Australia: New decision applies Civil Aviation Carriers Liability Act to aerial work operations

Endeavour Energy v Precision Helicopters Pty Ltd [2015] NSWCA 169

In reversing the Supreme Court decision and finding that the Civil Aviation (Carriers' Liability) Act 1967 (NSW) (the Act) applied to this carriage, the Court of Appeal has construed the application of the Act in a way that seems strained and inconsistent with the intention of the carriers' liability scheme it seeks to implement.

The facts

Precision Helicopters contracted with Endeavour Energy to supply one of their helicopters and a pilot to carry out low level aerial inspections of Endeavour's power lines. The contract provided that the inspection flights would carry two Endeavour employees, one to act as inspector and the other to act as observer. During the flight, the helicopter struck a power line and although the pilot was able to land the aircraft, it rolled over causing the main rotor blade to hit the cabin and the observer's head. Mr Edwards suffered a critical head injury but survived.

Mr Edwards received a damages award of $16 million. Precision Helicopters argued that the Act applied and limited its liability to $500,000. In question was s 4 of the Act, which provided:

"The carriage to which this Act applies is the carriage of a passenger where the passenger is or is to be carried in an aircraft being operated by the holder of an airline licence or a charter licence in the course of commercial transport operations under a contract for the carriage of the passenger between a place in the State and another place in the State..."

The Act defined commercial transport operations to mean "operations in which an aircraft is used, for hire or reward, for the carriage of passengers or cargo". The Act did not define a passenger.

Precision Helicopters held an Air Operator's Certificate (AOC), which authorised the use of certain registered aircraft (identified in the schedules to the AOC) to carry out either charter operations or aerial work operations. The aerial work operations were described in the AOC as including the inspection of power lines. The charter operations were referred to simply as passengers and cargo in Australia.

Trial judgment

The trial judge said it was necessary to consider the nature of the activity that the helicopter and its occupants were engaged in. In his opinion, the flight operation involved low level aerial work conducted as part of its contractual arrangement with Endeavour, which involved both Precision and Endeavour personnel on board. Considering the words used in s 4, the trial judge found that the activity being undertaken did not sit comfortably with the concept of intrastate airline and charter operations and seemed far removed from any notion of commercial transport operations by the holder of a charter licence. The judge also determined that because Edwards directed the pilot where to manoeuvre, he could not be considered a passenger. The trial judge found the Act did not apply to the flight.

Appeal judgment

The Court of Appeal rejected the approach of looking at the purpose of the flight and said the focus should be the activities carried out by Mr Edwards.

With that in mind, the appeal court considered the two key issues under s 4 were the terms "passenger" and "commercial transport operations".

The appeal court considered the underlying contract between Endeavour and Precision satisfied the contract for the carriage of Mr Edwards on the aircraft and in the circumstances; the aircraft was used for "hire or reward". The court said it was not appropriate to assume that because the AOC distinguished between charter operations and aerial work operations, such a distinction was to be found in s 4. The court said there was no suggestion that the operation of the aircraft was outside the terms of the AOC.

The court considered the only other issue was to determine if Mr Edwards was a passenger. After examining the extent of his duties as an observer for Endeavour, it was found that Mr Edwards was a passenger because he had no physical control over flying the helicopter, which meant the Act applied to limit Precision's liability to $500,000.

Lessons for aerial work operators and their insurers

The approach taken by the appeal court can be criticised for the same reason it disapproved of the trial judge's approach.

By adopting such a narrow construction of s 4, the court ignores a proper consideration of whether the aircraft is being operated by the holder of an airline or charter licence in the course of commercial transport operations.

An air operator cannot conduct a commercial operation unless it is authorised by an AOC. Precision Helicopters was authorised to conduct aerial work operations (described as inspection of power lines) only in certain aircraft set out in one of the schedules to the AOC. Precision Helicopters was also authorised to conduct charter operations, but only in certain aircraft nominated in another schedule to the AOC. Both the nature and purpose of the flight and the aircraft used must conform to the AOC terms and conditions.

Endeavour and Precision contracted to undertake a flight for the sole purpose of an aerial work operation. Precision, no doubt, held a low level flying permit to undertake this work. Although the contract and flight can be described as for a commercial purpose, it was not an agreement to undertake a commercial transport operation, for example, a charter operation for the carriage of passengers or cargo. Mr Edwards' carriage was for the specific purpose of engaging in the aerial work of inspecting his employer's power lines. The fact that he can be considered a passenger rather than an aircraft crew member does not convert his carriage to one with a commercial transport operation (charter) purpose.

Put another way, Precision did not need to utilise its charter authority to conduct this flight.

Although the appeal court's finding that Mr Edwards was a passenger because he had no physical control over flying the helicopter is arguably correct, this fact alone cannot trigger the application of the Act. The carriers' liability scheme in the underlying international conventions that are given the force of law by the Act is not intended to apply to aerial work or private operations, or passengers on those flights that are conducting aerial work duties. They are intended to apply to aircraft operating, for hire or reward, in commercial operations for the carriage of passengers and cargo. Aerial work operators and their insurers will rightly be concerned if they are now required to obtain carriers' liability insurance for such operations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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