Commerce Commission v Air New Zealand Limited HC Auckland CIV-2008-404-008352
[2011] NZHC 1501
•3 November 2011
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2008-404-008352
BETWEEN COMMERCE COMMISSION Plaintiff
ANDAIR NEW ZEALAND LIMITED Defendant
CIV-2008-404-008348
AND BETWEEN COMMERCE COMMISSION Plaintiff
ANDJAPAN AIRLINES INTERNATIONAL CO LIMITED
Defendant
CIV-2008-404-008349
AND BETWEEN COMMERCE COMMISSION Plaintiff
ANDEMIRATES Defendant
CIV-2008-404-008350
AND BETWEEN COMMERCE COMMISSION Plaintiff
ANDMALAYSIAN AIRLINES SYSTEM BERHAD LIMITED
Defendant
CIV-2008-404-008351
AND BETWEEN COMMERCE COMMISSION Plaintiff
COMMERCE COMMISSION V AIR NEW ZEALAND LTD HC AK CIV-2008-404-008352 3 November 2011
ANDKOREAN AIR LINES CO LIMITED Defendant
CIV-2008-404-008354
AND BETWEEN COMMERCE COMMISSION Plaintiff
ANDTHAI AIRWAYS INTERNATIONAL PUBLIC COMPANY LIMITED Defendant
CIV-2008-404-008356
AND BETWEEN COMMERCE COMMISSION Plaintiff
ANDSINGAPORE AIRLINES LIMITED & SINGAPORE AIRLINES CARGO PTE LIMITED
Defendants
CIV-2008-404-008357
AND BETWEEN COMMERCE COMMISSION Plaintiff
ANDCATHAY PACIFIC AIRWAYS LIMITED Defendant
Hearing: 27 October 2011
Counsel: BWF Brown QC, JCL Dixon, KC Francis and LCA Farmer for
Plaintiff
AR Galbraith QC, DJ Cooper and SJP Ladd for Air New Zealand
JA Farmer QC and IJ Thain for Cathay Pacific
MR Dean QC, GW Hall and AN Birkinshaw for Emirates
DS Alderslade, JWJ Graham and RM Irvine-Shanks for Japan Airlines
AM Callinan and AE Murray for Korean Airlines
JL Land and I-RL Sheerin for Malaysia Airlines
MD O'Brien, JH Stevens and KJ Dobbs for Singapore Airlines
TC Weston QC, AW Lear and MW McCarthy for Thai Airways
Judgment: 3 November 2011
JUDGMENT OF ASHER J
(Re: application for release from undertaking)
This judgment was delivered by me on Thursday, 3 November 2011 at 4.45pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Introduction
[1] The defendant airlines (“the airlines”) seek to be released from their undertaking not to appeal the judgment dated 24 August 2011[1] (“the decision”) on stage one of these proceedings until the determination of stage two. The plaintiff the Commerce Commission (“the Commission”) opposes that application.
[1] Commerce Commission v Air New Zealand Limited HC Auckland CIV-2008-404-8352, 24
August 2011.
[2] The background to the proceedings is set out in the decision. The Commission alleges that the airlines have entered into and given effect to arrangements imposing fuel and security surcharges at certain agreed rates.
[3] By Minute (No.2) of 6 May 2010, Harrison J with the consent of all parties directed a split hearing. The first stage of the trial took place in May and June of
2011. The decision on that first stage determined that:
(a) the Commission was required to prove a market in New Zealand;
(b)the airlines supplied inbound air cargo services in competition with each other in New Zealand;
(c) there was a market in New Zealand for inbound air cargo services;
(d)section 4 of the Commerce Act 1986 (“the Act”) applied only to conduct affecting competition in the market in New Zealand in respect of which a substantive provision was alleged to have been breached; and
(e) the Commission‟s amendments were not time barred.
