Leonie's Travel Pty Limited v British Airways Plc
[2012] FCA 635
•20 June 2012
FEDERAL COURT OF AUSTRALIA
Leonie’s Travel Pty Limited v British Airways Plc [2012] FCA 635
Citation: Leonie’s Travel Pty Limited v British Airways Plc [2012] FCA 635 Parties: LEONIE'S TRAVEL PTY LIMITED ACN 050 214 152 v BRITISH AIRWAYS PLC (ARBN 002 747 597) and AIR NEW ZEALAND LTD (ARBN 000 312 685) File number: NSD 2449 of 2006 Judge: ROBERTSON J Date of judgment: 20 June 2012 Catchwords: PRACTICE AND PROCEDURE – representative proceedings – application for further security for costs – remaining claim against respondent small – whether costs proportionate to importance of claim – whether prospects of success of defences pleaded relevant Legislation: Federal Court of Australia Act 1976 (Cth), s 37M Cases cited: Fiduciary Ltd v Morningstar Research Pty Ltd (2004) 208 ALR 564 followed
Leonie’s Travel Pty Ltd v Qantas Airways Ltd (2010) 183 FCR 246 citedDate of hearing: 12 June 2012 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 44 Counsel for the Applicant: Mr NJ Beaumont Solicitor for the Applicant: Slater & Gordon Counsel for the Fourth Respondent: Mr RR Stitt QC with Ms CO Gleeson Solicitor for the Fourth Respondent: Corrs Chambers Westgarth
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 2449 of 2006
BETWEEN: LEONIE'S TRAVEL PTY LIMITED ACN 050 214 152
ApplicantAND: BRITISH AIRWAYS PLC (ARBN 002 747 597)
First RespondentAIR NEW ZEALAND LTD (ARBN 000 312 685)
Fourth Respondent
JUDGE:
ROBERTSON J
DATE OF ORDER:
20 JUNE 2012
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The applicant provide additional security for the fourth respondent’s costs of and incidental to the proceeding in the sum of
a) $60,000 by 4.00pm on 18 July 2012; and
b) A further $60,000 within 14 days of the matter being set down for final hearing, in the form of a bank guarantee from an Australian trading bank (or in such other form as the Court deems fit) to be lodged with the Court in a form satisfactory to the Registrar and a copy of which to be served on the solicitors for the fourth respondent, such that the total security for the fourth respondent’s costs of and incidental to the proceeding is $270,000.
2.The proceeding be stayed as against the fourth respondent if security for the fourth respondent's costs is not provided in accordance with the order of the Court.
3.The fourth respondent have liberty to apply, on seven (7) days’ notice, to vary the amount of security for costs required to be provided in accordance with the order of the Court.
4.Each party pay its own costs of the fourth respondent’s interlocutory application.
5.Order 1 made on 17 May 2012 be varied so that the time within which the fourth Respondent is to file its evidence be extended to 28 June 2012.
6.Order 2 made on 17 May 2012 be varied so that the time within which the applicant is to file and serve its evidence be extended to 27 July 2012.
7.The directions hearing on 25 July 2012 be vacated.
8.The matter be stood over for directions to 9.30am on 27 July 2012.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 2449 of 2006
BETWEEN: LEONIE'S TRAVEL PTY LIMITED ACN 050 214 152
ApplicantAND: BRITISH AIRWAYS PLC (ARBN 002 747 597)
First RespondentAIR NEW ZEALAND LTD (ARBN 000 312 685)
Fourth Respondent
JUDGE:
ROBERTSON J
DATE:
20 JUNE 2012
PLACE:
SYDNEY
REASONS FOR JUDGMENT
Introduction
In these representative proceedings, by an interlocutory application filed on 16 May 2012, the fourth respondent, Air New Zealand Ltd, sought orders that the applicant provide further security for its costs of the proceeding and that the proceeding be stayed until such time as security is given.
The proceedings themselves concerned whether or not the respondent airlines were obliged to pay commission to certain travel agents on the fuel surcharge element of the price of tickets.
