FEDERAL COURT OF AUSTRALIA

Leonie’s Travel Pty Limited v International Air Transport Association (No 2)

[2009] FCA 646

PRACTICE AND PROCEDURE: - whether discretion to grant declaratory relief should be exercised – whether injunctive relief should be granted when no further contravening conduct.

COSTS: - exercise of discretion to award costs – apportionment.

Federal Court of Australia Act 1976 (Cth) ss 21, 43

Ainsworth v Criminal Justice Commission (1992) 175 CLR 564

Dodds Family Investments Pty Ltd v Lane Industries (1993) 26 IPR 26

ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248

Ruddock v Vardarlis (No 2) (2002) 115 FCR 229

Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53

LEONIE'S TRAVEL PTY LTD (ACN 050 214 152) v INTERNATIONAL AIR TRANSPORT ASSOCIATION (ARBN 002 545 226), QANTAS AIRWAYS LIMITED (ACN 009 661 901), BRITISH AIRWAYS PLC (ARBN 002 747 597), AIR NEW ZEALAND LIMITED (ARBN 000 312 685), SINGAPORE AIRLINES LTD (ARBN 001 056 195), MALAYSIAN AIRLINE SYSTEM BERHAD (ARBN 000 996 903) and CATHAY PACIFIC AIRWAYS LTD (ARBN 000 479 514)

NSD 2249 of 2006

MOORE J

17 JUNE 2009

SYDNEY

THE COURT ORDERS THAT:

1.         The application as against the second respondent be dismissed.

2.         The applicant pay eighty five per cent of the second respondent’s costs of the application.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

REASONS FOR JUDGMENT

1                          On 30 March 2009, I published reasons concerning the substantive issues in these proceedings at least as they concern the second respondent, Qantas Airways Ltd (Qantas): Leonie's Travel Pty Limited v International Air Transport Association [2009] FCA 280 (Reasons).  I ordered the parties to bring in short minutes of order to give effect to those reasons.  The parties were unable to agree on orders that should be made.  These reasons concern that question.

Orders sought by the parties

2                          The orders sought by the applicant are:

1.         THE COURT DECLARES that the Second Respondent has, between 11 May 2004 and 24 October 2008, contravened s 52 of the TPA by:

(a)       Notifying the Applicant and each group member to the effect that the fuel surcharge implemented by it is required to and will, appear under a specified code in the “Tax/Fee/Charge” box on all tickets using IATA standard traffic documents; and

(b)       Requiring the Applicant and each group member to include the said “fuel surcharge” in the “Tax/Fee/Charge” box on all paper tickets.

2.         THE COURT DECLARES the Second Respondent has, between 11 May 2004 and 7 October 2008, contravened s 52 of the TPA by requiring the Applicant and each group member to include the amount representing the said “fuel surcharge” within the amount recorded on receipts for electronic tickets within the field “Taxes/Charges”, being that field which appears immediately below the field “Fare” on the said receipt.

3.         THE COURT ORDERS that the Second Respondent be restrained, pursuant to s 80 of the TPA, by itself, its servants or agents, from requiring the Applicant or any group member to designate or represent a fuel surcharge as a tax, fee or charge on any ticket or otherwise without clearly indicating that any tax, fee or charge includes a component levied by the airline operator.

4.         THE COURT ORDERS that the Applicant and the Second Respondent bear its own costs of the proceedings.

5.         THE COURT ORDERS that the Second Further Amended Application filed 17 February as against the Second Respondent be otherwise dismissed.

Qantas simply seeks an order that the second further amended application filed on 17 February 2009 be dismissed, as against it, with costs.

3                          I now turn to consider whether it is appropriate to make the orders proposed by the applicant.

Declaratory relief (proposed orders 1 and 2)

4                          The applicant was successful in its claim that Qantas contravened s 52 of the Trade Practices Act 1974 (Cth) (TPA) by requiring agents to include the fuel surcharge within the "taxes, fees and charges" descriptor on airline tickets, when in truth, the fuel surcharge was not a tax, fee or charge (Reasons at [85]–[96]).  It follows, according to the applicant, that I should make a declaration in relation to Qantas's contravention of the TPA.

5                          In opposing proposed orders 1 and 2, Qantas read the affidavits of Philippa Hannay and Beverley Newbold.  Both affidavits were made on 6 May 2009.  The effect of the further affidavits, which were read without objection, establish that Qantas no longer engages (and has not done so for some time) in the contravening conduct.  The applicant accepts this is the case.

