Drill Engineering and Pastoral Co Pty Ltd t/a Depco Drilling v Luke

Case •

[2017] QMC 18

•

25 August 2017

MAGISTRATES COURT OF QUEENSLAND

CITATION:

Drill Engineering & Pastoral Co Pty Ltd t/a Depco Drilling v Luke [2017] QMC 18

PARTIES:

Drill Engineering & Pastoral Co. Pty. Ltd. ACN 009 982 094 trading as Depco Drilling
(Plaintiff)

v

Daniel Ralph Luke
(1st Defendant)

And

Lyrana Pty Ltd. ACN 071 452 698
(2nd Defendant)

FILE NO/S:

Claim M205/14

DIVISION:

Magistrates Court

PROCEEDING:

Civil

ORIGINATING COURT:

Rockhampton

DELIVERED ON:

25 August 2017

DELIVERED AT:

Rockhampton

HEARING DATE:

19 December 2016

MAGISTRATE:

M Morrow

ORDER:

CATCHWORDS:

Evidence – Reliance on spoken words – Standard of proof – Absence of reliable contemporary record or corroboration

Contract – Void contracts – Illegality – Whether contract rendered void or unenforceable – Drilling without licence

Civil – Corporations – whether debt owed by company or individual

Counterclaim – whether agreement to hire loader – where exaggeration of hours worked on machine – lack of disclosure – 100 litres free fuel provided

COUNSEL:

Mr S B Whitten for the Plaintiff

Mr G Lynham for the Defendants

SOLICITORS:

Bressington & Partners for the Plaintiff

Thynne & McCartney for the Defendants

  1. The Plaintiff is suing the Defendants for recovery of a debt of $43,523.70 they say is for drilling of a water hole on the second Defendant’s property. Bygana Station, in late 2013.

  1. The Defendants take issue and the disputes appear to be

(a)        Whether the drilling works were performed legally by the Plaintiff;

(b)        The terms of the agreement; and

(c)        A counter claim suing for work carried out at the request of the Plaintiff.

  1. The burden of proof lies with the Plaintiff and the standard of proof is on the balance of probabilities[1]. On the counterclaim the burden of proof is on the Defendant and the standard of proof is on the balance of probabilities.

    [1] Currie v Dempsey (1967) 69 SR (NSW) 116 at 539. Denning J said in Miller v Minister of Pensions [1947] 2 All ER 372 at 374: That degree is well settled. It must carry a reasonable degree of probability, but not so high as is required in a criminal case. If the evidence is such that the tribunal can say: “We think it more probable than not”, the burden is discharged, but, if the probabilities are equal, it is not. See also Sargent v Massachusetts Accident Co 29 NE (2d) 825 (1940) at 827. See also Smith v Rapid Transit Inc 58 NE (2d) 754 (SJC Mass, 1945); Malec v J C Hutton Pty Ltd (1990) 169 CLR 638 at 642-3; 92 ALR 545 at 548; [1990] HCA 20

  1. The Plaintiff called Wayne Riddell and Darrin Melton to give evidence and the Defence called Daniel Ross Luke and Hayden Caryle Luke.

  1. There was also no testimony from a number of other potential witnesses such as Megan Albert and Darrin Melton’s off sider. Whilst it may appear they might have been able to give some relevant evidence I cannot speculate about what they may have said if they had been called. I can only act on the basis of the evidence that has been called and only that evidence.

  1. In this case given the common situation of a court facing conflicting accounts, both without corroboration, no independent witness, it being a case of word against word, the Court resolves the matter on the credibility[2] of witnesses before it. In a civil case, it is commonplace to take into account in assessing the credibility of a party/witness what that party/witness stands to gain or lose.

    [2] Excelerate Technology Ltd v Cumberbatch [2015] EWHC B1, contain important observations about the way in which judges assess the credibility of witnesses. See also Piper v Hales [2013] EWHC 81 (QB)

  1. As to memories, in Watson v Foxman (1995) 49 NSWLR 315 it was said at 319: “human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed.”[3]

    [3] Onassis and Calogeropoulos v Vergottis [1968] 2 Lloyd’s Rep 403 at 43, Lord Pearce explained these issues, and emphasised the ‘utmost importance’ of contemporary documents. See also Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) [2008] ATPR 42-240; [2008] FCA 810 at [41]

  1. It is for that reason that where there is a long lapse between the date of disputed conversations and the date of trial, courts tend to “place primary emphasis on the objective factual surrounding material and the inherent commercial probabilities, together with the documentation tendered in evidence.”[4]

    [4]Effem Foods Pty Ltd v Lake Cumbeline Pty Ltd (1999) 161 ALR 599; [1999] HCA 15 at [15]

  1. Memories of witnesses varied greatly.

WITNESSES

Wayne Riddell

  1. Wayne Riddell testified he is sole director of Drill Engineering & Pastoral Company Pty Ltd (Depco) which he calls DEPCO Drilling.

  1. The company has undertaken drilling services since 1963 and he bought it off his father-in-law in 1990.

  1. He started drilling in 1980 drilling water and deep water bores down to 1,000 metres from 100 ml to one metre diameter.

  1. The office is in Chappell Street, Rockhampton and employees about 60 people.

  1. He recalls around the end of 2013 it was very busy as there was a “pretty bad drought out west.”

  1. Darrin Melton works for him and in October/November 2013 he was drilling by operating equipment and supervise rigs.

  1. Mr Riddell indicates Melton was not involved with discussions with customers about the type of work and prices. Invoices or money was discussed only with the office or Riddell.

  1. He then gives evidence about different types of bores or holes. Mr Luke’s was constructed as an artesian bore.

  1. He describes a “dry hole” as when you park a drill rig, drill down to 60 or 100 metres and do not put a surfacing casing in and if the property owner sees no water coming out at 100 metres of whenever he wants you to go. It is exploratory. Artesian he indicates you have to cement a steel casing into the ground and can’t pull it out.

