OCEANIA AVIATION LIMITED v THE DIRECTOR OF CIVIL AVIATION [2001] NZCA 88 (13 March 2001)

IN THE court of appeal of new zealand

ca163/00

	between	oceania aviation limited
		Appellant

	and	the director of civil aviation
		Respondent

Hearing:	12 and 13 February 2001
Coram:	Gault J Keith J Blanchard J
Appearances:	K P McDonald QC and G D Pearson for Appellant K I Murray and C J Chapman for Respondent
Judgment:	13 March 2001

judgment of the court delivered by blanchard j

Introduction

[1] In October 1995 two men were killed in the crash of a Robinson helicopter near Opotiki.The cause of the tragedy was found to be the failure of a tail rotor blade which had been damaged in an accident in the United States.The damage had been concealed when the blade was supposedly repaired in that country.It was then purchased by a New Zealander, imported here and installed on the helicopter involved in the fatality.The New Zealander was later convicted and imprisoned for manslaughter.

[2] The appellant, Oceania Aviation Limited, previously called International Heliparts NZ Ltd, which will be referred to as Heliparts in this judgment, is a dealer in helicopters and helicopter parts.It is important to say at the outset that Heliparts had no involvement whatever in the Opotiki crash.But the discovery of a bogus part on the Robinson helicopter caused the Civil Aviation Authority of New Zealand (CAA) to review the way in which aircraft parts are imported and traded and, in particular, the way in which their history is recorded.The recording process is important, not only because it may bring to light suspect parts, but also because some parts, including relevantly to this case helicopter rotor blades, are intended by their manufacturer to be used only for a limited number of hours after which, though apparently sound, they may fail.Accordingly it is important to know the flight history of blades and other such parts.

[3] Arising from the review carried out by the CAA, the respondent, the Director of Civil Aviation, who is its Chief Executive, first suspended and then revoked Heliparts' licence to certify parts (by issuing documents to accompany them called Release Notes).The Director also issued to the appellant Airworthiness Directives, which required specified parts previously supplied by it to be removed from helicopters on which they had been installed. Heliparts says that the loss of its licence and, particularly, the cost to it and the publicity in the industry attendant upon the removal and replacement of the parts has caused it considerable loss.It brought a damages claim against the Director in the High Court at Wellington alleging the torts of misfeasance in public office and negligence.In a judgment delivered on 9 August 2000 Gendall J dismissed the claim in its entirety.Heliparts appeals.

The regulatory background

[4] The Civil Aviation Act 1990 (the Act) provides for the issue of Civil Airworthiness Requirements by the Director.One of those Requirements, which had been issued under earlier legislation on 15 September 1986, related to Release Notes.It prescribed what foreign documents were acceptable as equivalent to a Release Note.It listed types of documents from some 15 countries, including the United States.In relation to the United States, it listed, as relevant to this case, only a Federal Aviation Administration form 8130-3 (Airworthiness Approval Tag) or "a document issued by an FAA Certified Repair Station and which quotes the certificate number issued to that repair station under United States of America, Federal Aviation Regulations part 145". These two kinds of certificate can be described as "FAA certification".

[5] Nevertheless, when approving the operating manual which each aircraft parts supplier is required to draw up and abide by and which is called an Engineering Procedures Manual (EPM), the CAA had approved a procedure under which, before supplying a part, Heliparts was obliged to obtain written confirmation from its own supplier of a part that the part had "FAA or equivalent serviceable tag."[Emphasis added]It is now common ground that, until the events to which reference has been made, CAA auditors had been in the practice, both in the case of Heliparts and other suppliers, of making no adverse comment on the use of United States documentation other than FAA certification.Such other documentation was routinely treated as being equivalent to FAA certification.

[6] The regulatory scheme also provided that parts were not to be fitted to aircraft unless they had been approved by a Licensed Aircraft Maintenance Engineer and a Release Note had been issued by that engineer.

[7] Whilst on the subject of the regulatory background, it is convenient to mention a contention for the appellant which was made in support of the argument that the Director had knowingly exceeded his powers.As his authority for issuing the Airworthiness Directives referred to in para [3] above requiring recall of parts supplied by Heliparts, the Director has relied upon Reg 173 of the Civil Aviation Regulations 1953 (authorising him to require modifications to any components of a particular class of aircraft when he considered any such modification necessary in the interests of safety).When read in conjunction with Reg 8A, authorising the promulgation of orders, requirements or instructions, this regulation, on its face, would seem to have been ample authority for the issuance of such Airworthiness Directives.The 1953 Regulations were preserved when the Civil Aviation Act 1990 came into force, first by s103 and later, when that section was repealed, by s8 of the 1991 amendment to the principal Act, as further amended in 1993.This was done in order to enable a new system of rules paralleling the United States regulatory regime to be gradually put in place.Therefore at the time when the Airworthiness Directives were issued in relation to Heliparts, Reg.173 had not been revoked.(Revocation did not happen until 1 April 1997.)

