr Cearns: Q. Quite. But for it you would have incurred significant cost? A. If we had proceeded with the draft plan, yes. Q. You were going to proceed with the draft plan? A. Yes, there was every intention to proceed with something, yes. Q. Quite. What I want to put to you is as at the event of 3 January. A. Yes. Q. The likelihood is that the cost to Optus of the warehousing of hardware would have been of the order of $460,000 per year; do you agree with that? A. It would have been possibly in the order of 350, I don't know. I don't know. (T1760:25 - 44) 1690 That evidence was compared with Mr Ogbourne's calculation in the order of $327,000.00 and, on that basis, it was contended that an allowance should be made of an annual cost of $350,000.00. I think the evidence fell short of justifying such a finding, although it is clear that a substantial cost would have been incurred in relation to dedicated equipment if the draft plans under consideration by Optus at the time of the incident had been finalised and at some stage implemented. Whether such costs would have extended beyond the "initial period ending 30th June 1998" I am unable to say. Further, I am unable to say that such an avoided expenditure represented a saving in view of the "considerable" expenses incurred by Optus in am alternative business recovery plan. 1691 As to sub-par (b) - the estimated cost of pre-emptiable space calculated at $75,000.00 per annum: The uncertainty of implementation of the draft plan of Optus as at the time of the incident is relevant to this 'benefit'. This may be illustrated, I think, by the following evidence of Mr Cearns: Q. And what was the size of the area that was being discussed? A. The pre-emptible space I believe was 290 square metres. Q. What was the status of that area as at November-December 1996? A. It was put forward to Optus and we were in the process of negotiating its acceptability. There were a number of outstanding items that our risk management people had some concerns about. They were expressed in a number of pieces of correspondence back. (T2304:31 - 43)

Similar observations to those made in relation to the last mentioned "saving" apply to this item. 1692 As to sub-par (c) - the cost of permanent space designated under the Statement of work comprising some 60 square metres: Tyco's submissions suffer from a mis-reading, in my view, of the terms of the Statement of Work earlier quoted in these reasons. I think it is clear from the terms of the Statement of Work that the 60 square metres was part of the contemplated 300 square metres of pre-emptiable space as appears from the following: "Optus has the option to use up to 60 sqm of the 300 sqm of pre-emptiable space on a permanent basis." 1693 Tyco has relied upon evidence of Mr Cearns in cross-examination suggesting that the permanent space was additional to the 300 square metres. Whether the evidence of Mr Cearns should be construed in that way is immaterial. The question is one of construction of the Statement of Work. I also note that here has been some confusion by Tyco with this item and the use by Optus of some 60 square metres by Optus at Homebush which is unrelated to the proposal in the Statement of Work. 1694 As to sub-par (d) - the cost of provision of Digital's management services indicated in the Statement of Work as being $270,000.00 in the 1996/1997 year and $190,000.00 in the 1997/1998: Tyco contended that those amounts should be credited against damages, subject to a reduction of the amount of the consultancy fee of $160,000.00 paid to Bergman & Voysey. Tyco has not satisfactorily explained, if at all, why costs related to the 1996 year should be brought to account. Otherwise, I think Tyco's case fails to take account of the additional "considerable" costs incurred by Optus in a replacement business recovery program. 1695 As to sub-par (e) - the cost of migrating development applications to equipment at Homebush in relation to LEVEL 1 equipment: Tyco estimated the cost to be approximately $53,00.00. Tyco's case is not beset by the same degree of uncertainty as affected other elements of this aspect of its case. At the time of the incident Optus was well advanced in its plan to migrate development systems to Homebush, as appears from the following evidence of Mr Cearns: Q. You were planning to migrate certain programs and certain equipment over to Homebush in the days at or about the time of the events; correct? A. Yes. Q. Have you made any attempt to work out how much that was going to cost? A. No, I haven't. Q. How many programs were going? You were going to migrate over, were you not, the equipment which is in figure B1A at page 3956 of exhibit 1.609? A. Yes. Q. That was to happen, was it not, virtually immediately; correct? A. It was planned for the 7th, I believe, yes. Q. That involved moving and installing all the equipment which appears in figure B.1a? A. Yes. Q. And all the testing and development programs associated with that? A. I believe so, yes. Q. You avoided that cost, you see, didn't you? It didn't occur. A. As a result of the incident we did not migrate, yes. (T1767:11 - 42) 1696 The only element of conjecture I think lies in the identification of the equipment that would have been involved in that exercise based upon the cabinet listing in the December 1996 strategy. Mr Cearns provided a detailed assessment of costs that would have been incurred [Ex 16.016] which was in the range of $17,424.00 to $18,924.00. Tyco asserted that to this should be added a cost of transferring other systems to Homebush which was contemplated in an Optus internal facsimile of 27 November 1996. The contemplated transfer, the subject of that facsimile, was unknown to Mr Cearns who, at the time of the incident, was responsible for Optus' business recovery plan, the strategy relating to the operation of data centres and the necessary support for that [T1526:40]. 1697 However, for the purpose of costing, in re-examination Mr Cearns provided an assessment of that further equipment in the range of $33,548.00 to $35,848.00. That cost of relocating equipment relating to Optus' development systems was not incurred following the incident. If an allowance was to be made, I think it would exclude the cost of relocating equipment the subject of the November 1996 email, as there does not appear to be any other evidence indicating that the equipment the subject of that email was in the process of relocation at the time of the incident. 1698 The evidence of Mr Cearns, I think, would support a finding that, in the process of time, further transfer of development systems to Homebush was one way of coping with space pressures on Rosebery. The acquisition of Blacktown could be expected to have had some bearing on Optus' business decisions in that respect: not as an alternative site for the development systems, but in the additional space that it offered, for whatever purpose Optus required of it. 1699 However, in my view, the benefit (as it has been described) that Tyco contended should be brought to account in relation to the avoided costs of relocation of development systems should not be treated as caused by the incident, rather than being a collateral event to it. Furthermore, Tyco's case failed to take into account the full, unquantified, costs of Optus' replacement business recovery program. 1700 In the course of its submissions Tyco listed some seven aspects of the acquisition of Blacktown as unquantified "Additional benefits". They included the capacity of Optus on acquisition to merge the Vision local telephony and cable TV network with Optus' existing network operations at Rosebery, providing economies of space and resources: additional space for the growth of a data centre and so on. In my view, there is no reasonable basis for quantifying things which may have flowed from the acquisition of Blacktown for the purpose of bringing cost saving 'benefits' to account by way of reduction of Optus' entitlement to damages. In the process of identifying the so-called benefits, I note that Tyco has made no reference to the cost to Optus of acquiring Vision. 1701 In dealing specifically with the "benefit" as particularised in sub-par (a) - (e) above, in all cases, I think, the claims of Tyco fail, to take into account the fact that Optus has embarked upon a business recovery plan, after consultations with Optus' insurer, that involved "considerable" costs. That is a reflection of the collateral nature of the "benefits" said to flow from the termination of Digital's business recovery services and from Optus' departure from the December 1996 business recovery plan after the incident. 1702 Item 35.1 Replacement Computer Boards: Part of the damages claimed by Optus included the sum of $207,241.00 which was the replacement cost of equipment that failed during the process of taking it out of operation, cleaning and reinstalling it. Tyco disputed liability for that cost on the basis that there was no evidence to show that the failures occurred as a result of the incident. In support of that contention, Tyco submitted that the cost records in support of this claim, being the subject of system index 529 and 530, did not relate the subject failures to the incident. 1703 There was no evidence that the failures were caused by the incident in the sense that the contaminant had damaged the equipment to the point of failure. However, that is not the basis upon which the claim is made. The claim is founded upon the commercial reality that, inherent in the complex process of taking equipment out of operation, removing it to an alternate site, submitting it to a cleaning process and returning it to its place of operation, inevitably involved failures and, further, that the problems of distinguishing failures which are inevitable in that process from ones that are the consequence of the conduct of operators involved in the process makes it impractical to differentiate failures in that way. 1704 The fact that such costs are inherent in a recovery exercise, such as that which Optus' equipment underwent, was recognised by both Digital and ExCEL and was accepted by Optus prior to embarking on the rectification of the damaged equipment. On 13 May 1998, Digital reported to Optus in relation to expenditures incurred in the restoration exercise. In doing so it noted that, prior to the performance of the rectification work, provision for costs had been made in the following terms: "Item 35.1 A provisions has been made to cover the replacement costs of computer boards that may fail during deinstallation, cleaning or reinstallation process. One board failure for each 10 cabinets has been assumed. While claim could be made on the cleaning contractor under such circumstances, the cause of the fault could be difficult to prove." 1705 ExCEL concurred in the inclusion of those costs, as evidenced in its report to Cunningham of 14 July 1997 (referred to in Optus' submissions as its March 1998 report) as follows: "Item 35.1 Board Failure during Clean

This is a budget estimate to cover the cost of board failures during the cleaning process. It is important to note that the disruption engendered by the removal, transport, cleaning, transport and re-commissioning is likely to introduce errors and faults. An acceptance of this risk is part and parcel of the clean v's replace with new strategy.