  1. He indicates if a landowner is expecting artesian water you would check maps and put 10 per cent or eight inch casing down 20 metres into consolidate ground which could be anywhere from 40 to 100 metres. You would construct six inch casing 20 metres off the artesian aquifer.

  1. The maps he refers to are Department of Natural Resources maps which are online.

  1. Riddell testifies Luke’s property is not known to be an artesian area but because they hit artesian water 2 kilometres away on Dan Luke’s sister Meg’s property, East Top, Luke should have had it. It did not as it flowed to the top of the ground but would not flow over the top.

  1. The area is around Clermont where Adani proposes a mine.

  1. Riddell also discusses different types of water flows and what people are looking for like stock water. Some people decide to case a hole at 100 gallons an hour because that is all they need, others will not take 1,500 as they want 2,500. It is up to the person, but 800 gallons can still do a lot of cattle.

  1. He explains the difference between flowing and non-flowing water. Non-flowing bores means water is pumped out of the ground and have one string of casing in them and cemented the top six metres with gravel packed and backfilled.

  1. Dan Luke had eight inch casings cemented into, he thinks, 40 metres, six inch cemented to 80 metres. They drilled to 160 metres trying to find artesian water but did not as the water pressure was not there.

  1. Dan Luke had a non-flowing hole as it never flowed over the top of the bore compared to a flowing bore where you put a cap on and a gate valve and can pump water 10 kilometres on your property going to your troughs under pressure.

  1. Riddell testifies Meg got a very good bore, a flowing bore doing around 15,000 gallons an hour, maybe 10,000 under very good pressure and could flow probably four, five kilometres from the bore under pressure.

  1. Luke hot a non-flowing bore as it did not flow over the top and had to pump it out.

  1. Riddell testifies about the costs of drilling. On Luke’s property he indicates you cement 2 strings as casing in. Every time they are cemented in, you have to wait 12 to 24 hours for the cement to cure before proceeding to the next stage. So with a 150 metre hole you can drill all day. In average country for a dry hole they can drill 120 to 200 metres a day. Sometimes you can only drill 30 metres. It depends how deep people wish to go. A normal hole takes a day or two days tops. To do an artesian like this takes 10 days.

  1. The standard cost, having done about 10 others in that area are around $65,000 and their competitors are around 95.

  1. Riddell says when they get a call from a customer the customer picks where they drill. They never give an assurance they will find water. The customer also picks how deep you drill although you talk to the customer about it.

  1. He says they do not use diviners as he has no faith in them. He does not know if Dan Luke used diviners.

  1. He also testifies you do not know when you start drilling what type of water flow you end up with. It is hit and miss.

  1. He describes the drilling on Meg’s place and she is lucky because the first hole drilled was a dry hole and next they hit an artesian water which they were not prepared for.

  1. Riddell indicates Meg received a quote for a stock nore.

  1. Riddell refers to a map, exhibit 1, with the yellowing indicating Meg’s bore and flags where other bores are with some artesian and some sub-artesian. He indicates that one flows and you do not surface case sub artesian. Again he states artesian take 10-12 days to do and the other one or two days – all depends on the depth – up to 100 metres one day, two hundred metres two days.

  1. Riddell also indicates from the map that Luke’s bore is within two kilometres across the creek from Meg’s bore.

  1. He testifies they had no choice but to construct surface casing and production casing for an artesian bore because of law required it and if you do not control the water flow it becomes uncontrollable and makes a huge mess.

  1. At Meg’s place, the water got out of control and had to cement if off as they had not constructed an artesian bore. Water was going everywhere and they had to get the rig off the site before it got completely sunk and bogged and they would never move it.

  1. He explained what they did at Meg’s place and the difficulty of retro fitting the hole. The quote for Meg did not cover that work.

  1. Mr Riddell then went through and indicated pricing in his letter/quote, exhibit 3, to Meg Albert.

  1. He testifies the second hole at Meg’s place they hit water around 80 metres and went to 90-95 metres. He charged 39 thousand and something for it.

  1. Riddell also says he authorised the work on Dan’s place and to construct an artesian bore because of the closeness with Meg’s bore 2 kilometres away.

  1. He says he had no discussion with Dan Luke as Darrin rang him who told him Dan wanted an artesian bore just like Megs. He does not recall any quote being asked for and nor was one given.

  1. Mr Riddell testifies that there was no mention of any budget before the work was started, only after a year later or something.

  1. If he had heard the budget was $18,000 and would not have started the job as it would not be worth it as he would spend more on materials than that.

  1. He does not recall any request for a written agreement.

  1. Mr Riddell then have evidence of the drill log, exhibit 4, filled out by Darrin with Wayne Riddell as driller and Darrin Melton as trainee driller. Riddell licence number 2856 is provided. He admits he did not actually do the drilling.

  1. He and Darrin were prosecuted by the Department of Natural Resources for drilling on the property and Meg’s property for not holding the right licence. They were fined and some work was ordered to be done on Meg’s property. Darrin has now got his licence.

  1. Mr Riddell evidence went through the rest of the drill log.

  1. He then testifies he rendered an invoice number 9253 dated 2 December 2013, exhibit 5, once the work was completed to Dan Luke. The charges he says were less than what he would normally charge. He said he felt sorry for them and gave a discount. The normal price is about 65 but worked out to 39. He has not been paid.

  1. As to the counterclaim, he first heard about that about four months after giving his invoice.

  1. No mention was made of it and property owners are expected to do their own earthworks. He would have not done the job if he knew he was to be charged for the earthworks or charge onto Meg’s because they do not do earthworks or rehabilitation of bore sites, just drill bores.

  1. He has not charged Meg for the earthworks.

  1. In cross-examination, Riddell was asked about his pleading in his statement of claim, paragraph three that on or about the 27 November 2013, Mr Luke requested a quote in respect of drilling and installation of a water bore on Bygana Station which is wrong and indicated “I haven’t got a clue”.

