Oil Drilling and Exploration (Borneo) Pty Limited v Nerdlihc Company Inc - [2005] NSWSC 298

No judgment structure available for this case.

CITATION:
Oil Drilling & Exploration (Borneo) Pty Limited & Anor v Nerdlihc Company Inc & Anor [2005] NSWSC 298

HEARING DATE(S): 05/04/05

JUDGMENT DATE :

5 April 2005

JURISDICTION:
Equity Division
Commercial List

JUDGMENT OF:
Einstein J

DECISION:
Order that judgment be entered for the first plaintiff against the first defendant in the amount of $15,738,861.89. Order that judgment be entered for the first plaintiff against the second defendant in the amount of $1,168,472.86;

CATCHWORDS:
Contract - Trade Practices Act - Assessment of damages - Principles where difficulties of assessment arise - Contract for provision of oil rig - Overlapping of damages to which corporate defendant liable across two causes of action - Several liability of individual defendant

LEGISLATION CITED:
Trade Practices Act

CASES CITED:
Agius v State of New South Wales [2001] NSWCA 371
Baxter v Obacelo Pty Ltd (2001) 205 CLR 635
Commonwealth of Australia v Amman Aviation Pty Limited (1991) 174 CLR 64
Cribb v Freyberger [1919] WN 22 (English Court of Appeal)
Jones v Schiffman (1971) 124 CLR 303
Phelps v Nationwide News Pty Ltd [2001] NSWSC 130
Placer (Granny Smith) Pty Limited v Thiess Contractors Pty Limited (2003) 196 ALR 257
Watson Specialised Tooling Pty Ltd v Stevens [1991] 1 Qd R 85

PARTIES:
Oil Drilling & Exploration (Borneo) Pty Limited (First Plaintiff)
Oil Drilling & Exploration Limited (Second Plaintiff)
Nerdlihc Company Inc (First Defendant)
Tom E Knowlton (Second Defendant)

FILE NUMBER(S):
SC 50142/03

COUNSEL:
Mr JK Kirk (Plaintiffs)
Mr T Lee (solicitor) (Defendants)

SOLICITORS:
Gadens Lawyers (Plaintiffs)
Terence Lockyer Lee & Associates (Defendants)

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Einstein J

Tuesday 5 April 2005 ex tempore
Revised 7 April 2005

50142/03 Oil Drilling & Exploration (Borneo) Pty Limited & Anor v Nerdlihc Company Inc & Anor

JUDGMENT

The state of these proceedings

Assessment of damages

1 These proceedings are presently before the Court for the assessment of damages.

2 The short position is that:

· this proceeding was commenced in this Court by summons, filed in the Commercial List, on 15 October 2003. The defendants filed an appearance on 20 November 2003. An amended summons was filed on 23 December 2003;

· there followed a series of defaults by the defendants in relation to complying with orders of this Court as to conduct of the matter. In particular, no defence was filed;

· eventually the plaintiffs moved for judgment to be entered against the defendants on two bases: that the defendants had breached three court orders, and for want of prosecution by way of defence;

· this motion was heard by Justice Bergin on 28 May 2004. The defendants were represented at the hearing of the motion, but filed no evidence. Bergin J noted that the defendants’ representative had indicated “firstly, that he has been in a position to obtain instructions and, secondly, that he has none”. In the result on 28 May 2004, her Honour entered judgment for the plaintiffs as against the defendants, with damages to be assessed, and with the defendants ordered to pay the costs of the proceedings (including of the motion);

· some three months later, on 20 August 2004, the defendants filed a motion seeking that the “default judgment” be overturned and that the amended summons be struck out. That motion was heard by McDougall J on 24 September 2004. The only material evidence relied upon by the defendants was hearsay evidence that Mr Knowlton had desired to settle the litigation (see judgment of McDougall J at para 16). His Honour dismissed the motion.