6                          Ms Hannay's evidence in particular shows that, in the main, paper tickets issued on behalf of Qantas have only been used in exceptional circumstance since May 2008.  On the rare occasion where it has been necessary to issue paper tickets, such paper tickets have had a sticker placed upon them that makes plain the fact that charges, surcharges and taxes included in the passenger's fare or shown separately on a ticket may not be levied by a government authority but may be carrier imposed.  Ms Hannay's evidence also is that certain electronic tickets generated through the Amadeus global distribution system (see Reasons at [15])contained no wording about taxes and charges and, therefore, could not have been part of any misleading or deceptive conduct.  The form of all other electronic tickets issued on behalf of Qantas has been modified to remove the vice that I identified at [94] of the Reasons.  Again, the current wording makes it plain that charges, surcharges and taxes included in the passenger's fare or shown separately on a ticket may not be levied by a government authority but may be carrier imposed.

7                          Although the Court has a wide discretionary power under s 21 of the Federal Court of Australia Act 1976 (Cth)to grant declaratory relief, the power is, as described by Mason CJ and Dawson, Toohey and Gaudron JJ in Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 581–582:

... a discretionary power which ‘(i)t is neither possible nor desirable to fetter … by laying down rules as to the manner of its exercise.’ However, it is confined by the considerations which mark out the boundaries of judicial power.  Hence, declaratory relief must be directed to the determination of legal controversies and not to answering abstract or hypothetical questions.  The person seeking relief must have ‘a real interest’ and relief will not be granted if the question ‘is purely hypothetical’, if relief is ‘claimed in relation to circumstances that [have] not occurred and might never happen’ or if ‘the Court’s declaration will produce no foreseeable consequences for the parties: 

And see also the observations of Gaudron J in Truth About Motorways Pty Ltd v Macquarie Infrastructure Management Ltd (2000) 200 CLR 591 at [52].

8                          In some cases, one sufficient consequence flowing from the making of a declaration arises from the public interest in having such an order made to indicate the Court’s disapproval of particular conduct.  The public interest in protecting Australian consumers from misleading conduct often warrants the making of a declaration (Australian Competition and Consumer Commission v Chen (2003) 132 FCR 309 at [47] – [48]) and a declaration can be made to mark the Court's disapproval of conduct (ACCC v Info4PC.com Pty Ltd (deregistered) [2006] FCA 1534 at [8], ACCC v Goldy Motors Pty Ltd [2000] FCA 1885 at [30] and [34], Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 at 99–100 and ACCC v Midland Brick Co Pty Ltd [2004] FCA 693 ; (2004) 207 ALR 392 at [21].

9                          However as Qantas submits, "the conduct that was found to contravene s 52 is truly historical ... and the making if a declaration will not vindicate any right held by the applicant or any group member".  I agree.  I do not think that it is necessary or appropriate to grant declaratory relief in the present case.  Moreover, the finding that Qantas engaged in conduct that contravened s 52 of the TPA did not arise in the context of enforcement proceedings brought by the ACCC.  To the contrary, the finding arose in the context of what might be characterised as inter partes litigation seeking to enforce private rights, the main focus of which was the contractual rights and obligations that underpinned the relationship between the applicant and Qantas.  The claim under the TPA appears very much to have been a subsidiary aspect to the applicant’s overall case though it was that aspect that engaged the Court’s jurisdiction.

10                        There is a further reason why I should not make the declarations urged by the applicant.  In Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53 at [89]–[95], Gummow, Hayne and Heydon JJ, in discussing declarations and injunctions made pursuant to the TPA, observed that the trial judge had made declarations of contravention by corporations of s 45 and s 46 of the TPA and of knowing involvement in such contraventions by natural person.  Although no complaint had been made concerning the orders, their Honours said at [89]–[90]:

[89]     … The declarations spoke merely of “an arrangement” having a purpose and effect, without giving any content to that expression and without indicating the gist of the findings of the primary judge identifying the arrangement. 

[90]     These declarations provide a bad precedent and were of a kind which the trial judge should not have agreed to make even if urged to do so by the parties.  Close attention to the form of proposed declarations, particularly those “by consent” should be paid by primary judges.

11                        At [86] of the Reasons, I summarised the applicant's trade practices claim as follows:

§Following Qantas’s notification to the group members that it was introducing a fuel surcharge and that it would appear under a special box in the "tax/fee/charge" box on all tickets, Qantas:

1.     had, until about May 2008, required each group member to include the said "fuel surcharge" in the "TAX/FEE/CHARGE" box on all paper tickets; and

2.     until the present time, and continuing, required each group member to include the amount representing the fuel surcharge within the amount code on receipts for electronic tickets within the field "Taxes/Charges".

§This conduct was misleading and deceptive given that, in truth, the fuel surcharge is not a tax, fee or charge.  The words "Tax/Fee/Charge" (that appear on paper tickets), and the words "Taxes/Charges" (that appear on electronic tickets) are generally understood to mean, in the context of  a designated component of the price of an air ticket, a sum of money collected by an agent for payment to a government  authority.