  1. He was also asked about other discrepancies in his pleadings.

  1. Riddell was cross-examined about his statement given to the Department of Natural Resources.

Darrin Melton

  1. Darrin Melton testifies he has worked for Depco Drilling for 13 years.

  1. He remembers a drilling job at Dan Luke’s property. Before that he testifies he was at East Top property which was Luke’s sister Meg’s property drilling stock water bores. He drilled three in total.

  1. The first one was 270 or 300 feet deep and intersected with salt water so the water was unusable. The second hole was just a shallow one and was a really bad close and had trouble with it. They had a break, came back and abandoned the site and moved 50 metres or so and the third hole became a flowing bore.

  1. They drilled 30 odd metres and put in seven inch steel welded casing to case out the clay and he and his offside drilled on 30 metres and then drilled on looking for water. As they got to 80 something metres he went to change the drill bit and pulled the hammer bit out it started to bubble up water. Water flowed within two hours after letting the client know and pulling out.

  1. They pulled out and moved the rig as it started to slide towards the pit and he went and spoke to his boss Wayne and asked what to do because the bore was flowing.

  1. They capped it and cemented it and drilled through the cement down to 66 metres and put five inch steel casing and pressure cemented it in so it was fully sealed and then punched through it and put a four inch liner in.

  1. Melton admits he had never drilled a flowing hole before.

  1. During the course of that job he says Meg spoke about possibly doing a bore on the adjacent property for her brother.

  1. He cannot remember exactly but thinks it was Meg that told him where to drill on Dan’s property.

  1. He heard mention of a diviner that had come over the property and picked the best spot he thought to drill on both Meg and Dan’s property. Mr Melton testifies that two people did the divining, Bruce Cobb and Bob Berry. He says a diviner picked the eventual flowing site on Meg’s property and Dan’s.

  1. Dan, Meg and the diviner were all adamant that water would flow on Dan’s prior to drilling.

  1. He spoke to Wayne about the type of hole that should be put down considering it was close proximity to the flowing bore on Meg’s place and then got the equipment for a flowing bore.

  1. Melton admits not having a licence to do a flowing bore.

  1. He cannot quite remember having a discussion with Dan about the type of bore that he wanted but indicates they were all adamant it was going to flow. He states with that you have to put measures in place to make sure they can control it.

  1. Although he cannot remember speaking to Dan before drilling, he definitely spoke to Meg and believes he got the information about the diviner from her.

  1. He thinks he first say Dan within a day or two when they started drilling the bore.

  1. They put steel casing down and cemented. Melton says Dan was around at that time when this was done and raised no concerns.

  1. He was asked about drilling a dry hole including putting steel casing down and Melton answered that you would have to because the first hole (Meg’s) got out of control and they were lucky they had steel casing at the top because if they did not it would be still flowing now.

  1. The work was done on the off chance they would get a flowing bore and from what he has now learnt about flowing bores in the last couple of years since this job and the rules say that is what you do.

  1. The rules he refers to are the Minimum Construction Requirement for Water Bores 3rd ed.

  1. Mr Melton referred to the publication regarding “expected hydrogeological conditions” and indicated he expected a free-flowing bore because of the close proximity of the other bore they had just drilled. He says he would have had a discussion with Mr Luke about the type of bore to be put down but does not recall having that discussion with him.

  1. Melton indicates Luke was there during various times of the construction of the bore and Melton says he had no discussions with him about the costs or Luke having a budget of $18,000.

  1. Melton states he has no idea about the costs of jobs or what the casing cost. He has no authority to give quotes or tell customers the cost of jobs and if asked would tell customers to contact the office.

  1. Mr Melton referred to the drilling log he completed. He indicates the certification “Driller: Wayne Riddell” is wrong and apart from that the document is true. He believes he filled the document out soon after finishing the job.

  1. Mr Melton indicates he hands the book in at the office where someone tears them out and send them off.

  1. In Section D, hole size, Melton has written drilling down to 168 metres and in Section E, Casing details wrote steel casing down to 78 metres.

  1. Melton says that is not something you would do for a dry hole. You would not put down steel casing.

  1. Section K, Description of Water-bearing beds he was asked about doing tests for water flow and indicates he did a V-notch test.

  1. The first reading at 98 metres there was 356 gallons per hour, the second reading at 168 metres 779 gallons per hour of potable (drinkable) water for stock.

  1. Melton states you would have to pump the water because it was not heavily free-flowing like Meg’s

  1. Melton says Mr Luke wanted a free-flowing bore, not a non-flowing bore and he guessed Luke was not happy.

  1. He does not recall speaking to Luke when they had drilled to 98 metres about a bill or about drilling to 150 metres as that fitted within Luke’s budget.

  1. He cannot remember any conversation with Luke about a quote given to Meg but saw it after this dispute arose. He has no idea what is in quotes as it is not his business.

  1. Melton testifies Luke never expressed any concern about the quality or standard of the work during the job.

  1. Melton was asked about when at Meg’s place when they had to cap the hole as the water was running onto the ground and Dan came over to help with a loader.

  1. Melton is not sure how that came about and not sure if he asked Luke.

  1. He states there was no mention Depco would be charged for the work on Meg’s property and no expectation Depco would be charged. If that were the case, Melton would have confirmed that with Riddell.

  1. Melton says at this time the water flow was under control on Meg’s place, but it was water logged. He states another brother, Blue, brought a dozer over to help cap the bore and did not charge for it.

  1. Melton states there was no mention of Dan Luke charging $275 an hour for his work.

  1. Melton also indicates he never heard of Lyrana being a company.

  1. Melton thinks he had a phone conversation with Luke but cannot remember the details.

  1. He testifies he gave no assurance to Luke he would get flowing water, or that Luke thought it was a dry hole.

  1. If it had been a dry hole, Melton says he would have written in Section K of the Drill Log “dry”.

  1. Melton indicates they stopped drilling at 168 metres because that was all the rods they had.

  1. He says he cannot remember having a conversation with Luke being unhappy with the hole; ever saying to Luke that the drilling services provided at Meg’s place produced one or more flowing bores of at least 2,000 gallons per hour; every saying Melton knew the region around the property, knew the underground conditions and what to expect from the undertaking being a flowing or non-flowing bore. He knew there was chance of a flow from Meg’s bore.

