FEDERAL COURT OF AUSTRALIA

Flight Centre Limited v Australian Competition & Consumer Commission [2014] FCA 658

FEDERAL COURT OF AUSTRALIA

Flight Centre Limited v Australian Competition & Consumer Commission [2014] FCA 658

CORRIGENDUM

1.    On the coversheet of the Reasons for Judgment, the date of judgment should be amended from 9 May 2014 to read 19 June 2014.

Associate:

Dated:    20 June 2014

THE COURT ORDERS THAT:

1.    The interlocutory application filed by the appellant on 6 May 2014 be dismissed.

2.    The appellant pay the respondent’s costs of the interlocutory application.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    The appellant, Flight Centre Ltd, applied for a stay of execution of two orders until the hearing and determination of its appeal against a judgment of Logan J. Those orders required Flight Centre to pay pecuniary penalties by 12 May 2014 and to pay the costs of the respondent, the Australian Competition and Consumer Commission (“the ACCC”). The application was opposed by the ACCC.

2    On 9 May 2014, I dismissed Flight Centre’s application for a stay of the orders. I indicated that I would later provide reasons. These are my reasons.

3    On 6 December 2013, Logan J found that Flight Centre Ltd had attempted to induce several airlines to make collusive arrangements in relation to the prices they charged for international air travel. His Honour held that Flight Centre had contravened s 76(1)(d) of the Trade Practices Act 1974 (Cth) (“the Act”) on six separate occasions by failing to comply with s 45 of the Act.

4    On 28 March 2014, Logan J made a series of declarations to the effect that Flight Centre had contravened the Act and ordered that it pay a total of $11 million by way of pecuniary penalties to the Commonwealth of Australia by 12 May 2014. Flight Centre was also ordered to pay the ACCC’s costs.

5    Flight Centre has appealed from the judgment of Logan J. The grounds of appeal challenge both his Honour’s findings of contravention of the Act and the quantum of the pecuniary penalties. The ACCC has cross-appealed in respect of the pecuniary penalties, alleging that they are manifestly inadequate.

6    The application for a stay of the orders was brought pursuant to s 29(1) of the Federal Court of Australia Act 1976 (Cth) and r 41.03 of the Federal Court Rules 2011 (Cth).

7    Section 29(1) provides, relevantly:

Where an appeal to the Court from another court has been instituted:

(a)    the Court or a Judge…may order, on such conditions (if any) as it or he or she thinks fit, a stay of all or any proceedings under the judgment appealed from;

8    Rule 41.03 provides:

A party bound by a judgment or order may apply to the Court for an order that the judgment or order be stayed.

9    I was not referred to any authorities in which an application for a stay of a pecuniary penalty order had been considered. The application fell to be determined having regard to the nature of the order and upon general principles. Those principles include the following:

(a)    There is an onus on the applicant to demonstrate a proper basis for a stay that will be fair to all parties.

(b)    There is a prima facie assumption that the judgment appealed from is correct.

(c)    There is a prima facie assumption that the Court should not deprive a litigant of the benefit of a judgment in its favour.

(d)    The Court has a broad discretion as to whether to grant a stay, and it is not necessary for an applicant for a stay to demonstrate special or exceptional circumstances. It is sufficient that the applicant demonstrates a reason or an appropriate case to warrant the exercise of discretion in its favour.

(e)    The mere filing of an appeal will not, of itself, provide a reason or demonstrate an appropriate case.

(f)    A stay will usually be granted if there is a real risk that the applicant will suffer prejudice or damage, if a stay is not granted, which will not be redressed by a successful appeal.

(g)    In the exercise of its discretion, the Court will weigh considerations such as the balance of convenience and the competing rights of the parties before it.

[Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 at 694; Powerflex Services Pty Ltd v Data Access Corporation (1996) 67 FCR 65 at 66; McLean Technic Pty Ltd v Digi-Tech (Australia) Ltd (2002) 55 NSWLR 737 at [18]].

