Smith v Airservices Australia

4 On 22 February 2002, Mr Anderson, the Minister for Transport and Regional Services ('the Minister') announced the terms of reference for a Special Aviation Reform Group ('SARG') which was to recommend a preferred plan for the reform of Australia's low level airspace. The applicant was a member of SARG from its creation until April 2004.

5 On 13 May 2002, the Minister announced that, on the recommendation of SARG, the Government had decided to adopt the National Airspace System ('NAS') as the model for reform of Australia's airspace. The Minister stated that the applicant and Qantas developed the NAS model. The Minister also stated:

'This model is based on the airspace model used in the world's leading aviation nation, the United States. A safety case will be required to be developed for NAS, and the existing processes will continue to be followed in finalising the safety case. The implementation of NAS will mean that Australian airspace will be harmonised with [International Civil Aviation Organisation's] airspace classifications.'

6 The NAS model was adopted in a series of stages between November 2002 and November 2003. These proceedings concerned NAS Stage 2(b), which was implemented on 27 November 2003.

7 The respondent is a body corporate established by s 7 of the Air Services Act. Pursuant to s 8(1) of the Air Services Act its functions include providing services and facilities (including air traffic control) related to, among other things, the safety, regularity or efficiency of air navigation. Pursuant to s 9, in exercising its functions, the respondent must regard the safety of air navigation as the most important consideration.

8 On 2 August 2004, the respondent announced that its review of the implementation of NAS Stage 2(b) had shown that 'enhancements should be made in some areas' of NAS Stage 2(b) to add safety and economic benefits. On 27 August 2004, the respondent made the Decision, which, as noted above, was to implement a reclassification of Australian airspace known as 'Option 3'. In its Statement of Reasons for Decision, made pursuant to s 13(2) of the ADJR Act, the respondent described Option 3 as follows:

'In substance Option 3 provided for: (a) retention of most of the enroute Class E airspace; (b) the reclassification of Class E airspace steps above and adjacent to Class D towers to Class C airspace; (c) the building of new Class C airspace steps above all Class C and D towers to the base of Class A or Class C airspace in order to contain pressurised aircraft climb/descent profiles; (d) simplification of areas where control area steps overlap by introducing some areas of enroute Class C airspace between 12 500 and 18 000 feet; (e) reclassification of Class G airspace over Bass Strait and Tasmania to a base of between 14 500 and 12 500 feet; (f) reclassification of Class G airspace to Class E airspace corridors between Sydney and Dubbo and Melbourne and Mildura.'

9 Prior to the date of the Decision, the applicant had engaged in extensive correspondence with, among others, the Minister and the Chief Executive Officer and Acting Chairman of the respondent. The general thrust of this correspondence was that the applicant was concerned that the changes to NAS Stage 2(b) being considered by the respondent would result in a reduction in safety, in part because the reclassification referred to in (b) of Option 3 above might not be accompanied by the installation of radar approach control facilities. In particular, the applicant had concerns about certain regional airports. Further, the applicant believed that the respondent had not sought independent advice in relation to the changes being considered.

10 The applicant's concerns were set out in a letter from the applicant to the Minister dated 12 August 2004. In this letter the applicant gave detailed examples of why he believed there were flaws in the safety case performed by the respondent. He also stated:

'I realise that the vast majority of people who are lobbying you in relation to airspace are firmly convinced that the changes introduced on 27 November 2003 reduced safety. A small number of people, myself included, believe that the changes improved safety and that there is a rational reason for the perception by others that safety has been reduced. If the airspace is to be reversed - clearly moving away from the US FAA system - it will be very difficult to ever move to that system again.'

11 Apparently, the safety of the changes involved in the respondent's Decision was also a matter of concern to the Civil Aviation Safety Authority ('CASA'). CASA was established by s 8 of the Civil Aviation Act 1988 (Cth) ('CAA'). Its primary function is to conduct the safety regulation of civil air operation in Australian territory; s 9(1) of the CAA.

12 By letter dated 26 August 2004, the CEO of CASA, Mr Byron, wrote a letter to the respondent's CEO in which he referred to a report of Professor Terry O'Neill ('the O'Neill Report'), commissioned by CASA in relation to the changes proposed under Option 3. A copy of the O'Neill Report was attached. In his letter Mr Byron stated:

'…I note that the [O'Neill] report concludes that the main deficiencies discovered related to the fault tree methodology used by Airservices Australia and that: "As a result of these findings it was concluded that the analyses conducted by Airservices were insufficient to support a determination that the [NAS Stage] 2b changes have in fact led to a change in safety or to determine the extent of any such changes. Based on the evidence available, it is not possible to make judgments about the safety effects of NAS [Stage] 2b." I believe the Airservices Board would benefit from a briefing by Professor O'Neill once they have had time to read his report.'

13 From 28 to 31 August 2004, Mr Smith had a number of conversations with the Minister and his staff, in particular the Minister's Chief of Staff, Mr Langhorne. Mr Smith stated in evidence that, among the various issues discussed, he reminded Mr Langhorne that the Minister could issue directives to ensure that the respondent complied with Government policy. The applicant also stated in evidence that during his contact with the Minister in this period he sought the Minister's support in making a direction to the respondent to the effect that the respondent could only reclassify Class E airspace above Class D towers as Class C if that airspace had an approach radar control service.

14 On 31 August 2004, the Minister issued two directives to the respondent pursuant to s 16 of the Air Services Act. The first of these (Air Services Act 1995 section 16 Direction No. 3 of 2004) directed the respondent to complete a full design and implementation safety case in respect of Option 3; to make such cases publicly available; and to obtain advice from CASA as to whether any risks to the safety of air navigation presented by the implementation of Option 3 revealed by the safety cases had been mitigated to acceptable levels. The second direction (Air Services Act 1995 section 16 Direction No. 4 of 2004) required the respondent to provide an approach radar control service, in circumstances set out at [11] above, 'at the earliest time one can be supplied and installed'. In his evidence in this proceeding the applicant stated that while he was 'pleased', at least in part, with the directives, he still had concerns about the impact of the Decision on air safety in Australia.

