Air National Corporate Ltd v Aiveo Holdings Ltd

[2012] NZHC 602

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV2011-404-001187 [2012] NZHC 602

BETWEEN  AIR NATIONAL CORPORATE LIMITED Plaintiff

ANDAIVEO HOLDINGS LIMITED First Defendant

ANDBONNE WILLIAM BYLSMA Second Defendant

Hearing:         1 November 2011

Counsel:         S S Cook for the plaintiff/respondent

B Henry/P Knapp for defendants/applicants

Judgment:      3 April 2012

JUDGMENT OF ASSOCIATE JUDGE ABBOTT

In accordance with r 11.5 High Court Rules

I direct the Registrar to endorse this judgment with a delivery time of 12pm on 3 April 2012.

Solicitors:

S S Cook, Buddle Findlay, PO Box 1433, Auckland

B Henry, D J Gates, P O Box 222, Whangaparaoa, Auckland, 0943

AIR NATIONAL CORPORATE LIMITED V AIVEO HOLDINGS LIMITED HC AK CIV 2011-404-001187 [3

April 2012]

[1]      This proceeding concerns a dispute over the termination in September 2010 of a contract under which the defendants agreed to provide the services of the second defendant (Captain Bylsma) as captain of, and flight examiner for, the plaintiff’s (Air National) commercial aircraft.

[2]      The defendants have brought two interlocutory applications:

(a)      In  the  first  they seek  a  permanent  stay of  the  proceeding  on  the grounds that it was brought solely to intimidate or punish Captain Bylsma after he raised public safety concerns about Air National’s operational activities and in the knowledge that the defendants have no prospect of meeting the substantial damages claimed.

(b)In  the  second  application  the  defendants  seek  discovery  of  two categories of documents: firstly, documents created after Captain Bylsma’s peremptory departure from his roles with Air National on 10

September 2010, relating directly to the reasons for this departure; secondly, documents in or relating to court proceedings between Air National and the director of the Civil Aviation Authority (CAA) regarding suspension of Air National’s air operations certificate in January 2011.  Both categories of documents are sought on the basis that they will throw light on the concerns the defendants had about the safety of Air National’s operations, which caused them to terminate the contract.

[3]      Air National says that there is no basis for a stay.  It says that it has brought the proceeding for a legitimate commercial purpose  – namely to recover losses caused  by  the  defendants’ summary  termination  of  the  contract  –  and  that  the defendants’ contentions about safety lie at the heart of the case and must be decided at trial.   It also says that the defendants’ inability to meet any judgment is not a ground to bar Air National from pursuing its claim.

[4]      In  response  to  the  discovery  application  Air  National  says  that  it  has discovered documents relating to the defendants’ state of mind and knowledge of Air National’s flight operations, and that no other documents are relevant.  It says that documents relating to the proceeding between it and the CAA are not relevant as those proceedings concerned the CAA’s suspension of Air National’s air operating certificate,  and  the  defendants’ reasons  for  terminating  the  agreement  were  not amongst the grounds for suspension.

The background

[5]      At all material times Air National was in the business of providing aircraft under charter, including the provision of flight services to Air New Zealand and other commercial customers.   It held an air operator’s certificate issued under the Civil Aviation Act 1990.  Captain Bylsma is a pilot.  He is the sole director and a shareholder (with his wife) of the first defendant (Aiveo).

[6]      On 22 January 2010 the parties entered into an agreement under which Aiveo agreed to provide services to Air National.  In essence, the agreement was to provide Captain Bylsma’s services as a captain of certain of Air National’s BAe146 and Westwind II aircraft and as a Flight Examiner for those aircraft.  The agreement was for a period of five years commencing 25 January 2010.

[7]      In June 2010 Captain Bylsma took on the additional roles of Manager Flight Operations (MFO) and Manager Check Training and Assessment (MCTA) (the latter on a temporary basis) for Air National, with the formal approval of the CAA.  This seems to have been in exchange for an agreement that he would become co-captain of a new aircraft called a G200 that Air National was acquiring.

[8]      It appears from the evidence before the Court that the CAA had had concerns for some time about the “risk profile” of Air National, and that there was frequent regulatory oversight of Air National’s operations.   This included regular routine audits  on  particular aspects  of  its  operation.    The evidence  shows  that  Captain Bylsma was present at meetings in mid-2010 seeking to address unresolved issues from preceding audits (presumably in his role as MFO).

