Alcoa suffers legal setback over Varanus blast case

Aluminum giant Alcoa has suffered a setback in its $158 million damages claim against Apache Energy over the 2008 Varanus Island gas explosion, after a judge threw out part of its legal argument.

West Australian Supreme Court judge Rene Le Miere yesterday handed down a pre-trial decision in the case and ruled that Alcoa could not argue a breach of statutory duty by Apache. At the same time, Justice Le Miere allowed Alcoa to argue that it had a claim for damages for economic loss sustained as a result of Apache's breach of duty. Apache had applied for Alcoa's claim of a breach of duty to be dismissed.

A date for the civil trial has not been set. Alcoa sued Apache and its partners, Tap Oil and Kufpec, for $158m in March last year. Yesterday, Alcoa's lawyer David Collins told the Supreme Court that Alcoa might make further allegations against Apache, following the release last month of a previously secret government-commissioned report.

The report, by Kym Bills and David Agostini, blamed the blast on Apache's poor safety culture and a focus on costs, combined with weak government regulation. It found the explosion cost the economy an estimated $3 billion.

"We've now received the final report on the explosion that might cause us to make further allegations," Mr Collins said.

A spokesman for Apache Northwest said it was pleased the court had struck out Alcoa's statutory-based claim. The spokesman said Alcoa's only viable legal claim was contract-based liquidated damages, which were subject to Apache's force majeure defense.

"Alcoa is trying to avoid this contractual limitation on damages, which it freely negotiated," the spokesman said.

"The court has left for later determination whether Apache owes any duty of care at all.

"Apache will vigorously defend Alcoa's remaining claim."

The spokesman said the two companies had a "strong commercial relationship".