Island Helicopters Pty Ltd v Central (Qld) Aviation Pty Ltd
[2017] FCCA 1665
•19 July 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| ISLAND HELICOPTERS PTY LTD v CENTRAL (QLD) AVIATION PTY LTD & ANOR | [2017] FCCA 1665 |
| Catchwords: CONTRACTS – Discharge of lease agreement by repudiation – helicopter destroyed as a result of crash – lessee makes no payments under lease agreement for period after date on which helicopter crashed – whether by not making such payments lessee repudiated the lease agreement – whether lessor elected to terminate the lease agreement on account of claimed repudiation by lessee of lease agreement so as to entitle lessor to loss of bargain damages – no evidence lessor elected to terminate lease agreement. CONTRACTS – Discharge of lease agreement by frustration - whether because helicopter was destroyed as a result of a crash the lease agreement was discharged by frustration – whether at the time the helicopter was destroyed the lessee bore the onus of proving it did not induce the crash – lease agreement frustrated. CONTRACTS – Whether under the lease agreement the lessor was required to insure not only the Helicopter but equipment that was also hired to the lessee under the lease agreement. CONSUMER LAW – Misleading or deceptive conduct – whether terms in lease agreement constituted representations as to future matters – whether lessee adduced evidence it had reasonable grounds for making the representations constituted by the terms of the lease agreement – whether lessor relied on the terms to deliver the helicopter to lessee – whether lessor suffered any loss by relying on the terms. CONSUMER LAW – Misleading or deceptive conduct and unconscionable conduct – whether lessee represented to the lessor it would pay additional insurance premium that became payable by lessor because the helicopter was to operate in PNG – whether lessor suffered any loss or damage. |
| Legislation: Civil Aviation Act 1988 (Cth), ss.3, 6, 7, 7(b) Trade Practices Act 1974 (Cth), ss.51AA, 51AC, 51A, 51A(2), 52, 52(1), 82 |
| Cases cited: Al Achrafi v Topic [2016] NSWSC 1807 Allied Mills Ltd v Gwydir Valley Oilseeds Pty Ltd [1978] 2 NSWLR 26 Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7 EPI Environmental Technologies Inc & Anor v Symphony Plastic Technologies plc [2005] 1 WLR 3456 Re Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd [1993] FCA 265; (1993) 42 FCR 470 Sykes & Ors v Reserve Bank of Australia (1998) 88 FCR 511; [1998] FCA 1405 |
| Applicant: | ISLAND HELICOPTERS PTY LTD (ACN 099 003 719) |
First Respondent: | CENTRAL (QLD) AVIATION PTY LTD (ACN 010 620 014) |
| Second Respondent: | ERIC WEBB |
| File Number: | SYG 371 of 2014 |
| Judgment of: | Judge Manousaridis |
| Hearing date: | 22, 23 & 24 June 2016 |
| Date of Last Submission: | 24 June 2016 |
| Delivered at: | Sydney |
| Delivered on: | 19 July 2017 |
REPRESENTATION
| Counsel for the Applicant: | Mr M Bennett |
| Solicitors for the Applicant: | Marsden Law Group |
| Counsel for the Respondents: | Mr O Fagir |
| Solicitors for the Respondents: | McCullough Robertson Lawyers |
ORDERS
Judgment for the applicant against the first respondent in the sum of $31,662.85.
The proceeding is dismissed as against the second respondent.
The parties have liberty to apply by 9 August 2017 on the question of costs.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 371 of 2014
| ISLAND HELICOPTERS PTY LTD (ACN 099 003 719) |
Applicant
And
| CENTRAL (QLD) AVIATION PTY LTD (ACN 010 620 014) |
First Respondent
| ERIC WEBB |
Second Respondent
REASONS FOR JUDGMENT
Introduction
On 18 November 2009 the applicant (Island Helicopters) and the first respondent (CQ Aviation) entered into an agreement in Australia (Lease Agreement) under which Island Helicopters agreed to lease to CQ Aviation a helicopter (Helicopter). On 20 February 2010, after CQ Aviation took possession of it, the Helicopter was destroyed in a crash in Papua New Guinea (PNG).
These events have generated three disputes. The first concerns the additional premium of $71,305 (Premium Differential) Island Helicopters paid to obtain insurance for the Helicopter’s operations in PNG. Island Helicopters alleges, and CQ Aviation denies, that, by early February 2010, CQ Aviation agreed to pay Island Helicopters an amount equal to the Premium Differential. Alternatively, Island Helicopters alleges, and CQ Aviation denies, that, before it agreed to CQ Aviation’s taking the Helicopter out of Australia for use in PNG, CQ Aviation, in breach of s.52(1), s.51AA, and s.51AC of the Trade Practices Act 1974 (Cth) (TPA), represented to Island Helicopters that it would pay to it an amount equal to the Premium Differential.
Island Helicopters claims the agreement and representation by CQ Aviation to pay the Premium Differential were made in conversations between Mr Sweeney, the director of Island Helicopters, and the second respondent, Mr Webb, who is the director of CQ Aviation. Because there is disagreement about what was said in those conversations, the resolution of the first dispute substantially turns on whether I accept Mr Sweeney’s evidence of those conversations. The resolution of the first dispute also turns, in part, on the proper construction of the Lease Agreement. Island Helicopters alleges, and CQ Aviation denies, that, on its proper construction, the Lease Agreement, when made, permitted CQ Aviation to operate the Helicopter only in Australia.
The second dispute concerns Island Helicopters’ claim that it would have made a profit of $156,500 had the Lease Agreement run its course. Island Helicopters claims that CQ Aviation is liable to pay damages in the amount of the lost profits because CQ Aviation repudiated the Lease Agreement after the Helicopter was destroyed by not making the payments it was required to make under the Lease Agreement. Alternatively, Island Helicopters claims its not having earned the profit of $156,500 represents the loss and damage it suffered as a consequence of CQ Aviation’s contraventions of the TPA.
CQ Aviation denies it is liable to pay any amount on account of the loss of profit Island Helicopters might have earned on the Lease Agreement. CQ Aviation claims the destruction of the Helicopter on 20 February 2010 frustrated the commercial purpose of the Lease Agreement and, for that reason, the parties’ obligations under the Lease Agreement were immediately discharged. CQ Aviation also claims that Island Helicopters was indemnified by its insurers for the loss it suffered and that, even if Island Helicopters suffered loss, it failed to act reasonably to mitigate its loss.
The third dispute concerns equipment that was leased to CQ Aviation together with the Helicopter. This equipment was described in the Lease Agreement as “blade tie”, “floats”, “wheels”, and “6 David Clark Headsets” (Equipment). The Equipment was destroyed when the Helicopter was destroyed, and Island Helicopters claims CQ Aviation is liable to pay to it the value of the Equipment. CQ Aviation denies it is liable to pay the value of the Equipment because it claims that, under the Lease Agreement, Island Helicopters agreed to insure the Helicopter and the Equipment.
In addition to these three matters that are in dispute, Island Helicopters claims CQ Aviation owes it $20,900. That represents the balance of an invoice for $75,000 Island Helicopters issued to CQ Aviation for reimbursement of the excess Island Helicopters paid under its insurance policy in relation to the destruction of the Helicopter. There is no dispute that CQ Aviation was liable to pay the excess of $75,000; and there is no dispute CQ Aviation reimbursed Island Helicopters for all but $20,900 of the excess Island Helicopters paid to its insurers. This means that, even if Island Helicopters were to fail on all its claims, it would be entitled to judgment against CQ Aviation for $20,900, together with interest.
Arrangement of reasons
These reasons are organised as follows. I will first set out the facts that are not in dispute. These largely consist of telephone conversations and email communications between Mr Sweeney and Mr Webb. Second, I will set out the evidence, and my findings, in relation to the disputed conversations. Third, I will summarise my principal findings of facts. Fourth, I will identify the issues that arise on the pleadings. Finally, I will consider each of the issues that arise on the pleadings.
Facts not in dispute
On or about 1 October 2009 Mr Sweeney placed an advertisement in the industry newspaper, Aviation Trader, that Island Helicopters had available for hire one Bell Helicopter, Model 206L-1 (that is, the Helicopter).[1] On or around 15 October 2009 Mr Webb responded to the advertisement by telephoning Mr Sweeney.[2]
[1] Sweeney affidavit 25.03.15, [9]
[2] Sweeney affidavit 25.03.15, [10]; Webb affidavit 19.10.2015, [9]
Mr Sweeney and Mr Webb had a number of telephone conversations about CQ Aviation’s leasing the Helicopter from Island Helicopters.[3] That resulted in Mr Sweeney, on 16 November 2009, sending to Mr Webb a draft document described as “Agreement for Lease of Aircraft”.[4] The draft named Mr Webb as the lessee. Mr Webb, however, requested the agreement be with CQ Aviation.[5] Mr Sweeney sent to Mr Webb an amended draft that Mr Webb signed on behalf of CQ Aviation on 18 November 2009.[6] (This is the Lease Agreement.)
[3] Sweeney affidavit 25.03.15, [11], [12]; Webb affidavit 19.10.2015, [11]
[4] Sweeney affidavit 25.03.15, [15]; CB55-62
[5] Sweeney affidavit 25.03.15, [16]
[6] Sweeney affidavit 25.03.15, [17], [18]; CB63-68
Under the Lease Agreement Island Helicopters agreed to lease to CQ Aviation the Helicopter for two years from the date of execution of the Lease Agreement, with an option to extend for a further twelve months on the terms set out in clause J. CQ Aviation also agreed to pay the fees specified in Item 5 to the Lease Agreement. That item provided that CQ Aviation would fly the Helicopter for a minimum of 25 hours per month, and that it would pay Island Helicopters $900 per hour (inclusive of GST).
The Lease Agreement contained terms that dealt with other matters. These included a warranty by Island Helicopters that it held the licences, permits, and authorisations necessary for the “general utilisation” of the Helicopter, and Island Helicopters’ agreeing to allow CQ Aviation the use of, and CQ Aviation agreeing to use the Helicopter “as per the manufacturer specifications in conjunction with the applicable Civil Aviation Laws of Australia”. Particularly relevant to the issues in this case is clause G of the Lease Agreement, which dealt with insurance:
The Lessor is responsible to ensure that the helicopter is insured as to item 1 below, and the lessee is responsible as to item 2 below, at all times during the currency of this agreement and pay the costs associated with such insurance coverage of the aircraft as more specifically described hereunder.
1.Hull insurance as defined in Item 8 of the Schedule.
2.For Third Party Legal Liability and Passenger Legal Liability for a combined single limit of not less than A$10 million.
The Lessee agrees to supply at the Lessor’s request, copies of all insurances with respect to the helicopter, which shall include all details as specified in Item 8.
In the event of any insurance claim, the Lessee shall be responsible for 100% of any insurance excess payable.
Item 8 provided as follows:
The helicopter is appropriately insured, including:
1)Hull Insurance to the value of $A1,000,000.00. (Lessor’s responsibility)
2)Third Party and Passenger Liability Insurance. (Lessee’s responsibility) for their respective rights and interests to be noted as owner/lien holder on the policy.
3)Breach of Warranty Endorsement included in favour of lien holder: CBFC Limited.
4)First Loss payee clause in favour in favour: Owner/lien holder.
5)Insurance excess payable as per Clause G hereof.
6)All insurance premiums are the responsibility of the Lessor with the exceptions as noted in Clause G hereof.
On 22 November 2009 Mr Webb met Mr Sweeney at Shute Harbour Airport and took possession of the Helicopter. [7] Mr Webb delivered to Mr Sweeney a cheque for $22,500.[8] On the same day Mr Sweeney sent Mr Webb the following email:[9]
As we discussed the following sets out further terms for the operation of [the Helicopter] under the Crosshire Agreement [sic] we executed on the 18th of November 2009.
1.When the aircraft is undertaking a long ferry, say, in excess of 2 hours flying time, a ferry rate of $800.00 per hour (inclusive of GST) will apply.
2.The minimum hours payable each month under the crosshire [sic] agreement is 25 hours ($22,500.00) This minimum is subject to a 3 month rolling calculation, where a shortfall in any month within the 3 month window can be credited back against hours flown in excess of the minimum in another month within the 3 month window. . . . .
3.Island Helicopters will source a new hook and frame for [the Helicopter]. In the short term Eric Webb will supply the Hook & Frame.
