Helilogging Ltd (in rec and liq) v Civil Aviation Authority of New Zealand

[2019] NZHC 3305

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2014-485-11204

[2019] NZHC 3305

BETWEEN

HELILOGGING LIMITED (in receivership and liquidation)
First Plaintiff

MARK WAYNE FORD (as trustee of the WESSEX TRUST)

Second Plaintiff

AND

CIVIL AVIATION AUTHORITY OF NEW ZEALAND

Defendant

Hearing:

13 – 15 August 2018

23 – 27 September 2019
30 September – 4 October 2019
7 – 11 October 2019
14 – 18 October 2019
21 – 25 October 2019
29 – 30 October 2019
4 – 5 November 2019

Counsel:

P J Dale QC, E Telle and L E Steel for Plaintiffs

L J Taylor QC, G M Richards and S F Lomaloma for Defendant

Date:

13 December 2019

JUDGMENT OF COOKE J

Table of Contents

ESSENCE OF THE PLAINTIFFS’ CASE  [3]

THE ELEMENTS OF THE ALLEGED TORTS  [12]

Misfeasance in a public office  [13]

Deceit  [19]

THE REGULATORY FRAMEWORK  [24]

The civil aviation system  [25]

The Westland Wessex  [36]

HELILOGGING LIMITED (in receivership and liquidation) v CIVIL AVIATION AUTHORITY OF NEW ZEALAND [2019] NZHC 3305 [13 December 2019]

The requirements of the Rules  [46]

The Director’s exemption power  [53]

FACTUAL BACKGROUND  [60]

Evidentiary issues  [61]

CAA concerns regarding helicopter safety  [66]

Development of Mr Ford’s proposals  [77]

Meeting February 2003  [83]

The Director’s May 2003 letter  [91]

Meeting May 2003  [98]

The 2004 flight trials  [103]

CAA assessment  [112]

Advice to the Director  [118]

The Director’s response  [132]

The judicial review challenge  [152]

PLAINTIFFS’ FIRST MAIN ALLEGATION: MISFEASANCE SURROUNDING

NOVEMBER MEMORANDUM  [161]

Views in 9 November memorandum  [163]

Accuracy of Director’s affidavit  [168]

Non-disclosure  [172]

Decision making integrity  [174]

Procedural misfeasance  [178]

Other allegations  [181]

Conclusion on 2004 allegations  [185]

THE SEVEN-STAGE PROCESS  [188]

Further information  [189]

Assessment and Preliminary decision  [197]

First involvement of Mr Lewis  [201]

Plaintiffs’ representations  [208]

Final advice and decision  [213]

Steps following decision  [220]

PLAINTIFFS’ SECOND ALLEGATION: MISFEASANCE SURROUNDING AUGUST 2005 DECISION    [224]

Obtaining the advice of Mr Lewis  [227]

Timing of instructions  [231]

Mr Lewis’ letter of advice  [234]

The earlier report of 12 January 1999  [240]

The vibration flight  [246]

Disclosure that advice was out of date  [252]

Alterations made to Mr Lewis’ 23 July letter  [255]

Conversation between Director and Irene King  [263]

Conclusions on misfeasance and deceit  [271]

OTHER ISSUES RAISED BY PLAINTIFFS’ CLAIMS  [275]

Was the decision reasonably open to the Director?  [276]

Causation and loss  [282]

Would judicial review have been successful?  [291]

Mr Lewis and vicarious liability  [299]

Limitation  [305]

CONCLUSION  [308]

[1]    The plaintiffs in this proceeding are Mr Mark Ford and his company now in receivership and liquidation. I will refer to them collectively as “Helilogging”.  On 19 August 2005 the then Director of Civil Aviation, Mr John Jones, made decisions under s 37 of the Civil Aviation Act 1990 (the Act) declining applications made by Helilogging to enable it to engage in helicopter logging activities using a type of former British military helicopter, the Wessex Mk 2, that had been acquired for that purpose. In this proceeding the plaintiffs advance two causes of action associated with this decision. The first is a claim for misfeasance in a public office, and the second is a claim in deceit.

[2]    The trial took approximately seven weeks. It was initially scheduled to be a little longer, but by an earlier judgment dated 12 July 2019 I ordered that there would be a split trial, and that any issues relating to damages would be dealt with at a later hearing.1 This was primarily due to the delays in the plaintiffs formulating their case on damages. The present judgment accordingly deals with liability, and what is described as “regulatory causation” as more precisely outlined in my earlier judgment.

ESSENCE OF THE PLAINTIFFS’ CASE

[3]    Without wishing to limit the claims as pleaded, it may assist if I summarise the essence of the plaintiffs’ case at the outset.

[4]    Helilogging wished to engage in heli-logging operations pursuant to which felled logs would be transported as an underslung load by the Wessex Mk 2 helicopter, particularly from more remote locations where road transport was not possible. Helilogging began engaging with the Civil Aviation Authority (the “CAA”) in relation to its proposals to be authorised to do so from late 2002, and received advice from senior officials on what the requirements were. It then engaged in a significant exercise involving major expenditure to meet the requirements, and it made the necessary applications. Following successful flight trials using the Wessex it pressed Mr Jones for his decision. Mr Jones advised, however, that he needed further information before he could make a decision.

1      Helilogging Ltd v Civil Aviation Authority of New Zealand [2019] NZHC 1641.

[5]    Judicial review proceedings were commenced by Helilogging in which it sought urgent mandatory orders. By judgment dated 16 December 2004 MacKenzie J did not grant such orders, but rather adjourned the proceedings so that a seven-stage process that Mr Jones had implemented could be followed in order that a decision could be made.2 That seven-stage process was originally set out in an internal memorandum of Mr Jones dated 19 November 2004 which had been provided to Helilogging.

[6]    The plaintiffs now allege that Mr Jones had already made up his mind to decline the application at the time of writing the 19 November memorandum, however. They say that his statements that he needed more time, and more information, including statements made in an affidavit he filed in the judicial review proceedings, were false. They rely on an earlier memorandum dated 9 November 2004 authored by Mr Jones that was not revealed at the time. They say that this memorandum demonstrates that Mr Jones had already decided to decline the application for the reasons he there set out. They say that the failure to disclose this memorandum, and the representations in his affidavit and otherwise that he needed more information to make a decision involved misfeasance and the tort of deceit.

[7]    The claims involve further allegations. The seven-stage process took some time to complete, and ultimately led to the decision of Mr Jones on 19 August 2005 to decline the application. Steps taken shortly before the final decision are also alleged to found claims for misfeasance and deceit. In particular before reaching his final decision Mr Jones and Mr John Fogden, the CAA official providing advice to him on the decision, obtained advice from Mr Bernie Lewis, a well-respected and experienced former test pilot who had had flying experience in the Wessex. By letter dated 23 July 2005 Mr Lewis advised that he had grave doubts about the safety of the Wessex for the tasks suggested by Helilogging. This letter was relied on by Mr Fogden in his advice to Mr Jones, and then by Mr Jones when declining the application. Mr Lewis’ advice was not disclosed to Helilogging before the final decision was made.

2      Helilogging Ltd v Civil Aviation Authority of New Zealand CIV-2004-485-2558, 16 December 2004 [Judicial review decision].

[8]    The plaintiffs allege that Mr Lewis’ advice was dishonest, and reliance on the advice by Messrs Jones and Fogden was also dishonest. This dishonesty is said to be manifested in a series of ways:

(a)First, the problems with the Wessex identified in Mr Lewis’ letter were all out of date, as they related to the original helicopter of the 1960s rather than the current aircraft. Yet the letter purported to say it related to the current aircraft. The out of date nature of the advice was not only not referred to in it, but was disguised by a hand alteration made to his letter which concealed the fact that he was referring to an obsolete Wessex model.

(b)Secondly, Mr Lewis failed to mention that he had specifically flown, and approved the Wessex Mk 2 aircraft in New Zealand in a 1999 report to the CAA in order for it to obtain an airworthiness certificate. This earlier approval of the current aircraft by Mr Lewis was dishonestly not disclosed.

(c)Thirdly, Mr Lewis later claimed that he was involved in an alarming flight in this aircraft shortly after the 1999 approval when it encountered severe vibration when lifting logs. This occasion either never occurred — and Mr Lewis’ evidence on this is untrue — or it represented his true reasons for his safety concerns, which he dishonestly did not reveal in 2005 as he knew that its significance could be readily challenged, and any concerns answered.

(d)Finally, when Helilogging saw Mr Lewis’ advice after the Director’s decision and Mr Ford contacted him, Mr Lewis further dishonestly misrepresented the true position by stating that his concerns were based on 40 year old fact. This was not true given the more recent events referred to above.

[9]    The plaintiffs contend that either Messrs Jones and Fogden knew of Mr Lewis’ wrongful conduct and effectively participated in it, or that the CAA is vicariously liable for Mr Lewis’ conduct.

[10]   The plaintiffs say that as a consequence of the alleged dishonest conduct, they lost the opportunity to have their application considered on its merits. In opening they accepted that it is possible that a reasonable Director of Civil Aviation might still have declined their application, but they said that a reasonable Director could also have granted it. They accordingly opened their case on the basis they sought damages on a “loss of a chance” basis. They invited the Court to assess the chances of the plaintiffs being granted their application, which would then be the starting point for the damages assessment to be made at the later hearing. In closing the case changed, however, and it was argued that a reasonable director would have been required to grant the application.

[11]   The key features of the plaintiffs’ allegations that I have just summarised were not set out in this way in the plaintiffs’ pleadings, or in the opening. After exchanges with Mr Dale QC during his opening, and in a ruling dated 26 September 2019, I not only dealt with applications to amend the pleadings and to allow the plaintiffs to call supplementary witnesses, but I sought to record the essence of the plaintiffs’ case as I understood it at that stage, and Mr Dale subsequently confirmed I had accurately captured the position.  That summary is similar to the summary I have just provided. I did that so that there was greater clarity in relation to the claims that were being advanced. I note at that stage the plaintiffs had accepted that a reasonable director could have decided to decline the application.

THE ELEMENTS OF THE ALLEGED TORTS

[12]   The plaintiffs allege that the defendant is liable for the torts of misfeasance in a public office, and/or deceit. In addressing the elements of those causes of action I deal first with misfeasance in a public office notwithstanding that it is the second pleaded cause of action. That is because it seems to me to be the more obviously relevant tort. Indeed there is an issue whether the tort of deceit is appropriately applied to public law decision-making. I will address this below.

Misfeasance in a public office

[13]   There is no dispute between the parties on the elements of the tort of misfeasance in a public office. In Currie v Clayton the Court of Appeal summarised them in the following way:3

[40]      The elements of the tort of misfeasance in public office can be summarised thus:

(1)Standing: The plaintiff must have standing to sue.

(2)Public office: The defendant must be a public officer.

