Acernus Aero Limited v Vincent Aviation Limited

[2013] NZHC 595

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2012-485-113 [2013] NZHC 595

UNDER  Section 256 of the Property Law Act 2007 and High Court Rule 7.53

BETWEEN  ACERNUS   AERO   LIMITED   a   duly incorporated company having its registered office  at  level  6,  Woodward  House,  188

Lambton  Quay,  Wellington,  Charter  Air

Service Operator

Plaintiff

ANDVINCENT AVIATION  LIMITED  a duly incorporated company having its registered office at 95 Tirangi Road, Rongotai, Wellington, Air Transport Operator

Defendant

Hearing:         11-13 February 2013

Counsel:         J Toebes and J Grant for Plaintiff

J Scragg and P Higbee for Defendant

Judgment:      26 March 2013

JUDGMENT OF MILLER J

Introduction

[1]    Acernus Aero owns a Cessna Citation 510 Mustang jet aircraft, registration ZK-MUS.    It  is  the second  such Cessna that  Acernus  has  owned.    They were successively involved in the events that led to this litigation, but nothing turns on the identity of the aircraft at any given point in time, so I will not normally distinguish

between them.

ACERNUS AERO LIMITED v VINCENT AVIATION LIMITED HC WN CIV-2012-485-113 [26 March 2013]

[2]    The first Cessna arrived in New Zealand on 12 February 2008.   It and later ZK-MUS were hangared at the premises of Vincent Aviation, which are situated at Wellington Airport, until February 2011.   Acernus paid $1,666.67 plus GST per month for hangarage.  Vincent also maintained the aircraft at Acernus’s expense.

[3]    The aircraft was substantially put to work transporting Acernus’s principals, Mike Garnham and Andrew Fawcett, and their associates.  But Acernus also wanted to charter it.  That required that it be entered on an air operator’s certificate (AOC) issued under rule 119, in accordance with Part 135 of the Civil Aviation Rules (NZ) (this is known as a Part 135 certificate).  Vincent agreed to add the aircraft to its own certificate.  That was done on 27 July 2010. Until March 2011 both parties chartered the aircraft, sharing revenue on an agreed basis.

[4]    On 12 November 2010 Vincent proposed to increase hangarage fees to $8,000 per month.  Acernus did not agree.  Vincent sent Acernus a notice of termination by letter of 22 December 2010, and in February 2011 it acted, removing the aircraft from its hangar complex.   On 18 February it told Acernus that the existing arrangement was not satisfactory and gave notice that the aircraft would be deleted from its AOC on 31 March.

[5]    These actions led to some acrimonious negotiations.  On 8 April 2011 Vincent told Acernus that it would accept $7,000 per month, comprising $3,000 for rent and

$4,000 for use of Vincent’s AOC.  Acernus did not respond, but it continued to use hangar space and to charter the aircraft.  It made no payments at all after May 2011.

[6]    On 1 December 2011 Vincent gave notice of termination, and on 19 January

2012 it terminated summarily for non-payment of $101,788.88.

[7]    It was until trial in dispute that on termination Acernus was in fact in arrears of hangarage payments.  I was told at the end of the trial that a sum of $11,878.88 has now been paid, representing hangarage that Acernus admits was payable.  Acernus now stores the aircraft in Napier and no longer charters it.

[8]    Acernus did not accept Vincent’s termination notice.  It claimed to have a sub- lease of part of one of Vincent’s hangars, with a term corresponding to Vincent’s own lease from Wellington International Airport Ltd, and it sought relief against forfeiture.  It also complained that Vincent had failed to get the aircraft onto its AOC within a reasonable time, with consequent loss of charter revenue, and that Vincent had wrongly charged it for certain out of pocket expenses associated with Vincent- originated charter flights.   Vincent met these claims with a counterclaim for hangarage and AOC fees, and for damages for Mr Garnham’s alleged failure to introduce charter business.

