Energy Resources Ltd v Cactus Wellhead Australia Pty Ltd
[2023] WASC 475
•18 DECEMBER 2023
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: ENERGY RESOURCES LTD -v- CACTUS WELLHEAD AUSTRALIA PTY LTD [2023] WASC 475
CORAM: HOWARD J
HEARD: 12 DECEMBER 2023
DELIVERED : 18 DECEMBER 2023
FILE NO/S: CIV 1620 of 2023
BETWEEN: ENERGY RESOURCES LTD
Plaintiff
AND
CACTUS WELLHEAD AUSTRALIA PTY LTD
Defendant
Catchwords:
Summary judgment application - Summary judgment application turns on a finding of fact - Not sufficient certainty as to outcome if it went to trial - Application dismissed
Legislation:
Nil
Result:
Application dismissed
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr M L Bennett |
| Defendant | : | Mr T J Porter |
Solicitors:
| Plaintiff | : | Bennett |
| Defendant | : | HWL Ebsworth Lawyers (Perth) |
Case(s) referred to in decision(s):
Eng Mee Yong v Letchumanan [1980] AC 331
Lepoidevin v State of Western Australia [No 2] [2021] WASCA 19
Pisano v South Metropolitan Health Service [2023] WASCA 80
Sutton Investments Pty Ltd v Realistic Investments Pty Ltd [2017] WASCA 14
HOWARD J:
The plaintiff's claim in overview
By a writ endorsed with a statement of claim, the plaintiff commenced these proceedings against the defendant on 12 June 2023.
The plaintiff filed an amended statement of claim on 25 July 2023 (ASOC).
It is alleged, and is common ground, that the plaintiff and defendant were parties to a written General Supply Agreement entered into in July 2020 (Agreement).
As I understand it, it is further common ground that:
1.pursuant to the Agreement the defendant was to supply certain goods to the plaintiff;
2.the Agreement provided specifications for the goods to be supplied and those specifications included drawings in the Agreement;
3.pursuant to the Agreement, the defendant supplied a 'Primary Wellhead System' to the plaintiff;
4.part of that system supplied was a '5-1/2" casing hanger'; and
5.in September 2021, the plaintiff commenced drilling an exploration well using the Primary Wellhead System, including the 5-1/2" casing hanger.
A further, separate matter which appears to be common ground is that the 5‑1/2" casing hanger was sent to a third party, Bossong Engineering Pty Ltd (Bossong), to have a 'pup joint' fitted to the bottom of the casing hanger. The broadly agreed chronology was that the defendant had finished its work on the casing hanger and it was then sent to Bossong for the fitting of the pup joint. The combined piece was then supplied to the plaintiff without going back to the defendant.
The plaintiff further alleges that:
1.a cementing operation which was part of the drilling of the exploration well in September 2021 failed: ASOC [10]; and
2.the failure occurred because the internal diameter of the 5-1/2" casing hanger had not been bored in accordance with the drawings in the Agreement and was too small: ASOC [11].
Paragraph 14 of the ASOC pleads:
Breaches of contract
In the premises of the matters pleaded at paragraphs 7, 10, 11 and 12 above, the defendant:
14.1breached the term of the [Agreement] pleaded at paragraph 6.2 above by failing to supply a Primary Wellhead System that complied with the requirements of Drawing 1;
14.2breached the terms of the [Agreement] pleaded at paragraphs 6.2 and 6.3 above by failing to supply a Primary Wellhead System that provides a 25-year service life expectancy for the Lockyer Deep-1 well;
14.3breached the term of the [Agreement] pleaded at paragraph 6.5 above, by failing to ensure that the Primary Wellhead System supplied was fit for purpose by failing to ensure it was manufactured strictly in accordance with the specifications in Drawing 1;
14.4breached the term of the [Agreement] pleaded at paragraph 6.8 above, by supplying a Wellhead System that did not conform with the terms of the [Agreement] and was unsatisfactory; and
14.5breached the term of the [Agreement] pleaded at paragraph 6.9 above, by failing to manufacture and supply the Primary Wellhead System in accordance with a FAT procedure that demonstrated functionality of the system prior to its shipment.