Air New Zealand Ltd relied on three affidavits, being those of Michelle Margaret Carr, Brian Raymond Silvia and Roland Patrick Matters each sworn on 25 May 2012.
Leonie’s Travel Pty Ltd, the applicant, tendered a folder of documents.
The amount now in issue between the parties was agreed, for present purposes, to be in the range of $35,000 to $40,000. A figure in this range had emerged in recent correspondence from the solicitors for Air New Zealand Ltd to the solicitors for the applicant.
Background
A brief procedural history of the matter is as follows.
On 4 December 2007 the Court ordered the applicant to provide security for Air New Zealand Ltd’s costs in the proceedings by lodging with the Registrar a bank guarantee in the amount of $150,000 in the form attached to that order by 4 pm on 14 December 2007.
Ms Carr deposed that the amount of the bank guarantee did not cover the amount of the costs which had been incurred by Air New Zealand Ltd up to 23 July 2007.
On 23 July 2007 the Court ordered that the proceeding against Qantas Airways Ltd be heard and determined before any other issues. The applicant undertook that it would not contend that the determination of the Qantas proceeding precluded, relevantly, Air New Zealand Ltd, from bringing forward in its own case any contention of fact or law.
In mid 2011, the applicant’s case against Air New Zealand Ltd and other airlines was revived following the Full Court’s determination of the question in the Qantas proceedings in favour of the applicant: Leonie’s Travel Pty Ltd v Qantas Airways Ltd (2010) 183 FCR 246 (the Qantas proceedings). On 3 September 2010 special leave to appeal was refused by the High Court. More specifically, on 24 June 2011, the Court made orders dismissing Air New Zealand Ltd’s amended notice of motion filed on 2 July 2007 seeking to strike out the proceedings and to have the proceedings not continue as a representative action.
More recent matters
The key features of the recent correspondence between the solicitors for the applicant on the one hand and Air New Zealand Ltd on the other hand is as follows.
First, by letter dated 1 May 2012, enquiries were made by the solicitors for Air New Zealand Ltd as to the financial circumstances of the applicant. These enquiries were misdirected in the sense that Litigation Lending Management Pty Ltd has since 2007 been the funder of the litigation. The same letter also sought some information about the funding agreement.
The reply, dated 7 May 2012, by the solicitors for the applicant stated that the request was regarded by those solicitors as “ill founded”. That letter said that were any variation appropriate to the status quo it would be an order for release of the bank guarantee provided on behalf of the applicant, in light of the decision in the Qantas proceedings on the same common form contract. The solicitors for the applicant declined to provide the requested information.
By a letter dated 22 May 2012 the solicitors for Air New Zealand Ltd wrote seeking yet further financial information in relation to Leonie’s Travel. It also sought extensive information in relation to a trustee from which Leonie’s Travel was said to have received trust distributions in the financial years ending 2004, 2005 and 2006. The letter also sought information as to the distribution of the payments made in related proceedings in which Qantas and British Airways had paid certain sums into interest-bearing accounts to be distributed by Slater and Gordon to the litigation funder and to the eligible group members.
By letter dated 23 May 2012, corrected by letter dated 24 May 2012, the solicitors for the applicant confirmed that the fund received the amount of $627,931.36 and $75,852.90 in respect of the Qantas and British Airways payments respectively.
By a letter dated 30 May 2012 the solicitors for the applicant stated that the issue before the Court was whether, in the circumstances, including the applicant’s at least practically assured prospect of success, the litigation funder should be required to provide any further security.
There was no suggestion that the litigation funder would be obliged to satisfy a costs order if called upon to do so, so as to make security for costs unnecessary.
Costs estimates
Ms Carr estimated the costs of the steps to which she referred to be $391,040, that is, Air New Zealand Ltd sought an increase in the security from $150,000, the 2007 figure, to a total of $541,040.
Ms Carr stated that the amount of the original bank guarantee did not cover the amount of the costs which had been incurred by Air New Zealand Ltd up to 23 July 2007.
