Hunter Valley Skydiving Centre Pty Limited v Central Coast Aero Club Limited & anor

CATCHWORDS : CONTRACT - Breach - Election- consent agreement for parachute operations between aero club and parachute operator - where contract gives club right to revoke consent in event of club forming opinion that there has been a breach of any condition of consent - where club alleges numerous breaches over a period of two years - where club accepts fees under agreement with notice of alleged breaches until one month prior to purported termination - whether club elected to affirm - whether further breaches committed by parachute operator after date to which waiver effective - Termination - Construction - whether provisions of agreement not expressly stated to be essential conditions were "conditions of consent" - whether breaches were such as to entitle club to revoke consent - Terms - implied terms - to exercise contractual rights only in good faith - whether such term to be implied - whether purported termination was in breach of any obligation of good faith - Relief against forfeiture - whether relief against forfeiture would have been granted.

Agricultural & Rural Finance Pty Ltd v Atkinson [2006] NSWSC 202 Burger King Corp v Hungry Jack's Pty Ltd [2001] NSWCA 187 Davenport v R (1877) 3 App Cas 115 Gardiner v Agricultural & Rural Finance Pty Ltd [2007] NSWCA 235 International Leasing Corporation Ltd v Aiken [1967] 2 NSWR 427 Mackay v Dick (1881) 6 App Cas 251 CASES CITED : New Zealand Shipping Co Ltd v Société des Ateliers et Chantiers de France [1919] AC 1 Newbon v City Mutual Life Assurance Society Ltd (1935) 52 CLR 723 Overlook Management BV v Foxtel Management Pty Ltd [2002] NSWSC 17 Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5 Service Station Association Ltd v Berg Bennett & Associates Pty Ltd (1993) 45 FCR 84 Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 Wendt v Bruce (1931) 45 CLR 245

TEXTS CITED : Contract Law in Australia, J W Carter and D J Harland (5th Ed)

Hunter Valley Skydiving Centre Pty Limited (plaintiff) PARTIES : Central Coast Aero Club Limited (first defendant) Warnervale Air Pty Limited (second defendant)

COUNSEL : Mr B J Salmon QC (plaintiff) Mr D J Fagan SC w Mr P C Silver (defendants)

SOLICITORS : Chamberlains Law Firm (plaintiff) Turnbull Hill Lawyers (defendants)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EXPEDITION LIST

