Loading...
Queensland Judgments

beta

Authorised Reports & Unreported Judgments
Exit Distraction Free Reading Mode
  •   Notable Unreported Decision

Santos Ltd v Fluor Australia Pty Ltd

 

[2017] QSC 153

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

Santos Ltd v Fluor Australia Pty Ltd [2017] QSC 153

PARTIES:

SANTOS LIMITED ABN 80 007 550 923

(plaintiff)

v

FLUOR AUSTRALIA PTY LTD ABN 28 004 511 942

(defendant)

FILE NO/S:

No 12939 of 2016

DIVISION:

Trial

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

26 July 2017

DELIVERED AT:

Brisbane

HEARING DATE:

18 May 2017

JUDGE:

Flanagan J

ORDER:

1.    I adjourn Fluor’s application to strike out paragraphs 92, 93, 94, 106 (to the extent it incorporates 105(a) and 105(c)), 185, 186, 187, 190 and 191 of the statement of claim. 

2.     The balance of Fluor’s application filed 6 April 2017 is dismissed.

3.     I will hear the parties as to costs.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – STRIKING OUT – DISCLOSING NO REASONABLE CAUSE OF ACTION OR DEFENCE – where the defendant applies to strike out paragraphs of the plaintiff’s claim – where the relevant parts of the statement of claim concern breaches of subcontracts the defendant entered into to carry out the work under the contract - whether paragraphs of the statement of claim fail to disclose a reasonable cause of action - whether the statement of claim identifies “global” or “total costs” claims – whether there is a “global” or “total costs claim” – whether a “global” or “total costs” claim is permissible in the circumstances – whether it is sufficient for a plaintiff to plead the material facts which are said to give rise to a causal connection

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – STRIKING OUT – EMBARRASSING, TENDENCY TO CAUSE PREJUDICE, SCANDALOUS, UNNECESSARY ETC OR CAUSING DELAY IN PROCEEDINGS – where the defendant applies to strike out paragraphs of the plaintiff’s claim - whether paragraphs of the statement of claim do not sufficiently inform the defendant of the case to be met – whether the statement of claim would impose an unreasonable or unfair burden on the defendant that would prejudice, embarrass or delay a fair trial – whether the plaintiff sufficiently pleaded a causal connection -  whether the plaintiff sufficiently pleads the causal connection between the breaches and amount claimed

Uniform Civil Procedure Rules 1999, r 171

Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215, cited

DM Drainage & Constructions Pty Ltd v Karara Mining Ltd [2014] WASC 170, applied

John Doyle Constructions Ltd v Laing Management (Scotland) Ltd [2004] BLR 295, cited

John Holland Construction & Engineering Pty Ltd v Kvaerner RJ Brown Pty Ltd & Anor (1996) 8 VR 681, cited

Kousa International LLC v CPB Contractors Pty Ltd [2017] WASC 11, applied

LBS Holdings Pty Ltd v The Body Corporate for Condor Community Title Scheme 13200 & Ors [2004] QSC 229, cited

Mainteck Services Pty Ltd v Stein Heurtey SA & Anor [2014] NSWCA 184, cited

McGrath Corporation Pty Ltd v Global Construction Management (Qld) Pty Ltd [2011] QSC 178, cited

Southern Cross Mine Management Pty Ltd v Ensham Resources Pty Ltd & Ors [2004] QSC 457, cited

COUNSEL:

G A Thompson QC, with J J Baartz, for the applicant/defendant

P L O’Shea QC, with C A Schneider, for the respondent/plaintiff

SOLICITORS:

Jones Day for the applicant/defendant

Corrs Chambers Westgarth for the respondent/plaintiff

  1. Fluor seeks to strike out a number of paragraphs of Santos’ statement of claim.  Santos commenced the proceedings by claim and statement of claim filed 13 December 2016.  The proceedings have been placed on my Supervised Case List.
  2. The application is brought pursuant to Rule 171 of the Uniform Civil Procedure Rules 1999.  Fluor’s application does not identify which of the grounds set out in Rule 171 are relied on to strike out the specified paragraphs of the statement of claim.  From the parties’ written submissions however, it may be accepted that Fluor’s strike out proceeds on the basis that the relevant paragraphs:
  1. fail to disclose a reasonable cause of action; and
  2. do not sufficiently inform Fluor of the case to be met, and would, if permitted to proceed to trial, impose an unreasonable and unfair burden on Fluor that would prejudice, embarrass or delay a fair trial.[1]

Background

  1. Santos is a proponent of a project to extract coal seam gas from the Fairview and Roma coal seam fields in the Surat Basin in Queensland and to supply that gas for commercial sale and/or conversion to liquefied natural gas.  The project is referred to as the GLNG Project.  Santos is one of several participants in the GLNG Project. 
  2. On 13 January 2011 Santos entered into a written contract with Fluor pursuant to which Fluor agreed to engineer, procure and construct certain facilities required by Santos for the GLNG Project (the Work).  These facilities included three gas compression plant facilities (Hubs 2, 4 and 5), new wellpads in the fields surrounding the compressor stations and networks of gathering lines to connect each wellpad with a hub.  The written contract was amended by deed dated 26 August 2011 (the Contract).
  3. By its claim filed 13 December 2016 Santos seeks the payment of an amount of approximately $1.4 billion as a debt due and owing under the Contract.
  4. The statement of claim comprises six parts.  The strike out application concerns Parts C and D.  Part C deals with breaches of various subcontracts that Fluor entered into for the purposes of the Work to be undertaken pursuant to the Contract.  Part C.1 alleges breaches of a subcontract between Fluor and Clough Seam Gas Pty Ltd and Downer EDI Engineering Power Pty Ltd, together trading as Clough Downer JV (the CDJV subcontract).  The CDJV subcontract was entered into on 17 February 2012.  It was in relation to works comprising the construction of facilities and pipelines in the Fairview field.  Part C.2 concerns alleged breaches by Fluor of a subcontract entered into on 28 July 2012 with McConnell Dowell Constructors (Aust) Pty Ltd (the McConnell Dowell subcontract).  This subcontract concerned works comprising the construction of facilities and pipelines in the Roma field.  Part C.3 of the statement of claim concerns a subcontract between Fluor and Tenix Australia Pty Ltd in which Tenix agreed to perform works comprising the design and construction of an overhead high voltage power distribution and sub-transmission network.  Part C.4 concerns a subcontract between Fluor and Hitec Welding Pty Ltd entered into on 8 August 2012.  Fluor does not press its strike out application in relation to paragraphs 229 and 230 of the statement of claim which concern the alleged breach by it of the Hitec subcontract.
  5. In Part C of the statement of claim Santos alleges that Fluor incurred (and Santos paid to Fluor) certain costs that were “Excluded Costs” or that were “not Actual Costs” under the Contract.  Pursuant to the Contract the Actual Costs properly incurred by Fluor in performing the Work under the Contract were calculated in accordance with Schedule 3 of the Contract, but excluded (except where provided otherwise in Schedule 3) profit, overheads and Excluded Costs.  Excluded Costs under the Contract included any costs, expenses, damages, liabilities or other amounts arising out of or as a consequence of:
  1. breach of the Contract by Fluor “personally”; or
  2. breach by Fluor of a subcontract or any other contract between Fluor and a third party.[2]
  1. In Part D of the statement of claim Santos claims that Fluor breached the terms of the Contract.  Part of the Work which Fluor was required to perform under the Contract was the preparation and completion of all design documents required for the performance of the Work.  One of the breaches alleged in Part D of the statement of claim is a failure on the part of Fluor to deliver all of the design documents by the date required by the relevant program referred to in the statement of claim as the “EPC program”.
  2. Part E of the statement of claim pleads the amounts Santos allege are owed by Fluor under the Contract.  The total overpayment of approximately $1.4 billion is pleaded in paragraph 323.  This amount does not include the amounts described in paragraphs 186 and 190 which are two of the paragraphs sought to be struck out in respect of the McConnell Dowell subcontract.
  3. Part E of the statement of claim also pleads in paragraph 326 that Santos issued to Fluor a Payment Certificate under clause 29.4(b) of the Contract certifying that Fluor is required to repay Santos the total overpayment.
  4. The particulars of the factual allegations in the statement of claim (including particulars of alleged breaches of the relevant subcontracts and Contract) are contained in 37 separate Schedules to the pleading.
  5. By its application Fluor seeks to strike out various paragraphs of parts C.1, C.2, C.3 and D of the statement of claim.

Fluor’s primary complaint

  1. Fluor’s strike out application identifies paragraphs sought to be struck out by reference to the relevant subcontract and the Contract.  Paragraph 1(a) of the application, for example, seeks to have struck out paragraphs 31, 37, 74, 76, 90, 91, 92, 93, 94, 96, 98, 99, 102, 103, 104 and 106 of Part C.1 of the statement of claim which is headed “Breach of the CDJV Subcontract”.  Santos in its written submissions however, addresses the strike out application by reference to individual claims rather than to the relevant subcontract or the Contract.  Santos identifies that Fluor seeks to strike out 13 claims which may be divided into six categories:

Category 1: Hub delay claims (6 claims);

Category 2: Gathering lines delay claims (2 claims);

Category 3: Defective material claims (2 claims);

Category 4: CDJV subcontract amendment claim (1 claim);

Category 5: CDJV acceleration claim (1 claim);

Category 6: Disruption claim (1 claim).[3]

In its written submissions in reply Fluor also addresses the strike out application by reference to these six categories of claim identified by Santos.  It is convenient therefore to deal with the strike out application by reference to these six categories.

  1. Fluor’s primary complaint is that Santos has failed to plead a causative link between multiple alleged breaches and alleged delay, loss and damage.  Fluor submits that many of the claims are “global” or “total costs” claims and that the statement of claim does not plead the material facts upon which Santos will rely at the hearing of these proceedings to prove causation.  Fluor further submits that a bare assertion that certain alleged costs arose “out of or as a consequence of” certain alleged events is not enough and that it is incumbent upon Santos to identify the facts which are said to give rise to the pleaded causal connection.[4]
  2. Fluor refers to the decision of Chesterman J (as his Honour then was) in Southern Cross Mine Management Pty Ltd v Ensham Resources Pty Ltd & Ors[5] where his Honour stated:

“The parties are agreed upon the relevant principles. In any cause of action in respect of which causation is an essential element it is necessary to plead the material facts which are said to give rise to the causal connection. In particular it is necessary to plead the facts which lead to a reasonable inference that the acts complained of (here the relevant non-disclosure) and the alleged later event (here the making of the dragline agreement) stand to each other in the relation of cause and effect. Douglas J put it this way in LBS Holdings Pty Ltd v The Body Corporate for Condor Community Title Scheme 13200 & Ors [2004] QSC 229 (at para [3]):

‘… The principle relied on is that facts must be set out which lead to a reasonable inference that the acts complained of and the loss claimed stand to each other in the relation of cause and effect and that the plaintiff must plead the necessary facts showing that causal link …’.”