[8] But Ms McDonald QC pointed to s72I (3A), which was inserted into the 1990 Act and came into force on 13 August 1996.This new subsection gave the Director power, when he believed on reasonable grounds that an unsafe condition existed in any aeronautical product and was likely to exist or develop in any other aeronautical products of the same design, to issue an Airworthiness Directive in the Gazette in respect of such products.It was said for the appellant that the Director was accordingly, at the time when he issued the Airworthiness Directives in relation to Heliparts, limited by s72I to promulgating general or industry-wide directives.Hence, it was said, he had exceeded his powers in purporting to issue a Directive specific to particular parts supplied on particular occasions by the appellant.

[9] However subs(3A) is expressly subject to subs(2) of the same section which confers on the Director the powers conferred by regulations made under the Act. It would appear to be the case that this was intended to include regulations preserved by a provision in the Act.We do not need to determine this point because even if counsel's argument had any validity, there is no basis in the evidence for the suggestion that the Director must have appreciated at the time, in October 1996, that he could no longer rely on Reg 173 or, in view of the legal complexity of the point, for the suggestion that he and his advisors were negligent in failing to appreciate the (alleged) cessation of the power conferred by the Regulation.Assuming the validity of the legal point, it therefore does not assist the appellant in its attempts to establish either of the torts and can be put to one side.

Facts

[10] Following the Opotiki accident the Transport Accident Investigation Commission (TAIC) investigated.It produced a report on 21 February 1996 which recommended, among other things, that the Director:

Review the current procedures for the procurement of critical aircraft components, with a view to requiring that such components be supplied through an approved distributor or the components' history be positively established by documentation, before they can be fitted to a certificated aircraft.

The report contained no criticism of the Director's earlier performance of his functions.

[11] The CAA proceeded to carry out an audit of the procedures and documentation used by helicopter part suppliers.In the case of Heliparts, it considered that it had detected inappropriate documentation (non-FAA certification of US sourced parts) in a large number of instances.The auditing process was ongoing when on 9 July 1996 the owner of a Bell helicopter, Helipro, advised the CAA that in the course of routine maintenance one of its pilots had discovered, purely by chance, a crack in a helicopter blade fitted to the aircraft.That blade had been supplied by Heliparts.On examination it was discovered that epoxy filler had been used to mask damage to the blade.This appeared to have been done in the United States.The blade had been bought by Heliparts from a United States Company, Clearwater Helicopters Inc.Heliparts had issued a Release Note relying upon a serviceable tag which was not in FAA form 8130-3 or issued by an FAA certificated repair station.Heliparts had however sent the blade to a CAA approved engineer, Mr Boustred, who had also not detected the damage and had issued his own Release Note approving it to be fitted to the helicopter. Heliparts is not an engineering facility and has no capacity for detecting other than superficial damage and was accordingly relying upon Mr Boustred.

[12] The CAA's concern was that this appeared to be an example of a bogus blade not accompanied by FAA certification.The next day the Director issued a general Airworthiness Directive to the industry advising registered helicopter owners of the incident and requiring immediate inspection of all helicopter blades.The CAA took the matter sufficiently seriously that on 12 July 1996 it advised the Minister of Transport of the occurrence, saying that it was suspending the aviation documents of Heliparts and of Mr Boustred and the organisation for whom he was working while a full technical investigation was carried out.

[13] In a press release on 17 July, the Deputy Director, Mr Stevens, said that a catastrophic failure of the Clearwater blade could have happened at any time, with consequent loss of life.The press release announced that there would be licence suspensions as part of the Authority's fight against bogus parts.He said that suspension notices were being served.Part of Heliparts' complaint is that it was in fact the only parts supplier which was then suspended. Further similar remarks were made by personnel from the Authority, including Mr Stevens, on 19 July at the Aviation Industry Conference in Nelson.Mr Stevens commented that "we have a cancer in our midst and the CAA is determined to cut it out".

[14] In the meantime on 17 July the Director had suspended Heliparts' licence with immediate effect, stating that he considered such action necessary in the interests of safety.Subsequently the suspensions were extended from time to time while investigations continued.

[15] On 22 July the CAA advised Mr Camp of Heliparts that the decision to suspend the certificate was made by the Director "when it became clear that on more than one occasion parts were being released through your organisation without supporting documentation that met the requirements of [the Airworthiness Requirements pertaining to Release Notes]".There was no mention in the suspension notice or in that letter or the correspondence which followed of what came to be called the Clearwater matter.