[9]    Some of these issues were abandoned or substantially reduced by the end of the trial.  In particular, Acernus abandoned its claim for relief against forfeiture and neither side pursued claims in respect of aircraft maintenance.   The following questions remain:

a)    Whether Vincent’s termination notice was reasonable.  This requires that I determine on what basis Acernus used the hangars, and what notice was necessary or reasonable to terminate hangarage and remove the aircraft from Vincent’s AOC;

b)   Can Vincent claim $7000 per month for storage and use of its AOC in contract; if not, can it claim that or some lesser sum in quantum meruit;

c)    Was Vincent contractually obliged to put the aircraft on its AOC, and if so, when;

d)    Is Vincent entitled to damages for Acernus’s failure to deliver promised

charter revenue;

e)    Was  Acernus  liable  to  pay  third  party  charges  (notably,  landing  and Airways charges) incurred by Vincent when the aircraft was operating on charter.

[10]  The answer to most of these questions turns on what obligations the parties assumed to one another at the outset or as their relationship evolved.  That in turn requires a narrative of their relevant dealings with one another.

The narrative

[11] In November 2007 Mr Garnham and Peter Vincent of Vincent Aviation discussed services that Vincent might supply for the aircraft.  That led to an email of

26  November,  in  which  Mr  Vincent  offered  a  menu  of  services  from  which Mr Garnham might choose: supply of pilots (a service which Acernus ultimately did not make use of, preferring to hire its own pilot), aircraft and equipment storage, and maintenance support.  Vincent might also be able to supply “some extra utilisation”, by which he meant charters.  I reject Mr Toebes’s submission that the letter offered a package all of which Acernus accepted.  That it was nothing of the sort is confirmed by an email between Messrs Fawcett and Garnham on 19 December, recounting a discussion with Mr Vincent in which it was made clear that Acernus might take part of the proposal, namely hangarage and maintenance.

[12]  On 19 December Mr Garnham and Mike Stobbs, Vincent’s check and training manager,  discussed  chartering  the  Mustang.    In  an  email  of  the  following  day Mr Stobbs explained that it would be pretty much impossible to get the aircraft set up quickly.  Vincent would need some input into the choice of pilot to put it onto Vincent’s Air Operator’s Certificate.  He recorded that the parties agreed this could be looked into later, when the second Mustang arrived.   Vincent was happy to proceed with hangarage, but a little more discussion was needed to get a contract in place.

[13]  On 21 December Mr Garnham replied by email, advising that while it would not be until later in January that they could “sit down more formally with you to finalise arrangements for a business association along the lines that we have been discussing … .”  He believed that they could confirm hangarage in “your facility and care” at a rate of $2,000 plus GST, and that Acernus would like to nominate Vincent as maintenance contractor.   He contemplated that Acernus might require some administration services.   He added that he saw potential to co-operate regarding

charter work, and suggested that the parties discuss that in detail in February, adding

that it was a secondary consideration from his and Mr Fawcett’s perspective.

[14]  On 30 January 2008 Mr Garnham advised that the aircraft would arrive during the following week and suggested that the parties should sit down when it arrived to discuss the arrangements.  On 7 February Mr Vincent emailed Mr Garnham asking if he knew a good lawyer who could draft a contract for “hangar storage and any other issues”;  he mentioned insurance.  He envisaged that the parties would use Vincent’s maintenance contract.   It appears that Mr Vincent hoped that Mr Garnham would offer to draft the contract.

[15]  Mr Garnham replied on 11 February, enclosing a copy of Acernus’s insurance policy and asking Vincent to check its own policy to ensure there were no gaps.  He suggested that the parties sit down in the following week and sort out “hangar and maintenance contracts”.  He recorded that Mr Vincent had kindly offered to allow Acernus to access Vincent’s favourable fuel purchase terms, and requested a fuel card.

[16]  Arrangements were made to have an engineer contracted to Vincent certified to work on the Cessna.  That involved a trip to the US for training at the Cessna plant.

[17]  On 28 March Mr Vincent emailed Mr Garnham, reminding him that he had asked for a draft hangarage agreement a couple of months previously.  That led to an email of 10 April, in which Mr Garnham confirmed that they had arranged a meeting at which they would discuss an agenda the first item on which was the principal terms of the Heads of Agreement relating to hangarage, maintenance and administration matters.  The agenda did not refer to chartering the aircraft.

[18]  The meeting had to be postponed, and it seems that it was never rescheduled. On 6 May Mr Garnham emailed, requesting that Vincent bill Acernus for rental, which he believed had been agreed at $20,000 per annum plus GST.  He added that the parties had yet to finalise a “brief summary heads of agreement” and invited Mr Vincent to set out his thoughts on the agenda sent on 10 April.  In response to this Vincent did bill rent at $1677.67 per month plus GST.

