Choppair Helicopters Pty Ltd v AMT Helicopters Pty Ltd [2022] QDC 169

DISTRICT COURT OF QUEENSLAND CITATION: Choppair Helicopters Pty Ltd v AMT Helicopters Pty Ltd [2022] QDC 169 PARTIES: CHOPPAIR HELICOPTERS PTY LTD (Plaintiff) v AMT HELICOPTERS PTY LTD & ANOR (Defendants) FILE NO/S: BD 2012/2018 DIVISION: Civil DELIVERED ON: 1 August 2022 DELIVERED AT: Brisbane HEARING DATE: 28, 29, 30, 31 March, 1 April, 6 May 2022 JUDGE: Barlow QC DCJ ORDERS: There be judgment for the first defendant on the plaintiff’s claim. CATCHWORDS: CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – OTHER MATTERS - the first defendant was the contractual bailee of the plaintiff’s aircraft engine for the purpose of repair of certain components - the first defendant sub-bailed the engine to the second defendant, which sent them to another party – the other party, with the sub-bailee’s consent (but not that of the bailee or the owner) dismantled the engine entirely and quoted for its repair – whether the first defendant was entitled to sub-bail the engine – whether the first defendant was in breach of the contract and bailment BAILMENTS – BAILMENT FOR REWARD – REMEDIES – PARTICULAR REMEDIES – DAMAGES - the first defendant was the contractual bailee of the plaintiff’s aircraft engine for the purpose of repair of certain components - the first defendant sub-bailed the engine to the second defendant, which sent them to another party – the other party, with the sub-bailee’s consent (but not that of the bailee or the owner) dismantled the engine – the sub-bailee breached the bailment – whether the bailee was liable to the owner for the actions of the sub-bailee – what loss (if any) the owner suffered for which the bailee was liable – what was the value of the engine Baxter v Obacelo Pty Ltd (2001) 205 CLR 635, applied -- 1 of 40 -- ii Graham & Linda Huddy Nominees Pty Ltd v Byrne [2016] QSC 221, distinguished Haines v Bendall (1991) 172 CLR 60, followed Hobbs v Petersham Transport Co Pty Ltd (1971) 124 CLR 220, applied Jones v Dunkel (1959) 101 CLR 298, discussed McKenna & Armistead Pty Ltd v Excavations Pty Ltd (1956) 57 SR (NSW) 515, applied Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) CLR 104, followed Robinson v Harman (1848) 1 Ex 850, applied Sellars v Adelaide Petroleum NL (1994) 179 CLR 332, distinguished Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272, cited Tang Man Sit v Capacious Investments Ltd [1996] AC 514, applied The Anderson Group Pty Ltd v Tynan Motors Pty Ltd (2006) 65 NSWLR 400, applied Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, followed Palmer on Bailment (Sweet & Maxwell, 3rd edition, 2009) Barker et al, The Law of Torts in Australia (Oxford University Press, 5th ed, 2012) COUNSEL: J Ribbands, for the plaintiff M Eade, for the first defendant SOLICITORS: Maitland Lawyers for the plaintiff Wilson Lawyers for the defendant Contents Introduction .......................................................................................................................... 1 Pre-contractual events .......................................................................................................... 2 What were the terms of the agreement? ............................................................................... 7 Bailment ............................................................................................................................. 13 The state of the engine........................................................................................................ 14 Events after the contract was made .................................................................................... 15 Was the agreement terminated, whether by agreement or by substitutional bailment? ..... 21 Did Airwork breach the agreement?................................................................................... 23 What loss has Choppair suffered? ...................................................................................... 24 The nature of Choppair’s claim and Airwork’s defence ................................................ 24 Principles ........................................................................................................................ 25 Choppair’s claim: the “trade-in value” ........................................................................... 26 -- 2 of 40 -- iii Expert evidence of value ................................................................................................ 28 Determination of value ................................................................................................... 30 The settlement with Pacific ............................................................................................ 34 Choppair’s loss ............................................................................................................... 36 Conclusions ........................................................................................................................ 37 -- 3 of 40 -- 1 Introduction [1] The plaintiff (Choppair) operates a commercial helicopter hire business out of Moorabbin Airport in Melbourne. Its managing director and chief pilot is Michael van der Zypp. He is a very experienced pilot. He is not a maintenance engineer. [2] In 2014, Choppair (or a subsidiary company, apparently on its behalf) bought an Airbus AS350BA helicopter and imported it from Cambodia. It arrived in June. The helicopter had installed in it an engine, known as an Arriel 1B and manufactured by a French company known as Safran or one of its group of companies.1 Neither the helicopter nor its engine was then in a state that would, under Australian civil aviation laws, allow it to be operated. Upon its arrival at Moorabbin, the helicopter was taken to the premises of the maintenance company used by Choppair, Whirlybird Helicopters Pty Ltd (Whirlybird), which removed and stored the engine. The director of Whirlybird was Russell Smedley. [3] The first defendant (Airwork) is a licensed aircraft maintenance organisation operating in Caboolture. Its director and chief pilot is Myles Tomkins. Mr Tomkins is also a very experienced pilot and he is a grade 1 flight instructor. He is not a maintenance engineer. Airwork is authorised by the Civil Aviation Safety Authority (CASA) to do certain types of maintenance of aircraft, including one-hundred hourly inspections of Bell and Safran helicopter engines. Airwork employs licensed aircraft maintenance engineers (LAMEs) and aircraft maintenance engineers (AMEs) to undertake that work. Mr Tomkins himself has no role in respect of maintenance work. At the relevant times, Airwork’s chief engineer was Glenn Geange, who was responsible for the maintenance work undertaken by Airwork.2 [4] In October 2015, Choppair sent the engine to Airwork. The reason and the terms on which it was sent and received are in dispute. Putting it objectively for now, Choppair wanted to have two modules and one other component of the engine “re-calendared” and, after sending the engine to Airwork, it sought and received from Airwork a quote to undertake those tasks.3 [5] Airwork sent the engine to another licensed aircraft maintenance organisation, Pacific Crown Helicopters Pty Ltd (Pacific), which operates at the Sunshine Coast airport. Pacific in turn sent it to the manufacturer (Safran4), in Sydney. Safran stripped down the engine completely, inspected every part and wrote a report about the airworthiness of every part. It sent Pacific a quote to re-assemble the engine, including to repair, service or replace parts as necessary. The engine was never re-assembled. It was returned (in its disassembled state) to Choppair by Pacific only shortly before trial. 1 The complete name of the French company is not in evidence. 2 T4-4:38 - T4-6:43. 3 The engine is “modular”, meaning that it has 5 principal modules, each of which can be separated from the engine and serviced or replaced. It also has several other components, including (relevantly) a fuel control unit (FCU). Each module (as well as individual components within it) and each other component has a service lifetime, which is expressed both in the number of hours it has been operated between services and the number of months between services (and, in some cases, the number of “cycles”, which I understand normally to mean a completed take-off and landing of the aircraft), as well as an overall life at the end of which it must be discarded. To “re-calendar” a module is to have it serviced to an extent that it may be returned to service for a fresh period of time. 4 A French company, whose sales and maintenance facility in Australia was operated by Turbomeca Australasia Pty Ltd or Safran Helicopter Engines Australia Pty Ltd. The names Turbomeca and Safran appear to have been used interchangeably, at least in this country. -- 4 of 40 -- 2 [6] Choppair claims, in essence, that Airwork received the engine as contractual bailee for Choppair and was obliged to return it to Choppair at least in the same condition as Airwork had received it. In breach of that bailment, without Choppair’s consent it passed on the engine to Pacific, which passed it to Safran, which stripped it down without Choppair’s knowledge or consent. Choppair claims that the engine in its current state is worthless. It contends that, had the engine not been disassembled, Choppair could have traded it in for another engine, receiving value for it of about €400,000. Choppair claims damages in that sum, claiming that that was the engine’s value to Choppair, which is now lost. [7] Airwork contends, in essence, that it received the engine without notice and before it had made any agreement with Choppair, it had no personnel who were qualified, under civil aviation laws, to undertake the work for which it later gave Choppair a quote and it sub-contracted that work to Pacific (in accordance with ordinary industry practice). It was not responsible for Pacific sending on the engine to Safran, nor for Safran stripping it down. Furthermore, the bailment to it and its sub-bailment to Pacific were ultimately superseded by a separate bailment directly between Pacific and Choppair. Finally, it contends that the engine was never able to be restored to an operable condition except by the work that Safran did and quoted to do and it was never worth more than it now is (which is more than nothing: about $20,000). [8] Choppair sued both Airwork and Pacific. Pacific (the second defendant) counterclaimed for payment of a sum that Pacific had paid Safran for the cost of “bagging and tagging” the component parts of the engine. Shortly before trial, Choppair settled with Pacific on terms that Pacific return the engine parts to Choppair and pay Choppair $40,000, with each party releasing the other from any other liability. [9] The parties, in their submissions, have agreed that the following issues arise for determination: (a) what were the terms of the agreement for bailment between Choppair and Airwork; (b) was the agreement terminated and (or alternatively) did a substitutional bailment between Choppair and Pacific arise; and (c) if the court finds that Airwork breached its agreement or bailment with Choppair, as a result did Choppair suffer any loss and, if so, in what sum? [10] These issues elide an essential question: did Airwork breach its agreement? [11] These questions must be considered in the context of the factual background to the agreement, to which I shall now turn. Pre-contractual events [12] At about the same time as Choppair imported the helicopter, another company known to Mr van der Zypp imported a similar helicopter (referred to by its callsign, VH- WOP), also from Cambodia. [13] Mr van der Zypp became aware that that company had engaged Airwork to obtain a certificate of airworthiness for VH-WOP. Mr van der Zypp learned that, in the course of undertaking that work, a LAME contracted to Airwork, Bill Owen, had reviewed the engine logbooks and discovered discrepancies in them that resulted in none of the modules being out of calendar limits, so that all that was required was a series of -- 5 of 40 -- 3 hourly inspections. He was able to undertake those inspections so that that engine was then certified as serviceable. [14] In about March or July 2015,5 Mr van der Zypp had a telephone conversation with Mr Tomkins. Mr van der Zypp said Mr Tomkins told him, in that conversation:6 “You need to stop mucking around down there. Send the engine to me. I’ve engaged the gentlemen Bill Owen and Glen Geange. Bill Owen knows Safran engines because he worked on them for years in England. And, yeah, he knows what he’s doing in regard to reservicing these engines and recertifying them. So they managed to recertify one of John Taylor’s modules that we thought was dead,” and, “Send them up.” [15] Mr Tomkins said that, in March 2015, while he was talking to the owner of VH-WOP, he was briefly put onto Mr van der Zypp and suggested that they talk later. Mr van der Zypp then rang him and Mr Tomkins told him what Mr Owen had been able to do with the logbooks of VH-WOP. Mr van der Zypp asked him if Mr Owen could look at the logbooks for his helicopter. Mr Tomkins told him to send them up and he would see what they could do.7 [16] Copies (and perhaps the originals) of the engine logbook and the log cards for its modules for Choppair’s engine were sent to Airwork for Mr Owen to do a similar review. Mr Owen reviewed the logbook and log cards in April 2015.8 He ascertained that module 5 and the FCU needed re-calendar inspections9 and he was later informed by Safran that module 1 also need such an inspection.10 He was also told by Alan Whitten, a Safran field service representative, that the engine had not been stored correctly at Whirlybird.11 Mr Owen said that, once he found that out, he was aware that the engine could not be made serviceable until it had been fully inspected by Safran, so he did little else apart from telling someone at Whirlybird (he could not remember who) that he understood that the engine had not been stored correctly, so he could not do anything to return the engine to service. He also told his supervisor at Airwork (Glenn Geange) or Mr Tomkins12 that he could not do anything with the logbooks to bring the engine back into service.13 [17] It is clear to me that the conversation between Mr Tomkins and Mr van der Zypp occurred in March 2015, not in July, as it was followed by Mr Owen inspecting the logbook and log cards in April. Mr Tomkins told Mr van der Zypp to send up the logbook and log cards, not the engine, for Mr Owen to see what, if anything could be done having regard to the logbook entries. I do not accept that Mr Tomkins told Mr van der Zypp to send the engine. [18] It is convenient here to consider a submission by counsel for Airwork that I should not accept Mr van der Zypp as a witness of credit. Mr Eade submitted that, in his 5 Mr Tomkins said it was in March, while Mr van der Zypp said it was in July. 6 T1-65:9-15. 