Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd

[1981] HCA 75

HIGH COURT OF AUSTRALIA

Aickin J. Barwick C.J., Stephen, Mason, Murphy and Wilson JJ. Barwick C.J., Gibbs, Stephen and Mason JJ.

AIR EXPRESS LTD. v. ANSETT TRANSPORT INDUSTRIES (OPERATIONS) PTY. LTD.

(1981) 146 CLR 249

10 February 1981

Injunction—High Court

Injunction—Interlocutory injunction—Undertaking as to damages—Loss or damage—Whether sustained by reason of grant of injunction—Distinction between loss or damage caused by grant of interlocutory injunction and loss or damage arising from litigation—Defendant added after commencement of action—Original undertaking as to damages extended to added defendant. High Court—Practice—Appeal—Objection to competence—Claim for damages for loss sustained by reason of grant of injunction—Usual undertaking as to damages—Order refusing damages—Whether judgment—Judiciary Act 1903 (Cth), s. 34.

Decisions

1979, August 17.
AICKIN J. delivered the following written judgment: -
In these proceedings Air Express Ltd. ("Air Express") claims against Ansett Transport Industries (Operations) Pty. Ltd. ("Ansett") damages pursuant to an undertaking given by Ansett to the Court to "abide by any order which the Court or a Justice may make as to damage in case the Court or a Justice shall hereafter be of the opinion that the defendants shall have sustained any, by reason of this Order, which the plaintiff ought to pay". (at p251)

2. That claim arises out of the decision of the Full Court in Ansett Transport Industries (Operations) Pty. Ltd. v. The Commonwealth (1977) 139 CLR 54 . In that case Ansett commenced proceedings against the Commonwealth of Australia and Mr. C. C. Halton, the Secretary to the Department of Transport, by a writ issued on 18th February 1977. The writ was generally indorsed and so far as now material it claimed as follows:

"The plaintiff's claim against the defendants is for an injunction to restrain them and each of them their servants and agents

. . .

(b) from granting or causing or permitting to be granted Air Express Ltd. or any company related to Air Express Limited a permission in writing under the said Regulations to import two Carvair aircraft on the grounds - (i) that the grant of the said permission in writing is in breach of provisions of an Agreement made 24 October 1952 between the Plaintiff and the firstnamed Defendant and Agreements made 26 September 1961, 21 October 1972 and 26 October 1973 between the Plaintiff, the firstnamed Defendant Ansett Transport Industries Limited and Australian National Airlines Commission, and

(ii) that neither of the defendants has power to grant the said permission in writing." (at p252)

3. On the same day an ex parte application was made to me in chambers for an injunction in terms of the relief claimed as quoted above, supported by an affidavit which set out a statement made by the Minister for Transport of the Commonwealth on 17th February 1977 in the House of Representatives. That statement included the following:

"I have looked at the air services to Tasmania and particularly the freight services and have concluded that some innovation is desired. That is why this week I have approved the import of two Carvair aircraft for Air Express and two Argosy aircraft for Ipec carriage of freight between the mainland and Tasmania. I believe that these innovations and the improved aircraft will assist markedly the capacity of Tasmanian industries to sell their goods on the mainland and, likewise, the mainland industries to deliver their goods to Tasmania."

At that time the Customs (Prohibited Imports) Regulations contained a provision which made aircraft prohibited imports unless the importer produced to the Collector of Customs "the permission in writing of the Director General of Civil Aviation to import the goods". The application was based on the grounds set out above and the affidavit stated (inter alia) that there was no office or person known as the "Director General of Civil Aviation" and that accordingly there was no person authorized to grant the permission required under those regulations. (at p253)

4. An order was made by me restraining the defendants from granting the written permission under the regulations until 4.30p.m. on Tuesday, 22nd February 1977, and giving various directions as to service. (at p253)

5. On Tuesday, 22nd February 1977, the parties appeared before the Chief Justice in chambers, and there also appeared before him counsel for Air Express and Interstate Parcel Express Co. (Australia) Pty. Ltd. ("Ipec"), who made oral applications to be added as defendants to the writ. The Chief Justice ordered that they be so added and continued the injunctions on the existing undertakings until Friday, 25th February, and gave certain directions as to pleadings. The matter again came before the Chief Justice in chambers on Friday, 25th February, when the defendants Air Express and Ipec asked for undertakings to the same effect as those given in respect of the original defendants. Those undertakings were given and the Chief Justice extended the injunctions on those undertakings until the suit was disposed of or further order. On the same day the writ was amended by adding Air Express and Ipec as defendants. Whether the amended writ was served does not directly appear but Air Express and Ipec entered appearances on that day. Order 16, r. 4(3) produces the result that the proceedings as against Air Express are to be deemed to have begun on that day. (at p253)

6. Ansett delivered a statement of claim which made no allegations and claimed no relief against Air Express or Ipec but claimed the original relief sought in the general indorsement against the Commonwealth and Halton. Those defendants delivered a defence as well as a demurrer to the statement of claim. Air Express and Ipec each delivered a document headed "defence" and demurred. The demurrers came on for hearing before the Full Court on 2nd March 1977 and on 4th March the hearing concluded and judgment was reserved. (at p253)

7. On 4th April 1977 Air Express applied to the Chief Justice in chambers for an order dissolving the injunction. The hearing of that application was adjourned to 18th April 1977 on which day the Chief Justice heard argument on the matter. The application was adjourned to 29th April 1977 at the request of Air Express to enable the parties to confer. The matter was again adjourned on 29th April to 5th May as no agreement had been reached. On 5th May the Chief Justice ordered that the application be refused with costs, though no formal order was taken out. (at p254)

8. The Full Court delivered judgment on the demurrer on 22nd December 1977 and by majority allowed the demurrer and dismissed the action (1977) 139 CLR 54 . (at p254)

9. By notice of motion taken out on 24th April 1978 Air Express sought an order that there be an inquiry as to whether it had sustained any and what damage by reason of the injunction granted on 18th February 1977 and continued on 22nd February and 25th February, which Ansett ought to pay in accordance with the undertaking given on 25th February 1977 and for directions as to further proceedings. On 4th May 1978 an order was made by Gibbs A.C.J. that the parties deliver pleadings, that they be at liberty to deliver interrogatories and that there be discovery and that the trial should be on affidavit with a right to cross-examine the deponents. The matter came before me for hearing on 7th March 1979, each party having filed numerous affidavits. Most of the deponents were cross-examined and a number of additional documents were put in evidence. (at p254)

10. When the matter came before the Full Court on 2nd March the Solicitor-General who appeared for the Commonwealth and Halton produced an Australian Government Gazette No. S34 of 2nd March 1977 which notified the making of Statutory Rule No. 23 on 1st March 1977 which amended the Customs (Prohibited Imports) Regulations by substituting the words "Secretary to the Department of Transport" for the words "Director-General of Civil Aviation" in the provision in the Third Schedule relating to permission to import aircraft. It was not suggested that the regulation was subsequently disallowed under the provisions of the Acts Interpretation Act 1903 (Cth). The making of that statutory rule produced the result that it was not necessary for the Full Court to consider the question whether under the unamended regulations the Secretary to the Department of Transport was authorized to issue the written permission referred to in the Third Schedule. It was clear that by 2nd March 1977 he was authorized by the regulations as they then stood to issue the written permission and no final order could be based on his alleged lack of power. That question is however material to some of the issues arising in the present proceedings and it is therefore necessary to set out the various administrative changes and statutory rules by which the abolition of the Department of Civil Aviation and the office of Director-General of Civil Aviation was affected. (at p254)

11. On 19th December 1972 there was notified in the Commonwealth Gazette the fact that the Governor-General in Council had approved the change of name of the former Department of Shipping and Transport to the Department of Transport and the name of the office of its permanent head from the Secretary to the Department of Shipping and Transport to the Secretary to the Department of Transport. On 5th March 1973 there was published in the Gazette approval by the Governor-General of certain administrative arrangements by which there were specified the principal matters dealt with by the Department of Transport and the Acts of Parliament which were to be administered by the Minister for that Department. The principal matters were "Navigation and shipping, Lighthouses, light-ships beacons and buoys, Land transport, Ship building". In the Gazette (No. 82) dated 30th November 1973 there was notified an order made by the Governor-General under s. 19B of the Acts Interpretation Act that references in any Act, or in any instrument (including regulations) made or issued under any Act to certain Ministers designated should be read as a reference to other Ministers designated in their place and that any references to certain specified departments should be read as a reference to departments specified in their place. That order required references to the "Minister of State for Civil Aviation" to be read as references to the "Minister of State for Transport" and references to the "Department of Civil Aviation" to be read as reference to the "Department of Transport". In the same Gazette there was notified the appointment of the defendant Halton to "the office of The Secretary to the Department of Transport and Director-General of Civil Aviation" to take effect on and from 30th November 1973. In a further issue of the Gazette (No. 183) dated 30th November 1973 there was notified the approval by the Governor-General of the abolition, in pursuance of s. 64 of the Constitution, of (inter alia) the Department of Civil Aviation and of the abolition, in pursuance of the Public Service Act 1922-1973, of (inter alia) "the office of Director-General of Civil Aviation". That Gazette also notified the creation in pursuance of the Public Service Act of the office of "The Secretary to the Department of Transport and Director-General of Civil Aviation" to be the permanent head of the Department of Transport. In the same Gazette there was also notified the revocation by the Governor-General of "so much of the Administrative Arrangements Order made on 19th December 1972" as related to the Department of Civil Aviation and so much of the Administrative Arrangements Order of 5th March 1973 as related to the Department of Transport. It also set out the approval of administrative arrangements which included the specification of the matters to be dealt with by the Department of Transport and the Acts to be administered by the Minister administering that Department. The matters to be dealt with by the Department of Transport included "Civil Aviation" and the Acts specified included the Air Navigation Act 1920-1973 and other Acts relating to air transport matters, but did not include the Customs Act or any part of it. (at p256)

12. The next step is recorded in the Gazette of Tuesday, 25th February 1975, which notified that the Governor-General in Council had changed the name of the office of the "Secretary to the Department of Transport and Director-General of Civil Aviation" to the "Secretary to the Department of Transport". It was however not until 1st March 1977 that the regulation was made which amended the Third Schedule to the Customs (Prohibited Imports) Regulations by omitting the words in the manner referred to above. (at p256)

13. That regulation was notified in the Gazette on 2nd March 1977 and pursuant to s. 48 of the Acts Interpretation Act took effect from the date of such notification, there being no other date specified. (at p256)

14. Accordingly when the interlocutory injunction was granted on 18th February 1977 and extended by the Chief Justice on 25th February 1977 the regulations were still in their old form. It is therefore necessary for me to consider whether there was then any person authorized under the Customs (Prohibited Imports) Regulations to issue the relevant written permission. Before I deal with the merits of the point I must note an objection raised by counsel for Air Express that Ansett had no locus standi to challenge the authority of the defendant Halton to issue that written permission. In my opinion there is no substance in this objection. It appears to me to be clear that Ansett had sufficient interest in the proper performance of the duties of those responsible for the administration of the relevant regulations to support its claim in these proceedings. It was affected in its private rights and had a greater interest than other members of the public. The relevant principle has recently been restated by four members of this Court in Robinson v. Western Australian Museum (1977) 138 CLR 283 and it is sufficient to refer to the following passages: per Barwick C.J. (1977) 138 CLR, at p 293 , per Gibbs J. (1977) 138 CLR, at pp 301-303 , per Stephen J. (1977) 138 CLR, at pp 324-325 , and per Mason J. (1977) 138 CLR, at pp 327-328 . If the formulation in Anderson v. The Commonwealth (1932) 47 CLR 50 is to be preferred, it is clear that Ansett was "more particularly affected" than other people, and in a manner different from the public generally. Accordingly I am satisfied that it does have locus standi in relation to this point. (at p257)

