Amann Aviation Pty Ltd v Commonwealth of Australia

[1988] FCA 21

Re: AMANN AVIATION PTY. LIMITED and COMMONWEALTH OF AUSTRALIA
And: COMMONWEALTH OF AUSTRALIA and AMANN AVIATION PTY.LIMITED
No. G667 of 1987
Contract - Practice

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Beaumont J.(1)

CATCHWORDS

Contract - Agreement with Commonwealth to provide coastal surveillance services - whether the contract contained an implied obligation on the part of the Commonwealth to perform its contractual undertaking in good faith - whether implied obligation to co-operate.

Practice - Pleading - application for leave to amend points of claim - whether pleading discloses an arguable cause of action.

HEARING

SYDNEY

#DATE 11:2:1988

Counsel and Solicitors for Amann Aviation Pty. Ltd.: L.C. Gruzman Q.C.,
D.A. Cowdroy and A.M. Gruzman instructed by Owen D. Hodge & Son.

Counsel and Solicitors for the Commonwealth of Australia: D. Grieve Q.C., P. Comans instructed by Australian Government Solicitor

ORDER

In respect of sub-paras. (vi) and (x) of para. 17 of the further amended points of claim and in respect of sub-para. (xii) of para.19, leave to amend is granted.

In respect of sub-paras. (xiv) of para.17 and (xv) of para.19, leave to amend is refused with liberty to re-plead.

In respect of sub-paras. (i), (ii), (iii), (iv), (v), (vii), (viii), (ix), (xi), (xii), (xiii) and (xv) of para. 17, para. 18 and sub-paras. (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x), (xi) (xiii) and (xiv) of para.19, leave to amend is refused.

The applicant pay three-quarter's of the respondent's costs of the application for leave to amend.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

The applicant has sued the Commonwealth claiming damages (i) for breach of a contract to carry out certain coastal surveillance services and (ii) in tort for negligent misstatement. The applicant has filed points of claim and now seeks to amend its pleading. The Commonwealth opposes the grant of leave to amend in respect of three paragraphs of the applicant's further amended points of claim (filed 19 January 1988) - paras. 17, 18 and 19. The Commonwealth's opposition to these amendments is grounded upon its claim that they are frivolous and vexatious and disclose no reasonable cause of action.

1. To place the contentious paragraphs in context, it is necessary to refer to the other allegations in the points of claim as follows:
   
   

(a) By letter dated 12 March 1987, the Commonwealth accepted a tender submitted by the applicant dated 25 November 1986 in compliance with a "Specification for Charter of Aircraft for Coastal Surveillance services" issued by the Commonwealth (para.2).

(b) Pursuant to the provisions of the contract, the applicant was required to carry out surveillance services on and from 12 September 1987 and, for this purpose, to have aircraft and personnel certified for flight by the Commonwealth (para.3).

(c) By representations made by the Commonwealth to the applicant after the award of the contract and prior to 1 September 1987, the Commonwealth (i) agreed that in certain respects absolute fulfillment of the applicant's contractual obligations was not required for the commencement of the contract and the applicant relied upon such representations and (ii) represented that in the event that the applicant was not in a position to comply totally with the terms of the written contract, the "penalty provisions" of the contract (cl. 2.23) might apply but not termination

(para.4).

(d) Pursuant to the contract, the applicant did a number of things and incurred substantial expenditure (paras. 5, 6).

(e) On or by 12 September 1987, the Commonwealth had given approval for the applicant's aircraft to commence flying operations (para. 7).

(f) On 12 September 1987 the aircraft commenced operations with the approval of the Commonwealth following inspections from 8.OO a.m. on that day (para. 8).

(g) Because of accidental or other circumstances beyond the control of the applicant, certain of the operations carried out on 12 September were not performed in the manner stipulated by the contract

(para.9).

(h) The Commonwealth is accordingly liable to the applicant in the sum of $13,946.58 for services performed or scheduled for 12 September (para.10).

(i) The services performed on 12 September complied with the applicant's contractual obligations because -

(i) they constituted substantial performance; or

(ii) they complied with the contract as varied by the oral representations described in para.4; or

(iii) any deficiencies in performance were attributable to circumstances beyond the control of the applicant (para.11).