[16] Although the suspension and the eventual revocation of its licence prevented Heliparts from issuing Release Notes, it did not prevent it from selling parts, because Release Notes could be issued for them by a Licensed Aircraft Maintenance Engineer like Mr Boustred.

[17] When the Director refused to lift the suspension, Heliparts began judicial review proceedings in which it contended that the Director had acted unlawfully in suspending its licence on the ground that Release Notes had been issued for US sourced parts without FAA certification.The point being taken against the Director was the discrepancy between the Airworthiness Requirement relating to Release Notes and the wording of Heliparts' EPM as approved by the CAA (see para [5] above).

[18] On 25 October 1996 the Director issued to Heliparts a series of Airworthiness Directives requiring removal of "Unapproved Components" supplied by Heliparts.Each Directive stated as a requirement:

To prevent possible in-service failure of unapproved components, remove the components listed from service.

Any of the components listed held as spares must not be fitted to any helicopter.

[19] In each case there was a notation on the Directive that if documentation for any listed component could be demonstrated to the CAA to comply with Airworthiness Requirements, the component might be returned to service.

[20] Compliance was required by 25 November.Heliparts began the expensive and no doubt embarrassing process of retrieving the proscribed parts.However, judgment in the judicial review proceedings intervened before the compliance date, because on 22 November Goddard J, sitting in the High Court at Wellington, found in favour of Heliparts on the question of the interpretation of the documentation requirements.The Director's interpretation was found to be "untenable", the Judge saying that it might be that "he has strained to place that interpretation on the requirements for the supply of aircraft parts with the benefit of hindsight and out of an undoubtedly very proper and real concern precipitated by the Opotiki crash".She said that her finding in no way cut across the Director's "proper concern for safety issues or minimises that concern".It was for the Director to set his requirements for the future if he was of the view that nothing less than FAA certification could properly satisfy authenticity and traceability requirements for aircraft parts.But in their present form, the Judge found the documentary requirements did not reflect that position.

[21] The Judge added the following:

The defendant has acted responsibly by issuing the ADs requiring the removal of parts whose authenticity and traceability it now has concerns about.The plaintiff has complained (inter alia) that ADs have been issued in respect of parts that have already been removed and this is damaging to its reputation. That is a matter for it to now discuss further with the defendant and I do not propose ruling on that issue.In the light of my findings on the issue of interpretation it is clear the defendant must now take responsibility for removing and/or replacing parts that are the subject of ADs and which have not yet been removed.

[22] The Judge made a declaration that the suspension of Heliparts' licence was invalid.

[23] On 25 November the Director reissued his Airworthiness Directives to Heliparts, evidently doing so as a precautionary measure lest the first series of Directives had been affected by the judgment.

[24] By that time, however, two further matters had come to the attention of the Director, although they were not mentioned in the new Directives.The first of these has been called the Helisika matter.In 1995 Heliparts had sold a helicopter to an organisation known as Helisika with blades installed. Heliparts did not issue or need to issue a Release Note.The CAA had issued a Certificate of Airworthiness after inspecting all the documentation relating to the helicopter.

[25] In May 1996 Helisika contacted Heliparts saying that a Licensed Aircraft Maintenance Engineer had scrapped one blade and indicated dissatisfaction with the others.They were sent back to Heliparts.A complaint to the supplier in the United States, Mansfield, produced the result that Mansfield was willing to give a credit for unexpired time.Mansfield told Heliparts to cut the root ends off the blades and send them back in order to get the credit.This was duly done.The other ends of the blades remained with Heliparts.

[26] The CAA became aware of this problem on 25 September 1996 which was actually before the issue of the first Airworthiness Directives on 25 October.On 1 November 1996 the CAA had written to Mr Camp requesting that Heliparts retain the blades for the purpose of a CAA investigation and make them available upon request.It is apparent that the CAA had not been told about the cutting of the blades and the sending of the root ends to the United States.Heliparts immediately replied advising, in a somewhat misleading way, that the blades "have already been shipped overseas". The CAA's response, on the same day, 1 November, was to request full details of the person or organisation to whom the blades had been shipped, including the date of shipment, carrier and consignment numbers.The CAA followed up this communication with a letter to similar effect to Heliparts' solicitor, Mr Price.

[27] Unfortunately, by this time Heliparts and its solicitor were adopting a combative attitude towards the CAA.Its request had been essentially unanswered at the time when the Airworthiness Directives were reissued after Goddard J's judgment.