The evidence before the Court

3 The plaintiffs rely on affidavits of Mr Kenneth John Picard, the current chief executive officer of the second plaintiff and a director of the first plaintiff [7 July 2004 and 1 April 2005 paragraphs 5, 6, 7], and of Mr Kenneth John Skirka, the former managing director of the second plaintiff and a director of the first plaintiff [7 July 2004]. The defendants, who continue to appear in this matter through their legal representative, have filed no evidence, and have indicated that Messrs Picard and Skirka are not required for cross-examination. A complaint advanced in terms of late service of affidavits on and after 1 April 2005 was withdrawn when the plaintiffs limited the new material to paragraphs 5, 6 and 7 of Mr Picard's affidavit of 1 April 2005.

Background

4 The plaintiffs have addressed detailed submissions to the Court in relation to each parameter of the material background and in relation to the orders which are sought. These submissions are accepted in their entirety, subject to certain matters to be referred to below, in particular concerning damages for loss of chance, and are generally, subject to that matter, adopted in what follows.

5 The proceedings concern a dispute about non-payment for extended hire and use of a large oil drilling rig in Western Australia. The first plaintiff owns and operates the rig, known as “Rig 16”. The first plaintiff is a wholly owned subsidiary of the second plaintiff.

6 On 22 September 2000 the first plaintiff entered into a contract (at KJP1) with the first defendant (“Nerdlihc”) whereby it agreed to provide the use of Rig 16, and associated personnel to operate it, to Nerdlihc to carry out certain “operations”. Those operations were the drilling of at least one exploratory oil well at a site in Western Australia called “Patience #2”, with options for also drilling wells at two other sites (see KJP1 at “Exhibit A”, which is attached to the contract).

7 The first plaintiff moved the rig to the Patience #2 site and commenced operations in September 2000 (Picard para 8). The drilling operations continued until late February 2001, at which point Nerdlihc claimed that the force majeure clause in the contract should come into operation because it had been unable to obtain certain equipment. The first plaintiff accepted that the clause could apply, and went into standby operations, as provided for in the contract (summarized in Picard paras 9-12). The force majeure clause gave either party the right to terminate if it applied (KJP1, cl.17.5). Neither party sought to do so. The contract provided that certain lower rates applied for use of the rig during such operations (KJP1, Exhibit A, cl.13(c)). Those rates reflected the fact that personnel were still required to man the rig to keep it in proper condition, even though it was not actually being used (see cl.13, ibid).

8 Rig 16 was thereafter kept at the Patience #2 site, at Nerdlihc’s request, for an extended period. However, Nerdlihc ceased making payments on the regular invoices issued by the first plaintiff after 29 January 2001 (Picard paras 8, 42-194). One payment of US$100,000.00 was made by Nerdlihc on 6 June 2003 (Picard para 31). Otherwise, the regular ongoing invoices of the first plaintiff were not paid.

9 The failure of Nerdlihc to pay for the continuing use of Rig 16 led to ongoing discussions between the parties. The first plaintiff was concerned to obtain the monies owed to it for use of the rig. It also wanted to know whether there was any real chance of payment being made – because if there was not, the rig could have been used elsewhere, or at least put into storage, which is cheaper than maintaining a rig in standby readiness on-site (see Picard paras 205-9).

10 In the period 8 February 2001 through to 21 November 2003 Nerdlihc, through its sole director and shareholder Mr Knowlton (the second defendant – see Am summons para 4), made a series of representations by telephone, facsimile and in person to the first plaintiff. The gravamen of these representations was that the first plaintiff would be paid by Nerdlihc for the accumulating amounts that were owing, that Nerdlihc did wish to continue to engage the services of the first plaintiff in providing Rig 16 and the associated personnel, and that Nerdlihc either had or imminently would have monies available to pay the amounts owing.

11 Such representations were made on approximately 29 occasions over the period (these representations are set out in the amended summons at paras 34-62; and see Picard paras 13-37, and affidavit of Skirka, and documents referred to in those affidavits). The claims were never made good. It may be inferred they were not capable of being made good.

