Ansett Transport Industries (Operations) Pty Ltd v Commonwealth

Ansett Transport Industries (Operations) Pty Ltd v Commonwealth - [1977] HCA 71 - HCA 1977 case summary — Zoe

[20]

The plaintiff, Ansett Transport Industries (Operations) Pty. Ltd., previously known as Australian National Airways Pty. Ltd., seeks relief by way of declarations, injunctions and damages against the defendants in connexion with the proposed importation into Australia of two Carvair aircraft by the third defendant, Air Express Ltd. ("Air Express"), and of two Argosy aircraft by the fourth defendant, Interstate Parcel Express Co. (Australia) Pty. Ltd. ("Ipec"). The plaintiff's case is that the proposed issue by the second defendant, the Secretary of the Department of Transport, of import permits under reg. 4(2) and the Third Schedule of the Customs (Prohibited Imports) Regulations in relation to the four aircraft would constitute or involve a breach on the part of the first defendant, the Commonwealth, of its contractual obligations under agreements made in 1952, 1961, 1972 and 1973 to which the plaintiff and the Commonwealth were parties and which were approved respectively by the Civil Aviation Agreement Act 1952, the Airlines Agreements Act 1961, the Airlines Agreements Act 1972 and the Airlines Agreements Act 1973. The plaintiff claims that by the 1952 Agreement, which was continued by the later Agreements, the Commonwealth contracted with the plaintiff that it would permit only the plaintiff and the Australian National Airlines Commission ("the Commission") to operate airline services for passengers and freight on trunk routes in Australia during the continuation of the Agreements. The plaintiff then contends that the issue of the permits by the second defendant is for the purpose of enabling Air Express and Ipec to carry freight between the mainland and Tasmania, that this is a trunk route, and that the issue of the permits therefore constitutes a breach of contract by the Commonwealth. It is alleged that Air Express holds a charter licence under the Air Navigation Regulations which authorizes it to operate air services on this route and that Ipec is an applicant for an airline licence under the regulations authorizing it to operate on this route. The plaintiff then claims that if the import permits for the four aircraft are granted, the second defendant will be required to issue airline licences to Air Express and Ipec for the route. The unexpressed assumption is that they have applied, or will apply, for such licences. Alternatively, basing its claim on an allegation that the Minister for Transport stated that he had approved the import of the aircraft for that purpose, the plaintiff alleges that the Commonwealth, by encouraging or directing the second defendant to issue the permits, is committing, or threatens to commit, a breach of contract.

[125]

The Agreement is expressed to have no force or effect and not to be binding until it is approved by Parliament and to come into force upon the date when it is so approved. It was approved by the Civil Aviation Agreement Act 1952 (No. 100 of 1952) which came into operation on 18th November 1952. That Act by s. 3 approved the Agreement as set out in the Schedule and by s. 4 it authorized the Commonwealth to give such guarantees and make such advances on loan as were provided for in the Agreement. Section 5 provides that the Australian National Airlines Commission constituted under the Australian National Airlines Act 1945-1947 ("the Commission") should do all such things as the Agreement provides that the Commission shall do. That Agreement is expressed to run for a period of fifteen years and accordingly would, but for subsequent agreements and legislation, have expired on 18th November 1967. It was however extended for a further period of ten years by the 1961 Agreement which came into operation on 27th October 1961 pursuant to the provisions of the Airlines Agreements Act 1961 (No. 70 of 1961). By the 1973 Agreement which came into operation on 12th December 1973, pursuant to the Airlines Agreements Act 1973 (No. 178 of 1973), it was agreed that the 1952-1972 Airlines Agreement should continue in force after 18th November 1977 unless and until determined in accordance with that clause. That clause enables the plaintiff to terminate the Agreement at any time after 31st December 1977 by giving notice in writing taking effect not less than five years after the giving of the notice. The Commonwealth may terminate the Agreement by giving notice after 31st December 1977 to take effect not less than five years after the giving of the notice, but shall not give such notice unless the consent of both Houses of the Parliament expressed by resolution has first been given to the termination of the Agreement. Accordingly, the Agreements have a minimum life of a further five years after 31st December 1977.

[175]