(3)Unlawful conduct: The defendant must have acted or omitted to act in purported exercise of her public office unlawfully either:

(a)      intentionally, that is actually knowing her actions or omission to act were beyond the limits of her public office; or

(b)     with reckless indifference as to whether she was acting or omitting to act outside those limits.

(4)Intention: The defendant must have so acted or omitted to act either:

(a)      with malice towards the plaintiff, that is, with intention to harm the plaintiff; or

(b)     knowing her conduct was likely to harm the plaintiff, or people in the general position of the plaintiff; or

(c)      with reckless indifference as to whether the plaintiff would be harmed. Subjective recklessness, not objective recklessness, is required.

(Note: (a) is what is often called “targeted malice”; (b) and (c) are often called “non-targeted malice”.)

(5)Resulting loss: The plaintiff must actually have suffered loss and the defendant’s actions must have caused the plaintiff’s claimed loss.

[14]   In the present case the plaintiffs do not allege targeted malice — that is they do not allege that Mr Jones abused his powers in order to cause harm to the plaintiffs. Mr Dale emphasised that establishing an improper motive was not required to establish liability, and that liability could arise even if Mr Jones was motivated by aviation

3      Currie v Clayton [2014] NZCA 511, [2015] 2 NZLR 195 (footnotes omitted).

safety. Rather the plaintiffs allege that the Mr Jones (and Mr Fogden) acted knowingly beyond their powers appreciating that this would cause harm to the plaintiff, or recklessly indifferent to this. This is a legitimate way of advancing the tort.

[15]   The reckless indifference alternative still requires a finding of lack of honesty, however. In Minister of Fisheries v Pranfield Holdings Ltd the Court of Appeal held:4

[118] In our view the formulation of the test for recklessness in Garrett requires more than simply uncertainty on the part of a public official as to the legal position, coupled with a failure to make enquiry. …

And the Court approved of an observation of Lord Hobhouse that the requirement that the defendant acted without honest belief in the lawfulness of the conduct best conveyed the required state of mind.5 Moreover, as Blanchard J said for the Court of Appeal in relation to alleged misfeasance against a former Director of Civil Aviation:6

[63] The question is not whether the Director’s actions were justified as a matter of public law, but whether he was knowingly or recklessly acting beyond his powers. …

[16]   Whilst the elements of the tort are not in dispute, the way in which the plaintiffs allege the tort has been committed here involves an allegation of some subtlety. In opening it was not alleged that the decision to decline the application was knowingly beyond the Director’s powers. Indeed Mr Dale accepted that a reasonable Director could have declined the plaintiffs’ application. It was nevertheless contended that the tort was committed. That is because of the alleged bad faith surrounding the decision that might otherwise have been lawfully made as summarised in paragraphs [6]–[10] above.

[17]   That allegation amounts to what might be described as procedural misfeasance. The ultimate decision itself is not alleged to be beyond the powers or functions of the decision-maker, but it is alleged that there was dishonest abuse of public powers in the processes surrounding that decision. I accept that it is theoretically possible to commit the tort even when the ultimate decision is lawfully open to the decision-maker. Ancillary or procedural powers are still public powers exercised by public bodies. If

4      Minister of Fisheries v Pranfield Holdings Ltd [2008] NZCA 216, [2008] 3 NZLR 649.

5 At [120].

6      Oceania Aviation Ltd v Director of Civil Aviation CA 163/00, 13 March 2001.

a body exercises such ancillary or procedural functions or powers with targeted malice, or knowing that (or recklessly indifferent to whether) the actions or omissions are beyond the limits of their powers or functions, knowing that it is likely to harm the plaintiff or people in the position of the plaintiff, the elements of the tort could still be satisfied. As Blanchard J observed for the Court of Appeal in Garrett v Attorney- General “the purpose behind the imposition of this form of tortious liability is to prevent the deliberate injuring of members of the public by deliberate disregard of official duty”.7 Misfeasance in the exercise of procedural powers could fall within this concept. But it may become a more difficult forensic exercise to establish the tort when the ultimate decision is reasonably open to the decision-maker, and difficult issues may emerge in terms of the loss caused by the wrongdoing.

[18]   I also accept Mr Taylor QC’s submission in relation to satisfying the burden of proof. The relevant standard remains proving the elements on the balance of probabilities, but the application of that standard requires cogent evidence to establish the dishonesty, or bad faith which is at the heart of the tort.8 This is also so in relation to the tort of deceit which I turn to next.

Deceit

[19]   There is also no dispute between the parties as to the elements required to be satisfied for the tort of deceit. They were set out by the Court of Appeal in Amaltal Corporation Ltd v Maruha Corporation.9 The relevant elements are:10

(a)the defendant has made a false representation, knowing it to be untrue, or being reckless as to whether it is true;

(b)the defendant intended that the plaintiff should act in reliance on it;

(c)the plaintiff does in fact rely on it; and

(d)the plaintiff suffers loss as a result.

7      Garrett v Attorney-General [1997] 2 NZLR 332 (CA) at 350.

8      See Z v Dental Complaints Assessment Committee [2008] NZSC 55, [2009] 1 NZLR 1.

9      Amaltal Corporation Ltd v Maruha Corp [2007] 1 NZLR 608 (CA) at [46].

10     As summarised in A v Attorney-General [2018] NZHC 986, [2018] 3 NZLR 439 at [22].

[20]   Given the essential nature of the plaintiffs’ case as summarised in paragraphs [4]–[10] above, the main false representations alleged here would be those made by the Director that he was considering the applications on their merits when he introduced the procedure in November 2004, and that what Mr Lewis had advised in 2005 represented genuine safety concerns on which his decision was based.11 Both are alleged to have been representations made to the plaintiffs because they were set out in materials provided to the plaintiffs at the time. There is also the further alleged misrepresentation made directly by Mr Lewis to the plaintiffs referred to at [8](d) above, and there are other variations pleaded in the sixth amended statement of claim.

[21]   Whilst there is agreement about the elements of the tort, there is a dispute as to whether the tort of deceit can be applied to an exercise of public powers. There is authority that the tort of deceit is a commercial tort which is not available in the public law arena.12 In A v Attorney-General Ellis J concluded, however that such a limitation could not be gleaned from the case law, or be regarded as settled law.13

[22]   It seems to me that the respective elements of the tort of misfeasance and of deceit significantly overlap in a case such as the present one. It may prove to be a distraction to introduce, and then seek to apply a clear commercial/public divide, which may be illusory in some cases. If a plaintiff is able to demonstrate that the elements of the tort of deceit are established, it would be surprising that a defendant were able to avoid liability simply because the defendant was exercising public functions. If anything such a status may enhance rather than eliminate wrongdoing. Equally it may be possible to apply, and if necessary extend, the tort of misfeasance to address such alleged conduct. Both torts are candidates for where such wrongdoing can be properly housed. As I say the torts seem to me to overlap.

[23]   Apart from making those observations I take this issue no further. For the reasons I address in greater detail below, I do not think it is necessary to decide this point in order to determine the present case.

11     More detailed allegations are set out in the sixth amended statement of claim dated 26 September 2019.

12     Clayton v Currie [2012] NZHC 1475 at [73] per Osborne AJ; and Clayton v Currie [2018] NZHC 1898 at [145]–[153] per Churchman J.

13     A v Attorney-General, above n 10, at [28].

THE REGULATORY FRAMEWORK

[24]   Before addressing the relevant facts, and the allegations made by the plaintiffs, it is appropriate to explain the regulatory background to the decisions required of the Director in connection with the applications made by Helilogging.

The civil aviation system

[25]   New Zealand is a party to the 1944 Convention on International Civil Aviation (the Chicago Convention).14 The International Civil Aviation Organisation (ICAO) was established under the Chicago Convention. The Chicago Convention introduced an overall international framework for civil aviation to be implemented by States. There are a number of articles in the Convention itself, as well as standards and recommended practices in the Annexes to it which are overseen by ICAO and are to be implemented by, or which are to guide the regulation of civil aviation in each of the States.

[26]   The Chicago Convention deals with particular topics that affect civil aviation in its various Annexes. When interpreting and applying New Zealand’s domestic legislation within those areas, it is appropriate to take into account what is set out in the Annexes. There are two leading authorities on the approach:

(a)In New Zealand Air Line Pilots’Assoc Inc v Attorney-General the Court of Appeal dealt with arguments concerning the interpretation of domestic legislation in light of the provisions of Annex 13 of the Chicago Convention.15 Annex 13 deals with the responsibility of States to conduct independent investigations into significant aviation accidents and incidents, with the reports of the investigation bodies then available as part of the overall system.16 The particular issue addressed in that case concerned the use of cockpit voice recorders, but the decision generally explains the relevance of the international materials

14     Convention on International Civil Aviation 15 UNTS 295 (open for signature 7 December 1944, entered into force 4 April 1947).

15     New Zealand Air Line Pilots’ Association Inc v Attorney-General [1997] 3 NZLR 269 (CA).

16     In New Zealand this function is performed by the Transport Accident Investigation Commission established under the Transport Accident Investigation Commission Act 1990.

to the interpretation and application of the Act, and the Civil Aviation Rules (the Rules) made under the Act.

(b)More recently in Wellington International Airport Ltd v New Zealand Air Line Pilots’ Assoc Inc the Supreme Court dealt with the interpretation and application of provisions in the Rules in light of the provisions of Annex 14 of the Convention relating to runway end safety areas. The issue arose because of proposals to extend Wellington airport, and involved a successful challenge to the decision of the Director of Civil Aviation under the Rules in that connection.17 Again the judgment addressed how the international standards and recommended practices affect the interpretation of the Rules.

[27]   The present case involves a decision by the Director under s 37 to issue an exemption from a requirement of the Rules. The content of those Rules is similarly understood by reference to an Annex to the Chicago Convention, in this case Annex 8, which deals with the airworthiness of aircraft. There is no interpretation issue of the kind that arose in either of the above authorities, but the overall system for civil aviation regulation internationally, and therefore domestically, remains relevant to the application of s 37. I will explain this in greater detail below.

[28]   I note that, as emphasised by the Court of Appeal in New Zealand Air Line Pilots’ Assoc Inc, there is a degree of latitude exercised by States in the implementation of the provisions of the Chicago Convention as well as the standards and recommended practices.18 That is reflected in the terms of Annex 8 which contemplate States having their own “national codes of airworthiness containing the extent of detail necessary for the certification of individual aircraft”.19

17     Wellington International Airport Ltd v New Zealand Air Line Pilots’ Assoc Inc [2017] NZSC 199, [2018] 1 NZLR 780.

18     See New Zealand Air Line Pilots’ Assoc Inc, above n 15, at 278 and 284-285 per Keith J.

19 David McClean (ed) Shawcross and Beaumont Air Law (Issue 168, 4th ed, NexisNexis, London, 2019) at [43].

[29]   A key philosophy of the overall system is that it involves an integrated system of devolved responsibilities.20 Under the system various entities involved in civil aviation are charged with undertaking specific responsibilities, and it is through observance of those responsibilities by each of those entities that the overall system of civil aviation operates both effectively, and safely. This generally involves each of those entities being certified by a domestic civil aviation authority to engage in the relevant activities in question. In the present context the case involves an intention to operate a particular helicopter in a particular way within New Zealand.

