PARTIES: HONE PIHAMA EDWARDS
(FILE 20426607)

&

E. R. AIR SERVICES PTY LTD
(FILE 20426309)

v

YUGUL MANGI CLAN DEVELOPMENT P/L
(FILES 20426607; 20426309)

&

HONE PIHAMA EDWARDS
(FILE 20426309)

TITLE OF COURT: Local Court

JURISDICTION: Local Court

FILE NO(s): 20426607, 20426309

DELIVERED ON: 17th March 2006

DELIVERED AT: Darwin

HEARING DATE(s): 24, 25, 26, 27 & 28 October 2005; Written submissions 21 November 2005

JUDGMENT OF: Jenny Blokland SM

CATCHWORDS:

EMPLOYMENT LAW – CLAIM FOR OUTSTANDING LEAVE

Annual Leave Act (NT) ss 4, 10, 11, 13, 16
Pilots (General Aviation) Award
Roping-in Award No. 1 of 1999
Common Rule Declaration, Australian Industrial Relations Commission, Commissioner Eames, 31 March 2004.

EMPLOYMENT LAW - EMPLOYMENT CONTRACT – FIDUCIARY DUTY
Breen v Williams (1996) 186 CLR 92
Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373
Daily Cleaning Service v Pavlovic (1992) 34 AILR 359
Paul Finn, “Contract and the Fiduciary Principle”, 12 UNSW Law Journal 76
Breen Creighton and Andrew Stewart, “Labour Law” 4th ed, Federation Press, 2005

REPRESENTATION:

Counsel:
Plaintiff: Mr Waters QC
Defendant: Mr McQueen

Solicitors:
Plaintiff: Ms Scicluna
Defendant: Mr McQueen

Judgment category classification: B
Judgment ID number: [2006] NTMC 023
Number of paragraphs: 84

IN THE LOCAL COURT
AT DARWIN IN THE NORTHERN
TERRITORY OF AUSTRALIA

No. 20426607, 20426309

BETWEEN:

HONE PIHAMA EDWARDS
(FILE 20426607)
Plaintiff 1
E. R. AIR SERVICES PTY LTD
(FILE 20426309)
Plaintiff 2

AND:

YUGUL MANGI CLAN DEVELOPMENT P/L
Defendant

AND:

HONE PIHAMA EDWARDS
(FILE 20426607)
Third Party

REASONS FOR DECISION

(Delivered 17th March 2006)

JENNY BLOKAND SM:

Introduction

1. These reasons concern two closely related matters that have been amalgamated. Both matters were heard at the same time and although the issues are more contained in the action in file 20426607, there are cross over evidential issues that relate to both matters. The claim brought by Mr Hone Pihama Edwards on file 20426607 concerns a claim for unpaid employment entitlements being the alleged balance of monies owed to him in lieu of annual and recreational leave, and leave loading. What is not in dispute is Mr Edwards commenced working for the defendant Yugul Mangi Clan Development P/L, (referred to also throughout these proceeding as “Ngukurr Air”), in 1998 and the employment ceased on 24 November 2004. As a result of the statutory requirements set out in the Amended Statement of Claim, the plaintiff claims $36,460.39 plus superannuation entitlements. This is calculated after a deduction to take account of $4,210.03 that the defendant acknowledged was owing and was paid. In general terms the defendant denies that the plaintiff was employed subject to the Pilots “General Aviation” Award until it was declared a common rule on 24 March 2004; it denies that the plaintiff accrued annual leave pursuant to the Award, although it admits that the defendant had entitlements to annual leave, the defendant denies that it owes the sum alleged in the Amended Statement of Claim. It is not in dispute that the plaintiff (Hone Edwards) at all material times was employed by Ngukurr Air.

2. In action 20426309 the plaintiff is E.R. Air Services Pty Ltd. E. R. Air Services Directors are Hone Edwards, (the plaintiff in the first mentioned action), along with his wife Roseanna Edwards and Mrs Edward’s sisters. It is alleged that by virtue of “Operating Lease” agreements the plaintiff’s aircraft, VH-XGN and VH-SYT were hired or leased to the defendant. The defendant admits that it leased these aircraft from the plaintiff company at the respective rates but denies that it entered into the lease arrangements on the dates alleged by the plaintiff or with awareness of certain of the terms set out. Because of alleged breaches of the operating leases the plaintiff company claims $53,501.80 plus interest and costs. Those sums are calculated by reference to alleged breaches of guaranteed minimum hiring hours. The defendant denies it is liable to the plaintiff company for those outstanding amounts. Further proceedings filed in action 20426309, concern the defendant Yugul Mangi Clan Development P/L issuing third party proceedings against Mr Hone Edwards (the plaintiff in the previous action and a Director of E. R. Air Services in this action). The third party claim in general terms alleges that, Hone Edwards was employed as a manager by Yugul Mangi Clan Development P/L; it alleges Ms Roseanne Edwards was responsible for the allocation of the aircraft owned or hired and the booking of those flights; it alleges that Mr Edwards as an employee of Yugul Mangi Clan Development P/L was under a fiduciary duty, and owed a duty of fidelity and of disclosure. Yugul Mangi Clan Development P/L alleges that the third party (Mr Edwards), with authority of or as agent of E. R. Air Services Pty Ltd made a number of representations to Yugul Mangi Clan Development P/L, namely that E. R. Air Services Pty Ltd were interested in purchasing the two aircraft from Yugul Mangi and that Mr Edwards had authority to negotiate a purchase of those two aircraft on behalf of E. R. Air Services Pty Ltd; further, that Mr Edwards represented that the value of aircraft VH-XGN was $175,000 to $180,000 plus GST and that the value of VH-SYT was $85,000 plus GST; further it is alleged that Mr Edwards made a representation that if E. R. Air Services Pty Ltd purchased those aircraft, those aircraft would be made available to the defendant Yugul Mangi Clan Development P/L on similar commercial terms to other aircraft leased to the defendant company by E. R. Air Services Pty Ltd.

3. It is alleged that at a meeting in 2003 the directors of Yugul Mangi Clan Development P/L agreed to sell both aircraft to E. R. Air Services at $160,000 for VH-XGN and $80,000 for VH-SYT. It is alleged that Mr Edwards was present at that meeting. It is alleged that Mr Edwards breached his fiduciary duty and duty of fidelity in respect of various aspects of the sale of the aircraft. It is also alleged that Mr Edwards prepared the “Operating Leases” omitting certain common provisions and at the same time including certain minimum flying hours for each aircraft. In general terms it is also alleged that there was a failure to disclose the minimum hours to the CEO of Yugul Mangi Clan Development P/L and that he did not disclose certain other issues that may have a bearing on this matter namely, that other aircraft belonging to E. R. Air Services Pty Ltd that had no minimum fixed time requirement were being used in preference over VH-SYT and VH-XGN. The third party claim is for $50,000 plus GST for loss of profit on the sale of aircraft VH-XGN; plus $11,818 being the loss of profit on the sale of aircraft VH-SYT less the charges claimed for VH-XGN and VH-SYT being $48,638 plus GST.

4. In his defence Mr Edwards denies the representations concerning the price of the aircraft to Yugul Mangi Clan Development P/L, suggesting the representations were made on the basis of estimates obtained from a valuer who had been retained by Yugul Mangi Clan Development P/L previously. Mr Edwards claims that at the meeting between himself and the defendant company concerning the purchase, the then Chief Executive Officer Ms Lynn Mott, its accountant Kevin Blacker and its solicitor Peter McQueen were present. Essentially as third party Mr Edwards claims the invoices for the cross-hire of the planes followed a meeting between himself and the CEO of Yugul Mangi Clan Development P/L and that there was advice that one of the lease agreements could commence in October 2003 notwithstanding the purchase of the planes had not been finalised. The third party agrees that Yugul Mangi Clan Development P/L sold the two aircraft to the plaintiff company E. R. Air Services Pty Ltd on or about 14 November 2003 for $201,500. Mr Edwards denies he was in breach of his fiduciary duty and duty of fidelity as alleged by the defendant Yugul Mangi Clan Development P/L.

Evidence Called in the Proceedings

Leah Lynette Mott

5. Ms Mott was the previous CEO of Yugul Mangi Clan Development Pty Ltd; she gave evidence that in 1998 she and Mr Edwards set up the airline with local people of the Yugul Mangi Clan; she said Mr Edward’s credit cards were used to operate the service prior to commencement of the company and that Yugul Mangi was incorporated around October 1998. Ms Mott said that from 1998 Mr Edwards was an employee, he was never a Director of Yugul Mangi. Exhibit P1, (the employment agreement), was identified by Ms Mott. She said she was responsible for the terms of the employment of Mr Edwards as she was CEO at the time. She said as CEO she had general instructions from the Directors to run the company. She said she remained CEO of Air Ngukurr until February 2004 when she resigned; between October 1998 and February 2004 she told the court Mr Edwards was a pilot; she said she had responsibility for wages. She said she did not work out the pays but she had the overview of the pays through subordinate employees and the records were generated by the MYOB (“Mind Your Own Business”) programme. The records before the court that form Exhibit P2 are records commencing in the year 2000. She said that the pre 2000 records, (along with other earlier records), may have been burnt in a fire at Winnellie. She said Mr Edwards very rarely took leave, he had taken no long service leave and had no advance concerning leave.

6. She told the court that in 2003 a decision was made to sell two of Yugul Mangi Clan Development Pty Ltd’s aircraft known in these proceedings as “XGN” and “SYT”; the motivation for the proposed sale was that the company was having cash flow problems and it was decided to sell them after discussions with Mr McQueen, (Yugul Mangi/Air Ngukurr’s lawyer), and a Mr Blacker (their accountant); she said she consulted and took the idea to the Directors of Yugul Mangi Clan Development Pty Ltd who resolved to sell the aircraft; she said Hone Edwards was involved in the meeting with the Directors; she told the court she asked Hone Edwards to contact a Mr MacLean concerning the value of the aircraft; she said Mr Edwards had expressed interest in buying the aircraft. Ms Mott said that Air Ngukurr had consulted Mr MacLean previously when the issue of sale of aircraft had arisen. She said she did not recall whether any commission was paid to Mr MacLean. She said it was at a Director’s meeting in July 2003 that it was agreed to sell the particular aircraft; she said present at that meeting were Mr McQueen, Mr Blacker, Andrew Robertson, a person named “Ishmael” and “two others”; she said Hone Edwards advised he was making inquiries to see if he could raise the money to purchase the aircraft. Ms Mott said she had seen the letter from Mr Edwards to Mr McQueen dated 29 August 2003 (Exhibit P4). That letter reads:
“Attention: Peter. These are the independent valuations for XGN and SYT. I am offering $80,000 for SYT and $160,000 for XGN. The reason I differ from XGN value is that the engine and prop times for this aircraft have increased by approximately 200 hours from the date of the valuation. I will send the SAETAS engineering pre purchase details to you later on.”