(j) By cl.2.24 of the contract, it was provided that whenever the applicant fails to carry out the contract, the Secretary of the Commonwealth Department may, by notice in writing, require the applicant to show cause in writing why the contract should not be cancelled. If the applicant fails to show cause in writing, the Secretary shall be entitled to treat the contract as cancelled

(para.12).

(k) The Commonwealth failed to give any notice to show cause prior to its purported termination of the contract (para.13).

(l) If such a notice had been given, the applicant would have satisfied the Commonwealth that the contract should not be cancelled (para.14).

(m) In breach of the contract, the Commonwealth purported to terminate it on 12 September (para.15).

(n) It was a term of the contract that the parties would do all acts necessary to bring about its performance

(para.16).

1. The paragraphs now in contention (paras.17, 18 and 19) follow. They will be referred to shortly. It is convenient first to summarise the remaining allegations in the further amended points of claim as follows:
   
   

(o) Pursuant to its contractual obligations, the applicant continued its coastal surveillance on 13, 14 and 15 September with the knowledge of the Commonwealth (para.20).

(p) By 15 September, the Commonwealth had overtly demonstrated its determination not to be bound by the contract notwithstanding that the Commonwealth had failed to give any notice to show cause and had failed to give any notice of termination of the contract (para.21).

(q) In mitigation of any further loss, the applicant, by letter to the Commonwealth dated 15 September, rescinded the contract (para.22).

(r) The relationship between the parties gave rise to a duty of care on the part of the Commonwealth to give accurate information to the applicant (para.24).

(s) In breach of that duty, the Commonwealth gave information to the applicant which was erroneous in a number of respects (para.25).

1. The applicant claims declaratory relief and the said sum of $13,946.58 together with an order for repayment of the sum of $113,000.00 being the amount of the applicant's performance guarantee purportedly forfeited by the Commonwealth. The applicant also claims substantial general damages.

2. The Commonwealth concedes the making of the contract sued upon but disputes any breach on its part. Its case is that the applicant breached several essential terms of the contract, thus entitling the Commonwealth to terminate it.

3. As has been said, the matter now before the Court is an application by the applicant for leave to amend its points of claim; and this is opposed by the Commonwealth in part - as to paras. 17, 18 and 19 - on the ground that, because these allegations do not disclose any reasonable cause of action, it would be futile to permit these amendments.

4. The argument in the present application has proceeded on the conventional footing, first, that the Court should, for present purposes, assume that the facts alleged in the pleading can be established; and secondly, that the relevant test is whether it has been demonstrated that there is a "real question" that a cause of action of the kind alleged exists (see General Steel Industries Inc. v. Commissioner for Railways (N.S.W.) (1964) 112 CLR 125 at pp 129-130). To adopt the language of Mason J. (as he then was) in McCauley v. Hamilton Island Enterprises Pty. Ltd. (1986) 69 ALR 270 at p 274, the Court must be "satisfied that there is no possible foundation in law for the cause of action which the (applicant) seeks to litigate". See also Mutual Life & Citizens' Assurance Co. Ltd. v. Evatt (1970) 122 CLR 628 at p 631.

5. It will be necessary to deal separately with each sub-paragraph of paras. 17, 18 and 19. It will be remembered that in para.16 the applicant alleged that it was a term of the contract that the parties would do all acts necessary to bring about its performance. Para.17 then proceeds:
   
   

'17. In breach of the aforesaid term, the Respondent failed to do all acts necessary to bring about the contractual result.

Particulars

(i) The Respondent actively encouraged a third party, namely Chatwin Pty Limited

("Chatwin") to compete for the Coastwatch Contract despite its award to the Applicant and before the Applicant had been given the opportunity to fulfil the Coastwatch Contract. Chatwin traded as "Sky West Aviation".'

1. It is common ground that the contract imposed an implied obligation on each party "to do all that was reasonably necessary to secure performance of the contract" (see Secured Income Real Estate (Australia) Ltd. v. St. Martins Investments Pty. Ltd. (1979) 144 CLR 596 per Mason J. at p 607). This seems to be what was intended to be pleaded by the opening sentence of para.17. But sub-para.(i) of para.17 appears to raise a different issue. It alleges that the Commonwealth urged a third party to seek the "Coastwatch" contract.

2. The applicant does not here claim that the third party induced the Commonwealth to breach its contract with the applicant; there is no such claim, in tort, against the third party or against the Commonwealth. The claim made in this sub-paragraph is based upon the implied obligation of co-operation.