[4] The Commission was unsuccessful in relation to issues (a) and (d). However, it succeeded on issues (b) and (c) and (e). In particular the decision that there was a market in New Zealand for inbound air cargo services meant that the Court had jurisdiction to determine the Commission‟s claims in relation to inbound air cargo. This meant that at the stage two hearing the Commission‟s allegations that there were agreements that were put into effect in relation to inbound air cargo would be heard and determined, as well as those arguments relating to outbound air cargo. If the Commission had been unsuccessful in relation to either of issues (b) and (c) the hearing would have related to only outbound air cargo and would have been much shorter.
[5] Harrison J‟s Minute attached memoranda of counsel for the airlines and the Commission which referred amongst other things to an undertaking offered by the airlines. The undertaking provided as follows:[2]
[2] Memorandum of counsel for the defendants (Singapore) of 6 May 2010.
7. Against that background the defendants offer the following undertaking: (a) Following judgment on the stage one trial (i.e. the trial of market
issues), the airline defendants may lodge but will not prosecute an appeal against that judgment until judgment on the stage two trial so
that all appeal issues are then dealt with together. (The plaintiff must agree not to take issue with the delayed prosecution of the
appeal and would consent to an application being made by the defendants under Rule 43 of the Court of Appeal Rules to extend time.)
(b) This is on the basis that if it is the plaintiff which is unsuccessful at the stage one trial then:
(i) the stage two trial will proceed on the basis of the stage one determination, unless the plaintiff successfully appeals against the stage one judgment in time to allow the stage two trial to proceed at the scheduled date on the basis of the appeal ruling;
(ii) if the plaintiff does appeal, the airline defendants have the right to cross appeal and/or have their appeals heard as a cross appeal (both the appeal and cross appeal would thus be heard at the same time);
(iii) if the plaintiff does appeal, the airline defendants agree to support an application from the plaintiff to the Court of Appeal for the holding of a priority fixture or to the High Court for a deferral of the stage 2 trial date;
(iv) each party has liberty to apply as may be necessary. (Emphasis added.)
[6] It is the undertaking referred to in [7](a) from which the airlines seek to be released.
The respective positions of the parties
[7] In their application the airlines argue that the undertaking was given in the context of an intention that the parties would complete discovery for stage two in parallel with preparation for stage one and in time for a possible stage two fixture in July or August 2012. That has not been done and discovery for stage two has not proceeded as intended. They also argue that there was an assumption that there would be insufficient time for any appeals to be heard and determined prior to a start of stage two in July or August 2012. Now the start is to be in February 2013 and there is more time. They argue that the stage one issues as determined in the decision are novel and of significance, and as matters have transpired there are a number of them which require an early appeal. The determination on appeal of the stage one issues will, the airlines say, significantly affect the nature, scope and focus of the evidence and argument in the stage two trial.
[8] They note that the Commission expressly reserved its right to appeal against the stage one decision and that it has signalled its possible intention to cross-appeal the existing stage one decision. This indicates that it considered it practical to have
an appeal of the stage one decision. It is also noted that there may be a need for a stage three trial if the appeals are not determined in advance. They say that there will be no material prejudice to the Commission if the airlines are released from their undertaking, and that it would be unjust to enforce the undertaking.
[9] The Commission rejects these arguments. It submits that it is entitled to rely on the undertaking. It claims that there has been no material change of circumstances, and that a lifting of the undertaking is likely to result in two sets of appeals and significant procedural difficulties. The Commission claims it will be prejudiced if the undertaking is lifted and that it will be preferable for the stage one and stage two appeals to be heard together. The Commission submits that there is no proper basis for the release of the airlines from their undertaking.
An undertaking to the Court
[10] An undertaking to the Court is treated as equivalent to a Court order.[3] A breach of an undertaking can be misconduct amounting to contempt.[4] However, if a litigant has given an undertaking and desires to be released from that undertaking, it may apply to the Court, supporting its application by evidence, for release.[5]
[3] Biba Ltd v Stratford Investments Ltd [1972] 3 All ER 1041 (Ch) at 1045; Laws of New Zealand Contempt of Court: Civil Contempt (online ed) at [75].
