P.T. Garuda Indonesia Ltd v Australian Competition & Consumer Commission

[2011] HCATrans 280

[2011] HCATrans 280

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S166 of 2011

B e t w e e n -

P.T. GARUDA INDONESIA LTD ARBN 000 861 165

Applicant

and

AUSTRALIAN COMPETITION & CONSUMER COMMISSION

Respondent

Application for special leave to appeal

GUMMOW J
HAYNE J
BELL J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 7 OCTOBER 2011, AT 10.16 AM

Copyright in the High Court of Australia

MR M.J. LEEMING, SC:   May it please the Court, I appear with my learned friend, MR C.H. WITHERS, for the applicant.  (instructed by Norton White)

MR T.M. HOWE, QC:   May it please the Court, I appear with my learned friend, MR D.J. ROCHE, for the respondent.  (instructed by Australian Government Solicitor)

GUMMOW J:   Yes, Mr Leeming.

MR LEEMING:   May it please the Court.  The special leave question is the scope of the commercial transactions exception in the Foreign States Immunities Act.  That is an important piece of legislation this Court has not had the opportunity to consider, although your Honour Justice Hayne did in another place.  It is cognate with legislation that has been considered in recent years by the House of Lords, by the Supreme Court of Canada very recently, and repeatedly by the United States Supreme Court.  Interestingly, all of those ultimate appellate courts construe their own domestic legislation harmoniously. Your Honours will have seen ‑ ‑ ‑

GUMMOW J:   What is the lack of harmony here?

MR LEEMING:   I am so sorry, your Honour?

GUMMOW J:   What is the lack of harmony presented in Australia by this decision of the Full Court?

MR LEEMING:   First of all, his Honour Justice Jacobson embraced, and we support his conclusion, what had been said in the House of Lords.  The Full Court, first of all – and I will take your Honours to this – it is a little difficult to see what the ratio is in light of the way in which their Honours have crafted their reasons, but secondly and more importantly, all members of the Full Court have consciously departed from the English approach.  They have done so for reasons that we say can reveal error which can be concisely stated.  Principally, they seem not to have had regard to the full breadth of the English legislation. 

The matters that are in the application book are, of course, much longer than the small point that arises.  The Malaysian Case which was heard in parallel and which was factually much more complex has dropped away.  The whole question of separate entity has gone away.  All that this case comes down to is a fact‑free question of statutory construction which can be exposed in this way.  His Honour the trial judge Justice Jacobson dealt with it in six pages in the appeal book; appeal book pages 22, commencing at paragraph 105 to 27, all of which we embrace.  We say that reasoning accords with the purpose, it gives proper deference and precedential authority to the foreign decisions and it affects the purpose of the legislation. 

The Full Court were conscious that what they were doing produced, in Justice Rares’ words, an odd result.  It is odd, one might think, that the commercial transactions exemption be so broad that the general grant of immunity to which my client is entitled does not apply when my learned friend seeks to bring what I often regarded as quasi criminal proceedings, although I am conscious that is a label that does not have very much value to the content of them, but proceedings for injunctions, declarations and civil penalties for contravention of Part IV of what used to be called the Trade Practices Act. 

Now, in terms, his Honour and their Honours in the Full Court departed from the English decisions.  The question is purely one of statutory construction and to make good the errors that we say appear, can I very briefly take your Honours to the Act itself, the starting point of analysis.  It is the first document in our bundle of materials.  The Court will know that here, as in Canada, the United States and the United Kingdom, implementing a notion described by the academic commentators as restrictive sovereign immunity, there is a general conferral of immunity subtracted from which are particular exemptions.  The general conferral of immunity is section 9, just page 5 of the print.

These provisions in Part II refer uniformly to foreign State, but by reason of section 22, my client, which it is common ground, is a separate entity.  Section 22 requires one to read the other provisions in Part II in this way, where you see “foreign State”, for the present purposes read it as including a separate entity with a couple of exemptions that do not make any difference.

From the general immunity in section 9 there is subtracted probably the most important exemption, section 11, commercial transactions, which is what this application is all about.  Can I draw the Court’s attention, if I may, first of all to the ultimate question of construction in subsection (1).  The focus is upon not the underlying facts – that is one of the areas that we say is disclosed in the reasoning of the Full Court – but the character of the proceeding.  It is the proceeding that must concern the commercial transaction.

GUMMOW J:   We just had federal legislation that used the word “connection”, now we have a “concern”.

