Airwork Holdings and The Helicopter Line were at one point claiming and counter-claiming respectively $16million and $5million against one-another, leading up to their High Court stoush. Simon Hartley reviews the High Court judgement released this week - the subtle nuances of contractual law somewhat overshadowed by an alarming insight into the safe operation of helicopters.
The Helicopter Line (THL) and Airwork Holdings are both heavyweights in the New Zealand's domestic aviation sector, the former being the country's largest tourism aviation operator and Airwork leasing out and maintaining numerous large fleets of commercial and charter aircraft.
Annual profits for the respective parent companies are often counted in the tens of millions of dollars.
Their falling out follows the cancellation by THL in July 2013 of a 20-year lease of eight twin-engine helicopters from from Auckland-based Airwork, claiming safety concerns around servicing of the aircraft.
The relationship between The Helicopter Line and Airwork Holdings was described by an expert witness in the High Court as "dysfunctional''.
Since publication of the High Court decision this week, Mark Quickfall, the chairman of THL parent company Totally Tourism, and Airwork chief executive Chris Hart have only briefly acknowledged the decision, both offering no more comment. An appeal could yet be lodged by THL in coming weeks.
The headline from the decision appears to go against The Helicopter Line, which was ordered to pay more than $2million, plus unspecified interest, to Airwork.
However, the complexity of the case was evident in the 196-page decision delivered by Judge Gerald Nation at a High Court hearing in Invercargill.
He considered not only the contractual issues at stake but went on to systematically trawl through 24 "incidents'', reported mainly by THL, on Airwork's maintenance work on its leased helicopter fleet.
The judge said at issue were THL claims that any obligations it had under the 20-year contract ended on July 4, 2013, at the latest, when it grounded the leased helicopter fleet over safety concerns, and Airwork's claim against THL for damages for unpaid helicopter use charges and loss of future income.
The contract included a "shortfall hours'' entitlement, where THL had agreed to fly each helicopter for a minimum 3500 hours or pay Airwork the entitlement.
THL had agreed to pay 75% of the price per hour, which, in 2002, was $925.
Airwork had a claim for 1410 hours over five years to 2013, totalling $2.32million.
Judge Nation said unless the contract was varied by agreement or cancelled by Airwork, THL was required to meet its obligations to pay the "shortfall hours'' between 2008 and 2013.
In considering THL's contractual obligations, Judge Nation considered at length the 24 "incidents'' alleged and logged to Airwork by THL during the contract period to ascertain their validity.
His judgement summary said during the years 2008 to June 2013 there were several serious incidents where Heli Holdings, Airwork's subsidiary, failed to comply with minimum standards.
On five occasions in 2008 and 2009 a helicopter was released for service with serious and dangerous defects, resulting from maintenance being carried out in a manner that breached manufacturer and CAA requirements, he found.
In 2008, 2010 and 2011, there were four incidents of tools or other foreign objects being left in aircraft after maintenance, which could either damage the craft or interfere with a pilot's ability to fly the aircraft, he said.
"Incidents over 2008, 2009 and 2010 culminated in Heli Holdings [Airwork's subsidiary] having to withdraw from service an aircraft that was found to be flying with ex-military blades,'' Judge Nation said.
Installation of ex-military blades was strictly prohibited, would render an aircraft non-airworthy and was potentially serious, he said.
The blades were bought at a heavily discounted cost and the purchase was approved by a senior Airwork executive. Although Heli Holdings had been "induced to make the purchase through fraud'', Heli Holdings/Airwork should have had a system and personnel in place to avoid that happening, the judge said.
One of the incidents repeatedly referred to was at "Gorilla Creek'', near Aoraki/Mt Cook.
On January 2013, a THL pilot landed a group of tourists at 2pm at Gorilla Creek, 2100m above sea level and above a 900m-1200m vertical bluff.
Judge Nation's summary said when the pilot and passengers were out of the aircraft, and the blades should have been locked stationary, the blades moved and the aircraft began rocking backwards and forwards, "shedding debris''.The pilot shepherded the passengers further away before shutting down the helicopter.
Another aircraft had to pick up the pilot and passengers and, the next day, an Airwork engineer permitted a pilot to try to fly the aircraft back to base with a damaged starter motor and unidentified debris on the engine floor.
That attempt was aborted after a fuel line was found to be broken.
Following the Gorilla Creek incident, THL engaged an engineer who reported "significant failings in aircraft maintenance and investigation'' and said the aircraft, passengers and crew "were exposed to an unacceptably high level of risk''.
The engineer described THL and Airwork's relationship as "dysfunctional'', which represented "a safety concern in itself''.