7 T4-8:40 - T4-9:45. 8 That he did so in April 2015 is obvious from emails he exchanged with Safran on 14 and 15 April 2015: TB547-556. 9 T4-42:6-9. 10 Exhibit 1 (trial bundle or TB), p548; T4-46:14-24. 11 T4-44:21-26, 40-41. 12 T4-50:13 - T4-51:27. 13 Mr Tomkins said that he thought Mr Owen told him that in about July or August 2015: T4-10:36-38. -- 6 of 40 -- 4 evidence, Mr van der Zypp was evasive and not responsive to questions and his evidence was irreconcilably inconsistent about a number of matters. In the course of the evidence, in response to a submission about Mr van der Zypp’s credit, Mr Ribbands, for Choppair, submitted that, “Credit … is the refuge of the forensically destitute.”14 [19] As will become apparent, I do not consider that Mr van der Zypp was a deliberately untruthful witness. However, I consider that he did not have a good memory of many of the relevant events. However, he has – I consider not deliberately – reconstructed events and his memories of them. As Mr Ribbands submitted in his closing written submissions: It is a not uncommon phenomenon that two individuals may tell divergent stories pertaining to the same event, but each honestly believes they are telling the truth. Such is the nature of the fallibility of the human memory that recollections fade over the years and likewise, tend to be reinforced in favour of a position which puts the person concerned in the best light. That is not to say that anyone is being anything other than entirely truthful. It simply recognises the fallibility of memory. [20] An example of Mr van der Zypp’s poor memory is in the event that I have just discussed. Mr van der Zypp’s evidence that he discussed with Mr Tomkins having Mr Owen review the logbooks in July is demonstrably wrong, as Mr Owen and Safran exchanged emails about the modules in April. [21] Therefore, where Mr van der Zypp’s evidence is inconsistent with that of other witnesses and surrounding events as shown in documents, I generally prefer that revealed by the documents and, at least where it is not inconsistent with documents or there are no documents, that of the other witnesses. [22] Choppair, or Whirlybird on its behalf, sent the engine to Airwork in October 2015. Mr van der Zypp said that he sent the entire engine, rather than simply the modules to be re-calendared, because in his telephone conversation with Mr Tomkins in July 2015, Mr Tomkins had told him to just send the whole thing up (although, he said, it wasn’t exactly said that way).15 As I said, I do not accept that Mr van der Zypp was told, by anyone at Airwork, to send up the entire engine. I consider it more likely that Mr Smedley or someone else at Whirlybird suggested that to him. Mr Smedley said he did not recall Mr Owen ringing him to tell him that the engine would have to be sent to Safran. However, at the time Whirlybird engaged a LAME by the name of Dennis Bradley. It is quite possible that Mr Owen spoke to Mr Bradley, who had worked on Choppair’s helicopter and, indeed, had removed the engine from it.16 [23] Mr Bradley was not called to give evidence. Counsel for Airwork, Mr Eade, submitted that I should infer from his absence that he was not called by Choppair because his evidence would not have assisted Choppair’s case.17 I do find it unusual that he was not called, given his involvement with the engine and that he could be expected to have given evidence about what happened to the engine after he had 14 T2-115:46-47. Clearly itself a forensic flourish that I do not accept as bearing on the issue here. 15 T1-69:20-25. 16 This appears from the engine logbook at TB553. Mr Smedley explained the relevant entry: T2- 125:43 – T2-126:13. 17 Relying on the principles in Jones v Dunkel (1959) 101 CLR 298, 320-321. -- 7 of 40 -- 5 removed it from the helicopter, including how and where it had been stored. He also had a conversation in November 2014 with Allen Whitten of Safran and subsequently exchanged emails with Mr Whitten and Mark Robinson,18 in which he said that the owner of the engine would like to know an approximate cost of a calendar overhaul of the engine and its trade-in value against a new Arriel 1D1 engine with an upgrade of the helicopter.19 [24] Counsel for Choppair, Mr Ribbands, submitted that no such inference should be drawn, as the court cannot conclude that he is in Choppair’s camp. He was a contractor to Whirlybird, which was a contractor to Choppair, not an employee of either. [25] In my view, it is puzzling that Choppair did not call Mr Bradley, given that he had direct involvement with the engine and that he made those enquiries on behalf of Choppair. There was no explanation for not calling him. Should it be necessary, I would draw an inference that his evidence would not have assisted the plaintiff. [26] The evidence is insufficient to determine with any certainty what led to Choppair sending the entire engine to Airwork rather than having Whirlybird take off the two modules and the FCU and send only those items. The timing of that event (October 2015) is curious, given that the dealings with the logbooks had occurred in April. But I do not accept that Mr Tomkins told Mr van der Zypp to do so, whether in March or July 2015. [27] Frankly, given the enquiries made by Mr Bradley about the cost of a full calendar overhaul of the engine and the alternative cost and benefit of an upgrade of the helicopter and a trade-in of the engine, I consider it likely that, having received a response about the latter possibility and having been told what Airwork had done for the owner of VH-WOP, Mr van der Zypp decided to explore whether some modules could be re-calendared more cheaply than the other options. He was then told, in April 2015, that modules 1, 5 and the FCU needed to be re-calendared, but he was aware that the entire engine may have to be re-calendared. He decided to explore the former first but, as the latter was a possibility, he decided to send the entire engine to Airwork even though, at that stage, he only wanted a quote for re-calendaring the two modules and the FCU. He therefore arranged for the entire engine to be packed and sent to Airwork. However, while this scenario seems likely, I am unable to find positively that it occurred, as the possibility was not explored in the evidence or in the parties’ submissions. [28] Mr Tomkins20 and Mr Owen21 said that the engine arrived without any prior notice that it was on its way. There is no evidence that they were told that it was being sent to Airwork and each of them said that he had not been told that it was on its way.22 Mr Owen said it arrived on 18 or 19 October 2015: he knows the date because he took photographs of it which show that they were taken on 19 October.23 They did 18 Safran’s support services and business development manager. 19 Exhibit 17. Mr van der Zypp denied any knowledge at the time of those enquiries being made: T2-5:32 – T2-7:1. 20 T4-10:41 - T4-11:16. 21 T4-52:30-42. 22 T4-11:7-12; T4-52:30-42. 23 T4-52:24, T5-35:1-7. The photographs are exhibit 12. -- 8 of 40 -- 6 not remove the engine from the container in which it had arrived. Mr Owen said that the crate in which it arrived was not a suitable container for an aircraft engine. He said that, having arrived in an unsuitable container, the engine could only be considered unserviceable as a whole. Having arrived that way and in that condition, he was not prepared to do any work on it.24 Mr Tomkins told him to find out what they could do and to get some options and some quotes.25 [29] Mr Owen sent an email to Mr Bill Haffner (Pacific’s managing director) on 19 October 2015, attaching the log cards for modules 1 to 5 and the FCU,26 noting that the engine had been left on a pallet uncovered in Whirlybird’s hangar for six months and asking for a quote on various options to get the engine to a serviceable condition. [30] Mr Haffner and Daniel Stromski from Pacific then exchanged emails with Mr Robinson of Safran. Mr Haffner said he was trying to see if there was anything that Pacific could do at a lower level of maintenance rather than sending it to Safran.27 They asked Mr Robinson what was required to get the engine serviceable and an estimate of the cost “assuming everything is ok inside.” Mr Robinson said he would say it would require a “full calendar reset strip.”28 As to cost, he said,29 It’s hard to put a figure on it but would expect it to be in range of 60,000 USD plus parts required. So would expect to be around the 200K-300K USD but will depend if the Life limited parts pass inspection then will push up price dramatically. [31] Mr Stromski30 passed on that email to Mr Owen, who recalled receiving it and said he showed it to Mr Geange, but did not recall if he showed it to Mr Tomkins. However, he said that he told Mr Tomkins that, because of the way the engine was transported to Airwork, there was nothing that Airwork could do; the only option was to have the engine inspected by Safran. While it was not clear whether he told Mr Tomkins the following, in his evidence Mr Owen said that Airwork could not even take off the modules and send them individually to be re-calendared because, if it did so, it would take responsibility for properly preserving and packing the engine, which would have involved extra costs for Airwork and there was also a risk that the owner would deny that any damage that had been caused by the method of transport was the owner’s fault.31 He said Mr Tomkins agreed to pass on the engine “to somebody who knew what they were doing.”32 Mr Owen took more photographs of the engine in its container33 and, on 11 November 2015, Airwork sent on the engine to Pacific, because Pacific was Safran’s representative and Mr Whitten had told Mr Owen to send everything through Pacific.34 24 T4-53:33-39; T4-59:41 – T4-60:3. 25 T4-11:38-42. 26 TB558-573. 27 T4-123:1-16. 28 TB575, emails 31 October, 4 and 5 November 2015. 29 TB574, email 9 November 2015 from Robinson to Stromski and Haffner. 30 Who said he understood that a full calendar reset strip was a maintenance activity to bring the calendar time of the engine back to zero, because there are fixed calendar intervals when engines need to be overhauled: T3-108:1-7. 31 T4-64:26-43. 32 T4-64:45-46. 33 Exhibit 13. 34 T4-65:5-19. -- 9 of 40 -- 7 [32] Mr Tomkins said that Mr Owen told him that, from the state of the logbooks and the way the engine was shipped, nothing could be done without opening up the engine. Mr Owen told him that he had a quote to re-calendar modules 1, 2 and the FCU, but said it would be subject to them opening up the engine.35 [33] Mr Tomkins then added Airwork’s usual 30% margin to the amount of the quote that Mr Owen had told him about, resulting in a price to Choppair of $78,000 plus GST for re-calendaring those components. As I will discuss later, he sent a quote for that work to Choppair and discussed it with Mr van der Zypp. What were the terms of the agreement? [34] The parties agree that the contract between them was made in November 2015. They each contend that it was partly oral and partly in writing. They differ about what was orally agreed and about the proper construction of the written part. Airwork also contends that the written part comprised two documents, while Choppair contends it comprised only one. [35] Mr Tomkins said36 that, after Mr Owen told him Airwork could not itself do anything, but he had a quote from Safran to re-calendar the modules that Choppair had asked Airwork to do, he telephoned Mr van der Zypp. Mr Tomkins said that he told Mr van der Zypp that it would be about $78,000 plus GST to do the work, but it would be subject to them opening up the engine. They did not discuss the maintenance that might or would need to be undertaken to the engine, because:37 Well, we couldn’t, because we didn’t know what it was until we opened the engine up. The only thing that we could be sure of is the re-calendar of 1, 5 and the FCU. [36] Mr van der Zypp said that, in his conversation in about July 2015 with Mr Tomkins, Mr Tomkins told him that Airwork had nearly finished with the helicopter bought by the other company and Mr van der Zypp should send his engine up to Airwork.38 He also said that he told Mr Tomkins that he did not want the engine to be sent to Safran.39 [37] Mr van der Zypp denied that he had a conversation with Mr Tomkins after the engine was sent to Airwork. He denied that Mr Tomkins told him that Airwork had received the engine and it had to be sent away to be opened up.40 However, he had earlier said that he and Mr Tomkins “had another conversation, but purely over the fact that [the] engine was there now.”41 They clearly had a conversation after their March conversation. I accept Mr Tomkins’ evidence and find that they had a conversation to the effect that he described, shortly before Airwork sent Choppair the quote.42 35 T4-12:2-18. Mr Tomkins said modules 1, 2 and the FCU, but he was obviously mistaken and intended to refer to modules 1, 5 and the FCU. It seems that Mr Tomkins believed that the quote from Mr Robinson was in fact only to re-calendar those components even though Mr Owen had asked for the cost of what was required to get the engine serviceable. 36 T4-12:29-41. 37 T4-12:38-41 38 T1-64:12-14, T1-65:7-15. 39 T1-72:32-36. 40 T2-44:36 – T2-45:10; T2-45:36-43. 