AVWEST AIRCRAFT PTY LTD -v- BOMBARDIER INC [2018] WASC 139 (8 May 2018)

(i) the no oral modification and entire agreement clauses in the written purchase agreements, which are expressly governed by the law of New York; and

(ii) the alleged oral agreements, which Bombardier says are governed by the law of New York.

1. Thirdly, in relation to the entire proceeding, Bombardier says this court should decline to exercise jurisdiction on the basis that the Supreme Court of Western Australia is a clearly inappropriate forum in which to litigate matters. This argument relies on the principles of forum non conveniens.

1. For present purposes, only a limited examination of the relationship between AVWest and Bombardier is necessary. AVWest is a proprietary limited company which has its registered office in Perth. AVWest's primary business activity is the purchase of aircrafts produced by Bombardier for resale to third party buyers. AVWest is part of a group of companies owned by Mr Roberts. Mr Roberts is a resident of Queenstown, New Zealand. Bombardier is a company headquartered in Quebec, Canada, and listed on the Toronto stock exchange. Bombardier's business involves the production and sale of aircraft and trains. The matters the subject of the statement of claim relate solely to Bombardier's business aircraft division. Bombardier produces, fits out, certifies and markets aircraft. All of its business operations are conducted in Canada.
2. Between 2009 and 2015, AVWest and Bombardier engaged in extensive commercial dealings involving the purchase by AVWest of aircraft positions (that is aircraft under construction) from Bombardier which were onsold to third parties in exchange for upfront payment of significant sums of cash by AVWest.
3. In order to obtain large upfront payments of cash from AVWest, Bombardier sold aircraft to AVWest (for onsale to third party buyers) on generous terms including by way of discounted pricing, credit memoranda and other inducements, together with undertakings to find the third party buyers for the aircraft, to facilitate the sale of aircraft to those third party buyers and to pay AVWest net profits and other amounts paid by AVWest to the defendant on account of the purchase price of the aircraft.
4. There are 12 relevant written agreements and three alleged oral agreements. In summary, these included:

(a) oral master agreements (being the 'minimum net returns agreement' and the 'rolling 7000 purchase agreement') which were entered into for consideration including very substantial amounts of cash;

(b) standard form written agreements (being aircraft purchase agreements and termination deeds) each of which related to a single aircraft; and

(c) an oral agreement for the purchase of a Global 7000 aircraft position, on terms previously agreed, in the event that a sale to a specified third party did not proceed ('the 7000 4 repurchase agreement').

1. None of the oral agreements relates solely to any one of the written agreements. Rather, they define the specific relationship between several of those agreements. The parties chose to sign standard form agreements as to each specific transaction, but on AVWest's case it was also to agree orally on broader questions including the relationships between and among the transactions. The scale of the dealings between the parties was very substantial. In the period between 10 April 2009 and 30 September 2015, AVWest purchased from Bombardier 67 new and used aircraft usually in batches of four or more aircraft with a total price of US$3,174,655,843 and made payments to Bombardier totalling US$912,294,409. Fifty eight of those aircraft were sold to third party buyers for US$2,919,058,698 and AVWest received a total of $1,113,516,839 which included a net profit of US$218,550,640.
2. It is AVWest's position that Bombardier has refused to wholly honour its undertakings to AVWest, including a number of undertakings which were instrumental in obtaining AVWest's agreement to make upfront payments of tens of millions of US dollars to Bombardier. The proceedings concerned claims by AVWest for declaratory relief and damages for breach of various contracts made in Western Australia.

