Federal Court of Australia

INPEX Operations Australia Pty Ltd v AkzoNobel NV (No 6) [2025] FCA 680

ORDERS

THE COURT NOTES THAT:

A.    Each of the applicants and the respondents have provided a proposed question to be provided to the referee in the event that orders for remittal are made under r 28.67 of the Federal Court Rules 2011 (Cth).

B.    The applicants' proposed question is contained in the submission filed 6 June 2025 bearing Epiq identification number [AID.010.025.0001] at [3.2(a)]. The respondents' proposed question is contained in the submission filed 6 June 2025 bearing Epiq identification number [AID.020.036.0001] at [6].

C.    The reference to 'Questions' in these orders is a reference to those identified questions.

THE COURT ORDERS THAT:

1.    Pursuant to r 28.67(1)(b) and (c) read with r 1.40 of the Federal Court Rules 2011 (Cth), the referee appointed by the Court on 20 March 2024 is to provide an explanation by way of a further report which considers and responds to the Questions.

2.    For the purpose of the further report, the referee has the powers set out in order 1(c) of the orders made 20 March 2024.

3.    Without affecting the powers of the Court as to costs, the parties are, in the first instance, to be jointly and severally liable to the referee for the fees payable to the referee in providing a report pursuant to these orders.

4.    There be liberty to the referee and the parties to seek directions with respect to any matter arising from the remittal upon application made on 48 hours' notice.

5.    Costs otherwise reserved.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

BANKS-SMITH J:

1    These reasons concern a discrete aspect of the mega-litigation the subject of this proceeding. The broader background is set out in previous interlocutory reasons, and it is not necessary to repeat it.

2    Between 6 May 2025 and 12 May 2025 I heard the parties (INPEX and ANIP respectively) on a number of issues. One of those was whether a report provided to the Court by a referee on certain quantum issues should be adopted under r 28.67 of the Federal Court Rules 2011 (Cth).

3    Rule 28.67 empowers the Court to pursue a number of options in relation to a referee's report. The question the subject of these reasons is whether the Court can and should seek clarification of a particular matter from the referee prior to determining whether the report should be adopted, rejected or otherwise dealt with.

Background

4    On 20 March 2024 I ordered, by consent, that nine questions of quantification of various heads of damages claimed by INPEX be referred to a referee for an inquiry and that the referee provide a written report to the Court stating, with reasons, the referee's opinion on those quantum questions.

5    The order was made under s 37P(2) and s 54A of the Federal Court of Australia Act 1976 (Cth) and r 28 of the Federal Court Rules. The quantum questions were amended by consent on 11 September 2024.

6    The referee conducted a hearing between 4 November 2024 and 18 December 2024, and provided a detailed report of some 224 pages to the Court on 28 February 2025. The matters the subject of the report are complicated damages calculations. They relate to rectification works (and I use the term 'rectification' in a neutral fashion) following failure of the anti-corrosive coating utilised on piping and equipment used in the Ichthys LNG Gas Field Onshore Project at Bladin Point, Darwin.

7    During the May 2025 hearing the parties sought various orders in relation to the referee's report. I should also add that the parties concur that the referee undertook a thorough and detailed task in a relatively short period of time. Relevantly, three points have been taken by them about the report and only one is the subject of these reasons. The other points (one of which is raised by ANIP) fall to be addressed generally in the adoption application.

8    The matter the subject of these reasons is whether there may have been an error or misconception as to the appropriate discount rate to be adopted where referred to in one part of the referee's report, and whether the discount rate and calculations should be adjusted accordingly.

9    This possibility of error or misconception was raised by INPEX. INPEX sought to tender a small number of documents that were not before the referee but which it says are relevant to the matter. The tender was opposed by ANIP. In light of my decision on the application, it has not been necessary to determine whether the documents should be admitted. ANIP does not agree that the relevant passage in the referee's report reveals any error or misconception.

10    At the commencement of the May hearing, and having read the detailed written submissions of the parties in relation to adoption, it seemed to me that certain issues might be dealt with more efficiently by remittal to the referee. After all, the referee heard the quantum evidence and wrote the report, and (in my preliminary view) likely would be the person best placed to resolve quickly and efficiently questions that arose.

11    During the hearing, and having considered the position, INPEX suggested that the particular matter relating to the discount rate could be the subject of further explanation or clarification from the referee.