15. It was argued on behalf of Air Express that after the defendant Halton had been appointed as "The Secretary of the Department of Transport and Director-General of Civil Aviation" he was then "Director-General of Civil Aviation" within the meaning of that term as used in the Customs (Prohibited Imports) Regulations. In my opinion this argument overlooks the fact that by the notice included in Gazette No. 183 of 30th November 1973 the Governor-General in Council abolished "the office of the Director-General of Civil Aviation" and created a new office, namely that of "The Secretary to the Department of Transport and Director-General of Civil Aviation". That in my opinion created a new and different office, and not two offices, nor did it refer to two existing separate offices. After the abolition of the office of Director-General there was not and there could not be any person who was "the Director-General of Civil Aviation" though there was a person who answered the description "The Secretary to the Department of Transport and Director-General of Civil Aviation". The fact that it created a single new office is demonstrated by Gazette No. 182 which appointed the defendant Halton to "the office of the Secretary of the Department of Transport and Director-General of Civil Aviation". (at p257)

16. I am therefore of opinion that there was no person who was "the Director-General of Civil Aviation" within the meaning of the provision in the Customs (Prohibited Imports) Regulations and that there was no such office. (at p257)

17. When the regulations were amended on 2nd March 1977 the words substituted in the Third Schedule were "Secretary to the Department of Transport". It may be that it was only an oversight that this change was not made at an earlier stage. That this point was overlooked by the relevant departmental authorities is suggested by the provisions of the Air Navigation Act 1974 which was assented to on 3rd December 1974. Sections 7 and 9 of that Act were to come into operation on a date to be fixed by proclamation, which was in fact 1st March 1975. Section 7 provided for the amendment of the Air Navigation Act 1920-1973 as set out in Pt 1 of the First Schedule. The effect of that schedule is to insert in lieu of the definition of "Director-General" a definition of the expression "The Secretary" as meaning "The Secretary to the Department of Transport" and throughout the Act to omit the words "Director-General" and to substitute the word "Secretary". Section 9 (1) provided that "For all purposes of the Air Navigation Act 1920-1971 and of that Act as amended . . . and for all purposes of any regulations in force at any time before the commencement of this section under that Act or under that Act as so amended, the office of Secretary to the Department of Transport and Director-General of Civil Aviation shall be deemed to have been the same office as the office of Director-General of Civil Aviation". (at p258)

18. Sub-section (2) provided as follows: - "Any act or thing done (including any instrument made or issued) -
(a) before 30 November 1973 by a person holding, or performing the duties of, the office of Director-General of Civil Aviation; or (b) on or after that date and before the commencement of this section by a person holding, or performing the duties of, the office of Secretary to the Department of Transport and Director-General of Civil Aviation. under or for the purposes of - (c) the Air Navigation Act 1920 or of that Act as amended and in force when the act or thing was done or the instrument was made or issued; or (d) any particular regulations in force under that Act or under that Act as amended and in force when the act or thing was done or the instrument was made or issued, has effect, after the commencement of this section, as if the act or thing had been done, or the instrument had been made or issued, by the Secretary to the Department of Transport under or for the purposes of the Principal Act as amended by this Act or those regulations as in force under the Principal Act as amended by this Act, as the case requires." Sub-section (3) provided that "In the application, after the commencement of this section, of any regulations or other instrument in force or subsisting under or for the purposes of the Principal Act immediately before the commencement of this section, any reference in those regulations or in that instrument to the Director-General of Civil Aviation or to the Secretary to the Department of Transport and Director-General of Civil Aviation shall be read as including a reference to the Secretary to the Department of Transport". (at p258)

19. It is significant that all those amending provisions are expressed to be "for all purposes of the Air Navigation Act 1920-1971", or "in relation to acts or things done under or for the purposes of the Air Navigation Act or regulations in force under that Act" and that no attention was given to the fact that under the Customs (Prohibited Imports) Regulations another and a different function was conferred upon "the Director-General of Civil Aviation". I am therefore satisfied that on 18th February 1977 and thereafter until 2nd March 1977 there was no such office as that of Director-General of Civil Aviation and no person who could issue the relevant permission in writing. There is no basis for regarding the fact that the point was overlooked as disqualifying Ansett from relying upon the failure to amend regulations until 2nd March 1977 for the purpose of these proceedings. (at p259)

20. It was also argued on behalf of Air Express that Ansett was not entitled to rely upon the argument that the Secretary to the Department of Transport had no authority under the Customs (Prohibited Imports) Regulations to grant permission in writing for the importation of an aircraft. The basis of this argument was the allegation that Ansett itself had on one or more occasions imported aircraft into Australia on the basis of written permission signed by the Secretary to the Department of Transport and at a date or dates after the abolition of the office of Director-General of Civil Aviation. It was also said that this fact should have been revealed to the Court upon the application for the interlocutory injunction or for its continuation. I can see no basis upon which this argument can succeed. It is clear that neither Air Express nor anyone else was misled in any way or relied in any way upon the fact that Ansett had obtained permission to import aircraft on that basis if in fact it had done so. If the point had been overlooked by Ansett as well as by the Department of Transport and those responsible for the making of the various administrative arrangements to which I have referred, Air Express can have suffered no prejudice by reason of Ansett, or for that matter anyone else, having previously received written permission from the Secretary to the Department of Transport. (at p259)

21. The question whether there was any person who could exercise the function of granting the necessary permission in writing under the Customs (Prohibited Imports) Regulations is material to the question of damages in more than one way. If there were no such person, it would follow that, if the proceedings had been finally dealt with at the time of Ansett giving the undertaking to the Court on 25th February 1976, Ansett would have succeeded in that point. However the law was changed by an amendment of the regulations on the day before the hearing began in the Full Court. This is a situation which is not the subject of any direct authority and I defer for the moment the consideration of that point. (at p259)

22. I also defer for later consideration the question of the effect of events both earlier and later than the grant of the interlocutory injunction on 18th February and its renewal or extension on 25th February. (at p259)

23. It will be convenient to turn now to the state of the law with respect to damages to be awarded upon an undertaking given by a plaintiff who obtains an interlocutory injunction, but ultimately fails in his action. (at p260)

24. The undertaking given by Ansett was in the customary form which has been in use since about the middle of the nineteenth century in cases where an injunction is granted either ex parte or on motion on notice to operate until the determination of the action or further order. It is a procedure said by Jessel M.R. in Smith v. Day (1882) 21 ChD 421, at p 424 to have been invented by Knight Bruce L.J., when Vice-Chancellor. The first reported case in which an injunction had been granted on such an undertaking appears to be Novello v. James (1854) 5 De GM &G 876 (43 er 1111) from which it appears that on 15th December 1851 Knight Bruce L.J. (then Vice-Chancellor) granted an interlocutory injunction upon such an undertaking being given by the plaintiff. The injunction was dissolved without opposition in view of a later decision by the House of Lords governing the substantive question involved. On an appeal in relation to the question of damages Knight Bruce L.J. (1854) 5 De GM &G, at p 878 (43 ER, at p 1112) said in effect that the fact that law was doubtful at the time of the grant of the interlocutory injunction provided no reason for not ordering damages. Turner L.J. (1854) 5 De GM &G, at p879 (43 ER, at p 1112) agreed with that view. In Chappell v. Davidson (1856) 8 De GM &G 1 (44 ER 289) Knight Bruce L.J. said in the course of argument, "Has it not been for the last twelve or thirteen years an almost universal practice to require, on granting an injunction, an undertaking on the part of the Plaintiff to be answerable in damages?" In 1865 Kindersley V.C. said in Wakefield v. Duke of Buccleugh (1865) 11 Jur NS 523, at p 524 "the practice is settled, that not only on ex parte applications, but on injunctions granted upon motion by notice, the plaintiff should give an undertaking as to damages". (at p260)

25. In Graham v. Campbell (1878) 7 ChD 490, at p 494 the Court of Appeal, James, Cotton and Thesiger L.JJ., said "The undertaking as to damages which ought to be given on every interlocutory injunction is one to which (unless under special circumstances) effect ought to be given. If any damage has been occasioned by an interlocutory injunction, which on the hearing is found to have been wrongly asked for, justice requies that such damage should fall on the voluntary litigant who fails, not on the litigant who has been without just cause made so." (at p260)

26. No reference was made in these cases to the interlocutory injunction having been obtained by suppression of facts or on insufficient information. It was however suggested by Jessel M.R. that an order for damages pursuant to such an undertaking would only be made where the injunction had been obtained by some false statement or suppression of information and that it would not apply where the injunction had been wrongly granted because of some mistake of law by the court: Smith v. Day (1882) 21 ChD 421, at pp 424-425 . However Cotton L.J. dissented from those observations and pointed out that in Novello v. James (1854) 5 De GM &G 876 Knight Bruce L.J. and Turner L.J. had said that the fact that the law was doubtful was no reason for not ordering damages. The third member of the Court, Brett L.J., expressly refrained from expressing a view upon the point. However, in Griffith v. Blake (1884) 27 ChD 474 the Court of Appeal expressly dissented from the dictum of Jessel M.R. and stated that it was not well founded. Baggallay L.J. (1884) 27 ChD at p 476 said "If the Defendants turn out to be right, it appears to me that they can, under the undertaking, obtain compensation for all injury sustained by them from the granting of the injunction". Cotton L.J. (1884) 27 ChD, at p 477 agreed and Lindley L.J. said "The dictum of the late Master of the Rolls is not consistent with what was done by the Court of Appeal in Novello v. James and Newby v. Harrison (1861) 3 De GF &J 287 (45 ER 889) ". (at p261)

27. The equitable nature of this remedy is apparent from its origin and nature. The view has always been taken that the right may be lost by delay - see Newcomen v. Coulson (1878) 7 ChD 764 and Ex parte Hall; In re Wood (1883) 23 ChD 644 , per Baggallay L.J. (1883) 23 ChD, at p 651 , per Cotton L.J. (1883) 23 ChD, at p 652 and per Bowen L.J. (1883) 23 ChD, at p 653 , the latter being a case in which the Court of Appeal held that the right had in fact been lost by delay. (at p261)

28. The cases display a substantial variation in the language in which the principle is expressed. The following are examples of expressions used: some cases speak of damages being available if it turns out that the injunction was "wrongfully granted"; others of where" The court is ultimately of opinion that the order ought not to have been made", and others again say that the damage should not fall on the "litigant who has without just cause been made so". It seems that the first two expressions mean no more than that the plaintiff ultimately fails and are not concerned with the question whether it was correct in the circumstances prevailing at the time to grant the interlocutory injunction. At the trial the issues are of necessity different from those involved in the question of whether or not an interlocutory injunction should be granted. The use of the expression "the litigant who has without just cause been made so" in Graham v. Campbell (1878) 7 ChD, at p 494 was not in circumstances where there was a difference between, on the one hand, defendants against whom the proceedings had been taken by the plaintiff and, on the other hand, defendants who on their own application, had been added to proceedings in which no claim was originally or subsequently made against them. I do not think that an observation of that kind made in a quite differet context can directly assist in the present case, though the fact that Air Express and IPEC applied to be made defendants when no cause of action was asserted or existed against them is not irrelevant. (at p262)

29. Counsel referred to a number of American and Canadian authorities. I have not found the American authorities helpful upon the general nature of the equitable principles which are applicable. They appear to me mostly to proceed upon a view of the principles the same as or similar to that adopted by Jessel M.R. and subsequently rejected by the later English authorities referred to above. See, for example, the decision of the Circuit Court of Appeals (4th Circuit) in Greenwood County v. Duke Power Co. (1939) 107 F 2d 484; 131 ALR 870 (Annotated) which proceeds upon the basis that no damages are allowed except in cases where the matter has been prosecuted maliciously and without reasonable cause and that no damages are allowed where the law is doubtful. Somewhat the same view had been adopted in the Supreme Court in Alberta in Albertson v. Secord (1912) 1 DLR 804 but that view was rejected by the Supreme Court of Canada in Vieweger Construction Co. Ltd. v. Rush and Tompkins Construction Ltd. (1965) 48 DLR (2d) 509 where the Supreme Court states the relevant test by reference to Griffith v. Blake (1884) 27 ChD 474 . (at p262)

30. I turn now to the question of the measure of damage to be applied where a plaintiff, having given an undertaking, has failed in the action. The matter was first adverted to in Smith v. Day (1882) 21 ChD 421 where it was the subject of some discussion by each member of the Court of Appeal. Jessel M.R. said (1882) 21 ChD, at p 425 :

"Then, again, the Court must have regard to the amount of damage; if it be trifling or remote the court would not be justified in directing an inquiry as to damages, though the injury might not be so remote that an action would not lie"

and (1882) 21 Ch D, at p 426 :

"Apart from this, I am of opinion that there is no sufficient proof of any damage having been sustained, and that if any was sustained it is too remote for the present purpose. I might indeed, say too remote for any purpose. It is said that the Cab Company had agreed to take a lease for seven years at a rack rent, but there was in fact no agreement, nothing but negotiations."

