NICHOLLS V AIRWAYS CORP OF NZ LTD COA CA566/2011

NICHOLLS V AIRWAYS CORP OF NZ LTD COA CA566/2011 [28 September 2012]IN THE COURT OF APPEAL OF NEW ZEALANDCA566/2011[2012] NZCA 444BETWEEN GRANT STANLEY NICHOLLSAppellantAND AIRWAYS CORPORATION OF NEWZEALAND LIMITEDRespondentHearing: 17 September 2012Court: O'Regan P, French and Ronald Young JJCounsel: W T Nabney for AppellantK I Murray for RespondentJudgment: 28 September 2012 at 10 amJUDGMENT OF THE COURTA The appeal is dismissed.B The appellant must pay the respondent costs for a standard appeal on a band A basis plus usual disbursements.REASONS OF THE COURT(Given by French J)Introduction[1] Mr Nicholls is an aircraft pilot. He has been involved in a longstanding dispute with Airways Corporation of New Zealand Ltd over payment of landing fees at Tauranga Aerodrome.[2] In 2010, Mr Nicholls instituted judicial review proceedings in the High Court.[3] The case was heard by Woodhouse J. Woodhouse J refused to grant Mr Nicholls the various declarations he was seeking,1 and in a subsequent judgment also ordered him to pay costs.2[4] Mr Nicholls now appeals both judgments.[5] The key issues raised by the appeal are:(a) Was Airways entitled to charge Mr Nicholls for provision of aerodrome control services and on what legal basis?(b) Was Airways entitled to withhold aerodrome control services from Mr Nicholls because of his refusal to pay its standard charges?Factual background[6] In 1995, the Director of Civil Aviation issued a notice requiring the Tauranga Airport Authority to maintain an aerodrome control service at Tauranga Aerodrome between designated hours each day of the week.[7] The only organisation certified to provide such services in New Zealand is Airways.[8] Airways is a state owned enterprise. It controls aircraft movements at 17 aerodromes throughout the country including Tauranga. Airways charges aircraft operators for the services it provides in accordance with a published schedule of fees. Its practice is not to enter into individual written contracts with each operator but rather to issue invoices based on its schedule to operators who use its services.1 Nicholls v Airways Corporation of New Zealand HC Tauranga CIV-2010-470-586, 15 August2011.2 Nicholls v Airways Corporation of New Zealand HC Tauranga CIV-2010-470-586, 31 October2011.[9] Mr Nicholls operates his own aircraft out of Tauranga Aerodrome.[10] Between February 2002 and May 2009, Airways charged Mr Nicholls a total of $399.29 for his aircraft landings at Tauranga. Mr Nicholls paid those charges.[11] In or about May 2009, Airways gave public notice of its intention to increase its standard charge from $3.25 per landing to $3.40, effective 1 October 2009.[12] On 22 May 2009, Mr Nicholls wrote to Airways stating that he and 31 other members of a Tauranga Airport Users Group did not accept that they were required or had ever been required to pay fees charged by Airways. The letter requested that Airways refund all monies that had been levied in the past and cease issuing future invoices.[13] An exchange of correspondence ensued, during the course of which Mr Nicholls continued to fly out of Tauranga and Airways continued to issue him with invoices which Mr Nicholls refused to pay. Eventually, Airways advised Mr Nicholls that unless he withdrew his objection to the standard terms and conditions and paid all outstanding charges, which by then amounted to $78.46, Airways would no longer provide him with services after 30 November 2009.[14] Mr Nicholls refused to comply with either of those conditions and Airways subsequently withheld services from him on two occasions in January 2010.[15] The first occasion was on 26 January 2010, when the control tower denied Mr Nicholls permission to take off. On the second occasion, on 29 January 2010, Mr Nicholls was able to take off without needing to obtain permission because it was at a time before the aerodrome control service became operative for the day. Sometime after the service became operative and Mr Nicholls was still airborne, the air traffic controller directed Mr Nicholls to land. He did not want to land but complied with the direction which the air traffic controller said was being given for commercial reasons.[16] Those incidents prompted Mr Nicholls to issue judicial review proceedings in the High Court where he represented himself. He sought various declarations, the general thrust of which was that there was no contract between him and Airways, that Airways was not entitled to charge fees, that it was not entitled to withhold services from him and that it had acted unlawfully on 26 and 29 January 2010.The decision of the High Court[17] In his decision, Woodhouse J identified three main issues arising out of the contentions advanced by Mr Nicholls.[18] The first issue was whether Airways could charge for air traffic control services in the absence of an express agreement with the operator.[19] Woodhouse J held that it could, relying on the decision of Airways Corporation of New Zealand Ltd v Geyserland Airways Ltd3 and s 4 of the State-Owned Enterprises Act 1986. Woodhouse J said the fact the services are required to be provided under regulations did not mean Airways was prevented from charging for those services.