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- Unreported Judgment
DISTRICT COURT OF QUEENSLAND
Pacific Crown Helicopters Pty Ltd v Helistar Aviation Pty Ltd  QDC 278
PACIFIC CROWN HELICOPTERS PTY LTD (ACN
106 330 689)
HELISTAR AVIATION PTY LTD (ACN 102 789 355)
1137 of 2017
District Court at Brisbane
10 June 2020
4 and 5 December 2019
I will give Judgement for the plaintiff in the sum of $750,000.
CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – BREACH OF CONTRACT – BAILMENT – DAMAGES – PENALTIES- where defendant’s helicopter engine damaged and required repair by US company – where defendant rented a replacement engine from the plaintiff – where the plaintiff was the US company’s agent- where replacement engine owned by the US company – where damaged engine sent to plaintiff and transhipped to US company – whether the contract for repair was with plaintiff or US company – whether the plaintiff responsible for repair of damaged engine – whether plaintiff liable as bailee – whether obligation as bailee ended on delivery of damaged engine to US company – defendant’s liability under rental agreement- quantification of rental or damages – whether some charges constituted penalties
Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785
Westrac Equipment Pty Ltd v Owners of the ship Assets Venture (19..) 192 ALR 277
Dunlop Pneumatic Tyre Company Limited v New Garage and Motor Company  A. C. 79
Bowstead and Reynolds on Agency 21st ed. at 9-005
COUNSEL: J. R Ward for the plaintiff
P. O’Brien for the defendant
SOLICITORS: Cleary Hoare Solicitors for the plaintiff
Thomson Geer Lawyers for the defendant
 The plaintiff seeks monies said to be owing pursuant to a rental agreement between it and the defendant and, alternatively, seeks damages for breach of that contract. It also seeks an order for delivery up of a helicopter engine rented to the defendant. The defendant opposes such orders and counterclaims for delivery up of another engine and assessment of the amount due between the parties arising out of their contractual relationship.
- The plaintiff conducts a business providing aviation services, including the hire and service of helicopter engines, from premises at Caloundra. The defendant operates helicopters commercially in South Australia. From about 2012 the defendant leased an Arriel helicopter engine (hereinafter the “original engine”) from a company closely related to it. That company had purchased the original engine from an American company, EuroTec Vertical Flight Solutions, LLC (hereinafter “EuroTec”).
- In early 2014 the original engine was started improperly, due to it being accidentally over primed by its pilot, an employee of the defendant. Such an event is known in the industry as a “hot start”. A feature of such a mishap was that, in order to continue using the engine, it was necessary for it to be dismantled, inspected and, if necessary, repaired by a competent and authorised service provider. The cost of doing so was, the defendant then anticipated, to be paid by its insurer, AIG.
- No doubt because there were few if any workshops in Australia able to carry out the necessary work following a hot start and because the original engine had been manufactured by EuroTec in America, Douglas Dinan, the chief pilot with and a director of the defendant, contacted EuroTec about the consequences of the hot start. He spoke to an employee of EuroTec, Shane Koch, but was directed by Mr Koch to contact the plaintiff. Mr Dinan said in evidence that Mr Koch had told him the plaintiff was EuroTec’s “Australian agent”.
- Consequently, Mr Dinan spoke by phone to the plaintiff’s sales manager, Simon Daley. They already knew one another. Mr Daley died in 2017 and so there is only the evidence of Mr Dinan as to what was said, together with contemporaneous written records of the parties’ dealings, including numerous emails. I shall refer in more detail to this issue especially when considering the evidence of Mr Dinan about an alleged conversation between he and Mr Daley at the end of June 2015.
- In any case, it is not disputed Mr Daley advised Mr Dinan the plaintiff had in its possession another engine (hereinafter the “replacement engine”) which could be used in the helicopter whilst the original engine was being repaired. That replacement engine was owned by EuroTec. Ultimately an arrangement whereby EuroTec rented this replacement engine to the plaintiff, which in turn rented it to the defendant, was undertaken. The plaintiff’s claim is based on construction of the terms of that written agreement between the plaintiff and defendant.
- The original engine was sent to America for it to be repaired by EuroTec. This engine was first sent by the defendant to the plaintiff, which then send it to EuroTec. The contractual arrangement underpinning this arrangement was in dispute.
- The plaintiff was not authorised to carry out necessary inspection and repairs following a hot start. In America, the repairs became somewhat more complicated than contemplated. The nature of the defendant’s insurance may have contributed to this complication. A report by EuroTec suggested some of the necessary repair work was due to a condition of the motor unrelated to the hot start. This too contributed to the delay and ultimate dispute. The defendant says that any suggestion it was responsible for any problems with the motor, unrelated to the hot start, is incorrect.
- Ultimately the replacement engine has remained in the defendant’s possession for much longer than was originally anticipated. So too the original engine has remained in North America with EuroTec, and part also with a Canadian company, Vector, engaged by EuroTec to carry out some of the repairs. It had originally been thought the whole repair and refitting of the original engine, and the return of the replacement engine, would take only about 6 months. It has now been over six years.
- A central issue in the dispute is whether the arrangement for EuroTec to dismantle, examine and repair (hereinafter compendiously referred to as “repair”) the original engine was a discrete contract between the defendant and EuroTec, as the plaintiff asserts, or whether the whole contractual arrangement was between the plaintiff and the defendant and was for the plaintiff to both rent the replacement engine to the defendant, as evidenced in writing, and also for the original engine to be delivered to the plaintiff for repair, by EuroTec, in circumstances that would make the plaintiff liable for any contractual breaches in carrying out that repair.
Pleadings and Allegations
- The plaintiff’s claim is based on a written agreement of 2 April 2014 to rent the replacement engine to the defendant. The plaintiff seeks the sum said to be due pursuant to the terms of that written agreement for the rental of the replacement engine or, in the alternative, seeks the identical sum as damages for breach of that agreement or a sum in damages for loss of use of the replacement engine after 1 June 2015. The significance of 1 June is that is when the plaintiff alleges the agreement was terminated by letter from its solicitor.
- The plaintiff as part of its claim seeks recovery of late return rent pursuant to the written agreement in the sum of $13,200 per month plus GST, being 150% of the normal monthly rental. Interest at the sum of 18 per cent per annum in accordance with the written agreement, or alternatively interest under the Civil Proceedings Act, and costs, are also sought. The plaintiff accepts it can recover no more than the jurisdictional limit of the District Court.
- The terms of the agreement, the plaintiff submits, are set out in the written agreement to rent the replacement engine. They include:
- (i)the rental agreement was to commence on 2 April 2014;
- (ii)the estimated end date was 31 October 2014;
- (iii)the rent, in $USD, was to be the greater of the hourly minimum, namely 40 hours per month at $220 per hour, or applicable engine rental calculated in accordance with the rental charges as set out in clause F of the written agreement (because of the relatively little use of the engine, the provisions of clause F are of no importance);
- (iv)interest on any overdue amount was to be at the rate of 18 per cent per annum;
- (v)if the defendant failed to return the replacement engine within 30 days of any termination of the agreement, the defendant would pay late return rent at 150 per cent of the normal rental charges;
- (vi)in the event the late return rent was held not to be enforceable (presumably because of its being categorised by a court as an unenforceable penalty) the defendant was liable to continue to pay rent until such time as the replacement engine was in fact returned;
- (vii)the defendant was to pay the fees and costs incurred by the plaintiff in enforcing the agreement.