[19]  The parties had not discussed the terms of Vincent’s own lease at Wellington Airport, or whether the lessor’s consent might be needed.  When the aircraft arrived Vincent actually operated under a sublease from a firm called Air National.  In June

2008  Wellington  Airport  Ltd  offered  Vincent  a  five-year  lease  commencing  1

August 2008, with one right of renewal.   It appeared that Air National was to surrender its lease.  These discussions and the subsequent lease negotiations made no mention of Acernus.

[20]  A  letter  from  Mr  Fawcett  to  Mr  Garnham  of  15  August  suggested  that, Acernus  having  now  hired  a  full  time  pilot  it  was  time  to  negotiate  access  to Vincent’s AOC for charters.   He hoped that charters would cover most of the aircraft’s fixed costs.  In a letter of 1 December 2008 Mr Garnham noted that getting the aircraft onto Vincent’s AOC would require Mr Vincent’s approval.  It was clear too that he had yet to negotiate charter rates and fees for use of the AOC with Mr Vincent.

[21]  Vincent added a 15 per cent surcharge to fuel purchased using its fuel charge. When Mr Garnham’s accountant noticed this in October 2008 he asked that the charge be reversed.  He was told that the alternative was that an administration fee would be payable.  As noted above, the parties had contemplated that Acernus might pay for administration services, but that had not been negotiated.   The surcharge issue was not resolved.   On 30 October 2008 Vincent wrote advising that bills of more than $6,000 had not been paid, some of them presumably for fuel.  It appears that these were later brought up to date and the parties met, Vincent suggesting a monthly administration fee, a surcharge, or a fee per litre of fuel;  alternatively, that Acernus could get its own fuel card.  No agreement was reached.

[22]  Early in 2009 Acernus and its pilot, Matthew Miller, began to press Vincent to get the aircraft onto its AOC.  On 9 January Vincent explained the work that had to be done.   Essentially it involved updating various Vincent documents, such as its maintenance, operation and check and training manuals, to include the aircraft and submitting the updated materials to the Civil Aviation Authority (CAA).  That led to a complaint from Mr Garnham, in which he stated that the parties had been exchanging emails on the AOC for about six months but nothing had been done.

Steve Kingsbury, Vincent’s flight operations manager and later general manager, replied that Vincent could not progress the work at that time, because of other commitments.   At the time Vincent was expanding into overseas markets in the Solomon Island, Myanmar and Australia, and its management were heavily committed to those projects.

[23]  On 13 February Mr Garnham emailed Mr Vincent, changing tack somewhat. He accepted that Acernus should not impose on Vincent, and that chartering would be held up if Vincent could not process the Part 135 documentation, but he suggested that Vincent staff spend a small amount of time with Mr Miller to give him a list of the necessary documents.   Mr Miller could then prepare them, perhaps with some outside assistance.

[24] On 23 February a Vincent staff member sent Mr Garnham a standard management contract and a draft contract “to cover the hangar lease”.  It appears that some of the terms had been guessed at by the person who prepared it.  The document contemplated that Acernus would take a sublease involved a hangar, and that the term was month to month.   It attached the Wellington Airport head lease.   The sublease was never executed.

[25]  On 11 March Mr Vincent replied to Mr Garnham’s email of 13 February.  He confirmed that “we will go ahead with the Mustang AOC”, explained that his staff would work with Mr Miller, and reminded Mr Garnham that he was to “come up with a draft contract covering the arrangement for operating the aircraft”.   On 18

March  he  followed  up  with  an  email  noting  that  about  $27,000  was  overdue, including about $3,000 in fuel surcharges, and asking that payments be kept up to date.

[26]  On 9 July Mr Kingsbury for Vincent emailed advising Mr Garnham that most of the work had been done to get the aircraft onto the AOC and seeking a meeting to establish the operating agreement and finalise hangar and maintenance arrangements. Pending those negotiations it appears that Vincent did not submit the AOC documentation to Civil Aviation.  It continued to press Mr Garnham for a meeting, evidently without success, for it was not until 27 November that he emailed with a

proposal for charter revenue and fees.  He proposed that Acernus would pay $250 plus GST per hour, being 10 per cent of the gross charter rate.   It is clear that he knew the Part 135 documents had not yet been submitted to Civil Aviation, but he did not complain about that.  Rather, he apologised for holding things up.