[20] In Woodhouse J's view, the correct analysis was that prior to 22 May 2009Airways was entitled to recover the charges it had obtained from Mr Nicholls on a contractual basis. A contract came into existence whenever Mr Nicholls requested clearance. His request constituted acceptance by conduct of the offer made by Airways in its published schedule of standard terms and conditions, a schedule of which Mr Nicholls had notice or deemed notice.[21] The Judge accepted that after 22 May 2009 the legal position changed, 22 May 2009 being the date Mr Nicholls had notified Airways of his objection to its standard charges. The objection meant that Airways could no longer recover from Mr Nicholls for the use of its services on a contractual basis but was entitled to recover on a quantum meruit basis (ie, recovery of a reasonable sum for the services provided).3 Airways Corporation of New Zealand Ltd v Geyserland Airways Ltd [1996] 1 NZLR 116 (HC).[22] In coming to these conclusions, the Judge also traversed a second issue raised by Mr Nicholls, namely that Airways had acted in breach of the Fair Trading Act 1986 and the Unsolicited Goods and Services Act 1975 by falsely representing there was a commercial relationship when it issued its invoices. The Judge rejected that argument as well as another argument that for charging purposes a distinction should be drawn between aircraft operating by Visual Flight Rules as opposed to those operating by Instrument Flight Rules.[23] Woodhouse J then turned to the other main issue which he identified as being whether Airways was entitled to withhold its services. The Judge concluded on the authority of Geyserland and Transpower New Zealand Ltd v Meridian Energy Ltd4that as a matter of general law Airways was entitled to withhold its services if an aircraft operator refused to accept its standard conditions and charges.[24] As for the lawfulness of Airways' actions on 26 and 29 January 2010, Woodhouse J was satisfied that Airways had acted on both occasions in accordance with the Civil Aviation Rules.[25] The Judge concluded by dismissing Mr Nicholls' claim and ruling:Airways was entitled and subject to compliance with the Rules remains entitled to withhold aerodrome control services from Mr Nicholls and any aircraft owned or operated by him unless he agrees to pay Airways' standard terms and conditions and its standard charges.[26] In a later costs judgment, Woodhouse J ordered Mr Nicholls to pay costs to Airways in the sum of $39,651.70 being calculated on a 2B basis.Grounds of appeal[27] Mr Nicholls was represented at the appeal hearing by Mr Nabney. Mr Nabney advanced the following arguments:4 Transpower New Zealand Ltd v Meridian Energy Ltd [2001] 3 NZLR 700 (HC).(a) The Judge was wrong to find that Mr Nicholls was liable in contract to pay the pre 22 May 2009 invoices. There was evidence Mr Nicholls only paid the fees not because he agreed to them but because he was labouring under the mistaken belief he had no choice by law but to pay.5(b) At the time Airways rendered its post 22 May 2009 invoices, it did so on the basis of a contract which did not exist. Airways never expressly relied on quantum meruit and therefore Mr Nicholls was entitled to decline to pay.(c) The Judge was wrong to find that Airways had complied with the Civil Aviation Rules, in particular r 172.157. The rule only permits withholding air traffic control clearance on the basis of non-payment of fees owed if the aircraft is on the ground. On 26 January there were no charges owed and on 29 January Mr Nicholls was airborne.(d) In awarding costs, the Judge wrongly failed to take into account that Airways had previously asserted it was entitled to charge on a contractual basis after 22 May 2009 and only changed its position at the hearing.Discussion[28] In our view, the questions raised by this appeal have already been answered by Geyserland which it was common ground was correctly decided.[29] Geyserland established the following propositions:(a) Airways is entitled to charge for its services.(b) Where an aircraft operator has not given notice of objection to Airways' standard terms and charges and makes use of Airways'5 Mr Nabney rightly in our view abandoned a second argument that there was no contract because Airways had not provided any consideration.services, Airways is entitled to recover its standard charges on a contractual basis.(c) Where an aircraft operator has given notice of objection to the standard charges but makes use of Airways' services, Airways may still recover payment of a fee from the operator, albeit not on a contractual basis but in quantum meruit.(d) Airways is not bound to provide services to an operator who refuses to pay its charges.[30] Woodhouse J articulated those principles and, in our view, correctly applied them to the facts of this case.