HELILOGGING V CIVIL AVIATION AUTHORITY [2021] NZCA 21 [25 February 2021]

IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA CA45/2020 [2021] NZCA 21 BETWEEN HELILOGGING LIMITED (IN RECEIVERSHIP AND LIQUIDATION) First Appellant AND MARK WAYNE FORD AS TRUSTEE OF THE WESSEX TRUST Second Appellant AND CIVIL AVIATION AUTHORITY OF NEW ZEALAND Respondent Hearing: 21–23 September 2020 Further submissions: 30 September 2020 Court: Miller, Gilbert and Goddard JJ Counsel: P J Dale QC and A J Steel for First and Second Appellants L J Taylor QC, G M Richards, S F Lomaloma and A B Darroch for Respondent Judgment: 25 February 2021 at 12 pm JUDGMENT OF THE COURT A The appeal is dismissed. B The appellants are to pay costs to the respondent for a complex appeal on a band B basis and usual disbursements. We certify for second counsel. ____________________________________________________________________ REASONS OF THE COURT (Given by Gilbert J) HELILOGGING v CIVIL AVIATION AUTHORITY [2021] NZCA 21 [25 February 2021] Table of contents Introduction [1] The appeal [7] Notice by CAA to support the judgment on other grounds [9] Regulatory framework [10] Chronology [18] Westland Wessex series of helicopters [22] Fatal accident in New Zealand involving a Westland Wessex Mk 5 [25] CAA review of safety issues concerning ex-military helicopters [27] Helilogging purchases two Westland Wessex Mk 2 helicopters [37] Steps by Helilogging prior to filing exemption petition [40] Petition for exemption [62] 9 November 2004 memorandum [75] Judicial review proceedings [83] Implementation of seven-stage process Step 1 — briefing from technical advisers [88] Step 2 — request for further information [90] Step 3 — updated advice from technical advisers [103] Step 4 — consideration of advice and preliminary decision [108] Step 5 — preliminary decision provided to Helilogging [109] Step 6 — consideration of Helilogging’s comments [110] Step 7 — final decision [125] 2005–2014 [135] The pleaded claims Deceit [160] The CAA [161] Mr Lewis [165] Mr Fogden [166] Misfeasance in public office [167] High Court judgment [171] Grounds of appeal [174] Ground 1 — 1999 Lewis report [177] Ground 2 — recklessness in respect of the 2005 Lewis letter [205] Ground 3 — the vibration flight [218] Ground 4 — safety as the primary ground for refusal [233] Ground 5 — the effect of the director’s conduct [237] Ground 6 — findings contrary to the weight of evidence [239] Ground 7 — pleadings [246] Ground 8 — counsel’s concession [249] Ground 9 — alteration to Mr Lewis’ 23 July 2005 letter [252] Ground 10 — the evidence of Irene King [258] Ground 11 — whether the decision was reasonably open to the director [266] Summary [269] Result [277] Introduction [1] In July 2004, the appellants (collectively referred to as Helilogging) petitioned the director of Civil Aviation (the director) for an exemption from the Civil Aviation Rules to enable them to use an ex-military Westland Wessex Mk 2 type helicopter for heli-logging operations in remote areas of the central North Island. The Westland Wessex series of helicopters were manufactured in the United Kingdom between 1958 and 1970 and were designed for use by the British armed forces. In a written decision issued on 19 August 2005, the then director, John Jones, declined to grant the necessary exemption. [2] Nine years later, in September 2014, Helilogging commenced the present proceedings against the Civil Aviation Authority of New Zealand (the CAA) claiming damages for alleged deceit and misfeasance in public office. In its sixth amended statement of claim Helilogging claimed 10 years’ lost profits of approximately $56 million or, alternatively, $5.2 million for wasted expenditure (including $2.86 million for the purchase in December 2002 of two Wessex Mk 2 helicopters and various spare parts). Unspecified exemplary or punitive damages were also claimed. In addition, the second appellant, Mr Ford sought $100,000 in general damages for stress, anxiety and inconvenience caused to him by “the CAA’s wrongful declinature and/or fraud by concealment”. [3] In July 2019, the High Court directed a split trial on liability due to delays by Helilogging in formulating its damages claim.1 The liability trial was also to deal with what the regulatory outcome would have been, or could have been, but for the wrongdoing.2 Following a trial of some seven weeks duration, the claims were dismissed by Cooke J in a comprehensive judgment delivered on 13 December 2019.3 As to the misfeasance claim, the Judge concluded that “at no stage did Mr Jones or other officials act knowingly beyond their functions or powers, or recklessly indifferent to this”.4 Indeed, the Judge observed that Helilogging did not advance their 1 Helilogging Ltd (in rec and liq) v Civil Aviation Authority of New Zealand [2019] NZHC 1641. 2 At [32]. 3 Helilogging Ltd (in rec and liq) v Civil Aviation Authority of New Zealand [2019] NZHC 3305 [High Court judgment]. 