AVIATION UTILITIES PTY LTD -v- KAHU NZ LIMITED [2026] WASCA 46 (16 April 2026)

1. The contractual arrangements at the heart of this case may be summarised as follows.
2. DFES is a member of the Australian Fire and Emergency Service Authorities Council Ltd (AFAC). The National Aerial Firefighting Centre (NAFC) is a business unit of the AFAC. On or around 27 October 2021, the AFAC entered a Contract for Services with United (Head Contract).[1] This contract was entered by the AFAC (acting through the NAFC) on its own behalf and on behalf of each of its members.
3. The services which the Head Contract required United to provide were described in Schedule 1. United was to supply two Black Hawk helicopters for use in firefighting services. The registration and year of each particular aircraft were identified in the Schedule. Each helicopter was to be fitted with a Helitak FT4500L tank as the primary firebombing delivery system. The helicopters were required to use an SEI Bambi Bucket BBX 7590 PF as a secondary, backup or ancillary firebombing delivery system. The nominated operational base for each helicopter was Serpentine in Western Australia.[2]
4. Schedule 2 of the Head Contract specified the service periods and availability requirements. Each helicopter was to be absolutely available during summer, over a period of 105 days. The helicopters were to be available otherwise on an ad hoc basis, as agreed.[3]
5. Clause 4.2 of the Head Contract provided that the term of the Head Contract would conclude on 30 June 2024. In other words, the Head Contract covered three summer seasons ‑ 2021/22, 2022/23 and 2023/24. Clause 4.2 also provided the option for the Head Contract to be extended for up to two terms of one year each, 'in the absolute discretion' of APAC/NAFC.[4]
6. Prior to entry into the Head Contract, APAC/NAFC had written to United by letter dated 30 August 2021, to indicate that United's tender proposal had been accepted. In accordance with cl 4.1(b) of the Head Contract, the Head Contract was taken to have commenced on 30 August 2021.[5]
7. Kahu had been part of the proposed tender submitted by United. That is a result of Kahu owning and operating one of the Black Hawk helicopters identified in the tender, which was later referred to specifically in Schedule 1 of the Head Contract. Upon United receiving notice that its tender had been accepted, it then entered a contractual arrangement with Kahu regarding the provision of Kahu's Black Hawk helicopter for the purpose of performing the Head Contract. This was achieved by a letter agreement (Kahu Contract) sent by United to Kahu on 1 September 2021, which was signed by the director of Kahu (Robert Mark Law, generally known as Mark Law) on 2 September 2021.[6]
8. The Kahu Contract provided for the exclusive 'cross hire' of Kahu's Black Hawk helicopter to United for the three seasons provided by the Head Contract, as well as for any of the two subsequent seasons where the option to extend the Head Contract was exercised.
9. The Kahu Contract was stated to be made upon 18 conditions. The first six conditions were as follows:[7]
   1. This agreement is conditional upon the NAFC Contract being entered into. United Aero Helicopters will notify Kahu as soon as this has occurred.
   2. The NAFC Contract provides for termination or reduction in certain circumstances. This agreement will similarly terminate or be reduced on termination or reduction (as the case may be) of the NAFC Contract.
   3. Kahu must study the entirety of the NAFC contract and comply with all requirements and conditions of the contract specifications. Unless stated in writing otherwise, United Aero will assume Kahu is in full compliance. The cost of compliance is to be the responsibility of Kahu.
   4. United Aero Helicopters, being the contract holder is the only point of contact on all matters relating to NAFC, its Members and State and Territory Agencies.
   5. United Aero Helicopters will check fly all pilots for general flying ability and airspace familiarisation.
   6. Aircraft shall at all times be operated in accordance with the United Aero Helicopters Operations Manual and the Kahu Operations manual where applicable and in accordance with the terms of the contract. Kahu will supply United Aero with their most recent and updated Operations Manual and Kahu flight crew will be expected to be familiar with and comply with the requirements of the United Aero Operations Manual.
10. On appeal, the critical provisions which United say were breached by Kahu, entitling them to terminate the Kahu Contract, are conditions 3 and 4.

1. The trial judge found that Kahu had breached the Kahu Contract on seven occasions across the 2021/22 season. However, his Honour did not consider that the nature of these breaches, individually or collectively, justified termination of the Kahu Contract by United. We will refer to each of the seven breaches, before considering the grounds of appeal.
2. In understanding the breaches, it is helpful to appreciate that neither United nor Kahu were large organisations. United had two directors (Jim Norrie and Sam Borg), who generally resided in the Eastern States. Kahu had one director, Mark Law, who also acted as the primary pilot for the Black Hawk helicopter operated by Kahu. Mark Law relocated to Serpentine in Western Australia during the 2021/22 bushfire season, but was otherwise generally resident in New Zealand. As well, his two brothers (Peter Law and David Law) were also pilots. United employed Peter Law, while David Law was employed by Kahu. United also employed other pilots, including Brock Hawes and Charlie Elliott.

1. On 22 December 2021, the Kahu helicopter performed a demonstration flight at the commencement of the 2021/22 bushfire season. This consisted of collecting water using the Helitak tank from a dam in Kings Park, and then dropping the water on an oval at Irwin Barracks, which is a military base a short distance away. This was repeated three times. The pilot for the aircraft was Mark Law. He had Brock Hawes as co‑pilot and Sam Borg as a passenger.
2. During the descent on the first pass to drop the water, the caution lights indicating a drop in oil pressure momentarily became illuminated on the helicopter's dashboard. When the helicopter returned to the Serpentine base, Sam Borg told Mark Law that they had exceeded an operational limitation of the aircraft due to the way in which Mark Law had been flying, and this had been unnecessary to get the job done. In Mark Law's evidence, he said that he did not seek to argue with Sam Borg, but that he did not think he needed to modify his flying style.
3. The trial judge made the following particular findings about the incident:[8]

The demonstration flight involved three trips from Kings Park to pick up water and drop it [on] an oval at Irwin Barracks. Mark Law was the pilot and Mr Hawes was the co‑pilot. Mr Borg sat behind Mark Law. On the first trip during the descent for the drop on the oval, it is probable that the two engine oil pressure lights went on, which caused the master caution light to go on and led Mr Hawes to call out 'master caution oil pressure'. The oil pressure lights were illuminated for only a matter of seconds before the issue resolved itself, and the lights went off. At that point, Brock Hawes manually turned off the master caution light. The incident most likely reflected some degree of aggressive flying and unwarranted exuberance on the part of Mark Law. The incident did not present any danger or emergency. Nobody involved considered at the time that there was any imminent danger. It is likely that Mark Law responded to Mr Hawes' call by making some reference to the illumination having happened before so as to minimise its significance. The flight and the subsequent two flights continued without incident. After the demonstration flight and the return to Serpentine, Mr Borg discussed the demonstration flight with Mark Law and in the course of that discussion told Mark Law, in effect, that in respect of the first flight, he thought Mark Law had flown the helicopter in a manner that unnecessarily exceeded the limitations of the aircraft. Mark Law did not express agreement or disagreement with Mr Borg's comment. Mr Borg considered that he had responded to and dealt with the incident in an appropriate manner, and that it did not require any further action. Mr Borg did not suggest, and in my assessment, likely did not consider at the time, that any issue arose of a breach of the Kahu Contract.

1. The trial judge later said that he considered that the first pass in the demonstration flight was undertaken with unnecessary exuberance and aggression, and that testing the limitations of an aircraft necessarily compromises safety.[9] Consequently, the trial judge considered that Mark Law was 'strictly in breach of the relevant requirements of the [Head] Contract and the Operations Manual'.[10] The trial judge considered that Kahu likely breached clauses 3 and 6 of the Kahu Contract. However, his Honour went on and said that, 'while this caused [Sam] Borg some temporary concern, it was a minor breach. Indeed, neither [Sam] Borg nor anyone else at United at the time likely turned their mind to whether it was a breach'.[11]

1. On 9 February 2022, Mark Law posted a photograph on the Kahu Facebook page of himself in the Black Hawk helicopter operated by Kahu. The photograph showed the DFES communication frequencies written in crayon on the windshield. The photograph was captioned as follows: 'the scribing on the window is a quick way to record important details from command and control whilst working on the fireground'.[12]
2. A senior representative of DFES (Adam Bannister) learned of the Facebook post, and emailed United, saying that the post represented 'a very serious breach of DFES media protocols as well as release of critical operational communication channels'.[13] The trial judge remarked that DFES were obviously sensitive to the frequencies disclosed in the post, and also the identification of the aircraft number. His Honour considered that the Facebook post rendered United in breach of the Head Contract. Consequently, making the post was a breach of clause 3 of the Kahu Contract by Kahu.[14]
3. Upon Mark Law being informed that DFES was concerned about the photograph, the post was immediately removed. There was no further breach of the social media protocol by Kahu after that. However, there were sharp words between Jim Norrie and Mark Law on 10 or 11 February 2022. The trial judge found that Mark Law raised a separate issue concerning the fact that the Helitak tanks had been making inadvertent water drops, and that he wished to obtain a letter from Helitak which exonerated Kahu from any liability in the event that his concerns about inadvertent water drops materialised. Mark Law threatened to ground the Kahu Black Hawk unless Helitak provided such a letter by 9.00 am the following day.[15]
4. The trial judge summarised the interactions which occurred in the following way:[16]

There is no doubt that Mr Norrie's tone and approach was angry and scolding. In light of the fact that Mark Law accepted that his conduct amounted to a breach of his obligations, his response in threatening to ground his helicopter in the absence of an assurance from Helitak was unduly reactive and churlish. Mark Law's inability to let go of his view of the benefits of social media in his communications with United, even though he immediately removed the Facebook post and accepted his conduct was wrongful, served to frustrate and irritate United further, and again exacerbated the tensions in the relationship.

1. On 2 February 2022, after returning to the base in Serpentine following a fire incident at Nambeelup, Mark Law noticed that the battery cover on Kahu's Black Hawk helicopter was missing, but he could not account for how this had occurred. The most probable explanation is that the fasteners for the cover became loose, and it flew off during the flight. However, nobody saw this occur. As well, it was unclear whether Mark Law or another person (Charlie Elliott) was the pilot in charge of the flight on that day.[17]
2. The trial judge found that the battery cover likely flew off during the flight on 2 February 2022 when Charlie Elliott and Mark Law were the pilots. Other than by replacing the missing cover, no one at Kahu or United did anything further about the incident. In particular, no one reported it to any regulatory authority.[18]
3. The trial judge concluded that both Charlie Elliott and Mark Law had an obligation to report the loss of the battery cover.[19] He then said:[20]

Kahu's failure to report the incident was inconsistent with the obligation under clause 5 of the [Head] Contract and therefore was a breach of clause 3 of the Kahu Contract. The fact that no one, including no one at United, ever reported the incident indicates that although there was a breach, it fell well short of a breach sufficiently serious to deprive United of the substantial benefit of the Kahu Contract. It was therefore not a breach that entitled United to terminate the Kahu Contract. In any event, United elected to continue with the Kahu Contract notwithstanding the breach.

