TDC Drilling Pty Ltd v Cydonia Resources Pty Ltd
[2012] WADC 22
•10 FEBRUARY 2012
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS
LOCATION: PERTH
CITATION: TDC DRILLING PTY LTD -v- CYDONIA RESOURCES PTY LTD [2012] WADC 22
CORAM: REGISTRAR KINGSLEY
HEARD: 13 OCTOBER 2011
DELIVERED : 10 FEBRUARY 2012
FILE NO/S: CIV 2580 of 2011
BETWEEN: TDC DRILLING PTY LTD
Plaintiff
AND
CYDONIA RESOURCES PTY LTD
Defendant
Catchwords:
Practice - Summary judgment - No new issues - Turns on own facts
Legislation:
Nil
Result:
Judgment allowed
Execution stayed pending counterclaim
Representation:
Counsel:
Plaintiff: Mr R Cywicki
Defendant: Mr D Jackson
Solicitors:
Plaintiff: Chris Martin & Associates
Defendant: Norton Rose Australia
Case(s) referred to in judgment(s):
Ansearch Ltd v Wavtech Pty Ltd [2006] WASC 184
Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332
Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87
Webster v Lampard (1993) 177 CLR 598
REGISTRAR KINGSLEY: The plaintiff (TDC) is a drilling company and provided core drilling services to the defendant (Cydonia) pursuant to the terms of a written agreement dated 18 December 2009 as varied by a variation agreement made about 25 January 2010. TDC carried out core drilling services at Cydonia Annvale No. 1 well at Casino in Queensland.
TDC sent invoice number 4934 dated 13 December 2010 to Cydonia in a total sum of $205,792.47 for the work preformed at the Annvale drill site. TDC says Cydonia has no defence to this claim and has brought an application to pursuant to O 14 Rules of the Supreme Court1971.
The evidence
The evidence before me comprises the affidavits of:
For the plaintiff;
Malcolm Sidney Cole sworn 5 September 2011 (Cole, 5 September).
Malcolm Sidney Cole sworn 7 October 2011 (Cole, 7 October).
For the defendant;
Christopher James Martin sworn 12 October 2011 (Martin, 12 October).
Philip Richard Jackson sworn 3 October 2011 (Jackson, 3 October).
The plaintiff's claim
Cole deposes, and Jackson agrees, that TDC entered into a written agreement with Cydonia (called the Principal Agreement) to drill and complete a well known as Romona No. 1. During the course of drilling Romona after discussions between the representatives of Cydonia and TDC, it was agreed that TDC perform other drilling work for Cydonia (Cole, 5 September pars 6 – 12; Jackson, pars 5 – 8). A variation of drilling agreement was entered into and dated 25 January 2010. Broadly the variation agreement provided TDC would perform further drilling work for Cydonia at unknown locations in northern New South Wales.
Cole deposes that about August 2010 Cydonia engaged TDC to drill wells at Talma and Annvale and the scope of works for these wells are contained in an email trail (Cole, 5 September, MSC–3 MSC–4).
Cole deposes that TDC mobilised its rig to Annvale on 8 November 2010. After difficulties were encountered with the Annvale well Cydonia directed TDC to discontinue drilling at Annvale and commence drilling at Talma.
Cole deposes that the difficulties with the Annvale well are not proven to be the fault of TDC. Cole believes the difficulties with the core drilling were associated with foreign material left in the well by a driller who drilled, by conventional means, to 350 metres prior to TDC coming on site. As an aside it appears a driller would drill to a particular depth and TDC would come on site and commence the core drilling programmeme. Cole deposes that no notices were issued nor fault on the part of TDC was alleged. All Cydonia stated was that they would suspend drilling on Annvale and directed TDC to move its rig to Telma. TDC obeyed that direction as it was bound to do so by cl 10 of the Principal Agreement (Cole, 5 September, pars 24 – 27).
Cole goes onto depose that TDC completed the drilling programme at Telma in December 2010. In December 2010 Cydonia advised TDC that it would not be returning to the Annvale well site. It appears that Cydonia engaged another contractor to complete the core drilling of the Annvale well.
On 13 December 2010 TDC rendered an invoice for the Annvale drilling. On 20 January 2011 Jackson, on behalf of Cydonia, emailed Cole advising that Cydonia was disputing all costs in the invoice for the unsuccessful Annvale coring programme. Cole deposes that prior to that email TDC had not received any complaint from Cydonia with respect to the Annvale well .