4.Island Helicopters will Fit a HF and UHF radio to [the Helicopter].
5.Due to the remote location of the aircraft and the costs of arranging appropriate labour for both Scheduled and Unscheduled maintenance, it is agreed that Island Helicopters Pty Ltd and Central (Queensland) Aviation Pty Ltd will share all travel and accommodation costs on a 50/50 basis.
[7] Sweeney affidavit 25.03.15, [19]; Webb 19.10.15 affidavit, [23]
[8] Sweeney affidavit 25.03.15, [20]
[9] Sweeney affidavit 25.03.15, [30]; CB72
I trust this properly reflects our discussions and I look forward to working with you.
On 26 November 2009 the Helicopter was delivered to Tadgell Aviation Services Pty Ltd (TAS) at Caloundra Airport.[10] TAS was then in the business of maintaining, selling, and leasing helicopters.[11] The Helicopter was delivered to TAS for the purposes of a 300 and 600 hourly service together with modifications, including the fitting of a HF Radio and a cargo hook and sling kit.[12] At the time the Helicopter was delivered to TAS, Mr Sweeney’s son, Mr Sean Sweeney, told Mr Tadgell, the principal of TAS, that the Helicopter was being sent to PNG for commercial charter contracts, and that the fitting of the HF radio, cargo hook, and sling kit was “for PNG purposes”.[13]
[10] Sweeney affidavit 25.03.15, [24]; Webb affidavit 19.10.2015, [26], [27]
[11] Tadgell affidavit 19.10.2015, [2]
[12] Tadgell affidavit 19.10.2015, [6]
[13] Tadgell affidavit 19.10.2015, [7]
Work was done to the Helicopter that included the installation of a HF radio. In addition TAS modified the Helicopter to fit a hook system to allow for sling operations, and to prepare the Helicopter for operations in very wet and humid conditions.[14] The work was completed by 1 February 2010.[15]
[14] Sweeney affidavit 25.03.15, [31]
[15] CB77
In the meantime, before 2 December 2009, Mr Sweeney informed Island Helicopters’ insurance broker, Jardine Lloyd Thompson Pty Limited (JLT), of the possibility that the Helicopter would be operating in Papua New Guinea (PNG).[16] That is apparent from the following email Mr Sweeney received on 2 December 2009 from Ms Heagney of JLT:[17]
Please find attached the amended [premium] funding quote including the endorsement premium for SHA [i.e., the Helicopter] going to full flight risks, and the invoice for your records.
With regards the possibility of SHA going to PNG, we do have to advise the underwriters to get the policy extended to cover the overseas operations of the aircraft. I will speak to the underwriters to ascertain what information they will require if this goes ahead.
[16] CB86
[17] CB80
The premium funding quote referred to four separate risks.[18] One of these was for “Aviation Hull” with effect from 31 October 2009.[19] The premium for this insurance was $14,753.71 (including GST and stamp duty).[20] The email also attached an endorsement recording that, with effect from 20 November 2009, the cover for the Helicopter was increased to “Full Flight Risks” with an agreed value of $1 million, and noting the interest of CQ Aviation as an additional insured under the liability sections of the policy. The endorsement also recorded next to the words “Geographical Limits” the words “Commonwealth of Australia (excluding Antarctica, MacQuarie Island, Heard Island and McDonald Island)”.
[18] CB82
[19] CB82, 84
[20] CB84
On 1 February 2010 Mr Sweeney sent to Mr Webb an email stating that, “[a]s you know”, the Helicopter “is ready to go and is waiting at Tadgell’s”.[21] Mr Sweeney also said that he needed to “start getting a return on it so the 25 hour minimum under the contract, which has been suspended until now, will have to apply from 1 February 2010”.
[21] CB242
On 7 February 2010 CQ Aviation took possession of the Helicopter from Mr Sweeney at Caloundra Airport.[22] The Helicopter was flown to Emerald and, by 9 February 2010, the Helicopter had landed on Horn Island in the Torres Strait.[23]
[22] Sweeney affidavit 25.03.15, [40]; Webb affidavit 19.10.2015, [37]
[23] Webb affidavit 19.10.2015, [38]; CB244
On 8 February 2010 Mr Sweeney sent an email to Ms Heagney of JLT as follows:[24]
[24] Exhibit A
As previously advised, VH-SHA is going to work up in PNG. It has returned to Flying Duties as of today 8th February 2010.
It is going to kiunga [sic] airport in the western province of PNG.
This is the lowland areas and will primarily be doing survey work.
I expect it will transfer to PNG on Thursday 11th February 2010.
At 10:22 am on 10 February 2010 Mr Sweeney sent the following email to Mr Webb:[25]
[25] CB95
I am advised by JLT that there will be a surcharge on my insurance premiums for SHA [i.e., the Helicopter] due to the aircraft operating in PNG.
This was not part of the rate charged under the Crosshire [sic] agreement and will have to be an additional fee which I will bill monthly.
I don’t know what it will be yet, but hopefully not too much.
I will let you know as I hear.
By email sent at 11:21 am on 10 February 2010 Mr Richardson, from JLT, informed Mr Sweeney that the insurers of Island Helicopters were not prepared to cover the Helicopter’s operations in PNG, but JLT obtained quotes from two other insurers.[26] The email stated the annual premium “will increase from $16,200 to $87,505”, and that the “excess increases from 5% to 7.5%”. The email continued as follows:[27]
You mentioned that you will need to get Eric Webb to agree to pay the additional costs to make this a viable proposition and look forward to your confirmation that the aircraft will be still going. We note that the aircraft is scheduled to leave for PNG shortly and have placed cover accordingly, however we await your confirmation.
[26] CB90
[27] CB90
At 5:12 pm on 10 February 2010 Mr Sweeney sent to Mr Webb an email in which he extracted part of the email Mr Sweeney received from JLT noting that the annual premium “will increase from $16,200 to $87,505”.[28] Mr Sweeney concluded his email as follows:
I note your confirmation that you will cover the increased premium (above my standard premium which I will cover), which I will bill monthly and I look forward to your email on this.
[28] CB96
Mr Webb did not respond by email.
On 16 February 2010 the Helicopter was flown from Horn Island to Kiunga Airport in PNG,[29] and it commenced charter operations in PNG on 19 February 2010.[30] On 20 February 2010 the Helicopter crashed, as a consequence of which it was destroyed.[31] On 21 February 2010 Mr Sweeney informed JLT of the accident.[32]
[29] Webb affidavit 19.10.2015, [41], [42]; CB244
[30] Webb affidavit 19.10.2015, [43]. Mr Webb in his affidavit states 2014 rather than 2010. That is an obvious error.
[31] Sweeney affidavit 25.03.15, [61]; Webb affidavit 19.10.2015, [44]
[32] CB111
On 28 February 2010 Island Helicopters issued an invoice to CQ Aviation for $71,305.[33] The description of the charge is as follows:
Insurance premium differential for PNG operations as agreed between Alan Sweeney, Eric Webb and Jardine Lloyd Thompson Pty Ltd by telephone and email dated 10th February 2010. Base premium $16,200.00 Final PNG Operations Premium billed by JLT on Invoice 437179 $87505.00.
[33] CB105
The $71,305 is the Premium Differential, and is the difference between the premium Island Helicopters was charged after it obtained cover for the Helicopter’s operations in PNG, and the $16,200 which appears to be the premium that was payable to the insurer who covered the Helicopter’s operations in Australia.
On 17 March 2010 Mr Sweeney received an email from Mr Knight of Michael Knight & Associates Pty Ltd, who appears to have been the loss assessor appointed by the insurers to investigate the accident.[34] Mr Knight said the insurers decided to settle the claim “on the basis of a constructive total loss”. The email further stated that the insurers would pay $925,000, being the difference between $1 million less an excess of $75,000; and of the $925,000, $562,657.46 was to be paid directly to the Commonwealth Bank. That left $362,342.54 to be paid into Island Helicopters’ nominated bank account.
[34] CB115
On 17 March 2010 Island Helicopters agreed to accept from its insurers $925,000 in full and final settlement of the claims it made under its policy of insurance in relation to the Helicopter.[35] $562,657.46 was paid directly to the Commonwealth Bank. Mr Sweeney, however, authorised the insurers to pay the $362,342.54 directly to JLT for the purpose of permitting JLT to deduct from that amount the Premium Differential. That occurred resulting in JLT depositing $274,342.54 into the account of Island Helicopters.[36]
[35] CB112
[36] Sweeney affidavit 25.03.15, [68]-[73]
On 24 March 2010 Mr Sweeney sent to Mr Webb an email attaching “all invoices in relation to the operation” of the Helicopter “as per the” Lease Agreement together with a credit note.[37] Four invoices were attached. Mr Sweeney described the invoices and credit note as follows:
[37] CB133
229 Hours Billing for November 2009 $15,760.00
236 Hours Billing for February 2010 $16,640.00
238 Insurance Excess Payable $75,000.00
239 PNG Insurance Premium Differential $71,305.00
CR237 Credit note for deposit paid ($22,500.00)
Mr Sweeney then stated:
Eric, I have already paid the Insurance Excess and the full years premium so am very badly out of pocket and suffering. I have also lost my future income through the destruction of the Helicopter and, as it was my retirement income, will now struggle.
Could you please advise me when I can expect payment of the amounts outstanding.
On 13 April 2010 Mr Webb sent an email to Mr Sweeney in which he said he was waiting for “the report on the engine as from my part and yours if it had not failed this problem may not have been affecting us”.[38] Mr Sweeney sent an email on 28 April 2010 in which he referred to “our outstanding account of $156,205.00 and must insist that you make an immediate payment against this account”.[39] Mr Sweeney said that a payment of $50,000 would give him an opportunity “to work out a payment plan for the balance of the amount owing with you”. On 6 May 2010 Mr Webb sent to Mr Sweeney the following email:[40]
Hello alan I am having a meeting tomorrow with my new accountants and still don’t know where to find this extra money for the fuckup in PNG I do want to meet with you im flying today regards Eric
[38] CB138
[39] CB139
[40] CB141
Conversations disputed or not agreed
There are two matters it would be useful to discuss before I consider the conflicting evidence of the conversations between Mr Sweeney and Mr Webb. The first is the approach I propose to take when assessing the conflicting evidence; and the second is the weight I propose to give to evidence of what Island Helicopters contends are admissions by Mr Webb.
Approach
In his written closing submissions, counsel for Island Helicopters made general submissions about the credibility of Mr Sweeney and Mr Webb. Counsel submitted Mr Sweeney was “a forthright witness” who, when challenged in cross-examination on particular issues, “did not seek to deny or evade the question”, but “rather met the question head on and often made concessions”.[41] On the other hand, counsel submitted, Mr Webb was “frequently elusive in his answers”, he gave “self serving evidence”, he was prepared to make “outlandish statements”, he did not have a “thorough understanding of his own affidavit”, he “often raised new evidence that was clearly relevant at the time of the affidavit”, and he was “selective as to use of emails”.[42]
[41] Applicant’s Closing Submissions [29]
[42] Applicant’s Closing Submissions [30]
These submissions imply that the disputed evidence of conversations is to be determined, at least in part, by my first making general credibility findings in relation to Mr Sweeney and Mr Webb, and then applying such findings when deciding which of the conflicting evidence I should prefer. In my opinion, however, it is not appropriate that conflicting evidence of conversations or other matters should be resolved in this way; at least not where, as is the case before me, there is relevant contemporaneous evidence or where, as is also the case before me, aspects of a witness’s evidence that are not challenged or disputed are consistent with that part of the witness’s evidence that is disputed.
The credibility of a witness depends on a number of matters. These include not only the witness’s willingness to tell the truth, but also the extent to which the witness had the opportunity and capacity to perceive the events to which the witness’s testimony relates; the extent to which the witness has the capacity to remember, recall, and communicate the matters to which the testimony relates; the extent to which the witness’s evidence is internally consistent and consistent with other objective evidence; and the extent to which the witness’s conduct is consistent with the witness’s evidence. Thus, for example, it has been said that the “most important tests of credibility are the consistency of a witness’s evidence with what can be shown to have occurred, and with what he has said or done previously”;[43] and it is necessary to keep in mind the following:[44]
(i) First, it is essential to evaluate a witness's performance in the light of the entirety of his evidence. Witnesses can make mistakes, but those mistakes do not necessarily affect other parts of their evidence. (ii) Second, witnesses can regularly lie. However, lies themselves do not mean necessarily that the entirety of that witness's evidence is rejected. A witness may lie in a stupid attempt to bolster a case, but the actual case nevertheless remains good irrespective of the lie. A witness may lie because the case is a lie."
