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Santos Limited v Fluor Australia Pty Ltd (No 4)[2021] QSC 296

Santos Limited v Fluor Australia Pty Ltd (No 4)[2021] QSC 296

SUPREME COURT OF QUEENSLAND

CITATION:

Santos Limited v Fluor Australia Pty Ltd & Anor (No 4) [2021] QSC 296

PARTIES:

SANTOS LIMITED

ABN 80 007 550 923

(plaintiff)

v

FLUOR AUSTRALIA PTY LTD

ABN 28 004 511 942

(first defendant)

AND

FLUOR CORPORATION

(second defendant)

FILE NO:

BS 12939 of 2016

DIVISION:

Trial

PROCEEDING:

Plaintiff’s Application filed on 29 September 2021, Defendants’ Application filed on 1 October 2021, Defendants’ Amended Application filed on 7 October 2021, Defendants’ Application filed on 8 October 2021, and Plaintiff’s Application filed on 22 October 2021

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

Orders made on 2 November 2021
Reasons delivered on 12 November 2021

DELIVERED AT:

Brisbane

HEARING DATE:

1 and 2 November 2021

JUDGE:

Bradley J

ORDERS:

BY CONSENT, THE COURT ORDERS THAT:

  1. 1.Pursuant to rule 667(2) or alternatively rule 502(1) of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR), paragraph 2 of the Order made on 15 February 2021 [CFI 240] (as varied by the order made on 27 May 2021 [CFI 266]) be varied to read:
  2. “ 2.The Questions referred to the Referees are those raised on the pleadings as amended from time to time (including, for the avoidance of doubt, the Counterclaim).”

THE COURT ORDERS THAT:

Third Amended Claim (Plaintiff’s Application filed on 29 September 2021)

  1. 1.Pursuant to Rule 375(1) and/or Rule 377(1)(c) of the UCPR, the Plaintiff have leave to file the Third Amended Claim in the form annexed at pages 1 to 5 of Exhibit JNP-1 to the affidavit of Joshua Norman Paffey sworn on 29 September 2021.
  2. 2.The Defendants pay the Plaintiffs’ costs of and incidental to the Plaintiff’s Application filed on 29 September 2021.

Ninth Amended Statement of Claim (Defendants’ Application filed on 1 October 2021 and Defendants’ Amended Application filed on 7 October 2021)

  1. 3.The Defendants’ Application filed on 1 October 2021 and the Defendants’ Amended Application filed on 7 October 2021 are dismissed.
  2. 4.The Defendants pay the Plaintiff’s costs of and incidental to the Defendants’ Application filed on 1 October 2021 and the Defendants’ Amended Application filed on 7 October 2021.

Revocation of Referral/Adjournment (Defendants’ Application filed on 8 October 2021)

  1. 5.The Defendants’ Application filed on 8 October 2021 is dismissed.
  2. 6.The Defendants pay the Plaintiff’s costs of and incidental to the Defendants’ Application filed on 8 October 2021.

Seventh Amended Defence and Counterclaim (Plaintiff’s Application filed on 22 October 2021)

  1. 7.The Plaintiff’s Application filed on 22 October 2021 is dismissed.
  2. 8.The Plaintiff pay the Defendants costs of and incidental to the Plaintiff’s Application filed on 22 October 2021.

Costs of Hearing on 1 and 2 November 2021

  1. 9.The Defendants pay the Plaintiff’s costs of and incidental to the hearing before Justice Bradley on 1 and 2 November 2021 (to the extent those costs are not otherwise addressed in Orders 2, 4, 6 and 8 above).

Further Pleadings

  1. 10.After 2 November 2021, no party may amend its pleading unless it has the consent of the other parties or the leave of the court.
  2. 11.The Defendants have leave to file an amended pleading responding to the Tenth Amended Statement of Claim.
  3. 12.The Plaintiff has leave to file an amended pleading responding to the Seventh Amended Defence and Counterclaim.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – TRIAL – MODE OF TRIAL – ASSESSOR, SPECIAL REFEREE ETC – where the parties are involved in a protracted and complex dispute comprising a number of separate but overlapping claims estimated to be in excess of $1.4 billion – where the Court referred significant elements of the dispute to a panel of three referees to hear and determine questions of law and fact – where the reference hearing is due to commence on 15 November 2021 – where the referees refused the respondents’ application to vacate the hearing of the reference – where the respondents seek to set aside the Referral Orders and effectively delay the determination of the issues by at least 12 months – where the respondents contend that the matter will not be ready for hearing on 15 November 2021, that if it were to proceed the reference may be at risk of miscarrying and that the re-enlivening of the MC Delay Costs claim necessitates an adjournment of the reference – where the referees are very experienced practitioners and are prepared to commence the reference as programmed – where an adjournment of the reference would result in a significant waste of time and costs – whether setting aside the Referral Orders will facilitate the just and expeditious resolution of the real issues in dispute at a minimum cost – whether the respondents will be denied procedural fairness if the reference is the proceed