[30]   Under the civil aviation system there will generally be a particular entity that has designed an aircraft intended for civil aviation use. This entity will be a certified designer, with the relevant authority within that State being responsible for certification of the designer. The Wessex Mk 2 aircraft in issue in this case was originally manufactured by Westland Helicopters Ltd in the United Kingdom for military use, but was later certified for civilian use. Often aircraft are designed and/or manufactured by more than one entity. For example, the entity that manufactured the engine for the aircraft may be different from that which designed/manufactured the aircraft itself. Each entity will have been certified to perform its function. Sometimes the entities who design, and the entities who manufacture, will be different, and the State of design may be different from the State of manufacture. Under cl 1.4 of Annex 8 of the Chicago Convention the State of design issues a “Type Certificate” in relation to aircraft of a particular type once it has met appropriate airworthiness requirements.

[31]   The system also flows through to where an aircraft is actually operated. The certified designer/manufacturer will retain responsibility for ongoing safety, overseen by their domestic authority. Each operator of a civil aviation aircraft will need to be certified as an approved operator of that aircraft in the State of operation. That certification will be granted by the relevant authority in that State. In the present case the proposed State of operation was New Zealand, the relevant proposed operator was the plaintiffs, and the relevant authority certifying the operator was the CAA under the Act and Rules.

20     For a detailed description of the international regime see Shawcross and Beaumont Air Law, ibid, div II “Administration of Civil Aviation”.

[32]   This integrated and devolved system extends further down the system. The only persons who may fly the duly certified aircraft are pilots who are duly certified to fly them, and the only persons who may be responsible for maintenance will again be persons duly certified to undertake the maintenance on those particular aircraft (referred to as Licensed Aircraft Maintenance Engineers or LAME) using certified parts from certified suppliers.

[33]   An important part of this system is that each of the entities performing functions are required to do so in accordance with prescribed standards. Standards and recommended practices are set out in the Annexes, and are amended over time by processes managed by ICAO. New Zealand’s implementation of the standards and recommended practices can sometimes be found in the Act, but are more commonly found in the Rules which are promulgated by the Minister under Part 3 of the Act. It is then the participants themselves that have the responsibility for adhering to the Rules as certified entities, although the Rules contemplate various levels of oversight of these responsibilities by the CAA.

[34]   There are detailed requirements and procedures for making and amending the Rules by the Minister of Transport under Part 3. This involves industry consultation, and such amendments normally take a long period of time.

[35]   One of the features of this overall regime is that the CAA as regulator under the Act does not police compliance in an exhaustive way. To some extent the system is designed to be self-regulating, or self-checking, with the certified entities having oversight and checking responsibilities within the system. That is why it can be described as an integrated system of devolved responsibilities. Even a pilot of an individual aircraft, for example, can be thought of as having responsibilities for the continuing operation of the safety system. Realistically, given the detail involved in a safe civil aviation system, that is the only way the system can be effective. The CAA could not police everything by itself — responsibilities need to be devolved. And it is integrated as the basic structure, and the general content of the requirements, all derive from the Chicago Convention and the standards and recommendations developed under it through ICAO. Given the international dimension of civil aviation, everyone is singing from the same hymn book, or at least their own translation of it.

The Westland Wessex

[36]   The Westland Wessex series helicopters were produced in the United Kingdom between 1958 and 1970. The original Wessex Mark 1 was developed for the Royal Navy to perform anti-submarine duties. The first Wessex Mk 2 flew in January 1961. The Wessex Mk 5 was developed for the Royal Airforce. The only essential difference between the Mk 2 and the Mk 5 was that the Mk 2 was used by the military, and the Mk 5 the air force. They were essentially the same aircraft. There is also evidence of a small number of Wessex used by the Iraqi Airforce, and flown by Mr Bernie Lewis in that connection. They were called the Wessex Mk 52.

[37]   It is apparent that the Wessex was a well-respected helicopter. There is evidence of some problems particularly with the initial version, but those who flew it appear universally to admire it. Indeed it obtained reputation by being used for the Queen’s Flight, meaning that it was used for transporting the Royal Family on any occasion when such helicopter transport was required.

[38]Westland also produced a civil variant of the military aircraft called the Wessex

60. It was designed to carry 10 passengers for air transport standards. It was issued with what was effectively a type certificate under the civil aviation system by the UK Air Registration Board in September 1965. It accordingly became part of the civil aviation system I have described. The aircraft was manufactured and delivered to a sole operator, Bristol Helicopters. The Westland Wessex 60 was used for passenger transport for North Sea oil rigs.

[39]   There was, however, a significant accident in the North Sea involving 13 fatalities in 1981. Later in 1990 the United Kingdom Civil Aviation Authority (UKCAA) withdrew the type certification. A letter dated 15 October 1999 from Mr D W Blackwell, Head of Aircraft Certification section of the UKCCA to Mr P Gill of the CAA advised as follows:21

I confirm that the Wessex 60 no longer has a status of a type certified product.

21 Mr Grainger of GKN (formerly Westland Helicopters) suggested that this letter was misleading in suggesting there was a connection between the 1981 accident and the 1990 decision, and in the suggestion that the accident was not investigated.

The status was withdrawn at the request of Westland Helicopters Ltd (WHL), the type design organisation at the time.

A Wessex 60 suffered a fatal accident in the North Sea in August 1981 which, because of decisions by the operator to discontinue operating the type and WHL to discontinue support was never fully investigated for cause. The wreckage was not recovered from the sea.

This uninvestigated element of the type’s continued airworthiness record would come back on the table where any re-instatement of support proposed. It is difficult to see how any investigation would be meaningful considering the time that has passed.

With no cause identified and therefore no solution possible it is doubtful the type certificate status would ever be restored.

[40]   Two of the Wessex helicopters were registered for operation in New Zealand prior to the plaintiffs’ application. A company called Metro Air Ltd of Christchurch operated by a Mr O’Malley imported a Wessex Mk 5 in 1998. In 1999 it also imported a Westland Wessex 60.

[41]   The first of these helicopters was inspected by CAA and issued an airworthiness certificate on 18 January 1999 after flight tests were conducted. The flight test pilot, and the certifier, was Mr Lewis. His report of the flight inspections recommended certification in the Restricted category, but it was ultimately registered in the Special category given that there was no type certificate for this aircraft. I will explain these categories in greater detail below.

[42]   Metro Air then used this aircraft for helilogging. Such use was controversial given that aircraft within the Special category were not to be used for “hire or reward”. Mr O’Malley was subsequently prosecuted for using the aircraft in that way. Again I will explain this issue in greater detail below.

[43]   In any event on 12 February 2001 this aircraft was involved in an accident which totally destroyed the aircraft, including because of a subsequent fire. The pilot was killed. The accident was not investigated by the Transport Accident Investigation Commission under the procedures contemplated by Annex 13 of the Chicago Convention, but the CAA conducted its own investigation.22 The CAA investigation

22     TAIC does not conduct all accident investigations, but only those that give rise to significant safety issues – see s 13(1) of the Transport Accident Investigation Commission Act 1990.

report identified that the aircraft was operating on only one of its two engines prior to the crash. It could not be established why that was the case, and accordingly the initiating cause of the accident was not established. The manufacturer responsible for the engine, Rolls Royce, conducted its own investigation which was also inconclusive. The CAA investigation nevertheless found that the pilot was primarily focused on log lifting activity, and probably did not detect that the second engine was not operative, that the helicopter rpm could not be sustained with a single engine given the weight of the log, and that the pilot most likely attempted to lower the nose and descend in an unsuccessful attempt to increase the rpm when he crashed. The findings were, however, inconclusive.

[44]   Following the accident the Director of Civil Aviation, Mr Jones, introduced a limitation on the use that could be made of the Wessex, in particular by imposing a condition which prevented the external hook fitted to the aircraft being used for carrying loads. This had the effect of preventing the Wessex from being used for helilogging.

[45]   Metro Air also attempted to register the other Wessex 60 aircraft it had acquired under a Standard category, but this was declined by the CAA. Metro Air also imported two further ex-military Wessex aircraft, but they were also not certified.

The requirements of the Rules

[46]   Under the Rules there are detailed requirements before an aircraft can be operated for civil aviation.23 In particular Part 21 of the Rules deals with the certification of products and parts, which includes the certification of the aircraft. At the relevant time there were three relevant categories  of certification referred to in  cl 21.173:

(a)Standard category aircraft.

(b)Restricted category aircraft.

23     Except as otherwise indicated, this section describes the Rules as they stood in 2004–2005.

(c)Special category aircraft.

[47]   Under cl 21.191(2) any Standard or Restricted category airworthiness certificates were required to conform with the type acceptance requirements set out earlier in the Rules. For example under cl 21.43(a) an applicant had to provide the Director with:

(1) Evidence that the type design has been approved by an ICAO  contracting state by the issue of a Type Certificate or an equivalent document;

[48]   So both Standard and Restricted category aircraft were required to be issued with a type certificate under the international framework described above. The difference between Standard and Restricted categories is not material in the present case. Restricted category was appropriate when there is some restriction on the operations of a particular aircraft, for example because it has been modified for a different use from its original design.

[49]   Clause 21.173 identified a third category, being the “Special category airworthiness certificate” which involved either an experimental certificate or a special flight permit. The special flight permit under cl 21.195 appeared to only contemplate a particular flight being authorised. Notwithstanding its name, an experimental certificate under cl 21.193 could be issued for other than experimental reasons, provided the standards in cl 21.193(c) were met, which broadly involved the aircraft being subject to flight evaluation and that it met certain safety standards.

[50]   There were, however, prescribed operating limitations on an aircraft obtaining certification in the Special category. Clause 91.105 provided:

91.105 Special    category   airworthiness   certificates    –    Operating limitations

(a)Except as provided in paragraph (b), no person may operate an aircraft that has a special category airworthiness certificate for the carriage of persons or goods for hire or reward.

(b)Paragraph (a) does not apply to a person operating an aircraft for the carriage of persons for hire or reward where the person being carried is-

(1)the holder of a flight instructor rating issued under Part 61; and

(2)giving conversion instruction to the operator.

(c)Except in the case of take-off and landing, no person may operate an aircraft that has a special category airworthiness certificate over a congested area of a city or town unless the aircraft has been authorised to do so by the Director in writing.

(d)A person operating an aircraft that has a special category airworthiness certificate must advise each person carried in the aircraft of the category of airworthiness certificate held.

[51]   In addition, and as identified above, following the Wessex accident under the operation by Metro Air the Director of Civil Aviation had decided to impose a limitation on the airworthiness certificates. Under cl 21.173(b) the Director was empowered to prescribe operating conditions and limitations on any airworthiness certificates.