[43] Cambridge v Makin [2011] EWHC 12 (QB) at [211]. I owe my becoming aware of this case to the article by Master Bell “An introduction to judicial fact-finding”, Commonwealth Law Bulletin, (2013) Vol. 39, No.3, 519 at page 528
[44] EPI Environmental Technologies Inc & Anor v Symphony Plastic Technologies plc [2005] 1 WLR 3456 at [74] (Peter Smith J)
It is also useful to keep in mind the following observations made by McLelland CJ in Watson v Foxman & Ors:[45]
[H]uman memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.
[45] (1995) 49 NSWLR 315 at page 319
I propose to assess the disputed evidence of conversations by applying the approach Justice MacKenna said he used to determine facts.[46]
This is how I go about the business of finding facts. I start from the undisputed facts which both sides accept. I add to them such other facts as seem very likely to be true, as, for example, those recorded in contemporary documents or spoken to by independent witnesses like the policeman giving evidence in a running-down case about the marks on the road. I judge a witness to be unreliable if his evidence is, in any serious respect, inconsistent with these undisputed or indisputable facts, or of course if he contradicts himself on important points. I rely as little as possible on such deceptive matters as his demeanour. When I have done my best to separate the true from the false by these more or less objective tests, I say which story seems to me the more probable, the plaintiff's or the defendant's, and if I cannot say which, I decide the case, as the law obliges me to do, in the defendant’s favour. The plaintiff has failed to discharge the burden of proof.
[46] MacKenna, B., “Discretion” (1974) 9 (new series) The Irish Jurist, 1 at page 10
It will be apparent from my analysis of the evidence below that, however much it could be said Mr Sweeney was “a forthright witness” who, when challenged in cross-examination on particular issues “did not seek to deny or evade the question”, but “rather met the question head on and often made concessions”, Mr Sweeney’s evidence of conversations he says he had with Mr Webb for the most part are inconsistent with the contemporaneous written communications between Mr Sweeney and Mr Webb, and between Mr Sweeney and Island Helicopters’ insurance broker. On the other hand, Mr Webb’s evidence is consistent with the communications he had with Mr Sweeney, and is also consistent with aspects of his evidence that has not been challenged. For these reasons, it will be unnecessary for me to rely on the demeanour or performance as witnesses of either Mr Sweeney or Mr Webb to resolve the conflicts of evidence.
Claimed admissions by Mr Webb
Island Helicopters claims Mr Webb made admissions. These are said to arise from Mr Webb’s not disputing CQ Aviation’s liability to pay the amounts claimed in the invoices Mr Sweeney sent to Mr Webb after the Helicopter was destroyed, including the invoice for the Premium Differential, and Mr Webb’s stating in his email of 6 May 2010 that he did not know “where to find this extra money for the fuckup in PNG”.[47]
[47] CB141
Mr Webb’s not disputing the amounts claimed in the invoices Mr Sweeney sent to Mr Webb that included the invoice for the Premium Differential, and Mr Webb’s statement in his email of 6 May 2010, is evidence that could reasonably be construed as an admission by Mr Webb that CQ Aviation owed all of the amounts Mr Sweeney claimed in the invoices he sent. Whether or not, however, this evidence should be construed to constitute admissions and, if so, what weight should be given to the admissions, depends on a number of considerations. These include, first, the reason or reasons Mr Webb did not dispute the amounts claimed; second, if it could be inferred from Mr Webb’s not disputing the amounts that he believed CQ Aviation owed all of the amounts claimed, the reason or reason for which he so believed; and, third, all other relevant evidence.
In my opinion, Mr Webb’s not disputing the invoice claiming the Premium Differential is capable of carrying little weight when assessing the conflicting evidence of the conversations between Mr Sweeney and Mr Webb. First, it is not apparent from the evidence why Mr Webb did not dispute that invoice. In cross-examination Mr Webb did say that his lawyers advised him he did not have to pay the invoice.[48] I am not prepared to find, however, Mr Webb sought legal advice at the time he received the invoices. Second, assuming Mr Webb’s not disputing the premium differential is to be explained by his believing that CQ Aviation was liable to pay the Premium Differential, there is no evidence about the reason or reasons Mr Webb may have held such belief. It is possible that Mr Webb erroneously believed CQ Aviation was obliged to pay the amount because, for example, he did not respond to Mr Sweeney’s second email of 10 February 2010. Third, as will appear from what I say below, there are matters relevant to the resolution of the disputed evidence of conversations that carry significantly greater weight than Mr Webb’s not disputing the invoice for the Premium Differential.
[48] T80.5
I am also of the opinion that Mr Webb’s reference in his email to his not knowing where he would be able to find the “extra money” is capable of carrying little weight when assessing the conflicting evidence of the conversations between Mr Sweeney and Mr Webb. First, Mr Webb may well have intended the expression “extra money” to refer only to CQ Aviation’s obligation to pay the $75,000 excess, rather than to all of the amounts, including the Premium Differential, Island Helicopters was claiming. Second, to the extent Mr Webb’s statement is evidence of a belief that CQ Aviation was liable to pay the Premium Differential, there is no evidence of the reason or reasons why Mr Webb may have held such belief. It is conceivable that he held that belief for incorrect reasons. Third, as will appear from what I say below, there are matters relevant to the resolution of the disputed evidence of conversations that carry significantly greater weight than Mr Webb’s statement in his email.
In short, whether or not Mr Webb agreed to pay the Premium Differential is to be assessed by reference to all of the evidence, not just to any admission Mr Webb may have made. To avoid repetition, I record here that, in arriving at my findings on the contested evidence of the conversations, I have assumed that Mr Webb believed, for reasons it is not possible to infer from the evidence, that after February 2010 CQ Aviation was liable to pay the Premium Differential, and have weighed that belief, together with the matters I identify below, when making my findings.
Conversations before signing of Lease Agreement
There is no dispute that, before Island Helicopters and CQ Aviation entered into the Lease Agreement on 18 November 2009, Mr Sweeney and Mr Webb had conversations about the leasing of the Helicopter. According to Mr Sweeney,[49] during one of those conversations, and before 10 November 2009, Mr Sweeney said he needed a minimum of $900 per hour, plus GST, and a minimum of 25 hours flying per month; that the first month’s minimum fee must be paid in advance; and that, for the purpose of complying with insurance requirements, any pilot who would be flying the Helicopter must have a minimum of 1,000 hour rotary and 500 turbine hours. After Mr Webb said he agreed, Mr Sweeney said he had a draft cross hire agreement that he would send to Mr Webb after Mr Webb confirmed he wanted to proceed. On or about 10 November 2009 Mr Webb informed Mr Sweeney that he would enter into an agreement on the basis of the matters they had discussed in the previous telephone conversations.
[49] Sweeney affidavit 25.03.15, [13]
Mr Webb agrees he had a number of conversations with Mr Sweeney. He says he discussed with Mr Sweeney the installation of a HF radio at Island Helicopters’ expense, the installation of a cargo hook and sling that would be supplied at CQ Aviation’s expense, the rate of $900 per hour flying time and minimum flight requirement of 25 hours per month, the payment of a deposit of $22,500, and the level of experience required by the pilot.[50] Mr Webb also says he and Mr Sweeney discussed the payment of “the insurance excess of $75,000 in the event of a claim and Island Helicopters pay the insurance premium”. I accept that, on or before 18 November 2009, although not necessarily before 10 November 2009, Mr Sweeney and Mr Webb had conversations to the effect recalled by Mr Sweeney and by Mr Webb, although I do not accept Mr Webb and Mr Sweeney discussed the excess would be $75,000 or any other amount.
[50] Webb affidavit 19.10.2015, [16]
According to Mr Webb, however, words to the following effect were also spoken during one of their conversations:[51]
Webb:I have potential work in New Guinea and want a LongRanger for that work.
Sweeney:That’s fine, I am interested in my helicopter working in Papua New Guinea.
[51] Webb affidavit 19.10.2015, [11]
There are a number of matters that point to Mr Webb having a conversation to this effect before he and Mr Sweeney signed the Lease Agreement.
a)First, in his affidavit, Mr Webb said that, at the time he responded to Island Helicopter’s advertisement of the Helicopter, Mr Webb was negotiating with a number of companies in PNG about obtaining helicopter charter contracts.[52] Mr Webb said that CQ Aviation owned a fleet of helicopters for its Australian operations, but it did not have a suitable helicopter with sufficient power to withstand the climatic conditions of PNG.[53] Mr Webb further said he responded to Island Helicopters’ advertisement because he was of the view that the Helicopter, as described in the advertisement, would be suitable for operations in PNG.[54] Mr Webb was not cross-examined about this aspect of his evidence; and it was not submitted that Mr Webb’s evidence on these matters should not be accepted. I accept Mr Webb’s evidence, not only because Mr Webb was not cross-examined on this part of his affidavit, but also because Mr Webb did in fact make arrangements to charter the Helicopter in PNG. That at the very least is consistent with Mr Webb having had discussions with persons about chartering a helicopter in PNG before 18 November 2009. If, therefore, as I find, Mr Webb answered Island Helicopter’s advertisement of the Helicopter because he wanted to charter a helicopter in PNG, it is likely Mr Webb informed Mr Sweeney of that fact early in his conversations with him, and before he and Mr Sweeney signed the Lease Agreement.
b)Second, there is no dispute that the terms recorded in Mr Sweeney’s email of 22 November 2009 related to making modifications to the Helicopter to equip it for operations in PNG. In those circumstances, it might seem unlikely that Mr Webb would have said nothing about his intention to operate the Helicopter in PNG before 18 November 2009, yet mention that fact almost immediately after he signed the Lease Agreement and agree with Mr Sweeney to the terms set out in the email of 22 November 2009. What is more likely is that Mr Webb discussed with Mr Sweeney his intention to use the Helicopter in PNG before he signed the Lease Agreement.
c)Third, on or about 26 November 2009, after Island Helicopters and CQ Aviation signed the Lease Agreement, Island Helicopters commissioned TAS to carry out work on the Helicopter that included the installation of a HF radio, and the installation of a hook and sling system to allow for sling operations. There is undisputed evidence that, at the time the Helicopter was delivered to TAS on 26 November 2009, Mr Sean Sweeney told Mr Tadgell that the “fitting of the HF radio and cargo hook and sling kit is for PNG purposes”.[55] Further, Mr Sweeney deposes he had a conversation with Mr Webb in which Mr Webb asked whether Mr Sweeney had “a HF radio which could be fitted to the aircraft as this is a requirement for PNG operations”.[56] I accept that Mr Sweeney had a conversation with Mr Webb in which Mr Webb said words to this effect although, for the reasons I give below, I do not accept they were said in the context in which Mr Sweeney recalls they were spoken. I find that Mr Webb asked whether Mr Sweeney had “a HF radio which could be fitted to the aircraft as this is a requirement for PNG operations” before Mr Sweeney sent his email of 22 November 2009. These matters are capable of rendering more likely than not Mr Webb’s evidence that, before the parties signed the Lease Agreement on 18 November 2009, he informed Mr Sweeney that he intended to charter the Helicopter in PNG, and that Mr Sweeney indicated his agreement that Mr Webb use the Helicopter in PNG. On its face, the Lease Agreement did not oblige Island Helicopters to make any modifications to the Helicopter, let alone what appear to have been the substantial and costly modifications that were made to the Helicopter over at least the first two months of the term of the Lease Agreement. That Island Helicopters agreed to carry out these modifications may indicate that, before 18 November 2009: Mr Webb informed Mr Sweeney that he intended to operate the Helicopter in PNG; Mr Sweeney and Mr Webb contemplated that the Helicopter would fly in PNG; and Mr Sweeney accepted that the Helicopter would be made suitable for use in PNG.
d)Fourth, Island Helicopters did not claim from CQ Aviation charges for the months of December 2009 and January 2010 even though, on the assumption the Lease Agreement reflected the entirety of the agreement between Island Helicopters and CQ Aviation, Island Helicopters would have been entitled to claim such charges. That Island Helicopters did not claim those charges is capable of indicating three things: the Lease Agreement did not reflect the entirety of the agreement between Island Helicopters and CQ Aviation; at the time they signed the Lease Agreement, Mr Sweeney and Mr Webb and, hence, Island Helicopters and CQ Aviation, contemplated that the Helicopter would fly in PNG; and, at some point on or before 18 November 2009, Mr Sweeney agreed Island Helicopters would, substantially at its own cost,[57] modify the Helicopter to render it fit for use in PNG, and that, during the time work was to be performed on the Helicopter to make it fit for that purpose, Island Helicopters would not charge the fees payable under the Lease Agreement.
