SUPREME COURT OF QUEENSLAND

CITATION: BHP Coal Pty Ltd and Ors v O & K Orenstein & Koppel AG
and Ors [2008] QSC 141
PARTIES: BHP Coal Pty Ltd (ACN 010 595 721)
First Plaintiff
Mitsubishi Development Pty Ltd (ACN 009 779 873)
Second Plaintiff
UMAL Consolidated Limited (ACN 000 767 386)
Third Plaintiff
BHP Queensland Coal Investments Pty Ltd
(ACN 098 876 825)
Fourth Plaintiff
QCT Investment Pty Ltd (ACN 010 487 831)
Fifth Plaintiff
QCT Mining Pty Ltd (ACN 010 487 840)
Sixth Plaintiff
QCT Management Pty Ltd (ACN 010 472 036)
Seventh Plaintiff
v
O & K Orenstein & Koppel AG
First Defendant
Thyssenkrupp Engineering (Australia) Pty Ltd
(ACN 000 515 333) (Formerly known as Krupp
Engineering (Australia) Pty Ltd)
Second Defendant
Frank Thiel
Third Defendant
FILE NO/S: 6288 of 2003
DIVISION: Trial Division
PROCEEDING: Trial
ORIGINATING
COURT: Supreme Court of Queensland

DELIVERED ON: 1 July 2008

DELIVERED AT: Brisbane
HEARING DATE: 16, 18-20, 23-24, 26, 30 April 2007, 1-4, 8-11, 14-18, 21-24,
28-31 May 2007, 1, 4-7, 12-14, 20 June 2007, 16-20, 23-27,
30-31 July 2007, 1-3, 6-10, 16-17, 21-24, 27-31 August 2007,
 2

4-6, 10-12, 17 September 2007, 1, 3-5, 8 October 2007, 29-31

January 2008, 1, 4-8 February 2008, 4-5 March 2008
JUDGE: McMurdo J
ORDER: 1. Judgment for the first plaintiff against the first
defendant in the amount of $22,932,881.
2. Judgment for the second plaintiff against the first
defendant in the amount of $8,311,497.
3. Judgment for the third plaintiff against the first
defendant in the amount of $401,392.
4. Judgment for the fifth plaintiff against the first
defendant in the amount of $6,422,276.
5. Judgment for the sixth plaintiff against the first
defendant in the amount of $8,445,293.
6. Judgment for the seventh plaintiff against the first
defendant in the amount of $2,456,520.
7. Judgment for the plaintiffs, save for the fourth
plaintiff, against the second defendant in the
amount of $53,288,976.
8. Judgment for the first plaintiff against the third
defendant in the amount of $22,834,326.
9. Judgment for the second plaintiff against the third
defendant in the amount of $8,275,777.
10. Judgment for the third plaintiff against the third
defendant in the amount of $399,667.
11. Judgment for the fifth plaintiff against the third
defendant in the amount of $6,394,676.
12. Judgment for the sixth plaintiff against the third
defendant in the amount of $8,409,000.
13. Judgment for the seventh plaintiff against the
third defendant in the amount of $2,445,964.
14. The fourth plaintiff’s claim against each defendant
is dismissed.
CATCHWORDS: TORT – ESSENTIALS OF ACTION FOR NEGLIGENCE –
DAMAGE – Causation – Whether the collapse of the
Bucketwheel Excavator was caused by modification of
original design – Whether the collapse of the Bucketwheel
Excavator was caused by use outside the operating
parameters for which it was designed – Whether the collapse
of the Bucketwheel Excavator was caused by the failure of
the inspector to examine the entire machine
TORT – ESSENTIALS OF ACTION FOR NEGLIGENCE –
 3

DUTY OF CARE –Whether engineer breached duty of care

when designing stiffeners to reinforce the machine – Whether
engineer should have had regard to the fact that the
engineering standard was current but subject to academic and
professional review when designing stiffeners
TORT – ESSENTIALS OF ACTION FOR NEGLIGENCE –
DUTY OF CARE – SPECIAL RELATIONSHIPS AND
DUTIES – Professional persons – Engineer – Duty of skill
and care implied into professional services contract –
Separate duty of care in tort – Whether these duties are
coextensive – Whether engineer was in breach of duty of care
in failing to inspect the entirety of the machine
TORT – CONTRIBUTORY NEGLIGENCE – Whether the
use of the machine outside the operating parameters for
which it was designed contributed to collapse of the machine
– Whether the failure to inspect more often contributed to the
collapse of the machine – Whether the failure to act
immediately prior to collapse contributed to the collapse of
the machine
CONTRACT – BUILDING, ENGINEERING AND
RELATED CONTRACTS – Contract for the inspection of a
Bucketwheel Excavator – Interpretation
CONTRACT – CONSTRUCTION AND
INTERPRETATION OF CONTRACTS – IMPLIED
TERMS – In the context of a contract to inspect machinery –
Whether it is an implied term that such inspection is limited
to that which can be safely seen from walkways
CONTRACT – CONSTRUCTION AND
INTERPRETATION OF CONTRACTS – CUSTOM AND
USAGE – Incorporation into contract – Whether an
instruction verbally given amounts to variation of contract –
Whether previous inspections vary the terms of the contract
CONTRACT – CONTRACT IMPLIED FROM CONDUCT
OF PARTIES – Whether an instruction verbally given can
amount to a variation of contract
CONTRACT – ACCEPTANCE ADDING TO OR
VARYING TERMS OF OFFER – Where both parties sought
contract on their standard terms
CONTRACT – BUILDING, ENGINEERING AND
RELATED CONTRACTS – Implied duty to exercise skill
and care in contract for the provision of professional engineer
services
DAMAGES – GENERAL PRINCIPLES – MITIGATION
OF DAMAGES – PLAINTIFF’S DUTY TO MITIGATE –
Where the plaintiffs purchased a shovel/sizer to replace
collapsed Bucketwheel Excavator – Whether this was an
 4

appropriate effort at mitigation – Whether to purchase the

shovel/sizer was reasonable when rebuilding the Bucketwheel
Excavator was possible and less expensive
DAMAGES – GENERAL PRINCIPLES – GENERAL AND
SPECIAL DAMAGES – Where claims for general, special
and “hybrid” damages made – Where those damages are
claimed for loss of use of a profit-earning chattel whose
contribution to profit cannot be specifically quantified
DAMAGES – MEASURE AND REMOTENESS OF
DAMAGES IN ACTIONS FOR TORT – DAMAGE TO
CHATTELS – Damages for loss of use of a profit-earning
chattel whose contribution to profit cannot be specifically
quantified – Whether measured on the cost of repair or
replacement – Whether replacement in these circumstances
constitutes a betterment
ENERGY AND RESOURCES – COAL – Bucketwheel
Excavator used at coal mine – Collapse – Claim in negligence
and for breach of contract
TORT – ESSENTIALS OF ACTION FOR NEGLIGENCE –
DAMAGE – Where damage is sustained upon joint venturers
– Whether joint venturers should have separate or joint
verdict
CONTRACT – JOINT AND SEVERAL CONTRACTORS –
Where joint venturers contract together – Whether their
interests are joint or several – Whether joint venturers should
have separate or joint verdict
PROFESSIONS AND TRADES – OTHER PROFESSIONS,
TRADES OR CALLINGS – ENGINEERS – Duty of skill
and care implied into contracts for the provision of
professional services

Schedule 3, Audit Reform and Corporate Disclosure Act

2004 (Cth)
s 1466, Corporations Act 2001 (Cth)
s 5, s 10, Law Reform Act 1995 (Qld)
s 47, Supreme Court Act 1995
s 52, s 53, s 53(aa), s 68, s 68A, s 74, s 74(1), s 74(2), s 82,
s 82(1B), s 84(2), Trade Practices Act 1974 (Cth)
r 63, r 67, Uniform Civil Procedure Rules

Admiral Management Services Ltd v Para-Protect Europe

Ltd [2002] 1 WLR 2722
Aerospace Publishing Ltd v Thames Water Utilities Ltd
[2007] EWCA Civ 3
AHR Constructions Pty Ltd v Maloney [1994] 1 Qd R 460
Allianz Australia Insurance Ltd v GSF Australia Pty Ltd
 5

(2005) 221 CLR 568

Allstate Life Insurance Co v ANZ Banking Group Ltd
Unreported, Federal Court, Lindgren J, 7 November 1994,
BC9400129
Atlantis Properties Pty Ltd v Cameron [2005] QCA 97
Australia and New Zealand Banking Group Ltd v Pan Foods
Company Importers and Distributors Pty Ltd [1999] 1 VR 1
Australian Securities Ltd v Western Australian Insurance Co
Ltd (1929) 29 SR (NSW) 571
Bachelor v Burke (1981) 148 CLR 448
Banco de Portugal v Waterlow [1932] AC 452
Batiste v State of Queensland [2002] 1 Qd R 119; [2001]
QCA 275
Birmingham Corporation v Sowsbery [1970] RTR 84
Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd &
Ors (1987) 14 FCR 215
Boston Commercial Services Pty Ltd v GE Capital Finance
Australasia Pty Ltd (2006) 236 ALR 720
Bradburn v Botfield (1845) 14 M&W 559; 155 ER 597
Brickhill v Cooke [1984] 3 NSWLR 396; (1984) Aust Torts
Reports 80-685
Bryan v Maloney (1995) 182 CLR 609
Caltex Oil (Australia) Pty Ltd v The Dredge “Willemstad”
(1976) 136 CLR 529
Camm v Salter [1992] 2 Qd R 342
Chappel v Hart (1998) 195 CLR 232
Commissioners for Executing the Office of Lord High
Admiral of the United Kingdom v Owners of the Steamship
Valeria (“The Valeria”) [1922] 2 AC 242
Commissioner for Railways v Luya, Julius Limited [1977] Qd
R 395
Cullen v Knowles [1898] 2 QB 380
Darbishire v Warran [1963] 1 WLR 1067 (CA)
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Davies v Taylor [1974] AC 207
Deutz Australia Pty Ltd v Skilled Engineering Ltd [2001]
VSC 194
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222
Equus Financial Services Limited v Glengallon Investments
Pty Ltd [1994] QCA 157
Financial Industry Complaint Services Ltd v Deakin
Financial Services Pty Ltd (2006) 157 FCR 229; (2006) 238
ALR 616
Foley v Addambrooke (1843) 4 QB 197; 114 ER 872
Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2
FCR 82
Gold Ribbon Accountants Pty Ltd (in liq) v Sheers [2006]
QCA 335
Graham Barclay Oysters Pty Ltd v Ryan (2002) 211 CLR 540
Greer v Alstons Engineering Sales & Services Ltd [2003]
 6

UKPC 46
Grincelis v House (2000) 201 CLR 321
Hampic Pty Ltd v Adams (2000) ATPR 41-737; [1999]
NSWCA 455
Hanave Pty Ltd v LFOT Pty Ltd (1999) 43 IPR 545; [1999]
FCA 357
Harbutt’s ‘Plasticine’ Ltd v Wayne Tank & Pump Co Ltd
[1970] 1 QB 447
Heydon v NRMA (2000) 51 NSWLR 1
Horace Holman Group Ltd v Sherwood International Group
Ltd [2001] All ER (D) 83
I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd
(2002) 210 CLR 109
Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526
Jones v Dunkel (1959) 101 CLR 298
Kendall v Hamilton (1879) 4 App Cas 504
King v Hoare (1844) 13 M&W 495
Lord Citrine (Owners) v The Hebridean Coast (Owners)
[1961] AC 545
Malec v JC Hutton Pty Ltd (1990) 169 CLR 638
March v E & MH Stramare Pty Ltd (1991) 171 CLR 506
Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494
Maxitherm Boilers Pty Ltd v Pacific Dunlop Pty Ltd [1998] 4
VR 559
McCarthy v McIntyre [1999] FCA 784
McDonald v Commonwealth (1945) 46 SR (NSW) 129
McDonald v Ludwig [2007] QSC 28
McRae v Commonwealth Disposals Commission (1951) 84
CLR 377
Mersey Docks and Harbour Board v Owners of the SS
Marpessa (“The Marpessa”) [1907] AC 241
Metropolitan Gas Co v Melbourne Corporation (1924) 35
CLR 186
Midland Bank Trust Co Ltd & Anor v Hett, Stubbs & Kemp
(a firm) [1979] 1 Ch 384
Moloney v Bells Securities Pty Ltd [2005] QSC 013
Moore v State of Queensland [2005] QCA 299
National Insurance Co of New Zealand Ltd v. Espagne
(1961) 105 CLR 569
National Mutual Property Services (Australia) Pty Ltd & Ors
v Citibank Savings Ltd & Ors (1995) 132 ALR 514
Naxakis v Western General Hospital (1999) 197 CLR 269
Oceanic Crest Shipping Company v Pilbara Harbour
Services Pty Ltd (1986) 160 CLR 626
Owners of the Steamship “Mediana” v Owners, Master and
Crew of Lightship “Comet” (“The Mediana”) [1900] AC 113
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105
Peabody v Barron (1884) 5 LR (NSW) 72
Perre v Apand Pty Ltd (1999) 198 CLR 180
Pollock v Mackenzie (1866) 1 QSCR 156
 7

Pritchard v Race Cage Pty Ltd (1997) 72 FCR 203

R + D Versicherung AG v Risk Insurance and Reinsurance
Solutions SA [2006] All ER (D) 209
Redding v Lee (1983) 151 CLR 117
Rickard Constructions Pty Ltd & Anor v Rickard Hails
Moretti Pty Ltd & Ors (2004) 220 ALR 267
New South Wales v Fahy (2007) 236 ALR 406, [2007] HCA
20
Roberts v Holland [1893] 1 QB 665
Rogers v Whittaker (1992) 175 CLR 479
Sedgworth v Overend (1797) 7 Term Rep 279; 101 ER 974
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332
Seltsam Pty Ltd v McGuinness (2009) 49 NSWLR 262
Serisier Investments Pty Ltd v English [1989] 1 Qd R 678
Standard Chartered Bank v Pakistan National Shipping
Corporation [2001] EWCA Civ 55
Sunley (B) and Company Limited v Cunard White Star
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Tate & Lyle Food and Distribution Ltd v Greater London
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Tesrol Joinery Pty Ltd v Cefla Scri [2005] NSWSC 528
The Owners of No 7 Steam Sand Pump Dredger v The
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AC 596
Queensland Independent Wholesalers Ltd v Coutts
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Thompson v Hakewill (1865) 19 CB (NS) 713; 144 ER 966
Travel Compensation Fund v Tambree (2005) 224 CLR 627
Trendtex Trading Corporation & Anor v Credit Suisse [1982]
AC 679
Wardley Australia Ltd v Western Australia (1992) 175 CLR
514
William Brandt’s Sons & Co v Dunlop Rubber Company
Limited [1905]
Woodman v Rasmussen [1953] St R Qd 202
Woolcock Street Investments v CDG Pty Ltd (2004) 216 CLR
515
Wyong Shire Council v Shirt (1979) 146 CLR 40
Yorke v Lucas (1985) 158 CLR 661
Zappulla v Perkins [1978] Qd R 92

GA Thompson SC and JD McKenna SC with AW Duffy and

CM Muir for the plaintiffs
P Morrison QC and DJS Jackson QC with P Roney and
G Thomas for the defendants
SOLICITORS: Mallesons Stephen Jaques for the plaintiffs
Baker & McKenzie for the defendants
 8

TABLE OF CONTENTS

The case in outline………………………………………………………..... [ 1]

The BWE…………………………………………………………………... [ 12]

THE DESIGN CASE

Before 1984……………………...…………………………………………. [ 23]
The 1984 repair……………………………………………………………. [ 28]
Dr Fleischhaker at Goonyella…………………………………………….. [ 32]
Dr Fleischhaker and welds………………………………………………... [ 39]
The stiffeners are attached………………………………………………... [ 51]
Which company owed the duty of care?..................................................... [ 53]
Scope of the duty of care…………………………………………………... [ 61]
To whom was the duty owed?...................................................................... [ 67]
What did Dr Fleischhaker consider?.......................................................... [ 87]
What should have been done?..................................................................... [103]
Supervision.................................................................................................... [177]
Causation…………………………………………………………………... [179]
The Design Case and Section 52………………………………………….. [201]
The Design Case: outcome on liability…………………………………... [219]

THE INSPECTION CASE [225]

What constituted the contract?................................................................... [230]
The Trade Practices Act terms…………………………………………….. [262]
What inspection did the contract require?................................................. [268]
The walkways case………………………………………………………… [273]
What did Mr Thiel inspect?......................................................................... [286]
What could and should have Mr Thiel done?
Mirrors……………………………………………………………….. [301]
Manboats and cherry pickers………………………………………… [321]
Ladders……………………………………………………………….. [328]
Scaffolding……………………………………………………………. [329]
The inspector’s report…………………………………………………….. [336]
Was Krupp negligent?.................................................................................. [339]
Was Mr Thiel negligent?.............................................................................. [343]
The inspector’s report and s 52…………………………………………... [351]
Section 52 and Mr Thiel…………………………………………………... [357]
Would a fatigue crack have been seen in 1999?......................................... [362]
Where was the crack in 1999?..................................................................... [363]
Dr Jones’ opinion…………………………………………………….. [371]
Dr Maddox…………………………………………………………… [379]
Dr Potts……………………………………………………………….. [393]
Dr Munz……………………………………………………………….. [406]
Conclusions as to crack size………………………………………………. [430]
What would Mr Thiel have seen?................................................................ [433]
Loss of a chance……………………………………………………………. [451]
Conclusions on causation………………………………………………….. [458]
The inspection case: outcome on liability……………………………….. [471]
 9

CONTRIBUTORY NEGLIGENCE……………………………………... [474]

Conduct outside the Design Operating Parameters
Removal of the gear box……………………………………………… [481]
Safety devices…………………………………………………………. [484]
Drop cutting…………………………………………………………... [507]
Teeth and buckets…………………………………………………….. [543]
Production rates……………………………………………………… [586]
Other allegations of contributory negligence
Reporting systems…………………………………………………….. [613]
Maintenance and inspection practices……………………………….. [620]
Finite element analysis……………………………………………….. [642]
The alleged mismanagement by the plaintiffs of the 1999 inspection... [647]
The days before the collapse………………………………………….. [655]
Conclusion as to contributory negligence………………………………... [668]
Other defences abandoned………………………………………………... [669]

DAMAGES
Introduction……………………………………………………………….. [670]
Cost of a rebuild…………………………………………………………… [682]
The shovel/sizer cost – should it be allowed?.............................................. [750]
Additional expenses
Dismantling and removing the BWE in 2000………………………… [792]
Dismantling and removal of damaged BWE………………………….. [810]
Costs of Investigation of the Failure and the Assessment of [816]
Replacement and Repair Options……………………………………..
Additional Administrative Costs Incurred as a Result of the Failure… [831]
Cost of Recommissioning Conveyor System………………………….. [844]
System Commissioning and Spreader Shutdown Costs………………. [859]
Additional Expenses: Summary……………………………………… [873]
Damages for loss of use – special damages………………………………. [874]
Further claim for loss of use: general damages [919]
Assessment of general damages [940]
Interest [950]
CONCLUSIONS [960]

The case in outline

[1] The Goonyella Riverside Mine is a coal mine near Moranbah in

Central Queensland. It is an open cut mine, so that the coal is reached by the
removal of the earth which is above it. This earth is called the overburden.

[2] The overburden is removed by various kinds of machines. This case concerns one
of them, which was called a bucket wheel excavator and which I will call “the
BWE” or simply “the machine”. It worked at the Goonyella Mine from 1982 until
2000. It was in continuous operation during those 18 years until suddenly, in the
early hours of 8 March 2000, it collapsed.

[3] On any view its owners suffered a large loss, which they seek to recover by these
proceedings. Subject to some qualifications which I will discuss, the plaintiffs are,
and have been the members of the joint venture which, through the first plaintiff as
the mine operator, has mined at Goonyella Riverside since the 1970’s.
 10

[4] The BWE was not repaired. It was replaced by machinery of a different kind. The
plaintiffs claim the cost of that machinery together with other alleged losses,
resulting in a total claim of just over $50 million. They have an alternative claim
for what they say would have been the cost of a rebuild of the BWE, which taken
with other losses, amounts to about $44.5 million. The quantification of each of
these alternative claims is strongly disputed. There are many alternative arguments
by the defendants as to quantum, but the defendants effectively concede losses of at
least $12 million.

[5] The BWE collapsed because of a fracture to its central tower or mast. It is common
ground that this was the result of fatigue. A crack developed in a certain part of the
tower which then grew with the effect of fatigue upon the structure. Undetected, the
crack ultimately grew to a point where the various forces caused that part of the
tower to break. Other components supported by the tower then collapsed with it.

[6] The first defendant, which I will call O&K, designed and manufactured the BWE.
There is no complaint about that however. The claim against O&K is from what
happened a few years after the BWE had been in operation at the mine in late 1984.
It then required some repair, and the chief designer of the BWE, O&K’s employee
Dr Fleischhaker, came from Germany to the mine to assist. Part of his suggested
repair involved the addition of lengths of steel, called stiffeners, to be welded on to
the main tower. He returned to Germany and a few weeks later that work, including
the addition of the stiffeners, was performed. O&K sent another of its employees, a
Mr Tiedt, from Germany to the mine to do something in the supervision of that
work.

[7] The cracking which led to the collapse originated at the end of one of these
stiffeners. In what the parties have called the design case, the plaintiffs allege three
things against O&K, which is sued in negligence as vicariously liable for the alleged
negligence of Dr Fleischhaker and Mr Tiedt. The first and principal claim is that
Dr Fleischhaker negligently designed the stiffeners, and the detail of their welding.
Secondly, it is alleged that Mr Tiedt did not properly inspect the affixation of the
stiffeners and in particular the welding. Thirdly, it is said that O&K failed to warn
of the risk that a crack would develop where it did at the top of a stiffener. The first
and second of those breaches is each said to have caused the crack to
develop with the ultimate consequence of the collapse of the machine. The third
breach is said to have caused the collapse, by the relevant area not being
inspected often enough to detect the crack before it could grow to the point
it reached in March 2000. They further claim that O&K breached s 52 of the
Trade Practices Act 1974 (Cth), by misrepresenting that Dr Fleischhaker’s design
was the result of reasonable skill and care.

[8] However, the machine was subject to regular inspections. In particular it was
inspected every two or three years by the second defendant. Its former name was
Krupp Engineering (Australia) Pty Ltd and I shall refer to it as Krupp. It is a
member of a group of companies based in Germany. As it happens, O&K is now a
member of that group. O&K, Krupp and the third defendant Mr Thiel (a former
employee of Krupp) have the same representation in these proceedings.

[9] The case against Krupp and Mr Thiel is what the arguments have called the
inspection case. In March 1999 Krupp sent Mr Thiel to the mine to conduct an
inspection of the BWE. He conducted an inspection and wrote a report. He saw
 11

nothing of a crack developing at the top of the stiffener. But he did not look at that
part of the BWE. The plaintiffs say that it was a breach of the contract for this
inspection that Krupp failed to inspect the entire machine, and in particular the place
where they say this crack would then have been visible. Krupp says that, for
various reasons, it was not obliged to inspect the whole machine and that it was not
in breach of contract. Krupp and Mr Thiel are also sued in negligence, for which
they say that reasonable care was taken in the inspection. They are also said to have
contravened or been involved in a contravention of s 52 in that Mr Thiel’s report
was misleading or deceptive. The plaintiffs say that a proper inspection would have
detected the crack and they would then have repaired it and avoided the collapse.

[10] The liability of each defendant is disputed. Further, the defendants say that the
plaintiffs have caused or contributed to their loss in many ways. They are said to
have misused the BWE in its operation in several respects and to have failed to have
it more frequently and thoroughly maintained and inspected. They also say that in
the last few days of its life, the BWE was showing unusual movements and the
plaintiffs should have stopped its operation to investigate, in which case it would
have survived.

[11] Then there are a very many quantum issues. As will be seen, the arguments, like
the bucket wheel itself, have left few stones unturned.

The BWE

[12] The BWE was a very large excavator. It weighed about 2,500 tonnes and was about
40 metres high. It travelled on caterpillar-type wheels and above them there was a
section (5 metres in height), over which there was a platform which I will call the
turntable. It rotated horizontally, as in consequence did every part of the machine
which was above it. Above the turntable was the main tower which was more than
30 metres in height but at an angle varying slightly from the vertical. Extending
from one side or the other of the main tower were three arms or booms. On what is
called the rear side of the tower there was the discharge belt boom. It was about 40
metres long and extended horizontally from the turntable. From a height just above
it, but extending from the front side of the tower, was the bucket wheel boom. At
the end of this was the bucket wheel itself, which was where the excavator engaged
the face of the earth it was digging. The bucket wheel boom appears to have been
about 35 metres long. Thirdly, and higher still there was the counter weight boom,
which extended from the rear of the tower. From photographs it appears to have
been of about the same length as the bucket wheel boom.

[13] The BWE as a whole moved on its caterpillar-type wheels, called crawlers. The
bucket wheel boom was moved laterally by the rotation of the turntable. It was
moved vertically by a system of ropes. There was a rope support tower, which was
a tower branching out from the main tower from about half-way up the front face of
the main tower and above the bucket wheel boom. A pair of ropes ran from
winches at the end of the counterweight boom, through the top of the main tower to
the end of the rope support tower and then back again. An arm connected the rope
support tower to the bucket wheel boom, so that as the ropes raised or lowered the
rope tower, the bucket wheel boom moved with it.

[14] The bucket wheel was a rotating wheel of about 10 metres in diameter. On the
periphery of the wheel were fixed a total of 10 containers or buckets. With the
 12

rotation of the bucket wheel, each bucket became a scoop or shovel. The buckets
were empty as they rotated through their lower arc towards the face of the earth to
be excavated. They then engaged the face, as they moved upwards before rotating
through the upper arc at the end of which their contents fell on to a conveyor on the
bucket wheel boom. That material was then conveyed towards the main tower
where it was dropped on to another conveyor on the discharge belt boom.

[15] From the end of the discharge boom, the excavated material went to another system
of conveyor belts which were distinct from the BWE itself. They were free
standing belts moved from time to time as the BWE was moved to another pit. This
system of conveyors was some kilometres in length. It took the material to another
machine called the spreader. As the name suggests, its function was to disperse the
material as it reached the end of the conveyor system. The free standing conveyors
and the spreader, together with another machine called the tripper car, worked with
the BWE in what the plaintiffs’ case describes at the BWE system.

[16] The BWE was driven by an operator sitting in a cabin which was at the foot of the
main tower on its front side. The operator faced the bucket wheel from this cabin
underneath the bucket wheel boom.

[17] The counter weight boom, as the name suggests, was to balance the machine. The
combined weight of the bucket wheel and its boom tended to pull the top of the
tower towards the bucket wheel, so the counter weight boom was to prevent that
from happening by applying a force to the top of the tower in its direction. The
result was a downward force through the main tower towards the turntable. I have
mentioned that the main tower extended upwards but varying from the vertical. As
the main tower rose in height it was angled slightly towards to the rear of the BWE.

[18] In the operation of the BWE, these downward forces produced both tension and
compression within the structure of the main tower. On the rear side of the main
tower there was compression. On the front side of the main tower there was always
tension. The crack which led to the collapse was on the front side of the tower.
There are disputes about what caused the initiation of this crack but it is common
ground that once it was there it grew as a result of fatigue. Fatigue cracks grow
only where steel is in tension, or there is some cycle of tension and no tension. In
effect the tension acts to open and further open a crack so it grows. Fatigue
cracking does not occur where steel is in compression: there the steel is being
compressed, rather than being stretched, so that it will not open up.

[19] The main tower was a welded steel fabrication, consisting of two parallel I-beams.
They were about 9.2 metres apart. Each I-beam consisted of a steel plate and a pair
of flanges. The plate was called a web and was about 20 millimetres thick. The
length of the webs defined the height of the I-beams and thereby the tower. The
beams extended almost vertically from the turntable and their width decreased as
they became higher. Along the entire length of each web, on each of its edges, was
a flange, 490 millimetres wide and 40 millimetres thick. They were perpendicular
to the web which joined the flanges half way across their width resulting in a
so called “I” beam. The beams were connected to each other by horizontal ties and
diagonal braces so that the tower constituted a single rigid structure.

[20] These two beams were called respectively the left-hand side mast and the right-hand
side mast. The left and right sides were according to the view looking to the rear of
 13

the BWE. So each side of the mast consisted of the web, a flange at its front edge
and a flange at its rear edge.

[21] In 1984 eight stiffeners were added to the tower. To each flange two stiffeners were
welded perpendicular to it (and thereby parallel to the web). There was a stiffener
on each side of the web on each flange. Each stiffener was 40mm thick,
200mm wide and 10.5 metres long. Therefore, the stiffeners did not extend up the
full height of a flange. According to the plaintiffs’ case, that fact was critical. They
say that the stiffeners should have been designed to extend to the full height of the
tower, because by having the top of the stiffeners some metres short of the top of
the tower, there was a concentration of forces at the top end of the stiffeners on the
front side of the tower (the tension side) which made those points especially
susceptible to fatigue cracking.

[22] It is common ground that the crack which caused the collapse of the BWE began at
the top of a stiffener on that front side. It was a stiffener on the left-hand mast and
of the two stiffeners on that flange it was that which was inside the web.

THE DESIGN CASE

Before 1984

[23] The BWE was designed and built by O&K pursuant to a contract made with
Utah Development Company in 1978. O&K had made several bucket wheel
excavators. They are not commonly used in Australian mines. Apart from this
BWE, their use in Australia has been in brown coal mining in Victoria. They are
more commonly used in Germany. O&K was a leading manufacturer of such
excavators at its works at Lubeck in what was then the Federal Republic of
Germany.

[24] Utah Development Company was the name of the company which is the first
plaintiff, now called BHP Coal Pty Ltd and which I will call BHP. The defendants
pleaded that it was a different entity, which raised questions as to the effect of
certain corporate mergers according to the law of the State of Louisiana. But
ultimately the defendants conceded it was the former name of the First Plaintiff.
It made that contract for itself and the other then members of the joint venture.
I will refer to it as Utah when discussing events when it had that name.

[25] Mr Brian Black is a retired engineer previously employed by Utah/BHP. His

involvement with this BWE commenced in 1977-78 when he prepared part of the
technical specification for the tender and ultimate purchase of the BWE. He was
centrally involved in the 1984 repair by which the stiffeners were added. And after
the collapse in 2000, by which time he had retired from BHP, he was brought back
as a consultant to advise on the options for replacing or repairing the BWE.

[26] In 1979 he was seconded to O&K at Lubeck to work as Utah’s representative in the
design of the BWE. O&K’s chief structural designer for bucket wheel excavators
was Dr Fleischhaker. He had first met him in Australia in about 1978 in connection
with this project. Then when Mr Black was at Lubeck he developed a close
working relationship with him.

[27] The BWE was commissioned at Goonyella in 1982, by which time Mr Black was
working there. He was the operations superintendent until early 1984 when he
 14

became the chief mechanical engineer of Utah and based in Brisbane, a position he
held until 1994.

The 1984 repair

[28] In October 1984 the BWE was damaged in what has been described as a
“grounding” incident. This involved the bucket wheel boom grounding in the sense
that its weight became supported by the ground rather than by the structure of the
BWE itself. The result was that the turntable, the counterweight boom, the
discharge boom and frame tipped backwards and there occurred severe
structural deformation of some of the main tower. The deformation was on the
upper left-hand mast: on some of its web and the flange on its rear side.

[29] Mr Black went to the mine to assist in the rectification of this deformation, or as it
has been described, buckling. At Goonyella he worked on this with Mr Tom
Raleigh. He is a mechanical engineer who was then employed by Utah in the
maintenance department at Goonyella.

[30] Mr Black decided almost immediately to seek the advice of Dr Fleischhaker.

Mr Black wrote two faxes which were sent to Dr Fleischhaker at O&K’s Lubeck
office on 6 November 1984. One was a single page fax under the names of
Mr Black and Mr Raleigh which summarised the grounding incident and the
deformation. It said that sketches of the deformation would be forwarded to him.
The fax concluded as follows:
“As can be seen we consider we have a serious structural failure and
request assistance.

We advise that Utah will meet the costs of a site visit by yourself and
would request advice as to your travel arrangements at your earliest
convenience. The machine will continue to be shutdown pending
your visit.”

The second fax contained three pages of sketches showing the damage.

[31] Mr Black said that he went to Dr Fleischhaker for assistance because he believed
that he was the person most able to advise on and design the necessary repairs. He
said that he went to him also because O&K, as the original manufacturer, would
have “all the necessary technical details, machine background and expertise to
provide a permanent engineering repair solution”. I accept this evidence. I also
accept, as Mr Black said, that when the BWE had been commissioned, very few of
the design drawings had been handed over by O&K, apart from drawings which
were contained within the operations manuals. I also accept Mr Black’s evidence
that he was particularly concerned to obtain the expertise of the O&K Lubeck
office, as well as that of Dr Fleischhaker, because of Mr Black’s experience of that
expertise when working there in 1979. I accept that Mr Black believed that the
appropriate engineering solution was beyond the scope of the in-house engineering
expertise at Utah.

Dr Fleischhaker at Goonyella
 15

[32] In response to this request for assistance, Dr Fleischhaker came to Australia within a
few days. Mr Black met him in Brisbane and they travelled together to the
mine. They inspected the machine and then discussed the damage and what
Dr Fleischhaker was proposing as the appropriate repairs. He advised on ways of
removing the buckling by what was called a jacking and dogging system. And he
further proposed the affixation of the stiffeners. Dr Fleischhaker’s evidence is that
he first proposed stiffeners for the compression side, in order to “bring out the
buckles”, (the buckling being on the rear or compression side) and then suggested
that if there were to be stiffeners on that side, the same should be installed on the
tension side “just to ensure symmetry”.

[33] Whilst he was at Goonyella, and according to Dr Fleischhaker on his first night
there, he arrived at a “solution”, which he then set out in five pages of handwritten
notes and sketches which he gave to Mr Black.

[34] First there was a page of notes which Dr Fleischhaker headed “BWE…Final
Repair.” These were in the form of instructions or advice as to what should be done
and they included the following:
“Straighten the buckled areas by fixing and clamping the new
stiffeners (see details).

Stiffeners are to be welded by fillet welds.

The pieces of the stiffeners are to be connected by full penetration

welding!”

[35] Then there were three pages of sketches. On one page Dr Fleischhaker drew the
stiffeners showing their shape and dimensions. That sketch also depicted a stiffener
welded to a flange, but no dimension was there expressed for the distance between
the stiffener and the end of the flange or between the stiffener and the web. On
another page he sketched another type of stiffener to be affixed somewhere else and
which need not be discussed. On a further page he sketched the “clamping” to
which his notes had referred. Indisputably Dr Fleischhaker had thereby
recommended the addition of the stiffeners and designed their shape and
dimensions.

[36] There is also another document which Dr Fleischhaker said that he provided to
Mr Black when he was at Goonyella. On an engineering drawing of a section of the
tower (part of the drawings prepared for the BWE’s manufacture) Dr Fleischhaker
had drawn the stiffeners. By this document, Dr Fleischhaker made it clear where
the stiffeners were to be affixed relative to the top of the tower. It is common
ground that Dr Fleischhaker provided this marked up drawing, although Mr Black
thought that he may have received it subsequently in that same month.

[37] Based upon these notes and documents, Utah had stiffeners fabricated and delivered
to the site. Dr Fleischhaker approved the grade of steel for the stiffeners. Mr Black
says, and I find, that he accepted Dr Fleischhaker’s advice as an expert and that
Mr Black did not assist or instruct Dr Fleischhaker in the design “or provide input
into the measures which Dr Fleischhaker determined.” The method of repair and in
particular the design of and specifications for the stiffeners came from
Dr Fleischhaker. Mr Black has no memory about whether at this time there was any
 16

discussion with Dr Fleischhaker about extending the stiffeners to the top of the
tower. Nor does he recall otherwise considering that matter.

[38] In essence, the plaintiffs allege that Dr Fleischhaker was negligent in failing to do
either of two things, each of which would have avoided the creation of this point at
the top of the stiffeners which they say unduly exposed the structure to fatigue
failure. They say he should have designed the stiffeners to extend to the top of the
tower. Alternatively, he should have specified a certain type of weld at the top of
the stiffener, which was a weld that was stronger than that which was used. The
plaintiffs allege that the extraordinary concentration of stress at the location of these
welds required a particularly strong weld to withstand those stresses and to avoid
fatigue cracking. It is undisputed that each of these things would have made the
structure significantly stronger. In particular in evidence from Dr Potts, who was
called by the defendants, there are calculations showing that the use of the type of
weld which the plaintiffs say should have been prescribed by Dr Fleischhaker,
would have about doubled the life expectancy of the BWE. However there is a
substantial issue as to what, if anything was prescribed by Dr Fleischhaker about
welds at the tops of the stiffeners. And there is a further critical issue of what he
should have prescribed.

Dr Fleischhaker and welds

[39] What, if anything, did Dr Fleischhaker prescribe for the welds? In that one page of
handwritten instructions, I have set out above, he wrote that the stiffeners were “to
be welded by fillet welds”. He also wrote that “the pieces of the stiffeners are to be
connected by full penetration welding”. Fillet welds required the stiffeners to be
welded to the flange on each side of the entire length of the stiffener. The question
is what, if anything was prescribed for the top of each stiffener, where its
40 millimetre wide end met the flange.

[40] The plaintiffs allege that Dr Fleischhaker made no recommendation about any weld
across the top of each stiffener. The defendants allege that by his drawing,
Dr Fleischhaker did prescribe a weld, the same weld as he clearly required for the
sides of the stiffener.

[41] At that time there was an engineering standard published in The Federal Republic of
Germany called BG 60. It was a standard for the design of “large machines in open
cut mines”, which included bucket wheel excavators. It informed engineers of the
relative strengths of different types of welds in such machines. Within BG 60 there
were three types of welds which are central to this case. The least strong of them
was the FII. An FII weld involves welding at the side of the component, in this case
the stiffener, but with no weld across the top of the stiffener. The plaintiffs say that
this is what Dr Fleischhaker recommended, by prescribing “fillet welds” but nothing
else.

[42] The next in ascending order of strength was the FI. This is the weld which the
defendants say was specified by Dr Fleischhaker. In this context, an FI would
involve the same welding across the top of the stiffener (and at its other end) as
along its sides.

[43] The third type was described as an EI which was stronger still. Like the FI, this
required the fillet welds to join by a weld running across the top of the component
(here the stiffener). But it further required that that weld be “tooled” and in this
 17

context, that the top (and bottom) ends of the stiffeners have a tapered shape. The
plaintiffs say that an EI (or its equivalent in another engineering standard) should
have been prescribed by Dr Fleischhaker. This is denied by the defendants.

[44] As I will discuss, Dr Fleischhaker has given different versions of what he did in
deciding upon his recommendations for these repairs in 1984. Ultimately his
evidence was that whilst he was at Goonyella, he performed certain calculations
from which he satisfied himself that an FI detail would be strong enough. The
plaintiffs allege that he performed no calculations and indeed, that he did not turn
his mind to whether the weld should be an FII, an FI or something else.

[45] As it happens, the question of whether Dr Fleischhaker prescribed an FI or an FII is

not critical for the outcome of this case. This because I am satisfied that on what
engineers know, there was no material difference between the strength of an FI and
that of an FII. BG 60, a standard which is no longer current, said otherwise and it
quantified such a difference. According to the plaintiffs’ witness Professor Fisher
and the defendants’ witness Dr Maddox, it is now recognised that there is no
material difference. Referring to certain research and published data Dr Maddox
said that for these stiffeners, it mattered not “whether there (was) a weld around the
edge end or not”. The defendants do not seem to challenge this, and in their
submissions in reply, they addressed only whether this had been disclosed by a text
published by a Dr Gurney in 1979.

[46] At the top of the stiffener where this fatigue cracking grew, no weld was applied.
There were simply the fillet welds along the sides of the stiffener. In other words,
what was applied by the welders here was the equivalent of an FII weld. But as we
now know, an FI would have been no stronger. The issue of whether his sketches
should have been understood as requiring FI or FII welds is still relevant, because it
is related to the question of what thought Dr Fleischhaker did give to the stresses
which would exist at the top of these stiffeners. Before going to that, I will discuss
what his sketches objectively represented.

[47] On the page of Dr Fleischhaker’s sketches on which he depicted the stiffeners and
their dimensions, he showed the fillet welds and gave them a dimension. He did not
draw a weld across the top of the stiffener. The defendants say that he nevertheless
prescribed the use of an FI detail in this way. On the same page, and underneath
where he showed the fillet welds, he wrote “see DRG No 259486 sheet 1 989657
sheet 1”. As Mr Black said he then understood, they were existing drawings of the
BWE. In turn, those drawings showed welded details equivalent to an FI. When
cross-examined Mr Black agreed that at the time, he understood that this
cross-referencing by Dr Fleischhaker to the drawings was to import what was
shown in them, including the FI detail. This was not the understanding of
Mr Raleigh however. Nor was it the understanding of Mr Graham Smith who
worked for the contractor which did this welding. Mr Smith has no recollection of
seeing those two drawings and he said he did not have copies of them during the
course of the work. But looking at them now, he says that there is no indication to
him that “end welds” were required.

[48] It seems therefore that the drawings were not an entirely clear specification of an
FI detail. On one view of them, which is Mr Black’s view, Dr Fleischhaker
effectively incorporated a requirement for “full closing” welds, or in other words an
FI detail. I was impressed overall by Mr Black as a witness. He is no longer
 18

employed by BHP and is an apparently independent witness. His understanding of

these drawings cannot be ignored. I accept that on an objective view, the
requirement for an FI detail was conveyed by Dr Fleischhaker’s reference to these
drawings.

[49] But that is not to say that Dr Fleischhaker had that in mind. The drawings were
relevant in other respects. In his first witness statement, Dr Fleischakker did not say
that he intended by this reference to the drawings to import what they depicted of an
FI detail. But in the same statement he said that he “assumed that any competent
welder would have carried out closing welds to the ends of the stiffeners and it
would have been completely unreasonable to have carried out the work without that
detail. If those closing welds were not carried out, it would have been the first time
in my life that I had seen it”. If that evidence is true, it strongly suggests that
Dr Fleischhaker was not intending to require an FI detail by his
cross references to those drawings. So whilst Mr Black reasonably understood them
to incorporate FI welds, I find that this was not what Dr Fleischhaker was intending
by his reference to those drawings.

[50] During the design and commissioning phases of the BWE, Mr Lothar Friedemann
had acted as an independent structural engineer supervising the work. As at
November 1984 he was still to deliver his final report as to the BWE’s design and
commissioning. The defendants argue that in some way Utah relied upon
Mr Friedemann in relation to these 1984 repairs. I accept Mr Black’s evidence that
Utah did not contact or provide any material to Mr Friedemann about the 1984
grounding incident or the proposed repairs and nor did it ask O&K to do so.
Mr Friedemann’s report as to the design and commissioning of the BWE was given
in 1985. In his evidence, Mr Friedemann said that he did not perform fatigue
calculations in relation to the 1984 modifications.

The stiffeners are attached

[51] The stiffeners were attached by independent contractors and the work was
completed by the end of 1984. By this stage, Dr Fleischhaker had returned to
Lubeck. O&K sent Mr Tiedt from Germany to supervise at least some of the repair
work. The extent of Mr Tiedt’s supervisory role is in dispute. There are different
accounts between Mr Tiedt and Mr Raleigh as to the extent to which Mr Tiedt was
involved in supervising the installation of the stiffeners and in particular the
welding. However, it is unnecessary to resolve that issue. Because, as is now
known, there is no difference in strength between the FI and FII details, any failure
by Mr Tiedt to see that there was an FI weld at the top of this stiffener (if he had
been instructed that this is what Dr Fleischhaker wanted) would have no
consequence. At one point the issue may have had another relevance, which was to
whether the crack was initiated by what is called a cold crack. Cold cracking results
from poor welding practice whereby hydrogen becomes present in the weld.
According to some of the expert evidence, if the crack was initiated as a cold crack
this has an impact upon the assessment of the likely size and appearance of the
crack at the time of the Krupp’s 1999 inspection. However, it is common ground
that whatever was the originating cause of the crack, its growth was caused by
fatigue. So the fact that the crack was initiated by the presence of hydrogen would
not affect the design case because that crack propagated and ultimately caused the
collapse because of the high stresses at the top of the stiffener as against the strength
of the weld at that point. There is no argument by the defendants that it is only a
 19

cold crack which could have grown to cause the collapse, and that the only cause of
the collapse was that there was cold cracking. The fact or otherwise that this crack
began its life as a cold crack is (perhaps) relevant as to the size of the crack at the
time of the 1999 inspection.

[52] O&K strongly disputes that Dr Fleischhaker was negligent, but before discussing
that question, it is necessary to resolve issues affecting the existence of the alleged
duty of care. One is that O&K argues that it is not vicariously liable for any
negligence of Dr Fleischhaker, because although he was employed by it, he
performed his work for the 1984 repairs under the control of another company
which was O&K Australia Pty Ltd. It no longer exists but it was a subsidiary of
O&K. It is pleaded that Dr Fleischhaker acted “in the capacity as servant or agent
of O&K Australia” and that his participation was with the consent of, but not at the
direction of O&K. Another issue is the scope of that duty: O&K pleads that
Dr Fleischhaker was to provide only general advice and not “a considered
engineering solution”. Then there is a third question, although not directly raised by
O&K in its pleading, of whether a duty of care was owed only to the then owners of
the BWE or also to future owners. Not all of the plaintiffs were joint venturers and
thereby owners in 1984.

Which company owed the duty of care?

[53] O&K is sued in negligence and not for breach of contract. Upon the plaintiffs’ case,
the proof of a contract is unnecessary. Possibly here there was no contract, and any
entitlement to be paid for Dr Fleischhaker’s services was in restitution. There is
evidence of a payment by Utah to O&K Australia for those services. But there is no
direct evidence that Utah contracted with O&K Australia. The fact that it was
O&K Australia which sent the relevant invoice to Utah could have been simply the
result of the way in which the O&K group preferred to record matters in its own
accounts.

[54] Significantly, Mr Black went straight to O&K in Lubeck and to Dr Fleischhaker

when Utah was seeking this urgent advice. His faxes of 6 November were sent
without any prior contact with O&K Australia. He went to Dr Fleischhaker because
of his belief in his particular expertise and experience, together with Mr Black’s
knowledge of the O&K design office at Lubeck and the fact that O&K held many
drawings which had not been provided to Utah. And, of course, the BWE had been
designed and built only a few years earlier by O&K and specifically under the
direction of Dr Fleischhaker. In Mr Black’s view, O&K Australia did not have the
required expertise or technical information. In these proceedings O&K does not
suggest otherwise.

[55] O&K Australia was managed by Mr Kogel. Mr Black did telephone Mr Kogel
shortly after the grounding incident. But apparently this was before the extent of
the damage, and particularly the buckling, had been noticed, and it was thought by
those at Utah that some relatively minor repair would be needed, the parts for which
could be ordered through Mr Kogel. Neither Mr Kogel nor his company was asked
for advice. Mr Black simply asked him about the price and availability of a certain
part for the BWE without explaining why it was required.

[56] Mr Kogel recalls another call from Mr Black on or about 5 or 6 November 1984, in
which Mr Black did describe the grounding incident, after which Mr Kogel received
 20

a copy of the one page fax of 6 November which Mr Black and Mr Raleigh had sent
to Dr Fleischhaker. On that day Mr Kogel sent a telex to O&K, addressed to
four people including Dr Fleischhaker. Mr Kogel has provided an English
translation of that telex in which he says that he wrote that he had received “from
Mr Brian Black confirmation that Dr Fleischhaker is requested as soon as possible
to arrive in Goonyella”, and that “in accordance with discussion with Brian Black it
looks that substantial repair work could be involved”. This does not provide
particular support for the defendants’ argument. The fact that Mr Black was
speaking to Mr Kogel about the problem and about his request for Dr Fleischhaker
to come to Goonyella does not mean that Utah and its co-owners of the BWE were
not relying upon Dr Fleischhaker and O&K. It is consistent with Utah having
O&K’s Australian representative involved for reasons of convenience with travel
arrangements and perhaps with parts. Mr Kogel agreed that one of the purposes for
the existence of O&K Australia was to represent O&K here and that it had become
difficult for customers of O&K to order parts directly from it in Germany. Within
its own ranks it hardly had the engineering expertise to rival that of its
parent’s Lubeck office. In correspondence earlier in 1984 concerning other matters,
O&K Australia had referred to O&K as its “principal”.

[57] In 1984 there was a practice whereby for work which it did in Australia, O&K
invoiced O&K Australia. An example is an invoice for an inspection by
O&K’s Mr Schander which was performed on the BWE in April 1984. But that
says more of the arrangements within the O&K group than it does of the plaintiffs’
case that they sought advice from and relied upon O&K, and it far from indicates
that Dr Fleischhaker provided his advice and design for the repair as the servant of
O&K Australia.

[58] O&K Australia was in no position to direct Dr Fleischhaker as to how to do his

work. There was no semblance of “control” to indicate that he had become the
servant of O&K Australia for the time being. The “relevant control” of
Dr Fleischhaker remained with his employer, O&K1.

[59] Dr Fleischhaker remained the employee in all respects of O&K. He did not become
effectively employed by O&K Australia whilst he was at Goonyella or otherwise
working on the matter of the 1984 repairs. Accordingly, it is O&K which would be
vicariously liable for his negligence. Further, it was O&K which owed a duty of
care, because it was O&K, not its Australian subsidiary, which was asked to provide
assistance in 1984 having regard to its particular resources and its experience and
also because it was the employer of Dr Fleischhaker.

[60] As to the plaintiffs’ alternative case that there was conduct in connection with this
advice and design which contravened s 52 of the Trade Practices Act, the conduct
was that of O&K, not O&K Australia.

Scope of the duty of care

1
Oceanic Crest Shipping Company v Pilbara Harbour Services Pty Ltd (1986) 160 CLR 626 at 668
per Brennan J citing Jordan CJ in McDonald v The Commonwealth (1945) 46 SR (NSW) 129 in a
passage set out by Ashley J in Deutz Australia Pty Ltd v Skilled Engineering Ltd [2001] VSC 194 at
[105].
 21

[61] O&K pleaded that any duty of care which Dr Fleischhaker or it owed for his work
in 1984 was very limited. Indeed, O&K denied that Dr Fleischhaker designed any
modification to the tower (including the stiffeners) and pleaded that instead he gave
“brief advice on the most appropriate method for removing the buckling”. It further
pleaded that this brief advice was given in relation to advice which Utah had
received from Ahden Pty Ltd, which was the contractor which undertook the repairs
and affixed the stiffeners. More specifically, in the original defence of O&K it was
pleaded that2:
“(ii) …Dr Fleischhaker did not advise as to the necessity to insert
stiffeners on the front flanges in the position alleged in
paragraph 30.2 or in any position on the front flanges. Such
stiffeners as were inserted were inserted by the contractor of
Utah, namely Ahden Pty Ltd at its suggestion. The
introduction of stiffeners to the two front flanges was not
necessary for the purpose of effecting repairs to any damage
since the two front flanges had not been damaged.”

But the repairs, including the stiffeners, were not according to any proposal by
Ahden, as O&K later acknowledged by deleting that reference to Ahden from its
pleading3.

[62] Moreover, O&K pleaded that “Dr Fleischhaker was not required to provide a
considered engineering solution to repair the damage and did not do so”. The
second of those facts (that he did not provide a considered engineering solution) is
indeed the plaintiffs’ case. The plaintiffs allege that he drew and recommended the
stiffeners without any or any proper consideration of their effect on the strength of
the tower, and in particular, without undertaking the necessary calculations of stress
in order to assess the suitable welded detail at the top of the stiffeners. This is
consistent with what Dr Fleischhaker said in his letter to the plaintiffs’ solicitors in
September 2004, when he wrote:
“Utah did not expect from me to make any calculations etc during
my stay in Australia. This would not have been possible on the site.
Even after my return to Germany Utah did not request further
engineering work to be done by me on this issue.”

He wrote also that his “personal involvement was limited to the visit of the
Goonyella mine and to the provision of repair advice to the responsible staff of
Utah” and that:
“In my recollection my visit to the mine was an emergency mission.
Utah did not request from me to provide them with a comprehensive
engineering solution, but to:

1. Review the damage to the tower frame,

2. Give them an advice how this damage could be repaired.”

As to the stiffeners he then wrote:

2
At paragraph 23(a)(ii).
3
Defence of the first defendant filed 3 March 2004.
 22

“It was only necessary to weld four stiffeners to the rear of the BWE
tower frame for removing the bucklings, since only the rear tower
frame was damaged. However, the introduction of additional steel at
one place of a steel structure can have structural consequences. Utah
wanted to strengthen the overall stability of the complete tower
structure and that is why it was decided to add the four stiffeners to
the front flanges of the tower frame. The addition of these stiffeners
caused greater stability of the tower frame. Furthermore, the
symmetry of the tower frame was maintained by the introduction of
the four front stiffeners.”

[63] Ultimately Dr Fleischhaker testified that he had performed calculations in the course
of providing the advice and sketches which he provided to Mr Black at Goonyella.
When cross-examined as to the inconsistency between that evidence and his letter of
September 2004, and in particular the statement that no calculations had been
expected or would have been possible, he said that his letter in those respects was a
lie. O&K now argues that Dr Fleischhaker’s evidence should be accepted and that I
should find that he did perform calculations by which he satisfied himself (and
O&K says reasonably) that the welded detail at the top of the stiffeners on the front
or tension side would be strong enough to withstand the maximum stress at that
point.

[64] He says these calculations related to an FI detail which, as I have mentioned already,
he said that he assumed that any competent welder would apply.

[65] In the ultimate submissions for O&K, it appears to be accepted that a duty of care
was owed by Dr Fleischhaker and by the company to whom his conduct is to be
attributed. There was ultimately no argument that the duty of care did not extend to
the provision of “a considered engineering solution”. Rather the argument was that
Dr Fleischhaker has provided it and with reasonable care. In particular the
argument appears to accept, as the plaintiffs plead, that there was a duty to exercise
the level of skill and care reasonably to be expected of a competent structural
engineer with expertise in the field of design and construction of bucket wheel
excavators.

[66] It was Dr Fleischhaker who advised that the stiffeners be placed on the rear side
where there had been the buckling, and then on the front side. It was
Dr Fleischhaker who prescribed the dimensions of the stiffeners, and their positions
on the height of the tower. To ensure that his repair solution was implemented, he
sent Mr Tiedt from Germany to supervise at least some of the work. There was no
reason for him to think that it was Utah or some other adviser which would check
his solution to see whether it was structurally sound. In particular, there was no
reason for him to think that someone else would do the work of ensuring that the
strength of the welded details by which these stiffeners were to be affixed was
sufficient to withstand stresses on the front or tension side of the tower. He should
have known that he was being relied upon to do that. More probably than not he did
know that. It was Dr Fleischhaker who was to provide a considered engineering
solution. In providing that solution, Dr Fleishhaker and O&K were obliged to
exercise reasonable care and skill.
 23

To whom was the duty owed?

[67] The contract for the manufacture of the BWE was made by Utah (the first plaintiff)
on behalf of the joint venture of which there were then three other members. The
composition of the joint venture had changed by November 1984 and, as I will
discuss, it has changed since then. By an amendment to the joint venture agreement
in April 1984 it was agreed by the joint venturers that all of what constituted “The
Joint Venture Property” (as there defined) should be owned by the joint venturers as
tenants in common in proportion to their respective interests in the joint venture. It
is admitted that the BWE was part of The Joint Venture Property.

[68] Clearly a duty of care was owed at least to the then owners of the BWE. The
defendants do not argue that no such duty could be owed because it would conflict
with any contract (save perhaps for their argument as to the role of O&K Australia).
Nor do they argue that a duty was owed only to the first plaintiff. In the defendants’
ultimate submissions, it is apparently accepted that there was a known reliance by
the then owners upon Dr Fleischhaker to exercise reasonable skill and care in his
advice and design for the 1984 repair.

[69] As at November 1984 the BWE was owned by the then joint venturers in the
following proportions:

First plaintiff 31.0%

Second plaintiff 12.0%
Third plaintiff 4.0%
Fifth plaintiff 12.0%
Sixth plaintiff 9.75%
Other Joint Venturers who are not plaintiffs 31.25%
TOTAL 100%

[70] On the day of collapse, 8 March 2000, the owners of the BWE were as follows:

First plaintiff 42.85%

Second plaintiff 15.53%
Third plaintiff 0.75%
Fifth plaintiff 12.0%
Sixth plaintiff 15.78%
Seventh plaintiff 4.59%
Other Joint Venturers who are not plaintiffs 8.5%
TOTAL 100%

These were also the respective interests in March 1999, when the events the subject
of the inspection case occurred.
 24

[71] The parties have agreed on a statement of facts as to the composition of the
joint venture at various times. The plaintiffs submit that on the basis of those facts,
the only plaintiff which was not a joint venturer in October 1984 is the seventh
plaintiff. However according to that agreed statement of facts, the fourth plaintiff
became a joint venturer only on 1 August 2002 when it acquired its 8.5 per cent
interest. It was not a joint venturer at the time of the collapse.

[72] The fourth plaintiff claims to be entitled to damages as an assignee of the rights of
action against the defendants coinciding with the acquisition of its 8.5 per cent
interest in the joint venture. The assignment of the share in the joint venture is
admitted by the agreed statement of facts. The assignor was a company originally
called General Electric Minerals Inc which held that share from 2 April 1984.
However the defendants did not admit that there was an assignment of its rights of
action. The plaintiffs do not rely upon the agreed statement of facts and its
attachments to prove that assignment. One such attachment is the agreement dated
1 August 2002 by which the fourth plaintiff acquired its share in the joint venture.
That agreement does not appear to provide for the assignment of rights of action and
the plaintiffs did not argue that it did. Indeed the plaintiffs ultimately made no
submission as to the means by which the fourth plaintiff is said to be entitled to any
of these rights of action.

[73] On day 39 of the trial the plaintiffs tendered this agreed statement of facts. At the
same time counsel for the plaintiffs referred to the “further matter” of this
assignment to the fourth plaintiff and then tendered a letter from the plaintiffs’
solicitors to the second defendant dated 2 June 2003 together with its enclosures,
which were two notices of assignment4. Counsel for the defendants then noted that
this was not the document by which the alleged assignment was made and that the
defendants were yet to be shown such a document. He said he was not objecting to
the tender but “pointing out it doesn’t seem to prove what’s in issue”. Counsel for
the plaintiffs said that “We’ll cure this. We’ll tender in due course the document
evidencing the assignment”. No further document was tendered.

[74] The letter which was tendered was addressed only to the second defendant, Krupp.
It was in these terms:
“We act on behalf of the underwriters of the Central Queensland
Coal Associates Joint Venture, a joint venture of BHP and others, in
relation to the collapse of the BWE on 8 March 2000.

Please find attached two notices of the assignment of choses in

action (“Notice”) as required under the provisions of the Property
Law Act 1974 (Qld).

Attached to each Notice is a draft statement of claim relating to the

matters arising as [a] result of the collapse of the BWE on 8 March
2000. We intend to commence proceedings in this matter in the near
future…”

The first attachment was a purported notice of an assignment to the fourth plaintiff
by BHP Queensland Coal Limited (formerly General Electric Minerals Inc) of its
“right, title and interest in and to the choses in action against you referred to in the

4
All of which is Exhibit 358.
 25

draft statement of claim annexed to this notice”. The second notice was in similar
terms but in respect of an assignment by the first plaintiff to the seventh plaintiff of
“two point one per cent (2.1%) of the assignor’s right, title and interest in and to the
choses in action against you…”. This is apparently related to the assignment of a
2.1 per cent share in the joint venture between those companies which, according to
the agreed statement of facts, occurred on 28 June 2001. This purported assignment
of rights of action to the seventh plaintiff is not pleaded in the statement of claim or
referred to in the arguments. Nor was it referred to when counsel for the plaintiffs
tendered this letter and its enclosures. I will not consider it when assessing the
seventh plaintiff’s loss. Its claims will be assessed upon the basis of its interest in
the BWE as at March 2000, which was to the extent of 4.59 per cent.

[75] Returning then to the alleged assignment of rights to the fourth plaintiff, the
evidence is deficient in at least two respects. The first is that there is no evidence of
the document by which the assignment was made. The statement of claim alleges
that the assignment was made on 1 August 2002. Particulars were sought of that
allegation and in response the plaintiffs said that they would provide the relevant
document. As I have also said it is not the contract by which the share in the joint
venture was assigned. As I have said the plaintiffs did not produce that document
when this point was taken during the trial. Nor does the notice of that purported
assignment refer to such document. Secondly, the notice is addressed only to Krupp
and not to O&K or Mr Thiel. It refers only to an assignment of rights of action
against Krupp. The draft statement of claim which was attached to the notice has
not been tendered. It cannot be inferred from this notice that there was an
assignment rights of action against O&K.

[76] Moreover, the right of action against Krupp for damages under s 82 of the
Trade Practices Act was not assignable, because the fourth plaintiff is not a person
who has suffered loss or damage by Krupp’s conduct: Park v Allied Mortgage Corp
Ltd5; Allstate Life Insurance Co v ANZ Banking Group Ltd6; National Mutual
Property Services (Australia) Pty Ltd & Ors v Citibank Savings Ltd7; Pritchard v
Racecage Pty Ltd8 and Boston Commercial Services Pty Ltd v GE Capital Finance
Australasia Pty Ltd9. The position with rights of action for damages for breach of
contract or negligence is not so clear, and in Australia there is a difference of
judicial opinion as to whether Trendtex Trading Corporation v Credit Suisse10
should be followed.11 That point need not be considered, however, because the
plaintiffs have not proved the pleaded assignment to the fourth plaintiff.

[77] That leaves the seventh plaintiff. The present point then affects its entitlement to
damages under the design case.

[78] The plaintiffs concede that at least “on one view” their claim is for economic loss,
as in my view it is. The alleged losses are the cost of repairing or replacing the
BWE itself together with losses from its unavailability in the mining operation. The

5
(1993) ATPR (Digest) 46-105 at 53, 469 per Davies J.
6
Unreported, Federal Court of Australia, Beaumont J, 7 November 1994, BC9400129.
7
(1995) 132 ALR 514 at 539 per Lindgren J.
8
(1997) 72 FCR 203 at 218 per Branson J.
9
(2006) 236 ALR 720 at 732-733 per Rares J.
10
[1982] AC 679.
11
See in particular the discussion of the Australian cases by McDougall J in Rickard Constructions Pty
Ltd v Rickard Hails Moretti Pty Ltd & Ors (2004) 220 ALR 267.
 26

collapse of the BWE did not result in damage to other property. The fact that there
was physical damage to the BWE itself does not make this claim one which is not
solely for economic loss: Woolcock Street Investments Pty Ltd v CDG Pty Ltd12;
Bryan v Maloney13.

[79] The plaintiffs argue that there was a sufficient connection between O&K and future
owners of the BWE for a duty to be owed to present and future owners as joint
venturers as a class. This is put on the basis of these matters:

(1) there was a determinate class constituted by the joint venturers as owners of
the BWE from time to time, notwithstanding that every member of that class
could not be nominated in November 198414;

(2) both future and present joint venturers were relevantly vulnerable;

(3) the imposition of liability upon O&K to such a class would not lead to
unacceptable consequences in terms of policy. Unlike the position in
Woolcock Street Investments, the existence of a duty owed to the then (1984)
owners of the BWE to avoid economic losses of this kind is clear; and.

(4) O&K must have known that the structural failure of the BWE was inherently
likely to produce economic loss15.

[80] It is argued that both existing and future owners of the BWE were relevantly
vulnerable in the event that there was a failure to exercise due care and skill
because:
(1) O&K “was better skilled to identify and guard against the risks posed by a
failure of the (repairs) to the BWE and to identify the risk of fatigue
cracking”;

(2) “The plaintiffs did not have the relevant engineering expertise” and in fact
relied on O&K;

(3) the repairs were done urgently, with no opportunity for the negotiation of
contractual terms which might have protected “the plaintiffs”;

(4) there was reliance “by the plaintiffs” on O&K as Dr Fleischhaker knew;
(5) “The plaintiffs” were unable to protect themselves from the consequences of
negligence; and

(6) the condition of the stiffeners made it difficult for “the plaintiffs” to inspect
them, other than by engaging the second defendant to conduct the type of
inspection which is the subject of the inspection case.

12
(2004) 216 CLR 515 at 529.
13
(1995) 182 CLR 609 at 617, 657.
14
Perre v Apand Pty Ltd (1999) 198 CLR 180 at 200 and 202 per Gaudron J and 255-256
per Gummow J.
15
Caltex Oil (Australia) Pty Ltd v The Dredge “Willemstad” (1976) 136 CLR 529 at 576 per
Stephen J.
 27

[81] Further, the plaintiffs argue that the distinction between economic loss and physical
damage in the present case is “a very technical one”, as they say appears from the
fact that personal injury was suffered by an employee of the first plaintiff in the
collapse16.

[82] Apart from that last submission, the plaintiffs’ arguments are properly directed to
the considerations indicated by the various judgments in Perre v Apand Pty Ltd17
and Woolcock Street Investments Pty Ltd v CDG Pty Ltd18. In the plaintiffs’ favour
is that the extension of the duty to future owners, as participants in the operation of
this mine would not result in the duty being owed to an indeterminate class. The
potential losses would be confined to those suffered by owners of the machine from
its damage or destruction and its unavailability at this mine.

[83] The plaintiffs’ arguments as to vulnerability are not as persuasive. The matters to
which they refer are relevant in demonstrating the vulnerability of the owners as at
November 1984. The position of future joint venturers is different. Apart from the
suggested difficulty in inspecting the critical part of the BWE, none of the matters
advanced by the plaintiffs seems to be directed to the vulnerability of them. The
difficulty of an inspection is relevant. As I will discuss in relation to the inspection
case, it was possible to inspect this critical area at the top of this stiffener. But it
was relatively difficult to do so because for the inspector, there was no direct line of
sight to that part of the tower from a position standing on the tower’s walkway.

[84] When acquiring its share in the joint venture, the seventh plaintiff might have
sought a warranty as to the condition of the mine’s plant and in particular the BWE.
Alternatively, the seventh plaintiff might have conducted its own inquiries and
taken its own professional advice as to the plant. No evidence was led by the
plaintiffs as to why these were not realistic means for the protection of subsequent
owners. And it was open to the seventh plaintiff to seek an assignment of any rights
which the seller of this share may have had against third parties in respect of any
defects in the plant. (As already discussed, there is no pleaded or agreed case that
the seventh plaintiff took an assignment.)

[85] In Woolcock Street Investments, Gleeson CJ, Gummow, Hayne and Heydon JJ said
that19:
“Since Caltex Oil, and most notably in Perre v Apand Pty Ltd, the
vulnerability of the plaintiff has emerged as an important
requirement in cases where a duty of care to avoid economic loss has
been held to have been owed.”

In Perre v Apand Pty Ltd, McHugh J said20:

“If the plaintiff has taken, or could have taken steps to protect itself
from the defendant’s conduct and was not induced by the defendant’s
conduct from taking such steps, there is no reason why the law
should step in and impose a duty on the defendant to protect the
plaintiff from the risk of pure economic loss.”

16
Which is not the subject of any claim here.
17
(1999) 198 CLR 180.
18
(2004) 216 CLR 515.
19
(2004) 216 CLR 515 at 530.
20
(1999) 198 CLR 180 at 225.
 28

The seventh plaintiff has not proved, or sought to prove, that it could not have taken
steps to protect itself from O&K’s conduct. In my conclusion, the duty of care
owed to the joint venturers as at 1984 was not owed also to subsequent joint
venturers and to the seventh plaintiff.

[86] However, the position of the seventh plaintiff in the claim against O&K for
damages under s 82 of the Trade Practices Act is a different question, and this is
considered below.

What did Dr Fleischhaker consider?

[87] Dr Fleischhaker provided two witness statements. The first was dated
8 February 2007. The second was dated 19 August 2007, just a few days
before he gave his oral evidence. In his first statement he said that he did “a rough
calculation of the static loads whilst I was at Moranbah” on which he “spent
approximately two hours”. He said he did this:
“because I’d chosen a limit on the end of the stiffener in the area
where I expected the stresses would be rather low, but I wanted to
know whether I was right about where the stiffeners ought end. I
was satisfied with my conclusion. I do not remember the figures but
I recall that they had been small enough to be reasonable.”

He also said that:

“My assessment of the effect on fatigue resistance involved a
consideration of the operational loads which applied to the tower. I
considered the likely maximum and minimum stresses which would
be found in the area of the upper ends of the terminations of the
stiffeners. I first considered this issue when I was at the Goonyella
site looking at the repairs. I did the calculations on paper although I
believe that no complete copy has been kept of this material. I
believe I expected that on my return to Lubeck that a more
comprehensive analysis of this would occur by my staff, however it
appears that this did not occur … I believe the assessment that I did
on site gave a reasonable indication of what the stress range was and
I was satisfied that the introduction of the stiffeners did not have any
significant consequences for fatigue.”

[88] His second statement was somewhat different. Rather than not being able to
remember the figures, in his second statement and in his oral evidence he purported
to recall some figures and to reconstruct others, in discussing what calculations he
did. Further, in his second statement, he did not say that he considered the minimum
stresses but instead that:
“Theoretically one would then need the minimum stress. This
wasn’t able to be calculated on site…”

[89] As already noted each of these accounts of doing calculations, to satisfy himself that
the introduction of the stiffeners would not have any significant consequence is
inconsistent with his assertion in his September 2004 letter, that he performed no
calculations because he could not have done so at Goonyella. They are also
inconsistent with his assertion in the 2004 letter, effectively repeated in
O&K’s pleading, that he was not asked for a comprehensive engineering solution.
 29

On his evidence, Dr Fleischhaker made his calculations broadly according to the

German standard BG 60. It is necessary to go now to its relevant provisions.

[90] The exercise of reasonable care required Dr Fleishhaker to consider the ability of
what was being added to the tension side of the tower to withstand the likely
stresses. In particular it required a consideration of the strength of the alternative
welded details. BG 60 instructed engineers how to calculate the ability of certain
welded details to withstand those stresses. That standard had been generally applied
in the original design of this BWE. The contract had required the BWE to be
constructed according to BG 60. But it had also provided, in Appendix 1 of the
specification, as follows:
“The Load Assumptions stated in [BG60] shall be used except
where modified by the specification and the following…

Where the BG and related Codes and Standards are under revision
during the Contract the Contractor shall draw the attention of the
Purchaser to any provisions of the proposed revisions which could
have a significant effect on the strength stability and ground
pressure of the excavator; but the Contractor shall not use any parts
of the proposed revisions in his design and construction with-out
the prior written approval of the Independent Expert (IE) and the
Engineer.”

[91] BG 60 was a standard which had been used in the Federal Republic of Germany
since 1960. As at November 1984 the standard was under review there by a
committee which included Dr Fleischhaker. Some members of the committee then
considered that BG 60 was unreliable and that in several respects it should be
changed. It was changed, but not until 1986 by the publication of the standard
BG 86.

[92] BG 60 required the designing engineer to calculate the maximum stress and the
minimum stress at the relevant point. The level of stress was referred to by the
Greek letter sigma. So the maximum stress was described as σmax. The minimum
stress was described as σmin. The ratio of one to the other was described by the
Greek letter kappa. The so called stress ratio, known also as the kappa factor (κ),
was thereby calculated thus:

σmin
κ= ___
σmax

By 1984 the use of this kappa factor had been abandoned in the engineering
standards of some countries, and most notably in the United States of America,
where the relevant codes for steel structures were on the basis that the critical factor
was not the proportion of the minimum stress to the maximum stress, but the
“stress range”, that is to say difference between the two.

[93] To be satisfied that a certain welded detail would be strong enough to withstand the
stresses from the operation of a machine the engineer would measure the maximum
allowable stress of that proposed weld. Under BG 60, that involved a calculation
according to the data and formulae set out in the standard. One factor in that
 30

calculation was the kappa figure. Another was the so called probability factor
which was called “W”. The calculation of “W” was also defined within the
standard.

[94] Once the engineer had calculated the maximum allowable stress of a certain welded
detail at a certain point of the structure, that figure was compared with the
maximum stress which was expected in the operation of the machine (σmax). If it
was less than σmax it was not strong enough. If it was greater than σmax, in theory it
would be an adequate welded detail to be employed, although there could be a
judgment required of the engineer as to whether, in all the circumstances, it was safe
enough. Dr Fleischhaker said that he would not have used a welded detail where
the maximum allowable stress (or strength) of the detail exceeded σmax but by less
than ten per cent.

[95] As noted already, in his first statement Dr Fleischhaker said that he considered the
“likely maximum and minimum stresses which would be found in the area of the
upper ends of the terminations of the stiffeners” (the likely σmax and σmin). But in his
second statement he said that the minimum stress was not able to be calculated on
site but that he knew from his “memory…that the kappa at the approximate position
of the stiffener end was .7”, so that “it was then a simple calculation to come to the
allowable stress which under BG 60 was 215MPa [215 megapascals]”.

[96] In his second statement he was a little more specific saying that he was able to
assess the σmax at 163MPa and to calculate the maximum allowable stress of an
FI detail at that point as 215MPa and he provided a handwritten reconstruction of
his calculations. But when cross-examined, and shown that the dimensions used by
him to arrive at his 163MPa were incorrect, he conceded that his calculations
should have resulted in a figure for σmax of 208MPa. Overnight during his
cross-examination, he was allowed the opportunity to look at drawings and to revisit
his evidence about his calculations. He then produced another calculation, again a
purported reconstruction of what he had done at Goonyella, which resulted in a
σmax of 171MPa. Then it was pointed out to him, by further cross-examination, that
he had made another error. Before the next day of his cross-examination he
therefore attempted a further reconstruction of his 1984 calculations, this time
reaching a σmax of 219MPa. But then he said that he had not applied the probability
factor, W, and that allowing for this the allowable fatigue strength of an FI weld at
this point of the structure was 229MPa, which being more than his σmax of 219MPa
showed that the strength of the FI would have been sufficient. But even so, the
margin for error was less than ten per cent and the problem with this evidence was
that in his second statement he had said “If the allowable stresses had been closer,
for example ten per cent, I would have considered moving up to the class EI”.

[97] Then he added another qualification to his calculation of 219Mpa, saying that it
could be reduced because, he now recalled, in 1984 he had taken into effect the
nearby bracing on the tower, and that when that is done, his 219MPa becomes
186MPa. This is a matter to which he had not referred in his evidence until then,
and in particular, in his witness statements, where he had purported to reconstruct
his calculations or in his attempts over several days of oral evidence to show how he
could have arrived at a figure under BG 60 with the information which he had at
Goonyella.
 31

[98] Of course it must be remembered that Dr Fleischhaker was being asked to

reconstruct what he said had been the calculations which he performed more than
20 years ago. That was always going to be difficult, assuming that he had
performed those calculations. Nevertheless the fact that his evidence changed
several times about this makes it even less persuasive. And what is significant is
that after several attempts, made over several days, he was unable to show how,
with the means and information available to him at Goonyella, he was able to
measure the strength of an FI detail at this point of the tower by a calculation
according to the formulae in BG 60. Probably because he recognised that, he
claimed (in cross-examination) that when he returned to Lubeck, he had his
“co-workers” check his calculations and “they confirmed it”. There is no support
for this from other evidence and it is inconsistent with his witness statements. As
noted already, in his February 2007 statement he said that:
“I believe I expected that on my return to Lubeck that a more
comprehensive analysis of this would occur by my staff, however it
appears that this did not occur…”

[99] O&K pleaded that “calculations as to the stresses, as a consequence of the stiffener
terminations, on the tensile and compression members of the tower” were
performed by another of its employees, a Mr To Baben. In his second statement
Dr Fleischhaker suggested that Mr To Baben had checked Dr Fleischhaker’s
calculations. He said that he did not receive any report of the result of
Mr To Baben’s checking, but that he was not concerned because he was satisfied
that his own analysis had been correct. Clearly Mr To Baben did make some
calculations after Dr Fleischhaker’s visit to Goonyella. However they were not
calculations checking calculations by Dr Fleischhaker and more generally, in
relation to fatigue or the strength of the upper stiffener terminations and the welds.

