Auskay International Manufacturing & Trade Pty Ltd v Qantas Airways Limited (No 2) [2010] FCAFC 129

FEDERAL COURT OF AUSTRALIA

Auskay International Manufacturing & Trade Pty Ltd v Qantas Airways Limited (No 2) [2010] FCAFC 129 Citation: Auskay International Manufacturing & Trade Pty Ltd v Qantas Airways Limited (No 2) [2010] FCAFC 129

Appeal from: Auskay International Manufacturing and Trade Pty Ltd v Qantas Airways Ltd (No 5) [2009] FCA 1464

Parties: 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)

File number: VID 903 of 2009

Judges: MOORE, JESSUP AND DODDS-STREETON JJ

Date of judgment: 29 October 2010

Catchwords: PRACTICE AND PROCEDURE – Costs – Applicant entitled to its costs following successful application for leave to appeal, and the appeal – Whether any qualification necessary in recognition of fact applicant was unsuccessful on one ground PRACTICE AND PROCEDURE – Costs – Respondents jointly and severally liable for applicant's costs – Effect on costs orders of stay of proceeding in respect of one respondent

Legislation: Cross-Border Insolvency Act 2008 (Cth) s 6 Sched 1 Art 20

Date of hearing: Heard on the papers

Date of last submissions: 23 September 2010

Place: Melbourne

Division: GENERAL DIVISION

Category: Catchwords

Number of paragraphs: 24

Counsel for the Applicant: N Hutley QC with K Hanscombe SC and M Pesman

Solicitor for the Applicant: Maurice Blackburn

Counsel for the First Respondent: J Lockhart SC

Solicitor for the First Respondent: Johnson Winter & Slattery

Counsel for the Second Respondent: B Quinn

Solicitor for the Second Respondent: Freehills

Counsel for the Third and Fourth Respondents: A Archibald QC

Solicitor for the Third and Fourth Respondents: Minter Ellison

Counsel for the Fifth Respondent: M Sloss SC, with M Borsky

Solicitor for the Fifth Respondent: DLA Phillips Fox

Counsel for the Eighth Respondent: A Bell SC with D Star

Solicitor for the Eighth Respondent: Norton Rose

Counsel for the Ninth Respondent: AJ Payne SC

Solicitor for the Ninth Respondent: Mallesons Stephen Jaques

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION VID 903 of 2009

ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA

BETWEEN: AUSKAY INTERNATIONAL MANUFACTURING & TRADE PTY LTD (ACN 078 654 243)

Applicant

AND: QANTAS AIRWAYS LIMITED (ACN 009 661 901)

First Respondent

DEUTSCHE LUFTHANSA AKTIENGESELLSCHAFT

(ARBN 495232)

Second Respondent

SINGAPORE AIRLINES LTD (ARBN 1056195)

Third Respondent

SINGAPORE AIRLINES CARGO PTE LTD (ARBN 95934857)

Fourth Respondent

CATHAY PACIFIC AIRWAYS LIMITED (ARBN 479514)

Fifth Respondent

AIR NEW ZEALAND LTD (ARBN 312685)

Sixth Respondent

AIR NEW ZEALAND (AUSTRALIA) PTY LTD

(ACN 084 974 569)

Seventh Respondent

JAPAN AIRLINES INTERNATIONAL CO LIMITED

(ARBN 564358)

Eighth Respondent

BRITISH AIRWAYS PLC (ARBN 2747597)

Ninth Respondent

JUDGES: MOORE, JESSUP AND DODDS-STREETON JJ

DATE OF ORDER: 29 OCTOBER 2010

WHERE MADE: MELBOURNE

THE COURT ORDERS THAT:

1. The first, third, fourth, fifth and ninth respondents pay 90% of the applicant's costs of the applications for leave to appeal and the appeal (including its costs incurred on the present application for costs). 2. In place of Order 2 made by the primary Judge on 11 December 2009, it be ordered that the motions of the first, third, fourth, fifth and ninth respondents be dismissed with costs. 3. The first, third, fourth, fifth and ninth respondents have liberty to apply to the primary Judge, by motion of which notice is given within 28 days, for an order as to the costs of the applicant's motion of which notice was given on 4 March 2009, such costs to be within the discretion of the primary Judge.

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 Federal Law Search on the Court's website.