12    It is important to fix on an appropriate course because if this matter is to be taken back to the referee, such course should be implemented sooner rather than later, and while the referee remains relatively familiar with the complexities of this matter.

13    Two issues arise:

(1)    Must I be satisfied that the referee has made an error before the Court can ask him to clarify the point raised by INPEX?

(2)    If I am satisfied that it is appropriate to revert to the referee, what should be the form of any questions issued by the Court to the referee?

Nature of the matter for potential clarification

14    I will approach disclosure of information about the matter in the report raised by INPEX in a conservative manner. It must also be recalled that no findings have yet been made in relation to liability, nor final orders made in relation to adoption.

15    The matter concerns the meaning of the phrase 'real discount rate' used by the referee in Part 81 of Chapter 12 of the report, and whether a nominal discount rate was in fact used instead of a real discount rate.

16    Relevantly, para 81.48 of the report states:

81.48    A nominal discount rate includes the inflation rate. This rate has two components:

81.48.1:    Real Discount Rate: This rate excludes inflation and reflects the time value of money. The time value of money principle asserts that money today is worth more than the same amount in the future because it can be invested to earn interest. A secure investment, such as the Government 10-year bond rate, typically determines the real discount rate. This rate signifies the return one can earn with minimal risk. ANIP contends that the real rate should incorporate a risk premium. I will consider that issue separately.

81.48.2    Inflation Rate: This component accounts for the expected rate of inflation. Discounting for inflation ensures consistency in comparing future costs to present values.

(emphasis added)

17    INPEX submitted that there was no evidence before the referee that 'a secure investment, such as the Government 10-year bond rate, typically determines the real discount rate', and none was identified by the referee. It submitted that the Commonwealth government 10-year bond rate is instead a nominal rate which incorporates inflation in its pricing. It submitted that it is possible that the referee has applied a double discounting for inflation when calculating the discount rate by inadvertently selecting the discount rate from the incorrect column of those in a schedule that was before him during the reference.

18    ANIP, on the other hand, denies that there is an error, ambiguity or misapprehension in the referee's approach and submitted that INPEX is seeking to agitate a new issue. It submitted that the referee's calculations reflect a broad-brush approach to fashioning a discount rate, and that such an approach was open to the referee.

19    It is fair to say that the parties were far apart on this matter and how it should be dealt with. The fixing of the discount rate has an effect on quantum, if liability is established.

Principles

20    Section 54A of the Federal Court of Australia Act provides:

Referral of questions to a referee

(1)    Subject to the Rules of Court, the Court may by order refer:

(a)    a proceeding in the Court; or

(b)    one or more questions arising in a proceeding in the Court;

to a referee for inquiry and report in accordance with the Rules of Court.

(2)    A referral under subsection (1) may be made at any stage of a proceeding.

(3)    If a report of a referee under subsection (1) is provided to the Court, the Court may deal with the report as it thinks fit, including by doing the following:

(a)    adopting the report in whole or in part;

(b)    varying the report;

(c)    rejecting the report;

(d)    making such orders as the Court thinks fit in respect of any proceeding or question referred to the referee.

21    Division 28.6 of the Federal Court Rules establishes the rules for the conduct of a reference.

22    Relevantly, r 28.67(1) of the Federal Court Rules sets out the processes that might be pursued after the report is received by the Court:

Proceeding on report

(1)    After a report has been given to the Court, a party may, on application, ask the Court to do any of the following:

(a)    adopt, vary or reject the report, in the whole or in part;

(b)    require an explanation by way of a further report by the referee;

(c)    remit on any ground, for further consideration by the referee, the whole or any part of the matter that was referred to the referee for inquiry and report;

(d)    decide any matter on the evidence taken before the referee, with or without additional evidence;

(e)    give judgment or make an order in relation to the proceeding or question.

23    Although the Court has a broad discretion, there are established principles. They are set out in authorities such as Chocolate Factory Apartments v Westpoint Finance [2005] NSWSC 784 at [7] (McDougall J), as adopted in this Court in a number of decisions including Gulf Conveyor Systems Pty Ltd v Gulf Integrated Systems Solutions Pty Ltd [2020] FCA 1245 at [13]-[21] (Katzmann J).

24    This application, as developed during the May hearing, focuses on the discretion to require a further explanation on some part of the report from the referee, or remit the matter for further consideration. That is, INPEX suggests that it is appropriate to exercise the discretion referred to in r 28.67(1)(b) and (c).

