Aussie Airlines Pty Ltd v Australian Airlines
[1995] FCA 765
•15 Sep 1995
CATCHWORDS
PRACTICE AND PROCEDURE - separate hearing of issues pursuant to O 29 r 2 the Federal Court Rules - whether applicant has "standing" to claim the declaratory relief sought and whether applicant a "new entrant to the domestic aviation industry" for purposes of leases of airport terminal facilities to be determined separately - separate hearing of issues ordered
PRACTICE AND PROCEDURE - security for costs - applicant company unable to satisfy a costs order against it - relevance of litigation raising for determination a matter of "public interest" - security for costs ordered
Trade Practices Act 1974 (Cth) - s 46
Federal Court Rules - O 29 r 2
Bell Wholesale Co Pty Ltd v Gates Export Corporation (1984) 52 ALR 176 Followed
Rosenfield Nominees Pty Ltd v Bain & Co (1988) 14 ACLR 467 Referred to
Aussie Airlines Pty Ltd
v Australian Airlines Limited & Ors
VG 608 of 1995
Drummond J
Melbourne
15 September, 1995
IN THE FEDERAL COURT OF AUSTRALIA ) No. VG 608 of 1995
VICTORIA DISTRICT REGISTRY )
GENERAL DIVISION )
BETWEEN: AUSSIE AIRLINES PTY. LTD.
(ACN 068 097 905)
Applicant
AND: AUSTRALIAN AIRLINES LIMITED
(ACN 008 642 886)
First Respondent
AND:QANTAS AIRLINES LIMITED
(ACN 009 661 901)
Second Respondent
AND:FEDERAL AIRPORTS CORPORATION
Third Respondent
(by original proceeding)
AND BETWEEN: AUSTRALIAN AIRLINES LIMITED
(ACN 008 642 886)
First Cross Claimant
AND: QANTAS AIRLINES LIMITED
(ACN 009 661 901)
Second Cross Claimant
AND:AUSSIE AIRLINES PTY. LTD.
(ACN 068 097 905)
Cross Respondent
MINUTES OF ORDERS
JUDGE MAKING ORDER: Drummond J
DATE OF ORDER: 15 September, 1995
WHERE MADE: Melbourne
UPON counsel for the applicant undertaking to the Court to abandon the claim for relief pursuant to s. 46 the Trade Practices Act 1977 (Cth) if it obtains the declaration it seeks, THE COURT ORDERS THAT:
The applicant be granted leave to amend its amended application to claim declaratory relief in the following terms:
"A declaration against all respondents that the applicant, in making each of the requests referred to in paragraphs 20 to 22 (inclusive) of the amended statement of claim herein was "a new entrant to the domestic aviation industry" within the meaning of that expression as used in the definition of "third party carrier" in each of the Head Leases referred to in paragraphs 8 and 10 of the amended statement of claim."
The leave to amend granted to the applicant be on terms that it is without prejudice to the entitlement of the first and second respondents to contend that the applicant lacks standing to claim that declaratory relief.
THE COURT FURTHER ORDERS THAT:
Pursuant to O. 29, r. 2 the Federal Court Rules the Court shall decide separately from all other questions raised by the pleadings filed in the proceeding herein the following questions:
a)Does the applicant have sufficient standing to seek declaratory relief in terms of the declaration referred to in paragraph 2?
b)If the Court determines that the applicant has sufficient standing to seek declaratory relief in the terms of the declaration referred to in its further amended application, was the applicant, in making each of the requests referred to in paragraphs 20 to 22 (inclusive) of the amended statement of claim herein, a "new entrant to the domestic aviation industry" within the meaning of that expression as used in the definition of "third party carrier" in each of the Head Leases referred to in paragraphs 8 and 10 of the amended statement of claim?
By 22 September, 1995 the applicant provide security for costs to the first and second respondents to the extent of $20,000, in a form acceptable to the District Registrar, and in default of the provision of such security the action be stayed thereafter.
The applicant pay the first and second respondents' costs of and incidental to their motion for further
and better particulars filed 22 August, 1995 and their motion for discovery filed 12 September, 1995.
THE COURT DIRECTS THAT:
The applicant file and serve by 4 p.m. on 28 September, 1995 any affidavit upon which it intends to rely at the hearing of the separate questions.