The valuation opinion from Mr Richard MacLean from “Aircraft Sales” became Exhibit P3. In relation to the aircraft XGN Mr MacLean states:

“I conducted a “walk around” inspection of VH-EGN whilst in Darwin recently and found the presentation to be average for its current operating environment. Avionics are of a very good standard for this operation and based upon information supplied I believe the total airframe time to be 6,432.9 hours, engines had 1,426.7 hours on the RH side and 1,248.9 hours on the LH side since overhaul TBO of 1,870 leaving 443.3 hours to run to overhaul on the right and 621.1 to run on the left engine propellers pad 45.4 hours on the right and 1,619 on the left since overhaul leaving 1,549.6 hours to run to overhaul on the right and 381 hours on the left. I believe the current value of this aircraft as is where is to be in the region of $175,000 AUD to $180,000 AUD plus GST given reasonable marketing time and exposure”.

7. In relation to the aircraft known as SYT in these proceedings Mr MacLean’s memorandum stated:

“I conducted a “walk around” inspection of VH-SYT whilst in Darwin recently and found it to be in need of repaint and interior refurbishments. Avionics are of a standard commensurate with that expected of the model and for the operation in which this aircraft and based upon information supplied I believe the total airframe time to be 7,823.1 hours, the engine had 1,866.8 hours since overhaul with a TBO of 1,870 hours leaving 3.2 hours to run to overhaul therefore virtually time expired the propeller had 1,866.8 hours since overhaul leaving 130 hours to run to overhaul. I believe the current value of this aircraft as is where is to be in the region of $80,000 AUD - $85,000 AUD plus GST”.

8. In relation to Exhibit P4 (the offer made by Mr Edwards for the purchase of the aircraft), Ms Mott told the court that letter had not come to her attention; she said she was overseas at the time. In relation to how a final price would be settled Ms Mott said there were some negotiations looking at issues concerning the fact that the aircraft may have been used for a few months after the valuations were received and there may need to be compensation for that and that engine life would have to be looked at. Ms Mott said she did not discuss with Mr Edwards what that compensation would be; she said she was aware that E. R. Air Services Pty Ltd had agreed to lease the aircraft back to Air Ngukurr. Ms Mott was shown Exhibit P5 being the “operating lease” concerning aircraft SYT and Exhibit P6 being the “operating lease” concerning aircraft XGN. Ms Mott agreed that those operating leases were from the standard template used by Air Ngukurr and that the standard template provides for minimum hours; she said that she had looked after that type of lease previously. She said other persons including the current CEO, (her successor, Mr Bleakley), also had an “operating lease” regulating the hiring of one of his aircraft: (see Exhibit P7). Ms Mott said she was not a party to the minimum flying hours being increased from 300 to 600 hours. She said she had no association with Mr Hone Edwards or E. R. Air Services Pty Ltd beyond their time being employed at Air Ngukurr.

9. In cross-examination Ms Mott agreed that the genesis of Air Ngukurr was with Hone Edwards and herself; she told the Court “Yugul Mangi” refers to the indigenous people of the area of Ngukurr. She agreed that the role of the Yugul Mangi Clan Development P/L was to benefit the community. She said that on or about 1998 Deloitts were asked to set up the company and the shares were held by the Yugul Mangi Council; she agreed the split of shares was that sixty percent was held by Directors and forty percent by the Council. She agreed the contract of employment for Mr Edward’s employment was prepared by her and signed by each of the relevant persons at Air Ngukurr; she thought the relevant agreements were still available at the office when she left Air Ngukurr; she agreed that there had been a fire but could not say what would have happened to original documents that were missing at the time of the hearing.

10. Ms Mott agreed that on or about December 2001 the Civil Aviation Safety Authority “CASA” sent a letter in relation to Mr Hone Edward’s employment as a Chief Pilot; it was suggested to Ms Mott that he was suspended in December; she said she recalled he was suspended in the long weekend of January; she agreed that in late 2002 Mr Edwards was terminated as the Chief Pilot as a requirement of CASA; she agreed CASA brought proceedings against Mr Edwards at that time. She agreed that Air Ngukurr provided a deal of support to Mr Edwards at that time; she agreed that Air Ngukurr grew and pursued opportunities with Mr Blacker assisting with financial matters from about mid 2002.

11. Ms Mott said that prior to her leaving Air Ngukurr in August (she acknowledged she took leave until around February 2004), there may have been wage records concerning the period prior to MYOB; she reiterated that she did not know whether they existed and that they may have been burnt. She agreed that part of the justification for selling the aircraft known as XGN and SYT was to contain or reduce costs; she said that if those aircraft were cross hired there would be a reduction in some of the costs associated with maintaining and running them. She said there were a number of companies who cross hired aircraft to Yugul Mangi Clan Development P/L. She said there were a number of hire and cross hire arrangements made for aircraft including arrangements made with “Island Air”, “Wimray Air” and “E.R. Air Services Pty Ltd”. She said of the valuations given by Mr MacLean on the sale of the two aircraft that she assumed the values included GST. She agreed the offer made by Mr Edwards for the aircraft was less than the valuations and she understood that to be because the aircraft had continued to fly and certain costs were associated with that. She said the benefit of the sale of those aircraft would be that the balance would be available to improve the cash flow of Air Ngukurr; she said she did not prepare the eventual hiring agreement for the cross hire of those aircraft from E. R. Air Services Pty Ltd; she said Mr Hone Edwards would generally prepare those agreements and that would have occurred until the time that she left.

Hone Pihama Edwards

12. Mr Edwards told the court that at the time of giving evidence he was 43 years of age and had been a professional pilot for 14 years. He commenced employment at Ngukurr Community in 1998 in a part time position and by October 1998 was full-time. He said he was paid in accordance with the agreement that is Exhibit P1 in these proceedings. He said representatives of Air Ngukurr had signed the original agreement and he was paid in accordance with that agreement. He said initially he did not take leave in his position as the work demanded all of his time; he said years later he did obtain leave and on or about the 27th October 2004 he received a document from Air Ngukurr concerning his leave entitlements; he said he had made enquiries concerning his leave entitlements. Mr Edwards acknowledged Exhibit P2 being the payroll advice from August 2000 to November 2004; he acknowledged also the advice prepared by the book-keeper Ms Sarina Shailer concerning his leave entitlements and his own calculations for entitlements being contained in Exhibit P10. He also acknowledged an amendment to his employment relationship noted in Exhibit P11 commencing 27th May 2004. He said that he worked at Air Ngukurr from October 1998 to the end of November or December 2004. He said he was suspended as the Chief Pilot due to “defects” that CASA had accused him of but he continued in his employment in various other roles with no loss of wages or entitlements. Tendered through Mr Edwards was Exhibit P12, a memorandum from the Directors of Air Ngukurr to Mr McQueen and Mr Bleakley that reads as follows:

“We confirm as per our meeting held at your office with Kevin Blacker and Hone Edwards present, that Hone was suspended on normal pay.”
Mr Edwards also identified a statement of entitlements from Air Ngukurr indicating his total entitlements were $4210.03 : (Exhibit P13) and with that entitlement was a letter from Mr McQueen, (acting for Air Ngukurr), offering a sum of $6000.00 in addition to leave entitlements; Mr McQueen wrote:
“I am instructed that if no agreement is reached on the terms as set out above by 1pm Friday 29 October 2004 then action will be taken to terminate your employment at that time”.

Also tendered was a letter from Mr Bleakley, (the CEO of Air Ngukurr dated 25th October 2004) stating amongst other matters,
“I now give notice that I propose to terminate your employment with Air Ngukurr, giving you four weeks notice effective from Wednesday 27 October unless you give notice of your intention to resign beforehand. Upon termination or resignation you will be paid such entitlements as may be due and owing taking into account your period of employment with Air Ngukurr.”

In evidence Mr Edwards said he did not at anytime waive or forego or forgive payment of long service leave and made no other agreements that would be relevant to his employment status.

13. Mr Edwards said that prior to July 2003 he owned aircraft registered and known in these proceedings as “UBK” and “KSS”; they were both leased back to Air Ngukurr in accordance with an agreement for a fixed term of 12 months; there was a minimum 500 hours hire per year set. Mr Edwards said that a minimum limit was always set; this provided a safe guard that the aircraft would actually be hired; he said that a number of other persons were leasing aircraft to Air Ngukurr in a similar way; Mr Edwards advised the court that he had some knowledge of these arrangements because he was involved in negotiating similar arrangements; he said there was some variation between these arrangements concerning the guaranteed minimum flying times and there were variations on issues such as which party would pay for insurance. He said Mr Bleakley, (who owned Wimrays Safaris), had a lease with Air Ngukurr in similar terms as his own lease; he said in relation to the number of hours that would be guaranteed as minimum hours, some operating leases had less than 500 hours but after some time the minimum hours were changed and with his later aircraft, SYT and XGN, the minimum hours agreed were 600 hours.

14. Mr Edwards said that while his new aircraft (“SYT” and “XGN”) were hired at the minimum hiring of 600 hours, Mr Bleakley’s aircraft from Wimrays was also re-negotiated to 600 minimum hours. He described Mr Bleakley as being “in charge”. Mr Edwards referred to Exhibit P15, (the “Operating Lease” concerning an aircraft hired to Air Ngukurr from Mr Bleakley trading as Wimray Safaries), to illustrate the point concerning his evidence that essentially these operating leases were the same for all aircraft. He pointed out the minimum hiring of 600 hours. The operating lease (Exhibit P15) contains clause 3(g) that reads as follows:
“Within one week of completion of each year, the hirer shall the total hours flown in the previous year. If the total hours flown is less than 600, the hirer shall pay to the owner a sum calculated by multiplying the difference between 600 hours and hours actually flown, by the amount agreed between the parties as being the hourly hire rate for the aircraft at the time of completion of the year. The sum shall be in addition to the amounts paid monthly under the terms of clause 3(b)”.
He told the court these were the terms for both of Mr Bleakley’s aircraft. He was asked to compare that with Exhibit P7, (an earlier operating lease between Mr Bleakley trading as Wimray Safaries and Air Ngukurr). That operating lease contains a similar minimum flying hours provision in clause 3(f) except that the minimum set is 360 hours. Mr Edwards confirmed his evidence that the minimum hour clause went up to 600 hours in respect of Mr Bleakley’s aircraft.

15. Mr Edwards became aware of concerns in relation to Air Ngukurr and its profitability, assets and similar financial matters. He said there were discussions that occurred in which Air Ngukurr expressed its intention to sell two aircraft and that the previous CEO, (Ms Mott) had told Mr Edwards that Air Ngukurr wanted to sell those aircraft. Mr Edwards said he showed interest in purchasing the aircraft to assist in helping the cash flow problems of Air Ngukurr and he made an offer on the two aircraft. He said that prior to making an offer he obtained a valuation and that valuation was obtained from Mr MacLean who was an aircraft salesman. He said Ms Mott had asked him to contact Mr MacLean to make the appropriate assessment and that he had phoned Mr MacLean just as he had over previous dealings with him. He said when the company first purchased XGN there was a valuation and that Air Ngukurr had relied on Mr MacLean’s valuation previously concerning a fair purchase price. He said after his approach to Mr MacLean a valuation was carried out at Air Ngukurr, one in relation to SYT and the other in relation to XGN. He became aware that the valuations were completed and he wrote his own letter of intent on behalf of E. R. Air Services to Mr McQueen; he said Ms Mott was not present at Air Ngukurr at that time and that Mr McQueen needed to be involved with the sale of the aircraft.