[52]   There were other former military aircraft in New Zealand undertaking helilogging. A number of former US military helicopters known as the UH-1 Iroquois were so used. They operated in the Restricted category. The reason for this was a little unusual. The Federal Aviation Authority of the United States of America (the FAA) had issued the equivalent of a type certificate for this aircraft. Earlier assessment by the CAA had held that these aircraft did not meet the type certificate requirements, but they were later seen by CAA as meeting them. In addition a company called Heli Harvest Limited used Russian built Mi-8mtv-1 and Mi-17 helicopters for such helilogging activities. Again this proceeded on the basis that the helicopters were type certified. In addition there were other operators using non-ex-military helicopters for such activities. Such helicopters are type certified and usually more expensive than ex-military helicopters.

The Director’s exemption power

[53]   The detailed requirements of the Rules described above prevented the plaintiffs from operating the Wessex for helilogging activities. The limitation on external load lifting was implemented by a discretionary decision, and accordingly could be addressed by the discretion exercised by the Director on the issuing of the certificate. But the other requirements of the Rules identified above would prevent the proposed activity.

[54]   There was, however, a power in the Act that enabled the Director to grant an exemption from the requirement of the Rules. At the relevant time s 37 provided:

37       Exemption power of Director

(1)The Director may, if he or she considers it appropriate and upon such conditions as he or she considers appropriate, exempt any person, aircraft, aeronautical product, aerodrome, or aviation related service from any specified requirement under section 28 or section 29 or section 30 of this Act.

(2)Before granting an exemption under subsection (1), the Director shall be satisfied in the circumstances of each case that—

(a)the requirement has been substantially complied with and that further compliance is unnecessary; or

(b)the action taken or provision made in respect of the matter to which the requirement relates is as effective or more effective than actual compliance with the requirement; or

(c)the prescribed requirements are clearly unreasonable or inappropriate in the particular case; or

(d)events have occurred that make the prescribed requirements unnecessary or inappropriate in the particular case,—

and that the risk to safety will not be significantly increased by the granting of the exemption.

(3)The number and nature of exemptions granted under subsection (1) shall be notified as soon as practicable in the Gazette.

(4)Nothing in this section shall apply in any case where any rule specifically provides that no exemptions are to be granted.

[55]There were three steps in the grant of an exemption under this section:

(a)First one of the pre-requisites set out in s 37(2)(a)-(d) needed to be satisfied. Each of the matters set out in paragraphs (a) through to (d) are alternatives, but one of them must exist to the Director’s satisfaction.

(b)Secondly the Director must be satisfied that the risk to safety will not be significantly increased by the granting of the exemption in accordance with the concluding words of s 37(2).

(c)The Director then has a discretion under s 37(1) to grant an exemption if he or she thinks that appropriate, and on such conditions he or she considers appropriate.

[56]   At the time of the events of this case, a specific Rule existed in relation to s 37 exemption applications — Rule 11.503. The additional procedural matters it outlined do not appear material.24

[57]   There are two relevant interpretation issues worthy of note. The first is that the ability to issue an exemption subject to conditions under s 37(1) seems to me to have enabled the Director to impose conditions in order that he or she can be satisfied of the matters set out in s 37(2). In particular, if a Director is not satisfied that the exemption without conditions would not significantly increase risk, but would be so satisfied if the exemption was granted subject to conditions, it seems to me that the pre-requisites in s 37(2) could be satisfied by imposing the conditions.

[58]   Secondly it is apparent that the Director ultimately exercised a discretionary power under s 37(1). It is plain that an applicant for an exemption is not entitled to an exemption simply because the s 37(2) requirements are satisfied. In Land Transport Safety Authority v Casey the Court of Appeal held that to be so in relation to a very similarly worded provision set out in s 166 of the Land Transport Act 1998 dealing with land transport issues.25 The exemption power in relation to civil aviation is exercised in a different context, however, given the very elaborate Rules regulating civil aviation. But it is undoubtedly correct that the Director exercises a discretion and cannot be compelled to grant an exemption simply because the s 37(2) pre-requisites have been satisfied.

[59]   This sets the scene for the issues that were central to the present case. The plaintiffs acquired Wessex helicopters from Metro Air, and then went about seeking to have them certified under the Rules to enable helilogging activities. That necessarily included applications to the Director that the exemption power under s 37 be

24 One of the plaintiffs’ expert witnesses, Mr Stevens, raised an issue about a  publication  requirement, but I do not regard it as material to this case. I also note the Director’s s 37 power could be delegated – s 23A.

25 Land Transport Safety Authority v Casey CA 14401, 26 February 2002, especially at [32].

exercised. The applications were for exemptions to the Rules preventing entry into the Restricted category (particularly the need for type certification) or alternatively into the Special category (particularly the limitation on hire or reward). The discretionary limitation on load lifting also needed to be lifted. The allegations of misfeasance and deceit arise in connection with the manner in which the Director and certain advisers dealt with these applications.

FACTUAL BACKGROUND

[60]   In order to address the plaintiffs’ claims I must first examine the background to the Director’s actions surrounding the judicial review proceedings in November and December 2004, and his ultimate decision in August 2005.

Evidentiary issues

[61]   Before addressing the facts, and making factual findings, it is appropriate to record some initial matters concerning the evidence.

[62]   First, the events in question occurred between 2002 and 2005, approximately 15 years ago. Whilst it was clear that the witnesses recalled some of those events, it seems to me that it is particularly important to assess oral evidence in light of the documentary record, and to give the documentary record significance in making factual findings.26

[63]   Secondly, some of the relevant  witnesses  have  since died.  This  includes Mr Jim Barclay who was the plaintiffs’ aviation consultant who dealt with the application in 2005, and the plaintiffs’ solicitor at the time, Mr Graham Takarangi. Given his advanced years, there were also concerns about the availability of Mr Lewis, who was a central witness, for a trial this year. In those circumstances I heard his evidence over three days in August 2018. At that stage he was 90 years of age. I am advised that he is still with us.

[64]   I also record that Mr Jones was able to give some evidence, but for reasons that do not need to be elaborated on in this judgment, but which are outlined in reports

26     See Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC (Comm) at [15]–[22].

admitted by consent from his general practitioner and a consultant, he had considerable difficulty in recalling the events. He read his brief of evidence, and was cross-examined for more than half a day, but counsel then agreed that his cross- examination should be abandoned. The reality was that his evidence had little or no probative value given his inability to recall events. I set out the basis upon which I would assess his evidence, and more information of the circumstances in a minute dated 30 October 2019.

[65]   Finally it is appropriate to record that the plaintiffs called a large number of witnesses that dealt with many of the issues that were relevant to the underlying applications made by the plaintiffs at the time in an extensive way. There were objections to some of this evidence, including on the ground of relevance, which I have recorded in rulings and minutes. Much of the evidence that was called by the plaintiffs was only of marginal relevance, but for the reasons I explained in my rulings and minutes it was not inadmissible on that ground.

CAA concerns regarding helicopter safety

[66]   Former military helicopters had been in use in New Zealand for heli-logging activities from about 2001. The former Soviet helicopter, the Mi-8/Mi-17 had been in operation as a type-certified aircraft, with the State of Moldova (formerly part of the Soviet Union) as the national authority. In addition the former US military helicopter, the Iroquois UH-1 (known as the “Huey”) was also in use. It was type certified by the FAA notwithstanding the aircraft was no longer supported by the manufacturer, Bell Helicopters.

[67]   In the period leading up to the plaintiffs’ first approach to the CAA in relation to obtaining its exemptions, the CAA had a growing concern relating to the safety standards involved in the operation of ex-military helicopters in New Zealand. Two reports from Mr Jeremy Remacha, the Manager of the Aircraft Certification Unit of the CAA are significant in that respect.

[68]   On 27 June 2001 Mr John Lanham, the General Manager at General Aviation had commissioned a review into the operation of ex-military helicopters by the CAA.

The following year, by memorandum dated 8 August 2002 Mr Remacha provided  Mr Jones with a report in response to the review. It stated in its overview:

The application of ex-military helicopters to a variety of roles in New Zealand over the last decade has raised a number of key issues surrounding the level of safety for particularly external load operations. A number of key issues have arisen which indicate current level of safety is inadequate and both short term and long-term action is required to address the situation. As more and more operators in the industry are keen to continue sourcing ex-military aircraft for external lifting operations, particularly heli-logging, the CAA must ensure that it formulates a plan to address the immediate safety issues in a rational and logical approach, whilst making strategic plans to address the wider regulatory issues raised by this type of operation with these aircraft.

[69]   The report made a number of recommendations designed to increase safety. They included a recommendation that any future importation of new ex-military helicopters would require type acceptance certification, and that all Special category helicopters would have limitations placed on the type certificates for external load and agricultural operations until the level of safety of the intended operation had been assessed as adequate.

[70]   In an earlier report of 22 May 2002 Mr Remacha specifically addressed the Westland Wessex. That report was prepared because of the applications that had been made by Metro Air, together with the consequences of the Wessex accident described above. This was a detailed analysis of the issues relating to this aircraft. This report said:

The current level of [the original equipment manufacturer] and continued airworthiness support from the State of Design for either the Wessex Mk 2 or Mk 5 series ex-military helicopters does not provide sufficient confidence that the level of safety is adequate for anything other than a general purpose operation conducted under CAR 91 to a basic military maintenance programme. Any approvals or airworthiness certificates issued should therefore limit the operation appropriately.

[71]   The report then went on to recommend a series of steps that would be required to be taken before the Westland Wessex could obtain authority beyond this basic ability to operate. This report ultimately led to a decision of the Director, set out in his letter to Mr O’Malley of 27 May 2002, that the Special category registration would be subject to conditions, including the condition that the helicopter could not be used for external load operations.

[72]   In September 2002 the views of the CAA arising from the 8 August memorandum concerning ex-military helicopters were presented to the Aviation Industry Association conference. The presentation was then reported in a publication entitled “CAA News” for September and October 2002. It occupied the cover page article for that edition with an article entitled “Lifting the safety record – ex-military helicopters”. This set out the essence of Mr Remacha’s report. This included the statement that:

All special category helicopters will have limitations imposed on external load and agricultural operations until the level of safety is assessed as adequate for the intended purpose.

[73]And then in respect of future imports that:

·     Imports of new types must meet the type acceptance certification.

·     Type certificates must address maintenance and continued airworthiness.

[74]   The publication also referred to a review of Restricted and Special airworthiness categories under Part 21 of the Rules.

