CESSNOCK City Council has lost an appeal in the High Court of Australia against a $6 million payout involving a bungled airport lease agreement.
Taking the long-running saga to the High Court, after it failed in the Supreme Court, has cost ratepayers $295,000.
Most applications - up to 90 per cent - fail at the first hurdle in the High Court where the council was warned its chances of success were not high.
The warning came from Supreme Court Justice Jeremy Kirk, who allowed the appeal but with reservation.
Council went ahead, engaging former solicitor-general Justin Gleeson SC, whose fees are understood to run up to between $20-25K per day, to represent them at a hearing on February 13 (2024).
The High Court appeal bill comes on top of the $6.154 million pay out it will now have to cough up, as well as the legal costs associated with the council defending the matter at every legal turn.
A council spokesperson said council was disappointed in the outcome, but accepted it.
"Cessnock City Council respects the High Court's determination and notes that it has now exhausted all legal avenues on the matter."
The dispute
The council had been granted a stay application in the Supreme Court on May 12, 2023, to avoid paying a company known as Cutty Sark $6.154 million for a breach of contract.
At the heart of the dispute is a lease agreement for the use and development of Cessnock Airport.
In late 1998, having decided to develop the airport site, the council started laying the ground work, obtaining a consultant's report known as the "Cessnock Aerodrome Development Plan", putting out an expression of interest for its development and management, and negotiating potential tenders.
Property developer James Johnston joined forces with commercial and instructing pilot Phil Unicomb who together were keen to operate an adventure flight business specialising in "unique and warbird aircraft" .
They met with the council in 2004 to discuss a suitable site for a hangar to incorporate an aviation museum, and an entertainment venue.
That plan was contingent upon the council registering a subdivision of the site and granting a 30-year lease for proposed Lot 104.
Council's backflip
In 2010, the council's consultants said it would cost $1.3 million to complete the subdivision and decided not to go ahead.
However, Mr Johnston had already spent nearly $3.7 million designing and building a hangar, as planned, and purchased planes, to operate an adventure flight business which he did in 2009.
By November of that year he decided it was not profitable, and tried to use the hangar as a museum, which also failed. He abandoned the site in 2012.
Breach of contract
Mr Johnston has sought compensation for the cost of the hanger ever since, claiming the council breached its contract by failing to complete the subdivision.
The council won in the first instance, but lost at appeal and was ordered to pay $3.7 million with interest, producing a final figure of $6.154 million, plus legal costs.
In dismissing the appeal with costs, High Court Justice Jayne Jagot said the Court of Appeal had been correct in finding the case against council proven - if it had stuck to its contract, the lessee would have recouped its expenditure.
"No good can come from a circumstances in which a local government body takes action to foster the development of its area without also being willing and able to fund the action it has contractually promised to undertake," Justice Jagot said.
"In this case, the hazard inherent in that circumstance has come to pass ...".