[4] Malavez v Knox [1977] 1 NZLR 463 (SC) at 467.
[5] Cutler v Wandsworth Stadium Ltd [1945] 1 All ER 103 (CA) at 105.
[11] As to the grounds on which the Court will release a litigant from an undertaking, it was observed by Young J in Raukura Moana Fisheries v The Ship “Irina Zharkikh”:[6]
… [t]here is substantial support in the authorities for the view that where an interlocutory consent order can be treated as being genuinely contractual it should only be set aside on grounds that would justify the setting aside of a contract.
[6] Raukura Moana Fisheries v The Ship “Irina Zharkikh” (2001) 16 PRNZ 478 (HC) at [62].
[12] The undertaking given in this case cannot be treated as akin to a contractual promise. Although it was part of the give and take between the parties that led to
consent orders for a split trial, it was not part of an agreement of a contractual nature,
as would be the case, for instance, if the undertaking was part of a settlement of proceedings. Rather it has the “other meaning” referred to by Lord Denning in Siebe Gorman & Co Ltd v Pneupac Ltd:[7]
The other meaning is this: the words „by consent‟ may mean „the parties hereto not objecting‟. In such a case there is no real contract between the parties. The order can be altered or varied by the court in the same circumstances as any other order that is made by the court without the consent of the parties.
[7] Siebe Gorman & Co Ltd v Pneupac Ltd [1982] 1 All ER 377, 380.
[13] However, this does not mean that a party can easily obtain a release. Given that opposing parties have accepted a procedural way forward on the basis of the undertaking, it cannot be lightly released. To do so would be to damage the fabric relied on when procedural compromises are reached between parties as cases progress to a hearing. If parties cannot rely on their opponents being held to their undertakings, they will cease to have regard for them, to the detriment of an efficient Court process which encourages co-operation and give and take.
[14] This has been recognised, although there is no simple test or formula to be applied in relation to an application for release. It was observed in Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc in relation to the power to release a party from an undertaking in the absence of consent of the other party:[8]
But in our opinion a court undoubtedly has such a power. Just as an interlocutory injunction continues “until further order”, so must an interlocutory order based on an undertaking. A court must remain in control of its interlocutory orders. A further order will be appropriate whenever, inter alia, new facts come into existence or are discovered which render its enforcement unjust: …. Of course, the changed circumstances must be established by evidence: ….
[8] Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 (HCA) at 178.
[15] It was put this way in Advanced Medical Institute Pty Ltd v Channel Seven
Sydney Pty Ltd:[9]
[9] Advanced Medical Institute Pty Ltd v Channel Seven Sydney Pty Ltd [2007] NSWSC 793 at [16].
But as the authorities upon which the plaintiffs rely reveal, [the defendant‟s original consent] does not operate to estop the defendant from applying to set aside or vary its original undertakings, or as a waiver of its right to do so. Rather, the defendant will be given an opportunity, supported by evidence, to establish that there has been “some significant change of circumstances” or
the discovery of facts that “could not reasonably have [been] known” on the
earlier occasion.
[16] In Jones v Sky City Auckland Ltd Glazebrook J observed “There must be a change in circumstances that would render the enforcement of the undertaking unjust”.[10] Later she observed that the hurdle was “high”.[11]
[10] Jones v Sky City Auckland Ltd HC Auckland CP229-AS01, 31 August 2001 at [5].
[11] At [13].
[17] It is relevant if an undertaking is given as part of a compromise that induces a change of position on the part of an opposing party. In such circumstances there can be a greater injustice in releasing the undertaking, than if the undertaking has been given without any quid pro quo. There must be some clear circumstance that has arisen or been revealed that makes it unjust on an overview taking into account the interests of all parties to continue to enforce the undertaking. It is relevant to take into account the circumstances of the giving of the undertaking and subsequent developments, and the effect on the parties of release. It is not any change of circumstances that would warrant a release. The change must be significant and render the continuation of the undertaking unjust on an overview, considering the perspectives of both parties.