15 By letter dated 1 September 2004, the applicant's solicitors, acting on his behalf, wrote to the Acting Chairman of the respondent outlining the applicant's concerns regarding the Decision and seeking further information about the Decision.

16 As noted at [1] above, the applicant filed an application for judicial review of the Decision on 16 September 2004. The application alleged that the respondent failed to take into account relevant considerations; failed to comply with procedures required by law; and the Decision was an unreasonable exercise of power. It appears from the application and the applicant's evidence that he was concerned that the changes to NAS Stage 2(b) by the implementation of Option 3 had not been investigated or analysed appropriately and, as a result, the Decision was unsafe from an air navigation viewpoint. On the same day the applicant also filed a notice of motion seeking to have the proceedings expedited. On 21 September 2004, I ordered that the matter be set down for hearing on 1 and 2 November 2004.

17 The Federal parliamentary elections that took place on 9 October 2004, returned the Coalition parties to government. The transportation component of the Coalition's election policy stated, in a document titled, 'Building Our National Transport Future',

'A Coalition Government will continue to modernise Australia's airspace system through the continued staged implementation of the National Airspace System (NAS).'

18 The applicant gave evidence that the Federal Opposition's aviation policy was to halt the implementation of all further stages of the NAS until Stage 2(b) had been revised and fully implemented. The applicant also asserted that when the Coalition made the above policy statement it was aware of the Opposition policy as well as of the respondent's intentions with respect to the NAS. These statements were admitted, with the consent of the parties, as evidence of the applicant's belief, not as evidence of the truth of the underlying facts asserted.

19 The applicant also gave evidence of a telephone conversation he had with the Minister's Chief of Staff, Mr Langhorne on 12 October 2004. The applicant gave the following account of the conversation:

'Applicant: What's happening? The Labor policy was to wind back the NAS, whereas your policy was to go ahead with NAS. Has that changed? Mr Langhorne: No, we haven't changed our view. We are obtaining advice for the Minister on how we can stop Air Services, in a legally valid way, from going ahead with their August decision to change NAS 2b. Air Services have even agreed to delay sending out the charts while this is resolved. Applicant: Well that's a start. At least for the first time in 8 months they've taken notice of the Minister. Mr Langhorne: Dick, a meeting has been organised between the Minister and Les Fisher [the Acting Chairman of the respondent]. I'll keep you posted on what happens.' The applicant's account of this conversation was not the subject of cross-examination.

20 By letter dated 12 October 2004, the Australian Government Solicitor ('AGS') provided the Secretary of the Department of Transport and Regional Services with advice regarding the Minister's power to prevent the implementation of the Decision. This letter, which apparently was provided to the applicant sometime prior to 18 October 2004 (see [25] below), stated:

'1. I refer to your request for urgent advice on this matter of 12 October 2004. Question and short answer Q: Are there any steps the Minister may validly take to prevent Airservices Australia (AA) from implementing its August 2004 decision? A: The Minister may express the view to AA that the August 2004 decision should not be implemented, and AA may have regard to the Minister's view. However, the Minister cannot dictate to AA as to how it should exercise its statutory powers to determine airspace classifications. The Minister cannot give AA a direction under s 16 [of the Air Services Act] to not implement the decision. There are some directions the Minister may be able to give to AA, depending upon the circumstances. However, any such direction would need to be consistent, in all the circumstances, with s.9(1) of the AA Act and with common law duties to which AA is subject. Generally, however, having regard to the process which the Board of AA followed in reaching its decision of August 2004, there is little scope, on present information, for the Minister to effectively prevent the Board from implementing that decision.'

21 The advice from the AGS provided a comprehensive discussion of the background to the advice and the legal principles. While it is unnecessary to set out the letter in full, the Court was referred in particular to the following passage from the advice:

'24. In addition, if there is similar objective and technically strong and rigorous evidence that the technical assumptions relied upon by AA in reaching its decision of August 2004 are fundamentally flawed, which would give rise in turn to a valid concern that the implementation of that decision would not be in the interests of safety, the Minister could direct AA to delay the implementation of the decision until that issue is addressed. Again, however, any such direction would need to meet the same onerous test discussed in the previous paragraph [that is, that any direction would have to be able to be justified on the basis that it addressed safety concerns which effectively outweigh those concerns which gave rise to the Decision] in order for it to be defensible as consistent with s.9(1) of the AA Act and with applicable common law principles.'

22 The applicant also gave the following evidence of a telephone conversation he had with the Minister on 14 October 2004 as follows:

'Applicant: Peter Langhorne has told me that you are going to stop the NAS being wound back - can you tell me what is happening? Minister: Dick, my people are finalising our legal advice on how I can direct the [respondent's] Board. … Minister: Dick, I can assure you that if I get advice that the 'wind back' reduces safety, I will stop it. I can assure you of that.'

It was the applicant's evidence that based on this conversation with the Minister, he was confident that the Minister would take all steps necessary to ensure that the NAS was not wound back.

23 On 14 October 2004, the Minister wrote to the Acting Chairman of the respondent expressing his 'great concern' over possible uncertainty resulting from Option 3. The Minister asked the Acting Chairman to meet urgently with CASA to consider this issue. The Acting Chairman responded by letter dated 19 October 2004, stating that the issues raised by the Minister did not create any difficulty for the respondent and the Board did not see any reason to change its position.

24 On 18 October 2004, the Minister wrote to the CEO of CASA. The Minister sought CASA's opinion on, inter alia, the safety risks associated with Option 3. The Minister noted that CASA might wish to seek expert advice. CASA's response to this letter is set out at [35] below. On the same day the Minister also wrote to the Acting Chairman of the respondent attaching a copy of his letter to the CEO of CASA. The Minister stated:

'…I have had the opportunity to review the short paper by Mr Tony Broderick. In view of Mr Broderick's concerns and those of several others including Professor O'Neil (sic), I ask that you reassure me in writing that you and the Board are fully satisfied that the course being taken by Airservices is based on all the advice available and that you are certain that the safety of the travelling public will not be compromised. If you are satisfied then I would ask that you advise me on what basis did the Board reject the concerns of Mr Broderick and the others.'

