CRUSADER RESOURCES NL v SANTOS LIMITED No. 2635 of 1989 Judgment No. 2915 Number of pages - 27 Contract - Joint venturers - [1991] SASC 2915 - SASC 1991 case summary — Zoe

SASASC

CRUSADER RESOURCES NL v SANTOS LIMITED No. 2635 of 1989 Judgment No. 2915 Number of pages - 27 Contract - Joint venturers

[1991] SASC 2915

Supreme Court of SA|1991-06-18|Before: McHugh JA, Olsson J, King CJ

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Court

Supreme Court of SA

Decision date

1991-06-18

Before

McHugh JA, Olsson J, King CJ

Source

Original judgment source is linked above.

Judgment (26 paragraphs)

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CRUSADER RESOURCES NL v SANTOS LIMITED No. 2635 of 1989 Judgment No. 2915 Number of pages - 27 Contract - Joint venturers (1991) 58 SASR 74 [1991] SASC 2915 (18 June 1991)

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COURT IN THE FULL COURT OF THE SUPREME COURT OF SOUTH AUSTRALIA KING CJ(1) and OLSSON J(2)

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CWDS Contract: Joint venturers: Cooper Basin Gas Fields: Joint venturers to agree Input Data for computer model: computer using agreed Input Data to produce a Production Schedule and Unit Participations: Production Schedule "so prepared" to be binding on the joint venturers unless altered by arbitration: defendant had task of supervision of the input stage: agreed Input Data varied without knowledge or consent of joint venturers: plaintiff seeking to set aside Production Schedules and Review of Block and Unit Participations as not valid under the contract and therefore not able to be subject of arbitration: trial judge finding that, whatever the changes, the result was properly the subject of an arbitration. Held: the correct test to be applied depends in the first instance upon the terms of the contract express or implied: meaning of "so prepared": the Production Schedule and Review and Adjustment of Block and Unit Participations not being based upon agreed Input Data, were not "so prepared" and could not be the subject of arbitration under the agreement: decision of trial judge reversed. Legal and General Life of Australia Limited v. A. Hudson Pty. Ltd. per McHugh JA followed. R v. The Commonwealth Conciliation and Arbitration and Ors; ex parte The Amalgamated Engineering Union (Australian Section) and Ors. ; distinguished.

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JUDGE1 KING CJ The factual background and issues are fully set out in the judgment of Olsson J. 2. The principal argument of Mr Gray, QC, for the appellant, was simplicity itself. He contended that under the terms of Clause 4 of the Unit Agreement, the adjusted Block Participation and Unit Participation were binding upon the parties only if prepared in accordance with the Clause and the Fourth Schedule to the Agreement. It is plain from the findings of the learned trial judge, supported by ample evidence, that there were substantial departures in the preparation from both the agreed input data which the Clause required to be used for preparing the Go-It-Alone Production Schedule and the adjusted Block Participation and Unit Participation, and also perhaps from the requirements of the Fourth Schedule. Mr Gray contended that the Block and Unit Participations were therefore invalid and not binding upon the parties. He relied upon the law as stated in the judgment of McHugh JA in Legal and General Life of Australia Limited v. A. Hudson Pty Ltd (1985) 1 NSWLR 314 and in particular the passages quoted in the judgment of Olsson J. I do not think that those passages are wholly applicable to the present case. In that case there was no arbitration clause. The decision of the qualified valuer was final and binding. It could only be so if made in accordance with the terms of the contract. The present contract provides for arbitration of "any matter arising" from the Block Participation and Unit Participation. I think that that expression is wide enough to cover alleged departures from the provisions of the contract in the course of the preparation of the Participations. The contract therefore appears to contemplate that such matters may be the subject of determination and correction by arbitration. 3. For those reasons I would not place upon the words "so prepared" in Clause 4 the emphasis which Mr Gray placed on them. I think that at least some departures from the Fourth Schedule would not operate to invalidate the Participations. It seems to me that if what is produced possesses the character of a Block Participation and Unit Participation contemplated by the contract, it is binding, subject to arbitration, and that by no means every departure from the contract in the course of preparation would deprive it of that character. 4. I have reached the conclusion, however, that preparation on the basis of agreed input data is essential to the character of the product as a Participation contemplated by the contract. The substantial variations of the input data from that agreed upon, in my opinion, have the effect that the product is not a Participation contemplated by the contract and is not binding upon the parties. 5. It seems to me, moreover, that the matter cannot be remedied by preparing fresh participations upon the basis of the "January Agreement". Mr Gray contended, of course, that that agreement had been validly rescinded for misrepresentation and deceptive conduct. I find it unnecessary to decide that point. As the product of the process engaged in is a nullity, it will be necessary, in my opinion, to undertake the whole process again including negotiation of a fresh agreement as to input data. Clause 4 provides that the preparation of the Go-It-Alone Production Schedule and the Participations is to occur "immediately following receipt of such unanimous approval" of the input data. That did not occur. As the purported preparation of the Go-It-Alone Production Schedule and the adjusted participations was not in truth such a preparation and did not result in valid participations, the appellant cannot, after the lapse of time and in the light of the further information which has emerged, be bound by the "January Agreement". 6. In my opinion the so-called Go-It-Alone Production Schedule and the purported Block and Unit Participations are invalid and the Review and Adjustment process contemplated by Clause 4 must be undertaken de novo. 7. I would allow the appeal and set aside the judgment appealed from. In lieu thereof there should be judgment for the plaintiff for the declarations claimed in paragraphs 3 and 4 and specific performance as claimed in paragraph 5, of the Prayer for Relief in the Amended More Explicit Statement of Claim filed herein the 17th May 1990. These orders, in my view, effectively dispose of the matters in controversy between the parties and it is unnecessary to make any of the other declarations or orders sought in the Prayer for Relief.