16. Mr Edwards gave evidence concerning a meeting of the Directors of Yugul Mangi Clan Development P/L held 10 September 2003. Minutes of that meeting were tendered as Exhibit P18 although I have been mindful that paragraphs 1, 2, 4 and the paragraph under “General Business” do not form part of the evidence in this matter. Mr Edwards said it was clear at that meeting what capacity he was acting in his attendance. He said that the persons present were Andrew Robertson, (a Director, who Mr Edwards said always wanted “to quit”), Carol Robertson, who Mr Edwards described as Mr Robertson’s wife; Ishmael Andrews was present who was a Director, Mr McQueen and Mr Blacker were also present. Reference was made to paragraph 3 of the minutes that reads as follows:
“Peter McQueen discussed the terms of the agreement for sale of the aircraft, which had been faxed to Andrew at Ngukurr earlier that day. The directors were informed that the sale would result in the company obtaining a surplus of approximately $40,000.00 and that that money could be used to meets claims by creditors. The directors were also informed that the aircraft would continue to be made available for cross hire by the company on the same terms as cross hire of other aircraft and that while there would be cross hiring fees the company would not pay the maintenance bill and other expenses associated the ownership of the aircraft thereby reducing the companies overheads.”

“The directors resolved to sign the agreement for the sale of aircraft and fax to McQueens to be passed on to Air Ngukurr.”

“Hone confirmed with the directors that the company purchasing the aircraft was the same company as was already making aircraft available to the company on cross hire.”

“The directors were informed that the business the airline was doing to and from the Tiwi Islands was going well, that people were paying and that the company was taking steps to ensure that early payment was made for flights that were booked and taken.”

17. Mr Edwards explained that it was clear at the meeting that the company referred to making the cross hiring available was E. R. Air Services. He said the company already had previous leasing agreements concerning other aircraft with Air Ngukurr; he says it is clear from paragraph 3 of the minutes that there was discussion of E. R. Air Services and that the Directors were aware that E. R. Air Services were the purchasers. Mr Edwards said he made his offers with reference to the valuations obtained but taking into account that XGN’s value was decreasing as it was still being operated and the expiry time of the engine was accelerating which reduces the value. He was asked whether he had any discussions with Mr Bleakley about this and he said he was not called upon to explain any difference but there were some discussions with Mr Bleakley along the lines that while the aircraft was still being used the value was decreasing. He said Mr Bleakley agreed on the value that he gave it and that Mr Bleakley was acting in the role of CEO as at 10th September 2003 when the directors approved the sale.

18. Mr Edwards was asked about two tax invoices from Yugul Mangi to E. R. Air Services for the sale of the aircraft, dated 14 November 2003; he was asked why the agreement was made on the 10th September but the invoice was not paid until some time later and not invoiced until the 14th November 2003; Mr Edwards said he agreed with Mr Bleakley that if Ngukurr Air continued to operate the aircraft the value would drop and there was an oral agreement that E. R. Air Services would operate the aircraft during that period; he said it took some time to secure finance and there were interim arrangements of various kinds between September and November 2003. He said the invoices, (which became Exhibit 19 in these proceedings), issued by E. R. Air Services and levied on Yugul Mangi for hire of the aircraft in October and November of 2003 were agreed with Mr Bleakley and that they would be contra’d against the purchase price. He said these arrangements were reflected in Yugul Mangi account transactions concerning sale of assets in Exhibit P20.

19. Mr Edwards reiterated that he considered the conclusion of his employment was 4 weeks after 27 October 2004 and that as far as he was concerned Air Ngukurr owed arrears for SYT and XGN; he said there was no money outstanding for the cross hire of other aircraft; he said the relevant invoices (Exhibit P21) concerning the hire of XGN and SYT were given to the book-keeper Sarina Shailer and he was told he would not be paid. He instructed his solicitor to write to Air Ngukurr concerning the alleged sums outstanding. The correspondence between the solicitors has been tendered, the calculation of the sum owed, (according to Mr Edward’s solicitor) is based on breach of clause 3(g) of the agreements plus GST; the letter from solicitors for Yugul Mangi indicates the validity and the enforceability of the agreements was to be challenged stating “a primary objection of the company is that no deduction or allowance as apparently been made for such periods as the aircraft have been unavailable to fly while undergoing maintenance or repairs during the period”. Mr Edwards reiterated that other aircraft generally had minimum flying times of 500 hours, increased to 600 hours and that the 600 minimum hours had never been the subject of dispute with Air Ngukurr. In this regard the court’s attention was drawn to Exhibit 24, an operating lease from March 2000 between Mr and Mrs Edwards and Air Ngukurr concerning an aircraft VH-UBK. Clause 3(g) refers to 500 minimum hours; Mr Edwards also referred to the lease in Exhibit 25 between E. R. Air Services and Air Ngukurr concerning VH-KSS similarly containing a minimum hours of 500 hours. He said this had never been queried by Air Ngukurr in relation to minimum hours.

20. In cross examination Mr Edwards agreed that he and Ms Mott set up Air Ngukurr, that they were both residing at Ngukurr and that Air Ngukurr commenced relying on Mr Edward’s credit card; he agreed that initially Air Ngukurr was being operated without an Air Operators Certificate and that it used another operator’s Air Operating Certificate; he agreed that he was the chief pilot from October 1999 and that other pilots were paid as “line pilots” at a general salary of approximately $30,000.00 but as chief pilot his salary was $60,000.00 per annum; he agreed that he continued in his employment as chief pilot until January 2002 when Rowan Dougall was appointed. Mr Edwards agreed that CASA were conducting an inquiry into allegations concerning himself as chief pilot and that after the 29th January 2002 he was not employed as a chief pilot.

21. In relation to responsibility for the hire agreements of aircraft Mr Edwards agreed that he was responsible for those agreements and he was given that responsibility by the previous CEO Ms Mott; he agreed he retained that responsibility until about August 2004 when Mr Bleakley removed that responsibility from his duties. He agreed that when CASA proceeded with their investigation concerning his role as chief pilot there was some uncertainty on whether CASA would grant an Air Operators Certificate to Air Ngukurr and solicitors were briefed to represent him. He agreed that he was still employed at the same level of income even though he did not have the responsibilities of chief pilot anymore; he agreed that the salary of $60,000.00 per annum reflected the importance of the chief pilot’s position. He agreed that after he was replaced as chief pilot his role changed but he was an advisor to Air Ngukurr advising the company and the Directors and performing various administrative tasks. In relation to the role of Directors of Air Ngukurr he said it was difficult to define their role as sometimes they would all of a sudden become a manager and he cited the example of Mr William Hall in that regard. In relation to his duties to the Directors he said he would try to perform his duties as an advisor concerning any problems the company had and that at one level he might be described as a manager but he couldn’t manage the company officially because of the restraints imposed by CASA. He said his role was something of a “trade off” with CASA as they had accused him of doing various things and he had been acquitted in court; he said for some time CASA continued with other allegations and a “deal” was reached and all of the charges were dropped; he said a condition was that he was not to be a manager of Air Ngukurr. He said that he “took” that penalty for the sake of Air Ngukurr. He understood that that restriction formed part of the grant of the Air Operating Certificate to Air Ngukurr. He said he continued to receive his salary as the company gave him other duties to perform and it was understood that by agreeing to the suspension of a number of duties it was a “trade-off” so that Air Ngukurr could operate; he said that occurred after Ms Mott’s departure from the company.

22. He told the court Air Ngukurr operated from the Ngukurr community and then from Winnellie but in 2002 because of the fire, he was not sure if all records were transferred. He said Ms Mott worked until August 2003 but he attended a meeting of Directors at Air Ngukurr of the 10th September 2003. He agreed that Mr Bleakley was not present at that meeting; he agreed an issue to be discussed was Mr Bleakley as CEO and that the minutes indicated that Mr Bleakley was formally appointed.

23. He agreed that he was asked to explain the valuations and that the original valuation was sent to Ms Mott. He agreed that when Air Ngukurr purchased XGN in 1999 it was around $200,000.00 and SYT was purchased at about the same time for around $150,000.00

24. He agreed he didn’t approach anyone else apart from Mr MacLean concerning the valuations; he agreed that he contemplated purchasing the aircraft during that period. In relation to the question of the value of the aircraft he confirmed that that was influenced by ongoing costs that needed to be factored in to include the hours accumulating towards the period when the engine would need to be replaced, the costs of running the aircraft and the need to amortise the cost; he cited costs for the need to replace propellers and other repairs. He agreed he had been involved in the sale transaction in circumstances where he knew Air Ngukurr were facing pressure from creditors; Air Ngukurr had borrowed money for the purchase of XGN and SYT and it would be of benefit to Air Ngukurr if it could pay out the loan if those aircraft were owned by someone else. He said he did not know what was left owing on the loans that Air Ngukurr had taken out to purchase the aircraft originally. He agreed that there was no one else at the Directors meeting that confirmed his purchase of the aircraft who had experience or knowledge of aircraft, their cost of maintenance or generally the method of assessing costs over the whole transaction. He said he was unaware that XGN had not done the flying from June that he had calculated; he said his figures were calculated at a rough rate; he said he calculated that rate from engine times. He agreed that the issue of the 200 hours was not the only reason he differed from the valuation.

25. He said that even though Ms Mott was away on holidays from the 3rd August, Mr Bleakley was acting CEO. He agreed that when Air Ngukurr first purchased XGN at the start of 1999, Ms Mott had “some” aviation experience but not as much as himself. He said in relation to XGN, Air Ngukurr operated it prior to purchasing it and the owner gave Air Ngukurr an opportunity to purchase it; he said the purchase took place with Ms Mott bargaining on behalf of Air Ngukurr and he gave her technical advice; he said the Directors agreed to purchase and he gave the technical advice and provided information to them; he said he accepted the cost was reasonable and that was conveyed to the Directors.

