Qantas Airways Limited v Leonie's Travel Pty Limited

[2010] HCATrans 232

[2010] HCATrans 232

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S122 of 2010

B e t w e e n -

QANTAS AIRWAYS LIMITED ACN 009 661 901

Applicant

and

LEONIE’S TRAVEL PTY LIMITED ACN 050 214 152

Respondent

Application for special leave to appeal

GUMMOW J
HEYDON J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 3 SEPTEMBER 2010, AT 9.39 AM

Copyright in the High Court of Australia

MR B.W. WALKER, SC:   May it please the Court, I appear with my learned friends, MR J.R.J. LOCKHART, SC and MR I.C. COLQUHOUN, for the applicant.  (instructed by Minter Ellison Lawyers)

MR J.T. GLEESON, SC:   May it please the Court I appear with MR N.J. BEAUMONT for the respondent.  (instructed by Slater & Gordon Lawyers)

GUMMOW J:   Yes, Mr Walker.

MR WALKER:   Your Honours, may I, in the application book, take you immediately to page 119, IATA, the International Association of Airlines ‑ ‑ ‑

GUMMOW J:   You are going to demonstrate to us the strength of your case on construction of these clauses?

MR WALKER:   I wanted to do that as quickly as I may.

GUMMOW J:   Yes, that is what we want you to do.

MR WALKER:   Thank you.  May I take you immediately to page 119.  This is the resolution 824 agreement.  It is a resolution of IATA.  Its alternation goes through the processes of IATA.  Some might think that would more difficult through than getting through the Parliament of the Commonwealth.  Clause 2 of resolution 824 form of agreement stipulates in 2.1(a) what are the terms and conditions governing the relationship between the carrier and the agent.  We are application book 119, left‑hand column about line 40. 

One sees as well that they are set forth in the resolutions – there are more than one – and other provisions contained in the handbook.  That is a handbook published from time to time.  It is attached to the agreement.  It incorporates various things, including sales agency rules and other applicable IATA resolutions.

GUMMOW J:   This becomes a contract between these parties?

MR WALKER:   This becomes, ultimately, a contract between us, represented by our agent, IATA, and the travel agent.  On page 119, right‑hand column, about line 25 or so one sees clause 2.4.  I will call it in brief a paramountcy provision.  There is apparently a textual crux relied upon in the argument between the parties.  You will see at about line 23 there is a reference to the “conflict, contradiction or inconsistency” triggering the paramountcy being “between any provisions with which the Agent is required to comply under Subparagraph 2.1”. 

That has been read, we say, unrealistically as meaning something that calls for positive act of performance.  “Comply” of course means “falls in with”.  That is the Anglo-Saxon of the Latin.  It means accept, it means act in accordance with.  I will not ask for more commission than I am entitled to is compliance with a provision as to commission.  It refers back to subparagraph 2.1 and one sees, of course, that that includes the sales agency rules in the subordinate or subordinated set of provisions.  While still then in the paramount set of provisions, on page 121, left‑hand column, about line 35 you will see the all important clause 9 headed “Remuneration”.  Remuneration is there stipulated to be an obligation on our part:

in a manner and amount as may be stated from time to time and communicated to the Agent by the Carrier. 

That, in our submission, is plain English of a kind that does not brook any entrenchment upon all those variations and permutations, all those devices expressed in words for reaching finally a dollar amount conveyed by the expression “manner and amount” comprehensive of every way you can cut the matter.  We then turn over the page 124 where in the right‑hand column you see the beginning of another resolution.  This is Resolution 816.  Because of the English authority in question I should draw to your attention that these rules are globally territorial.  These rules are in like form, relevantly, to the ones which were before the Court of Appeal of England and Wales. 

