Orbit Travel Services & Ors v Travel Compensation Fund

[1999] HCATrans 466

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S54 of 1999

B e t w e e n -

ORBIT TRAVEL SERVICES PTY LIMITED, BASSILIOS ABDUL-KARIM and KATIA ABDUL-KARIM

Applicants

and

TRUSTEES OF THE TRAVEL COMPENSATION FUND

First Respondent

MINISTER FOR FAIR TRADING

Second Respondent

Application for special leave to appeal

GAUDRON J
KIRBY J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 10 DECEMBER 1999, AT 10.08 AM

Copyright in the High Court of Australia

MR D.F. JACKSON, QC:  If the Court pleases, I appear with my learned friend, MR V.R.W. GRAY, for the applicants.  (instructed by David Cass)

MR G.A. PALMER, QC:  If the Court pleases, I appear with my learned friend, MR N.F. FRANCEY, for the first respondent.  (instructed by Minter Ellison)

MR P.A. JOHNSON, SC:  If the Court pleases, in this matter I appear for the second respondent.  (instructed by I.V. Knight, Crown Solicitor for New South Wales)

GAUDRON J:   Yes, Mr Jackson.

MR JACKSON:   Thank you, your Honours.  Your Honours, this case, in our submission, gives rise to two important questions.  One under the general law, the other under the terms of the nationwide legislative scheme for compensation for those who are suffering from defaults by travel agents.  May I go first to the legislation and, very briefly, to indicate the way in which the issues arise and identify them as I do so?  Your Honours, there is a deed of trust - it is the first item in the bundle of applicant’s material – made by State Governments, under which the trustees of the scheme may make payments.  The provision for making payments is clause 15.1 and it appears on the page numbered 19 in the middle of the bottom of the page.

Your Honours, clause 15.1 allows the making of payments as a matter of right and 15.2 gives the trustees of the scheme a discretion in relation to it.  I do not think I need to go to the detail of it because I simply wanted to say that that is the scheme prescribed as the compensation scheme pursuant to section 57 of the Travel Agents Act 1986, that is the New South Wales version of it which, your Honours, is again amongst that bundle.

KIRBY J:   And there are companion Acts throughout the Commonwealth.

MR JACKSON:   Yes, your Honour.

KIRBY J:   And this trust deed is commonplace or is in the same form throughout Australia.

MR JACKSON:   Yes, your Honour, I think, maybe five States.  I think it is six, but it may be only five, but the relevant provisions in the Acts that are in the bundle are the same.  Maybe a few words of difference but nothing of any great consequence.

KIRBY J:   Yes.

MR JACKSON:   Your Honours, on the making of a payment under the compensation scheme, the trustees are subrogated to the rights of the claimant.  That appears from section 40(3) of the Act which simply says what I have said:

Where a payment is made to a claimant under the compensation scheme by reason of an act or omission by a person carrying on business as a travel agent, the compensation scheme trustees are subrogated to the rights of the claimant in relation to the act or omission.

Now, your Honours, that gives rise to the first question – what rights did the claimants have against us?  The position in relation to that can be stated quite shortly, if I may do so?  We, as a travel agent, supplied airline tickets booked in the names of people who were introduced by a Mrs Nemes.  We received the full price for those tickets in cash or by bank cheque made out to us.  The money was handed over to us by Mrs Nemes.  We pay, of course, the airline the money, keep the normal commission from the airline payable to travel agents and we paid Mrs Nemes a sum being part of that commission, but she had secret and different arrangements with those with whom she dealt.

She had developed a psychiatric problem - she was said to have been a survivor of Auschwitz - a psychiatric problem which manifested itself in a need to be liked or, perhaps, a need to be needed.  To satisfy the need she began to offer airline tickets to persons she knew or people who were introduced by people she knew, at prices far below the price at which they could be obtained – about half price.  She insisted on payment well in advance, if possible, but, in any event, in a manner which would not identify to anyone to whom she onpaid the money the persons who had paid it to her.

GAUDRON J:   There are findings to the contrary, are there not, in so far as ‑ is there not evidence that at some stage your clients received cheques signed by Mrs Landa which was applied to fares for other persons.

MR JACKSON:   Could I say, the qualification I am going to add - there are two cases.

GAUDRON J:   Yes.

MR JACKSON:   Two instances out of the 121, and, I accept they are in a separate category but your Honours will see at the bottom of page 80 a reference to the evidence of Mr White, the accountant.  This is paragraph 42:

The evidence was to the effect that, with some minor exceptions, none of the accounting records of Orbit indicated that Orbit ever received from any of the claimants any moneys in respect of any of the travel arrangements identified in the schedule annexed to the –

primary judge’s judgment.  That is referred to, also, by the primary judge in similar terms. 

