INPEX Operations Australia Pty Ltd v AkzoNobel NV (No 6)

This decision arose in what the Court itself described as "mega-litigation". The broader background had already been addressed in earlier interlocutory reasons, and Justice Banks-Smith said it was unnecessary to repeat it here. What mattered for this judgment was a narrower procedural question about a referee's report.

The parties were INPEX Operations Australia Pty Ltd and Ichthys LNG Pty Ltd on one side, and AkzoNobel NV, International Paint Limited and Akzo Nobel Pty Limited on the other. The underlying damages questions related to rectification works following failure of an anti-corrosive coating used on piping and equipment at the Ichthys LNG Gas Field Onshore Project at Bladin Point, Darwin.

On 20 March 2024, the Court ordered by consent that nine questions about quantification of damages claimed by INPEX be referred to a referee for inquiry and written report. The order was made under ss 37P and 54A of the Federal Court of Australia Act 1976 (Cth) and r 28 of the Federal Court Rules 2011 (Cth). The questions were later amended by consent on 11 September 2024.

The referee then conducted a hearing between 4 November 2024 and 18 December 2024 and produced a detailed 224-page report on 28 February 2025. When the matter came back before the Court in May 2025, the parties sought various orders about whether the report should be adopted. Three points were raised about the report, but this judgment dealt with only one of them.

That one point concerned the discount rate used in part of the report. INPEX argued there may have been an error or misconception in the referee's use of the phrase "real discount rate". The AkzoNobel side disputed that and said there was no error, ambiguity or misapprehension. The Court therefore had to decide whether it could and should ask the referee to clarify the issue before deciding whether to adopt the report.

The disputed point was technical but commercially important. In one part of the report, the referee discussed a "real discount rate". The report said that a nominal discount rate includes inflation and has two components: a real discount rate, which excludes inflation and reflects the time value of money, and an inflation rate. The report also said that a secure investment, such as the Government 10-year bond rate, typically determines the real discount rate, while noting a separate issue about risk premium.

INPEX challenged that reasoning. It submitted there was no evidence before the referee that a government 10-year bond rate typically determines the real discount rate. It argued that the Commonwealth government 10-year bond rate is instead a nominal rate that incorporates inflation in its pricing. On that basis, INPEX said it was possible the referee had inadvertently selected the wrong figure from a schedule before him and had effectively applied double discounting for inflation.

The AkzoNobel side took the opposite position. It denied there was any error, ambiguity or misapprehension in the referee's approach. It submitted that INPEX was trying to agitate a new issue and that the referee's calculations reflected a broad-brush approach that was open on the material.

The Court noted that the parties were far apart on both the substance of the point and how it should be dealt with. The issue mattered because the fixing of the discount rate could affect quantum if liability were ultimately established.

The legal issue was procedural. The Court was not deciding whether INPEX would ultimately succeed on damages, and it was not deciding whether the referee had definitely made a mistake. Instead, the Court had to decide whether it could seek clarification from the referee before determining whether to adopt, vary or reject the report.

Section 54A of the Federal Court of Australia Act allows the Court to refer proceedings or questions to a referee for inquiry and report, and then deal with the report as it thinks fit. Rule 28.67 of the Federal Court Rules sets out the options available after a report is received. Those options include adopting, varying or rejecting the report, requiring an explanation by way of a further report, remitting all or part of the matter for further consideration, deciding a matter on the evidence taken before the referee, and giving judgment or making orders.

The parties disagreed about threshold. INPEX argued that a possible misconception or uncertainty was enough to justify remittal or a further report. The AkzoNobel side argued that the Court should not send the issue back unless at least an apparent error had first been shown.

So the real question was this: does the Court need to identify a clear or apparent error on the face of the report before it can ask the referee to explain a discrete issue, or can it do so where there is an important ambiguity, uncertainty or possible misapprehension that may affect the reasoning process?

Justice Banks-Smith held that a clear or apparent error was not a mandatory precondition to remittal. The Court reviewed the authorities and accepted that they refer to a spectrum of matters that may justify sending a report back, including error, apparent error, possible error, internal inconsistency, uncertainty of meaning and possible misconception. Those descriptions were not treated as rigid limits on the Court's power.