10    The assumption that the Court should not deprive a litigant of the benefit of a judgment is not relevant where a stay is sought of an order imposing a pecuniary penalty. That is because a pecuniary penalty order is not a “benefit” to the ACCC. The primary object of a pecuniary penalty is general and specific deterrence; it is not compensatory: ACCC v TPG Internet Pty Ltd (2013) 88 ALJR 176 at [65]; Singtel Optus Pty Ltd v ACCC (2012) 287 ALR 249 at [62]-[63]; Trade Practices Commission v CSR Ltd (1991) ATPR 41-076 at 52,152. The penalty is payable to the Commonwealth, not the ACCC. It cannot be described as the “fruits of victory” for the ACCC. The position is different in relation to the costs order, where the ACCC has incurred expenditure as a result of taking the proceeding.

11    Flight Centre submitted that it has reasonable prospects of success in its appeal. The trial judge expressly recognised that the proceeding involved a degree of novelty. It is the first time it has been held that an agent has engaged in anti-competitive conduct in attempting to fix or maintain the price it is paid by its principal for supplying the principal’s services to the public. If Flight Centre succeeds in its argument that it did not contravene the Act it will not be liable to pay any pecuniary penalty at all. The ACCC accepted that the appeal is reasonably arguable.

12    Flight Centre demonstrated that it has substantial financial means and that there is no real risk, if a stay were granted, that it would not pay the penalty in the event appeal failed. It was prepared to undertake to pay interest on the penalty sum at the rate specified under r 39.06 of the Federal Court Rules if its appeal is unsuccessful.

13    Flight Centre did not suggest that it would face any financial or other difficulty in complying with the order to pay the pecuniary penalty in the event that a stay were not granted. Rather, it argued that the pecuniary penalty is a punishment and that it should not be required to perform that punishment when the appellate court may set aside the judgment. It submitted that, pending the appeal, the pecuniary penalty should not be given effect so as to effectively operate to deter Flight Centre, and give a signal to the public of deterrence, in circumstances where there is no demonstrated risk of prejudice to the respondent by granting the stay.

14    Flight Centre’s argument amounts to a proposition that the mere commencement of an appeal against an order imposing a pecuniary penalty is, in the absence of prejudice to the respondent, enough to warrant a stay of the order pending the appeal. The basis of its argument is that payment will involve the performance of a punishment. However, punishment is not a relevant factor in the imposition of a pecuniary penalty: NW Frozen Foods Pty Ltd v ACCC (1996) 71 FCR 285 at 297, c.f. ACCC v Australian Safeway Stores Pty Ltd (1997) 75 FCR 238 at 241. Therefore, while a pecuniary penalty may be seen as a deterrent, it is not a punishment.

15    Flight Centre suggested that there is unfairness in being required now to pay the pecuniary penalty to deter it from conduct that it says may ultimately be found to be lawful. However, the deterrent effect arises from the imposition of the penalty, not the requirement that it be paid before the appeal. A stay of the order would affect the requirement for payment before the appeal, but not the validity of the order. A stay would not affect the deterrent effect of the order.

16    Flight Centre hinted, but did not directly submit, that reputational damage to it pending the appeal would be undone or lessened by a stay. I would not have accepted such a submission because the declarations made by the primary judge, as well as the orders imposing the pecuniary penalties, stand.

17    The mere fact that Flight Centre was required to pay the pecuniary penalty in accordance with the order made by the primary judge was not enough, in my opinion, to warrant a stay. The position might have been different if Flight Centre had alleged and demonstrated some particular prejudice or difficulty in complying with the orders. It did not.

18    If Flight Centre succeeds in overturning the findings that it contravened the Act, the costs order is likely to be set aside or reversed. In that case, any action taken by the ACCC to enforce the costs order would be productive only of wasted costs. However, the ACCC is entitled now to the benefit of the costs order it obtained. I considered that the costs order should not be stayed.

19    For these reasons, I decided that Flight Centre’s interlocutory application should be dismissed. Flight Centre should pay the ACCC’s costs of the application.

Associate:

Dated:    19 June 2014