The circumstances of the giving of this undertaking
[18] This was an undertaking on which the Commission and the Court relied. The prospect of multiple appeals is often one of the reasons for refusing the final determination of trial issues in different hearings.[12] The threshold to be crossed to establish that release is warranted is in such circumstances high.
[12] Clear Communications Ltd v Telecom Corporation of New Zealand Ltd (1998) 12 PRNZ 333 (HC) at 335; Young v St Lukes Square (1993) Ltd HC Auckland CIV-2003-404-3215, 17 November 2005 at [6](d).
[19] The airlines had been seeking the determination of a preliminary question before trial involving the determination of preliminary jurisdictional questions. The Commission opposed that course. It had observed in its memorandum of 6 May
2010 that “To avoid delay, the Defendants need to agree to defer any appeal of
stage 1 until after stage 2.”[13] It stated that all the airlines would need to confirm an undertaking to this effect before any order could be made. In the end it agreed to the staged trial procedure, but on the basis of the undertaking.
[13] Memorandum for the Respondent for adjudication of separate issue application of 6 May 2010 at [1.2](b).
[20] I am satisfied, therefore, that the provision of the undertaking was a significant factor in the Commission deciding to accept the two-stage trial. The burden on the airlines is therefore high. It seeks to change the basis on which the two-stage trial was agreed.
The effect of the deferment of the fixture
[21] The second stage of the trial was expected to begin in July or August 2012. Due in large part to delays in progressing discovery and inspection the start date for stage two has now been deferred until February 2013. The airlines argue that the undertaking is no longer necessary because their appeal against the stage one decision can be heard and determined in time for the stage two trial. The effect of a successful appeal would be to dramatically reduce the number of causes of action to be determined at the stage two trial to only those involving outbound air cargo. Thus, the airlines argue that the change of circumstance of the delayed start date of the stage two trial is a reason to release them from their undertaking.
[22] The airlines estimate that an appeal of the stage one judgment will take four to five days to hear. The Commission, which has obtained an extension of time for the filing of a cross-appeal, estimates that the time is more likely to be five or six days. Mr Farmer QC advises that his inquiries reveal that a fixture could be available by May 2012. There is also the possibility of obtaining a priority fixture. Mr Brown QC, who observes that the fixture will go into a second week, is doubtful whether a fixture could be obtained so soon.
[23] Whatever the exact date of an appeal, there is no doubt that the extra time that is now available prior to the trial makes it more likely that an appeal could be
heard and determined before the start of the stage two trial. However, a judgment on
the appeal before the start of stage two will be a close run thing. Even if a fixture can be obtained in the Court of Appeal in the middle of 2012, a judgment may not be available until some months later. There remains the possibility that a judgment may not be available until 2013, after stage two has commenced. Even assuming a judgment is available before the start of the trial, most of the work will have been done to prepare for the full stage two trial. And then there will be the prospect of a further appeal, if leave is obtained, to the Supreme Court.
[24] While a successful appeal may reduce the issues, it may only do so temporarily, if the Commission then successfully appeals to the Supreme Court. And if that happens there will be a real mess, with a need for a third substantive hearing, involving the resurrected inbound air cargo issues.
[25] The airlines have made little reference in their written submissions to the prospect of a further appeal to the Supreme Court. The Commission observes that it is likely that any unsuccessful party in the Court of Appeal will seek leave to appeal to the Supreme Court. This seems a realistic prospect, given the importance of the issues involved.