3. It may be that conduct of the kind alleged in this sub-paragraph could explain why the Commonwealth may have refused to co-operate in the performance of the contract. But to seek out the motives of the Commonwealth in so conducting itself is an impermissible and irrelevant inquiry. What is relevant is the conduct of the Commonwealth, looked at objectively. Its reasons for doing what is alleged against it are of no legal consequence. The only question is whether the Commonwealth did, in fact, co-operate to the degree required. If it did, the applicant cannot complain. If the Commonwealth did not do so, a number of legal consequences might follow. But, in any event, the Commonwealth's motives are irrelevant.

4. Put differently, in the absence of a fiduciary obligation (and none is suggested here), the rights given by the contract to the Commonwealth may be exercised by it in accordance with the terms of the contract, properly construed, irrespective of the reasons for exercising or not exercising those rights. The powers conferred upon the Commonwealth by the contract are not fiduciary powers; they are beneficial contractual rights. The only question is whether the conditions giving rise to these rights have been fulfilled (see Gordon v. Australian and New Zealand Theatres Limited (1940) 40 SR 512 per Jordan C.J. at p 517). The Commonwealth need not show that it was actuated by a legitimate purpose (see Champtaloup v. Thomas (1976) 2 NSWLR 264 per Glass J.A. at p 271; Hospital Products Limited v. United States Surgical Corporation (1984) 156 CLR 41 per Gibbs C.J. at pp 64-7; per Mason J. at pp 95-6; per Deane J. at pp 121-2; per Dawson J. at pp.137-140).

5. On behalf of the applicant, it was argued that "in every contract there is an implied covenant that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract, which means that in every contract there exists an implied covenant of good faith and fair dealing" (see Kirke La Shelle Co. v. Paul Armstrong Co. 263 N.Y. 79; 188 NE 163 (1933).

6. According to Professor H.K. Luecke ("Good Faith and Contractual Performance", Essays on Contract (Ed. by Professor P.D. Finn, 1986; at p.155), the majority of American jurisdictions now recognize a common law duty to perform contractual undertakings in good faith. But, as Professor Luecke acknowledges, this development has not become part of the Anglo-Australian law of contract (see at pp.173-4). As Wills J. said in Allen v. Flood (1898) AC 1 at p 46:
   
   

"...any right given by contract may be exercised as against the giver by the person to whom it is granted, no matter how wicked, cruel, or mean the motive may be which determines the enforcement of the right."

1. According to Lord Reid (White and Carter (Councils) Ltd. v. McGregor (1962) AC 413 at p 430):
   
   

"It might be, but it never has been, the law that a person is only entitled to enforce his contractual rights in a reasonable way, and that a court will not support an attempt to enforce them in an unreasonable way. One reason why that is not the law is, no doubt, because it was thought that it would create too much uncertainty to require the court to decide whether it is reasonable or equitable to allow a party to enforce his full rights under a contract."

1. Here the question which arises is concerned with performance of the contract. Different considerations may apply where the question is whether a condition precedent (or subsequent) to obligations arising under a contract has been fulfilled. In the case of an agreement for the sale of land made "subject to finance", it may be that, in considering the terms of finance that is offered, the purchaser is bound to act both reasonably and honestly (see Meehan v. Jones (1982) 149 CLR 571). In issue there was the question whether a contract had come into existence. Here the question is different, namely, whether it was open to the Commonwealth to exercise its contractual right to terminate its contract with the applicant notwithstanding that the Commonwealth did so with a view to giving the Coatchwatch contract to a third party. In my opinion, inquiry into the Commonwealth's motivation is immaterial. The only relevant question is whether, viewed objectively, circumstances existed which justified termination. If such circumstances did exist, the Commonwealth's power to determine the agreement would not be lost because it wished to advance the interests of a third party rather than the interests of the applicant.

2. On behalf of the applicant reliance is placed upon the decision of the Court of Appeal in Quennell v. Maltby (1979) 1 All ER 568. It was there held that in bringing an action for possession against a tenant on behalf of the mortgagor, a mortgagee was not acting bona fide to protect her security. Possession was refused on the ground that the action was contrary to the intention of Parliament as expressed in the Rent Acts. The case thus turned on the proper construction of that legislation and can provide no useful analogy here.