On page 125, within those sales agency rules, one sees in the right‑hand column under “Section 9” headed “Conditions for Payment of Commission or Other Remuneration”, first of all, the next most important provision in our argument, section 9.1.  This is an immediate point of distinction if anything in the nature – and I stress “in the nature” – of stare decisis could be supposed between our judicature and the English Court of Appeal on the matter because in the English case this equivalent provision was abandoned as a point of argument.  It was not argued, not decided.  In 9.1:

Commission or other remuneration . . . shall be as may be authorised from time to time by the Member –

that is us –

provided that the Agent complies with the applicable rules governing sales –

Then there is a recommendation of doing things in timely fashion.  The critical provisions upon which we have succeeded before Justice Moore but foundered in the Full Court are to be found on page 126, section 9.4 and, in particular, paragraph (a) of 9.4.1 and (b) of 9.4.1 you will see respectively at about line 15 and 35.  The first of those is headed “where commission is payable to an Agent” and it involves calculation “only on the amount of the fares applicable”, et cetera, and the second of those defines “fares applicable” exhaustively in a fashion which, it may be accepted, do not exclude – I stress does not exclude – the fuel surcharge in this case.

GUMMOW J:   You use this expression “fuel surcharge”, that is just a form of words attached to a charge.

MR WALKER:   It is just a form of words attached to money which is payable in differing amounts from time to time in avowed reflection of expense or at least part of the expense suffered by the most volatile, the most important variable cost of running an airline.

GUMMOW J:   So what is the point of construction?

MR WALKER:   The point of construction is that under clause 9 to which I have drawn attention on page 121, that is clause 9 of the agreement, the manner and amount of remuneration is that which should be stated and communicated.  Again, in a very important distinction between us and the English case, it is common ground that there was a statement and communication which, if 9 attaches, would satisfy that requirement and it was a statement and communication which, in terms, excluded from the denominator of the arithmetic in question the fuel surcharge, so that the so‑called commission was to be calculated on an amount that was first reached by excluding that surcharge amount.

Of course, one could arithmetically or in dollar terms reach exactly the same result, no doubt, by reducing the head percentage by which commission was calculated.  However, that obviously introduces in commercial terms considerable difficulties of jamming together different categories of different kinds of customers with different kinds of discounts.  For those reasons, the flexibility which clause 9 manifestly by its terms indicates in a manner and amount, as it may be stated from time to time when communicated to the agent by the carrier, is one which permits, we submit, as a matter of ordinary English in the commercial expectation of these parties, that the dollar sum can be devised by whatever means the carrier chooses, no doubt always subject to good faith, so long as it applies only after it has been communicated.

Put against us is that if the word “commission” is used in a statement or recommendation – and I do stress if the word “commission” is used – then notwithstanding the paramountcy of clause 9 under clause 2.4, then somehow section 9.4.1 of the rules means that that flexibility disappears.  There can be no manner devised which alters the denominator, although you could for many of your customers, perhaps all of them, crudely or otherwise, do it by manipulating the numerator.  In our submission, that is a highly artificial formalistic approach which commits error in a number of ways.  The most obvious way in which it commits error is not to give the plain meaning to clause 9.  The next obvious way in which it commits error is not to give the paramountcy that clause 2.4 requires to clause 9.

GUMMOW J:   Do you say this fuel surcharge fell within the notion of fares applicable in 9.4.1(b)?

MR WALKER:   We say no – that is the second point we raise – because of the way in which the tariff was published.  We published a tariff – this is a finding of fact that we obtained at trial.  As a matter of interpretation we failed on the point, but not as a matter of fact in the Full Court.  We say we published a tariff which omitted this surcharge, made it clear that it was coming out.  So the second point ‑ ‑ ‑

GUMMOW J:   Coming out?

MR WALKER:   It came out of the denominator which was part of the calculation of the amount to be paid by way of remuneration.

KIEFEL J:   Could you explain for me again what the inconsistency is between clause 9 and 9.4.1(a)?

MR WALKER:   There may be no inconsistency, but the inconsistency which, as the parties presented their arguments, emerged was that under clause 9, as we put it, there was no limitation on the manner and amount as may be stated from time to time and communicated.  We would take our commercial risk if we were silly, one way or the other, too little or too much, but we could devise a formula untrammelled by any other provision, insubordinate provisions of the suite of terms and conditions.  The rules, it was said against us, in answer to Justice Kiefel’s question, the rules meant that if the word “commission” were used to describe the form of remuneration in question, then we say, contrary to the ordinary English of that word, it would have to be a per cent and it would have to be a per cent of something which inflexibly, that is, without being able to devise a different manner, would require as the denominator, that is the whole of which the fraction would be paid, an amount defined under 9.4.1(b), leaving, in our submission, this question, when in clause 9 it is said Qantas can set the manner of remuneration, is there an inconsistency when the Full Court says, “No, you cannot.  You cannot pay commission otherwise than on a whole defined in accordance with 9.4.1(b).”?  There is the inconsistency.  In our submission, it can be seen ‑ ‑ ‑

GUMMOW J:   Between 9.4.1(b) and?