41 T1-72:28-30 42 See [40] below. -- 10 of 40 -- 8 [38] Choppair pleaded that the contract included a term that Airwork was not to send the engine to Safran and Airwork itself was to do the work of re-calendaring the three components. I do not accept that. The evidence about not sending the engine to Safran was that of Mr van der Zypp referred to above.43 But that conversation, if it occurred, took place many months before the contract was in fact made. Even if Mr van der Zypp had told Mr Tomkins, in a conversation in March or July 2015, that he did not want the engine sent to Safran, on an objective analysis from the point of view of reasonable business people, a statement made so long before the contract date and not repeated or referred to at the time the contract was made in November 2015, nor reflected in the written documents comprising (or forming part of) the contract, would not constitute a term of the contract. Furthermore, Mr van der Zypp knew that Airwork was not able itself to perform the re-calendaring and that it had to be done by a level 4 facility (of which Safran was the only one in Australia).44 In such circumstances, no reasonable business people in the parties’ positions would consider that there was such a term in the contract ultimately made. [39] On 11 November 2015, Mr Tomkins sent an email to Mr van der Zypp,45 saying: Attached is a copy of the tax invoice/quote for the re-calendaring of your engine. The re-calendar modules 1 & 5 as well as the FCU. The price quoted is of course subject to them opening up the engine. [40] Mr Tomkins said that he sent this email after his conversation with Mr van der Zypp.46 I accept that evidence, as Mr Tomkins appeared to have a clear recollection of the sequence of events. It is also not surprising that, before sending a quote that was not precise, especially after a long gap since the last communication between them, a person in Mr Tomkins’ position would telephone the customer to inform him that the quote was about to be sent. [41] The document attached to the email47 is set out below: 43 Paragraph [36]. 44 See [49] below. 45 TB579. 46 T4-13:16-17. 47 TB580. -- 11 of 40 -- 9 [42] The parties disagree about which of those documents comprise the written part of the agreement between them and how they should be construed. Before I consider that issue, I record that, on 16 November 2015, Mr Tomkins sent Mr van der Zypp an email attaching an invoice for the 25% deposit provided for in the 11 November -- 12 of 40 -- 10 document.48 Choppair (or another company in Mr van der Zypp’s group) paid that amount, apparently some time later in November 2015.49 [43] The “tax invoice/quote” sent by Mr Tomkins to Mr van der Zypp on 11 November 2015 was clearly a quote, not an invoice. That was subsequently clarified by Airwork sending to Choppair a credit note for the amount in the invoice and expressly confirming that it had been a quote, not an invoice.50 The invoice for the deposit also referred to the “quote 8994 11/11/2015”. The parties agree that it was a quote, not an invoice. [44] The quote was therefore an offer to do the work described in it. The quote was accepted by Choppair, at the latest, when it paid the deposit for which the invoice was sent on 16 November 2015.51 [45] I find that the contract was purely in writing. The terms of the contract were set out in the quote sent by Airwork to Choppair on 11 November 2015. The terms were agreed by Choppair when it paid the deposit. All conversations before 11 November 2015 were discussions that led to the contract, but none of the matters said in those discussions comprised a term of the contract. [46] The contract was therefore that Airwork would have modules 1, 5 and the FCU re- calendared. The price quoted was not a fixed price but was “subject to inspection after disassembling.” It falls to me to determine what that phrase meant. Airwork contends that it meant “after the entire engine is disassembled” because, by that stage, Airwork understood (from Pacific and Safran) that the engine could not be returned to service, nor could any module be re-calendared, without the engine being fully inspected by Safran. Choppair contends that it meant “after the modules are disassembled.” [47] Of course, the meaning of the contract terms must be determined objectively, having regard to what a reasonable business person would understand by the language of the contract and the parties’ conduct and also having regard to the circumstances addressed by the contract and the commercial purposes or objects to be secured by it.52 As the High Court has said:53 It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. [48] I have discussed Airwork’s knowledge above: particularly that of Mr Owen and Mr Tomkins. Mr Owen knew that the entire engine had to be disassembled before it could be returned to service. He told Mr Tomkins that nothing could be done without opening up the engine. Although Mr Tomkins is not a LAME, I infer that he knew (and Mr Owen clearly knew) that, for a module to be re-calendared, that module needed to be disassembled and its component parts to be inspected and repaired or replaced as necessary. Mr Owen knew that the quote provided by Safran was for 48 TB581, 583. 49 T2-65:16-22; T4-16:26-32. 50 TB585, 586. 51 There is no evidence of any earlier express acceptance of the quote. Mr Tomkins was not asked and did not say whether Mr van der Zypp told him to go ahead on the quote provided. 52 Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) CLR 104, [47]. 53 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, [40]. -- 13 of 40 -- 11 labour only and that, with the cost of parts, to re-calendar modules 1, 5 and the FCU could well cost several hundred thousand dollars. But it does not appear that he told Mr Tomkins either that the entire engine had to be disassembled before it could be placed back into service, nor that the cost to re-calendar the particular modules would possibly be so high. Mr Tomkins knew only that Safran had quoted US$60,000 to re- calendar those items and that the engine had to be “opened up.” The question is what aspects of that corporate knowledge Airwork passed on to Choppair. [49] For Choppair, Mr van der Zypp was aware that a re-calendar of a module involved the module being stripped down into its constituent parts and fully inspected. He also knew that to overhaul an FCU required it to be disassembled, at least partly, by a fuel service shop. He did not believe (although he did not know) that Airwork itself would overhaul the FCU.54 He also knew that a re-calendar could only take place at a level 4 maintenance facility for Safran. He said that Mr Tomkins told him that Mr Owen “had the contacts to get that done.”55 He also knew that Airwork was not itself authorised by the regulations to open up the engine, though it was allowed to separate it into modules.56 In those circumstances, I do not accept that he believed that Airwork itself could do the work to re-calendar those modules. I do not accept that Airwork told him, or led him to believe, that it would necessarily do the work itself. [50] Mr Tomkins did not tell Mr van der Zypp what the full price might be, nor that the entire engine had to be disassembled. He said that he and Mr van der Zypp did not discuss any other maintenance that might need to be done to the engine because he did not know what it would be until the engine was opened up. The only thing he could be sure of was the re-calendar of modules 1, 5 and the FCU.57 He said that he told Mr van der Zypp, in November 2015, that to re-calendar modules 1, 5 and the FCU would cost about US$78,000 plus GST, but that price was subject to the engine being opened up. He reiterated, in his email of 11 November 2015, that the price quoted was “subject to them opening up the engine.” In the quote attached to that email, the price was “subject to inspection after disassembling.” [51] Mr van der Zypp did not ask Airwork to do whatever was necessary to return the entire engine to service. He asked only that the two modules and the FCU be re-calendared. Airwork’s counsel relied on statements that Mr van der Zypp made in his evidence that his agreement with Mr Tomkins was that Mr Tomkins would “get … this engine running”58 and that Airwork would undertake “anything to do to get the engine running”.59 However, it seems to me, viewing those statements in the evidentiary context in which they were made, that it was Mr van der Zypp’s understanding that the likely outcome of re-calendaring modules 1, 5 and the FCU would be that the engine would then be “running”: that is, serviceable. He and Mr Tomkins did not agree that Airwork would have any work done that was necessary to get the engine running. Airwork was only to have those modules and the FCU re-calendared. I do not accept the proposition by Airwork’s counsel that it was an express or implied term of the agreement that the entire engine would be stripped down. 54 T1-96:18 – T1-97:2. 55 T1-97:4-7. 56 T2-51:20-21. 57 See [35] above. 58 T2-57:43-45. 59 T2-66:5-10. -- 14 of 40 -- 12 [52] I accept Mr Tomkins’ evidence that he had a telephone conversation with Mr van der Zypp shortly before he sent the quote. It would be unusual simply to send the quote, after a long gap in communication, without informing Mr van der Zypp orally. I accept that he told Mr van der Zypp that it would cost US$78,000 plus GST to re- calendar modules 1, 5 and the FCU, but that quote was subject to opening up the engine. He did not tell Mr van der Zypp that the quoted price was for labour only (and indeed, for labour to strip down the engine, not just to re-calendar two modules and the FCU) and parts would be likely to cost significantly more. He did not tell him that the entire engine would have to be stripped down in order for it to be rendered serviceable. He had been asked to have only the two modules and the FCU re- calendared (as they had been identified by Mr Owen as needing to be re-calendared) and that is what he discussed with Mr van der Zypp. [53] Airwork’s counsel submitted that, in order to determine the terms of the contract, I must take into account the legislative regime that governs aircraft maintenance and who may undertake what levels of maintenance to different aircraft and engines and their components. Mr Eade set out, in his written submissions, considerable and helpful detail about the relevant statutory requirements. He relied in particular on requirements that: (a) the maintenance of all aircraft and engines and their components must be completely and accurately recorded in the relevant manuals and maintenance cards; (b) if a step is not recorded in the relevant manual, it is taken not to have happened; (c) the manufacturer’s manual for an engine (once approved by CASA) takes on a quasi-legislative character and must be complied with; (d) therefore, if the manual requires that an engine or its modules be returned to the manufacturer or its representative for certain work to be done, or if certain work has not been done, then only the manufacturer or its authorised (and properly licensed) representative can do that work. [54] I accept that that regime is a relevant factor in determining the terms of this contract between the parties. I do take it into account. It is the regime in which the parties operated their respective businesses and all the witnesses demonstrated that they have at least a broad (and in some cases, a very specific) knowledge of the requirements of the legislation. Mr van der Zypp’s knowledge that I have found in paragraph [49] above was in part informed by that regime. [55] The contract scope and price were stated in the quote. As I have said, the email by which the quote was given to Choppair was not part of the contract. Nor do I consider that the words of the email, nor any conversation between Mr Tomkins and Mr van der Zypp, qualified or constituted terms of the contract. The email and the contractual document must be considered in the context of each other. The contract was to re- calendar the two modules and the FCU, which was the work that Choppair had asked Airwork to have done. In that context, and given also that Airwork did not tell Choppair that the entire engine would have to be disassembled to return the entire engine to service, the “disassembling” referred to in the quote was disassembling the modules and the FCU specifically referred to in the quote. Consistently with those facts, a reasonable person in the parties’ situations would understand the email to be referring to the same qualification to the price: opening up the modules concerned could be described relevantly as opening up the engine but, in the context in which it -- 15 of 40 -- 13 was described that way, it would be understood by the putative reasonable businessman as meaning opening up the three parts of the engine that were to be re- calendared.60 Furthermore, given that the price was subject to disassembly, in my view it went without saying and was obvious that, after the modules had been disassembled, Airwork would inform Choppair of the final price, at which time Choppair could decide whether or not the re-calendaring should proceed further. [56] In other words, Airwork was engaged by Choppair to take possession of the engine, to arrange to have modules 1, 5 and the FCU stripped down (by a properly qualified maintenance facility) in preparation for re-calendaring, to provide to Choppair a quote for the re-calendaring once they had been stripped down and the parts required were known and, if it was subsequently authorised by Choppair to do so, to have the re- calendaring undertaken. [57] There was no term of the contract that Airwork would not have the engine or the modules sent to a third party, including Safran if necessary, to undertake the work. Nor was it a term of the contract that Airwork would do the work itself. It was to do such work (if any) as it was licensed to do and to organise for the balance of the work to be done by appropriately licensed people. [58] Nor was there any agreement that the entire engine would be disassembled, even if that were necessary to restore it to a serviceable condition. The only parts that Choppair authorised Airwork to have disassembled were modules 1, 5 and the FCU; such disassembly being necessary in order for them to be re-calendared. Bailment [59] Choppair’s claim relies not only on breach of contract, but also on the law of bailment. Choppair contends that, the engine having been delivered to Airwork, as bailee Airwork had an obligation to return it to Choppair in no less than the same state or condition as it was when received by Airwork. [60] If the two modules and the FCU had been stripped down in preparation for re- calendaring and a quote had been provided to Choppair, which then did not authorise that the re-calendar work proceed, then Airwork’s