Re Amann Aviation Pty Limited and Commonwealth of Australia v Commonwealth of Australia and Amann Aviation PtyLimited [1988] FCA 24 (11 February 1988)

FEDERAL COURT OF AUSTRALIA

Re: AMANN AVIATION PTY. LIMITED and COMMONWEALTH OF AUSTRALIA
And: COMMONWEALTH OF AUSTRALIA and AMANN AVIATION PTY.LIMITED
No. G667 of 1987
Contract - Practice

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Beaumont J.(1)

CATCHWORDS

Contract - Agreement with Commonwealth to provide coastal surveillance services - whether the contract contained an implied obligation on the part of the Commonwealth to perform its contractual undertaking in good faith - whether implied obligation to co-operate.

Practice - Pleading - application for leave to amend points of claim - whether pleading discloses an arguable cause of action.

HEARING

SYDNEY
11:2:1988

Counsel and Solicitors for Amann Aviation Pty. Ltd.: L.C. Gruzman Q.C.,
D.A. Cowdroy and A.M. Gruzman instructed by Owen D. Hodge & Son.

Counsel and Solicitors for the Commonwealth of Australia: D. Grieve Q.C., P. Comans instructed by Australian Government Solicitor

ORDER

In respect of sub-paras. (vi) and (x) of para. 17 of the further amended points of claim and in respect of sub-para. (xii) of para.19, leave to amend is granted.

In respect of sub-paras. (xiv) of para.17 and (xv) of para.19, leave to amend is refused with liberty to re-plead.

In respect of sub-paras. (i), (ii), (iii), (iv), (v), (vii), (viii), (ix), (xi), (xii), (xiii) and (xv) of para. 17, para. 18 and sub-paras. (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x), (xi) (xiii) and (xiv) of para.19, leave to amend is refused.

The applicant pay three-quarter's of the respondent's costs of the application for leave to amend.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

DECISION

The applicant has sued the Commonwealth claiming damages (i) for breach of a contract to carry out certain coastal surveillance services and (ii) in tort for negligent misstatement. The applicant has filed points of claim and now seeks to amend its pleading. The Commonwealth opposes the grant of leave to amend in respect of three paragraphs of the applicant's further amended points of claim (filed 19 January 1988) - paras. 17, 18 and 19. The Commonwealth's opposition to these amendments is grounded upon its claim that they are frivolous and vexatious and disclose no reasonable cause of action.

2. To place the contentious paragraphs in context, it is necessary to refer to the other allegations in the points of claim as follows:

(a) By letter dated 12 March 1987, the Commonwealth
accepted a tender submitted by the applicant dated 25
November 1986 in compliance with a "Specification for
Charter of Aircraft for Coastal Surveillance
services" issued by the Commonwealth (para.2).

(b) Pursuant to the provisions of the contract, the
applicant was required to carry out surveillance
services on and from 12 September 1987 and, for this
purpose, to have aircraft and personnel certified for
flight by the Commonwealth (para.3).

(c) By representations made by the Commonwealth to the
applicant after the award of the contract and prior
to 1 September 1987, the Commonwealth (i) agreed that
in certain respects absolute fulfillment of the
applicant's contractual obligations was not required
for the commencement of the contract and the
applicant relied upon such representations and (ii)
represented that in the event that the applicant was
not in a position to comply totally with the terms of
the written contract, the "penalty provisions" of the
contract (cl. 2.23) might apply but not termination
(para.4).

(d) Pursuant to the contract, the applicant did a number
of things and incurred substantial expenditure
(paras. 5, 6).

(e) On or by 12 September 1987, the Commonwealth had
given approval for the applicant's aircraft to
commence flying operations (para. 7).

(f) On 12 September 1987 the aircraft commenced
operations with the approval of the Commonwealth
following inspections from 8.OO a.m. on that day
(para. 8).