25 By letter dated 18 October 2004, the applicant wrote to Mr Langhorne. The applicant again expressed his concerns about the Decision and stated:

'…Thank you for sending me a copy of the advice from the Australian Government Solicitor in relation to any legally valid way the Minister can prevent Airservices from implementing its August 2004 decision to change NAS 2b. … I point out that the Minister has signified that he is concerned about the conflict of interest where Airservices are responsible for the regulation of airspace while they have a commercial involvement. The Airservices safety case exactly reflects the wishes of the air traffic controllers' union, Civil Air. There is a conflict issue here that affects safety. That is, that the air traffic controllers in the Class D towers will require less skill under the NAS and therefore believe that they will receive less pay in the longer term. Under the NAS, Class D towers are VFR [visual flight rules] towers and air traffic controllers will not need to be trained to separate IFR [instrument flight rules] and VFR aircraft procedurally as they would have to do in Class C. The existing air traffic controllers know this so they run an effective campaign to return to the old ways. … I believe that the decision made by the Airservices Board in August 2004 is fundamentally flawed because they did not properly consider all relevant advice. … I request in the interest of public safety that the Minister complies with paragraph 24 of the Government solicitor's advice and "directs AA to delay the implementation of the decision until that issue is addressed."'

26 On 19 October 2004, a further telephone conversation took place between the applicant and Mr Langhorne. Mr Smith's account of the conversation was as follows:

'Applicant: Peter, I need to know what is going on. If the proceedings continue it looks like they will be futile and waste even more money particularly when the Minister plans to stop the reversal anyway. Mr Langhorne: Don't do anything until tomorrow. I will then be able to give you the answer. We are receiving further legal advice and I'm confident we will stop the reversal, but I won't be able to give you an answer until tomorrow. … Mr Langhorne: If the Minister had independent advice it would provide him with the 'ammunition' that would allow him to stop Airservices from winding back the airspace. Applicant: Kevin Gale [a member of the respondent's Board] is writing to the Prime Minister and Chris Corrigan [Chairman of Virgin Blue Airlines Pty Ltd] is preparing a report for submission to the Minister in relation to the NAS. I am positive both Kevin and Chris will advise that the wind-back will reduce safety. Mr Langhorne: Ok, that would be helpful.'

27 On the same day the applicant wrote to the Minister forwarding a copy of a letter he had received from Tony Broderick, an aviation consultant. Mr Broderick stated reading the O'Neill Report strengthened his view that the safety case analysis of the respondent was fundamentally flawed.

28 At 2.15 pm on 20 October 2004, there was a directions hearing at which the applicant, by notice of motion, sought leave to discontinue the proceedings with no order as to costs. The notice of motion was stood over to 22 October 2004 to enable senior counsel for the respondent to obtain instructions. However, at the directions hearing, senior counsel for the respondent stated that he was instructed the Minister was not going to issue a direction to prevent the implementation of the Decision. Between this directions hearing and the Court giving the applicant leave to discontinue on 22 October there was further correspondence that is relevant to the applicant's claim that he sought to discontinue the proceedings because he believed that Option 3 would be rejected by the Minister thus making the proceedings futile. That correspondence consisted of three letters all dated 21 October 2004 namely: a letter from Mr Langhorne to the applicant; a letter from the applicant to Mr Langhorne; and a letter from the applicant to the Prime Minister's Chief of Staff, Mr Sinodinos.

29 In his letter Mr Langhorne clearly indicated that the Minister had made no decision about his actions in the matter:

'Following our conversation about my letter to Mr Tom Grant of 21 October 2004, I wish to confirm that the Minister is still awaiting advice, including legal advice from CASA and from the Australian Government Solicitor, in relation to what action he may be prepared to take in regard to the changes proposed by Airservices to the NAS. This confirms my earlier advice that the question of whether or not a direction would be issued, or whether the Minister might take some action, is still subject to the Minister considering advice from the relevant parties.'

The letter to Mr Grant to which Mr Langhorne refers corrected the instructions given to senior counsel for the respondent concerning the Minister's position as to whether he would issue a direction to stop the proposed changes. 30 It may be, as the respondent submitted, that Mr Langhorne's letter should be read as meaning that the Minister had not decided what, if any, action he should take. The applicant's evidence was that he believed that this letter indicated that the Minister had decided to intervene to prevent the adoption of Option 3 and was merely undecided as to the form his action should take.

31 In his letter to Mr Langhorne the applicant was still plainly seeking to persuade the Minister and Mr Langhorne to his point of view although it is unclear whether this was in response to Mr Langhorne's letter above. The applicant said:

'The legal advice from the Australian Government Solicitor did not say that somebody has to tell the Minister that the wind back is unsafe for him to make a direction to Airservices Australia. The AGS advice, in paragraph 24, clearly states that if there is evidence that the safety case prepared by Airservices was fundamentally flawed, and this could give rise to "valid concern that the implementation of that decision would not be in the interests of safety", that the Minister could direct AA to delay the implementation of the decision until that issue is addressed. Peter, that is clearly the situation here. All of the expert advice that has come externally is quite clear that the Airservices safety case does not prove that the wind back will be in the interests of safety. This is the key to the issue.'

32 Irrespective of the above, the letter to Mr Sinodinos is also clearly written to support the applicant's position in regard to Option 3. Relevantly the applicant stated:

'Chris Corrigan…has engaged a consultant to give advice on the planned airspace wind back and how it affects Virgin. I understand that this consultant is the immediate past Vice Chairman of the US National Transportation Safety Board (NTSB). He is considered one of the world's leading aviation safety experts. I understand that this expert has told Chris Corrigan that the technical data and assumptions used as the basis for the Airservices safety case are, in his expert opinion, so fundamentally flawed that there is a risk that air safety could actually be reduced by the wind back. I also understand the expert has told Chris Corrigan that the only way of guaranteeing that this is not so is for a proper safety case to be undertaken to address the errors and deficiencies that were shown to exist by O'Neill and Griffith.'

