Air NZ’s attempt to have Z Energy bear losses the airline incurred during the two week disruption of Auckland avgas deliveries in September 2017 was dismissed. Z Energy was under no obligation to provide Air NZ with the full volume of fuel demanded; it was only required to take all reasonable endeavours to supply, the High Court ruled.
Avgas, designated as Jet A1, is delivered to Auckland airport from Marsden Point refinery along a 160 kilometre pipeline. A pipe rupture prevented fuel deliveries for two weeks. As airport stocks ran down, fuel supplied to airlines was rationed, flights cancelled and airlines ‘tankered in’ fuel with Auckland-bound aircraft taking on extra fuel at other airports.
Air NZ sued suppliers BP Oil and Z Energy alleging breach of contract; they failed to supply avgas as needed, it said. The claim against BP Oil was settled out of court. The Z Energy claim went to trial. Air NZ said Z Energy was obliged to provide an ‘unqualified supply’. Their contract, concluded by an exchange of emails, said nothing about levels of supply. It merely specified the period of supply and a formula for fixing price. Justice Venning ruled past practice created an implied term that Z Energy was obliged only to take all reasonable endeavours to supply fuel required. Disruptions to fuel supply at Sydney airport in 2003 and from Christchurch airport after the series of Canterbury earthquakes saw industry protocols developed for fuel rationing. These protocols formed an implied term in the Z Energy supply contract with Air NZ. Z Energy said it alone had suffered losses totalling five million dollars with the 2017 Auckland disruption.
The court was told an industry study in 2003 had highlighted the vulnerability of avgas supply to Auckland. Airlines did not support construction of extra storage at the airport. This would increase the cost of fuel supplied.
Air NZ Ltd v. BP Oil NZ Ltd & Z Energy Ltd – High Court (28.05.19)
19.102