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JUDGE2 OLSSON J Introduction This is an appeal by a plaintiff ("Crusader") against a judgment of Bollen J entered on 24 August 1990. By that judgment the learned trial Judge wholly dismissed claims by Crusader for various forms of relief against the defendant ("Santos"). 2. The judgment now sought to be impugned marked the outcome of a long and complex commercial cause, which had already been before the Full Court on a preliminary point prior to proceeding to trial (Crusader Resources NL v. Santos Limited and Others (1990) 156 LSJS 420). 3. The trial extended over a period of some three months. A large volume of complex documentary and oral evidence was placed before Bollen J. As he pointed out in his lengthy and definitive reasons for decision, although there was a need to traverse a great deal of evidentiary ground in order to place the issues in proper context, the truly critical issues were of relatively narrow compass. 4. On the hearing of this appeal the submissions of counsel ranged over a fairly wide field. At the same time a great deal of documentary material was placed before the Full Court. However, having regard to the specific matters ventilated by counsel, it is unnecessary to discuss that material in great detail. The Factual Background 5. It is desirable, initially, to canvass the basic historical facts (as conceded or found) prior to identifying the issues which arise for consideration on the appeal. 6. In the 1970s, prior to the events with which this litigation is concerned, the parties owned interests in various areas of land in the Cooper Basin region by virtue of certain petroleum exploration licences held by them. Large quantities of natural gas and allied petroleum products were discovered in and about Moomba. The parties decided that they would develop the reserves which were found on a co-operative basis, thereby achieving a far more efficient and economic production process. 7. After negotiation, and with a view to achieving that end, they, as joint venturers (but not partners), entered into a written commercial agreement known as the South Australian Cooper Basin Unit Agreement ("the Unit Agreement") bearing the date 1 January 1975. 8. It should be noted at the outset that a specific term of that document was expressed as follows:- "Each party exercising the rights, privileges and authorities conferred on it under this Agreement and in performing its obligations hereunder shall at all times act in good faith towards each of the other Parties." 9. The Unit Agreement was a lengthy document, to which various appendices were attached. However, it may be said (in non fully definitive terms) that the key features of it (as later varied) were:- (1) The required expenditures of and the entitlements of each of the joint venturers to petroleum products (including natural gas) produced were to be determined by reference to so-called Block Participations and Unit Participations, as defined in the Unit Agreement. (2) Block Participations and the Unit Participations were to be reviewed and adjusted, in accordance with the Unit Agreement, as at 1 January 1983 and biannually thereafter. (3) Specific procedures were stipulated in relation to the mode of conduct of the process of review of and adjustment to those Block Participations and Unit Participations. 10. In that regard it was provided by clause 4.03 of the Unit Agreement that:- "(a) such review and adjustment shall be effected in a fair and reasonable manner, shall be based upon all available information and shall be determined in the manner set forth in the Fourth Schedule hereto; and (b) there shall be no retroactive adjustment of Unit Participations or Block Participations." 11. The Unit Agreement envisaged that Santos was to be the so-called "Unit Operator" under it, i.e. it was, for all practical purposes, to manage the day to day field operations on behalf of the consortium. As Unit Operator it also had the responsibility of carrying out each review and adjustment of Block Participations and Unit Participations, including the preparation of what was known as a "Go-It-Alone Production Schedule" (GIAPS) (which formed portion of that process), as envisaged by the agreement. The Participations so adjusted actually determine the rights of each party to the Unit Agreement to the "Unitized Substances" produced and in relation to other matters referred to in the agreement, as well as each party's obligations to pay operating costs and capital expenditure. 12. In simple terms the agreement contemplated, in relation to each scheduled review and adjustment:- . the establishment, by unanimous approval of the parties (or by arbitral award), after appropriate reconsideration and re-evaluation, of input data, including certain specific data, the nature and content of which is specified in Clause A to the definition of the GIAPS appearing in a schedule to the agreement; . the preparation by the Unit Operator, immediately following the unanimous approval of, or arbitral award resolving any dispute in relation to, such input data, of a GIAPS as defined in the Schedule; and then a subsequent review and adjustment of Block Participations and Unit Participations; . the use of the input data above referred to as the basis or, as was put by counsel, "the foundation" of such preparation; and . the submission to the parties of the GIAPS and the review and adjustment of Block Participations and Unit Participations so prepared. 13. On or about 10 November 1988 Santos, as Unit Operator, submitted to the other parties to the Unit Agreement a body of data proposed by Santos to be the input data required for the preparation of the GIAPS for the 1 January 1987 review and adjustment of Block Participations and Unit Participations. 14. This followed earlier meetings held by a technical advisory body known as the Unit Technical and Operating Committee "A" ("UTOC") comprised of representatives or nominees of the parties, as envisaged by the Unit Agreement. An express function of UTOC appears to have been to facilitate the review and adjustment process by assisting to formulate, or advising as to, correct input data for use in evolving the GIAPS. 15. The parties to the Unit Agreement had, in fact, signed a Unit Amending Deed dated 30 June 1988, the effect of which was to stipulate 1 March 1987 as the cut off date for information to be used for the purposes of the 1 January 1987 Review and Adjustment. 16. So it was that a UTOC meeting had been held from 24-26 August 1988 to discuss and review the necessary input data. It did so on the basis, inter alia, of a large volume of computer generated output sheets referred to as DSO (SIPS-SRM) summaries, which were proposed to be used by Santos in relation to the Review and Adjustment process. SIPS was simply an acroynym for a software program known as the Santos Investment Planning System. 17. The formal written minutes of the UTOC proceedings were sent to the parties on 22 September 1988 and, inter alia, record that:- "All parties have the recovery reports and the SIPS-SRM one page summary sheets as contained in these reports would be included in the input data package." 18. It will be convenient hereafter to refer to the data in the DSO summary sheets as "the August data sheets". 19. In the period August to November 1988 Santos, without the knowledge of Crusader or any prior consultation with UTOC, made a series of alterations to the August Input Data at the direction of the witness Bennett, one of its senior engineers. The details of those alterations are included in the so-called DS1 data sheets found in exhibit P29. Crusader was totally unaware of most of those changes until they came to light during the course of discovery. 20. Under cover of a letter dated 10 November 1988, Santos formally submitted the fully developed input data which it proposed to use in production of the GIAPS to the parties to the Unit Agreement, as foreshadowed in the UTOC minute. In doing so, it stated that "This data has been prepared by the Unit Operator in consultation with the Unit Technical Committee". The input data was very substantial in volume and not readily susceptible of rapid checking or verification. As proffered to Crusader it included (inter alia) a complete set of SIPS-SRM data sheets as an integral portion of it. (See exhibit P12.) 21. The Santos letter of 10 November 1988, inter alia, went on to say:- "As agreed at the August UTOC 'A' meeting, the SIPS-SRM Input Data Sheets for each of the models to be used in the Go-It-Alone Production Schedule are included as a reference in Appendix G." This inferred, and Crusader took it to infer, that, insofar as input data sheets were to be used in relation to the production of the GIAPS, they were those examined and accepted by UTOC at its August meeting. In fact, they were not. Moreover, it was incorrect to aver, as Santos did, that UTOC had been consulted with regard to the alterations made at the direction of Bennett. 22. In the same letter, Santos raised a series of issues related to the technical basis upon which the GIAPS was to be prepared, specifically in relation to certain input data other than any derivable from the SIPS-SRM input data sheets, to which it desired the concurrence of the other parties to the Unit Agreement. 23. I pause at this point to deal with the significance of the Santos letter of 10 November 1988, in terms of the provisions of the Unit Agreement. 24. The detailed provisions related to the periodic review and adjustment procedure contemplated by the Unit Agreement were set out in Clause 4.05(b) of it. Those provisions were expressed as under:

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support thereof. If any Party does not so approve such re-consideration and re-evaluation and the Parties do not unanimously approve any revision thereto within fourteen (14) days following expiry of the beforementioned period of twenty eight (28) days then the matter shall be referred to arbitration pursuant to the provisions of Article III hereof. Immediately following receipt of such unanimous approval or of the making of an arbitration award or decision (as applicable) Unit Operator in consultation with Unit Technical Committee shall prepare and submit to the Parties a Go-It-Alone Production Schedule (as such expression is defined in the Fourth Schedule hereto) and a review and adjustment of Block Participations and Unit Participations subject to and in accordance with the provisions of the Fourth Schedule hereto. The Block Participations and Unit Participations so prepared and submitted to the Parties shall take effect from the relevant dates referred to in Clause 4.04 hereof (and in the event that such Block Participations and Unit Participations have not been submitted to the Parties prior to the relevant dates then the same shall, notwithstanding the provisions of Clause 4.03(b) hereof be adjusted retroactively to such relevant dates) and shall be binding upon the Parties for all purposes of this Agreement unless and until an arbitration award or decision in respect of any matter arising therefrom is made pursuant to Article III hereof to the contrary. Notwithstanding anything in this Agreement contained to the contrary, no Party shall be entitled to refer any such matter to Arbitration unless it shall have given written notice to that effect to each of the other Parties within twenty eight (28) days of submission of the relevant review and adjustment." 25. It will at once be observed that, as was put by Mr. Gray QC, of senior counsel for Crusader, Clause 4.05(b) envisaged a three stage process, which can best be illustrated in the following manner:- "CLAUSE 4.05(b) For the purpose of any review and adjustment to Block Participations and Unit Participations pursuant to Clause 4.02(a) hereof or Clause 4.02(b) hereof:

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STAGE 1 the input data referred to in Clause A to the definition of Go-It-Alone Production Schedule appearing in the Fourth Schedule hereto shall be reconsidered ... and re-evaluated in the light of all available information by Unit Operator in consultation with Unit Technical Committee and such reconsideration and re-evaluation shall be submitted to the Parties for their consideration and approval. Each of the Parties shall within a period of twenty eight (28) days ... advise Unit Operator and each of the other Parties in writing as to whether or not that Party approves such reconsideration and re-evaluation and in the event that any Party does not so approve then such Party shall provide specific grounds in support thereof. If any Party does not so approve such reconsideration and re-evaluation and the Parties do not unanimously approve any revision thereto within fourteen (14) days ... then the matter shall be referred to arbitration pursuant to the provisions of Article III hereof. STAGE 2 Immediately following receipt of such unanimous approval or of the making of an arbitration award or decision (as applicable) Unit Operator in consultation with Unit Technical Committee shall prepare and submit to the Parties Go-It-Alone Production Schedule (as such expression is defined in the Fourth Schedule hereto) and a review and adjustment of Block Participations and Unit Participations subject to and in accordance with the provisions of the Fourth Schedule hereto. STAGE 3 The Block Participations and Unit Participations so prepared and submitted to the Parties shall take effect from the relevant dates referred to in Clause 4.04 ... hereof and ... be binding upon the Parties for all purpose of this Agreement unless and until an arbitration award or decision in respect to any matter arising therefrom is made pursuant to Article III hereof to the contrary. END OF STAGE 3" 26. Mr. Mansfield QC, of senior counsel for Santos, asserted that there were but two stages envisaged by the clause. However, this argument was one of semantics rather than substance. 27. There are several important points which need to be made in relation to the three stages. 28. The preparation of a GIAPS in terms of the Unit Agreement simply could not proceed until stage 1 was complete, i.e. until the requisite input data was assembled and approved by the parties. If the parties were not agreed as to the material proposed by Santos in accordance with the prescribed procedure the dispute had to be referred to arbitration at that point - the outcome of which finally and conclusively determined the very basis or foundation upon which the GIAPS was produced. It was thus a process which was both critical and essential to the evolution of the GIAPS, as contemplated by the Unit Agreement. Once the input data was approved or settled by arbitration then it was finally stabilised, settled and conclusive for the purposes of Stage 2. 29. Stage 2 contemplated a process which was solely in the hands of Santos, save that, in producing the requisite GIAPS, it was required to do so in consultation with UTOC. However, the Unit Agreement demanded that it be evolved "subject to and in accordance with the provisions of the Fourth Schedule". That Schedule was a substantial, technical document but, in essence, it, inter alia, required application of certain prescribed formulae to the approved input data. 30. The concept of the GIAPS, as defined for the purposes of the Unit Agreement, but broken down into its component parts, may be expressed thus:- "GO-IT-ALONE PRODUCTION SCHEDULE Go-It-Alone Production Schedule means the schedule setting forth the notional orderly development of all Unitized Zones within each Block which from time to time shall be prepared by the Unit Operator in consultation with the Unit Technical Committee so as to determine the maximum constant annual percentage (being sufficient to meet the average day and peak day requirements during each year of the Sales Contracts commencing January 1 1975) of the Contract Gas actually supplied commencing January 1, 1975 up to the date of the relevant review and required to be supplied thereafter under the

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Sales Contracts, which percentage can be delivered in the most efficient and economic manner, having regard to good oil field practice and on the basis of considering the development of such Block in isolation subject only to the provisions hereinafter appearing in Paragraph E of this definition and after taking into account the fuel from such Block required to gather and process the Unitized Substances from such Block necessary to meet such maximum constant annual percentage of Contract Gas in accordance with the process scheme pertaining." 31. That definition was contained in the Fourth Schedule to the Unit Agreement. It was (inter alia) followed by the following supplementary definition:- "The input data for each such Unitized Zone shall include but not be limited to the following:- (1) The Unitized Substances in place; (2) The distribution of permeability and pay as evidenced by Kh maps; (3) The component analysis of Unitized Substances in place; (4) The predicted changes in component analysis of the full wellstream of Unitized Substances with depletion; (5) Well spacing and the consequent maximum number of wells to be drilled; (6) The policy for completion and workover, from time to time, of wells to equip them with the most efficient string of production tubing in their particular circumstances; (7) The formula which describes the average deliverability as a function of depletion of a group of wells considering Kh maps, size of tubing, skin damage, back pressure and all other relevant data; (8) The limit for the abandonment of a Unitized Zone or portion of a Unitized Zone expressed either as a maximum percentage depletion or a minimum well production rate but based on all relevant considerations including, but not limited to, the reservoir drive mechanism; (9) The process scheme apporopriate to the Sales Contracts in force. The Go-It-Alone Production Schedules in respect to the initial Block Participations for the 50/40/10 Block and the Nappacoongee/Murteree Block are set forth in the Initial Block Participation Calculations referred to in Clause 25.02(a)(xi) of the Unit Agreement." 32. As exhibits P12 and P24 clearly illustrate, the input data relied upon was certainly not limited to the items separately enumerated and did include the SIPS-SRM data sheets. 33. The conclusion of Stage 2 was the delivery of the GIAPS and the associated review and adjustment of Block Participations and Unit Participations to the parties to the Unit Agreement for approval by them. 34. Stage 3 in effect confered on the parties a right, within 28 days of the submission of the review and adjustment to them, to refer any question arising from it to arbitration. Subject to that right (and, where appropriate, the outcome of any arbitration) the review and adjustment became binding on the parties for all purposes of the Unit Agreement. 35. Having so digressed, I return to a recitation of the relevant narrative facts. 36. It seems clear that Crusader responded to the Santos letter of 10 November 1988 on the basis that it understood that the DS1 SIPS-SRM data sheets related to the GIAPS simply reproduced those discussed at the August UTOC meeting. Crusader did, however, by letter dated 28 November 1988, object to one aspect of the methodology employed in the production of the GIAPS. It asserted that the input data had been reconsidered and re-evaluated by Santos on a field by field basis, whereas the Fourth Schedule to the Unit Agreement required this to be done on a Unitized Zone basis. 37. This led to some further consideration of the matter by Santos. Quite apart from the conceptual issues raised by Crusader, in the period November 1988 to January 1989 Bennett caused some further changes to be made to the August data sheets without the knowledge of Crusader and without prior reference to UTOC. These are to be found in the DS2, SIPS-SRM sheets. 38. On 21 December 1988, Santos wrote to all other parties to the Unit Agreement proposing various specific revisions of the input data for the GIAPS (see exhibit P19). To this, Crusader responded that it was prepared to accept what was proposed "provided there is a further reduction of the original gas in place in Moomba by 100 billion cubic feet". 39. Santos accepted that counter proposal by facsimile response dated 9 January 1989. The consensus so arrived at has become known as "the January Agreement". 40. On 17 April 1989, Santos forwarded "for the convenience of Parties" a fresh copy of the input data required for the preparation of the GIAPS, which was stated to be "by way of consolidation of the Data Package issued by Operator on November 10, 1988 (PER: 1343/88) and of the agreed revisions". The letter also said that "As agreed at the August 1988 UTOC 'A' meeting, the SIPS-SRM Input Data Sheets for each of the models to be used in the Go-It-Alone Production Schedule are included as a reference in Appendix G." Once more the documentation in question was of quite massive proportions and the product of a computer programme to which only Santos had access. 41. This communication was followed by a further letter from Santos to all parties dated 2 May 1989. It enclosed a document entitled "Principles and Procedures to be used in 1/1/87 Review and Adjustment". This contemplated a review and adjustment based on input data for each unitized zone, as sought by Crusader. It was a document sent for information rather than approval. 42. In the period extending from April 1989 to prior to 15 September 1989, numerous further changes to the August data sheets were made by one Thomson, who was a senior engineer of Santos then responsible for the production of the new GIAPS and review and adjustment documentation. These led to the production of the DS3 and DS4 series of SIPS-SRM data sheets. 43. The precise empirical effect of these is not known, but, clearly, on the evidence of the expert witness Professor Dougherty, they had a potential for significant alterations in the computer output and possible detriment to Crusader. These changes were also made without the knowledge of Crusader and without prior consultation with UTOC. They included major variations of flow lengths, alterations to reservoir sizes and numerous other changes to data. The existence, nature and extent of them only emerged for the first time either immediately prior to and/or in the actual course of the trial. 44. The evidence given by Thomson concerning the alterations was little short of remarkable. Thomson's background and the relevant part which he played within the operations of Santos was described by him in evidence in these terms:- "Q. In March 1985 you joined Santos. A. That's correct. Q. You have been working for Santos ever since. A. I have. Q. I think your first position was as Petroleum Engineer Development. A. That's correct. Q. After a year or so were you promoted. A. Yes. Q. To what position. A. Lead Engineer and Planning.