[100] It was conceded ultimately by O&K that Mr To Baben had not made any calculation
in relation to this part of the tower and that his calculations had been of the static
strength of the tower at a much lower and presently irrelevant point. I find that
there was no work by way of calculations or checking calculations in relation to the
point of these stiffener terminations by O&K after Dr Fleischhaker’s visit to the
mine. Significantly, however, according to Dr Fleischhaker’s evidence, O&K could
have done so.

[101] In my conclusion, it is more probable than not that Dr Fleischhaker did not calculate
the strength of an FI detail at the stiffener terminations. His reconstructions of
calculations effectively acknowledged that it was not then possible for him to
perform the calculations required by BG 60 whilst he was at Goonyella. That is
consistent with the evidence of Mr Friedemann, who said that he did not believe it
would have been possible for Dr Fleischhaker to have conducted an assessment of
the impact on the fatigue resistance of these stiffeners. Dr Fleischhaker could have
attempted only some less precise and therefore less reliable calculation. As is
shown by the evidence of other witnesses, such as Professor Hulsmann called by the
plaintiffs or Dr Potts called by the defendants, a precise calculation of the adequacy
of an FI detail would have required more time and data than Dr Fleischhaker had
available to him in his couple of days at Goonyella. Precisely calculated according
to BG 60, it would have been necessary for Dr Fleischhaker to apply the probability
factor, which he could have calculated only by knowing the various load
combinations which would provide the figures from which probability factor was to
be calculated under the equation set out on pages 12 and 13 of BG 60, and he does
 32

not suggest that he had all of this information on hand at Goonyella. He did not say
that he had used the probability factor (W) in his calculations. The submission that
I should find that he did use it, and from a memory of what it had been in his design
of the BWE itself, has no basis in the evidence.

[102] So whilst his duty was to provide a considered engineering solution, he did not do
so at Goonyella, at least in respect of the strength of the upper terminations of these
stiffeners was concerned. As his evidence acknowledges, he could have had O&K
perform that analysis upon his return but that did not happen.

What should have been done?

[103] The plaintiffs argue that upon those facts, that Dr Fleischhaker was negligent and
that in consequence, there was an undue risk of fatigue cracking which would result
in the structural failure of the tower, as did occur in 2000. They say that those facts
are sufficient to make O&K, as vicariously liable for Dr Fleischhaker’s negligence,
responsible for the damage from the collapse of the BWE.

[104] However, the plaintiffs must go further. They must prove not only what O&K did
or did not do, but also what a reasonably careful and competent engineer in
Dr Fleischhaker’s position would have done. It is necessary to inquire further into
the facts to identify “with some precision, what a reasonable person in the position
of the defendant would do by way of response to the reasonably foreseeable risk”,
as Gummow and Hayne JJ said in Graham Barclay Oysters Pty Ltd v Ryan21, where
their Honours cited the observation of Isaacs A-CJ in Metropolitan Gas Co v
Melbourne Corporation22 that:
“[no] conclusion of negligence can be arrived at until, first, the mind
conceives affirmatively what should have been done.”

[105] As the defendants’ case ultimately accepted, Dr Fleischhaker was obliged to assess
the fatigue strength of this weld detail. They say that this required no more than the
application of BG 60. So if upon a proper analysis, an FI detail would have proved
sufficient according to BG 60, no more was required of the engineer.

[106] The plaintiffs argue that the reasonable engineer was required to go further than
simply the application of BG 60. They say that the reliability of BG 60 was then the
subject of considerable professional doubt, as Dr Fleischhaker knew or should have
known, such that no reasonable engineer in his position could have simply applied
that standard. The reasonable response which was required was either the
prescription of a stronger welded detail, and in particular the equivalent of an
EI under BG 60, or the design of the stiffeners so that they extended to the top or
near the top of the tower, where the stress at the stiffener terminations would have
been far less.

[107] Applying only BG 60, an FI weld at the top of this stiffener would have been
adequate. That was the evidence of Professor Hulsmann, called by the plaintiffs,
and Dr Potts called by the defendants. Professor Hulsmann’s opinion about that
was expressed in his report of July 2007. By then, this trial had been underway for
some months when the plaintiffs, apparently as a result of that report, obtained leave
to amend their case. The amendments were in the form of further particulars, the

21
(2002) 211 CLR 540 at 611-612.
22
(1924) 35 CLR 186 at 194.
 33

first draft of which were produced on 23 July 2007 and which in final form are
dated 3 August 2007. Until then there was no specific plea that a reasonable
engineer in Dr Fleischhaker’s position would have gone beyond BG 60. At least
once Professor Hulsmann had made his calculations which showed that an FI would
have sufficed according to BG 60, the plaintiffs had to allege that Dr Fleischhaker
knew or ought to have known that BG 60 may have overstated the fatigue strength
of the FI detail.

[108] Professor Hulsmann undertook two sets of calculations, one involving a beams
model and the other a finite element analysis. The beams model used a program
which his firm, Schippke & Partners, had acquired and which he knew to be the
same as that used by O&K in 1984 and earlier when it had designed this BWE. He
undertook the finite element analysis to make a better comparison with the
calculations undertaken by Dr Potts’ firm (AMOG). As appears from his July 2007
report, there is little difference between his finite element analysis figures and those
of Dr Potts. Professor Hulsmann calculated on the finite element basis the σmax at
210.4MPa and the strength of an FI detail for this stiffener end at 223.9MPa, with
the result that the weld was strong enough according to BG 60. According to the
AMOG calculations, the maximum stress was 191.1MPa and the strength of the
detail was 219.8MPa. Professor Hulsmann’s calculations using the beams model
resulted in a maximum stress of 216.1MPa against a strength of the FI of 226MPa.
This is the more relevant calculation because the beams model calculation is that
which would have been performed in 1984.

[109] So on Professor Hulsmann’s calculations, the maximum stress was more than
90 per cent of the fatigue strength of the FI detail. Dr Fleischhaker said that had his
(alleged) calculations produced a maximum stress within that range of the strength
of the FI, he would have prescribed a stronger detail.

[110] Should the reasonable engineer with the results according to Professor Hulsmann’s
calculations, have chosen a stronger detail than an FI? This 10 per cent margin for
safety was not suggested by the text of BG 60 itself. Nor was it suggested by
Professor Hulsmann, upon the assumption that BG 60 was a reliable standard.
Perhaps Dr Fleischhaker did have a practice of allowing for that margin for safety,
although it is just as likely that he falsely claimed that he had this practice in order
to represent that he had a conservative approach to these things. But whether he had
such practice, I would not conclude that any reasonable engineer must have applied
it. And it is not part of the plaintiffs’ pleaded case that if BG 60 was otherwise
reliable, such a margin should have been allowed.

[111] Accordingly, it is necessary for the plaintiffs to prove that any reasonable engineer
in Dr Fleischhaker’s position ought to have thought that BG 60 was unreliable and
that some more conservative solution should be designed in case BG 60 overstated
the strength of the FI detail.

[112] The plaintiffs’ case in this respect, as set out in the particulars of 3 August 2007, is
as follows:
“B. Alternatively, if the welded detail designed by the
First Defendant was intended by Dr Fleischhaker to be an
FI detail under standard BG 60, which is denied by the
Plaintiffs, Dr Fleischhaker knew or ought to have known at
the time the welded detail was designed that:
 34

[1] BG 60 overstated the fatigue strength of the

FI welded detail and that maximum stress in the
region of the termination exceeded the fatigue
strength of the FI welded detail;

[2] further or in the alternative, there was a body of

engineering opinion (including the papers and text
particularised in (III) below) to the effect contained
in the codes and standards and particularised in (IV)
below which indicated that BG 60 may have
overstated the fatigue strength of the FI welded detail
and there was a risk that the maximum stress in the
region of the termination might exceed the fatigue
strength of the FI welded detail.

PARTICULARS

Particulars of the facts or matters by reason of which

Dr Fleischhaker knew or ought to have known at the
time the welded detail was designed that BG60
overstated the fatigue strength of the FI welded detail
and that maximum stress in the region of the
termination exceeded the fatigue strength of the
FI welded detail, are:

(I) Dr Fleischhaker participated in a committee

which reviewed the adequacy of BG 60 from
in or about 1976 to until BG 86 came into
force in 1986;

(II) in January 1984 that committee produced a

draft of the standard that later became BG 86,
which treated fatigue strength of welded
details equivalent to the FI detail in BG 60 as
having a lower fatigue strength than the
maximum stress in the region of the stiffener
termination;

(III) that experimental fatigue data indicating that

the calculation of the fatigue strength of
welded details by reference to a stress ratio,
such as the method by which the fatigue
strength of welded details was calculated
under BG 60, might overstate the fatigue
strength of welded details had been referred
to in the following published papers and
texts:

…
 35

(IV) the method by which the fatigue strength of

welded details was calculated under BG 60
(by calculating a stress ratio κ and applying a
probability factor) had not been followed or
adopted in standards introduced after 1978,
that is AASHTO (1983), ISO 5049 (1980),
DIN 15018 (1984) and DS 804 (1983),
Sia 161 (1979), BS 5400 (1978), AS 1250
(1981) and Exhibit 401;

(V) an FI welded detail at the stiffener

termination would not have had sufficient
fatigue strength under any of those standards;

(VI) by reason of Dr Fleischhaker’s position as

head of the department for design and
development at the First Defendant in
Lubeck and by reason of his membership of
the committee referred to in (I), he ought to
have been aware of the matters referred to in
(III) to (V) above;

(iv) The matters referred to in paragraph 25(a)(i) to (iii)

above would have been recognised by a reasonable
[sic] competent structural design engineer.”

[113] BG 60 had been used in the design of bucket wheel excavators in

The Federal Republic of Germany for more than 20 years by 1984. With some
qualifications, it had been used in the design of this BWE. It prescribed “principles
of calculations” for “large machines in open cut mines”. As would be expected of
such a standard, it was the product of considerable professional expertise and
practical experience. And it was a standard specifically referable to machines such
as these and the conditions in which they were expected to operate, rather than
having a more general application, such as a standard for cranes. It did not have the
force of law in The Federal Republic of Germany or elsewhere, but professionally it
was for many years considered to be authoritative and reliable.

[114] However the plaintiffs say that by November 1984 BG 60 had been discredited.
Professor Hulsmann recalled that there had been some accidents involving the
structural failure of bucket wheel excavators in The Federal Republic of Germany
leading up to 1984 which he believed were significant in causing the
reconsideration of BG 60. But nothing of that kind is alleged within the particulars.
Undoubtedly BG 60 was being reconsidered by the relevant professional body in
1984 but apart from Professor Hulsmann, there appears to be no evidence that this
was the result of the structural failure of machines. I accept that he has some
recollection that there were accidents of the kind he described, but not surprisingly
given the passage of time, his recollection was very general. He was unable to
recall the particular cause of the incidents and what they indicated in particular
about BG 60.

[115] BG 60 was being reviewed by a professional committee in The Federal Republic of

Germany of which Dr Fleischhaker was a member. It was under review at least by
 36

January 1984, when a draft of a proposed new standard was produced and
provided to the committee for its consideration. That draft was not produced
by the committee itself (as the particulars allege) but by one of its members,
Professor Kaufmann. Professor Hulsmann was aware of the committee’s review of
BG 60, and of at least some of the suggested changes to it, through his working with
Professor Kaufmann at the time. The committee was made up of academic
engineers and people such as Dr Fleischhaker, who represented leading
manufacturers. Its members included Mr Friedemann and Dr Kowalewski, each of
whom gave evidence.

[116] Professor Kaufmann was advocating a change from the kappa based analysis of
fatigue strength to one based on stress range. His January 1984 draft included that
change. Another change he proposed was in the measurement of the relevant loads
on a machine. BG 60 did not require that “dynamic loads” be taken into account.
Broadly speaking these are loads resulting from the movement of the machine. As
is now known, the disregard of dynamic loads had led to an understatement of the
stress condition at points of these structures. Accordingly, as is now known, this
was one respect in which BG 60 required amendment. The revision of BG 60
culminated in the publication of a new standard in 1986, called BG 86. This new
standard brought dynamic loads into account.

[117] Mr Friedemann had questioned the appropriateness of the loads under BG 60,
suggesting that the loads which it assumed were too low. The load assumptions
under BG 86 were higher then as a result of the inclusion of dynamic loads and,
according to Dr Fleischhaker, research as to loads which had been done by
Mr Friedemann.

[118] The committee caused tests to be undertaken to assess the proposals of

Mr Friedemann and Professor Kaufmann, the results of which showed that their
proposals could not be immediately accepted and that there was much further work
to be done. However, those tests were not conducted until 1985, and the plaintiffs’
argument is that, as Dr Fleischhaker conceded in cross-examination, the position in
late 1984 was “inconclusive”. Dr Fleischhaker’s evidence was that according to the
then opinions of Mr Friedemann and Professor Kaufmann, many machines designed
to BG 60 by then should have broken, suggesting that they were wrong. But if that
was so, it was not apparent by the end of 1984.

[119] Had an engineer calculated the fatigue strength of an FI detail for this stiffener
termination on the BWE using the 1984 draft standard, an FI would have been
insufficient according to that draft. That is shown by Professor Hulsmann’s
calculations. There was some dispute between the experts as to what detail within
the 1984 draft was the equivalent of an FI under BG 60. But that need not be
resolved. On any of the relevant possibilities under this draft, an equivalent of an
FI would not have been strong enough, according to AMOG’s calculations. And the
plaintiffs do not argue that the reasonable engineer should have applied the then
untested 1984 draft standard. It could not be said that any reasonable engineer must
have applied this draft rather than the BG 60 which still stood. Indeed, because in
November 1984 the relevant tests had not been conducted in relation to the draft,
and it had not otherwise received the consideration which necessarily would have
preceded its adoption, the application of the draft then would have been
unreasonable. But rather than arguing that an engineer should have used the draft
 37

standard, the plaintiffs argued that the draft suggested such a departure from BG 60
that overall the reliability of BG 60 should not have been assumed.

[120] Mr Friedemann was called by the defendants. He gave his evidence by video link
from Germany from where he had been unable to travel because of ill health. He
described the regulatory regime in The Federal Republic of Germany for the
approval of machinery in the mining industry, under which the regulatory authority
would engage a so called independent expert to examine a machine and to analyse
its design and construction. The expert would report to the authority on whether the
machine was safe for its operations to be permitted. For many years
Mr Friedemann worked as such an independent expert and his experience and
expertise in relation to bucket wheel excavators was well established. He has
written independent expert’s reports in relation to more than 20 bucket wheel
excavators in Germany and elsewhere, as well as such reports on other heavy
mining equipment such as other excavators, spreaders and reclaimers. He has
written similar reports outside The Federal Republic of Germany although a similar
regulatory regime in requiring the report of an independent expert, was not in place.
He provided reports on certain machinery for the State Electricity Commission of
Victoria, and on its recommendation he was introduced to Utah to advise it in
relation to the then proposed BWE in 1978. He was engaged by Utah in that year to
review the structural design of the main load frames and preliminary approval of
drawings for the BWE, spreader and transfer conveyor. Subsequently he was
engaged to provide an independent expert’s report concerning the BWE and its
ancillary equipment in accordance with the German practice. He delivered this
report to Utah in 1985.

[121] Mr Friedemann was not told of the 1984 grounding before the repairs, involving the
stiffeners, were effected. He became aware of the grounding when Dr Fleischhaker
telephoned him after the repairs had been carried out. He later received some
written material about the incident from O&K.

[122] In his witness statement, Mr Friedemann said that he had “been called upon to
propose a method to repair this tower in 1984 I would not have done it any
differently”. He said:
“At that point in time [his 1985 report] I was not focussed on the fact
that the welding around the ends of the stiffeners was not presented
in detail. I don’t believe that anyone would have paid attention to a
detail like that, considering that no information was available about
any extent of strain that may have been present there. It was clear
that the forces present in that location were not relevant, assuming
the dredger [the BWE] was used in accordance with the regulations.
The ends of the stiffeners were at that point in time not of great
significance.”

Further, he said that he would “not have thought it appropriate to have the
stiffeners extended any further than they were dimensioned in this repair”. He also
wrote that he did not believe it would have been possible “in the given time frame
to conduct an assessment of the impact on fatigue resistance of these
modifications” and that he would not have been able to do so. By “given time
frame” as he explained in his oral evidence, he meant that that those calculations
would have required “another four months or so” whereas he understood that the
damage had to be repaired “as soon as possible”.
 38

[123] In two respects this evidence seems at odds with the case for the defendants. First
there is the statement that “the forces present in that location weren’t relevant,
assuming the dredge was used in accordance with the regulations.” However
Mr Friedemann was discussing his own position in writing his 1985 report, rather
than the position of Dr Fleischhaker in designing the modifications.
Understandably Mr Friedemann would be defensive, having vouched for the safety
of the BWE in his 1985 report without having considered the fatigue strength of
what had been added to the load carrying structure of the BWE in the 1984 repairs.
In that way he was not an independent witness. But more importantly, it was not
ultimately the defendants’ case that no one would have considered the forces at the
top of these stiffeners or “paid attention to a detail like that”. Instead the defendants
sought to demonstrate that Dr Fleischhaker had done so, by his evidence of
calculations which he said he performed in the course of his producing his
suggestions for repair. So upon the final arguments, it is common ground that the
reasonable engineer would have considered those forces and made or caused to be
made some assessment of the strength of the detail to withstand them.

[124] Secondly there is Mr Friedemann’s point that calculations would have taken
“another four months or so”. That was not Dr Fleischhaker’s evidence.
Mr Friedemann was apparently referring to a finite element calculation which in
1984 could not be performed as quickly as it can be now. Importantly O&K does
not argue that the appropriate calculations could not have been performed within
any time limit imposed by Utah. At the foot of their written submissions in reply,
the defendants suggested that the “pressure was on” and there was an “urgency”, but
that is no submission that there was insufficient time for a proper design.

[125] Remarkably, Mr Friedmann was not examined or cross-examined about the work of
the committee reviewing BG 60 and in particular his contribution to it. The likely
explanation for this is that Mr Friedemann was called on 12 June 2007, before the
plaintiffs amended their case to allege that Dr Fleischhaker ought to have gone
beyond BG 60. Mr Friedemann was not recalled.

[126] Professor Kowalewski, also called by the defendants, did give evidence on this
matter. His evidence-in-chief was by a witness statement given in September 2007
and his oral evidence was by telephone from Germany. He has had a long career in
engineering both in academic and manufacturing work. From 1969 to 1974 he was
a professor at a university in The Federal Republic of Germany before becoming
head of the structural department of the mining machinery division of a
manufacturer from 1974 to 1983, during which he supervised the design of and
strength calculations for numerous bucket wheel excavators and other heavy mining
equipment. In that period he was involved with bucket wheel excavators which
were sent to mines in Germany, Spain, India and Turkey. In 1983 he was appointed
as an independent expert by the West German regulatory authority for surface
mining equipment. He has assessed bucket wheel excavators in Indonesia,
Germany and one operated by the State Electricity Commission of Victoria. He has
also worked as a consultant on numerous reconstructions and refurbishments of
mining equipment including bucket wheel excavators. He retired last year.

[127] During his work in the design of bucket wheel excavators, which was from 1974 to
1983, he said that the stress calculations were performed according to BG 60.
 39

[128] He referred to articles published in 1972 by Professor Kaufmann who had

questioned whether BG 60 was up to date in comparison with other
German standards. His recollection was that Professor Kaufmann had then
concluded that BG 60 remained “a safe code and he (Professor Kaufmann)
proposed only minor amendments”. He referred to the committee which was
appointed to review BG 60, and Professor Kaufmann’s January 1984 draft standard.
Professor Kowalewski said that this draft had no “official status” and did not
“represent the state of the art as agreed or endorsed by the committee”. He said that
until the issue of BG 86, BG 60 “was the applicable code and was the code
according to which I designed the structure of bucket wheel excavators and
modifications to bucket wheel excavators”. To his knowledge this was the practice
of other designers of bucket wheel excavators in Germany. As to this the plaintiffs
point out that Professor Kowalewski had no involvement in the design of bucket
wheel excavators after 1983, from which they argue that his evidence as to
engineering practice in 1984 is of no moment. However that is not a complete
answer to his evidence. If it is accepted, then this evidence is inconsistent with the
plaintiffs’ case that there was a growing body of professional opinion against the
use of BG 60, for it is unlikely to have been the case that this emerged only after
1983 but before the November 1984 repairs.

[129] Professor Kowalewski said that the January 1984 draft was very different from what
the committee later agreed should be the new standard in 1986. In his view the
draft would not have been “a sound or practical basis upon which to design a bucket
wheel excavator”. He said that “[i]n the process of finalising BG 86, it was
calibrated against a number of machines that had been designed to BG 60 in order
to derive comparable solutions” and that when these machines, which had been
operating successfully for more than 20 years, were assessed under the proposed
BG 86 loading conditions, they were “shown to have a comparable fatigue life of
the BG 86 permissible fatigue stress ranges.” This appears to have been well after
November 1984 however, because I infer that BG 86 in draft was produced later
than the testing in 1985 of Professor Kaufmann’s January 1984 draft.

[130] Each of the parties led extensive evidence about codes or standards published after
1984 and about what these codes would have required for a welded detail at the end
of this stiffener. The plaintiffs apparently did this to demonstrate that BG 60 was
out of date by 1984 and that later codes have been more demanding of what welds
are required. The defendants led evidence, mainly through Dr Potts and his report
number 13, written in August 2007, that these subsequent codes were not so
demanding compared with BG 60. At times the respective cases seemed to lose
sight of the ways in which such evidence was or was not relevant.

[131] As to the question of what the reasonable engineer would have done in 1984,
evidence of the requirements of subsequent codes was of little relevance. Its only
relevance to that issue could have been that the publication of a subsequent code,
such as BG 86, could tend to prove, in conjunction with other evidence, the
existence of a process of review of BG 60 being undertaken in November 1984.
But that fact is uncontroversial. At one stage some of this evidence appeared to be
relevant to another issue, which is causation. The standard or code which is now
current might show what is now known to be the strength of certain welded details
as against the stress range to be experienced on such machines. So if the equivalent
of an FI detail would not be strong enough according to the current code, this might
assist in the proof that the use of an FI (or an FII, which is now known to be no
 40

weaker than an FI) contributed to the fatigue cracking which caused the collapse of
this BWE. However, as I discuss below, there is other and more direct evidence as
to the effect of an FI or FII upon the life expectancy of the BWE. In particular there
is the evidence of Dr Potts that with an EI weld, the BWE’s life expectancy would
have been twice that which it had with its welded detail.

[132] BG 86 has some relevance in showing that the January 1984 draft had not been
accepted by the committee because in several respects it differed from the draft.
But the plaintiffs do not suggest otherwise. Rather their case ultimately relied upon
what Dr Fleischhaker said was the inconclusive position in the review of BG 60 as
at late 1984. That fact is not disproved by evidence that subsequently there was
published a code, and in particular BG 86, having requirements which may have
been no more demanding than those of BG 60.

[133] Professor Kowalewski also referred to other codes or standards, existing in 1984,
which are pleaded by the plaintiffs as indicators of the unreliability of BG 60. He
was aware in 1984 of the standard DIN 15018 which was used for the design of
cranes. As Dr Fleischhaker accepted, this standard specified a lower fatigue
strength for an equivalent of the FI detail than according to BG 60, although he said
that DIN 15018 was “a standard for cranes which classifies things completely
differently”.

[134] Professor Kowalewski was not then familiar with the East German codes pleaded by
the plaintiffs23. He said he had no reason to refer to those codes as the design of
bucket wheel excavators in The Federal Republic of Germany was done in
accordance with the West German code (BG 60) which he believed was “largely
applied to bucket wheel excavators around the world”. He said that he had:
“no cause, nor saw a need, to make reference to other codes e.g.
bridge design codes (for example AASHTO or BS 5400) which do
not take care of the special operating and loading conditions of
bucket wheel excavators.”

[135] Of the code ISO5049, he said that this was:

“a standard that has been adopted from a document prepared by the
FEM (Federation Europeene de la Manutention). It deals with the
design of equipment for continuous handling of bulk materials and is
not suited for design of bucket wheel excavators digging solid soil or
in situ lignite.”

[136] He said, and I accept, that at no stage did the committee issue any warning or notice
as to any inadequacy in the design provisions of BG 60, including the FI and
FII details.

[137] In his witness statement, he said of Dr Fleischhaker’s sketches and his “final repair”
document that:
“The type of stiffener and profile used by Dr Fleischhaker … was
one which was commonly used not only on bucket wheel excavators
but also on other mining machinery.”

23
In the Particulars they are referred to as “Exhibit 401” which is the East German standard
TGL 13500/01 (1982).
 41

He added that:
“If designing the modifications in accordance with BG 60, this type
of detail would have corresponded with FI detail if it had an
all around closing weld of the same size as the fillet welds. If the
structural stresses at that location detail met at the permissible
stresses for the FI detail under BG 60, I would see no reason not to
have used it.”

In cross-examination Professor Kowalewski was taken to part of his witness

statement in which he had said that:
“In consequence of measurements on bucket wheel excavators, or
excavators and spreaders in operation, additional load assumptions
for dynamic effects have been included in BG 86.”

He agreed that the “measurements” to which he referred were those made by

Mr Friedemann in the late 1970s and that they had indicated that the maximum
stresses in operation were higher than those calculated under BG 60 because it made
no allowance for dynamic loads. He also agreed that he was aware of
Mr Friedemann’s calculations when he was a member of the committee in 1984, this
being “part of the information the committee had to consider”. He accepted that the
committee received Professor Kaufmann’s January 1984 document which he said
contained:
“sections which had been agreed by the committee already, sections
that were still under discussion and sections which had not been
discussed at all”,

and he confirmed his written evidence that there had been no discussion of the
draft’s tables for allowable stress. He agreed that it was likely that he read the
document as a whole in 1984.

[138] When cross-examined he referred to the assessment of machines which had been
designed according to BG 60 to assess the effect of adding the dynamic loads which
Mr Friedemann had identified, and said that the result of this was:
“that the permissible stresses of the BG 60 were over stepped.
Because these machines had been operating for 30 years without a
major fatigue damage, it was concluded that the permissible stresses
had to be increased.”

The defendants submit that he was referring to some assessment prior to 1984. As I
understood from subsequent answers he agreed that in 1984 the committee was still
considering Mr Friedemann’s data and more generally whether and if so, what
changes needed to be made to BG 60. Dr Fleischhaker was clear that the
committee’s assessment occurred after 1984.

[139] In cross-examination, he conceded that in 1984, he would have taken dynamic loads
into account, but then said that he would also have considered that there were
machines which had survived for decades although designed under BG 60. This
shows that he would not have simply and faithfully applied BG 60.

[140] The plaintiffs’ submissions strongly attack the credibility of Professor Kowalewski,
saying that his evidence has been tailored to support Dr Fleischhaker who they
suggest is a friend. He said that Dr Fleischhaker was not a personal friend but that
they were on friendly terms when they met at meetings or social events.
 42

[141] Professor Kowalewski made a short statement at the request of the plaintiffs which
is dated 11 July 2007 and I infer, immediately provided by them to the defendants.
It simply identifies some articles which he had written. But two days later
Dr Fleischhaker rang him with “a few technical questions related to my statement
and the attached articles”. Professor Kowalewski volunteered this exchange to the
plaintiffs’ lawyers by an email of 15 July 2007, in which he added “I would have
preferred to tell Dr Fleischhaker beforehand of my statement because I am on
friendly terms with him”. His witness statement, tendered by the defendants, is
dated 25 September 2007 and he gave his oral evidence on 1 October. After that
statement had been provided to the plaintiffs’ lawyers, they contacted him and
arranged a telephone conference, but shortly prior to that conference
Professor Kowalewski sent an email cancelling it. He sent a copy of his email to
the defendants’ lawyers. He said that he cancelled the conference because he was
afraid that it would “become very complicated and very uncomfortable”. He said
that in his conversation with Dr Fleischhaker, he had been told that none of the
other terminations had fatigue cracks and that “the crack started at a point where the
welding had not been conducted properly – carried out properly”. Apparently from
then on, he decided he would not speak to the plaintiffs’ side.

[142] He was re-examined about these matters and emails between him and a solicitor
acting for the defendants were tendered. That solicitor had told him that he was
under no obligation to speak to the plaintiffs’ lawyers but was free to do so if he
wished. There is, however, some cause for concern about this exchange. In his
email to the defendants’ lawyers, he referred to their recent conference and wrote:
“I would be grateful if you would help me remembering who was your partner
yesterday who fairly helped me realising your points and finding agreeable
solutions for several paragraphs of the statement in question”. The defendants’
solicitor replied that “the participants at the telephone conference last night were
myself, Mr Andrew Potts and Mr Uli Priester”. This is the same Dr Potts of
AMOG, an expert through whom reports were tendered. He should not have been
participating in that conference and, in particular, helping another witness to find
“agreeable solutions” for a witness statement. However, as also emerged from this
re-examination, when Professor Kowalewski was interviewed by the plaintiffs’
lawyers in July 2007, he was asked questions by the plaintiffs’ expert witness
Professor Fisher.

[143] I am not persuaded that Professor Kowalewski was dishonest. But I have the
impression that he was sympathetic to Dr Fleischhaker’s position, which is not
surprising given his long professional association with him and also perhaps
because it seems that Dr Fleischhaker had given him a certain side of the story by
suggesting that this was all the product of poor work by those who did the welding.
As appears from his email, he received what he thought was some considerable
assistance in the completion of his witness statement, and this much detracts from
its weight. Further, the standard of English in his witness statement was quite
different from that of his oral evidence. Indeed prior to the commencement of that
evidence, counsel for the defendants argued that he should have the assistance of
interpreters because of the standard of his English. Clearly enough he has been
greatly assisted by others, including those with technical expertise, in the
preparation of this witness statement.

[144] The plaintiffs argue that in 1984, BG 60 did not represent the state of the art in the
assessment of fatigue and that it was out of date in at least five ways, each of which
 43

was subsequently addressed in BG 86 and had been addressed in the January 1984
draft. First, BG 60 did not require dynamic loads to be taken into account. Second,
the probability factor “W” under BG 60 is said to have been “an arbitrary figure,
wrongly inflating the allowable maximum fatigue”. This probability factor was not
used in BG 86. Third, BG 60 distinguished between steel strengths but the plaintiffs
say it had been established by analysis of experimental data that the strength of the
steel made no material difference to the fatigue strength of the detail. Fourth,
BG 60 applied the kappa concept and not the stress range concept. Lastly, it is said
that BG 60 overstated the allowable fatigue strength of welded details by
comparison with more current standards but published by 1984, such as DIN 15018
and ISO 5049.

[145] It is one thing to say that there were these elements of BG 60 which were not
retained in BG 86. It is another to say that by November 1984, the relevant branch
of the engineering profession in which Dr Fleischhaker worked had accepted that
those elements were wrong and that BG 60 was out of date.

[146] So going to the first of them, Dr Fleischhaker knew that Mr Friedemann, for one,
was advocating the relevance and need for allowance for dynamic loads. But the
plaintiffs have far from demonstrated that there was a prevalent opinion held by
engineers that this should be done.

[147] The probability factor “W” is not proved to have been rejected by the profession by
1984. Nor is it proved that it was, or is, an arbitrary figure. On the contrary, as
would be expected, it was within BG 60 as the result of some considerable
professional consideration. It did not reappear in BG 86 but, as several witnesses
explained, BG 86 was not simply a repetition of the elements of BG 60 absent the
probability factor. There was quite a different means of calculating the adequacy of
a welded detail, but built into the figures which would result from the application of
BG 86 was a multiple of 1.4. Several witnesses explained that the committee which
drafted BG 86 considered it necessary to multiply by 1.4 what would otherwise be
the fatigue strength of a weld because otherwise machines which had been operating
successfully for years would have been unsafe according to that standard.

[148] As to steel strengths, whilst many may have believed that this was not material,
again it is not proved that in 1984 that this had become the prevalent professional
opinion. Nor is it demonstrated that by 1984 the use of the stress ratio (kappa) was
regarded as out of date and unreliable. For example the East German code
published in 1982 used kappa as did ISO 5049. Professor Fisher was strongly
critical of use of kappa, having developed the stress range concept to replace it, in
his work in the United States in the late 1960s and early 1970s. But as at 1984, the
stress range concept had not been employed within codes in Europe with the
exception of a code in Switzerland (to which Professor Fisher contributed) and in
what he described as the Euro code, which is not pleaded by the plaintiffs. The
crane code, DIN 15018, used the kappa concept.

[149] I have mentioned already Professor Kowalewski’s evidence as to that crane code.
The plaintiffs have far from established that its content, even considered with other
evidence, would have demonstrated to an engineer in 1984 that BG 60 was out of
date. It suggested a lower fatigue strength of welded details by comparison with
BG 60. But BG 60 was expressed to be relevant to large machines in open cut
mines whereas DIN 15018 was in relation to cranes.
 44

[150] The plaintiffs’ argument in reliance upon ISO 5049 is stronger because that standard
was expressed to apply to bucket wheel excavators. ISO stands for International
Standards Organisation which is an association of national bodies responsible for
formulating engineering standards. ISO 5049 is dated March 1981 but it recited
that it was first presented to its member corporations in 1978. It also recited
that 15 of those countries, including the Federal Republic of Germany, had
approved it although three had rejected it “for engineering reasons”, they being the
United Kingdom, Denmark and Australia.

[151] Under the heading “Regulations for the Calculation of Structural Elements”, this
ISO standard said this:
“Area of Application

These international standards shall be applied to mobile continuous

handling equipment for bulk materials; spreaders and bucket wheel
loaders with their conveyors, bucket wheel excavators and bucket
chain excavators for open cut mines, ship loading equipment and
ship unloading equipment etc.”

It went on to make particular provision for what were described as “storage yard
machines”, which it distinguished for some purposes from other machines such as
excavators and more generally machines “in which the digging resistance is mainly
uncertain”.

[152] I point to these references to stockyard machines as well as to things such as bucket
wheel excavators because of evidence given by a current employee of the
Krupp group, Dr Schneider. In his witness statement (dated 3 September 2007)
Dr Schneider argued that ISO 5049 was too conservative in its assessment of the
structure of a bucket wheel excavator. He wrote that because an excavator works in
natural soil, which is not homogenous material, its drive has to provide sufficient
reserves to cope with harder material whereas in contrast a machine such as a
reclaimer operating in a stockyard, and moving materials which have already been
excavated, has a more continuous application resulting in a different spectrum of
digging forces compared with an excavator. He said, in effect, that ISO 5049 was
apt for the stockyard machines but not for the bucket wheel excavators operating in
a pit. Dr Schneider said that this had been recognised by subsequent amendments to
the ISO standard and in particular in the 1994 edition of ISO 5049.

[153] However, on its face the 1981 edition of ISO 5049 was clearly expressed to apply
to, amongst other things, bucket wheel excavators. If it is now thought to have
limited application to them, nevertheless it was a standard published only a few
years prior to November 1984 and was approved by several countries including The
Federal Republic of Germany. Dr Fleischhaker was aware of it and he accepted that
he knew in 1984 that it specified lower allowable fatigue strengths than BG 60. In
Dr Fleischakker’s first witness statement (dated 8 February 2007) he wrote:
“17. Until my involvement at the Goonyella excavator, the codes
which were applied to these designs were in all cases either
the BG 60, or FEM, (otherwise known as ISO 5049). One
or other of these standards was specified in each contract for
any excavator in which I was involved. These were the only
codes applied by my professional colleagues.
 45

18. In 1992 Krupp … took over the business of O&K Germany.

Previously those two companies had been in competition.
The only designers and suppliers of this kind of excavating
equipment in the world until then were O&K Germany and
Krupp outside of the East German states, and Takraf in
East Germany. … Therefore the only persons experienced in
the design of such equipment were those who had worked
for either of those three organisations. I was familiar with
the design practices which were used by O&K Germany and
Krupp. O&K Germany and Krupp always applied, with one
exception to which I shall refer later, either FEM, or BG 60
to the exclusion of any other standard of any kind. …

19. Subsequently the design codes applied were invariably

either BG 86 (otherwise known as DIN 2261) once it came
into operation in 1986 or the FEM as subsequently
modified.”

So according to that, ISO 5049 did apply to bucket wheel excavators, and O&K and
Krupp used it in that context. That witness statement, of course, was made prior to
the plaintiffs widening their case to include this allegation that BG 60 should not
have been followed, and to rely in that on the more conservative requirements of
ISO 5049.

[154] In his second statement (dated 19 August 2007) Dr Fleischhaker again referred to
ISO 5049 as being “specifically for the design of bucket wheels”. He said that he
was invited to join the committee which developed that standard and that he
appointed a delegate to attend and participate on his behalf in that committee’s
deliberations, from which he followed the progress of its work. He went on to say
that the ISO code used the kappa concept and not the stress range concept, as an
apparent rebuff to Professor Fisher. Yet in his oral evidence he denied that
ISO 5049 applied to bucket wheel excavators, saying that instead it was
“established for materials handling”. By another answer in cross-examination, he
asserted that to his knowledge “nobody ever has ordered a bucket wheel excavator
constructed by this ISO norm or an FE norm – FEM norm”. That evidence cannot
be reconciled with his written evidence. As it happens there is evidence from
Krupp’s Mr Scheid showing that in about 1992, Krupp designed and manufactured
a bucket wheel excavator by the application of ISO 5049-1. And this was at a time
when Dr Fleischhaker was employed as the head of Krupp’s design office at
Lubeck. Perhaps Dr Fleischhaker had forgotten about this machine and its design.
Regardless of that, the design of that machine adds to the evidence, which comes
from the terms of the code itself, that ISO 5049 as published in 1981 was regarded
by relevant engineers, including, I find, by Dr Fleischhaker, as a code applicable to
bucket wheel excavators being used, as was the BWE, in a pit. And as he conceded,
he knew that it specified lower allowable fatigue strengths than did BG 60.

[155] It is not the plaintiffs’ case that the 1984 repairs should have been designed simply
according to ISO 5049. Rather it is their case that this code should have alerted
Dr Fleischhaker to the risk that BG 60 overstated the fatigue strength of the
FI detail. I accept that argument. ISO 5049 was then a relatively recent code, the
product of considerable international research and specifically applicable to bucket
wheel excavators. At the same time BG 60 was under review. The committee
 46

undertaking that review was investigating its adequacy and the position in
November 1984 was “inconclusive”. The other codes pleaded in the plaintiffs’ case
are not of the same relevance. But ISO 5049 should have alerted an engineer to the
risk of using only BG 60.

[156] In his report number 13, Dr Potts compared the requirements of BG 60 with those of
other codes published before and after 1984. He concluded that
“Whilst BG 60 has higher permissible stress ranges than
ISO 5049…, it is not inherently unconservative when compared with
other codes [such as DIN 15018 (1974) and TGL 13500 (1972 and
1982), the East German codes] taking into account the consideration
of the usage spectrum”.

The defendants say that this analysis was not seriously challenged and that I should
conclude from it that the reasonable engineer in 1984 would not have been
concerned about the application of BG 60, because that engineer would have
understood that it was not at odds with other relevant codes. I accept the factual
correctness of Dr Potts’ calculations within the report. I accept also that there is a
plausible basis for a comparison of the requirements of these codes which is set out
in that report. But it does not put paid to the plaintiffs’ argument based upon
ISO 5049, because as appears from this report, ISO 5049 was far more conservative
than BG 60 for the equivalent of an FI detail. Dr Potts’ explanation for that
difference was that ISO 5049 assumes “uniform load duty”, or in other words that
“the ultimate stress occurs almost always for the repetition cycles on which the
lifetime of the appliance is based.” The implicit suggestion within his report is that
if ISO 5049 had not made that assumption, it would have been less conservative and
its requirements would have been closer to those of BG 60. Be that as it may,
ISO 5049 did make that assumption, and this was a code published only a few years
prior to 1984 with specific reference to bucket wheel excavators. Dr Potts’ report
does not lead to the conclusion that the reasonable engineer could disregard
ISO 5049. I am unable to see how the reasonably careful engineer could have
disregarded it and gone simply to BG 60, especially when BG 60 was being
challenged by some and officially reviewed.

[157] Some of the codes or standards pleaded by the plaintiffs are not in evidence. They
are DS 804 (1983) and Sia 161 (1979). The others which are AASHTO (1983),
BS 5400 (1978) and AS 1250 (1981) are not as important because they were not
specifically referable to bucket wheel excavators. If as Dr Potts suggests, these
codes were not more conservative than BG 60, that is of little moment because
unlike ISO 5049, they were not specifically referrable to bucket wheel excavators.

[158] Another point argued by the plaintiffs was that the reasonable engineer would have
brought into account what is described as the significant “eccentricity” introduced
by this detail. Professor Fisher was strongly critical of Dr Fleischhaker’s repair
solution in many respects. One was that there was a “massive eccentricity” which
increased the global stresses to which this particular stiffener termination was
subjected. This was because the stiffeners were on one side of the flange but with
no corresponding stiffener on its other side, with the result that the centroid of the
force travelling the length of the flange was redirected towards the stiffeners so that
the stress became higher still on the stiffener side of the flange, concentrating at the
point of the end of a stiffener. Professor Fisher did not purport to calculate the
effect of this eccentricity and nor had he referred to it in his reports. But in his oral
 47

evidence he claimed to have “difficulty thinking that an engineer would not think of
this”. It is unnecessary to discuss the detailed response by Dr Potts to this
eccentricity argument. I am not persuaded by Professor Fisher’s oral evidence
about this to hold that any reasonable engineer in Dr Fleischhaker’s position would
have not relied upon BG 60, absent some other reason for not doing so, because
BG 60 would not have allowed for this eccentricity factor. Other witnesses such as
Professor Hulsmann and Dr Jones accepted that there was some eccentricity. But
apart from Professor Fisher, no witness seemed to say that any reasonable engineer
would have disregarded BG 60 for this factor if it was otherwise reliable.

[159] The plaintiffs’ case is not much advanced by the publications pleaded in the
particulars. I accept that the effect of these publications would have been to suggest
the unreliability of BG 60. But I do not accept that a reasonable engineer would
have been obliged to disregard a long-standing code (BG 60), if otherwise
considered to be reliable merely because some engineers, however eminent, were
publishing an opinion suggesting otherwise. The fact of this engineering opinion is
demonstrated by the formation by the relevant authority of the committee to review
BG 60 and the contributions being offered by Professor Kaufmann and
Mr Friedemann.

[160] In all of this, of course, the benefit of hindsight must be kept in mind. What must
be considered is that which was or should have been known or understood by an
engineer in Dr Fleischhaker’s position in November 1984. I am not satisfied that
such an engineer should have thought that BG 60 overstated the fatigue strength of
an FI detail. Some engineers in his position might reasonably have thought that it
did so. But that is not to say that any reasonable engineer must have held that view.

[161] However, any reasonable engineer in his position should have doubted the
reliability of BG 60. After all there was a review of BG 60 which had been put in
place by the relevant West German authority. A review committee had been
constituted, made up of leading engineers from the major manufacturers and
academics. Some eminent members of that committee had undertaken substantial
research. Mr Friedemann had compiled a large database from his research. All of
this amounted to more than a professional opinion being ventilated occasionally in
published journals or seminars. This was an official process for the review of the
code, not as a matter of routine, but because some leading engineers were providing
substantial reasons for its necessity. The outcome of that review was unknown and
could not have been safely predicted as of November 1984, as Dr Fleischhaker
effectively conceded. And as he knew, the inclusion of dynamic loads as advocated
by at least Mr Friedemann and by Professor Kaufmann in his January 1984 draft,
would affect the stress condition of relevant parts of an excavator and thereby the
ability of certain welded details to withstand that stress. The position was then
“inconclusive”. In the midst of that review the reasonable engineer in
Dr Fleischhaker’s position could not have said to himself at the same time that
BG 60 was reliable.

[162] Had Dr Fleischhaker or some other engineer at O&K performed

calculations according to BG 60, as Professor Hulsmann did, and thereby arrived at
Professor Hulsmann’s figures (or figures very close to them) he or she would have
seen that the strength of an FI detail, according to BG 60, was very close to the
maximum stress at the point of this termination. In his Report no 11, Dr Potts
challenged Professor Hulsmann’s FEA calculations as to BG 60, and suggested
 48

certain corrections. They are to his FEA calculations. The changes to the
FEA analysis by Professor Hulsmann, if accepted, are not significant. Under
Professor Hulsmann’s calculations, the maximum stress (210MPa) was 94 per cent
of the strength (223.9MPa). As changed by Dr Potts, the percentage was
87 per cent. Because BG 60 was unreliable, that margin for error should not have
been accepted as reasonable. And if the engineer had not performed calculations
either according to BG 60 or to ISO 5049, it is difficult to see how he could have
been satisfied that the FI detail was strong enough.

[163] Without being able to be satisfied that an FI detail was adequate, what would the
reasonable engineer have done?

[164] The plaintiffs argue that the exercise of reasonable care required Dr Fleischhaker
either to design the stiffeners to be much longer, so that they extended to the top or
near the top of the tower, or to prescribe a stronger welded detail such as the
EI under BG 60.

[165] In his first witness statement, Dr Fleischhaker said that if the stiffeners had been
four or five metres longer, so as to extend to or near to the top of the tower, they
would have been impossible to attach. The stiffeners which he designed were
10.5 metes long and very heavy and he said that it would have been too difficult to
weld them given the limited space. He claimed that he gave considerable thought to
this at the time but his solution “had to take account of practicalities”. Further, he
said that it was simply impossible to extend the stiffeners to the upper most tower
frame because they could not have been manoeuvred into position and they could
not have been extended through the rope support at the top of the tower. At one
point in his oral evidence he seemed to suggest that there was another reason for not
having longer stiffeners which was “that you had to expect the machine to collapse
at any minute”, although when pressed he was unable to explain that.

[166] There was some cross-bracing which would have affected the extension of the
stiffeners further up the tower which was about 2.3 metres (from its centre line)
from the top of the stiffeners as installed. Mr Platzer, an engineer from Schippke &
Partners, gave unchallenged evidence that the stiffener in question could have been
extended approximately 2.1 metres up the tower without interfering with the
cross-bracing between the two webs. On the other side of the web, that is on the
outside of the web, of course there was no cross-bracing inhibiting the extension of
the stiffeners. Mr Platzer performed some calculations from which he concluded
that an extension of the stiffeners by 2.1 metres would have had the effect that the
stress at their terminations would have been less than the permissible stress for an
FII detail under BG 60 (assuming that it accurately stated the fatigue strength of that
detail) and its equivalents under the 1984 draft code (if relevant) and under BG 86.
And on the assumption that BG 86 accurately stated the fatigue strength of the
equivalent of an FI detail, Mr Platzer said that it would have been necessary to
extend the stiffener only a little more than one metre before the stress condition
became less than the fatigue strength of such a detail. None of this was ultimately
challenged.

[167] Professor Hulsmann said that there would have been no imbalance created by
extending the stiffeners higher, or by extending the outside stiffeners higher than the
inside stiffeners (if their extension was impeded by the cross-bracing). He added
that an extension of the inside stiffeners was not impeded by the cross-bracing
 49

because any interference with the cross-bracing to make way for the stiffener would
not have affected “the stability of the machine”, but would have been merely a
“problem from construction”. Nevertheless the cross-bracing might have seemed a
significant impediment to a reasonably careful engineer considering this in 1984.

[168] Ultimately the defendants did not appear to argue that the extension of the stiffeners
at least to that cross-bracing as discussed by Mr Platzer, would have been
impracticable. But they say an engineer could have been reasonably satisfied with
that solution only by deciding that the stress condition at that point would have been
met by the fatigue strength of a certain welded detail. This would have taken the
engineer back to BG 60 and to a judgment of what margin should be allowed for the
prospect that BG 60 overstated that fatigue strength.

[169] Alternatively, the plaintiffs say that a stronger welded detail should have been
prescribed. Again, the defendants do not appear to argue that this was
impracticable. They argue that an FI detail was strong enough and they say that if
the engineer was not to rely upon BG 60, there was no logical means of measuring
the adequacy of some alternative detail.

[170] Dr Fleischhaker accepted that a stronger detail could have been selected and
claimed that he would have done so if what he said were his calculations had
revealed that the fatigue strength was within 10 per cent of the maximum stress. As
I have said, that would have been the position had Dr Fleischhaker made the
calculations which Professor Hulsmann made. That was not the result of Dr Potts’
calculations, although his were performed by a finite element analysis rather than
the beam model which was available in 1984.

[171] An EI detail according to BG 60 was considerably stronger. Consistently with

Professor Hulsmann’s calculations for FI and FII details (in his July 2007 report),
and from the English version of BG 60, the maximum allowable stress of EI at this
location can be calculated as follows:

Maximum allowable stress = 140 / (1-0.641 κ) W

= 140 / (1-0.4070) 1.153
= 272MPa

Dr Potts criticised Professor Hulsmann’s calculation, and would make the same
criticism of this one. But it is valid in illustrating the difference between the F1 and
the E1. And without calculations as performed by Professor Hulsmann, the engineer
would still have seen that the EI detail was much stronger than the FI detail. So as
Dr Jones confirmed when cross-examined, at an assumed kappa of 0.6, and without
any allowance for the probability factor “W”, BG 60 indicated a maximum
allowable stress for an FI detail of 187MPa24 and for an EI detail a comparable
figure of 227MPa. So even without calculating the amount of the probability factor,
the engineer would then have known that according to BG 60 an EI would have had
a maximum allowable stress considerably higher than 227MPa.

[172] Whilst BG 60 was unreliable as providing a means of safely calculating the precise
strength of a weld at a particular location, there appears to have been no

24
1870kg per cm2 divided by 10 to arrive at the equivalent number of megapascals.
 50

professional doubt cast upon the proposition that the detail depicted as an EI weld in
that standard was much stronger than an FI detail. The precise difference in that
strength, according to BG 60 was not so important: what would have mattered to
the careful engineer was that the EI was obviously so much stronger that it could be
safely used.

[173] The defendants say that it is critical that no evidence has been called “from any
practitioner in the category of Dr Fleischhaker, that is to say a designer of bucket
wheel excavators, to suggest that Dr Fleischhaker’s approach was wrong” and that
the evidence called from Mr Friedemann, Professor Kowalewski and another of
their witnesses, Dr Dittrich, provides “cogent evidence that the subject conduct was
not in breach of the practitioner’s duty of care”. They cite what was said by Muir J
in McDonald v Ludwig25 and argue that the significance of the lack of evidence
from a practitioner saying that he would not have applied BG 60 appears from
Atlantis Properties Pty Ltd v Cameron26. However, this is a factual question, and
care must be taken in the use of statements made in other factual contexts. This was
a particularly specialised expertise which was being called upon by Utah and the
other owners in seeking Dr Fleischhaker’s assistance. They were entitled to expect
that he would exercise due care and skill, having regard to what he knew.
Dr Fleischhaker knew of the work of the committee of which he was a member and
knew that the substantial challenges which had been made by some members of that
committee to the accuracy of BG 60 raised critical questions which were then
unanswered, and for which Dr Fleischhaker does not claim that he then had his own
answer. It is in these particular circumstances, of course taken with others such as
the relatively demanding requirements of the other relevant standard (ISO 5049),
that Dr Fleischhaker could not reasonably have relied only upon BG 60. This is not
a case in which the assessment of the reasonableness of a defendant’s conduct can
be made simply against some long established professional practice. Further, it
cannot be suggested that any prevalent professional practice should dictate the
outcome of a professional negligence claim: Rogers v Whitaker27.

[174] As the defendants appeared to accept, a reasonable engineer in Dr Fleischhaker’s

position should have foreseen that his design of these stiffeners and their welds
involved a risk that if the design was deficient, the structure could crack with
fatigue, with the ultimate consequence of the destruction of, or serious damage to,
the BWE. In considering what should have been done in response to that risk, the
magnitude of the risk and the degree of probability of its occurrence, along with the
expense, difficulty and convenience of taking alleviating action and any other
conflicting responsibilities which the engineer may have had, must be considered:
Wyong Shire Council v Shirt28. Neither the extension of the stiffeners, at least to the
cross-bracing, nor the use of an EI weld would have been problematic. There was
sufficient time to have O&K undertake the necessary calculations according to
BG 60 as Professor Hulsmann has done by his beam model. Those calculations
would have shown a very large margin for error if the EI detail was chosen or if the
stiffeners were extended. A combination of the two could have been employed with
yet more confidence. However with the benefit of such calculations, one of those
courses could have been taken, and should have been taken in the exercise of
25
[2007] QSC 28 at [76].
26
[2005] QCA 297 especially at [9] per Keane JA.
27
(1992) 175 CLR 479.
28
(1979) 146 CLR 40 at 47, approved in New South Wales v Fahy (2007) 236 ALR 406,
[2007] HCA 20.
 51

reasonable care. The same applies if it is assumed that the engineer’s calculations
resulted in the AMOG figures as set out in the Schippke report of July 2007. The
unreliability of BG 60 should have made the engineer adopt one or other, if not
both, of these courses. Alternatively, if those calculations could not have been done
in the time available again, the reasonable response would have been to
minimise the risk of fatigue failure by both extending the stiffeners at least to the
cross-bracing and prescribing what could have been reasonably assumed to be the
much stronger EI detail.

[175] The potential consequences from a structural failure should have been obvious and
even putting to one side the risk to the persons working on or near the machine, the
avoidance or reduction of the risk of economic loss from the structural failure of the
machine warranted at least the stronger detail of the EI or extension of the stiffeners.
Because neither was required or recommended by Dr Fleischhaker in his design,
there was negligence.

[176] There is a further argument of negligence in that there is an alleged failure to warn
of the prospect of fatigue cracking. Dr Fleischhaker agreed that he did not give any
specific advice or warning about fatigue cracking in this area of the upper
termination of the stiffeners. But overall this argument adds little to the plaintiffs’
case, because the longer stiffeners or EI detail was reasonably required of this
design, and as I am about to discuss, either measure would have made a difference.
The owners knew that they should have the machine regularly inspected to detect,
amongst other things, fatigue cracking. They needed a specific warning only if the
engineer had doubts about the strength of the tower at this part of it. If he was
entitled to rely on BG 60, he would have had no such doubts. Nor should he have
had doubts if he had extended the stiffeners or prescribed an EI.

Supervision

[177] There is the further allegation that there was a negligent failure to supervise the
welding of the stiffeners. As I have found, there was no material difference
between the strength of an FI and an FII weld. Accordingly, a complaint that
Mr Tiedt should have supervised the welding to ensure that the detail was an FI and
not an FII is inconsequential.

[178] O&K’s pleading still contains a denial that the structural failure was a consequence
of a fatigue crack “on the basis that the structural failure was the consequence of the
propagation of a cold crack…” As already discussed, cold cracking is no longer a
causation issue. It is not argued that if this originated as a cold crack, that broke the
chain of causation. The structural failure occurred because of fatigue cracking
which was the result of the relevant stress conditions exceeding the strength in the
region of the stiffener terminations.

Causation

[179] The plaintiffs argue that it is sufficient for them to establish that the defendant’s
conduct increased the risk of a failure occurring and that the risk eventuated. For
this they cite Batiste v State of Queensland29, Moore v State of Queensland30, Gold

29
[2002] 2 Qd R 119; [2001] QCA 275.
30
[2005] QCA 299 at [12] per Jerrard JA and at [37] per Keane JA.
 52

Ribbon (Accountants) Pty Ltd (in liq) v Sheers31 and Seltsam Pty Ltd v
McGuinness32. They refer also to what was said by McHugh J in Chappel v Hart33
as follows:
“If a wrongful act or omission results in an increased risk of injury to
the plaintiff and that risk eventuates, the defendant’s conduct has
materially contributed to the injury that the plaintiff suffers whether
or not other factors also contributed to that injury occurring.”

That passage was referred to with approval in Naxakis v Western General Hospital34
by Gaudron J35 and Callinan J36.

[180] However, these passages guide the determination of what is a factual issue, and in
each case there must be an assessment of the evidence relevant to that issue in
deciding whether the plaintiff has discharged its onus. So in Gold Ribbon,
Keane JA said37:
“It must be emphasised that the approach of McHugh J is one of
logical inference of a causal link, not of a legal presumption which
obviates the need for proof of a casual link. As McHugh J himself
said in Commissioner of Main Roads v Jones, the approach to
causation which he explained in Chappel v Hart is appropriate to
cases ‘where the only evidence concerning causation was that the
defendant had breached his duty of care and that the injury that
occurred was within the scope of the risk of injury arising from the
breach of duty’. The inference of causation is a deduction which
may logically be made in a case where the risk created or increased
by the defendant’s breach of duty may operate, either alone or with
other risks attending particular action or enterprise, to produce the
loss. But it is not a logical deduction where the evidence, either
shows that the removal of the risk created by the defendant’s breach
of duty would not have prevented the occurrence of the loss by
reason of the operation of the other attendant risks, or gives reason to
regard the possibility of such a result as equally probable.” [footnotes
omitted]

[181] Here there is other evidence relevant to causation. In particular there is evidence
from Dr Potts’ report number 11, the effect of which is that the life expectancy of
the BWE would have been twice as long with an EI detail at the end of this stiffener.

[182] In that report Dr Potts was examining the likelihood that an EI detail would have
failed because of the manner in which the BWE is said to have been operated
outside its “design operating parameters” or DOP. Under the heading “Assessment
of Adequacy” Dr Potts set out in table 4 the results of his calculations of “calculated
fatigue life” comparing the FI and the EI details. Upon the assumption that the
BWE was operated by “exceeding DOP” (in the respects which the defendants had
instructed Dr Potts to assume), he calculated that the “design life” of the BWE with

31
[2006] QCA 335.
32
(2000) 49 NSWLR 262.
33
(1998) 195 CLR 232 at 244 [27].
34
(1999) 197 CLR 269.
35
(1999) 197 CLR 269 at 278-279 [31].
36
(1999) 197 CLR 269 at 312 [127].
37
[2006] QCA 335 at [278].
 53

an FI detail was six years, but that with an EI detail it was 12 years. On the same
assumption he calculated that the “expected life” of the BWE with an FI was
16 years, whereas with an EI it was 32 years. The design life was calculated in each
case upon a three per cent probability of failure whereas the expected life was upon
a 50 per cent probability of failure. In other words, with an FI detail there was a
three per cent chance of failure within six years and a 50 per cent failure within
16 years. With the EI detail there was a three per cent chance of failure within
12 years and a fifty per cent chance of failure within 32 years. From this it follows
that more probably than not, and operated as AMOG had been asked to assume, the
BWE was not going to last more than 16 years with the FI detail or more than
32 years with the EI detail. It also follows that more probably than not, the BWE
would have lasted almost 32 years with an EI, even assuming it was operated as
AMOG was asked to assume. Dr Potts pointed out that this expected life of
16 years with the FI corresponded with what happened here: the BWE failed at just
over 15 years from the installation of the stiffeners.

[183] His table 4 also showed his calculations for operating the BWE within its DOP, in
which case its design life with an FI was 41 years and with an EI was 84 years, and
its expected life with an FI was 114 years and with an EI was 232 years. In his view
this indicated that under what he regarded as the expected operating regime, the
FI detail “would have ample factor of safety against fatigue failure at 41 years of
life”.

[184] On its face, this is evidence that the life expectancy of the BWE would have been
about doubled by the use of the EI detail. It would also prove that the particular
operation of the BWE was a cause of its failing when it did. But nevertheless it
would prove that the use of an FI detail (or what is now known to be its equivalent,
the FII), rather than an EI detail was also a cause of that. It appears to prove that the
negligent failure to require the EI detail caused the collapse.

[185] In response to that proposition, counsel for the defendants argued that this evidence
was not relevant in that way. Their argument is difficult to summarise. But for this
point first it is necessary to explain an issue on which some of the experts differed,
involving the interpretation of BG 86 and the current German code for bucket wheel
excavators, which is DIN 22261-2:2006.

[186] Professor Hulsmann calculated under BG 86 the adequacy or otherwise of what he

saw as the equivalent of the FI detail. On a page which is numbered sheet 47 of that
code, there is a table which depicts what all relevant witnesses seem to say was the
equivalent of the FI detail under BG 60. However, in that table there are four
subcategories, each having a different strength. According to Professor Hulsmann,
the category into which an FI would fall was “NBT4”. According to the defendants,
and in particular their witness Dr Potts, it would be “NBT2”. The table directs the
reader to another table which is numbered 10.1 on sheet 30. Professor Hulsmann
said that a reference to that table shows that an FI under BG 60 would be a NBT4.
The defendants argue that it is a NBT2 because reference must be made also to
another document38 which differentiates between NBT1, 2, 3 and 4 details when
providing for different testing and inspection requirements. An NBT2 requires
more testing and inspection than an NBT 4. Under BG 86 the NBT4 is weaker than

38
Exhibit 379.
 54

the NBT2. The plaintiffs say that it is BG 86 itself, and by its table 10.1, which
shows that the equivalent of an FI under BG 60, was for BG 86, an NBT4.

[187] It is probably unnecessary to resolve that debate, but my view is that the plaintiffs’
argument, based upon Professor Hulsmann’s evidence, is more likely to be correct.
As the plaintiffs say, it would be unusual if a weld could be regarded as stronger,
not because of any physical quality, but because it was subject to a more detailed
assessment after it was executed. And the defendants’ argument did not appear to
be able to explain away the fact that BG 86 differentiated between the different
categories expressly by reference to table 10.1, rather than by reference to the
document upon which the defendants rely. Dr Potts seemed to acknowledge that on
its face, BG 86 has effect as interpreted by Professor Hulsmann, but said that this
was “anomalous” and the mistake had not been repeated in the standard DIN 2261
(2006).

[188] Then Professor Kowalewski said that for a detail to be an NBT2 the designer must
give an instruction on the drawing. So, absent such an instruction in anything which
Dr Fleischhaker provided (even if he required an FI rather than an FII detail), his
design did not require the equivalent of an NBT2. On the basis of these matters, I
would find that the equivalent of what was required by Dr Fleischhaker’s drawings
(assuming that they required an FI) under BG 86 would be the NBT4. If so, it is
undisputed that it would have been inadequate under BG 86. (It is also undisputed
that it would have been adequate had it been an NBT2.)

[189] There is not an English language version of the current standard, DIN 22261 (2006)
in evidence, and Professor Hulsmann was not asked about DIN 22261.

[190] I return then to the defendants’ submission about Dr Potts’ calculations of life
expectancy, comparing the FI with the EI detail. Dr Potts’ report seemed to make
the comparison clearly enough as follows:
“The assessment indicates that under the recorded operations the
design life of the machine, representing a 3% probability failure,
would be exhausted for the FI category after only six years, and for
the EI category after 12 years. The mean life, representing a 50%
probability of failure, would be exhausted after 16 years for the FI
category. This indicates that under the recorded operation of the
machine, the expected life of the machine predicts with a reasonable
accuracy the actual life of the machine. Furthermore, under the
recorded operation, an end termination detail in the EI category
would not have a reasonable factor of safety against fatigue failure
beyond 12 years.”

[191] In saying that “the expected life …predicts with a reasonable accuracy the actual
life”, Dr Potts was commenting on the fact that there was a 50 per cent probability
of failure at 16 years and that this coincided (approximately) with the actual point of
failure, providing some support for his calculations.

[192] So faced with the prospect that their evidence might be used in the plaintiffs’ favour
to prove causation, the defendants developed an argument along these lines. It was
submitted that what had to be remembered was that, as it happened, the quality of
welding at this stiffener termination was poor, because there was no all round weld.
Accordingly, this would fit into the weakest of the FI categories under the more
 55

modern codes. Dr Potts had done his calculations upon the hypothesis of an NBT2,
not an NBT4. The weaker category NBT4, corresponding with what was actually
welded on to this stiffener, it should be thought would not have had the life
expectancy represented by his table. Instead, it would have had a life expectancy of
about the design life shown in that table. In the same way, so it was asserted, a
correspondingly poor execution of an EI weld would have meant that it had a lower
life expectancy than shown by his table, again approximating its design life of
12 years rather than its expected life of 32 years.

[193] In plainer terms, the submission was that a specification of an EI detail would not
have made a difference, because it would have been poorly executed and had a life
expectancy indeed of less than the 16 years for which the machine survived.

[194] There are at least two problems with this argument. The first is that it sets up a
comparison, between a poorly executed FI detail and a poorly executed EI detail,
which is not the comparison made by Dr Potts. It is a comparison which is said
could be derived from Dr Potts’ report. But the precise evidentiary foundation for it
is far from clear. For example, it is not clear from the evidence that a poorly
executed EI detail, whatever exactly that means, would have had a certain strength
from which there could be calculated a certain life expectancy. This is not the
comparison which Dr Potts saw fit to make. The comparison which he did make
within table 4 was introduced as follows:
“This assessment addresses the issue as to even whether the UST
[upper stiffener termination] end detail had fabricated as an EI, was
there a likelihood that it too would have failed due to the manner in
which the BWE was operated.”

Had Dr Potts made a comparison between a poorly executed FI and a poorly

executed EI, the life expectancy of the FI would have been far less than 16 years, and
it seems to follow from this argument that it was highly improbable that the machine
lasted as long as it did.

[195] Secondly, the argument assumes that had Dr Fleischhaker prescribed an EI detail,
that prescription would not have been followed, and instead there would have been
a poorly executed weld. The basis for such an assumption is not apparent. Of
course there is always the prospect of human error and there is a chance that an
EI detail, if prescribed, nevertheless would not have been applied. But I do not see
why it should be inferred that this would have occurred. An EI detail would have
required a much more specific prescription by Dr Fleischhaker than is said to have
been his prescription of an FI. Had that occurred, more probably than not an
EI weld would have been applied which met the requirements for such a detail.
That is the hypothesis which Dr Potts saw fit to address in his report. And had that
occurred, it follows from his report that more probably than not the BWE would
have survived almost twice as long as it did. The result is that the defendants’
attempt to explain away the impact of this part of Dr Potts’ evidence is
unpersuasive.

[196] The plaintiffs do not entirely accept Dr Potts’ analysis which is summarised in his
Table 4. But whilst they would challenge the particular quantification within this
comparison, they accept that it demonstrates that the additional strength of an
EI detail would have made a significant difference to the likely life of the BWE. In
 56

my view it is established by this evidence that the failure to use an EI detail on the
stiffener was a cause of the failure of the BWE at this point in its life.

[197] More generally there is no dispute as to the proposition that the EI detail was far
stronger, from which it is likely that the life expectancy with that detail would have
been years longer than with the FI detail. Dr Potts sought to make the point that the
design life of the machine, if it was to be operated in the way in which he assumed
it was operated, would still have been too low with an EI detail. Put another way
the prescription of an EI detail would not have put paid to an undue risk (a
probability of failure of more than three per cent) of structural failure by the time at
which the BWE did fail (on his assumptions about operations outside the DOP).
But if that is so, causation is not thereby disproved. Causation is assessed on the
balance of probabilities. According to his calculations, on the balance of
probabilities this machine would have survived until at least 2015 with an EI detail,
whereas it was likely to fail when it did with an FI detail.

[198] This Table 4 in Dr Potts’ report does not affect what I have said about whether the
reasonable engineer would have prescribed the EI detail. There is no suggestion that
the engineer would have undertaken the analysis represented by Table 4 and would
have rejected the EI detail.

[199] Then there is the alternative that longer stiffeners should have been prescribed. Had
that occurred, the weakness at this stiffener termination would have been removed.
There is no similar analysis by Dr Potts as to the life expectancy of the machine on
that hypothesis. But by designing this stiffener to end at the point on the tower
stipulated by Dr Fleischhaker, an undue risk of failure was created, and what
occurred in 2000 was within the scope of the risk which arose from that negligence.

[200] In summary, the plaintiffs have proved that Dr Fleischhaker’s negligent design was
a cause of the structural failure of the BWE and the losses which arose as a result.

The Design Case and Section 52

[201] The plaintiffs plead that O&K engaged in conduct which was misleading or
deceptive or likely to mislead or deceive in contravention of s 52 of the
Trade Practices Act 1974 (Cth). They plead that O&K impliedly represented that it
had exercised appropriate care and skill in designing the 1984 modifications and
that:
“there was no aspect of that design of which the [joint venture]
participants ought to have been informed which might:

(a) introduce a welded detail having a low fatigue strength;

(b) introduce additional stresses into the front flange of the tower frame;
(c) concentrate stresses at the point of the upper terminations of the
stiffeners;
(d) have the effect that the stress range to which the front flange was
exposed exceeded its fatigue strength;
(e) cause fatigue cracks to develop at the upper weld toe terminations of
the fillet welds attaching the stiffener and the front flange plate of the
left tower frame in the location of the upper termination of that
stiffener;
(f) give rise to a risk of structural failure of the BWE tower;
 57

(g) diminish the operational life of the BWE or the BWE tower.”

[202] Each of those representations is alleged to have been false on the basis of what the
plaintiffs plead in their negligence case. Further, they plead that the design was
misleading by the fact that it was not accompanied by any qualification.

[203] Further or in the alternative, the plaintiffs plead that the same representations were
false representations that the design services provided by O&K had been undertaken
with appropriate care and skill, so that the representations contravened s 53(aa) of
the Act.

[204] Then they plead that “by reason of the conduct of O&K in contravention of
ss 52 and 53(aa) of the TPA the plaintiffs have suffered and are likely to suffer loss
and damage”, the particulars of which are those pleaded in the negligence case.

[205] Accordingly, the case under the Trade Practices Act appears to closely follow the
negligence case. Upon my conclusions that Dr Fleischhaker and O&K owed a duty
of care which was breached, it would appear to follow that O&K misrepresented
that, through Dr Fleischhaker or otherwise, it had exercised appropriate care and
skill in this design. O&K itself owed a duty of care. And by reason of s 84(2),
Dr Fleischhaker’s conduct is deemed to have been engaged in also by O&K
because, as I have found, it was conduct engaged in on its behalf by one of its
servants.

[206] O&K admits that it was a corporation within the Act. It does not admit that if the
conduct was its conduct (as opposed to the conduct being that of O&K Australia) it
was conduct in trade or commerce. That non-admission is not explained.
Ultimately there was no argument in support of it. The fact that the conduct
involved the provision of the professional services of an engineer does not take it
outside conduct in trade or commerce; see for example, Bond Corporation Pty Ltd v
Thiess Contractors Pty Ltd & Ors39. The conduct here was in trade or commerce.
But O&K makes a number of arguments as to why this alternative case under the
Act should fail even if the negligence case should succeed.

[207] The first of those arguments focuses upon what is pleaded as the relevant conduct.
At paragraph 37 of their statement of claim, the plaintiffs plead that there were those
implied representations “by the design referred to in paragraph 25.2”. That
paragraph pleads as follows:
“25 In November 1984 O&K by Dr Fleischhaker:
25.1 …
25.2 Designed modifications to the tower frames (the 1984
modifications)
Particulars
The design for the 1984 modifications was contained in
hand dimensioned sketches and a construction drawing of
the tower frames.”

[208] The plaintiffs say that there is a critical limitation upon the s 52 case by its reference
only to paragraph 25.2 because:
“no part of the plaintiffs’ case relies upon any other conduct on the
part of Dr Fleischhaker, or anyone else on the O&K side. Nor is the

39
(1987) 14 FCR 215 at 220.
 58

pleaded case one which seeks to characterise a piece of conduct by

reference to other conduct or extraneous circumstances”.

O& K argues that “the sketches and the drawing by themselves could hardly convey
those implied representations” and that all that they do is “show the shape,
dimensions, weight and location of the stiffeners”. It is said that they say nothing as
to whether this was a proper design or anything about the care and skill involved in
their production, nor it is argued, do they say anything about stresses, fatigue,
cracks or how the work was to be done.

[209] This is too restricted a view of the pleaded case, and O&K cannot have been under
any understanding of the s 52 case which corresponds with its submission. Where
there is an alleged contravention of s 52, the subject of the complaint must be some
conduct of the defendant. The conduct here involved the design, by
Dr Fleischhaker on behalf of O&K, of the 1984 modifications as depicted in those
documents. But of course, that conduct involved more than his production of those
documents. As O&K would always have realised, the alleged conduct involved also
his providing them to Utah. It was by O&K’s conduct in the circumstances that the
alleged representations were made. The question is whether the plaintiffs had to
plead particulars of those circumstances. But the plaintiffs have pleaded those
matters elsewhere, and it was unnecessary to repeat them in the paragraph which
alleged the fact that the representations were made. It is clear that the plaintiffs
were relying upon the facts in their negligence case, and in particular those facts
from which they alleged the existence of a duty of care, to allege that there were
implied representations that appropriate care had been exercised. There was no
room for surprise in any of this and no surprise is apparently claimed. In my
conclusion, the plaintiffs have proved that O&K impliedly represented that its repair
solution was the product of a professional opinion reached with appropriate care and
skill.40

[210] The next point relates to the terms of the plaintiffs’ pleading of the falsity of the
representations. By paragraph 38 the plaintiffs plead that each was false and that
the particulars of that are “the matters particularised in paragraphs 31 and 35”,
together with the absence of any adequate qualification of the representations.
O&K says that paragraphs 31 and 35 are each expressly tied to the allegation of
design in paragraph 30, which describes a detail without an end weld, and therefore
an FII detail, as that designed by Dr Fleischhaker. In effect, the argument is that
there is no pleaded case under the Trade Practices Act upon the alternative factual
premise that what Dr Fleischhaker designed was an FI detail.

[211] Again that argument unrealistically confines the plaintiffs’ pleading in a way which
O&K and those conducting its case could not have thought to be so. Paragraphs 30
and 35 are the subject of extensive particulars. They include the particulars dated
3 August 2007, by which the plaintiffs set out their case as to why an FI detail
would not have involved the exercise of reasonable care. That was an amendment
introduced by particulars and more correctly it should have appeared within the
body of the statement of claim itself. But just as that matter of form did not
prejudice O&K in its defence of that case, nor is O&K prejudiced by it on this
alternative case under the Trade Practices Act. It should have been clear, and I infer

40
Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 at 88; Heydon v NRMA
(2000) 51 NSWLR 1 at [428], [431]-[433], [307].
 59

that it was clear to O&K, that it had to meet a case under the Act which was
advanced on the alternative premise that Dr Fleischhaker had, knowingly or
otherwise, prescribed an FI detail. Consistently with my findings as to negligence, I
find that O&K misrepresented that it had exercised reasonable care in arriving at its
recommended repairs, and it thereby breached s 52.

[212] It is argued that there is a further difficulty for the plaintiffs in that “there is no
pleading of reliance upon the alleged implied representations” and that “there is no
allegation that the plaintiffs altered their position in any way as a consequence of
the implied representation”. O&K argues that it is not sufficient for the plaintiffs to
plead, as they have in paragraph 41, that “by reason of the conduct”, they have
suffered loss. The plaintiffs’ pleading in this respect accords with the terms of s 82
which provides that a person who suffers loss or damage “by” the conduct of
another person that was done in contravention of a provision of Part V may recover
the amount of that loss or damage. In Wardley Australia Ltd v Western Australia41,
Mason CJ, Dawson, Gaudron and McHugh JJ said42 that the word “by” in s 82
expresses the notion of causation without defining or elucidating it, and it
should be understood as “taking up the common law practical or
commonsense concept of causation recently discussed by this Court in March v
E & M H Stramare Pty Ltd43”.