12 Apart from these representations, further agreements were entered into in order to seek to resolve the situation,. First, on 10 February 2003 the first plaintiff and Nerdlihc entered what has been labelled the “February 2003 Letter Agreement” (see amended summons paras 13-16; Picard paras 23-26, and KJP12), which sought to resolve the outstanding payments on the basis that Nerdlihc would pay the first plaintiff the amount of US$3.5m. This amount was never paid, as the defendants accept (subs para 9). It may be noted that although this was signed on behalf of the second plaintiff, it appears from all the circumstances that the second plaintiff was entering the contract as agent for the first plaintiff, as the defendants here also indicate (subs para 10).

13 At the same time a new drilling contract (the “February 2003 Drilling Contract”) was to be entered by the first plaintiff and Nerdlihc (KJP13). This was in substantially the same terms as the original drilling contract, except that it provided that the first plaintiff would charge higher rates (see Picard para 25, and KJP 13 “Schedule of Rates). In fact it appears that whilst this was signed on behalf of Nerdlihc, it was not executed on behalf of the first plaintiff (see KJP 13, execution page at p.21). As discussed below nothing turns on this. In practice, the first plaintiff continued issuing invoices at the lower rates set out in the original drilling contract (Picard para 25).

14 A further attempt to settle the outstanding payments was made in June 2003. This was contained in what has been labelled the “June 2003 Letter Agreement” (Am Summons paras 22-28; Picard paras 27-37; KJP 15 and 16). This provided that Nerdlihc would pay US$3.2m for the outstanding invoices, in instalments up to 1 September 2003, with the first amount of US$1.0m to be paid by 10 June 2003. US$100,000.00 of this was paid on 6 June 2003, but the remainder was not (Picard paras 31-37). This was despite Mr Knowlton sending a facsimile to the first plaintiff indicating that US$2.0m had actually been paid into the first plaintiff’s account (Picard para 36, KJP 22). In fact, that money was never transferred. The defendants here do not dispute that the total amount due under the June 2003 Letter Agreement was not paid (subs p.3, para 9).

15 Again, a new drilling contract was discussed between the parties at this time (the “June 2003 Drilling Contract” – Am Summons paras 29-33; see KJP 17). Again, this appears to have been signed on behalf of Nerdlihc, though not on behalf of the first plaintiff, although note clause 4 of the June 2003 Letter Agreement. In any event, once again it was in much the same terms as the original drilling contract, except that again it provided for higher rates (Picard para 30). Once more, the first plaintiff continued to issue invoices at the lower rates applicable under the original drilling contract (ibid).

16 The drilling contract was terminated by the first plaintiff by letter of 5 November 2003, and steps to transfer Rig 16 were implemented on 21 November 2003 (Picard paras 38-9; KJP 23).

The approach taken by the defendants

17 The defendants notwithstanding their failure to file any evidence and notwithstanding their indication than Messrs Picard and Skirka were not required for cross-examination nevertheless opposed the awarding of damages on the claims on two bases:

Issue 1

· That the state of the evidence is such that “no meaningful assessment of damages is able to be made” (subs para 5, also para 6);

Issue 2

· That “it would be impossible to properly assess contractual damages, as the plaintiffs have pleaded, cumulatively, contracts which have in fact replaced one another” (subs para 9).

18 The first issue must be addressed simply by examining the evidence.

19 The second issue manifests a misunderstanding of the nature and effect of the judgment given, of what is pleaded in the amended summons, and of the contracts involved. Nonetheless, as did the plaintiffs, it seems to me convenient to address this issue first.

Dealing with the second issue

The nature of the contractual claims

20 The defendants appear to suggest that there is some legal problem with making claims “further and/or in the alternative” (eg subs para 9). In fact, it is commonplace that a plaintiff will have causes of action which overlap or which are alternative to one another. To plead causes of action “further or in the alternative” is equally commonplace.

21 The authority relied upon by the defendants on this point is Agius v State of New South Wales [2001] NSWCA 371, and in particular the statement at [41] that the pleading being considered there suffered from “meaningless generality”. However, it is plain that the Court was simply referring to the fact that the pleading in question did not properly identify the material facts supporting the claimed duty of care: see at [40-41], and generally at [30-41]. The Court was not calling into question the fact that a particular duty of care was being pleaded in the alternative.