[28] The third matter which had come to attention has been called the RNZAF matter.This involved a blade, which had in the 1980s been used on a New Zealand military helicopter.The blade had come into the possession of Mr Camp in 1990 or thereabouts through Mr Boustred and for a time it was used by Mr Camp simply as a decoration, but the RNZAF documentation pertaining to it remained available.In 1995, when a replacement blade for a helicopter was needed urgently by Helipro, the same company which later had the problem with the Clearwater blade, Mr Camp and Mr Boustred, considering from the documentation that the blade still had about 200 hours of unexpired time, respectively supplied, and tested and fitted it to a Helipro helicopter.

[29] On 12 November 1996 Mr Lucas of Helipro telephoned the CAA with a concern about whether the RNZAF blade was in fact time expired.The question raised was about the interpretation of the RNZAF documentation and whether it had justified the issue of Release Notes by Heliparts and Mr Boustred.The CAA began to investigate this complaint.(At a later stage Mr Boustred's licence was suspended over this matter and it was only restored after he had been required to sit an examination.)

[30] Having indicated the overall position regarding matters said to be of concern to the CAA at the time when the Airworthiness Directives were reissued following Goddard J's judgment, we now move to subsequent events.

[31] The appellant's licence was again suspended by a notice given by the Director on 18 December 1996.The notice referred to matters which were said to be "unrelated to the finding of the High Court regarding the interpretation of [Airworthiness Requirements] and your company's Engineering Procedures Manual" but said that this question continued to give concern.Reference was made to the Helisika and RNZAF matters and to certain specific problems relating to documentation.Clearwater was not mentioned.

[32] The appellant responded by a letter from its solicitor the next day seeking reconsideration and intimating that otherwise a further application to Goddard J would be inevitable.On the subject of the Helisika matter, the solicitor merely passed on his client's assurance that "main rotor blades that have been cut in half cannot be fitted nor used on a helicopter".He did not explain this reference.He asked for a copy of the RNZAF documentation.The concerns about documentation were also disputed.

[33] On the same day the CAA wrote to Heliparts in response to an earlier application for concessions from the Airworthiness Directives.It granted concessions in respect of nine parts and refused them in respect of 18, giving its reasons.

[34] On 23 December Goddard J gave judgment on an application by the Director to recall the passage of her earlier judgment concerning responsibility for removing or replacing parts.The Judge declined to recall the judgment.She said that she had not made a finding of liability as such, only an obiter statement relating to the effect of her finding that the Director had misinterpreted the regulations.

[35] Jumping ahead somewhat, there was later an appeal to this Court in the judicial review proceedings (Director of Civil Aviation v International Heliparts NZ Ltd, 18 September 1997, CA44/97).The Director's appeal was unsuccessful, the Court confirming the interpretation given by Goddard J. A ground of the appeal related to the controversial passage about removal and replacement of parts.This Court said that that ground of appeal was misconceived for it did not and could not form part of the sealed judgment and was no more than an observation."There is no adverse finding, and no binding obligation is placed upon the Director." Heliparts complains about a press release issued by the Director after this Court's judgment was delivered. Gendall J said that it was semantically inaccurate but in substance truthful. We agree.The press release provided no support for the appellant's claims.

[36] On 24 December the CAA responded to the submissions of Mr Price.On the Helisika matter, that letter recorded the previous request for information and said that Heliparts had failed to produce documentation concerning the statement made on 1 November that the blades were shipped overseas.The CAA said that there were serious safety concerns relating to the blades and that it was not satisfied that they had been removed from use.It was considered irresponsible for a New Zealand supply company to simply send blades overseas without notifying the CAA of the problem with the blades in order for a full investigation regarding the source of the blades to be conducted.The letter said that the actions of the company with respect to the blades had prevented the CAA from undertaking further inquiries regarding them.

[37] On the subject of the RNZAF matter, the letter said that the documentation provided by Mr Price relating to the Release Note issued with the blade did not include any document that identified its time remaining.A copy of the RNZAF documentation was supplied to Heliparts as it had requested.Advice was given that there had not been an explanation from Heliparts and that the New Zealand Police had been contacted with respect to the matter.

[38] On 12 January 1997 the Director promulgated a new Civil Airworthiness Requirement for Release Notes.This stipulated that all US sourced parts must have FAA certification.

[39] Mr Price made further submissions relating to Heliparts' licence on 31 January 1997 but declined to provide further information on the Helisika matter.He suggested with regard to the RNZAF matter that the papers supplied by the CAA, dating from 1988 before Heliparts was even formed, appeared "mutually contradictory".He asked the CAA whether it had considered the possibility "that the RNZAF is not infallible".