Judge Nation said subsequent investigations confirmed there had been significant failings in the way the Airwork engineer had permitted the aircraft to be flown, given "observed defects'' seen earlier had not been properly investigated.
It was a breach of Civil Aviation Authority rules and "best industry standards'' to have let the retrieval pilot try to fly the damaged aircraft, he said.
"The engineering failings associated with the Gorilla Creek incident had created serious avoidable risks, including a risk of fatalities, for all those who had been in the aircraft,'' Judge Nation said.
He said THL could not be discharged from its liabilities under the contract with Airwork on the basis of a subjective loss of trust and confidence but had to prove the loss of confidence resulted from substantial breaches of contract or anticipated breaches of contract.
"The evidence has satisfied me that, after 2 July 2013, the [THL] directors were justified in deciding there was too great a risk for THL's pilots, passengers and the business to continue operating Heli Holdings' aircraft and that they had genuinely lost the confidence and trust in Heli Holdings/Airwork, which they needed to continue flying Heli Holdings' aircraft,'' Judge Nation said.
Judge Nation said he was satisfied "there had been such breaches'' and that they were going to continue because of the attitude of a senior Airwork executive towards THL, the statements he had made and the way he had acted in relation to THL's safety concerns.
Reported incidents
Twenty-four incidents reported, between January 2008 and January 2013, including:
•Incident 1 - January 1, 2008
Anti-vibration assembly retention bolts missing. During a post-maintenance, pre-flight inspection, a THL pilot discovered an assembly on top of the rotor blades was loose with six retaining bolts missing.
If not discovered on the pre-flight check, the blades could have detached from the aircraft, albeit unlikely if the aircraft was in an upright position in normal flight.
‘‘The experts agreed that, with this incident, Airwork had failed to meet CAA-approved standards of maintenance,'' the incident summary said.
•Incident 11 - December 8, 2010
Airwork advised THL that an aircraft had been grounded because it had found unapproved main rotor blades had been installed in a way that was strictly prohibited. Ex-military blades had been acquired from the United States and fitted to the aircraft, which is regarded by the CAA as being particularly dangerous.
‘‘The fitting of ex-military blades had been identified as the cause of a major helicopter crash resulting in fatalities near Murchison in August 2005,'' the incident summary concluded.
•Incident 21 - August 21, 2012
After maintenance, pilot noticed an imbalance in main rotor blade; landed and shut down helicopter. It was discovered that maintenance engineers had not matched blades with the correct sleeves into which they should have been inserted.
‘‘Had the problem not been detected by the pilot, there would have been the potential for damage to the aircraft,'' the incident summary concluded.
•Incident 23 - January 3, 2013
In the the ‘‘Gorilla Creek incident'', a pilot parked a helicopter on a Mount Cook ledge and left the engines running but locked the blades so they remained stationary through application of the cyclic friction mechanism, a locking device.
While the pilot was out of the helicopter, the locking device failed. The main rotor head components disintegrated. There was an associated starter generator bearing failure. Heli Holdings expert said there was compliance with minimum standards but THL experts disagreed.
- SOURCE: HIGH COURT JUDGEMENT
Evidence
Evidence during High Court proceedings:
•An expert witness, involved in the aviation industry for 40 years, told court he considered the 24 incidents highlighted by THL were ‘‘representative of the aviation industry as a whole''.
He said, of the 24 incidents, seven involved a ‘‘genuine issue of non-compliance, being a failure to comply with maintenance procedure including lack of adherence to Airwork policy (human factors errors)''.
Of the 24 incidents, he considered only 13 to genuinely relate to Airwork's maintenance.
•Another expert witness, with experience and expertise both as pilot and licensed helicopter engineer over more than 40 years, considered that, in 19 of the incidents, there was ‘‘a pattern of repeating failures on behalf of Airwork''.
An Airwork quality safety manager's report in court: ‘‘This is the third induced maintenance error in the last month of major issues from the Queenstown maintenance base and, while in isolation, it did not threaten the immediate flight safety of the helicopter, it fails to promote the necessary level of flight safety confidence''.
•Senior Airwork manager's email to an Airwork quality service manager: ‘‘Such comments are serious enough if they are confined to company internal correspondence but to make those statements to a customer under these circumstances is inexcusable and puts us in a difficult position with THL.
‘‘There is no doubt that they will use your words against us in our upcoming commercial negotiations and that could result in a negative financial impact for the company. ‘‘In future please think before making detrimental statements about Airwork to people outside of the company''.
-SOURCE: HIGH COURT JUDGEMENT