4278/07 Hunter Valley Skydiving Centre Pty Limited v Central Coast Aero Club Limited & anor JUDGMENT 1 HIS HONOUR: The first defendant Central Coast Aero Club Limited ("CCAC" or "the Club") is the controlling authority for Warnervale Airport under arrangements between the Club and Wyong Shire Council. It has delegated operational control of the airport to the second defendant Warnervale Air Pty Limited. Until 16 August 2007, the plaintiff Hunter Valley Skydiving Pty Limited ("HVS") carried on its business of conducting parachuting and skydiving operations from Warnervale Airport, under a consent agreement dated 15 September 2005 between the Club and HVS, for a term expiring on 31 December 2007 with two options of renewal each for a further term of three years, the first of which was exercised by HVS on 22 June 2007, thus extending the term until 31 December 2010. On 16 August 2007, the Club purported to revoke the consent, citing various alleged breaches of the conditions of consent over the period from late 2005 until August 2007, and HVS has since then been excluded from the airport and has moved its operations, on a temporary basis, elsewhere. In these proceedings, HVS seeks specific relief restraining the defendants from treating the consent agreement as terminated, and additionally or alternatively damages. The main issues are: · Whether any of the alleged breaches have been waived. I conclude that the Club has waived all breaches of which it had notice up to 21 July 2007, by acceptance of payment of fees under the agreement up to that date; · Whether HVS has since 21 July 2007 committed breaches of provisions of the consent agreement as alleged by the Club. I conclude that there have been breaches of the agreement by HVS on 28 July, 4, 11 and 12 August 2007; · Whether any such contraventions were such as to entitle the Club to revoke the consent. I conclude that those breaches were breaches of conditions of the consent, upon which the Club had a contractual right to terminate; and · Whether the Club's purported termination was in breach of an implied obligation of good faith. I conclude that no breach of any implied obligation of good faith was involved in exercising the contractual right of termination, nor would relief against forfeiture, if sought, have been granted. The Consent Agreement 2 The consent agreement dated 15 September 2005 between HVS and the Club is entitled "Consent from the Central Coast Aero Club for parachute operations at Warnervale Aerodrome and parachuting chief instructor's agreement". It recites that by agreement between the Club and Wyong Shire Council, the Club is the controlling authority for the day-to-day operation of Warnervale Airport and holds the necessary approvals from relevant planning authorities for the conduct of parachuting at that airport, and has delegated operational control to Warnervale Air who act as its agents, the ultimate authority for all matters resting with the Club. It provides: In order to adhere to the agreement between CCAC and WSC, the CCAC has established a number of operational procedures. These procedures are set by the CCAC to best serve the interests of all users and to maintain an acceptable level of safety and efficiency at Warnervale. The board of the CCAC has directed WVA to approach all pilots who breach operational requirements and to advise them of operational procedures. 3 Under the heading "Consent" relevantly appears the following (emphasis added): Consent to parachuting operations is granted by the CCAC to the parachute operator to the end of December 2007 with an option of a further two periods of three years or in the event that WSC closes the Warnervale Airport, whichever occurs first and is subject to strict compliance with all of the conditions detailed within this consent . … This consent will be suspended or withdrawn if in the opinion of the CCAC there has been a breach of any of the conditions of consent . The CCAC reserves the right from time to time, to add to or vary these conditions of consent. The CCAC will discuss any proposed changes to the conditions of consent with 'Just Jump'. 4 Under the heading "Indemnity Conditions of Consent" appear nine paragraphs, of which five (clauses 3 to 7 inclusive) commence with the words "It is an essential condition of this consent". Clause 8 is as follows (emphasis added): 8. The parachute operator is responsible to enforce and ensure absolute compliance with these conditions of consent. 5 Clause 9 provides as follows: 9. It is an essential condition of this consent that the parachute operator, the parachute chief instructor, the drop zone safety officer (S) and the parachute aircraft pilot (S) attend a briefing at Warnervale airport with the CCAC and Warnervale Air Pty Ltd, to discuss these conditions of consent and to avail themselves of all information relating to the conditions and to ensure they have a full understanding of the conditions of consent. This consent shall not be in force until such a briefing has occurred to the satisfaction of the CCAC. 6 Clauses 11 to 16 appear under the heading "Operational Conditions of Consent Specific to Visitors". They regulate circumstances in which and means by which persons may enter, remain upon and move around the airport. 7 Clauses 17 to 36 inclusive appear under the heading "Operational Conditions of Consent Specific to Parachute Operator". Clause 21 provides as follows: 21. The parachute operator shall ensure all (APF), CASA regulations, orders, advisory publications and AIP are complied with. Without limiting the above Visual Meteorological Conditions (VMC) for parachute aircraft shall be maintained at all times. APF operational regulation 5.2.4 states: All descents shall be made in meteorological conditions such that the target is clearly visible and the parachutists do not enter cloud. The parachute operator on completion and submission of a 'CASA' and 'APF' approved 'cloud manual' may present the same to the CCAC for condition. The CCAC gives no assurance that jumping through cloud will be approved within this consent. 22. 'Just Jump' shall make available to the CCAC a copy of annual audit reports as prepared by the APF as they apply to parachuting operations conducted by 'Just Jump' at Warnervale Airport. The prompt provision of these reports at intervals not exceeding 15 months shall be an essential condition of this consent. … 25. This consent grants approval for parachuting in accordance with the 'Just Jump' operations manual only if the conditions are such, and the skill level of the parachutists such, that the PCI is confident that the parachutist is capable of executing a safe landing in the target area of the airport. … 32. The parachute operator must ensure that parachutists understand that if any parachutist intentionally lands in or flies through the 'prohibited areas' as defined in Annexure 'A', then that parachutist may be banned for life from this drop zone. 33. If conditions are such that parachutists are forced to land outside the target areas, then parachute operations must cease forthwith for the remainder of the day or until conditions improve. 8 Then, under the heading "Aircraft", appear clauses 37 to 48. They provide as follows (emphasis added): 37. Vehicular access onto the airside of the Airport is not normally permitted. Access to the airside is controlled by 'WVA' as the aerodrome manager. 38. Approval is granted for C180, C182, C185 (3 bladed prop), C206 and aeroplanes known as Turbine Beaver and CRESCO type aeroplanes. Written approval is required from the CCAC for any other type of aircraft and a minimum of seven days notice is required. 39. All parachute pilots must present themselves to WVA prior to each day's activities for briefing . This is to ensure that the pilots are made aware of any other activities that may affect parachuting operations for the day and so that WVA may, where possible, advise itinerant aircraft of parachuting operations at Warnervale in the interest of safety. 40. The Parachute Operator shall ensure that at all times they co-ordinate their operations with any other operator. 41. Aircraft on climb must avoid prolonged climbs over or near noise sensitive areas. 42. Pilots must give notifications of 'drop' on CTAF frequency. 43. Aircraft on descent must avoid noise sensitive areas. 44. Aircraft on descent and joining the circuit must fly at least four legs of the circuit. That is Crosswind, Downwind, Base and Final as a minimum. Aircraft must be 1000' AGL when joining crosswind and must be beyond the upwind end of the duty runway. Circuit speed shall not be in excess of 120 kts . 45. Aircraft must conform to the active circuit directions. 46. Aircraft already in the circuit have right of way. Overtaking in the circuit is not permitted. Pilots of parachuting aircraft shall refrain from asking for permission to overtake aircraft already in the circuit. 47. Aircraft must not take off or land if the runway is occupied. Backtracking on the runway is not permitted. Aircraft entering the runway to take off are to do so in one continuous movement, holding on the runway is not permitted. Landing aircraft are to use the first available taxiway to vacate the runway. 48. Aircraft used by the Parachute Operator will be parked in a location as directed by the CCAC. 9 Clause 50 provides for the parachute operator to pay an annual fee of $19,800 in twelve equal instalments on advance on the 21st of each calendar month, with failure to pay by the due date automatically suspending the consent until payment in full is received. Provision is made for an additional fee in the event that the number of tandem jumps in any one year exceeds 1,400.