  1. Santos does not cavil with the proposition that it is required to plead all of the material facts that give rise to the causal connection that forms an essential element of its claim.[6]  Santos however, submits that the relevant causal connection which should be pleaded is that identified by the Contract.  This is further explained in paragraphs 14 to 16 of Santos’ Outline of Submissions as follows:

“14. The principal claims made by Santos in the proceeding (and the only claims relevant to the paragraphs that Fluor seeks to strike out) are for payment of a debt due and owing by Fluor under a contract.  Santos pleads that this debt arises as a result of:

  1.  Fluor having claimed, and Santos having paid, amounts which Fluor was not entitled to be paid under that contract; and
  1.  Santos having issued a payment certificate under the head contract requiring Fluor to repay those amounts, and Fluor not having paid those amounts.

15. Santos’ claim that Fluor was not entitled to be paid those amounts is based on the following:

  1.  these amounts are ‘Excluded Costs’, which is relevantly defined in the contract as being:

any costs, expenses, damages, liabilities or other amounts arising out of or as a consequence of … breach of the Contract by [Fluor] Personally; [or] breach by [Fluor] of a subcontract or any other contract between [Fluor] and any third party

  1.  alternatively, these amounts are not ‘Actual Costs’ as they were not properly incurred by Fluor in performing the work under the contract (because they arose out of or as a consequence of Fluor’s wrongful conduct);

16. The strength of the causal connection that Santos will ultimately be required to establish between Fluor’s conduct and the amount claimed is therefore that stated in the contract – i.e. the claimed amounts must be proven to ‘arise out of or as a consequence of’ Fluor’s wrongful conduct.  This is the causal link that must be articulated in the pleading.  For the reasons set out in this outline, the statement of claim fulfils this requirement as it clearly pleads the material facts that Santos intends to prove at trial which, if accepted, give rise to a reasonable inference that the amounts claimed arose out of or as a consequence of Fluor’s wrongful conduct.”

  1. In respect of Fluor’s complaint that many of Santos’ claims are pleaded “globally” or as “total costs” claims, Fluor primarily relies on three cases.  The first is the decision of the New South Wales Court of Appeal in Mainteck Services Pty Ltd v Stein Heurtey SA & Anor.[7]  In that case Leeming JA (with whom Ward and Emmett JJA agreed) emphasised that there are no special legal principles that mean plaintiffs in “building cases” win or lose differently from the plaintiffs in other classes of contractual case.  His Honour stated that the plaintiff seeking damages will fail unless he, she or it establishes breach, causation and loss.[8]  His Honour continued:

“True it is that some decisions on breach of contract in building cases have used the language of ‘global claim’. Contrary to what was at the forefront of Mainteck’s written and oral submissions, this does not involve any special principles of fact or of law.”[9]

  1. The second case is DM Drainage & Constructions Pty Ltd v Karara Mining Ltd.[10]  In that case Beech J identified the nature of a “global claim”, a “total costs claim” and a “modified total costs claim” as follows:

 "[36]  A global claim is one in which a plaintiff claiming under a construction contract contends that there were multiple interacting events for which the defendant is responsible and, rather than attempting to identify (if it were possible) the precise loss from each event, the plaintiff pursues a claim for the global loss which the plaintiff says was caused by all the events for which the defendant is responsible.

 [37]  A total costs claim is where a contractor alleges against a principal a number of breaches of contract and quantifies its global loss as the actual cost of the work less the contractually expected cost.

 [38]  A modified total costs claim is where the contractor divides up its additional costs, and claims that the whole of one or more parts of those costs is the result of events for which the principal is contractually responsible.”

  1. The basis upon which Beech J determined that some of the claims were global claims was as follows:

“The claims are global in nature because nothing in the statement of claim or schedules attempts to draw any causal link between any particular items in Sch A (the giving of access or approval), Sch B (the sequencing directions), or Sch F (the issue of IFC drawings) and any particular consequence in relation to any particular part of the work identified in Sch C, or to the incurring of any particular cost referred to Sch C.”[11]

  1. After considering a number of authorities Beech J stated that a global claim is permissible where it is impractical to disentangle that part of the loss which is attributable to each head of claim, and where that situation has not been brought about by delay or other conduct of the claimant.[12]
  2. Beech J referred to the decision of Byrne J in John Holland Construction & Engineering Pty Ltd v Kvaerner RJ Brown Pty Ltd & Anor[13] which is the third decision referred to by Fluor.  In that case Byrne J observed as follows:

“The question whether in a given case a pleading based on a global claim, or even a total cost claim or some variant of this, is likely to or may prejudice, embarrass or delay the fair trial of a proceeding, must depend upon an examination of the pleading itself and the claim which it makes.  The fundamental concern of the court is that the dispute between the parties should be determined expeditiously and economically and, above all, fairly.  Where the proceeding is being managed in a specialist list, the judge, whose task it is to steer the case through its interlocutory stages, might, and perhaps should, explore the claim to determine whether the form it takes is driven by its nature and complexity, or by a desire to conceal its bogus nature by presenting it in a snowstorm of unrelated and insufficiently particularised allegations, or by a desire to disadvantage the defendant in some way.  Relevant to this is an acknowledgement that a total cost claim puts a burden on the defendant.  This burden may involve the defendant in extensive discovery of documents relating to the performance of the project; it may mean that at trial the defendant must cross-examine the plaintiff’s witnesses to expose the flaws in a claim which assumes that the defendant is, itself, responsible for every item of the plaintiff’s cost overrun; it may mean that the defendant must lead evidence to explain what, in fact, was the impact of each of the acts complained of on the project, as was done in McAlpine Humberoak Ltd v McDermott International Inc (No 1).  Litigation inevitably imposes burdens on the parties; the court must exercise its power to ensure that, as far as possible, these burdens are not unreasonable and are not unnecessarily imposed.”[14]

  1. Beech J in DM Drainage ultimately determined that it was appropriate for the plaintiff to plead that it was impossible or impracticable to identify that part of the loss which was attributable to each head of claim or conduct on the part of the principal.[15]
  2. Fluor accepts that so-called “global” or “total costs” claims may be pleaded.[16]  It may also be accepted that there is nothing incomplete or necessarily defective about “global” or “total costs” claims.  As submitted by Santos, causes of action comprising global and/or total costs claims have in the past proceeded to trial, and have succeeded.[17]  Santos submits that none of the claims Fluor complains of in this application comprise a composite global and total costs claim of the kind struck out by the courts in DM Drainage and John Holland.  Accordingly, whilst these decisions provide useful guidance on the principles to be applied, they are not directly applicable to the resolution of the matters raised by Fluor in this application.
  3. Fluor’s ultimate submission is that the statement of claim may be cured by Santos pleading that: “It is impossible or impracticable to identify what part of its loss is attributable to each head of its claim or relevant conduct on the part of [Fluor].”[18]  According to Fluor, to the extent Santos has failed to put its case upon that basis, the relevant claim is liable to be struck out.  Fluor further submits that requiring the pleading to address causation in this way is no mere technicality:

“Fluor is entitled to understand the way in which Santos puts its case.  If Santos intends to put its case globally, then Fluor may prepare for and defend that case by demonstrating that the inference contended for by Santos (that all of the alleged events (and nothing else) caused all of the alleged consequence) cannot be sustained (for example, by demonstrating that some of the alleged consequence claimed by Santos is not in fact due to an alleged event).”[19]

  1. The effect of the Court requiring Santos to plead in the terms suggested by Fluor was further explained by Senior Counsel for Fluor in oral submissions:

“The consequence is that it – unless the plaintiff proves that there were no other material causes of the delay, the plaintiff fail.”[20]

  1. Fluor, therefore, by this application seeks to have Santos either plead the causative link in respect of each of the “multiple breaches” which are relied upon or alternatively put its case on the basis that its claims are variants of global claims.[21]  According to Fluor, if Santos is required to plead that it is impossible or impracticable to identify what part of its loss is attributable to each head of its claim or relevant conduct on the part of Fluor, this would also relieve Fluor of having to give extensive disclosure in relation to a project which extended over four years.[22]  Whether Fluor’s primary complaint as to the pleading of causation is made out requires a detailed examination of the statement of claim and the claims which it makes.[23]

Category 1: Hub delay claims (six claims)

  1. Before turning to the paragraphs sought to be struck out, it is of assistance to set out from Santos’ Outline of Submissions some of the construction activities undertaken and the materials used in the GLNG Project:

“The claims raised in this application concern construction activities undertaken in relation to the first three categories:[24] the construction of 3 compressor stations (known as the stations at Hubs 2, 4 and 5), new wellpads in the fields surrounding the compressor stations, and networks of gathering lines to connect each wellpad with a hub.

To extract coal seam gas, wells are drilled at certain sites into coal seams.  A wellpad (comprising the structures and equipment associated with the well) is then built.  Water is pumped out of the coal seam which, after some time, allows a mix of gas and water to flow up the well.  The gas and water byproduct are separated at the wellpad and sent to the nearest hub by means of the ‘gathering lines’.  The gathering lines are in essence pipelines.  There were approximately 700 km of gathering lines constructed for the Project.  At each hub the by-product water is treated before release and the gas is compressed and transmitted to the facilities on Curtis Island to be liquefied.

The equipment for each wellpad was prefabricated onto steel structures known as ‘skids’, which were then installed at the site of each wellpad.  A skid is made up of the relevant equipment, and the required electrical wiring, control systems, pipes and connector fittings.  One of the allegations made in the proceeding is that many of the skids had to be reworked because of defects in them, including defects in the piping material used in fabrication.