[27]  Vincent leased two hangars at Wellington Airport.  As a result of losing Air New Zealand maintenance work in 2009, it contemplated surrendering the lease for smaller of the two hangars.   Some discussions were held between Acernus and Vincent about how the area leased, which included some curtilage and car parks, and the rent might be split.  Only at this time does it appear that the parties discussed the terms of Vincent’s lease from the Airport.  This proposal did not proceed, Vincent electing to continue with the lease.

[28]  On  12  February 2010  Mr  Vincent  emailed  Mr  Garnham  advising  that  he planned to get the Part 135 documentation to the CAA the following week.  He was content that Mr Garnham’s numbers formed the basis of an operating agreement but suggested that “15% of the bare charter rate is a bare minimum”.  He now seemed keen to have the aircraft on the AOC, stating that it was a big part of his plans to gear up and do some marketing.  On 3 March he wrote again, apologising for having “very much dragged the chain on getting the Mustang up and running on Part 135 operations”, and apologising for the delay.

[29]  The documentation was submitted to the CAA on 24 May 2010, and approval to operate the aircraft was given on 27 July.

[30]  Vincent now sought to “finalise the contract paperwork” to operate the aircraft. Mr Kingsbury emailed Mr Garnham on 24 August, recording his understanding of various discussions between Mr Vincent and Mr Garnham:

Acernus charges Vincent Aviation an hourly rate of $2500 plus GST per hour inclusive of crew, landing and airways navigation charges, fuel.

Acernus is responsible for all operational and maintenance costs of the aircraft.

Acernus meets all crew training costs to allow pilot(s) to operate in accordance with Vincent Aviation AOC.  In terms of any new pilots, both parties need to be in agreement as to who is flying the aircraft.

Vincent Aviation Ltd is noted on the insurance policy as operator.

Vincent  Aviation operates the aircraft, authorises flights, ensures training as planned, maintenance is carried out.

Forbooking of the aircraft we thought we would block out your requirements within our aircraft schedule.   Matt can liaise directly with Ops as your requirements arise.   If a charter from Vincent Aviation is requested we would liaise with him so there are no clashes.

Irecall some discussion on different rates for clients originated from your sources, but not sure as to how this was left.

Vincent Aviation would market the aircraft.

[31]  This email indicates that Mr Kingsbury was principally concerned about flights on which Vincent would charter the aircraft, but he also referred to “different rates” for charters originated by Acernus.

[32]  On  9  November  2010  Mr  Garnham  emailed  following  a  meeting  with Messrs Vincent and Kingsbury.   He stated that at the moment the parties had a sublease in place with a rent of $20,000 per annum.  It appears that he had in mind only one hangar, presumably the smaller one.  I record at this point that the evidence established that the aircraft was normally but not invariably housed in the smaller hangar.  Occasionally Vincent would move it outside or to the larger hangar for its own reasons, without seeking Acernus’s approval.  There was a dispute about how often this  happened  after Vincent  lost  its  Air  New  Zealand  work  and  had  less demand for hangar space.  I am satisfied that it happened occasionally, sometimes for operational reasons and sometimes merely because Vincent disliked what it saw as Mr Garnham’s increasingly proprietorial attitude toward the small hangar.

[33]  In the 9 November email Mr Garnham recorded that the charter rate for the Mustang was now $3,000 per hour plus GST.   Where Vincent arranged a flight, Acernus proposed that it would get 10 per cent of the “gross charter rate”, adding that  the  percentage  of  gross  charter  revenue  was  “exclusive  of  out-of-pocket expenses relating to pilot and landing charges etc ... .”   For Acernus-originated

charters the fee would be $55 per flight hour for Part 135 paperwork and administration.

[34]  On 12 November Mr Kingsbury wrote advising that it proposed to increase payment for “the space currently being rented to you” to $8,000 per annum.  Subject to agreement on that, and to a 15 per cent administration handling fee on costs incurred on Acernus’s behalf, Vincent was agreeable to Acernus’s proposed charter rates.   I pause at this point to note that although Acernus has since conceded this issue, one cause of the friction now increasingly evident between the parties was the need to have a second engineer travel to the US for Cessna certification.  Acernus had insisted that Vincent should share the cost.