[213] The plaintiffs must prove that they have suffered loss by this conduct, that is to say
by the making of the misrepresentations. In this there is a potential difference
between the position of those plaintiffs who were Joint Venturers in 1984, and that
of the seventh plaintiff. For the moment I shall not include it in referring to the
plaintiffs. Mr Black said that Utah relied solely on O&K in relation to the 1984
modifications. Mr Raleigh said that he regarded these drawings as final in the sense
that they could be used for the repair. When challenged about his reliance on
Dr Fleischhaker’s design, given that he had done some calculations of his own,
Mr Raleigh said that he expected that Dr Fleischhaker had performed calculations
and he relied upon Dr Fleischhaker as to “the way the repair was to be done”. I
accept their evidence that they did rely upon Dr Fleischhaker’s design and upon that
design having been produced with the skill and competence to be reasonably
expected of Dr Fleischhaker.

[214] It has always been the plaintiffs’ case that modifications which were made would
not have been made absent Dr Fleischhaker’s design. That fact is established and it
is by that installation that there was created this weakness in the structure from
which the fatigue crack grew. That is so regardless of whether the design was for an
FII or an FI detail because, as is now known, a FI detail would not have been
materially stronger. I infer that absent the making of these representations, Utah
would have required an engineering design for the necessary repairs which was a
design undertaken with due care and skill. After all, that is why Dr Fleischhaker
was asked to come from Germany to Goonyella when repairs were required. It is
inconceivable that, as O&K now suggests, the plaintiffs would have gone ahead
with this design whether or not the implied representations were made. Had
Dr Fleischhaker said to Mr Black and Mr Raleigh when providing this design that
he had not exercised the appropriate care and skill for which they had gone to him

41
(1992) 175 CLR 514.
42
(1992) 175 CLR 514 at 525.
43
(1991) 171 CLR 506.
 60

and procured his visit to Australia, there would have been no serious possibility that
they would have installed these modifications and not required O&K, or if
necessary someone else, to provide a design which they had reason to believe
had been made with appropriate care and skill. It is not necessary for the
plaintiffs’ witnesses to swear to the facts that the conduct had that effect. Such
direct evidence is common but is not required in every case. As Kiefel J said in
Hanave Pty Ltd v LFOT Pty Ltd44:
“The question of causation can sometimes be resolved not by direct
evidence as to what part a misrepresentation played… but by a court
determining what effect must be taken to have resulted. Indeed this
course may sometimes be preferable to one which rested solely on
evidence later given on the point.”

[215] Accordingly, there was reliance upon the alleged representations and in particular
upon the represented fact that Dr Fleischhaker had exercised appropriate care and
skill in his design. The plaintiffs’ losses were caused by at least that
misrepresentation because the provision of this design absent that implied
representation would have resulted in the design not being accepted by Utah and its
procuring a further design which was the result of due care and skill.

[216] I return to the position of the seventh plaintiff. As a part owner of the BWE when it
collapsed, it undoubtedly suffered losses of the same kind as those suffered by its
co-venturers and for which they are entitled to be compensated pursuant to s 82 of
the Act. There was no argument by the defendants that the seventh plaintiff is not
entitled to damages under s 82 if its co-venturers are so entitled but the point must
be considered. The question is whether the seventh plaintiff is a person which
suffered loss or damage by the conduct of O&K which breached s 52. That
conduct was in the nature of a misrepresentation but the seventh plaintiff was
not a representee. However that need not be fatal. In Janssen-Cilag Pty Ltd v
Pfizer Pty Ltd45 Lockhart J said:
“Section 82 is the vehicle for the recovery of loss or damage for
multifarious forms of contravention of the provision of Pts IV and V
of the Trade Practices Act. It is important that rules laid down by the
courts to govern entitlements to damages under s 82 are not unduly
rigid, since the ambit of activities that may cause contravention of
the diverse provisions of Pts IV and V is large and the circumstances
in which damage there from may arise will vary considerably from
case to case.

What emerges from an analysis of the cases (and there are many of
them) is that they do not impose some general requirement that
damage can be recovered only where the applicant himself relies
upon the conduct of the respondent constituting the contravention of
the relevant provision.

Also, a perusal of the provisions of Pts IV and V, the contravention

of which gives rise to an entitlement to an applicant for
compensation for loss or damage, points to the conclusion that the
applicants may claim compensation when the contravener’s conduct

44
(1999) 43 IPR 545 at 555-556; [1999] FCA 357 at [45].
45
(1992) 37 FCR 526 at 529-530.
 61

caused other persons to act in a way that led to loss or damage to the
applicant.”

This passage was cited with approval by Gummow J in Marks v GIO Australia
Holdings Ltd46 and has been applied in many cases: see e.g. Hampic Pty Ltd v
Adams47 and McCarthy v McIntyre48. In Australia and New Zealand Banking
Group Ltd v Pan Foods Company Importers and Distributors Pty Ltd49, Winneke P,
referring to Janzen-Cilag, said that the burden of proving the causative link between
the conduct and the loss is not as easily discharged where the claimant is not an
entity which has relied to its detriment upon misleading representations made
directly to it. In McCarthy v McIntyre, the Full Court of the Federal Court said
that50:
“All that is necessary, in our opinion, is that there be a sufficient and
direct link (ie causation) between the loss or damage alleged to have
been suffered by the claimant and the misleading or deceptive
conduct.”

[217] The notion of causation within s 82 is “to be understood by reference to the

statutory subject, scope and purpose” as Gummow, Hayne and Heydon JJ said in
Allianz Australia Insurance Ltd v GSF Australia Pty Ltd51. An order under s 82 is
made “in order to give effect to a statute with a discernible purpose; and that
purpose provides a guide as to the requirements of justice and equity in the case”:
per Gleeson CJ in I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd52
cited in Allianz Australia Insurance Limited v GSF Australia Pty Limited53.

[218] In the case of the seventh plaintiff, it is unlikely that anyone on its behalf knew of
the 1984 repairs or of O&K’s conduct in relation to them. Unlike the other
plaintiffs, the seventh plaintiff does not claim to have acted in some way, or not
acted in some way, in reliance upon the exercise of due care and skill in
O&K’s design of the repair solution. Nevertheless the connection between the
conduct and the loss suffered by the seventh plaintiff is relatively close. The
immediate consequence of O&K’s misleading conduct was, as I have found, that the
then owners did not procure a careful repair solution and the BWE thereafter had an
undue structural weakness. It was susceptible to a sudden and catastrophic collapse
which is exactly what happened in 2000. When that occurred, the nature of the
seventh plaintiff’s loss was identical to that suffered by the other plaintiffs. It is
difficult to see that the statutory purpose would be served by compensating those
other plaintiffs but not the seventh plaintiff. It has suffered an identical loss because
its co-owners relied upon advice which was misleading or deceptive. Its loss is
thereby from a reliance upon that conduct, although the reliance was not its reliance.
Accordingly, the seventh plaintiff is entitled to damages against O&K pursuant to
s 82.

46
(1998) 196 CLR 494 at 528 [101].
47
(2000) ATPR 41-737; [1999] NSWCA 455 at [35] per Mason P and Davies AJA.
48
[1999] FCA 784 at [48] per Hill, Sackville and Katz JJ.
49
[1999] 1 VR 29 at 41-42.
50
[1999] FCA 784 at [48].
51
(2005) 221 CLR 568 at 597 [99]. See also Travel Compensation Fund v Tambree (2005) 224 CLR
627 at 639 [30] per Gleeson CJ and 643-644 [49] per Gummow and Hayne JJ.
52
(2002) 210 CLR 109 at 119 [26].
53
(2005) 221 CLR 568 at 598 [100].
 62

The design case: outcome on liability

[219] I have earlier set out the differing composition of the joint venture at relevant
times. O&K is liable to the first, second, third, fifth and sixth plaintiffs in
negligence, and to those plaintiffs as well as the seventh plaintiff under s 82 of the
Trade Practices Act.

[220] Those six plaintiffs suffered losses by reason of their ownership of the BWE when it
collapsed and, it is argued, from its unavailability for operations in their mine in the
two or three years following the collapse. The plaintiffs claim the same losses as
damages for negligence and damages under s 82. And for O&K it is not argued that
if it is liable under s 82, there should be a different assessment from the negligence
case.

[221] The plaintiffs owned the BWE in common in proportion to their respective
participating interests in the Joint Venture. Because the BWE was owned in
common, rather than jointly, each plaintiff has suffered its own loss and has a
distinct cause of action. There is no claim for breach of contract in the design case
as there is in the inspection case. As I discuss in the inspection case, the position in
that respect is different because a contractual promise made to two or more persons
jointly as in the contract for the 1999 inspection, creates but one obligation and its
breach creates but one cause of action.

[222] Little consideration was given by the parties to these points. Within the
written submissions of the defendants, nothing is said of them. In their
oral argument the plaintiffs referred me to the judgment of Finkelstein J in
Financial Industry Complaint Services Ltd v Deakin Financial Services Pty Ltd54.
Finkelstein J there summarises the position in presently relevant respects in terms
which I respectfully adopt55:
“[67] The “legal rules” regarding claims and contract are as
follows: joint claims cannot be “split” because a promise
made to two or more persons jointly creates only one
obligation: King v Hoare (1844) 13 M&W 495; Kendall v
Hamilton (1879) 4 App Cas 504; Foley v Addambrooke
(1843) 4 QB 197; 114 ER 872. Accordingly, a joint
promisee has no several right of action: Australian
Securities Ltd v Western Australian Insurance Co Ltd
(1929) 29 SR (NSW) 571; Peabody v Barron (1884) 5 LR
(NSW) 72; Cullen v Knowles [1898] 2 QB 380…

[68] The position regarding actions in tort is not so clear, but

appears to be the same as in contract, in my opinion. Thus
persons who suffer a joint loss have a single cause of action.
A V Dicey in his treatise “A Treatise on the rules for a
selection of the parties to an Action”, J Cockcroft & Co.,
New York, 1870 at p 380 writes that “persons who have a
joint interest must sue jointly for an injury to it”. He gives
an example (at p 382) of joint owners of a chattel – and
partners generally – whom he says must join in an action for

54
(2006) 157 FCR 229 at 248 [67] - [68]; (2006) 238 ALR 616.
55
(2006) 238 ALR 616 at 634-345.
 63

injury to their common property. See also Foley v

Addambrooke, above. It is different if the injury is to a
separate and distinct interest, as for example in the case of a
chattel that is owned in common. Then each owner in
common may bring a separate action for injury to his
individual interst: Sedgworth v Overend (1797) 7 Term Rep
279; 101 ER 974; Roberts v Holland [1893] 1 QB 665.”

[223] So each plaintiff (other than the fourth plaintiff who has no standing) has a several
cause of action in tort under the design case, and for the same reasons, under the
inspection case. In the same way each of those plaintiffs has its own cause of action
under the Trade Practices Act: its loss is several because its interest in the BWE
and in the profits of the joint venture was in common.

[224] The outcome is that apart from issues of contributory negligence, the plaintiffs
(other than the fourth plaintiff) are severally entitled to judgments in differing
amounts according to their respective proportions in the joint venture as at
March 2000. At that date there was another joint venturer which is not a plaintiff.
It was the company formerly called General Electric Minerals Inc
which merged into Utah Queensland Coal Limited, the former name of
BHP Queensland Coal Limited. It assigned its 8.5 per cent interest to the
fourth plaintiff. So it suffered a loss in March 2000, to the extent of 8.5 per cent of
the overall loss from the collapse and unavailability of the BWE. But because it is
not a plaintiff and because the rights of the plaintiffs are several and not joint, it
follows that the total liability of O&K to the various plaintiffs is 91.5 per cent of the
losses suffered by the then owners.

THE INSPECTION CASE

[225] On the plaintiffs’ case, the terms of the contract for the 1999 inspection were in
writing. On the defendants’ case, the terms were partly written and partly oral. But
the alleged oral terms of the contract (before an alleged variation) are
inconsequential. They relate only to payment for the inspector’s accommodation
and they were not part of the original terms because the alleged conversation
post-dates the inspection and the inspector’s report.

[226] The substantial disputes concern what constituted the relevant writing,
whether an exclusion clause relied upon by the defendants was an agreed term,
and if so, whether it excluded the implication of warranties under s 74 of the
Trade Practices Act 1974 (Cth). There are issues about the proper interpretation of
the terms which defined the scope of the inspector’s duties. And there is an
argument by the defendants that the agreed scope was varied, by a conversation
during the course of the inspection.

[227] Before going to these questions, I should mention one point pleaded by the
defendants which was not argued. They had denied that Krupp made the contract
with the joint venturers, rather than with BHP alone. An explanation for that denial
was not pleaded. It is clear that BHP did contract on behalf of its joint venturers as
its co-owners of the equipment. It does not matter whether that agency was
disclosed within the contractual documents or at all.

[228] As discussed in the design case, the fourth plaintiff was not an owner of the BWE at
any material time. Its owners were the other plaintiffs together with the company
 64

which assigned its 8.5 per cent share to the fourth plaintiff in August 2002. The
joint venturers’ rights to the BWE were as owners in common. But it does not
follow that Krupp’s promise to inspect the machine was made to them severally,
rather than jointly. It is implicit in the plaintiffs’ case that Krupp’s promises were
made to the then joint venturers as joint promisees, and there is no argument to the
contrary. Indeed there is no argument at all by the defendants as to whether for any
of the claims in these proceedings, there is one cause of action to which the
plaintiffs are jointly entitled, or several causes of action.

[229] The question of whether the promisees are joint promisees, meaning that there is but
one promise made to them jointly, or several promisees, meaning that there is a
promise made to each of them severally, depends upon the wording of the contract
and on the interest of the parties in enforcing it56. In this case the joint venturers
had the same interest in the performance of the contract although they had separate
interests in the property which was affected. The position is analogous to a
covenant to repair given by a tenant in favour of a number of lessors who hold the
reversion as tenants in common, for which it has been held that the lessors are
jointly entitled to performance: Bradburne v Botfield57; Thompson v Hakewill58.
Joint promisees do not have several rights of action. Their (one) cause of action
will merge when it is pursued to judgment59. Ordinarily all persons who are jointly
entitled to the relief sought by a plaintiff must be parties to the proceeding60,
however an action will not fail for want of parties and it is apparently conceded that
the absence of one of the then joint venturers should not preclude recovery by the
others for breach of contract61. There is then but one cause of action and one award
of damages which can be made upon it, in which case the defendants are protected
by that cause of action merging in the judgment. Accordingly, if the plaintiffs62
establish that Krupp breached its contract and is liable for damages, the amount of
the damages is not to be reduced because one of the three joint venturers is not a
party.

What constituted the contract?

[230] On the plaintiffs’ case, the contract was contained in these documents:

• BHP Purchase Order No L77359 dated 19 February 1999;

• a fax from Krupp to BHP dated 22 February 1999;

• an attachment to that fax entitled “Comprehensive Inspection Service”,

which I will call the “scope document”;

• BHP’s Contractor/Supplier General Onsite Conditions No F001 (Revision 4

1998); and

56
Treitel, The Law of Contract, 10th edition, p 533.
57
(1845) 14 M&W 559; 153 ER 597.
58
(1865) 19 CB (NS) 713; 144 ER 966.
59
Financial Industry Complaints Service Pty Ltd v Deakin Financial Services Pty Ltd (2006) 157 FCR
229 at 248 [67] – [68].
60
A long standing requirement now within Uniform Civil Procedure Rules r 63.
61
Equus Financial Services Limited v Glengallon Investments Pty Ltd [1994] QCA 157
per McPherson JA citing William Brandt’s Sons & Co. v Dunlop Rubber Company Limited [1905]
AC 454 at 462 and Uniform Civil Procedure Rules r 67.
62
Other than the fourth plaintiff.
 65

• BHP’s General Order Terms and Conditions RBSU 100/4.

[231] The defendants say that the relevant writing consists of:

• that BHP Purchase Order;

• that fax;

• the scope document;

• a further attachment to that fax entitled “General Conditions for Service

Contracts”; and

• such of the BHP’s Onsite Conditions and General Order Terms and
Conditions as were not excluded by that last mentioned attachment.

[232] Accordingly, the substantial contest concerns Krupp’s “General Conditions for
Service Contracts”, which I will call the Service Conditions. Undoubtedly they
were attached to Krupp’s fax of 22 February 1999. But the plaintiffs say that these
conditions, or at least the warranty and exclusion clauses within them, did not
become part of the contract.

[233] The defendants rely upon earlier dealings between the parties, including their
contract for the inspection of the same equipment in 1996, as affecting the proper
interpretation of this 1999 contract. I will return to those matters after discussing
the effect of the 1999 documents.

[234] BHP sent a fax to Krupp on 19 February 1999, attaching the BHP Purchase Order,
which described the required work as:
“Krupp Engineering Personnel to carry out a complete inspection of
the bucketwheel, tripper and spreader forwarding a report on all
repairs required.”

BHPC said that its order would be governed by BHP’s General Onsite Conditions
and its General Order Terms and Conditions. But the order did not specify a price.
The fax asked Krupp to do that, by a fax to be sent to BHP’s Mr Nixon.

[235] On 22 February 1999 Krupp’s Mr Reiter sent a fax to Mr Nixon. It consisted of a

front sheet and two annexures. On the front sheet, Mr Reiter advised that
Krupp’s price was $27,000 for “on site inspection, induction, travel time, report
preparation, accommodation, airfare and car hire” with the provision that “any time
delay will incur an additional charge of $95 per hour”. He wrote that
Krupp’s “earliest starting date” would be 16 March 1999 and asked whether that
was suitable. The front page referred to the attachments as follows:
“Attached is our inspection service scope and conditions.

Also attached are our General Conditions for Service Contracts.”

Consistently with that, what was attached was the scope document and the
Service Conditions.

[236] However, in the scope document, which it is common ground became part of the
contract, one of the expressed terms was:
 66

“1. All conditions pertaining to and associated with the work

shall be as per our Standard Conditions of Sale and Contract
for Inspections and Servicing of Machinery and Equipment
No SCI0989 (copy attached).”

These conditions were not the same as the Service Conditions. Instead, they were
conditions which, at least on Krupp’s understanding, had been part of the contract
for Krupp’s previous inspection of the BWE, which was in 1996. I will call them
the Inspection Conditions.

[237] A further complication is that on the following day, 23 February 1999, Krupp sent
another fax to BHP but with yet a further set of conditions. This fax, although also
addressed to Mr Nixon, was sent to a different number and was intended for
Mr Grant at BHP. It comprised the same front page of the fax of the previous day
and the scope document, but in lieu of the Service Conditions (to which the front
page still referred), it attached what were entitled “General Conditions for Supply
Contracts”, which I will call the Supply Conditions.

[238] BHP made no specific response to those faxes. In particular, it said nothing about
whether it accepted all or any part of Krupp’s Service conditions, its
Inspection conditions, or its Supply conditions. Possibly someone from BHP rang
Krupp to confirm that the inspection would go ahead, but there is no direct evidence
of that. What apparently happened next was that on 11 March 1999, Krupp sent a
fax to Mr Grant advising that Mr Thiel would be arriving to start the inspection on
16 March 1999. Mr Thiel arrived on that date and after talking to Mr Grant, went to
work.

[239] In these circumstances, the defendants say that the plaintiffs must be taken to have
agreed that Krupp’s Service conditions would be part of the contract. The plaintiffs
deny that on several grounds.

[240] First, they say that Krupp’s faxes were at least ambiguous in what was said about
the conditions upon which Krupp was prepared to contract. The scope document
specified another set of conditions, the Inspection Conditions, which were just as
likely to have been intended by Krupp (on an objective view), because they were
expressed to be Krupp’s conditions for inspections of machinery and equipment and
they had been the only conditions which Krupp had included or purported to include
in the 1996 contract. Accordingly, BHP should not have understood
Krupp’s reference to these Inspection conditions to be an error: it was at least
equally likely that the error was in attaching the Service Conditions and (on the
next day) the Supply Conditions, an impression which would be fortified by the
difference between those two.

[241] Secondly, the plaintiffs argue that BHP had shown an intention to contract
only upon its standard conditions, which were those identified in the
BHP Purchase Order. So in that context, BHP’s silence in response to
Krupp’s faxes, and its subsequent conduct should not have been understood as an
acceptance of Krupp’s conditions.

[242] Thirdly, they say that the Service Conditions, and in particular the exclusion clause
upon which Krupp relies, were so inappropriate to the provision of the service of an
inspection, and so unreasonable if applied as Krupp now argues, that Krupp could
not have reasonably assumed that BHP had agreed to them.
 67

[243] Further, the plaintiffs say that those provisions of the Service Conditions upon
which Krupp relies, if agreed, would be void as inconsistent with warranties implied
by s 74 of the Trade Practices Act.

[244] The Service Conditions included the following:

"12.0 WARRANTY

Krupp's liability for the Services shall be limited to the rectification

of deficiencies in the Service. Krupp shall make good by repair
within a reasonable time after notification by the Purchaser, defects
which appear in the Services, arising from Krupp's faulty design,
material or workmanship, provided always that:

• The equipment on which the Services have been performed

has been properly handled and used and has been properly
operated and maintained; and
• Such deficiencies are not caused by incorrect use of
operational material or lubricants, faulty civil or mechanical
work, unsuitable soil conditions and all other chemical,
electrochemical and/or electrical influences which have not
been provided for in the Contract; and
• Such defects (whether apparent or not) occur within a
warranty period of six (6) months after the risk has been
transferred to the Purchaser
• Krupp is notified in writing within seven (7) days of the
alleged defect occurring; and
• The Purchaser has fulfilled his Contractual obligations.

For repaired or replaced supplies of Krupp which form part of

Services a new warranty period of six (6) month shall begin after
finalisation of the remedial action.

However, Krupp's warranty obligations shall expire at the latest

twelve (12) month after the risk has been transferred to the
Purchaser.

If Krupp fails to remedy a defect for which it is solely responsible

under this clause within a reasonable time, the Purchaser may
determine in writing a reasonable time for remedying the deficiency.
If Krupp then fails to fulfil its obligations, the Purchaser may carry
out the work himself or by qualified others and shall then to the
exclusion of other rights be entitled to recover from Krupp all
reasonable direct costs.

Krupp shall not be liable for goods of a consumable nature, goods

having a low rated service life, goods or part of goods which are
subject to wear and tear and where any unauthorised repair or
alteration to the Services has been performed by the Purchaser.

This express warranty is in lieu of any rights that would otherwise be

conferred on the Purchaser under statute and law save that this
 68

express warranty does not exclude any conditions of warranties

implied into this Contract by the provisions of the Trade Practices
Act 1974 or by any other Federal or State Laws to the extent that
such conditions or warranties may not be excluded by express
agreement.

13.0 LIMITATION OF LIABILITY

Subject to clause 5.0, paragraph 3 Krupp shall not be under any

liability whether in Contract, tort or otherwise from any cause
whatsoever, whether occasioned by negligence or otherwise, for any
injury, damage or loss, including indirect and/or consequential
damages or losses whether to persons or property, arising out of this
Contract or the Services performed pursuant hereto including any
defects therein or anything connected therewith or any other work
related thereto. Krupp does not assume any liability for equipment,
parts, tools etc. or labour provided to Krupp by the Purchaser. Any
liability of Krupp shall expire at the end of the warranty period."

[245] The evident intention in the drafting of these conditions was to have clause 13 limit
Krupp's liability to the discharge of Krupp's obligations under the warranty
provision, cl 12: hence the last sentence of cl 13.

[246] The Service Conditions defined “Services” widely as “the work to be performed by
Krupp under this contract”. But the terms of cl 12 appear to be apt only for services
in the nature of something which is done to the equipment or machinery: something
which physically affects the equipment, rather than an inspection of it. More
generally, the Service Conditions appear to have been drafted with that kind of work
in mind. For example, in cl 5.0 headed “Date for completion”, it was provided that
the Services should be deemed to be completed on the earliest of several alternative
dates, one being “one calendar month after it has been put into commercial use.”
Clause 8.0 provided that Krupp would:
“insure at the Purchaser’s expense the plant on which the Services
are to be performed in the joint names of Krupp and the Purchaser …
for its full value against damage or destruction … from the date of
commencement of the Services until completion,”

and that “all moneys received under any such policy shall be applied in or towards
the replacement or repair of the Services lost, damaged or destroyed …”.
Clause 11.0 provided that absent some express payment terms specified in an offer,
there should be progress payments according to the percentage of the “completion
period” which had elapsed.

[247] Krupp argues that the Service Conditions were intended to apply to a variety of
contexts, so that the fact that some of these provisions appear to be intended for the
provision of services by way of work done to a machine does not mean that they
cannot apply to a service such as this inspection and the inspector’s report. Perhaps
some of these conditions could be sensibly applied to this service. I go now to
whether cl 12 is one of them.

[248] Clause 12 began by limiting Krupp’s liability “to the rectification of deficiencies in
the Services”. It continued:
 69

“Krupp shall make good by repair within a reasonable time after

notification by the Purchaser, defects which appear in the Services,
arising from Krupp’s faulty design, material or workmanship …”

[249] I shall endeavour to summarise Krupp’s argument as to how these words could be
applied to the present context. The essence of Krupp’s argument is that the
“defects” are those “which appear in the services, not the object of the service”.
The argument proceeds:
“This can contemplate a circumstance in which what is observed is
the defective character of the service, in which case Krupp can be
notified and it can remedy the defect. Alternatively the defect in the
services might become apparent by some physical characteristic
which might be the subject of repair. ...The reference is to ‘defects
which appear in the services’, not to ‘defects which result from
Krupp’s breach of liability [sic] and provision of the services’.”

[250] As to what Krupp must do under cl 12, its submission is that a “defect” in the
[inspection] service
“could be rectified by the re-supply of services and/or the further
provision of services, independently of whether any repair is required
to any physical defects.”

Alternatively, if there was “some physical manifestation of the consequences of the

defective service”, then
“a defective inspection could indeed be made good by a repair, or
alternatively by some other means which falls within the description
of ‘rectification of the deficiencies’.”

[251] As those submissions indicate, it is very difficult to explain how the words of cl 12
could be construed in a way in which it could operate in the context of a contract
such as this one. The essential reason for that is that the services in this case are in
the nature of professional advice and they did not involve anything being done
which physically affected the machine. For this service, things such as rectification,
making good by repair, defects and faulty workmanship have no logical place.
Upon Krupp’s premise that the “deficiencies” or “defects” are things which were
wrong with the services themselves, rather than things that went wrong with the
machine in consequence, the end point of the argument is that cl 12 limited Krupp’s
liability to the supply or re-supply of its services: in other words that Krupp’s
liability would be limited, in the first place, to the performance of an inspection and
the provision of a report as the contract had already required. I say in the first place
because cl 12 provides that:
“if Krupp fails to remedy a defect for which it is solely responsible
under this clause within a reasonable time…the Purchaser may carry
out the work himself or by a qualified others and shall then to the
exclusion of other rights be entitled to recover from Krupp all
reasonable costs.”

So consistently with Krupp’s argument, if it failed to inspect or properly inspect and

report on this machine, the customer’s remedy was to conduct the inspection itself
or have others do so at Krupp’s cost. It hardly seems apt, in the context of a
contract for an independent engineer’s inspection of equipment, including for its
 70

structural soundness, that the customer’s remedy should be to itself inspect the
equipment.

[252] In my view the words “deficiencies” and “defects”, which are apparently used
synonymously, cannot be read as referring to some shortcoming in the provision of
a service, rather than as the physical consequences of Krupp’s performance or
non-performance. That is fortified by, for example, the second of the provisos
within cl 12, which is that:
“such deficiencies are not caused by incorrect use of operational
material or lubricants, faulty civil or mechanical work, unsuitable
soil conditions and all other chemical, electrochemical and/or
electrical influences which have not been provided for in the
Contract”.

Similarly there is the next proviso which presents a particular difficulty in

Krupp’s argument. The proviso is that:
“such defects, whether apparent or not, occur within a warranty
period of six (6) months after the risk has been transferred to the
purchaser.

And the further proviso is that “Krupp is notified in writing within seven (7) days of
the alleged defect occurring”. Upon Krupp’s interpretation, the defect is in the
provision of the service so that the occurrence of the defect would be when the
service was provided or purportedly provided. It is nonsensical then to speak of a
“defect” in this sense occurring or not occurring within a further six months. It is
also nonsensical to suggest that Krupp was not liable unless within a week of its
non-performance it was notified of such.

[253] Krupp does not argue that where a crack went undetected by an inspection, the
crack itself was a “defect which appear[ed] in the Services” so that Krupp was
obliged to “repair it”. That would not be a defect “in the Services”, but rather a
pre-existing defect which the services should have detected.

[254] Accordingly, cl 12 could not be interpreted in a way which would make it

applicable for the provision of the services required by this contract. If upon an
objective view BHP must be taken to have accepted the inclusion of the
Service Conditions, it does not follow that cl 12 could be interpreted so as to have
any effect upon this contract. If BHP accepted an offer which included the Service
Conditions, it accepted only so much of those conditions as could be applied to this
contract. As the defendants submit, the Service Conditions are drafted for many
contexts so that some of them might have no operation in some contracts.

[255] That has consequences for the operation or otherwise of cl 13. Clauses 12 and 13
were evidently intended to operate together. Absent the operation of cl 12, the
effect of cl 13 would be absolve Krupp from any responsibility for not performing
its contract. So if BHP is to be taken to have accepted the Service Conditions, again
it has accepted only those which could be read as applying in this context. Absent
cl 12, cl 13 could not be applied without having the effect that Krupp could breach
its contract as it pleased.

[256] The defendants also rely upon these clauses of the Service Conditions:
“18.0 … The Purchaser’s right to sue Krupp shall expire at the latest
six months after expiration of the warranty period.
 71

These express rights and remedies of the Purchaser shall be lieu of

any rights that would otherwise be conferred on the Purchaser under
statute and law save that those rights and remedies do not exclude
any conditions or warranties implied into this contract by the
provision of any Federal or State statutes except to the extent that
such conditions or warranties may not be excluded by express
agreement.”

“These express rights and remedies of the Purchaser” is a reference to those under
the warranty provision, cl 12. Absent cl 12, these provisions would have no
sensible operation.

[257] Some of the Service Conditions, at least considered alone, might be thought to be
capable of application to such an inspection contract. But none of them expressly
refers to the service of an inspection, or indeed to any “service” which does not
involve something being done to the equipment. Consequently, Krupp’s attachment
of the Service conditions to the fax of 22 February, on an objective view, could
have appeared as a mistake, considered also with the fact that a different set of
conditions was referred to within the scope document. And Krupp’s difficulty is
compounded by the fact that on the next day, Krupp sent a different attachment,
comprising the Supply Conditions.

[258] The question is not whether the parties should be taken to have agreed to include the
Inspection Conditions or the Supply Conditions, because Krupp has no alternative
case which relies upon them.

[259] As the plaintiffs argued, the inclusion of the Service Conditions would be
inconsistent with the terms of the BHP General Order Terms and Conditions, of
which condition 1 provides, in part as follows:
“(c) Orders when accepted by the Supplier, shall constitute the entire
contract with reference to the subject matter and subject to the
following terms and conditions shall not be altered, amended,
supplemented or cancelled without written approval of the Supplier
and company. Either supplier’s written acceptance of the order or
the delivery of any article or commencement of performance
hereunder shall constitute acceptance of the order and no contrary or
additional terms or conditions shall apply, notwithstanding any oral
or written statement made by the Supplier.”

Krupp admits that these BHP conditions were part of the contract. So the plaintiffs
say that the parties could not be thought to have agreed to the addition of other
terms and in particular Krupp’s Service Conditions. Krupp argues that after receipt
of BHP’s order, Krupp said in effect, that it was prepared to contract but only on its
terms, so that BHP should be understood to have accepted Krupp’s terms by going
ahead with the inspection.

[260] The fact that BHP said it would contract only on the BHP conditions did not prevent
the parties reaching a different agreement by what they subsequently wrote or did in
relation to each other. But in my view that fact makes it more difficult to accept,
that without anything being said by BHP about the Service Conditions, BHP did
agree to them.
 72

[261] Under the payment provisions of the Service Conditions, an initial payment of
10 percent of the price would be payable “within ten (10) days after confirmation of
the order”. That was an event described in cl 2 of the Service Conditions as
follows:
“Unless previously revoked by written notification to the Purchaser,
Krupp’s offer shall remain valid for the period as stated in the offer
or, where no such period is stated, for ninety (90) days from the date
hereof.

… Krupp reserves the right to decline any order which includes

deviations from Krupp’s offer. An order shall only be deemed to be
accepted after Krupp has submitted to the purchaser a written order
confirmation.”

So according to the Service Conditions, there was not to be a contract unless the
Purchaser had “ordered” the services in response to an offer containing those
conditions, and Krupp had “accepted” that order by a written “confirmation”. But
there was nothing by Krupp in the nature of “a written order confirmation”. This
makes it yet more difficult to accept that on an objective view, the parties agreed to
include the Service Conditions.

The Trade Practices Act terms

[262] Section 74 of the Act provides in part as follows:

“(1) In every contract for the supply by a corporation in the course
of a business of services to a consumer there is an implied warranty
that the services will be rendered with due care and skill and that any
materials supplied in connexion with those services will be
reasonably fit for the purpose for which they are supplied.

(2) Where a corporation supplies services (other than services of a

professional nature provided by a qualified architect or engineer) to a
consumer in the course of a business and the consumer, expressly or
by implication, makes known to the corporation any particular
purpose for which the services are required or the result that he or
she desires the services to achieve, there is an implied warranty that
the services supplied under the contract for the supply of the services
and any materials supplied in connexion with those services will be
reasonably fit for that purpose or are of such a nature and quality that
they might reasonably be expected to achieve that result, except
where the circumstances show that the consumer does not rely, or
that it is unreasonable for him or her to rely, on the corporation’s
skill or judgment.”

[263] The plaintiffs were “consumers” because the price of the services did not exceed the
prescribed amount of $40,00063. Accordingly, and subject to its possible exclusion
by a provision which would engage s 68A, there was a warranty of due care and
skill in terms of s 74(1).

63
s 4B(1)(b), s 4(2).
 73

[264] The plaintiffs also rely upon s 74(2). They say that by implication from the
documents which contained the contract, they made known to Krupp a particular
purpose for which the services were required or a result which they wished to
achieve, which was the detection of any cracks in the structure of the BWE. So they
say there was an implied warranty that the services would be reasonably fit for that
purpose and of such a nature and quality that the services might reasonably be
expected to achieve that result. As I will discuss, Krupp’s scope document required
Krupp to carry out a visual inspection to check for the presence of cracks. But
because not every crack is visible, Krupp did not promise to find every crack. The
implication from the documents was that the services were required for the
detection of any cracks which were able to be detected by a visual inspection. And
within that qualification was the circumstance that some parts of the structure would
be relatively difficult to see at close range. But with that qualification, I accept that
by implication such a purpose was known to Krupp.

[265] However, s 74(2) does not apply where the services are of a professional nature
provided by a qualified engineer. That was the case here. The contract expressly
required the inspection to be conducted by an engineer. And the report of the
inspector was likely to have required the specialist advice of an engineer on such
matters as the relative urgency of remedial work and the detail of that work. The
plaintiffs argue that the exception in s 74(2) operates only where the services are
provided “by persons carrying on the profession of architect or engineer” and that
“the second defendant did not carry on that profession”. But the exception applies
according to the nature of the services and the qualifications of the natural person
through whom the corporation supplies them. The exception applies here because
the services were of a professional nature supplied through Mr Thiel as a qualified
engineer. So no warranty was implied by s 74(2).

[266] Section 68 provides:

“Application of provisions not to be excluded or modified

(1) Any term of a contract (including a term that is not set out in
the contract but is incorporated in the contract by another
term of the contract) that purports to exclude, restrict or
modify or has the effect of excluding, restricting or
modifying:

(a) the application of all or any of the provisions of this

Division;
(b) the exercise of a right conferred by such a provision;
(c) any liability of the corporation for breach of a
condition or warranty implied by such a provision;
or
(d) the application of section 75A;

is void.

(2) A term of a contract shall not be taken to exclude, restrict or

modify the application of a provision of this Division or the
application of section 75A unless the term does so expressly
or is inconsistent with that provision or section.”
 74

If contrary to my conclusion, the parties had agreed in terms of the

Service conditions, then subject to s 68A, each of cl 12, cl 13 and cl 18 would have
been void by s 68(1), because it would have had the effect of excluding, restricting
or modifying Krupp’s liability for breach of the warranty implied by s 74(1).
Section 68A provides, in part, as follows:
“(1) Subject to this section, a term of a contract for the supply by
a corporation of goods or services other than goods or
services of a kind ordinarily acquired for personal, domestic
or household use or consumption is not void under
section 68 by reason only that the term limits the liability of
the corporation for a breach of a condition or warranty
(other than a condition or warranty implied by section 69)
to:

(a) in the case of goods, any one or more of the

following:

(i) the replacement of the goods or the supply of

equivalent goods;
(ii) the repair of the goods;
(iii) the payment of the cost of replacing the goods
or of acquiring equivalent goods;
(iv) the payment of the cost of having the goods
repaired; or

(b) in the case of services:

(i) the supplying of the services again; or

(ii) the payment of the cost of having the services
supplied again.

(2) Subsection (1) does not apply in relation to a term of a

contract if the person to whom the goods or services were
supplied establishes that it is not fair or reasonable for the
corporation to rely on that term of the contract.”

Krupp ultimately argued that s 68A(1) was engaged by the warranty in cl 12. But
cl 12 could not be thought to have been agreed, because on any rational
interpretation, it could have no operation in this contract. Because cl 12 was not a
term, it follows that cl 13 and cl 18, if otherwise agreed, would be void by s 68,
because they would not engage s 68A.

[267] The result is that a term of due care and skill was implied by s 74(1). And because
this was a contract for the provision of the professional services of an engineer, an
equivalent term was also implied by the common law64.

What inspection did the contract require?

[268] This was defined by the scope document. The plaintiffs also rely upon their
Purchase Order which described the work as “a complete inspection of the

64
See for example, Brickhill v Cooke [1984] 3 NSWLR 396; (1984) Aust Torts Reports 80-685.
 75

bucketwheel … forwarding a report on all repairs required”, which although

relevant, adds nothing to the effect of the scope document.

[269] Under its heading, which described the inspection service as “comprehensive”, the
scope document began by describing the inspection as an assessment of the
condition of the plant by way of a structural inspection and a mechanical inspection.
Then followed descriptions of what those inspections should involve. Under
“Structural” was this:
“The structural inspection would be done visually for the entire
primary load carrying structure to check for the following :

• Damaged, loose or missing structural members

• Firm fit of bolts in their connections
• Missing and corroded bolts
• Soundness of welds
• Slippage of joints
• Visible changes in cross sectional area of joints and members
due to corrosion or wear
• Condition of the corrosion protection system
• Presence of cracks in sections and plates

Structure of a secondary nature including handrailing, walkways and

ladders would be assessed for damage and corrosion.”
[emphasis added]

It is common ground that the main tower and the stiffeners were part of “the
primary load carrying structure”.

[270] After a description of what the mechanical inspection should involve was this note:
“Any structural and/or mechanical defects shall be clearly marked by
the Krupp Engineer using coloured spray paint or marking pen. In
the event that structural cracking is detected, more detailed NDT
inspection may be required. As the extent to which this may be
required cannot be assessed at this stage, we have not allowed for
ultrasonic/magnetic particle testing in this proposal.”

[271] The document then described what was required of the inspector’s report as follows:
“REPORTS

All fault descriptions, locations and routine repair procedures will be

fully detailed in an Inspection Report for the plant item.

The report format includes separate sections that deal with each of
the structural and mechanical assemblies. Photographs will be
incorporated where necessary for fault location and clarification.

All faults will be assigned a priority level with regard to urgency of

repair, based upon the nature and location of each fault.

Any repair procedures of an extra-ordinary nature which may

involve detailed investigation and design, computations, machine
 76

trestling and off-loading, and critical structural member replacement

shall be dealt with as additional work on a cost plus basis.

The Inspection Report will be compiled and written as a document

capable of clear interpretation for fault rectification work.”

[272] That was followed (again within the Scope document) by some 10 conditions which
it is necessary to set out in full:
“CONDITIONS

1. All conditions pertaining to and associated with the work

shall be as per our Standard Conditions of Sale and Contract
for Inspections and Servicing of Machinery and Equipment
No SCI 0989 (copy attached).

2. If machine access cannot be provided, a stand-by rate of

$94.00/hour applies.

3. Prior to arrival of the Engineer on site and the

commencement of inspection work, the structure of each
plant item must be cleaned to allow proper identification of
defects.

4. To enable inspection of all elevated structure not serviced by

walkways, you need to provide (free of charge) an elevating
platform (“cherry picker”) and operator as required by the
Engineer during the inspection period.

5. We would require your assistance in the provision of fitters

and electricians to remove cover plates and housings as may
be required by the Engineer for inspection purposes.

6. All electrical drives on the plant shall be isolated under

permit conditions during the inspection period in accordance
with standard procedures.

7. To prepare reports, we require all necessary drawings and

technical manuals which are not in Krupp’s possession.

8. Any other equipment which may be required during the

course of inspection shall be made available to the Engineer,
[for example]:

• Scrapers and brushes for cleaning

• Spray paint for fault marking
• Crack testing compounds
• Extension ladders
• Battery torch
• Lead lights
• Safety harness and lanyard
 77

9. We have made no provision in our proposal for NDT such

as ultrasonic, radiograph etc, nor for diagnostic techniques
such as shock pulse monitoring, spectrometric oil analysis
etc, as the extent to which these may be required cannot be
assessed.

10. Krupp will submit duplicate copies of the Inspection Report

within four calendar weeks after the inspection period.

You will be notified during the inspections of any faults of a

serious nature that require immediate repair or other
actions.”

The walkways case

[273] The defendants’ case is that the inspector was not obliged to leave the walkways,
accessways or ladders which were affixed to the BWE (which I will call the
walkways). Although the “entire primary load carrying structure” was to be
inspected, they say that if some part of it could not be seen from the walkways,
it was not to be inspected and nothing had to be written about it in the
inspector’s report. The relevance of this is that the defendants say that the likely
location of the crack at the time was such that it was not visible from the walkways.

[274] As I will discuss, it would have been possible for Mr Thiel to look at what the
defendants say was the location of the crack, without his leaving the walkways, but
with the use of a mirror. But first I will discuss the arguments that the contract
originally, or by a variation, contained this qualification.

[275] The scope document required a visual inspection of the entire primary load carrying
structure. It was not in terms which required the inspector to stay on the walkways.
It expressly provided to the contrary. Condition 4 provided that “to enable
inspection of all elevated structure not serviced by walkways”, BHP had to provide
an elevating platform and an operator as required by the inspector. Condition 8
provided that any other equipment required by the inspector should be made
available to him and it gave as examples extension ladders and a safety harness and
lanyard. Had the inspector required such an item of equipment to inspect part of the
structure, and had BHP not made it available, the inspector would have been
relieved of the obligation to inspect that part. And as the plaintiffs concede, the
contract did not require the inspector to do anything which was not reasonably safe.
In particular, he was not obliged to leave the walkways unless he had available to
him some reasonably safe means of doing so. But with these qualifications, the
express terms of the contract are inconsistent with the defendants’ “confined to the
walkways” case.

[276] For this argument the defendants rely upon what happened in Krupp’s 1996
inspection of the BWE. Although that inspection was subject to identical terms so
far as the scope document is concerned, the defendants point to the fact that on that
occasion, as in 1999, Mr Thiel did not leave the walkways. To this they add the
faxes exchanged by Mr Grant and Mr Reiter in December 1997, some fourteen
months prior to the 1999 contract. Mr Grant faxed to Mr Reiter on
8 December 1997 in these terms:
“2 YEARLY INSPECTIONS BWE
 78

Reiner,

It is that time again BUDGET time. Can you please forward me a

quote to have the Bucketwheel, Spreader and Tripper examined by
one of your engineers as part of its 2 yearly inspection the same as
Frank did the last time.”

Mr Reiter replied as follows:

“Dear Martin

We wish to advise that the price for the inspection will remain as per
your last order No L02362, $25,600.

We thank you for the enquiry and will be pleased to carry out the
inspections for you when required. Please advise us one month prior
to inspections so that we can schedule Frank’s workload.”

The defendants argue that the contract made in February 1999 has to be read subject
to those faxes in 1997: the 1999 documents are to be understood as requiring “the
same as Frank [Thiel] did last time”.

[277] On their face, the 1997 faxes were not intended to conclude a contract or to have
any contractual effect. As Mr Grant’s fax made clear, BHP’s interest was in
knowing, for budgetary purposes, the likely cost of the next inspection. He
described the proposed inspection as “the same as Frank did the last time”
apparently to assist Mr Reiter to provide an estimate. In referring to what was done
“last time”, he should not have been understood as indicating something less than
what had been the agreed inspection in 1996. The exchanges were on the basis that
what had been required by the contract in 1996 would be again required.
Consistently with that, Mr Reiter gave the same price.

[278] It may be accepted that BHP knew that Mr Thiel had not used equipment such as a
cherry picker or a harness and lanyard in 1996. But it is not demonstrated that BHP,
and specifically Mr Grant, knew that in 1996 Mr Thiel had been unable to inspect
from the walkways the entire primary load carrying structure.

[279] In the cross-examination of Mr Grant, it was suggested that he had told the
Mining Warden’s inquiry into the BWE collapse that he knew that the critical area
at the top of this stiffener could not be seen from the nearby walkway. He did not
agree that he had said that and his evidence to the Warden’s inquiry was not
tendered in this trial. He was involved in the investigative process undertaken by
BHP after the collapse but he said here that he remained unsure as to whether the
critical area would have been visible from the walkway. I accept that evidence.
I find that in 1999 he did not have any particular belief about the visibility of the
end of this stiffener.

[280] Mr Grant agreed with the suggestion that in the 1996 inspection he told Mr Thiel
“to stay on the walkways and ladders”. He also agreed that in 1996 he had “no
expectation that Thiel would go outside the walkways if he was on the tower if the
machine was operating”. When it was put to him that he had “no expectation that
he would go outside the walkways and ladders on the tower without a harness”, he
 79

agreed, saying “correct, he would need to have a harness, yes”. At that point there
was a further question in which this was put: “and in fact, your expectation was
exactly the opposite; you’d expect him not to do that, not to go outside?” to which
Mr Grant answered “that’s correct”. But in context this meant that Mr Grant had
not expected him to go outside the walkways without something such as a harness.
It was not an admission of an expectation that he would not leave the walkways at
all. At about the same point in his cross-examination, Mr Grant said that “if
(Mr Thiel) needed any equipment or any assistance, he needed to ask myself, the
operators or the operations supervisor”. A little further on in the cross-examination
occurred this exchange:
“All right. You see, I want to suggest to you that as with ’96, so with
’99, in this respect at least, that he was told, “Stay on the stairways”
– “on the walkways and ladders”?-- The instructions would have
been the same as in 1996, to stay within the walkways and ladders.

And your expectation of what he would do was even stronger in ’99

because of the way safety changes had gone in the three years since
’96. That is to say, you didn’t expect him to go off the walkways or
ladders when the machine was operating at all. So you see the –
while the machine’s operating, not off the walkways, ladders at all?--
The expectation was that he would do all his work from the handrails
and walkways.”

And a little further on in the cross-examination was this:

“All right. And your anticipation or your expectation of what
Mr Thiel had actually done during his inspection was, can I ask you
to agree with me, if you do, that he had followed what you’d said,
namely, he hadn’t gone outside the walkways and ladders?--
Correct.”

In his statement tendered as evidence-in-chief, Mr Grant said:

“[47] I can recall I specifically told Mr Thiel that he should not stray
from the walkways and ladders of the BWE. I also told Mr Thiel
that if he needed to work outside these constraints and needed access,
I could arrange this, as he needed to have a safety harness. The
Mine’s safety motto had changed from “if it is not safe – don’t do it”
to “if it is not safe – make it safe” and I believe I told Mr Thiel this
as part of his induction. I recall also mentioning to Mr Thiel that if
he needed to talk to an operator about when the BWE would be
down for the day he could do so.

[58] Mr Thiel has full access to the BWE, it was entirely up to him
how the inspection was to be undertaken.”

[281] Two things should be said about the evidence of Mr Grant’s expectations. The first
is that any expectation, or more generally his state of mind, as to what Mr Thiel
would do is not relevant to the interpretation of the terms of the 1999 contract,
although it may be relevant to other issues, such as whether Mr Thiel’s report was
misleading or deceptive. Secondly, from this evidence taken as a whole it can be
seen that it was not his expectation that Mr Thiel would stay on the walkways, if
 80

leaving the walkways was reasonably safe, such as with a harness, and was
necessary for an inspection of the entire structure. It was not that he thought that
Mr Thiel would in no circumstances leave the walkways or ladders, but rather that
he would do so only with the necessary equipment and when the machine was not
operating.

[282] Then there is a conversation between Mr Grant and Mr Thiel in the course of
the 1999 inspection upon which the defendants rely, in the alternative, as amounting
to some variation or waiver. On this occasion, Mr Thiel was climbing from a
walkway to stand on top of a hand rail to see some part of the structure. At this
point, his feet were on the top of the hand rail, his hands were holding on to another
part of the structure and he was not wearing a harness or other safety device. The
machine was operating. Mr Grant called out to him words to the effect of “Stay on
the stairways and platform walkways. Stay on them”. I accept Mr Thiel’s evidence
in that respect. Mr Grant does not recall the incident but does not deny that it
occurred.

[283] The defendants argue that this incident had an impact on the contract. They say that
at least from that time, the contract required the inspector to keep to the walkways
and that the provisions about cherry pickers and other equipment such as a harness
became irrelevant. I do not accept the argument. On no objective view could the
parties be understood to have been varying their contract by what Mr Grant called
out to Mr Thiel. Nor in this was there any waiver by BHP of its entitlement to an
inspection of the entire structure. The incident was simply an instruction that
Mr Thiel was not to leave the walkways and ladders as he had done: without safety
equipment and while the machine was operating. It should not have been
understood as saying anything about the use of equipment provided for by the scope
document.

[284] The defendants also argue their walkways case in the language of an estoppel by
convention. They plead that the plaintiffs, Krupp and Mr Thiel had these common
assumptions, from which the plaintiffs should be estopped from now departing:
“(i) that the inspection carried out [in 1999] was that which was
requested by the Plaintiffs;

(ii) that the inspection carried out [in 1999] was one which was
carried out in accordance with contract, duty and statute;

(iii) that the Plaintiffs did not require the inspection on the BWE
itself to be performed otherwise than visually and from
walkways, access ways, and ladders;

(iv) that the Plaintiffs did not require the stiffeners to be

inspected more than they had been;

(v) that the Plaintiffs did not require any further inspection
performed.”

According to my findings concerning Mr Grant’s state of mind, the defendants have

not proved the factual foundation for this estoppel. It may be accepted that at the
time BHP believed that the 1999 inspection had been carried out in accordance with
the contract and any other legal obligation, and for that reason, did not ask Krupp to
 81

do anything further. But to establish an estoppel by convention which alters the

effect of the express terms of a contract, a party must prove more than that each
party believed on the basis of the facts known to or assumed by that party and
according to its own understanding of the contract’s requirements, that the contract
had been performed. To establish this estoppel, the defendants must show that the
parties acted in this transaction upon an agreed and certain premise. In whatever
form, this estoppel case requires a common premise that an inspection from the
walkways was sufficient, whether or not the entire structure had been inspected.
Mr Thiel may have thought that but BHP, and Mr Grant in particular, did not.
So that was not commonly assumed and quite apart from any legal difficulty of such
an argument in the face of the express terms of the contract65, the argument fails on
the facts.

[285] In summary, I reject the defendants’ walkways case. The contract obliged Krupp to
inspect the entire structure, if that could be done safely and if the necessary
equipment was made available by BHP. Krupp was obliged to ask for that
equipment if the inspector was not able to see part of the structure, or to see it well
enough to detect any apparent cracking.

What did Mr Thiel inspect?

[286] The answer appears from Mr Thiel’s own evidence which in this respect is
unchallenged. As to the structural inspection of the tower, he first went to the top of
the tower to look at the sheaves and the wear on the ropes. These were at the very
top of the tower where there was a platform alongside the ropes running across the
rear of the tower. He then inspected some mechanical parts before returning to the
tower. This time he walked slowly up the stairways and ladders looking at
structural parts. His structural inspection took him about three days, of which he
spent about four hours inspecting what he describes as “the structural aspects of the
tower”. He says he walked up the stairway very slowly “looking at all the areas that
I could get access to”. When he reached the top, he looked down both sides of the
tower as far as he could and on his way down he again looked at whatever he could
see.

[287] He was able to inspect the full length of the outer stiffener (the stiffener on the same
flange as the critical stiffener but on the outside of the web) and the weld affixing
that stiffener to the flange. He was so close to this that he could touch it. As to the
critical stiffener and its equivalent on the right hand side of the tower, he said that
“The only way I could see the inside stiffeners was from the
counter-weight boom level. I could touch the bottom end of the
inside stiffeners from the counter-weight pivot level platform. I was
approximately eight metres away from the top of the inside stiffener
at that point i.e. at the counter-weight boom level. I could not see the
top of the inside stiffeners from the walkways at the top of the tower
as the walkway was too far from the flange and the stiffeners were
hidden by the flange.”

[288] I accept that Mr Thiel looked up from the counterweight boom platform as he
described. The defendants argue that this constituted an inspection of the area
which is where the top of the stiffener met the flange. But it was no such thing,

65
See Queensland Independent Wholesalers Ltd v Coutts Townsville Pty Ltd [1989] 2 Qd R 40 at 46.
 82

because standing on the counterweight platform Mr Thiel could not have seen most
of it and whatever view he had of the rest of it was of no use. This explains why he
endeavoured to inspect the area from a walkway near the top of the tower. This
appears from his evidence in cross-examination:
“And you couldn’t see the top of the inside stiffeners from that
location? [the counterweight platform]-- You can see the top but not
the top where the weld is.

All right. So you can see up along the side of them?-- The side.
Right to the top.

Yes. But you can’t see------?-- The actual top.

------the actual top?-- No.

Nor could you see that area, I suggest to you, between the stiffener
and the web?-- Partly you can. Down near the bottom end, maybe,
but not right at the top.

No. Because in fact along the web there’s a bracket or a stiffener-----

?-- That’s right.

--------that intersects?-- That’s right.

So the area that you couldn’t see from that location at the
counterweight boom was across the top of the stiffener, and then that
further distance across to where the flange intersected with the web
at that level?-- Mmm. But only up near the top. Mainly near the
top.

Yes. Sorry, what do you mean ‘mainly near the top’?-- Because at
the bottom I could see it, I could even touch it.”

With the benefit of other evidence, it is clear that from the counterweight boom
platform, Mr Thiel could not have seen the top of the stiffener, the welding (if any)
between the end of that stiffener and the flange or the adjacent area on the flange.
As is now known, this was the critical area because the crack which caused the
collapse grew from where the top of the stiffener met the flange, and as it grew it
extended along the flange in each direction from the stiffener: towards the web and
(in the other direction) towards the end of the flange. There is an issue as to
whether by March 1999 it had grown to the end of the flange.

[289] So most of the critical area was simply not seen and therefore not inspected.
Accepting that Mr Thiel had a direct line of sight to some part of the critical area, he
was in no position to inspect it, because what little he could have seen of that part
from so far away and at such an awkward angle, (as he stood almost directly
beneath it looking up eight metres,) was not sufficient to enable him to say anything
reliable about the soundness of the weld at the top of the stiffener or the presence or
absence of cracks. That this was not an inspection of the critical area was
effectively conceded by Mr Thiel in this evidence:
“This area at the top of the stiffener on the inside of the tower was an
area where you couldn’t tell if there were any indications of
 83

cracking? You couldn’t see if there was any rust marks, or paint
cracking, that’s correct, isn’t it?-- I couldn’t see that end, no.

No. So the position was that you were not in a position to form any
view about whether or not in that location there were features which
might call for a closer inspection?-- No, because I could not see that
area.”

[290] There was a series of ladders or steps on the left hand side of the tower and running
up the outer face of that web. They led to a walkway which linked the left hand side
to the right hand side of the tower. The walkway passed immediately in front of the
tower and underneath the ropes which were between the tower and the rope support
tower. Mr Thiel said that to move along this walkway which I will call the relevant
walkway, and beneath these ropes, he had to move on his knees.

[291] I have the benefit of what the parties agree is an accurate scale model of the top of
the tower, including most of the length of the stiffeners, the relevant walkway and
other parts of the structure, including the supports of that walkway which extended
horizontally underneath it from each side of each web. From the model, it appears
that the ropes were not above the relevant walkway for its entire length, so that there
were several metres at each end on which Mr Thiel would have been able to stand
up. That includes the part of the relevant walkway which was closest to the critical
area.

[292] A person standing at that point would be close to the critical area because, as the
parties seem to agree, the top of the critical stiffener was about 1.3 metres below the
platform of the walkway. The walkway had a steel handrail of a metre or perhaps a
little more above the platform with another rail beneath it at about half that height.
The handrail did not obscure the view below.

[293] The difficulty was that the view from the relevant walkway of the critical area was
blocked by the flange. The walkway was on the front side of the flange and the
stiffener was on its other side. So the front of the flange and its side or edge could
be seen from the walkway but not the stiffener side.

[294] Mr Thiel says that from the relevant walkway, he looked at the edge of this flange
from about one and a half metres away. He says that he knelt on the platform and
looked “as far as I could but I couldn’t see anything”. He believes that had there
been a crack 15mm long or more on that edge of the flange (as some evidence
suggests), he would have seen it.

[295] Clearly then Mr Thiel did not see that part of the flange against which was welded
the top of the stiffener. Nor did he see the welds connecting the stiffener to the
flange at or near the top of the stiffener.

[296] According to the evidence of several experts, it is likely that by then there was a
fatigue crack of at least 100mm in length in a horizontal line across the flange at the
top of the stiffener, and that it was this crack which continued to grow to where it
caused the fracture of the tower and the collapse of the BWE within a year.

[297] I will come to the question of whether an inspection of the critical area was likely to
have detected that crack. But from Mr Thiel’s own account, it is proved that he did
 84

not “check…the soundness of (all) welds” or inspect “the entire primary load
carrying structure”.

[298] According to the contract, the entire structure had to be inspected if that could be
done safely and with the necessary equipment which BHP was to provide at the
inspector’s request. Mr Thiel made no such request. He was obliged to do so
unless the use of that equipment would have been futile or unsafe.

[299] Before going to those matters however, two points which occupied some
considerable time in the evidence should be mentioned. The first concerns whether
the inspector was obliged to give priority to certain parts of the structure, even if
that compromised the inspection of other parts. The defendants’ case seemed to be
that Mr Thiel was told to concentrate on an inspection of other parts of the machine,
so that he could be excused for not inspecting all of it and the critical part in
particular. But in that respect there was nothing proved which involved any
variation or waiver of BHP’s entitlement to an inspection of the entire primary load
carrying structure. Moreover, it is clear from Mr Thiel’s evidence that he intended
to inspect this part of the structure and would have done so had he been able to see
it from where he tried to see it on the relevant walkway. As he said, he regarded it
as something which he should inspect if possible.

[300] The second point concerned whether Krupp, and specifically Mr Thiel, should have
realised that the top of this stiffener was especially vulnerable and particularly
warranted an inspection. This involved a debate about what an inspector should
study and know about the equipment and its history, and what he should be told
about that by its owner. This point also extended to a debate about the appropriate
level of experience and qualifications of an inspector, such as whether the engineer
required by this contract should have been a structural engineer. For the breach of
contract case, these are irrelevant issues because the contract required the inspector
to inspect the entire load carrying structure. And any duty of care owed by Krupp
or Mr Thiel was surely to be consistent with that contractual obligation. Again,
Mr Thiel well understood that it was important to inspect the top of this stiffener if
possible. He said it was his practice when conducting a visual inspection to check
any areas prone to stress or failure, including welds and joints between sections and
plates, and between members. He said that he understood the difference between
the tension side and the compression side so far as the chance of fatigue cracking
was concerned. The reason why he did not inspect the critical area was not that he
had to do other things or that he did not know what to inspect.

What could and should Mr Thiel have done?

Mirrors

[301] Some inspectors use mirrors to look at things which are not within a direct line of
sight. These are mirrors with either a fixed length or a telescopic handle attached to
the mirror face by a pivot.

[302] Mr IR Newnham is the principal engineer at a firm which provides engineering

consultancy services for the operation, maintenance and development of large bulk
handling and continuous mining equipment. He carries an inspection mirror in his
toolkit for inspecting such equipment. Inspection mirrors are also kept in his firm’s
workshop. He says that inspection mirrors are available for purchase in a variety of
 85

sizes with the mirror itself ranging from 30 to 54mm in diameter and the handle
from 300 to 450mm. His firm has used them for the past 15 years.

[303] Another inspector, Mr Cheney, says that his firm (CCI Pope Pty Ltd) uses mirrors
on inspections and he has recently purchased another one. It cost $30. He has seen
inspection mirrors with faces 70mm x 130mm and handles of 750mm to 1 metre.

[304] The defendants called Mr Russell, from CW Pope & Associate Pty Ltd, who
undertook an inspection of some parts of the BWE later in 1999. He said that it was
not unusual for inspectors to carry mirrors so that they can see around and behind
pieces of steel and other obstructions. During the cross-examination of Mr Russell
the plaintiffs tendered an inspection mirror which he agreed was an example of
extendable mirrors he had seen carried by inspectors. It has a telescopic handle
extending to about 90cm and a rectangular mirror pivoting at the end of the handle
which is about 90mm x 50mm.

[305] Dr Dittrich, also called by the defendants, said that he has used inspection mirrors
although he would use a mirror only if there was
“solid indication of any risk at a particular site point, or if my
experience showed that there was a high risk there, and that would be
the case for an FII detail”.

He was not critical of Mr Thiel for not using a mirror because he said there was no
particular indication to Mr Thiel that there might be a crack in the critical area. But
as I have said Mr Thiel understood that he should inspect the critical area if
possible.

[306] Another German engineer but with extensive experience in Australia, Mr Haberler,
said that he was aware of the availability of extension mirrors although he “would
not consider them to have any particular use in the machine inspection context.” He
did not use them and he said that they gave the risk of producing a deceptive or
misleading impression.

[307] Mr Schander was the inspector, who from O&K and later Krupp, conducted the
1984, 1986, 1990 and 1994 inspections of the BWE. He said that he had never seen
mirrors used for inspections of bucket wheel excavators although he agreed that
they could be used.

[308] BHP’s Mr Grant had no recollection of the use of mirrors save for a conversation
with someone at CCI Pope who said that they could be used to look at various parts
of the machine. The defendants say that it is significant that he appears to have had
no experience with the use of mirrors by mine staff. Apparently the point here is
that if the use of mirrors was so obvious, someone within BHP would have thought
of it.

[309] So undoubtedly in 1999 some inspectors used such mirrors and some did not. They
were readily available and inexpensive. The present question is not whether any
competent engineer should carry an inspection mirror. It is whether the use of such
a mirror was a realistic means of inspecting the critical area, as Krupp was obliged
to do if that could be done safely.

[310] No witness was called to provide precise dimensions of the distance between the
platform of the relevant walkway or the height of its handrail and the top of the
 86

stiffener. The plaintiffs’ witness Mr Platzer calculated a distance of 1.32 metres

from the top of the stiffener to another stiffener running horizontally along the web.
The defendants say that this horizontal stiffener was “below and supports” the
relevant walkway. But as I understand Mr Platzer’s evidence, he was referring to a
horizontal stiffener which is below the top of the (vertical) stiffener on the flange,
and his measurements do not assist on this point. Yet looking at the model of the
tower, which it is agreed is on the scale of 1:20, 1.3 metres seems to be a fair
estimate of the distance from the platform of the walkway to the top of the stiffener.
As already mentioned, the handrail seems to have been about 1 metre or a little
more above the platform. There was another rail below it at about half that height.
The top of the stiffener would have been almost directly underneath one edge of the
walkway platform. These matters are helpfully represented in images within
Dr Potts’ report no 166, one of which is below. As that indicates, an inspection
mirror of the dimensions of that which was tendered would not have provided a
reliable view of the top of the stiffener if held by an inspector who was standing
upright on the walkway because the critical area would have been too far below
him.

[311] In a written statement tendered in chief, Mr Thiel said that he would not have been
prepared to lie down on the walkway with any part of him outside the railings or to
lean out over or through the handrails, because of “the risk of the handrail failing or
one stumbling or falling, or evening losing one’s hard-hat and endangering others
below”. He there wrote that “lying on the walkway necessarily involves altering the
body’s attitude from upright to lying down, which involves the risk of slipping and
falling, either when getting down, or when getting up again. In addition, there is
nothing to grip onto when lying down, unlike when one is upright and able to use

66
Figures 59 and 60.
 87

the handrails, and therefore there is risk of falling off if the machine moved”. In
oral evidence, he also said that he would not have been prepared to “support himself
on the bracket that is the support for the walkway”. This was in response to a
suggestion that he could have climbed over or through the handrails and stood on
the bracket which extended horizontally from the web to support the walkway. He
said that this would have been unsafe because “any horizontal surface under the
sheaves is likely to have grease spatter on it and the risk of slipping is high”.

[312] In my view the risk of the handrail failing was not significant, at least as long as
most of the inspector’s weight was still on the walkway platform. Nor was there a
significant risk of someone being injured by a falling hard hat. After all, the
inspector was already walking around this machine, and crawling along the relevant
walkway, whilst he carried things such as a notebook, binoculars and a camera. I
accept that without any safety harness, the inspector should not have been expected
to stand and lean between the handrails so that his upper body was outside them.
The image from Dr Potts’ report (the Figure above) represents an inspector in that
very position, but contrary to a submission for the plaintiffs, Dr Potts was not
offering a considered opinion about the safety of that. However, with the use of a
properly secured safety harness, in my view this would not have been unsafe. But
had that been done, I am not satisfied that the mirror, with a handle of 900mm to
1 metre long, would have been sufficient to give the inspector a reliable view.

[313] Had the inspector used the mirror, not from a standing but from a kneeling or
crawling position, the mirror would have provided a reliable view. This would have
required the inspector to kneel on the walkway and to have at least his head and his
arm holding the mirror outside the handrails, between the lower rail and the
platform, but with his body inside the handrails and his weight entirely upon the
walkway platform. With a properly secured harness, that would not have involved
an undue risk. Not everyone would be comfortable doing this but then not everyone
would be comfortable working at this height on a structure like the tower of the
BWE. Mr Thiel described how he crawled along this walkway to pass underneath
the ropes for a distance of what must have been at least 5 metres each way and,
according to his evidence, at least twice. And he described his attempts to see the
top of the stiffener as he knelt on the walkway platform. That was no more safe
than the position I have described when it is considered that he could have used a
safety harness.

[314] The defendants say that it would have been unsafe to have attached a harness to the
handrail because the handrail was not strong enough. This is said to come from
something within BG 60, although it was not explored with any witness. At cl 2.4
of BG 60, it was provided that
“staircase, landings and walkways must be assessed for an individual
load of 300kg…and top rails or balustrades for a horizontal force of
50kg”.

But I accept, as the plaintiffs say, that the harness could have been attached to
something else, such as the bracket supporting the walkway. In this position the
inspector would have been almost directly above that bracket. The defendants
argued nothing against that. As already discussed, the inspector was entitled to a
harness if required. I accept Mr Grant’s evidence that a harness would have been
provided if requested. BHP had provided a harness to Mr Schander.
 88

[315] Mr Cheney, who was called by the plaintiffs, said that he would not have been
prepared to lean out over the rails or to lean out from a position lying on the
walkway, in order to look behind the flange, although he was not asked to say
whether his attitude would have been different with the use of a safety harness.
Mr Cheney also said that he would not lie on a walkway and put his head outside
the balustrade using an inspection mirror. But again as I understood that evidence it
did not assume the use of a harness.

[316] Krupp’s previous inspector, Mr Schander, was described by the defendants as one
of the most experienced inspectors ever to have practised in this field. According to
his witness statement his practice on the BWE was as follows:
“54. No one from Utah BHP ever asked me to pay any particular
attention to the tower or the flanges on the tower nor anyone
from ThyssenKrupp or O&K Germany. I would inspect
from the walkways or possibly leave the walkways and
improvise a little. There was a possibility that one could use
a safety rope and improvise to some degree. So you could
get a metre or 2 metres away from the walkway if one
wanted to look down the corner for example. You would
lean over the handrail with a safety rope attached.

55. That would only be done if there was down time with the
machinery. I always specified that I needed a certain
number of days downtime and so many other days for
inspection during operation. I never had any problems with
the machine being stood down for that part. Additionally I
sometimes make use of a short ladder where there is ease of
access to a certain point simply by climbing up. I always
adopted that practice in inspecting the tower of any BWE. I
did not use binoculars for my inspections at Goonyella.”

[317] Mr Schander also said that he “did not climb through the tower or access the upper
stiffener area either with or without a harness and it would have been both unsafe
and impossible for me to do so.” But that is not the exercise which I have
described. The extracts which I have set out show that Mr Schander felt safe
enough using a safety rope “to improvise to some degree”, such as by leaning over
the handrail or leaving the walkways for a metre or two.

[318] Mr Newnham said that harnesses “have been used fairly frequently now to access
areas off walkways” compared with his earlier experience where there were less
safe practices of leaving walkways without a harness. He said that
“that doesn’t necessarily mean that everybody else does it, but I have
a harness which will hook on to a walkway. So if I want to go over a
handrail and inspect something over there, I can do that safely.”

Looking at the model of the tower, he said that he would not have been prepared to
leave the walkway with a harness and walk along a horizontal bracket which
extended from the tower and supported the walkway. But his evidence as to his
confidence in the use of harness is relevant for what is now being considered, which
is an inspector who is still on the walkway.

[319] Looking at the model Mr Russell said that

 89

“one would get a fairly clear view of the edge of the flange in the
vicinity of the top termination of the stiffener, that is the side part of
the flange”,

from a position lying on the walkway. He would not have been prepared to lean out
and support himself on the bracket which supported the walkways. He was not
asked whether the rear side of the flange in the area of the top of the stiffener could
have been seen from that position. Nor was he asked whether it could have been
seen from the position with the aid of a mirror. But significantly he expressed no
reservation about lying on the walkway, even without a safety harness.

[320] I am satisfied that the critical area could have been safely inspected with a mirror by
an inspector lying or kneeling on the walkway and secured by a safety harness. It
follows that at least for this reason, Krupp breached the contract, even if Mr Thiel
was to keep to the walkways.

Manboats and cherry pickers

[321] Mr Haberler said in cross-examination that if an inspector has to move outside the
walkways, scaffolding is one means and a cherry picker is “a good one” which he
used extensively. Whilst he agreed that there were some cherry pickers which could
be used at this height, his view was that the inspector would be “better off with a
crane lift” by which he meant “a manbox and a crane”. This is a box suspended
from a crane in which “one is lowered from the top down into the area of
investigation”.

[322] Mr Thiel’s evidence on the use of cranes or cherry pickers was inconsistent. In his
witness statement signed in March 2007 he said:
“It was my practice, when conducting structural inspections, unless
specifically directed otherwise by the client, to use the following
methodology: …

(b) My observations, especially in elevated areas, would be

made from designated walkways. I would only call for
special equipment, such as a crane or cherrypicker, to
inspect particular inaccessible or unobservable parts of the
machine structure if there was a specific reason to do so and
it was shown to be safe and legal to do so. Such reasons
might include the presence of rust, peeling paint,
deformation or other damage to a particular area. A man
boat had never been required for such areas.”

However in his further statement signed in September 2007, he said that he had
never used such equipment or seen other inspectors using it, which he repeated in
oral evidence. The more recent version is more likely to be true, because it provides
something of an explanation, but not an excuse, for his not asking for such
equipment to be made available.

[323] In cross-examination Mr Thiel asserted that an inspector using a manboat would not
have been close enough to the top of the stiffener to get a reliable view. Had he
used a manboat, Mr Thiel said it would have been lowered behind the rear side of
the main tower and he said that he would have been no closer than “three or three
and a half metres”. With the benefit of the scale model, it appears that the distance
 90

would have been more than that, perhaps about six metres. But Mr Thiel could
have used the binoculars which he said he carried in his inspector’s bag. As
mentioned, he had used these binoculars to look some eight metres up the tower
from the bottom of the stiffeners. From a manboat he would have had a direct line
of sight and he would have been looking at the critical area from the same height. A
cherry picker would have provided him with yet a better view because it could have
moved him sideways from the rear of the tower closer to the stiffener. I infer that
this would have brought him at least two metres closer and perhaps Mr Thiel had
this position in mind when he gave his estimate of three or three and a half metres.

[324] Had Mr Thiel told BHP that it was necessary to have a manboat or a cherry picker
to view parts of the load bearing structure, and in particular the welds at the tops of
the two inside stiffeners on the front side of the tower, it is more probable than not
that BHP would have provided one or other device. The submissions for the
defendants were critical of Mr Grant for not offering things such as a harness or a
manboat but they do not seem to challenge his evidence that these things would
have been provided had Mr Thiel asked for them. A crane and manboat were
provided to Mr Russell for an inspection of part of the BWE which he undertook in
August 1999.

[325] Mr Patroni is a former employee of the mine. He left in January 2000 and had no
involvement with the BWE system after early 1999. But during the 1996 inspection
he was Mr Grant’s supervisor and he was then responsible for overseeing all aspects
of the maintenance and operation of the BWE system. He says that if a crane had
been needed, it would have been arranged, together with a dogman and a crane
operator.

[326] As several witnesses say, the use of a cherry picker or manboat would have required
some organisation. Mr Patroni said that it could not have been provided on the day
it was requested. But there seems to be no suggestion that after some planning, a
cherry picker or manboat could not have been used and safely. Several witnesses
said that a “risk assessment” would have been necessary but not that these things
would have been unsafe.

[327] So had Mr Thiel not been able to see the end of this stiffener otherwise, he should
have requested a cherry picker or manboat, again because the contract required
Krupp to inspect the entire structure. And as to the implied contractual duty to take
care, Mr Thiel should have known that an inspection could have revealed cracking
even from three to six metres away.

Ladders

[328] The plaintiffs’ argument that Mr Thiel could have used an extension ladder to climb
from the counterweight boom is less persuasive. Mr Schander said it would have
been impossible to use a ladder to inspect the stiffener ends because of the required
length of the ladder and the difficulty of securing it. Mr Schander was not
challenged about that. Mr Thiel said in cross-examination that “maybe a means (of
securing the ladder) would have been found” and that “probably” he and Mr Grant
could have found a safe way to secure it. Mr Haberler said no more than a general
comment that an extension ladder can be used in some cases if it is properly
secured. There was no evidence called by the plaintiffs to explain how an extension
ladder could have been secured and how it would have been reasonably safe for an
 91

inspector to have climbed a ladder of at least eight metres in height, without any
protective railings behind him. Despite Mr Thiel’s concession, I am not satisfied
that the extension ladder would have been a reasonably safe alternative.

Scaffolding

[329] Undoubtedly, scaffolding could have been erected in a way which enabled Mr Thiel
to see this area at close range.

[330] The defendants complain that there is no pleaded case that a gantry or scaffold
should have been requested by Mr Thiel. I accept that this explains why these
matters were not explored with many relevant witnesses, although by the time
Mr Thiel gave evidence, the scaffold argument must have been anticipated because
he addressed it in his evidence-in-chief, when he said that he had not used
scaffolding or seen it used by other inspectors, although he agreed that it could have
been built.