33 Also relevant is a letter concerning Option 3 that Mr Gale, a member of the Board of the respondent, wrote to the Prime Minister on 22 October 2004 saying:

'I am writing to you about a subject that is causing me great concern and that is the pending roll back of airspace classifications by Airservices Australia. I have been a member of the Board of Airservices Australia for over eight years but now fear that we are on the verge of making a dreadful mistake with possible dire consequences. … On this issue I firmly believe that the best interest of Airservices, the Australian public and Australian aviation industry will be served equally by not rolling back this airspace. I am the only Air Traffic Controller on the Board. I have over thirty six years experience as an Air Traffic Controller and have been involved in airspace reform in the Sydney basin since 1986. In 1991 I became involved with the first attempt to bring about widespread change to Australian airspace management. I am also a Commercial Pilot. Senior management and the Board are acting in good faith in proposing to roll back because they believe the safety case presented to them from within the organisation is correct. I am convinced that the safety case is seriously flawed and that rolling back this airspace classification will not improve safety but will have the complete opposite effect, that is, reduce safety, in particular at Hobart, Launceston, Albury, Tamworth and Alice Springs. … Intuitively I knew the safety case upon which this decision was based was flawed. … I had neither the time nor resources to prove it was flawed. However, having read the independent reports of Prof T O'Neill, Mr Anthony Broderick, and Dr R Hall, Mr Jeff Griffith and Mr Chris Mills, they collectively provided me with the explanation I needed and with great conviction I voted against the roll back. The Board had almost no time to evaluate for themselves these reports. … At no time was the Board given the opportunity to hear directly from any of the independent experts criticizing the safety case because of time constraints. More importantly, I do not believe our management, who advised the Board on this issue, had time to properly consider the independent reports.'

34 It appears from his telephone conversation with Mr Langhorne (see [26] above) that the applicant was aware of the views Mr Gale expressed in this letter as early as 19 October 2004. In cross-examination, Mr Smith was unable to recall the order in which the comments made in that telephone conversation were made. It was put to Mr Smith that a plain reading of his account of the conversation, and the letter to him from Mr Langhorne on 21 October (see [29] above), demonstrated that the Minister had not made up his mind. Mr Smith insisted that when referring to the independent advice from Kevin Gale and Chris Corrigan he did not mean that his belief that the Minister would act to stop the roll back was solely based on the Minister receiving this advice. Counsel for the applicant submitted that the applicant's belief in this respect must be looked at against the background to that belief which included the advice from Professor O'Neill and Messrs Griffith and Broderick.

35 The CEO of CASA responded to the Minister's letter of 18 October 2004; (see [24] above) on 2 November 2004 stating:

'I refer to your letter dated 18 October 2004 seeking my view on a number of matters relating to the proposed Option 3 changes to stage 2b of the National Airspace System (NAS). The matters about which you have sought my views, and indeed many aspects of Stage 2b of the NAS have, unlike any other aspects of aviation, polarised various sectors of the industry to a point where I believe most views are based on subjective assessments, emotive reaction to isolated components of the system or self-interest. … … In relation to risks associated with implementing the structure decided by the AA Board, CASA has previously evaluated the Option 3 safety assessment report in its totality and has advised AA of any outstanding concerns, as well as providing advice regarding the implementation process. Based on the material presented to CASA, including the risk mitigation strategies proposed, I have no safety-related basis to object to the planned changes being implemented on 25 November 2004.'

CoSTS 36 Subject to exceptions that are not presently relevant, the award of costs in the Federal Court is 'in the discretion of the Court or Judge'; Federal Court of Australia Act 1976 (Cth) ('FCA Act'), s 43(2). The Federal Court Rules ('Rules') make provision for the award of costs where proceedings are discontinued. A party making a claim for relief may, in some circumstances, discontinue proceedings without the leave of the Court; in other circumstances leave is required. Order 22 rules 2 and 3 relevantly provide: '2 Discontinuance (1) … a party making a claim for relief may discontinue a proceeding so far as concerns the whole or any part of any claim for relief, by notice in accordance with Form 29: (a) at any time before the directions hearing appointed in the application without the leave of the Court or the consent of any other party; (b) where after the directions hearing the proceeding continues on pleadings but the pleadings are not closed without the leave of the Court or the consent of any other party; (c) where judgment has not been entered with the consent of all the parties; and (d) at any time with the leave of the Court. … 3 Costs (1) A party who discontinues pursuant to paragraph 2 (1) (a) or (b) shall be liable to pay the costs of the other party or parties occasioned by the whole or the relevant part of the proceeding. (2) A party who discontinues under paragraph 2 (1) (c) is liable to pay the costs of the other party or parties occasioned by the whole or the relevant part of the proceeding, unless the terms of the consent provide otherwise.' 37 Order 62 rule 26(1) provides: '26 Discontinuance (1) Where pursuant to Order 22, rule 2 a party to any proceeding discontinues the proceeding without leave as to the whole or any part of the relief claimed by him against any other party, the discontinuing party shall, unless the Court otherwise orders, pay the costs of the party against whom the discontinued claim is made occasioned by the discontinued claim and incurred before service of notice of the discontinuance.' [Emphasis added] 38 Consequently, where a party discontinues proceedings under O 22 r 2(1)(a) or (b), that party is liable to pay the costs of the other parties. In Ahmed v Minister for Immigration & Multicultural Affairs [2000] FCA 1436 at [5], Emmett J held that O 62 r 26(1) applied to discontinuance pursuant to O22 r 2(1)(c). 39 However, the Rules do not make express provision for costs where, as is the case here, proceedings are discontinued with the leave of the Court pursuant to O 22 r 2(1)(d). As such, the award of costs is in the discretion of the Court: s 43(2) of the FCA Act. See Inground Constructions Pty Ltd v Federal Commissioner of Taxation (1994) 27 ATR 513; O'Neill v Mann [2000] FCA 1680 ('O'Neill v Mann'); and Harvey Norman Holdings Limited v Fels [2002] FCA 13 ('Harvey Norman'). 40 Nevertheless the respondent submitted that the general rule 'that a successful party in litigation is entitled to an order of costs in its favour' should apply here unless the applicant is able to establish a departure from that rule by reference to the doctrine of futility or on the basis of 'any public interest exception' to the general or usual rule. 41 The power to award costs is a discretionary power to be exercised judicially: see Mineralogy Pty Ltd v National Native Title Tribunal [1998] FCA 1700. Within that constraint it is an unfettered power, however, as Cooper J stated in Grundy v Lewis [1998] FCA 563: 'Although the power to award costs is unfettered, there is in the Federal Court Rules an underlying policy that a party who discontinues proceedings is to be held liable for the costs of the other parties…unless the court otherwise orders (see for example O 22 r 3, O 62 r 26).' See also, FAIRA Aboriginal Corporation v Minister for Aboriginal and Torres Strait Islander Affairs [2002] FCA 9 per Cooper J at [7]. 42 In submitting that this underlying policy should be manifested here in a order that the applicant pay its costs, the respondent referred the Court to Bell v Macquarie Bank Limited [2000] FCA 1521 ('Bell'). In Bell, the applicants discontinued the proceedings without leave under O 22 r 2(1)(b) of the Rules. Lehane J held that the applicant was prima facie liable to pay the other parties' costs because of the operation of O 22 r 3 and O 62 r 26. His Honour commented at [5]: '…the ordinary result of the applicants' discontinuance would be that they would be required to pay the respondents' costs of the proceeding. The question is whether the applicants have established that, in the particular circumstances of this case, there is any particular matter which should, as a matter of discretion, displace that ordinary consequence.' The fact that his Honour was considering discontinuance without leave pursuant to O 22 r 2(1)(b) of the Rules distinguishes the position in Bell from the present circumstances and therefore, with respect, his Honour's comments about the displacing the 'ordinary consequence' have limited relevance to the present case.