26. An advertisement was shown to Mr Edwards for an aircraft of similar engine size as XGN for $270,000.00 plus GST. Mr Edwards said it was a later model with lower hours (Exhibit D26). He was shown an advertisement for a 1977 cessna said to be similar to SYT with similar hours for $240,000.00 plus GST. Mr Edwards said there were a number of variables between that aircraft and SYT. He was shown a range of examples contained in Exhibit D26, (advertisements from “The Aviation Trader”); Mr Edwards made a number of observations concerning differences in models. He said in relation to XGN the new engines and new prop could be well over $10,000.00 plus around $400.00 to install. Mr McQueen drew Mr Edward’s attention to P16, (being an agreement for the sale of the two aircraft that is dated 1 December 2003). Mr Edwards said it would have been dated by someone else and would have been paid on the 1st December because he had to organise finance; he said in September 2003 he did not have the finance and that Air Ngukurr knew he was obtaining a loan; he said the offer was made on the 10th September and it was subject to him obtaining finance; he said the understanding was that the finance had not come through and that finance was obtained from CBFC Ltd. Mr Edwards said between the 10th September and the 1st December 2003 he was trying to find finance and during that time there was an oral agreement between Mr Bleakley and himself that the aircraft would still be operating; he said the company could not afford not to have the aircraft operating; Mr Edwards said he agreed to start operating the aircraft before finance and that meant that he took over responsibility for the aircraft. He said in October when invoices were being processed he assumed that his company owned XGN in October 2003. He said SYT was in need of an overhaul but he assumed responsibility for SYT; he said with XGN there was an oral agreement to commence operating the aircraft as he would have stopped the purchase if there had not been such an agreement. He said with SYT there was an agreement with Mr Bleakley that lead to Mr Edwards arranging maintenance, repairs and certain refurbishments. He said if there was no such agreement he would not have proceeded with the sale. In relation to a maintenance bill totalling $18,682.00 to Air Ngukurr, Mr Edwards said that that work may have been conducted before August of 2003; Mr Edwards could not recall the precise nature of work done by the company SAE and precisely when it was done and levied on Air Ngukurr. He said certain work needed to be done before he took over operating the SYT or else he would not have been able to take over operating that aircraft. Of the invoices summarised in Exhibit P28 he agreed SYT did not operate until November or December of 2003; he said SYT needed to be brought “up to scratch” and that this was done by agreement with Mr Bleakley to get that aircraft operating and that it was done in good faith towards Air Ngukurr; he said Air Ngukurr were responsible for a variety of repairs after the agreement to sell the aircraft was made but this was done by further agreement so that the aircraft would be able to be operated prior to E. R. Air Services obtaining the finance.

27. Mr Edwards agreed that he prepared the operating leases concerning his own aircraft; he agreed he did not prepare the operating lease for Island Air Services. He agreed that in early 2004 there was a meeting between himself, Mr Brown and Mr Bleakley concerning cross hiring and the parties who were creditors for the cross hiring; Mr Edwards said there was a discussion about whether cross hire money would be used to “prop the company up” but that plan was not proceeded with as none of them agreed with it. He said Mr Brown and Mr Bleakley still had some liabilities. Mr Edwards agreed his claim was for the unexpired minimum flying period; he agreed that the starting point for the template of the agreement concerned the cross hire of an aircraft known as UBK signed on 16 March 2000 at Air Ngukurr; the minimum hours rate was 500; the period was 5 years and the agreement was kept at Air Ngukurr with the CEO in a file; it was agreed Mr Ron Lawford had prepared that document: (Exhibit 24). It was agreed the common seal was affixed. His attention was drawn to Exhibit 25 concerning an operating lease between E. R. Air Services and Air Ngukurr concerning the aircraft KSS that is for a 5 year period after the commencement date. Mr Edwards said that operating lease dated the 20th March 2002 was prepared for Mr Bleakley with the minimum hours of 360; the commencement date was the 5th May, it was for an aircraft VH-BIR and Ms Mott had initialled the agreement on behalf of Air Ngukurr.

28. Mr Edwards agreed Exhibit P5 concerning SYT had a minimum flying time of 600 hours and that lease was prepared by him; he agreed the commencement date is noted as 1 September 2004 but he said that must have been a misprint as the previous pages are dated 1 September 2003. On Exhibit P15, (the operating lease prepared for Mr Bleakley trading as Wimrays Safaris), he agreed that agreement was without a schedule but he said he witnessed that agreement. Mr Edwards said he would have prepared that agreement because by that stage he knew to print the agreements out; he said he would not have omitted the schedule and has not held that document in his possession. Mr Edwards was asked about what was termed a “common provision” with reference to Exhibit P15. It was pointed out that the minimum hiring time was 600 hours but that there was also some relief should the hirer be denied the opportunity to utilise the aircraft due to maintenance or other reasons: (clause 3(h)). Mr Edwards said that in some leases that provision was taken out because a lot of owners have maintenance agreements with the operators and the aircraft sits too long on the ground during those periods. In this regard P7, (also an aircraft cross-hired by Mr Bleakley) dated March 2002 with a minimum of 360 hours flying time provided a relief clause in clause 3(g):
“The Hirer shall make a written record of all periods exceeding two consecutive days during which the aircraft was not serviceable and available for flying. The Hirer shall note the number of days in each period, excluding the first two days in each period (here in after called excess days). The Hirer shall total the excess days in each year and the date of completion of each year shall be extended by the total excess days.”

29. It was pointed out to Mr Edwards that the operating leases concerning himself and E. R. Air Services did not include this relief clause. Mr Edwards said Mr Bleakley’s was printed off of the format. He said the hire rate influenced whether this clause was included or not. In relation to the leases concerning SYT and XGN, it was suggested to him that Andrew Robertson, (who appeared as one of the signatories), had faxed his resignation as a Director; Mr Edwards said he had no idea and that he had never seen Mr Robertson’s resignation. It was suggested to him that at no stage had Mr Bleakley as CEO been provided with a copy of the operating leases but Mr Edwards said he must have received it prior to the 1st September 2003.

30. Mr Edwards agreed it was part of Rosanna Edward’s function to keep the records and organise the cross hire of aircraft. Mr Edwards was referred to the cross hire records, in particular to the fact that XGN first appears as an aircraft recorded against E. R. Air Services in October 2003 and SYT appears in November 2003: (Exhibit 29). Mr Edwards was questioned on his knowledge of the pressure that Air Ngukurr was under in the 2003 to 2004 period and agreed that he was both an advisor to Air Ngukurr and had an administrative role; he agreed he was aware of the financial position, that the Directors were under pressure, that there was a letter from the Australian Tax Office concerning liability to pay PAYG and there were questions concerning underwriting the costs of the CASA inquiry that exceeded $150,000.00. Mr Edwards said he was aware of these matters although not the precise figures. In relation to the sum of $40,000.00 recorded in the minutes of Exhibit P18, Mr Edwards was asked if he was aware that there was no cash made available to distribute to creditors; he said he was not made aware of the amount that was paid to creditors; he said there was always an understanding of a contra of around $40,0000.00.

31. In relation to the invoices for the cross hiring of SYT and XGN, Mr Edwards was asked about the accounts being paid on a basis of daily invoices; he said that if Air Ngukurr didn’t pay on a daily basis the old debt would increase, hence the terms were essentially on cash terms. He said the accounts had been with the book-keeper; he said that if the arrears to E. R. Air Services were allowed to increase it would be difficult to keep operating as E. R. Air Services had its cash flow issues as well; he said the move to daily billing was brought about due to E. R. Air Services not being paid. Mr Edwards said that no one person could sign a cheque on behalf of Air Ngukurr; he said that the book-keeper, his wife Rosanna and Mr Bleakley could sign the cheques but one person could not. He was asked about electronic banking transfers of funds and he told the court the CEO maintains and checks those.

32. Mr Edwards was asked about a software package (“OSS”) for bookings that Air Ngukurr had arranged the development of; it was suggested to him that Air Ngukurr paid money to Mr Andrew Grey-Spence to develop the program and that the system ended up with Barrier Air Charter; Mr Edwards was asked if he provided a copy of OSS to Barrier Air Charter and replied “no”.

33. Mr Edwards was asked about maintenance carried out be SAE Engineering for work on SYT when Air Ngukurr was being billed as the customer; Mr Edwards said his company did not own SYT at that stage; he said E. R. Air Services had not taken over full ownership until they’d paid in December and pursuant to an oral agreement it was agreed certain maintenance would be covered by Air Ngukurr; Mr Edwards said he did not tell SAE he was the owner at that point. Mr Edwards reiterated that there was an oral agreement with Ms Mott before they started the purchase process that major maintenance would be completed by Air Ngukurr in particular, he said a “check 2” was required of one aircraft and a “check 4” was to be completed on also. He said this had been agreed with Ms Mott and later Mr Bleakley. He said after the major maintenance was completed, E. R. Air Services had no problems taking over the maintenance responsibility.

34. Mr Edwards agreed that at some stage after an incident he was involved in, (that lead to the CASA investigation), the Directors of Yugul Mangi were faced with the choice of continuing with Mr Bleakley or with himself. In relation to whether the Pilots (General Aviation) Award applied, Mr Edwards said he was always bound by that award initially as chief pilot and later as pilot. Mr Edwards was taken to Exhibit P12, (the letter from the Directors to Mr McQueen and Mr Bleakley confirming Mr Edwards was suspended on normal pay). Mr Edwards said he did not recall who gave it to him. The letter dated the 24th May 2004 concerning his conditions (Exhibit P11) was referred to Mr Edwards; he was asked whether he had forwarded it to Andrew Robertson and Mr Edwards replied he had forwarded it to Ngukurr; he said it was given to Mr Bleakley who had signed “that he had agreed with it” on the 31st of May; he disagreed that he had been informed by Mr Bleakley on the 30th of May that the letter was void. Mr Edwards agreed he had received the letter from Mr Bleakley (Exhibit P33) dated 26th August 2004 requiring him to take leave. Mr Edwards agreed that as CEO from September Mr Bleakley was responsible for looking after the interests of staff and associated matters; Mr Edwards qualified this saying that this was under the direction of the Directors. Mr Edwards denied suggestions that Mr Bleakley was not provided with copies of the contracts concerning XGN and SYT.

35. In re-examination Mr Edwards was asked whether at the meeting of the 10th September 2003 (minutes in Exhibit P18), he was asked any questions about his offer put in Exhibit P4 for the sale of the aircraft; he said Mr McQueen put the letter of offer to the Directors and nobody questioned him about it. In relation to the cost of maintenance of the new aircraft Mr Edwards said he had had negotiations with Ms Mott and later with the CEO who said he agreed with the terms; he said Mr Bleakley agreed with those terms as the maintenance was due and had been agreed by the previous CEO; he said his wife Roseanna was present during that conversation; he said the major maintenance had to be paid some time after the 10th September; he said SYT was not serviceable at that time in September but was serviceable in November. He said the minimum operating hours had been agreed by Mrs Mott originally and later by Mr Bleakley; he said Mr Bleakley’s agreement to 600 hours was on the proviso that he wanted his contracts to have the same provision; he said Mr Bleakley’s companies had some four aircraft chartered on the same terms and that Mr Bleakley had said that he wanted all his aircraft to have the same minimum flying hours; Mr Edwards said the first time he heard that there was any problem with the minimum flying provision was during the court proceedings. He said in relation to Exhibit P5 and P6 operating agreements that the “1st of September” date was not accurate as some things were still being negotiated, for example the date that E. R. Air Services were going to commence operations was still being negotiated. In relation to whether he had been terminated or suspended, Mr Edwards said he was asked to take leave in August 2004 but there was a futher meeting held with Mr Blacker and other officers of the defendant and it was agreed he would stay on normal pay; he said it was agreed that he would stay on normal pay during the investigation; he said he never took leave not withstanding the letter from Mr Bleakley as the meeting that occurred countermanded Mr Bleakley’s attempt to place him on leave; he said his pay was never docked and there was no negative or detrimental action taken.

Rosanna Edwards

36. In her evidence in chief Mrs Edwards confirmed she was a director of E. R. Air Services along with her husband and two sisters. She said she had been employed at Air Ngukurr from the 10th of May 1998; she said she had been operations manager since 2003 involving such duties as booking charters, overseeing certain office work and helping with the leasing and cross hire of aircraft.