[331] Mr Habeler has used scaffolding on inspections, although the defendants say for an
“engineering audit or inspection” and not a “general condition inspection”, a
distinction of little moment in the context of this contract.

[332] The defendants argue that having regard to the time and cost likely to have been
involved, it is improbable that BHP would have built scaffolding had Mr Thiel
requested it. Mr Haberler said that the use of scaffolding would take a machine out
of operation for three or four days in “complex areas”. I accept that BHP would not
have built scaffolding if there was another means of inspecting the critical area. So
BHP would not have erected scaffolding without first providing Mr Thiel with the
use of a manboat or cherry picker.

[333] As I have found, BHP would have provided a manboat or cherry picket if requested.
Had this occurred, and had Mr Thiel seen some indication of cracking in the critical
area (such as rust marks) but not been able to properly diagnose the problem in
order to provide the required advice about its repair, then the contract effectively
obliged Krupp to use scaffolding, unless BHP declined to erect it. More likely than
not, in those circumstances BHP would have erected the scaffolding. The reason is
that this would have been the sensible course. This was a machine which had been
continuously used by the mine for many years, and at this time it was proposed that
its output would be increased. And after all, BHP had requested this inspection for
which it was paying at least $27,000, and from which it was to be given
professional advice as to any required repairs. Faced with a request for scaffolding,
to more closely inspect signs of fatigue cracking on the tension side of the main
load carrying structure, it would have been irrational for BHP to have refused it.

[334] It follows that Krupp breached its contract because it did not inspect the entire
primary load carrying structure and in particular the critical area. It was obliged by
an express term to inspect all of the structure, subject to the necessarily implied
qualifications that it would be reasonably safe to do so and that BHP had provided
the necessary equipment. It was for the inspector to request what equipment he
required. Because he failed to require the necessary equipment which would have
provided him with a means of inspecting this part of the structure with reasonable
safety, Krupp cannot claim that it was relieved of its obligation to inspect the entire
structure. It is no answer for Krupp to say that the use of such equipment was not
specifically proposed by BHP.
 92

[335] Its services were not rendered with due care and skill, contrary to the warranty
implied by s 74(1), because Mr Thiel knew that he had not inspected or indeed seen
part of the structure which he knew should be inspected. His attempt to look at the
critical area from eight metres below on the counterweight boom platform did not
constitute an inspection of that area. He had no good reason to believe that he
should stay on the walkways rather than requiring a harness and (if necessary) a
manboat or cherry picker.

The inspector’s report

[336] The report was signed by Mr Thiel and commenced with this executive summary:
“The accompanying report is in response to the BHP Coal Pty Ltd,
Goonyella Riverside Mine order for Krupp Engineering (Australia)
Pty Ltd to carry out an independent inspection of Excavator 1367.

This report lists the major and medium defects found, together with
recommended remedial measures required. Very minor defects have
not been commented on as this would not be of any assistance.

Defects reported in the 1996 report that have not been repaired are
listed under 1.4 Inspection Report 1996 and have not been detailed
again in this report.

In our opinion, the Excavator does not have any major defects which
would prevent the operation of the machine.”

[337] Section 2.1 of the report contained four pages containing a description with
drawings and photographs of a buckled web plate on the right hand tower and near
the counterweight boom. This was the only fault found in the tower.

[338] Krupp was obliged to report on the inspection required by the contract, which was
an inspection of the entire structure. Krupp’s report was of an inspection of part of
the structure. Thus Krupp failed to provide the report which the contract required.
Further, the report was in breach of the term implied by s 74. Again, Mr Thiel knew
that he had not inspected part of the main load carrying structure which ought to
have been inspected. He should have known that his report would convey the
impression that he had inspected the entire structure. If he had not inspected the
critical area, reasonable care required him to say so in his report, because otherwise
there was at least a risk that the reader would understand that he had inspected it and
that it contained no visible defect.

[339] The defendants argue that the reader, and in particular Mr Grant, must have known
that the whole structure had not been inspected so there was no need for that to be
said in the report. As I have found, Mr Grant and more generally BHP did not
know that fact. And Mr Thiel had no good reason to think that it was so. Mr Thiel
could not have reasonably assumed that Mr Grant or BHP knew what was visible
from the walkways, or that Mr Thiel had not used an inspection mirror. So the fact
that some important part of the structure had not been inspected was not so obvious
that it went without saying.
 93

Was Krupp negligent?

[340] The plaintiffs plead that Krupp and Mr Thiel owed a duty to them “to exercise a
level of skill and care:

• reasonably to be expected of those [defendants];

• alternatively, reasonably to be expected of a competent structural engineer

with expertise in the field of inspecting bucketwheel excavators.”

[341] In substance there appears to be no difference between those two alleged duties, or
between them and Krupp’s contractual duty of due care and skill from the warranty
implied by s 74(1). The defendants did not argue that no concurrent duty of care
was owed by Krupp. Nor did they argue that no duty of care was owed by Mr Thiel
to the then owners.

[342] It follows that Krupp was negligent in the respects in which its inspection and report
were in breach of the term implied by s 74(1). As against Krupp, the negligence
case seems to add nothing to the contract case. It was the contract which defined
what Krupp had to do, and with reasonable care and skill. If a concurrent common
law duty of care was owed, it is difficult to see how it could have affected the scope
of what Krupp had to do. Much of the evidence and some of the arguments on the
inspection case seemed at times to ignore the contract. It is not to the point to look
at what inspectors, under different contracts and in some cases, under different laws,
consider to be “prudent inspection practices” unless this can be related to the
specific requirements of this contract. Evidence of inspection practices was
potentially relevant to what could or could not have been done to inspect the critical
area. But reference to the practices of other inspectors cannot affect the scope of
the duties owned by Krupp here, according to the unambiguous terms of the
scope document. And it was not Krupp’s pleaded case that the terms of the contract
had some particular meaning, from accepted inspection practices, which was
different from their ordinary meaning.

Was Mr Thiel negligent?

[343] Mr Thiel’s position, of course, must be considered separately.

[344] The content of Mr Thiel’s duty of care was affected by the contract, although he
was not a party to it. Mr Thiel may not have understood the extent of
Krupp’s obligations. As it happened, he had signed one of the faxes to BHP which
had enclosed the scope document. He said he did not recall whether he read the
enclosures or simply signed the document. I am not prepared to infer that he read
and understood the scope document. But if he did not, he ought to have read it,
because it defined clearly and concisely, the work he was to do on Krupp’s behalf.

[345] Mr Thiel knew that he had not inspected the critical area. He well knew that
whatever view he had gained from looking up from the discharge boom was
inadequate to provide any basis for an opinion. He understood that the critical area
was something which should be inspected and in particular that there were welds
there.
 94

[346] I do not accept that he thought he was bound to keep to the walkways. In one of his
statements tendered in chief67 he said: “I understood that I was entitled under the
contract that we had with the mine operator to request that I be provided with a
manboat”. In his oral evidence he said that he understood that the inspection
contract contained conditions to the effect of 4 and 8. Yet he says that he was told
by Mr Reiter, and later by Mr Grant, to stay on the walkways. I have discussed
already the incident with Mr Grant upon which he relies. That could not have
provided any reasonable basis for thinking that he should not request such
equipment as was necessary for him to inspect from outside the walkways. It is
unlikely that he believed that to be the case. Nor do I accept that he went to the site
in 1999 believing, as a result of something Mr Reiter had said, that he was not to
leave the walkways although the contract entitled him to request the necessary
equipment. It is unlikely that Mr Reiter would give such an instruction to Mr Thiel,
which was inconsistent with the contract and which Mr Reiter had not discussed
with Mr Grant or anyone else at BHP. And the necessary equipment was to be
provided by BHP at its cost according to the relevant conditions of the scope
document.

[347] It was not his practice to use an inspection mirror. But many inspectors do use such
mirrors. Whether reasonable care requires their use depends upon the
circumstances of a particular case. As I have found, an inspection mirror, at least if
used by an inspector wearing a harness, would have provided a ready means of
inspection of the critical area.

[348] In my conclusion, he failed to exercise reasonable care by not following any of the
courses which I have said would have provided him with a sufficient vantage point
for inspection of the critical area. The foreseeable consequences of an undetected
fatigue crack were very serious and the taking of one or more of these steps to
endeavour to inspect the area would not have occasioned any expense to his
employer.

[349] As he had not inspected the entire structure, there was no reasonable basis for the
opinion which he expressed. Objectively his report conveyed the opinion that from
a visual inspection of the entire structure only the things specified in the report
required attention. He may have understood that the report did not convey that
opinion or represent that he had inspected everything. But the reasonable engineer
would not have written in these terms. If he had not inspected the entire structure,
reasonable care required that he express that in his report. He ought not to have
thought that his report would be understood as referring only to what he had
inspected rather than the entirety of the structure.

[350] In my conclusion, he breached his duty of care.

The inspector’s report and s 52

[351] The report represented that there had been an independent inspection of the BWE.
In context it was a representation that the inspection had included a structural
inspection of the entire primary load carrying structure including all welds on that
structure. That was not true because not all of the structure had been inspected.

67
Exhibit 513, paragraph 91.
 95

[352] The defendants say that it was not misleading and deceptive, or likely to mislead
and deceive, because of what Mr Grant knew. BHP, and in particular Mr Grant,
must be taken to have known that Mr Thiel had not used any equipment such as a
harness, a manboat and crane or a cherry picker because BHP had not been asked to
make it available. But as already discussed, BHP, and specifically Mr Grant, did
not know that Mr Thiel had been unable to inspect the critical area by standing on
the nearby walkway. According to my findings of what was known and not known
by Mr Grant, there was nothing to qualify the effect of what was represented by the
inspection report. I accept Mr Grant’s evidence that he expected and assumed that
Mr Thiel would and had inspected the entire structure. The contents of his report
contributed to that assumption.

[353] The report also contained an express statement of an opinion, which was that the
BWE did not have any major defects which would prevent the operation of the
machine. That statement is relevant to the representation that the entire structure
had been inspected because it would fortify the impression of the reader that the
whole had been inspected. Further, this express statement was misleading and
deceptive, because, in the circumstances, it impliedly represented that there was a
reasonable basis for that opinion. It was not a representation of fact that there were
no such defects. But it was a representation that the defendants held the opinion
that there were no major defects, and that this was a considered professional opinion
which had been reached in a reasonable way. Because Mr Thiel had not inspected
the critical area, and insofar as he had seen any of it, he had been unable to make
any reliable assessment about defects, there was no reasonable basis for this
opinion. For this reason also the report contravened s 52.

[354] The defendants submitted that “there may be cases in which a provision of an
opinion may convey a representation that the opinion is based on reasonable
grounds but there is no basis for such a conclusion here”. In my conclusion, the
expression of this opinion in the circumstances, did convey a representation that it
had a reasonable basis. After all, Krupp was engaged as an independent
professional adviser with a vast experience in machinery of this kind and in
particular bucket wheel excavators. It is nonsensical to treat Mr Thiel’s statement
of opinion as simply a representation of what he thought, without any indication that
the opinion was worth anything.

[355] Of course, this question of reasonable basis does not arise in relation to the
representation that the entire structure had been inspected. That was a
misrepresentation of fact.

[356] I should note that there was no submission that if cl 12 of the Service Condition was
a term of the contract for the inspection, it affected the plaintiffs’ rights against
Krupp under s 82 of the Trade Practices Act for a report in contravention of s 52, or
against Mr Thiel in any respect.

Section 52 and Mr Thiel

[357] The plaintiffs claim damages pursuant to s 82 of the Trade Practices Act against
both Krupp and Mr Thiel. He is alleged to be a person who was involved in the
contravention (by Krupp) and thereby liable for it.

[358] The plaintiffs plead that he was “knowingly concerned in or a party to”
Krupp’s contravention and thereby rely upon s 75B(1)(c). They plead that this
 96

follows from matters earlier pleaded within a certain three paragraphs of the
statement of claim. The first of those simply pleads the price of the inspection and
report, a matter of relevance to the implication of the s 74 warranty but of no
relevance to this point. The second is the paragraph alleging that Mr Thiel did not
inspect the critical area. The third is the paragraph alleging that Krupp and
Mr Thiel breached common law duties of care in the inspection and report, and in
particular by a failure to inform the plaintiffs that the purported inspection was
incomplete and inadequate to detect the presence of fatigue cracking. In none of
these paragraphs was there any allegation about Mr Thiel’s state of mind.

[359] The written submissions for the plaintiffs upon this claim against Mr Thiel are
simply in these terms:
“444 Mr Thiel knew what was expected by the contract and knew
that he had not done it. He knew that when the report said
that there were no defects, that he had not in fact inspected
at least the critical area in question.

445 He had the requisite knowledge of the elements of the

contravention such as to satisfy (s 75B).”

[360] In Yorke v Lucas68 Mason ACJ, Wilson, Deane and Dawson JJ said of subparagraph
(c) of s 75B(1)69:
“There can be no question that a person cannot be knowingly
concerned in a contravention unless he has knowledge of the
essential facts constituting the contravention.”

The plaintiffs do not plead, as they should have pleaded, that Mr Thiel knew of the
necessary elements of Krupp’s contravention and, if they proposed to prove that
knowledge by inference, the facts from which that knowledge is to be inferred70.
The plaintiffs argue that his knowledge was sufficient, because he knew what the
contract required, what he had and had not inspected and what he had written in his
report. The second and third of those matters are established. The first is not
established and in any case, knowledge of that would not be sufficient. The
plaintiffs must prove that he knew that his report conveyed the relevant
representations and that they were misrepresentations.

[361] The report represented that the entire structure had been inspected because that is
what the contract had required. Absent that requirement, the case that the report
contained that representation would not be as strong. I am not prepared to infer that
Mr Thiel understood that his report contained that representation when it is not
established that he understood what the contract required. Of course he knew what
he had written, but that is not to say that he knew of the fact that it contained that
representation. Nor is it established that Mr Thiel knew that he had not exercised
reasonable skill and care, so that it is not established that he knew it had
misrepresented that matter. Accordingly, the plaintiffs have not proved that he was
aware of the elements of Krupp’s contravention of s 52. He is not liable under the
Act.

68
(1985) 158 CLR 661.
69
(1985) 158 CLR 661 at 670.
70
Uniform Civil Procedure Rules, r 150(1) and (2).
 97

Would a fatigue crack have been seen in 1999?

[362] In broad terms, there are two questions here. The first involves the likely size and
location of the crack in March 1999. The second is whether such a crack would
have been seen had Mr Thiel inspected that part of the tower.

Where was the crack in 1999?

[363] This question occupied much of the trial. It was the subject of complex opinion
evidence, given by engineers of very high standing. For the most part, it involved
the application of the science of fatigue crack growth analysis. Three of these
witnesses made calculations of the likely length and location of the crack. They are
Dr Jones, who was called by the plaintiffs, and Dr Maddox and Dr Potts, who were
called by the defendants.

[364] Professor Fisher gave evidence going to the likely location of the crack, which
whilst not involving any fatigue crack growth calculations of its location, was to the
effect that the crack was further advanced in 1999 than was suggested by any of
those who had made calculations. Professor Fisher did not claim to have experience
or expertise in such calculations and indeed at one point he seemed to suggest that
such calculations were unreliable. Professor Fisher closely examined the fractured
remains of the tower and placed particular reliance upon what was revealed by his
study of their surfaces. These revealed striations, which are marks on the surface
not visible to the naked eye and which record the steps by which the crack had
advanced. He made a qualitative judgment that probably the crack would have been
through the entire thickness of the flange and apparent on the front side of the
flange, i.e. the side facing Mr Thiel on the walkway.

[365] However the plaintiffs did not seek a finding to that effect. Ultimately they argued
that there is a range of likely crack locations, which is effectively defined by the
evidence of Dr Jones, Dr Maddox and Dr Potts, and that the crack was somewhere
within that range. None of these three witnesses said that the crack would have
been entirely through the thickness of the flange so that it would have appeared on
the front face of the flange. Mr Thiel said that had there been a crack even half-way
along the edge of the flange he believes he would have seen it and that when he was
looking at the flange edge from the walkway “there was definitely nothing there”.
This evidence indicates at least that the crack had not reached the front of the
flange. Had the crack reached the front of the flange it would have been visible not
only because of its location but also because by then it would have broken the paint
and had obvious corrosion.

[366] There is no dispute between these three engineers as to the path in which the crack
grew. They agree that this crack began its life as two cracks: one around each
corner of the top of the stiffener. They disagree as to the initiating cause of these
cracks. Dr Potts and Dr Maddox (adopting the view of his colleague Mr Pargeter)
said that the cause was probably hydrogen (cold) cracking. Dr Jones did not agree
but said that it did not matter. All agreed that what happened after the initiation of
this crack is that it grew as a result of fatigue. Its origin would not then have
affected its rate of growth as a fatigue crack. But cold cracking would have made
for a relatively larger initial crack, providing something of a head start, and said Dr
Jones, resulting in a relatively more advanced crack as at March 1999.
 98

[367] This pair of cracks grew in depth, from the rear or stiffener side of the flange
towards the front side, and in length, along the surface of that rear side. Eventually
the two cracks coalesced. The engineers agree that this occurred when the crack
depth was part way through the 40mm thickness of the flange, that is, before the
crack tip had reached the front side of the flange, and before the length on the
surface of the rear side had reached the edge of the flange.

[368] Thereafter the crack continued to grow horizontally through the flange towards its
front face, and along the rear side of the flange. Its shape was semi-eliptical. Along
the rear face of the flange it grew at the same rate at each end, as those ends grew
away from the stiffener. One end, of course, was growing towards the web, and the
other towards the end of that side or edge of the flange. Where the rear side of the
flange reached the edge, I will describe as “the corner”. When the crack reached the
corner, its length on the rear face of the flange was 120mm, because its middle point
was half way along the top of the stiffener, which had a width of 40mm, and there
was 40mm from the side of the stiffener to the edge of the flange.

[369] After then, the crack tip continued its advance through the flange towards its front
side, the crack continued to grow along the rear side towards the web and at the
other end, having turned the corner, it became a crack moving along the 40mm edge
of the flange towards its front side. As I will discuss, there is some evidence,
particularly from Dr Jones, that the crack had progressed this far by March 1999.
The relevance of that would be in the possibility that the crack was evident to an
inspector looking at the edge of the flange. Even from a position of standing on the
relevant walkway, Mr Thiel would have had a direct line of sight to the edge of the
flange. According to other evidence, the crack had not turned the corner by then, so
that it would have been visible, if at all, only on the rear side of the flange.

[370] After penetrating the full thickness of the flange, the direction of its growth
changed. It made a right turn and grew along the flange towards the outside of the
tower. It spread towards and past the web and also branched sideways into the web.

Dr Jones’ opinion

[371] His approach was to apportion the crack growth over the life of the stiffener, which
was 15.3 years, to the period prior to the 1999 inspection (14.3 years) and the period
after it (1 year). He assumed that the crack length at the commencement of the life
of the stiffener was nothing or effectively nothing. And the point to which the crack
had grown by the time of the collapse of the BWE is known. So that there is a
length of crack growth which he was able to apportion in order to find its location in
March 1999. He assumed that the machine had been operated in effectively the
same way throughout those 15.3 years so that there was a uniform imposition of
load cycles and stresses. On that assumption it was unnecessary for him to arrive at
figures which were in fact the stresses which would have resulted from the
operation of the BWE, and in particular what are called stress cycles and the stress
intensity range. Whatever had been the number of stress cycles over the 15.3 years
were effectively apportioned as a result of his calculations.

[372] The apportionment exercise was not simply a matter of taking the total crack growth
and multiplying it by 14.3 over 15.3 (years). The rate of crack growth varies over
time, even assuming that the loads and stresses to which the structure is subjected
are uniform. The crack itself has a stress raising effect: the stresses are intensified
 99

at and near the tip of a crack. The extent to which this occurs is a function of the
length of the crack. The further the crack grows, the more the stresses are
intensified and accordingly, the faster is the crack growth at any point. So as each
of Dr Jones, Dr Maddox and Dr Potts agree, the rate of growth was very much
higher late in the life of the crack and most of the crack growth occurred after
Krupp’s 1999 inspection.

[373] As discussed in the design case, the tower of the BWE was subjected to
considerable stress from its operations. As also discussed, the more modern
standards or codes recognise that the relevant measure of stress is the range of
stress, that is to say the difference between maximum and minimum stress. It is that
alternation between high and low stress which contributes to fatigue crack growth.
These events of alternating high and low stress are called stress cycles, and in the
day to day operation of the BWE they occurred very often. For example, Dr Jones
calculated a total of 11.2 million stress cycles over the 15.3 years in question.

[374] A widely used measure for calculating the rate of crack growth is the
Paris-Erdogan Law. It calculates the crack growth rate according to a stress
intensity range together with two constants. The stress intensity range is effectively
a function of the stress range, the difference between maximum and minimum stress
and the length of the crack. The constants are derived from databases based upon
the results of laboratory fatigue tests. There are several sources from which
different figures for those constants can be derived, as appears from Dr Potts’ first
report, and each of the engineers who undertook these calculations adopted different
figures for them.

[375] The Paris-Erdogan crack growth equation permits a calculation of the incremental
crack growth per cycle. Proceeding from the premises of certain crack growths at
certain locations of the flange, Dr Jones was able to calculate, by using the equation
to work backwards, the number of cycles which would have produced that amount
of growth. That first required a calculation of a crack growth rate, which was
different according to what was its then size and location. So he divided the growth
of this crack from its commencement to its ultimate position (upon collapse) into
five stages. Three were within the phase when it was a semi-elliptical crack
growing through the thickness of the flange. Two were when it was a crack
advancing along the length of the flange in the direction of the outside of the tower.
In the first phase the crack depth grew from 0 to 4mm, in the second from 4 to
13mm and in the third from 13 to 40mm (the thickness of the flange). Once the
crack was through the flange, and it had thereby changed direction as it advanced
towards the outside of the tower, its depth was measured by the distance between
the inside edge of the flange and the crack tip. As it began this advance, that
distance was 130mm according to Dr Jones. So his fourth phase was from a crack
depth of 130mm growing to 260mm. His fifth and last phase was from 260mm to
340mm which is where the crack was when the BWE collapsed. He calculated for
each stage the number of cycles which had caused that defined amount of crack
growth. Those calculations gave him what he described as his time-line. On the
assumption that the incidence of stress cycles was effectively uniform throughout
the life of the BWE, he was then able to apportion those cycles between the period
to the March 1999 inspection and the period after it. Then on the basis of his
calculations of the number of load cycles in those stages, he was able to calculate
the crack depth at various times but most importantly as at March 1999.
 100

[376] He calculated that as at 24 March 1999, the crack had a depth of 28mm and a
surface length along the rear face of the flange of 112mm. But his opinion was that
the surface length of the crack must have been somewhat longer than he had
calculated. He reached that opinion by reference to what are called beach marks.
These are marks left behind on the surfaces of the fractured remains of the tower. In
his first report Dr Jones worked from photographs of them but subsequently he
worked from an examination of the pieces themselves. These beach marks indicate
the path which the crack took as it grew. Importantly, they also indicate the shape
of the crack. So when the crack was the semi-elliptical crack progressing through
the thickness of the flange, it made beach marks which show certain surface lengths
at certain crack depths. The standard crack growth calculation is a calculation of the
growth in crack depth (called a), which in this case is relevantly the depth of the
semi-elliptical crack through the flange. As Dr Jones explained, his calculations of
the crack surface length for a certain crack depth resulted in an understatement.
This was because the shape of the crack, as evidenced by the beach marks, was
different from that which was the basis for his calculations of the surface length
corresponding to a certain crack depth. So he revised his opinion about the surface
crack length by reference to what the beach marks showed for his calculated crack
depth of 28mm. In consequence he thought that the surface crack length was
125mm in March 1999, so that the crack had turned the corner and was progressing
along the edge of the flange. In the same way he assessed its length along that edge
at 15mm.

[377] In a later report, Dr Jones revised these calculations, not for any reason of principle,
but because of an algebraic error which he had discovered. His revised calculations
resulted in a calculated crack depth at 14.3 years of 31mm and a calculated crack
surface length of 118mm. But again by reference to the beach marks, the surface
crack length corresponding to that depth was assessed as 127mm and the crack had
progressed along the edge of the flange, not by 15mm but by 28mm.

[378] At the same time he calculated the depth and length upon alternative hypotheses
involving cold cracking and drop cutting. On the hypothesis that the crack began as
a 2mm cold crack, its calculated depth at March 1999 was 33mm, its calculated
surface length was 121mm and its “observed” length (i.e. its length by reference to
the beach marks) was 128mm on the rear side of the flange with a length along its
edge of 32mm. On the hypothesis of an activity known as “drop cutting” occurring,
but only within the final year of operation (as Dr Potts had hypothesised), the
numbers were reduced but only slightly. The calculated crack depth became 29mm,
the calculated crack length 114mm, the observed crack length 125mm and the
length along the flange edge became 22mm. Dr Jones’ use of the beach marks to
revise his calculations of crack length from a certain crack depth was persuasive.
According to Dr Jones’ evidence then, the crack had turned the corner and was at
least half way along the edge of the flange.

Dr Maddox

[379] Dr Maddox had the same approach as Dr Jones, which was to apportion a certain
crack growth to the periods before and after the inspection. In his first report he
undertook six alternative fracture mechanics growth calculations.

[380] The first assumed that the crack grew from something which was “nominally
defect-free”. He said that:
 101

“as is well established … even defect-free welds in steel contain

minute flaws at the weld toe and these provide the sites for fatigue
crack initiation. They are a consequence of welding and range in
depth up to 0.4mm, with an average (based on the rather limited data
available) of 0.15mm. Such inherent flaws are not detectable and
therefore it is necessary to assume their size in fracture mechanics
calculation. For the purpose of the present analysis, an initial depth
of 0.15mm with a surface length of 2c = 0.5mm was assumed.”

As Dr Maddox thereby explained, this fatigue cracking need not have resulted from
an initial defect in the stiffener weld, although his opinion, based upon the work of
his colleague Mr Pargeter (who gave evidence to this effect), was that this crack
began as a cold crack.

[381] For this first case he assumed a nominal stress range71 of 40N/mm2, equivalent to
40MPa compared with Dr Jones’ assumed 50MPa. And Dr Maddox explained a
difference in what are called the stress intensity factors assumed in their respective
calculations. The stress intensity factor is a parameter which quantifies the stress
intensity in the region of the crack tip which is a function of the applied stress and
the crack length. In turn the stress intensity range, used in the Paris-Erdogan Law,
is a function of the stress intensity factor. Dr Jones used a technique which I will
describe as the Taylor technique to meet the difficulty in calculating a reliable stress
intensity factor for the early period when the crack has not grown far from the
initiation site. To meet that difficulty, Dr Maddox used what he described as
established solutions which he derived from a British Standard BS 7910. As I will
discuss, another engineer called by the defendants, Dr Munz, was particularly
critical of Dr Jones’ use of the Taylor technique. It is unnecessary to discuss other
differences between the Jones and Maddox calculations, only some of which result
in differences in the calculated results which are potentially significant.

[382] Dr Maddox said that he was more closely following available experimental data and
it was ultimately submitted by the defendants that Dr Maddox had applied
“accepted fracture mechanics principles” from which Dr Jones, it was said, had
departed.

[383] The results of the Maddox calculation for this “base case” of a defect-free weld with
an applied stress of 40MPa was that in March 1999, the crack depth was 15mm and
the surface length was 103mm.

[384] His second calculation was upon the same assumed applied stress but with an
initiating defect (from cold cracking) of 1mm x 10mm. This resulted in a crack
depth of 29mm and a surface length of 122mm. The same figures were said to
come from a third calculation which was the same as the second but with the
initiating crack being 2mm rather than 1mm.

[385] The three other calculations were on the premise of there having been
“drop cutting” in the final year of operation, for which there were certain
assumptions as to the number of cycles and their MPa, amongst another number of
the cycles from the BWE’s other operations, and an assumed applied stress of
40MPa. Under the first of these “drop cut alternatives”, the weld was assumed to be
defect-free and the results were a depth of 15mm and a surface length of 103mm.
71
A stress range before intensification of the stress by the crack.
 102

Under the second, a 1mm initiating crack was assumed resulting in a depth of
29mm and a length of 122mm. Under the third, the initiating crack was assumed to
be 2mm, resulting in a depth of 30mm and a surface length of 125mm. Drop cutting
is a type of operation of the BWE which is described below72 in relation to
allegations of contributory negligence. It is said to have placed especially high
stresses upon the tower and contributed to fatigue. Upon one of the defendants’
arguments, its practice was particularly heavy in the last year of the BWE’s life.

[386] In his second report73 Dr Maddox revised those calculations. This involved some
concession of the correctness of Dr Jones’ approach to an issue concerning the
stress concentration effect of the stiffener, although Dr Maddox remained of the
view that Dr Jones had underestimated that matter. And as he there detailed, there
continued to be some differences between them as to how these calculations should
be made. Dr Jones had been critical of his first set of calculations because they did
not accord with the shape of the growing crack as indicated by the beach marks.
Dr Maddox said that his revised calculations “very closely” matched the beach
marks.

[387] Yet he agreed that the calculated lengths could be adjusted to accord with the shapes
demonstrated by the beach marks, and he explained that the calculations would tend
to underestimate the surface length “since one side of the crack is close to or at the
flange edge and … this is not taken into account in the assumed stress intensity
factor solution”. He concluded that “overall the agreement between calculated and
actual crack sizes add support to the present analysis”.

[388] His re-calculations involved the same six alternatives. The defect-free weld had a
depth of 22mm and a length of 95mm and the same result with drop cutting.
The calculations for a 1mm initial crack resulted, in each case, in a depth of 23mm
and a length of 96mm. Those for a 2mm initial crack resulted in a depth of 26mm
and a surface length of 98mm.

[389] There appears to be an error here in that the calculations result in the same crack
sizes with or without drop cutting. Yet as Dr Maddox explained in the text of each
report, if there had been drop cutting but only in the final year, the crack size at the
commencement of that year would have been less than with no drop cutting
(because the crack growth in the last year would have been higher). The level of
drop cutting assumed for his second report was greater than that for his first, and
there were other differences in the calculations as Dr Maddox explained in his
second report. It is surprising that his calculated depth and length should be the
same with or without an assumption of drop cutting only in the last year.

[390] But as I find below, there was no significant difference between the incidence of
drop cutting before and after the 1999 inspection, so that calculations such as these
which are upon the premise of this significant drop cutting only within the last year
are not so relevant. More generally, the assumption that the manner and extent of
the operations of the BWE over the 15.3 years was consistent is reasonable.

[391] There was effectively no exploration of these calculations in the cross-examination

of Dr Maddox, no doubt because by then the plaintiffs were content to rely upon
them as part of the proof of their case of the likely range of crack sizes. I do not see

72
At [507]-[509].
73
January 2006.
 103

any basis for questioning Dr Maddox’ figures under the “no drop cutting”
calculations. Because drop cutting was not limited to the last year of operations, its
incidence does not affect the “time line” method which underlies the calculations of
both Dr Maddox and Dr Jones.

[392] In his second report, Dr Maddox then compared those calculated sizes with the
beach marks. For his first case, the beach marks indicated that for the crack depth
of 22mm the actual surface length was 108mm. The next beach mark was at a
crack depth of 31mm (giving a surface length of 128mm). Thus from his report, it
can be inferred that if there was a cold crack of 1mm or 2mm, with a calculated
depth of 23 or 26mm, the actual surface length would have been a little longer than
108mm but perhaps not as long as 120mm.

Dr Potts

[393] Dr Potts had quite a different approach from the “timeline” approach of Dr Jones
and Dr Maddox. Instead of apportioning a certain amount of crack growth to a
certain time period, he calculated the crack growth over that time period. He
calculated backwards from the position of the crack at 15.3 years, by using the
standard crack growth rate equation with certain alternatives for the appropriate
stress range, the number of cycles and the crack growth relation factor. This meant
that he was not concerned with the rate of growth before March 1999 and did not
have to meet the difficulties addressed by Dr Jones and Dr Maddox in calculating
the rate of growth when the crack was very small. But necessarily the results of his
calculations are a function of his assumptions and opinions about cycles and stress
range.

[394] His initial calculations involved some eight different calculations but effectively
four different factual scenarios. The differences in the factual scenarios are in the
assumed number of slews per terrace and the amount of operational up-time, which
is the percentage of any given time for which the BWE was actually digging. Later
in relation to drop cutting as alleged contributory negligence, I discuss the methods
of excavation used in the operation of the BWE. Although the use of the BWE was
much the same from year to year, some drivers had different practices from others
in some ways. There are other variables, such as the relative hardness of the
material. Recognising that, Dr Potts chose alternatives according to the number of
slews per terrace. The bucket wheel was slewed as it cut into the face of the
overburden, and it progressed by cutting the overburden in terraces. Before going
to those alternatives and the calculations for them, it should be noted that there are
several assumptions common to all scenarios. One is that drop cutting commenced
from 14.3 years and particular assumptions were then made as to the incidence of
that drop cutting.

[395] Scenario number one involved 24 slews per terrace and an up-time of 45 percent.
This calculation used mean crack growth parameters, or what is called the “mean
line” of an SN graph. SN graphs plot the endurance or life of a structure against a
stress range. Scenario number two involved no difference to the assumed facts but
the calculation by Dr Potts was based on the so called “design line” of the
SN graph. The mean SN curves represent the fatigue test data obtained from
experiments without any added safety margin, or in other words the mean life
expected at different levels of stress, those levels being measured by the stress range
(the difference between maximum and minimum stress). The design SN curves are
 104

lower in terms of stress range for a given life, so that in practice designers can avoid
failures by designing conservatively.

[396] Dr Potts was not challenged for using the mean SN curves but the plaintiffs say that
it was inappropriate to alternatively use the design SN curves. It appears that
Dr Potts presented these alternative calculations based on the design curve in order
to represent what he described as the “lower bound” of the scatter. However the use
of parameters from the design SN curve would misrepresent a realistic range. The
mean SN curve informs of the mean life from a certain stress range: that there is a
50 per cent probability of survival to that life. The design curve shows the (lower)
life for which there is about a 97 per cent probability of survival at that stress
range74. Therefore, the design curve results in parameters according to which the
structure is treated as very much weaker, so that the crack growth rate is very much
faster. Working back from the crack size at the collapse, the calculated growth in
the final year would be much higher, and the size of the crack at March 1999, much
lower. When challenged in cross-examination, Dr Potts said that “you might expect
that the mean value is the more probable, but it doesn’t preclude that within the
scatter band that the others could occur”. Of course where this BWE actually was
within that scatter could never be discovered. But in determining where this crack
was most likely to have been in March 1999, it is logical to calculate by reference to
the mean SN curve rather than the design curve.

[397] The third scenario was for 24 slews per terrace but with 60 percent up-time, the
fifth scenario for 8 slews per terrace with 45 percent up-time and the seventh
scenario for 8 slews with 60 percent up-time. Each of those calculations was on the
mean SN curve. Scenarios four, six and eight corresponded respectively with three,
five and seven but were calculations on the design SN curve. The results ranged
from a crack depth of 7.8mm and surface length of 18.2mm for scenario four to a
depth of 37mm and surface length of 129mm for scenario five. The lowest
involving the mean SN curve was scenario three with a depth of 21mm and a
surface length of 108.6mm.

[398] In his report number eight, Dr Potts revised the calculations for each of those
scenarios. The lowest was still scenario four, with a depth of 19.6mm and a length
of 51.6mm and the highest was scenario five with the same dimensions as
previously. The lowest of the calculations using the mean SN curve was still
scenario three but the result of the revised calculations was a depth of 29.8mm and a
length of 119mm. The three other calculations using the mean SN curve resulted in
a crack length which had the crack as having turned the corner.

[399] In that same report, Dr Potts undertook further alternative calculations. One
was to employ, as Dr Maddox had suggested, what is described as the
Hobbacher parametric solution which demonstrated that this had no impact upon
Dr Potts’ calculations because the impact of the Hobbacher solution is on the early
stages of crack growth and Dr Potts, working backwards from the position of the
crack in 2000, was not much concerned with those stages.

[400] Perhaps more relevantly, in report number 8 he made some calculations to represent
the effect of small stress cycles. Professor Fisher and Dr Jones had challenged the
load duty spectrum used in his earlier reports as simplistic by not taking into

74
The design parameters are at two standard deviations from the mean.
 105

account small stress cycles. In essence their point was that in practice, there is a
variable load spectrum involving many different stress cycles and that once there is
fatigue growth from the larger cycles, there is a further contribution to fatigue
growth from the smaller cycles which, operating alone, would not have had that
impact. So in this report Dr Potts made some calculations which endeavoured to
take into account the effect of small stress cycles. He said that because the actual
magnitude of such cycles was unknown and difficult to quantify, he considered
three alternatives, which were small stress cycles with stress ranges respectively of
50 per cent, 25 per cent and 10 per cent of the normal slew operational stress range.
Using his scenario three, the calculations including the effect of these cycles showed
that the size of the crack in 1999 reduced in its surface length from 119mm (for
scenario three without small cycles) to 117.2mm (cycles of 10 per cent of normal),
111.6mm (cycles of 25 per cent of normal) or 93.4mm (cycles of 50 per cent of
normal)75.

[401] Also in his report number eight, Dr Potts looked at the effect of assuming
drop cutting, but not limited to the last year of operations but instead occurring
throughout the life of the machine. Again by his scenario three, and upon this
alternative premise of drop cutting, nevertheless he reached the same size for the
crack in 1999. (What changed was the calculated initial crack size, that is, at the
commencement of the 15.3 years76.)

[402] In his report number 12, Dr Potts made calculations of further alternatives. The first
of these resulted from his correcting two errors in his previous assessments. He had
assumed that the distance from the relevant stiffener to the edge of the flange was
35mm (as indicated by an O & K drawing) instead of the 40mm as built. Secondly,
he had assumed that the longitudinal weld leg was 14mm whereas in fact it was
10mm. He recalculated for his scenarios four and five, which he chose because they
had provided what he said were the “lower and upper bound predicted crack sizes
respectively”. For scenario four, the result was to increase the calculated depth
from 19.6mm to 21mm and the length from 51.6mm to 101.6mm. For scenario five
the result was to decrease the depth from 37mm to 35.9mm and the length from
129mm to 120.8mm. For scenario five this still involved the crack turning the
corner but its length along the edge of the flange was thereby decreased from
19.6mm to 4.1mm.

[403] Also within report number 12, he revisited the effect of small stress cycles and drop
cutting throughout the 15.3 years. But the small stress cycles used in these
calculations were different from those assumed previously. In this report he said
that in the light of his further investigations on the dynamic loading experienced by
the BWE, it was more realistic to work from a certain number of small stress cycles
per slew with certain stress ranges for those cycles depending upon the relative
hardness of the material. As for drop cutting, Dr Potts thought that he should revise
his calculations, explaining why drop cutting throughout the entire life might be a
significant variation from an assumption that it occurred only in the last year. He
then recalculated his scenario three to give effect to these assumptions of small

75
His table 3, setting out these results within report number 8 (exhibit 31), wrongly describes the
10 percent and 50 percent alternatives as calculations on the design SN curve although it is clear that
this is an error and, being variants of his scenario 3, they are calculations on the mean SN curve.
76
Again, the same typographical error referring to this alternative calculation using the design
SN curve is present.
 106

stress cycles and drop cutting. The effect was to change his calculated crack depth
to 21.8mm and his calculated crack length to 100.8mm.

[404] The result is that the lower bound of his calculations is scenario three with a depth
of 21.8mm and a length of 100.8mm, and the upper bound is his scenario five, with
a depth of 35.9mm and a length of 120.8mm. And for that crack depth of 21mm it
would be appropriate to make the adjustment which Dr Jones and Dr Maddox each
made to take account of what was demonstrated by the beach marks. The effect
would be to increase Dr Potts’ surface crack lengths. But regardless of the beach
marks, it can be seen that there is a fair correlation between the results from the
respective calculations of Dr Jones, Dr Maddox and Dr Potts. Of course in one
sense a difference of a few millimetres in crack depth or length is substantial
because at that stage of its development the crack would take some time to grow
that few millimetres. But for present purposes, which is to assess whether the crack
would have been visible had Mr Thiel inspected the critical area, such differences
are unlikely to be significant.

[405] The defendants argue that from Dr Potts’ evidence there is a prospect of a smaller
crack, of a depth of 15mm. In their written argument they contend that Dr Potts’
calculations:
“arrive at a crack depth of 21mm under scenarios four and five in
no.8, or two thirds (15mm) of that using their most reasonable
parameters after re-analysis taking into account the adjusted weld leg
dimensions, and the distance between the stiffener and the flange
edge on the basis that the as-installed stiffener was 40mm from that
edge, rather than the 35mm as-designed figure”.

But this misstates the evidence. As already discussed, in report number 12, Dr Potts
re-calculated his scenarios four and five to take into account those very matters, and
I have set out the results of those re-calculations. It is wrong to say that they result
in a crack depth of 15mm. In that same submission, the defendants rely upon some
oral evidence given by Dr Potts, where Dr Potts referred to his “lower bound values”
as being “about a third less” than other values. But he was not saying that his 21mm
calculation, or any other calculation, should in turn be reduced by a third. Instead,
he was there referring to the difference between his calculations based on the mean
SN curve compared with those on the design SN curve for which the difference was,
for each of his scenarios, roughly one-third.

Dr Munz

[406] Dr Dietrich Munz, who was called by the defendants, wrote two reports and gave
extensive oral evidence about the calculations by Dr Jones and, to a lesser extent,
the calculations by Dr Maddox and Dr Potts. Dr Munz did not offer calculations of
his own as to the crack length as at March 1999. He expressed the opinion that
more probably than not the crack had not reached the edge of the flange and that
otherwise it is “not possible to make a reliable statement about the location of the
crack at the 1999 inspection”. In that last respect, his evidence effectively
challenged the opinions of each of the three engineers who had made such a
statement. The defendants argue that I should reject the evidence of Dr Jones but
they do not make the same argument based on the evidence of Dr Munz about
Dr Maddox and Dr Potts who, of course, were called in their case.
 107

[407] Dr Munz described the two approaches taken to calculate the crack size in 1999, the
first being that of Dr Jones and Dr Maddox and the other that of Dr Potts. I have
described that difference already. Dr Munz explained that each approach has
advantages and disadvantages.

[408] The advantages of the first approach were that it was independent of the selection of
a certain stress range, the constant factor of crack growth relation or a certain
number of cycles over any period. As Dr Jones explained, a change to the
components of stress range and the constant factor of crack growth relation would
result in his calculations producing a different number of stress cycles over the
15.3 years, but it would not affect the relativity of one period of growth to another:
his time line approach. A higher or lower number of cycles overall would be
apportioned in the same way.

[409] Dr Munz said that the disadvantages were that the number of cycles for crack
initiation has to be known, the crack growth rate for small crack sizes cannot be
properly calculated by lineal elastic fracture mechanics principles, what he
described as the magnification factor has to be in some way quantified and the
difficulty in quantifying a proper stress intensity factor for the crack in its various
shapes as it travels through what he described as phases one and two. Dr Munz
described phase one as when the crack depth was 0-19mm, phase two from
19-40mm (i.e. until it was to front side of the flange) and phase three, the final
stage, where the crack was progressing towards and past the web.

[410] He described the advantage of Dr Potts’ approach as being that it is not necessary to
have any information about phase one. He said that because phase one had the most
uncertainties, the results from this approach should be more reliable than by the
first approach. The disadvantages are that the results depend upon an assumed
stress range, a number of cycles per year and an assumed crack growth relation
factor.

[411] As already mentioned, the plaintiffs ultimately rely not only on Dr Jones but upon
the calculations of Dr Maddox and Dr Potts. They say that the evidence of these
three presents a range within which was the location of the crack. The defendants
ultimately argued that “a conclusion cannot be reached on the state of the evidence
as to the probable state of the crack”, which appears to go past the evidence of their
witnesses Dr Maddox and Dr Potts and to rely upon the evidence of Dr Munz. But I
do not understand Dr Munz to have said that none of the evidence of any of these
three was relevant. Instead, in providing his opinion that more likely than not the
crack had not reached the flange edge, Dr Munz was making use of at least some of
these calculations. That opinion was expressed in a report as follows77:
“Allowing for all the incomplete information about stress intensity
factors, stress cycles and cycles in one year and considering the
information and calculations of the different experts I can make the
following statement:

If one considers all this information in a qualitative way, the

probability that the crack has extended to the edge of the flange, so
that it could have been seen during the inspection in 1999, is less
than 50 percent.”

77
Exhibit 456 at 55.
 108

Similarly in his oral evidence, in answer to the question “Where was the crack at
the 99 inspection?” Dr Munz said:
“First of all, I don’t know exactly. However, if I consider all these
unknown or not accurately enough [sic] facts such as stress intensity
factor, number of cycles in one year and stress ranges, and if I take
into account the calculations made by Dr Jones, by (Dr Potts), by
(Dr Maddox) and my own calculations, and to take into account in a
qualitative way these unknown facts, then I come to the conclusion
that the probability that the crack has not penetrated the edge of the
flange is less than 50 percent.”

Those calculations of his own were based upon various calculations by Dr Jones
and Dr Potts. They were done to demonstrate the effect of certain variables. He did
not put them forward as showing where the crack was in March 1999.

[412] Dr Munz was strongly critical of Dr Jones’ work in many respects, contending that
Dr Jones had made errors in principle in his calculations. He did not make the same
criticism of the work of Dr Maddox or Dr Potts. Of their work, he described the
limitations on the reliability of their results because of the many variables or inputs
which would affect the calculated result. But he was not saying that the calculations
by Dr Maddox and Dr Potts did not provide some indicative range or as Dr Potts
described it, “the bounding of what the likely outcomes would be”. With that
observation I will discuss the evidence of Dr Munz in relation to each of Dr Jones,
Dr Maddox and Dr Potts.

[413] I will start with the work of Dr Potts. As already mentioned, Dr Munz said there
were disadvantages in his approach because it depended upon an assumed stress
range, an assumed number of cycles per year and the adoption of a certain crack
growth relation. I accept that in theory they qualify the reliability of any
calculations under this approach.

[414] Dr Potts did provide alternatives as to the number of cycles, by his different
scenarios. Of course there are many other alternatives which he could have adopted
but Dr Munz did not suggest that those used by Dr Potts were likely to produce
some misleading result. The method by which these alternative scenarios were
chosen and the cycles were calculated under each of them was set out in Dr Potts’
first report and appears to be thorough and persuasive (putting on one side his
alternative calculations for the scenarios based upon the design SN curve). Dr Potts
said of his chosen scenarios78:
“Since there is no machine log detailing the exact way in which the
machine was operated over its lifetime, it is prudent to assume some
variability in the parameters and key assumptions used for crack
growth assessments. Table 36 describes the various scenarios
considered in the crack growth assessments. Bounded solutions,
which take into consideration variability in the assumptions made on
the operational behaviour of BWE, for both initial and likely crack
sizes at the time of inspection will be presented in the ensuing
section.”

78
Report No 1, paragraph 7.5.1 at 68.
 109

In his first report, Dr Munz referred to the Potts estimate of the number of cycles,
and described them as more reliable than those of Dr Jones or Professor Fisher
“because they are based on the operational conditions of the excavator”.

[415] In his report no 1, Dr Potts had calculated on the basis of a stress range of 40MPa
for the load cycles involving changes in the stresses between slews of the
bucketwheel. This was not simply an assumed figure. It was reached after
extensive analysis. Dr Potts’ firm had obtained a stress range by a finite element
calculation and from BG 60 resulting in a stress range of 57.21MPa which was
reduced to 75 percent or 43MPa by a judgment which Dr Munz described as
“realistic”. After further analysis, then Dr Potts settled on 40MPa and 125MPa for
drop cutting. Again Dr Munz suggests no error in any of the calculations or the
professional judgments which were involved in reaching those figures. Clearly,
there were in his analysis instances of judgment by Dr Potts so that the precise
accuracy of these figures cannot be assured.

[416] Dr Munz79 agreed with Dr Jones that:

“this (Potts) approach contains so many uncertainties that the results
could well be in error by an order of magnitude. In practice, there
are many different stress ranges and frequencies, and deriving these
from the assumed duty of the BWE would be a complex task … the
only feasible way to obtain an accurate remote spectrum for the
flange is to attach strain gauges to the surface, and log data over a
period of time while the BWE is in operation. Even then, there are
practical and theoretical difficulties in determining the average crack
growth rate from a complex stress spectrum.”

[417] Dr Munz said there was a further problem with load cycles and stress ranges which
he said affected the calculations of all three engineers. It was that they had not
included the effect upon fatigue of smaller stress cycles. As several witnesses
confirmed, the stress spectrum was complex involving many different causes of
stress, each involving different stress ranges. And as Dr Munz emphasised, as did
Professor Fisher and Dr Jones, these smaller stress cycles can have an impact when
added to the impact of the larger load cycles although they would not have had that
impact upon fatigue if operating alone. Now under the Jones/Maddox approach,
Dr Munz agreed that there was an advantage in not having to assume a particular
stress range. However, Dr Munz went on to say that this particular effect of smaller
stress cycles occurred only in relatively larger cracks. Accordingly, because it does
not have an effect over the entire “timeline”, it had to be considered even under the
Jones/Maddox approach.

[418] Dr Potts did allow for small stress cycles. As already discussed, he did so first in
his report no 8. This was written in March 2007, after the Munz first report and
before the subsequent Munz report (May 2007), wherein Dr Munz offered no
criticism of Dr Potts’ treatment of the effect of small cycles in report no 8. In his
oral evidence he referred to what Dr Potts had said in report no 8 about small stress
cycles (apparently without criticism). Then in his report no 12, Dr Potts revised his
calculations for the effect of small stress cycles. He assessed the effect of
small stress cycles from vibrations, that is, from “boom resonance vibration”
caused by the oscillation of the bucket boom. So it seems that Dr Potts has met

79
In his first report at 24.
 110

Dr Munz’s concern about the inclusion of small stress cycles. I do not have the
opinion of Dr Munz about the Potts report no 12, because it was written a few days
after the completion of the oral testimony of Dr Munz. Presumably, the defendants
tendered this evidence because it was thought to answer Dr Munz’s concerns in this
respect. Ultimately, what Dr Munz said about the limitations in the Potts approach
by the adoption of certain stresses does not mean that the Potts’ analysis provides no
valuable indication of the crack sizes.

[419] Next there is the crack growth relation factor. Dr Munz is clearly correct in saying
that a disadvantage of the Potts’ approach is that it requires the selection of the
crack growth parameters, to be used in the application of the Paris-Erdogan Law.
But what is the significance of that uncertainty? In his report no 1, Dr Potts set out
the results of his survey of various publications revealing a range of these
Paris-Erdogan constants recommended for an assessment for this type of steel.
Dr Munz does not suggest that the range is unrepresentative or that there are others
which should have been included. Nor does he suggest that Dr Potts did not make a
reasonable selection from that range. As it happened, Dr Potts’ selections were the
highest in that range, with the consequence that they would result in a faster
crack growth rate and, on his approach of working backwards from the crack size at
the collapse, a relatively smaller crack size in 1999. The range of possible
crack growth parameters thereby indicate that the Potts’ calculations might
understate the crack size, but it does not make the calculations unreliable.

[420] In summary, I accept that there are these uncertainties in the Potts approach, but the
ways in which Dr Potts addressed those matters is logical and those uncertainties
do not detract rom the value of his calculations. They have probative value and are
unlikely to overstate the crack size in 1999.

[421] I turn then to what Dr Munz has said of the approach of Dr Jones and Dr Maddox.
In the evidence of Dr Munz, led by the defendants, he not surprisingly directed his
attention to Dr Jones’ work. There seemed to be no particular criticism of the
Maddox calculations, except to the extent that the Jones/Maddox “timeline”
approach had inherent limitations.

[422] The first of those was related to the initiation of the crack. Because a fatigue growth
analysis is concerned with the growth of a crack, Dr Munz says that it does not
assist with the question of how much of the 15.3 years was taken up with the
initiation of the crack. If, as the defendants sought to prove, these cracks were
originally cold (hydrogen cracks), then none of that 15.3 years was taken up with
crack initiation. But it is unnecessary to determine whether there was cold cracking,
because assuming there was none, still it would be probable that there were some
small cracks from the outset, as Dr Maddox said. In cross-examination, Dr Munz
was shown publications by the International Institute of Welding and by an eminent
engineer in fracture mechanics, Dr Gurney80, which were to the effect that the crack
initiation phase could be ignored in fracture mechanics analysis because either the
majority of fatigue cracks develop from cracks existing from the outset or because
any initiation phase is very small compared to the life of the welded joint. Faced
with this material, Dr Munz accepted that what he had said about the crack initiation
phase would be “confined to exceptionally a small number of cases”. Accordingly,
it is of little weight here.

80
The author of the text referred to above in the design case at [45].
 111

[423] The next uncertainty, said Dr Munz, was as to the crack growth rate for very small
crack sizes. Dr Jones said that this difficulty could be met by a crack modelling
technique described as the Taylor method. Dr Munz was strongly critical of
Dr Jones in that respect. Dr Munz said that the Taylor method was not yet accepted
professionally and had been published in only two papers. However during his
cross-examination, it was demonstrated that it was more widely published, which he
was prepared to accept. Dr Munz said also that the Taylor method is “only accurate
within 20 to 30 percent”, which he derived from one of the papers he had seen.
When other publications were put to him in cross-examination, he effectively
agreed that the 20 to 30 per cent figure was not representative of all data, but was
more confined to a particular case. Also in cross-examination, he was forced to
withdraw his assertion that the Taylor method “has never been applied for fatigue
crack growth calculations”. In his oral evidence-in-chief, given by reference to
what he described as his powerpoint presentation, Dr Munz had made made
two further points in criticism of the use of the Taylor method. But as he conceded
in cross-examination, one of those had been effectively disavowed by him in his
second report, where he had said that “because it is so small … it doesn’t make
sense to discuss this point further”. His other point was that the Taylor method
depended upon the selection of a range of distances from the point of crack
initiation. But when it was suggested to him that this would not have a significant
effect on the result, Dr Munz could say only this:
“I don’t know, because I didn’t try out this method. But there is
some arbitrary [sic] in this method and so far I could see, Taylor did
not say – or give any hint where these two values (maximum and
minimum distance from the point of crack initiation) should be …
and therefore, you can maybe adjust his values just to get a good
agreement.”

In all, Dr Munz’s criticism of the Taylor method and its use by Dr Jones was
unpersuasive and has no weight.

[424] As mentioned earlier, Dr Maddox did not use the Taylor method but instead used
what he described as “the established solutions available in BS 7910”. He said that
there was “good agreement” between these two solutions when the crack depth was
very small. No particular criticism was offered by Dr Munz of Dr Maddox other
than to say that there was an uncertainty involved in measuring the growth of very
small cracks.

[425] Next there was the uncertainty involved in the so-called magnification factor. This
involves a complication which results from the effect of the stiffener on the stress
intensity range in the area in the flange close to the stiffener. In his first report,
Dr Munz saw fit to plot the different magnification factors then used by Dr Jones,
Dr Maddox, Professor Fisher and a line of his own. It appeared that he was there
adopting a magnification factor somewhat higher than Dr Jones was then using but
less than that of Dr Maddox or Professor Fisher. Then in his oral evidence he
asserted that all of these lines, including his own plotted magnification factor, were
wrong, because none of them had been based upon a proper understanding of the
relevant stress distribution. Yet none of Dr Jones, Dr Maddox or Dr Potts had a
difficulty in this respect. Each felt able to bring this magnification effect into
account (although for Dr Potts the point was less important because of his different
approach). I am not persuaded that this factor significantly affects the reliability of
the respective calculations of Dr Jones and Dr Maddox.
 112

[426] Then there is the Dr Munz’s point that the crack changes shape before it is in his
phase three, although the calculations have been made on the basis of a
semi-elliptical shape. He pointed out that it is not semi-elliptical during the
transition period from two cracks to one. Secondly, after the crack turned the corner
and was extending along the edge of the flange but before its tip reached the front of
the flange, it was no longer semi-elliptical. Thirdly, he pointed to the period of its
transition from a surface crack to an edge crack, that is to say a crack advancing
towards the web and beyond. He said that all experts had neglected:
“the special situation when the surface crack penetrates the end of the
flange (interaction with the end of the flange) and the complicated
shape, when the crack size has penetrated the end of the flange”.

He said that these different shapes result in different stress intensity factors. He
does not suggest that they can be calculated. Nor did he offer an estimate of the
likely effect of these changes in shape. For example, whilst he said that there would
be some cycles taken up with the coalescence of the two cracks, he said this was
something that he took “qualitatively” into account, adding that “it hasn’t had a
major effect (on) my mind (as) to the critical crack size, but I just would like to have
mentioned it”.

[427] In his final report Dr Jones said that the effect of the crack changing in shape as it
reached the end of the flange and in turn from a curved to a straight edge crack
would be insignificant. The interaction between the crack and the edge of the flange
would result in a small decrease in the number of fatigue cycles, and the change
from a curved to a straight edge crack would result in a small increase. The
two effects, he said, would tend to “cancel one another out to a certain extent”. To
investigate their effects, he modelled his analysis by using a three times faster crack
growth rate for a crack depth in the range of 27 to 40mm and inserted an additional
10mm of crack growth at the start of the edge crack phase (to estimate the additional
cycles required to rotate the crack into a straight edge crack). The result was
a 1999 crack depth of 27mm, a crack length on the flange rear face of 122mm and a
crack length on the flange edge of 15mm. I am persuaded that these points of
Dr Munz as to crack shape do not have any significance for what is indicated by the
Jones calculations.

[428] Dr Munz said that linear elastic fracture mechanics “breaks down for small cracks
less than 5.3mm”. This was not supported by another witness and I am not
persuaded to accept it. His point was that the plastic zone around the crack tip
affects the rate of growth and he said that this would distort the result of linear
elastic fracture mechanics when the crack depth is either very small or is relatively
close to being through the steel through which it is growing. In cross-examination
he was directed to a paper by Dr Maddox which suggested a correction factor which
can be applied to allow for crack tip plasticity and which suggested that the
correction factor was very small. Dr Munz seemed to have no effective response to
what Dr Maddox had there written. Further, when directed to something Dr Jones
had written in his first report relevant to this, he agreed that it would bring down his
limit of 5.3mm “to a small value, and that then maybe in the lower part of linear
elastic fracture mechanics maybe not give a large error”.

[429] There are other matters on which Dr Munz was critical of one or more of the reports
of Dr Jones. I have discussed the points which Dr Munz offered as criticism of the
approach taken by Dr Jones and Dr Maddox, because Dr Munz was not otherwise
 113

critical of what had been done by Dr Maddox, and the plaintiffs do not submit that I
should find that the crack was the size calculated by Dr Jones rather than by
Dr Maddox.

Conclusions as to crack size

[430] Clearly there is no means of precisely calculating the size and location of this crack
as at March 1999. But I am persuaded that the application of the principles of
fracture mechanics, by each of Dr Jones, Dr Maddox and Dr Potts, is able to provide
a probative approximation of its size and location. Two eminent engineers in this
field, called by different sides of the case, saw fit to adopt the same approach and
expressed confidence in the reliability of their results. The third engineer, Dr Potts,
had quite a different approach but yet reached results which I do not see as
significantly different from the others. Of his results, the more useful are those
upon the mean SN curve because they represent the most probable result.

[431] The respective results of the calculations of these engineers are not so far apart.
Dr Jones reached a surface length of 120mm and a crack along the surface of the
flange edge of 28mm (with some alternatives for cold cracking). His and others’
calculations upon the premise of drop cutting, but only in the last year of operations,
are not useful because as I find below, drop cutting was not confined to the last
year. Dr Maddox reached a range (like Dr Jones with the benefit the beach marks)
for the surface length of between 108mm and 120mm. Dr Potts’ alternatives
suggest a range from about 105mm to about 130mm (with a length on the flange
edge of more than 32mm in that event), again once the beach marks are considered.

[432] From this evidence it would be unrealistic to make a finding about the precise crack
size and location. More probably than not, the crack had progressed beyond the
stage of coalescence of the two original cracks and was at least half-way through the
thickness of the flange. At the half-way point, its depth was 20mm and by the
beach marks, its surface length would have exceeded 100mm.

What would Mr Thiel have seen?

[433] I accept, as many witnesses have said, that a visual inspection will not detect every
fatigue crack. As Dr Potts said, detection is affected by, amongst other things, the
ability of the inspector to have close access to the location of the crack, the
illumination of the surface, the cleanliness of the structure in that location, the size
of the defect and whether the crack is “open”, which can occur under certain loading
conditions. Dr Maddox identified the same matters in his first report.

[434] There would have been no problem with illumination here. As to the cleanliness of
the structure, this should not have presented a significant obstacle to detection for at
least two reasons. The first is that the contract entitled Krupp to require the
machine to be cleaned if that was necessary for its inspection. Mr Habeler and
Mr Newnham each said that if a machine was not clean enough, an inspector asked
for it to be cleaned. The contract expressly required that the structure of each item
be “cleaned to allow proper identification of defects”. Secondly, Mr Thiel said that
dust was not a problem for inspecting the tower above the counterweight pivot
because dust did not accumulate there. Consistently with that, Mr Thiel did not ask
for the tower or any part of it to be cleaned. Other witnesses (Mr Clews, Mr Wood,
Mr Grant and Mr Newnham) said that this part of the structure was clean, although
another witness, Mr Allen suggested otherwise. The defendants suggest that I find
 114

there was dust from some photographs. The more likely position is that Mr Thiel is
correct about this point, supported as he is by those other witnesses. At one point it
also seemed to be suggested by the defendants that grease dropping from the ropes
might have been at the top of the stiffener and affecting the visibility of the crack.
But the critical area was not directly underneath the ropes. The possibility that there
was grease is not significant. Overall, the relative cleanliness of this part of the
tower was unlikely to have affected the detection of the crack.

[435] Several witnesses said that the crack would have “opened up” because of the load
on the structure as a result of the tensile dead loads. In Dr Jones’ view, because the
stress on the stiffener side of the flange was greater than the stress on the front of
the flange, the opening of the crack at the surface would have been relatively wide.
He said that a crack of a surface length as Dr Maddox had calculated in his first
report would have been revealed as a “gaping toe crack”. In his most recent report
Dr Jones wrote:
“… because the centre of the ligament is offset from the centre of the
cross section of [the] whole strip, the point of application of the
applied load is offset from the point of application of the reacting
load in the remaining ligament. In turn, this ‘load eccentricity’
applies a bending movement to the ligament, and this tends to move
the crack faces apart like a pair of scissors being opened – the crack
faces rotate around the crack tip (the hinge pin in the scissors), and
the mouth of the crack gapes open (the outer ends of the scissors
moving apart). In addition to this hinging movement, the crack faces
are also pulled apart in a parallel manner by the applied tensile load.
Overall, the crack surfaces move apart with a combination of both
hinging and parallel movements.”

[436] Professor Fisher wrote that “the tension flange cracks were all subject to high dead
load stresses which would open them and make them easy to see”.

[437] Dr Maddox seemed to agree in this passage from his cross-examination:

“Now, in relation to this particular detail on the bucketwheel
excavator where you can see we’ve got a model in Court, the detail
was located on the front flange of the bucketwheel tower?-- Right.

And that front flange was under tension?-- Yes.

And it was under a dead load of somewhere around about

180 megapascals, is that your understanding?-- Stress, that is.
Right.

And crack closure was not occurring, do you agree with that?-- It’s
circumstances where you might expect crack closure not to be
occurring.

Yes. And the dead load condition, I suggest to you, would have had
the consequence that the crack surfaces would have been open?-- If
the cracks don’t close, they would be open.”
 115

In re-examination he said that whilst “there’s more chance of seeing them if they’re
open than if they’re closed”, nevertheless “cracks could be open by a fraction of a
millimetre which, in terms of visibility, doesn’t make a lot of difference, really.”

[438] The size of the crack affects its visibility not simply because something large is
easier to see. It is also because the crack is more likely to fracture the paint as it
becomes larger. A fractured painted surface makes for a more apparent crack, and
what follows shortly after the fracture of the paint is the onset of corrosion which
would clearly signal a problem. All of that seems common ground but the question
then is: what would be the size of the crack before it would fracture the paint?

[439] Professor Fisher provided answers to that question in an instruction manual he

wrote for inspectors employed by the United States Federal Highway
Administration. Professor Fisher has given courses to inspectors instructing them in
the detection of fatigue cracks and still gives those courses occasionally although he
has retired from his university. In this manual, which is entitled “Inspecting Steel
Bridges for Fatigue Damage”, he wrote:
“The usual and most reliable sign of fatigue cracks are the oxide or
rust strains that develop after the paint film has
cracked.…Experience has shown that cracks have generally
propagated in depth to between one fourth and one half the plate
thickness before the paint film is broken, permitting the oxide to
form. Smaller cracks are not likely to be detected visually unless the
paint, mill scale, and dirt are removed by blast cleaning the suspect
area. Furthermore, at weld terminations, very small cracks are very
difficult to detect by other non-destructive inspection techniques,
unless the crack depth is between 1/8 in and 1/4 in.”

In another part of the manual, he wrote:

“There are several levels of inspection that can be carried out. A
visual examination can be made of the suspect details often from the
ground. It is recommended that binoculars be used to see the details
focusing on the location where cracks will be likely to grow.…cracks
can often be identified from the oxide (rust) lines that form after the
paint film has broken. Only large cracks will be detected at this level
of inspection.

The next level of inspection is a close visual inspection of the detail.

Careful attention should be given to the weld toe of attachments to
the flange or web … Generally any visual crack will likely be several
inches long and at least 1/4 in [about 6mm] deep in order to break the
paint film.”

[440] Therefore Professor Fisher has given a few measures for correlating the size of the
crack and the breaking of the paint film. One is that the crack depth is between
one-fourth and one-half of the plate thickness. As found above at paragraph [432] it
is likely that the crack depth was at least half of the plate (flange) thickness. The
second is that the crack depth was at least one-quarter of an inch deep. Here it was
much deeper. The third was that its length was “several inches” as was the case
here. At more than 100mm, it would have been at least four inches long.
 116

[441] The basis for these measures does not appear from the manual or other evidence.
Nevertheless Professor Fisher wrote this manual from his considerable experience
in the investigation of the effects of fatigue on steel structures. His high
qualification in this area is illustrated by the fact that he is the author of this manual
of which he says 20,000 copies or so have been distributed throughout the
United States. Importantly the defendants did not suggest that this information was
out of date or otherwise unreliable. Professor Fisher was cross-examined in a way
which suggested an acceptance of the correctness of this information. He gave
some answers during that cross-examination to the effect that the paint would have
fractured earlier in this case because of the particular stress conditions and because
these are transfer seal welds which would have cracked relatively quickly. He said
that “it would have been detectable. There’s no question in my mind that it
wouldn’t be detectable”. This and some other general statements in his oral
evidence have limited value, at least because Professor Fisher was probably
premising those remarks upon the existence of a much larger crack than, say,
one of 100mm. Perhaps not surprisingly for someone of his eminence and
achievements, Professor Fisher was very sure of his own opinions. His answers
were often given in emphatic terms which could give the impression of
exaggeration. I found his evidence in the design case to be of less weight than that
of some other witnesses. Probably because he had pioneered the changes to the
strength assessment of steel structures at least in his own country, he was
particularly critical of the use of BG 60.

[442] However, what Professor Fisher wrote in his instruction manual has considerable
weight. It was, of course, not written for this litigation and, as already mentioned,
the defendants appeared not to challenge it. I do not see that Professor Fisher in this
manual was saying that there was a precise mathematical relationship between, say,
a certain crack depth and the paint being broken. But these passages from the
manual provide a strong indication that a crack which was about half-way through
the flange and at least about four inches long would have broken the paint film and
that, with the prompt onset of corrosion, it would have been seen in 1999.

[443] In his first report Dr Potts wrote at some length on the subject of the detection of
fatigue cracks. Under the heading “Effect of Crack Size upon Detectability”
Dr Potts wrote:
“The ability of the naked eye to detect a crack in its early stages is
very difficult, whereas other forms of NDT (non-destructive testing)
can to a better degree, depending on the technique employed, the
quality of the equipment and the operator’s skill. The figure below
presents the measured range of the probability of detection (POD) of
a defect offered by the Magnetic Particle Inspection (MPI) NDT
technique in comparison with Visual Inspection as a function of
defect size (ie crack length).”

He then presented a graph plotting the purported probabilities of the detection of a

crack by a visual inspection and an inspection using the magnetic particle inspection
technique. The origin of this graph and of the information conveyed by it was not
identified. The graph specifies particular probabilities and crack lengths and
represents, as he discussed, that there is a 75 percent probability of detecting by
visual inspection a crack of a length of 17mm. He said that this particular graph
was not “universally applicable” but that it illustrates that “any visual inspection
offers a significant probability of crack detection only when the crack has
 117

propagated along a relatively large distance”. By reference to the graph it can be

seen that by this he meant a distance of about 10mm. This hardly assists the
defendants’ case or detracts from Professor Fisher’s evidence on this question.

[444] In the same report, Dr Potts extensively discussed the results of a study by the
United States Federal Highway Administration’s Non-destructive Evaluation
Validation Centre published in 2001. After reference to the results of that study,
Dr Potts said that the study:
“… indicates that whilst visual inspection is a commonly used
technique for assessing the condition of large welded steel plate
structures, including the intent to detect weld defects such as cracks,
the process is inherently unreliable, even for experienced inspectors
and qualified engineers”. He added that “this finding is not intended
to suggest that visual inspection should not be undertaken, but that
the expectations from such an inspection should not be one of 100%
detection of weld defects.”

I accept those propositions but otherwise the results of that US study are of little
value here. The study no doubt indicates the limitations upon the value of visual
inspections which is to say that had Mr Thiel looked at the critical area, it is not
100 per cent certain that he would have detected the crack. But that is not the
question.

[445] Dr Potts then referred to his various scenarios and possibilities for the crack size
before concluding that “these analyses suggest that the assertion that a crack of a
visually detectable size must have been present a year prior to the failure is flawed”.
Since his first report, his range of crack sizes has been recalculated, as I have
discussed, and the lower end of that range has tended to become higher.
His conclusion in that first report, under the heading “Overall likelihood of crack
detection during 1999 BWE Inspection” was that “it is doubtful that a competent
inspector could have reasonably detected the crack”. And this was an opinion
affected by the premise that the inspector had been restricted to the walkways and
lacked a line of sight to the critical area.

[446] In his second report, Dr Maddox concluded that “the chances of detection would
have been either zero or very small”. But that conclusion was reached as follows:
“In the present context, the crack size and its visibility at the time of
the last inspection in 1999 is of particular relevance. It is not
possible to state with any certainty how easy it is to detect a fatigue
crack in a real structure. Detection will depend on many things,
including the crack size, the extent to which it opens under cyclic
loading, the surface condition of the steel, the distance from the
observer, the lighting and of course whether or not the view of the
relevant area is obstructed. As a general comment, many years of
experience testing welded steel components in the laboratories at
TWI confirms that, even for relatively clean surfaces, fatigue cracks
are extremely difficult to see without the aid of a microscope or
penetrant testing. Further, if (Dr Potts’) estimate of the areas that
could be viewed during the 1999 inspection … is correct, the inner
surface of the flange was completely obscured. Consequently, the
cracking state that is most likely to have been visible is the presence
of a crack that extends right through the flange thickness and across
 118

to the edge of the flange. According to the present fracture

mechanics analyses this was effectively the state at the end of stage
two, when the semi-elliptical crack growing through the flange
thickness changed into an edge crack. On this basis it will be evident
from [his calculations] that the proportion of the total fatigue life
remaining was very small, ranging from around 2.3% for the case of
a 2mm deep defect [at the outset] to under 2% for the defect-free
case. These proportions may be compared with a proportion of the
actual life remaining at the time of the inspection in 1999, namely
6.5%. In fact, according to the results of the fracture mechanics
analyses, the fatigue crack that led to failure was still less than 65%
of the way through the flange thickness one year before failure, and
had not reached the flange edge. Thus depending on whether or not
the flange surface was obscured … the chances of detection would
have been either zero or very small”.

[447] In context, his opinion as to the chance of detection was upon the two premises that
probably the crack had not turned the corner and started to move along the edge of
the flange and that it was impossible to see a crack on the stiffener side of the
flange. This was consistent with his calculations set out in that report, where under
each of his alternatives, the calculated crack length would not have resulted in the
crack being then on the edge of the flange. Accordingly, the assessment of the
chances of detection by Dr Maddox does not assist, because he was not asked to
address the chances of detecting a crack (of the order of his calculations) on the
premise that the inspector had looked at the place where that crack would have
been.

[448] The defendants argue that the invisibility of the crack is indicated by the facts that
Mr Thiel did not see it when looking up to the top of the stiffener with his
binoculars from the counterweight level and that no other person had seen it. As to
Mr Thiel, I accept that as he says in his supplementary statement, he stood on the
counterweight level and used his binoculars to look at the “area” of the top of the
stiffener and the welds at the length of the stiffener. But from that angle and some
eight metres or so below the top of the stiffener he could not have seen all of the
surface where a crack of, say, 100mm would have been. The fact that he did not see
from that angle and distance any sign of corrosion does not strongly suggest that it
was not present. No doubt it was because Mr Thiel realised that his view from the
counterweight level was not sufficient to assess the top of the stiffener and the
welds at that point, that he tried to see it, as he described, by kneeling onto the
walkway platform and looking as far as he could.

[449] The fact that others did not notice cracking or corrosion at the top of this stiffener is
not significant unless any of them had been in a position to see the top of the
stiffener. Mr Russell from CW Pope undertook an ultrasonic inspection of all pivot
points and pins on the BWE during 1999 and after Mr Thiel’s inspection. Most of
the pins could be inspected by him from the walkways but there were some at the
top of the tower which did not have adequate access, so he used a crane and a
manboat to get close enough to them. He arranged with BHP for these to be
available a week or so prior to his inspection. But he used the manboat only to
inspect these pins at the top of the tower and he did not at the same time undertake
an inspection of the BWE frame and in particular the critical area. He performed a
visual inspection and magnetic particle inspection on the BWE frame structure. He
 119

says he then conducted a visual inspection as far as he could from the walkways and
saw no cracking. So the fact that he did not detect this crack does not give any
strong indication that it was not visible in March 1999 by the use of a mirror, cherry
picker or manboat. Mr Newnham went up the tower in 1999 looking for cracks.
The context was that he was visiting the site endeavouring to persuade BHP to
retain his firm for his inspection services. His journey up and down the tower was
not in the course of an inspection. He did not leave the walkways.

[450] Ultimately I am persuaded that had Mr Thiel used a mirror, a cherry picker or a
manboat as I have discussed, it is more probable than not that he would have
detected the presence of this crack. Of course there are many uncertainties and
possibilities, including those involving the size and location of the crack. But more
probably than not, it was at least 20mm deep and 100mm long. I am persuaded that
what appears in the manual written by Professor Fisher provides a reliable basis for
assessing the relative probability that a crack of that order would have cracked the
paint. The visibility of the crack is also indicated by the evidence of Dr Jones and
Dr Potts. I conclude that more probably than not, this is a crack which would have
been seen had Mr Thiel inspected its location.

Loss of a chance

[451] An alternative argument by the plaintiffs was that this was a loss of a chance case,
so that they did not have to prove that on the balance of probabilities, the
performance of the contract or the discharge of the defendants’ alleged duties of
care would have revealed the crack. The argument is that they were denied the
chance of the crack being detected and repaired, for which they should be
compensated in the amounts claimed but discounted according to the relative
probability that the crack would have been detected.

[452] I was asked to consider this argument only if I was not satisfied on the balance of
probabilities that the crack would have been detected and repaired. In my view, that
would not have been a legitimate approach. If this is a loss of a chance case, then it
remains so whether or not the relative probability is more or less than 50 percent.