The construction at each hub is a significant undertaking.  In simple terms, each hub has gas dehydration equipment and compression equipment.  The compression equipment requires power which in turn requires electricity generation and transmission equipment.  Water desalination, treatment facilities and storage ponds are also required.  This equipment is all connected by pipes and cables.  Those pipes and cables generally sit above-ground on what are called ‘piperacks’.  The piperacks are relatively simple structural steel frames comprising structural steel components fabricated to the required design.  The ‘piping’ sits on the piperacks.  The piping comprises carbon steel pipe and fittings, which are prefabricated (usually off-site) into sections (known as ‘spools’) in accordance with a design.  The spools are then brought to the site and connected together to complete the required length of piping.”[25]

  1. The Hub delay claims may be categorised into three groups:
  1.  Late Design Claims comprising the McConnell Dowell subcontract Late Design Claim (paragraphs 146, 183, 187, 188 and 191); the CDJV Late Design Claim (paragraphs 103 and 106); and the Fluor Late Design Claim (paragraphs 235, 236 and 237);
  1.  Late Material Claims, comprising the CDJV late material claim (paragraphs 90, 91, 104 and 106); and the McConnell Dowell late material claim (paragraphs 184, 187, 189 and 191); and
  1.  Late Access Claims, comprising the Tenix late access claim (paragraphs 214, 215, 217 and 218).
  1. I commence, by way of example, with the McConnell Dowell Late Design Claim.  I say “by way of example”, because similar allegations are pleaded for the Late Material Claims and the Late Access Claims.  Paragraph 146 alleges that Fluor did not provide AFC drawings for the piperack structural steel at Hub 2 to McConnell Dowell in a timely and progressive manner to enable the MD Hub Works to be performed in accordance with the MD Baseline Schedule and without delay.  The delay which is particularised is critical delay of 222 calendar days.  The allegation made in paragraph 146 is premised on those material facts pleaded in paragraphs 142 to 144.  Paragraph 142 pleads that pursuant to the MD Baseline Schedule Fluor was to provide McConnell Dowell with all of the AFC drawings for the civil, structural and architectural works at Hub 2 on or before 16 January 2012.  The term “AFC drawings” is defined in paragraph 108(k) by reference to the fact that the McConnell Dowell Work was to be performed using only drawings and specifications marked “Issued for Construction” or equivalent by Fluor.  This was a term of the McConnell Dowell subcontract.  Paragraph 143 pleads that the AFC drawings included AFC drawings for all piperack structural steel to be constructed at Hub 2.  Paragraph 144 pleads that Fluor did not provide these drawings to McConnell Dowell but instead, on various dates after 16 January 2012, provided McConnell Dowell with 3D models for the piperack structural steel.  The particulars provided in relation to this allegation are set out in Schedule 18 under the heading 18.7 Late AFC Drawings – Hub 2.
  2. Paragraph 145 pleads that as a consequence of Fluor’s conduct it was necessary for McConnell Dowell to use design information contained in 3D models provided by Fluor to carry out further design work so that it could prepare shop drawings to allow it to fabricate the piperack structural steel for Hub 2, and after fabrication commence construction of the piperacks for Hub 2.  Paragraph 147 pleads that by reason of the matters pleaded in paragraphs 142 to 145 Fluor breached the relevant pleaded terms of the McConnell Dowell subcontract.
  3. Paragraph 183(a) pleads that as a result of these breaches the performance of the MD Hub Work was critically delayed by 222 calendar days.  Paragraph 183(b) pleads that McConnell Dowell claimed from Fluor under the McConnell Dowell subcontract and Fluor paid to McConnell Dowell costs in the amount of $12,412,518 “which would not have been incurred but for the MD Hub Design Delays”.  This amount is particularised by reference to Schedule 20 of the statement of claim.  Schedule 20 seeks to calculate the McConnell Dowell delay costs for the MD Hub Work due to the Late Design Claim by multiplying an estimate for the average daily time-related overhead costs incurred by McConnell Dowell caused by the MD Hub Design Delays ($55,912.24) by the number of calendar days of critical delay (222).  This calculation arrives at the figure of $12,412,518 pleaded in paragraph 183(b).  Paragraph 183(c) pleads that in addition to the McConnell Dowell Contract Price, Fluor claimed under clause 29 of the Contract and Santos paid to Fluor, the amount described in paragraph 183(b), namely $12,412,518.
  4. Paragraph 187 relevantly pleads that the amount described in paragraph 183(b):
  1.  is made up entirely of costs, expenses or other liabilities arising out of or as a consequence of breaches by Fluor of the McConnell Dowell subcontract, and accordingly are excluded costs;
  1.  further or alternatively, are not otherwise amounts properly incurred by Fluor in the performance of the Work under the Contract, and therefore are not Actual Costs which Fluor was entitled to be paid under the Contract. 
  1. Paragraph 188 pleads that Fluor incurred and claimed under clause 29 of the Contract and Santos paid to Fluor, time-related overhead costs in various amounts which would not have been incurred but for the relevant breaches of the McConnell Dowell subcontract and do not include any direct costs incurred by Fluor in performing the Work under the Contract.
  2. Paragraph 191 relevantly pleads that the amounts pleaded in paragraph 188:
  1.  are made up entirely of costs, expenses or other liabilities arising out of or as a consequence of breaches by Fluor of the McConnell Dowell subcontract, and accordingly are Excluded Costs;
  1.  further or alternatively, are not otherwise amounts properly incurred by Fluor in the performance of the Work under the Contract, and therefore are not Actual Costs which Fluor was entitled to be paid under the Contract.
  1. It is apparent from the structure of these pleaded paragraphs that in relation to each of the Late Design Claims, Late Material Claims and Late Access Claims, Santos pleads five key allegations:

“(a) First:  Fluor breached the relevant subcontract (or in the case of the Fluor late design claim, the head contract) by failing to deliver certain particularised design documents in accordance with the relevant baseline schedule.  In each case, the relevant dates for the delivery of the particularised design documents according to the baseline schedule are identified in the pleading.  The dates on which Fluor in fact delivered relevant design information are identified.

  1.  Second:  Fluor’s contractual breach caused critical delay to the performance of the Work.  For each Late Design Claim, the pleading includes particulars of the number of calendar days of critical delay alleged.
  1.  Third: the critical delay caused both the relevant subcontractor and Fluor (or, in the case of the Fluor late design claim, Fluor only) to incur time related overhead costs which would not have been incurred but for the critical delay.  For each Late Design Claim, the pleading includes particulars of the amount of additional costs incurred by each relevant entity as a result of the pleaded critical delay, and the way in which this amount has been calculated.
  1.  Fourth:  Fluor claimed these additional time related overhead costs from Santos under the head contract, and Santos paid them.
  1.  Fifth: In the premises, the additional time related costs that Fluor claimed, and Santos paid, are not Actual Costs (as that term is defined in the head contract with Santos).”[26]
  1. Fluor submits that paragraph 146 constitutes a global claim because Santos alleges numerous breaches in the provision of AFC drawings “in a timely and progressive” manner and then asserts, by reason of those breaches, there was a single (global) delay of 222 days. 
  2. Paragraph 146 is not, in my view, a global claim as that term is explained by Beech J in DM Drainage.  The breach relied on by Santos is the one breach, namely Fluor’s failure to provide the AFC drawings to McConnell Dowell on or before 16 January 2012.  Schedule 18.7, which is referred to in the particulars to paragraph 144, particularises the description of the 3D model provided by Fluor to McConnell Dowell, the date the 3D model was provided and the number of calendar days after 16 January 2012 that the 3D model was provided.  For example, the last entry in the table found at paragraph 13(c) of Schedule 18.7 shows that the 3D model described as “RM02 Ponds Piperack” was provided on 15 February 2013, which was 396 days after 16 January 2012.  Each time a 3D model is provided after 16 January 2012 is not a separate breach by Fluor of the McConnell Dowell subcontract.  The pleaded obligation which is alleged to have been breached is Fluor’s obligation to provide the AFC drawings on or by 16 January 2012.  The critical delay pleaded to have arisen because of this breach, in accordance with the MD Baseline Schedule, is 222 calendar days.  The MD Baseline Schedule was approved by Fluor on or about 7 February 2012.[27]  Relevantly paragraph 113 pleads that pursuant to the MD Baseline Schedule the MD Hub Works had a separate sequence of activities and critical paths to completion.  Paragraph 114 pleads that both Fluor and McConnell Dowell had time-related overhead resources (including management resources) that were dedicated to relevantly, the MD Hub Works.
  3. By reference to the MD Baseline Schedule, it is unsurprising that a delay in the provision of the AFC drawings would have a knock-on effect leading to critical delay.  This knockon effect is pleaded in paragraph 145:

“As a consequence of the Defendant’s conduct pleaded in paragraph 144 above, it was necessary for McConnell Dowell to use design information contained in 3D models provided by the Defendant to carry out further design work so that it could prepare shop drawings to allow it to fabricate the piperack structural steel for Hub 2, and after fabrication commence construction of the piperacks for Hub 2.”

  1. Fluor however, contends that Santos has not pleaded the causal nexus between each alleged failure to provide AFC drawings and the critical delay claimed by McConnell Dowell.  Fluor points to the table found at paragraph 13(c) of Schedule 18.7 to the statement of claim.  This table identifies 14 alleged delays for periods ranging between 192 and 396 days and to cover a period from 16 January 2012 to 15 February 2013.  Fluor submits that there is no way that it can relate the claimed 222 calendar days delay to the critical path for completion of the MD Hub Works to the alleged delays particularised in Schedule 18.7:

“The specific allegation that delay to the critical path for completion of the MD Hub Works was 222 calendar days indicates that the Plaintiff is capable of identifying a causative link between some alleged delays and the alleged delay to the critical path.  That causative link should be pleaded.”[28]

  1. Santos’ response to this submission is that the extent to which the late provision of any particular drawing caused a critical delay is a question for expert evidence.  Whether a particular delay to a particular activity is a delay on the critical path to completion of work, and if so the extent of that critical delay, depends on the complex interaction of many activities.  It is simply not possible to write down all of those interactions in a pleading.[29]  As a matter of case management, Santos submits that the parties and the Court will be informed of the respective cases in relation to critical delay caused by the breach by the provision of expert evidence.  In this respect the solicitors for Santos wrote to the solicitors for Fluor on 21 April 2017 proposing a meeting of the programming experts with a view to agreement being reached on matters such as methodology and the appropriate programs to be utilised.[30]
  2. Santos refers to the approach taken by Allanson J in Kousa International LLC v CPB Contractors Pty Ltd.[31]  In that case his Honour, in dismissing an application for further and better particulars, observed:

“The procedures to be followed in a particular case must be adapted to the nature of the matters in issue, and how they will be resolved. To support its allegations that Kousa's breaches of contract caused delay affecting the date of completion, CPB must adduce expert evidence of the project sequencing and analysis of delays. Both parties accepted that there will be expert evidence of this kind.

