SUPREME COURT OF NORFOLK ISLAND The Administration of Norfolk Island v SMEC Australia Pty Ltd [2006] NFSC 7 CONTRACT – Contract between Administration and civil engineering consultants for management of a project involving cliff stabilisation and recovery, for use as aggregate, of hard durable rock ('HDR') – Project carried out by contractor (Kaipara) pursuant to contract requiring HDR to be stockpiled separately from other material ('OTR') – Whether Kaipara carried out work in such a manner as to produce an unacceptable degree of intermingling of HDR and OTR – Manner of excavation of unit I of cliff – Nature of material in HDR stockpile – Nature of defendant's responsibility – Effect of clause in contract between plaintiff and defendant capping defendant's liability at $300,000. FAIR TRADING – Whether defendant engaged in misleading or deceptive conduct – Recoverability of damages in relation to moneys paid after intermingling occurred. FIDUCIARY DUTY – Whether there was a fiduciary relationship between the parties. Fair Trading Act 1995 (NI): ss 14, 16, 37, 41 THE ADMINISTRATION OF NORFOLK ISLAND v SMEC AUSTRALIA PTY LIMITED SC2 of 2003 WILCOX J 3 AUGUST 2006 SYDNEY IN THE SUPREME COURT OF NORFOLK ISLAND SC2 of 2003 BETWEEN: THE ADMINISTRATION OF NORFOLK ISLAND PLAINTIFF AND: SMEC AUSTRALIA PTY LIMITED DEFENDANT JUDGE: WILCOX J DATE OF ORDER: 3 AUGUST 2006 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Judgment be entered in favour of the plaintiff, The Administration of Norfolk Island, against the defendant, SMEC Australia Pty Limited, in the sum of three hundred thousand dollars ($300,000). 2. The defendant pay the plaintiff's costs of the proceeding. IN THE SUPREME COURT OF NORFOLK ISLAND SC2 of 2003 BETWEEN: THE ADMINISTRATION OF NORFOLK ISLAND PLAINTIFF AND: SMEC AUSTRALIA PTY LIMITED DEFENDANT JUDGE: WILCOX J DATE: 3 AUGUST 2006 PLACE: SYDNEY REASONS FOR JUDGMENT WILCOX J: 1 This case arises out of an agreement for the provision of engineering services by the defendant, SMEC Australia Pty Limited ('SMEC'), to the Administration of Norfolk Island ('the Administration' or 'NIA'), in connection with an engineering project undertaken by NIA. Outline of the case (i) Origins of the project 2 The project was known as 'the Cascade Cliff Safety Project'. It concerned a cliff, about 260 metres wide, that rose steeply about 80 metres above the northern foreshore of Norfolk Island ('the Island'), in the area known as 'Cascade Reserve'. Cascade Reserve is included in the Register of the National Estate and, therefore, was subject to control under the Australian Heritage Commission Act 1975 (Cth) [see now the Australian Heritage Council Act 2003 (Cth)]. 3 Cascade Cliff lies between an old quarry, known as 'Cascade Quarry', to the east, and the site of a former whaling station, to the west. A roadway traverses the narrow strip of flat foreshore that lies between the foot of the cliff and the sea. The road provides access to both the quarry and a jetty. The jetty is situated about one-third along the length of the cliff, measuring from the quarry. This jetty is regularly used for the loading and unloading of goods transported to and from the Island. 4 By the year 1991, Administration officers had become concerned about the long-term availability, on the Island, of rock suitable for crushing as aggregate. They saw a continuing need for aggregate for both public works, including occasional resurfacing of the airport and the construction and maintenance of roads, and private use. The quarry had long provided suitable rock, good quality basalt, but by 1991 it was almost worked out. 5 In 1991, the Administration retained a mining engineer, Andrew Lyell, to advise about future supply options. Mr Lyell held a Bachelor of Engineering (Honours) degree from the University of New South Wales. At that time, he had had over 30 years practical experience in mining and quarrying, including quarrying basalt rock for production of aggregate. As Mr Lyell explained in evidence, basalt is the preferred source rock for aggregate because crushing is relatively easy and cheap. 6 Mr Lyell visited the Island. He confirmed the quarry, as then structured, was almost exhausted and examined many alternative sites. There were problems about them all. Finally, he recommended the life of the quarry be extended by lowering its floor and extending it laterally over some adjacent public land. This was only a short-term solution; Mr Lyell thought long-term sourcing of rock remained a serious problem. 7 By 1995, the rock in and around the extended Cascade Quarry was nearly exhausted. After again reviewing the options, Mr Lyell concluded the most suitable course was to remove part of the adjoining cliff. In an affidavit read in this case, he said: 'From physical observation it was apparent to me that Cascade Cliff was comprised of overburden at the top of the Cliff, under which there were horizontal layers of hard basalt rock interspersed with weathered rock and tuff. I prepared a vertical section depicting my interpretation of those layers.' 8 Mr Lyell explained: 'The tuff, or volcanic ash, and the basalt, which is solidified lava, were both deposited at the time of the formation of the Island. Tuff and weathered rock are very weak and unsuitable for the production of aggregate and road base. The Quarrying technique employed to win basalt from Cascade Cliff would have to provide for the separation of the quality basalt and inferior tuff and weathered rock.' 9 Mr Lyell returned to the Island in September 1997 in order to interview three local residents who had expressed interest in carrying out the work suggested by him. At that time, he provided further advice to officers of the Administration. He had no further involvement in the project until August 2001. (ii) The SMEC agreements 10 In February 1998, officers of the Administration contacted SMEC, a consulting engineering company. SMEC had previously indicated willingness to advise the Administration in relation to the safety of Cascade Cliff, from which there was occasional rock fall. Particularly as the road and jetty lay below the cliff, the Administration had been concerned about rock fall. A scheme to stabilise the cliff face was formulated and discussed with the Commonwealth Government. The Administration constituted a 'Cascade Cliff Management Board' ('CCMB'), comprising a Commonwealth member, an Executive Member of the Legislative Assembly (a 'Minister') and relevant government officers. CCMB obtained approval from the Australian Heritage Commission for a project to stabilise the cliff face 'provided the benching is undertaken in such a way that the existing overall rock strata profile is maintained at the conclusion of the works'. 11 The Norfolk Island Legislative Assembly enacted the Cascade Cliff Loan Act 1998 (NI) which authorised NIA to borrow from the Commonwealth a loan not exceeding $3 million (increased later to $3.25 million) in order to fund a project described as 'stabilisation' of specified land 'to ensure public safety' and 'the extraction of rock, soil or other material (including its subsequent handling, transportation, treatment and stockpiling prior to crushing)'. 12 On 13 July 1998, a formal agreement was made between NIA and the Commonwealth government whereby the Commonwealth would lend NIA $3 million, the loan being repayable out of the proceeds of sale of the basalt rock extracted from the cliff. 13 With the approval of CCMB, the Administration issued a brief to SMEC in which it described the project as follows: 'It is proposed to bench and batter the Cascade cliff back to a suitable profile as shown in the attached section (Appendix 2) and to recover basalt rock for the Island's needs. The overburden will be removed at the top of the cliff extending back to the modified stage two proposal above RL50; bench the cliff commencing at RL50 and then complete the benching as proposed for stage one – see Appendix 2 From known geological information, the project involves the removal of approximately 255,000m3 of overburden and approximately 70,000m3 of rock. Some of the overburden and topsoil from the cliff will be used to rehabilitate the existing quarry (portion 5a) to the south-east of the Cascade cliff. The final landform is to be as agreed with the landowner.' Appendix 2 was a section plan showing a slope containing three benches at various heights above road level. 14 After various inspections and discussions, SMEC prepared a proposal for supply of engineering services. The services were to be broken into two phases: design and pre-construction, for a fixed fee; and construction management, on a fee-for-service basis. The Administration accepted SMEC's proposal on 20 March 1998. 15 On 11 May 1998, SMEC and the Administration entered into two separate agreements. One of them was called 'Consulting Engineer Agreement' ('the CEA'). The services stipulated in this agreement related entirely to the pre-construction phase of the project. They seem to have included everything necessary in that phase, including detailed design of the project, preparation of contract documents and calling and assessing tenders. Although NIA pleaded in this case that SMEC breached this agreement, for reasons that will appear, that claim is not open to it. Consequently, with an exception that will appear, I need not detail the provisions of the CEA. 16 NIA does not have the same problem in relation to the other agreement, called 'Project Management Agreement' ('the PMA'). So it is necessary to refer more extensively to its provisions. 17 Annexure A to the PMA itemised the services that SMEC (called 'the Consulting Engineer') was to provide 'as the Project Manager for the Cascade Cliff Safety Project'. That project was described in a recital to the PMA in this way: 'It is proposed to bench and batter the Cascade cliff back to a suitable profile and to recover basalt rock for Norfolk Island's needs. The overburden will be removed at the top of the cliff extending back approximately 60 metres from the top of the existing cliff and the new cliff face left at a suitable and safe batter. Benches will be constructed at suitable levels in the new cliff face. From known geological information, the project involves the removal of approximately 255,000m3 of overburden and approximately 70,000m3 of basalt rock. Some of the overburden and topsoil from the cliff will be used to rehabilitate the existing quarry to the south-east of the Cascade cliff. The final landform is to be agreed with the landowner.' 18 Annexure A to the PMA prescribed SMEC's obligations: '2. The Consulting Engineer will manage the construction phase of the project and ensure its timely and successful completion to achieve the projects outcomes and objectives. 3. The Consulting Engineer will appoint a person to be project manager. The Consulting Engineer will assist the Cascade Cliff Management Board in its functions to ensure the successful and timely completion of the project in accordance with the project specifications. 4. The Consulting Engineer shall provide general project management services: • contract administration and supervision including but not limited to: - monitoring the compliance by the Contractor with the quality requirements of the specifications; - undertaking surveillance of the contractors quality system; - release of hold points and issue of corrective action requests as necessary; - maintain quality assurance lot registers and compliance records; - maintain details records of construction activities; - check progress against the construction programme; - verify contractors progress claims prior to certification for payment; - review and recommend contractors claims (if any) for variation; - review and recommend contractors claims for extension of time of the contract period - supervision of blast design and execution; - monitor and overview of site and public safety procedures; - monitor compliance with environmental control requirements; - issuing of payment certificates; - liaise with clients representative on a weekly basis to keep the client informed of the progress of the works; - assist in the preparation of monthly reports for the Cascade Cliff Management Board; - provide periodic reports to the client and the Commonwealth Government on the progress of the project; - verify closure of work lots as they are completed by the Contractor; and - preparation of a final report on the construction works upon completion.' 19 Clause 1.1 of the PMA provided that, in performing the contracted services: 'the consulting engineer shall exercise the degree of skill care and diligence normally exercised by members of the engineering profession performing services of a similar nature, in accordance with the ethics [of] the engineering profession.' 20 Clause 1.2 said: 'If the Consulting Engineer is required to exercise his professorial [sic] judgement between the Client and a third party with whom the Client has a contract then he shall do so independently and as required by the terms of that contract.' 21 The remainder of Part 1 of the PMA imposed obligations on the consulting engineer in relation to ascertaining the Administration's requirements. Part 2 imposed some obligations on the Administration. Part 3 dealt with payment. 22 Both the CEA and the PMA included, in Part 4, provisions relating to the scope of SMEC's liability, as follows: '4.1 Direct and indirect Loss The liability of the Consulting Engineer to the client arising out of the performance or non-performance of the services, whether under the law of contract tort or otherwise shall be limited to the cost of rectifying the works which are the subject of the commission. 4.2 Maximum amount of Liability The maximum liability of the Consulting Engineer to the Client arising out of the performance or non­performance of the Services, whether under the law of contract, tort or otherwise, shall be the amount specified in Item 9 of the Schedule, or if no amount is specified, $300,000.00. [No amount was specified in Item 9 of the Schedule of either agreement.] 4.3 Duration of Liability The Consulting Engineer shall be deemed to have been discharged from all liability in respect of the Services, whether under the law of contract, tort or otherwise, at the expiration of the period specified in Item 10 of the Schedule or if no date is specified on the expiration of one year from the completion of the Services, and the Client (and persons claiming through or under the Client) shall not be entitled to commence any action or claim whatsoever against the Consulting Engineer (or any employee of the Consulting Engineer) in respect of the Services after that date. [In the case of both agreements, Item 10 of the Schedule read: '12 months after the finalisation of the services.'] … 4.5 Extent of Warranty The Consulting Engineer does not give any warranty nor accept any liability in relation to the performance or non-performance of the Services except to the extent, if any, required by law or specifically provided for in this Agreement. If apart from this Clause any warranty would be implied whether by law, custom or otherwise, that warranty is to the full extent permitted by law hereby excluded. Nothing herein, contained shall be read or applied so as to purport to exclude, restrict or modify or have the effect of excluding, restricting or modifying the application in relation to the supply of any goods or services pursuant to this Agreement of all or any of the provisions of Part V of the Trade Practices Act 1974 (as amended) or any relevant State Act or Territorial Ordinance which by law cannot be excluded, restricted or modified.' (iii) The geotechnical assessment 23 On about 18 May 1998, SMEC provided to the Administration a 'Geotechnical Assessment' for the project. The document was signed by two SMEC employees, Patrick MacGregor (Chief Engineering Geologist) and Dan Reeve (Project Manager). It contained the following description of Cascade Cliff: 'The geological sequence in the Cascade Cliff area is clearly exposed in outcrops on the cliff face, in the rock faces produced by the quarry excavation and in the coastal cliffs to the east and west of Cascade. There is an essential consistency in the subsurface profile demonstrated by these exposures and supplemented by the information obtained from the exploration drill holes. This consistency can be expected given the volcanic origin of the island. The cliff face at Cascade is composed of a series of near horizontal layers of material. The horizontallity in the project area is clear in the east-west cliff and in the north-south quarry faces. Further east, outside the project area, a low dip to the east is evident. The cliff is composed of two rock types - basalt, a crystalline igneous rock that formed by the cooling lava flows and tuff, a deposit of granular volcanic fragments created by ejection from the volcanic vent during explosive phases ofthe volcanic eruption. The tuff bands contain indistinct bedding. In several cases the upper surface of a tuff layer is irregular, presumably due to erosion during the volcanic eruption, and the basalt lava flow above has infilled the depressions. The rock mass in the basalt flows contain several distinct types of fracture: • Regular columnar fractures • Pillow lavas with elliptical units with few continuous defects • Jointed rock with dominant sub-vertical irregular joints The interflow tuff layers have indistinct bedding and practically no jointing. The review of the cliff face at Cascade has indicated the presence of 17 layers between sea level and the crest of the cliff. For the purpose of this study these layers have been numbered 1 to 17. The layer identification has been used to enable recognition of the different bands. The sequence exposed is listed in Table 1. Unit Layer Reduced Level Thickness Description From To (m) IV 17 79 84 5 Soil 16 76 79 3 Soil strength weathered basalt 15 72 79 7 Soil strength weathered interflow deposits 14 70 72 2 Soil strength weathered basalt 13 65 72 7 Soil strength weathered interflow deposits 12 62 65 3 Low strength weathered basalt 11 53 62 9 Soil strength weathered interflow deposits III 10 49 53 4 Low-medium strength weatherflow basalt 9 44 49 5 Very low rock strength interflow deposits 8 39 44 5 Low-high strength partly weathered basalt 7 35 39 4 Very low rock strength interflow deposits II 6 25 35 10 Very high strength basalt I 5 22 25 3 Low rock strength interflow deposits 4 18 22 4 Very high strength basalt 3 15 18 3 Low rock strength interflow deposits 2 8 15 7 Very high strength basalt 1 5 8 3 Low rock strength interflow deposits The 17 layers were diagrammatically illustrated in an appended drawing called 'Typical geological section'. 24 In a section of the document called 'Material Strength', the authors further described the various layers. They said: The cliff face at Cascade is composed of 17 different layers as listed in Table 1. For this project the face has been divided into four units numbered I to IV. Each unit is considered to have essentially uniform engineering properties. These properties govern the performance of the cliff face and the amount of remedial works required in the reduction of the risk of slope failure Unit I, the lowest section of the cliff, includes Layers 1 to 5 and extends from sea level to about RL 25 m. Unit I includes two basalt layers (Layers 2 and 4) and three tuff interflow layers. The basalt flows have an irregular outline and are composed of very high strength jointed rock. Columnar jointing is well developed in Layer 2 near the jetty. The tuff layers are assessed to be of low rock strength with few rock mass defects. Erosion of the tuff has produced some areas of undercutting. Unit II extends from about RL 25 m to between RL 35 m and RL 38 m and comprises Layer 6, the prominent basalt flow which is the main member of the "Cascade Basalt" and is well exposed throughout the coastal cliffs on the northern side of Norfolk Island. Layer 6 is composed of very high strength basalt with irregular, widely spaced near-vertical jointing which has resulted in a distinct cliff line with a blocky profile. Layer 6 has been the main source of aggregate in the development of Cascade Quarry. Unit III includes Layers 7 to 10 and extends from about RL 35 m to about RL 53 m. Unit III includes two basalt flows (Layers 8 and 10) and also tuffaceous interflow layers. The basalt flows are partly affected by weathering with rock substance which is assessed to range from low to high strength. There are several areas of close jointing. The tuff layers are composed of granular material which is assessed to be of very low rock strength with few joints. The generally lower strength of this unit is reflected in the surface on this unit where erosion and shallow slumping have produced slope angles close to 50 degrees. Unit IV extends from about RL 53 m to the crest of the cliff at about RL 84 m and includes Layers 11 to 17. Layers 12, 14 and 16 are relatively thin, composed of weathered basalt which ranges from soil strength to low rock strength. Some relict jointing can be observed. Layers 11, 13 and 15 are tuff interflow deposits which have weathered to soil strength material. Layer 17 is the residual volcanic clay soil that forms the crest of the cliff. The low strength in Unit IV is indicated by the natural slope angle which is generally less than 40 degrees with local areas where it appears that slumping has occurred - presumably following periods of heavy rain.' 25 In a section on risk assessment, the authors noted the slope angles of each of the four units they had identified. They were as follows: Unit I, >60ş; Unit II, >70ş; Unit III, 40-50ş; Unit IV, 30-40ş. 26 Section 6 of the assessment concerned production of construction materials. It said: 'The proposed modification of Cascade Cliff will produce: • Soil, tuff and weathered basalt suitable for use as general fill • Fresh basalt suitable for processing as aggregate It is considered that most of the general fill will be obtained from excavation in Units III and IV with some basalt obtained from Layers 8 and 10. Unit II (Layer 6) should be the prime source of basalt suitable for aggregate. The quantity of material involved in the excavation of Unit I will be relatively small. The survey data indicates that the basalt forming Layer 6 has an outcrop about 180 m long and an average thickness of at least 10 m. Excavation of this layer should produce 1,800 cubic metres of rock suitable for processing per metre width of excavation from the present face. The minimum excavation required for the slope improvement recommended above would involve removal of a width of about 16 m - a volume of 28,000 cubic metres or about 86,400 tonnes of basalt. Additional excavation of Layer 6 would widen the Unit I/Unit II bench and thus further reduce the risk of rock fall from Units II, III and IV to the foot of the cliff. The excavated material would provide more aggregate. It is understood that alternative sources of aggregate on Norfolk Island are limited and the option of maximising the development resource at Cascade is under consideration. The potential for the production of more aggregate may be achieved by the extension of the excavation of Units III and IV within practicable property limits. Removal of the overburden would increase the width of the Unit II/Unit III bench and expose additional Unit II material. This basalt may either be excavated as part of the present project or as required in the future provided that the minimum width of 5 m is retained for the Unit II/Unit 3 bench.' 27 In a concluding section, the authors set out some recommendations as to bench widths and slope grades. They stated this degree of excavation 'should produce about 86,000 tonnes of rock suitable for use as aggregate'. (iv) The Kaipara agreement 28 In June and July 1998, SMEC advertised for expressions of interest by persons willing to execute the proposed works. SMEC issued tender documents to interested parties. Those documents included a copy of the typical geological section and detailed drawings of the proposed slopes and benches. There were also drawings concerning works at Middlegate, a place about three kilometres south of Cascade Cliff, where it was proposed to dump the non-usable excavated material. The contract documents required this material to be levelled, top soiled and grassed, so as to provide an additional sports area for the adjoining public school. 29 After an assessment process, SMEC and NIA decided to award the construction contract to a New Zealand company, Kaipara Excavators Limited ('Kaipara'). Kaipara was notified of the decision on 5 March 1999. On 20 April 1999, NIA and Kaipara executed an agreement, prepared by SMEC, to which were annexed some documents. Kaipara was bound to comply with the agreement (including the annexed documents) in executing the contract works. The annexed documents included 'Special Conditions of Contract'. Several of those provisions are relevant to this case. 30 Clause S6 of the Special Conditions of Contract was titled 'Quality Assurance'. Subclause S6.3 required the contractor to 'plan, establish, implement and maintain a Quality System in accordance with the Quality System Specification'. Failure to do this was to constitute a default by the contractor under the General Conditions of Contract. The contractor was required to 'control the work under the Contract for quality in accordance with the Quality System'. 31 The Quality System Specification ('QSS') was attached to the Special Conditions of Contract document. The QSS contained a detailed description of the works, together with some information and undertakings about the supply of materials by NIA. There were sections, called 'General Requirements', 'Environmental Protection' and 'Control of Traffic', imposing detailed work-rules on the contractor. There was also a section called 'Quality System Requirements'. Clause 3.4 of this section required the contractor to submit to SMEC a written proposal for a Project Quality Plan. Some quality system requirements were specified. They included rules about blasting, effectively making each blast dependent on prior approval by SMEC's onsite representative. 32 The QSS included a section called 'Earthworks'. That section opened with the following description: 'The work to be executed under this Specification consists of: (a) removal of topsoil; (b) general earthworks, which comprises all activities and quality requirements associated with the excavation of cuttings, preparation of excavated surfaces and embankment foundations, the haulage of material and the construction of embankments to the extent defined in the Drawings and Specification; (c) removal and replacement of any unsuitable material as defined in Clause 4; (d) any spoil or borrow activities associated with general earthworks; (e) any additional processing of selected material for the selected material zone; and (f) removal of material stockpiled under the previous contract, and its use in embankments, selected material zone, verge or spoil. The Contractor shall undertake all inspection and testing necessary to demonstrate that the quality requirements of this Specification have been achieved.' 33 Clause 1.8 of the Earthworks section of QSS required the Project Quality Plan to include a 'Material Management Plan' that was (by cl 5.2.1) to include, for all earthworks: '(a) The excavation sequence and proposals for the management of select, non-select and weathered surface materials; (b) the preliminary identification of zones of potentially unsuitable materials and the management of the disposal and replacement of the unsuitable materials; (c) the methods to be employed to ensure that materials of the specified quality are identified and incorporated into the work at the sites where the quality of the material has been specified; and (d) the methods to be employed to ensure that the higher quality materials are available and used for the upper zones of the formation.' 34 Clause 5.9 of the Earthworks section of QSS (hereafter simply 'cl 5.9') lies at the heart of this case. It provided as follows: 'All hard, durable rock, excavated from Units 1, 11 and 111, shall be separated from the OTR and stockpiled at the site nominated on the drawings. The rock pieces placed in this stockpile shall be no greater than the following dimensions: - length = 900 mm - width = 600 mm - height = 375 mm where the length is the greatest dimension of a single rock and the width is the largest dimension measured transversally to the length. Any oversize rock pieces shall be reduced in size before placing in the stockpile. The rock extracted from Units 1 and 11 shall be generally larger than 50mm in all dimensions. The batters of the rock stockpile are to be no steeper than 1.5H to 1 V and trimmed to be relatively even in appearance.' The 'site nominated on the drawings' was in the old quarry. 35 The acronym 'OTR' stands for 'other than rock'. It will be seen, therefore, that the contract envisaged that all the material extracted from units I, II and III of the cliff would fall into one of only two categories: 'hard, durable rock' (which was to be stockpiled in the quarry) and 'other than rock' (which was to be taken to Middlegate). 'OTR' was intended to include everything but hard, durable rock ('HDR'), whatever that was. (v) Execution of the works 36 SMEC appointed an employee, Richard David Evans, to be its on-site representative during the period of the works. Mr Evans was a qualified civil engineer holding honours degrees in civil engineering and engineering geology from English universities. He had worked with SMEC since 1997. 37 Mr Evans arrived on the Island on 24 March 1999. During the next day, he attended a meeting of CCMB. During that meeting, James Gary Robertson, who was then the Ministerial representative on CCMB and its chairperson, said to Mr Evans: 'The airport runway needs to be upgraded in 2003 and we will need to have quality basalt. The method of stockpiling will need to allow access to the quality rock for that purpose'. Mr Robertson stated in evidence that Mr Evans replied: 'We can do that.' 38 Kaipara commenced work early in April 1999, although its equipment barge did not arrive until 13 May 1999. 39 Notwithstanding cl 3.4 of the QSS, Kaipara never submitted a Project Quality Plan to SMEC. However, on 4 May 1999, Kaipara's Project Manager, Warren Silich, supplied to Mr Evans, for his comment, a document called 'Methodology for the Cascade Cliff Safety Project'. This document included the following short section concerning rock excavation: 'Prior to uncovering rock a survey of all homes/buildings within a one kilometre radius will be done by ourselves possibly accompanied by a local building inspector and insurance assessor. Rock will be uncovered and excavated from the quarry end of the cliff with the 40 tonne digger and two dumptrucks while the 22 tonne digger and road trucks continues the clay removal. The presplit and main blast will work away from the quarry along the batter as the clays are removed. The ammonium nitrate will be mixed with diesel in a concrete mixer on site and rebagged and stored in a magazine if necessary until use. Any oversize will be stockpiled and eventually broken with the 40 tonne digger and hydraulic breaker.' 40 Mr Evans agreed in evidence that this statement of methodology did not 'specifically deal with how they would separate out … hard durable rock from OTR'. He accepted that no Material Management Plan was ever prepared. He took no action to obtain such a document or a further or better statement of methodology. 41 Excavation work commenced at the top of the cliff, in unit IV. Unit IV had little high-quality rock. Although rock from this unit was not required by cl 5.9 to be separated from OTR and stockpiled in the quarry, a small quantity of good quality unit IV rock was in fact placed in the quarry. The remainder of the unit IV material was taken to Middlegate. No issue arises out of the excavation of unit IV. 42 As had been forecast by the geological assessment signed by Mr MacGregor and Mr Reeve, unit III was found to contain a significant quantity of basalt rock. Much of it was soft weathered basalt. However, some of the unit III material was treated as HDR and stockpiled in the quarry. The remainder was removed to Middlegate. In his affidavit, Mr Evans explained how the selection was made: 'It was Kaipara's role to select the material for stockpiling. My role, as Superintendent's Representative, was to administer the contract. I was not supervising the works. That was Kaipara's role under its contract. I satisfied myself that Kaipara was carrying out its contractual obligations by reference to a sufficiently representative sample of its work. I regularly looked at the material it was excavating and checked whether it was taking the right material to the right place as the contract required. I had to satisfy myself that Kaipara's selection of hard durable rock was reasonable having regard to the nature of the project, resources available on the Island and methods of work. Whether material was in fact hard durable rock and, therefore, not OTR was a matter of judgment and agreement between the contractor and me. There were no laboratory facilities on the island. It was not practical to set up a testing regime to use as a control to determine what was rock and what was OTR. I had to use a visual assessment. That is a commonly used method in the industry particularly in projects of this nature. My visual assessment involved first an observation of the blasted rock from nearby, usually from above the blast area as the contractor is [sic] excavator was operating. I also looked at the rock that had been tipped into the stockpile. I also picked up samples of rock and hit them with a geologist's hammer. When I looked at the material from above the blast area I looked to see the colour of the material. Colour is an indicator of weathering which is in turn an indicator of strength. I was looking to see if the rock was a mid to dark grey. More weathered material is generally darker. I looked to see if there was a good rock fragmentation in a range of rock piece sizes. By that I mean that I was looking to see that the material has not been converted into dust by the blast. I also picked up rock pieces and looked to see what mineral decomposition was evident. I then hit them with my geologist's hammer to feel the strength. I also listened to the sound that was made by the hammer on the rock. A ping sound indicates a harder rock. I also considered the number of times it took to split the rock if it was possible to split [at] all. I used a combination of all of those things to determine whether the rock was hard and durable and should be stockpiled. In making that assessment relied on my study and my experience gained in similar projects. I understood that the rock that was being stockpiled was intended to be used in construction projects on the Island. Material of that nature is primarily used as aggregate in road base or as concrete aggregate or chip for road seal. In either case, it has to be crushed to a size that is able to be used for that application. Generally, aggregate is no greater than 37.5 mm. The specification includes a reference rock sizes being generally larger than 50 mm from Units I and II. I had no involvement in the preparation of the specification but did talk to Dan Reeve about it. I took the view at the time that a rock that is less than 50 mm in size but is otherwise hard durable rock is still able to be used as crushable rock to produce aggregate. Similarly, rock fines can also be incorporated in some products. The selection criteria that was used at the time was whether the material was hard durable rock that was crushable or screenable and capable of being used as aggregate. In those circumstances the material was placed in the stockpile.' 