Brett L.J. said (1882) 21 Ch D, at pp 427-428 :

"Again, I am strongly of opinion that the question whether an inquiry as to damages should be granted is within the discretion of the Judge who originally tries the case, and that his discretion ought not lightly to be interfered with. In exercising this discretion the Court should act as nearly as may be on fixed rules, or by analogy to fixed rules. Now in the present case there is no undertaking with the opposite party, but only with the Court. There is no contract on which the opposite party could sue, and let us examine the case by analogy to cases where there is a contract with, or an obligation to the other party. If damages are granted at all, I think the Court would never go beyond what would be given if there were an analogous contract with or duty to the opposite party. The rules as to damages are shewn in Hadley v. Baxendale (1854) 9 Exch 341 (156 ER 145) . If the injunction had been obtained fraudulently or maliciously, the Court, I think, would act by analogy to the rule in the case of fraudulent or malicious breach of contract, and not confine itself to proximate damages, but give exemplary damages. In the present case there is no ground for alleging fraud or malice. The case then is to be governed by analogy to the ordinary breach of a contract or duty, and in such a case the damages to be allowed are the proximate and natural damages arising from such a breach, unless as in Hadley v. Baxendale, notice had been given to the opposite party, of there being some particular contract which would be affected by the breach. This doctrine of notice has introduced some difficulty into these cases, and it is not settled what sort of notice is sufficient. Here an alleged agreement for a lease is relied on. In the first place I do not think the existence of such agreement proved. If it did exist, the next question is, whether the injunction so interfered with the erection of the buildings as to entitle the tenant to throw up the agreement. I am not satisfied that it did. But assume that it did, and that the agreement was broken in consequence of the injunction, still I agree with the Vice-Chancellor in thinking that the breach is not by reason of the injunction, but is a consequence too remote to be regarded. If any one obtains an injunction preventing another from proceedings with a building, he must be taken to have notice of everything in the building contract, and all liabilities which the person stopped incurs to his contractor by reason of the stoppage, are a natural and immediate consequence of the injunction. But the fact that the injunction prevents the carrying out of an entirely independent agreement as to the property is too remote."

Cotton L.J. said (1882) 21 Ch D, at p 430 : "I think that the damages must be confined to loss which is the natural consequence of the injunction under the circumstances of which the party obtaining the injunction has notice." (at p264)

31. In Hunt v. Hunt (1884) 54 LJ (Ch) 289 , Pearson J. referred to the judgment of Brett L.J. in Smith v. Day and applied that test. (at p264)

32. In Schlesinger v. Bedford (1893) 9 TLR 370, at pp 370-371 Lindley L.J., with whom Lopes and A.L. Smith L.JJ. agreed, said:
"The real nature of an undertaking of this kind and the extent to which damages ought to be awarded thereunder were carefully explained by the late Master of the Rolls in the well-known case of Smith v. Day. That case was instructive for this reason, that it showed that all the remote consequences of obtaining an injunction which was afterwards dissolved, were not to be taken into account in assessing the damages to be paid to the defendant under the plaintiff's undertaking. It would be unduly straining such undertaking to include in it damages which did not naturally flow from the injunction. In Smith v. Day (1882) 21 Ch D 421 it was held that the damage was too remote. The defendant there claimed that he had lost a good tenant by reason of the injunction, but it turned out that there had not at the date of the injunction been any agreement for a lease, although negotiations had been entered into with a view to a lease. That case was followed by Ex parte Hall; In re Wood (1883) 23 Ch D 644 , where a receiver obtained an injunction restraining a man from the selling of certain goods, and damage resulted from the receiver restraining him from removing the goods. The Court held that the man against whom the injunction was obtained was not entitled to recover any damage except such as resulted naturally from his being restrained from selling and that the damage was too remote. So here the plaintiffs ought not to be exposed to damages which were not fairly consequential upon the injunction, and which they could not have foreseen when the injunction was granted." (at p264)

33. In Re an Arbitration between Pemberton and Cooper (1912) 107 LT 716, at p 718 Bankes J. spoke of "damage which necessarily and naturally flowed from the course which the landlord compelled them to adopt" by obtaining the interlocutory injunction. In referring to the damage claimed he said that he did not agree "that such a loss was not in the contemplation of the parties or that it was not a natural consequence of what the landlord did". (at p265)

34. There do not appear to be any later English authorities but there was one Canadian and one New Zealand authority to which I must refer before turning to the only Australian authority. In Douglass v. Bullen (1913) 12 DLR 652, at p 655 Britton J. in the Ontario Supreme Court, after referring to Smith v. Day said:

"The damages ought to be confined to the immediate natural consequences of the injunction, under the circumstances, which were within the knowledge of the party obtaining the injunction. The damages claimed are, in my opinion, too remote. The defendant gave notice to the plaintiffs that he was liable to suffer damage by reason of the injunction, and that he would hold the plaintiffs responsible, but, as to such damages as are claimed, the plaintiffs could have no knowledge, and they could not have been within their reasonable contemplation when the order was asked for. Damages should be confined to circumstances of which the plaintiffs had notice. See Kerr on Injunctions, 4th ed. (1903), p. 592.

No doubt, the defendant has suffered some damage, but I cannot sort out damage by reason of the injunction distinct from loss of time and trouble and detriment arising from litigation; so no inquiry should be directed. See Gault v. Murray (1892) 21 OR 458 ." (at p265)

35. In Newman Bros Ltd. v. Allum, S.O.S. Motors Ltd. (In liq.) (No. 2) (1935) NZLR Suppl 17, at p 18 Myers C.J. dealt with this question:
"If it appears that no damage is proved occasioned by the injunction as distinct from the detriment arising from the litigation, the defendants are not entitled to an inquiry as to damages on an application such as this. The cases on this point are referred to in the Canadian case Gault v. Murray. I am inclined to think in the present case that it cannot be said that the defendants have sustained damage by reason of the interlocutory injunction apart from the litigation. All that the interim injunction did was to restrain the defendant J.C. Allum from hearing or adjudicating upon the application for the transfer of the passenger-service license referred to in the proceedings until the further order of the Court. Mr. Allum was acting as the statutory Licensing Authority. As I pointed out in the judgment in the main action, considerable power and a wide discretion are vested in the Licensing Authority, but it cannot be doubted that, if the authority acts without or in excess of jurisdiction, he can be controlled by this Court. I had occasion in my previous judgment to make some comment on the affidavit filed in support of the application for an interim injunction, but, nevertheless, the plaintiff was entitled to that injunction. It is inconceivable, however, that Mr. Allum as a quasi-judicial authority, after being served with a statement of claim in which the validity of his grant of the renewal of the license and his other actions in connection with the applications before him were attacked would have proceeded, even though there had been no interim injunction to adjudicate further upon the matter until the main action had been decided. My inclination of opinion, therefore, is that it cannot be said that the defendants have sustained damage by reason of the interim injunction which the plaintiff ought to pay." (at p266)

36. In Victorian Onion and Potato Growers' Association v. Finnigan (1922) VLR 819, at p 822 , Cussen J. said:

"The question which I have to decide, therefore, is whether, in the exercise of my discretion, I should direct an inquiry or myself assess the damages. It was contended for the defendants that I should do so by analogy to the principles to which effect is given in connection with enforcing the obligations on a sale of goods where there has been a breach of contract by one of the parties. I think the terms of the undertaking are themselves of importance. It provides that there may be an order as to damages if the Court shall be of opinion that the defendant has sustained any. I think the word 'damages' in that undertaking is to be given a very general meaning, and is not necessarily to be given the same meaning as the word 'damages' when used in connection with breaches of contracts. 'Damages' in this case seems to me to mean real harm, rather than to have any strictly defined meaning."

He referred to the judgment of Brett L.J. in Smith v. Day (1882) 21 Ch D 421 and said in effect that that judgment suggests that damages which might be given on breach of contract are the utmost which can be given, and he then turned to the question of delay. (at p266)

37. However he did not refer to the decision in Schlesinger v. Bedford (1893) 9 TLR 370 where a subsequent Court of Appeal applied the principle as to damages referred to in Smith v. Day. With all the respect properly due to Cussen J., I am unable to derive much assistance from the expression "real harm" and I respectfully think that it cannot be adopted as a substitute for what on the authorities has become at least a prima facie guide. In a proceeding of an equitable nature it is generally proper to adopt a view which is just and equitable, or fair and reasonable, in all the circumstances rather than to apply a rigid rule. However the view that the damages should be those which flow directly from the injunction and which could have been foreseen when the injunction was granted, is one which will be just and equitable in the circumstances of most cases and certainly in the present case. No doubt the view as expressed in the two decisions of the Court of Appeal does not constitute a rigid rule and circumstances may sometimes require a different approach. However it will in my opinion be seldom that it will be just or equitable that the unsuccessful plaintiff should bear the burden of damages which were not foreseeable from circumstances known to him at the time. (at p267)

38. The subject of measure of damage has not been much discussed in the text-books but it may be noted that in Kerr on Injunctions, 3rd ed. (1888), p. 639 the learned author says "The damages, moreover, must be confined to the loss which is the natural consequence of the injunction under the circumstances of which the party obtaining the injunction has notice" and he cites as authority for that proposition Smith v. Day (1882) 21 ChD 421 , the words used being substantially those of Cotton L.J. The same proposition has been repeated in each successive edition up to the latest (6th ed. (1927)) without alteration other than the addition of subsequent authorities. There is a useful discussion on the matter in Spry, Equitable Remedies, 1st ed. (1971), pp. 559-566, but for reasons which I have already given I am unable to agree with the view that the observations of Cussen J. are to be preferred to the earlier English authorities. (at p267)

39. It was suggested that on the question of the measure of damage it would be appropriate to proceed by analogy with the practice of the Court of Chancery under Lord Cairns' Act (Chancery Amendment Act, 1858 (U.K.)). In my opinion that would not lead to any different approach. The practice of requiring an undertaking originated prior to 1858 but there is no reported case on the measure of damage prior to that date, and no mention of that analogy in any of the later cases. The position under Lord Cairns' Act has been recently restated by Lord Wilberforce in Johnson v. Agnew (1980) AC 367, at p 400 where he said:
"Since the decision of this House, by majority, in Leeds Industrial Co-operative Society Ltd. v. Slack (1924) AC 851 it is clear that the jurisdiction to award damages in accordance with s. 2 of Lord Cairns' Act (accepted by the House as surviving the repeal of the Act) may arise in some cases in which damages could not be recovered at common law: examples of this would be damages in lieu of a quia timet injunction and damages for breach of a restrictive covenant to which the defendant was not a party. To this extent the Act created a power to award damages which did not exist before at common law. But apart from these, and similar cases where damages could not be claimed at all at common law, there is sound authority for the proposition that the Act does not provide for the assessment of damages on any new basis." (at p268)