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SIPS program. Q. Were they within a particular division of Santos at that time, that is the Planning Department. Was the Planning Department within a particular division of Santos at that time. A. At that stage I believe it was in the Petroleum Engineering Department. Q. Whilst you were working as a Petroleum Engineer Development and Lead Engineer Planning in the Planning Department what work were you doing. A. Using the SIPS program predominantly to prepare the budget plans for Santos or for the Cooper Basin and some long term development plans for the Cooper Basin. Q. Perhaps you might just explain to us what you mean by budget plans, what do they relate to. A. Budget plans are referred to as the Optimised Production Schedule. Q. Just in general terms what sort of things do they address. A. It addresses the short and long term development plans of the fields, gas fields, in the Cooper Basin. Q. You mentioned that in that work you were using SIPS. A.
Yes. Q. What is SIPS. A. SIPS stands for Santos Investment Planning System. It is a computer program that enables us to address the economic viability of developing a number of gas fields in the Cooper Basin amongst other implications and it operates both as an economic analysis computer program and reservoir simulation program. HIS HONOUR Q. And it has a lot of material that can be put into computers. A. Yes, a great deal. Q. So, the computers are used to produce the answers. A. Yes." He went on to depose in these terms:- "Q. There came a time when you were promoted to Supervising Senior Engineer. A. Yes. Q. When was that. A. That was in March 1988. Q. What were your responsibilities following that promotion. A. At that time I headed up a team of four professional engineers and a technical assistant. They weren't all engineers. Four professional staff and a technical assistant and I was responsible for exploration, drilling evaluation from an economic point of view together with providing the economic models to be used and standards to be used throughout the company together with performing long term development plans with the use of the SIPS program in areas such as South-west Queensland. Q. Within what department were you working. A. Still in the Planning Department. Q. In that I think you held that position up to December 1989. A. That's correct. Q. In that position did you use SIPS or were you involved in its programming in any way. A. Yes, I used SIPS and I am not sure if I was doing any modifying of the program at that stage or not but I was using it. Q. With what sort of frequency. A. Probably about 50% of my time except during the period I was overseas spending a great deal of my time working on producing the Go-It-Alone Production Schedules and that required a hundred per cent of my attention." 45. He was asked questions by Bollen J on two occasions concerning his part in making alterations to the August data sheets. His evidence in response to those questions is recorded in the transcript (pp.2920-1) in these terms:- "Q. Looking at Exhibit D272 the heading is 'Changes complained of'. A. Yes. Q. Those changes did happen. A. Yes. Q. You made them or approved them. A. I made them or approved them, yes. Q. Did you receive a bundle of information which you understood was to be used. A. Yes. Q. That agreement would have been struck by officers of the company superior in position to you. A. Yes. Q. Where did you get your authority to make any change. A. A number of the changes simply had to be made. Q. What about the others. A. I was working towards or in the back of my mind I had the principles of good oil field practice and I felt that these were some issues that had simply been overlooked in the input data approval stage. So, I didn't get any direct authority to change those, I was using my prudent engineering judgment." 46. I pause at this juncture to make the point that, even if it was the situation that some quite important changes had to be made to ensure that opening data was correctly initialised, Thomson seems entirely to have ignored the fact that the Unit Agreement required that the input data upon which the GIAPS and the review were to be based had to be evolved in consultation with UTOC and specifically agreed to by the parties. 47. The transcript reveals the following further exchanges recorded at page 3128:- "Q. Do you know that you told me some time ago about the complaints that Crusader made of changes. A. Yes. Q. You made the changes.

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A. Yes. Q. And you told me that Crusader were right in complaining that those changes or right in saying that those changes had been made. A. Yes, your Honour. Q. I may still take that as definite and clear. A. Yes. We made some changes, some of them - Q. Never mind why, but I can still take it that Crusader was right in making its list of those changes. A. In most of the cases, yes. Q. In the vast majority. A. Yes. There was one I think we pointed out, I think was not - Q. Still, that is clear. A. Yes, your Honour." 48. On 15 September 1989, Santos forwarded to the parties to the Unit Agreement what purported to be a GIAPS and Review and Adjustment of Block Participations and Unit Participations as at 1 January 1987 prepared pursuant to clause 4.05 of the Unit Agreement. This evoked responses from Crusader which constituted exhibits P48 and P49, in which it requested additional information on 29 September and 3 October 1989, respectively. 49. The evidence reveals that a meeting was held in Adelaide between representatives of Santos and Crusader on 6 October 1989 to discuss aspects of the documentation produced by Santos. 50. The outcome of that meeting was that, on 12 October 1989, Santos wrote to all other parties to the Unit Agreement in these terms:- "Re: 1/1/87 Review and Adjustment Go-It-Alone Production Schedule Crusader Resources N.L. has requested that we seek the agreement of all Parties to the Unit Agreement and Downstream Agreement to the following:- 1. that the Nappacoongee/Murteree Block Go-It-Alone Production Schedule (and, consequently, as applicable, the 50/40/10 Block Go-It-Alone Production Schedule) be re-run by Unit Operator to assess inclusion of production from the Namur field and be submitted to the Unit and Downstream Parties; 2. that the date by which any Party is entitled (pursuant to the last sentence of Clause 4.05(b) of the Unit Agreement) to refer any matter to arbitration which any Party may at the date hereof refer to arbitration pursuant to the Unit Agreement be twelve days following the submission by Unit Operator of such Go-It-Alone Production Schedule; 3. that the Unit Participations, Block Participations and Downstream Participations enclosed with our letter of 15th September, 1989 (but not the Accounting Adjustments, Equalization and Interest Free Loans based on such Unit Participations and