[9]      In and between late July and late August 2010, Captain Bylsma was assigned to fly Air National’s BAe146 aircraft on a lengthy charter in Australia.   For that period he was also responsible for the training of his co-pilot, with a view to the co- pilot  becoming  a  captain  of  that  aircraft  and  being  appointed  as  MCTA on  a permanent basis.

[10]     From  the  middle  of August  2010,  several  issues  arose  in Air  National’s

operations which involved Captain Bylsma:

(a)      First,  Captain  Bylsma  received  and  passed  on  to  Air  National’s general  manager,  Mr Gray,  a formal  safety concern raised  by the captain of another aircraft known as a G233 about difficulties he was having training a pilot as first officer for that aircraft.   On Captain Bylsma’s advice the other captain referred his concern directly to the CAA (although the aircraft was not under CAA regulatory control at that time) as a matter that, in his view, emanated from an overly cost- conscious management culture within Air National.

(b)Secondly, Mr Gray received complaints from crew on the Australian charter about Captain Bylsma’s behaviour towards them and generally in the course of that charter.

(c)      Thirdly, on 8 September 2010 Captain Bylsma wrote to the CAA setting out safety concerns about Air National’s maintenance department and flight operations and advised the CAA that in light of those  concerns  he  felt  he  could  not  continue  to  be  MFO  for Air National.  Two days later, on 10 September 2010, he wrote again to the CAA reiterating  his  safety concerns  and  advising that  he had resigned as MFO.

[11]     At the same time as writing his second letter to the CAA, Captain Bylsma wrote to Air National’s Mr Gray to inform him that he no longer wished to carry out the role of MFO because of his concerns.  He enclosed the statement of concerns that

he had sent to the CAA (although it is unclear whether or not he provided all of the supporting materials that had been sent to the CAA).

[12]     Mr Gray responded immediately on 10 September 2010.   He sought the opportunity to discuss the concerns before Captain Bylsma made a final decision, pointing out that it was the first time that Captain Bylsma had brought those matters to his attention.  He added that he also needed to discuss a serious personal matter. They met the following working day (13 September 2010).   There is a difference between the parties’ evidence as to the outcome to that meeting.   Air National understood that the defendants’ concerns had been addressed and resolved, subject to the defendants’ confirmation.  The defendants say that no decision was reached.  In any event, later that day Captain Bylsma emailed Mr Gray and informed him that there was no change to his decision to resign.

[13]     Captain Bylsma had not stated when his resignation was to take effect.  Mr Gray responded to him and suggested that a notice period of up to three months was appropriate.   Captain Bylsma replied the following morning to advise that his resignation as MFO was effective as of 10 September 2010, and that he was also resigning with immediate effect as the acting MCTA.

[14]     Air National  wrote immediately to  each  defendant.    It  informed  Captain Bylsma that it was investigating personal grievance complaints and performance issues, noted his advice of immediate resignation, and suspended Captain Bylsma from flying pending the outcome of an investigation.  In its letter to Aiveo, it referred to the various complaints about Captain Bylsma’s performance of his contractual obligations, required Aiveo to provide another suitably qualified person immediately, and advised that a failure to do so would be treated as repudiation of the parties’ contract.

[15]     The  defendants  responded  through  their  solicitors  the  following  day, purporting  to  give  one  month’s  notice  of  termination  of  the  agreement  and contending  that  Captain  Bylsma’s  performance  of the  roles  from  which  he  had resigned arose from a separate arrangement and not under their contract.   The solicitors added that the allegations set out in Air National’s letters were denied.

[16]     In the meantime, Air National had informed the CAA of the resignation of Captain Bylsma and learnt for the first time that he had raised his safety-related concerns with the CAA.  Air National considered that Captain Bylsma’s concerns were inconsistent with his previous conduct (they had not been raised by him previously)  but  nevertheless  arranged  to  investigate  them.    Air  National  also indicated that it would voluntarily cease operations until the senior roles could be filled.  It suspended all flight operations on the evening of 16 September 2010, after it had become apparent that there was no prospect of Captain Bylsma returning to fulfil the roles and because the alternative person that Air National had in mind to fill them immediately was not suitable to the CAA.