The ASOC goes on to plead that, as a result of breaches pleaded in [14], the plaintiff:
1.had to, and did, undertake repair work to rectify the damage caused: [15];
2.suffered loss and damages, being the cost of rectifying the damaged Primary Wellhead System: [16];
3.by reason of the repairs undertaken to the damaged Primary Wellhead System, it has been compromised: [17]; and
4.by reason of the matters pleaded in [14], [15] and [17] above, the plaintiff has suffered and will continue to suffer loss and damages: [18].
The Prayer for Relief then is principally for damages for breach of contract, and interest and costs: Prayers for Relief A - C.
The defendant has not yet filed a defence.
The application by chamber summons filed 26 July 2023
The plaintiff seeks summary judgment 'for breach of contract as set out in pars 14.1 to 14.5' of the ASOC.
The plaintiff relies on the affidavits of:
1.Darrell Paul Girgenti made 26 July 2023 with attachments DPG-1 - DPG4 (First Girgenti Affidavit);
2.Darren Ashley Hardy made 26 July 2023 with attachments DAH-1 - DAH9;
3.Mr Girgenti made 10 November 2023 with attachments DPG-5 - DPG-22 (Second Girgenti Affidavit).
The defendant relies on the affidavits of:
1.Jeffrey Wallace Rooney made 12 October 2023 with attachments JR-1 - JR20; and
2.Jared Denis Wiencke made 27 October 2023 with attachments JW-1 and JW-2.
The principles to be applied
As the Court of Appeal said in Sutton Investments Pty Ltd v Realistic Investments Pty Ltd [2017] WASCA 14 [24], the principles to be applied on an application for summary judgment are well established:[1]
Summary judgment will be granted only when there is no real question to be tried. The power to order summary judgment is one that should be exercised with great care. It is only in the clearest of cases, when there is a high degree of certainty about the ultimate outcome of the proceedings that went to trial, that summary judgment ought properly be granted. (case citations have been omitted)
[1] See also Pisano v South Metropolitan Health Service [2023] WASCA 80 [52].
The authorities are plain that it is not for the Court to resolve contested questions of fact in a summary judgment application. The Court in Sutton Investments described whether the defendant had 'an arguable defence' as not being 'a high threshold': [26].
Having said that, I am mindful of the oft‑quoted passage from the Judicial Committee of the Privy Council in Eng Mee Yong v Letchumanan [1980] AC 331, 341 E - G:
Although in the normal way it is not appropriate for a judge to attempt to resolve conflicts of evidence on affidavit, this does not mean that he is bound to accept uncritically, as raising a dispute of fact which calls for further investigation, every statement on an affidavit however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself it may be.[2]
[2] As recently stated in Pisano v South Metropolitan Health Service [2023] WASCA 80 [52(5)].
The principal factual question
The principal factual question raised in this application is whether the internal diameter of the 5-1/2" casing hanger was too small and, so, not in accordance with the relevant drawing in the Agreement. More specifically, am I satisfied to the requisite degree of certainty that there is no relevant question to be tried as to the internal diameter of the casing hanger.
The plaintiff, for its part, relies on the following:
1.Field Performance Report reference W-4876 Rev-0, prepared by defendant's Quality Manager, Ajith Vetil, dated 8 November 2021 which is DAH-7 at page 170 of Mr Hardy's affidavit;
2.Field Performance Report reference W-4876 Rev-1, also prepared by Mr Vetil, dated 8 November 2021 which is DAH-8 at page 178 of Mr Hardy's affidavit;
3.report prepared by Baker Hughes dated 25 October 2021 which is DAH-5 at page 159 of Mr Hardy's affidavit;
4.report prepared by Swan Fabricators dated 15 October 2021 which is DAH-6 at page 168 of Mr Hardy's affidavit;
5.a spreadsheet said to contain a digital summary of the raw measurement data gathered by Baker Hughes for the purposes of its report - this 212 page document was DPG‑16 at page 78 of the Second Girgenti Affidavit; and
6.a 'log' of data collected which appeared to be created by an engineer at Baker Hughes and which was attached as DPPG-17 at page 219 of the Second Girgenti Affidavit.