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION VID 903 of 2009

ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA

BETWEEN: AUSKAY INTERNATIONAL MANUFACTURING & TRADE PTY LTD (ACN 078 654 243)

Applicant

AND: QANTAS AIRWAYS LIMITED (ACN 009 661 901)

First Respondent

DEUTSCHE LUFTHANSA AKTIENGESELLSCHAFT

(ARBN 495232)

Second Respondent

SINGAPORE AIRLINES LTD (ARBN 1056195)

Third Respondent

SINGAPORE AIRLINES CARGO PTE LTD (ARBN 95934857)

Fourth Respondent

CATHAY PACIFIC AIRWAYS LIMITED (ARBN 479514)

Fifth Respondent

AIR NEW ZEALAND LTD (ARBN 312685)

Sixth Respondent

AIR NEW ZEALAND (AUSTRALIA) PTY LTD

(ACN 084 974 569)

Seventh Respondent

JAPAN AIRLINES INTERNATIONAL CO LIMITED

(ARBN 564358)

Eighth Respondent

BRITISH AIRWAYS PLC (ARBN 2747597)

Ninth Respondent

JUDGES: MOORE, JESSUP AND DODDS-STREETON JJ

DATE: 29 OCTOBER 2010

PLACE: MELBOURNE

REASONS FOR JUDGMENT 1 On 12 August 2010, we gave judgment on two applications for leave to appeal by the applicant in proceeding VID 12 of 2007, Auskay International Manufacturing & Trade Pty Ltd ("the applicant"): Auskay International Manufacturing & Trade Pty Ltd v Qantas Airways Limited [2010] FCAFC 96. We dismissed one of those applications with costs (VID 48 of 2010). In the other application (VID 903 of 2009), we granted leave to appeal, and allowed the applicant's appeal, from the first two of three orders made by the primary Judge on 11 December 2009. We dismissed the application for leave to appeal from the third order made by his Honour on that day. 2 In our orders made on 12 August 2010 in VID 903 of 2009, we reserved to the parties liberty to apply for orders as to costs: both as to the application for leave and the appeals themselves, and as to relevant aspects of the proceeding before the primary Judge. Pursuant to that liberty, the applicant has applied for its costs at both levels, and we have received written submissions from it, and from the respondents concerned, in relation to that application. 3 We should commence by pointing out that, in the proceeding before the primary Judge, there were nine respondents. They were also the respondents to the applications for leave to appeal. Of the nine respondents, we have been informed that the second, sixth and seventh took no part in the motions before his Honour which led to the judgment of 11 December 2009; and they took no part in the present applications for leave to appeal. Each of the remaining six respondents moved his Honour to strike out the Fourth Amended Statement of Claim, and resisted the applicant's motion for an amendment of the group definition in the proceeding. Those six respondents also made submissions on the applications for leave to appeal. The third and fourth respondents are members of the same corporate group, and had common representation. They submitted that, for costs purposes, they should be treated as a single party, and the applicant was not heard to resist that submission. There are, therefore, five respondents, or groups of respondents, with which we are presently concerned. 4 There is an additional complication concerning the circumstances of the eighth respondent, Japan Airlines International Co Limited. On 30 June 2010, Emmett J ordered that the proceeding in the Tokyo District Court, Civil Department, No 8, by which trustees were appointed to the eighth respondent on 19 January 2010, be recognised as a "foreign proceeding" and a "foreign main proceeding" within the meaning of Art 17 of the Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law, as applied by s 6 of the Cross‑Border Insolvency Act 2008 (Cth). Pursuant to Art 20 of the Model Law, the effect of Emmett J's order was that, in relation to the eighth respondent, the continuation of the proceeding before the primary Judge, and of the proceeding before the Full Court, is stayed. The eighth respondent participated in the submissions made on the present applications for leave to appeal (on 17 and 18 May 2010), but made no submission on the present questions of costs. The applicant accepted that, since 30 June 2010, no costs order may be made against the eighth respondent. 5 In the result, there are four respondents, or groups of respondents, with which we are presently concerned: the first respondent, Qantas Airways Ltd; the third and fourth respondents considered together, Singapore Airlines Ltd and Singapore Airlines Cargo Pte Ltd; the fifth respondent, Cathay Pacific Airways Ltd; and the ninth respondent, British Airways Plc. Henceforth in these reasons, we shall refer to these parties as "the respondents".