(g) Because of accidental or other circumstances beyond
the control of the applicant, certain of the
operations carried out on 12 September were not
performed in the manner stipulated by the contract
(para.9).

(h) The Commonwealth is accordingly liable to the
applicant in the sum of $13,946.58 for services
performed or scheduled for 12 September (para.10).

(i) The services performed on 12 September complied with
the applicant's contractual obligations because -

(i) they constituted substantial performance; or

(ii) they complied with the contract as varied by
the oral representations described in para.4;
or

(iii) any deficiencies in performance were
attributable to circumstances beyond the
control of the applicant (para.11).

(j) By cl.2.24 of the contract, it was provided that
whenever the applicant fails to carry out the
contract, the Secretary of the Commonwealth
Department may, by notice in writing, require the
applicant to show cause in writing why the contract
should not be cancelled. If the applicant fails to
show cause in writing, the Secretary shall be
entitled to treat the contract as cancelled
(para.12).

(k) The Commonwealth failed to give any notice to show
cause prior to its purported termination of the
contract (para.13).

(l) If such a notice had been given, the applicant would
have satisfied the Commonwealth that the contract
should not be cancelled (para.14).

(m) In breach of the contract, the Commonwealth purported
to terminate it on 12 September (para.15).

(n) It was a term of the contract that the parties would
do all acts necessary to bring about its performance
(para.16).

3. The paragraphs now in contention (paras.17, 18 and 19) follow. They will be referred to shortly. It is convenient first to summarise the remaining allegations in the further amended points of claim as follows:

(o) Pursuant to its contractual obligations, the
applicant continued its coastal surveillance on 13,
14 and 15 September with the knowledge of the
Commonwealth (para.20).

(p) By 15 September, the Commonwealth had overtly
demonstrated its determination not to be bound by the
contract notwithstanding that the Commonwealth had
failed to give any notice to show cause and had
failed to give any notice of termination of the
contract (para.21).

(q) In mitigation of any further loss, the applicant, by
letter to the Commonwealth dated 15 September,
rescinded the contract (para.22).

(r) The relationship between the parties gave rise to a
duty of care on the part of the Commonwealth to give
accurate information to the applicant (para.24).

(s) In breach of that duty, the Commonwealth gave
information to the applicant which was erroneous in a
number of respects (para.25).

4. The applicant claims declaratory relief and the said sum of $13,946.58 together with an order for repayment of the sum of $113,000.00 being the amount of the applicant's performance guarantee purportedly forfeited by the Commonwealth. The applicant also claims substantial general damages.

5. The Commonwealth concedes the making of the contract sued upon but disputes any breach on its part. Its case is that the applicant breached several essential terms of the contract, thus entitling the Commonwealth to terminate it.

6. As has been said, the matter now before the Court is an application by the applicant for leave to amend its points of claim; and this is opposed by the Commonwealth in part - as to paras. 17, 18 and 19 - on the ground that, because these allegations do not disclose any reasonable cause of action, it would be futile to permit these amendments.

7. The argument in the present application has proceeded on the conventional footing, first, that the Court should, for present purposes, assume that the facts alleged in the pleading can be established; and secondly, that the relevant test is whether it has been demonstrated that there is a "real question" that a cause of action of the kind alleged exists (see General Steel Industries Inc. v. Commissioner for Railways (N.S.W.) [1964] HCA 69; (1964) 112 CLR 125 at pp 129-130). To adopt the language of Mason J. (as he then was) in McCauley v. Hamilton Island Enterprises Pty. Ltd. [1986] HCA 86; (1986) 69 ALR 270 at p 274, the Court must be "satisfied that there is no possible foundation in law for the cause of action which the (applicant) seeks to litigate". See also Mutual Life & Citizens' Assurance Co. Ltd. v. Evatt (1970) 122 CLR 628 at p 631.