25    For the purpose of this application, the following principles are of particular relevance:

(1)    A report is obtained by the court in aid of the due administration of justice, and the attainment of that purpose must remain the principal object: Wallfire Pty Ltd v Andwendrod Services Pty Ltd [2003] VSC 348 at [32] (Hansen J).

(2)    It is for the court to decide whether to adopt a report in whole or in part, and it retains control of the exercise: Wallfire at [31]-[32].

(3)    It is undesirable to attempt closely to confine the manner in which the discretion under a rule such as r 28.67 is to be exercised: Chocolate Factory at [7].

(4)    The purpose of the rule is to provide, where the interests of justice so require, a form of partial resolution of disputes alternative to orthodox litigation, and it would frustrate that purpose to allow the reference to be treated as some kind of warm-up for the real contest: Super Pty Ltd (formerly known as LEDA Constructions Pty Ltd) v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549 at 563 (Gleeson CJ).

(5)    If the referee's report reveals some error of principle, absence or excessive jurisdiction, patent misapprehension of the evidence or perversity or manifest unreasonableness in fact finding, that would ordinarily be a reason for rejection: Chocolate Factory at [7].

(6)    However, where the court decides that the reasons are flawed, either on their face or because they have been shown not to deal with important matters, the court has a choice. It may decline to adopt the report. Or it may itself look at the detail of the evidence to decide whether or not the expense of further proceedings before the referee (which would be the consequence of non-adoption) is justified: Chocolate Factory at [7].

(7)    If there appear to be difficulties about the application of the report such as 'significant internal inconsistencies, uncertainty of meaning or possible misconceptions' there is ample power under the rule for the court to request a further report: Integer Computing Pty Ltd v Facom Australia Ltd (unreported, Sup Ct, Vic, 10 April 1987) (Marks J), cited with approval in Wallfire at [35]; and in Brady Queen Pty Ltd v 280 Queen Street Pty Ltd (No 3) [2019] VSC 307 at [38]-[39] (Sifris J).

(8)    Before the court considers the use to be made of a report and whether to adopt it in whole or in part, 'the Court has power to remit any matter mentioned or not mentioned in the report to the special referee for further consideration, or to seek the provision of a further report': Australian Pharmaceutical Industries Ltd v O'Neale [2021] VSC 371 at [110] (Sloss J), citing Wallfire.

26    Therefore, having regard to the authorities, where there is error in a report it may be rejected by the Court and not adopted. But that is not the only potential course and it may be appropriate to consider further consideration by or proceedings before the referee. The wide terms of the rules provide for such steps, including in relation to matters not mentioned, possible misconceptions and uncertainty of meaning.

Examples of remittals for further report or consideration

27    Two cases provide particular assistance.

28    In Wallfire, a party sought remittal to the special referee of a question of the fair value of shares addressed prior to adoption of the initial report. Expert witnesses for each party contended that the special referee's conclusion in the initial report on value was affected by relevant errors. Counsel moving for the remittal said that the errors affected a matter on which the parties had not previously had an opportunity to be heard. The alleged errors were apparently clearly identified and explained in affidavits before the Court. Remittal was ordered.

29    The rule addressed in Wallfire permitting remittal was r 50.03(2)(b) of the Supreme Court (General Civil Procedure) Rules 1996 (Vic). The rule provided:

(2)    On the receipt of the special referee's report, the Court −

…

(b)    may by order −

(i)    require the special referee to provide a further report explaining any matter mentioned or not mentioned in the report;

(ii)    remit the whole or any part of the question originally referred to the special referee for further consideration by him or any other special referee;

(iii)    vary the report.

30    The powers in r 50.03(2)(b) to seek a further report or further consideration are analogous to the powers in r 28.67(1)(b) and (c) of the Federal Court Rules.

31    Justice Hansen in Wallfire said this (at [34]):

The wide terms of rules 50.01(2)(c) and 50.03(2)(b) ensure that the Court has power to do that which is just and appropriate in all cases. That is consistent with its control over the orders it makes and the supervision of that which is done under them by its appointee. The rules aid in ensuring that a report sufficiently deals with the question it addresses. The further information ordered under rule 50.02(2)(c) or the further report or consideration ordered under rule 50.03(2)(b)(i) or (ii) will serve to fulfil the reference and provide a report better able to be considered for adoption. Moreover, the wide powers seem only reasonable, and necessary, having regard to the power to vary or to refuse to adopt the report. In other words, they assist the Court's delegate to better perform the task which the Court itself requires to dispose of the litigation.