[52] Webb affidavit 19.10.2015, [5]
[53] Webb affidavit 19.10.2015, [6], [7]
[54] Webb affidavit 19.10.2015, [9]
[55] Tadgell affidavit 19.10.2015, [7]
[56] Sweeney affidavit 25.03.15, [26]
[57] The sling system was to be provided by CQ Aviation
There are, on the other hand, two matters that may be thought to point to Mr Webb not having informed Mr Sweeney before he and Mr Sweeney signed the Lease Agreement. First, the Lease Agreement does not refer to the Helicopter’s being used in PNG. It could be said that, had the use of the Helicopter in PNG been discussed, the Lease Agreement would have provided for the Helicopter to be used in PNG. As against this, however, the following are relevant:
a)There is no question that the terms of Mr Sweeney’s email of 22 November 2009 relate to the Helicopter’s being modified so that it may be able to operate in PNG; yet Mr Sweeney did not in his email expressly refer to the Helicopter being used in PNG. This may indicate that Mr Sweeney considered it a fact so obvious to him and Mr Webb that the Helicopter would be used in PNG that it was unnecessary to refer to it in his email. Given the relatively short period between 18 November 2009, when the Lease Agreement was signed, and 22 November 2009, when Mr Sweeney sent his email, it could be inferred that, at the time they signed the Lease Agreement, Mr Sweeney and Mr Webb also considered it a fact so obvious to both of them that the Helicopter would be used in PNG that there was no need for the Lease Agreement to expressly provide that the Helicopter would be used in PNG.
b)If, contrary to what he recalls, Mr Webb had not mentioned PNG before he signed the Lease Agreement, but did so only between the time he signed the Lease Agreement and Mr Sweeney sent his email of 22 November 2009; and if, at the time he signed the Lease Agreement, Mr Sweeney had assumed that the Helicopter would be used only in Australia, it is reasonable to expect that, after Mr Webb informed him of his desire to use the Helicopter in PNG, Mr Sweeney would have made some reference in his email of 22 November 2009 to the fact that the Helicopter would be used in PNG. It is reasonable to expect that Mr Sweeney would have said something along the lines of: “I confirm our agreement that you may use the Helicopter in PNG”. That Mr Sweeney made no statement to that effect in his email may indicate that, at the time he and Mr Webb signed the Lease Agreement, he was aware that the Helicopter would be used in PNG.
The second matter that may be thought to point to Mr Webb not having informed Mr Sweeney about PNG before he and Mr Sweeney signed the Lease Agreement is that the matters Mr Sweeney recorded in his email of 22 November 2009 as having been agreed were not recorded in the Lease Agreement. That might suggest that those matters were agreed after the Lease Agreement was signed which, in turn, might suggest that Mr Webb mentioned his intention of using the Helicopter in PNG after he and Mr Sweeney signed the Lease Agreement. In my opinion, however, that inference is a difficult one to make in the face of the matters I have referred to in paragraphs 49(c) and (d) of these reasons. Further, as I note below, Mr Sweeney deposes to a conversation that he says occurred in or around the middle of November 2009 during which Mr Webb asked whether Mr Sweeney had a HF radio that could be fitted to the Helicopter, and that Mr Sweeney said he did not have a HF radio, but that he would have a look into the costs of installing the equipment and changing the insurance to cover the Helicopter in PNG.[58] For reasons that I give below, I do not accept that Mr Sweeney said anything to Mr Webb about changing insurance until February 2010. I do find it plausible, however, that a conversation about fitting the Helicopter with a HF radio took place before the Lease Agreement was signed, and that Mr Sweeney confirmed his agreement to do so in his email of 22 November 2009.
[58] Sweeney affidavit 25.03.15, [26]
In my opinion, the best explanation of the evidence, and what, therefore, I find, is that, before Mr Webb and Mr Sweeney signed the Lease Agreement, Mr Webb informed Mr Sweeney that he intended to use the Helicopter in PNG, and Mr Sweeney agreed that Mr Webb would be able to do so. That led Mr Sweeney to accept before the parties signed the Lease Agreement that the Helicopter would have to be fit for use in PNG. It is probable Mr Sweeney and Mr Webb discussed the installation of a HF radio before they signed the Lease Agreement. Nothing, however, turns on whether it was before the Lease Agreement was signed by the parties, or after the parties signed the Lease agreement but before Mr Sweeney sent his email of 22 November 2009, that Mr Webb informed Mr Sweeney the Helicopter had to be fitted with a HF radio.
Even if I am wrong in finding that Mr Webb informed Mr Sweeney before the parties signed the Lease Agreement that he intended to use the Helicopter in PNG, Mr Sweeney was certainly aware of that fact by the time the parties had agreed the terms set out in Mr Sweeney’s email of 22 November 2009. Even if, therefore, as Island Helicopters submits, the Lease Agreement only permitted CQ Aviation to use the Helicopter in Australia, the agreement recorded in Mr Sweeney’s email may be regarded as a variation of the Lease Agreement to permit CQ Aviation to use the Helicopter in PNG. Island Helicopters’ agreement to the variation would have been supported by consideration in the form of CQ Aviation agreeing it would share equally the travel and accommodation costs involved in scheduled and unscheduled maintenance of the aircraft. Under clause C of the Lease Agreement, all scheduled and unscheduled maintenance and repairs, including “consumables and labour costs” were at “the Lessor’s expense”.
November conversation
According to Mr Sweeney,[59] “[i]n or around mid November 2009, whilst the Helicopter was still at TAS”, Mr Webb telephoned Mr Sweeney and a conversation to the following effect took place.
Webb:I am finding it difficult to secure enough work for the helicopter to meet the monthly 25-hour minimum. This will impact CQA’s ability to meet the lease payments under the agreement. However, I have the opportunity to secure sufficient work in Papua New Guinea. Do you have a HF radio which could be fitted to the aircraft as this is a requirement for PNG operations?
Sweeney:I don’t have a HF radio, but I will have to look into the costs of installing the equipment and changing the insurance to cover the Helicopter in PNG. I’ll get back to you.
Webb:Thanks. I also require a Hook System to be fitted for Slingwork Operations.
Sweeney:I will get back to you.
[59] Sweeney affidavit 25.03.15, [26]
Mr Webb denies he “made this telephone call to [Mr Sweeney] in or around mid November 2009” because Mr Webb “had only taken possession of the [Helicopter] on 22 November 2009 and it had ben [sic] delivered to TAS on 26 November 2009”.[60]
[60] Webb 19.10.15 affidavit, [30]
I accept that by the middle of November 2009, before the parties signed the Lease Agreement, Mr Sweeney and Mr Webb had a conversation in which Mr Webb said words to the effect that he had an opportunity to secure work in PNG, Mr Webb asked Mr Sweeney whether he had a HF radio which could be fitted to the Helicopter because that was a requirement for PNG operations, that Mr Sweeney said he did not have a HF radio, but he would look into the costs of installing a HF radio, that Mr Webb said that he also required a hook system to be fitted on the Helicopter for sling work operations, and that Mr Sweeney said he would get back to Mr Webb about that. I do not accept, however, that Mr Webb said words to the effect that he was having difficulty securing enough work for the Helicopter to meet the monthly 25-hour minimum, or that that would impact CQ Aviation’s ability to meet the lease payments under the agreement. As I have already found, Mr Webb answered Island Helicopters’ advertisement because he intended to operate a helicopter in PNG. Further, a conversation to the effect recalled by Mr Sweeney could not have taken place while the Helicopter was with TAS. The Helicopter was delivered to TAS on 26 November 2009 after Mr Sweeney sent to Mr Webb the email on 22 November 2009 in which he confirmed Island Helicopters would fit a HF radio to the Helicopter.
I also do not accept that, during this conversation, Mr Sweeney said words to the effect that he would need to look into “changing the insurance to cover the Helicopter in PNG”. I find that Mr Sweeney did not inform Mr Webb of the possibility that CQ Aviation would be required to pay for any additional premium to cover the Helicopter’s operations in PNG until he sent to Mr Webb the email at 10:22 am on 10 February 2010.[61] In that email Mr Sweeney did not refer to any previous discussion he had with Mr Webb about insurance. Mr Sweeney only referred to his having been informed of a “surcharge” on the insurance premiums due to the Helicopter’s operating in PNG, and that this did not form part of the rate charged under the Lease Agreement. Had Mr Sweeney in truth discussed with Mr Webb the possibility of changing insurance cover, it is reasonable to expect he would have mentioned that fact in his email of 10 February 2010.
[61] CB95
Claimed conversation on 25 November 2009
According to Mr Sweeney,[62] on or around 25 November 2009 Mr Webb called him and said “[w]e are having a few problems with the radios in the Helicopters [sic] and need them to be fixed”. In response to Mr Sweeney’s question about what the problem was, Mr Webb said the “radios are making a scratchy sound”. Mr Sweeney said: “I can fix them”, and requested that the Helicopter be delivered to TAS “so we can get the work done”.
[62] Sweeney affidavit 25.03.15, [23]
Mr Webb appears to deny having a conversation with Mr Sweeney to this effect. Mr Webb says a Mr Hewitt operated the Helicopter from 22 November to 26 November 2009 when Mr Hewitt delivered the Helicopter to TAS at Caloundra Airport.[63] According to Mr Webb, Mr Hewitt was a client of CQ Aviation who, on 21 November 2009, enquired of Mr Webb about chartering a helicopter. Mr Hewitt normally chartered a JetRanger (which was a different model helicopter than the Helicopter), but Mr Webb offered to Mr Hewitt the Helicopter from 22 to 26 November 2009. Mr Webb agreed with Mr Hewitt that Mr Hewitt would charter the Helicopter from 22 November until 26 November 2009, and that Mr Hewitt had to return the Helicopter to TAS at Caloundra Airport on 26 November 2009.[64] Mr Webb had previously requested, and Mr Sweeney agreed, that Mr Webb would fly the Helicopter to Mr Webb’s helicopter operation in Emerald in Queensland.[65] Mr Webb further says he does not recall Mr Hewitt contacting Mr Webb to complain about the radios in the Helicopter making a scratchy sound, or Mr Webb contacting Mr Sweeney complaining about scratchy radios.[66]
[63] Webb 19.10.15 affidavit, [27]
[64] Webb affidavit 19.10.2015, [26]. Mr Webb was not cross-examined about this aspect of his affidavit.
[65] Sweeney affidavit 25.03.15, [21]
[66] Webb 19.10.15 affidavit, [28]
I find a conversation to the effect recalled by Mr Sweeney did not occur on 25 November 2009, or at any other time. First, as is recorded in Mr Sweeney’s email of 22 November 2009, he and Mr Webb had already agreed that Island Helicopters would install a HF radio in the Helicopter. That by itself supports the conclusion that the Helicopter was delivered to TAS on 26 November 2009, not because TAS was to repair the existing radio because it was “making a scratchy sound”, but because TAS was to install a HF radio in the Helicopter and carry out other work on the Helicopter to equip it for operations in PNG. Second, Mr Webb was not cross-examined about his evidence that he had chartered the Helicopter to Mr Hewitt from 22 November to 26 November 2009, or that it was Mr Hewitt who delivered the Helicopter to TAS on 26 November 2009. Nor was it submitted that I should not accept Mr Webb’s evidence about these matters. Mr Webb’s evidence is supported by a “Daily Inspection Certifications and Aircraft Time-in-Service” which appears to record the signature of Mr Webb on 22 November 2009 and the signature of Mr Hewitt on 22, 23, 24, 25, and 26 November 2009.[67] I accept Mr Webb’s evidence that he hired the Helicopter to Mr Hewitt from 22 November to 26 November 2009.