Fourth breach: Failure to fill in flying time records

1. The trial judge found that Mark Law did not fill in his flying times on the Air Maestro system, which is a software program used in the aviation industry to record flight information, as required from about 29 January 2022 to about 29 March 2022.[21] Mark Law said that this was because of difficulty accessing the internet from the Serpentine base, although there was a suggestion that he would have been able to access internet from a nearby café had he wished to do so.[22] Nevertheless, Mark Law went back and filled in all of the Air Maestro flying time records on around 30 March 2022. The trial judge found that there was no evidence of any concern expressed about that by anyone at the time.[23]
2. The trial judge made the following findings about the failure to record flight and duty times:[24]

In the circumstances, I consider that Kahu, through the action of Mark Law, failed to meet the requirement of the Operations Manual in respect of time recording. Some leeway was permitted under the Operations Manual and by Mr Borg in his email [of 10 February 2022]. But Mark Law's delay in the circumstances went beyond any permitted indulgence. By doing so, Kahu was in breach of clause 6 of the Kahu Contract. It may be accepted that time recording is an important obligation. However, given the terms of the Operations Manual and its express tolerance for the 'updating' of time records, it does not appear to me that Mark Law's delay was a sufficiently serious breach to entitle United to terminate the Kahu Contract. That is reinforced by the content and tone of Mr Borg's email of 10 February 2022, and the absence of any real concern expressed by United at the time. The breach was not such as to go to the root of the contract, or substantially deprive United of its benefit. Once again, and in any event, United plainly elected to continue with and thus affirm the Kahu Contract notwithstanding the breach.

Fifth breach: Debriefing comments and discussion with DFES representative

1. On 24 January 2022, Mark Law provided a debriefing about an incident which occurred the day before when the Kahu Black Hawk helicopter affected a woman who was taking photographs while the helicopter filled its tank from a water source. The Kahu Black Hawk helicopter created downwash during the process of refilling its tank, and this led to the woman falling over. The debriefing took place via a video link. There was a DFES officer on the video link. Mark Law apparently said that when the woman fell over, 'the poor lady went up to over her breasts in water'.[25]
2. A DFES officer (John Landwehr) visited the Kahu pilots at their Serpentine accommodation a day or two later, and told them that the reference in the debriefing to a woman's breasts had created an issue, and that it had caused offence due to the use of the word 'breasts'. Mark Law said that this would not happen again, and he considered that John Landwehr had undertaken that the matter would go no further. However, John Landwehr mentioned the incident a short time later to Fiona Wedenig, who was United's operations and safety manager based in Western Australia. John Landwehr considered that Fiona Wedenig ought to be informed about what had occurred.[26]
3. Subsequently, Mark Law discovered that John Landwehr had spoken to Fiona Wedenig, contrary to the expectation of Mark Law, that the matter would go no further. Mark Law told Fiona Wedenig that he proposed to speak to John Landwehr about the fact that he had 'broken his word', and Mark Law was intending to sort out the matter 'man‑to‑man'.[27] Fiona Wedenig told Mark Law that she considered that it was quite appropriate for her to have been informed about the matter, and requested Mark Law not to confront John Landwehr.[28] Notwithstanding this, Mark Law approached John Landwehr and told him that he regarded the disclosure to Fiona Wedenig as inconsistent with his assurance that the matter would go no further, and that it undermined the trust between them. John Landwehr responded by apologising, and the two men then shook hands.[29]
4. Approximately two days after this had occurred, John Landwehr confirmed to Fiona Wedenig that Mark Law had approached him. John Landwehr was not called to give evidence at trial. However, Fiona Wedenig said that she thought that John Landwehr had been discomforted by the direct approach made by Mark Law. On the other hand, Mark Law said that, to the extent that there had been any difficulty, it had been resolved by the apology given by John Landwehr and a positive relationship had resumed.[30]
5. The trial judge found that the conversation between Fiona Wedenig and Mark Law, where Fiona Wedenig asked Mark Law not to confront John Landwehr, did not bear the character of an order or directive. Moreover, the trial judge found that the initial contact was commenced by John Landwehr.[31] However, Mark Law's subsequent approach to John Landwehr 'man‑to‑man' was a contravention of clause 4 of the Kahu Contract, which required United to be the only point of contact with DFES.[32]
6. The trial judge was evidently unimpressed by the emphasis which was placed upon this incident at trial, as justifying termination of the Kahu Contract. His Honour ended his analysis of the episode as follows:[33]

While there was a breach of clause 4, it fell well short of a breach that went to the root of the contract. United's submission that the breach would itself have justified its termination of the Kahu Contract must be rejected. Further, not only did United respond to the breach by plainly electing to carry on with the Kahu Contract, it took no step at the time to convey or record its view that Mark Law's conduct was so serious that it justified termination of the Kahu Contract or even so much as express the view that a breach of contract had occurred.

1. At the end of the firefighting season, the standard practice was that there would be a debriefing session. United arranged a meeting between a senior representative from DFES (Adam Bannister) and Jim Norrie on 26 April 2022 to debrief the 2021/22 firefighting season, but excluded Mark Law from that meeting. That angered Mark Law who considered that Kahu had 'partnered' with United in 'establishing the business and then helping together [to] run the business'.[34]
2. Mark Law then contacted Adam Bannister and asked whether they could have a short meeting the following morning. Mark Law said that the purpose of the meeting was to discuss a conceptual plan for a new type of bucket/tank, and that he wanted to draw upon Adam Bannister's experience for his concept ultimately to obtain approval from DFES. On the other hand, United maintained that Mark Law was angry at being excluded from the end‑of‑season debriefing session, and he wanted to have a conversation with Adam Bannister in which he intended to raise an issue concerning two inadvertent water drops from the Helitak tank which had occurred from the helicopter operated by United.[35]
3. A meeting proceeded the following morning on 27 April 2022, at a café nearby. It was a regular breakfast venue for people associated with the DFES firefighting project, including pilots and personnel from both United and Kahu. As well, Sam Borg was staying in the same house as Mark Law at the time. The trial judge mentioned these things to demonstrate that there was no covert intention in Mark Law arranging the meeting.[36]
4. After discussing what occurred at the meeting extensively, the trial judge made the following findings:[37]

(a) The meeting was initiated by Mark Law;

(b) Mark Law initiated the meeting on the basis that he wanted to discuss his new tank proposal with Adam Bannister;

(c) Mark Law was motivated to seek that meeting to discuss his tank proposal, at least in part, by his exclusion from the end‑of‑season debriefing, because he was slighted by his exclusion, and he perceived himself to have been central to the season's activities. He wished to remind Adam Bannister of that;

(d) Mark Law did not call a meeting for the purpose of disclosing the inadvertent water drops, but was not averse to the prospect of that arising in the course of conversation;

(e) Adam Bannister was entirely comfortable with the propriety of the meeting on the basis suggested by Mark Law;

(f) Mark Law's proposed new tank was the focus of the meeting;

(g) Mark Law's proposed new tank as discussed with Adam Bannister was at a fairly preliminary stage of development;

(h) The issue of inadvertent water drops arose incidentally at the meeting;

(i) The meeting was not secretive or clandestine. Mark Law must have been aware of the distinct possibility of the meeting coming to Sam Borg's attention;

(j) When the issue of inadvertent water drops arose, far from seeking to discuss it in a clandestine manner, Mark Law immediately beckoned Sam Borg (who had come into the café) over to join the discussion; and

(k) Mark Law's conduct in arranging and attending the meeting was not intended to flout contractual obligations, but rather was a product of Mark Law's single‑mindedness, his perception of the centrality of his own role in the season, and his unwitting insensitivity to United's attitude to him, and the delicacy of its relationship with DFES.

1. The trial judge considered that there was no operational necessity for Mark Law to meet with Adam Bannister, and that the meeting was not part of ongoing operational contact but was a sit‑down meeting after the season had concluded. In the circumstances, notwithstanding the findings set out above, the trial judge was of the view that the meeting with Adam Bannister on the morning of 27 April 2022 constituted a breach of clause 4 of the Kahu Contract.[38]
2. The trial judge also found that United had not consciously withheld important safety information about the inadvertent water drops from DFES. The trial judge considered that United had an entirely reasonable foundation to believe that an adequate solution for that issue had been provided, although the trial judge said that it was regrettable that United did not implement that solution as soon it became available, and before it had experienced inadvertent water drops.[39]

Seventh breach: Follow-up email on 29 April 2022

1. After Mark Law's meeting with Adam Bannister, Mark Law had an angry confrontation with Sam Borg and Jim Norrie that afternoon. Mark Law accepted that, in broad terms, they made it clear that Mark Law was not to have direct contact with Adam Bannister.[40] Notwithstanding this, Mark Law sent an email to Adam Bannister on 29 April 2022, having returned to New Zealand on 28 April 2022.
2. This email commenced with the following paragraphs:[41]

Had a very robust meeting with Jim and Sam. They made it clear to me that I was simply a contractor to them and I shouldn't meet behind their backs. I said I did not meet behind their backs, I just didn't include them for a meeting re a path for tank development. I think the fact you and I have had regular one on one dealings across the season, and they didn't, felt to them like I took advantage of that and treated it like it was our contract, not theirs.

I made it clear [that the meeting] was about my new tank/bucket and we then discussed issues of the [H]elitak tank across the season. I also made it clear that I performed as a contractor to them like I perform as the CEO to my business, my people and others. There was no difference from [sic] in my opinion and I wasn't not going to say nothing when things needed saying.

I'm glad you know everything warts and all. I expect that of my own, like you expect of your people. I said to Sam and Jim, we need help from the likes of DFES and ARENA with the tank issues, as we got treated like a doormat by Helitak and proper support was not there during critical issues.

It was good to clear the air. I know I squeezed you a bit with the position I placed you in (unintentional) but better that way than possibly being involved in something way worse. I value your honesty and professional dealings with me and the teams. We all commented that you did a great job. I trust you will deal with issues now, that you have real time knowledge.

It's onwards and upwards now I'm back. Lots of tank/bucket testing across the next couple months and I hope to have something I've envisioned for a while, come together and be an operator driven, KISS product. I'll keep you updated.

Sing out if you need anything. (emphasis added)

1. In commenting upon this email, the trial judge said that, in substance, it simply traversed what had already happened, but in addition it referred briefly to Mark Law's plans for the further development of his tank idea and indicated that he would keep Adam Bannister updated. This led the trial judge to conclude that this further email transgressed clause 4 of the Kahu Contract.[42]
2. As a result of the meeting between Mark Law and Adam Bannister on 27 April 2022, Adam Bannister was informed that there had been two inadvertent water drops by the United Black Hawk helicopter. He was not happy that these had not been reported to him, and subsequently requested for United to provide a report about these incidents which was submitted on 4 May 2022.[43]
3. United contended that the discovery of the inadvertent water drops by DFES meant that the breach of the Kahu Contract by Mark Law was particularly serious. The trial judge dealt with this in the following way:[44]

United's position largely reduces to the contention that the breach was serious because its relationship with its client was threatened by the fact that Mark Law told Mr Bannister something that United was obliged to tell him, but neglected to do so. It is difficult to see how Mark Law's breach could have deprived United of the substantial benefit of the contract by him doing something that United was required, but neglected, to do. In addition, the reality is that there is little if any evidence that United's relationship with DFES was indeed threatened. Plainly, Mr Bannister was unhappy about United's failure to disclose the inadvertent drops. But that attitude fell well short of any suggestion that the relationship was threatened. Nor objectively was it likely that the non‑disclosure would materially threaten United's relationship with DFES. No damage had been caused by the inadvertent drops. Mr Bannister was aware of problems associated with [the] Helitak tank, including the drop from the Aerotech helicopter earlier [in the 2021/22] season. The use of the Black Hawk helicopters and the Helitak tanks had largely been very successful, notwithstanding the difficulties caused by the COVID‑19 pandemic. A solution to the problem had been identified, and while reasonable doubts might remain, it could reasonably be expected to be effective. It was objectively most unlikely that the relationship would be threatened by the exposure of United's non-disclosure.

Nor was Mark Law's discussion regarding his proposed new tank a matter that substantially deprived United of the benefit of the [Head] Contract. The plan was preliminary. In any event, as I have observed, it is clear in my assessment that Mr Bannister would not have pursued the matter as it evolved behind United's back and would indeed have required any serious consideration to be conducted with United. That is not only a matter that can be assessed retrospectively. A sober analysis of the situation would have made that objectively apparent at the time.

