Smashing through roadblocks to settlement: non-binding determinations in mediation Fluor Australia v Email Metals A C

1. This PowerPoint template must be used for all Minter Ellison presentations. It has been created in line with our visual identity guidelines. http://sydintranet.int.minterellison.com/Marketing/NewIntranet/Design/VisualIDManual_MAY08.pdf Assistance Captivate, an�online training program,�is located on�the intranet http://sydintranet.int.minterellison.com/technology/captivate/ For technical assistance, please contact the National Technology Helpdesk x8000. For assistance with visual identity, please contact Brand Support x4743. Refer also to �Using the ME presentation template� http://intranet.int.minterellison.com/production/resources/file/eb381f05f1f44d6/TECH_1412.nrl General Guidelines Please use the text boxes positioned on each slide as a guide to font colours and sizes Use page guides to align text boxes and diagrams All text, diagrams and graphs should be coloured according to the Minter Ellison Colour Palette slide Refer to Notes pages for additional instructions where necessary.This PowerPoint template must be used for all Minter Ellison presentations. It has been created in line with our visual identity guidelines. http://sydintranet.int.minterellison.com/Marketing/NewIntranet/Design/VisualIDManual_MAY08.pdf Assistance Captivate, an�online training program,�is located on�the intranet http://sydintranet.int.minterellison.com/technology/captivate/ For technical assistance, please contact the National Technology Helpdesk x8000. For assistance with visual identity, please contact Brand Support x4743. Refer also to �Using the ME presentation template� http://intranet.int.minterellison.com/production/resources/file/eb381f05f1f44d6/TECH_1412.nrl General Guidelines Please use the text boxes positioned on each slide as a guide to font colours and sizes Use page guides to align text boxes and diagrams All text, diagrams and graphs should be coloured according to the Minter Ellison Colour Palette slide Refer to Notes pages for additional instructions where necessary.

2. Smashing through roadblocks to settlement: non-binding determinations in mediationFluor Australia v Email Metals � A Case Study IAMA 2009 Annual ConferenceSaturday 30 May 2009Plenary 4 Session 6 Peter WoodPartnerConstruction Engineering & Infrastructure Title Slide This title slide should be used if you use the Minter Ellison logo slide as slide 1 in your presentation. If using this option � delete Slide 3 (alternative title slide) Title Slide This title slide should be used if you use the Minter Ellison logo slide as slide 1 in your presentation. If using this option � delete Slide 3 (alternative title slide)

3. This case study is presented with the kind permission of the parties involved in the dispute: Fluor Australia Pty Ltd Email Metals Pty Ltd Text slides Keep your words large enough to read on a screen � minimum size 20pt Limit the number of words you put on a page: Avoid paragraphs Use bullet points (max. 3 levels � as per slide 4) Use succinct phrases instead of sentences Limit each slide to 6 bullet points Slide titles should align to first left hand guideline. Slide text boxes should align to second left hand guideline. Text must always be left aligned, except in some diagrams and tables when it makes more sense to centre text Text wrapping and paragraph spacing set to 0.3 lines after gives the desired text spacing effect Text slides Keep your words large enough to read on a screen � minimum size 20pt Limit the number of words you put on a page: Avoid paragraphs Use bullet points (max. 3 levels � as per slide 4) Use succinct phrases instead of sentences Limit each slide to 6 bullet points Slide titles should align to first left hand guideline. Slide text boxes should align to second left hand guideline. Text must always be left aligned, except in some diagrams and tables when it makes more sense to centre text Text wrapping and paragraph spacing set to 0.3 lines after gives the desired text spacing effect

4. �Some mediators work on �settlement by exhaustion�. Others will be content to allow a fixed period� on the basis that that is sufficient time for the parties to �agree� or �agree to disagree�.� Ian Nosworthy The Future of Arbitration and Mediation 5 February 2003

5. Fluor v Email Metals � A Case StudyOverview The nature of the dispute The mediation The issues that were barriers to settlement The non-binding evaluation agreement Putting material before the Conciliator The assessment The resumed mediation

6. Fluor v Email Metals � A Case StudyBackground to the dispute Fluor purchased 972 valves from Email for $4.1 million Upon installation 103 valves leaked Fluor replaced 438 valves with an alternative valve Fluor claimed repair, replacements costs and interest - $16 million

7. Fluor v Email Metals � A Case StudyBackground to the dispute (cont.) Supreme Court proceedings commenced in 2001 Fluor represented by Minter Ellison Email represented by Baker & McKenzie (Andrew Salgo)

8. Fluor v Email Metals � A Case StudyFluor�s case Warranty of fitness for purpose Purpose defined by plant conditions in specification Rubber lining of valves was inadequate Mechanical design of valves was inadequate Failure of valves was systematic Fluor acted reasonably by assessing each valve and replacing those that failed or were likely to fail

9. Fluor v Email Metals � A Case StudyEmail�s case re liability Email used the rubber specified in Fluor�s specification That rubber was too soft Failures occurred due to incorrect installation Failures were due to operating conditions outside those specified To the extent failures were due to rubber hardness or operation outside specified conditions, the warranty was not applicable