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – GENERALLY – where the parties have made various late amendments to their respective pleadings – where the plaintiff’s amended pleading advances alternative characterisations of its long-standing claims based on the same evidence – where the respondents seek to disallow the amendments on the basis they are embarrassing and introduce new factual controversies requiring further investigation and disclosure – where the respondents seek to amend their defence in light of the re-enlivening of the MC Delay Costs claim – where the plaintiff seeks to disallow the amendments on the basis that the additional lay evidence would prevent the referees hearing the evidence in the allocated time – whether the amendments facilitate alterative legal arguments about the same factual basis pursued throughout the litigation – whether the amendments avoid prejudice to the parties and to the administration of justice  

Uniform Civil Procedure Rules 1999, r 5, r 501

Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, applied

Hartnett v Hynes [2009] QSC 225, considered

Re D [1996] AC 593, considered

COUNSEL:

P L O'Shea QC, with A C Stumer and C A Schneider, for the plaintiff

S Couper QC, with J P O'Regan, for the defendants

SOLICITORS:

Corrs Chambers Westgarth for the plaintiff

Jones Day for the defendants

  1. [1]
    This is a decision on five interlocutory applications.  Two are filed on behalf of the plaintiff (Santos), and three on behalf of the defendants (the Fluor parties).

The background to the applications

  1. [2]
    Santos and the Fluor parties entered into written agreements.  Under one (the EPC), Fluor Australia agreed to perform certain works in connection with gas wellpads, gathering lines and gas compression plant facilities in the Surat Basin.  Under another Fluor Corporation agreed to guarantee the performance of Fluor Australia, its subsidiary, and to indemnify Santos for any loss arising from any breach by Fluor Australia of the first contract. 
  2. [3]
    On 13 December 2016, Santos commenced the present proceeding against the Fluor parties. 
  3. [4]
    On 23 March 2017, the proceeding was placed on this Court’s Supervised Case List.
  4. [5]
    The quantum of Santos’ claim is estimated to be in excess of $1.4 billion.  It is comprised of a number of separate but overlapping claims. 
  5. [6]
    Prior to the events noted below, eight versions of the statement of claim and six versions of the defence and counterclaim have been filed and served.  The Santos statement of claim is about 260 pages in length.  The Fluor parties’ defence and counterclaim is about 720 pages with an attached schedule, running to another 200 pages.  Santos’ reply and answer is over 500 pages in length and its attached schedule, responding to the Fluor schedule, is another 100 pages. 
  6. [7]
    The parties have made extensive disclosure.  Each created a database.  The Santos database has 10 million documents in it.  The parties agreed to use Technology Assisted Review to identify relevant documents in their respective databases. 
  7. [8]
    The parties have served about 167 statements of evidence from lay witnesses and about 59 expert reports.  At the beginning of 2020, the parties estimated that a trial of all issues arising on the pleadings would take between six and nine months to hear in court. 
  8. [9]
    On 17 October 2019, Santos applied for an order pursuant to rule 501 of the Uniform Civil Procedure Rules 1999, referring questions arising in the proceeding to referees to be appointed by the Court.  Programming directions were made to bring that application to a hearing before the Court on 17 and 18 February 2020.  About a month after the hearing, international border restrictions were imposed by the Commonwealth government.  These were followed by state directions restricting the entry into Queensland.  These legal developments were followed by the filing of additional evidence and written submissions by the parties, pursuant to orders made at the request of and with the consent of the parties.
  9. [10]
    On 15 December 2020, I published reasons in which I expressed the conclusions I had reached on Santos’ application.[1]  These included that significant elements of the dispute should be referred to a panel of three referees to enquire into and make findings of fact or law, as they consider necessary or convenient, for making any decision on the questions the subject of the reference.  I invited the parties to make submissions about the appropriate form of order.

The reference orders

  1. [11]
    On 15 February 2021, an order referring questions to the three referees was made.  On 24 February 2021, as contemplated by the 15 February order, a further order was made appointing the three referees.  Neither party appealed either reference order.

The first directions hearing before the referees

  1. [12]
    On 11 March 2021, the referees conducted the first directions hearing. 
  2. [13]
    On 24 March 2021, the referees made directions in the form of a procedural order.  Amongst the comprehensive directions made was one setting down a hearing for a period of up to eight weeks, commencing on 25 October 2021.  The directions also provided for a two day hearing to be held:

“for the purpose of the parties outlining their respective cases, for the purpose of determining the matters to be the subject of the October hearing and the procedures to be adopted in the October hearing, and to further consider whether the rules of evidence should or should not apply in the October hearing.”

The second hearing before the referees

  1. [14]
    The further contemplated hearing took place on 3 and 4 June 2021. 
  2. [15]
    On 28 June 2021, the referees issued a second procedural order.  It included directions that the October hearing would “encompass the hearing of all of the oral lay witness evidence as to the entirety of the questions.”  The October hearing was to commence on Monday, 25 October and finish on Friday, 17 December 2021, a period of eight weeks.  All lay witnesses were to give evidence in chief by way of statements exchanged prior to the hearing.  There was to be no oral examination in chief of a lay witness without leave of the referees.  The time available for the October hearing was to be divided evenly between Santos on the one hand and Fluor on the other. 
  3. [16]
    The second procedural order also provided for a hearing to be set down for a period of up to four weeks, commencing on 7 February 2022.  This February hearing was to encompass the hearing of all of the oral expert witness evidence.  The parties were to provide written closing submissions to the referees by 18 March 2022. 
  4. [17]
    A further hearing was set down for a period of up to one week, commencing on 21 March 2022.  This March hearing was to encompass oral closing submissions as to the entirety of the questions.  The second procedural order contemplated that further directions would be made for the conduct of the February 2022 and March 2022 hearings at a subsequent review hearing.