obligation would have been to return the stripped down modules and FCU, together with the rest of the engine, unless it was instructed otherwise by Choppair. [61] Of course, at the time the agreement was reached, the engine was already in Airwork’s possession, having arrived at its premises in October 2015. In other words, Airwork was already bailee of the engine. As bailee, Airwork was obliged to redeliver the engine to Choppair or to deal with it in the way stipulated by Choppair.61 In this case, Airwork had possession of it in order to have work done on it under the terms of the contract: that is, to re-calendar modules 1, 5 and the FCU (subject to further instructions from Choppair). In order to get that work done, it was entitled to deliver it to others to do the work, which would give rise to a sub-bailment. But ultimately, unless the bailment from Choppair to Airwork was terminated, it was Airwork’s obligation, as bailee, to return the engine, with modules 1, 5 and the FCU re- 60 The same must be said for Mr Tomkins’ statement to Mr van der Zypp, in their conversation, that the price of $78,000 (which was for re-calendaring the three items) was subject to the engine being opened up. 61 Hobbs v Petersham Transport Co Pty Ltd (1971) 124 CLR 220, 238 (Windeyer J). -- 16 of 40 -- 14 calendared if that work was done, or in their stripped down state if Choppair did not authorise further work to be done. [62] As bailee for reward, it was Airwork’s obligation to Choppair, while the bailment persisted, to keep the engine safe. Airwork could not escape that duty (nor did the bailment to it cease) by delivering the engine to Pacific. Ordinarily in the case of bailment: If the goods are lost or damaged, whilst they are in [the bailee’s] possession, he is liable unless he can show - and the burden is on him to show - that the loss or damage occurred without any neglect or default or misconduct of himself or of any of the servants to whom he delegated his duty.62 [63] One of the issues in this case is whether the bailment from Choppair to Airwork ended and, if so, when and by what method. I shall consider that issue later, but at this stage it is relevant to set out the duties of a principal bailee when the relevant goods are passed on to someone else to undertake work on them. In such a case, ordinarily the principal bailee continues to owe the duties of a bailee to the bailor, while the sub- bailee also owes those duties to the principal bailor, as well as to the principal bailee.63 Furthermore:64 If, on a proper analysis, [the principal bailee] has accepted overall responsibility for the performance of a task, albeit with a power to delegate it wholly or in part to another, the mere fact of delegation will not exonerate him if, as a result, the goods are wrongfully lost or damaged. … If, on the other hand, the original bailee has agreed only to perform and to be responsible for one link in a chain of successive services, … he will be liable only for those services he has undertaken personally and (excluding unauthorised dispositions) will not be answerable for anything happening to the goods while they are out of his possession. [64] Having regard to the terms of the contract, I find that Airwork took possession of the engine in order to have modules 1, 5 and the FCU re-calendared (whether it did any of the work itself or it delegated it to others), subject to first obtaining a quote for the work and confirming with Choppair that it should go ahead to have it done. It was authorised to delegate that work to others, but it retained responsibility to Choppair to obtain the quote and then (if authorised by Choppair to do so) to have the work done. In either case it was (and remained) responsible for returning the engine to Choppair, either in the state in which it received it or with the three modules stripped down (for quotation purposes) or re-calendared. [65] Whether that situation later changed and Airwork was relieved of those obligations (as Airwork contends) must be determined by examining what occurred after Choppair authorised Airwork to proceed, by accepting Airwork’s offer. But first it is necessary to consider the state of the engine when it arrived at Airwork’s premises. The state of the engine [66] By November 2015, it was known to Pacific and Airwork that the engine was required by law to be returned to Safran for a complete strip-down and inspection before it or 62 124 CLR 220, 234 (Menzies J). The same applies if Airwork, as bailee from Choppair, “delegated its duty” to a sub-bailee such as, in this case, Pacific. 63 Palmer on Bailment (Sweet & Maxwell, 3 rd edition, 2009), [23-002]. 64 Palmer on Bailment, [23-006], pp 1246-1247. -- 17 of 40 -- 15 any of its modules or components could be returned to service. That requirement stemmed from a number of factors. [67] First, the logbooks showed that little or no maintenance had been done on the engine since 2014. None of the steps required by the engine manual had been taken (such as running the engine periodically) to maintain its calendar or life currency. In the absence of any maintenance, the manual required that it be returned to the manufacturer for inspection. [68] Secondly, the logbooks did not record that the engine had ever been stored in accordance with the manual. In short, the manual required that, if the engine was not used (that is, flown) and maintained regularly, it was required to be stored in very particular ways, depending on the period over which it was to be out of use. As with all maintenance, storage requirements had to be strictly observed and recorded in the engine logbook. There were no entries in the logbook showing any storage. [69] Furthermore, Mr Whitten from Safran had observed the engine in Whirlybird’s hangar on two occasions approximately six months apart. He observed that it had not been stored in accordance with the manual. I accept his evidence that it was this engine that he saw and that it was not properly stored. [70] Mr Smedley, the director of Whirlybird, gave evidence that this engine had been stored in his office, not in the hangar, so Mr Whitten must have seen another engine in the hangar. But even if that were so, Mr Smedley did not say, nor show, that the engine in his office was stored in accordance with the manual’s requirements and the logbook showed no entries for its storage. Therefore, it must be assumed – and in any event I infer - that it was not properly stored, even if in his office. In this respect, the absence of evidence from Mr Bradley that might have confirmed or conflicted with Mr Smedley’s evidence makes it easier for me to draw this inference. [71] Thirdly, when transported from Choppair to Airwork, the engine was not in a proper container, nor on a proper support system, nor was it properly sealed and covered for transportation in accordance with the manual. Rather, it was in a crate, on a home- made stand and it suffered apparent contact damage during transport. In all those circumstances, it was compulsory that it be sent to the manufacturer for a full strip- down inspection before any component, module or the engine could be returned to service. [72] For some or all of these reasons, by November 2015 none of the engine’s modules could be re-calendared without the manufacturer inspecting them. [73] This was known by Safran (Mr Whitten and Mr Robinson), Pacific (Mr Stromski and Mr Haffner) and Airwork (Mr Owen, although not Mr Tomkins), but not by Choppair. Events after the contract was made [74] It had not been necessary for Choppair to send the entire engine to Airwork in order for two modules and the FCU to be re-calendared. Whirlybird could have removed them and packaged them to send to Airwork. [75] As the entire engine was sent to Airwork for the re-calendaring to be done, one might have expected Airwork to remove the two modules and the FCU and to send only them to one or more appropriately licensed maintenance facilities to have each of them re-calendared. -- 18 of 40 -- 16 [76] However, having received the engine and given Choppair a quote to re-calendar modules 1, 5 and the FCU, Airwork sent on the engine to Pacific. As I have already recorded, Mr Owen said that, the engine having arrived in an unsuitable container and improperly packed, he was not prepared to do any work on it.65 He arranged to have it sent to Pacific because Pacific was Safran’s representative and Mr Whitten had told him that everything needed to go through them.66 The engine left Airwork’s premises on 11 November 2015. [77] Mr Haffner said that he was present at Pacific when the box containing the engine arrived there. He did not see the engine itself. He was not involved in it leaving Pacific.67 [78] Mr Stromski said he was present on the day that the engine arrived at Pacific.68 He saw the box in which it was packed and he saw it opened by unscrewing the lid.69 The documentation for the engine arrived separately and Pacific had been asked to pack it into the box with the engine to send on to Safran, which they did. He did not observe the engine itself.70 [79] On 1 December 2015, Pacific sent the box containing the engine to Safran. Mr Stromski sent an email to Mark Robinson,71 saying: The engine from below is on its way down to Bankstown for Inspection and Calendar Reset now. Please find attached our RO. As this is not our engine, please keep us updated in regards to cost. If possible, please provide me a quote after initial inspection and review of Log cards, so I can communicate this with our customer and ask for a deposit, based on the initial results. Engine Log Book and Cards are included in the shipment. Please confirm once the engine arrived. … [80] The “RO” (repair order) attached to that email was from Pacific to Turbomeca.72 It required shipment to Pacific (presumably of the engine after the works were completed). The description of the work to be done was: INSPECTION AND CALENDAR RESET PLEASE CONFIRM QUOTE FOR LABOUR USD 60,000 EQUIVALENT IN AUD PRIOR COMMENCING WORK. FINAL INVOICE IN AUD PLEASE. [81] On 7 December 2015, Mr Stromski received two emails from Mr Robinson (also copied to Mr Haffner). In the first,73 Mr Robinson said: The engine has arrived and bad news, it was loose (not bolted) in the box. Engine arrived leaning to one side of box and sitting on power shaft. Was not 65 See [28] above. 66 T4-65:9-19. 67 T4-126:32-33, T4-127:11-31. 68 T3-95:23. 69 T3-96:11-19. 70 T3-96:21-26. 71 TB587. 72 That is, Safran. TB588. 73 TB589. -- 19 of 40 -- 17 even clamped into the cradle. We will send thru photos when available. There’s a nut on bottom of box and bolt in one flange. … This shipping issue will add costs, as more work will be involved. [82] In the second email,74 Mr Robinson said: Please find attached photos of engine loose in transit box. Please advise how you wish to proceed asap, engine will require full strip as will be treated as a heavy landing due way was transported. Engine is now on hold awaiting further instructions. Please advise how you wish to proceed. The email recorded that 15 photographs were attached, nine of which are in evidence.75 [83] That afternoon, Mr Stromski responded by email,76 saying: Apart from registering SN of the engine modules and attaching the logbooks to the crate our storeman did not inspect the shipping crate and fixtures. The crate came to our facility the same way you received it at TAA as we only shipped it further on to you without [sic]. I will have to get in touch with the owner of the engine and confront him with the news and see how we want to go ahead. [84] Nothing appears to have happened between that day and 11 February 2016, when Mr Robinson sent the following email to Mr Stromski (copying Mr Haffner):77 Can you advise how you wish to proceed with this engine? Is it to proceed for for [sic] quote or return as-is to PCH. Let us know how you wish to proceed asap. [85] Mr Stromski and Mr Robinson then exchanged the following emails that day (copying Mr Haffner):78 Stromski to Robinson: I talked to the customer the other day and we need a quote also for the damage through transport. Robinson to Stromski: Can you please clarify you mean 1. Quote for original reason sent in (calendar etc) plus any transport damage that has occurred? Y/N If so can you send thru a revised purchase order for the additional workscope for transport damage. Stromski to Robinson: 74 TB590. 75 TB592-600. 76 TB601. 77 TB601. 78 TB604 (the first email carrying on to TB601). -- 20 of 40 -- 18 I confirmed with the owner and please go ahead as described below, i.e. Y. Attached is the amended RO. Please bear in mind that we need a quote first (especially on the damage), before commencing the work. [86] The repair order attached to the last of these emails repeated the original order set out above and added the following:79 REPAIR TRANSPORT DAMAGE PLEASE QUOTE FOR LABOUR AND MATERIAL IN AUD PRIOR COMMENCING WORK. [87] Mr Stromski was asked who he was referring to as “the owner” in his emails. He responded that he was probably referring to Mr Owen, because he was his “focal point of contact.” He said he had no actual recollection of speaking to Mr Owen, but he was sure he must have because he had to let him know that there was bad news. He had never had any contact with the real owner.80 [88] Mr Stromski was clearly mistaken about having contacted Mr Owen in February 2016, as Mr Owen stopped working for Airwork in December 2015. Mr Owen said that he could not recall having any conversation with anyone, let alone Mr Stromski, about the engine between December 2015 and May 2016 and he never received any phone call or email seeking approval, or asking him to get Airwork’s approval, for Safran to do the work of disassembling the entire engine.81 Although Mr Owen did work with Pacific in December 2015, when Mr Stromski told Mr Robinson that he would have to contact the owner, there is no evidence that he spoke to Mr Stromski about the engine then. [89] Mr Haffner explained the difference between a “full calendar reset strip” and a “full strip”: the latter involved more work than the former.82 He said that he thought that Pacific notified Mr Owen about Safran’s email of 7 December 201583 and that the engine now required a “full strip” as it would be treated as a heavy landing. He said he remembered talking to Mr Owen about it in December 2015, saying, “But it had to go in for inspection anyway, so … we’re not going to stop everything.”84 When asked if he personally got the go ahead to ask Safran to disassemble the engine, he said:85 Well, … we had the go ahead prior to that. This was … the additional – the hard landing which is just – is going to be additional parts replacement. … There wasn’t going to be really – wasn’t enormous amount of cost for the additional – for the shipping damage. … But I mean, we kind of expected that. If something gets damaged in shipping, I mean, Safran were going to tell us it’s damaged, sort it out. It’s not worth – it only went down there for a quote to get repaired, so it still needed to get quoted for repair even if you get it quoted to see what damage was done in shipping as well. … So we’re still at – at this 79 TB605. 