MR WALKER:   And clause 9 of the agreement.  It is unfortunate they both have 9 in their titles but they are different, of course.  It is clause 9 of the agreement, page 121, and section 9.4.1(b), in particular, the definition, but also (a), on page 126.

GUMMOW J:   Is not resolution 816 ‑ ‑ ‑

MR WALKER:   That is in resolution 816.

GUMMOW J:   No, is not resolution 816 an implementation of 9 on page 121?

MR WALKER:   No, not at all.  Clause 9 refers to statement from time to time and communication.  Resolution 816 is not a statement of communication by us at all.  It is contemplated indeed by resolution 816 – see section 9.1 at the top of page 125 – that there will be the authorisation from time to time.  So, no, the answer to Justice Gummow is ‑ ‑ ‑

GUMMOW J:   Section 9.1 on 125.

MR WALKER:   Yes.  Page 125.  Section 9.1 is the alternative ‑ ‑ ‑

GUMMOW J:   That is part of resolution 816.

MR WALKER:   It is and it is ‑ ‑ ‑

GUMMOW J:   And within resolution 816 there is this mechanism in section 9.

MR WALKER:   There is.

GUMMOW J:   Which has an element of rigidity in it that is said against you?

MR WALKER:   Yes, exactly.  In answer to the question, but is 9.4.1 not inconsistent but merely a working out, well, the answer is no, it is the very antithesis of the working out of a statement of communication by us from time to time.  It sits there, according to the argument that has succeeded against us in the Full Court, as an inflexible, immutable way in which commission must be calculated if there be commission.

GUMMOW J:   What is the rigidity of the operation of 9.4.1(b)?

MR WALKER:   It appears to be introduced, on the argument against us, by the notion of being ‑ ‑ ‑

GUMMOW J:   What do you say it is?  What do you say is the rigid operation of 9.4.1(b)?

MR WALKER:   It comes from the definition in 9.4.1(b), your Honour, the inclusion ‑ ‑ ‑

GUMMOW J:   Yes, but what is the rigidity in 9.4.1(b)?

MR WALKER:   We say there is none because of 9 in the agreement.

GUMMOW J:   There is none?

MR WALKER:   Clause 9 in the agreement, but we have lost that argument.  It has been held that clause 9 of the agreement is overborne by the rigidity in the definition of section 9.4.1(b) of the subservient or subordinate set of rules and that is, in our submission, in answer to Justice Gummow’s earlier question, a very important aspect in the suite of errors that we say the Full Court committed.

KIEFEL J:   Should one approach resolution 816 and the rules there under on the basis that it assumes something already in operation under resolution 824 and the meaning given to clauses such as 9?

MR WALKER:   With respect, your Honour, that must be the natural response to the opening words of 9.4.1(a) “where commission is payable to an Agent”.  So it is positing a case which need not be the case, but it is positing a case.  That, of course, is why, as part of the errors involved, one asks, is there anything other than formalism in the argument against us?  Because if some word other than “commission” had been used, then presumably the argument would have to have been attempted to say that commission can be something called by any name which ought to, even if it does not, comply with 9.4.1.  That would be a very difficult argument indeed.

In our submission, where remuneration, as we know from clause 9 of the agreement, is expressed in terms easily sufficient to encompass commission, no body has ever doubted that, when the rules themselves repeat that obvious usage – see section 9.1 on page 125 – it is only a formalistic approach that could say that if the word “commission” is used, hey‑presto you have lost the flexibility of remuneration generally in clause 9, you must calculate under 9.4.1.  We submit that these are parties that accepted that resolutions made from time to time, no doubt by different outcomes of different negotiations in international association, stitched probably literally together in a handbook, are apt, rather than unlikely, to include from time to time inconsistencies.