4 At [271]. case on the basis that the director had done so.5 In terms of the deceit claim, the Judge found that “at no point did [the director or other CAA officials] make untrue representations to [Helilogging]”.6 [4] While strictly not necessary in view of these key factual findings, the Judge identified difficulties with Helilogging’s case on causation and loss.7 In particular, the Judge considered much of Helilogging’s evidence had been directed to the wrong question — what would have occurred if the alleged wrongdoing had been exposed? Instead, the relevant enquiry should have been to examine what would have occurred if there had been no wrongdoing. The Judge said this should be considered with reference to the objective test of whether a reasonable director would have granted the exemption but for the wrongdoing.8 A related issue concerned the appropriate methodology for assessing loss. The Judge identified three possible approaches. The first was whether Helilogging could prove on the balance of probabilities that the exemption would have been granted (an “all or nothing” approach). The second was to assess the loss on a loss of a chance basis. The third possibility was to assess the loss “more directly caused by the wrongdoing”.9 In respect of the deceit claim, the loss would be confined to that directly caused by any reliance on the director’s allegedly fraudulent representations.10 [5] The Judge also commented briefly on the issues of vicarious liability and limitation. The Judge did not consider the CAA could be vicariously liable for any wrongdoing on the part of Charles (“Bernie”) Lewis, an independent aviation consultant whose advice, which was heavily criticised by Helilogging, was relied on by the director to support one of his reasons for declining the exemption. The Judge pointed out that the authorities relied on by Helilogging concerned the vicarious liability of a principal for the conduct of a person acting as its agent. But Mr Lewis was not acting as an agent of the CAA, rather as an independent expert.11 5 At [284]. 6 At [271]. 7 At [282]. 8 At [287]. 9 At [288]. 10 At [289]. 11 At [303]. [6] Finally, the Judge noted that the proceedings were commenced well outside the normal six-year limitation period and the claims were therefore time-barred unless the alleged fraud was not reasonably discoverable more than six years before the proceedings were issued. The Judge went no further, considering it would be artificial to do so given his finding there was no fraud and therefore nothing to discover.12 The appeal [7] Helilogging now appeals. There is no complaint that the Judge made any error of law. Rather, Helilogging seeks to persuade this Court to interfere with the Judge’s key factual findings on the liability issues. In their agreed statement of issues, counsel formulate the principal questions on appeal in very broad terms, namely whether the High Court was correct to find that Helilogging had not proved: (a) Fraudulent acts or omissions sufficient to establish misfeasance by the director and/or John Fogden (Mr Fogden was employed by the CAA as the manager of rotary wing and agricultural operations. He provided a detailed report to the director dated 9 August 2005 recommending that Helilogging’s application be declined). (b) Fraudulent misrepresentations and reliance on such representations sufficient to establish the tort of deceit. [8] The appeal grounds are mostly directed to these factual issues. Helilogging abandoned a further ground, ground 12, which challenged the Judge’s finding that the CAA was not vicariously liable for any dishonesty on the part of Mr Lewis. This was an appropriate concession. The other appeal grounds are directed to the issues of causation and loss. In particular, Helilogging contends the Judge erred by focusing on whether a reasonable director could have granted the exemption. This is said to be an error because Helilogging’s case was that they were misled in the approval process by material information being withheld. Helilogging claims that if this information had been disclosed, this would have resulted in: 12 At [307]. 25.1 An application for judicial review, with good prospects for success. 25.2 The possibility that the Director would be removed from the decision- making process, both because of the withholding of material information and the political and public pressure which the Director was facing at the time, which would have required then an assessment on a loss of a chance basis of the appellants’ prospects of succeeding. Notice by CAA to support the judgment on other grounds [9] The CAA has given notice to support the judgment on four further grounds: (a) Contrary to the Judge’s finding, it is more likely than not that a director of the CAA, acting reasonably, would not have granted the exemptions sought by Helilogging.

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