  1. In cross-examination, Melton indicates he cannot remember a lot of the discussions and events.

Daniel Ross Luke

  1. Daniel Luke testifies he owned a property in 2013. It was purchased by him, Megan Patricia Luke and Leanne Luke as a whole in 2005 as tenants in common and ran it separately by two companies each operating their own business, own dealings and own contracts.

  1. Lyrana Pty Ltd is trustee for the Luke Family Trust. Mr Luke is a director of the company with 50% shareholding.

  1. He sold the property in July 2015.

  1. He testifies he does not dispute a bore was drilled on his property.

  1. In August 2013, his sister phoned him and said she was getting a bore drilled. On 3 September she sent him an email which was a quote from DEPCO and said if he was interested they would be there in September.

  1. Mr Luke indicates he was attracted to the quote because of the pricing they gave and the pricing for a dry hole because he did not have a lot of money and it was a pretty food price for dry hole drilling.

  1. He understood dry hole drilling was where you got no water or some water but do not need casting as it is self-lubing and a dry hole may be wet but not sufficient water that could be used and you can seal it off and class it as a dry hole.

  1. The reason for having a bore drilled was for the longevity of the place with backup water.

  1. Towards the end of October his sister rang again and asked if he was interested in getting a bore done and she gave him numbers to ring which were Wayne and Darrin.

  1. He rang several times and never got an answer. He then rang his sister who said to ring Depco’s head office.

  1. He rang the office spoke to someone who said Cameron Sharpe would ring him back. He did not ring, he kept ringing and got through to Wayne Riddell who was out west – Blackall and could not do it.

  1. They spoke about a bore, dry hole and he had a small amount of money. Riddell said to ring Darrin Melton. He spoke to Melton and discussed he only had $18,000 and would like an exploratory bore. Melton said he would ring back closer to the time.

  1. He worked out because he only had $18,000 that he could get 150 metres which he calculated from Megan’s quote.

  1. Drilling commenced late October early November. He spoke to Melton before drilling and said “don’t start till I’m there” and by the time he got there Melton had two lengths of eight inch casing in,

  1. Luke raised the issue of money and his budget and says he raised it every day, sometimes a couple of times each day and never received a reply.

  1. He saw casings going down and cementing and he said regularly to Melton “make sure we stay to the budget $18,000”. Melton assured him they were.

  1. He did not receive a written quote and the drilling took two weeks and, during this time, kept going back to his sister’s place, 3.5 kilometres away.

  1. He was not aware his land had artesian water.

  1. After drilling, the bore started flowing but did not have to be plugged or capped and was left an open bore after he asked it be plugged. He said the bore was of no use, plug it and take your casing and go.

  1. When asked about the volume of water produced was told during the drilling 356 but then 800 at the end.

  1. The water was not suitable for his purpose as it was too far down and not enough volume. He was hoping to fill his dam 800 to a kilometre away.

  1. He became aware of a problem with Meg’s bore. Meg rang him to borrow his loader as they could not stop the water flowing from the bore. He said no problems although the arrangement was that each of their respective companies would charge each other. She took it and returned it not long after because it could not handle the job as it was too wet.

  1. He testifies when he came back Darrin asked him to put in a couple more mud puts at his bore which he did. He then parked the loader up. And Darrin had to go back and do something with Meg’s bore.

  1. He wanted to swap buckets on the loader but had trouble getting a pin out.

  1. One morning Darrin came by with his offsider and asked to borrow the loader and he said “Not really It’s not working having trouble with a pin”. Melton offered to help and Melton said he needed a hand over there to get back on my drill site and widen the track, getting through a sand patch and dig some more mud pit because he could not control the water and it was flowing too fast.

  1. He said to Melton he would be charged for the loader and work. He then went off and did the job and explains what he did.

  1. He issues a tax invoice to Depco Drilling on 14 February 2014 which he explains. He also indicates the delay in sending the invoice was that he was busy working.

  1. In cross it was put the invoice was sent charging Depco that he had no intention of charging Depco until after Luke received Depco’s invoice and he was unhappy with the outcome of the bore. Dan Luke disagreed with this proposition and he indicates he has not paid anything for the bore.

  1. This led to an exchange with Mr Whitten where Mr Luke became argumentative with Mr Whitten as he saw no relevance in the questions. In cross, Dan Luke admits he had the ability to send an invoice well before the time he did.

  1. Mr Luke at this time appears not to have liked the questioning and I had to advise him he should just answer the questions and his counsel will object if the questions were inappropriate.

  1. It then becomes apparent that his wife Leanne Luke was also a director of Lyrana and she was in charge of invoicing and could have easily produced the invoice.

  1. Mr Luke admits also in cross that he kept records of the work he did on the loader but they apparently have not been disclosed or brought to court  as he “didn’t think of it”.

  1. In cross he also admits the invoice sent for 44 hours work is an overstatement and be something less than 13 hours.

  1. He also admits he was given 100 litres of fuel by Depco and not charged for.

  1. He was also asked about his statement given to Department of Natural Resources (DNR) which contain nothing about charging Depco for work.

  1. He was asked about his knowledge of bores and indicated he had “not a hell of a lot”.

  1. He was also asked if he had a flowing bore and agreed that would significantly increase the value of his property, much more than the cost of the bore. It would also increase level of stock that could be kept on the property and therefore increase revenue.

  1. Mr Luke indicates he did not really need this bore as he had others and dams and had sufficient water for his 2,000 head of cattle.

  1. Mr Luke in cross says that he made the decision to engage Depco only after Meg had a flowing bore but not because Meg had flowing water.