[17]     Air National widened its investigation to include one of the matters arising out of the defendants’ safety concerns (training of the co-pilot on the Australian charter) on the grounds that that safety concern put into question Captain Bylsma’s training process or judgment.   It says that at a meeting on 17 September 2010, Captain Bylsma advised that he was willing to resume his roles as MFO and MCTA for the one-month notice period that the defendants had given, subject to agreement on various employment issues.  Air National took the view that the offer came too late as it had already been forced to suspend its operations, had formulated a plan with the CAA for appointment of new senior persons, Captain Bylsma had lost credibility with it (and, it said, with the CAA) and it would still have to spend more time obtaining CAA approval for the reappointment.  The CAA approved new senior persons to fill the MFO and MCTA roles on or about 22 September 2010.

[18]     On 6 October 2010 Air National’s solicitors advised the defendants that they had completed an investigation into the allegations against  Captain Bylsma and found certain of them to be established.  It informed the defendants that it considered their conduct to be a breach of the agreement, including an obligation to comply with its rules and operating procedures, noted that Aiveo had not found a suitable replacement in accordance with the terms of the agreement, and concluded accordingly that the breach amounted to repudiation, which it accepted.

[19]     Air National did not secure the services of a qualified pilot for its BAe146 aircraft until 29 October 2010, and had not obtained the services of a pilot for its Westwind II aircraft before later events overtook the need to do so.

[20]     On 26 January 2011 the CAA commenced an audit of Air National.  On 28

January 2011  the  CAA gave  notice  to Air  National  that  as  a  result  of  matters identified in the audit it was suspending Air National’s operations for an initial period of 10 days.

[21]     On 31 January 2011 Air National applied to this Court to review that decision and sought its interim reversal.  The application for interim relief was granted by this Court, but that decision was immediately appealed by the CAA.   The Court of Appeal heard and gave its decision on that appeal on 4 February 2011 (with reasons given later).  It reversed the High Court’s decision, so that the suspension remained.

[22]     On 10 March 2011 the CAA revoked Air National’s air operator certificate.

This proceeding

[23]     Air National issued this proceeding on 2 March 2011, seeking damages under three causes of action (breach of contract, inducement to breach contract, and conspiracy to cause harm by unlawful means).  The claim is for losses of $584,594 incurred up to 7 December 2010 (in other words, incurred prior to the suspension in January 2011).

[24]     The pleaded facts underlying all causes of action are:

(a)      In the written agreement of 23 January 2010, the defendants agreed to provide professional aviation services to Air National, including the services of Captain Bylsma as Captain of, and Flight Examiner for, its BAe146 and Westwind II aircraft (the plaintiff contends that it was an essential term that the defendants would provide a suitable qualified pilot to captain those aircraft).

(b)Subsequently, Captain Bylsma was appointed under the agreement to undertake the senior roles of MFO and (acting) MCTA for Air National.

(c)      Captain  Bylsma  resigned  from  his  roles  on  10  September  2010 without providing reasonable notice (which, in the circumstances, was three months).

(d)The defendants, through Captain Bylsma’s behaviour in relation to the Australian  charter  and  the way in  which  he dealt  with  his  safety concerns (that is, not raising those concerns promptly with Air National), breached obligations under the agreement, leading to Captain Bylsma’s suspension.

(e)      Aiveo did not provide a suitably qualified person to undertake Captain Bylsma’s  roles  of  Captain,  MFO  and  (acting)  MCTA  following Captain Bylsma’s resignation and his suspension.

[25]     The defendants dispute that Aiveo agreed to provide the services of Captain Bylsma (or any person) as MFO and MCTA under the agreement (they say that this was a separate arrangement), but accept that it must be taken to have done so for the purpose of this application.

The application for stay

The legal principles

[26]     Air National seeks a permanent stay of the proceeding, pursuant to r 15.1 of the High Court Rules, the relevant parts of which read:

15.1     Dismissing or staying all or part of proceeding

(1)      The court may strike out all or part of a pleading if it—

(a)      discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or

(b)      is likely to cause prejudice or delay; or

(c)      is frivolous or vexatious; or

(d)      is otherwise an abuse of the process of the court.

...

(3)       Instead of striking out all or part of a pleading under subclause (1), the court may stay all or part of the proceeding on such conditions as are considered just.

(4)       This rule does not affect the court’s inherent jurisdiction.