40. It is important in all cases, and particularly in the present case, to bear in mind the distinction adverted to in many of the cases (e.g. per Myers C.J. in Newman Bros. Ltd. v. Allum; S.O.S. Motors Ltd. (In liq.) (No. 2) (1935) NZLR Suppl, at p 18 between damages flowing from the injunction and damages flowing from the litigation itself. There may not in every case be any difference between the two but, where there is a difference, it is essential that the damage flowing from the litigation should not be confused with the damage flowing from the interlocutory injunction. This is necessarily required by the form of the undertaking itself. (at p268)

41. I have discussed the authorities at some length because of an argument put on behalf of Ansett that as a preliminary step it was necessary to decide whether the interlocutory injunction had been "obtained without just cause" or the order "ought not to have been made". It was said that if it were not so obtained then, in the absence of special circumstances, no inquiry as to damages should be made and no damages should be awarded, and that it was for Air Express to prove that the interlocutory injunction had been obtained without just cause and that the upholding of the demurrer by the Full Court was not in itself sufficient to demonstrate that. In my opinion the cases do not support those propositions. The argument harks back to the dictum of Jessel M.R. which was rejected in the cases to which I have referred. (at p268)

42. It was also submitted that it was first necessary to decide as a preliminary point whether there should be an inquiry. It is not necessary to decide whether this point was in effect disposed of by the directions given by Gibbs A.C.J. I indicated in the course of this hearing that it would be convenient to hear the evidence and give a ruling at the conclusion of the hearing since all the affidavits had already been filed. In my opinion this is a proper case for an inquiry, whatever the result of the inquiry may be. It would have been impossible to say at the outset that no inquiry was warranted. (at p268)

43. I turn therefore to the material facts as alleged and to the evidence. The early history of Air Express is not material to the present question. At the beginning of 1975 Air Express had four aircraft operating for the carriage of freight between Essendon Airport and Launceston and other northern Tasmanian airports. At that time its mode of operation was to charter an aircraft at an hourly rate to a customer for a flight between Essendon and a Tasmanian airport and return. The charterer was responsible for obtaining his own cargo, transporting it to the airport and loading it, and for unloading and dispatch to its ultimate Tasmanian destination. The aircraft comprised two Mk 31 Bristol Freighters which had been acquired in 1962 and 1968, and two Mk 21 Bristol Freighters which were said to have been acquired in 1971 for the purpose of providing a daily service from Melbourne to Launceston for an organisation known as Kwikasair. In May 1975 one of the two Mk 21 Bristols was lost in an accident. (at p269)

44. From the early 1950s a firm named Brain &Brown Airfreighters had operated an air freight business between Melbourne and Launceston and other northern Tasmanian airports, including Flinders Island and King Island in Bass Strait. That operation was taken over by a company named BBA Air Cargo Pty. Ltd. ("BBA"), the original shareholders and directors of which were the former partners, Brain and Brown. At all material times it had three DC3 aircraft. In 1974 it acquired one Argosy aircraft, at a stage when half of the shares held by each of Brain and Brown had been transferred to new shareholders who put in funds required to finance the acquisition of the Argosy. It appears that the Argosy was leased by BBA, but that it was in a position to dispose of the aircraft, and it was later sold. BBA and Air Express had operated as competitors until 1974, although in precisely what way does not appear. As from that time BBA acted as a carrier and as a freight forwarder in that it obtained cargo from its own customers which it carried in its own aircraft and, in addition, it carried freight for other freight forwarders. The Argosy was operated during part of 1974 and during 1975 primarily to carry goods from Melbourne to Launceston for Ipec - but that business came to an end on 24th December 1975, Ipec having given notice to that effect on 24th November 1975. The Argosy was due for a major and expensive overhaul in January 1976, which included a wing spar change. That work would have put the plane out of action for a considerable time. In the result the registration of the aircraft was not renewed and the necessary work to maintain its airworthiness certificate not then done. Brown had resigned from the position of managing director during 1975 and sold his shares in BBA to one of the incoming shareholders. (at p269)

45. Astling, the present managing director of Air Express, joined its staff and that of BBA at some time late in 1975 and by the middle of 1976 he was in effect in control of the operations of both companies. At that time the principal shareholder in each of the two companies was Signet Insurance Holdings Pty. Ltd. but the other shareholders were not identical in each company. (at p270)

46. On 19th October 1976 Astling made a formal offer to acquire the whole of the shares in BBA for the sum of $25,000 payable as to a deposit of $2,500 on acceptance of the offer, a cheque being enclosed with the formal offer, and the balance on or before 24th December 1976. Under the terms of the offer Astling was personally to guarantee debts owed by BBA to Donlin Industries Pty. Ltd. (one of the shareholders in BBA) for an amount of $155,000 and to Brain for the sum of $65,000. Those debts however were to be interest free until 1981 and to be repaid not later than that date or if not so repaid to bear interest as from the date of the offer. That offer was in fact accepted by all the shareholders at a date which does not expressly appear but which was probably on or shortly after 21st October 1976. Also on 19th October Astling made a written offer to the Chairman of Air Express for all the shares in that company and on 25th October Signet Insurance Holdings Pty. Ltd., acting with the authority of the other shareholders, accepted the offer subject to some minor adjustment of the figures, on which nothing now turns. (at p270)

47. At about the end of October 1976 some 97 per cent of the shares in Air Express were transferred to a subsidiary of a company, all the shares in which were owned by Astling and his wife ("Uplift Pty. Ltd.") and the transfers duly registered. This was done without payment of the balance owing on the purchase. The same course was taken with respect to all the shares in BBA. (at p270)

48. Shortly after the purchase of the shares in 1976 Astling prepared a document called "Proposal for acquisition of an equity interest in Air Express Limited and BBA Air Cargo Pty. Ltd." (the "Proposal"). He received some assistance in the presentation and in the setting out of the financial statements and projections from a Mr. Hilton, a partner in a well-known firm of chartered accounts, but the text was Astling's, not Hilton's. The document is undated, as was a copy of a letter sent to various persons by Astling to interest them in the project. It seems probable that the Proposal was completed by the end of October or perhaps early in November. The letter stated (inter alia):

"The amount of investment required is in the vicinity of $400,000, and it is expected that earnings before tax in the first full year of operation should exceed $500,000. A positive cash flow in excess of $200,000 at the proposed level of operations is expected in the first year rising to in excess of $300,000 in subsequent years. Sales contracts exist, and more are potentially available, to support such level of operation."

It lists the aircraft available to the two companies as one Argosy, two Mark 31 Bristol freighters and one Mark 21 Bristol freighter and three DC3s. It stated "These two companies now operate as a single unit". (at p271)

49. The Proposal is a document of some twenty-seven pages and states that its purpose is " . . . to demonstrate the viability and potential return from obtaining a controlling equity interest in Air Express Ltd. (AEL) and BBA Cargo Pty. Ltd. (BBA)". The Proposal is important for a number of reasons, and it is necessry to state its contents in some detail. It stated that "The shares presently being offered are: - AEL - 148,120 ordinary shares of 50 cents each (97.45%) BBA - 89,808 ordinary shares of $2.00 each (100%)" and that "in due course steps will be taken to acquire the remaining 3,880 shares in AEL". The document began with an historical survey of the aviation industry in Australia and in particular gives the history of BBA and of Air Express. It referred to the existing charter licences and stated that for almost a decade Ipec had been seeking to obtain aircraft for use under a licence which it held, but it had not been permitted to import aircraft. It said that Ipec had been conducting discussions with BBA to purchase the Argosy aircraft. It then said:

"However, BBA appreciates that allowing a competitor into the field would affect the future viability of AEL and BBA. It is the only opportunity left for IPEC to obtain an existing aircraft which is already registered in this country, and it is essential for them to complete a deal with BBA. To this end IPEC have offered either $440,000 to purchase the Argosy or $150,000 to acquire all the shares of BBA which, as shown in Appendix 1, had a deficiency in nett worth of $704,924.00."

It stated that the price offered by Ipec for the Argosy was to be "compared with its ex Australian value of some $200,000. This would seem to indicate that the value of the import licence may be in the vicinity of $240,000, but the potential worth to the company, based on future profit projections show its worth to be much higher". (at p271)

50. Under the heading "Present Position Of The Companies" the Proposal stated:

"The operations of AEL and BBA have been merged during 1976 with a view to reducing staff in the areas of engineering, operations and management, thereby increasing potential profits of the group. The decision to ground the Argosy resulting in approximatey 30 staff being retrenched with the closure of BBA's engine overhaul workshop."

It then explained that all the employees with one exceptin were paid by Air Express and that BBA paid only the air navigation charges and insurance on its aircraft and that Air Express operated the DC3s for BBA at a rate of $200 per hour. It then stated that both companies were at that time operating profitably whereas twelve months earlier BBA had been operating at a loss of more than $2,000 per day. (at p272)

51. The Proposal contained the following further paragraphs relating to the Argosy aircraft and Ipec's endeavours to purchase it.

"For almost a decade Ipec have been seeking ways and means to obtain aircraft for the charter licence which they hold, but on every occasion the government has refused to grant the necessary import licences. For some time, they have been conducting discussions with BBA to purchase the Argosy and have made several firm offers. However, BBA appreciates that allowing a competitor into the field would affect the future viability of AEL and BBA. It is the only opportunity left for Ipec to obtain an existing aircraft which is already registered in this country and it is essential for them to complete a deal with BBA. To this end Ipec have offered either $440,000 to purchase the Argosy or $150,000 to acquire all the shares of BBA which, as shown in Appendix I, has a deficiency in net worth of $704,924.

In the event they obtain the Argosy aircraft, or the BBA shares, Ipec could then demonstrate to the government that it was impossible to operate a regular service without a similar backup aircraft. Almost certainly, if Ipec already owned or controlled a turbo-prop freighter, such as the Argosy, the government would be forced, because of operational requirements, to allow them to import a second aircraft. Alternatively, with ownership or control of the Argosy, Ipec could approach the government and agree to keep the Argosy grounded forever provided they were allowed to replace that aircraft with two new aircraft from overseas." (at p272)

52. The position of the Argosy was again mentioned in par. 69 as follows:
"The Argosy will be sold as soon as possible after the acquisition of the companies. An offer of $440,000 has been received from Ipec, but as previously noted in Part V, this would enable one of the companies' competitors to expand its operations which they are not otherwise able to do. Therefore it is intended to sell the aircraft overseas, recovering only the amount outstanding on the lease." (at p272)

53. The Proposal stated that the companies were short of working capital, needed short-term funds to pay creditors and that there were a number of "deferred borrowings" by the companies and that Astling had available to him an arrangement deferring those loans on an interest-free basis until October 1981. It then stated that Astling was "managing the combined AEL/BBA operations" and "holds options to acquire all or most of the shares". There is however no evidence that he ever held any options and the situation at the time of the Proposal was that he had already acquired but had not paid for the shares in both companies. (at p273)

54. Under the heading "Financial Forecasts" a summary of a year's operations based on the existing Bristols and DC3s and the acquisition of two Carvairs was set out showing a projected profit before tax of $532,900. The paragraph then stated "existing long term sales contracts have an escalation clause for fuel and payroll increases". There was no evidence of the existence of any long-term sales contracts. The only evidence as to such contracts was that in the air transport business freight forwarders did not enter into such contracts. The Proposal also stated that "in the past two months AEL and BBA have been approached by three major freight forwarders prepared to enter into long-term arrangements for the air freight of cargoes to Tasmania." If that was intended to convey that such forwarders were prepared to enter into long-term contracts it was not borne out by the evidence. Paragraph 72 of the Proposal was as follows:
"It is expected that the BBA tax losses would be available to the new shareholders. The tax losses amount to approximately $900,000 and if available would result in the companies paying little or no tax for at least two years based on the forecast profit and loss statement." (at p273)

55. The Proposal then set out the basis on which a 50 per cent interest might be obtained, viz.:

"Purchase of 50% equity in AEL and BBA $140,000 Interest-free loan to W.S. Astling for a period not exceeding 10 years 115,000 Short term loan at 10% interest per annum 150,000 ------ $405,000" ======

This involved the provision of only $150,000 in working capital to the two companies, but it was projected that it would enable them to earn a profit of $532,900 before tax. However it emerged that the situation was not as simple as that. (at p273)