MR LEEMING:   That is so.  My learned friends and I agree these words of connection depend – one obviously does not apply dictionary definitions.  One looks very closely at the context and the context here in legislation whose subject matter is directed to what happens offshore very much is informed by the common ancestor of all of these provisions in Anglo Australian and North American common law jurisdictions.

In subsection (3) one has a definition expressed using the verb “means” of commercial transaction.  His Honour Justice Rares in particular emphasised the fact that not merely are commercial transactions the sorts of transactions in the first two lines, but also “like activity”.  His Honour, as we read his Honour’s reasons with which the other two judges agreed generally, in order to discount the English approach which had been applied by the trial judge in accordance to which we win, his Honour emphasised that there was a very different – that is his Honour’s language – text that he was construing 11(3) from England and although he does not say expressly what that difference is, we rather think it is the “like activity” because that is something that he refers to about four times in his reasons at this stage.  Of course, that “like activity” extension, going beyond contract and things very close to contract, also exists in the English legislation, something which, with great respect, we think perhaps his Honour had not appreciated.

The third thing to say about subsection (3) is the fine‑grained nature of the exceptions that are carved out from the general immunity.  There are three expressly included, without loss of generality, inclusions in paragraphs (a), (b) and (c), but one can see immediately from paragraph (c), so 11(3)(c), that carved out from the – this is the carve out from the exception – contracts of employment and bills of exchange.  They at that level – low level we would say – of abstraction are dealt with expressly and differently in the following exemption.  Section 12 deals with contracts of employment and, in particular, section 12(3) excludes the exception of contracts of employment where one has foreign nationals or habitual residents of the other State being employed. 

So one can see immediately this is the level of detail at which the Parliament has in this country, as elsewhere, enacted these exceptions to the general immunity.  Likewise, there is an exception 11(3) to bills of exchange and section 19 of the Act makes it plain that you do not get into the commercial transactions exception just because you can point to a bill of exchange, although that is the sort of thing you might see in many commercial transactions, you have to look for something underlying it.  So you cannot bootstrap yourself into the exception.  Now, the Court of Appeal in this State has recently noticed these carefully crafted – their words are “precise and complete” – list of exceptions and one further difficulty with the decision of the Full Federal Court is that it rather creates the impression that section 11 is much broader than it is intended to be. 

In light of that, can I take your Honours lastly to where we say this Court will find error in the reasons of the Full Court.  Again, most of the reasons fall away with the falling away of Malaysia and the agreement that my client is a separate entity.  In the joint judgment at page 50 of the appeal book, one can see at paragraph 54, their Honours agree with Justice Rares’ conclusion, but can I add also paragraph 67 there is agreement generally with his Honour Justice Rares’ reasons.  Notwithstanding that agreement, they say:

in these short reasons we have explained why we have come to the same conclusion as his Honour.

That is what I was referring to before when pointing to the difficulty that appears in – just identifying what the ratio is one has to see to what extent the short reasons disagree with what Justice Rares’ judgment says.  On page 52, in paragraphs 62, 63 and 64, shortly stated, with great respect, we say error in the task of statutory construction can be discerned in the joint reasons.  First of all, in paragraph 62, your Honours may see five lines up from the end it is said:

The paragraphs in s 11(3) do not limit the types of transactions to which s 11(3) apply.

We say, with great respect, no, in two respects.  First of all, plainly, one reads the whole of section 11 together and the mere fact that there are those words “without limiting the generality of the foregoing” does not warrant the conclusion that is there being expressed.  More particularly, it is, with respect, quite plain from the carve out in 11(3)(c), contracts of employment or bills of exchange, that they cannot be included within commercial transactions generally defined.  So that is error we say. 

Paragraph 63, there is a statement of conclusion to do with the distinction between a general claim for immunity of a lawful transaction but an immunity for an unlawful transaction.  We say that is exactly the sort of odd result that Justice Rares was referring to in paragraph 210, to which I will come in a moment.  Why surprising at all that in something which has been hammered out at an international level there be an immunity that permits, in effect, civil proceedings but when one gets to proceedings by regulator, although formally civil, a different course is taken?  Critically in paragraph 64, your Honours can see the reference to the conduct complained of by the ACCC being conduct which concerns a commercial transaction –

BELL J:   This is the difference with the United Kingdom authorities, the proceedings.