43 In O'Neill v Mann, while acknowledging the existence of such an 'underlying policy', Finn J commented at [13] that so various are, 'the reasons for, and circumstances of, discontinuance that that policy cannot safely be said to have hardened into a "usual rule" where leave is granted such as exists where there has been a determination of a claim on its merits'. [Emphasis added] 44 I accept the underlying policy as articulated by Cooper J and also respectfully agree with Finn J that the policy has not 'hardened into a usual rule'. Nevertheless the underlying policy suggests a starting point for any consideration of the award costs in a case of discontinuance. Where a claim for relief is discontinued the respondent to that claim is thereby deprived of an opportunity to vindicate its position despite, generally, having incurred costs in preparing to do so. Although the reasons for discontinuance may vary considerably, it is likely to be in the interests of justice that in those circumstances the respondent to the claim should have those costs met by the discontinuing party. 45 There is, however, good reason for the distinction implicitly drawn in O 62 r 26(1) between discontinuance with and without leave. It is appropriate that the position with respect to liability for costs be clear where a party can unilaterally discontinue proceedings even though, as O 62 r 26 provides, the Court can otherwise order. Where the leave of the Court is required for discontinuance a default position is not necessary as, in determining whether leave is to be granted, the Court has the discretion to impose conditions including as to costs. This still leaves for consideration the principles that should guide the Court in the exercise of this discretion where there has been no hearing on the merits of the dispute. 46 In Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1998) 186 CLR 622 ('Ex parte Lai Qin'), McHugh J at 624-625 commented on the difficulties of allocating costs where there has been no hearing on the merits: '…Ordinarily, the power [to order costs] is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.' In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. … In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation. … Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. … But such cases are likely to be rare.' [Emphasis added and footnotes omitted] 47 In this case there has been no hearing on the merits. Moreover, there is nothing to suggest that this is one of those rare cases to which McHugh J referred in Ex parte Lai Qin where I can have any confidence that either party was 'almost certain to have succeeded if the matter had been fully tried' despite the respondent's attempt to, in some way, characterise itself as the successful party. In Gribbles Pathology Pty Ltd v Health Insurance Commission (1997) 80 FCR 284 ('Gribbles Pathology') Finkelstein J, at 287, was emphatic that in such a case, 'it is difficult to see how any order, other than an order that each party bear its own costs, can be made except in special circumstances'. By 'special circumstances' I do not understand his Honour to mean other than that the issue of costs in a case such as the present must be determined having regard to all of the circumstances of the case, the underlying policy in the Rules and the conduct of the parties.

48 Often an application for leave to discontinue proceedings is made because the applicant believes that further prosecution of the proceedings has become futile. This may be because the applicant believes he or she will be unable to substantiate the claim, or because the parties have settled their dispute or because a change in extrinsic circumstances means that the proceedings are no longer a necessary or appropriate means to the desired end. The reason for the futility is a relevant consideration in determining whether costs are to be awarded.

49 In Ex parte Lai Qin extrinsic circumstances rendered the proceedings futile. An applicant who had been refused a protection visa by the Refugee Review Tribunal sought an order nisi for writs of prohibition, certiorari and mandamus directed to the Minister for Immigration and Ethnic Affairs and the Refugee Review Tribunal. Before her application was heard the Minister granted her a protection visa in exercise of his discretion under s 417 of the Migration Act 1958 (Cth). In granting the prosecutrix leave to discontinue the proceeding, McHugh J held that there should be no order as to costs and commented at 625:

'If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. …' There was a similar situation in Tasmanian Conservation Trust v Minister for Environment and Heritage [2004] FCA 883 where the proceedings became futile as a result of a Ministerial decision that removed one of the principal bases on which the action was founded. Jacobson J held that in all the circumstances both parties had acted reasonably and therefore there should be no order as to costs; see also, Lean v Tumut River Orchard Management Limited [2004] FCA 1670 per RD Nicholson J at [35]; Gribbles Pathology at 287.

