Australian Competition and Consumer Commission v Air New Zealand Limited

REASONS FOR JUDGMENT 1 On 6 December 2012, the Commission called Mr Gunther Reissig to give evidence. During his cross-examination of Mr Reissig, Mr Smith SC for Air New Zealand ('AirNZ'), sought to elicit from Mr Reissig answers directed to establishing that: (a) The undifferentiated markets pleaded by the ACCC did not exist and, in particular, there were no general markets for the supply of 'air freight services'; on the contrary, there were different markets for the supply of express and non-express air freight services; and (b) AirNZ did not compete with airlines that provided express services from Singapore and Hong Kong into ports in Australia because it only provided air freight services between those ports via indirect routes. 2 At the time that this occurred, the Commission objected to the questions and Mr Reissig's evidence on these topics was taken on the voir dire. Following full argument on 13 December 2012, I admitted the evidence as against AirNZ but subjected it to a direction under s 136 of the Evidence Act 1995 (Cth) preventing it from being used: (a) to establish that the markets alleged by the Commission did not exist because they were further subdivided into markets such as the market for express cargo services; or (b) to prove that AirNZ did not compete in the relevant market for express services. For reasons delivered simultaneously with these reasons, the same conclusion applies to the use of evidence against the other respondent in this trial, Garuda: see Australian Competition and Consumer Commission v P. T. Garuda Indonesia Ltd (No 3) [2012] FCA 1481. 3 There had been, prior to objection being taken to Mr Reissig's evidence, some similar evidence elicited to which objection had not been taken. Objection was finally taken to Mr Reissig's evidence, so Mr Halley informed me, to avoid the subsequent contention that the case was being conducted other than on the pleadings (an allegation that has already been levelled against Mr Halley: see Australian Competition and Consumer Commission v Air New Zealand Limited (No 1) [2012] FCA 1355 at [13]-[19]). 4 The short issue is whether the evidence which is sought to be elicited is relevant to an issue which is pleaded. 5 The answer to this question is both 'yes' and 'no'. It is 'yes' because, by the time the matter was fully argued, the Commission accepted that Mr Reissig's evidence was relevant on an alternate basis, namely, to prove that services provided at the destination port, such as ground handling, (which the Commission alleges are relevant for market purposes) were of little concern in the market as a whole. In that endeavour, it was permissible to point to the express market. 6 The answer is 'no' because, as discussed below, the argument outlined at (a) in [1] above is not a subject of AirNZ's pleading. To see why, it is necessary to turn to AirNZ's defence. It is to be interpreted in its ordinary light against a backdrop which includes the pleading rules contained in the Federal Court Rules 2011. These rules show that trial by ambush has become an obsolete practice in at least two ways. First, parties are now required to admit or deny allegations with the possibility of non-admission being reserved to those occasions where a party lacks sufficient knowledge to admit or deny. This emerges from rr 16.07(1)-(3) which are as follows: 16.07 Admissions, denials and deemed admissions (1) A party pleading to an allegation of fact in another party's pleading must specifically admit or deny every allegation of fact in the pleading. (2) Allegations that are not specifically denied are taken to be admitted. (3) However, a party may state that the party does not know and therefore cannot admit a particular fact. 7 This rule does not permit the tactic of putting to proof an opponent of matters known to be true. 8 Secondly, a party is required by its pleading to signal any matter of fact or law which, if not notified, might take the opponent by surprise. So much flows from r 16.08, which provides: 16.08 Matters that must be expressly pleaded In a pleading subsequent to a statement of claim, a party must expressly plead a matter of fact or point of law that: (a) raises an issue not arising out of the earlier pleading; or (b) if not expressly pleaded, might take another party by surprise if later pleaded; or (c) the party alleges makes another party's claim or defence not maintainable. 9 A consideration of AirNZ's defence requires an appreciation of the Commission's pleading. At paragraphs 38, 40 and 43 of the Further Amended Statement of Claim, it pleads three categories of markets: (a) country-originated markets; (b) Australian markets; and (c) route-specific markets. 10 The issue between the parties may be illustrated by reference to only one of these. Paragraph 38 of the Further Amended Statement of Claim is as follows: The Country Originated Markets 38. By reason of the matters alleged in paragraphs 3 to 37 inclusive, at all material times, there were markets in which customers, freight forwarders and international airlines participated being markets for the supply and acquisition of air freight services on uni-directional routes between ports in particular countries and ports in other countries, including markets for the carriage of air freight originating in each of: 38.1 Singapore, being a market in which customers, freight forwarders and international airlines participated in the supply and acquisition of air freight services on uni-directional routes from Singapore to ports outside Singapore, including ports inside Australia, both by direct routes and by indirect routes via intermediate ports (the "Singapore Originated Market"); 38.2 Hong Kong, being a market in which customers, freight forwarders and international airlines participated in the supply and acquisition of air freight services on uni-directional routes from Hong Kong to ports outside Hong Kong, including ports inside Australia, both by direct routes and by indirect routes via intermediate ports (the "Hong Kong Originated Market"); and 38.3 Japan, being a market in which customers, freight forwarders and international airlines participated in the supply and acquisition of air freight services on uni-directional routes from ports in Japan to ports outside Japan, including ports inside Australia, both by direct routes and by indirect routes via intermediate ports (the "Japan Originated Market").' 