56. The appendices to the Proposal comprise what were called "Combined Balance Sheets (Unaudited)" for the two companies as at 30th June 1976, and notes thereon, "Forescast Profit and Loss Statement (Full Years' Operations)" which set out the estimated revenue and "Cost of Sales" in respect of each of three categories of aircraft. In addition, there was a heading for "Selling and Administration Expenses" split up as between the three categories of aircraft upon a basis which is not explained in the Proposal but which in relation to most items splits the expenses equally between each category of aircraft. However smaller figures for salaries and wages are attributed to the Bristols and DC3s than to the Carvairs and larger figures for payroll tax are attributed to the Bristols and DC3s than to the Carvairs, a difference which is hard to follow. For some reason not explained, the whole of the long service leave provision and the motor vehicle expenses are attributed to the Bristols and DC3s, with none to the DC4s. The notes to the Forecast Profit and Loss Statement stated that one Bristol which had a structural fault, which was expected to be rectified, had been excluded from the Revenue Forecast, and that one DC3 had been excluded on the basis that at any particular point of time only two would be operating. The notes to the combined balance sheets included under the heading "Argosy" the following statment: "As it is intended to sell the Argosy for the amount outstanding on its lease it has been excluded from the balance sheet, as has the liability for future lease rentals" and in the notes to the "Forecast Cash Flow Statement" it is stated that "The intended sale of the Argosy has not entered in the cash flow calculations". (at p274)

57. Thus the financial statements in the Proposal arrive at estimated profits on the assumption that the Bristol freighters would remain in operation alongside the Carvairs for a full three year period. (at p274)

58. In the notes to the "Forecast Cash Flow" statement the following appeared under the heading "Income Tax" - "The accumulated losses of $921,781 are assumed to approximate the tax losses, and therefore little tax would be payable on the profit for years one and two", and the "Forecast Profit and Loss Statement (Full Year's Operations)" contains no provision for tax. Astling purported not to understand these statements and in fact said it was for Hilton to explain. Astling had insisted that the text was his and not Hilton's. I do not accept his evidence that he did not understand the statements, which were plainly inserted as an inducement to those to whom he intended to show the Proposal. Hilton said that he was responsible for the figures and not the text and was evasive in answering questions about these two statements. Neither was in cross-examination prepared to grasp the obvious nettle of the "continuity of business" test. (at p274)

59. The remaining relevant statement in the Proposal is that "approval for the leasing of the two Carvair aircraft for use by the combined operations of AEL and BBA had been obtained from the Department of Transport". (at p274)

60. On 22nd November 1976 Astling wrote on behalf of Air Express to the Secretary to the Department of Transport enclosing a formal application for a permit to import two Carvairs, having had earlier discussions with an officer of that Department. The nature of those discussions does not appear. That letter stated that "At very best the two Bristol MK 31 freighters cannot be expected to continue operating after the early part of 1978 due to unavailability of engine spares". On 25th November 1976 Astling again wrote to the Secretary, this time on behalf of BBA enclosing an application for a permit to import two Carvairs to replace the Argosy which he said had performed satisfacorily for eighteen months. The letter complained about the activities of Ipec and asserted that it was very undesirable for a freight forwarder to have a licence, notwithstanding that according to Astling's evidence BBA was then operating only as a freight forwarder, having leased its DC3s to Air Express. (at p275)

61. It is convenient at this stage to set out the position of the licences held by Air Express for the aircraft which it had in January 1977. The Air Navigation Regulations provide in Pt XIII for the licensing of aircraft for various operations. Regulation 191 defines (inter alia) "charter operations" as "the carriage of passengers or cargo for hire or reward to or from any place, but which are not conducted in accordance with fixed schedules to and from fixed terminals", or "carriage, in accordance with fixed schedules to and from fixed terminals, of passengers or cargo or passengers and cargo in circumstances in which the accommodation in the aircraft is not available for use by members of the public". Regulation 197 (1) provides that aircraft are not to be used in charter operations except in accordance with charter licences issued under the regulations. Sub-regulation (2) is as follows:
"A charter licence shall not be authority for the holder of such a licence to engage in charter operations on two or more occasions within any period of four weeks over a route or section of a route on which a regular public transport service is operating, but the Director-General may specially authorize the holder of such a licence to engage in such operations and that authority may be given subject to such of the conditions applicable in relation to the regular public transport service as the Director-General considers necessary." (at p275)

62. Sub-regulation (3) provides in effect that, in exercising his powers under sub-reg. (2) in relation to operations between the States, the Director-General shall "have regard to matters concered with the safety, regularity and efficiency of air navigation and to no other matters". (at p275)

63. At all material times Air Express held three licences which had been renewed from time to time. Licence No. 991 authorized charter operations between any of the States "for the carriage of passengers or cargo for hire or reward that are not conducted in accordance with fixed schedules to and from fixed terminals". That licence was subject to the condition that only Bristol Mk 21 and Mk 31 aircraft were to be used. Licence No. 2194 authorized charter operations of the same kind within any of the States, but subject to the same condition. Licence No. 2195 authorized "charter operations to or from the Australian Capital Territory or to or from the Northern Territory", subject to the same condition. Those three licences together covered between them charter operations throughout Australia. (at p276)

64. In addition Air Express had been given authority under reg. 197 (2) to engage in charter operations on two or more occasions within any period of four weeks over a section of a route on which a regular public air transport service was operating between Essendon and any Tasmanian airport or two or more Tasmanian airports. It appears that a number of ad hoc authorities had been granted in respect of flights which would otherwise contravene the restriction in reg. 197 (2). There is no reason to suppose that from time to time other authorities would not be granted for particular purposes but I do not believe Astling's statement that he could obtain such authorities simply by asking for them. (at p276)

65. The position with respect to Air Express's aircraft in January 1977 was expressed in somewhat different terms in various parts of the evidence. It seems however that the correct position was as stated in Astling's first affidavit in which it is said that, after the loss of one of the Mk 21 Bristols in May 1975, the other was grounded pending investigations, as a result of which load restrictions came into operation in January 1976 which made that aircraft unsuitable for regular use although it was later used for back-up purposes. One of the Mk 31 Bristols was grounded in January or February 1977 because of wing-spar fatigue and the other Mk 31 was subjected to load restrictions as from mid-January 1977. During 1977 Air Express used the second Mk 31 and the Mk 21 notwithstanding the load restrictions. Notwithstanding this the assumption made in the Proposal that two Bristol freighters would continue in operation for at least three years was carried forward into the calculation of the calimed loss in the particulars of damage. This was also contrary to what had been said by Astling in his letter to the Minister in November 1976 that at the very best the Bristols could not operate beyond January 1978 at the latest. (at p276)

66. Astling said that the phasing out of the Bristols had been discussed with the Minister in January and that he knew that the Minister would not permit their sale because of the problem of over-capacity. Notwithstanding this, he said at a later stage of his evidence that he proposed to sell the Mk 31 Bristols to BBA to replace the Argosy and one DC3. (at p277)

67. It appears that further discussion with the Minister took place before the announcement was made by the Minister on 17th February 1977. On 16th February the Minister wrote to Astling as follows:

"I refer to your recent letter wherein you mentioned that operational restrictions make it no longer economic for your Company to operate its three Bristol freighter aircraft - accordingly you had sought permission to import two Carvair aircraft. I understand that the Secretary of the Department has written you to say that he will issue the import permit immediately he has the necessary assurances from you that the three Bristol freighter aircraft being replaced will be permanently withdrawn from the Australian air transport fleet."

On 17th February 1977 the Secretary to the Department wrote to Astling as follows:

"I refer to your letter of 22 November 1976, and later correspondence and discussions, whereby you sought approval for the import of two Carvair freighter aircraft. I note that you have sent me a completed application form for that purpose. I am pleased to advise you that the Minister has raised no objections to the import of these aircraft provided they are on a firm replacement basis for the three Bristol freighter aircraft that are at presently (sic) with your Company. You might please let me know the arrangements that you propose for the concurrent disposal of the three Bristol freighter aircraft. When I am satisfied that the three Bristol freighter aircraft will definitely be removed from the Australian air transport scene I will sign the import permit forthwith."

In those letters there is no reference to the Carvairs being for the Bass Strait service, as there was in the Minister's statement in Parliament, but I am satisfied that the permits if they had been issued would have been subject to that condition. Astling said in evidence that he did not believe that the permits would have been so limited but I am unable to accept that evidence. Later events confirm that it was the intention of the Minister and the Secretary to the Department in January and February to restrict the operation to the Bass Strait service. In May 1977 Astling wrote to the Acting Minister for Transport setting out proposals for the purchase of two DC4 aircraft from Qantas and the import of two Carvairs. The Acting Minister approved the purchase of the DC4s on condition that if the decision of the High Court allowed the importation of the Carvairs, the import permits would not issue until the DC4s had been exported or disposed of to the satisfaction of the Secretary. A further condition was that the Bristols should be retired from service in accordance with the Secretary's directions. Astling acknowledged that the Department of Transport also imposed the condition that the DC4s were to be confined to the Bass Strait service. Arrangements were subsequently made by Air Express to purchase the DC4s from Qantas. They came into use by Air Express towards the end of 1977. In March 1978 Air Express applied for a permit to import three Carvairs, indicating to the Minister that it was intended to continue to operate one of the Bristols. The Minister replied on 22nd March 1978 stating that he was prepared to agree only to permits for two Carvairs to operate the Bass Strait service. He also said that the conditions imposed at the time of the purchase of the Qantas DC4s still applied. (at p278)

68. Although I am satisfied that the issue of the import licences would have been subject to that condition, it seems likely that occasional departures from it would have been permitted for special purposes. (at p278)

69. In late November or early December 1976 Astling approached British Air Ferries Limited with a view to the acquisition of two Carvairs. By a document dated 8th December 1976 entitled "Heads of Agreement" an arrangement was made for the purchase of two Carvairs fitted with the equipment listed for a price of 256,666 pounds stg. with delivery to be made by the end of January 1977, but no list of equipment was attached to the document tendered. British Air Ferries was also to sell half of its remaining spare parts and spare engines for 47,500 pounds stg. The arrangement was subject to the proviso that it should lapse if a deposit of 32,000 pounds stg. was not paid within twenty-one days. No payment was in fact made within that time. (at p278)

70. At some stage in December 1976 Astling entered into discussions with a company named Bill Patterson-Cheney Ltd. ("BPC") which had evidently expressed interest in the Proposal. On 29th December 1976 BPC made a payment of $5,000 to Astling which was expressed to be "deposit on contract". That cheque was enclosed in a letter which stated that BPC was interested in investigating the Proposal with a view to reaching agreement concerning the purchase. The letter concluded by saying "As a tangible indication of our intentions, we enclose a cheque for $5,000 which is to be refunded in the event of us not being able to finalise negotiations for the purchase within two months". Discussions continued during January and on 25th January BPC wrote to Astling stating that it was prepared to enter into an arrangement "for the acquisition of the two companies" and the terms and conditions were set out. They required the formation of a holding company to be called Bill Patterson-Cheney Aviation Pty. Ltd., which company would acquire all the shares in Air Express and BBA. The remaining terms offered may be summarized as follows: BPC was to take 60 per cent of the 50 cent shares in the holding company, to be fully paid with a par value of $168,000 and Astling was to take up 40 per cent with a par value of $112,000 but paid up to 11 cents. That 11 cents was to be treated as paid by "using $24,640 of the $25,000 lodged as a deposit for the purchase of the shares in Air Express and BBA". The balance was to be payable at any time within ten years subject to a minimum of 30 per cent of all dividends being applied in that way. Suggested terms of employment of Astling as Managing Director were set out, as well as arrangements to be made if Astling wished to sell his shares. BPC was to provide the holding company with the balance of $76,106 necessary to purchase the shares in Air Express and BBA, and a loan of $150,000, repayment to be secured by charges over the assets of the companies. These arrangements were subject to written approval from the Department of Transport and the Customs Department for immediate import of two Carvairs, finalization of puchase arrangements for two Carvairs, and to completion of various arrangements to replace existing securities granted to the A.N.Z. Bank and the offer of security for the deferred borrowings from Signet Insurance Holdings Pty. Ltd., Mr. Brain and Donlin Investments Pty. Ltd. (at p279)