(emphasis added)

1. By letter dated 27 May 2022, United gave notice to Kahu of a contractual breach and requested an explanation. This letter referred to conditions 3 and 4 in the Kahu Contract. It then set out two breaches of the Kahu Contract as follows:[45]

Breach 1

Clause 5.15 specimen contract [ie the Head Contract] relates to Social Media. On 9th February 2022, [United] was asked to attend a contract meeting with DFES for a purported breach of contract. It turned out to be a social media picture posted by you on your Kahu Facebook page showing information deemed to be sensitive by DFES and was logged as a [United] contract breach by them. After our meeting with DFES and subsequent corrective actions taken by [United] which included [a] social media education program and company meetings to ensure there was no reoccurrence, the matter was closed. You accepted responsibility for this contract breach.

Breach 2

Condition 4 UAH-Kahu Agreement [ie the Kahu Contract] & Clause 5.14 specimen contract [ie the Head Contract] relates to Sub-Contracting. On the 27th April 2022, you were observed conducting a meeting with Adam Bannister, Manager Air Operations DFES, which was not sanctioned or approved by [United]. You chose to intentionally keep this meeting from [United] by not providing information of your intent to conduct it. It was subsequently discovered that you were discussing sensitive company information relative to the supply of services, as well as providing information on the development of a concept tank design you are developing. You were informed immediately by [United] that your actions were deemed to be a major breach of contract and that as a subcontractor you are bound by certain clauses in your agreement which specify that [United] is the only point of contact on all matters relating to NAFC, its members and State and Territory Agencies. DFES is a Member and State Agency.

The circumstances of your meeting with DFES, including the confidential nature, suggest that there was an intentional breach and disregard of the contractual obligations. As we have previously pointed out, this is a very serious matter. Accordingly, we are obliged to ask for you to provide in writing an explanation and assurances about the future. If we are not certain your actions in the future will not jeopardise our contract with AFAC and contravene our agreement with you, we will be forced to consider the cancellation of our agreement.[46]

We request that you respond within 14 days from the date of this letter.

1. Mark Law responded by email on 7 June 2022, attaching a lengthy letter of the same date. In effect he explained that he was concerned about the inadvertent water drops by the United Black Hawk helicopter, and whether these generated a safety issue. He then explained that the meeting with Adam Bannister was to discuss the new tank design, but the question about inadvertent water drops came up during the course of that meeting. He also admitted that he made adverse comments about the existing Helitak system.[47]
2. Relevantly, Mark Law said:[48]

The meeting with Adam [Bannister] was to ask about the process of introducing a new tank into the Fire agency. Adam expressly said he was not meeting with me about the contract. He did say he was surprised that I wasn't in the meeting. I said I was also. He asked me about the tank and I said it was crap and there were many issues to work through. We talked about inadvertent drops and [that's] when we discussed ours. He said he hadn't been told about this and that he needed to speak to you both, ASAP, as this was significant. I said Sam [Borg] has just arrived at the [c]afe and so you can speak with him now. He said he didn't want to speak there and would sort it out later. Adam left.

I feel I breached the contract between us in the context of the meeting only. I said I was sorry about that.

He then referred to there having been a 'lot of learnings' from the relationship. He ended the letter by stating:[50]

[It's] ultimately your choice if I stay or go. I can put my hand on my heart and say I tried my best to keep us safe and operational. Yeah we might have some robust discussions but thats [sic] what we do as leaders and people responsible for others. We have come along [sic] way and I am sure we [can] continue on.

Again thanks for the work opportunity and thanks for the opportunity to reply.

1. On 22 July 2022, Jim Norrie telephoned Mark Law and told him that United had resolved to terminate the Kahu Contract and that United would confirm that in writing.[51]
2. By 3 August 2022, Kahu had not received any written confirmation of United's position, as foreshadowed by Jim Norrie on 22 July 2022. Mark Law emailed Jim Norrie stating, '[p]lease send something in writing re your intent, otherwise its Ops Normal as I haven't agreed to pull out of our agreement'.[52] Shortly afterwards Jim Norrie emailed back a letter. That letter was dated 2 August 2022.[53]
3. The substance of the letter was in the following terms:[54]

Thank you for your letter dated 7 June 2022 in response to the matters we had raised in connection with the Agreement.

We appreciate your honesty and the frank approach adopted to the issues concerning the continuation of the agreement. We do not think it is either necessary or helpful to go over old ground or to canvass all the issues raised in your letter.

Having given careful consideration to the matters raised and the options presented in your letter, we have decided that the appropriate course is not to continue with the agreement which will now terminate. This will relieve you of the obligations to relocate aircraft to Australia and acquire a tank for the next season.

We appreciate your efforts and your approach to the matters that have arisen.

1. After that, the question of the termination became litigious. There is no other correspondence from United identifying particular contractual breaches by Kahu which United says justify termination and which it accepts. Likewise there is no further correspondence in which United claims that Kahu has repudiated the contract, which repudiation United says it accepts.
2. On appeal, United only relies upon the sixth and seventh breaches (ie, the Bannister meeting on 27 April 2022 and the follow‑up email on 29 April 2022) as separate contractual breaches which justify termination.[55] Even then, United did not expressly rely on those breaches as the basis for termination at the time they occurred, but so much may be inferred from the correspondence which followed the first letter, as set out above.
3. As for the question of repudiation, the parties appear to have accepted that the Kahu Contract has ended, but the grounds for saying that United accepted a repudiation by Kahu are unclear.

1. There are seven grounds of appeal. The first four grounds concern termination of the contract for breach (grounds 1 and 2) or repudiation (grounds 3 and 4). At the oral hearing of the appeal, the appellant accepted that grounds 1 and 2 were essentially the same.[56]
2. In so far as the appeal is based upon termination of the contract for breach (grounds 1 and 2), the appellant relies upon the conduct of Mark Law in respect of the sixth and seventh breaches referred to above (ie attending the meeting with Adam Bannister on 27 April 2022 and then emailing Adam Bannister on 29 April 2022) as constituting relevant breaches of cl 4 of the Kahu Contract justifying termination of that contract.
3. United alleges the sixth and seventh breaches must be considered in the context of the letter sent by Mark Law on 7 June 2022 responding to United's notice of contractual breach. United says that it is significant that, in the letter, Mark Law does not undertake to abide by the terms of the Kahu Contract into the future, but effectively says that he will continue to do as he pleases. United claims that the trial judge entirely overlooked this context. United claims that the context is highly relevant.
4. It is in that context that the first appeal ground alleges, by paragraph 1(b), that the trial judge erred by not finding that, by reason of the sixth and seventh breaches and the letter dated 7 June 2022:[57]

[Kahu] had breached the [Kahu Contract] in such a manner that it deprived [United] of a substantial part of the benefit of the [Kahu Contract] and that the breach was likely to continue, in that [Kahu] was likely to continue to initiate and make direct contact with Mr Bannister and the DFES on matters relating to the [Head] Contract on any occasion that Mr Law on behalf of [Kahu] thought appropriate, and to do so irrespective of the terms of the [Kahu Contract] (J [301]) and irrespective of any lawful direction by [United] under the [Kahu Contract] to the contrary. (emphasis added)

1. Apart from whether the factual matters alleged in this paragraph can actually be inferred from the sixth and seventh breaches and the letter of 7 June 2022, the nature of the contractual breach identified as justifying termination gives rise to two questions of law:

(a) First, is it sufficient to justify termination for a contractual breach to deprive a contractual party of 'a substantial part of the benefit' of the relevant contract as opposed to depriving the contractual party of the whole, or substantially the whole, of the benefit of the contract?

(b) Secondly, in assessing whether a breach justifies termination, is it legally correct to consider whether the immediate breach 'is likely to continue' or whether that or other breaches of a similar kind are likely to occur in the future, or must the effect of the immediate breach be sufficient by itself to justify termination?

1. In relation to termination for repudiation, by ground 3 the appellant relies upon all seven breaches set out above. This claim is made against the alleged background of Mark Law's determination to act in a manner that he considered was justified. It is contended that ‑ objectively ‑ there was an unwillingness of Kahu to comply with the terms of the Kahu Contract, either at all or save only in a manner substantially inconsistent with Kahu's obligations.
2. Ground 4 asserts an additional basis for concluding that the Kahu Contract had been repudiated by Kahu. This is an alleged likelihood that Mark Law, having been prepared to breach fundamental rules of aviation safety in the past, would do so again. Ground 4 contends that this likelihood, considered either by itself or taken together with the seven breaches of contract identified previously, indicated an unwillingness of Kahu to comply with the terms of the Kahu Contract, either at all or save only in a manner substantially inconsistent with its obligations.
3. Grounds 5 ‑ 7 concern the assessment of damages, if there was a wrongful termination by the appellant.
4. Grounds 5 and 6 concern whether the appellant lost any profit by reason of the termination of the Kahu Contract. The major issue here is the exclusion of certain 'standing' maintenance costs in calculating the profitability of the Kahu Contract for Kahu. If these grounds are established, United claims that no damages are payable and the appeal should be allowed. United made no submission that damages should be recalculated so that a reduced amount of damages would be payable.
5. Ground 7 concerns whether it was correct for the trial judge to apply a discount of only 25% to the profits in the 2022/23 and 2023/24 seasons as the chance of the Kahu Contract being lawfully terminated. The appellant contends that the discount ought to have been in the order of 75%.

When does a right of contractual termination arise?

1. Before considering grounds 1 ‑ 4, it is helpful to refer to a number of basic propositions about when a right to terminate a contract arises.[58]
2. First, a breach of contract by one party may entitle the other to terminate where the obligation with which there has been a failure to comply is an essential term, which is sometimes described as a condition.[59] Whether a term is essential for the purposes of generating an entitlement for a contractual counterparty to terminate the contract if the term is breached may be expressly agreed between the parties, or may be a matter of proper construction of the contract. This was best explained by Jordan CJ in the classic passage from Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd,[60] which has been approved many times since, including in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd.[61]
3. Secondly, if a contracting party is unwilling to render substantial performance of a contract, that is the party evinces an intention no longer to be bound by the contract, or shows that he or she intends to fulfil the contract only in a manner substantially inconsistent with that party's contractual obligations and not in any other way, the counterparty is entitled to accept that the first party has repudiated the contract and that the contract is thereby discharged from future performance.[62] This situation may be described as renunciation.[63] The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, the renunciation either of the contract as a whole or of a fundamental obligation under it.[64]
4. In determining whether one party has renounced the contract or an essential term of the contract, it is necessary to determine the present intention of the party said to be renouncing the contract. However, intention will relate to how that party presently proposes to act in the future, as the whole concept of renunciation concerns whether a party intends to continue to act as if bound by the contract.
5. In Carr v J A Berriman Pty Ltd,[65] Fullagar J referred to a situation where a building owner had announced that he had engaged another contractor to carry out a large part of the building works (consisting of steel fabrication for the construction of a factory) comprised in an existing building contract. This involved a breach of the existing contract, which may itself have justified termination for breach of an essential term.[66] However, Fullagar J dealt with the case as involving renunciation. The inference about renunciation depended upon the building owner's present intention about his proposed future conduct. Fullagar J said:[67]

It is in this state of affairs that the building owner announces that he has engaged another contractor to carry out a large part of the work comprised in the contract. A reasonable man could hardly draw any other inference than that the building owner does not intend to take the contract seriously, that he is prepared to carry out his part of the contract only if and when it suits him. The intention must be judged from acts ... The intention 'evinced' here is an intention not to be bound by the contract. When such an intention is shown, the other party is entitled to rescind the contract. (citations omitted)