[453] The defendants complained that this point was not pleaded. But they also argued
that there were many contingencies affecting the relative probability of detection of
the crack and the avoidance of the collapse of the BWE.

[454] By this alternative argument, the plaintiffs say that what must be proved on the
balance of probabilities is not that the crack was visible, but that it was present. The
detection of that crack was a possibility, affected by the relative probability that it
was visible. It is said that the failure to inspect the stiffener termination, and the
failure to tell Mr Grant that it had not been inspected, deprived the plaintiffs of “a
valuable chance to detect the crack and to repair it, and to avoid the loss which was
suffered as a consequence of the collapse of the machine”. The argument seeks to
rely in particular on passages from Sellars v Adelaide Petroleum NL81 and Naxakis
v Western General Hospital82.

[455] In my view this is an incorrect characterisation of the plaintiffs’ claim and the issues
which it raises. In substance the plaintiffs’ claim is that their BWE was

81
(1994) 179 CLR 332 at 348 and 355.
82
(1999) 197 CLR 269 at 277-278 [28]-[29].
 120

effectively or partially destroyed because of the defendants’ defaults. It is

artificial to characterise this as a claim for compensation for the deprivation of a
chance or business opportunity. In rejecting the loss of a chance argument in
Chappel v Hart83, Gummow J said84:
“… However, this is not a case in which Mrs Hart seeks damages for
the loss of an opportunity or chance to acquire or receive a benefit
with the value to be ascertained by reference to the degree of
probabilities or possibilities. As is explained in Sellars v Adelaide
Petroleum NL, in Australia this generally is what is involved in the
“loss of a chance” cases. Similarly, in Athey v Leonati the Supreme
Court of Canada observed:
‘The [loss of chance] doctrine suggests that plaintiffs may
be compensated where their only loss is the loss of a chance
at a favourable opportunity or of a chance of avoiding a
detrimental event.’

Rather, Mrs Hart claimed damages for the injuries she sustained.”
[footnotes omitted]

[456] In this context it is necessary to distinguish between past events and events which
allegedly would have occurred or might occur. In Malec v JC Hutton Pty Ltd85,
Deane, Gaudron & McHugh JJ said86:
“When liability has been established and a common law court has to
assess damages, its approach to events that allegedly would have
occurred, but cannot now occur, or that allegedly might occur, is
different from its approach to events which allegedly have occurred.
A common law court determines on the balance of probabilities
whether an event has occurred. If the probability of the event having
occurred is greater than it not having occurred, the occurrence of the
event is treated as certain; if the probability of it having occurred is
less than it not having occurred, it is treated as not having occurred.
Hence, in respect of events which have or have not occurred,
damages are assessed on an all or nothing approach. But in the case
of an event which it is alleged would or would not have occurred, or
might or might not yet occur, the approach of the court is different.
The future may be predicted and the hypothetical may be
conjectured. But questions as to the future or hypothetical effect of
physical injury or degeneration are not commonly susceptible of
scientific demonstration of proof. If the law is to take account of
future or hypothetical events in assessing damages, it can only do so
in terms of the degree of probability of those events occurring.”

Their Honours there cited Davies v Taylor87 where Lord Reid said88:
“When the question is whether a certain thing is or is not true –
whether a certain event did or did not happen – then the court must
decide one way or the other. There is no question of chance or
83
(1998) 195 CLR 232.
84
(1998) 195 CLR 232 at 260.
85
(1990) 169 CLR 638.
86
(1990) 169 CLR 638 at 642-643.
87
[1974] AC 207.
88
[1974] AC 207 at 213.
 121

probability. Either it did or it did not happen. But the standard of

civil proof is a balance of probabilities. If the evidence shows a
balance in favour of it having happened, then it is proved that it did
in fact happen. … You can prove that a past event happened, but you
cannot prove that a future event will happen and I do not think the
law is so foolish as to suppose that you can. All you can do is to
evaluate the chance.”

The distinction here is described in McGregor on Damages (17th Edition) at 8-029:

“With matters past, therefore, the court has to determine on the
balance of probabilities whether the defendant’s act caused the
claimant’s loss, and if the answer is in the affirmative there is full
recovery, while if in the negative there is none. We are in the realm
of causation and liability, not in the realm of chance and
quantification.”

[457] The existence of the crack is a past event in this sense. But so too is its location and
its visibility. Those matters are facts although the evidence relevant to them is
complex and does not consistently provide a single answer. I have found that in
fact, the crack was then visible. It follows that an inspector who had looked at the
critical area by any one of the available means should have detected the crack. On
the other hand, had I not found that the crack was visible, it would have followed
that it would not have been seen by an inspector doing what was required of him.

Conclusions on causation

[458] By the contract, Krupp was obliged to inspect the entire structure and the welds. It
failed to do so. Had it inspected the critical area the crack would have been
detected. As I discuss below, in that event the crack would have been repaired and
the collapse avoided. So this breach of contract was a cause of the plaintiffs’ losses
from the collapse.

[459] There is the further case that Krupp breached its contract by breaching the term
implied by s 74(1), which was that it would inspect with due care and skill. I have
found that it breached that term just as it and Mr Thiel breached their common law
duties to exercise reasonable care. These duties were breached by failing to inspect
the critical area. So again, in consequence of a breach of contract, and also in
consequence of negligence for which Krupp and Mr Thiel are liable, the crack was
not repaired and the collapse and consequent losses followed.

[460] The negligence by the terms of the report raises a different question. It is the same
question which arises in the s 52 case. Had the report not represented that the entire
structure and relevant welds had been inspected, what would BHP have done? I
accept Mr Grant’s evidence that he expected and assumed that Mr Thiel would and
had visually inspected the entire structure. I accept also that had he known before
the collapse that Mr Thiel had not inspected the entirety, he would have taken this
up with Mr Thiel or someone else from Krupp and he would have insisted that a full
inspection occur. It is inherently likely that this is so, because I see no reason why
Mr Grant would wish to take the risk of an inspection of only part of the machine.
At least some of the potential consequences for BHP and its joint venturers from a
structural failure of the BWE would have been appreciated by him. The
performance of an entire inspection would not have been unduly disruptive. And it
 122

was for an entire inspection that the agreed price was to be paid. Further, the
inspector’s report was not only for Mr Grant’s use. It is likely that someone from
BHP would have demanded that the entire structure be inspected on reading that it
had not been, and accordingly, that nothing could be said of the soundness of part of
it. It is indicative that BHP provided a crane and a manboat to Mr Russell for his
inspection in 1999. And the evidence shows also that there was considerable
downtime in the operations of the BWE during the period when Mr Thiel was there
in 1999, putting paid to the suggestion that the BWE was too busy to undergo a
proper inspection.

[461] It follows that in consequence of Krupp’s negligence, its contravention of s 52 and

Mr Thiel’s negligence constituted by the terms of the inspection reports, BHP did
not cause the entire structure to be inspected within the year prior to its collapse.
Had it been inspected, this crack would have been detected.

[462] The defendants argue that BHP was unlikely to have repaired this crack had
Mr Thiel identified it. They submit that “this was not a mine in which there was a
culture or history of identified and significant defects on the BWE structure being
repaired in a timely way or at all.”

[463] The evidentiary basis for this argument is what they say was BHP’s failure to
remedy several matters identified by earlier inspectors’ reports. There is evidence
within the sequence of Mr Schander’s reports which, on its face at least, shows that
cracks which were identified in a report were still present at the time of subsequent
reports. Witnesses for the plaintiffs such as Mr Raleigh and Mr King said that they
believed that these cracks had been remedied but had reappeared. Their evidence
was strongly challenged and was criticised for an absence of documentary support.
It must be remembered however that these were events, in some cases, of more than
20 years ago.

[464] It is more relevant to look at BHP’s response to inspection reports in the years close
to 1999. This is especially so because it was from 1995 that Mr Grant, in his
position as BWE system maintenance planner, was responsible for the maintenance
and long term planning of the BWE system. But the defendants are critical of
BHP’s response to Krupp’s 1996 report, upon which they heavily rely in this
argument.

[465] In the 1996 report by Mr Thiel, there were 10 items relating to the structure for
which repairs were advised. None of them was said to require immediate repair, but
seven required repair within three months and the others within 12 months. In the
1999 report, four of those 10 were shown as still not repaired and two of those four
were within the three month category. One was a missing bolt in the bucket wheel
boom about which Mr Grant said that it was not critical. The other was an item in
the operator’s cabin support. This was not the cracking in that area which was also
identified in the 1996 report. As to that crack, Mr Thiel wrote in his 1999 report
that “the crack reported in the previous two inspection reports had been repaired but
has now reappeared”. I find that it had been repaired, accepting as I do Mr Grant’s
evidence as to that, which is supported by that reference by Mr Thiel to it in 1999.
Another of the four structural items said to be unrepaired was fault no 2.1.7.1.
However no such item appeared in the 1996 report.
 123

[466] There were three items in the 1996 report which involved cracking in the structure.
None of those reappeared in the 1999 report, supporting Mr Grant’s evidence that
they were repaired. Mr Grant engaged Preventative Maintenance Services to
address the defects identified by Mr Thiel in his 1996 report. It also appears from a
memorandum by Mr Grant to other mine staff in 1997 that BHP was then attending
to the list of outstanding work identified in the 1996 report. These documents
demonstrate that the 1996 report was indeed taken seriously. The fact that there
were some matters still unrepaired by 1999 is relevant. But overall BHP appears to
have accepted Mr Thiel’s recommendations. Importantly each of the items of
cracking was repaired.

[467] Further, there is the fact that in 1999 BHP engaged G&S Engineering and CW Pope
to perform various maintenance and inspection services under a regime which
strongly indicates that BHP did not have the “culture” which the defendants now
attribute to it. Mr Russell performed some structural inspections in the middle of
1999.

[468] Had Mr Thiel identified this crack in 1999, the inspection contract required him to
assign “a priority level with regard to urgency of repair”, based upon its nature and
location. In this case that would have required him to recommend its urgent repair
or at the very least its repair within three months. That repair would have been
costly but it would have been irrational for Mr Grant and others to ignore such a
recommendation. And after all, BHP had commissioned this inspection. It was not
obliged by law to do so. It was wanting to be advised as to the condition of the
machine so that the necessity for repairs, particularly urgent repairs, could be
identified and those repairs effected.

[469] Had the crack been detected, the tower would have been repaired and the collapse
avoided. Professor Fisher and Dr Jones said that the crack could have been repaired
and their evidence in that respect was not contested. Nor do the second and
third defendants plead that it could not have been repaired. Instead, they plead
that the repair would have cost $160,000, of which they provided particulars by
reference to an expert report of RWE Power International, which is in evidence.
The plaintiffs’ Reply admits that cost.

[470] In summary, I find that the breach of contract by the second defendant, the
negligence of the second and third defendants and the second defendant’s
contravention of s 52, caused the tower to go unrepaired and in consequence the
collapse occurred.

The inspection case: outcome on liability

[471] Krupp is liable to the plaintiffs (save for the fourth plaintiff) for damages for breach
of contract. That is upon one cause of action to which they are jointly entitled and
the award is not to be reduced for the absence in these proceedings of another
joint venturer.

[472] Krupp is liable for damages for negligence and damages under s 82. Mr Thiel is
liable for damages for negligence. They are several liabilities to the plaintiffs (again
save for the fourth plaintiff), so that each plaintiff is entitled to a judgment in
differing amounts according to its interest in the joint venture as at March 2000.
Because the principal claim against Krupp was for the one judgment in favour of the
plaintiffs jointly, and because that will be in an amount which exceeds the aggregate
 124

of the several awards to which the plaintiffs are alternatively entitled against Krupp,
there will be one judgment against Krupp in favour of the plaintiffs.

[473] There will be several judgments for those plaintiffs against the third defendant.

CONTRIBUTORY NEGLIGENCE

[474] The defendants plead in answer to the design and inspection cases that the matters
alleged against them, if established, were not causes of the collapse of the BWE, on
the basis that the cause was the operation of the BWE outside its design operating
parameters or “DOP”. The same matters are pleaded as part of the contributory
negligence case raised against both the design and the inspection cases. As the
matter was ultimately argued for the defendants, it is only in relation to contributory
negligence that these matters were pressed. That concession was rightly made,
because if the BWE was operated outside its DOP in all the respects alleged,
nevertheless the negligence, breach of contract or s 52 misconduct attributable to a
defendant was at least a cause of the collapse. Accordingly, the case in relation to
the DOP is relevant only, if at all, to contributory negligence. As I will discuss,
there are additional matters pleaded by the defendants as contributory negligence.

[475] However, before going to those factual issues the relevance of any contributory
negligence must be addressed. Undoubtedly contributory negligence can be raised
in response to the plaintiffs’ claims in negligence against O&K, Krupp
and Mr Thiel. However, each of O&K and Krupp is liable under s 82 of the
Trade Practices Act and Krupp is liable for breach of contract.

[476] Contributory negligence is pleaded in response to the claims under the

Trade Practices Act. By s 82(1B), contributory negligence can now be raised in
response to a claim for s 82 damages. But it does not assist the defendants because
in neither case did the cause of action under s 82 accrue after 26 July 200489.
Absent the application of s 82(1B), contributory negligence cannot reduce an award
of damages under s 82: I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty
Ltd90. Because O&K is liable for damages under s 82, contributory negligence
cannot reduce its liability. Nor can it reduce Krupp’s liability under s 82.

[477] Damages for breach of contract in some cases can be reduced for the plaintiffs’
contributory negligence. Section 10 of the Law Reform Act 1995 (Qld) provides as
follows:
“10 Apportionment of liability in case of contributory
negligence

(1) If a person (the claimant) suffers damage partly

because of the claimant’s failure to take reasonable
care (contributory negligence) and partly because of
the wrong of someone else –

89
Section 82 was amended by Schedule 3 to the Corporate Law Economic Reform Program (Audit
Reform and Corporate Disclosure) Act 2004 (Cth). By s 1466 of the Corporations Act 2001 (Cth) it
is provided that the amendments to the Trade Practices Act made by Schedule 3 apply to causes of
action that arise on or after the day on which that Schedule commenced, which was 26 July 2004.
90
(2002) 210 CLR 109.
 125

(a) a claim in relation to the damage is not

defeated because of the claimant’s
contributory negligence; and

(b) the damages recoverable for the wrong are to

be reduced to the extent the court considers
just and equitable having regard to the
claimant’s share in the responsibility for the
damage.”

The term “wrong” is defined by s 5 as follows:

“wrong means an act or omission that-

(a) gives rise to a liability in tort for which a defence of

contributory negligence is available at common law; or

(b) amounts to a breach of a contractual duty of care that is

concurrent and coextensive with a duty of care in tort.”

Krupp was in breach of a contractual duty of care which it owed by the implication
of the term from s 74(1) of the Trade Practices Act. In my view that was concurrent
and coextensive with its duty of care in tort and neither party suggested otherwise.
But it was also in breach of its contract by failing to inspect the entire structure. In
my view that did not amount to a breach of such a contractual duty of care.

[478] In some cases the dividing line between a contractual promise to do something and
a promise to do it with reasonable care will be a fine one. That dividing line was
discussed by Oliver J (as his Lordship then was) in Midland Bank Trust Co Ltd &
Anor v Hett, Stubbs & Kemp (a firm)91 as follows:
“The classical formulation of the claim in this sort of case as
‘damages for negligence and breach of professional duty’ tends to be
a mesmeric phrase. It concentrates attention on the implied
obligation to devote to the client’s business that reasonable care and
skill to be expected from a normally competent and careful
practitioner as if that obligation were not only a compendious, but
also an exhaustive, definition of all the duties assumed under the
contract created by the retainer and its acceptance. But, of course, it
is not. A contract gives rise to a complex of rights and duties of
which the duty to exercise reasonable care is but one.

If I employ a carpenter to supply and put up a good quality oak shelf

for me, the acceptance by him of that employment involves the
assumption of a number of contractual duties. He must supply wood
of an adequate quality and it must be oak. He must fix the shelf.
And he must carry out the fashioning and fixing with the reasonable
care and skill which I am entitled to expect of a skilled craftsman. If
he fixes the brackets but fails to supply the shelf or if he supplies and
fixes a shelf of unseasoned pine, my complaint against him is not
that he ahs failed to exercise reasonable care and skill in carrying out
the work but that he has failed to supply what was contracted for.”

91
[1979] 1 Ch 384 -435.
 126

[479] Because Krupp failed to inspect the entire structure this crack was not detected and
the collapse occurred. Had the critical area been inspected, there is a possibility that
by carelessness the crack would not have been detected, although having regard to
my findings as to its visibility that is a very small possibility. In that event, the
breach of contract would not have been a “wrong” as defined. In my view the
breach constituted by a failure to inspect the critical area should not be characterised
as simply a breach of a contractual duty of care, notwithstanding that the obligation
to inspect was one to be discharged with the exercise of reasonable care.
Accordingly, s 10 does not apply to this breach of contract and contributory
negligence could not be raised in response to it.

[480] Contributory negligence is available in relation to each defendant’s liability in tort,

and on my findings, it could assist only the third defendant Mr Thiel. For that
reason, and in case the other defendants are not liable under s 82 or in contract, I go
now to the extensive case of contributory negligence.

Conduct outside the Design Operating Parameters

Removal of the gear box

[481] In July 1999 the gear box of the BWE was removed. It was then walked without its
gear box for a distance which various witnesses estimated as between 30 and
70 metres. The gearbox had been removed because of the failure of the main
bearing, and Krupp’s Mr Armstrong was sent to the site to supervise the
replacement of the bearing. Not a little time was spent on exploring with the
relevant witnesses whether Mr Armstrong actually watched whilst the BWE was
walked without its gearbox. But in any case there appears to have been no objection
by Mr Armstrong to this course, who was aware at least that it had occurred, and
more generally, there was nothing said about it by Krupp at the time.

[482] Originally, the defendants’ point deemed to have been that this would have
damaged the structure, by the BWE being imbalanced through the loss of its gear
box. But there is no basis for concluding that this had some causative effect on the
collapse of the BWE. Ultimately the defendants simply argued that “it is almost
certain that it had a contributing affect”, whilst conceding that none of the experts,
including their witness, Dr Potts, had been able to quantify that contribution.
Indeed it appeared that Dr Potts had done some modelling and calculations in 2004
to investigate whether this walking incident contributed to the collapse and that the
exercise established nothing to support this allegation.

[483] Further, the plaintiffs’ walking the BWE without its gearbox on this occasion is not
proved to have been negligent. The defendants’ argument went no further than
saying that “the description of the machine shaking and rocking (during the
walking) and the absence of any suggestion in the operating manual that such a
course was recommended or permitted, strongly suggests the inappropriateness of
what was done.” As that submission shows, the operating manual contained no
instructions to the user that this was not to be done. I am not satisfied that the
evidence about its “shaking and rocking” demonstrates that the plaintiffs were
negligent.
 127

Safety devices

[484] The bucket wheel boom was raised and lowered by two ropes extending from the
rear end of the counter-weight boom through the top of the main tower to the rope
support tower and back again. One end of each of the ropes was connected to a
winch so that there were two parallel winches at that end of the counter-weight
boom. The other end of each rope was connected to an hydraulic cylinder. The two
cylinders were connected so that the pressure in each cylinder could be kept the
same. Devices called manometers monitored the pressure in the cylinders. When
the pressure reached a set high point or a set low point, that triggered an electrical
device which automatically limited the movement of the bucket wheel boom. In
particular, if the pressure was measured by the manometer at higher than the set
limit, then further hoisting or raising of the bucket wheel boom would be prevented.
Similarly if the pressure fell below the set low point, further lowering of the bucket
wheel boom would be prevented. In each case the boom could still be slewed but
the manometers and the associated electrical components acted as a safety measure
to prevent the bucket wheel boom from suddenly falling and grounding.

[485] The defendants allege that by some means the operation of the manometers was
compromised. They say that this was done to facilitate “drop cutting”, which is a
practice which they say was a negligent operation of the BWE and which greatly
shortened its life. The suggestion is that operators of the BWE found that their
work was being unduly inconvenienced by the frequent intervention of the safety
system when they were drop cutting. It is said that the drop cutting resulted in a
“partial grounding” of the bucket wheel boom, which would affect the loads on the
ropes and thereby the pressure in the cylinders as measured by the manometers, and
that had they been calibrated and operating correctly, the set limits would have been
reached and the safety system of brakes on the winches would have been engaged.
The defendants say that the operators then did something to negate the operation of
the manometers to avoid the inconvenience of the interruption from this braking,
and to enable them to engage in drop cutting as they pleased.

[486] The ultimate relevance of all of this is in relation to the case that the drop cutting
itself was contributory negligence. What was allegedly done to the manometers is
really a particular of that case. It is said that it proves the high incidence of
drop cutting, although as I will discuss, it is clear that drop cutting was a regular
practice with this BWE. But if this interference with the manometers had to occur
to facilitate the drop cutting which was undertaken, then this would support the
defendants’ case that the operators knew or ought to have known that they should
not be drop cutting. Operators should have realised that they were not using the
machine in the manner for which it was designed, if they had to interfere with a
safety device.

[487] There is no direct evidence that the operation of the manometers was deliberately
interfered with in any way. The defendants argue that an inference of that should be
drawn from the following facts.

[488] First, there was an incident in March 1993 in which there was a grounding of the
bucket wheel boom. The ball race began lifting out of its normal position, causing
another switch to activate and to cut power. This was a safety switch which had
been placed on the ball race in 1984 after the grounding in that year (which led to
the repair with the stiffeners). It appears that the manometers did not operate to cut
 128

out power in this 1993 incident. The defendants suggest that this was because the
operation of the manometers had been compromised in some way. An internal
report of the incident92 said that the rope tension had been checked and that the
“pointer was below [the] bottom red line which indicated low rope tension”. This
indicates that the manometers were showing that the pressure was below the
minimum set level and is thereby inconsistent with one of the defendants’ theories,
which is that the manometers were compromised by operators changing the set
limits, so that they were not exceeded. The same report referred to the remedial
steps as including the raising of hydraulic pressure for the rope tension to “bring
indicator back into centre of the two (2) red lines. This brought ropes back to
normal tension.” This seems to have been a resetting of the appropriate hydraulic
pressure as then measured by the manometers, with its two red lines marking the
upper and lower set limits. This is inconsistent with another of the defendants’
theories, which is that the oil line to the manometers had been closed (by shutting
the oil line isolation valve) which would have prevented the manometers from
measuring the pressure in the cylinders.

[489] The defendants called Mr Brady, who was the operator of the BWE in this 1993
incident. In his witness statement he described how it occurred as follows:
“On maintenance day the hoist controls had been turned off by the
electricians, so that the position of the bucket was fixed at about
1.5 metres from the ground. I was walking the BWE backwards over
a slight decline. When the BWE went over the ledge the bucket
wheel was grounded to a considerable degree. The machine shut
down after walking a few metres with the bucket wheel on the
ground. As a result, two of the buckets on the bucket wheel were
damaged and had to be replaced. On this occasion, the light on the
control panel which would indicate that the manometers had shut the
machine down did not come on.”

The defendants argue that this shows that the manometers were “not effectively
operational at the time”, although Mr Brady did not say so. What he said was that
the hoist controls (an apparent reference to the hoisting of the bucket wheel boom)
had been turned off by the electricians. It is not known what else had been turned
off by them and whether the operation of the manometers was on that day affected
by the fact that the machine was in a certain condition for the purposes of
maintenance. What the evidence appears to show is that this grounding did not
occur because of some sudden loss of tension in the ropes causing the bucket wheel
boom to fall. Rather it seems that the BWE grounded because of its operation by
Mr Brady.

[490] Then in their written submissions, the defendants rely upon another part of
Mr Brady’s statement, in which he had said that one of the jobs of the attendant
assisting the BWE operator was that if the manometers caused the machine to be
shut down, the attendant would “adjust the ropes, pump up the settings and reset the
manometers to enable the BWE to resume working”. That evidence would not
assist the defendants’ case because it is consistent with the manometers being in
operation and occasionally shutting the machine down, rather than the manometers
being made inoperative according to one of the defendants’ theories. But as it
happened, that part of his statement was objected to by the plaintiffs and the

92
Dated 24 March 1993 from Mr Kraatz to Mr Raleigh.
 129

defendants conceded that it should be ruled out, and so it was93. So that part of the
statement must be disregarded.

[491] Next the defendants rely upon an incident in October 1996, about which the
plaintiffs then sought assistance from Krupp, who engaged a Mr Edinger. He wrote
as follows:
“The following is a brief description of the problems experienced by
the customer [BHP]. The customer’s main concern was the
consequences if failure of the hoist rope tension cylinder occurred.
The boom would then drop, and catastrophic damage would result.”

Under the heading “Problem” Mr Edinger wrote:

“The left-hand side cylinder (looking to the front of the machine)
piston is against the retainer, and the piston rod is fully extended.
This condition cannot be permitted because it has lost its hydraulic
cushion effect. The right-hand cylinder is in normal condition. The
piston rod is 50 per cent (approximately 600 millimetres) extended.

A second problem is being experienced by the customer in that they

have to readjust the system pressure continually to stay above the
operational lower point of the hoist function.”

In that last sentence, “the operational lower point of the hoist function” is an
apparent reference to the set lower limit on the manometers. This is inconsistent
with the defendants’ theory that the settings themselves were being changed: rather
the problem was that the pressure was falling below the lower setting and it was the
pressure, and not the set limits, which was being “readjusted”. It is also inconsistent
with the theory that the manometers were being isolated so that they were not
actualling measuring the pressure.

[492] Mr Edinger also referred to the “maximum set point of 113 bars” and to increasing
the system pressure up to that maximum. Again, this is inconsistent with each of
the theories which I have mentioned. Yet the defendants say that that there is some
significance in this reference to a maximum of 113 bar, because photographs of the
manometers in 2000 appear to show a maximum of something just under 110 bar.
But this hardly suggests that the operators were changing the settings to give them
more scope in their operations, because on this theory the maximum was reduced.
In any event, the degree of change (from 113 to 110) seems inconsequential.

[493] Of more significance is that Mr Edinger did not report any interference with the
safety devices. And after all, as Mr Edinger wrote, it was because of concerns by
BHP that he was brought in to investigate, which seems inconsistent with the notion
that BHP was causing the problem by compromising the safe operation of the
machine by affecting the operation of the manometers.

[494] Next there is a reference to the ropes in Mr Thiel’s inspection report of 1999 (the
subject of the inspection case). Mr Thiel did not report that any safety devices had
been switched off or not working. But he wrote that:

93
Transcript 2961-2962.
 130

“The RH cylinder and rope are slack and vibrate freely, while the LH
cylinder and rope are very tight. It would appear that the two
cylinders are not equally loaded as they should be.

Recommended Actions
Readjust the cylinder to rope connections so that both cylinders are
approximately mid-extension. This may need to be done more
frequently than is the case up to the present.”

Mr Thiel said that he found one cylinder fully extended and, he assumed, bottomed
out against the end of the cylinder and its rope was so slack that he could shake it. It
is submitted that this suggests that the manometers were not then operating.
Mr Grant said that when it was brought to his attention, the problem was fixed the
following day.

[495] Mr Thiel said that the manometer needles were then at the “12 o’clock position”.
This would have put them beyond the maximum pressure point. Again this is
inconsistent with the theory that the preset limits had been extended by the
operators. It also appears inconsistent with the theory that the manometers were
unable to record the pressure, and in particular that the isolating valve had been
shut.

[496] The defendants called Mr Grayson, who was from General Electric, which had been
a subcontractor of O&K for the initial installation of the safety devices and which
had remained involved in providing services for the BWE in its electrical
components. Mr Grayson was personally involved from 1984 to 2000, frequently
attending Goonyella and having responsibility for other General Electric employees
who went there. Over all of that time, he saw no evidence of any interference with
the safety devices and nor, to his knowledge, did anyone else from his company.

[497] In his first witness statement, tendered when he was called by the defendants, he
referred to the effect of one cylinder reaching the end of its travel and, in turn, both
cylinders doing so. Where there was one cylinder in that condition, he said that
“one rope could end up taking more load than the other” and that once both reached
that point, “the manometer pressure would drop to zero”. In other words, according
to this statement, whilst only one of the cylinders had become fully extended, there
would still be oil pressure within the system and the manometers, if operating
correctly, would measure that pressure as if both cylinders were under pressure. Put
another way, having one cylinder in that condition with one slack rope, whilst the
machine continued to operate, would not be inconsistent with the continued working
of the manometers. It was when both cylinders were allowed to reach the end of
their travel that the oil pressure would fall to zero. If both cylinders did so, and the
machine still operated, this would indicate that something had been “bridged out
somewhere in order for the machine to work like that.”

[498] Mr Grayson made a supplementary witness statement, also tendered in his evidence-
in-chief, in which he corrected some matters from his first statement. Relevantly he
changed what he had said about the interaction between the two cylinders, by saying
that it was not necessary for both cylinders to be fully extended “before the pressure
will start to reduce in the system”, so that whilst there would be “for a short period”
pressure in the cylinder which had not fully extended (where the other had), “as
soon as any oil that leaks from the pressure side of the RAM to the non-pressure
 131

side, the pressure in that cylinder will quickly drop”, with the result that the system
would be “unable to equalise, with the rope attached to the fully extended cylinder
taking all the tension of the bucket wheel boom and the other rope taking none of
the tension and becoming slack.” In cross-examination he was not entirely
consistent on this issue but ultimately he seemed to hold to the view in his
supplementary statement. And that view was supported by the evidence of
Mr Bovell, an employee of Krupp, and by the evidence of Mr Black and Professor
Hulsmann.

[499] Mr Bovell suggested three ways in which the operation of the manometers could
have been negated, two of which have already been mentioned. One was by closing
the isolation valve while the pressure within the manometers was within the
operating range. He explained that this would maintain the then pressure within the
manometers no matter what became of the pressure in the cylinders. A second was
to adjust the upper and lower limits of pressure on the manometers. The third, not
yet mentioned, was by some electrical bridging of the contacts at some location in
the circuitry, so that the manometers would not be in contact with the braking
system for the ropes.

[500] The defendants called another witness named Brian Black, Mr BH Black. He
worked at the mine from 1971 until 2000 in various positions, and for a long time as
an operator of the BWE. From the early 1990’s he trained other operators but still
about half of his time was spent operating the BWE. He said he was familiar with
the safety devices on the BWE, including the manometers, as to which he said:
“As a matter of course, I checked the manometers almost every shift
when I was working on the BWE. I would often need to adjust the
rope tension to bring them within the correct limits on the gauges.
This was done by pressing the buttons on the pump until the tension
was corrected and the needles on the gauges were in the middle of
the set limits.”

Mr Bovell referred to this evidence and explained that the buttons to which
Mr Black was referring were those which filled or drained oil in the cylinders.
According to that evidence of Mr Black then, he would regularly adjust the rope
tension by pumping oil with a consequent effect on the readings shown by the
manometers. This seems to be inconsistent with Mr Bovell’s theory that the
manometers had been isolated from the rest of the system.

[501] Mr Max Clews worked at the mine from 1978 until the collapse of the BWE. From
1985 he worked as an operator of the BWE and in the following years he gained
extensive experience in the operation of the entire BWE system. He was ultimately
responsible for the training and assessing of many operators and crew members on
that system. He was called in the plaintiffs’ case and was cross-examined over
many days. As I discuss below, he gave significant evidence as to the nature and
extent of drop cutting. He was an impressive witness. He was independent in the
sense that he had left the mine’s employ. It might be said that he had some
underlying interest in defending the manner of operation of this machine, but this
defensiveness was not apparent. I accept his evidence that he had never seen
anyone make any adjustments to the manometers and that there was no alteration of
the set limits. I also accept his evidence that he had only ever seen the machine shut
down perhaps three times from the operation of the manometers, although that is a
point which, on one view, might be thought to assist the defendants.
 132

[502] I am unpersuaded that the manometers were interfered with by the first or second
methods raised by Mr Bovell: the closing of the isolation valve or the resetting of
the limits. Indeed more probably than not, neither occurred. That leaves the
possibility that the electrical circuitry was changed. If that occurred it was not by
some deliberate decision by somebody higher up than an operator. In the
defendants’ favour is the record by Mr Thiel in his 1999 report about the ropes. As
I have discussed, many witnesses seem to think that this was not possible,
consistently with the continued operation of the machine, if the manometers were
doing their work. But ultimately I am unpersuaded that they were interfered with in
this way, or at all.

[503] If the manometers were not working during Mr Thiel’s 1999 inspection, there may
be many reasons for that. Mr BH Black recalled that “there was a lot of bridging
out of electrical circuits on the BWE system” which:
“was done by the electricians when there was an electrical fault
because it was quicker than investigating the problem and fixing it,
and allowing the BWE to get back to digging more quickly”,

and he said that he was:

“often present when the electricians were working in electrical
cupboards on the BWE and I saw the wires hanging from the
circuits, which I knew to be bridging wires.”

So on the occasion of Mr Thiel’s inspection, there is room for speculation, for

example, that there may have been some temporary bridging out of the circuits
connected to the manometers, not because this had to be done to facilitate
drop cutting, but because of some electrical fault.

[504] From the evidence of Mr Clews and Mr BH Black, it does not appear that there was
any stage at which the operation of the machine was being constantly interrupted by
the operation of the manometers, which would then have made it likely that an
operator would see fit to disengage them. Had there been such a constant shutting
down by the manometers so that it was seriously affecting the work programme of
the BWE system, it is likely that operators would have discussed that with one
another, and that Mr Clews or another operator would recall it. And had there been
some bridging out of the circuits attached to the manometers, or some other
interference with their operation as suggested by Mr Bovell, it would be unlikely
that none of the operators, called by one or the other side here, would know of it.

[505] The defendants argue for a finding that the manometers “were regularly by-passed”,
suggesting that sometimes they were in operation and sometimes not. It is quite
possible that at some time or times they were not working, given that the period in
question exceeded 15 years. It is another thing to say that they were deliberately
interfered with so that drop cutting could occur.

[506] The defendants argue that given the evidence of Mr Clews and others as to the
frequency of drop cutting, it is likely that the manometers were “by-passed” because
of the likely instance of a “partial grounding during drop cutting, that always ran the
risk of creating enough of a slack rope situation that the manometers would trip”.
But as that written submission appears to accept, it was not inevitable that
drop cutting would cause such an interference with the rope tension that the
manometers would shut down the operation of the boom. It far from appears that
 133

any drop cutting required the manometers to be by-passed in some way. As I will
discuss, drop cutting was practised constantly over the entire life of the BWE.
Consistently with the defendants’ argument, there was a need to isolate the
manometers from the outset, and to keep them isolated. This makes it more
remarkable that there is no direct evidence that it happened.

Drop cutting

[507] Some witnesses distinguished between different types of drop cutting. But in
essence drop cutting involves the bucket wheel engaging a horizontal ground
surface, rather than an (almost) vertical face.

[508] The BWE excavated “blocks” of overburden. A block was the term for a mass of
earth, extending from the natural ground surface to a depth of 25 metres. Any block
was defined, of course, by the excavation of the earth which had been next to it. As
one block was excavated, the face of the next block became exposed. A block was
about 40 metres wide, depending upon the arc of the bucket wheel as it slewed from
side to side into the face. The face of the block would be divided into four or five
terraces (or “benches”94). The block with its terraces is represented in this figure95.

[509] The operator would start at the top terrace and slew the bucket wheel across its face;
the BWE would then move forward (by about a metre or less depending on the
hardness of the material) and slew back across the face. This would be repeated in
the top terrace until the BWE could advance no further because of the position of its
wheels next to the foot of the lowest terrace. The BWE would then reverse and the
bucket wheel boom would be lowered to the level of the next terrace, where that
would be dug, and then the next terrace and so on. Throughout the bucket wheel
was always turning but of course not always digging.

[510] Mr Clews gave a detailed description of the use of drop cutting. His evidence as to
this is apparently uncontroversial and I accept it. One situation in which drop
cutting occurred, he said, was at the start of a new terrace (which he called a bench).
When moving from one terrace to the next below it, the machine would be reversed
to position the bucket wheel over that terrace, and whilst the boom was then being
lowered, its wheel would begin to dig. This would involve a cut of about one metre
94
Some witnesses used the term “bench” to refer to a block, but I will use it as meaning a terrace.
95
Which is in Dr Potts Report no. 4 (Exhibit 26).
 134

or less before the BWE would commence its slewing action. Mr Clews described
this downward cut as involving a “slice” of less than one metre into the face of the
lower terrace. This was different from what he said was the usual method of
operation which was to walk the machine back completely clear of the face of the
lower terrace and then lower the boom before advancing into the (vertical) face to
start slewing. As to how often this drop cutting might have occurred, Mr Clews
estimated that during a 12 hour shift, there would be a maximum of about six
terrace changes, that is a change about every two hours. He said that if there was
drop cutting on each terrace change, there would have been no significant saving in
time or increase in production. And drop cutting of this first kind could not have
been used on the highest terrace, he said, because the wheel would not extend high
enough to do so.

[511] The second situation was where the machine could not be reversed a sufficient
distance to start a new terrace by the usual advance into the vertical face. This
might occur, for example, if there was insufficient room between the face and a
conveyor belt behind the machine. But this would occur only at the start of a new
“strip”. The BWE worked in a direction parallel to a conveyor belt behind it. A
“strip” or “pass” was completed when the BWE had travelled the length of that
conveyor belt. So this second situation, Mr Clews said, could occur only about
every three months. Over the years, he said he had to use drop cutting in this
situation “on several occasions”.

[512] The third situation was when the lowest terrace was being cut by the BWE and it
had to cut to a certain ground level. To achieve this precision, the operator
sometimes had to lift or lower the boom slightly (a matter of inches) as it slewed.

[513] Mr Clews also recalled a few occasions (three or four over his entire 16 years or so
with the BWE system) when there was an electrical drive fault on the crawlers so
that the machine could not be walked backwards. On these occasions a drop cut
method was used for a short period of no more than an hour or so.

[514] Mr Clews also described in cross-examination another context of drop cutting,

which was where there was a cut in order to put in a drainage sump.

[515] In cross-examination he also recalled seeing drop cutting where the operator
dropped the wheel into the new terrace as the machine was being walked back
before coming forward again to start digging it. He said that he “had seen one or
two operators that did do that”.

[516] There was also drop cutting if and when the BWE cut below the ground level on
which it then stood. This was when it was excavating behind itself, that is to say, in
the opposite direction form its usual (in the case of this mine) easterly path across
the mine site. The conveyor system would remain in position but the bucket wheel
would dig to the west of the conveyor. This was described in a report by
Dr Hofmann and Dr Dittrich as a “deep cut in drop cut method”. Cutting at this
lower level, they explained, “starts as a fully drop cut”. There was some excavation
by the BWE of this kind, late in its life. Mr BH Black recalled that when it was
trialled in 1999, and also that in an earlier trial about ten years earlier, this “shook
the whole machine…[there was] a lot of shaking and bouncing”, which he attributed
to the “tighter” and “harder” earth at that depth.
 135

[517] So of those situations, it is only the first, which some witnesses called an “initiating
drop cut”, which could have involved drop cutting to any substantial extent.
Mr Clews said that some operators more than others preferred the initiating drop
cut. As a trainer of operators, he probably demonstrated the initiating drop cut as an
option “to save a little bit on production time but that this depended on the material
being dug and so forth.” Mr Clews said that this initiating drop cutting occurred
from the “first three or four years of (the BWE’s) operation” and was “carried on
throughout”. Drop cutting of the second situation would have occurred “from day
one” as did the third type.

[518] It appears to have been left to operators to decide if and when they would drop cut.
Mr Clews said that operators “were really left to make up their own minds about
how they would operate the excavator on any given shift” in this respect.

[519] The defendants suggested that the frequency of drop cutting became greater in later
years. This was the evidence of Mr BH Black who said it occurred because it meant
that “a slightly faster overall digging rate could be achieved”; and that it occurred
“just about every bench coming down”, although he did not use the drop cut.

[520] Mr Bowater has been a fitter and turner employed by the plaintiffs since 1980. He
was called by the defendants and in evidence-in-chief said that
drop cutting in itself was “not really a problem done properly”, but that some
operators “did not know what they were doing”. He then gave a description of what
they were doing which is not easy to comprehend, but which seemed to describe a
practice which occurred throughout the life of the machine. His evidence, on what
was or was not “proper drop cutting” is of relatively little weight because at no time
was he an operator.

[521] It was suggested to Mr Clews that the frequency of drop cutting increased in late
1998 or early in 1999, with the introduction of the automation of the hopper car
system. This involved a device which measured the distance between the BWE’s
discharge conveyor and the hopper car into which its contents were emptied. If a
certain distance was exceeded, then a switch prevented the BWE from walking until
the discharge conveyor was automatically re-aligned, which took five or ten
seconds. Mr Clews said that this probably resulted in “a slight increase in the
amount of drop cutting” but it would not have been “very significant”.

[522] Mr Brian Black, (the engineer) was asked about drop cutting and in particular the
initiating drop cut. He knew of it but said “I don’t think you would drop very far”.
When asked about the loads likely to be transmitted from drop cutting he said in
effect that he did not know because he did not “claim to be an expert”.

[523] Mr Graham Wood is an electrician employed at Goonyella since 1976. He was

involved in the electrical maintenance of the BWE system from when it was
commissioned until early 1985 and he later became supervisor of the system from
1998 until its collapse. He supervised operators of the BWE, the spreader and the
conveyors. He attended the operator’s cabin on a daily basis. He said that drop
cutting was “not encouraged but there were some incidents where it was done”. He
instanced the commencement of a new “cut”, which was at the end of a complete
pass. Otherwise it was not “part of everyday operation”. In my view, this
understated the likely extent of drop cutting. And Mr Woods’ views about its
desirability are of relatively little weight given that his expertise is as an electrician.
 136

[524] From this evidence several matters should be noted. The first is that drop cutting
undoubtedly occurred and for effectively the entire life of the machine. Secondly,
the significant context was the first situation, the initiating drop cut. Thirdly, whilst
some operators such as Mr Clews did not see the benefit of it, other operators did
see some point in the initiating drop cut, believing that it made some difference to
productivity. Fourthly, apart from the somewhat difficult descriptions given by
Mr Bowater and apart from the trials of digging the harder material below 25 metres
as described by Mr BH Black, this drop cutting does not seem to have resulted in a
particularly unusual or alarming movement of the machine.

[525] The defendants’ case is that the use of drop cutting was largely responsible for the
BWE’s demise. They rely upon detailed modelling and analysis by Dr Potts. On
his evidence, drop cutting involved the effect of a “partial grounding”, by which
some of the weight of the machine was taken off the bucket wheel boom, with the
consequence that substantial vertical forces were transmitted up the tower, causing
significant stress and substantially contributing to the growth of the crack.

[526] Dr Potts was the only expert to undertake such a detailed analysis of the effects of
drop cutting. Professor Fisher was adamant that there had been no drop cutting, or
at least nothing of significance. Indeed he said that had it occurred the machine
would have failed long before it did. His evidence as to this cannot be accepted
consistently with the evidence which the plaintiffs themselves called from
Mr Clews as to the extent of drop cutting. The same applies in relation to Dr Jones
who argued in one of his reports that:
“AMOG [Dr Potts’ firm] produced no evidence to support the use of
drop cutting [and] had drop cutting been used, and had it produced a
significant upward force on the wheel, then the mast would have
failed by a single overload earlier than 15.3 years.”

Professor Hulsmann said that in drop cutting there was something which was the
equivalent of a “ten per cent grounding”, whereas Dr Potts’ modelling assumed
various possibilities of between 30 and 70 per cent grounding, for which therefore
the stresses would have been higher.

[527] Whilst the nature and incidence of the drop cutting which did occur is known, the
extent to which this resulted in an increase in stress in the main tower is far from
clear. I accept Dr Potts’ evidence that in principle, a partial grounding (if any)
caused by drop cutting would have resulted in vertical forces extending up the tower
resulting in stress. But the quantification of those forces and in turn the additional
stress is difficult, at least because it requires an assumption that the postulated drop
cutting involved some particular extent of partial grounding. It is difficult to accept
that for each and every occasion on which this wheel engaged the horizontal face of
a terrace there was consistently a partial grounding and of a certain extent.

[528] Was this drop cutting, and most importantly the initiating drop cutting, negligent?
Should those operating the BWE or those instructing them have realised that there
was such a risk of damage to the structure that drop cutting should not be
performed?

[529] Remarkably for the case which they now advance, neither O&K nor Krupp ever
warned or advised the plaintiffs about drop cutting. The plaintiffs had no
experience of a bucket wheel excavator apart from this one. The use of bucket
 137

wheel excavators in coal mines in this country had been limited to those used in the
La Trobe Valley. There was hardly an established practice or body of experience in
Australia which would have made it reasonably clear that drop cutting was to be
avoided. And the conditions in Victoria were not in all respects comparable
because the material there was much softer than at Goonyella. So it was not so
obvious without saying that the plaintiffs were not to drop cut. The machine was
capable of drop cutting, and someone without the benefit of the engineering
evidence which I have heard may have thought that he was doing no harm operating
the BWE in that way. And this was something done by an operator no more than a
few times within his shift, if at all.

[530] Save perhaps in one respect which I will explain, the written operating instructions
provided by O&K with the BWE said nothing about drop cutting. That fact is at the
heart of the defendants’ argument. They contend that because the instructions said
nothing about drop cutting, the reader should have understood that he was not to do
it.

[531] In my view that was not how any reasonable person should have understood the
instructions. The drop cutting in question was not a significant means of actually
excavating. The initiating drop cut, when used, was merely something done at the
very commencement of the slewing of a bench. The fact that O&K’s instructions
described the slewing process, but did not mention the initiating drop cut, need not
have suggested to the reader that the drop cut was to be avoided. The operating
instructions endorsed the practice of slewing below the level of the ground on which
the BWE was standing, which involved the so called “deep cut drop cut”. In his
1981 article about this machine, Dr Fleischhaker said that it was designed for a
“deep cut” of 2.5 metres, apparently referring to this digging below the level on
which the machine was standing.

[532] Moreover, it would have been surprising had O&K warned the user against all
drop cutting, because as the evidence demonstrates, drop cutting was considered to
be an acceptable practice.

[533] In a report by Dr Hofmann and Dr Dittrich, tendered by the defendants, they wrote
that:
“Drop cut method is a frequently used operation method in all the
mines over the world. Animations in this report show how it is used
in German mines.

Drop cuts – especially in a wrong application – have to be observed

carefully to avoid big machine vibrations.”

They referred to some pictures of the BWE and the mine site immediately after the
collapse and described as “not really understandable and not explainable” the facts
of “a drop cut in the second terrace face” and a “bogged dropped cut” in the ground.
The translation from their native German in this report is awkward but in effect,
their evidence was that drop cutting of itself is not dangerous and it is a frequently
used method with bucket wheel excavators, but that it must be done carefully.

[534] In a well known text by Dr Durst and Professor Vogt entitled “Bucket Wheel
Excavator” (published 1988), instructions are given as to several methods of
operation including not only the “terrace cut” and the “deep cut” (cutting below the
 138

level of the tracks) but also the “drop cut”. Dr Durst was formerly the chief of the
design department at O&K and Dr Fleischhaker’s superior. He had some early
involvement with the design of this BWE. Drop cutting is also the subject of
instruction in an earlier text by Rasper.

[535] Then there is the fact that O&K itself offered to train operators at Goonyella in drop
cutting. In a letter dated 20 May 1981 from O&K to Utah, O&K proposed a
training program with the BWE which would include instruction as to:
“Cutting methods
Terrace cut – dropping cut”

[536] Mr Kogel was an employee of O&K in Germany until he came to Australia in

May 1980 to act as project manager for the supply, construction, commissioning
and handing over of the BWE. He remained employed by O&K. He was based in
Brisbane and went to Goonyella monthly, and when O&K Australia commenced
business in July 1981 he became its managing director remaining in that position
until 1991. He confirmed that the term “dropping cut” is synonymous with drop
cutting. And when asked about an initiating drop cut and whether a dropping cut
can be used in that context, he replied, “You can”. Faced with this evidence, the
defendants submitted, without any further evidence, that O&K might have been
offering to train operators not to drop cut, rather than how to drop cut. I do not
accept this submission.

[537] So far as Australian experience is concerned, Mr Newnham ranks highly. He is an

engineer who has been involved with the bucket wheel excavators used in the
La Trobe Valley, where equivalent machines are sometimes referred to as dredgers.
He was responsible for managing the repair of these machines and their operating
procedures. From 1980 to 1983 he was employed at the Yallourn Mine as the
mechanical maintenance superintendent, and was there responsible for maintenance
of a wide range of equipment which included bucket wheel/bucket chain excavators.
From 1983 to 1991 he held various positions at the Loy Yang Mine and then the
Loy Yang Power Station in the employ of the State Electricity Commission of
Victoria. In 1990 and 1991 he was the manager, mine improvements for the SECV,
which provided engineering support for the Commission’s La Trobe Valley coal
mines. For the next three years he was principal engineer of another group which
provided plant design and support services to the La Trobe Valley coal mines and
then from 1994 he has been in his own business, WBM Pty Ltd.

[538] He discussed drop cutting as a common practice and referred to its reference in
“Experience with Bucket Wheel Excavators in Australian Brown Coal” by Mr HCG
Rodgers. He also referred to the publication by Rasper. Mr Newnham wrote in one
of his reports as follows:
“Personally, I am unaware of any direction or caution by machine
manufacturers, warning against the use of the dropping cut
technique. Documentation for Dredgers 9 and 13 in La Trobe Valley
depicts the drop cutting technique.”

[539] It may be the case that the drop cutting with this BWE, or some of it, was a cause of
its early demise. It may also be the case that O&K, and in particular
Dr Fleischhaker, had not anticipated either the extent of that drop cutting or its
impact given the particular conditions at Goonyella. Especially having regard to the
evidence as to German practices, some drop cutting should not have surprised them.
 139

It is quite another thing to say that the owners of the machine should have
understood that there was to be no drop cutting, and in particular none of the
“initiating” kind. Not only was there no warning or instruction against it, O&K
offered to train operators in drop cutting. It cannot be said that drop cutting of itself
was obviously wrong.

[540] It may be that the overburden in which some drop cutting was undertaken was
damaging to the BWE and that the individual operator should have known that he
was then working the machine too hard. But that is mere speculation, and it is not
proved that such drop cutting occurred.

[541] The fact of contributory negligence is not proved by Dr Potts’ extensive modelling
and analysis. That evidence goes to the causative effect of drop cutting. It cannot
be fairly used to reason to a conclusion of contributory negligence. And necessarily
in his analysis Dr Potts had to make numerous assumptions. In particular he
assumed an incidence of drop cutting which was not borne out completely by the
evidence and in particular by that of Mr Clews.

[542] In my conclusion, it is not shown that the drop cutting which did occur involved the
absence of reasonable care.

Teeth and buckets

[543] The defendants plead that the plaintiffs negligently “caused or permitted teeth of an
improper or inadequate design to be used on the buckets”, with the consequence that
vertical loads were increased which imposed loads outside “the parameters of
BG 60” and unduly increased the stresses on the tower.

[544] They further plead that the plaintiffs “failed to adequately act upon the expressed
view of Dr Fleischhaker to the effect that the teeth being used were the wrong shape
and were imposing excessive vertical forces”.

[545] Thirdly, they plead that the plaintiffs wrongly “caused or permitted the BWE to be
operated for periods with teeth missing from the buckets, and with buckets missing
from the bucket wheel”.

[546] That second allegation is really a particular of the first allegation: that the wrong
teeth were used.

[547] On each of the buckets were several metal protrusions, which would engage the
earth ahead of its encounter with the bucket itself. These were its teeth. There were
160 teeth, eight on each of the 10 buckets and eight on each of the pre-cutters.
(Originally the pre-cutters had six teeth but this was changed to fit the teeth in the
same configuration as on the buckets.) Each tooth was attached to the wheel by an
adaptor.

[548] In essence the defendants’ case is that the plaintiffs used teeth which were too blunt
and that this resulted in higher loads and stresses than those for which the machine
had been designed. This is said to have contributed to the fatigue cracking which
caused the collapse.

[549] The BWE was supplied by O&K with teeth which it had designed and
manufactured. But very soon they proved to be unsatisfactory. According to
Mr Michael King, who was formerly employed as the mechanical maintenance
 140

superintendent at the mine, the O&K teeth failed within the first 25 hours of
operation. So in conjunction with Mr Raleigh and a Mr Stahl, Mr King set about
finding a solution. Many different types of teeth were trialled. O&K was involved
to some extent in that process as were two other suppliers of teeth, which were Esco
and Hensley. According to the defendants’ particulars, the plaintiffs’ use of both
the Esco and the Hensley teeth was negligent.

[550] Mr Gemballa was an employee of O&K who was at the mine site when the BWE
was commissioned and for about 10 months afterwards. He had some involvement
in this trialling of other teeth. Mr King recalls that when Mr Gemballa left the site
he took with him a couple of the Hensley teeth.

[551] While this trialling was occurring Utah was fast running out of O&K teeth. In about
the middle of 1983, Utah started trialling Hensley teeth, firstly with tungsten carbide
tips and later with other tips.

[552] Dr Fleischhaker was well aware of the problems with the O&K teeth and of the
search by Utah for substitutes. And he was well aware of what teeth were being
used, as appears from, for example, an article about this BWE which he published
in 1985. He sent a draft of that article to Mr Black in January 1985. In the
published article he wrote of the performance of the BWE, detailing its output and
the conditions in which it worked. Under the heading “Lifetime of Teeth” he wrote:
“Looking at the experience of about 30 months, it seems to be a
question of economics whether or not extremely hard material should
be preblasted.

[Utah] has conducted some experiments with various teeth. They

have used:

O&K teeth - cast steel GS with hard metal

Esco teeth - hardened cast steel
Hensley teeth - tungsten carbide mounted on cast steel

The reported data show the following:

Esco teeth - 65 – 80 h average lifetime

Hensley/O&K teeth - 160 – 240 h average lifetime

The lifetime depends on the hardness of the material (ratio of

minimum to maximum lifetime about 1:3) and on the position of the
teeth in the bucket (ratio of minimum to maximum lifetime about
1:8).”

[553] In 1989 Dr Fleischhaker wrote to Mr Black about teeth as follows:

“Dear Brian

As you will remember we are doing some trials to develop better

wear resistant teeth for heavy duty operation. We have installed
some special teeth in Bukit Asam, Indonesia, and we would like to
ask you to do some other trials in your Goonyella mine.
 141

If you could agree we would like to ask you for 4 teeth of your
Australian fabrication (Hensley supply?). Please send them by
airfreight , we will pay the bill. We will modify these teeth (another
kind of wear resistant cover) and send them back to you. They
should be installed on one bucket to observe their lifetime.

Hopefully we will achieve some good results for the future.

Thank you very much for your assistance.”

[554] At no time did Dr Fleischhaker or anyone else from O&K write in terms which
expressed any concern as to the teeth on this BWE. More particularly at no time did
he or any other person suggest that the teeth which were being used could damage
the structure, or that some engineering assessment of that risk (if any) should be
undertaken.

[555] There was nothing about teeth or missing buckets as part of the defendants’ original
pleadings of contributory negligence. O&K pleaded these matters only by an
amendment allowed at the commencement of the trial. And they were raised for the
first time by parts of Dr Fleischhaker’s witness statement of February 2007. The
lateness in the addition of this case about teeth is not satisfactorily explained. If, as
Dr Fleischhaker says, he had always been concerned about teeth, it is remarkable
that O&K did not plead this case earlier. Yet Dr Fleischhaker’s evidence is that he
did warn against the use of these teeth, by “what was said to Black and Shepherd
between 1982 and 1984, in Brisbane, and said to Black in November 1984 at
Goonyella”.

[556] In his first statement, Dr Fleischhaker sought to explain the unsuccessful O&K teeth
as follows:
“…The responsibility for developing and specifying the shape of the
teeth used in the bucket wheel itself was left to the mechanical
department [of O&K]. In 1978, it was not as fully appreciated as it
has become, that the shape of the tooth may be critical to where the
vertical loads were being imposed upon the bucket wheel in its
ordinary use.”

This suggests that there was some engineering advance which occurred after the
design of the bucket wheel, although that is not otherwise indicated by the evidence.

[557] In the same statement Dr Fleischhaker said that:

“It would have been inappropriate for the tooth specified for this
excavator for use in hard material to have a tungsten tip because the
result of that is that the tooth is not permitted to wear in a manner
which is described as underwear. By this process, the teeth are
quickly sharpened by the wearing process, and it is the sharpened
edges which form the effective cutting task. If the teeth are not
shaped in this way, it is possible for vertical loads to be imposed
upon it.”

In this he appears to have been referring to the Hensley tooth, which had a cutting
edge of tungsten carbide. But on Mr King’s evidence, which I accept, when the
machine was first commissioned the O&K teeth were tungsten with carbide inserts.
 142

On the O&K teeth these inserts shattered or broke out and then the adaptors began
to fail and break off. Mr King explained that with the Hensley tooth there were not
the same tungsten carbide failures because a softer grade of tungsten carbide was
used which avoided fractures.

[558] Then in the same statement he said that when he was at the mine in October 1984,
he discussed with Mr Black his “concern that the type and inclination of the teeth
were wrong and that they were imposing vertical forces”. He continued:
“The geological conditions on the site required a special shape of
teeth on the buckets to ensure the correct angle and the digging
process. Although this was not known at the time of the original
design, after my investigation on site following the distortion to the
tower in October 1984, I formed the view that part of the explanation
was that the wrong type and inclination of the teeth, which resulted
in the operator of the machine in having a problem being unable to
dig into the ground but just sliding on the surface with the result that
vertical forces were increased.”

[559] In the same statement he said that:

“Between 1982 and 1984 I told Mr Black and Mr Shepherd in
Brisbane that the teeth they were using were the wrong shape. I
informed them that immense forces were needed to bring these teeth
through the hard material. I said that unless O&K designed teeth
were used, the life of the machine would be significantly shortened
and that the O&K teeth were specially designed for this process.
One of those occasions I believe was a mining conference in
Brisbane.”

He claims that he had no success in persuading them that they should come back to
the O&K teeth, or teeth shaped like the O&K teeth.

[560] He continued:
“The result of the use of the teeth referred to above, was, in my
opinion, that there has been a load introduced for fatigue which is
outside the load assumptions for the excavator and BG 60. The
result is that we would expect cracks which would develop into the
structure as the result of fatigue.”

[561] Remarkably these strong concerns were not expressed in writing. And consistently
with his claims in response to the design case, that he made various calculations of
strength of the structure and applied BG 60, it seems he would have assumed in
October 1984 that the higher loads introduced by these different teeth would not
continue.

[562] Mr Black and Mr Shepherd deny receiving this advice. Mr Black said he had no
conversation with Dr Fleischhaker or anyone else from O&K about using only
O&K teeth, or that tungsten teeth should not be used. Nor was he advised that the
teeth had to be worn so that they became sharp. He accepted that he may have had
some discussion with Dr Fleischhaker about teeth, but not in terms of those related
within Dr Fleischhaker’s statement. He denied that it was suggested to him that the
teeth were the wrong shape. Importantly he denied that Dr Fleischhaker said to him
 143

that the life of the excavator would be shortened if “O&K design teeth” were not
used.

[563] Mr Shepherd was the manager of engineering and construction with Utah from 1976
to 1982, and as such he was involved on the construction and commissioning of the
BWE and other parts of the BWE system. When the construction and
commissioning commenced in late 1979, he began to attend the mine site every one
or two weeks for a day at a time. He denied having any conversation with
Dr Fleischhaker about the teeth used in the BWE and he has no recollection of
attending a mining conference in Brisbane with Mr Black or Dr Fleischhaker.

[564] Mr Black was an impressive witness. So too was Mr Shepherd, who gave his oral
evidence in an apparently considered and balanced way. He is no longer employed
by BHP.

[565] There are many reasons why I am not persuaded to accept Dr Fleischhaker’s
evidence about teeth, and in particular his evidence of these conversations. The first
is the view that I have of his credibility generally, which ought to be apparent from
what I have written earlier on the design case. The second is that it seems at odds
with his published article in 1985 and his 1989 correspondence, which suggest no
misgivings about these teeth. Dr Fleischhaker said that the reference to teeth in his
1985 article:
“was simply to report information I had at that stage been provided
by Utah, information about their attempts to obtain longevity in their
teeth in experimentations. I was not provided with information about
the shape of those teeth”.

Yet here was an article widely published where, as Dr Fleischhaker would have it,
he was writing of the success of the BWE without knowing whether Utah had
desisted in the use of the teeth about which he had strongly warned Mr Black in
late 1984.

[566] It is inherently unlikely that he had such strong concerns, in particular when at the
mine in 1984, and yet he wrote nothing about them. He was then at Goonyella to
advise on the repair of the machine which he had designed and which had been in
operation for only a relatively short time. It had suffered substantial structural
damage. On his version, he saw teeth were being used which would be likely to
cause further structural damage, yet he wrote nothing about it, either to Utah or to
anyone else.

[567] And had Mr Black received such advice about teeth in 1984, it is likely that he
would have acted upon it. After all he had arranged for Dr Fleischhaker to come to
Australia to advise on the repair, because he thought that there was no other person
with the same knowledge and experience. It is very difficult to see that Mr Black
would have ignored such advice from Dr Fleischhaker.

[568] There is also the lateness with which this teeth issue has been raised. As I have said
that lateness is not satisfactorily explained. It is to be inferred that
O&K’s pleadings were prepared from the outset with the benefit of information
from Dr Fleischhaker.

[569] But there is another matter which I think makes it likely that Mr Black would recall
such advice about teeth had it been given. It is the fact that Utah had to find
 144

alternative teeth because the O&K teeth had failed. In that circumstance, had
Dr Fleischhaker been bold enough to tell Mr Black to use only teeth designed by
O&K,it is likely that Mr Black would remember that.

[570] Then when cross-examined, Dr Fleischhaker conceded that he had no specific

recollection of speaking with Mr Black about this. He claimed still to have spoken
with Mr Shepherd and a Mr Brett at a mining conference in Brisbane. But when
asked what was the subject of that conversation, he said that it was “the wear and
tear of teeth” and the trials which were then being conducted. He conceded that at
that stage he did not know what kind of teeth were being trialled, because he was in
Brisbane and not at Goonyella. He also agreed that he did not say to them anything
along the lines that the design of the teeth they were using would shorten the life of
the machine. So if he had a conversation with Mr Shepherd or anyone else from
Utah at this conference in Brisbane, it seems that the discussion concerned only the
problems which Utah was having in finding teeth which were sufficiently durable,
consequent upon the failure of the O&K teeth. Overall the effect of these
concessions in cross-examination all but put paid to his evidence-in-chief (which
was in the form of written statements), that he gave warnings to Mr Black and
Mr Shepherd.

[571] It follows that O&K offered no warning about the use of these other teeth. Strictly
speaking that is not fatal to their claim of contributory negligence. In theory, the
plaintiffs could have been negligent absent a warning. But it makes that claim more
difficult to accept, particularly when Dr Fleischhaker himself was prepared to
publish statements which gave apparent approval to what was being done.

[572] Mr King was shown a photograph of the teeth at the time of the collapse in 2000
and said that the teeth had apparently the same sharpness as the O&K teeth. During
the trials of the teeth, he did not notice that they dug in any way differently from the
O&K teeth. And from his regular observations of the operation of the BWE, he did
not see that it was vibrating in any way differently from its operation when it was
first commissioned (with O&K teeth) and “if anything it probably ran smoother”.

[573] Mr Clews said that some teeth dug the material more easily than others but that it
depended upon the type of material. He said that there were some types of material
where a “wedge-shaped tooth dug and cut better than a block-faced type tooth,
whereas in other materials a block-faced tooth was much more wear-resistant and
did a better job.”

[574] Ultimately the teeth case came down to an argument that some people at the mine,
in particular Mr Black and Mr King, understood that the use of particular teeth
could add additional loads to the structure of the machine. As to Mr King, this went
no higher than his concession in cross-examination that he may have discussed with
Mr Black the possibility of additional loads. As to Mr Black, the argument relies
upon a reference by him in a report in August 1985 where he considered whether a
particular type of teeth (“pick” teeth) would “add additional loads to the main load
frames.” However what he there wrote was that such teeth would not add loads to
the main load frames (the structure). Further, Mr Black did not remember that this
type of tooth was actually used on the BWE. When cross-examined Mr Black
accepted that in principle, forces were transmitted through the bucket wheel boom
and into the structure itself which were the result of, amongst other things, the shape
and angle of the teeth. But this was hardly a concession that he knew or should
 145

have known that the teeth which were used were of the wrong design, or that their
design might cause the premature demise of the BWE.

[575] Professor Hulsmann explained why he had done no modelling on the effect of the
shape of teeth. He said: “we do not really find out why the different teeth would
change anything as far as the load of the machine is considered”, and that he did no
calculation as to “whether different teeth would make a difference” because “there
was nothing that referred to it in any of the BGs”. That evidence was strongly
criticised in the argument for the defendants, which relied upon yet another analysis
undertaken by Dr Potts and his firm (AMOG report no 10). Now Dr Potts’ opinion
about that may be the better one. But it is of some significance, in considering
whether any reasonable operator in the position of BHP would have used different
teeth, that such an eminent engineer as Professor Hulsmann would not have seen
some cause to do so.

[576] As to what was the alleged effect on the life of the BWE of its teeth, the defendants
say that “the fact of the matter is that the only expert to have attempted to quantify
the resultant force from using the improper teeth is Dr Fleischhaker”, and that “even
he did not suggest that there was a perfect figure, but an approximation in order to
give some idea of the general impact.” I would not be prepared to accept his
evidence as to this if there is no other analysis to support it.

[577] I am unpersuaded that the plaintiffs were negligent in using the teeth which they
did. And I am unpersuaded that these teeth were any different from the O&K teeth
in their effect on the life expectancy of the BWE.

[578] There is then the related plea that the plaintiffs used the machine sometimes with
missing teeth from buckets, or missing buckets from the wheel. Undoubtedly these
things occurred, although as the defendants concede, “it is difficult to be specific
about it, either in terms of its duration or its impact”96. The submission is, however,
that this was “not good for the machine” and was likely to have resulted in
increased loads transferring through to the tower.

[579] Mr Clews remembered a time when the machine was operated for about four days
with one of its buckets missing. This was found to be unsuccessful, as Mr Clews
described in detail, and it resulted in one of the safety devices shutting the wheel
down. He said that it was not done again.

[580] Mr King said that from time to time the excavator operated without some teeth. The
maximum teeth missing at any one time would have been a dozen. He did not think
that this was the “best idea” because it placed additional work on other teeth.

[581] Mr Bowater described instances where “a lot of times people didn’t change out a
tooth” although “people [were] supposed to change out the teeth every shift”. He
described his practice of promptly changing teeth when necessary.

[582] Mr BH Black said that as soon as he found a broken tooth he changed it and he
never operated the machine with missing teeth.

[583] Unsurprisingly, none of these recollections is very precise. But the evidence does
not give the impression that the owners paid no attention to missing or broken teeth.

96
Written submissions, paragraph 651.
 146

And nor does it appear that they were negligent in failing to do anything more
promptly. More particularly, it is not shown that they should have seen a risk of
structural damage to the machine from missing teeth and that the reasonable
response to that risk was to not operate the machine for any time whilst any tooth
was missing.

[584] As to the case about missing buckets, this has no factual foundation, at least because
it is not shown that this occurred except very rarely and perhaps only on the
occasion recalled by Mr Clews. According to the defendants’ pleading about
missing teeth and buckets, the particulars of this case were to be found in certain
paragraphs of a statement of a Mr WJ McKee. But that statement was not tendered
and nor was Mr McKee called.

[585] It follows that these belated pleas of contributory negligence involving teeth,
missing teeth and missing buckets are unsuccessful.

Production rates

[586] In essence the case here is that the plaintiffs worked the BWE too hard. They
caused it to dig too much by making it dig more earth in a given amount of time
than it should have dug. It is claimed that the plaintiffs knew this and were thereby
negligent, and that this shortened the machine’s life. It is pleaded that BHP directed
the BWE operators to increase productivity, and established a system of reporting
productivity levels, which encouraged “the overuse and overworking of the BWE
and its use outside its DOP”.

[587] It does appear that, not surprisingly, operators were encouraged to improve
productivity. But the questions are whether the machine was overworked and if so,
whether that was known or should have been known by BHP, either by its
management or its operators. There are two parts to the pleaded case about those
matters.

[588] The first is that “in the years leading to March 2000”, the digging rate
regularly exceeded what were said to have been established by BHP in earlier years
“as the normal production figures”. As to what were the ‘normal’ figures, it is
alleged that in the first four years of its operation, the BWE dug at a rate of about
2150 bank cubic metres (bcm) per hour, and when measured over the first 10 years
of its operation, its rate was 1672 bcm per hour.

[589] Secondly, it is said that the “BWE’s designed performance parameters … were such
that the peak output of the BWE, which was not to be exceeded, was 6600 bcm
per hour, and that this was often exceeded in the period from May 1999 to
March 2000.

[590] That first argument is an unusual case of negligence, because the alleged standard of
reasonable care was that set by the party against whom negligence is alleged. It is
not a standard which is said to have come from some wider practice in the operation
of bucket wheel excavators. It is simply that if the machine dug at certain rates on
average over a 10 year period, then digging at much higher rates in subsequent years
must have been negligent. Such a disparity could be relevant, but does not of itself
prove negligence.
 147

[591] The defendants’ case then focuses upon the so called designed performance
parameters, and in particular, this so called upper limit of 6600 bcm per hour.
According to the defendants’ argument, this and other figures as to digging rates
were set out in the written operating instructions provided by O&K. That appears to
be incorrect. The various figures relied upon, and in particular that 6600 bcm per
hour, are derived from other documents as follows.

[592] Clause 12 of the special conditions of the contract for the supply of the BWE
required O&K to carry out performance tests prior to the issue of a final certificate.
Clause 12.1.2 was in these terms:
“12.1.2 [O&K will] carry out performance tests involving operation
of the Works for a period of 30 days and establish, to the
satisfaction of the Superintendent that for 26 working days
of 3 shifts each the Works has an operation capacity not less
than that warranted in special condition 13, and meets the
conditions set forth in this contract provided that any such
performance tests need not continue after the nominal
warranted throughput for a 30 day period has been
processed….

12.1.5 If the contractor conducts the performance tests referred to

in special condition 12.1.2 in the circumstances referred to
in the preceding sub-clause then the contractor shall return
to the erection Site at such time (during the 15 months
Defects Liability Period) as the superintendent may direct to
ascertain whether:

(a) the works when operated in conjunction with the

associated conveyor system have the operating
capacity warranted in special condition 13;

(b) the integrated system comprising the Works and the

associated conveyor system is capable of performing
at the rate warranted in the performance guarantee
entered into by the principal, the contractor and the
contractor constructing the conveyor system,
pursuant to special condition 13.6 of this contract,
and the like condition of the contract between the
principal and the contractor constructing the
conveyor system.”

The “contractor” was O&K, and the “Works” comprised the BWE and certain other
things but not the conveyor system.

[593] Special condition 13 contained or provided for several warranties by O&K. It was
as follows:
“13.1 The contractor warrants and guarantees to the principal
that…the Works in all its parts shall achieve its guaranteed
output and without undue wear, undue straining of parts and
without undue vibration or noise…
 148

13.2 In the case of the excavator the contractor warrants the

continuous output of the Works during the performance test
referred to in special condition 12 as follows:

(a) in all material [of a certain geology]…1500m3/h

(solid)

(b) in all material [of another classification]…1000m3/h

(solid)

(c) in all material [of another classification]…1000m3/h

(solid)

(c) for [a further classification]…750m3/h (solid)

(d) for[ a further classification]…500m3/h (solid)

(e) in all material that has been blasted 2000 tonne

per hour…

in all cases, the excavator’s output shall be determined by

survey and when excavating and discharging at the
guaranteed rate, the output during any 15 second period
shall not exceed 11 cubic metres (solid) equivalent, at a
swell factor of 1.5, to a throughput of 4,000 cubic metres per
hour (loose).

The inability of the excavator to dig at more than a peak rate

of 6600 cubic metres per hour (loose) shall be demonstrated
during a short-time test of 10-15 minutes duration…

13.3 In the case of the spreader and tripper/cable reel, the

contractor warrants the continuous throughput of the Works
to be at least 5200 cubic metres per hour (loose) with
capacity to handle peak loads of 1 (one) minute duration of
6600 cubic metres per hour (loose) …

13.6.1 It shall be a condition subsequent to this Agreement that the

Contractor shall subscribe to a separate Guarantee of
Performance of the integrated pre-stripping system
comprising the Works and the conveyor system. Such
guarantee in favour of the principal shall be given by the
Contractor and the contract to whom the principal awards a
contract for the constructor of the conveyor system (referred
to in this special condition as “the Conveyor Contract”).

The prime terms of such guarantee shall be as follows:

(1) The Contractor and the conveyor contractor jointly

and severally guarantee that the integrated
pre-stripping system comprising the works and the
 149

conveyor system (referred to in this special condition

as “the integrated system”) is capable of performing
at the following rates:

(a) for the higher setting of conveyor belt speed

and in suitable digging;

1500 bank cubic metres per hour or better as

the effective, average hourly output;

4800 loose cubic metres per hour as the

nominal throughput of the system;

6600 loose cubic metres per hour as a peak

load occurring for the duration of 1 (one)
minute for up to 10 occurrences per hour.”

[594] The defendants also refer to part of the tender documents for the supply of the
BWE. In tender schedule J, in a table headed “Technical Data”, were these
references:
“Guaranteed output bank m3/h 1500
Peak output (not to be exceeded) loose m3/h 6600”

In the same document, under the heading “Technical Particulars” was this:
“Theoretical output 1728 m3/h loose”

On another page, also under the heading “Technical Data” was this:
“Theoretical output 1728 to 5184 loose m3/h
Material to be handled opposite
that overburden bulk weight ABT. 1.8t/m3”

[595] The defendants’ argument proceeds from a misunderstanding of the effect of these
contractual provisions, and in particular, what was said about a limit of 6600 cubic
metres.

[596] A bank cubic metre is a measure of unexcavated material. That which is measured
by “loose cubic metres” is the excavated earth. The same earth has a larger volume
once it is excavated and that increase in volume is quantified by the so called “swell
factor”. So in special condition 13.2 as set out above, there was an assumed swell
factor of 1.5, meaning that the unexcavated or “solid” figure of 11 cubic metres
per 15 seconds (or 2640 cubic metres per hour) should be multiplied by 1.5 to arrive
at the volume as excavated or “loose” material. It should be noted that this output
of 2640 bcm per hour is nearly half as much again as the guaranteed output of 1500
bcm per hour, yet the defendants’ submissions appear to suggest that 1500 bcm was
indicated by these documents as the normal and prudent output. At that swell factor
of 1.5, the “peak output” of 6600 (loose) cubic metres per hour would equate to
4400 bcm per hour.

[597] Further the sense in which the 6600 cubic metres was a “peak” must be considered.
Within condition 13.2, O&K warranted that “the inability of the excavator to dig at
more than the peak rate of 6600 cubic metres per hour (loose) shall be demonstrated
during a short-time test of 10 – 15 minutes duration”. That appears to be a warranty
 150

about what the excavator was unable to do, and hence it was that inability which
had to be demonstrated.

[598] This must be read with the warranty in condition 13.3, which concerned not the
excavator, but the spreader and tripper/cable reel. For that equipment, O&K
warranted that the continuous throughput would be “at least 5200 cubic metres per
hour (loose) with capacity to handle peak loads of 1 (one) minute duration of 6600
cubic metres per hour (loose)”. So this was a warranty as to the continuous
throughput, and also as to the capacity of the spreader and tripper to handle loads of
a certain order (up to 6600 cubic metres for one minute at a time).

