FEDERAL COURT OF AUSTRALIA

Auskay International Manufacturing & Trade Pty Ltd v Qantas Airways Limited (No 5) [2009] FCA 1464

PRACTICE AND PROCEDURE – motion to strike out pleading under O 11 r 16 – whether pleading discloses reasonable cause of action – whether pleading confusing or embarrassing – whether group definition adequate

TRADE PRACTICES LAW – whether a ‘market’ has been pleaded adequately for the purposes of s 45 of the Trade Practices Act 1974 (Cth)

Federal Court Rules O 11 r 16

Trade Practices Act 1974 (Cth) ss 4E, 45, 45(2), 45(2)(a)(i), 45(2)(a)(ii), 45(2)(b)(i), 45(2)(b)(ii), 45A, 82, 88, 155

Auskay International Manufacturing & Trade Pty Ltd v Qantas Airways Ltd (2008) 251 ALR 166, referred to

Australian Competition and Consumer Commission v Qantas Airways Ltd (2008) 253 ALR 89, referred to

Emirates v Australian Competition and Consumer Commission (2009) 255 ALR 35, cited

Re Queensland Co-operative Milling Association Ltd (1976) 8 ALR 481, cited

Sammy Russo Supplies Pty Ltd v Australian Safeway Stores Pty Ltd (1998) ATPR 41-641, cited

Singapore Airlines Ltd v Australian Competition and Consumer Commission (2009) 260 ALR 244, referred to

State of Queensland v Pioneer Concrete (Qld) Pty Ltd [1999] FCA 499, referred to

Trade Practices Commission v Nicholas Enterprises Pty Ltd (1979) 26 ALR 609, cited

Universal Music Australia Pty Ltd v Australian Competition and Consumer Commission (2009) 131 FCR 529, cited

AUSKAY INTERNATIONAL MANUFACTURING & TRADE PTY LTD (ACN 078 654 243) v QANTAS AIRWAYS LIMITED (ACN 009 661 901), DEUTSCHE LUFTHANSA AKTIENGESELLSCHAFT (ARBN 495232), SINGAPORE AIRLINES LTD (ARBN 1056195), SINGAPORE AIRLINES CARGO PTE LTD (ARBN 95934857), CATHAY PACIFIC AIRWAYS LIMITED (ARBN 479514), AIR NEW ZEALAND LTD (ARBN 312685), AIR NEW ZEALAND (AUSTRALIA) PTY LTD (ACN 084 974 569), JAPAN AIRLINES INTERNATIONAL CO LIMITED (ARBN 564358) and BRITISH AIRWAYS PLC (ARBN 2747597)

VID 12 of 2007

TRACEY J

11 DECEMBER 2009

MELBOURNE

THE COURT ORDERS THAT:

1.                  The fourth amended statement of claim filed on 3 March 2009 be struck out.

2.                  The applicant pay the first, third, fourth, fifth, eighth and ninth respondents’ costs of and incidental to their respective strike-out motions.

3.                  The applicant’s motion to amend the definition of the represented group in its second amended application, notice of which was given on 4 March 2009, be refused.

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                     In Auskay International Manufacturing & Trade Pty Ltd v Qantas Airways Ltd (2008) 251 ALR 166, I struck out the applicant’s second amended statement of claim (“the SASC”).  I granted the applicant leave to file and serve a further amended statement of claim.  The current pleading is its fourth amended statement of claim (the “FASC”).

2                     The respondents (other than the second, sixth and seventh respondents) seek the striking out of the whole of the FASC or parts of it under O 11 r 16 of the Federal Court Rules on the grounds that it discloses no reasonable cause of action or has a tendency to cause embarrassment or delay.

3                     In my reasons for striking out the SASC (“my previous reasons”) I explained the nature of the proceeding and the issues in dispute between the applicant and the respondents.  I also identified the principles which informed the exercise of the Court’s powers under O 11 r 16.  I do not here repeat what I have said on those matters.  These reasons should be read together with my previous reasons.

4                     The deficiencies in the SASC fell into four broad categories.  They related to the applicant’s failure to identify a “market in Australia”, the definition of the represented group, the allegations of loss and damage and various internal inconsistencies in the SASC. 