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Unit Participations, Block Participations or Downstream Participations calculated from such Go-It-Alone Production Schedule is made pursuant to Article III of the Unit Agreement or Article 20 of the Downstream Agreement to the contrary; 5. that Unit Operator determine the Accounting Adjustment, Equalization and Interest Free Loans based on such Unit Participations, Block Participations and Downstream Participations consequent upon the preparation of such Go-It-Alone Production Schedule as soon as practicable after submission of the same to the Parties, all payments pursuant thereto to be made by 15th December, 1989; and 6. that each Party execute all such further deeds and documents as any other Party may reasonably request in order fully to perform and carry out the foregoing. Each of Santos Ltd., Vamgas Ltd., Reef Oil N.L., Alliance Petroleum Australia N.L. and Santos Petroleum Pty. Ltd. will agree to the foregoing. If you similarly so agree, would you kindly signify your agreement by signing in the space provided below and forward by fax to reach us by no later than noon tomorrow, the 13th October." 51. All parties did in fact agree to the proposal expressed in that letter. The consensus so came to has been known as "the October Agreement". 52. On or about 3 November 1989, Crusader received the re-run GIAPS and Block and Unit adjustments (Exhibit P52). Having become aware of some (but not all of the changes in the input data) Crusader transmitted to the other parties to the Unit Agreement on 15 November 1989 a notice of arbitration pursuant to the provisions of the Unit Agreement. 53. The Unit Agreement set out the rights of each party concerning arbitration in Article III. The relevant portion of such Article (as to the right to seek arbitration) read as under:- "23.02 Matters to be subject to Arbitration If any question, difference, dispute or disagreement whatsoever (other than in relation to a matter to be decided by vote of the Parties pursuant to Clause 6.05 hereof) arises between the Parties hereto upon or in relation to or in connection with:- (a) any matter or course of action in respect of which it is provided in this Agreement that such disagreement shall be referred to arbitration; (b) any matter which the parties to the dispute agree to submit to arbitration; (c) any matter substantially of a technical nature; (d) any estimate made by Unit Operator under Clause 3.04(b)(i) hereof; or (e) any matter not agreed upon in this Agreement or depending upon further agreement of the parties; then such question, difference, dispute or disagreement shall be referred to arbitration as hereunder provided and for such purpose each party to such question, difference, dispute or disagreement shall as soon as reasonably practicable by notice in writing to each party involved in such question, difference, dispute or disagreement clearly specify the nature of such question, difference, dispute or disagreement and call for the point or points of issue to be submitted for settlement by arbitration which notice is hereinafter called a "Notice of Arbitration". 54. Article III also contained a privative clause expressed as follows:- "23.05 Arbitration as Condition Precedent No Party shall in respect to any matter referred to in Clause 23.02(a)-(e) inclusive hereof take any dispute to any Court until after an arbitration

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award has been made. The arbitration award or decision shall be a condition precedent to any legal proceedings which shall be limited to enforcement of an arbitration award or decision." 55. The notice given by Crusader was, of course, pitched at that provision of Clause 4.05(b) which conferred the right to refer any question related to the review and adjustment of Block and Unit Participation to arbitration. 56. It has, at all stages, been the stance of Crusader that its notice of arbitration was no more than a protective measure, because it primarily contended that, by virtue of the changes by Santos to the input data, the GIAPS and review and adjustment of Block and Unit Participations was a nullity

because it was simply not produced from input data agreed by the parties.

On 24 November 1989 the present proceedings were initiated with a view, inter alia, to seeking appropriate declarations to the lastmentioned effect. The Issues between the Parties
These proceedings came on for trial as a matter of urgency and, as a consequence, the processes of discovery and pleadings lagged somewhat behind the other procedural processes of the action. In his reasons for decision, Bollen J adverted to this and said:- "I have offered an imperfect summary of the pleadings. It will suffice. Of the pleadings I should say that much that one would expect to see in a Statement of Claim is in the Reply. This oddity was caused in the first instance by the order for early trial much desired by the plaintiff. Documents or information or supposed information came to light after the filing of the Statement of Claim, even after the filing of the More Explicit Statement of Claim and indeed during trial. Some amendments sought were allowed. Some denied. Thus the plaintiff put some pleas better suited for the Statement of Claim in the Reply. I announced early that I would read the pleadings in the most liberal way possible in favour of each pleader. That is what I have done. I think that each issue which each party wished to bring before the Court is somehow or other raised in the pleadings and all evidence or at least each topic raised in evidence is justified by some plea or other."
Crusader, having eventually become aware, by reason of the somewhat belated discovery, of the full magnitude of the changes made by Santos in the input data, by its express pleadings, formally rescinded the January Agreement and the October Agreement in about April 1990.
On the hearing of the present appeal, Crusader sought to advance three separate strands of argument, namely that the final Review and Adjustment made by Santos (Exhibit P52) was not valid and binding on the parties because:- (1) it was not a Review and Adjustment made pursuant to and in accordance with Clause 4.05 of the Unit Agreement; (2) Santos made misrepresentations and engaged in misleading and deceptive conduct. As a result, it gained Crusader's agreement to Input Data in circumstances giving Crusader rights to rescission and an entitlement to relief pursuant to the provisions of the Trade Practices Act, 1974 (Cth.); (3) the process of making the purported determination was vitiated by the breach by Santos of its fiduciary duty to the other parties to the Unit Agreement and of its duty of good faith.
The first point relied upon was based upon the assertions that:- . the GIAPS produced by Santos was not, because of the many changes made by it to the material without the knowledge or consent of Crusader, the product of agreed input data and was thus not a GIAPS as defined in the Unit Agreement. It also did not determine a necessary attribute of the Schedule as required, namely a maximum constant annual percentage of contract gas; . Santos failed to prepare a valid Go-It-Alone Economic Report (GIAER) as defined in the Fourth Schedule of the Unit Agreement, which was essential to the production of a proper Review and Adjustment and that which was produced was invalidated by what were said to be vital changes in input data; . Santos failed to use the specific formulae set out in the Fourth

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Schedule, which mandatorily specified that these were to be used to calculate the Block and hence Unit Participations. 62. Mr. J.R. Mansfield QC, of senior counsel for Santos, objected to a number of the lastmentioned technical aspects being raised on the hearing of the appeal, because he said that they were not issues raised on the pleadings and litigated at the trial. 63. The riposte of Mr. Gray QC to that assertion was that the real question was not whether they ought to have been incorporated into formal pleadings (particularly having regard to the manner in which the trial developed) but whether they were live issues raised at trial, i.e. the relevant principle was rather that the appellant cannot make out a case on appeal different from that relied upon at trial (Maloney v. Commissioner for Railways (1978) 52 ALJR 292, O'Brien and Ors. v. Kamesaroff [1982] HCA 33; (1982) 150 CLR 310). 64. Mr. Gray QC pointed to written submissions tendered to the learned trial Judge which adverted to the matters in question, cross- examination on those topics and reiterated the comment of Bollen J, in the course of his published reasons, to the effect:- "I think that each issue which each party wished to bring before the Court is somehow or other raised in the pleadings and all evidence or at least each topic raised in evidence is justified by some plea or other." He also stressed that Mr. Mansfield QC had, during final addresses, asserted that the matters now in contention had not been pleaded or put to witnesses other than the witness Thomson. Mr. Gray QC directed attention to pages 4146-7 of the transcript, which reveal that he said to the learned trial Judge that, if it was felt necessary so to do, he would seek to make relevant amendments to the pleadings. To this the learned trial Judge responded "I don't think it's necessary", whereupon Mr. Gray QC did not further pursue the question of amendments. 65. It is stating the obvious that, if there is substance in the objections now advanced by Mr. Mansfield QC, the trial process obviously miscarried as to that aspect of the case. It would, if necessary, have to go back to Bollen J for further consideration - the more so as he does not appear, in his reasons for decision, specifically to have referred to a number of aspects ventilated by Mr. Gray QC on the appeal. However, having regard to my conclusions as to the broader aspects of the case, it is not necessary to pursue this facet of the case in further detail. The Findings of the Trial Judge 66. The reasons for decision published by Bollen J extend over some 102 pages and it is neither practical nor necessary to attempt a detailed resume of them. There are, however, a number of aspects which do command specific attention. 67. In the course of his submissions on this appeal Mr. Mansfield QC sought to contend that, at least in so far as unilateral alterations to the various editions of the SIPS-SRM data sheets were concerned, these were not alterations to "input data" in the sense in which that expression is employed in the Unit Agreement. He also asserted that, in any event, they were either essential to reflect the practical situation, or to convert actual information to that required to meet the theoretic concepts upon which the GIAPS had to be prepared or, plainly, had little or no practical effect on the eventual outcome. 68. There are several short answers to that submission. 69. The first is that, as appears from exhibits P12 and P24 and the letters of transmission of them, Santos itself regarded and held out to the other parties to the Unit Agreement that the SIPS-SRM sheets were part and parcel of the input data package. 70. The second is that Bollen J specifically found, on the whole of the evidence, that Santos had made many alterations to the input data. As Mr. Gray QC summarized in his written submission, the following citations from the reasons for decision of the learned trial Judge speak for themselves:- "(I)t (Crusader) did not know that Santos would alter agreed 'input data' as it undoubtedly did" (AB Part I Page 134) "Bennett and Thomson made changes in the agreed Input Data. There is no doubt about that" (AB Part I Page 151) "I speak very briefly indeed of changes and of the effected change. There is no doubt that Santos made very many changes

very many indeed of those alleged by Crusader. Santos has offered reasons for the changes. I say no more than that some reasons sounded good to me and some bad" (AB Part I Page 181) "I say by sweeping comment, that very many were made" (AB Part I Page 182) "The 'Bennett and Thomson changes' set out in exhibit P29 are changes made by those engineers in the employ of Santos to 'agreed input data' ... Bennett and Thomson did make changes in gathering for use and in using the data. Thomson made changes when he was putting data 'into' the computer." (AB Part I Pages 185-186)

