Dial Travel P/L t/as Cartours v British Airways Plc

[1994] FCA 305

JUDGMENT No. ........ ,. 3 0 7 74 , ..,... ,.. ,.. ..

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ERAL COURT OF AUSTRAT	1
)

NEW SOUTH W m	DISTRICT REGISTRY	) No NG 794 of 1993
1
G E N E W DIVISION	1
1

BETWEEN: D -

d	da	-
ACN 053 083 480

Applicant

m:  ( - B
ARBN 002 747 597

,

Respondent

m:	Davies J.
&	l	3 May 1994
W:	Sydney
million. The respondent has sought secunty for the costs which it will incur.

This is an application for security for costs m proceedings brought by Dial

Travel Pty Limited against Brit~sh Amay PLC. The applicant is now m liquidation

and I have been informed that its debts are substantial, perhaps m the wcinity of $2.5

Reliance is placed on s.1335 of the Corporations Law and s.56 of the Federal Q u r t of Australia Act 1976 (Cth). I am satisfied that the usual principles which

apply in relation to insolvent compames which are applicants should be applied here.

Dial Travel Pty Limited was a wholesaler of air services. It was involved m the selling and issuing of tickets to persons who wished to travel. It had developed a particular arrangement wth Bntish Airways using its trade name, Cartours, and it had

specialised in a service which dealt with flying and touring. It was to that extent in competition with a service which British Airways ltself promoted which was called "Key to Britain".

In the middle of 1993, Dial Travel found that it was unable to compete with

other services, including the service which Bnhsh Airways itself promoted, and ultimately by October 1993 it was found necessary to cease operations of the company.

The principal application raises a number of grounds based upon the contract whrch existed between Dial Travel and Bnhsh Arways, upon allegations of mis- representation and negligence on the part of British Arways, upon allegations of breach of s.52 of the Trade Practices Act 1974 (Cth) ("the m) and upon

allegations of breaches by Bntish Arways of ss.45, 46 and 47 of the m.

It is clear from the statement of clam that, if the litigation proceeds to a
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heanng, it will be major litigation and the costs will be very high. Mr Bouris, solicitor

for the respondent, has estimated that the case Hnll take four to SIX weeks, and that

the solicltor and client costs of British Airways might amount to $450,000 to $600,000.

When the causes of action under ss.45, 46 and 47 of the m are taken into account, it is clear that there will be experts' costs involved as well as the costs of lawyers. Moreover, the allegations are of a senous nature and pve rise to issues

concerning the relationships between Brit~sh Arways and other airways, and British Arways and wholesalers of their services. Issues as to market, market power and

anti-cornpetitwe conduct would be raised. The liquidator says that he IS m the position that he can fund the applicant's own costs from the moneys which he has or

expects to have but would be unable to provide security for British Airways' costs.

The amount available to the liquidator has not been clarified, but there is in evidence a schedule whlch sets out receipts and payments and shows receipts of $148,000 and payments of $70,000 for the period 14 February 1994 to 27 April 1994.

So it would appear there to be a balance on hand of about $80,000. The hquidator's

mention of a company from whom $80,000 was collected, it being anticipated that	reports also show some possibility of recovenng other moneys and there is one
there will be further collections.
I mention these matters, not because it 1s clear to me exactly what the liquidator's posltion is, but to show that the amount of money available to hun is not
great and certainly minlmal in relatlon to the overall amount of the debts of the company.
That brings me to consider the reasons relled upon by Mr Jackman as to why an order for security for costs should not be made. Mr Jackman submitted inter alia that no order should now be made. He submitted that the matter should wait until there has been discovery of documents, that discovery might disclose breaches of ss.45, 46 and 47 of the m and that the apphcant, Dial Travel, may then be able to interest the Trade Practices Commission in fundmg or jolning m the proceedings.
I reject that submssion for the reason that an order that the applicant provide the security sought immediately, namely, $30,000, would not shfle the libgation to the stage of discovery. If the liquidator has funds to continue the proceedings, he has funds to provide security in the amount of $30,000.
Therefore, it seems to me that an order to that effect will not prevent the matter proceeding to the stage where there is discovery and to the stage where documentary evidence can be given to the Trade Practices Comm~ssion if revealed
dunng the discovery process.
The next point that was put by Mr Jackman was that the allegations of contraventions of ss.45, 46 and 47 ralse matters which ought to be pursued m the public interest and that thls is an aspect of the matter which has been referred to in a
number of judgments.
It seems to me, however, that we have entered a time where llbgation is very expensive and applicants who undertake it should be prepared to follow the usual rules. It does not seem to me that it is in the pubhc interest, as a rule, for insolvent corporations simply to ralse interesting points of law and of fact. I take account also of the point that the proceedings are brought not m the public interest but for the financial benefit of Dial Travel and its creditors. My own wew is that matters such as
those which are alleged ought not be litigated, as a general rule, unless there is someone on the applicant's side who is prepared to fund the l~tigation and to stand the ordinary result of failure in the litigation, namely, that he or she or it will suffer a detriment if costs are awarded agalnst the apphcant.