5                     More specifically, my previous reasons identified the following defects in the SASC:

• The failure to give particulars about where in Australia it was said that the respondents competed with each other for the provision of international air freight services (at [20]);

·        Inconsistency in the pleadings as to whether group membership was established on the basis of payment for the relevant services or acquiring the services, or both (at [30]);

·        The failure to plead sufficient material facts to establish that the applicant was a member of the group it sought to represent (at [34]);

·        The failure to establish that any loss suffered occurred as a result of a contravention of the Act as required by s 82 of the Trade Practices Act 1974 (Cth) (“the TPA”)(at [37]);

·        The failure to plead material facts as to the applicant’s own loss (at [38]); and

·        The making of inconsistent allegations relating to the imposition of a fuel surcharge and a war-risk surcharge (at [46] and [48]).

6                     The statement of claim has now been significantly amended.  The applicant has also advanced an amended group member definition and sought leave to substitute that definition for the one appearing in its second amended application.

7                     The respondents accept that some of the deficiencies in the SASC have been rectified and do not appear in the FASC.  They do, however, complain that some of the earlier deficiencies recur in the FASC and that objectionable material has been introduced such as to warrant it being struck out.  They oppose the grant of leave to amend the group definition.

AN OVERVIEW OF THE FASC

8                     The structure of the FASC is explained by the applicant in its written submissions as follows.

9                     Its claim relies on alleged breaches by the respondents of ss 45(2)(a)(ii) and (b)(ii) of the TPA.  Those sections prohibit, inter alia, a corporation from making an arrangement which has a provision that has the purpose of substantially lessening competition or giving effect to such a provision. 

10                  The FASC alleges that the respondents and other cartel participants made arrangements for the fixing of prices for international air freight services and concealment of those arrangements:  at paragraphs 94, 95 and 116.  It alleges that the respondents and other cartel participants gave effect to the proscribed arrangements by applying fuel surcharges and security surcharges and by concealing the existence and terms of the arrangements:  paragraphs 96-115; 117-121.  The applicant seeks damages only in relation to that part of the respondents’ contravening conduct as occurred in Australia:  paragraphs 111-114; 118-120. 

11                  The FASC, at paragraph 122, alleges that various provisions of the arrangement (which are identified in paragraphs 94, 95 and 116), inter alia, had the purpose of fixing the price of international air freight services.  The FASC also alleges that:

·                    By making each of the price fixing arrangements, the respondents contravened s 45(2)(a)(ii) (paragraph 123);

·                    By making subsidiary price fixing arrangements, they gave effect to the price fixing provisions of the overarching price fixing arrangement and contravened s 45(2)(b)(ii) (paragraph 124); and

·                    By their pricing conduct they gave effect to those provisions in Australia and contravened s 45(2)(b)(ii) (paragraphs 124-130).

12                  The applicant next alleges that the price fixing arrangements were a cause of the price of international air freight services being higher than they otherwise would have been on every occasion that the surcharges or corresponding increases in price were applied by the respondents, the other cartel participants and other carriers, and that the amount of the overcharge was the surcharge or corresponding increase in price:  paragraphs 131-134.

13                  It alleges that it and the group members paid for Australian international air freight services (defined as the carriage of international air freight to or from Australia) to which the surcharges or corresponding increases in price had been applied:  paragraphs 135-6.  The result was that the applicant and group members suffered loss or damage, being the amount of the surcharges or corresponding increases in price paid by them and the loss of the use, by them, of those funds:  paragraph 137.

14                  The applicant now acknowledges the need to plead the existence of markets in Australia.  The extent of that acknowledgement appears in its written submissions and is reflected in the FASC: 

“The applicant accepts that the TPA requires the applicant to plead that two or more of the cartel members supplied international airfreight services in competition with each other in any market in Australia for those services.  Accordingly, the applicant alleges in detail matters relevant to the existence of various markets in Australia for international airfreight services (4ASOC at [13]-[82]), and that at least two or more of the respondents supplied international airfreight services in competition with each other in those markets (4FASOC at [83]-[92])”.

THE RESPONDENTS’ OBJECTIONS

15                  The respondents contend that the applicant has failed to allege material facts which identify relevant markets in Australia and certain consequential deficiencies in the FASC.  They also maintain their objection to the adequacy of the group definition.