8. It will be necessary to deal separately with each sub-paragraph of paras. 17, 18 and 19. It will be remembered that in para.16 the applicant alleged that it was a term of the contract that the parties would do all acts necessary to bring about its performance. Para.17 then proceeds:

'17. In breach of the aforesaid term, the Respondent
failed to do all acts necessary to bring about
the contractual result.

Particulars

(i) The Respondent actively encouraged a
third party, namely Chatwin Pty Limited
("Chatwin") to compete for the Coastwatch
Contract despite its award to the
Applicant and before the Applicant had
been given the opportunity to fulfil the
Coastwatch Contract. Chatwin traded as
"Sky West Aviation".'

9. It is common ground that the contract imposed an implied obligation on each party "to do all that was reasonably necessary to secure performance of the contract" (see Secured Income Real Estate (Australia) Ltd. v. St. Martins Investments Pty. Ltd. [1979] HCA 51; (1979) 144 CLR 596 per Mason J. at p 607). This seems to be what was intended to be pleaded by the opening sentence of para.17. But sub-para.(i) of para.17 appears to raise a different issue. It alleges that the Commonwealth urged a third party to seek the "Coastwatch" contract.

10. The applicant does not here claim that the third party induced the Commonwealth to breach its contract with the applicant; there is no such claim, in tort, against the third party or against the Commonwealth. The claim made in this sub-paragraph is based upon the implied obligation of co-operation.

11. It may be that conduct of the kind alleged in this sub-paragraph could explain why the Commonwealth may have refused to co-operate in the performance of the contract. But to seek out the motives of the Commonwealth in so conducting itself is an impermissible and irrelevant inquiry. What is relevant is the conduct of the Commonwealth, looked at objectively. Its reasons for doing what is alleged against it are of no legal consequence. The only question is whether the Commonwealth did, in fact, co-operate to the degree required. If it did, the applicant cannot complain. If the Commonwealth did not do so, a number of legal consequences might follow. But, in any event, the Commonwealth's motives are irrelevant.

12. Put differently, in the absence of a fiduciary obligation (and none is suggested here), the rights given by the contract to the Commonwealth may be exercised by it in accordance with the terms of the contract, properly construed, irrespective of the reasons for exercising or not exercising those rights. The powers conferred upon the Commonwealth by the contract are not fiduciary powers; they are beneficial contractual rights. The only question is whether the conditions giving rise to these rights have been fulfilled (see Gordon v. Australian and New Zealand Theatres Limited (1940) 40 SR 512 per Jordan C.J. at p 517). The Commonwealth need not show that it was actuated by a legitimate purpose (see Champtaloup v. Thomas (1976) 2 NSWLR 264 per Glass J.A. at p 271; Hospital Products Limited v. United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 per Gibbs C.J. at pp 64-7; per Mason J. at pp 95-6; per Deane J. at pp 121-2; per Dawson J. at pp.137-140).

13. On behalf of the applicant, it was argued that "in every contract there is an implied covenant that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract, which means that in every contract there exists an implied covenant of good faith and fair dealing" (see Kirke La Shelle Co. v. Paul Armstrong Co. 263 N.Y. 79; 188 NE 163 (1933).

14. According to Professor H.K. Luecke ("Good Faith and Contractual Performance", Essays on Contract (Ed. by Professor P.D. Finn, 1986; at p.155), the majority of American jurisdictions now recognize a common law duty to perform contractual undertakings in good faith. But, as Professor Luecke acknowledges, this development has not become part of the Anglo-Australian law of contract (see at pp.173-4). As Wills J. said in Allen v. Flood (1898) AC 1 at p 46:

"...any right given by contract may be exercised as
against the giver by the person to whom it is
granted, no matter how wicked, cruel, or mean the
motive may be which determines the enforcement of
the right."