[27]     Rule 15.1 is more usually invoked by a party seeking to strike out a pleading. The  principles  applicable  to  an  application  to  strike  out  are  equally  relevant, however, to an application for a stay.  Those principles are succinctly stated in the following oft-cited passage from Attorney-General v Prince:1

A striking-out application proceeds on the assumption that the facts pleaded in the statement of claim are true.  That is so even although they are not or may not be admitted.  It is well settled that before the Court may strike out proceedings the causes of action must be so clearly untenable that they cannot possible succeed (R Lucas & Son (Nelson Mail) Ltd v O’Brien [1978]

2 NZLR 289 at pp 291 – 295; Takaro Properties Ltd (in receivership) v Rowling [1978] 2 NZLR 314 at pp 316 – 317); the jurisdiction is one to be exercised sparingly, and only in a clear case where the Court is satisfied it has the requisite material (Gartside v Sheffield, Young & Ellis [1983] NZLR

37 at p 45; Electricity Corporation Ltd v Geotherm Energy Ltd [1992] 2

NZLR  641);  but  the  fact  that  applications  to  strike  out  raise  difficult questions  of  law,  and  require  extensive  argument  does  not  exclude jurisdiction (Gartside v Sheffield, Young & Ellis).

[28]     Consistent with the approach that pleaded facts will be assumed to be true, in an appropriate case the court will accept affidavit evidence of facts that are not in dispute. However, the court will not attempt to resolve genuine disputes of fact.  It will not normally consider evidence that is inconsistent with the pleading, but may reject a pleading of essential fact if it is demonstrably contrary to an indisputable fact.2

[29]     Turning to the principles underlying the grounds in r 15.1, a proceeding has

been said to be frivolous when it lacks “the seriousness required of matters for the

Court’s  determination”.3      In  order  to  be  considered  vexatious  (given  that  “all

1      Attorney-General v Prince [1998] 1 NZLR 262 (CA) at 267, endorsed by Couch v Attorney- General [2008] NZSC 45.

2      Attorney-General v McVeagh [1995] 1 NZLR 558 (CA) at 566.

3      Deliu v Hong [2011] NZAR 681 at [22]. See also R A McGechan McGechan on Procedure

pleadings tend to vex the opponent”)4 an element of impropriety is required – often a procedural impropriety.5

[30]     The ground of abuse of process is said to extend beyond the other grounds set out  in  r  15.1(1)  to  catch  all  other  instances  of  misuse  of  the  court’s  process,6 including where a proceeding has been brought with an improper motive or to seek a collateral advantage beyond that legitimately gained from a Court proceeding.7   The High Court of Australia8  has stated the principle in the following terms (adopting a passage from the English Court of Appeal in In re Majory:9

The general principle applicable when a plaintiff intends to obtain a result outside the scope of the remedy was stated by Lord Evershed in In re Majory

court proceedings may not be used or threatened for the purpose of obtaining for the person so using or threatening them some collateral advantage to himself, and not for the purpose for which such proceedings are properly designed and exist; and a party so using or threatening proceedings will be liable to be held guilty of abusing the process of the court and therefore disqualified from invoking the powers of the court by proceedings he has abused.

In our view, that is a correct statement of the principle.

[31]     Stay on the grounds of abuse of process has been given more consideration in criminal  prosecutions  than  in  civil  claims,  but  the  policy  considerations  apply equally to both (although perhaps with different weighting of the considerations). The policy considerations were considered extensively in Williams v Spautz10 (which decision has been followed in New Zealand in a number of criminal cases).11    The

policy considerations identified in Williams v Spautz included the following:

(looseleaf ed, Brookers) at [HR 15.1.04(1)].

4      McGechan, above n 3, at [HR 15.1.04(2)].

5      Registered Securities Ltd (in liq) v Yates (1991) 5 PRNZ 68 (HC).

6      McGechan, above n 3, at [HR 15.1.05(1)(a)].

7      McGechan, above n 3, at [HR 15.1.05(2)(b)]. See also Stephen Todd “Abuse of Process” in Stephen Todd, John Hughes, John Burrows, John Smillie and Cynthis Hawes (eds) The Law of Torts in New Zealand (5th ed, Brookers, Wellington, 2009) at [18.4.01]. For the purposes of this application the test is the same for both a stay under r 15.1 (or the Court’s inherent jurisdiction)

and the tort.