[599] It must also be read with condition 13.6.1, which was not a warranty as such, but a
promise by O&K that on the occasion of the provision of “the integrated system”, it
would join with the contractor which was providing that equipment (specifically the
conveyors) in providing a warranty as to the system as a whole. That warranty was
to be that the “system comprising the works and the conveyor system” would be
capable of digging at 1500 bcm per hour, and of handling a nominal throughput of
4800 loose cubic metres per hour and 6600 loose cubic metres per hour as a peak
load occurring for the duration of one minute for up to 10 occurrences per hour.

[600] As I read these provisions, they were not some warning to or acknowledgement by
the owners that the BWE was not to dig at a rate which would produce more than
6600 loose cubic metres per hour. These were warranties, and broadly speaking,
they were directed to two concerns. The first was that there should be a guaranteed
minimum output. The second was that because the excavator could dig at a faster
rate, the output of the excavator should not be too fast for the rest of the system.
This explains the warranty as to the inability of the excavator, that is that it was
unable to dig at a rate equivalent to more than 6600 cubic metres. It explains why
that inability was to be demonstrated at a test. It explains also the warranty that the
spreader and tripper would be able to handle a throughput with peaks of up to
6600 cubic metres and the further warranty under clause 13.6 as to the capacity of
the entire system. The reference in the tender document to “Peak output (not to be
exceeded) loose m3/hr 6600” had the same meaning.

[601] These warranties have to be read also with an understanding of other things about
the design of this machine. The output of the excavator was a function of the speed
of rotation of its bucket wheel. The wheel would and could turn only as fast as it
was driven by the BWE’s motors. This was explained by Mr Black. When asked
about this reference to 6600 cubic metres and whether it was “a warning that if you
(exceeded that) the machine might suffer stress?” he answered:
“I am not too sure about that. What you have to bear in mind with
this machine, that it had a direct current motor drive with regulated
direct current. And it got to 100 per cent torque on the motors, and
then it started to ramp off … [This] was another means of trying to
ensure that it didn’t get loads into the drives and into the wheel that
would wreck it prematurely.”

The speed with which the wheel could be turned depended upon the relative
hardness of the material: hence the different amounts warranted as the minimum
continuous output according to the geological quality of the material. But the
motors themselves placed a limit on the speed of the wheel and in turn on the
BWE’s output. So the “theoretical output” of 5184 cubic metres per hour was an
 151

estimate of how much could be excavated with the wheel turning as fast as it could
in certain assumed conditions of relatively soft material.

[602] This was also explained by Dr Fleischhaker. In his first witness statement he
described how the operator is able to select the speed at which the wheel will rotate
and “that were the wheel operating fast but encountering harder material, the speed
will be automatically reduced to take account of those conditions”. In his oral
evidence he agreed that the BWE was designed “based on the proposition that
whatever power was provided by the machine would be used by the operators”.

[603] In other words, the machine itself contained its own limitations on output. The
power of its motors together with certain safety devices limited its capacity.
Operators were expected to drive it hard and to use what power was available. This
is then why, contrary to what the defendants now suggest, there was no warning
about excessive rates of digging. The so called “peak” of 6600 cubic metres was
not some kind of speed limit. It was a warranted as a maximum output, so that the
components downstream from the excavator could cope with what it was delivering.

[604] The defendants rely upon some answers of Mr Black in cross-examination to

suggest a different meaning of these documents. He was taken to those parts of the
warranty which I have set out above and asked whether he understood “that if those
rates…were exceeded, then you were likely to get the undue wear and undue
straining and undue vibration referred to (in the warranty)”. He replied “I
understood that to operate above those capacities on a continuous basis was not a
very smart thing to do”. The cross-examination continued:
“No. You could go up and out of it momentarily?--- Yes.

But if you did that hour after hour after hour,…its not a very smart
thing to do, its unwise and would lead to, as you understood it, the
very things referred to, that’s undue wear, undue straining?--- Undue
wear and earlier wear out of components, bearings, what have you.

So in your understanding then, this was very much a warning to not

exceed on a regular basis those limits?--- I think it was a way of
expressing prudent operational capacity.”

Three things may be noted about that evidence. The first is that Mr Black was
shown certain parts of the warranties as I have set out above, but he was not given
the opportunity to read through them in context and reflect upon their effect as a
whole. Secondly, he did not agree that these warranties or the guarantee constituted
a “warning”. Rather, he said that they were expressions of an operational capacity,
which is as I read them. Thirdly, he did not accept the suggestion that the
continuous exceeding of these limits (if possible) would result in structural damage
(if indeed that was suggested by the cross-examiner’s reference to “undue
vibration”). He did accept that there would be “undue wear and earlier wear out of
components, bearings”: in other words, the harder it was driven, the faster some
components would wear.
 152

[605] I am fortified in my interpretation of these warranties, and in particular this “peak”

of 6600 cubic metres, by Professor Hulsmann’s evidence in his report of July 2007
where he wrote97:
“The upper limits of a continuous output rate of 4000m3/h or as peak
of 6600m3/h (loose material) are given because you have to handle
the output also with all other following machineries (conveyors,
spreader) (see contract special conditions 13.3 …) – this is a question
of integrating the overall system.”

[606] The result is that the defendants’ case in this respect rests upon a number of
misunderstandings of the effect of these documents and in particular the warranties.
The warranted output of 1500 bcm was a warranted minimum. The peak of
6600 cubic metres was not a recommended maximum. It was a warranted upper
limit on the capacity of the excavator: the manufacturer’s promise was that it would
not exceed that level. And these were not “operating instructions”. Nor was the
1500 bcm “stated as an effective average hourly output”. The pleaded basis for this
overworking case thereby fails.

[607] But before leaving this allegation, some matters should be noted about the
defendants’ case as to what in fact was the BWE’s output. They argued that it was
worked too hard late in its life, and in particular they relied upon a spreadsheet
which set out the production of the BWE from May 1999 until its collapse98. This
shows a number of tonnes per hour for each day in that period. Over the entire
period the average production was 4197 tonnes per hour. The defendants say that
the appropriate rate of conversion from bank cubic metres to tonnes is about 1.9.
Accepting that, the average bcm was thereby about 2209 bcm per hour, hardly an
unusual figure having regard to the contract documents. At a swell factor of 1.5 this
would be about 3300 cubic metres (loose). But the defendants say that it is
“critically important” to recall that these are average figures and that even for each
shift, what appears is an average over that shift. So, for example, on 24 June 1999
when there was an average of 6407 tonnes per hour, they stress that “the rates at
various points during that shift must have greatly exceeded 6407 tonnes”. It must
be accepted that because that figure is an average, at times that rate was exceeded
during that shift. It does not follow that it was “greatly exceeded”, whatever that
should mean. And 6407 tonnes per hour would equate to 3372 bcm per hour, or as
loose material about 5000 cubic metres per hour, which is well short of the so called
“peak”. The defendants emphasise that within this spreadsheet, there were several
shifts where the average rate was “clearly exceeding 6,000 tonnes per hour”. That
is so, but it is not at all apparent that the so called peak was exceeded. The highest
output in this period appears to have been on 21 July 1999 when a rate of 8439
tonnes was achieved, which divided by 1.9 would equate to 4441 bcm (at a swell
factor of 1.5) or (as it happens) about 6660 tonnes. Yet this list of production
figures for shifts during this period is the document pleaded by the defendants as
demonstrating that the rate “often exceeded 6600 bcm per hour”. Accepting the
defendants’ point about these being averages, nevertheless the document does not
support that allegation.

[608] Moreover average rates of output are relevant. The defendants’ thesis is that over
time, the machine was worked so hard that the cumulative effect of this overwork

97
Page 4.
98
Exhibit 186.
 153

contributed to its demise. It is not their case that an occasional excess was life
shortening.

[609] The defendants also refer to the evidence of the enthusiasm at the mine in later years
to lift the output of the BWE. Mr Haegel was said to be responsible for much of
this. Undoubtedly, BHP, and Mr Haegel in particular, were looking to lift the
output of the BWE at this time. The defendants emphasise Mr Haegel’s evidence
that he chose a target of 5000 tonnes per hour as an average production rate. But
this is no more than about 4000 cubic metres of loose material or 2600 bcm. Again,
these are not remarkable figures.

[610] And as to the significance of the figures in the last nine months of operation, it
should be noted that the machine was then working in the Red Hill North pit, where
the material was softer than at the Cleanskin pit where it had operated in its first
years and in the mid-1990’s. Clearly its output would have been greater in the
softer material.

[611] As to the effect of this suggested overwork, the defendants’ submission was put as
generally as this:
“There is an abundance of evidence which shows that the machine
was subject to vibrations, and rocking when operating. To operate
adding increasing production rates, regardless of history, regardless
of the operating manual, regardless of the technical specifications,
and regardless of the condition of the machine beyond maintenance,
is conduct…which is a material contributor to what occurred in
March 2000.”

For this argument there is no particular support in Dr Potts’ evidence. In his oral
evidence, he said that the problem was not so much that the machine had worked at
“a faster rate than the contract provided for”, but more that “it was working lower
down in harder material than it was apparently designed for”. Further, he agreed
that production in excess of “the guaranteed production rates” did not involve any
necessary departure from “the design operating parameters”.

[612] For these reasons this allegation of contributory negligence by excess production
must be rejected.

Other allegations of contributory negligence

Reporting systems

[613] The defendants plead that BHP:

“failed to have in place any, or any adequate reporting system that
recorded serious operational incidents involving the BWE which
raised safety issues, so as to permit such issues to be investigated to
ensure they did not recur”.

[614] The “serious operational incidents” relied upon are the following:
(a) the 1984 grounding;
(b) the 1993 grounding;
(c) the event investigated by Mr Edinger in 199699;

99
Discussed earlier in relation to safety devices.
 154

(d) the discovery by Mr Thiel of a slack rope and one cylinder having
(probably) bottomed out100;
(e) the movement of the excavator without the main bucket wheel
gearbox in July 1999;
(f) a suggested unusual rocking movement of the excavator in the few
days before its collapse;
(g) the “regular partial groundings as a result of the practice of drop
cutting over the life of the machine”.

With one exception each of these matters has been discussed. The exception relates
to the events of the few days prior to the collapse, to which I will return.

[615] According to this plea, the plaintiffs were negligent because they did not properly
report or record these things. The defendants advanced an extensive argument
which criticised the way in which these things, or at least some of them, were or
were not recorded or passed on to others such as inspectors or supervisors. But the
defendants must demonstrate that these alleged deficiencies ultimately contributed
to the collapse of the BWE and in no respect have they done so.

[616] The reliance in this plea upon what are alleged to have been “regular partial
groundings” as a result of drop cutting is curious. On the defendants’ case, the
practice of an initiating drop cut was so prevalent that it considerably added to stress
and shortened the life of the machine. The effect of this argument is that the mine
should have kept records detailing the existence and extent of drop cutting,
including the initiating drop cut. But there could have been no cause to keep such
records unless it should have been understood that the drop cutting was significant,
and in particular that it created a risk of premature structural failure. If that should
have been understood, then it was the drop cutting itself which was negligent. If it
need not have been understood, there would have been no reason to record the
practice.

[617] As to walking the machine without its gear box in 1999, again unless it ought to
have been understood that this created the risk of structural failure, there was no
reason to put in place some scheme for reporting and regularly reminding others of
its occurrence.

[618] In the written submissions in support of this plea, the defendants addressed the
question of the causal connection between the alleged poor recording and the
BWE’s collapse only in the general terms that:
“those in positions of responsibility (the Grants, Patronis and
Haegels of this world) would have been in a position to have a better
understanding that the excavator had undergone major incidents
which were of importance to the supervisors as well as inspectors.
There would have been a record that could be shown to inspectors:
the likelihood is that inspectors would have been told specifically
about the stiffeners. The likelihood is that inspectors would have
been told more details about the buckling, the repeat grounding in
1993, the repeated partial groundings by drop cutting, and the fact
that the stiffeners had been added as part of the repair. In the normal

100
Again discussed above in relation to safety devices.
 155

course, if matters were specifically raised with the inspectors, one

could reasonably expect them to respond appropriately.”

So ultimately it was asserted that this would have made a difference to the
inspectors such as Mr Thiel. But it would have made no difference to him in his
1999 or 1996 inspections. The knowledge or otherwise by Mr Thiel of any of these
incidents was inconsequential. This was because, as already discussed in the
inspection case, Mr Thiel well understood that it was important to inspect the top of
this stiffener if possible and that it was his practice when conducting a visual
inspection to check in the areas prone to stress or failure, including welds and joints
between sections and plates and between members.

[619] Nor does it appear that it would have made any difference to a previous inspector.
Prior to Mr Thiel the inspector was Mr Schander, who conducted the 1984, 1986,
1990 and 1994 inspections. His evidence, called of course in the defendants’ case,
hardly sits well with this argument. In his witness statement he said101:
“…to a limited degree some information was also provided by
Goonyella at my request. However most of the time my experience
was that one had to start the inspection from scratch, without
background information other than my own previous reports. This
experience was not significantly different from my experience in
Germany. In general, I will not have access to the owners’ historical
inspection records and other history of the equipment. These reports
could be asked for but to do so was not common practice. The task
of the inspector is in effect to take a record of the machine at the time
of his inspection.”

And as the defendants submit elsewhere102, Mr Schander was aware of the

character of the repairs which had been carried out in 1984, and that the stiffeners
had been added then.

Maintenance and inspection practices

[620] The defendants plead that BHP:

“did not have in place any, or any adequate, maintenance and
inspection program for the BWE to adequately ensure its ongoing
structural integrity, or any adequate plant management of
maintenance and inspection procedures.”

They further plead that BHP:

“failed to cause monthly inspections by experienced personnel, or
other periodic inspections of the tower by way of a main inspection
by an independent expert familiar with the engineering associated
with the BWE, and four monthly interim inspections of the tower,
particularly in the less accessible areas”,

either between the 1996 and 1999 inspections by Krupp or between the 1999
inspection and the collapse.

101
Exhibit 347, paragraph 33.
102
Paragraph 250 of their written submissions on the inspection case.
 156

[621] I go first to the subject of maintenance. The defendants led a considerable amount
of evidence going to whether the BWE was well maintained at various times over
its life. They led evidence from Mr Bowater that when Mr Haegel was in charge
towards the end of the machine’s life, it was poorly maintained and from Mr Thiel
that the BWE was the worst maintained machine he had encountered. They led
evidence from Mr Brady which was critical of the maintenance overall.

[622] But it is for the defendants to show not only that the plaintiffs were negligent in
maintaining their machine and but also that this was a material cause of the
collapse. In certain respects, the defendants’ case was more specific. I have
discussed those matters already, such as operating the machine with missing teeth or
buckets. But apart from them, the evidence going to whether there was or was not a
proper maintenance regime was inconsequential, because none of it could be
causally related to the BWE’s collapse.

[623] The subject of inspections is in a different category. If reasonable care required that
the plaintiffs cause the tower to be inspected more often than biennially, and
specifically between March 1999 and the collapse, it could be argued that such
inspections could have made a difference.

[624] There was evidence as to whether a complete structural inspection, as Krupp

undertook or should have undertaken in 1999, was one which ought to have
occurred annually rather than biennially. But as it happened, less than a year passed
between Krupp’s 1999 inspection and the collapse. And had Krupp, and in
particular Mr Thiel, conducted another inspection between 1996 and 1999, there is
no reason to believe that the outcome would have been different.

[625] The defendant’s case is that there was not a proper “inspection program”, and more
specifically that BHP did not cause monthly inspections, or “four monthly interim
inspections” of the tower to be undertaken. The four month interval is based upon
the evidence of Mr Haberler and Mr Dittrich.

[626] For many years, Mr Haberler was employed by Krupp as a project manager on
major projects overseas and in Australia. He formed his own company in 1993
through which he provided engineering services to the mining industry including
the performance of numerous plant inspections. He has developed systems and
procedures designed for the management of heavy open cut mining/materials
handling equipment. He said that an inspection interval of 12 months “used to be
accepted practice in the Australian industry” and is also suggested in the
German standard DIN 22261-1 (1997). He said that this code also makes reference
to structural inspections of main load carrying members at shorter intervals, namely
four months, if the main inspection interval is extended to 24 months. He added
that the Australian practice in scheduling inspection intervals would not differ
greatly from the practice overseas.

[627] Dr Dittrich spoke of his German experience. He referred to the

Standard DIN 22261-1 (1997) which he asserted was “accepted worldwide by
suppliers, by owners and operating companies”. So in his opinion there were
two types of inspections which ought to have been carried out: the “main”
investigation to be carried out every 24 months, and an “interim” investigation
every four months. Again relying upon the German standard, he said that this main
investigation ought to have been performed “under the guidance and responsibility
 157

of an independent expert”, whereas the interim investigation could have been done
by “an experienced employee of the owner and operator or by its consultants”. As
earlier discussed103, the role of the so called independent expert is a feature of the
regulatory regime in Germany for which there is no Australian equivalent. So
according to Dr Dittrich, there should have been at least six interim inspections
carried out between 1996 and 1999 and the results of them should have been
available to Mr Thiel in his 1999 inspection. And he was critical of the main
inspection being carried out by someone who was not “independent of…the
equipment manufacturer”, by which he was apparently suggesting that it should not
have been conducted by Krupp.

[628] The case for inspections at monthly intervals comes from clause 5.03 of the
operating instructions supplied by O&K for this BWE, which were as follows:
“5.03 Steel structure
The steel structure forms the carrying frame for the
machinery elements and transmits all loads on to the track
level via the travel gears.

Check
The steel structure and high tensile screwed connections at
connecting points of the component parts should be checked
at least once a month, when machine is inspected.
Any detected damage (cracks, loose bolts, bent parts,
scaling-off of paint etc) has to be reported at once so that it
can immediately be repaired. In order to protect the
machine from corrosion, the coat of paint must always be in
perfect condition.”

On its face this seems an onerous requirement. In the opening of the defendants’
case, it was apparently conceded that these monthly inspections need not have
involved what was required in an annual or biennial inspection. Neither
Mr Haberler nor Dr Dittrich seemed to maintain that structural inspections as often
as every month should have been undertaken although each saw some general
relevance in the operating instructions.

[629] Mr Newnham was able to describe the inspection practices for similar machines in
the La Trobe Valley. Under the regime in Victoria which he described,
structural inspections do not have to be more often than annual. There are no
required monthly or four monthly structural inspections. There is a practice of an
independent structural inspection every two years and what is called an annual
inspection in the interim which he said is less rigorous.

[630] Mr Haberler suggested in a roundabout way that there were more frequent structural
inspections in Victoria. Referring to the safety device testing to which
Mr Newnham referred in his report, Mr Haberler wrote that this testing “also
includes a structural inspection”. That was not Mr Newnham’s evidence. I accept
Mr Newnham’s evidence as to the Victorian practice.

[631] There is no Australian standard governing such inspections. And that was the
premise upon which Mr Newnham was cross-examined by the defendants.

103
In the design case at paragraph [120].
 158

However, in the report of Dr Dittrich104, there is the suggestion of an Australian

standard, AS 4324.1 – 1995. Dr Dittrich wrote:
“These practices have been implemented in the mines of
RWE Power, in accordance with BG 1986 and its further
development in DIN 22261. Both are German codes for structural
design. The Australian Standard AS 4324.1 – 1995 is largely based
on BG 1986. The application of these standards ought to have been
part of the prudent practice in Australia by mine owners when this
collapse occurred.”

A copy of the Australian standard was tendered. But it deals only with the design of
the structures and in a preface, it refers to a proposal to develop another part to deal
with, amongst other things, the inspection of these machines. So it appears that
Dr Dittrich is mistaken in thinking that there was an Australian standard for
inspection of bucket wheel excavators.

[632] On all of this evidence I am not persuaded that reasonable care required BHP to
have a structural inspection undertaken every four months, let alone monthly. But I
do accept that it required more frequent inspections than according to this mine’s
practice until 1999, which was an inspection every two or three years. BHP was not
obliged to follow the Victorian practice. But behind that practice there was a long
and considerable experience with bucket wheel excavators in Australia which there
was no reason to ignore.

[633] Reasonable care required that BHP assess the required frequency for structured
inspections, and if necessary that it take professional advice as to that. The relevant
risk, of course, was that some problem might develop and cause major damage to
the structure in the interval between the inspections which BHP was having Krupp
perform every two or three years. I am unable to see the basis upon which BHP
could have dismissed that risk as being so small that the expense of some interim
inspection was not warranted. The practice in Victoria, quite apart from the stricter
practice in Germany, considered also with the operations manual at least as a more
general advice for interim inspections, should have led to at least some “interim”
inspection of the structure by mine staff in the intervals between the Krupp
inspections.

[634] BHP did not undertake interim inspections. At least in the five years prior to the
1999 inspection, there were effectively no structural inspections of the main load
carrying structure, apart from the Krupp inspections.

[635] However by 1999, the plaintiffs had apparently decided that there should be some
inspection of the structure between the Krupp inspections. In the plaintiffs’
argument, much is made of the engagement of G&S Engineering at this time to
assist in the maintenance and inspection of the machine. Particular reliance is
placed upon the evidence of Mr Parfitt of G&S Engineering of his introduction of a
comprehensive maintenance system whereby BWE operators and other crew were
to undertake various inspections at different intervals, according to which parts of
the BWE were to be inspected. There were 71 such parts of the BWE for which
inspections were required, at intervals ranging from every week to every two years.
But as Mr Parfitt explained, none of this involved a structural inspection of the

104
Exhibit 393.
 159

tower. There was to be an inspection of the “frame”, but this was not a structural
inspection. But as Mr Parfitt also explained, another firm was involved in structural
inspection and testing. This was CW Pope.

[636] Mr Russell of CW Pope was called by the defendants. In about the middle of 1999
he started to do new destructive testing on the BWE, the spreader and the hopper
car. He worked on the BWE system about 10 times from then until the end of 1999.
CW Pope was also involved with the “condition monitoring of the BWE system,
including vibration monitoring”. The types of work which he performed on the
system included a visual structural inspection. According to his witness statement,
his “job on the BWE was to inspect the machine for cracks, mechanical damage,
buckling, corrosion etc”, his focus being on the main load bearing parts of the
machine. It was his practice to report on all visible cracking. In August 1999 he
performed a visual inspection on the BWE frame structure during a maintenance
shutdown. He limited his inspection to the walkways. His inspection of the BWE
and the spreader took more than one day. But as appears from his cross-
examination, he confined his attention, as he had been asked by his employer, to
another part of the structure. He spent only about 20 minutes at the top of the tower
and in evidence given by Mr Russell to the Mining Warden’s enquiry into this
accident (which was tendered here), Mr Russell said that when he walked up the
tower looking “for evidence of cracking in the structure in the tower”, he was
unable to look underneath the walkway at what became the critical area at the top of
this stiffener.

[637] Mr Russell’s evidence is relevant to the inspection case, as I have discussed. He did
not use a mirror on this inspection and he was not instructed to look specifically at
this stiffener termination. Nevertheless he was instructed more generally to inspect
the structure to look for evidence of any cracking, and I infer, this was because his
employer had agreed or been requested by BHP to do work which included that
task. By August 1999 then, the plaintiffs had put in place some system for more
frequent structural inspections. The fact that this interim inspection might have
been more thoroughly undertaken by CW Pope, and in particular, that it might have
given its employee different instructions, does not matter. It was Mr Russell’s
employer who told him to focus upon particular things. The plaintiffs had engaged
CW Pope to provide, amongst other things, the service of a visual inspection of the
tower. Had it been argued, I would not have been persuaded that the plaintiffs were
negligent for not insisting that CW Pope conduct a more thorough inspection. To
the extent that it was not thorough, that is not shown to have been the plaintiffs’
fault. This inspection was some five months after the Krupp inspection and six
months before the collapse. I am not persuaded that reasonable care required the
plaintiffs to undertake interim inspections at four monthly intervals and or that it
was negligent for the plaintiff to have had but one of these interim inspections
undertaken in the 11 months which passed between Krupp’s work and the collapse.

[638] The defendants’ case went wider than a criticism of the frequency of structural
inspections. It criticised the lack of any system for inspections. Ultimately that
criticism is immaterial if the plaintiffs did take reasonable steps to have external
engineering firms undertake inspections. As I have found, the plaintiffs had not
done so prior to 1999 (leaving aside perhaps the very early years of the BWE). But
the question is whether that failure was a cause of the collapse of the BWE. The
purpose of these interim inspections was not to act as some check on the correctness
of Krupp’s work. It was to protect against the risk that damage would result from
 160

cracking or something else which appeared only after the most recent major
structural inspection. As it happened, there was an interim inspection
(by CW Pope) within the relevant period.

[639] Moreover, accepting as I do Mr Newnham’s evidence, I am not persuaded that

inspections were required more often than annually. Had the plaintiffs considered
it, they could have been reasonably satisfied with annual inspections on the basis of
the extensive Victorian experience. The BWE collapsed within a year of the Krupp
inspection.

[640] Accordingly I reject the defendants’ case in relation to maintenance and inspection
practices.

[641] I should note here another matter pleaded as contributory negligence which
concerns inspections. The plea is that having received Mr Friedemann’s 1985
report and its recommendations as to inspections, the plaintiffs failed to discuss
them with Mr Friedemann and failed to give effect to them. He recommended that
there be “main inspections of the BWE” annually. He also recommended that
particular attention be paid to three nominated areas of the structure which he said
should be inspected thoroughly three or four times a year. But as the defendants
concede, none of these was the critical area which led to the collapse. It would have
made no difference if those areas had been inspected as often as he recommended
and as just discussed, his recommendation of annual inspections would have made
no difference as it happened. It is pleaded that the plaintiff should have instructed
Mr Thiel to inspect those three nominated areas. Again that is immaterial.

Finite element analysis

[642] The defendants plead that the plaintiffs were negligent by not having a finite
element analysis conducted in 1998, which they assert would have revealed the
presence of the crack.

[643] This case is based entirely upon what Krupp’s Mr Reiter is said to have told
BHP’s Mr Haegel sometime in that year. They were then discussing the possibility
that Krupp would be awarded a contract for the entire maintenance of the BWE. In
the course of that, Mr Reiter says that he:
“suggested to Mr Haegel that it would be prudent, given that the
BWE had by that stage been in operation for around 16 years, to do a
finite element analysis (FEA) on the machine in order to obtain a
clearer picture about the structural and mechanical integrity of the
entire machine. While this was partly to enable Krupp to identify the
risks it would be taking on through the maintenance contract, it was
also my view that any responsible owner of such a machine would do
an FEA after 16 years of operation. The current standard practice
within the industry is to conduct an FEA every six years, however
none had ever been done for the BWE. Mr Haegel, however, did not
want to spend the money doing an FEA and did not agree to my
proposal in this regard.”

[644] Mr Haegel has no recollection of this matter being discussed with him and said that
had he been asked about this by Mr Reiter, he would have found it to be “a most
unusual request”. He explained this by saying that there are many pieces of
equipment which are well in excess of 16 years old, and he had never heard of an
 161

equipment manufacturer suggesting that a finite element analysis be conducted. He

added that the only time such an analysis is used is when there are significant
modifications intended for a machine, such as where the carrying capacity of the
equipment is to be increased and consequently there are new loads to apply to the
structure.

[645] In his oral evidence (in chief), Mr Reiter was taken to that part of his witness
statement and he was asked whether in his conversation with Mr Haegel “there was
any comment about others who do FEAs or the frequency of FEAs?”, to which he
answered “at that time, no. But the frequency of – we had been asked by other
clients to do FEAs after, say, a life of about 20 years on a machine.” There are two
significant things in that answer. The first is that it seems at odds with his witness
statement and its reference to an FEA every six years, unless his reference there to
“the current standard practice” was to the present time rather than to 1998.
Secondly, it confirms the impression from his statement that he did not suggest that
BHP should do this for the purpose of detecting problems in the machine, or that it
was something which other owners did with their machines. On his version, a finite
element analysis was something he was suggesting if a total maintenance contract
was to be awarded to Krupp.

[646] The defendants’ case on this point goes no wider than this one conversation. It is
not said that for some other reason, the plaintiffs should have known that a finite
element analysis should be undertaken. From this conversation, if it occurred,
Mr Haegel need not have understood that it was reasonably necessary in the
interests of the safety of the machine for this analysis to be undertaken. Nor need
he have understood that by not doing so, BHP would be at odds with some
acknowledged safety standard or practice. Even on Mr Reiter’s version,
contributory negligence is far from established.

The alleged mismanagement by the plaintiffs of the 1999 inspection

[647] In a number of ways the defendants say that the plaintiffs failed to exercise due care
in the instructions and information provided or not provided to Mr Thiel in 1999,
and in the arrangements which were made or not made for his inspection.

[648] The first of these is that they failed to “adequately inform” Krupp or Mr Thiel of
what had happened in 1984 or the further grounding incident in March 1993. It is
also argued that the construction drawings for the 1984 repairs should have been
provided by BHP to Mr Thiel. The defendants say that these occurrences meant
that the stiffener terminations warranted “particular” or “special” attention from the
inspector. The argument is that had he been told of these things, some “additional
attention would have been paid” with the result that he would have discovered the
crack. Similarly, it is alleged that Krupp and Mr Thiel should have been provided
with the drawings for the 1984 repairs.

[649] For many reasons, it was not careless of BHP to have said nothing to Mr Thiel
about these matters. Perhaps the most important is that Krupp had promised to
inspect the entire machine. To suggest that something should have been said to Mr
Thiel so that he would give special attention to some parts of the structure is at odds
with Krupp’s promise to inspect the entirety of it and with reasonable skill and care.
The plaintiffs were entitled to assume that Krupp would do that. Secondly, each of
the major structural inspections since 1984 had been undertaken by an entity from
 162

the Krupp group or, when it was outside that group, some O&K entity. It was
reasonable for the plaintiffs to assume that this continuity would have provided
Krupp with information as to the 1984 grounding. Thirdly, some inspectors, and in
particularly Mr Schander as discussed above, preferred to do the inspection “from
scratch”.

[650] In any case this alleged negligence is irrelevant because it would have had no effect.
This is because Mr Thiel believed that it was important to inspect the stiffener
terminations. The provision of that information could only have told him of the
need to inspect areas which he already knew required particular attention.

[651] The defendants say that it was negligent of the plaintiffs, through Mr Grant, to
instruct Mr Thiel to inspect the slew bearings even if other tasks had not been
finished. Mr Grant denied that he gave such an instruction. But even on Mr Thiel’s
version that he did, this was inconsequential. Mr Thiel did not fail to inspect the
critical area because of this instruction. He had ample time to do so and again, he
believed that it was an area which should be inspected.

[652] There was a distinct plea that the plaintiffs were negligent by failing “to identify and
monitor areas of the BWE requiring special attention during any subsequent
structural inspections”. This is really no different from some arguments already
discussed. Again, the allegation goes nowhere because Mr Thiel well knew that he
should inspect the critical area.

[653] It is alleged that the plaintiffs were negligent by failing to provide Mr Thiel with
equipment or assistance which may have enabled an inspection to be made of the
critical area. However Mr Thiel conceded that he could have asked for the
necessary equipment to be provided and that he knew that the plaintiffs were to
provide it if required. He did not ask for any equipment or tell anyone that there
was an area which he was unable to inspect.

[654] Next it is pleaded that the plaintiffs failed to have the BWE immobilised and
cleaned to permit Mr Thiel’s inspection to take place. The cleaning point was
argued but nothing was pressed about immobilisation. The cleanliness or otherwise
of the machine did not contribute to the result of the 1999 inspection. This is
because Mr Thiel did not look at the critical area at all. And as I have discussed
above in the inspection case105 most of the evidence, including that of Mr Thiel, was
that dust was not a problem in the critical area.

The days before the collapse

[655] Several witnesses described what they perceived was the unusual movement of the
BWE within the few days prior to its collapse. The defendants say that these
observations should have resulted in the cessation of operations and a thorough
investigation of the machine, in which case the collapse would have been avoided.

[656] One of these witnesses is Mr Allan, who was part of the maintenance crew on the
BWE system. He said that about four days before the collapse he was doing some
work on the BWE when he noticed an unusual movement of the machine: “It was
giving a lurching or strange rocking motion which I had not noticed before.” He
was then on the BWE beneath the slew deck. He left the machine to investigate this

105
At paragraph [434].
 163

rocking and walked around it for about 10 minutes whilst it continued to work. He
noticed that whilst the excavator was walking, its tracks were moving at a constant
speed and there was no sign to him that they were moving unusually. He believes
that had there been any damage to one of the tracks he would have noticed it. He
thinks that he spoke to Mr Brady about his concern at the time. But otherwise he
did nothing about it. He worked again on the following day and then on the night of
the collapse. In re-examination, he said that he then understood that he could have
shut the machine down but only “if I had found the problem” and that “I didn’t find
a problem, so I had no reason to stop it”. There was then this question and answer:
“So, your understanding was you need to have identified a specific
problem?—That’s right.”

At the time, Mr Allan did not think that this movement was sufficiently important
for him to make a report or mention it to his supervisor.

[657] Mr Cazzola was a fitter and turner at the mine and became the permanent fitter on
the BWE in early 1999. He recalled that a day or so before the collapse, Mr Brady
said to him that he was worried that the BWE was “walking in a funny way”. He
recalls Mr Brady saying also shortly prior to the collapse that “that thing’s going to
fall down in three days”. After this, and on the day before the BWE collapsed, he
was watching it work and looking for anything out of the ordinary with the crawlers
and the steering cylinders. He was watching it for about 15 or 20 minutes during
which he did not see it do anything unusual in its digging work. He did not see it
walk. He then answered a call to do some work elsewhere and did nothing further
to see whether there was any problem as Mr Brady had described. He knew that he
could immediately shut down the machine if he was sufficiently concerned about
safety.

[658] When Mr Cazzola was called away to that other work, he went to the workshop
where he saw Mr Wood with Mr Kroemer, who had the responsibility for safety
practices. Mr Kroemer was conducting a “safety audit”. Mr Cazzola told Mr Wood
that he was waiting to see what was wrong with the machine. Mr Wood said to him
that if it was up to him he would let him go back to the machine but that Mr
Kroemer required other things to be done such as cleaning up a grease spill. As he
finished his shift he mentioned the problem to Mr Allan who was taking over. This
was on the night of the collapse.

[659] Mr Brady was an operator of the BWE and had been for about five years prior to the
collapse. A few days prior to the collapse, he said that the machine was “rocking
very badly”. He was on the machine, standing on the catwalk, when:
“The whole machine seemed to be rocking really badly when it was
walking that I had to hold on to the handrails to stop myself from
losing balance. I had been on the catwalk when the machine was
being walked on many times before and had never experienced it
rocking about that badly or needed to hold on to the hand rails to stay
on. The way it was rocking this time was not normal, in my
experience.”

He remembers also that in these days leading to the collapse, there was “general
discussion among the bucket wheel crew about the fact that it was rocking badly
and that something was not quite right”. In his witness statement he recalled saying
to someone around this time words to the effect that the BWE “was walking like a
 164

lame duck”. In the afternoon of 7 March, he was working as a belt serviceman

when he saw that the BWE was walking with bad rocking at its front. He said that
“the amount that the bucket wheel boom was going up and down” was more than he
had ever seen. He radioed Mr Busk, who was the foreman on the machine that
afternoon, and said words to the effect that the machine was rocking badly “with
those square wheels on it”. He also remembers telling one of the other fitters (who
appears to have been Mr Cazzola) that he was worried by its movements. At the
end of this shift, he spoke to Mr Thomas who was the operator about to start the
shift in which the collapse occurred. He told him to be careful and that there was
something “not right”. He made a statement immediately after the collapse but that
comment to Mr Thomas was not in it. He knew that he could have asked the BWE
to be stopped but he did not do so.

[660] Mr Bowater was a fitter based on the bucket wheel system. He had also been an
operator from time to time. In a statement he made the day after the collapse he
described the “rocking motion” of the machine as he boarded it on 7 March. He
also described a gap between the shute baffle plate area and the top of the discharge
conveyor hopper and he said that this gap was “opening and closing differently than
usual”. He began checking welds on the side of the mast, feeling them with his
hands to find out if welds were opening or closing. None were. He looked at the
structure from other angles and saw nothing. He then left to do other work before
he had checked everything on the tower. He told Mr Roberts, the BWE attendant
then, of his concerns. He says that Mr Roberts did not see anything of concern. He
knew that if he had a concern about safety, he was able to close down operations
immediately but he said “that is okay in theory”. He agreed that he had not
concluded “that there was something major wrong” and that he was just “very
curious”. Mr Bowater said that ordinarily in the operation of the BWE it was
“constantly nodding” and that “over a period of time the machine is constantly
rocking”. So far as the rocking motion was concerned, the difference which he
perceived was then one of degree.

[661] Mr Clews was the BWE attendant on the shift during which the collapse occurred.
He said that had Mr Bowater told him of his perceptions, he would have taken them
seriously, but he would not have shut the machine down immediately because there
would then be no symptoms to observe in order to identify any problem. Mr Clews
saw an unusual flexing and movement of the BWE on this evening. But he put this
down to the fact that one of the tracks was due to be replaced. He noticed nothing
unusual in the walking of the machine until only minutes prior to the collapse and
he has no recollection of unusual rocking. He noticed something about the
discharge conveyor however, and at one stage said that he had wondered “how long
this has to flex like this before it’s going to have a failure in the structure”. He
explained this by saying that he was thinking of some fatigue cracking which would
ultimately lead to some sort of breakage, but not the risk of immediate failure. I
accept that. On my view of Mr Clews, he would have acted had he thought there
was some immediate threat to safety. He was in radio contact with the operator
Mr Thomas, but he did not ask him to stop the machine as he knew he could have
done. He said he had seen rocking on a number of occasions which involved track
problems but none of them had caused him concern that the structure might fail.

[662] Mr BH Black (the BWE operator) said that there were problems in walking the
machine but they had existed for five years. He described the movement as serious
rocking or nodding so he would try to avoid walking it too quickly. He saw that
 165

“some of the BWE operators would ignore the serious rocking or nodding when it
was walked and would go at full speed anyway”. He too knew that if he had any
concern he could ask for the machine to be stopped.

[663] Mr Wood was the operations supervisor, responsible for the overall supervision of
the operators of the excavator and associated equipment. Although he was on the
machine at some stage each day, he said he did not have what he described as “the
intuitive understanding of the way in which to operate the excavator and as to the
way it ordinarily moved”, so as to assess whether its movement was unusual. He
said that Mr Bowater, Mr Clews or Mr Busk did have that knowledge and that if
any of them had suggested to him that there was some unusual movement, that is
something which he would have investigated. As to Mr Bowater’s observation of
the shute gap, he agreed that if he had been contacted and told of that on the evening
of 7 March, he would have shut the machine down. But as to that hypothesis,
Mr Wood’s present thoughts are no doubt affected by what then occurred. What he
would have done would have depended upon the particular information he then
received and the particular advice of the informant. I accept, however, that if
Mr Woods had been called at home on the night of 7 March, the fact that someone
had seen fit to ring him out of hours would have given him some impression of
urgency.

[664] The defendants rely upon the opinion of Mr Friedemann that the appropriate course
in these circumstances would have been to cease operations immediately and
investigate the causing of the rocking. But amongst the facts which he was asked to
assume, there was no reference, for example, to Mr BH Black’s recollection that
there had been this excessive rocking for some five years.

[665] The principal argument for the defendants in all of this is that there was a deficient
system for the reporting and consideration of such problems, with the result that the
various observations of these men (and perhaps others) were not made known to
each other and to others at the mine. It is said that if those who had witnessed
unusual movement had known of the same experiences of others, their reactions
would have been different.

[666] To some extent the experiences of one man were passed on to some others, as I have
discussed. I am not persuaded that there was some significant defect in the system
for the communication and recording of safety concerns. What happened was that
some men saw things which were unusual, or in some cases, concerning to them.
Others working with the machine at this time did not have the same impression.
But no one thought that the problem was so serious that the machine should be
stopped.

[667] To an extent the recollection of some of these witnesses is likely to have been
affected by the seriousness of what then occurred. It is natural that some would
look back to the few days prior to the collapse and place more importance on what
they saw than they gave to it at the time. To say that there was unusual rocking of
the machine, of course, involves a question of degree. Ordinarily there was some
rocking of the machine, as is shown by the evidence of Mr BH Black. I am not
persuaded that those workers who were unconcerned about the machine’s
movements were themselves negligent. And of those who were concerned, the level
of their concern at the time is shown by what they did not do. I would not hold that
they were negligent for taking no action. It is unrealistic now to attempt to find
 166

precisely how the BWE was then behaving because of the generality of these
recollections. But overall, the impression which the BWE should have given, and
the level of concern which should have resulted, is best indicated by the fact that of
the many experienced and capable men who saw it working, not one then thought
that the machine should be stopped. This plea of contributory negligence fails.

Conclusion as to contributory negligence

[668] It follows that in no respect has it been proved that there was negligence which
caused or contributed to the plaintiffs’ loss.

Other defences abandoned

[669] There were other matters pleaded by each of the defendants in reliance upon alleged
defaults by the plaintiffs. But they were not pursued in the defendants’ ultimate
submissions. One was the plea that to the extent that the defendant was liable, the
first plaintiff (BHP) was under a “co-ordinate liability” with that defendant “to
make good the said losses”, so that the defendant was entitled to
equitable contribution from it. Another plea was that the defendants were
entitled to a reduction under the proportionate liability provisions of Part VIA of the
Trade Practices Act, on the suggested basis that the plaintiffs were “concurrent
wrongdoers”. There was a further curious plea by the second and third defendants
that the plaintiffs were in breach of the inspection contract (by failing to advise of
the history of the machine, failing to clean it and failing to provide any elevated
structure or other mechanism “to allow for proper inspection of the BWE”), from
which it was then pleaded that those defendants were exposed “to a risk of liability
for the plaintiffs’ losses” so that they, the defendants, were entitled to be
indemnified by the plaintiffs against their own liability to the plaintiffs.

DAMAGES

Introduction

[670] As should already be apparent, the consequence of each of the wrongdoing of a

defendant was ultimately the collapse of the BWE and the losses which resulted
from that. As it happens there is no difference, save for one matter, as to the
assessment of damages between the various causes of action. That qualification is
that in the inspection case, there must be deducted the sum of $160,000 which is the
cost of repairing the crack if detected in 1999.

[671] The damages case has been argued one each side as if each defendant was liable
under but one cause of action. In these reasons I will proceed upon that same
assumption, initially disregarding the fact that the entitlements to damages against
O&K and Mr Thiel are several entitlements. After the damages are assessed I will
make the apportionment necessary to quantify the respective losses for which the
plaintiffs are to be compensated severally by those defendants and I will use the
expression “the plaintiffs” in that general sense, as if they were jointly entitled to
damages against each defendant.

[672] The plaintiffs did not repair the BWE. Instead they replaced it with a shovel and a
mobile sizer or crusher. The alleged cost of the shovel was $18,455,459.33, of
which all but $24,817.15 is admitted. The alleged cost of the sizer was
$19,283,655.54, of which all but $37,868.65 is admitted. This required also the
 167

acquisition of a transformer, at an admitted cost $612,475. In total what was

acquired to replace the BWE is conceded to have cost $38,288.911.07, and the
plaintiffs claim $38,351,589.87.

[673] They further claim that they should be awarded other expenses totalling
$4,260,482.71. Then there are claims for damages for the loss of use of the BWE in
the two and a quarter years between its collapse and its replacement by the
shovel/sizer. All up the total is $50,166,920.58.

[674] Alternatively the plaintiffs claim what they say would have been the cost of
rebuilding the BWE. This claim is based on the second defendant’s tender to
rebuild the BWE which it provided on 20 December 2000 (‘the December tender’).
The total tender price for that rebuild (and it is argued, certain other things) was
$29,174,182. The plaintiffs say that the likely ultimate cost, had that tender been
accepted, was this amount increased by a factor of at least 20 per cent, resulting in a
total of $35,009,018. To that they add additional expenses occasioned by the
collapse (many of which are the same as those claimed for the acquisition of the
shovel/sizer and (again) a claim for the temporary loss of use of the BWE.106 The
total on this alternative basis of a repair or rebuild of the BWE is $44,496,646.12.

[675] The ultimate cost of the shovel/sizer was more than had been expected when the
decision was made to acquire it. It was expected to cost $36.9 million but it cost
$38.35 million. The increase was partly due to movements in foreign exchange
rates and also by a cost of $577,474 to purchase different components for the sizer.

[676] The plaintiffs pleaded, by their amended reply to the defence of the first
defendant,107 that ‘it was not feasible to repair the damaged BWE’ for a number of
reasons. That was in response to a plea that the cost of repairing the BWE was no
more than $11 million. The defendants reached that figure by an adjustment to an
indicative price provided by Krupp in May 2000 for what has been described as the
‘minimal rebuild’. As I will discuss, this involved much less of a rebuild than that
the subject of the December tender. Perhaps this allegation by the plaintiffs that a
repair of the BWE was not feasible was meant to be limited to the minimal rebuild.
But ultimately it was not pressed. In particular the plaintiffs did not argue that a
rebuild according to the December tender was not feasible. Instead they pointed to
uncertainties which they say existed in relation to that proposal and which made it
reasonable for them to pursue the more expensive alternative of the shovel/sizer.

[677] It was possible to rebuild the BWE to have it again do the same work. Its reliability
and longevity would then have been dependent upon the extent of that rebuild. In
particular it would have depended upon the extent to which parts were replaced
rather than being repaired or simply left alone. But it was reasonable for the
plaintiffs to consider the alternative of a rebuild of the BWE, and this they did
before deciding on the shovel/sizer in about March 2001. The plaintiffs also say
that there were risks of an increase in the cost of the rebuild (above that quoted by
the second defendant) and of delay which could have led to increased costs in
removing overburden by less economical means than the BWE whilst it was being
rebuilt.

106
In this case measured over a longer period on the basis that the repair of the BWE would have taken
longer than the delivery of the shovel/sizer.
107
Further amended reply to the second further amended defence of the first defendant filed on 28 May
2007.
 168

[678] Neither side said that the plaintiffs’ loss should be measured by the cost of replacing
the BWE with a new equivalent BWE. Nor was it suggested that there was a
market from which the plaintiffs could and should have acquired a second-hand
BWE, the cost of which would be the proper measure of their loss.

[679] The defendants pleaded many things in response to these alternative cases. One is
that ‘the market value of the BWE, and therefore the plaintiffs’ loss in consequence
of the collapse, was not more than the sum of $8,800,000.’ The derivation of that
figure will be discussed and it has become relevant for other parts of the case. (That
is because the plaintiffs ultimately sought to rely upon this figure, as relevant in the
assessment of general damages for the temporary loss of the BWE.) But the
defendants did not make any final submission in support of this plea. Ultimately
they abandoned any case that the plaintiffs should be compensated according to any
suggested market value of the BWE. By their written submissions, they agreed that
“if successful, the plaintiffs are at least entitled to the cost of repair, but they will
also be entitled to more if they can lead “acceptable evidence” that (damages
assessed by the cost of repair only) would deprive the plaintiff(s) of (their) right to
restitution in the form of complete compensation for loss proved to have been
sustained”, citing McPherson J in Davidson v JS Gilbert Fabrications108.

[680] The plaintiffs must prove that it is reasonable in all the circumstances that they
should be awarded damages which exceed the cost of a repair. The defendants
argued that this onus has not been discharged. That issue is affected by another
question which was the subject of considerable evidence and argument, which is
what would have been the cost of repair. At first that would seem to be a surprising
controversy, because it was Krupp which submitted the December tender upon
which the plaintiffs have based their case.

[681] In order to compare the acquisition of the shovel/sizer with a repair or rebuild then,
it is first necessary to consider the various alternatives for a rebuild which were
presented to the plaintiffs and what would have been the likely costs of them.

Cost of a rebuild

[682] On 17 May 2000 Krupp submitted three price estimates. The first was for the
dismantling of the BWE and its relocation two kilometres away, for which the price
given was $1,290,864. The second was for the minimal rebuild, for which the price
was estimated at $12,171,647 (after dismantling). The minimum rebuild was to be
to BG 60 and was estimated to take 15 months from dismantling. The third was for
a more expensive rebuild, involving an entirely new superstructure and electrical
systems. The price was $23,221,159 (again after dismantling). This was to be done
to BG 86 “for all new work”, and the rebuilt BWE was to be “pre-accident” but
with “more automation”. This was estimated to take 18 months from dismantling.
For each of those rebuild proposals, the price estimate was expressed to be plus or
minus ten per cent.

[683] At this time Krupp had not conducted any extensive examination of the wreckage
because for safety reasons, access had been limited. So it was not in a position to
say what was the limit of the required work. In essence the minimal rebuild
involved a repair or replacement of only those parts of the BWE which were then
known to be damaged. The minimal rebuild proposal itself provided for a fuller
108
[1986] 1 Qd R 1 at 4-5.
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inspection. But Krupp’s estimates of price and timing were upon the assumption
that no further work would be required, and that items such as the tower could be
re-used. The proposal provided that any changes to the scope of works would be
treated as variations.

[684] Shortly after the collapse Krupp had sent three men to inspect the damage. They
were Mr Scheid, a structural engineer with the Krupp Group in Germany, and
Mr Bovell and Mr Jones, each from Krupp. Mr Scheid was to inspect the load
carrying structure to identify areas of structural damage and the extent to which it
might be repaired or replaced. They were at the mine site for three days. Mr Scheid
says that during that time he conducted a detailed inspection which involved a
visual inspection of much of the structure, but that there were some areas, including
the tower or mast, which he said could be “accessed ... by special request only”. It
seems that he did not inspect them.

[685] During this visit, Mr Scheid marked and made other notations on a drawing of the
BWE showing the areas which he observed had been damaged. He also noted on
that drawing the tonnage of the relevant section, to assist in the costing of its repair
or replacement. His witness statement explained that his drawing showed a number
of areas which had sustained damage and for which there was a requirement for
replacement or repair and he listed some 18 areas. Curiously however, the drawing
and Mr Scheid’s opinions were not reflected in the scope of the work the subject of
the minimal rebuild. Seven of the “important areas” which he had identified did not
appear in the minimal rebuild. And he had recommended replacement of several
bent parts of the bucket wheel boom, but what was provided for them in the detailed
scope of works in the minimal rebuild proposal was “straighten re-use”. There was
the same description for the discharge boom, although again Mr Scheid had
recommended the replacement of its damaged sections.

[686] The defendants did not attempt to lead evidence from Mr Scheid by reference to the
minimal rebuild proposal. His evidence hardly assists the defendants’ argument for
an assessment upon the basis of that proposal. On the other hand, the plaintiffs
made no challenge to his evidence and their short cross-examination related to
matters apparently relevant only to the design case. I accept his evidence as far as it
goes. But he had only limited access to the BWE and neither side asked him about
the possibility that there were other components which, on closer inspection or
testing, may have required repair or replacement. The defendants called Mr Bovell,
but not in relation to this subject. And Mr Jones was not called.

[687] The May 2000 proposals were sent under cover of a letter from Mr Reiter. He had
attended a meeting on 26 April 2000 at BHP’s offices in Brisbane. Also present
were Mr Peter Wagner of Krupp and Mr Kilgour and Mr Haegel from BHP. There
was a discussion about alternatives for a rebuild and also the possible supply of
either a new smaller BWE or a system involving an in-pit mobile crusher. It was
that last alternative which was being promoted by Mr Wagner. Mr Reiter managed
Krupp’s Melbourne office which was concerned mainly with after sales services,
and Mr Wagner managed the Perth office, which was concerned with the supply of
new equipment.

[688] BHP did not ask for the minimal rebuild proposal. On 3 April 2000 Mr Haegel had
written to Mr Wagner asking for four estimates. The first was for an “indicative
price estimate” for the rebuilding of the BWE according to an Australian Standard,
 170

the second was for such a price estimate for its rebuilding according to the current
German Standard, the third a ‘budget estimate’ for its rebuilding “according to the
original standard which I understand was a combination of BG 60 and BG 86”, and
the fourth a budget estimate for “alternative bucket wheel excavators capable of
performing the required work”. For the third estimate, Krupp was to assume that all
structural members above the first joint on the tower were to be replaced with new
structures as well as the replacement of an extensive list of mechanical components.
There were other specified assumptions for that alternative. It was Mr Wagner who
decided to add the ‘additional option’ of the minimal rebuild.

[689] Mr Reiter said that at this time,

“pricing the job was made extremely difficult by the fact that BHP
would not allow access to the collapsed BWE so that a clear
assessment could be made of the condition of the machine in order to
determine which parts could safely be re-used”.

He said that it was

“never the intention of Krupp to re-use any of the structural
components of the collapsed BWE and, nor was this meant to be part
of the proposal put forward by Krupp. It was only ever intended that
mechanical components of the machine which could be safely re-
used would be re-used. It is a ludicrous suggestion that an
engineering firm like Krupp would propose to re-use structural
components which may be unsound.”

[690] Those passages were from his witness statement tendered as part of his evidence in
chief. In cross-examination he said that the basis of the minimal rebuild was always
to extensively test whatever would be re-used, and structural steel would
“obviously” be new. When asked whether that “included re-using some of the
structural components”’ he said
“No. The basis of our proposal was always that the price was
indicative because we cannot assess the extent of what had to be
done. So most of our pricing was done on a cost per tonne basis,
because we didn’t have enough data to really come down with
anything as firm as that”.

So on his understanding, the minimal rebuild inevitably would have involved more
than the work which was priced.

[691] Mr Wagner proposed the minimal rebuild when on 5 April 2000 he wrote to others,
including Mr Reiter, that
“there is one additional costing that we intend to submit which is not
mentioned. This is the costing that repairs the bucket wheel
excavator, re-using as much of the existing components as possible,
replacing only damaged sections rather than whole structural
elements”.

In an email he sent on 19 April 2000, again to others within Krupp, he described

what became the minimal rebuild offer as a “minimalistic approach re-using some
existing structural members and cutting out and replacing damaged sections.”
Mr Wagner was not further involved in the preparation of the May proposals. But
 171

his understanding was different from that of Mr Reiter that it was not Krupp’s
intention to re-use any of the structural components.

[692] When the May offers were sent, Krupp did not have any structural or mechanical
drawings from which a price could be calculated, as Mr Reiter in cross-examination
conceded. He said
“we were asking for that information from Krupp in Germany. It
was slow in coming; however, we did have enough information from
the general arrangements to be able to say – make educated
assessments to the tonnage and from similar machines ...”.

He said that this was one of the reasons these were just “indicative prices”.

[693] The minimum rebuild allowed an amount of $42,169 for “inspections”. It is not
certain whether this was to inspect other items, not within the minimal rebuild,
which might require repair or replacement, or whether it involved simply an
inspection of the work the subject of the minimal rebuild. Mr Frericks, who was
called by the defendants, said that it was the former and consistently with that, he
accepted that there may have been items damaged which were not then identified as
such. At one point in his oral evidence, however, he seemed to accept that the sum
might be for inspections of the latter kind. In any case, Mr Frericks, like each of the
relevant witnesses, acknowledged the real possibility that further work beyond the
scope of the minimum rebuild would have been required.

[694] In discussing the design case, I have referred to the role in 1984 of Mr Brian Black.
In August 2000, he was no longer employed by BHP, when he was engaged by it as
a consultant by to advise on what should happen with the BWE. More specifically,
he was asked to inspect the BWE machine and to advise on Krupp’s May estimates
as well as another rebuild proposal which was from the firm WBM.

[695] Mr Black’s evidence as to the minimal rebuild proposal is of particular weight. He

had been closely involved with those in O&K who designed the BWE, when he was
working in its office in Germany. He knew the history of the BWE’s operation and
well understood the conditions under which it operated. He had a deep knowledge
of the machine from which he was well placed to form a view as to what should be
done in rebuilding it. And his evidence corresponds with what he was saying to
BHP at the time, when he was not engaged to provide evidence but independent
advice as to what should be done. .

[696] He said:
“You could not trust the BWE’s structure after the failure ... .I would
not re-use the steel even if it was not obviously damaged. It is
difficult to re-weld pieces of steel as each piece is specifically
designed for the BWE. Each and every individual weld on the
structure would have to be examined, both visually and
ultrasonically, to determine whether there was damage. Further, by
the introduction of new welds where steel was replaced, it would
have to be shown that the new welding was satisfactory for the load
conditions.”

When cross-examined, he held to that view, and said that it was a reference “to the
structure above the bolted joint on the turntable”, of which he said: “I felt that all of
this – because of the way of the collapse, that all of this was suspect.” He said that it
 172

would not have been impossible to simply repair what then appeared to be damaged
but that this would have left “too many grey areas using material that had gone
through that collapse”, and to him “a conservative attitude was the best to adopt”.
He said
“If the mine said ‘Look, we want it to last five years’, that’s a
different matter. But my impression was – or my brief was that it
went back to the original condition.”

By “original condition” he appeared to be referring to its condition when new. His

reference to the alternative of it “lasting five years” indicates that he thought the
BWE with the minimal rebuild would last only something of that duration. That
was less than the plaintiffs had been entitled to expect as the total life of this
machine. They are not to be limited to an award of damages in an amount which
would have given them a machine for only that period.

[697] Mr Black said that any mechanical parts which in any way contributed to the
stability of the machine had to be replaced and that some of this would be “difficult
to detect” so that the “risk (was) not worth taking.” He said that the damage may
also have involved components such as brakes, bearings, drums and sheaves which
“precluded their further use”. In relation to steel parts, he said that everything above
the slew deck was too risky to re-use. He was critical of the assumption in the
minimal rebuild proposal that major components such as the bucket wheel shaft and
the ball race could be re-used.

[698] Overall Mr Black believed that there had to be much more investigation by
inspections and in some cases other testing, to assess what was reasonably required,
after which it would be necessary to prepare a detailed specification upon which
suppliers such as Krupp could be asked to tender. He reported in those terms to
BHP at the end of August 2000. Then he was asked to and did prepare that
specification, upon which Krupp provided the December tender. I accept
Mr Black’s evidence, which even if taken alone, would establish that the amount
quoted for the minimal rebuild underestimated the cost of an appropriate rebuild.
But of itself it does not prove what was that cost.

[699] In June 2000 the BWE was inspected by Professor Hulsmann and his colleage from
Schippke & Partnesr Dr Remke. They spent just over a week examining the
machine and making an assessment of the damage to those parts which they could
see. This was a much longer inspection of the wreckage than was undertaken by
any other witness. In October 2000 they produced for the plaintiffs a report of
27 pages entitled “Scope of Damage and Costs to Repair”. The opinions in that
report have weight because they were given after a relatively extensive inspection
and because, like Mr Black’s report, they were provided as independent advice to
BHP as to what to do with the BWE, rather than in the context of the
collection of evidence. Indeed this Schippke report was not tendered by the
plaintiffs: it was tendered by the defendants in the course of the cross-examination
of Professor Hulsmann. (Dr Remke was not called.)

[700] They concluded that the cost to repair the BWE was in the range of US$12 million
to US$14 million. They compared this to what they said would be the cost of a new
BWE, which was in the range of US $20 million to US $24 million. The exchange
rates with the US dollar for October 2000 are in evidence, and the rate was then
approximately US 0.54 per Australian dollar. So in broad terms their estimate was
 173

that the cost of repair would be A$22 to A$26 million. Professor Hulsmann was
asked a few questions in cross-examination of this report but there was no challenge
to the opinions there expressed: as I have said, it was the defendants who tendered
it. In that brief exchange within what was a very extensive cross-examination of
Professor Hulsmann, he agreed that some of the items to be repaired according to
that report were things which required repair not from the collapse, but from the
pre-collapse condition of the machine. There were several items expressed to be
within that category in the schedules in this report. There were also other items
where the authors were unable to say whether a repair would be required, but where
some inspection or testing was certainly required. For the most part however, what
they priced as repairs were things which, in their opinion, had to be repaired.

[701] I have set out in the table below a summary of their report. There are three
categories: items definitely in need of repair or replacement; items requiring
further inspection, the repair or replacement of which could prove to be necessary;
and those where repair or replacement was required but for some reason other than
the collapse. In that table there are some numbers which appear in parenthesis.
This corresponds with their report, in which they showed in parenthesis an estimate
for the repair of an item using the existing parts, alongside the cost of repair or
replacement with new parts. (The amounts are expressed as multiples of
US$1,000.)

Item Definite repair Further Replace or repair Total

or replacement inspection for other reasons

Travel gear 0 875 20 895

Undercarriage 848 (654) 45 (25) 936 (722)

16 6
6 51 (31)
15
885 (691)

Turntable 806 198 (100) 1064 (946)

60 (40)

Tower frame 1306 1306

Counterweight girder 777 43 100 920

Bucket wheel boom 1722 (1697) 44 (30) 119 (70% of 1997 (1927)
37 (20) cutters)
3 13
11 (7) 4
30 (20) 136
12
2
139 (94)

Discharge 430 95 (50) 16 891 (691)

equipment 60 (45)
290 (150)
445 (245)
 174

Total for 5926 (5707) 1811 (1428) 272 8009 (7407)

machine

Additional costs for 889 (856) 271 (214) 41 1201 (1111)

transport, erection
(15%)

Additional costs for 2770 2770

electrical and
electronic control
and equipment

Total 9585 (9333) 2082 (1642) 313 11980 (11288)

[702] There was a rider in relation to the substructure within this report where the authors
said:
“We discovered no essential damage at the substructure of the BWE.
Therefore it is only necessary to make an extensive check of these
parts as crack and ultrasonic test and inspections of the welds. We
have calculated only the costs to (do) the check and some costs of
repair. If the results of these checks should be very bad, we
must assume that the estimated cost to repair would increase (by)
about 3-5 million US$.”

Apparently with that contingency in mind, the authors concluded that “the costs to
repair are in a size of 12 to 14 million US$”.

[703] So what appears from this table is that of the US$11.98 million as the estimated cost
of repair, US$9.585 million was for items, in their view, requiring repair or
replacement and a further US$2.082 million for items possibly requiring repair or
replacement. It further appears that the use of existing parts would not have greatly
reduced the overall cost.

[704] This report thereby recommended much more extensive remedial work than was
proposed by the minimal rebuild. It adds to the impact of Mr Black’s evidence in
proving that an appropriate rebuild was much more extensive and it provides cogent
evidence that a reasonable estimate of the likely cost of repair was at least of the
order of A$20 million.

[705] The defendants, having tendered this Schippke report, ultimately made no
submission about it. Their written submissions noted it, without specifically
arguing that it should or should not be accepted.

[706] The defendants sought to support the minimal rebuild proposal by evidence from
Mr Frericks. He is an engineer in the employ of the Krupp Group in Germany. It
seems that the idea of procuring an opinion to support the minimal rebuild argument
came fairly late to the defendants, because his report is dated 28 October 2007.

[707] He had not inspected the BWE either before or after it was dismantled. He based
his opinions upon photographs and, it emerged during his oral evidence, upon what
he had been recently told by Mr Scheid. Unfortunately it is unknown what
Mr Scheid said to him and at least for that reason the evidence of Mr Frericks has
less weight. And as to the photographs, Mr Frericks agreed that he would have
been assisted by inspecting the machine and at one point he seemed to concede that
 175

he could not make an assessment of the damage simply from looking at

photographs, saying that “photographs provide a good first indication but they are
not sufficient of themselves.”109

[708] In some respects Mr Frericks said that the minimal rebuild was more than was
required. It provided for “a complete new bucket wheel and inner ring shute.” But
Mr Frericks wrote that
“it would have been conceivable and technically reasonable not to
replace the damaged bucket wheel in its entirety, but to repair it.
Since the bucket wheel consists of several sections which are
assembled and welded together on site, it would have been possible
to remove and replace the damaged sections only”.

The proposal itself had specified that many items would be “inspected and re-used”,
meaning that they would be re-used if the inspection revealed no need for repair or
replacement. Yet Mr Frericks felt able to say from the photographs alone whether
there was any damage. For example, one of those items was the bucket wheel shaft,
about which Mr Frericks wrote:
“The bucket wheel shaft needs to be inspected in great detail and
examined to ensure there are no cracks (dye penetration or magnetic
powder test, ultrasound test). It can, however, be assumed that the
shaft, being of solid construction, was not damaged by the forces
arising from the boom grounding.”

So Mr Frericks seemed to be at the same time saying that the item should be
thoroughly inspected and tested but that a favourable outcome from the inspection
could be assumed.

[709] He also suggested that the price of the minimal rebuild, or perhaps at least the cost
to Krupp, could have been decreased by manufacturing the structural steel
components in China, at a saving of 15 to 20 per cent. He said that this would have
allowed Krupp “to offset additional expense for any additional deliveries which
could have become necessary in the minimal rebuild” and then expressed his
conclusion that “the overall price of $12.17 million was realistic and ... did not
contain any price increase risks of significance.” The suggestion about the
manufacture of components for this rebuild in China is surprising, because it does
not seem to have occurred to anyone within Krupp when it was preparing and
submitting this proposal in 2000. Now some seven or so years later, Mr Frericks
felt that this would have provided a sufficient buffer for potential price
increases from the discovery of further matters needing repair. Mr Wagner said that
the May 2000 estimates followed his communications with Krupp in Germany, but
again China does not seem to have been considered.

[710] The minimal rebuild was to be performed according to BG 60. The complete
rebuild of the superstructure proposed at the same time was to be according to
BG 86. The plaintiffs, largely in reliance upon the evidence of their witness
Mr Matz, were critical of the proposed use of BG 60, which by then of course had
long been superseded. Mr Frericks wrote that because the BWE had been built
according to BG 60 (modified by additional load assumptions), it was appropriate to

109
Transcript 6218.
 176

rebuild it to the same standard because this would continue “to provide a suitable
design basis which ensures the safety of a BWE”. He wrote that:
“Dimensioning the new superstructure components according to
BG86, for instance, as provided for in the complete superstructure
rebuild tender, would have resulted in increased connecting forces at
the turntable and substructure, and these elements would not have
been capable of absorbing these without additional measures. The
substructure would probably have had to be reinforced for that
reason. On the other hand, that measure would not have been very
sensible considering that the machine had been running for 18 years
without any problems.”

[711] Mr Matz, said that any rebuild should have been done according to a current and
not an outdated standard. On the other hand, Mr Black wrote in his report to BHP
of August 2000 that even a rebuild of the entire superstructure should be on “the
basic standard of BG 60 for design load cases”, but that “the welding detail in all
areas carrying loads essential to the stability of the machine shall be stringently
evaluated to the latest codes ...”. So there is some support for Mr Frericks on that
point.

[712] Mr Frericks was strongly challenged for the fact that a draft of his report had
something else about BG 60, which was not in the report which was tendered. But
read in context I do not think that the difference is significant.

[713] Overall I am unable to accept Mr Frericks’ evidence that the minimal rebuild was
appropriate. His contentions that in some respects the minimal rebuild was
excessive and that some things could have been done at a lower price, make his
evidence less persuasive. Unlike Mr Black and Professor Hulsmann, he was not
independent and had not seen the BWE. I prefer their evidence, and find that the
minimal rebuild would not have provided the plaintiffs with a reasonable repair.

[714] In his report of August 2000 headed “Evaluation of Repair/Replacement of the

O&K Bucket Wheel Excavator”, Mr Black was clearly of the view that a rebuild of
the BWE was feasible. He wrote:
“The crawler and sub structure machine groups are intact and are
reusable, subject to a thorough and satisfactory inspection to agreed
criteria, of all load bearing structures and the load support points on
the fixed and moving crawlers.

The main slew bearing should be replaced and the discharge

conveyor support and luffing cylinder support bearings should be
inspected and replaced if necessary.

The first bolted joint stubs of the main frame which are integral with
the substructure would be the starting point for a replacement main
frame.

All other machine groups, excepting the main frame, could be rebuilt
using the original design criteria and load case detail.

These machine groups are:

 177

- Bucket wheel boom with Stays to Rope Support

- Rope support structure
- Discharge Boom
- Counterweight Boom with Stays to Main Frame

Inspection shows that these structures, although damaged by the

collapse of the machine and cut into manageable sections for
dismantling, were not subject to structural distress prior to the
collapse and were in operational condition after eighteen (18) years
of use.”

[715] He continued that “all replacement structure shall be from new materials. None of
the original structural material is to be used”. All mechanical components
supporting the weight of the machine and contributing to its stability were to be
“replaced as new” and he there listed them. Further mechanical components which
had been damaged were to be replaced, and again he listed them. Certain other
listed mechanical components were to be refurbished. All electrical control systems
and lighting, he said, should be replaced with “modern day equivalents.” Mr Black
then prepared the tender documents for that rebuild and it was upon that
documentation that Krupp submitted its December tender.

[716] In the December tender, Krupp departed from the tender documents in that it
requested the use of the current standard DIN22261, explaining that
“a major deviation between BG60 and BG86 and DIN22261-2
respectively is the introduction of dynamic effects for different
construction elements and some modifications in loading
combinations.”

The December tender was for a price of $27,893,461 plus the following:
“Supply and deliver ball path $778,693
Installation PC sum $143,373
Supply and deliver discharge boom slew bearing $358,655”

making for a total of $29,174,182. Krupp toffered to reach practical completion

within 108 weeks after the date of acceptance of the tender.

[717] The plaintiffs claim that the probable cost of that rebuild was not $29,174,182, but
rather that amount increased by a factor of 20 per cent. The defendants concede that
if their case for the minimal rebuild is rejected, then it should be found that the
reasonable cost of repair is $27,893,461 and that the amount which it tendered for
the ball path should not be allowed because, it is argued, the plaintiffs have not
proved that the collapse of the BWE was the cause of its required replacement.

[718] Of the December tender that leaves the component which is “supply and deliver
discharge boom slew bearing” for which the tender price was $358,655. In his
August 2000 report, Mr Black wrote that
“all (mechanical) components which support the weight of the
machine and contribute to stability are to be replaced as new”

and that they included the discharge boom slew bearing. At page 19 of the scope
of works in the tender document he wrote:
 178

“The contractor shall allow for the supply and fitting of a new main
slew bearing and discharge conveyor slew bearing. These items
should be shown as separate costs in the Tender Price Schedule”.

The discharge conveyor slew bearing had not been the subject of the same request in
April 2000, when BHP had sought estimates from Krupp. On that occasion,
Mr Haegel had written that
“the price should include the installation of a new and complete slew
bearing. This should be itemised separately and will be subject to
further inspection.”

This appears to be a reference to the main slew bearing and not the discharge
conveyor slew bearing. Why then were these two components, the ball race and the
discharge boom slew bearing, singled out and not treated simply as part of the
rebuild of the BWE in BHP’s tender document?

[719] The answer would appear to be that BHP did not consider that it was insured for the
replacement of these components. I discuss below a document prepared by
Mr Ellery in early 2001, entitled “Shovel crusher project case”, which explains most
of the reasoning behind BHP’s decision to acquire the shovel/crusher instead of
rebuilding the BWE. Mr Ellery referred there to the anticipated receipts from the
plaintiffs’ insurers, according to whether the shovel/crusher was acquired or the
BWE was rebuilt. For the rebuild, he wrote that it was expected that $30.14 million
would be received made up of “BWE rebuild $27,894,000” together with “project
costs” of $851,000 and a five per cent contingency sum of $1,394,700. The project
costs were to cover project management as well as the provision of a large “special
purpose construction pad”. So clearly at this time the plaintiffs were not expecting
to be indemnified by their insurers for the loss of a ball race or discharge boom slew
bearing. This appears to have been the reason why the plaintiffs asked for these
items to be separately priced. An explanation for these items being in a separate
category is that their costs did not represent the repair or replacement of something
which had been damaged in the collapse, but instead of something which otherwise
needed replacement.

[720] As to the ball path, Mr Black’s opinion, as expressed in his witness statement, was
that there was a “fair chance” that the ball path had been damaged in the collapse.
This was because
“when the BWE collapsed ... the loading upon the ball race would
have become uneven. This means that the loading where the balls
meet the upper and lower rings of the ball race could have resulted in
indentation of the surface of the rings in those locations. The ball
race is designed as having hard balls and soft rings i.e. over time the
rings are sacrificial elements. The ball race is replaced when the
upper and lower rings are within a specified dimension. The
hardness of the ring rolling surfaces decreases with depth and this
results in an increasing rate of wear. ... (At para 5.12) From my
recollection, the original life of the race was estimated to be 8-10
years. When machine collapse occurred the life of the bearing was
18 years. I think it would be very prudent to take the bearing apart
and have a very close inspection of the components.”
 179

[721] In cross-examination he gave this evidence:

“And the existing ball path to be visually inspected and remain,
that’s the point I was just talking to you about. The existing ball path
might have been worn out, but it wasn’t obviously damaged? – Yep.

And so this quote proceeded on the basis that since it wasn’t

damaged, you don’t get a new ball path when all that happened is
you wore out the old one? – It depends upon the duty that’s
envisaged for the machine afterwards.

Right? – Because the ball path for that machine at that time was
about a good eight years beyond what was the original design life.

That is the point you make in 5.12, they’d already had a pretty good
run with it? – Yes.

Really, almost double its life, in fact more than double its life? –
Yeah.”

[722] So Mr Black did not say that the ball path needed replacement probably as a result
of the collapse. The highest he was prepared to put it was that there was a “fair
chance” that it was damaged then. This is an example of where he was prepared to
make concessions against the interests of the parties which had called him.

[723] I discuss below the evidence of Mr Matz, including his evidence as to the ball path.
As there appears, his evidence is unpersuasive on this and many other points.

[724] The best evidence for the plaintiffs for the ball path replacement is in that
Shippke report, where Professor Hulsmann and Dr Remke wrote that “ball path
lower part ... with ball cage, steel balls ... and oil catching channel” had been
“partially damaged and deformated ... by structural members which fell down” so
that “no repair is possible”. They further wrote that “ball race with fasting, gearing
cover and roller bearing” had been “partially damaged and deformated ... by
structural members which fell down.” Professor Hulsmann was not asked about this
when questioned about this report. And of course it was the defendants who
tendered it.

[725] Against this, Mr Frericks said that it was unlikely that the ball path was damaged by
the collapse but he conceded that some measurement of the ball path would be
necessary to exclude that possibility. For reasons earlier discussed, Mr Frericks’
opinion is of little weight and the opinion expressed in the Shippke report should be
preferred.

[726] Professor Hulsmann was an impressive witness. But unfortunately he was not
asked about this matter at all. Mr Black’s evidence shows the real prospect that the
ball path needed replacement in any event and indeed, that this was just as likely as
that it was damaged in the collapse. Ultimately I am not persuaded that the
plaintiffs have discharged their onus of proof in relation to this item.

[727] As to the discharge boom slew bearing, the plaintiffs’ argument refers to no
evidence in support of this component. And there is the fact that the tender
document and Mr Ellery’s report treated this item, together with the ball path, as in
 180

a different category from the other items the subject of the December tender. The
plaintiffs have not proved that this item had to be replaced because it was damaged
in the collapse.

[728] Accordingly the plaintiffs should be awarded at least $27,893,461, the price of
Krupp’s December tender. The next questions are whether there are other sums to
be added to that amount to represent the full cost of a rebuild of the BWE.

[729] In order to prove their claim for an extra 20 per cent on the December tender, the
plaintiffs called Mr Matz, a German engineer. He provided an opinion on many
matters but of immediate relevance are his views on the likely cost of a rebuild. In
his report of 19 October 2004, which with attachments extends to nine volumes,
there are some three pages of text which discuss the December tender and the likely
additional costs. In his view, those extra costs would have been of the order of
$8.5 million, resulting in a total cost for the rebuild of the BWE of about
$38 million. That report was supplemented by evidence in chief given orally.
Nevertheless, this evidence was remarkably short of detail. He said that his
estimates of the costs of these additional items did not come from any calculations,
because he had no drawings or parts lists. Instead, he “benchmarked”. He claimed
that each of his estimates was “based on experience of similar machines, of similar
equipment, of similar work being done”. At another stage he was asked whether
there was some spreadsheet which showed any calculations, to which he answered:
“Not any more … because I was only interested in the budget
figures, I deleted everything … I probably came up with a more
detailed calculation that backs up the figures said here.”