Ms Carr said that she expected that the finalisation of Air New Zealand Ltd’s evidence would occupy professional time of 150 hours at a blended rate of $423 per hour, or $63,450. Ms Carr referred to calling evidence from persons engaged in Air New Zealand Ltd’s business from 2004 to date who have had the care of negotiations with travel agencies related to the remuneration of those travel agents from the sale of passenger fares on Air New Zealand. Further reference was made to reviewing email directories and the interrogation of systems of Air New Zealand Ltd over a period of seven years.
In addition to the sum of $63,450 Ms Carr estimated that the collection of documents, preparation of objections, review of evidence in reply, assistance in preparation of submissions and reporting and other incidental perusal would take another 160 hours, in total $67,680.
Next was reference to senior and junior counsel. Ms Carr had engaged one senior counsel and two junior counsel. The amounts for junior counsel totalled $62,000. The amount for senior counsel totalled $42,000.
The next category of estimated costs in respect of “the databasing of documents” was estimated to be $16,000.
Next was photocopying, transcript and sundry items in the sum of $30,000. This included the costs of an interstate witness.
Next was $3,300 in respect of the directions hearing on 25 July 2012.
The last item was in respect of a hearing time of seven days at $15,230 per day totalling $106,610.
Despite some initial confusion, it appears these estimates were prospective, that is from the date of filing the interlocutory application.
Mr Matters gave his opinion that, subject to certain qualifications, the costs set out in the affidavit of Ms Carr were in the order of the quantum that would be allowed as proper on taxation.
The accuracy of these estimates was not put in issue by the applicant.
No question of delay was agitated before me.
As I have said, the amount in issue between the parties was agreed, for present purposes, to be in the range of $35,000 to $40,000. It is not however apparent to me that Mr Matters was informed that the amount in dispute was now in the order of $35,000-$40,000.
Consideration
There application of s 37M of the Federal Court of Australia Act 1976 (Cth) was the subject of submissions. It provides, relevantly:
37M
(1)The overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes:
(a) according to law; and
(b) as quickly, inexpensively and efficiently as possible.(2) Without limiting the generality of subsection (1), the overarching purpose includes the following objectives:
(a) the just determination of all proceedings before the Court;
(b)the efficient use of the judicial and administrative resources available for the purposes of the Court;
(c) the efficient disposal of the Court’s overall caseload;
(d) the disposal of all proceedings in a timely manner;(e) the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute.
It was submitted on behalf of Air New Zealand Ltd that the question of the importance of the proceedings, for the purposes of s 37M(2)(e), was a matter for its commercial judgement. It was put that the commercial importance of the proceedings was not a matter for the judgement of the applicant’s solicitors. It was also put that the importance of the proceedings was illustrated by the fact that Air New Zealand Ltd was anxious to defend them. In my opinion, apart from the proposition that the importance of the proceedings was not a matter for the judgment of the applicant’s solicitors, these contentions are stated too broadly and should be rejected.
I do not conclude that the importance of the proceedings to the parties is irrelevant but the context shows that the importance of the matters in dispute is to be determined by the Court, with a dominant element of the objective importance of the matters in dispute. Part of that context is the “generality” of s 37M(1)(b), that is, to facilitate the just resolution of disputes as quickly, inexpensively and efficiently as possible. I was taken to the Explanatory Memorandum to the Bill which introduced s 37M but in my view that extrinsic material did not add to what is apparent from the terms of the provision; see Explanatory Memorandum, Access to Justice (Civil Litigation Reforms) Amendment Bill 2009.
As I have said, the amount in issue between the parties, the applicant and the group members on the one hand and Air New Zealand Ltd on the other hand, was agreed for present purposes to be in the range of $35,000 to $40,000. No other issue of importance was identified. I accept that Air New Zealand Ltd is anxious to defend the proceedings but of itself that cannot constitute the importance of the matters in dispute. I also take into account that subsequent to the commencement of the proceedings Air New Zealand Ltd announced, in March 2009, that it would be paying commission on the fuel surcharge. Thus the litigation relates to a closed period in the past. No precedent value for the commercial operations of Air New Zealand Ltd was identified. I therefore proceed on the basis that the money amount of the claim constitutes the importance of the matters in dispute and that this is to be taken into account in the exercise of the judicial discretion whether or not to order further security for costs and, if so, in what amount.