  1. As to the ownership of Bygana, Mr Luke indicates he, Leanne and Megan own it as tenants in common with him and his wife having one-half shares and the other half owned by Megan.

  1. He indicates there is an arrangement where he has no interest in Megan’s property East Top and Megan has no interest in his as they are run as separate businesses. An agreement was drawn up by their solicitor dividing the land into their separate properties although that appears not to have been disclosed.

  1. When he sold out he had to freehold his to sell and that Megan received no money from the sale.

  1. It was put since he was an owner of the property he was selective when charging for work and when he does not which Luke agreed to.

  1. Luke was cross-examine about a statement he gave DNR. He admits he did not, in that statement indicate that he told Melton or Riddell every single day up until they had drilled 96 metres that he had a budget of $18,000. His statement indicates that only after they got to 96 metres at 350 gallons per hour that he mentioned a budget of $18,000.

  1. He agreed that over the years he and Hayden had spoken about the events.

  1. In re-examination he first testifies he does not know why in his statement to DNR that he had discussions before the bore go to 96 metres but later says in his opining they were focusing on the bore.

Hayden Luke

  1. Hayden Luke testifies in November 2013 he remembers having a bore drilled on his father’s property, Bygana Station.

  1. The driller was Darrin who he had contact with regularly. He and his father would go each day while he was drilling and have a discussion with him, check on the progress.

  1. He testifies his father would indicate the cost was $18,000 and no more and the bore depth of 150 metres.

  1. Hayden says his father would ask for daily costings of the work performed, how much the cost had accumulated, This occurred each day and that is how the conversation started.

  1. Darrin did not make any response but his assurances were the bore would not exceed the cost of $18,000 and it was unnecessary for him to provide the cost up to date.

  1. He recollects the drilling took place over five or six days.

  1. Hayden also testifies his aunt, Meg, asked to use the loader, a 980C loader. Her husband, Rusty, came over and took the loader and returned it saying it could not do the job that they needed it for.

  1. Then while Darrin was in the middle of drilling he came over to the Bygana homestead and asked if Depco could hire the loader. He and his father responded it was not possible as they were in the middle of changing over the bucket and having trouble fitting the pins. Darrin offered to help refit the bucket so that Depco could use the machine and they agreed.

  1. The bucket was refitted and the machine was used to clear tracks to dig pits to capture water that was overflowing from the bore. This occurred the whole time their bore was being drilled; over several days. Hayden and his father operated the machine, he operated it about a third of the time.

  1. He recalls his father digging pits and clearing tracks.

  1. He indicates he may have operated the machine for approximately 10 hours as well as running a support vehicle, fuel etc.

  1. In cross-examination Hayden was asked if her had an expectation of being paid and indicates no as it was assisting family.

  1. Hayden testifies that Darrin said “could we hire the loader?” and denies it was said differently although he says actual costs or charges was not discussed other than a payment for its use.

  1. He later states Darrin asked to hire the loader and it was discussed at the end of the work there would be payment of some sort.

  1. In cross he states Darrin and his offside helped with the bucket. He also states that the loader was used for about 30 hours from his recollection. He does not know if his father kept a diary.

  1. He has worked on his aunt’s property before as a general station handler for eight months.

  1. Hayden testifies they had no idea what the cost was at any stage and that it was made clear after they had arrived and started drilling that the cost is going to be over $18,000 to stop. Hayden says this was said once.

  1. Hayden initially denies discussing the evidence with his father and then indicates he has.

  1. When asked specifically of that discussion, Hayden denies they have discussed:

·    The daily costs and depths of the drilling

·    His father telling Darrin to stop once it got to $18,000

·    Requesting daily costings from Darrin

·    The conversation Darrin could hire the loader

·    Darrin helping to refit the bucket

  1. They did discuss Darrin giving assurances that the cost would not exceed $18,000.

  1. When put that he had discussed these matters with his father, Hayden answers “I don’t recall” and later accepts that he has discussed these matters with his father.

DISCUSSION

  1. Handshake deals work well – till they do not as parties may have a different understanding and as the parties have found out litigations costs increase as the parties have to battle over what their agreement said, if there was one. For that reason a witness, however honest, rarely persuades a Court that their present recollection is preferable to that which was taken down in writing. Therefore, contemporary documents are always of the utmost importance.

  1. Where a contract is important it is prudent to put all terms in writing as this will enable both parties to understand their rights and liabilities, and provide evidence of the terms of the agreement if a dispute arises.

  1. As to the witnesses I make the following findings as to credit.

  1. Wayne Riddell, I though, was an honest witness. His evidence is limited as he had little to do with many discussions and the drilling itself.

  1. Darrin Melton could not remember a lot of the events and conversations. He is a driller and that was his job. I though he did the best he could from what he remembered and was honest. Without wishing to disparage or demean Darrin at all, from the time he spent in the witness box, the Court can conclude that Darrin is a single minded man who knows drilling, not other parts of the business.

  1. Daniel Luke at times did not impress me as a witness. Mr Luke’s evidence at times was surrounded by some vagueness and uncertainty. At times he was hesitant and nor forthright, was argumentative in that he did not want to answer questions he though irrelevant.

  1. For example the following took place:

“And she asked you that, didn’t she, and you decided yes, only after you knew that Meg had got the flowing water?---I see that – I don’t see that’s relevant to my decision.

BENCH:         Just answer the question”

And

“You knew the type of charge that you were doing to employ her hour. You knew both of these things. As soon as the job had been undertaken and finished on the 15th of November, didn’t you?--- Your Honour, may I speak?

BENCH:         No?---No

MR WHITTEN:          Just answer the question?--- That is correct.

Yeah.

BENCH:         Your counsel will object if it’s required to do so, but at the present time you answer the questions of Mr Whitten. If your counsel considers it’s inappropriate, I’m sure he will object.”