[40] Eventually, after further correspondence, notice of revocation of the appellant's licence was given on 17 February 1997.In relation to Helisika, the Director stated in a letter to Mr Camp on 24 February that the primary concern was not related to the documentation that accompanied the blades, "but rather to the actions of the Directors of the company after discovering that the CAA was conducting an investigation".Previous concerns were reiterated. As to the RNZAF blade, it was said that the entry of a time-expired finite-life component into the New Zealand Civil Aviation system was considered to be an extremely serious matter.Heliparts had not produced documentation to support the hours on the Release Note which it had issued.The fact that the RNZAF documentation was dated in 1988 was not considered to be a satisfactory response.It was said to be insufficient to rely on the files of another organisation to justify documents issued pursuant to a licence.

[41] The notice also referred at some length to the various documentary complaints.The Director said that the cumulative nature of the incidents involving Heliparts indicated that it was not operating in a responsible manner and he was not satisfied that the situation would change.The stated grounds for the decision to revoke were that Heliparts had failed to comply with s12(3) of the Act "in that their activities and functions carried out pursuant to [the licence] have not been carried out responsibly and safely and in accordance with the relevant prescribed safety standards and practices."Also, the Director considered that "the privileges or duties for which the document has been granted are being carried out in a careless or incompetent manner".

[42] As on the previous occasions of suspension, the Director advised of the right to appeal against his decision to a District Court under s66 of the Act. Heliparts did not bring such an appeal.

The High Court judgment

[43] In his judgment, Gendall J said that he was not persuaded that the CAA's view of the documentary position, which had been found in the judicial review proceedings to be untenable, had arisen from any improper motive or purpose. It had been suggested that the purpose was not the protection of public safety but, rather, the protection of the CAA from public criticism.But the Judge was not able to discern any evidence that any adverse publicity directed at the CAA had occurred or was likely to occur.There was none in the TAIC report. After reviewing the evidence, Gendall J said that he did not accept that the CAA's actions in 1996 were motivated in part because of any of its own earlier shortcomings.

[44] Turning to the matter which occupied much of the time in this Court, namely the suggestion that bad faith or improper purpose could be inferred because of the way in which Heliparts had been singled out for regulatory action in a discriminatory way, being treated differently from similar organisations in the industry, the Judge said that a crucial fact "from which I draw the compelling inference that investigation was necessary and had an influence upon the CAA" was the complaint made in July 1996 regarding the Clearwater blade.The issuing of a general Airworthiness Directive on 10 July 1996 requiring inspection of all helicopter blades not supplied directly from the manufacturer was evidence of immediate action being taken, which reflected concern with the whole industry.Later in September the Helisika complaint arose and in November 1996, before the judicial review hearing, the complaint concerning the RNZAF blade:

All of those three matters would, on any objective analysis, have provided grounds for concern.Concern or analysis may not have been directed in a critical way towards the plaintiff's actions, in the sense that there was blame or fault, but factually speaking there existed matters which - in light of the acknowledged industry awareness or concern over defective parts - made it understandable as to why CAA may have focused on the plaintiff rather more directly than others.Quite apart from the documents, areas of concern pointed to it and not to others, and I do not accept that the evidence in this regard establishes bad faith or improper purpose.

[45] Heliparts had complained that the CAA had ignored the High Court judgment in the judicial review proceedings.But the Judge said that the judgment was limited to the narrow area of the legal validity and basis for imposing the original suspension.It could not prevent the CAA from acting if safety concerns existed provided that it did so in good faith.The obiter remarks of Goddard J were not binding.The Judge saw force in the submission of counsel for the Director that Heliparts failed to recognise his statutory duties and public safety responsibilities generally in relation to the problem of unauthorised parts, given the Clearwater, Helisika and RNZAF blade complaints."Although the plaintiff was not involved in the Opotiki crash, such was caused directly through the supply and installation of defective parts and there existed, separately, three areas of alleged defective parts dealt with by the plaintiff."The Judge noted that Goddard J had said that the CAA acted "responsibly" by issuing the Airworthiness Directives and he could not disagree with that.He considered that they were issued for genuine reasons. He found as a "compelling inference" from the facts that the CAA acted in good faith for a proper purpose (public safety) and had not been recklessly indifferent to Heliparts, despite erring in law as was found by Goddard J.It followed, the Judge said, that the essential ingredients of the tort of misfeasance in public office had not been established on the balance of probabilities.

[46] Moving to the allegation of negligence, where Heliparts alleged that the CAA's actions in relation to the licence and the Airworthiness Directives were in breach of a duty owed to Heliparts and had caused it to suffer economic and reputational loss, the Judge had no difficulty in finding that there was a "degree of proximity" or relationship between the parties.But he was of the view that there were strong policy considerations which limited any duty of care.He asked himself whether the wider interests of public safety, which he saw as the "overriding purpose of the Act", would be put in jeopardy because of a requirement that the Director take care not to injure the commercial interest of participants in the aviation industry.The undesirability of defensive practices was especially acute where public safety was an issue.The Judge was satisfied that conflict with a wider public duty owed by the Director was so clear that the purpose of the statutory scheme to protect public safety negatived the existence of a duty of care to Heliparts in the particular circumstances of this case.The supplier of aircraft components was not within the class of persons for whose protection the regulatory scheme and measures were established.The negligence action therefore also failed.