8      Williams v Spautz [1992] HCA 32, (1992) 174 CLR 509 at 536.

9      In re Majory [1955] Ch 600 at 623-624.

10     At 519.

11     For example Fox v Attorney-General [2002] 3 NZLR 62 (CA); Solicitor-General of New

Zealand v Siemer HC Wellington CIV 2010-404-8559, 13 May 2011.

(a)      In general, the Courts should exercise their jurisdiction on matters properly brought before them.

(b)      It is important to preserve freedom of access to the Courts.

(c)      The Courts need to be vigilant that abuse of process claims are not advanced  other  then  in  clear  and  appropriate  cases,  and  are  not brought for tactical reasons.

(d)Equally fundamentally, however, the Court should be alert to misuse of its processes, and be prepared to exercise its power to stay where the interests of justice demand it.

[32]     The Courts have identified several matters which guide their approach to whether a proceeding has been brought for an improper purpose:

(a)      The improper purpose need not be the sole purpose, as long as it is the predominant purpose.12

(b)A stay will not be granted to debar a litigant from pursuing a genuine cause of action that is to be pursued in any event because there is an ulterior purpose as a desired by-product.13

(c)      The onus is on the party alleging abuse of process to show that the proceeding was brought for an improper purpose.  It is “a heavy onus” and one to be exercised only in exceptional circumstances:14

It is, of course, well established that the onus of satisfying the court that there is an abuse of process lies upon the party alleging it.  The onus is “a heavy one”, to use the words of Scarman L.J. in Goldsmith v. Sperrings Ltd15 and the power to grant a permanent stay is one to be exercised only in the most exceptional circumstances.

12     Goldsmith v Sperrings Ltd [1977] WLR 478 (CA) at 496; Williams v Spautz, above n 8, at 529.

13     Goldsmith v Sperrings Ltd, above n 12, at 503; Williams v Spautz, above n 8, at 522; followed by this Court in Siemer, above n 11, at [60]-62]; see also Ullrich v Ullrich (1996) 10 PRNZ 253 (HC) at 255, following Hanrahan v Ainsworth (1990) 22 NSWLR 73 at 112.

14     Williams v Spautz, above n 8, at 529.

15     Goldsmith v. Sperrings Ltd, above n 12, at 498.

(d)It is unnecessary to prove commission of an improper act to justify exercise of the power to stay;16 however, save in the clearest of cases, it will be necessary to point to some separate manifestation of the defendant’s intent in the form of an overt act such as a demand which identifies the true collateral purpose.17

Arguments

[33]     The defendants apply on the grounds that the proceedings are frivolous or vexatious or otherwise an abuse of the court’s processes in terms of r 15.1 of the High Court Rules.  The underlying contention is that Air National has brought this proceeding in  retaliation  for the defendants’ “whistle-blowing”  complaint  to  the CAA and withdrawal of Captain Bylsma’s services.   The defendants say that Air National’s claim ignores the underlying safety concerns and turns on Captain Bylsma’s entitlement to raise his issues with the CAA and to resign rather than operate (or permit Air National to operate) the aircraft in light of those concerns.

[34]     Counsel for the defendants referred to statutory obligations owed by the defendants (and Captain Bylsma in particular) relating to public safety and argued that any contractual obligations were subject to these overriding statutory duties.18

He submitted that there was clear evidence of genuinely held safety concerns affecting the safety of Air National’s flying operations, and posing a real risk to the public (he contended that this view was supported by the CAA’s subsequent suspension of Air National’s air operating certificate).   He argued that in light of those  concerns  and  the  various  statutory  responsibilities,  Captain  Bylsma  was entitled to resign from all roles and to refuse to operate or permit the plaintiff to operate the aircraft.   Counsel submitted that the claim was doomed to fail as any competent captain, MFO or MCTA would have done the same.

[35]     Against that background, counsel for the defendant submitted that the claim and the way in which Air National was pursuing it (by denying the defendants full

16     Williams v Spautz, above n 8, at 527-529; Todd, above n 7, at [18.4.01].

17     Ullrich v Ullrich, above n 13, at 255-256 citing Hanrahan v Ainsworth, above n 13, at 107–123;

see also Williams v Spautz, above n 8.