Events before the further directions hearing before the referees

  1. [18]
    Shortly before the further directions hearing, at the request of the parties and with their consent, the Court made an order varying the 15 February 2021 order so as to include within the questions referred to the referees the questions raised on the pleadings arising solely under Part D.2 and Part D.3 of the statement of claim and the corresponding parts of any defence, reply, rejoinder or subsequent pleading.

The further directions hearing before the referees

  1. [19]
    On 8 September 2021, the parties put submissions to the referees about further directions.  Fluor sought an adjournment of the October hearing and instead start the hearing on 7 February 2022.  The Fluor parties submitted that they could not be ready for a hearing to commence on 25 October 2021, due to the following factors.
    1. (a)
      There had been delays in the completion of expert evidence. 
    2. (b)
      There were outstanding claims of privilege and challenges to those claims.
    3. (c)
      There were allegations of deficiencies in the disclosure given by Santos.
    4. (d)
      The Fluor parties had amended part of their defence and counterclaim ([330R] and Schedule 20) on 28 July 2021 and Santos was yet to file and serve an amended reply and answer in response.
    5. (e)
      The Fluor parties had made some changes to their legal team, consequent upon the appointment of one of the leading counsel to this court.
    6. (f)
      The Fluor parties were concerned by “challenges” and “risks” associated with a virtual hearing due to restrictions on travel across internal borders. 
    7. (g)
      Santos intended to make amendments to plead a further alternative ground of relief and had provided a draft of an amended claim and a ninth amended statement of claim to the Fluor parties “very, very recently.”   
  2. [20]
    The referees noted that “the significant delays in completion of the expert evidence have arisen because Fluor has been very delayed in producing its own expert reports.”  After the delays by the Fluor parties were considered, “the delays for which Santos was responsible were quite minimal.”  The referees observed that the delays in completing the expert evidence would delay the timing of conclaves and the production of joint reports and would impact on the cross-examination of lay witnesses.  The referees concluded that these problems could be mitigated, to an extent, by the recall of lay witnesses for further cross-examination if it appeared factual matters had not been explored because their significance had not appeared from the earlier state of the expert evidence.  As the chairman of the referees, Hon Robert McDougall QC, observed:

“To my mind, that is not an enormous problem because the extent to which the matters of fact will appear to become significant through the further development of the expert evidence is, in the real world, likely to be minimal.”

  1. [21]
    The privilege issues were to be determined by the court.  The referees expressed confidence that court would hear them promptly.[2]
  2. [22]
    The disclosure issues were also a matter for the court.  The Fluor parties had not applied for any orders.  The referees could accommodate any requirement to recall witnesses within the allocated hearing times.
  3. [23]
    The referees accepted that the delay in the provision of an amended reply and answer would cause problems. But observed:

“However, those problems seem to me to be substantially of Fluor’s making, given the substantial amendments to the amended defence and cross-claim that was filed, in the form of the sixth amended defence and cross-claim, as late as 28 July 2021.”

  1. [24]
    The referees noted that the Fluor parties had obtained the assistance of Mr Couper QC, in place of Mr Declan Kelly QC and so “this aspect of the prejudice has been, to an extent, mitigated”. 
  2. [25]
    As to a virtual hearing, the referees rejected the Fluor parties’ contention that they had never contemplated there would be a virtual hearing.  The Fluor parties’ solicitors asked each of the referees, before they were appointed, whether they would be prepared to undertake a virtual hearing. Many of the Fluor parties’ lay witnesses and expert witnesses were proposed to give evidence remotely.
  3. [26]
    The amendment of the claim and statement of claim was a matter for the court.  The referees declined to grant an adjournment on the basis of “a threatened application for leave to amend”. 
  4. [27]
    The referees also considered and gave “great weight” to the evidence of the Fluor parties’ solicitor and the view of Mr Liam Kelly QC, their lead senior counsel, that the Fluor parties could not be ready for a hearing on 25 October 2021.    
  5. [28]
    Having taken the parties’ submissions into account, the referees decided to postpone the start of the hearing from 25 October to 15 November 2021 and to conduct a view of the site on 15 and 16 November, so that witnesses would not give evidence until 17 November 2021. The hearing would then resume on 31 January 2022 and continue for five weeks until 4 March 2022.  The hearing would again resume on 14 March 2022 and continue until 30 March 2022.  The referees could sit in the week commencing 4 April 2022, if required. 

Events after the further directions hearing before the referees

  1. [29]
    On 20 September 2021, Santos filed and served the fourth amended reply and answer, responding to the amendments made by the Fluor parties on 28 July 2021. 
  2. [30]
    On 23 September 2021, Santos filed the ninth amended statement of claim (9ASOC), a draft of which had been provided before the 8 September 2021 directions hearing.
  3. [31]
    On 24 September 2021, the Court of Appeal allowed an appeal by Santos against my decision to grant the Fluor parties summary judgment on part of the claim referred to as the MC Delay Costs claim.[3] The parties are agreed that the MC Delay Costs claim and all time-related overhead cost claims should be included in the questions the subject of reference.  At the end of the hearing, by consent, an order was made to that effect.  
  4. [32]
    On 29 September 2021, Santos filed an application for leave to amend the claim to add the additional ground of relief, together with its written submissions. Santos filed a written outline of submissions with the application.