37. She said she did not prepare the operating lease for SYT and XGN (Exhibit P5 and Exhibit P6); she said the commencement of the 1st of September 2003 was not correct; she said a number of negotiations had occurred between Ms Mott and Mr Edwards; that the new CEO Mr Bleakley took over in September 2003; she said he was not present for around six weeks but re-appeared after the 15th of September or thereabouts. She said there were discussions that she was present when Mr Bleakley discussed the hiring arrangements towards the end of September; she said Mr Bleakley asked her what the arrangements were for Hone Edwards and that Mr Bleakley was happy with those arrangements but said he “wanted the same for his planes”; that he had said he wanted the same rate and the same hours; she said Mr Bleakley had wanted the same conditions for the aircrafts BIR; XMI; and OEL.
38. In terms of Air Ngukurr covering the maintenance of the E. R. Air Services aircraft after the departure of Ms Mott, Mrs Edwards said Mr Bleakley had said words to the effect of “if that’s what Lynn’s agreed with”. Mrs Edwards said in relation to a number of payments made such as the $11,268.00, that she had asked the accounts person (Sarina Shailer) to check with “Noel” (Mr Bleakley). She said it was always understood that Air Ngukurr would be responsible for major maintenance and that there were particular discussions about this given it was in everybody’s knowledge that a “check 4” was coming up with one of the aircraft. Mrs Edwards denied that she had allocated work to other aircraft in preference to those owned by E. R. Air Services; she denied arranging payment of maintenance bills by Air Ngukurr that should have been paid by E. R. Air Services. She said once the operating leases were prepared they were shown to the CEO and sent to Ngukurr, initialled and signed off. She said the CEO was responsible for keeping the contracts and that the CEO had the seal and she did not affix the company seal herself to any leases.

39. In cross-examination Mrs Edwards agreed the “for work on XGN for October 2003” directed to Yugul Mangi Clan Development was authorised by Mrs Edwards; (Exhibit D37). She agreed she was responsible for allocating work to the various aircraft hired; she said that SYT was getting close to substantial maintenance work and that after it went to SAE for maintenance work it was available for private hire; she said the extent of the private hire was a matter that went through the chief pilot; she said the appropriate records would be with Air Ngukurr. She agreed that in October 2004 XGN was not hired for any period by Air Ngukurr: (see Exhibit 22); she could not explain why except to say that it could have been in maintenance; she said she could not say why it only had 21 hours work for the month before (September 2004 see Exhibit 29). She said the records at Air Ngukurr would explain that. Mrs Edwards said that in September 2003 there had not been final agreement concerning the sale and hire of the aircraft although there was agreement on price. At that stage the hourly rate and minimum hours had not been agreed. Mrs Edwards agreed that the operating leases concerning SYT and XGN did not have a relief clause. In relation to the low flying hours at times of some of the aircraft Mrs Edwards explained that not all aircraft are properly comparable. Mrs Edwards said she did not know where the company seal was kept but assumed that it was with “Noel” (Mr Bleakley). She said in earlier days there was a stamp and it changed to seals but she thought it was with Ms Mott at the offices of Air Ngukurr.

Noel John Bleakley

40. Mr Bleakley gave evidence on behalf of Yugul Mangi Clan Development as the CEO of Air Ngukurr; he confirmed that Air Ngukurr was owned by Yugul Mangi Clan Development P/L. He said he commenced with Air Ngukurr in December 2001 as a line pilot earning around $40 - $45,000.00 per annum; he said he brought two aircraft with him that were available for cross hire being aircraft known as XMI and OEL; he said there was never a hire agreement prepared for those two aircraft. He said he later acquired two aircraft known as BIR and SAQ; he said Ms Mott was CEO when he first worked at Air Ngukurr. Mr Bleakley identified the operational lease (Exhibit P7); he agreed this was for one of his aircraft (BIR); he said this was an agreement that commenced on the 5th of May 2002 for 12 months and there had not been a further agreement; he said this lease was prepared by Mr Edwards and the relief clause on the minimum hours was contained in paragraph 3(g). He said he acquired the aircraft SAQ at a later time. In relation to the operating lease concerning his aircraft “SAQ”: (Exhibit P15), he said he was familiar with that operating lease; he said he was given a template from Mr Edwards and it was produced by Mr Edwards; he said the relief clause was included in clause 3(h); he said the operating leases were dated the 24th of September 2003 but the aircraft didn’t go into service until December 2003. He said there was no schedule attached to that operating lease. He said no tax invoices were sent to Air Ngukurr when the aircraft was out of operation.

41. Mr Bleakley said he was a line pilot with Air Ngukurr until around July or August of 2003; he said he was approached by Mrs Mott to see if he would be CEO; he was asked to stand in on an acting capacity while she was away; he said he took on the responsibility as acting CEO while she was away; he said he went on leave in September 2003 but could not recall the dates; he said prior to becoming acting CEO he had been given some information concerning the sale of XGN and SYT and he knew the aircraft would be placed for sale but not necessarily to be sold to Mr Edwards; he said he did discuss the sale with Mr and Mrs Edwards sometime in July, August or September of 2003. In relation to the agreement for the sale of XGN and SYT (Exhibit P16) Mr Bleakley said he had not seen the agreement until after the court proceedings had begun. Similarly, in relation to the operating leases for SYT and XGN: (Exhibit 5 and 6), Mr Bleakley said he had not seen those until October 2004. He said Mr Blacker faxed him the copy on 13 October 2004.

42. Mr Bleakley said when he took over from Mrs Mott he also took over her desk and filing cabinet and following his appointment he familiarised himself with the office and went through the whole building looking for records and documents. He said the common seal was in a drawer in the CEO’s office and that he had been told by Mr Edwards that Mrs Mott had company seals; he said he had an open door policy as CEO; he said despite all of his searches he found no copies of operating leases. He said both Mr and Mrs Edwards and Sarina Shailer were employees of Air Ngukurr when he took over; he said Ms Shailer left in late 2004; he said he relied on the cross hire records for information concerning cross hire of various aircraft; he said he relied on monthly reports and other information given by Mrs Edwards; he said although he didn’t have regular reports from Ms Shailer concerning bank conciliations he did receive reports from her reasonably frequently; he said the records from the bank did not disclose records of invoices and the origin of invoices and the like. He said there was an ongoing connection between SAETAS and Air Ngukurr; he said there would be little indication from the records on whether invoices were for aircraft or maintenance or other matters. He said 85 – 90% of Air Ngukurr’s payments were paid by EFT and the rest paid by cheque; he said Ms Sarina Shailer had the password and connections to make these payments but he did not; he said Ms Edwards either had the access or was able to access through Ms Shailer. In relation to discussions concerning the sale of XYN or SYJ to E. R. Air Services and whether there was an agreement concerning maintenance, he said he was aware of the documentation contained in Exhibit P38 and presumes he would have had that document at some stage but he said he was not aware of any other discussions in relation to agreements for maintenance; he said none of the invoices for maintenance for XGN and SYT were brought to his attention for approval; he said he trusted Sarina Shailer. Mr Bleakley said he had no part in the Directors meeting of the 10th September 2003 and he was aware that confirmation of his employment was part of the discussion. He said at the time of his appointment as CEO he had an Air Operators Certificate. He said the relationship between himself and Mr Edwards deteriorated during 2004; probably from late 2004. He said that at the time of a Directors meeting in 2004 the Air Operators Certificate had two months to run. Mr Bleakley said he received confirmation from the Directors on or about the 2nd of September 2005 that they had trust and confidence in him and that he should do what he thought was correct. Because of the actions of CASA, Mr Bleakley said he was forced to suspend Mr Edward’s chief pilot duties which is why he gave him notice on the 26th of August 2004 requiring him to take annual leave or recreation leave. Mr Bleakley referred to this letter (Exhibit 33) reading as follows:

“Dear Hone, further to my advice to you on August 23, 2004, I confirm you are now on annual leave.
The information I have received from wage line is that I can insist that you take your annual leave under clause 23.3 in the pilots general aviation award.
Yours faithfully
Noel Bleakley”

43. Mr Bleakley was asked about the lease arrangement with the aircraft SAQ; he said it had the 600 hours minimum flying time; he said that that number of hours was needed so that finance could be arranged; he indicated it was a condition of borrowing money for the purchase of the aircraft to make it available for cross hire to Air Ngukurr. Mr Bleakley agreed that a conversation of some sort had taken place in relation to hourly rates and minimum terms of aircraft cross hired by himself to Air Ngukurr; while he acknowledged it took place, he said it was not as Ms Edwards had described; he said he wanted the hourly rate increased and he didn’t know the terms of SYT and XGN; he said there was no agreement that he made in relation to minimum hours with other aircraft. Mr Bleakley said he had never seen the employment agreement between Yugul Mangi Clan Development P/L and Mr Edwards (Exhibit P1). Mr Bleakley said he had not seen that document until these proceedings although during his searches of the offices he had not located it.

44. In relation to whether he agreed that Air Ngukurr would pay hire charges for XGN prior to ownership being transferred, he said he wasn’t aware that Air Ngukurr was making those payments.

45. In relation to the facsimile of records from SAE Air: (Exhibit 31) Mr Bleakley drew the court’s attention to the fact that the owner is listed as E. R. Air Services for the check 4 and check 2 and other work done on XGN in one instance and SYT in three other instances. The dates are variously from August through to December and although the owner is listed as E. R. Air Services, the customer is Yugul Mangi Clan Development. Mr Bleakley said that Exhibit P3 (the valuation of XGN and SYT by Mr MacLean) was not brought to his attention; he said he was not aware of it until legal proceedings had commenced in this matter. He said he was not aware either of the letter from Mr Edwards to Mr McQueen. Mr Bleakley said he was not aware of the operating lease between ER Services and Air Ngukurr concerning SYT: (Exhibit P5), nor was he aware of the operating lease between E. R. Air Services and Yugul Mangi concerning XGN: (Exhibit P6). Mr Bleakley said he was not aware of the MYOB record contained in these proceedings in Exhibit P2. Noting the transaction for the sale of the aircraft to E. R. Air Services; Mr Bleakley said he could not say the exact date but it was not until legal proceedings commenced that he became aware of that document. He said in relation to Exhibit P11, (the renegotiation of employment conditions of Mr Edwards and Mrs Edwards), that it had been shown to him by Mr and Mrs Edwards and he signed it as showing that he had cited it only; he said the other signatures were already there; he said he took it to a meeting and showed it to the meeting and explained it but he considered it to be null and void and he was to cancel it. He said that he had seen a letter of resignation of Andrew Robertson and he had shown that to Mr Edwards prior to the 24th of May.

46. In relation to a document of the 5th of March 2004: (D40) Mr Bleakley agreed that this document indicated his presence at a meeting on that date and a note stating “Noel spoke of position of company” and later a line saying “Hone spoke of his wages and Roseanna. An agreement reached and condition to be written and signed”. Mr Bleakley said he was possibly there but he couldn’t recall. In Relation to a note of minutes of the 19th of May 2004 indicating an entry “Hone conditions” Mr Bleakley said that what was discussed he could not agree with and he opposed the conditions being sought. His understanding was there would be further consideration of the matter.