18     Civil Aviation Act 1990, ss 12, 13 and 43; Health and Safety in Employment Act 1992, ss 2A, 16 and 49; Aviation Crimes Act 1972, s 15.

discovery of matters bearing upon their safety concerns) was oppressive.   On the matter of  conduct  of the claim,  he argued  that  if  full  discovery was  given  the defendants could seek summary judgment on the ground that there was no factual basis for any damage given the unsafe nature of Air National’s operation and the CAA orders which prevented it from operating.  In that way the defendants would have the opportunity to avoid the significant time and cost they otherwise face.

[36]   Counsel submitted that the totality of this behaviour, coupled with the defendants’ lack of resources to meet any judgment, was consistent with issuing and conducting this proceeding solely for the improper purpose of intimidating or punishing the defendants.  He argued that this could also be inferred from the fact that the defendants do not have the resources to pay the damages being sought.

[37]     Air National says that the defendants have not made out any case for stay.  It says  that  the defendants  have not  put  forward  any evidence to  refute  the clear commercial purpose of the claim (to recover losses caused by the summary termination).  Air National accepts that Captain Bylsma was entitled to report health and safety issues to the CAA, but submitted that the defendants have not put forward any  evidence  to  support  their  allegation  that  the  proceeding  was  brought  to intimidate or punish and that, even if punishment is an outcome, that is only a by- product of the claim.

[38]     Counsel argued that the application assumes the facts and conclusions that lie at the heart of this proceeding, namely that there were serious health and safety concerns with Air National’s operations.  He pointed out that the defendants’ views are strongly disputed and says the disputes cannot be determined on this application. He also submitted that the defendants’ inability to meet a judgment is not a ground to stay on strike out.

Discussion

[39]     Although the application was also said to have been brought on the grounds that the claim was frivolous and vexatious, the real focus in the hearing was on the ground  of  abuse  of  process.    The  defendants  must  satisfy  the  Court  that  the

predominant purpose of this proceeding is the improper purpose of oppressing the defendants (whether by way of intimidating them, or punishing them) for raising their concerns with the CAA.

[40]     Counsel for the defendants accepted that the Court could not resolve the various disputes of fact, but submitted that the Court could draw an inference that Air National was abusing the Court’s process from the circumstances of the case:

(a)      the safety concerns notified to the CAA on 8 September 2010 (being maintenance concerns including a claim of unauthorised work to the fuselage of an aircraft, and two separate instances of flight operational concerns);

(b)      the history of CAA audits and notices and the CAA’s assessment that

Air National had a “high risk profile”;

(c)       the further audit and findings, and the suspension of the air operator’s

certificate in January 2011;

(d)Air National’s resistance to the defendants’ efforts to obtain evidence from Air  National’s  proceedings  against  the  CAA concerning  the culture within Air National and its systemic failings; and

(e)       the scant likelihood of recovery of any award of damages.

[41]     Counsel submitted that when one considered these matters as a whole there was a sufficient basis for granting the stay in the interests of justice.

[42]     I am not persuaded that these matters, even taken collectively, constitute sufficient evidence of an improper purpose.

[43]     First, the defendants’ view of many of these matters and the significance of them  for safety is  strongly disputed, and  these  disputes  lie at  the heart  of this proceeding. Those disputes need to be determined at trial.

[44]     Secondly,  the  defendants  ask  the  court  to  accept  not  only that  the  facts constituted genuinely held safety concerns, but also that Air National cannot mount a successful claim because any other senior person, having Captain Bylsma’s responsibilities, would have taken the step of withdrawing his services in the same circumstances.

[45]     Whilst I accept that the matters that Captain Bylsma raised were proper matters for concern, it does not necessarily follow that a competent captain, MFO or MCTA would have refused to fly, or would have immediately withdrawn services so as to prevent Air National from flying.  The CAA did not regard the matters as so serious as to suspend Air National’s operating certificate following receipt of the defendants’ concerns.

[46]     It is also significant that the defendants offered to have Captain Bylsma continue with his roles as MFO and MCTA (which would have allowed Air National to continue to operate) during the one month’s notice period that they offered on 17

September 2010, provided that the defendants’ employment-related requests were met.   That last matter alone suggests that it must be arguable that the defendants were  not  as  vulnerable  in  terms  of  their  statutory  responsibilities  as  they  now contend.