[35]  Mr Garnham replied to Mr Vincent, claiming that the agreement was that rent would be paid at $20,000 per annum plus GST “to have the part use of the small hangar”, that arrangement to continue for the balance of Vincent’s lease or any renewal thereof.

[36]  On 22 December 2010 Mr Vincent wrote by letter, advising Mr Garnham that the “interim lease” of the hangar would cease as of 31 January.  He explained that hangarage could not be separated from charter and use of the Vincent AOC.   He noted that Vincent’s own aircraft had regularly been left outside while the Mustang was hangared, which was not acceptable at the current rent, and that as the operator under the AOC Vincent was responsible for all the Mustang’s operations, including private flights.  It is clear that Mr Vincent was delivering an ultimatum.  He added that “as previously advised” there was a 15 per cent administration charge for all consumables, parts, Airways charges, landing fees, fuel and other outsourced work.

[37]  Mr Garnham did not respond to Vincent initially, but he did pay attention.  He pressed Wellington Airport for a lease of the small hangar.  However, the Airport noted that this would require that Vincent surrender the lease, and advised that it would contact Mr Vincent to discuss the matter.   This proposal ultimately went nowhere.

[38]  In the meantime, Vincent removed the aircraft from the hangar on 2 February. In an email of the same date, Mr Garnham challenged the termination and alleged, among other things, that he and Mr Vincent had agreed to a sublease for a term corresponding to Vincent’s own lease.

[39]  Some further attempts were made to negotiate the terms of an arrangement, and Acernus brought its account up to date, apart from the new charges that Vincent claimed.  Vincent did some work internally on the costs of having the aircraft added to its AOC.  Meantime Mr Garnham complained that the aircraft had been out in the elements for two weeks and instructed his accountant to deduct two weeks rent. That led Mr Vincent to warn on 18 February that unless another arrangement was negotiated the aircraft would be removed from the AOC from 31 March.   For his part, Mr Garnham demanded that Mr Vincent co-operate with getting Acernus a lease of the small hangar and associated space from Wellington Airport.

[40]  On 8 April Mr Vincent wrote, offering in return for $7,000 per month to provide hangarage and host the Mustang on its AOC.   If this was not suitable, Vincent would co-operate with transition to another operator’s AOC, but would not provide hangarage beyond 30 May 2011.  If Acernus elected to remain with Vincent, the aircraft would be housed in a shared hangar.   Mr Garnham ignored this communication, evidently taking the position, as he explained in evidence, that he had made his position clear, and Vincent began to bill at the proposed rate.  In the meantime, Acernus’s payments to Vincent under the previous arrangement again fell into  arrears.     No  payments  were  made  after  May  2011.     It  appears  that Mr Garnham’s  position  was  that  he  was  not  satisfied  with  the  accuracy  of  the invoices so would not pay them.  It appears that both parties continued to charter the aircraft.  Certainly Acernus did so, and it continued to utilise hangar space.

[41]  On 1 December 2011 Vincent gave notice that the arrangement would cease on

31 March 2012, or within seven days if Acernus did not pay the amount outstanding.

[42]  On  19  January  2012  Mr  Vincent  wrote  terminating  the  arrangement,  and saying that by that time $101,708.88 was due.  Termination was not contingent upon

Acernus failing to pay.   He also advised that the aircraft would be removed from

Vincent’s AOC.

[43]  The aircraft was removed from Vincent’s facilities in March, and from its

AOC on or about 22 February 2012.

What notice of termination, if any, was Vincent required to give Acernus?

[44]  Mr Toebes argued that the parties entered into a sublease corresponding to the term  of  Vincent’s  head  lease,  alternatively  a  licence  or  at  least  a  bailment. Whichever it was, he submitted, Vincent could not terminate the parties arrangement summarily on 19 January 2012.  He pointed out that under s 245 of the Property Law Act 2007 the notice period implied into leases and licences is 10 clear working days where termination is due to non-payment.  Further, the notice was plainly wrong;  it claimed more than $101,000 when the actual amount due was $11,878.88.   This latter submission assumed, of course, that Acernus was not liable to pay Vincent at

$7,000 per month.