71. It is apparent from the letter that BPC was dealing with Astling upon the assumption that he was not already the owner of the shares in Air Express and BBA but had an option or some contract under which he had paid only a deposit and that the shares in these companies were to be transferred from their former holders direct to the new holding company. (at p279)

72. The witness Gibson, the Finance Director of BPC, said that Astling had objected to the requirement that BPC should have 60 per cent of the shares and had initially insisted on a 50/50 arrangement. Gibson said that BPC would not agree to any figure lower than 51 per cent. He said twice in cross-examination that Astling had not agreed to the 51 per cent prior to 17th February. In re-examination however he said that, although there was nothing in writing, he thought that Astling had agreed to the 51 per cent and that BPC would not have proceeded unless he had. In answer to a further question he said "at that time for us to have forwarded the deposit there must have been discussions that we were able to have 51 per cent control". (at p279)

73. I am satisfied that Gibson was an honest and truthful witness to the best of his recollection, and was careful in expressing his recollection. I am disposed to think that his statement that BPC would not have paid the deposit unless Astling had agreed to the 51 per cent required was more reconstruction than recollection but it seems very unlikely that BPC would have paid some $75,000 as deposit on the Carvairs unless they were satisfied that they could obtain control. In the end I do not find it necessary to resolve this conflict between the various passages in Gibson's evidence because it is clear on any view that no final agreement had been reached and that there was no more than a proposed agreement still in the course of negotiation. A number of matters were still outstanding, including the preparation of a satisfactory written contract and the finalisation of the position of the existing creditors, perhaps including the former shareholders. Gibson said that he understood that there was an arrangement that the loans by the former shareholders would not bear interest and would not be due for repayment until 1981 but evidently expected to have to provide security for such repayment. The question of the manner in which the acquisition of the Carvairs was to be arranged had not been finalised. BPC had provided three quotations with respect to leasing but no decision had been made. The position of the licences held by Air Express and BBA was still to be checked and Gibson said there would have to be a formal agreement before BPC would consider itself bound. Gibson was asked about the announcement that Ipec was to have a licence to import two Argosies and said that BPC had been concerned about that. He said that BPC had not heard of the possibility of Ipec obtaining an import permit until the Minister's announcement on 17th February. He said BPC would not have refused to go ahead on that ground because they understood that the Argosy would be permitted to operate only between Melbourne and Tasmania, whereas Air Express was licensed to operate throughout Australia. He said however that the latter requirement was not essential so far as BPC was concerned, a statement which is hard to reconcile with his explanation of why the competition was not regarded more seriously. He also said that the company ceased negotiations purely because of the injunction and the fact that Air Express was unable to bring the Carvairs into Australia. It is apparent that negotiations were resumed with British Air Ferries after BPC had expressed interest in the Proposal and presumably also after the letter of 25th January from BPC to Astling. In the result BPC paid the balance of deposit of 50,000 pounds sts on 17th February 1977. (at p280)

74. It is to be observed that the deposit required under the Heads of Agreement of 8th December 1976 was 32,000 pounds stg. The difference is to be accounted for by the fact that the amount paid was a deposit on three Carvairs, as appears from BPC's letter to Astling of 23rd February 1977 and British Air Ferries letter to Astling dated 1st March 1977. Astling said in his first affidavit that an additional Carvair was ordered for BBA in the expectation that it would obtain an import permit. It does not appear when this was done. (at p281)

75. It was submitted on behalf of Ansett that if damage was suffered by Air Express that damage was not a consequence of the injunction but a consequence of the litigation itself. I have already indicated that Air Express did not become a party to the proceedings until 25th February on which date the undertaking was given to the Court in respect of such damage as Air Express might suffer by reason of the order made on that day continuing the injunction. It is plain that the negotiations with Bill Patterson-Cheney had been broken off not later than 23rd February. The breaking off of those negotiations thus took place prior to the giving of the undertaking to Air Express and it is necessary to consider what the situation was on 25th February and thereafter. It was argued on behalf of Ansett that if the injunction had been dissolved at that point but the litigation had otherwise continued, as it is clear that it would have done, then the probability was that the defendant Halton, as Secretary to the Department of Transport, although by then having the necessary authority under the Customs (Prohibited Import) Regulations, would not in fact have signed the relevant permission because to do so would have been to pre-empt the decision of the Court and perhaps to subject the Commonwealth to a substantial claim for damages for breach of the Airlines Agreements. It is plain that an amendment of the proceedings against the Commonwealth would have been sought to add a claim for damages for breach of contract, the original claim having been only for an injunction to restrain a threatened breach. It does not follow from the fact that it was ultimately held that what was threatened would not have been a breach of contract that if the injunction had not been extended on 25th February the defendant Halton would have issued the written permission, either then or after the regulations were amended on 2nd March. The situation was analogous to that dealt with by Myers C.J. in Newman Bros. Ltd. v. Allum, S.O.S. Motors Ltd. (In liq.) (1935) NZLR Suppl, at p18 in the passage which I have quoted above. In my opinion it is probable that the Secretary would not have pre-empted the decision of the Court in a situation in which the breach alleged to be involved in the grant of the permission would be one which was not reversible because once in the country the aircraft could be used for interstate trade. Unless conditions were imposed on the importation of the aircraft which would have required their re-export if it turned out that Ansett's claim was right, there would be no way in which the Commonwealth could have restored the situation to that which prevailed immediately prior to the commencement of the proceedings. If that had been proposed, it would be very unlikely that the aircraft would have been imported because finance would not have been available on that basis. Although it is perhaps going too far to use the word "inconceivable", as did Myers C.J., I consider that it is probable that the defendant Halton would not have issued the written permission while the litigation was continuing. (at p282)

2. The claim for damages arose out of the decision of the Full Court in Ansett Transport Industries (Operations) Pty. Ltd. v. The Commonwealth (1977) 139 CLR 54 . Ansett had commenced proceedings against the Commonwealth and Mr. Halton by writ issued on 18th February 1977. The writ was issued following the making of a statement in the House of Representatives on 17th February by the Minister for Transport in which he said that he had approved the importation of two Carvair aircraft by Air Express and two Argosy aircraft by Ipec for the carriage of air freight between the mainland and Tasmania. The importation of the aircraft would enable Air Express and Ipec to compete with Ansett in the carriage of air freight on the Tasmanian route. At the time, the Customs (Prohibited Imports) Regulations prohibited the importation of aircraft unless the importer produced to the Collector of Customs "the permission in writing of the Director-General of Civil Aviation to import the goods". (at p321)

3. On 18th February, Aickin J. made an order ex parte restraining the two defendants from granting the written permission until 4.30 p.m. on Tuesday, 22nd February. The ex parte injunction was granted on an undertaking in the usual form to "abide by any order which the Court or a Justice may make as to damage in case the Court or a Justice shall hereafter be of the opinion that the defendants shall have sustained any, by reason of this Order, which the plaintiff ought to pay". (at p321)

4. On Tuesday, 22nd February, on an application by Air Express and Ipec, the Chief Justice ordered that they be added as defendants to the writ. He continued the existing injunctions until Friday, 25th February. On that day Air Express and Ipec asked for, and obtained, undertakings in terms similar to those already given in respect of the original defendants. The Chief Justice continued the injunctions on those undertakings until the suit was disposed of or further order. On the same day the writ was amended by the addition of Air Express and Ipc as defendants and they entered appearances. By virtue of O. 16, r. 4 (3) the proceedings against Air Express are deemed to have commenced on that day. (at p321)

5. Ansett's statement of claim made no allegations and sought no relief against Air Express or Ipec. The two original defendants delivered a defence and demurrer to the statement of claim, as did Air Express and Ipec. On 4th March the Full Court reserved judgment on the demurrers. On 4th April Air Express applied for dissolution of the injunction. On 5th May the Chief Justice refused the application with costs. (at p322)

6. The day before argument on the demurrers began in the Full Court on 2nd March 1977, the Customs (Prohibited Imports) Regulations were amended by the substitution of the words "Secretary to the Department of Transport" for "Director-General of Civil Aviation" in the provision in the Third Schedule relating to the importation of aircraft. The amendment made it clear that by 2nd March 1977 the Secretary to the Department of Transport was authorized to issue the written permission and that the objection based on his lack of power could no longer be maintained. (at p322)

7. Aickin J. held that "on 18th February 1977 and thereafter until 2nd March 1977 there was no such office as that of Director-General of Civil Aviation and no person could issue the relevant permission in writing". His Honour noted that if there was no person who could exercise the function of granting the necessary permission under the Regulations, then, if the proceedings had been dealt with finally when Ansett gave its undertaking on 25th February 1977, Ansett would have succeeded in obtaining a final injunction. But this conclusion is not material to the issue which presently arises on the appeal. (at p322)

8. Although the injunction restrained the original defendants and did not restrain Air Express, Aickin J. considered that the undertaking as to damages could be enforced by Air Express as a defendant if it sustained damage in consequence of the injunction. In this his Honour was plainly right. The undertaking can be enforced by any defendant who suffers damage as a result of the injunction (Tucker v. New Brunswick Trading Co. of London (1890) 44 ChD 249, at p 252 ). (at p322)

9. Aickin J. accepted that damages should be awarded to a defendant for breach of an undertaking given to the court if, in the light of the final judgment, it transpires that an interlocutory judgment should not have been granted. Authority for this principle is provided by Novello v. James (1854) 5 De GM &G 876 (43 ER 1111) , where Knight Bruce and Turner L.JJ. concluded that the fact that the law was doubtful at the time when the interlocutory injunction was granted was not a reason for not awarding damages (1854) 5 De GM &G, at pp 878-879 (43 ER, at p 1112) . To the same effect was Graham v. Campbell (1878) 7 ChD 490, at p 494 , where the Court of Appeal (James, Cotton and Thesiger L.JJ.) said:

"If any damage has been occasioned by an interlocutory injunction, which, on the hearing, is found to have been wrongly asked for, justice requires that such damage should fall on the voluntary litigant who fails, not on the litigant who has been without just cause made so."