15. According to Lord Reid (White and Carter (Councils) Ltd. v. McGregor [1961] UKHL 5; (1962) AC 413 at p 430):

"It might be, but it never has been, the law that a
person is only entitled to enforce his contractual
rights in a reasonable way, and that a court will
not support an attempt to enforce them in an
unreasonable way. One reason why that is not the
law is, no doubt, because it was thought that it
would create too much uncertainty to require the
court to decide whether it is reasonable or
equitable to allow a party to enforce his full
rights under a contract."

16. Here the question which arises is concerned with performance of the contract. Different considerations may apply where the question is whether a condition precedent (or subsequent) to obligations arising under a contract has been fulfilled. In the case of an agreement for the sale of land made "subject to finance", it may be that, in considering the terms of finance that is offered, the purchaser is bound to act both reasonably and honestly (see Meehan v. Jones [1982] HCA 52; (1982) 149 CLR 571). In issue there was the question whether a contract had come into existence. Here the question is different, namely, whether it was open to the Commonwealth to exercise its contractual right to terminate its contract with the applicant notwithstanding that the Commonwealth did so with a view to giving the Coatchwatch contract to a third party. In my opinion, inquiry into the Commonwealth's motivation is immaterial. The only relevant question is whether, viewed objectively, circumstances existed which justified termination. If such circumstances did exist, the Commonwealth's power to determine the agreement would not be lost because it wished to advance the interests of a third party rather than the interests of the applicant.

17. On behalf of the applicant reliance is placed upon the decision of the Court of Appeal in Quennell v. Maltby [1978] EWCA Civ 1; (1979) 1 All ER 568. It was there held that in bringing an action for possession against a tenant on behalf of the mortgagor, a mortgagee was not acting bona fide to protect her security. Possession was refused on the ground that the action was contrary to the intention of Parliament as expressed in the Rent Acts. The case thus turned on the proper construction of that legislation and can provide no useful analogy here.

18. It follows, in my view, that although no exception could be taken to the general statement made in the opening sentence of para.17, the purported "particulars" given in sub-para.(i) fail to disclose any reasonable cause of action. The particulars do no more than give an historical narration of dealings alleged between the Commonwealth and a third party. If the tort of inducement of breach of contract were alleged, the particulars could possibly be sustained. But no such cause of action is alleged here. In the absence of any necessary connection between the particulars in sub-para.(i) and the implied obligation of co-operation, the sub-paragraph is vexatious and leave to raise it is refused.

19. By sub-para. (ii) of para.17, it is alleged:

"(ii) "The Respondent acceded to threats and
pressure from Chatwin and in consequence
reversed its requirements stated to the
Applicant in the representations referred to
in the particulars to paragraph 25 of the
Points of Claim."

20. The comments made of sub-para.(i) are equally applicable here. Again, there is no tortious claim; nor is there any claim for judicial review on administrative law principles (see, e.g. Australian Capital Territory Health Authority v. Berkeley Cleaning Group Pty. Ltd. (1985) 60 ALR 284). There is no necessary connection between this assertion and the general claim made in para.17. Leave to amend is refused.

21. By sub-paras. (iii), (iv) and (v) of para.17, it is alleged:

"(iii) The Respondent collaborated with Chatwin
concerning a temporary and permanent
award to it of the Coastwatch Contract
before any occasion arose to warrant any
assertion of breach by the Applicant.

(iv) The Respondent acquiesced in
investigations by Chatwin into the
preparations of the Applicant to fulfil
the Coastwatch Contract when it knew or
ought to have known that such
investigations were made with a view to
the sabotage of the Coastwatch Contract.

(v) The Respondent actively encouraged the
holder of an existing Contract for
coastwatch services, namely Chatwin Pty
Limited to continue its coastwatch
services even after the date of
commencement of the Coastwatch Contract
and entered into an agreement or
understanding with Chatwin that it would
not permit the Applicant any extension or
allow any relaxation of the terms of the
Contract."

22. Leave to amend is refused on the grounds previously stated.

23. By sub-para. (vi) of para.17, it is alleged:

"(vi) The Respondent failed to co-operate with
the Applicant by refusing permission to
the Applicant to operate certain of its
aircraft on the Coastwatch Contract while
certain of its aircraft retained their
United States registration."