1. A contract may be renounced either prior to the time for performance of an obligation under the contract, or when the time for performance has arrived. If the contract is renounced prior to the time for performance of an obligation, the renunciation is called 'anticipatory breach'.[68]
2. Thirdly, if a party is unable to render substantial performance of a contract, or an essential obligation under the contract, this may also give the other party the right to terminate.[69] This may also be described as renunciation.[70] If the time for performance of the contract, or the essential obligation under the contract has not yet arrived, the renunciation may also be described as a matter of 'anticipatory breach'.[71]
3. Fourthly, a breach of contract by one party may entitle the other to terminate where there has been a sufficiently serious breach of a non‑essential term,[72] which may be described as an 'intermediate' term.[73]
4. To be sufficiently serious to justify the other party having a right to terminate for breach of an intermediate term, it is necessary to start by considering the proper construction of the contract and whether the breach is such as to deprive the injured party of a substantial part of the benefit to which that party is entitled under the contract. In addition, but only after the proper construction of the contract and the substantial benefit conferred by it have been considered, it may be appropriate to take into account the seriousness of the breach, the consequences of the breach, the fairness of holding an injured party to the contract and the adequacy of damages as a remedy.[74]
5. For the purpose of identifying whether breach of an intermediate term gives rise to a right of termination, the proper construction of the contract, and identification of the benefit which the contract is intended to deliver, relates to the point at which the contract was entered. Temporally, this is an entirely different question from whether the intention evinced by one of the parties at the time of breach is to remain bound by the contract, such as arises in cases of alleged renunciation.[75]
6. One matter which arises in this appeal is whether there is any difference between a breach which deprives the injured party of a substantial part of the benefit of the contract, and a breach which deprives the injured party of the whole, or substantially the whole, of the benefit of the contract. This question is generated by the way in which the trial judge expressed himself at different parts of his Honour's reasons for decision. In some parts of the reasons, and consistent with the way in which the plurality expressed itself in Koompahtoo,[76] the trial judge referred to a breach depriving United of a substantial part of the benefit of the contract.[77] However, in various other places, the trial judge simply referred to whether the identified breaches by Kahu deprived United of the substantial benefit of the Kahu Contract or substantially the whole of the benefit of the Kahu Contract.[78] At other times his Honour expressed himself in terms of whether the breach went to the 'root' of the Kahu Contract.[79]
7. It ought to be acknowledged that the test for whether a breach of an intermediate term is sufficiently serious to entitle the innocent party to treat the contract as discharged has been expressed in many different ways. While, in this respect, it might be thought that there is an apparent tension between the test of 'substantially the whole benefit' and 'a substantial part of the benefit',[80] it has been explained that:[81]

The difference in expression ... does not, in my opinion, reflect a divergence of principle, but arises from and is related to the particular contract under consideration: they represent, in other words, applications to different contracts, of the common principle that, to amount to repudiation [here used in the sense of a breach entitling the innocent party to terminate] a breach must go to the root of the contract.

1. In Koompahtoo the plurality stated that to describe a breach as 'going to the root of the contract' is a 'conclusory description' that:[82]

takes account of the nature of the contract and the relationship it creates, the nature of the term, the kind and degree of the breach, and the consequences of the breach for the other party.

1. Their Honours equated a breach of a term that so went to the root of a contract with a breach that is 'such as to deprive the injured party of a substantial part of the benefit to which [it] is entitled under the contract' (the judgment of which rested primarily on a construction of the contract).[83]
2. As a matter of law, the appropriate test is the one stated by the plurality in Koompahtoo, namely whether any of the breaches by Kahu deprived United of a substantial part of the benefit of the Kahu Contract. That is the basis on which the plurality decided the case in Koompahtoo.[84] But, consistently with Koompahtoo, this may also be understood in terms of whether the breach went to the root of the contract in the sense explained by the plurality. And further, depending on the contract, there may be no difference in practice between the test of 'a substantial part of the benefit' and the test of 'substantially the whole benefit'.
3. There is a question (which is considered below) about whether the trial judge actually applied the test of whether any of the breaches by Kahu deprived United of a substantial part of the benefit of the Kahu Contract, as expressed by reference to the benefit of this particular contract. In our view, his Honour did so for reasons which we elaborate in relation to ground 1.
4. A second matter of law which arises in the appeal is whether, in the context of whether a breach of an intermediate term gives the innocent party a right to terminate the contract, it is permissible, when considering the seriousness and consequences of the particular breach, to take into account the likelihood of further and separate, but similar breaches of the same intermediate term in the future.
5. The consequences of the breach, and the fairness of holding an innocent party to a remedy in damages, are relevant in determining whether a breach of a term is such as to deprive the innocent party of a substantial part of the benefit to which it is entitled under the contract. It must, however, be remembered that these:[85]

are matters to be considered after construing the agreement the parties have made. A judgment as to the seriousness of the breach, and the adequacy of damages as a remedy, is made after considering the benefit to which the injured party is entitled under the contract. (emphasis added)

1. The appellant placed significant reliance upon what was said by Lewison LJ in Ampurius Nu Homes Holdings Ltd v Telford Homes (Creekside) Ltd[86] in submitting that whether breach of an intermediate term gives the innocent party a termination right, the court may also take into account the prospect of separate future breaches of contract. The appellant emphasised that Lewison LJ said that, in assessing whether the breach gives rise to a termination right, the court must take into account likely future events.[87]
2. At least in many cases, the effect of the appellant's contention is to significantly elide the question of whether breach of a non‑essential term generates a termination right with whether the breaching party has evinced an intention not to be bound by the contract any longer. If the court takes into account the likelihood of possible future breaches of contract, when assessing the seriousness of a breach of an intermediate term, the court is effectively considering whether the breaching party intends to remain bound by the contract, or has evinced an intention not to be bound by the contract.
3. This consequence was expressly embraced by senior counsel for the appellant. He said:[88]

[T]he seriousness of the breach of an intermediate term is capable of being informed [by] the likelihood of there being a repeat of that breach, and one reason why [Y]our Honours would accept that proposition is that [you] would have that part of contract law principle in relation to remedies for breach of an intermediate term, relevantly, the same as the approach to termination for repudiation. Because equally in a termination for repudiation, a relevant consideration is whether or not the conduct of the wrongdoer is indicative of the wrongdoer not being bound by the terms of the contract into the future.

1. In our view, this is not what was intended in determining whether breach of a non‑essential or intermediate term was sufficiently serious to justify termination. The focus of the inquiry is the specific breach giving rise to the question of termination, not the overall intention of the breaching party to remain bound by the terms of the contract. That is why the inquiry is concerned with whether the particular breach 'goes to the root of the contract' or deprives the innocent party of a substantial part of the benefit of the contract.
2. As already mentioned, the plurality in Koompahtoo regarded the possible 'consequences of the breach' as a consideration. There was no mention of consideration of the likelihood that there may be repeated breaches of a similar kind. Also, the plurality expressly stated that termination for breach of an intermediate term should not be regarded as the same as termination based upon contractual renunciation:[89]

A question as to contractual intention, considered in the light of the language of the contract, the circumstances in which parties have contracted and their common contemplation as to future performance, is different from a question as to the intention evinced by one of the parties at the time of the breach, such as arises in cases of alleged renunciation.

1. Similarly, in Wallace-Smith v Thiess Infraco (Swanston) Pty Ltd, Allsop J said:[90]

In any given circumstance, a serious breach going to the root of the contract and repudiatory conduct may both be present, though it is necessary to keep the notions distinct ... Repudiation requires attention to the evincing of any intention not to be bound by the obligations of the contract ... a serious breach of contract warranting termination requires attention to the nature and consequences of the breaches ... . Though, of course, the parties may ... agree upon the essentiality of a term or of a fact. Of course, one body of facts may be both a breach going to the root of the contract and a repudiation. (citations omitted) (emphasis added)

1. As well, having regard to likely future breaches may be a backdoor route undermining the limitations of the doctrine of anticipatory breach, which requires proof of certain matters, such as whether a party would be ready, willing and able to perform at the necessary time, before an anticipatory breach may justify contractual termination by that party.
2. In this context of whether breach of an intermediate term is sufficiently serious to justify termination of a contract, we consider that the reference in various cases to considering likely future events following a breach of contract is confined to considering the consequences of the particular breach under consideration, and does not require any wide ranging consideration of whether the breaching party has evinced an intention not to remain bound by the contract. That position aligns with the way Ampurius and English law is understood by the editors of Chitty on Contracts.[91]

1. In our view the proper construction of the Kahu Contract shows that the benefit which it was intended to deliver to United was the provision of a particular Black Hawk helicopter (with registration ZK HKU) with pilots and other necessary operational staff, for use by United in providing firefighting services to APAC/NAFC pursuant to the Head Contract, for three seasons with the option of two one‑year extensions.
2. For the following reasons, we consider that this is the relevant benefit for the purposes of considering whether any breach of cl 4 of the Kahu Contract, which is an intermediate term, deprived United of a substantial part of the benefit to which it was entitled under the Kahu Contract. As will be seen, we derive the identified benefit under the contract from the proper construction of the terms of the Kahu Contract read and construed in context. However, it is not without significance that the benefit we have identified is consistent with the commercial purpose of the Kahu Contract as pleaded by United. At trial, United pleaded that the 'commercial purpose of the Kahu Subcontract was to enable [United] to meet obligations under the [Head Contract]'.[92]
3. The introductory paragraphs in the Kahu Contract contain the substantive obligation for Kahu to hire a particular Black Hawk helicopter to United. The introductory paragraphs also define the period of the hire contract and the purpose for which the helicopter will be used ('tactical firefighting operations').
4. The intention for Kahu's Black Hawk helicopter to be supplied upon an operational basis is evident from the various conditions attached to the Kahu Contract. In particular, Kahu is responsible for the maintenance of the helicopter (condition 8); the helicopter is supplied with pilots from Kahu (condition 5, 11, 12, 16); Kahu is responsible for transporting the helicopter to the operational base (condition 9); and Kahu is responsible for the operational costs of the helicopter and ensuring that it is properly insured (conditions 10, 12, 13, 14, 15).[93] The provision of equipment, along with operators for the equipment, is sometimes described as a 'wet hire'. This contrasts with a 'dry hire' which only involves the hire of equipment without operators.[94]
5. It is also plain from the introductory paragraphs and clause 1 of the conditions that the purpose of United hiring the Black Hawk helicopter is for use by United in performing its obligations under the Head Contract.[95] Hence, United 'cross hires' Kahu's Black Hawk helicopter (with pilots and operating staff), as it hires the helicopter from Kahu in order to supply it to APAC/NAFC.
6. It is in the context of the arrangement just described that clause 4 of the conditions appears. This is the clause which provides that United:[96]

being the contract holder is the only point of contact on all matters relating to NAFC, its Members and State and Territory Agencies.

1. This clause emphasises that it is United that is the 'contract holder', which provides the services pursuant to the Head Contract, and that it does not do so as a joint enterprise with Kahu. That is, the arrangement with Kahu is a hiring arrangement and there is no partnership or joint venture between United and Kahu to provide firefighting services pursuant to the Head Contract. It is only a matter for United.
2. In this sense, cl 4 delivers a benefit of the contract by supporting the nature of what is contemplated, namely a hire agreement, not a partnership or joint venture agreement. So understood the prohibition against communication with APAC/NAFC and its members is not a free‑standing benefit of the Kahu Contract, apart from the other terms of the contract and the nature of the contemplated arrangement.
3. However, in effect, the appellant characterised cl 4 as delivering a separate contractual benefit in and of itself, rather than looking at the benefit of the Kahu Contract as a whole. The appellant appeared to submit that the communication breaches by Kahu deprived United of a substantial part of the contractual benefit of cl 4, because communications had in fact occurred between Kahu and DFES as a member of APAC/NAFC.
4. The way we prefer to express the benefit delivered by cl 4, for the purposes of assessing whether there has been a breach of an intermediate term entitling United to terminate the Kahu Contract, is slightly broader than the benefit identified by the trial judge, and expressly places the contractual benefit into the context of the whole contractual scheme.
5. The trial judge said:[97]

In my view, taking account of the text of the provision, its purpose and the context of the Kahu Contract, clause 4 meant that contact between Kahu and DFES was to be at United's discretion, and under its control and direction. Kahu could have direct contact with DFES with the approval of United. Approval could be given expressly or tacitly. The necessity for tacit approval is consistent with the absence of a plain and unambiguous prohibition against direct contact in the language of the clause. Generally speaking, direct contact in the course of firefighting operations would be an obvious example of tacit approval. That was well understood by the parties and by DFES from the outset.