Costs in the Full Court 6 With respect to the successful application for leave to appeal, and the appeal, against the strike-out judgment of the primary Judge, the applicant submitted that it had succeeded in reversing the order that the Fourth Amended Statement of Claim be struck out, and that it was entitled to its costs against the respondents jointly and severally. At the general level, the respondents did not dispute that proposition. As we understand the submissions made on their behalf, there are only two respects in which the applicant's entitlement to its costs should be qualified: one which relates to the costs incurred (both by the applicant and by the respondents) in connection with the applicant's unsuccessful application for leave to appeal against the primary Judge's refusal to amend the group definition, and the other which relates to the insolvency of the eighth respondent, and the effect of the order made by Emmett J on 30 June 2010. 7 It was submitted on behalf of the applicant that the application for leave on the group definition question occupied such a minor portion of the energies of the parties, and of the attention of the Full Court, as to make it inappropriate to qualify its general entitlement to costs by reason of that limited respect in which it did not succeed. The respondents accepted that this question was a minor part of the Full Court proceeding, considered as a whole, but submitted that it was a part nonetheless, and that the applicant had failed in relation to it. They submitted that the Court should take a "broad brush" approach to the matter, and measure at 10% the contribution of this question to the Full Court proceeding generally. By this reasoning, the applicant would be denied 10% of its costs in the Full Court and the respondents would receive 10% of their costs in the Full Court, the nett result being that the respondents should pay 80% of the applicant's costs. 8 In addition to the submission to which we have referred, the applicant pointed out that, at least in relation to the group definition question, the cases run by the respondents were indistinguishable one from the other, yet they chose not to engage common representation to present those cases. It was said that it would be unfair, and inappropriate, for the applicant to be obliged to meet 10% of the costs of each of the respondents as the price for having failed on a relatively minor aspect of the case as a whole. Dealing with this submission first, we must say that we consider that the applicant has misunderstood the position for which the respondents contend. They do not suggest that the applicant should pay, or be debited, 10% of the costs incurred by each of them by reason of its failure on the group definition question. Rather, the respondents' proposal that they should pay 80% of the applicant's costs effectively fixes 10% of the applicant's costs as the amount to which the respondents collectively should be entitled by reason of their success on this question. Subject to our consideration of the applicant's submission that no account at all should be taken of the extent to which it failed before the Full Court (a matter to which we shall next turn), we can see no unfairness or inappropriateness in the approach proposed by the respondents. Indeed, we are disposed to think that, if anything, it works in the favour of the applicant. 9 Turning then to the primary argument advanced on behalf of the applicant, it was put that the question of group definition "occupied four of the 59 paragraphs of the principal judgment, which fairly represented the very little time taken in argument with that issue". The question was, however, not merely an "issue" within a challenge to the judgment of the primary Judge on which the applicant otherwise succeeded. It was a discrete challenge in its own right, and related to an order made by the primary Judge other than that on which the applicant succeeded before the Full Court. It is true that it constituted a minor aspect of the proceeding before the Full Court, but it was an aspect nonetheless. It is also true that not all of the respondents made oral submissions on the point, and that the submissions which were made were relatively brief. The respondents did, however, give attention to the point in the written submissions which they filed, and the brevity of the oral submissions which were made was no more than was justified by the very short submissions made orally on behalf of the applicant itself. The fact is that this point was one upon which the applicant made a discrete application for leave to appeal, and the respondents were required to resist it. There is no reason, either at the level of principle or as a matter of practicality, why costs should not follow the event in relation to this application for leave to appeal. 10 It was also submitted on behalf of the applicant that "argument on [this] issue was not so much directed to identifying error in the primary decision but to finding a practical way of resolving an issue between the parties without further delay". So much may be granted, but the approach proposed by the applicant did not recommend itself to the Full Court, and the result was that for which the respondents contended. We are not disposed to qualify the order that we would otherwise make by reason of our recognition that the approach which the applicant proposed was one which, on one view, might have had a certain pragmatic appeal. 