[45]  Mr Scragg responded that the arrangement was a bailment.  He pointed out that Clifford J suggested that such was its true character after hearing an unsuccessful Acernus application for interim relief.1   The bailment here was in the nature of hire of custody, for the aircraft was delivered to Vincent to be stored in return for a monthly fee.2

[46]  I agree that this was a bailment, not a lease or licence.  The parties sometimes spoke of a “lease”, but not until many months had passed was that word used in discussions, as Mr Garnham conceded, and none of the essential elements of a lease were present at any relevant time.  First, there was no certainty of premises.  I do not accept that Acernus was ever promised that the aircraft would be stored only in the small hangar, but even if it had been the aircraft did not occupy the entire hangar and no precise area can be assigned to the space that it occupied.   Mr Garnham was reduced to pointing out in evidence that because of its height the aircraft had to

occupy the centre of the hangar, which has a gable roof, leaving limited room for other aircraft and uses unless the Cessna was pushed to the rear or moved to the large hangar.  But to say that is not to define an area leased, let alone any rights to administration, carparks and common areas.

[47]  Second, I have already found that Acernus did not have exclusive possession of any part of the hangar.  As time went on the aircraft usually went into the small hangar, but Vincent moved it as it saw fit.

[48]  Third, there was no certainty of commencement date and term.  I flatly reject Acernus’s claim that a term corresponding to Vincent’s own was agreed.  When the arrangement was first set up Acernus knew nothing of Vincent’s then arrangements with Air National, and I accept Mr Vincent’s evidence that he never offered a term corresponding to Vincent’s new lease with Wellington Airport.   The parties did discuss Vincent surrendering part of the premises, which would allow Acernus to negotiate its own lease with the Airport, but that is a different matter.

[49]  Nor was the arrangement a licence, under which an occupier of land permits another person to do something on the land that would otherwise be a trespass.3

Under a mere licence the licensor assumes no obligation to the licensee for the care of an item that the licensee brings onto the land.4    In this case, Acernus originally asked that the aircraft be stored in Vincent’s facility and care, and that is what happened.  Vincent took responsibility for it, and maintained insurance.

[50]  Section 245 of the Property Law Act, dealing with notice, does not apply to a bailment.  Mr Scragg accepted that reasonable notice was required.  But in context the notice was reasonable, for several reasons.  First, on 8 April 2011 Vincent had warned that the arrangement would end on 30 May unless its terms were accepted. Acernus maintained that the parties had a lease, but I have rejected that;   Vincent was entitled to terminate at that time.  Second, on 1 December 2011 Vincent gave the seven-day notice to which I have already referred.  Third, at that time Acernus had paid nothing since May 2011.  Finally, Acernus did not respond to the notice by

tendering payment of that sum which it had acknowledged was due.  Not until trial did it pay.  A longer period of notice would have made no difference.

[51]  The consequence of these findings is that Acernus’s claims based on wrongful termination fail to the extent they were not already abandoned.   This conclusion disposes  of  the  first,  second,  third  and  fifth  causes  of  action  in  the  amended statement of claim.

Is Vincent entitled to additional sums for hangarage and use of its AOC?

[52]  Vincent counterclaimed for money payable under “the fee structure”, alleging that  Acernus  agreed  by  conduct  to  pay  from  1  June  2011.    The  fee  structure concerned is the rate of $7,000 per month for hangarage and use of the AOC. Mr Scragg relied on the email of 8 April 2011 in which Vincent advised that the rate would be $7,000 per month.  Acernus did not respond, but it continued to store the aircraft in the hangar complex and to operate it on Vincent’s AOC.  It undertook at least 12 charters between 1 June 2011 and 22 February 2012.

[53]  Faced with the difficulty that it was perfectly clear by the close of evidence that Mr Garnham had no intention of paying and Vincent must have known it, Mr Scragg sought at the end of the case to amend to advance the same claim in quantum meruit, on the basis that Acernus accepted services knowing that payment was expected.

[54]  Mr Toebes responded that there was no such agreement, and no basis on which the Court could establish a reasonable fee.  I understood him to adopt a proposition that I put to Mr Scragg, namely that Acernus may have lost the opportunity to call evidence about the reasonable price for hosting an aircraft on an AOC.

[55]  I  have  found  that  the  hangarage  and  AOC  hosting  arrangements  were terminable on reasonable notice.  It follows that Vincent was entitled to increase the price for which it would supply these services, on reasonable notice.   The notice given on 8 April 2011 was unquestionably reasonable.