10 Clause 54, entitled "Accidents and Incidents", provides as follows: 54. A copy of a record of any incidents or accidents made in the 'incident log' as required by section 7.6 of the APF rules must be forwarded to the CCAC on the same date as they are forwarded to the APF. The Club has waived all breaches of which it had notice up to 21 July 2007 11 Although in the consent agreement the Club's entitlement to suspend or withdraw the consent is expressed as having automatic effect upon the Club forming the relevant opinion, an express provision for automatic termination on the occurrence of a breach is usually to be interpreted as giving rise to a right to terminate if and when the event occurs [New Zealand Shipping Co Ltd v Société des Ateliers et Chantiers de France [1919] AC 1; Newbon v City Mutual Life Assurance Society Ltd (1935) 52 CLR 723, 732-3; Suttor v Gundowda Pty Ltd (1950) 81 CLR 418, 441-2; Carter, Peden and Tolhurst, Contract Law in Australia, 5th Ed, p 722]. Moreover, that prima facie position is confirmed in this case by the circumstance that the clause provides for the alternatives of suspension or withdrawal, which makes manifest that termination was not an automatic consequence of breach, but that the Club was to have an election. 12 A party having a contractual right to terminate will lose that right if it affirms the contract with notice of the right to terminate. One way in which it may do so is to act in a manner, or to exercise rights to benefits under the contract, consistent only with the contract remaining on foot. A classic form of waiver is acceptance by a lessor of rent under a lease with notice of a breach. The voluntary receipt of the promisor's performance, such as receipt of rent payable under a lease, is usually an unequivocal election to affirm [Davenport v R (1877) 3 App Cas 115; Wendt v Bruce (1931) 45 CLR 245; but cf International Leasing Corporation Ltd v Aiken [1967] 2 NSWR 427; Carter et al, p 727]. 13 In the present case, clause 50 of the consent agreement provided: 50. The Parachute Operator shall pay an annual fee of $19,800.00 (GST inclusive) in twelve equal instalments to be paid in advance on the 21st of each calendar month. The following conditions apply: (a) Failure to pay by the due date will automatically suspend this consent. Parachute operations will remain suspended until payment in full is received. (b) Should the number of tandem jumps in any one financial year exceed one thousand four hundred (1400) then a further fee of $8.25 (GST inclusive) per tandem jump is payable to the CCAC. 14 On 22 July 2007, the Club wrote to HVS, relevantly as follows: I am again forced to write to you about the manner in which your pilots operate VH-ZVM. Your agreement is specific in regard to circuit joining procedures for the parachuting aeroplane, rather than repeat them here you would do well in reading that section of your agreement and pointing out those requirements to your pilots. There have been other issues of demonstration of poor airmanship, with fear of stating the obvious some are listed below: … The necessity for a go round (baulked approach) is often the consequence of a poorly executed circuit. Although a pilot may intend a touch and go landing, circumstances may prevent it, such as a late touch down, a recovery from a bad landing, or unusual as it may be, a kangaroo bounding across the runway as happened the other day. The AIP advises that an approach should not continue beyond the threshold of the runway, if the runway is occupied. At Warnervale we will not accept that the runway length is sufficient to land behind a preceding aeroplane. AIP requires wings level 500 metres from aerodrome boundary. VH-ZVM is usually not wings level until over the road. When executing a baulked approach, the conditions for the earliest a pilot can turn are the same as for a take off. Lately, on two occasions one of your pilots has executed a steep left turn at very low level (50') and continued the turn onto a short downwind for a close base/final. … Lately however, this common frequency has been somewhat dominated by your pilot, transmitting various instructions to aeroplanes within our area. The APF's own rules require you not to drop unless it's clear. Therefore wait until it is, your pilot/s have no authority to control aeroplanes. … Any further problems in the above areas will be considered a breach of your agreement. The Aerodrome is mainly for flying training and other aeroplane activities, parachuting is permitted under the CCAC's requirements. 15 Under cover of a letter dated 27 July 2007, HVS tendered a cheque in the sum of $1,650, being its payment of fees for August 2007. Ms Ingram, a director of the Club, received the 27 July cheque some time between 4 and 12 August 2007, and wrote a receipt for it on 12 August 2007. Ms Ingram banked the cheque on 19 August 2007.

16 On 28 July 2007, the Club wrote to HVS, relevantly as follows: Now I refer to my letter of the 22nd July 2007. Again in spite of my efforts your pilot failed to comply with the conditions of your agreement in respect of circuit entries, as stated in that letter such actions have put you in breach of your agreement with the CCAC.

17 On 15 August 2007, HVS forwarded payment of the fees for September. The Club resolved to terminate the consent agreement at a board meeting on 16 August 2007. The letter of termination was sent to HVS that day, and received by it on 17 August 2007. When the Club received the 15 August cheque, it did not accept it, but returned the cheque to HVS. 18 When Ms Ingram on behalf of the Club formally receipted the 27 July payment on 12 August 2007, the Club accepted benefits under the consent agreement consistent only with it remaining on foot on 21 July (when the payment was due under clause 50). That rent was accepted with knowledge of the alleged breaches referred to in the Club's letter of 22 July. In my view, by accepting that payment, the Club elected to affirm the consent agreement, notwithstanding whatever entitlement it may have had to terminate for breaches of conditions of which it had notice, at least until 21 July 2007.