In respect of each of the above documents, there was scant compliance with O 37 r 6 in the adducing of the documents by Mr Hardy and Mr Girgenti respectively.
Additionally, the plaintiff placed particular reliance on a document headed 'Casing Hanger Dimensions Verification Form' which was DPG‑18 at page 291 to the Second Girgenti Affidavit and JW‑1 to Mr Wiencke's affidavit. That Dimensions Verification Form was signed by Mr Wiencke (and an officer of the plaintiff).
In Mr Wiencke's affidavit he described at [54] - [60] the process he followed in making the measurements which are recorded on the Dimensions Verification Form.
The plaintiff contends that the two Field Performance Reports prepared by Mr Vetil (DAH-7 and DAH-8), (the defendant's Quality Manager), were 'admissions' by the defendant of the facts relied on by the plaintiff to establish the breaches of contract: indeed, the plaintiff contends that they are 'a clear admission of liability on behalf of the defendant of its failure to comply with the specifications in the [Agreement] and supply Defective Goods'.[3]
[3] Plaintiff's written submissions dated 10 November 2023 [15].
The plaintiff contends that the above reports and documents establish sufficiently (for the purposes of summary judgment) the pleaded breach by reason of the internal diameter being too small.
An asserted factual defence was identified in [18(b)], [19] and [20] of the defendant's written submissions:[4]
18(b)At [39]-[70] of his affidavit, Mr Rooney deposes to the Factory Acceptance Testing (FAT) process that was designed and applied in order to ensure that the Primary Wellhead System met the requirements of the GSA. During the FAT process, Mr Rooney and Mr Neil Carr (a third party inspector appointed by, or on behalf of, ERL) specifically verified that the hanger dimensions matched the drawing for the casing hanger. This was an express step of the FAT procedure. Mr Rooney measured the narrowest section of the casing hanger and recorded that it was 'satisfactory'. Mr Rooney's evidence is that he would not have recorded the measurement as 'satisfactory' if it was less than 4.66" (Rooney Affidavit, [59]-[64]).
19.This is the only evidence (on this application) of the internal dimension of the narrowest part of the casing hanger at the time it was delivered to ERL. It is evidence that the casing hanger was checked and measured, and found to be compliant, at the time it was delivered in June 2021.
20.This is the version of events CWA advances. It supports CWA's defence of the allegation of non-compliance. The application should be decided on the basis that CWA's version of events would ultimately be accepted.
[4] Defendant's written submissions dated 15 November 2023.
There is a further factual matter raised in the defendant's evidence which is said may ground a defence. Mr Wiencke deposes to removing the 'Blow Out Preventer' on the Primary Wellhead System and then inspecting the 5‑1/2" casing hanger. He then deposed in his affidavit at [52](b), (c):
b.The point where the Casing Hanger connected to the Pup Joint looked like it was on a slight angle, which could affect the internal diameter of the Casing Hanger and could cause a restriction. At the time of inspection, I considered this to be the cause of the cement plugs jamming.
c.It looked to me like the cement plugs had been caught up near the bottom of the Casing Hanger, at the point where the Casing Hanger connected to the Pup Joint (being where I saw the connection on an angle). This is because the Casing Hanger appeared to me to be the most damaged towards the bottom, which suggested to me that that was the location where the drill bit sat as it drilled through the cement plugs.