11 That leaves the question of how the proportion of the contribution of the group definition question to the costs incurred by the parties before the Full Court should be identified. As we have noted above, the respondents proposed that, broadly, the question occupied about 10% of the parties' cases in the Full Court. The applicant resisted that suggestion, but offered no alternative. In the absence of agreement, the default position, as it were, would be for us to require the applicant to pay so much of the costs of each of the respondents as were incurred in relation to the application for leave to appeal from the group definition order; and to require the respondents to pay the applicant's costs, save to the extent that they related to that application for leave. Neither party proposed that we should take this approach, implicitly taking the position, which we would endorse, that the amounts most probably involved would be unlikely to justify the additional time and expense required to carry out the necessary quantification. Besides, an approach of this kind is likely, as we have suggested above, to expose the applicant to the prospect of paying a sum which would be greater in total than the amount of its own costs which would be sacrificed if the respondents' 80% proposal were adopted. 12 We consider that, despite its obvious lack of precision, the robust approach for which the respondents contend is the one which should be taken. However, we take the view that 5%, rather than 10%, represents a fair approximation of the extent to which the group definition question is likely to have contributed to the costs of the parties. We take into account not only the relatively minor contribution which the question made to the length of the submissions advanced by the parties, but also the circumstance that the question was conspicuously less complex, and less difficult, than those with which the first two orders made by the primary Judge on 11 December 2009 were concerned. It follows that, subject only to our consideration of the complication introduced by the circumstances of the eighth respondent, we shall order the respondents to pay 90% of the applicant's costs of the applications for leave to appeal. 13 The respondents submitted that, as the price for an order requiring them generally to pay its costs, the applicant should be required to give an undertaking to the court that it would, within 28 days, make application, both in the proceeding before the Full Court and in the proceeding before the primary Judge, for leave to proceed against the eighth respondent "and for any relevant costs orders made against [the respondents]…. to also be made against [the eighth respondent]". The rationale for this proposal was that the eighth respondent played a full part in the hearing before the Full Court (which, as noted above, was concluded before Emmett J's order was made), but its liability, or potential liability, to share the burden of paying the applicant's costs would depend upon "the whim of the applicant as to whether or not to seek an order that [the eighth respondent] pay these costs". The applicant has declined to offer any such undertaking, contending that the court should simply order that the respondents pay the appropriate percentage of its costs. 14 The starting point for any consideration of the respondents' submission is that the sum which they will be obliged to pay (whether with or without the undertaking which they propose) will represent the residue of the applicant's entitlement to its costs in relation to the applications for leave, and the appeal, on which it succeeded, after taking account of the impact of the application upon which it failed. Each of the respondents moved the primary Judge to have the Fourth Amended Statement of Claim struck out. Each was properly made a respondent to the application for leave to appeal. Had there been one party only opposing the applicant, the applicant's case, and presumptively its costs, on the application for leave would have been no less than they were. The principle of joint and several liability for the applicant's costs, which was accepted by the respondents, implies that any one of them is appropriately fixed with an obligation to pay the whole of the applicant's costs. 15 It follows, in our view, that the presence or absence of the eighth respondent as a viable party against whom the applicant might seek its costs, or a contribution to its costs, is irrelevant to the legal justification for the applicant's entitlement to its costs from any one of the respondents. Put another way, once the principle of joint liability be accepted, no one of the respondents can be heard to say that the legal basis of its obligation to pay the applicant's costs is affected or qualified by the circumstance that a like obligation cannot be imposed on the eighth respondent. There is, therefore, no basis for us to require the applicant to make the undertaking proposed by the respondents as a condition for the making of a general order, to which the applicant is otherwise entitled, that the respondents pay its costs. 16 For the above reasons, we shall order that the respondents pay 90% of the applicant's costs of the applications for leave to appeal and (in the case of the applications against the first two orders made on 11 December 2009) the appeal. Although the parties made no submissions on the subject, the applicant's costs will included costs incurred on the present application for costs. 17 We appreciate that the approach we have taken may be viewed as unsatisfactory from the perspective of the respondents. Assuming – as seems to be implicit in their submissions – that each of them would have a right of contribution from each other in relation to the applicant's enforcement of the general costs order which we propose to make, absent such an order binding on the eighth respondent, the respondents would have no such right of contribution as against it, and would each be obliged to contribute one quarter, instead of one fifth, of the applicant's costs entitlement. This difficulty, however, lies wholly along the axis between the respondents and the eighth respondent. The applicant should not have to concern itself with it. Unless otherwise minded to seek leave to proceed against the eighth respondent, the applicant should not be required to take the potentially inconvenient and costly steps implicit in the respondents' proposal as the price for obtaining an order which, as against any one, or all, of them separately from the eighth respondent, is its conventional entitlement.