16                  It will be convenient to deal separately with each of the alleged deficiencies with the FASC.

A “MARKET IN AUSTRALIA”

17                  In its SASC the applicant failed to expressly identify any “market”.

18                  In my previous reasons, I set out the relevant statutory provisions and referred to various authorities which established the need for an applicant, in a case such as the present, to identify a “market in Australia” in which it was alleged that the anti-competitive conduct occurred: at [9]-[19].  I also ventured some observations on what material facts should be pleaded in order to establish the existence of a relevant market: at [20]-[21].  The applicant has responded with a radical re-pleading.  It pleads the existence of a variety of markets.  They include a “Global Market” for the supply of international air freight services (paragraph 35) and an “Australian Global Market” for Australian international air freight services which formed part of the Global Market (paragraph 38).  It has also pleaded the existence of what is described as a “Transactional Global Market”, which formed part of the Global Market (paragraph 37), as well as a “Transactional Australian Global Market”, which formed part of the Australian Global Market (paragraph 39).  It alleges that, in each of the transactional markets, “at least part of the negotiation of, or entry into a contract for, the supply of international airfreight services comprised a communication directed to or originating from Australia”.  Both the “Global Market” and the “Australian Global Market” are said to be “a market in Australia” within the meaning of s 4E of the TPA (paragraphs 36 and 38).  Various regional markets are also said to exist.

19                  The material facts on which the applicant relies for the purpose of establishing the existence of the “global market” are:

·                    There was a demand, around the world, for international air freight services (paragraph 15);

·                    Various carriers, including the respondents, provided such services (paragraph 16);

·                    The respondents provided their services between various regional hubs and between manifold points of departure and arrival around the world (paragraph 32);

·                    The existence of various modes of carriage of international air freight between hubs and ports of departure and origin (paragraph 33); and

·                    It was possible for carriers to provide services between hubs and ports of origin and arrival, to substitute routes between hubs and ports, and to substitute modes of carriage between hubs and ports (paragraph 34).

20                  The applicant also seeks to rely on the details of the alleged cartel agreement to establish the existence of the global market.  It is alleged that, under cover of the agreement, the respondents further agreed to impose a fuel surcharge and a security surcharge which were applied to the provision of air freight services throughout the world, including into and out of Australia.  I assume that the Court will, at trial, be invited to infer that the geographic reach of the agreements is indicative of the existence of a global market. 

21                  The respondents submit that parts of the “market” pleadings are unintelligible.  They also complain that the applicant’s pleadings of a “global market” and “market in Australia” are conclusionary and do not contain all of the material facts which my previous reasons suggested were necessary.

22                  The applicant responded that, because no attempt had been made in the SASC to identify a “market”, the re-pleading was struck out for that reason and therefore anything which I had said about material particulars was obiter.  It further submitted that, since my previous reasons were published, other decisions had been handed down which suggested that it may not be necessary to plead all of the material particulars which I had identified.  In any event, it contended, it was sufficient that it was able to establish “that two or more parties to the price fixing arrangements supply services the subject of the price fixing arrangement in competition with each other in any market in which a party to the price fixing arrangement supplies those services”.

23                  The law on what constitutes a “market in Australia” is far from settled.  One thing that is clear is that a market which is wholly outside Australia is not comprehended by the statutory definition:  see Singapore Airlines Ltd v Australian Competition and Consumer Commission (2009) 260 ALR 244 at 254; Australian Competition and Consumer Commission v Qantas Airways Ltd (2008) 253 ALR 89 at 112.  The existence of a global market which extends into the geographic boundaries of Australia does not, on the other hand, preclude a finding that there exists a “market in Australia”.  There can, therefore, be no objection to the applicant pleading, as it has done, that there is a global market for air freight services and that part of that market is a “market in Australia”, provided that material facts are pleaded which establish the existence of those markets:  see Sammy Rosso Supplies Pty Ltd v Australian Safeway Stores Pty Ltd (1998) ATPR 41-641 at 41-094 per Goldberg J.

24                  One of those material facts, in a case in which s 45A of the TPA is relied on, is the area or areas within Australia in which particular respondents compete with each other and in which they give effect to any anti-competitive agreement to which they are parties.  As Middleton J said in Emirates v Australian Competition and Consumer Commission (2009) 255 ALR 35 at 41:

“The services the subject of the unlawful provision must be the services supplied by the relevant party to the arrangement in competition with the other party in any market in Australia.  Put another way, the area of competition has to coincide with the area of restriction imposed by the unlawful provision:  see ss 45A(8), 4D(1)(a) and (2) …”.

