Herbert Smith Freehills has today achieved a significant success in the English High Court acting on behalf of Providence Resources Plc in a claim brought by Transocean Drilling UK Limited, one of the world's largest drilling rig contractors. Transocean Drilling UK Limited -v- Providence Resources Plc [2014] EWHC 4260 (Comm).

In a strong judgment, Mr Justice Popplewell found that Transocean had acted in breach of contract in failing to adequately maintain several key components of the subsea well control equipment of its drilling rig, the Arctic III, which resulted in significant downtime in drilling operations for Providence.

The decision makes a clear statement that drilling rig contracts are not to be viewed as having any sort of special status and the day rates regime in question (common in many rig contracts) does not constitute a complete contractual code such as to allow Transocean to be paid where operations were delayed due to its own breach of contract.

Importantly, the Court also determined that the presence of an extensive knock-for-knock indemnity regime and a consequential loss exclusion clause, based in part on the LOGIC model form, did not preclude Providence from recovering the third party spreadcosts it incurred during the periods of downtime which resulted from Transocean's breach of contract.

As a result, Transocean was found not to be entitled to obtain day rates for periods where the delay had arisen as a result of Transocean's own breach of contract and for those same periods Providence was able to recover its wasted spreadcosts.