[47]     Further, I am not persuaded that the defendants did not have an option in the matter by reason of the statutory responsibilities that they bore.  It must be at least arguable that they met their statutory responsibilities by notifying the CAA of their concerns, particularly as the CAA’s primary interest at that point appears to have been to fill the roles of MFO and MCTA (it did not suspend flight operations of its own accord once new appointments were made).

[48]    Once the facts are determined at trial, it may also be arguable that the defendants’ contractual obligations were not inconsistent with, and therefore not overtaken by, their statutory responsibilities.  It must be arguable that the defendants had an obligation to report their safety concerns to Air National to allow it to address its statutory responsibilities in respect of them.

[49]     I do not see that the other matters relied on by the defendants advance their case for an improper purpose.  The audit and subsequent suspension of Air National by the CAA are equivocal at best in terms of the motivation for this proceeding. Similarly, I do not accept that Air National’s resistance to the defendants’ request for documents in its proceedings against the CAA is evidence of improper purpose.  It has argued on the basis of relevance.   There is no evidence before the Court to suggest that it was for tactical purposes.  Lastly, a plaintiff is fully entitled to issue proceedings and obtain a judgment even if there is clear evidence that the judgment cannot be met.   In most cases a plaintiff will take into account the prospects of recovery, but there is no obligation to do so.   In any event, there is no evidence before the Court that the defendants have put a full statement of their financial position  before Air  National  to  show  that  they  could  not  meet  some  part  of  a judgment.

[50]     I accept the submission of counsel for Air National that this case can be distinguished from Williams v Spautz where a stay was granted.19    In that case Dr Spautz, a former university lecturer, instituted prosecutions against three persons involved in the management of the university.   These proceedings were amongst over 30 civil and criminal proceedings commenced by Dr Spautz against persons of authority in the university or who played a part in events leading to his ultimate dismissal.  The trial judge found as a matter of fact that the predominant purpose in instituting and maintaining the proceedings was to exert pressure on the university to

reinstate Dr Spautz and/or to agree to a favourable settlement of his wrongful dismissal case.   He reached this conclusion on the basis of newsletters, pamphlets and memoranda which Dr Spautz had written and distributed to members of the university, media outlets, politicians and legal advisors to his opponents.   In that material he warned about the proposed legal proceedings, referred to his demands for reinstatement, and presented material from which Dr Spautz’s purpose and motive and, importantly, threats were apparent.  There is no evidence of similar nature in

this proceeding.

19     Williams v Spautz, above n 8.

[51]     I accept that the plaintiff has tenable causes of action.  I do not accept on the evidence before the Court that the issue of this proceeding is oppressive on that it was issued for an improper purpose.

The application for discovery

[52]     At the time this application was brought and argued under then r 8.24 of the High Court Rules, the principle to be applied was whether the class of documents being sought by the defendants should be discovered, under the expansive test for relevance then applying – which required documents which directly or indirectly enabled an applicant either to advance his own case or damage the case of his adversary, and could include documents that lead him to a train of inquiry into

documents which might have either of those two consequences.20

[53]     The rules as to discovery were amended as from 1 February 2012.21   The new rules remove the former “train of inquiry” extension, and require instead that the parties are to give standard discovery (where the focus is on documents that either support or adversely affect a case), save where a more focussed process (referred to as tailored discovery) is required by the circumstances of the case).  The former r

8.24 is carried forward in r 8.19, subject to the change in criteria just mentioned.

The arguments

[54]     The defendants seek two categories of documents:

(a)      Documents  created  after  Captain  Bylsma’s   departure  from  Air National (in September 2010) which relate directly to the reasons for his departure and, specifically, documents relating to the CAA’s investigation into Air National’s health and safety practices in late

2010 (whether in the form of correspondence, official orders or audit

reports).

20 ANZ National Bank Ltd v Tower Insurance Ltd HC Auckland CIV 2008-404-007271, 1 September

2009.

21 High Court Amendment Rules (No.2) 2011, inserting a new part 8 to the High Court Rules.

(b)Documents in or relating to Air National’s proceedings against the CAA, referring to the health and safety concerns raised in Captain Bylsma’s complaint and leading to his decision to resign from his role.

