Rail Corporation New South Wales v Leduva Pty Limited

Rail Corporation New South Wales v Leduva Pty Limited - [2007] NSWSC 571 - NSWSC 2007 case summary — Zoe

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Aickin J observed at 261 [cited with approval in Roberts v Walter Developments Pty Ltd & Ors , WASC, 13 June 1997 per Wheeler J]: "The cases display a substantial variation in the language in which the principle is expressed. The following are examples of expressions used: some cases speak of damages being available if it turns out that the injunction was 'wrongfully granted'; others of where 'the court is ultimately of opinion that the order ought not to have been made'. ….. It seems that the first two expressions mean no more than that the plaintiff ultimately fails and are not concerned with the question whether it was correct in the circumstances prevailing at the time to grant the interlocutory injunction." [It is appropriate to note that the preponderance of authority does not support the proposition that the principled exercise of the discretion is solely concerned with the question whether it was correct in the circumstances prevailing at the time to grant interlocutory injunction. I do not understand the last sentence of the above quotation from the judgment of Aickin J as suggesting to the contrary.] ii. Financiera Avenida SA v Shiblaq Times , 7 November 1990, where Lloyd LJ stated [as cited in Cheltenham & Gloucester Building Society v Ricketts [1993] 1 WLR 1545 at 1555]: "The first question is whether the undertaking ought to be enforced at all. This depends on the circumstances in which the injunction was obtained, the success or otherwise of the plaintiff at the trial, the subsequent conduct of the defendant and all the other circumstances of the case. It is essentially a question of discretion." iii. Yukong Line Ltd v Rendsburg Investment Corp [2001] 2 Lloyd's Rep 113 (CA) at 119-120 Potter LJ, with whom Hale and Thorpe LJJ agreed, stating: "The order for an inquiry as to damages is discretionary, such discretion being exercised in accordance with equitable principles, taking into account all the circumstances of the case, but bearing in mind that, since the injunction should not have been obtained, prima facie the plaintiff ought to bear the loss … As observed by Lord Justice James in Graham v Campbell (1878) 7 Ch D 490 at 494 the undertaking ought to be given effect except under 'special circumstances'. Those special circumstances include the conduct of the injunctee at the time the injunction was obtained or later, see per Lord Diplock in F Hoffmann-La Roche & Co AG v Secretary for Trade & Industry [1975] AC 295 at 361."

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(iii) the operation of the Railway to be at risk (as determined by Rail Party), Developer agrees to (and must) immediately co-operate with Rail Party (including by ceasing to carry out that part of the Works in respect of which the Alert Event applies and vacating the Railway Corridor) and to assist Rail Party to take such action as Rail Party directs is necessary to avert any danger and ameliorate the risk." 25 Clause 7 dealt with development and building applications and approvals and included a number of provisions inter alia requiring the defendant to only construct the Works in accordance with the development consent unless otherwise agreed in writing by the plaintiff and dealing with matters such as variations and modifications. 26 Clause 8 dealt generally with design development documents including requirements that the defendant not make any variation or modification of the design which may have a material impact upon the railway, the railway corridor wall of the plaintiff's facilities without first providing details of the proposed variation or modification to the plaintiff for its review. 27 Clause 10.3 required the defendant to ensure that all construction was carried out strictly in accordance with the Development Documents. The definition of "Development Documents" extended to include Architectural Drawings, Structural Drawings, Excavation Drawings, contract for the execution of the Works, specifications of the Development, the Development Approval, the Design Method Statement, the Excavation Method Statement, the Construction Method Statement, the Excavation Program, the Construction Program and other material specifications, drawings, method statements and the like compendiously set out within this definition. 28 Notably the parties have always proceeded in the litigation upon the basis that the words "Design Method Statement" are to be taken as having referred to the 'Work Method Statement' which is itself strictly described in the contractual documents as "Rail Related Work Procedures For Underground Construction Works" to be found on page 303 of Exhibit A before Nicholas J. The Work Method Statement was one of the contractual documents contemplated and produced under the deed and was prepared by the defendant's geotechnical engineers and presented to the plaintiff by the defendant as a statement of the procedures it would bind itself to follow in exchange for the plaintiff's approval to the Development proceeding. 29 The Work Method Statement relevantly included:

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vi. the document required a statement of the positions held by the persons who were required to complete the certificates including the Masters Civil Foreman, the Structural Engineer, the On-site piling supervisor (for piling activities only): each of these persons had to append their name, signature and the date on which they signed the document. 30 The rationale for a reliable contemporaneous system of certification was to provide Rail Corp with the high degree of assurance it obviously needed to ensure that the public infrastructure and public safety were not endangered. As will already have become apparent, the WMS included a specific work regime in Part 2.5 which it was specified must be complied with and a certification process designed to ensure that Rail Corp would have contemporaneous, reliable, accurate and independent written evidence that the development did not endanger the public safety or the public infrastructure. I accept that in effect, the contract required Leduva to prove, by an agreed mandatory procedure, that the piles had been correctly constructed so as to avert any danger to public infrastructure or public safety. 31 Plainly another matter of special significance comprised the public interest to have a reliable record of the building work. If a problem of public safety arose in relation to the tunnel in, say, 15 years time, it would be important to have a reliable record not only as to the depth of the piles, but also as to the founding material on which they rested, and other matters dealt with in the Certificates of Underground Construction. As the plaintiff has submitted, from that perspective such a documentary record has long term significance itself. 32 Leduva's position in the proceedings before Nicholas J at least over a particular period constituted an attempt to establish substituted or substantive compliance through Mr Ryan's contradictory affidavits and evidence. Ultimately as will appear from what follows, it was forced to accept that the certification provided by Leduva could not be relied upon. The period from early July up to 16 November 2004 33 This period covers the time during which directions were given by the plaintiff to the defendant and during which the hearing of the sundry applications [first for injunctive relief and then for dissolution of the injunctive relief granted] were heard by Nicholas J. 34 By reason of the concession that the defendant's case does not require the period anterior to 16 November 2004 to be scrutinised otherwise than as background, it is appropriate to simply adopt a vastly cut down version of the plaintiff's written submissions on the present application. 5 July 2004 35 Rail Corp became concerned about Leduva's compliance with the WMS. Blake Dawson Waldron on behalf of Rail Corp wrote to Leduva on 5 July 2004 directing Leduva among other things to follow designated procedures for piling works and to provide individual certification for each pile. The direction included a direction not to apply load until the WMS had been complied with. Leduva was warned of the possibility of injunction proceedings or a stop work notice if it did not comply. 8 July 2004 36 On 8 July 2004 the Project Manager for the defendant, sent a fax to BDW in response to their fax dated 5 July 2004 attaching various documents. The following observation may be made about those documents:

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[The events following 16 November are examined later in these reasons.] Sonic Testing Results 49 It was not until the proceedings commenced that the defendant agreed to some sonic testing being carried out and made available some piles for that purpose. 50 The results of testing indicated that there was a real possibility that some of the CP2 piles were short. 51 Sonic testing was never put forward by Rail Corp or Douglas Partners as a definitive form of testing. I accept that the sonic testing which showed up a probability of short piles presented a totally unacceptable risk to the public safety, and was no substitute for the concise authoritative certification required by the Deed which, if provided, would be based on measurement of each hole before the concrete pour. 52 No sonic testing was possible in respect of the piles in CP1 because the defendant had built over those piles. No diamond drilling testing of those piles had been possible for the same reason. The Deed expressly contemplated certificates of underground construction being provided to the plaintiff by the defendant in respect of these piles in order to give to the plaintiff an assurance that the piles have been constructed to their designed and agreed depth. However, no such certificates of underground construction, as required by the Deed, had ever been provided by the defendant to the plaintiff for the CP1 piles despite numerous requests for the same. 53 In those circumstances, the plaintiff had no reliable means of knowing whether those piles were constructed as designed and agreed and had thus no way of being reasonably assured that a risk to public safety and to public infrastructure would not exist if those piles are subjected to their intended design loads. 54 In respect of the CP2 piles, Mr Bruce McPherson of Douglas Partners was the geotechnical engineer retained by Rail Corp for the purposes of sonic testing of the piles. 55 The results of Mr McPherson's testing revealed the following (page references are to the pages of Exhibit D, which is Exhibit BM1 to Mr McPherson's affidavit):