1. The principles which govern this application were not really in dispute between the parties. Dealing first with the grant of leave to serve outside the jurisdiction, the intended plaintiff must show that, in the circumstances, it is proper that a court should grant leave for service out of the jurisdiction. In Crawley Investments Pty Ltd v Elman [2014] WASC 233, Justice Edelman set out a two limbed test for whether the issue of a writ and its service out of the jurisdiction should be set aside.
2. The first limb of the test is whether the case falls within one of the jurisdictional 'pigeonholes' under O 10 r 1(1). The standard is whether there is a 'good arguable case' that the plaintiff's case falls within one or more of these jurisdictional pidgeonholes. The second limb of the test is the exercise of the discretion by the court O 10 r 1(1) provides that the court 'may' grant leave. There remains a discretion on the court's part under this second limb as to whether or not to grant leave even assuming the first limb is satisfied.
3. In responding to the defendant's application to set aside service of the writ, the plaintiff continues to bear the onus of establishing that the jurisdictional prerequisites of O 10 r 1(1) are satisfied and that the circumstances favour the exercise of the court's discretion to grant the leave to serve the defendant.
4. In relation to the written agreements, Bombardier accepts that the agreements are validly made contracts. It does not challenge the facts as to how the contracts were made. However, it contends that because of certain introductory words in the agreements, the ordinary principles governing where a contract is made are displaced, and that by reason of those words the agreements were not made in Western Australia. If that is so, then the contracts were made in Canada or at least in some jurisdiction outside this State. That would be enough to ensure the writ and service of the writ were set aside.
5. Under Western Australian law, determining where an agreement was made requires consideration of where the 'final act' completing the formation of the contract occurred. As a general rule, a binding contract is formed when acceptance of an offer is communicated to the offeror. Accordingly, as a general rule, a contract is made at the place where the communication of acceptance is received.
6. Relying on the general rule, AVWest points to the fact that the practice employed by the parties was that AVWest would sign the agreement and send it to Bombardier in Canada. Bombardier would then sign it and communicate its 'acceptance' to AVWest by returning the signed agreement to it by email, which was received by AVWest personnel in Western Australia. If these factors are accepted, communication of acceptance would be received in Western Australia and this court would have jurisdiction.
7. It has long been accepted that it is possible for parties to an agreement to dispense with or modify the general rule that an agreement will only be binding once acceptance of the offer is communicated. Both parties agreed with that statement of principle. They also agreed that one way in which the general rule may be dispensed with or modified is through providing for acceptance by the doing of some act which is not dependant on communication. Specifically, it is possible for the parties to a contract to include language to the effect that the act of execution by the offeree is sufficient to, without the need for any further act, create a binding agreement.
8. Whether the parties to an agreement have, in fact, dispensed with or modified the general rule, requiring communication of acceptance is a matter of contractual construction. The principles for construing commercial contracts in Western Australia are well understood. The Court of Appeal in Black Box Control Pty Ltd v Terravision Pty Ltd [2016] WASCA 219 [42] summarised those principles in the following terms:

(1) The process of construction is objective. The meaning of the terms of an instrument is to be determined by what a reasonable person would have understood the terms to mean.

(2) The construction of a contract involves determination of the meaning of the words of the contract by reference to its text, context and purpose.

(3) The commercial purpose or objects sought to be secured by the contract will often be apparent from a consideration of the provisions of the contract read as a whole. Extrinsic evidence may nevertheless assist in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding of the genesis of the transaction, its background, the context and the market in which the parties are operating.

(4) Extrinsic evidence may also assist in determining the proper construction where there is a constructional choice.

(5) If an expression in a contract is unambiguous and susceptible of only one meaning, evidence of surrounding circumstances cannot be adduced to contradict its plain meaning.

(6) To the extent that a contract, document or statutory provision is referred to, expressly or impliedly, in an instrument, that contract, document or statutory provision can be considered in construing the instrument, without any need for ambiguity or uncertainty of meaning.

(7) There are important limits on the extent to which evidence of surrounding circumstances (when admissible) can influence the proper construction of an instrument. Reliance on surrounding circumstances must be tempered by loyalty to the text of the instrument. Reference to background facts is not a licence to ignore or rewrite the text. The search is for the meaning of what the parties said in the instrument, not what the parties meant to say.

(8) There are also limits on the kind of evidence which is admissible as background to the construction of a contract, and the purposes for which it is admissible. Insofar as such evidence establishes objective background facts known to the parties or the genesis, purpose or objective of the relevant transaction, it is admissible. Insofar as it consists of statements and actions of the parties reflecting their actual intentions and expectations it is inadmissible. Such statements reveal the terms of the contract which the parties intended or hoped to make, and which are superseded by, or merged into, the contract.

(9) An instrument should be construed so as to avoid it making commercial nonsense or giving rise to commercial inconvenience. However, it must be borne in mind that business common sense may be a topic on which minds may differ.