[75]   Some  witnesses  called  by  the  defendant  denied   what   was   stated   in Mr Remacha’s reports,  and  this  publication,  was  CAA  policy.  It  appears  that Mr Remacha’s August report may not have gone through formal policy approval channels within the CAA. But the advice given to the industry nevertheless reflected CAA policy that had been effectively approved by senior managers, and provided to the Director himself.27

[76]   The plaintiffs contend that this publication by itself gave them reason to believe the Westland Wessex could now be operated for helilogging. I do not accept this. The report, and the publication, were not directed to the topic of any required s 37 exemption, and the matter of hire and reward in particular. But I accept that the plaintiffs could reasonably believe that permission might be a possibility if the increased standard of safety generally described was demonstrated to CAA’s satisfaction. In other words, a potential pathway for approval was identified.

27 There is also some evidence that the 8 August 2002 memorandum was only a draft, but as its substance was presented at the Conference, and in the CAA News, nothing would appear to turn on that.

Development of Mr Ford’s proposals

[77]   Mr Ford explained his personal background in evidence. He had been inspired by his grandfather who had worked in the logging industry, and he wanted to be a pioneer like him. He began his early working life in the logging industry, but was also a pilot, and later developed proposals for helilogging. He acquired helicopters, and also made innovations to assist that activity, including the development of a portable saw mill, and alternative log carrying techniques.

[78]   He initially used Hughes helicopters, and then subsequently other types for helilogging. This included a Westland Scout  helicopter  which  he  acquired  from Mr O’Malley of Metro Air in about 1998. It was smaller than the Wessex. He explained that no issue was raised by the CAA in relation to these activities. I note, however that there was a fatal accident in the Scout while it was being used for helilogging.

[79]   From about November 2002, after seeing the article in the CAA News referred to above, Mr Ford made efforts  to  acquire  the  Wessex  helicopters  operated  by Mr O’Malley.  This  was  after  the  Wessex  accident,   and   the  prosecution  of   Mr O’Malley, and there was accordingly a potential opportunity to acquire the aircraft given that Mr O’Malley’s endeavours were proving unsuccessful.

[80]   Initial contact was made on his behalf with the CAA in December 2002 after which Mr Ford agreed to acquire two Westland Wessex helicopters that were originally owned by Mr O’Malley, and a Wessex 60 which was not registered. He also purchased some spare parts.

[81]   By letter dated 21 January 2003 to Mr Remacha of CAA, Mr Ford advised that he had purchased the aircraft and asked for a meeting to discuss a proposal for a helilogging trial. At about this time he involved Mr Maurice Gordon, a well-respected aircraft engineer in the project. He also involved Mr Ronald Potts who was an aircraft engineer certified to maintain the Wessex.

[82]   After further exchanges in correspondence a meeting was arranged with the CAA in February 2003.

Meeting February 2003

[83]   On 10 February 2003 Messrs Ford and Gordon and one other representative (Mr Paul Miller) met with CAA representatives (Messrs Lanham, Remacha, Fogden and Pearson). The purpose of the meeting was for the plaintiffs to obtain advice as to what would be necessary for them to be authorised to conduct helilogging activities using the Wessex.

[84]   I broadly accept that at that meeting the CAA representatives outlined the requirements for obtaining such permission. Mr Lanham and Mr Remacha were both called as witnesses for the plaintiffs notwithstanding that they were former senior CAA employees. Mr Gordon also gave evidence. Mr Fogden was called by the defendant. Mr Lanham referred to the plaintiffs providing a “whole concept” proposal that would involve CAA approving:

(a)the aircraft’s airworthiness;

(b)a maintenance programme; and

(c)an operations programme.

[85]   The CAA personnel particularly emphasised at the meeting the need for design authority support as part of such approvals. The plaintiffs referred to their understanding that this was a reference to the support of the original designer/manufacturer, which was now GKN in the United Kingdom.

[86]   I accept that the plaintiffs reasonably believed that if they satisfied the CAA on the three broad categories identified above that permission to operate the Wessex for helilogging would be forthcoming in the Special category. The plaintiffs were provided with a copy of Mr Remacha’s report into the Wessex of May 2002, and at the meeting Mr Remacha went through the recommendations in it. So it was understood that there were many detailed issues to address. But all the issues in relation to the Wessex identified in Mr Remacha’s report are legitimately seen as subsumed within the three broad topics identified at the meeting.

[87]   There were no guarantees that permission would be granted, however. Behind each of the three categories of requirement there were a series of detailed issues, and the plaintiffs could not guarantee success in obtaining the CAA’s approval in those three areas. It was also expressly pointed out that the CAA would not lead the proposal, and would simply assess what the plaintiffs put to the CAA. I note that the need for a s 37 exemption was not specifically discussed at the meeting.

[88]   But I do not accept that it was expressly stated, or even implicit, that if the plaintiffs satisfied CAA on the three matters the CAA had outlined, it might still not grant approval. That would be inconsistent with the purpose of the meeting, which was to obtain the CAA’s advice on what was required, and the response of the CAA representatives which was intended to explain what the requirements were. I accordingly accept the evidence of Messrs Ford and Gordon that they were encouraged by this meeting, and they went about committing time and resources to meet the requirements of these three areas in light of that encouragement.

[89]   Mr Ford said that he completed the purchase of the Wessex aircraft only after this meeting. There does not appear to have been a formal contract, but the agreement to purchase seems to me to have been formed at the end of the previous year, although potentially not completed until after this meeting.

[90]   I will deal with the consequences of this advice, and the reasonable expectations of the plaintiffs in more detail below. Ultimately a legitimate complaint arising from any breach of legitimate expectation does not mean the plaintiffs are able to succeed in their actions in tort which they advance. But it provides relevant background to the events as they unfolded.

The Director’s May 2003 letter

[91]   Following the meeting the plaintiffs made progress, including by contacting GKN, and Air and Ground Aviation Ltd (AGA), a company that now owned remaining Wessex helicopters and parts in the United Kingdom.

[92]   By email to Mr Remacha dated 22 April 2003 Mr Gordon advised that GKN had indicated a cost of £114,285 for the analysis and maintenance document work,

and there were flight test costs of approximately $85,000. Mr Gordon stated that Mr Ford required confidence that “on satisfactory completion of the test and analysis” CAA would remove the current prohibition on logging, and that it would then permit commercial use of the Westland Wessex helicopters for logging operations. He asked CAA to provide that confirmation.

[93]   CAA addressed that request at an internal meeting involving not only Messrs Remacha and Lanham, but Mr Jones, Mr Fogden and the CAA chief legal counsel Ms MacIntosh.  After  debating  the  issues  at   the  meeting  it  was  decided  that Mr Remacha would draft a letter for Mr Jones’ consideration to be sent in response.

[94]   By letter dated 7 May 2003  Mr Jones  wrote  to  Mr Ford.  He  referred  to Mr Gordon’s email and stated that the request had been reviewed and “… CAA … has identified the following issues”. The letter then identified the current condition preventing external load operations. It advised that given the Wessex was not a type certified aircraft it could only be considered in the Special category. It said to remove the external load restriction would involve “two key elements”. First was an assessment of the aircraft’s airworthiness, with the letter stating that “your current approach to GKN Westland is very appropriate in working towards meeting this requirement”. The second involved operational considerations, with the letter advising that the draft operations manual was “appropriate and suitable for further development”.

[95]   The letter then addressed the restriction on hire and reward involved in the Special category. It advised that the CAA’s view was that such helilogging activities did involve hire and reward and that:

To address this rule prohibition, you may apply to the CAA under CAR 11.503 for an exemption against this requirement. The CAA will consider this application in conjunction with the supporting evidence provided.

[96]   The Director and the CAA later contended that this letter stated that there were no assurances. Equally the plaintiffs later contended that it provided such assurances. The letter expressly does neither, and in that respect it is unfortunately ambiguous. If the CAA wanted to tell the plaintiffs that there were no assurances, and that even if the matters it had outlined were met to its satisfaction it may not grant approval, then this

should have been stated in this letter. After all that was what Mr Gordon’s letter sought. Equally, given that the letter did not actually provide the express assurance that was sought, it was apparent to the plaintiffs that the CAA were not prepared to give any such express assurances. From the plaintiffs’ point of view that necessarily meant there was a risk.

[97]   But given the background described above it would be fair to say that the letter provided further encouragement to the plaintiffs. More specifically the plaintiffs could reasonably expect that if they met the prerequisites for gaining approval that had been explained by the CAA approval would be forthcoming. They could not be sure, however, that they would meet CAA’s requirements. In the letter the Director advised they were on-track to doing so, however. The final reference to CAR 11.503 is a reference to s 37 (to which CAR 11.503 cross-referenced) but there was no suggestion that this would involve any additional unarticulated requirements — rather it was raised as a means to “address this rule prohibition”. I do not think that could reasonably be understood to suggest that there were potentially additional requirements that had not been explained.

Meeting May 2003

[98]   A further meeting was then held at GKN’s premises at Cowes on the Isle of Wight in the United Kingdom on 21 May 2003. GKN was represented by Messrs Gladdis and Grainger and other Wessex specialists. The plaintiffs were represented by Mr Gordon. The CAA also attended through Mr Remacha and Mr Geoff Connor. Mr Remacha explained that he was in Europe for another purpose, and took the opportunity to attend the meeting.

[99]   Mr Remacha generally accepted the evidence of Mr Grainger and Mr Gordon in relation to this meeting, although he did not accept Mr Gordon’s evidence that the impression was given as a consequence of the discussions that his 22 May 2002 report was “no longer quite so relevant”. I agree that the issues in the report remained relevant. The key feature of the meeting was, however, that GKN were supportive, was prepared to back the plaintiffs’ proposals. This had been one of the key requirements mentioned at the February 2003 meeting.

[100]   This was Mr Remacha’s last real involvement in this issue. He was seconded from CAA to Air New Zealand in July 2003 and left the CAA for the private sector in September 2003. He now resides in Zurich working in the private sector and returned to New Zealand to give evidence.

[101]   One of the points of discussion at this meeting was the programme to engage in test flight trials in New Zealand, and GKN agreed to oversee those trials so that the airworthiness of the Wessex could be established to CAA’s satisfaction.

[102]   I note, however, as Mr Grainger explained when he gave evidence, that GKN had no expertise in relation to the engines used in the Wessex and the concept of “engine lifing” — which refers to when components of the engine must be replaced given their usage. When the Wessex was being used for activities for which it was not expressly designed — ie repetitive heavy lifting operations — the “lifing” of components of the engine could significantly change. GKN’s stance was that the plaintiffs would need to liaise directly with the engine manufacturer, Rolls Royce. GKN were nevertheless experts on the “lifing” of the non-engine components of the Wessex, and this was a matter that would be expressly addressed during the anticipated flight trials.

The 2004 flight trials

[103]   Between June 2003 and June 2004 the plaintiffs progressed their plans, including by dealing with the flight trials. This took longer than the plaintiffs were expecting. In part that was due to delays at GKN.

[104]   Mr Ford explained that during the period leading up to the trials he purchased a further five Wessex aircraft and spare parts from AGA for a total of £225,000. AGA had obtained much of the residual Westland Wessex fleet in the UK. Mr Ian Dodds of AGA gave evidence and explained the steps he had taken in the UK, in conjunction with GKN and the UKCAA to maintain the viability of the Wessex for active use, particularly as a civil aircraft.

