Transocean Drilling UK Ltd v Providence Resources plc

Citation: [2014] EWHC 4260 (COMM)

This was a dispute about the financial consequences of delays in the drilling of an appraisal well in an off-shore oilfield off the south coast of Ireland.  The case raised issues of key importance to the energy industry and the wider construction industry as it involved construing remuneration provisions and an exclusion clause in an amended version of the standard LOGIC form.

The Claimant, Transocean, provided the rig GSF Arctic III to the Defendant, Providence, and claimed remuneration of over $13 million and £3.5 million according to contract provisions plus reimbursables.  Providence denied all liability and counterclaimed for some $10 million for ‘spread costs’ of personnel, equipment and services from third parties wasted due to alleged breaches of contract by Transocean, although there was an admitted balance due to Transocean in any event.  It also alleged misrepresentation.

In interpreting the payment provisions of the Contract, the court found that the obligation to provide a rig in “good working condition” was an absolute warranty, so that any breakdown of Transocean’s equipment amounted to a breach of contract which meant that Transocean was not entitled to remuneration for periods of delay caused by the breach.  On the evidence, the deficient state of rig equipment was sufficient to put Transocean in breach of contract.  Where the unavailability of the rig was during a period of bad weather, the crucial question was whether normal drilling operations would or would not have occurred; i.e. whether the non-operation of the rig was due to the breach; absent that, the delay would have caused no diminution in the value of the services which could deprive Transocean of remuneration.

So far as Providence’s claim for ‘spread costs’ were concerned, the court held that these were not covered by an amended version of clause 20 of the LOGIC form, which would be read contra proferentem against Transocean, despite being a ‘mutual’  clause.  Providence’s misrepresentation claim failed because, on the facts, it could not prove reliance on any statements made by Transocean.

The parties agreed that they would seek to calculate and agree the financial consequences of the judgment.

Link to Judgment

Counsel: Lucy Garrett appeared as Junior Counsel for Transocean Drilling UK Ltd.

Counsel

Lucy Garrett QC

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