Clause 4 on its proper construction permitted direct contact between Kahu and DFES with United's tacit approval, and that approval might be ... quite obviously and objectively inferred in certain circumstances. However, on a proper construction of clause 4, that tacit approval was also capable of being expressly revoked.

1. There was no express challenge to the benefit of the contract determined by the trial judge. However, in order to understand the 'benefit of the contract', it is necessary to appreciate the contractual purpose of the provision in the context of the whole of the contract.
2. For example, in Koompahtoo, the question was not simply whether, properly construed, the clause in that case required the timely production of books, records and financial information. The purpose of the clause was to enable the Koompahtoo Land Council to have relevant financial information for its financial protection, and to ensure that it was able to comply with the requirements of various pieces of legislation.[99]
3. In the present case, the question as to whether any breaches of cl 4 of the Kahu Contract by Kahu denied United a substantial part of the benefit of the Kahu Contract reduces to a question of whether those breaches substantially undermine the operation of the Kahu Contract as an agreement by Kahu to hire out a fully operational Black Hawk helicopter to United, leaving United in a position to administer the Head Contract with APAC/NAFC.

Grounds 1 and 2: Termination for breach of a non-essential term

1. Although the trial judge found that each of the sixth and seventh breaches of the Kahu Contract occurred, his Honour rejected the submission by United that these breaches were sufficiently serious breaches of a non‑essential term to justify United terminating the Kahu Contract.[100]
2. Ground 1 is in the following terms:

In rejecting [United's] contention that [Kahu's] breaches of clause 4 of the contract between [United] and [Kahu] the [Kahu Contract] were sufficiently serious to justify termination of the [Kahu Contract] (J [359] ‑ [368]), the primary judge:

(a) in adopting the incorrect test for a serious and substantial breach, erred in law by asking whether the breach deprived [United] of the substantial benefit of the [Head Contract] (J [361]) or the [Kahu Contract] (J [362]) when the correct question is whether the breach deprived [United] of a substantial part of the benefit of the [Kahu Contract], conformably with Koompahtoo Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115 at [71];

(b) erred in fact and law in failing to find that by reason of:

(i) the conduct of Mr Law in respect of the meeting with Mr Bannister on 27 April 2022 (J [161], [176], [356]);

(ii) Mr Law's email to Mr Bannister on 29 April 2022 following the meeting on 27 April 2022 (J [188] ‑ [189]); and

(iii) the letter of Mr Law dated 7 June 2022 in response to [United's] letter alleging a breach of contract (J [196]);

[Kahu] had breached the [Kahu Contract] in such a manner that it deprived [United] of a substantial part of the benefit of the [Kahu Contract] and that the breach was likely to continue, in that [Kahu] was likely to continue to initiate and make direct contact with Mr Bannister and the DFES on matters relating to the [Head Contract] on any occasion that Mr Law on behalf of [Kahu] thought appropriate, and to do so irrespective of the terms of the [Kahu Contract] (J [301]) and irrespective of any lawful direction by [United] under the [Kahu Contract] to the contrary; and

(c) erred in fact and law in finding that the power to replace Mr Law relevantly bore upon whether the breaches justified termination (J [363]), in so far as he took this matter into account, in circumstances where:

(i) Mr Law had been directed not to contact the DFES but did so in any event (J [161], [188]);

(ii) by his letter of 7 June 2022, Mr Law made it clear he was likely to contact the DFES again whenever he thought it appropriate to do so; and

(iii) the power under clause 11 to replace Mr Law, if considered to be an unsuitable pilot, was not an effective remedy for Mr Law's conduct, as principal of [Kahu], in engaging and continuing to engage in such unauthorised communications.

The primary judge erred in fact and law in failing to find:

(a) that the breaches by [Kahu] of clause 4 of the [Kahu Contract] deprived [United] of a substantial part of the benefit for which it had contracted such that [United] ought not to be left to its remedy in damages; and

(b) that [Kahu] had, by the penultimate paragraph of its letter of 7 June 2022, admitted or agreed that its past and likely continuing breaches of clause 4 were so serious and antithetical to the purposes of the [Kahu Contract] that [United] was entitled to terminate the [Kahu Contract] should it not wish to suffer a continuation of those breaches (J [197]).

1. Accordingly, on termination for breach of contract, United's grounds of appeal raise the following issues for determination:

1. Did the trial judge adopt the incorrect legal test in rejecting United's contention that Kahu's breaches of cl 4 were sufficiently serious to justify termination of the Kahu Contract? (See ground 1(a).) 2. Should the trial judge have held that Kahu's breaches of cl 4 were sufficiently serious to justify termination of the Kahu Contract (in particular because of the objective likelihood of future repeated breaches of cl 4 by Kahu)? (See grounds 1(b) and 2(a).) In that respect there are sub‑issues as follows:

(a) Did, as the primary judge noted in passing at Reasons [363], the power to replace Mark Law relevantly bear upon whether the breaches justified termination? (See ground 1(c).)
>
> (b) Did, by its letter dated 7 June 2022, Kahu admit or agree that its breaches of cl 4 entitled United to terminate the Kahu Contract? (See ground 2(b).)

2. In respect of the second issue, and ground 1(b) in particular, Kahu says that United did not run a case at trial which relied on the likelihood of future repeated breaches of cl 4 by Kahu. Kahu also says that United did not propound an 'admission' case in terms of ground 2(b).
3. For reasons which we have explained, we have concluded that the question about whether any breaches of cl 4 of the Kahu Contract by Kahu denied United a substantial part of the benefit of the Kahu Contract depends upon whether those breaches substantially undermined the operation of the Kahu Contract as a hire agreement for a single operating helicopter by Kahu to United, leaving United unable to administer the Head Contract with APAC/NAFC.
4. That is almost precisely the position which the trial judge reached. His Honour said, in relation to the sixth and seventh breaches:[101]

United's position largely reduces to the contention that the breach was serious because its relationship with its client was threatened by the fact that Mark Law told Mr Bannister something that United was obliged to tell him, but neglected to do so.

1. In our view, that is the correct question, as applied to the particular benefit of the contract in this case. As a result, we consider that the trial judge applied the correct test required by the plurality in Koompahtoo. In this regard, ground 1(a) is not established.
2. The way in which the trial judge addressed the question which he posed was as follows:[102]

It is difficult to see how Mark Law's breach could have deprived United of the substantial benefit of the contract by him doing something that United was required, but neglected, to do. In addition, the reality is that there is little if any evidence that United's relationship with DFES was indeed threatened. Plainly, Mr Bannister was unhappy about United's failure to disclose the inadvertent drops. But that attitude fell well short of any suggestion that the relationship was threatened. Nor objectively was it likely that the non‑disclosure would materially threaten United's relationship with DFES. No damage had been caused by the inadvertent drops. Mr Bannister was aware of problems associated with [the] Helitak tank, including the drop from the Aerotech helicopter earlier [in] the season. The use of the Black Hawk helicopters and the Helitak tanks had largely been very successful, notwithstanding the difficulties caused by the COVID‑19 pandemic. A solution to the problem had been identified, and while reasonable doubts might remain, it could reasonably be expected to be effective. It was objectively most unlikely that the relationship would be threatened by the exposure of United's non‑disclosure.

Nor was Mark Law's discussion regarding his proposed new tank a matter that substantially deprived United of the benefit of the [Head Contract]. The plan was preliminary. In any event, as I have observed, it is clear in my assessment that Mr Bannister would not have pursued the matter as it evolved behind United's back and would indeed have required any serious consideration to be conducted with United. That is not only a matter that can be assessed retrospectively. A sober analysis of the situation would have made that objectively apparent at the time.

1. United claims that the sixth and seventh breaches 'went to the root' of the Kahu Contract, by affecting United's commercial relationship with its client and depriving it of the ability to manage and control that relationship.[103] That claim is not based upon any factual finding made by the trial judge. Indeed, it is entirely contrary to the findings set out in the passage just quoted.
2. United also argues that the trial judge ought to have considered the objective likelihood of future repeated breaches of cl 4 of the Kahu Contract.[104] United submits that, on the evidence, the trial judge ought to have found that it was objectively likely that Kahu would continue to breach cl 4, and that the likelihood of such further breaches was relevant to assessing the seriousness of Kahu's breaches of cl 4.[105]
3. For the reasons explained previously, the prospect of future breaches of cl 4 is not, in our view, legally relevant in determining whether breach of a non‑essential contractual term gave United a right of termination.
4. In any event, we are not able to infer that it is likely that there would have been continued breaches of cl 4. The circumstances of the inadvertent water drops being disclosed to Adam Bannister involved Kahu, through its director Mark Law, disclosing to DFES a matter which United ought to have disclosed. That is not a firm basis for inferring that there would be multiple and many further breaches of communication between Kahu and DFES.
5. United submits that its contention that Mark Law proposed to keep on communicating with DFES is supported by the terms of the letters dated 29 April 2022 and 7 June 2022, when Mark Law in effect said that he would not be prevented from saying things which needed to be said, and he gave no assurances that he would not continue to communicate with Adam Bannister or DFES. In that context, United submits that the only plausible reading of the 7 June 2022 letter was that Mark Law:[106]

was conveying that he felt he had made his position clear as to the role he wanted in being at liberty to communicate with DFES, and United's only option was to take it or leave it. In sum, nothing in Mr Law's words or conduct after the 27 April 2022 meeting gave any indication that he would change his approach and no longer breach cl 4.

1. In our view, the events comprising the sixth and seventh breaches, and the letter of 7 June 2022, need to be understood in the context of a disclosure by Mark Law of the inadvertent drops which ought to have been disclosed by United. It is difficult to infer that Mark Law would have continued to regularly breach cl 4 without that context. That is consistent with the comment of Mark Law in the email of 29 April 2022 that 'I wasn't not going to say nothing when things needed saying'.[107]
2. For these reasons, we do not consider that ground 1(b) is legally or factually correct. In the circumstances it is not necessary to consider Kahu's riposte, on appeal, that United did not run a case below which relied on the likelihood of future repeated breaches of cl 4. Certainly, as senior counsel for United properly conceded at the appeal hearing, the language of predictive judgment was not pleaded.[108] Senior counsel argued that this was a contextual matter, rather than a material fact, and was not required to be pleaded.[109] It is, however, not obvious that United sought at trial any factual finding of the kind it now presses for within ground 1(b).
3. Given our view on grounds 1(a) and (b), it is unnecessary to address ground 1(c). It seems to us that the comments of the trial judge at Reasons [363], which are the object of ground 1(c), were not particularly related to the sixth and seventh breaches of the Kahu Contract. Instead, they concern those breaches which related to the flying operations of Mark Law as a pilot. We are therefore doubtful whether ground 1(c) is particularly relevant to the arguments which have been mounted by United. Certainly, United did not dwell upon this sub‑ground at the oral hearing.[110] In any case, so far as the trial judge made it clear that these observations were only a 'note in passing', the observations were by way of obiter. Any error in terms of ground 1(c) could not be material.
4. At the oral hearing, United accepted that ground 2(a) did not raise any new matter in addition to ground 1.[111] Given that United accepted that ground 2(a) would stand or fall with ground 1, we would also dismiss ground 2(a) for the same reasons we would reject ground 1.
5. As for the contention in ground 2(b), we do not accept that the last paragraph of the letter of 7 June 2022 contained any admission or agreement that Mark Law proposed to continue breaching cl 4, or that he acknowledged that United had a legal right to terminate the Kahu Contract.
6. In our view, the comment in the last paragraph that it was ultimately United's choice if Mark Law stayed or left was a statement that Mark Law was willing to try and continue with the contractual relationship, but that it would require both parties to make an effort in the future. This interpretation of the paragraph is supported by the rest of the content in that paragraph, in which Mark Law refers to the efforts that he has made to ensure that he had done his best to keep 'us safe and operational', and the responsibilities of leaders having robust discussions.
7. For these reasons, ground 2(b) fails.