[67] Webb 19.10.15 affidavit, [26]; CB234
Claimed conversation in December 2009/January 2010
Mr Sweeney says that during December 2009 and January 2010 he had “several conversations” with Mr Webb about the use of the Helicopter by CQ Aviation in PNG.[68] According to Mr Sweeney, one of the conversations was to the following effect:
Webb:I need to use the Helicopter in Papua New Guinea.
Sweeney:That’s fine however the Helicopter is only insured in Australia so I have been looking at insuring it for PNG. I do not have the costings or specific requirements for insurance of the Helicopter for PNG yet, but it can’t leave Australia until: the Placing Slip is issued; you agree to comply with the new terms of any policy; and you agree to pay the difference between the insurance now and the new insurance policy.
Webb:I understand. Can I pay the differential in insurance as a further fee at the end of each month?
Sweeney:Yes. I would be happy to do that.
Webb:Send me the details as soon as you get them.
[68] Sweeney affidavit 25.03.15, [28]
Mr Webb does not in his affidavit address this part of Mr Sweeney’s affidavit. As I will set out later, however, Mr Webb recalls having a conversation relating to the additional insurance premium Island Helicopters was required to pay, but he says this conversation occurred on or about 10 February 2010.[69]
[69] Webb 19.10.15 affidavit, [32]
I do not accept that a conversation to the effect recalled by Mr Sweeney occurred.
a)First, as I have already found, Mr Webb had informed Mr Sweeney before Island Helicopters and CQ Aviation entered into the Lease Agreement that he wanted to use the Helicopter in PNG. There would therefore have been no reason for Mr Webb to state to Mr Sweeney in any conversation in December 2009 or January 2010 that he needed to use the Helicopter in PNG.
b)Second, in his email of 1 February 2010 Mr Sweeney urged Mr Webb to collect the Helicopter because he needed to “start getting a return on it so the 25 hour minimum under the contract, which has been suspended until now, will have to apply from 1 February 2010”. [70] Mr Sweeney did not state in that email the requirements Mr Sweeney says he communicated to Mr Webb in the telephone conversation, those requirements being the Helicopter not leaving Australia until “the Placing Slip is issued; you agree to comply with the new terms of any policy; and you agree to pay the difference between the insurance now and the new insurance policy”. I find he did not do so because Mr Sweeney did not communicate those requirements to Mr Webb in any telephone conversation or by any other means.
c)Third, in the email Mr Sweeney sent to Mr Webb at 10:22 am on 10 February 2010,[71] being the first occasion on which Mr Sweeney informed Mr Webb in a document of the need to pay an additional premium for insurance to cover the Helicopter’s operations in PNG, Mr Sweeney did not refer to any previous discussion he had with Mr Webb about insurance to cover the Helicopter’s operations in PNG. In particular, he did not refer to any of the matters Mr Sweeney claims he discussed with Mr Webb in the telephone conversation. Had Mr Sweeney had a conversation with Mr Webb to the effect he claims he did, it is likely he would have referred to the substance of those matters in an email.
d)Fourth, if, as Mr Sweeney says he recalls, in December 2009 and January 2010 he informed Mr Webb that the Helicopter could not leave Australia until “the Placing Slip is issued; you agree to comply with the new terms of any policy; and you agree to pay the difference between the insurance now and the new insurance policy”, Mr Sweeney would not on 1 February 2010 have urged Mr Webb to take possession of the Helicopter before those conditions were met. That Mr Sweeney urged Mr Webb to take possession of the Helicopter before these conditions had been satisfied indicates Mr Sweeney did not communicate those requirements to Mr Webb.
e)Fifth, according to Mr Sweeney’s recollection, Mr Webb agreed to pay the additional premium by paying an additional monthly fee. That, however, is inconsistent with what Mr Richardson of JLT, in the email he sent to Mr Sweeney on 10 February 2010, recorded Mr Sweeney said, namely, that Mr Sweeney “will need to get Eric Webb to agree to pay the additional costs to make this a viable proposition”.[72] In other words, as at 10 February 2010, Mr Sweeney was of the view, not that he had Mr Webb’s agreement that Mr Webb would pay the additional premium, but that he needed to obtain Mr Webb’s agreement to pay the additional premium.
f)Sixth, the email Mr Sweeney sent to Mr Webb at 10:22 am on 10 February 2010 is inconsistent with Mr Sweeney’s recollection of the conversation. [73] In that email Mr Sweeney informed Mr Webb that JLT had informed Mr Sweeney there will be a surcharge on the insurance premiums “due to the aircraft operating in PNG”, that the surcharge was not part of the rate charged under the Lease Agreement, and that there “will have to be an additional fee which I will bill monthly”. [74] The email did not refer to the agreement Mr Sweeney recalls he made during his telephone conversation with Mr Webb. Nor does it refer to the other matters Mr Sweeney says he recalls were discussed. Mr Sweeney did not state the Helicopter could not leave Australia until “the Placing Slip is issued; you agree to comply with the new terms of any policy; and you agree to pay the difference between the insurance now and the new insurance policy”.
[70] CB242
[71] CB95
[72] CB90
[73] CB95
[74] CB95
Claimed conversation on 7 January 2010
Mr Sweeney says that on or about 7 January 2010 he had a telephone conversation with Mr Webb during which Mr Sweeney said words to the following effect:[75]
I agree to allow you and CQA to operate the Helicopter in Papua New Guinea subject to the resolution of the insurance. I’m going to carry out the relevant modifications to the Helicopter including new VHF Radios, new VHF Antenna and a hook lifting system.
[75] Sweeney affidavit 25.03.15, [32]
Mr Webb denies he spoke with Mr Sweeney on or about 7 January 2010 or that Mr Sweeney told Mr Webb he would have to pay the insurance premium differential between the current rate and the increased rate for operating the Helicopter in PNG. Mr Webb also denies he agreed to pay the premium differential at the end of each month.[76]
[76] Webb 19.10.15 affidavit, [31]
I do not accept such conversation took place on 7 January 2010 or at all. First, and most obviously, Mr Sweeney’s evidence is inconsistent with the email he sent on 22 November 2009 in which he confirmed his agreement that “Island Helicopters will source a new hook and frame for” the Helicopter, and that “Island Helicopters will Fit a HF and UHF radio to” the Helicopter. It is impossible to imagine that Mr Sweeney would have agreed on 7 January 2010 to that which he had agreed some six weeks before 7 January 2010 to do, and which was in the process of being done by TAS. Second, as I have already found, the first occasion on which Mr Sweeney raised with Mr Webb the possibility of there being an additional premium payable in relation to the Helicopter due to its intended use in PNG, and Mr Sweeney’s looking to CQ Aviation to pay the Premium Differential, was in Mr Sweeney’s email to Mr Webb sent at 10:22 am on 10 February 2010.[77]
[77] CB95
Further claimed conversation “during this period”
Mr Sweeney says that “[d]uring my discussions with Mr Webb during this period”, he and Mr Webb discussed the Lease Agreement. Mr Sweeney further says that he and Mr Webb had a conversation to the following effect:[78]
Webb:We need to confirm the hourly rate and payments during the time the helicopter can’t be used.
Sweeney:The hourly rate will remain the same and Island Helicopters won’t invoice CQA or you during the time the helicopter is being refitted. You will also have to pay the insurance premium differential between the current rate and the increased rate for operating the helicopter in PNG.
Webb:I understand. Can I pay the differential in insurance as a further fee at the end of each month? I also want the lease fee varied for time spent taking the helicopter from Australia to PNG. It should be $800 plus GST per hour.
Sweeney:Yes. I would be happy to do that and agree to the lower ferrying rate.
Webb:The [sic] I agree to those three changes.
[78] Sweeney affidavit 25.03.15, [33]
Mr Webb denies he participated in any such conversation.[79]
[79] Webb 19.10.15 affidavit, [31]
I do not accept a conversation to the effect recalled by Mr Sweeney took place. A conversation to this effect could not have taken place after 22 November 2009 because the conversation refers to matters that were the subject of the agreement Mr Sweeney recorded in his email of 22 November 2009. That is the case with that part of Mr Sweeney’s recalled conversation that deals with the $800 an hour rate for travelling to PNG. That was the “ferry rate” referred to in Mr Sweeney’s email of 22 November 2009. I accept that a conversation took place about Island Helicopters not invoicing CQ Aviation during the time the Helicopter was to be refitted. But it is likely such conversation took place on or before 22 November 2009. I do not accept, however, that Mr Sweeney and Mr Webb had a conversation in relation to Mr Webb agreeing to pay “the insurance premium differential between the current rate and the increased rate for operating the helicopter in PNG”. As I have already found, Mr Sweeney first raised that issue in the email he sent to Mr Webb at 10:22 am on 10 February 2010. Had he had the discussion with Mr Webb Mr Sweeney recalls he had, Mr Sweeney would have said so in that email.
It is convenient to refer here to questions asked of Mr Sweeney in cross-examination about the email he sent to Mr Webb at 5:12 pm on 10 February 2010. It was put to Mr Sweeney that if, as Mr Sweeney claimed he recalled, Mr Webb had agreed to pay the Premium Differential, Mr Sweeney would have referred to that agreement in the email. Mr Sweeney responded:[80]
Could I do things better? Yes, but, no, all I was doing was stating the facts. In hindsight, there’s a whole lot of things I could do better.
[80] T59.5
This does not overcome the adverse inferences that are available to be drawn from Mr Sweeney’s not having recorded in any email communication to Mr Webb until the email he sent to Mr Webb at 10:22 am on 10 February 2010 matters relating to insurance including the conversations Mr Sweeney recalls he had with Mr Webb about insurance. If Mr Sweeney’s evidence of the conversations is to be accepted, he mentioned to Mr Webb on four occasions the possibility of an additional premium having to be paid because of the Helicopter’s intended operation in PNG, or to Mr Webb’s agreement to paying an additional premium. Those occasions were in mid November 2009,[81] in December 2009 or January 2010,[82] on 7 January 2010,[83] and on one other occasion.[84] That indicates it was a matter at the forefront of Mr Sweeney’s mind. If that were so, however, it is reasonable to expect that Mr Sweeney would have communicated by email matters relating to insurance, just as Mr Sweeney did on 10 February 2010; and that he would have recorded in an email any agreement he reached with Mr Webb about the payment of any additional premium, just as he did in relation to the matters Mr Sweeney recorded in his email of 22 November 2009. That he did not in an email refer to the payment of an additional premium until his first email of 10 February 2010 is a strong basis for inferring he did not have the discussions Mr Sweeney recalls he had with Mr Webb about insurance; and I have so inferred.
[81] Sweeney affidavit 25.03.15, [26]
[82] Sweeney affidavit 25.03.15, [29]
[83] Sweeney affidavit 25.03.15, [32]
[84] Sweeney affidavit 25.03.15, [33]
Conversation of 10 February 2010 (1)
According to Mr Sweeney, on or around 10 February 2010 he had a conversation with Mr Webb in which Mr Sweeney said that the “Insurance Placement Slip had been issued and the Helicopter was insured to be flown in PNG”.[85] Mr Webb does not deny he had any such conversation with Mr Sweeney. I nevertheless do not accept Mr Sweeney said words to this effect in any conversation with Mr Webb.
[85] Sweeney affidavit 25.03.15, [54]
The first occasion, on my findings, Mr Sweeney could be taken to have referred to the subject of the Helicopter being insured to cover operations in PNG was the email Mr Sweeney sent to Mr Webb at 10:22 am on 10 February 2010. All Mr Sweeney said in that email is that there would be a surcharge on the insurance premium due to the Helicopter operating in PNG, and that he would let Mr Webb know what that might be “as I hear”.[86] There is no suggestion Mr Sweeney said he would inform Mr Webb of when any “Insurance Placement Slip” would be issued and that “the Helicopter was insured to be flown in PNG”.
[86] CB95
Conversation of 10 February 2010 (2)
According to Mr Webb, on or about 10 February 2010 he had a conversation with Mr Sweeney to the following effect:[87]
Sweeney:There could be an additional insurance payment for Papua New Guinea.
Webb:If that is the case, we might work it out down the track on an hourly rate.
[87] Webb 19.10.15 affidavit, [32]
Mr Sweeney filed a second affidavit, but he did not, in that affidavit, refer to any part of Mr Webb’s affidavit. Thus, Mr Sweeney has not in terms denied this part of Mr Webb’s affidavit. Further, Mr Webb was not cross-examined about this part of his affidavit, and it was not submitted that I should not accept this part of Mr Webb’s evidence.