[31] We accept that prior to 22 May 2009, Mr Nicholls may not have appreciated he was entering into a contract. However, that does not avail him. What matters is the legal effect of his conduct viewed objectively.[32] As for the post 22 May 2009 invoices, even if Airways did wrongly seek recovery of those charges on a contractual basis at the time, that would not of itself later preclude it from recovering in quantum meruit. Mr Nicholls was not entitled to receive the services for free. He had to pay something. Under quantum meruitprinciples, whether the "something" was the standard charges would depend onwhether those standard charges were reasonable. The fact the standard charges are paid by every other operator throughout the country would tend to suggest they are reasonable in the absence of any evidence to the contrary.[33] Mr Nabney attempted to argue that the charges were not reasonable because there may be no cost to Airways in providing the service, that Airways should have produced evidence of its costings and that Mr Nicholls would be entitled to a set off for the benefit of the information he provides to Airways. However, that was not the way the case was run in the High Court. The contention then was that Mr Nicholls should not have to pay anything. If he had really wanted to challenge the reasonableness of the quantum, his better course of action would have been to havepaid Airways what he considered a reasonable amount and then argued the balance. He did not do that but steadfastly refused to pay anything at all.[34] We now turn to the argument raised by Mr Nabney about the events of 26 and 29 January 2010.[35] Rule 172.157 of the Civil Aviation Rules provides:172.157 Denial of ATC clearance(a) The holder of an air traffic service certificate in respect of an aerodrome control service shall not deny the pilot of an aircraft an ATC clearance on the basis of non-payment of charges owed to the certificate holder unless-(1) the aircraft is on the ground; and(2) that clearance is for entry onto the manoeuvring area.(b) The certificate holder shall continue to provide normal ATC service for any aircraft entering the manoeuvring area without an ATC clearance.[36] Our finding that the post 22 May 2009 invoices were recoverable in quantum meruit disposes of the argument about Airways breaching r 172.157 when it denied Mr Nicholls permission to take off on 26 January 2010. Charges were owed and had not been paid.[37] Further and more fundamentally, we do not accept r 172.157 means that the only basis on which Airways is ever entitled to refuse services is when there are outstanding fees. As Geyserland makes clear, there is nothing to prevent Airways from withholding services once it receives notice of objection to its charges. A fee does not have to be incurred before it can take that step.66 The fact r 172.157 came into force after Geyserland was decided cannot logically alter thatconclusion.[38] As for the incident on 29 January 2010 when Mr Nicholls was already airborne, this was investigated by the Civil Aviation Authority which found as follows:The CAA's view is that the prohibition in rule 172.157, on denying an ATC clearance for non-payment of charges, does not derogate from the power of an ATC to issue instructions to a Pilot under rule 91.241 even if the motivation for the instruction is commercial (i.e. non payment of charges) so long as there are no safety issues and the pilot is given appropriate clearances by the ATC to land the aircraft safely.[39] Like Woodhouse J, we agree with that conclusion which accords with commonsense. Any other construction would put a premium on pilots becoming airborne before the control services became operative and then remaining in the air either unsupervised (with obvious safety implications) or receiving services for nothing. Rule 91.241 provides that the pilot of an aircraft operating in a control area must comply with any air traffic control instruction.[40] Finally on the issue of costs, we do not accept there is any basis forinterfering with the Judge's decision. At an early stage in the dispute, well beforeproceedings were issued, Airways specifically referred Mr Nicholls to theGeyserland decision as well as Airways Corporation of New Zealand Ltd v Tandem Skydiving (2002) Ltd.7 Significantly, the latter case involved a quantum meruit claim brought by Airways against parachute operators who had objected to Airways'standard charges. The focus of Airways' statement of defence in this case was of necessity on the right to withdraw services once objection was made, rather than the outstanding fees of $78.46. Airways never asserted before Woodhouse J that there was a contractual basis for the recovery of the post 22 May 2009 fees.Outcome[41] The appeal is without merit.[42] The two judgments of Woodhouse J are upheld and the appeal is dismissed.7 Airways Corporation of New Zealand Ltd v Tandem Skydiving (2002) Ltd DC Wellington CIV-2006-069-319, 31 August 2007.[43] Mr Nicholls must pay costs to Airways for a standard appeal on a band A basis plus usual disbursements.Solicitors:Lyon O'Neale Arnold, Tauranga, for AppellantAirways Corporation of New Zealand, Wellington, for Respondent