The fourth directions hearing before the referees

  1. [33]
    On 6 October 2021, the referees conducted another directions hearing.  At the hearing, the parties were agreed that the remaining issues in the proceeding should also be made the subject of the reference. 
  2. [34]
    Mr O'Sullivan QC for the Fluor parties put the following in support of a proposal that the reference be adjourned until March 2022:

“We respectfully submit that looking at it realistically, the changes to our clients’ defence, the matters that are consequential upon that, including the inevitable pleading fight, further evidence, limited further evidence, I accept, Mr Rudge, reply to pleading, any reply evidence, that alone makes it impossible to start on the dates, and the introduction of the quantum problem is another separate reason why it is just very hard to get it done.”

  1. [35]
    Mr O'Sullivan also submitted that probably another five hearing days would be required for cross-examination of witnesses and submissions on matters of law as a result of the proposed amendment to the Fluor parties’ defence and the proposed inclusion of the further questions in the reference. 
  2. [36]
    The referees considered the parties’ submissions.  The chairman then delivered the following reasons:

“The proceedings on the reference had been set down for hearing originally on 25 October 2021 to extend until 10 December 2021 and then to resume in February 2022, although with a little break in the middle.  As a result of an application made by one of the parties, the start of the hearing was delayed until 15 November 2021 and the balance of the timetable was rejigged.

Since those events happened, the Court of Appeal has given judgment on an appeal from a decision of the judge at first instance, which first instance decision struck out a substantial part of the plaintiff’s claim.  In effect, the Court of Appeal reinstated that part of the claim, but because of the way the order for reference was framed, it is not before us on the reference.

The parties are proposing to invite the court to refer those further questions, which are generally referred to as the mechanical completion delay cost questions, to us.

We convened this directions hearing so that we could hear what might be involved in that reference and could express a view for the benefit of the court, should it be minded to consider our views, on what we thought that would involve.

To some extent, the questions of fact and law involved in what I will call the new questions overlap with those that are already before us.  That is one of the reasons why the Court of Appeal suggested, at 76 of its reasons, that the order striking them out ought not have been made.  The court made the point that the questions of construction that arose ought be determined on the whole of the case and not in isolation, and we respectfully see the sound sense behind those observations.

The defendants submit that if the further questions are to be referred to us, it will not be possible for the hearing to commence on 15 November.  They submit that it ought to be adjourned until the end of April, at the earliest, so that the whole of the reference (assuming of course that the additional questions are referred to us) can be heard at once.

We accept, of course, that there is significant merit in hearing all questions at once and in one continuous hearing and in giving one set of reasons (in our case, a report) dealing with all those questions.  Unfortunately, sometimes real-world events interfere with what is ultimately desirable.

In our view, there are several alternatives, none of which is entirely acceptable.  One is that the court decides to terminate the reference.  If that happens (and we do not suggest that it should), there will be an enormous waste of time and money on the work that has been done already to prepare for the reference.

Another alternative is that the reference could be adjourned, as the defendants submit should be done.  That would also involve an enormous waste of time and costs.  It would have a further complication, because on the present commitments of the referees the reality is that the reference could not start until November [2022], and given that it will take more than four or six weeks, must continue into [2023].  That is an entirely undesirable outcome and one that again will involve substantial waste of time and costs.

A third alternative is to start as presently planned with the issues that are presently before us.  If the court accedes to the parties’ request to refer the mechanical completion delay cost issues to us, then we will be able to assess at that time what is involved and whether they can be accommodated within the existing timetable.  If they cannot, then we would propose, depending on what comes out, to separate the hearing of those questions out until after we have completed our inquiry on the existing questions and delivered our report.

We accept that that would involve a number of inefficiencies.  One of those would be that some witnesses would need to be recalled for further examination and cross-examination.  That raises the theoretical possibility of findings as to credibility differing on one issue as opposed to the others.  In our view, that is not a real problem; 99 per cent of the facts in this case are to be determined by reference to the documents, and indeed it is a common feature of the witness statements that they refer to and give evidence based on the documentary trail.  Thus, we do not think that there is likely to be any real problem with inconsistent views as to credibility, if only because credibility will have been examined very closely in what happens up until (on this hypothesis) the end of the inquiry on the current questions.

Another possible problem is that the expert evidence will have to be re-examined and that this will involve a degree of duplication.  That again cannot be ignored, but as against that, it offers a considerable advantage because the experts will be able to leave aside their consideration of the mechanical completion delay cost case and focus on the existing costs issues and then resume their consideration of that case once we have concluded our hearing on the existing issues.

As I have said, all the alternatives involve unpalatable aspects.  However, in our view, the least unpalatable is the last one that I have outlined.

To the extent that there was an application made today to vacate the hearing of the reference, our decision is that we refuse it.  If the court is minded to direct us to adjourn it, then of course we will abide by that order, but our present and very strong view is that the competing rights of the parties (and we notice, of course, that the plaintiff has a very strong interest in having its case dealt with as quickly, in the context of this gargantuan dispute, as possible) and adjudicated within the relatively near future.