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(d) 4 piles were uninterpretable meaning that of 9 piles which were interpretable, 1 is probably too short and 1 may well be too short (pp. 4, 11, 21, 38). 56 Assuming there were in the order of 65 piles in total, only a relatively small number were tested. The problems identified were significant and indeed alarming having regard to the small number tested. 57 Sonic testing constitutes a preliminary form of testing. As stated in Annexure "B" to Dr. Burman's affidavit dated 25 October 2004 "Sonic testing of the piles as they have been installed at this site is at best problematic and … the interpreted results are of limited credibility, albeit possibly the best that can be done in the circumstances." 58 All that can be safely said is that the sonic testing did not reliably demonstrate that all of the CP2 piles tested had been excavated and constructed to the required depth so as to give the plaintiff the required assurance contemplated by the Deed and the WMS. 59 That Mr Ryan's evidence was unsatisfactory was not contested before Nicholas J, nor was it contested on the instant application. Some of the highlights of that evidence and of the defendant's concessions before Nicholas J were: · at the beginning of the hearing on 29 October 2004, Leduva admitted in open Court (TS 126.41-46): "That it is clear that some of the evidence given by the key witness, Mr Ryan, was inaccurate and confused to say the least and in consequence of that, we prepared a further affidavit by Mr Ryan setting out what he says to be the exact position dealing with matters line by line." · his further evidence only landed him in even further contradictions in his evidence. Later on the same day Leduva submitted (TS 135.24-29): "What is suggested is that we have failed to give the documentation and it is surrounded by suspicion and uncertainty and that the Rail has not properly discharged its obligation to ensure that it is all totally safe and so on. So much could not be gainsaid." · two sets of certificates relating to piles had been produced by Mr Ryan, being (i) the Certificates of Underground Construction (the form required by the WMS) and (ii) certain "Structural Certificates" which were not required by the WMS; · no Certificates of Underground Construction had been provided in relation to CP1 piles; · in his earlier evidence Mr Ryan attempted to give the impression that he actually measured the depth of some CP1 holes. As it turned out in further cross-examination, he actually measured none; · the failure to provide Certificates of Underground Construction for the CP1 piles was a breach of the Deed and of Rail Corp's directions. Mr Ryan had made no attempt, in any of his affidavits, to explain why no such certificates have been provided, nor has Leduva provided any explanation; · his evidence was inconsistent as to whether he was present for the drilling of the CP2 piles; · initially Mr Ryan's unqualified evidence was that the dates of his structural certificates indicated the dates on which he was on site. When confronted with his invoices and car logs which indicated he was not on site on certain days referred to in his certificates, he accepted the certificates were mistaken in that respect; · Leduva acknowledged that the documentation was "not up to scratch" (TS 82.20) and that there were "plainly shortcomings" and that Leduva's witnesses "when cross-examined on the matter said some things that were pretty silly and obviously wrong, which is true"; · Leduva referred to "the unhappy matter of the documentation". This concession was undoubtedly properly made at the time (27 October 2004). On 29 October 2004, Mr Ryan gave further evidence reinforcing the correctness of the concession. At TS 201, Mr Ryan accepted the Certificates of Underground Construction, at the time he signed them: i. did not record the piers to which the certificates related;

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iii. did not record "Today's date" . · Mr Ryan did not subsequently record the missing information on the certificates, nor was he consulted about the information subsequently entered on the certificates. He never saw the certificates again after he signed them which at that time did not record the critical information, namely, the identity of each pier and its depth; · there were signs of unexplained alteration to documents provided to Rail Corp; · Mr Ryan acknowledged that he did not follow the required procedure for daily completion of forms for piles. This was also acknowledged by counsel for Leduva; · his evidence as to the words identifying the pier numbers at the top of the certificates at Exh SC 1 pages 459-465 was contradictory. Those pier numbers did not appear at the top of those documents when Mr Prasad first sent them to Rail Corp on 8 July 2004 - see Exh SC 1 pp. 414ff. The numbers were inserted between that date and when they were next sent to Rail Corp on 5 August 2004. Initially Mr Ryan said he thought the pier numbers were inserted on the day the form was filled in and that he was consulted about that. He then said the pier numbers were originally identified using a grid reference which was no longer on the certificates. He said he was the one who wrote the grid reference on the sheets, that he wrote it, that "they were written in ink actually", and that someone had rubbed them out. The originals of these certificates were called for and produced and became Exhibit C. After being shown Exhibit C, Mr Ryan changed his evidence to suggest the grid references must have been written in pencil. He later admitted that his categorical evidence before this Court on 8 September 2004 was false. He was asked, "You have got no explanation for that false evidence?" to which he replied, "No, I haven't."; · it is plain from TS 184-190 that there has been alteration in the dates on Certificates of Underground Construction. · Mr Ryan admitted that when he signed the Certificates of Underground Construction, one critical entry, namely the entry for "Excavated depth RL" was blank and was filled out by someone else but he did not know who that was (TS 49.30-50.44 on 9/9/04).