ExCEL concurs with the requirement to replace cards that manifest a fault during the recovery process. A draft document exists specifying the materials handling policy in regard to the allocation of responsibility for the equipment failures at the various points in the cleaning - re-commissioning chain. This document needs to be table [sic] formally." 1706 All parties involved in the restoration process at the time accepted that this cost was an inherent and unavoidable cost of the process. In my view, it should be treated accordingly and form part of Optus' damages. 1707 Item 200.2 Cleaning of the environment: Optus has claimed $151,880.00 for the cost of cleaning rooms and air-conditioning in the areas as summarised in Tyco's submissions as follows: "300. The plaintiffs claim an amount of $151,880 being the costs charged by Australian Disaster Recovery Pty Limited ("ADR") for cleaning the Switch and Transmission Room and other areas within the Sydney Technical Centre at Rosebery. According to the plaintiffs' Submissions on Quantum the rooms cleaned were the Switch Room (Zone 1), the Transmission Room (Zone 1), the UPS Room (Zone 1) the ESP Training Room (Zone 1), the MAPS Room, the Interface, the Main Switchboard and Power Room (all in Zone 2), the FMC Room (Zone 4) and the Inergen Storage Room and Staging Area." (footnotes omitted) 1708 The amount is disputed by Tyco for the reasons set out in its following submissions: "302. Optus received a quote from ADR to clean the areas referred to in paragraph 300 above at a cost of $151,880. Optus also received a quotation from ADR for the cost of cleaning the rooms referred to above with the exception of the FMC Room, Inergen Storage Room and Staging Area at a cost of $75,320. Mr Cearns agreed that the difference between the two quotations reflects the costs of cleaning the Staging Area, Inergen Cylinder Storage and FMC Equipment Room. Mr Cearns also agreed that the quote for $75,320 was not just for cleaning in Zone 1 as it included the Power Room, Main Switchboard Room and Interface Room all of which are in Zone 2 and the MAPS Room which is not part of any zone. On the basis of these quotations Tyco submits that the cost allowed for cleaning the Rosebery Switch and Transmission Room should be no more than $75,320. This is a generous allowance as the quote for $75,320 included the cleaning of the Power Room, Main Switchboard Room, Interface Room and MAPS Room none of which are included in Zone 1." (footnotes omitted) 1709 EMAE appeared to have adopted, in substance, Tyco's contentions in relation to this cleaning cost which counsel for EMAE referred to in oral submissions as "the $63,000.00 case". In cross-examination of Mr Cearns, counsel for EMAE dissected the various costs that go to make up this claim. It is not a rewarding exercise to go through the detail of the breakdown of costs reflected in that cross-examination and I have adopted the figure of $75,320.00 which Tyco accepted was "a generous allowance" for the cleaning of zone 1. 1710 There was no evidence that the areas outside of zone 1 and zone 3 were directly affected by the discharge of contaminant and Inergen gas in the incident. 1711 On behalf of Optus it was submitted that in examining this item of claim I should take into account the following: a) the mobility of the contaminated discharge as exacerbated by the operation of the air-conditioning system; b) the relatively short distances between the point of the discharge and the adjacent areas involved in the clean up; c) the fact that a discharge test had been carried out in zone 2 as part of the commissioning process on 8/9 July 1995 and that from Ex 9.03 it can be seen that pipework joints had failed allowing discharge into the Inergen storage room and staging area. 1712 Of these contentions Tyco submitted that there was no evidence of the mobility of the contamination, nor of the distances between zone 1 nozzles and the adjacent areas, nor of any contamination as a consequence of the July 1995 discharge test, as to which it was also noted that Optus did not plead damage as a consequence of that test discharge. Tyco did not dispute that the pipework joints had been forced open and discharge had occurred into the Inergen storage room and staging area. 1713 In my view it is a question of reasonableness. I accept that there is no direct evidence of contamination in the areas other than zone 1 and 3. However, as a matter of reasonableness, one is obliged to approach the response by Optus in the context of a centre which was a highly valuable sensitive operations area and where cleanliness in the environment was absolutely essential. The level of cleanliness demanded extended to procedures and resources designed to exclude dust particles from the environment. The evidence in these proceedings of the contamination involved minute particulate matter and its capacity to damage the equipment. 1714 I think, in those circumstances, one should not be too restrictive in examining the reasonableness of Optus' response to the incident and, in my view, it was eminently reasonable for Optus to ensure that the adjacent areas were not left in a contaminated state. The nature of the work involved reflected the reasonable concerns of Optus to ensure that there was no residual contamination in the adjacent areas to zone 1. 1715 The nature of the work involved was summarised on behalf of Optus as including vacuuming, wet cleaning of external surfaces including ceilings, walls, floor, piping, air-conditioning ducts, light fittings, cable trays and cables, in addition to the external surfaces of the cabinets. In my view, the claim should be allowed in full. 1716 Non-confirmed amounts: Tyco has disputed several items of cost primarily on the basis that they are not costs in Optus' register of costs produced by the system of recording costs of recovery which have been 'confirmed' by Mr Cearns and, in relation to particular items of cost that there was no evidence that they were costs related to that incident. On the face of the submissions of Tyco and Optus there is confusion as to the extent of the dispute raised by Tyco under this heading: a confusion that was not removed during the course of oral submissions. 1717 The confusion arises out of the assertion on behalf of Optus that items disputed by Tyco of this character have been reduced to three items, namely cost item 100.1, cost item 100.3 only as to $4,392.09 and cost item 130.4 only as to $120.00 (that figure is not a typographical error). Tyco has not accepted that assertion and the approach I have adopted is to treat all of the matters raised in Tyco's submissions as being in issue. 1718 As to cost item 100.1 - Unisearch fees: of the amount of $27, 805.00 claimed by Optus, Tyco does not dispute costs the subject of systems index 849, 855, 859 and 867 which amount to $2,205.00. The balance of the cost item is disputed on the basis that there was no evidence that the costs were incurred by Optus "as part of the recovery process" and that the evidence pointed to these costs as being costs of "investigation as to the cause of the incident which lead to the preparation of reports filed in these proceedings": presumably, contending that they would be costs in the nature of costs of the proceedings (which raises the query why that item of costs could not have been the subject of agreement). 1719 The costs as recorded in System Index 851, which is the amount in dispute, is supported by a Unisearch invoice which recorded of particulars of time spent by Dr Doig, Mr Thompson and Mr Flynn between 3 February and 18 February 1997. Details of the time and activities involved are such that, in the context of the evidence of Mr Flynn and Dr Doig, I am satisfied that the costs are substantially costs incurred in the course of identifying the source, cause and nature of the contamination of the Optus equipment as a consequence of the incident and, I think, properly should be treated as part of the costs of rectification. There may be a grey area of legal costs involved. However, the allowance of these costs I think is justified as part of Optus' damages and cannot be duplicated as part of the entitlement of Optus to the cost of the proceedings. 1720 As to item 100.3: this expense code related to fees of consulting engineers Guttridge Haskins & Davey which costs are the subject of System Index 874 - 876 and 881. Item 874 is in the amount of $4,392. 09, Item 875 in the amount of $614.46, Item 876 $341.21 and Item 881 $1,376.40. The last mentioned amount was included by Optus, inadvertently, it having, at an early stage in the proceedings, amended its claim to exclude costs relating to a heat exchanger at Cambellfield. 1721 It is very difficult to come to terms with the lack of common sense in putting in issue items of the magnitude Systems Index 875 and 876. It is some indication of the failure of the parties to reach some practical accommodation of costs of this kind. In relation to System Index 874, the cost record included a report of Guttridge Haskins & Davey of April 1997. The purpose of the report was "to review, comment and advise on the quantity of Inergen gas to Zone 1 compared to that discharged to Zone 3". The purpose of the report appears to have arisen out of a concern of Optus as expressed in the report as follows: "That had there been a fire in Zone 3 the Inergen gas concentration may have been insufficient to suppress such a fire." 1722 No issue has arisen in these proceedings as to the adequacy of the fire suppressant system to serve its purpose in particular zones. However, having regard to the time at which that report was obtained, I think its is sufficiently related to the incident as part of the investigation by Optus of the full extent of the implications of the incident so far as it concerned the failure of Leighton and Tyco to provide an Inergen system in accordance with specification requirements. For that reason I think the costs should be allowed. Having regard to the nature of the invoices supporting System Index 875 and 876, it follows that those two items should be allowed. As noted, the cost recorded in System Index 881 is not part of Optus' amended claim. Accordingly cost item 100.3 should be allowed except for that sum of $1,376.40. 1723 Cost Item 130.4: In relation to this cost item, Tyco has disputed costs the subject of System Index 954 in the sum of $120.00 and costs the subject of System Index 955 in the sum of $1,600.00. The invoice in System Index 954 is by API security for the cost of padlocking the container containing the Heat Exchanger on 13 March 1998. On the face of it, it is a cost on the periphery of the investigation of the incident in the form of securing the Heat Exchanger after it had been transported to the Hunter Valley for investigation. As such it may form part of the Optus' legal costs. I propose to allow it as part of damages and if the approach adopted in these proceedings is persisted in when the time comes for assessing costs, that will no doubt be carefully examined on the assessment of costs to avoid disputation. 1724 The record supporting System Index 955 included an invoice from Australian Data Solutions of 27 February 1998 for the valuation of equipment which arose, on the face of the records, out of an approach by Optus to Excel to approve use of the left over equipment by Optus as part of its Y2K compliance program, for which purpose some value was required to be placed upon that equipment. In my view, while peripheral, the cost should be regarded as part of the cost of rectification in the form of the cost of steps taken by way of mitigation of damages. 1725 In relation to cost items 5.2, 21.2, 21.5, 25.1, 27.1, 28.3, 30.1, 34.1, 35.1, 52.1 and 53.1, Tyco has submitted that an amount of $11,479.00 should not be accepted as part of Optus' damages. It was submitted that although these costs were recorded in the register established by Optus for the purpose of isolating costs of rectification, they have not been "confirmed" by Mr Cearns. They are not disputed on any other basis and having regard to the views I have earlier expressed concerning the reliability of the system, I am satisfied that these costs should not be rejected on the basis advanced on behalf of Tyco. 1726 To put that contention of Tyco in perspective, Optus identified several registers of costs in the form of printouts of costs as recorded in the recovery costs system, the latest of which was that reproduced by Mr Cearns in the form of Exhibit 10.022A. 1727 To understand the nature of that document, it is a confirmation report which was admitted into evidence on 24 April 2001 in the form of "an updated confirmation report" produced as a consequence of Mr Cearns having "become aware of a number of additional invoices" being in existence during the course of his cross-examination. That enabled him to present the update of the confirmation report which had accompanied his statement of evidence in chief. [Ex 10.020] 1728 The task undertaken by Mr Cearns was, without any question, a remarkable exercise in diligence and detail and, primarily, prompted by the approach adopted by the defendants by attempting to put Optus to proof of the costs recorded in the recovery costs system as true rectification costs. To have some understanding of the extent of the task involved, there are some 22 folders in evidence being exhibit 8.001, comprising a system index ranging from 1 to 1011. Each index was associated with supporting cost records which comprise several thousand pages of records. In relation to those cost records, Mr Cearns' confirmation report, accompanying Exhibit 10.020, ran to some 49 pages and that produced in evidence on 24 April 2001, ran to 72 pages of review of countless cost items of claim. That exercise, at least, served the purpose of further bolstering the reliability of the cost recording system. 1729 To have put in issue the cost items as particularised by Tyco under this heading, simply on the basis that they are "unconfirmed", without any attempt to demonstrate why the costs as recorded by Optus in its cost recovery system are in some respects suspect, is not, in my view, of particular assistance in resolving disputes of this nature. In any event, for the reasons I have given the costs should be allowed. 1730 Cost Item 30.2: Rosebery-Data Centre Recovery Space Impact of Delay Projects: Optus has claimed the sum of $216,736.00 as a delay cost incurred under a consultancy agreement between Optus and Kenan Systems Corporation (Kenan) of 29 October 1996. It was due for completion in April 1997 and, in fact, was delayed until June of 1997. 1731 The subject of the agreement was the implementation of Optus' Bill-A Project, the object of which was to enable Optus' residential customers, who had both mobile and wire-line telephony services, obtain a single bill for the cost of those services from Optus. 1732 Kenan was the supplier of the software known as ARBOR upon which that project was based. It was the evidence of Mr Gerard Joseph Taylor an IT architect who worked for Optus until June of 1999 that the project was delayed for two months between April and June 1997 as a consequence of the diversion from the project of a team known as the GSMIS test team to assist in the migration of the GSMIS applications as part of the rectification process engaged in by Optus. 1733 Mr Taylor's position between May 1996 and September 1996 was the "IT Group Business Manager - Residential Billing Re - Architecture", in which position he was engaged in a project which was the precursor to the Bill-A project. Between September 1996 and June 1997 he was the "IT Business Manager - Customer Care and Billing Migration Strategy", in which capacity his responsibilities were "primarily in relation to the Main ARBOR Project". 1734 In his evidence in chief Mr Taylor stated that the GSMIS test team were diverted from the project in about March 1997 and, that as a consequence of that diversion, the Bill-A Project was delayed, during which time the Kenan staff continued to work on the Bill-A Project. As a consequence Kenan submitted to Optus a "Form of Work Order." That Work Order was part of the cost records supporting System Index 502 which was the relevant cost index for this item of claim. That work order was dated 24 May 1997 and was in the following terms: "A. Name of task and approximate completion date:

Task Approximate Completion Date 1) Additional Full Time support for Testing June 16th 1997

B. Definition Statement or brief description of work to be performed (attach additional sheets if necessary):

Kenan Systems Personnel were required to provide additional full time testing support for the Optus Solution Test team for an extra two months due to the change of the launch date to the BillA project.

The cost of providing the full time support for solution testing is 160,000 US$

D. Company personnel to be available to assist KSC in the Project:

N/A" 1735 There was no issue raised as to the conversion rate applied by Optus to that charge. The work order was signed by Mr Taylor and Kenan subsequently invoiced the cost of the "Additional Full time support for testing" by invoice dated 17 June 1997. The cost was accepted by ExCEL as a delay cost appropriate to be posted to the costs recovery record of Optus. It was so posted on 11 November 1998 in terms of a journal entry form which was signed on behalf of ExCEL posting it to item 30.2. 1736 The supporting documents also included an internal email of Mr Taylor to Mr Cearns of 8 April 1998 in which he identified various cost items which included the Kenan work order. The email contained the following statement: "The above costs were incurred since the initial relocation attempt in April 1997 occurred while Bil-A was in Solution Test. The GSMIS test team were redeployed to the DCRP activity which prevented BillA solution testing proceeding. With the delay in the BillA project the requirement of a full-time BillA project manager was extended by 9 weeks." 1737 Mr Taylor's evidence was adduced following cross-examination of Mr Cearns which sought to establish that he had no direct involvement or personal knowledge of the Bill-A project sufficient to entitle him to state that the Kenan invoice was properly attributed to the cost of rectification.

1738 On the evidence, Mr Cearns did not have personal knowledge of the day to day activities of the Bill-A project team sufficient to enable him to form an independent opinion as to the correct attribution of this cost to the rectification costs. However, having regard to the nature of the system established by Optus, the material provided to Mr Cearns by Mr Taylor and the concurrence of ExCEL in attributing costs of this nature to the rectification cost journal, that evidence should be treated as sufficient basis to accept Optus' treatment of these costs. 1739 Tyco put into evidence a bundle of documents [Ex 18.005] which is a collection of material obtained by Tyco in relation to the Kenan contract and its performance. Included in that material is a capital expenditure evaluation document which outlined the nature of the project and which contained the following schedule of completion dates: KEY DELIVERABLES AND TIMING (Basic scheduling with completion dates) -Completion of BRS 11 October 1996 -Fixed Price Quote and Vendor Proposal (Kenan component) -Project Plan and Schedule 25 October 1996 -Completion of Solution Design 29 November 1996 -Completion of Operational Project Overview, Test Plan, Training Plan, QA Plan 13 December 1996 -Completion of AFSs 17 January 1996 -Delivery of Hardware 22 February 1997 - Delivery of Kenan Arbor Core System Version 6.x 7 March 1997 -Development of mods to CASS, GSMIS, etc. 18 April 1997 -Completion of integrations and UAT testing

1740 In addition to that documentary evidence, counsel for Tyco cross-examined Mr Taylor at some length in an exercise which, in substance, was one going behind the records of the system identifying this cost as part of Optus' cost of rectification. The cross-examination in my view had a significant difficulty about it in that none of the documents upon which Mr Taylor was cross-examined were documents of which he was an author. Probably in every case, it was a document he had not sighted, or had no recollection of having seen it. 1741 The cross-examination, however, so far as it involved a technical explanation of the subject matter of the documents I think was legitimate, the more so since Mr Taylor had expressed in his evidence in chief an opinion identifying the cost as one that was caused by the transfer of the Optus GSMIS test team away from the Bill-A project to the restoration of the contaminated GSMIS system. 1742 The rationale for calling Mr Taylor presumably, was that it was his email upon which Mr Cearns, in part, relied in identifying the cost as attributed to the removal of the GSMIS test team from the Bill-A project and the fact that Mr Taylor was a party to the examination by the Bill-A project team of the rescheduling effects of the delay attributed to the removal from the Bill-A project of the GSMIS test team. [T2451:22 - :56] [T2430:10 - :28]. 1743 However, it was also established by his evidence that Mr Taylor's "involvement was really one of providing advice in terms of major decisions being made with the project" relating to schedule changes, as appeared from the following cross-examination: Q. By this stage, your involvement with the project was at a higher level which didn't involve solution testing; is that correct? A. My involvement was really one of providing advice in terms of major decisions being made with the project. HIS HONOUR: Q. I am sorry, advice to whom? A. It would have been first of all my manager at the time, who would have been Pat Buonincontri. Q. Anyway, apart from that person? A. Another person would have been Jeff Rollason. He was the manager of the test teams - the GSMIS and CASS solution test teams, who also provided the resources for the Bill A test team. So they would have been the two principal people I would have provided advice to. MR LOCKHART: Q. It is the case, isn't it, that your advice was given in response to a request from persons within Optus as to certain particular matters; is that right? A. It was normally in response to the project team coming to me or those managers coming to me and asking advice in terms of, you know, how can we accommodate schedule changes - that is one example. There are many different aspects of the project. Q. Your advice was given when it was sought; correct? A. Yes. Q. So unless your advice was sought in relation to a particular matter, you didn't offer advice in relation to the project? A. No. Q. You agree with that? A. I agree. …… MR LOCKHART: Q. Do you recall there was a delayed start to the solution testing, or do you have no recollection of that? A. I don't have any recollection in terms of any specific delay in the start. Q. If there had been delays, because you weren't directly involved in this, you simply won't know about it; is that right? A. If there had been small delays, most probably not. Any significant delays, yes. HIS HONOUR: Q. When you say "Any significant delays", you would have been informed? A. I would have been made aware of it because I was involved in reviewing the rescheduling and knew what the status was at that point in time in the process of rescheduling. (T2408:14 - 5; T2417:50 - T2418:9) 1744 There are two aspects of that evidence of some importance in the consideration of the matters the subject of the reasons that follow, namely a) Mr Taylor did not have day to day involvement in the project and was not conversant with scheduling matters on a day to day basis. His only involvement was in relation to significant or major rescheduling with the consequence that much of the cross-examination of Mr Taylor on the Bill-A project bundle of documents related to matters of which he had no knowledge or passing knowledge. b) an inference is available in respect of particular items of delay, other than the claimed delay resulting from the diversion of the GSMIS test team from the project, namely, if Mr Taylor was not brought into the consideration of the delay it was not involving a significant rescheduling and was unlikely to be one on the critical path. 1745 Mr Taylor's role is important in understanding the evidence upon which Tyco has relied. 1746 Tyco's position was founded upon two propositions, namely a) since Kenan worked throughout the period of the alleged delay, Optus had the benefit of Kenan's services and incurred no loss through that alleged period of delay. b) In any event, the period of delay was concurrent with another neutral cause of delay, neutral in the sense that it was unrelated to the incident. 1747 There was no substance in the first proposition. That completely ignored the existence of time related costs and clearly the Kenan invoice and the authorised order form concerned time related costs. In this context, I think is important to note that Tyco has not attempted to dispute the estimate of two months delay to the Bill-A project. Tyco's case was one of undermining the reliability of the register of costs of rectification by showing that there could have been, or were, other delays to the Bill-A project concurrent with the delay caused by the removal of the Optus GSMIS test team from the project. Hence, the delay costs of Kenan would not have been properly attributed to the consequences of the incident, or may well not have been properly so attributed. 1748 My observation of Mr Taylor as a witness was that he endeavoured to be scrupulously frank in his responses to a point that at times it was very difficult to elicit evidence from him. He was very inexperienced in the environment of the witness box and freely made concessions to a point that, in some instances, I had reason to doubt the correctness of the concession and, in others, considered that he was plainly wrong in accepting propositions put to him against interest. 1749 Unfortunately, in order to reach a conclusion in this matter, I think it is necessary to examine the evidence in some detail. In doing so, I have some doubt as to the precise nature of the question to be addressed: whether the issue is one in which it is necessary for me to determine, on a balance of probabilities, whether the removal of the GSMIS test team from the project caused a delay on the critical path of the project, or whether the evidence adduced justifies a finding that the record of costs as maintained by Optus as costs of rectification may be acted upon as a reliable record of costs of rectification. I think it is preferable to approach the matter on both bases. 1750 Issues of the kind as first expressed are notoriously vexing in that they involve delay questions which, in turn, require a consideration of the critical path of a project and the effect of delays upon that critical path. As a matter of common knowledge, those issues are open to quite subjective and differing judgements, both as to the identification of the critical path and as to the effect of subject delays upon it. Those questions further involve considerations of what steps might have been taken to avoid a delay which, if unattended to, would operate to extend the time reflected in the critical path of the project. When that nature of Tyco's case is reflected upon, one may appreciate the foresight of Optus in setting up a sophisticated system of in-built, requirements for authorisation and one which was overseen by the insurer's representative in isolating costs of rectification in the form of the complex system indices with supporting documentation. 1751 I think it is also of some importance to note that neither party has addressed this issue in what I would describe as the conventional way of adducing evidence, both lay and expert, of the daily performance of the project, examining it in terms of each element of delay as it emerged; identifying a critical path or critical paths and evaluating the effect of each delay on that path or paths and the steps that might, or should have been taken to avoid delays as they occurred and where concurrent delays operated, to identify the extent of the delay that was 'neutral' as distinct from one for which one party or another was said to be liable. Such a dispute would occupy several weeks of litigation. 1752 Given the approach adopted by the parties, I think all that I can do is the best one can on the material with which I have been provided. 1753 The conclusion I have reached is that, on the balance of probabilities, the delay the subject of the Kenan invoice of delay costs was the consequence of removing the Optus GSMIS test team from the Bill-A project to assist in the migration of the GSMIS system as part of the restoration work undertaken by Optus. 1754 Independently of that view, I am also of the opinion that, on the material available to Optus, the cost the subject of the Kenan invoice has been reasonably attributed in the record of costs as expenses incurred as a consequence of the incident. 1755 As a starting point I think it is reasonable to observe that throughout the evidence of Mr Taylor on the Bill-A project documents there was never any mention of a critical path. Delays are treated as discrete things with no attempt to evaluate them in terms of a critical path, nor in terms of the capacity of any party involved in the project to avoid them, or overcome them. 1756 The Bill-A project bundle of documents do not purport to be a complete record of all documents associated with the project. It consisted of some 162 pages and comprised the capital expenditure evaluation document earlier referred to in these reasons, the agreement between Kenan and Optus to which I have also referred, the remainder mainly consisting of daily status reports covering a period from 7 March 1997 to 11 June 1997. 1757 In order to understand the records and the cross-examination of Mr Taylor I think there would be some utility in including the daily status reports of 17 March 1997, 1 April 1997 and 3 April 1997 as Schedule W to these reasons. I have chosen those three reports as the first is a contemporaneous record in the construction records of the fact that some adverse impact on time would flow from giving priority to the GSMIS migration program. The second was a contemporaneous note of the decision of Optus' directors to give priority over the Bill-A project to the relocation of the GSMIS to Homebush and the further acceptance of its effect upon the "production availability of Bill-A" which was to be determined on 3 April 1997, the date of the third report which recorded that assessment. 1758 The terms in which that assessment was expressed in the daily report of 3 April 1997 have given rise, principally, to the Tyco challenge to the validity of attributing this cost of delay to the consequences of the incident. 1759 The executive summary of the report of 26 March 1997 included the following: "At the Directors' meeting yesterday, a decision was made to give priority to the relocation of GSMIS from Rosebery to Homebush. At this time, this potentially can add several weeks delay to the delivery of BillA to the business. The Project Team is investigating the impact of this move and will deliver the new production availability date of BillA on 3 April 1997." 1760 From that paragraph it may be noted that those involved in the project saw the potential for this decision to "add several weeks delay" to it and that it was that delay which was to be investigated by the Project Team for decision on 3 April 1997. In the report of that date it will be noted that the executive summary was expressed in the following terms: "The impact of the relocation of GSMIS to Homebush and the changes to GSMIS 4.2 has been determined. BillA will be delivered on 16/6/97. This is dependent on the successful migration to production of the relocated GSMIS 4.1.1 at Homebush on 28/4/97 and the availability of the revised GSMIS 4.2 for Solution testing on 5/5/7. In order to meet the delivery schedule, we will be conducting parallel vendor and solution testing after a week of vendor testing."