3. It follows, in my view, that although no exception could be taken to the general statement made in the opening sentence of para.17, the purported "particulars" given in sub-para.(i) fail to disclose any reasonable cause of action. The particulars do no more than give an historical narration of dealings alleged between the Commonwealth and a third party. If the tort of inducement of breach of contract were alleged, the particulars could possibly be sustained. But no such cause of action is alleged here. In the absence of any necessary connection between the particulars in sub-para.(i) and the implied obligation of co-operation, the sub-paragraph is vexatious and leave to raise it is refused.

4. By sub-para. (ii) of para.17, it is alleged:
   
   

"(ii) "The Respondent acceded to threats and pressure from Chatwin and in consequence reversed its requirements stated to the Applicant in the representations referred to in the particulars to paragraph 25 of the Points of Claim."

1. The comments made of sub-para.(i) are equally applicable here. Again, there is no tortious claim; nor is there any claim for judicial review on administrative law principles (see, e.g. Australian Capital Territory Health Authority v. Berkeley Cleaning Group Pty. Ltd. (1985) 60 ALR 284). There is no necessary connection between this assertion and the general claim made in para.17. Leave to amend is refused.

2. By sub-paras. (iii), (iv) and (v) of para.17, it is alleged:
   
   

"(iii) The Respondent collaborated with Chatwin concerning a temporary and permanent award to it of the Coastwatch Contract before any occasion arose to warrant any assertion of breach by the Applicant.

(iv) The Respondent acquiesced in investigations by Chatwin into the preparations of the Applicant to fulfil the Coastwatch Contract when it knew or ought to have known that such investigations were made with a view to the sabotage of the Coastwatch Contract.

(v) The Respondent actively encouraged the holder of an existing Contract for coastwatch services, namely Chatwin Pty Limited to continue its coastwatch services even after the date of commencement of the Coastwatch Contract and entered into an agreement or understanding with Chatwin that it would not permit the Applicant any extension or allow any relaxation of the terms of the Contract."

1. Leave to amend is refused on the grounds previously stated.

2. By sub-para. (vi) of para.17, it is alleged:
   
   

"(vi) The Respondent failed to co-operate with the Applicant by refusing permission to the Applicant to operate certain of its aircraft on the Coastwatch Contract while certain of its aircraft retained their United States registration."

1. It is conceivable that this allegation could involve a breach of the implied term of co-operation. Leave to amend is granted.

2. By sub-paras. (vii) and (viii) of para.17, it is alleged:
   
   

"(vii) The Respondent communicated confidential information to Chatwin concerning the arrangements which the Applicant was making to fulfil its obligations under the Coastwatch Contract.

(viii) The Respondent permitted information, known by it to be of a confidential nature relating to the Applicant's preparations, to be released for publication in circumstances that there existed the real probability that the publication would be harmful to the Applicant in its preparations."

1. There is no distinct claim in contract, or on equitable grounds, that the Commonwealth breached a confidence. It is not open to raise such a matter as "particulars" of an alleged breach of the implied obligation of co-operation. Leave to amend is refused.

1. By sub-para. (ix) of para.17, it is alleged:
   
   

"(ix) The Respondent made statements to the media concerning the Applicant which could reasonably be expected to hamper, obstruct or prevent third parties dealing with the Applicant in its preparations for the Coastwatch Contract."

1. The comments made in respect of sub-para.(ii) apply. Leave to amend is refused.

2. By sub-para. (x) of para.17, it is alleged:
   
   

"(x) On 12 September 1987 the Respondent caused delay to the inaugural flights under the Coastwatch Contract and in some instances such delay rendered all flights impossible of performance."

1. It is now common ground that this allegation discloses a possible cause of action. Leave to amend is granted.

2. By sub-para. (xi) of para.17, it is alleged:
   
   

"(xi) In respect of flights which were not performed by the Applicant in the manner required by the Coastwatch Contract for the reasons stipulated in Clause 2.23 thereof, the Respondent, even if it were not satisfied that the failures were due to accident or other reasonable cause beyond the control of the Applicant, did not apply the penalty provided by issued the purported Notice of Termination."

1. This allegation raises a question of election in the context of the proper construction of the contract. The point sought to be made may be arguable but not as "particulars" of an allegation of a breach of the implied term of co-operation. Leave to amend is refused.