43 Mr Evans took photographs to illustrate the progress of the works. These are in evidence. They bear dates, although some dates are difficult to read. The photographs taken of the stockpile during the course of the unit III excavation show only grey material that is consistent with there then being no contamination of the stockpile. 44 Mr Robertson stated that, in late November 1999, he visited the Middlegate site, in company with Mr Evans, at the request of an adjoining owner. Mr Robertson noticed what looked to him to be good hard rock. He said to Mr Evans: 'It looks like there is some good rock in that fill'. 45 Mr Robertson said Mr Evans replied: 'It's too difficult to sort. Some of it is good and some of it isn't. I am keeping a close eye on the material that is going to the Middlegate site and the material going to the stockpile.' Mr Robertson said he was satisfied with this answer. 46 As predicted by the geological assessment, unit II turned out substantially to comprise very high strength basalt. Mr Evans treated this material as 'hard, durable rock'. Once again, there is no reason for believing the quarry stockpile – which was considerably augmented during excavation of unit II – became contaminated at that time. 47 The excavation of unit I commenced about the end of February 2000, apparently at its western end. By this time, Kaipara was well behind its initial works schedule, which had fixed 23 December 1999 as the date of practical completion of the whole project. In a progress report to NIA for the month of February 2000, delivered on 13 March 2000, Mr Evans stated he had granted extensions of time totalling 34 days; but this took the date of practical completion only to 10 February 2000. In the following progress report to NIA, dated 10 April 2000, Mr Evans reported further extensions, taking the total to 52 days. The report stated that Kaipara 'is about eleven weeks behind on the overall excavation'. He said Kaipara was late starting the main excavation of unit II and projected that, by completion, the main excavation works would be 12 weeks late. The contract between NIA provided for penalties for late completion of the works. 48 It is common ground between the parties that there was no substantial blasting of the western end of unit I, where the rock was weathered and able to be mechanically excavated. It is also common ground that the eastern half (approximately) of layers 4, 3 and 2 (all in unit I) were blasted, top to bottom. However, thereafter, there is a major issue in relation to the excavation of unit I. NIA says the eastern end of unit I was blasted in such a manner as to cause extensive intermingling of the basalt rock in layers 4 and 2, which was 'hard, durable rock', and the low strength interflow deposit in layer 3; this intermingled material was added to the HDR quarry stockpile, causing it to become contaminated with OTR. Although SMEC concedes that some OTR ended up in the quarry stockpile, it claims the degree of contamination was minimal and well within the margin of tolerance usually accepted by engineers. 49 I will later examine the evidence concerning the method of excavation of unit I and the content of the stockpile. 50 According to Mr Evans' progress report for the month of May 2000, delivered on 2 June 2000, Kaipara completed the main earthworks (including excavation of unit I) on 13 May 2000. There was still some work to do and Mr Evans estimated practical completion would occur in the first week of June. On this estimate, the job would finish about 13 weeks late. Mr Evans left the Island on 4 June 2000. 51 Mr Reeve certified practical completion on 1 June 2000. However, Kaipara was still finishing its work. It was not until 2 July 2000 that John Cowie, Kaipara's site manager, left Norfolk Island. (vi) The Island Industries crushing contract 52 Island Industries Pty Limited ('Island Industries') is a company controlled by John Brown, a solicitor who carries on practice on the Island. Mr Brown is, and at all material times has been, a member of the Norfolk Island Legislative Assembly. Prior to commencement of the Cascade Cliff project, Island Industries had excavated rock in the Cascade Quarry and carted it to a site in Stockyard Road where it crushed the rock for aggregate. The plant operated by Island Industries was the only crusher on the Island, so the Administration had purchased all its required aggregate from that company. 53 Island Industries was not directly involved in the Cascade Cliff project. However, as might be expected, Mr Brown took an interest in it. It seems he became concerned about the possibility of contamination of the HDR stockpile. On 30 December 1999, Mr Brown wrote a letter to Mr Robertson, on Island Industries' letterhead, in which he said: 'I observed that a considerable quantity of material has been placed on Portion 5a. There did not appear to be a separation of first grade rock from second grade rock and other material, but I appreciate that a casual observation from a distance of several hundred metres might not have been reliable. Are you able to advise as to the following: 1. Is an independent quality control person on hand at all times to check that rock which is placed on Portion 5a is no larger than the maximum size which is prescribed by the contract? 2. Is first grade being separated from second grade rock and other material? Island Industries is concerned at the possibility that oversize and second grade rock might cause significant difficulties when we resume crushing operations.' Portion 5a is the land containing Cascade Quarry. 54 In his affidavit, Mr Robertson gave this account of a conversation he had with Mr Evans at a meeting on 7 January 2000: 'I said: "I have received a letter from Island Industries complaining about second grade rock going into the stockpile. Is dirt or second grade rock going into the stockpile?" Evans replied: "I keep an eye on it and undertake regular inspections of the rock going to the Stockpile. The rock going onto the Stockpile is good quality clean rock." Either at this meeting or at a meeting with Evans at about the same time I said to him words to the following effect: "We need good clean rock for the Airport Runway Upgrade." Evans said: "There will be a mix in the rock quality but the good rock for the Upgrade will be in the middle of the stockpile and will be generally separated from the other rock."' 55 Following that meeting, on 10 January 2000, Mr Robertson wrote to Mr Brown as follows: 'I have made enquiries of the Resident Engineer and he has confirmed that crushable quality rock is being separated from other materials. Although not technically qualified to make an accurate assessment, I have also viewed the rock stockpile and thought it looked of good strength and size. It is likely that you have observed the specifically set aside pile of oversize rock which is waiting to be broken. In relation to the questions posed in your letter, I advise as follows: 1. Is an independent quality control person on hand at all times to check that rock which is placed on portion 5a is no larger than the maximum size which is prescribed by the contract? Response: The Resident Engineer undertakes regular checks of the rock being stockpiled in portion 5a. 2. Is first grade being separated from second grade rock and other material? Response: Yes. Rock thought unsuitable for crushing has not been stockpiled on portion 5a. It has either been used in the re-construction of the Ball Bay Road, taken to Middlegate as fill, or stockpiled on Cascade Reserve or Middleridge.' 56 Apparently this letter did not fully allay Mr Brown's concerns. Mr Evans wrote a letter, dated 1 April 2000, to Alma Davidson, an Administration employee who was secretary of CCMB, in which he said: 'As discussed at previous Board meetings, and elsewhere with the previous Minister, Gary Robertson, we did experience a higher fines content from the Unit 2 rock taken from the western end of the cliff. However, in my opinion this still had a high rock content. We considered it wasteful and unnecessary to discard. I have further spoken to Mr Brown on the matter. He clarified that he is more concerned about the inclusion of "second-grade" rock. This basically means rock that has been affected by weathering, reducing the strength. Whilst it is inevitable that some of this type of material will have been placed into the stockpile, we think this will be in minute quantities. 1 would be very surprised if it was not reserved to the occasional block of rock, rather than whole truck loads. As you are aware, a significant quantity of second-grade rock was placed on Cascade Reserve for use by the Administration at a later date. Also, a further amount was taken to Ball Bay for the road re-construction. Bearing in mind the practicalities of this exercise, I consider that the Contractor has performed well in keeping the different grades of material separate. We have always been very conscious of not wasting rock, as it is clearly in short supply on the Island. However, this approach has not been followed at the expense of rock quality, which is why so much material was discarded on Cascade Reserve and made available for the Ball Bay road re-construction.' 57 It had apparently been intended that Island Industries would purchase unprocessed rock directly from the quarry stockpile. Ms Davidson spoke to Mr Evans about that matter and, on 26 April 2000, Mr Evans wrote to her suggesting the Administration purchase a weighbridge and locate it nearby. This was done. 58 It was also decided some rock would be crushed in the immediate vicinity of the quarry. In about July 2000, the Administration called tenders for carrying out a temporary rock-crushing operation using a crusher to be located near the stockpile. Although a number of other persons and companies put in tenders, NIA decided to award this contract to Island Industries. No suggestion has been made that it acted improperly or unwisely in deciding to do this. 59 The crushing contract between NIA and Island Industries is not in evidence. However, the parties accept that it incorporated the tender documents, which are in evidence. These require the successful tenderer to produce up to a maximum of 40,000 tonnes of crushed rock product, as specified in a schedule of rates, during a maximum period of six months. The tender documents described the rock to be crushed in the following way: 'The Principal [NIA] has approximately 160,000 tonnes of high and very high hardness basalt of variable gradings available for crushing stockpiled on the Stockpile Site, immediately to the east of Cascade jetty. Maximum rock size is 375mm x 600mm x 900mm. Access to the Stockpile Site will be via Cascade Road and the track to the east of the jetty along the foreshore to the Stockpile Site. The track to the Stockpile Site is only wide enough for one vehicle at a time. The haulage distance from the Stockpile Site to the Site is approximately 500m. Rock will only be removed from the area at the top of the stockpile as agreed with and marked by the Principal. No rock will be taken from any other place, including the foreshore. No rock (other than the crushed rock product of rock removed from the Stockpile Site) will be taken or removed from the Site.' The crushed rock was to remain the property of NIA. (vii) Concern about rock quality 60 Island Industries commenced rock crushing, pursuant to the contract, on 16 October 2000. Almost immediately, it raised concerns about the rock, apparently complaining it was not as represented in the tender documents. 61 On 20 October 2000, a meeting was held alongside the rock stockpile in the quarry. It was attended by Mr Brown and by representatives of the Administration, including the relevant Minister, Geoff Gardner, and Ms Davidson. Ms Davidson made the following minute of the meeting: 'This meeting was arranged due to the allegation that rock in the stockpile was too large for crushing. On inspection the following problems were noted. - • A great deal of the rock appears to be larger than that specified in the specifications for the project, namely 900mmx600mmx375mm • There is substantial soil amongst the rock • There is second grade rock (not basalt) The Superintendent's Representative for the Crushing Operation has been requested to take photographs of the stockpile which clearly show the above. These issues will be drawn to the attention of the Project Manager, SMEC Australia Pty. Ltd. **** The size of the rock purportedly in the stockpile is also specified in the Tender Specifications for the Temporary Crushing Operation on the Whaling Station site. The problems which are foreseen for the performance of this contract are: • The excavator is having to sort rock to obtain crushable rock. This process is achieving only ten tonnes per hour. • The excavator is sorting large rocks and non-basalt rock into different stockpiles • The crusher operator has advised that the new crusher to arrive is capable of crushing 50 tonnes per hour • The amount of dirt amongst the rock will have an adverse impact on the quality of the crushed product • There will be a need to take a rock breaker onto the stockpile site • The neighbour, Mr Forrester, will need to be advised of the need to use the rock breaker.' 62 In her affidavit evidence, Ms Davidson verified the minute and described what she saw at the time of the meeting: 'This inspection was the first occasion upon which I had made any close inspection of the Quarry stockpile. During the progress of the Works on several occasions I viewed the stockpile from above the Quarry but not from within the Quarry. I had not viewed the Quarry at all after the completion of works by Kaipara. At the inspection I observed a significant number of individual pieces of rock that appeared to be larger than the measurement of 900mm, which I then recalled to be the largest dimension that the specification allowed. I also observed rock with overall dimensions greater than 900mm by 600mm by 375mm. I observed rock in the stockpile that was not hard basalt, of the kind that I had seen over a period of many years throughout Norfolk Island. Whereas hard basalt is grey in colour, what I saw in the stockpile included rock and other material that was brown or pink in colour, some of which had holes in it. There also appeared to be substantial quantities of material with the appearance and consistency of soil in the stockpile that was brownish in colour and capable of being compressed or stuck together in the hand.' 63 Ms Davidson said she was very concerned by what she saw. She thought there had been a departure from the terms of cl 5.9. For that reason, when she wrote the meeting minute, she attached to it a copy of cl 5.9 and asked Mr Gardner to sign the minute. 64 During 11 and 12 December 2000, representatives of NIA, SMEC and Kaipara together inspected both the Middlegate site, in relation to which NIA was seeking some drainage rectification work by Kaipara, and the rock stockpile and held a meeting in the office of the Administrator. According to Ms Davidson's minute of the meeting, both SMEC and Kaipara denied there was dirt in the stockpile. Mr Reeve said the material classified as dirt was in fact fines; i.e. small basalt fragments. A representative of Kaipara maintained 'there is 100% of usable material in the stockpile'. Although it was admitted 'there are oversize rocks in the stockpile', their proportion was claimed by Kaipara 'to be less than 0.5%'. It appears from the minute that Mr Reeve said SMEC would 'provide a second advice as to the quantity of rock in the stockpile for calculating royalties', while a Kaipara representative promised that Kaipara would 'develop a profile of the rock stockpile'. Ms Davidson said in evidence that, to her knowledge, Kaipara never did this. 65 On 19 December 2000, Mr Reeve wrote to Ms Davidson saying SMEC estimated that the stockpile contained 163,000 tonnes of rock. He made the following observations about the nature of the material: 'The stockpiled rock is variable in particle size distribution and this may be quite distinct in some areas of the stockpile. Some areas will be made up of larger rocks that have been broken down by the rock hammer into blocks. Other areas will be areas of finer material (100mm minus), but most areas will be generally mixed from rock dust to large blocks. As the material was excavated by drill and blast techniques and with the nature of the basalt rock from the cliff, quite a varied range of rock sizes were produced with each blast. The larger rocks were put to one side for later breaking down to size while the rest was placed in the stockpile. The best quality rock was won from the centre of Unit 2 (ie. the large band of basalt that can easily be seen in the face of the cliff). The larger sized rocks from this area were broken down using rock hammers and this has been stored at the front of the rock stockpile on the area of the Youngs Road Reserve. The other rock in the stockpile from Unit 2, is generally in the middle layers of the stockpile. This better quality rock will be needed for crushing to allow construction of the airport runway overlay. Generally only hard durable rock was put into the rock stockpile. Rock of lessor quality was either sent with the overburden to the embankment fill site at Lot 44A Middlegate, or stockpiled at the top of Youngs, Road. An amount of rock fines will be found in the rock stockpile matrix, but finer sized rock particles are a normal part of the rock excavation process. When processed by the crushing plant, these smaller rock particles will form the finer fraction of the rock grading as required for road-base and concrete aggregate specifications. This material should not be wasted, as it is rock that has already been broken down through the drill and blast, and excavation process. A good crushing and screening plant can handle the range of rock sizes that have been stockpiled on the old quarry site.' 66 Shortly after this letter, the Administration received from Island Industries a series of consultants' reports about the material in the quarry stockpile. An engineering consultant to Island Industries, Martin Cooper of Ridgmill Pty Ltd, had visited the Island in October 2000. He had become concerned about the quality of the HDR stockpile, the source material for the crusher. Mr Cooper again visited the Island between 18-20 January 2001. In a report dated 25 January 2001, Mr Cooper expressed the opinion that there was 'serious contamination of the source rock with soil, clay, substandard rock etc'. Indeed, he thought there was 'little difference' between the OTR material at Middlegate and the material in the rock stockpile. 67 After his October visit, Mr Cooper had retained Bowler Geotechnical Pty Ltd, a Queensland company, to advise about the quality of the stockpile material. Mr David Bowler, managing director of that company, is a geotechnical engineer who worked for some years on major construction projects, in Australia and overseas, before establishing his own company in 1990. Mr Bowler has been responsible 'for overall direction of the geotechnical engineering and materials testing operations of the company, which has expanded to support over 90 professional and technical staff in ten offices/laboratories in Queensland and two overseas countries'. 68 Mr Bowler visited the Island and inspected the stockpile with Mr Cooper on 18 January 2001. He took a number of photographs. In a report, also dated 25 January 2001, Mr Bowler stated: '• The re-graded Cascade Cliff, which was the source of crusher feed material, was inspected. The exposure showed very clearly that two distinct types of material would have been produced by the quarrying operation; hard, relatively fresh, fine grained, grey basalt, and a weak, highly weathered, brown and grey tuff ... … • The stockpile of crusher feed material produced as part of the Cascade Cliff regrading project was inspected. The material exposed in the stockpile comprised of sound, hard, fresh basalt cobbles and boulders, as mantle about 1m or so thick over the stockpile, with the internal material much more variable ... It included some zones of coarse, hard basalt cobbles and boulders, but also a significant proportion of much finer material, comprising weak, highly weathered fragments and plastic silt and clay fines .. . There was also a significant proportion of "oversize" material in the stockpile ... Oversize was defined in the contract as being a boulder greater than 375mm x 600mm x 900mm in any one dimension. • The operation involved in obtaining rock from the stockpile and transporting it to the crusher was observed. Because of the weak finer fragments and clay material included between the coarser hard basalt material, it was necessary to undertake a rough pre-screening process at the stockpile prior to loading better quality material in trucks and transporting it to the crusher. A screen/bucket attachment to an excavator at the stockpile initially handled the material by agitating each scoop in the screen/bucket. The material finer than say 150mm fell through the screen and the remaining coarser material was placed in a separate stockpile. Once sufficient coarser material had been obtained by this process, the coarse material was loaded and trucked to the crusher. A separate excavator was working to move material to within reach of the excavator with the screen attachment so that the better quality material screened off could be stockpiled at a location able to be more easily loaded into trucks ... The stockpile was constructed in an area of limited size, which created difficulties in terms of dealing with the finer material produced by this pre-screening operation at the stockpile. Once a truck load of the finer material had been screened off, it was then necessary to move this material to a temporary storage area down near the crusher to allow sufficient room to keep working at the stockpile. It is understood that it is the intention that a second pre-screening operation is to be carried out on this fine material to try and recover any sound, hard basalt. The oversize material encountered in the stockpile was being selectively removed and placed together in the separate stockpile. Once a particular amount had accumulated, these were then broken down by rockbreaker to sizes that could be handled by the crusher.' (Photograph references omitted.) 69 Mr Bowler's reference to material finer than 150mm falling through the screen seems to be an error. The evidence is that the Island Industries excavator, that was working on the stockpile at that time, had a bucket with 100mm apertures. 70 After referring to relevant documents, Mr Bowler offered this assessment of the problem: 'The contract documents, both for the quarrying operation and the crushing operation, refer to the material that was supposed to be stockpiled for crushing as basalt rock. The specification for the quarrying refers to "basalt rock" being placed in the stockpile, as opposed to the "OTR" being placed at Middlegate. The inspection of the exposed cut at Cascade Cliff shows a very clear demarcation between the hard, durable grey basalt flows and the highly weathered tuff interflow deposits. It is clear that the intention of the specification writer was that the hard durable basalt be "selected" and separated by the quarrying contractor from the tuff before hauling the basalt to the stockpile. The crushing contract specification indicates that the crushing contractor would have "high and very high hardness basalt" to crush. It is clear from the work done that a high proportion of highly weathered weak material also exists in the stockpile. The observation of the winning and loading operation at the stockpile emphasised the inefficiencies that were introduced into their operation because of the necessity to selectively work the source material. The oversize has to be excluded from the stockpile and placed in a separate pile for later breaking up by a rockbreaker. The finer material has to be coarse screened to remove fines. The retained coarser rock then has to be stockpiled separately until enough is won to load a truck to carry it to the crusher. Because of the limited area available at the stockpile, the screened out fines have had to have been loaded and trucked to a space nearer the crusher. This material will be screened at a later date (using a 25mm screen especially imported for the process) to try and recover good quality sound basalt fragments for further processing. What this means in sum is that the process required to obtain suitable feed for the crusher is much less efficient and more time consuming than it would have been if sound "hard and very hard" basalt only had been placed in the stockpile.' 71 At the hearing of this case, Mr P White, solicitor for NIA, read an affidavit by Mr Bowler that confirmed the observations and opinions set out in his report. Mr Bowler was then cross-examined. 72 In coming to his initial conclusions, Mr Bowler had had the benefit of a report from a petrology and geochemistry consultant, Dr A S Joyce of Geochempet Services, a Queensland firm. Dr Joyce had not inspected the quarry stockpile. However, he had visited Norfolk Island, on holiday, about one year earlier. He had observed the work being performed at Cascade Cliff. In his report, Dr Joyce made the following general comment about it: 'Based on examination of the supplied sample, on personal observations made of the Cascade Cliff area on Norfolk Island about a year ago and on information contained in a SMEC Geotechnical Assessment prepared in 1998 for the Government of Norfolk Island, it is my opinion that the supplied raked residue (finer than a nominal 100 mm and actually finer than about 50 mm) consists of roughly equal amounts of robust, essentially unweathered basalt analogous to that obtainable from Layer 6 of Unit II and from some other layers (such as Layers 2, 4 and 8 of Units I and III) and weak, weathered or otherwise argillized basalt rock fragments and related free mineral grains analogous to material derivable from the various interflow deposits (such as Layers 1, 3, 5, 7, 9 of Units I and III) and/or from weathered basalt layers in Units III and IV). The brown colour of the sample is attributable partly to bright brown iddingsite (a deuteric mineral liberated and probably from interflow fragmental basaltic deposits and possibly from weathered basalt) and partly to yellowish to pale brown clay (liberated from weak, argillized and/or weathered interflow deposits and perhaps from weathered basalt layers).' 73 Before making his January 2001 report, Dr Joyce had been supplied with a sample that he described as follows: 'The sample consisted of several kilograms of greyish brown, fragmented basalt with particle sizes ranging from clay size to a maximum intermediate diameter of about 50mm. It is understood that the material was generated as the fine residue of quarried material which had been raked to remove fragments coarser than about 100m. The quarried materials were sourced from Cascade Cliff, Norfolk Island. A crude sieve test of a dry subsample of about 800g indicated no less than 14% finer than 0.300mm, around 17% between 0.300 mm and 1.18 mm and around 69% between 1.18m [sic: mm] and 50mm. 74 Dr Joyce washed the coarse fraction 'to remove adherent brownish fines' and examined it microscopically. He said: 'It was found to consist of essentially dark grey fragments of finely crystalline basalt. Some have essentially angular shapes, but many are subangular or even subrounded. Being grey, the fragments do not look particularly weathered, but many of them are sufficiently weak to allow them to be broken using fingers and finger nails only. A grab sample of 53 fragments was tested with the following results: 60% robust, grey basalt fragments 40% grey basalt fragments sufficiently soft and weak to be broken by fingers and nails alone' 75 The medium size fraction was also examined and analysed, with similar results except that Dr Joyce also found 'some free mineral particles (some whitish and others brown iddingsite)'. Dr Joyce described the fine material in this way: 'The fine fraction is brownish, but in detail consists of a variety of free mineral grains. The brown colour seems to be attributable mainly to liberated iddingsite. Not much details can be discerned using low power binocular microscopy.' 76 In his affidavit evidence in this case, Dr Joyce summarised his findings in this way: 'The grab sample of 53 fragments to which I refer on page 1 of my Report was selected at random by hand from the sample I had been given. The grab sample did not include material finer than about 5mm; some pieces were as coarse as about 50 mm in size. In my opinion the material represented in the sample supplied to me consisted essentially of basalt. In detail some of the material consisted of hard, robust basalt, a similar amount consisted of soft, weak, weathered or otherwise argillized (clayey) basalt and more than 14% of the material consisted of free mineral grains derived from basalt. The soft, weak fragments of basalt could be broken by fingers and finger nails; such basalt could also be readily crushed by tweezers. Whilst both types of rock fragments are essentially grey, a brownish colour is imparted to the bulk sample because of the presence of iddingsite, a brown mineral, present not only within the rock fragments, but also as a dusting of free mineral grains.' 77 Dr Joyce was not required for cross-examination. (viii) Development of the dispute between NIA and SMEC 78 Ms Davidson notified Mr Reeve of this new material. A meeting was arranged. In preparation for the meeting, Michael Johnston, NIA's Acting Works Superintendent, made a 16 minute video of Island Industries' operations at the stockpile. The video, which is in evidence in this case, confirms Mr Bowler's description of those operations. It demonstrates that the stockpile contained a considerable proportion of fine material, some of it apparently very fine, that fell between the 100mm-wide apertures in the bucket of the excavator. Ms Davidson was not present when the video was taken but she visited the quarry on 3 February 2001, when she observed activities similar to those depicted in the video. In her affidavit, Ms Davidson said: 'In particular, I observed the composition of the material in the Quarry stockpile. By this time a portion of the material in the stockpile had been treated by being passed through apertures in the bucket of an excavator as shown on the video. There was an obvious difference between the sorted rock, and the balance of material that had passed through the apertures in the bucket. The sorted rock was clearly hard basalt although not necessarily clean of soil. The balance of the material was small pieces of rock and material the appearance and consistency of soil.' 79 The video was shown at a meeting, in Sydney on 9 February 2001, that was attended by representatives of NIA (Ms Davidson and NIA's Crown Counsel, Trish Cowles) and SMEC (including Mr Reeve). Ms Cowles complained that the stockpile was contaminated with OTRs. SMEC took the position that the fine material was not OTR but basalt 'fines'; that is, small particles of hard, usable basalt. It was agreed that SMEC would commission a report from an independent expert. 80 In a letter dated 12 February 2001 to Mr Reeve, Ms Cowles summarised the issues raised at, and outcomes of, the meeting: '1. [NIA] is concerned that a significant portion of the stockpile processed to date has included other than rock material (OTR material). At the time of the meeting approximately 1/6th of the stockpile processed was considered to be OTR material. 2. [SMEC] suggested that with different crushing equipment it would not be necessary to separate rock from fines and that the fines were an important addition to rock particularly as Norfolk Island does not have a lot of sand to add to mix. SMEC indicated that Island Industries showed a preference for crushing larger pieces of rock and, that this increased the amount of OTR stockpiled (in comparison to other crushing operations), 3. [NIA] considers, however, that the OTR material consists of material other than fines. A significant portion of the OTR is reddish brown in appearance which is not consistent with it being basalt. 