[105]   A draft petition for exemption from the hire and reward limitation for Special category registration had been submitted by the plaintiffs in October 2003. The

following year a petition was lodged seeking an exemption from the type certification requirement in the Restricted category. Both petitions were treated as alive when the Director of Civil Aviation was asked to make decisions in 2005. I accept that it was the CAA that raised with the plaintiffs the possibility of using the Restricted category as an alternative to the Special category during this period.

[106]   Ultimately the flight trials took place in June 2004 under GKN’s supervision. Representatives of GKN and the CAA were present during part of the trials. They can be described as a success. A document described as the “green book” was produced as a consequence. This involved a detailed assessment of the airworthiness of the aircraft for its helilogging operations, and formed the basis for maintenance and operational procedures.

[107]   Some issues emerged during the flight trials. Both of the main pilots gave evidence. The pilots reported some vibration during the early flights, but this appears to have been addressed by further flying experience. On one occasion the helicopter would not start, but this issue was remedied. Initially GKN had intended for a frame to be attached to the aircraft for lifting purposes, and that never occurred, probably because of delays at the GKN end. But these issues did not prevent the flight trials being successful.

[108]   During the process of seeking approval for conducting the flight trials, including by letter to the CAA dated 7 May 2004 Mr Ford sought further hours of trials. In Mr Lanham’s email response the same day the CAA declined the additional hours involved. When doing so Mr Lanham explicitly addressed, for the first time, the question whether there would be approval following the processes the plaintiffs were going through. He stated:

I regret if there has been any misunderstanding and I emphasise that there has been no change in thinking or little ‘policy’ with respect to your long term goals. We also appreciate the considerable investment you have made, we commend the professional approach you are taking and we wish you every success in the outcomes. However, as we agreed, this project was/is always going to be a steady process through to the end of carefully planned and approved stages, with no guarantee necessarily of technical, operational or financial viability at the end of it.

[109]   As I have already said, however, the plaintiffs could readily accept this point. The plaintiffs could not guarantee that they would meet CAA’s requirements in each of the three areas CAA had outlined. But what the plaintiffs could reasonably expect was that the CAA had told them what the requirements were, and that if they met those requirements to CAA’s satisfaction, approval would be forthcoming. Mr Lanham’s email is consistent with that understanding.

[110]   The trials themselves were completed by August 2004. From the plaintiffs’ perspective, however, the delays in progressing its applications were placing it under financial pressure. On 26 July 2004 the formal petition for exemption from Rule 21.43 was filed. This was an application for registration in the Restricted category. In 2003 an application had been sent in relation to Rule 91.105(a), the restriction on carriage of persons or goods for hire or reward, in relation to the Special category.28 Soon after presenting the results of the trials and making the application Mr Ford began pressurising the Director to grant his applications. When this was not immediately forthcoming he also communicated with the Minister of Transport, and began media contact. He also sought the assistance of the New Zealand First Party. All of this provided the backdrop to the circumstances that presented themselves to the Director in the following months.

[111]   It is appropriate to record that the following year Mr Ford was charged with an offence of using the aircraft during the flight trials for “hire and reward” activities. Whilst the plaintiffs had been given approval to conduct the trials under the Special category, and the restriction on external loads had been lifted for that purpose, there was no exemption from prohibition against hire and reward. Mr Ford had arranged contracts to lift logs in association with the trials. The prosecution was unsuccessful, however, with the District Court concluding that the purpose of these activities was not “hire or reward” but testing the aircraft under the trials, which had been authorised.29 That approach was upheld by the High Court on appeal.30

28     It was technically only a draft when sent, but nothing turns on that.

29     Civil Aviation Authority v Heli Logging Ltd DC New Plymouth CRI-2005-043-2361, 12 April 2006 at [42] and [47].

30     Civil  Aviation  Authority  v  Heli  Logging   Ltd   HC   New  Plymouth   CRI-2005-043-2361,  19 September 2006 at [91]–[93].

CAA assessment

[112]   Following the trials there was a further meeting with CAA on 7 September 2004. Messrs Ford and Gordon were accompanied by Mr Gladdis from GKN and  Mr Lee, one of the test pilots. CAA were represented by Messrs Lanham, Fogden and Gill. Messrs Ford and Gordon both gave evidence that at this meeting there appeared to be a change of attitude by the CAA representatives and that they were now more negative towards the proposal. I accept that such an impression may have been given. As I explain below Messrs Gill and Fogden both had reservations, and Mr Lanham left the meeting early. Mr Gordon also referred to a passing comment that Mr Stephen Douglas of the CAA had made to him outside the meeting in which Mr Douglas indicated that he was not agreeable to the plaintiffs’ application, and that there was no precedent for granting it. This is also consistent with the evidence of a slightly earlier internal CAA meeting on 30 August involving Mr Jones, Mr Lanham, the chief legal counsel Ms MacIntosh and others where the applications were raised. Mr Jones is recorded as saying at that meeting that he was “not comfortable with the idea of an exemption given the history of the aircraft operating in New Zealand”.

[113]   I accept that at this point the plaintiffs became aware for the first time that there was a real prospect that their applications might be declined notwithstanding the success of the trials and the apparent CAA approval of the maintenance and operations procedures.

[114]   Mr Ford gave evidence of an exchange that he had with Mr Gill at the end of the meeting on 7 September. Mr Ford asked why CAA did not lift the restriction on external lifting to allow the plaintiffs to commence helilogging straight away. The reply was that to do so would be an offence as this would involve hire and reward activities. Mr Ford said he was shocked by the reply, and that this was the first time this issue was raised and that he would not have sought to meet the three criteria had he been told this. This is clearly not correct as the Director’s letter of 7 May 2003 had expressly made the point that the proposed activities were hire and reward activities. That was the very reason for an exemption petition in relation to the Special category.

[115]   Following the meeting, by letter dated 9 September Mr Ford wrote to the Associate Minister of Transport, the Hon Harry Duynhoven. Mr Ford indicated that the CAA had advised him that it could not grant the application, and he  asked for Mr Duynhoven’s assistance. From this point Mr Ford engaged in an active campaign involving politicians and the media directed to obtaining a positive decision from  Mr Jones.

[116]   Prior to receiving the formal advice on the application in September and October Mr Jones had had limited involvement in dealing with the plaintiffs’ proposals, however. The preceding year he had met with his advisers in April in connection with the request from Mr Gordon that the CAA provided an assurance in connection with the proposal, and this had led to the letter of 7 May 2003 provided by him in response. The applications were then raised with him again for the first time at the 30 August 2004 meeting.

[117]   It was not until 16 September 2004 that he directly became involved again in detail. On that day he met with Messrs Lanham, Fogden and Gill and Ms MacIntosh to discuss the applications. The Director’s affidavit in the 2004 proceedings records that he indicated at this meeting that he had safety concerns, including because of the poor safety record of ex-military helicopters.

Advice to the Director

[118]   Following evaluation of the material supplied to the CAA by the plaintiffs, formal advice was then provided to the Director in the form of memoranda from the relevant CAA staff. In essence that advice was that he should grant one or other of the applications.

[119]   In memoranda dated 21 September 2004 and 11 October 2004 Mr Gill, the team leader of the Aircraft Certification Unit advised that the Unit was satisfied with the level of airworthiness demonstrated, and he recommended approval in the Restricted category. In a report from Mr Fogden to Mr Lanham dated 11  October  Mr Fogden addressed the three areas under which the proposal was being assessed. In terms of airworthiness he confirmed that the Aircraft Certification Unit was “satisfied with the level of airworthiness demonstrated by the Wessex”. In terms of the

maintenance programme he advised that there were “no outstanding issues”, and in terms of the operations manual he advised that “Heli-logging Ltd has produced a manual over and above the [requirements]”.

[120]   By memorandum dated 11 October 2004 to Mr Jones, Mr Lanham then made the formal recommendations for a decision. He assessed the history of the applications, and the three areas under which they were to be assessed in light of those reports. He advised:

There are no aircraft certification, flight operations and/or maintenance concerns which would prevent or inhibit CAA approval of the Helilogging proposal.

The aircraft should be retained in the Special category, with the prohibition on external loads removed, with an Exemption granted from the prohibition on use for hire or reward operations …

[121]   He then outlined the conditions that he suggested should be granted on that exemption, one of which involved a review of the approval when the proposed amendments to the Rules then in train was completed.

[122]   On the basis of this advice I accept that the CAA had assessed the plaintiffs’ application in accordance with the three areas originally outlined to the plaintiffs in the February 2003 meeting, and had met what had been outlined to CAA’s satisfaction. On that basis the recommendation to Mr Jones was to approve the application.

[123]   The recommendations were not without complications, however. First, both Mr Gill and Mr Fogden explained when they gave evidence that their memoranda did not reflect their view that the application should be granted, but were confined to the more technical issues that they each had been asked to assess. I accept their evidence that they were not being asked for their opinion on whether granting these applications was a good idea. A reservation was expressly referred to in Mr Gill’s memorandum to the Director of 21 September 2004, however, where he stated:

In my personal view the CAA should never have started the process of allowing a non-certified aircraft to be used for commercial operations. However now the CAA has allowed the trials and investigations to go so far and the applicant has committed a substantial sum of money, it would be very difficult to refuse the application except on purely technical grounds.

[124]   I accept Mr Gill’s evidence that he did not think the granting of the applications was a good idea. Mr Fogden later recommended that the applications not be granted. By contrast both Messrs Lanham and Remacha were in favour.

[125]   Secondly there was a significant difference of view between Mr Lanham and Mr Gill in relation to the category that should be used to grant the application if it was to be granted. In the 21 September 2004 memorandum Mr Gill advised that it should be approved in the Restricted category. This was because he was of the view that allowing non-type certified aircraft to obtain approval for commercial operation in the Special category would create a precedent which would undermine the basis of approving aircraft operations within New Zealand. As he put in his memorandum in relation to the requirements of s 37:

In fact I find it difficult to see on what ground an exemption could be given, other than that the requirements were unreasonable. As stated above this would be calling into question the whole need for type certification. Any other grounds would effectively not be an exemption, but would be de facto rule- making.

[126]   He did not see that as being such difficulty with the Restricted category because it could be identified as arising from the particular circumstances relating to the Wessex which could be regarded as being a better standard aircraft than others that had obtained type certification (particularly the Iroquois aircraft).

50     Exchange rates converting the hours of use in military operations into cycles for each of the components were not readily available.

51     This letter, dated 3 March 2005 to Mr Gordon was not disclosed by the plaintiffs to the CAA at the time. An earlier letter from Rolls Royce to Mr Remacha of 20 April 2002 raised similar issues.

feature of the integrated safety system was absent, and a reasonable Director could conclude that s 37(2) was not satisfied.

