Claim for $3m over Cessnock Airport deal ends in Supreme Court

On Monday, the Newcastle Herald reported plans for an $8.8 million upgrade of the airport, sparking interest from Crowne Plaza Hunter Valley owner Jerry Schwartz, who is investigating the introduction of flights from Bankstown to Cessnock.

"It's going to be wonderful for tourism," he said. But he is far from the first to have a vision for the site which has had a long and troubled history. One of it's most significant chapters was closed earlier this month in the Supreme Court where a damages claim against the council for upwards of $3million was dismissed.

The saga, however, started 22 years ago in 1998 when Cessnock City Council called for expressions of interest to use and develop the site. The vision of vintage aircraft enthusiast Peter Roberts, and his company, Aviation and Leisure Corporation, fitted in with that of the council - to develop the airport and surrounding sites into a gateway to the Hunter Valley. Mr Roberts won the tender in June 1999, and signed a license and management agreement with the council, with plans to sign a longer lease when the council subdivided the site (by September 2011) for 30 years.

Meanwhile, a commercial and instructing pilot, Philip Unicomb, joined forces with property developer James Johnston, who had an interest in aircraft. They were keen to operate an adventure flight business specialising in "unique and warbird aircraft" .

They also talked about building a hangar to house the planes, incorporating an aviation museum and an entertainment venue for corporate events. They became interested in Cessnock airport because it was cheaper and close to the Hunter Valley.

In April 2004, the two men met with the council's then corporate and community services manager, Peter Gogarty. Mr Johnston said he was keen to invest "substantial funds". Mr Gogarty was interested, but it was too early for him to give any assurance the development would go ahead.

Nonetheless, in August 2004, Mr Johnston bought a second plane, a T28D North American Trojan fighter/bomber aircraft which he hoped would 'raise the profile' of the adventure flying business.

The council determined that any proposed developments at the airport site would be conditional upon connecting the proposed lots to the reticulated sewerage system. In November 2006, the estimated cost of compliance was $789,000.

Negotiations between Mr Johnston and the council continued until April 2007, during which time Mr Johnston engaged an architect to design a hangar, and selected what would become his lot when the subdivision was complete.

The council granted development consent for 'a new aircraft hangar for joy flights and advanced flight/Aerobic training incorporating an aviation museum' in 2006. Construction of the hangar began, with no agreement with the council as yet for Mr Johnston to use the land.

In January of 2007, Mr Johnston, via his company Cutty Sark HK bought another plane - a L39c Albatross fighter jet from South Africa, which Mr Unicomb used for adventure flights.

Later that year Mr Johnston also finally signed an agreement with the council - a lease, a proposed future lease and a management agreement, similar to that of Mr Roberts'. The longer-term lease would not take effect until the council completed the subdivision, by September 30, 2011.

Mr Johnston says he spent nearly $3.7 million designing and building the hangar. But in her judgement, Supreme Court Judge Christine Adamson says the adventure flight business only operated from the site for less than six months, in 2009.

By November of that year, Mr Johnston had decided it was not profitable. He also used the hangar as a museum, with an average admission charge of $20 per person, which also did not prove profitable.

Nonetheless, he bought another plane in 2010, a 1941 tiger Moth. He held 14 different corporate events at the site, but created no repeat business, and that venture, too, became "completely unsustainable" around June 2011, the judgement says.

In February 2010, the council's consultants reported that it would have to spend another $1.3 million to complete the subdivision. By October 2010, Mr Johnston tried to sell the hangar, along with his "immaculate fleet of jetfighter, warbird and vintage aircraft".

In June 2011, the then general manager, Lea Rosser, told Mr Roberts that the council was not going ahead with the subdivision. "Council has no intention of spending about a million dollars fixing the sewerage," she said. "We don't have the money and won't be doing it." and his lease was terminated.

Mr Roberts recovered damages of $500,000 from the Council, for what was described as an "unlawful and ill-advised" termination of his contract, according to Cessnock MP Clayton Barr in a statement he made in 2013. The legal costs were in the vicinity of $200,000, Mr Barr said.

In August 2012, the council applied for a grant of $2 million to buy the hangar, refurbish it and use it for terminal, office and hangar space, but was unsuccessful. At the end of September that year Mr Johnston disconnected the power to the hangar because he couldn't afford the bills. By that time he'd abandoned the site.

Council made another attempt to secure funding to upgrade the airport in 2014, but failed again. It then discovered that Mr Johnston's company had been de-registered, had had no directors since April 2012, and owed them money. The council ended its agreement with him in September 2015. The council turned to ASIC which agreed to issue ownership of the hangar to it for $1.

Mr Johnston claimed the council had breached its contract by failing to complete the subdivision, rendering it impossible to prove he could have recouped his expenditure during the tenure of a longer-term lease, and sought to be reimbursed for the cost of the hangar.

In her judgement handed down on October 18, Justice Adamson agreed that, by not committing funds to connect the proposed lots to sewerage, the council was in breach of the agreement. But Mr Johnston had vacated the site prior to the Sunset date in 2011, lending force to the council's argument the venture was "a white elephant", and Mr Johnston's commercial judgement was flawed from the outset, she said.

In dismissing the claim, Justice Adamson said the council 'did what it could', having regard to it's lack of available funds, to comply with the agreement, and Mr Johnston took a calculated risk, which did not pay off. "The council neither asked for the hangar to be built, nor had a say in its cost of ostentation."

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