AED Oil Ltd v Puffin FPSO Ltd

AED Oil Ltd v Puffin FPSO Ltd - [2022] WASC 376 - WASC 2022 case summary — Zoe

[27]

The first notice pleaded by PWC is a Notice of Curtailment by letter dated 22 April 2021.[19] The estimated duration of Curtailment was [redacted], with estimated delivery capacity during that period [redacted].
Particulars of the cause of the Curtailment were set out in annexure which stated the Curtailment 'arises from [redacted]'. Eni noted that further investigations were needed to better define the cause, and the opportunity for those investigations would be during a planned offshore campaign scheduled for June/July 2021.
A Force Majeure Notice, also dated 22 April 2021, stated that the Curtailment had arisen 'as a result of the Force Majeure event or circumstances the subject of this Notice'.[20] Particulars of the event or circumstance of Force Majeure were the same as those given for the Curtailment.
On 27 May 2021, PWC sent a request to inspect records relating a Curtailment in May 2020.[21] An 'indicative list' of records to which PWC sought access was provided. Without evidence about the contents of the Notice of Curtailment, it is not possible to comment on the items in that list.
Eni wrote to PWC on 25 June 2021, responding to a letter from PWC of 27 May 2021.[22] The record of correspondence before the court appears incomplete: Eni responds to comments and statements by PWC which are not in the letter now in evidence. Eni's response suggests there had been another letter from PWC, dated 27 May 2021, responding to the Force Majeure Notice of 22 April 2021.
PWC first requested to inspect Eni's records with regard to the Notice of Curtailment of 22 April 2021, pursuant to clause 15.5, by letter dated 12 November 2021.[23] The letter refers to both the Curtailment and the Force Majeure Notice, as well as to emails not in evidence. Relevantly, PWC requested Eni to update the Force Majeure Notice and other notices provided by Eni, and requested access 'to all such records of Eni in relation to the Seller's facilities that may reasonably enable it to confirm the information provided to PWC'. PWC wrote that it would shortly provide a list of the records it wished to access.
On 12 November 2021, PWC sent two further letters to Eni headed 'Gas Sale Agreement - Curtailment and Force Majeure event notice', responding to Eni's letter of 25 June 2021.[24] The letters were primarily directed to the validity of the Force Majeure claim. PWC requested that Eni provide 'all relevant information and documents relating to the purported Force Majeure event or circumstance', and that the information would enable PWC to determine if Eni was meeting its obligations under cl 19.4.
On the material now before the court, there is no evidence of list of records which PWC wished to inspect pursuant to cl 15.5 being sent around the time of these letters.
PWC wrote again on 24 December 2021, expressing concerns in relation to the flow of information from Eni in relation to the Force Majeure claim.[25]
Eni responded on 31 December 2021,[26] and again on 18 January 2022.[27] Its responses were directed towards PWC's comments about the Force Majeure claim, and the information it provided at the meeting between the parties on 14 December 2021.
A second letter from Eni, dated 18 January 2022, headed 'Gas Sale Agreement - Curtailment' provided an update to the notice of April 2021. Eni stated its position that PWC's entitlement to inspect records was limited to 'records to confirm the accuracy of any information provided to [PWC] under this clause 15'. Eni suggested that PWC formulate a specific request for the categories of records that it wished to inspect and which matched 'the terms and purpose' of clause 15.5. Eni wrote that it was not obliged to and did not propose to accede to 'a far-ranging enquiry in a manner inconsistent with that provision'.[28]
In an annexure to the letter of 18 January 2022, an update to the Notice of Curtailment, Eni provided information on the reason for the curtailment, its likely duration, and the estimated delivery capacity of its facilities during the period of Curtailment. Eni stated:

[29]