HVS has committed breaches after 21 July 2007 19 Accordingly, in order to found a right to terminate, the Club must point to breaches of conditions occurring after 21 July 2007.

20 On 15 August 2007, Mr Wayne Young, a flying instructor and officer of Warnervale Air, reported to Mr Dennis Hunt, the president of the Club, relevantly as follows: I feel the need to write to the Board about issues that we, the Flying Instructors, have with the parachuting operation at Warnervale. My understanding is that in their agreement with the CCAC, the parachute aeroplane when rejoining the circuit, is to join crosswind at 1000' AGL, the crosswind leg is to be flown beyond the upwind end of the runway. In the circuit they are not to overtake another aeroplane, nor ask the pilot of another aeroplane if they can overtake. I also understand that their speed in the circuit is limited to 120 kts. Of late it is very unusual for them to adhere to these requirements. Lately it has become more common for them to join the circuit on a very high downwind or base leg, hardly ever on crosswind. This is contrary to their agreement or the AIP requirements. They regularly ask other pilots if they can overtake or just operate inside another aeroplane's circuit pattern anyway. Over the last three weeks they have used four different pilots. David Watkins, Mikey, Jack and on the weekend of the 11th/12th August, another pilot whose name I don't know. Each of these pilots operated outside the rules the CCAC set for Parachuting Operations at Warnervale Aerodrome. Their method of operation has been almost identical and I cannot recall one occasion when they joined the circuit either in accordance with their agreement or the AIP. Some other incidents include, endeavouring to get other aircraft to hurry up to facilitate their own operations, and with their joining the circuit on a descending crosswind or downwind, at times descending over another aeroplane, calling joining downwind when actually on a very high base, observed by Andy Coulthard to be over 2000' on base on one occasion, asking pilots of other aeroplanes can they go first or can they overtake them, landing whilst another aeroplane is on the runway, giving other aeroplanes instructions etc. When looking out for circuit traffic, one usually looks where you'd expect an aeroplane to be, that's in the accepted circuit pattern. All this is very disconcerting to a student or low time pilot who, when asked if they can be overtaken, usually answers in the affirmative and then finds it difficult to deal with the abnormal situation, paying more attention to the aeroplane that's just overtaken them at the expense of flying their own. … We may also join on high downwind in the course of simulating an emergency with pilots, but this is the course of training, we have a syllabus that conforms to CASA's requirements, it's part of a pilot's training. When we do so, we do not interfere with another aeroplane's circuit pattern, nor do we expect nor request any other aeroplane to give away to us. The parachute pilots are required, by the agreement with the CCAC, to come into the Flight Hut before they operate on each day so we can inform them of any unusual activities that we know of, for example, Schofields Aero Club have some of their competition days here. Mikey was the only one that did, he called in halfway through the day with a comment that he was told to! … I realise that their aeroplane is expensive to operate and they try to keep the flying times as low as they can also for faster turn arounds, our student's and other pilot's time is also valuable, apart from the considerations of safety. … These incidents are so common now that sadly, we do not bother writing them in the incident book. You may remember that I informed you of this sometime ago. I think on the day you used the base station radio to call the pilot in question and told him to join the circuit in the correct manner. I'm sure that Paul Crowfoot would endorse these comments. 21 The runway at Warnervale is oriented a little off North-South: when operating from the South towards the North (for northerly winds), it is designated runway 02 (20 degrees); when operating from North towards the South (for southerly winds), it is designated runway 20 (200 degrees). The standard circuit was a left-hand circuit. Clause 44 of the consent agreement stipulated that: · aircraft on descent and joining the circuit must fly at least four legs of the circuit - joining crosswind (at right-angles to and beyond the upwind end of the duty runway), then downwind (parallel to the runway), base (at right-angles to and beyond the downwind end of the runway) and final (on the axis of the runway) as a minimum; · aircraft must be 1000' AGL when joining crosswind; and

· circuit speed shall not be in excess of 120 knots.