80 T3-100:40 – T3-101:35 81 T4-74:45-47; T4-75:35-44; T4-107:1-6. 82 T4-130:24-35. 83 Although there is no evidence that Mr Stromski sent it to anyone at Airwork. 84 T4-132:1-13. 85 T4-132:15-30, 42-43. -- 21 of 40 -- 19 point chasing a quote, we weren’t repairing the engine at this stage. … At any stage. He could not remember having any conversation with Mr Tomkins about the engine at around that time (nor in February 2016). [90] Mr Tomkins said that he had no contact with Choppair, Whirlybird or Pacific (apart from one possible conversation with Mr Haffner in about May 2016) about this engine after about November 2015.86 [91] Mr van der Zypp said that he was not told in December 2015 that the engine had been damaged in transit and Safran required it to be treated as a hard landing and to have a full strip. He also said that he was not told in February 2016 and asked for permission to go ahead with the full strip. He never gave permission for Safran to disassemble the engine. He did not even know it was at Safran until later.87 [92] On the basis of this evidence, I am not satisfied that Mr Stromski or Mr Haffner spoke to Mr Owen to seek permission to instruct Safran to go ahead and strip down the engine. Mr Haffner seems to have been of the view that the engine went to Safran to get a quote for it to be repaired, which had already been authorised. I consider that he was mistaken in his somewhat hazy belief that he spoke about it to Mr Owen and they agreed that it had to be stripped down anyway. I consider that Mr Owen would not have authorised any such work without first speaking to Mr Tomkins about it. There is no evidence of any conversation between those gentlemen at that time. [93] It may be that, by February 2016, Mr Stromski had a recollection (apparently incorrect) that he had sought and obtained permission from someone at Airwork, which led him to authorise Safran to do the work. But, as I said, I consider it highly unlikely that Mr Owen would have taken it upon himself to authorise the work, particularly when he no longer worked at Pacific in February 2016. Rather, he would have referred the question to Mr Tomkins, who would probably then have asked Mr van der Zypp. Given the damage to the engine and that it appeared to have been caused in transit and given Mr Owen’s view, when he saw the box and the engine inside it, that he wanted nothing to do with it, I am sure that, if it had been raised with him or Mr Tomkins, they would have remembered. I find that Mr Haffner’s “recollection” is, rather, an inadvertent reconstruction in the light of Mr Stromski’s email exchange with Mr Robinson. [94] Regardless of how it came about that Mr Stromski thought he could authorise Safran to proceed, it is crystal clear that nobody told Choppair about the damage and sought its permission to instruct Safran to do a full strip to the engine. Mr van der Zypp had no idea, in December 2015 or February 2016, that the engine was at Safran or that anything other than re-calendaring of two modules and the FCU was to be done. The decision to authorise Safran was taken by Mr Stromski without any authority from Choppair nor, I find, from Airwork. [95] Having been authorised by Mr Stromski to go ahead and strip the engine, Safran did so. It then provided to Pacific a detailed report into the state of the engine, including each of its individual components, a quote to restore the engine to a serviceable 86 T4-20:12-19; T4-21:9-17. 87 T1-78:18-26; T1-79:38 – T1-80:3; T1-80:31-35; T1-81:5-39. -- 22 of 40 -- 20 condition and a list of parts needed for that purpose.88 The repair quote was for $608,014.79 (after a 10% discount for Pacific). [96] Ultimately, nobody accepted that quote and instructed Safran to proceed with that work. Instead, in November 2016 Mr Haffner spoke to Mr van der Zypp and suggested that the disassembled engine be “bagged and tagged”89 and returned to Pacific, as Safran wanted to return the engine because it was due to shut down its Australian facility. Mr Haffner said that Mr van der Zypp agreed to that happening.90 Mr van der Zypp disagreed that he did so, saying that he thought it had already been bagged and tagged by the time of that conversation.91 [97] Mr van der Zypp is clearly wrong in that recollection. In June 2016, Safran sent an invoice for $19,078.29 to Pacific for “labour charges up to Quote only,” which on its face was for stripping down the engine, producing the technical report and the quote to repair the entire engine.92 Pacific initially sent an invoice for that work to Airwork on 5 July 2016, charging $21,198.10.93 On 12 August 2016, Pacific sent an invoice for that work in that sum to Choppair.94 That is the only invoice that Choppair had received from Pacific by November 2016. On 16 December 2016 Safran sent Pacific an invoice for $27,042.84 for “labour charges to return the engine U/S ‘as is’.”95 [98] In an outline of evidence made and signed by Mr van der Zypp on 20 January 2022,96 he said: In a further discussion with Haffner in or about late November 2016, I asked him where the Engine was at that time. Haffner said the Engine was still in Sydney with Safran and disassembled. … I said to Haffner that I needed time to work out what to do with the situation but in the meantime, I asked Pacific Crown to bag and tag the Engine and return it to Choppair. [99] That statement was put to Mr van der Zypp in cross-examination, but he persisted in his evidence that, at the time of that conversation, he thought it had already been bagged and tagged. [100] In the light of Mr van der Zypp’s written statement that he asked Pacific Crown to bag and tag the engine and return it to Choppair and his error in thinking that the prior invoice (which Choppair did pay) was for that process, I do not accept his oral evidence that he did not authorise Mr Haffner to get the engine bagged and tagged. 88 Exhibits 3, 4 and 5 respectively. The email under which Safran sent these documents to Pacific is at TB606-607 (13 April 2016). The report itself was 170 pages long. Safran subsequently sent Mr Stromski an additional copy of the list of parts in which the parts needed due to the transport damage were identified: TB609 (19 April 2016), exhibit 15. 89 A process involving putting each component into a plastic bag suitable for its preservation and tagging the bag with information identifying the component and whether it was serviceable, unserviceable but repairable, or unrepairable. 90 Haffner, T5-18:9-20. 91 T2-102:24 – T2-103:23. 92 Exhibit 16. 93 Exhibit 6. 94 Exhibit 7. 95 TB662. 96 Exhibit 9, [41]. -- 23 of 40 -- 21 His written statement was no doubt written after careful consideration by him and his lawyers and is more likely to be accurate than his clearly mistaken oral evidence. [101] I therefore accept Mr Haffner’s evidence on this point and I find that Mr van der Zypp did authorise Mr Haffner to arrange for the engine to be bagged and tagged. [102] Safran then went ahead with the process of bagging and tagging the engine and, on 16 December 2016, invoiced Pacific for that work.97 Pacific paid the Safran invoice and itself invoiced Choppair on 1 July 2017 for $30,047.6098. Pacific retained the components pending payment to it by Choppair of that invoice. Pacific claimed that sum from Choppair in its counterclaim in this proceeding. Eventually Pacific returned the components to Choppair and abandoned its counterclaim as part of the settlement between them shortly before trial. Was the agreement terminated, whether by agreement or by substitutional bailment? [103] In the written submissions of counsel for Airwork, he contended:99 The legal relationship between Choppair and Airwork was at an end in 2016 in that: (a) the bailment relationship was superseded and terminated by a substitutional bailment between Choppair and Pacific Crown; and (b) the contractual relationship with (sic) terminated by agreement or abandonment, through: (c) the dealings between Mr Haffner on behalf of Pacific Crown and Mr van der Zypp on behalf of Choppair between July 2016 to (sic) March 2017, to the exclusion of Airwork; and (d) Airwork, upon demand, returning Choppair’s deposit to it. Thus, irrespective of whether Airwork was authorised to sub-bail the Engine to Pacific Crown (and thereafter Safran) for the purposes of its disassembly, Airwork’s involvement and liability thereafter ceased by no later than December 2016. [104] Counsel went on to submit that, although Airwork remained principal bailee and Pacific was sub-bailee until about July 2016, between July and December 2016 certain events occurred that resulted in the bailment to Airwork ceasing to exist and Pacific becoming the principal bailee. By December 2016:100 the common intention of both Airwork and Choppair was that Airwork had withdrawn entirely from any future obligations with respect to the Engine and, with Choppair’s acquiescence if not consent, had been substituted by Pacific Crown as (principal and sole) bailee and 97 TB662. The invoice described the work as “labour charges to return the engine U/S ‘as is’” and showed a price of $27,316, reduced by a 10% discount to $24,584.40, plus GST of $2,458.44. 98 Exhibit 10: being for $27,316 plus GST of $2,731.60. 99 Defendant’s outline of submissions, 3 May 2022, [149]-[150]. 100 Defendant’s outline, [170], [179]. -- 24 of 40 -- 22 Airwork and Choppair mutually agreed their contractual relationship was at an end or alternatively were both mutually content to abandon any future obligations pursuant to it. [105] Airwork particularly relied on the following facts as demonstrating the end of the agreement between it and Choppair and the substitution of an agreement between Pacific and Choppair:101 (a) first, Mr van der Zypp was informed by Mr Haffner that the Engine was at Safran where it had been disassembled;102 (b) second, Mr Haffner sent to Mr van der Zypp a copy of Safran’s email and the enclosed Safran report, quote and list of parts;103 (c) third, Mr Haffner informed Mr van der Zypp of the costs of the disassembly and that Pacific had been charged those costs and had invoiced Airwork for that amount;104 (d) fourth, Choppair requested that it be invoiced directly by Pacific for the costs of the disassembly and the provision of the quote;105 (e) fifth, Choppair was subsequently directly invoiced by Pacific Crown for those costs106 and Choppair paid that amount;107 (f) sixth, Choppair sought to recover,108 and in fact recovered,109 the deposit it had paid to Airwork; (g) seventh, Pacific Crown cancelled its invoice to Airwork;110 (h) eighth, aside from the return of the deposit, no other correspondence occurred between Choppair and Airwork;111 (i) ninth, Mr Haffner and Mr van der Zypp spent almost 12 months exploring options to obtain a serviceable engine for Choppair (to the exclusion of Airwork)112; and (j) tenth, Mr van der Zypp agreed to the engine being bagged and tagged and returned to Pacific Crown113 while they continued to explore options (again to the exclusion of Airwork).114 101 Defendant’s outline, [169]. 102 This occurred either in April, May or June 2016 (Mr van der Zypp: T1-75:3-22, T2-71:12-30) or in July 2016 (Mr Haffner: T5-6:31 to T5-7:46). Given the following emails, I find that it was in July 2016. 103 Email, Mr Haffner to Mr van der Zypp, 13 July 2016: TB616-617. 104 Email, Mr Haffner to Mr van der Zypp, 13 July 2016: exhibit 6. 105 T2-87:14-27; T2-90:10-22. 106 Exhibit 7. 107 T2-89:4 - T2-91:19. 108 Email, Mr Johan de Vries (Choppair’s business manager) to Mr Tomkins, 13 October 2016, and attachments: TB625-627; 109 By two payments, on 25 November and 9 December 2016: TB675. 110 TB637-639. 111 T2-100:5-15; T2-106:17-18. 112 T5-20:41-46. 113 Exhibit 9, [7]; T5-18:9-20. 114 T5-20:41-46. -- 25 of 40 -- 23 [106] Choppair’s counsel submitted that the bailment agreement and contract between Choppair and Airwork was not terminated or substituted by a bailment between Choppair and Pacific. He submitted that:115 By the time Van der Zypp began discussions with Haffner in or about May 2016, the engine had already been disassembled. The damage was done – the agreement had already been breached as previously described. Any discussions after the fact of the breach and the occurrence of damage must be seen and construed in that context. [107] In fact, the parties’ submissions on this issue appear to have passed each other like unlit ships in the night. The crucial question is whether the bailment agreement between Choppair and Airwork ended before any breach of it by Airwork and any consequent loss to Choppair occurred. On that issue, the facts are clear. The engine was sent to Safran and stripped down with the consent of Pacific (but not with the knowledge or consent of Choppair) while the bailment from Choppair to Airwork and the sub-bailment from Airwork to Pacific were in existence. There is no doubt that, by November 2016 (upon Airwork’s return to Choppair of part of the deposit), the contract between them was ended. However, that end to the contract did not release Airwork from any liability for any prior breach of its obligations under the contract and as bailee. [108] As Airwork’s counsel accepted, upon the termination of its contract with Choppair, the bailment from Choppair to Airwork ended and Airwork withdrew from any future obligations then existing under the contract.116 However, notwithstanding the end of the contract and bailment, Airwork would remain liable for any breach of its contract with Choppair that had occurred during the period of that contract and bailment. [109] I find that the agreement between Airwork and Choppair, pursuant to which Airwork was bailee of the engine, was terminated by mutual agreement when Airwork returned the first part of the deposit to Choppair at Choppair’s request. That occurred on 25 November 2016. At that stage the engine was still at Safran’s premises. Pacific then became principal bailee of the engine in the state in which it then existed, while Safran remained sub-bailee. [110] Safran later returned the engine parts (bagged and tagged) to Pacific, which then held the parts in that state as principal bailee for Choppair. Did Airwork breach the agreement? [111] As I have found, Airwork was engaged by Choppair to take possession of the engine, to have modules 1, 5 and the FCU stripped down in preparation for re-calendaring, to provide to Choppair a quote for the re-calendaring once they had been stripped down and the parts required were known and, if it was subsequently authorised by Choppair to do so, to have the re-calendaring undertaken. For those purposes, Airwork was entitled to send the engine, or those modules and the FCU, to an appropriately licensed facility for that specific work to be done. Airwork was not authorised by Choppair to have any other work done to the engine. As principal bailee, it was responsible for the return of the engine to Choppair with the work for which it had been engaged done or, if it could not get it done, in the state that it received the engine. 