Santos Limited v Fluor Australia Pty Ltd [2016] QSC 129

Significance

Petrina Macpherson and Alexandria Hammerton conclude that this case reaffirms the position that parties to a contract will be held to their bargain to resolve their disputes in the agreed manner, unless there is persuasive evidence so as to preclude the contractual process.

Facts

The applicant, Santos Limited (principal) and the respondent, Fluor Australia Pty Ltd (contractor) were parties to a contract relating to the GLNG Project involving the extraction and processing of coal seam gas in inland Queensland and its transportation to Curtis Island where it is liquefied and then exported (contract). The contractor had been paid about $5.43 billion under the contract, an overrun to the target budget estimate of about $1.85 billion.

The principal, concerned that the contractor had claimed amounts that it was not entitled to claim under the contract, sought access to the contractor's job costs records under a power contained in the contract. Correspondence was exchanged between the parties and ultimately the contractor denied the principal access to the requested records. The principal filed an application seeking an order that the contractor provide it with access to the records pursuant to its obligations under the contract. The contractor then filed an application, the subject of this proceeding, seeking a stay of the principal's application, pending compliance by the parties with the dispute resolution process under the contract.

The dispute resolution clause set out a structured approach to resolving disputes, prescribing the service of a dispute notice and response, without prejudice meetings of representatives and, if required, a further without prejudice meeting of 'Dispute Resolution Representatives', being higher level employees. The process, if followed promptly, would take 30 business days. The principal had not followed the process.

The principal argued that there had been sufficient information exchanged between the parties to make it clear that the dispute resolution process would be impractical or useless. It also relied on evidence of similar disputes between the parties to show that the dispute resolution process was unlikely to resolve the current dispute. The contractor argued that failure to resolve previous similar disputes did not mean the agreed process should not be followed in this case.

Decision

The court stayed the principal proceedings pending the performance of the parties' obligations under the dispute resolution clause.

Douglas J held that the principal's arguments were not sufficient to make reference to the dispute resolution procedures 'obviously futile' or 'so slight as not to justify enforcing the agreement'. His Honour found that the principal would not be prejudiced by being obliged to comply with the agreement. His Honour also acknowledged the public interest in obliging parties to adhere to their agreements and in avoiding the potentially unnecessary use of court time. Finally, Douglas J held that the history of previous dealings between the parties was not enough to satisfy him that there was no point in enforcing the agreement.