Ainsworth v Criminal Justice Commission

His Honour answered two questions, which had been ordered by another judge of the Court to be heard separately from other issues in the case pursuant to Order 29 rule 2 of the Court's Rules. In addition, Northrop J. made a declaration, to which reference will be made later, and reserved costs. The case concerns the attempt by the applicant, Aussie Airlines Pty Limited ('Aussie Airlines'), to become a carrier in the Australian domestic airline industry. For a long time the Parliament endorsed the policy, known as the Two Airline Policy, under which the airlines now known as Qantas and Ansett Airlines ('Ansett') operated the main domestic interstate trunk routes. In 1987 the then Minister for Transport and Communications announced that the Two Airline Policy would end in October 1990. To assist the deregulation of the domestic aviation industry, Qantas and Ansett were to be granted long-term leases to enable each of them to develop terminal facilities essential for the operation of their services. Importantly, the leases were to contain provisions compelling both airlines to provide sub-leases to new entrants to the domestic aviation industry, so that they could widen the sphere of competition and conduct their businesses. Head Lease The new policy was carried into effect, inter alia, by a series of head leases being executed between the Commonwealth of Australia as lessor and the Australian National Airlines Commission as lessee. A separate head lease was entered into with respect to each of the major airports: Sydney, Melbourne, Adelaide, Perth and Coolangatta. In all material respects each of the five leases is in similar form, and each is dated 31 December 1987. The terms of the head leases are important for present purposes. For convenience, the learned primary Judge referred to the Melbourne head lease as illustrative of all the head leases, and I shall adopt the same course. Generally, I shall used the expression 'head lease' when discussing the terms of the Melbourne head lease. The learned primary Judge and the parties have throughout adopted the course of referring to the Commonwealth of Australia and the Australian National Airlines Commission as 'Qantas'. The reason for this is that since 1988 the first respondent, Australian Airlines Limited, has carried on in Australia the business previously carried on by the Australian National Airlines Commission pursuant to the provisions of the Australian Airlines (Conversion to Public Company) Act 1988. In 1992 Qantas acquired the whole of the issued capital of Australian Airlines Limited and assumed its domestic airlines operation. The third respondent, Federal Airports Corporation ('FAC'), is a statutory corporation created under the Federal Airports Corporation Act 1986. It is now the lessor under the head lease. Hence, it is convenient to refer to the head lessor as 'FAC' and to the head lessee as 'Qantas'. It is necessary at this stage to recite the relevant clauses in the head lease because the principal questions turn on their interpretation. Once I have done that it will be easier to understand the issues. Recital A to the head lease states that the parties to it are: 'both aware of the importance of terminal facilities for the conduct of airline operations, and to this end it is the intention of the Lessor to make available to the Lessee, long term leases of suitable sites for airline terminals, which are on fair and equitable terms to the Lessor and the Lessee and on such terms which make provision for new entrants to the airline industry and commuter and regional airlines'. The term of the head lease is 20 years, with options for extension to be exercisable by Qantas. Clause 5 is the critical clause. It relevantly provides as follows: '5(b)(i) Subject to the other provisions of this Clause, during the Relevant Period the Lessee shall, and if so requested by a Third Party Carrier (a "Sub-Lessee"), enter into a sub-lease of Third Party Carrier Facilities comprised in the Premises for the boarding and/or discharge of passenger aircraft (a "Sub-Lease"); (ii) Any Sub-Lessee either: (aa)shall hold; or (bb)shall have made a bona fide application for, all licences necessary for the conduct to and from the Airport of a regular public air transport service or passenger charter operation as defined in the Air Navigation Act 1920 and the Air Navigation Regulations. (c) Any such Sub-Lease will be on reasonable commercial terms and, without limitation, will provide for: (i) the Sub-Lessee to be entitled, where appropriate, to provide and remove at its own expense equipment and facilities for use within the Third Party Carrier Facilities; (ii) a term of not less than one year; (iii) one and only one option to renew for a period not exceeding the initial term; (iv) rentals which are consistent with the provisions of paragraph (d); (v) the provision to the Lessee of reasonable and adequate security for the Sub-Lessee's obligations under the Sub-Lease; (vi) undertakings on the part of the Sub-Lessee: (aa) to operate the Third Party Carrier Facilities in a manner consistent with the Lessee's terminal operations; and (bb)to ensure that security arrangements for its operations are to the same standard as those applied from time to time by the Lessee; (vii) ... (viii) ... (ix) ... (x) ... Clause 5(d) provides that the terms of the sub-lease as regards rental shall be reasonable with regard to certain specified matters, including the following: monies payable by the lessee to the lessor under the lease; the return on capital value of the third party carrier facilities; any costs incurred by the lessee in providing services and staffing facilities related to the operations through third party carrier facilities; and certain additional capital costs required to be spent by the lessee. The expression 'Third Party Carrier' is defined in clause 2.1 (the definition clause) as meaning relevantly: 'a new entrant to the domestic aviation industry or an existing regional or commuter carrier who becomes a Third Party Carrier pursuant to clause 5(n)'. Aussie Airlines is not an existing regional or commuter carrier; so in order to be brought within clause 5 it must answer the description of 'a new entrant to the domestic aviation industry'. The expression 'Third Party Carrier Facilities' is defined in clause 2 as meaning: 'access for a Third Party Carrier to facilities at the Premises of a type normally utilised by the Lessee for its own operations, including appropriate airline identification, display of necessary flight information, baggage check-in facilities, baggage handling facilities to and from trolleys (including necessary staffing), passenger assembly areas and aircraft parking and aerobridges where appropriate'. At this point