115 Plaintiff’s outline of closing submissions, 3 May 2022, [47]. 116 Defendant’s outline, [170], [177]. -- 26 of 40 -- 24 [112] I have set out the relevant principles, as explained by Professor Palmer, in paragraph [63] above. In this case, Airwork agreed to be responsible for getting the work done on the two modules and the FCU. It was therefore responsible for more than one link in the chain of work to be done. The mere fact that it delegated that work to Pacific or (through Pacific) to Safran did not exonerate Airwork from liability to Choppair for any loss of or damage to the engine. It remained answerable to Choppair for what happened to the engine while it was out of Airwork’s possession. The sub-bailee of the engine, Pacific, was of course answerable to Airwork and to Choppair. [113] Airwork breached its obligation to return the engine because it did not do so. Although it did not authorise Pacific or Safran to strip down the entire engine, as principal bailee it remained responsible to Choppair for the return of the engine in the relevant state; not stripped down, bagged and tagged. [114] I find, therefore, that Airwork breached its agreement with Choppair and its obligations as bailee of the engine. It did so in two respects: first, it did not have the two modules and the FCU re-calendared, nor obtain a full quote for doing so (once the cost of relevant parts was known) and seek Choppair’s consent to proceed with the work. Secondly, from the time that the engine was stripped down Airwork became unable to return the engine in the proper state (unless it paid the cost of doing so) and it did not, during the term, return the engine to Choppair. Those breaches occurred while the agreement and bailment were on foot, so Airwork remains liable to Choppair for any loss117 suffered by Choppair as a result. What loss has Choppair suffered? The nature of Choppair’s claim and Airwork’s defence [115] It is necessary to determine what loss, if any, Choppair has suffered as a result of Airwork’s breaches. [116] In its further amended statement of claim, Choppair pleaded that it had suffered loss as a consequence of the loss of use of the engine. However, in its prayer for relief, it sought the return of the engine and damages for breach of contract, detinue, conversion and negligence. It did not set out any particulars or amount of the damages sought except that, in the notice under rule 150(3) of the Uniform Civil Procedure Rules, it said that it claimed $675,000118 in damages for the engine and an amount (unspecified) for “the loss of profits to the business because of the loss of the engine.” [117] In the plaintiff’s closing submissions, Mr Ribbands said:119 The loss to Choppair is the value of the engine that it would have received on a trade-in: €400,000.120 That may not equate to the second hand value of the engine if it were to be sold in some other marketplace, but it is the value of the engine to Choppair. That is the measure of its loss. 117 By this I mean any recoverable loss in accordance with the ordinary principles for the determination of damages for breach of contract or breach of bailment. 118 This figure is the amount quoted by Safran to Pacific before allowing for the discount. 119 At [4]. 120 Relying on exhibit 17, to which I shall refer in detail later. For now it suffices to say that the figure is based on the difference between the list price for a new engine of a different sort (an Arriel 1D1) at €696,500 and the price payable for that engine (€296,400) if it was bought as part of an upgrade to Choppair’s helicopter and after a trade-in of the Arriel 1B engine. -- 27 of 40 -- 25 [118] Later, he contended that the engine is now beyond economic repair.121 The initial preservation provided by “bagging and tagging”, which preserved some value in the component parts, is now more than 5 years old and has expired. Therefore the present value of the engine is nil.122 He went on:123 The critical question that then arises is to ask what is the loss suffered by Choppair? The starting point for the determination of that question would be a comparison of the value of the engine prior to its bailment to [Airwork], as compared to its present value as a consequence of the disassembly. The proper answer to the question as to the original value however is not simply determined by reference to the value of the engine by way of a second hand sale. In the circumstances of this case, it is more appropriately a consideration of the loss sustained to Choppair as a result of the loss of the capacity to trade the engine in. [119] In opening Choppair’s case at the commencement of the trial, Mr Ribbands expressly disavowed pursuing the pleaded claim for loss of use of the engine. In the face of an objection from Airwork’s counsel to any claim for damages based on the loss of an opportunity to obtain a greater than normal value for the engine, or a new engine for a lower than normal price (neither of which has been pleaded), he also disavowed making any such claim. Rather, he said, Choppair was seeking damages comprising the value of the engine. That value, he contended, is to be determined by the value that Choppair could have obtained by trading it in for a new engine as part of an upgrade of a helicopter. [120] Airwork maintains that this is not the true value of the engine, but is an un-pleaded claim for a lost opportunity to obtain more than its true value.124 As it is un-pleaded, the plaintiff cannot pursue it. That leaves the question of the true value of the engine. The expert evidence was that its true value, both when it was transported to Airwork as a complete (but in fact unserviceable) engine and in its bagged and tagged separate components, is the same: no more than $25,000. [121] Airwork also contends that Choppair has already recovered more than that loss because, in settlement of its claim against Pacific, it received the engine (in its component parts), it was paid $40,000 and Pacific forgave its own claim of $30,047.60 against Choppair for the cost of Safran bagging and tagging the engine components, which Pacific had paid. Therefore Choppair has suffered no loss as a result of any breach by Airwork. Principles [122] The basic principle for the award of damages for breach of contract is well known: the plaintiff is entitled to be placed in the same position as if the contract had been performed, so far as money can compensate for that position.125 That principle applies in this case to Choppair’s claim for breach of contract. 121 This is agreed and is obvious. 122 Plaintiff’s closing outline, [27]. 123 At [28]. 124 On principles elicited in cases such as Sellars v Adelaide Petroleum NL (1994) 179 CLR 332, 335. 125 Robinson v Harman (1848) 1 Ex 850, 855; 154 ER 363, 365; Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64, 80, 98, 116, 117, 134, 148, 161; Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272, 286 [13]. -- 28 of 40 -- 26 [123] The basic principle for the award of damages for conversion is usually the full market value of the goods at the time of conversion. However, if the goods are returned to the plaintiff, the damages would either be nominal (if returned in the same condition as when taken) or may be the difference between their market value at conversion and at return, together with any foreseeable and not remote consequential losses. The same is normally the case for damages in detinue.126 [124] The same is also normally the case where a bailee has breached a bailment. If the bailed goods are returned in the same state as delivered, the plaintiff may be entitled only to nominal damages, but if the goods are damaged then damages would usually be determined as the difference between the value of the goods at the commencement of the bailment and their value in the state in which they were returned. If the bailed goods are not returned at all, then damages would normally be the market value of the goods at the date of the bailment. [125] Where a bailment is contractual, the measure of damages is usually the same as for breach of contract. Professor Palmer refers to an “apparent exception” to this rule where the bailee commits a deviation (ie, radical departure) from the terms or purpose of the bailment, in which case the bailee is liable for all loss occurring to the goods. He points out that that is not universally accepted.127 However, it has been accepted in Australia for the principle that “an unauthorized departure from the terms of the bailment renders the bailee liable for damage which results from it” and, “There is no doubt that a bailor is entitled to sue a bailee for any damage resulting from an unauthorised departure from the terms of bailment.”128 [126] Choppair and its counsel did not seek to distinguish the principles on which it sought the loss that it claimed. Nor did Airwork and its counsel make any distinction between the relevant causes of action in submissions about damages. [127] Essentially, as I understand Choppair’s case, it is that its loss was the value of the engine to Choppair, which had reduced (due to its disassembly) from €400,000 to nil and it is entitled to recover that loss on any of the bases pleaded in its prayer for relief. As I have said, it disclaims any claim based on a loss of a valuable commercial opportunity. It is therefore sufficient for me simply to consider the issues concerning that claim. The questions are what was the value of the engine when it was delivered to Airwork and what is its value now. If it is now worth less than it was then worth, because it has been disassembled, then that difference would comprise the amount of Choppair’s loss. Choppair’s claim: the “trade-in value” [128] The principal issue is the basis on which the value of the engine must be determined. [129] Choppair bases the amount of its claim on an email dated 11 December 2014 from Mr Robinson of Safran to Mr Bradley when he was contracted to Whirlybird. The email was in the following terms:129 Hi Denis, 126 Barker et all, The Law of Torts in Australia (Oxford University Press, 5 th ed, 2012), 140-141, 143. 127 Palmer on Bailment, [37-005], citing Lilley v Doubleday (1881) 7 QBD 510, 511. 128 McKenna & Armistead Pty Ltd v Excavations Pty Ltd (1956) 57 SR (NSW) 515, 518; The Anderson Group Pty Ltd v Tynan Motors Pty Ltd (2006) 65 NSWLR 400, 412 [79]. 129 Exhibit 17. -- 29 of 40 -- 27 We have a special price for the AS350BA to B2 Engine upgrade when carried out through AIRBUS Helicopters. Price list for NEW ARRIEL1D1 is 696,500 Euro Pricing when under a AS350BA to B2 conversion is 389,700 Euro we will then offer an additional incentive credit for the as removed ARRIEL1B SN 4810TEC engine of -93,300 Euro Which will mean a total cost to customer of 296,400 Euro +GST 296,400 Euro for a Brand New Arriel 1D1 engine exchange for ARRIEL1B Core SN 4810TEC, engine will come with 2 years or 1000 hours warranty. If your customer wishes to secure a production slot at 2014 prices he will need to place a PO and pay deposit before end of this month. Then can just advise when required in 2015. Regards Mark Robinson [130] Choppair submits that it was seeking to have a fully serviceable helicopter. It has a recurring need for engines and engine parts. If Mr van der Zypp had known that this engine was beyond economic repair (because it would have to be fully stripped down and rebuilt), then its true value to Choppair was by way of a trade in for an upgrade to a 1D1 engine. When the above offer was made it was not pursued because the recalendar was thought to be viable and more cost-effective. If Airwork had informed Choppair that the engine was in such a state that it required a complete strip down, Choppair would have opted for the trade in and upgrade that was available to it. It would therefore have realised the value to it of the engine, which it has now lost. [131] Airwork disputes that method of calculating any loss to Choppair. It submits that the offer by Safran to allow a high value for the engine, as part of an upgrade and toward the purchase of a new engine, was not its true value or its market value, but rather was a commercial opportunity for Choppair to obtain a benefit for the engine that was greater than its actual value. The loss of the trade-in amount offered was therefore a loss of opportunity that is not a subject of the claim for damages. The plaintiff has not purported to plead any of the necessary facts to give rise to a claim for a lost valuable commercial opportunity.130 There had therefore been no opportunity for the defendant to put such facts in issue, to obtain disclosure about them and to cross- examine the plaintiff’s witnesses about them. Therefore the plaintiff should not be allowed to claim damages based on such a claim. Rather, it is restricted to its pleaded claim for the lost value of the engine. [132] Airwork also submits that the opportunity to trade in the engine at the price offered by Safran was also