The applicant file and serve by 4 p.m. on 28 September, 1995 such further and better particulars of its amended statement of claim as requested in the document marked "A" attached to these directions.
The applicant file and serve by 4 p.m. on 28 September, 1995 a supplementary list of documents limited to documents relevant to the separate questions.
The respondents file and serve by 4 p.m. on 12 October, 1995 any affidavits upon which they intend to rely at the hearing of the separate questions.
The costs of the applicant's motion filed 23 August, 1995 be reserved.
Liberty to apply be reserved to all parties.
The directions hearing be adjourned to 20 October, 1995.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA ) No. VG 608 of 1995
VICTORIA DISTRICT REGISTRY )
GENERAL DIVISION )
BETWEEN: AUSSIE AIRLINES PTY. LTD.
(ACN 068 097 905)
Applicant
AND: AUSTRALIAN AIRLINES LIMITED
(ACN 008 642 886)
First Respondent
AND:QANTAS AIRLINES LIMITED
(ACN 009 661 901)
Second Respondent
AND:FEDERAL AIRPORTS CORPORATION
Third Respondent
(by original proceeding)
AND BETWEEN: AUSTRALIAN AIRLINES LIMITED
(ACN 008 642 886)
First Cross Claimant
AND: QANTAS AIRLINES LIMITED
(ACN 009 661 901)
Second Cross Claimant
AND:AUSSIE AIRLINES PTY. LTD.
(ACN 068 097 905)
Cross Respondent
"Attachment A"
The first and secondnamed respondents request the applicant to make, file and serve its further and better particulars to the respondents' requests numbered 1 to 12 (inclusive) as set out in the first and secondnamed respondents' request for further and better particulars of the applicant's amended statement of claim dated 1 August, 1995.
IN THE FEDERAL COURT OF AUSTRALIA ) No. VG 608 of 1995
VICTORIA DISTRICT REGISTRY )
GENERAL DIVISION )
BETWEEN: AUSSIE AIRLINES PTY. LTD.
(ACN 068 097 905)
Applicant
AND: AUSTRALIAN AIRLINES LIMITED
(ACN 008 642 886)
First Respondent
AND:QANTAS AIRLINES LIMITED
(ACN 009 661 901)
Second Respondent
AND:FEDERAL AIRPORTS CORPORATION
Third Respondent
(by original proceeding)
AND BETWEEN: AUSTRALIAN AIRLINES LIMITED
(ACN 008 642 886)
First Cross Claimant
AND: QANTAS AIRLINES LIMITED
(ACN 009 661 901)
Second Cross Claimant
AND:AUSSIE AIRLINES PTY. LTD.
(ACN 068 097 905)
Cross Respondent
Coram: Drummond J
Date: 15 September, 1995
Place: Melbourne
REASONS FOR JUDGMENT
The applicant seeks leave to amend its originating application and also an order that the issue whether it is a
"new entrant to the domestic aviation industry" for the purposes of certain leases, which I will refer to as leases to QANTAS from the Federal Airports Corporation of airport terminal facilities at five domestic airports, be determined separately from the other issues in the proceedings. The applicant is not a party to these leases, but the third respondent, the Federal Airports Corporation ("the FAC"), supports these applications. The first and second respondents, who I will call QANTAS, oppose them and for themselves seek orders for dismissal of the proceeding in view of the applicant's default in providing certain particulars of its statement of claim, an order for further discovery and an order for security for its costs of defending the proceedings.
It is apparent that there is a real question as to the applicant's standing to claim the declaratory relief it seeks to make by the proposed amendment to its application. There will be a considerable, if not complete, overlap between the factual enquiries that will have to be made to determine whether the applicant has this standing and whether it is a "new entrant" for the purposes of the leases. The issue whether the applicant is a "new entrant" is the core issue in the case. QANTAS is bound by its leases from the FAC to enter into a sub-lease with the applicant of its leased facilities on reasonable commercial terms if the applicant is a "new entrant". The FAC wrote to QANTAS on 24 April last in the following terms:
"Accordingly, I request Australian Airlines to give effect to its obligations under clause 5 of the leases and to commence bona fide negotiations forthwith with Aussie Airlines.
