JKC consortium loses Ichthys claim

The engineering consortium that built the Ichthys LNG plant has lost a Court of Appeal case relating to $1.5 billion worth of claims against three contractors.

JKC, a joint venture between Japanese companies JGC and Chiyoda and US giant KBR, failed in its appeal against a 2019 Supreme Court ruling.

It had been claiming parent company guarantees against the three contractors that were responsible for the power station at Ichthys.

CIMIC Group subsidiary UGL and US companies CH2M Hill and General Electric pulled their workers off the Darwin site in 2017 after their contract was terminated.

JKC, represented by law firm Clyde & Co, argued the parent company guarantees were 'pay now, argue later' instruments, similar to bank guarantees.

It claimed the respondents (i.e. the contractors) needed to put JKC “in the money in the amount claimed” even though their liability was disputed.

After a close reading of the original contracts, signed in 2012, the Court of Appeal judges rejected this claim, siding instead with the three contractors, which were represented by Corrs Chambers Westgarth.

Today’s ruling noted that the parties were still in dispute as to who validly terminated the power station contract, with the matter now subject to an international arbitration process. 

The contractors have lodged claims for the value of works performed while JKC has counterclaimed, seeking reimbursement of its additional costs in completing the power station.

The contractors successfully argued the arbitration must be resolved and quantified, in favour of JKC, before any liability on their part crystallises.

The Court of Appeal ruling published today disclosed that JKC’s claim for costs amounted to just more than $1.5 billion.

The overall cost of building the Ichthys LNG project, jointly owned by Japan’s Inpex and France’s Total, came to about $US45 billion, including commissioning costs.

The project was marred by multiple delays and cost increases as it was approaching completion.

Other contractors caught up in disputes included CIMIC’s CPB Contractors and Laing O'Rourke.