Director not calling evidence

[47] In the High Court, evidence had been given for Heliparts by Mr Camp, Mr Price, Mr Boustred and eight other witnesses, including some other Licensed Aircraft Maintenance Engineers.They had been extensively cross-examined by the Director's counsel.At the close of the case for Heliparts the Director had elected not to call any evidence.

[48] The appellant's counsel criticised the Judge's failure to accept the case which it had presented, saying that it had not been answered and that the Court was therefore almost bound to accept it; that where facts lie peculiarly within the knowledge of one party - here the Director's reasons for taking the actions he did - very slight evidence may be sufficient to discharge the burden of proof resting on the opposite party (Reid v Rowley [1977] 2 NZLR 472, 478).Counsel further submitted that it was necessary and appropriate to draw an adverse inference when the holders of public positions choose not to give evidence in such circumstances; that it may otherwise be difficult, if not impossible, to hold them accountable for improper conduct.Such an approach was said to be "an important safeguard."

[49] The Judicial Committee recently had cause to consider this question in Gibbs v Rea [1998] UKPC 3; [1998] AC 786, an appeal from the Cayman Islands, which concerned an action against a police officer and the Crown for the malicious procuring of a search warrant.The majority of their Lordships, in a judgment delivered by Gault J, pointed out that although it was open to the defendants to elect to give no evidence and simply contend that the case against them was not proved,

...that course carried with it the risk that should it transpire there was some evidence tending to establish the plaintiff's case, albeit slender evidence, their silence in circumstances in which they would be expected to answer might convert that evidence into proof. (p798-9)

The majority also commented that they "saw no reason to speculate for the benefit of parties within whose knowledge the true state of affairs rests".

[50] The evidence as a whole in Gibbs v Rea took the matter further than mere equilibrium.The silence of the defence was maintained when some answer was called for.The absence of any answer supported the inference that there was no satisfactory answer.

[51] The minority considered that the plaintiff had failed to discharge the onus which lay upon him and that there was no basis for drawing an inference adverse to the police officer.It is clear, however, that their difference with the majority concerned the application of principle to the facts, rather than any difference of principle.The minority judgment contains the following passages which provide guidance in a case such as the present:

Proof that there was an absence of reasonable and probable cause involves proving a negative.So it is clear that slight evidence to show that there was no reasonable or probable cause will be enough to shift the burden of proving reasonable and probable cause on to the defendant.It is also well settled that proof of the absence of reasonable and probable cause may itself be evidence of malice.(p805)

And:

...a circumstantial case can only be built up by the use of relevant evidence. An inference may then be drawn from various circumstances which, when taken individually, are of little significance.But if the circumstances are of no value whatever, no combination of them can give them any greater weight when they are examined collectively.(p810)

[52] Although Gendall J did not refer to any case law on the question of burden of proof, he appears to have directed himself very much in accordance with these principles.At para [38] of the judgment below he remarked:

It does not automatically follow that an election by the defendant not to call evidence will result in adverse evidential finding being made against that defendant.It all depends on the strength, weight and significance of the evidence adduced in support of a plaintiff's case and slight evidence may possibly be sufficient to discharge the plaintiff's burden of proof in circumstances where no contrary evidence is called.But evidence, slight or otherwise, is required and not simply allegations, beliefs or speculation.And there must be evidence accepted by the Court which, objectively viewed, is able to lead the Court to draw the reasonable and probable inference from such proven facts that a certain intention, desire, motive or state of mind existed.

[53] In para [39] he said:

I proceed on the basis that the intention, motivation or beliefs of officers of the CAA are not to be determined by any self-serving statements and documents created by them.But I am able, and am required, given the cause of action in misfeasance in a public office, to determine motivation, intention or reckless indifference, from the available evidence and from reasonable and proper inferences to be drawn from such evidence.But the burden of proof still remains on the plaintiff, although it may be more easily discharged where a defendant calls no evidence, provided that the plaintiff's evidence reaches a certain threshold.

[54] Whilst, as will appear, we ourselves would not have gone as far as the Judge when he expressed the view that there was a "compelling inference" that the CAA had acted in good faith for a proper purpose and was not recklessly indifferent to the position of Heliparts, we do not consider that he approached the question of proof in an incorrect manner.Nor does it appear from a reading of his judgment as a whole that he was other than fully conscious of the need to ensure that public officials are properly accountable for the use of their powers.