Consideration
Broadly, whether the plaintiff has made good its case for summary judgment may be conveniently considered under four broad headings, being:
1.the 'independent expert' reports of, in particular, Baker Hughes, on which the plaintiff placed great reliance;
2.whether the defendant had admitted the breaches by its Field Performance Reports and the Dimensions Verification Form (being DPG-18 and JW-1 respectively);
3.whether the defendant had raised factual matters, which prevented a high degree of certainty being reached as to the ultimate outcome of the proceeding; and
4.whether there are other considerations against the grant of summary judgment.
'Independent Expert' reports
The plaintiff, in its amended reply submissions dated 24 November 2023, asserts effectively that this Court ought to accept the 'reliable expert evidence submitted by the plaintiff': [14].
As noted, by the Second Girgenti Affidavit, the plaintiff sought to adduce what it said was the underlying factual basis for the Baker Hughes report.
That is not, obviously enough, the normal way in which expert opinion evidence is put before the Court.
The plaintiff sought to contend at the hearing, without counsel's usual conviction, that the documents were not expert evidence. I do not accept that submission, if it is maintained. On their face, the documents rely on arcane (and I infer specialist) knowledge.
The plaintiff says that the Baker Hughes report, the Swan Fabricators report, and the spreadsheet and log of data gathered by Baker Hughes (DPG‑16 and DPG‑17 respectively) may be adduced as business records.
I think the difficulty with that submission is that on a summary judgment application while, technically, those documents may be admitted into evidence as business records (of some business), it is difficult for me to accept them as expert opinions, in their current form, going to the contested factual question.
The six documents referred to in [18] above do not speak for themselves.
The plaintiff, no doubt to attempt to overcome this issue, prepared an aide memoire which combined diagrams and data from different parts of the plaintiff's evidence over some 11 pages.
While a valiant effort, it seems to me not to overcome the difficulty that, in particular, the Baker Hughes report (and the other five documents in [18] above) is being relied on, effectively, as ipse dixit.
The 'independent expert' reports do not set out: the author, nor their qualifications; instructions received; assumptions made; nor methodology adopted. They remain, on their face, arcane technical documents.
To grant summary judgment, as sought by the plaintiff, would involve accepting the reports relied on in circumstances where they are not written expressly with any court protocols as to independence in mind and are not written (and I say this without criticism) for the lay person.
The Court has not had the benefit of the experts explaining their reports or any examination of those reports.
Of course, a Court is not obliged to accept expert evidence, even uncontroverted expert evidence (if that be the correct characterisation of the reports relied upon).[5]
[5] See eg Lepoidevin v State of Western Australia [No 2] [2021] WASCA 19 [66] - [67], [71] - [72].
In these circumstances, I do not consider I can rely on the six documents in the way submitted by the plaintiff.
Defendant's 'admissions'
The plaintiff, as noted, placed considerable reliance on the defendant's Field Performance Reports which were DAH‑7 and DAH‑8 to Mr Hardy's affidavit.
Mr Rooney, for the defendant, deposed to his involvement in the preparation of those Field Performance Reports. In relation to the further draft report which was Rev‑1 (DAH‑8), Mr Rooney gave evidence that the measurements relied on by the plaintiff under the heading 'Immediate Action Taken' were supplied to him by officers of the plaintiff.[6]
[6] Mr Rooney's affidavit [106].
I am in no position, obviously enough, to verify that. However, if accepted, it would undermine the Field Performance Report in its revised form being an admission by the defendant on that central factual issue.
In short, I do not consider for the purposes of this application that the defendant has made clear admissions as contended for by the plaintiff.
Factual matters raised by the defendant
It seems to me that there are two matters (identified above) which may raise factual defences to the plaintiff's case and which suggest the matter should proceed.
The first is the evidence given by Mr Rooney as to the Factory Acceptance Test (FAT) he conducted with an officer of the plaintiff on the 5‑1/2" casing hanger before its delivery.
That evidence is to the effect that Mr Rooney measured the internal diameter and, by reference to the relevant drawing, marked the internal diameter as satisfactory.
That is, the defendant asserts that the 5-1/2" casing hanger had been checked and measured and found to be compliant with the Agreement at the time it left the defendant, before being delivered to the plaintiff in June 2021.