24. It is conceivable that this allegation could involve a breach of the implied term of co-operation. Leave to amend is granted.

25. By sub-paras. (vii) and (viii) of para.17, it is alleged:

"(vii) The Respondent communicated confidential
information to Chatwin concerning the
arrangements which the Applicant was
making to fulfil its obligations under
the Coastwatch Contract.

(viii) The Respondent permitted information,
known by it to be of a confidential
nature relating to the Applicant's
preparations, to be released for
publication in circumstances that there
existed the real probability that the
publication would be harmful to the
Applicant in its preparations."

26. There is no distinct claim in contract, or on equitable grounds, that the Commonwealth breached a confidence. It is not open to raise such a matter as "particulars" of an alleged breach of the implied obligation of co-operation. Leave to amend is refused.

27. By sub-para. (ix) of para.17, it is alleged:

"(ix) The Respondent made statements to the
media concerning the Applicant which
could reasonably be expected to hamper,
obstruct or prevent third parties dealing
with the Applicant in its preparations
for the Coastwatch Contract."

28. The comments made in respect of sub-para.(ii) apply. Leave to amend is refused.

29. By sub-para. (x) of para.17, it is alleged:

"(x) On 12 September 1987 the Respondent
caused delay to the inaugural flights
under the Coastwatch Contract and in some
instances such delay rendered all flights
impossible of performance."

30. It is now common ground that this allegation discloses a possible cause of action. Leave to amend is granted.

31. By sub-para. (xi) of para.17, it is alleged:

"(xi) In respect of flights which were not
performed by the Applicant in the manner
required by the Coastwatch Contract for
the reasons stipulated in Clause 2.23
thereof, the Respondent, even if it were
not satisfied that the failures were due
to accident or other reasonable cause
beyond the control of the Applicant, did
not apply the penalty provided by issued
the purported Notice of Termination."

32. This allegation raises a question of election in the context of the proper construction of the contract. The point sought to be made may be arguable but not as "particulars" of an allegation of a breach of the implied term of co-operation. Leave to amend is refused.

33. By sub-para. (xii) of para.17, it is alleged:

"(xii) The Respondent failed to provide an (sic)
"Show Cause" notice as prescribed by
Clause 2.24 but instead elected to
purport to terminate the Contract,
thereby denying the Applicant any
opportunity to show cause why the
Contract should not be terminated and to
rectify defects (if any) which existed in
its performance."

34. For the reasons given in respect of (xi), leave to amend is refused.

35. By sub-para. (xiii) of para.17, it is alleged:

"(xiii) The issue of the Notice of Termination
by the Respondent was in the
circumstances unconscionable, peremptory
and issued for purposes which were mala
fide, namely to enable the Contract to be
awarded to Chatwin, and/or pursuant to an
arrangement, agreement or understanding
made between the Respondent and Chatwin
that the Respondent would not permit the
Applicant any extension or relaxation."

36. For the reasons already given, this allegation is bad in substance as an attempt to plead an implied obligation of good faith in the exercise of contractual rights. Leave to amend is refused.

37. By sub-para. (xiv) of para.17, it is alleged:

"(xiv) Pursuant to the provisions of the
Coastwatch Contract, certain tolerances
in the performance of flying operations
were permissible in order that the
Applicant comply with its terms: See
Clauses 2.22 and 2.23. If there were any
deficiencies in the performance by the
Applicant on or after 12th September 1987
then such operations complied with the
contractual obligations."

38. If the particulars stood alone, they might be a good plea of "substantial performance". But there is no necessary connection between such a plea and the implied term of co-operation. Leave to amend is refused but liberty to re-plead is reserved.