4. SMEC suggested that it is possible that a seam of compressed volcanic ash had been included in the stockpile. Pictures of the cliff face (both prior to and after works) were shown which showed a reddish brown seam in the lower cut of the cliff. This material may have been included in the stockpile. There do appear to be other such seams in the cliff face. 5. [NIA] is concerned because the contract required Kaipara to separate all hard durable rock from OTR and stockpile the two amounts separately. The Administration would accept a minor differential but the quantities the Administration had seen to date indicated the amount of OTR is significant. 6. [NIA] needs to know how much more of the OTR is present and what can be done about any claims against the Administration in relation to amounts already processed. 7. It is very important that the quantities of OTR are carefully estimated because: ► The Administration's contract with Island Industries is consistent with the tender documents for the Cascade Cliff Project. That is, the Administration has contracted with Island Industries that the rock stockpile is a stockpile of hard grade basalt. Any variations to this may result in variations to the contract and contract price. Island Industries already has a claim with respect to variations arising out of the amount of OTR; and, ► Kaipara were paid on a schedule of rates basis and were paid an amount for 158 000 tonnes of rock. Royalties have also been calculated on this basis. It may be necessary to calculate variations to the quantity of rock for these purposes. ► Concerns have been raised by the Airport Manager about the effect of OTR material being present in the stockpile on the Airport's requirements for high grade basalt for the runway. … 8. SMEC agreed that the best thing to do would be to arrange for an independent engineer to attend the site and to obtain samples of OTR to establish what is the content of the OTR. It was agreed that the engineer should be independent of SMEC, but that SMEC would be the engaging party. 9. In addition, in December 2000, Kaipara agreed to produce a profile of the stockpile. The profile has not been forthcoming. SMEC also agreed that Richard Evans would be able to prepare a profile based on his records. The profile will be useful for present purposes but will all assist the Administration in meeting its longer term needs for rock. At the meeting [it] was agreed that SMEC would follow this up with Richard Evans as soon as possible. 10. [NIA] has asked that the inspection be carried out as soon as possible as claims have already been made. SMEC agreed to this, and you indicated that you would write to follow up on the discussion.' 81 SMEC recommended and engaged Douglas Partners Pty Ltd of Sydney ('Douglas Partners') to undertake an assessment of the stockpile. 82 Grahame Wilson, is an engineering geologist with degrees in applied geology, at both Bachelor's and Master's level, from the University of New South Wales. He has had over 30 years experience in civil engineering. He is a principal of Douglas Partners. 83 In late February 2001, Mr Wilson travelled to the Island and inspected the quarry stockpile, the materials at Island Industries' crusher, near the whaling station site, and material at Middlegate. He took some samples for later examination by Dr B J Barron, a Sydney petrologist. Mr Wilson had the benefit of reading Dr Barron's report on her analysis of the sample before writing a report ('the Douglas report') that was dated April 2001. The Douglas report contained the following summary: 'The principal conclusions and findings of the site inspection, laboratory testing and petrological assessments are that: • the Main Stockpile is composed of generally very high strength fresh and high to very high strength, slightly weathered basalt suitable for aggregate production. • material suitable for aggregate production has been estimated to have totalled 152 000 tonnes compared to the 158 000 tonnes reported by SMEC in the Final Construction Report. It is noted that this quantity may increase as a result of the reported zones of 'single size' material formed by breakage of over-sized materials, but now generally buried within the stockpile and unavailable for close assessment. • there is a component of clay and very low strength to high strength, highly to slightly weathered and altered basalt, which directly, or as a contaminant in the finer stockpile size ranges, results in an estimated 6% to 7% of the Main Stockpile being regarded as unsuitable for aggregate production. • the acceptable percentage of 'secondary rock'within stockpile is considered to be a function of the specification of the required product and the efficiency of the processing plant to handle the feed material. The Main Stockpile is required to provide source material for a wide range of products ranging from road base to concrete and sealing aggregates. It is considered that a 10% component of "secondary rock"would be a reasonable value. • if additional equipment was included to process scalped product, together with associated investigation of the quality, a higher included `secondary rock' component may be acceptable. • the term OTR used at the site describes material passing the 100 mm sieving bucket. Usual practice is that soils and weathered rock profile unsuitable for production of aggregates would be described by this term. • the OTR stockpiles are also composed of predominantly very high strength, durable basalt materials, but with an increased proportion, assessed as approximately 30%, of material regarded as unsuitable for aggregate production, although additional processing may increase the utilisation of the material, particularly for subbase or base course use. • the Main Stockpile includes over-size material estimated to comprise less than 1% of the total. This proportion is within the range of general quarry industry practice. • industry practice is to generally describe particle size in relation to the maximum particle dimension. Rock pieces for selected uses (eg. rock armour) are however described by three dimensions. • the inclusion of, at least, additional screening facilities is suggested to maximise the utilisation of the resource currently within the Main Stockpile and OTR stockpiles. • prior to inclusion of additional screening plant, the utilisation of the Main Stockpile could be improved by more careful working ensuring that durable coarse material is not placed in the OTR stockpile.' 84 While the Douglas report was being awaited, NIA was in negotiation with Island Industries concerning Island Industries' claim for compensation arising out of the alleged misdescription, in the crushing contract tender documents, of the quarry stockpile material. NIA agreed to pay Island Industries an additional sum of $134,495. This comprised plant, machinery hire and cartage ($84,495) and 'contract compensation' ($50,000). On 3 May 2001, NIA and Island Industries executed a deed of release whereby NIA agreed to extend the time for completion of the rock crushing operations and to pay $134,495 compensation and Island Industries agreed to release NIA 'from all current or past claims or demands'. According to Ms Davidson, NIA subsequently paid additional compensation to Island Industries, also arising out of contamination of the rock stockpiled in the quarry. 85 On 7 May 2001, there was a further meeting in Sydney between representatives of NIA and SMEC. Mrs C E O'Sullivan, then chairperson of CCMB, claimed the Douglas report vindicated NIA's complaints regarding contamination. Mr Wilson was contacted by conference telephone call to obtain clarification of the report. According to Ms Davidson, in answer to a question from Ms Cowles about the dimensions of rock in the quarry, Mr Wilson said: '30% of the material was below the range of 9.5 – 13.2 mms but that only applied to material 'that could be seen'.' At the meeting, the settlement with Island Industries was discussed. However, it appears that no substantive agreement was reached about any matter. SMEC agreed to consider the issues raised and, in particular, to advise as to whether a claim should be made against Kaipara. 86 Mr Reeve prepared a report for the SMEC board of directors. On 16 May 2001, he sent a copy of the report to Ms Davidson. The report summarised NIA's concerns as follows: '1. The Administration considers that a significant portion of the rock stockpile processed to date has included OTR material, and as at the 9 February 2001, the OTR content of the stockpile was estimated at approximately 1/6th(17%) of the rock stockpile. 2 The Administration considers that this "OTR" consists of material other than rock fines and that a significant portion of the OTR is not consistent with basalt. 3. The Cascade Cliff Safety Project construction contract required the contractor to separate hard durable rock from OTR. The Administration accepts there will be a minor amount "OTR" in the stockpile but consider there is currently an excessive amount of OTR in the stockpile. 4. The Administration is concerned about the basis of the royalty calculations and the estimated amount of rock suitable for aggregate production in the stockpile. 5. The Administration is also concerned with the quality of the material remaining in the stockpile, especially with the future airport runway contract in mind. 6. The Administration has a separate crushing contract consistent with the specifications for the cliff contract. As a consequence of what is in the stockpile and as a consequence of the way it was described in the specifications, the present crushing contractor and any future crushing contractor will be required to filter the dirt / OTR and the Administration has and will incur further extra costs. 7 The Administration feels that as a consequence of nature of the material that is in the stockpile, and as a consequence of the way it was described in all relevant specifications, the Administration were exposed to a fairly significant claim from the current crushing contractor, Island Industries. This claim has since been settled on a commercial basis. The Cascade Cliff Management Board on behalf of the Administration believes that there may be a claim for damages and variations against the Cascade Cliff Safety Project contractor, Kaipara Excavators Limited arising out of what is being called OTR.' 87 Mr Reeve discussed all these issues. Effectively, he rejected all of NIA's concerns. It is not necessary to set out all his comments. However, it may be helpful to record his reaction to the first identified concern: 'The Administration's and the crushing contractor's definition of "other than rock", is incorrect. This term has been incorrectly attributed to any rock or material that has passed through the sieving bucket (or root rake) of the crushing contractor. As stated in the report by Douglas and Partners, the term "OTR" should be reserved for clay and weathered rock unsuitable for production of a finished product. This is the definition accepted throughout industry and SMEC suggest that the Administration do not confuse rock fines with "true" OTR. Based on the independent investigations by Douglas Partners, the percentage of actual OTR (i.e. material unsuitable for the production of aggregate - not just material that passed through the crushing contractors sieving bucket) is estimated less than 6% to 7%. This cannot be directly compared with the 17% claimed by the crushing contractor because they have very crudely scalped off rock pieces only greater than about 100 mm, effectively wasting smaller rock. Rock fines are a normal part of rock that has been blasted and should not be confused with OTR. No one has ever denied that fines were not a normal part of rock produced by blasting, as noted in our letter dated 1 April 2000 ... The removal of fine material from the overall rock matrix is normally undertaken as part of the crushing and screening process and not as part of the bulk excavation works. The crushing contractor would normally allow for some double handling of material in order toproduce the aggregate to the specified standards, as is the normal industry practice. SMEC Australia would also like to point out that the claimed amount of17% OTR has not been independently verified.' 88 NIA did not accept Mr Reeve's response. On 31 May 2001, NIA issued to SMEC and Kaipara a notice of dispute, pursuant to the PMA, and required that the dispute be resolved by arbitration. The claim was particularised in a schedule to the notice. 89 There were subsequent discussions between the parties. However, no substantive agreement was reached. There was not even an agreement about appointment of an arbitrator. (ix) The Middlegate dispute 90 During the course of these discussions, NIA decided to investigate the nature of the material that had been dumped as fill at Middlegate, and subsequently top-soiled and grassed. Ms Davidson supervised the excavation, on 8 July 2002, of five test pits, each to a depth between one and two metres. The surface area of the pits ranged from 7.48 square metres to 16.64 square metres. Ms Davidson found that holes 2 and 3 contained little rock but there were significant quantities of rock in holes 1, 4 and 5. At her request, Mr Johnston removed and weighed the larger pieces of rock in each hole. He reported rock volumes ranging from totals of 13.46 tonnes (in hole 2) to 47.42 tonnes (in hole 4). Photographs of the excavated material were taken. 91 NIA's solicitor advised both SMEC and Kaipara of the results of the test pits. NIA retained Coffey Geosciences Pty Ltd ('Coffey') to undertake geophysical testing of the Middlegate site. Dr Bob Whiteley, a senior principal geophysicist with that company, and Chris Henry, a geophysicist, undertook an investigation, the stated purpose of which was 'to determine whether significant quantities of rock are present in the fill and to provide estimates of rock quantities'. Dr Whiteley's investigation involved magnetic testing (based on the fact that basalt rock is more magnetic than tuffaceous waste and soil overburden), gravity testing (rock is denser than compacted or uncompacted waste or soil overburden) and resistivity testing (rock is more electrically resistive than waste and soil overburden). Rock samples were taken and analysed in a laboratory. 92 On 28 May 2003, Coffey issued a report in which Dr Whiteley offered the following conclusion: 'From the geophysical testing undertaken at the Middlegate fill site it is concluded that significant quantities of rock and boulders are present at various locations in the fill mainly in the depth range from near to the surface to 5 m below the current ground level. The gravity testing has provided an estimated volume of rock that is 13% (i.e. ~30,000 m3) of the total landfill volume.' 93 At about the same time as Dr Whiteley and Mr Henry were carrying out the geophysical assessment, Dr Keith Simpson, a senior engineering geologist with Coffey, excavated four test pits, each much the same size as the smallest of those previously excavated by NIA. The excavated material was examined, photographed and divided into two categories: material assessed to be useable, 'crushable' rock ('high strength basalt') and waste rock ('weathered, hard tuffaceous clay and very low to low strength basalt and tuff'). In each of the four test pits, high strength basalt was encountered in that portion of the hole that lay between 1.0 and 1.5 metres below the finished surface of the land. Dr Simpson assessed the volume percentage of crushable rock, within each of the test pits, as being respectively: 4%, 3%, 8% and 7%. In a report dated September 2003, Dr Simpson extrapolated these percentages to reach the following conclusion: 'From the investigation undertaken at the Middlegate fill site, the estimated volumes of crushable rock vary from a minimum of 3% of the total landfill volume (i.e.~6,900 m3) to 8% of the total landfill volume (i.e.~18,385m3) in four shallow test pits of about 1.6m to 2.05m depth. In each of the four test-pits, the high strength crushable basalt material was encountered in the upper portion of the sequence, above 1.0m to 1.5m depth. Overall bulk densities of the upper fill as tested from the test-pits are assessed to be low (average 1.66t/m3) and may reflect the fill compaction material and/or processes during construction. Fill observed in the test-pits comprises a mixed grade of material with significant cobble and boulder rock (waste and crushable) material up to 0.7m in size. Waste rock is noted to include vesicular and weathered material of low density. Adequate compaction of such mixed grade material may also be expected to be difficult due to the larger material sizes and likely associated layer thicknesses, the degree of compaction also dependant on the size of plant used. Locally, high bulk densities would be expected in the fill if high concentrations of crushable rock occur.' 94 Copies of the Coffey reports were furnished to both SMEC and Kaipara, as was a report of Richard Almond, of Geophysical Software Solutions Pty Ltd, analyzing Dr Whiteley's gravity data. Mr Almond estimated the volume of rock in the Middlegate fill as being between 34,000m3 and 100,000m3, probably somewhere between 50,000m3 and 60,000m3. 95 Neither Dr Whiteley nor Mr Almond distinguished between crushable rock and waste rock. No doubt, that was because of the manner of estimation; however, the lack of such a distinction undermines the significance of their assessments. (x) Legal action 96 On 30 May 2003, NIA filed in this Court a Notice of Originating Motion. The named defendants were SMEC and Kaipara. Six causes of action were identified, being as set out in an accompanying Statement of Claim. That pleading was amended on 24 March 2006, shortly before the commencement of the trial. In the meantime, on 18 April 2005, NIA had discontinued its action against Kaipara. An agreement had been reached between NIA and Kaipara whereunder Kaipara would perform certain work at Middlegate in return for a release of NIA's claim against it. The agreement between NIA and Kaipara is not in evidence. However, I understand it required Kaipara to excavate the filled area at Middlegate to a depth of three metres and to place in two separate stockpiles (HDR and waste rock) all rock found in that excavation. 97 The Amended Statement of Claim pleaded five causes of action: breach of contract, in relation to both the CEA and the PMA, contravention of ss 14 and 16 of the Fair Trading Act 1995 (NI) ('FTA Act'), breach of fiduciary duty, misrepresentation and negligence. Legal issues in the case (i) Preliminary 98 It is possible immediately to narrow the legal issues I have to resolve. Most of NIA's causes of action confront fundamental problems that make them non-viable in this case. (ii) Breach of the CEA 99 At all material times, NIA has claimed that SMEC breached the CEA by the manner in which it documented the works to be undertaken by the contractor. NIA has pointed to the lack, in the contract documents, of a definition of either HDR or OTR and of any instruction to the contractor as to the required manner of separating HDR and OTR; the formulation of a Schedule of Rates that gave the contractor no financial incentive to maximise the separate stockpiling of HDR; and various alleged deficiencies in the drawings prepared by SMEC. Having heard these criticisms discussed in evidence, I think there is force in each of them. However, I need not make a final determination about that matter, for two reasons. 100 First, NIA has not shown that it suffered any damage as a result of any of the documentation deficiencies. It is apparent from the evidence of Mr Cowie that Kaipara knew it was obliged to separate HDR from OTR; if not absolutely, then with only minimal (he thought 1) contamination. It is evident from the evidence of Mr Evans that he also understood this to be a requirement of Kaipara's contract and that it was feasible for this to be done; indeed, Mr Evans asserted it had been done, with OTR contamination of the HDR stockpile of 'less than 1%'. 101 Second, SMEC pleaded, in relation to the CEA (but not the PMA) that any cause of action first accrued to the plaintiff over one year before it filed its Statement of Claim in this proceeding; so the cause of action is not maintainable against SMEC by virtue of cl 4.3 of the agreement. 102 Mr White recognised Part 4 of the CEA (see para 22 above) applied to any claim of breach of that agreement. Clause 4.3 had the effect of deeming SMEC to have been discharged from all liability, in relation to the services rendered under that agreement, in respect of any action commenced against SMEC after the expiration of the period specified in Item 10 of the Schedule or, if no date was specified, one year from the completion of the services. As previously mentioned, Item 10 specified a period of '12 months after the finalisation of the services'. 103 SMEC finalised its services under the CEA at least by the date of the Kaipara agreement; SMEC's subsequent services were provided pursuant to the PMA. The Kaipara agreement was dated 20 April 1999. Clause 4.3 of the CEA, therefore, had the effect that any liability of SMEC, in relation to breach of that agreement, was discharged on 20 April 2000, unless an action was instituted before that date; yet this action was not commenced until 30 May 2003. Even if NIA had demonstrated damage flowing from breach of the CEA, cl 4.3 would constitute a complete defence to that claim. (iii) Breach of the PMA 104 SMEC did not plead that cl 4.3 of the PMA defeats NIA's claim, under that agreement, against it. That was because SMEC did not complete its services under the PMA until it issued a certificate of final completion on 19 August 2002. This proceeding was commenced within 12 months of that event. 105 Mr White concedes that, by virtue of cl 4.2 of the PMA, the maximum amount of damages available to his client for breach of the PMA is $300,000. 106 NIA pleaded two breaches of the PMA: '(i) SMEC did not exercise the degree of skill, care and diligence normally exercised by members of the engineering profession and thereby breached the Project Management Agreement; (ii) SMEC did not manage the Construction Phase of the Project to ensure its timely and successful completion to achieve the outcomes and objectives of the project in accordance with project specifications.' Particulars were provided. 107 The first alleged breach is of cl 1.1 of the PMA: see para 19 above. The second allegation is of breach of para 2 of Annexure 'A' to the agreement see para 18 above. 108 I will later consider whether these allegations have been sustained. (iv) The FTA claims 109 NIA claims that SMEC contravened both s 14 and s 16 of the FTA. 110 Section 14(1), which is obviously based on s 52 of the Trade Practices Act 1974 (Cth) ('the TPA') and the various State Fair Trading Acts, says: 'A person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive'. 111 Section 16 relevantly provides: 'A person shall not, in trade or commerce, in connection with the supply or possible supply of goods or services … (b) falsely represent that services are of a particular standard, quality, value or grade'. 112 SMEC does not argue that either of these claims is barred by anything in either of the agreements between it and NIA or the terms of any statute. However, it submits the type of damage allegedly suffered in this case would not be compensable under the FTA. 113 NIA identified the conduct of SMEC that was said to constitute misleading or deceptive conduct, or conduct likely to mislead or deceive, so as to amount to a contravention of s 14 of the FTA. The identified conduct was as follows: (i) preparing and furnishing to NIA: (a) progress reports 1 to 15, bearing dates between 14 April 1999 and 2 June 2000; and (b) a letter dated 30 May 2000; (ii) certifying 14 progress payment claims, made by Kaipara between 9 June 1999 and 25 July 2000; (iii) issuing to Kaipara, and furnishing to NIA, the certificate of practical completion dated 5 June 2000 specifying the date of practical completion as 1 June 2000; (iv) issuing and providing to NIA a final construction report dated 28 August 2000; (v) furnishing to NIA the letter dated 19 December 2000 (see para 65 above); (vi) furnishing to NIA the Douglas report; (vii) issuing to Kaipara and furnishing to NIA a certificate of final completion on 19 August 2002. 114 NIA pleaded that this conduct was misleading or deceptive, or likely to mislead or deceive, because it induced a belief in NIA that Kaipara had in fact carried out its contractual obligations pursuant to its agreement with NIA and, in particular, its obligations under the earthworks specification. 115 NIA pleaded that by engaging in the conduct identified in para 57.1 (see para 113), SMEC contravened s 16 of the FT Act. NIA contended that SMEC falsely represented both the standard of services provided by itself and the standard, uses or benefits of the services provided by Kaipara. 116 To the extent that any relevant conduct related to a future matter, NIA relied on s 11 of the FTA. 117 The provision of the FTA which enables an action for damages, in respect of loss or damage suffered as a result of contravening conduct of another person (s 37), closely follows the wording of s 82 of the TPA. The principles developed by the courts in relation to the latter section must apply to s 37 of the FTA. 118 In Nikolich v Goldman Sachs JB Were Services Pty Ltd [2006] FCA 784 at [290]-[305], I reviewed those principles. I need not repeat what I then said. It is sufficient to note that I concluded that s 82 of the TPA did not permit the applicant in that case to recover damages stemming from the failure of the respondent to act in accordance with an expectation generated by its conduct; damages may only be awarded for loss or damage caused by the relevant misleading or deceptive conduct. When that distinction is applied to the present case, it follows that NIA is not entitled to damages under the FTA for losses suffered as a result of any failure of its expectation that SMEC would act in accordance with the CEA or the PMA, unless NIA could show it was induced by that expectation to take, or refrain from taking, some other course of action. Subject to that exception, NIA can recover, under s 37 of the FTA, only such loss or damage as was caused by the misleading or deceptive conduct itself. 119 The conduct identified in this case consists of the provision of documents by SMEC, either directly to NIA or as copies of documents issued to Kaipara. Those documents fall into two categories. 120 First, NIA says, SMEC made progress reports, issued certificates (including the certificate of practical completion dated 5 June 2000 and the final construction report of 28 August 2000) and certified progress payments on the basis that Kaipara was fulfilling, or had fulfilled, its obligations under its contract with NIA when, in fact, it was (and had) not. NIA does not suggest any of these documents made a positive statement that HDR and OTR were being kept separate, but NIA argues it was misleading for SMEC to report the quantity of 'crushable rock' stored in the quarry area without revealing that this rock was unacceptably contaminated with OTR. 121 I accept that a positive statement, which is literally true, may be regarded as misleading, for the purposes of a provision like s 14 of the FTA, if a necessary qualification is omitted: see Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477; Henjo Investments Pty Limited v Collins Marrickville Pty Limited (No 1) (1988) 39 FCR 546. So SMEC may have engaged in misleading conduct in relation to documents issued by it after the commencement of any unacceptable degree of intermingling of HDR and OTR. However, it is not suggested that event occurred before unit I blasting commenced, on 11 March 2000. Consequently, there cannot be a s 14 or s 16 claim in relation to any of the progress reports, or certificates for progress payments, issued by SMEC prior to that date. I will refer, in a moment, to those issued after that date. 122 The documents in the second category are those created after completion of all payments to Kaipara and the outbreak of the current dispute. They are the letter of 19 December 2000, the Douglas report and the certificate of final completion dated 19 August 2002. However, none of these documents caused NIA to incur any loss or suffer any damage. By the earliest of those documents, the parties were already in dispute. No monies were paid to anybody, in reliance on the statements made in any of them. 123 It appears that NIA made four progress payments to Kaipara pursuant to certificates issued by SMEC after 11 March 2000. The relevant certificate dates and amounts were: 5 April 2000 - $103,292.69 4 May 2000 - 44,033.39 2 June 2000 - 72,452.51 25 July 2000 - 127,413.16 These payments total $347,191.75. It seems to me this is the maximum amount that could possibly be recovered by NIA pursuant to its FTA claim. However, in order to allow recovery of this sum, I would need to be satisfied of three things: (i) that the relevant progress reports and certificates were misleading or deceptive, or likely to mislead or deceive, in the sense explained above; (ii) that the payments were made in reliance upon the reports and certificates; and (iii) that, absent those reports and certificates, the payments would not have been made at any stage. 124 The first matter depends upon evaluation of the factual issue as to whether HDR and OTR had become unacceptably intermingled. I will deal with that issue later. 125 There is no direct evidence in relation to the second matter. However, I think it is reasonable to infer that each progress payment was dependent upon NIA first receiving from SMEC a satisfactory progress report and progress payment certificate. NIA is the government of the Island; it is highly unlikely it would have paid public monies to a contractor without appropriate authorisation. 126 There is also no direct evidence regarding the third matter. I have, therefore, considered whether there is material enabling me to draw an inference in NIA's favour. I do not think there is. 127 It is interesting to consider what would have happened if the supposedly misleading progress reports and certificates had not been issued by SMEC to NIA and SMEC had given accurate information to NIA, revealing unacceptable intermingling. Assuming, as I do, that, under those circumstances, NIA would not have been prepared to make any further progress payments at that stage, it may confidently be assumed a dispute would immediately have arisen between NIA and Kaipara. However, what might then have happened can only be a matter of speculation. Kaipara would probably have been unwilling to continue working, if it was not being paid. NIA would probably have been unhappy about the work closing down, with the job incomplete and the cliff in an unattractive (perhaps even dangerous) condition. Some arrangement might have been negotiated – possibly involving importation of a screen from New Zealand; at whose ultimate cost? If an arrangement had been negotiated, the $347,191 covered by the last four progress payments would, presumably, ultimately have been paid. 128 It is not possible to reach an opinion about the accuracy of those speculations. Even making the assumption I have about the second element of NIA's FTA claim, there is no basis for me to find in its favour in relation to the third element. The FTA claim is doomed to failure, regardless of my factual findings concerning the first element. 129 I should add that Mr White drew to my attention the terms of s 41 of the FTA. This section is the equivalent of s 87 of the TPA. It enables the Court to make any one or more of several specified rectification orders in a case in which it finds that a party 'has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in' contravention of the Act. Mr White argued that the Court should use its power under this section to set aside or vary cl 4.2 of the PMA, which caps SMEC's liability for breach of that agreement. 130 There are two objections to this argument. First, no such claim was pleaded. Second, s 41 is available only where there is a causal connection between the misleading conduct and the rectification sought to be obtained. It is open to the Court, under s 41, to vary a contract by omitting a contractual term that was procured by a defendant's misleading conduct. However, it is not suggested, in the present case, that cl 4.2 was the result of misleading conduct by SMEC. No doubt the clause was suggested by SMEC. However, it was inserted in a contract negotiated by the parties at arm's-length and, in the case of NIA at least, with legal advice. I would not be justified in using s 41 of the FTA to remove cl 4.2 of the PMA simply because I felt its existence unduly restricted NIA's rights. (v) The claim of breach of fiduciary duty 131 In my opinion, the claim of breach of fiduciary duty is misconceived. I do not think there was a fiduciary relationship between NIA and SMEC. 132 I agree with Mr White that the existence of a contractual relationship between two persons does not necessarily exclude the possibility that those persons are also in a fiduciary relationship. Some contractual relationships, such as that between a solicitor and client or between business partners, provide classic examples of fiduciary relationships. Nonetheless, as Gibbs CJ pointed out in Hospital Products Limited v United States Surgical Corporation (1984) 156 CLR 41 at 70 ('Hospital Products'): '… the fact that the arrangement between the parties was of a purely commercial kind and that they had dealt at arm's length and on an equal footing has consistently been regarded by this Court as important, if not decisive, in indicating that no fiduciary duty arose.' 133 Gibbs CJ went on, at 71, to say: 'I agree with the statement of Megarry V.C. in Tito v Waddell [No. 2] [1977] Ch. 106, at pp. 229-230, that the imposition of a statutory duty to perform certain functions cannot be said as a general rule to impose fiduciary obligations, and the same is true of contractual duties arising under ordinary commercial contracts.' 