Addressing that and on a matter of great commercial moment, namely, who had the whip hand in terms of remuneration, in clause 9 it was accepted, with the protection of clause 2.4, that ways of cabining in our flexibility to determine the manner and amount of remuneration would necessarily fall away and not bind the parties because of an inconsistency that would represent with the uncabined, the unrestrained rights, under clause 9. 

When one considers that a change of terminology, to omit the word “commission”, or a change of amounts so as to bring about in arithmetic terms, from time to time, and it would have to be changed very frequently as the surcharge changes, when one considers that that could be done, and the arguments that succeeded against us have never suggested it could not be done, so long as we never used the word “commission”, then one sees, with respect, that there has a been a tail wagging the dog effect.  The dog is meant to be the commercial position given by clause 9 ‑ ‑ ‑

GUMMOW J:   Your fares will go up and down for all sorts of reasons.

MR WALKER:   That is the point.

GUMMOW J:   If for the purpose of public image you choose to label it as “fare surcharge” that is neither here nor there.  The fares go up and down.

MR WALKER:   Quite.

GUMMOW J:   And everyone knew that when resolutions 824 and 816 were adopted.

MR WALKER:   Yes, and everyone knew that and everyone knew that we could adjust commission from time to time, and remuneration, so as to pay only a manner and amount as we wished after the notification has been received.  It is precisely because fares can go up and down, precisely because there is volatility, obviously from fuel most of all, but from other things as well ‑ ‑ ‑

GUMMOW J:   Competition for one thing, one hopes.

MR WALKER:   I was about to say, not least of which it may have to do with how other people are going.  It is precisely because of that that the

flexibility is of great moment and, in our submission, the Full Court’s reasons fail to give that important aspect of the commercial dealings the proper weight, a weight which happens, in technical terms, to be reflected by the clause 2.4 paramountcy provision.

HEYDON J:   Do you have to win on both aspects?

MR WALKER:   No.

HEYDON J:   If the fuel surcharge was, in truth, part of the fares, then the announcement of May 2004, the advice given to the agents, would simply be wrong, that commission would have to be paid on the whole?

MR WALKER:   That is the point of the argument against us.

HEYDON J:   It might be that you could get around that by issuing another piece of advice.

MR WALKER:   That is right.

HEYDON J:   At least for that period 2004 to 2010 or 2011.

MR WALKER:   Yes.  Well, for the period covered by any notification invalidated.

HEYDON J:   If you were wrong on that point, though, the other point is just advisory, is it not?

MR WALKER:   No, your Honour, because clause 9 – it is nothing merely advisory in whether we can devise any manner ‑ ‑ ‑

HEYDON J:   Sort of proleptic or future declaration ‑ ‑ ‑

MR WALKER:   Well, no.

HEYDON J:   ‑ ‑ ‑ something you may or may not do.

MR WALKER:   Well, the first point is that we have lost on the argument about clause 9 and had we won on it, we would win the case.  It is not advisory in any sense.  It would be decisive if we win on that point.  I see the lights, your Honours.

GUMMOW J:   Yes, Mr Gleeson.

MR GLEESON:   Your Honours, there is no issue of contract law or principles of construction raised by the case.  It is the question of application of settled principle to a particular document.  Your Honours, there is one place where the principle which is common ground is conveniently identified.  Could I just go to that authority and then come to the clauses. 

If your Honours would go to the applicant’s authorities bundle.  Commencing at page 13 is the decision in Pagnan SpA which was relied upon by the English Court of Appeal.  At page 20 in the judgment of Lord Justice Dillon in the second last paragraph, the second and third sentences set out the conventional principle that:

It is a commonplace of documentary construction that an apparently wide and absolute provision is subject to limitation, modification or qualification by other provisions.  That does not make –

them inconsistent or redundant. 

GUMMOW J:   That is what we were putting to Mr Walker, in effect.

MR GLEESON:   Yes.  In essence, that is the principle which has been applied by the English Court and the Full Federal Court.  To illustrate it simply, if your Honours go first to page 121, clause 9 of resolution 824 expresses the proposition in a general term that the manner and amount will depend upon decisions of the airline from time to time, as opposed to it being locked in stone.