Expert reports will be exchanged well in advance of trial. Should there be competing expert evidence, the experts will confer. It would be an unnecessary duplication to require CPB to plead that information by way of particulars. If, following exchange of expert reports, Kousa maintains that it still does not have adequate notice of the case against it, the court can then consider what further needs to be done. But in my opinion it is not something to be dealt with by an order for particulars at this stage of the proceedings.”[32]

  1. Fluor submits that such a case management approach is not appropriate in the present proceedings.  First, the decision in Kousa only concerned a single claim for delay of 41 days.  In the present proceedings by contrast, Santos alleges multiple periods of delay in some cases spanning several years.  The magnitude of the claim was a factor relevant to the Court’s decision in DM Drainage to strike out the pleading in that case.[33]  Secondly, it is incorrect to state that the extent to which the late provision of any particular drawing caused a critical delay is a question for expert evidence.  This is because the alleged period of delay is a fact that must be identified.  According to Fluor, the purpose of the expert report is to prove that the alleged period of delay occurred.  Fluor is not asking Santos to prove that delay occurred.  It is merely asking Santos to identify the causal link between the periods of delay alleged and the alleged instances of breach.[34]  I do not accept Fluor’s submissions. First, there is much to commend the case management approach of Allanson J in Kousa.  It is irrelevant that his Honour was only dealing with a single claim for delay.  Each claim for critical delay in the present case should be viewed as separate and discrete.  The breaches refer to a number of specific subcontracts.  Each of those subcontracts relate to specific works and locations.  This point was emphasised by Senior Counsel for Santos in oral submissions:

“So, in other words, this is not a claim which, in some fashion, pulls together the entire project which Fluor carried out, and seeks to make some claim in relation to the whole project.  Each claim is directed in the name of a particular subcontractor because most of the claims are in relation to breaches of subcontract, and in relation to a particular part of the work.  For example, the program for the gathering lines is quite separate from the program for the hubs.  They don’t meet each other.”[35]

  1. Secondly, in respect of the McConnell Dowell Late Design Claim there was, as I have already observed, only one relevant breach.  Given the nature of the breach, namely a failure to provide the AFC designs by 16 January 2012, this would prima facie have an expected effect on critical delay.  Santos has pleaded that the breach caused a critical delay of 222 days.  Santos has therefore pleaded the facts which “lead to a reasonable inference” that the alleged breach of the McConnell Dowell subcontract caused the relevant delay.  That is, a single consequence of the alleged breach is pleaded, namely critical delay to the performance of work under the McConnell Dowell subcontract.  I accept Santos’ submission that the amount of additional cost claimed is a function of this delay.[36]  Thirdly, it is not necessary, as a matter of pleading material facts, for Santos to identify the critical delay referable to each time Fluor provided McConnell Dowell with a 3D model.  Whilst the dates of provision of the 3D models may ultimately be relevant in any critical delay analysis, such critical delay is referrable to the failure on the part of Fluor to provide AFC drawings on or by 16 January 2012.
  2. It follows from the above discussion that I do not accept Fluor’s submission that paragraphs 146, 183, 187 or 191 plead a global claim in relation to the McConnell Dowell Late Design Claim.  As the structure of the CDJV Late Design Claim is the same for the McConnell Dowell Late Design Claim it also follows that I conclude that the CDJV Late Design Claim (paragraphs 103 and 106) is not a global claim and sufficient material facts have been pleaded which give rise to the causal connection between the pleaded breach and the pleaded critical delay.
  3. As to the Fluor Late Design Claim (paragraphs 235, 236 and 237) Fluor submits that these are total costs claims and therefore should be struck out.  In its reply submissions Fluor further submits that the more fundamental defect is that there is no pleading of a causative link between the alleged “breaches” and the alleged delays to the critical path.[37]  I do not accept either of these submissions.  Neither paragraphs 236 or 237 are total costs claims or modified total costs claims as those terms were explained by Beech J in DM Drainage.  As correctly submitted by Santos, the amounts pleaded in paragraphs 236 and 237 comprise the costs Santos has determined that Fluor incurred during the critical delay pleaded and which it would not have incurred but for the critical delay:

“The claimed amount is therefore not a top-down calculation of the difference between the actual costs incurred and an estimated or contractual price, but is an amount which Santos has calculated from the ‘bottom up’.  As the particulars set out in schedule 31 make clear, in calculating this amount, Santos has excluded costs that would have been incurred even if there had been no critical delay.  The possibility that the claim includes costs not causally linked to Fluor’s breach has therefore been excluded.”[38]

  1. As to Fluor’s second submission, paragraphs 232 to 235 do not plead multiple breaches.  Fluor’s obligation identified in paragraph 232 pursuant to the Contract was to proceed with the Work in accordance with the EPC Program set out in Schedule 5 of the Contract.  The work which Fluor was required to perform included the preparation and completion of all design documents required for the performance of the Work.  The alleged breach in paragraph 233 is Fluor’s failure to complete all of the design documents by the date required in the EPC Program.  The table in paragraph 233 identifies three separate locations of Hub 4, Hub 5 and Hub 2.  The table identifies in relation to each location three instances where there had been delay in the planned delivery date of design documents and the actual completion date of the design documents.  Whilst there are nine instances in relation to three locations, the breach is of the one contractual obligation.
  2. The Late Material Claims concern the CDJV and McConnell Dowell subcontracts.  The relevant paragraphs of the McConnell Dowell Late Material Claim which Fluor seeks to strike out are paragraphs 184, 187, 189 and 191.  The relevant paragraphs of the CDJV Late Material Claim are paragraphs 90, 91, 104 and 106.  As the structure of the two Late Material Claims are similar, it is sufficient to consider the McConnell Dowell Late Material Claim. 
  3. Under the McConnell Dowell subcontract Fluor was to furnish or cause to be furnished to McConnell Dowell, without cost to McConnell Dowell, certain materials (Free Issue Materials) to be incorporated into or used in performing the McConnell Dowell Work.  The Free Issue Materials included carbon steel pipe, fittings and flanges (CS Fittings).  The McConnell Dowell Work was to be carried out in accordance with an approved schedule and in accordance with particular specifications.[39]  It was also a term of the McConnell Dowell subcontract that Fluor was to undertake all obligations as specified in the subcontract to allow McConnell Dowell to construct the McConnell Dowell Work in accordance with the approved schedule.[40]
  4. Paragraph 109 of the statement of claim pleads that on the proper construction of the McConnell Dowell subcontract:
  1. Fluor was required to provide McConnell Dowell with Free Issue Materials which:
  1. complied with the specifications and standards pleaded in paragraph 108(j);
  1. further or alternatively, were fit for incorporation into, or use in performing the McConnell Dowell Work.
  1. Fluor was required to provide all Free Issue Materials to McConnell Dowell in a timely and progressive manner to enable McConnell Dowell to complete the McConnell Dowell Work:
  1. in accordance with the approved schedule;
  1. further or alternatively, by the McConnell Dowell Milestone Dates;
  1. further or alternatively, without delay.
  1. Paragraphs 120 to 123 of the statement of claim allege that Fluor delivered defective CS Fittings to McConnell Dowell for the purpose of McConnell Dowell incorporating those fittings into the McConnell Dowell Work.  The CS Fittings which constituted Free Issue Material under the McConnell Dowell subcontract were defective in that they did not comply with specifications and standards described in paragraph 108(j) of the statement of claim.  The particulars of how the CS Fittings did not comply with those specifications and standards are set out in Schedule 9 to the statement of claim. 
  2. Paragraph 122(b) alleges that, further or alternatively, the CS Fittings were not fit for incorporation into the McConnell Dowell Work.  The best particulars that Santos can presently provide as to that allegation are set out in Schedule 10 and Schedule 18 to the statement of claim under the heading “18.2 CS Fittings defects”.  These particulars include in 18.2.3(a) to (e) correspondence from Fluor to McConnell Dowell in relation to the CS Fittings.  Fluor by this correspondence variously required McConnell Dowell to quarantine all CS Fittings that had been delivered and were marked with specified heat numbers and refrain from hydro-testing any fabricated spools containing such CS Fittings.  The CS Fittings were to be used to fabricate the spools.  This correspondence culminates in a letter dated 5 March 2013 from Fluor to McConnell Dowell, instructing McConnell Dowell to immediately cease all fabrication works involving the CS Fittings described in that letter.
  3. Paragraph 132 of the statement of claim pleads that by a letter dated 23 June 2013 Fluor notified McConnell Dowell that:
  1. the scope of the McConnell Dowell Work was varied to remove the fabrication of the spools identified in certain drawings listed in the attachment to that letter (“the removed spools”);
  1. the removed spools would be fabricated by Fluor using another subcontractor; and
  1. Fluor would arrange for the removed spools (once fabricated) to be delivered to McConnell Dowell in a manner which supported McConnell Dowell’s pipe installation schedule.
  1. Paragraph 134 pleads that the removed spools which had been manufactured by another subcontractor were delivered to McConnell Dowell from about January 2014.  Paragraphs 109 and 110 set out the contractual obligations of Fluor to provide the CS Fittings to McConnell Dowell which complied with the specifications and standards and which were fit for incorporation into or use in the performing of the McConnell Dowell Work.  A further contractual obligation pleaded is the provision of the CS Fittings in accordance with the approved schedule or alternatively by the McConnell Dowell Milestone Dates or, further and alternatively, without delay.
  2. Paragraph 148 pleads that Fluor did not make the removed spools and CS Fittings available to McConnell Dowell in a manner sufficient to enable McConnell Dowell to construct the McConnell Dowell Work in accordance with the MD Baseline Schedule and without delay.  This failure constitutes the relevant breaches of the pleaded terms of the McConnell Dowell subcontract.[41]
  3. Paragraph 184 (which is sought to be struck out) pleads that, as a result of the matters pleaded in paragraphs 148 to 149, the performance of the MD Hub Work was critically delayed by 166 calendar days.  Paragraph 184(b) pleads that McConnell Dowell claimed from Fluor under the McConnell Dowell subcontract and Fluor paid to McConnell Dowell costs in the amount of $15,804,895 which would not have been incurred but for the MD Hub materials delay.  The best particulars of this amount that Santos can presently provide are set out in the calculations contained in Schedule 21 of the statement of claim.  This calculation identifies McConnell Dowell total time-related overhead costs in the relevant period.  An average daily time-related overhead costs is then ascertained.  A deduction is made for time-related overhead costs for MD gathering lines work resulting in an average daily time-related overhead cost of $95,210.21.  This daily average is then multiplied by the critical delay of 166 calendar days to arrive at the pleaded figure in paragraph 184(b) of $15,804,895.
  4. Paragraph 189 (which is also sought to be struck out) pleads that in addition to the amount described in paragraph 184(b) Fluor incurred and claimed under clause 29 of the Contract and Santos paid to Fluor, time-related overhead costs in a number of amounts which Fluor would not have incurred but for the occurrence of the matters pleaded in paragraphs 148 to 149.  The amounts described in paragraph 189 are pleaded to be made up entirely of costs, expenses or other liabilities arising out of or as a consequence of breaches by Fluor of the McConnell Dowell subcontract and accordingly excluded costs or, alternatively, not amounts properly incurred by Fluor in the performance of the Work under the Contract and therefore not Actual Costs.[42]
  5. Fluor submits that paragraph 184 is cast as a global claim and it is not possible for Fluor to understand the case put against it on the current pleading.  This is because the “removed spools” and “CS Fittings” are not identified and there appears to be multiple alleged breaches in circumstances where the commencement and durations of the alleged delays are not pleaded or particularised.  Further, there is no pleaded causal connection between the alleged instances of breach and the delays and money claimed by McConnell Dowell. 
  6. For reasons already expressed, I do not accept these submissions.  The material facts pleaded sufficiently establish a causal connection.  The relevant terms of the McConnell Dowell subcontract and how they were breached are identified.  From the MD Baseline Schedule[43] the delivery of the spools to site was contemplated by 31 March 2013 and spool site installation and tie-in was to be finished by 26 April 2013.  It is a reasonable inference to draw from the pleaded material facts that if the removed spools were not delivered until on and from January 2014 that critical delay would occur in respect of the McConnell Dowell Work.  The pleading identifies the period of that critical delay as 166 days.  The quantum of that critical delay is particularised by identifying McConnell Dowell’s average daily time-related overhead costs and multiplying it by the number of days of critical delay.
  7. The Late Access Claim concerns the Tenix subcontract.  Pursuant to this subcontract Fluor was required to provide Tenix with non-exclusive access to such parts of the site as were required for the performance of the Tenix Work sufficient to enable Tenix to commence and undertake the Tenix Work in accordance with the subcontract and without delay.  Paragraph 212 pleads that on 9 March 2013 Fluor notified Tenix that it approved the Revised Tenix schedule.  Paragraph 213 pleads that during the period from February 2013 through to August 2014 Fluor did not provide Tenix with access to the Tenix Site in accordance with the timetable set out in the Revised Tenix schedule.  The best particulars that Santos can presently provide are set out in Schedule 25 to the statement of claim.  Paragraph 214 pleads that as a result of the matters pleaded in paragraph 213, during the period from 20 February 2013 to about 6 August 2014, the performance of the Tenix Work was delayed by 278 calendar days.  Paragraph 216 pleads that as a result of this delay Tenix claimed from Fluor and Fluor paid to Tenix costs in the amount of $14,446,003 which would not have been incurred by Tenix and paid by Fluor but for the occurrence of the delay.
  8. The 278 calendar days’ delay identified in paragraph 214 is not specified as critical delay.  The best particulars that Santos can presently provide are as follows:

“1. Pursuant to the Revised Tenix Schedule, Tenix was to achieve completion of all of the Tenix Work by 13 November 2013 …

2. In order for Tenix to achieve completion of the Tenix Work by 30 November 2013, it required access to the Tenix Site to be provided progressively in accordance with the Revised Tenix Schedule and in any event on or before 1 November 2013.

3. The latest date that (Fluor) provided access to Tenix for the Tenix Work was 6 August 2014 being 278 days later than the latest date required by the Revised Tenix Schedule.”

  1. The 278 days of delay is therefore calculated as the period between 1 November 2013 (the last day it is alleged that Fluor was required to provide access) and 6 August 2014 (the latest date that it is alleged that Fluor provided access).  Fluor submits however, that Schedule 25 identifies that in respect of 11 of the alleged breaches, the delay in providing access is alleged to have occurred prior to November 2013.  Accordingly the pleading and particulars fail to address how these earlier alleged delays (or, indeed any of the alleged delays) were causative.[44]  Santos submits, and I accept, that there is sufficient logical connection between Fluor delaying granting Tenix access and delay to completion of the Tenix Work.  Whilst Santos cannot presently identify whether the whole of the 278 days is critical delay and how pre1 November 2013 delays to access affects this analysis, a sufficient causal connection is, in my view, pleaded.  As orally submitted by Senior Counsel for Santos:

“If you can’t get access until 278 days after you are supposed to have finished it, clearly that has caused some sort of delay.  For the moment, it’s said to be a delay of 278 days.  That – and might I say, and not wishing to hide this, your Honour, when one looks into it more closely, there might be some other factors which impinge on that 278 days.  I don’t know that there are, but that’s the sort of thing that programmers look at.  But for the moment you can say, ‘Here’s a breach.  Clearly enough it caused a delay.  It looks like it caused a critical delay.’  So causation is established.  The fact is pleaded.”[45]

  1. I accept this submission.  The present difficulties identified by Fluor in the Tenix Late Access Claim should not result in the relevant paragraphs being struck out.  It is not a sufficiently clear case of a failure to plead the material facts which are said to give rise to a causal connection.

Category 2: Gathering lines delay claims

  1. These claims concern the CDJV and McConnell Dowell subcontracts.  Fluor seeks to strike out paragraphs 92, 93 and 94 in respect of the CDJV gathering line delay claim and paragraphs 185, 186, 187, 190 and 191 in respect of the McConnell Dowell gathering lines delay claim.  It will suffice to deal with the first of these claims.
  2. Paragraph 92 pleads that during the period from about August 2012 to about July 2014 Fluor:
  1.  did not provide CDJV with access to parts of the CDJV Site where CDJV Gathering Lines Work was to be undertaken in a manner sufficient to enable CDJV to complete the CDJV Gathering Lines Work in accordance with Schedule 10E and, further or alternatively, without delay.  Particulars of this allegation are said to be found in Schedule 5, section 5.5 which is headed “Failure to provide access in accordance with Schedule 10E”.  Schedule 5 contains 12 separate subparagraphs which refer to various documents including monthly reports and correspondence.  This documentation records numerous failures on the part of Fluor to provide access to specified ROWs or disruptions to access associated with environmental and cultural heritage approvals;
  1.  did not provide to CDJV Free Issue Materials that were required for the performance of the CDJV Gathering Lines Work in a manner sufficient to enable               CDJV to complete the CDJV Gathering Lines Work in accordance with Schedule 10E and, further or alternatively, without delay.  This allegation is particularised by reference to paragraph 5.6 of Schedule 5 which is entitled “Failure to provide Free Issue Materials in accordance with Schedule 10E”.  Section 5.6 consists of 19 subparagraphs (12(a) to 12(s)). These subparagraphs detail documentation including monthly reports and correspondence concerning issues relating to delay to the construction of pipelines caused by the late or non-delivery of materials.  Again, multiple failures on the part of Fluor to provide CDJV with Free Issue Material are particularised.
  1. Paragraphs 93 and 94 plead that in the two year period from August 2012 to August 2014 the performance of the CDJV Gathering Lines Work was delayed by approximately 280 days.  This delay is pleaded to be as a result of the matters pleaded in paragraphs 92(a) and 92(b).  In the particulars to paragraph 94 Santos acknowledges that it cannot presently particularise the number of days of critical delay that were caused by Fluor’s breaches, out of the total critical delay suffered by CDJV between August 2012 and August 2014 to the progress of the CDJV Gathering Lines Work.  As correctly submitted by Fluor, Santos’ claim appears to be that, of the 730 days between August 2012 and August 2014, there were 280 days of delay “as a result of” the alleged failure to provide access and Free Issue Materials.  The particulars to paragraphs 94 therefore suggest that there may be other critical delays during the two year period which are either concurrent with or in addition to the 280 days.[46]
  2. It is readily apparent that the structure of the pleading in relation to the Gathering Lines Delay Claims differs from that for the Hub Delay Claims.  This is acknowledged by Santos.[47]  The Gathering Lines Delay Claims rely on multiple breaches of different contractual obligations.  Further, Santos is presently unable to plead how much of the overall critical delay was caused by Fluor’s breaches.  Santos does however, plead that part of the critical delay was caused by Fluor’s wrongful conduct.
  3. Paragraph 105 relevantly pleads that as a result of the CDJV Gathering Lines Delays pleaded in paragraph 94 CDJV claimed from Fluor and Fluor paid to CDJV an amount on account of the costs incurred by CDJV.  The best particulars Santos can presently provide are to be inferred from the particulars provided for paragraph 94.  Santos cannot presently quantify these costs.  Paragraph 105(c) claims an additional amount that Fluor claimed under clause 29 of the Contract which was paid by Santos for time-related overhead costs incurred by Fluor in relation to the performance of the CDJV Gathering Lines Work.  These additional costs are pleaded as being ones which Fluor would not have incurred but for the CDJV Gathering Lines Delays.  Paragraph 106 pleads that the costs identified in paragraphs 105(a) and 105(c) “are made up entirely of costs or other amounts arising out of or as a consequence of breaches by (Fluor) of the CDJV subcontract and, accordingly, are Excluded Costs.”
  4. Fluor submits that the Gathering Lines Delay Claims are global claims which do not plead or particularise the causal nexus between any alleged failure to provide access and/or failure to provide Free Issue Materials without delay or not in accordance with Schedule 10E and the alleged delay of 280 days.[48]  That is, the pleading identifies multiple interacting breaches of the CDJV subcontract producing a single consequence in terms of additional costs or time.
  5. Santos accepts that the pleaded claim is arguably a global claim.  This concession was explained by Senior Counsel for Santos in the following terms:

“We say this is arguably, the global claim, simply for this reason, that Santos does not presently say we can’t disentangle this.  Santos in fact hopes to be able to disentangle it but it doesn’t currently have the information sufficient to do that.  But what it is able to do is to show breaches of contract which caused delay likely to result in critical delay without being able to disentangle the precise effects of the different breaches.”[49]

Senior Counsel continued:

“We accept that there are multiple breaches but we simply repeat what we’ve said before, that it is not able at the moment to establish how much of the critical delay resulted from those breaches or the effect of particular breaches, but it does plead causation, it proposes to provide further particulars, and at this stage it doesn’t propose to run a global claim on this at trial.  It wants to provide further particulars and that is why we would say, as a matter of case management, that it’s not appropriate to require Santos to plead that it is not possible to disentangle because Santos in fact doesn’t believe that.  It may not – it may prove that it is not possible to disentangle it but at the moment Santos can’t honestly plead that it’s not possible to disentangle it.  It’s – that’s simply a result of the fact that they don’t have sufficient information about these matters.”[50]

  1. Santos submits that a claim in relation to delay caused by more than one type of breach is “a familiar and unremarkable category of case”.[51]  Santos further submits that its inability to state the precise scope of critical delay that was caused by the pleaded breaches “is both readily explicable, and does not render the pleading embarrassing or otherwise defective.”[52]  In relation to most of the claims concerning subcontracts Santos emphasises that it was not a party to the subcontracts and accordingly was neither privy to, nor is conversant with, all events that occurred during the performance of these subcontracts.  It follows that in those circumstances, it is readily understandable that Santos may not presently be able to accurately identify the extent of the critical delay to the subcontractor’s work that was caused by Fluor’s breaches.  Santos refers to the following observation of Byrne J in John Holland for the proposition that the mere fact that, at the time of pleading, a plaintiff is unable to state the precise scope of the consequence which the plaintiff alleges was caused by the defendant’s wrongful conduct, does not render the plaintiff’s pleading embarrassing or otherwise liable to be struck out:

“… For present purposes, I assume that each of these facts has been established.  This may be obvious but it is, none the less, worth stating, if only to underline that I am concerned with a pleading question: to what extent it is necessary to set out in the statement of claim the causal link between these two asserted facts.  I am not concerned with the question, what loss, if any, flowed from the breach.  Where a plaintiff establishes a breach of contract it will not be denied relief on the ground only that it is difficult to estimate the damages which flow from that breach. This being the case, it may be said that a statement of claim which is unable to set out with the precision the amount of loss claimed ought not to be struck out.  But even in such a case, the plaintiff must identify what is the loss alleged to have been suffered and which cannot be quantified and how it is that this loss was caused by the breach.  The amount of loss claimed here is not the problem; it is the causal link between this and the breaches of contract.”[53]

  1. Fluor submits in relation to the above passage that the principle identified by Byrne J concerns the proper quantification of loss; not causation.[54]  Fluor submits that Santos should at this stage of the proceeding be required to plead that it is impossible or impracticable to identify what part of its loss is attributable to each head of its claim or relevant conduct on the part of Fluor.  The difficulty I have with this submission is that Senior Counsel for Santos has unequivocally stated to the Court that Santos does not accept that it is either impossible or impracticable to undertake this task.  I accept Santos’ submission that, as a matter of proper case management, it is undesirable to require Santos to plead in the above terms at this stage of the proceedings.  If it ultimately eventuates that Santos is unable to plead the Gathering Lines Delay claims other than as global claims, then Fluor’s application to strike out these paragraphs should be revisited.  The appropriate order in respect of the Gathering Lines Delay claims should therefore be that Fluor’s strike out application in respect to paragraphs 92, 93, 94, 106, 185, 186, 187, 190 and 191 be adjourned to a date to be fixed.