25                  Any attempt to define a “market” with absolute precision confronts serious obstacles.  The term “is a metaphor used to describe a range of competitive activities by reference to function, product and geography”:  see Universal Music Australia Pty Ltd v Australian Competition and Consumer Commission (2003) 131 FCR 529 at 545.  The concept was succinctly explained by Fisher J in Trade Practices Commission v Nicholas Enterprises Pty Ltd (1979) 26 ALR 609 at 647 where he quoted with approval a passage from a decision of the Trade Practices Tribunal:

“The Trade Practices Tribunal considered the concept of market in some detail in Re Queensland Co-operative Milling Association Ltd (1975-6) 8 ALR 481 at 517, where the members said:  “A market is the area of close competition between firms or, putting it a little differently, the field of rivalry between them … Within the bounds of a market there is substitution – substitution between one product and another, and between one source of supply and another, in response to changing prices.  So a market is the field of actual and potential transactions between buyers and sellers amongst whom there can be strong substitution, at least in the long run, if given a sufficient price incentive”…”.

26                  The “market”, then, is an area within which close competition occurs between the same firms to enter into business transactions with buyers of their products or services, and where the competitors provide or seek to provide their goods or services.

27                  As Re Queensland Co-operative Milling and other authorities to which I made reference in my previous reasons make clear, a market for services will exist only if there is strong substitutability between those services on both the demand and supply sides.  In its submissions, Cathay Pacific cited a number of hypothetical examples which make good this point.  There may be a high degree of cross-elasticity of demand between an international air freight service from Hong Kong to Sydney and an equivalent service from Hong Kong to Melbourne.  An increase in the price of the Hong Kong to Sydney service might lead to customers using the Hong Kong to Melbourne service and then using land transport to move the goods within Australia.  In such circumstances it could be said that the Hong Kong to Sydney and the Hong Kong to Melbourne services were part of the same market.  On the supply side, if carriers were faced with reduced demand for services on the Hong Kong to Sydney route, and an increased demand on the Hong Kong to Melbourne route, the carriers which service both routes could move aircraft and other resources from the Sydney route to the Melbourne route to meet the changed demand.  It could, therefore, be said that there was a high degree of cross-elasticity of supply between the services so as to justify treating the two routes as part of a single market.

28                  It would, on the other hand, be far more difficult, if not impossible, to establish the existence of cross-elasticity of demand or supply for international air freight services on the routes from Hong Kong to Moscow and from Dubai to Sydney.  The applicant, nonetheless, maintained that the field of rivalry between the respondents, and hence the market, is worldwide.

29                  As has been noted, the material facts relied on by the applicant to establish the existence of a “global market” include the possibility that carriers are able to substitute routes and modes of carriage between hubs and ports when providing services.  In some cases this will be suggestive of cross-elasticity of supply.  It would not matter to the customer, assuming no material variation in charges or delivery time, whether goods sent from London to Melbourne were routed through Hong Kong or Singapore.  That may be accepted and the two routes may be found to form part of the same market.  That example, however, deals with but one of a myriad of routes comprehended by the substitutability pleading in paragraph 34.  Not all of these routes could possibly be said to form part of the same market. It could not, realistically, be asserted that close competition and strong substitution could be found for the supply of international air freight services between one particular route and every other route in the world.    Rather, there are potentially thousands of discrete markets, the existence of which will depend on the type of economic analysis referred to in the authorities.

30                  It follows that the matters pleaded in paragraph 34 do not assist in establishing the existence of a global market or a market in Australia.  Rather they are suggestive of the presence of multiple markets for international air freight services throughout the world and in Australia.

31                  In the absence of any other material facts which establish a field or fields of rivalry between the respondents (or some of them) in Australia, in which competition between particular respondents occurs for the provision of international air freight services and negotiations take place between respondents and customers or potential customers, the FASC fails to identify (other than in a conclusionary manner) any “market”, be it a global market or a market in Australia.  The pleadings in relation to the transactional markets and the regional markets suffer from the same deficiency.  The existence of transactional markets cannot, for example, be established on the simple basis that communications passed to or from Australia. The pleadings are confusing in that, rather than supporting the existence of the conclusionary global market for international air freight services which includes a market in Australia, they suggest the existence of multiple markets scattered throughout the world.

