OIL-BORING RIGHTS

Taranaki Daily News, 2 June 1922, Page 8

OIL-BORING RIGHTS

CLAIM FOR FORFEITURE, PROPERTY-OWNER TAKES ACTION. SUPREME COURT CASE An action aiming at securing the forfeiture of certain oil-boring rights was heard in the Supreme Court, New Plymouth, yesterday, by Mr. Justice R The plaintiff, William John Honeyfield, settler, of Moturoa, New Plymouth, proceeded against the Taranaki (N.Z.) Oil WeU? Ltd., for possession of land, forfeiture of grant, and claimed £2OO compensation for alleged non-performance of agreement, Mr. 0. H. Croker appeared for the plaintiff and Mr. D. Hutchen for the defendant company. . The various stages connected with the granting of the rights were touched on by Mr. Croker in placing the case for the plaintiff before the court. He said that about April 15, 19G4, plaintiff, by a memorandum, purported to grant certain oil-boring rights over land at Moturoa to a company known as the New Zealand Oil Wells Proprietary (no liability), of Adelaide. Since then there had been various transfers or assignments of the rights, and they subsequently became vested in the Taranaki (N.Z.) Chi Wells, Ltd. a company registered in London, with a capital of £400,000. On February 4, 1920, that company passed a resolution to wind up voluntarily. Prior to the resolution plaintiff had given notice that he proposed to cancel the grant, acting under section 94 of the Property Land Act on account of non-compliance. The notice was served on a Mr. Millar, the then secretary of the company at New Plymouth. ARRANGEMENTS held up. Shortly after liquidation, Mr. James Clarke, of New Plymouth (since deceased) was appointed attorney for the liquidators, and an amicable settlement was made with him, whereby he arranged that certain portions of the land affected by the oil-boring rights should be released. An appointment was made to execute the document, and, unfortunately. Mr. Clarke was killed in an aeroplane accident on the very day for which he had made the appointment. Mr. E. R. C. Gilmour was appointed attorney, and an appointment was made for him to sign; but he was subsequently advised by his solicitors not to execute the documents. On March 22, 1920, Honeyfield sold a portion of the land (about half)- affected by the grant to E. R. C. Gilmour and James Clarke, the pur-chase-price being £2OOO. He had also sold the other half of the land to one Mackinder, while it was arranged that a small portion of the area should be dedicated to the New Plymouth Borough Council for road-widening purposes. The real reason for the present action was that none of the arrangements mentioned could be completed, owing to these oil-bearing rights being a clog on the title. The rights were to be held for 25 years.. Counsel remarked that there was one peculiarity about the grant—it was apparently not a document which was provided for in any section of the Land Transfer Act, and he submitted it should be removed from the title. The principal complaint in respect of the grant was that the company had ceased to bore on the land for a period of 12 months and upwards. The agreement stipulated that the company was bound to continue boring operations if payable oil was reached. There might be no legal definition of what payable oil was, but counsel thought the court could take into consideration the fact that a company with a capital of £400,000 actually got some oil through the two bores which were laid down; that they went further, and at the expense of thousands of pounds erected refining machinery, while the position to-day was that the company was in liquidation. His Honor asked how much money was available for the operations. Counsel replied that he did not know, but he knew that the company had obtained a considerable amount of assistance from the Government. Before the company went into liquidation attempts were made to get further assistance, but these were unsuccessful. THE MONEY SPENT. Continuing, Mr. Croker said he understood that all the assets of the company were to be disposed of under an agreement for sale to Mr. P. Hadley, subject to a mortgage to the State, the price being £5OOO. Here was the answer to the question whether payable oil had been reached. The company had used £275,000 of paid-up capital, together with the money borrowed from the Government. Nothing had been done for 12 months or more, and the bore was grown over with grass and rubbish. Mr. Croker submitted the Court was entitled to draw its own deduction as to whether payable oil had been obtained or not. On the grounds mentioned, plaintiff was asking for a cancellation of the grant. His Honor asked if there was any provision for payments to Honeyfield. Mr. Croker said that the only money plaintiff ever received was the sum of £lOO, which was paid to him at one period for damages when the company desired cancellation. He was supposed to receive royalty after the first thousand gallons of oil were taken, but as he had received no royalty, counsel thought it was quite natural to assume one thousand gallons had not been taken.