12                        When dealing with this issue, I found that "[t]he direction or requirement [wa]s but the first step in the misleading or deceptive conduct attending the characterisation of the fuel surcharge, having regard to where the amount representing the surcharge is located on the ticket.  It [wa]s the publication of the ticket to the passenger (in the sense of creating the ticket in a paper form and giving it to the passenger or providing it to the passenger in electronic form) that perfects or completes the misleading or deceptive conduct":  Reasons at [89].  This aspect of the conduct is not reflected in the draft orders proposed by the applicant.  For this additional reason, I am not prepared to make the declarations proposed.

Injunctive relief (proposed order 2)

13                        In determining whether to grant injunctive relief, similar considerations arise as those discussed in relation to declaratory relief.  A factor that tells against the granting of injunctive relief is that the impugned conduct has since passed, the evidence establishing that Qantas no longer engages (and has not done so for some time) in the contravening conduct.  Related to this factor is the likelihood of repetition, given that injunctions are traditionally employed to restrain repetition of conduct: ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 at 256.

14                        As Goldberg J explained in Australian Competition & Consumer Commission v Dermalogica Pty Ltd (ACN 067 065 105)  [2005] FCA 152 at [110]:

In determining whether to grant an injunction proscribing future conduct, the court should consider whether all the circumstances of the case – including the scale of the prior contravening conduct, any evidence as to the contravener’s future intentions and the likelihood of damage to other persons as a result of further proscribed conduct – call for the contravener being subject to the more onerous burdens, such as contempt of court, in relation to their future conduct.  This consideration is required even though the power of the Court to grant an injunction under s 80 is not limited by the requirement of a threat of future contravening conduct. 

15                        There is no evidence that Qantas will, or is at least likely to, to re-engage in the contravening conduct.  The probability is that it will not.  I think this is one of the types of cases discussed by the Full Court in Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (2007) 161 FCR 513 at [111].  I do not propose to grant the injunctions sought by the applicant.

Costs

16                        I now turn to consider the issue of costs.  The applicant seeks an order that it and Qantas bear their own costs of the proceeding, whereas Qantas seeks an order that the applicant pay Qantas's costs of the proceeding.  The question of costs is governed by s 43 of the Federal Court of Australia Act 1976 (Cth) which confers a broad discretionary power.

17                        Ordinarily, costs follow the event and a successful litigant receives costs in the absence of special circumstances justifying some other order: Ruddock v Vardarlis (No 2)(2002) 115 FCR 229 at 235.  The applicant succeeded on its claim concerning s 52 and Qantas succeeded on the contractual claim.

18                        In an oft-cited passage in Hughes v Western Australian Cricket Association Inc(1986) 8 ATPR 40-748, Toohey J set out the following helpful observations in relation to the exercise of the discretion to award costs (at 48,136):

1.         Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order ...

2.         Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed ...

3.        A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party’s costs of them.  In this sense, ‘issue’ does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law ...

19                        It has long been the case that the Court may make a costs orders that reflect the success of the parties on individual questions of fact and law: see Hughes; BHP Billiton Iron Ore Pty Ltd v National Competition Council (No 2) [2007] FCA 557 and Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107.  It is clear that the applicant succeeded on its trade practices claim, notwithstanding that I am not prepared to make the declarations or grant the injunction sought by the applicant.  Qantas accepted that even if no such orders were made, the applicant's success on the trade practices claim could be brought to account when determining what costs order should be made. 

20                        A further issue was raised concerning whether the applicant should have a portion of its costs having regard to Qantas' failure on several issues, including two in relation to the applicant's contractual claim.  It is to be recalled that, although the applicant ultimately was unsuccessful in its contractual claim, it was nonetheless successful in respect of two of the three issues propounded by Qantas:  see Reasons at [68], [79] – [81].  The applicant also succeeded in the estoppel argument:  see Reasons [82] – [84].  The applicant submits (and Qantas resists) that it should not be required to pay Qantas's costs in relation to the issues upon which it failed.  The applicant draws particular attention to the decision of the Full Federal Court in Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 271 – 272 per Gummow, French and Hill JJ, where their Honours said:

The propositions enunciated in [Hughes v Western Australian Cricket Association (Inc) (1986) 8 ATPR 40-748 at 48,136]are subject to the further consideration that justice may not be served if parties are dissuaded by the risk of costs from canvassing all issues which might be material to the decision in the case - Cretazzo v Lombardi(1975) 13 SASR 4 at 12.  In Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3)(1979) 42 FLR 213; 28 ALR 201, Fisher J regarded the discretion to apportion costs as one to be exercised only in the most exceptional circumstances. Nevertheless he accepted that where a considerable part of the trial is taken up in determining issues upon which a party fails, it is a proper exercise of the discretion to reduce the costs allowed to that party.  Generally speaking, and notwithstanding the considerations referred to by Toohey J and the other authorities mentioned above, the demands of the community for greater economy and efficiency in the conduct of litigation may properly be reflected in a qualification of the presumption that a successful party is entitled to all its costs.

