Karara wins case after 'trial by avalanche'

Iron ore miner Karara Mining has had a big win in its multi-million dollar dispute with DM Civil after a Supreme Court judge delivered a withering critique of the contractor’s legal strategy.

The two parties have spent the better part of a decade fighting each other in the courts after big cost blowouts at Karara’s giant iron ore project in the Mid West.

Karara has already paid $53.8 million to DM Civil, more than double the original $26 million contract value.

DM Civil went to court seeking a further $19.1 million for alleged additional work, delays and disruption while Karara lodged a counterclaim for $7.1 million, alleging it had overpaid DM.

A Supreme Court ruling handed down yesterday by Justice John Vaughan was a big win for Karara, which was represented by law firm Jackson McDonald.

The judgement, handed down two and a half years after the case was heard, was also noteworthy for Justice Vaughan’s scathing assessment of the strategy adopted by DM Civil, represented by law firm Lavan.

“The litigation has consumed resources of the parties and the court that are significantly disproportionate to the amounts in issue,” Justice Vaughan said.

He said there was an extravagant approach to the litigation that was incompatible with the rules of the court.

“That is particularly evident in the approach of DMC,” Justice Vaughan said.

“DMC, by its legal representatives, has to my mind sought to litigate by quantity and mass of materials (sometimes referred to as 'trial by avalanche') rather than identifying the essential legal and factual nature of its complaint and presenting the evidence - and only that evidence - required to address that case.

“Little consideration has been given to whether the way in which DMC's case was prepared and presented was efficient and effective.

“From my perspective much of the materials as pressed on the court have served only to obscure rather than elucidate.”

Justice Vaughan criticised the statements of claim and the witness statements as exceedingly long while the expert evidence was described as tendentious and difficult to follow.

“The case was one of death by a thousand spreadsheets,” he said.

“More concerning than the volume of the expert evidence was: (a) the amount of the so-called expert evidence which was not advanced as containing an admissible statement of opinion; and (b) the degree to which - due to error or objection properly taken - DMC sought to introduce supplementary expert evidence in the course of the trial.”

Justice Vaughan said he was willing to accept some responsibility for the length of the submissions.

“Against my better judgment I was persuaded not to introduce a page limit.

“With the benefit of hindsight that was a serious mistake.

“All of this has contributed to a trial and a trial record of mammoth dimensions.”

As well as criticising DMC’s legal advisers for their “lack of discrimination”, Justice Vaughan said responsibility was shared by DM Civil founder and chairman Reg Toohey.

“The tenor of Reginald Toohey's evidence, in particular, was one of indignation as to the actions of KML and an impassioned resolve to pursue KML to obtain justice.”

The judge added that, because of Mr Toohey’s personal sense of grievance, he had reservations as to the reliability of Mr Toohey’s evidence.

“Mr Toohey was unable to divorce himself from the litigation, and his sense of grievance towards KML, and thus was unable to approach his evidence objectively and dispassionately.”

The dispute stemmed from a $26 million contract signed in 2010 by DMC and Karara, which is owned by China’s Ansteel.

The contrast was for construction of water supply infrastructure, including a 136-kilometre pipeline from a borefield to the mine site.

The works were due to be completed in May 2011 but took an extra four months.

Karara subsequently paid DMC a total of $53.8 million after both parties agreed the contractor was unable to complete the works in a sequential manner and that the project design was modified.

Despite these payments, DMC sought further payments from Karara to the tune of $19.1 million (down from an early estimate of $23 million).

Karara’s counterclaim was for $7.1 million (down from a previously flagged $9.6 million).

“DMC has failed on its overarching claims,” Justice Vaughan concluded.

The Maddington-based contractor succeeded in claims worth about $679,000 while Karara succeeded in counterclaims worth at least $6 million, with a final amount yet to be determined.

In his concluding comments, Justice Vaughan said the case should have been run differently.

“In the course of preparing these reasons I have often reflected on the disproportionate use of public resources that has been consumed by the litigation,” he said.

“I accept that various aspects of the litigation demanded judicial determination.

“But much in dispute could and should have been dealt with by a referee once the underlying legal issues were dealt with.”

He noted that, historically, there has been a reluctance to require reference to a referee over the objection of one or both parties to an action.

“This litigation is testament to why that historical reluctance should be put aside,” he concluded.

Lavan managing partner Dean Hely told Business News he was disappointed with both the result and some of the comments in the judgement.

He said the case was extremely complex.

Mr Hely also noted that Lavan had engaged two experienced senior counsel at different times.

Lavan is seeking instructions from DM Civil regarding an appeal.