Blame shared for tunnel collapse

A geotechnical engineering firm found partially responsible for the 2005 Sydney Lane Cove Tunnel collapse has been denied a subrogation waiver by NSW Supreme Court Justice Robert McDougall.

Justice McDougall said he could not understand how the now liquidated company Pells Sullivan Meynink Ltd (PSM) could argue it had not breached an unprofessional work indemnity exemption clause because it did not meet its contractual obligation to provide the service.

“Had PSM made some attempt to comply with its obligations and negligently [provided a service], it would not be entitled to indemnity,” he said.

“Therefore I do not understand how [it] can be placed in a better position simply because it made no attempt to perform its contractual duties.” Justice McDougall found PSM one third responsible for the collapse.

Tunnel builders Thiess Pty Ltd and John Holland Pty Ltd (TJH) sued PSM, designer Parsons Brinckerhoff Australia (PBA) and independent reviewer URS Australia for $20.95 million plus interest to cover the costs of equipment left underground and property damage.

The court was told the tunnel roof collapsed at Marden Street temporary works at 1.40am on November 2, 2005. No one was killed or injured but plant could not be retrieved from beneath rock and there was considerable nearby property damage.

TJH blamed PBA’s design, PSM for not monitoring ground conditions, and URS for not fulfilling its responsibilities to review the other subcontractors’ work. PBA, PSM and URS all blamed TJH’s construction techniques and each other if TJH was found not wholly responsible.

TJH and PBA reached agreement during the trial, leaving only apportionment of blame to be decided by Justice McDougall.

The 12-day trial was held in July-August 2015. Justice McDougall established a complex list of 20 issues in dispute.

He also outlined the complexity of the contractual documentation which he said was increased by the way in which obligations appearing in a contract at one level of the hierarchy were repeated in, so as to become terms of, a contract or contracts at a lower level.

“Another factor increasing the complexity (and decreasing the immediate comprehensibility) of the contract documents is their heavy reliance on a system of extensive and cross-referenced definitions. A consequence of the former characteristic is that, to understand the content of an obligation called up in one contract, it is necessary to refer to another.

“A consequence of the second characteristic is that, to make any sense of the obligation thus discovered, it is often necessary to follow through a chain of cross-referenced definitions,” he said.

In apportioning blame to PSM, Justice McDougall said its obligations extended beyond assessing ground conditions to selecting support types to suit the actual ground conditions.

PSM argued the primary cause of the collapse was construction deficiencies, specifically in rockbolting and shotcreting. But Justice McDougall concluded PSM had not demonstrated any deficiencies in the tunnel to the point where the collapse occurred.

“In any event, there was a disagreement between the experts as to whether those construction deficiencies (to the extent they occurred) had any causal significance.

“There can be no doubt there was a causal relationship between PBA’s breach of its design duties and the collapse. There is no explanation for PBA’s decision to recommend a support design based on use of rockbolts and shotcrete only, particularly when its design philosophy required passive support, such as steel sets. There is no evidence such a design, if complied with, would have been inadequate.”

Justice McDougall said: “In terms of causal potency, each failure seems to be an independent and effective cause of the loss that followed. Had PBA adhered to its design philosophy and produced a design using passive support, such as steel sets, then the collapse would not have occurred. Had PSM assessed the design in light of the ground conditions encountered, it should have raised with PBA the adequacy of the design. Had PSM done so, it is likely PBA would have revised the support design to ensure it was adequate.”

But Justice McDougall said “it does not follow that their contributions were equally potent”. “Assessment of causal potency requires more than an analysis of causation.”

He attributed primary responsibility to PBA, which was responsible for producing appropriate designs. But PMS’s failure to perform its contractual obligations was, nonetheless, significant.

He said it was difficult to convert “impressionistic views of comparative responsibility” to precise figures, but assigned responsibility two thirds to PBA and one third to PSM.

There were two insurance policies, a construction risks policy and a legal liability policy. TJH had been indemnified for some but not all losses under both policies.

PSM claimed it was an insured under both policies and therefore entitled to the benefit of the waiver of subrogation clause in each.

But Justice McDougall found PSM was not an insured under the construction policy and there was no bar to recovery.

Nor was PMS an insured under the legal liability policy. “The question is not what [PMS’s] position might have been under some hypothetical policy that, on its view, should have been effected.” The policy was clear. Clause 5 qualified the general definition of the insured so a subcontractor had the benefit of the policy only where the terms of the contract made between that subcontractor and TJH required TJH to effect such insurance for the benefit of the former. There was no such provision in the TJH-PSM consultancy agreement.

Justice McDougall said URS was not responsible because it had met its contractual obligations and could have provided advice to avoid a collapse had PSM done its job. He ordered PSM to pay $6.98 million plus interest.

(Thiess Pty Ltd and John Holland Pty Ltd v Parsons Brinckerhoff Australia Pty Ltd [2016], NSWSC 173, 04/03/2016)