Thus, unless and until the court directs otherwise or supervening events require otherwise, the hearing will commence as planned on 15 November, with a view for the first two days, and the existing directions should be adhered to.”

Events after the fourth directions hearing before the referees

  1. [37]
    On 1 October 2021, the Fluor parties filed an application to disallow some of the amendments made in the 9ASOC. On 7 October they filed an amended application together with an outline of submissions seeking substantially the same relief.  The Fluor parties’ outline dealt also with the application by Santos for leave to file an amended claim.  Santos responded with written submissions on 12 October 2021.  Fluor replied on 15 October 2021.
  2. [38]
    On 8 October 2021, the Fluor parties filed an application to vacate the reference orders or for directions as to how the referees were to proceed.  The Fluor parties filed written submissions in support of this application on 12 October 2021.  Santos responded with written submissions on 20 October 2021, and Fluor replied on 25 October 2021.
  3. [39]
    On 18 October 2021, the Fluor parties filed the seventh amended defence and counterclaim (7ADCC) and Santos filed a tenth amended statement of claim (10ASOC). 
  4. [40]
    On 22 October 2021, Santos filed an application to disallow some of the amendments made in the 7ADCC, together with an outline of submissions.

The hearing on 1 and 2 November 2021

  1. [41]
    On 1 and 2 November 2021, the applications filed 29 September, 1 October, 7 October, 8 October and 22 October 2021, were heard.  At the outset, the Fluor parties urged the court to consider its application to set aside the orders made in February 2021 (referring questions to the referees), in advance of all the other applications. 

Reference Orders

  1. [42]
    The Fluor parties identified three circumstances that, they contended, made it necessary and appropriate for the court to set aside the reference orders made on 15 and 24 February 2021.  These were:
    1. (a)
      “The matter will not be ready for hearing [on 15 November 2021] in a way that will permit Fluor to have a fair hearing.  It is, however, likely to be ready for a hearing commencing in mid-March 2022, provided that the amendments sought to be made by Santos in the 9ASOC are not allowed.”
    2. (b)
      “if the matter proceeds to hearing on 15 November 2021 when it is not ready, the reference will likely miscarry, insofar as the report made by the Referees is adverse to Fluor, by reason of a denial of procedural fairness and a consequent inability of the Court to adopt the Referees’ report.”
    3. (c)
      “It is … not feasible or sensible to attempt to separate out the MCD Costs Claim from the other Questions arising for inquiry and report”.
  2. [43]
    The Fluor parties put the first and second of these submissions to the referees on 8 September and again on 6 October 2021. The referees considered them and on 9 September 2021 determined to adjust the starting date, fixed on 24 March 2021, to allow the parties, but in particular the Fluor parties, an extra three weeks before the hearing would start and a further two days before they would be called on to cross-examine any Santos lay witnesses.  The Fluor parties still say this is not enough.  They contend they will be denied procedural fairness if the hearings proceed as scheduled by the referees. 
  3. [44]
    At the hearing, the court was informed that the outstanding evidence for the Fluor parties on the MC Delay Costs claim was an expert report by Mr Badala, which would be finalised in December 2021, and up to an additional seven witnesses statements, which would be finalised in four weeks.  Santos had already served its evidence on this claim before the summary judgment application was made in 2021. 
  4. [45]
    At this point, I should identify that the evidence in chief of all witnesses is in or to be in the form of statements or reports.  The hearings scheduled by the referees would have Santos call its lay witnesses in the November-December 2021 hearing to allow the Fluor parties’ to cross-examine them.  In February 2022, the Fluor parties would call their lay witnesses so that Santos could cross-examine them.  In March 2022, the expert witnesses for all parties would be cross-examined.  The expert hearing is to be preceded by conclaves between corresponding experts and the preparation of joint reports, in the now usual way.  As noted above, the referees have already made provision to allow witnesses to be recalled for further cross-examination, should the Fluor parties reasonably require it.
  5. [46]
    Members of the panel of referees have read the evidence in chief already filed by the parties.  In the course of the directions hearings, a view has been expressed that much of the evidence in the lay witness statements refers to, repeats, and exhibits contemporaneous documents.  The expert reports also rely on identified documents, perhaps a sub-set of those to which the lay witnesses refer.  
  6. [47]
    This has always been a very significant and complex proceeding.  It was heralded by a pre-action letter on 26 November 2016.  The parties recognised it as such soon after, if not before, it was commenced.  It is therefore surprising that the Fluor parties say whatever they have been doing over the intervening period has left them unready to commence to cross-examine the Santos lay witnesses from 17 November 2021. 
  7. [48]
    Since the adjustment of the start date for the 2021 hearing, the Fluor parties say they have failed to get ready because they have been involved with amending their own pleadings, applying, again, before the referees for a deferral of the hearing date, bringing and arguing a challenge to Santos’ privilege claims, and preparing to argue this application to set aside the reference orders, amongst other things. 
  8. [49]
    Significant commercial entities have the same responsibilities under the court rules as an ordinary litigant.  They impliedly undertake to the court and to the other parties to proceed in an expeditious way.[4] 
  9. [50]
    The Fluor parties’ contentions were examined carefully by the referees over two hearings.  I considered carefully the written submissions filed in advance of this hearing and then listened to the oral submissions put over two days.  I found them unpersuasive. 
  10. [51]
    On closer examination, the Fluor parties’ generalised assertions about their lack of readiness are based on scenarios that have little likelihood of occurring.   They appear to proceed on an unexplained assumption that the Fluor parties cannot cross-examine any Santos lay witness until the Fluor parties have finalised all their own evidence.  They overlook the referees’ proposal that witnesses may be recalled if further cross-examination proves necessary. 
  11. [52]
    A decision about terminating a reference is a case management decision.  It calls for close attention to the Court’s role in ensuring effective, flexible principles of case management are applied to the resolution of disputes. Like all such decisions in civil proceedings, it is informed by the objective to avoid undue delay, expense and technicality and to facilitate the purpose of the rules, namely the just and expeditious resolution of the real issues in civil proceedings at a minimum expense.[5]  The first consideration is whether the decision to set aside the reference orders will facilitate the just and expeditious resolution of the real issues in the proceeding at a minimum of expense.  The power to set aside the orders is to be applied to facilitate that purpose and with the objective of avoiding undue delay, expense and technicality.  The expeditious resolution of the real substance of a party’s claim and the countering defences and the avoidance of delay require the Court to deliver a well-founded judgment pronounced within a reasonable time and within available resources. The requirement to provide a resolution at a minimum expense, and to avoid undue expense, directs the Court to undertake its role with an economic and proportionate use of resources – both the public resources of the Court and the litigants’ private resources. Inefficiencies in the use of the Court’s resources affect not only the immediate parties, but other litigants seeking their share of those resources. There is an obvious public interest in the efficient use of Court time funded by the community.[6]
  12. [53]
    The effect of the relief sought by the Fluor parties would be to delay the determination of the issues raised in the statement of claim and in the defence by at least 12 months.  This delay would occur at a time when the proceeding has been on foot for nearly five years. The contractual instruments at the heart of the litigation were executed in January and September 2011 and the work the subject of factual enquiry was undertaken between 2011 and 2014.  The claims for payment (or repayment) were made by Santos in 2016, shortly before it commenced the proceeding.
  13. [54]
    The Fluor parties contend that the consequences of terminating the reference sound only in costs and they are content to pay to Santos any costs thereby thrown away.  
  14. [55]
    The more significant question is about the just determination of the real issues. In Re D [1996] AC 593 at 603-604, Lord Mustill called it “a first principle of fairness”, namely:

“that each party to a judicial process shall have an opportunity to answer by evidence and argument any adverse material which the tribunal may take into account when forming its opinion.” 

  1. [56]
    There are two different subject matters that concern the Fluor parties. 
  2. [57]
    Firstly, there are the matters arising from the recent Santos amendments and the addition to the reference, by consent, of the MC Delay Costs claim.  As to these matters, the Fluor parties have all the evidence Santos proposes to adduce.  They have had it for a very long time, some for more than a year.  The only missing evidence is any the Fluor parties decide to adduce.  That is expected to be finalised within four to eight weeks.  No real issue about procedural fairness for the Fluor parties arises from this circumstance. 
  3. [58]
    Secondly, there is the evidence arising from recent amendments by the Fluor parties.  There is an element of unreality in the contention that, although the Fluor parties have been able to plead their new defences in great detail and have been able to respond to the new Santos pleas in detail, they will not know what case they must put to any Santos witness until they have finalised and filed any additional witness statements and the one outstanding expert report.  If the hearings proceed as scheduled by the referees, I am not persuaded that the Fluor parties would be denied an opportunity to answer by evidence and argument any adverse material which the referees may consider when preparing their report. 
  4. [59]
    The Fluor parties sought to disparage the referees for allowing additional hearing time in March 2022, because it reduced the time between the end of the expert examination and the provision of written and oral addresses.  This “compaction” was the referees’ response to the Fluor parties’ September submission that they could not be ready to start a hearing on 25 October 2021.  By it they sought to accommodate the Fluor parties’ concern.  The three weeks lost by postponing the start of the 2021 hearing until 15 November was compensated by sitting in the former interval between the end of the March 2022 hearing and the addresses. 
  5. [60]
    The referees are very experienced practitioners.  In the December 2020 reasons for rejecting the Fluor parties’ objection to any reference, I observed that:

“The reference could involve appropriate and just limits on the time each party may have to present its case, the number of witnesses (including expert witnesses) each party may call on any issue, the time to be taken in the examination of witnesses, the time to be taken in oral submissions, and the length of any written submissions. These are matters for the referees.”[7]

  1. [61]
    Between them, the referees have received, and have read, the evidence in chief of the lay witnesses and the expert reports that have been filed.  With the benefit of this knowledge, they have staged the hearing, over the adjusted schedule of 13.5 weeks, so that the lay witnesses for Santos are to be cross-examined from 17 November 2021 to 10 December 2021, the lay witnesses for the Fluor parties from February 2022, and the experts from March 2022.  They have offered to make provision for the recall of witnesses, should it prove necessary.  In the circumstances, the Fluor parties’ attack on the referees for the revised hearing schedule was unconvincing. The referees’ opinion on the fairness of the process they are charged to conduct should not be lightly discounted. 
  2. [62]
    In the circumstances, I did not make the order sought setting aside the reference orders.  The alternative order sought is to the same effect as that I made by consent, ensuring all the questions raised on the pleadings are before the referees for inquiry and report.   I did not make the directions sought by the Fluor parties, in the alternative to terminating the referral.  These would direct the referees as to the manner in which they were to report and the timing of the hearings before them.  These are matters that the referees ought to decide.  If their future decisions on these matters give rise to a legitimate concern, the parties might seek to bring the decision before the court.  I do not expect that will be necessary or likely. 