32                  This is not a deficiency which can be dismissed as peripheral.  As I pointed out in my previous reasons, there are multiple routes into and out of Australia on which air freight is carried.  Not all respondents operate on all of these routes.  Some of the routes may fall within the same market because two or more respondents compete on the routes and there is cross-elasticity of demand and supply on those routes.  On other routes into and out of Australia some of the respondents will not be in competition with other respondents and those routes will constitute separate markets.  Even in respect of routes which commence or end in Australia, there may not be a market in Australia if all or most of the competitive activities in which the parties engage, and the negotiations between respondents and customers, take place outside Australia.  Each respondent is entitled to know in which market or markets in Australia it is alleged to have engaged in anti-competitive conduct with one or more of the other respondents contrary to the TPA.  The FASC does not provide them with this information.  It cannot be assumed that, simply because the alleged cartel arrangements were expressed to be operative throughout the world, that this necessarily led to anti-competitive conduct taking place in all markets for the provision of international air freight services.  It is possible, for example, that the respondents would not have applied surcharges on routes on which they were competing with other airlines who were not cartel members and who were not inflating prices.

33                  One of the matters which I previously suggested must be identified was the place or places where negotiations took place between the respondents and their customers and agreements were entered into by them.  The respondents complain that the applicant has not pleaded that negotiations between the respondents and potential customers took place within Australia or that contracts were signed here.

34                  In my previous reasons, I said at [20] that:

“In my view an applicant in a proceeding such as the present in which exclusive reliance is placed on s 45A of the Act, must, in its statement of claim, identify the market or markets in which it is said that the anti-competitive conduct has taken place.  The pleadings must identify (at least) the relevant goods or services and the geographic boundaries of the market.  The pleading need not descend to the degree of particularity to which Heerey J objected in McPhee or the detail which Selway J found to be unnecessary in McMahon Services.  In both of those cases it was held that the identification of a market was a material fact or particular which had to be pleaded”.

35                  In order for there to be a “market in Australia”, it is necessary for competitive activity to occur within Australia.  As I said at [19]:

“In economic terms “a market is the field of actual and potential transactions between buyers and sellers among whom there can be strong substitution, at least in the long run, if given a sufficient price incentive”:  see Re Queensland Co-operative Milling Association Ltd (1976) 25 FLR 169 at 190.  In the same case a market was also referred to as an “area of close competition between firms”: ibid; see also Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Company Ltd (1989) 167 CLR 177 at 195 (per Deane J); at 199-200 (per Dawson J).  Buyers and sellers of goods and services must negotiate and enter transactions in an area in which suppliers are engaged in close competition with each other.  That area must be located within Australia”.

36                  Competitive activity can take many forms.  It may involve advertising campaigns by the suppliers of particular goods or services by which they attempt to attract customers.  It may involve the efficiency with which services are provided or attempts to provide higher quality products.  Firms may also compete by offering better quality after-sales service, or in ensuring the ready availability of spare parts.  These competitive activities may take place within a geographic market even though contracts for the provision of the goods or services are negotiated or entered into elsewhere.  In many cases, negotiations between seller and buyer will take place in a competitive environment in Australia and contracts will be signed here.  When, however, there is a global or international market of which Australia forms part, it is possible for competitive activity of the kind earlier mentioned to take place in Australia even though contractual arrangements are formalised overseas.

37                  It has yet to be determined authoritatively that a “market in Australia” exists when goods and services are provided on a competitive basis in Australia, but the terms and conditions on which they are provided have been negotiated and agreed upon wholly outside Australia.

38                  In Emirates, Middleton J referred to the issue in the course of dealing with applications to set aside notices issued under s 155 of the TPA.  His Honour held (at 52):

“… the place of contracting is not determinative of the geographic locality of the relevant market.  The references relied upon in Heydon J D, Trade Practices Law (Lawbook Co, subscription service) do not, in context, stand for such a proposition.  As the authorities referred to previously indicate, the concept of a ‘market’ refers to a range of ‘competitive activities’ relating to the field of actual or potential activities between buyers and sellers among whom there is, or can be, close competition.  It involves the ‘field of rivalry’, not just referrable [sic] to the place of contracting”.