21                        However, as Middleton J noted recently in Emirates v Australian Competition and Consumer Commission (No 2) [2009] FCA 492 at [8], courts have traditionally cautioned against too ready a resort to apportionment according to "issue based" outcomes.  His Honour repeated the observations of Jacobs J in Cretazzo v Lombardi (1975) 13 SASR 4 at 15 concerning a court's traditional reluctance to make costs orders based on the relative success of the parties in relating to particular issues in the proceedings.  As Jacobs J said:

The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to the decision of the case.  There are, of course, many factors affecting the exercise of the discretion as to costs in each case, including, in particular, the severability of the issues, and no two cases are alike.  I wish merely to lend no encouragement to any suggestion that a party against whom the judgment goes ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded, based merely upon his success in those particular issues.

However, as noted by Finkelstein and Gordon JJ in Bowen Investments, the Court's traditional reluctance to tailor a costs order based on the success of the parties in relating to particular issues has tempered over time.  As their Honours said (at [3] – [6]): 

We think there is force in the argument that the appellant should not benefit from the usual rule that costs follow the event.  For many years the traditional rule has been that the winner (once the winner is properly identified) is entitled to recover his costs of the trial.  It sometimes happens that there is a departure from the traditional rule and the costs order takes account of the success of the parties on particular issues.  But to date the award of costs on an issue by issue basis has only been accepted in limited cases and then only when the circumstances are exceptional.

This approach is, if we may be permitted to say so, quite unfair.  Its effect is that a winner is entitled to all of his costs even if he raises a plethora of issues on which he is unsuccessful.  The unfairness of the traditional rule has been recognised in England where, following Lord Woolf’s interim report, Access to Justice (June, 1995) [at para 25.22], the Civil Procedure Rules were modified to require the judge to have regard to the circumstance (if it occurs) that the unsuccessful party has succeeded on some issues:  see r 44.3(4)(b).  In Western Australia, the Supreme Court Rules provide that costs should follow the event of each pleaded cause of action:  see r 66(2)(a).  This is narrower than the English approach but certainly more reasonable than adherence to the traditional rule.   

We do not believe there is any need to wait for a change in the Federal Court Rules to adopt an issue by issue approach here.  Costs are in the court’s discretion.  Fairness should dictate how that discretion is to be exercised.  So, if an issue by issue approach will produce a result that is fairer than the traditional rule, it should be applied.  It is not suggested that such an approach requires a precise arithmetical apportionment of the costs as between the winner and loser of discrete issues.  No doubt the assessment will often be rough and ready.  But it will have the virtues of both fairness and reasonableness, which are often lacking in the application of the traditional rule.

22                        As I see it, the dilemma I confront is this.  Qantas succeeded in the contractual claim because of the construction I gave to the Agency Agreement.  It was necessary to have some understanding of the ticketing process to construe, as I did, the contract favourably to Qantas.  Accordingly, evidence was necessary to establish that process.  However some of the evidence as well as time taken in submissions concerned details of the ticketing process and the relevant documents directed to Qantas's use of the YQ code which underpinned two of the arguments on which Qantas failed in the contractual claim.  In addition, Qantas successfully resisted a submission made by the applicant earlier in the proceedings, that the construction point should be determined as a separate issue.  Its resistance was based, in part, on the contention that it was necessary or at least desirable to deal with its estoppel argument when considering questions concerning rights and obligations arising under the contract.  Even though I accepted this argument at the time, Qantas ultimately failed on the estoppel point. 

23                        On the other hand, Qantas was confronted with a case based, in large measure, on the approach adopted by the Court of Appeal in Association of British Travel Agents Ltd and others v British Airways plc and others [2000] 2 All ER (Comm) 204.  It was reasonable, in those circumstances, for Qantas to take a comparatively conservative approach to defending the contractual claim by raising any reasonably arguable point.  I do not think I can characterise any of the points on which Qantas failed as patently unarguable.

24                        Nonetheless I think, as a matter of overall fairness some small adjustment should be made to the costs order I propose to make in Qantas's favour, to make allowance for the fact that it lost on several issues in relation to the contractual claim in addition to the adjustment I propose to make having regard to the applicant's success on the trade practices issue.

25                        In my opinion, it is appropriate that the applicant pay 85% of Qantas's costs of the proceedings.  This order is intended to reflect Qantas's overall success on the contractual point, which took up most of the hearing time (and to which most of the evidentiary material was directed) while making some adjustment for Qantas's failure on several issues, while also reflecting the applicant's success on its trade practices claim.

CONCLUSION

26                        Accordingly, the orders I propose to make in the proceeding are that the application as against the second respondent be dismissed and the applicant to pay 85% of the second respondent's costs of the proceedings.

Associate:

Dated:         17 June 2009