[730] Mr Matz was called to prove a case for an allowance of a further 20 per cent on the
December tender ($5.834 million). In the context of such a lengthy report, and the
sums involved, the absence of any explanation for his estimates is remarkable.

[731] Mr Matz said that the ball path required replacement “as a consequence of accident
impact and long storage”. He said that a replacement with a reinforced ball path
could be required, “including structural modifications to slew platform and
substructure ring girder” because of the use of the current German standard
(DIN 22261) and the addition on the structure of further access walkways. These
changes to the slew platform and the ball path, with installation, were estimated by
him to cost in total $2.75 million. Yet Krupp offered to replace the ball path for
$922,000, of which the installation was a “PC” sum of $143,373. In its May 2000
estimates, Krupp had estimated the cost of a new ball path at $921,555.

[732] Mr Matz failed to satisfactorily explain why there was such a difference between his
estimates and the amount quoted by Krupp. He referred to what he saw as the need
for some modifications because of the increased weight of the superstructure. But
one reason for this increased weight was the application of the current
German standard and Krupp seems to have allowed for that in its December tender
in all respects. Mr Matz suggested that Krupp's December tender should be
understood as providing for the current German standard for the superstructure but
not for the ball path. That is not the effect of Krupp's tender. It would be
remarkable if Krupp had tendered upon the basis of the current German standard for
the entire superstructure but for the replacement of something beneath it on a
different and outdated standard. Further, Mr Matz conceded that he had not done
 181

any analysis to identify just what differences there should be between the proposed
ball path and the present one. In cross-examination there was this evidence:
“Would it be fair to say you haven't done any analysis of the actual
elements that you are talking about to see what it was and what
might need to be done to increase it?--- No, for sure not. I just go by
the increased weight, and I know that the designer bids and puts so
much money in the machine he's selling, there's profit, just to do the
job. So, when you increase the task of doing the job, you have to
increase the components.”

[733] This is an example of what I see as the willingness of Mr Matz to exaggerate and to
offer opinions, and in particular estimates of costs, without any apparent foundation.
Because overall I think his evidence should be given very little weight, his opinion
that the ball path needed replacement in consequence of the collapse is not
persuasive.

[734] Another of his extra items was described as “site installations, eg barracks, power
and water supply, yard equipment, security services”. For this item his estimate was
$500,000. As he had to concede in his oral evidence he had simply overlooked the
fact that all of this had been included in the December tender.

[735] Another item was for the:

“design, supply of materials and construction of civil works,
including bulk earthworks, ground levelling and consolidation,
drainage, trestle & equipment foundation, trestles, anchorage, plant
access roads etc.”

This was not included in the December tender and there would have been some cost
to the plaintiffs for the provision of the construction site and proper access to it.
That is why it appears in Mr Ellery's “Project Case” document as part of the cost of
a rebuild. As already noted, Mr Ellery referred there to “project costs” of $851,000
which covered project management as well as the provision of a construction pad.
Beyond Mr Ellery's estimate however, I am not persuaded by Mr Matz that anything
within this item was required. BHP was well placed to know the costs of whatever
works were necessary for a construction site and access to it at its own mine, and
Mr Ellery’s estimate is likely to have been correct.

[736] Item no 3, estimated at $250,000, was for:

“interface hardware and software between new electrics and central
mine control and communication system, especially with
transportation system controls (conveyors, spreader and mine control
centre).”

On this basis then, BHP, and in particular Mr Ellery, has overlooked this cost in its
assessment of the cost of the rebuild against the alternative of the shovel/sizer. I
am not persuaded by Mr Matz's evidence that there would have an extra cost. Nor
am I persuaded by his so called “benchmark” estimate of $250,000. In this and in
other instances, he sought to justify his estimates of costs as “benchmark
estimates”, without at the same time explaining what the relevant benchmark was.

[737] Another item was “supply of consumables and spares for modernised system
components (electrical and mechanical)” for which his estimate was $750,000.
However it appears that these spare parts were not needed for a rebuild of the BWE,
 182

but were required for the future maintenance of the machine. This machine had
always needed spare parts.

[738] Then there is an item described as “follow-up repair upon inspection findings on
components not included for refurbishment e.g. gear-boxes, couplings, crawler
steering, hydraulics etc”. Mr Matz allowed $1,250,000 for this. Again, the estimate
lacks any apparent basis. But the existence of a risk of substantial extra costs from
components still to be properly inspected was real and was considered by both BHP
and Krupp at the time. In the Project Case Mr Ellery allowed five per cent for this
contingency and others. When he was cross-examined, his attention was drawn to
that figure but he was not challenged upon it. Similarly in the evidence of
Mr Kilgour, there was this exchange:
“… The bucket wheel rebuild option which calculated the total cost
of $30.1 million, including a contingency for unknown costs?---
That's right.
And that was an assessment which had been made in consultation
with you and with which you agreed, I suggest?--- Yes.”

Krupp considered the risk of these further costs by ensuring that its tender did not
oblige it to bear the cost. In section 10 of its December tender, it proposed
amendments to the terms of the tender document provided by BHP to provide that
“prices for all refurbished items provided in this Tender are conditional on
inspection, at the time of refurbishment. Any unforeseen conditions will constitute
a variation of the contract”. Similarly there were the frequent references, on pages
in the tender dealing with gear-boxes and other mechanical items, that “worn or
damaged parts will be quoted at the time of inspection”. The plaintiffs argue that
Mr Reiter agreed that the price might vary by 15 to 20 per cent. On one view of that
evidence, however, Mr Reiter was speaking of a potential variation in the cost to
Krupp, rather than in the contract price. He spoke there of the uncertainty in the
pricing of things which were known to be work required under the rebuild, rather
than specifically in relation to items which upon further inspection would need
repair or replacement. Nevertheless, Krupp was careful to ensure that the proposed
terms placed the risk of further but then unknown defects upon the plaintiffs. I am
satisfied that this risk was substantial and should be in some way recognised in the
assessment of the likely cost of the rebuild.

[739] His next item was the cost of the services of an Independent Expert, estimated by
Mr Matz at $250,000. Mr Black had proposed such an expert in his August report
writing that:
“Structural and stability design of new machines and modification of
existing machines is subject by law in Germany to review by an
Independent Expert. This is not a requirement under Australian law
but is a subject the purchaser may wish to discuss with tenderers.
Considering the main frame failure of the original machine it would
be prudent to have the design of the replacement frame and the
revised stability calculation reviewed by a recognised Independent
Expert. … There are consultants within Australia who could review
the main frame structural design but overall review, in my opinion,
would be best performed by an Independent Expert knowledgeable
of the process as carried out in Germany.”
 183

I accept that such an expert was reasonably required. I do not accept Mr Matz's
assertion as to the cost. Apart from his evidence, the plaintiffs rely upon what was
charged by Mr Friedemann, acting as such an expert, when the BWE was
constructed and commissioned more than 20 years earlier. The document
recording his appointment seems to have provided for a fee of 140,000DM. I do
not know what was the then equivalent in Australian dollars and in any case this
hardly seems a reasonable way to prove the likely cost of an inspection in 2003. I
am unable to quantify that, but it should be brought into account in assessing
overall the likely extra cost beyond the December tender price. I infer that BHP
did just that in reaching the five per cent contingency referred to by Mr Ellery and
Mr Kilgour.

[740] Mr Matz said that there was a further item involving a “complete supply of
manufacturing documentation …, drawings …, part lists and spreadsheets”, together
with a “complete supply of operation and maintenance manuals” in electronic form.
In his report he said that the cost would have been $250,000. At the
commencement of his oral evidence, he halved this, conceding that some drawings
would have been provided under Krupp’s December tender. Mr Matz maintained
that there would still be this additional cost of $125,000 for other drawings. It
emerged that he had in mind drawings which did not relate to components provided
under the rebuild, but components unaffected by the rebuild. Assuming that BHP
did not have such drawings, the cost of their provision would not be part of the cost
of a rebuild.

[741] The next of his items was “function and performance tests of the rebuild (sic)
machine, entire machine” for which the estimate was (again) $250,000. The
December tender allowed for what was described as “dry commissioning” of the
rebuilt machine, but specifically excluded “wet commissioning” and performance
testing. There is no evidence as to the likely cost of that item alone, save for that of
Mr Matz. I accept that this further testing was required in a rebuild and that its cost
was not included in the December tender and it should be allowed for in some way.
Again, however, it is likely that BHP did so within the five per cent allowance for
contingencies.

[742] The next item refers to the warranties to be provided, or not provided, under the
December tender. Krupp proposed a warranty for new parts but not for re-used or
refurbished parts. Krupp’s Mr Frericks said that had such a warranty been
insisted upon, then a reasonable allowance for that would have been $260,000,
being 10 per cent of the value of the re-used components. The warranty offered for
new parts was for a period of 12 months. Mr Matz said 24 months was appropriate
so that there should be an allowance for the cost of that warranty. Overall, the cost
of these more extensive warranties was estimated by Mr Matz at $1 million. Again,
this was explained simply as another “benchmarking” estimate.

[743] At this point there are three things which must be noted about the warranties which
Krupp offered. The first is that the plaintiffs do not plead that one of the factors
justifying a 20 per cent increment is this matter of the warranties. The particulars of
the relevant paragraph of the statement of claim refer to the 20 per cent as covering
“the cost of contract preparation and administration, principal
superintendents and subcontractors, site services, contingency for
repairs to principal supplied components (crawler frames and tracks),
variations, costs increases and time over-runs.”
 184

Secondly, the complaint that the warranties offered by Krupp were inadequate does
not seem to have been of particular concern to BHP at the time. In particular, there
is no reference to this in Mr Ellery's Project Case. There is a reference to the risk of
the BWE being less reliable than the new shovel/crusher but there was nothing
written of the inadequacy of the warranties. The Project Case does say that:
“This (rebuild) option was considered to contain considerable
technical risk in relation to the mechanical reliability of the bucket
wheel as the suppliers would not offer the machine productivity
guarantees normally provided with new machines.”

This seems to accept that the warranties offered by Krupp were not unusual or
unreasonable. Thirdly, Mr Black would not have considered a 12 month warranty
on, and only on, the new components as unreasonable. In his witness statement, in
discussing the minimal rebuild, he said that a 12 month warranty on all new
components was reasonable and that for rebuilt components, such as gearboxes,
there should be a six month warranty. In his August 2000 report he wrote that:
“Tenderers should be requested to advise the warranty period for the
machine components supplied from and including the main slew
race. A usual period would be 12 months although a major OEM
(original equipment manufacturer) may offer extended warranty on
the main ball race. Tenderers should evaluate the existing condition
of the crawler and substructure machine groups and, after repair or
replacement of components if necessary, include these groups in the
warranty period. The costs associated with this could be treated as a
provisional sum.”

[744] Especially given the absence of any reference to the warranty in the Project Case
document, or (apparently) in any other contemporaneous document, the claims by
some witnesses such as Mr Kilgour, that the limitations on Krupp’s liability and the
warranties proposed by Krupp were of concern, is difficult to accept. There was no
response by BHP to the December tender. Had the extent of the warranties been a
matter of concern as now related by Mr Kilgour, it is likely that BHP would have
enquired about an extended warranty.

[745] For these reasons, had the plaintiffs decided to rebuild, it is unlikely that they would
have sought and obtained, but at a greater cost, more extensive warranties. There is
no basis for increasing the assessed cost of the rebuild for this item.

[746] The last of Mr Matz's items is for “miscellaneous”, for which he proposed the sum
of $750,000. He gave no details of what this involved in his report or in his oral
evidence. Its only relevance is as a further indicator of his unreliability.

[747] As I have indicated in the course of discussing Mr Matz's evidence, there are some
matters which require an addition to the amount tendered by Krupp in assessing the
likely rebuild cost. The best indication of what should be added is what BHP, no
doubt after proper consideration, thought should be added when considering
whether to rebuild the BWE or acquire the shovel/crusher. Mr Ellery wrote that
there should be added to the tender price the anticipated project cost of $851,000
and a five per cent contingency sum (which equalled $1,394,700). As already
noted, Mr Ellery was not challenged on those estimates and nor was Mr Kilgour.
An allowance of some amount for the cost of repairing or rebuilding what was not
known to be damaged is necessarily imprecise. But the plaintiffs have not
 185

demonstrated why their own allowance of five per cent at the time was an under-
estimate. On the other hand, a five per cent allowance does not seem an extravagant
sum for the cost of the unknown and other things such as the Independent Expert
and performance testing of the rebuilt machine.

[748] The plaintiffs also argue that some amount should be allowed for exchange rate
variations. The risk of adverse movements in currency values affected both the
rebuild and the shovel/crusher alternatives, as Mr Ellery wrote in the Project Case.
Had BHP accepted the December tender, the tender price would have been
increased by a fall in the Australian dollar against the Deutschmark. In
condition 9.4 of the tender, Krupp wrote:
“Our offer is based on the current exchange rate of A$1 equals
DM 1.216. Any variations to exchange rate as date of invoice will
be to BHP Coal account.”

Elsewhere in the tender, Krupp provided that the components to be supplied from
overseas had prices totalling $2,937,440. Accordingly, the depreciation of the
dollar against the Deutschmark would have led to an increase in that sum, thereby
affecting the ultimate cost of the rebuild. Although this point does not appear to
have been pleaded, the defendants knew that it would be argued. Indeed, it was a
letter from the solicitors for the defendants which was tendered by the plaintiffs to
prove the relevant exchange rates for the purpose of this argument. According to
that letter, the exchange rate by May 2003 was A$1 to DM 1.0956. So, had the
BWE been rebuilt according to the December tender, the price would have been
increased by approximately $327,000. Measured by the exchange rate a month
earlier (1 April 2003), the increase would have been about $356,000 but measured
by the exchange rate a month earlier again, the increase would have been
$280,511. Of course, the exact date for this purpose is unknown. The contract
provided for a completion period of 108 weeks from the formation of the contract.
In these circumstances, the sum of $320,000 will be allowed.

[749] The result is that the plaintiffs have proved that the cost of the rebuild of the BWE
would have been just what they were expecting when deciding between the rebuild
and the shovel/crusher (together with that component for the movement in exchange
rates). I find that the cost of the rebuild would have been a total of $30,459,161,
made up of the December tender price of $27,893,461, a five per cent contingency
sum of $1,394,700, Mr Ellery’s estimate of project costs of $851,000, and that
component of $320,000.

The shovel/sizer cost – should it be allowed?

[750] The next issue is whether the plaintiffs should be compensated upon the basis of this
rebuild or upon the basis of the cost of the shovel/sizer system (which I will call the
replacement claim). The plaintiffs must prove that it was reasonable for them to
replace the BWE with this new system. But what is reasonable in this sense is
concerned with the mitigation of damage. The question is what was reasonably
necessary for the purpose of making good the plaintiffs’ loss110. The question is not
whether the acquisition of the shovel/sizer was reasonable as a business decision.
Yet much of the evidence seemed to be concerned with that question, rather than

110
Darbyshire v Warran [1963] 1 WLR 1067 (CA) at 1075 cited in McGregor on Damages (16th edn)
at [298].
 186

with whether the acquisition of that system was reasonably necessary to put the
plaintiffs in the position which they would have enjoyed but for the collapse.

[751] In assessing what was reasonable in the relevant sense, a court will not scrutinise a
plaintiff’s conduct “with an eye focussed for criticism”, and a plaintiff “ought not to
be weighed in nice scales at the instance of the party whose [conduct] has
occasioned the difficulty. It is often easy after an emergency has passed to criticise
the steps which have been taken to meet it, but such criticism does not come well
from those who have themselves created the emergency”: Banco de Portugal v
Waterlow & Sons Ltd111 cited in Davidson v JS Gilbert Fabrications Pty Ltd112 and
AHR Constructions Pty Ltd v Maloney113.

[752] Further to the cost of the shovel/sizer system, or alternatively the cost of the BWE
rebuild, the plaintiffs claim a number of items as “additional expenses occasioned
by the collapse”. As already noted, for the most part there is no difference between
the replacement claim and the rebuild claim. There are two amounts claimed by the
plaintiffs under the replacement claim which are not claimed under the rebuild
alternative. They are $455,557 for the additional cost of “bunding” and $819,863 as
the cost of the ultimate dismantling and removal of the BWE from the mine site.
Those items are now relevant in comparing the alternative courses open to the
plaintiff in 2001. However, apparently they were not so important to BHP at the
time. So far as the respective costs of the alternatives were concerned, BHP’s
assessment then was that there was an “incremental capital spend of $6.7M”. As set
out in the Project Case, the comparison then was between the cost of the rebuild
($30,139,700) and the cost of the shovel/sizer system ($36,926,158).

[753] Mr Kilgour was the general manager at Goonyella from 1996 to 2002. He was very
much involved in the decision to acquire the shovel/sizer. In his witness statement
he expressed several reservations which he said he held at the time about the rebuild
proposal. He was concerned that the price might increase, depending upon what
was discovered to be the actual condition of some components. He was also
concerned, he said, by the warranty proposed in the tender. But as already
discussed, the warranty did not so significantly depart from that which Mr Black
had anticipated. Mr Kilgour acknowledged that the warranty may have been able to
be further negotiated and that “detailed contractual negotiations between parties was
relatively common in contracts of this type”. But he said that such negotiations did
not occur because he and his colleagues were not “satisfied in the first place with
the technical and commercial aspects of the tender”. He said that:
“as is invariably the case in any major machinery repair, further
problems or previously unidentified damage emerges once the repair
work has commenced. I therefore saw Krupp’s tender price as the
minimum price, which might increase as the rebuild progressed.”

He said that the shovel/sizer was chosen over a rebuild for the following reasons:

• the time involved in rebuilding was about two years (108 weeks according to
the December tender) compared with about one year for the shove/sizer system;

111
[1932] AC 452 at 456.
112
[1986] 1 Qd R 1 at 15.
113
[1994] 1 Qd R 460 at 467.
 187

• the prospects that the rebuild costs would increase and that the time involved in
rebuilding would exceed that 108 weeks;

• the uncertainty attending what he described as “warranty, workplace health and

safety issues and continuing operational performance which accompany the
rebuild option”;

• replacing the BWE with the shovel/sizer system enabled the plaintiffs to utilise
the conveyor and spreader systems of the BWE which were not damaged in the
collapse (although this seems not to have been a distinction from the rebuild
alternative);

• the anticipated cost of operating the shovel/sizer system “compared well” to the
cost of operating other replacement systems; and

• the overall cost (including capital costs and time involved in replacement)
appeared to be less than the anticipated total cost of repairing the BWE.

[754] Mr Ellery had been the Senior Mining Engineer (Operations) at Goonyella at the
time of the collapse. From mid-2000 until June 2002, he was employed at the mine
as the Project Manager of what was called the Red Hill Optimization Project, which
in effect, was the project of the rebuild or the replacement of the BWE. He
managed a group of mine employees and others (such as Mr Black) in the
evaluation of the various alternatives. In early 2001, he prepared his Project Case
document. It was a submission to more senior management of BHP for approval to
acquire the shovel/sizer system. There are several versions of the document in
evidence. Indeed it emerged at the end of the trial that the defendants had cross-
examined Mr Ellery looking at a different version from that which was tendered
during his evidence114. As the parties seemed to accept, the differences are not
significant and I will discuss the document in its ultimate form.

[755] Mr Ellery there summarised the technical advantages of the shovel/sizer over the
rebuilt BWE as follows:

• it would be more reliable because it would be an entirely new system, whereas

the BWE would use “the bucket wheel crawler frame, and crawlers and other
key components which are more than 20 years old and have suffered severe
shock loads as a result of the failure in March 2000”;

• an unreliable pre-stripping system would have “major downstream impacts on

our ability to schedule coal exposure operation of the mine”;

• the shovel/sizer had an earlier start-up time, thereby requiring “less contract
pre-stripping and less constraints to the operation in terms of working around
the existing conveyor belts”;

• the shovel/sizer components, operations and maintenance requirements had

more in common with existing machinery than the BWE, making for more

114
Exhibit 134, the original exhibit, which omitted one annexure and was later replaced by the complete
document. The earlier draft from which the defendants had been conducting their case became
Exhibit 588. Another draft is Exhibit 154.
 188

efficiency in relation to the required levels of spare parts, and the crusher would
be “much simpler to maintain and operate”;

• the shovel would be interchangeable with other pre-stripping shovels so that it

could be used to assist the truck/shovel fleet while the remainder of the system
was down for conveyor belt moving;

• the shovel/sizer could operate in blasted rock and could dig deeper than the
BWE; and

• the shovel/sizer would be able to operate closer to the advancing coal face
“thereby reducing the pre-stripping inventory compared to the bucket wheel”.

[756] He analysed the operating costs for the BWE which were calculated to be
$1.26/bcm and for the shovel/sizer system which were calculated to be $1.06/bcm.
He then discussed the financial advantage of the shovel/sizer (described there as the
shovel/crusher system) in these terms:
“To understand the benefit of spending additional capital on the
shovel crusher system over the lower capital cost of the bucketwheel
rebuild, the incremental capital and operating costs between these
two cases was analysed. The full cost of contract prestrip to make up
for the late delivery of the bucketwheel during the next two years
was not included because the insurance coverage for business
interruption would significantly reduce this impact. The lower unit
operating cost of the shovel crusher system alone is more than
sufficient to offset the incremental capital spend of $6.7M. The
analysis shows a NPV of $7.4M in 100% terms with a ROR of 20%
in favour of spending the additional capital on the more efficient
system. The value of the bucketwheel rebuild ($30.1M) was shown
as a cost saving and the capital for the shovel crusher was shown as
normal capital in the financial model in order to calculate the correct
tax treatment of the insurance funds.

A hypothetical case of no insurance impact was run to demonstrate

the validity of the decision and allow equitable comparison with
other company capital expenditures that have no insurance claim.
The results proved to be exactly the same as the case with insurance.
This is because the insurance proceeds considered from either
rebuilding the bucketwheel or installing a shovel crusher are
assumed to be the same, and on a differential basis there is no net
impact as shown in the input comparison tables above. A summary
table of the financial results is shown below.

Case NPV $M ROR % Ave

Increase
NOPAT pa
Shovel crusher v 7.4 20 2.0
BWE No insurance

Shovel crusher v 7.4 20 2.0

BWE Insurance
Case ”
 189

[757] His conclusions were expressed as follows:

“Goonyella Riverside Mine have developed a carefully thought about
plan, to combine the higher productive capacity of modern rope
shovels, with the low operating cost of the existing conveyor
spreader system to produce the stripping capacity lost, from the
structural failure of the bucket wheel excavator.

Approval for this project to proceed with the order of shovel and
crusher equipment is highly recommended as it represents a sound
business decision for BHP and will be a valuable asset for
Goonyella Riverside Mine”.

[758] Mr Ellery was not the decision maker. Nevertheless the document provides a very
useful description of the relevant considerations for the business decision which was
to be made. As already discussed, however, the present question is not what was a
reasonable business decision, but rather what was reasonably necessary to make
good the loss. Some of those technical and financial considerations discussed in the
Project Case were relevant to making good the loss and some were not.

[759] So for example, the fact that the shovel/sizer could operate at deeper levels than the
BWE was not a consideration which is relevant to the present question. To spend
more for that advantage may have made perfect commercial sense but it was to
obtain a benefit which the plaintiffs did not have prior to the collapse. Of these
technical considerations set out above, all but the first three points are in the same
category. The presently relevant considerations were the perceived greater
reliability of a new system and the advantage of an earlier start-up time.

[760] It was reasonable for BHP to believe that the new system would be more reliable
because it was entirely new, rather than rebuilt from something which had suffered
serious damage. Nevertheless, the fact that BHP investigated the alternative of
rebuilding the BWE as it had, demonstrates that overall there was confidence in the
performance of a rebuilt BWE. Mr Black had recommended the replacement of the
entire superstructure and had written a detailed tender document upon which BHP
had sought tenders. Further, BHP had the benefit of the Schippke Report of
October 2000. The advice to BHP was that a rebuilt BWE would perform, although
there was the possibility that other components would have to be repaired or
replaced upon closer inspection. That was recognised by the five per cent
contingency allowed in the Project Case. Of course there were risks that even after
such an extensive rebuild and considerable testing and inspection, there might still
be some failure because of undetected damage to some part of the sub-structure.
But the extent of that risk, as BHP assessed or ought to have assessed it, was that it
was not so high that an additional $6.7 million should have been spent to acquire the
sizer/crusher on that ground alone.

[761] Further, the extent to which the new system would have been more reliable was also
considerably due to simply the difference between a new system and a machine
which was, as Mr Ellery wrote, more than 20 years old.

[762] Again the question for BHP in 2001 was different from the present question. If the
BWE could be rebuilt so that it was as reliable overall as it should have been for its
age, then the fact that a new system would be more reliable would not be relevant in
assessing now what had to be spent to make good the plaintiffs’ loss. And the
 190

rebuilt BWE would have many new components in place of 20 year old
components, which was likely to have enhanced its reliability.

[763] The earlier start-up time of the shovel/sizer was more a financial than a technical
consideration. Mr Ellery wrote that there would be savings from the earlier delivery
of the shovel/sizer because it would perform work which would otherwise have to
be performed by external contractors. According to his analysis, the operating cost
of the shovel/sizer would be about one-half of the cost of contractors: $1.06/bcm
for the shovel/sizer as against $2.00/bcm for contractors. In a schedule annexed to
the Project Case, his calculations assumed that the shovel/sizer would remove
4.4 million bcm in the year to 30 June 2002 and 13 million bcm in the following
year, with 8.6 million bcm being removed by contractors in the 2002 year.
On the premise of a rebuild of the BWE, 13 million bcm would be removed by
contractors in the 2002 year and 8.8 million bcm in the 2003 year, the remaining
4.2 million bcm being removed by the rebuilt BWE. In these calculations he
appears to have assumed that the cost of contractors in these two years was
$1.70/bcm. But still that was significantly higher than his assessed $1.06 bcm for
the shovel/sizer or $1.26 for the BWE. The difference between the operating cost of
contractors and the cost of the BWE or the yet lower expected cost of the
shovel/sizer, had a large impact upon his financial assessment.

[764] The Project Case assumed that the difference in timing between the shovel/sizer and
the rebuild would represent a further 13.2 million bcm to be removed by contractors
in the 2002 and 2003 years, which could be avoided by acquiring a shovel/sizer.
That would result in a saving of $8.448 million, measured by the difference between
$1.06/bcm for the shovel/sizer and $1.70/bcm for contractors. However, the more
relevant comparison for present purposes was the extra cost according to the
difference between the contractor’s rate and the BWE rate, which is a difference of
$0.44 bcm and a difference overall of $5.808 million. Here, the relevant loss to the
plaintiffs was the loss of use of the BWE with its capacity to excavate at less than
the assumed contract rate.

[765] So far as operating costs were concerned, the Project Case discussed two ways in
which the shovel/sizer was the better alternative. One was that suggested avoidance
of excavation by contractors would result in lower costs in the years 2002 and 2003.
I will call this the interim saving. The other was because it was then expected that
the operating costs of the shovel/sizer over its life would be less than those of the
BWE. I will call this the long-term saving. According to the Project Case, although
both savings were material, it was the long-term saving which was critical. This
was because of what BHP understood would be made good by its insurer. It was
insured for losses occasioned by the unavailability of the BWE until it was rebuilt or
replaced. If it had to engage contractors to do the work which would have been
done by the BWE, then BHP considered that it was insured for the extra cost. So by
the interim saving from the earlier delivery of the shovel/sizer system, BHP would
be no better off. What mattered to it was the long term saving: the difference
between the operating cost of the shovel/sizer and that of the BWE. The
Project Case assessed the net present value of the long term saving at $7.4 million.
By itself, that made the shovel/sizer effectively the cheaper alternative. Mr Ellery
there wrote:
“To understand the benefit of spending additional capital on the
shovel crusher system over the lower capital cost of the bucketwheel
rebuild, the incremental capital and operating costs between these
 191

two cases was analysed. The full cost of contract prestrip to make up
for the late delivery of the bucketwheel during the next two years
was not included because the insurance coverage for business
interruption would significantly reduce this impact. The lower unit
operating cost of the shovel crusher system alone is more than
sufficient to offset the incremental capital spend of $6.7M. The
analysis shows a NPV of $7.4M in 100% terms with a ROR of 20%
in favour of spending the additional capital on the more efficient
system. The value of the bucketwheel rebuild ($30.1M) was shown
as a cost saving and the capital for the shovel crusher was shown as
normal capital in the financial model in order to calculate the correct
tax treatment of the insurance funds.”

[766] As it happened, in its actual operation the shovel/sizer was more expensive than the
Project Case had estimated. Indeed it was more expensive than the estimated cost
of the BWE per bcm, or the use of the mine’s own fleet of trucks and shovels.

[767] According to Mr Ellery’s analysis in the Project Case, the acquisition of the
shovel/sizer was clearly a reasonable business decision. However, the long-term
saving is not presently relevant. By obtaining that benefit, the plaintiffs were not
making good a loss from the collapse of the BWE. They were simply obtaining in
that respect a better system than they had enjoyed with the BWE. The cost of
acquiring that benefit was not a loss from the collapse of the BWE.

[768] The interim saving was a different matter. If it was necessary to engage contractors
to do what would have been done by the BWE before the expected completion of its
rebuild, then the extent to which that excavation would have been more expensive
than with the use of the BWE would constitute a loss resulting from the collapse of
the BWE. It could have been reasonable for the plaintiffs to have tried to avoid that
loss by a higher expenditure on a replacement system. As already discussed,
according to the analysis in the Project Case, from the difference between the
contract rate and the BWE rate multiplied by the extra volume to be removed by
contractors, the interim saving would have been $5,808,000. This was less than the
$6.7 million by which the capital cost of the shovel/sizer exceeded the cost of the
BWE rebuild. But the risk of a price increase for the rebuild was greater than for
the shovel/sizer, so that overall the acquisition of the shovel/sizer could be seen as a
reasonable course to replace what was lost.

[769] However, this is upon the premises that, as the Project Case assumed but did not
analyse, the overburden which would have been removed by the BWE in those two
years would have to be removed within that period, and removed by contractors.
Neither of those premises is established. It is not demonstrated that absent the
BWE, that amount of overburden had to be removed from where the BWE would
have worked. Nor is it demonstrated that the work had to be done by contractors
rather than by the mine’s own fleet of trucks and shovels.

[770] The probable the reason why the Project Case did not consider those two matters is
explained by the passage I have set out above, where Mr Ellery wrote that the
interim savings were not so important because of the availability of insurance.

[771] What is presently being considered, of course, is the claim to recover the capital
cost of the shovel/sizer. There is a distinct claim by the plaintiffs for what they say
 192

was the actual difference in their operating costs over the two years ending
30 June 2002. The shovel/sizer began its operation in May 2002 and by 30 June it
had removed 896,892 bcm. That overburden was removed from the area in which
the BWE would have worked but for its collapse. But as I discuss below, apart
from that excavation, there was not one cubic metre which was excavated by
contractors, or by the mine’s trucks and shovels, between the collapse in
March 2000 and the arrival of the shovel/sizer in May 2002 which would have been
excavated by the BWE. In that period, the work done by contractors, and to a
greater extent by the mine’s fleet of trucks and shovels, was done at other locations
at the mine. It was all done closer to where excavated overburden was dumped,
thereby avoiding the greater cost of hauling the material over a longer distance.
And it was done at levels deeper than where the BWE would have worked, which
for the most part was to a depth of 25 metres below the natural ground level.
This 25 metres is described in the evidence as level 1.

[772] Accordingly, the assumption in the Project Case that the lost capacity of the BWE
would be replaced by the engagement of contractors does not correspond with what
occurred. When the mine was without the BWE, it did not engage contractors to do
the work which would have been done by the BWE.

[773] The plaintiffs argue that to some extent they engaged both contractors and their own
fleet of trucks and shovels to remove much of the volume which would have been
removed by the BWE in this period. But they concede that in no case did that
involve the removal of anything within level 1, and therefore anything which would
have been removed by the BWE.

[774] In theory it might have been reasonably assumed, in early 2001, that contractors
would have to remove from Level 1 what the BWE would have removed, although
subsequent events resulted in that not happening. However, there is no document
which evidences BHP’s consideration of that assumption at the time. There are
some documents which record discussions as to what was to be done to replace the
lost capacity of the BWE in the interim. But there is no document which records
any analysis of what had to be excavated from level 1, and what excavation might
have been postponed at level 1 pending the rebuild or replacement of the BWE.

[775] The Project Case assumed the removal of 13 million bcm in the 2002 year,
4.4 million bcm by the shovel/sizer and 8.6 million bcm by contractors. It predicted
that with the shovel/sizer in operation for the whole of the 2003 year, it would then
remove 13 million bcm. What occurred was that the shovel/sizer removed 897,000
bcm in 2002 and 8.909 million bcm in 2003. Of the projected 26 million bcm for
those two years, about 9.8 million bcm was in fact excavated and none of it by
contractors. Moreover, in the 2004 year, for which the Project Case had again
assumed that the shovel/sizer would remove 13 million bcm, in fact it removed
9.844 million bcm. So less than half of the projected amount was removed in the
2002 and 2003 years, and the amount removed in 2004 indicates that BHP did not
feel that it had to then make up the extent to which it had not reached this target in
2002 and 2003.

[776] In the consideration below of the damages claimed for loss of use of the BWE, I
discuss the Long Term Mine Plans. They show the intended quantities of
excavation at various levels and by various types of excavation systems. But they
do not necessarily demonstrate the amounts which needed to be excavated. The
 193

Project Case assumed that a rebuilt BWE would have excavated 4.2 million bcm in
the 2003 year. As already mentioned, the quantity excavated in the 2002 and 2003
years from where the BWE had been working was about 9.8 million bcm.
Therefore if it is assumed that everything which was excavated by the shovel/sizer
in 2002-2003 needed to be then excavated, the extent to which that excavation
could not have been performed by the rebuilt BWE was no more than about
6 million bcm. Therefore, a more realistic assessment of the extra cost from the
later delivery of the BWE (compared with the delivery of the shovel/sizer) would
have been 6 million bcm by $0.44. which is $2,640,000. That extra cost, considered
with other matters relevant for the present question, could not have justified the
expenditure of a further $6.7 million for the shovel/sizer. Moreover, the assumption
that everything which was removed by the shovel/sizer in 2002 and 2003 had to be
removed at that time is not shown to be valid.

[777] Then there is a further difficulty for the plaintiffs, which is that any work which had
to be done where the BWE would have worked did not have to be done by
contractors rather than by the mine’s fleet of trucks and shovels. The BWE was
used in only two pits in this mine and elsewhere that fleet excavated level 1
material, as well as deeper material. The cost of these trucks and shovels was less
than excavation by the trucks and shovels belonging to contractors. According to
what the plaintiffs claim for as damages for loss of use, the cost per bcm of their
own trucks and shovels for the 2002 year was $1.49 and for contractors the actual
cost was $2.00. In the 2002 year those trucks and shovels removed a total of
35.83 million bcm and contractors removed a total of 10.338 million bcm, so that
most of the excavation (apart from draglines) was performed by the mine’s own
fleet and at a much lower cost than $2.00/bcm. The basis for an assumption in
Mr Ellery’s Project Case, that work which would have been performed by the BWE
but for the collapse would then be performed by contractors, rather than to some
extent at least, by the mine’s own trucks and shovels, is not demonstrated. Once the
prospect that any gap would be made up by the mine’s trucks and shovels, rather
than by contractors, is considered, the advantage from the earlier arrival of the
shovel/sizer was less again. It is not demonstrated that the mine’s trucks and
shovels could not have been employed where the BWE would have worked, had
excavation at that place and at that time had been necessary.

[778] In discussing below the claim for damages for interim loss of use, I consider the
plaintiffs’ case that they decided to increase the rate of excavation of overburden at
other places in the mine to make up for what was not excavated where the BWE
would have worked. Overall the quantity of excavation undoubtedly was increased
in the 2002 year and following, although for that there are explanations other than
the unavailability of the BWE. But on no view could it be said that BHP made up
for the loss of the BWE in 2002 and 2003 simply by the engagement of contractors.
In the 2002 year, 10.338 million bcm were removed by contractors, but as the
plaintiffs ultimately conceded, most of this was in an area of the mine called The
Air Strip, where the excavation there had nothing to do with the lost BWE. At its
highest there were 4.121 million bcm excavated by contractors in the 2002 year
which the plaintiffs have sought to argue was the result of this need to make up for
the unavailability of the BWE. But even then this is less than half of the amount
assumed in the Project Case to be the required work of contractors in the 2002 year.

[779] In summary, the assumption as to the use of contractors in the 2002 and 2003 years
within the analysis in the Project Case was quite different from what actually
 194

happened. A basis for those assumptions is not proved. As what occurred in those
years demonstrated, it would not have been necessary to have engaged contractors
at all or to the extent which was assumed in the Project Case. At its highest, the
case proved by the plaintiffs is that the extra year or so required for the rebuild,
beyond the expected delivery of the shovel/sizer, meant there was some prospect of
an increase in the cost of removing that overburden which the BWE would have
removed but for the collapse. There was no reasonable basis for expecting that the
amount of such an increase in costs could justify the expenditure of the higher price
of the shovel/sizer.

[780] It follows that the plaintiffs have not proved that it was necessary for them to
acquire the shovel/sizer in order to make good their loss. The rebuild was
undoubtedly cheaper in so far as the capital outlay was concerned.

[781] The most important considerations for BHP’s business decision were the advantages
of the shovel/sizer in what I have called the long term savings and the various
technical advantages of that new system. The shovel/sizer was acquired because
those benefits warranted the extra capital expenditure, not because that had to be
spent for the purpose of making good the plaintiffs’ loss. The plaintiffs will
therefore be awarded damages on the rebuild basis.

[782] However, the prospect that some excavation would have been necessary where the
BWE had been working, at least during the 2003 year, needs to be considered for
another purpose. It is one thing to say that this prospect, and the likely extent of an
increase in operating costs from it, were not sufficient to now allow the plaintiffs an
award on the replacement basis rather than the rebuild basis. It is another question
as to whether that prospect should not itself result in a further component of the
award, as an additional expense which the plaintiffs would have incurred had the
BWE been rebuilt.

[783] When it collapsed the BWE was working in the Red Hill pit. The machine stood on
a level which was the result of previous excavation. It dug material which was in
front of it rather than which was below it. As it performed this operation gradually
moving through Level 1 across the mine site, it was followed by the trucks and
shovels which dug at the next level down, that is to say from below 25 metres below
the natural surface. At this lower level, the ground was harder and it was blasted
before it was dug. So there had to be a proper distance then between the operations
of the BWE and those of the trucks and shovels following it across the pit. Because
no excavation was done at Level 1 in the Red Hill pit from the collapse until
May 2002, that gap between where the BWE had been operating (and where the
shovel/sizer began to operate in May 2002) and the advancing trucks and shovels
digging at the next level became narrower. Mr Ellery’s evidence was that by
May 2002, the gap was so narrow that blasting activities were inhibited by the
operation of the shovel/sizer and there were only some “tens of metres” of space
available for it to operate. I accept that evidence. It follows that, had the BWE
been rebuilt and delivered in (say) April 2003, some excavation would have been
necessary at Level 1 in the Red Hill pit in order to allow for the trucks and shovels.

[784] Because the mine had its own trucks and shovels, which were less costly than those
of contractors, any work which had to be performed there would have been by the
mine’s trucks and shovels. The forensic accountants called by the parties agreed
that the cost per bcm of the truck and shovel excavation in the 2002 year was
 195

$1.4863. That included $0.2761 for blasting, which would not have been incurred
at Level 1. Against that, I accept that trucks working from Red Hill would have had
a relatively long trip, thereby increasing the cost. Overall I accept that the trucks
and shovels at Red Hill in the 2003 year would have been at least $0.22 dearer than
the BWE.

[785] The actual volume removed by the shovel/sizer in 2003 was 8.908 million bcm.
Accordingly, this measures the upper limit of what needed to be excavated from
level 1 in that year. The same applies to 897,000 bcm which was removed by the
shovel/sizer in the 2002 year. It is not alleged that proper planning and operations
of the mine were significantly disturbed once the shovel/sizer had been
commissioned. Apparently trucks and shovels were not used to assist the work of
the shovel/sizer at level 1 in the 2003 year.

[786] The working width of the area required for the BWE system was at least 100
metres. Mr Clews said that the shovel/sizer required a similar space in which to
operate, as another witness, (Mr Maiden) also explained. Mr Clews said that when
the shovel/sizer was commissioned, there was not enough space for its operations
and that it was necessary to build a pad for the conveyor. It follows that by
May 2002, there would have been insufficient space for the BWE. With the
addition of that pad, the shovel/sizer was able to operate. Therefore, if the quantity
removed by the shover/sizer had been removed by trucks and shovels whilst the
BWE was being rebuilt, there would have been sufficient space for its arrival in
May 2003. Had the BWE been available from the end of May 2003 (as predicted
by the program of works in the December tender) the BWE would have removed at
least one-twelfth of the overburden which was removed in 2003 or about 0.75
million bcm. It is probable then that the required work of trucks and shovels,
pending the arrival of the rebuilt BWE, would have been about 9.05 million bcm.
The loss to the plaintiffs then would have been for that quantity, $0.22 per bcm, or
about $1.99 million. I am satisfied that this amount should be added to the award.

[787] The defendants pleaded that if the BWE had been rebuilt it would have resumed
operations by 16 August 2001, or alternatively by 26 September 2002 or
alternatively by 20 December 2002. The first of those dates is 15 months from
Krupps’ letter of 16 May 2000, the second is derived by adding 90 weeks to the date
of the December tender and the third is said to be derived by adding “not more than
108 weeks to the date of that tender”. Ultimately none of this was argued by the
defendants. By the December tender, Krupp proposed practical completion within
108 weeks of its acceptance and a program which had the commissioning completed
at the end of May 2003.

[788] I have not overlooked the extensive evidence given by Mr Maiden in the plaintiffs’
case and Mr Hyde Page in the defendants’ case, as to the scheduling of operations at
this mine and the impact of various alternatives upon the rate of the recovery of
coal. That evidence was directed more to the plaintiffs’ claim, considered below,
for damages for the loss of use of the BWE between March 2000 and May 2002.
But it was relevant to the component just discussed, because on one view at least,
some of it could provide a basis for assessing how much had to be excavated in the
2002 and 2003 years at the relevant location to stay sufficiently ahead of the trucks
and shovels working nearby. The more reliable indication however, is in what BHP
actually did at the relevant location, which seems to have been sufficient to stay
ahead of them (with the rider that the pad had to be constructed in May 2002 as
 196

Mr Clews explained). The plaintiffs claim the extra operating cost from the
unavailability of the BWE during the 2003 year on the basis of calculations by
Mr Van Homrigh. But those calculations are based upon a different comparison.
Mr Van Homrigh was not asked to calculate the extra cost of a certain number of
bcms at Level 1 in the Red Hill pit.

[789] Before going to the claims under the heading of “Additional Expenses Occasioned
by the Collapse”, it is convenient to say something of other arguments by the
defendants.

[790] In response to the replacement claim, the defendants argued credit should be given
for the benefits which the plaintiffs have with the shovel/sizer, compared to their
position prior to the collapse. They say that the shovel/sizer will require lower
service and maintenance costs as well as lower operating costs, that it will have a
longer useful life than the BWE would have had, that it is a depreciable asset of
greater value than the BWE and that it provided other technical advantages over the
BWE. None of those matters is said to be relevant to an assessment on the
alternative basis of the cost of a rebuild. In particular there is no pleaded or argued
case that the rebuilt BWE has a higher value than the pre-collapse BWE and that the
difference should be deducted from the award.

[791] In response to the replacement claim, but not the rebuild claim, the defendants also
pleaded that the plaintiffs would have replaced the BWE with alternative equipment
“in due course”, because they considered it to be “obsolete, or having served its
effective useful life”115. Should it be considered relevant to the assessment of
damages upon the rebuild basis, this point should be considered. As it was argued,
it went no higher than this:
“There is some evidence here that the plaintiffs had given
consideration to the eventual retirement from service of the BWE. It
is not contended though that the evidence shows that a decision to
that effect had certainly be made to do that at the time of the
collapse. But of course the fact is that it would have been retired
eventually at the end of its effective service life, whether that be
50 years or less.”

This point had been raised in a report by Ms Wright, the forensic accountant called
in the defendants’ case. She there referred to some documents which inspired this
point, but the latest of them was July 1997 and none provides any strong indication
of a likely retirement. The 1997 document was a discounted cash flow analysis
indicating “that the plaintiffs have considered the possibility of ‘standing down’ the
BWE system at various times in the period 1999 to 2003”. Ms Wright took this
document and others to indicate, as she put it, that “the plaintiffs recognise certain
limitations of the BWE (as compared with the use of shovels), including the fact
that its usefulness is limited to only two pits (Cleanskin and Red Hill) within the
mine, and that its useful life is limited by constraints on availability of dumping
locations.” However, the BWE continued in constant operation until its collapse
and indeed its production was being increased. The long term mine plans showed
its use was proposed for many more years. In particular, the December 1999 plan
showed its proposed use through to the end of the period the subject of that plan

115
Third Further Amended Defence of the First Defendant, paragraph 27A, and Third Further Amended
Defence of the Second and Third Defendants, paragraph 49A.
 197

which was 2014. And the very detailed consideration which was given by BHP to
the rebuild is inconsistent with the notion that it was likely to have been retired
before long in any event. Had the plaintiffs established their case for the costs of
the shovel/sizer, there would have been nothing in this point warranting some
reduction of the award. In case it is relevant to the rebuild claim, there is nothing in
it which would warrant the reduction of the award.

Additional expenses

Dismantling and removing the BWE in 2000

[792] The plaintiffs’ claim $869,576.03, most of which is admitted. Disputed is the claim
for labour costs of BHP’s own employees amounting to $135,572.15 and various
other items totalling $16,171. Two points arise here which also affect other so
called additional costs claims.

[793] The first is the evidentiary value of documents which were “coded”, in that staff of
BHP have recorded an expenditure as referable to the BWE collapse by the use of a
certain number (varying from year to year). Mr Ellery supervised the relevant work
and was responsible for approving plans to external contractors and the allocation of
BHP resources to the acquisition of shover/sizer work. Most of that work would
also have been required on a rebuild of the BWE, so that most of the amounts
claimed as additional expenses are claimed also in the rebuild case. Mr Ellery
explained that when an order was placed, or money was spent which was related to
the replacement project, one of these costs codes was applied to the expense with
the result that BHP’s electronic accounting system allocated that cost to the project.
He did none of the allocation in individual cases. This was done by accounting staff
and not surprisingly, he was unable to comment in most cases about a particular
allocation. There is a vast amount of documentation which was tendered to prove
these claims and it would be unrealistic to expect Mr Ellery or any other individual
to be familiar with it and the very large number of transactions involved.

[794] Evidence was given by Mr Carr who was employed at the mine as the Commercial
Manager and as such was the most senior accountant there. He was responsible for
overseeing the accounting records and systems. He explained the practice of
allocation of codes to various projects, including this BWE replacement project. He
reviewed the costs for this project monthly to identify any cost entries that appeared
to him to be unusual or incorrectly allocated. This was not, however, a detailed
audit. He accepted that there had been some miscoding but was confident that those
entries had been corrected.

[795] The defendants argued that it was significant that there were no written policy or
procedure for staff working on the project about recording relevant expenditure.
They argued that this tended to increase the risk of error. They also referred to other
things affecting the reliability of this recording, such as teething problems
experienced with a particular accounting system when it was introduced in 2001.
They argued that it was significant that not one of the accountants who applied this
coding was called to give evidence about it, and went so far as to submit that as a
result, there was a Jones v Dunkel116 inference to be drawn that their evidence
would not have assisted the plaintiffs’ case.

116
(1959) 101 CLR 298.
 198

[796] Over the defendants’ objection, documents relevant to these expenses were admitted
pursuant to s 1305 of the Corporations Act 2001 (Cth) which provides as follows:
“Admissibility of books in evidence

(1) A book kept by a body corporate under a requirement of this

Act is admissible in evidence in any proceeding and is prima
facie evidence of any matter stated or recorded in the book.

(2) A document purporting to be a book kept by a body

corporate is, unless the contrary is proved, taken to be a
book kept as mentioned in subsection (1).”

The relevant “requirement” of the Act is from s 286 which provides, in part, as
follows:
“Obligation to keep financial records

(1) A company, registered scheme or disclosing entity must

keep written financial records that:

(a) correctly record and explain its transactions and

financial position and performance; and

(b) would enable true and fair financial statements to be

prepared and audited.

The obligation to keep financial records of transactions extends to

transactions undertaken as trustee.”

The term “financial records” is defined by s 9 to include:

“(a) invoices, receipts, orders for the payment of money, bills of
exchange, cheques, promissory notes and vouchers; and
(b) documents of prime entry; and
(c) working papers and other documents needed to explain;
i. the methods by which financial statements are
made up; and
ii. adjustments to be made in preparing financial
statements.”

[797] In objecting to the admission of these documents, the defendants accepted that for
the most part these were financial records. Their principal argument was that they
were not financial records of a company but instead were financial records of the
joint venture. I held that they were financial records kept and required to be kept by
the first plaintiff, which operated the mine on behalf of the joint venturers of which,
of course, it was one. Secondly, it was argued that some documents were not of the
type which were required to be kept, because they were not “records”. In relation to
some documents, I upheld that submission. In particular there were some
documents which were prepared not as a record of anything but to assist in the
plaintiffs’ insurance claim. Thirdly, the documents were of no probative value
because, in particular, their record of an expenditure described only as
“BWE failure”, did not evidence “any matter”. As that submission was developed,
the defendants’ counsel said that they wished to explore that matter with Mr Ellery.
It was really an argument as to weight. The recording of an expense by the category
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“BWE failure” was, on its face, a record that this was expenditure made because the
BWE had collapsed. According to s 1305(1) it is prima facie evidence of that fact.
But it is now a question of whether, on the evidence as a whole, that fact is
established. It is in that context that the defendants now argue that the records are
unreliable as proof of that fact.

[798] Clearly there is scope for error in this record keeping. The persons who may have
made those errors were not called. But this does not warrant a Jones v Dunkel
inference. Apart from simply the general prospect of human error, there seems to
be no point raised as to the particular potential for errors in these records. It is said
that there was no written policy or instruction document about this but I do not see
that these were necessary. Most of the expenses incurred in relation to this
collapsed BWE and its replacement are likely to have been easily identifiable as
such by those who were keeping the records. There is the possibility that they have
wrongly included other expenses. There is equally the possibility that they have
wrongly excluded them. The defendants do not seem to suggest that the amounts
recorded, taken individually or taken with other items, are well beyond some
expected range. There is no suggestion that accountants and other employees were
asked to falsely inflate the amount of these expenses. This system of coding is not
unique to expenses from the collapse of the BWE. In general, the coding provides a
sufficiently reliable basis for a finding that the expense was caused by that incident.

[799] Many of the items in issue concern the cost of staff, both salaried and non-salaried
staff, of BHP. There was a system whereby non-salaried employees would write a
description of what they were doing on time sheets and if it related to the
replacement, they would write “bucketwheel replacement” from which a foreman
would then write the relevant code on the time sheet. By this means the costs of
those employees were coded in the electronic records. Another argument was that
the documents tendered were unreliable because the relevant supporting documents
do not show the name of the employee. Something was said to come from the fact
that Mr Ellery had no knowledge as to which employees referred to in his witness
statement were the employees relevant for certain items or what indeed they were
specifically engaged to do and how it related to the BWE failure. Nor in some cases
was he able to determine from the supporting documents, how many hours were
involved in the cost which was recorded. But this is not a basis for rejecting the
evidence. There was a system which was likely to have been followed for the most
part and to provide a reliable record of these labour costs. Again it is not suggested
that the costs claimed are higher than could be expected or that there was some
intention to inflate them and the records are not less reliable for the fact that none of
the workmen was called to say that he was accurate in his time sheets. There were
some of these employees who were called in the plaintiffs’ case about other matters.
There is no basis for drawing an inference against the plaintiffs from the fact that
they were not asked by the plaintiffs to give evidence about this matter. The
absence of any particular indicator of unreliability of the records is no doubt the
reason why the defendants asked them no questions about it.

[800] There is also a claim for the cost of some salaried employees. Two of them were
employed specifically for the BWE project. They were Mr Testrow and Mr Maher.
Others, being Mr Ellery, Mr Hughes, Mr Crawford and Mr Cazzola, were BHP
employees prior to the collapse. Mr Ellery said, and I accept, that he, Mr Hughes
and Mr Crawford worked full-time on the project. The defendants conceded that
the salaries for Mr Testrow and Mr Maher were recoverable, but for reasons to do
 200

with the argument about to be discussed, the others were not recoverable and that
there was a difficulty in allocating the costs between those two categories.

[801] A further and more substantial argument was that the plaintiffs have not
established that the costs of non-salaried staff, and the salaried staff apart from
Mr Testrow and Mr Maher, were incremental in that they were costs which
would not have been payable in any event by BHP in the course of the operation
of the mine. The plaintiffs did not lead evidence that they hired any additional
staff to perform the work which would have been performed by these employees
had they not been working on the BWE project. There is no suggestion that
work on the BWE project was more costly than other work which would have
been done by the same employee. So it was argued that if these claims for
internal labour were upheld, the plaintiffs would not be compensated by them.
Rather, they would be placed in a better position than if the BWE had not
collapsed.

[802] As to salaried employees, Mr Ellery said that his vacancy and those of
Mr Hughes and Mr Crawford were “back filled” by somebody from within the
department and then “somebody would have had to take his role and so forth and
so on”. He said “this back filling process would be … of some months”, but he
was unable to say who was involved. The defendants say that he was merely
speculating. The evidence went further than speculation and I accept that in his
case and in those of Mr Hughes and Mr Crawford, there was an incremental cost.

[803] In response, the plaintiffs argue that in each case the labour costs, for both
salaried and non-salaried employees are recoverable. They say that had they
engaged new employees to do the same work and at the same cost, those costs
would have been recoverable and that there is no reason in principle why they
should be worse off because they diverted their existing workforce “from other
proper-earning activities”.

[804] The Australian authority cited for this argument is Tesrol Joinery Pty Ltd v Cefla
Scri117, where the plaintiff recovered damages for breach of contract against a
party which had sold it a defective machine for use in its factory. It continually
broke down and the plaintiff’s staff were taken off other duties to deal with the
problems which it caused. The damages sought included wasted employees’
costs, about which the defendant argued that those wages would have been paid
in any event. Einstein J said:
“[26] In terms of CEFLA’s contention that no damages should be
awarded because Tesrol was bound to pay the employees’
salaries and wages in any event, I accept that this contention
ignores the fact that Tesrol received no benefit for these
salaries and wages wasted, whereas if these salaries and
wages had not been wasted on consequences of the CEFLA
spray line non-performance, Tesrol would have been able to
benefit from the productive capacity of the workforce in the
time which would then have been available (see annexures
M and N to exhibit P7).

117
[2005] NSWSC 528.
 201

[27] CEFLA’s contention entails the proposition, as the plaintiffs

have submitted, that a contractual wrongdoer can cause the
total loss of the plaintiff’s production capacity but have no
liability for the labour cost incurred by the plaintiff while its
workforce remains idle.

[28] The principle is that the innocent party is entitled to be put

in the same position, as best as money can do it, as if the
contract had not been broken. In the case of employees that
means that the employer is entitled to be reimbursed for the
cost of the employees’ productive time lost by reason of the
breach of contract. Hence in McRae v Commonwealth
Disposals Commission the Commonwealth was liable to pay
as one head of damages, the wages of the crew of the
“Gippsland” incurred in the futile search for the tanker
contracted to be sold [see 84 CLR 377 at 418: See also
Pollock v Mackenzie (1866) 1 QSCR 156, cited in McRae’s
case at 413].”

Neither McRae v Commonwealth Disposals Commission nor Pollock v Mackenzie

dealt with the present question. They were cases involving damages for
non-delivery of a tanker in one case and cattle in the other, and the relevant
expenditure was incurred on the faith of the promise of delivery, so that when that
expenditure was wasted, there was a compensable loss.

[805] The plaintiffs also cited Aerospace Publishing Ltd v Thames Water Utilities
Ltd118 where the relevant English cases are discussed. A private archive owned
by the plaintiff was partly lost and partly damaged by flooding for which the
defendant was responsible. As part of a claim for special damage, the plaintiff
claimed for the costs of some existing employees as well as two outsiders each
of whom did work in consequence of the flood. There was an issue as to the
recoverability of the costs of the existing employees. The plaintiff argued that
absent the flood, they would have concentrated upon their usual work, out of
which the plaintiff would have made money. But it was unable to prove any
particular loss of revenue. In a passage upon which the present plaintiffs rely,
the trial judge said119:
“Had the claimants engaged temporary workers, there could have
been no objection to the cost. As I see it, there can be no objection in
principle to essentially the same claim because they took the easier
and possibly cheaper course of diverting their existing workforce
from profit earning activities to those arising from the flood.”

[806] On appeal, the principal judgment on this point was given by Wilson LJ who
discussed Tate & Lyle Food and Distribution Ltd v Greater London Council120;
Standard Chartered Bank v Pakistan National Shipping Corporation121; Horace
Holman Group Ltd v Sherwood International Group Ltd122; Admiral

118
[2007] EWCA Civ 3.
119
Set out at [2007] EWCA Civ 3 at [77].
120
[1982] 1 WLR 149.
121
[2001] EWCA Civ 55.
122
[2001] All ER (D) 83.
 202

Management Services Ltd v Para-Protect Europe Ltd123 and R + D Versicherung

AG v Risk Insurance and Reinsurance Solutions SA124. Wilson LJ, with whom
Longmore and Pill L.JJ agreed on this question, said that those authorities
established the following propositions125:
“(a) The fact and, if so, the extent of the diversion of staff time
have to be properly established and, if in that regard
evidence which it would have been reasonable for the
claimant to adduce is not adduced, he is at risk of a finding
that they have not been established.

(b) The claimant also has to establish that the diversion caused
significant disruption to its business.

(c) Even though it may well be that strictly the claim should be
cast in terms of a loss of revenue attributable to the
diversion of staff time, nevertheless in the ordinary case,
and unless the defendant can establish the contrary, it is
reasonable for the court to infer from the disruption that, had
their time not been thus diverted, staff would have applied it
to activities which would, directly or indirectly, have
generated revenue for the claimant in an amount at least
equal to the costs of employing them during that time.”

What was meant by “significant disruption to its business” was apparently a

reference to Standard Chartered Bank v Pakistan National Shipping
Corporation, where the plaintiff bank claimed the salary of an employee who
was sent to work on the relevant problem for a total of four months. That claim
was unsuccessful and in a passage set out by Wilson LJ, Potter LJ said126:
“However it is not suggested that his trip abroad, as an employee
engaged in the business of [the bank] and in respect of whose
responsibilities his salary was in any event payable, led to any
significant disruption in [the bank’s] business or any loss of profit or
increased expenditure on [the bank’s] part…In certain situations,
involving particular types of training concerned, such a claim may be
appropriate. In particular, building contractors who, by reason of
delay, suffer increased costs attributable to a particular job which
costs are irrecoverable elsewhere, may claim for a proportion of their
fixed overheads (including head office salaries) as part of their claim
for consequential loss. However that is not this case. There is no
suggestion that the business of [the bank], or the system of charging
upon which its profits depend, were in any way adversely affected by
the diversion [the employee].”

[807] As that passage indicates, this is a similar issue to that arising in litigation from
building contracts, and some of the authorities in that context are relevant here.
In particular there is relevance in this passage from the judgment of Giles J in

123
[2002] 1 WLR 2722.
124
[2006] All ER (D) 209.
125
[2007] EWCA Civ 3 at [86].
126
[2001] EWCA Civ 55 at [49].
 203

Thiess Watkins White Construction Ltd v The Commonwealth127, concerning the

recoverability of off site overheads by a contractor for the principal’s delay:
“Off site overheads are costs incurred by the contractor. In the sense
that they are incurred in relation to the performance of all the
contracts on foot from time to time, in part they are costs incurred in
the performance of any given contract. It is common for a contractor
to include in his price a percentage on the estimated direct costs in
order to recover a share of the off site overheads (and often the
percentage is intended to include profit as well). Hence the argument
that where delays increase the time required for performance of a
contract, the off site overheads referable to that contract are
increased.

In this situation the contractor may well suffer loss by reason of the
delay. The loss is not necessarily measured by a proportionate
extension of the percentage (or the part of it originally intended to
provide for recovery of off site overheads, if that is known) for the
period of delay (the so called “Hudson formula”: see Hudson’s
Building and Engineering Contracts, 10th ed, at 598-600). The share
of the off site overheads attributed to the contract must be justified
(State of South Australia v Fricker Carrington Holdings Ltd (1987)
3 BCL 72), and in principle it must be otherwise shown that a true
loss has been suffered. The problems are well stated in Abrahamson,
“Engineering Law and the ICE Contracts”, at 3690: ‘The theory is
that the contractor’s site and management resources are his revenue
earning instrument, and that in so far as they are detained on a
contract by delay he will lose the earnings he would have made with
them on some other contract out of which he would have paid his
overheads and pocketed his profit. The reality is that in many cases,
particularly where the delay affects a small part of a large
contractor’s total resources, the contractor’s organisation has
sufficient flexibility to cope with the extra time on site without
sacrificing any other contracts that may be available, so that the
contractor’s total overhead return and profit is not in fact adversely
affected by the delay, or not to the extent claimed on foot of the
usual mathematical formula. On the other hand, where a major part
of his resources are tied down on a site because of a delay, the
ultimate length of which is not known, the contractor genuinely may
be inhibited from tendering for other work at competitive rates: the
edge may be taken off his tendering in a way not susceptible to very
clear proof. The difficulty is to establish the real facts…’”

[808] That passage is consistent with the reasoning in Aerospace Publishing. In

particular it is a matter for a plaintiff to prove that there was such a significant
disruption, that there was a likely impact upon its profit, although not in a way
“susceptible to very clear proof”. In the present case, where it is not proved that
there was, as Mr Ellery described it, some “back filling”, there is no proof of a
“significant” disruption in this sense. Thus for the non-salaried employees, the
impact upon the mine’s resources as a whole is not shown to have had the likely
effect of inhibiting the mine’s operations. In my view proof of such a likely
127
Unreported, Supreme Court of New South Wales, Giles J, 23 April 1992.
 204

impact is necessary. It is not simply a matter of saying that the plaintiffs should
recover as if they had incurred an incremental cost by engaging outsiders to do
the same work.

[809] I go now to the particular items of expenditure which are claimed.

Dismantling and removal of damaged BWE

[810] A total of $869,576.03 is claimed, of which all but $151,743 is now admitted.
Of that, $135,572 involves the costs of BHP employees. These result from
allocating some of an employee’s time to this project. That component fails for
the reason just discussed.

[811] Of the balance, there are two items128 of a total of $3,036, for which there is no
demonstrated connection to the BWE in the document (in each case an invoice)
which is said to support the claim. These items will not be allowed.

[812] The next is item 210, (from the spreadsheet of claims), which is for $2,226.50.
The supporting documents show a connection to the BWE by the code. The
supporting document in this case is not an invoice but a journal entry showing
that an item was changed from another code to the relevant code in April 2000.
The connection between this expense and those from the same contractor, which
are evidenced by invoices in June and July 2000 and which are conceded by the
defendants, does not appear. It is curious that there is no invoice in this case and
given that fact and the difference in time from the other items involving this
contractor, it will not be allowed.

[813] Item 217, for which the contest involves some $25, will be allowed, the
document having the BWE code. Item 218, involving $500, will be allowed
because of Mr Ellery’s evidence that this involved the survey of the BWE in its
failed state following its collapse. Items 220 and 221 are sufficiently established
by Mr Ellery’s evidence about them. Items 222 and 223 will be allowed because
they have the BWE code.

[814] Item 225 is a catering bill for people from G & S Engineering (the contractor,
whom I will refer to as “G&S”) which performed the dismantling, and some
people from Monash University. These have been allocated by the code and
they will be allowed. For the same reason items 226 through 229 will be
allowed.

[815] The result is that all items are proved save for those totalling $140,836. Under
this heading then, the amount allowed is $728,740.

Costs of investigation of the failure and the assessment of replacement and repair
options

[816] The amount claimed is $402,878.54.

[817] Items 324 through 329 involve BHP labour and will be disallowed. They total
$62,543.52.

128
Items 208 and 209.
 205

[818] There are then many more items in dispute. Most of this was not the subject of
oral argument but I have considered the extensive written submissions from each
side, in some cases over very small amounts.

[819] The first is item 242, involving $60 paid to Minserve which will be allowed
because it is apparently associated with work it undoubtedly did in providing
advice as to the options for rebuild or replacement. The same applies to items
246 and 248.

[820] Items 252 through 263 are for the lease of the car used by Mr Ellery whilst he
was working fulltime on this project. The defendants submit that these are
“unsubstantiated”. But they are recorded in extracts from the books which I
have admitted under s 1305 of the Corporations Act. They claim that they are
non-incremental. As I have said, I accept that Mr Ellery was replaced by
someone and that ultimately there was a net cost from his working fulltime on
this project. The defendants might say that the other person did not have a
leased car. As I see it, the cost is part of the cost of the employment of Mr
Ellery.

[821] Items 267 and 268 involve payments to a firm called JK Tech. The argument
about 267 is that it was “not reasonable to incur expense because (work) was
undertaken to assess unnecessary replacement equipment”. This argument is
repeated in many items under this heading. I reject it. It is one thing to say, as I
have held, that the plaintiffs could have made good their loss by rebuilding the
BWE rather than acquiring the shovel/sizer. It is another thing to say that the
costs of investigating these alternatives should be disallowed. Until the
alternatives were investigated, the plaintiffs could not have made a proper
assessment of what they should do to replace the capacity which they had lost.
Such an investigation had to be extensive, as the trial of this case starkly
demonstrates. All of this was in the context of the likely high cost of the rebuild
of the BWE, which was certainly high enough to warrant an investigation of the
alternatives. Item 267 will be allowed. The same applies to the objection to
item 268. But for this, involving $270, it is said that there is no supporting
documentation. There is Mr Ellery’s evidence about it which I accept, as well as
the BWE code. It will be allowed.

[822] Items 269 – 271 involve payments to MV Mining Consultants. Mr Ellery said
that this was necessary as part of the evaluation and technical review of the
replacement system. What I have said about JK Tech applies here and these
amounts will be allowed.

[823] Items 272 – 274 involve payments to Egis Consulting which provided advice in
relation to the replacement system. This advice was provided, however, in
March 2001 and subsequently. The position here is different, because by then
the plaintiff should have appreciated that their loss would be made good by the
rebuild. They were pursuing the replacement for other reasons. These amounts
will be disallowed. They total $8,866.

[824] Items 275 through 288 are objected to each on the basis that there is “no
evidence of connection with BWE Project except a BWE code” and because
“Ellery unaware of reason for cost”. This is covered by what I have said earlier
about the codes. These items will be allowed.
 206

[825] Next are items 289-291 which involve the expenses of the overseas travel by
Mr Ellery, Mr Grant and Mr Stringer to investigate possible replacements for the
BWE. The defendants say that it was not reasonable to incur these expenses
because, as it happened, this trip was undertaken “to assess unnecessary
replacement equipment”. But again it was reasonable for the plaintiffs to
investigate the alternatives and these items will be allowed. The same applies to
another item from Mr Ellery’s travel overseas whilst involved in this project
which is item 293.

[826] Item 292 involves “staff accommodation” for which the evidence is
documentation bearing the relevant code. This will be allowed. The same
applies to items 294 and 295. Items 296, 297, 298, 300, 302, 303, 304, 306, 307,
313 and 314 involve expenses of overseas travel by one of Mr Grant,
Mr Stringer and Mr Ellery and again I reject the defendants’ argument that these
are not recoverable because the ultimate acquisition of the shovel/sizer was not
reasonable.

[827] There have been many low points in this litigation but item 301 probably
represents the lowest. It involves a claim for $1.30 for stamp duty for which
there is no supporting evidence. It is a good example of how written
submissions are used to advance something which an advocate would not be
prepared to say out loud. It is disallowed.

[828] Items 303 and 321 concern expenses for Mr Kroemer for which the evidence is
the BWE code attributed to the expense. These will be allowed on that basis.
Items 305 and 315 involve travelling costs for Mr Spearling of Minserve, who
were consultants in relation to the various alternatives. One has the BWE code.
Given Minserve’s role, I am prepared to allow them. Item 299 is “payment for
staff accommodation” which has the BWE code and the amount claimed, in all
$60, is allowed.

[829] Items 308-312 and 316-320 are challenged in each case on the basis that the
supporting document shows no connection to the BWE project except for the
code. In the absence of other relevant evidence, that is sufficient in my view.
Item 312 is also challenged on the basis that it was in relation to the replacement.
Again this involved the consideration of the alternatives including the
replacement. Item 320 relates to travel costs from Mr Testrow who was
employed specifically for the BWE replacement project. These will be allowed.
Item 322 is a further expense of Mr Ellery but given that he was working
fulltime on the project and that BHP was prepared to incur the expense, I infer
that it was relevantly caused by the collapse. It will be allowed. The same
applies to item 323.

[830] In the result, the items disallowed are labour totalling $62,543.52, the amounts
paid to Egis Consulting totalling $8,866 and that item of $1.30, in all
$71,410.82. Deducting that amount, the sum which will be allowed for the costs
of investigation of the failure and the assessment of the replacement and repair
options is $331,467.72.

Additional administrative costs incurred as a result of the failure

[831] The amount claimed totals $411,755.81 and covers the items numbered 330 to
404 inclusive.
 207

[832] The first item, which is 330, involves a claim for “BHP labour” of which there is
no evidence and for which, in particular, it is not demonstrated that the cost was
incremental. It will be disallowed. Items 331-333 are admitted.

[833] Item 334 is the first of many items involving the expenses relating to Mr Buxton.
He was employed by BHP but only for the purpose of compiling its insurance
claim. The plaintiffs’ response to that point goes no further than to say that
nevertheless the costs are reasonable and further that “such work would have
been required to bring the present claim even if there had been no claim to
insurers.” So it seems to be conceded that the expenses of Mr Buxton were
related only to the insurance and not to making good the plaintiffs’ loss. The
Buxton claims should be disallowed. They are items 334, 354-358, 361-366,
368-383 and 395-404.

[834] Item 405 is a claim for $12,974.42 for “payment of portable long service leave
entitlements”. The evidence does not explain this expense and the plaintiffs
made no submissions specifically in support of it. It will be disallowed.

[835] Item 336 relates to some incentive described as “sports bag provided to people
employed on the shovel and sizer project” and which Mr Ellery explained as
necessary “to encourage safety and to recognise the achievement of significant
milestones on the project”. It is not otherwise explained or substantiated and I
am not persuaded to allow it.

[836] Item 337 is admitted.

[837] Items 338-346 are described a “BHP internal legal costs”. Mr Ellery was unable
to say for what work these costs were incurred. BHP’s in-house lawyers were
involved in the Mining Warden’s inquiry into this collapse and a related claim
by a person for personal injuries. He was unable to say whether lawyers also
assisted with the insurance claim. Then there are some other documents which
suggest, on one view, that these costs or some of them were incurred in relation
to the present proceeding, rather than being recoverable as damages. Somewhat
surprisingly the plaintiffs have advanced this claim without explaining the work
to which these legal costs relate. But further, they were costs incurred within
BHP and did not involve an incremental cost to it or to the plaintiffs. They were
part of the salaries paid to BHP staff. In total they amount to $12,703.18 and
they will be disallowed.

[838] Items 349 and 350, totalling $553.20, are supported by the code and will be
allowed. Item 351 is a coded expense in relation to Mr Grant and item 352 a
coded expense for another employee. In each case they will be allowed.

[839] Items 359 and 360 are for taxi fares and they are substantiated by the code and
they will be allowed. Item 367 is $52.14 for expenses of Mr Carr. It is
supported by the code and will be allowed.

[840] Next come some items involving the costs of salaried employees. Items 384 to
387 involve the costs of Mr Ellery and Mr Testrow from July 2001 to
February 2002. Item 388 involves Mr Ellery in March 2002. Items 391 and 392
again involve salary for Mr Ellery. As earlier discussed the defendants concede
that the salary for Mr Testrow should be allowed but they dispute Mr Ellery’s
salary. He was involved fulltime in the project, and as already discussed, his
 208

costs were relevantly incremental. But these were salaries paid after the decision
was made not to rebuild. They appear to relate therefore to the replacement
option. Perhaps something of this would have been paid under the rebuild
option. It is likely that the rebuild also would have involved considerable time
from BHP’s staff, including salaried staff. The plaintiffs have claimed these
costs for each of their alternative cases, ie they claim these costs as what would
have been the costs of the rebuild. Implicitly then there is an acceptance that
costs of this order would have been incurred had there been a rebuild and the
arguments for their disallowance are that Mr Ellery’s salary was not
“incremental”. Because in my view it was, I am prepared to allow these items.
Undoubtedly there would have been substantial involvement by Mr Ellery and
others in the rebuild of the BWE had that occurred and it is reasonable to
suppose that they would have been at least of the order of the costs involved for
the acquisition of the shovel/sizer. Indeed the rebuild would likely have been the
alternative which required more attention from BHP mine staff given the
substantial construction which would have occurred at the mine site.

[841] Items 389 and 393 involve salaries paid to Mr Hughes and Mr Cazzola.
Mr Ellery said that the role held by Mr Hughes had probably been “back filled”
but he did not say that about Mr Cazzola. Accordingly I will allow half these
items, being $36,912.79 for item 389 and $2,397.98 for item 393.

[842] Items 390 and 394 relate to the salaries paid to Mr Maher and Mr Crawford. I
accept Mr Ellery’s evidence that Mr Crawford’s previous role had been “back
filled” and it is conceded that Mr Maher’s salary should be allowed.
Accordingly the full amounts will be allowed.

[843] The result is that for these so called additional administrative costs, the total
which will be allowed is $291,498.96.

Cost of recommissioning conveyor system

[844] These are (allegedly) costs incurred when the shovel/sizer was commissioned.
The plaintiffs claim the same amounts on the alternative basis of a rebuild of the
BWE. They say that the cost of recommissioning the conveyors would have
been no different according to whether they were working with the shovel/sizer
or the rebuilt BWE. The defendants argue amongst other things that some items
would not have been incurred with a rebuild.

[845] The principal argument for the defendants for the claim under this heading is
that a large part of it is likely to have been claimed twice in these proceedings.
They suggest that the plaintiffs also claim part of these costs in their claim for
special damages for the alleged increase in their operating costs for the year to
30 June 2002. The plaintiffs there compare the operating costs within that
financial year to what would have been the BWE’s operating costs. The high
operating costs of the shovel/sizer in the 2002 year tend to increase that claim.
The defendants suggest that the costs of recommissioning the conveyor system,
or at least part of them, have been included in those operating costs of the
shovel/sizer for the 2002 year, so that the plaintiffs should not be allowed them
effectively twice. However, that claim for special damages is not made out, as is
discussed below. Accordingly, there is no risk of the plaintiffs being
compensated twice for the same damage.
 209

[846] Apart from the collapse of the BWE, there was another reason for
recommissioning part of this conveyor system. Conveyor number 2 had been
flooded. The length of that conveyor was about 27 per cent of the total length of
the conveyors. So the plaintiffs have limited their claim under this heading for
several items to 73 per cent of what was actually spent. There is no apparent
challenge to that apportionment but the defendants argue that the same
apportionment should be applied to some other items under this heading.