There are two things to note about this part of Mr Webb’s evidence. First, it does not refer to any discussion about the amount of the additional premium. If Mr Webb’s evidence of the conversation is accepted, therefore, it probably took place before Mr Sweeney sent the email to Mr Webb at 5:12 pm on 10 February 2010. The second thing to note is that, if accepted, Mr Webb did no more than communicate to Mr Sweeney a willingness to consider “down the track” CQ Aviation’s contributing towards any additional premium by paying an increased hourly rate for the use of the Helicopter.
Next, I must consider Mr Webb’s evidence in the context of the email Mr Sweeney sent to Mr Webb at 5:12 pm on 10 February 2010 in which Mr Sweeney noted that the annual premium “will increase from $16,200 to $87,505”, and Mr Sweeney’s further noting Mr Webb’s “confirmation” that Mr Webb “will cover the increased premium (above my standard premium which I will cover), which I will bill monthly and I look forward to your email on this”. There are three things to note about this email. First, the use of the word “confirmation” suggests a conversation between Mr Webb and Mr Sweeney about increased insurance premiums. Second, there is no evidence from Mr Sweeney or Mr Webb of a conversation in which Mr Sweeney informed Mr Webb of the $87,505 premium. I find there was no such conversation. In those circumstances, Mr Sweeney’s noting Mr Webb’s “confirmation that you will cover the increased premium” cannot be taken to refer to any actual agreement between Mr Sweeney and Mr Webb that CQ Aviation would pay the additional premium referred to in the email. The third matter to note about the email is that it ends with Mr Sweeney stating that he is looking forward to Mr Webb’s “email on this”. That suggests, and I find, that Mr Webb had not agreed to pay the increased premium referred to in the email, or any increased premium, and that Mr Sweeney was aware Mr Webb had not so agreed.
In these circumstances, I accept Mr Webb and Mr Sweeney had a conversation to the effect recalled by Mr Webb. It is consistent with the email Mr Sweeney sent to Mr Webb at 5:12 pm on 10 February 2010. That email implies Mr Sweeney and Mr Webb had a conversation about increased premiums. For the reasons I have given, the email also suggests that no agreement was reached between Mr Sweeney and Mr Webb about the payment of any additional premium.
Principal Findings
My principal findings may be summarised as follows:
a)On or about 1 October 2009 Island Helicopters placed an advertisement in the industry newspaper, Aviation Trader, listing the Helicopter for hire. Mr Webb responded to that advertisement on or about 15 October 2009 by telephoning Mr Sweeney. By that time Mr Webb had discussions with persons about chartering a helicopter in PNG. Mr Webb was of the view that the Helicopter might be suitable for use in PNG.
b)Island Helicopters and CQ Aviation signed the Lease Agreement on 18 November 2009. Before that occurred, Mr Webb informed Mr Sweeney that he intended to use the Helicopter in PNG, and Mr Sweeney agreed that Mr Webb would be able to do so. That led Mr Sweeney to accept before the parties signed the Lease Agreement that the Helicopter would need to be fit for use in PNG. It is probable Mr Sweeney and Mr Webb discussed the installation of a HF radio before they signed the Lease Agreement. Nothing, however, turns on whether it was before the Lease Agreement was signed by the parties, or after the parties signed the Lease Agreement but before Mr Sweeney sent his email of 22 November 2009, that Mr Webb informed Mr Sweeney the Helicopter had to be fitted with a HF radio.
c)On 21 November 2009 Mr Webb agreed to charter the Helicopter to Mr Hewitt, a client of CQ Aviation from 22 November 2009 to 26 November 2009.
d)On 22 November 2009 Mr Webb took delivery of the Helicopter from Island Helicopters at Shute Harbour Airport. At the time Mr Webb collected the Helicopter, he and Mr Sweeney had a conversation about, and agreed that Island Helicopters would install a HF and UHF radio system, CQ Aviation would pay a particular rate for ferrying the Helicopter, and Island Helicopters and CQ Aviation would share the travel and accommodation costs for scheduled and unscheduled maintenance.
e)The Helicopter was hired by Mr Hewitt from 22 November 2009 to 26 November 2009. On the latter day Mr Hewitt delivered the Helicopter to TAS at Caloundra Airport for work to be done to the Helicopter. That work included the fitting of a HF radio.
f)Sometime before 2 December 2009 Mr Sweeney applied through JLT for a full flight risks policy of insurance in relation to the Helicopter for the twelve-month period commencing 31 October 2009. On 2 December 2009 JLT advised Mr Sweeney that JLT needed to advise the underwriters to get the policy extended to cover overseas operations of the Helicopter. JLT said it would speak to the underwriters to ascertain the information they will require.
g)On 1 February 2010 Mr Sweeney sent an email to Mr Webb informing him that the work on the Helicopter had been completed, that the Helicopter was available to be collected from TAS at Caloundra Airport, and that “the 25 hour minimum under the contract, which has been suspended until now, will have to apply from 1 February 2010”.
h)On 7 February 2010 CQ Aviation took possession of the Helicopter from TAS at Caloundra Airport. The Helicopter was flown to Emerald and, by 9 February 2010, the Helicopter had landed on Horn Island in the Torres Strait.
i)At 10:22 am on 10 February 2010 Mr Sweeney sent an email to Mr Webb in which he said he had been informed there would be a surcharge on the insurance premiums payable for the Helicopter. Mr Sweeney also said that the surcharge was not part of the rate charged under the Lease Agreement, and there will have to be an additional fee that will be billed monthly. That is the first occasion on which Mr Sweeney raised with Mr Webb the possibility of an additional premium being payable for insurance Island Helicopters had taken out in relation to the Helicopter, and of CQ Aviation or Mr Webb being required to pay any additional premium.
j)By an email sent at 11:21 am on 10 February 2010 Mr Richardson from JLT informed Mr Sweeney that the insurers were not prepared to cover the Helicopter’s operations in PNG, but JLT obtained quotes from two other insurers. The email stated the annual premium for the Helicopter “will increase from $16,200 to $87,505”, and that the “excess increases from 5% to 7.5%”.
k)On 10 February 2010, before Mr Sweeney communicated to Mr Webb the amount of the additional insurance premium, Mr Webb and Mr Sweeney had a conversation in which Mr Sweeney said there could be an additional insurance payment for PNG, in response to which Mr Webb said that, if that was the case, “we might work it out down the track on an hourly rate”.
l)At 5:12 pm on 10 February 2010 Mr Sweeney sent to Mr Webb an email in which he extracted part of the email Mr Sweeney received from JLT noting that the annual premium “will increase from $16,200 to $87,505”, and in which Mr Sweeney concluded by noting Mr Webb’s “confirmation that you will cover the increased premium (above my standard premium which I will cover), which I will bill monthly and I look forward to your email on this”.
m)On 16 February 2010 the Helicopter was flown from Horn Island to Kiunga Airport in PNG, and it commenced charter operations in PNG on 19 February 2010. On 20 February 2010 the Helicopter crashed as a consequence of which it was destroyed. On 21 February 2010 Mr Sweeney informed JLT of the accident by email.
Issues arising on the pleadings
The statement of claim pleads causes of action in contract and under the TPA.
Claims in contract
The allegations based on breach of contract may be summarised as follows:
a)Island Helicopters and CQ Aviation entered into the Lease Agreement on or about 18 November 2009.[88]
[88] Amended Statement of claim, [7], [8]
b)The Lease Agreement contained express terms that Island Helicopters would supply to CQ Aviation the Helicopter and “Blade Ties, Floats and Wheels and six (6) David Clark headsets” (that is, the Equipment); that CQ Aviation would pay Island Helicopters $900 per hour for the use of the Helicopter and Equipment, CQ Aviation would use the Helicopter a minimum of 25 hours a month, that CQ Aviation would make an advance payment equal to the rate for 25 hours, that CQ Aviation would pay the insurance excess of $75,000, and that the Helicopter would be flown in Australia.[89]
[89] Amended statement of claim, [9]-[14]
c)In accordance with the Lease Agreement, Island Helicopters provided the Helicopter and Equipment to CQ Aviation.[90]
[90] Amended statement of claim, [18]
d)The Lease Agreement was varied (Variation) to the effect that Island Helicopters would allow CQ Aviation to operate the Helicopter in PNG so long as CQ Aviation agreed to pay for the increased insurance cost to be incurred by Island Helicopters for the Helicopter being used outside of Australia.[91]
[91] Amended statement of claim, [20]
e)The insurance premium that was payable by Island Helicopters under the Variation would increase from $16,200 to $87,505, being the sum of $71,305 (Insurance Differential).[92]
[92] Amended statement of claim, [21]
f)In or around February 2010, in accordance with the Variation and in reliance on the Insurance Representation, CQ Aviation took the Helicopter to PNG.[93]
[93] Amended statement of claim, [24]
g)Pursuant to the Lease Agreement Island Helicopters issued to CQ Aviation the following invoices:[94]
[94] Amended statement of claim, [32]
Date Invoice No. Amount
18/11/2009 225 $22,500
01/04/2010 229 $15,760
01/04/2010 236 $16,640
01/04/2010 238 $75,000
01/04/2010 239 $71,305
h)Invoice no. 225 was credited to CQ Aviation in complete discharge of invoice 229 and partial discharge of invoice 236 and CQ Aviation made payments in partial discharge of invoice 236 and 238.[95]
i)Alternatively, CQ Aviation failed to pay rent pursuant to the Lease Agreement for the period February 2010 to 18 November 2011 as a result of which Island Helicopters suffered loss and damage in the sum of $156,500, being the difference between the rent CQ Aviation ought to have paid for the period ($472,500) and the anticipated operational costs of the Helicopter ($315,000).[96]
[95] Amended statement of claim, [32], [33], [34], [35]
[96] Amended statement of claim, [37], [38]
In its amended defence, CQ Aviation:
a)admits it entered into the Lease Agreement;[97]
b)says it was an express term of the Lease Agreement that Island Helicopters would ensure the Helicopter was insured with hull insurance to the value of $1 million, and that Island Helicopters was responsible for the payment of the premium for that insurance;[98]
c)Island Helicopters provided to CQ Aviation the Helicopter and Equipment in accordance with the Lease Agreement;[99]
d)denies the Lease Agreement was varied,[100] or that Island Helicopters agreed to CQ Aviation operating the Helicopter in PNG so long as CQ Aviation paid any increased premium Island Helicopters was required to pay in relation to the Helicopter’s operating in PNG;[101]
e)says the Helicopter was flown to PNG on or about 16 February 2010 as contemplated by the parties,[102] but denies that occurred in accordance with any variation to the Lease Agreement;[103]
f)admits Island Helicopters issued the invoices, but says it paid all of the invoices except invoice no 239 (which it is said was not issued pursuant to the Lease Agreement[104]) and all but $20,900 of invoice no 238;[105]
g)says that, because of the destruction of the Helicopter, there was a fundamental change in the situation as contemplated by the Lease Agreement such that the main purpose of the Lease Agreement was defeated and, for that reason, the Lease Agreement was frustrated;[106]
h)denies Island Helicopters suffered any loss but, if it did suffer loss, it was indemnified against the loss because it had the benefit of the insurance policy;[107] and
i)further, and in the alternative, if Island Helicopters suffered any damage as a consequence of CQ Aviation’s conduct, it did not take all reasonable steps to mitigate or minimise its loss.[108]
[97] Amended defence, [2(a), (b)]
[98] Amended defence, [2(c)]
[99] Amended defence, [4(a)]
[100] Amended defence, [5]
[101] Amended defence, [5], [6]
[102] Amended defence, [7(a)]
[103] Amended defence, [7(b)]
[104] Amended defence, [15(c)]
[105] Amended defence, [15(b)]. When, on the last day of the hearing, I granted Island Helicopters leave to amend the statement of claim I made a consequential order that paragraph 15(b) of the amended defence be read as including the words “and $20,900 of invoice 238” (see T194.35). That is an obvious error. It is common ground that CQ Aviation paid all but $20,900 of invoice 238, being the invoice Island Helicopters issued for the excess it paid when it claimed under the policy of insurance. The words that should have been added are “and all but $20,900 of invoice 238”.