22 The other authority relied upon by the defendants on this point is Phelps v Nationwide News Pty Ltd [2001] NSWSC 130 (see defendants subs para 26). That was a case dealing with the technical question of pleading of imputations in defamation claims and, in particular, defining the “boundaries” of whether there was one or more publication of an imputation: see eg at [10], [32-34]. The case has nothing to do with the issues in this matter.

23 In this case the plaintiffs have obtained judgment against the defendants, subject to assessment of damages. In consequence every allegation of fact in the pleading – except perhaps those going purely to quantum – is taken to be admitted or proved: see analogously Cribb v Freyberger [1919] WN 22 (English Court of Appeal). This necessarily means that all of the causes of action pleaded in the amended summons are taken to be made out.

24 The plaintiffs accept that insofar as relief is claimed in the alternative, and in a way which is not cumulative, the Court would not permit judgment to be entered in a cumulative manner on both claims: Watson Specialised Tooling Pty Ltd v Stevens [1991] 1 Qd R 85 at 93 per Lee J.

25 That reflects two basic points:

· first, it is necessary for the plaintiffs in such cases to prove the quantum of their loss;

· secondly, the courts will not permit double recovery for the same loss under different causes of action: eg Baxter v Obacelo Pty Ltd (2001) 205 CLR 635. That principle in turn reflects the basic compensatory aim of awarding damages: that is, damages are awarded to compensate a plaintiff for losses caused by the actions of defendants. [cf Baxter at [39]]

26 Applying these principles, the plaintiffs are entitled to recover damages in respect of all or any of the causes of action pleaded in the amended summons, but they are not entitled to be awarded anything more than their proved losses, and they cannot be doubly compensated for any particular loss.

27 In this case the plaintiffs have determined to focus just on two claims:

· the claim under the original September 2000 drilling contract, and

· the misleading conduct claim under s.52 of the Trade Practices Act in relation to various misrepresentations made by the defendants (see amended summons paras 34-81).

28 The plaintiffs submission which is accepted is that this is not to suggest that the other claims are not pursued, simply that they need not be specifically addressed insofar as they would not add to the amount of damages awardable to the first plaintiff.

29 In relation to the misleading conduct claims, as noted above, the plaintiffs have pleaded a total of approximately 29 misrepresentations made over the period February 2001 to November 2003. These misrepresentations were of much the same character as each other. Clearly the damages claimable for the later misrepresentations cannot exceed those for the earlier misrepresentations.

30 As for the contract claims, the defendants’ main point here appears to be that the plaintiffs should not be able to claim on the original contract in light of the attempted settlements in the February and June 2003 Letter Agreements, and/or in the light of the possible February and June 2003 Drilling Contracts.

31 In relation to the later Drilling Contracts, these can make no relevant difference to the contract claim, because they are in substantially the same terms as the original drilling contract except that they provide higher rates of payment. The plaintiffs have chosen to claim only at the lower rates of payment in the original contract, reflecting what was set out in their invoices at the time. This, I accept, can hardly be a source of complaint by the defendants. I return to deal with the invoices below.

32 With respect to the Letter Agreements, the plaintiffs advance two propositions each of which seems to me to be correct:

· first, these were sued upon by the plaintiffs in the alternative to the primary claim on the original drilling contract. It is alleged in the amended summons that the first plaintiff provided Rig 16 over the period September 2000 to December 2003 “pursuant to the September 2000 Contract” (para 9). This allegation is now to be taken to be proved. If the defendants had filed a defence to this pleading it would have been open to them to dispute this claim. They never did so. By claiming in submissions here that in fact the use of Rig 16 was not provided for that period (or at least in the period subsequent to the Letter Agreements) pursuant to the September 2000 drilling contract, the defendants are seeking now to argue issues of liability. It is no longer open to them to do so;

· secondly, and in any case, by their terms the two Letter Agreements did not end the liability under the original drilling contract. Clause 1 of the February 2003 Letter Agreement provided that “Upon payment” of US$3.5m, “the existing contract … will be at an end and no longer binding on both parties” (KJP 12). That payment was never made, leaving the original drilling contract unaffected. As for the June 2003 Letter Agreement (KJP 15), clause 1 similarly stated “Upon payment of the instalments listed, the Contract dated September 21, 2000 shall be at an end”. Those instalments were not paid. The plaintiffs accept that clause 4 of the Agreement does suggest that the original drilling contract was replaced by the June 2003 Drilling Contract. The plaintiffs’ proposition which is of substance is that that ambiguity in the contract is one of the things that might have been capable of being argued if the defendants had filed a defence. But even then it would have made no difference, given that the only relevant difference between the drilling contracts was that the later ones provided for higher rates.