  1. Daniel Luke’s invoice to Depco makes it clear that he has a propensity to exaggerate. I am satisfied that there was a failure to engage in the process of disclosure in this case by Mr Luke. The difficulty for Daniel Luke is that, even assuming in his favour that he may not have been deliberately exaggerating the hours worked, the Court cannot be satisfied that, taken by itself, his recollection is likely to be accurate given the passage of time, the commercial advantage or gain and his lack, at times, of being frank and open with a tendency to answer questions that best suited his case. What may well be kernels of truth are subsumed in the noise of hyperbole.

  1. I am at a loss as to why he expected before drilling to be paying for a dry hole as he had not received a quote and the expectation was for a flowing bore. That is unrealistic considering the nature and circumstances that had evolved on Meg’s place. A reasonable and prudent person would be on notice that if flowing water was found not far from where he was drilling then the chances are the same would occur and the driller would take all necessary precautions to avoid what happened on Meg’s place. Melton, in fact, was required to do so even if he did not have the appropriate licence to drill.

  1. By his own admission Hayden Luke lied about talking to his father about the evidence. Where a witness has been found to be lying about one thing that does not automatically mean that they are to be disbelieved about everything else. The Court is not bound to accept or reject a witnesses’ evidence in its entirety. However that conduct is the basic reason for the Court’s conclusion that Hayden’s evidence is generally not able to be accepted unless it is inherently credible or corroborated by independent testimony or is otherwise against interest.

  1. I find that Daniel Luke together with his wife, Leanne Luke and Megan Luke owned a rural property west of Clermont as tenants in common with half share to Daniel and Leanne Luke and half share of Megan Luke in 2013. The parties had entered into an arrangement about the land splitting it between Megan Alberts (Luke) who called her property East Tops and Leanne and Daniel Luke calling their property Bygana.

  1. Depco Engineering & Pastoral Co Pty Ltd, amongst other things, drilled bores including water bores. Mr Riddell is a director of that company and Darrin Melton is an employee.

  1. Bygana was suffering dry conditions at this time.

  1. Depco had sent Ms Megan Alberts a letter dated 3 September 2013 which contained rates for drilling various types of bores. There is some issues about whether it is a quote as a quote is a statement of the price at which a business will supply goods or services. The letter is a quote that sets out the rates for providing a service. When Meg accepted this quote, she formed a contract.

  1. Ms Alberts agreed to the drilling of a bore and ended up being a flowing artesian bore which was unexpected  as the drilling was not set up and constructed for that.

  1. After seeing Meg Albert’s quote, Dan Luke decided to enquiry about getting a bore.

  1. He first tried ringing Wayne Riddell, then Depco’s office and then finally spoke to Riddell who put him on to Melton.

  1. Mr Luke contacted Depco after Meg Alberts told Mr Luke Depco had “struck water” at the place she had requested to be drilled. This was a free flowing bore. Dan Luke spoke to Melton and spoke to Melton about drilling.

  1. It is probable that arrangements were that that Luke requested Melton not to start drilling until he was there. That is because I would infer that Melton drilled in the right spot.

  1. Melton started drilling in Dan Luke’s bore on 29 October 2013 at a location Mr Luke chose and first Dan Luke the next day. Drilling ceased on 15 November 2013. Depco drilled a bore down to 168 metres with water struck at 98 metres at and 168 metres as per the drill log, exhibit 4. The water was potable (drinkable) and the bore tested as providing 779 gallons per hour. It was a non-flowing bore.

  1. The design and construction of the bore was completed in anticipation of artesian water being struck. The drilling priority for artesian bore construction is the control of artesian pressure and flow as per the “Minimum Construction Requirements for Water Bores in Australia”.

  1. Depco invoiced on 2 December 2013 for drilling services in the sum of $43,523.70 (including GST).

  1. The account remains unpaid.

  1. Mr Luke counterclaims for the work he did around Meg’s bore which turned out to be somewhat of a disaster as the bore had to, amongst other things, be cemented and capped as water was flowing everywhere it seems and control measures where needed.

  1. There was no quote provided to Mr Luke by Depco and there is no written contract.

  1. In Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, French CJ, Nettle and Gordon JJ said: “In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.”

  1. It may have been that Luke indicated to Riddell he had a budget of $18,000 in their first conversation. That may have covered the cost of a dry well.

  1. But it all changed when water was struck at Meg Albert’s bore with flowing water.

  1. I accept that because of the closeness to her bore that the design and construction of an artesian bore was necessary on Mr Luke’s property because of the chance of a flowing bore. That is both logical, sensible and realistic. The rate of charge for that type of bore is far more expensive than drilling for a dry bore. Meg’s quote did not include rates for a flowing hole or artesian bore.

  1. On the whole of the evidence I am satisfied Daniel Luke was hopeful he would strike water. On hearing the result of Meg’s bore he was hopeful of the same result. From that a reasonable and prudent person would realise that it was going to be more expensive than a “dry hole” or exploratory hole.

  1. I accept Melton’s evidence that he had a phone discussion with Mr Luke that was limited to his interest in a bore and could Depco did it. He did not have authority and knowledge of prices and as he says would have referred Luke to Riddell or the office.

  1. I also accept that Luke never asked for a daily running total of the costs as Melton did not know how to calculate that and no authority to discuss rates and costs. He is a driller. Anything outside the actual drilling like costs and accounts, as he says, he would have referred to “head office”.

  1. I find that Depco’s claim is not limited to $18,000 as it was not a term of the contract taking into account the circumstances addressed by the contract as I have discussed and the objects to be secured by the contract in an expectation of a flowing bore.

  1. The express terms of the contract were that

(a)        Depco performed the work to construct an artesian bore, no matter whether water was found as a result of a flowing bore on Meg’s place;

(b)        Mr Luke would pay the fees charged.

  1. Nor is there an implied term in the contract as:

    (i)          It is not reasonable and equitable because Depco had to construct the bore in line with the “Minimum Construction Requirements for Water Bores in Australia”

    (ii)        It is not “obvious that it goes without saying” because of the design and construction of an artesian bore and as there was no quote and Meg’s quote had no rate for an artesian bore.