Costs before the primary Judge 18 In their written submissions on costs, the parties accepted that, as a result of the way that we disposed of the matters that were before us on appeal, new costs orders, dealing with the motions before the primary Judge, should be made. All parties proposed that we should take a robust approach, and estimate the proportion of their costs before the primary Judge that were incurred in connection with the motions upon which the applicant succeeded on appeal, and the motion with respect to which his Honour's determination was confirmed, respectively. Where the parties differed was in the bottom‑line percentage, as it were, which they proposed as an appropriate reflection of the overall measure of the applicant's notional success at first instance: the applicant proposed 80%, and the respondents proposed 60%. 19 We are at something of a disadvantage in dealing with the matter on the basis proposed by the parties. Their submissions as to the relative weight and complexity of the motions before the primary Judge proceeded at a very high level, and were more by way of assertion than by way of analysis. Neither side, for example, entered upon any serious attempt to justify its preferred percentage. Although we accept the good sense of avoiding further costs and inconvenience by making estimates of the kind proposed by the parties, there is a limit to the extent to which a Full Court can take this approach in relation to proceedings over which it has not presided. On the basis of the parties' submissions only, there is no way that we would have of determining, even approximately, whether 80% was more likely to be a true measure of the applicant's relative entitlement to costs than 60%; or, for that matter, what might be a reasonable intermediate figure. 20 We also note that, in the orders made on 11 December 2009, the primary Judge did not make any provision for the costs of the applicant's motion with respect to the group definition. His Honour only ordered the applicant to pay the respondents (and the eighth respondent) their costs of their successful strike-out motions. In the parties' costs submissions before us, no reference was made to this circumstance. However, those submissions proceeded, on both sides, by reference to an implicit assumption that the respondents were entitled to have credited to them their costs of successfully resisting the applicant's motion before the primary Judge. 21 In the proceeding below, each of the respondents (in the case of the third and fourth respondents, jointly) moved separately for the Fourth Amended Statement of Claim to be struck out. Had the primary Judge disposed of those motions consistently with the reasons of the Full Court, his Honour would have ordered that each of them be dismissed with costs. For reasons explained above, we consider that we are in no position to go beyond that. 22 In the normal course of things, we would take the same approach with respect to the eighth respondent's motion before his Honour, but, for reasons explained above, no such expedient is now open to us. Indeed, to the extent that Order 1 made by the primary Judge on 11 December 2009 granted the relief sought on the eighth respondent's Notice of Motion, it may be that our order of 12 August 2010 setting aside his Honour's order was inconsistent with the stay which came into force on 30 June 2010. Our attention was not drawn to the orders made by Emmett J before we made our orders on 12 August 2010, and we desire to say nothing further on that subject. However, it would on any view be inconsistent with the stay for us now to make a costs order on the eighth respondent's motion before his Honour. 23 To assist the parties and the taxing officer, we also take this opportunity to record our view that, since there were five separate (albeit effectively identical) notices of motion before his Honour, the disposition of the costs question in the way we propose will have the consequence – in the absence of facts being brought forward that require a contrary conclusion – that the applicant would be entitled, as against each of the respondents, only to an aliquot part of its costs incurred resisting the five motions. If the applicant conducted an undifferentiated defence to those five motions, a just result would require that it receive one‑fifth of its costs from each of the respondents. We appreciate that this will leave the applicant out of pocket to the extent of one-fifth of the costs to which it ought to have been entitled had the motions before his Honour been disposed of in the way determined by the Full Court, but we can see no basis in principle or in fairness for the respondents to be required to pay the notional part of the applicant's costs that was incurred resisting the eighth respondent's motion. We do not propose to incorporate an express provision to this effect in the relevant order which we make today only because we would not wish to cut the applicant out of bringing forward facts – if such facts exist – which demonstrate that the costs which it incurred in resisting the strike‑out motions varied as between those motions. However it be done, the result should not be such as would have the effect of requiring the respondents to pay that actual or notional part of the applicant's costs as were incurred in resisting the eighth respondent's motion. 24 It would seem to be in harmony with the thrust of the submissions made to us on costs that an order should now be made that the applicant pay the respondents' costs of its unsuccessful motion with respect to the group definition. However, as we have said, the primary Judge made no such order, and there may have been good reasons for that approach. His Honour may have taken the view that it would not be appropriate to require the applicant to pay the costs of each of the respondents incurred in successfully dealing with a single point. The parties' written submissions did not deal with this question, but, as we have said, their proposals to give the applicant only a percentage of its costs at first instance seemed to imply a recognition that the costs of the group definition motion at first instance should be dealt with in a manner different from that adopted by his Honour. In the circumstances, we consider that the preferable course would be to make no order determining the respondents' entitlement to these costs, but to give them leave to raise the matter before the primary Judge within a specified period. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Moore, Jessup and Dodds-Streeton.

Associate: Dated: 29 October 2010