1. Grounds 3 and 4 allege that the trial judge ought to have found that the Kahu Contract had been repudiated, in the sense of having been renounced, by reason of, among other things, the circumstances of the seven established breaches by Kahu over the 2021/22 firefighting season. United claimed that these breaches evidenced or evinced an intention on the part of Kahu not to remain bound by the terms of the Kahu Contract.
2. Ground 3 is in the following terms:

Further, or in the alternative to grounds 1 and 2, the primary judge erred in law at J [369] ‑ [371] in failing to find that the conduct of [Kahu] relating to:

(a) the breach of clause 3 in respect of the social media post found at J [319];

(b) the breaches of clauses 3 and 6 in respect of the Kings Park demonstration flight found at J [331];

(c) the breach of clause 3 in respect of [Kahu's] failure to report the incident concerning the missing battery cover found at J [338];

(d) the breach of clause 6 in respect of the breach of the 'important obligation' to record time in accordance with the Operations Manual found at J [343];

(e) the breach of clause 4 through the approach by Mr Law to Mr Landwehr found at J [349];

(f) the breach of clause 4 through the meeting arranged by Mr Law with Mr Bannister on 27 April 2022 found at J [356];

(g) the breach of clause 4 through the email sent by Mr Law to Mr Bannister on 29 April 2022 found at J [357],

(collectively Breach Findings) in the context of:

(h) the finding that Mr Law was the sole director and controlling mind of [Kahu]: J [l];

(i) the finding as to Mr Law's single‑minded self‑confidence: J [59];

(j) the findings:

(i) that Mr Law was not prone to delicacy and nuanced judgment;

(ii) that Mr Law approached matters in a more 'black and white fashion'; and

(iii) of Mr Law's strident and almost Manichean approach to issues: J [88];

(k) the findings:

(i) that Mr Law did not accept that the café meeting with Mr Bannister was of itself wrongful;

(ii) that Mr Law rejected the criticisms levelled by Mr Borg of his flying style: J [186]; and

(l) the finding that Mr Law was capable of dishonesty in connection with his record keeping pursuant to aviation regulatory requirements and practice: J [206];

taken together, objectively indicated an unwillingness of [Kahu] to comply with the terms of the [Kahu Contract], either at all or save only in a manner substantially inconsistent with [Kahu's] obligations.

Further to ground 3, the primary judge erred in fact and law in failing to find:

(a) that there was a likelihood that Mr Law, having been prepared to breach fundamental rules of aviation safety, would do so again (Likelihood of Future Aviation Safety Breaches), in circumstances where:

(i) Mr Norrie as the Chief Executive Officer and Mr Borg as the Head of Flying Operations were 'key personnel' within the meaning of section 28 of the Civil Aviation Act 1988 (Cth);

(ii) the effect of the Civil Aviation Safety Regulations 1998 (Cth) was that the 'key personnel' were responsible for ensuring compliance with the civil aviation legislation and maintaining safety standards in accordance with [United's] Operations Manual;

(iii) Mr Law had flown the Kahu Black Hawk aircraft during the first demonstration flight on 22 December 2021 in an unnecessarily aggressive manner in breach of [United's] Operations Manual and which tested the limitations of the aircraft (J [56], [329]);

(iv) the unnecessarily aggressive flying was reflective of Mr Law's flying style (J [56]) and Mr Law did not modify his flying style as a result of the criticism of his aggressive flying on 22 December 2021 by Mr Borg (T 921);

(v) Mr Law failed to fill in his time records for the period of 29 January 2022 to 30 March 2022 (J [125]), which involved a serious obligation relating to safety (J [122]), and a breach by [Kahu] of [United's] Operations Manual (J [343]);

(vi) when Mr Law belatedly did enter his flying time on Air Maestro for 29 January 2022 to 30 March 2022, he entered times which were inconsistent with his aircraft logbook entries;

(vii) Mr Law failed to report the loss of the battery cover in flight to [United's] Head of Flying Operations, or in [United's] safety management system or to any regulatory authority (J [86]) despite the fact that it was a reportable matter (J [336]) which involved a safety hazard; and

(viii) Mr Law operated the Kahu Black Hawk aircraft on 2 November 2022 when he had overflown the aircraft beyond the time when maintenance had become due and the aircraft could not have been lawfully operated. Moreover, Mr Law falsified the aircraft's Technical Log to show that the flight took place in December 2022 after the overdue maintenance had been performed (J [206]);

(b) that the Likelihood of Future Aviation Safety Breaches, of themselves, alternatively taken together with the Breach Findings, indicated an unwillingness of [Kahu] to comply with the terms of the [Kahu Contract], either at all or save only in a manner substantially inconsistent with [Kahu's] obligations. (original emphasis)

1. Accordingly, on repudiation, United's grounds of appeal raise the following issues for determination:
   1. Did, taken in the context of the background facts, Kahu's conduct in breaching the Kahu Contract (as found by the trial judge) objectively indicate an unwillingness by Kahu to comply with the Kahu Contract either at all or only in a manner substantially inconsistent with Kahu's obligations? (See ground 3.)
   2. Did the trial judge err in fact in failing to find that, so far as Mark Law had been prepared to breach fundamental rules of aviation safety, there was a likelihood that he would do so again in the future? (See ground 4(a).)
   3. Did such a likelihood of future aviation safety breaches, either of itself or taken together with Kahu's conduct in breaching the Kahu Contract (as found by the trial judge), objectively indicate an unwillingness by Kahu to comply with the Kahu Contract either at all or only in a manner substantially inconsistent with Kahu's obligations? (See ground 4(b).)
2. Kahu contends that the second of the abovementioned issues did not form part of United's case at trial. If that is correct, and this alleged likelihood of future aviation safety breaches amounts to a new point that should not be entertained for the first time on appeal, then the third repudiation issue must fall away.
3. We will address grounds 3 and 4 in order.
4. First is ground 3. In effect, this ground contends that it should be inferred that Kahu did not regard itself as bound by the terms of the Kahu Contract having regard to:

(a) the circumstances of the seven breaches;

(b) the way in which Mark Law reacted to those breaches;

(c) the self‑confidence and self‑belief of Mark Law concerning the correctness of his actions; and

(d) the one incident of dishonesty in connection with his record keeping in New Zealand.

1. The dishonesty finding may be put aside at once. The events that lead to this finding occurred after the termination of the Kahu Contract. Nothing in these events could evince an intention not to be bound by the Kahu Contract so as to justify United's termination of the contract.
2. It should be immediately observed that there was never any statement made by Mark Law or by Kahu to the effect that Kahu was not bound by the terms of the Kahu Contract. Further, despite the immediate reactions of Mark Law to receiving rebukes for certain breaches of contract, with the exception of the cl 4 breaches, none of the relevant breaches were repeated in substance. For example, no further contravening social media posts were made, and there were no further complaints made against Mark Law of aggressive flying which amounted to having breached Kahu's obligations under the Kahu contract.
3. The breach involving the failure to report the missing battery cover and to properly record time were matters of laxity in the administration of the Kahu Contract, rather than deliberate flouting of that contract.
4. The breach involving the further contact between Mark Law and John Landwehr related to a very particular set of circumstances. Mark Law considered that personal assurances which had been provided to him by John Landwehr had not been taken seriously. We do not consider that the contact with John Landwehr represents any deliberate or fundamental flouting of the Kahu Contract. The only inference we would draw is that Mark Law (incorrectly) did not regard the Kahu Contract as relevant to the way in which he conducted his personal relationships.
5. The sixth and seventh breaches, concerning contact between Adam Bannister and Mark Law, have already been discussed in the context of ground 1. In our view, they do not provide a firm basis to infer an intention by Mark Law to disregard the general operation of the Kahu Contract. At most, the instances suggest that Mark Law might be prepared to breach the Kahu Contract in circumstances where he regarded that important safety information ought to be provided to DFES, but that this had not been provided.
6. Nothing in any of the circumstances, or in the self‑belief of Mark Law, provides any ground for considering that Mark Law (acting on behalf of Kahu) would not generally abide by the Kahu Contract into the future. Nor do those matters, considered alone, or taken together with the breaches as found, sustain a conclusion that Mark Law or Kahu would not generally abide by the Kahu Contract into the future.
7. For these reasons we consider that ground 3 is not established.
8. We agree with Kahu that ground 4 seeks to agitate a new case on appeal. The premise of ground 4, by paragraph 4(a), is that the trial judge did not find, but should have found, that as a matter of fact there was a likelihood that Mark Law, 'having been prepared to breach fundamental rules of aviation safety ‑ would do so again.' That proposed factual finding then grounds the contention of renunciation. However, reliance on the proposed factual finding was not part of United's pleaded case. United's pleaded case as to repudiation was that:[112]

[Kahu's] breaches of the Kahu [Contract], each alone or in any combination, evidence an intention to no longer be bound by the terms of the Kahu [Contract] and which entitled [United] to terminate the Kahu [Contract] for repudiation.

1. The breaches referred to were pleaded breaches which had allegedly all occurred by the time of the termination.[113] There was no pleaded reliance on any likelihood of future aviation safety breaches.
2. The trial judge was careful to hold the parties to their respective pleaded cases, observing that, in this respect, United was keen to limit Kahu to its pleadings.[114] No lesser exactitude should apply on appeal. The limitations on advancing a new case on appeal are well established.[115] We are not satisfied that the present case is one of the exceptional situations in which the court, conducting an appeal by way of rehearing, ought to undertake its task of correcting error by reference to a new point not advanced in the primary proceedings. In that respect, contrary to the argument of senior counsel for the appellant, the additional factual finding now sought potentially could have been met by calling evidence at trial. Had Kahu been aware that United sought to make something of an alleged likelihood of future aviation safety breaches, it is likely that additional evidence would have been led from Mark Law on this subject matter.
3. In all the circumstances, we are not satisfied that it is just to permit United to raise a new case of alleged repudiation based on the likelihood of future aviation safety breaches. This could work an injustice upon Kahu. It concerns a fundamental matter, and could well have affected the manner in which Kahu approached or prepared for the case, and the emphasis it gave to certain matters. Nor can we see that it is otherwise in the interests of justice to allow the new case to be raised.
4. This is enough for ground 4 to be dismissed. Separately, however, we would not make the additional factual finding that there was a likelihood of future aviation safety breaches. We will briefly explain why this is so.
5. In our view, even accepting the breaches of the safety standards comprised by the first, third and fourth breaches, it does not follow that any inference can be drawn that Mark Law or Kahu did not intend to operate the Black Hawk helicopter in accordance with applicable safety standards.
6. The aggressive flying involved in the first breach occurred momentarily and without Mark Law being aware of the oil pressure light coming on.[116] It cannot be inferred that he intended this to occur and was careless about it. The third breach, involving the loss of the battery cover, is unexplained in any comprehensive way. That is because the manner in which the battery cover became lost is not known. It is impossible to come to the view that this breach involved any intention to flout or disregard the terms of the relevant safety standards.
7. The fourth breach, being the failure to complete the Air Maestro time records, appears to be one which is based upon lax administration of the Kahu Contract. Again, it does not provide the basis for a firm inference that Kahu would only comply with safety standards and requirements as and when it chose to do so.
8. For all of these reasons, we do not consider that the fourth ground of appeal can be established. We would dismiss this ground.