  2. Depco performed the works and is entitled to their money.

Is the contract as formed or as performed prohibited by statute or public policy?

  1. There is no written contract.

  1. As to implied term that the driller had the necessary licenses, I note that the sample Contract documentation, namely Water Bore Agreement which is part of exhibit 10 – Minimum Construction Requirements for Water Bores in Australia 3rd edition has the following term:

“2.3 Permits etc.

Obtain and comply with all municipal shire and governmental permits or licenses and any other requirements at law, including any statutory obligations, in relation to the works, except for those specified herein to be the responsibility of the Drilling Contractor”

  1. That clause to me would be implied in any drilling contract and would be necessary to be implied to give business efficacy to the contract. Whilst it may be said there is a deficiency in the expression of the consensual agreement caused by a failure of the parties to direct their minds to a particular eventuality and make explicit provision for it, it is implied as:

1.          It would be just and equitable;

2.          It is necessary to give business efficacy to the contract;

3.          It goes without saying;

4.          It does not contradict any express term in the contract.[5]

[5]Codelta Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337.

  1. In Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104, French CJ, Nettle and Gordon JJ said:

“In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.”

  1. Mr Melton did not have the appropriate licence to undertake the drilling works.

  1. The Water Act 2000, at the relevant time, provides:

“302 Conditions of water bore driller’s licence

(1)   The water bore driller’s licence is subject to the conditions – (a) prescribed under a regulation, including the period for which the licence has effect; and (b) the chief executive may impose for a particular licence. (2) Without limiting subsection (1), the conditions may limit the types of equipment and drilling methods the licence holder may use.”

  1. The Water Regulation 2002, at the relevant time, provides:

“23 Conditions of water bore driller’s licence – Act, section 302

For section 302(1)(a) of the Act, the following are the conditions for a water bore driller’s licence – (a) water bore drilling activities that tap an aquifer in the sediments of an artesian basin must be carried out in accordance with ‘Minimum standards for the construction and reconditioning of water bores that intersect the sediments of artesian basins in Queensland’, published on the department’s website; (b) other water bore drilling activities must be carried out in accordance with ‘Minimum construction requirements for water bores in Australia’, published on the department’s website; (c) if a development approval or compliance permit under the Sustainable Planning Act 2009 is required to carry out particular water bore drilling activities, the licence holder must see the approval or permit and carry out the activities in accordance with the approval or permit; (d) self-assessable development that is operational work mentioned in the Sustainable Planning Regulation 2009, schedule 3, part 2, table 4, item 1(b)(iii), must be carried out in accordance with the code approved for the development under section 62; (e) the licence has effect for a period of 10 years. Editor’s notes – 1 The department’s website is. 2 A copy of a document mentioned in paragraph (a) or (b) may also be obtained from the department’s head office in Brisbane.”

  1. Minimum Construction Requirements for Water Bores in Australia 3rd Ed provides:

“Driller’s Classification System Licence classes Class 1 – This licence is restricted to drilling operations in non-flowing (sub-artesian) single aquifer systems. Class 2 – This licence, in addition to operating in Class 1 conditions, permits operations in non-flowing (sub-artesian) multiple aquifer systems. Class 3 – This licence, in addition to operating in Class 1 and Class 2 conditions, permits drilling operations in flowing (artesian) aquifer systems.

Mandatory Requirement 4.1 Only drillers licensed for the class of work proposed and endorsed for the drilling method to be sued shall carry out work on a water bore unless state or territory legislation provides an exemption.”

  1. The Water Act 2000 also relevantly provides:

“816 Unauthorised water bore activities (1) An individual must not carry out any of the following activities unless the individual is licensed under chapter 2, part 10 to carry out the activity – (a) drill, deepen, enlarge or case a water bore; (b) remove, replace, alter or repair the casing, lining or screen of a water bore; (c) decommission a water bore. Maximum penalty – 500 penalty units.

  1. The Defendant asserts that the consequences of the contravention of section 816(1) is that the agreement to drill a water bore is void and unenforceable by reason of its illegality.

  1. The principles applicable to the enforcement of contracts whose making or performance is illegal were summarised in the majority judgment in Miller v Miller (2011) 242 CLR 446 at [24]-[26]:

·    “It has long been established that a contract whose making or performance is illegal will not be enforced. Often enough, however, the statute in question does not expressly prohibit the making of the relevant contract and does not expressly prohibit its performance. Whether such a statute “prohibits contracts is always a question of construction turning on the particular provisions, the scope and purpose of the statute”. Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd identifies considerations of the kind that are engaged in the task of statutory construction.

·    But in addition to, and distinct from, cases where a statute expressly or impliedly prohibits the making or performance of a contract, are cases “where the policy of the law renders contractual arrangements ineffective or void even in the absence of breach or a norm of conduct or other requirement expressed or necessarily implicit in the statutory text”. In cases of the latter kind the refusal to enforce the contract has been held to stem “not from express or implied legislative prohibition but from the policy of the law, commonly called public policy. Regard is to be had primarily to the scope and purpose of the statute to consider whether the legislative purpose will be fulfilled without regarding the contract as void and unenforceable”.

·    The same kinds of question have been identified as arising in relation to allegations of illegality in the constitution or performance of a trust. In Nelson v Nelson, Deane and Gummow JJ said that authorities in contract law (including Yango) suggest drawing distinctions between three cases:

(i)          An express statutory provision against the making of a contract or creation or implication of a trust by fastening upon some act which is essential to its formation, whether or not the prohibition be absolute or subject to some qualification such as the issue of a licence;

(ii)        An express statutory prohibition, not of the formation of a contract or creation or implication of a trust, but of the doing of a particular act; and agreement that the act be done is treated as impliedly prohibited by the statute and illegal; and

(iii)        Contracts and trusts not directly contrary to the provisions of the statute by reason of any express or implied prohibition in the statute but which are “associated with or in furtherance of illegal purposes”. The phrase is that of Jacobs J in Yango.