1761 It is the reference to the "changes to GSMIS 4.2" that has given rise to much of the cross-examination of Mr Taylor and the submissions presented on behalf of Tyco. I think the height of the cross-examination of Mr Taylor may be found in its closing stages as follows: Q. Once the delivery of the GSMIS version 4.2 had occurred and the relocation of the GSMIS 4.1.1 had occurred, end-to-end solution testing could recommence, but not before - that's correct, isn't it? A. Yes. Q. What the note on page 117 shows is that the databases were ready for activation on 7 May, but you simply don't know when the end-to-end testing recommenced - is that what you're saying? A. I wouldn't know the specific date. What they're doing is re-executing the test cycles again. So they are cleaning up the environment so they can do a new clean run through the testing cycles. Q. Do you know when the revised GSMIS 4.2 arrived for the purposes of the solution testing, or don't you -- A. The actual date I don't know. Q. The reality is, Mr Taylor, is it not, that it is simply fanciful to suggest that the extended testing period for which Kenan billed Optus was brought about solely by the decision to relocate the GSMIS; correct? A. Solely? Q. Yes, solely. A. Correct. Q. In fact, the extended testing would have happened in any event because of at least the very significant problem of the service maintenance feeds which required delivery of a revised GSMIS 4.2 system; correct? A. It required delivery of changes, yes. …… Q. So the test team, the GSMIS test team had nothing to do with the conduct of the modifications to the GSMIS 4.2; correct? A. They would have had to test it. Q. Yes, but that testing occurred after the delivery of the GSMIS 4.2 in modified form; correct? A. Yes. Q. So they had no involvement until that time - that is, the delivery of the modified GSMIS 4.2; correct? A. They would have been involved previously in terms of identifying the problem. Q. Well, again, Mr Taylor, you don't know that, do you? A. No, they would have. Q. In terms of identifying the problem, did you say? A. Yes. Q. But in terms of rectifying the problem, they did not have involvement; correct? A. No, they have to test it. Q. But the testing didn't occur and couldn't occur until after delivery of the modified 4.2; correct? A. It didn't occur, yes, until that was delivered. Q. So it's correct, isn't it? A. The testing did not occur until it was delivered. Q. Mr Taylor, when you determined to pay the amount in relation to the two months of extending testing to Kenan, did you give any consideration to the fact that there had been significant delays in the completion of the project due to the events wholly separate from the event of 3 January? A. Can you repeat the question. Q. I will put it again. When you determined to pay the amount to Kenan in relation to the two months of extended testing, did you give any consideration to the fact that there had been significant delays in the completion of the project due to the events wholly separate from the events of 3 January? A. I took consideration of, obviously, the delays and knew that the original schedule would be - was around early April and I also took into account what was advised to me as the primary cause for those delays. Q. But, Mr Taylor, you didn't know about these other problems at the time; correct? A. That's right. Q. The fact of the matter is that there were all sorts of problems involved in solution testing and you cannot say that there was a single cause, that being the relocation of the GSMIS to Homebush; correct? A. I cannot say that is a single cause, no. Q. So far as you know, exactly the same delay could have occurred irrespective of the incident of 3 January - you don't know any different, do you? A. A delay could have occurred for other reasons, yes. Q. That's right, isn't it - and the delay would have occurred due to the other reasons, including the problems involved with the service maintenance feeds; correct? A. Sorry, could you repeat that again? Q. Yes. The delay would have occurred due to the other reasons, including the problems I've referred to involving the service maintenance feeds; correct? A. There would have been a delay. Q. And you can't say that that delay would not have been such as to delay the project for the time that it was thus incurring the additional Kenan expenses; correct? You simply can't say? A. I can't say what the extent of the delay would be. Q. So you therefore agree with my proposition, that you can't say that the delay would not have been such as to delay the project for the time that it was, thus incurring the additional Kenan expenses in any event. A. Sorry, can you repeat it, please? Q. You've said that you can't say what the extent of the delay would be in relation to the problems other than the relocation; correct? A. Correct. We'd be surmising what the - you know -- Q. You can't say -- A. -- what the timetable would have been. Q. You can't say what the extent of that delay would have been, can you? A. I can't say what the extent would be, no. Q. You have already agreed that there would have been a delay; correct? A. Yes. I don't know what the size of that delay would be. Q. You can't say; correct? So it follows from that that you can't say that the delay that in fact occurred would not have been such as to delay the project for the time that it was delayed, thus incurring the additional Kenan expenses; correct? A. Sorry, could I ask you to repeat that? Q. The proposition is simply this: irrespective of the incident on 3 January and the relocation of GSMIS, Optus would have incurred the additional Kenan expenses in relation to the extended two months solution testing anyway; correct? A. No, I wouldn't say this. Q. You simply don't know, do you? A. I would be unsure what the extent of the delay would be, yes. Q. Can I take you to paragraph 11 of your statement, Mr Taylor? Do you have that there with you? Paragraph 11, the last sentence. Do you see that? A. Yes. Q. In expressing that opinion you had no regard to the other problems that we have referred to today; correct? A. I knew there were some problems in solution testing but of not [sic] of the nature causing that delay. Q. You had no regard, when you formulated your opinion in paragraph 11 of your statement, to the problems related to the service maintenance feeds; correct? A. Correct. Q. Because you just didn't know about it; correct? A. I knew about there [sic] was some problems. I most probably wasn't fully aware of their extent. Q. So, Mr Taylor, you really cannot express an opinion, as you do in paragraph 11, where you say: As a result of the diversion of the GSMIS test team to the recovery project, the scheduled completion date was delayed from early April to early June. You cannot express that opinion, can you? A. Well, it was a factor in the delay. Q. You are unable to express the opinion that it was the diversion of the GSMIS test team that caused the delay of the scheduled completion date - that's correct, isn't it, because you simply don't know? A. It was a factor. Q. The other factors we have referred to might have been equally sufficient to bring about that same delay - that's correct? A. The other items we went through could have contributed, yes. Q. And so far as you know, those other items, irrespective of the relocation to Homebush, could have been sufficient to bring about that delay; correct? A. They could have - it's possible. Q. Mr Taylor, in paragraph 13 you refer there to the Kenan staff who worked during the two-month period, each of whom were charged out at a rate in the order of $2000 per day. Presumably during that two-month period, they were working on solution testing in the way you've described; correct? A. Yes. Q. In that respect, Optus was getting value from the work that Kenan was doing during that period; correct? A. Yes. (T2441:22 - T2442:57; T2443:16 - T2446:53) 1762 Re-examination on the GSMIS 4.2 feed problem was as follows: Q. The reference to service maintenance feed problem here involved who in fixing it up? A. It involved - principally involved the EDS development team initially, but also would have to involve - that's the GSMIS team - GSMIS/EDS team. ……. MR GREENWOOD: Q. Am I right in saying that there was a GSMIS 4.2 which was being initially tested - that is, before the service maintenance feed problem - a new 4.2, which was being tested and that was part of the solution testing that was going on; correct? A. Yes. Q. Then there was a service maintenance feed problem; right? A. With that release, yes. Q. With the 4.2? A. Yes. Q. And that problem needed to be solved in some way? A. Yes. Q. What was involved in solving the problem? A. There would need to be, first of all, identification what the problem was; then identification of who would do - make changes to rectify the problem, whether Kenan would make the changes or whether EDS would make the changes because Kenan developed the ARBOR side of the interface and EDS developed the GSMIS side of the interface. It was determined to get EDS to fix up that side of the interface so they would have their -- MR LOCKHART: I object to this evidence. HIS HONOUR: I will hear the evidence, Mr Lockhart, then I will hear your objection. THE WITNESS: So the EDS technical team would have had to design the changes and then they would have to do the code changes. Then they would test and then the GSMIS solution testing team would then test it. …... Q. You were involved in rescheduling, you said, the program. When did you become involved in that rescheduling? A. It would have been in March. Q. You were taken to a Bill A solution test daily status report of 26 March. It is at page 77 of that bundle which is MFI86. A. Yes. Q. That was the report that referred to the decision being made the previous day to give priority to the relocation and it potentially adding several weeks delay. Was it shortly after that that you became involved, or at that time that you became involved in rescheduling? A. I became involved prior to that decision. HIS HONOUR: Q. Involved in what? A. I suppose assessing what, if they were going to go and move the GSMIS platform, what sort of impact would it have on the project. MR GREENWOOD: Q. Were you involved in the actual rescheduling of the anticipated completion date to 16 June? A. I had input into that. Q. If you go over to page 81 of that bundle, that's the 3 April status report which refers to the rescheduling of 16 June. What was the input that you had in terms of the selection of that rescheduling date? A. Exploring what things could be done without the GSMIS test team. …….. Q. I will put it another way if it makes it easier. You were asked questions about the elements of impact of the relocation and the changes to the 4.2. You said there was a connection between the two. I am asking you what was the impact of the unavailability of the test team on the rescheduling. ….. THE WITNESS: The majority of the testing couldn't proceed without that test team there. With relation to the fix, the fix couldn't be tested until that test team was available. ..….. MR GREENWOOD: Q. The reference change to GSMIS 4.2, or as you just referred to it as "the fix," how did that impact on the rescheduling? A. If you like it was - it fitted into the rescheduling. The rescheduling was done and then when the - with the timing of the fix being available, when it was going to be available, that was aligned with what had been rescheduled. So the timing of the delivery of the fix didn't delay past the 16th - the schedule that was already set to the 16th time frame. Q. What do you mean by that? I don't know what you mean. A. Maybe I can put it a different way. The Optus environment very much had to have this in as early as possible. Q. Had to have what in? A. The Bill A solution. There was a rescheduling exercise that was being done due to the changes - due to the relocation of GSMIS and when EDS came back and said, "This is when we can do the fix given the current workload." There was like no push-back, if you are, like, saying that was not early enough. Q. Why? A. The fix to 4.2 service maintenance feed, EDS advised when they could deliver that -- Q. Yes. A. -- in these situations normally if that wasn't - not in an agreeable time frame by Optus they would have put an extreme lot of pressure to have that changed or look at other options to have it changed to meet an earlier date. ……… Q. Mr Taylor, could you be a little more explicit in terms of your role in rescheduling of this testing procedure that is referred to starting at page 77 and I think it is taken up at page 81? Can you tell me what your involvement was in the rescheduling process? A. I recall working with Jeff Rollason and Craig Humphreys in terms of if they were moving the GSMIS platform, what did that do to their testing schedule. Q. What did that -- A. What was the timing impact to the testing schedule and was there any other - exploring any other options to reduce the impact of having the GSMIS move occur as a higher priority. Q. Now, in that exercise did the revision of the GSMIS 4.2 come into consideration? A. Not really. There was only a certain amount of testing that could have been completed and we needed the GSMIS component and the team to be available to complete the significant portion of the testing. …… Q. One other thing, there is a question that you were asked at page 2441 and I just raise it now, your Honour, if your Honour wouldn't mind going to it, it is at 12.37, lest the answer be considered to be in agreement with the proposition in the question. It starts out: In fact, the extended testing would have happened