Misfeasance in public office

[55] Ms McDonald summarised the ingredients of the tort, citing this Court's decision in Garrett v Attorney-General [1997] 2 NZLR 332, by saying that it is committed if an official

* acted in the purported exercise of his/her office.

* acted believing or suspecting that the action taken was outside the powers of his/her office, and going ahead anyway.

* knowing that harm or loss was likely to be occasioned to the plaintiff, and if

* the plaintiff suffered damage.

For the purposes of the present appeal, we are content to address the matter on that basis, but without intending any departure from the way in which the matter was formulated in Garrett, which has been followed by the House of Lords in Three Rivers District Council v Governor and Company of the Bank of England (No.3) [2000] 2 WLR 1220.

[56] It was contended by counsel for the appellant that the Director could not have reasonably believed that his actions of targeting one organisation for suspension, issuing individual Airworthiness Directives and later revoking the licence was a legitimate exercise of power in the light of his knowledge of the rest of the industry, his previous acceptance of the appellant's documentation, his continued acceptance, until January 1997, of use of similar documentation by other parts suppliers, the absence of genuine safety issues relating to the documentation and the attitude displayed towards Heliparts in the Director's public utterances, including those at the industry conference.The Director had immediately re-issued the Airworthiness Directives despite the High Court's ruling that he had been misinterpreting his own rules.He had earlier been informed by the appellant's solicitor of the damage that was being done to its business, which was in any event quite obviously likely to occur.

[57] Ms McDonald said that the Judge had erred in not giving sufficient weight to the singling out of the appellant.She accepted that unequal treatment by an official of one participant in an industry does not in itself amount to unlawful exercise of power, but she said that the respondent could not possibly have thought that it was legally permissible to single out the appellant as had been done.The appellant had no involvement in the Opotiki crash and had done nothing which contributed to any legitimate safety concerns.No others were similarly treated.Heliparts was not an engineering company.It could not have been expected to detect problems with the Clearwater blade which was imported with documentation which at the time was regarded throughout the industry and by the CAA as acceptable.Heliparts had itself no capacity to detect well concealed defects.On all occasions it had it relied upon an independent engineer.The Director could therefore not reasonably have believed that issues raised about documentation gave rise to a safety concern. If it did, why was that not equally applicable to others?

[58] The appellant repeated the argument made to the High Court that the only reasonable inference, which ought to be drawn when the Director was silent, was that he acted against the appellant, not for safety reasons, but as a response to public criticism of his previously lax control of the industry.Evidence had been called from three engineers, including Mr Boustred, that they did not consider the issuance of the Airworthiness Directives to the appellant to be justified on safety grounds.It was also said by counsel to be significant that at no stage did any of the notices given by the Director purport to rely upon the Clearwater incident.In the case of Helisika, the CAA had itself approved the blades on the importation of the helicopter.The Director refused to listen to the appellant and did not make inquiries of Mansfield, the party to whom the appellant had sent the severed root ends of the blades.The RNZAF documentation had been reviewed by Mr Boustred as well as the appellant.At most, this was a question of misinterpretation.None of the three specific concerns had any logical connection to or provided a basis for the very damaging Airworthiness Directives.

[59] Having reviewed the evidence, we consider that this Court would not be justified in disturbing the Judge's conclusion that the tort of misfeasance in public office has not been established.We say this for two reasons.First, and very significantly, the allegation that the Director was motivated by his concern at being publicly criticised following the Opotiki crash, rather than acting, as he must do, in the interests of public safety, has not been made out.Ms McDonald was simply not able to point to anything in the TAIC report, or in any other published material, to support the argument that there had been strong public criticism.Tellingly, when he gave evidence, Mr Camp was unable to point to anything other than very limited evidence of concerns having been expressed in private communications to the CAA.There is therefore nothing to justify the inference that Heliparts was the Director's scapegoat for his own alleged sins.

[60] If it had appeared that the Director was facing public criticism and if the questions raised by the CAA about the non-FAA certified documents had stood alone, there might have been some basis, when the Director failed to call evidence, for the Judge to draw an adverse inference from the Director's failure to take similar action against other suppliers, particularly as three engineers gave evidence that they saw no serious problems arising out of the documentation.But this brings us to our second reason.Although the formal notices made no mention of the Clearwater incident, the Director had become aware of it immediately before the suspension notice was issued.It had given rise to an urgent general Airworthiness Directive, and the Director had obvious reason to be concerned about it, particularly as it arose quite soon after the cause of the Opotiki crash had been established and the Director's attention had been drawn by the TAIC to the need to review the use of documentation.The Director appears to have had good cause also to be concerned about another incident of a problem with a blade which had been imported from the United Stated without FAA certification.It had been found to be in a condition where it could have failed catastrophically at any time.The Helisika matter too had come to light before the issue of the Airworthiness Directives.The Director appeared to be getting no co-operation on that matter from Heliparts, which failed to provide requested evidence about what had happened to the Helisika blades.That was another apparently legitimate concern.