only available if Choppair were to agree to upgrade an existing AS350BA helicopter into a B2 helicopter, with the upgrade to be performed by Airbus. Choppair was not prepared to agree to have such an upgrade undertaken. Therefore, the trade-in amount offered was not really available to Choppair. [133] Finally, Airwork submits that, even if the trade-in value were considered to be the value of the engine, a substantially similar offer was made to Choppair in November 130 As described by Jackson J in Graham & Linda Huddy Nominees Pty Ltd v Byrne [2016] QSC 221, [50]. -- 30 of 40 -- 28 2016, after the engine had been disassembled, and it remains on foot. Therefore Choppair has not lost the opportunity. Expert evidence of value [134] Each party called a witness purporting to be an expert to give evidence about a number of matters, including the value of the engine when delivered to Airwork and its value once stripped down into its component parts. Each purported expert provided a report to the court. The experts then conferred and produced a joint report. [135] Choppair’s “expert” was Barry Foster, who has a commercial pilot’s licence and is a licensed aircraft maintenance engineer. In his report,131 Mr Foster said he is not familiar with the Arriel 1B engine, but he is familiar with “the requirements and procedures of removing engines and components to be sent to a third party for inspection, repair or overhaul.” [136] Much of Mr Foster’s report was of little assistance to me. For example, he expressed the view that:132 According to the log book entries the engine at the time it was sent to the first defendant did not require a complete disassembly to re-calendar, but he did not explain that opinion, nor address whether the logbook entries indicated that the entire engine was unserviceable due to failure to maintain it and to store it in accordance with the manual. [137] However, he did go on to say:133 After the inspection and re-calendar of modules 1 and 5 and the fuel control unit the engine cannot just be reassembled as all the modules have been deemed unserviceable and an entry made into the log book to cover the unserviceability. It now means that to bring the engine back to a serviceable state, Safran or any other overhaul facility will have to check each part of each module as to the serviceability state of the part. [138] Mr Foster was asked what was: (a) the approximate value of the engine in its disassembled condition; (b) the approximate cost of a replacement engine in the same condition and hours as the plaintiff’s engine when it was sent to Airwork; and (c) the approximate value of the engine if it had undergone the maintenance proposed by Safran in its quote. [139] In response, he said:134 As I have not had cause to have any dealings in the Arriel 1B engine it is hard from me to give you any pricing, however I have found an Arriel 1B engine from a dealer in the USA with similar times for approximately USD $380,000.00. As for the price of the engine in its present state it would be like 131 TB176-191. 132 TB180, [4.4]. 133 TB181, [4.6]. 134 TB181, [4.7] -- 31 of 40 -- 29 any other turbine engine core value between USD $10,000.00 and USD $50,000.00. [140] The evidence about the cost of a replacement engine is effectively worthless, given that there is no information about the engine to which he refers from which a comparison with the state of Choppair’s engine can be drawn and Mr Foster states that he has no experience with Arriel 1B engines. I can give little weight to his opinion about the “core value” of turbine engines without corroborating evidence, as he has not explained what that means nor the basis of his opinion as to value. However, the latter is the subject of an opinion of the expert called by Airwork, to which I now turn. [141] Airwork engaged Peter MacKenzie as its expert.135 Mr MacKenzie has far more relevant experience than Mr Foster. He is a licensed aircraft maintenance engineer with over 45 years’ experience in the industry. He has experience in the maintenance of Safran engines, including the Arriel 1 series and is familiar with the Arriel 1B engine. [142] Mr MacKenzie disagreed with Mr Foster’s unexplained conclusion that I have set out in paragraph [136] above. He explained a number of reasons why, at the time the engine was sent to Airwork, it was required to be completely disassembled by Safran before it could be deemed serviceable. Those reasons not only included the time- expired modules 1, 5 and the FCU, but also the absence of log book entries recording any of the required maintenance of the engine since September 2012, or recording the removal of the engine from the aircraft, or recording the proper storage of the engine. In all those circumstances, the engine had to be inspected by Safran, which required its complete disassembly and repair, before it could be made serviceable.136 [143] As to the value of the engine, Mr MacKenzie expressed the view137 that, as the engine was not serviceable when Airwork received it, its value: would be based on a core engine price and dependant on its modification status. I would estimate a value of between $25,000.00 AUD to $70,000.00 AUD. … I would estimate the current value of the Engine to be in the range of $20,000.00 AUD to $25,000.00 AUD. [144] The experts made a joint report about the matters about which they agreed and disagreed.138 In that report, Mr Foster agreed with (among others) paragraphs [46] to [50], [125] and [127] of Mr MacKenzie’s report,139 thus apparently disavowing the opinions on those matters that he had expressed in his report with which Mr MacKenzie disagreed. [145] In the joint report, Mr Foster said that he disagreed with Mr MacKenzie’s valuation of the engine at the time it was delivered to Airwork. He did not state the basis of that disagreement, but presumably he relied on the value he had expressed in his report at 135 Mr MacKenzie’s report, including annexures, is at TB192-331. 136 TB202-203, [46]-[50]; TB217, [125], [127]. 137 TB215, [111], [113]. 138 TB332. 139 See [142] above. -- 32 of 40 -- 30 [4.7]. But he agreed that the current value of the core engine is A$20,000 to $25,000.140 [146] Messrs Foster and MacKenzie gave oral evidence together.141 Contrary to his view expressed in the joint report, Mr Foster agreed with Mr MacKenzie’s view that, assuming that the engine was unserviceable when it was delivered to Airwork, it was worth $25,000 to $70,000.142 [147] Neither expert made it clear what factors would affect where in that range the engine’s actual value fell. As best I can glean from their evidence, it depended on the likely extent of serviceable parts, having regard to its history (as recorded in the logbooks), and the amount of work likely to be needed to make it serviceable at the time.143 Before it was stripped down, its core value may have been higher, as only two modules and the FCU were time expired. But once stripped down and inspected, the state of each component and the extent of work required to render it serviceable (where it was possible) was obvious, especially with the assistance of the Safran report. So that shows that the core value was in fact comparatively low.144 Determination of value [148] I do not consider that the offer by Safran to Choppair in November 2014 demonstrates that the engine had a value of €400,000. There are a number of reasons. [149] First, while the effect of the offer, if accepted, would have been that Choppair would have acquired a new Arriel 1D1 engine for about €400,000 less than its retail price, that amount was not the trade-in value attributed to the engine. The offer included a substantial discount for the new engine. The price would be €389,700 instead of €696,500: a discount of €306,800. Then Safran offered, in effect, a trade-in value of €93,300 for Choppair’s Arriel 1B engine. That sum was the amount that was open for Choppair to receive for the engine if it agreed to a helicopter upgrade by Airbus. [150] Secondly, Mr Haffner’s evidence was that the cost for Airbus to upgrade a helicopter under such an arrangement would have been €200,000 to €350,000.145 Mr van der Zypp did not give evidence that Choppair was prepared, or even financially able, to pay such an amount, particularly on top of the amount of €296,400 plus GST that it would have to pay to Safran for the Arriel 1D1 engine (after the discount and the trade-in). That is probably because that evidence would only be relevant to a claim for a lost commercial opportunity, which is not pleaded and was disavowed by Choppair’s counsel. [151] Thirdly, after Mr van der Zypp was told that the engine had been stripped down, he received a similar offer from Safran, although the pricing was different. That offer was made on 7 November 2016 in an email from Mr Robinson to Mr van der Zypp:146 Hi Michael, 140 Although this was contrary to his expression of the core value as US$10,000 to $50,000: see [139] above. 141 Commencing at T5-96. 142 T5-96:29 to T5-97:3. 143 Mr MacKenzie at T5-97:5 - T5-98:20; Mr Foster at T5-100:11-20. 144 Mr MacKenzie at T5-101:27 - T5-102:24; T1-103:37 - T5-104:25. 145 T5-25:20. 146 TB632. -- 33 of 40 -- 31 Thank you for your inquiry in regard upgrading to an ARRIEL1D1 engine. The 2016EC special pricing for a NEW ARRIEL ID1 Engine under the upgrade of AS350BA, trading in the removed ARRIEL1B engine is as follows: Brand New Engine 425300 Euro Buyback ARRIEL1B credit -101900 Euro Total 323400 Euro All prices in Euro and are Plus GST FYI if you place a PO and pay 30% deposit before 15 Dec 2016 with delivery by June 2017 then can hold 2016 pricing. Delivery As of today available New Production slots available for NEW ARRIEL 1D1 Engines (actual delivery date to be confirmed at time of receipt of deposit and Purchase order) currently March 2017. Price valid for orders received and deposit paid at time of order by 15th Dec 2016. Production slots are subject prior sale. We would require an upgrade contract to be signed for the special pricing. Please contact myself or Bill if you have any questions. Regards Mark Robinson [152] It can be seen that there are material differences from the offer made two years earlier. (a) First, the list or retail price of an Arriel 1D1 engine was not stated. (b) Secondly, the price for a “Brand New Engine” increased to €425,300. (c) Thirdly, the amount offered for the Arriel 1B engine increased to €101,900. (d) Fourthly, the amount payable by Choppair for the new engine increased to €323,400. (e) Finally, it expressly required that an upgrade contract be signed as a condition of getting the special pricing. [153] The offer remained contingent on Choppair agreeing to an upgrade of an AS350BA helicopter. Although it did not expressly state that it was to be carried out by Airbus, in my view that would be implied, given the reference to an “upgrade contract”. [154] In my view, therefore, if the correct method of determining the loss were the trade-in value of the engine, that value would be the amount offered as a trade-in: either €93,300 or €101,900. The other benefits related to other parts of an overall proposed “deal” that were unrelated to the value attributed to the Arriel 1B engine. [155] If it were necessary, I would find that Choppair has not proved that it would ever have accepted either offer. First, there was no evidence that it was in a financial position to do so. Secondly, when the second offer was made in November 2016, it chose not to take it up. That was its decision. [156] Therefore, even if the opportunity to obtain the trade-in value for the engine were claimed by it in this proceeding, it was not prevented from doing so by any action or -- 34 of 40 -- 32 default of Airwork. It made its own conscious decision not to take up the opportunity, or it was unable to do so, or both. [157] There was even a suggestion that Safran might still now be prepared to make such an offer in order to take Arriel 1B engines out of service. However, there was no evidence directly to that effect and, even if it were still prepared to make a similar offer to the owner of a serviceable (or even an unserviceable but still entire) Arriel 1B engine, I am not satisfied that it would now be prepared to make such an offer for Choppair’s engine, given what it knows about that engine and the long delay since it stripped down and inspected it. [158] However, I do not consider that the offers that were made, or any such offer that might now be made is, or is reflective of, the true value of the engine. Each offer created a commercial opportunity for Choppair to obtain a fixed price for the engine that was not related to or reflective of its actual value. The opportunity would only arise if Choppair were to accept an offer from Safran on the terms stated, which would include spending a considerable additional amount on upgrading a helicopter. [159] In my view, the value of the engine when it was delivered to Airwork was that eventually deposed to by both experts: that is, $25,000 to $70,000. As to where, within that range, the value of this engine actually fell, the most useful evidence can be found in the following exchange with Mr MacKenzie:147 HIS HONOUR: Again, with regard to the value range you’ve put in paragraph 111 of your report, you said, as I understood it, that the actual value within that range would be determined by the – effectively, the condition of the engine; is that right? Did I understand you correctly? MR MACKENZIE: Yes. Yes, your Honour. HIS HONOUR: But you don’t know the condition. The whole purpose of that range is that you don’t know the condition, and - - - MR MACKENZIE: I don’t know the condition unless it’s – had been inspected and the outcome of that inspection had been divulged. HIS HONOUR: Yes, so in that case, it’s really just – if anyone were prepared to pay between 25 and 70,000, they’re just take a pot – taking pot luck on what they get for that money, is it? MR MACKENZIE: It’s – it’s ju – it’s a – it’s just a range. You would have to go and inspect and have the – to be convinced yourself that it was worth that amount of money. HIS HONOUR: And if it wasn’t - - - MR MACKENZIE: You’re – you’re taking – you’re taking that on the value and the inspection of the logbooks of the aircraft or the engine to evaluate what value you would put – put on that as a core engine. HIS HONOUR: So in the case of this aircraft – or this