[55]     Air National opposes orders in respect of both categories of documents.   It contends that the essential issue in this proceeding is Captain Bylsma’s state of mind and knowledge of Air National’s operations as at 10 September 2010 (the date he resigned).  It says that an order is not necessary in respect of the first category as it has already discovered documents (both pre- and post-dating 10 September 2010) bearing on this issue, including the matters raised in Captain Bylsma’s letters to the CAA and  to Air National  on  10  September 2010.    It  further contends  that  the documents relating to its proceedings against the CAA are not discoverable as they are irrelevant to matters in question in this proceeding: its proceeding against the CAA concerned  the  CAA’s  suspension  of  its  air  operator’s  certificate  and  that decision was based on the results of an audit in late January 2011.  It maintains that the defendant’s reasons for resigning were not among the grounds for suspension and were not addressed in the proceedings against the CAA.

Discussion

[56]     Air National has said that it has discovered all documents relating to matters known to Captain Bylsma and relied on by him in coming to his decision including, specifically, documents relating directly to the specific matters of complaint (I understand this to include the specific maintenance and flight operation matters that were raised).   The issue at the centre of this application, therefore, is whether documents relating to the safety of Air National’s operations that were not known to Captain Bylsma or relied on by him in coming to his decision to resign have any relevance.

[57]     The test, whether under the rules applying at the time this application was heard, or under the recent changes, is whether the defendants have shown that there are further documents which advance their case or damage Air National’s case.

[58]     I accept that the liability arguments will focus on events up to the point of

Captain Bylsma’s resignation. Those documents have been discovered.

[59]     I consider that any other documents can only be indirectly relevant to the extent  that  Air  National  disputes  the  existence  of  facts  giving  rise  to  Captain Bylsma’s concerns or the significance of those facts.   In those circumstances, documents not known to Captain Bylsma or relied on by him in coming to his decision could be relevant to support his view. This takes me to what the defendants’ say in their complaints.   Documents relating to the specific complaints have been discovered.   However, the defendants say that the significance of these matters of complaint has to be assessed in the context of systemic failings in the management of  Air  National  and  an  alleged  culture  within  the  company  which  put  cost implications ahead of safety considerations.

[60]     I am not persuaded that Air National should be required to give discovery of the categories of documents as sought in the application.  It is difficult to see where one  might  draw  the  boundaries  of  such  discovery.    The  question  of  systemic problems had been considered over a period of time by the CAA, and at least until January 2011 had not reached the point where the CAA have felt it necessary to intervene.   The defendants already have copies of the CAA’s audit reports in the period ahead of Captain Bylsma’s resignation.   I consider that that is sufficient discovery under the first category.

[61]     As against that, I take into account the comments made first by the High Court and then by the Court of Appeal on the evidence in Air National’s proceedings against the CAA.   Although  I accept that the trigger for the suspension in late January 2011 were matters occurring after Captain Bylsma’s resignation (the absence of a proper competency check on Air National’s training manager in November 2010 and falsification of training records for two pilots on Air National’s Westwind II aircraft in December 2010), both judgments made reference to concerns held and views  formed  by  CAA  regarding  organisational  failings  and  a  negative  safety culture.  That evidence may well be material to the Court in this proceeding when assessing the context in which Captain Bylsma decided to resign in September 2010. Air National’s responses to that evidence could also be material.  The affidavits may

not go far beyond what is referred to in the judgments, but nevertheless I consider that they are material and should be discovered as having the potential to support Captain Bylsma’s concerns, or to have an adverse affect on Air National’s rejection of those concerns.

[62]     Counsel for the defendants also argued that a wider category of documents should  be available relating to  the CAA’s  investigations  after Captain  Bylsma’s resignation, leading to the suspension, if for no other reason on the grounds of quantum (there could not be any basis for damage because the airline could not operate safely).  I don’t accept this submission on the basis of the pleadings as they stand. Air National is only seeking damages for the period prior to the suspension in January 2011, and I accept that the trigger for that suspension was what was uncovered in the audit of January 2011.

Decision

[63]     The defendants’ application for stay is dismissed.

[64]     The defendants’ application for further discovery is granted, but only to the extent that Air National is to provide discovery of all affidavits filed in its proceedings against the CAA in early 2011.

[65]     Counsel did not address me as to costs.  Although on balance Air National has succeeded to a greater extent than have the defendants, I reserve costs.  If the parties are unable to reach agreement, they are to file memoranda. Air National is to file  its  memorandum  within  15  working  days,  and  the  defendants  to  file  their

memorandum within 20 working days.

Associate Judge Abbott