I am not aware of any reason why Aussie Airlines should not be treated as a new entrant to the domestic aviation industry ..."
The applicant does not at the moment seek any relief against the FAC, although it is not clear whether the declaration it seeks to raise by amendment is sought against QANTAS only, or against the FAC also. The FAC has not claimed in the proceedings for relief against QANTAS on the basis that the applicant is a "new entrant", or on any other basis. But there are good practical reasons for thinking that if the applicant can obtain the declaration it seeks to raise by amendment, that that is likely to resolve the litigation. QANTAS would then have to be prepared to offer sub-leases to the applicant that would have to be on "reasonable commercial terms" within the meaning of that expression in its leases from the FAC. If QANTAS did not do that it would be in fundamental breach of each lease, a position it could not allow to arise given what appears to be the Federal Government's objectives for domestic airline deregulation as they are revealed by the evidence before me.
The applicant also claims against QANTAS for declarations, injunctions and damages for alleged contraventions of s. 46 the Trade Practices Act 1974 (Cth). The applicant, in its statement of claim, alleges that it requested QANTAS to provide the airport facilities to it in
reliance on the head lease provisions and that QANTAS contravened s. 46 the Trade Practices Act 1974 (Cth) by refusing to negotiate with the applicant for the grant to it of sub-leases, as QANTAS was required to do by the head leases from the FAC. The applicant also alleges that QANTAS infringed s. 46 the Trade Practices Act 1974 (Cth) by refusing to grant sub-leases to it, as it is said to have been obliged to do by the head leases. If the applicant is not a "new entrant" for the purposes of the leases, it is difficult to see, given the way that it has framed its s. 46 case against QANTAS, how the applicant could prove that QANTAS' refusals, said to contravene s. 46 the Trade Practices Act 1974 (Cth), were made for purposes proscribed by that section rather than for other reasons altogether. Counsel for the applicant conceded in argument, correctly I think, that the applicant's whole case would collapse if it failed to establish that it was a "new entrant". Counsel for QANTAS made a submission to the same effect in opposing the separate hearing. Counsel for the applicant also said that:
"... if the Court were to grant the trial of the separate question [as to whether the applicant is a "new entrant"] and if that question is finally resolved in favour of [the applicant], ... [the applicant] will abandon the claim under the Trade Practices Act ..."
The applicant also has a claim for damages based on the notion that, even though not a party to the head leases, it is a "new entrant" for the purposes of those leases and can sue QANTAS for any breach by QANTAS that it can establish of
the latter's obligation to negotiate bona fide and to grant sub-leases to such an entrant. The applicant has not indicated any intention to abandon this particular claim if it obtains a separate trial of its claim to be a "new entrant" and wins on that.
However, if it loses on the "new entrant" issue, or on the issue that it lacks standing to seek this declaration, that will, for the reasons given, mean the end of the litigation. If the applicant succeeds, that may produce the same result, although there may still be the damages claim that I have mentioned to be resolved.
It is common ground that the litigation for the s. 46 claim will consume much in the way of the parties' resources of time and money, if the action proceeds in the ordinary way with all issues going to trial together after pre-trial procedures, including discovery. Litigation of the applicant's separate damages claim, which will fail if the applicant fails to get the declaration it seeks, will also be an expensive exercise.
QANTAS opposes the fragmentation of the case by the determination of the "new entrant" question as a separate issue. It points to the applicant's failure to reveal just what its case is on this point, in the face of persistent enquiries by QANTAS before the action was commenced and in the face of consent directions to provide elucidation, by way of further particulars of its statement of claim, with which the applicant has failed to comply.
However, I think acceding to the applicant's request will be likely to substantially shorten the litigation with consequent savings to the parties. The "new entrant" issue is at the legal centre of all the applicant's claims. It is intimately associated with the standing question. It is not an issue likely to take an inordinate time to litigate. If the "new entrant" point is determined adversely to the applicant it will certainly bring the litigation, including the complex s. 46 claim, to an end. If it is determined favourably to the applicant it is likely, for practical reasons, (but not certainly) to resolve the whole dispute. In this regard I take into account, but do not give more than limited weight to, the bargain the applicant is prepared to strike with QANTAS and the Court to abandon the s. 46 claim. But that is no reason not to seek to hold the applicant to its offer.
