Gas Project Construction Litigation: Australian Courts can Refer the Substance of a Whole Proceeding to a Panel of Referees
The Queensland Supreme Court has confirmed its ability to refer all questions of fact and law in a proceeding to a panel of expert referees
Foreign companies should be aware that Australian courts have the power to refer all questions of fact and law in a court proceeding to a referee or panel of referees, even where one of the parties to the litigation objects to the referral.
A ‘referee’ is a person (or panel) with specific expertise appointed by the court to hear and decide questions of fact or law, and to report back to the court on their findings.
In a decision of the Queensland Supreme Court1, all questions of fact and law in litigation between Santos Limited and Fluor Australia were referred to a panel of senior barristers and a former judge (against Fluor’s objection). This had the practical effect of moving the substance of the dispute from court litigation to the referral process under the Court’s supervision.
DLA Piper’s Nick Wray-Jones recently co-authored a paper with James Aird “'Come On Ref!': Bulk, Disputed Expert Referrals of Construction Litigation in Queensland”, which won the Society of Construction Law Australia’s 2022 Brooking Prize for the best essay submitted in the field of construction law. Following on from that paper, this update provides practical guidance for parties to construction disputes in Queensland who may be considering or facing a referral process as part of any litigation.
What is a Referral?
Referrals involve the court appointing a referee (or panel) who have relevant expertise (e.g. technical experts such as engineers and/or former judges or senior barristers with a background in construction law) to decide questions of law or fact in dispute between the parties to the litigation. These referrals are made by order of the court, in contrast to contractual agreements between the parties to refer a dispute to an expert determination or arbitration. Such referrals by the court aim to provide parties with a quicker and cheaper way to resolve their disputes while also freeing up the court’s time to deal with other matters. Courts often use referrals for complex construction disputes because they are document-heavy, technically complex, and time-consuming for both the parties and the court.
Amendments to Queensland’s Expert Referral Regime
In 2019, the Queensland Parliament amended Rule 501 (Court may refer question to referee) of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR) to promote the use of expert referrals. Most importantly, the amendments allowed both issues of fact and law to be referred (where referrals were previously confined only to issues of fact) and made the process for hearings before referees more flexible than a trial before a judge (where previously referral hearings mirrored the trial process).
The Supreme Court’s decision in Santos
Following the amendments to the UCPR, Queensland’s first Bulk Disputed Referral occurred in Santos. The proceedings involved an AUD1.4 billion dispute over the engineering, procurement, and construction of facilities for a large coal seam gas project in the Surat Basin. Santos as principal commenced proceedings against Fluor as contractor, on the basis that Fluor was not entitled to all of its claimed costs for the project.
After five years of court litigation, Santos sought to refer all residual legal and factual issues in the proceedings to be heard by a panel of expert referees, in order to expedite the resolution of the dispute. Fluor opposed the application, arguing that the Court could not refer “the whole proceeding” to a panel of referees.
The Court’s decision
Justice Bradley acknowledged that the amended UCPR now permitted the Court to refer all legal and factual issues in the proceedings to be heard by referees. His Honour rejected Fluor’s submissions that the text of the UCPR and previous judgments from Queensland meant that the Court could not make the large-scale referral sought by Santos. Furthermore, his Honour explained that Fluor did not need to consent to the referral – instead, the question was whether a referral would result in a more efficient dispute resolution process overall. This is a significant departure from previous case law in Queensland, which emphasised that referrals should generally only be made with the consent of both parties.[2]
Justice Bradley also emphasised that a referral of all the legal and factual issues in the proceedings did not mean that the referees would replace the Court as the ultimate decision-maker. Instead, the referees would provide a non-binding report to the Court, which the Court would adopt, vary, or reject as it considered appropriate.
The recent amendments to the UCPR and the decision in Santos align Queensland with other Australian jurisdictions that allow for bulk referrals. For example, in NSW the Uniform Civil Procedure Rules 2005 (NSW) expressly permit the whole of a proceeding to be referred.3 Similarly, the Federal Court of Australia Act 1976 (Cth) expressly provides that “a proceeding in the Court” may be referred in appropriate cases.4 Additionally, Victorian courts have previously engaged in bulk referrals5, although recent case law suggests that it may be necessary to draft specific referral questions for each of the legal and factual issues in a bulk referral, as Victorian courts must “state the question referred” under rule 50(2)(a) of the Supreme Court (General Civil Procedure) Rules 2005 (Vic).6 Further, the fact that Queensland courts are now willing to make disputed referrals (i.e. without the consent of all parties) also reflects the position in these other jurisdictions.7
What this means for you
- Australian courts have recognised that in Major Projects and Construction litigation, the technical complexity, size and quantum of a dispute will sometimes require the court to appoint of a panel of referees to hear and decide it under the court’s supervision.
- In practical terms, this means that parties to litigation of this kind in Australia should be alive to the possibility of all or part of their matter being referred to a panel of experts, even without their consent.
- Where this occurs, especially where the substance of the whole of the proceeding is referred, parties should understand that the referral process is quite different to court litigation, and it will look and be conducted more like commercial arbitration.
- The referral will also require the parties to relinquish a degree of control over the process and its outcome. Specifically:
- referees are not necessarily bound by the normal procedures and rules of evidence that apply to a trial;
- for the most part, the court is unlikely to revisit or overrule the factual findings of referees, unless they commit serious errors. If the court refers all legal and factual issues to referees, their report may effectively decide the outcome of the dispute. Parties should not expect to get a second bite of the cherry, and should proceed on the basis that the referral hearing is the primary dispute resolution process and the court may largely (if not entirely) adopt the referees’ report; and
- unlike litigation before a judge, the parties will have to pay for the referral hearing, including the professional fees and disbursements of the referees (similar to arbitration). This means that a lengthy hearing before a panel may increase the parties’ total costs, especially where there is a subsequent dispute about whether the court should adopt the referees’ report. Parties should consider obtaining costs estimates for referral hearings, which may also be used to support or oppose an application for a referral.
1Santos Limited v Fluor Australia Pty Ltd [2020] QSC 373 (Santos).
2See Honeywell Pty Ltd v Austral Motors Holdings Ltd [1980] Qd R 355; Netanya Noosa Pty Ltd v Evans Harch Constructions Pty Ltd [1995] 1 Qd R 650; Everingham v Clarke [1994] 1 Qd R 34; Earl Covington & Associates Pty Ltd v Bondley Pty Ltd [2004] QDC 14 at [12] - [17]; MJ Arthurs Pty Ltd & Anor v Portfolio Housing Pty Ltd & Anor [2014] QSC 151 at [9] - [10].
3Uniform Civil Procedure Rules 2005 (NSW) r 20.14. Bulk referrals where also permitted before the introduction of the current rules: see Beveridge v Dontan Pty Ltd (1991) 23 NSWLR 13, 23 (Rogers CJ): ‘... from time to time, due to pressures of congested court lists, orders for reference are made, usually to persons who have formerly held high judicial office, or to senior counsel of eminence at the Bar, of the entirety of the dispute …’
4Federal Court of Australia Act 1976 (Cth) s 54A(1). See also Federal Court Rules 2011 (Cth) r 28.61; Optiver Australia Pty Ltd v Tibra Trading Pty Ltd (2012) 203 FCR 520 at [49].
5See, for example, Kilpatrick Green Pty Ltd v Leading Synthetics Pty Ltd (Unreported, Supreme Court of Victoria, Nathan J, 14 February 1997).
6 Construction Engineering (Aust) Pty Ltd v Adams Consulting Engineering Pty Ltd (Ruling No 2) [2016] VSC 209 at [23].