Mr. Mansfield QC argued that, in making such statements, Bollen J was only speaking in very general, non definitive terms. Such a suggestion must, in my view, be rejected. The learned trial Judge was well aware of the significance of the expression "input data" in the context in which he was adverting to it. He must be taken deliberately and consciously to have used it in the sense adverted to in the Unit Agreement.
Moreover any suggestion that the bulk of the changes were of no practical significance is so contrary to common sense and the evidence as a whole that they must summarily be rejected. Various examples given by Mr. Gray QC effectively exploded that myth.
Given the foregoing situation, the essential reasoning of the learned trial Judge may be summed up by reference to a relatively few short excerpts from his reasons for decision.
At page 59 of those reasons, having adverted to the changes made by Bennett and Thomson to the agreed input data, Bollen J commented:- "But still what came out in the end was a valid Review and Adjustment and Go-It-Alone Production Schedule. The 'changes' did not change the character of exhibit P52 nor produce something which was not a R+Ad and GIAPS."
He elsewhere went on to say:- "... the contract here is the Unit agreement. The agreement about input data was an exercise within the action of the contract. The product of that agreement (P52) could, if invalid, be so declared. But the reaching of agreement on input data or anything else pursuant to the Unit Agreement is not, in my opinion, part of a contract. It is something done under the contract, something done

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in exercise of the contract. It would not be appropriate to declare the agreeing of data void or to vary the agreed data. The real complaint in this case lies in the use of the agreed data. It may well be that changes and non-disclosure will loom large in an arbitral determination of Crusader's rights to correction or adjustment of entitlement to property. Both in the context of so-called concealment and in their very making, much evidence was called about the changes and about non-disclosure. They were changes in agreed input data. Crusader asserted that changes or failure to reveal some things about input data as proffered by Santos and accepted by Crusader as altered by agreement, made P52 invalid. I have considered the voluminous evidence and the arguments offered on each side of this score. As I have said the changes if all existed and the 'non-revelations' do not produce invalidity. For that reason and for the reasons discussed briefly above, there is no need to embark on consideration of each and every or any combination of 'changes'. The failure of Santos to tell Crusader of any change is irrelevant. If they are to be condemned for this failure it must be for a breach by Santos through Thomson and Bennett of the obligation to behave with good faith. If the changes mean that P52 is invalid that is that. If not, then an arbitral hearing can correct any proven faults on from the part of Santos. That is the route to remedy chosen by the parties in the Unit Agreement. Perhaps in the absence of that agreement a failure to reveal changes could, other things being proved, have founded an award of damages. That is not a remedy sought." 76. So it was that Bollen J reached these ultimate conclusions:- "Concealment, misrepresentation and deceptive conduct all turn out to be irrelevant. That is apparent when one looks back at the totality of the evidence and arguments in the light of the Unit Agreement and the pleadings. I have considered all the evidence including the evidence addressed to these topics. I have considered and reconsidered and considered again all the submissions of counsel addressed to these topics as well as to all other topics. Of course, the evidence of all the changes made was offered not only in

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relation to concealment etc. but in relation to the very making of the changes. It was said for Crusader that the combined effect of the changes to Input Data rendered P52 invalid. That submission is not sound. ... Of them all considered severally and cumulatively, I say again that they do not produce invalidity. ... After all this then I come back again to saying that the R+Ad and GIAPS is valid. Exhibit P52 is valid. It is binding unless and until altered by an arbitrator. I hold that Crusader is entitled to none of the relief which it seeks. I enter judgment for the defendant, Santos." 77. So it was that the learned trial judge, in effect, considered that any purported rescission of the January Agreement and the October Agreement was essentially irrelevant for present purposes. 78. The linch pin of his reasoning was that, once it is accepted that exhibit P52 was a valid document, then all of the other arguments proffered by Crusader were tangential issues which could not bear significantly on the final result. As he put it:- "I come to 'concealment', 'misrepresentation' and 'deceptive conduct'." 79. "Mr. Mansfield submitted that the main obligation of a general nature imposed on Santos by the Unit Agreement was 'to act bona fide'. He said that there was no obligation to disclose anything to other producers. I cannot agree. I think that the duty to act with good faith demanded that some things, but particularly those done by way of change to agreed input date, be disclosed to other producers and, therefore, of course, to Crusader. But I do not think that that obligation or any breach of it matters in this action. Again I say that the main issue here is - invalidity or no. If things were not done, done incorrectly or not done as expected or if things expected to be done were changed, the question is - does all that or any of that render exhibit P52 invalid so that it should be so declared and ordered by way of specific performance to be done again? And if Santos did not reveal or disclose or speak about some matters which it should have revealed, disclosed or spoken about to Crusaders, those failures cannot go to the issue of validity or invalidity. If the things done or omitted make P52 invalid, then the failure to (for example) disclose something adds nothing to the case. If P52 is valid then failure to (for example) disclose cannot make it invalid, cannot turn something which is within the contemplation of the contract into something which is not. And it must be remembered that concealment is not something in itself. It is not in itself a cause of action or a shield. There can be deceit or misrepresentation by concealment. If there has been deceit or misrepresentation Crusader may, if that conduct caused it to act to its detriment, be entitled in law to relief. Perhaps that would have sounded in damages had there not been the agreement to arbitrate which I have already mentioned. If there had been deceptive conduct by concealment under s.52 of the Trade Practices Act, then relief under s.87 of that Act might have been considered. But again we come up against the fact that P52 is valid. No relief should be given under s.87 because it would be wrong to grant any relief or make any orders under it when we have the two facts of a valid review and adjustment and an agreement to submit differences to arbitration." 80. He sought to draw an analogy in these terms:- "... it must be shown that the thing is so far removed from that description (i.e. a Review and Adjustment) as to be incapable of answering to it. If I have a motor car which goes intermittently and badly it is still a motor car. If I have recently bought it 'sale of goods law' may entitle me to return it in exchange for a return of the price. But it is still a motor car. It would be