- The plaintiff sent the replacement engine to the defendant in early April 2014. The defendant has had the use of it thereafter, having still not returned it. The plaintiff also alleges that the agreement was terminated on 1 June 2015 by letter from its solicitors of 22 May 2015, thus enlivening the late return rental provisions of the agreement.
- The defendant’s case is that it contracted with the plaintiff, which was itself to arrange for EuroTec to repair the original engine and that the plaintiff was itself liable for any negligence or breach by EuroTec when doing so.
- In its Further Amended Defence (“FAD”) the defendant alleges, inter alia, that EuroTec was the plaintiff’s agent (see para 1.2(iii) of FAD), a fact denied by the plaintiff (see para 2.2 of Further Amended Reply and Answer, hereinafter (“FARA”). The defendant also alleges (in para 2.9 of FAD) that it engaged the plaintiff to inspect and repair the original engine following the hot start, to lease (or rent) the replacement engine to the defendant while that was being done, to return the original engine to the defendant on its being repaired and, in turn, to then receive the replacement engine back. That allegation is denied in para 8 of FARA. The allegation by the defendant that EuroTec was the plaintiff’s agent must be seen in the light of Mr Dinan’s accepting, when giving evidence, that he knew EuroTec was to do the work and that the plaintiff was in fact not authorised to do so and also that he had been told by both Mr Koch and Mr Daley that the plaintiff was EuroTec’s agent.
- The defendant also alleges that a condition of the agreement with the plaintiff was that the plaintiff would rent the replacement engine to the defendant and that, on the return of the repaired original engine by the plaintiff to the defendant, the defendant would return the replacement engine to the plaintiff (see [2.9.4] of the FAD).
- The defendant pleads also that the defendant and plaintiff were in a bailment relationship with respect to the original engine and that a term of that bailment was that the plaintiff would repair the original engine and then return it to the defendant who would then return the replacement engine to the plaintiff (see paras [2.10], [2.11] and [2.12] of the FAD).
- In that context the defendant admits it entered into the written agreement to rent the replacement engine (see para  of FAD).
- It is also alleged by the defendant that during initial discussions Mr Daley told Mr Dinan that the defendant “should send the (original) engine to the plaintiff to complete the inspection and any repair” (see para 2A.2.3 of the FAD). I interpose that is not what Mr Dinan said in evidence. He said (see T1-69) only that Mr Daley confirmed that the defendant “had to deal through him” to get it repaired as the plaintiff was “the agent for EuroTec”. This seems to me a vastly different circumstance than the suggestion in the defendant’s pleading that the plaintiff would complete the inspection and any repair, and that EuroTec was the plaintiff’s agent.
- In addition to pleading that the written rental agreement was subject to the plaintiff’s obligation to repair and then return the original engine, the defendant also alleges that the terms of the written agreement relating to late return rent, interest at 18 per cent per annum and recovery of the plaintiff’s fees and costs associated with the enforcement of the agreement constitute penalties and are unenforceable.
- The defendant alleges that it was a term of its engagement of the plaintiff to repair the original engine that the plaintiff, and its agents, would exercise due care and skill repairing the original engine and would complete the work such that the defendant’s insurance claim and the repair work, including the return of the original and replacement engines, could be completed within six months (see para 5.5 of the FAD). It alleges that the plaintiff has not at any time discharged its obligation to repair and return the original engine (see para 8A.7 of the FAD) and that, consequently, the defendant has not returned the replacement engine (see para 9.3 of the FAD).
- The defendant alleges (in paragraph 9.4 of FAD) that the plaintiff engaged EuroTec to inspect and repair the replacement engine. It also alleges EuroTec as agent for the plaintiff negligently performed the work required by the contract between the plaintiff and the defendant in breach of the contractual terms of that agreement. The defendant also alleges a report concerning the repairs required was produced by EuroTec well beyond the contemplated timeframe. It alleges that this resulted in ongoing problems between the plaintiff and its insurer.
- The defendant alleges it ultimately accepted a sum from the insurer for the repair of the engine and says it authorised the plaintiff “via EuroTec” to conduct the repairs of the original motor, but that has still not been done by the plaintiff (see paras 22.214.171.124.8 of the FAD). Once again this allegation must be seen against the background of Mr Dinan’s evidence.
- In reliance on the evidence of Mr Dinan, the defendant also alleges that on about 29 June 2015 Mr Dinan and Mr Daley agreed in a phone conversation to terminate the agreement between them. He said that agreed the plaintiff would return the original engine to the defendant with repairs due to the hot start effected, but not any “extra work” (as defined in the pleadings), that the defendant, or its insurer, would pay for the inspection and those repairs and that, upon receipt of the original engine, the defendant would return the replacement engine to the plaintiff (See [10.5] of FAD).
- Mr Dinan said, and the defendant alleges that pursuant to that agreement, it removed the replacement engine from its helicopter on 2 July and “crated” it, putting it in a transport crate provided by the plaintiff, in preparation for returning it as agreed. The defendant’s case is that this was not done because that the plaintiff failed to return the original engine, due to EuroTec’s refusing to repair and return the original engine to the plaintiff. It alleges that in the circumstances no rental is payable by it after 29 June 2015. It also alleges that in any case no ongoing rental is payable after about 29 November 2015 as the engine then required scheduled overhauls in order for it to be used. Since this has not been done, it is alleged by the defendant that the engine is thereafter unfit for the purpose for which it was rented and so no rental is payable (see [10.7] of FAD).
- The defendant’s counterclaim alleges the failure of the plaintiff to return the original engine has caused the defendant loss being, inter alia, the amount of rent and other amounts payable in respect of the replacement engine after the initial six month period of the rental agreement.
- It is also alleged that from 15 December 2015 the defendant has rented an alternative engine from Aviation Partners Pty Ltd, at a significant cost, though less than the cost of renting the replacement engine, which it would not have had to do if the original engine had been returned by the plaintiff as required. Aviation Partners Pty Ltd is, I interpose, a company closely related to the defendant company.
- The plaintiff alleges it was the defendant which engaged EuroTec to repair the original engine and that its role was only to ship that engine to America, where EuroTec was to repair it pursuant to an agreement between EuroTec and the defendant. It alleges that the defendant separately contracted with the plaintiff to rent the replacement engine whilst those repairs were being effected.