in any event because of at least the very significant problem of the service maintenance feeds which required delivery of a revised GSMIS 4.2 system; correct? And, Mr Taylor, you answered: It required delivery of changes, yes. Were you intending to agree with the proposition that was earlier in the question, namely, that extended testing would have happened anyway because of the service feed problems, even if the GSMIS test team had been available the whole time? A. Retesting would have been required, or testing would have been required. If the testing team were available earlier there would have been a lot of pressure requiring the fix to be available earlier. ……. Q. You mentioned earlier that there was this feed problem and a question of who would be involved in fixing it in terms of EDS or Kenan. What did you understand or what do you understand to be the nature of the problem that was encountered in March 1997? A. The outcome of the problem was that the data, service data being populated in ARBOR was not being correctly populated and I believe there was some consideration given to what possible solution there may be to that. In the end they decided the solution was to make GSMIS changes and I think the other options weren't explored very much at all. ……… MR GREENWOOD: Q. Mr Taylor, you gave an answer to the effect that the outcome of the problem was that the service data being populated in ARBOR was not being correctly populated. Before we go on, what does that mean, "being populated"? A. ARBOR produces the bill that you received. Now, the service details - now, I'm not quite sure exactly what items of data weren't being populated correctly but my understanding was there were data that wasn't being populated correctly. Q. What does "populated" mean in this context? A. The information to end up in the ARBOR application so then ARBOR could process and do the billing correctly. Q. So data transfer? A. Data transfer. Q. And you said that you believed there was some consideration given to what possible solution there may be to that, one being the GSMIS end - what is the other? A. End of the interface and ARBOR was the other end of the interface. ARBOR actually did some specific coding of that end of the interface as well, or Kenan Systems did that development work, if you like. So if you have a situation where the data in ARBOR is not being transferred correctly, you potentially have opportunities at different spots to rectify the problem. Q. Right. What are the different spots? A. One would be the GSMIS end and one would be the ARBOR end of the interface. Q. Do I take it from what you have said that the EDS option was the GSMIS end? A. Yes. Q. And the Kenan approach would have been at the ARBOR end? A. Yes. Q. And the option that was taken here was the EDS approach? A. Yes. ….… A. …..So one - if the priority had been given back on to Bill A, then there would have been an extreme lot of pressure on EDS to deliver the fix a lot earlier. Now, EDS would have had to deploy some technical resources to be working on the GSMIS move/relocation, so if the priority was the other way round, then they would be looking obviously to deploy the resources on rectifying the fix as soon as possible. (T2447:27 - 32; T2449:31 - T2450:13; T2451:22 - 56; T2452:36 - 42; t2452:49 - 52; T2453:4 - 40; T2454:56 - T2455:21; T2456:28 - 56; T2458:51 - T2459:10; T2460:1 - T2460:50; T2462:16 - 26) 1763 Counsel for Tyco was given liberty to further cross-examine Mr Taylor as follows: MR LOCKHART: Q. Mr Taylor, in relation to EDS, the fact is that at the time of this project you had no knowledge as to what EDS was doing in connection with the fix for the problem; correct? A. Detailed knowledge in terms of activity it is doing, no. Q. So far as you are know, EDS were applying whatever resources were required to fix the problem in the shortest time frame possible; correct? A. With the priority setting they had, I believe they were aiming to do it as quickly as they could. Q. And you simply do not know if there was anything that EDS could have done to have brought that forward, do you? A. If it was considered a major timing issue, then they would have explored a number of options. Q. So far as you knew EDS were working as efficiently as they could in order to complete the fix within the shortest time frame possible; correct? A. Given the priority they had been given, yes. Q. No -- HIS HONOUR: That is the answer, Mr Lockhart. It is not a response to say "no". MR LOCKHART: Q. Mr Taylor, you have no knowledge as to whether or not it was available to EDS to adopt a faster time frame than they did adopt in relation to fixing this problem, do you? A. Under the current circumstances - under the circumstances that existed at that point in time, no. Q. And so far as you know, even if the circumstances had not involved the necessity to relocate to Homebush, so far as you know EDS would have worked in the same time frame; correct? A. I felt that they would have been made to work in a faster time frame. Q. You just simply don't know that, do you - you are speculating? A. Because I know the situation as to pressure in relation to the project at that point of time. If there was any opportunity to bring it in earlier, they would have explored that. Q. It is the case, is it, that you are aware of pressure in relation to the project generally in terms of finishing in a short time frame; correct? A. Yes. Q. But you don't know that in circumstances where there had not been a relocation to Homebush, EDS would have worked to a different timetable. You simply don't know that, do you? A. I can't say for certain what the revised schedule would be, if that was the situation. (T2462:37 - T2463:49) 1764 What I have drawn from that evidence is that: a) There was clearly a delay to the Bill-A project occasioned by the removal of the GSMIS team from that project to the migration of the GSMIS system involved in the rectification work of Optus. As at 3 April 1997 that involved extending the time for delivery of the Bill-A project until 16 June 1997. b) As a consequence of that delay there was no pressure upon Optus to attend to the feed problem related to the GSMIS 4.2 system. c) The feed problem was capable of being addressed at either the "Kenan end" or the "Optus end" if the feed problem threatened a delay to the project. d) Other unspecified steps would have been addressed to shorten the duration of activities involved in addressing the feed problems had it been necessary. e) Given the absence of the feed problem as one of the "Major Issues" noted in the status reports in the weeks preceding 3 April 1997, it should not be treated as an activity on the critical path of the project and that the reference to it in the status report of 3 April 1997 should be read in the context of the inevitable delay to the project occasioned by the "relocation of GSMIS from Rosebery to Homebush". f) In the weeks preceding the 3 April report "Major Issues" noted on the status reports dealt with such matters as the need to work extended hours, access problems and, then, from 14 March onwards the only Major Issue that was noted (and it was noted on a daily basis) was the "planned relocation of GSMIS production team from Rosebery to Homebush". That remained so until the status report of 1 April 1997 when no Major Issues were noted and the executive summary contained the following note: "Impact of the GSMIS relocation and the changes to GSMIS V4.2 on BillA is being evaluated and will be released on 3/4/97" g) Had the activity relating to the feed problem been on the critical path, the probabilities are that a consequent rescheduling would have involved Mr Taylor. He was not so involved and that nature of the feed problem activity is further emphasised by the fact that, when Mr Taylor was involved in the major re-scheduling associated with the removal of the GSMIS team, that did not require consideration of the feed problem activity. h) The approach adopted by Tyco cannot be reconciled, reasonably, with the absence from the identification of Major Issues in the daily status reports of any impact on the completion date occasioned by or likely to be occasioned by the GSMIS feed problem activity. 1765 The feed problem emerged in the form of a note in the status report of 14 March to the effect that, while a planned bill run had not been executed because a "mapping exercise" was outstanding, it was also noted that "Severity 1 faults discovered in the GSMIS Services Maintenance feed to ABOR hampered testings". 1766 I think it is significant that, in the same status report, Major Issue was noted as the impact on the Bill-A project of removing resources to give priority to the rectification work being undertaken by Optus. The feed problem was not regarded as a Major Issue and that, I think, was typical of the way in which the feed problem activity was addressed in subsequent status reports. For example, on 20 March 1997 it was noted that this feed problem was "hampering the test team from conducting a clean end-to-end run" and that the problem was being addressed. It was not being treated as a Major Issue as distinct from the impact on the project of the removal of resources, as also noted in that status report. 1767 The status report of 21 March 1997 referred to the feed problem as a "major stumbling block". It was not treated as a major scheduling problem. It was not brought to the attention of Mr Taylor. On the evidence, it would have been so referred if it required any significant rescheduling of the project. 1768 I think it is significant that it was not until after the determination of 3 April 1997 extending completion of the project extension to 16 June 1997 that the feed problem emerged as a major issue. That appeared in the status report of 19 April 1997 in which the impact was identified as follows: "Delay in the delivery of GSMIS 4.2 to ST by the number of days the specification is not finalised and agreed from 21/4/97" 1769 In the status report of 22 April 1997 while it is still shown as a Major Issue it is also noted under the column R which is identified as meaning "Resolved. Remained on report until checked ()". The report of that date showed the column as bearing such a tick and the item does not appear as a major issue in the following reports. I note also that in the status report of 29 April 1997 the GSMIS v4.2 was on schedule. 1770 The cross-examination of Mr Taylor of the status report of 23 April 1997 did not draw his attention to the matters referred to above and he was prompted to agree that it was being treated as a major issue on 22 April 1997. It was a concession that Mr Taylor, I think, incorrectly made from his mis-reading of the report. 1771 In the status report of 25 March 1997 it was noted that "anticipated effect of [the feed] fault on Solution Testing [was] that when the fix was received, the test team [would] have to re-execute 70% of the currently executed tests, re-run service maintenance and re-run billing". Mr Taylor agreed that that was a "pretty serious problem" [T2426:50]. However, in the same report it was not noted as a major issue and the executive summary of the same report contained the following: "However, in moving forward while the above fault is being rectified, the test team will continue testing the following areas: s Other ARBOR feeds and FTPs s Print Vendor link and Bill Presentation s Lackbox payments s ARBOR reports s ARBOR table validation" 1772 I would draw from that report that, while Mr Taylor accepted the description of it being a "pretty serious problem", it did not amount to a major issue and other significant activities were able to be continued while the feed problem was being rectified. I would not regard that as being descriptive of a critical activity. 1773 Mr Taylor was cross-examined on other problems recorded in the status report which were expressed in terms of delay. However, without going into the detail of those activities I am satisfied they are not records of problems that caused any relevant delay in the critical path of the project. It is clear I think from both Mr Taylor's evidence and the contents of the status reports that they were problems which were normal in a project of this kind [T2420]: and could be addressed in the United States by Kenan in some instances [T2436:3; 2429:28]: that they were of a nature that was capable of being addressed by re-allocation of activities or resources. 1774 A prime example of that is the status report of 11 March 1997 which recorded that there was a delay to "Solution Test" of 7 days on "original planning estimates". The same report recorded the following: "To catch up with the schedule the Solution Test Team will be working overtime daily and on weekends. The cycle test plan is currently being reviewed to determine how we can achieve our delivery schedule and the impact to the overall project." 1775 The same observations apply to records in the status reports of the testing being behind schedule. One can point to an equal number of records where the testing was known to be in advance of schedule. 1776 Earlier, I have noted a concession incorrectly made by Mr Taylor in his reading of the records in cross-examination. It is not the only example. I think another illustration is the concession he made that "testing work couldn't take place unless and until the problem of the services maintenance feed had been addressed" [T2440:38]. That was clearly not the case, as the references earlier quoted in these reason demonstrated. I also note that, in relation to testing, it was carried out "according to the "Arbor Solution Test Cycle Plan" [and that it would] not form part of [the report of 25 February 1997] as it [was] a dynamic document and [would] be updated throughout testing". 