39. By sub-para. (xv) of para.17, it is alleged:

"(xv) The respondent failed to co-operate with
the Applicant by imposing an obligation
on the Applicant that it fly seven
coast watch flights on 12 September 1987
when it was open to the Respondent
consistently with the contract that it
require only four such flights on that
day."

40. The pleading is short of detail and fails to explain precisely how the Commonwealth acquired the right to choose between seven and four flights. The plea is probably bad for obscurity but, in any event, would also be bad as an attempt to import an obligation of good faith. Leave to amend is refused.

41. Sub-para. 18 is as follows:

"18 It was an implied term of the Contract that the
Respondent would not make any arrangement,
agreement or understanding with any third party
which would be contrary to the contractual
obligations of the Respondent, yet the
Respondent breached such term.

Particulars

Refer to Particulars set out in paragraph 17(i)
to (xv) above."

42. It appears that this paragraph is an attempt to plead an implied obligation to act in good faith. For reasons already given, there is no room for such an implication. Leave to amend is refused.

43. Para. 19 alleges:

"19. As a consequence of the Respondent's conduct
particularized in paragraph 17(i) to (xv) the
Applicant was hindered, obstructed, delayed and
prevented from effecting its arrangements for
the implementation of the Coastwatch Contract.

Particulars

(i) Suppliers of capital with whom
arrangements were made to provide
aircraft lease finance, namely A.G.C. and
Westpac, declined to fulfil earlier
assurances that they would provide funds
for the Applicant and informed the
Applicant that they had been warned not
to do business with the Applicant. In
consequence, it became necessary for the
Applicant to obtain alternative sources
of finance for such purpose, namely
through Continental Venture Capital Ltd.

44. As has been said, there is no claim here in tort for inducement of breach of contract. What is alleged is that the Commonwealth was obliged to perform its contract with the applicant in good faith. Since, in my view, there is no basis for importing such an obligation, the allegations made in sub-para.(i) of para.19, which are consequential upon the allegations in para.17, must also be bad. Leave to amend is refused.

45. By sub-paras.(ii), (iii), (iv) and (v) of para.19, it is alleged:

"(ii) Continental Venture Capital Ltd, acting
as the agent of the Applicant for the
purpose of arranging finance were
informed by Bains Leasing that that
company would be unable to offer finance
without the risk of losing a major
customer. Similar statements were made
by officers of Westpac and A.G.C. In
consequence it was necessary for the
Applicant to arrange for a syndication
through its agent, Continental Venture
Capital Ltd, to purchase aircraft and for
this purpose to require substantial
contributions from members of that
company.

(iii) The Applicant made arrangements with a
large well established dealer in Aero
Commander Aircraft in the United States
for the supply of aircraft to fulfil the
Applicant's obligations under the
Coastwatch Contract. In consequence of
the difficulties experienced by the
Applicant arising from the actions of the
Respondent, the task of modifying the
aircraft, examining them and ensuring
that they were safe and in suitable
condition for registration on the
Australian Register was substantially
delayed.

(iv) In consequence of information supplied by
the Respondent to Chatwin (hereafter
referred to as "Sky West"), Mr. Meeke,
Chief Executive of Sky West, learned of
the places at which aircraft were being
fitted and modified for the Applicant.
Mr. Meeke thereupon visited Oklahoma City
and Portland, Maine for the purpose of
industrial espionage which contributed to
the sabotage of the preparation of the
Applicant.

(v) Following the award of the Coastwatch
Contract to the Applicant, the media
published statements concerning the
viability of the Applicant and of its
integrity. In certain instances, the
Respondent issued statements highly
prejudicial to the Applicant and
rendering it more difficult for the
Applicant to be accorded favourable
treatment in its dealings with the
various suppliers."

46. These sub-paragraphs suffer from the same deficiencies as sub-para.(i). Leave to amend is refused.

47. By sub-para. (vi) of para.19, it is alleged:

"(vi) In certain instances information of a
highly confidential nature which was
known only by principals of the
Applicant, was conveyed to officers of
the Respondent. Thereafter, such
information was disseminated to other
persons."