- In FARA the plaintiff denies the defendant’s allegation that EuroTec was the plaintiff’s agent. The plaintiff specifically denies the allegation (at [2.9] of FAD) that the plaintiff was engaged to complete the inspection and repair of the original engine. This has been the subject of earlier comment by me and the defendant’s assertion seems to be inconsistent with Mr Dinan’s own evidence that he was told the plaintiff was EuroTec’s agent and also that he knew the plaintiff was not to carry out any work on the engine.
- In relation to the defendant’s allegation of bailment, the plaintiff denies it was a bailee but says, in the alternative, that it discharged its duties in that regard, presumably by shipping the goods safely to EuroTec in accordance with its engagement as particularised in [8.5] of FARA.
- The plaintiff denies that the provisions of the rental agreement said by the defendant to be penalties are so categorised, pleading they are not extravagant, unconscionable or out of proportion.
- The plaintiff denies the defendant’s allegations concerning the purported discussion between Mr Daly and Mr Dinan on about 29 June 2015, asserting the alleged conversation did not occur. I shall deal with that conversation in due course. The plaintiff denies the defendant has a lien over the replacement engine because of the non-delivery of the original engine.
- In relation to the allegation that the plaintiff is not entitled to any rent for the replacement engine beyond 29 November 2015, the plaintiff pleads (see [47.5] of FARA) that:
- (i)it does not admit to the serviceability or otherwise of the replacement engine after 29 November until it is able to inspect the engine; and
- (ii)that its useability after that date is in any case irrelevant as the defendant has failed to return the engine as required.
- This latter assertion is, as I understand it, an assertion that the need for the engine to be serviced, as alleged, and the fact that it has not been so serviced is due to the defendant’s failure to return the engine to the plaintiff.
- Consideration of this summary of what I see as the most important allegations in the pleadings indicates the complicated nature of this dispute and the somewhat convoluted nature of the pleadings themselves.
- It is, quite frankly, somewhat astonishing that relatively sophisticated business people have allowed this very unsatisfactory situation to have developed, particularly since July 2015. The original engine is now in parts in North America. EuroTec is effectively in control of that engine. It is an American company and for some reason has not been made a party to the proceedings. The plaintiff seeks recovery of a very large sum – ultimately its claim is well beyond the monetary jurisdiction of the court – and says it bears no responsibility for the original engine. The plaintiff would have obtained relatively little benefit from the agreement to repair the original engine, although it does benefit from the rental of the replacement engine, being the difference between the rental it agreed to pay to EuroTec, and the rental it says it is entitled to recover from the defendant. While the plaintiff claims the large sum I have referred to from the defendant, there is nothing to indicate what, if any, sum it might be required to pay to EuroTec pursuant to the related written agreement it entered into with that company to rent the replacement engine from EuroTec. It seems that from an early time EuroTec has not rendered invoices pursuant to the agreement between it and the plaintiff. That situation causes me to have some concern about the genuineness of the assertion made on behalf of the plaintiff that it has incurred a significant debt to EuroTec, which it is obliged to pay.
- It is clear that after the hot start, Mr Dinan contacted EuroTec and spoke to Mr Koch. I have referred to this conversation, his referral of Mr Dinan to Mr Daley and their subsequent conversation already. He says he told Mr Daley, presumably after explaining the engine had been damaged due to a hot start, that Mr Koch said the defendant “had to deal” through the plaintiff. He said Mr Daley confirmed that. Mr Dinan said he then asked if he could send the engine to the plaintiff “to get it rectified”. He said Mr Daley again concurred, saying the plaintiff was “to deal with us because we are the agents for EuroTec” (see T1-68 l 43 to T1-69 l 10). This conversation it seems to me is entirely consistent with the notion that the plaintiff was merely an agent for EuroTec and was to take possession of the engine, but only in order to ship it to EuroTec in America which was then to repair it. It was never suggested that the plaintiff was to carry out any work on the engine, or to take possession of the engine other than to ship it to America as agent for the repairer, EuroTec.
- Indeed Mr Dinan said he knew EuroTec were to carry out the repairs, and that the plaintiff was not qualified to do so.
- Mr Dinan says that he then also asked Mr Daley if the plaintiff had a rental engine and was told it had (T1-69 l 39/47). He gave evidence Mr Daley said it was available for the defendant to rent and that he would get back to him with a rental agreement (T1-70l1-7).
- Subsequently there was an exchange of emails between the plaintiff and the defendant. Tab 1 of the Trial Bundle includes an email from Mr Daley to Mr Dinan, CC’d also to Mr Koch in America. It attached the proposed rental agreement and other documentation relevant to the rental of the replacement engine.
- Although Mr Dinan did not give evidence about it, there must have been some discussion between Mr Daley and Mr Dinan during their initial conversation about the terms of the proposed rental because Mr Dinan responded to Mr Daley’s email enclosing the proposed agreement saying “we discussed the minimum should be 40 hours per months”.
- At the end of his email to the defendant, Mr Daley had written;
“As mentioned his engine must come to us for repair”
- This statement, made in circumstances where everyone understood the plaintiff was to effect no repairs to the engine, is somewhat tortured English, but seems to me, in the circumstances of this matter, to be entirely consistent with a requirement that the original engine (referred to as “his engine”) must first be delivered to the plaintiff and to then be send to America in order for repairs to be effected by EuroTec. It was common ground the plaintiff was not authorised to carry out such repairs. I suspect the sentence may have been uplifted by Mr Daley from an email between he and EuroTec, and copied in to the email he sent Mr Dinan, but it does not change the parties’ understanding that the plaintiff was to be a conduit for shipping the engine to EuroTec for repair.
- I have already set out some critical terms of the rental agreement and will refer to further terms in due course. It is also clear the replacement engine was in fact owned by EuroTec, and they, at the same time, rented that engine to the plaintiff to enable the plaintiff to rent it to the defendant.
- Clause 12 of the rental agreement provides as follows;
“ENTIRE AGREMENT/AUTHORITY. The terms and conditions contained in this Agreement supersede, and render null and void, the terms and conditions of any previous oral or written correspondence, purchase order or acknowledgement form before the date hereof. This Agreement may not be modified or amended except in writing signed by the parties hereto. Each party warrants that it is duly organised and in good standing in the jurisdiction in which it is organised and it has obtained all necessary power and authority to enter into and perform under this Agreement.”
- The signed agreement was emailed back to Mr Daley by Mr Dinan on 2 April together with a request for the replacement engine to be dispatched to the defendant.
- This was done.
- It is also undisputed that the original engine was sent by the defendant to the plaintiff and then forwarded by the plaintiff to EuroTec in accordance with the arrangement that had been made.
- On 2 May 2014, Mr Dinan asked Mr Daley to confirm that he had received the original engine and forwarded it to EuroTec. Mr Daley immediately emailed Mr Dinan to say it had been collected from the plaintiff and was “on its way to the USA” (Tab 6, Trial Bundle), consistent with the agreement between them.
- On 10 May, Mr Koch of EuroTec emailed Mr Daley (Tab 7) attaching “your customer update report for the assets you have at our facility”. He also “included the workscope” for the original engine and asked Mr Daley to “… review each page, sign and return to proceed forward with the work described”.
