Background
Four Air Leitchville Pty Ltd (FAL) paid Hurlad Pty Ltd $880,000, including GST, for a 1982 Fairchild SA227-TT Merlin III-C aircraft in December 2017. Before the purchase, FAL retained Interair Pty Ltd to conduct a pre-purchase inspection. Interair’s director, Ermis Shapanis, inspected the aircraft and issued a report describing it as being in reasonable condition for its age and hours. The aircraft was, however, unairworthy at the time of inspection and sale and had not been maintained in accordance with applicable requirements.
FAL alleged that Interair breached the inspection contract and that Interair and Shapanis contravened ss 18 and 29(1)(a) of the Australian Consumer Law. Its claims against the seller and the seller’s director had been settled in February 2023. The aircraft, which flew little during FAL’s ownership and sustained damage in a 2021 ground collision, was sold in August 2023 for $30,000. The seller parties and the Interair parties also brought cross-claims against one another for contribution or indemnity.
The Court’s Holding
Snaden J dismissed FAL’s remaining claims. On the proper construction of the pre-purchase inspection agreement, Interair performed what it had undertaken to do. In particular, the contractual requirement for a “full review of aircraft log books” did not establish the broader auditing obligation for which FAL contended. Interair therefore did not breach the inspection contract.
The Court also held that Interair and Shapanis did not make the alleged express or silent representations about the aircraft’s maintenance and condition. To the extent any alleged express representations were made, they were not false, misleading or deceptive. FAL also failed to establish that it relied on the alleged representations when purchasing the aircraft. Those conclusions disposed of the proceeding, although the Court addressed loss and related issues to the extent necessary. Both sets of cross-claims were dismissed, and costs were left for later determination.
Key Takeaways
- The scope of a pre-purchase inspection depends on the terms actually agreed; a promise to review logbooks does not necessarily require an independent audit of whether all recorded maintenance was properly performed.
- An aircraft’s later-discovered unairworthiness does not by itself establish that an inspector breached its contract or made a misleading representation.
- An Australian Consumer Law damages claim requires proof of the alleged representation, its misleading character and causative reliance; FAL did not establish those elements.
Why It Matters
The decision illustrates the importance of defining the scope of technical due diligence precisely, particularly where a purchaser expects an inspector to verify the accuracy of maintenance records rather than merely review them. Courts will not enlarge a specialist’s contractual obligations solely because serious defects later emerge.
It also shows that contractual and consumer-law liability remains distinct from the underlying condition of the purchased asset. Even where an aircraft was concededly unairworthy, recovery against a pre-purchase inspector depended on proof of a breached contractual duty or actionable, relied-upon representations.