[56]  However,  I  am  not  satisfied  that  there  is  room  for  an  inference  that  by continuing to utilise these services Acernus agreed to the new rates.5    Mr Garnham had made it perfectly clear that so far as it was concerned nothing more was payable. It is true that Acernus did not even pay that which he admitted it ought to pay, but it never denied liability;  rather, its stance was that it was not satisfied with Vincent’s accounting.

[57]  As to quantum meruit, it is I think too late now to raise it. Acernus has lost the opportunity to adduce evidence about what other aircraft owners pay for a similar service.

[58]  Nor am I persuaded, on the merits, that anything more should be paid.  I accept readily enough that the work involved in getting the aircraft onto the AOC and maintaining it there was significant, and further that by hosting the aircraft Vincent attracted obligations under aviation law and should be entitled to some compensation for assuming the associated risks.   However, the evidence about reasonable price was unsatisfactory, for two reasons.  First, the most that Vincent could say was that another aircraft owner indicated that it thought  $4,000 per month for the AOC reasonable, but that owner never took up Vincent’s offer to host its aircraft.

[59] Second, the best evidence of the reasonable price at the time was the price it actually negotiated with Acernus for rent and for sharing charter revenue. As noted at [33] above, Vincent agreed to a rate of $55 per hour for Acernus-originated charters, on the basis that such payment would cover “P135 paperwork and administration”. In other words, it meant to recover something for the use of its AOC from its share of charter revenue. It had also agreed to a rent of $1667 per month plus GST for storing the aircraft. It is no answer to suggest that the rent is smaller, as a proportion of Vincent’s rent under the head lease, than the proportion of the overall hangar space that the Mustang occupied. Acernus did not have a tenant’s rights. By way of illustration, it did not enjoy exclusive possession of a defined area, which meant it was always at risk of having the aircraft scraped as Vincent staff manoeuvred it or other aircraft in the hangars, causing damage which Mr Garnham

described as “hangar rash”.  I am told that Execujet charges $7,000 per month for

5      Magnum Photo Supplies Ltd v Viko New Zealand Ltd [1999] 1 NZLR 395 at 399.

storage of a similar aircraft, but it has entered what seems to be a growing local market for storing private aircraft recently, and what quality of service it provides I do not know.

[60]  However, Vincent is entitled to $2,908.05, being unpaid hangarage fees at the originally agreed rate for the period 1 January 2012 to 15 February 2012, being the date when it appears the arrangement aircraft was finally removed from the hangar. It will have judgment accordingly.   Vincent’s first cause of action under its counterclaim otherwise fails insofar as it claims hangarage and AOC rental.

Was Vincent obliged to put the aircraft onto its AOC, and if so, when?

[61]  Mr Toebes submitted that the parties agreed in December 2007 that each of them would charter the aircraft, and “as a preliminary matter” the aircraft must be placed on Vincent’s AOC.  A reasonable time for that was no longer than 24 weeks. In fact it took much, much longer.   As a result, Acernus lost substantial charter revenue, which was calculated at NZD $113,005 plus USD $24,342 (some charters were negotiated in US currency) over a 16 month period.

[62]  In response, Mr Scragg argued that no binding commitment was ever made;  at most a best endeavours assurance was given.  Any obligation could not be severed from agreement over the commercial terms;  manifestly, Vincent was not doing this for nothing.    He  added  that  the damages  claim  is  unproved;  notably,  it  claims revenue for “charters” for associated entities of Acernus, and there is no evidence of lost profits.

[63]  The evidence leads me to the unequivocal conclusion that Vincent assumed no obligation to place the aircraft on its AOC.  Contrary to Mr Toebes’s submission, the parties did not agree at the outset that it would be done.  I find that charter was very much a secondary consideration for Mr Garnham.  When the parties did discuss the issue it was linked, as one would expect, to agreement over terms on which the aircraft would be chartered.  Mr Garnham did not complain when Vincent told him in 2009 that it did not have time to do the work.   It was always recognised that having the aircraft on the AOC was valuable for Acernus and required a good deal of

work for Vincent.  The passage of time is substantially attributable to delays, mostly attributable  to  Mr  Garnham,  in  negotiating  commercial  terms.    There  was  no separate agreement about when the aircraft would be put onto the AOC.   On the contrary, both parties envisaged that an agreement covering all matters would be negotiated and reduced to writing.

[64]  Acernus’s fourth cause of action fails, and with it all that remains of its claim.

Must Acernus pay third party charges incurred by Vincent on charters?