50 As McHugh J indicated, the position is generally the same where the proceedings have become futile because the parties, having generally acted reasonably in commencing and pursuing the litigation, have settled their dispute by mutual agreement; Taylor v Australian Postal Corporation [2004] FCA 1265. Alternately the respondent may have given the applicant the substantive benefit or relief it was seeking to obtain through the proceedings. For instance, in Sullivan v Secretary, Department of Defence [2005] FCA 786 the applicant sought leave to discontinue the proceedings after the respondent gave undertakings that negated the need for a hearing of the application. I held that the parties had acted reasonably throughout and that there should be no order as to costs; see also Harvey Norman.

51 The respondent submitted, correctly in my view, that futility is not a matter of objective or subjective belief but a matter of fact; either the proceedings were futile or they were not. It follows that, in the absence of extrinsic circumstances such as are described in [47] and [48] above, where there has been no hearing on the merits of the case it is not possible to say with certainty that the proceedings have become futile even where discontinuation is an acknowledgment of likely defeat. Nevertheless the applicant's belief as to futility and the reasonableness of that belief is a relevant factor in the exercise of the Court's discretion as to costs.

52 In Bucknell v Robins [2004] QCA 474 the plaintiff sought leave to discontinue proceedings in which he alleged that the defendant, his former solicitor, had been negligent in his conduct of a matter for the plaintiff. When the trial judge refused to allow certain parts of the plaintiff's evidence to be admitted, the plaintiff sought leave to discontinue the proceedings stating that without the evidence, his action would be bound to fail and therefore the proceedings would be futile. The defendant opposed the grant of leave and the trial judge ordered instead that the claim be dismissed, that there be judgment for the defendant but that there be no order as to costs. The Queensland Court of Appeal allowed the defendant's appeal on the issue of costs and ordered that the plaintiff pay the defendant's costs. Philippides J, with whom, generally, McMurdo P and Williams JA agreed, said at [19]:

'The respondent's reasons for seeking to withdraw can in no way be seen as reflecting in any adverse manner on the applicant's [ie the defendant solicitor's] conduct in the litigation and was not a consideration which permitted the costs order made. This was not a case which turned on whether the parties acted reasonably in commencing and defending the proceeding. Rather, the basis for the respondent's discontinuance made it a case of the kind discussed by Finn J in O'Neill v Mann [2000] FCA 1680, at [13]: "[…] where the discontinuance can be said to be an acknowledgment by an applicant of likely defeat or where no objective circumstance provides reason for the discontinuance, a costs order in favour of the other party will ordinarily be made."'

53 O'Neill v Mann itself involved whether the applicant, Mr O'Neill, should be permitted to discontinue proceedings in defamation that he had initiated while still continuing to enjoy the benefit of a costs award that he had obtained in relation to the determination of an interlocutory point of law. Finn J, in expressing the view that Mr O'Neill sought too much, said at [19]:

'He fought and won a preliminary skirmish which resulted in a costs order but which did not cast light on his prospects of success in the proceeding. He now seeks to leave those prospects forever unresolved. Dr Mann did not act unreasonably in defending the claim by having the separate question determined. And he may ultimately have been successful in his defence of the claim at trial. It is not my function to make a prediction about that. What I consider to be unfair is for Mr O'Neill to seek the benefit of his interlocutory "spoils" while seeking to terminate prematurely the contest he initiated and which already has occasioned cost to Dr Mann and has exposed him to a costs liability. What may have been appropriate for him to have had at the end of the day and as an element in a larger reckoning as to costs is, in my view, quite inappropriate when he seeks to walk away from litigation he initiated.'

Finn J ordered, as a condition of the applicant being given leave to discontinue, that he undertake not to take steps to have taxed the order for costs that had been made in his favour.

54 In the present case the applicant was granted leave to discontinue the proceedings five working days before the expedited hearing was to commence on 1 November 2004; no question of settlement arises and there has been no finding as to the merits of the claims made in the application. The applicant seeks that there be no order as to costs; the respondent claims that its costs should be awarded against the applicant. It was submitted however, that as at 26 October 2004, the applicant believed on reasonable grounds that the proceedings were about to be rendered futile because he expected that the Minister was about to intervene to stop the Decision being implemented. In making this submission the applicant relied on the circumstances outlined above and referred in particular to:

(a) the applicant's conversations with the Minister on 14 October 2002 and Mr Langhorne on 19 October 2004 referred to respectively at [22] and [26] above; (b) Mr Langhorne's letter of 21 October 2004 to Mr Grant correcting the statement made by senior counsel at the directions hearing on 20 October 2004 referred to at [28]-[29] above; and (c) Mr Langhorne's letter of 21 October 2004 to the applicant extracted at [29] above.

55 It was submitted that, as a result of those discussions and correspondence, the applicant believed that the Minister would intervene if he had independent advice warranting such action and that such independent advice was available not only from the expert reports of Professor O'Neill and Mr Broderick but also from Mr Gale and an expert retained by Mr Chris Corrigan. Furthermore, it was submitted that these beliefs were 'objectively reinforced" by Mr Langhorne in his letter of 21 October to Mr Grant.

56 I am prepared to accept that Mr Smith genuinely believed that his views would prevail. His strong convictions on the matter were supported not only by his extensive personal experience in aviation and that of Mr Gale but, apparently, also by the expert reports of Professor O'Neill and Mr Broderick. The Minister's concern about the issue evidenced in his letters to the Acting Chairman of the respondent and the CEO of CASA as well as the conversations between the applicant and Mr Langhorne at about the time the applicant decided to discontinue the proceedings were sufficiently equivocal that it is understandable that Mr Smith's convictions may have led him to believe that the Minister would act to stop the implementation of Option 3 and I accept his evidence that he genuinely held that belief. This is not to say, however, that Mr Smith's belief was objectively reasonable.