47. In cross examination Mr Bleakley was referred to Exhibit P11, the letter signed by a number of the Directors and Mr and Mrs Edwards concerning their employment conditions; Mr Bleakley said their conditions were discussed but were not agreed to; he said Andrew Robertson was not a Director; he said the only reason he signed it was to reflect receipt. He said there was a subsequent meeting around May 2004; Mr Bleakley said he had no notes. A call was made during these proceedings for the records of that meeting but they were not produced.

48. Mr Bleakley agreed as chief executive officer he was responsible for the day to day operation of Air Ngukurr and had responsibility for various payments and sub-contractors as well as hiring and firing. He said the Directors would oversee the policy and major acquisitions. He agreed the responsibility for determining the liquidity or profitability of the company rested with him; he acknowledge that he was not aware of the sale and terms of the sale of the aircraft until these proceedings commenced but he acknowledged he knew the sale was going on; he said that all the negotiations were done before he was involved. He agreed that he knew on or about September 2004 that the company was struggling financially and it was intended it would be relieved of about $200,000.00 of debt; he said he didn’t at that time make enquiry about the sale of the airlcraft and did not discuss the agreement concerning the cross hire with Mr and Mrs Edwards.

49. Mr Bleakley was taken through a number of the leases already mentioned in the evidence and said that he was not aware of the terms of them; he said the only leases he’d seen were BIR and SAQ. In relation to the operating leases: (Exhibit P5 and P6 – SYT and XGN), he said he saw those leases in about October 2004 and considered buying the aircraft back. He said he obtained those leases from Mr Blacker, (the accountant), but he did not know where Mr Blacker obtained them from; he offered, although it is obviously hearsay that they had been provided by Mr and Mrs Edwards. He said he did not have discussions with Mr McQueen about these matters as he (Mr Bleakley) was too involved in other legal matters. Of the letter of 1st of December 2003 concerning Air Ngukurr’s alleged obligations to repair XGN: (Exhibit P38, 1st December 2003), he said he saw that letter at a much later date, although he acknowledged that he subsequently learnt of the amount being contra’d from Mrs Mott. Mr Bleakley reiterated he never had any details of the contract of sale of the aircraft dated 1st December 2003: (Exhibit P16); he said he had no indications of the details of other documents related to that.

50. In relation to the disputed wages Mr Bleakley told the court Mr Edwards had already been given his holiday pay and that by having Mr Edwards stood down or being put on leave Mr Bleakley said he was doing what was in the best interests of the company. He said the various records produced were not a true reflection of the annual leave taken.

51. In relation to the hire agreements Mr Bleakley said he wasn’t present when they were drawn up; they were onerous and unconscionable and the terms were not true; he said that all contracts with guaranteed minimum clauses have relief clauses; he acknowledged that the minimum flying time clauses vary between contracts but that without a relief clause the minimum hours could be abused; he said he would never have agreed to a contract providing for minimum hours without a relief clause. He said of the operating leases: (Exhibit P5 and P6) that when he saw them in October 2004 they were signed by the directors and possessed the company seal; he said he didn’t know anything about how the company seal was fixed. He said in relation to Exhibit P15, (the operating lease concerning his own aircraft SAQ), that it was signed by the Directors including Andrew Robertson and sealed and he did not know who had sealed it; he said that Air Ngukurr haven’t acted in accordance with the lease and he was not being paid under that lease however he agreed that he may be able to claim under it. In relation to the operating leases concerning Mr Edwards or concerning E. R. Air Services aircraft, he said that up to the point of proceedings, both parties had complied with the leases. In relation to SGY and XGN Mr Bleakley said he had learnt of the hourly rates from the records of cross hire that have become Exhibit P29 in these proceedings; he thinks he found out about the rates in October 2003 or later. He agreed that the operating lease concerning his aircraft in Exhibit P15 resembled the leases concerning XGN and SGY; Mr Bleakley said he needed the 600 hour guarantee for his own aircraft in order to arrange finance; he said he asked Mr Edwards to prepare the lease as he wanted to be at arms length; he said it was Mr Edward’s responsibility to draw up the leases; he said Mr Edwards had drawn up previous leases and because at the time of having his own lease drawn up he was not officially appointed he thought he was in an invidious position; he agreed that previously the rate for hire of his aircraft had been improved by $25.00 per hour; he said the Directors trusted and relied on him to do the best thing for the business; he agreed there had been increases in rates for the aircraft OEL and XMI from around July 2003; he said Mr Edwards aircraft were around $160.00 per hour; he said he advised Mr Edwards to increase the rate; he said his failure to look at all the leases is probably explained by the fact that he was distracted by other monumental legal problems on behalf Air Ngukurr. Mr Bleakley said he believed that losses were sustained by Air Ngukurr through not having the relief clause.

52. Mr Bleakley agreed he knew nothing about the sale because he was not present; it was pointed out to him that the third party notice says of Mr Edwards at 13(e): “knew or ought to have known at the date of executing the operating leases that no meeting of Directors had been held to authorise the fixing of the seal of the defendant to the operating lease”. He agreed that all parties had a responsibility concerning these procedures; he agreed that there were a number of leases not just the two that were the subject of these proceedings. In relation to 13(f): “fail to bring to the attention of Directors who executed the documents the terms of similar operating leases to which the defendant was a party”. Mr Bleakley accepted that that was also the responsibility of the CEO; he said that Mr Edwards should have also advised the Directors. He was asked about 13(g): “fail to seek the approval of or bring the contents of the operating leases to the attention of the CEO of the defendant until approximately 12 months after the purported execution of them and following notification to Edwards of the termination of his employment by the defendant” Mr Bleakley agreed that he did obtain these from Mr Blacker but said had they been given to him he would never have let it proceed under the terms and conditions of the lease. Under 13(h): “failing to disclose to the CEO the obligation of the defendant to pay for 600 hours for each aircraft in each year without deduction and whether the aircraft were allocated work or not”; Mr Bleakley reiterated that there should have been relief. Mr Bleakley said he was not aware personally of any other evidence of valuation of the subject aircraft.

53. In re-examination he was asked about the “monumental legal proceedings” that he had referred to; he answered that this concerned CASA against the company, Mrs Mott and Mr Edwards. CASA placed the company under a show cause “threat” on why the AOC should be cancelled; that there were allegations against Mr Edwards and according to CASA Mr Edwards was to have nothing to do with the company. He said in relation to his hourly rate it had been agreed previously by Ms Mott when he was a line pilot and there was an agreement made in relation to BIR. He said that Mr Brown had requested an increase in rates from aircraft he cross hired and he did allow increases in hourly rates including SAQ as “Island Air” could not operate at the earlier rate; he said in relation to SAQ there were no outstanding claims against Air Ngukurr and he had no intention to pursue those claims; he said throughout 2003 and 2004 Air Ngukurr owed significant amounts of money to his company around $250,000.00; he said there was still around $200,000.00 owing; he said he has not taken action as it is in the best interest of the company to help keep it operating. He said at the time of the SAQ lease his only experience with leases of that type was the experience with BIR and he said he had nothing to do with the preparation.

Marjorie Hall

54. Ms Marjorie Hall told the court she and her husband William had been involved with Air Ngukurr from the start; she said she was involved from the start when members of the Community spoke about wanting their own airline; she said she spoke with Sarina and Lyn (Mott) for an airline for the Community benefit; she said Hone Edwards was not employed as a pilot at the time. Ms Hall said she told Ms Mott she wanted Hone Edwards to be employed as a pilot which may have been around 1996 to 1998. She said she continued as a Director and there was a large groups that were working by themselves; she said Ms Mott had other people join in such as Walter Rogers and the Robertsons, she and her husband and she mentioned that “Ishmael” was involved as a share holder.

55. Ms Hall said in 2003 she was aware of the difficulties between Air Ngukurr and CASA; there was a meeting and there was a “legal thing” or “legal problem”; and she said there was talking to CASA, talking to Mr McQueen and that CASA “took Hone in” after there had been a talk with Noel. She remembered there had been a sale document concerning the sale of XGN and SYT and the purpose of the sale was to make money for the company and that profit would come back to the company; she said there was a meeting in mid 2003. She said there was a meeting held in September 2003 of Directors, Hone Edwards was present as was Mr Blacker; she said an agreement had been sent to Ngukurr but she did not remember an agreement between Air Ngukurr and E. R. Air Services; she said she may have signed such an agreement but could not remember; she said it may have been faxed and she knows she signed a few agreements. She said agreements were sent to them at Ngukurr from time to time; sometimes they would sign them, some times they wouldn’t and sometimes she didn’t get an explanation of the documents. She said there were meetings about XGN and SYT with Hone Edwards and there were discussions about conditions after September 2003 and that was when everybody was at Air Ngukurr in Darwin. She said Ms Lyn Mott continued until August 2003 but she couldn’t remember when Ms Mott resigned. In cross-examination Ms Hall was shown Exhibit P11 being the memorandum concerning Mr Edwards conditions dated the 24th of May. She said it was her signature at the bottom but she had been hassled by Mr Robertson to sign it and hassled by other Directors. She said she could see it but she couldn’t understand it. She couldn’t remember if she discussed later with Mr Bleakley about changing that memorandum.

William Hall

56. Mr Hall said he resided at Ngukurr and had been a Director of Yugul Mangi Development P/L since it first started until the present; he said he was present for discussions in July, August and September of 2003 with the Directors and Ms Mott concerning two aircraft; he said monies had been borrowed and the company wanted to sell the aircraft off. He said he had been at a meeting on the 10th of September 2003 but did not see Exhibit P16 (the agreement for the sale of SYT and XGN). He said in relation to a meeting concerning Mr Edward’s and Mrs Edward’s conditions of the 19th of May, Mr Bleakley and Mr Edwards were present; he said they wanted more money and the Directors couldn’t give them money and no agreement was reached. He agreed his signature was on P11 and agreed he was given that paper but he said he wasn’t told what it was for; he said Mr Robertson gave it to him. In cross-examination Mr Hall was asked if he had the recollection of another meeting about it and he said he did not.

Consideration of the “Leave Allowances Claim” (file 20426607)

57. I have not set out the contents of Exhibit P2 in the reasons thus far, essentially they incorporate the pay roll advice in significant detail from 24 August 2000 to 11 November 2004. It does not incorporate the earlier period from 1998 when the plaintiff was employed by the defendant. Those records are generally consistent with the employment agreement received into evidence as Exhibit P1. Ms Mott who was the CEO at the relevant time told the court that Exhibit P1 represented the employment agreement. It is noted that that agreement is not signed but it is clear from Ms Mott’s evidence that the document represented the basic terms on which Mr Edwards was employed. It is true that he was employed in the position of “Chief Pilot” and that during or after the CASA action, he was no longer able to work as a “Chief Pilot”, but there is no evidence from the payroll records contained in Exhibit P2 of there being any change of the base salary or associated entitlements. There has not been a contrary set of records placed before the court. The records tendered by the plaintiff in support of this claim, I would have thought would have been in the possession of the defendant. There has been no dispute that the form of the agreement before the court confirms the nature of the agreement between Mr Edwards and the defendant and the substance of the relationship in terms of the wages and conditions are confirmed in the defendant’s records before the court as Exhibit P2. Further, before the court is Exhibit P9 a document of Sarina Shailer of Air Ngukurr setting out Mr Edward’s annual leave and recreation leave. Those documents all appear to be consistent with the calculations put on behalf of the plaintiff to the defendant in correspondence before the court and as contained in the particulars of the claim.