It was submitted by Mr Jackman that the evidence showed that the

proceedings had brought about the insolvency of Dlal Travel. There 1s no express

statement to that effect m the affidawts. It seems to me that the evidence is quite inadequate to enable me to draw that conclusion. The profit and loss account of Dlal

Travel for the year ended 30 June 1993 showed a loss for the year of approximately

$360,000 and a deficit m shareholders equity as at 30 June 93 of $280,000. Other

serious than that for the liquidator in a report has menhoned debts of $2.5 to $3

information before the Court shows that the pos~tlon must have been much more

million, and there are matters in the accounts which would raise questions such as the liqu~dator's note that there may have been possible preference payments including a possible preference payment of $1,051,722 to Euro-Rent-a-Car. These matters show that the financial posltion of Dial Travel is complex and I would not be prepared to draw from the evidence now before me the inference that it was the acbons of Bntish

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Ainvays that brought about the insolvency of the company, though the mference may

fairly be drawn that the difficulties whch Dlal Travel encountered in early 1993 m

promoting its service contnbuted to its msolvency.

Mr Jackman said that the making of an order for security would frustrate the

litigation, but on this point I repeat that it seems to me that the malung of an order

for security now sought, that is for $30,000, would not frustrate the htigation at this point of time and that, if it is frustrated after there has been discovery of documents,

that will be a matter brought about principally because no one, such as the Trade Practices Commission or any creditor, 1s prepared to take an interest in the

proceedings and to make itself liable for costs if the applicant 1s unsuccessful.

Mr Hodgekiss, counsel for Bntish Ainvays, put the submission that the case has not been proved even on a prima facie basis. It seems to me, however, that I should

treat the matter on the footing that Dial Travel has an arguable case. I think

sufficient evidence has been put before the Court for me to arrlve at that view. The

facts are dlsputed but that 1s an ordinary Incident of litigation. There 1s nothmg in the evidence going directly to clalms made under ss.45, 46 and 47 of the m 1974 (Cth)

but it can be perceived how those claims would be put ~f they were pursued. So I

approach this matter on the footlng that the applicant has an arguable case; but I thlnk that this is a case in whlch the ordinary principles should apply, that both parties should stand on an equal footing and should suffer a detriment in respect if the proceedings are resolved against them.

Such a sltuabon assists the resolubon of htlgahon by agreement before it ever

gets to a hearing. It is always an unfortunate position if one party approaches a

hearing being liable for costs if unsuccessful, and havlng to pay its own costs, knowing

that the other side will be unable to comply with any order as to costs made against it.

I will therefore make an order as sought that the applicant provide security in the sum of $30,000 for the respondent's costs, that sum to be provided by payment into Court or by bank guarantee in a form approved by the Registrar or in such other

form as the Registrar may approve.

I direct that the security be paid within 14 days and I will order that, if the sum is not pald that the proceedings be then stayed.

I note that this order 1s Intended to cover the proceedings only up to the stage of the completion of discovery and lnspectlon of documents. The $30,000 may be a little less than the figure calculated by Mr Bouris in respect of discovery and

inspection, but it seems to me to be an appropriate amount.

are a true copy of the reasons for judgment	I certify that this and the preceding 6 pages
of the Honourable Mr Justice Davles.
Date:  3 May 1994
Counsel for the applicant:	Mr I. Jackman
Solicitor for the applicant:	Kalyk Nash Lawyers
Counsel for the respondent:	Mr C.C. Hodgekiss
Solicitor for the respondent:	Mallesons Stephen Jaques
Date of hearing:	3 May 1994
Date of judgment:	3 May 1994