Deane and Gummow JJ said that, I the last of these three kinds of cases, “the courts act not in response to a direct legislative prohibition but, as it is said, from ‘the policy of the law’”. (Citations omitted).

  1. Few statutes provide express guidance as to the consequences of illegality during performance of the contract. The Courts are normally required to determine whether a contract has become illegal during performance by looking to the purpose of the statute in question and considering whether the purpose would be frustrated by giving effect to contracts which has been performed in a manner forbidden by the statute. The Court may take into account the effect on third parties in deciding whether the object of a statute required a contract in breach of the statute to be illegal.

  1. In other words, if the statute imposes a penalty for contravention of its provisions, then it is necessary to construe the statute to determine if the legislature intended the penalty to be the only consequence of contravention, or whether the legislature intended that the contract should also be void and unenforceable as a consequence of the contravention. As Mason J pointed out in Yango Pastoral Company v First Chicago, at p 429”…[t]here is much to be said for the view that once a statutory penalty has been provided for an offence the rule of the common law in determining the legal consequences of commission of the offence is thereby diminished…”.

  1. Therefore should the effect of illegality be placed in the contract or in the person?

  1. In general, unless a bargain necessary contemplates an illegal act, it is not unenforceable and if it is later performed in a way that involves some slight violation of law, not seriously injurious to the public order, the person performing may recover on his bargain.

  1. It is said such a situation may well result in increased litigation, a premium being placed on a contracting party’s ingenuity in discovering some illegality in the other party’s performance. It may indeed prove advantageous to refuse to perform contractual obligations when illegality in the other party’s performance has been found because if the courts decide that the illegality is enough to vitiate the contract, the Defendant realises all the contractual benefits without suffering any detriment other than payment of legal fees.[6]

    [6] Contracts – Illegal Performance as Bar to Recovery – Public Policy – McConnell v Commonwealth Pictures Corporation, John B. Deady, Boston College Law Review, Volume 2, Issue 1, Article 24.

  1. The Water Act 2000 in section 2 sets out the purpose of the Act including sustainable management of Queensland’s water resources. The reason, I discern from the Act, to have licenced persons perform drilling is to have properly qualified people so as to protect groundwater resources from contamination, deterioration, and uncontrolled flow associated with poorly constructed bores, and on the construction of bores to provide a good water supply.

  1. My view is to treat the regulatory statute as imposing its own penalty and not requiring in addition that the whole contract be declared unenforceable, and in this sense the statutory violation may be termed incidental or collateral to the performance of the contract. Not having a particular licence did not have an effect on the performance of the contract.

  1. Alternatively, an unjustified windfall can provide grounds to override the Court’s concern about illegality. In this case, the unjust windfall outweighs the alleged illegal contract. See McHugh and Gummow JJ at 189 CLR 215 at 229.

  1. For these reasons the contract is not void or unenforceable because of illegality.

Who is the correct Defendant?

  1. A Defendant may be an individual or corporation. A Plaintiff should sue the correct person or risk having their claim dismissed. The rule of privity of contract allows only the parties to the contract to acquire rights and liabilities under that contract. Under the doctrine of undisclosed principal, the principal may be sued or may sue on the contract that is made by its agent, despite the fact that upon strict interpretation, the agent is the contracting party and the undisclosed principal is a third party to that contract.[7]

    [7] Andrews v Nominal Defendant (1968) 89 WN (Pt 2) (NSW) 113 at 124. See F Reynolds, Bowstead on Agency, 15th ed Sweet & Maxwell, London, 1985, p 313.

  1. In this case the Defendant argues that correct Defendant is Lyrana Pty Ltd as it was that company that incurred any debt owed to Depco.

  1. Mr Luke’s evidence in chief made no reference to telling anyone from Depco that Lyrana was engaging Depco. The nature of the exchange between the parties leading up to the drilling of the bore to me supports this view as it was more about the drilling to be performed than who was liable for payment. It is only after Dan Luke sent the invoice to Depco that it becomes apparent that Lyrana is claimed as the entity engaging Depco.

  1. If a person does not represent they are acting as an authorised officer or agent for a company to a third party in a transaction or deal, then they may well be personal liable for any debt incurred.

  1. That is the position I find in this case.

  1. Mr Luke is personally responsible for the debt.

COUNTERCLAIM

  1. Earthworks are the responsibility of the landowner not the driller.

  1. I am not satisfied on the balance of probabilities that Melton agreed that Depco would hire the loader.

  1. Melton, in my opinion, would have referred being charged to Riddell or the “office” as he full well knew he did not have authority to bind Depco.

  1. There is a lack of proof with a failure to produce documentation and evidence including a conflict between Daniel and Hayden Luke’s evidence.

  1. There is no satisfactory explanation as to why it took so long to issue an invoice when Daniel Luke’s evidence is his wife could easily have done it and it does appear to be in response to the invoice he received from Depco.

  1. It also became clear from the evidence that the number of hours worked had been significantly exaggerated and there was an absence of disclosure.

  1. Nor do I believe his answer to the following exchange:

“So you’re saying that if Depco walked off that job, then you would have just let Meg have this water running around everywhere?---Absolutely.”

  1. Mr Luke received 100 litres of fuel free from Depco. That to me indicates there is an inference to be drawn that there was no agreement as to the hire of the loader but that Mr Luke was helping his sister and Depco out.

  1. The counterclaim is dismissed.

CONCLUSION

  1. For the reasons above, I give judgment for the Plaintiff against Daniel Ralph LUKE for the claim of $43,523.70.

Mark Morrow

Acting Magistrate


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Malec v JC Hutton Pty Ltd [1990] HCA 20
Malec v JC Hutton Pty Ltd [1990] HCA 20
Malec v JC Hutton Pty Ltd [1990] HCA 20