10. Fluor v Email Metals � A Case StudyEmail�s case re quantum Fluor could have repaired valves using harder rubber Fluor replaced 438 valves, but only 103 failed The replacement valves were an upgrade Fluor was not entitled to recover its internal costs

11. Fluor v Email Metals � A Case StudyInterlocutory history Voluminous discovery Very detailed particulars Arguments about discovery Arguments about particulars Standoff re particularisation of plant operation conditions at location of each valve

12. Fluor v Email Metals � A Case StudyThe first mediation � October 2006 Dr Clyde Croft SC Detailed position papers Liability Quantum Mediation conducted on 18 October 2006 Parties wedded to positions Email offer No Fluor counteroffer

13. Fluor v Email Metals � A Case StudyBarriers to settlement Factual, legal and technical: Which party was responsible for the rubber? Was the rubber lining defective? Was the valve design, other than the rubber lining, defective? Did valves fail due to incorrect installation? Should Fluor have repaired rather than replaced valves?

14. Fluor v Email Metals � A Case StudyBarriers to settlement (cont.) Factual, legal and technical: Should Fluor have replaced valves, and if so, which ones? Should Fluor have replaced the valves with L&M valves? Was Fluor entitled to recover its internal costs?

15. Fluor v Email Metals � A Case StudyThe non-binding assessment Parties agreed the 9 key issues and priority of those issues Conciliation agreement Mediation should continue Conciliation Assessment Mediation position papers Additional material According to law In writing with reasons

16. Fluor v Email Metals � A Case StudyThe non-binding assessment (cont.) Conciliation agreement (cont.) Not an expert or arbitrator Non-binding Released Conciliator Without prejudice Power to seek clarification or further material Parties completed two column table concerning the 9 key issues

17. Fluor v Email Metals � A Case StudyThe non-binding assessment (cont.) Parties limited to one folder of documents each Expert reports Diagrams Primary documents (letters) Photographs Draft witness statements Case law A cast of players

18. Fluor v Email Metals � A Case StudyThe non-binding assessment (cont.) On 28 April 2008 Dr Croft provided Preliminary Assessment in writing Dealt with all but last 2 issues 108 pages Assessment of the findings that the Court was likely to make concerning Factual disputes Technical issues Legal issues

19. Fluor v Email Metals � A Case StudyThe non-binding assessment (cont.) Some findings in favour of Fluor and some in favour of Email On 6 and 7 May 2008 mediation resumed With benefit of Preliminary Assessment Dr Croft explained Preliminary Assessment Sought clarifications Provided clarifications Mediation resumed Matter quickly settled

20. Fluor v Email Metals � A Case Study The original barriers to settlement Were real and entrenched Could not be resolved by global or �commercial� approaches Proposed compromises were regarded as arbitrary The parties had very different expectations as to the result Factual Technical Legal

21. Fluor v Email Metals � A Case Study The barriers to settlement were overcome Respected Conciliator Opportunity to put evidence and submissions Reasoned Assessments Assessments could be provided to stake holders for authority to move Most reliable indication of eventual result without a 6 month trial

22. Fluor v Email Metals � A Case Study There remained reserve capacity Dr Croft identified �gaps� and provided opportunity for parties to provide material to fill the �gaps� Reserved ability to seek clarifying material

23. Fluor v. Email Metals � A Case Study A process moulded to resolve the barriers to settlement Wholly �without prejudice� and non-binding Avoided trial preparation and trial costs Respect for material positions Restored commercial relationship Effective use of the legal skills of an eminent silk and mediator

24. This PowerPoint template must be used for all Minter Ellison presentations. It has been created in line with our visual identity guidelines. http://sydintranet.int.minterellison.com/Marketing/NewIntranet/Design/VisualIDManual_MAY08.pdf Assistance Captivate, an�online training program,�is located on�the intranet http://sydintranet.int.minterellison.com/technology/captivate/ For technical assistance, please contact the National Technology Helpdesk x8000. For assistance with visual identity, please contact Brand Support x4743. Refer also to �Using the ME presentation template� http://intranet.int.minterellison.com/production/resources/file/eb381f05f1f44d6/TECH_1412.nrl General Guidelines Please use the text boxes positioned on each slide as a guide to font colours and sizes Use page guides to align text boxes and diagrams All text, diagrams and graphs should be coloured according to the Minter Ellison Colour Palette slide Refer to Notes pages for additional instructions where necessary.This PowerPoint template must be used for all Minter Ellison presentations. It has been created in line with our visual identity guidelines. http://sydintranet.int.minterellison.com/Marketing/NewIntranet/Design/VisualIDManual_MAY08.pdf Assistance Captivate, an�online training program,�is located on�the intranet http://sydintranet.int.minterellison.com/technology/captivate/ For technical assistance, please contact the National Technology Helpdesk x8000. For assistance with visual identity, please contact Brand Support x4743. Refer also to �Using the ME presentation template� http://intranet.int.minterellison.com/production/resources/file/eb381f05f1f44d6/TECH_1412.nrl General Guidelines Please use the text boxes positioned on each slide as a guide to font colours and sizes Use page guides to align text boxes and diagrams All text, diagrams and graphs should be coloured according to the Minter Ellison Colour Palette slide Refer to Notes pages for additional instructions where necessary.