[106] Amended defence, [9(c)]
[107] Amended defence, [12]
[108] Amended defence, [19]
The issues that arise on the pleadings, therefore, are as follows:
a)Did the Lease Agreement contain an express term that the Helicopter would operate (only) in Australia?
b)Was the Lease Agreement varied, as alleged by Island Helicopters?
c)Was the Lease Agreement discharged by frustration as a result of the destruction of the Helicopter, as alleged by CQ Aviation?
d)Assuming Island Helicopters suffered loss as a consequence of CQ Aviation’s breach or breaches of the Lease agreement:
i)was Island Helicopters indemnified by the payment made to it under the insurance policy against the loss it suffered such as to prevent Island Helicopters from being awarded damages against CQ Aviation for such loss; and
ii)did Island Helicopters fail to take all reasonable steps to mitigate or minimise its loss?
Claims based on TPA
Island Helicopters’ claims based on the TPA may be summarised as follows:
a)By entering into the Lease Agreement, CQ Aviation represented that CQ Aviation would pay Island Helicopters $900 per hour for the use of the Helicopter and Equipment, CQ Aviation would use the Helicopter a minimum of 25 hours per month for the period 18 November 2009 to 18 November 2011, that CQ Aviation would make an advance payment equal to the rate for 25 hours, that CQ Aviation would pay the insurance excess of $75,000, and that CQ Aviation would only use the Helicopter in Australia (Lease Representations).[109]
b)To the extent any of the representations referred to in (a) were representations as to a future matter within the meaning of s.51A of the TPA, CQ Aviation did not have reasonable grounds for making them.
c)By entering into the Variation, CQ Aviation represented to Island Helicopters that it would pay to Island Helicopters the increased insurance costs that would be incurred as a result of the Helicopter being used outside of Australia by CQ Aviation (Insurance Representation).[110]
d)To the extent the Insurance Representation was a representation as to a future matter within the meaning of s.51A of the TPA, CQ Aviation did not have reasonable grounds for making it.[111]
e)The Lease Representations were misleading or deceptive or both, contrary to s.52 of the TPA, because CQ Aviation did not use the Helicopter for a minimum of 25 hours per month during the term of the Lease Agreement.[112]
f)The Insurance Representation was misleading or deceptive or both, contrary to s.52 of the TPA, and CQ Aviation acted unconscionably, contrary to s.51AA or s.51AC or both of the TPA because CQ Aviation did not pay the Premium Differential.[113]
[109] Amended statement of claim, [15], [16]
[110] Amended statement of claim, [22]
[111] Amended statement of claim, [23]
[112] Amended Statement of Claim, [26]
[113] Amended Statement of Claim, [27]
Although I am of the opinion Allied Mills is not relevant to the issues I have to decide, it is necessary to consider questions of onus of proof where, as in the case before me, a party claims a contract has been discharged by the operation of the doctrine of frustration because of the destruction of the subject matter of the contract. The starting point is the speeches of the House of Lords in Joseph Constantine Steamship Line Ltd v Imperial Smelting Corporation Ltd.[136] In that case, charterers claimed damages against the shipowners for failure to load a cargo. The shipowners pleaded the charterparty had been frustrated because an explosion prevented them from loading the cargo. The shipowners proved the explosion occurred, and that it frustrated the charterparty, but the cause of the explosion was not ascertained. The only issue before the House of Lords was the onus of proof. In the words of Lord Russell, the competing contentions were: “Frustration will excuse unless it is proved to be self-induced” and “Frustration will not excuse unless it is proved not to be self-induced”.[137] The House of Lords decided that the shipowners, having established that the explosion had frustrated the charterparty, were not bound to prove further that the explosion was not due to their neglect or default. In other words, where a party claims an event has frustrated a contract, the onus is on the party resisting that claim to show that the party claiming frustration induced the event.
[136] [1942] AC 154
[137] [1942] AC 154 at page 177
Starke and McTiernan JJ referred to Joseph Constantine in passing in Darling Island Stevedoring & Lighterage Co Ltd v Jacobsen;[138] and, in a judgment that has been consistently followed,[139] McClelland CJ in Eq, in Plumor Pty Ltd v Handley, relied on Joseph Constantine to conclude that, where a party claims to be entitled to rescind a contract on the happening of a specified event, the onus of proof as to whether the party induced the happening of the event lies on the party resisting rescission.[140] In my opinion, therefore, the decision in Joseph Constantine governs the question of the onus of proof in relation to the cause of the Helicopter’s destruction; and the onus is on Island Helicopters to prove that the doctrine of frustration does not apply because it was induced through the fault of CQ Aviation.
[138] [1945] HCA 22; (1945) 70 CLR 635 at pages 641 and 646
[139] Al Achrafi v Topic [2016] NSWSC 1807 at [89] (Robb J)
[140] (1996) 41 NSWLR 30 at page 35G
I then turn to whether the Lease Agreement was frustrated when the Helicopter was destroyed. First, there is no question that reasonable persons in the position of Island Helicopters and CQ Aviation assumed that the Helicopter would be available for use by CQ Aviation for the term of the Lease Agreement.
The next question is whether, on the proper construction of the Lease Agreement, it can be said that CQ Aviation accepted the risk of the Helicopter being destroyed. Relevant to answering that question is clause G of the Lease Agreement, which obliged Island Helicopters to take out Hull Insurance in relation to the Helicopter. That indicates the parties considered on whom the risk of destruction of the Helicopter would lie; and they agreed it would lie, not with Island Helicopters or CQ Aviation, but with an insurer under a policy of hull insurance Island Helicopters agreed to obtain. That, however, was qualified by clause H of the Lease Agreement, which provided:
The Lessee shall, notwithstanding clause G above, be responsible for all costs associated with the rectification of any damage caused to the aircraft as a result of the negligent operation of the aircraft including but not limited to hot starting, over torque and ground damage.
It is also expressly agreed that, due to the conditions in which the aircraft will be operating, any corrosion or structural repairs required to return the aircraft to it’s [sic] same condition as at the date of the execution of this agreement, will be at the expense of the Lessee.
On the proper construction of the Lease Agreement, therefore, the parties agreed that CQ Aviation would take the risk of damage or destruction of the Helicopter if such damage or destruction were to be caused by the negligent operation of the Helicopter, but the risk would otherwise not fall on either party, it would fall on an insurer whom Island Helicopters was required to arrange.
The next question is whether the destruction of the Helicopter radically altered the nature of CQ Aviation’s obligations under the Lease Agreement. In my opinion, it did. Unless the Lease Agreement were to be treated as discharged, CQ Aviation would have been obliged to pay a minimum of $22,500 every month over a two-year term in circumstances where it would not have had the benefit of the very subject matter of the Lease Agreement, namely, the use of the Helicopter. That is not what CQ Aviation agreed to do.
The final question is whether the Helicopter’s destruction was due to the negligence or other fault of CQ Aviation. Island Helicopters has not alleged, and, therefore, it has not attempted to prove, that the Helicopter was destroyed because of the negligence or other fault of CQ Aviation.
The destruction of the Helicopter, therefore, frustrated the Lease Agreement and, for that reason, from the time the Helicopter was destroyed, the Lease Agreement was discharged “forthwith, without more and automatically”.[141] CQ Aviation, therefore, did not repudiate the Lease Agreement by not paying amounts for the period after the Helicopter was destroyed.
[141] Hirji Mulji v Cheong Yue Steamship Co. Ltd. [1926] A.C. 497, 505 (Lord Sumner)
Other matters
Before I leave this section of my reasons, it is appropriate I consider the submission counsel for CQ Aviation made that the parties’ bargain was not that lease fees would be payable, whether or not the Helicopter was in fact supplied and flown; counsel submits the effect of the Lease Agreement was that the payments would be made only on Island Helicopters supplying “helicopter services”. On that construction, Island Helicopters had no entitlement to receive any payments under the Lease Agreement because it ceased to supply “helicopter services” after the Helicopter was destroyed.[142]
[142] Outline of Submissions for the Respondents, [62]-[69]
I do not accept these submissions. The essential elements of the bargain recorded in the Lease Agreement is that Island Helicopters agreed to deliver to CQ Aviation the Helicopter for it to be used by CQ Aviation for a period of at least two years in return for which CQ Aviation agreed it would fly the Helicopter for a minimum of 25 hours per month and pay Island Helicopters $900 for each hour the Helicopter was to be flown. The requirement of “minimum hours” implied an obligation on CQ Aviation that it would fly the Helicopter for at least 25 hours every month.
Claims under the TPA
Representations by agreeing to Lease Terms
In its amended statement of claim, Island Helicopters alleges that terms of the Lease Agreement (Lease Terms), including the term that CQ Aviation would use the Helicopter for a minimum of 25 hours per month at the rate of $900 an hour (Payment and Usage Terms), constituted representations; and it further alleges that the Lease Terms were misleading or deceptive because CQ Aviation did not have reasonable grounds for making them.
Island Helicopters relies on s.51A of the TPA, which relevantly provided as follows:
(1)For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.
(2)For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation.
The operation of s.51A(2) of the TPA was considered by the Full Federal Court in North East Equity Pty Ltd v Proud Nominees Pty Ltd:[143]
[28] Section 51A(2) imposes an evidential burden on the respondents to adduce evidence on the issue of whether there were reasonable grounds for making the representations. No persuasive burden (onus) falls upon the respondents to prove that they had reasonable grounds….
[29] At [33], the Full Court observed that the relationship between the burden cast upon the respondents to adduce evidence of reasonable grounds, and the dispositive burden upon the appellant, once the respondents had adduced evidence of reasonable grounds, was important in the present case. When relying upon s 51A(1), taken alone, to establish a contravention of s 52, two integers must be satisfied by an applicant. The first is that the representation relied upon must be a representation with respect to a future matter, and the second is that the representor did not have reasonable grounds for making the representation.
[30] However, the question of whether a respondent had, at the time of making the representation as to the future matter, reasonable grounds for making it, is particularly illuminated by the knowledge, understanding, or reasoning of the respondent. Section 51A(2) therefore casts an evidential burden on the respondent to adduce evidence on that issue, that is, some evidence ([33], first Full Court decision) of reasonable grounds for making the representation, failing which the deeming effect of s 51A(2) is engaged thus making it unnecessary for the applicant to prove the second integer under s 51A(1) in order to establish a contravention of s 52. Once evidence is adduced by a respondent in discharge of the evidential burden, the applicant must satisfy the dispositive burden of showing that the respondent did not have reasonable grounds for making the representation.
[143] [2012] FCAFC 1 at [28]-[30]
A term contained in a contract is capable of constituting conduct that is misleading or deceptive, or which is likely to mislead or deceive, within the meaning of s.52(1) of the TPA;[144] and where “the conduct relied upon involves not a statement as to a presently existing state of affairs, but a representation with respect to a future matter, which is contained purely in a contractual promise, then a case for contravention of s. 52 will involve consideration of the extra steps spelled out in s. 51A of the” TPA.[145] It has been held that, before s.51A(2) of the TPA can be engaged, there must be evidence of some facts or evidence existing at the time of the representation on which the person who made the representation as to a future matter in fact relied.[146]
[144] ReAccounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd [1993] FCA 265; (1993) 42 FCR 470 at pages 505-506
[145] Re Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd [1993] FCA 265; (1993) 42 FCR 470 at page 506
[146] Sykes & Ors v Reserve Bank of Australia (1998) 88 FCR 511 at page 513; [1998] FCA 1405. See also the cases referred to in A Eastwood “Future representations and the grounds that may be relied on to establish reasonableness” (2015) 89 ALJ 270
Mr Webb did not in his affidavit identify the facts or matters on which he relied for agreeing to the Lease Terms, including the Payment and Usage Terms. It may reasonably be inferred that Mr Webb did so because he believed he would be able to obtain the necessary business for the use of the Helicopter in PNG. There is, however, no evidence that is capable of establishing that Mr Webb’s belief was based on reasonable grounds. Given CQ Aviation has adduced no evidence to the contrary, Mr Webb, and, therefore, CQ Aviation, must be deemed not to have had reasonable grounds for agreeing to the Lease Terms and, for that reason, his agreeing to the Lease Terms constituted conduct that was misleading or deceptive.