- The workscope indicates that most of the repair work was to be done by EuroTec but one item of work, described as Module 3, was noted to be level four. I understand it was this piece that was sent by EuroTec by Vector, which was a level four authorised repairer, which EuroTec was not at that time and so not authorised to do.
- That email and attached workscope send from EuroTec to the plaintiff was then sent by Mr Daley to Mr Dinan at 1.48 pm on 12 May, with a request that Mr Dinan review and initial each page.
- Whilst it is not explicitly stated, I assume this was done. In any case, nothing turns on proof that it was.
- On 12 May 2014, Mr Dinan emailed Mr Daley (Tab 9):
- (i)He wrote, “It took us a long time to get it going due to the outstanding maintenance which was required”. It is clear the reference to “it” is a reference to the replacement engine, hired by the defendant from the plaintiff.
- (ii)He then asked, “What would help… is having some idea of when our engine will be returned to service and what is required to achieve this”.
- It is not apparent to me that Mr Daley responded to this email.
- On 1 July Mr Daley emailed Mr Dinan about an unrelated issue. Mr Dinan responded, but then wrote “(a)ny news on our Engine quotation with EuroTec” (Tab 12).
- Subsequently on 23 July the plaintiff emailed the defendant (Tab 15) saying “I am expecting a quote for your engine very soon” and asked about a “data plate” for the engine. The defendant responded the following day (also Tab 15) saying he would check on the data plate and then wrote: “I am keen to have the engine returned as it is obviously expensive having to rent and (sic) engine with 40 hours per month minimum rental when it is winter here and rains nearly every day”.
- The next relevant event appears to be an email from Vector to EuroTec attaching a quote to repair “your MO3 sn 160” (Tab16). I assume this was the quote for the repair of the Module 3 which had to be repaired by a level four accredited repairer as referred to in the earlier workscope document (part of Tab 7).
- On 12 August 2014, EuroTec provided a quote to the plaintiff to repair the original engine (see Tab 17, p 63, Tab 25, pp 99/100 and the actual quote at p 101). The email asked the plaintiff to sign and return the quotation “to proceed with the repair of your engine”. This was in turn forwarded by the plaintiff to the defendant on 15 August 2014 (see Tab 17, p 63 also). The defendant in turn indicated it would forward the quote to its insurer.
- That EuroTec would send the quote to the plaintiff and not directly to the defendant is relied on by the defendant in support of its contention that the defendant’s contract for repair was with the plaintiff but in my view it is equally consistent with the plaintiff being no more than an agent to pass on the quote to the defendant. The actual quotation (at Tab 25, p 101 ff) is directed by EuroTec to the plaintiff. It refers to “your” engine, and to presenting the quotation to “you… for the repair of your modules”. It says, “More work has been accomplished based on your approval of the workscope”, and also says “unserviceable parts will be returned to the customer” (my emphasis). The email draws a distinction between “you”, referring to the plaintiff, and the “customer”, referring to the defendant. The plaintiff was invited to sign its acceptance of that quotation. Those matters do not cause me to conclude, in the whole of the circumstances, that the agreement for repair was between the plaintiff and defendant such as to make it the plaintiff liable for the non-return or faulty repair of the original engine.
- On 29 August, EuroTec “followed up” the earlier quotation, asking the plaintiff “(h)ave you heard from (the defendant) regarding the quotation”. The plaintiff replied that the defendant was “claiming it” on insurance (see Tab 18). There is then correspondence effectually authorising the defendant’s insurer, Andrew Nevin of AIG to liaise directly with EuroTec (Tab 19). An issue arose with the insurer concerning whether repairs to be effected to the original motor were related to the hot start, or just to normal wear and tear or other uninsurable events. This issue resulted in correspondence comprising Tab 21. In particular, there was a suggestion the defendant had itself carried out earlier inappropriate repairs to the original engine.
- There was obvious concern on all sides as to how long the process was taking. Mr Dinan on 12 March 2015 wrote directly to Mr Koch at EuroTec, CC’d to Mr Daley and others. He indicated a real need to have the insurance claim finalised as the replacement engine was approaching a need for a significant maintenance service (see email, Tab 22, p 85).
- At this time Shane Yeend became involved in negotiations. He was a director of the defendant (indeed, in an email of 12 May 2015 he said he was the sole director) and also a director of the related company which owned the original engine and leased (or rented) it to the defendant as earlier referred to (see Tab 27, p 119). He, on behalf of the defendant, negotiated directly with Chad Decker of EuroTec in mid-2015 (see, for example, Tab 27, p 8/9 re 12 May and p116/7 re 19 May and Tab 31). Bill Hafner, on behalf of the plaintiff, was also CC’d into at least some of these emails.
- There was a clear dispute between Mr Yeend and Mr Decker, and matters became somewhat acuminous. It is not necessary to resolve those matters.
- The language of Mr Yeend’s response is consistent with the position that EuroTec was the principal in the contract to repair the engine. As an example, on May 12 2015 he emailed Mr Decker of EuroTec and said;
“I would request that you fix the engine for the quote from EuroTec … and get that engine back ASAP” (Tab 31, P135).
- He negotiated directly with EuroTec (see, eg, email of 19 May at Tab 31, p133). He too described the plaintiff as “the agents in Aust for EuroTec” (p130) and said the plaintiff “forwarded (the engine) as your agents” (p125).
- On 22 May 2015, the plaintiff had its solicitors, Cleary and Hoare, write to the defendant in relation to the non-payment of invoices for the rental of the replacement engine (see Tab 28).
- On 9 June 2015, Mr Brett Hart of Cleary Hoare, the plaintiff’s solicitors emailed Mr Yeend enclosing documents related to the hire of the replacement engine (Tab 29). The letter, consistent with the plaintiff’s current position, refers to the defendant’s dispute “with other parties relating to the serviceability of your aircraft; but those issues are not relevant to your obligations under the Engine Hire Agreement dated 2 April 2014”.
- Mr Yeend, as I have said, has referred to the plaintiff as EuroTec’s “Australian agent”, consistent with the notion that EuroTec was the principal to the contract. He noted in an email to Mr Hart of 10 June (Tab 30) the interconnectivity of the plaintiff and EuroTec. He wrote;
“I am as your client knows working from my US office this month. If he and the company he is the agent for (that happens to be the rental engine owner and the company that sold us a defective illegal repaired engine through your client, which is the hold up for six months extra rental) I will be happy to discuss in the best interests of closure.”
- That the plaintiff was agent of EuroTec for the purposes of shipping the engine to EuroTec seems clear. The defendant’s case is, however, that it in fact engaged the plaintiff to arrange the repairs by EuroTec such that plaintiff is responsible for the delay in repairs to the engine and that it was the plaintiff which delegated the repairs to EuroTec. The case the plaintiff wishes to promote is really that EuroTec is the plaintiff’s agent, rather than the reverse, which was what Mr Dinan in his evidence and Mr Yeened in emails consistently described them as.