48. If it stood alone, this sub-para. might have been a good plea of a cause of action for breach of confidence at common law or in equity. However, when viewed in context, this is a plea based on the claim that there is an implied obligation of good faith. Leave to amend is refused.

49. By sub-paras. (vii) and (viii) of para.19, it is alleged:

"(vii) Shortly before the notification from the
Respondent that the Coastwatch Contract
had been awarded to the Applicant, the
Applicant made inquiries in the United
States and Australia concerning the
availability of supply of Aero Commander
680FL aircraft and learned that there
were approximately 18 aircraft of this
type in America which would be suitable
and 2 in Australia. On the day that the
Coastwatch Contract was awarded to the
Applicant, it made arrangements with
agents in the United States to purchase
14 of the available Aero Commander 680FL
aircraft, which were not in high demand.
Approximately two weeks after the award
of the Contract, the Respondent informed
the Applicant that it had received
information from a source which it was
not prepared to identify, that the
aircraft which the Applicant had given
instructions to procure were no longer
available. The Applicant was further
informed by the Respondent that the
engines which the Applicant proposed to
install, namely Avco Lycoming 720 were
not available. The Applicant had
confided in the Respondent its plans to
purchase 680FL aircraft for the purpose
of fulfillment of the Coastwatch Contract
and a special confidentiality was
maintained by the Applicant.
Subsequently, an officer of the
Respondent acknowledged that there had
been a disclosure of confidential
information received from the Applicant.

(viii) During the course of the Applicant's
preparation, information was provided to
the Department of its progress.
Correspondence discovered from the
Respondent's records reveals that Sky
West was provided with a detailed and
intimate knowledge of the confidential
provisions of the agreement between the
Applicant and the Respondent and of the
precise state of the Applicant's
preparation. Such information could only
have been supplied to Sky West by the
Respondent."

50. Leave to amend is refused for the reasons given in respect of sub-para.(vi).

51. By sub-paras. (ix), (x) and (xi) of para.19, it is alleged:

"(ix) Mr. Meeke of Sky West during the course
of a meeting with the Respondent
following the award of the Coastwatch
Contract to the Applicant, informed Mr
Richardson that one of the aircraft of
the Applicant had been impounded in the
United States as a result of
drug-smuggling activities. The report of
Mr. Meeke was utterly baseless.

(x) Mr. Meeke, as Chief Executive of Sky West
is directly accountable to Sir Peter
Abeles who has control of Sky West.
Documents produced by the Respondent show
that Sir Peter Abeles communicated with
the Respondent in an attempt to have the
Contract with Amann set aside so that it
could be restored to Sky West.

(xi) Departmental records of the Respondent
also reveal that various officers wrote
derogatory remarks casting disrepute upon
directors of the Applicant, each of which
remarks are without foundation."

52. There is no claim in tort for defamation. Again, each of these appears to be an attempt to plead a duty to act in good faith. Leave to amend is refused.

53. By sub-para. (xii) of para.19, it is alleged:

"(xii) The Respondent delayed preparation of the
final Contract which caused a consequent
delay in the Applicant attempting to
arrange its finance for the Contract."
This is a good plea as an allegation of a breach of the

implied obligation to co-operate. Leave to amend is granted.

54. By sub-para. (xiii) of para.19, it is alleged:

"(xiii) Following the award of the Contract the
following events occurred:

a. Unknown persons placed the house of Mr Amann
under surveillance. When approached by
Police, the unknown persons claimed to have
been from an investigation agency which was
found to be non-existent.

b. On 30th April 1987 when Mr Amann departed
from Australia for San Francisco, two
passengers on board the Qantas flight
followed Mr Amann to Portland, Maine,
occupied the same hotel and followed Mr
Amann as he made preparations for the
Applicant's contractual obligations. The
name used by one of such persons was
"Brock". The Respondent has possession of
transmissions from a person described as
"B...". Such transmissions relate to the
Applicant's state of preparations, yet the
Respondent has refused to nominate the
identity of such person.