Further letters passed between the parties. In summary, Eni continued to provide information to PWC but did not provide access to its records.
On 10 June 2022, PWC sent the second pleaded request to inspect records of Eni. The request was to inspect records 'to confirm the accuracy of the information provided to PWC under clause 15 of the [agreement] in relation to the Curtailment which forms the basis of the Second Force Majeure Notice'.[30] An annexure to the letter set out 'an indicative list' of the records PWC sought to inspect. The annexure listed 11 items (not exhaustive). In summary, the first five items were analyses and records referred to in the presentation on 14 December 2021; the remaining items related to matters referred to in the Second Force Majeure Notice.
Eni responded on 29 June 2022.[31] In substance, it said the request to inspect was 'overbroad and impermissible' and would require Eni 'to embark on an unmanageable task to identify records that relate to any information that has been provided under clause 15, no matter how immaterial or uncontroversial'. Eni again required PWC to formulate specific requests for records 'that match the terms and purpose' of clause 15.5. In particular, Eni disputed PWC's reliance on the meeting of 14 December 2021 and the Second Force Majeure Notice as a basis for its request.
There was further correspondence between the parties and some negotiations.
On 11 August 2022, Mr Murphy of PWC wrote by email to Mr Brett Walker of Eni, referring to those discussions and that PWC had been and was proceeding on the basis that Eni would not rely on any delay in response to any subsequent action.[32] Although the email was expressed as 'confirming' that position, there is no evidence that the position had previously been stated.
One of the areas of objection regarding the affidavit evidence was the admissibility of paragraph 39 in the affidavit of Mr Delfos. I will not allow that evidence, on the basis that it refers to without prejudice meetings.

[42]

The issue joined between the parties in their correspondence is whether PWC has sufficiently specified and confined the categories of records it seeks to inspect. At the heart of the dispute, as I understood the submissions of counsel for PWC, is the reliance by Eni on the same matters in its Notice of Curtailment and its Force Majeure Notice, and its reliance on the information presented in the meeting of 14 December 2021 in providing information about the Curtailment.
Eni responded to the second request for inspection by asserting that the 11 categories of documents that PWC sought related to the presentation at the technical meeting on 14 December 2021 and the Force Majeure Notice, and were not within the scope of the 'terms and purpose' of cl 15.5. PWC would argue for a construction of cl 15.5 that would include those records, so that, on reasonable notice from PWC, Eni is in breach by failing to allow the inspection requested.
PWC submitted that the court proceedings require no discovery, and no evidence outside what was before me on the stay application. The hearing would not be longer than a day, and the interlocutory processes could be confined to the filing of a defence to complete pleadings, and the filing of submissions.
On that basis, subject to the availability of the court and the parties, the matter could be heard within a month.
If, however, the matter is not so stark, and there is a question of what records Eni holds and that PWC is entitled to inspect under cl 15.5, the action may take longer to resolve.
The difficulty in reliably estimating the time necessary to complete court proceedings is obscured by the relief PWC seeks. PWC does not plead what records it is entitled to inspect, other than by reference to the text of cl 15.5. It descends to any level of detail only in the particulars to Statement of Claim [11], where it pleads the basis Eni gave, in its letter of 29 June 2022, for denying PWC's request. It is not apparent on the fact of the Statement of Claim whether all of Eni's objections are in issue.
If the court is required to find facts to determine the issues involved in the dispute, it must make findings about the records which Eni holds and which records it is obliged to make available for inspection. PWC may not know, or be in a position to plead or prove with any precision, what records Eni has. Eni may, properly, seek further particularisation of PWC's case. There are processes available through the court to overcome the imbalance in information between the parties: either by discovery, or by expert evidence about what records Eni would be expected to have. PWC relied on the latter process in attaching advice it has received from RISC Advisory Pty Ltd to the affidavit of Mr Grondal.[53] Once the parties go down either of those paths, however, the time required for resolution of the action becomes both uncertain and extended.
Eni referred also to the additional time that may arise from the appeal process available in court proceedings.