The defendant's case
Jackson deposes that at the completion of the work at the Romona No. 1 well he was informed by Cole he intended to change the winch on the rig that it used at Romona No. 1 to improve its drilling capacity. Jackson deposes that Cole, by email dated 7 April 2010, stated that he anticipated the rig with a new winch would be ready to operate by 1 June 2010 (Jackson, par 12). Jackson goes on to depose, at par 13, that between May and July 2010 there were a number of discussions as to when TDC might be able to mobilise, but many of the emails were not responded to. It was Jackson's belief that TDC was not ready to begin the drill programme at Annvale No. 1 well.
Jackson goes on to say that on 25 August 2010 he sent an email to Cole advising that it was Cydonia's intention to engage a local driller to do the pot‑hole drilling to core point. Cole deposes that in his experience it is not uncommon in the gas exploration industry to have one company complete drilling to the casing depth, and then another driller to perform the coring. In Jackson's belief it was for TDC to satisfy itself, irrespective of the hole drilled by the local drilling contractor and any casing or cementing in existence at the time of its commencing work on the Annvale No 1 well.
Jackson deposes that on 16 September 2010 Cydonia contracted with a local drilling contractor Gricks Drilling Company Pty Ltd (Gricks Drilling) to drill the top hole sections. There were delays due to heavy rain fall and Gricks Drilling completed the its drilling on 3 November 2010. On 9 November 2010 TDC arrived at Annvale.
Jackson goes onto depose that he recalls TDC arrived with incomplete equipment, necessary gear missing, and were generally ill‑prepared to commence work. Issues were identified at a preliminary inspection and on 10 November 2010 when TDC conducted a test run of the rig, a winch cable snapped. Jackson deposes that he was voicing concerns to representatives of TDC through 11 ‑ 13 November as to the competency and skill inadequacies displayed by TDC. Attached to Jackson's affidavit and marked PRJ 16 is a series of documents titled TDC Rig No 7 daily report which Jackson deposes records the various problems encountered and incompetency/skill inadequacies displayed by TDC (Jackson par 49).
Jackson deposes at par 51 that he recalls TDC encountering numerous problems in attempting to carry out the work it was contracted to perform. Jackson refers to a loss of the drill string between 14 and 15 November when TDC had drilled only 1.6 metres of core. In TDC attempting to fish out the lost drill string Jackson deposes that further damage occurred and as a result 4.13 metres of equipment was left in the Annvale well.
Jackson deposes that on 16 and 17 November 2010 TDC cemented the lower section of the hole to lock the lost steel/equipment in place and attempted to mill out the cement and equipment. This however was unsuccessful.
Apparently the difficulties in drilling out the lost equipment continued until 20 November when Jackson made the decision that TDC should stop work on Annvale and move to Telma No. 1 well. This was because Gricks Drilling had completed the casing on Telma and this well was ready for coring to commence.
On 23 November Jackson requested TDC to provide a detailed invoice of the costs TDC would charge for the work on Annvale. Jackson deposes that in his belief TDC was well aware of the dissatisfaction of Cydonia (Jackson, par 82). Jackson makes reference to a complaint from a representative of TDC that the damage at Annvale was a result of foreign matter left by others in the hole. As Gricks Drilling were the only other party to have access to Annvale Jackson spoke with Stan Gricks of Gricks Drilling who advised that he had not lost anything down the Annvale well.
Subsequently Jackson engages another company (DEPCO) to mill out the foreign matter left in the well by TDC and to core the well.
Apparently pieces were retrieved by DEPCO from Annavale which were sent to Hardmetal Industries for analysis. According to Jackson the report (attached as PRJ 20) indicates a lack of fluid in resulting in high friction and eventually failure of the bit.
Jackson goes onto depose that towards the end of the coring process by DEPCO it became apparent there is a real possibility some steel material from TDC had been left behind. The remnants from the material caused snagging and eventually breakage occurred. Jackson deposes that DEPCO were not able to complete the desired depth of coring because the well hole had been compromised by TDC's pollutant lose metal left in the well.
Jackson then determines that Cydonia should abandon Annvale well and Cydonia arranged for DEPCO to drill and core another well a short distance away.
Jackson deposes that TDC did not carryout the work required competently nor did it exercise reasonable skill care and attention and therefore TDC is not entitled to invoice Cydonia for the amount claimed.