22 Mr Young said that he observed about 70 percent of the descents of the parachute aircraft VH-ZVM over the weekends 28-29 July, 4-5 August and 11-12 August, and saw it join the circuit on the downwind leg on most occasions (not crosswind, as required), and on one occasion - he said on Sunday 12 August - on the base leg, always from an altitude greater than 1000', and usually announced by radio calls in terms "joining downwind" or "joining high downwind". Somewhat remarkably, Mr Young made no entry in the incident log in respect of any of these matters. Nor was there any report to CASA or any other authority, despite what Mr Young conceded to be his obligation to make such a report - an omission which he sought to explain on the basis that he did not believe that CASA would act, an explanation which I find less than compelling. 23 Mr Hunt, the President of the Club and chief protagonist on its behalf, said that he observed an incident - on the weekend 11-12 August - when VH-ZVM continually cut the circuit pattern short, joining downwind several times in a day: "He's just come around and instead of coming across wind, across the threshold, he's just come half way to the airport on 20. It's very dangerous to the skydivers actually coming down. He was actually coming on the inside of a couple of skydivers, a very dangerous manoeuvre". 24 One of the pilots who flew VH-ZVM during this period was Jack Hart. He deposed to having been the pilot on 28 July, but there is strong evidence that Mr Watkins was the pilot that day, although it is not impossible that they shared the flying duties. Mr Hart may have been the pilot on 29 July and 5 August. In his affidavit evidence, Mr Hart acknowledged that if he did not think it safe to fly the full circuit he would not do so, that if there were four or five other aircraft already in the circuit he might "descend onto a high downwind to 500/1000' above the circuit and wait for a gap to appear in the traffic in the circuit that would allow me to safely enter the circuit". In cross-examination, he said "I might join downwind and that would save this pilot from having to follow me in a much greater arc which would put him a lot further from where he needs to be to turn base and the people behind him in turn". Although he said that he did so rarely on 28 July, the cross-examination established that he at least sometimes did so, notwithstanding his initial claim that he flew full circuits on all flights that day. 25 Mr Watkins was a pilot on 28 July. He was unaware that it was mandatory - as distinct from preferred or requested - that he join the circuit on the crosswind leg; he said that he treated that requirement as no more than a request, and accepted that on 21, 22 and 28 July he frequently joined the downwind leg, though denied that he did so "high" and maintained that he did so at circuit altitude of 1000' AGL. 26 The pilot on 4 August was Mikey Rogers. He says that he always flew four legs of the circuit as required, but he concedes that he forgot to report to the Flight Hut before commencing operations - though he did so later in the day. 27 The pilot on 11 and 12 August was Damian Trajkovic. He says that he was aware of the requirement to join the circuit on the crosswind leg, and denied having joined downwind, let alone "high downwind". But he conceded that on neither day did he attend the Flight Hut for a briefing, and was unaware of any aircraft flying right hand circuits that weekend. 28 The significance of this is that Mr Lechowski, then a student pilot, describes an incident that he says occurred on 11 August when performing load testing in a Cessna 172 VH-KHT. He says that he had completed his takeoff using runway 02, and turned left onto the crosswind leg and observed two aircraft ahead of him in the circuit, a Tecnam on mid-downwind, and a Jabiru on early downwind. He heard VH-ZVM call "joining high downwind" and that the pilot of VH-ZVM had sighted the 172 and the Jabiru, but not the Tecnam. VH-ZVM then flew over the Jabiru, descending, then over and in front of the Tecnam, still without sighting it, then turned from downwind through base onto final and landed. As it was still occupying the runway when Mr Lechowski was on final, he "went around" - aborting his landing and flying another circuit. He says that at one point there was only 300 feet separation between the Tecnam and ZVM. Confronted with the suggestion that there had been no operations on runway 02 on 11 August, Mr Lechowski conceded that he could have been mistaken about the date but was very doubtful, since he had checked his log as to the date. 29 Mr Smith, a flying instructor, gave evidence of an occasion on which he was returning from a training flight over Tuggerah Lakes, in a Cessna 150, which in his affidavit sworn 1 November 2007 he said occurred "about six months ago", which would put it in about May 2007. On returning to the circuit area he joined the crosswind leg of the circuit for runway 02 and called "joining crosswind" on the radio. He heard VH-ZVM call "joining high downwind I have the Jabiru on downwind sighted". Mr Smith could see that there was also another aircraft on mid-downwind, and that as VH-ZVM was descending at speed from height there was potential for a collision, and called "ZVM this is JYQ. Do you have the aircraft on mid-downwind sighted?", to which ZVM answered "I have one aircraft on downwind sighted". Mr Smith replied "The aircraft on early downwind that you said that you have sighted is now behind you. There is another aircraft in front of you. Do you have it sighted?", to which ZVM replied "No", but continued to descend. Mr Smith said "It is now mid to late downwind". ZVM tracked in towards the runway, and when below the level of the aircraft on late downwind said "I have him sighted now". Mr Smith estimates that at their closest point the aircraft had only about 100 metres of lateral separation. In cross-examination, Mr Smith said that he believed from memory that the second aircraft was a Tecnam, but could not be 100 percent sure. He could not recall the student who was with him, but said that it could have been Mr Lechowski. He accepted that it was possible that he was in a Cessna 172 as opposed to a 150. While he did not think the event could have been as late as the first half of August, he added "I guess it's possible". 30 Mr McPherson gave evidence that on a date in around June or July 2007 he was returning in his Tecnam aircraft from a flight to Narromine, and on approach into Warnervale from the north gave a ten mile inbound call, and then another from five miles out, and a further call from three miles out. He then joined the downwind leg of the circuit for runway 02. He could see a Cessna 172 just taking off from runway 02, but could observe no other traffic in the circuit and had heard no other radio calls. When about three-quarters of the way down the downwind leg he heard a call: "Tecnam 4201, have you got me sighted. I am above you?". As the caller did not identify his aircraft call sign, he did not know who was calling but returned the call and said "Negative. I cannot see you. I will extend the downwind leg". A few moments later, he saw VH-ZVM descending from above and in front of him, at the closest point with not more than 100 metres of separation. VH-ZVM then turned on to base and onto final and landed. Mr McPherson had to extend his downwind leg to allow the other aircraft to land and provide adequate separation. 31 It is fair to say that there was a degree of confusion and imprecision in Mr McPherson's oral evidence. In cross-examination he said that he had looked up his flying book and confirmed the date, but then that he had not worried about the precise date. He denied that the event could have taken place on 11 August, but in the absence of being able to give it a particular date it is difficult to see the basis for such a denial. He said that he called "joining late downwind", but it became apparent that he was somewhat confused about the terminology, and in fact joined at the commencement of the downwind leg. 32 The pilot of VH-ZVM on 11 August was Mr Trajkovic. He had a co-pilot Matthew, but Mr Trajkovic was in command. He denied that there was an occasion on which he joined the downwind leg of the circuit when there was a Jabiru and a Tecnam both already established in the downwind leg. However, he conceded that he did not report to the Flight Hut before commencing operations on either 11 or 12 August, and appeared quite unaware of any requirement to do so. 33 On the evidence of Mr Lechowski, Mr Smith and Mr McPherson, I am comfortably satisfied that an incident involving VH-ZVM joining high downwind over and in front of the Jabiru and Tecnam as described by them occurred. I accept the submission of Mr Salmon QC, for HVS, that each of Mr Lechowski, Mr Smith and Mr McPherson were describing the same incident. The question is when it occurred, and in particular whether I can be satisfied that it occurred on 11 August, in the light of Mr Trajkovic's denial, and the differences in versions as to dates and detail.

