Helicopter Services Cairns Pty Ltd v GBRH Holdings Pty Ltd

[2011] QDC 269

DISTRICT COURT OF QUEENSLAND

CITATION:

Helicopter Services Cairns Pty Ltd v GBRH Holdings Pty Ltd [2011] QDC 269

PARTIES:

HELICOPTER SERVICES CAIRNS PTY LTD
(ACN 097 868 776) as trustee for the Helicopter Services Discretionary Trust
(Applicant)
v
GBRH HOLDINGS PTY LTD (ACN 143 159 531)
(Respondent)

FILE NO/S:

150 of 2011

DIVISION:

Trial

PROCEEDING:

Application

ORIGINATING COURT:

District Court, Cairns

DELIVERED ON:

17 November 2011

DELIVERED AT:

Cairns

HEARING DATE:

21 October 2011

JUDGE:

Everson DCJ

ORDER:

1. I declare that the applicant is entitled to indemnity under the insurance policy in respect of the destruction of the helicopter to the exclusion of the respondent.

2. I order that $247,706.72, together with all interest earned thereon, be paid from the trust account of the respondent’s solicitors to the applicant.

CATCHWORDS:

INSURANCE- Helicopter insurance– Put and Call Option and Cross Hire Agreement– Helicopter destroyed- whether applicant entitled to indemnity under insurance policy to the exclusion of respondent

Mercantile Mutual Insurance (Workers’ Compensation) Ltd v AMEV Finance Limited and Anchorage Marine Underwriting Pty Ltd (1988) 5 ANZ Insurance Cases 60-855

COUNSEL:

P A Freeburn SC for the applicant
M Jonsson for the respondent

SOLICITORS:

Miller Harris Lawyers for the applicant
Williams Graham Carman Solicitors for the respondent

Introduction

1. On 1 June 2011 a Bell Jetranger 206B III helicopter, registration VH-BHU serial number 2964 (“the helicopter”) was destroyed.

1. Previously, on 16 August 2010, the applicant and the respondent had entered into a Put and Call Option and Cross Hire Agreement in respect of the helicopter (“the agreement”).  Pursuant to clause 13(4) of the agreement, the respondent entered into a policy of insurance No. 99 000 0913AVT with Allianz Australia Insurance Limited (“the insurance policy”).  The insurance policy insured the helicopter in the event of its destruction to an agreed value of $650,000.00 for the benefit of both the applicant and the respondent subject to an insurance deductible of 2.5% on any claim made, for a period of one year commencing on 16 August 2010.

1. The Commonwealth Bank of Australia was the holder of a registered mortgage over the helicopter securing monies owed to it by the applicant.

1. The insurer has agreed to pay out the full insured value of the helicopter to those lawfully entitled under the proceeds of the insurance policy.

1. With the agreement of the parties the insurer paid $386,043.28 to the Commonwealth Bank of Australia in discharge of monies owed to it as the holder of the registered mortgage over the helicopter.

1. In this proceeding, the applicant seeks declarations that it is entitled to indemnity under the insurance policy to the exclusion of the respondent and payment of the whole of the net proceeds of the insurance policy and an order that it be paid the whole of the net proceeds under the insurance policy.  It also seeks an order that the respondent indemnify it for the insurance deductible in the sum of $16,250.00 and orders for interest and costs.

The agreement

1. At the time of its destruction, the applicant was the owner of the helicopter which was the subject of the agreement.  Essentially, pursuant to the agreement:

(a)        The applicant agreed to grant the respondent an option to purchase the helicopter (“the call option”);

(b)        The respondent agreed to grant to the applicant an option to sell the helicopter to the respondent (the “put option”);

(c)        Until such time as the call option or the put option were exercised, the applicant was entitled to sell the helicopter to a third party subject to offering the respondent a right of first refusal;

(d)        Until either option was exercised or there was a sale to a third party, the applicant agreed to hire the helicopter to the respondent for a fixed monthly fee of $8,057.00 being equal to the loan repayments comprising principal and interest payable by the applicant to the Commonwealth Bank of Australia in respect of the helicopter;

(e)        In the event of the sale of the helicopter to any party, the applicant was obliged to repay the respondent the difference between the amount then owing in respect of the mortgage and the initial debt of $442,864.00 which as at 1 June 2011 was in the sum of $56,820.72.

1. As at the date of the destruction of the helicopter, neither the call option nor the put option had been exercised and the helicopter had not been sold to a third party.

1. Upon the destruction of the helicopter no further payments were made by the respondent to the applicant pursuant to the agreement.

1. Significant clauses of the agreement were in the following terms:-

1(6) “Subject to the terms of this Agreement, no interest in the Aircraft shall be vested in or transferred to the (respondent) until either the call option or the put option has been exercised.  Each option granted pursuant to this Agreement is to be construed and interpreted as an irrevocable offer made by one party to the other.;”

12(1) “Throughout the period of hiring, the (respondent) shall have exclusive use of the Aircraft and be entitled to use the Aircraft for its own commercial purposes, charter and air work subject to the terms and conditions of this Agreement.”