- On 18 June 2015 (Tab 34, p 151), the plaintiff, through Mr Hafner sent the defendant an email in which the plaintiff:
- (i)sent a revised estimate of costs from EuroTec, for the defendant’s consideration;
- (ii)said, “the estimate includes a 20 day grace period for consideration then (sic) after subject to termination. Out of courtesy, I am extending the estimate proposal for another 14 days from today’s date”; and
- (iii)said, “If the approval and funds for the repair are not received prior to June 24 2015 the repair process will stop and not be completed. All modules at Vector will return as is (disassembled) to EuroTec and the engine assembly will be properly boxed and crated for holding and eventual return. All tear down, inspection fees will invoiced and are due and payable before shipment. As well, storage fees in the amount of $200 a month will be charged for storage. The storage period will begin on June 24 2015”.
- The plaintiff’s counsel submits this email is entirely consistent with the plaintiff being responsible for sending the original motor to EuroTec for repair, and is not such as to make the plaintiff liable for any negligence or other breach or for delay by EuroTec in effecting such repairs. The defendant emphasises that not only did the plaintiff receive the quote from EuroTec, and then send it to the defendant, but itself extended the period the offer remained open for, and indicated consequences to the defendant if it did not agree to the quotation. Again I see that correspondence as nothing more than the plaintiff being the agent for EuroTec and it does not cause me to conclude the plaintiff assumes any liability to the defendant arising from neglect or delay by EuroTec.
- The plaintiff’s solicitor’s in a letter to the defendant of 30 June 2015 (Tab 35) indicates Mr Dinan had agreed to remove the replacement engine from the defendant’s helicopter by 2 July for it to be collected by the plaintiff. The engine was not so returned. The defendant advised on 6 July (Doc 37) it would not return the replacement engine to the plaintiff until it received the original engine back. This stalemate has continued since.
- In the course of the dispute the defendant instructed solicitors in South Australia, Minicozzi Lawyers. In paragraph 5 of a letter of 6 August 2015, (Document 42) those solicitors asserted that the original engine had been removed from the helicopter and “sent to (your client) (in its capacity as agent for EuroTec) for repair”. In such circumstances, it is said, the defendant made arrangements to hire the replacement engine from the plaintiff, by means of the written lease agreement. The letter sets out relevant assertions concerning EuroTec’s quotation of 11 August and the defendant insurer’s refusal to indemnify the defendant. Ultimately the letter states:
“12. My client’s position is that the delays were the fault of EuroTec and that, as agent for EuroTec in respect of all dealings with Helistar, your client cannot now seek to profit out of its principal’s delay.” (My emphasis).
Agreement late June 2015
- A significant aspect of the defendant’s case is based on the assertion that in late June 2015, Mr Dinan and Mr Daley came to an arrangement whereby the parties would exchange engines, so that rental on the replacement rental was no longer payable, and then “work out everything else afterwards”. It is said that because the original engine was not returned to the plaintiff by the defendant, the plaintiff, in turn, refused to return the original engine. The matter there lies.
- In support of this position, the defendant introduced into evidence photos of the replacement engine packed into a transport box, apparently preparatory to its being shipped back to the plaintiff. The defendant also introduced into evidence business records said to support this oral agreement. Exhibit 3 contains a number of workshop sheets of a related company, NAC Helicopters, which did necessary maintenance for the defendant’s helicopters. The worksheet at page two of that exhibit was completed by a maintenance engineer with NAC and records “loan engine removed and shipped back to supplier”. That document is dated 2 July 2015.
- Mr Dinan explained why the worksheet was completed in that way. He said the reference to the engine having been shipped to the plaintiff, when it was not in fact so shipped, was because the engineer, when he wrote that, was of the belief, because of what Mr Dinan had told him, that it was to be so shipped.
- There are significant difficulties in accepting Mr Dinan’s evidence about these matters.
- When he first gave evidence about the alleged oral agreement, he made no mention of the fact that the original engine was to be returned first. He referred only to an exchange of engines, without reference to the order in which, or how, that was to occur. He said Mr Daley had told him he would send a transport box to Mr Dinan for the replacement engine to be sent back to the plaintiff.
- The packing of the replacement engine in the transport box is also consistent with Mr Daley sending the box for return of the replacement engine, without any arrangement about the original engine. Indeed if, as Mr Dinan said, but only when I specifically asked him, the agreement was that the original engine would first be returned to the defendant, why was it necessary to send a box to South Australia when the box holding the original engine, on its return to the defendant, could have been utilised? And why would the box have been sent to the defendant prior to 2 July (the date when it was packed into the box) and why would the engine have been taken out of the helicopter at that time, when it would have been obvious the engine in America had not yet been returned. Surely it would have been sensible to have used it in the helicopter until the original engine was returned. Given it was coming from America, this might have been expected to take some time.
- That it was imprudent to have removed it without waiting for the contemplated return of the original engine, if the agreement was as Mr Dinan asserts, is supported by the fact that the worksheets, exhibit 3, show it was fitted back into the defendant’s engine on 25 August and continued to be used until its final removal on 15 January 2016. Since that time it was said by Mr Dinan that it has remained in the defendant’s possession, but not in use, despite the significant potential rental liability.
- Consideration of email correspondence between Mr Dinan and Mr Daley, and others, during this period is also instructional.
- On 18 June Mr Hafner of the plaintiff sent an email to Mr Dinan and Mr Yeend (Tab 34) which I have already partly set out (see  hereof). Although sent on 18 June, the email is in the form of a letter, dated 10 June.
- The email enclosed an earlier quote from EuroTec of 22 May. The period for acceptance of that quotation had by then expired but Mr Hafner said he was extending it for a further 14 Days. The date of the email, being 18 June, and the earlier date of the letter of 10 June, some eight days earlier, must be borne in mind when considering the letter.
- The letter indicated that if, as transpired, the quote was not accepted and funds for repair not received, the disassembled original engine would be “boxed and crated for holding and eventual return”. This would, it was said, happen only once tear down and inspection fees were invoiced and paid. This is of course consistent with the plaintiff not expecting the immediate rerun of the original engine. The sending of the crate to the defendant must be seen against that background.
- On 30 June 2015 Cleary and Hoare, again, wrote to the defendant marked attention Mr Yeend (see Tab 35). The letter asserts that on 22 June a commercial agent had attended the defendant’s premises and seen the replacement engine in the defendant’s helicopter. The letter states that the defendant’s “manager”, “Barry”, had advised the agent the defendant would surrender the engine. It was said Barry told the agent that the defendant had engineers “to remove the engine”. The letter further records that on 25 June “Barry” contacted the agent and told him he would “advise the agent as to when he receives approval from (Mr Yeend) for (Helistar’s) engineers to remove the Engine”. The letter then records that on 29 June the plaintiff contacted Mr Dinan who “had agreed to remove the engine … by no later than … 2 July 2015”. The letter also said “the agent proposes to monitor the removal and will attend the hangar for that purpose”.