Dealing with the first issue

Damages for breach of the drilling contract

33 Turning to the assessment of damages for non-payment under the drilling contract (or contracts), as noted above the defendants have submitted that there is insufficient evidence to support these claims.

34 That plainly is incorrect. Mr Picard’s affidavit sets out in detail what invoices were issued pursuant to the drilling contract, and records that (with a few exceptions which he notes) payments were not received on these invoices: see paras 42-194, and the documents referred to therein.

35 Nerdlihc has made no attempt to show that in fact any of these invoices were paid. The defendants have chosen to file no evidence in this hearing on quantum. I accept that given the documents, the evidence of Mr Picard, and the absence of any contrary evidence from Nerdlihc, there can be no doubt about the liability of Nerdlihc on these invoices. I reject the contention that it is not possible to tie back the invoices to the September 2000 contract.

36 Looking at exhibit KJP1, clause 5, headed "Time of Payment", one finds clauses 5.1, 5.2 and 5.3 in the following terms.

· Subject to the provisions of Clause 13 of the Contract and compliance by Contractor with all the terms and conditions of this Contract and Exhibit A, Operator shall pay to the Contractor the amounts in Clause 4 in the manner set out in this Clause 5.

· Payment shall be due and payable by Operator of the amount of Contractor’s invoice. Invoices shall be submitted weekly and on a ‘per well’ basis, and shall be payable within 14 days.

· Operator shall notify Contractor within seven (7) days after receipt of any invoice that the amount in the invoice or any portion of it is disputed by the Operator.

37 Further, in paragraph 8 of Mr Picard's 7 July 2004 affidavit he gave evidence that pursuant to exhibit A of the September 2000 contract ODE (Borneo) had commenced the operations of Nerdlihc's first well site, Patience #2, in September 2000 and had rendered invoices to Nerdlihc for carrying out the operations. His evidence was that payment of the invoices rendered to Nerdlihc by ODE (Borneo) was made by Nerdlihc up until 29 January 2001. He gave detail of the invoices rendered to Nerdlihc which remained outstanding, tying these invoices back to the relevant contract are set out in Part II.

38 Additionally to that, in paragraph 40 of the same affidavit Mr Picard deposed that to the best of his belief the invoices referred to below in the affidavit were correctly rendered by ODE and related to separate items and were cumulative. And in paragraph 44, dealing with invoices rendered on 2 February 2001, he deposed as follows:

“Invoices rendered on 2 February 2001

39 In short, the evidence certainly justifies the subject invoices presented to the Court on this tranche of the hearing being shown as tied to the September 2000 contract.

40 The total amount owing on the invoices, taking into account the payments that were made on the materials presented to the Court, is $12,569,549.28 [see MFI P3].

41 Further, under clause 5.4 of the drilling contract interest was payable on unpaid invoices at the rate of 10% per annum, from 14 days after the date of receipt of the invoice until the invoice is paid. There had been exhibited to Mr Picard’s affidavit a spreadsheet recording the interest owing on each invoice on this basis: see paragraph 197 and KJP 178. During the course of the hearing an up to date calculation was provided also to be found as part of MFI P3, together with the calculations. That amount is $3,169,321.61.

42 The first plaintiff is entitled to an award of such interest.

43 I further accept that it is the first plaintiff which is entitled to judgments for these amounts. It was that company which was party to the drilling contracts. The second plaintiff was apparently added to the proceedings in the alternative, merely to counter any possible argument about which of the two was entitled to claim in light of the fact that the Letter Agreements were signed for the second plaintiff.