It is thus apparent that the 1957 Agreement proved to be of an interim nature. It dealt with the situation which arose upon A.T.I. acquiring the whole of the issued shares in the plaintiff. At that time another company under the control of A.T.I., namely Ansett Airways Pty. Ltd., also operated airline services within Australia. The 1952 Agreement had dealt amongst other things with the rationalization of the airline services of the Commission and the plaintiff in respect of routes on which both were operating services at the date of the commencement of that Agreement, i.e. 18th November 1952. The 1957 Agreement contained a recital in the form now contained in the fifth recital to the 1961 Agreement, relating to the "two airline policy". It provided in cl. 5 that as soon as practicable and in any event within a period not exceeding twenty-five months Ansett Airways Pty. Ltd. would cease to operate airline services and that it would not during the continuance of that Agreement, resume the operation of airline services. The 1957 Agreement was expressed to continue in force until the termination of the 1952 Agreement. In addition, A.T.I. was bound to do everything within its power to ensure that airline companies or firms in which it had a controlling interest would do all such acts and things as the Agreement provided that they should do and that those companies would not do anything inconsistent with the provisions or purposes of the Agreement. It extended the rationalization procedure established in 1952 to air routes in addition to those specified in the 1952 Agreement cl. 7 (1), namely to those upon which both the Commission and any one of the other "airline operators" (as defined) operated or proposed to operate. This was of course part of the change necessary to give effect to the policy of two and not more than two operators of trunk route airline services. After the period specified for the closing down of the operations of Ansett Airways Pty. Ltd. the 1961 Agreement was made. It brought the 1957 Agreement to an end but like obligations and a somewhat re-arranged and extended rationalization system was substituted.

[193]

It would require no express agreement to produce the result that nothing in the 1952-1972 Airlines Agreement would prevent the Commonwealth, the Minister or the Director-General from permitting the development of air services on routes other than trunk routes consistently with the object of the parties to that Agreement. However for the Commonwealth, the Minister or the Director-General to permit other operators to develop "specialist freight and passenger services" on trunk routes would not be consistent with the object of the parties as expressed in the relevant recital to the 1961 Agreement, unless some special provision declared it to be so. The effect of cl. 10(b) of the 1972 Agreement is in my opinion to declare that for the Commonwealth, the Minister or the Director-General to permit the development by other operators of specialist freight and passenger services on trunk routes where the Minister holds the required opinion shall be consistent with the object of the parties as stated in the relevant recital, notwithstanding that without such agreement it would not be consistent with that object. The use of the word "acknowledge" does not in this context mean that the clause merely records the previously existing situation. Paragraph (a) may be assumed to be related to routes which are not trunk routes, though subject to "rationalization", but it provides for a modification of the objective of the plaintiff and the Commission under cl. 11 (1) (c) of the 1952 Agreement to "conduct its operations in a businesslike and economical manner". Paragraph (b) is on its face recording a change which is to operate for the future as the use of the word "shall" makes clear. To this extent the object of the parties is therefore modified and the operational situation may thereafter be changed by permission of the Commonwealth, the Minister or the Director-General without departure from the continuing joint objective. Clause 10 thus recognizes that the object of the parties as stated in the recital cannot be modified without agreement, and that there were at that time two, and only two, operators of trunk route airline services.

[223]

A number of arguments were advanced against the making of any implication. The Solicitor-General argued that no reliance had been placed on cl. 10 of the 1972 Agreement in the statement of claim and it is not pleaded that the Minister did not entertain the relevant opinion under cl. 10. It seems to me that this argument is misconceived. If in fact there is an obligation or an implied term of the kind to which I have referred, cl. 10 operates by way of an exception and indeed it is expressed in a manner appropriate to an exception. It would not be appropriate to plead in a statement of claim that an exception did not operate. It would be appropriate to rely upon cl. 10 by way of a defence, under which it might be established that the Minister entertained the relevant opinion and that the service for which the Minister proposed to permit importation was of the kind specified. The Commonwealth also relied upon the provision in cl. 10 of the 1952 Agreement that the Commonwealth would during the Agreement give "the Company substantially equal treatment with the Commission in relation to the grant of import licences and the allocation of airport facilities". It was argued that it would be contrary to the ordinary rules of construction to imply a term about importation where the contract expressly dealt with one aspect of it. So it might be, if the term to be implied related to import licences only, but it does not. The term which I consider to be implied in the 1952-1961 Agreement is of a general character, namely that the Commonwealth is obliged to do nothing to disturb the existing situation in which there were two and not more than two operators of trunk route airline services and to secure and maintain that position. What is necessary to comply with that obligation will depend upon the particular circumstances prevailing from time to time and may in some circumstances operate on matters, such as importation of aircraft, which are the subject of other provisions, so long as there is no conflict. It is an obligation which has a variable content and a wide operation. In the present case the obligation operates so as to oblige the Commonwealth not to permit, encourage or facilitate the granting of permission to import, which would operate to lift the general prohibition of the importation of aircraft, so as to enable a third operator to commence trunk route airline services.