- On 2 July, an email was sent by Mr Daley to Steve Dunstan, CC’d also to Quentin Bonafede. Mr Dunstan was an engineer with NAC Helicopters, the company responsible for removing and boxing the replacement engine on 2 July. His name is on the worksheet, at page two of exhibit 3, evidencing that work to which I have already referred. Mr Bonafede was also with NAC Helicopters, as evidenced, for example, by his email address shown in Tab 37.
- Mr Daley wrote that “the lady won’t be turning up today”, suggesting that the agent, who was to view the engine being taken from the helicopter, would not be attending the NAC Helicopter workshop on that day. Instead Mr Daley told Mr Dunstan to “sent me some photos of the engine in the frame and with the lid on. Then we can arrange the collection”. Mr Dunstan in fact sent such photos as requested at 1.58 pm on that same day. (They are part of exhibit 3).
- The next email of significance is another from Mr Daley to Mr Dunstan and Mr Bonafede of 6 July. It asks: “Can you please confirm that you are not going to be sending the engine”.
- Mr Bonafede replied very shortly after that “(w)e have been instructed not to ship the engine, until such time that they receive theirs back. I apologise for the inconvenience as we are only the middle man following our boss’s instruction”.
- It is, if Mr Dinan’s evidence about his alleged conversation with Mr Daley of 29 June was correct, remarkable that nowhere in the contemporaneous written record is there any reference to the plaintiff having agreed to first send the original engine to the defendant, before the defendant was required to ship the replacement engine to the plaintiff. It is also remarkable that Mr Daley had asked for photos in his email, and they were in fact so taken.
- That feature of the matter is all the more remarkable because on 6 July Cleary and Hoare sent a further letter to the defendant, again marked attention for Mr Yeend (see Tab 38). The letter refers to a conversation of 29 June between Mr Dinan and some unidentified employee of the plaintiff in which Mr Dinan was said to have agreed to remove the engine by 2 July, but is “now inexplicably refusing to ship the engine to (the plaintiff)”. There is no subsequent correspondence from the defendant disputing that version. I have mentioned the letter of 6 August from Minicozzi Lawyers to Cleary and Hoare (Tab 42). Nowhere does the letter assert any agreement to exchange engines reached in a conversation at the end of June 2015. The letter proposes an exchange of engines, but does so as a form of settlement of the dispute and not in reliance on any oral agreement to do so of 29 June.
- The failure of Mr Dinan, the defendant’s solicitor, or anyone on behalf of the defendant to refer to the alleged agreement of the 29 June to exchange engines on which the defendant now relies is telling.
- That is especially so in circumstances where Mr Daley, the other party to the alleged conversation, has died and so is unable to give any contrary evidence. Such circumstances requires an especially careful examination of Mr Dinan’s evidence about his conversations with Mr Daley. In Eyota Pty Ltd v Hanave Pty Ltd McLelland CJ in Eq referred so such an issue in these terms:
“… the Master relied on the principle exemplified by Plunket v Bull (citation omitted) that, in a claim based on communications with a deceased person, the Court will treat uncorroborated evidence of such communications with considerable caution.”
- His Honour then referred to the particular significance of a party, in such circumstances, not calling any available corroborative evidence. It is not suggested by either party that there is any corroborative evidence in this case, but in my view, the failure of Mr Dinan, or anyone associated with the defendant, to have referred to the alleged agreement in the significant volume of contemporaneous correspondence is of great importance.
- I do not accept Mr Dinan’s evidence of the conversation he says he had with Mr Daley. Instead, I conclude that the defendant’s removal of the replacement engine, and placing it in the box, for transportation to the defendant, was not because of any agreement in a conversation between Mr Dinan and Mr Daley to exchange engines. It merely reflected that the defendant had agreed to send the engine back which would have ended the rental arrangement between them.
- What a pity the defendant did not follow through with that sensible intention. If it had, the engine would have been in the plaintiff’s possession by early July 2015. It may be that the original engine would by now have been returned to the defendant, though that is mere irrelevant speculation. But the plaintiff’s claim would have been limited to one for rent for a very much more limited period than it now seeks.
- A further aspect of this factual finding is that it necessarily causes me to view Mr Dinan’s evidence with some scepticism. When giving evidence he had, by my assessment, an impressive demeanour and I was initially inclined to believe him. Careful examination of his evidence about the alleged 29 June conversation, and of the contemporaneous documents, caused me to change that belief.
- The question whether an agent who has made a contract on behalf of his principal is to be deemed to have contracted personally and if so the extent of his liability, depends on the intention of the parties, to be deduced from the nature of terms of the particular contract and the surrounding circumstances, including any binding custom. See Bowstead and Reynolds on Agency 21st ed., at 9-005 from which this statement of principles is taken.
- In this case the identity of EuroTec was well known to the defendant. Mr Dinan described each of Mr Koch and Mr Daley as telling him the plaintiff was EuroTec’s agent. It was clear the plaintiff was to do no work on the engine, beyond shipping it to EuroTec. It also was effectively a post-box for quotes send by EuroTec, forwarding them to the defendant for acceptance. There was no suggestion that the defendant was to pay to the plaintiff, or anyone, anything beyond the quote by EuroTec. The plaintiff did not represent anything to the defendant at the time the contract was made, other than had been represented by EuroTec, as the defendant knew.
- In the circumstances I accept the contract was made with the plaintiff only as the identified agent of EuroTec and the circumstances were not such as to make it personally liable for delay or neglect by EuorTec in repair of the original engine.
- The fact the plaintiff also rented the replacement engine to the defendant, having itself rented it from EuroTec, for a lesser sum, does not influence my assessment of that situation.
- In the circumstances I find the agreement for repair of the engine reached in February 2014 was for EuroTec to repair the engine. The plaintiff acted only as an agent for EuroTec. It did not become responsible for any breach of the contract to repair the engine by EuroTec. The non-return of the original engine in a timely fashion did not justify the defendant in retaining possession of the replacement engine.
- The defendant delivered the original engine to the plaintiff, but only for the plaintiff to arrange for it to be transported to EuroTec in America. It was never contemplated that, thereafter, the plaintiff would in any way be involved in the inspection or repair of the engine. That was, as Mr Dinan agreed in evidence, to be done by EuroTec. The plaintiff was not qualified, as Mr Dinan knew, to carry out level four repairs on the engine. Such qualification was required to repair the engine after a hot start.
- The circumstances therefore show that the bailment between the plaintiff and the defendant terminated upon that delivery to EuroTec being effected. The liability of the plaintiff to the defendant in bailment ceased on such delivery and did not depend on the conduct of EuroTec thereafter.
- In Westrac Equipment Pty Ltd v Owners of the ship “Assets Venture”. Lee J said the question of whether a variation in the bailment relationship, i.e. a passing of the obligation of bailee from one bailee to a sub-bailee, will thereafter end the obligation of the original bailee “will depend on the nature of the transaction undertaken and relevant facts including the participation in and acceptance of the transaction by the original bailor”.