2. By sub-para. (xii) of para.17, it is alleged:
   
   

"(xii) The Respondent failed to provide an (sic) "Show Cause" notice as prescribed by Clause 2.24 but instead elected to purport to terminate the Contract, thereby denying the Applicant any opportunity to show cause why the Contract should not be terminated and to rectify defects (if any) which existed in its performance."

1. For the reasons given in respect of (xi), leave to amend is refused.

2. By sub-para. (xiii) of para.17, it is alleged:
   
   

"(xiii) The issue of the Notice of Termination by the Respondent was in the circumstances unconscionable, peremptory and issued for purposes which were mala fide, namely to enable the Contract to be awarded to Chatwin, and/or pursuant to an arrangement, agreement or understanding made between the Respondent and Chatwin that the Respondent would not permit the Applicant any extension or relaxation."

1. For the reasons already given, this allegation is bad in substance as an attempt to plead an implied obligation of good faith in the exercise of contractual rights. Leave to amend is refused.

2. By sub-para. (xiv) of para.17, it is alleged:
   
   

"(xiv) Pursuant to the provisions of the Coastwatch Contract, certain tolerances in the performance of flying operations were permissible in order that the Applicant comply with its terms: See Clauses 2.22 and 2.23. If there were any deficiencies in the performance by the Applicant on or after 12th September 1987 then such operations complied with the contractual obligations."

1. If the particulars stood alone, they might be a good plea of "substantial performance". But there is no necessary connection between such a plea and the implied term of co-operation. Leave to amend is refused but liberty to re-plead is reserved.

2. By sub-para. (xv) of para.17, it is alleged:
   
   

"(xv) The respondent failed to co-operate with the Applicant by imposing an obligation on the Applicant that it fly seven coast watch flights on 12 September 1987 when it was open to the Respondent consistently with the contract that it require only four such flights on that day."

1. The pleading is short of detail and fails to explain precisely how the Commonwealth acquired the right to choose between seven and four flights. The plea is probably bad for obscurity but, in any event, would also be bad as an attempt to import an obligation of good faith. Leave to amend is refused.

2. Sub-para. 18 is as follows:
   
   

"18 It was an implied term of the Contract that the Respondent would not make any arrangement, agreement or understanding with any third party which would be contrary to the contractual obligations of the Respondent, yet the Respondent breached such term.

Particulars

Refer to Particulars set out in paragraph 17(i) to (xv) above."

1. It appears that this paragraph is an attempt to plead an implied obligation to act in good faith. For reasons already given, there is no room for such an implication. Leave to amend is refused.

2. Para. 19 alleges:
   
   

"19. As a consequence of the Respondent's conduct particularized in paragraph 17(i) to (xv) the Applicant was hindered, obstructed, delayed and prevented from effecting its arrangements for the implementation of the Coastwatch Contract.

Particulars

(i) Suppliers of capital with whom arrangements were made to provide aircraft lease finance, namely A.G.C. and Westpac, declined to fulfil earlier assurances that they would provide funds for the Applicant and informed the Applicant that they had been warned not to do business with the Applicant. In consequence, it became necessary for the Applicant to obtain alternative sources of finance for such purpose, namely through Continental Venture Capital Ltd.

1. As has been said, there is no claim here in tort for inducement of breach of contract. What is alleged is that the Commonwealth was obliged to perform its contract with the applicant in good faith. Since, in my view, there is no basis for importing such an obligation, the allegations made in sub-para.(i) of para.19, which are consequential upon the allegations in para.17, must also be bad. Leave to amend is refused.

2. By sub-paras.(ii), (iii), (iv) and (v) of para.19, it is alleged:
   
   

"(ii) Continental Venture Capital Ltd, acting as the agent of the Applicant for the purpose of arranging finance were informed by Bains Leasing that that company would be unable to offer finance without the risk of losing a major customer. Similar statements were made by officers of Westpac and A.G.C. In consequence it was necessary for the Applicant to arrange for a syndication through its agent, Continental Venture Capital Ltd, to purchase aircraft and for this purpose to require substantial contributions from members of that company.