[45]

There is no doubt PWC has a contractual right to inspect records within the scope of cl 15.5. And the parties' different views about the meaning and scope of cl 15.5 is a serious issue to be determined.
PWC contends the resolution of the dispute is urgently needed to facilitate the inspection of records. It submitted that a declaration in the form it seeks would finally determine an aspect of matters in its dispute with Eni. PWC further submitted that the capacity to confirm information provided by Eni is necessary for it to properly discharge its obligations and responsibilities downstream - that is, to the Tier 1, Tier 2 and other customers.
PWC relies also on the urgency of gas supply to the Northern Territory government, referring in particular to the evidence that it supplies all of the fuel for the Northern Territory electricity grid, and the risk of blackouts or other measures if not enough gas is supplied. It referred to Mr Trier's evidence of a real risk of crisis in the electricity market. PWC also referred to the potential consequences of continued failure to supply gas to a major downstream customer, Southern Cross Fertilisers. Those are consequences of the Curtailment. How they would be affected by the relief sought is unclear.
As Eni submitted, the question on this application is not the importance for the Northern Territory to maintain its gas or electricity supply, or the urgency of contingency measures to ensure the lights stay on. Eni does not dispute that the Curtailment requires steps to mitigate the effect of the reduced supply of gas. But the question of urgency must be tied to the relief sought. The declaratory relief, to the extent it may determine the scope of the right of inspection under cl 15.5 and facilitate access to Eni's records, must be objectively urgent so that the claim requires immediate attention by the court.
To the extent that PWC's case for urgency relies upon the demand for gas and electricity over the next few months, the evidence does not show how the resolution of this dispute would materially affect PWC's position. PWC has already taken short term measures to secure gas, although the evidence about what it has done is vague and imprecise. PWC, or the Northern Territory government, may wish to secure alternative sources of gas for the future. But the evidence does not demonstrate how the information obtained from access to Eni's records is immediately needed for the purpose of those arrangements.
It is not sufficient that the court is satisfied there is a real issue to be determined, or that PWC properly wishes to obtain information that will enable it to plan and estimate cost exposures with more certainty. PWC has not shown that the relief it seeks is urgent.
There are other matters which, in my opinion, support that conclusion.
First, there is the delay between relevant events and the bringing of these proceedings.
PWC submitted that it has acted in a timely way. PWC has sought to engage cooperatively with Eni, referring to its correspondence with Eni, the technical committee meeting of 14 December 2021, a meeting with Eni on 1 April 2002, and without prejudice discussions in the period between 27 July 2022 and 26 August 2022. PWC further submitted that there has been a deterioration in its trust in Eni, and the need to confirm the accuracy of information provided by Eni has grown.
The question of urgency must be considered in the factual context that the relevant Notice of Curtailment was issued in April 2021. PWC requested access to records, over six months later, on 12 November 2021. On 24 December 2021, PWC wrote 'to raise serious concerns about the flow of information from Eni to PWC...and to demand that Eni comply with its contractual obligations in that regard',[54] but did not then initiate the dispute resolution procedures.
In its letter of 18 January 2022, Eni updated the Notice of Curtailment and clearly stated that PWC should formulate a specific request for the categories of records that it wished to inspect, and that it was not obliged to and did not propose to accede to 'a far-ranging enquiry in a manner inconsistent with [cl 15.5]'.[55] The second request to inspect documents was nearly five months later. In its Mitigation Weekly Update of 30 June 2022, Eni forecast no improvement in supply in 2022. PWC did not commence proceedings for nearly two months.
Second, a bare declaration that Eni has breached cl 15.5, on the facts pleaded, may not resolve the dispute about the extent of records to which PWC is entitled. It is not that the relief sought relates to past breaches. If the failure to provide access is a breach of cl 15.5, the breach is continuing. The problem, as Eni submitted, is that the pleading does not raise any crystallised issue of construction for determination.
I am not, in this application, resolving issues which are the proper subject for any ultimate hearing. But I have doubts about the utility of the declaration in the way it has been pleaded, and how a declaration in those terms requires immediate action. If the action requires a determination of what records come within the scope of cl 15.5, on the facts of this case, I doubt that it can proceed simply on pleadings and without evidence. The time difference from an arbitration under the ACICA Expedited Rules may not be as significant as PWC contends.
Third, I have regard to the relative ability of the court and a single arbitrator[56] to resolve the dispute quickly. I have earlier referred to the difficulty of assessing how the matter would progress. I doubt that the comparison is between a matter of weeks and several months.
Assuming that the matter may be dealt with more swiftly in this court, the evidence does not indicate how the difference (whatever it is) materially affects PWC.
Fourth, an arbitrator would not be confined to making a bare declaration.
The major difficulty facing PWC in this application, however, is evidentiary. PWC must prove that the relief it seeks is urgent. It must show some purpose to be met by dealing with the matter immediately by urgent declaratory relief rather than by proceeding to arbitration. The evidence adduced by PWC is too general to satisfy me that the relief it seeks requires immediate attention.