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iv. Nevertheless Mr McPherson's initial assessment is that there would be increased load on the tunnel by reason of concentrated pressure from short piles. The effect of that on the tunnel would need to be assessed by a structural engineer. 63 Mr Nye prepared a further report dated 11 November 2004 on the fourth page of which he opined that "a key issue is knowing where the tunnel is within the easement". That was not a key issue in the WMS prepared by Mr Nye's firm, nor was it identified as a key issue. The design in the WMS required the CP2 piles to be situated below the tunnel so that lateral forces would not impact on the tunnel. However once it was recognised that the CP2 piles may not extend below the tunnel, it is understandable why the distance of the piles from the tunnel wall became a key issue. 64 When the matter came back to Court on 16 November 2004, Mr Nye had prepared a further report of that date. In paragraph 4 of that report, Mr Nye accepted the tunnel could not be loaded by the building structure. Counsel conceded that Mr Nye, in his earlier report, had made an incorrect assumption in that respect; T294.35-.45 and T295.10-.16. 65 Between 16 November 2004 until Rail Corp consented to a dissolution of the injunction on 2 February 2005, the safety of the tunnel [on the assumption that the piers were not at their specified depth] was investigated by Rail Corp through its geotechnical engineers, Connell Wagner, and importantly, Rail Corp addressed the key issue identified by Mr Nye, namely, the distance of the piers from the tunnel wall. 16 November - 14 December 2004 66 An ATS sketch dated 12 November 2004 [MFI D2 ('the Sketch')] was provided to Rail Corp on or about 16 November 2004 [Defendant's Tender Bundle ('DTB') tab 52-54]. The sketch showed that the tunnel was not right up against the edge of the easement, but placed at some distance from the easement boundary. However this 'survey' or sketch by Mr Todarello of ATS was not a field survey, it was "a scaled-off calculation" and was not based on as-built drawings. It was prepared by calculation of plans which were not on their face as built plans and may or may not have been correct. 67 In an internal fax of Rail Corp dated the same day [DTB tab 55] as the receipt of the ATS sketch, namely 16 November 2004, Rail Corp confirmed the abovementioned ATS sketch by stating that the same conclusions as to the location of the tunnel was reached by Mr Ian Jones of Rail Corp. Leduva sought to place significance on this 'agreement' by Mr Jones.

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72 On 15 December 2004, Hard & Forester were retained by Railcorp to conduct a field survey as to the precise location of the CP2 piles relative to the tunnel. This involved performing survey works on Leduva's property and in the tunnel. Mr Cornish requested information from Leduva on 21 December 2004 for this purpose [DTB tab 79]. Further survey work was conducted on behalf of Rail Corp on 22 December 2004 [as referred to in the Hard & Forester report dated 7 January 2005 [DTB tab 80]]. 73 The final [SKM] Nye Report was completed on 14 December 2004 [MFI D3]. It was served on Rail Corp on 17 December 2004 [reference at DTB tab 92 p2]. It concluded there was an "extremely low" risk to the tunnel. In the Introduction on page 1 in the third paragraph, Mr Nye records that the major technical issue on the site has been doubts over the depth of the piles. At page 3, under "Survey information", Mr Nye states that "[a] very important issue in/for any technical assessment is knowing the relative position of the building foundations to the tunnel both horizontally and vertically in space." I interpolate that despite this acknowledgment it did not appear important enough for Mr Nye's assessment that a survey of the actual position of the railway tunnel relative to the easement be actually carried out. Mr Nye's reliance on the Rail Corp drawings as provided by Mr Todarello to determine the location of the tunnel was inadequate, as Mr Todarello's drawings could not necessarily be regarded as 'as built' drawings, [cf Mr Hilton's 24 May 2007 affidavit which was unchallenged]. Mr Hilton deposed that in the absence of 'as built' plans depicting the location of the railway tunnel wall, a physical survey of the actual location of the tunnel was required before it was possible to conclude that the construction and location of the piles did not pose a risk [other than a negligible risk] to the structural integrity of the railway tunnel. 74 On 7 January 2005, Mr Cornish completed his survey and a copy was provided to Leduva on 12 January 2005. At the same time, Rail Corp had forwarded this Hard & Forester survey to its engineering consultants and was awaiting their comments on the 14 December 2004 Nye Report [DTB tab 81 p1]. 75 On 14 January 2005 Leduva asked Rail Corp to consent to the dissolution of the injunction given the conclusions provided in the Nye and the Hard & Forester reports [DTB tab 82]. 76 Rail Corp responded to this request on 18 January 2005 [DTB tab 83] advising that it was conferring with its engineering experts, [as discussed in its letter to Leduva of 12 January 2005] regarding the views expressed in the Nye Report and advising that it would articulate its position upon receipt of this advice from its engineers. Rail Corp also expressed its willingness to explore an alternative solution proffered in the Nye Report to the then perceived problem: the isolation of the piles from the building such that no loads would be applied to the piles. 77 By letter dated 20 January 2005 [DTB tab 84] Leduva's solicitors advised Rail Corp's solicitors that they were yet to receive replies from Rail Corp's engineers in relation to the Nye Report and confirmed that Rail Corp had been unable to indicate when such replies would be forthcoming from its engineers. 78 A further letter dated 21 January 2005 from Leduva's solicitors to Rail Corp's solicitors [DTB tab 85] advised that no response had been received to its earlier fax communication on the same day, and requested that clear instructions be obtained as to when Rail Corp's engineers, Connell Wagner, would be forwarding their reply [regarding the Nye Report]. The letter required a response from Leduva's solicitors by no later than 5.00pm on Monday 24 January 2005.