- In this case I conclude the obligation of the plaintiff to take appropriate care to ensure the safety of the engine ended on its safe delivery to EuroTec. At all times the defendant knew that EuroTec was to inspect and repair the engine and that no part of that function was to be undertaken by, or supervised in any way by, the plaintiff. The defendant knew the plaintiff would have nothing to do with the engine after it was safely delivered to EuroTec in America. The defendant knew of, an accepted, that arrangement.
- In his written submissions counsel for the defendant refers to the observations of Lee J at paras 44 and 45 in the Westrac Equipment case. In that passage his Honour noted that if the goods were sub-bailed to an independent contractor, then the subbailee cannot avoid liability for loss or damage by asserting that the cause of the loss was the act or omission of the independent contractor.
- But that statement of principle is qualified by his Honour’s observations at para 46 to which I have already referred. The circumstances of this case establish, in my assessment, that the act of safely passing the goods from the plaintiff to EuroTec constituted a termination of the original bailment of the goods to the plaintiff, for the reasons I have identified.
- The defendant’s counsel submits that the specific requirement of the contract that the engine be delivered to the plaintiff, and then transhipped to EuroTec, makes the plaintiff liable for loss suffered even after delivery of the goods to that company. I accept that the plaintiff would be liable for loss if it had occurred during such transhipment, for example by negligence of an independent contractor carrying out the actual transportation of the goods. It could not in this case be said the parties contemplated that the delivery of good to an independent carrier effectively terminated the plaintiff’s obligation as bailee.
- But that is not the situation here.
- I do not accept the plaintiff’s obligations extended to liability for any problems or delays in the repair of the engine.
- Subject to the issue of whether the interest claimed, and default rental rate, are illegal penalties, to which I shall shortly turn, there is no real dispute about the plaintiff’s calculation of the sum due in the event the defendant was found liable, as I have found.
- Under the written agreement:
- (i)The plaintiff was entitled, in the particular circumstances of this matter, to a base rental of $US 8,800 per month, being 40 hours minimum usage at $220 per hour, plus GST.
- (ii)The plaintiff was also entitled to interest under cl 9 of the agreement at 18 percent per annum, but only on amounts unpaid “within 10 days of the invoice date”;
- (iii)The plaintiff was entitled to a late return rent, commencing on the 30th day after termination of the agreement, at the rate of 150 percent of the daily rent charge for each day the equipment remains unreturned.
- In this case, no invoices have been rendered only for the periods January to March and April to May 2015, being invoices 5745 and 5936. The plaintiff’s counsel accepts that in the absence of any invoices interest at 18% is not claimable except with respect to those two earlier invoices. The plaintiff instead claims interest in accordance with District Court Practice Direction No. 6/2013 in respect of the other sums due.
- Interest at the higher rate is also only sought up to date of the issue of proceedings.
- The plaintiff submits the rental agreement was terminated by the solicitor’s letter of 22 May, effective 1 June. Consequently late return rent is sought for the whole of the period since the first of July 2015, being 1 month after the termination of the agreement. Having regard to the base rental of $US 8,800 per month, rental of $ US 13,200 is therefore sought for that period.
- The plaintiff’s claim is formulated in a separate document comprising part of the plaintiff’s submissions entitled “Loss Claim by Plaintiffs” and is as follows, after making due allowance for the period from date of trial to the current time:
Period 1/1/15 to 31/3/15 as per invoice 5745 $29,040.00
Period 1/4/15 to 30/5/15 as per invoice 5936 – two months $19,360.00
Subtotal $48,400.00 $48,400.00
Interest at 18% -
On invoice 5745 to 26/1/16 $4095.52
On invoice 5936 to 26/1/16 $1862.25
Interest on both invoices to 5/12/19 $10,373.91
Subtotal for interest $16,331.68 $16,331.00
Late return rental period 1/7/15 to 30/11/19 – 53 months at
$ US 13,200 per month $699,600.00 $699,600.00
- No interest is claimed on any of the late return rental because of the requirement that interest is only payable upon non-payment, for a period in excess of 10 days, from the date of any invoice.
- Using a conversion rate of $ US 1.00 equals $0.6529AUD (as at 25 May 2020) the claim of $764,331.00 amounts to a figure of $1,170,670AUD.
- Since 30 November, and additional 5 months rental, and interest, has also accumulated.
- It can be seen that even if the 18% interest on the two invoices, and the late return rental rate, were not invoked because of the submission concerning penalty rates, the plaintiff’s claim would still exceed the jurisdictional limit of the court, as damages would then be calculated as follows.
Invoice 5745 and 5936 $48,400.00
Rental 1/7/15 to 30/4/20 at $8,800/month & GST $561,440.00
Interest on invoiced amount as per Practice
Direction from 30/6/15 to 1/5/2020 (for simplicity) $81,640.90
- Using the same exchange rate, this amounts to a figure of $984,960.79 still well in excessive of courts jurisdictional limit. Indeed even without any interest allowance the sum for rental alone of $US609,840 amounts to $934,048AUD.
- The argument concerning penalty provisions in relation to late return rental and interest at 18% is therefore largely academic, since even without the benefit of those provisions, the claim would exceed the jurisdiction of the court.
- Nevertheless, I shall briefly consider it, not the least because of the defendant’s additional argument that the rental was only due for the limited period up to Dec 2016 in any circumstance, thus significantly limiting the defendant’s potential liability.
- Although not really an argument about whether the provisions is a “penalty”, the defendant first submits that the late return rental applies only if, having regard to the terms of cl 2 of the written agreement, there is a terminations of the agreement. Counsel submits that, in the circumstance of this case, the solicitor’s letter of 22 May:
- (i)Makes no mention of termination;
- (ii)Contains no language giving rise to the bringing an end to the rental agreement;
- (iii)Constitute written notice as to default but there was no subsequent termination of the agreement as required by cl 2 and cl 8 of the Agreement.
- Clause 2 contains the definition of late return rental. It is in these terms:
LATE RETURN RENT. Commencing on the 30th day after the termination of the Agreement, Lessee shall pay a per day late charge in the amount of one hundred fifty percent (150%) of the Daily Rent Charges set forth in paragraph F above calculated for each day the Equipment remains unreturned to Lessor and for each day after return that is required to restore the Equipment to the return condition required by paragraph 3 below.
- Clause 8 is in these terms:
“DEFAULT. If the Lessee fails to
- (i)pay any some when due,
- (ii)return the Equipment in a timely manner, or
- (iii)observe, keep or perform any other provision of this Agreement,
such failure of any of the above continues for ten (10) days after receipt of written notice….
it shall be a default hereunder and Lessor may, in addition to any other rights and privileges contained herein or granted by law, terminate this Agreement and/or take possession of the equipment, without demand or notice, wherever the same may be located, without any court order or other process of law. The Lessee herby waives any and all damages occasioned by such taking of possession. No right or remedy exercised by Lessor is exclusive of any other right or remedy herein or provided by law, but each should be cumulative on every other right or remedy now or hereafter existing at law, and may be enforced concurrently or not, or from time to time, as lessor may determine.