1777 I also note that, while re-testing was associated with the feed problem, the status tests do not, in the detailed recording of tests performed and outstanding, reflect such an activity of retesting. In my view, that indicated the level of importance of that retesting in the overall schedule. 1778 For those reasons I am satisfied that the delay in the critical path of the project on the evidence before me, attributable to the removal of resources of the GSMIS test team was in the order of two months and was the subject of the Kenan invoice and the Optus order form in respect of that delay. 1779 The rectification of the feed problem, in my view, was not shown to be on the critical path and I think the evidence of Mr Taylor should be accepted to the effect that resolutions of that problem would have been addressed had it become necessary to do. 1780 In addition to the Kenan invoice amount, Tyco also put in issue two further amounts of $1,150.00 as recorded under System Index 503 and $5,765.00 under System Index 504, on the basis that Optus had failed to show that the subject matter of the invoices captured by Optus in its cost recovery system was not "assistance that would have been provided regardless of the incident". There was no cross-examination of any witness in relation to either of those items and in my view, having regard to the nature of the system, both items should be allowed. I note that in each case the subject invoices were approved as costs of rectification by the representative of Optus' insurer. 1781 Item 29.1 Test and application support resources; Item 36.1; Item 57.1 Optus staff costs: In respect of these items of claim, Tyco has put in issue the amount of $221,250.00 based upon an analysis by Mr Lonergan of the cost records relating to these items which formed part of the records maintained by Optus in its recovery costs system. I think it is of some importance to note that in the confirmation exercise carried out by Mr Cearns, referred to earlier in these reasons, these records were the subject of his confirmation. 1782 The records are voluminous and are maintained under System Indices running from 400 to 435, each with supporting records, 531 to 754 with supporting records and System Index 815 to 848 with supporting records which occupy several volumes. I observe that Mr Lonergan's analysis involved a comparison of the total amount confirmed by Mr Cearns with the total amount revealed by Mr Lonergan's analysis and that the differences were "minor". Tyco has not disputed the nature of this claim which it summarised in the following way: "191. Optus has not claimed for time, if any, spent on the recovery project by its permanent staff. Optus has claimed for costs representing what it alleges is time spent on the recovery project by its external contractor staff. Optus had a general practice that when it required staff it would seek the supply of staff required from organisations which regularly supplied Optus with staff. The usual method was that when Optus needed staff from time to time it issued a service order which would state the staff requirement and the time period for which the staff was required. Staff were engaged generally on a daily rate. ….." 1783 Mr Lonergan was requested to carry out an analysis of the subject records to identify the following: a) Those contract personnel recorded as engaged in the recovery program who were personnel, as revealed in Optus' general cost records, who had been contracted to perform work by Optus prior to the incident [pre-incident personnel]. b) Contracted personnel who were shown by the recovery program records as having been engaged, on the face of the subject invoice, on recovery program work and, partly, on non-recovery program work for discrete periods. c) The contracted personnel which the cost records of the recovery program reveal, on the face of then, to be wholly engaged in recovery program work. 1784 The cost of the pre-incident personnel and the cost of the services of the personnel in category (b) was then calculated by Mr Lonergan from the recovery cost records. He quantified that cost in the sum of $38,681.00 in relation to pre-incident personnel and $182,569.00 in relation to category (b) personnel, making a total of $221,250.00. 1785 It was Tyco's contention that this amount should be deducted from the recovery costs claimed by Optus on the basis that they had not been shown to be incremental and that, on the face of it, they are costs that Optus would have incurred in any event. The logic of that argument and of the assumption made by Mr Lonergan was that, if the contracted personnel had been performing tasks for Optus prior to the incident, or were shown, on any particular invoice, to be engaged in discrete periods on recovery program work and on other Optus work in discrete periods, then those personnel would have been engaged by Optus regardless of the incident and should not be designated as incremental and therefore recoverable personnel costs. 1786 Optus has not made claim for recovery of costs of its permanent executive personnel engaged in the recovery program and that matter is not in issue in these proceedings. It is not disputed that, on the face of the records, hours of engagement are recorded separately in respect of recovery program work and non-recovery program work. At the same time, Tyco complained that the records were "opaque" and that they were the product of a system, substantiated, in part, by Mr Cearns' own knowledge of the recovery program, but only in part, and that his confirmation of the costs as recovery program cost was, in part, based upon his examination of the records produced by the system. 1787 To illustrate that point, Tyco referred to the time sheet of a Mr Steven O'Brien for the week starting 12 January 1998 which identified one hour on 15 January 1998 as engaged in the recovery program activity. The entry is cost coded 396 and is described as "DCRP - liase with Softway" for which Optus claimed the sum of $65.62 in accordance with system index 716. The cross-examination on this subject matter was as follows: Q. Could you go to 716 which is the first page of it is OPT314G307. It is in respect of the labour of a Mr or Ms O'Brien, I don't know which. I have just chosen it really at random, just to make a point. There it is a claim for a small amount of money and if you go over to what appears to be a time sheet and you go to Thursday, 15 January 1998 - this is OPT314G310 - you go LAN or project 396, that seems to be the work the person did. Do you agree with that? A. Yes. Q. Again, you would agree with me that essentially these are opaque? I mean it is almost impossible, for any person who is not aware of what Mr O'Brien was doing from other sources, to ascertain what Mr O'Brien was doing. Would you agree with that? A. You would have to look behind -- Q. That's what I'm saying. Look at it from the point of view of somebody such as, rather than us, his Honour, coming to consider this. A. Yes. Q. This is utterly opaque, would you agree with me? A. Yes, it is. HIS HONOUR: Standing alone? MR HUTLEY: Q. Standing alone? A. Standing alone, yes, it is. Q. That's all the material Optus puts forward? A. Other than my statement, yes. Q. Your statement doesn't say that Mr O'Brien worked on this particular project at this particular time. Your statement says "I have looked at that and I confirm it"; correct? A. Yes, and it would have to go into the detail as to how I arrived at that, yes. HIS HONOUR: Could we take an example of that? MR HUTLEY: Yes. Q. In your confirmation process, when you came to system index 716, what did you do? A. Right. Well, let me take you back a step. Mr O'Brien worked for me at the time. The time sheet that you see there was one - a system that I developed for the purposes of allocating costs to particular projects. You will notice in the second column, 396, there is a project that had been created for DCRP and if we went to the material that could certainly be obtained, there would be identification of project 396 as being established for the purpose of capturing contribution to, in this case it was the migration of the firewalls, our firewalls. I know that simply because Softway was involved in the support of our firewall systems. So that is my rationale, right, for what has been posted here. Q. But it is impossible without, as it were, your information beyond that which you put in your statements, other than the statement confirmed, to know what it relates to? A. You would have to go back to the process that ensures that this information is captured and ensures that indeed it is posted in the correct manner. Q. But Optus has not put forward for his Honour's consideration that material, has it? A. I am just thinking whether any of that is in discovery at the moment - no, you are quite right. Nothing has been put forward to his Honour, no. Q. So his Honour is in this position - if, for example, his Honour were to take the view that, just to take an example, an allowance should be made for migration costs in relation to some FEMD program because you would have done it anyway? I just take a purely hypothetical. I have nothing like my learned friend Mr Robb's or your intimate acquaintance with this, but if his Honour came to that conclusion, his Honour, on the evidence, would be incapable of ascertaining what the costs claimed were for that migration. Would you agree with that? A. On the basis of the information found here, yes. Q. So when you have "confirmed" in this material, you have not confirmed it by reference to the documents you have put forward to his Honour as evidence to justify the claim, but by reference to a lot of other evidence, other material which it is impossible to know what you have had regard to; correct? A. Yes, that hasn't been spelled out, yes. Q. Sometimes that would have involved your personal knowledge; correct? A. Yes. Q. Sometimes it would have been involved [sic] what you deduced from analysing other people's records; correct? A. From the process, yes. This apportionment of costs is done on a daily basis for a multitude of other reasons. Q. I understand, but what you haven't done is put forward evidence saying "We migrated program X from A to B, and the people who were involved in relation to that were Mr Leenders, Mr or Ms Fox, who we are looking at here, some other individual, and that's what we have charged"? A. That has not been done. That could be done, yes. Q. It is theoretically possible, it could be done; correct? A. Yes. Q. You, or other people who know these things, are the only people who could do it; correct? A. Yes. Q. Simply impossible from the point of view of the defendants, in any practical sense; correct? A. As I said, I would have to be - have to look at the discovered documents but from that which has been presented to his Honour, yes, that's the case. Q. But you suspect that, practically, the task which I have described is really impossible for the people in the position of the defendants, because there are hundreds and hundreds of volumes of this material, are there not? A. Yes, there are. But we are talking about, if you look at the dissection of ad hoc contribution to the total resources, there is not a lot. Q. To do it required you to, as you described, pore over voluminous documents; correct? A. Yes. Q. And in effect bring to bear in that exercise all the background that you have in relation to this? A. Yes. Q. And it is simply impractical, unless somebody in your position sets it out in detail -- A. Or others, yes. Q. -- or other people who know these things, to check it; that's right, isn't it? A. Yes. Q. Just to complete it, it is impossible for his Honour to know really what you have looked at? A. I can say I have looked at every invoice in the system. Q. That just says that you have looked at everything that you have looked at; correct? A. Every invoice that is found in exhibit 8 I have looked at, yes. Q. But you have had regard to a whole lot of other material? A. Yes. (T1721:56 - T1725:9) 1788 Another example taken by Tyco related to an illustration chosen by Tyco involved a claim of $181.75 as recorded under System Index 726. It was said by Tyco to represent one hour of the personnel's performance of recovery program work in a six week period [T1717:46 - 1719:52]. Given the complexity of the task of recording the costs of the recovery program, the confirmation task undertaken by Mr Cearns and the approval of these costs by the insurer's representative, it is extremely difficult to know what else Optus could have done to identify its costs of rectification. 