39                  It had been submitted to his Honour that some observations which I had made in my previous reasons supported the proposition that there could not be a market in Australia unless contracts between buyers and sellers were negotiated and entered into in Australia.  One of the respondents’ grounds for seeking to have the SASC struck out was that it did not identify the various routes, to and from Australia, on which the various respondents (or some of them) competed.  It was in this context that I said at [21] that:

“The respondents in the present proceeding are entitled to know where in Australia it is said that they compete with each other named respondent for the provision of international airfreight services.  This will depend on where negotiations between the respondents and their customers take place and contracts are entered into.  These material particulars are not provided.  It cannot be assumed that all or even some of the respondents are in competition, in the necessary sense, in all parts of Australia.  In the absence of these material facts the pleadings are deficient in a significant respect”.

40                  On reflection, I should have used the word “may” instead of “will” in the second sentence of the quoted passage.  It was not my intention to rule, on a pleading summons, that the place or places where the international carriers negotiated and entered into contracts with those who wished to use their services, were or would be determinative of the geographic location of the relevant markets.  These were relevant but not decisive considerations.  If the only substantial competitive activity which occurred between particular carriers on routes into and out of Australia took place overseas this may have suggested that the relevant market was not “in Australia” even if contracts were signed here.  On the other hand, if vigorous competition and negotiations in Australia culminated in contracts being signed overseas the opposite conclusion would be likely.  These matters were, therefore, material in determining the geographic parameters of the relevant market and, in particular, whether that market was “in Australia”.  Those parameters differed between the respondent carriers, because they did not all provide services to and from the same ports or along the same routes.

41                  For present purposes, the applicant’s failure to identify where relevant negotiations took place, and where contracts were entered into and signed between the respondents and their customers, does not lead to the conclusion that it has thereby also failed to plead facts which would be determinative of the geographic boundaries of the market.  The failure does, however, mean that material facts which must be provided in order to identify the global market and the part of it which constitutes a “market in Australia” have not been supplied.

42                  In its SASC the applicant failed to plead the existence of any relevant market in Australia.  It sought to remedy this deficiency, in its FASC, by pleading the existence of multiple markets, variously described.  This has served only to create greater confusion.  The individual respondents are entitled to know the markets for the provision of international air freight services which are alleged to exist in Australia, and in which of those markets it is alleged that they compete with another respondent or respondents and who those other respondents are.  The FASC does not provide this essential information.

43                  In my previous reasons I noted that the failure of the applicant, in its SASC, to identify a market or markets created a special problem for British Airways: at [24].  This was because that airline had the benefit of an authorisation under s 88 of the TPA in relation to a joint services agreement which it has with Qantas.  That agreement permitted British Airways to agree with Qantas about the prices for services offered, including cargo services, on routes covered by the agreement.  Such an authorisation would provide British Airways with a defence against any claim that it had contravened s 45 of the TPA.  This issue remains despite the attempts of the applicant, in its FASC, to allege the existence of global, Australian and other markets.  This is because, for the reasons which I have already given, the applicant has failed to plead material particulars which are necessary to identify the relevant markets.

44                  The applicant has submitted that it would be open to British Airways to plead, in its defence, that it had the benefit of s 88 in particular markets.  That would be so had the relevant markets been identified in the FASC.  They have not.

RELATED DEFICIENCIES

45                  Singapore Airlines, supported by the other respondents, raises further objections to the pleading of the alleged conduct by the respondents in imposing the fuel surcharge and the security surcharge (paragraphs 101-120), and the allegations which sought to establish that, in giving effect to these arrangements, the respondents contravened s 45(2) of the TPA (paragraphs 122-130).

46                  The respondents point to what they submit are various infelicities of pleading in these sections of the FASC.  Some of the allegations are branded as “confusing” or “artificial”.  Others are said not to support subsequent allegations which are said to be founded on them.

47                  The substantial complaints, however, are related to the way in which the applicant has dealt with the pleading of a “market in Australia” earlier in the FASC. 

48                  The parties conceded that the acceptance of their principal submissions impugning and defending these parts of the pleadings depended on the acceptance or rejection of their submissions relating to the “market in Australia” issue.

49                  Even if I were to accept that these parts of the pleading are confusing or artificial as contended, I am not persuaded that the alleged problems with them are of such gravity as to warrant them being struck out.  These sections, however, culminate in the allegations (in paragraphs 124-130 of the FASC) that the respondents gave effect to the global cartel arrangement in contravention of s 45(2)(b)(ii) by making and giving effect to the fuel surcharge and security surcharge arrangement and by imposing the fuel and security surcharge arrangements and concealing those arrangements.

