Fluor Ltd v Shanghai Zhenhua Heavy Industry Co Ltd

Preliminary issues concerning the meaning and effect of a settlement, waiver or release should be ordered only where they can sensibly be tried separately and there is a real prospect of saving time or costs. The court must proceed cautiously where resolving the issues would require substantial evidence about the factual matrix, negotiations, witnesses’ understanding, liability or the claims said to have been waived. A preliminary determination is inappropriate where it may prove abortive or leave substantial questions for the main trial. The court may instead find that a liability trial will clarify the scope and effect of the alleged settlement.

Fluor engaged Shanghai to manufacture and supply offshore windfarm components. After alleged welding defects and extensive testing and remedial work, the parties entered into waiver and payment agreements. Fluor later brought a substantial claim against Shanghai. Shanghai sought preliminary issues concerning the construction and effect of those agreements and alleged estoppels, including whether Fluor had waived or released its claims.

The application had previously been adjourned for consideration after the pleadings were closed. The central question was whether the proposed issues could properly and efficiently be determined before a trial of liability and quantum.

1. The application was refused. The court was not satisfied that the proposed preliminary issues could be tried without a real risk of wasted time and substantial additional cost.
2. The apparent attraction of deciding whether the agreements produced a full or substantial waiver did not overcome the need for caution. The court had to consider whether the issues could be determined in isolation and whether the result would leave unresolved questions requiring a further trial.
3. The factual matrix was likely to be important. The court would need evidence about the history of alleged defects, the parties’ communications, the negotiations preceding the agreements and what the representatives understood by references to waived claims. This could require cross-examination and, potentially, expert evidence relevant to credibility.
4. The proposed issue asking whether all claims in the Particulars of Claim had been waived was particularly unsuitable for preliminary determination. The claims covered a wide range of expenditure and losses incurred at different times. Their character and timing might need to be examined before the effect of any waiver could be assessed.
5. A liability trial had practical advantages. Findings about whether Shanghai was contractually liable for defects might assist in determining what the parties had settled. The court would consider an earlier liability hearing in 2016, but the proposed 2015 timetable did not give Shanghai sufficient time to prepare its expert case.