1789 It was submitted that Mr Cousins did no more than clerical work in his overseeing of these costs, relying upon his cross-examination as follows: Q. Yes, if you just go to the first guide card you should find 36.1. I just want to ask you about the system so that I understand it. It doesn't particularly matter who we are dealing with here, I will just ask you were you involved in the concurrence by ExCel in relation to employee costs or staff costs, or was that somebody who reported to you? A. Yes, I was. My involvement was actually in conjunction with the auditors, who are the auditors - the accounting company, sorry, I can't remember their -- Q. KPMG? A. KPMG, sorry, yes. My involvement with this was not to determine whether their work was directly related to the incident, but to ensure that the time that they logged against codes which were related to the incident were entered into the database. So there is a slight difference there to the normal process. Q. We will take an example. Take this individual - it doesn't really matter who he or she is - Optus maintained that he or she did some work on the project; correct? A. Yep. Q. At some point some allocation was made of the amount of work said by that person to have been done? A. Correct. Q. That wasn't done by you? A. No. Q. After that allocation had been done, somebody entered that in the system; correct? A. I did. Q. You entered it into the system? A. Yes. Q. You didn't identify whether the amount attributed to the disaster recovery program in fact had been expended -- A. No. Q. -- in relation to that? A. Only to the documents that I was presented did I check the amounts against the recovery project. Q. I see. A. And you will note, for example on the front here, my concurrence is only to 83,000 of the 84,000 amount on that document. So it was purely reviewing the documents. It had nothing to do with whether, in fact, this person did work directly related to the incident and logged the time accordingly. I didn't have any other information than the documents in front of me. Q. Also, did you ever turn your mind, with respect to all these employees - and I don't want to go through them; there are dozens of them - to whether they, in effect, would have been working for Optus in any event irrespective of these events? A. I have no way of auditing that process from the position that I had. Q. I don't in any way use this in an offensive sense; yours was essentially, in this regard, a clerical role? A. Purely clerical, yes. Q. Are there any other roles that you took which you describe as purely clerical? A. No. Q. There are a vast number of items and item codes and things like that. I don't want to go through every one. A. Yes, it did, it was part of this, and that was to ensure that the register was up to date and contained only the records that I had concurred with. So in conjunction with KPMG I revisited all of the original source documents with my stamp on it, reviewed my concurrence, checked to see if they were in the register. If they were in the register that was fine. If they were not in the register they were entered. So at the end of the day the register should have contained only those documents with my concurrence on it with respect to the recovery process, not in regard to Relectronic and not in regard to any investigation of cause, only on the aspects of recovery. Q. But are there any other items where you took yourself as essentially having the role of solely reviewing the documents which were given to you and saying that you had done, in effect, an arithmetic calculation. A. No, only this. (T2188:21 - T2190:10) 1790 However, I think that evidence has to be viewed in the context of the circumstances in which the system was established, its reliability and the initial involvement of the insurer in that process: a context which, I think, notwithstanding Mr Cousins' description of his role, reflected a role that was more than "purely clerical". 1791 I note also that Mr Cousins saw his role as having a relationship to the "auditors" of Optus. I am also of the view that one ought not disregard the experience of Mr Cousins in exercises of this nature which, one would expect, would give him a "feel" for the extent of costs involved. 1792 I have some considerable difficulty in Tyco's general approach to these costs as not being incremental. On the face of the records and as substantiated, I think, by Mr Cearns, these costs were directly incurred for the sole purpose of rectification, of the contaminated equipment and of other damage to Optus' property. No dispute existed as to the payment for that work by Optus. I find it extraordinarily difficult to accept that such direct costs of rectification should not be treated as recoverable on the basis that they are not shown to be incremental. Of their nature, in my view, being the costs of contracted personnel, they are incremental costs of rectification. 1793 I think the assumptions which Mr Lonergan was asked to make in relation to pre-incident personnel and those the subject of category (b) as being personnel whose costs would have been incurred in any event are far from reasonable and should not be accepted. 1794 I have been referred to what was said by his Honour Giles J as is Honour then was in NRMA at 804 - 805 in which his Honour examined certain internal costs of the plaintiff in which it was contended on behalf of the defendants that "there [was] no evidence of incurrence of abnormal or additional expense" in relation to work undertaken by the plaintiff in anticipation of a corporate restructuring which in the event did not occur. In the course of considering that question his Honour referred to his decisions in Thiess Watkins White Construction Limited v The Commonwealth (1992) 14 BCL 61 at 77-8 and Bulk Materials (Coal handling) Pty Ltd v Compressed Air & Packaging Systems (NSW) Pty Ltd (1997) 14 BCL 109 at 134-5. Neither NRMA, nor the earlier decisions of his Honour, in my view, are in point factually, having regard to the nature of these costs as costs of contracted personnel who were engaged in the rectification work of Optus and whose costs are direct costs of that program. The mere fact that personnel who were engaged in the rectification work included a few personnel who had been contracted to perform work for Optus prior to the incident is not material, in my view, from which one could draw an inference reasonably that, in some way, these costs of rectification were not incremental. 1795 A similar observation should be made in respect of contracted personnel whose time sheets record work while engaged in the recovery program for discrete periods and also record work separately performed on other Optus activities. In my view, it is quite illogical to draw the inference, such as Tyco made and which formed the basis of the assumption made by Mr Lonergan, that the costs of those personnel engaged in the recovery program would have been incurred in any event, regardless of the incident. The illogicality of that suggested inference lies in the fact that, presumably, if some other person was engaged to perform only this work of rectification, those costs would be recoverable. It also runs against the nature of the engagement of the contracted personnel on time related bases. For those reasons I am of the view that the costs as claimed by Optus are recoverable as costs of the recovery program. 1796 In a series of submissions presented on 14 and 17 December 2001 Optus and Tyco continued their disputation over the credit to be allowed for left-over equipment, cleaned and retained by Optus which was equivalent to the equipment acquired by Optus in the course of its recovery program. 1797 The evidence of valuing that equipment with "DCRP equivalents" which was effected by Mr Keaveny was based upon two schedules prepared by Mr Quodling as part of his statement of evidence in chief of 10 April 2001. In his earlier statement of evidence in chief of 31 March 2000, Mr Quodling had identified a list of residual contaminated equipment which was "still in storage at Relectronic" (the residual contaminated equipment list). In relation to the Equivalence Spreadsheet, as earlier noted in these reasons, some of the DCRP equipment retained by Optus did not have an equivalence in the Equivalence Spreadsheet. 1798 Prior to Mr Quodling giving evidence, Mr Lister was called, and in his oral evidence in chief, he identified from the Optus stock list items of equipment omitted from the Equivalence Spreadsheet but which appeared in the stock list as equipment equivalent to the DCRP acquired equipment. His evidence was as follows: Q. One other matter, and that is, you have said in your second statement that you were involved in the preparation of the stock list as well as the document headed "Optus DCRP Purchase Versus Remaining Equivalent"? A. That's correct. Q. Do you have a copy of that there with you? A. I have a copy, yes, of those spreadsheets, yes. Q. In recent times have you checked that again and found that it is missing two 4100 cabinets and two storage works cabinets? A. I have checked it again recently and it was missing two 4100 processors and one storage works cabinet. Q. Sorry, one storage works cabinet, right. Have you then looked to see if there was other equipment which would have been "equivalent" in the same way as you've looked at equivalence within the leftover equipment? A. Yes, I have. Q. What did you ascertain? A. I have ascertained that in the DCRP stock list there is equipment that could be regarded to be equivalent to the two 4100 processors and the storage works cabinet. Q. When you use that expression "equivalent" and you've used it for the purpose of doing this exercise, what do you mean? A. It's functionally equivalent and in the same manner that we have found equivalence before, it could be substituted for those systems in the general term "equivalent". (T2229:33 - T2230:12) 1799 Mr Quodling was not cross-examined upon those omissions nor upon the state of the equipment in the stock list. Subsequently to Mr Lister and Quodling being called, Mr Ogbourne gave evidence which led to cross-examination suggesting that he was in error in his identification of equipment and, in particular, as can be seen in Schedule U, the attention of Tyco's solicitors was drawn to the inclusion in the Optus stock list of equipment which, in error, had been omitted from the Equivalence Spreadsheet, namely, equipment identified as that equivalent to the two AS4100's and storage works forming part of the equipment acquired by Optus in the DCRP. This was acknowledged by Mr Ogbourne after further information was provided by Optus' solicitors in their letter to Tyco's solicitors of 8 August 2001, also part of schedule U. 1800 In its submissions on quantum, Tyco submitted that, in addition to the valuation effected by Mr Keaveny there had to be included the equipment identified by Mr Lister which had been omitted, in error, from the Equivalence Spreadsheet and as listed in the correspondence forming part of Schedule U to these reasons. In relation to the two AS 4100's that equivalent equipment was valued by Tyco in the sum of $97,497.07, based upon Mr Keaveny's comparable valuations. 1801 In relation to storage works, that equivalent equipment was valued in the same manner in the sum of $62,639.69. That was related to a storage works cabinet identified as cabinet 54. In addition, Tyco sought inclusion of the value of residual equipment known as cabinet 40 which it contended was equivalent to equipment acquired in the DCRP and listed in the Equivalence Spreadsheet as cabinet 800. The valuation for that residual equipment based on Mr Keaveny's comparable valuation was calculated in the sum of $102,559.45. 1802 Optus disputed the entitlement of Tyco to the addition of those valuations to the valuation of Mr Keaveny. Optus' opposition to these additional valuations was on the basis that, in Mr Quodling's evidence in chief, he listed residual equipment which had been cleaned and either used or in store by Optus and which did not include these additional items of equipment, the value of which Tyco sought to be brought to account. 1803 Optus submissions were rather dismissive of the exchange of material between solicitors as set out in Schedule U. It was further contended on behalf of Optus that in relation to cabinets 54 and 40 they appeared in the residual contaminated equipment list from which it should be inferred that being contaminated and left in storage at Relectronic no real value could be attributed to it. While accepting that the two cabinets appeared in the residual contaminated equipment list, Tyco rejected the inference that, being left in a contaminated state in storage, did not lead to the inference that the equipment had no value. 1804 Tyco's response in relation to the two AS4100s was that the equipment in the stock list equivalent to the two AS4100s did not appear in the residual contaminated equipment list and did appear in table C of Mr Quodling's statement of evidence in chief of 10 April 2001, that being "Left-over equipment cleaned and stored/not used at BLOC or CHOC (with no DCRP equivalence)". 1805 The difficulties with this series of submissions are not dissociated from their belated nature: by the failure of Optus to draw Mr Quodling's attention to Mr Lister's evidence of errors by way of omission from the Equivalence Spreadsheet and by Tyco's failure to cross-examine Mr Quodling upon the accuracy of his statement. 1806 I am not prepared to infer, as Optus has contended, that, since equipment equivalent to the two AS4100s does not appear in Mr Quodling's statement of evidence in chief as equipment cleaned and stored by Optus with DCR equivalence that therefore it should be treated as contaminated uncleaned equipment. That inference is not supported by the stock list and ignores the error acknowledged in the material the subject of Schedule U. I think its value should be added to Mr Keaveny's valuation representing the value of the equivalent material in the stock list to the two AS4100s. Optus has not challenged the method by which Tyco has calculated that value and, accordingly, the amount of $97,497.07 should be added to Mr Keaveny's valuation. 1807 In relation to the storage cabinet (cabinet 54) and cabinet 40, there was no dispute that that equipment was contaminated and remained in storage at Optus in that state. In those circumstances, I am not prepared to attribute any value to that equipment said to be equivalent to the DCRP equipment in the Equivalence Spreadsheet.