MR LEEMING:   Precisely so.  The only other thing to say is that Justice Rares in his reasons, the whole of which can be found again in a few pages at the end, emphasises, as I have said, the differently worded United Kingdom Act.  That can be seen in particular at paragraph 206 at application book 99.  At the bottom of page 99, his Honour refers five lines into the paragraph:

to the differently worded United Kingdom Act –

And on the last line of the page states that –

The definition of “commercial transaction” in s 11(3) is obviously different to that in s 3(3) of the United Kingdom Act. 

If one reads paragraph 207, although I do not think anywhere expressly does he say what the obvious differences of the matter are, there is a focus upon the first and the second branch; last sentence of paragraph 207 refers to a “second branch”, the “like activity” which goes on what is contractual and that is something that recurs throughout his reasons.  We say, with great respect, that is not a difference that can be seen if one turns back to page 92 within the application book in his Honour’s own reasons.  He has reproduced the United Kingdom provision.  Your Honours can see in 3(3) at line 20 on page 93, again there is a definition of “commercial transaction” just as in Australia.  Again, paragraph (a) is identical to ours.  Paragraph (b) deals with loans or other transactions and picks up guarantees.  That is what is picked up in our paragraph (c).  Then in paragraph (3)(c) of the English provision one has “any other transaction or activity”.  The same words are picked up, materially the same words anyway, the “like activity” in our provision.

GUMMOW J:   Is there some common international genesis of this legislation?

MR LEEMING:   Yes, and that is why the Canadian – and even at the level of absolute detail of no relevance to the case, the carve out at the end of the English provision, neither paragraph above applies to a contract of employment between a State and individual.  That is what you have seen in our provision as well.  Mr Withers helpfully tells me England, Canada, United States then us.  Our provision was informed by Professor Crawford’s reports to the Australian Law Reform Commission legislation that was adopted by the Parliament.  Academically there was a deal of concern and traditionally there was a deal of concern with the former notion of complete immunity ‑ ‑ ‑

GUMMOW J:   Yes, we know that.

MR LEEMING:   So it is not a case where there is a treaty ‑ ‑ ‑

GUMMOW J:   That is what I was asking really.

MR LEEMING:   No, it is not.  But it is a case where there is an ancestry and we would say that, especially given the subject matter, the same principles of giving a construction that affords comity would apply, particularly when one has regard to this.  A separate entity under Australian law if it engaged in anti‑competitive conduct, if the mirror image were applied to England, it would be, on the English authorities, quite clear that the immunity would arise.  Not so the other way around. 

So, in short, we say that Justice Jacobson’s reasons by themselves show that there are at least reasonable prospects of success.  The point is short, there were no facts, it is important, it is also interesting, to the extent that that is worth anything.  The consequences at the moment on international relations are not necessarily without significance and we would say, although the appeal took two days because of the other matters that have gone away, we would say this would be well and truly over in half a day’s argument.  May it please the Court. 

GUMMOW J:   Yes, Mr Howe.

MR HOWE:   Your Honour, the principal proceedings between the parties before the trial judge concerned the lawfulness but alleged activity entered into and implemented by the applicant of an inherently commercial nature, namely, it was alleged that the applicant and others had entered into and implemented an arrangement to fix the price at which air cargo services would, in effect, be sold to consumers of services in a particular market.  The respondent sought declarations to the effect that that alleged conduct contravened section 45 of the then Trade Practices Act, now the Australian Consumer and Competition law, and also sought remedies by way of injunctions and civil penalties. 

The subject matter of the proceedings concerned activity of an inherently commercial nature.  In our submission, it is not to the point to focus particularly upon the precise remedies that were sought, although we would note even were that the correct approach, the fact that the Commission put in issue the lawfulness of that transactional activity on the part of the applicant, very much demonstrates that the proceedings, the principal proceedings below, concern commercial transaction or commercial activity as defined in the Act.  The applicant seeks to confine section 11 largely to an operation with respect to suits between parties to a contract and in that respect, in our submission, the applicant seeks to introduce a very dramatic and unwarranted gloss on the plain amplitude of the words on the page in section 11. 

In our submission, the text, the immediate statutory context, the extrinsic materials consisting of the Australian Law Reform Commission report and the Minister’s second reading speech and conventional principles of statutory construction when applied to the issues joined between the parties in the proceedings below leads inevitably, in our submission, to the result that there is no sufficient prospect of any appeal proceeding here because the reasoning and decision of all members of the Full Court of the Federal Court is not attended with sufficient doubt as to its correctness to warrant a grant of special leave.  In our submission, there is no lack of harmony at all with international decisions, and we have referred in some detail to those in our written submissions.