GUMMOW J:  Anything turn upon the sequence of these resolutions?

MR GLEESON:   If anything, that was in the favour of the decision of the Full Federal Court because 824 came in and was retained after 816 was there, that is, that they sat together neatly.  That was further confirmed by this point, that, if your Honours go over to the subsequent amendment which is at page 182 – this is 816 as amended in 2008.  So with full knowledge of the UK decision and of the issue, what the airlines did in 816 was to, in fact, make the position even clearer.  In particular, in section 9.4 they said in clear terms:

where commission is payable to an Agent, it shall be calculated only on the amount of the fares applicable –

and then the fares applicable retained the meaning from the earlier provision.  So the airlines have the ability to amend or list via conference and what they chose to do was to amend to make it even clearer that 816 is intended to have some real and substantive work.  So essentially how they work together is that the clause 9 provision, which was on page 121, is the statement in the general terms that these decisions will depend upon what particular airlines choose to do and then that is supplemented, implemented, taken further, worked out by section 9.4 on page 126. 

HEYDON J:   So your point is that there is no conflict, contradiction or inconsistency?

MR GLEESON:   None at all.  Section 9.4 on 126 works out, supplements the early provision and even if one looks at 9.4.1(a), as the Full Federal Court pointed out, it supplements the earlier provisions in a number of ways.  The first, which is found near the end of the clause, is that it will only be the fares “paid over to the Member . . . and collected by the Agent”.  So the agent only earns the reward if the money is collected by the agent.  If it is paid direct to the airline, no commission will be payable.  So that is for the benefit of the airline.  The other aspect of the clause, the fares applicable aspect, is to say, this will be the base upon which the commission will be earned.  If you choose commission, we all know what the base is.  If you do not want to choose commission, you can take a different route. 

Now, that provision, one might think, has some real and sensible work to do.  It enables travel agents to know with some certainty what will be the dollar figure they will get as a result of a given percentage of commission.  It takes one readily down to 9.4.1(b) and that exhaustively tells us that the fares applicable – well, we start with the fare, including surcharges, for the transportation in accordance with the tariff. 

GUMMOW J:   Your point is that 9.4.1(a) is a provision, to put it generally, in favour of the airline but in defining the expression “fares applicable” you go to 9.4.1(b) and at least, it makes it clear that that which is paid over is this “fares applicable” definition.

MR GLEESON:   Yes, and we all know from that ‑ ‑ ‑

GUMMOW J:   .....that is too favourable to the agent.

MR GLEESON:   What it in fact does is align the base with the revenue which the agent is actually earning for the airline.  That is its purpose, because you start with the fare including the surcharge for the transportation in accordance with the tariff, which is simply, what is it that it costs me to get from Sydney to London in accordance with the particular airline’s tariffs or charges, but then you exclude, and this is for the benefit of the airline, you exclude excess baggage.  Why?  Because normally people only find out they have got too much at the airport, so the agent has not earned that fee.  Then you exclude taxes and other charges collected by the agent, and that was common ground, that means amounts collected for payment over to a government or other body, such as what used to be the departure tax, so that the airline does not pay on them because the agent has not earned any

revenue from them for the airline.  So the end result is that fares applicable quite neatly aligns the base for commission with the revenue which the agent has earned for the airline and the airline then, if it wishes to pay by commission, chooses a rate and applies it to that base. 

Your Honours, in essence, our point is that the Full Federal Court has carefully and independently come to a strong construction of the clause, but as well as that it has given appropriate consideration to the fact that as an international instrument there are interests of comity and the UK decision which is to similar effect ought to have been given some weight and was given some weight in the process.  We would ask your Honours to reject the application.

GUMMOW J:   Yes, Mr Walker.

MR WALKER:   Your Honours, in our submission, it is not simply under the flag of comity that the issue of the English authority ‑ ‑ ‑

GUMMOW J:   I can tell you, Mr Walker, we will not be deciding this application on any posture that requires comity with anybody.

MR WALKER:   Thank you.