50                  Section 45(2) will be contravened only if a corporation has made an arrangement which contains a provision which has the purpose, or would have or is likely to have the effect, of substantially lessening competition in a market in Australia where that corporation supplies or acquires goods or services.  In the absence of a clearly pleaded market or markets in Australia, these allegations are embarrassing and must be struck out.

THE GROUP DEFINITION

51                  The applicant sought leave to file a further amended application which contained a new definition of group members.  That definition, which is repeated at [3] of the FASC, reads:

“The group members to whom this proceeding relates … are all those persons currently resident in Australia who during the period 1 January 2000 to 11 January 2007 … paid more than twenty thousand Australian dollars (AUD $20,000.00) for the carriage of goods to or from Australia by air and who are not related parties for the Respondents or any of them within the meaning of the Corporations Act 2001”.

52                  The application for leave to amend the definition was supported by an affidavit sworn by a solicitor acting for the applicant.  She deposed that:

“The Applicant seeks to amend the definition of group member in the proceeding by applying for the orders set out in the Notice of Motion on the basis that it seeks to clarify that:

(a)                it sues as representing those persons who have paid identified amounts on account of air-freight; and

(b)                it does not seek to represent “retailers who purchased goods from the importer and the customer who purchased the goods from the retailer” who may have paid inflated prices for goods transported by air, but did not pay identified amounts on account of international air-freight for those goods as a separate item”.

53                  It would, therefore, seem that the applicant does not wish to represent retailers or customers who have purchased goods brought into Australia by air but does wish to represent other indirect acquirers of international air freight services such as freight forwarders and importers.  Such persons need not have been resident in Australia between the relevant dates. 

54                  The respondents submit that the phrase “identified amount … for the carriage of goods to or from Australia by air” is fraught with ambiguity, and renders it difficult for potential group members to know whether or not they are included in the represented group.

55                  Singapore Airlines (supported by some of the other respondents) illustrates its concern by reference to the “identified amounts” which the applicant has claimed bring it within the group definition.

56                  In my previous reasons I held that there were insufficient material facts pleaded in the SASC to establish that the applicant was a member of the group which it sought to represent:  at [34].  In an effort to overcome this deficiency the applicant alleges in the FASC that it paid “identified amounts for Australian international air-freight services” (paragraph 135) and, as a result, suffered loss and damage (paragraph 137).  The “identified amounts” were said, in particulars subjoined to paragraph 135, to be amounts “identified by way of invoices … which identified international airfreight as a separate item for which payment was due”.  The invoices, according to particulars subjoined to paragraph 137, identified payments due to freight forwarders, carriers of international air freight services “via agents” and overseas suppliers or manufacturers of the goods who had paid for the carriage of goods by air to Australia.  In total, it was said that the applicant had paid $24,975.28 to such persons for Australian international air freight services during the relevant period.

57                  A solicitor, acting for Singapore Airlines, examined copies of the invoices referred to in these particulars.  On examining the invoices he found that:

·                    The “vast majority” of the invoices were issued by Federal Express (Australia) Pty Ltd;

·                    None of the Federal Express invoices identified a payment for international air freight services in terms; rather the invoices were said to cover “freight charges”;

·                    The invoices did not specify what part of the “freight charges” related to the carriage of  goods by air and what part related to the carriage of goods by land; and

·                    A number of the invoices did not relate to transport services at all but were for customs duties.

The solicitor also noted that many of the invoices related to payments and shipments which had occurred after 11 January 2007.

58                  The applicant contended that charges for the carriage of international air freight may include a component or components for carriage by land.  As a result, the use of the term “freight charges” in invoices embraced both modes of transport and it was unnecessary separately to identify the charges for the different modes.  The applicant conceded that amounts paid for customs duty should not have been included as amounts paid for international air freight services. 

59                  As I said at [27] of my previous reasons, a party which commences representative proceedings must clearly identify the group members to whom the proceeding relates so, inter alia, persons falling within the group definition who do not wish to be bound by the outcome of the proceeding have the opportunity to opt out.  The issue is, then, whether the revised definition is sufficiently clear to enable a person, who had directly or indirectly paid one or more of the respondents to carry goods into or out of Australia during the relevant period, to know whether it was a member of the group. 