57 In Potato Marketing Corporation of Western Australia v Galati Nominees Pty Ltd [2004] FCA 1216 ('Potato Marketing') the applicant sought leave to discontinue proceedings with no order as to costs. The applicant contended that the proceedings were to be rendered futile or academic because of a report recommending or foreshadowing legislative change. While accepting the applicant's practical considerations were entirely legitimate, French J held at [4] that the decision to discontinue 'turns upon a prognosis about the introduction of legislation which at this stage, giving due respect to the intention of the Executive to introduce it into the Parliament, is somewhat speculative'. Having regard to the speculative nature of the applicant's judgment and the uncertainties of the legislative process, his Honour ordered that the applicant should pay the respondent's costs of the proceedings.

58 There are obvious similarities between the present circumstances and those considered in Potato Marketing. This was emphasised in the respondent's submissions that at best the applicant had an expectation that Mr Gale and Mr Corrigan would each provide their opinions, or those of an expert, to the Minister and such opinions would recommend against adopting Option 3; that the elected Minister was responsible for air safety, rather than the respondent; that the applicant believed that 'all independent advice was against' the Decision; and he believed that the Coalition Government would honour its election promise. It was submitted for the respondent that the applicant's beliefs and expectations are manifestly inadequate to establish futility. This was said to be reinforced by the fact that the Minister did not issue any direction or take any other action to prevent the Decision being implemented.

59 In the absence of a hearing on the merits of the application, or clear evidence that one party was almost certain to have succeeded if the matter had been fully tried, it is not possible to say that the proceedings were, as a matter of fact, futile. In the absence of any such finding of fact, however, the reasonableness of the applicant's belief is relevant in the consideration of the reasonableness of his actions overall. I do not accept that the applicant's belief that the proceedings would be futile, although genuine, was objectively reasonable. I should note that my opinion does not depend in any way on the fact that the Minister did not take any steps to prevent the respondent implementing the changes to Stage 2(b) of the NAS or on the fact that the changes were implemented on 25 November 2004. The futility issue must be addressed at the point at which the applicant discontinued the proceedings and not on what eventuated in due course. However, while I accept that the absence of demonstrated futility and of an objectively reasonable belief in the futility of continuing the proceeding is an important factor to be taken into consideration in exercising my discretion in relation to costs, it is not determinative but must be weighed with other relevant factors.

Public interest litigation 60 In his affidavit sworn on 16 September 2004 the applicant stated that he commenced this proceeding because of his 'grave safety concerns regarding the Decision' and its 'serious air safety ramifications'. It was submitted for the applicant that in doing so Mr Smith was acting for the benefit of the public in a matter of public interest and that no private or personal interest of his was involved. The applicant submitted that this is a relevant, although not determinative, consideration for the Court in the exercise of its discretion to determine the award of costs; Oshlack v Richmond River Council (1998) 193 CLR 72 ('Oshlack'). See also, North Australian Aboriginal Legal Aid Service Inc v Bradley [2002] FCAFC 297 per Black CJ and Hely J at [146]. The respondent, of course, accepts the authority of Oshlack, which has been followed in decisions of the Full Court of this Court including Ruddock v Vadarlis [2001] FCAFC 1865 ('Vadarlis'), but points out that it does not provide that a new costs regime is to apply whenever an applicant brings proceedings asserting that they involve a defence of public interest. There is, as Kirby J commented at 123, no 'free-kick' in litigation; see also South-West Forest Defence Foundation Inc v Executive Director of Department of Conservation and Land Management (No 2) (1998) 154 ALR 411 at 412 per Kirby J. 61 Oshlack concerned proceedings that had been brought under s 123(1) of the Environmental Planning and Assessment Act 1979 (NSW) ('EPA Act') which provided that 'any person' had standing to seek an order in the New South Wales Land and Environment Court to remedy or restrain a breach of that Act. Section 69(2) of the Land and Environment Court Act 1979 (NSW) ('Court Act') provided that costs were in the discretion of the Court. The trial judge dismissed the application but held that there should be no order as to costs. The New South Wales Court of Appeal reversed this order in so far as it related to the costs of the Richmond River Council. On appeal the majority of the High Court upheld the decision of the trial judge and refused to order costs against the unsuccessful plaintiff. The majority (Gaudron, Gummow and Kirby JJ) stressed the significance of the relevant statutory provisions. Gaudron and Gummow JJ stated at 78: 'The difference of opinion, as to the carriage of costs, between the primary judge and the Court of Appeal turned to a significant degree upon the construction placed upon and significance attached to certain provisions of the EPA Act and the Court Act.'