134 Gibbs CJ (at 72, referring back to 68-69) accepted the test that was propounded by the New South Wales Court of Appeal when Hospital Products was before that Court: 'a fiduciary relationship exists where the facts of the case in hand establish that in a particular matter a person has undertaken to act in the interests of another and not in his own'. The Court of Appeal held it was not inconsistent with that principle that a fiduciary is entitled to have regard to his own interest in particular matters. 135 In Hospital Products, Gibbs CJ (at 72) regarded two matters as decisively excluding the existence of a fiduciary relationship. First, the arrangement between the parties was a commercial one, entered into by parties who were at arm's length and on an equal footing. Gibbs CJ said: 'An ordinary commercial contract made in those circumstances, even as a result of fraud, is unlikely to give rise to fiduciary obligations'. Second, the whole purpose of the transaction was that the appellant, the supposed fiduciary, should make a profit. In the performance of the contract between the parties, a conflict of interests was likely to arise, that was not necessarily to be resolved in favour of the respondent. 136 Wilson and Dawson JJ agreed with the Chief Justice, in relation to this aspect of the case. At 142, Dawson J made this comment: 'The difficulty in identifying and classifying those qualities in individual relationships which give rise to fiduciary obligations is well recognized … There is, however, the notion underlying all the cases of fiduciary obligation that inherent in the nature of the relationship itself is a position of disadvantage or vulnerability on the part of one of the parties which causes him to place reliance upon the other and requires the protection of equity acting upon the conscience of that other … From that springs the requirement that a person under a fiduciary obligation shall not put himself in a position where his interest and duty conflict or, if conflict is unavoidable, shall resolve it in favour of duty and shall not, except by special arrangement, make a profit out of his position.' (Citation omitted) 137 Mason J thought there was a fiduciary relationship between the parties. However, as I read his judgment, this was not because he differently understood the relevant principles. At 96-97, his Honour said: 'The accepted fiduciary relationships are sometimes referred to as relationships of trust and confidence or confidential relations … viz., trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company, and partners. The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position.' (Citation omitted) 138 Mason J then considered contractual relationships. He said (at 97): 'That contractual and fiduciary relationships may co-exist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.' 139 The remaining member of the Court, Deane J, held there was no overall fiduciary relationship between the parties; the relationship between a manufacturer and a distributor of goods is not ordinarily a fiduciary one. However, his Honour thought a constructive trust arose in respect of one aspect of the appellant's activities. 140 The obligation undertaken in the PMA by SMEC was to 'provide general project management services'. The agreement containing this obligation was negotiated at arm's length, by parties who were on an equal footing. The services to be provided under the PMA were intended to benefit NIA; but SMEC was also to benefit, from fees to be paid to it under the agreement. There is nothing in the terms of the agreement that warrants imputation of a fiduciary relationship. And there is something that points the other way. An extremely important part of the services required under the agreement, supervision of the contractor's performance of its contract with NIA, was to be undertaken 'independently and as required by the terms of that contract'; that is, not necessarily in a manner that would favour the interests of NIA. (vi) Misrepresentation 141 In his final submissions, Mr White put no separate argument in support of NIA's claim for damages for misrepresentation. Presumably, Mr White realised this claim could not rise higher than his client's FTA claims. Having regard to my conclusion about those claims, I need not further discuss the misrepresentation claim. (vii) Negligence 142 NIA pleaded that, at all material times, SMEC owed it a duty of care: 'To exercise skill, care and diligence in the performance of its role as Superintendent under the Kaipara Agreement; To take those steps which a reasonable Superintendent would have taken in the circumstances to avoid a foreseeable risk of economic loss to the Plaintiff arising from the carrying out of the Cascade Cliff Safety Project.' NIA claimed that SMEC breached those duties, both in relation to its preparation of the contract documents and its supervision of Kaipara's work. 143 However, whatever the factual merit of these allegations, NIA faces the difficulty that Part 4 of both the CEA and the PMA restricted SMEC's liability in tort, as well as in contract. Clause 4.3 of both agreements provided a maximum $300,000 liability arising out of the performance or nonperformance of SMEC's services, 'whether under the law of contract, tort or otherwise'. It is well-established that a contractual provision cannot exclude a statutory remedy such as those provided by ss 14 and 16 of the FTA: see Henjo Investments at 561. However, nothing precludes parties validly contracting to limit their rights to obtain damages in respect of tortuous claims. 144 Mr White argued that cl 4.2 of the PMA did not restrict SMEC's liability in negligence. He pointed to the words, in the clause, 'arising out of the performance or non-performance of the Services' and submitted that these words did not cover a situation in which work is done, but in a faulty way. 145 I cannot accept that submission. It seems to me the clear intent of cl 4.2 was to cover both the acts and omissions of SMEC, in connection with the services it contracted to perform. A negligent performance of services is nonetheless 'performance … of the services'. 146 In the circumstances, NIA's negligence claim adds nothing to its claims of breach of contract. (viii) Conclusion as to legal issues 147 In the result, it seems to me, the only cause of action that requires detailed consideration is NIA's PMA breach of contract claim. The issue about excavation of Unit 1 (i) Preliminary 148 The major factual issue in the case is whether or not the HDR stockpile in the quarry became contaminated by OTR, to more than an acceptable, minimal degree. NIA asserts that it did. It sought to support that assertion in two ways: (a) by calling evidence from witnesses who worked on the project, as to the manner of excavation of unit I; (b) by evidence, including expert evidence, as to the nature of the material found in the stockpile. 149 SMEC denies unacceptable contamination of the stockpile. Its counsel (Mr I G R Roberts and Mr A Martin) led evidence from Mr Evans designed to rebut aspects of NIA's case concerning the manner of excavating unit I. Counsel also led expert evidence about the stockpile material. I will consider separately each of the areas of evidence. (ii) Ambit of the factual dispute 150 The factual issue between the parties on this subject narrowed during the course of the trial. It became common ground that the excavation of unit I commenced with the machine removal of the whole of the relatively soft layer 5. This layer was described on the typical geological section as 'low rock strength interflow deposits'. 151 Although layer 4 was described on the typical geological section as 'very high strength basalt', it also became common ground that, in fact, approximately the western half of the layer comprised softer, weathered basalt that was predominantly OTR. This material was able to be machine excavated, along with the underlying layers 3 and 2, with only minimal blasting. 152 The whole of layer 1 was machine-excavated. 153 It was always common ground that the eastern ends of layers 4 and 2 comprised very high strength basalt, as stated in the typical geological section. This material could not be removed without blasting; all the relevant witnesses agreed it was in fact blasted. 154 At one stage of the trial, it appeared there was a major issue as to the manner of blasting. However, the ultimate dispute about that matter turned out to be narrower than had first appeared. 155 Mr White put into evidence copies of entries in Kaipara's blasting log concerning unit I. The log contained a separate entry for each blast. Each entry contained detailed particulars, including an identifying number, the date of the blast, the number of holes drilled in preparation for the blast, the diameter, depth and inclination of the holes, the spacing between the holes, the explosive type and diameter, the quantity of explosives per hole and the total explosives per shot. 156 The blasting was planned by Mr Cowie and he compiled the log entries. However, it was necessary for Mr Evans to grant advance approval for each blast. In evidence, Mr Evans said he did in fact do this, although on most occasions his written notation of approval was made some days after the blast had occurred. 157 The unit I entries were for blasts B35 to B49. Of these 15 blasts, nine (B35, B36, B38, B41, B42, B43, B44, B45, B46) were described in the evidence as 'top to bottom blasts' meaning that the hole not only penetrated through the basalt layer 4 but also through layer 3 (described on the typical geological section as 'low rock strength interflow deposits') and layer 2 ('very high strength basalt'). In all but one of these cases, the hole depth was of the order of 20 metres. The exception was hole B38 which reached a depth of only 16 metres. 158 The remaining six entries (B37, B39, B40, B47, B48 and B49) were for what was described in evidence as 'bulk toe blasts'. A 'bulk' blast is one that is designed to shatter a quantity of material, as distinct from splitting it from other material. The depths of the bulk toe blast holes were of the order of three metres. As I understand the evidence, the purpose of these blasts was to break up relatively small fragments of rock which had not been broken by a preceding top to bottom blast sufficiently to enable machine excavation; or which were left after machine excavation of the surrounding material. 159 Blast B35 occurred on 11 March 2000. The last top to bottom blast (B46) was on 13 April 2000. Blast B49 occurred on 19 April 2000. 160 Mr Evans called the top to bottom blasts 'pre-split blasts'. The term 'pre-split' tends to suggest a blast that is the first of two blasts affecting the same area, the second being a bulk blast designed to shatter material already split from the cliff face by the first blast. The unit II basalt was treated in this way. However, the blasting records do not suggest this occurred in unit I. It seems clear that, in unit I, there were never two blasts of the same material. Mr Lyell, who gave expert evidence about unit I on behalf of NIA, at first assumed this was because an excessive quantity of explosive was used in the first blast, thus shattering and bringing down the whole of the affected material. He reached that conclusion by noting the quantity of explosives per hole, as shown on each blasting log entry, and multiplying this by the number of holes shown on the entry. However, it eventually became clear that explosive was placed only in every second hole; so the total explosive force of each blast was within normal limits. The purpose of the uncharged holes was to ensure the rock would split along the intended batter line. 161 Mr Evans gave a different explanation of the fact that, in unit I, there were never two top to bottom blasts of the same material. He said this was never necessary, although toe blasts were needed in some cases. Mr Evans claimed the effect of the 'pre-split' blast was always to loosen the material, without displacing it; it could be (and was) then mechanically removed, without intermingling HDR with OTR. Mr Evans' evidence on this point is not easy to reconcile with that of NIA witnesses. The manner of excavation of unit I (i) Mr Boudan's evidence 162 Yvan John Boudan worked on the project as a front-end loader driver. From time to time, he was seconded to drilling duties. He was instructed by Mr Cowie. Mr Boudan said he did all the drilling required for the project. 163 In his affidavit, Mr Boudan described what he did: 'The drill worked using 3 metre long rods. These would be inserted in the drill shaft and then as they were drawn in by the machine a new rod would need to be added. The hammer would vibrate. I knew exactly if the machine had drawn 3 metres or six metres for example. The depth of drilling could be worked out by how many three metre rods were inserted. Generally the drill could hold up to 4 or five rods so that the maximum depth at any one time would be around 12 to 15 metres. A further rod could be added. The hole created by the drill was about four to six inches in diameter. I knew how far to drill for each hole based on measurements on each of the battersticks which marked where the holes were to be drilled. The batter sticks were put in position by John Cowie. The first set of battersticks for Unit II were placed about 2.5 metres apart at the front of the cliff to blast that off before preparing a neat edged batter. I drilled these holes straight down. There were six lines along the area. I helped put in the explosives. Approximately two bags of prill were put in each of the holes depending on how deep the hole was. Then the holes were filled up and blasted. I recall that some of the rock was blasted into the water during this process. Some of the larger boulders fell in the blasting stage needed to be drilled and blasted as well.' 164 Mr Boudan said the average hole depth in unit II was approximately 21 metres. The deepest hole he drilled in unit I was 27 metres. In the case of both units, the drilling holes went through the entire depth of the unit. Mr Boudan said that, in unit II, he was 'mostly drilling through rock' whereas in unit I he also encountered clay. He said: 'Once I got the hang of it, I could tell quite quickly if I was drilling through rock or drilling through clay. First, the drill goes much more quickly through clay than rock. Second, a clay brown dust was coming through the drill hole when I reached clay instead of bluey gray dust that would come through when I was drilling through rock. Third, the drill bit tended to block up when I hit clay.' 165 Mr Boudan said: 'When I drilled for Unit I, I had to make a note of the depth when I was drilling through rock and the depth when I was drilling through clay. I wrote these measurements down on an old notepad which could have been old timesheets, I think. The paper was half the size of a normal sheet of paper. I gave these measurements to John Cowie so that he could work out where to put the explosives. The explosives were salami sticks on a fuse cord and the measurements I took were used to work out where the explosives should be on the fuse cord and where the cord should be left uncovered. … All the rock and dirt was blasted together in Units II and Unit I. There was no excavation of dirt first, then blasting of rock. Unit II had more rock in it than Unit I. When the excavator was working after the blasting of Unit I, some of the obvious rock was taken out but not very much and the type of material that was going to the Quarry Site did not differ much to the material going to the Middlegate Oval.' 166 In his affidavit, Mr Boudan said that, in early 2000, he 'observed that material other than hard rock was being loaded into trucks and taken to the Quarry Site' and that 'hard rock was being taken to Middlegate Oval'. He said he pointed this out to Mr Cowie but he continued to see the same thing happening. 167 When he gave oral evidence, Mr Boudan was asked what he meant by 'hard rock'. He replied: 'Blue rock, that's the good rock, that's bluestone rock, hard rock'. He distinguished this from what he called 'the other rock', which he described as having 'holes in the rocks and it's different colours and breaks real easy'. He also spoke of clay that broke if squeezed by hand. Mr Boudan said he worked the front-end loader on unit I before that unit was drilled. He loaded some of the trucks going to Middlegate, but loading was mainly done by the excavators. He said he was able to see what was placed in the trucks; no steps were taken to separate rock from OTR during that process. 168 In cross-examination, Mr Boudan explained the role of the excavator: 'You understand that there was an intention to blast so that the batter or the finished cliff was smooth and clean and neat?‑‑‑It was supposed to be yes. And ultimately that is what occurred, correct?‑‑‑No, the excavator finished it off. Presumably there was some work to complete the job but the purpose of those holes that you were drilling throughout the whole of the unit was to crack the rock along a clean face so that the machines could take it away, correct---It didn't crack at all, it was getting blasted, it wasn't [a] nice clean face at all, I drilled the holes and I blasted it and then the excavator would have to come along bench itself up right up to the top and work its way down to the bottom and get a nice clean finish.' 169 Later, Mr Boudan was asked to explain what happened in unit I after the blasts. He replied: 'Well, it was all rock and dirt mixed together'. His evidence went on: 'What happened to that rock and dirt?---It got loaded straight on to the trucks and most of it was going into the quarry. Did it fall down?---Yes. Did it fall down the cliff side or did it stay basically where it was?---No, it fell down the cliff side. And it sometimes left some unblasted rock along the toe, did it, that had to have more drilling put in to blast that out?---Yes.' 170 Mr Boudan was asked whether he drilled all the required unit I drill holes before there was any blasting of that unit. There was some confusion about the question between him and Mr Roberts; ultimately, he agreed this was the case. (I think Mr Boudan may have been wrong about that, but it does not seem to matter one way or the other.) In the course of his evidence on this subject, however, Mr Boudan made another observation about the result of the blasting. Asked about unit I, he said: 'I'm not sure. I don't understand. Like all's I know I drilled that cliff face to the middle and we blasted it, like blasted it all together instead of in sections and like rock and the dirt fell down with the rock.' (ii) Mr Thompson's evidence 171 Timothy Charles Thompson was employed by Kaipara as Quality Assurance/Occupational Health and Safety officer on the project, but much of his time was spent as general assistant to Mr Cowie. In his affidavit, Mr Thompson described the blasting process in this way: 'John Cowie was in charge of blasting. He did the gridding, marking out the boreholes in green or pink paint and told us where to drill. He supervised all of the blasts. I assisted him with every blast. For the last blast he allowed me to do it from beginning to end but that was the only time. Yvan Boudan drilled the bore holes. Sometimes someone else would assist him. I would assist John Cowie in mixing the prill. John Cowie and I would put about two bags into each of the holes depending on how deep the holes were ... To my recollectionUnits I and II were both drilled downthrough the entire Unit. Yvan Boudan kept a record of the different depths as he was drilling, so that he was able to tell us the depth he was at when he was drilling and reached rock or tuff. I would then lower the explosive down on its string to the depth indicated by Yvan Boudan. As I understood it, the reason for this approach was there was no point in laying explosive in the tuff because it would just leave a crater in the tuff if blasted and the main purpose of the blasting was to get a neat batter. Why the holes were drilled where they were and to the depth that they were drilled I don't know. I recall that there were specifications for blasting. I had confidence in the blasting that John Cowie did because he appeared competent and confident. We discussed the outcome of blasts in the course of our work. 99 out of 100blasts did what we expected. There were some surprises as some rocks were harder or bigger than anticipated. We didn't go deep enough sometimes. When we started blasting Unit II and Unit I there were many blasts that resulted in rock and other material falling down onto the foreshore often blocking the foreshore access road.' (References to photographs omitted.) 172 In oral evidence, Mr Thompson said that, although he was quality assurance officer, he was not involved in assessing whether material should be taken to the quarry or to Middlegate; the decision was made by the excavator driver. 173 Mr Roberts suggested to Mr Thompson that, 'to the extent that material fell down from the cliff following blasting, that was primarily from unit II'. Mr Thompson replied: 'I can't exactly remember but I know there was a lot of - whether it was the shear face or the stuff behind the actual batter, if you like, it would roll down the hill or propel itself down the hill and gather on the pier.' 174 Mr Thompson's evidence went on: 'And they were large boulders actually, weren't they?---It would have been a mixture similar to the background of this study. There would have been some dirt and smaller rocks, larger rocks. … But what I want to suggest to you is that to the extent that material was blasted away from the cliff, that is off the cliff face, on those occasions when that did occur it was from unit 2 when large boulders came away from the cliff as part of the blasting, or as a consequence of the blasting?---I couldn't say for certain.' 175 Mr Thompson later said: 'There was quite a considerable amount of material that would collect on the road after blasting …'. 176 Mr Thompson said he was unaware of any means, apart from visual observation, 'whereby a load of material which comprised rock and OTR … could be separated out so that the rock went into the quarry and the OTR went to Middlegate'. (iii) Mr Cowie's evidence 177 In his affidavit, Mr Cowie said that excavation of unit I commenced early in March 2000. He had previously decided it was necessary to drill the whole height of unit I at the finished profile of the butts. Mr Cowie said he had intimated this intention to Mr Reeve and Mr Evans at a pre-construction meeting on 29 March 1999, when the three men visited the site. Mr Cowie described the drilling process in this way: 'I drilled Unit I in sections, commencing from the Quarry end, for about two thirds of its distance. I then placed the charges in the lengths of the drill holes that passed through rock and blasted the face in sections. The effect of the blasting was to heave the material forward for the whole length of the drill hole and drop it down to a point about halfway down the face, and at an angle of repose of about 35 - 37 degrees to the face. With this process it was inevitable that there would be intermingling of hard rock and OTR. It was also inevitable that rock would be taken to Middlegate, and that OTR would end up in the Quarry with the rock that was placed there. There was no way of avoiding this consequence. The only way in which it would have been possible to ensure that only hard rock went to the Quarry stockpile was to screen the material onsite before stockpiling the rock in the Quarry.' 178 Mr Cowie said it was possible to use machines to excavate the blasted batter reposing at about 35-37 degrees to the face. He did this. However, when the loosened material was removed, 'we came to patches of unblasted rock in layer 2', which required secondary blasting. He said there was also 'a small amount of additional blasting to create drainage at the base of the Cliff'. As I understand Mr Cowie's evidence, the last two categories of blasts are what have previously been called 'bulk toe blasts'. 179 Mr Cowie made it clear that the pre-split blast was never followed by a blast of the same material. He said: 'The pre-split carried out throughout the full height of Unit I was effective to fracture the material in front of the pre-split because of the limited width of the material. This enabled the removal of the material by excavator with the exception of the limited areas in layer 2 which required further blasting. As stated above my understanding was that the primary objective of the project was to render the Cliff safe and that the recovery of rock was a bonus. The quality of the rock was not specified. If it was necessary to ensure that only hard durable rock not intermingled with any OTR was deposited in the Quarry, a screen should have been specified to screen the material from Unit I. Kaipara could have brought a screen to Norfolk Island by ship at or about the time Unit I was reached. In about October 1999, Kaipara brought a rock breaking hammer over to Norfolk Island by ship for the purpose of breaking up over sized rock. Kaipara brought a screen to Norfolk Island by ship in about April 2005 which is currently screening the material being excavated from Middlegate.' 180 Mr Cowie said that, after unit I was blasted, the road was blocked until the material was finally removed. Some of the photographs show a considerable quantity of material on the road. 181 Mr Cowie deposed to a conversation between himself and Mr Evans about the amount of rock being taken to Middlegate. This conversation arose out of Mr Cowie's concern at the difficulty in obtaining compaction layers at Middlegate as thin as 150mm. Mr Evans' response was to invite Mr Cowie to submit a Non Conformity Report ('NCR'). Following that conversation, on 25 February 2000, Mr Thompson wrote to Mr Evans as follows: 'Please find attached N.C.R. – No. 32. As stated, the layer thickness for the remaining Lots at the Middlegate site (as per the Construction Specifications – Annexure 402/1) are to be maximum 150 mm. However, due to the presence of rock material within the fill, layers are not achieving this desired thickness. We will endeavour to keep the layers as thin as physically possible.' 182 In the section of the NCR itself, in which the contractor was required to identify corrective or preventative action, Mr Thompson wrote: 'More care to be taken with fill selection'. Mr Evans signed the NCR, making the following written comments: '1. In weathered basalt, try to keep excessively sized blocks out, say over 250 mm dia. 2. In tuff, 150 mm layers possible.' 183 In his affidavit, Mr Cowie said that, sometime later, after unit I was blasted, Mr Evans said to him: 'Somebody from Administration has rung up and said that he has seen good rock being taken to the fill at Middlegate'. Mr Cowie said he responded that he thought the material was too dirty for the rock stockpile. Mr Evans said: 'Just do the best you can. The Administration is worried about being short of rock.' 184 At the time of this conversation, Mr Cowie said, the road was blocked as a result of blasting. The decision as to where the material was taken was made by the digger driver. Apparently nothing changed as a result of the conversation; however, Mr Cowie said he often saw Mr Evans checking material that had been taken to the quarry, including tapping it with a geologist's hammer. 185 Mr Cowie said he could recollect only one occasion, after the conversation just mentioned, on which Mr Evans commented about the quality of the material deposited in the quarry. Mr Cowie said he and Mr Evans were standing near their offices, at the whaling station site. They noticed that a load, in a truck headed for the quarry, contained rock mixed with a quantity of OTR. Mr Evans commented: 'That load looks quite dark like it has OTR in it.' Mr Cowie spoke to the driver, who confirmed he had been told to take the load to the quarry. Mr Cowie directed him to take the load to Middlegate and to be more careful in future. 186 Mr Cowie said: 'I looked in the Quarry every day. I formed the view that material had been placed in the Quarry that was too dirty. However because of the conversation that I had to [sic] with Evans referred to in paragraph 44 I did not say anything. There was nothing I could do. Evans did not issue any written direction concerning the quality of the material being taken to the Quarry stockpile. Neither did he raise this issue again. My observations of Evans inspecting the material in the Quarry indicated to me that he was aware of and satisfied with what was going into the Quarry stockpile.' 187 Mr Cowie had further compaction problems at Middlegate. In his affidavit, he said: 'In early April 2000 further problems were encountered with compaction at Middlegate even at 300mm because of the presence of weathered rock in the OTR and good rock. This created voids in the material and difficulties with compaction. In mid-April 2000 I hired a vibrating roller from Island Industries. We had been using a pad roller which was less effective than a vibrating roller because a vibrating roller vibrates the particles of material closer together and settles the floating rock better than a pad roller. As part of the specification Kaipara was required to extend an oval associated with the local school which was some metres higher than the final level of the Middlegate site. It was necessary to create a gentle slope between the oval and the Middlegate site. I refer to paragraphs 124 - 126 of the Evans Affidavit. The rock in the embankment came from Unit I. Some of it was taken from the Quarry end and some of it was taken from the office end. This resulted in the placement of some OTR from layer 3 intermingled with high strength basalt from layer 4, and on the top of that material was placed some clean rocky material of poor quality taken from the office end of Unit I.' 188 In oral examination, Mr Cowie confirmed the extent of the top to bottom blasting in unit I. He gave this evidence: 'And if you go to the geological cross section, there are two bands of rock interspersed with layers of interflow deposits, is that correct?‑‑‑Yes. The drill holes to the depth of 20 metres I take it run from the bench on the top of Unit I down the entire length of the Unit I batter, which is about 20 metres as is shown on the scale on the left hand side of the section, is that right?‑‑‑Yes, except they would stop if you see layer - that layer 1 near that softer layer, layer 1, they would be down to the top of that, they wouldn't actually go through that layer. I see, and in relation to the interflow deposit at the top, would that be taken off by some mechanical means before you started to drill?‑‑‑Yes. So you are drilling two layers of rock and one layer of interflow deposit between them, is that right?‑‑‑That's correct.' 189 Mr Cowie also gave this evidence: 'When you were drilling to blast the batter on unit I, did you clear the interflow deposit off the top before you started to drill?‑‑‑Yes, we did. Then you drilled through one layer of rock, then the layer of interflow deposit and then through to the base of the layer of rock below, is that right?‑‑‑Yes. And that was blasted in one blast except where you needed to blast again down on the toe to clear up some rock that hadn't been blasted away at the bottom, is that right?‑‑‑Yes. That was purely the batter line. Yes, and when the explosives were set off at a particular place, what was the consequence in terms of the material that was thrown off, was it just moved a little bit or was it thrown right off the pit or did it vary?‑‑‑It varied down lower, like that bottom layer 2, it wouldn't move at all because there was too much rock there in front of it so it wouldn't actually do anything. The stuff on top, that layer 4, because there wasn't much of that there, in places there would probably be only two metres etcetera or something, but there it would actually come down with the stuff underneath it, that layer 3, it would come down and sit on the top of that bottom stuff and go out over the front of it. Can I take you to paragraphs 30 and 31 of your affidavit. You there describe this process and you say that it was inevitable that there would be an intermingling - I take it this is in relation to unit I - intermingling of hard rock and OTR, is that correct?‑‑‑Yes. And it was inevitable that rock would go to Middlegate and OTR would end up in the quarry, is that right?‑‑‑Yes. And if, in fact, only hard rock was to go to the quarry and OTR to Middlegate from unit I, what would have been required for that to be achieved?‑‑‑You had to screen it. And to your knowledge, on any occasion was it suggested by SMEC or anybody else that you should be screening the material from unit I?‑‑‑No. And was Mr Evans present at the site most days or only some days?‑‑‑Most days.' 190 During the course of his cross-examination, Mr Cowie complained about the lack of specification, in the contract documents, as to what was HDR. However, he agreed he was able to recognize HDR; he knew it was to be stockpiled in the quarry and he knew OTR was to go to Middlegate. He knew that, if he was unsure about particular material, he could ask Mr Evans. He said he did so. He gave this evidence: 'You were able to use the experience you'd gained over many years since the mid 1980 in identifying material, you'd been to the site, you'd seen the rock that was there, there would have been no need for anybody to describe in a document that which you could already see and on the basis of the experience you'd gained identify as rock?---As rock but there's no thing in there to say as to exactly what standard of that rock they want it to be at. But you ---You can say it's good rock but it's good rock for this or good rock for that. I see. So to the extent that you had some concern over whether the rock was sufficiently hard or sufficiently durable you would raise it with Mr Evans, I take it?---I did. And did you?---Yes. Mr Evans would form a judgment and express a view about whether it should be taken to one place or the other?---Yes. So between you and Mr Evans, having regard to your extensive experience there would not have been any need to describe the material in any greater detail?‑‑‑Yes, what my problem is, as I mentioned to Mr Evans, that I had to go on what Mr Evans said, whether I agreed or not. Did you ever express disagreement?