In the amended statement of claim, Island Helicopters alleges it relied on the Lease Terms to deliver the Helicopter to CQ Aviation. Mr Sweeney has given no evidence that he in fact relied on the Lease Terms to deliver the Helicopter to CQ Aviation. It appears, therefore, that Island Helicopters relies on my inferring that Island Helicopters relied on the Lease Terms. I am not prepared to find Island Helicopters relied on the Lease Terms. The more probable explanation for Island Helicopters’ having delivered the Helicopter to CQ Aviation, both on 22 November 2009 and on 7 February 2010, is that Island Helicopters considered itself to have been bound by the terms of the Lease Agreement to deliver the Helicopter to CQ Aviation.
Even if it be accepted that Island Helicopters delivered the Helicopter to CQ Aviation in reliance on the Lease Terms, I am not satisfied it suffered any loss. That is so because, at the time Island Helicopters delivered the Helicopter to CQ Aviation, it was required by the terms of the Lease Agreement to do so. In other words, the Lease Terms did not lead to Island Helicopters altering its position because they would have induced Island Helicopters to do that which it was contractually bound to do. (Island Helicopters does not allege it was induced to enter into the Lease Agreement because of any representation it alleges CQ Aviation made.)
In my opinion, therefore, although, by agreeing to the Lease Terms, CQ Aviation is deemed by the operation of s.51A(2) of the TPA to have engaged in conduct that is misleading or deceptive, contrary to s.52(1) of the TPA, Island Helicopters was either not induced by those representations to deliver the Helicopter to CQ Aviation or, if it was so induced, it suffered no loss or damage because it was contractually obliged to deliver the Helicopter to CQ Aviation.
Claimed representation to pay Premium Differential
Given the findings I have made, this part of Island Helicopters’ claims can be dealt with briefly. It depends on my accepting Mr Sweeney’s evidence of the conversations he had with Mr Webb in which, according to Mr Sweeney, Mr Webb agreed to pay the Premium Differential. For reasons I have given, I do not accept Mr Sweeney’s evidence. I have also concluded that no agreement by Mr Webb to pay the Premium Differential can be inferred from Mr Webb’s not responding to the email Mr Sweeney sent to Mr Webb at 5:12 pm on 10 February 2010.
Counsel for CQ Aviation submitted that even if CQ Aviation represented it would pay the Premium Differential, Island Helicopters is unable to establish it suffered any loss. Counsel referred to the absence of any evidence from Mr Sweeney that he could have attempted to retrieve the Helicopter from CQ Aviation had CQ Aviation not represented it would pay the Premium Differential. Counsel further submitted Island Helicopters would have had no legal right to retrieve the Helicopter because the Lease Agreement did not oblige CQ Aviation to pay the Premium Differential.
I have concluded that, on its proper construction, the Lease Agreement from the outset contemplated that CQ Aviation would operate the Helicopter in PNG, and that any agreement by CQ Aviation to pay the Premium Differential would have been unenforceable for want of consideration. In those circumstances, even if CQ Aviation represented to Island Helicopters it would pay the Premium Differential, that would not have resulted in any loss to Island Helicopters because it would have had no legal right to prevent CQ Aviation from using the Helicopter in PNG.
This part of Island Helicopters’ claims, therefore, fails.
Unconscionable conduct
The ground on which, in the amended statement of claim, Island Helicopters relies for claiming that CQ Aviation acted unconscionably, contrary to s.51AA and s.51AC of the TPA, is that CQ Aviation “failed and/or refused to pay the Insurance Differential”.[147] Given I have found CQ Aviation did not agree or represent to pay the Premium Differential, CQ Aviation’s failure to pay the Premium Differential by itself is incapable of constituting conduct that is “unconscionable within the meaning of the unwritten law” for the purposes of s.51AA of the TPA or as constituting unconscionable conduct “in all the circumstances” within the meaning of s.51AC of the TPA.
[147] Amended statement of claim, [28]
Damages
Finally, I should say something about the loss Island Helicopters claims it suffered because of CQ Aviation’s alleged contraventions of the TPA. The loss Island Helicopters says it suffered is its not receiving payment of an amount equal to the Premium Differential and its having lost the profit of $156,500 it claims it would have earned had the Lease Agreement run its course. Island Helicopters does not, however, explain how CQ Aviation’s alleged contraventions resulted in such losses.
At least for most purposes, when assessing compensation under s.82 of the TPA for loss claimed to have been suffered because of a misleading or deceptive or unconscionable representation, it is necessary to compare two situations, one actual, and the other hypothetical. The hypothetical situation is that in which the person alleging contravention of the TPA would have been in had the representation not been made. The actual situation is that in which the person claiming damages has been placed because the person relied on the representation. If the applicant is worse off in the actual situation than he would have been in the hypothetical situation, that would represent the applicant’s loss and an amount will be assessed to compensate the applicant for the loss.
Island Helicopters has made no clear submission about the position it claims it would have been in had CQ Aviation not engaged in the alleged contravening conduct. One suggestion is that, had CQ Aviation not represented it would pay the Premium Differential, Island Helicopters would not have permitted CQ Aviation to take the Helicopter to PNG. Given my findings about the proper construction of the Lease Agreement, however, Island Helicopters would not have been entitled to prevent CQ Aviation from taking the Helicopter to PNG. In those circumstances, if Island Helicopters were to have succeeded in preventing CQ Aviation from taking the Helicopter to PNG, it would have repudiated the Lease Agreement. That would not only mean that Island Helicopters would not have earned any profit on the Helicopter; it would have been exposed to a claim for damages for breach of contract.
In my opinion, therefore, even if Island Helicopters were to have succeeded on its TPA claims, I am not satisfied it would have suffered the losses it claims it would have suffered.
Did Island Helicopters suffer loss?
CQ Aviation submits that Island Helicopters suffered no loss as a consequence of the destruction of the Helicopter and its not receiving the profits it would have received had the Lease Agreement run its course because of the money it received from the insurer. This submission is premised on the Helicopter having a value of around $477,529, exclusive of GST, but Island Helicopters having received a payment of $1 million. Island Helicopters submits that this amount was sufficient not only to indemnify Island Helicopters for the capital loss it suffered because of the destruction of the Helicopter, but also the profit Island Helicopters claims it would have made had the Lease Agreement run its course.
Island Helicopters, on the other hand, claims that, as at 20 February 2010, the Helicopter had a value of USD735,000 which, when converted into Australian dollars at the rate then prevailing, had a value of $825,843. Island Helicopters further submits, however, that even if the Helicopter was worth less than $1 million, and the amount it received from its insurers exceeded the value of the Helicopter, that is not a benefit that is available to be credited against the losses it claims it suffered. In particular, Island Helicopters submits that the losses for which it claims damages do not relate to the capital loss of the Helicopter, but to losses arising from the destruction of the Helicopter.
The competing contentions of Island Helicopters and CQ Aviation are supported by competing valuations. The resolution of the question of the value of the Helicopter as at 20 February 2010 is far from straightforward; and the legal issues that arise out of CQ Aviation’s claim that Island Helicopters suffered no loss are complex. In those circumstances, and given that, on my findings, CQ Aviation did not repudiate the Lease Agreement or, if it did, I am not satisfied Island Helicopters elected to terminate the Lease Agreement on account of CQ Aviation’s repudiating the Lease Agreement, and therefore CQ Aviation is not liable to pay damages for any profit Island Helicopters may have lost because the Lease Agreement did not run its course, I do not propose to consider and make findings on the value of the Helicopter. Nor do I propose to consider whether, if the payment Island Helicopters received from its insurers exceeded the value of the Helicopter, that ought to be taken into account when assessing whether Island Helicopters suffered any loss.
Failure to mitigate loss?
CQ Aviation claims Island Helicopters unreasonably failed to mitigate its loss. CQ Aviation submits Island Helicopters had sufficient cash in hand to acquire another helicopter, but it instead applied the cash to other purposes.[148]
[148] Outline of Submissions for the Respondents, [72]-75]
These submissions fail because there is insufficient evidence to make them good. The evidence does not satisfy me that the cash CQ Aviation submits Island Helicopters had available to it as at 30 March 2010 ($274,000) was sufficient to purchase a helicopter comparable to the Helicopter. Nor is there evidence on the basis of which a finding could be made about the time by which Island Helicopters would have been able to acquire another helicopter that was, or was capable of being made, suitable for CQ Aviation’s operations in PNG.
Claim for value of Equipment
Although not so stated, the basis on which Island Helicopters claims that CQ Aviation is liable to pay to it the value of the Equipment is bailment. The general principle that governs the liability of a bailee for reward for the destruction of goods held by the bailee was stated by Lord Denning in Morris v C W Martin & Sons Ltd:[149]
Once a man has taken charge of goods as a bailee for reward, it is his duty to take reasonable care to keep them safe: and he cannot escape that duty by delegating it to his servant. If the goods are lost or damaged, whilst they are in his possession, he is liable unless he can show - and the burden is on him to show - that the loss or damage occurred without any neglect or default or misconduct of himself or of any of the servants to whom he delegated his duty.
[149] [1966] 1 QB 716, at page 726
Although there is some evidence of the circumstances in which the Helicopter and Equipment were destroyed,[150] CQ Aviation does not submit the evidence proves the Helicopter and Equipment were destroyed without any neglect or default or misconduct on its part. CQ Aviation submits, however, it is not liable to compensate Island Helicopters for the destruction of the Equipment because Island Helicopters was required to insure not only the Helicopter, but also the Equipment. Whether or not that submission is correct turns on the proper construction of the Lease Agreement.
[150] CB112. There is annexed to Mr Webb’s affidavit what appears to be a statement made by the pilot at the time the Helicopter crashed. Objection was taken to its being admitted. I rejected its admission, but gave CQ Aviation’s counsel leave to adduce evidence from Mr Webb to show the statement was a business record (T29.35). Counsel did not, however, attempt to lead such evidence from Mr Webb.
Clause G of the Lease Agreement provided that the “Lessor is responsible to ensure that the helicopter is insured as to item 1 below”. Item 1 is “Hull insurance as defined in Item 8 of the Schedule”. Item 8 of the Schedule includes “Hull Insurance to the value of $A1,000,000.00”. In item 4 of the Schedule to the Lease Agreement next to the words “The Helicopter” there is included the letters “VH-SHA”, which I find is a reference to the Helicopter, and each item of Equipment, namely, “blade tie”, “floats”, “wheels”, and “6 David Clark Headsets”. On the plain reading of these words, the requirement in clause G that “the helicopter” be insured is a reference to the Helicopter and the Equipment described in Item 4.
I am conscious that the expression “hull insurance” may have a special meaning in the aviation insurance market.[151] No party, however, submitted that “Hull Insurance”, as that expression is used in the Lease Agreement, bore any special meaning. There is no reason, therefore, for me to give clause G a construction that differs from how reasonable persons in the position of Mr Sweeney and Mr Webb would have understood the meaning of that clause. In my opinion, the proper construction of clause G is that Island Helicopters agreed to insure the Helicopter and the Equipment, and that Island Helicopters would look to its insurer, not CQ Aviation to be indemnified for damage or destruction of the Equipment.
[151] See, for example, R D Margo “Aspects of Insurance in Aviation Finance”, 62 J. Air L. & Com. 423 (1996-1997) at pages 439-442
This part of Island Helicopters’ claims also fails.
Conclusion and disposition
Island Helicopters fails on its claims that it is entitled to be paid an amount equal to the Premium Differential, an amount equal to the profits it claims it would have made had the Lease Agreement run its course, and an amount equal to the value of the Equipment. Island Helicopters, however, is entitled to be paid $20,900, being the unpaid balance of the invoice it issued for the excess it paid under its policy of insurance. Island Helicopters is also entitled under s.76(3) of the Federal Circuit Court of Australia Act 1999 (Cth) to interest on that amount from 24 March 2010, being the date on which Island Helicopters sent the invoice to CQ Aviation,[152] to the date of judgment. The interest should be calculated by applying the rates prescribed by Practice Note CM16 issued by the Federal Court of Australia. The interest calculated on the basis of those rates is $10,762.85.
[152] CB133
I propose, therefore, to order that judgment be entered against Island Helicopters for $31,662.85 being the sum of $20,900 and interest of $10,762.85, and order that the application be dismissed as against Mr Webb. I will grant the parties liberty to apply within twenty one days on the question of costs.
I certify that the preceding one hundred and forty-seven (147) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis
Date: 19 July 2017
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