Category 3 – Defective materials claims

  1. Fluor no longer presses the strike out of paragraphs 229 and 230 in respect of the Hitec Defective Materials claim. 
  2. As to the McConnell Dowell Defective Materials claim, paragraph 173 of the statement of claim pleads:

“In the premises set out in paragraphs 116 to 141 and 156 to 171 above, the amounts which (Fluor) agreed to pay McConnell Dowell as identified in paragraphs 157, 160, 163, 166, 169 and 171 above:

  1.  are made up entirely of costs or other amounts arising out of or as a consequence of breaches by (Fluor) of the McConnell Dowell Subcontract and, accordingly, are Excluded Costs;
  1.  further or alternatively, are not otherwise amounts properly incurred by (Fluor) in performing the Work under the Contract, and therefore are not Actual Costs which (Fluor) was entitled to be paid under the Contract.”
  1. Fluor submits that Santos does not plead any causal nexus between each alleged breach and the alleged “Excluded Costs” (or costs that are allegedly “not Actual Costs”).[55]
  2. I do not accept this submission.  Paragraph 173 in terms refers to six payments which Fluor agreed to make to McConnell Dowell.  The first is that referred to in paragraph 157 which pleads that in or about February 2014 Fluor agreed to pay to McConnell Dowell an additional amount over the McConnell Dowell Contract Price in the sum of $1,189,686.52 as a result of delivering defective DN500 HDPE Pipe to McConnell Dowell.[56]  I accept Santos’ submission that the necessary causal nexus for each of the six amounts referred to in paragraph 173 has been pleaded.  The pleaded causal nexus is summarised by Santos as follows:
  1.  Fluor breached the McConnell Dowell subcontract by supplying DN500 HDPE Pipe that did not comply with the contractual specifications and standards, and further or alternatively, was not fit for use by McConnell Dowell in performing its work (paragraphs 116, 117, 118 and 119).
  1.  McConnell Dowell submitted a claim to Fluor for payment of additional costs which it claimed it had or would incur as a consequence of Fluor’s supply of defective DN500 HDPE Pipe (paragraph 156).
  1.  Fluor made an additional payment of $1,189,686.52 in settlement of McConnell Dowell’s claim made in relation to the defective DN500 HDPE Pipe (paragraphs 157, 172).
  1.  In the premises set out above, the additional payment of $1,189,686.52 to McConnell Dowell arose out of or as a consequence of Fluor’s breach of the subcontract in supplying the defective DN500 HDPE Pipe (paragraph 173).[57]
  1. Fluor submits that paragraph 173, through paragraphs 170 and 171, conflates delay, late access and defective material claims.  This is because according to Fluor paragraphs 170 and 171 pick up paragraphs 152 and 154 of the statement of claim which deal with delays in the provision of materials and access.  Whilst the claimed amounts in paragraph 173 may cover more than defective materials, the necessary causal nexus has been sufficiently pleaded.  This is because the claim is in effect based on Fluor’s acceptance that additional payments in settlement of McConnell Dowell’s claims had to be made.
  2. It follows that paragraph 173 of the statement of claim should not be struck out.

Category 4: CDJV acceleration claim

  1. Fluor seeks to strike out paragraphs 31, 37, 102 and 106 of the statement of claim.  Paragraphs 31 and 37 fall under the heading “Breaches of the CDJV Subcontract” and the subheading “Delays to initial baseline schedule between September 2011 and March 2012”.  Paragraphs 31 and 37 need to be understood in the context of their surrounding paragraphs.
  2. Paragraph 29 pleads that on 10 November 2011 CDJV submitted to Fluor its initial baseline schedule.  This is referred to in the pleading as the November 2011 Baseline Schedule.  This schedule included dates by which Fluor was to provide CDJV with certain AFC Drawings and access to parts of the site on which the CDJV Work was to be constructed, as well as the dates by which certain aspects of the CDJV Work were to be commenced and completed.  Paragraph 30 pleads that between 14 September 2011 and 1 March 2012 Fluor failed in a number of respects.  These include a failure to provide CDJV with AFC Drawings in a manner sufficient to enable CDJV to undertake the relevant Work without delay and, further or alternatively, complete the CDJV Work by the CDJV Milestone Dates.  Paragraph 30 makes similar allegations in relation to Free Issue Materials and access.  Particulars of these failures are identified in Schedule 5 and in particular 5.1, 5.2 and 5.3.  By reference to Schedule 5 Fluor asserts that in respect of the alleged breaches in paragraph 30 Santos purports to provide particulars of 66 individual alleged failures.[58]
  3. Paragraph 31 pleads that as a result of the matters pleaded in paragraph 30:
  1. the progress of the CDJV Work was delayed; and
  1. further or alternatively, CDJV could not complete the CDJV Work by the CDJV Milestone Dates; and
  1. accordingly, Fluor breached certain pleaded terms of the CDJV Subcontract.
  1. Paragraph 32 pleads that on 6 February 2012 Fluor requested that CDJV accelerate the activities comprised in the CDJV Work to overcome the effect of the delay in the execution of the CDJV Work described in paragraph 31(a) and to enable CDJV to complete the CDJV Work by the CDJV Milestone Dates.
  2. Paragraph 33 pleads that CDJV provided Fluor with its proposal for the acceleration of the activities comprised in the CDJV Work.  Paragraph 35 pleads that Fluor approved a document titled “Revision 10E”. 
  3. It is in this context that paragraph 37 pleads that but for the occurrence of the events that are pleaded in paragraph 30, it would not have been necessary for the activities comprised in the CDJV Work to be accelerated and performed in the matter set out in Schedule 10E.
  4. Paragraph 38 pleads that on 5 November 2012 CDJV notified Fluor that CDJV was entitled to be compensated for the extra costs that it had incurred or would incur as a result of the acceleration of activities comprised in the CDJV Work that was required pursuant to Schedule 10E.  CDJV’s estimate of the total amount of compensation that it was entitled to claim as a result of this acceleration was $101,250,000.
  5. Paragraph 102 pleads that as a result of the matters pleaded in paragraph 30 CDJV accelerated the performance of the CDJV Work and, as a result of that acceleration, CDJV claimed from Fluor and Fluor paid to CDJV further costs in the amount of $101,250,000.  Paragraph 102(c) pleads that Fluor claimed under clause 29 of the Contract and Santos paid to Fluor that amount.  Paragraph 106 picks up paragraph 102 (as well as other paragraphs) and pleads that the relevant amount claimed by Fluor from Santos constitutes Excluded Costs and, further or alternatively, does not constitute Actual Costs.
  6. Fluor’s first complaint is that the claim advanced in paragraph 31 is “global” in nature, in that it fails to identify a causative link between any alleged instance of breach and the alleged delay.[59]  Santos submits that Fluor’s complaint rests on a failure to properly understand the pleading.  According to Santos, the central link in the causal connection between the breaches of the subcontract pleaded in paragraph 30 and the amount claimed in paragraphs 102 and 106 is Fluor’s request (pleaded in paragraph 32) that CDJV accelerate the works to overcome the delay caused by the breaches, and then Fluor’s acceptance of the accelerated schedule (pleaded in paragraph 35).  Santos asserts that it is Fluor’s own conduct which establishes the link between the breaches of contract and the additional costs claimed in paragraphs 102 and 106.  Similarly, Fluor’s contention that Santos has pleaded an impermissible “global” claim in the sense that Santos has not identified the causal link between each alleged instance of breach of the subcontract in paragraph 30 and the delay which led to acceleration of CDJV’s Work also rests on the same failure to understand the pleading.  It was the conduct of Fluor, according to Santos, which establishes the link between the breaches and the acceleration.  Accordingly, the claim is not a “global” claim.[60] 
  7. Fluor submits, however, that Santos’ assertion that “the central link in the causal connection between the breaches of subcontract pleaded in paragraph 30 and the amount claimed in paragraphs 102 and 106 is Fluor’s request (pleaded in paragraph 32) that CDJV accelerate the works to overcome the delay caused by the breaches …” ignores that Santos pleads in paragraph 32 that Fluor requested CDJV to accelerate the activities “to overcome the effect of the delay in the execution of the CDJV Work that is described in paragraph 31(a) …”.[61]  Fluor therefore submits that Santos has failed to identify the causal nexus between each alleged instance of the 66 breaches and the contended delay which led to the requirement to accelerate.
  8. In my view, there is no need for Santos to plead such a causal connection.  The period of delay identified in the particulars to paragraph 31 is 114 days.  This was the period of delay claimed by CDJV in its letter dated 5 November 2012 to Fluor.  The details of this letter is further particularised in paragraph 38.  The CDJV acceleration claim, as a matter of causation, rests on the pleaded fact in paragraph 32 that it was Fluor which requested CDJV to accelerate the activities comprised in the CDJV Work to overcome the effect of the delay caused by Fluor’s own failures.  The fact of this request, together with the payment by Fluor to CDJV for accelerating the relevant activities, constitutes a sufficient pleading of the material facts which are said to give rise to the causal connection.  That causal connection is identified in paragraph 102 of the statement of claim by reference to paragraph 30.  In oral submissions Senior Counsel for Santos identified that the reference to paragraph 30 in paragraph 102 should really be a reference to paragraphs 30 through to 35.[62] Accordingly Santos should consider amending paragraph 102 to incorporate not just paragraph 30 but paragraphs 30 to 35.
  9. Senior Counsel for Santos (correctly in my view) identified the pleaded causal connection for this claim as follows:

“Fluor, in accepting those matters, making the request and accepting the schedule, was accepting the link between the breaches and the delay.  So there may again be some answer to this which could be pleaded by way of defence, but we say perfectly proper and comprehensible pleading.  It’s not quite an admission, but it’s of that nature.  We’re saying we’re simply relying on the position which Fluor took in relation to these matters.”[63]

  1. I therefore refuse to strike out paragraphs 31, 37, 102 and 106 (to the extent that this paragraph incorporates paragraph 102).