If the applicant is prepared to undertake to the Court to abandon the s. 46 claim if it obtains the declaration it seeks, I will be prepared to order that the applicant have leave to amend its amended originating application to claim the declaration in paragraph 1 of its notice of motion filed 23 August last. The applicant will need to clarify whether the declaration is also sought against the FAC. The amendment will be on terms that it is without prejudice to the entitlement of the first and second respondents to contend that the applicant lacks standing to claim that declaratory relief. I will also order, pursuant to O. 29, r. 2 the Federal Court Rules, that the issues in paragraph 1(a) and (b) of the applicant's document titled "Applicant's Proposed Further Directions/Orders", which I will mark exhibit 4, be determined separately from all other issues in the proceedings.
I can therefore proceed to the only other live matter for decision by me now, viz., QANTAS' application for security. The applicant does not dispute that QANTAS has made out a case that it will be unable to satisfy any order for costs against it, if QANTAS succeeds in the litigation, including litigation involving determination of the separate issues. The applicant, however, contends it should not be ordered to provide security because it has a strong prima facie case that it is a "new entrant". The correspondence that has passed between the parties is relevant to this proposition. It also shows the manoeuvring that has gone on to date. QANTAS has been seeking, by claiming an entitlement to be satisfied that the applicant is truly a "new entrant" for the purposes of the head leases, very extensive information as to the applicant's resources and business intentions before it will open the negotiations it is required by the leases to enter into with a "new entrant". For its part, the applicant has asserted that it has provided the minimal evidence that it is a "new entrant" which is all QANTAS is entitled to have. QANTAS is seeking, according to its letter of 13 April, 1995:
"The information I have sought as to whether Aussie Airlines Pty Ltd has in fact the capacity, capital, equipment and resources to be a new entrant in the domestic aviation industry is obviously relevant to such negotiations as we are obliged to enter into under the terminal leases."
The applicant's position for its part is indicated by what it says in its own letter of 13 April, 1995:
"The resources you refer to are a matter for Aussie Airlines and do not need to be in place until the commencement of operations. In a practical sense, no one would commit to have the resources to be used in place prior to terminal space being secured. Your position in this matter is an apparent attempt to frustrate the commencement of operations by this company ...
...
I do not propose to debate with you the appropriate height of a barrier that simply does not exist for this company to commence operations. I would however point out that, subject to satisfying the Civil Aviation Authority, the resources required for a new entrant could be as little as a few hours charter cost for a small aircraft. The fact that Aussie Airlines will have the resources at commencement to operate sophisticated jet aircraft over domestic routes does not impose an obligation of the sort referred to by you."
I should also say I note that, notwithstanding the position the applicant took in its letter of 13 April, 1995, it did provide a little more information about its intentions in subsequent correspondence. I express no opinion on the correctness of the positions adopted by either party in relation to what is necessary to be demonstrated before QANTAS' obligation to enter into negotiations under the head leases in fact arises, other than to say that it is not clear beyond all argument that the minimal information which is all the applicant says QANTAS is entitled to have is sufficient to show that it is a "new entrant".
The applicant is, moreover, a company newly established for the purpose according to what its solicitor, the only deponent for the applicant, says of establishing a domestic passenger airline business in Australia. It has a paid up capital of $550. The solicitor also says:
"...Unless and until the Applicant is able to obtain third party carrier facilities at the requested terminals it is unable to conduct a business in the aviation industry."
It is clear it has no business premises and at present is not trading. There is no evidence that it has any assets or that it has entered into any arrangements or taken any other steps to implement its stated business objective other than to demand access to the facilities QANTAS has leased from the FAC.
The applicant has refused to reveal, outside the litigation, any of the details of its business plans to QANTAS on the ground that it will be commercially disadvantaged if such a competitor is privy to that information. It has, however, failed, in the litigation, to disclose any such
information to QANTAS either, although at least some of that information might well turn out to be relevant to the issue of whether it is a "new entrant".
It is not possible therefore to form a view of the likely strength of the applicant's case on this issue. I do not regard the FAC's expression of opinion in its letter of 24 April, 1995, referred to in the statement of claim, as carrying this particular matter very much further.