58. The defendant in part relies on Mr Bleakley’s letter of 26th of August 2004 (Exhibit P33) where he “confirms” that Mr Edwards is on annual leave from August the 23rd of 2004. It is clear from the evidence that Mr Edwards continued working from then until the cessation of employment on the 24th November 2004. I accept that it had been necessary to re-arrange Mr Edward’s duties in light of the CASA investigation which has been something of a shadow over these proceedings. I note that I am simply aware of those proceedings as the backdrop or context of some of the factual matters that have brought this action before the court, but I am not aware in these proceedings as to the full extent of the actions of CASA. I accept however Mr Bleakley’s evidence that he felt compelled by CASA to take appropriate action against Mr Edwards so that Air Ngukurr’s ability to operate would not be jeopardised. Mr Bleakley may have directed Mr Edwards to take annual leave but that is not what in fact occurred. In any event, the actions of the Directors at the meeting of 31 August 2004: (Exhibit D41) is consistent with the plaintiff’s case that the Directors countermanded any direction given by Mr Bleakley on that point. That meeting considered issues concerning Mr Bleakley and Mr Edwards and the issues concerning CASA. I note that at that meeting (which was adjourned over to the 1st September 2004 initially) the Directors resolved unanimously “that the CEO be directed to take no action terminating Hone’s employment until a further meeting of Directors is held on or before 30 September”. Of further relevance is another resolution at the same time “that until the investigations are complete no other changes be made to staff numbers or levels.” In my view this all supports the plaintiff’s contention that he continued to work as an adviser and in administration and there is no evidence that his conditions were adversely effected. Further, it is clear from Exhibit P11: (the memorandum to Directors of the 24th May 2004) that there had previously been negotiations concerning Mr Edwards’ employment that left his base salary the same with certain variations concerning fuel card, loss of vehicle, and loss of airfares, and that any terminations or changes to that employment could only be done through the Directors. This was the document signed by the Directors and also signed by Mr Bleakley. I accept Mr Bleakley’s evidence that he did not sign that document signifying agreement but rather that he had cited it, however it is more probable than not that if he disagreed with those conditions, as the new CEO, he would have taken some action with the Directors with respect to it. I note the evidence of Mr Bleakley that he discussed the matter with Directors and the substance of that memo was all changed, however, I note that neither Marjorie Hall or William Hall acknowledged such a discussion. I note also their uncertainty on what all of that discussion contained in Exhibit P11 was about. I have come to the conclusion however that the probabilities favour the view submitted by the plaintiff, namely that he was not on leave for the last three months of his employment and that his employment conditions are properly reflected in the records that I have referred to. To hold that he was on leave during that period would be completely contrary to the facts of the matter.

59. I note the defendant’s submission to the effect that from the 25th of January 2002 the plaintiff was unable to perform duties as Chief Pilot and from 31 October 2003 the plaintiff was no longer able to perform Managerial duties as a result of the investigation by CASA. I note that the defendant submits that the plaintiff has been paid an income well in excess of award entitlements of an employed line pilot. In my view that is no basis on which to reject the plaintiff’s claim. He was clearly working in alternative duties and no renegotiation of his wages and entitlements are before the court. The records indicate continuous employment on similar terms.

60. In relation to leave loading, I accept there is no entitlement provided for in the contract however this is a statutory entitlement in the Northern Territory. It has not been submitted that the defendant is in a category of persons who are excluded from the Annual Leave Act (NT): (see section 4 and the categories of employees who are excluded). There has been some discussion about the application or otherwise of the “Pilots (General Aviation) Award”, however I note that neither party has suggested this award potentially ousts the plaintiff under section 4(c). It is necessary to make a finding on whether the “Pilots (General Aviation) Award” applied at the relevant time because section 4(1)(c) of the Annual Leave Act reads:

“(1) This Act applies to all employees employed in the Territory other than –

(c) an employee in respect of whom an employment award makes provision for annual leave.”

61. Mr Edwards believes he is covered by the Award. The Award was not produced to the court during the hearing of this matter. A copy of the Award retrieved by the court indicates it was not initially general coverage, but only those employers or operators named in Appendix A were bound: (see Clause 6). On my reading of Appendix A, neither “Yugul Mangi Clan Development Pty Ltd”, nor “Air Ngukurr” were included. The Award was declared “Common Rule” to operate from midnight 24th March 2004: (See Declaration, Commissioner Eames, Australian Industrial Relations Commission, 31 March 2004) and clearly covered operators in the Northern Territory. What I was not told during the hearing was whether the Defendant had succeeded another party to the Award or whether there had been a Roping In Award at any stage to make the Defendant a party. That documentation is simply not before me. (I have found references to Roping-in Award No. 1 of 1999 but the Defendant is not included).

62. Assuming that there was no award coverage dealing with annual leave prior to 24 March 2004, clearly, Mr Edwards is not excluded from the Annual Leave Act.

63. Section 9 of the Annual Leave Act is clear: “An employee shall be paid by the employee, before the employee goes on annual leave (including leave taken under section 12 subsection 2), an amount equal to the pay (at the employees ordinary rate) for the period of annual leave together with an amount equal to 17.5% of that pay".

64. The structure of the Annual Leave Act rests on leave being accrued. This is the obvious assumption underlying ss10, 11, 13 and note the reference to the obligation on employers to keep records of “accrued annual leave credit” in s16. The fact that the contract of employment made no reference to leave loading or accrual does not affect rights under the Annual Leave Act: s18. The contract does not require leave to be lost if it is not used within one year. It remains an entitlement.

65. After the Common Rule Declaration, provision s4(1)(c) Annual Leave Act operates so that the plaintiff is not covered by that Act because the Award “makes provision for annual leave”. Recreation leave is dealt with at clause 23, including a loading of 17.5 percent for recreation leave. Further, the Award provides for payment of untaken leave entitlements: “That have fallen due in relation to any completed years of service…..and the loading specified”.
66. In conclusion, where the Award does not cover the time period, the Act covers it in precisely the same way. I note the defendant’s office records that are before the court in these proceedings reflect leave loading at 17.5 percent and accrual. I reject the argument, I believe was faintly put, that the claim must fail because the entitlements were not paid before leave was taken. The leave remains an entitlement.

67. There will be judgement in favour of the plaintiff for entitlements in the sum of $36,460.39. I will award interest for the period of 22 November 2004 up until the court received the written submission of the Defendant (21 November 2005). I calculate interest at $3,817.99 (calculated at 10.5%). I will decline to award any amount for superannuation as liability for that will be determined by regulation external to this proceeding.
E. R. Air Services Pty Ltd v Yugul Mangi Clan Development P/L and third party claim against Mr Edwards – Claim Number 20426309

68. This claim concerns the amounts allegedly outstanding that have become due and owing as a result of the alleged breach of the minimum hiring clauses concerning XGN and SYT. The amount alleged for XGN is 163 hours at $250.00 per hour totalling $40,750.00 and for SYT a shortfall of 49.3 hours at $160.00 per hour totalling $7,888.00 which together plus GST brings the matter to a total of $53,501.80. The details of all cross hire arrangements that cover a number of aircraft owned variously by the plaintiff company, Mr Bleakley’s companies and other aircraft owner operators are set out in detail in Exhibit P29.

69. The defence filed “admits that it leased aircraft from the plaintiff at a rate of $250.00 per hour when the aircraft was available for flying but denies that lease agreements were entered into by the plaintiff on the date as alleged or for the term alleged”, or otherwise, the defence sets our a denial of each particular of the claim. I see it as some what inconsistent that the defendant does not take issue with the hire rates and does not take issue with other aspects of the operating lease, but takes issue with the minimum guarantees. There is dispute about the dates on which those leases were signed and became operative. On the face of them the agreements state the 1st of September 2003, however the cross hire records (Exhibit P29) indicate that XGN became operational and available for cross hire from October 2003 and SYT from November 2003; further, the records concerning invoicing and payment reflect that the leases commenced from the 1st October 2003 to the 30th September 2004 in terms of XGN and from the 1st November 2003 to the 31st October 2004 in terms of SYT. The documents and records surrounding the operating leases including the actual evidence of the practice of cross hiring favours the plaintiff’s claim and in my view the outstanding hours should be calculated on that basis. It is difficult to accept the position put on behalf of the defendant that only parts of these agreements operated. I was surprised myself at the minimum hours guarantees, but having now heard the evidence and seen the documentation concerning the broad extent of cross hiring in this part of the aviation industry, I am no longer surprised by it. The defence case does not go as far as to suggest the leases are invalid. There can be no doubt from the evidence and the documents that cross-hiring of the plaintiff’s aircraft had occurred for one year.

70. The real question is whether these operating leases should be enforceable to their full extent and if so whether any liability to E. R. Air Services ought to be offset against Mr Edwards. This revolves around the issues raised by the third party notice. These issues involve whether Mr Edwards as an employee of Yugul Mangi was subject to a fiduciary duty, a duty of fidelity and disclosure and whether he breached those duties.

71. Clearly as a matter of principle, the employment relationship is considered fiduciary in nature: (Breen v Williams (1996) 186 CLR 71 at 92,107; Concut Pty Ltd v Worrell (2000) 75ALJR 312). It is important however that the particular employment relationship be put in its appropriate context. Generally speaking, a senior manager would be expected to accept a high standard of loyalty in return for the seniority of their position: (Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373). In relation to contractual relationships of which employment contracts are but one example, it is doubtful every employee must always put the interests of the employer above their own. The very formation of the employment contract requires the employee to promote their own interests. As with all contracting, as Paul Finn has observed in “Contract and the fiduciary principle” 12 UNSW Law Journal 76, contracting “is at once a selfish and a cooperative endeavour”. Although I of course accept that many courts have pronounced that the employment relationship is “fiduciary” in nature, as with any contractual relationship, it is not fiduciary in the sense of the more traditional orthodox fiduciary relationships recognized by law. Paul Finn attempts to isolate characteristics common to fiduciary relationships as: first, the capacity one party has to effect the interests of the other and the corresponding vulnerability of the other and second, the reliance one party has upon the other because of the trust or confidence reposed in or because of the influence or ascendancy endured by that other: (Finn at 85). Finn also makes the point that rarely do contracting parties deal with each other from positions of actual equality and that to some extent inequality is an endemic feature of contracting: (Finn at 86). I accept that chief executive officers and senior managers are in a classic fiduciary position, however there are obviously some limitations on the application of the doctrine in the employment setting. In many respects the fiduciary aspect of the employee’s relationship might be regarded as arising from the obligation of faithful service readily implied into employment contracts. Even on this approach there are still a number of grey areas concerning a person working for a competing firm or “moonlighting”. (See generally the discussion in Creighton and Stewart, “Labour Law”, Chapter 13) That is not the allegation here. As a chief pilot, pilot, manager and administrator, as well as being conversant with the setting up of Air Ngukurr, Mr Edwards had a duty or obligation to serve Air Ngukurr faithfully, such an obligation includes not operating a business which competes with the employee: Daily Cleaning Service v Pavlovic(1992)34 AILR 359, however that is not the allegation here. Broadly speaking the allegation here involves allegations of Mr Edwards or E. R. Air Services gaining certain advantages to the detriment of the employer.