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returned because it is a defective motor car not because it is something else ..." 81. Finally, Bollen J noted that Mr. Gray QC had pointed out that, under section 87 of the Trade Practices Act, the court has wide power to grant relief including (as he sought) an order declaring the whole or any part of the contract to be void or an order varying the contract. "But", the learned trial Judge said, "the contract here is the Unit Agreement". It was his opinion that the subject matter of Crusader's complaint was in relation to what was no more than an exercise within the four corners of that contract and that reliance on the Trade Practices Act was misconceived. The Appeal to the Full Court 82. It is, I consider, not an undue simplification to say that the primary, initial issue to be addressed on this appeal is as to whether the learned trial Judge posed and applied the correct test as to the facts. 83. A number of cited authorities were adverted to by counsel during the course of the appeal. None of them were directly on point, having regard to the particular facts of the matter now before the Court. However, there can be no doubt that certain helpful propositions can be extracted from them. 84. It is, in my opinion, undeniable that the most logical commencement point is a consideration of what fell from the New South Wales Court of Appeal in Legal and General Life of Australia Limited v. A. Hudson Pty. Ltd. (1985) 1 NSWLR 314. 85. That case related to a commercial lease which contained a rental revision clause stipulating that, where the lessor and lessee were unable to agree, a qualified valuer, acting as an expert, should determine the "amount of the current annual open market rental value of the demised premises". Pursuant to the provisions of the lease, the decision so made was to be final and binding. A valuation was duly made. It was apparent that, on the face of it, the valuation, as prepared, was based upon a calculation of the floor space which included an area of a mezzanine floor removed by the lessee, with the lessor's consent, after the commencement of the lease. The lease made no reference to the letable area of the building nor to the removal of the mezzanine floor. The lessee obtained a declaration that the valuation was not binding upon the ground that the valuer had erred in valuing the premises as at the date of the commencement of the lease. The lessor appealed against that finding. 86. The Court of Appeal had no difficulty in accepting that the valuer had fallen into error in the mode by which he proceeded to his final valuation. However, that was not an end to the matter. 87. McHugh JA dealt with the situation in these terms:- "The next question is whether the mistake is one which invalidates the valuation? The mistake is one made in the course of valuation. But it is not a mistake as to the identity of the thing to be valued. The error is the same in principle as one where a valuer has erroneously taken into account as comparable rents, rents which are not in fact comparable. The mistake, however, is not one which involved the valuer departing from the question which was referred to him. Despite his mistake, he assessed 'the current annual open market rental of the demised premises ... on the terms, covenants and conditions of this lease.' The mistake is not comparable to the mistake which I think occurred when the valuer considered other uses of the premises. In that case the valuer did not answer the question which was referred him because his assessment was not based 'on the terms, covenants and conditions of this lease'. But the lessee has not relied on this mistake, if it be a mistake. The only mistake relied upon, therefore, is one which involves a mistake as to the process of valuation. The question is whether a mistake of that class is sufficient to avoid a valuation?" 88. In addressing that question McHugh JA, later in his reasons for decision, reflected upon the situation that the authorities revealed some difference of opinion as to the correct conceptual approach which ought to be adopted to problems of this general type. He went on to state what he took to be the correct basis of approach. He said:- "In my opinion the question whether a valuation is binding upon the parties depends in the first instance upon the terms of the contract, express or implied. This was pointed out by Sir David Cairns in the Court of Appeal in Baber v. Kenwood Manufacturing Co. Ltd. (1978) 1 Lloyd's Rep 175 at 181. A valuation obtained by fraud or collusion can usually be disregarded even in an action at law. For in a case of fraud or collusion the correct conclusion to be drawn will almost certainly be that there has been no valuation in accordance with the terms of the contract. As Sir David Cairns pointed out, it is easy to imply a term that a valuation must be made honestly and impartially. It will be difficult, and usually impossible, however, to imply a term that a valuation can be set aside on the ground of the valuer's mistake or because the valuation is unreasonable. The terms of the contract usually provide, as the lease in the present case does, that the decision of the valuer is 'final and binding on the parties'. By referring the decision to a valuer, the parties agree to accept his honest and impartial decision as to the appropriate amount of the valuation. They rely on his skill and judgment and agree to be bound by his decision. It is now settled that an action for damages for negligence will lie against a valuer to whom the parties have referred the question of valuation if one of them suffers loss as the result of his negligent valuation: Sutcliffe v. Thackrah (1974) AC 727; Arenson v. Arenson (1977) AC 405. But as between the parties to the main agreement the valuation can stand even though it was made negligently. While mistake or error on the part of the valuer is not by itself sufficient to invalidate the decision or the certificate of valuation, nevertheless, the mistake may be of a kind which shows that the valuation is not in accordance with the contract. A mistake concerning the identity of the premises to be valued could seldom, if ever, comply with the terms of the agreement between the parties. But a valuation which is the result of the mistaken application of the principles of valuation may still be made in accordance with the terms of the agreement. In each case the critical question must always be: was the valuation made in accordance with the terms of a contract? If it is, it is nothing to the point that the valuation may have proceeded on the basis of error or that it constitutes a gross over or under value. Nor is it relevant that the valuer has taken into consideration matters which he should not have taken into account or has failed to take into account matters which he should have taken into account. The question is not whether there is an error in the discretionary judgment of the valuer. It is whether the valuation complies with the terms of the contract." 89. The reasoning of McHugh JA was not on all fours with that of the other members of the Court of Appeal, who proceeded to a similar end result by somewhat different routes. McHugh JA's reasoning has, however, since been followed in other unreported decisions in both New South Wales and Queensland, to which the attention of the Full Court was invited. For myself, I see no reason to question the validity of his reasoning. 90. A perusal of the reasons for decision of the learned trial Judge indicates that he found the test postulated by McHugh JA helpful, although he appears also to have relied upon other authorities - dealing with statutory provisions - referred to by Mr. Mansfield QC These also were discussed before this Full Court. 91. The lastmentioned authorities evidence an approach which is, perhaps, best enunciated by Kitto J in The Queen v. The Commonwealth Conciliation and Arbitration and Ors.; ex parte The Amalgamated Engineering Union (Australian Section) and Ors. [1967] HCA 47; (1967) 118 CLR 219 at 252. The question which the High Court was there required to address was whether or not the Conciliation and Arbitration Act 1904-1966 (Cth.) directed an exclusive method of determining the appropriate wage to be paid in industrial employment in the settlement of an industrial dispute. 92. What was in issue was whether or not (having regard to various interacting and possibly conflicting provisions of the statute) the award of a reference bench, which replaced an earlier concept of basic wage plus margins with a minimum wage plus a total wage, was valid and within power. This, in turn, required consideration to be given to the effect of the privative provision of the Act contained in section 60; which stipulated that, subject to the Act, an award made was to be final and conclusive and could not be challenged, appealed against, reviewed, quashed or called into question in any court. 93. Having discussed various interacting provisions of the statute, Kitto J said:- "In other contexts a problem of this general kind is solved by construing the privative provision as having a validating operation where, but only where, three conditions are fulfilled, namely that the purported exercise is a bona fide attempt to exercise the power, it relates to the subject matter of the legislation, and it is reasonably capable of being referred to the power (i.e. does not on its face go beyond the power): R v. Hickman; Ex parte Fox and Clinton [1945] HCA 53; (1945) 70 CLR 598 at 614, R v. Metal Trades Employers' Association; Ex parte Amalgamated Engineering Union, Australian Section [1951] HCA 3; (1951) 82 CLR 208 at 249." 94. Whilst some assistance may be obtained from the statutory privative provision cases, it seems to me that the test which ought to be applied in the instant case is more appropriately that articulated by McHugh J, because of the context in which the issues now before the Full Court arise. 95. The present matter arose in relation to the private law contractual arrangements between the parties. Of necessity what was done needs to be tested by reference to the specific arrangements by which the parties to the Unit Agreement bound themselves; rather than by having regard to the effect of public law privative provisions contained in some statutory setting which are the product of a different practical environment. The test enunciated by Kitto J was essentially thrust towards reconciling potentially inconsistent statutory pronouncements contained in separate sections of a special Act. Much the same may be said of some other public law decisions to which attention was directed. 96. In the instant case, there is no apparent potential conflict between the relevant provisions in the Unit Agreement. On the contrary, the words "so prepared" appearing in clause 4.05(b) actually link the prescriptive provisions with the "binding" clause. 97. The first question, therefore, which must be posed and answered in relation to the case at bar is: What was the relevant contractual provision which gave rise to the evolution of exhibit P52? 98. The answer to that question is necessarily to be found in clause 4 of the Unit Agreement. 99. As already emerges, clause 4 operated to establish the following situation:- (1) The Block and Unit Participations were to be reviewed and adjusted "subject to and in accordance with the provisions of" the Unit Agreement on 1 January 1983 and thereafter at two-yearly intervals. (2) That review and adjustment was to "be effected in accordance with and subject to the following matters: (a) such review and adjustment shall be effected in a fair and reasonable manner, shall be based upon all available information and