Damages for misleading conduct

44 In the amended summons it was pleaded that the first plaintiff suffered loss and damage as a result of the representations made by Mr Knowlton on behalf of Nerdlihc, that those representations were made in Australia, in trade or commerce, and were misleading and deceptive in contravention of s.52 of the Trade Practices Act: Am Summons paras 34-81.

45 It is pleaded that Mr Knowlton made these representations both for Nerdlihc and in his own capacity (Am Summons, paras 4-6). This pleading reflects the fact that at least some of the representations involved personal pleas by Mr Knowlton, such as, for example, “I pay my debts, I am an honourable man, I have equity money arranged to pay ODE and all other creditors” (Skirka para 9).

46 Further, and in any event, it is pleaded that Mr Knowlton was knowingly involved in the misleading conduct by Nerdlihc such as to found accessorial liability under the Trade Practices Act: amended summons, paras 74-81.

47 Clearly the judgment that has been entered against the defendants extends to these claims.

Difficulties in estimating damages

48 It is clear that mere difficulty in estimating damages does not relieve a Court from the responsibility of estimating them as best it can: cf Mason CJ and Dawson J in Commonwealth of Australia v Amman Aviation Pty Limited (1991) 174 CLR 64 at 83, who went on to refer to Jones v Schiffman (1971) 124 CLR 303 at 308, where Menzies J went so far as to say that "assessment of damages … does sometimes, of necessity, involve what is guess work rather than estimation." Mason CJ and Dawson J continued:

49 Likewise in Commonwealth v Amman, Toohey J at 138 said:

Radcliff v Evans

"As much certainty and paricularity must be insisted on … in the proof of damage, as is reasonable, having regard to the circumstances and to the nature of the acts themselves by which the damage is done. To insist upon less would be to relax old and intelligible principles. To insist upon more would be the vainest pedantry."

50 In Placer (Granny Smith) Pty Limited v Thiess Contractors Pty Limited (2003) 196 ALR 257, Hayne J [at paragraph 41] said as follows:

It was not enough for Thiess Contractors to answer this evidence by saying that there

might

have been some other unidentified reason for its profit being as large as it was, or by pointing to the possibility of adopting some other method of assessing Placer’s damages.

51 Importantly, Hayne J treated, in paragraph 41 of Placer, with the proposition that it was not enough for the plaintiffs' evidence to be answered by simply stating that there might have been some other unidentified reason for the particular profit being as large as it was or by pointing to the possibility of adopting some other method of assessing Placer's damages.

The approaches to damages

52 Mr Picard's affidavit had set out two types of damages suffered by the first plaintiff in reliance on the misleading conduct of Nerdlihc in respect of which the plaintiffs pursue today their first claim. The two types of damage were as follows:

Claim for a loss of profits of $2,623,030.00 (paras 198-204) [updated by MFI P4 to $2,867, 606.00

· This claim was said to reflect the use that could have been made of Rig 16 elsewhere if the first plaintiff had not been induced to leave it at the Patience site. The submission from the plaintiff being that this is necessarily a loss of chance claim and an acceptance that it is always difficult making assessments on such claims. The plaintiff submitted that this assessment by Mr Picard should be seen to have been based on reasonable assumptions, taking account of particular contracts which he identified and exhibited, and which he gave an estimate of the likelihood of the first plaintiff having obtained.

53 As the plaintiffs have accepted there is no absolute certainty about such estimates, for there cannot be – the exercise of hypothesizing as to what might have occurred but for certain misleading conduct is necessarily a matter of estimation, as the authorities I have referred to make clear. The plaintiffs also note that Mr Picard had only claimed profits for a portion of the time in question, ignoring periods when heavy rain meant that the equipment could not have been removed from the Patience site, and other periods in which there was no likelihood of the rig being employed. The submission was that in the absence of any evidence suggesting that Mr Picard's estimate should not be accepted, and in light of its plausibility, there was no reason not to accept it.