BELL J:   Justice Rares might be thought to have taken a different view in that respect, distinguishing the United Kingdom legislation from the text of this legislation.

MR HOWE:   In our submission, Justice Rares ultimately distinguished the case of Holland, the principal English case which I would apprehend my learned friend to have adverted to, but, more particularly, that case is dealt with in the plurality judgment at application book page 52 in paragraph 65.  In our submission, their Honours Justices Lander and Greenwood distinguished very properly and self‑evidently correctly the outcome of the case in Holland v Lamden‑Wolfe.  They did so there because the House of Lords specifically held that the subject matter of those proceedings was not about the contract.  It was not about the commercial transaction.  That is, the principal proceedings there did not require the court to adjudicate any issues, any contested issues about the underlying contract.  Rather, the issue agitated in that case concerned a claim for damages for defamation. 

With respect, that reasoning, namely, that the case was not about a commercial transaction and did not require the adjudication of any contested issues to do with or touching upon the commercial transaction, found very strong expression in an earlier decision of this Court in O’Grady’s Case – and we have referred to that in our written submissions – where the majority of the Court in O’Grady’s Case held that proceedings will concern a subject matter if resolution of the proceedings and the determination of entitlement to relief turns upon how the court adjudicates contested facts which relate to that subject matter. 

Now, in this case, in our submission, it is absolutely clear that there are contested facts joined between the parties and the principal proceedings as to whether or not the applicant did engage in price fixing arrangements and implement those arrangements for the purposes of profiting, by way of price fixing, in the subsequent sale of air cargo services to consumers.

HAYNE J:   Can the proceeding brought by ACCC be described as a proceeding seeking penal enforcement of a norm of conduct governing commercial transactions generally?

MR HOWE:   Your Honour, we would not cavil with the proposition that what we are concerned with here is broadly in the nature of enforcement proceedings brought by a regulator to enforce standards of conduct which apply to the very conduct in issue here, namely, the engagement in a commercial transaction directed to, allegedly, the diminution of competition in a market. 

HAYNE J:   The question that would then arise is whether a proceeding seeking the penal enforcement of the norm of conduct governing commercial transactions generally in which the focus falls upon one or more commercial transactions that have been undertaken in pursuance of some agreement arrangement or understanding concerns a commercial transaction.  Is that the question that confronted the courts below?

MR HOWE:   Yes, your Honour. 

HAYNE J:   You say it is resolved one way, Mr Leeming says it is resolved the other.

MR HOWE:   Indeed so.

HAYNE J:   You say it is clear as burning daylight.

MR HOWE:   Yes, I would agree with my learned friend that the point is an interesting one.  With respect, the reasoning of their Honours in the Full Court below is cohesive.  It is not at variance with the reasoning in any of the international cases.  It is wholly consistent with the purposes of the Act which was to, in effect, abolish absolute immunity when separate entities of States enter a marketplace and the restrictive immunity adopted and expressed in the Act was explained in the ALRC report as basically requiring that when separate entities of foreign States enter the marketplace, they should be subject to all the rules of that marketplace and in Australia and in respect of overseas conduct the rules of the marketplace include adherence to the norms stipulated in the legislation, in this case in section 45 of the Australian Consumer and Competition Act.

Your Honours, we say that there were differences in the precise wording of section 11 of our Act and section 3 of the UK Act, although we had understood my learned friend to suggest that the UK legislation did not direct attention to whether or not the proceedings concerned or related to a commercial transaction.  Now, if we are mistaken about that, I apologise but

section 3 appears at application book page 93 and in paragraph 185 at the top of the page your Honours will see that it provides that:

A State is not immune as respects proceedings relating to – 

(a)a commercial transaction – 

So we really have largely the same immediate test, although it is true and it was accepted by Justice Rares that the precise immediate context is different, but the use of the language, the test, the threshold that has to be satisfied is largely the same.  So the principal basis, your Honours, upon which the application for special leave is opposed is that it has not been demonstrated that the reasoning and outcome in the court below is attended, in our submission, with sufficient doubt to warrant a grant of leave.  May it please the Court.

GUMMOW J:   We do not need to hear you in reply, Mr Leeming.  There will be a grant of leave in this matter.  The draft notice of appeal at page 111 seems adequate, does it not?  This will be a one‑day case.

AT 10.45 AM THE MATTER WAS CONCLUDED