I was also referred to statements made by the solicitors for the applicant both when the proceedings were commenced and after the decision in the Qantas proceedings in the applicant’s favour that the amount in issue was some millions of dollars. However I do not regard that material as being of present, as opposed to historical, relevance.
Notwithstanding the evidence of Mr Matters, to which I have referred above, in my opinion, for present purposes the estimates of future costs are too high to found further security in the amount of $391,040. Although a broad brush approach is appropriate, I indicate that in my view the amounts for the completion of evidence, preparation by solicitors, the number of counsel and the length of the hearing are each too high for present purposes in relation to the amount in issue between the parties in the substantive proceedings. I also take into account in respect of part of the matters to be litigated the precedent constituted by the decision of the Full Court in the Qantas proceedings. I would not order security for costs of a total amount of about $540,000.
The second major contention on behalf of the applicant went to the prospects of success of Air New Zealand Ltd in the substantive proceeding. The position of the applicant seemed to be that no further security should be ordered by virtue of the decision of the Court in the Qantas proceedings. Put at that level of generality, I reject that contention. However although Air New Zealand Ltd is free to litigate in its own right the questions of construction and to litigate its other defences, the former of these matters is now covered by precedent. In saying this I assume, as did the parties before me, that the question of construction determined by the Court in the Qantas proceedings is the same question of construction as presently arises.
However the flaw in the position of the applicant is that the question of construction of the common form contract does not exhaust the defences pleaded by Air New Zealand Ltd. Although the applicant submits that Air New Zealand Ltd has not put forward any material which would cause the Court to conclude that it has any real prospect of succeeding on any of its defences, in the ordinary case I would not regard that exercise as being appropriate in an interlocutory application such as the present. I would not regard this case as one where each of the defences is self-evidently hopeless.
In the same vein, some time was spent in submissions on whether Air New Zealand Ltd’s estoppel defence may succeed. However this is not the entirety of Air New Zealand Ltd’s defences and even if it were Air New Zealand Ltd’s sole defence I would not regard it as appropriate to go into the prospects of success of that defence. Indeed I would not regard it as appropriate to go into the prospects of success of any of the defences pleaded: see Fiduciary Ltd v Morningstar Research Pty Ltd (2004) 208 ALR 564 at [37]-[39] per Austin J.
No submission was put that an order for further security would or would tend to stultify the proceedings.
In my opinion there should be some increase in the amount of security for Air New Zealand Ltd’s costs. However, in my view, the increase should be well below the claimed additional amount of $391,040 bearing in mind first the history both substantive and procedural of the matter; second the common ground that the dollar amounts now in issue are relatively small, approximately $35,000 to $40,000; and therefore, third, what is in my opinion, for present purposes, the disproportionate nature of the proposed expenditure on the part of Air New Zealand Ltd. It is of course quite entitled to outlay those amounts but the present question is whether as a matter of judicial discretion security should be ordered to reflect that expenditure. I have concluded that it should not.
Orders
The orders I propose to make are as follows:
1.The applicant provide additional security for the fourth respondent's costs of and incidental to the proceeding in the sum of $120,000 in the form of a bank guarantee from an Australian trading bank (or in such other form as the Court deems fit) to be lodged with the Court in a form satisfactory to the Registrar and a copy of which to be served on the solicitors for the fourth respondent, such that the total security for the fourth respondent's costs of and incidental to the proceeding is $270,000.
2.The bank guarantee required by order 1 be lodged with the Court by 18 July 2012.
3.The proceeding be stayed as against the fourth respondent if security for the fourth respondent's costs is not provided in accordance with the order of the Court.
4.The fourth respondent have liberty to apply, on seven (7) days’ notice, to vary the amount of security for costs required to be provided in accordance with the order of the Court.
I will hear the parties in relation to the costs of the interlocutory application and on any proposed staging of the provision of the further security.
I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Robertson. Associate:
Dated: 20 June 2012
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