72. Bearing those general principles in mind and reminding myself of the context of the employment relationship and various capacities that Mr Edwards acted in, Mr Edwards was subject to fiduciary duties consistent with his obligation to serve Air Ngukurr faithfully. Those duties included disclosure of contrary interests and not to act to the detriment of Air Ngukurr or to damage Air Ngukurr in anyway. He also had a duty not to place his own business interest above Air Ngukurr’s to the disadvantage of Air Ngukurr. These duties do not extend to prohibit Mr Edwards from operating E. R. Air Services. He was involved openly in that company for sometime. The context of the particular employment setting allows, even CEO’s to operate their own ventures.

73. I do not find there was anything sinister or contrary or detrimental to the employment relationship or the defendant by virtue of Mr Edwards obtaining the quotations for the sale of the aircraft and negotiating the sale for the aircraft. There was no other evidence before the court as to the value of those aircraft and Ms Mott’s evidence was clear that she, as CEO at the time was involved in the sale. Nothing has been put forward to suggest that there was anything sinister in Mr McLean’s valuation; nothing has been put forward to suggest that Mr Edward’s suggested price was flawed; there is supportive evidence from Ms Mott concerning the need to take into account the fact that the aircraft had been used for a number of months since the valuation. There is simply no evidence before the court to show that the sale of the aircraft to Mr Edwards was to Air Ngukurr’s detriment or in breach of Mr Edwards fiduciary duty. Arguably, the sale relieved Air Ngukurr of the responsibility of the aircraft and although it may not have improved the cash flow of Air Ngukurr as some of the Directors and the CEO believed, that in my view cannot be seen to be attributable to any breach of fiduciary duty and disclosure on the part of Mr Edwards. It must have been clear to everyone he was negotiating on his own behalf. I bear in mind taking account of Mr and Ms Hall’s evidence, that they and the other Directors appear to be indigenous persons whose first language is not English. The evidence before me still indicates that those Directors were appropriately advised with a lawyer present, input from Ms Mott at various stages and also the input of an accountant. There is no evidence before the court that Air Ngukurr sought to advertise the availability of the aircraft for sale, nor is it alleged that Mr Edwards did anything to stop that process occurring. There have also been suggestions that Mr Edwards knew or ought to have known of the resignation of a Director that he seemed to have some association with, (Mr Andrew Robertson) however Mr Edwards said Mr Robertson was always threatening to resign and in any event at the relevant time Mr Robertson was listed as a Director according to the ASIC company extract before the court: (Exhibit P8). Although Mr Edwards was an employee and was in an advisory role, in my view the negotiation of the sale has been conducted in an open manner and the fact that Mr Edwards is perceived to benefit for himself in buying the aircraft does not mean he is in breach of his obligation to serve his employer faithfully nor does it breach the fiduciary aspects of that particular relationship in this context.

74. Although initially I was somewhat sceptical about the issue of cross hiring of aircraft back to Air Ngukurr, from the evidence before me it is clear that a number of parties were cross hiring at very similar rates to Air Ngukurr. Mr Edward’s company was not the only company cross hiring. As well as other companies, the CEO’s own company was cross hiring to Air Ngukurr. In my view in the context of the commercial arrangements Air Ngukurr had with various pilots and air operators, it is not a breach of the employment contract including the obligation to serve faithfully to cross hire aircraft back to Air Ngukurr. Clearly, there was demand for the aircraft. Although I was sceptical initially of the arrangements concerning maintenance repairs of the aircraft between the initial operating date and the payment for the aircraft being covered by Air Ngukurr, there is evidence that I accept from the plaintiff’s case that it was agreed that the various scheduled checks and earlier repairs would be paid. The documentary evidence seems to support this, in particular the dates for various repairs being undertaken. I note also that the costs for those repairs were primarily, (not solely), but primarily processed by Ms Shailer. Mr Edwards is adamant he would not have agreed to even purchase the aircraft, (prior to hearing this case I was unaware of the costs associated with operating small aircraft), unless appropriate arrangements for those costs could be made. Mr Edwards gave evidence of discussions with Mr Bleakley about this. It is difficult with events occurring and conversations occurring two or three years ago and although I have no doubt Mr Bleakley honestly believed that what he was saying to the court was true, there is a real problem with his recall, he eluded to the fact throughout his evidence that he was distracted with other larger issues at Air Ngukurr at the time and I certainly had the impression that the work environment and the environment of the company was somewhat chaotic. Generally, where the evidence between Mr Bleakley and Mr Edwards conflicts I prefer the evidence of Mr Edwards. I note that evidence of certain of the conversation of Mr Edwards is confirmed or supported by Mrs Edwards. Mrs Edwards didn’t strike me as simply tailoring her evidence to suit her husband, in fact on some of the detail of the alleged conversations with Mr Bleakley she relayed to the court was at some but not significant variance from Mr Edward’s evidence. Further, the documentation concerning purchase of the aircraft, the repairs and maintenance and invoicing tends to support Mr Edwards case. Even though I am mindful that in this situation where the administration of a company may be chaotic, there is a greater need for all involved to take particular care, in most respects I do not regard the actions of Mr Edwards to be in breach of a fiduciary duty towards the defendant in the context of the particular employment situation he was in. I formally reject the allegations in paragraph 9 of the Third Party notice. Clearly the documentation went to the CEO and Directors. The sale could hardly take place without their knowledge. The CEO could have attended to these matters.

75. Save for one matter, I make similar findings in relation to the operating leases. Although prepared by Mr Edwards, it must be remembered that his duties were that he generally prepared the operating leases. Ms Mott seemed to be aware of the operating leases and given the number of cross hire leases that were being managed by Air Ngukurr, everyone in the organisation from Directors to the CEO to other employees were obviously used to dealing with such operating leases. As has been noted in the summary of evidence, the CEO himself, Mr Bleakley had cross hire arrangements with Air Ngukurr. Mr Edwards had other aircraft that he had previously cross hired to Air Ngukurr. It is therefore surprising to me that the breach of fiduciary duty is raised in respect of these two leases.

76. With one exception, these were very standard leases. There is an issue about the minimum hiring hours being 600 hours but in my view given all of the evidence about how the minimum hiring hours clause was raised in a number of operating leases including a lease concerning Mr Bleakley’s aircraft, it is hardly surprising in the context of a standard form operating lease that there would be this number of hours. There is also the evidence of Mrs Edwards that Mr Bleakley did approve of the number of operating hours provided he had the same provision for his aircraft. Mr Bleakley gave evidence that he needed the 600 hours minimum guarantee as he would have been unable to obtain finance to purchase the aircraft without it. He also told the court he would not enforce the clause. In my view that is a matter of choice for him. It does not detract from the point that this was a common clause that he was aware of. Given the context of the company, the employment relationship and the, (save for one aspect), standard form nature of the agreement, even accepting Mr Edwards was advising and may have been in a managerial capacity for some of his duties, it was not a breach of his fiduciary duty to conclude theses contracts with the minimum hire hours. The evidence indicates that even if Mr Bleakley did not see these leases, Mr Blacker at least had them.

77. In my view the plaintiff has proven that the lease for XGN ran from the 1st October 2003 to the 30th September 2004 and the lease for SYT ran from the 1st November 2003 to 31st October 2004. It must be remembered that these are “operating leases” that regulate the terms of hire. The aircraft were clearly being operated by E. R. Air Services, even if the finance had not been finally approved. It is not the point as submitted on behalf of the defendant that it is impossible to lease from oneself. These leases were about the rights and obligations concerning operating.

78. In relation to the allegations against Mr Edwards and E. R. Air Services concerning documents not being in the CEO’s office or the company seal not being readily available, that is not a state of affairs that can be attributed to Mr Edwards, (although that may have been the intention in raising that evidence). In any event, there is no evidence I can draw upon to conclude that Mr Edwards was concealing documents or had done something with the seal. I reject that assertion.

79. In my view there is one area where the duty on Mr Edwards to serve his employer faithfully has been breached and that is the failure, without adequate disclosure to include what has been known in these proceedings as the “relief clause”. On that point I am not satisfied that there is an appropriate explanation accounting for why such a clause was not in the agreement. Mr Edwards did make reference to the hourly rate however in my view that is not sufficient. Even though I am prepared to draw the inference on balance of probabilities that Mr Bleakley and the entity of Yugul Mangi were aware of the leases, and would have been aware of the standard clauses, I do not believe they were aware of the exclusion of the “relief” clause. What I intend to do is to calculate an adjustment where it appears that XGN was not available for flying as in that situation the full extent of the minimum hours should not be enforced.

80. There has been an allegation made that work was not allocated the XGN and SYT in preference to other ERA aircraft: (third party notice, paragraph 13(i)). In my view there was no evidence of that. There are irregular patterns of cross hiring but there’s no pattern that comes close to bearing that allegation out. Essentially I dismiss the third party claim save for the failure to disclose the lack of a relief clause for which I make adjustment to the amount awarded to the plaintiff. In any event, if any of the matters pleaded in the defence or third party notice had been made out, there is no evidence as to loss or damage. Even if loss or damage is not the appropriate relief, save for the “relief” clause, in all other respects, the contract is enforceable.

81. Reasons will be forwarded to the parties today.

82. I will list this matter on 22nd day of March at 9:30am where I will make the following orders:
Orders: File 20426607
Judgement for the plaintiff
in the sum of : $36,460.39
Interest $ 3817.99

TOTAL $40,278.38

Order: File 20426309
Judgement for the plaintiff
In the sum of

Being
XGN – reduced from the claimed 163 to
123 hours based on approximately 40
hours average per month @ $250 per
hour. XGN unavailable for one month $30,750.00

SYT – 49.3 hours claimed, (although there
May be more hours according to Ex 29) $7,888.00

Subtotal $38,638.00
GST $ 3863.80

TOTAL $42,501.80

83. I decline to order interest on this claim as unlike file 20426607, this claim is not associated with wage entitlements and I am unaware as to any detriment through not having earlier access to the sum claimed. I dismiss the third party notice save for part of paragraph 13(h) concerning the relief clause.
84. I request the parties confer concerning costs and I will hear any application on 22 March concerning costs.

Dated this 17th day of March 2006.

_________________________
Jenny Blokland
STIPENDIARY MAGISTRATE

Note to Judgement
The following orders were made by the Court on 22 March 2006:
1. The Court noted the reasons were published and forwarded to the parties on 17 March 2006.
2. On 20 March 2006 a letter from the receivers for the Defendant was filed.
3. These proceedings are now stayed unless or until notification is received that the receiver consents to the action proceeding or leave is granted by the appropriate court.
4. Vacate the date of 22 March 2006.