Category 5: CDJV subcontract amendment claim

  1. Fluor seeks to strike out paragraphs 85, 86, 96, 98 and 99 of the statement of claim.  Paragraphs 85 and 86 fall under the subheading “the Amended CDJV Subcontract”.  This subheading contains paragraphs 78 to 86. 
  2. Paragraph 80 pleads that Fluor and CDJV entered into an agreement on 4 December 2012 to amend the terms of the CDJV Subcontract so to convert the basis of compensation from the combination of lump sum and unit price portions, to a cost reimbursable contract.  This is referred to in the pleading as the Amended CDJV Subcontract.
  3. Paragraph 84 pleads that as a consequence of the CDJV Contract Price in the original CDJV Subcontract consisting of a lump sum price and a unit price portion based upon a schedule of rates, the CDJV Subcontract allocated the full risk of the lump sum portion of the CDJV Work to CDJV and apportioned the risk of the schedule of rates portion of the CDJV Work between CDJV and Fluor.
  4. Paragraphs 85 and 86 plead:

“85. By converting the CDJV Contract Price in the Amended CDJV Subcontract to reimbursement of actual costs incurred by CDJV in performing the CDJV Work (as described in paragraph 80 above), (Fluor):

  1.  accepted the full risk of the costs incurred by CDJV in performing the CDJV Work;
  1.  removed the incentive for CDJV to minimize the costs that it incurred in performing the CDJV Work; and
  1.  removed all certainty as to the amount (Fluor) would ultimately have to pay to CDJV as compensation for the performance of the CDJV Work.

86. Further, by agreeing to increase the fee payable to CDJV under the Amended CDJV Subcontract in the event that the actual costs incurred by CDJV increased from $184,000,000 up to, or in excess of $770,000,000 (as described in paragraph 81 above), (Fluor) created an incentive for CDJV to increase the costs it incurred in performing the CDJV Work.”

  1. Paragraphs 96 and 97 allege that but for Fluor’s breaches of the CDJV Subcontract that are pleaded in paragraphs 31, 44, 51, 59, 66 and 71, Fluor would not have agreed to enter into the Amended CDJV Subcontract and that CDJV would have been entitled to be paid, and Fluor would have been required to pay $571,582,631 for the performance of the CDJV Work.
  2. Paragraphs 98 to 100 plead:

“98. In the event that (Fluor) had not agreed to convert the CDJV Subcontract to a cost reimbursable contract and (Fluor) had not breached the CDJV Subcontract as pleaded in paragraphs 31, 44, 51, 59, 66 and 71 above, pursuant to the original terms of the CDJV Subcontract, CDJV would have been entitled to be paid, and the Defendant would have been required to pay $571,582,631 for the performance of the CDJV Work.

Particulars

The best particulars that the Plaintiff can currently provide in relation to the calculation of this amount is set out in Schedule 13 to this statement of claim.  Further particulars may be provided after disclosure has been completed.

99. In the premises set out in paragraphs 96 to 98 above, the amount of $884,484,800 (being the difference between the amounts pleaded in paragraphs 97 and 98 above) paid by (Fluor) to CDJV under the Amended CDJV Subcontract:

  1.  is made up entirely of costs and other amounts arising out of or as a consequence of breaches by (Fluor) of the CDJV Subcontract, and accordingly is an Excluded Cost;
  1.  further or alternatively, is not otherwise a cost properly incurred by (Fluor) in performing the Work under the Contract, and therefore is not an Actual Cost which (Fluor) was entitled to be paid under the Contract.

100. The Defendant claimed under clause 29 of the Contract, and the Plaintiff paid to the Defendant, all of the Total CDJV Costs.

Particulars

The best particulars that the Plaintiff can currently provide are set out in Schedule 12 to this statement of claim.  Further particulars may be provided after disclosure has been completed.”

  1. Fluor submits that the pleaded allegations in paragraphs 85 and 86 are embarrassing primarily because the allegations are not relevant to the amount of cost actually incurred.  The allegations pleaded in paragraphs 85 and 86 are therefore not material facts.
  2. Paragraphs 85 and 86 are referred to in the particulars to paragraph 96(a).  This subparagraph pleads that Fluor entered into the Amended CDJV Subcontract for the purpose of settling claims made by CDJV against Fluor for breaches of the subcontract that are described in paragraphs 38, 45, 52, 53, 60, 61, 67, 73 and 77.  This allegation is particularised by reference to three matters.  These include the actual terms of the Amended CDJV Subcontract.  One of those terms pleaded in paragraph 81(j) is that CDJV released Fluor from all claims for compensation that CDJV would have had against Fluor (but for the execution of the Amended CDJV Subcontract) for compensation under or in respect of the CDJV Subcontract for events occurring before the Conversion Date.  The allegation is further particularised by reference to paragraphs 85 and 86 in the following terms:

“3. Having regard to the matters pleaded in paragraphs 85 and 86 above, there was no other rational commercial justification for (Fluor) to agree to convert the CDJV Subcontract into a cost reimbursable contract.”

  1. Fluor submits that the inclusion of the allegations pleaded in paragraphs 85 and 86 is not supported by “an oblique reference to them in the particulars to paragraphs 96(a)”.[64]
  2. In determining whether paragraphs 85 and 86 are embarrassing it is necessary to consider those paragraphs in the context of the CDJV Subcontract Amendment claim as pleaded.  Santos identifies the material facts giving rise to the causal connection between Fluor’s “wrongful conduct” and the amount claimed:

“(a) Fluor breached the CDJV subcontract in a number of respects [SOC paragraphs 31, 44, 51, 59, 66 and 71.]

  1.  As a consequence of each of those breaches, CDJV made separate claims against Fluor for the payment of compensation.  Those claims totalled $308,928,331 [SOC paragraphs 38, 45, 52, 60, 61, 67, 73 and 77].
  1.  In December 2012, in order to settle the claims described in subparagraph (b) above, Fluor agreed to amend the CDJV subcontract so as to convert it from a lump sum and fixed rates contract into a cost plus contract [SOC paragraphs 78, 80, 81, 85, 86 and 96(a)].
  1.  But for the breaches of the CDJV subcontract pleaded (as summarised in subparagraph (a) above) Fluor would not have agreed to convert the CDJV subcontract [SOC paragraphs 96(b)].
  1.  Fluor incurred additional costs under the amended CDJV subcontract that would not have been incurred if the CDJV subcontract had not been amended [SOC paragraphs 97, 98 and 99].
  1.  Fluor claimed under the contract, and Santos paid, these additional costs [SOC paragraph 100].”[65]
  1. Santos submits that the critical link in the causal connection between the breaches and the amount claimed is Fluor’s entry into the Amended CDJV Subcontract.  Santos further submits that it is made clear by the particulars to paragraph 96 that it contends that Fluor’s purpose for amending the CDJV Subcontract may be inferred from the pleaded terms of the Amended Subcontract and from the matters alleged in paragraphs 85 and 86.  It follows, according to Santos, that paragraphs 85 and 86 contain matters which it is required by rule 150(2) of the UCPR to plead.  Rule 150(2) provides that any fact from which any of the matters mentioned in subrule (1) is claimed to be an inference must be specifically pleaded.  Rule 150(1)(k) refers to motive, intention or other condition of mind, including knowledge or notice.  Santos pleads in paragraph 96(a) that Fluor entered into the Amended CDJV Subcontract for the purpose of settling claims made by CDJV against Fluor for breaches of the subcontract.  That purpose is to be inferred in part from the commercial consequences in terms of risk by Fluor entering into the Amended CDJV Subcontract.  Fluor, however, submits that it remains necessary for Santos to plead and ultimately prove a causative link in relation to the breaches pleaded in each of paragraphs 31, 44, 51, 59, 66 and 71 to make good the counterfactual allegation in paragraph 98 of the statement of claim.[66]  I do not accept this submission.  The relevant causal connection is that as described in Santos’ written submissions, which I have quoted in [100] above.  The statement of claim pleads that CDJV had made separate claims against Fluor for the payment of compensation.  Those claims totalled $308,928,331.  These are the claims pleaded in paragraphs 38, 45, 52, 60, 61, 67, 73 and 77.  The settlement of these claims is identified as the relevant purpose for Fluor entering into the Amended CDJV Subcontract.  This led to Fluor incurring additional cost which it would not have incurred if the CDJV Subcontract had not been amended.  These costs were passed on to Santos.  As submitted by Santos, this is the pleaded basis for the allegation that all of the additional costs incurred as a result of the amendment “arose out of or as a consequence of” Fluor’s breaches. 
  2. From the above discussion in relation to the relevant causal connection, it also follows that I do not accept Fluor’s submission that the CDJV subcontract amendment claim is a total costs claim.  As previously observed, a total costs claim is where a contractor alleges against a principal a number of breaches of contract and quantifies its global loss as the actual cost of the work less the contractually expected cost.  This is to be contrasted with the present claim.  Santos identifies in the statement of claim the amount that Fluor would have been entitled to recover from Santos pursuant to the original terms of the CDJV Subcontract.  That amount would have been $571,582,631.  This is a counterfactual amount against which Santos compares the total amount actually paid to CDJV under the Amended CDJV Subcontract ($1,456,067,431) in order to arrive at the costs incurred as a result of the amendment ($884,484,800).[67]
  3. It follows that I refuse to strike out paragraphs 85, 86, 96, 98 and 99.  Further, from the above reasoning I also refuse to strike out paragraphs 74 and 76 of the statement of claim.[68]  These two paragraphs incorporate the same breaches of the CDJV Subcontract pleaded in paragraphs 31, 44, 51, 59, 66 and 71 which are incorporated in paragraph 98 of the statement of claim.