there is little difficulty with the definitions of the expressions used in clause 5(b)(i). The difficulties commence with the expression 'Relevant Period' which is defined by clause 5(a)(i) in the following terms: '(i)the expression "Relevant Period" means the period which begins at 00.01 a.m. (Local time) on 30th October 1990 and expires at midnight (Local time) on: (aa)where no third party has made use of Third Party Carrier Facilities prior to 30 October 1995, that date; (bb)where sub-paragraph (aa) does not apply but at any time after 30th October, 1995 Third Party Carrier Facilities have not been utilised pursuant to a Sub-Lease by a Sub-Lessee for any continuous period of two years, the last day of that period; and (cc)where neither sub-paragraph (aa) nor (bb) applies, 30th October 2000; ... ' I shall return to this definition later. Aussie Airlines claims to be 'a new entrant to the domestic aviation industry' within the first part of the definition of the expression 'Third Party Carrier'. The two questions and the facts The two questions which Northrop J. heard as separate questions are in the following terms: 'Pursuant to order 29, rule 2 of the Federal Court Rules the Court shall decide separately from all other questions raised by the pleadings filed in the proceeding herein the following questions: (a) Does the applicant have sufficient standing to seek declaratory relief in terms of the declaration referred to in paragraph 2A of the further amended application? (b) If the Court determines that the applicant has sufficient standing to seek declaratory relief in the terms of the declaration referred to in its further amended application, was the applicant, in making each of the requests referred to in paragraphs 20 to 22 (inclusive) of the amended statement of claim herein, a "new entrant to the domestic aviation industry" within the meaning of that expression as used in the definition of "third party carrier" in each of the Head Leases referred to in paragraphs 8 and 10 of the amended statement of claim?' Northrop J. answered both questions in the affirmative and made a declaration substantially in the same terms as question (b). His Honour took the view that it was impossible to answer question (a) until consideration was given to question (b). He therefore found the relevant facts to be as stated in the following paragraphs. Mr Grey, the Managing Director and Chief Executive of Aussie Airlines (who signed the letter of 21 February 1995) has had extensive experience in the conduct of airline operations within Australia, Papua New Guinea, and the USA, with particular experience in the financial provisions relating to all aspects of the conduct of airline operations. In 1988 Mr Grey commenced the preparation of a plan to establish a domestic aviation business in Australia, intending to introduce a third domestic carrier into Australia following the end of the Two Airline Policy. He caused a number of companies to be formed for this purpose, with Compass Airlines Pty Limited ('Compass') as the principal entity. Compass made a request under clause 5 of each of the head leases relating to the Melbourne, Sydney, Adelaide, Perth and Coolangatta terminals for access to third party carrier facilities. Following negotiations, sub-leases were granted by Qantas to Compass. Compass commenced its domestic airline passenger service on 1 December 1990 and continued to do so, making use of the requisite terminal facilities, until 20 December 1991 when a provisional liquidator was appointed to Compass. Thereafter, following negotiations between the provisional liquidator and a company, Southern Cross Holdings Limited ('Southern Cross'), that company entered the domestic aviation industry using the terminal facilities previously used by Compass. It conducted its business under the name Compass. Southern Cross operated its airline business until March 1993, when it was placed in liquidation. Later in 1993 Mr Grey began to consider the establishment of another domestic airline business, and with this in mind he registered the name Aussie Airlines. In February 1995 Aussie Airlines Pty Limited was incorporated with an issued capital of $550. It is controlled by Mr Grey. Other directors are members of his family. Its registered office is a flat in Toorak, Melbourne, which is Mr Grey's residence. By letter dated 21 February 1995, Aussie Airlines requested Qantas to grant it a sub-lease for third party carrier facilities at the Melbourne terminal for the boarding and discharge of passenger aircraft, with such facilities to be of the kind normally used by Qantas for its own operations at that terminal. By other letters of the same date, Aussie Airlines sought from Qantas similar rights with respect to the airports at Sydney, Perth, Adelaide and Coolangatta. The letters are lengthy and it is not necessary to refer to them in detail. Aussie Airlines set out the 'basic facilities' which it said should be provided to it at Melbourne Airport, but the list was stated not to be exhaustive. The letter asked Qantas to state when negotiations could commence with respect to the provisions of the sub-leases. Qantas disputed that Aussie Airlines was a 'new entrant' to the domestic aviation industry on the ground it was not conducting any business at all in the aviation industry, its registered business address was a residence, and it had only a small paid-up capital. Qantas sought 'full details of the reasons, facts and circumstances said by the applicant to justify its request for access to third party carrier facilities as a "new entrant"'. A deal of correspondence followed between Aussie Airlines and Qantas, with Aussie Airlines refusing to give most of the information sought because it did not think it was obliged to do so, and because it regarded Qantas as a potential competitor that should not have access to confidential commercial information. FAC took a different view to Qantas. On 24 April 1995 the General Manager of FAC wrote to Qantas, noting that Aussie Airlines had requested Qantas to provide it with third party carrier facilities in domestic terminals at the five cities previously mentioned. The letter recited the fact that Mr Grey had given copies of the relevant correspondence to FAC. In the penultimate paragraph of its letter to Qantas, FAC requested Australian Airlines to give effect to its obligations under clause 5 of the leases and to commence negotiations forthwith with Aussie Airlines. The letter concluded: 'I am not aware of any reason why Aussie Airlines should not be treated as a new entrant to the domestic aviation industry. If you believe that Australian Airlines is not obliged to negotiate with Aussie Airlines would you please, as a matter of urgency, provide me with your reasons for this belief'.