34 Mr Smith is a vastly more experienced pilot than Mr Lechowski. He is far more likely than Mr Lechowski to have confused one of his countless flights with another. While he did not think that the incident took place in August, he conceded that it possibly did so. Mr Lechowski, then a much less experienced pilot, is far more likely to have had a recollection of specific flights. Moreover, he had checked his log to confirm the date of the event, and his concession that he might have been mistaken about the date was made in response to the proposition put to him that there were no operations on runway 02 on 11 August, which proposition was not made good. Mr McPherson's description of the incident substantially accorded with Mr Lechowski's, but his evidence as to the date was imprecise and uncertain and, in that respect, I think quite unreliable. Mr Lechowski's evidence is by far the most reliable as to date, and I am satisfied on the probabilities that the incident occurred on 11 August 2007. 35 Another student pilot, Mr Hodges, describes an incident on 12 August, when he was flying a right hand circuit (the standard pattern at Warnervale being a left hand circuit) to practice a glide landing as part of the Club's regular monthly competition. Mr Young, who was acting as a judge for the competition, accompanied him. He was on the right base leg, when VH-ZVM called "joining high downwind", but in fact joined high (left) base, opposite Mr Hodges' aircraft, which was then on right base.

36 Mr Young corroborated Mr Hodges' evidence. In addition, Mr Young's 15 August letter to Mr Hunt, though not in detail, mentions an incident of VH-ZVM "joining the circuit on a descending crosswind or downwind, at times descending over another aeroplane, calling joining downwind when actually on a very high base, observed by Andy Coulthard to 2000' on base on one occasion …".

37 Mr Trajkovic was not aware of any operations on right hand circuits that weekend, and denied that he joined the circuit on the downwind (let alone base) leg. 38 Mr Hodges is a member of the board of the Club. Mr Young also had and has a significant financial interest in the Club being able to relocate to AeroPelican, in that although no contracts had been executed, there was a proposal that his company would receive $1.5 million upon relocation; this had the practical effect of requiring the Club to rid itself of HVS. He accepted that, if everything goes according to plan and the proposed relocation proceeds, he would be paid $1.5 million for his business. But notwithstanding this, weighing the evidence of Mr Hodges and Mr Young against the denial of Mr Trajkovic, and having regard to the practically contemporaneous reference in the letter of 15 August, I am on balance persuaded that there was such an incident as Mr Hodges described on 12 August. There was no obvious reason to disbelieve Mr Trajkovic, but also no obvious reason to prefer his evidence to that of Mr Hodges, who was corroborated by Mr Young, albeit not in the latter's affidavit. 39 Accordingly, I conclude that, after 21 July 2007: · On 28 July 2007, when piloted by David Watkins, VH-ZVM frequently joined downwind, not crosswind, in contravention of condition 44 of the consent; · On 11 August 2007, when piloted by Mr Trajkovic, VH-ZVM at least once joined high downwind (as described by Mr Lechowski, Mr Smith and Mr McPherson), in contravention of condition 44, and overtook aircraft already in the circuit, in contravention of condition 46; · On 12 August 2007, VH-ZVM, when piloted by Mr Trajkovic, at least once joined high on base (as described by Mr Hodges and Mr Young), in contravention of condition 44; · On 4 August 2007, the pilot Mr Rogers failed to present himself to Warnervale Air prior to commencing operations for briefing, in contravention of condition 39. · On 11 August 2007, the pilot Mr Trajkovic failed to present himself to Warnervale Air for briefing prior to commencing operations, in contravention of condition 39. · On 12 August 2007, the pilot Mr Trajkovic failed to present himself to Warnervale Air for briefing prior to commencing operations, in contravention of condition 39. The breaches were of conditions of consent, upon which the Club had a contractual right to terminate