(iii) The Applicant made arrangements with a large well established dealer in Aero Commander Aircraft in the United States for the supply of aircraft to fulfil the Applicant's obligations under the Coastwatch Contract. In consequence of the difficulties experienced by the Applicant arising from the actions of the Respondent, the task of modifying the aircraft, examining them and ensuring that they were safe and in suitable condition for registration on the Australian Register was substantially delayed.

(iv) In consequence of information supplied by the Respondent to Chatwin (hereafter referred to as "Sky West"), Mr. Meeke, Chief Executive of Sky West, learned of the places at which aircraft were being fitted and modified for the Applicant. Mr. Meeke thereupon visited Oklahoma City and Portland, Maine for the purpose of industrial espionage which contributed to the sabotage of the preparation of the Applicant.

(v) Following the award of the Coastwatch Contract to the Applicant, the media published statements concerning the viability of the Applicant and of its integrity. In certain instances, the Respondent issued statements highly prejudicial to the Applicant and rendering it more difficult for the Applicant to be accorded favourable treatment in its dealings with the various suppliers."

1. These sub-paragraphs suffer from the same deficiencies as sub-para.(i). Leave to amend is refused.

2. By sub-para. (vi) of para.19, it is alleged:
   
   

"(vi) In certain instances information of a highly confidential nature which was known only by principals of the Applicant, was conveyed to officers of the Respondent. Thereafter, such information was disseminated to other persons."

1. If it stood alone, this sub-para. might have been a good plea of a cause of action for breach of confidence at common law or in equity. However, when viewed in context, this is a plea based on the claim that there is an implied obligation of good faith. Leave to amend is refused.

2. By sub-paras. (vii) and (viii) of para.19, it is alleged:
   
   

"(vii) Shortly before the notification from the Respondent that the Coastwatch Contract had been awarded to the Applicant, the Applicant made inquiries in the United States and Australia concerning the availability of supply of Aero Commander 680FL aircraft and learned that there were approximately 18 aircraft of this type in America which would be suitable and 2 in Australia. On the day that the Coastwatch Contract was awarded to the Applicant, it made arrangements with agents in the United States to purchase 14 of the available Aero Commander 680FL aircraft, which were not in high demand. Approximately two weeks after the award of the Contract, the Respondent informed the Applicant that it had received information from a source which it was not prepared to identify, that the aircraft which the Applicant had given instructions to procure were no longer available. The Applicant was further informed by the Respondent that the engines which the Applicant proposed to install, namely Avco Lycoming 720 were not available. The Applicant had confided in the Respondent its plans to purchase 680FL aircraft for the purpose of fulfillment of the Coastwatch Contract and a special confidentiality was maintained by the Applicant. Subsequently, an officer of the Respondent acknowledged that there had been a disclosure of confidential information received from the Applicant.

(viii) During the course of the Applicant's preparation, information was provided to the Department of its progress. Correspondence discovered from the Respondent's records reveals that Sky West was provided with a detailed and intimate knowledge of the confidential provisions of the agreement between the Applicant and the Respondent and of the precise state of the Applicant's preparation. Such information could only have been supplied to Sky West by the Respondent."

1. Leave to amend is refused for the reasons given in respect of sub-para.(vi).

2. By sub-paras. (ix), (x) and (xi) of para.19, it is alleged:
   
   

"(ix) Mr. Meeke of Sky West during the course of a meeting with the Respondent following the award of the Coastwatch Contract to the Applicant, informed Mr Richardson that one of the aircraft of the Applicant had been impounded in the United States as a result of drug-smuggling activities. The report of Mr. Meeke was utterly baseless.

(x) Mr. Meeke, as Chief Executive of Sky West is directly accountable to Sir Peter Abeles who has control of Sky West. Documents produced by the Respondent show that Sir Peter Abeles communicated with the Respondent in an attempt to have the Contract with Amann set aside so that it could be restored to Sky West.

(xi) Departmental records of the Respondent also reveal that various officers wrote derogatory remarks casting disrepute upon directors of the Applicant, each of which remarks are without foundation."

1. There is no claim in tort for defamation. Again, each of these appears to be an attempt to plead a duty to act in good faith. Leave to amend is refused.

2. By sub-para. (xii) of para.19, it is alleged:
   
   

"(xii) The Respondent delayed preparation of the final Contract which caused a consequent delay in the Applicant attempting to arrange its finance for the Contract." This is a good plea as an allegation of a breach of the

implied obligation to co-operate. Leave to amend is granted.