And in Griffith v. Blake (1884) 27 ChD 474 the Court of Appeal explicitly rejected the suggestion made by Jessel M.R. in Smith v. Day (1882) 21 ChD 421, at pp 424-425 , that damages for breach of an undertaking will only be awarded when the interim injunction has been procured by a false statement or suppression of material information and that damages will not be awarded when the injunction has been wrongly granted because the court made a mistake of law (1884) 27 ChD, at pp 476-477 . (at p323)

10. There are statements which indicate that the court has a discretion to decide whether it shall order an inquiry for damages for breach of an undertaking given to the court - see Smith v. Day (1882) 21 ChD, at pp 425, 427 . But the discretion is to be exercised according to well-settled principle. Generally speaking, so long as the claim for damages is not trivial or trifling an inquiry should be directed and the defendant will be entitled to recover the loss which is the natural consequence of the grant of the injunction. The Supreme Court of Canada has held that the court will be entitled to refuse a reference as to damages where there are special circumstances, i.e. when the plaintiff is a public body and acts in the public interest to hold the situation until the rights are determined or when the defendant, having succeeded on technical grounds, has been guilty of misconduct (Vieweger Construction Co. Ltd. v. Rush &Tompkins Construction Ltd. (1964) 48 DLR (2d) 509, at p 519 ). It has not been suggested that there are any special circumstances in the present case. (at p323)

11. Aickin J. drew a distinction between damage flowing from the litigation and damage flowing from the interlocutory injunction. The latter, but not the former, he thought, was compensable pursuant to the undertaking. In making this distinction his Honour followed what was said by Britton J. in Douglass v. Bullen (1913) 12 DLR 652, at p 655 and by Myers C.J. in Newman Bros. Ltd. v. Allum, S.O.S. Motors Ltd. (No. 2) (1935) NZLR Suppl 17, at p 18 . See also Gault v. Murray (1892) 21 OR 458 . Newman Bros. has some similarity to the present case. There, an interim injunction was granted restraining a licensing authority from hearing or adjudicating upon an application for transfer of a passenger-service omnibus licence. The Chief Justice said (1935) NZLR Suppl 17, at p 18 :
"If it appears that no damage is proved occasioned by the injunction as distinct from the detriment arising from the litigation, the defendants are not entitled to an inquiry as to damages on an application such as this . . . It is inconceivable . . . that Mr. Allum as a quasi-judicial authority, after being served with a statement of claim in which the validity of his grant of the renewal of the license and his other actions in connection with the applications before him were attacked would have proceeded, even though there had been no interim injunction to adjudicate further upon the matter until the main action had been decided. My inclination of opinion, therefore, is that it cannot be said that the defendants have sustained damage by reason of the interim injunction which the plaintiff ought to pay." (at p324)

12. The distinction between damage caused by the injunction and damage which flows from the litigation is, I think, well founded on the language in which the usual undertaking as to damages is expressed. The party seeking damages must show that he has sustained damage "by reason of the Order". The words cannote a causal connexion between the damage and the interim injunction. (at p324)

13. English law has not adopted a uniform approach to causation. Instead, it has tended to take refuge in the notion that causation is very largely a question of fact. But the many statements to this effect which are to be found in the decided cases do not attempt to deny the fact that the common law has applied a variety of theories and standards of causation, in each instance applying that which is in point of policy the most apt or appropriate to the question which arises for decision. (at p324)

14. For this reason little is to be gained in the present case from an examination of the myriad authorities which deal with causation of damage in contract, tort and other situations many of which were pressed upon us in argument. We are better advised to look to the purpose which the undertaking as to damages is designed to serve and to identify that causal connexion or standard of causal connexion which is most appropriate to that purpose. The object of the undertaking is to protect a party, normally the defendant, in respect of such damage as he may sustain by reason of the grant of the interim injunction in the event that it emerges that the plaintiff is not entitled to relief. It is no part of the purpose of the undertaking to protect the defendant against loss or damage which he would have sustained otherwise, as for example, detriment which flows from the commencement of the litigation itself. That is loss or damage which the defendant must bear himself, as he does when no interim injunction is sought or granted. Consequently, it is for the party seeking to enforce the undertaking to show that the damage he has sustained would not have been sustained but for the injunction. (at p325)

15. Air Express does not deny that a distinction is rightly to be made between damage caused by an injunction and damage which flows from the litigation. However, it asserts that the distinction in most cases is of theoretical significance only and that where, as here, an injunction restrains the doing of an act, the inference to be drawn is that damage flowing from the non-performance of the act is to be attributed to the injunction, not to executive action which might have taken place independently had the injunction not been granted. It is upon this submission that the outcome of the appeal substantially hinges, because Aickin J. held that such loss as Air Express sustained was damage flowing from the litigation, not from the injunction, inasmuch as the original defendants would have refrained from granting permission to import the two Carvair aircraft once Ansett commenced its action seeking substantive relief. (at p325)

16. Air Express claimed damages in the sum of $2,427,000. This sum consisted of an amount of $2,127,000 representing estimated profits for five years on the footing that Air Express would have been able to operate the two Carvairs, less estimated recovery. In making this estimate Air Express took into account loss of customers, damage to its long history of service and reliability, inhibition of its natural expansion, inability to proceed with a planned financial restructuring of the company which was stopped by the injunction, and other factors which I need not mention. The calculation was based on the fact that the two new aircraft would replace two Bristol freighters owned by Air Express which were nearing the end of their economic life. The additional amount of $300,000 reflected loss due to deteriorating cash flow of Air Express occasioned by suppliers changing their terms to cash on delivery in lieu of normal trading terms. Aickin J. did not accept these figures. He said that, if he had taken the view that any damage was caused by the injunction, he would have awarded an amount of $1,745,754 consisting of -
Loss of deposit on Carvair aircraft $50,754
Loss of net earnings in 1977 and 1978 $695,000
Additional damages $1,000,000 (at p326)

17. At all material times Air Express held three licences entitling it to engage in commercial air navigation: (a) two air charter licences authorizing charter operations "for the carriage of passengers or cargo for hire or reward that are not conducted in accordance with fixed schedules to and from fixed terminals"; they were subject to the condition that only Bristol Mark 21 and Mark 31 aircraft be used; and (b) another air charter licence authorizing "charter operations to or from the Australian Capital Territory or to or from the Northern Territory", subject to the same condition. In addition Air Express had been given authority under reg. 197 (2) to engage in charter operations on two or more occasions within any period of four weeks over a section of a route on which a regular public air transport service was operating between Essendon in Victoria and any Tasmanian airport or two or more Tasmanian airports. A number of ad hoc authorities had been granted for flights which would otherwise contravene the restriction in reg. 197 (2). (at p326)

18. At the beginning of 1975 Air Express had two Mark 21 and two Mark 31 Bristol freighters which carried freight between Essendon and northern Tasmanian ports. In May 1975 one Mark 21 was lost in an accident. (at p326)

19. In 1975 William Sinclair Astling became Managing Director of Air Express. At about the same time he joined BBA Air Cargo Pty. Ltd. ("BBA"), a former competitor of Air Express. It owned an Argosy freighter and three DC3 aircraft. By 1976 Astling was in control of the operations of both companies, the principal shareholder in each company being Signet Insurance Holdings Pty. Ltd. In the same year Uplift Pty. Ltd., a company owned by Astling and his wife, purchased the share capital in Air Express and BBA. (at p326)

20. With the assistance of Mr. Hilton, an accountant, Astling prepared a document described as "Proposal for acquisition of an equity interest in Air Express Limited and BBA Air Cargo Pty. Ltd." for circulation to persons who might be interested in taking up a controlling interest in the two companies. The document stated that the operations of the two companies had been merged and that both companies were operating profitably. It said that the amount of the investment sought was $400,000 and that earnings before tax in the first full year of operations should exceed $500,000. It went on to say that the companies were short of working capital, needed short-term funds to pay creditors and that there were a number of "deferred borrowings" by the companies and that Astling had available to him an arrangement deferring those loans on an interest-free basis until October 1981. (at p327)

21. A summary of a year's operations based on the existing Bristols and DC3s and the acquisition of two Carvairs showed a projected profit before tax of $532,900. This calculation was evidently made on the footing that the Argosy freighter would be sold. It had been said that an offer of $440,000 had been received from Ipec for the Argosy. However, it was proposed to sell the aircraft overseas, recovering only the amount outstanding on the lease, as a sale of the aircraft to Ipec would give that company an undesirable advantage in the Australian air freight market. (at p327)

22. The proposal was that a 50 per cent equity in the two companies should be acquired for $140,000 and that the purchaser should make an interest-free loan to Astling for ten years in an amount of $115,000 and a further short-term loan at 10 per cent per annum in the sum of $150,000, the latter constituting provision of working capital to the two companies. (at p327)

23. In support of its application to import two Carvairs, Air Express informed the Department of Transport that the two Bristol Mark 31 freighters could not be expected to continue operating after the early part of 1978 due to unavailability of engine spares. As I have said, one Mark 21 Bristol was lost in May 1975. Moreover, it appeared that the other Mark 21 was grounded pending investigations as a result of which load restrictions came into operation in January 1976 which made that aircraft unsuitable for regular use, although it was later used for back-up purposes. One of the Mark 31 Bristols was grounded in January or February 1977 because of wing-spar fatigue and the other Mark 31 was subject to load restrictions in January 1977. The second Mark 31 and the Mark 21 were used in 1977 notwithstanding the load restrictions. (at p327)

24. On 16th February the Minister wrote to Astling and stated that the Secretary to the Department had written to Air Express to say that the import permit for the two Carvairs would issue immediately the Secretary had the necessary assurances that the three Bristol freighter aircraft being replaced would be permanently withdrawn from the Australian air transport fleet. In fact the Secretary wrote on 17th February 1977 to Astling asking for information as to the arrangements proposed for the current disposal of the three Bristol freighters, stating that when he was satisfied that they would definitely be removed from the Australian air transport scene he would sign the air permit forthwith. (at p327)

25. Aickin J. found that if the permits had been issued they would have been subject to a condition that the Carvairs were to be used on the Bass Strait service exclusively. (at p328)

26. In May 1977 Astling wrote to the Acting Minister for Transport setting out proposals for the purchase of two DC4 aircraft from Qantas and for the import of the two Carvairs. The Acting Minister approved the purchase of the DC4s on condition that if the High Court allowed importation of the Carvairs, the import permits would not issue until the DC4s had been exported or disposed of to the satisfaction of the Secretary. A further condition was that the DC4s were to be confined to the Bass Strait service. Subsequently arrangements were made by Air Express to purchase the DC4s from Qantas and they came into use by Air Express towards the end of 1977. In March 1978 a further application by Air Express for a permit to import three Carvairs was refused, the Minister stating that he was prepared to agree only to permits for two Carvairs to operate the Bass Strait service. (at p328)

27. As will be seen, the conclusion reached by Aickin J. turns partly on the state of the negotiations undertaken by Astling at the end of 1976 and in the beginning of 1977 with a view to the acquisition of two Carvairs. At the end of 1976 Astling approached British Air Ferries Ltd. ("BAF"). An arrangement entitled "Heads of Agreement" dated 8th December 1976 was made with BAF for the purchase of two Carvairs fitted with certain equipment for a price of 256,666 pounds stg. with delivery to be made by the end of January 1977. However, the list of equipment was not settled and the arrangement was subject to the proviso that it should lapse if a deposit of 32,000 pounds stg. was not paid within twenty-one days of 8th December 1976. No payment was in fact made within that time. (at p328)

28. At some stage in December 1976 Astling entered into discussions with Bill Patterson-Cheney Ltd. ("BPC"). On 29th December 1976 BPC made a payment of $5,000 to Astling which was expressed to be "deposit on contract". BPC's covering letter stated that the cheque for $5,000 was to be refunded in the event of negotiations for the purchase of an interest in the two companies not being finalized within two months. On 15th January 1977 BPC wrote to Astling setting out the terms and conditions on which it was prepared to enter into an arrangement for the acquisition of two companies. They required the formation of a holding company, Bill Patterson-Cheney Aviation Pty. Ltd., which would acquire all the share capital in Air Express and BBA. BPC was to take 60 per cent of the 50 cent shares in the holding company, to be fully paid with a par value of $168,000, and Astling was to take up 40 per cent with a par value of $112,000 but paid up to 11 cents. The 11 cents was deemed to be paid by "using $24,640 of the $25,000 lodged as a deposit for the purchase of the shares in Air Express and BBA". The balance was to be payable at any time within ten years subject to a minimum of 30 per cent of all dividends being applied in that way. Astling was to be appointed as Managing Director. BPC was to provide the holding company with the balance of $76,106 necessary to purchase the shares in Air Express and BBA and a loan of $150,000, repayment to be secured by charges over the assets of the companies. These arrangments were subject to written approval from the Department of Transport and the Customs Department for the immediate importation of the two Carvairs, finalization of purchase arrangements for the two aircraft and to completion of arrangements to replace existing securities granted to the A.N.Z. Bank, and to certain other arrangements. (at p329)

29. Mr. Gibson, the Finance Director of BPC, who, according to his Honour, "was an honest and truthful witness to the best of his recollection, and was careful in expressing his recollection", stated that Astling had objected to the requirement that BPC should have 60 per cent of the capital and had initially insisted on an equal division of capital. However, Gibson said that BPC would not accept a figure lower than 51 per cent. It is not clear on his evidence whether Astling had agreed to BPC having a 51 per cent interest. Aickin J. found it unnecessary to make a finding on this issue of fact because, as he said, "it is clear on any view that no final agreement had been reached and that there was no more than a proposed agreement still in the course of negotiation". His Honour observed that there were a number of matters still outstanding, "including the preparation of a satisfactory written contract and the finalisation of the position of the existing creditors, perhaps including the former shareholders". His Honour also noted that the manner in which the acquisition of the Carvairs was to be arranged had not been finalized. BPC had provided three quotations with respect to leasing but no decision had been made. The licences held by Air Express and BBA were still to be checked and a formal agreement had to be made before BPC would consider itself bound. (at p329)