[26] The proposed way forward suggested by the airlines therefore involves an appeal against stage one going to the Court of Appeal with the unsuccessful party most probably seeking leave to appeal then to the Supreme Court. Meanwhile the stage two proceedings continue on the basis of either a full or truncated hearing of stage two, depending on the outcome of the stage one appeal (if it is known before
2013). Following the hearing in 2013 of the stage two proceedings there is likely to be a further appeal to the Court of Appeal and then again the prospect of the unsuccessful party seeking leave. The net consequence will be the undesirable reality of two distinct appellate processes, and the added cost and delay of such a development, as well as a lot of extra time wasted in busy appellate Courts.
[27] In contrast if the airlines are not released from their undertaking and there is only a single appeal on all issues after stage two, there will be a single appeal process where all issues are traversed. This prospect offers cost savings and ultimately a shorter route to complete finality. If the judgment on stage two is
available by mid-2013, and an appeal to the Court of Appeal and to the Supreme Court (if leave is granted) completed in 18 months, finality could be achieved by the end of 2014 or early 2015. If the scenario of two lots of appeals eventuates, at worst there could be:
(a) a successful appeal by the airlines to the Court of Appeal and a truncated stage two;
(b) a judgment on the truncated stage two by mid-2013;
(c) a successful leave application and appeal to the Supreme Court by the
Commission within 18 months, say the end of 2014 or early 2015;
(d)a third stage hearing in the High Court at the end of 2016, with judgment in early 2017; and
(e) an 18 month appeal process to the Court of Appeal and Supreme
Court, finishing as late as mid-2018.
Thus on a worst case scenario from the point of view of how the appeals transpire, two stages of appeals could prolong proceedings by up to three years.
Cross-appeal issues
[28] The airlines argue that a possible outcome of the appeal is that the airlines succeed in whole or in part on their appeals and the Commission also succeeds in whole or in part on its cross-appeal, if pursued. It is suggested that in that event the stage two trial may not have addressed the relevant factual issues necessary to determine the outcome of the case if the cross-appeal, in particular the cross-appeal in relation to the meaning of s 4 of the Act, is successful. It might then be necessary to hold a stage three trial.
[29] I consider that this is a relatively faint possibility. It is difficult to take into account all permutations, but it seems most likely to me that even if there was a
cross-appeal in relation to s 4, and that cross-appeal was successful, it is unlikely to give rise to a significant further hearing. Indeed, the Commission may be able to lead such evidence as is necessary to support a finding in its favour based on its interpretation of s 4, at the stage two hearing.
[30] I also accept Mr Brown‟s submission that there is a more real and palpable prospect of a significant stage three trial should this application for a release be granted. For the reasons given,[14] I consider that this eventuality would involve considerably more time and expense than any possible stage three trial addressing residuary s 4 issues.
[14] At [23]–[27].
[31] Further, I have no doubt that the appeal courts will find it preferable to consider all appeal issues together rather than discreet issues on separate occasions. They will be in a more informed position and better able to do justice if all the evidence and all the legal issues are before them.
Multiple issues
[32] Mr Farmer for the airlines pointed out that the judgment dealt with a considerable number of issues and determined some in favour of the Commission and others in favour of the airlines. However, this was a prospect when the undertaking was given. As could have been anticipated, if the Commission succeeded on the essential point that there was a relevant market in New Zealand, this meant that the stage two trial would proceed in full in relation to inbound air cargo, even if other interpretation points were lost.
[33] It must have been contemplated that stage one would involve the determination of a number of issues. A number had been identified for stage one when the undertaking was given. The undertaking was given. Indeed, the undertaking itself records that the airlines would not prosecute an appeal against the stage one judgment until judgment on the stage two trial “so that all appeal issues are
then dealt with together”.
Material injustice to the Commission if a release is given
[34] Mr Brown points out that the Commission is dealing with eight different cases against the eight different airlines. I have no doubt that this is so. Indeed, in arguing for a later fixture date the airlines have emphasised the differences between them, and the need for cross-inspection.