32    His Honour did not determine whether there were in fact errors in the initial report before deciding that there should be a remittal, instead stating (at [42]):

Having read the affidavits, and on several occasions heard what each counsel has said as to errors in and affecting the report, I am concerned as to the integrity and sufficiency of the report, in terms of the extent to which it has appropriately dealt with the question referred. I do not propose to elaborate on the matters raised. I consider it inappropriate and of potential embarrassment to the special referee, as the delegate of the Court, to do so. I am in no doubt that in the interests of justice as between the parties the question should be remitted to the special referee for further consideration, and I will so order. The report produced in response to the remit should address specific matters identified in an annexure to the order.

33    I should add that Hansen J referred to r 50.01(2)(c) in addition to r 50.03(2)(b) of the Supreme Court Rules in his reasons. Rule 50.01(2)(c) is in the section of the rules that permits the Court to make a reference, and provides that the Court may direct that the special referee give such further information in their report as it thinks fit. It is not one of the rules that concerns the situation after the initial report has been provided. Regardless, I do not consider the absence of an analogue to r 50.01(2)(c) in Division 28.6 of the Federal Court Rules alters the breadth of r 28.67.

34    More recently, in McDonald v Commonwealth of Australia [2025] FCA 380, Mortimer CJ accepted the majority of a referee's report relating to legal costs, but sought clarification from the referee, pursuant to r 28.67(1)(b) read with r 1.40 of the Federal Court Rules, concerning possible miscalculations in the report: at [74]-[84]. Her Honour described the questions remitted to the referee as relating to 'possible' or 'apparent' miscalculations in the referee's reasons: at [74]-[85], [387], [606].

Consideration

35    Despite the express power in r 28.67(1)(b) and (c) and the broad discretion provided by s 54A(3)(d) of the Federal Court of Australia Act to make orders as the Court thinks fit, the parties disagreed as to what, if any, threshold of error needed to be apparent or determined by me before it would be appropriate to seek clarification of any matters from the referee either under r 28.67(1)(b) or (c).

36    According to INPEX, the matter it has identified gives rise to a concern that can properly be described (at least) as a possible misconception, being a relatively low threshold. INPEX contends there is no evidence, no evidence mentioned and a possible misconception as to the meaning or content of the term 'real discount rate' as highlighted above.

37    ANIP, on the other hand, submitted that there is no ambiguity or misconception revealed by the referee's report on this issue and that, at the very least, I would need to be satisfied that there was an 'apparent error' (referring to McDonald) before I should exercise any discretion to remit the issue to the referee. It argues that in McDonald there was clear error on the face of the documents, in contrast to the position before me. It argues that in Wallfire, again in contrast to the position before me, both parties contended that there were factual errors.

38    The references in the authorities to error, apparent error, possible error, internal inconsistencies, uncertainty of meaning or possible misconceptions reveal a spectrum of descriptions of matters that have supported remittal, but those descriptions do not purport to prescribe or limit the circumstances in which r 28.67 and its analogues might be invoked. I do not accept ANIP's submission that clear or apparent error on the face of the report must be revealed. While such error may well feature in some circumstances, it is enough to support the exercise of discretion under r 28.67 that there be an ambiguity, uncertainty or misapprehension of sufficient importance to the reasoning process that the just and efficient determination of the issue in question is likely to be facilitated by a remittal.

39    Nor is it necessary that I determine the nature of any purported error in any definitive terms. I endorse the approach of Hansen J in Wallfire by recording that I am persuaded based on the submissions that there are sufficient concerns about the meaning ascribed to 'real discount rate' to support a remittal, but I do not intend to elaborate now on the respective arguments before me, the evidence, the submissions made before the referee, the referee's reasons or the proposed new evidence.

40    Having read and heard the detailed submissions that highlight the different positions of the parties in the issue, I have determined that it is appropriate to remit the matter for further consideration and further report. The competing submissions extended not only to the content of the referee's report, but also (as indicated above) to whether I should admit the few items of proposed new evidence.