engine, if you hadn’t inspected it but you had the logbooks available, one would expect the person looking at buying the engine to say, well, those logbooks indicated that it hasn’t been stored or maintained correctly, therefore I’ll offer 25,000 or less, instead of 70,000; is that right? MR MACKENZIE: Yes, sir. 147 T5-105:31 - T5-106:21. -- 35 of 40 -- 33 HIS HONOUR: So its true value – it was probably, at the time, less than twenty - - - MR MACKENZIE: Twenty-five thousand dollars or even less. [160] Having regard particularly to the extent of unserviceability arising from the inadequate maintenance and storage, as recorded (and not recorded) in the logbook, which would be known to any reasonable but not over-anxious prospective buyer and meant that it was necessary to strip down the entire engine, I find that the value of the engine when it was delivered to Airwork was no higher the lower end of that range, namely $25,000. I shall adopt that figure as its value at that time. [161] Again on the basis of the experts’ evidence, I find that the engine’s value once “bagged and tagged” was $20,000 to $25,000. It had that value when the bailment to Airwork ended in November 2016 and when Safran returned it to Pacific soon thereafter. Of course, some of the damage to the engine that likely reduced its value was not caused by Airwork, Pacific or Safran, but by Choppair having packed and transported it to Airwork in an unsuitable manner and container.148 [162] The “bagging and tagging” of the component parts involved Safran inspecting each part and identifying whether or not it was serviceable or repairable and then preserving it in a proper preservation bag. Mr Haffner said that serviceable parts that are bagged and tagged are quite valuable.149 However, that process of preservation of the parts has a life limit of five years, after which even items tagged as serviceable must be re-inspected before they can be returned to service.150 Mr MacKenzie was not aware of that requirement.151 Choppair contends that that has rendered them now valueless. [163] In Mr MacKenzie’s evidence he reiterated that the core value of the engine is still now in the range of $20,000 to $25,000.152 However, he later accepted the proposition that the value he attributed to the bagged and tagged components was on the basis that some items were serviceable and able to be returned to service without further inspection.153 The report, if I understand it correctly, revealed that about 33 out of over 145 parts (that is, about 23%) were deemed repairable. None was said to be serviceable. The cost to repair items was quoted at a total of $25,880. Having regard to all the evidence, their value after that process was completed would have been no more than the low end of the range, namely $20,000. I find that that was the engine’s value after bagging and tagging. [164] In the light of that evidence and Mr MacKenzie’s explanation of the value derived from the bagging and tagging and the Safran report,154 none of which was contradicted by Mr Foster, I can infer that, after the expiration of the validity of the bagging and tagging process, the value is now well below the bottom of the range given by Mr MacKenzie. However, the evidence does not demonstrate how much less that value is. I infer that some parts would still have value. But, given the 148 The damage caused in transport was identified in exhibit 15. The indicated prices for the necessary replacement of those parts totalled over $55,000. 149 T5-17:45 - T5-18:7. 150 T5-19:13-30. 151 T104:27 - T5-105:16. 152 T5-99:43 - T5-100:4; T5-100:19 - T5-101:25. 153 T5-104:21 - T5-105:23. 154 TB215, [113]-[115]. -- 36 of 40 -- 34 expiry of the tags and the small number of repairable parts, it is appropriate to select a figure well below the bottom figure in the range. Doing the best I can and having regard in particular to the proportion of repairable parts, I shall adopt approximately that proportion as the value of the parts now. Therefore I find that the bagged and tagged component parts still retain a core value of $5,000. [165] However, the component parts of the engine are worth less now than they were in 2016 because the bagging and tagging has now expired. That diminution in value was caused by the effluxion of time while the parts were in the possession of Safran or, for most of the time, Pacific. The diminution in value caused by the expiration of the tags occurred in December 2021, well after Airwork’s contract with Choppair was terminated by mutual agreement. I consider that any loss to Choppair of the value of those parts was caused, not by Airwork’s breach of its contract and bailment, but by Pacific refusing to return the parts to Choppair until after the five years had expired. It is not, therefore, a loss claimable against Airwork. [166] Consequently, I find that the engine was worth $25,000 when it was delivered to Airwork. Once stripped down, bagged and tagged by Safran, it was worth about $20,000. Thus, the consequence of stripping down the engine and bagging and tagging it instead of returning it to Choppair in its pre-stripped down state was that it diminished in value by $5,000. The settlement with Pacific [167] On 15 March 2022, Choppair settled its claim against Pacific and Pacific’s counterclaim, on terms that Pacific return the engine parts to Choppair and pay Choppair $40,000, with each party releasing the other from any other liability.155 Pacific has paid that sum and returned the engine parts to Choppair.156 [168] By the settlement deed, the mutual releases included a release by Pacific of its claim for $30,047.60 against Choppair. As Choppair had asked Pacific to arrange for the engine to be bagged and tagged, the cost of that process is likely to have been payable by Choppair.157 At the least, the release of Pacific’s claim for that sum was a valuable benefit to Choppair. [169] Airwork submits that the value of that settlement to Choppair should be deducted from any loss suffered by Choppair for which Airwork may be liable, as to do otherwise would infringe the so-called rule against double recovery. [170] In response, counsel for Choppair submitted that I should infer that the amount paid by Pacific was a token contribution toward Choppair’s costs of conducting the proceeding against Pacific and therefore it should not be considered a repayment of any loss suffered by Choppair. It would only become relevant if Choppair were to succeed in its claim against Airwork and were to be awarded the costs of the proceeding, when the amount received from Pacific might then be taken into account in any assessment of costs that were incurred for steps in the overall proceeding against both defendants.158 He submitted that the return of the parts to Choppair was 155 The deed of settlement is exhibit 14. 156 Haffner, T4-109:1-10. 157 Although I do not have to reach a final conclusion on that question. 158 Transcript of the proceeding on 6 May 2022, T1-77:26 to T1-78:9. -- 37 of 40 -- 35 of no value to it, as he contended that they are now worthless. I infer that he would submit that the release of Pacific’s counterclaim was also of little or no value to Choppair. [171] Lord Nicholls of Birkenhead, delivering the advice of the Privy Council in 1996, said:159 Faced with cumulative remedies a plaintiff is not required to choose. He may have both remedies. He may pursue one remedy or the other remedy or both remedies, just as he wishes. It is a matter for him. He may obtain judgment for both remedies and enforce both judgments. When the remedies are against two different people, he may sue both persons. He may do so concurrently, and obtain judgment against both. Damages to the full value of goods which have been converted may be awarded against two persons for successive conversions of the same goods. Or the plaintiff may sue the two persons successively. He may obtain judgment against one, and take steps to enforce the judgment. This does not preclude him from then suing the other. There are limitations to this freedom. … A third limitation is that a plaintiff cannot recover in the aggregate from one or more defendants an amount in excess of his loss. Part satisfaction of a judgment against one person does not operate as a bar to the plaintiff thereafter bringing an action against another who is also liable, but it does operate to reduce the amount recoverable in the second action. However, once a plaintiff has fully recouped his loss, of necessity he cannot thereafter pursue any other remedy he might have and which he might have pursued earlier. Having recouped the whole of his loss, any further proceedings would lack a subject matter. This principle of full satisfaction prevents double recovery. [172] That part of his Lordship’s speech was referred to and applied by Gleeson CJ and Callinan J in the High Court in 2001. Having referred to it, their Honours went on to say:160 Discussion of this subject often contemplates judgment entered by a court following a judicial assessment of damages. That will ordinarily involve a judicial assessment of the entire extent of the plaintiff's loss or damage. Or judgment may be entered by consent, and this may be by way of compromise. Recoupment of the whole of a plaintiff's loss may not be the only circumstance in which it might be unconscientious to pursue a claim against another. Subject to those qualifications, the principles stated by his Lordship are in point. … If there has been no judicial assessment of damages, then, … [i]f it would be unconscientious of the plaintiff to pursue a claim against another tortfeasor, or if the amount received pursuant to the settlement is, or ought to be regarded as, recoupment of the whole of the plaintiff's loss or damage, then action against another tortfeasor, whether in separate proceedings, or, where the other tortfeasor was a party to the original proceedings, by way of continuation of those proceedings, must fail. [173] This is a clear equitable principle that applies to the assessment of damages, whatever be the cause of action. Indeed, the High Court has referred to it as “the ‘universal’ 159 Tang Man Sit v Capacious Investments Ltd [1996] AC 514, 522. 160 Baxter v Obacelo Pty Ltd (2001) 205 CLR 635, [40], [47]; similarly, Gummow and Hayne JJ, [57], [64]. -- 38 of 40 -- 36 rule that a plaintiff cannot recover more than he or she has lost.”161 As Gleeson CJ and Callinan J said,162 The principles respecting ‘double satisfaction’ may be seen as a particular application of that rule. That particular application involves the unconscientious exercise of legal rights. [174] In my view, Airwork’s submission is correct. Choppair sought the same relief against both Airwork and Pacific. The value of Choppair’s settlement with Pacific, which Choppair has received, must be deducted from its total loss and from the amount of any damages that might otherwise be recoverable by it against Airwork. If that were not the case, then Choppair would recover more than its overall loss. [175] I do not accept that I should infer that the amount received was a token amount toward Choppair’s costs of the proceeding against Pacific. The deed of settlement does not say that. There was no evidence that that was what the parties meant by the deed. Nor was there any evidence that Choppair applied that sum toward the costs that it had incurred.163 But even if there were evidence to the latter effect, how Choppair chose to apply a sum paid to it in settlement of its claim against one defendant does not affect how the law applies the benefits of that settlement in determining whether the plaintiff has recouped some or all of the loss that it claimed against both defendants. [176] Furthermore, in addition to the payment of $40,000, Choppair received the benefit of the release of Pacific’s counterclaim and the return of the engine. Neither of those benefits was capable of being applied to Choppair’s costs and therefore their value must be applied against Choppair’s loss. That value is $5,000 for the engine and at least some proportion of the amount of the counterclaim. For the reasons discussed below, even if the cash of $40,000 were disregarded, the value of the returned engine is the same as the amount of Choppair’s loss for which Airwork might otherwise have been liable. It is therefore unnecessary for me to determine the actual value of the release, although Pacific’s claim was apparently strong and therefore that value would be a considerable proportion of Pacific’s claim and of the costs of the counterclaim (from which Pacific also released Choppair). Choppair’s loss [177] Choppair sent to Airwork an engine that was worth $25,000. At the time the contract between them was terminated, the engine (then in its bagged and tagged component parts) was worth $20,000. Therefore, Airwork caused Choppair a loss of $5,000 in the value of the engine. Even if I had found that the parts are now worthless, Choppair’s loss would have been only $25,000. [178] That loss was contributed to by Pacific. But, in settlement of Choppair’s claim against Pacific, claiming the same loss, Choppair received cash of $40,000 and the forgiveness of Pacific’s counterclaim. It also recovered and retains possession of the bagged and tagged items which, I have found, have a residual value of $5,000. 161 Haines v Bendall (1991) 172 CLR 60, 63, citing Lord Reid in Parry v Cleaver [1970] AC 1, 13. 162 Baxter v Obacelo, [57]. 163 Contrary to Mr Ribband’s opening and closing addresses, in which he said there was evidence to that effect: T1-3:45-46; T1-77:34-36 (6 May 2022). -- 39 of 40 -- 37 [179] Given the amount of Choppair’s loss and the benefits it received from Pacific (including its recovery of the bagged and tagged engine components), I find that Choppair has recovered the loss in value of the engine caused by Airwork’s breach of its contract and bailment. Therefore, it has now suffered no loss recoverable from Airwork. Conclusions [180] Although Airwork breached its contract and the terms of the bailment of the engine to it and, as a consequence, Choppair did originally suffer a loss of $5,000, it has recouped that loss (and more) from Pacific. [181] In those circumstances, Choppair is not entitled to any damages from Airwork. [182] Consequently, I shall give judgment for Airwork. [183] I shall hear from the parties about the costs of the proceeding. -- 40 of 40 --