13(4) “The (respondent) shall be responsible for all risks of or in connection with the operation of the Aircraft by the (respondent), including risks of third party damage to persons or property and risks of liability towards persons who or whose property may be carried on the Aircraft during the hiring and the (respondent) undertakes to indemnify, release and hold harmless the (applicant) against all actions, claims, demands and liability howsoever arising (whether direct or indirect and irrespective of jurisdiction) from such risks and to cover the same adequately by an insurance or insurances with industry approved insurers with the (applicant’s) interest noted, and will maintain such insurance or insurances throughout the period of hiring.  Upon request, the (respondent) shall provide to the (applicant) evidence of the currency of any such insurance or insurances.”

The insurance policy

1. A number of parties including the applicant and the respondent were nominated as being insured pursuant to the insurance policy.  It included other aircraft.  It was general in its terms and did not specify which risks were covered in respect of which insured party.  In this regard it is aptly described as a composite policy and it is necessary to determine what indemnifiable loss, if any, has been sustained by the parties as a consequence of the destruction of the helicopter.[1]

   [1]Mercantile Mutual Insurance (Workers’ Compensation) Ltd v AMEV Finance Limited and Anchorage Marine Underwriting Pty Ltd (1988) 5 ANZ Insurance Cases 60-855

1. The relevant clause of the insurance policy provided:-

“We will at our option pay for …loss of …your aircraft from the risks covered…subject to any amounts to be deducted.”[2]

[2]Insurance Policy, section 1, para 1

Discussion

1. The respondent claims that it ought to be compensated under the insurance policy for the loss of its right to call for the purchase of the helicopter pursuant to the agreement.  It claims an expectancy quantified at $525,000.00 being the purchase price recorded in the agreement less the adjustment in the sum of $56,820.72 referred to in paragraph [7] above making a balance of $386,043.28 in respect of which it claims.  Putting aside the difficulties of assessing a loss of this type in the absence of any evidence of the likelihood of the respondent exercising its right, the difficulty with this submission is that at the date of its destruction the helicopter remained the property of the applicant, no interest in it having been transferred to the respondent by virtue of clause 1(6) of the agreement.

1. Whilst it is clear that prior to exercising its right to purchase the helicopter, the respondent could look to the insurance policy for indemnity in respect of such things as injury to third parties and damage to their property in the course of using the helicopter for its own commercial purposes, the respondent is not entitled to indemnity in respect of the loss of the helicopter itself where it was not the owner of it at the relevant time.  Any adjustments as to the purchase price, should the respondent exercise its option under the terms of the agreement, were contingent and did not confer upon the respondent an interest in the helicopter which corresponded to an entitlement to be indemnified under the terms of the insurance policy in the event the helicopter was destroyed while the agreement was in force.

1. The applicant also claims the deductible pursuant to the insurance policy in the sum of $16,250.00 from the respondent pursuant to clause 13(4) of the agreement as the respondent has undertaken to “indemnify, release and hold harmless” the applicant against “all actions, claims, demands and liability howsoever arising” and it is submitted that this extends to the liability to pay the deductible in respect of the claim on the insurance policy.

1. The above clause also obliged the respondent to cover these risks “adequately” by insurance in circumstances where the applicant was entitled to be provided with evidence of such insurance upon a request being made to the respondent.

1. The existence of the deductible is not unusual in a policy of insurance.  There is no evidence before me that the presence of the deductible meant that the above risks were not adequately covered by the insurance policy.  No issue was taken with the adequacy of the insurance policy by the applicant.  I am satisfied that the obligation to indemnify the applicant by the respondent was adequately addressed by the insurance policy which provided for the helicopter being insured for an agreed value of $650,000.00 where the purchase price under the agreement was only $525,000.00.  There is simply no evidence before me which justifies the claim for the deductible in the circumstances.

1. The applicant also claims interest on the net proceeds of the insurance policy where there have been extensive negotiations with the insurer resulting in the insurer agreeing to pay out the full insured value of the helicopter in the sum of $650,000.00, the insurer paying out the mortgage to the Commonwealth Bank of Australia in the sum of $368,043.28 on 3 August 2001 and paying the balance of the proceeds of the insurance policy less the deductible in the sum of $247,706.72 into the trust account of the respondent’s solicitors for investment in an interest bearing account pending determination of this dispute. 

1. In all of the circumstances it has not been demonstrated to me that the applicant should be entitled to interest on the sum of $247,706.72 over and above that which is accruing pursuant to the arrangement between the parties.  The parties appear to have commendably cooperated with each other, the insurer and the Commonwealth Bank of Australia with a view to finalising this matter as expeditiously as possible.

Conclusion

1. The applicant was the owner of the helicopter at the time it was destroyed and the agreement did not alter this. The respondent did not suffer an indemifiable loss pursuant to the terms of the insurance policy merely upon the destruction of the helicopter. It follows that the applicant is entitled to be indemnified under the insurance policy to the exclusion of the respondent. The applicant is entitled to the net proceeds of the insurance policy in the sum of $247,706.72 together with interest earned thereon following the investment of this sum by the respondent’s solicitors.

Orders

1.          I declare that the applicant is entitled to indemnity under the insurance policy in respect of the destruction of the helicopter to the exclusion of the respondent.

2.          I order $247,706.72 together with all interest earned thereon be paid from the trust account of the respondent’s solicitors to the applicant.