Disallowance of amendments

  1. [63]
    The parties have made the various pleading amendments between 20 September and 18 October 2021 very close to the commencement of the first scheduled hearing of evidence before the referees.  All may be regarded as late amendments in that sense.  These are the ninth (and tenth) amendments by Santos to its statement of claim and the third amendment to its claim; and the seventh amendment by the Fluor parties to their defence and counterclaim.  Santos is up to its fourth amended reply and answer.  There has been ample time and opportunity for each party to consider and revise its pleaded case. 
  2. [64]
    Some of the amendments are less concerning.  The parties have responded sensibly to the reintroduction of the MC Delay Costs claim, as a result of the Court of Appeal’s decision, by consenting to that matter being included in the questions to be considered by the referees.  The reaction of the Fluor parties to amendments made by Santos to align its pleaded case (and its particulars) to its expert evidence might be regarded as theatrical.  The defendants have had the underlying expert reports for more than six months. 
  3. [65]
    The other amendments made by Santos (and the proposed change to its claim) were explained, in written submissions and at the hearing, as alternative characterisations of the long-standing claims.  Santos has added a pleading that advances another legal pathway to relief, based on the existing lay and expert evidence.  Santos expressly disclaimed any proposal to adduce further evidence in support of these most recent amendments. 
  4. [66]
    The Fluor parties submitted that, even if Santos adduced no new evidence in support, they would be entitled to further disclosure from Santos of documents relevant to the alternatively characterised Santos allegations.  In particular, they contend that much material about an “audit” Santos alleges it undertook would be directly relevant.  On enquiry, I was not satisfied that any document directly relevant to the matters arising from the amendments would not have been directly relevant to the pre-amendment allegations made by Santos (and denied by the Fluor parties) in the proceeding.  This was a concern without real substance. 
  5. [67]
    Similarly, the Fluor parties submission - that they will need to investigate alleged errors identified in the audit, through further disclosure and document analysis, prepare lay and expert evidence - may be disregarded.  It is based on the assumption that Santos will have to plead the alternative in accordance with the Fluor parties’ view of the contract. Santos has not done so.  It does not have to do so.  If Santos is wrong about the construction of the contract, then its alternative basis of case will fail. 
  6. [68]
    The Fluor parties also submitted that the alternative case is “embarrassing” and “not viable”. As explained in their written submissions, these contentions are about the proper construction of the underlying contract between Santos and Fluor Australia.  The Fluor parties may make these submissions to the referees.  Their application to disallow the amendments is not an occasion to construe the contract and determine whether they would be entitled to judgement against Santos in respect of the alternative basis of claim.  
  7. [69]
    The other amendments made by Santos, which the Fluor parties seek to disallow, are also, on analysis, really legal points about the contract and the alleged contractual or common law right of a party to an order for recovery of moneys, which were not payable but were paid under a contract.  
  8. [70]
    These submissions were made against a background where Santos has been providing drafts of the amended pleading to the Fluor parties since 7 September 2021 and they have been responding with various objections and criticisms over more than a month. 
  9. [71]
    The Fluor parties sought to explain the reason for the most recent amendments to their defence due to a new leading counsel considering the defence in light of the Court of Appeal’s decision to set aside summary judgment for them on the MC Delay Costs claim.  The new pleas assert four defences of estoppel by convention and a counterclaim under the Australian Consumer Law alleging contravention of s 21.
  10. [72]
    The application by Santos to disallow some of the Fluor amendments was put primarily on the ground that the additional lay evidence the Fluor parties propose to adduce would prevent the referees from completing the hearing of evidence within the presently allocated time periods.
  11. [73]
    As the referees have already indicated, for the benefit of the court, the addition of the MC Delay Costs claim would likely mean the scheduled hearings will be insufficient to deal with all the evidence and submissions for the questions the subject of the reference.  In part this is due to the earlier adjustment to the hearing schedule to accommodate the Fluor parties’ concern that they would not be ready to commence on 25 October 2021, the date originally fixed. 
  12. [74]
    These further amendments had been indicated before the referees at the 6 October 2021 directions hearing.  The referees provided some comments on them for the benefit of the court:

“There are further complications, of course.  One is that the plaintiff has filed a ninth amended statement of claim.  The defendants have signalled a desire to object to certain aspects of that.  The court’s decision on that (and it is a matter for the court) may affect the progress of the reference.  However, we cannot chart our course by hypotheses, and the reality is that we will have to deal with whatever flows out of the defendants’ application once the court has given its direction.