[68]

Eni's alternative position was that a special costs order should be made pursuant to s 141(3) of the Legal Profession Uniform Law Application Act 2022 (WA), for the costs payable to the defendant to be taxed:
1. without reference to the limit provided for in Table B, item 10 of the Legal Practitioners (Supreme and District Courts) (Contentious Business) Determination 2022; and
2. without reference to the hourly rates and the daily rates provided for Senior Counsel in Table A of the Determination.
The relevant scale item (Table B, item 10) is for proceedings in chambers, other than on motions and originating process. Under that item, allowance is made for 2 days getting up and 1 day hearing, by either senior or junior counsel. No separate allowance is made for preparation of the case, for senior counsel to be briefed with second counsel, for preparation of written submissions, or for the attendance of instructing legal practitioners.
The application was heard in a day. But the hearing proceeded on seven affidavits, addressing the history of the dispute, the contractual underpinning in the Gas Sale Agreement, and the comparison of arbitral process and court process for the urgent resolution of the dispute. In short, there was a degree of complexity that made the allowance under the scale for an application in chambers inadequate.
I also accept that the application was important. All cases are important to the parties involved. But the particular need for Eni to seek the stay to ensure that its dispute was resolved in a confidential arbitration makes it appropriate to recognise that this matter justified the application of resources greater than those required for the usual interlocutory application in chambers.
Eni led no evidence about the costs actually incurred. As the presiding judge, having read all of the material and heard the application, I can see what was done and can form some opinion of what was required. The court should not, however, fall into the trap of making an estimate of the time which it considers would have been spent on the tasks, when the court does not have all information before it to make the judgment.[62] In the absence of evidence, I may underestimate, but I can only act on what was before me.
First, having regard to the way in which the application proceeded, an order should be made allowing for Eni to recover for the reasonable costs of preparation of the affidavits on which it relied at the hearing, and to recognise that preparation for hearing included the preparation of written submissions and the need to consider and deal with the evidence filed by PWC.
Second, no evidence has been led as to the rates of the practitioners engaged in the application. The court does not lift the limit on hourly rates simply because a party has engaged lawyers who charge at a higher rate.[63] Although the matter overall was more complex, and would require more time and resources than what is allowed for in item 10, it did not require special expertise. Ultimately, the application turned on limited questions of construction of item 5 (which were largely not controversial) and questions of fact. In the absence of evidence to justify such an order, I will not make a general order with regard to the hourly or daily rates of the practitioners engaged in the application.
Third, the time allowed in item 10 does not allow for attendance of practitioners at the hearing, other than counsel. The complexity and importance of the application was one which, in my opinion, justified the attendance of instructing solicitors for each party and I would allow the attendance of a senior practitioner instructing at the hearing.
Fourth, there is the time to be allowed for counsel in preparation. Eni submitted that four days should be allowed. I am satisfied that it would be reasonably arguable on assessment that allowance for two days is inadequate, having regard to the nature of the issues, the volume of evidence, and the importance of the application. I would order that preparation for up to four days be allowed. I would further order that allowance should be made for senior and junior counsel.
Finally, although a specific order lifting the rates of senior counsel was sought, no evidence was led regarding the rates charged. It is not uncommon for rates for senior counsel to be lifted above that allowed in the determination. It is not, however, appropriate to simply remove the limit on hourly and daily rates. I am aware of the standing of counsel who appeared. But the case was not in an area calling for specialist expertise; and, as Pullin J said in Flotilla Nominees, 'a party is always entitled to the luxury of retaining the highest paid practitioners in the conduct of their case, but they cannot always expect to recover these costs from the other party'.[64] In considering costs between parties, I will allow an uplift of 50% on the rate in the determination for senior counsel. The evidence does not justify an open ended order.
In conclusion, I will make a special costs order to the effect that Eni be allowed:

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