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of any matter arising therefrom" was made pursuant to Article III to the contrary. 100. In my opinion, Mr. Gray QC is plainly correct when he declaims that the critical question which must be posed and answered in the instant case is whether or not it can fairly be said that the Block Participations and Unit Participations contained in exhibit P52 were "so prepared" as required by the Unit Agreement. That is to say, the question is whether the Block Participations and Unit Participations set out in exhibit P52 can fairly be described as being the end result of the mandatory process prescribed by clause 4.05(b) of the Unit Agreement. 101. No doubt what is in question is, to some extent, as Bollen J pointed out, necessarily a question of degree. There will always be room for the de minimis principle to apply and, at the end of the day, the question which will arise is whether any departures from the requirements of the Unit Agreement did or did not deprive the GIAPS and associated Participations of their character as valid determinations contemplated by that Agreement. 102. However such are the provisions of clause 4.05(b) that it is, in my opinion, impossible to discern how it can reasonably be said that Participations have been "so prepared" unless it can properly be said that they took, as and for their base, input data of the type stipulated, which had first been submitted to the parties for their consideration and approval; and which had been stabilised, either by approval of the parties to the Unit Agreement or arbitration in the manner required by the clause. 103. In this connection, the significance of the word "so" in conjunction with a word such as "required" is that it specifically and unequivocally imports the notion of the doing of the relevant act in the manner, and so as to satisfy the requirements, previously prescribed (Great Western Railway v. Halesowen Railway (1882-83) 52 LJQB 473 at 479). 104. It is beyond doubt, upon the express findings of the learned trial Judge, (which were amply supported by the evidence led before him) that the GIAPS and associated Block Participations and Unit Participations were not so prepared. They were, in fact, admittedly the product of input data which had been the subject of numerous and patently significant alterations to input data made by both Bennett and Thomson. In the result it could never be said that the input data upon which the GIAPS and Participations were based was ever approved by the parties - that being a pre-condition to the valid implementation of stage 2 of the Clause 4.05(b) process. 105. True it is that, in relation to some of the earlier changes in input date, these were reflected in exhibits P12 and P24 sent to Crusader, which had an opportunity of considering them. It is equally true that Crusader's attention was not drawn to changes made as at the dates when the two exhibits were prepared, in circumstances in which, having regard to its obligations under the contract to act in good faith, the learned trial Judge quite correctly held that Santos was under a duty to make relevant disclosure. But, even if Crusader should, in a sense, be held the author of its own misfortune by failing, at the relevant points in time, to give detailed and adequate consideration to exhibits P12 and P24, the same consideration simply does not and cannot arise with regard to the numerous alterations made by Thomson at a later point in time - notice of which was never given to any party. 106. It seems to me that there is one critically important aspect of the legal effect of what was done, which does not appear directly to have been addressed by the learned trial Judge. The structure of the scheme erected by clause 4.05 of the Unit Agreement was such that at least the making of the alterations by Thomson subsequent to the evolution of exhibit P24 were such that they necessarily denied Crusader any opportunity of approving or taking to arbitration the very input data which was the commencement point and foundation of the second stage of the exercise. 107. In all of the circumstances, the analogy resorted to in the reasons for decision of the learned trial Judge was neither appropriate nor accurate. 108. The circumstances revealed by the evidence were not akin to a situation in which a purchaser had acquired a motor vehicle which performed indifferently, but was nevertheless still capable of answering to the description of being a motor car. A more pertinent analogy would be to say that, if one commissioned the design of a motor vehicle utilising an agreed power plant, it is no satisfaction of that requirement to design a vehicle with some other power plant. Certainly both are motor cars and, to use the expression adopted by Bollen J, both "work". However, the two vehicles are constructed from different components. What was supplied is simply not that which was designated in the order. In the case at bar the parties expressly established the means of stabilising the characteristics of their 'vehicle' in explicit terms. It had to be constructed of data which they first explicitly agreed. On the express findings of the learned trial judge it was not so constructed. 109. With all due respect to the learned trial Judge such are the departures from the very specific requirements of clause 4.04(b) as to the component items to be used that what was ultimately evolved by Santos as exhibit P52 simply cannot be described as a review of the nature contemplated by the contract made between the parties. P52 was, as a matter of fact, not the product of input data submitted to and approved by the parties as contracted for in the Unit Agreement. The fact that the evolution of any GIAPS and review and adjustment of Block Participations and Unit Participations necessarily involved the exercise of considerable judgment and discretion in any event affords no answer to such a proposition. 110. Furthermore, the very substantial additional matters raised by Crusader as to what, it argued, were wholesale departures from the express, mandatory technical requirements of the Fourth Schedule to the Unit Agreement (related to failure to use prescribed formulae and other stipulated matters) were such that, if established, they would certainly tend to add further force to the argument that exhibit P52 was simply not a document which met the description and requirements of the contract between the parties. However, as I have earlier pointed out, having regard to what was said by the learned trial Judge during the course of addresses, such appears to have been a potential misunderstanding as between the parties concerning the need for additional pleadings and the scope of matters actively being litigated in this action that, in other circumstances, this issue might have needed to go back for further express findings on his part. 111. It is therefore my opinion that the learned trial Judge fell into error; and that he thereby deprived Crusader of relief to which it was clearly entitled. 112. Such a conclusion obviates the necessity to direct detailed consideration to a number of other issues which were debated at some length on the hearing of the present appeal. 113. As I understand the reasoning of the learned trial Judge, his finding that the review and adjustment conducted by Santos was an effective and valid process within clause 4.05(b) of the Unit Agreement, was, itself, an answer to the contentions of Crusader related to the aspects of the alleged fiduciary relationships between the parties, the purported rescision by Crusader of the January Agreement and the October Agreement, and the submission based on the provisions of the Trade Practices Act. 114. I merely content myself with saying that I am by no means convinced that those contentions may so lightly be put to one side. 115. For example, if one accepts, as all counsel appeared in the present case to accept, that the relevant provisions of the Unit Agreement, on any view, imposed upon Santos duties and responsibilities akin to those arising out of a fiduciary relationship, it seems to me a somewhat strange proposition to assert that, nevertheless, there having been a fundamental breach by Santos of those duties (as was found by the learned trial Judge), Crusader was denied a remedy at law and restricted entirely to resort to arbitration. 116. Equally, having regard to the width of the potential application of section 52 of the Trade Practices Act (both as to its ambit of operation and the nature of remedies available) I find it a somewhat startling proposition that, if it be accepted as a matter of fact that Santos behaved in a manner proscribed by that section, such a statutory provision can be ousted by a provision such as that contained in Article III of the Unit Agreement. That section, on the face of it, extends not only to contracts but also arrangements made between parties. 117. Finally, there would appear to be great force in the contention of Mr. Gray QC that, if Crusader did validly rescind the January Agreement and/or the October Agreement, then the inevitable practical consequence was that, on any view, there was never any agreed input data which could possibly have supported the production of any determination having the character of a determination of Participations contemplated by the Unit Agreement. 118. Be that as it may, I am driven to the conclusion that, on any view, this appeal must be allowed and that, in lieu of the judgment of dismissal, there must be a judgment with appropriate declarations in favour of Crusader. 119. I would declare that the relevant purported Review and Adjustment made by the respondent was not a valid Review and Adjustment made by Santos pursuant to and in accordance with clause 4.05 of the Unit Agreement.