1808 Accordingly, the damages to be allowed are as set out and apportioned by Optus amongst the first, second and fourth plaintiffs subject to the adjustment of $118,252 as conceded by Optus in final addresses :the abandonment of cost item 881 in the sum of $1,376.40 and the further adjustment of the sum of $97,497.07 in accordance with these reasons. I have required the parties to being in short minutes of order in anticipation of the publication of these reasons with the view to making final orders at that time. ********** Schedule A Diagram of floor plan of Rosebery centre

Schedule B Figure 2 - The Heat Exchanger

Schedule C Figure 4 - Tubesheet

Schedule D Figure 6 from Bundle of Colour Photographs filed for Plaintiffs

Schedule E Figure 7 from Bundle of Colour Photographs filed for Plaintiffs

Schedule F Figure 8 from Bundle of Colour Photographs filed for Plaintiffs

Schedule G Figure 9 from Bundle of Colour Photographs filed for Plaintiffs

Schedule H Figure 10 from Bundle of Colour Photographs filed for Plaintiffs

Schedule I Figure 12 from Bundle of Colour Photographs filed for Plaintiffs

Schedule J Figure 14 from Bundle of Colour Photographs filed for Plaintiffs

Schedule K Figure 17 from Bundle of Colour Photographs filed for Plaintiffs

Schedule L Figure 3 from Bundle of Colour Photographs filed for Plaintiffs

Schedule M Figure 5 from Bundle of Colour Photographs filed for Plaintiffs

Schedule N Figures 42 and 48 from Bundle of Colour Photographs filed for Plaintiffs

Schedule O Description of Services to be provided by NDY as set out in Phases two, three, four and five of Annexure E

Schedule P Tyco Specification [Ex1.228]

Schedule Q Revision 1 of the Lummus data sheets and the tubeside layout diagram

Schedule R Photographs of Computer Data Centre

Schedule S Equivalence Spreadsheet

Schedule T Ex 10.048 [response of Mr Quodling] Paragraphs 22 - 54

Schedule U Requests by Optus' solicitors to Tyco's solicitors

Schedule V1 Equipment Recovery Strategies 27 April 1997

Schedule V2 Equipment Recovery Strategy and Cost Review

Schedule W Exhibit 18.005 BillA Daily Status Reports 17 March 1997 (1), 1 April 1997 (2), 3 April 1997 (3)

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