KEYWORDS: STAY PROCEEDINGS; SETTLEMENT OF DISPUTES; DISPUTE
There is a heavy onus on a party to prove it does not have to
comply with contractual dispute resolution clauses.
Santos Limited (Principal) engaged Fluor
Australia Pty Ltd (Contractor) on a project which
involved coal seam gas being extracted, processed and exported in
its liquefied form from Curtis Island near Gladstone. The contract
originally commenced in early 2011. Later that year it was amended
and converted into a costs reimbursable contract subject to various
At the completion of the project the Principal was concerned
that the Contractor had claimed costs which were excluded under the
contract and to which it was not entitled. The Contractor had
claimed and been paid $5.43 billion, which was an overrun of $1.854
billion from its target budget estimate.
In May 2016, the Principal exercised its rights under the
contract by applying to access the Contractor's records to
ensure the Principal had not been charged or paid excluded costs.
The Contractor opposed this and sought to stay the application
pending compliance with the contract's dispute resolution
clauses which the Principal had not followed.
Douglas J held that the dispute resolution procedures were
undoubtedly enforceable. This was so even though the Principal had
argued similar disputes had not been resolved using the dispute
Douglas J confirmed there was a heavy burden on the Principal to
persuade the Court to allow the dispute resolution clause not to be
followed and so allow the action to proceed.1 His
determined that staying proceedings was not sufficient to make
reference to the contractual procedure "obviously
futile" or "so slight as not to justify
enforcing the agreement". 2 This was
the parties had succeeded in compromising similar disputes in
the past, even if this was not until litigation commenced, and the
formal process of negotiation commonly helps parties
Santos was not deprived by the dispute resolution clause of
having their claim judicially determined;4 and
it was in the public interest to avoid potentially unnecessary
costs and use of court time.5
In addition, Douglas J noted that while the case generated a
legal point suitable for the Court's determination, the
commercial reasons for parties entering into dispute resolution
agreements are significant.6
Accordingly, the proceedings were stayed pending the performance
of the parties' obligations under the dispute resolution
clauses of the contract.
1 See also Zeke Services Pty Ltd v Traffic
Technologies Ltd  2 Qd R 563 at 569 2 At  3 At ; Downer EDI Mining Pty Ltd v Wambo Coal
Pty Ltd  QSC 290 at  4 At  5 At  6 At  and ; Cable & Wireless plc v IBM
UK Ltd  EWHC 2059 (Comm)
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Warranties can be risk-shifting mechanisms when the party giving the warranty is not the party at fault for the defect.
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