Later in their judgment their Honours, having commented on the submissions that this was public interest litigation, observed at 84: 'The true issue here is not whether this was "public interest litigation". Rather, … the question is whether the subject matter, the scope and purpose of s 69 are such as to enable the Court of Appeal to pronounce the reasons given by Stein J to be "definitely extraneous to any objects the legislature could have had in view" in enacting s 69.' 62 This consideration makes Oshlack a very differentcase from the present. The statutory extension of standing in s 123(1) of the EPA Act, with its implied invitation to the public, suggested that the discretion as to the award of costs given in s 69 of the Court Act was not to be construed narrowly. Kirby J expressed the position as follows at 122: 'Given that statutory context and the clear purpose of Parliament to permit, and even encourage, individuals and groups to exercise functions in the enforcement of environmental law before the Land and Environment Court, a rigid application of the compensatory principle in costs orders would be completely impermissible. It would discourage, frustrate or even prevent the achievement of Parliament's particular purposes.' 63 I accept that proceedings cannot be characterised as having been brought in the public interest merely because they involve 'elements of public law or the judicial review of the exercise of executive power'; De Silva v Minister for Immigration and Multicultural Affairs [1998] FCA 311 at [8] per Merkel J. As his Honour pointed out, those proceedings had been brought to enable the applicants to remain in Australia rather than for the benefit of the public or to enforce a public duty. 64 The application in Vadarlis concerned a group of non-citizens who were said to be detained by the Commonwealth on the Norwegian vessel, MV Tampa, off the coast of Christmas Island. The Victorian Council for Civil Liberties Inc and Mr Vadarlis, a Melbourne solicitor, commenced proceedings for orders in the nature of habeas corpus and mandamus to compel their release and delivery into Australia. While the applicants were successful before the primary judge, they were not successful either before the Full Court or on an application to the High Court for special leave to appeal. The issue of costs came back to the Full Court, which had no difficulty in identifying a public interest issue in the litigation and held that, despite the applicants' lack of success, the parties should bear their own costs of the appeal and of the proceedings before the primary judge. In their joint judgment at [29] Black CJ and French J made some comments that resonate with the present circumstances: 'This is a most unusual case. It involved matters of high public importance and raised questions concerning the liberty of individuals who were unable to take action on their own behalf to determine their rights. There was substantial public and, indeed, international controversy about the Commonwealth's actions. The proceedings provided a forum in which the legal authority of the Commonwealth to act as it did with respect to the rescued people was, and was seen to be, fully considered by the Court and ultimately, albeit by majority, found to exist. The case is quite different in character from the predominantly environmental litigation in which may of the previous decisions concerning the impact of public interest considerations on costs awards have been made. Having regard to its character and circumstances the appropriate disposition is that there be no order as to the costs of the appeal or the application before North J.' 65 The respondent suggests that, there is in the present context, 'an inherent and perhaps insurmountable difficulty in identifying the public interest'. With respect, I do not share that difficulty. 66 The respondent's scepticism appears to spring, not from any denial of the importance to the public of the regulation of air safety in Australia, but from its view that, in commencing the proceedings, the applicant was motivated by personal and private rather than public interest; see, for example, Hollier v Australian Maritime Safety Authority (No. 2) [1998] FCA 975 in which the appellant sought to obtain a private benefit. Although the applicant was cross examined about the additional fees that he might have to pay as a private pilot under the proposed changes, it was not seriously suggested that his interest was financial. Rather it was suggested that it was his emotional investment in and commitment to reforms that he had played a major part in bringing about that led him to oppose so vigorously their partial rollback. 67 Interestingly, however, the very same factors that the respondent relies on to support its submission also are relied upon by the applicant to show that he had no personal or private interest in the litigation but was, by virtue of his training and experience, one of the few, if not the only person in a position to challenge the proposed changes in the public interest. The factors, as identified in the written submissions of the applicant, are: 'Mr Smith was in a singularly unique position to bring these proceedings on matters involving such important issues of public interest and concern because he: · has held a private pilot licence for 30 years; · until recently, he was a member of the National Airspace System Project Advisory Group (NASPAG) and has been a member since that group was created in April 2004; · is a former member of the Special Aviation Reform Group for the period February 2002 to April 2004, the purpose of which was to recommend a preferred plan for the reform of Australia's low-level airspace. That group was responsible for recommending to the Government that it implement the NAS proposals. In announcing the Government's acceptance of that recommendation, the Minister in his press release dated 13 May 2002 expressly paid tribute to Mr Smith for developing the proposals; · is former Chairman of the Civil Aviation Authority from February 1990 to February 1992 and former Chairman of the Civil Aviation Safety Authority from December 1997 to March 1999; · is a person who has made numerous submissions to both Airservices and the Minister with responsibility for the administration of the ASA prior to the making of the Decision (and afterwards), which submissions were opposed to the Decision being made.' 68 The applicant's submissions added that it would be difficult to think of a person other than the applicant being able to challenge the Decision given the undoubted complexity of the issues involved. The respondent's view was that given the applicant's intense involvement with the NAS reforms it is not surprising that he reacted negatively to the proposal to reconsider the introduction of Stage 2(b). 69 The conundrum illustrated by these opposing views is that it is likely that the only person who could with any credibility or sense challenge the proposed Option 3 would be a person with extensive experience in air safety and who would be likely to have deeply held convictions on the matter. Such a person will always have the type of private interest to which the respondent refers. The respondent, in asserting the applicant's private interest, commented in oral submissions: 'It's not as if he's coming to this as an innocent bystander'. My point is that an innocent bystander would be in no position to make any sensible comment on the matter. The applicant is no ordinary bystander, officious or otherwise; he is by virtue of his expertise and experience, in a special position in relation to air safety. For these reasons I am satisfied that there was a public interest element in these proceedings. 70 In considering futility and public interest and the cases relevant to those issues, I have had occasion to express an opinion as to whether the parties have acted reasonably in relation to specific aspects of the proceedings and the surrounding circumstances. In summary, I find that both parties have acted reasonably in relation to these proceedings. 71 In all the circumstances there is nothing to suggest to me that the applicant acted unreasonably in commencing the proceedings. The parties seem to have acted with a degree of co-operation and expedition. It must be remembered that it was only a little over a month from the time the proceedings were commenced on 16 September 2004 until the applicant sought leave to discontinue on 22 October. I have no doubt that strong feelings have been involved on both sides of this dispute; the letter from the CEO of CASA quoted at [35] makes this point. Mr Smith has been a persistent and probably irritating advocate of his views and may well have expressed them robustly and not very tactfully. Nevertheless I find that the issue in dispute has immense public significance and, for reasons already mentioned, that Mr Smith was peculiarly, if not uniquely, positioned to express an opinion. 72 I do not see any special circumstances that enable me to find that there should be an award of costs in the respondent's favour. None of the issues I have considered is determinative but taking all of the circumstances into account, I am of the opinion that there should be no order as to costs in this matter with the intent that the parties should bear their own costs. I certify that the preceding seventy two (72) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stone.

Associate: Dated: 22 July 2005 Dr JE Griffiths SC and Ms KM Richardson Counsel for the Applicant:

Counsel for the Respondent: Mr JA Halley and Mr SD Moran

Solicitor for the Respondent: Allens Arthur Robinson