[61] By the time the judicial review judgment was delivered and the Directives were re-issued, the RNZAF problem had also surfaced.The Director's concerns about the Helisika and RNZAF matters, and particularly about the obstructive attitude, as he quite reasonably appears to have viewed it, of the appellant and its solicitor, are apparent from the correspondence which has been referred to earlier in this judgment.

[62] There is no basis in the evidence for any suggestion that when suspending the licence the Director was aware that he was mis-reading his own rules.It is to be remembered also that, although the Director lost the judicial review proceeding in the High Court on the question of interpretation of the rules, he was told by the Judge that he had been acting responsibly in issuing the Airworthiness Directives.Although it was suggested to us that perhaps the Judge did not have the full picture, that picture would have to include the three incidents which have just been mentioned.In the light of all the various concerns, it would be wrong to draw the inference that when the Director proceeded to issue and then to reissue the Airworthiness Directives he was improperly motivated.

[63] The question is not whether the Director's actions were justified as a matter of public law, but whether he was knowingly or recklessly acting beyond his powers.Possibly because we have set to one side all of the Director's internal materials, of which Gendall J made some limited use, we would not go as far as he did when finding a "compelling inference" that the Director had acted in good faith for a proper purpose.But in our view the evidence did not provide even slight support for the view that the Director singled out the appellant because of an ulterior motive and must be taken therefore to have known that he was acting unlawfully.Viewed as a whole the evidence suggests that the Director's actions were much more likely to have been taken because of genuine safety concerns.Rightly or wrongly, he seems to have regarded the appellant, because it was linked with three specific incidents causing understandable concern, as the worst example of the industry practices which he wished to change and did in fact change, so far as the future was concerned, as from 12 January 1997 when he put in place new Civil Airworthiness Requirements relating to documentation.The Director did not take any comparable action against other suppliers of parts, but if, as the Judge concluded, he was motivated by a safety concern and if he believed Heliparts to be the worst example, his failure to act against others could not constitute a misuse of power.

[64] In summary, there is insufficient evidence to support the view that the Director was improperly motivated and knowingly or recklessly acted unlawfully when he suspended and revoked the appellant's licence and when he issued and re-issued the Airworthiness Directives.Nor does the evidence provide any proper basis for inferring that he acted for reasons other than public safety. The tort of misfeasance in public office has not been made out.

Negligence

[65] Mr Pearson submitted that the Director owed the appellant a duty to take reasonable care to ensure that his statutory powers were exercised properly and in accordance with legal requirements.Stated so broadly, this appeared to come close to an attempt to equate the common law duty of care with a public law right to have powers exercised lawfully, which traditionally has not been thought to give rise to a right to damages.

[66] Counsel was, not surprisingly, unable to point to any case in which a public official charged with responsibility for public safety had been found to owe a common law duty of care to those who were being regulated in that public interest.The analogies which he attempted to draw with officials concerned respectively with the care of mental patients and with the safe construction of buildings, who may well owe duties to the general public as well as to the patients and building owners, were remote from the present facts and unconvincing.

[67] It was entirely foreseeable that the appellant would suffer loss as a result of the Director's action.There was also the necessary proximity or closeness of relationship between the Director and the appellant, to whom his notices and directives were addressed.But, against these factors, there was a very strong policy argument that it would not be just and reasonable to impose any duty of care.The Judge was in our view right to conclude that, even if the postulated duty were to be confined to situations not involving an emergency exercise of power, the imposition of a duty to take care for the interests of suppliers of aircraft parts - the persons being regulated - would be likely to conflict with the Director's primary duty to those potentially affected by the use of those parts in an aircraft.It might well, as the Judge said, promote undue caution or reticence on the part of the Director and so impede his role as a protector of public safety.This is an area where to err on the side of caution in the interests of the suppliers of a part might be to place the lives of pilots and passengers at some risk.

[68] Gendall J said that "in the particular circumstances of this case" a duty of care was not to be imposed.We too are content to leave the matter on that basis.

Result

[69] The appeal is dismissed with costs of $10,000 to the respondent.The appellant must also pay the respondent's reasonable disbursements on the appeal, to be fixed, if necessary, by the Registrar.

Solicitors:

Ewan Price, Henderson for Appellant

Crown Law Office, Wellington for Respondent