---Yes.' 191 Mr Cowie explained the disagreement by saying: 'What I considered not to be hard durable rock he considered to be hard durable rock'. He went on: '…I was taking it to Middlegate and we had trouble there because as far as he was concerned he reckoned it was too good and I didn't reckon it was too good. I didn't reckon it was good enough for what he wanted to do.' 192 Mr Cowie never put his concerns in writing. He said the problem did not arise until unit I; unit II 'was virtually all rock and so there wasn't too much of a decision to be made'. However, it was a different matter in relation to unit I: 'When it came to unit I there was a variety of material that varied from tuff or overburden right up to hard durable rock and virtually everything in between, correct?---Yes. And at one end of the cliff towards the quarry there was more rock. At the other end of the cliff towards the whaling station there was virtually all rubbish, correct?---Yes. And all of that western end, the whaling station end, was able to be excavated using a machine?---Yes. And most of that, if not all of it, was taken to Middlegate because it was generally soft or highly weathered rock and it was stockpiled or used to fill at Middlegate?---Yes.' 193 Mr Cowie conceded he had not put in a NCR, in relation to Mr Evans' directions about treating particular material as HDR. He agreed he could have done this. He said: 'That was a verbal. He didn't give me a letter or nothing on it neither. We were just talking to each other about it.' 194 Mr Roberts pointed out to Mr Cowie that a NCR would have protected Kaipara. Mr Cowie responded: 'Unfortunately, I am not up with that sort of way of working. We don't normally work that way.' Mr Cowie said the 'dirty rock' did not come from the whaling station end of unit I. He went on: 'The dirty rock has come from the other end where we blasted it and it's got that layer 3 interposed into it. That's where the dirty rock came from. Is that because the interface between layer 3 and layer 4 was variable and there were, unlike what is shown on the typical geological section it being a straight line between the two layers, it was all over the place?---Yes. And the layers themselves ---?---But also there was no room out the front of the face, there was only that metre at the top and blowing that piece down, there was no physical way we could actually get to that rock, it had to come with that layer underneath and that whole piece was doing the batter line, it all had to come as one.' Mr Cowie claimed much of the blasted soft rock came from layer 2. 195 Mr Roberts took Mr Cowie back to the method of excavating unit I: 'Now, when you carried out the blasting in that way, having removed the layer 5 tuff, exposed the layer 4 rock, which was variable, and blasted it, you described it as having slumped, I think, or sat on top of the bottom stuff?---Yes. It wasn't blasted out onto the road so much, it just dropped down, is that the case?---A certain amount would go over the front of that rock that was there, naturally, it would go over than normal slope because with a slope at the top it would naturally move away from the face and that would fall down and the rest of it left sitting there. Yes, but having removed the top layer of tuff, the material that would rotated out [sic: remain?] would be all rock?---No, it would soak some of the interleaving layer through as well. Isn't the layer 4 which is what you are blasting rolling out onto layer 3, because you are not blasting the tuff levels, are you?---No, but the rock in layer 2 is being blasted at the same time, so that's naturally going to - at the top where it's so thin it's moving a little bit, it's only when you get right to the base of it where it's really thick because there's no movement there. Yes, but when you say it's moving a little bit, that rock at the top which does move has moved out and sits down on the material beneath it?---Yes, apparently that would - like that's going to move more and be sitting at the front down over that side but with the other stuff intermingled with it. And you've considered that having regard to your experience in that type of work that that was an appropriate method of recovering the rock separate from the OTR?---Well, we could just go through it and peck through it as we went to try and sort it with the digger. I take it you did that carefully by extracting the rock that had been moved as part of the blasting?---Yes. But generally the material wasn't shattered in a way that a bulk blast would?---No. And to the extent that rock remained and that was in layer 2, once the layer 4 rock was picked and taken away and the excavators had removed layer 3 tuff ---?---No, because the layer 4 is too thin, the little amount there, it actually breaks up to be quite small, because you've only got like a metre and a half of burden, it's all there is there, because it's so close, you know, in the front there's nothing there. Yes, I understand that, but I thought what you said was, after the blasting was carried out you carefully picked out the rock that had come down the cliff?---Yes, as best you can with the digger, but you've still got some - it doesn't just fall down at that layer that, that's intertwined with layer 3 as it comes down, there's no way you can stop that from happening. Did you ever raise any concern that that may affect the amount of rock you were able to recover with Mr Evans?---No. Having regard to the nature of the project, the reality was that was the only way of approaching it, was that the case?---Yes. And you in any event, having pre-split the face, carefully picked out the rock to the extent you were able to from the material that was sheared from the cliff?‑‑‑Yes. Then the diggers came in and took the tuff layer away, which is layer 3, correct?‑‑‑The tuff layer doesn't sit there by itself, it still intermingles with the rest of it because it's so thin a layer.' (iv) Mr Evans' evidence 196 Mr Evans made an affidavit dealing specifically with excavation of unit I. He said most of the unit was 'directly excavated with machinery'; that is, without the need for blasting. He thought about 120 metres of the unit I face was subjected to pre-split blasting. Mr Evans gave this description of the effect of the pre-split blasts: 'The pre-split blasts did not bench the material nor did it throw the Unit 1 material onto the road below. Some blocks of rock did fall from the face from blasting vibrations, but this was unavoidable and experienced in all other Units excavated. Those blocks that comprised hard durable rock were easily recovered and taken to the stockpile. The pre-split blasts did not mix the HDR with the OTR. The harder rock layers, where present, were simply cracked to leave a clean batter once the material was later removed by excavation. This is the intent of a pre-split blast.' 197 Mr Evans conceded that 'some material did from time to time fall onto the road during excavation', but he said 'it was not appreciably caused by the blasting but by the excavation equipment as it pulled the OTR down from the cliff face to be loaded and carted away'. 198 Early in his cross-examination, Mr Evans agreed that, during this project, he was able to differentiate between HDR (which is grey in colour and pings if hit with a hammer) and weathered, non-durable basalt (which thuds if hit hard). Mr Evans said the term OTR includes tuff and also 'basalt rock that is more weathered than slightly weathered'; 'it includes rock that is of a strength which is less than high strength in terms of the Australian standard ways of describing rock strength'. 199 Mr Evans was asked about blasting. He said: 'There was holes - I am not sure how much discussion there's been on pre-split blasting or I am not familiar with the term, toe blasting, but there was holes called pre-split blasting which is for the purpose of providing a final neat rockface which is stable and to the design line and it has no other purpose apart from cracking the rock to form that final face. It does not mean that the rock was thrown off or loosened or fractured in an appreciable way and from that line. The holes for the pre-split blaster drilled on one line, like following that piece of timber there at fairly regular centres and it's purely for the purpose of providing that final place in the rock. I disagree strongly with that blast having thrown the material off on to the road.' 200 Mr Evans was asked whether the pre-split blast moved the material lying forward of it. He said: 'It will have done to some amount but not to the point where it caused it all to form into rubble and fall on the ground'. Mr Evans went on: 'I believe it would be reasonable to expect and I recall that some of the outside face would have fallen off, individual blocks of rock, big blocks and small blocks would have fallen off from the vibration of the blast but that happened everywhere else on the cliff but in terms of distance I don't know how much it would have moved but just enough to crack the rock.' 201 Mr Evans rejected Mr White's suggestion that 'when unit I was blasted the material collapsed onto the roadway intermingling HDR and OTR'. He said only 'a certain part of the harder durable rock layers' would have fallen off the cliff face due to the vibration of the blast. 202 Mr White asked Mr Evans to examine five rock samples. Mr Evans described two of them as HDR, two as OTR (because they were soft) and one as borderline. The evidence went on: '…I'm wanting you to assume that all of those samples were in one pile?---Collectively you mean? Collectively in one pile and an excavator came along and took a bucket of material which comprised each of those particular samples and placed it on a hundred millimetre screen, what would happen?---Well, theoretically if the weaker blocks of rock didn't break down you should separate out the pieces of rock which are bigger than 100 millimetres from the pieces of rock which are less than 100 millimetres. So everything would fall through the screen other than any piece of hard durable rock that was greater than 100 millimetres in size?---Not necessarily. One of those samples was, like I've described before, was borderline and in that I felt it was medium to high strength rock. That may not be broken down in the transportation. So the hard durable rock would stay on the screen. That particular sample may or may not break down and pass through the screen and the rest would pass the screen, is that right?---It's possible. It depends how you've handled the material.' 203 Mr White showed Mr Evans exhibit B, a photograph that shows an excavator loading a truck with material that seems to be a mixture of rock and loose material. Mr Evans' evidence went on: 'If what was being put into that truck was a mixture of hard rock and OTR whether it was taken to the quarry or to Middlegate it was not a compliance with the specification, was it?‑‑‑I do not agree that you can say it has got no hard rock. It has got appreciable quantities of hard rock in it. I am saying, if it had hard rock in it of the kind that is lying round near where the excavator is working?‑‑‑Well, how far do you take it? I mean if you had one piece of hard rock in there would that be deemed to not comply with the material taken to Middlegate? I think you have got to look at this, and certainly this is [the] view I had during the job, what was fair and reasonable to expect the contractor to separate? In other words, is it fair and reasonable to expect him to go in there with a toothpick and pick out every single hard block of rock? If that is the case then - I mean I certainly did not form the view at the time, so if it has got some hard rock in that material it could not be reasonably separated in the cliff at the time and it probably was taken to Middlegate and I fully think that on that case it still would have met with the specification. In terms of taking that material to the quarry then, no, I would not. It does not look suitable for stockpiling in the quarry. It would have contaminated the stockpile with all of the fines and if there is tuff in there, then the tuff and I certainly would not have put it in the quarry.' 204 Mr White drew attention to the terms of cl 5.9. The evidence proceeded: 'Now what it says is plain as a pike staff, is it not, Mr Evans?‑‑‑In what sense? All rock has to go to the quarry. All hard durable rock has to go to the quarry?‑‑‑Well, I interpret that to mean all reasonably practical separation of hard durable rock would have gone to the quarry. I do not think it means 100 per cent: every single last drop of rock. Can you please tell me where in the specification the words "all hard durable rock that can reasonably, practicably be taken to the quarry shall go to the quarry"? Where does it say that, Mr Evans?‑‑‑Well, if you read it literally it does not say that. So as far as you were concerned there was some basis upon which you were entitled not to read the specification as it is written, is that correct?‑‑‑No. I think there is a basis in terms of having the position of Superintendent Representative to act fairly and honestly with regard to the contractor and the principal. Fairly and honestly to whom?‑‑‑To both parties. To both parties?‑‑‑The contractor and the principal. But if rock is taken with OTR to Middlegate and buried when it is a scarce resource on the Island, that is not very fair to the Administration, is it?‑‑‑I disagree. You have to question what would have been the cost of actually separating out that rock at the time. Would that have been in the Administrations interest? I cannot answer that question.' 205 Mr Evans later explained: 'I am saying I did not read the word "all" in the literal sense that every last, single drop of rock had to be taken out of there. I assumed that "all" meant in a reasonable and practical manner. It does not state those words, I agree with you, but that is what I assumed at the time. And that is how I administered the contract and how I would think that civil engineering projects are provided or pushed forward. I could not see how you could reasonably, practically separate every single last drop.' 206 Mr Evans said there was some top to bottom bulk blasting in unit II, but that did not happen in unit I. He denied this meant all the loosened material in unit I came down in the pre-split blast. He gave this evidence: 'Well, how did you get it down, the hard rock, how did you get that down?---The contractor would just pull it with a machine. You could just pull it. It wasn't terrifically wide. He could pull it off with a machine. They're quite powerful excavators. Are you saying that the hard durable rock was pulled down by a machine after the pre-split blast?‑‑‑Yes, I mean there's a free face. I mean you've got a discreet layer which was not terribly thick. It's not terribly wide. He can pull at the blocks. Remember, it's not one solid block of rock, it's got joints in the rock, so it comes out as blocks anyway. It's not a solid mass, like glass for instance. He could pull it out with the excavator. That's why there's only three bulk blasts in layer 2. The rest of it could be pulled out. It didn't fall off with the blast.' 207 Mr White had Mr Evans summarise his evidence about the blasting of unit I. The evidence was in this form: 'And the effect of the pre-split blast was to, on your evidence, create a crack in the rock top to bottom, is that right?‑‑‑Top to bottom of layers 2 and 4. Yes?‑‑‑Not top to bottom of Unit I. Well, there was no need to blast layer 5 was there?‑‑‑No. You blasted layer 4 and layer 2 together?‑‑‑Yes. And you blasted that right through the two layers of rock at the same time, 2 and 4?‑‑‑Yes. And the effect was to cause the rock in layers 2 and 4 to fall down onto the road?‑‑‑No, I didn't say that at all. I said the effect ‑ ‑ ‑ No, I'm suggesting it to you?‑‑‑The effect was to crack the rock on the final excavation face in layers 2 and 4 and I've explained previously that some material inevitably fell out of the face from vibration, but the bulk of the material didn't. What you say is that the excavators then came in and were able to rip layer 4 off the cliff face?‑‑‑Were able to pull it. Pull it down?‑‑‑I wouldn't call it ripping out. I'd say would be able to pull blocks of rock off the cliff face back to the final cracked pre-split face, yes. Then that procedure continued through layer 2 and the rock was pulled down there?‑‑‑No, layer 2 - there was, I mean there was more width at the bottom. Layer 2, I recall, was worked more as a bench. So the material was cleaned off down to layer - layer 4 was removed, obviously pulled down and removed. Layer 3 was taken off and it was taken down as a bench to the top of layer 2 where layer 2 was present and I think there's photographs in my albums which show that. Well, I'll ask you to show them to me in a moment, but is this what you're saying, that layer 4 was pulled off and deposited on the road?‑‑‑It would be pulled down to the level at which the excavator was working at and then loaded into the truck.' 208 Mr Evans explained that the excavator had a bucket that could be retracted and used to pull down material. Mr Evans agreed with Mr White that 'throughout the excavation of unit I, it was inevitable that some hard rock would be intermingled with OTR', but he thought this was less related to the blasting than the fact that the excavators were working both materials. Mr Evans said the intermingling would be 'negligible'; by which, he explained, he meant 'fractions of a per cent'. 209 Mr White took Mr Evans back to cl 5.9 and asked him what description he would substitute for the word 'all', in reference to HDR. Mr Evans responded: 'That's quite a detailed question. I've said that I would think something like reasonably practicable, I mean you may even say something like reasonably practicable with excavation equipment or something like that.' 210 I took up the point and the following exchange occurred: 'You put your finger on it there, what's reasonably practicable depends upon what equipment you're prepared to use, doesn't it?‑‑‑That's right, your Honour. You took it as the other extreme, a toothpick, and I don't think anybody is suggesting that?‑‑‑Yes. But what sort of equipment - if it's all hard durable rock, why for example wouldn't a screen be appropriate?‑‑‑I mean a screen could be appropriate, but, I mean, a screen separates material based on size. Yes, I understand that?‑‑‑It doesn't necessarily separate material based on strength or weathering. I mean you could have ‑ ‑ ‑ Yes, you still have to pick out the weathered material, but bearing in mind that you have an additional segregation knowing where it comes from out of the cliff?‑‑‑That's right. And if it's very badly weathered, you'd take it off anyway?‑‑‑Yes. Why wouldn't the screen, say with a 50 millimetre mesh have enabled you to do a pretty good sorting out of the hard durable rock versus the tuff material?‑‑‑Well, I don't think we actually mixed the two up anyway.' 211 Mr Evans said there was no screen on the Island at the time. He never thought of importing one because there was 'no significant intermingling'. Mr Evans then spoke about the western end of unit I. This caused me to have the following exchange: 'Well, I think in fairness to you, Mr Evans, seeing you haven't been here, the real emphasis in this whole case has been at the quarry end of Unit I?‑‑‑Okay. Which on any view had hard durable rock in layers 2 and 4?‑‑‑Right. And you'd agree with that and it had intervening layer 3 which was tuff material and the suggestion is that the problem was that the drilling right through that and blasting which was strong enough, whatever you called it, pre-split or otherwise, was enough to blow it all free and it came down into an intermingled heap, that is the essence of the case made by the plaintiff?---Okay. And if you say that didn't happen, there was no significant intermingling, therefore the problem of the screen didn't arise?---That's my belief, yes. If it had happened a screen would have been one way of separating out what was in that place good hard durable rock out from the tuff material, would that be right?---Well, it certainly would have assisted. It certainly would have assisted, but if there was weathered rock in there as well, it wouldn't have assisted in separating the hard durable rock from the weathered rock. I understand that, but you could pick that out visually, couldn't you, because that was a relatively small quantity out of the whole rock at that point?---Towards that quarry end, I'd say you're correct, yes, but not at the whaling station end.' 212 During the course of Mr White's cross-examination of Mr Evans about the video and some of the photographs, it appeared to me that Mr White and Mr Evans were at cross-purposes. The following clarification occurred: 'HIS HONOUR: I think you have a got a problem here [of] terminology. You are using the words fines, Mr White, I think to mean small pieces of whatever they are composed whether they are rock or OTR. The witness is using fines to mean small pieces of rock. Now you really have to be consistent or we are going to get confusion. As I understand it the witness is maintaining that all the small pieces that we are looking at in the photographs are small pieces of hard durable rock as distinct from OTR. You don't accept that, as I understand it. MR WHITE: No. My understanding was that the witness said that he thought that the majority of the fines were hard durable rock possibly with 10 per cent of tuff. Is that right?---I never said that at all. You didn't say that. HIS HONOUR: Well, what is your position?---The fines are rock fines from --- So all of this material is hard durable rock of varying sizes some of it being very small pieces?---Some of it being dust size. As distinct from tuff material or dirt?---Yes. I mean there is bound to be a very small amount of tuff material in that pile somewhere. By very small you mean minuscule of the order of one per cent or something like that?---I would say less, I would [say] less than that. Less than one per cent, all right?---I mean just from the sheer fact that you are trying to excavate the material you can't toothpick it, like I sort of said yesterday.' 213 Mr Evans maintained that, assuming the material shown in the photographs was rock, it complied with the requirement of cl 5.9 of being 'generally larger than 50 mm in all dimensions'. He had earlier said he understood this requirement did not exclude some material less than 50 mm in size; he thought 10 to 20 per cent of undersized material would be reasonable. 214 At the conclusion of Mr White's cross-examination, I put to Mr Evans some difficulties that arose out of my viewing of the photographs and the video: 'All right, Mr Evans, there is one matter I am a bit puzzled about and I would like your help on. In the video and perhaps even more so in many of the photographs, and I can take you to some of them if you wish, but you probably don't need to, we see what are on any view rocks of significant size. I don't mean over size rocks, I mean rocks that would comply with the dimensions in the specification?---Yes. And that we have a considerable quantities of fine material. Now at issue is whether it is hard rock fines or whether it is tuff or dirt or material other than rock?---Yes. And on my observations in numerous occasions there is a difference in the colour between the larger rock which on any view is rock and hard rock and the fine material. I have been wondering, I take your point about moisture, but if you had fines from hard durable basalt rock wouldn't you expect them to be affected by moisture in the same way as the rock would be affected by moisture?---Not necessarily, no, because I mean the rock, the fines can actually hold moisture whereas the rock has just got a surface area that would dry very quickly. Whereas, you know fines can actually absorb moisture within its material while the rock, it might be bigger rock particularly is not as likely to do that. But the hard durable rock is grey in colour. We have seen that in the samples that were produced in court?---Yes, darker grey, yes. Well, darker grey, but what we are looking at in some of the photographs, and I think it came out significantly in the photographs that Mr White took you to, you are looking at material which is a rich brown colour?---I didn't really see much of a browny colour. Didn't you?‑‑‑I saw the darky grey sort of colour. Well, perhaps, MRJ5A, I think it is photograph 7?---Yes, in the bottom left hand corner, it looks a bit brown I suppose, yes. Well, yes, but it is not only in the bottom left hand corner, is it? Have you got that photograph?---Yes, I have, your Honour. You see what I am having great difficulty with is the proposition that what is looked at in that photograph is simply hard rock fines. It doesn't look like it. All of the evidence in this case is that the tuff material is a browny colour and you even see that on the views of the cliff face itself and I should say---?---I think, your Honour, the only definite way to determine that is using a geological examination. Well, I know but we don't have the luxury of geological examination ---?---No petrological, sorry. Well, there is evidence from people who did make a geological examination at the time and that is evidence that is in conflict with what you have said?---Okay. What I am endeavouring to do is weigh that evidence against your statement by reference to the photograph and I am really just seeking whatever assistance you can give me on it because when I look at photograph 7 I see there two colours of fine material and I don't see why one would be moist and the other isn't?---Well, I think it appears like that because the material to the bottom left has been disturbed recently so on the other material you see it looks greyer --- But how do you work that out, apart from the fact that that suits the argument?---I mean this is dried on the surface because it has been exposed and this is showing moisture because it has been pulled back. Yes, but that assumes that the dark colour is moisture as distinct from what is the material itself?---Well, my feeling is your Honour that it is damper than the material you've seen on the surface elsewhere. Well, did you notice in the video a hand appeared in front of the camera and picked up material and moulded like clay, that's inconsistent with it being hard durable rock fines, isn't it?---It didn't ball together and become a plastic sort of plastic ball, it stuck together in some ways but it still looked crumbly to me so it didn't look like it had much plasticity. Just so I get this quite clear, you say that even what the hand moulded, you say that was hard rock fines?---I feel it was hard rock fines yes.' Evidence about the content of the quarry stockpile (i) Mr Johnston's evidence 215 Mr Johnson is a qualified carpenter and joiner. He has no formal qualifications in relation to rock or aggregate production but has had about ten years experience in road construction. He is familiar with quarrying and crushing operations in Norfolk Island and has spent some time at a large quarry in Auckland, New Zealand. The Norfolk Island Works Department is a major user of rock and rock products and Mr Johnston has been responsible for its rock product orders for about eight years. 216 Mr Johnston was not directly involved in the Cascade Cliff Safety Project. He was aware of the work being performed. He deposed to one observation early in 2000: 'I observed that an excavator, driven by one of the Kaipara employees, Travis Yeats, was on the eastern side of the access road, and was loading a truck. When loaded the truck drove up the track leading to the Quarry Stockpile. Shortly after, a truck came back down from the direction of the Stockpile, was loaded and then drove back up the track. As I watched the loading operation it did not appear that any sorting of material was being carried out so as to separate hard rock from other material. I observed that there was quite a large amount of reddish brown material being loaded into the truck. It was a different colour from the grey colour of hard rock. There was no truck on the western side of the material that was blocking the access road. I watched for just under an hour.' 217 Mr Johnston's observations on this occasion were made at a distance of some 500-600 metres. Mr Johnston reported his observations to his supervisor, Rod McAlpine. Mr McAlpine said he 'would look into it'. 218 In his affidavit, Mr Johnston recounted that, on 20 October 2000, Neville Christian, the Island Industries supervisor, complained to him about the quality of the rock in the quarry stockpile. Mr Johnston immediately inspected the stockpile, with Mr Christian. He recorded his observation in a file note made that day: 'Problem with the stockpile area. Rock from SMEC/KAIPARA is too big and there is mud and rubble all through stockpile.' (Original emphasis) 219 On 24 October 2000, Mr Johnston took 21 photographs. They are in evidence as exhibit MRJ 5A. The photographs show piles of rock, including some apparently oversized rocks, and also significant quantities of fine brown material resembling soil. 220 When he gave oral evidence, Mr Johnston was asked about photograph 1, showing a pile of brownish coloured rocks. He said the colour depicted in the photograph was how the rocks appeared. He described these rocks as 'secondary rocks' and said that, 'compared to the hard, durable rock that we usually use for our crushing purposes, they were … porous, like Swiss cheese; they have holes all through them and they are very soft rock'. Mr Johnston described the fine brown material as 'brown type sediment'. He described it as OTR, saying 'it doesn't look like good durable hard rock'. 221 Photograph 7 shows some material darker than other brown material. Mr Johnston explained the lighter material had been exposed to the sun. It had dried off; the darker material was damp, it had only just been exposed to the air. 222 Mr Johnston mentioned photograph 11 as a depiction of both HDR and secondary rock, which he regarded as OTR. 223 On 25 October 2000, Mr Johnston directed removal from the stockpile of some material that was definitely not HDR; apparently pieces of concrete and other rubbish. This material was taken to a site in Young's Road. Mr Johnston also directed the separation of oversized rock. 224 During the following week, Mr Christian complained that more OTR had been discovered in the stockpile. 225 During the period 19-21 October 2000, Mr Cooper of Ridgmill visited the Island to advise Island Industries. Mr Johnston accompanied him to the quarry and was present when Mr Cooper took some photographs. He subsequently saw a report prepared by Mr Cooper to which was attached photographs that depicted what he had seen. The photographs are in evidence but, being black and white, they are of limited utility. 226 Mr Johnston made notes on his copy of Mr Cooper's report. Mr Cooper had listed three 'stockpile rock problems': oversize; unsound/secondary rock; dirt contamination. In relation to that last item, Mr Johnston commented: 'major problem at present'. 227 Mr Johnston gave evidence about the meeting of 11-12 December 2000 (see para 64 above) with representatives of SMEC and Kaipara. He said: 'They inspected the Quarry Stockpile and met with the Cascade Cliff Safety Board. I attended the site inspections and meetings. At one such meeting Dan Reeve … of SMEC said words to the following effect: "The reddish brown material in the stockpile is 'crushing fines' not dirt. It is all 100% useable. The rock quality will significantly improve at about four metres into the stockpile. There will be less crushing fines further into the middle of the stockpile. Richard Evans has prepared a map to show how to work the stockpile so that the best rock could be reached for the airport upgrade." In December 2000 I contacted Richard Evans by email to ask him for a copy of the map that he had prepared. I did not receive the map. Between December 2000 until February 2001 work pursuant to the crushing contract continued. Progress continued to be hampered by the need to sort the hard rock from OTR. During the excavation from the Quarry Stockpile there were times when good rock was recovered for a day or two and I thought that the rock quality was improving as Reeve had suggested. However thereafter it got much worse and consistently stayed that way. This was at a depth below four metres from the original top of the stockpile.' 228 On 3 February 2001, Mr Johnston took the video that was tendered in evidence in this case. He said: 'At that time Island Industries was using two excavators with sized root rakes to sort the good rock from the OTR. The sorting of the material in this fashion was time consuming and was causing delay in the production schedule. Island Industries wrote to NIA requesting an extension of time.' 229 On this day, Mr Johnston also took some photographs (exhibit MRJ 11). They show large quantities of fine, brownish material in the stockpile. 230 Mr Johnston attended the Sydney meeting held in February 2001: see para 79 above. He said Mr Reeve offered to provide 'a mud map of high quality and low quality rock drawn by Richard Evans'. This was requested by the NIA representatives in order to allow them to plan their operations. However, the mud map never arrived. 