c. Whilst Mr Amann was visiting his agents,
namely North East Air in Portland concerning
the supply of avionics for aircraft for use
in the Coastwatch Contract, someone
intervened by communicating with King Radio
Corporation and Tracor Inc. which were
avionics suppliers.

d. In July 1987 Mr Meeke travelled to Portland,
Maine and Oklahoma City and thereby created
a security crisis resulting in certain legal
proceedings being taken against him
following his attempts to gain access to
hangers in which aircraft which had been
ordered by the Applicant were being
equipped.

e. Following Mr Meek's visit to Oklahoma City
in July, certain aircraft sustained
mechanical failures, namely in relation to
the fuel controller, which were unexplained.

f. The installer of the long-range fuel tanks
for certain of the aircraft ordered by the
Applicant was contacted by Mr Meeke who
inquired as to the progress of fittng such
tanks.

g. A private investigator was retained, namely
Peggy Sue Danner by Amann Aviation
concerning Mr Meeke's visits to the United
States. Subsequently information supplied
by her was changed to the apparent advantage
of Sky West. Such change followed a meeting
between Mr Meeke and a person who posed as
an applicant for a job with North East.
Such meeting was photographed and Mr Meeke
is depicted as having provided an envelope
to the unknown person. Miss Danner had
previously reported that the envelope
carried by Mr Meeke contained cash.
Subsequently Mr. Meeke made a public
statement stating the envelope carried auto
racing photographs.

h. Following arrival of various aircraft in
Australia from the United States they were
to undergo modifications for an Australian
Certificate of Airworthiness. Hawker
Pacific in Darwin was contacted and
arrangements made for the aircraft to be
converted. Following such arrangements Sky
West brought into Darwin a large number of
aircraft which were not normally serviced in
Darwin and had never previously been to
Darwin for service. Hawker Pacific had
originally carried out work for Sky West and
such work was given preference over and
above that of the Applicant.

i. The Applicant was delayed in preparations of
its aircraft in consequence of the conduct
of the Respondent in adopting a
fault-finding and unjustly officious
attitude towards the Applicant."

55. This appears again to raise a claim of good faith as an implied contractual obligation. Leave to amend is refused.

56. By sub-para. (xiv) of para.19, it is alleged:

"(xiv) Allegations have been raised that the
Applicant and/or its directors have been
involved in the trafficking of illegal
drugs. Such allegations were completely
baseless."

57. There is no claim in tort for defamation. Leave to amend is refused.

58. By sub-para. (xv) of para.19, it is alleged:

"(xv) The contents of the notice of termination
of contract have never previously been
the subject of any reasons to terminate
the Contract or even to foreshadow its
termination. The Applicant, had it known
that the Respondent proposed to rely upon
the strict terms of the written Contract
and require total compliance therewith,
would have organized aircraft (subject to
the delays caused or contributed to by
the Respondent) to have been ready by
12th September 1987. In particular:

a. Long-range tanks could have been
installed if they were demanded.

b. Bubble windows had been manufactured and
were ready for installation. They could
have been installed within two weeks from
the start-up date. The absence of the
bubble windows did not prevent the
aircraft from fulfilling their major
role.

c. Drop hatches could have been installed
within a short period.

d. The serviceability of the aircraft was
beyond question. They were serviceable
and suitable for the task for which they
were intended.

e. In the process of installation, certain
radios went missing. They could have
been installed within a very short period
and did not affect the performance of the
aircraft in any way."

59. It is possible that this could be a good plea of estoppel or perhaps of substantial performance. It appears to be an attempt to plead a duty to act in good faith. As such, this is a bad plea. Leave to amend is refused but liberty is reserved to re-plead.

60. In the circumstances, the applicant should pay three-quarters of the respondent's costs of this application.