[224]

It was argued that the 1957 Agreement is inconsistent with the notion that the parties are contractually bound to permit two and not more than two airlines and that the recital to that Agreement and the same recital in the 1961 Agreement does no more than indicate the purpose of the Agreement for the guidance of the Rationalization Committee in the allocation of routes and so forth between the two companies. In my opinion the recital has no direct relevance, and certainly does not have exclusive relevance, to the activities of the Rationalization Committee. It is, I think, plain upon the face of the recital that it is not concerned with guidance to the Rationalization Committee. The guiding principles for the Rationalization Committee are "to avoid unnecessary overlapping of services and wasteful competition, to provide the most effective and economical services with due regard to the interests of the public and to bring earnings into a proper relation to overall costs". Clause 10 is quite plainly concerned with the rationalization of the operations of the two airlines and the Committee has no power or authority to deal with any other airline. Accordingly there is no means by which its activities could secure and maintain a position in where there were two and not more than two operators of trunk route airline services and such a policy would give no guidance in the manner in which they were to avoid unnecessary overlapping of services and wasteful competition between these two airline services or provide the most efficient, effective and economical services with due regard to the matters referred to in cl. 10. The obligation on the Rationalization Committee to keep under review the industry/passenger load factor and freight/load factor necessary to permit profitable airline operations by the Commission and the Company makes it clear that the Committee is concerned only with the operations of those two airline operators. This is entirely consistent with the recital, but the recital does not aid the Committee in the performance of its function.

[229]

For the third defendant it was also argued that the Agreements cannot be so construed as to require the total prohibition of all imports of aircraft, or of all aircraft that might possibly be used in airline services. This argument misconceives the nature of the Agreements and of the allegations. The implied term sought to be established is one to "secure and maintain a position in which there are two, and not more than two, operators of trunk route airline services". These must be interstate or territorial services because the Commission is (so far as material) limited in its powers to the conduct of such services. The implied term is not directly concerned with the importation of aircraft, but, if as I think it is to be implied in the terms of the recital, then occasions may arise, of which this is one, in which approving, permitting or encouraging the lifting of the prohibition on the importation of aircraft may, depending on the purpose for which it is intended they should be used, constitute a breach of the obligation to secure and maintain the position. What the Minister said is that he "had approved the import into Australia of two Carvair aircraft for the third named defendant and two Argosy aircraft for the fourth named defendant for the carriage of freight between the mainland and Tasmania" and it must be accepted that routes between the mainland and Tasmania include trunk routes within the meaning of the Agreement. This does amount to an allegation that the Minister has approved and will therefore arrange or procure or direct the issue of the relevant "permission in writing" for the importation of aircraft to be used for that purpose. The statement of claim effectively alleges, though not in express terms, that the aircraft are to be imported for the operation of a trunk route airline service within the meaning of the Agreement. It may be that, if facts other than those alleged in the statement of claim come to be investigated, the allegation of fact may not be made out, perhaps because the conditions of cl. 10 of the 1961 Agreement are shown to be fulfilled. But those are matters which cannot be investigated upon demurrer. The only questions which do arise are whether there is an implied term as alleged and if so whether permitting or procuring permission for the importation of aircraft for the carriage of cargo on trunk routes, by an "airline service" within the meaning of the implied term, would constitute a breach of the Agreement. It is not open on demurrer proceedings to say that that is not what the third and fourth defendants intend to do. I do not think that the argument is assisted by an endeavour to equate the expression "trunk route airline services" as used in the Agreement with one or other of the "operations" or "air service operations" for which licences are required as a division of the expression "air transport" used in reg. 191.

[233]

A separate argument was raised by the third and fourth defendants and by the Solicitor-General for Tasmania that s. 92 of the Constitution could be relied upon to defeat the operation of the Agreements and the legislation. It was argued that if the Agreement contains the implied term alleged then it would not be competent to the Parliament to approve such an Agreement because the term would be contrary to s. 92 and accordingly the Act approving the Agreement would be invalid. It was said that the Agreement would require the Commonwealth to exercise its powers to maintain a position in which there were two and not more than two operators of interstate airline services and that that would be contrary to s. 92. The argument involved the proposition that the Parliament cannot approve an agreement which obliges the Commonwealth, where an interstate operation exists, to use a different power (i.e. the customs power) for the purpose of preventing such an operation commencing or continuing. Such legislation would, it is said, be discriminatory against interstate operations. This argument misconceives both the nature of the contractual situation as at 1961 and of the implied term (according to the way the matter is regarded). On the former view the Commonwealth is required to do no more than maintain the existing situation, the continuance of which involves no conflict with s. 92. The latter involves an obligation to do no more than it can lawfully and effectively do, which does not include anything which is contrary to s. 92. The Solicitor-General for Tasmania argued that the recent decisions in North Eastern Dairy Co. Ltd. v. Dairy Industry Authority (N.S.W.) [52] ; S.O.S. (Mowbray) Pty. Ltd. v. Mead [53] and Perre v. Pollitt [54] required a re-examination of the Ipec Case [55] and that those decisions demonstrated that the Ipec Case was wrongly decided. It was also said that a monopoly in interstate trade is clearly invalid and that, if an executive discretion is required by some external requirement, such as a contract, to be exercised in a particular manner against freedom of interstate trade, then s. 92 must apply so as to prevent that result. It was also said that this was discrimination against interstate trade and accordingly directness of the operation of the law on interstate trade was not an essential requirement.

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Judgment (245 paragraphs)

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