The Court said it was enough that there be an ambiguity, uncertainty or misapprehension of sufficient importance to the reasoning process such that remittal was likely to facilitate the just and efficient determination of the issue. Applying that approach, the Court was persuaded there were sufficient concerns about the meaning ascribed to "real discount rate" to support remittal.

The Court therefore ordered, under r 28.67(1)(b) and (c) read with r 1.40, that the referee provide an explanation by way of a further report considering and responding to the parties' proposed questions. The referee was also given the powers set out in the earlier March 2024 orders for the purpose of the further report. The parties were, in the first instance, jointly and severally liable for the referee's fees for the further report. Costs were otherwise reserved, and liberty was given to the referee and the parties to seek directions on 48 hours' notice.

Importantly, the Court did not decide whether the referee had in fact made the alleged discount-rate error. It decided only that clarification should be sought before the Court determined whether to adopt the report.

A central theme in the reasons was the proper role of a referee. The Court said a report is obtained in aid of the due administration of justice, and the Court retains control over whether to adopt it. The reference process is meant to provide a practical alternative to having every technical issue fought through orthodox litigation.

Justice Banks-Smith considered it would partially negate the purpose of the reference if the Court had to spend substantial time trying to gain the same level of technical knowledge as the referee on the discount-rate issue just to work out whether there had been an error and, if so, what kind of error it was. The Court was already engaged in the significant task of determining liability, while the rationale for the reference was to separate out complex quantum issues for a referee with appropriate time and expertise.

The Court also considered the issue to be discrete, technical and important enough to justify clarification. The referee had heard the quantum evidence, written the report and was best placed to explain what was meant. The Court noted that there was some urgency in dealing with the issue while the referee remained relatively familiar with the complexities of the matter.

The judgment also addressed fairness. The AkzoNobel side argued there was a fairness issue in permitting a reopening of the question. The Court rejected the idea that this concern prevented remittal. Where there is speculation about what the referee intended by particular words, the Court considered the obvious and efficient course was to ask the referee directly. Because a referee's report is not binding unless adopted by the Court, seeking clarification before adoption can minimise the risk of unintended mistakes or ambiguities having serious consequences for the parties.

At the same time, the Court made clear that not every minor dispute should be remitted. Courts will not ordinarily reconsider disputed factual questions where there was material sufficient to support the referee's conclusion, and they will not usually interfere with findings based on a choice between conflicting evidence. The power exists to be used when appropriate, not indiscriminately.

For most businesses, the practical value of this case lies in how to handle technical reports in litigation. If your dispute involves expert modelling, future costs, valuation assumptions, discount rates or rectification calculations, a referee or similar process can strongly influence the eventual outcome. This decision shows that the Court may prefer targeted clarification over forcing the parties into a blunt choice between full adoption and full rejection.

The useful lesson is to be precise. INPEX did not simply say the result felt wrong. It identified a specific concept, the meaning of "real discount rate", and explained why the concept might have affected the calculation. That kind of focused challenge is more likely to attract procedural relief than a broad complaint that the report is unsatisfactory.

Businesses should also note the limits of the decision. It does not create a free-standing right to rerun expert disputes whenever a party is unhappy. The Court emphasised proportionality, efficiency and the need for the issue to be sufficiently important to the reasoning process. A minor disagreement or an attempt to relitigate factual choices will usually not be enough.

In practice, if your business receives an expert or referee report in a court process, review it for internal consistency, terminology, assumptions and links between evidence and conclusion. If there is a concern, ask whether it is a discrete point that the original decision-maker can clarify quickly and fairly. That may be more effective than trying to turn the adoption hearing into a second full trial on the same technical material.

The judgment was delivered on 24 June 2025. It records that the referee had been appointed on 20 March 2024, that the quantum questions were amended on 11 September 2024, that the referee's hearing ran between 4 November 2024 and 18 December 2024, and that the report was provided on 28 February 2025. The relevant court hearing took place on 7, 8 and 12 May 2025, with last submissions on 6 June 2025.

The decision is procedural and interim in character. It orders a further report from the referee and reserves costs otherwise. It does not finally determine liability, final quantum or whether the original report will ultimately be adopted.