Now, I was going to go on to say we supplied the tickets but at the full price, and, needless to say, the balance had to come from somewhere and what happens was that the money supplied by, for example, B, was used to provide the balance for A’s ticket.  The scheme, of course, was doomed to failure and the consequence – it would be commercial suicide, the evidence of Mr Dart was, to operate in that way.  The consequence of using the money of B to pay for the tickets of A was that for B’s tickets, or anyone else’s, there were not tickets provided because they had not been paid for and they could not be, the money having been used.

When the world of her imagination, as it were, fell in there were 121 people who had given her money which she had paid to Orbit for tickets for other people.  The primary judge specifically found that she had neither actual authority nor apparent authority from Orbit to enter into arrangements of that kind with the intending travellers.  You will see that set out in a passage which commences at page 27, line 24 and goes through to page 29, line 15.  Now, if I could go on to say that the primary judge went on, if I may say so, with respect, we would submit a little curiously to find that notwithstanding that she had no authority to make the arrangements, she yet had authority to receive the money which she did, an inherent part of the arrangements.  You will see that at page 29 about line 40.

KIRBY J:   Is that so curious if on two occasions she did receive it and you accepted it?  I mean, it is an evidentiary evaluation but it is not totally contrary to evidence.

MR JACKSON:   One is dealing with a number of – if one takes the transaction rather than the rump of them, if I may put it that way, you have a situation, we would submit, where the whole transactions were one that involved two things.  One was an agreement to provide travel and the other was payment at half price and payment now, in effect, in cash, and, if the view that was taken was that she had no actual or apparent authority to enter into those arrangements an inherent necessary part of the arrangements was the payment and, in our submission, the finding that she had authority to receive the money for the unauthorised arrangements, but that the arrangements were unauthorised is – if I can use the expression again, with respect – curious.

What I was going to go on to say was that the Court of Appeal, although that aspect of it I should mention was argued before it, did not really deal with it.  It, instead, adopted a simpler view that also had been adopted by the primary judge, namely, that there had been receipt of money on account of the claimants but it had not been accounted for to them.  Your Honours will see that at page 126, paragraph 149 where Justice Powell for the Court of Appeal says that and one sees it also in the primary judge at page 30, line 37 where it is expressed a little more fully, and going over to page 31.

Now, what we would submit is this.  The situation which was then left was simply one where one had, if I could use perhaps As and Bs, where A had provided services to B, the traveller; the services were paid for with money which had been provided by C as well as by B, the traveller, unknown to the service provider A; C’s money had been given to the person through whom both B and C dealt to be used for a different purpose.  That person had no actual authority to engage in the transactions from anyone and B and C had notice of the fact that the transactions were irregular.

May I mention where your Honours will see the evidence about that.  It is Justice Hodgson at page 29, about line 9, where he speaks of, in dealing with the question of ostensible authority, says, “Even in relation to those claimants” – they are the ones who actually gave evidence_ the argument had not “overcome the points made” about “notice of irregularity”.  What he means by that can be seen at page 24.

KIRBY J:   Is what he was saying that the hundred‑odd people did not know that in the two cases regularity was achieved?

MR JACKSON:   I am sorry, I just did not catch what your Honour said.

KIRBY J:   Is the point that the people, the hundred‑odd people who received the ticket and paid to the so-called agent, did so without knowledge of the two cases in which the transaction was entirely regular?

MR JACKSON:   No, what he is saying is ‑ ‑ ‑

KIRBY J:   I asked that because the bottom line is that you were happy to accept it in the two cases and, presumably, you would have been happy to accept it in other cases, but when things go wrong you are not happy to accept it.

MR JACKSON:   Well, all that the evidence demonstrated was that if one looked at the transactions one could not see that the money, the subject of the claims by the claimants, was ever identified to us in the 121 cases to which reference is made but that one was able to see that in respect of two people there was something – some document – which had come into existence in relation to them.  Now, one surely, in our submission, would not take the view that the fact that there were two cases about 121 where one might happen to see some documents would draw the others down.

KIRBY J:   But, the other view you can take is that on those two occasions your client would have said, “Well, what on earth are you up to?  What are you doing?  We do not want to have anything to do with you.  You are not authorised.  Go away.”  Instead, you take it when it goes right, but you will not take it when it goes wrong.  I mean, that is the reality of it.  I do not what consequence that has for the trust deed or the Act but ‑ ‑ ‑

MR JACKSON:   It is hardly unusual for payments for airline tickets to be made by persons other than the person who is travelling.  It frequently happens, of course, with children, relatives and so on.  What I was going to say was is the irregularity to which reference has been made appears at page 24, line 4 to 36.

KIRBY J:   Yes.