1. Grounds 5 and 6 concern whether the Kahu Contract was profitable or loss‑making. The trial judge considered that it was profitable and calculated damages upon that basis. United claims that the Kahu Contract was loss‑making and that no damages ought to have been awarded.
2. The basis of United's contention is that the signed financial accounts for Kahu, which demonstrated the existence of a profit, omitted the costs of carrying out significant routine servicing and maintenance work upon Kahu's Black Hawk helicopter.
3. In effect, United contends that Kahu's financial accounts, which were prepared by Kahu's own accountants, did not show that appropriate maintenance and repair costs were incurred.
4. In that context, ground 5 provides as follows:

The trial judge erred in fact and law in finding that [Kahu] had suffered loss and damage in the form of lost profits as a result of the termination of the [Kahu Contract] (including at J [454]) and in reaching that conclusion made the following errors of fact:

(a) that [Kahu's] financial statements were not materially inaccurate (J [417]);

(b) that the profitability of the [Kahu Contract] was more reliably assessed by reference to the expert analysis of the financial statements analysed as a whole (J [418]);

(c) that [Kahu's] 2021/2022 and February 2023 financial statements were probative as an accurate record of [Kahu's] financial performance (J [419]);

(d) that there was little direct evidence of the maintenance inspection costs and that [Kahu's] expert's estimate of US$200,000 was a reasonable one (J [429]);

(e) that the financial statements of [Kahu] reflected what in fact happened in the first firefighting season and was more likely to be an accurate and reliable guide to expenses than the material relied upon by [United's] expert (J [439]);

(f) that Kahu's financial statements may be accepted as likely to represent accurately the financial position (J [439]);

(g) that the adjustment made by [Kahu's] expert for maintenance was a reasonable one in the circumstances (J [429], [444]);

(h) that the analysis and assessment of [Kahu's] expert should be preferred (J 451]);

(i) the financial statements on which [Kahu's] expert relied made no provision for maintenance and repair costs which accrue on the expiry of calendar time or operational hours which was the usual practice;

(j) the adjustment made by [Kahu's] expert for maintenance was in respect of one item of maintenance only and made insufficient provision for the extensive maintenance and repairs required on a periodic basis and made insufficient provision for such on an hourly basis;

(k) to the extent that the adjustment by [Kahu's] expert made any provision for repairs and maintenance in the calculation of profit derived by [Kahu] from the [Kahu Contract], the provision was wholly inadequate; and

(l) the trial judge, save for referring to the allowance for the single item of maintenance for which [Kahu's] expert made provision (J [429], [444]), failed to consider, alternatively give sufficient weight to, the evidence in respect of maintenance and repair costs for the operation of a Black Hawk aircraft; and

(m) [Kahu's] financial statements were prepared in circumstances which meant that they should be approached with some caution (J [416] ‑ [417]).

1. The counterpart to this ground is ground 6. This ground is expressed as follows:

The trial judge erred in fact and law in failing to find that [Kahu] had made no profit from the [Kahu Contract] during the 2021/2022 fire season and would in future make no profit from the [Kahu Contract] by reason of the matters referred to in the last preceding paragraph and the following:

(a) the only evidence before the Court of a reasonable provision for maintenance and repairs for a Black Hawk aircraft of the type operated by [Kahu] was for a provision on an hourly basis of AUD$3,060;

(b) an analysis of revenue and expenses of [Kahu] for the 2021/2022 firefighting season which made provision for maintenance and repairs on an hourly basis at AUD$3,060 and otherwise on the basis of the actual expenses identified by [Kahu] and [Kahu's] expert demonstrated that the expenses exceeded the revenue from the [Kahu Contract]; and

(c) in the absence of any adequate provision for maintenance and repairs in the financial statements or the assessment by [Kahu's] expert, the analysis of revenue and expenses for the 2021/2022 firefighting season, which demonstrated that expenses exceeded the revenue from the [Kahu Contract], was not a prognostication but the more reliable guide to the profitability of the [Kahu Contract], contrary to the findings of the trial judge at J [439].

1. The trial judge admitted financial statements prepared by Kahu's accountants for the 2021 and 2022 New Zealand financial years and the 2023 financial year up to February 2023. The trial judge considered that they were admissible as to the truth of their content under s 79C(2a) of the Evidence Act 1906 (WA). His Honour considered that, in the absence of competing evidence, it was open to the court to find, on the balance of probabilities, the truth of the matters reflected in the financial statements.[117] The financial statements demonstrated that Kahu had made a substantial profit in operating the Kahu Contract.
2. At trial, United contended that the financial statements did not include all necessary maintenance costs to ensure that the Black Hawk helicopter remained operational. United endeavoured to demonstrate this by referring to budgeted profit, based upon standard maintenance costs which ought to have been incurred to service a Black Hawk helicopter. The budgeted costs were taken from a schedule prepared for commercial purposes by a firm experienced in such maintenance (Conklin & de Decker).
3. United referred to the nature and extent of costs which were predicted by Conklin & de Decker, and pointed out that the financial statements prepared on behalf of Kahu contained a much smaller amount for repair and maintenance. In these circumstances, United submitted that the court should infer that the financial statements prepared on behalf of Kahu were not reliable, and did not include all repair and maintenance costs.[118]
4. United did not identify any particular costs which had actually been incurred, and which had not been properly brought to account. This is a surprising feature of the position now adopted by United.
5. It would be expected that, in circumstances where there was a significant factual issue about the particular costs and whether they were incurred, there would have been a substantial investigation into the existence of these costs, and how they had been treated for the purposes of the accounting exercise. No doubt the existence of receipts for the costs should have been available upon discovery of particular categories of documents. Moreover, it would be expected that Mark Law, who was the sole director of Kahu, would have been cross‑examined extensively about particular maintenance costs which should have been incurred to ensure the safe operation of Kahu's helicopter.
6. The cross‑examination of Mark Law on the question of the actual maintenance costs which were incurred did not descend to the details of the particular costs. Instead, he was cross‑examined about the difference between budgeted maintenance costs and actual maintenance costs, but he could not explain why there was a large difference between the budgeted profit (of 5%) and the actual profit disclosed by the financial statements (in the order of 40%). The matter was left without suggesting to Mark Law that the financial statements were inaccurate because they left out actual specific and identified maintenance costs which they ought to have included.
7. The relevant cross‑examination on this issue was as follows:[119]

All right. That being the case, Mr Law, it would seem that the actual performance has got to be very, very different from the budgets that were prepared for the purpose of the tender because the budgets for the purpose of tender show quite different outcomes predicted? ‑ ‑ ‑ Well, I ‑ I have no ‑ I have no answer why anything would be ‑ why it's different from the budgets. At that ‑ at the time the budget was 105 days ‑ ‑ ‑

Yes? ‑ ‑ ‑ and without any flying. Then we got the extension. So there was further remuneration added through those two income streams.

Let me just take it step by step. I showed you a long ‑ it feels like a long time ago ‑ the budgets that were prepared by you and by Mr Norrie in connection with the preparation of the tender, and you saw those budgets and [what] the budgets provided for of the likely cost; that's correct? And that was gone through and worked out having regard to maintenance, having regard to all the expenses likely to be incurred leading to the conversation I put to you about the margin, which I ‑ you remember that? Then you said you would be happy with a five per cent margin. Those budgets show certain results, certain likely results or predicted results. You accept that? ‑ ‑ ‑ Yes.

And they were prepared to make sure that when you put in the tender, both with United and your side, that your costs were covered and so forth? ‑ ‑ ‑ Yes.

And provision was made from the profit margin, the five per cent that I asked you about; yes? ‑ ‑ ‑ Yes. Yes, counsel.

And as the contract progressed, you said on numerous occasions it was costing you a lot more than what you had expected? ‑ ‑ ‑ Yes.

Budgeted for, and there was a concern about that. What I'm putting to you is it's a fundamentally odd result that when one looks at this document prepared for the course of the litigation ‑ that this presents as a very lucrative contract compared to what was budgeted for and compared to the experience as you did the work? ‑ ‑ ‑ Yes.

All right. We can ask Mr Fisher any other questions, can we, about how this will happen? ‑ ‑ ‑ Absolutely, counsel.

Have you read the expert report ‑ the expert ‑ you've read your accounting expert's report? ‑ ‑ ‑ I believe so.

Do you accept ‑ I mean, costs were continuing to increase. Costs generally were continuing to increase, the costs that would have been incurred in performing this contract going forward? ‑ ‑ ‑ No, they had a little rise, and then they started to mellow out.

1. Again, in relation to the accountant for Kahu who had prepared the financial statements (John Fisher), the cross‑examination did not descend to discussion of particular costs which had actually been incurred, but which were not reflected in the financial accounts. The relevant cross‑examination of John Fisher was as follows, after reference to the standard costs published by Conklin & de Decker:[120]

On the assumption that that is an authoritative document from which the average or approximate costs of operating these helicopters can be discerned, would you accept that the maintenance costs that you've allowed for work out to about $300 per hour on the assumption that the hours flown in Australia were 131? ‑ ‑ ‑ I don't know how many hours, but on that basis, if that's correct, it would come to about $202 per hour.

Right. And on the assumption I've asked you to make about Conklin & de Decker, if that publication states that the approximate average cost per hour of operating one of these helicopters is about ‑ somewhere between three ‑ three and a‑half, even $4000 dollars an hour. So say [$]3000, [$3500] on that assumption, would you necessarily increase and allocate that cost to the Australian operations ‑ ‑ ‑? ‑ ‑ ‑ No.

1. The second answer from this passage was subsequently reversed by John Fisher on the basis of the assumption put to him, although John Fisher made a significant point that he did not accept the underlying assumption that the Conklin & de Decker costs should be accepted.[121] Nevertheless, upon the basis of the assumption, John Fisher was cross‑examined as follows:[122]

So what's the answer? Accepting that is ‑ accepting the assumption that the costs [are] somewhere in the order of ‑ somewhere between 3 and 4 thousand dollars per hour. Let's say three and a half thousand dollars per hour. It is correct, is it not, that on your analysis, you would allocate such a cost back to the cost of the Australian operations? ‑ ‑ ‑ Yes, I would.

1. So far as they go, the passages of cross‑examination set out above simply establish that the standard costs (reported by Conklin & de Decker) for the repair and maintenance of a Black Hawk helicopter were significantly in excess of the actual costs which were accounted for in Kahu's financial statements. They do not prove the existence of actual costs incurred by Kahu for the repair and maintenance of its Black Hawk helicopter. Nor do they demonstrate that if these costs were incurred in respect of Kahu's Black Hawk helicopter, they had been wrongly allocated to other accounts of other entities, or not correctly brought to account in relation to the profitability of the Kahu Contract.
2. In these circumstances, the trial judge was correct to say that the case run by United was inadequate to rebut the correctness of the financial statements. It may well have raised queries about those financial statements, and the underlying basis for their preparation. However, those questions were not pursued at the required level of detail by United at trial.
3. In these circumstances, the alleged errors of the trial judge cannot be established. Grounds 5 and 6 should be dismissed.
4. We should make a final comment upon these grounds. It might well be inferred that United's decision not to pursue the question of actual costs at the detailed factual level was a deliberate and strategic one. The case occupied 20 days of trial, and the parties raked over many issues in significant detail. Although it is unnecessary to decide the reason why the parties did not go into the question of Kahu's actual maintenance costs, it would be surprising if this question had not been carefully considered. No doubt United well understood the actual costs of maintenance, as it also operated a Black Hawk helicopter.
5. Further, it is not lost upon us that John Fisher was the only person, apart from Mark Law, who, at trial, could cast light upon the actual maintenance costs incurred by Kahu. When John Fisher was asked to assume that the maintenance costs were at the level mentioned by Conklin & de Decker he vehemently opposed making that assumption. He said:[123]

Well, I can't make the assumption based on something that I don't believe. You can. I can't. I'm under oath.