231 Mr Johnston went on: 'The problems of dirty material and oversized rock continued. The quantities of OTR that left the Stockpile area were measured by taking the trucks over the weighbridge. The stockpiles of OTR that remained in the Stockpile area were accounted for by truck load based on an average load per truck and accounted for. Island Industries continued to send invoices for additional work. I reviewed the invoices. In my opinion the invoices were generally reasonable in terms of the extra work required to sort dirt and secondary rock from good quality rock. There was also a small amount of metal parts, vegetation and concrete. However there were disputes between Island Industries and NIA about hours worked, plant hire, transport rates and down time. In about March 2001, I assisted a geotechnical expert retained by SMEC to assess the quality of the stockpile material in taking samples from the Stockpile, the OTR near the weighbridge and the OTR at the Middlegate site. In April 2001 Reeves and another man from SMEC came to the Island to look at the rock stockpile. I attended a meeting at the Stockpile with the SMEC representatives, Crown Counsel and Alma Davidson. I saw Reeve pick up a rock and break it in his hand. He said words to the following effect: "This rock has weathered since it was stockpiled. That is why there is so much fine material." Reeve on more than one occasion described the reddish brown dirt as fines. It did not appear to me that the quality of rock improved as Island Industries excavated further into the stockpile. The amount of oversized hard rock did decrease but there continued to be a lot of dirt, deleterious material and fine particles in the material and this caused difficulty in the processing of good quality rock product and aggregate.' 232 During the course of cross-examination about his qualifications and experience, Mr Johnston said he had been responsible for roadwork on the Island 'from basically the survey plan upwards, from start to finish'; 'everything from a graded dirt track to sealed road'. He claimed to be familiar with the specification requirements for various types of road and said he had been involved in selecting materials to meet those specifications. 233 Mr Roberts suggested to Mr Johnston that the reddish-brown particles he had described as 'dirt' were in fact basalt fines. Mr Johnston did not accept that suggestion. The relevant evidence was as follows: 'You're aware from your experience in quarrying sites of what fines are?‑‑‑Yes. What you were describing there were in fact fines, were they not?‑‑‑Fines are generally closer to a greyer colour rather than a red colour. But you're aware, aren't you, that basalt ordinarily oxidises as it weathers and produces a brown fines?‑‑‑Yes. That's essentially what you were seeing at that stockpile?‑‑‑No, I would still say it was closer to other materials. How is that you came to the view that it was other materials rather than fines?‑‑‑There was a combination of all sorts of bits and pieces in it apart from vegetation and dirt, for a better word. What I'm asking you is how is it that you looked at the material and formed the view that it was dirt rather than the reddish-brown fines that one would expect in oxides basalt?‑‑‑Just assuming that it was dirt, the water content of it - you could squeeze it together and it would stay together as a solid mass. Generally when it's fines it doesn't stick together in a solid mass. Like, you can't squeeze it in your hand and it will stay in a mass. You can pick up a handful of fines, squeeze it and it will basically break out in your hand. You can pick up a handful of this brown fines, for a better word, and squeeze it together and it stays together in a lumpy mass. And it was a moist sample?‑‑‑Moist, yes. In much the same way as roadbase holds together when it's been compacted with moisture for the purposes of construction of a road, isn't it?‑‑‑Yes, but that dries out and you're left with a compacted dust material that's compacted in a square or in a confined square area that's been compacted by a roller. The same process but with more pressure applied to the sample, isn't it? You still get cohesion with fines, isn't that the case?‑‑‑To a point, yes.' (ii) Mr Bowler's evidence 234 Mr Bowler gave evidence on behalf of NIA regarding his inspection of the quarry stockpile, in company with Mr Cooper, in January 2001. In his affidavit, he described what he saw: 'During my inspection of the stockpile I observed that the material in the stockpile comprised of a mantle of sound hard fresh basalt cobbles and boulders about 1metre thick over the stockpile with the internal material much more variable. I observed a significant proportion of much finer material comprising weak highly weathered fragments of volcanic rock and plastic silt and clay fines. I also observed a significant amount of 'oversize' material in the stockpile by reference to the crushing contract specification. I also observed a rough pre-screening process being undertaken at the stockpile by means of a screen/bucket attachment to an excavator handling the material by agitating each scoop in the screen/bucket. The material finer than, say 150mm fell through the screen and was placed in a separate stockpile. The material left in the screen/bucket was then loaded into trucks and transported to the crusher nearby. Oversized rock was broken down by a rock breaker.' 235 Mr Bowler confirmed the contents of his report, dated 25 January 2001: see paras 68-70 above. Mr Bowler mentioned the petrographic analysis done, at his request, by Dr Joyce. He said: 'Dr Joyce had reported that the sample contained 60% robust grey basalt fragments and 40% grey basalt fragments sufficiently soft and weak to be broken by fingers and nails alone. I concluded by reference to the Report, and by my personal observations of the Cliff face and the material in the stockpile that this material probably came from the interflow deposits (tuff) …' 236 Mr Bowler also referred to evidence given by two expert witnesses, Dr Barron and Dr Burman, on behalf of the defendant. This evidence concerned the petrographic qualities of the brown material found in the quarry. Dr Barron and Dr Burman claimed it was of basaltic composition; so, it was argued, it could not properly be described as tuff. It is common ground that tuff is material deposited, by an explosive eruption, on top of lava that has already cooled and hardened into basalt. When he referred to the evidence of Dr Barron and Dr Burman, Mr Bowler observed that the source of the description of the interflow deposit as 'tuff' was the original SMEC report on the cliff. He said: 'because no samples were recovered from the cliff face for spectrographic work we don't know whether the interflow deposits were in fact tuff or whether they could be equally described as basalt'. 237 Mr Roberts put to Mr Bowler the possibility that the material he observed in the quarry had broken down between the time it was excavated from the cliff by Kaipara and the time of his inspection. Mr Bowler rejected that suggestion. 238 He said: '… the material that I observed in the cliff face, based on any observations, would not lend itself to such a rapid degradation in my view.' (iii) Mr Lyell's evidence 239 Mr Lyell was retained by NIA to advise it in connection with its dispute with SMEC and Kaipara. He visited the cliff, for the first time since Kaipara's work, in August 2001. He deduced from the remnants of the drill holes in unit I that this unit had been blasted from top to bottom. In his affidavit, he said the effect of such blasting 'would have been to mix basalt rock and tuff and overburden together on the access road' to the quarry; 'this would have rendered it impossible, to separate rock from the tuff and overburden without screening'. 240 In considering that statement it is necessary to remember that, when he made his affidavit, Mr Lyell was under the belief that every hole had been charged with explosives, rather than every second hole. Consequently, he was assuming an explosive force twice as great as that which was applied. Mr Lyell almost certainly assumed a degree of displacement, as a consequence of the blasting, that exceeded the actual displacement. 241 During his August 2001 visit, Mr Lyell examined the quarry stockpile. He thought it was 'a mixture of hard rock and tuff, highly weathered basalt, and overburden'. Mr Lyell referred to photographs, taken in his presence on a later date, which, he said, 'demonstrate the obvious difference in colour between hard rock, which is grey, tuff and overburden which is brownish in colour'. 242 Mr Lyell deposed to a later visit to the quarry, in January 2002. He found a significant quantity of rock had been removed and crushed for road base; other rock had been stockpiled at the back of the quarry. Mr Lyell went on: 'Toward the jetty end of the Quarry I observed a large stockpile of material generally minus 100mm in size which had been scalped; that is, the fine and inferior material had been removed from the larger and clean sound rock, suitable for crushing. This material contained a significant percentage of overburden and tuff which I estimated to be 35% of the scalps after deducting blue metal fines. I reached this estimate from my own observations and assisted by the documentation referred to in' [the Douglas report and the Bowler/Geochempet reports]'. Mr Lyell accepted these percentages 'as representing what I saw'. 243 Finally, Mr Lyell deposed to a visit in February 2005: 'When I visited Norfolk Island in February 2005 I observed machinery separating the scalpings into two fractions. One fraction was clean rock generally of a size of minus 100mm and plus 25mm and the other fraction of a size of minus 25mm comprising some basalt rock and fines and a very high proportion of overburden and tuff. I observed the operator carrying out the process of separation. Approximately half of the separated material was placed on each separated pile. The piles were approximately of equal size. I estimated that the recoverable sound basalt was about 50 to 55% of the initial scalpings.' (iv) Mr Wilson's evidence 244 Mr Wilson of Douglas Partners gave evidence on behalf of SMEC concerning his visit to the Island in February/March 2001 and his subsequent report, the Douglas report (dated April 2001). He verified the statements made in that report. He confirmed Ms Davidson's note of the subsequent conference telephone conversation when he was asked to clarify some issues arising out of that report: see para 83 above. 245 Mr Wilson made a second visit to the Island, in August 2005. He wrote a report, dated 27 September 2005, about his observations during that visit of both Middlegate and the quarry stockpile. In relation to the quarry, Mr Wilson noted that large 'very high and high strength blocks' were being broken by a hydraulic rock breaker; the OTR stockpile had been partly removed since his 2001 visit and 'the exposed face included numerous high or very high strength fragments'. He said: 'excavation into the outer, upper level of the stockpile exposes relatively fine materials placed over in-situ basalt in the cliff line … It is not known whether this finer material, which also included numerous high or very high strength fragments, was placed during the formation of the stockpile or during subsequent processing for sized product.' 246 When he gave oral evidence, Mr Wilson was asked by Mr Roberts to explain the source of the reddish brown colour discernible in photographs of the material in the quarry. He said: 'There would be a reasonable variety of methods that colouration could occur. A lot of the basalt itself has been slightly weathered so there is the individual grains, the material themselves have already stained so small fragments of that will result in a reddish colour. There are seams of clay within the materials which have a reddish colour so if any of that material was included that would also have given that tinge. ... Which is fine basalt material. How does it colour?---The weathering in the material itself, individual grains, particularly along joints, will weather. One of the products of the breakdown is an iron oxide so you tend to have a coating of iron oxide on many joints. The breakage of the material will liberate some of that material and that may well be a dust that could be spread across the embankment. Also, as I say, there is some clay materials within the rock mass which when broken still adhere to the particles, even the very high strength particles, they still have some material adhering to them. MR ROBERTS: Can I just stop you there. When you say in the rock mass are you talking about individual pieces of rock which have a closed seam through them?‑‑‑In the face there are many joints cutting the basalt profile. Some of those have joints, have clay adhered to them. When broken by blasting or excavation and placement, some of that will also be carried through to the stockpile. So there's a variety of methods from initial breakage of the material which may result in some colouration of the stockpile in general. I noted also in one initial visit there was some materials during the working of the edge of the stockpile was also being pulled in from the edge of the quarry area, so that would've been a secondary contamination of the material. When you say iron oxide that is a process similar to the rusting ---?---Yes. And the dust is similar to the dust that we see on steel that rust?---Yes, it's an iron oxide product.' 247 In cross-examination, Mr White asked Mr Wilson about tests of the tactile strength of samples of quarry material that were recorded in the Douglas report. Mr Wilson had collected these samples in February 2001. 248 Sample XI was taken from a pile of material that had passed through the 100mm apertures in the bucket of Island Industries' excavator. The material in the pile had also passed though a 26.5mm Douglas Partners' sieve; the components of the pile ranged in size from 4.75mm to 26.5mm. 249 In the Douglas report, the test procedure had been described as follows: 'Fifty pieces of aggregate were randomly selected from each test fraction. Using a pair of pointed nosed pliers, each piece of aggregate was picked up with the front of the pliers and subjected to single hand pressure. Whilst some chips broke off the hard and flat pieces of aggregate, only those pieces of aggregate that completely broke up under pressure were counted. The percent breakdown was determined by the weight of loss divided by the initial mass of the sample expressed as a percentage. All testing was undertaken by the one technician.' 250 The results were reported as follows: FRACTION TESTED NO. OF PIECES TESTED PERCENT BREAKDOWN -26.5mm + 19.0mm 50 6.0 -19.0mm + 13.2mm 50 2.6 -13.2mm + 9.5mm 50 17.4 -9.5mm + 6.7mm 50 29.8 -6.7mm + 4.75mm 50 31.8 251 Mr Wilson said he would regard the first two results (concerning pieces down to 13.2mm in size) as being consistent with the material being HDR, but not the results for the three smaller sizes. 252 Sample X3 was also taken from the pile that had passed through Island Industries bucket apertures. The breakdowns, for the same five size categories, were 3.2%; 2.9%; 4.9%; 8.2% and 32.8%. 253 Mr White asked Mr Wilson to examine a photograph of the cliff face. He then had this exchange with the witness: 'But if you were standing where you were standing when you took this photograph and looked up at that cliff, you could see the delineation that you depicted in the photograph?‑‑‑That's right. Yes. And you could see that what was above the delineation and before the next layer of rock was OTR?‑‑‑Yes. That is interbedded material that - ..... or altered material. Yes. Yes, and the materials that were to go into the quarry as distinct from those that were to go to Middlegate were easily identifiable on the cliff face?‑‑‑They're identifiable as in the very high strength rocks. Yes. Yes. Well, the high strength rock is the section of the cliff which is not only grey but it's also jointed?‑‑‑In that picture the jointed, it is basalt not altered basalt as far as I could determine on site. And I want to suggest to you that if you had been asked how to go about winning the hard durable rock from that cliff face so as to separate it out from the OTR you would not have recommended blasting the cliff from top to bottom?‑‑‑You would have to say you would have to selectively mine layers. Whether that would be - as I understand it, this was a safety project and the winning of the material was second. A what project? What did you say, you understand it was a what project?‑‑‑A safety issue. The cliff line stabilisation was the main purpose of the work and the winning of the material was otherwise. So there would be a criteria for the actual mining of the face to meet that stabilisation requirements. Could you just tell me please where it was, from what source you obtained the information that the - I withdraw the question. The fact is, Mr Wilson, that you knew that one of the purposes of excavating this cliff was to win hard durable rock for the island's needs. Is that right?‑‑‑Yes. Certainly. Yes, certainly. Yes, and in order to win hard durable rock for the island's needs, one had to ensure that OTR was not mixed with the HDR when the rock was stockpiled?‑‑‑That was the specification as far as I understand. Yes. … If you were to be setting about battering this cliff for the purpose of making it safe and for the purpose of winning hard rock, you would not blast it from top to bottom, would you, because that would mix the materials up?‑‑‑I understand it is clearly cut in benches so it's not top to bottom exercise. There's individual benches, maybe - - - Yes, I stand correct, Mr Wilson. Confining your answer to Unit I, could you please give me the answer?‑‑‑From the blasting point of view, the material on the top of Unit I there which overlies the red Unit in photo 29, there's only a couple of metres of that. To blast that you would be blasting probably only the lower half of it. Typically, you have to require a stemming above your blast face. So you could, with some difficulty, blast that top Unit. I would expect that you would then excavate off the interlayered Unit which I presume was done by excavator or similar, or could have been, and then again, the lower section could be blasted as a separate item. And that would keep the rock separate from the [OTR]?--- It would maximise - it would not necessarily say we'd keep all of it. It would maximise. Thank you. HIS HONOUR: So this would maximise what?‑‑‑The recovery of the higher strength material. Recovery of uncontaminated hard durable rock?‑‑‑Yes, it would minimise ‑ ‑ ‑ Or minimise the contamination of material?‑‑‑Yes. Right. MR WHITE: And maximise the ability of a contractor to make sure that hard durable rock went to the quarry and the other material went to Middlegate in accordance with the specification?‑‑‑Yes.' 254 After conclusion of Mr White's cross-examination, I took Mr Wilson to a matter that had been troubling me throughout much of the evidence: 'Mr Wilson, there is just one thing I want to take you back to. It is sufficient perhaps to look at your photograph 3 which Mr White spent some time looking at. I think you said that if you look at the OTR stockpile there and it was suggested to you that the excavation into the stockpile which is where the brown area is, as I understand it you were saying [that] even the brown material is predominantly basalt fines?‑‑‑That is correct, yes. I really have a problem about this which runs through quite a bit of the evidence in this case. I don't understand why small pieces of basalt rock turn brown when they are moist?‑‑‑On those pieces a lot of the fine materials is from the more weathered pieces to start with so they are more likely to have an iron stained coating, or part of the matrix of the material is likely to be weathered with resulting iron oxides being formed. Are you talking about weathered basalt or are you talking about interflow?‑‑‑Weathered basalt. Weathered basalt, well there is not a lot of weathered basalt in the eastern end of Unit II, was there? There certainly was at the western end?‑‑‑I understand that the material on the top there was from Unit I. I'm sorry, I beg your pardon, I meant to say Unit I, yes. Unit I, there wasn't a lot of weathered basalt on the eastern end of Unit I, was there? We have been told that the material, the weathered basalt from the western end was taken straight to Middlegate?‑‑‑You are referring to photos 28 and 29? I don't know the declination of where the material was taken directly to or not but you can see on both photos the quite significant iron staining around various joints and within the matrix of sections of the rock on those photos. Well, you are talking about areas that is within the red mark that you have put on?‑‑‑No, sorry the red mark is to the left of most of the iron stained areas which is covered in photo 20. Yes, but the red mark to my eye, looking at your photograph 29, doesn't seem to have any red marks?‑‑‑Even within that material the joints themselves may have iron staining in them which will generate the ‑ ‑ ‑ But they are going to be a tiny fraction of the whole volume, aren't they?‑‑‑No, of the total mass, but certainly in terms of power by blasting or whatever they will certainly give a distinct colouration to the material. All right. And in 28 you have pointed out there what you call interflow and intraflow deposits. They are what we have been calling tuff, are they?‑‑‑That's right, yes, And they are brown or yellowy brown?‑‑‑That is correct. If they got mixed up with the rock pile they would show up as brown?‑‑‑They would, yes. If this was done by blasting some of that presumably would be thrown up there as well so the dust component may also be part of that.' (v) Dr Burman's evidence 255 Brian Burman is a civil engineer with specialist experience in the geotechnical and groundwater aspects of civil, mining and environmental projects. He holds the degrees of Bachelor of Engineering (First Class Honours) and Master of Engineering Science from the University of Queensland and the degree of Doctor of Philosophy awarded by James Cook University for a thesis on rock mechanics. Dr Burman was a director of Coffey (or an associated company) for about 20 years before establishing his own consultancy business in 1993. 256 It appears Dr Burman's first visit to the Island was in August 2005, at the request of the solicitors for the defendant. Dr Burman's main activity on that visit was to inspect the work then being undertaken at Middlegate, about which he wrote a report. He visited the quarry; but he apparently did not make any comprehensive inspection of the material then stored there. In answer to a question in cross-examination, Dr Burman said: 'What I saw was stockpiles that had been separated. They were being worked on. I didn't actually go near them. I looked at the finer stockpiles which I took to be the processed material.' 257 Notwithstanding the limited nature of his inspection of the quarry materials, Dr Burman wrote a report, separate from the Middlegate report, that he styled: 'Report on Geotechnical Issues for Quarry Stockpile'. As the title perhaps suggests, this was not a report about Dr Burman's observations; it was an attempt to analyse, explain and rationalise the material contained in other reports, all of which are in evidence in this case. Much of this discussion is better seen as a submission than as expert evidence. However, particularly in the section of the report called 'Conclusions on Stockpile Quality', Dr Burman made some statements that can properly be regarded as expert opinion. 258 In this section of his report, Dr Burman shortly summarised the position taken by each of the seven experts who had preceded him (Dr Joyce of Geochempet, Mr Bowler, Mr Cooper, Mr Wilson, Dr Barron, Dr Redman and Mr Lyell). He went on: 'In my view the conflict in opinions can be resolved by reference to the particular style of weathering effects on volcanic rock types. I start with the observations of Mr Wilson, being the only experienced geologist to have inspected the stockpiles directly, and his opinion that the material he saw, apart from very minor exceptions, was entirely basalt. His views are supported by the petrographic examinations done by Dr Barron and Geochempet. Geochempet's interpretation as to the possible presence of derivatives from tuffaceous deposits is at best speculative and in my view not sustainable on the facts. Thus the weight of informed geological opinion is that the stockpiles to all intents and purposes consist of basalt. Of the four remaining opinions, neither Dr Redman nor Mr Cooper commits himself in terms of stockpile composition. Dr Redman, who did not inspect the stockpiles, prefers an OTR definition based on the +50mm size limit and Mr Cooper appears to have adopted the views of Mr Bowler. That leaves the opinions of Mr Bowler and Mr Lyall who, although experienced in geotechnical and mining/quarrying fields, do not appear to claim particular expertise in petrology. Nevertheless, their views as experienced practitioners have some weight and cannot be disregarded out of hand. I would presume that they know what they saw and have interpreted their observations in relation to the general geological setting of the site. However, it appears to me that while their observations are probably correct their interpretation of them in geological terms is not. A possible explanation lies in the fact that basalt and tuff have a common parentage … and consequently have similar mineralogical and chemical composition. When basalts and tuff weather they will produce similar alteration products and not be readily discerned. As part of his stockpile observations, Mr Wilson noted the following: • In the Main stockpile "isolated moderately and slightly weathered, grey basalt blocks were … fretting (disintegrating) on exposure to air" • "The finished product stockpile included very low to medium strength, moderately to slightly weathered basalt fragments that were either fretting or easily broken by hand. The stockpiles also included aggregate particles with a clay veneer on at least one face. The clay was assessed as a weathering product, probably present as joint coatings within the rock mass, which had not been dislodged by the sieving or crushing processes." The specification called for hard, durable rock to be stockpiled, however, as Mr Wilson noted that "the weaker material was derived from the altered and/or weathered margins of the basalt flows" and that "when freshly exposed the strength and coloration of the altered and moderately to slightly weathered materials is very similar to much of the fresh basalt with ironstained joints" ... He concluded that in this circumstance it was "reasonable to expect the inclusion of a proportion of weaker product" ... What Mr Bowler and Mr Lyall saw in the stockpiles as tuffaceous material was, in my view, most likely the results of breakdown under handling and weathering on exposure in stockpile of moderately to slightly weathered basalt that was not readily differentiated from slightly weathered to fresh basalt. Superficially, it may have looked similar to tuffaceous material but was not from that source.' (References omitted) 259 When he gave oral evidence, Dr Burman produced a table that was designed to illustrate the sequence of degradation of fresh basalt into soil, with a note as to its appearance and utility at different stages. The table took the following form: FRESH BASALT Grey Rusting HDR SLIGHTLY WEATHERED Grey ? MODERATELY WEATHEREDGrey Clay conversion ? HIGHLY WEATHERED Grey/Brow n COMPLETELY WEATHERED Brown/Grey BASALTIC SOIL Red Brown OTR 260 In response to a question from Mr Roberts, Dr Burman explained: 'Well, what I was trying to do, your Honour, is to get across the concept that there's a gradation of materials from fresh basalt on one hand to soil on the other and that the process is not a uniform process. Rusting or the chemical conversion occurs with fresh basalt and is essentially finished by the time that the basalt is, what we call, moderately weathered. Now, at that stage the basalts from Norfolk Island are still grey when they are moderately weathered. By the time they're highly weathered, they're certainly - colouration has come in to it and it would be very clear that you were dealing with material that was OTR in the highly weathered, completely weathered and soil phases. It would also be reasonably clear that you were in what I would prefer to call good rock when you have fresh basalt and slightly weathered basalt. In the area between those two you have rock that might be useful depending on the application to which you want to put it. When you say between those two, between what two?---Between slightly weathered and highly weathered. So it's the grey area if you like, of moderately weathered. Now, some of that material - that material could preferentially have been wasted and placed in Middlegate and I believe, to a large extent that is what happened. Some of it may also have got into the quarry stockpiles and I can understand that because I have seen material on Norfolk where you have a block of rock, often a bit rounded. They start off with pretty straight edges but weathering rounds the edges and you have a weathered skin on what might be slightly weathered or even fresh basalt. So what do you do with that piece of rock? It's grey, it meets that test. If you hit it with a hammer you'll probably get a slightly dull feel but you can't hit everything with a hammer. If you throw it away then it's material that could potentially have been useable by the Norfolk Island administration but it may introduce to the stockpile material that, in the fullness of time, might be identified by some people as OTR.' 261 I asked Dr Burman about the time that would be required for fresh basalt to break down to basaltic soil. Dr Burman said: 'Geological type times … well beyond anything that might worry us'. He agreed to my next question, which is transcribed as 'Hundreds or thousands of years?' but was, I believe 'Hundreds of thousands of years'. 262 Dr Burman's evidence went on: 'Well, how long to get from fresh basalt to moderately weathered basalt in those conditions?---I think that could take some time, too, but it occurs in situ, that weathering process. Yes, but when you say "some time"?---That could be hundreds and thousands of years also. It depends on the environment. And highly weathered, of course, is even more so?‑‑‑Yes. Yes. So if you've got fresh basalt sitting in a stockpile in the quarry ---?---You wouldn't expect the fresh basalt to be disintegrating but there is evidence of basalt and I rely on Mr Wilson's observations for this, of material placed in the stockpile that, I believe from his description, would have appeared to be good rock that had actually broken down because not only is there conversion of - there is chemical conversion but there's fracturing of rock as this chemical conversion occurs so that the rock becomes more porous, it loses its density and it becomes much more susceptible to weathering on exposure. Well, look, I understand the point Mr Wilson made, that you get jointing in rocks and so even what is - the totality or the large bulk of it is fresh basalt, will have weathered joints?‑‑‑Yes. And the joint material might properly be described as highly weathered or moderately weathered or completely weathered, something of that nature?‑‑‑That's correct. And that goes in with the pile. I understand that?‑‑‑Yes. Although I would have thought it was going to be a very small proportion of the whole. What I'm more concerned with, assume that you had - the bulk of the material was fresh basalt and you put it in a pile and you go back six to nine months later, you're not going to find that fresh basalt has now become moderately weathered or highly weathered are you?‑‑‑I wouldn't expect so, no. No, so that the material that is brown, although there may have been other causes of browning such as joint material, it's not going to be the fresh basalt which is weathered to that extent within a few months?‑‑‑Fresh basalt, if it's broken, based on the petrological examinations done by Dr Barron, there was 15 per cent, by volume, of brown material in fresh basalt, 25 per cent in slightly weathered basalt are the figures she gives. But why is that 15 or 25 per cent there? Because of weathering pre-quarrying or at post-quarrying?‑‑‑Pre-quarrying I would expect. So that meant that it wasn't totally pristine fresh if you like at the moment of quarrying?‑‑‑Correct. Yet it still might be acceptable for making aggregate for structural purposes?‑‑‑Yes, but when broken down the brown material is allowed to escape. It's liberated as they say. So that that adds to the material that was also - the weathered material that might have been on joints. Or any other cause of contamination?‑‑‑Yes. It's just that there's a tremendous amount of brown material, Dr Burman. That's the thing that - I understand all these explanations of how you could get some ground material but you've only got to look at the photographs to be just very impressed with the extent of the brown material?---Well, your Honour, it is very fine material. It can't be just from jointing?---So it has a big surface area so I think you see - I mean if you were to use the analogy a little bit of rust also goes a long way and it's a similar --- But by volume it's not great but here by volume you've got a lot of brown material?---Well, the iddingsite in fresh basalt was identified as 15 per cent. That's quite a big volume. I mean 15 - if you could liberate all that then - and you would liberate a certain amount of it by the blasting then I think that's probably enough to give you your colouration.' 263 When he commenced his cross-examination, Mr White took Dr Burman to the terms of cl 5.9. The evidence was: 'Before you did your report and the specification provides for dimensions for the rock shall be no greater than and also provides that rock extracted from Units I and II shall be generally larger than 50 millimetres in all dimensions in all directions, do you see that?‑‑‑Yes, I do. It is the fact, is it not Dr Burman, that none of the brown material that we have seen in the quarry stockpile would comply with that specification?‑‑‑That is correct. Well, sorry, it may not be correct for Units III and IV. This says only for Units I and II, doesn't it? Yes?‑‑‑So there could be colouration derived from Units III and IV that would meet this particular requirement, whatever the requirement is supposed to mean.' 264 Mr White sought to negative the possibility of there being colouration from units III and IV by showing Dr Burman photographs of the material in the quarry at the time of excavation of those units. However, Dr Burman insisted it was impossible to tell from a photograph whether particular material was HDR or OTR. 265 Dr Burman was critical of the drafting of cl 5.9. He thought there ought to have been some definition of HDR and that the definition should have been prepared after analysing samples taken from the cliff face. He gave this evidence: 'So in that sense you would say that the specification did not provide sufficient information for the contractor to carry out the job?