(10) An instrument should be construed as a whole. A construction that makes the various parts of an instrument harmonious is preferable. If possible, each part of an instrument should be construed so as to have some operation.

(11) Definitions do not have substantive effect. A definition is not to be construed in isolation from the operative provisions in which the defined term is used. Rather, the operative provisions are ordinarily to be read by inserting the definition into it.

1. Against that background, the actual wording of the agreements is to be considered. As indicated above, there are 12 relevant agreements. Eleven of them have a 'date of acceptance and execution' clause in the following terms:

This [Aircraft Purchase Agreement / Deed] is made [by and] between BOMBARDIER INC. ('Seller') and AVWEST AIRCRAFT PTY LTD ACN 129 279 072 as trustee of AVWEST AIRCRAFT TRUST established under a Trust Deed dated 18 January 2008 ('Buyer') and shall be effective as of the date of its acceptance and execution by [the] Seller.

The twelfth agreement has a clause in the following terms:

This agreement ('Agreement') amends and restates Amended and Restated Aircraft Purchase Agreement G170-0132 effective 31 January 2011 ('Previous Agreement') between BOMBARDIER INC. ('Seller') and AVWEST AIRCRAFT PTY LTD ACN 129 279 072 as trustee of AVWEST AIRCRAFT TRUST established under a Trust Deed dated 18 January 2008 ('Buyer'). This Agreement is made on the date of its acceptance and execution by Seller, to replace and supersede the Previous Agreement in its entirety, and to have effect and govern the contractual relationship between the parties on and from 29 June 2012.

1. In my view, the words of these two clauses are not sufficient to conclude with certainty that the general principle as to acceptance has been modified. The clauses use the phrase 'effective as of the date of its acceptance and execution'.[1] That seems to me to require Bombardier to actually notify AVWest of the acceptance of the contract. The point was made by counsel for AVWest that, unless acceptance was communicated to AVWest, there could be uncertainty as to whether or not the contract had actually been formed. In that context, it is relevant to note that on each occasion AVWest was advised by email that Bombardier had completed the contract. That act appears to be 'a final and unqualified expression of assent to the terms of an offer' as that expression is used in Treitel on Contract (10th ed, (16)). That being so, I am satisfied there is a good arguable case that acceptance of the contracts was in Western Australia and this court has jurisdiction.

1. The second limb of the application, on which Bombardier bears the onus, is to establish that the claims relating to the oral agreements have no reasonable prospects of success. To succeed in setting aside jurisdiction on this basis, Bombardier must establish AVWest's claim has so little prospect of success that the proceedings should not go to trial. The test is the same standard as applied in a summary judgment application: see Crawley Investments [45]. Summary judgment will only be given in cases where it can be seen from the outset that however the facts are found there is no basis for the legal conclusion contended for by the plaintiff. The onus on Bombardier in this case is a heavy one.
2. Bombardier contends that the oral agreements had no prospect of success because oral agreements are governed by the law of New York and would be unenforceable under New York law as:

(a) in relation to two of the agreements, they purport to modify the written agreements which contain no oral modification clauses and entire agreement clauses; and

(b) in relation to all three of the agreements, they would be contrary to the Statute of Frauds provisions, the General Obligation Law or the Uniform Commercial Code of New York.

1. It was accepted by AVWest, that so far as the written contracts were concerned, the law of New York was the applicable law. There was a disagreement between the parties as to whether the law of New York would govern the oral agreements. For present purposes, I will assume that the law relating to the oral contracts is the law of New York. AVWest did not concede that point. Counsel pointed out that it was possible for a choice of law to be inferred from the terms of the contract and the surrounding circumstances. That process requires consideration of the terms and nature of the contract and if necessary the general circumstances of the case. It was said by AVWest that such a factual investigation meant that this was not a suitable case to be determined on a summary basis. To use the expression found in AVWest's written submissions, the enquiry is 'fact rich'.
2. Counsel for AVWest advanced a number of reasons why the law of Western Australia is the system of law with which the transactions had their closest and real connection. Counsel submitted the factors which support that conclusion include:

(a) the agreements were concluded in Western Australia, the place of contracting being a significant factor in this regard;

(b) the parties to the agreements were resident respectively in Western Australia and Canada and the agreements were made when AVWest was situated in Western Australia;

(c) the party obliged to make upfront payments in consideration for the minimum net return agreement and the rolling 7000 purchase agreement was resident in Western Australia;

(d) the party obliged to make payments under the rolling 7000 purchase agreement was resident in Western Australia;

(e) the party entitled to receive the payments under the minimum net return agreement and the benefits under the other oral agreements was resident in Western Australia; and

(f) the oral agreements are valid and enforceable under Western Australian law. The principle of validation would apply if the alternative choice of law resulted in invalidity of the agreements.