GUMMOW J:   We will be deciding it as the final Court for this country by our own mental processes, which we hope are strong enough.

MR WALKER:   My learned friend, with respect, correctly says the Full Court decides the matter on the merits for themselves, but it is not possible to read the Full Court’s reasons without seeing that, among the reasons inclining them to that view of correctness, is an approach to the English authority which, in our submission, is appropriate for this Court to consider not only the English authority on the issue presented between these parties but the approach to it as an authority. 

In the application book page 88 in paragraph 58 there is, in our submission, without supporting grounds given or elaborated, given at about line 45 a ruling which is disturbing, in our submission, of the proper sequence of use of authority, resort to authority, persuasive or binding in this country, because a test for what should be a trigger for disagreement among co‑ordinate courts, particularly intermediate appellate courts, in this country in relation to matters with federal import, neither directly being as laws of the Commonwealth or indirectly by reason of uniform schemes, is proposed by their Honours.  It is just borrowed holus bolus.  One sees the expression “plainly wrong” at about line 45.

HEYDON J:   This does not seem to be a ground in the draft notice of appeal.

MR WALKER:   Yes, I think it is, with respect, your Honour.

HEYDON J:   There is a ground relating to the English decision, but it is not what you are presently saying.

MR WALKER:   The individual ground does not attack that as bare method on its own.  A reason to overturn the Full Court’s approach to the English authority is the approach taken in relation to the proper use of and resort to merely persuasive authority.  “Plainly wrong” is one which, in our submission, is an appropriate yardstick within our federal system but should have nothing to do, even with international commercially used instruments.  In similar vein, at paragraph 61 on page 89 of the application book, there is reasoning which actually produces, at its end – see about line 35 – the startling proposition that that which the English Court of Appeal regarded as their reason for deciding was, in fact, to be regarded truly if there was any obiter as the relevant obiter.

In our submission, examination of the way in which the English court expressed its reasons and, most particularly, when one goes in page 125 of the authorities book to paragraph 48 at the foot of that page, it is clear that that case went off on the fact there had not been the notification required.  What follows was in case their Lordships were wrong on that point.  It includes an abandonment of an argument – see page 126 of the authorities book in paragraph 49 at letter c – it involves abandonment or one of the arguments upon which we relied and which was dealt with in the Full Court in this case.  In our submission, therefore, quite apart from being wrong, as we put it, there are approaches to the way in which that authority was resorted to by the Full Court which, in our submission, justify attention by this Court in order to administer correction. 

Your Honours, my learned friend’s argument does not, in characterising the rules as supplementing rather than being inconsistent with the agreement, deal with the simple proposition, simply stated but the more powerful for that reason, that clause 9 gave the power of determining manner and amount of remuneration, which will include all commissions, to the airline.  The whole of the argument against us, the finding against us, is to deny that flexibility and to deny that flexibility in relation not to a minor matter but to a major matter.  It is for those reasons, in our submission, that this is a matter appropriate to be considered by the Court. 

The Pagnan decision, in our submission, does not supply by reasoning any obvious detection of a lack of inconsistency.  We are left with a proposition there is flexibility by one provision, the supposedly

paramount one.  There is inflexibility, that is, a control of what may be done according to manner, in relation to manner, in the subordinate provision, but the subordinate turns out to control the situation.  In our submission, that is an error that invites the attention of this Court.  May it please the Court.

GUMMOW J:   We will take a short adjournment.

AT 10.14 AM SHORT ADJOURNMENT

UPON RESUMING AT 10.18 AM:

GUMMOW J:   The conclusion reached by the Full Court of the Federal Court in its decision which is reported in (2010) 183 FCR 246, as to the relationship between resolution 816 and resolution 814 and, in particular, as to the construction of section 9.4 of resolution 816, is correct. We reach that view without any reliance upon what appears in paragraphs 56 to 59 of the Full Court decision. What was said in the joint reasons in Great China Metal (1998) 196 CLR 161 at 176 does not support any general proposition that the decisions of other jurisdictions are of assistance other than for the cogency of their reasoning.

Special leave to appeal is refused with costs.

AT 10.19 AM THE MATTER WAS CONCLUDED