A further complicating factor is that the defendants have indicated a desire to raise a conventional estoppel defence to the mechanical completion delay costs claim.  They point out (and we think it is correct) that they are entitled to amend their defence as of right now that that claim has been reinstated.  However, it must be borne in mind that up until quite recently there was a very extensive conventional estoppel defence pleaded to all the claims.

It is by no means apparent to us how what the defendants now propose will differ from what had been pleaded.  If it turns out that there are further material facts to be pleaded and further evidence needed to support them, then again that is a complication that can be taken into account in the conduct of the reference.

If it appears to the court that those pleading issues are of such magnitude as to threaten to derail the reference, then, obviously enough, the court will take into account the waste of time and effort involved in postponing the start of the reference as one of the discretionary factors to be considered in deciding how to deal with the defendants’ applications.  We do not mean to suggest to the court how it should weigh those factors.  Rather, we are indicating only our view on those factors to the extent that they may be relevant to the court’s thinking.

In short, the court should be aware from these reasons that if the further questions are to be referred to us, we are prepared to accept the reference.

The court should also be aware that we would regard it as the worst outcome that the whole of the reference were to be adjourned to allow for those further questions to be accommodated and that our alternative proposal is to proceed with what we have as at present planned and to seek to accommodate the further questions (should they be referred to us) if and when that happens.

As I have said, if the worse comes to the worst, they can be accommodated by hiving them off and dealing with them in a matter of two or three weeks, at the outside, later next year and after our report has been given.  Apart from anything else, the parties will then know what, if anything, is really left in those further questions and if they need to be re-agitated.”

  1. [75]
    I have already noted the experience of the referees.  As their initial consideration of the consequences of the amendments shows, they are well-placed to consider and make any appropriate further accommodation to facilitate their enquiry and report process if the contested amendments are not disallowed. 
  2. [76]
    The principles governing the exercise of discretion to disallow an amendment (and to allow an amendment to a claim) are not in issue.  Deriving from Aon,[8] they have been identified by Applegarth J in Hartnett v Hynes.[9]
  3. [77]
    To this time, in accordance with the rules, the parties have been entitled to raise arguable claims or defences, subject to being liable to pay any costs thrown away.  However, justice does not permit a party to raise any arguable claim or defence at any point in the proceeding, merely on the payment of costs.  It is not uncommon that further amendments arise when concentrated attention is applied in preparation for a hearing. The coincidence of the Court of Appeal’s decision has played a role in the recent emergence of these amendments.  These matters provide better explanations for some of the amendments than for others.  In the context of litigation of this scale, the less well explained amendments would make little difference if the better explained ones were not disallowed.  
  4. [78]
    Although in form some of the amendments raise new claims or issues, in substance they emerge from the same factual basis as the claims and defences pursued throughout the litigation.   For the most part, they seek to facilitate additional or alternative legal argument about the consequences of what occurred.  It is preferable that parties have the opportunity to put their case in a way that allows the real issues to be heard and determined. 
  5. [79]
    As the proceeding is before the referees for enquiry and report, the otherwise significant consideration of the prejudice caused to other persons with claims for the attention and resources of the court, and to the court itself, do not tell strongly in favour of disallowing the amendments.  
  6. [80]
    Balancing the procedural convenience of disallowing the various amendments with the court’s mandate to facilitate the just and expeditious resolution of the real issues, I favoured allowing the parties to put forward their respective cases substantially in the form they have now adopted, following the decision of the Court of Appeal.  To facilitate this outcome, I also allowed Santos to amend its claim. 
  7. [81]
    In the course of the litigation, there has been a degree of movement, advancing and withdrawing various elements of the claims and the defences.  This has been particularly the case with the Fluor parties.  There is a point in time when the parties’ freedom to amend their cases should end and the process for hearing and determination be allowed to run its course, without further disruption or delay.  The submissions put on behalf of each of the parties clearly indicate that they understand the proceeding has reached such a point. Their respective understandings suffer the distorting consequences of fixing on the specks in each other’s eyes and overlooking the beams in their own. 
  8. [82]
    To socialise this understanding, I directed that no party was to make any further amendment to its pleadings, save by consent or with the leave of the court.   I gave leave for the parties to file and serve amended pleadings responsive to the latest amendments, which I have not disallowed.  

Footnotes

[1] Santos Limited v Fluor Australia Pty Ltd & Anor (No 2) [2020] QSC 373

[2] Brown J delivered judgment on the privilege issues on 8 November 2021: Santos Limited v Fluor Australia Pty Ltd & Anor (No 3) [2021] QSC 281

[3] Santos Limited v Fluor Australia Pty Ltd & Anor [2021] QCA 204

[4] Uniform Civil Procedure Rules 1999 (Qld), r 5(3).

[5]  r 5(2).

[6] Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 at 182 (French CJ) (Aon).

[7] Santos Limited v Fluor Australia Pty Ltd & Anor (No 2) [2020] QSC 373 at [92].

[8]  (2009) 239 CLR 175.

[9]  [2009] QSC 225 at [27].

Close

Editorial Notes

  • Published Case Name:

    Santos Limited v Fluor Australia Pty Ltd (No 4)

  • Shortened Case Name:

    Santos Limited v Fluor Australia Pty Ltd (No 4)

  • MNC:

    [2021] QSC 296

  • Court:

    QSC

  • Judge(s):

    Bradley J

  • Date:

    02 Nov 2021

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

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