The applicant also refers to comments in the Minister's policy statement of October 1987 explaining the Federal Government's objectives in de-regulating the domestic airline industry and submits the determination of whether it is a "new entrant" is a matter of public importance. It should therefore not be required, so it is said, to provide security for the costs of the established semi-monopoly airline operator, QANTAS. However, that a litigant is seeking to raise for determination a point of public importance is, in my opinion, only relevant to the question whether it should provide security for its opponent's costs if it can be seen that an order for security would stop the litigation. The desirability of ensuring a point of public importance is ventilated may, in such a case, justify denying the opponent the security to which it would otherwise be entitled. See Rosenfield Nominees Pty. Ltd. v Bain & Co. (1988) 14 A.C.L.R. 467 at 471. That is not this case. In Bell Wholesale Co. Pty. Ltd. v Gates Export Corporation (1984) 52 A.L.R. 176, the Full Court of this Court pointed out that a court is not justified in declining to order security on the ground that to do so would frustrate the litigation unless the company from whom security is sought establishes that those who stand behind it and who would benefit from the litigation if it is successful, whether they be shareholders or creditors or beneficiaries under a trust, are also without means. The Court also observed that it is not for the party seeking security to raise that matter. It is an essential part of the case of the company seeking to resist the order for security on the ground that the granting of security would frustrate the litigation to raise the issue of the impecuniosity of those whom the litigation would benefit and to prove the necessary facts. There is no evidence from the applicant that touches on the reasons why the directors and shareholders of the applicant, Mr. Grey and family members, who are the persons who can be expected to benefit financially if the litigation is successful, have not offered to provide the security the applicant cannot itself provide.
Security must be provided.
The only evidence as to the quantum of the costs QANTAS is likely to incur to the start of the hearing in preparing the issues for trial is a brief affidavit by Mr. Dobbie, solicitor for QANTAS. His estimate that such costs will be of the order of $50,000 is uncontradicted. However, even though this estimate does not include any costs associated with discovery with respect to the s. 46 issue, it does appear, from what Mr. Dobbie says, to include other costs of work already done and of work to be done in the future to prepare the s. 46 issue and past and future preparation costs associated with issues other than the two fairly narrow ones I have directed be dealt with separately. The future preparation costs included in Mr. Dobbie's estimate, but which are unrelated to these two issues and which QANTAS will not now have to incur for the time being and may never have to incur, are likely to be a fairly substantial part of the $50,000 referred to by Mr. Dobbie.
The action was commenced in late June last while the application for security was only filed in late August. QANTAS appears to have raised the question of security for its costs only on 10 August, 1995, i.e., after it filed its defence and counter-claim. I do not think the applicant should be required to provide security for QANTAS' no doubt significant costs incurred prior to that date at the earliest: QANTAS allowed the applicant to incur for itself costs up to that time which, if security is now ordered and not able to be provided, the applicant will have incurred for no purpose. I think that the action should be stayed if the first and second respondents are not provided with security for their costs of defending the case, being costs incurred for all work done between 10 August, 1995 and today and for the costs to be incurred between today and the commencement of the hearing of the separate issues in preparing for the trial of those separate issues. Adopting the broad approach open to me, I think that the action should be stayed if the first and second respondents are not provided with security for those costs in an amount of $20,000.
The order I propose to make is that the applicant is to provide security to the extent of $20,000 in a form acceptable to the District Registrar for the costs of defending the action incurred by the first and second respondents from 10 August, 1995 to today and for the costs to be incurred by those respondents from today to the commencement of the trial of the separate issues in preparing those separate issues for hearing. The action will be stayed unless the security is provided.
I certify that this and the preceding
12 pages are a true copy of the
reasons for judgment herein of the
Honourable Justice Drummond.
Associate:
Date: 15 September, 1995
Counsel for the applicant: Mr. I. Sutherland
Solicitors for the applicant: Oakley Thompson & Co.
Counsel for the first and
second respondents: Mr. A. Goldberg, Q.C.
Solicitors for the first Middletons Moore &
and second respondents: Bevins
Counsel for the third
respondent: Mr. C. Maxwell
Solicitors for the third Mallesons Stephen
respondent: Jaques
Date of Hearing: 14 September, 1995
Date of Judgment: 15 September, 1995
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