30. Gibson stated in evidence that BPC ceased negotiations solely by reason of the injunction and the fact that Air Express was unable to bring the Carvairs into Australia. Negotiations with BAF for the purchase of the Carvairs were resumed after BPC expressed interest in the Proposal. On 17th February 1977 BPC in fact paid the balance of the deposit of 50,000 pounds stg. payable to BAF. (at p329)

31. The deposit required under the Heads of Agreement of 8th December 1976 was 32,000 pounds stg. The amount of the deposit was increased because in the meantime an additional Carvair had been ordered for BBA in the expectation that an import permit would be obtained for it. (at p330)

32. Aickin J. found that the negotiations with BPC had been broken off not later than 23rd February, prior to the giving of the undertaking as to damages to Air Express on 25th February. (at p330)

33. His Honour, returning to the question whether the import permit would have issued had no injunction been granted, said:
"In my opinion it is probable that the Secretary would not have pre-empted the decision of the Court in a situation in which the breach alleged to be involved in the grant of the permission would be one which was not reversible because once in the country the aircraft could be used for interstate trade. Unless conditions were imposed on the importation of the aircraft which would have required their re-export if it turned out that Ansett's claim was right, there would be no way in which the Commonwealth could have restored the situation to that which prevailed immediately prior to the commencement of the proceedings. If that had been proposed, it would be very unlikely that the aircraft would have been imported because finance would not have been available on that basis. Although it is perhaps going too far to use the word 'inconceivable', as did Myers C.J., I consider that it is probable that the defendant Halton would not have issued the written permission while the litigation was continuing." (at p330)

34. His Honour based his conclusion upon the substantial probability that neither the Minister nor the Secretary would seek to pre-empt the decision of the Court and subject the Commonwealth to the risk of a substantial claim for damages. (at p330)

35. Aickin J. then came back to the contract under negotiation with BPC. He observed that it was not a contract to which Air Express would have been a party and that it would not directly affect Air Express. After referring to Air Express's need for working capital, for finance with which to acquire the aircraft, his Honour said:
"These matters were all subject to a variety of contingencies which made it by no means certain that the aircraft would in fact become available, although it may be said that it was more likely than not that the outstanding problems would be solved and satisfactory arrangements made for hiring aircraft. BPC's estimate of what its commitment would have been was approximately $1 million, being $405,000 according to the Proposal and some $560,000 for leasing charges or purchase of the aircraft. There is no doubt that all the facts would have been most carefully checked before any agreement was entered into." (at p330)

36. His Honour went on to say:
"These considerations also lead to the conclusion that it was not the continuance of the injunction which brought about such damage as Air Express may have suffered but was the litigation itself." (at p331)

37. From what I have already said it will be seen that Aickin J. advanced two grounds for his conclusion that the damage was caused, not by the injunction but by the litigation: (1) that the Minister and the Secretary to the Department would have refused to issue the written permission to import the aircraft had the injunction not been granted; and (2) that the negotiations between Astling and BPC, which were subject to a number of contingencies, had been broken off not later than 23rd February. As I understand his Honour's judgment, he was saying that had the litigation and the injunction not supervened, the likelihood was that outstanding difficulties would have been overcome and satisfactory arrangements would have been made for the hiring of the aircraft. By implication his Honour was also saying that the grant of the injunction did not cause the breaking off of the negotiations. They were terminated by reason of the litigation. By linking this factor to his conclusion, his Honour indicated that the termination of the negotiations was also a detriment due to the litigation. (at p331)

38. It is important to a proper understanding of the first ground to appreciate that his Honour was not denying that the immediate reason for the non-issue of the written permission was the grant of the injunction. His Honour was saying that although the original defendants obeyed the injunction by not issuing the permission, the injunction was not the effective or operative cause, for the reason that, even if there had been no injunction, they would have taken the same course. This finding was not based on evidence given by Halton. He was not called as a witness. The finding was made by reference to considerations which might have influenced Halton to make a decision one way or the other on the hypothesis that no injunction was granted. (at p331)

39. An examination of the question must begin with the fact that on 16th February 1977 the Minister wrote to Astling stating that the Secretary would issue an import permit on receipt of the necessary assurances. On 17th February the Secretary wrote to the like effect and the Minister announced in Parliament that a written permission to import two Carvairs would be granted. There is an irresistible inference that the subsequent non-issue of the written permission was due to a fresh decision on the part of the Secretary, whether acting on his own motion or at the instigation of the Minister or of the Government. In the absence of any other evidence there was a compelling inference that the fresh decision was taken in response to the grant of the injunction. Two events supervened after the Minister's announcement. One was the commencement of the litigation, the other was the grant of the injunction. The commencement of the litigation did not prohibit the issue of the permission to import. The injunction did. It was therefore to be inferred that the decision to refrain from issuing the permission was taken in obedience to the injunction. (at p332)

40. But is it enough for Air Express to show that the decision not to issue the written permission to import the two Carvairs was taken by way of response, or in obedience, to the injunction? Air Express must show that it has sustained damage "by reason of" the injunction. Air Express bears the onus of showing the necessary causal connexion in the sense already explained between the damage and the injunction, that is, that the damage would not have been sustained but for the injunction. The crucial question is whether by establishing the sequence of events it has done enough to discharge that onus by making out a prima facie case. (at p332)

41. Unless the circumstances indicate otherwise, when it appears that damage flows from the non-performance of an act and the performance of that act has been restrained by an interim injunction, the inference will generally be drawn that the damage has been occasioned by the injunction. That, I think, is the conclusion which I would draw here if the non-issue of the import permit was all that was in question. On the view which I take of the evidence, the circumstances do not indicate that the non-issue of the permit was caused by the litigation. Ansett might have made out countervailing circumstances by proving that it was Government policy to leave the question to the Court once proposed Government action is challenged in legal proceedings, or perhaps by calling Halton to give evidence of what he would have done had the injunction not been granted. Ansett took neither of these courses. Instead, it invited the primary judge to speculate on what would have occurred had no injunction been granted. I use the word "speculate" advisedly because, as it seems to me, it is mere conjecture to attempt to identify the factors which the Secretary would have regarded as relevant to the making of a decision and to assess the weight or force which he would have attached to the factors which he considered relevant in the absence of any evidence from him. (at p332)

42. Had he applied his mind to the hypothetical question whether to proceed with the issue of the written permission on the assumption that proceedings had been commenced by Ansett but no interlocutory injunction had been granted, he would have encountered a number of competing considerations. On the one hand, he would not have wished to pre-empt a decision by the Court, more particularly when importation of the aircraft would have put it beyond the capacity of the Commonwealth to deny authority to Air Express to use the aircraft in interstate air navigation in accordance with the conditions of the permission to import. On the other hand, in the absence of an injunction, the Secretary was entitled to grant the permission. He was free to do so, subject to the risk that if his action constituted a breach of contract, he thereby subjected the Commonwealth to liability for damages to Ansett. Whether he was prepared to take that risk depended on several factors of which there is no evidence. They include the nature of the legal advice which he received and the importance which he and the Minister (or perhaps the Government) attached to the provision of additional air freight services between the mainland and Tasmania. But one thing we do know is that the Secretary and the Minister (possibly with Cabinet approval, because it is a question which, having regard to its importance, one would expect to be taken to Cabinet) had already decided to embark on a course which would expose the Commonwealth to liability in damages in the event that this Court subsequently held that the proposed action constituted a breach of the "Two Airlines Agreement". It can scarcely be supposed that they had not taken into account the possibility, indeed the probability, that Ansett would commence proceedings. It is almost inevitable that they had decided to proceed upon the announced course with this eventuality in mind. It is inconceivable that the decision taken on 16th February or earlier was taken without legal advice. (at p333)

43. When all these matters are taken into account I do not find it "inconceivable", to use the word favoured by Myers C.J. in the Newman Bros. Case (1935)NZLR Suppl 17, at p 18 , that the Secretary might proceed to issue the written permission to import in the absence of an injunction. I regard Myers C.J.'s observations, not as the enunciation of a general principle, but as the expression of his reaction to a particular factual situation which is very different from the instant case. (at p333)

44. Ansett sought to highlight the point by saying that the question should be considered on the footing that there was no entitlement to issue an import permit until the regulations were amended on 1st March and that the issue was: Would the Secretary have granted the permit on the eve of the Court commencing the hearing of the demurrer which was to dispose of the substantial question in the case? I do not find this way of expressing the question more favourable to Ansett. It seems to me to invite the likely response from the Secretary, "Unless restrained by injunction I shall carry into effect the decision already made. I shall grant permission to import the two Carvairs on the conditions stated and on receipt of the necessary assurances." (at p334)

45. However, my preferred view is that the materials to which I have referred, regarded as a foundation for predicting the likely response of the Secretary and the Minister, give rise to speculation and not to legitimate inference. In the result, without the benefit of evidence from the Secretary and perhaps from the Minister, we are left to speculate as to the decision which the Secretary would have made, had no injunction been granted. (at p334)

46. There remains to be considered the effect of the breaking off of the negotiations with BPC and his Honour's finding that it was likely that outstanding problems would be solved and satisfactory arrangements made for hiring aircraft. It seems to me that in making this finding his Honour was postulating a continuation of the negotiations on the footing that there was no litigation and no injunction. On this hypothesis the finding is consistent with his Honour's ultimate conclusion that the termination of the negotiations and inability to obtain finance for the acquisition of the aircraft were attributable to the litigation, not to the injunction. (at p334)

47. The principal obstacle barring the way to an acceptance of this conclusion is the evidence of Gibson, which was not rejected by his Honour. Gibson, who was called by Air Express, said in cross-examination:

"The fact that we ceased negotiations was purely because of the injunction and the fact that Air Express was unable to bring the Carvairs into the country." Later, his evidence continued in this way: "MR. BARNARD: Prior to 22nd February, had the board expressed any intention as to whether it was going to acquire an interest in Air Express Limited? --- Certainly, yes; we had a directors' meeting on 20th January at which it was decided that the letter of offer would be made to Mr. Astling, and the letter was subsequently sent on 25th January. So we certainly had agreed at that stage, as a board, that we would proceed. The only point subject to negotiation after that time was what the equity interest would be. And you say that point was resolved by oral agreement? --- Yes. At the time - on 23rd February 1977, what were the factors which led the board to change that intention? --- The granting of the injunction preventing the Carvairs to be brought into the country. After that time did the company, Bill Patterson-Cheney Limited, retain an interest in Air Express in the sense of watching what was happening there? --- Oh certainly; we have kept in close contact with Mr. Astling and followed the progress of the situation, yes.

In fact, at that time had your company sought any representation in Air Express? --- Yes, our managing director was appointed a director of Air Express." (at p335)

48. It was not suggested to him in cross-examination that BPC would have terminated or suspended the negotiations if no injunction had been granted. Counsel for Ansett was more intent on putting to Gibson circumstances which might lead to the conclusion that the negotiations were far from complete and that they were unlikely to result in a firm contract. However, Gibson repudiated these suggestions and his repudiation was accepted by Aickin J. It is impossible to go behind the finding that the difficulties would be overcome, an arrangement made and the aircraft procured, because it is a finding based on the evidence of a witness whose testimony was accepted. (at p335)

49. In all this I find no secure footing for drawing an inference that the failure of the negotiations was caused by litigation, not by the injunction. (at p335)

50. In the result I am unable to accept the basis on which the primary judge held that Air Express suffered no damage by reason of the injunction. (at p335)

Orders

Appeal dismissed with costs.