Claim in relation to the other periods in which there was no apparent likelihood of Rig 16 being put to use

· At such times, on Mr Picard’s evidence, the rig is “stacked”, that is, shut down and put into storage: paras 205-9. There are some costs, it was submitted, in storing the rig, which are inevitable. But those are much less than the costs of keeping the rig in standby mode at a site, which is what the first plaintiff submits it was induced to do by the ongoing representations of the defendants. Hence the first plaintiff was said to be entitled to the relevant difference between those two amounts.

54 The first approach put by the plaintiffs in terms of the damages for the Trade Practices Act counts importantly relied upon paragraph 201 of Mr Picard's 7 July 2004 affidavit in which he deposed that in his view ODE would have had more than a 90 per cent chance of being awarded all of the contracts which he had referred to in the previous paragraph to his affidavit. Mr Picard had supplemented paragraph 201 of his earlier affidavits in paragraphs 5 to 7 of his affidavit of 1 April 2005. In paragraph 5 he deposed as follows:

55 Whilst, as the authorities to which I have referred have made plain, the Court can only expect as much certainty and particularity in proof of damage as is reasonable having regard to the circumstances, and the present circumstances make the task of estimation of Trade Practices Act loss somewhat difficult for the Court, I have reached the clear view that the appropriate mode of the Court assessing the Trade Practices Act loss is what was referred to by the plaintiffs in their final address as an alternative means of calculating reliance loss.

56 Here the approach which is set out in the document which was marked for identification P2 is as follows:

Alternative means of calculating reliance loss

Additional costs incurred (ie as opposed to profits foregone)

The costs incurred of keeping Rig 16 at the Patience site in the period February 2001 to November 2003 is shown at KJP 181. It is $2,363,459.00.

However, Mr Picard indicates (Picard I para 199) that the rig could not be demobilised due to rains before April 2002. Let it be assumed – in favour of the Defendants – that all the costs for that period were unavoidable.
Thus the claim is only made re the 20 months from April 2002 to November 2003.

The costs for that period is: $990,318.00

If no other contracts had been entered (ie and no profits made) then costs that would have been incurred would have been:
Stacking costs @ $600.00/month (Picard I para 205), for 20 months = $12,000.00
Insurance costs of $4468.33 (Picard I para 206)
Costs unavoidably incurred thus = $16,468.33

57 The calculations are self-explanatory. Essentially one begins with the cost of keeping Rig number 16 at the site for the whole period of the representations [$2,363,459.00].

58 The plaintiffs concede that as Mr Picard has deposed in his affidavit, in fact there was a very high rainfall in 2001 which meant that the Rig could not be demobilised until April 2002. This approach therefore ignores the period prior to April 2002. What is adopted is a 20 month claim from April 2002 up to November 2003 giving the costs figure of $990,318. 00. Had no other contracts being entered into and no profits made the costs that would have been incurred would have been stacking costs and Insurance costs. There is a subtraction of $16,468.33.

Holding

59 To my mind bearing in mind the particular difficulties of assessment this is the proper albeit minimalist approach which should be taken in the present circumstances.

60 This alternative means of calculating reliance costs [or loss] results in the Trade Practices Act cause of action succeeding in that additional costs incurred in reliance upon the representations amounted to $973,849.67.

61 The first plaintiff is also entitled to interest on this amount at Supreme Court rates. The interest calculation relevantly is to be found in the materials which came forward and were marked as MFI P4, that is to say, recognising that the period of time ran from April 2002 to November 2003 it is appropriate to take the course of selecting the date 15 January 2003 as the commencement point in time from which interest will run. So that the interest entitlement of the first plaintiff is to $194,623.19.

Identification of which defendant is appropriately the subject of this claim

62 The issue then arises of which of the defendants is subject to this claim.

63 The plaintiffs correctly accept that the damages claimed on this basis overlap with the damages claimed above under the drilling contract. That is because this claim proceeds on the basis that some other profitable use could have been made of Rig 16 but for the misleading conduct. If the invoices under the drilling contracts are paid then that does represent a profitable use. This means that this claim adds nothing to the liability of Nerdlihc.