1. In other words, John Fisher effectively gave evidence to the effect that he did not believe that the assumption was correct, and that he did not believe the actual costs were the same as the costs mentioned by Conklin & de Decker. He gave evidence (quite properly) that he should not be asked to make, and should not make, an assumption which he knew to be incorrect, as he was under oath. That is of some significance where, presumably, John Fisher would have known the actual costs and how they were treated in Kahu's accounts.

Ground 7 and cross-appeal: Discounts to damages

1. The last ground of appeal concerns whether the trial judge applied an appropriate discount to the damages awarded to Kahu, upon the basis that the chance of the Kahu Contract being lawfully terminated during the period of the initial term was 25%. United argues that the discount should have been in the order of 75%.
2. Ground 7 of the appeal provides:

Further, and in the alternative to grounds 5 and 6, the primary judge erred in fact and law in finding that the chance of the [Kahu Contract] being lawfully terminated was in the order of 25% (J [457]) as opposed to a figure in the order of 75%, having regard to:

(a) the finding that during the first demonstration flight on 22 December 2021 Mr Law flew the Kahu Black Hawk aircraft in an unnecessarily aggressive manner in breach of [United's] Operations Manual and which tested the limitations of the aircraft (J [56], [329]);

(b) the evidence of Mr Law that he did not modify his flying style as a result of the criticism of his aggressive flying on 22 December 2021 by Mr Borg, who was the Head of Flying Operations (T 921);

(c) the finding at J [125] that Mr Law did not fill in his time records for the period of 29 January 2022 to 30 March 2022 but went back and filled them in after the fact, which was a serious obligation relating to safety (J [122]), and a breach by [Kahu] of [United's] Operations Manual and of clause 6 of the [Kahu Contract] (J [343]);

(d) the finding that the battery cover on the Kahu Black Hawk aircraft flew out of the aircraft on 2 February 2022 when Mr Law was one of the pilots and did not report the incident to [United's] Head of Flying Operations, in [United's] safety management system or to any regulatory authority (J [86]) when the incident created a safety hazard and was a reportable matter (J [336]);

(e) the findings that Mr Law operated the Kahu Black Hawk aircraft on 2 November 2022 when he had overflown the aircraft beyond the period in which maintenance had become due and therefore should not have been flown and falsified the aircraft's Technical Log to show that the flight took place in December 2022 after the overdue maintenance had been performed (J [206]);

(f) the likelihood that a person prepared to breach such fundamental rules of aviation safety would do so again in the same or some other fashion; and

(g) the personality traits of Mr Law as found by the trial judge.

1. Conversely, the cross‑appeal by Kahu challenges the trial judge's assessment that the likelihood of the Kahu Contract being extended for one or both of the additional terms was 10%. Kahu claims that the trial judge should have assessed the prospect of these extensions as being 80%.
2. The cross‑appeal grounds are in the following terms:

1. The learned trial judge erred in fact and in law in assessing the prospect of the two options to extend the [Head Contract] being exercised at 10% as opposed to a figure of 80%. 2. The learned trial judge's assessment was based on the assumption that NAFC would not have exercised the options because that would have necessitated the maintenance of a fractured and increasingly dysfunctional relationship between Kahu and [United]. Implicit in the learned trial judge's reasoning was the further assumption that this fractured and increasingly dysfunctional relationship would become known to the NAFC. The learned trial judge erred in making that further assumption, which was contrary to the actual evidence before the trial judge, which was to the effect that:

(a) [United] had not revealed to NAFC that there were any unresolved or ongoing problems or issues with its relationship with Kahu at any time prior to termination of the Kahu Contract (see TJR [201]);
>
> (b) [United] was keen to keep the [Head] Contract and it was not in [United's] commercial interests to reveal that there were any issues or problems with its relationship with Kahu (see TJR [87] ‑ [88] & Ex A);
>
> (c) United had deliberately not reported, contrary to its express contractual reporting obligations under the [Head] Contract, incidences of non‑compliance with the [Head] Contract because it did not wish to put the [Head] Contract at risk (see TJR [86], [93], [118], [139], [141], [160], [162], [174], [219], [338], [360] & Ex A);
>
> (d) NAFC had been satisfied with the performance of the [Head] Contract (see TJR [201] & [465]); and
>
> (e) NAFC was unaware that there were any unresolved or ongoing problems or issues with its relationship with Kahu at any time prior to the termination of the Kahu Contract (see TJR [201]).

1. The learned trial judge also erred in fact in overlooking his own assessment that the conduct of Kahu did not justify the termination of the Kahu Contract and that [United's] assessment of the relationship was a 'retrospective embellishment of [Mark Law's] and Kahu's conduct'. See TJR [57], [95], [130], [136], [157], [331] & [346]. 2. Having regard to that evidence, the learned trial judge should have found that:

(a) it was not in [United's] commercial interests to reveal that there were any issues or problems with its relationship with Kahu;
>
> (b) it was unlikely that NAFC would have learned of there being any issues with the relationship between [United] and Kahu;
>
> (c) the issues and problems with the relationship were not as serious as [United] retrospectively attempted to claim; and
>
> (d) there was a high likelihood (at least 80%) that the two options would have been exercised by NAFC,

and assessed [United's] damages of 80% of the expected lost profit for the 2024/2025 and 2025/2026 seasons as assessed by the trial judge (rather than only 10% of those expected lost profits).

1. Both ground 7 and the cross‑appeal raise matters of interfering with a quintessentially evaluative judgment,[124] which attracts the principles from House v The King:[125]

It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.

See also Wright v De Kauwe [No 2].[126]

1. The particular matter which United contends engages the principles from House v The King is the falsification of the Technical Log for Kahu's Black Hawk helicopter which occurred in December 2022. This occurred after the first firefighting season had finished and just prior to the commencement of the second firefighting season for the purposes of the Head Contract. United contends that this falsification would have been discovered by it and would have provided a sound basis for termination of the Kahu Contract.
2. The particular matter is a hypothetical event, based upon how Kahu would have acted in the scenario that there had been no purported termination by United, what United would have discovered through its procedures, and how United would have acted as a result.
3. What would have occurred, hypothetically speaking, is a matter of impression. The trial judge considered that, had United not purported to terminate the Kahu Contract, Kahu would have been more careful about whether it might be discovered in the falsification of the Technical Log. This is not an unreasonable view, as Mark Law would have been aware that the Technical Log would no doubt be reviewed by United in the very near future. In the circumstances, it is not unreasonable to postulate greater care by Mark Law in the maintenance of the Technical Log.
4. United points out that Kahu was endeavouring to keep the Kahu Contract on foot at the point where the Technical Log was falsified. Nevertheless, it may be that the termination which had been issued by United placed Kahu under greater pressure, which led to the falsification.
5. In our view, there was no error in principle or misstatement of facts by the trial judge in considering this issue, because it would have required, and depended upon an assessment of the possibilities and probabilities of hypothetical events occurring in a particular scenario. We would not allow ground 7 of the appeal.
6. Equally, we do not consider that any error of principle can be identified in the decision of the trial judge that it was unlikely that the Kahu Contract would be extended for a further term or two terms. The assessment of a 10% possibility that this would occur acknowledges the significant friction which had been generated between the parties and the fact that, most likely, a basis for bringing the relationship under the Kahu Contract to an end as soon as possible would be found.
7. Consequently, we would not allow the cross‑appeal.

1. For all of these reasons, we would uphold the judgment of the trial judge in its entirety, and we would dismiss both the appeal and the cross‑appeal.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

[1] GAB 386 (Contract for Services between AFAC and Aviation Utilities).

[2] GAB 448 ‑ 449 (Schedule 1: Service and Aircraft Details).

[3] GAB 451 (Schedule 2: Service Periods and Availability).

[4] GAB 406 (Contract for Services between AFAC and Aviation Utilities).

[7] GAB 383 (Contract between Kahu and Aviation Utilities).

[8] Kahu NZ Ltd v Aviation Utilities Pty Ltd [No 3] [2024] WASC 347 (Reasons) [55].

[43] Reasons [183], [191] ‑ [192]; GAB 804.

[45] GAB 806 (Letter from United to Kahu titled, 'Notice of Contract Breach and Request for Explanation' dated 27 May 2022).

[54] GAB 822 (Letter to Mark Law from United dated 2 August 2022).

[58] See also Sharjade Pty Ltd v Commonwealth of Australia [2009] NSWCA 373 [46] (Hodgson, Young JJA & Sackville AJA).

[59] Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115 [47] (Gleeson CJ, Gummow, Heydon & Crennan JJ).

[60] Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632, 641 ‑ 642.

[62] Shevill v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620, 625 ‑ 626 (Gibbs CJ); Koompahtoo [44].

[65] Carr v J A Berriman Pty Ltd [1953] HCA 31; (1953) 89 CLR 327, 351 (Fullagar J).

[68] Foran v Wight [1989] HCA 51; (1989) 168 CLR 385, 416 (Brennan J); Wallace-Smith v Thiess Infraco (Swanston) Pty Ltd [2005] FCAFC 49; (2005) 218 ALR 1 [53] ‑ [54]; Armada Balnaves Pte Ltd v Woodside Energy Julimar Pty Ltd [2022] WASCA 69; (2022) 16 ARLR 1 [603].

[78] For example, Reasons [281], [321], [338], [343], [360], [361], [362].

[79] For example, Reasons [321], [343], [350].

[80] Ampurius Nu Homes Holdings Ltd v Telford Homes (Creekside) Ltd [2013] EWCA Civ 577; [2013] 4 All ER 377 [49].

[81] Federal Commerce and Navigation Co Ltd v Molena Alpha Inc (The Nanfri, The Benfri, The Lorfi) [1979] AC 757, 779.

[83] Koompahtoo [55], citing Decro-Wall International SA v Practitioners in Marketing Ltd [1971] 1 WLR 361; [1971] 2 All ER 216, 232 (Buckley LJ).

[90] Wallace-Smith v Thiess Infraco (Swanston) Pty Ltd [2005] FCAFC 49; (2005) 218 ALR 1 [299].

[91] Chitty on Contracts Vol I: General Principles (36th ed, 2026) [28-042] ‑ [28-043], esp footnote 172.

[92] BAB 202 par 12. See also United's written closing submissions dated 21 November 2023 [117].

[94] Westina Corporation Pty Ltd v BGC Contracting Pty Ltd [2009] WASCA 213; (2009) 41 WAR 263 [55].

[100] Reasons [354], [356], [360] ‑ [362].

[103] WAB 19 ‑ 20 (Appellant's Amended Case (AAC) [16]).

[105] WAB 22 ‑ 23 (AAC [22] ‑ [23]).

[107] GAB 800 (Email from Mark Law to Adam Bannister dated 29 April 2022).

[109] Appeal ts 51 - 54, 169 - 170, 181 (as to the repudiation case).

[113] See BAB 204 ‑ 208 (Second Further Amended Defence [15] - [19]).

[114] Reasons [346] (see also Reasons [250]).

[115] See generally Zerjavic v Chevron Australia Pty Ltd [2020] WASCA 40 [65] - [67] (Buss P, Murphy & Vaughan JJA).

[118] WAB 30, 33 (AAC [47], [60]).

[119] Transcript, Kahu NZ Limited v Aviation Utilities Pty Ltd, Supreme Court of Western Australia, 6 June 2023 ‑ 11 November 2023 (Ts), 986 ‑ 987.

[124] See Falkingham v Hoffmans (a firm) [2014] WASCA 140; (2014) 46 WAR 510 [49].

[125] House v The King [1936] HCA 40; (1936) 55 CLR 499, 504 ‑ 505.

[126] Wright v De Kauwe [No 2] [2024] WASCA 51 [71] - [72], [213] - [214], [216], [218] - [220].