11 Paragraph 38 of AirNZ's Further Amended Defence provides: The Country Originated Global Markets 38. In response to paragraph 38 Air New Zealand: (a) admits that at all material times there were markets in Singapore for the supply and acquisition of air cargo transport services on uni-directional routes from Singapore to ports outside Singapore, including ports inside Australia, both by direct routes and by indirect routes via intermediate ports; (b) admits that at all material times there were markets in Hong Kong for the supply and acquisition of air cargo transport services on uni-directional routes from Hong Kong to ports outside Hong Kong, including ports inside Australia. both by direct routes and by indirect routes via intermediate ports; (c) admits that at all material times there were markets in Japan for the supply and acquisition of air cargo transport services on uni-directional routes from Japan to ports outside Japan, including ports inside Australia, both by direct routes and by indirect routes via intermediate ports: (d) otherwise does not admit the allegations. 38. denies the allegations in paragraph 38. 12 It will be seen that, insofar as Singapore is concerned, a single market is alleged by the Commission. The defence admits, in paragraph 38(a), that there were 'markets'. That admission formed the basis of AirNZ's submission that the market of express services was sufficiently flagged by paragraph 38. The key was to observe the plural word 'markets'. 13 I reject this submission. There is no way a substantial economic proposition such as that which AirNZ seeks now to propound can be pleaded by adding the letter 's' to the word 'market'. Such a defence must be sufficiently flagged to avoid surprise: r 16.08. Not only is paragraph 38 not sufficient for that purpose, the word 'admits' in paragraph 38(a) is apt to suggest that what follows is an admission of an allegation made by the Commission. Yet on AirNZ's construction of paragraph 38, it does not admit the market alleged by the Commission; rather, it admits allegations made by nobody. In substance, if AirNZ is correct, paragraph 38 is to be read as if it denied there was a single market, impliedly alleged that there were several markets and then expressly admitted that implied allegation. Such a pleading, if it had been drawn, might have invited a request for particulars. 14 In those circumstances, I do not accept that the multiple markets point is pleaded. 15 Nor do I accept that it is open to AirNZ to contend (consistently with its pleading) that it did not compete with providers of express services from Hong Kong and Singapore into Australia. 16 This is because it has already admitted competing with other airlines on that route whether directly or indirectly. To take an example, paragraph 19 of the Further Amended Statement of Claim says: 19. International airlines which supply air freight services between ports compete with, and are constrained by, all other international airlines which: 19.1 offer direct services between those ports on their own aircraft; 19.2 offer indirect services between those ports via one or more other intermediate ports by any route on their own aircraft; 19.3 offer direct or indirect services between those two ports using a combination of their own aircraft and those of other international airlines (e.g. as a result of interline or prorate arrangements with other international or domestic airlines); 19.4 have block-purchased space on another international airline that operates on any part of the route between the two particular ports; 19.5 offer direct or indirect services between ports which are geographically close to the particular ports such that goods may be transported competitively between the particular ports by a combination of air and land transport; and 19.6 are able to profitably redirect [sic] flights (including dedicated air freighter aircraft) to meet the demand between the two particular ports or a sector of the journey by relying upon existing traffic rights, by obtaining new traffic rights, or by operating supplementary or charter services. 17 In response, paragraph 19 of the Further Amended Defence says: 19. In response to paragraph 19 Air New Zealand: (a) admits that in respect of the supply of services to transport cargo by air from a particular airport to another airport, it competes in the country in which the originating airport is located with other international airlines that offer substantially similar services from the origin airport to the destination airport (either directly, or via one or more intermediate airports); (b) otherwise does not admit the allegations. 18 On a plain reading, AirNZ is admitting that it competes with airlines flying indirectly or via intermediate ports into Australia from Hong Kong or Singapore (as AirNZ itself does). It is also admitting that it competes with those airlines who are flying directly from Hong Kong or Singapore into Australia (as it does not, but as express services do). 19 Mr Owens, for AirNZ, submitted that it was open to AirNZ to contend that it did compete with airlines providing express services between those ports because of the words 'substantially similar services'. A variant in other parts of the pleading turned on a similar admission in relation to 'substitutable services'. 20 I do not regard those references as being a sufficient foreshadowing of a defence based on the proposition that AirNZ did not compete in the express services market. If that defence was to be run, it had to be expressly pleaded. No ordinary reading of the defence would signal the presence of these defences. 21 It was for that reason that I gave the ruling I did. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.