Cole 5 October 2010
In his 5 October affidavit Cole amplifies the Principal Agreement and Variation Agreement as well as highlighting cl 8.4 in the Principal Agreement which assured TDC of payment in the absence of objection within 30 days. Cole deposes that such clauses are usual in drilling contracts. The clause recognises a drilling company bears its operating costs for the period before the first account and between the first and subsequent accounts (par 15).
Cole at par 11 disputes the reason for abandonment of Annvale by DEPCO and deposes that it is his understanding that DEPCO suffered the same fate as the plaintiff in that its drill string was twisted off.
As to the opinion received from Hard Metal Industry Cole makes no comment.
Legal principles
The power to grant summary judgment is one that should be exercised with great care: it must be clear there is no real question to be tried where there are disputed facts and in the absence of cross‑examination to a summary judgment application is to be determined on the basis the defendant's version of the facts will be accepted at trial ‑ answering those facts are not inherently incredible (see Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87; Webster v Lampard (1993) 177 CLR 598). Whilst the summary judgment procedure is not confined to cases which are immediately plain and obvious, in the end if, after argument, there remains uncertainty about the plaintiff's right to judgment, then the application must be refused (Ansearch Ltd v Wavtech Pty Ltd [2006] WASC 184; Australian Can Co Pty Ltd v Levin & Co Pty Ltd [1947] VLR 332).
Discussion
Clause 8.5 of the principal agreement provides that if the operator (Cydonia) does not raise a dispute about any portion of the contractor's (TDC) invoice within 30 days after receipt, then Cydonia cannot later dispute or refuse to pay on the invoice, except where manifest error has occurred.
Cole deposes (Cole, par 15) that such clauses are common in drilling contracts and recognise that a drilling company - in this case TDC - bears its operating costs, including labour, for the period before the first account, and between the first and subsequent accounts. Thus the contractual obligations is cast on the operator (Cydonia) to review the invoice and either promptly object or make payment. The manifest error stated in cl 8.5 must be read in the context of rendering the invoice. That is where there is clearly an error in the invoice then there is no obligation to pay within the 30 days.
Jackson deposes he received the invoice on Friday 17 December; and on 20 January 2010 he sent an email to Cole, and Don Dean for TDC, informing them that Cydonia was disputing all costs in relation to that invoice (Jackson, pars 100 ‑ 101). There is no reference in Jackson's affidavit that there was any manifest error. So far as Jackson is concerned TDC did not carry out the work competently, nor did it exercise reasonable skill, care and attention.
In my opinion cl 8.5 is clear in its intent. Cydonia and TDC have contractually agreed that Cydonia will pay TDC's invoices within 30 days unless it objects within that period, or unless there is manifest error. There is no evidence of any manifest error. In my opinion, as Cydonia did not raise any objection in the invoice within the 30‑day period, it is now contractually obliged to pay.
Cydonia submits that it has arguable claims in breach of contract and negligence. Cydonia submits that TDC warranted its drill rig was in good working order, free of defects, fit for the purposes and capable of performing the work required. Jackson deposes (Jackson, pars 31 ‑ 50) to the various instances where, in his opinion, TDC was in breach of its contract in relation to the drilling equipment and competency of TDC staff.
Further, Jackson deposes that, from the Hard Mental Industries report there is some evidence of negligence. The report suggests that the drill bit that broke off was run for a considerable time without drilling fluid or water set up a high friction environment which caused premature failure of the bit.
The issues of breach of contract and negligence suggest that Cydonia has a counterclaim against TDC.
That counterclaim has not been formulated by Cydonia. The breach of contract argument is based on some documentary evidence and within The Daily Drilling Reports.
The negligence claim appears to be based on the belief of Jackson (Jackson par 92). Further, there is no informed assessment of the likely quantum of damages. They only comment is that Cydonia has a counterclaim for substantial damages (Jackson par 3), in the vicinity of $500,000 (Jackson par 109).
Conclusion
In my opinion cl 8.5 contractually binds Cydonia to paying TDC on its invoice. Judgment should be entered for TDC against Cydonia for its claim, together with interest.
However there is the potential for a counterclaim to be brought by Cydonia against TDC in relation to the alleged breach of contract and in negligence O 14 r 3(2) Rules of the Supreme Court provides that whilst judgment may be entered against a defendant, execution of that judgment may be stayed until after trial of the counterclaim. Accordingly, I will stay execution on the judgment until the trial of the counterclaim or earlier order.
I will hear counsel on the issue of costs and on programming orders in relation to the counterclaim.
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