‑‑‑Well, in a way it didn't provide enough information to my way of thinking for the consultant to carry out the job. For the consultant?‑‑‑SMEC. Yes, but first of all the contractor?‑‑‑Well, then the poor old contractor, yes. But, Dr Burman, SMEC drafted this specification. Are you saying that even though they drafted it it was not sufficient for their own purposes?‑‑‑To my way of thinking, yes.' 266 Mr White put to Dr Burman various methods of drafting a specification that would distinguish HDR from rock that was not hard and durable. Dr Burman answered 'possibly' in response to the feasibility of a definition that HDR is material that rings when hit with a hammer. He rejected a definition that would depend on the rock needing to be excavated by blasting. His most confident suggestion was to require weathering grades or strength grades to be met, but he added 'they probably require a geologist or somebody with some basic geological training to put into effect and they're somewhat inconvenient in practice'. 267 Mr White took Dr Burman to more photographs. Dr Burman agreed that, if it was an element of the definition of HDR that the rock pieces not be less than 50mm in size, there was a significant quantity of material in the quarry that ought not to have been there. The line of questions culminated in this exchange: 'Dr Burman, is this your evidence then that you understand that what's next specified here was for the purpose of determining what should go in the quarry and what should go to Middlegate?‑‑‑Yes. But beyond that, you say it is simply not possible to determine what really was to go to the quarry and what was to go to Middlegate. Is that right?‑‑‑I guess it's possible because it was done but it's open to interpretation as to precisely what is meant though and I think this is, this seems to me to be at the root of the problem. Well, the root of the problem is that it wasn't done. Isn't that right?‑‑‑I'm not sure that that's right. No. Well, there was OTR placed in the quarry wasn't there?‑‑‑Only according to the 50 millimetre definition. Otherwise I don't believe it was what I would call OTR. All right. Well, let's call it what the specification calls it, that is, material less than 50 millimetres?‑‑‑Okay. A very substantial quantity of material less than 50 millimetres went into the quarry, didn't it?‑‑‑Yes. And that was contrary to the specification, wasn't it?‑‑‑Yes.' 268 After some questions about Middlegate, Mr White took Dr Burman back to the specification. Dr Burman's answer was not really responsive to the question but is interesting: 'How would you have drafted this specification to maximise the amount of rock available for the Island's needs bearing in mind, as I'm sure you know, that it's a heritage area and there are considerable heritage constraints on winning basalt from anywhere on the Island?‑‑‑Well, I can't claim to know too much about the heritage side of it but I think with the benefit of hindsight having seen what material was excavated from the cliffs I think there probably should have been some processing either when it was won or subsequently so that you could take away what was clearly very good rock. You would be left with intermediate quality rock and then you could separate out material that probably should have gone to Middlegate. I think some level of processing that hadn't been envisaged by the contract was probably required.' 269 Mr White took Dr Burman to a third report he had made, dated 2 May 2006, in which he commented on the evidence of the plaintiff's expert witnesses; in particular a statement by Mr Lyell that, once SMEC's particular construction design was accepted: 'there was no safe way to selectively mine the cliff and drilling and blasting from top to bottom was the only method of removing the rock and OTR which were inevitably mixed and required screening to separate the two materials.' 270 Mr White asked Dr Burman about that proposition: 'You'd agree with that proposition would you not?‑‑‑I don't know that I'd agree with everything that he says there. Tell me what you agree with and what you don't agree with?‑‑‑I'd probably agree with the screening part of it. Yes?‑‑‑I'm not sure that it's within my province to talk about drilling and blasting and the excavation of these materials particularly. Are you saying that it would not be within your area of expertise to say whether or not a process of drilling and blasting from top to bottom was the only method of removing rock and OTR, is that what you're saying?‑‑‑It's not something that I've had a lot of experience with. But obviously if the material was blasted from top to bottom so as to mix durable rock and OTR then screening is essential?‑‑‑I'm not sure that it was blasted to mix the two and even then once they're mixed screening will only separate on size. It won't separate on materials. I mean, as others have said, selective mining sounds like the way to approach it. I mean I would expect that you'd - I have seen this as essentially a stabilisation exercise with a secondary requirement to achieve what reasonably can be done in terms of selecting material from the excavation. But, Dr Burman, how does that interpretation of what occurred sit with clause 5.9 of the specification which says: All hard durable rock excavated from Units I, II and III shall be separated from the OTR and stockpiled in two different places. How does that sit with the plain words of the specification?‑‑‑No, it doesn't sit terribly well but it is the way that specifications tend to be written and they're written in a fashion which is - by engineers which are onerous on the contractor generally with the view that if necessary the requirements can be read down to some extent.' (v) The evidence of Mr Meredith and Mr Hardman 271 The defendant tendered a report made by John L Meredith, Chief Estimator/Senior Associate of Rider Hunt Sydney Pty Ltd, in which he addressed various questions raised by the defendant's solicitors in connection with the project. The questions included the SMEC tender assessment process and the adequacy of the specification prepared by SMEC. As I see the matter, and despite Mr White's cross-examination of Dr Burman in relation to the terms of cl 5.9, neither of these questions are matters I need to resolve. However, I note in passing that neither Mr Meredith nor David Hardiman, who gave evidence for NIA about Mr Meredith's report, was prepared to condemn the specification. 272 Mr Meredith said in his report: 'In the absence of a specified definition for "rock", "hard durable rock" or the OTR (other than rock) then in my opinion it would be prudent to adopt the general industry definition relative to "hard rock" as a measure of the degree of difficulty in removing or excavating in rock. The SMEC specification required the contractor to take the risk on the excavation as being "material as found" and this is normal practice to avoid claims from the contractor relating to the difficulty of the excavation.' 273 As Mr Meredith was not required to attend for cross-examination, there was no elucidation of what he meant by the 'general industry definition relative to "hard rock"'. 274 Mr Hardiman is a quantity surveyor and chartered surveyor who has spent some 30 years working on major construction projects in many parts of the world. He is currently a senior associate at Evans & Peck. In his report, Mr Hardiman expressed the opinion that cl 5.9 'is adequate to satisfy the objective of the Project in relation to the provision of rock for future use'. He said: 'In my opinion, the combination of the Quality Assurance procedures that the Contract requires the Contractor to undertake and the monitoring and surveillance to be carried out by the Superintendent under both the Contract and the Project Management Agreement was adequate to ensure the fulfillment of the objectives of the Project.' 275 Mr Hardiman went on to criticise the level of quality assurance on the Project. He concluded: 'In my opinion, the surveillance, testing and any special testing carried out by the Superintendent, or instructed by the Superintendent to be carried by the Contractor, did not properly contribute to the safeguarding of the Project's objective of separating all HDR from OTR in Unit I, Unit II and Unit III.' 276 Mr Hardiman was cross-examined. He told Mr Roberts he had calculated the additional cost that would have been incurred by Kaipara, if it had screened all the material from unit I: $312,639. The contract price was $2,809,928. He explained the position in this way: 'You have assessed the cost of screening rock at the cliff face during the course of the works as $312,000 additional to the contract sum; correct?‑‑‑To quantify that, to Unit I material, correct, yes. Yes. Sorry, I am talking about Unit I. But do you draw any distinction between that additional cost as part of the contract sum had it been specified at the time of the contract, and that cost had it arisen during the course of the works as a variation?‑‑‑The contract required all the material to be separated. Therefore, maybe Kaipara's price should have included all that was required to separate the material. Now, whether that was screening or not, I mean, I am not technically qualified to say that. So what I am saying is that against Mr Meredith's view that if all the material was to be screened, it would be an increase of 99 per cent. I am just comparing that with my view that says if you were going to add the cost of screening Unit I to the contract price, it would be 300,000. I am not saying that that was excluded from the contract price because in my view it should have been included in the contract price if that was the solution Kaipara would take to separate the material.' 277 Mr Hardiman went on to make it clear that his figure treated screening as an additional requirement. He said: 'What we are saying is if the contract required screening for Unit I, then the price would have included an amount for that work. That may not have been the amount that I have calculated at this point because this amount takes into account the additional time that would be required for screening over and above the contract period. But had the contract required screening, that work would have had to have been done within the original contract period and, therefore, there would not be an extra cost for the time related. So you can't compare the two. As I say again, what I have calculated here is: if screening is additional to the contract and causes a delay to completion of the contract, this is my assessment of what it would be. You can't relate that to: had it been in the contract, what would be the allowance by Kaipara for that work. It is not the same question.' 278 I checked my understanding of the position: 'Can I just make sure I understand that. You are saying that if this had been approached as an extra because the complaint was made, for example, by Kaipara that the conditions … within the cliff were not as represented and, in particular, that the amount of bench space available at the top of Unit IV was less than had been thought. There seems to be some suggestion of that in the evidence. So if Kaipara said, well, look this is different, under the contract we are obliged to separate the hard durable rock from other than rock ‑ ‑ ‑?‑‑‑Yes. ‑ ‑ ‑ given the lack of bench space, we have to drill and blast within one line through rock and other than rock, so it is going to get mixed up, the only way we can get the required result is screening and that should be regarded as an extra because we didn't allow for it because we were misled as to the subsoil conditions?‑‑‑Yes. If that had been the argument and that had been successful, the extra amount would have been the $312,639; that is what you are saying?‑‑‑Yes, your Honour, that is correct. Now, the only problem I have about that is that seems to be related to the total rock within the project; it is not confined to the rock in Unit I?‑‑‑No, my calculation is confined to the rock in Unit I. To unit [I] - thank you. Now, what you are saying is, if at day one, the specification had said, "and the contractor shall screen", it would be less than that because although the contractor would have had the expense of a screen the work would have been done simultaneously with other work so you wouldn't have had a time overlag at the ‑ ‑ ‑?‑‑‑Correct, your Honour. That is correct, your Honour. So this is a maximum figure treating it as an extra, not as part of the contract sum?‑‑‑That is correct.' 279 Mr Hardiman thought there would have been no need to test the rock in unit II 'where it is fairly clear that it is hard durable rock throughout'. But, speaking of unit I, he said: 'I took the view that there would be a requirement for a certain amount of testing where you might have marginal material where you weren't too sure whether you were HDR or OTR at the boundaries and that the personnel on the site were quite capable of doing that and I think it was advertised that SMECs resident engineer was a geotechnical engineer and that the personnel that were already included in the pricing and were supposed to be on site were quite capable of doing that. So I took the view that there was no requirement for a junior geotechnical engineer to be added to the site personnel for that purpose.' 280 Mr Hardiman rejected the suggestion that he was assuming all the rock was consistent in terms of strength and durability. His evidence went on: 'Well if there is rock that is hard durable but within hard durable, the hard durable definition, you assume that there can be variations in the grade?‑‑‑I am not a geologist but it is necessary to identify what is HDR and what is OTR, the two of them meet at some point in time. And you accept in your answer a minute ago that there are materials in the cliff that are marginal, it is not easy to tell whether it is HDR or OTR?‑‑‑You are suggesting that I am saying that there is a third quality of material, there isn't. There is OTR and there is HDR. At some levels within the cliff or at some points in the cliff they change from one to the other. There must be a zone, a boundary between the two, we know that, we know the cliff's layers. What I am saying is that it is necessary for this verification that we spoke about earlier to be able to say what is HDR and what is OTR and what I am saying in my report is I believe that is part of the quality assurance system, that that problem is resolved before you start attacking the cliff rather than during the work or after the work. The failure here is to address that problem from the very beginning.' 281 Mr Roberts showed Mr Hardiman a photograph of the cliff, as it now is. The evidence went on: 'If you have a look at photograph 26.12, on the bottom half of the cliff as it is shown in that photograph is I will actually assume Unit I and you see at the face of the cliff the rock is quite undulating in variable, in places it disappears altogether. Now when I say rock the ‑ there is obviously two types of material in the face of the cliff, are there?‑‑‑Yes, and I presume you are distinguishing the rock as deep grey. And there is a brown sort of colour?‑‑‑The red you are distinguishing as OTR? Well if that is the correct distinction you would agree, would you not, that unlike the geological section that you referred to there is quite a variation in the material?‑‑‑Well of course what we are looking at is not what is excavated, it is what is left behind but on the assumption that the excavated became the same, it is a complicated geology, I agree. However, that is exactly my point is that you need to address that before you start work through the QA system rather than end up with it all sitting at the bottom of the cliff and then saying, "How do we sort this mess out?". But even if you dealt with the problem at the outset, prior to the excavation taking place, it would still require some system of testing when you get to Unit I, having regard to the variability of the material that you see there?‑‑‑Well it looks to me unless the engineer is colour blind it is probably quite easy to distinguish between the two. So all that would be required on your assumption is determination by colour?‑‑‑No, I am saying in general terms you can tell by the colour. When you are getting to a point of saying, "Well, this is becoming a transition zone", it needs somebody to go along - I am not a geologist but presumably with a geological hammer and ping the rocks and say, "Are these hard or are they something different?", but I don't believe that it needs a particular geotechnical department to go and attack that problem. That is the problem with this excavation from the beginning. How do you excavate it and separate the material and that has been the requirement from the beginning. The whole of Unit I is virtually a series of interchange zones or whatever the word was that you used?‑‑‑Yes. Transition zones I think it was?‑‑‑Yes. So the whole of Unit I would require somebody to be walking around all the time with a geological hammer, wouldn't it?‑‑‑Exactly my point. I mean Unit I needed to be considered at an early stage between the contractor and the supervisor to say, "This is a complicated piece of excavation, we have to separate this". There needs to be a method achieved for that, there needs to be a method achieved where you can define what the material is, whether it is OTR or HDR, there is only those two classifications ‑ ‑ ‑ And having regard to that method that you say is required and the complexity of the material that is there, that would have increased significantly the cost of that part of the works, would it not?‑‑‑No, because that is what the price covers. That is the same work. No, no, you are saying at the outset, at the design stage for example, there would need to be those issues addressed by the designer so that the tender documents require the contractor to take into account the complexity of Unit I?‑‑‑No, I am sorry, it is not a design issue. The design issue is where you put the berms and the slopes that you put there. It is not a design issue, it is an excavation and separation issue, it is a contractor's problem but it is for the superintendent to make sure that he addresses that problem and comes out with the right quality of work at the end of the day. And that assumes also that the extent of the complexity as shown in the excavated face was able to be seen in the face as it existed prior to the work being carried out?‑‑‑Well, obviously you can't see that but you need a method and a quality control system that will adapt to this type of situation rather than carrying on as though it is all one material and ending up with a mixture. The skill in this for an experienced contractor is to excavate it and separate it, it is not just a question of being able to excavate or a question of being able to quarry, what was required was the separation and that is the complication of this project in my lay view anyway. What I am suggesting to you, Mr Hardiman, is that the problems that you have identified that required separation, if they had been addressed at the outset would have increased the contract sum having regard to the complexity of the material?‑‑‑I don't know what was in Kaipara's mind but my perception is it wouldn't, it was Kaipara's price for doing exactly that work and I don't think Kaipara would have, as an experienced contractor, expected it to be in regular bands.' (vi) The evidence of Mr Reeve 282 Mr White pointed to evidence of Mr Reeve that suggests he reacted to the challenge of unit I in a similar manner to Mr Hardiman. Mr Reeve said that, on the basis of Mr MacGregor's geological report, he made an assessment that 50% of unit I would be rock suitable for crushing. Mr Reeve said that, although SMEC did not specify how this was to be done, 'at times of putting the documents together I assumed it would be selectively excavated'. Mr Reeve said a 'materials management plan would have included the process by which hard durable rock was separated and placed in the quarry and OTR placed at Middlegate'. His evidence went on: 'Do you recall ever having seen a materials management plan by which Kaipara identified how they were going to keep hard durable rock and OTR separate?‑‑‑When I audited their quality system early on in the project I recollect saying that they needed to do work on that work method statement and improve it and to make sure that would be identified, and later on discussions, I cannot recall exactly, my recollection is that they were going to do it by selective excavation from the site. Selective excavation?‑‑‑When they had material, if it had been blasted they would then make sure that when they took the material that was rock the rock would go to the stockpile and material that was OTR would go to the Middlegate. If there was material in there that was secondary rock, then the secondary rock would go to Middlegate as well. In terms of the over all objective of this project or one of the over all objectives to separate out HDR and get it up into the quarry and take the OTR to Middlegate, that was a crucial part of the project, wasn't it?‑‑‑It was part of the project, yes. When we put the specifications together we didn't choose a quality control type materials specification where we told the contractor exactly what to do. We wanted to give the administration the opportunity to have contractors who could choose their work methods and give them best value for money. So therefore we chose a quality assurance system and specifications that the contractor could choose the methods to best do that and we tried to set up the specifications so that they could [do] it that way. So it was up to them to select the actual methods to in the end separate the rock and that out. Then it was up to your site superintendent to make sure that the methods that they adopted were in fact carried out; is that correct?‑‑‑He was there to provide surveillance, to audit their methods and if he did not believe that their methods were applicable and they weren't doing it, to tell them so.' 283 Mr Reeve said he thought 5% would have been an 'acceptable' amount of OTR to have been placed in the stockpile. His evidence went on: 'You would agree, would you not, that it would have assisted if your specification, the specification you have drawn, had said, All hard durable rock shall go into the quarry but an acceptable amount of OTR would be say 5 per cent?‑‑‑That would have assisted, yes. In the absence of some specification of that type, nobody knew what an acceptable thing was, is that correct?‑‑‑Yes, it hadn't been specified. And in the absence of you and Mr Evans discussing it, there was just no guidelines to allow for something which you, as you sit in the witness box, knew was going to happen?‑‑‑No, I relied on Mr Evans' judgment. Mr Reeve, you visited the site on a number of occasions, didn't you?‑‑‑Yes. Mr Evans was a geologist of some five years experience, is that right?‑‑‑Yes. Which is quite a difficult job?‑‑‑It wasn't that difficult a job. Well, it turned out to be difficult, didn't it, Mr Reeve, that's why we're in court today?‑‑‑Seems that way, yes. Yes, and the reason for that is that somebody didn't keep an eye on what was being put in the quarry, is that right?‑‑‑It seems material, OTR material, has got into the quarry, yes.' Was the quarry stockpile unacceptably contaminated by OTR? (i) Interpretation of cl 5.9 284 It is necessary to address the vexed question of what constitutes OTR for the purposes of cl 5.9. As mentioned, it is common ground between the parties that the totality of the material excavated from unit I was to be regarded as either HDR or OTR, for the purposes of cl 5.9; but neither term is expressly defined. The parties agree as to the appropriate category for many types of material. However, they disagree about pieces of basalt that are not 'larger than 50mm in all dimensions' ('basalt fines'). 285 I have reached the conclusion that, upon its proper interpretation, cl 5.9 did not enable or require all the basalt fines derived from units I and II to be included in the rock stockpile. I think it was intended that the stockpile would predominantly comprise larger pieces of rock, over 50mm in all dimensions. I will examine the evidence on this basis and make findings about it. However, in case my interpretation is incorrect, I will also make findings on the basis that all basalt fines were to be included in the stockpile. 286 At para 34 above, I set out the terms of cl 5.9. That clause requires that HDR excavated from units I, II and III 'shall be separated from the OTR and stockpiled' at the nominated site. Rock placed in the stockpile was to have maximum dimensions of 900 x 600 x 375mm; larger pieces were first to be reduced to that size. The clause then contains this problematic sentence: 'The rock extracted from Units I and II shall be generally larger than 50mm in all dimensions'. 287 Read literally, the problematic sentence might be interpreted as a requirement about the size of rock pieces at the moment of extraction. However, it seems unlikely the sentence was intended to control extraction. The better view is that it was intended to impose a further criterion for identifying the rock able, and required, to be placed in the stockpile; rock that had been extracted from units I and II (but, for some unexplained reason, not unit III) was required to be 'generally larger than 50mm in all dimensions'. 288 If the word 'generally' did not appear in the problematic sentence, the natural interpretation of that sentence would be that only pieces of rock of a minimum 50mm size, in all dimensions, were to be included in the stockpile. The sentence would be a minimum size stipulation, in the same way as the preceding sentence specified maximum dimensions. 289 From time to time during the trial, there were suggestions that, despite the presence of the word 'generally', the problematic sentence should be construed in this way. However, I cannot accept a construction of the sentence that ignores the presence of 'generally'; that word must have been inserted in order to procure a different result than if it had not been inserted. 290 The Australian Oxford Dictionary gives four meanings of the word 'generally': '1. usually; in most cases. 2. in a general sense; without regard to particulars or exceptions (generally speaking). 3. for the most part; extensively (not generally known). 4. in most respects (they were generally well-behaved)'. The Macquarie Dictionary definitions are similar: '1. with respect to the larger part, or for the most part: a claim generally recognised. 2. usually; commonly; ordinarily: he generally comes at noon. 3. without reference to particular persons or things: generally speaking'. 291 Having in mind these definitions, but also considering the context and apparent purpose of the problematic sentence, it seems to me appropriate to read the word 'generally', in that sentence, as meaning 'usually', 'commonly', 'ordinarily', 'for the most part'. I do not think the standard is a mere majority. It would not be enough that 51% of the rock from units I and II have minimum 50mm dimensions; the rock from those units placed in the stockpile was predominantly to comply with the 50mm requirement. Having regard to the subject matter, it must have been intended that predominance be determined by rock volume, not by counting or estimating the numbers of individual rocks that comply, or fail to comply, with the 50mm requirement. I see no justification for stipulating a particular percentage, as establishing that the rock in the quarry generally complies with the 50mm rule; all that can be said is that non-complying rock should be exceptional and relatively rare. 292 In coming to this conclusion, I have not overlooked the considerable body of evidence about the utility of basalt fines. Several witnesses pointed out that the inclusion of small pieces of basalt improves the plasticity of road base and that basalt fines may usefully be included in aggregate intended for concrete-making. It follows that it would have been a waste of a valuable resource to have dumped basalt fines at Middlegate. 293 On the other hand, the Island's crushing capacity is limited. At all material times, the only crusher on the Island has been that of Island Industries. The evidence suggests this crusher is relatively primitive; in particular, it has low versatility to source material. It seems the maximum dimensions specified in cl 5.9 directly reflected the crusher's inability to handle larger pieces of rock. There is no evidence concerning the crusher's limitations at the other end of the spectrum – that is, very small pieces of rock – but we know that Island Industries immediately encountered problems in crushing the material in the quarry stockpile, because of the amount of fine material it contained. So it is possible that the specification of a 50mm minimum size reflected a concern about the crushability of any material that was dominated by small pieces of rock. 294 If my interpretation of the problematic sentence is correct, it seems it would have been advisable for SMEC to have drafted cl 5.9 in such a manner as to provide for a third category of material – basalt rock having a dimension below 50mm – which would not have gone either to the crusher or Middlegate, but have been stored and made available, from time to time, for appropriate selected uses. 295 Whether or not the minimum size requirement was included in order to meet the limitations of Island Industries' crusher, the proper course is to give 'generally' its usual meaning. Accordingly, I conclude that while cl 5.9 permits some basalt fines to be included in the quarry stockpile, it is incorrect to treat HDR as including all basalt fines that might have been added to it. (ii) Findings about the manner of excavation of unit I 296 At paras 162 - 214 above, I summarised the evidence about the manner of excavation of unit I given by Mr Boudan, Mr Thompson, Mr Cowie and Mr Evans. It will be recalled that Mr Boudan drilled all the top to bottom blast holes in unit I. His evidence about the nature, and manner of loading, of those holes turned out to correspond with that of Mr Cowie, who loaded and fired the blasts, and Mr Evans, who supervised them. However, Mr Boudan gave a description of the result of the top to bottom blasts that differed from that of Mr Evans, although not Mr Cowie. It will be recalled that Mr Boudan said that, after the blasts, 'it was all rock and dirt mixed together'; the rock and dirt 'fell down the cliff side'; it was 'loaded straight onto the truck and most of it was going to the quarry'; 'we blasted it … all together instead of in sections and like rock and dirt fell down with the rock'. 297 Mr Boudan was in a position to observe what happened at the time of blasting. Counsel made no challenge either to his credibility or accuracy of recollection. 298 In his affidavit, Mr Thompson referred to 'many blasts that resulted in rock and other material falling down onto the foreshore often blocking the foreshore access road'. However, in cross-examination it appeared that Mr Thompson was not clear as to whether the phenomenon of material falling from the cliff was 'primarily from unit II', where there was top to bottom bulk blasting through high strength basalt. Perhaps erring on the side of generosity to the defendant, I will put aside Mr Thompson's evidence in assessing the manner of excavation of unit I. 299 Mr Cowie had day to day responsibility for performance of Kaipara's contract. He had particular responsibility for blasting operations. He was present at each blast and had every reason closely to observe the result. In his affidavit, he said the effect of the blasting was 'to heave the material forward for the whole length of the drill hole and drop it down to a point about halfway down the face, and at angle of repose of about 35-37 degrees to the face'. He said that, with this process, 'it was inevitable that there would be intermingling of hard rock and OTR' and that 'OTR would end up in the quarry with the rock that was placed there'. 300 Counsel for SMEC did not challenge Mr Cowie on this matter, or suggest he should not be believed. Their approach, rather, was to submit that the effect of the blast described by Mr Cowie in oral evidence 'paints a very different picture than the one in his affidavit prepared by the solicitor for him to sign'. However, I do not think that is correct. 301 In oral evidence, in response to a non-leading question from Mr White, Mr Cowie said that layer 4 'would actually come down with the stuff underneath it, that layer 3, it would come down and sit on the top of that bottom stuff [presumably layer 2 material] and go out over the front of it'. 302 In answer to Mr Roberts himself, Mr Cowie said the 'dirty rock has come from the other end where we blasted [that is, the eastern end] and its got that layer 3 interposed into it. That's where the dirty rock came from'; 'it all had to come as one'. Later he said the rock that would remain after the blast 'would soak some of the interleaving layer [that is, layer 3] through as well'. 303 Mr Roberts had Mr Cowie confirm that he carefully extracted rock that had been moved as part of the blasting. However, that did not resolve Mr Roberts' problem, because Mr Cowie added: 'as best you can with the digger but … it doesn't just fall down at that layer … that's intertwined with layer 3 as it comes down, there's no way you can stop that from happening.' 304 I see no difference in substance between the affidavit and oral evidence of Mr Cowie, or any reason why he should be disbelieved. Mr Cowie appears to have had no motive to exaggerate the extent of intermingling; if anything, professional pride might be expected to have motivated him towards understatement of that extent. 