Notwithstanding termination of this Agreement, Lessee shall remain liable for the daily rate for the balance of the initial term described in paragraph D PLUS Lessee shall remain liable for any and all expenses of collection including reasonable attorney’s fees and return of the Equipment to Lessor and for any repair to good and workable condition.
- The reference to termination of the agreement in clause 8 reflects the similar wording of the late return rent provision, which accrues only from the thirtieth day after determination of the agreement.
- The plaintiff’s solicitor’s letter of 22 May is at tab 28 of the trial bundle. It asserts that the defendant was in default of the agreement by not paying the invoices rendered. The letter indicates that, if not paid by 28 May, the solicitor had been instructed to commence proceedings for recovery without further notice.
- Subsequent correspondence does not make clear whether the plaintiff terminated the agreement. The solicitor’s correspondence of 16 June (tab 33), for example, refers to the plaintiff taking enforcement proceedings, but did not refer to termination.
- The solicitor’s letter of 30 June (tab 35) also sets out relevant history but again does not indicate any intention to terminate the agreement or any assertion that it had been.
- On 6 July, the solicitor sent a further letter (tab 38) enclosing a notice to the defendant pursuant to s 123 of the Personal Property Securities Act, 2009, which asserted that, in default of the agreement of 2 April 2014, the defendant “has neglected or refused to pay invoices that are due and payable”. Neither the notices nor letter indicate an intention to terminate the agreement. It was a demand to reposes the engine on the following day.
- On 30 July, the solicitor noted the defendant’s failure to comply with the notice and indicated that the defendant “actively impeded (the Plaintiff’s) collection of the engine”.
- As I have previously indicated on 6 August 2015 Minicozzi Lawyers responded on the defendant’s behalf. I referred to that letter earlier. On the same day, Cleary & Hoare responded (tab 43) noting the defendant “does not dispute that (the Plaintiff) is entitled to possession of the engine”.
- The defendant therefore first submits that the late return rent clause has not been enlivened because there has been no termination, a requirement of the contract before such provision is enlivened.
- I accept that the letter did not terminate the agreement.
- Furthermore, the defendant’s counsel submits that to impose the late rental would be to impose a punishment on the defendant for its non-payment of rental due to the plaintiff. He refers to observations Lord Dunedin in Dunlop Pneumatic Tyre Company Limited v New Garage and Motor Company where Lord Dunedin proposed relevant considerations in assessing whether a clause amounts to a penalty.
- It is in my view not necessary to consider his Lordship’s observations in detail, other than to note that he included as a relevant consideration whether a provision can be seen as disproportionately extravagant or unconscionable and whether it is a genuine pre estimate of damage.
- There is no evidence to suggest that the penalty rate was a genuine pre-estimate of damage. The rental of $8,800 per month can be seen as an applicable market rent. Indeed the rental paid by the defendant to subsequently rent a third engine, admittedly from a related company was, at a lower monthly rental, although it was said to have used the $8,800 as a market guide. The rental paid by the defendant to the plaintiff is the best evidence of market rental.
- In such circumstances, a claim of $13,200 does not seem to me to be a genuine pre estimate of damage.
- Moreover, it is strongly arguable that to allow such a claim would be disproportionate and extravagant. I make those observations having regard to the duration of the obligation, the fact that there was no “downtime” or period without receipt of rent as might occur, for example, if the engine had been returned to the plaintiff and it had then sought to rent it out to others. The fact the engine was in April 2014, lying idle in the plaintiff’s premises supports that view.
- I also conclude a claim for 18 percent interest is extravagant having regard to significantly lower current interest rates, even in 2014 at the time of this contract.
- Accordingly, so far it is relevant, I would determine that the late return rental and 18 percent interest provisions, constitute penalties.
Rental After December 2015
 The defendant’s submission that it is only liable for rental of the replacement engine up to 29 November 2015 because, after that time, it became effectively unusable, or, to use the wording of the defendant’s pleading, “unfit for the purpose of being used as a Loan Engine” because of the need to service it, is without foundation and can be seen as a mere legal contrivance. The reason any scheduled overhaul of the engine could not be effected was solely because the defendant had possession of it and refused to return it to the plaintiff. Moreover, it does not seem the defendant, at any time, advised the plaintiff of that need or requested the plaintiff to effect any such overhaul.
- Having regard to my findings it is appropriate to address the issues formulated by the defendant’s counsel in paragraph 5 of his written submissions as the key issues to be determined in this way:
- (1)The relevant terms of the agreement of April 2014, relating to the replacement engine were those set out in the written lease agreement. In addition it was agreed the original engine was to be sent by the defendant to the plaintiff; which was then to arrange for the engine to be transported to EuroTec in America. EuroTec was to there effect appropriate repairs to the engine before returning it to Australia. Although it might well have the shipped it again to the plaintiff, to be then sent by the plaintiff to the defendant, that matter had not then been specifically agreed. Issues about the final return of the original engine were thus subject to further agreement being reached about that issue. The defendant might have agreed with EuroTec for the engine to have been shipped directly to the defendant.
- (2)It is not necessary to determine all terms implied into the agreement about the original engine in order to resolve this matter.
- (3)There was no oral variation of the written rented agreement on or about 29 June 2015 between Mr Dinan and Mr Daley. Mr Dinan’s evidence about such a conversation is specifically rejected.
- (4)There was a relationship of bailment between the plaintiff and the defendant in relation to the original engine, but that relationship meant only that the plaintiff would be liable for any breach arising from the shipment of the engine to EuroTec. Upon the engine being safely delivered to the principal to the contract to repair the engine, EuroTec, that relationship of bailment ceased.
- (5)There was no breach of bailment by the plaintiff.
- (6)The defendant does owe rental payments to the plaintiff, up to the current time, but calculated without regard to the provisions for 18 per cent interest or late return rental which constitute unenforceable penalties.
- (7)The plaintiff is not in breach of its agreement with the defendant and so does not owe the defendant any sum in damages.
- (8)I will, in the circumstances, order that the defendant return the replacement engine, described as a Turbomeca helicopter engine bearing serial number 220, to the plaintiff forthwith.
- I will, in the circumstance, give judgment for the plaintiff in the sum of $750,000.
- I will hear any submissions in relation to costs.
 The original email was sent at 10.53 am on 2 April and Mr Dinan’s response at 10.47 am but this is because it was sent to South Australia, half an hour behind New South Wales timeframe. Throughout the documentation similar issues arise with respect to documentation sent from the United States by email.
 (1994) 12 ACSR 785 at 789.
 (19..) 192 ALR 277 at par 46 and 47 per Lee J.
 As per attached interest calculation, completed by plaintiff’s solicitor.
  A. C. 79.
- Published Case Name:
Pacific Crown Helicopters Pty Ltd v Helistar Aviation Pty Ltd
- Shortened Case Name:
Pacific Crown Helicopters Pty Ltd v Helistar Aviation Pty Ltd
 QDC 278
10 Jun 2020