1. Counsel for Bombardier made detailed submissions which attempted to refute each of these propositions. I will not go through the submissions in detail. I have focussed on the submissions put by AVWest because it is AVWest that claims its position is arguable. By reference to the matters outlined above, I am satisfied that is so. In any proceeding which looks to dispose of an application summarily, if the application is unsuccessful and the matter must go to trial, it is inappropriate to deal in detail with all matters raised because no certain finding can or should be made. That is the case here. I am satisfied it is arguable in relation to the oral contracts that the proper law is the law of Western Australia.
2. Even if that were not the case and the proper law was the law of New York, picking up the provisions of the written agreements, it would seem to me arguably the oral contracts may be enforceable. Both parties filed expert evidence AVWest relying on an opinion of retired judge Robert S Smith and Bombardier relying upon two opinions of retired judge Victoria A Graffeo. Bombardier lodged objections to large parts of retired judge Smith's evidence. I do not propose to deal with these objections in detail. For the purposes of this application it is sufficient if I just refer to the evidence of retired judge Graffeo. Essentially, it was the argument of Bombardier that the Statute of Frauds provisions in the New York Uniform Commercial Code and General Obligation Law are an absolute bar on enforcement of oral agreements. But, the opinion of judge Graffeo indicates there are a number of exceptions which permit the enforcement of oral contracts governed by New York law. These include where the party against whom enforcement is sought admits that the contract was made or the agreement is capable of completion with one year, no matter how unlikely or improbable performance within that period may be. Furthermore, what we would regard as equitable principles appear to apply. So, equitable estoppel may be available to prevent a party denying its words that the other party has relied upon to its detriment. If enforcement of the Statute of Frauds would result in an unconscionable outcome, that, too, may mean an exception is available.
3. All of these matters require a detailed examination of the facts and, perhaps more importantly in this context, a full and complete understanding of the law of New York as it applies to those facts. It is simply not possible in an interlocutory proceeding to conclude, based upon written expert evidence untested by cross examination, that AVWest's position is hopeless. There is no real prospect of summary judgment ever being available to a party in Bombardier's position were it bold enough to make such an application.

1. The remaining issue is the forum non conveniens argument. There was no dispute between the parties as to the relevant test. Bombardier must establish Western Australia is a 'clearly inappropriate' forum for the determination of the dispute. The test focuses on the advantages and disadvantages arising from a continuation of the proceedings in the selected forum rather than on the need to make a comparative judgment between alternative forums.
2. The main objection to jurisdiction of Western Australian courts raised by Bombardier was that numerous witnesses, none of whom were in Western Australia, would have to give evidence and key relevant individuals were no longer employed by Bombardier and were unable to be compelled to give evidence in the proceedings. These two separate, but interrelated, concerns were the only matters raised by Bombardier to justify a ruling that Canada would be a more appropriate forum.
3. In my view, there is no substance in Bombardier's complaint. Most of the evidence in this case will be of a documentary nature and which court hears the matter is not really a factor. It is true that the relevant witnesses whom Bombardier may wish to call are based in Canada or at least out of the jurisdiction. But, modern technology video links are possible and if there is any disadvantage it is in cross examining a witness on a video link and that disadvantage rests with AVWest. Canada is a sophisticated jurisdiction and witnesses are as compellable in Australian courts as they are in Canadian courts with some added complications. Both the Canadian court and this court would be confronted with the difficulty of interpreting New York law, but that in and of itself does not render this forum clearly inappropriate.

1. In all the circumstances then, I am not satisfied there is any basis for setting aside the writ in this matter or setting aside service of the writ. On publication of these reasons, I will hear the parties as to orders and as to costs.

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

[1] The twelfth agreement is slightly different, but not significantly so.