[847] The first of them is item 405, which involved earthworks at a cost of $4,934.50.
The defendants say that only 73 per cent of that should be allowed. They say the
same about the earthworks in item 406 for which $13,578.50. But it was not
suggested to Mr Ellery that this 73 per cent apportionment should be made to
these items. They will be allowed.

[848] Item 407 is a claim for $3,547.80. The expense was for newspaper advertising,
and specifically for the position of a supervisor for the shovel/sizer system.
Against that item within the schedule to their written submissions, the
defendants say that it was “not reasonable to incur expense because purchase of
sizer and shovel not reasonable.” In effect the defendants say that this is a cost
which was incurred with the shovel/sizer but which would not have been
incurred upon a rebuild. The same submission is repeated for items 410-416,
420, 422 and 430-432. For each of those items then, the plaintiffs must prove
that the same expense would have been incurred with a rebuild of the BWE.

[849] For item 407 the plaintiffs have not discharged that onus. Items 408 and 409
also involve newspaper advertising expenses. There was no evidence as to the
purpose of this but the supporting documentation does bear the BWE code. The
use of the code is evidence of the connection between these expenses and the
replacement project. It is not evidence that the same costs would have been
incurred with a rebuild. Absent any evidence of the content of the
advertisements, the plaintiffs have not proved that matter and these items will be
disallowed.

[850] Items 410-413 involve payments to electrical engineering consultants who,

according to Mr Ellery, were engaged in relation to the electrical and data link
co-ordinating the sizer with the rest of the system. The plaintiffs have not
proved that the same costs would have been incurred with a rebuild of the BWE.
These items will be disallowed.

[851] Items 414-416 are for “training and a team building and development program”
for the crews to operate the shovel/sizer. Again the plaintiffs have failed to
prove that the same costs would have been incurred with the recommencement
of operations of the BWE. They will be disallowed.

[852] Items 417 and 418 are challenged on the above “double claiming” argument.
They will be allowed.

[853] Item 419 is conceded as is item 421. Item 420 is for setting up telephones for a
project office for the shovel/sizer project. It is likely that such costs would have
been incurred had the rebuild been pursued. It is also said that the claim is
unsubstantiated but the documents do carry the BWE code. It will be allowed.
 210

[854] Item 422 is for the hire of the Moranbah Community Centre “for training, team
building and development program”. The plaintiffs have not proved that this
would have been required on the resumption of work by the BWE. It will be
disallowed. Items 423-425 are accommodation expenses for employees and
contractors. Mr Ellery said that they were working on the BWE replacement
project, which I accept. These items will be allowed.

[855] Items 426 and 427 are expenses in relation to Mr Ellery, paid through
American Express and totalling just over $2,000. The defendants submit that
these are “unsubstantiated and non-incremental”. But they relate to the BWE
collapse because they are part of the expenses of employing Mr Ellery during the
time which he was exclusively involved in this project. I am prepared to accept
that costs of that nature and extent would have been incurred under a rebuild.
They will be allowed. Then there are expenses paid for Mr Carr and
Mr Connolly, who were not working full time. Nevertheless they have been
attributed to the BWE project by the code. There is no submission that they
were specific to the shovel/sizer acquisition and would not have been
incurred under a rebuild. They are items 428 and 429 and will be allowed.
Items 430-432 are for Mr Ellery’s travel to observe the progress of the
construction of the sizer. They do not appear to be relevant n the rebuild basis
and they will be disallowed.

[856] The next items, numbered 437 and 438 (which constitute most of the amount
claimed under this hearing), are opposed only on the double claiming argument.
They will be allowed.

[857] Item 439 will be allowed on the basis that the code shows its connection with the
collapse. The same cannot be said for items 440 and 441 which will be
disallowed.

[858] The result is that $109,783.66 of the total claimed is disallowed. The amount
which is allowed under this heading is thereby $815,977.08.

System commissioning and spreader shutdown costs

[859] A total of $455,022 is claimed for “system commissioning” and a total of

$222,727 for “spreader shutdown costs”. The same point arises for each of these
claims and it is convenient to deal with them together.

[860] They each relate to work done or parts supplied by G & S. Broadly speaking the
charge in each case was for what could be described as maintenance. The
amounts claimed are derived from invoices from G & S but the invoices are for
amounts which are higher than those here claimed. The explanation for that is
that the plaintiffs acknowledge that at least some of the charges were for work or
parts which were probably required regardless of the collapse of the BWE. The
plaintiffs’ case is that some of the components required maintenance because
they had been idle for so long because the BWE was not operating. The
plaintiffs must prove the extent to which the charges by G & S were increased
because of maintenance of that kind. The defendants argue that the plaintiffs
have failed to discharge that onus.

[861] Mr Ellery examined the G & S invoices, and further details of the work and parts
provided by them, and identified the items which in his view were the result of
 211

the relevant components being idle through the collapse of the BWE. So in
relation to items 443 and 444 (the system commissioning items) he explained
that129:
“The deductions made from the total costs of system commissioning
were made because it was assessed by me, in conjunction with
Ian Kilgour, that some costs would probably have been incurred
anyway in relation to the system, regardless of the collapse; that is
they were things that would have needed to be done, regardless of
the collapse of the BWE and the resultant idle state of the system.
The idea was to identify and claim only those costs which were
incurred because of the collapse of the BWE.

This was done by going through G & S’ itemised invoices on a line

by line basis. In the case of identifiable parts, in relation to each
part, an assessment was made as to whether it was necessary because
of the collapse and the resultant idle state of the system, or whether
they would have been incurred in any event if the BWE had
continued its normal operation. In the case of labour, and other ‘non-
divisible’ items (such as accommodation, mobilisation and general
consumables, etc) an allocation was done by calculating the
approximate percentage of labour that related to the work necessary
only because the BWE collapsed and applying that percentage to the
total charges for these items.”

For items 446 and 447 (the spreader shutdown items), he said that130:
“Item 446 claims an amount of $180,039.00 for the spreader
shutdown work. In fact, as can be seen from the documents referred
to in the particulars, invoices from G & S Engineering Services for
this work totalled $990,724.15. As with the other items (as discussed
above), an assessment was made so as not to claim costs that would
have been incurred for regular maintenance of the spreader system in
any event. This resulted in the amount of $180,039.00, which was
assessed by me and Ian Kilgour as being attributable to the collapse,
that is costs that would not have been incurred but for the collapse.
This assessment was done in the manner described above.

Document BHO.031.003.0241 is a list of parts used in the spreader

shutdown. Those parts would not have been required but for the
collapse, that is they were not part of the usual maintenance of the
spreader. This list of parts for the spreader shutdown was generated
in the same manner as described above for the system
commissioning costs. The amounts listed in respect of those parts
are in my view reasonable.”

[862] In his oral evidence he said that Mr Maher was also involved in this process.
Mr Maher was not called.

[863] The plaintiffs called Mr Parfitt of G & S. He was closely involved with the
maintenance of the BWE system. When cross-examined he was taken to the

129
Exhibit 123 paragraphs 80 and 81.
130
Exhibit 123, paragraphs 82-83.
 212

invoices which support item 446 which is part of the spreader shutdown costs.
He was unable to identify particular items likely to have been caused by the
collapse of the BWE apart from “the possibility [of] some of the electrical
testing” and perhaps some items described as “cleaning, inspecting or testing”.
As Mr Parfitt said, the invoices were not prepared for the purpose of
distinguishing between regular maintenance and items which would have been
unnecessary but for the collapse. In re-examination he said, in relation to the
spreader shutdown costs, that “at the end of the day there was some items in
there that would have been commissioning to a certain extent, and then yes,
there is work in there that would be in just general maintenance”. (By
“commissioning” he meant “not regular maintenance”.) But then when asked
whether he was able to estimate “what the proportion of the additional work in
that regard was?”, he said “not – not necessarily, no.”

[864] Mr Parfitt was not asked about items 443 and 444 which make up the claim for
“system commissioning” or item 447 which is that component of the spreader
shutdown claim which concerns parts. (Item 446 relates to labour.) It may be
assumed at least for item 447 that his evidence would have been the same.

[865] The defendants argue that if Mr Parfitt was unable to distinguish general
maintenance from things required as a result of the collapse, then Mr Ellery
could not do so and that the allocation was “guesswork”. Mr Ellery was
cross-examined about items 446 and 447 but not 443 and 444. When it was
suggested that his exercise of allocation had been just a matter of guessing, he
answered that “I think it was a bit better than a guess. It was done by
maintenance – it was assessed by maintenance people as leakage that wouldn’t
normally occur had the thing not been sitting there.”

[866] Mr Ellery performed this allocation exercise from the invoices and the
particulars of those invoices which G & S had provided. He did not do so from
an examination of the relevant components before G & S did their work.
Further, he did so with no great experience in the maintenance of mining
equipment, prior to his work in this project. His qualification was originally as a
geologist and he has worked in various areas of mine management including
mine planning. Undoubtedly that is why he sought the assistance of Mr Maher.
Mr Kilgour had no demonstrated experience to enable him to make a significant
contribution to this exercise. As Mr Ellery explained Mr Kilgour’s involvement,
it was that “Mr Kilgour reviewed the logic”.

[867] The argument is not that Mr Ellery was doing this dishonestly in an attempt to
inflate the insurance claim or perhaps the present claim. It is simply that his
allocation exercise is not reliable.

[868] But it is not unreliable for the fact that Mr Parfitt was unable, when confronted
with the invoices for item 446 as he sat in the witness box, to do what Mr Ellery
had done. In relation to item 446, Mr Parfitt was not taken to all of the
supporting material and nor was he given the time that Mr Ellery must have
spent in this exercise. And Mr Ellery did this at a time when he had been closely
involved with the commencement of the new shovel/sizer system and related
work upon the parts of the system the subject of these claims. Mr Parfitt was
being asked to look at invoices many years after the event.
 213

[869] In item 443 there is a claim for parts for the system commissioning in a total of
$119,190. In his evidence-in-chief131 Mr Ellery said that “those parts were
necessary for the commissioning of the system.” He was not specifically
challenged as to that statement or otherwise in relation to items 443 and 444.
For item 444, he allocated $325,832 from the G & S invoices which totalled
$558,103. For item 446 the claim is for $180,039 extracted from G & S invoices
totalling $990,724.15. Item 447 involves $42,688 for parts.

[870] Overall, Mr Ellery was an impressive witness and in this allocation exercise I
have no doubt that he was endeavouring to be measured in his approach. He was
not in charge of the maintenance, but by this stage he must have had a very
considerable knowledge of the components of the BWE system.

[871] In my conclusion, Mr Ellery’s evidence should be accepted as a reasonable

estimate of the costs resulting from these parts of the system being idle for so
long through the collapse of the BWE.

[872] Accordingly, $455,022 will be allowed for system commissioning and $222,727
for spreader shutdown costs.

Additional expenses: summary

[873] The amounts allowed are then as follows:

Dismantling and removal of the BWE $728,740.00
Investigation of failure and assessment of replacement and $331,467.72
repair options
Additional administrative costs $291,498.96
Additional cost of reconditioning conveyor system $815,977.08
System conditioning $455,022.00
Spreader shutdown cost $222,727.00
Total $2,845,432.60

Damages for loss of use – special damages

[874] The BWE was replaced in May 2002 when the shovel/sizer was commissioned. So
for about 26 months the plaintiffs did not have the use of the BWE or its
replacement. For this loss of use, the plaintiffs claim to be compensated by an
award of special damages or an award of general damages or, it was ultimately
suggested, by some hybrid of the two. Before going to those claims it is necessary
to discuss the ways in which overburden was removed at this mine.

[875] At any time, overburden was being removed at various places at the mine and there
were three systems which were being used. The first was the BWE system,
comprising the BWE itself and the series of conveyer belts which transported its
material from the BWE to the spreader some kilometres away. The second system
comprised the mine’s fleet of trucks and shovels. There were two or three shovels

131
Exhibit 123, paragraph 79.
 214

which did the digging and a number of trucks which then drove the material to
where it was to be dumped. Thirdly, there was a fleet of draglines.

[876] Ordinarily the BWE excavated only to a depth of 25 metres from the surface, or as
already described, within level 1. It was able to excavate about 11 metres deeper
than this and had done so at times but its usual operation was in the level 1. Below
that depth, overburden was removed by the shovels down to the level at which the
draglines would operate. This was about the lowest 60 metres of the pit, so that
when it was removed, the coal seam was exposed.

[877] The mine is many kilometres in length. Its length and orientation as well as the
depth of the excavation, corresponds with the location of the coal seam. In essence
the coal seam and therefore the mine runs north to south. At the northern end was
the Red Hill pit where the BWE was working when it collapsed. The BWE system
was used in only two pits: the Red Hill pit and the Cleanskin pit, which was to the
south. From time to time the BWE system would be moved from one of those pits
to the other. That was an expensive process because of what was involved in
moving the conveyer belts. Because of that expense the BWE system was used
only in those pits. At other parts of the mine, level 1 (the top 25 metres) was
removed by the trucks and shovels system. The plaintiffs’ case is put upon the basis
that the BWE would have continued to work in the Red Hill pit during the
period which is the subject of this claim, which is effectively the two years to
30 June 2002.

[878] The excavation of overburden proceeded from the west to the east. Therefore the
deepest excavation would be on the western side, where the draglines were working,
and then moving east, the ground became higher with level 1, broadly speaking, on
the eastern side. As already discussed, there had to be a distance between where the
BWE was excavating and where the shovels were excavating of the order of 100
metres. The common view of the relevant expert witnesses is that this was the
required width of what is described as the BWE bench.

[879] Part of the planning for the mining operations was to ensure that the BWE was
sufficiently ahead of the trucks and shovels. The BWE would be used in one pit so
that it would build up a lead well in excess of the minimum, before being relocated
to the other pit, and while it was operating there, the trucks and shovels would
narrow the lead in the first pit. I will refer to this lead, as many witnesses including
Mr Ellery did, as the “BWE inventory”. (That is a term also found in the mine’s
records and Mine Plans, but in those contexts it has a different meaning.)

[880] The BWE system was the most economical means of excavating at level 1. This
was because it was cheaper to transport the earth by its series of conveyer belts than
by trucks. The draglines were a relatively economical system for removing
overburden, because there was no transportation of the material to where it was to
be dumped. The draglines could simply dump the material behind them. They were
excavating from close to the top of the coal seam and the dumped material would
not be in the way of any further operations.

[881] I have called the level at which the BWE operated level 1. The next level,
excavated by the shovels can be called level 2, and the dragline level can be called
level 3. Work had to be scheduled on these three levels so that the work on one
level was not held up by the work above it. Some witnesses referred to this as the
 215

mine being in “balance”. But there was no single measure of this balance. What
was important was that the level 1 work would not hold up the level 2 work, and
that work the level 3 work. The planners allowed some scope for variation, in that
one level did not have to be worked in precise proportion to the workings at other
levels. It seems undisputed that, as Mr van Homrigh wrote in his first report, the
BWE when it collapsed was about 34.4 million bcm ahead of the truck and shovel
system, so that on an assumed output of 13 million bcm per year, the BWE was then
more than two and a half years ahead. It is unsurprising then that during this two
and a quarter years for which the mine was without the BWE or its replacement,
none of level 1 of the Red Hill and Cleanskin pits was excavated.

[882] Obviously, the removal of overburden is not of itself productive of income. The
mine’s income is from the sale of coal. So the plaintiffs do not claim to have lost
income by not having the use of the BWE. Their case is that their costs were
increased. They claim that the costs of removing overburden during the two year
period to 30 June 2002 became higher because they did not have the BWE.

[883] They say that when the BWE was unavailable, it was decided that the excavation of
overburden should proceed nevertheless at the same rate: the same amount of earth
should be removed by trucks and shovels as would have been removed by the
combined operations of the trucks and shovels and the BWE. At least as the case
was originally advanced, it was that the plaintiffs put that into effect and that they
suffered a loss because the excavation by trucks and shovels alone was more
expensive.

[884] As originally pleaded the claim was quantified as follows. Had the BWE not
collapsed, it would have removed 26,405,723 bcm between the date of its collapse
and 30 June 2002, at a cost of $34,049,015. The truck and shovel system would
have removed in the same period 46,807,705 bcm at a cost of $71,736,807. The
combined operations would have removed 73,213,428 bcm at a total cost of
$105,785,822. It was pleaded that with the loss of the BWE, the plaintiffs
nevertheless removed that quantity of 73,213,428 bcm but at a total cost of
$120,130,195. Most of this was due to trucks and shovels at a cost of $93,138,442.
There was also $22,016,245 paid to contractors who used their own fleet of trucks
and shovels. The balance of the cost ($4,975,508) was said to be the cost of the
896,892 bcm excavated by the shovel/sizer in the first few weeks of its operations in
May/June 2002. So the claim was for $14,344,373, being the difference between
that alleged actual cost and what would have been the cost of removing precisely
the same quantity of overburden.

[885] As the case was ultimately argued this became a claim for $7,554,848. This was
because the plaintiffs conceded that more than half of the excavation undertaken by
the contractors during this period (6,216,971 bcm of a total of 10,338,400 bcm) was
work which had no connection with the collapse of the BWE. It was work on
another part of the mine described as the Airstrip pit. This weakened the plaintiffs’
case that they had seen it necessary to maintain the same amount of overburden
removal despite the absence of the BWE. On their ultimate case they fell well short
of that objective if they had ever held it. Still, their case remains that the cost of
excavating what was removed (apart from the Airstrip) was higher than what would
have been the cost of excavating that same quantity with the benefit of the BWE
working in combination with the plaintiffs’ trucks and shovels.
 216

[886] At first sight that case would seem plausible. But two things must be understood.
The first is that none of the overburden removed during this period was earth which
would have been removed by the BWE. None of it was within level 1. The second
is that all of it was earth which had to be removed in any case.

[887] According to Mr Kilgour, BHP wished to maintain the same rate of excavation of
overburden notwithstanding the loss of use of the BWE, but that it decided to use its
trucks and shovels and its contractors at various locations, all at level 2,
because it was less costly for them to work there than where the BWE would have
operated. Those level 2 locations were closer to where the material had to be
dumped. There were shorter distances for the trucks to travel from those locations
than from where the BWE had been operating. So, Mr Kilgour said, the
output from trucks and shovels was increased and contractors were engaged
to make up for the loss of the BWE; but to mitigate the plaintiffs’ loss, they were
employed elsewhere and at level 2.

[888] Undoubtedly the output of the trucks and shovels was increased within this period
from what had been planneed not long prior to the BWE’s collapse, according to the
then latest Long Term Plan. These plans detailed, amongst other things, the amount
of the proposed excavation by each of the three systems year by year for the next
15 years or so. The plans also detailed the proposed amount of coal recovery. They
clearly evidence the intentions of the mine’s management about these things as at
the time of their production. Of course they were being constantly revised as the
result of some changes in circumstances such as the demand for and likely price of
coal. The plaintiffs’ case relies upon them, and in particular upon the plan
produced in December 1999. There are several of these plans which have
been tendered and they are respectively dated December 1999, May 2000,
September 2000, December 2000, March 2001, May 2001 and March 2002.

[889] In the tables below I have gathered the projections from those plans for each of the
three systems for the financial years (ending 30 June) 2001 through 2004. I have
also included in those tables the actual quantity excavated. The amounts are in
millions of bcm.
Trucks and Shovels
Dec 1999 May 2000 Sept 2000 Dec 2000 Mar 2001 May 2001 Mar 2002 Actual
LTP LTP LTP LTP LTP LTP LTP

2001 24.647 24.647 26.317 26.147

2002 24.647 24.647 25.090 30.231 24.889 32.184 46.578
5.000* 8.126* 8.301*
35.231 33.015 40.485
2003 24.647 24.647 32.451 31.222 32.754 34.404 43.881 31.283
4.000*
35.222
2004 29.478 29.478 32.350 30.916 32.492 33.729 33.415
* Contract stripping

BWE
Dec 1999 May 2000 Sept 2000 Dec 2000 Mar 2001 May 2001 Mar 2002 Actual
LTP LTP LTP LTP LTP LTP LTP (shovel/
sizer)
2001 13 0 0
2002 13 13 6.6 6.5 4.421 4.421 0.897
2003 13 13 13 13 13 13 12.903 8.908
2004 13 13 13 13 13 13 13.001 9.844
 217

Draglines

Dec 1999 May 2000 Sept 2000 Dec 2000 Mar 2001 May 2001 Mar 2002 Actual
LTP LTP LTP LTP LTP LTP LTP

2001 27.43 27.195 33.397 30.859

2002 26.989 26.889 29.550 28.964 24.712 26.334 32.348
2003 27.342 27.342 22.898 25.172 30.970 31.220 32.515 30.397
2004 29.197 29.197 27.858 26.078 29.258 30.425 29.247

[890] So from the table relating to the BWE, it can be seen that the December 1999 plan
projected 13 million bcm in each of those four years. The plaintiffs’ case is that the
BWE would have excavated 12.7 million bcm, and not 13 million bcm, in each of
2001 and 2002. Relying on the 1999 plan, the plaintiffs say that in combination
with the BWE, trucks and shovels would have removed 24.647 million bcm in the
2002 year, although they say 22.16 million bcm in the 2001 year (rather than
24.647 million bcm projected also for that year).

[891] The quantity actually removed by trucks and shovels in 2001 was
26.147 million bcm and in 2002 was 46.578 million bcm, or excluding the
Airstrip work, a total of 40.361 million bcm. Thus it is clear that the work done by
trucks and shovels, both by the mine’s fleet and by contractors, in this period was
well in excess of what had been intended when the BWE collapsed.

[892] But the plaintiffs must prove that this increase was a deliberate response to the loss
of the BWE. And if that is proved, there is a further question of whether the cost of
performing that additional excavation by trucks and shovels, compared with the cost
of removing an equivalent volume of earth but from elsewhere in the mine
(at level 1), gives rise to a compensable loss. It is convenient to discuss that
question first.

[893] Not one clod of earth was removed during this period which did not have to be
removed at some time. And as the plaintiffs accept, none of it would have been
removed by the BWE, save for the relatively small amount removed by the
shovel/sizer in May and June 2002. That particular work can be put on one side for
the present question. The point is whether, assuming that a certain quantity of earth
was moved by trucks and shovels and contractors within the period which would
not have been moved within that period but for the BWE collapse, there was a
compensable loss.

[894] On that assumption, what changed was the timing of that (extra) work. Instead of
that earth being removed in 2003 or later, it was removed within this period. The
plaintiffs do not claim that the acceleration of the timing of this work made it more
costly. Nor do they claim for the loss of use of the money spent on those works, by
that expenditure being accelerated. And there is no claim that the acceleration of
the works had some impact upon other operations of the mine, which caused those
operations to be more expensive or less productive. So how then are the plaintiffs
worse off for accelerating this work?

[895] The plaintiffs say that their loss is to be measured by reference only to the period for
which they were without the BWE or its replacement. The claim is for the amount
by which the actual costs of removing a certain quantity within that period exceeded
 218

what would have been the costs of removing that same quantity within that period
with the assistance of the BWE. The plaintiffs say that it is irrelevant to consider
the effect beyond that period of removing that material. They say that only the
period for which they were without the use of the BWE could be in any sense
relevant.

[896] The defendants argue that it is artificial to confine the inquiry to that period. They
say that the plaintiffs’ overall position must be assessed. What the defendants say
were the beneficial consequences of accelerating the removal of overburden from
level 2 must be brought into account. To that end they led opinion evidence to the
effect that the acceleration of this work in turn accelerated the recovery of coal and
so overall the plaintiffs were better off. This led to an extensive factual contest,
involving detailed opinion evidence of independent mining engineers called by both
sides.

[897] Undoubtedly the removal of overburden contributes to the profitable mining and
sale of coal. The quantification of that contribution is another matter. But in my
view it is unnecessary to investigate that question, and the effect on income in
subsequent years from the removal of extra overburden in this period. There is a
more obvious benefit to the mine from removing an extra cubic metre within a
certain year, which is that it does not have to be removed in a subsequent year. The
extra dollar spent in 2002 is the dollar which would have been spent, (probably) in
2003 or not much later than that. (The extra work by trucks and shovels and
contractors within this period was less than the quantity for the 2003 year proposed
for them by the 1999 LTP and it is not suggested that the sequence of work was
affected.)

[898] Once the inquiry as to the plaintiffs’ financial position is not confined to its
cashflow within the period to June 2002, the flaw in this claim appears. The claim
is for the loss of use of the BWE within a period, but the plaintiffs must demonstrate
that they have a compensable loss, in that there is something which they should be
paid now in order to put them in the position they would enjoy had the BWE not
collapsed. Had the plaintiffs used trucks and shovels where the BWE would have
worked in that period, and had the trucks and shovels been more costly than the
BWE, the difference would be a loss for which the plaintiffs should be
compensated. The plaintiffs say that instead they used the trucks and shovels
elsewhere, in order to mitigate their loss and they should not be denied
compensation for having done so. But if they have thereby avoided a loss by not
digging at level 1 in the interim, they are not entitled to be compensated.

[899] There is a further matter which underlines the artificiality of this claim. It involves
the difference between digging at level 1 and digging at level 2. At level 1, the
BWE dug material which had not been blasted. Generally, the material at level 2
dug was blasted. Early in its life the BWE had been used to dig blasted material but
this proved unsuccessful, because the size of the pieces of earth after the blasting
were often too large for the conveyer system. Mr Black described the attempts to
use the BWE in blasted material and said that it was for this reason it was decided
early in the life of the BWE that it would not dig below 25 metres because, he
recalled, below that level the material would have to be blasted. That difference in
the nature of the overburden between, broadly speaking, levels 1 and 2 features in
the plaintiffs’ claim. In the evidence of Mr van Homrigh, he reached his costs
per bcm for the truck and shovel system by including a component for the cost of
 219

what his report called drilling and blasting. In his first report Mr van Homrigh
wrote:
“The T & S system requires overburden to be blasted before the
T & S fleet can operate effectively. Hence a Drill and Blast
(‘D & B’) cost per bcm is added to the T & S costs to determine the
full costs of operating the T & S system.”

He went on to quantify them at $0.3064 for the 2001 year and $0.2761 for the 2002
year. Those costs are substantial because without them, Mr van Homrigh’s rates for
trucks and shovels would be lower than his rates for the BWE. What follows is that
it was more expensive to move a metre of earth from level 2 than a metre from
level 1 by the BWE partly because of the cost of having to first blast the level 2
material. As appears from their own case then, what the plaintiffs are looking to
recover is the cost of a particular operation (drilling and blasting) which was and is
required by the geology of the mine site, rather than the cost of digging with one
system rather than another.

[900] In summary then, assuming that a certain amount of extra work was done by trucks
and shovels and contractors within this period because the BWE was not operating,
in my conclusion there was no compensable loss. To the extent that more dollars
were spent within the period than would have been the case, there was a
corresponding benefit in that the same amount did not have to be spent, as it would
have been spent, in the year or so following that period.

[901] Within this claim for interim use, there is an element which is the use of the
shovel/sizer in May and June 2002. The cost of its operations beyond 30 June 2002
do not figure in this particular claim. The costs of its first couple of months of
operation have been included because the claim is defined by the date of collapse of
the BWE and 30 June 2002. So these costs are included within the actual costs,
thereby increasing the claim. The shovel which became part of the shovel/sizer
system was operated from October 2001 but the sizer did not begin to operate until
17 May 2002. According to Mr van Homrigh’s first report, the cost of operating the
shovel/sizer system in 2002 was $4,975,502, which for the volume of 896,892 bcm
was the equivalent of $5.5475 per bcm. The impact of the inclusion of this cost
upon this loss of use claim, were it to succeed, is large. With its inclusion the
ultimate claim was for $7,554,848. With its exclusion the claim would amount to
$3,750,776.60132.

[902] But this component, the cost of the shovel/sizer operation during the period, is
inappropriately included within this claim because it is not a claim arising from
unavailability of the BWE or its replacement. Instead, this component represents
the costs of operating the replacement.

[903] It also differs from the other costs because this work was done on level 1 and it was
work which would have been done by the BWE. In that way the claim for a
difference in the cost of removing this 896,892 bcm does not suffer from a
fundamental flaw of the rest of this claim. However, it has the same problem that it
confines the relevant investigation to the period ending 30 June 2002. This cost of
$4,975,502 appears unrepresentative, because the shovel/sizer system was then
being commissioned. Moreover, according to Mr van Homrigh’s first report, only
132
Present claim of $7,554,848 less shovel/sizer costs of $4,975,502 plus 896,892 bcm at $1.3061
(Mr van Homrigh’s rate for the BWE for 2002).
 220

about a third of these costs ($1,638,472) were “operating costs for shovel/sizer” and
the balance ($3,337,030) was the “cost in reinstating the equipment required to
operate the shovel/sizer system”. (Hence the submission referred to earlier at
paragraph [845] that there was some double claiming with the items
there discussed.) As to those operating costs of $1.6 million, they equate to $1.027
per bcm, and they may be compared with the rate of $1.01 per bcm for the full 2003
year, in which the volume was 8.908 million bcm. It is artificial to take this first six
weeks of operation of the shovel/sizer in isolation from what happened after it was
past its teething stage.

[904] As it happened, the shover/sizer system became more expensive to operate on a

per bcm basis in subsequent years. Mr van Homrigh has concluded that the
operating costs of the shovel/sizer exceeded what would have been the
BWE’s costs, in the four years ending 30 June 2006, by something in the range of
$8.6 million to $16.4 million. However the plaintiffs do not claim for that
difference. That evidence was led to rebut Ms Wright’s opinion that there was a
betterment, through lower operating costs, from the substitution of the shovel/sizer
for the BWE which had to be brought into account. Had the plaintiffs claimed that
difference as damages, it would have raised issues such as what were the reasons for
the relatively high costs in 2005 ($3.85 per bcm) compared to, in particular, the
$1.01 per bcm for 2003.

[905] The point in all of this is that for the plaintiffs to claim only for the first six weeks
of this new system provides a misleading account of the plaintiffs’ position.

[906] Should it become relevant I should express my findings as to the factual assertion
that a certain volume of material was moved from level 2 within this period because
the BWE was not working.

[907] In his witness statement made in January 2007133, Mr Kilgour said:

“85 Over the life of the mine, a certain quantity of overburden has
to be removed in order to expose the available coal. The coal
has to be uncovered. The dirt has to be moved. If you don’t
move it today, you have to move it tomorrow. All things
remaining equal, any loss of capacity to continue the removal
overburden will necessarily have the consequence that it will
take longer to expose the available coal. The collapse of the
BWE involved such a loss of capacity.

86 Following the collapse of the BWE, in addition to evaluation

of the rebuild/replacement options discussed above, one of my
principal concerns was to maintain the rate of overburden
removal. It was not possible to use the conveyor and spreader
components of the BWE system in conjunction with a shovel,
so as to continue to remove overburden where the BWE had
been operating. Because of the way they dig overburden,
shovels excavate larger chunks or pieces of dirt than the BWE
did, and they are too big for the BWE’s conveyor unless first
crushed by a crusher or sizer. Nor was it economically
feasible to deploy trucks to transport overburden from the area

133
Exhibit 209.
 221

where the BWE had been operating because of the

transportation costs to which I have referred.

87 There was a certain amount of truck and shovel capacity

available to BHP using its own fleet, and using contractors.
To maintain the rate of overburden removal, I decided to
deploy additional BHP equipment and to use contractors
(Henry Walker Eltin). It was more cost effective to deploy the
additional equipment and the contractors in areas where the
BWE had not operated because of the shorter haulage
distances involved. I chose the most economic way to use the
resources at our disposal. I basically looked at what dirt could
be moved and selected the cheapest method of removal. The
contractors were normally more expensive than our own fleet,
so I deployed the contractors in places where their margin was
the lowest – so we deployed them in shorter hauls. ...

88 The steps which I implemented to maintain the rate of

overburden removal were:

(a) temporarily moved Shovels 29 and 31 to a seven day

roster;

(b) subsequently replaced Shovel 29 with the higher

capacity Shovel 33 on or about 1 June 2001;

(c) temporarily deployed Shovel 22 (which would

otherwise have been parked as a standby machine);

(d) temporarily engaged contract overburden removal

services (from Henry Walker Eltin (‘HWE’)) between
July 2001 and June 2002.”

[908] I have extracted that evidence because it shows that Mr Kilgour’s evidence was that
he caused steps to be taken to “maintain the rate of overburden removal”. That
evidence corresponded with the plaintiffs’ then pleaded case. As discussed earlier
at paragraph [884] this particular claim, as originally pleaded, was that the plaintiffs
had acted by causing to be excavated the same volume of material in the subject
period as would have been excavated with the contribution of the BWE and
according to the 1999 LTP. For many reasons that is now shown to be false.

[909] The first of them comes from the terms in which this loss of use claim was
ultimately advanced, by which it is conceded that at least the “Airstrip” work had
nothing to do with the BWE. This was not work by way of maintaining the rate of
overburden removal.

[910] Secondly, the sequence of Long Term Plans is not consistent with Mr Kilgour’s
evidence. The plans do not show some point at which a decision was made to
increase the excavation by trucks and shovels and contractors to make up for the
BWE. The relevant parts of the plans are extracted in the tables set out earlier at
[889]. The May 2000 LTP shows no change for trucks and shovels from the 1999
LTP although, of course, it shows that there would be no excavation in the 2001
 222

year by the BWE. The September 2000 LTP does show some revision of outputs
for trucks and shovels, but only to a small extent: from 24.647 million bcm per year
in 2001 and 2002 to 26.317 million and 25.09 million. The same plan showed no
excavation by the BWE in 2001 and 6.6 million bcm projected for 2002. Next is the
December 2000 LTP. It had no projection for the 2001 year (it being halfway
through the year), but for the 2002 year the projected volume by trucks and shovels
was 30.231 million and by contractors 5 million, and similar figures were also
projected for 2003. The 2002 projection was thereby a very substantial increase
over that in the September 2000 LTP. Nevertheless it does not appear that the mine
was looking to make up for the lost output of the BWE. Then there was the March
2001 LTP which projected an increase in contract excavation to 8.125 million but a
decrease (again for 2002) for trucks and shovels to 24.889 million (much the same
as the 1999 LTP). That was followed by the May 2001 LTP in which the projected
work of trucks and shovels for 2002 was increased to 32.184 million. Aggregated
with the work to be done by contractors for that year, the projection for 2002 was
40.485 million. That was near to the end of the 2001 year in which the actual
recovery by trucks and shovels became 26.147 million. So as at May 2001 it could
be said that the mine was proposing in the 2002 year to take the two year total to
about 66 million bcm. Nevertheless that would have fallen well short of what was
required to maintain the rate as Mr Kilgour described it. And if this May 2001 plan
could be thought to evidence a decision to make up for the BWE, it would appear
that the decision was made at about that time, rather than the months following the
collapse of the BWE.

[911] The plans demonstrate at least two other significant things. The first is that there
was the same trend in relation to draglines as there was for increased production
from trucks and shovels. The various increases, through the sequence of plans, did
not precisely correspond in percentage terms. But because the trucks and shovels
had to do their work to make way for the draglines, the projected increase in
dragline excavation strongly suggests a reason for at least some of the projected
increase for trucks and shovels. Secondly, I have shown the projected figures also
for 2003 and 2004, because they negate the suggestion that any increase for trucks
and shovels and contractors was simply to fill the gap until the BWE or its
replacement was in operation. So for example for the 2003 year, when the BWE
was again projected to be excavating 13 million bcm, the May 2001 LTP projected
34.404 million bcm for trucks and shovels. This shows that at least much of the
increase in the trucks and shovels activity was due to other things and not to the
absence of the BWE. Some of these other things are suggested by the evidence.
For example there is evidence of industrial disputes affecting other mines operated
by BHP with the consequence that more resources were able to be employed in
working this mine.

[912] Then there is the timing of the of the work in fact at level 2. The actual recovery by
trucks and shovels for 2001 was 26.147 million bcm, which was not so much higher
than the 24.647 million bcm which had been projected by the 1999 LTP. The real
increase was in the 2002 year. This suggests that the decision to accelerate this
work was not made to preserve the rate of removal of overburden as Mr Kilgour had
said.
 223

[913] Next there is the matter of what I described earlier134 as the balance between the
various systems of excavation. It was necessary to maintain a sufficient “inventory”
on level 1 for that level to be far enough ahead of the work at level 2. Yet, rather
than doing some work on level 1 to maintain that balance, the trucks and shovels
were put to work entirely at level 2, with the result in some cases of closing the gap
between the two operations. Yet Mr Kilgour’s evidence did not seem to address
that question of balance. According to his evidence, it was a matter of maintaining
the overall volume of overburden removal. So the fact that none of the extra truck
and shovel activity was employed at level 1 tends to suggest that it was not a
response, or not alone a response, to the loss of the BWE.

[914] But as to this the plaintiffs argued that it was a logical response in this way: by
accelerating the work at level 2, the plaintiffs were able to create some excess
capacity for the trucks and shovels in subsequent years, so that if there was a delay
in replacing the BWE, trucks and shovels could be quickly brought to level 1
without having as much work to do at level 2. Mr Maiden, an independent expert in
mine management called by the plaintiffs, said that this would have been a
reasonable strategy. But it far from appears that this was the plaintiffs’ strategy.
Mr Kilgour did not seem to refer to it. And it is inconsistent with what Mr Ellery
wrote in his Project Case, where he considered the possibility of a delay in the
repair of the BWE and what would be done at level 1 in that event. He there costed
the removal of level 1 material by contractors, not by the plaintiffs’ own fleet of
trucks and shovels.

[915] Against all this, there is no persuasive evidence that the plaintiffs were acting as Mr
Kilgour maintained. In particular, the contemporaneous records of BHP do not
provide much support. There is some support in an email distributed by Mr Kilgour
on 10 March 2000, where he wrote that:
“appropriate measures will be taken in the medium term to ensure
adequate stripping volumes are maintained at the levels required to
meet coal recovery targets, pending a decision on the future repair
and use of the bucket wheel ...”

This was repeated in a press release. This was not exactly the same as maintaining
the same rate of overburden removal. But this was not a record of a decision made
within BHP. In a later document in March 2000, there is evidence that it was
proposed to investigate “other short term replacement ideas”, that is to say the
replacement of the BWE’s capacity. In a Powerpoint presentation by Mr Kilgour to
the Joint Venture Board, probably made in about May 2000, Mr Kilgour said
that a key objective was to “achieve lowest cost short-term makeup capacity
(18-24 months)”, and he there summarised some alternatives under the heading
“Interim Capacity Replacement”. Then there is a memorandum from Mr Kilgour to
a Mr Honeychurch, who represented the plaintiffs’ insurer. In this memorandum
Mr Kilgour represented that the plaintiffs had taken and would take further steps
with the effect of “replacing the lost BWE capacity”. He told Mr Honeychurch that
this would result in a loss of the order of $12.5 million. But this was a document
written to an insurer to advance a claim against it, and it hardly provides the most
reliable evidence of what had actually been decided and implemented. The
defendants argued that I should find that the increase in level 2 excavation in 2002
was because the plaintiffs were looking to substantiate their interim loss of use claim

134
At paragraph [881].
 224

against their insurer. I am not persuaded about that, particularly as I do not see that
it was put as clearly to Mr Kilgour as it should have been.

[916] It is for the plaintiffs to demonstrate that at least some of that level 2 excavation was
then undertaken because of a concern about the loss of use of the BWE. Overall the
plaintiffs have not proved that in any amount. And more probably than not, much
of what they claim was this additional excavation was due to other things.

[917] I have not disregarded the detailed evidence, presented by both sides of the
argument, as to what happened with the use or replacement of various shovels in
BHP’s fleet. There was some relevance in all of this evidence and it fairly appears
that BHP changed the composition of its fleet in a way which would increase its
capacity. As this evidence also shows, it would not have been such a simple matter
to increase the extent of excavation by the fleet: it would have been something
requiring some forward planning, and it seems, the acquisition of new equipment.
But all of that begs the question: why was the truck and shovel activity being
increased? Overall it suggests that BHP was looking to increase the activity in the
long term, as indeed it did, rather than simply during the absence of the BWE.

[918] It follows that the factual basis for this interim loss of use claim is not established
and for that reason also it should be rejected.

Further claim for loss of use: general damages

[919] The plaintiffs argue that they should be compensated by an award of general
damages for their loss of use of the BWE between the collapse and its replacement
by the shovel/sizer. Upon this basis, they seek an award calculated by applying an
annual interest rate of, say, 10 per cent over 27 months, to what they contend was
the “true worth” of the BWE. By that they mean, not its depreciated value. They
argue that the value to them of the BWE system was “considerably more than its
written down value” and that its true value was what had to be spent to replace it (or
rebuild it if the acquisition of the shovel/sizer was not a reasonable course).

[920] At first this seemed to be an alternative claim to that just discussed: the claim for
special damages for increased operating costs during this same period. But
ultimately counsel for the plaintiffs submitted that I could make an award which
was something of a hybrid of the two. Because the special damages claim has
failed, that particular submission need not be considered.

[921] For this general damages claim, the plaintiffs do not seek to establish that the
absence of the BWE affected their costs or otherwise affected their profits. As I
have found, the plaintiffs have not demonstrated that their costs were affected.
They do not seek to establish that their earnings were affected. In particular, they
do not claim that by the unavailability of the BWE, they have extracted less and
sold less coal. Although this was a chattel used in the course of an operation carried
on for profit, this claim involves no allegation that their profits have been affected
to some extent.

[922] The plaintiffs say that they are worse off, because the BWE was a valuable part of
their production process, and their loss is a loss of capacity. The argument cites
several cases where general damages have been awarded for the loss of use of a
chattel, and in particular, where those damages have been quantified by applying a
rate of interest, representing a reasonable rate of return, to the value of the chattel.
 225

This is said to be a representation of the cost of the capital invested in the chattel,
which is a cost thrown away whilst the chattel cannot be used.

[923] The principal argument in response to this claim is that the plaintiffs must prove that
they have suffered a compensable loss, and absent proof that the unavailability of
the BWE has increased their costs or decreased their revenue, they have simply
failed to prove their case. Because the purpose of the use of the BWE was to
contribute to the generation of profits, the loss of use of the BWE results in no
compensable loss absent an impact upon profits. They argue that cases in which
such general damages have been awarded are distinguishable, because they involved
chattels used in a non-profit activity.

[924] Before going to the authorities, there is a feature of the present case which must be
noted. It is in the way in which the BWE contributed to the operations of the mine
and in turn to its profits. It was not an asset from which there could be derived any
distinct profit. It would be impossible to assess the profitability of the BWE itself.
In contrast to, for example, a car used as a taxi, this chattel had no distinct revenue
attributable to its use. Undoubtedly it contributed to revenue, and thereby to profit,
but not in that direct sense. Its indirect contribution to profit was undoubtedly
valuable, as is demonstrated by its continued use at this mine for more than 17
years. This is why the plaintiffs invested capital in the BWE system. Unlike some
other cases in which general damages have been claimed for loss of use of a chattel,
this is not a chattel which would have been idle in any event and nor is it a chattel
which, if available, would have been operated at a loss. Further, unlike some other
cases, this is not one where it can be seen that probably there has been a loss of
profits but where the amount of that loss has not been properly proved. Rather, as
already noted, the plaintiffs do not say that their earnings were affected and the
claim that their costs were increased has been rejected.

[925] General damages can be recovered for the loss of use of property which would have
been used, not to make a profit, but for other purposes such as the provision of a
service to the public or simply for the plaintiff's own enjoyment. In The Greta
Holme135, the Mersey Docks and Harbour Board was deprived of the use of its
dredger which it operated for public purposes and from which it derived no revenue.
It did not hire a substitute. In response to its claim for damages for loss of use of
the dredger, it was argued that the Board had suffered no loss. That argument was
rejected by the House of Lords which held that the plaintiff was entitled to an award
of general damages. The same conclusion was reached in two further cases brought
by the same Board: The Mediana136 and The Marpessa137.

[926] In The Mediana, the plaintiff had lost the benefit of a lightship. It was argued that
this distinguished it from its loss of use of a dredger in The Greta Holme, because
the unavailability of the dredger in that case had resulted in a loss by the
accumulation of further silt which was likely to increase the cost of its dredging
operation overall. In rejecting that argument, Lord Halsbury LC said138:

135
The Owners of No 7 Steam Sand Pump Dredger v The Owners of SS “Greta Holme” (“The Greta
Holme”) [1897] AC 596.
136
Owners of the Steamship “Mediana” v Owners, Master and Crew of Lightship “Comet” (“The
Mediana”) [1900] AC 113.
137
Mersey Docks and Harbour Board v Owners of the SS Marpessa (“The Marpessa”) [1907] AC 241.
138
[1900] AC 113 at 115-116.
 226

“My Lords, it is true that in that case there were two circumstances
which I mention for the purpose of pointing out that I do not omit to
consider them, namely, that the dredger was actually prevented from
doing work which the particular corporation entrusted with the duty of
doing it had intended to do; and further, as was pointed out by Lord
Watson, the effect of not dredging during the period while the dredger
was rendered incapable of doing its proper work was to set up an
additional amount of silt which would itself of course be an injury which
would properly sound in damages when the person responsible for
taking away the dredger was called upon to pay. These two
circumstances were not unnaturally pointed out by the learned counsel
who challenged this judgment as shewing that there were grounds for the
decision in that case which do not apply here. But, my Lords, I think it
is impossible to read the judgments of those noble and learned Lords
who took part in that case without seeing that it rests upon a much wider
and broader principle than would be applicable to the particular
circumstances which I have referred to in that case. Lord Herschell in
terms did lay down a much broader principle, and I may say that I
myself intended to lay it down, though I may have expressed myself
imperfectly, namely, that where by the wrongful act of one man
something belonging to another is either itself so injured as not to be
capable of being used or is taken away so that it cannot be used at all,
that of itself is a ground for damages.”

Lord Shand said139:

“In those circumstances it appears to me that if the commissioners had
hired a ship for the purpose of doing duty as a sixth lightship, finding
that necessary in the course of their administration, there could have
been no answer to their claim for the cost of hiring that ship. It appears to
me that if there could have been no answer in that case, as little is there
any answer here. Instead of waiting for an emergency suddenly
occurring, they have thought fit to have a ship ready. It costs them 1000l a
year to have it ready. It appears to me that the expense of having this
ship ready instead of having to look for a ship when the emergency
occurs, or rather a part of that expense, must properly fall upon the
person who has been guilty of running down the lightship.”

[927] The Marpessa was another claim for the loss of use of a dredger. In the speech of
Lord Loreburn LC, this was said about the amount of such general damages140:
“If the plaintiffs had hired another vessel to do this work they could have
recovered the cost of doing it. They have not done so, no other vessel being
available at so short a notice, and, perhaps, not being available at all; for
the construction is peculiar. Failing that evidence, the plaintiffs were
entitled to put their case in another way. They might say: The cost to us
maintaining and working this dredger, while it is working, amounts to do
much per day, and its depreciation daily amount to so much more.
We take the total daily sum which it costs us as a fair measure of the
value of its daily services to us. Those services are at least worth

139
[1900] AC 113 at 122.
140
[1907) AC 241 at 244.
 227

what we are habitually paying for them year after year, including
what we sacrifice in depreciation.”

[928] The threshold question here is whether general damages of this kind are recoverable
where the chattel would have been used in an operation conducted for profit. The
defendants argued that I am bound by the Full Court's judgment in Zappulla v
Perkins141 to hold that such damages are not recoverable where the chattel was used
for profit. In that case, the plaintiff, a practising solicitor, leased a Jaguar car at a
monthly hire of $481. Through the defendant's negligence he was deprived of its
use for six months and he claimed, successfully at first instance, damages equivalent
to six months hire. Whilst he was without the Jaguar, the plaintiff had purchased a
Ford which he used as a substitute and then resold it at a net cost of $198. The
defendant's appeal was allowed and in substitution there was an award of that
amount of $198. The plaintiff's argument was that the relevant loss was the loss of
use of the Jaguar, which according to The Greta Holme, The Mediana and The
Marpessa, was a loss to be measured by the cost of hiring a Jaguar. But
Matthews J, with whom Wanstall CJ and Kelly J agreed, held that those cases
were not applicable because the plaintiff had used the Jaguar for his legal practice.
Matthews J said this142:
“For the respondent it was argued that the hire which he continued to
pay for the Jaguar was the proper measure of his loss. For this
proposition counsel relied on statements in The Greta Holme … The
Mediana … and The Marpessa … The third of these cases in the
House of Lords went to establishing a measure of damages in respect
of a principle accepted in the earlier two cases that the owners of a
vessel could recover damages against a wrongdoer although the
vessel made no money for its owners and merely rendered services.
All three cases were concerned with vessels which were not profit
earning and as such in my opinion are to be distinguished from the
instant case just as they were distinguished in The Valeria … The
facts in The Valeria are enlightening when one is seeking an
appropriate principle in respect of the present appeal. The British
Government had hired from the Dutch Government a steamer, the
rate of hire being £342 per day. She was damaged by collision with
the Valeria and it had been found that the Valeria was solely to
blame. The damage done to the British vessel was capable of repair.
The vessel was in fact repaired and the voyage completed but for a
period, and because of the damage to her, she was detained and the
Admiralty claimed a sum in respect of the loss of use during that
period. The sum was in part calculated by multiplying the hire per
day of the vessel by the number of days during which the use of her
was lost. At p 247, in the course of dismissing the appeal from the
Court of Appeal which had disallowed damages calculated by
reference to the hire, Lord Buckmaster said:

‘What has to be considered is what would this vessel have

earned for the period of the seven days that she was
incapacitated owing to the accident; and that amount is the

141
[1978] Qd R 92.
142
[1978] Qd R 92 at 94-95.
 228

true measure of the damage which the vessel who was to

blame is called upon to pay.’

In the case under appeal the respondent expended an extra $198.00

and thereby continued his practice as he had carried it on by using
his Jaguar, and this $198.00 is the sum which represents his loss. I
would therefore allow the appeal with costs and substitute for the
judgment below, judgment for the plaintiff in the sum of $198.00
with no order as to costs.”

[929] In the case of The Valeria143, a ship which was costing in hire £342 per day was
making a net income from its use of £142 per day and the House of Lords held that
the plaintiff was entitled to demurrage only according to the net income lost, rather
than the hire paid. So in that case there was a finding that there was a loss of profit
and that it was able to be quantified at £142 per day. Because in truth that was the
plaintiff's loss, the plaintiff would have been over-compensated by the equivalent of
£342 per day. Similarly, in Zappulla v Perkins, the actual loss to the plaintiff was
known: it was the sum of $198 as the net cost of the substitute car. Cases such as
The Greta Holme are not authority for the proposition that where there was an
actual and quantified monetary loss from the loss of use of a profit-earning chattel,
nevertheless some larger amount could be recovered as general damages. So those
cases were not applicable in Zappulla v Perkins, because they dealt with a different
situation where there was no demonstrable financial loss from the loss of use of the
chattel. That is what Matthews J was identifying as the point of distinction. His
Honour was not considering the present type of case, where the chattel was used in
a profit-making operation but where no loss of profit can be demonstrated.
Zappulla v Perkins is not authority for a proposition that general damages are
irrecoverable for the loss of use of a chattel which was an asset of a business carried
on for profit.

[930] This is probably the reason why Matthews J made no reference to an earlier
decision of the Full Court, in which general damages were awarded for loss of use
of a chattel used for profit, which is Woodman v Rasmussen144. The plaintiffs there
operated a sawmill and by the defendant's negligence they were deprived of the use
of a planing machine. They claimed to have lost £1,800 in profits over a period of
three months. They endeavoured to prove this loss by reference to evidence of their
production and profitability, but the evidence fell short of what was required to
prove the loss as claimed. The Full Court held that the trial judge's allowance of
their claim should be set aside. Macrossan CJ said that it was impossible to
ascertain from the evidence “what the loss of profits actually was”145. But he then
said146:
“In my opinion the judgment so far as it gave the respondents
damages for loss of profits cannot be sustained. It would, however,
be in accord with authority to give the respondents damages by way
of interest at the rate of five per centum per annum on the capital
value of the machine for the period of three months during which

143
Commissioners for Executing the Office of Lord High Admiral of the United Kingdom v Owners of
the Steamship Valeria (“The Valeria”) [1922] 2 AC 242.
144
[1953] St R Qd 202.
145
[1953] St R Qd 202 at 212.
146
[1953] St R Qd 202 at 212.
 229

they would have been deprived of the use of it whilst the necessary
repairs were being made.”

Philp J and Townley J each agreed, Philp J citing The Greta Holme147.

[931] Accordingly, Woodman v Rasmussen is authority for the contrary of the defendants’
argument. Counsel for the defendants conceded this, but submitted that of the
two decisions of the Full Court, I should apply Zappulla v Perkins. As I have said,
that was a different kind of case to the present, whereas Woodman v Rasmussen is
not.

[932] There is other authority against the defendant's argument. There is first the decision
of the English Court of Appeal in Sunley (B) and Company Limited v Cunard White
Star Limited148, where a plaintiff was entitled to damages for breach of contract for
a delayed delivery of machinery. The delay resulted in a loss of use for about a
week. The machinery was a tractor and scraper used for profit in the plaintiffs'
business. The plaintiffs attempted to prove an actual loss of profits which they had
claimed as £577. The trial judge was unpersuaded about that claim, but
nevertheless awarded a lump sum of £250, candidly admitting that his choice of that
figure had no particular explanation149. That award was set aside. The court
substituted an award of general damages of £14, which it reached by making some
allowances for depreciation, interest on the money invested in the machinery which
was being wasted during that period and something for wasted expenditure on
wages. In a joint judgment the court said150:
“The machine here was a chattel of commercial value, but on the
facts before us there are only four possible heads of damage: (1)
depreciation which was running on, (2) interest on the money
invested which was being wasted, (3) some trivial amount of
maintenance which was no doubt involved, (4) some expenditure of
wages which were thrown away. The plaintiffs could not complain if
they are refused any relief whatever on heads (2), (3) and (4); for,
having opened their mouth wide for a wholly illegitimate claim, they
did not condescend to lead evidence on any of these three legitimate
topics.”

[933] There are obiter dicta in support of the plaintiffs' argument have in Lord Citrine
(Owners) v The Hebridean Coast (Owners)151, within the judgment of Devlin LJ in
the Court of Appeal and the speeches of Lord Reid and Lord Morton of Henryton.
The plaintiff was a public utility supplying electricity on a not for profit basis. It
owned the Lord Citrine, a collier which it used to carry coal for its generation
plants. It failed to establish that there was an actual cost of replacing the temporary
loss of capacity from the damage to its ship, but at first instance it recovered an
award representing the interest on its capital value. Devlin LJ (as his Lordship then
was) said152:
“In the cases in which this general principle has been applied to
ships, various ships, of different types have been considered –

147
[1953] St R Qd 202 at 214.
148
[1940] 1 KB 740.
149
[1940] 1 KB 740 at 747.
150
[1940] 1 KB 740 at 748.
151
[1961] AC 545.
152
[1961] AC 545 at 562-564.
 230

trading or profit-earning vessels, pleasure vessels, warships, utility

vessels such as dredgers and lightships. But that does not mean that
there are different rules for different categories of ships. I think with
respect that the registrar was wrong in regarding the matter primarily
as ‘a problem of classification’. The class of vessel is only one of the
matters to be considered. Even the broad distinction between profit-
earning and non-profit-earning vessels must be handled with care.
The same type of car in the hands of a car-hiring concern has
different potentialities from those which it has in the hands of a
private owner. Likewise with ships: there are types of vessels, such as
pleasure yachts, which are capable of earning a profit in some
circumstances but not in others: one must inquire into all the
circumstances and in particular into what the owner would probably
have been able to do with the ship during the period of detention. I
have not, therefore, studied the cases that have been cited to us in order
to place the Lord Citrine in any particular category of vessel. I have
looked for the broad statements of principle which show how the
general rule has been made to work. There are, I think, two ‘working
principles’ that are relevant to this case.

The first is that where there is ‘a reasonable certainty of

employment,’ the owner is entitled to be compensated for the profit
he has lost.

The other principle is that the owner of a vessel may get substantial,
and not merely nominal, damages notwithstanding that he cannot
show any loss of profit. He has lost the use of his vessel; and whether
he would have used her for pleasure or business or some other form of
service, such as dredging, he is entitled to compensation for the loss of
use. Whereas in cases in the former class the award may best be
calculated by starting at the top end, as it were, with charter rates or
the like and working downwards, cases in this class may best be
dealt with by beginning at the bottom, that is, by counting the costs.
The owner will be entitled to recover running expenses in
maintaining the vessel and paying the crew while they are of no use
to him. In addition he must have something which in the last
analysis can only be a lump sum as compensation for loss of use.

This second principle does not mean that the owner of a damaged
vessel must inevitably be given something for loss of use. The facts
may show that before the casualty occurred the owner was already
saddled with the liability to maintain an idle vessel from which he
could get no profit or pleasure or other form of service.”

[934] Lord Reid said153:

153
[1961] AC 545 at 577.
 231

“I do not proceed on any supposed distinction in principle between a

profit-earning ship and a non-profit-earning ship. The task of
assessing damages is easier with a profit-earning ship and depends
on the probability that she would have earned so much money if her
owner could have used her. With a non-profit-earning ship there is
no direct financial loss and one must ask what harm was done to the
owner by his being deprived of the use of his ship. Then comes what
may be a very difficult task, to put a value in money on the harm
which the owner has suffered. But you must first prove the harm. If
no harm is proved beyond the mere fact that the owner is deprived of
the services of his ship during the period of repairs, the opinion of
Lord Herschel in [The Greta Holme] appears to have given rise to the
practice of awarding damages based on interest on the value of the
ship.”

To the same effect, Lord Morton said that he could see no distinction “for this
purpose, between a profit-earning body and a non-profit-earning body”154.

[935] Next there is the judgment of Lucas J in Commissioner for Railways v Luya, Julius
Limited155. The claim there was for the temporary loss of use of a locomotive and
other vehicles. Lucas J did not accept the Commissioner's claim for loss of profits
because there was no evidence that the Railways “in fact suffered any loss of
revenue as a result of the absence from service of these vehicles”156. But referring
to Lord Citrine v The Hebridean Coast, Lucas J said that damages could be awarded
by way of interest upon their value during the period for which the vehicles were
out of service157.

[936] More recently, in Greer v Alstons Engineering Sales & Services Ltd158, the
Privy Council upheld an award of $5,000 for the temporary loss of use of a backhoe
used commercially, by reference to The Greta Holme and The Mediana as well as to
a decision of the English Court of Appeal in Dixons (Scholar Green) Ltd v J L
Cooper Ltd159, where a similar award had been made for the temporary deprivation
of a commercial vehicle.

[937] As already noted, a feature of the present case is that it would be artificial to attempt
to assess the profitability of the BWE itself. Its operation was undoubtedly
beneficial, but that could not be measured as a quantified contribution to the profit
of the mine. The position is here analogous to that in the so-called non-profit cases,
where, for example, the dredge in The Greta Holme was beneficial but not in a way
which could be quantified in monetary terms. There is no basis in principle for
distinguishing the present case from those where a chattel is not used in a
profit-making operation. And to do so would be inconsistent with authority, and in
particular the judgment of the Full Court of this court in Woodman v Rasmussen.

[938] The defendants also rely upon Macgregor on Damages (16th edition), which they
say expresses the principle for which they contend. I am not sure that this is

154
[1961] AC 545 at 580.
155
[1977] Qd R 395.
156
[1977] Qd R 395 at 398.
157
[1977] Qd R 395 at 398.
158
[2003] UKPC 46.
159
[1970] RTR 222.
 232

expressed within Macgregor, but other text writers have done so160. In particular,
Tettenborn, Wilby and Bennett, in The Law of Damages at paragraph [14.87]
contains a criticism of the dicta in Lord Citrine v The Hebridean Coast on the basis
that “if it were right, it would mean that the commercial owner of a profit-earning
chattel who was running at no profit at all, or even at a loss, could nevertheless
claim substantial sums for being deprived of its use”. In my view, that does not
follow. In a case where a loss would have been made, or a direct or indirect
contribution to profit would not have been made, general damages would be denied
because there would have been no loss from the deprivation of a chattel. As Lord
Devlin said in the passage which is set out above, general damages will not be
awarded where:
“the facts … show that before the casualty occurred the owner was
already saddled with the liability to maintain an idle vessel from
which he could get no profit or pleasure or other form of service.”

Therefore, the availability of general damages in this context does not mean that a
there is no need for a plaintiff to prove that it is worse off for not having the chattel.
Consistently with the cases which I have discussed, it is an available remedy where
the use of the chattel is beneficial in a profit making venture but where the plaintiff
cannot or has not proved a certain loss of profit.

[939] I turn then to the assessment of general damages.

Assessment of general damages

[940] The plaintiffs argue that the starting point should be an allowance equivalent to
10 per cent per annum upon the then value of the BWE. That rate is chosen because
it is the rate prescribed on outstanding judgments under the Supreme Court
Regulation 1998 (Qld). The defendants seem to take no point about the rate.

[941] The plaintiffs say that the then value of the BWE was about $8.8 million. They
have not proved the value to which the BWE (rather than with other parts of the
BWE system) had been depreciated in their accounts. Instead they argued for this
amount upon the basis of something in the defendants’ pleadings. In responding to
the plaintiffs’ case of a capital loss for having to replace the BWE, the defendants
plead that the replacement equipment (the shovel/sizer) gave the plaintiffs an asset
of significantly greater value than the BWE, the particulars of which included the
statement that the “depreciable value of the BWE was $8.8 million”. Some further
things were said in the particulars as to how that figure was derived. But for present
purposes, the point is that it is part of the defendants' case that the BWE had that
value. Further, the defendants tendered a report by Ms Wright in which she
assessed the “estimated book value of the BWE at 30 June 2002” at $9.53 million.

[942] Ultimately the defendants did not argue against the amount of $8.8 million being an
appropriate value if general damages were to be allowed and quantified by an award
of interest on the written down value of the BWE.

[943] But the plaintiffs argue that this is only the starting point and that the award should
be higher because of other factors. First, they say that the award should reflect the
fact that the conveyors and other associated parts of the BWE system were rendered

160
Tettenborn, Wilby and Bennett, The Law of Damages (2003) Butterworths, London, 289 [14.87] and
SM Waddams, The Law of Damages (1983) Canada Law Book Ltd, Toronto, 114-120 [203]-[210].
 233

useless during this period. Secondly, they say that the $8.8 million does not reflect
the particular value to the plaintiffs of the BWE system, demonstrated by the high
cost of a new BWE, the high volume of the BWE system, the lower operating cost
of the BWE compared with other systems and the amount which it was reasonable
to spend in having the BWE rebuilt or replaced. Having regard to those
considerations, the plaintiffs argued that the general damages should be an award of
10 per cent interest on the cost of rebuild or replacement of the BWE. The
defendants say that this submission goes further than the plaintiffs’ pleaded case.
But in any event I am not persuaded by it.

[944] The plaintiffs rely upon what Lord Loreburn said in The Marpessa161 in the passage
which I have set out above. They argue that this warrants an award which is
assessed by the costs of working the BWE. But that was said in the context of an
asset which was not used directly or indirectly to produce revenue. Whilst that
difference does not in principle affect the availability of general damages, it can be
relevant to their assessment. To allow general damages according to the BWE’s
operating costs would be excessive, because it would ignore what would have been
the benefit from those costs.

[945] The explanation for awarding interest on the written down value of a chattel was
explained by Geoffrey Lane J in Birmingham Corporation v Sowsbery162:
“… The operators have been deprived during the relevant period of a
valuable chattel, and therefore, at least notionally, of the use of the
money expended on its purchase, or so much of that money as is
represented by the value of the vehicle at the date of its loss …”

Similarly, Philp J in Woodman v Rasmussen said that the relevant loss which could
be compensated in that case was the “loss of interest” on the cost of the relevant
chattel163. It is not appropriate to look at the cost of a rebuilt BWE or its
replacement, because either cost is different from, and far higher than, the capital
represented by the BWE at the date of its collapse. To say that $30 million was
needed to rebuild the BWE is not to say that it was worth $30 million before it
collapsed.

[946] And as to the relatively low operating costs of the BWE system, that is not a
relevant matter for this assessment. Had the plaintiffs used another system in place
of the BWE system during this period (in doing work at level 1 which the BWE
would have done) the difference in operating costs between that system and the
BWE would be relevant, but as an element in a calculation of special damages.
That difference in operating costs does not demonstrate that the capital invested in
the BWE was higher than the $8.8 million.

[947] The plaintiffs claim, correctly, that their damages should be awarded for the loss of
use of the BWE system, not simply of the BWE. That system comprised the BWE,
the conveyor, the tripper and the spreader. The defendants plead that the BWE was
worth at least $8.8 million, but there is no pleaded value for the other parts of the
system. However, there is evidence of the value of those parts. It is found in the
Project Case, where Mr Ellery wrote that the conveyor/spreader system had a resale
value of $6.0 million and that the written down value of the BWE and conveyor

161
[1907] AC 241.
162
[1970] RTR 84 at 86.
163
[1953] St R Qd 202 at 217.
 234

system was $11.9 million. This evidence was not, however, relied upon by the
plaintiffs. There was no investigation in this trial of the depreciated value of the
other components of the BWE system or of their resale value. And Mr Ellery gave
his evidence well before the plaintiffs applied for leave to amend to add this general
damages claim. No doubt because the plaintiffs wished to avoid arguments of
prejudice from the lateness of this amendment, they limited their case to the value
of the BWE because that came from something which the defendants had pleaded.
The amended case was pleaded in terms of a loss of use of the BWE system, but it
was not specifically alleged that the award of general damages should be higher for
the fact that there was a certain value in the other components. In these
circumstances it would be unfair to increase the award according to the value of
those things as set out in the Project Case.

[948] As to the evidence or otherwise of the amount of $8.8 million, there had been
something in a report by Dr Hoffman and Mr Dittrich to that effect in which it was
said that the BWE had a “residual value” of that amount164. But I upheld the
plaintiffs’ objection to that part of the report (before the plaintiffs raised this claim
for general damages). Still, the plaintiffs have the defendant’s pleading for that
value, and as noted, the defendants did not argue against it.

[949] The plaintiffs will be awarded general damages at ten per cent per annum on
$8.8 million for 26 months. That period ended with the commencement of the
operations of the shovel/sizer system. (Earlier, I have allowed $1,990,000 in the
rebuild case, for what would have been the extra costs of overburden removal in
Red Hill to that same point in time.) Accordingly, $1,936,000 is allowed.

Interest

[950] The plaintiffs claim interest pursuant to s 47 of the Supreme Court Act 1995 (Qld)
as follows:
(a) from 8 March 2000 to 31 October 2000 at the rate of 9 per cent;
(b) from 1 November 2000 to 31 August 2001 of 10.5 per cent;
(c) from 1 September 2001 to 31 March 2002 of 9.5 per cent; and
(d) from 1 April 2002 to the date of judgment at 9 per cent.

An award of interest under s 47 is discretionary. The defendants rightly concede

that the plaintiffs should have interest under s 47, but make a number of
submissions as to why they should not have interest as claimed.

[951] The first argument concerns the date from which interest should be awarded.
Ordinarily it would be awarded from the date of the accrual of the cause of action.
The defendants argue that the financial consequences of the collapse of the BWE
were not immediate so that the plaintiffs should not have interest from that date.
They argue that the losses claimed were incurred over a period of time. For
example, the payments for the sizer were made on a periodical basis from June 2001
through to July 2002 and the payments for the shovel were made from April 2001 to
November 2001. Similarly any damages for the loss of use of the BWE are to
compensate for a loss incurred over a period rather than immediately on 8
March 2000. Their argument cites the joint judgment in Grincelis v House165, and
seeks to draw from it authority for the proposition that in a case such as the present,

164
The balance of the report became Exhibit 393.
165
(2000) 201 CLR 321 at 331.
 235

“the fair approach … is to halve the period for which interest is ordered”. The
“halving” of interest is appropriate where, broadly speaking, a plaintiff suffers the
relevant financial consequences relatively evenly between the period between the
accrual of the cause of action and the judgment. That is not the case here.

[952] Nevertheless the financial consequences of the collapse of the BWE were not felt
immediately. The principal component of the plaintiffs’ damages is for the cost of a
rebuild of the BWE, a cost which would not have been incurred in any amount
earlier than about March 2001. It is reasonable to suppose that it would have been
incurred between then and about May of 2003. Related to that is the amount of
$1,936,000 allowed for a period of a year from May 2002. Then there are the large
number of other amounts which I have allowed, which were expended at various
times from 2000 over the next two or three years. There is the amount allowed for
general damages for the loss of use of the BWE, over two and a quarter years from
March 2000. So overall, an allowance of interest from 8 March 2000 would exceed
what is reasonably necessary to compensate the plaintiffs. Mainly because most of
the amount awarded to the plaintiffs involves the cost of a rebuild, which would
have been incurred no earlier than 2001 and then over time, in all the
circumstances it would be reasonable to award interest upon these awards from no
earlier than 1 April 2002.

[953] Necessarily there is much approximation in such an award of interest, especially

where the principal component of the award of damages is calculated upon a
hypothetical basis because in fact there was no rebuild. And although the plaintiffs
have not proved that it is reasonable that they be awarded damages in the amount of
the cost of the shovel/sizer, it is of some relevance to the present question that their
substantial expense was incurred from June 2001 through to July 2002. Overall I
conclude that interest should not be awarded from 8 March 2000 but it should be
calculated from 1 April 2002.

[954] The next argument concerns the rate of interest. The plaintiffs argue for the rates
prescribed for the unpaid judgments. The defendants say that these rates bear no
resemblance to “normal commercial rates” and that it is more appropriate to impose
a “simple rate of five per cent”. For that rate they cite Moloney v Bells Securities
Pty Ltd166, but there is nothing said there about what should happen in any other
case. There was no evidence here as to commercial rates of interest, but in that
respect the parties were adhering to what was said by Thomas J, with whom the
other members of the Court agreed, in Serisier Investments Pty Ltd v English167.
The claimed rates are high compared with commercial rates in this period from
2002. But it must be remembered that this will be an award of simple interest. In
my conclusion, the rate allowed should be seven per cent.

[955] The defendants argue that interest as claimed will be of such a magnitude that the
Court should decline to allow it in full. Of itself this is not a persuasive submission:
the magnitude of the interest would be simply a result of the magnitude of the
plaintiffs’ losses and the period for which the plaintiffs have had to wait for their
compensation. These submissions provide no basis for departing from the rates
claimed. Again because this is a process of approximation, it is appropriate to allow
interest at the one rate, and it will be allowed at seven per cent.

166
[2005] QSC 013; (2005) ATPR 057.
167
[1989] 1 Qd R 678 at 681.
 236

[956] It was suggested that there should be some allowance for the fact that the plaintiffs
have already received payments from an insurer for their losses, so that in a sense,
the plaintiffs have not been without the funds claimed. For this they cite Harbutt’s
“Plasticine” Ltd v Wayne Tank & Pump Co Ltd168, when Lord Denning MR said:
“The plaintiffs say that the court should ignore the fact that they were
insured, or have received insurance moneys, and should give them
full interest as if they had paid the cost of replacement out of their
own pocket or borrowed money for the purpose. I think this goes too
far. In assessing damages, we ignore, of course, the fact that the
plaintiffs are insured. But, in awarding interest, it is different. An
award of interest is discretionary. It seems to me that the basis of an
award of interest is that the defendant has kept the plaintiff out of his
money; and the defendant has had the use of it himself. So he ought
to compensate the plaintiff accordingly.

This reasoning does not apply when the plaintiff has not been kept
out of his money but has in fact been indemnified by an insurance
company. I do not think the plaintiff should recover interest for
himself on the money when he has not been kept out of it. The
receipt from the insurance company should go in relief of the
defendants.”

[957] There is evidence that the plaintiffs were indemnified by insurers. The defendants
say that the evidence does not reveal
“whether a payment for interest to the plaintiffs will be in addition to
any payment already received from the insurer, and hence represent
an over compensation of the plaintiffs.”

There is no suggestion that the insurance was relevant to the assessment of

damages. Plainly it is irrelevant for the reasons explained in, for example, National
Insurance Co of New Zealand Ltd v Espagne169. Nor is it disputed that the purpose
of an award of interest is compensatory170. It follows then that the insurance is
irrelevant to the question of interest. That was the reasoning of each of the judges
(Thomas, Ryan and Mackenzie JJ) in Camm v Salter171. In that case the collateral
benefit received by the plaintiff was an invalid pension, which according to
Redding v Lee172, was to be disregarded in an assessment of damages for personal
injuries. In Camm v Salter, Ryan J said that173:
“50 … Invalid pensions are, in the words used by Dixon CJ in
National Insurance Co of New Zealand Ltd v. Espagne
(1961) 105 CLR 569 at 573, ‘not provided in relief of any
liability in others fully to compensate’ the plaintiff. In my
opinion, there can be no relief from the liability of a
defendant to compensate the plaintiff for being kept out of
his money because he has received an invalid pension
during the pre-trial period.”

168
[1970] 1 QB 447 at 468.
169
(1961) 105 CLR 569 at 573 per Dixon CJ and at 599-600 per Windeyer J.
170
Bachelor v Burke (1981) 148 CLR 448 at 455.
171
[1992] 2 Qd R 342.
172
(1983) 151 CLR 117.
173
[1992] 2 Qd R 342 at 349-350.
 237

[958] It was also said that there has been a “significant delay” in the commencement of
these proceedings. It was suggested that the period of four years and four months
between the commencement of these proceedings and the commencement of the
trial was unduly long. But on any view this was very complex litigation, and made
the more so by the defendants’ raising so many matters although unsuccessfully.
This is not a case where there has been such an untoward delay either in its
commencement or in its prosecution that the plaintiffs should be denied some of the
interest which would otherwise be allowed. And in any case, interest has been
allowed only from 1 April 2002.

[959] The result is that interest will be awarded from 1 April 2002 at seven per cent to
today’s date.

CONCLUSIONS

[960] The losses from the collapse of the BWE have been assessed as follows:

Rebuild $27,893,461
Plus 5 per cent contingency 1,394,700
Project costs 851,000
Currency movements affecting the rebuild 320,000
cost
The extra operating costs pending a rebuild 1,990,000
Additional expenses from the collapse 2,845,432
General damages for loss of use 1,936,000
TOTAL $37,230,593

[961] This is the basis for the several judgments in the design case. Interest on that sum
would be a further $16,288,384, resulting in a total of $53,518,977. This is then to
be apportioned between the plaintiffs according to their respective interests in the
BWE as at 8 March 2000. There will be the following judgments against the First
Defendants:

For the first plaintiff $22,932,881

For the second plaintiff 8,311,497
For the third plaintiff 401,392
For the fifth plaintiff 6,422,276
For the sixth plaintiff 8,445,293
For the seventh plaintiff 2,456,520

[962] The damages under the inspection case must be reduced by $160,000, which is what
the cost of repair of the tower would have been had the crack been inspected.
Accordingly, the damages are $37,070,593, which with interest of $16,218,384,
amounts to $53,288,976.

[963] There will be judgment for the plaintiffs, save for the fourth plaintiff, against the
second defendant for $53,288,976.
 238

[964] There will be several judgments against the third defendant as follows:

For the first plaintiff $22,834,326

For the second plaintiff 8,275,777
For the third plaintiff 399,667
For the fifth plaintiff 6,394,676
For the sixth plaintiff 8,409,000
For the seventh plaintiff 2,445,964

[965] The fourth plaintiff’s claim against each defendant is dismissed.