MR JACKSON:   The point we would then seek to go on to make is that referred to by Justice O’Connor in a case amongst our papers, Lysaght Bros & Co Ltd v Falk 2 CLR 421. The particular reference is page 439 and at the bottom of that page in the last four lines where his Honour said:

Further, it is quite clear that if a person dealing with an agent has knowledge that there has been a fraudulent exercise of the authority, then as far as he is concerned, he is not allowed to say that the authority exists.

What we would submit is the view taken in the courts below, in our submission, does rather widen the law.

GAUDRON J:   One can see that, but does it not essentially depend on factual findings that are absent in this case if you wanted to rely on what you have just read to us from Justice O’Connor.  You are missing some factual findings, are you not?

MR JACKSON:   We are not really, with respect, your Honour.  We would seek to deal with it – I do not place our case purely on that, so far as this point is concerned.

GAUDRON J:   Yes.

MR JACKSON:   What we would seek to say is that there is the larger point to which I have been adverting and that is, in the circumstances that were disclosed where there was, let us assume, no authority on the part of the claimants – no actual authority for her to do anything else than pay the money to us for particular travel, where we had given no authority to her to engage in the transactions of this kind.

GAUDRON J:   But, it is very difficult, is it not?  She is put in your brochures as a sales rep, she tells people she can get tickets through Orbit, Orbit in fact deals with her and issues tickets to these people using Orbit’s stationery and name.  Orbit, at some stage, is approached by IATA people saying, “Look, there is something crazy going on here” and still keeps dealing.

MR JACKSON:   No, your Honour, the ‑ ‑ ‑

KIRBY J:   And your directors gave no evidence and you are in the best position to put controls and checks on people like this woman.

MR JACKSON:   What your Honour Justice Gaudron put to me is this.  The transactions were over at the time – for example, there is reference made to an agreement we entered into on 8 May on one of the years involved, but the transactions that are involved were transactions that had taken place before that.  When it was drawn to our attention, these transactions are completed.

KIRBY J:   Yes, but she is hardly in the position of a friendly relative.

MR JACKSON:   I am sorry, your Honour?

KIRBY J:   She is not in the position of a relative, a friendly relative buying a ticket.

MR JACKSON:   No.

KIRBY J:   That is what you were trying to suggest earlier, I took it.  She is not a parent or somebody buying it for a child or a relative, she is on your brochure.

MR JACKSON:   Your Honour, she is someone – what I was saying about the relative was that it is not surprising for people who are relatives to buy tickets for other people and pay for them.

KIRBY J:   Of course not, but it is not analogous to this situation.

MR JACKSON:   Well, could I just say in relation to it that we would say that the core situation is that one had someone who was given authority by the people who were dealing with her to deal with money in a particular way, that one of the things was that she was to be the person who dealt with us.  Whatever the facts might be in other cases, there are findings in our way in relation to authority and that, in our submission, takes the case to bring us to the point of was there, on that, any basis for finding that she was ‑ ‑ ‑

GAUDRON J:   But it ultimately is a facts case, is it not?

MR JACKSON:   Well, of course, your Honour, every case is, if I can – but that is really the ‑ ‑ ‑

KIRBY J:   Some of the constitutional cases you serve up are disembodied from facts.

MR JACKSON:   Your Honour, sometimes the majority think they are not, with respect, and sometimes the majority do.  We are living in a lofty area in some of those matters.  Could I move, perhaps, to the second point.  The second point concerns the liability under section 40(6) of the Act.  That provision applies if “the act or omission was” that of “an unlisted person”.  An “unlisted person” is defined in section 40(1).  As appears from both subsection (1) and subsection (3) there is a requirement that the:

unlisted person…..carries on business as a travel agent –

The term “carries on business as a travel agent” is defined by section 4(1).  The Court of Appeal recognised the possible application of section 40(6) to the case.  Your Honours will see that at page 127, paragraph 151.  Its application turns, in the first place, on the nature of “carrying on business”.  This Court, per Justice Mason, referred to that concept in Hope v Bathurst City Council 144 CLR 1, at pages 8 to 9. I do not suggest this is an exhaustive definition but it does indicate the central concepts of carrying on business. At the bottom of page 8 his Honour said:

It denotes grazing activities –

that was the particular case -

undertaken as a commercial enterprise in the nature of a going concern, that is, activities engaged in for the purpose of profit on a continuous and repetitive basis.

To regard the products of Mrs Nemes’ tortured mind, as it were, as “carrying on business” in our submission would be going very far.  Your Honours, those are out submissions.

GAUDRON J:   Thank you, Mr Jackson.  We need not trouble the respondents in this matter.

We are of the view that the case turns upon its own facts and as such it raises no question of general principle suitable to attract the grant of special leave.  Accordingly, special leave is refused with costs, submissions having been made in writing with respect to costs.

The Court will now adjourn to reconstitute.

AT 10.30 AM THE MATTER WAS CONCLUDED