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the principle applies in the present case. As set out in paras [7] and [21] of the Principal Judgment, Rail Corp had the power under the Development Deed to direct Leduva to cease work where an "Alert Event" occurred. Rail Corp issued such a direction in view of the absence of proper certification. Leduva failed to comply with that direction and did not stop work; for the detail. Accordingly, Rail Corp sought and obtained an injunction. 84 It has been necessary to include in these reasons a reasonably detailed chronological account of the principal events relied upon by the respective parties in their attempts to justify their respective cases: the defendant contending to an entitlement to enforce the undertaking on and from 16 November 2004 and the plaintiff denying that contention. 85 It is particularly important in standing back from all of the detail to keep steadfastly in mind that the departure from the contractual Work Method Statement with which the plaintiff ultimately went along, was solely caused by the conduct of the defendant. In the particular circumstances which obtained the plaintiff was entirely justified in proceeding at every stage with special caution. That is what it did. 86 The short answer to its case is that the plaintiff was justified in not agreeing to the dissolution of the injunction prior to 2 February 2005 (or, relevantly, between 17 December 2004 and 2 February 2005) because, given that the defendant had failed to satisfy it as to the depths of the piles in breach of the deed, the plaintiff was entitled to obtain such expert advice as was reasonably necessary to satisfy itself as to the correctness or otherwise of Mr Nye's opinion, [served on 17 December 2004], that the risk posed by the development to the tunnel was negligible even if the piles were not at their specified depth. 87 The expert advice received by the plaintiff was constituted by Connell Wagner's opinion as to the risk posed to the tunnel in both the Nye Report and the Field Survey of Hard & Forester. As the plaintiff has contended, that advice would not have been necessary if the defendant had honoured its obligations under the Deed. 88 The finding is that on the evidence, the plaintiff was not obliged to accept at face value the Nye Report nor the Sketch.

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(ii) for a " sign off " by Connell Wagner before consenting to a dissolution of the injunction. [I note that leading counsel for the defendant on a number of occasions through the addresses sought to make the point that the latest affidavit of Mr Hilton had only been received shortly before the hearing of the motion and that it was 'inappropriate' for the plaintiff to be heard to submit that the defendant had not challenged that evidence. However it is plain that at no time was there any objection to the admission of the later affidavit. It is equally plain that at no stage did the defendant seek to have the hearing adjourned in order to prepare for and prosecute any such challenge to this evidence. In those circumstances there is no substance in any suggestion that the Court proceed otherwise than by accepting the evidence given by Mr Hilton in that affidavit.] 90 Further and as the plaintiff has also contended, the timeframe in which Mr Cornish and Connell Wagner undertook their respective tasks has not been subjected to any analytical criticism either through cross-examination or in address. I accept that even disregarding the time of year at which Mr Cornish and Connell Wagner were called upon to perform their works consequent upon service of the Nye Report, an attempt at such criticism could not be sustained bearing in mind the importance and the significance of the issue upon which their opinions was sought. 91 In substance, the issue was whether abandonment of a critical safeguard embedded in the carefully considered and approved WMS intended to prevent load being placed on the tunnel would make any difference. Connell Wagner's opinion on the issue and the plaintiff's decision on the issue had potential ramifications for decades into the future. 92 At the end of the day the application to enforce the undertaking requires to be dismissed because of the special circumstances which obtained. Using the words of Lord Diplock in F Hoffmann-La Roche & Co AG v Secretary for Trade & Industry supra at 361 those special circumstances critically included "the conduct of the injunctee". 93 In this regard the finding is that the plaintiff acted entirely properly during the period of its further investigations which took place between 16 November 2004 and 2 February 2005, being the investigations which led to its own geotechnical engineers analysing the safety of the tunnel if the views were not at their specified depth and concluding that the relevant risk was negligible.

At a glance

Court

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Judgment (132 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (3)

Cited By (1)