40 The right to withdraw the consent "if in the opinion of the CCAC there has been a breach of any of the conditions of consent" is not dependant on repudiation at law, nor on breach of a condition strictly so called, but is a contractual right to terminate, conferred by the contract and not by the general law. That is not to say that at least some of the alleged breaches might not also found a right to terminate at law, but if a right to terminate under the contract is established, it is not necessary that it be such a breach as would justify termination for repudiation of breach of condition. Mr Salmon submitted that CCAC could not terminate unless the breach were sufficiently serious to justify that consequence. That submission, however, overlooks the distinction between a right of termination given by law for breach of a condition or intermediate term, and a contractual right to terminate for any breach - in which case the character of the term (as condition, warranty or intermediate) and the seriousness of the breach is irrelevant to the promisee's right to terminate. Thus - although the submissions for the Club sought to emphasise the risks to aviation safety occasioned by various of the alleged breaches, while those of HVS sought to establish that there was no risk to aviation safety - as what is in issue is a contractual right of termination, the gravity of any particular breach is not to the point. This is not an aviation safety case. The question is simply whether there was a breach of a condition of consent, not whether any such breach created a significant risk to aviation safety.

41 Unlike clauses 1 to 10 (which appear under the heading "Indemnity Conditions of Consent"), clauses 11 to 16 (which appear under the heading "Operational Conditions of Consent Specific to Visitors"), and clauses 17 to 36 (which appear under the heading "Operational Conditions of Consent Specific to Parachute Operator"), clauses 37 to 48 are not preceded by a heading which designates them to be "conditions of consent". And unlike clauses 3, 4, 5, 6, 7 and 9, and clause 22 (each of which specifies itself to be "an essential condition of this consent"), there is no corresponding provision in any of clauses 37 to 48. Mr Salmon submits that CCAC's contractual right to suspend or withdraw the consent if in its opinion there has been a breach "of any of the conditions of consent" is not attracted by a breach of any of clauses 37 to 48, as those clauses are not "conditions of consent" for the relevant purpose. 42 I do not think that the absence of such words as "Operational conditions of consent specific to aircraft" from the heading that precedes clauses 37 to 48 is of significance. In particular, I do not accept that absence of such words from that heading connotes an intention that nothing thereunder be a condition of the consent. The circumstance that some earlier conditions are said to be "essential" could have been of greater significance, had the contractual right to terminate been limited to conditions specified to be essential, and the grant of consent not specified to be "subject to strict compliance with all of the conditions detailed within this consent" - the term "consent" being used to describe the entire instrument. The draftsperson has not used the word "condition" in any technical sense to discriminate between conditions, warranties, and intermediate terms. That CCAC was entitled to insist upon strict and punctilious compliance with all provisions of the consent agreement is apparent from the statement that the consent is "subject to strict compliance with all of the conditions detailed within this consent", and that the parachute operator is responsible "to enforce and ensure absolute compliance with these conditions of consent" (clause 8). I am driven to conclude that clauses 39 to 47 inclusive - all of which are expressed in mandatory terms, using the words "must" or "shall" - are "conditions detailed within this consent", and that CCAC is entitled to revoke the consent if in its opinion there has been a breach of any of them. Accordingly, I accept that clauses 37 to 48 were "conditions of consent" although they were not so designated in express terms; they were nonetheless "conditions detailed within this consent".

43 The contractual right to terminate is conditioned on "the opinion of the CCAC there has been breach", which might be distinguished from being conditioned on the fact of a breach objectively established. Ultimately, however, the opinion of CCAC serves as a proxy for the fact of breach, for the purposes of facilitating proof. The Club elected to exercise its contractual right to withdraw the consent, by its letter of 16 August 2007. Although that letter refers to other matters also, it includes: 7. In breach of clauses 44 and 45 of the consent your pilots have persistently failed to comply with the requirement to operate within the established circuit pattern procedures for Warnervale airport. 44 If it is necessary for the Club to establish not just the fact of a breach but also that it formed the opinion that there had been a breach, then that letter - coupled with the resolution of the board on 16 August 2008 to terminate parachute operations in accordance with Mr Woodward's recommendations and to send the letter as drafted - evidences the formation of the requisite opinion. I am content to accept that the opinion that there has been a breach must be formed bona fide, and for present purposes I will accept without finding that it must also be formed reasonably. However, my conclusion that the breaches are established objectively leaves no room for a finding that any opinion that breaches had been committed was reached other than bona fide and reasonably.

45 Accordingly, I conclude that the post 21 July breaches were breaches of conditions of the consent, upon which the Club had a contractual right to terminate, which right it has exercised by its letter of 16 August 2007.

46 For CCAC, Mr Fagan SC submitted that even if a "breach of a condition of consent" within the meaning of the contract were not established, there was a sufficiently serious accumulation of other breaches to justify termination at law, quite apart from the contractual right to terminate. In view of the conclusion that I have reached, it is unnecessary to consider this further.