64 However, and as the plaintiffs have submitted, the situation is different as regards Mr Knowlton. He has no liability under the drilling contract. This claim thus does not overlap with any liability he already has.

65 Clearly, this liability of Mr Knowlton is several with the liability of Nerdlihc, in the sense that the first plaintiff is not entitled to both cumulatively, that is, it is liability in respect of (some of) the same damage. In other words, it is several liability: note eg Baxter v Obacelo Pty Ltd (2001) 205 CLR 635 at [18].

66 Any judgment against Nerdlihc may, in the end, go unsatisfied. The first plaintiff is thus also entitled to judgment against Mr Knowlton in respect of his liability. The matter may be tested by considering the position of Nerdlihc. Clearly the first plaintiff would be entitled both to the damages claimed under the drilling contract as well as to its damages incurred by reason of the misrepresentations. However in terms of the identification of the amount of the verdict the first plaintiff is not entitled to recover both cumulatively so that the actual verdict must be restricted to the total amount of the damages claimed under the drilling contract.

67 However this is not to say that it is inappropriate to enter judgment against Mr Knowlton for his liability pursuant to the Trade Practices Act claim. That judgement is appropriate to be entered against him in the instant circumstances.

Orders

68 The Court makes orders as follows:

1. Order that judgment be entered for the first plaintiff against the first defendant in the amount of $15,738,861.89;

2. Order that judgment be entered for the first plaintiff against the second defendant in the amount of $1,168,472.86;

4. Order that the costs of the transcription of today's hearing be costs of the proceedings.

I certify that paragraphs 1 - 68
are a true copy of the reasons
for judgment herein of
the Hon. Justice Einstein
given on 5 April 2005 and revised
7 April 2005

Susan Piggott

Associate

7 April 2005

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Citations

Oil Drilling and Exploration (Borneo) Pty Limited v Nerdlihc Company Inc [2005] NSWSC 298

Cases Citing This Decision

0

Cases Cited

6

Statutory Material Cited

1

Agius v New South Wales [2001] NSWCA 371

Phelps v Nationwide News Pty Ltd [2001] NSWSC 130

Baxter v Obacelo Pty Ltd [2001] HCA 66

CITATION:	Oil Drilling & Exploration (Borneo) Pty Limited & Anor v Nerdlihc Company Inc & Anor [2005] NSWSC 298
HEARING DATE(S):	05/04/05
JUDGMENT DATE :	5 April 2005
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
DECISION:	Order that judgment be entered for the first plaintiff against the first defendant in the amount of $15,738,861.89. Order that judgment be entered for the first plaintiff against the second defendant in the amount of $1,168,472.86;

CATCHWORDS:	Contract - Trade Practices Act - Assessment of damages - Principles where difficulties of assessment arise - Contract for provision of oil rig - Overlapping of damages to which corporate defendant liable across two causes of action - Several liability of individual defendant
LEGISLATION CITED:	Trade Practices Act
CASES CITED:	Agius v State of New South Wales [2001] NSWCA 371 Baxter v Obacelo Pty Ltd (2001) 205 CLR 635 Commonwealth of Australia v Amman Aviation Pty Limited (1991) 174 CLR 64 Cribb v Freyberger [1919] WN 22 (English Court of Appeal) Jones v Schiffman (1971) 124 CLR 303 Phelps v Nationwide News Pty Ltd [2001] NSWSC 130 Placer (Granny Smith) Pty Limited v Thiess Contractors Pty Limited (2003) 196 ALR 257 Watson Specialised Tooling Pty Ltd v Stevens [1991] 1 Qd R 85
PARTIES:	Oil Drilling & Exploration (Borneo) Pty Limited (First Plaintiff) Oil Drilling & Exploration Limited (Second Plaintiff) Nerdlihc Company Inc (First Defendant) Tom E Knowlton (Second Defendant)
FILE NUMBER(S):	SC 50142/03
COUNSEL:	Mr JK Kirk (Plaintiffs) Mr T Lee (solicitor) (Defendants)
SOLICITORS:	Gadens Lawyers (Plaintiffs) Terence Lockyer Lee & Associates (Defendants)