[65]  One aspect of Vincent’s first cause of action under its counterclaim remains.  It

claims charter, landing fees and Airways charges for the period 1 May 2011 to 19

January 2012, and fuel surcharges for the period 28 July 2010 to 19 January 2012. The amount now claimed is just $4,602.70, being unpaid third party charges such as landing charges and Airways fees.

[66]  The  question  is  whether  third  party  charges  were  payable  by  Acernus  or Acernus.  Vincent says that such charges were always payable by Acernus, no matter which party generated the charter.  Acernus responds that its offer of 9 November

2010  (paragraphs  [32-33]  above)  was  exclusive  of  out  of  pocket  expenses  and

Vincent accepted that offer on 12 November (paragraph [34] above).

[67] I find that Vincent’s interpretation is correct.   I begin by observing that negotiations  began  with  Vincent  proposing (on  24  August)  that  Acernus  would charge it an hourly rate of $2500 plus GST, inclusive of such expenses.  I next note that Acernus’s argument overlooks what it is that the word “exclusive” qualifies in its email of 9 November.  I find that when Acernus offered a rate of 10 per cent as a charter fee exclusive of out of pocket expenses it was specifying that for charters generated by Vincent the fee would be calculated as a percentage of the charter rate, not the charter rate plus expenses.   It was not proposing that Vincent should pay these expenses.  I further find that it makes no commercial sense for Vincent to agree to such arrangement, which might well result in it recovering nothing, or next to nothing, on its own charters, depending on what third party charges a given journey attracted.   That point is even more apparent when it comes to Acernus-generated

charters, for which the agreement was that Vincent would get a fee of $55 per hour for use of its AOC and as a profit margin.

[68]  Vincent’s claim for these sums succeeds.  The quantum, $4,602.90, is not in dispute.

Vincent’s damages claim for charter revenue that did not materialise

[69]  Vincent persisted in a claim for damages for charter revenue that ought to have been earned had Mr Garnham delivered on representations about demand for the aircraft from his business and public sector acquaintances and the legal profession. Mr  Garnham  denied  making  any  such  representations,  conceding  only  that  the parties had discussed potential sources of business.

[70]  On this issue, I generally prefer Acernus’s case, and I further find that Vincent did not rely on Mr Garnham’s opinions about potential demand.   I observe that Mr Vincent stated that Mr Garnham said his contacts might provide 50-70 hours of work per month.  That may have been said, but the important points are that it was at best an opinion and Mr Vincent admits discounting it as unrealistic.   It was clear from  the  outset  that  Mr Garnham  knew nothing  about  aircraft  chartering  while Vincent  knew  a  good  deal,  that  chartering  was  a  secondary  consideration  for Acernus, and that the aircraft was the first small jet of its kind in New Zealand.  The demand could not be known.   Nor can it be said that Mr Garnham’s predictions about demand rested on any factual foundation which might found a misrepresentation.   I find that Vincent understood that, and did not rely on his opinions.   The record compels the conclusion that Vincent did not anticipate significant  gains  from  chartering  the  Mustang.    That  explains  why it  put  other business opportunities first.   Nor did it tie its acceptance of the revenue-sharing arrangement to any minimum level of Acernus-generated business.

[71]  Vincent’s second cause of action in its counterclaim fails.

Decision

[72]  Vincent will have judgment for $7,510.95 under its first cause of action.  All other claims by each party are dismissed to the extent that they were not abandoned at trial.

[73]  This result might suggest that honours have been more or less evenly shared. That is not so.  In my opinion the real motive for the litigation was Acernus’s desire to gain access to the small hangar through its claim for relief against forfeiture.  That claim was always both untenable and certain to meet resolute opposition;  and it was withdrawn when I challenged Mr Toebes about the evidence for a lease after hearing the evidence of both principals.   Overall, Vincent has clearly been the successful party.  I am disposed to allow it costs on a 2B basis with provision for one counsel, subject to a deduction of perhaps 30 per cent for those issues on which it did not succeed.

[74]  With the benefit of this indication I invite counsel to seek agreement on costs. If they cannot agree, submissions must be filed, Mr Scragg’s within eight weeks of the date of this judgment and Mr Toebes’s within a further two weeks.

Miller J

Solicitors:

JTLAW, Wellington for Plaintiff

Duncan Coterill, Wellington for Defendant