Plaintiff in evidence said the first company put down two bores, one of which was known, as the “Birthday” bore. After drilling for some time, oil was struck in the “Birthday.” This was in 1906. It was not quite six years since any oil had been taken from that bore, and it was now closed up. There was another bore, the “Rotary.” Oil, water and gas were struck ip that bore about eight or nine years ago. It was worked for twelve months, and then abandoned. He had received nothing in the shape of royalty, nor had he been supplied with any record of oil taken from the bores. The “Rotary” was lying on the site, rusting away; and, as far as he knew, the company had not taken any payable oil from the bores. Just before the formation of the defendant company there had been a boom in oil shares, and the shares of the previous company went up to £6O. To Mr. Hutchen: He had four £5 shares, fully paid up, in the Moturoa company. He sold three of these for a total of £l5O, and in exchange for the remaining share was given one hundred shares in the Taranaki Oil Wells, which was formed to take over the Moturoa company. He later sold these for £5O. His Hcnor asked if any oil had ever been sold from New Plymouth. Mr. Hutchen, in reply, quoted from the balance sheet of the Taranaki Oil Wells, Ltd., in 1914, showing stocks of crude and refined oil worth about £6OOO. Examined by Mr. Hutchen, the plaintiff said he did not agree with the statement in the company’s balance sheet that the average flow at one period was 40 barrels per week. He did not know whether an output of 20 barrels per week would constitute payable oil. Answering His Honor, plaintiff said it was about six years since any oil was taken from his property. THE ATTORNEY’S EVIDENCE. E. R. C. Gilmour, attorney for the liquidator, said that nothing had been done on the property for the last 17 months. He did not know whether a report had beei circulated to shareholders setting up the reasons for going into liquidation, as this occurred before he took the position of attorney. There was no question that had the wells been payable the company would not have been in liquidation today. In giving a description of the plan and buildings, he estimated the value of the casing in the bores at from four to five thousand pounds. He thought Nos. 2 and 5 wells might produce some oil if they were cleaned up. Neither of these were on Honeyfield’s property. At Honeyfield’s, the “Rotary” was absolutely defunct. In reply to His Honor, the witness said he had no idea of the amount of oil which was taken from the “Rotary,” nor had he any records. Touching on this point, Mr. Croker said he could gather no information about the point, though he had interviewed a number of persons whom he thought were likely to be able to supply some facts. Continuing his evidence, the witness said all the oil he had seen at the “Rotary” came out about a cupful at a time. He believed this particular well was plugged up with concrete. This concluded the case for the plaintiff. Mr. Hutchen contended that there was no case to answer, and urged that in a claim for forfeiture strict proof was requried. His Honor said he agreed with counsel so far as the facts were concerned, that there was not sufficient proof that the company had net reached payable oil. He pointed out, however, that the plaintiff had proved the company had not borsd on the property for over 12 months. Mr. Hutchen pointed out that the grant contained the proviso that the company should not be required to bore after reaching payable oil. His Honor said it was a question of what was payable, but he was not satisfied with the evidence placed before him, and he thought evidence could be got. He certainly did not think a well could be held to be payable because it happened to produce profitably for a week, fortnight, or month. Such would be quite a wrong construction. At present, how ever, he was not satisfied actually what the facts were. He thought it would be best for counsel for plaintiff to accept a non-suit and endeavor to get more evidence. His Honor said that at the same time he sympathised with defendant in having his land tied up and nothing done. In the course of further argument, His Honor said it would be quite impossible ; for him to decide that, because a company had gone into liquidation, they had not reached payable oil. Counsel intimated that he would accept a non-suit, judgment being entered accordingly.