(e)Whilst the plaintiffs had obtained a large number of spare parts, and many of them appear to have been properly certified in accordance with the requirements, not all of them were. Despite requests by the CAA, the plaintiffs had not confirmed the position in detail. Confirmation of a clear and unquestioned supply of duly certified spare parts could have been treated as a pre-requisite that had not been satisfied by the plaintiffs.

[278]   I am less convinced that other factors, at least by themselves, would have meant that a reasonable Director could have declined the application. For example, the requirement for a duly signed contract with GKN had a “catch 22” aspect, as the plaintiffs may not have been able to commit to signing up a contract without knowing that they were being granted the exemption application. That is also true with respect to other matters, such as the identity of the chief pilot. It seems to me that this kind of matter could have been appropriately addressed by the exemption application being granted on conditions — for example a condition that a contract between the plaintiffs and GKN, on terms and conditions agreeable to the Director, be entered before operations could start.

[279]   I also conclude, however, that a reasonable Director could have granted one or other exemption application. Mr Lanham advised Mr Jones that he could do so with the input from  Messrs  Gill  and  Fogden  in  2004.  A  former  Deputy  Director,  Mr Maxwell Stevens gave evidence that the exemption should have been granted, and Mr Remacha also gave evidence that he would have given a recommendation to approve it had he still been employed by CAA. In relation to the matters I have highlighted above, there were potential answers to these points that meant that a reasonable Director could have granted the application. In particular:

(a)The fact that the application involved departure from significant rules, and was potentially precedent setting would not, by itself, mean it could not be granted. Section 37 still applied in such circumstances. A

reasonable Director could also have concluded that it would be unfair to the plaintiffs not to allow the exemption after the encouragement the plaintiffs had received during 2003–2004 to progress the application in knowledge of these features. The Director could also have concluded that the exemption did not create a precedent given the very detailed requirements the plaintiffs had met, such as the flight trials with GKN support, and the fact that the CAA policy disclosed at the September 2002 AIA conference was that all new imports would need to be type certified.52

(b)Whilst the accident history of ex-military helicopters was very poor, and there were unresolved accidents involving the Wessex, the materials the plaintiffs had put together in terms of airworthiness, operational procedures, the maintenance programme, and Mr Barclay’s report more generally were regarded as very high quality. As Mr Gill advised, the Wessex was in a different league from other ex-military aircraft. Approving an operation with thorough materials of the kind provided could have allowed a reasonable Director to be satisfied that s 37(2)(b) was met — namely that the action taken was “as effective or more effective than actual compliance with the requirement”.

(c)Whilst the support of Rolls Royce, and their confirmation of the lifing of components would have been necessary, this could have been addressed by way of conditions requiring both the entry of a contract satisfactory to the Director, and that the lifing of components also be established to the Director’s satisfaction under such arrangements. Rolls Royce did not suggest that this was not possible. In addition lifing could have been achieved in the manner suggested by Mr Barclay and Mr Gordon — by more heavily discounting the remaining life of key components adopting a precautionary approach.

52 See [72]–[76] above. The Wessex was an exception as it had already been imported and certified for operation.

(d)The NAA matter could reasonably have been treated as not being a pre- requisite for the grant of approval. The requirement for such an Authority did not exist in the Special category, and the Director could reasonably conclude that the overall systems put in place by the plaintiffs, with the support of GKN and Rolls Royce, were sufficient in themselves to demonstrate an equivalent level of safety, and a greater level of safety than other type certified aircraft currently in operation in New Zealand.

(e)Whilst some of the plaintiffs’ spare parts were not certified, it is clear that a number were. An audit could have been required as a condition of approval. In any event as a certified operator the plaintiffs could only use certified spare parts, installed and maintained by a certified LAME, in accordance with the operational and maintenance programmes that had duly been signed off.

[280]   Accordingly I conclude both that a reasonable Director could have granted the application, and that a reasonable Director could also have declined it. These findings are not inconsistent. Section 37 is a power that requires the Director to exercise judgment, and then a discretion. Reasonable Directors could reach different conclusions. This is not only because of the discretionary nature of s 37(1), but also because different judgments could be formed by different persons when making the assessments required under s 37(2).

[281]   The main significance of this conclusion is its impact on the difficult question of causation and loss.

Causation and loss

[282]   The trial dealt with what was identified in my ruling separating liability from quantum as “regulatory causation”.53 What was alive for determination at this trial was what would have occurred from a regulatory perspective but for the alleged wrongdoing.

53     Helilogging Ltd v Civil Aviation Authority of New Zealand, above n 1.

[283]   There are complexities with the plaintiffs’ case in this respect. These complexities do not mean that the case will have failed on this basis, but there are difficult issues.

[284]   The plaintiffs did not advance their case on the basis that Mr Jones acted knowingly beyond his s 37 power, or recklessly indifferent to this. That approach became less clear in closing given Mr Dale’s argument that a reasonable Director would have been obliged to grant the exemption given the evidence at trial. To the extent this included an argument that Mr Jones knowingly/recklessly acted beyond his power by declining the application I reject the argument. The evidence does not support it. For example, the plaintiffs’ case is that the 9 November 2004 memorandum evidenced Mr Jones’ true thinking. But there is nothing in that memorandum suggesting that Mr Jones thought that he would be (or may be) acting beyond his powers in declining the application.

[285]   It was this feature of the plaintiffs’ case that led me to characterise it during the plaintiffs’ opening as a claim for procedural misfeasance.54 It was also this feature that led the plaintiffs to advance their case on a “loss of a chance” basis.

[286]   In advancing the case on a loss of a chance basis, the plaintiffs called very detailed evidence as to what would have occurred had the defendant’s alleged wrongdoing been discovered at the time. I received evidence from counsel who acted for the plaintiffs in 2004, Mr Castle, as to the judicial challenges he would have advised to be advanced if the 9 November 2004 memorandum had been revealed. I also heard evidence from the Rt Hon Winston Peters, the Deputy Prime Minister, as to the political avenues that would have been pursued to assist the plaintiffs in this event. Some of the evidence and argument pursued by the plaintiffs on this counterfactual approach also became complicated. For example it was argued that not only would a judicial review challenge have been successful in 2004 or 2005 if the true position had been known, but that Mr Jones would have been disqualified from reconsidering the plaintiffs’ applications because of the discovery that he had not been acting in good faith.

54     See paras [17] and [178] above.

[287]   Much of this evidence seems to me to be directed to the wrong question. In assessing causation for the purpose of assessing loss the relevant inquiry is what would have occurred if there had been no wrongdoing, rather than what would have occurred if the wrongdoing had been exposed. In addition it seems to me the inquiry should be made by reference to whether a reasonable Director would have (or could have) granted the application but for this wrongdoing, rather than what Mr Jones himself would have done. I do not think it would have been appropriate to include Mr Jones, and the views he personally had, within the counterfactual. The wrongdoer’s personal views are properly excluded. Rather the question should be considered objectively – what a reasonable Director would likely have done.

[288]   A related question concerns the appropriate method for quantifying or assessing the plaintiffs’ loss. There appear to be three possible approaches:

(a)The first approach is to consider whether the plaintiffs could establish that it was more likely than not that the s 37 exemption would have been granted, with the full loss to be awarded on that basis only if that was established (the “all or nothing” approach).

(b)An alternative is to conclude that when a discretionary power could have been exercised either way the indeterminate feature relevant to assessing damages on a loss of a chance basis exists (the “lost chance” approach).55

(c)A further alternative would have been to identify the loss more directly caused by the wrongdoing. That would be the loss incurred by the plaintiffs arising from being required to undertake the further procedural steps from November 2004 following the Director’s improper imposition of them, or his misrepresentations about the true position. Those could be said to have been limited to the additional costs or losses incurred by the plaintiffs over this period of time, rather

55 See Strack v Grey [2019] NZCA 432 at [46]–[53]; and Forest Holdings Ltd v Mangatu Blocks Inc [2019] NZHC 2258. See also Lock v Australian Securities and Investments Commission [2016] FCA 31, (2016) 334 ALR 250 at [138] per Gleeson J.

than a loss assessed on the basis of the chance of the exemption being granted (a “wasted expenditure” approach).

[289]   This last alternative also arises in relation to the tort of deceit. The first alleged deceit would have been the representation by the Director in November/December 2004 that he retained an open mind. But the only loss directly caused by any reliance on this representation may well have been limited to the further costs incurred by the plaintiffs in seeking to satisfy the Director on the issues he had outlined.

[290]   Equally any misrepresentation in August 2005 that Mr Lewis’ views, (and indeed the Director’s decision) were the true reasons why the plaintiffs had been declined could only be said to have caused loss if steps were taken in reliance as a consequence. That is also so in relation to any misfeasance related to the integrity of Mr Lewis’ views. It could be argued that the plaintiffs did not challenge the decisions by way of judicial review because of a belief in those matters. But unless the plaintiffs could demonstrate on the balance of probabilities that they could have overturned the decision through judicial review and that the application would have been granted — conclusions I do not necessarily accept for the reasons I address further below — then no loss of that kind would have been caused.

Would judicial review have been successful?

[291]   The complexities in relation to causation and loss are reflected in the arguments directed to the potential judicial review challenges to Mr Jones’ decisions. For the reasons already outlined, had the plaintiffs succeeded in establishing liability for misfeasance it would not have been necessary for the plaintiffs to have also demonstrated that they could have overturned Mr Jones’ decisions by way of judicial review. The question would more simply have been what would have happened with their applications if there had been no wrongdoing. It is potentially more relevant if the claim in deceit had succeeded, although if there had been any such deceit the decisions themselves could have been overturned for fraud. In any event, for completeness, I address some of the matters the plaintiffs raised on this issue.

[292]   Had Mr Jones declined the exemption application on the basis set out in his   9 November 2004 memorandum (or revealed he had so declined it) I accept that the

plaintiffs would likely have succeeded with a claim for judicial review on two related grounds:

(a)First on the basis that the decision was made in breach of the plaintiffs’ legitimate expectations arising from the earlier express and implied representations earlier made in 2003–2004.56 Given the statutory context of this decision, however, there is no prospect of the plaintiffs establishing a legitimate expectation of a substantive outcome.57 All that the plaintiffs could have obtained was an order that Mr Jones reconsider the application after giving the plaintiffs an opportunity to be heard before the earlier representations were departed from. Given that was essentially what the plaintiffs were given in the seven-stage process, I conclude that the plaintiffs would have been in materially the same position.

(b)Second the plaintiffs could have succeeded on the basis that the policy concerning ex-military helicopters announced at the AIA conference in September 2002 was not considered and/or applied. That included the policy that all new imports would need to be type certified, which would have been particularly relevant to any precedent considerations. This involved a failure to consider a mandatory relevant consideration. Again, however, all that the plaintiffs could have obtained was an order requiring reconsideration by Mr Jones, and the plaintiffs would have been in materially the same position.