Category 6: disruption claims

  1. This claim is in respect of alleged breaches of the Contract and the Hitec Subcontract.  Fluor seeks to strike out paragraphs 312 and 313 on the basis they are “global claims”.  Fluor also seeks to strike out paragraphs 315, 318, 319, 321 and 322 on the basis that they are “total costs claims”. 
  2. The relevant paragraphs fall under section D.4 of the statement of claim, which is entitled “The Defendant did not perform the Wellpad Works in accordance with the Contract”.  Pursuant to the Contract Fluor was required to complete civil, structural, mechanical, electrical piping and instrumentation works in relation to the construction of new single and multi-wellpads throughout the Roma and Fairview Fields.  These requirements extended to upgrades of existing wellpads and the construction of new underground gas storage wellpad facilities.[69]  On or about 6 January 2012 Santos gave written notice to Fluor that it did not object to Fluor’s proposal to perform the Wellpad Works itself and further notified Fluor that it could proceed to undertake the Wellpad Works in accordance with the terms of the Contract.  The Wellpad Works were to proceed in accordance with the EPC program set out in Schedule 5 of the Contract and with due expedition and without delay.[70]
  3. Paragraph 305 alleges that Fluor breached its subcontract with Hitec by supplying carbon steel fittings that did not comply with the contractual specification.  Paragraphs 309 and 310 plead that Fluor breached clause 4.1(a)(3) of the Contract by failing to perform certain inspections of materials in accordance with Good Industry Practice.  Further or in the alternative, Fluor breached clauses 4.1(a)(3) and 36.3 of the Contract by its negligent omission in failing to adequately cover, store and protect the separator skids in accordance with Good Industry Practice.  This is pleaded to constitute a breach by Fluor of the Contract.[71]  As a consequence of these breaches the Wellpad Works were delayed and disrupted and could not be performed in accordance with the EPC program.[72]  A further breach of the Contract is identified in paragraph 314, namely a failure on the part of Fluor to manage the performance of the Wellpad Works to take account of the delay and disruption particularised in paragraph 312.
  4. Paragraph 315 pleads that, as a consequence of the breaches of Contract pleaded in paragraphs 311 and 314, Fluor incurred extra costs in the amount of $83,375,212.  This amount is calculated by comparing the productivity and productivity-related costs incurred during the period 1 April 2012 and 31 January 2014 which was adversely impacted by the breaches with productivity and productivity-related costs achieved in the period between 1 February 2014 and 30 September 2014, which was not adversely affected by the breaches.  Paragraph 316 pleads that in the impacted period Fluor completed 27 wellpads and incurred productivity-related costs of approximately $102,688,271 in completing those 27 wellpads.  Paragraph 317 pleads that in the unimpacted period Fluor and its subcontractor, Goodline, completed 139 wellpads and incurred production-related costs of approximately $117,063,611 in constructing the 139 wellpads.
  5. Paragraph 319 pleads that if the progression of the Wellpad Works had not been disrupted and delayed during the impacted period as a consequence of the breaches, Fluor would have incurred production-related costs of approximately $22,519,798 in constructing the 27 wellpads completed during the impacted period (as opposed to $102,688,271).
  6. Paragraph 319 pleads that if the delay and disruption had not occurred, the productionrelated costs incurred by the defendant in performing the Wellpad Works would have been reduced by approximately $83,375,212.  Paragraph 321 pleads that the disruption costs were incurred as a consequence of Fluor breaching the Contract and the Hitec Subcontract.  Paragraph 322 pleads that Fluor was not entitled to be paid the sum of $83,375,212 as these costs were either Excluded Costs or were not Actual Costs.
  7. Fluor’s complaint is that Santos relies on multiple breaches as causing the Wellpad Works to be delayed and disrupted.  These breaches include an unidentified number of instances in which Fluor is said to have failed to conduct inspections in accordance with Good Industry Practice and failures on the part of Fluor to adequately cover unidentified skids in unidentified lay down areas.  Fluor asserts that there is a failure on the part of Santos to identify a causal link between these multiple breaches and the disruption claim.[73] 
  8. Santos accepts that this is a claim for disruption caused by more than one breach.  This in itself, according to Santos, is not a ground for striking out the pleading.  Santos submits that all of the material facts required to support the contention that the amount claimed “arose out of or in connection with” Fluor’s wrongful conduct have been pleaded.  I accept this submission.  I have already set out the relevant breaches identified in the statement of claim in paragraphs 305, 309 and 310.  Paragraphs 312 and 313 plead that the Wellpad Work was disrupted because of these breaches.  The extent of the disruption is calculated by using a measured mile approach.  It may be accepted that this approach is a widely accepted method of calculating lost productivity.[74]  Fluor submits however, that a measured mile analysis in accordance with the Society of Construction Law Delay & Disruption Protocol proceeds upon the basis that it is not possible to undertake a critical path analysis of delay or to analyse the cause and effects of the claimed delay.  Fluor therefore submits that if that is the basis of the claim, Santos should expressly plead that it is not possible to disentangle the causative contribution of individual breaches.[75]  The statement of claim however, as pleaded, does not advance a case of critical delay caused by the pleaded breaches.  Rather, the consequence of the breaches is that the performance of the Wellpad Work was delayed and disrupted.[76]  Further, as a consequence of the delay and disruption to the Wellpad Work during the impacted period, Fluor incurred extra costs in performing that work during that period which would not have been incurred had the delay and disruption not occurred. 
  9. There is, in my view, a sufficient pleading of material facts which is said to give rise to the causal connection between the breaches and the amount claimed for delay and disruption.  The allegation in paragraph 305 for example, is particularised by reference to Schedule 28. This schedule refers to Non-Conformance Reports, Requests for Information, written reports and correspondence evidencing ongoing problems with defective CS Fittings supplied by Fluor to Hitec. Paragraph 1(cc) of Schedule 28 particularises letters from Fluor to Hitec dated 15 March 2013 and 16 March 2013 (referred to as the Hitec Stop Work Notice) whereby Fluor instructed Hitec to dismantle all piping skids and offskid pipework that had been assembled by Hitec using spools with one or more of the defective fittings. This notice also required Hitec to remove defective fittings from all spools which had been fabricated using a defective fitting and refabricate the affected spools using replacement CS Fittings to be supplied by Fluor. I accept the submission of Santos that Schedule 28 (and Schedule 35 which is referred to in paragraphs 308 and 309 of the statement of claim) sufficiently particularise the pleaded material facts from which it may be inferred that delay and disruption was caused.[77]
  10. It follows that I refuse to strike out paragraphs 312, 313, 315, 318, 319, 321 and 322 of the statement of claim.

Disposition

  1.  I adjourn Fluor’s application to strike out paragraphs 92, 93, 94, 106 (to the extent it incorporates 105(a) and 105(c)), 185, 186, 187, 190 and 191 of the statement of claim.
  1.  The balance of Fluor’s application filed 6 April 2017 is dismissed.
  1.  I will hear the parties as to costs.

Footnotes

[1]  Fluor’s Outline of Submissions, [39]; Santos’ Outline of Submissions, [1].

[2]  Statement of Claim, [5(e)(i)].

[3]  Santos’ Outline of Submissions, [29].

[4]  Fluor’s Outline of Submissions in Reply, [6] citing Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215 per French J at 222.

[5]  [2004] QSC 457 at [15].

[6]  Santos’ Outline of Submissions, [13].

[7]  [2014] NSWCA 184.

[8]  At [187].

[9]  At [188].

[10]  [2014] WASC 170.

[11]  At [41].

[12]  At [56].

[13]  (1996) 8 VR 681.

[14]  At [22]-[23].

[15]  At [75].

[16]  Fluor’s Outline of Submissions In Reply, [8].

[17]  Santos’ Outline of Submissions, [21] citing McGrath Corporation Pty Ltd v Global Construction Management (Qld) Pty Ltd [2011] QSC 178 at [101]-[106], [121]-[124] and [162]-[166]; Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633;  John Holland, at 694-695.

[18]  This is the wording that Beech J required to be pleaded in DM Drainage.

[19]  Fluor’s Outline of Submissions in Reply, [8]-[9].

[20]  T1-7, lines 37-38.

[21]  T1-8, lines 3-5.

[22]  T1-8, lines 17-20.

[23]  John Holland, [22]-[23].

[24]  The “first three categories” is a reference to wellpads, gas and water gathering network and compressor stations.

[25] Santos’ Outline of Submissions, [4]-[7].

[26]  Santos’ Outline of Submissions, [31].

[27]  Statement of Claim, [111].  The MD Baseline Schedule is incorporated into the pleading.  The relevant entry for AFC drawings being required by 16 January 2012 is found on page 17 of 29 of the MD Baseline Schedule.

[28]  Fluor’s Outline of Submissions, [56].

[29]  Santos’ Outline of Submissions, [36].

[30]  Exhibit 1.

[31]  [2017] WASC 11.

[32]  At [14]-[15].

[33]  Fluor’s Outline of Submissions in Reply, [42]; DM Drainage, [64].

[34]  Fluor’s Outline of Submissions in Reply, [41].

[35]  T1-34, lines 24-30.

[36]  Santos’ Outline of Submissions, [33].

[37]  Fluor’s Outline of Submissions in Reply, [46].

[38]  Santos’ Outline of Submissions, [44].

[39]  Statement of Claim, [108(g) and (j)].

[40]  Statement of Claim, [108(o)].

[41]  Statement of Claim, [149].

[42]  Statement of Claim, [191].

[43]  Pages 19 to 20.

[44]  Fluor’s Outline of Submissions, [85].

[45]  T1-59, lines 6-14.

[46]  Fluor’s Outline of Submissions, [105].

[47]  Santos’ Outline of Submissions, [46].

[48]  Fluor’s Outline of Submissions, [106] and [128].

[49]  T1-61, lines 38-43.

[50]  T1-63, lines 30-40.

[51]  Santos’ Outline of Submissions, [47] citing John Doyle Constructions Ltd v Laing Management (Scotland) Ltd [2004] BLR 295; [2004] ScotCS 141, [10].

[52]  Santos’ Outline of Submissions, [49].

[53]  (1996) 8 VR 681 at 688, [13].

[54]  Fluor’s Outline of Submissions in Reply, [48].

[55]  Fluor’s Outline of Submissions, [51].

[56]  Statement of Claim, [118] and [156].

[57]  Santos’ Outline of Submissions, [56].

[58]  Fluor’s Outline of Submissions in Reply, [58].

[59]  Fluor’s Outline of Submissions in Reply, [59].

[60]  Santos’ Outline of Submissions, [61]-[64].

[61]  Fluor’s Outline of Submissions in Reply, [61].

[62]  T1-68, lines 22-23.

[63]  T1-68, lines 35-40.

[64]  Fluor’s Outline of Submissions, [119].

[65]  Santos’ Outline of Submissions, [67].

[66]  Fluor’s Outline of Submissions in Reply, [78].

[67]  Santos’ Outline of Submissions, [70].

[68]  Fluor’s Outline of Submissions, [95]-[98]; Fluor’s Outline of Submissions in Reply, [77]-[78]; Santos’ Outline of Submissions, [74]-[76].

[69]  Statement of Claim, [290].

[70]  Statement of Claim, [295] and [296].

[71]  Statement of Claim, [311].

[72]  Statement of Claim, [312]-[313].

[73]  Fluor’s Outline of Submissions, [132]; Fluor’s Outline of Submissions in Reply, [79].

[74] Society of Construction Law Delay & Disruption Protocol (2nd ed, February 2017), [18.6]; Santos’ Outline of Submissions, page 20, footnote 47.

[75]  Fluor’s Outline of Submissions in Reply, [80].

[76]  Statement of Claim, [312].

[77]  T1-71, lines 15-18.

Close

Editorial Notes

  • Published Case Name:

    Santos Ltd v Fluor Australia Pty Ltd

  • Shortened Case Name:

    Santos Ltd v Fluor Australia Pty Ltd

  • MNC:

    [2017] QSC 153

  • Court:

    QSC

  • Judge(s):

    Flanagan J

  • Date:

    26 Jul 2017

  • White Star Case:

    Yes

Litigation History

Event Citation or File Date Notes
Primary Judgment [2017] QSC 153 26 Jul 2017 -

Appeal Status

No Status