60                  Potential group members could ascertain whether they were currently resident in Australia at the time they read the notice and whether they had received invoices and paid amounts totalling more than $20,000 for air freight services.  The problem, if there is one, relates to the term “identified amounts” and the use of that term as part of the phrase “paid identified amounts … for the carriage of goods to or from Australia by air …”. 

61                  Reference to payments for “the carriage of goods by air” is apt to comprehend a wider range of payments than payments for “international air‑freight services.”  Furthermore, the applicant appears to consider that the definition would cover payments for items which were incidental to the provision of international air freight services, such as charges for moving goods to and from (or at) airports.  That may or may not be right, but it would not, in my view, necessarily be clear to a potential group member whether the land transport component of “freight charges” would constitute a payment for the “carriage of goods by air”.

62                  It would, in my opinion, not be clear to a potential group member that the “identified amounts” referred to in the definition included land transport costs paid to one of the respondents.  It is not immediately obvious why such a person would be aware that air freight charges included a land transport component.  Invoices which referred to “freight charges” rather than “air-freight charges” and stipulated a monetary figure would not, on their face, entitle the recipient to claim the full amount of the charge for the purpose of determining whether the $20,000 minimum had been exceeded. 

63                  There continued to be an issue between the parties as to whether or not the applicant had established, in the FASC, that it satisfied the requirements for membership of the group which it seeks to represent.  The dispute arose from competing contentions as to whether the “identified amounts” for “freight charges” appearing in the invoices produced by the applicant totalled more than $20,000.  This, in turn, depended on arguments as to whether the land transport component of the freight charges should be brought into account.  This dispute does not need to be (and should not be) resolved on a strike-out application.

64                  The retention, within the group definition, of persons who indirectly pay the costs of moving goods by air again raises the “passing on” issue to which I referred at [41] – [43] of my previous reasons.  The extent of any resultant difficulty is much reduced by the narrowing of the definition to exclude many down-stream members.  If the definition is further refined to remove the remaining difficulties, any pleading issue relating to a possible “passing on” defence will be avoided.  The applicant will then be able to identify the amounts which it alleges it has paid for air freight services, directly or indirectly, to one or more of the respondents.  If need be, further clarification of the amounts allegedly overpaid by reason of the cartel arrangements can be sought by the respondents.  The Court would be able to direct the applicant to file a statement setting out how it intends to prove the losses which it and group members are said to have suffered:  see Queensland v Pioneer Concrete (Qld) Pty Ltd [1999] FCA 499.  The respondents will then be in a position to determine whether they may plead a “passing on” defence.  Whether or not such a defence is available will be a matter to be determined at trial.

OTHER MATTERS

65                  The applicant continues to plead that it and the represented group members suffered loss and damage because the impugned agreements caused prices for international air freight services to be “higher than [they] otherwise would have been” (paragraphs 133 and 134).  The applicant has sought to meet the shortcomings which I identified in my previous reasons at [38] by asserting, in particulars subjoined to paragraph 137, that the extent of the loss and damage suffered by the applicant and group members, in part, comprised the fuel and security overcharges paid by each of them. 

66                  Despite this, the problems to which I referred in my previous reasons remain.  In particular, the allegations in paragraphs 133 and 134 are conclusionary without material facts to support them.  The amendments to the particulars subjoined to paragraph 137 are not confined to overcharging in the course of transactions which occurred in a market in Australia.  As currently framed, the particulars suggest that the applicant and the group members’ loss and damage is to be calculated by reference to any occasion anywhere on which they paid surcharges which were imposed pursuant to the cartel arrangements.

67                  In particulars subjoined to paragraphs 35 and 94 of the FASC, the applicant seeks to rely on admissions made in other proceedings involving other parties.  Those proceedings were civil penalty proceedings brought by the ACCC against Qantas and British Airways.  The admissions were made only for the purposes of the proceedings in which they were made.  They may not be relied on in the present proceeding.  These particulars are embarrassing and should be struck out.

DISPOSITION

68                  The deficiencies which I have identified in the FASC are so fundamental that it is not possible selectively to strike out parts of the document leaving a coherent pleading.  The FASC must be struck out.

Associate:

Dated:         11 December 2009