The plaintiff was quite dismissive of this evidence and submitted, in effect, that its lack of detail and precision meant that it could not be accepted.
In my view, it is not really a question of whether I accept Mr Rooney's evidence about the FAT, but rather whether it clears the low bar set in Eng Mee Yong as quoted above.
The significance of the FAT evidence is that, as the defendant submits, with respect correctly, it is the only measurement on the evidence before me which was carried out prior to the 5‑1/2" casing hanger leaving the defendant.
By way of contrast, the defendant says that the plaintiff is relying on measurements made after the 5-1/2" casing hanger was delivered by the defendant and at points in time after the plaintiff or its contractors had 'undertaken further work to the casing hanger, and after the casing hanger had been damaged by drilling works undertaken by [the plaintiff]'.[7]
[7] Defendant's written submissions dated 15 November 2023.
It may be, ultimately, that the passing of the FAT is not sufficient by itself, or in combination with other evidence, to provide the defendant with a defence.
However, at this stage, I cannot dismiss the possibility of it providing a defence which ought to be tried.
The second factual matter is the evidence given by Mr Wiencke as to his observations of the casing hanger after the incident. His evidence is that he made the observation that the cement plugs appeared to have been caught up near the bottom of the casing hanger and that the point at which the casing hanger was joined by the pup joint appeared to be on a slight angle.[8]
[8] Mr Wiencke's affidavit [52] and [25] above.
The plaintiff sought to counter this by [4] of the Second Girgenti Affidavit which deposed to why (presumably in his experience or opinion) the joining of the pup joint would not affect the internal diameter of the casing hanger. He relied on the data gathered by Baker Hughes to support that opinion.
The plaintiff also pointed to the reports and, in particular, to the Dimensions Verification Form (DRG‑18 and JW‑1) to the effect that the 'pinch points' identified which were smaller in diameter than that required were in the middle of the casing hanger and not at the bottom where the pup joint joined.
Again, it may be that, ultimately, Mr Wiencke's observations as deposed to are not sufficient, of themselves or in combination with other evidence, to provide the defendant with a defence. However, I am not able to say that comfortably presently.
The plaintiff said that if there was a restriction at the bottom of the casing hanger, that did not provide a defence to the allegation of breach of the Agreement. Rather, the plaintiff submitted, it was a point going only to causation and that was no part of its summary judgment application. That leads to another consideration.
Another consideration
On the plaintiff's application and submissions, the Court would grant the summary judgment application, and leave questions of causation and damages to a trial.
The defendant says that the question of causation would need to be the subject of a trial in any event, and that appears to be common ground.
The defendant says, and I accept, that at such a trial the plaintiff would need, in any event, to prove the exact diameters of the 5‑1/2" casing hanger before the Court could decide the question of causation.
The defendant says that even if the casing hanger supplied did not conform with the Agreement, then a (smaller) casing hanger may not have caused the consequences of which the plaintiff complains. That is because standard wiper plugs would not, the defendant submits, necessarily have got stuck in the way the plaintiff alleges because of the size of the casing hanger. It would depend on how out of the specification in the Agreement the casing hanger was.
The short point is, in my view, whether or not summary judgment were to be granted now, the issues of the exact internal diameter of the 5‑1/2" casing hanger will nonetheless have to be resolved at a trial.
The defendant says, and I accept, that granting summary judgment on this application would leave a real question as to what facts would be found and taken to be established as to the internal diameter by that judgment.
In effect, it may be one thing to find that the internal diameter did not comply with the Agreement, but it would not answer the question (which appears to be necessary for a resolution of the issue of causation) as to where and to what extent the casing hanger was not compliant with the contract.
Disposition
For the reasons set out above, I would not grant the plaintiff summary judgment on its application. I would grant the defendant unconditional leave to defend the matter.
I will hear the parties as to costs and the further programming of the matter.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
JR
Associate to Hon Justice Howard
18 DECEMBER 2023
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