No breach of any implied obligation of good faith was involved 47 Mr Salmon submitted that CCAC was bound to act in good faith and reasonably "in relation to the aircraft section of the consent agreement"; I take this to mean that CCAC must act in good faith and reasonably in exercising any power to revoke consent for breach of the conditions of consent, at least those relating to aircraft operation. It was submitted that want of good faith was established by CCAC's failure to give appropriate notice or warnings before termination, and that CCAC was motivated to eject HVS so that it could move its operation to AeroPelican, and reap the considerable potential rewards of a sale of the Airport, which was then under active consideration.

48 Beyond that, assuming without concluding that a duty of good faith in the exercise of contractual rights and powers is to be implied [cf Burger King Corp v Hungry Jack's Pty Ltd [2001] NSWCA 187; Overlook Management BV v Foxtel Management Pty Ltd [2002] NSWSC 17], the content of such an obligation is to co-operate in permitting the other party to have the benefit of the contract [cf Mackay v Dick (1881) 6 App Cas 251], to act honestly and to act reasonably having regard to the interests of the parties. But I cannot see why such an implied obligation places restraints on the exercise of a contractual right of termination once it arises, even though the breach is trivial and the benefit to the terminating party great. Generally, the implication of a term that a contractual right will be exercised only in good faith does not fit neatly into the structure of Australian contract law [Service Station Association Ltd v Berg Bennett & Associates Pty Ltd (1993) 45 FCR 84, 96-7; Agricultural & Rural Finance Pty Ltd v Atkinson [2006] NSWSC 202 (reversed on other grounds Gardiner v Agricultural & Rural Finance Pty Ltd [2007] NSWCA 235)]. If circumstances have occurred which the parties have agreed should entitle one or other to terminate, then (except where the party seeking to take advantage of the event has brought it about itself, or so conducted itself as to found an estoppel) it is difficult to see why effect should not be given to their agreement, without more. Moreover, equity has crafted rules that surround the availability of relief against forfeiture in an appropriate case, a doctrine which would have been superfluous had the common law implied a "good faith" term in connection with the exercise of contractual rights of termination [cf Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5, [88] (Kirby J), [156] (Callinan J); (2002) 76 ALJR 436, 452-3, 482; (2002) 186 ALR 289, 312, 327; Agricultural & Rural Finance v Atkinson [72]-[73]].

49 HVS made no formal application for relief against forfeiture. Had the breaches been limited to an incident such as that attributed to 8 July (when VH-ZVM landed while the runway was still occupied by another aircraft, which had aborted a "touch and go" because of a kangaroo on the runway), or even a single incident of the type described by Mr Hodges on 12 August, there might have been at least an arguable case for relief against forfeiture. Likewise, had there only been a failure by Mr Rogers to attend the flight hut for briefing on 4 July, remedied by an attendance later in the day. However, the provisions of the consent agreement make clear that the Club was entitled to insist on punctilious compliance with the conditions. HVS cannot complain that it was lulled into any false sense of security; to the contrary, the need for punctilious compliance was repeatedly reinforced to it. In the Club's letter of 28 July to HVS, Mr Hunt wrote: Now I refer to my letter of the 22nd July 2007. Again in spite of my efforts your pilot failed to comply with the conditions of your agreement in respect of circuit entries, as stated in that letter such actions have put you in breach of your agreement with the CCAC.

50 And the Club's letters of 22 and 28 July were but the latest in a series of warnings about the importance of compliance with circuit patterns and the Club's insistence on compliance. Although earlier warnings had focussed on breaches of the parachute conditions of consent, there had been a previous warning about the requirement to report to the Flight Hut at the commencement of operations each day, in October 2006. This warning also related to adherence "to the requirements of operating at Warnervale. For example, overtaking in the circuit. Clause 48". 51 The breaches that I have found to be established were not single incidents, but repeated contraventions in the face of prior warnings. The circumstance that the breaches established include joining high downwind and even on base on 11 and 12 August, in the face of the previous warnings about such manoeuvres culminating in the letter of 28 July, would have presented a formidable obstacle to an application for relief against forfeiture. Conclusion 52 My conclusions may be summarised as follows. 53 By accepting as it did payment on 12 August 2007 of the fees due on 21 July 2007, the Club elected to affirm the consent agreement despite whatever entitlement it had to terminate it for breaches of conditions of which it had notice prior to that date, and thereby waived any breaches up to at least 21 July 2007. 54 After 21 July 2007, HVS committed breaches of condition 39 (which required all pilots to present themselves to Warnervale Air prior to each day's activities for briefing) on 4, 11 and 12 August; and breaches of conditions 44 and 46 (requiring aircraft joining the circuit to fly at least four legs joining crosswind at 1000 feet, and not to overtake in the circuit) repeatedly on 28 July, and also at least once on each of 11 and 12 August. 55 On 15 August, the Club reasonably formed the opinion that there had been breaches of condition 44. 56 In those circumstances, the Club was entitled to revoke the consent, as it did by letter dated 16 August 2007. 57 Relief against forfeiture was not sought in terms, but had it been, the nature of the contraventions of clause 44, following earlier warnings, would have presented a formidable obstacle. 58 It is therefore unnecessary to consider whether in any event specific performance would have been an inappropriate remedy. 59 My order is:

1. Order that the proceedings be dismissed with costs. **********

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