[35] Each of the eight airlines has a well resourced legal team. In contrast the Commission has one team dealing with all eight cases. The case is complex and likely to involve many thousands of relevant documents. Mr Brown points out that if the release is given the Commission will be obliged to fight on two different fronts simultaneously, being the appeal and the stage two trial. It will have grave difficulty in doing so. The Commission has only briefed one senior counsel in contrast to the four senior counsel and the other very senior lawyers briefed for the airlines. Mr Brown and his experienced junior Mr Dixon will have a heavy burden if they have to prepare for and argue a major appeal as well as undertake the necessary preparation for the second stage trial, as well as meeting their other commitments. There will be a greater risk of slippage on the Commission‟s part. The airlines have made it clear that even with all their resources they will be struggling to be prepared in time for a February 2013 fixture. The Commission will be even more stretched.
[36] This was undoubtedly one of the considerations that led to the Commission requiring the undertaking before it agreed to a staged trial process. It would be unfair now to take this protection away from the Commission by releasing the airlines from their promise.
[37] It was predictable that any decision that was to be delivered on stage one issues could involve success and failure for both parties, and the likelihood of appeals and cross-appeals. The fact that the Commission may cross-appeal does not in any way obviate the injustice that will follow from releasing the undertaking.
[38] Mr Farmer emphasised the fact that the Commission expressly reserved to
itself at the time of Harrison J‟s Minute the right to appeal the stage one judgment.[15]
Indeed the airlines undertook to support an application from the Commission to the Court of Appeal for a priority appellate fixture, or to the High Court for a deferral of the stage two trial date. While this may have been so, the more important point is that the Commission in agreeing to the staged trial process on the basis of the undertaking placed itself in the position where it could appeal and defer the trial, while the airlines expressly did not. The airlines cannot now seek to reverse that concession.
Conclusion
[15] Memorandum for the Respondent for adjudication of separate issue application of 6 May 2010 at [4](b).
[39] This application must be considered against the reality that the trial has been divided into two stages and the first stage concluded. The dangers of preliminary issues or staged trials are well known.[16] The Commission sought to obviate that by making it a condition of its consent that this undertaking be given. I am satisfied that the effect of the undertaking has been to make the divided trial process more speedy and inexpensive,[17] in ensuring that if at least the Commission was successful, there would only be one round of appeals.
[16] See for example Strathmore Group Ltd v Fraser [1992] 3 NZLR 385 (PC).
[17] See r 1.2 of the High Court Rules.
[40] To allow this application and to release the airlines from their undertaking would be to permit two rounds of appeals with all the attendant disadvantages. Moreover, it would be unjust to the Commission which agreed to the split trials on the basis of one set of appeals (reserving the ability to appeal to itself only). The Commission‟s resources are such that to require it to conduct both the appeal and all the trial preparation next year would be unfair.
[41] I conclude therefore that the case has not been made out for a release of the undertaking and that, indeed, it would be positively unjust to grant the application.
Result
[42] The application to release the airlines from their undertaking is declined.
Costs
[43] I can see no reason why costs should not be paid by the airlines as the unsuccessful applicant to the Commission. Therefore, the airlines are ordered to pay costs to the Commission on this application on a 2B basis.
……………………………..
Asher J
Solicitors/Counsel:
Meredith Connell (Auckland) for Commerce CommissionBell Gully (Auckland/Wellington) for Air New Zealand & Singapore Airlines
Chapman Tripp (Auckland) for Japan Airlines
Buddle Findlay (Auckland) for EmiratesKensington Swan (Auckland) for Malaysian Airlines Simpson Grierson (Auckland) for Korean Air Lines Lowndes Associates (Auckland) for Thai Airways DLA Phillips Fox (Auckland) for Cathay Pacific
BWF Brown QC; MR Dean QC; JA Farmer QC; AR Galbraith QC; TC Weston QC; AW Lear
0
2
1