1. By sub-para. (xiii) of para.19, it is alleged:
   
   

"(xiii) Following the award of the Contract the following events occurred:

a. Unknown persons placed the house of Mr Amann under surveillance. When approached by Police, the unknown persons claimed to have been from an investigation agency which was found to be non-existent.

b. On 30th April 1987 when Mr Amann departed from Australia for San Francisco, two passengers on board the Qantas flight followed Mr Amann to Portland, Maine, occupied the same hotel and followed Mr Amann as he made preparations for the Applicant's contractual obligations. The name used by one of such persons was "Brock". The Respondent has possession of transmissions from a person described as "B...". Such transmissions relate to the Applicant's state of preparations, yet the Respondent has refused to nominate the identity of such person.

c. Whilst Mr Amann was visiting his agents, namely North East Air in Portland concerning the supply of avionics for aircraft for use in the Coastwatch Contract, someone intervened by communicating with King Radio Corporation and Tracor Inc. which were avionics suppliers.

d. In July 1987 Mr Meeke travelled to Portland, Maine and Oklahoma City and thereby created a security crisis resulting in certain legal proceedings being taken against him following his attempts to gain access to hangers in which aircraft which had been ordered by the Applicant were being equipped.

e. Following Mr Meek's visit to Oklahoma City in July, certain aircraft sustained mechanical failures, namely in relation to the fuel controller, which were unexplained.

f. The installer of the long-range fuel tanks for certain of the aircraft ordered by the Applicant was contacted by Mr Meeke who inquired as to the progress of fittng such tanks.

g. A private investigator was retained, namely Peggy Sue Danner by Amann Aviation concerning Mr Meeke's visits to the United States. Subsequently information supplied by her was changed to the apparent advantage of Sky West. Such change followed a meeting between Mr Meeke and a person who posed as an applicant for a job with North East. Such meeting was photographed and Mr Meeke is depicted as having provided an envelope to the unknown person. Miss Danner had previously reported that the envelope carried by Mr Meeke contained cash. Subsequently Mr. Meeke made a public statement stating the envelope carried auto racing photographs.

h. Following arrival of various aircraft in Australia from the United States they were to undergo modifications for an Australian Certificate of Airworthiness. Hawker Pacific in Darwin was contacted and arrangements made for the aircraft to be converted. Following such arrangements Sky West brought into Darwin a large number of aircraft which were not normally serviced in Darwin and had never previously been to Darwin for service. Hawker Pacific had originally carried out work for Sky West and such work was given preference over and above that of the Applicant.

i. The Applicant was delayed in preparations of its aircraft in consequence of the conduct of the Respondent in adopting a fault-finding and unjustly officious attitude towards the Applicant."

1. This appears again to raise a claim of good faith as an implied contractual obligation. Leave to amend is refused.

2. By sub-para. (xiv) of para.19, it is alleged:
   
   

"(xiv) Allegations have been raised that the Applicant and/or its directors have been involved in the trafficking of illegal drugs. Such allegations were completely baseless."

1. There is no claim in tort for defamation. Leave to amend is refused.

2. By sub-para. (xv) of para.19, it is alleged:
   
   

"(xv) The contents of the notice of termination of contract have never previously been the subject of any reasons to terminate the Contract or even to foreshadow its termination. The Applicant, had it known that the Respondent proposed to rely upon the strict terms of the written Contract and require total compliance therewith, would have organized aircraft (subject to the delays caused or contributed to by the Respondent) to have been ready by 12th September 1987. In particular:

a. Long-range tanks could have been installed if they were demanded.

b. Bubble windows had been manufactured and were ready for installation. They could have been installed within two weeks from the start-up date. The absence of the bubble windows did not prevent the aircraft from fulfilling their major role.

c. Drop hatches could have been installed within a short period.

d. The serviceability of the aircraft was beyond question. They were serviceable and suitable for the task for which they were intended.

e. In the process of installation, certain radios went missing. They could have been installed within a very short period and did not affect the performance of the aircraft in any way."

1. It is possible that this could be a good plea of estoppel or perhaps of substantial performance. It appears to be an attempt to plead a duty to act in good faith. As such, this is a bad plea. Leave to amend is refused but liberty is reserved to re-plead.

2. In the circumstances, the applicant should pay three-quarters of the respondent's costs of this application.