[293]   I do not accept that any other potential grounds of judicial review at that time would have succeeded. I do not accept the plaintiffs’ argument that there was an irrelevant consideration — namely that a precedent would be set which would encourage the incumbents to lower existing standards. That seems to me to be a relevant consideration under s 37.

56     See Comptroller of Customs v Terminals (NZ) Ltd [2012] NZCA 598, [2014] 2 NZLR 137.

57     See Green v Racing Integrity Unit Ltd [2014] NZCA 133, [2014] NZAR 623 at [40].

[294]   As I have indicated, however, if liability was established for conduct in November/December 2004 it may not be necessary to ask what Mr Jones would have done on a Court ordered reconsideration. In those circumstances the relevant inquiry would more likely have been what a reasonable Director would have done. On that approach a different outcome was possible as a reasonable Director could have granted one of the applications for the reasons I have outlined.

[295]   I also accept the plaintiffs could have successfully challenged Mr Jones’ 2005 decision on two grounds:

(a)First  on  the  basis  of  procedural  unfairness.  Mr Jones  relied  on Mr Lewis’ report without disclosing and allowing submissions on it.58 As I have held, that was inconsistent with the seven-stage process. Such a judicial review would likely have identified the significant issues arising from Mr Lewis’ advice. But again that could only have resulted in an order directing Mr Jones to reconsider his decision in light of the submissions made by the plaintiffs on Mr Lewis’ advice. I also conclude that Mr Jones would have declined the application irrespective of Mr Lewis’ advice. So the plaintiffs would have ultimately been placed in the same position.

(b)Second, whilst Mr Fodgen’s advice to Mr Jones referred to the policy set out to the September 2002 AIA conference, it did not refer to the part of the policy providing that all new imports of ex-military aircraft would need to be type certified. That part of the policy might have answered the concern that granting the application would create a precedent.59 This again involved a failure to consider a mandatory relevant consideration. But this was only one consideration and for the reasons already addressed I conclude that the ultimate outcome would have been no different.

58 See [228] above.

59     The Westland Wessex was an exception because it had already been imported and certified for operation in New Zealand.

[296]   I do not consider that there were grounds of judicial review that would have succeeded at this time.60 Again, however, the position would be different if liability were established for the conduct through to August/December 2005, and the relevant inquiry is what a reasonable Director would have done. On that basis one of the applications could have been granted.

[297]   I accordingly conclude that the decision made in August 2005 was vulnerable to successful challenge by way of judicial review. If a decision had earlier been made by Mr Jones on 9 November it would also have been vulnerable to such a challenge. The ultimate decision by Mr Jones would still likely to have been the same in either case if he had been directed to reconsider it, but a reasonable Director could have reached a different decision.

[298]   Apart from identifying these complexities, and difficulties with the plaintiffs’ case on the questions of causation and loss, I take the issues no further. It would be difficult to express the chances of success if the applications were considered by a reasonable Director in percentage terms. That is particularly so when what is involved is a discretionary power, and alternative approaches are reasonably open. It is ultimately artificial to attempt to reach such conclusions without findings of fact which establish the torts of misfeasance or deceit that would allow a clearer analysis of causation, and the loss flowing from those findings.

Mr Lewis and vicarious liability

[299]   The plaintiffs advance their case on the basis the defendant was vicariously liable for Mr Lewis’ conduct. There are difficulties with this approach even if I had found that Mr Lewis acted dishonestly.

[300]   First, in relation to misfeasance, I do not accept that Mr Lewis could himself have been liable for this tort. That is because he was not exercising a public office. Rather he was acting as a private consultant providing his opinion to the Director of Civil Aviation within his area of expertise. In Commissioner of Inland Revenue v

60     The claim for breach of legitimate expectation would not have been available because the plaintiffs were given the right to be heard in the seven-stage process.

Chesterfields Preschools Ltd the Court of Appeal addressed whether the tort of misfeasance in a public office could be alleged against a lawyer acting for the Commissioner of Inland Revenue.61 The Court adopted the approach of the New South Wales Court of Appeal in Leerdam v Noori,62 and held that the legal practitioner was acting in a private capacity and did not thereby hold a public office or exercise any statutory power.63 That reasoning applies here, and for that reason I conclude that Mr Lewis was not exercising a public office, and would not have been liable for misfeasance.

[301]   In relation to deceit there needs to be a representation by the defendant intending that the plaintiff rely on it, and that the plaintiff does in fact rely on it.64 Here Mr Lewis’ advice was given to the CAA, not to the plaintiffs. The plaintiffs respond to this point by arguing that Mr Lewis’ advice was subsequently given to the plaintiffs, but that argument seems to me to be artificial. So Mr Lewis would not have been liable in deceit. I accept that Mr Lewis’ subsequent email of 14 December 2005 in which he said his views were based on 40 year old fact was a representation made to the plaintiffs which might have formed the basis of liability if it had been false and the plaintiffs relied upon it.

[302]   In closing I put to Mr Taylor that it seemed to me that when a private individual dishonestly induced a public body to make an adverse decision against a prospective plaintiff tortious liability should arise. I drew an analogy with private individuals inducing prosecutions where such liability can arise.65 Mr Taylor’s answer to this point was to say that such liability could exist for the tort of injurious falsehood.66 I accept that that is a potential answer to any suggested gap.67

61     Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA 53, [2013] 2 NZLR 679.

62     Leerdam v Noori [2009] NSWCA 90, (2009) 255 ALR 553.

63     Commissioner of Inland Revenue v Chesterfields Preschools Ltd, above n 61, at [77]–[82].

64 See [19] above.

65     See, for example, Commercial Union Assurance Co of New Zealand Ltd v Lamont [1989] 3 NZLR 187 (CA).

66     See Stephen Todd (ed) Todd on Torts (8th ed, Thomson Reuters, Wellington, 2019) at [15.3].

67     If the plaintiffs had established the elements of injurious falsehood, but not deceit, I would have expected an application to amend the pleadings.

[303]   In any event, even if Mr Lewis did commit a tort, I do not accept that the defendant would have been vicariously liable for it. I accept the defendant could become liable if it, or one of its officers, participated in the tortious wrongdoing and become principally liable. But if Mr Jones and Mr Fogden were unaware of dishonesty by Mr Lewis, I do not accept that the defendant would have been liable for Mr Lewis’ tortious actions on vicarious liability principles. In advancing their case for vicarious liability the plaintiffs relied on cases where a person is acting as an agent for the principal, including Dollars and Sense Finance Ltd v Nathan68 and FM Custodians Ltd v R.69 But Mr Lewis was not acting as the agent of the CAA. He was asked for his advice as an independent expert. I accept the defendant’s general proposition that there is no vicarious liability for the actions of independent contractors in the absence of an agency relationship.70

[304]   Finally on the question of vicarious liability, I record that the defendant argued that if Messrs Jones or Fogden had acted dishonestly the defendant may not be vicariously liable on the basis that if they did so they were acting outside the scope of their employment.71 That is a difficult point, and on the face of it not a particularly attractive one for the defendant to rely upon. But in the absence of factual finding relevant to such an assessment I do no more than note the point.

Limitation

[305]   These proceedings were commenced in 2014 more than six years after the causes of action arose.

[306]   To address this point the plaintiffs relied on s 28 of the Limitation Act 1950 contending that the limitation period was postponed because a cause of action for fraud was not known or able to be discovered with reasonable diligence. The relevant test for that inquiry is set out by the Supreme Court in Murray v Morel & Co Ltd,72 and the Court of Appeal in Amaltal Corporation Ltd v Maruha Corporation.73

68     Dollars & Sense Finance Ltd v Nathan [2008] NZSC 20, [2008] 2 NZLR 557.

69     FM Custodians Ltd v R [2019] NZHC 1128.

70     See Cashfield Houses Ltd v David & Heather Sinclair Ltd [1995] 1 NZLR 452 (HC).

71     See Stephen Todd, above n 66, at [22.5.04].

72     Murray v Morel & Co Ltd [2007] NZSC 27, [2007] 3 NZLR 721.

73     Amaltal Corporation Ltd v Maruha Corp, above n 9, at [150]–[161].

[307]   Given that I have concluded that there was no fraud, then there is no relevant inquiry to make under s 28. I make the somewhat obvious point that the plaintiffs neither discovered, nor were able to discover any fraudulent conduct given that none existed. Neither was there anything on the face of the events at the time that would have put the plaintiffs on notice of fraud. But any further analysis on this question becomes artificial given my findings on the facts.

CONCLUSION

[308]For the above reasons the plaintiffs’ claims fail.

[309]   I do not accept that the plaintiffs have established any relevant dishonesty, or conduct in bad faith. In particular they have not established that Mr Jones acted knowingly beyond his functions or powers, or recklessly indifferent to this, or that Mr Fogden and/or Mr Lewis acted such that the tort of misfeasance could be established. Furthermore there was no untrue representation by any of them that could found a claim in deceit.

[310]   I also conclude that there may have been difficulties in upholding the plaintiffs’ claimed loss if misfeasance or deceit as alleged had been established. This is because of the point initially accepted by the plaintiffs in opening, and then found by me when that concession was withdrawn, that the ultimate decision made by the Director not to grant the exemption applications was open to a reasonable Director. I also conclude that a reasonable Director could have granted one of the exemption applications, and it may be that damages could still be awarded based on the application being granted, including on a loss of a chance basis. An alternative would be to allow only the additional costs incurred by the plaintiffs from November 2004 when the alleged torts were committed. In the absence of factual findings in relation to misfeasance or deceit, it is not realistic to take that analysis any further.

[311]   I also find that there would have been no basis to find the defendant was vicariously liable for any tort committed by Mr Lewis. Otherwise I do not reach conclusions of the issues that were raised during the proceedings.

[312]   I generally accept that the plaintiffs were unfairly treated. The plaintiffs committed substantial resources to the project on an understanding of the requirements outlined to them by CAA from early 2003. By the time CAA advised that the requirements were actually more extensive the plaintiffs were financially committed. Declining the applications ultimately led to the first plaintiff’s demise. The treatment of the plaintiffs was far from ideal. But that does not mean the defendant is liable in tort.

[313]   The plaintiffs' have advanced a comprehensive case. A large number of witnesses were called to address wide ranging factual issues, and a number matters of expert evidence. They key questions, however, centre on the honesty of the decision- makers at the time — namely Mr Jones and Mr Fogden, and those advising them — Mr Lewis and (as it transpired as the evidence emerged) Ms MacIntosh and Mr Gill. I conclude that all acted honestly.

[314]   The plaintiffs’ claims are dismissed. If the parties are unable to agree upon costs I invite memoranda. I set no precise timetable for doing so, but any claim for costs that is filed and served should be responded to by a memorandum filed and served within 20 working days.

Cooke J

Solicitors:

Neilsons Lawyers Ltd, Auckland for plaintiffs Darroch Forrest Lawyers, Wellington for defendant