41    The purpose of the reference would be partially negated if the Court were obliged to spend time attempting to gain a similar level of technical knowledge to that of the referee on the discount rate question in order to discern whether there had been an error and, if so, the nature of the error. As it is, the Court is engaged in the significant task of determining liability in this proceeding, and the rationale for the reference was to attempt to sensibly demarcate complex quantum issues that could properly be dealt with by a referee with appropriate time and expertise. In circumstances where unravelling what was or was not submitted before the referee would itself be a time-consuming task for the Court, and in circumstances where the referee is best placed to understand the nature of the particular dispute between the parties arising from the report, it is clearly in the interests of the administration of justice that the referee be asked to clarify the position.

42    Whilst ANIP contends there is a fairness issue in permitting a 'reopening' of the question, its submission is premised on its position that the words 'real discount rate' used by the referee have a particular meaning and it is only that particular meaning that the referee intended to convey. That might ultimately be found to be so – but it may not be. Where there is a level of speculation involved in deciding what the referee had in mind, who better to determine that (important) question than the referee? Why not simply ask the referee to confirm or clarify that? The breadth of the rule is consistent with the very purpose of a reference. A referee's report is not determinative and is not binding without an order of the court. Its purpose is best met if, before an adoption order is made or refused, the court can seek clarification where appropriate and so minimise the risk of perpetuating unintended mistakes or ambiguities, either of which might have serious consequences for the parties.

43    ANIP's identification of distinguishing features from both McDonald and Wallfire are not such as to change my view. The quality of 'error' is likely to be different from case to case and it is but one of the matters to be taken into account. The fact that only one of the parties (here, INPEX) alleges there is a basis for a further report or consideration does not determine the matter: it may often be the case that the grounds for a referral arise from the fact that the parties do not agree or have competing views on different aspects of a referee's report. Again, it is the circumstances of each case that must be considered.

44    Remittal for clarification and further report is a proportionate and fair response in all of the circumstances.

45    The question to be resolved, although technical, is discrete. It relates to part only of the report. The referee has indicated to the parties and the Court that he has some capacity to assist further if required. In this case, time permits such a course being undertaken.

46    That is not to say that every minor dispute should be the subject of remittal under r 28.67(1)(b) or (c). The authorities are clear that on an adoption hearing the court will not reconsider disputed questions of fact where there is factual material sufficient to entitle the referee to reach their conclusions. Nor will the court ordinarily interfere with findings of fact by a referee where the referee has based their findings upon a choice between conflicting evidence. But the utility of the reference process is best preserved if the powers provided for by r 28.67 are exercised when appropriate. There are relatively few cases that address remittal for further report or consideration, which suggests that they are provisions that are not used indiscriminately.

The form of the remittal

47    There will be an order to the effect that pursuant to r 28.67(1)(b) and (c) read with r 1.40 of the Federal Court Rules, there will be a remittal of the matter that I have summarised at [15]-[17] above to the referee for inquiry and further report. The form of the remittal will constitute additional questions to be put to the referee.

48    The parties were unable to agree the drafting of a question that might be asked of the referee, assuming I decided to proceed under r 28.67(1)(b) or (c). Instead, INPEX and ANIP each provided its own formulation of a question. ANIP also included a background paper which it submitted should be provided to the referee together with its proposed question. The parties informed the Court on 20 June 2025 that despite further conferral, they were unable to agree a compromise position in relation to any proposed question. Further, INPEX opposed the provision of the background paper in the form prepared by ANIP. INPEX said that although it had no objection to a 'neutral' paper being provided, it would be futile to ask the parties to prepare such a document. In the circumstances, I agree. However, nor is it for the Court to embark on drafting such a document for the referee.

49    In my view, and having carefully considered the respective proposed questions, the appropriate course is that through the registrar, the Court provide both formulations of the questions (without the ANIP background paper) to the referee. It will then be a matter for the referee to decide the best manner in which those questions are to be understood and answered, or otherwise responded to. In particular, it will be for the referee to decide what, if any, further information or submissions from the parties might assist him, and in this regard the referee should have the same powers expressly granted in relation to the reference by order 1(c) of the orders of the Court made 20 March 2024. It is hoped that the task will not be complex for the referee and that he will not need to call on all such powers. There will also be liberty to the referee and the parties to seek directions with respect to any matter arising from the remittal upon application made on 48 hours' notice.

50    The Court intends that the registrar will write to the referee (copied to the parties) not before 4.30 pm on 26 June 2025.

Associate:

Dated:    24 June 2025