305 Mr Evans conceded that pre-split blasting caused some blocks of rock to fall from the face, but he said the pre-split blasts 'did not mix the HDR with the OTR'; the harder rock layers were 'simply cracked to leave a clean batter once the material was later removed by excavation'. 306 The picture this description conveys to me is similar to that of a block of firewood partially split by a vertical axe-blow – the two sides have separated at the top, but there has been no downwards slump. However, a block of firewood generally comprises only firm wood. In a case where soft material is split, it might be expected to slump forward, reflecting Mr Cowie's description of layer 3 dumping forward, carrying the higher hard material (layer 4) onto, and forward of, the lowest layer 2. 307 I have reached the conclusion that I ought to prefer the evidence of Mr Boudan and Mr Cowie to that of Mr Evans, in relation to the manner of excavation of unit I. I was favourably impressed with both Mr Boudan and Mr Cowie, as witnesses of truth. Neither of them is a sophisticated person but they each appeared honest, and were prepared to describe events as they remembered them. Neither of them had any reason to deceive the Court. Mr Evans is a better educated, more sophisticated person. No doubt he is basically an honest person. However, it was apparent during his evidence that he felt himself under attack; he became very defensive and unwilling to make even obvious concessions. 308 Two other lines of evidence seem to support preferring the evidence of Mr Boudan and Mr Cowie to that of Mr Evans, although I am cautious of putting much weight on either of them. 309 First, it is interesting to compare the photographs of the quarry material last taken, before the first unit I blast on 11 March 2000 (photographs 21/1, 21/2, 21/3 and 21/4, all dated 28/2/00), with the first photographs after that blast (photographs 22/1 and 22/5, both dated 14/3/00). The quarry material shown in the first set of photographs all has a grey, rock-like appearance; in the second set of photographs there is significant reddish-brown colour. 310 The second line of evidence is based on the assumption that there was little or no OTR contamination of the rock stockpile before commencement of the excavation of unit I. I think that assumption is justified by the evidence. If it is correct, the 6-7% contamination of the final stockpile, assessed by Mr Wilson, came predominantly from unit I. Yet it appears that unit I constituted only about 14% of the total material stockpiled in the quarry, meaning that, at this stage of the work, there was a very high rate of OTR contamination. 311 Mr Evans' progress reports permit an approximation of the proportion of the total quarry stockpile that came from unit I. 312 The report for January 2000, delivered on 15 February 2000, stated (para 1.1) that a 'total of about 22,500m3 of crushable quality rock has been won from layers 6, 8 and 10'. Paragraph 2.1 says that 6,160m3 of that rock came from layer 6, in unit II. So the yield of layers 8 and 10, in unit IV (then complete) and unit III (then 'nearly complete'), was about 16,340m3. 313 Paragraph 1.1 of the March report, delivered on 10 April 2000, stated that 51,215m3 of crushable rock had been won from layers 4, 6, 8 and 10. According to para 2.1, the total yield of unit II was 34,321m3. If those figures are correct, by the end of March only about 554m3 (51,215 – 16,340 – 34,321) of the stockpile had come from unit I. 314 In his April report, delivered 9 May 2000, Mr Evans put the stockpile at 'about 57,000m3'. The difference between that figure and the end of March figure is about 5,800m3, meaning that the unit I contribution of the stockpile was then about 6,350m3. In his May report, delivered on 2 June 2000, Mr Evans revealed an additional 2,300m3. That took the total unit I contribution to about 8,650m3, out of a total crushable rock stockpile of about 59,300m3. On that basis, unit I provided about 14% of the stockpile volume. 315 I do not rest my conclusion about the manner of excavating unit I on these two lines of evidence. However, they tend to support the conclusion I previously reached, independently of them. 316 I find that unit I was not excavated in a manner that was conducive to the separation of HDR and OTR, but rather in a manner that made it likely there would be substantial intermingling between the two. 317 I also find this intermingling was not the result of an accident or an unexpected act or omission of Kaipara. As Mr Cowie said, it was an inevitable result of the process adopted by Kaipara: top to bottom blasting of unit I, without screening the material before it was stockpiled in the quarry. It was the duty of SMEC to ensure Kaipara adopted a satisfactory system of work. Mr Evans did not fulfil that obligation. (iii) Findings about the content of the quarry stockpile 318 The earliest evidence about stockpile content is that of Mr Johnston. I will put to one side his evidence about a long-range observation during the progress of Kaipara's work (para 227 above). A long-range observation cannot be regarded as sufficiently reliable. However, Mr Johnston also had a close-up inspection on Friday, 20 October 2000, only four days after Island Industries started work in fulfilment of its temporary crushing contract. On this occasion, as he recorded in his diary, Mr Johnston noted 'mud and rubble all through [the] stockpile'. 319 Mr Johnston is not academically qualified as a soils expert. However, at that time, he had had several years experience in road construction, being the person responsible for the maintenance and construction of all roads on the Island. He was the person who purchased the Administration's rock products and was familiar with quarrying operations. I think he was in a position to determine whether the stockpile contained only 'rock … generally larger than 50mm in all dimensions'. He plainly thought it did not; that is why he took photographs of the stockpile on the following Tuesday, 24 October 2000. It will be recalled that, in evidence, Mr Johnston discussed these photographs. He described some of the rocks as 'secondary rocks'. They were 'porous, like Swiss cheese; they have holes all through them and they are very soft rock'. Mr Johnston called the fine brown material 'brown type sediment', it was not 'good durable hard rock'. 320 Ms Davidson also inspected the stockpile on 20 October 2000, at the time of the meeting/inspection referred to in para 61 above. She deposed to what she saw at that time. She observed material that 'was not hard basalt' of the kind with which she was familiar, but 'rock and other material that was brown or pink in colour, some of which had holes in it'. She also noted 'substantial quantities of material with the appearance and consistency of soil … that was brownish in colour and capable of being compressed or stuck together in the hand'. 321 Ms Davidson has no expert qualifications. However, she is a long-term Island resident. She had been secretary of CCMB throughout the project and was aware of the objectives and course of the project. Her evidence about her observations on 20 October 2000 is confirmed by her contemporaneous minute of the inspection. The fact that she was concerned about the situation is eloquently attested by her action in attaching a copy of cl 5.9 to the minute and having the minute signed by Mr Gardner. 322 Mr Cooper inspected the stockpile in October 2000, but it is unclear whether the description in his report of 25 January 2001 ('serious contamination of the source rock with soil, clay, substandard rock etc') was derived from his observations at that time or during his January 2001 visit with Mr Bowler. The fact that, between October and January, Mr Cooper took the trouble, and put his client to the expense, of retaining Mr Bowler, suggests it was probably both; but it does not matter which is correct. 323 Mr Bowler is a geotechnical engineer with considerable soils experience. Immediately after his January 2001 inspection, Mr Bowler reported that the stockpile contained 'a significant proportion of much finer material, comprising weak highly weathered fragments of volcanic rock and plastic silt and clay fines'. He referred to Mr Cooper's photo 4. This is a close-up shot of portion of the stockpile. It shows a substantial quantity of fine, brown material. Mr Bowler referred to the terms of cl 5.9 and offered the opinion 'that the intention of the specification writer was that the hard durable basalt be "selected" and separated by the quarrying contractor from the tuff before hauling the basalt to the stockpile'. He clearly thought that intention had miscarried. He went on to state that the 'finer material has to be coarse screened to remove fines'. Mr Bowler spoke about a 25mm screen being used 'to try and recover good quality sound basalt fragments for further processing'. 324 There is no doubt that Mr Bowler was well-qualified to assess whether or not the material in the quarry was properly to be regarded as HDR, with only minimal contamination by OTR; and there is no doubt that he concluded this question should be answered in the negative, whether or not basalt fines are to be classified as HDR or OTR. 325 When he wrote his report, Mr Bowler had read the report of Dr Joyce concerning his analysis of a sample from the stockpile. Dr Joyce described the sample as 'several kilograms of grayish brown, fragmented basalt with particle sizes ranging from clay size to a maximum intermediate diameter of about 50mm'. Dr Joyce's analysis of 53 fragments of the sample showed they were '60% robust, gray basalt fragments' (and, presumably, therefore HDR, subject to the 50mm dimension issue) and '40% grey basalt fragments sufficiently soft and weak to be broken by fingers and nails alone' (and, therefore, not HDR). 326 Three comments should be made about Dr Joyce's report. First, Mr Roberts emphasised that this particular sample was not found to contain material that Dr Joyce would describe as tuff or 'plastic silt and clay fines'. However, that fact does not refute Mr Bowler's evidence that he saw such material in the stockpile. The sample was not necessarily representative of the whole of the fine material in the stockpile. 327 Second, in the context of discussing Dr Joyce, Mr Roberts submitted that '[t]uff and weathered basalt can only be identified by detailed examination by appropriately qualified persons, such as geologists'. If that proposition is correct, SMEC was seriously remiss in failing to require Kaipara to have on hand, throughout the project (or at least throughout the excavation of unit I), a qualified person who would closely inspect each bucketful of material handled by an excavator. Neither Mr Evans nor Mr Cowie thought this was necessary; they were prepared to leave to the excavator operator the decision whether, on balance, a particular bucketful should be regarded as HDR or OTR. 328 Third, Mr Roberts submitted that strength 'cannot distinguish between tuff and altered basalt'. I believe that statement is correct. However, from that base, Mr Roberts contended that, in Dr Joyce's sample, 'only apparently unweathered basalt was found; there was no tuff'. It may be agreed that Dr Joyce did not identify any tuff, but I see no basis for assuming that a sample which comprised 40% 'basalt fragments sufficiently soft and weak to be broken by fingers and nails alone' was taken from unweathered basalt. It is true that the fragments were grey. However, as Dr Burman's table (para 259 above) makes clear, that does not mean they were unweathered. The very fact that people such as Mr Lyell and Mr Evans think it necessary to test suspect rock with a geologist's hammer shows it is unsafe to judge on colour alone. I note that, despite the grey colour of the coarse fraction of the sample, Dr Joyce thought it contained 'roughly equal amounts of robust, essentially unweathered basalt … and weak, weathered … basalt rock fragments and related free mineral grains analogous to material derivable from various interflow deposits … and/or from weathered basalt layers'. 329 The next inspections took place in early February 2001, when Mr Johnston videoed the operation being carried out by Island Industries' excavator to extract the rocks larger than 100mm. Ms Davidson thought the 'sorted rock was clearly hard basalt although not necessarily clean of soil', whereas the 'balance of the material was small pieces of rock and material the appearance and consistency of soil'. 330 In the light of the scientific evidence, I am prepared to accept that some (perhaps most) of the soil-like material was of basaltic origin; Dr Joyce deposed that '14% of the material [in his sample] consisted of free mineral grains derived from basalt'. However, whatever its derivation, the soil-like material described by Ms Davidson could not be described as 'rock … larger than 50mm in all dimensions'; and the video shows this material was not merely a small proportion of the material being sorted by Island Industries, being the exception allowed by the word 'generally' in cl 5.9, but that it constituted a major proportion of it. 331 As recounted at para 231, Mr Johnston continued to observe the quarry operations: 'there continued to be a lot of dirt, deleterious material and fine particulars in the material', which caused difficulty in the processing of good quality rock. 332 The observations of Mr Johnston are consistent with those of Mr Lyell, made a few months later, in August 2001. Mr Lyell spoke of 'a mixture of hard rock and tuff, highly weathered basalt, and overburden'. When he returned to the quarry in January 2002, Mr Lyell noted scalpings – that is, material that had passed through the 100mm apertures on the excavator bucket – that 'contained a significant percentage of overburden and tuff'. He thought the overburden and tuff might constitute 35% of the scalpings, 'after deducting blue metal fines'. In February 2005, Mr Lyell estimated the 'recoverable sound basalt' to be about 50-55% of the initial scalpings. 333 As Mr Roberts has emphasised, Mr Lyell is not a geologist. However, he has had a long career in quarrying, much of it for basalt. Under those circumstances, it is reasonable to assume he knows HDR (particularly basalt HDR) when he sees it and, conversely, that he is qualified to say that particular material is not HDR. 334 Mr Lyell reached a clear conclusion that much of the material in the stockpile was not HDR. Even treating basalt fines as HDR, he estimated 35% of the scalps were OTR. 335 The earliest defendant's evidence about the content of the stockpile is that of Mr Reeve, arising out of the joint inspection of the stockpile that occurred on 11 December 2000. Mr Reeve said in his affidavit that he told Ms Davidson and Ms Cowles: 'the majority of "dirt" in the stockpile is fines'; and that neither of them disputed what he said. I will treat this as evidence of the opinion Mr Reeve formed at the time. However, it does not exclude the proposition that a substantial minority of the material was non-fines OTR, or assist in resolving the question whether the basalt was 'generally' larger than 50mm in all dimensions. 336 Mr Wilson made a thorough inspection of the stockpile two months later, in late February 2001. In his subsequent report (the Douglas report), he described the main stockpile as being 'composed of generally very high strength fresh and high to very high strength, slightly weathered basalt suitable for aggregate production'. As became apparent during Mr Wilson's evidence, he treated basalt fines as falling into this category of material. 337 Mr Wilson acknowledged that an 'estimated 6% to 7%' of the main stockpile was 'unsuitable for aggregate production' because it was clay or weathered basalt. However, he regarded this result as acceptable; he considered a 10% component of 'secondary rock' would be reasonable. 338 I make four comments about the Douglas report and Mr Wilson's evidence. First, I understand his reference to 'the main stockpile' to be a reference to the material left in the quarry by Kaipara which had not yet been sorted by Island Industries into separate piles (>100mm and <100mm). By the date of Mr Wilson's inspection, according to section 4 of the Douglas report, the upper three metres of the main stockpile had been removed – presumably by Island Industries in the course of its sorting (scalping) exercise. Mr Wilson had learned 'from discussions with Administration staff' that this upper layer had been derived from unit I and had included a 'significant proportion of material less than about 100mm' which had passed through the bucket apertures and been stockpiled as OTR. As unit I was excavated last, it is likely that the material taken from that unit would have been on top of the stockpile, as the NIA staff had apparently stated. Mr Wilson did not indicate the height of the main stockpile at the date of his inspection. However, given that unit I contributed only about 14% of the material stockpiled in the quarry by Kaipara (paras 310 - 314 above), it is reasonable to assume that removal of a three metre layer would have removed much, if not all, of the unit I material. The estimate of 6% - 7% therefore gives little insight into the proportion of low-strength weathered basalt that went into the quarry from unit I. 339 Second, Mr Wilson gave no reason for his view that a 10% component of 'secondary rock' would be reasonable. He gave no evidence about any relevant Australian standard or industry practice. It is not possible to reconcile Mr Wilson's opinion with the requirements of cl 5.9, Mr Cowie's view that the limit of acceptable contamination would be about 1% - 2% or Mr Evans' reference to 'less than 1%'. 340 Third, Mr Wilson thought that approximately 30% of the material in the OTR piles should be regarded as unsuitable for aggregate production. (Mr Bowler said 40%, Mr Lyell 35%). Given that the material in the OTR piles was simply what had passed through the 100mm apertures in the excavator buckets, and so included basalt fines, this is a high figure. The video shows a large proportion of what was being scooped up by the excavator to be passing through the apertures. In the telephone conference call of 7 May 2001, Mr Wilson said 30% of the visible material in the quarry was below the range of 9.5 – 13.2mm. The proportion of material below 100mm must, therefore, have been well above 30%. 341 Fourth, Douglas Partners tested the strength of fragments taken from two samples collected by Mr Wilson: see paras 247-252 above. The results showed a significantly higher percentage breakdown of pieces below 13.2mm in size, compared with those larger than 13.2mm. Mr Wilson regarded the results for the three size ranges below 13.2mm as being inconsistent with the material being HDR. Yet, on his assessment, 30% of the visible material in the quarry was in this category. 342 None of the defendant's other experts gave evidence about observations of the quarry stockpile. 343 In the expert evidence, there was much discussion about possible sources of the reddish-brown colouration that is so notable in the photographs; also discussion about the results of petrographic examinations of various samples. A complicating factor about the latter subject is that it appears, from the evidence of both Dr Burman and Dr Redman, that basalt and tuff have a common origin. They are apparently not easily distinguished by chemical analysis. 344 I do not think the evidence would enable me to determine the proportion of brown colouration that emanated from one source, rather than another. Neither do I think it necessary to do so. It will be recalled that Dr Burman, who was called by counsel for SMEC, had read and analysed all the other expert reports. In cross-examination, Mr White put to him the following broad question, making clear that it was confined to material extracted from unit I or unit II: 'It is the fact, is it not Dr Burman, that none of the brown material that we have seen in the quarry stockpile would comply with that specification [cl 5.9]?' Dr Burman agreed. Given the quantity of brown material visible in the photographs, that answer is extremely damaging to the defendant's case. 345 However, I do not wish to rest my conclusion about this issue on the answer to one question by one witness. Dr Burman's concession merely confirmed the impression I had obtained from the evidence of each of the other witnesses mentioned in this part of my reasons, including (importantly) Mr Wilson. 346 If, as I believe, it is not appropriate to treat all the basalt fines as HDR, for the purposes of cl 5.9, the evidence overwhelmingly demonstrates that the material stockpiled in the quarry by Kaipara did not comply with that clause. Even if I am wrong, and all basalt fines should be regarded as HDR, the evidence clearly indicates an unacceptable degree of contamination of the stockpile by material that is neither hard basalt rock, having the prescribed dimensions, or basalt fines. It is not necessary to determine the source of the contaminating material. However, having regard to the evidence concerning the manner of excavation of unit I, it is reasonable to conclude that much, probably most, of it came from layer 3 of unit I. 347 From time to time, during the trial, it was suggested that the material stockpiled in the quarry should be regarded as acceptable, for the purposes of cl 5.9, because this was the best that Kaipara could do, having regard to the characteristics of the cliff, especially the width of the bench at the top of unit I. I reject that approach. It is true that the bench was narrow; it was probably narrower than had been intended by the SMEC design team. The difference may have been the result of an error by SMEC personnel; it may have been the product of unforeseeable rock conditions. The narrow bench possibly left Mr Cowie no choice but to use top to toe blasts in unit I. Inevitably, according to him, such blasts would result in the intermingling of layer 3 material with HDR. However, as both he and Mr Evans acknowledged, that intermingling could have been reversed by screening. Screening would not have separated HDR from weathered rock, but the excavation program could have separately targeted patches of weathered rock. 348 Mr Cowie gave evidence that a screen could have been brought in from New Zealand. Of course, this would have been at a cost. If the screen had become required only because of inaccuracies in the contract documents, Kaipara presumably would have been entitled to reimbursement of that cost from NIA – leaving NIA to sort out with SMEC the ultimate burden of the extra. However, nobody considered importing a screen. I believe this was because there was inadequate forethought about the problem of separating the unit I material. For reasons that remain unexplained, SMEC did not insist that Kaipara comply with its contractual obligation to prepare, and produce for approval, a materials management plan. As Mr Reeve conceded, a 'material management plan would have included the process by which hard, durable rock was separated and placed in the quarry and OTR placed at Middlegate'. The Middlegate claim 349 NIA claims that SMEC breached the PMA in relation to the dumping of material at Middlegate. Once again, NIA accepts it would have been impossible totally to prevent intermingling, but it contends that there was an unacceptable degree of intermingling of OTR and HDR at this location. 350 It was a term of the settlement agreement between NIA and Kaipara that Kaipara would return to the Island and excavate, to a depth of three metres, the area in which it had placed fill taken from Cascade Cliff. Kaipara removed rock from the excavation. At some stage, that rock was sorted into two categories: material above 100mm in diameter and material below 100mm. The two categories were separately stockpiled. A surveyor, Donald Roderick Taylor, calculated that there were about 7,345m3 of rock in the >100mm stockpile and 17,410m3 in the <100mm stockpile, a total of 24,755m3. 351 Mr Lyell inspected the two stockpiles. He also inspected material that had been dumped at Youngs Road, for want of space at Middlegate. He concluded that 70% of the rock stored at Middlegate was HDR; that is, about 17,328m3. However, as there was much more <100mm material than >100mm, it may be surmised that a considerable proportion of this material ought not to have been treated, under cl 5.9, as HDR and stored in the quarry. 352 SMEC does not accept Mr Lyell's assessment. However, as appears from a schedule of damages prepared by the parties prior to the hearing, it does accept that HDR went to Middlegate. In the schedule, SMEC said: 'SMEC accepts that the Middlegate stockpile of >100mm material contains ~37% of very high or high strength basalt and that the stockpile of 50-100mm material contains ~7% of very high or high strength material. However, the rock showed signs of having come from a distinctly weathered layer such to make selective mining of the material from the cliff uneconomic.' 353 If the >100mm stockpile contains 7,345m3, this is a concession that it contains about 2,717m3 of HDR. Applying the conversion ratio adopted by Mr Evans in his progress reports (one cubic metre equals 2.75 tonnes), this means SMEC concedes there were about 7,472 tonnes of HDR in the >100mm stockpile. To put that figure in perspective, I mention that Mr Evans' final progress report, for May 2000, claimed that a total of 163,075 tonnes (59,300m3) of crushable rock had been stockpiled in the quarry. In other words the HDR concededly taken to Middlegate was equivalent to 4.6% of what was claimed to have been stored in the quarry. On Mr Lyell's estimated 70% HDR, the Middlegate HDR would have been equivalent to about 8.7% of the crushable rock stored in the quarry. 354 It is not necessary to determine which percentage is correct; even a proportion as low as 4.6% is significant, in relation to waste of a scarce resource. 355 As will have been noted, SMEC's answer to this aspect of the claim is to say that the rock 'showed signs of having come from a distinctly weathered layer such as to make selective mining of the material from the cliff uneconomic'. No evidence was led to support this claim. There was no evidence about the provenance of the material about which the concession was made; nor is there any evidence that either Mr Cowie or Mr Evans ever considered the possibility of selective mining of particular areas of rock. Both unit II and unit I were blasted top to bottom, except in the western half of unit I, where the relevant rock was so weathered as to be capable of mechanical excavation. In any event, there is nothing in the Kaipara contract documents that excludes compliance with cl 5.9 where to do so is 'uneconomic', whatever that means in this context. 356 It seems clear that the Middlegate operations were affected by an unacceptable degree of intermingling. That intermingling was a function of the failure of SMEC to require Kaipara to produce, and subsequently implement, a materials management plan that would ensure proper separation of the material to be dumped at Middlegate. 357 It is not necessary to make a finding as to the extent of intermingling at Middlegate. On any view, it was sufficient to support NIA's claim to recover the costs it incurred in relation to investigation of the Middlegate situation. The parties have agreed that these costs amount to $64,965. Damages 358 It follows from what I have said, in relation to both the quarry stockpile and Middlegate dumping, that NIA is entitled to succeed in its claim for damages for breach by SMEC of the PMA. However, as is accepted by NIA, because of the terms of cl 4.2 of the PMA, the maximum amount that may be awarded for that breach is $300,000. Under these circumstances, I see little point in making findings about all the items of damages claimed by NIA, some of which are highly contentious and would require detailed references to the evidence. The more useful course is simply to determine whether I am satisfied that NIA has established damage to the extent, at least, of $300,000. 359 In its schedule of losses, NIA claimed the sum of $343,216.34, as being payments made to Island Industries, up to August 2001, 'for work performed to screen, separate and stockpile OTR from HDR in [the] Quarry, including for payment for settlement of dispute over non-conforming material'. 360 In his affidavit, Mr Johnston referred to these claims. He said: 'Over the next two to three months [following October 2000] I became aware that Island Industries was corresponding with NIA and making claims for extra money for the time and work that had been involved in moving and sorting OTR. I closely monitored Island Industries' operations to enable me to calculate the extra time and work that was required to complete the project because of the OTR. I observed that apart from the problems with the material in the Stockpile, Island Industries was also having problems with machinery. Every claim Island Industries made was reviewed and authorized by me. Exhibited to me and marked "MRJ8" are copies of: • Payment Detail Summaries; • Authorisation advice memos; and, • Invoices from Island Industries Pty Ltd, for each of the invoices submitted for OTR sorting and removal expenses by Island Industries. The handwriting on the invoices and crossing out of figures is mine. I ensured to the best of my ability that Island Industries was only paid for the equipment used and hours performed in excess of what was specified in the Crushing Contract.' 361 Exhibit MRJ8 does set out all the material listed by Mr Johnston. It includes a schedule, compiled by him, which gives invoice dates between 22 March 2001 and 26 October 2001 and shows, in relation to each invoice, the total claim and what Mr Johnston calls 'OTR amount'. The total claims come to $414,128.24; the total 'OTR amount' to $288,216.34. 362 The sum of $288,216.34 does not include $134,495 paid to Island Industries under the deed of release dated 3 May 2001: see para 84 above. It will be recalled the deed of release identified $84,495 as being 'plant, machinery hire and cartage' and the remaining $50,000 as 'contract compensation'. 363 I make no criticism of the inclusion of the $50,000 item in the settlement with Island Industries. However, as there has been no evidence about the rationale of, or necessity for, this item, I would not be prepared to include it in my assessment of damages. On the other hand, there is no reason not to include the $84,495 item, the reasonableness of which is amply established. 364 When Mr Johnston gave oral evidence, Mr White took him to exhibit MRJ8. Mr Johnston explained the documents and confirmed that he 'extracted the sum of $288,000 as being relevant to the plant hire and screening of the minus 100 scalpings in the rock stockpile'. Mr Roberts did not challenge Mr Johnston's computation or justification for treating the sum of $288,216.34 as being the cost of having Island Industries screen out the <100mm material that had been left in the rock stockpile. 365 I am satisfied that screening was necessary, but only because of the failure of Kaipara and SMEC to ensure adequate separation of HDR and OTR in the quarry. Mr Johnston said in evidence that, when NIA was assessing the various tenders for the temporary crushing contract, he had not expected that screening would be necessary because, as part of the contract with Kaipara, 'it was supposed to be clean durable rock'; he had 'assumed that that is how it would be'. Mr Lyell said that, if the material in the quarry stockpile had complied with cl 5.9, it would not have required screening, even to meet the specification contained in a subsequent contract between NIA and Boral for re-surfacing the airport. 366 The <100mm screening did not precisely reflect the specifications set out in cl 5.9. A 50mm screen would have better reflected the specification of the material being 'generally' not less than 50mm in all dimensions. However, it seems no 50mm screen was immediately available. Even if it had been, there is no reason to believe the cost of a 50mm screening would have been less than that paid for the 100mm screening. Accordingly, as it seems to me, it is reasonable to allow the full sum of $288,216.34 calculated by Mr Johnston. 367 It will be apparent that the sums allowed by me already exceed $300,000. They are: (i) Investigations at Middlegate $ 64,965 (ii) Item 1 of the Island Industries settlement 84,495 (iii) Screening costs assessed by Mr Johnston 288,216 Total $437,676 368 In the circumstances, I need not determine the recoverability of any of the other items claimed by NIA. However, I comment that, if it had been necessary for me to go further, I would have allowed the cost incurred by NIA in having Boral rescreen the <100mm material in order to remove OTR from the aggregate required for resurfacing the airport ($601,460) and the cost that will be incurred by NIA in relation to screening the material remaining in the quarry after removal of that required for the airport. I would not be prepared to allow the whole cost of purchasing a screen, since this is for acquisition of a capital item that will provide an ongoing benefit to NIA. However, the parties agree that the further screening would involve 66,987 tonnes at $8.80 per tonne – a total of $589,485. That item should certainly be allowed. I would also allow the cost incurred by NIA in obtaining the Douglas report ($11,500). It being unnecessary to do so, I refrain from comment on the other items claimed by NIA. Disposition 369 I propose to enter judgment for the plaintiff, NIA, against the defendant, SMEC, in the sum of $300,000. The defendant will be ordered to pay the plaintiff's costs. I certify that the preceding three hundred and sixty-nine (369) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wilcox. Associate: Dated: 3 August 2006 Solicitor for the Plaintiff: Mr P D White of White & McDonald Counsel for the Defendant: Mr I G R Roberts & Mr A Martin Solicitor for the Defendant: Phillips Fox Dates of Hearing: 26, 27, 28 April 2006; 1, 2, 3, 4, 5, 8 and 11 May 2006 Date of Judgment: 3 August 2006